Q4 2021 Sherwin-Williams Co Earnings Call

Good morning, Thank you for joining the Sherwin Williams Company's review of fourth quarter 2021 results and our outlook for the first quarter and full year of 2022.

With us on the call on today's call are John <unk>, Chairman, President and CEO .

Al <unk> CFO .

Jane Cronin senior Vice President corporate controller, and Jim Jaye, Senior Vice President Investor Relations and communications.

This conference call is being webcast simultaneously in listen only mode by issuer direct via the Internet at Www Dot Sherwin dotcom.

An archived replay of this webcast will be available at www Dot Sherwin com beginning approximately two hours. After this conference call concludes.

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 statements 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's prepared remarks, we will open the session to questions Alan.

I will now turn the call over to Jim Jaye.

Thank you and good morning, everyone.

While our fourth quarter sales were within our guidance earnings results fell short of our expectations ending our year on a disappointing note.

As we described on our January 14th call raw material availability did not improve as meaningfully as anticipated in the quarter and the omicron variant put additional pressure on our company, particularly in the Americas group and our global supply chain organization.

As well as on our suppliers and our customers.

We also faced the highest inflation of the year in the fourth quarter, which we are combating with continued pricing actions.

These are near term headwinds.

The good news is that demand remains strong across our end markets.

We are seeing raw material supply issues improve sequentially.

We also continued to strengthen our customer relationships and take actions during the quarter that strongly position us for the long term.

And we remain very confident in our strategy and above all our people.

Let me briefly summarize the quarterly numbers before turning to John <unk>, who will provide commentary on our full year and our outlook for 2022.

Starting with the topline fourth quarter 2021, consolidated sales increased six 1% to $4 76 billion.

Raw material availability negatively impacted sales by an estimated high single digit percentage.

With about 65% of the impact in the Americas group.

The remaining impact was largely in the consumer brands group.

With an immaterial impact to performance coatings group.

Pricing in the quarter was in the high single digit percentage range.

Consolidated gross margin decreased to 39, 5% driven by lower sales volume raw material cost inflation outpacing our price increases near term.

And supply chain inefficiencies.

SG&A expense decreased to 32% of sales.

Consolidated profit before tax decreased to $308 9 million.

The quarter included $70 1 million of acquisition related amortization expense.

Diluted net income per share in the quarter decreased to $1 15 per share.

The quarter included acquisition related depreciation and amortization expense of <unk> 19 per share.

Excluding these items fourth quarter adjusted diluted earnings per share were $1 34 per share.

Moving on to our operating segments.

Sales in the Americas group increased 3% as high single digit pricing offset lower volume related to raw material availability.

Segment margin decreased to 15, 1%, resulting primarily from lower sales volume and higher raw material costs.

Partially offset by selling price increases.

Segment SG&A was up slightly as a percent of sales as we continued investing in strategic growth initiatives.

Sales in the consumer brands group decreased seven 8% against a double digit comparison a year ago.

Sales were flat, excluding the impact of the what'll divestiture.

Adjusted segment margin decreased to six 3% of sales, resulting primarily from lower sales volume and higher raw material costs and supply chain inefficiencies, which were partially offset by selling price increases and good cost control.

Sales in the performance coatings group increased 18, 7% driven by price and volume increases.

Adjusted segment margin decreased to eight 9% of sales as operating leverage from the higher volume.

Selling price increases and good cost control were more than offset by higher raw material costs were.

Where inflation was the highest among the company's three operating segments.

Let me turn the call over to John now for additional commentary on 2021, along with our outlook for the first quarter and full year 2022.

Thank you Jim and good morning, everyone.

Ill provide some additional color on our fourth quarter in a moment, but first I'd like to summarize our full year.

For the second year in a row, we faced a series of challenges that no one could have predicted.

The natural disasters of winter storm Yuri.

Hurricane either cripple the industry's raw material supply chain for most of the year.

The lack of raw material availability, coupled with strong demand led to a rapid and unprecedented raw material cost inflation.

Labor and transportation costs also escalated throughout the year.

And through it all we continued to battle various complications brought on by the continuation of the pandemic, especially in the fourth quarter.

The 61000 dedicated employees of Sherwin Williams, our greatest asset responded with determination.

We did not use any of these challenges as an excuse but there is an opportunity to get even closer to our customers.

We focus on supporting our customers businesses through innovation value added services and differentiated distribution.

This solutions based approach resulted in our customer loyalty metrics and new account activity growing significantly during the year.

These trends bode well for years to come.

While we focused on meeting customers' needs. We also attacked rising costs with aggressive pricing actions in all businesses.

Near term pressure on our margins was significant but we remain highly confident they will recover just as they have in past cycles as we grow the business and see commodity costs moderate over time.

We also continue to invest in multiple long term growth initiatives during the year.

I'll mention just a few full year metrics.

Consolidated sales increased eight 6%, including a mid single digit headwind related to raw material availability to a record $19 9 billion.

It was the 11th consecutive year, we have grown the business.

Pricing for the year was in the mid single digit range.

On a segment basis.

The Americas group delivered 8% sales growth in.

And 20% PBT margin for the full year.

Solid performance given the challenging operating environment.

Pricing was in the mid single digit range.

Our largest customer segment residential repaint grew by a double digit percentage for the sixth year in a row.

Sales in all other customer segments with the exception of DIY grew mid to high single digits in the year.

We also opened 85 net new stores during the year.

Consumer brand sales were down 10, 9% for the year, including a four percentage point impact from the divested water business.

This was against a mid teens comparison that was driven by DIY projects related to consumers nesting during the pandemic.

Pricing was a little less than what we saw in tag.

Performance coatings sales were up 22% for the year.

Every region and every business unit increased by a double digit percentage.

Price realization was in the mid single digit range.

Amidst the highest cost inflation and accompany this segment preserved the vast majority of adjusted profit before tax was decreased $18 1 million or two 5% from the prior year.

Even with the increase in consolidated sales, we were not able to fully overcome the impacts of raw material and other cost inflation raw material availability and the omicron variant in the year.

As a result, net income and diluted net income per share were below last year's levels.

Adjusted EBITDA for the full year was $3 7 billion.

Or 16, 4% of sales.

Net operating cash for the year was $2 2 billion or 11, 3% of sales.

We put our cash to work returning a little over $3 3 billion to our shareholders in the form of dividends and share buybacks.

We invested $2 8 billion to purchase 10 1 million shares at an average price of $273 18.

We distributed $587 million in dividends, an increase of 23%.

We also invested $372 million in our business through capital expenditures, including approximately $56 million for our building our future project.

We ended the year with a net debt to adjusted EBITDA ratio of two nine times.

Additionally, we announced three acquisitions that will add to our capabilities the coatings business of Tennant company.

The European industrial coatings business of Sika AG.

Specialty polymers, Inc.

Total return to shareholders in 2021 was 44, 9%, which outpaced the S&P 500, and our peer group.

Finally, I'd also like to mention our ESG efforts we.

We announced and made good progress on our next generation targets this year.

We were recognized for various aspects of our program this year by Newsweek for.

<unk> and investor's business daily.

Given the volatility of the macroeconomic environment over the past two years, our combined results over the period or perhaps a better illustration of the underlying strength of our business.

Since the end of 2019 consolidated net sales grew $2 billion or 11, 4%.

Most profit increased $507 million or six 3%.

Adjusted EBITDA increased $211 million or six 9%.

GAAP diluted net income per share increased 26, 9% to $6 98 per share.

And adjusted diluted net income per share increased 15, 8% to $8 15 per share.

Over the two year period, we have returned approximately $6 $3 billion to shareholders in the form of dividends and share buybacks.

As far as our fourth quarter I'll keep my comments brief in order to get to our 2022 outlook.

The key themes remain the same as in our third quarter.

Demand was strong in nearly all of our end markets raw material.

Real availability remains a challenge.

There was some improvement but recovery was not as quick as we would have liked.

Commodity and other costs remained elevated and we continued to implement price increases.

The new wrinkle was the impact of the <unk> variant, which was meaningful as we discussed on our call earlier this month.

In the Americas group sales growth in the fourth quarter was led by protective and marine which was up by a double digit percentage.

New residential and property management were up in the mid single digit range.

Whereas repaint and commercial were up in the low single digit range.

<unk> was down double digits against an extremely strong double digit comparison.

From a product perspective exterior paint sales performed better than interior sales with interior being the larger part of the mix.

We realized a high single digit increase in price in the fourth quarter, resulting from our February one and August one 2021 price increases and our mid September 2021 surcharge.

As we mentioned a new 12% price increase is effective February one of this year.

We opened 35 net new stores in the fourth quarter.

Along with these new stores, we continued to make investments in sales reps management trainees innovative new products e-commerce and productivity enhancing services.

Moving on to our consumer brands group.

Fourth quarter sales were basically flat to last year, excluding the impact of the what'll divestiture.

Sales were up low single digits in North America that was offset by softer sales in Europe , and Asia, where COVID-19 restrictions were <unk>.

More pronounced.

Pricing was positive in the quarter and in the high single digit range.

Well, let me comment on the fourth quarter trends in our performance coatings group.

We continue to see momentum as this is the sixth straight quarter of growth for this business.

Group sales increased by a high teens percentage in the quarter.

Price realization was in the low double digit range and all regions and all divisions generated growth.

Regionally.

Sales in the quarter grew fastest in North America, followed by Europe , Latin America and Asia.

Every division and the group grew with nearly all by double digits drew.

Driven by robust underlying demand new customer wins share of wallet gains and pricing.

Packaging was strongest followed by coil general industrial and industrial Wood and auto refinish, respectively.

Turning to our 'twenty two outlook.

We see an operating environment with strong demand across architectural and industrial end markets.

Customer labor will likely continue to be a governor on growth in some areas.

We expect raw material availability to continue improving sequentially.

So the trajectory remains uneven.

As supply improves we stand ready with ample capacity to quickly convert those raw materials to paint.

We believe the impact of the Amacrinal variant on the supply chain should moderate through the first quarter.

And the additional impacts from Covid over the remainder of 2022 are hard to predict.

But it's not hard to predict is our determination.

Our role is to influence results.

Not to simply report them.

Looking ahead, we expect to bend the curve in our favor through the very deliberate steps we've been taking.

These include arrangements and agreements with existing and new suppliers.

Prioritizing our product offering to our customers'.

Investments in additional capacity.

The acquisition of a resin supplier and actions to retain employees to produce and distribute product.

As the year goes on we expect to be talking less and less about raw material availability and supply chain issues and more and more about volume growth sequential gross margin improvement and sequential margin improvement in each of our operating segments.

Our outlook also assumes that the market rate of inflation for our raw material basket will be up by a low double digit to mid teens percentage in 2022 compared to 2021.

We expect to see year over year inflation in all four quarters with the largest impacts likely occurring in the first quarter and gradual reductions each quarter as the year progresses.

We expect all commodity categories to be meaningfully elevated.

We expect other costs, including wages and transportation to be up in the mid to high single digit range. We.

We are currently implementing additional price increases in all businesses and we'll continue to do so as necessary.

For the first quarter of 2022, we anticipate our consolidated net sales will increase by a low to mid single digit percentage compared to the first quarter of 2021 inclusive of a low double digit price increase partially offset by ongoing raw material availability issues.

We expect the Americas group to be up low to mid single digits with North America paint stores at or above the high end of that range.

We expect consumer brands to be down by a high single digit to low double digit percentage.

And we expect performance coatings to be up by a mid to high teens percentage.

Our full year guidance is heavily second half weighted due to stronger volume the impact of pricing action and weaker second half 2021 comparison.

As Youll recall, we began 2021 with great momentum, including first half sales growth of 14, 7% and adjusted EPS growth of 26, 4% before the natural disasters supply chain and Covid issues derailed the second half of the year.

For the full year 2022, we expect net sales to increase by a high single digit to low double digit percentage.

We expect the Americas group to be up a mid to high single digit percentage again with north American paint stores at or above the high end of the range.

We expect consumer brands to be up a low to mid single digit percentage and performance coatings group.

Up a high single digit to low double digit percentage.

We expect diluted net income per share for 2020 to be in the range of $8 42.

To $8 80.

Per share compared to $6 98.

Per share earned in 2021.

Full year 2022 earnings per share guidance includes acquisition related amortization expense of approximately 85 per share.

On an adjusted basis, we expect full year 2022 earnings per share of $9 25 to $9 65, an increase of 16% at the midpoint over the $8 15, we delivered in 2021.

Let me close with some additional data points and an update on our capital allocation priorities.

Given volume growth pricing actions and our ongoing continuous improvement initiatives, we would expect full year gross margin expansion.

We expect to see SG&A leverage in 2022 by controlling costs tightly in non customer facing functions.

We will continue to make investments across the enterprise.

We will enhance our ability to provide differentiated solutions to our customer.

We expect to open between 80 and 100, new stores in the U S and in Canada in 2022.

We will be focused on sales reps capacity and productivity improvements.

Systems as well as product innovation.

We also plan additional incremental investments in our digital platform and the home Center channel.

These investments are embedded in our full year guidance.

We expect currency exchange will be a headwind of about one 5% on consolidated sales.

We expect our 2022 effective tax rate to be in the low 20% range.

Our core Capex guidance for the year is approximately $415 million.

In addition to this core Capex, we expect to make investments of approximately $450 million in 'twenty two related to our new headquarters and R&D facility project.

Both depreciation and amortization should be about $300 million each.

Interest expense should be about $330 million, we have $260 million of long term debt due in 2022.

Historically, we've targeted dividends at about 30% of prior year GAAP earnings.

Next month at our board of Directors meeting, we will recommend an annual dividend increase of nine 1% to $2 40 per share up from $2 20 last year.

We expect to.

Continue making opportunistic share repurchases.

We will also continue to evaluate acquisitions that fit our strategy.

As we begin 2022, we remain confident in our strategy our capabilities and the differentiated product and service solutions, we bring to customers.

Above all my confidence in our people has never been higher.

Our business remains extremely well positioned and we're emerging as an even stronger showing lambs. Following the challenges that we faced the last two years.

We remain steadfast in our focus on creating shareholder value.

That concludes our prepared remarks with that I would like to thank you for joining us This morning, and we'll be happy to take your questions.

Thank you.

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Thank you and our first question is from the line of Chris Parkinson with Mizuho. Please proceed with your question.

Mr. Parkinson, perhaps your line's muted your line for questions sorry.

Sorry about that so.

It seems there can be multiple steps to rebuild your margin structure and strive towards back towards your long term goals.

Especially in consumer performance, just given near term raw material shortages, hopefully getting better on a sequential basis raw material inflation logistics costs et cetera, et cetera, all hopefully to be offset by pricing how should we think about whats actually embedded in here in 'twenty two guidance on margins based on those factors and then perhaps more importantly.

How should investors recalibrate expectations for the cadence of improvement in.

<unk> 23 and back towards your long term goals.

There would be appreciated thank you.

Yeah sure Chris This is almost <unk>.

As the 2021 unfolded with a strong very strong first half and a softer second half.

Our 2022 budget.

Is exactly the opposite we expect continued.

Headwinds as John mentioned that raw materials are heavily weighted to the first half.

So the incremental pricing, we've talked about tag going out with its February 112% increase and we're going out across all divisions and groups with pricing. So when you look let me start with when you look at our gross margin our first half.

Do you expect to see.

Slight contraction.

But six sequential improvement.

Quarter goes on and then you start seeing gross margin recovery and our second half and that expectation is across each of the segments and its really.

Volume traveling on the on the architectural side continued pricing catch up on the performance coatings side, along with the continued strong demand and volume.

And what I would expect to see some contraction in the first half on operating margin so among the segments.

I would expect to see recovery.

Starting in our second half on the operating margins in all segments growing operating margins year over year, and our second half and even including.

If fire even including.

Tag even has the potential to get on top of previous years and as you know.

In an inflationary environment that dead.

And you look back at our history as we see raw material increases, we implement price to offset those raw material increases and as the price effectiveness continues to improve we start to see recovery and then as raw materials moderate and rollover receipt gross margin expansion I can point back as I have in the past.

Past 10, 11, and 12, we saw the big run up in titanium dioxide, we saw our margins get on track and then we saw growth from 13 to 16.

It's almost 600 basis points, we expect to see a similar environment today.

That's very helpful and just as a quick follow up just in terms of 'twenty two demands.

But let's say more recently theres been a little bit of skepticism just given rates now housing affordability.

Essentially the broader inflationary environment, just from the Sherwin specific angle and what Youre hearing.

Specifically from your stores what.

Really truly underscores your volume confidence on the macro for tag.

And as well as your ability to further win share both pro and Big box. It's just any additional insights will be very helpful. Thank you Chris.

Chris I think you hit on two very important points. There one is the market.

And our position in that market.

It would be the second point so.

We believe in the first indicator would be the close relationship that we have with our customers I'll ask Jim to talk to the macro indicators that give us confidence in a moment, but I.

I'd say what gives me the most confidence is the.

Nearly 3500 sales reps and over 4000 store managers that we have out there everyday feeding our CRM system with data.

That plays back to incredible confidence that our customers have in this market.

We've had.

We believe.

A pretty strong run here in a challenging market.

But our customers are telling us that as they look forward demand continues to grow.

You look across the segments and every one of those architectural segments.

Feedback that we're getting is exactly that this is going to be a terrific year.

Many of our customers would say they are there.

Pipeline is pretty much full right now and they are looking out into the second third quarter, taking bids right now so this.

It's very solid, but let me ask Jim to give you a.

Little bit on the macro numbers that reinforce what we're hearing from our customers.

Yes, Thank you John and good morning, Chris.

As you look across the various indicators that we've always talked about for years now they are all pointing in a very positive direction, Chris and I won't go through all of them, but on the residential repaint side, we look at lira, the leading indicator of remodeling activity that was up high single digits in the fourth quarter in <unk>.

I see strong double digit growth throughout 2022.

The remodeling market index also is at near record levels going forward.

I think on the new Red side. When you look there in addition to John's comments about what our customers are saying.

Permits in trends or permits and starts have been trending very well since the summer there is still a big backlog of homes that need to be built both at the entry level and at the.

Luxury level as well mortgage rates, while may be ticking up a little bit still are largely supportive I think.

On the commercial construction side, you've got other indicators the Dodge momentum index. The architectural billing index all of those pointing in really strong directions.

In property maintenance, we're seeing good activity there so no matter, where you look.

On our tag business It feels very strong tag and we believe also our consumer brands business as well as a lot of opportunity there for pricing in the market as well, but one additional point that I would make in addition to the pricing and availability on consumer brands.

What we're seeing from our contractors, we talk about gross margins and our ability to push that pricing through this is a market where our customers have confidence in their ability to put pricing in because of the supply demand.

Dynamics, so we're putting price in two customers who have confidence in their ability to put price into the market I've often said, we typically don't receive thank you notes for putting price increases through and I don't expect to receive any on this round.

I will tell you our teams are very confident that our customers are almost in the mindset of okay.

Need to know what the price increase is going to be so it could push it through.

And at the same time, they're deciding which projects that are going to take and which ones. They are not so the dynamics are very powerful.

That's helpful. Thank you very much.

Thanks, Chris.

Our next question is from the line of Ghansham Panjabi with Baird. Please proceed with your question.

Thank you and good morning, everybody.

Yes, I guess, there's somewhat of a follow up I know, it's very early in the year and Theres a lot going on.

Seemingly every week.

But can you break out for us what you're assuming in terms of raw material availability for 2022 as it relates to your specific earnings guidance.

Yes, I'm, referring to volume catch up and then your own inventory levels as the year unfolds.

Yes, so Scott.

The availability.

Expectation is that we may see some in our first quarter, we talked about our first quarter being a little bit of choppiness seen a little bit of choppiness in our.

Availability.

Could be low single to.

Mid single digits.

But.

The commitment that we've gotten across.

Our existing supplier base and our new supplier base really gives us great confidence that we will have the raw materials available to us to meet the stronger demand, we expect in our first quarter and I should say stronger production in our first quarter, so with that prioritize product line that John mentioned.

We are going to build them at significantly more inventory.

To the end of our first quarter compared to year end 2021 and versus last year, but not to what I would say more historic levels.

So.

The additional inventory for tag that we put in at.

At the end of the year because of the sales shortfall will help us early on but Youre talking 10 to 15 days of inventory our real growth.

Because of the excess capacity that we have put in and that being filled up with.

Raw material supply and really getting ourselves in a better inventory position. So if I could add I think a terrific response by I think looking long term. There's some choppiness here short term, we understand that but when we look long term and why we feel our company is going to really.

Reform and we often talk about this coiled spring.

I look at the points that al just mentioned and I'd like to just add a couple if I could.

Certainly our opportunities to his point about the additional capacity that we've just brought on we got more that's coming on.

Yes.

It is important.

The other thing that I think is important to understand that we're not complacent.

If you look at how we get more efficiency and more productivity out of our plants.

There is work to be done here, but we're well underway in a simplification process of our products to ensure that our responsiveness and I think this would be a question some shareholders might have as we've come through this how do we ensure that if anything like this were to happen again that where the horse to bet on and we're not sitting.

Here waiting just trying to get out of the current situation. We are looking at how do we build in the response as a result of this experience to ensure that we avoid these types of issues going forward. So it does include the resin company that we bought it does include the capacity that we just bought but an equally important one.

Is the simplification of many of our product lines to allow us to be more responsive more adaptive to the to the situation. If it would be from raw materials suppliers of raw material products.

Or to be able to move different resins around to be able to supply our customers. So there's a lot of really good work heavy heavy lifting that's taking place that we're not going to see today, but it's going to help us it's going to help us not only in situations like this in the future but to be more responsive to our customers' needs.

And more reactive to opportunities going forward.

Okay. That's very helpful and then.

Realizing this is a difficult question to answer but.

All the various nodes in the supply chain theres. So many different issues that your customer site in their earnings calls and so on and so forth.

Just trying to gauge if you are able to produce more paint and you just wave a magic wand and.

Are you able to get what you need from a raw material standpoint.

Is there still going to be a fair amount of Choppiness do you think in terms of.

Volumes on a quarterly basis because of the other constraints that customers decide including appliances labor et cetera.

Well I think.

We're going to have raw material raw material position is going to improve it's improving now and as al mentioned between our current and new suppliers. We've got confidence that this is going to improve and that's why I made the comments earlier.

I'd say it this way, we've always hate talking about weather.

I would associate with our feelings with what we're talking about regarding raw materials to feel like whether we want to get this behind us.

And start talking about growing our business and talking about the incredible results. We are going to post and we're going to have the raws to be able to do that now are there other issues that we're going to face so like transportation and.

The fact that we're going to be in a race to build product through the first quarter, but we're not going to be able to build the inventory that we typically build in the first quarter to be as responsive responsive as wed like so there is going to be some hand to hand combat. If you will as we get through the year, it's going to get better, but we're going to be racing to.

Phil the pipeline here and we would've liked if possible to build more inventory in the fourth and first quarter.

But we're going to be in a position to have more raw materials and more capacity to be able to respond we will build some inventory coming out of the first quarter, but.

But it won't be the traditional level that we would like going into a paint season, yes gotcha.

There I think when you look at the past two years have been really challenging.

Because we've got a long tenured and experienced management team, we've been able to meet those challenges and produce solid results. We believe we are paid to influence results and not simply report them and I believe our management team is doing that if you look at the midpoint of our 2022 adjusted EPS net yields of 10%.

30 year compounded average growth rate and while doing that we continue to invest in the future growth of the company and returning a significant portion to.

To our shareholders in the form of dividends and share buybacks.

So I think what youre going to see is our volume and I'll look at it maybe architectural volume in our first half.

My expectation is because we had such a strong first half of 2021 that our architectural volume will be.

Flat to down.

Low single digits.

Really our second half and the expectation is.

All the things that our global supply chain team is doing to get past and procurement teams get past raw material supply.

More consistent transportation and logistics.

Set up our second half, we're expecting to be up mid to high single digits in volume, that's really what's going to drive that.

Operating margin improvement across our architectural businesses tag and consumer.

Okay. Thanks, so much.

Thanks Ghansham.

Our next question comes from the line of Bob Court with Goldman Sachs. Please proceed with your question.

Thank you very much.

Maybe following on that last response I just want to make sure I understood. It properly I think you said, maybe your architectural business will be down in the first half you were implying revenues and I'm wondering.

Given the pricing cadence through 'twenty, one and then again the February price hike coming.

Why it would be so weak and then even more broadly for all of 'twenty. Two I think the guidance you gave on tag revenues.

Seems to match.

What you would expect in pricing. So it seems like there is maybe not a whole lot of net volume maybe you could give us a little more color on why that would be okay.

Range for production this year.

Yes.

To clarify.

I was highlighting architectural volume in our first half.

That would be flat to down and Thats, because we had such a strong start to our first half last year. If you look at our first quarter consumer was up 25%.

The North America paint stores were up high single digits and tag was up high single digits.

And our first quarter, so I was referring to volume.

R R.

Our full year.

Tag being up mid to high single digits with the comment being that our North America paint stores will be at or above the high end of that range. If you annualize the price increases.

Youre going to get to a mid to high single digit so volume I would expect to be up in our North America paint stores to be low to mid <unk>.

Okay. That's helpful. I appreciate that and then I'm just curious if you guys have any insight on.

I'm trying to figure out.

There was double ordering if there were maybe some.

Bookings throughout 'twenty, one of your customers were scrambling.

And the scarcity mode is there any risk or how do you do you.

I have confidence that there wasn't some of that and maybe the underlying demand is slightly weaker than you'd suspect.

You get that comfort.

That's not a concern for me at all and we've got tremendous comfort and confidence that the demand is real.

And as we look at the bidding activity is taking place the job requests that are taking place.

Can verify that.

The demand is real we've got great confidence.

That's clear thank you Jay.

Thanks, Paul.

Our next question is from the line of Truman Patterson with Wolfe Research. Please proceed with your question.

Hey, good morning, everyone. Thanks for taking my questions.

First look I understand the raw material inflation is kind of a moving target, but if we took a snapshot as we sit today in January I'm, hoping you can discuss.

By fourth quarter, 'twenty, two whether raw material inflation.

Embedded in guidance is still up year over year or down and then for your full year 'twenty two.

Low double digit to mid teens inflation could you just breakout expectations by your segments.

Yeah Truman.

What I would say is for the full year, we're expecting as we said that low double digit to mid teens inflation. This should be the highest in the first quarter and I would expect it to sequentially improve as the year goes on and the comparisons get a little bit.

<unk>, but I think even in our fourth quarter youre likely to see us up low to mid singles in the fourth quarter.

I think the strong demand that's out there is helping to support.

The inflation.

It's out there I would again expect.

By segment, probably to still see.

Pretty.

Highest inflation in our performance coatings group, yes.

The comment I would make on that.

Just to reiterate still.

Still we talked about last year the increase in raw materials was heavily weighted to our performance coatings I would say that about 60%, we expect to see a little bit less than that this.

This year.

But also just.

<unk> said it our line of sight on raw material inflation is probably at best two quarters out so looking at our second half of this year.

We will continue to continue to monitor the basket as we have throughout 2021, and if we see any change.

Our increase in inflation, we'll react with pricing quickly like we did last year.

Okay. Okay. Thanks for that and then.

In the fourth quarter tag.

Margins fell 660 bps year over year, and I know that leverage is it volume leverage is a key component to your operating model I'm, hoping you can help us parse out how much of this was due to volumes declining we'll call it high single digits versus this price.

Cost dynamic that's going on.

Yes, that's true.

Sure.

As I said in the past volume as the singer single biggest driver of operating margin improvement and that is especially the case in our tag organization.

I would say that is almost 100% driven by by the volume decline and if I may I, just like to recap the fourth quarter across each of the segments.

Kind of.

Talk about this year get level set and move on to 2022, but if you look at tag as I mentioned, it's all volume driven that margin.

When we look at consumer it was better than our sales guidance, but primarily due to non paint sales increasing and if you look at the paint gallons being less than what we expected that again that volume really impacts our operating margin, but we also had.

Because global supply chain is embedded in our consumer brands group.

Because of availability, we didn't meet the production plans that we had planned so the supply chain inefficiencies and ROM at higher raw material costs.

<unk> impacted.

<unk> segment, so volume is the number one.

Driver of that impact, but then the other two are probably equally weighted and then you get into our performance coatings group nice nice sales gains.

But again, the raw material increase quarter to quarter that we saw and for the full year was really about 60 plus percent of the sequential increase.

They took the brunt of the incremental increase in raw materials that really drove what.

Impact on margins and as we said.

This is the one segment that has more work to do on pricing to chase the increase in raw materials. They are out and as I mentioned earlier with additional pricing in our first quarter and our expectation is that we will get on top of raw materials.

This year and see segment operating segment margin improvement in our second half.

Hey, al for clarity.

I lost you a little bit on the tag segment commentary.

Clarity.

The majority overwhelming majority almost all of it was entirely due to the margin decline not dollar decline was due to that lost volume leverage.

That's right.

That's right chairman, Okay Wow, okay. Thank you.

Thanks Troy.

Our next question comes from the line of Jeff Zekauskas with Jpmorgan. Please proceed with your question.

Thanks very much.

Don't want to pursue.

Tax guidance for 2022.

Mid to high single digit percentage.

I think you said earlier that your volumes might be up low to mid single digits.

If your prices are going to be up some high single digit number I realized it any better.

Negative currency I don't see how you attack range should be mid to high single digits.

Unless you expect.

Flat or negative volume growth.

Yes.

Got it sorry, I am sorry, yes.

<unk>.

We talked about is our North America stores.

Being up.

At the high end or above the high end of that range and if you look at your thinking eight.

The <unk> 12, or 8% to 12% if you look at the.

Paint stores group price increase.

The cadence of the increase as you think about how we annualize the price increases on paint stores, we're going to be up.

Low double digit in our first quarter high single digit in our in our first half and that will moderate as we go through the second half to get to a mid to high single digits. So that's how I get to.

Kind of a low to mid volume.

I don't see why it would moderate really in the third quarter and maybe maybe it with.

That level.

But to put that aside.

Your SG&A costs, I think were up 2% for the year. So what is it that there was a lagging effect.

To whatever inflation, you're experiencing in SG&A and you expect it to be up much more or can you can you talk about your SG&A inflationary expectations and a little bit more detail.

Sure.

We're looking at.

Although we don't really provide the guidance by line.

Give you some.

Directionally, we do expect to get leverage.

On our SG&A.

As the year progresses, we'll continue to invest as John mentioned in 80 to 100, new stores and tag.

And our digital platform will continue to look for opportunities to invest in the probe paints within our consumer segment and other key initiatives, there and then services programs.

In our performance coatings group, but we're still going to be.

Very focused on controlling our non customer facing.

SG&A and I would say if you look at how our volume months unfolds throughout the year.

The first half will be.

Slower than our second half like I mentioned, so we expect to see more leverage in our second half on SG&A than we see in our first half.

Okay, great. Thank you so much.

Thanks, Jeff.

Our next question is from the line of Mike Sison with Wells Fargo. Please proceed with your question.

Hey, guys good morning.

Just curious.

Kevin.

You don't have as much volume our gallons as Elon how are you sort of allocating those amongst customers and are there particular areas of the country and more profitable can you maximize mix and profitability as you think about.

Where to put your limited volume at this point.

I think theres a lot of really good work, that's taking place Mike in this pretty good observation.

Your part because we've had to make some decisions and some of those decisions include paring down the product line to ensure that we have the products that needs that were needed.

Really I think done a terrific job.

And utilizing the resources or the raw materials that have become available and we treat those precious raw materials, just as that so we're manufacturing products that could best fit the needs of our customers and there are times, when we're giving customers.

A product that will fit their needs, but it may not have been the product that they came in to get into.

So we're working with them and I would say this that as we exit this the line of site that we've established and the relationships that we've built with our customers is one of the reasons that we're so excited about how do you turn something bad into something good the relationships are stronger because our teams are working with our customers in a very unique way.

They may come in talking about wanting a product.

And our teams work with them to understand what is the project. What are you doing let me get this project product for you and we're keeping our customers in peat and Thats been a big mantra within the tag organization is keeping our customers and that responsiveness, particularly at the store and Rep level is a point of differentiation, we've got a number of stores.

Out there and we're leveraging the inventory and availability in those stores.

The way that quite frankly, most companies Couldnt do and I'm really proud we talk a lot about one sherwin mentality of doing what's best for the company and so there is a sharing of inventory as close to the customer as possible to be as responsive as possible. So we're not we're trying not to get to the decision point that you make about which customer to serve what we are trying.

Thing to do is get to the point, where we're we're answering the question of what products can we get this customer to keep them moving and keep them, making paint and keep them providing for their families and as a result of that are our view of their projects has improved their sharing more information with us and Thats why when we asked we were asked earlier about the confidence.

We have an in demand while we think it's as solid as we believe as our customers as we've worked through this.

Our sharing more with us than they ever have before.

Just us were working with them and we're partners and so we're giving them products that get them off their projects onto the next ones next project and they are making money doing it.

Got it and as a quick follow up given that our cast a surprise to the upside one came out of first place but.

If you were to see upside or <unk>.

Where do you think you guys could surprise to the upside in 'twenty, two where do you think you can do that and particularly what what's in your control to do that.

We're going to surprise.

I would tell you. This if you look back over the last two years we've generated.

Over $5 6 billion in net operating cash and we've returned $6 3 million a $1 billion to our shareholders in the form of dividends and share buybacks. We've also been investing in this business Mike.

So in our North America paint stores, we've opened 133, new stores net new stores of 180, new reps.

Added.

Probably over 2800 management trainees.

To make sure that we have a really strong future pipeline we've we've.

Adjusted in our pro who paints with our consumer brands partners.

The performance coating side, we're adding services and solutions that we really believe our customers are willing to pay for because it's helping them make more money and that's what we're focused on.

We've not talked about this yet, but we've been investing in innovation.

And some might say well geez, how can you invest in innovation.

Your first question.

We're sitting here with raw materials, having to make tough decisions about which products we're going to make.

Would you be investing in innovation and the answer is yes, we are investing in innovation and in fact, if you look over the last 10 years, we've averaged probably over 20, new products per year, and that's really important it's an important part of our strategy and I know that firsthand because I can remember when I was a store manager and just learning to <unk>.

<unk> product.

New products made a.

A pretty average salesperson are much better salesperson I would tell you. It helped me a lot.

And I think it gave me confidence and it gives our people confidence and most importantly, I think it gives our customers confidence.

So we're investing in these products and these products or solutions that our customers use to help their business and we think we're uniquely positioned to be responsive to those customers needs.

In both the.

The needs they have that they can articulate and sometimes the unarticulated the things that they do.

<unk> may not know.

And so it should be no surprise that one of the surprises that we have coming down. The pipe include breakthrough technologies in areas of durability scuff resistance more resistance.

It's clear with the surge in Covid variance a key emphasis in the market right now is keeping surfaces clean.

And so you'll be hearing about some of these surprises as you say our self cleaning technology platforms.

As we move forward, but right now naturally we are focused on.

On the precious raw material allocations and servicing our customers.

But rest assured that that's an important part of what we're doing.

I think the other areas that you should expect that might surprise us.

The output of the capital expenditures that we're making we've talked about capacity utilization.

And the incremental capacity that we've added we've added $670 million over the last few years, we're going to we're going to get every ounce of money out of those we're going to put those assets to work and we're going to use them hard.

But I also think the and this is a bit longer term, but.

Youre asking about surprises I think people will be surprised as we've invested in our new R&D facility in I, just mentioned innovation, while thats not going to be in the short term, it's going to be an important part of what helps drive our company forward.

Because I think the collaboration that we're going to get from our wonderful technology people is really going to be exciting.

And then I guess just thinking on top of my head the last thing that I would add.

That would be the utilization of this <unk>.

<unk> polymers asset that we that we acquired.

I think.

Our ability to respond and our ability to do so.

Really.

Outperformed the market.

And really de risk some of what comes inherent from the Gulf Coast.

We believe going to be a differentiator as well. So those are the things Mike I want to talk about there is a lot more than we have up our sleeve, we're pretty excited over here about what we're working on we could talk about themes like what's coming down the pipe in digital and some of the other areas, but I've got a lot of confidence that.

While we're excited about what we've accomplished and yet.

This quarter, we would like to have a better fourth quarter.

I'm really excited about where we're headed and I really do believe that the best is ahead, we're just getting started.

Alright, thank you.

Mike.

Our next question comes from the line of Steve Byrne with Bank of America. Please proceed with your question.

John You just mentioned this approach of paint what exactly is that initiative.

How can you help loews capture more paint contractor business and do you see any risk from a recent initiative at home depot to do something similar.

But we respect all our competitors Steve so.

We don't just stick our head in the San Jose.

Nothing's a risk in fact, we often talk about our healthy paranoid life, which we.

We take we take everything.

Serious and nothing for granted but what's the what's the pro who piece is an initiative that really drives.

Effort towards these contractors, who who paid as a part of our project. So our stores are focused on the painting contractor those that wake up every day with a goal of applying paint.

There's a whole host of contractors out there that could be remodelers are.

In fact, I would say nearly every project out there nearly every project ends with paint on the project.

And so there are customers that prefer a different shopping environment than a paint store and the reason is they might want to pick up drywall they might want to pick up cabinets, they might want to pick up plumbing, whatever it might be and so they choose their preference to be a home center platform. We've got a terrific relationship with a number of.

<unk>.

Consumer brands customers to focus in on this pro who paints and we believe that.

There is a terrific opportunity in many cases to apply what we've learned through our our tag business.

Both in services and actions as well as product technology to bring in to help our customers better penetrate those customers that prefer that format.

While we have had some very limited success in that through our stores.

I would say that the terrific opportunity for us is to have much greater penetration through our home Center partners just as they may have had some success with painters.

We think by kind of looking at the market and finding these opportunities and really putting the effort in product services.

All the different unique nuances on helping those customers make more money will ultimately benefit everyone.

And then just one more on this.

Year over year issue with respect to tag.

You noted the the year ago volumes were very strong and you have year over year headwind is there is there are components of it.

That year over year volume.

Drag that is also has a mix shift impact on price.

If the year ago volumes were more DIY and tag.

Did that result in a.

The price benefit that is a year over year drag that is also something that's being reflected in the guide.

No I wouldn't say, that's the case, Steve, but when you when you bring a mix shift.

I jumped too is wanting to clarify that what we are experiencing is a very positive mix shift.

Our highest quality products are the ones in greatest demand.

If you could talk about a lot of issues. One we've not talked about yet is labor and when you talk about painting contractors trying to get as much done as possible.

They are all very well aware.

Getting the most out of a project getting in and out with less call backs being able to go back and touch up if you will getting the lowest price get on a peak is not the answer in fact, just the opposite and.

And we do believe that part of the specialty store experience.

And quite frankly in many cases, what we are.

Either now or will be bringing to our home center partners allows our contractors to be more productive. So again, we're looking at helping our contractors make their labor some of whom may not be as experiences. They would like we are helping to make those laborers much more productive.

And more professional in their output.

Their finished products in the wood and a lower quality.

Yes, the only thing I would add is just as a reminder, DIY related to relative to the paint stores is probably about 10% when I was talking about architectural volume in our first half versus a difficult comp that included both tag.

Speaker 1: consumer and consumer had a 25% growth in their first quarter last year.

And consumer and consumer at a 25% 25% growth.

In their first quarter last year.

Okay. Thank you.

Thank you Steve.

Speaker 2: Our next question is from the line of Arun Viswanathan with RBC Capital Markets. Please just see what you're...

Our next question is from the line of Arun Viswanathan with RBC capital markets. Please proceed with your question.

Speaker 3: Great. Thanks for taking my question. Good morning. A lot of the questions, I guess, have been asked. So maybe I'll just ask a couple of questions on a particular couple of verticals. So could you update us on what you're seeing in commercial construction and MRO? I know those are markets that have kind of lagged during the pandemic. Has there been any improvement there? I imagine not, just given kind of the lingering effects, but maybe you can just address that first.

Great. Thanks for taking my question good morning.

A lot of the questions I guess I have been asked so maybe I'll just ask a couple of questions.

A couple of vertical so.

Could you update us on what Youre seeing and commercial construction and MRO I know those are markets that had kind of lag during the pandemic.

Has there been any improvement there I imagine not just just given kind of a lingering effects, but maybe you can just address that first.

Yeah.

Speaker 4: Underlying demand, I'd say, in commercial is solid. Sales, we've been challenged in some of these areas as.

Under line demand I'd say in commercial as solid sales.

<unk> been challenged in some of these areas as we've been pumping through availability, but.

Speaker 4: You know, we've been pumping through availability but a product that I'd say it feels pretty good. And the reason I say that everyone is that these projects are beginning to come back online.

Product, but I'd say it feels pretty good and the reason I say that Arun is that these projects are beginning to come back online.

Speaker 4: in reaching the paint stage in many cases. Our customers in this space have reported some of the labor constraints.

And reaching the paint stage in many cases.

Our customers in this space have reported some of the labor constraints that we've talked about there not only impacting the paint business. So these guys are waiting for drywall, those who may be fighting for more labor to get.

Speaker 4: that we've talked about, you know, they're not only impacting the paint business. So these guys are waiting for drywallers who may be fighting for more labor to get, you know, the drywall done sooner and you keep moving up the food chain. So it's having an impact on the entire flow of the project. But as Jim mentioned, you know, if you look at the Dodge

The dry wall done sooner and you keep moving up the food chain. So it's having an impact.

<unk>.

The entire flow of the project, but as Jim mentioned, if you look at the Dodge momentum index, it's strong and we have a lot of confidence.

Speaker 4: Momentum index it's it's strong and we have a lot of a lot of confidence that it will continue

We will continue.

Speaker 4: I'm sorry, the other segment you asked about was, oh, MRO from a – well, I'd say maybe on a broader sense, we could answer MRO because I think it also fits this, but maybe I could help you with protective and marine because it fits underneath that very well. Our business here was up and very strong. We were up double digits.

I'm sorry, the other segment you asked about was MRO from AR.

Well.

I'd say, maybe on a broader sense, we could answer MRO because I think it also fits this maybe I could help you with protective and marine because it fits underneath that very well.

Our business here was up very strong Europe double digits.

Speaker 4: And there's a lot of really good work here.

And there is a lot of really good work here.

Speaker 4: We have spoken about our strength in Petrochem and the opportunities there.

We have spoken about our strength in Petro Chem.

And the opportunities there.

Speaker 4: The work that we've been doing in the adjacent markets is beginning to pay off. We're excited about that. And as the government spending on infrastructure continues to work its way through, while it may not be immediate, if you look longer term, we're really well positioned for that and working hard to capture that as well. So it's really good. If you look at the professional side of every TAG segment that we have, we've got tremendous confidence. We've got a lot of talent. We've got a lot of talent.

The work that we've been doing in the adjacent markets is beginning to pay off we're excited about that.

And as the.

Government spending on infrastructure continues to work its way through while it may not be immediate if you look longer term, we're really well positioned for that and working hard to capture that as well so.

Really good if you look at the professional side of every tag segment that we have.

Tremendous confidence.

It's a very strong market.

Speaker 4: It's a very strong market from a demand standpoint. And as I mentioned, I know that from my years of experience. You know that when pricing is flowing through from us to our customers, as well as it is, and from them to their customers, because their customers simply want the project done and they're willing to pay to get it, it's an indicator for us of the strength of the market.

From a demand standpoint, and as I mentioned I know that from my years of experience.

No what that when pricing is flowing through from our customer from us to our customers as well as it is in from them to their customers because their customers simply want the projects done and they're willing to pay to get it it's an indicator for us of the strength of the market.

Yes.

Speaker 3: Thanks. And just as a follow up, maybe I can just ask about free cash flow and uses there are so.

Thanks.

Just as a follow up maybe I can just ask about free cash flow and uses thereof. So.

Speaker 3: You know, it appears that maybe working capital, you know, could be a drag as you as you kind of.

It appears that maybe working capital could be a drag as you as you kind of.

Sal higher priced inventory and Raj is that right or is it building inventory that would actually.

Speaker 3: you know, maybe benefit working capital as you move through 22.

Maybe benefit working capital as you move through 'twenty, two and so could you just help us understand free cash flow growth in 'twenty two expectations and.

Speaker 3: And so, could you just help us understand free cash flow growth in 22 expectations and then uses thereof? I mean, have you seen valuation multiples remain elevated and thus, you know, most excess cash will be used for buybacks? Is that how we should think about free cash flow and its use here?

And then uses thereof.

Have you seen valuation multiples remain elevated.

And Thats.

Most excess cash will be used for buybacks is that how we should think about.

Free cash flow and its use here.

Speaker 1: Yeah, Ron, I think what we're expecting is that we'll generate a slightly higher net operating cash in 2022 with the improvement in net income.

Around.

I think what we're.

We're expecting that that will generate a slightly higher net operating cash in 2022 with the improvement in net income.

Speaker 1: To your point, partially offset by the increase in working capital, we expect the end of the year with significantly more architectural inventory gallons than we ended in 2021. You're correct. There's some inflation there. As far as CapEx, as John talked about, we expect that to be about 1.9% or $415 million.

To your point, partially offset by the increase in working capital we expect to end the year with significant more architectural inventory gallons than we added in 2021, plus you are correct. There is some inflation there.

As far as Capex.

John talked about we expect that to be about one 9% or $415 million.

Speaker 1: plus another $450 million for the building or future projects. That does not include incentives, so we'll see some cash out less than that $450. Dividends, we expect a 9% increase to $240. That's about a $630 million number, up 8%.

Another $450 million for the building our future projects.

Does not include incentives so we will see some.

Cash out less than that $4 50.

Dividends, we expect.

And that 9% increased to 240.

$630 million number.

Up 8%.

Speaker 1: So your free cash flow is, you know, gonna go backwards.

So your free cash flow.

I'm going to go backwards.

Speaker 1: But as far as M&A is concerned, when you look at our debt to EBITDA leverage ratio, it was up to 2.9 at the end of this year.

But as far as M&A is concerned when we look at our debt to EBITDA leverage ratio was up $2 nine at the end of this year.

Speaker 1: Our forecast is really for the debt to EBITDA to approach the high end of our range. So two to two and a half times we expect debt to be flat and really what's driving that leverage ratio down is the increase in EBITDA. So from a balance sheet standpoint we're going to have capacity to acquire and we're going to continue to pursue acquisitions.

Our forecast is really for the debt to EBITDA approached the high end of our range. So.

The two to two five times, we expect that to be flat.

What's driving that leverage ratio down is the increase in EBITDA. So from a balance sheet standpoint, we're going to have capacity to two.

To acquire and we're going to continue to pursue acquisitions.

Speaker 1: uh... that fit our strategy uh... and and we do expect to close the previously announced seek acquisition in our first quarter but and then you're right absent uh... additional M&A we're gonna buy our stock back. We're going to continue to be very consistent in our capital allocation philosophy and we're not going to hold cash.

That's been our strategy.

And we do expect to close the previously announced seek acquisition and our first quarter, but and then youre right absent dish.

<unk> M&A, we're going to buy our stock back we're going to be continue to be very consistent in our capital allocation philosophy, and we're not going to hold cash.

Thanks.

Thanks Sarah.

Speaker 2: Our next question comes from the line of Mike Harrison with Seaport Research. Please proceed with your question.

Our next question comes from the line of Mike Harrison with Seaport Research. Please proceed with your question.

Hi, good morning.

Speaker 5: Hi, good morning. I was wondering if you can break down the raw material situation a little bit further for us. How do you see some of these specific raw material baskets behaving this year? As you look at resins, pigments, solvents, additives, and packaging, are you still seeing some of those go up significantly while others are stable or maybe moderating?

I was wondering if you can break down the raw material situation a little bit further for us how do you see some of these specific raw material baskets behaving. This year as you look at resin pigments solvents additives and packaging are.

Are you still seeing some of those go up significantly while others are stable or maybe moderating.

Yes, Mike a couple of comments, there I would say.

Speaker 6: Yeah, Mike, a couple of comments there, I would say, you know, in 22, I think the biggest increases you'll, we're still expecting will be monomers, resin, solvents, and packaging.

And 'twenty two I think the biggest increases yield.

Still expecting will be monomers resins solvents and packaging.

Speaker 6: You know, we look at propylene, as we've often talked about, and that really is critical to about 60% or so of our raw material basket. There's been a little bit of a disconnect here recently. We've seen propylene ticking down, but we haven't necessarily seen it in the things that we're buying that come from that feedstock. I think part of that is because of the strong demand environment that we're in.

No we look at propylene as we've often talked about and that really.

It is critical to about 60% or so of our raw material basket.

Little bit of a disconnect here recently, we've seen propylene ticking down, but we haven't necessarily seen it in the in the things that we're buying that come from that feedstock I think part of that is because of the strong demand environment that we're in.

Speaker 6: You know, I think that also on the TIO2 side, we're seeing that tick up as well. Inventories remain tight given the strong demand, but we feel very good about our supply of TIO2 given the really strong relationships that we have with our suppliers.

I think that also on the <unk> side, we're seeing that tick up as well inventories remain tight given the strong demand, but we feel very good about our supply of tio too given the really strong relationships that we have with our suppliers.

Alright, and then my other questions on the Covid situation. It seems like two weeks ago that was kind of dominating the conversation maybe just give us an update on how youre seeing the all micron.

Speaker 5: All right, then my other questions on the COVID situation, it seems like two weeks ago, that was kind of dominating the conversation. Maybe just give us an update on how you're seeing the Omicron impact playing out relative to where you were two weeks ago.

Packed playing out relative to where you were two weeks ago.

Speaker 4: Well, I'd say it's improving, you know, we're no different than what you what you would see in the

Well I'd say, it's improving.

We're no different than what you.

You would see.

The.

Speaker 4: in the marketplace itself. So we saw the same spike and kind of decline that the rest of the country saw.

And the marketplace itself. So we saw the same spike in.

And kind of <unk>.

Decline that the rest of the country saw so we.

Speaker 4: are excited to try to get this, you know, behind us, as we mentioned earlier, Mike.

We are excited to try to get this behind us as we mentioned earlier Mike.

Speaker 4: We're tired of talking about this stuff. I don't wanna talk about COVID. I don't wanna talk about raw materials. I wanna talk about growing sales and growing profits. So we can try to give you a forecast and what's happening, but we're just gonna do what we do. We've got.

We're tired of talking about this stuff.

We'll talk about COVID-19 over talking about raw materials, and we're talking about growing sales and growing profit. So we can try to give you a forecast.

What's happening, but we're just going to do what we do we've got.

Speaker 4: A lot of determination on this side, backed up with a lot of skill and scar tissue, and I'd rather really not even answer this and just tell you we're going to fight through this. That's what we do.

A lot of determination on this side backed up with a lot of skill and scar tissue.

I'd, rather really not even answer this and just tell you we're going to fight through this that's what we do.

All right fair enough thanks very much.

Thank you Mike.

Speaker 2: Our next question is coming from the line of David Baigleiter with Deutsche Bank. Please proceed with your question. Thank you. Good afternoon. I'm.

Our next question coming from the line of David Begleiter with Deutsche Bank. Please proceed with your question.

Thank you good afternoon.

Speaker 7: John , Al, just looking at Q1, how should we think about the improvement or the growth in TAG earnings versus Q4?

John I was just looking at Q1, how should how should we think about the improvement or the growth in tag earnings versus Q4.

Yeah. So.

David If you look at our fourth quarter and tag I talked about the volumes and the impact there.

Speaker 1: David, if you look at our fourth quarter in TAG, I talked about the volumes and the impact there. When you look at it coming into

When you look at it coming into.

Speaker 1: Our first quarter, you know, we're still going to see elevated raw material cost

Our first quarter.

Still going to see elevated raw material costs.

Really the highest.

Speaker 1: In our highest cost quarter for the year is our expectation, you know, we do expect our tag fails.

And our highest cost quarter for the year is our expectation.

We do expect.

Our tag.

Sales to be.

Bob.

Speaker 1: by a low to mid-single digit, which tells you with the higher price that our volumes are going to be backwards, which again is going to put pressure.

Bye at low to mid single digit, which tells you with the <unk>.

Higher price that our volumes are going to be backwards, which again is going to put pressure on our margins, but when you look at it sequentially we.

Speaker 1: on our margins, but when you look at it sequentially, we do expect to see improvement in our dollars and in our margins.

We do expect to see improvement in our in our R.

Our dollars and in our margin.

Speaker 1: It's a small quarter, so any driver of volume, specifically when we talk about the first quarter and fourth quarter, we talk about exterior sales in the southeast and southwest.

It's a small quarter, so any trip driver of volume.

Specifically, when we look to talk about the first quarter and fourth quarter, we talked about exterior sales in the southeast and southwest.

Speaker 1: driving the performance and assuming.

Driving the performance.

Assuming.

Speaker 1: those hit the forecast we need to hit and expect them to hit, you know, we should be ahead of our fourth quarter TAG EBIT margin in profit.

Those hit the forecast, we need to hit and expect them to hit we should be ahead of.

Our fourth quarter tax EBIT.

EBIT margin and profit dollars.

Speaker 7: Great. And just briefly, John , looking at price realization on announced price increases, this cycle versus prior cycles, it seems to be doing a little bit better. Why is that, and is it sustainable going forward?

Great and just.

John looking at price realization, our announced price increases this cycle versus prior cycles.

If you're doing a little bit better.

Is that and is it sustainable going forward.

Speaker 4: Well, I think for all the reasons, David, that we just talked about, you know.

Well I think for all the reasons, David that we just talked about.

Speaker 4: But actually, maybe a little more. I'd say it's certainly a market where supply and demand is such that our customers have the confidence that speaks to the demand.

Actually maybe a little more I'd say, it's certainly a market where supply and demand is such that our customers have the confidence that speaks to the demand but.

Speaker 4: I would also say that our teams, if it's, you know, in our consumer business with Todd Ray and his team, working really hard to help our customers be more successful or in our tag business with Heidi Petz and her team, you know, aligning to make sure that our customers, I talked earlier about, you know, keep our customers in pain, working hard to develop products and services, have them at the right place at the right time to be able to do that, or Justin Benz on our performance coding side.

I would also say that our teams if it's in our consumer.

Business with Todd Ray and his team working really hard to help our customers be more successful or.

In our tag business with Heidi Petz and her team aligning to make sure that our customers I talked earlier about keep our customers and working hard to develop products and services have them at the right pleased at the right time to be able to do that or adjusting bids on our performance coating side.

Speaker 4: I mean, we're not just simply reporting. We're not just responding. Customer wants this. We don't have it. That's not who we are.

We're not just simply reporting we're not just responding customer wants us we don't have it thats not who we are.

Speaker 4: What we're trying to do is influence as greatly as possible. So we're aligning closely with our customers. We often talk about running to the center of the fire. We're running to our customers. We're trying to understand what is it that they need? How do we respond the best as we can? Yeah, there's challenges.

What we're trying to do is influenced as greater greatly as possible. So we're aligning closely closely with our customers.

Often talk about running to the center of the fire, we're running to our customers. We're trying to understand what is it that they need how do we respond the best as we can theres challenges.

Speaker 4: What do we do to keep you in paint, to keep you moving? And as a result of that, I think while we're trying to help our customers to be successful, and if it's a public company helping them to reach their goals, their numbers, or a private company who's just trying to feed their family, our goals are aligned with their goals. And when we do.

What do we do to keep you and Pete to keep you moving and as a result of that I think.

While we're trying to help our customers to be successful.

And if it's.

Our public company, helping them to reach their goals their numbers or a private companies who is just trying to feed their families are our goals.

Our goals are aligned with their goals.

When we do our jobs.

Speaker 4: We don't ask to get fat and crazy with money. We ask for our fair share for our shareholders while we're helping them. And that's the focus that we have. And because I think we're working really hard to do that and focusing on their success, we're having more success in executing price increases.

We don't have to get fat and crazy with money, we asked for our fair share for our shareholders, while we're helping them.

And that's the focus that we have and because I think we're working really hard to do that and focusing on their success, we're having more success in executing price increases.

Thank you very much.

Thanks, David.

Speaker 2: Our next question comes from the line of PJ's UberCart with Citi. Please proceed with your question.

Our next question comes from the line of P. J <unk> with Citi. Please proceed with your question.

Yes, hi, good afternoon.

Speaker 8: Yeah. Hi. Good afternoon. Um, John , last year, you know, many projects got delayed with rising lumber and steel prices and lumber after declining in second half of last year. You know, the prices are on the move again and have gone up this year. So you think that's a concern for construction remodeling as a project cost have gone up significantly? No.

John last year, and how many projects that got delayed with rising lumber and steel prices and lumber after declining in second half of last year.

Prices are on the move again and haven't gone up this year.

Or do you think thats, a concern for construction and remodeling.

Project cost have gone up significantly.

No.

Speaker 4: I don't. If you look at the Lyra as an example, and other indicators that we look at, PJ.

If you look at the Libra as an example, and other indicators that we look at P. J.

Speaker 4: There's a very strong demand, it's a strong backlog and, you know, I've.

There is very strong demand and a strong backlog and.

Hi.

Actually heard.

Speaker 4: people including one of them on my staff named my CFO who bought an item that was going to be a slight delay in getting it and the price was variable. Now not everyone may have that patience or ability to just say okay I want it you know I'll pay whatever the market is at that time but there are a lot of people out there that have been

People, including one of them on my staff and my CFO , who bought.

An item that was going to be.

Delay in getting it in the price was variable now not everyone may have that patients our ability to just say, okay I want to pay.

Pay whatever the market is at that time, but there are a lot of people out there that have been.

Speaker 4: pushing off the remodel of their home or the addition that they need or, you know, an area that requires remodeling because it's either aging in place or the home itself needs to be fixed. And many of them, quite frankly, are looking at it with the idea that prices are going up. I want to get this done and get the best price that I can right now because it looks like this may continue.

<unk> off the remodel, there, whom or the addition that they need or.

Area.

That requires remodeling because it's either aging in place or the home itself needs to be fixed.

Any of them quite frankly are looking at it with the idea that prices are going up I want to get this done and get the best price as they can right now because it looks like this may continue.

Speaker 4: But I would tell you that, you know, I think the question that you're asking, once again, comes back to demand. Demand is very strong.

But I would tell you that.

I think the question that Youre asking once again comes back to demand demand is very strong.

Speaker 8: Great. In light of time, I'll pass it along. Thank you.

In light of time I'll pass it along thank you. Thank.

Thank you P J.

Our next question comes from the line of Kevin Mccarthy with vertical Research partners. Please proceed with your question.

Speaker 2: Our next question comes from the line of Kevin McCarthy with Vertical Research Partners. Please receive your question.

Speaker 9: Thank you for taking my question. Al, I think you addressed sequential earnings in TAG already, but I'm tempted to ask about performance coding in that regard, so 4Q into 1Q. If we look at history, I think there are examples of

Yes. Thank you for taking my question.

Al I think you addressed sequential earnings in <unk>.

<unk> already but I'm tempted to ask about performance coatings.

In that regard so <unk> into <unk>, if we look at history and I think they are examples of.

Speaker 9: of that segment trending, you know, flat up and down in 1Q versus 4Q. Do you have a strong feeling of directional sequential trend in performance for 1Q?

Of that segment trending.

Flat up and down in <unk> versus <unk> do you have a strong feeling of directional sequential trend in performance or <unk> 22.

Speaker 1: Yeah, Kevin, I do believe we're going to see sequential improvement. I think that team, for a couple reasons, first, that team has done a terrific job of putting in price increases aggressively throughout 2021 and the need to go again in 2022. There's no backing off on that team. The discipline around knowing they need to get the price and getting it, they are, along

Okay.

Yes, Kevin I do believe we're going to see sequential improvement I think that team.

For a for a couple of reasons first the team has done a terrific job of putting in price increases aggressively throughout 2021.

And the need to go again in 2022, Theres no backing off on that team the discipline around.

Knowing they need to get it get the pricing getting it.

Along with the.

Speaker 1: Volumes that that we're seeing, you know, we talked about our first quarter being up mid to high teens with a high

Volumes that we're seeing.

We talked about our first quarter.

Up mid to high teens with it.

Hi.

Speaker 1: or low double digit increase in price in our first quarter that tells you volume should be low to mid. And I think that's gonna help drive that improvement as well.

Our low double low double digit increase in price in our in our first quarter.

That tells you volume should be low to mid <unk> and I think that's going to help drive.

That improvement as well.

Speaker 9: Excellent, and then I wanted to follow up on the three acquisitions that you referenced. Can you talk through the financial impact of those deals, recognizing that they're in various stages of closing? For example, what is the contribution to sales that you're thinking about that's embedded in your guidance for the first quarter?

Excellent and then I wanted to follow up on the three acquisitions that you referenced can you talk through the financial impact of those deals recognizing that they are in various stages of closing for example, what is the contribution to sales that youre thinking about that's embedded.

In your guidance for the first quarter.

Yes for the first quarter.

Speaker 1: Yeah, for the first quarter, you know what, I would look at a net, if you look at the ANZ divestiture net of acquisitions, it'd be an immaterial head.

I would look at it net if you look at the ANZ divestiture net of acquisition to be immaterial headwinds.

Speaker 4: CECA we don't have in our first quarter or expect to have in our first quarter, so you're really talking about tenant and SPI and net of ANZ, it's immaterial. Tenant was more of a technology buy, we're going to require that to try to take that technology and grow it throughout the company.

CECO, we don't.

On our first quarter or expect to have in our first quarter. So you're really talking about tenant in Spi and net of the ANZ. It's immaterial tenant tenant was more of a technology buy we're going to acquire that to try to take that technology and growth throughout the company.

Speaker 4: It's a it's pretty small acquisition, but it does give us an opportunity and into house points Especially polymers is more internal manufacturing

Yes.

It's pretty small acquisition, but it does give us an opportunity and to Al's point the specialty polymers is more internal manufacturing.

Okay. Thank you very much thanks.

Thanks, Kevin.

Speaker 2: Our next question comes from the line of Greg Mellick with Evercore ISI. Please receive their question.

Our next question comes from the line of Greg <unk> with Evercore ISI. Please proceed with your question.

Speaker 1: Thanks. I wanted to follow up on the impact of volume and ROAS on the gross margin. If we look at last year holistically, would you say that ROAS were half of the 450 BIP pressure and volume was the other half?

Thanks, I wanted to follow up on the impact of volume in raws.

Gross margin.

If we look at last year Holistically.

Would you say that that raws were half of the 450 bps pressure in volume was the other half.

Yes, I think it may be a little more.

Speaker 1: Yeah, I think it may be a little more skewed on the raw material side, and here's why I would say that, Gregg. We saw raw materials really ramp up in the second half of the year, and not having...

Skewed on the raw materials side, and here's why I would say that correct. We saw raw materials really ramp up in the second half.

Of the year and not having.

Pricing really built in to cover that until we got into August 1st we got into a September .

Speaker 1: Pricing really built in to cover that until you know, we got into August 1st. We got into a September 30th the end on tag and then it was heavier on our Petrochem basket and really impacted performance coding. So I think Ross

30th.

On Tag and then it was heavier on our Petro Chem basket and really impacted performance coatings I think Ross.

Speaker 1: really impacted it a little bit more, you know, because the dollar, we couldn't offset dollar for dollar. We were close, but we couldn't offset it.

Really impacted a little bit more because of the dollar.

We couldnt offset dollar for dollar we're close.

Offset it and as that.

Impacts us.

Speaker 1: impacts us, you really see a margin decline. In the specific, though, to like the fourth quarter, the tag volume missed and tag being down, high single digits.

See a margin decline in the specific though to like the fourth quarter the tag volume Miss in tag being down high single digits.

Speaker 1: really would have been the heavier driver in our fourth quarter, but I think if you look at it across the year, it's a little heavier at Raws. Raws would still be the driver, and I guess the follow-up is sort of looking back at history and sort of how we get back to the margins we had in 2020. I think when you went back, that last cycle in 2011 and 2012, it took two years to get back to where you were. Do you think...

Really what have been the.

The heavier driver in our fourth quarter out I think if you look at it across the year, it's little heavier Ross.

<unk> still will be the driver and I guess the follow up is sort of looking back in history and sort of how we get back to the margins. We had in 2020 I think when you unpack that last cycle in 2011 and 12. It took two years to get back to where you were.

Yes.

Speaker 1: Has the business or the company changed enough or the world that you'd expect that to happen faster or slower?

Business or the company changed enough for the World that you would expect that to happen faster or slower.

Speaker 1: the cadence of recovery. You know, I do think, you know, we're a different makeup of a company than we were back then because of the Valspar acquisition. But I don't think the.

The cadence of recovery.

I do think we're.

Current different makeup of our company than we were back then because of the Valspar acquisition, but I don't think.

Speaker 1: you look at the businesses within our performance codings group and the strategy around that and where we can differentiate and get paid for that. I still think that two-year cadence is

You look at the businesses within our performance coatings group.

The strategy around that and where we can differentiate and get paid for that excess still think that that two year cadence.

This is <unk>.

Speaker 1: And the other thing I'd highlight is TAG is still over 50% of our sales, and you look at the strong volume that we expect.

Applicable and the other thing I'd highlight is tag is still over 50% of our sales and you'd look at.

The strong volume that we expect and our second half.

Speaker 1: in our second half and with the pricing activities that have taken place and what we have going in, you know, we have a real opportunity not only to surpass, we certainly feel like the second half of this year will surpass 2020, or 2021, but really approach the 2020 operating margin. So, I think in TAG we could be there. I think the other two segments have more work.

And with the pricing activities that have taken place and what we have going in.

Have a real opportunity not only to.

Surpass we certainly feel like the second half of this year will surpass 2020 or 2021, but really approach. The 2020 operating margin. So I think attack we could be there I think the other two segments have more work to do but.

Speaker 4: But Greg, I would add this, that we learn an awful lot. And I would say with that learning came incredible conviction. Because, you know, when there were some of those delays and it took a little bit longer, you know, it becomes tougher to get it as time goes out. So I agree with Al, and I think that's, those are good guidelines, but.

But Greg I would add this that we learned an awful lot and I would say with that learning came incredible conviction because when there were some of those delays and it took a little bit longer.

It becomes tougher to get it as time goes out so I agree with al I mean, I think thats, a good guidelines, but I'd.

Speaker 4: I'd also say that there's a lot of determination and conviction. We're going to push that as hard as we can.

I'd also say that there's a lot of determination and conviction, we're going to push that as hard as we can.

That's great good luck guys.

Correct.

Next question comes from the line of John Roberts with UBS. Please proceed with your question.

Speaker 10: Next question comes from the line of John Roberts with UBS. Please proceed with your question. Just a quick one here, guys. New commercial construction paint is bid pretty far in advance of when the buildings are completed and painted. Have you been able to go back and reprice that, or does that just have to roll through over time?

Just a quick one here guys new commercial construction paint is bid pretty far in advance of when the buildings are completed and painted.

<unk> been able to go back and reprice that or does that just have to roll through over time.

Speaker 4: There's not a single answer for that, John . In some cases, there are opportunities to adjust in many of them, but in some cases, there's not. And so it's a case-by-case basis. Thank you.

There's not a single answer for that John in some cases, there there are opportunities to adjust and many of them, but in some cases, there is not and so it's a case by case basis.

Okay. Thank you you.

You bet. Thanks, John .

Speaker 2: The next question is from the line of Adam Baumgarten with Zellman. Please just view their questions.

The next question is from the line of Adam Baumgarten with Zelman. Please proceed with your question.

Speaker 11: Hey, good afternoon, guys. Do you expect to bring back some of the SKUs you rationalized as the raw material supply improves in the back half? And if that's the case, do you expect that to have a negative impact on margins?

Hey, good afternoon guys.

Yes.

Spect to bring back some of the Skus you rationalized as the raw material supply improves in the back half and if Thats. The case do you expect it to have a negative impact on margins.

Speaker 4: But what I would say is that it's not just going to be going back to business as usual. They'll go through a very disciplined approach. And, you know, the question is going to be if we survived this long without it, why do we need to bring it back? So we want to manage our inventory.

But what I would say is that it's not just going to be going back to business as usual, we'll go through a very disciplined.

Approach and the question is going to be if we survived this long without it why do we need to bring it back so we want to manage our inventory.

Speaker 4: and are working capital very closely. So my answer would be that.

Our working capital very closely so my answer would be that.

Speaker 4: There's a disciplined approach and if in fact you see a working capital investment, it's because there's the proper return that comes along with it.

There is a disciplined approach and if in fact, you see of working working capital investment is because there is the proper return that comes along with them.

Speaker 11: Thanks. And then just thinking about CapEx maybe beyond 22, do you anticipate any additional headquarter related CapEx in 2023?

Got it thanks, and then just thinking about Capex, maybe beyond 'twenty two do you anticipate any additional headquarter related capex in 2023.

Speaker 1: Uh, yeah, I think, um, you look at what, what we're spending so far, we, we, uh, gonna see another similar amount in 2023 and then have it drop off in 2024.

Yes, I think.

If you look at what we're spending so far.

<unk> got to see another similar amount in 2023, and then have a drop off in the 2024.

Great. Thank you.

Thanks.

Speaker 2: Our next question is from the land of Garrick Chamoy with Loop Capital. Please proceed with your question.

Our next question is from the line of Garik <unk> with loop capital. Please proceed with your question.

Speaker 5: All right, thanks. Just one question for me. Just to be clear on the full year guidance and pricing, are you assuming any additional pricing is needed beyond what you've announced for the first quarter?

Alright. Thanks, just one question for me just to be clear on the full year guidance and pricing are you assuming any additional pricing as needed beyond what you've announced for the first quarter.

Speaker 1: I'd say and tag the assumption is that there's no additional...I think within consumer, that'll roll in, but I don't expect...there's not in Argonne, it's additional. Performance coding is a little different just because of the way...

I would say and tag the assumption is that there is no additional.

I think within consumer.

That'll roll in but I don't expect.

There is not in our guidance additional performance coatings is a little different just because of the way.

Speaker 1: Um, they rolled pricing in in 2021, they may have some in the first quarter, they may have some rolling into the second quarter, but, you know, we're not.

They roll pricing in 2021, they may have some in the first quarter. They may have some rolling into the second quarter, but we're not certainly planning today to have second half price increases.

Speaker 1: certainly planning today to have second half price increase.

Speaker 4: I think our approach is this, that we try to keep the increase to a minimum.

I think our approach.

Is this that we try to keep the increase to a minimum.

Speaker 4: And when you approach it that way, there can be a little more volatility. You know, we don't want to be out in front of our customers asking for more than what we really absolutely can see with the hopes of covering what might be a future price increase.

When you approach it that way there can be a little more volatility we don't want to be out in front of our customers asking for more than what we really absolutely can see.

With the hopes of covering what might be a future price increase and so that introduces a little more volatility if in fact, the numbers move prices move we've got to respond to that but we think that's the best approach to our customers to try to keep the pricing to a minimum.

Speaker 4: And so that introduces a little more volatility if, in fact, the numbers move or the prices move, we've got to respond to that, but we think it's the best approach to our customers to try to keep the pricing to a minimum.

Speaker 4: and have an open discussion with them about the volatile environment that we're in.

And have an open discussion with them about the volatile volatile environment that we're in.

Got it thanks, so much.

Thanks Garik.

Speaker 2: Our final question is from the line of J.D. Padgett with Onfield Research. Please proceed with your question.

Our final question is from the line of JD Paget with ICL Research. Please proceed with your question.

Thank you.

Speaker 12: It's really just around M&A. Considering what has happened in the raw materials industry, if you want to look at it from a point of view of bulking up and increasing your size, do you think a large-ticket consolidation on an inter-regional basis is an answer to this, or is this really how you're going about in-housing some of the resin?

It's really just around M&A actually.

Considering what has happened in the raw materials industry.

And if you want to sort of look at it from our point of view of bulking up in.

Increasing your sized using a large ticket consolidation.

On the inter regional basis.

Is that answer to this or is this really how you're going about in housing some of the resin.

Speaker 12: capacity and, you know, verifying or rather putting more suppliers on your list is the way to go about sort of different way of asking, but do you see large ticket consolidation in this industry? Because generally, raw material crisis have brought coating consolidations. Thank you.

Capacity.

Verifying all rather.

Putting more suppliers on your list is the way to go about sort of different way of asking but you see large taking consolidation in this industry because generally raw material prices have brought coating consolidations. Thank you.

Speaker 4: Well, if I may, just start with your first point about our desires to bulk up. I'd say that what is really the driver for our M&A strategy is in fact our strategy. So it's not to be the biggest, it's not to do anything other than to put ourselves in a position to be able to best serve our customers. And we prefer to do that in a very unique and differentiated way.

Well if I may just start with your first point about our desires to bulk up I would say that.

What is really the driver for our M&A strategy is our is in fact our strategy. So.

So it is not to be the biggest if not to.

To do anything other than to put ourselves in a position to be able to best serve our customers and we prefer to do that in a very unique and differentiated way.

Speaker 4: bringing them solutions that help them to be successful and profitable.

Bringing them solutions that help them to be successful and profitable.

Speaker 4: And so the litmus test, if you will, is business by business.

And so the litmus test if you will is business by business.

Speaker 4: looking at what is it that we need to be in position to be able to serve our customers. We don't have a desire to be everything to everyone everywhere. We're not chasing commodities, we're not, it's not just about size, to us it's about

Looking at what is it that we need to be in position to be able to serve our customers. We don't have a desire to be everything to everyone everywhere, we're not chasing commodities were not.

It's not just about size to us it's about <unk>.

Speaker 4: driving value for our customers and shareholder value for our shareholders. And we do that by staying true to a very precise strategy. You're not going to see us jumping all over the world. You know, something's for sale, so we're chasing it.

Driving value for our customers and shareholder value for our shareholders and we do that by.

To ensure to very precise strategy.

Youre not going to see us jumping all over the world Something's for sale. So we're chasing it.

We've got a very defined strategy.

Speaker 4: We've got a very defined strategy and if it bounces up against our strategy and all hands us to do it, we're interested. If not, we're not.

Ounces up against our strategy and will enhance us to do it we're interested if not we're not.

Alright, thank you so much.

Q.

Speaker 2: Thank you. At this time, I'll turn the call back to Jim Jay for closing remarks.

Thank you at this time I will turn the call back to Jim Jaye for closing remarks.

Speaker 6: Thank you, Rob. I hope you heard today how excited we are as we enter Fiscal 22, a lot of opportunity ahead of us and we're after it.

Thank you Rob Hope you heard today, how excited we are as we enter fiscal 'twenty two a lot of opportunity ahead of us.

We're after it.

Speaker 6: Tell you that demand is strong, as you heard, across all of our businesses. And just a lot of confidence in our people and our capability.

I'll tell you that demand is strong as you heard across all of our businesses and it's just a lot of confidence in our people and our capabilities. So thank you for joining us today as always we'll be available for your follow up calls and follow up emails have a great rest of your day. Thank you.

Speaker 6: But thank you for joining us today. As always, we'll be available for your follow-up calls and follow-up emails. Have a great rest of your day.

Speaker 2: This will conclude today's conference. Thank you for your participation. You may now disconnect your lines.

This will conclude today's conference. Thank you for your participation you may now disconnect your lines at this time.