What was the primary driver for the decrease in net sales?

The primary driver for the decrease in net sales was the challenging global economic downturn, which led to significant reductions in end-market demand for coatings and related building materials. This was particularly felt in the domestic market and subsequently expanded into global markets.

How did Sherwin-Williams manage profitability despite declining sales?

Despite declining sales, Sherwin-Williams improved its gross profit margin. This was achieved through pricing initiatives implemented over the past year, ongoing cost control efforts, a favorable product sales mix, and reduced freight and distribution costs. These factors helped offset the increased costs associated with lower manufacturing volumes.

What is the company's current financial health and liquidity situation?

The company's financial condition, liquidity, and cash flow remained strong. Net working capital improved, and the current ratio increased to 1.04 at June 30, 2009. Total debt was significantly reduced year-over-year, and the company had substantial unused borrowing capacity, indicating solid liquidity.

Are there any significant legal or environmental contingencies that investors should be aware of?

Yes, the company is involved in significant litigation, most notably concerning lead pigment and lead-based paint. While the company believes these claims are without merit, it has not accrued any amounts for potential liabilities due to the inherent uncertainties in estimating the outcomes. Environmental-related liabilities are also significant, with ongoing investigations and remediation activities at several sites, though management does not believe these will have a material adverse effect on the company's financial condition.

SHW 10-Q Quarterly Report Q2 FY2009 — Revenue, Net Income, EPS

Summary

Sherwin-Williams Company's (SHW) Q2 2009 filing reflects the challenging economic environment, with a notable decrease in net sales across all segments compared to the prior year. Net sales fell by 12.6% in the second quarter and 12.8% for the first six months, primarily driven by reduced demand in both domestic and global markets due to the economic downturn. Despite declining sales, the company managed to improve its gross profit margin due to pricing initiatives, cost control measures, and a favorable product mix. Selling, general, and administrative (SG&A) expenses were controlled, decreasing in dollar terms year-over-year, though increasing as a percentage of sales due to the revenue decline. The company maintained a strong financial position with improved net working capital and a strengthened current ratio. Debt levels were significantly reduced year-over-year. While net income and diluted EPS declined, the company demonstrated resilience by generating substantial net operating cash flow, which was used for debt reduction, capital expenditures, share repurchases, and dividends. Management is actively managing costs and debt while navigating the difficult economic landscape.

Financial Highlights

48 data points

Beta

Revenue

$1.95B

0.5% Gross Margin

Net Income

$158.02M

0.1% Net Margin

EPS (Diluted)

$0.45

Total Assets

$4.50B

Cash & Equivalents

$49.26M

Free Cash Flow

$360.23M

Financial Statements

Beta

Revenue	$1.95B
Cost of Revenue	$1.05B
Gross Profit	$895.34M
SG&A Expenses	$653.00M
Net Income	$158.02M
EPS (Basic)	$0.45
EPS (Diluted)	$0.45
Shares Outstanding (Basic)	345.59M
Shares Outstanding (Diluted)	348.89M

Key Highlights

1Consolidated net sales decreased by 12.6% for the second quarter and 12.8% for the first six months, reflecting the broad economic downturn.
2Gross profit margin improved to 46.0% in Q2 2009 (from 43.6% in Q2 2008) and 45.0% for the first six months (from 43.7% in H1 2008) due to pricing, cost controls, and mix.
3Selling, general, and administrative (SG&A) expenses decreased in dollar terms but increased as a percentage of sales, indicating cost management efforts.
4Diluted net income per common share decreased to $1.35 for Q2 2009 (from $1.45 in Q2 2008) and $1.66 for the first six months (from $2.07 in H1 2008).
5The company's financial condition remained strong with a current ratio improving to 1.04 at June 30, 2009, and total debt reduced significantly from the prior year.
6Net operating cash flow was robust, totaling $266.4 million for the first six months of 2009, used for debt reduction, acquisitions, capital expenditures, and shareholder returns.
7The company is subject to significant litigation risks, particularly concerning lead pigment and lead-based paint, with no amounts accrued for these matters due to estimation uncertainties.

SHERWIN WILLIAMS CO Quarterly Report for Q2 Ended Jun 30, 2009

Summary

Financial Highlights

Key Highlights

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