Summary
The Sherwin-Williams Company (SHW) reported a significant shift in its financial performance for the nine months ending September 30, 2017, largely driven by the transformative acquisition of Valspar Corporation. While consolidated net sales surged by 21.3% to $11.004 billion compared to the prior year, this growth was heavily influenced by the inclusion of Valspar's sales. Diluted earnings per share (EPS) saw a decline, with EPS from continuing operations at $9.67 for the nine months, down from $9.85 in the prior year. This decrease was attributed to acquisition-related costs, purchase accounting adjustments, and increased amortization of intangibles. Despite the EPS dip, the company highlighted strong operational performance in The Americas Group and a general increase in paint sales volume. However, gross profit margins compressed from 50.0% to 45.3% for the nine-month period, primarily due to the impact of Valspar's purchase accounting and rising raw material costs. The company's financial structure underwent a significant change with total debt increasing substantially to fund the acquisition, leading to a higher debt-to-capitalization ratio. Nevertheless, SHW reported continued strength in operating cash flow, which increased by $292.3 million.
Financial Highlights
53 data points| Revenue | $4.51B |
| Cost of Revenue | $2.61B |
| Gross Profit | $1.90B |
| SG&A Expenses | $1.31B |
| Operating Income | $655.62M |
| Interest Expense | $91.59M |
| Net Income | $316.61M |
| EPS (Basic) | $1.13 |
| EPS (Diluted) | $1.11 |
| Shares Outstanding (Basic) | 278.96M |
| Shares Outstanding (Diluted) | 285.62M |
Key Highlights
- 1Consolidated net sales increased by 21.3% to $11.0 billion for the nine months ended September 30, 2017, largely due to the acquisition of Valspar.
- 2Diluted net income per share decreased to $9.23 for the nine months ended September 30, 2017, from $9.85 in the prior year, impacted by acquisition-related costs and amortization.
- 3Gross profit margin declined to 45.3% for the nine months ended September 30, 2017, from 50.0% in the prior year, due to purchase accounting adjustments and higher raw material costs.
- 4Total debt increased significantly to $10.9 billion as of September 30, 2017, from $1.96 billion a year prior, reflecting debt incurred to finance the Valspar acquisition.
- 5Operating cash flow improved by $292.3 million to $1.26 billion for the nine months ended September 30, 2017.
- 6The company completed the acquisition of Valspar on June 1, 2017, for approximately $8.9 billion, integrating it into three new reportable segments: The Americas Group, Consumer Brands Group, and Performance Coatings Group.
- 7The Americas Group showed continued strength with a 7.3% increase in income before taxes for the nine months, while the Consumer Brands Group and Performance Coatings Group experienced declines in income before taxes.