10-KPeriod: FY2010

SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2010

Filed February 23, 2011For Securities:SHW

Summary

The Sherwin-Williams Company's 2010 10-K filing indicates a company actively navigating the economic landscape following the 2008 recession. Despite challenges, Sherwin-Williams demonstrated resilience, with net sales increasing to $7.776 billion and net income rising to $462 million, up from $436 million in 2009. The company's diversified business model, encompassing the Paint Stores Group, Consumer Group, and Global Finishes Group, appears to be a key strength, allowing it to serve a broad range of customers from professionals to DIYers. Key to the company's strategy is its extensive retail presence through the Paint Stores Group, which continued to expand its footprint. The report also highlights a focus on managing raw material costs and supply chain dynamics, which became more volatile in 2010 due to global demand and supplier consolidation. Investors should note the company's proactive approach to risk management, including its share repurchase program and the forward-looking statements addressing potential economic headwinds and market competition.

Financial Highlights

57 data points
Beta

Revenue

$7.78B

44.8% Gross Margin

Net Income

$462.49M

5.9% Net Margin

EPS (Diluted)

$1.40

Total Assets

$5.17B

Cash & Equivalents

$58.59M

Free Cash Flow

$581.43M

Financial Statements
Beta
Revenue$7.78B
Cost of Revenue$4.30B
Gross Profit$3.48B
R&D Expenses$39.88M
SG&A Expenses$2.73B
Operating Income$948.00M
Interest Expense$70.59M
Net Income$462.49M
EPS (Basic)$1.43
EPS (Diluted)$1.40
Shares Outstanding (Basic)321.06M
Shares Outstanding (Diluted)326.36M

Key Highlights

  • 1Increased Net Sales and Net Income: Sherwin-Williams reported net sales of $7.776 billion and net income of $462 million for the fiscal year ended December 31, 2010, showing an improvement from the previous year.
  • 2Diversified Business Segments: The company operates through three reportable segments: Paint Stores Group, Consumer Group, and Global Finishes Group, providing a broad market reach and revenue diversification.
  • 3Expansion of Paint Stores Group: The Paint Stores Group continued its growth strategy, opening 36 net new stores in 2010, reinforcing its direct-to-consumer and professional market presence.
  • 4Acquisition Strategy: In 2010, Sherwin-Williams completed key acquisitions in the industrial wood coatings sector (Becker Acroma, Sayerlack) and in Ecuador (Pinturas Condor), indicating an active pursuit of strategic growth.
  • 5Raw Material Price Volatility: The report flags increased prices and potential shortages for certain raw materials in 2010, driven by supply consolidation and rising global demand, posing a potential challenge for margins.
  • 6Share Repurchase Program: The company continued its share repurchase program, buying back 1.525 million shares under the program in Q4 2010, signaling a commitment to returning value to shareholders.
  • 7Extensive Brand Portfolio: Sherwin-Williams manages a wide array of well-recognized trademarks and trade names across its segments, contributing significantly to brand recognition and customer loyalty.

Frequently Asked Questions

The company's financial performance in 2010 was influenced by an increase in net sales to $7.776 billion and net income to $462 million. This growth was supported by the continued expansion of its Paint Stores Group, strategic acquisitions in key segments, and efforts to manage raw material cost pressures. The overall economic environment, while still recovering, showed signs of stabilization which benefited demand across its diverse customer base.

Sherwin-Williams acknowledges that consolidation among raw material suppliers and increased global demand led to shortages and price increases for certain key materials in 2010. The company is working to manage these challenges by securing adequate sources, potentially offsetting higher costs through operational efficiencies, and adjusting product pricing where feasible. They also note that sufficient suppliers exist for purchased products for resale.

Sherwin-Williams continues to pursue strategic acquisitions as part of its long-term growth strategy. In 2010, significant acquisitions were made in industrial wood coatings in Europe and in the paint and coatings market in Ecuador. The company also continues to expand its international presence, particularly in Asia, Europe, Mexico, and South America, while managing the associated economic and regulatory risks.

The company identifies several key risks for investors, including adverse changes in general business and economic conditions globally, particularly in cyclical segments like construction and manufacturing. Other significant risks include potential increases in raw material and energy costs, competitive pressures, the successful integration of acquisitions, foreign currency exchange rate fluctuations, and potential liabilities related to environmental matters and litigation, notably concerning lead pigments and lead-based paint.