Overview: We continue to operate in a challenging economic environment that has negatively affected our results. In the second quarter of fiscal year 2009, sales decreased compared to the prior year primarily due to volume declines and unfavorable foreign currency exchange rates, partially offset by price increases implemented last year. Sales in our Coatings segment decreased significantly reflecting continued weakness in industrial markets. A dramatic drop in global demand, particularly in commercial construction, heavy equipment and consumer durables, has affected our coil and general industrial product lines. Our wood product line continues to be affected by the weak housing market. Sales in our packaging product line were soft due to continued customer inventory reductions and a slowdown in growth in eastern European markets. Sales for the quarter in our Paints segment were flat after adjusting for the negative effect of foreign currency. Gross profit as a percent of net sales increased compared to last year as a result of previous price increases, lower raw material costs, favorable product mix and improved productivity in our manufacturing facilities, partially offset by restructuring charges and higher incentive-based compensation accruals. Operating expenses for the quarter, as a percentage of net sales, increased compared to the prior year due to lower sales volumes. Operating expense dollars decreased in the second quarter of 2009 compared to the second quarter of 2008 primarily as a result of effective expense controls and the positive impact of foreign currency exchange, partially offset by higher incentive-based compensation accruals.

During the third quarter of 2008, we initiated a comprehensive series of actions to lower our cost structure and further increase our operational efficiency. During the first quarter of 2009, we expanded these restructuring activities. We presently expect the total restructuring cost to be $0.35 to $0.38 per share after tax. The restructuring activities in 2008 resulted in pre-tax charges of $23.5 million or $0.16 per share after tax. The restructuring activities for the three and six-month periods ended May 1, 2009, resulted in pre-tax charges of $7.9 million or $0.05 per share after tax, and $17.0 million or $0.11 per share after tax, respectively.

Earnings Per Share: Net income per share available to common stockholders was $0.28 and $0.39 for the three and six-month periods ended May 1, 2009, and $0.38 and $0.59 for the three and six-month periods ended April 25, 2008, respectively. We accrued $3.3 million in the second quarter of 2009 and $6.6 million year to date for the Huarun Redeemable Stock (see Note 3 for further details). This compares to an accrual of $2.9 million for the second quarter of 2008 and $5.8 million year to date in 2008. The accrual reduced basic and diluted income available to common stockholders by $0.03 and $0.06 per share in both the three and six-month periods ended May 1, 2009 and April 25, 2008. The table below presents adjusted net income per common share - diluted, which excludes a non-cash accrual relating to Huarun Redeemable Stock. The table also presents restructuring charges included in net income in the respective periods.

                                                  Three Months Ended          Six Months Ended
                                                 May 1,      April 25,      May 1,      April 25,
                                                  2009          2008         2009          2008
  Net income per common share - diluted        $     0.28    $     0.38    $    0.39    $     0.59
  Huarun redeemable stock accrual                    0.03          0.03         0.06          0.06
  Adjusted net income per common share -
  diluted                                      $     0.31    $     0.41    $    0.45    $     0.65
  Restructuring Charges                         $    0.05     $       -     $   0.11             -

"Adjusted net income per common share - diluted" is a non-GAAP financial measure. Management discloses this measure because we believe the measure may assist investors in comparing our results of operations in the respective periods without regard to the effect on results in the 2009 and 2008 periods of the non-cash accrual related to the Huarun Redeemable Stock. As the Huarun Redeemable Stock is redeemed, acquisition accounting is applied.

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Critical Accounting Policies: There were no material changes in our critical accounting policies during the three-month period ended May 1, 2009.

Operations:




Net Sales                      Three Months Ended                 Six Months Ended
(Dollars in millions)    May 1,     April 25,      %        May 1,     April 25,      %
                          2009        2008       Change      2009         2008      Change
Coatings                 $ 357.8   $     493.9    (27.5 )% $   732.5   $    965.3    (24.1 )%
Paints                     257.2         261.8     (1.8 )%     469.9        490.6     (4.2 )%
All Other                   53.4          80.7    (33.8 )%     105.5        145.6    (27.5 )%
Consolidated Net Sales   $ 668.4   $     836.4    (20.1 )% $ 1,307.9   $  1,601.5    (18.3 )%

• Consolidated Net Sales - The sales decline for the second quarter of 2009 was 15.6% after excluding the negative effect of foreign currency of 4.5%. The sales decline year-to-date was 14.8% after excluding the negative effect of foreign currency of 3.8% and the positive effect of acquisitions of 0.3%. The decrease in core sales for the second quarter and year-to-date periods was primarily due to lower volume, partially offset by previous price increases.

• Coatings Segment Net Sales - The sales decline for the second quarter of 2009 was 21.4% after excluding the negative effect of foreign currency of 6.1%. The sales decline year-to-date was 19.3% after excluding the negative effect of foreign currency of 5.3% and the positive effect of acquisitions of 0.5%. Our coil, general industrial and wood product lines primarily drove the core sales decline for the quarter and year-to-date periods. Our wood product line continues to be affected by the weak housing market. A dramatic drop in global demand, particularly in commercial construction, heavy equipment and consumer durables, has affected our coil and general industrial product lines.

• Paints Segment Net Sales - Sales were flat for the second quarter of 2009 after excluding the negative effect of foreign currency of 1.8%. The sales decline year-to-date was 3.4% after excluding the negative effect of foreign currency of 1.0% and the positive effect of acquisitions of 0.2%. The decrease in core sales year-to-date was primarily due to lower demand in the first quarter of 2009 in our North American architectural product line. Weaker demand in the Chinese market has affected the growth of our Huarun Paints architectural product line. The majority of our architectural markets showed improvement in demand from the first quarter of 2009, particularly in the U.S. do-it-yourself market.

• All Other Net Sales - The All Other category includes resins, colorants, gelcoats and our furniture protection plan business. The sales decline for the second quarter of 2009 was 30.7% after excluding the negative effect of foreign currency of 3.1%. The sales decline year-to-date was 24.1% after excluding the negative effect of foreign currency of 3.4%. Decreased volumes in the gelcoat product line due to the weakened economy was the primary driver of the lower sales.

Due to the seasonal nature of portions of our business, sales for the second quarter are not necessarily indicative of sales for subsequent quarters or for the full year.

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS




Gross Profit                   Three Months Ended           Six Months Ended
(Dollars in millions)         May 1,       April 25,      May 1,      April 25,
                               2009          2008          2009         2008
Consolidated Gross Profit   $    221.1    $     244.3   $    410.5   $     454.7
As a percent of Net Sales         33.1 %         29.2 %       31.4 %        28.4 %

• Gross Profit - The gross profit increase, as a percent of net sales, was driven primarily by previous price increases, lower raw material costs, favorable product mix and improved productivity in our manufacturing facilities, partially offset by restructuring charges and higher incentive-based compensation accruals. Gross profit for the quarter and year-to-date periods ending May 1, 2009 included restructuring charges of $7.9 million or 1.2% of net sales and $12.8 million or 1.0% of net sales, respectively.

Operating Expenses *                           Three Months Ended               Six Months Ended
(Dollars in millions)                       May 1,          April 25,        May 1,        April 25,
                                             2009              2008           2009           2008
Consolidated Operating Expenses           $     164.0      $      167.2    $     319.1    $     322.6
As a percent of Net Sales                        24.5 %            20.0 %         24.4 %         20.1 %

• Consolidated Operating Expenses (dollars) - Consolidated operating expenses decreased 1.9% to $164.0 million in the second quarter of 2009 compared to the prior year. Consolidated operating expenses declined 1.1% to $319.1 million year-to-date compared to the prior year. The decrease in both periods was driven primarily by effective expense controls and the positive impact of foreign currency exchange, partially offset by higher incentive-based compensation accruals. The year-to-date period was also affected by restructuring charges of $4.2 million or 0.3% of net sales. There were no restructuring costs in operating expenses for the second quarter of 2009.

• Consolidated Operating Expenses (percent of net sales) - As a percent of consolidated net sales, consolidated operating expenses increased 4.5 percentage points for the second quarter compared to last year. The increase is primarily due to lower sales volume. As a percent of consolidated net sales, consolidated operating expenses increased 4.3 percentage points for the year-to-date period compared to last year. The increase is due to lower sales volume, restructuring charges and higher incentive-based compensation accruals.

EBIT                           Three Months Ended           Six Months Ended
(Dollars in millions)         May 1,       April 25,     May 1,       April 25,
                               2009           2008        2009          2008
Coatings                    $     29.9     $     49.5   $    54.8    $      88.8
As a percent of Net Sales          8.3 %         10.0 %       7.5 %          9.2 %

Paints                      $     35.3     $     23.5   $    51.3    $      41.8
As a percent of Net Sales         13.8 %          9.0 %      10.9 %          8.5 %

All Other                   $     (8.2 )   $      2.8   $   (15.4 )  $      (2.5 )
As a percent of Net Sales        (15.4 )%         3.5 %     (14.6 )%        (1.7 )%

Consolidated EBIT           $     57.0     $     75.8   $    90.7    $     128.1
As a percent of Net Sales          8.5 %          9.1 %       6.9 %          8.0 %

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• Consolidated EBIT - EBIT for the second quarter of 2009 decreased $18.8 million or 24.8% compared to the prior year. EBIT year-to-date decreased $37.4 million or 29.2% compared to the prior year. The second quarter and year-to-date periods ending May 1, 2009 included restructuring charges of $7.9 million or 1.2% of net sales and $17.0 million or 1.3% of net sales, respectively. Foreign currency exchange fluctuation had an immaterial effect on EBIT.

• Coatings Segment EBIT - The EBIT decrease as a percentage of net sales for the second quarter and year-to-date periods was driven primarily by restructuring charges. The second quarter and year-to-date periods of 2009 included restructuring charges of $5.5 million or 1.5% of net sales and $12.7 million or 1.7% of net sales, respectively.

• Paints Segment EBIT - The EBIT increase as a percentage of net sales for second quarter was driven primarily by an improvement in architectural demand, previous price increases, effective expense controls and lower raw material costs. The EBIT increase as a percentage of net sales for the year-to-date period was driven primarily by previous price increases, effective expense controls and lower raw material costs. The second quarter and year-to-date periods of 2009 included restructuring charges of $0.3 million or 0.1% of net sales and $0.6 million or 0.1% of net sales, respectively.

• All Other EBIT - The All Other category includes resins, colorants, gelcoats, our furniture protection plan business and corporate expenses. The decrease for the second quarter and year-to-date periods was primarily due to the decline in net sales, higher incentive compensation accruals and restructuring charges. The second quarter and year-to-date periods of 2009 included restructuring charges of $2.1 million or 4.0% of net sales and $3.7 million or 3.5% of net sales, respectively.

Due to the seasonal nature of portions of our business, EBIT for the second quarter is not necessarily indicative of EBIT for subsequent quarters or for the full year.

Interest Expense                   Three Months Ended         Six Months Ended
(Dollars in millions)             May 1,      April 25,     May 1,      April 25,
                                   2009          2008        2009          2008
Consolidated Interest Expense    $    10.6     $    13.9    $   22.5      $   29.6

• Interest Expense - The second quarter and year-to-date decrease is primarily due to lower average debt levels and lower average interest rates.

Effective Tax Rate      Three Months Ended         Six Months Ended
                       May 1,      April 25,     May 1,      April 25,
                        2009          2008        2009          2008
Effective Tax Rate         32.9 %        34.0 %      33.6 %        34.2 %

• Effective Tax Rate - The second quarter 2009 tax rate reflects an adjustment due to a favorable tax ruling related to a prior year. We expect the effective tax rate for the full year to be 33.5% to 34%.

Net Income                      Three Months Ended                 Six Months Ended
(Dollars in millions)     May 1,     April 25,      %       May 1,     April 25,      %
                           2009        2008       Change     2009        2008       Change

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Financial Condition: Net cash used by operations was $26.6 million for the first six months of 2009, compared with net cash generated by operations of $26.5 million for the first six months of 2008. The net cash provided by operating activities in 2009 compared to 2008 decreased $53.1 million due to the timing of our income tax and bond interest payments and lower net income.

The use of cash for operations was primarily related to a reduction in accounts payable and accrued liabilities and a decrease in income taxes payable, partially offset by a decrease in accounts receivable and notes receivable and a decline in inventory and other current assets. Accounts payable and accrued liabilities declined $169.5 million due to a reduction of purchases and timing of disbursements. Income taxes payable decreased $18.8 million primarily due to the timing of disbursements and lower income. Accounts receivable and notes receivable declined $48.1 million due to the reduction in net sales and timing of customer payments. The inventory and other current asset decrease of $26.8 million is primarily due to proactive inventory management in response to lower sales levels.

During the 2009 period, $62.9 million in proceeds from bank borrowings and $5.6 million in proceeds from the sale of treasury stock were used to fund seasonal working capital needs. During the six month period, we used cash to fund $30.0 million in dividend payments, $23.3 million in capital expenditures and a $4.8 million payment to settle the remaining deferred liability for excess cash related to the Huarun Paints acquisition (see Note 3 for more information).

Capital expenditures for property, plant and equipment were $23.3 million in the first six months of 2009, compared with $17.8 million in the first six months of 2008. We anticipate capital spending in 2009 to be approximately $60 million.

The ratio of total debt to capital was 41.0% at May 1, 2009, compared to 38.8% at October 31, 2008 and 43.9% at April 25, 2008. Short-term debt (notes payable plus current portion of long-term debt) was $286.0 million at May 1, 2009. This debt was comprised of U.S. commercial paper and borrowings from a credit facility that matures in November 2009. We believe cash flow from operations, existing lines of credit, access to credit facilities and access to debt and capital markets will be sufficient to meet our current and projected financing needs. We ended our second quarter with $356.8 million of liquidity that includes $281.2 million of available committed credit facilities and $75.6 million of cash, which is in excess of our anticipated funding requirements for fiscal year 2009.

Our cash balances are primarily held by our international subsidiaries and are used to fund day-to-day operating needs. Those cash balances have also been used to finance acquisitions. Our investment policy on excess cash is to preserve principal.

We use derivative instruments with a number of counterparties principally to manage well-defined interest rate and foreign currency exchange risks. We evaluate the financial stability of each counterparty and spread the risk among several financial institutions to limit our exposure. We will continue to monitor counterparty risk on an ongoing basis.

Off-Balance Sheet Financing: We do not have off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements: This discussion contains certain "forward-looking" statements. These forward-looking statements are based on management's expectations and beliefs concerning future events. Forward-looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside our control and could cause actual results to differ materially from such statements. Any statement that is not historical in nature is a forward-looking statement and may be identified by the use of words and phrases such as "expects," "anticipates," "believes," "will," "will likely result," "will continue," "plans to" and similar expressions. These uncertainties and other factors include, but are not limited to, changes in general economic conditions both domestic and international, including recessions and other external economic and political factors, which may adversely affect our business, the value of our investments, the financial stability of our customers and suppliers and our ability to obtain financing; dependence of internal earnings growth on economic conditions and growth in the domestic and international coatings industry; competitive factors including pricing pressure and product competition; risks related to any future acquisitions, including risks of adverse changes in the results of acquired businesses and the assumption of unforeseen liabilities; risks of disruptions in business resulting from the integration process and higher interest costs resulting from further borrowing for any such acquisitions; our reliance on the efforts of vendors, government agencies, utilities and other third parties to achieve adequate regulatory compliance and avoid disruption of our business; risks of disruptions in business resulting from strains in or the loss of relationships with our material customers and suppliers; risks and uncertainties associated with operations and achievement of growth in developing markets, including China and Central and South America; unusual weather conditions adversely affecting sales; changes in raw materials pricing and availability; delays in passing along cost increases to customers; changes in governmental regulation, including more stringent environmental, health and safety regulations; changes in accounting policies and standards and taxation requirements such as new tax laws or revised tax law interpretations; the nature, cost and outcome of pending and future litigation and other legal proceedings; civil unrest and the outbreak of war and other significant national and international events; and other risks and uncertainties. The foregoing list is not exhaustive, and we disclaim any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements.