10-QPeriod: Q1 FY2013

SHERWIN WILLIAMS CO Quarterly Report for Q1 Ended Mar 31, 2013

Filed April 24, 2013For Securities:SHW

Summary

Sherwin-Williams Company (SHW) reported a solid first quarter for 2013, demonstrating revenue growth and improved profitability. Net sales increased by 1.4% to $2.167 billion, driven primarily by higher paint sales volume in the Paint Stores Group. Gross profit margin expanded to 44.4% from 42.6% in the prior year's quarter, reflecting increased volume, better operating efficiency, and strategic pricing increases. Diluted earnings per share (EPS) rose to $1.11 from $0.95, signaling a positive trend in operational performance and shareholder value. The company also highlighted a strengthened balance sheet, with a significant increase in cash and cash equivalents and a reduction in short-term borrowings, largely due to strategic debt financing. While facing ongoing environmental and legal matters, the company's core operations appear robust, with consistent growth in its key segments and a clear strategy for future expansion, including the pending acquisition of Comex.

Financial Highlights

50 data points
Beta

Revenue

$2.17B

44.4% Gross Margin

Net Income

$116.19M

5.4% Net Margin

EPS (Diluted)

$0.37

Total Assets

$6.17B

Cash & Equivalents

$613.93M

Free Cash Flow

-$91.13M

Financial Statements
Beta
Revenue$2.17B
Cost of Revenue$1.20B
Gross Profit$962.85M
SG&A Expenses$778.68M
Operating Income$238.46M
Interest Expense$15.31M
Net Income$116.19M
EPS (Basic)$0.38
EPS (Diluted)$0.37
Shares Outstanding (Basic)305.88M
Shares Outstanding (Diluted)312.77M

Key Highlights

  • 1Consolidated net sales increased 1.4% to $2.167 billion in Q1 2013 compared to Q1 2012.
  • 2Gross profit margin improved to 44.4% from 42.6% year-over-year, driven by volume and efficiency.
  • 3Diluted EPS increased to $1.11 from $0.95, indicating enhanced profitability.
  • 4Cash and cash equivalents saw a substantial increase, supported by debt issuance and reduced short-term borrowings.
  • 5The Paint Stores Group showed strong performance with a 4.0% increase in net sales.
  • 6The company is progressing with the planned acquisition of Consorcio Comex, S.A. de C.V.
  • 7Despite ongoing legal and environmental provisions, the core business demonstrates resilience and growth.

Frequently Asked Questions

The primary driver for the increase in net sales was higher paint sales volume within the Paint Stores Group segment, alongside strategic selling price increases across various segments and contributions from recent acquisitions.

Profitability improved significantly. Net income rose by $16.0 million to $116.2 million, and diluted earnings per share increased to $1.11 from $0.95. This improvement was attributed to higher sales volumes, better operating efficiencies, and strategic pricing.

The company continues to address environmental-related liabilities and litigation, particularly concerning lead pigment and lead-based paint. While management believes these matters will not have a material adverse effect on the company's financial condition, liquidity, or cash flow due to the extended resolution periods, significant liabilities could impact future net income. The company has not accrued amounts for all lead-related litigation due to inherent uncertainties in estimating potential losses.

The company's financial condition, liquidity, and cash flow remained strong. Cash and cash equivalents increased significantly due to debt financing in late 2012, and short-term borrowings decreased substantially. The company has sufficient short-term borrowing capacity and total available borrowing capacity to fund its operating needs.