01—Abstract
Summary
Summary of the 10-K filed February 21, 2020. Cited figures are marked; the original filing is the authoritative source.
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 billiona, 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 millionb 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.
02—Key points
Key Highlights
- Net sales increased by 2.1% to $17.9 billion, driven by strong performance in The Americas Group.
- Gross profit margin improved to 44.9% from 42.3% in the prior year, reflecting favorable pricing, cost efficiencies, and moderating raw material costs.
- Net operating cash flow reached a record $2.321 billion, supporting debt reduction, capital investments, and shareholder returns.
- The company reduced total debt by $658.5 million, ending the year with $8.685 billion in total debt.
- Sherwin-Williams returned $1.200 billion to shareholders through dividends ($420.8 million) and share buybacks ($778.8 million).
- The Americas Group, the largest segment, saw a 5.7% increase in net sales, benefiting from higher paint sales volume and price increases.
- The company recorded non-cash pre-tax impairment charges of $122.1 million related to recently acquired trademarks, primarily in the Performance Coatings Group.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Sherwin Williams Co kept $0.09.
- Revenue$17.90B100.0%
- Cost of revenue−$9.86B55.1%
- Gross profit$8.04B44.9%
- Operating costs−$5.23B29.2%
- Operating income$2.81B15.7%
- Interest, other & tax−$1.27B7.1%
- Net income$1.54B8.6%
Where FY2019 revenue went
$17.90B- Cost of revenue: $9.86B, 55% of revenue
- SG&A: $5.27B, 29% of revenue
- Net income: $1.54B, 8.6% of revenue
- Interest, other & tax: $1.27B, 7.1% of revenue
Kept 8.6% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 21, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $17.90B$17.53B | +2.1% |
| Cost of Revenue | $9.86B$10.12B | −2.5% |
| Gross Profit | $8.04B$7.42B | +8.3% |
| SG&A Expenses | $5.27B$5.03B | +4.8% |
| Operating Income | $2.81B$2.61B | +7.6% |
| Interest Expense | $349.30M$366.70M | −4.7% |
| Net Income | $1.54B$1.11B | +39.0% |
| EPS (Basic) | $5.60$3.97 | +40.9% |
| EPS (Diluted) | $5.50$3.89 | +41.4% |
| Shares Outstanding (Basic) | 275.40M278.98M | −1.3% |
| Shares Outstanding (Diluted) | 280.30M284.96M | −1.6% |
05—Questions
Frequently Asked Questions
What was the overall financial performance of Sherwin-Williams in 2019?
Sherwin-Williams reported a 2.1% increase in net sales to $17.9 billion in 2019. The company also showed improved profitability with a higher gross profit margin and significant growth in net operating cash flow, reaching a record $2.321 billion. This allowed for debt reduction and substantial returns to shareholders.
Which segment performed the best, and what drove its growth?
The Americas Group was the strongest performing segment, with net sales increasing by 5.7%. This growth was primarily driven by higher paint sales volume across most end-market segments and favorable selling price increases.
How did the company manage its debt and shareholder returns?
Sherwin-Williams effectively managed its debt by reducing total debt by $658.5 million during 2019. The company also demonstrated a strong commitment to shareholder returns, investing $1.200 billion in cash dividends and share repurchases, underscoring its financial strength and confidence in future operations.
Were there any significant one-time charges or impairments recorded?
Yes, the company recorded non-cash pre-tax impairment charges totaling $122.1 million in the fourth quarter of 2019 related to certain recently acquired indefinite-lived trademarks. These charges were primarily concentrated in the Performance Coatings Group.
06—Continue