How did the company manage its financial position during this period?

The company managed its financial position by using cash flow from operations to repay long-term debt and short-term borrowings, fund capital expenditures, repurchase treasury stock, and pay cash dividends. There was a net decrease in short-term borrowings of $23.1 million and long-term debt of $9.6 million in the first nine months of 2001.

What is the company's exposure to legal and environmental liabilities?

Sherwin-Williams is involved in significant legal proceedings related to lead pigments and lead-based paints, for which it believes the litigation is without merit and is vigorously defending. The company has not accrued any amounts for this litigation, as it cannot reasonably estimate the scope or amount of potential liability, but management does not currently believe it will have a material adverse effect. Additionally, the company is involved in environmental remediation activities and has accrued appropriate amounts for certain sites, though ultimate liabilities could be higher than currently estimated.

What is the expected impact of the adoption of SFAS No. 142 on goodwill and intangible assets?

The adoption of SFAS No. 142, which requires goodwill and intangible assets with indefinite lives to be tested for impairment rather than amortized, is expected to increase net income by approximately $22.0 million for the full year 2002. The company is conducting impairment tests and the exact effect on its financial position is yet to be determined.

SHW 10-Q Quarterly Report Q3 FY2001 — Revenue, Net Income, EPS

Q: What were the primary drivers of the sales decline in the third quarter of 2001?

The primary drivers of the sales decline in the third quarter of 2001 included ongoing poor domestic and South American economic conditions, unfavorable foreign currency exchange rates, discontinued paint programs at certain customers, and the temporary impact of the September 11th attacks on consumer buying habits.

Summary

Sherwin-Williams Company (SHW) reported a decline in net sales and net income for both the third quarter and the first nine months of 2001 compared to the prior year. This downturn was attributed to challenging domestic and South American economic conditions, unfavorable foreign currency exchange rates, and the impact of discontinued paint programs at certain customers. The September 11th attacks also contributed to a temporary shift in consumer buying habits, negatively affecting third-quarter sales. Despite the sales decline, the company continued to invest in its business, notably through new store openings in the Paint Stores Segment, even as comparable-store sales saw a modest decrease. Management is focused on navigating these economic headwinds while maintaining service levels and protecting market share. The company is also managing its financial position by reducing short-term borrowings and managing capital expenditures, while continuing to return value to shareholders through dividends and share repurchases.

Key Highlights

1Consolidated net sales decreased by 3.2% for both the third quarter and the first nine months of 2001, reaching $1.37 billion and $3.93 billion, respectively.
2Net income for the third quarter fell to $90.3 million ($0.58 per diluted share) from $106.7 million ($0.66 per diluted share) in the prior year.
3Diluted earnings per share for the nine-month period decreased to $1.38 from $1.61 in the same period last year.
4The Paint Stores Segment, the largest by sales, experienced a slight decline in net sales for the quarter but a slight increase for the nine-month period, though comparable-store sales decreased.
5The company is actively repurchasing its common stock, with authorization for an additional 18.2 million shares as of September 30, 2001.
6Interest expense has decreased due to lower average short-term borrowing rates and reduced long-term debt balances.
7The company is facing significant legal proceedings related to lead pigments and lead-based paints, for which it is vigorously defending and has not accrued any amounts, believing potential liability will not be material.

SHERWIN WILLIAMS CO Quarterly Report for Q3 Ended Sep 30, 2001

Summary

Key Highlights

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