What was the impact of the adoption of SFAS No. 142 on the company's financial results?

The adoption of SFAS No. 142, 'Goodwill and Other Intangible Assets,' effective January 1, 2002, required the company to test goodwill and intangible assets for impairment. This resulted in a significant $183.1 million after-tax transitional impairment charge recorded in the first quarter of 2002. This charge impacted the reported net income for the nine months ended September 30, 2002, reducing it to $70.5 million. However, excluding this one-time charge, the company's operating performance showed positive growth.

How did the different business segments perform during the quarter?

The Paint Stores segment saw a 5.9% increase in net sales for the quarter, driven by architectural paint volume. The Consumer segment also experienced a 4.9% sales increase, benefiting from the DIY market. The Automotive Finishes segment's sales declined slightly due to unfavorable currency and price competition, while the International Coatings segment's sales decreased in U.S. dollars, primarily due to currency exchange rates, though it showed growth when excluding these effects.

What is the company's financial position, particularly regarding cash and debt?

At September 30, 2002, Sherwin-Williams had $49.9 million in cash and cash equivalents. Total current liabilities were $1.15 billion, and total current assets were $1.51 billion, resulting in a current ratio of approximately 1.31. The company had $508 million in long-term debt. While short-term borrowings were minimal at the end of the quarter, the company had significant unused borrowing capacity under its commercial paper program, backed by revolving credit agreements.

What are the major risks or potential liabilities mentioned in the report?

The company highlighted significant legal proceedings related to lead pigments and lead-based paints, with plaintiffs seeking substantial damages. A jury trial in Rhode Island resulted in a mistrial. The company also faces potential liabilities related to environmental compliance, investigation, and remediation activities. While management believes these matters will not have a material adverse effect on the company's financial condition, they introduce inherent uncertainties.

SHW 10-Q Quarterly Report Q3 FY2002 — Revenue, Net Income, EPS

Summary

Sherwin-Williams Company (SHW) reported its third-quarter and year-to-date results for the period ending September 30, 2002. For the third quarter, net sales increased by 4.4% to $1.43 billion, driven by strong domestic architectural paint sales and a favorable DIY market. This growth was somewhat offset by weaker performance in commercial architectural, industrial maintenance, and automotive product lines, as well as challenges in South America due to economic conditions and currency fluctuations. The company's profitability saw a significant improvement, with net income for the quarter rising 23.3% to $111.3 million. This was bolstered by an increase in gross profit margin to 45.2% and a decrease in SG&A as a percentage of sales to 32.0%. A notable event for the nine-month period was the adoption of SFAS No. 142, which resulted in a $183.1 million after-tax transitional impairment charge primarily related to goodwill and intangible assets, significantly impacting reported net income for the nine months to $70.5 million. Excluding this charge, income before the cumulative effect of accounting change for the nine months increased by 16.5%.

Key Highlights

1Consolidated net sales for Q3 2002 increased 4.4% year-over-year to $1.43 billion, driven by domestic architectural paint and DIY markets.
2Q3 2002 net income surged 23.3% to $111.3 million, with diluted EPS at $0.73.
3Gross profit margin improved to 45.2% in Q3 2002 from 44.0% in Q3 2001, aided by higher sales, favorable product mix, and moderating raw material costs.
4The adoption of SFAS No. 142 led to a $183.1 million after-tax transitional impairment charge in Q1 2002, impacting nine-month net income.
5Diluted EPS before the cumulative effect of accounting change for the nine months increased to $1.66 from $1.38 in the prior year.
6The company repurchased 5.19 million shares of common stock year-to-date for general corporate purposes.
7Despite challenges in South America and currency headwinds, international sales, excluding currency effects, showed growth in the International Coatings segment.

SHERWIN WILLIAMS CO Quarterly Report for Q3 Ended Sep 30, 2002

Summary

Key Highlights

Frequently Asked Questions