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In 2004, we opened The Sherwin-Williams Center of Excellence at our headquarters in Cleveland, Ohio. The Cen- ter is a living archive which celebrates our storied past and serves as an inspiration to all of the hard-working men and women of Sherwin-Williams who are creating our future. 

Included among the vast collection of photographs, product samples and artifacts spanning more than 138 years is a special gift given to Sherwin-Williams by its sec- ond Chairman and CEO, Walter Cottingham. His “Code of Principles” is a document that speaks of loyalty, considera- tion, politeness, winning by merit, and growth in character as well as size. In short, these are the very principles of hon- esty, integrity and morality, which still guide us today. 

## PAINT STORES SEGMENT 

Net sales for our Paint Stores Segment increased by 14.6 percent to $3.98 billion from $3.47 billion in 2003. Comparable store sales improved by 10.1 percent over the prior year. Operating profit from the Segment fin- ished at $480.2 million, an increase of 19.0 percent compared to 2003. The positive effects of strong sales volume and aggressive cost control throughout the year was partially offset by rapidly rising raw material costs. 

We remain focused on the professional user of coatings products. The services of professional painting contractors continue to be in high demand, and these customers shop our paint stores for the quality products and services to make their businesses more successful. 

In September of 2004, we completed the acquisition of Duron, Inc., one of the nation’s top five operators of specialty paint stores in the eastern and southeastern United States. The customers served by Duron’s compa- ny-operated stores include professional painting contractors, builders and do-it-yourself homeowners. The acquisition of Duron, Inc. added approximately 3.5 percent to the Paint Stores Segment’s full year net sales and was slightly accretive to earnings for the year. 

In 2004, we added a total of 295 new stores through organic expansion and acquisition, ending the year with 2,983 stores in operation in North America compared to 2,688 stores at the end of last year. We organically opened 71 new stores and closed 5, resulting in a net increase of 66 stores for the year. The acquisition of Duron, Inc. added 229 stores, all in the United States. We also completed our Store Refresh Program, a three- year project to re-merchandise and refresh the shopping environment in our stores. 

The introduction of new and innovative products designed to improve performance and productivity 

continues to be a store strength. We introduced the ProXP ™ Eg-Shel which provides two-coat performance in a one-coat application; DeckScapes$^{™}$, a complete line of deck care products; and E-Barrier$^{™}$, an energy- efficient reflective coating for attics. 

We continued to introduce new products for our industrial maintenance customers under the ExpressTech ® product line. This technologically advanced line of coatings offers significant labor savings and productivity improvements that allow property and equipment to be returned to service in minimal time. 

We capitalized on the growing momentum in manu- facturing activity in North America and Asia. During the past year we successfully introduced numerous new products for use on wood, plastic and metal substrates, several of which feature low-VOC, low-HAPS formula- tions. Manufacturing at our new facility in Shanghai, China began in 2004, and has helped align us with our domestic OEM customers who have relocated their oper- ations to the Far East. 

## CONSUMER SEGMENT 

External net sales in the Consumer Segment increased 9.0 percent to $1.3 billion in 2004 versus the prior year. Acquisitions accounted for 7.2 percent and the balance was largely due to the introduction of new product pro- grams throughout the year. 

## THE SHERWIN-WILLIAMS COMPANY SURPASSED THE $6 BILLION MARK IN SALES. 

Operating profit for the year declined $11.3 million, or 5.7 percent, to $187.7 million. In 2004, operating profit was adversely impacted by a charge for the impairment of certain assets totaling $12.5 million and by sharply rising raw material costs that could not be fully offset by operating profit from acquisitions and favorable manufacturing absorption. The price increases announced during the year were not implemented in time to offset rising raw material costs. 

The focus of our Consumer Segment remains on building market share, expanding distribution and growing category demand through product innovation and brand strength. For example, our new Ready to 

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