The Sherwin-Williams Company

Good morning. Thank you for joining the Sherwin-Williams Company's review of first quarter 2020 results and our outlook for the second quarter and full fiscal year of 2020. With us on today's call are John Marikis, Chairman and CEO, David Sewell, President and COO, Alma Fishen, CFO, James Cronin, Senior Vice President, Corporate Controller, and Jim Jay, Senior Vice President, Investor Relations. This conference call is being webcast simultaneously in listen-only mode by issue or direct view of the Internet at www.sherwin.com. An archived replay of this webcast will be available at sherwin.com beginning approximately two hours after this conference call concludes and will be available until Wednesday, May 13, 2020 at 5 p.m. Eastern Time. This conference call will include certain forward-looking statements as defined under U.S. federal securities laws with respect to sales, earnings, and other matters. Any forward-looking statement speaks only as of the date on which such statement is made, and the company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. A full declaration regarding forward-looking statements is provided in the company's earnings release transmitted earlier this morning. After the company has prepared remarks, we will open the session to questions. I will now turn the call over to John Maricas.

Thanks, Jessie. Good morning, everyone. I hope you and your families are remaining safe and healthy during the pandemic. Given the extraordinary circumstances over the last quarter, we've changed our typical format a bit today to provide you with some additional perspective. After my opening remarks, I'll turn the call over to Jim Jay, our Senior Vice President of Investor Relations, for some short comments on our first quarter results. David Sewell, our President and Chief Operating Officer, will follow Jim and provide you with details on how we're responding to the pandemic. After David's remarks, I'll share some color on what we're seeing across our various end markets before turning it over to our Chief Financial Officer, Al Mastician, who will provide you with our revised outlook for the year. Let me begin today by thanking the more than 60,000 employees of Sherwin-Williams for their courage, determination, and resilience in the face of the COVID-19 pandemic. Their extraordinary efforts to serve each other, our customers, our company, and our communities during this challenging time truly has been inspiring. This wonderful team has my deepest appreciation and my deepest respect, and I'm confident in their ability to meet the challenges ahead of us. Clearly, we're in a much different economic environment than anyone could have imagined when we provided our 2020 outlook back in January. More than 26 million have filed for unemployment benefits in the U.S. alone since mid-March, and other geographies also remain under significant pressure. Sherwin-Williams is not immune from these realities. We are seeing major near-term impacts to demand in most of our end markets. We have a long-tenured and experienced management team that has successfully managed the company through a number of challenging times. Recession in the early 2000s, the 2008-2009 financial collapse, and the integration of ALSPAR, the largest acquisition in the company's long history. Our entire global team remains undaunted and has taken actions to navigate this crisis. We remain very confident in our ability to manage the near-term impacts we are seeing while positioning ourselves for continued long-term success. We've developed and are executing a comprehensive response to the pandemic focused on the safety and well-being of our employees, our customers, our company, and our communities. We are implementing multi-phased contingency plans across our businesses to adjust to the near-term business environment. We are well positioned from a balance sheet and liquidity perspective. We've adapted in order to stay connected to our customers through this crisis, including modified operations in our stores and increased use of e-commerce and other technologies. We believe we're seeing a pause in demand in many of our end markets rather than destruction of demand. We believe the long-term fundamentals remain intact. We intend to continue strategic investments that support profitable growth. These include continued investments in our stores, our products, our e-commerce platform, and other initiatives as we look for opportunities to expand our business. But before moving ahead, I'd like to thank our team again for remaining focused and delivering on our first quarter plan, even as the COVID pandemic began to impact us. Let me now turn the call to Jim Jay for some additional comments on the quarter.

Thank you, John, and good morning, everyone. In addition to this morning's press release and our commentary on today's call, we've provided a slide deck on our website with additional information. All comparisons in my remarks are to the first quarter of 2019, unless otherwise stated. Overall, Sherwin-Williams delivered a strong first quarter that was in line with our expectation, with year-over-year improvement in sales, gross margin, profit before tax, EBITDA, diluted net income per share, and net operating cash. First quarter 2020 consolidated sales increased 2.6%, to $4.15 billion and consolidated gross margin increased to 45.6% from 42.9%. Consolidated profit before tax increased $93.4 million to $392.3 million. Diluted net income per share for the first quarter 2020 increased to $3.46 per share from $2.62 per share. The first quarter of 2020 includes acquisition-related amortization expense of $0.62 per share. And the first quarter of 2019 includes acquisition-related costs and other adjustments of $0.98 per share, as described in the Regulation G reconciliation table included in our press release. Excluding these items, first quarter adjusted diluted earnings per share increased 13.3% to $4.08 from $3.60. Adjusted EBITDA increased $48 million to $623.1 million, or 15% of sales. Cash from operations was $54.9 million, an increase of $91 million year over year in the quarter. As is typical for us in the first quarter, We use cash to build inventory levels in advance of the busier spring and summer selling season. We continue to monitor the demand environment closely. From a segment perspective, the Americas Group grew same-store sales by 7.4% and improved segment margin by 140 basis points. Consumer Brands Group and Performance Coatings Group also delivered improved segment margin performance. Additional details on our segment performance are included in the slide deck I referenced previously. Let me now turn the call over to David Sewell for some specific comments on how we are responding to the pandemic. David?