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 Quarterly Period Ended March 31, 2022 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 | | --- | --- | | (S ...

1Q 2022 Results April 26, 2022 Forward-Looking Statements This presentation may contain certain "forward-looking statements," as defined under U.S. federal securities laws. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "could," "plan," "goal," "target," "potential," "seek," "intend," "aspire" or "anticipate" or the negative thereof or comparable terminology. These forward-looking statements are based upon current ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 Commission file number 1-04851 THE SHERWIN-WILLIAMS COMPANY (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) Ohio 34-0526850 101 West Prospect Avenue Cleveland, Ohio 44115-1075 ...

Financial Data and Key Metrics Changes - Fourth quarter 2021 consolidated sales increased by 6.1% to $4.76 billion, while earnings results fell short of expectations [6][8] - Consolidated gross margin decreased to 39.5%, driven by lower sales volume and raw material cost inflation outpacing price increases [10] - Diluted net income per share decreased to $1.15, with adjusted diluted earnings per share at $1.34 [11][12] - Full year consolidated sales increased by 8.6% to a record $19.9 billion, marking the 11th consecutive year of growth [20] Business Line Data and Key Metrics Changes - **Americas Group**: Sales increased by 3%, with segment margin decreasing to 15.1% due to lower sales volume and higher raw material costs [12] - **Consumer Brands Group**: Sales decreased by 7.8%, with adjusted segment margin at 6.3% due to lower sales volume and higher costs [13] - **Performance Coatings Group**: Sales increased by 18.7%, but adjusted segment margin decreased to 8.9% due to higher raw material costs [14][23] Market Data and Key Metrics Changes - Demand remains strong across end markets, with raw material supply issues showing sequential improvement [7][30] - Sales growth in the Americas Group was led by Protective and Marine, with new residential and property management up in the mid-single-digit range [31] - Performance Coatings Group saw high-teens percentage sales growth, with all regions and divisions generating growth [35][36] Company Strategy and Development Direction - The company is focused on long-term growth initiatives despite near-term headwinds from raw material availability and inflation [18][19] - Continued investment in customer relationships and strategic growth initiatives is emphasized [18][19] - The company plans to open 80 to 100 new stores in the US and Canada in 2022, alongside investments in digital platforms and product innovation [49] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand outlook for 2022, despite challenges from raw material availability and inflation [37][39] - The expectation is for sequential improvement in raw material availability and a focus on volume growth and margin recovery in the second half of 2022 [40][44] - Full year 2022 guidance anticipates net sales growth of high single-digit to low double-digit percentage [46] Other Important Information - The company returned over $3.3 billion to shareholders through dividends and share buybacks in 2021 [25] - The net debt-to-adjusted-EBITDA ratio at year-end was 2.9 times, indicating a strong balance sheet [26] - The company announced three acquisitions to enhance capabilities in the coatings business [26] Q&A Session Summary Question: How should investors think about margin recovery in 2022? - Management expects slight contraction in gross margin in the first half of 2022, with recovery anticipated in the second half driven by volume growth and pricing actions [59][61] Question: What is the outlook for demand in 2022 given macroeconomic conditions? - Management remains confident in demand, citing strong customer relationships and positive macro indicators supporting growth [63][64] Question: What are the expectations for raw material availability in 2022? - Management anticipates some choppiness in raw material availability in the first quarter but expects significant improvements as the year progresses [70][72] Question: How will the company allocate limited volume among customers? - The company is focused on maintaining strong customer relationships and ensuring product availability to meet customer needs [113][119]

The Sherwin-Williams Company (NYSE:SHW) Q3 2021 Earnings Conference Call October 26, 2021 11:00 AM ET Company Participants John Morikis – Chairman, President and CEO Al Mistysyn – CFO Jane Cronin – Senior Vice President Jim Jaye – Senior Vice President Investor Relations Conference Call Participants John Mc Nulty – BMO Capital Markets Ghansham Panjabi – Baird Jeff Zekauskas – JPMorgan Chris Parkinson – Mizuho Arun Viswanathan – RBC Capital Markets Steve Byrne – Morgan Stanley Truman Patterson – Wolfe Resear ...

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 September 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 ...

The Sherwin-Williams Company (NYSE:SHW) Q2 2021 Earnings Conference Call July 27, 2021 11:00 AM ET Company Participants Jim Jaye – Senior Vice President-Investor Relations and Communications John Morikis – Chairman, President and Chief Executive Officer Al Mistysyn – Chief Financial Officer Conference Call Participants Ghansham Punjabi – Baird Jeff Zekauskas – JPMorgan John McNulty – BMO Capital Markets Bob Koort – Goldman Sachs Truman Patterson – Wolfe Research Arun Viswanathan – RBC Capital Markets Duffy ...

Part I. Financial Information [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2021, and 2020, including income, comprehensive income, balance sheets, cash flows, and shareholders' equity, with detailed notes on accounting policies, acquisitions, debt, litigation, and segment information [Consolidated Financial Statements](index=3&type=section&id=Consolidated%20Financial%20Statements) The company reported increased net sales and income for Q2 2021, with total assets stable, but shareholders' equity decreased to $2.84 billion due to treasury stock purchases, while net operating cash flow rose to $1.20 billion Consolidated Income Statement Highlights | (in millions USD) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $5,379.8 | $4,604.0 | $10,035.8 | $8,750.7 | | **Gross profit** | $2,411.4 | $2,208.9 | $4,523.4 | $4,098.6 | | **Net income** | $648.6 | $595.9 | $1,058.2 | $917.6 | Consolidated Balance Sheet Highlights | (in millions USD) | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Total current assets** | $5,185.7 | $4,591.4 | | **Total assets** | $20,519.6 | $20,401.6 | | **Total current liabilities** | $6,190.4 | $4,594.4 | | **Long-term debt** | $7,603.8 | $8,266.9 | | **Total shareholders' equity** | $2,840.4 | $3,610.8 | Consolidated Cash Flow Highlights | (in millions USD) | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | **Net operating cash** | $1,201.3 | $1,074.6 | | **Net investing cash** | ($72.5) | ($146.8) | | **Net financing cash** | ($1,125.3) | ($886.1) | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail a three-for-one stock split, a $27 million acquisition, a $111.9 million pre-tax loss from divestiture, a new $2.0 billion credit agreement, and a $64.7 million accrual for lead paint litigation - A **three-for-one stock split** was effected on March 31, 2021, with all prior year share and per-share information retroactively adjusted[19](index=19&type=chunk) - In Q1 2021, the company acquired a domestic coatings company for **$27 million** and divested its Wattyl business, recognizing a pre-tax loss of **$111.9 million**[21](index=21&type=chunk)[22](index=22&type=chunk) - On June 29, 2021, the company entered into a new five-year **$2.0 billion credit agreement**, replacing the 2018 agreement[25](index=25&type=chunk) - The company maintains a **$64.7 million accrual** as of June 30, 2021, for the Santa Clara County lead paint litigation settlement[50](index=50&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2021 financial performance, noting a **16.9% increase in consolidated net sales** driven by Americas and Performance Coatings, offset by Consumer Brands decline, while facing raw material inflation and supply chain constraints, maintaining strong liquidity and capital allocation [Outlook and Summary](index=26&type=section&id=Outlook%20and%20Summary) The company delivered solid first-half performance but faces raw material inflation and supply chain uncertainties, remaining confident in its long-term outlook while managing COVID-19 impacts and maintaining strong liquidity for acquisitions and share repurchases - Key uncertainties for the remainder of 2021 include the extent and duration of **raw material inflation** and **supply chain constraints**[111](index=111&type=chunk) - The company has announced **price increases** across all businesses to offset higher raw material costs[115](index=115&type=chunk) - The company maintains a **strong liquidity position** with **$219.6 million in cash** and **$2.741 billion** of unused credit facility capacity as of June 30, 2021[116](index=116&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) Q2 2021 consolidated net sales rose **16.9% to $5.38 billion**, driven by Americas and Performance Coatings, offsetting a **25.4% decline** in Consumer Brands, while gross margin decreased to **44.8%** due to higher raw material costs, yet diluted EPS increased **12.0% to $2.42** Net Sales by Segment | (in millions USD) | Q2 2021 Net Sales | Q2 2020 Net Sales | % Change | | :--- | :--- | :--- | :--- | | The Americas Group | $3,093.4 | $2,523.7 | 22.6% | | Consumer Brands Group | $731.5 | $980.2 | (25.4)% | | Performance Coatings Group | $1,554.5 | $1,099.8 | 41.3% | | **Total** | **$5,379.8** | **$4,604.0** | **16.9%** | - Consolidated gross profit as a percent of net sales decreased to **44.8%** in Q2 2021 from **48.0%** in Q2 2020, primarily due to higher raw material costs across all segments[130](index=130&type=chunk) Segment Profit | (in millions USD) | Q2 2021 Segment Profit | Q2 2020 Segment Profit | % Change | | :--- | :--- | :--- | :--- | | The Americas Group | $727.3 | $599.7 | 21.3% | | Consumer Brands Group | $122.8 | $237.4 | (48.3)% | | Performance Coatings Group | $144.8 | $97.4 | 48.7% | - Diluted net income per share increased **12.0% to $2.42** in Q2 2021, compared to **$2.16** in Q2 2020[116](index=116&type=chunk)[146](index=146&type=chunk) [Financial Condition, Liquidity and Cash Flow](index=31&type=section&id=Financial%20Condition%2C%20Liquidity%20and%20Cash%20Flow) The company's financial position remains strong, with net operating cash increasing to **$1.201 billion** for the first six months of 2021, returning **$1.943 billion** to shareholders, while total debt was **$9.053 billion** and shareholders' equity decreased by **$770.4 million** due to share repurchases - Net operating cash for the first six months of 2021 was **$1.201 billion**, an improvement of **$126.7 million** from the prior year period[148](index=148&type=chunk)[172](index=172&type=chunk) - The company returned **$1.943 billion** to shareholders in the first six months of 2021, comprising **$1.646 billion** in share buybacks and **$297.7 million** in cash dividends[149](index=149&type=chunk)[168](index=168&type=chunk) - During the first six months of 2021, the Company purchased **6.4 million shares** for treasury purposes and had remaining authorization to purchase **52.25 million shares** as of June 30, 2021[170](index=170&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from interest rates, foreign currency, and commodity fluctuations, utilizing derivative instruments for hedging, not speculation, and expects no material adverse effect on its financial condition, with no material changes since fiscal year 2020 - The company is exposed to market risk associated with **interest rate**, **foreign currency**, and **commodity fluctuations**[188](index=188&type=chunk) - Derivative instruments are used for **hedging**, not for speculative or trading purposes, and the company does not expect hedging contract losses to have a material adverse effect on its financial condition[188](index=188&type=chunk) [Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Based on CEO and CFO evaluation, the company's disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting identified during the quarter - The CEO and CFO concluded that the company's **disclosure controls and procedures were effective** as of the end of the reporting period[190](index=190&type=chunk) - No changes in **internal control over financial reporting** that materially affected or are reasonably likely to materially affect internal controls were identified during the quarter[191](index=191&type=chunk) Part II. Other Information [Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Notes 8 and 9 of the financial statements for environmental and other legal proceedings, incorporating details by reference, with a **$1 million threshold** for disclosing environmental proceedings involving governmental authorities - Information regarding **environmental-related matters** and other **legal proceedings** is incorporated by reference from Notes 8 and 9 of the Condensed Consolidated Financial Statements[195](index=195&type=chunk) [Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors from the 2020 Annual Report, focusing on the uncertain impacts of the COVID-19 pandemic, detailing adverse effects on operations, demand shifts, supply chain disruptions, and increased costs, with future impact highly uncertain and dependent on evolving factors - The **COVID-19 pandemic** has adversely impacted the business, and the extent of future impact remains uncertain[197](index=197&type=chunk) - The pandemic caused an unprecedented surge in **do-it-yourself (DIY) demand** in 2020, which has since begun to normalize, while industrial businesses recovered at a slower pace[201](index=201&type=chunk) - Future impacts depend on numerous evolving and uncertain factors, including the pandemic's duration, scope, government directives, and the effectiveness of treatments and vaccines[202](index=202&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company details Q2 2021 share repurchase activity, with **3.1 million shares** repurchased at an average price of **$280.70 per share**, and **52.25 million shares** remaining authorized for purchase as of June 30, 2021 Share Repurchase Activity - Q2 2021 | Period | Shares Purchased (Program) | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2021 | 285,420 | $269.69 | | May 2021 | 2,714,580 | $282.06 | | June 2021 | 100,000 | $275.40 | | **Q2 Total** | **3,100,000** | **$280.70** | - At the end of the second quarter, the company had remaining authorization to purchase **52,250,000 shares** under its repurchase program[205](index=205&type=chunk) [Other Information](index=40&type=section&id=Item%205.%20Other%20Information) During the first six months of 2021, the Audit Committee approved global tax advisory and tax compliance non-audit services to be performed by the independent auditor, Ernst & Young LLP - The Audit Committee approved permitted **non-audit services** related to global tax advisory and tax compliance to be performed by Ernst & Young LLP during the first half of 2021[206](index=206&type=chunk) [Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including amendments to credit agreements, CEO and CFO certifications, and XBRL data files - Exhibits filed with the report include **amendments to credit agreements**, **certifications by the CEO and CFO**, and **Inline XBRL documents**[209](index=209&type=chunk)

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for the first quarter [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Q1 2021 and 2020, including income statements, balance sheets, cash flows, and detailed notes [Statements of Consolidated Income (Unaudited)](index=3&type=section&id=STATEMENTS%20OF%20CONSOLIDATED%20INCOME%20%28UNAUDITED%29) This section provides the unaudited consolidated income statements for the three months ended March 31, 2021 and 2020 Three Months Ended March 31, 2021 vs. 2020 (in millions, except per share data): | Metric | 2021 | 2020 | Change ($) | Change (%) | | :--------------------------------- | :----- | :----- | :--------- | :--------- | | Net sales | $4,656.0 | $4,146.7 | $509.3 | 12.3% | | Cost of goods sold | 2,544.0 | 2,257.0 | 287.0 | 12.7% | | Gross profit | 2,112.0 | 1,889.7 | 222.3 | 11.8% | | Selling, general and administrative expenses | 1,325.9 | 1,307.6 | 18.3 | 1.4% | | Other general expense - net | 117.5 | 3.7 | 113.8 | 3075.7% | | Income before income taxes | 509.0 | 392.3 | 116.7 | 29.7% | | Net income | $409.6 | $321.7 | $87.9 | 27.3% | | Basic net income per common share | $1.54 | $1.18 | $0.36 | 30.5% | | Diluted net income per common share | $1.51 | $1.15 | $0.36 | 31.3% | [Statements of Consolidated Comprehensive Income (Unaudited)](index=4&type=section&id=STATEMENTS%20OF%20CONSOLIDATED%20COMPREHENSIVE%20INCOME%20%28UNAUDITED%29) This section presents the unaudited consolidated comprehensive income statements for the three months ended March 31, 2021 and 2020 Three Months Ended March 31, 2021 vs. 2020 (in millions): | Metric | 2021 | 2020 | Change ($) | Change (%) | | :------------------------------------ | :----- | :----- | :--------- | :--------- | | Net income | $409.6 | $321.7 | $87.9 | 27.3% | | Other comprehensive loss, net of tax | (45.5) | (221.6) | 176.1 | -79.5% | | Comprehensive income | $364.1 | $100.1 | $264.0 | 263.7% | - Foreign currency translation adjustments significantly impacted other comprehensive loss, with a loss of **$46.3 million** in 2021 compared to **$218.7 million** in 2020, net of tax[11](index=11&type=chunk) [Consolidated Balance Sheets (Unaudited)](index=5&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS%20%28UNAUDITED%29) This section details the unaudited consolidated balance sheets as of March 31, 2021, December 31, 2020, and March 31, 2020 Balance Sheet Highlights (in millions): | Metric | March 31, 2021 | December 31, 2020 | March 31, 2020 | | :-------------------------------- | :------------- | :---------------- | :------------- | | Total current assets | $5,109.6 | $4,591.4 | $4,928.0 | | Total assets | $20,435.0 | $20,401.6 | $20,570.3 | | Total current liabilities | $5,651.6 | $4,594.4 | $5,220.2 | | Total liabilities and shareholders' equity | $20,435.0 | $20,401.6 | $20,570.3 | | Total shareholders' equity | $3,078.7 | $3,610.8 | $3,289.1 | - Cash and cash equivalents increased to **$314.7 million** at March 31, 2021, from **$226.6 million** at December 31, 2020, and **$238.5 million** at March 31, 2020[13](index=13&type=chunk) - Short-term borrowings significantly increased to **$818.1 million** at March 31, 2021, from **$0.1 million** at December 31, 2020, but were lower than **$1,051.5 million** at March 31, 2020[13](index=13&type=chunk) [Condensed Statements of Consolidated Cash Flows (Unaudited)](index=6&type=section&id=CONDENSED%20STATEMENTS%20OF%20CONSOLIDATED%20CASH%20FLOWS%20%28UNAUDITED%29) This section outlines the unaudited consolidated cash flow statements for the three months ended March 31, 2021 and 2020 Three Months Ended March 31, 2021 vs. 2020 (in millions): | Cash Flow Activity | 2021 | 2020 | Change ($) | | :------------------------- | :----- | :----- | :--------- | | Net operating cash | $195.7 | $54.9 | $140.8 | | Net investing cash | $(6.4) | $(97.9) | $91.5 | | Net financing cash | $(94.8) | $115.7 | $(210.5) | | Net increase in cash and cash equivalents | $88.1 | $76.7 | $11.4 | - Operating cash flow saw a significant increase, primarily driven by higher net income, despite an increase in working capital requirements[14](index=14&type=chunk)[153](index=153&type=chunk) - Investing cash flow improved due to proceeds from the Wattyl divestiture, partially offset by cash used for acquisitions[14](index=14&type=chunk)[154](index=154&type=chunk) [Statements of Consolidated Shareholders' Equity (Unaudited)](index=8&type=section&id=STATEMENTS%20OF%20CONSOLIDATED%20SHAREHOLDERS%27%20EQUITY%20%28UNAUDITED%29) This section presents the unaudited consolidated statements of shareholders' equity for the periods ended March 31, 2021, December 31, 2020, and March 31, 2020 Shareholders' Equity Balances (in millions): | Metric | March 31, 2021 | December 31, 2020 | March 31, 2020 | | :-------------------------------- | :------------- | :---------------- | :------------- | | Common Stock | $90.2 | $89.9 | $119.7 | | Other Capital | $3,543.6 | $3,491.4 | $3,215.5 | | Retained Earnings | $1,102.1 | $844.3 | $7,562.7 | | Treasury Stock, at cost | $(893.4) | $(96.5) | $(6,707.7) | | Accumulated Other Comprehensive Loss | $(763.8) | $(718.3) | $(901.1) | | Total Shareholders' Equity | $3,078.7 | $3,610.8 | $3,289.1 | - Total shareholders' equity decreased by **$532.1 million** in the first three months of 2021, primarily due to treasury stock repurchases and cash dividends, partially offset by net income[149](index=149&type=chunk) [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=9&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20%28UNAUDITED%29) This section provides detailed notes explaining the accounting policies and significant financial events for the interim period [Note 1 – Basis of Presentation](index=9&type=section&id=Note%201%20%E2%80%93%20Basis%20of%20Presentation) This note describes the basis of preparation for the interim financial statements, including GAAP compliance and seasonality - The financial statements are prepared in accordance with US GAAP for interim financial information and Form 10-Q, with all necessary adjustments included[17](index=17&type=chunk) - The Company's business is seasonal, with the majority of Net sales traditionally occurring during the second and third quarters, meaning Q1 results are not indicative of the full year[19](index=19&type=chunk) - A three-for-one stock split was approved and effected on March 31, 2021, with all share and per share information retroactively adjusted[20](index=20&type=chunk) [Note 2 – Recently Issued Accounting Pronouncements](index=9&type=section&id=Note%202%20%E2%80%93%20Recently%20Issued%20Accounting%20Pronouncements) This note discusses the adoption of new accounting pronouncements and their impact on the financial statements - Effective January 1, 2021, the Company adopted ASU 2019-12, 'Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,' which did not have a material impact on financial position, results of operations, or cash flows[21](index=21&type=chunk) [Note 3 – Acquisitions and Divestitures](index=9&type=section&id=Note%203%20%E2%80%93%20Acquisitions%20and%20Divestitures) This note details the Company's acquisition and divestiture activities during the first quarter of 2021 - In Q1 2021, the Company acquired a domestic coatings company for **$27 million**, expanding the Performance Coatings Group's platform[22](index=22&type=chunk) - On March 31, 2021, the Company divested Wattyl, an Australian and New Zealand coatings business with approximately **$200 million** in annual revenue, recognizing a pre-tax loss of **$111.9 million**[23](index=23&type=chunk) [Note 4 – Inventories](index=10&type=section&id=Note%204%20%E2%80%93%20Inventories) This note provides a breakdown of inventory balances and the valuation methods used by the Company Inventories (in millions): | Category | March 31, 2021 | December 31, 2020 | March 31, 2020 | | :----------------------- | :------------- | :---------------- | :------------- | | Finished goods | $1,413.0 | $1,427.6 | $1,586.9 | | Work in process and raw materials | 434.3 | 376.5 | 367.9 | | Total Inventories | $1,847.3 | $1,804.1 | $1,954.8 | - The Company primarily uses the last-in, first-out (LIFO) method for inventory valuation, with interim calculations based on management's estimates[24](index=24&type=chunk) [Note 5 – Goodwill, Intangible and Long-Lived Assets](index=10&type=section&id=Note%205%20%E2%80%93%20Goodwill%2C%20Intangible%20and%20Long-Lived%20Assets) This note presents information on property, plant, and equipment, and discusses goodwill and intangible asset impairment assessments Property, Plant and Equipment, Net (in millions): | Category | March 31, 2021 | December 31, 2020 | March 31, 2020 | | :-------------------------------- | :------------- | :---------------- | :------------- | | Property, plant and equipment, gross | $4,457.0 | $4,548.8 | $4,385.6 | | Less allowances for depreciation | 2,676.6 | 2,714.3 | 2,556.1 | | Property, plant and equipment, net | $1,780.4 | $1,834.5 | $1,829.5 | - As of March 31, 2021, management determined that no interim impairment test for goodwill and intangible assets was required, considering COVID-19 impacts and market conditions[26](index=26&type=chunk) [Note 6 – Debt](index=11&type=section&id=Note%206%20%E2%80%93%20Debt) This note details the Company's debt structure, including credit agreement amendments and senior note issuances - On February 16, 2021, the Company amended its five-year credit agreement, extending the maturity of **$75.0 million** of commitments to December 20, 2025[28](index=28&type=chunk) - In March 2020, the Company issued **$1.0 billion** in Senior Notes (2.30% due 2030 and 3.30% due 2050) and used proceeds to repurchase and redeem existing notes, resulting in a **$21.3 million** loss on extinguishment of debt[29](index=29&type=chunk) [Note 7 – Pension and Other Postretirement Benefits](index=11&type=section&id=Note%207%20%E2%80%93%20Pension%20and%20Other%20Postretirement%20Benefits) This note outlines the net periodic benefit cost for the Company's domestic and foreign pension and postretirement benefit plans Net Periodic Benefit Cost (in millions): | Component | Domestic Defined Benefit Pension Plan (2021) | Domestic Defined Benefit Pension Plan (2020) | Foreign Defined Benefit Pension Plans (2021) | Foreign Defined Benefit Pension Plans (2020) | Other Postretirement Benefits (2021) | Other Postretirement Benefits (2020) | | :------------------------------------ | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------------------------------- | :----------------------------------- | | Service cost | $1.3 | $1.1 | $1.9 | $1.7 | $0.3 | $0.4 | | Interest cost | 0.6 | 0.8 | 1.4 | 1.8 | 1.3 | 1.9 | | Expected return on assets | (1.8) | (1.5) | (2.5) | (2.6) | — | — | | Recognition of unrecognized prior service cost (credit) | 0.3 | 0.3 | — | — | — | (0.3) | | Recognition of unrecognized actuarial loss | — | — | 0.4 | 0.3 | 1.2 | 0.5 | | Ongoing pension cost | 0.4 | 0.7 | 1.2 | 1.2 | 2.8 | 2.5 | | Divestiture of business | — | — | 0.7 | — | — | — | | Net periodic benefit cost | $0.4 | $0.7 | $1.9 | $1.2 | $2.8 | $2.5 | [Note 8 – Other Long-Term Liabilities](index=11&type=section&id=Note%208%20%E2%80%93%20Other%20Long-Term%20Liabilities) This note discusses environmental-related accruals and other long-term liabilities, including significant uncertainties at major sites - The Company accrues for estimated environmental-related activity costs based on available facts and industry standards, with accruals for Other long-term liabilities at **$293.3 million** at March 31, 2021, down from **$308.6 million** at March 31, 2020[34](index=34&type=chunk)[35](index=35&type=chunk) - Four 'Major Sites,' including Gibbsboro, New Jersey, account for the majority (**85.1%**) of the environmental accrual, with significant uncertainties remaining regarding ultimate costs[37](index=37&type=chunk)[38](index=38&type=chunk) - Management does not expect potential environmental liabilities to materially adversely affect the Company's financial condition, liquidity, or cash flow due to the extended resolution period[41](index=41&type=chunk) [Note 9 – Litigation](index=13&type=section&id=Note%209%20%E2%80%93%20Litigation) This note details the Company's involvement in various claims and lawsuits, including product liability, environmental, and lead pigment litigation - The Company is involved in various claims and lawsuits, including product liability, environmental, and lead pigment/lead-based paint litigation, which are subject to inherent uncertainties[44](index=44&type=chunk)[45](index=45&type=chunk) - For the Santa Clara County, California proceeding, the Company and two other defendants agreed to a **$305.0 million** settlement in July 2019, with the Company's accrual at **$64.7 million** at March 31, 2021[50](index=50&type=chunk) - In the Wisconsin personal injury litigation (Owens, Sifuentes, Burton Jr.), the Seventh Circuit reversed judgments against the Company in April 2021, entitling the Company to judgment as a matter of law[57](index=57&type=chunk) - The Company is also engaged in insurance coverage litigation to determine if abatement costs for lead pigment are covered, with the trial court granting summary judgment in favor of insurers in December 2020, which the Company appealed[63](index=63&type=chunk) [Note 10 – Shareholders' Equity](index=17&type=section&id=Note%2010%20%E2%80%93%20Shareholders%27%20Equity) This note provides information on dividends paid and share-based compensation activities affecting shareholders' equity Dividends Paid on Common Stock: | Period | Dividend Per Share | | :----------------------- | :----------------- | | Q1 2021 | $0.55 | | Q1 2020 | $0.4467 | - During Q1 2021, **461,682** stock options were exercised at a weighted average price of **$82.97** per share, and **269,118** restricted stock units vested[66](index=66&type=chunk) [Note 11 – Accumulated Other Comprehensive (Loss) Income](index=17&type=section&id=Note%2011%20%E2%80%93%20Accumulated%20Other%20Comprehensive%20%28Loss%29%20Income) This note details the components of accumulated other comprehensive income (loss) and changes during the period Accumulated Other Comprehensive (Loss) Income (AOCI) (in millions): | Component | Balance at Dec 31, 2020 | Amounts recognized in AOCI (Q1 2021) | Amounts reclassified from AOCI (Q1 2021) | Balance at Mar 31, 2021 | | :-------------------------------- | :---------------------- | :----------------------------------- | :--------------------------------------- | :---------------------- | | Foreign Currency Translation Adjustments | $(671.5) | $(46.3) | — | $(717.8) | | Pension and Other Postretirement Benefits Adjustments | $(87.2) | — | $1.8 | $(85.4) | | Unrealized Net Gains on Cash Flow Hedges | $40.4 | — | $(1.0) | $39.4 | | Total | $(718.3) | $(46.3) | $0.8 | $(763.8) | [Note 12 – Derivatives and Hedging](index=17&type=section&id=Note%2012%20%E2%80%93%20Derivatives%20and%20Hedging) This note describes the Company's derivative instruments used for hedging and their impact on financial results - In February 2020, the Company entered into two U.S. Dollar to Euro cross currency swap contracts with notional values of **$500.0 million** and **$244.0 million** to hedge its net investment in European operations[70](index=70&type=chunk) - An unrealized gain of **$23.1 million** (net of tax) was recognized in AOCI for the three months ended March 31, 2021, related to changes in fair value of cross currency swap contracts[73](index=73&type=chunk) [Note 13 – Fair Value Measurements](index=18&type=section&id=Note%2013%20%E2%80%93%20Fair%20Value%20Measurements) This note provides fair value measurements for financial assets and liabilities, including publicly and non-publicly traded debt Financial Assets and Liabilities Measured at Fair Value (in millions): | Category | March 31, 2021 Total | March 31, 2021 Level 1 | March 31, 2021 Level 2 | December 31, 2020 Total | December 31, 2020 Level 1 | December 31, 2020 Level 2 | | :-------------------------------- | :------------------- | :------------------- | :------------------- | :------------------- | :------------------- | :------------------- | | **Assets:** | | | | | | | | Deferred compensation plan assets | $72.2 | $39.4 | $32.8 | $69.2 | $37.9 | $31.3 | | Qualified Replacement Plan assets | $87.1 | $87.1 | — | $161.5 | $161.5 | — | | **Liabilities:** | | | | | | | | Deferred compensation plan liabilities | $95.0 | $95.0 | — | $92.2 | $92.2 | — | | Net investment hedge liability | $55.2 | — | $55.2 | $85.8 | — | $85.8 | Debt Carrying Amounts and Fair Values (in millions): | Debt Type | March 31, 2021 Carrying Amount | March 31, 2021 Fair Value | December 31, 2020 Carrying Amount | December 31, 2020 Fair Value | | :---------------------- | :----------------------------- | :------------------------ | :-------------------------------- | :------------------------ | | Publicly traded debt | $8,265.2 | $8,912.0 | $8,265.2 | $9,707.0 | | Non-publicly traded debt | $25.7 | $25.2 | $26.8 | $26.5 | [Note 14 – Revenue](index=19&type=section&id=Note%2014%20%E2%80%93%20Revenue) This note explains the Company's revenue recognition policies, contract balances, and allowance for doubtful accounts - The Company recognizes revenue primarily at the point of transfer of control of products to the customer, with a large portion from sales not under long-term agreements[80](index=80&type=chunk)[81](index=81&type=chunk) - Variable consideration, such as volume rebates and discounts, is estimated based on historical information and current trends and recorded as a reduction of net sales[84](index=84&type=chunk) Contract Assets and Liabilities (in millions): | Category | December 31, 2020 | March 31, 2021 | | :----------------------- | :---------------- | :------------- | | Accounts Receivable, Net | $2,078.1 | $2,414.1 | | Contract Assets (Current) | $52.0 | $61.7 | | Contract Assets (Long-Term) | $170.7 | $157.2 | | Contract Liabilities (Current) | $266.3 | $182.6 | | Contract Liabilities (Long-Term) | $8.2 | $8.4 | Allowance for Doubtful Accounts (in millions): | Metric | 2021 | 2020 | | :-------------------------------- | :----- | :----- | | Balance at January 1 | $53.5 | $36.5 | | Bad debt expense | 6.4 | 30.2 | | Uncollectible accounts written off, net of recoveries | (1.1) | (9.5) | | Balance at March 31 | $58.8 | $60.2 | [Note 15 – Other](index=20&type=section&id=Note%2015%20%E2%80%93%20Other) This note details the components of other general expense and other (income) expense, including divestiture losses Other General Expense - Net (in millions): | Category | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Provisions for environmental matters - net | $2.5 | $2.2 | | Loss on divestiture of business | 111.9 | — | | Loss on sale or disposition of assets | 3.1 | 1.5 | | Total Other general expense - net | $117.5 | $3.7 | Other (Income) Expense - Net (in millions): | Category | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Investment and royalty (income) expense | $(6.5) | $2.3 | | Loss on extinguishment of debt | — | 21.3 | | Net expense from banking activities | 2.6 | 2.8 | | Foreign currency transaction related losses | 2.5 | 3.9 | | Miscellaneous pension expense | 0.9 | 1.2 | | Other income | (5.2) | (10.8) | | Other expense | 3.5 | 1.7 | | Total Other (income) expense - net | $(2.2) | $22.4 | [Note 16 – Income Taxes](index=21&type=section&id=Note%2016%20%E2%80%93%20Income%20Taxes) This note provides information on the effective tax rate, unrecognized tax benefits, and ongoing income tax examinations - The effective tax rate for Q1 2021 was **19.5%**, up from **18.0%** in Q1 2020, favorably impacted by tax benefits from employee share-based payments[96](index=96&type=chunk) - The Company had **$227.0 million** in unrecognized tax benefits at December 31, 2020, with **$16.8 million** potentially changing significantly in the next twelve months[97](index=97&type=chunk) - The IRS is currently auditing the Company's 2013-2016 income tax returns, and the Company is subject to non-U.S. and state/local income tax examinations for various years[99](index=99&type=chunk)[100](index=100&type=chunk) [Note 17 – Net Income Per Share](index=22&type=section&id=Note%2017%20%E2%80%93%20Net%20Income%20Per%20Share) This note presents the calculation of basic and diluted net income per share for the reporting periods Net Income Per Share (in millions, except per share data): | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net income | $409.6 | $321.7 | | Basic net income per share | $1.54 | $1.18 | | Diluted net income per share | $1.51 | $1.15 | | Weighted average shares outstanding (Basic) | 265.8 | 273.2 | | Weighted average shares outstanding (Diluted) | 270.6 | 278.6 | - Diluted net income per share increased by **31.3%** to **$1.51** in Q1 2021, compared to **$1.15** in Q1 2020[102](index=102&type=chunk) [Note 18 – Reportable Segment Information](index=23&type=section&id=Note%2018%20%E2%80%93%20Reportable%20Segment%20Information) This note provides financial data segmented by the Company's three reportable groups and administrative segment - The Company operates with three reportable segments: The Americas Group, Consumer Brands Group, and Performance Coatings Group, plus an Administrative segment[104](index=104&type=chunk) Net External Sales by Segment (in millions): | Segment | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change ($) | Change (%) | | :---------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | The Americas Group | $2,503.1 | $2,305.5 | $197.6 | 8.6% | | Consumer Brands Group | $778.1 | $622.3 | $155.8 | 25.0% | | Performance Coatings Group | $1,374.3 | $1,217.6 | $156.7 | 12.9% | | Administrative | $0.5 | $1.3 | $(0.8) | -61.5% | | Consolidated Totals | $4,656.0 | $4,146.7 | $509.3 | 12.3% | Segment Profit (in millions): | Segment | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change ($) | Change (%) | | :---------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | The Americas Group | $480.0 | $388.3 | $91.7 | 23.6% | | Consumer Brands Group | $143.7 | $83.5 | $60.2 | 72.1% | | Performance Coatings Group | $143.8 | $113.7 | $30.1 | 26.5% | | Consolidated Totals | $767.5 | $585.5 | $182.0 | 31.1% | - The Administrative segment includes a **$111.9 million** pre-tax loss on the Wattyl divestiture in Q1 2021[105](index=105&type=chunk) [Note 19 – Non-Traded Investments](index=24&type=section&id=Note%2019%20%E2%80%93%20Non-Traded%20Investments) This note describes the Company's investments in affordable housing and historic renovation real estate markets - The Company invests in U.S. affordable housing and historic renovation real estate markets, and other variable interest entities, but is not considered the primary beneficiary and thus does not consolidate them[107](index=107&type=chunk) Non-Traded Investments Balances (in millions): | Category | March 31, 2021 | December 31, 2020 | March 31, 2020 | | :------------------------ | :------------- | :---------------- | :------------- | | Other assets | $212.7 | $198.2 | $192.4 | | Other accruals | $49.3 | $89.0 | $72.0 | | Other long-term liabilities | $139.8 | $127.3 | $98.6 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Q1 2021 financial performance, liquidity, and capital resources, highlighting strong results despite raw material inflation and supply chain constraints [Background](index=25&type=section&id=BACKGROUND) This section provides an overview of The Sherwin-Williams Company's business, history, and organizational structure - The Sherwin-Williams Company, founded in 1866, develops, manufactures, distributes, and sells paint, coatings, and related products primarily in North and South America, with operations also in Europe, Asia, and Australia[109](index=109&type=chunk) - The Company is structured into three reportable segments: The Americas Group, Consumer Brands Group, and Performance Coatings Group, along with an Administrative segment[110](index=110&type=chunk) [Summary](index=25&type=section&id=SUMMARY) This section summarizes the Company's strong Q1 2021 performance, ongoing challenges, and disciplined capital allocation strategy - The Company started 2021 strong but faces uncertainties including raw material inflation, supply chain constraints, recovery pace in commercial/property maintenance markets, and DIY demand duration[111](index=111&type=chunk) - The Company maintains a disciplined capital allocation approach, focusing on customer value, shareholder returns, strategic acquisitions, and share repurchases with excess cash[112](index=112&type=chunk) - The Company reported strong liquidity with **$314.7 million** in cash and **$2.683 billion** in unused credit facility capacity at March 31, 2021[112](index=112&type=chunk) [Outlook](index=25&type=section&id=OUTLOOK) This section addresses the ongoing impact of the COVID-19 pandemic and the Company's measures to maintain operations - The COVID-19 pandemic continues to disrupt the global economy, but the Company is actively monitoring its impact and implementing safety measures to maintain operations[113](index=113&type=chunk)[114](index=114&type=chunk) [Results of Operations](index=25&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the Company's consolidated and segment-specific financial performance for the first quarter - Consolidated net sales increased **12.3%** to **$4.656 billion** in Q1 2021[115](index=115&type=chunk) - Net sales from U.S. and Canada stores open over twelve months increased **8.2%**[115](index=115&type=chunk) - Diluted net income per share increased **31.3%** to **$1.51**[115](index=115&type=chunk) - Net operating cash increased **256%** to **$195.7 million**[115](index=115&type=chunk) - Completed a three-for-one stock split to improve investor accessibility[115](index=115&type=chunk) [Net Sales](index=26&type=section&id=Net%20Sales) This section analyzes the consolidated and segment-specific net sales performance for the first quarter Net Sales by Segment (in millions): | Segment | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | $ Change | % Change | | :---------------------- | :-------------------------------- | :-------------------------------- | :------- | :------- | | The Americas Group | $2,503.1 | $2,305.5 | $197.6 | 8.6% | | Consumer Brands Group | $778.1 | $622.3 | $155.8 | 25.0% | | Performance Coatings Group | $1,374.3 | $1,217.6 | $156.7 | 12.9% | | Administrative | $0.5 | $1.3 | $(0.8) | (61.5)% | | Total | $4,656.0 | $4,146.7 | $509.3 | 12.3% | - Consolidated net sales increased primarily due to higher product sales volume across all Reportable Segments, with currency translation adding **0.7%** to net sales[118](index=118&type=chunk) - Foreign subsidiary net sales increased **25.3%** to **$1.037 billion** in Q1 2021, driven by higher volume in Consumer Brands and Performance Coatings[118](index=118&type=chunk) [Income Before Income Taxes](index=26&type=section&id=Income%20Before%20Income%20Taxes) This section examines the factors influencing income before income taxes, including gross profit and operating expenses Income Before Income Taxes by Segment (in millions): | Segment | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | % Change | | :---------------------- | :-------------------------------- | :-------------------------------- | :------- | | The Americas Group | $480.0 | $388.3 | 23.6% | | Consumer Brands Group | $143.7 | $83.5 | 72.1% | | Performance Coatings Group | $143.8 | $113.7 | 26.5% | | Administrative | $(258.5) | $(193.2) | (33.8)% | | Total | $509.0 | $392.3 | 29.7% | - Consolidated gross profit increased **$222.3 million**, but the gross margin rate decreased to **45.4%** (from **45.6%**) due to higher raw material costs[122](index=122&type=chunk) - Selling, general and administrative expenses (SG&A) increased **$18.3 million** but decreased as a percent of sales by **300 basis points** due to good cost control and higher sales volumes[124](index=124&type=chunk) - Other general expense - net increased significantly by **$113.8 million**, primarily due to a **$111.9 million** loss on the Wattyl divestiture[126](index=126&type=chunk) [Income Tax Expense](index=28&type=section&id=Income%20Tax%20Expense) This section discusses the effective income tax rate and its contributing factors for the first quarter - The effective tax rate increased to **19.5%** in Q1 2021 from **18.0%** in Q1 2020, benefiting from tax benefits related to employee share-based payments[130](index=130&type=chunk) [Net Income Per Share](index=28&type=section&id=Net%20Income%20Per%20Share) This section analyzes the diluted net income per share, considering divestiture losses and acquisition-related amortization - Diluted net income per share increased to **$1.51** in Q1 2021 from **$1.15** in Q1 2020, despite a **$0.34** per share loss from the Wattyl divestiture and a **$0.21** per share charge for acquisition-related amortization[131](index=131&type=chunk) [Financial Condition, Liquidity and Cash Flow](index=28&type=section&id=FINANCIAL%20CONDITION%2C%20LIQUIDITY%20AND%20CASH%20FLOW) This section reviews the Company's financial position, liquidity, and cash flow activities for the first quarter [Overview](index=28&type=section&id=Overview) This section provides a high-level summary of the Company's strong financial condition, liquidity, and cash flow improvements - The Company's financial condition, liquidity, and cash flow remained strong in Q1 2021, with net operating cash improving by **$140.8 million** to **$195.7 million**[132](index=132&type=chunk) - EBITDA increased **18.2%** to **$736.8 million** in Q1 2021[132](index=132&type=chunk) - Cash and cash equivalents increased by **$88.1 million**, and the Company returned **$927.2 million** to shareholders through share buybacks and dividends[133](index=133&type=chunk) [Net Working Capital](index=29&type=section&id=Net%20Working%20Capital) This section analyzes changes in net working capital and the current ratio for the reporting periods - Net working capital decreased by **$249.8 million** to a deficit of **$542.0 million** at March 31, 2021, compared to a deficit of **$292.2 million** at March 31, 2020[135](index=135&type=chunk) - The current ratio was **0.90** at March 31, 2021, down from **1.00** at December 31, 2020, and **0.94** at March 31, 2020[136](index=136&type=chunk) [Property, Plant and Equipment](index=29&type=section&id=Property%2C%20Plant%20and%20Equipment) This section discusses the changes in net property, plant, and equipment, including depreciation and asset dispositions - Net property, plant and equipment decreased by **$54.1 million** in Q1 2021, primarily due to depreciation, asset dispositions, and unfavorable foreign currency translation, partially offset by capital expenditures[137](index=137&type=chunk) [Goodwill and Intangible Assets](index=29&type=section&id=Goodwill%20and%20Intangible%20Assets) This section details the decrease in goodwill and intangible assets, mainly due to divestitures and amortization - Goodwill and intangible assets decreased by **$299.0 million** in Q1 2021, mainly due to dispositions (primarily the Wattyl divestiture), amortization, and foreign currency translation[138](index=138&type=chunk) [Other Assets](index=29&type=section&id=Other%20Assets) This section explains the decrease in other assets, driven by investment sales and deferred tax asset reductions - Other assets decreased by **$99.4 million** in Q1 2021, primarily due to the sale of investments to fund the domestic defined contribution plan, and decreases in deferred tax assets and deposits[140](index=140&type=chunk) [Debt (including Short-term borrowings)](index=29&type=section&id=Debt%20%28including%20Short-term%20borrowings%29) This section provides an overview of the Company's total debt outstanding, including short-term borrowings and credit facility capacity Total Debt Outstanding (in millions): | Metric | March 31, 2021 | December 31, 2020 | March 31, 2020 | | :---------------------- | :------------- | :---------------- | :------------- | | Long-term debt | $8,290.9 | $8,292.0 | $8,718.7 | | Short-term borrowings | $818.1 | $0.1 | $1,051.5 | | Total debt outstanding | $9,109.0 | $8,292.1 | $9,770.2 | - Short-term borrowings at March 31, 2021, were **$818.1 million**, primarily from commercial paper, with a weighted average interest rate of **0.29%**[142](index=142&type=chunk) - The Company had **$2.683 billion** in unused capacity under its credit agreements at March 31, 2021[142](index=142&type=chunk) [Defined Benefit Pension and Other Postretirement Benefit Plans](index=30&type=section&id=Defined%20Benefit%20Pension%20and%20Other%20Postretirement%20Benefit%20Plans) This section notes the stability of long-term liabilities for postretirement benefits other than pensions - Long-term liabilities for postretirement benefits other than pensions did not significantly change from December 31, 2020, and March 31, 2020[143](index=143&type=chunk) [Deferred Income Taxes](index=30&type=section&id=Deferred%20Income%20Taxes) This section explains the decrease in deferred income taxes due to amortization and asset dispositions - Deferred income taxes decreased by **$48.3 million** in Q1 2021, primarily due to amortization of acquisition-related intangible assets and disposition of certain intangible assets in the Wattyl divestiture[144](index=144&type=chunk) [Other Long-Term Liabilities](index=30&type=section&id=Other%20Long-Term%20Liabilities) This section addresses environmental-related liabilities and management's assessment of their potential financial impact - Environmental-related liabilities are subject to various federal, state, and local laws, with management believing operations comply and not expecting material adverse effects on financial condition, liquidity, or cash flow[145](index=145&type=chunk)[146](index=146&type=chunk) [Contractual Obligations, Commercial Commitments and Warranties](index=30&type=section&id=Contractual%20Obligations%2C%20Commercial%20Commitments%20and%20Warranties) This section confirms no significant changes to contractual obligations and commercial commitments in the first quarter - No significant changes to contractual obligations and commercial commitments occurred in Q1 2021, other than the change in total debt[147](index=147&type=chunk) [Litigation](index=30&type=section&id=Litigation) This section refers to detailed litigation information provided in the notes to the financial statements - Information concerning litigation is detailed in Note 9 of Item 1, which is incorporated by reference[148](index=148&type=chunk) [Shareholders' Equity](index=30&type=section&id=Shareholders%27%20Equity) This section discusses the changes in total shareholders' equity, including share repurchases and dividends Total Shareholders' Equity (in millions): | Date | Amount | | :---------------- | :----- | | March 31, 2021 | $3,078.7 | | December 31, 2020 | $3,610.8 | | March 31, 2020 | $3,289.1 | - Shareholders' equity decreased by **$532.1 million** in Q1 2021 due to treasury stock activity (**$796.9 million**) and cash dividends (**$151.8 million**), partially offset by net income (**$409.6 million**)[149](index=149&type=chunk) - The Company purchased **3.3 million** shares of common stock for treasury purposes in Q1 2021 and had authorization to purchase an additional **55.35 million** shares[151](index=151&type=chunk)[176](index=176&type=chunk) - The Board of Directors increased the quarterly cash dividend from **$0.4467** to **$0.55** per share in February 2021, resulting in an annual dividend of **$2.20** per share[152](index=152&type=chunk) [Cash Flow](index=31&type=section&id=Cash%20Flow) This section analyzes the Company's operating, investing, and financing cash flow activities for the first quarter - Net operating cash was **$195.7 million** in Q1 2021, an improvement of **$140.8 million** from Q1 2020, driven by increased net income[153](index=153&type=chunk) - Net investing cash usage decreased by **$91.5 million** to **$6.4 million** in Q1 2021, primarily due to proceeds from the Wattyl divestiture[154](index=154&type=chunk) - Net financing cash decreased by **$210.5 million** to a usage of **$94.8 million** in Q1 2021, due to lower debt issuances and higher cash dividends, partially offset by fewer treasury stock purchases[155](index=155&type=chunk) [Market Risk](index=31&type=section&id=Market%20Risk) This section discusses the Company's exposure to market risks from interest rate, foreign currency, and commodity fluctuations - The Company is exposed to market risk from interest rate, foreign currency, and commodity fluctuations, occasionally using derivative instruments for hedging, not speculation[157](index=157&type=chunk) - The Company does not expect foreign currency exchange rate, commodity price fluctuations, or hedging contract losses to materially adversely affect its financial condition, results of operations, or cash flows[157](index=157&type=chunk) [Financial Covenant](index=31&type=section&id=Financial%20Covenant) This section outlines the Company's consolidated leverage ratio covenant and its compliance status - The Company's consolidated leverage ratio covenant (total indebtedness to EBITDA) is not to exceed **3.75 to 1.00**. At March 31, 2021, the Company was in compliance and expects to remain so[159](index=159&type=chunk) [Non-GAAP Financial Measures](index=31&type=section&id=Non-GAAP%20Financial%20Measures) This section explains the use of non-GAAP financial measures like EBITDA and Adjusted EBITDA for performance analysis - Management uses non-GAAP financial measures like EBITDA and Adjusted EBITDA to analyze business performance, providing additional data for investors[160](index=160&type=chunk)[161](index=161&type=chunk) EBITDA and Adjusted EBITDA (in millions): | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :---------------- | :-------------------------------- | :-------------------------------- | | Net income | $409.6 | $321.7 | | Interest expense | 83.2 | 86.2 | | Income taxes | 99.4 | 70.6 | | Depreciation | 65.4 | 66.5 | | Amortization | 79.2 | 78.1 | | EBITDA | $736.8 | $623.1 | | Loss on divestiture | 111.9 | — | | Adjusted EBITDA | $848.7 | $623.1 | [Critical Accounting Policies and Estimates](index=32&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) This section addresses the critical accounting policies and estimates used in financial statement preparation - The preparation of financial statements requires management to make estimates and assumptions, which are believed to be reasonable, but actual results could differ[163](index=163&type=chunk) - There have been no significant changes in critical accounting policies, management estimates, or accounting policies since December 31, 2020[164](index=164&type=chunk) [Cautionary Statement Regarding Forward-Looking Information](index=33&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD-LOOKING%20INFORMATION) This section provides a cautionary statement regarding forward-looking information, highlighting inherent risks and uncertainties - The report contains forward-looking statements based on management's current expectations, estimates, and beliefs, which are subject to risks and uncertainties that could cause actual results to differ materially[165](index=165&type=chunk)[166](index=166&type=chunk) - Key risks include general economic conditions, raw material/energy pricing, integration of acquisitions, competitive factors, regulatory changes, environmental liabilities, litigation, and impacts of the COVID-19 pandemic[166](index=166&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section reiterates the Company's exposure to market risks from interest rate, foreign currency, and commodity fluctuations. It confirms the use of derivative instruments for hedging purposes, not speculation, and states that no material changes in market risk exposure have occurred since the last annual report - The Company is exposed to market risk from interest rate, foreign currency, and commodity fluctuations and uses derivative instruments for hedging, not speculation[167](index=167&type=chunk) - No material changes in the Company's exposure to market risk have occurred since the disclosure in the Annual Report on Form 10-K for the year ended December 31, 2020[167](index=167&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms that the Company's disclosure controls and procedures were evaluated and deemed effective as of March 31, 2021. It also states that there were no material changes in internal control over financial reporting during the period - The Company's disclosure controls and procedures were evaluated and concluded to be effective as of March 31, 2021[169](index=169&type=chunk) - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the period[170](index=170&type=chunk) [PART II. OTHER INFORMATION](index=35&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to the detailed disclosures on environmental-related matters and other legal proceedings provided in Notes 8 and 9 of the Condensed Consolidated Financial Statements, which are incorporated by reference. It also specifies a $1 million threshold for disclosing environmental proceedings involving potential monetary sanctions - Disclosure of environmental matters is required when a governmental authority is a party and potential monetary sanctions exceed **$1 million**[173](index=173&type=chunk) - Information on environmental-related matters and other legal proceedings is incorporated by reference from Notes 8 and 9 of the financial statements[174](index=174&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) This section states that there were no material changes to the Company's previously disclosed risk factors during the first quarter ended March 31, 2021, and refers readers to the Annual Report on Form 10-K for a comprehensive discussion of risk factors - No material changes to previously disclosed risk factors occurred during Q1 2021[175](index=175&type=chunk) - A discussion of the Company's risk factors can be found in Part I, Item 1A, Risk Factors in the Annual Report on Form 10-K for the fiscal year ended December 31, 2020[175](index=175&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section summarizes the Company's share repurchase activity for the first quarter of 2021, detailing shares purchased under the publicly announced program and those related to employee transactions. It also notes the Board's authorization for additional share repurchases Share Repurchase Activity (Q1 2021): | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of a Publicly Announced Plan | Maximum Number of Shares That May Yet Be Purchased Under the Plan | | :----------------------- | :----------------------------- | :--------------------------- | :------------------------------------------------------------------ | :---------------------------------------------------------------- | | January 1 - January 31 | — | $— | — | 13,650,000 | | February 1 - February 28 | 2,192,838 | $237.91 (program) / $238.22 (employee) | 2,100,000 | 56,550,000 | | March 1 - March 31 | 1,200,237 | $229.79 (program) / $232.87 (employee) | 1,200,000 | 55,350,000 | | Total | 3,393,075 | $234.96 (program) / $238.21 (employee) | 3,300,000 | 55,350,000 | - On February 17, 2021, the Board of Directors authorized the purchase of an additional **45,000,000** shares of common stock for treasury purposes, with no specified expiration date[176](index=176&type=chunk) [Item 5. Other Information](index=35&type=section&id=Item%205.%20Other%20Information) This section discloses that the Audit Committee approved permitted non-audit services, specifically global tax advisory and tax compliance services, to be performed by Ernst & Young LLP during the first quarter of 2021 - The Audit Committee approved global tax advisory and tax compliance non-audit services to be performed by Ernst & Young LLP in Q1 2021[177](index=177&type=chunk) [Item 6. Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including amendments to articles of incorporation, executive officer severance agreements, certifications from the CEO and CFO, and Inline XBRL documents - Exhibit 3.1: Amendment to the Amended and Restated Articles of Incorporation[180](index=180&type=chunk) - Exhibit 10.1: Schedule of Executive Officers who are Parties to Amended and Restated Severance Agreements[180](index=180&type=chunk) - Exhibits 31(a) and 31(b): Rule 13a-14(a)/15d-14(a) Certifications of CEO and CFO[180](index=180&type=chunk) - Exhibits 32(a) and 32(b): Section 1350 Certifications of CEO and CFO[180](index=180&type=chunk) - Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE: Inline XBRL Taxonomy Extension Documents[180](index=180&type=chunk) - Exhibit 104: The cover page from this Quarterly Report on Form 10-Q, formatted in Inline XBRL[180](index=180&type=chunk) [SIGNATURES](index=37&type=section&id=SIGNATURES) This section contains the required signatures for the Form 10-Q, certifying its submission on behalf of The Sherwin-Williams Company by its Senior Vice President - Finance and Chief Financial Officer, Allen J. Mistysyn, and Senior Vice President - Corporate Controller, Jane M. Cronin, on April 28, 2021 - The report was signed on April 28, 2021, by Allen J. Mistysyn, Senior Vice President - Finance and Chief Financial Officer, and Jane M. Cronin, Senior Vice President - Corporate Controller[184](index=184&type=chunk)

The Sherwin-Williams Company (NYSE:SHW) Q1 2021 Earnings Conference Call April 27, 2021 11:00 AM ET Company Participants Jim Jaye - Senior Vice President-Investor Relations & Communications John Morikis - Chairman, President & Chief Executive Officer Al Mistysyn - Chief Financial Officer Conference Call Participants Ghansham Panjabi - Baird Bob Koort - Goldman Sachs Steve Byrne - Bank of America Jeff Zekauskas - JPMorgan P.J. Juvekar - Citi John McNulty - BMO Capital Markets David Begleiter - Deutsche Bank ...