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SHW · SHERWIN WILLIAMS CO

30 filings

10-K

SHW 10-K Annual Reports

SHERWIN WILLIAMS CO - 30 annual reports

Filing record · 2016–202610-K1110-Q328-K145

2025
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2025
The Sherwin-Williams Company reported a modest increase in net sales for the fiscal year ended December 31, 2025, reaching $23.574 billion, a 2.1% rise from the previous year. This growth was primarily driven by the Paint Stores Group and the Consumer Brands Group. However, diluted net income per share saw a slight decrease of 2.7% to $10.26. The company successfully generated substantial net operating cash of $3.452 billion, which was utilized for strategic investments, including the acquisition of Suvinil in Brazil, capital expenditures, and returning value to shareholders through dividends and share repurchases. The company anticipates continued demand challenges in 2026 but remains confident in its "Success by Design" strategy. Key initiatives for growth include store expansion, ongoing acquisitions, and a focus on talent, simplification, digitization, supply chain responsiveness, and sustainability. While facing potential impacts from evolving tariff policies and increased employee-related expenses, Sherwin-Williams aims to offset these with cost-saving simplification efforts.
Feb 19, 2026
2024
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2024
The Sherwin-Williams Company reported record net sales of $23.099 billion for the year ended December 31, 2024, a slight increase of 0.2% from the prior year. Despite facing continued macroeconomic challenges, the company demonstrated resilience with a 14.1% increase in diluted net income per share, reaching $10.55. This growth was supported by a 4.1% increase in gross profit, driven by higher sales volumes in the Paint Stores Group and moderating raw material costs. The company also generated strong net operating cash flow of $3.153 billion, enabling significant investments in its operations, strategic acquisitions, and substantial returns to shareholders through dividends and share repurchases. Looking ahead to 2025, Sherwin-Williams anticipates continued economic pressures impacting consumer behavior, particularly in North America and Europe. However, the company remains confident in its "Success by Design" strategy, focusing on talent development, digitization, supply chain responsiveness, and sustainability to drive above-market growth opportunities. Key initiatives include opening 80-100 new stores and managing inflationary pressures through simplification efforts. The company also announced a significant acquisition of BASF's Brazilian decorative paints business for $1.15 billion, subject to regulatory approval, signaling continued strategic expansion.
Feb 20, 2025
2023
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2023
The Sherwin-Williams Company reported record net sales of $23.05 billion for the fiscal year ending December 30, 2023, an increase of 4.1% over the previous year. This growth was driven primarily by price increases across its segments and robust sales volume in the Paint Stores Group, which saw comparable store sales increase by 6.8%. Diluted net income per share rose by 19.8% to $9.25, with adjusted diluted net income per share increasing to $10.35, reflecting improved gross margins due to moderating raw material costs and effective pricing strategies. The company generated strong net operating cash of $3.52 billion, a significant improvement from the prior year, enabling strategic investments in business expansion, acquisitions (including the German-based SIC Holding GmbH), debt reduction, and capital returns to shareholders through dividends and share repurchases. Sherwin-Williams continues its expansion strategy, with plans to open 80-100 new stores in the U.S. and Canada in 2024 and ongoing investments in new headquarters and R&D facilities.
Feb 20, 2024
2022
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2022
The Sherwin-Williams Company reported a strong financial year in 2022, with consolidated net sales reaching a record $22.149 billion, an increase of 11.1% year-over-year. This growth was primarily driven by selling price increases across all segments and higher product sales volume in The Americas Group, partially offset by lower volumes in the Consumer Brands and Performance Coatings Groups. Despite facing macroeconomic challenges such as raw material inflation and supply chain disruptions, the company generated robust net operating cash of $1.920 billion. The company demonstrated a balanced approach to capital deployment, investing $1.003 billion in strategic acquisitions to enhance its product offerings and capabilities, while also returning significant value to shareholders through $883.2 million in share repurchases and $618.5 million in dividends. Looking ahead to 2023, Sherwin-Williams anticipates a challenging demand environment due to inflationary pressures impacting consumer behavior and elevated mortgage rates, particularly in housing markets. However, the company remains confident in its long-term strategy, focusing on gaining market share in resilient end markets and leveraging previously implemented price increases. Management expects to realize significant savings from ongoing restructuring actions and anticipates gross margin expansion driven by cost control initiatives and anticipated raw material cost deflation.
Feb 22, 2023
2021
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2021
Sherwin-Williams Company reported record net sales of $19.94 billion in 2021, an increase of 8.6% driven by selling price increases across all segments and higher volumes in the Performance Coatings Group. However, diluted net income per share saw a slight decrease to $6.98 from $7.36 in 2020, impacted by higher raw material costs and availability issues that negatively affected full-year sales by a mid-single digit percentage. The company completed a three-for-one stock split in Q1 2021 to enhance accessibility for investors. The company navigated significant headwinds, including raw material inflation and supply chain disruptions, which are expected to improve in 2022. Sherwin-Williams is focused on meeting customer demand through capacity expansion, store growth, and strategic acquisitions, while implementing price increases to offset cost inflation and recover margins. The company maintains a strong balance sheet and plans to continue disciplined capital allocation, prioritizing organic growth, strategic acquisitions, and returning capital to shareholders via share repurchases and dividends.
Feb 17, 2022
2020
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2020
The Sherwin-Williams Company's 2020 10-K filing reveals a year of resilience and growth despite the challenges presented by the COVID-19 pandemic. The company reported a notable increase in net sales, driven primarily by strong performance in The Americas Group and Consumer Brands Group, offsetting a slight decline in Performance Coatings Group. The company demonstrated effective cost management and operational efficiency, leading to improved gross profit margins and a significant increase in income before income taxes and net income compared to the previous year. Financially, Sherwin-Williams maintained a strong liquidity position, with substantial unused capacity under its credit facilities. The company generated record net operating cash flow, which allowed for significant reinvestment in capital expenditures, a reduction in total debt, and substantial returns to shareholders through share repurchases and dividends. Management highlighted the company's strategic focus on store expansion and product offerings across its segments, indicating confidence in continued growth. The report also details ongoing efforts in talent management, health and safety protocols, and environmental compliance, underscoring a commitment to sustainable business practices.
Feb 19, 2021
2019
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2019
The Sherwin-Williams Company (SHW) reported a solid performance for the fiscal year ended December 31, 2019. Net sales grew by 2.1% to $17.9 billion, driven primarily by increased paint sales volume and pricing in The Americas Group, which offset slight declines in the Consumer Brands Group and Performance Coatings Group. The company demonstrated improved profitability, with gross profit increasing by $617.5 million and gross profit margin expanding to 44.9% from 42.3% in the prior year, attributed to volume growth, price increases, supply chain efficiencies, and moderating raw material costs. Financially, the company maintained a strong position, with net operating cash flow reaching a record $2.321 billion. This robust cash generation allowed SHW to invest $406.2 million in capital expenditures and acquisitions, reduce total debt by $665.8 million, and return $1.2 billion to shareholders through dividends and share buybacks. Key financial indicators such as EBITDA and adjusted EBITDA showed positive trends. The company also managed its debt effectively, reducing its total debt to capitalization ratio. Despite facing some litigation expenses and trademark impairment charges, Sherwin-Williams demonstrated operational resilience and a commitment to shareholder returns.
Feb 21, 2020
2018
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2018
The Sherwin-Williams Company (SHW) reported record-scale results for 2018, driven largely by the July 2017 Valspar acquisition (closed June 1, 2017 for about $8.9 billion). Net sales rose 17.0% to $17.534 billion from $14.984 billion, with incremental Valspar sales contributing 12.4 points of growth, higher Americas paint volume, and selling price increases. Gross margin compressed to 42.3% from 44.8% on raw material inflation, a full year of Valspar mix, and a new customer program's supply chain costs. Diluted EPS from continuing operations fell to $11.67 from $18.64 (and $18.20 total in 2017, which included a one-time $7.04/share tax benefit), while the company absorbed $4.15/share of acquisition-related costs plus about $2.71/share of non-operating charges, including a $167.6 million environmental provision, a $136.3 million California lead-paint litigation charge, and a $37.6 million pension settlement. Balance sheet and cash flow were the strongest part of the story. Net operating cash flow was a record $1.944 billion, and free cash flow (operating cash less capex and dividends, as defined by management) was $1.370 billion. Management used this cash to reduce total debt by about $1.18 billion to $9.344 billion, repurchase $613 million of stock, and pay $323 million in dividends. Total debt to capitalization improved to 71.5% from 74.3%, though leverage remains elevated. The Board raised the quarterly dividend to $1.13 per share in February 2019, implying $4.52 annualized for 2019. Key risks for investors include the lead pigment and lead-based paint litigation, particularly the Santa Clara County, California public nuisance judgment, where the company has accrued $136.3 million but acknowledges joint and several liability could expose it to the full abatement fund. Other risks include ongoing environmental remediation exposure at four major sites, integration of Valspar synergies, rising raw material and petrochemical costs, cyclical housing and construction demand, and a pending SCAQMD civil complaint seeking an initial $30 million in penalties.
Feb 22, 2019
2017
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2017
Sherwin-Williams (SHW) reported a transformational 2017 driven by its $8.9 billion all-cash acquisition of The Valspar Corporation, which closed June 1, 2017. Net sales rose 26.4% to $14.98 billion (core operations, excluding Valspar, grew 5.6%), and diluted EPS from continuing operations was $19.11, boosted by a one-time $668.8 million deferred tax benefit from the Tax Cuts and Jobs Act and subsidiary mergers (about $7.04 per share). Excluding that benefit, the effective tax rate was 25.1%, and acquisition costs, purchase accounting, and new Valspar interest expense weighed on results. Total reported diluted EPS was $18.67 after a $41.5 million loss from discontinued operations (the divested industrial wood coatings business). Gross margin fell to 45.3% from 50.0%, largely due to acquisition inventory adjustments and higher raw material costs. The balance sheet changed materially. Total debt rose to $10.5 billion from $1.95 billion, and total debt-to-capitalization climbed to 74.0% from 51.0%. Goodwill and intangibles increased by roughly $11 billion combined, and total assets reached $19.96 billion. Operating cash flow was $1.88 billion and free cash flow (management's definition) was $1.34 billion. Management held the annual dividend at $3.40 for 2017 and increased the quarterly dividend to $0.86 in February 2018, while noting it is temporarily modifying its payout practice. The company stated it was in compliance with its 5.25x leverage covenant. The key investor watch items are the Valspar integration and synergy realization, deleveraging from elevated debt levels, and the lead pigment litigation. The Santa Clara County public nuisance judgment, which the company has not accrued and cannot reasonably estimate, was affirmed in part on appeal (pre-1951 residences) and remains a potential exposure, with the company stating it may be jointly and severally liable for the full abatement fund, which was originally $1.15 billion.
Feb 23, 2018
2016
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2016
The Sherwin-Williams Company (SHW) closed 2016 with record results: net sales rose 4.6% to $11.86 billion, diluted EPS grew 7.5% to $11.99 (including an $0.86 per-share charge for Valspar acquisition costs and a $0.40 benefit from the ASU 2016-09 tax accounting change), and net operating cash was $1.309 billion, the fourth straight year above $1.0 billion. Growth was led by the Paint Stores Group, where net sales rose 8.1% on higher architectural paint volume and 94 net new stores; the Latin America Coatings Group was the weak spot, posting a segment loss of $17 million that included a $10.7 million goodwill and trademark impairment. Gross margin expanded to 50.0% from 49.0%, though SG&A rose to 35.1% of sales, partly due to new stores and deal costs. The dominant forward-looking issue is the pending $9.3 billion acquisition of The Valspar Corporation at $113 per share in cash, expected to close in early 2017. The deal is subject to antitrust approvals; if required divestitures exceed $650 million in net sales, the per-share price drops to $105, and if they exceed $1.5 billion, Sherwin-Williams can walk away. Committed financing of $9.3 billion (a $7.3 billion bridge and a $2.0 billion term loan) means total debt would rise sharply from about $2.0 billion at year-end 2016, shifting the balance sheet from low leverage toward heavier debt service. Shareholder returns remained substantial, with $312 million in dividends paid and a quarterly dividend raised to $0.85. Investors should also weigh the company's long-running lead pigment and lead-based paint litigation. The most significant item is the $1.15 billion public nuisance judgment in Santa Clara County, California, which the company is appealing and has not accrued. Management says it cannot estimate a loss from this litigation, so a negative outcome could be material and is a key uncertainty alongside integration and leverage risk.
Feb 22, 2017
2015
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2015
Sherwin-Williams (SHW) closed 2015 with record results. Net sales rose 1.9% to $11.339 billion, gross margin expanded to 49.0% from 46.4%, and net income grew 21.7% to $1.054 billion. Diluted EPS rose 27.1% to $11.16. The gains were driven mainly by higher architectural paint volume in the Paint Stores Group (sales +5.2%, segment profit +19.3%) and the Consumer Group (sales +11.1%, boosted by the HGTV HOME by Sherwin-Williams program at a national retailer). Global Finishes and Latin America Coatings were weaker, with Latin America segment profit down 54% on currency translation losses. Foreign currency translation reduced consolidated sales by about 3.3%. Cash generation was strong. Net operating cash reached $1.447 billion, the third straight year above $1 billion, and free cash flow (as management defines it) was $963 million. The company returned capital through $1.035 billion of share repurchases and $250 million of dividends. The board also raised the quarterly dividend to $0.84 per share, implying $3.36 annualized for 2016. Total debt rose to $1.963 billion, and debt-to-capitalization reached 69.3%, up from 64.4%, largely because of $800 million of new senior notes issued in July 2015 and the aggressive buyback program. Shareholders' equity fell to $868 million. The main investor concern is the lead pigment and lead-based paint litigation. The Santa Clara County, California public nuisance judgment of $1.15 billion remains under appeal, and the company has accrued nothing for this litigation, judging a loss not probable and not estimable. The company describes this as the key risk to its balance sheet. Management also notes ongoing exposure to environmental remediation and foreign currency swings, particularly in Latin America.
Feb 24, 2016
2014
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2014
The Sherwin-Williams Company (SHW) closed 2014 with record results driven by its Paint Stores Group. Net sales rose 9.3% to $11.13 billion from $10.19 billion, helped by higher architectural paint volume and acquisitions (which added about 3.1 points of growth). Gross margin improved to 46.4% from 45.3%, and net income grew 15.0% to $865.9 million. Diluted EPS was $8.78, up 20.9%, though 2014 included roughly $0.22 per share of environmental charges, a $0.18 per share acquisition-related loss, and a $0.13 per share benefit from a $21.4 million titanium dioxide antitrust settlement. Net operating cash flow was about $1.08 billion, roughly flat year over year, and the company deployed it largely into share repurchases of $1.49 billion, capital expenditures of $200.5 million, and dividends of $215.3 million. The balance sheet shifted meaningfully toward leverage. Shareholders' equity fell to $996.5 million from $1.775 billion after buybacks, total debt rose to $1.805 billion, and the debt-to-capitalization ratio climbed to 64.4% from 49.2%. Working capital turned negative at a deficit of $113.9 million, with a current ratio of 0.96. Management described this as manageable given sufficient short-term borrowing capacity and $1.638 billion of remaining borrowing ability, and the company was in compliance with its 3.25x leverage covenant. The most important investor-relevant risk in the filing is the lead pigment and lead-based paint litigation. A California jury-based judgment in the Santa Clara County public nuisance case requires the company, jointly and severally with two co-defendants, to pay $1.15 billion into an abatement fund. The company has appealed and has not accrued any amount for this or other lead litigation, stating that it cannot estimate a range of loss. Growth also depends on continued expansion of the store base and on foreign operations, which accounted for about 19.8% of 2014 net sales.
Feb 25, 2015
2013
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2013
Sherwin-Williams (SHW) reported a strong 2013, with net sales up 6.8% to $10.19 billion and net income up 19% to $752.6 million, or $7.26 diluted EPS (up 20.6%). Growth was driven mainly by higher architectural paint volume in the Paint Stores Group, which added 388 net stores in 2013 including acquired Comex U.S./Canada stores, and by acquisitions that contributed about 1.8 points of sales growth. Gross margin improved to 45.3% from 44.1%, while SG&A held at 34.0% of sales. Operating cash flow rose to $1.08 billion and free cash flow (operating cash less capex and dividends) reached $712 million. Total debt was about $1.72 billion, with a debt-to-capitalization ratio of 49.2%, and the company plans to pay about $1.6 billion-scale debt for the pending Comex Mexico deal (about $2.25 billion purchase price). The most important risk for investors is litigation. On January 27, 2014, a Santa Clara County, California court entered a final judgment holding Sherwin-Williams jointly and severally liable with two other defendants for $1.15 billion to abate lead-pigment public nuisance. The company strongly disputes the ruling, has filed post-trial motions, and has recorded no accrual because it does not believe a loss is probable. Other exposures include lead-based paint personal injury suits, Life Shield product liability, and environmental remediation accruals of $102 million. The pending Mexico acquisition of Comex, which the Mexican competition authority has blocked, is also uncertain and must close by March 31, 2014 or the agreement can be terminated. The company also increased its quarterly dividend to $0.55 per share, implying $2.20 for 2014, and it repurchased $769 million of stock in 2013 with 12.15 million shares still authorized. Overall, the filing shows a financially strong business with solid margins and cash generation, offset by a large, unresolved litigation overhang and near-term financing and regulatory uncertainty around the Comex transaction.
Feb 27, 2014
2012
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2012
The Sherwin-Williams Company (SHW) closed 2012 with record results driven by a recovering U.S. architectural paint market. Net sales rose 8.8% to $9.53 billion, and diluted EPS increased 45.4% to $6.02 (after a $0.47 per-share charge for the Department of Labor ESOP settlement). Gross margin expanded to 44.1% from 42.7%, aided by higher paint volume and selling price increases that more than offset raw material inflation. The Paint Stores Group delivered most of the growth, with segment income before taxes up 33.5%, while the Administrative segment absorbed the $80 million DOL charge and higher incentive compensation. Operating cash flow reached $887.9 million, and free cash flow (as management defines it) was $569.8 million. The balance sheet changed materially. Total debt rose to about $1.7 billion from $993 million after a $1 billion senior notes issuance in December 2012, and the debt-to-capitalization ratio climbed to 48.8% from 39.6%. Cash ended the year at $862.6 million. Management is also pursuing the approximately $2.34 billion cash acquisition of Consorcio Comex, a Latin American coatings company with about $1.4 billion in 2011 sales, which is subject to Mexican regulatory approval and is not financing-conditional. Shareholder returns remained substantial: $557.8 million of buybacks and $160.9 million of dividends, with the quarterly dividend raised to $0.50 for 2013. Key risks include lead pigment and lead-based paint litigation, for which the company has accrued nothing, including a Santa Clara County public nuisance trial scheduled for June 2013. Other exposures include environmental remediation liabilities, raw material cost volatility (notably titanium dioxide and petrochemicals), leverage after the Comex deal, and currency translation. Investors should weigh strong operating momentum against a more leveraged balance sheet, the pending Comex integration, and the unquantified lead-litigation exposure.
Feb 28, 2013
2011
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2011
The Sherwin-Williams Company (SHW) reported a record 2011 with net sales of $8.77 billion, up 12.7% from $7.78 billion in 2010, and $761 million above its prior revenue peak set in 2007. Growth was driven mainly by selling price increases, acquisitions (which added roughly 4.5 points to sales), and higher volume in the Global Finishes and Latin America Coatings groups. Gross margin compressed to 42.7% from 44.8% because of raw material inflation, particularly titanium dioxide and petrochemicals, and SG&A rose to 33.8% of sales from 35.1%, though it fell as a percentage of sales. Income before taxes rose 9.4% to $741.5 million, but net income declined to $441.9 million ($4.14 diluted EPS) from $462.5 million ($4.21) after a one-time $75.0 million (about $0.70 per share) charge to settle an IRS audit of the employee stock ownership plan. Segment results were mixed. Paint Stores Group sales rose 9.1% to $4.78 billion, with segment profit up 4.2% but margin down to 13.5%. Global Finishes Group sales jumped 32.5% to $1.88 billion, and profit rose almost 40%. Latin America Coatings Group, now a separate reportable segment, grew sales 22.7% to $828 million. The Consumer Group was the weak spot, with sales down 1.8% to $1.27 billion after losing part of a paint program at a large retail customer; its profit fell about 15%. Cash generation stayed solid, with operating cash flow of $736 million and free cash flow of $428 million. The company returned more than $520 million to shareholders through buybacks and dividends, and it raised the quarterly dividend to $0.39 for 2012. The filing also flags several longer-dated risks. The lead pigment and lead-based paint litigation remains unresolved, with no amounts accrued and management unable to estimate potential losses. Environmental accruals total $132.1 million, and the unaccrued maximum exposure is about $97.8 million higher. Management expects continued raw material cost headwinds in 2012 and says margins may erode unless it takes further pricing action.
Feb 23, 2012
2010
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2010
The Sherwin-Williams Company (SHW) reported a year of recovery and growth in 2010, with consolidated net sales up 9.6% to $7.78 billion and net income up 6.1% to $462.5 million. Diluted EPS rose 11.4% to $4.21. All three reportable segments achieved organic sales growth for the first time in several years. Growth was driven by higher paint volume, three 2010 acquisitions (Sayerlack, Becker Acroma, and Pinturas Condor for about $298 million), and selling price increases. Gross margin compressed to 44.8% from 46.0% because of severe raw material shortages and cost inflation, notably acrylic latex and titanium dioxide, which the company offset only partially through price increases. Cash generation weakened. Net operating cash fell 18% to $706.6 million (9.1% of sales versus 12.1% in 2009), mainly due to a $191.8 million working capital build. Free cash flow declined to $425 million from $605 million. Total debt rose $227 million to $1.04 billion, and debt-to-capitalization increased to 39.4% from 35.4%. Management nonetheless returned over $530 million to shareholders through buybacks and dividends, and raised the quarterly dividend to $0.365 in February 2011. The filing also flags persistent risks. Lead pigment and lead-based paint litigation remains unresolved, with no amounts accrued and management unable to estimate potential liability. Environmental accruals total $149.6 million, and the company faces a possible IRS challenge to ESOP-related tax deductions. Management expects a slow and uneven domestic recovery in 2011, with new construction only modestly higher from a low base and home remodeling a relative bright spot.
Feb 23, 2011
2009
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2009
Sherwin-Williams (SHW) closed 2009 with net sales down 11.1% to $7.09 billion from $7.98 billion, and net income fell 8.6% to $435.8 million, or $3.78 diluted EPS (down 5.5%). The decline reflected weak U.S. architectural paint demand, particularly from professional contractors, and a global slowdown. Gross margin improved to 46.0% from 43.8% on selling price increases, cost control and lower freight costs, while SG&A fell $108.8 million. Segment profit was mixed: Paint Stores Group profit fell 7.4% to $600 million (margin up to 14.3%), Consumer Group profit rose 12.2% to $157 million, and Global Finishes Group profit fell 57.3% to $65 million after impairments and a $21.9 million subsidiary dissolution loss. Cash generation and balance sheet management were the strongest parts of the year. Net operating cash was $859 million (12.1% of sales) and free cash flow reached an record $605 million. Working capital fell sharply, short-term borrowings were cut by $494 million, and the company issued $500 million of 3.125% five-year notes. Management returned cash through $530 million of share repurchases (9 million shares) and $163 million of dividends, and raised the annual dividend to $1.42 and signaled a higher 2010 payout (quarterly $0.36). Key risks flagged in the filing include the lead pigment and lead-based paint litigation, for which no amount has been accrued and the outcome cannot be estimated, environmental remediation accruals of $170.9 million with up to $99.5 million of additional possible exposure, and product liability exposure from the Life Shield subsidiary. Management described 2010 cautiously, expecting a slow and uneven recovery.
Feb 24, 2010
2008
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2008
The Sherwin-Williams Company (SHW) reported a year of sharp earnings pressure in 2008 as the U.S. housing downturn deepened and spread globally in the second half of the year. Net sales were essentially flat at $7.98 billion (down 0.3% from $8.01 billion), with volume declines offset in part by selling price increases, acquisitions (which added about 1.9%), and favorable currency translation. Gross margin compressed to 43.8% from 45.0% on higher raw material costs and under-absorbed manufacturing costs, while SG&A rose to 33.1% of sales. Trademark and goodwill impairments of $54.6 million further weighed on results. Net income fell 22.6% to $476.9 million, and diluted EPS fell 14.9% to $4.00 from $4.70. By segment, the Paint Stores Group (about 61% of sales) saw sales fall 2.4% and segment profit drop 15.5%, with same-store sales down 5.3%. The Consumer Group, hit by weak DIY demand, saw profit fall 37.4%. The Global Finishes Group was the bright spot, with sales up 7.8% to $1.87 billion and profit down only 5.3%, helped by acquisitions and international growth. Balance sheet and cash flow remained solid: net operating cash was $876 million, free cash flow (as management defines it) was $594 million, total debt fell $132 million to $834 million, and debt-to-capitalization improved to 34.2%. Management returned capital through $393.5 million of share repurchases and $165 million of dividends, and the Board raised the quarterly dividend to $0.355 in February 2009. Investors should weigh the company's cash generation and conservative leverage against the cyclical exposure to housing and DIY demand, rising pension costs (domestic net pension cost expected to rise about $46.8 million in 2009), and open-ended lead pigment litigation for which no accrual has been recorded.
Feb 24, 2009
2007
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2007
The Sherwin-Williams Company (SHW) reported a record 2007 with net sales surpassing $8 billion for the first time (up 2.5% to $8.01 billion) and net income of $615.6 million (up 6.9%). Diluted EPS rose 12.2% to $4.70, which included a goodwill impairment charge of roughly $0.08 per share. Growth came mainly from the Global Group (sales up 8.7%, segment profit up 23.2%) and acquisitions, while the Consumer Group's sales fell 3.9% on weak do-it-yourself demand. Paint Stores Group sales rose 2.3%, supported by acquisitions and commercial contractor business, but same-store sales declined. Cash generation was strong, with net operating cash of $874.5 million (over 10% of sales) and free cash flow of $546.4 million. Management spent that cash on $863.1 million of share repurchases (13.2 million shares at an average of roughly $60-65) and $162.3 million of dividends, and the board raised the 2008 quarterly dividend to $0.35. Total debt rose to $965 million, which lifted the debt-to-capitalization ratio to 35.1% from 30.5%, and working capital turned negative because short-term borrowings increased. The main investor overhang is the lead pigment and lead-based paint litigation. The Rhode Island public nuisance judgment is on appeal, with oral argument scheduled for May 2008, and management has not accrued any amount for these suits. Management describes the outlook as "guardedly positive," expecting continued softness in U.S. residential construction and repaint demand through 2008 while growth in commercial, industrial, and international markets offsets it.
Feb 28, 2008
2006
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2006
The Sherwin-Williams Company (SHW) reported a record 2006 for the fiscal year covered by this 10-K filed February 28, 2007. Consolidated net sales rose 8.6% to $7.81 billion, net income increased 24% to $576.1 million, and diluted EPS grew 27.7% to $4.19. Net operating cash flow reached a record $815.8 million, and free cash flow (as management defines it, after capex and dividends) was $470.5 million. Growth was led by the Paint Stores Group, whose sales rose 11.3% to $4.84 billion and whose segment profit rose 26.5% to $719.9 million, plus strong Global Group results. The Consumer Group was the weak spot, with external sales down 1.9% on sluggish DIY demand, although its segment profit still rose 25.2%. Management flagged softer new residential construction and DIY demand heading into 2007, and expects to keep opening stores at a 100-plus net-new pace. The key investor risk is the lead pigment and lead-based paint litigation. In February 2006 a Rhode Island jury found the company, with two other defendants, caused a public nuisance; on February 26, 2007 the court entered a judgment of abatement and appointed a special master to oversee remedies. The company intends to appeal and has accrued nothing for this litigation, saying it cannot estimate the potential liability. Management also says the outcome could materially affect net income in the period a liability is recorded. Separately, environmental accruals were $173.1 million at year-end, with up to $149.6 million of additional reasonably possible exposure. Financial flexibility was tested in 2006: total debt rose to $874.5 million (30.5% of capitalization), partly because the company borrowed short-term to keep liquidity ahead of litigation uncertainty, and Moody's and S&P both downgraded the company's ratings. On capital allocation, the company repurchased 5.6 million shares for $311.1 million and paid $135.4 million in dividends. The board raised the quarterly dividend to $0.315 (an annualized $1.26, about a 26% increase), consistent with its policy of paying roughly 30% of prior-year diluted EPS. The company also continued to hold 12.8 million shares of repurchase authorization.
Feb 28, 2007
2005
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2005
The Sherwin-Williams Company (SHW) closed 2005 with its strongest results in the period shown: net sales rose 17.6% to $7.19 billion (from $6.11 billion), net income increased 17.8% to $463.3 million, and diluted EPS grew 20.6% to a record $3.28. Growth was driven mainly by strong domestic architectural paint demand from contractor and do-it-yourself customers, with the Paint Stores Segment delivering a 21.9% sales increase and comparable store sales up 13.6%. Acquisitions (Duron, Paint Sundry Brands) contributed about 6.0% of sales growth and roughly $0.14 of diluted EPS. Gross margin compressed to 42.8% from 44.2% due to raw material cost inflation, notably titanium dioxide and petroleum-based inputs, partially offset by pricing and SG&A discipline (SG&A fell to 32.4% of sales from 33.8%). Balance sheet and cash generation strengthened. Net operating cash rose to $716.7 million, free cash flow (as management defines it) reached $460 million, and total debt to capitalization fell to 26.4% from 30.9%. The company repurchased $356.5 million of stock (8.1 million shares) and raised its dividend to $0.82 per share, the 27th consecutive annual increase, with a proposed 2006 quarterly dividend of $0.25. S&P upgraded the credit rating to A+. The dominant risk for investors is the lead pigment and lead-based paint litigation. On February 22, 2006, a Rhode Island jury found the cumulative presence of lead pigment in paints on buildings in the state to be a public nuisance and found the company, with two other defendants, liable for contributing to it. The court will determine the abatement remedy, and the company intends to appeal. Management states it cannot estimate the potential liability and has accrued nothing for this litigation, so the outcome could materially affect future earnings, liquidity, or financial condition. The filing also discloses a grand jury investigation into RCRA hazardous-waste transportation at the Garland, Texas plant, and a $22.0 million goodwill impairment in the Consumer Segment.
Mar 7, 2006
2004
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2004
The Sherwin-Williams Company (SHW) reported a strong 2004 in its 10-K filed March 10, 2005. Net sales rose 13.1% to $6.11 billion, the first time the company passed $6 billion, and diluted EPS grew 20.4% to a record $2.72 on net income of $393.3 million. Growth was driven by strong domestic architectural paint demand from contractors and DIY customers, the Duron and Paint Sundry Brands acquisitions, and favorable currency effects in South America. Paint Stores, the largest segment at about 65% of sales, grew sales 14.6% and operating profit 19.0%. Management warned that rapidly rising raw material costs pressured gross margin, which fell to 44.2% from 45.4%, and expects that pressure to continue. Balance sheet leverage increased. Acquisitions of $554.5 million were funded partly with short-term borrowings, pushing total debt to capitalization up to 30.9% from 26.0%, and cash fell to $45.9 million. Operating cash flow remained robust at $544.7 million, supporting $106.8 million of capex, $96.9 million of dividends, and $267.4 million of share repurchases. Management plans to reduce debt toward the mid-20% range in 2005 and raised the quarterly dividend 20% to $0.205. The main legal and financial overhang is the lead pigment and lead-based paint litigation, including a Rhode Island public nuisance retrial tentatively set for September 2005, for which no amount has been accrued. Environmental accruals total $141.5 million, with up to $117.1 million more possible.
Mar 10, 2005
2003
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2003
The Sherwin-Williams Company (SHW) closed 2003 with record diluted income before the cumulative accounting change of $2.26 per share, up 10.8% from $2.04, on net sales of $5.41 billion, up 4.3%. Income before the cumulative effect rose 6.9% to $332.1 million. Growth was led by the Paint Stores Segment, which added 45 net new stores (2,688 total) and produced 64% of sales, while the Consumer Segment's sales grew only 1.0%. The Automotive Finishes segment was weak domestically, and International Coatings grew 16.8% helped by South American recovery and a fiscal-year change at a Brazilian subsidiary. Operating profit rose 5.2% to $522.9 million, though a $13.3 million after-tax drop in the net pension credit weighed on margins and SG&A rose to 34.8% of sales. Balance sheet and cash generation strengthened. Net operating cash flow was flat at $558.9 million, free cash flow (as defined by management) was $351.7 million, and total debt fell to $513.6 million, bringing debt-to-capitalization down to 26.0% from 28.0%. The company bought back 8.0 million shares for $238.1 million and paid $90.7 million in dividends, and the board raised the quarterly dividend to $0.17 per share, which management said would support a 26th consecutive year of dividend increases. Cash ended the year at $302.8 million. The main investor risk flagged in the filing is the lead pigment and lead-based paint litigation, which the company says it is vigorously defending and for which it has accrued nothing. Environmental remediation accruals total $133.4 million, with a further $99.8 million of reasonably possible unaccrued exposure, and some of that could affect results materially if future loss estimates rise. The filing also cites ongoing currency translation losses in South America and soft domestic industrial and automotive refinish demand as headwinds into 2004.
Mar 11, 2004
2002
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2002
The Sherwin-Williams Company (SHW) reported solid 2002 results despite a difficult economy. Net sales rose 2.3% to $5.18 billion, and income before the cumulative effect of an accounting change grew 18.1% to $310.7 million, or $2.04 per diluted share, a record for the company. Reported net income fell to $127.6 million ($0.84 per diluted share) because of a $183.1 million after-tax goodwill and intangible impairment charge recorded as a cumulative effect of adopting SFAS No. 142. Gross margin improved to 45.1% from 43.8%, driven by the Paint Stores Segment, which contributed about 64% of sales and grew sales 3.7% with 70 net new stores. The Consumer Segment's operating profit rose 73.8% to $192.5 million, while the International Coatings Segment swung to an operating loss, reflecting South American currency weakness and asset impairments. Cash generation and balance sheet strength were key positives. Net operating cash flow was $558.9 million, and free cash flow (as management defines it, after capex and dividends) was $341.4 million. Management retired $101.9 million of debt, reducing total debt to capitalization to 28.0% from 29.3%, and repurchased 6.7 million shares for $190.3 million. The Board raised the quarterly dividend to $0.155 per share, the 24th consecutive annual increase. Shareholders' equity fell to $1.34 billion, however, largely because of buybacks and currency translation losses. Investors should monitor the ongoing lead pigment and lead-based paint litigation, which the company says it has never lost or settled, but which has no accrual recorded and faces a trial calendar in 2003. Management also cautioned that raw material costs began rising in late 2002 and that gross margin gains are not expected to continue in 2003, while guiding only to modest industry growth and continued sales and earnings improvement.
Mar 13, 2003
2001
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2001
The Sherwin-Williams Company (SHW) reported a difficult 2001 in which net sales fell 2.8% to $5.07 billion from $5.21 billion, and diluted EPS was $1.68, down from $1.90 before the prior year's impairment charge (reported 2000 EPS was $0.10 after a $293.6 million after-tax, $1.80/share impairment of long-lived assets, mostly Consumer Segment goodwill). Management attributed the decline to a weak U.S. and South American economy, discontinued paint programs at certain Consumer Segment customers, and currency weakness. Segment results were mixed: Paint Stores, the largest segment at 63% of external sales, grew sales 0.7% to $3.21 billion but saw operating profit fall 5.1% to $390.5 million; Consumer sales dropped 9.0% and operating profit fell 24.1%; Automotive Finishes sales declined 5.9%; and International Coatings sales fell 8.9%, with operating profit down to $4.9 million. The strongest point for investors was cash generation. Net operating cash flow was $561.6 million, and free cash flow (defined by the company as operating cash less capex and dividends) rose to a record $388.1 million. Management reduced receivables and inventory by a combined $133.6 million, cut SG&A for the first time in 20 years, and used the cash to retire $123.1 million of debt, buy back 6.7 million shares for $157.1 million, and acquire Mautz Paint's 33 stores. Total debt to capitalization improved to 29.3% from 33.5%. The company also raised its first-quarter dividend for a 23rd consecutive year, to $0.15 per quarter from $0.145. Key risks include pending lead pigment and lead-based paint litigation, for which the company has accrued no amounts and says it cannot reasonably estimate exposure; environmental liabilities, including a potentially material exposure at its southeast Chicago and PMC facilities; the bankruptcy of a large Consumer Segment retail customer; a planned Argentine currency devaluation; and a 2002 SFAS 142 goodwill impairment test whose outcome management has not yet determined. Management guides to 2002 market conditions that are flat to slightly up, with 'pockets of strength' domestically.
Mar 14, 2002
2000
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2000
The Sherwin-Williams Company (SHW) reported record 2000 net sales of $5.21 billion, up 4.2% from $5.00 billion in 1999, driven by the Paint Stores, Automotive Finishes and International Coatings segments. However, reported net income collapsed to $16.0 million ($0.10 per diluted share) from $303.9 million ($1.80) in 1999, due to a $352.0 million pre-tax ($293.6 million after-tax, or $1.80 per share) non-cash impairment of long-lived assets, almost entirely goodwill, recorded in the fourth quarter in the Consumer Segment (Pratt & Lambert, Thompson's and Cleaning Solutions). Excluding the charge, net income rose 1.9% to $309.7 million and diluted EPS rose 5.6% to $1.90, the company's 23rd consecutive year of operating earnings improvement. Management acknowledged margin pressure from a sharp rise in oil-linked raw material costs, a slowdown in demand in the second half, and an underperforming Consumer Segment, where operating profit excluding the charge fell 8.0%. The Paint Stores Segment, which generated about 61% of sales, remained the core strength, with sales up 6.1% to $3.19 billion, operating profit up 9.2%, and 92 net new stores (2,488 total). Management is shifting focus toward professional painting contractors. The Consumer Segment was restructured into three units, and two non-core businesses (Cleaning Solutions and Graphic Arts) are being marketed for divestiture. International Coatings operating profit fell 47.9% to $17.7 million amid South American economic weakness. Balance sheet metrics remain manageable: long-term debt was roughly flat at $623.6 million, the current ratio was 1.39, and the company bought back 6.8 million shares for $146.9 million. The dividend was raised to $0.145 per quarter in February 2001, extending a 22-year streak of increases. For investors, the headline GAAP loss is primarily non-cash and did not affect 2000 operating cash flow of $461.1 million. The key questions going forward are whether the Consumer Segment can recover pricing power, whether raw material inflation eases, and whether the company's goodwill and remaining lead-pigment litigation exposure, which is not accrued, will generate further charges.
Mar 13, 2001
1998
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 1998
The Sherwin-Williams Company (SHW) reported fiscal 1998 net sales of $4.93 billion, up 1.1% from $4.88 billion in 1997, and net income of $272.9 million, up 4.7%. Diluted EPS rose to $1.57 from $1.50. Growth came from the Paint Stores Segment, whose sales rose 6.9% on higher gallon volume and comparable-store sales growth of 4.9%, and from the Other (real estate) Segment. These gains offset a 5.7% decline in Coatings Segment external sales, which was hurt by weak do-it-yourself demand, poor South American markets, and lost business from 1997. Consolidated gross margin improved slightly to 43.2%, while SG&A rose to 32.4% of sales, partly due to Year 2000 spending. Balance sheet and cash flow were solid. Operating cash flow was $478.5 million, used to fund $146 million of capital expenditures, reduce debt, repurchase 3 million shares for $85 million, and raise the dividend. Long-term debt fell $113.6 million to $730.3 million, and there were no short-term borrowings at year-end. Interest coverage improved to 7.1 times from 6.3 times. Shareholders' equity grew to $1.72 billion. Goodwill and intangibles continue to amortize, and the Company faces ongoing lead-pigment litigation and a significant environmental exposure at its southeast Chicago facility, where the ultimate liability could exceed current accruals. Looking ahead, management plans about 65 net new paint stores in 1999, more than 50 new products, a new brand advertising campaign, and a Year 2000 budget of roughly $35 million. Management expects continued weakness in South America and is pursuing cost reductions there. The quarterly dividend was raised to $.12 per share, the twentieth consecutive annual increase.
Mar 10, 1999
1997
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 1997
The Sherwin-Williams Company (SHW) reported a transformative 1997 for its top line and balance sheet, driven largely by the $830 million acquisition of Thompson Minwax Holding Corp. and several smaller deals. Net sales rose 18.1% to $4.88 billion and net income rose 13.7% to $260.6 million ($1.50 diluted EPS). However, excluding acquisitions, sales grew only 3.7% and the Coatings Segment's organic sales declined 0.5%, as the company chose not to match low-priced competitor offers and lost some business. Management attributes the weaker underlying growth partly to the company's refusal to chase price, and it warned that first-half 1998 earnings growth would be slightly dampened by these lost sales. The balance sheet changed materially. Total assets grew to $4.04 billion from $2.99 billion, goodwill rose to $1.16 billion, and long-term debt jumped to $844 million from $143 million. Interest coverage fell to 6.3x from 16.3x, and the company remains in a borrowing position through 1998. Operating cash flow of $439.5 million covered capital expenditures of $164 million and dividends of $69 million, and the board raised the quarterly dividend to $0.1125 for 1998. Investors should weigh strong gross margin expansion (43.0% vs. 41.8%) and a Paint Stores Segment that is performing well against higher leverage, heavy goodwill and intangible amortization, and ongoing environmental and lead-pigment litigation exposure, which management says is not expected to be materially adverse. Looking ahead, management expects 1998 sales and earnings to exceed 1997 levels, though Year 2000 costs and a multi-year IT project will weigh modestly on near-term profits. The company is also restructuring its Coatings Division, consolidating Coatings and Consumer Brands and building new plants in Brazil and Chile. Key items to monitor are the pace of integration of Thompson Minwax, the recovery of Coatings volumes, the environmental accruals tied to the southeast Chicago facility, and whether the company can deleverage from its current debt load.
Mar 11, 1998
1994
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 1994
The Sherwin-Williams Company (SHW) reported fiscal 1994 results that showed solid growth in a sluggish paint market. Net sales rose 5.1% to $3.10 billion, and net income increased 12.9% to $186.6 million, or $2.15 per share. The gain was driven mainly by the Paint Stores Segment, where sales grew 8.5% and segment operating profit rose 20.3%, helped by a 7.8% comparable-store sales increase and the company's EverClean and national advertising push. The Coatings Segment was essentially flat on sales, but its operating profit still rose 3.4% on better gross margins. Consolidated gross margin improved to 42.8% and SG&A fell to 32.9% of sales, while interest expense dropped 50.1% after debt repurchases. The balance sheet is strong. Long-term debt was cut to $20.5 million, leaving a debt-to-capitalization ratio of 2.0%, and cash and equivalents stood at $251.4 million. Operating cash flow was $250.5 million, and capital expenditures were $78.7 million. The company bought back over four million shares for treasury, and the Board raised the quarterly dividend to $0.16 in February 1995, the sixteenth consecutive increase. Management said no external financing is needed for planned 1995 capital projects. Investors should watch several risks. Environmental and lead-pigment litigation remains open, and the company says the Southeast Chicago facility liability could end up significantly above current accruals. Total environmental-related long-term liabilities were $71.0 million. Management also expects a $3.2 million reduction in the 1995 pension credit because of higher unrecognized losses. Overall, the filing describes a financially conservative company with steady earnings growth and a fortress balance sheet, though its top-line growth depends heavily on the Paint Stores Segment.
Mar 15, 1995
1993
SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 1993
The Sherwin-Williams Company (SHW) reported a solid 1993 with net sales up 7.3% to $2.95 billion and net income of $165.2 million, or $1.85 per share, up 14.2% from income before accounting changes in 1992 ($145 million). Growth was driven mainly by the Paint Stores Segment, which contributed about 74% of the sales increase on an 8.8% sales gain, comparable-store sales up 8.5%, and a 28.5% jump in segment operating profit to $117 million. The Coatings Segment grew sales 5.0% and operating profit 11.9%, supported by volume gains, stable raw material costs, and cost containment. Gross margin edged up to 42.5% from 42.2%, while SG&A held flat at 33.3% of sales. The balance sheet is conservative. Long-term debt fell to $37.9 million from $60.1 million after the company retired $20 million of its 9.875% debentures, and the debt-to-capitalization ratio was 3.7%. Cash and short-term investments reached $269.8 million, operating cash flow was $254.3 million, and shareholders' equity rose to $1.03 billion. Capital expenditures of $63 million were funded internally, and management does not expect external financing needs in 1994. Key risks include environmental exposure (accruals of $61.4 million), an EPA lawsuit over the southeast Chicago facility where the company warns the ultimate liability could be significantly higher than accrued, and lead-paint litigation that management believes is without merit. A higher federal tax rate and a lower pension discount rate (8.5% to 7.25%) pressure future earnings modestly. The dividend was raised to $.14 per quarter, the fifteenth consecutive annual increase.
Mar 15, 1994