10-QPeriod: Q3 FY2020

SHERWIN WILLIAMS CO Quarterly Report for Q3 Ended Sep 30, 2020

Filed October 27, 2020For Securities:SHW

Summary

Sherwin-Williams Co. (SHW) reported a strong third quarter in 2020, with net sales increasing by 5.2% year-over-year to $5.12 billion. This growth was primarily driven by robust performance in the Consumer Brands Group and continued strength in The Americas Group, particularly in residential repaint and DIY segments. Diluted earnings per share saw a significant increase to $7.66, up from $6.16 in the prior year's quarter, reflecting improved gross profit margins due to favorable customer/product mix and moderating raw material costs. Operationally, the company demonstrated strong cash flow generation, with net operating cash increasing by 54% year-to-date. Despite the ongoing economic uncertainties related to the COVID-19 pandemic, Sherwin-Williams maintained a solid liquidity position with substantial unused capacity under its credit facilities. The company proactively managed expenses and returned capital to shareholders through dividends and share repurchases. While acknowledging potential future impacts from the pandemic, the company's diversified business model and operational efficiencies position it well for continued performance.

Financial Highlights

54 data points
Beta

Revenue

$5.12B

47.9% Gross Margin

Net Income

$705.80M

13.8% Net Margin

EPS (Diluted)

$2.55

Total Assets

$20.81B

Cash & Equivalents

$619.90M

Free Cash Flow

$1.49B

Financial Statements
Beta
Revenue$5.12B
Cost of Revenue$2.67B
Gross Profit$2.46B
SG&A Expenses$1.41B
Operating Income$1.10B
Interest Expense$83.30M
Net Income$705.80M
EPS (Basic)$2.60
EPS (Diluted)$2.55
Shares Outstanding (Basic)271.60M
Shares Outstanding (Diluted)276.30M

Key Highlights

  • 1Consolidated net sales increased by 5.2% to $5.12 billion for the three months ended September 30, 2020, compared to the prior year period.
  • 2Diluted net income per share rose to $7.66, a significant improvement from $6.16 in the same period last year.
  • 3Gross profit margin improved to 47.9% from 45.7% year-over-year, driven by favorable product mix and lower raw material costs.
  • 4The Consumer Brands Group saw a substantial 23.5% increase in net sales, indicating strong retail demand.
  • 5Net operating cash flow for the first nine months of 2020 was $2.56 billion, a 54% increase from the prior year, highlighting strong cash generation.
  • 6The company maintained a strong liquidity position with $619.9 million in cash and $3.50 billion in unused credit facility capacity at the end of the quarter.
  • 7The Americas Group reported a 2.8% increase in net sales, with same-store sales in the U.S. and Canada up 3.1%.

Frequently Asked Questions

Sales growth was primarily driven by higher sales to the Consumer Brands Group's retail customers across various regions, continued strong performance in the residential repaint and DIY segments within The Americas Group, and a return to growth in the Performance Coatings Group. Favorable customer and product mix also contributed significantly.

While the company noted that the COVID-19 pandemic did not have a material adverse effect on its consolidated financial results for the first three quarters of 2020, it anticipates potential future impacts due to economic deterioration. The company has implemented safety measures and adapted its operations, including temporary store hour reductions and curbside pickup, to mitigate impacts and maintain essential services. Notably, there was an increase in DIY demand due to more people spending time at home.

Sherwin-Williams reported a strong liquidity position, with $619.9 million in cash and cash equivalents and $3.50 billion of unused capacity under its credit facilities. Net working capital also saw a significant increase. The company is in compliance with its financial covenants and expects to remain so, indicating a solid financial footing.

The company acknowledges the ongoing evolution of the COVID-19 pandemic and its potential for future adverse impacts on business, results of operations, cash flow, and financial condition. Key uncertainties include the duration and severity of the pandemic, evolving governmental directives, and the impact on economic activity and consumer confidence. Despite these risks, the company's diversified business and proactive management strategies aim to navigate these challenges.