Summary
Sherwin-Williams reported a solid third quarter and first nine months of 2011, demonstrating revenue growth driven by price increases, acquisitions, and organic sales growth, particularly in the Global Finishes Group. Net sales increased by 14.4% in the third quarter and 13.8% year-to-date. Despite rising raw material costs impacting gross margins, the company managed SG&A expenses effectively, leading to improved profitability on a percentage of sales basis. Diluted earnings per share saw a notable increase, reflecting operational improvements and the benefits of strategic acquisitions, although the company is also managing significant litigation risks, particularly related to lead-based paint, and environmental liabilities which could materially impact future financial results if adverse judgments or assessments occur. The company's financial condition remained stable with adequate liquidity, supported by strong operating cash flow and available borrowing capacity, even amidst tight credit markets. Strategic acquisitions, such as Leighs Paints, Pinturas Condor, Acroma, and Sayerlack, continue to expand the company's global reach and product offerings, primarily within the Global Finishes Group. However, investors should monitor the ongoing lead pigment and lead-based paint litigation, where the company has not accrued any amounts, and significant future liabilities are possible. Additionally, the company settled an IRS audit regarding its ESOP, resulting in a significant after-tax charge in the fourth quarter, which will impact shareholders' equity.
Financial Highlights
53 data points| Revenue | $2.48B |
| Cost of Revenue | $1.45B |
| Gross Profit | $1.04B |
| SG&A Expenses | $760.18M |
| Operating Income | $321.42M |
| Interest Expense | $10.45M |
| Net Income | $179.88M |
| EPS (Basic) | $0.58 |
| EPS (Diluted) | $0.57 |
| Shares Outstanding (Basic) | 306.45M |
| Shares Outstanding (Diluted) | 312.37M |
Key Highlights
- 1Consolidated net sales increased by 14.4% to $2.48 billion for the third quarter and 13.8% to $6.70 billion for the first nine months of 2011, driven by price increases, acquisitions, and organic growth, especially in the Global Finishes Group.
- 2Diluted net income per common share rose to $1.71 for the third quarter and $3.98 for the nine months, up from $1.60 and $3.53 in the prior year periods, respectively, reflecting improved profitability.
- 3Gross profit margin decreased year-over-year (41.8% vs. 44.7% in Q3; 42.7% vs. 44.8% YTD) due to rising raw material costs, partially offset by selling price increases and acquisitions.
- 4Selling, General, and Administrative (SG&A) expenses as a percentage of sales improved, falling to 30.6% in Q3 and 33.0% YTD, down from 32.4% and 34.1% respectively, indicating effective cost control.
- 5The company made significant progress on its acquisition strategy, integrating Leighs Paints, Pinturas Condor, Acroma, and Sayerlack, which strengthened the Global Finishes Group's international presence.
- 6Sherwin-Williams continues to face significant litigation risks, particularly related to lead pigment and lead-based paint, with no amounts accrued for potential liabilities, highlighting a material contingent risk.
- 7A settlement was reached with the IRS regarding the company's ESOP, resulting in an estimated $75 million after-tax charge and a reduction in shareholders' equity in the fourth quarter.