10-KPeriod: FY2015

SHERWIN WILLIAMS CO Annual Report, Year Ended Dec 31, 2015

Filed February 24, 2016For Securities:SHW

Summary

The Sherwin-Williams Company's 2015 10-K filing highlights a year of continued growth, with net sales reaching $11,339 million, an increase from $11,130 million in 2014. Net income also saw a substantial rise to $1,054 million from $866 million in the prior year. The company operates across four distinct segments: Paint Stores Group, Consumer Group, Global Finishes Group, and Latin America Coatings Group, each contributing to its broad market presence. Key areas of focus for investors include the company's expanding store network, particularly within the Paint Stores Group which added 83 net new stores in 2015, and its international operations, which accounted for approximately 15.8% of total consolidated net sales. The report also touches upon the company's commitment to research and development, its competitive landscape, and significant risk factors, including economic conditions, raw material costs, and ongoing litigation, notably concerning lead pigment and lead-based paint. Despite these risks, Sherwin-Williams demonstrates resilience and a strategic approach to growth.

Financial Highlights

54 data points
Beta

Revenue

$11.34B

49.0% Gross Margin

Net Income

$1.05B

9.3% Net Margin

EPS (Diluted)

$3.72

Total Assets

$5.78B

Cash & Equivalents

$205.74M

Free Cash Flow

$1.45B

Financial Statements
Beta
Revenue$11.34B
Cost of Revenue$5.78B
Gross Profit$5.56B
R&D Expenses$57.67M
SG&A Expenses$3.89B
Operating Income$1.96B
Interest Expense$61.79M
Net Income$1.05B
EPS (Basic)$3.81
EPS (Diluted)$3.72
Shares Outstanding (Basic)276.59M
Shares Outstanding (Diluted)283.63M

Key Highlights

  • 1Net sales for 2015 reached $11,339 million, up from $11,130 million in 2014, indicating steady revenue growth.
  • 2Net income surged to $1,054 million in 2015, a significant increase from $866 million in 2014, demonstrating improved profitability.
  • 3The company operates through four primary segments: Paint Stores Group, Consumer Group, Global Finishes Group, and Latin America Coatings Group, showcasing a diversified business model.
  • 4The Paint Stores Group continued its expansion, adding 83 net new stores in 2015, reinforcing its direct-to-consumer reach.
  • 5International operations represent a growing portion of the business, with foreign subsidiaries contributing 15.8% of total net sales in 2015.
  • 6The company highlights potential risks including economic downturns, fluctuations in raw material costs, and ongoing litigation, particularly related to lead pigment and lead-based paint.
  • 7Sherwin-Williams maintains a strong brand portfolio across its segments, with numerous recognized trademarks and trade names.

Frequently Asked Questions

Sherwin-Williams operates through four reportable segments: Paint Stores Group (direct sales through company-operated stores), Consumer Group (manufacturing and distribution to third-party customers and the Paint Stores Group), Global Finishes Group (protective and marine, automotive, and OEM finishes globally), and Latin America Coatings Group (architectural and industrial coatings in Latin America). Each segment targets different customer bases and markets, contributing to a diversified revenue stream and market penetration.

Key risks identified include adverse changes in general business and economic conditions domestically and globally, which can reduce product demand. Increases in raw material and energy costs can impact earnings. The company also faces substantial competition, risks associated with international operations (currency fluctuations, regulatory constraints), and potential liabilities from ongoing litigation, particularly the historical lead pigment and lead-based paint litigation. Cybersecurity threats and stringent environmental regulations are also noted.

The company typically builds inventories in the first quarter to meet increased demand in the second and third quarters. Working capital items like inventories and accounts receivable are generally financed through short-term borrowings, including lines of credit and commercial paper. The company also utilizes revolving credit facilities and other financing arrangements to fund seasonal working capital needs and general corporate purposes.

Sherwin-Williams has a strategy of expanding its physical footprint, as evidenced by the net addition of 83 stores in its Paint Stores Group in 2015. The company is also actively involved in international markets across its Global Finishes Group and Latin America Coatings Group, with foreign operations contributing a significant portion of total sales. This suggests a dual focus on strengthening domestic market share and pursuing global growth opportunities.