Sherwin Williams : Quarterly Reporting Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

• Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Period Ended June 30, 2021

or

• Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number 1-04851

THE SHERWIN-WILLIAMS COMPANY

(Exact name of registrant as specified in its charter)

	Ohio		34-0526850
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
	101 West Prospect Avenue
	Cleveland,Ohio		44115-1075
	(Address of principal executive offices)			(Zip Code)
[phone]
	(Registrant's telephone number including area code)
	Title of each class			Trading Symbol		Name of exchange on which registered
	Common Stock, par value of $0.33-1/3 per	SHW		New York Stock Exchange
	share

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date.

Common Stock, $0.33-1/3 Par Value - 263,302,451 shares as of June 30, 2021.

TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements	2
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3. Quantitative and Qualitative Disclosures About Market Risk	35
Item 4. Controls and Procedures	35
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	36
Item 1A. Risk Factors	36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 5. Other Information	38
Item 6. Exhibits	39
SIGNATURES	40

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES

STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)

(in millions, except per share data)		Three Months Ended			Six Months Ended
		June 30,				June 30,
		2021			2020			2021			2020
Net sales	$	5,379.8	$	4,604.0	$	10,035.8	$	8,750.7
Cost of goods sold		2,968.4			2,395.1			5,512.4			4,652.1
Gross profit		2,411.4			2,208.9			4,523.4			4,098.6
Percent to net sales		44.8 %			48.0 %			45.1 %			46.8 %
Selling, general and administrative expenses		1,437.8			1,291.3			2,763.7			2,598.9
Percent to net sales		26.7 %			28.0 %			27.5 %			29.7 %
Other general (income) expense - net		(5.2)			(1.1)			112.3			2.6
Amortization		77.8			77.4			157.0			155.5
Interest expense		83.5			88.1			166.7			174.3
Interest and net investment income		(0.6)			(0.6)			(1.2)			(1.2)
Other (income) expense - net		(1.1)			6.4			(3.3)			28.8
Income before income taxes		819.2			747.4			1,328.2			1,139.7
Income taxes		170.6			151.5			270.0			222.1
Net income	$	648.6	$	595.9	$	1,058.2	$	917.6
Net income per common share:
Basic	$	2.47	$	2.20	$	4.00	$	3.37
Diluted	$	2.42	$	2.16	$	3.93	$	3.31
Weighted average shares outstanding:
Basic		262.8			271.4			264.3			272.3
Diluted		267.8			275.9			269.0			277.3

See notes to condensed consolidated financial statements.

2

THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (UNAUDITED)

(in millions)		Three Months Ended			Six Months Ended
		June 30,			June 30,
		2021			2020			2021			2020
Net income	$	648.6	$	595.9	$	1,058.2	$	917.6
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (1)		62.6			34.4			16.3			(184.3)
Pension and other postretirement benefit adjustments:
Amounts reclassified from Other comprehensive income (loss) (2)		1.4			0.7			3.2			1.3
Unrealized net gains on cash flow hedges:
Amounts reclassified from Other comprehensive income (loss) (3)		(1.4)			(1.2)			(2.4)			(4.7)
Other comprehensive income (loss)		62.6			33.9			17.1			(187.7)
Comprehensive income	$	711.2	$	629.8	$	1,075.3	$	729.9

1. The three months ended June 30, 2021 includes unrealized losses of $(6.0) million, net of taxes of $2.0 million, related to net investment hedges. The three months ended June 30, 2020 includes unrealized losses of $(9.3) million, net of taxes of $2.9 million, related to net investment hedges. The six months ended June 30, 2021 includes unrealized gains of $17.1 million, net of taxes of $(5.5) million, related to net investment hedges. The six months ended June 30, 2020 includes unrealized losses of $(0.1) million related to net investment hedges. See Note 12 for additional information.
2. Net of taxes of $(0.3) million and $(0.1) million in the three months ended June 30, 2021 and 2020, respectively. Net of taxes of $(1.1) million and $(0.3) million in the six months ended June 30, 2021 and 2020, respectively.
3. Net of taxes of $0.1 million and $0.2 million in the three months ended June 30, 2021 and 2020, respectively. Net of taxes of $0.4 million and $1.4 million in the six months ended June 30, 2021 and 2020, respectively.

See notes to condensed consolidated financial statements.

3

THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions)		June 30,		December 31,			June 30,
		2021			2020			2020
Assets
Current assets:
Cash and cash equivalents	$	219.6	$	226.6	$	188.1
Accounts receivable, net		2,590.6			2,078.1			2,472.5
Inventories		1,804.1			1,804.1			1,788.6
Other current assets		571.4			482.6			434.0
Total current assets		5,185.7			4,591.4			4,883.2
Property, plant and equipment, net		1,806.3			1,834.5			1,798.6
Goodwill		7,017.5			7,049.1			6,976.8
Intangible assets		4,165.8			4,471.2			4,533.7
Operating lease right-of-use assets		1,764.2			1,761.1			1,696.6
Other assets		580.1			694.3			605.6
Total assets	$	20,519.6	$	20,401.6	$	20,494.5
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings	$	762.1	$	0.1	$	559.5
Accounts payable		2,502.8			2,117.8			1,848.4
Compensation and taxes withheld		593.1			752.7			467.3
Accrued taxes		228.8			183.5			255.7
Current portion of long-term debt		687.1			25.1			0.7
Current portion of operating lease liabilities		393.0			387.3			369.4
Other accruals		1,023.5			1,127.9			958.6
Total current liabilities		6,190.4			4,594.4			4,459.6
Long-term debt		7,603.8			8,266.9			8,289.4
Postretirement benefits other than pensions		273.1			275.6			262.5
Deferred income taxes		803.4			846.1			953.2
Long-term operating lease liabilities		1,429.5			1,434.1			1,390.7
Other long-term liabilities		1,379.0			1,373.7			1,269.2
Shareholders' equity:
Common stock-$0.33-1/3 par value:
263.3 million, 268.7 million and 273.1 million shares outstanding
at June 30, 2021, December 31, 2020 and June 30, 2020, respectively		90.6			89.9			120.0
Other capital		3,608.1			3,491.4			3,289.1
Retained earnings		1,604.8			844.3			8,036.0
Treasury stock, at cost		(1,761.9)			(96.5)			(6,708.0)
Accumulated other comprehensive loss		(701.2)			(718.3)			(867.2)
Total shareholders' equity		2,840.4			3,610.8			3,869.9
Total liabilities and shareholders' equity	$	20,519.6	$	20,401.6	$	20,494.5

See notes to condensed consolidated financial statements.

4