Group 1 - ClearBridge Investments reported a significant rally in US equities during Q2 2025, with the S&P 500 returning 10.9% and the Russell Midcap Growth Index advancing 18.2% [1] - Growth stocks outperformed value stocks across market caps, contributing to the strategy's outperformance driven by strong performance in the "mid cap plus" segment and solid stock selection in IT, industrials, and financials [1] - The Sherwin-Williams Company (NYSE:SHW) experienced a one-month return of -3.79% and a 52-week loss of 5.89%, with a market capitalization of $88.065 billion as of September 16, 2025 [2] Group 2 - ClearBridge Growth Strategy added The Sherwin-Williams Company to its portfolio, highlighting its high-quality business model and potential for earnings growth as housing turnover normalizes [3] - The company is noted for its strong through-cycle pricing power and defensive characteristics, which may provide a natural offset during periods of volume decline [3] - Despite its potential, The Sherwin-Williams Company is not among the 30 most popular stocks among hedge funds, with 67 hedge fund portfolios holding the stock at the end of Q2 2025, a slight decrease from 68 in the previous quarter [4]

Group 1: Wearables and IPOs - Meta Platforms (META) is set to unveil new smart glasses named "Celeste" with a built-in display at a retail price of $800 [1] - StubHub (STUB) is going public today after several delays, pricing its shares amid a recovering IPO market in 2025 [1] Group 2: Manufacturing Investments - GSK (GSK) announced a $30 billion investment in R&D and manufacturing in the United States [2] - Eli Lilly (LLY) revealed plans for a new $5 billion production plant in Virginia [2] Group 3: Federal Reserve Insights - Danielle DiMartino Booth discussed significant changes at the Federal Reserve, highlighting the impact of easy credit on consumer spending [2] - The conversation noted the reality of stagflation at the company level, with a margin squeeze being observed [2] Group 4: Retail and Media Developments - Kroger (KR) is reintroducing paper coupons as part of its retail strategy [3] - Paramount Skydance's bid for Warner Bros. (WBD) may take longer than expected [3] - Apollo Global (APO) is exploring the sale of AOL, an internet pioneer [4] Group 5: Technology and Transportation - Baidu (BIDU) shares surged as investors anticipate growth in AI [4] - Waymo is set to test robotaxis at San Francisco International Airport [5] Group 6: Market Updates - In Asia, Japan's market decreased by 0.3%, while Hong Kong increased by 1.8% [6] - In Europe, London saw a slight increase of 0.2%, while Paris decreased by 0.1% [6] - Futures indicate a slight increase in Dow by 0.1%, with S&P flat and Nasdaq down by 0.1% [6]

Core Insights - When businesses experience financial difficulties, retirement benefits are frequently among the first expenses to be reduced, according to experts [1] Group 1 - Companies often prioritize cutting retirement benefits during financial downturns as a cost-saving measure [1] - Experts highlight that this trend can have long-term implications for employee morale and retention [1] - The reduction of retirement benefits may lead to increased financial insecurity for employees, impacting their future planning [1]

Group 1 - The Sherwin-Williams Company (NYSE:SHW) has gained 7.3% year-to-date but has lagged behind the S&P 500 in 2025 [2] - The company's shares have been flat over the past month after a 3.7% dip earlier this week, indicating struggles with weak demand [2] - The firm missed its second-quarter earnings estimates in July and subsequently cut its full-year profit forecast [2] Group 2 - Jim Cramer expressed a cautious but positive outlook on Sherwin-Williams, emphasizing the belief in home renovations and the potential for stock appreciation when the Federal Reserve cuts interest rates [3] - Cramer highlighted the importance of being proactive in the market, suggesting that stocks like Sherwin-Williams could rise significantly if long-term interest rates decrease [2][3] - Despite the potential of Sherwin-Williams, there is a belief that some AI stocks may offer greater returns with limited downside risk [3]

Core Insights - The "2025 Global Industrial Paint Brand Top 30" list was published by Coatings World, ranking brands based on their industrial paint sales revenue for the fiscal year 2024, with a minimum entry threshold of $260 million [1][10] - The total sales revenue of the listed companies reached $53.9394 billion, accounting for 51.60% of the global industrial paint market [1][10] - The top ten brands generated a total sales revenue of $44.068 billion, a decrease of $2.989 billion from the previous year, representing 42.17% of the global market share, down 1.89 percentage points [1][15] Market Overview - The global industrial paint market is valued at approximately $104.5 billion in 2024, showing a decline compared to the previous year [3] - The market remains fragmented, with a CR10 of less than 43%, indicating no monopoly [17] - High concentration exists in specific segments such as automotive, marine, and aerospace coatings, with the top 10 brands holding 89% and 92% of the respective markets [17] Brand Performance - PPG Industries leads the ranking with sales of $10.9 billion, followed by Sherwin-Williams at $8.05 billion and AkzoNobel at $6.731 billion [12][14] - Other notable brands include Axalta, BASF, Nippon Paint, Kansai, Jotun, and Hempel, with revenues ranging from $5.276 billion to $2.623 billion [14][24] - Chinese brands such as Xiangjiang Paint, Dewey, and Megachem have made significant strides, with Xiangjiang Paint maintaining its position as the top Chinese brand at $530.7 million [21][22][23] Regional Distribution - The majority of top brands are located in developed countries, with the U.S. having six brands, Japan five, and Germany four [18] - China's industrial paint sector is robust, with a total revenue of approximately 408.903 billion yuan ($56.4 billion) in 2024, with industrial paint accounting for over 70% [20] Financial Highlights - PPG's industrial paint revenue decreased by 5.7% to $6.687 billion, while Sherwin-Williams' industrial paint revenue grew by 0.63% to approximately $8.0503 billion [3][4] - AkzoNobel's industrial paint revenue fell by 2% to $2.036 billion, while other brands like Kansai and Jotun reported growth in their industrial paint segments [4][6][7] - Megachem reported a remarkable growth of 87.56% in revenue, reaching $2.139 billion, driven by strong demand in the container paint market [23]

Core Viewpoint - Sherwin-Williams has experienced a 7.1% increase in share price since its last earnings report, outperforming the S&P 500, but there are concerns about whether this positive trend will continue leading up to the next earnings release [1] Financial Performance - In Q2 2025, Sherwin-Williams reported earnings of $3 per share, a decline of 14.3% from $3.50 in the same quarter last year, and adjusted earnings of $3.38 per share, missing the Zacks Consensus Estimate of $3.76 [2] - The company generated revenues of approximately $6.31 billion, reflecting a year-over-year increase of 0.7%, surpassing the Zacks Consensus Estimate of $6.28 billion [2] Segmental Review - The Paint Stores Group segment achieved net sales of $3.70 billion, up 2.3% year over year, exceeding the Zacks Consensus Estimate of $3.68 billion, driven by higher selling prices despite a slight decline in volume [3] - The Consumer Brands Group segment saw a 4.1% decline in net sales to $809.4 million, missing the consensus estimate of $821.3 million, attributed to weak DIY demand in North America and unfavorable foreign currency translation [4] - The Performance Coatings Group segment's net sales decreased by approximately 0.3% year over year to around $1.80 billion, beating the consensus estimate of $1.77 billion, with flat sales impacted by lower selling prices [5] Financials - In the first half of 2025, the company generated $1.05 billion in net operating cash and returned $1.27 billion to shareholders through dividends and stock repurchases of 2.5 million shares [6] - As of June 30, 2025, the company had authorization to repurchase 32 million shares of its common stock [6] Outlook - For Q3 and the full year 2025, the company expects net sales to fluctuate by a low-single-digit percentage, indicating a stable revenue outlook [7] - Projected net income per share for the full year ranges between $10.11 and $10.41, while adjusted net income per share is forecasted between $11.20 and $11.50 [7] Estimate Trends - Following the earnings release, there has been a downward trend in estimates for the stock, indicating a shift in investor sentiment [8][11] - Sherwin-Williams currently holds a Zacks Rank 4 (Sell), suggesting expectations of below-average returns in the coming months [11] VGM Scores - The company has a Growth Score of B but lags with a Momentum Score of C and a Value Score of D, placing it in the bottom 40% for the value investment strategy [9][10]

Core Insights - Sherwin-Williams ranks first in the global decorative paint market for the eighth consecutive year, with a sales revenue of $13 billion and a global market share of 13.27% [1][11][21] - The top ten brands in the ranking collectively generated $39.979 billion in revenue, accounting for 40.79% of the global architectural paint market [1][2] - The ranking is based on the sales revenue of brands in the architectural decorative paint business for 2024, with a minimum entry threshold of $286 million [1][2] Company Overview - Sherwin-Williams, established in 1866, is one of the oldest paint suppliers globally, serving various sectors including professional, industrial, commercial, and retail customers [5][12] - The company operates three main business segments: Paint Stores Group, Consumer Brands Group, and Performance Coatings Group, with a presence in over 120 countries [5][12] - As of the end of 2024, Sherwin-Williams employed 63,890 people, with 80.84% of its revenue generated in North America [5][12] Financial Performance - Sherwin-Williams' sales revenue increased from $11.339 billion in 2015 to $23.1 billion in 2024, reflecting a compound annual growth rate (CAGR) of 7.85% over the past decade [6][11] - Net profit rose from $1.054 billion in 2015 to $2.681 billion in 2024, with a CAGR of 15.18% [6][11] - In 2024, the company reported total revenue of $23.1 billion, a year-on-year increase of 0.2%, and a net profit of $2.681 billion, up 12.25% from the previous year [6][11] Market Position - Sherwin-Williams' architectural paint sales revenue is projected to be approximately $13 billion in 2024, with an estimated market share in the U.S. architectural paint industry rising to around 55% [10][11] - The company has maintained a strong market position, with its share in the U.S. architectural paint market increasing from 26.3% in 2000 to about 53% in 2023 [10][11] Strategic Initiatives - Sherwin-Williams plans to acquire BASF's Brazilian architectural paint business for $1.15 billion, which will enhance its footprint in South America [11][12] - The company has a strong focus on innovation, with over 2,300 R&D personnel and 2,300 active patents, investing over $750 million in a new global headquarters and R&D center [23][25] - The company has a history of strategic acquisitions, including the purchase of Valspar, which helped it surpass PPG to become the largest paint manufacturer globally [5][11][25] Distribution and Channel Strategy - Sherwin-Williams has established a robust distribution network, with over 5,400 stores globally, primarily focusing on direct sales to professional contractors [16][19] - The company has a high percentage of direct sales channels (over 80%), which allows for better service and lower transportation costs [16][19] - The architectural paint market in the U.S. is characterized by a growing trend towards professional contractors, driven by increasing consumer income and an aging population [14][19]

Group 1 - The new tax law, referred to as the "OBBB," is praised by companies for enhancing consumer capacity and releasing funds, allowing immediate expensing of domestic capital costs for various enterprises [1] - 19% of companies in the Russell 3000 index mentioned the new tax regulation during their earnings calls, indicating a significant awareness and potential impact on corporate strategies [1] - Companies can now fully deduct expenses related to R&D, new equipment, and property in one go, which is expected to save funds and accelerate equipment procurement and facility upgrades [1] Group 2 - Johnson & Johnson views the tax law favorably, linking it to their previously announced $55 billion investment plan in the U.S. and expressing optimism about job creation and innovation [2] - AT&T anticipates saving up to $8 billion in cash taxes from 2025 to 2027, planning to allocate approximately $3.5 billion to expand its fiber network [2] - PACCAR and General Dynamics report increased business inquiries due to released funds, with PACCAR projecting a 4% to 6% growth in parts sales this quarter [3] Group 3 - Companies like Booz Allen and United Rentals have raised their free cash flow expectations by $200 million and $400 million, respectively, due to tax incentives [3] - Northrop Grumman expects to receive $200 million to $250 million in cash tax benefits this year, while Roper Technologies anticipates a tax reduction of about $150 million and $120 million in benefits next year [3] - Some companies, such as Ford and Sherwin-Williams, are still assessing the financial impact of the new tax law, while Boeing does not foresee significant effects this year [3] Group 4 - The tax law may encourage companies to expand their operations in the U.S., but it could also lead to increased costs, complicating the overall financial landscape [4] - Ongoing tariff negotiations add complexity to the situation, suggesting that the financial benefits of the tax law may not be straightforward for all companies [4]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section contains the unaudited condensed consolidated financial statements and accompanying notes for the periods ended June 30, 2025 and 2024 [Statements of Consolidated Income (Unaudited)](index=3&type=section&id=STATEMENTS%20OF%20CONSOLIDATED%20INCOME%20(UNAUDITED)) **Consolidated Income Highlights (Three Months Ended June 30)** | Metric | 2025 (in millions) | 2024 (in millions) | Change (%) | | :--- | :--- | :--- | :--- | | Net sales | $6,314.5 | $6,271.5 | 0.7% | | Gross profit | $3,118.3 | $3,063.4 | 1.8% | | Gross profit % to Net sales | 49.4% | 48.8% | +0.6 pp | | Selling, general and administrative expenses | $2,011.6 | $1,845.7 | 8.9% | | SG&A % to Net sales | 31.9% | 29.4% | +2.5 pp | | Income before income taxes | $985.7 | $1,173.4 | -16.0% | | Net income | $754.7 | $889.9 | -15.2% | | Diluted net income per common share | $3.00 | $3.50 | -14.3% | **Consolidated Income Highlights (Six Months Ended June 30)** | Metric | 2025 (in millions) | 2024 (in millions) | Change (%) | | :--- | :--- | :--- | :--- | | Net sales | $11,620.2 | $11,638.8 | -0.2% | | Gross profit | $5,677.4 | $5,594.4 | 1.5% | | Gross profit % to Net sales | 48.9% | 48.1% | +0.8 pp | | Selling, general and administrative expenses | $3,805.4 | $3,645.5 | 4.4% | | SG&A % to Net sales | 32.7% | 31.3% | +1.4 pp | | Income before income taxes | $1,638.7 | $1,813.4 | -9.6% | | Net income | $1,258.6 | $1,395.1 | -9.8% | | Diluted net income per common share | $5.00 | $5.47 | -8.6% | [Statements of Consolidated Comprehensive Income (Unaudited)](index=4&type=section&id=STATEMENTS%20OF%20CONSOLIDATED%20COMPREHENSIVE%20INCOME%20(UNAUDITED)) **Consolidated Comprehensive Income (Three Months Ended June 30)** | Metric | 2025 (in millions) | 2024 (in millions) | Change | | :--- | :--- | :--- | :--- | | Net income | $754.7 | $889.9 | -15.2% | | Other comprehensive income (loss), net of tax | $175.0 | $(71.9) | N/A | | Comprehensive income | $929.7 | $818.0 | 13.7% | **Consolidated Comprehensive Income (Six Months Ended June 30)** | Metric | 2025 (in millions) | 2024 (in millions) | Change | | :--- | :--- | :--- | :--- | | Net income | $1,258.6 | $1,395.1 | -9.8% | | Other comprehensive income (loss), net of tax | $277.3 | $(152.6) | N/A | | Comprehensive income | $1,535.9 | $1,242.5 | 23.6% | - Foreign currency translation adjustments significantly impacted other comprehensive income, showing a gain of **$176.2 million in Q2 2025** compared to a loss of **$(66.6) million in Q2 2024**, and a gain of **$282.8 million for the six months ended June 30, 2025**, versus a loss of **$(141.9) million** in the prior year period[13](index=13&type=chunk) [Consolidated Balance Sheets (Unaudited)](index=5&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS%20(UNAUDITED)) **Consolidated Balance Sheet Highlights (as of June 30)** | Metric | 2025 (in millions) | 2024 (in millions) | Change (%) | | :--- | :--- | :--- | :--- | | Total Assets | $25,363.6 | $23,734.0 | 6.9% | | Total Current Assets | $6,425.3 | $6,050.6 | 6.2% | | Property, plant and equipment, net | $3,805.9 | $3,136.6 | 21.3% | | Goodwill | $7,807.6 | $7,606.9 | 2.6% | | Total Liabilities and Shareholders' Equity | $25,363.6 | $23,734.0 | 6.9% | | Total Current Liabilities | $8,196.4 | $7,466.6 | 9.8% | | Long-term debt | $7,828.9 | $8,130.8 | -3.6% | | Total Shareholders' Equity | $4,400.9 | $3,751.8 | 17.3% | [Statements of Condensed Consolidated Cash Flows (Unaudited)](index=6&type=section&id=STATEMENTS%20OF%20CONDENSED%20CONSOLIDATED%20CASH%20FLOWS%20(UNAUDITED)) **Consolidated Cash Flow Highlights (Six Months Ended June 30)** | Metric | 2025 (in millions) | 2024 (in millions) | Change | | :--- | :--- | :--- | :--- | | Net operating cash | $1,051.5 | $1,144.0 | -8.0% | | Net investing cash | $(557.3) | $(582.1) | 4.3% | | Net financing cash | $(442.8) | $(627.8) | 29.5% | | Net increase (decrease) in cash and cash equivalents | $59.4 | $(76.8) | N/A | | Cash and cash equivalents at end of period | $269.8 | $200.0 | 34.9% | - Net operating cash decreased by **$92.5 million**, primarily due to lower net income and higher working capital requirements, partially offset by decreased cash used for long-term contract assets[16](index=16&type=chunk)[193](index=193&type=chunk) - Net investing cash usage decreased by **$24.8 million**, driven by a decrease in capital expenditures, partially offset by cash used for business acquisitions[16](index=16&type=chunk)[194](index=194&type=chunk) - Net financing cash usage decreased by **$185.0 million**, mainly due to increased short-term borrowings, decreased long-term debt payments, and reduced treasury stock purchases, partially offset by lower proceeds from real estate financing and stock option exercises, and increased cash dividends[16](index=16&type=chunk)[195](index=195&type=chunk) [Statements of Consolidated Shareholders' Equity (Unaudited)](index=7&type=section&id=STATEMENTS%20OF%20CONSOLIDATED%20SHAREHOLDERS'%20EQUITY%20(UNAUDITED)) **Consolidated Shareholders' Equity (as of June 30, 2025)** | Metric | Amount (in millions) | | :--- | :--- | | Common Stock | $92.7 | | Other Capital | $4,680.2 | | Retained Earnings | $8,106.6 | | Treasury Stock, at cost | $(7,880.7) | | Accumulated Other Comprehensive Loss | $(597.9) | | **Total Shareholders' Equity** | **$4,400.9** | - Total shareholders' equity increased by **$349.7 million** during the first six months of 2025, driven by net income of **$1.259 billion**, a **$277.3 million** increase in AOCI (mainly from currency translation), and a **$104.0 million** increase in Other capital (stock-based compensation and stock option exercises)[187](index=187&type=chunk) - These gains were partially offset by **$892.1 million** in treasury stock activity and cash dividends[187](index=187&type=chunk) [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=8&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) [Note 1 - Basis of Presentation](index=8&type=section&id=NOTE%201%20-%20BASIS%20OF%20PRESENTATION) The financial statements are prepared under US GAAP for interim reporting, reflecting business seasonality and revised accounting estimates - The Company's business is seasonal, with the majority of Net sales traditionally occurring during the second and third quarters, though economic uncertainty can alter these patterns[19](index=19&type=chunk) - Supply chain financing liabilities recorded in Accounts payable amounted to **$222.2 million** at June 30, 2025, up from **$215.7 million** at December 31, 2024[21](index=21&type=chunk) - Non-Traded Investments are accounted for using the proportional amortization method, with amortization and related tax credits recognized in Income tax expense[23](index=23&type=chunk) **Non-Traded Investments Amortization and Tax Benefits (Six Months Ended June 30)** | Metric | 2025 (in millions) | 2024 (in millions) | | :--- | :--- | :--- | | Amortization of Non-Traded Investments | $57.4 | $42.4 | | Tax credits and other tax benefits received | $63.4 | $47.4 | [Note 2 - Recently Issued Accounting Pronouncements](index=9&type=section&id=NOTE%202%20-%20RECENTLY%20ISSUED%20ACCOUNTING%20PRONOUNCEMENTS) The Company is evaluating new ASUs that will expand future income tax and expense disaggregation disclosures - ASU 2023-09, 'Improvements to Income Tax Disclosures,' effective for fiscal years beginning after December 15, 2024, will expand annual income tax disclosures but not affect financial position, results of operations, or cash flows[26](index=26&type=chunk) - ASU 2024-03, 'Disaggregation of Income Statement Expenses,' effective for annual fiscal years beginning after December 15, 2026, requires additional disclosures about specific expense categories in the notes to the consolidated financial statements[27](index=27&type=chunk) [Note 3 - Acquisitions](index=9&type=section&id=NOTE%203%20-%20ACQUISITIONS) Details a pending $1.15 billion acquisition and several recently completed smaller acquisitions - The Company signed an agreement in February 2025 to acquire BASF SE's Brazilian decorative paints business for **$1.15 billion**, pending antitrust approval[28](index=28&type=chunk) - In June 2025, the Company acquired a domestic regional floor covering provider (immaterial purchase price), reported within the Paint Stores Group[29](index=29&type=chunk) - In March 2025, the Company acquired a European coil and industrial coatings company for approximately **$80 million**, reported within the Performance Coatings Group[30](index=30&type=chunk) [Note 4 - Inventories](index=10&type=section&id=NOTE%204%20-%20INVENTORIES) Total inventories, valued primarily using the LIFO method, increased to $2.48 billion at June 30, 2025 **Inventories (in millions)** | Category | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Finished goods | $1,915.7 | $1,751.9 | $1,787.7 | | Work in process and raw materials | $568.9 | $536.2 | $501.4 | | **Total Inventories** | **$2,484.6** | **$2,288.1** | **$2,289.1** | - The Company primarily uses the last-in, first-out (LIFO) method for inventory valuation, with interim calculations based on estimates of year-end levels and costs[32](index=32&type=chunk) [Note 5 - Long-Lived Assets](index=10&type=section&id=NOTE%205%20-%20LONG-LIVED%20ASSETS) Net property, plant and equipment increased to $3.81 billion, with goodwill and intangible assets tested for impairment annually **Property, Plant and Equipment, Net (in millions)** | Category | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Land | $270.5 | $259.9 | $254.0 | | Buildings | $1,712.7 | $1,175.9 | $1,084.6 | | Machinery and equipment | $3,951.0 | $3,689.5 | $3,575.7 | | Construction in progress | $1,270.4 | $1,598.1 | $1,380.0 | | Property, plant and equipment, gross | $7,204.6 | $6,723.4 | $6,294.3 | | Less allowances for depreciation | $3,398.7 | $3,190.2 | $3,157.7 | | **Property, plant and equipment, net** | **$3,805.9** | **$3,533.2** | **$3,136.6** | - Goodwill and indefinite-lived intangible assets are tested for impairment annually during the fourth quarter, with interim tests performed when events or circumstances indicate impairment[33](index=33&type=chunk) [Note 6 - Debt](index=11&type=section&id=NOTE%206%20-%20DEBT) Total debt increased to $10.69 billion due to higher short-term borrowings, while available credit capacity was $2.24 billion **Outstanding Debt (in millions)** | Category | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Long-term debt (including current portion) | $8,979.6 | $9,226.0 | $8,980.5 | | Short-term borrowings | $1,706.7 | $662.4 | $1,358.3 | | **Total debt outstanding** | **$10,686.3** | **$9,888.4** | **$10,338.8** | - The Company repaid **$250.0 million** of 3.3% senior notes due February 1, 2025, using commercial paper during the first quarter of 2025[35](index=35&type=chunk) - In March 2025, the Company amended its credit agreement to extend the maturity of **$75.0 million** of commitments from June 20, 2025, to June 20, 2030[37](index=37&type=chunk) - At June 30, 2025, the Company had unused capacity under its various credit agreements of **$2.235 billion**[38](index=38&type=chunk) [Note 7 - Pension and Other Postretirement Benefits](index=12&type=section&id=NOTE%207%20-%20PENSION%20AND%20OTHER%20POSTRETIREMENT%20BENEFITS) Net periodic pension and benefit costs showed a net credit for the six months ended June 30, 2025 **Net Periodic Pension and Benefit (Credit) Cost (Six Months Ended June 30, in millions)** | Component | Domestic Defined Benefit Pension Plan | Foreign Defined Benefit Pension Plans | Other Postretirement Benefits | | :--- | :--- | :--- | :--- | | Service cost | $1.4 | $2.2 | $0.2 | | Interest cost | $2.6 | $6.2 | $3.4 | | Expected return on assets | $(4.8) | $(5.2) | — | | Amortization of prior service cost (credit) | $1.0 | — | $(7.2) | | Amortization of actuarial gains | $(1.0) | $(0.6) | $(1.2) | | **Net periodic pension and benefit (credit) cost** | **$(0.8)** | **$2.6** | **$(4.8)** | - Service cost is recorded in Cost of goods sold and Selling, general and administrative expenses, while other components are in Other expense (income) - net[39](index=39&type=chunk) [Note 8 - Other Long-Term Liabilities](index=12&type=section&id=NOTE%208%20-%20OTHER%20LONG-TERM%20LIABILITIES) Details environmental accruals, asset retirement obligations, and real estate financing for the new global headquarters - Accruals for environmental-related activities reported as Other long-term liabilities were **$218.6 million** at June 30, 2025, with an additional **$65.0 million** in Other accruals for current activities[44](index=44&type=chunk) - Four Major Sites, including Gibbsboro, New Jersey, account for **84.6%** of the total environmental accrual[46](index=46&type=chunk) - The Company received the final proceeds of **$800 million** for its new global headquarters real estate financing in the first quarter of 2025[54](index=54&type=chunk) **Real Estate Financing Liabilities (in millions)** | Category | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Short-term liability (Other accruals) | $50.5 | $49.7 | $46.6 | | Long-term liability (Other long-term liabilities) | $759.2 | $715.9 | $633.5 | | **Total liability** | **$809.7** | **$765.6** | **$680.1** | [Note 9 - Litigation](index=15&type=section&id=NOTE%209%20-%20LITIGATION) The Company is involved in various legal proceedings, including ongoing lead paint and environmental litigation - The Company is a defendant in lead pigment and lead-based paint litigation, with most past proceedings concluding in its favor, except for the California Proceedings and currently pending cases[58](index=58&type=chunk) - In the California Proceedings, the Company reached a court-approved agreement in 2019 after nearly twenty years of litigation[60](index=60&type=chunk) - Ongoing Wisconsin litigation involves claims of personal injury from lead pigment/paint, with amended complaints filed in May 2024 alleging strict liability, negligence, and public nuisance[61](index=61&type=chunk)[62](index=62&type=chunk) - The NJ DEP filed a lawsuit in December 2019 seeking natural resource damages and penalties related to the Company's former Gibbsboro, New Jersey site, with a trial date set for February 23, 2026[64](index=64&type=chunk)[65](index=65&type=chunk) - The Company is investigating claims related to a changed listing for a protective coatings product (Firetex intumescent coating) and issues with its Firetex Design Estimator software, with any additional loss currently not reasonably estimable beyond an immaterial product warranty liability[66](index=66&type=chunk) [Note 10 - Shareholders' Equity](index=17&type=section&id=NOTE%2010%20-%20SHAREHOLDERS'%20EQUITY) The Company increased its quarterly dividend and continued share repurchases, with 32.0 million shares remaining authorized **Cash Dividends Declared and Paid on Common Stock (in millions, except per share data)** | Quarter | 2025 Cash Dividend Per Share | 2025 Total Dividends | 2024 Cash Dividend Per Share | 2024 Total Dividends | | :--- | :--- | :--- | :--- | :--- | | First Quarter | $0.79 | $200.4 | $0.715 | $182.5 | | Second Quarter | $0.79 | $197.9 | $0.715 | $178.6 | | **Total** | **$1.58** | **$398.3** | **$1.43** | **$361.1** | **Treasury Stock Purchases (Three Months Ended June 30)** | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Treasury stock purchases (in millions) | $518.5 | $434.4 | | Treasury stock purchases (in shares) | 1,450,000 | 1,400,000 | | Average price per share | $357.57 | $310.29 | **Treasury Stock Purchases (Six Months Ended June 30)** | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Treasury stock purchases (in millions) | $870.2 | $979.9 | | Treasury stock purchases (in shares) | 2,450,000 | 3,100,000 | | Average price per share | $355.17 | $316.09 | - As of June 30, 2025, the Company had remaining authorization to purchase **32.0 million shares** of its common stock[68](index=68&type=chunk) - The Sherwin-Williams Company 2025 Equity and Incentive Compensation Plan, authorizing 21,969,555 shares, was approved by shareholders on April 16, 2025[70](index=70&type=chunk) [Note 11 - Accumulated Other Comprehensive Income (Loss)](index=18&type=section&id=NOTE%2011%20-%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME%20(LOSS)) AOCI improved to a loss of $(597.9) million, primarily due to positive foreign currency translation adjustments **Accumulated Other Comprehensive Income (Loss) (in millions)** | Component | Balance at Dec 31, 2024 | Amounts recognized in AOCI (6M 2025) | Amounts reclassified from AOCI (6M 2025) | Balance at June 30, 2025 | | :--- | :--- | :--- | :--- | :--- | | Foreign Currency Translation Adjustments | $(972.9) | $282.8 | — | $(690.1) | | Pension and Other Postretirement Benefits Adjustments | $73.1 | — | $(6.8) | $66.3 | | Unrealized Net Gains on Cash Flow Hedges | $24.6 | $3.1 | $(1.8) | $25.9 | | **Total** | **$(875.2)** | **$285.9** | **$(8.6)** | **$(597.9)** | - Foreign currency translation adjustments included changes in the fair value of cross currency swap contracts of **$(145.3) million**, net of taxes, during the six months ended June 30, 2025[72](index=72&type=chunk) [Note 12 - Derivatives and Hedging](index=18&type=section&id=NOTE%2012%20-%20DERIVATIVES%20AND%20HEDGING) The Company uses various derivative contracts to hedge net investment, interest rate, and foreign currency risks - The Company uses U.S. Dollar to euro cross currency swap contracts to hedge its net investment in European operations, effectively converting U.S. Dollar denominated fixed-rate debt to euro denominated fixed-rate debt[73](index=73&type=chunk) **Cross Currency Swap Contracts Notional Value (as of June 30, 2025)** | Notional Value (in millions) | Maturity Date | | :--- | :--- | | $200.0 | August 8, 2025 | | $687.7 | June 1, 2027 | | $100.0 | March 1, 2028 | | $525.0 | August 15, 2029 | | $200.0 | September 1, 2031 | | **Total** | **$1,712.7** | - In April 2025, the Company entered into interest rate lock contracts with an aggregate notional amount of **$300 million** in anticipation of a probable issuance of new long-term fixed rate debt[77](index=77&type=chunk) - The Company uses foreign currency option and forward contracts with maturities less than twelve months to hedge against foreign currency value changes, with related gains and losses recorded in Other expense (income) - net[78](index=78&type=chunk) [Note 13 - Fair Value Measurements](index=19&type=section&id=NOTE%2013%20-%20FAIR%20VALUE%20MEASUREMENTS) Assets and liabilities are categorized into Level 1 and Level 2 for fair value measurement purposes **Financial Assets Measured at Fair Value (as of June 30, 2025, in millions)** | Category | Total | Level 1 | Level 2 | | :--- | :--- | :--- | :--- | | Deferred compensation plan | $104.1 | $104.1 | — | | Net investment hedges | — | — | — | | Interest rate locks | $4.1 | — | $4.1 | | **Total Assets** | **$108.2** | **$104.1** | **$4.1** | **Financial Liabilities Measured at Fair Value (as of June 30, 2025, in millions)** | Category | Total | Level 1 | Level 2 | | :--- | :--- | :--- | :--- | | Net investment hedges | $144.1 | — | $144.1 | - The fair value of publicly traded debt was **$7,994.3 million** (carrying amount $8,979.5 million) at June 30, 2025, while non-publicly traded debt had a fair value of **$0.1 million** (carrying amount $0.1 million)[85](index=85&type=chunk) [Note 14 - Revenue](index=20&type=section&id=NOTE%2014%20-%20REVENUE) Revenue is recognized primarily at a point in time, with approximately 80% of sales originating in North America - A large portion of the Company's revenue is recognized at a point in time, with most customers having payment terms between 30 and 60 days[86](index=86&type=chunk) - Approximately **80%** of the Company's Net sales are in the North America region, with less than 10% in the EMEAI region[89](index=89&type=chunk) - Variable consideration, such as volume rebates and discounts, is accrued as a reduction of Net sales based on forecasted percentages and historical sales[91](index=91&type=chunk) **Accounts Receivable and Contract Balances (in millions)** | Category | Balance at Dec 31, 2024 | Balance at June 30, 2025 | | :--- | :--- | :--- | | Accounts Receivable, Less Allowance | $2,388.8 | $3,111.9 | | Contract Assets (Current) | $55.0 | $85.9 | | Contract Assets (Long-Term) | $231.0 | $247.7 | | Contract Liabilities (Current) | $386.2 | $304.0 | | Contract Liabilities (Long-Term) | $1.6 | $14.8 | **Allowance for Current Expected Credit Losses (Six Months Ended June 30, in millions)** | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Beginning balance | $60.4 | $59.6 | | Bad debt expense | $29.3 | $37.4 | | Uncollectible accounts written off, net of recoveries | $(13.0) | $(20.1) | | **Ending balance** | **$76.7** | **$76.9** | [Note 15 - Other (Income) Expense](index=22&type=section&id=NOTE%2015%20-%20OTHER%20(INCOME)%20EXPENSE) Other expense categories shifted from net income in 2024 to net expense in 2025 due to various factors **Other General Expense (Income) - Net (Three Months Ended June 30, in millions)** | Category | 2025 | 2024 | | :--- | :--- | :--- | | Provisions for environmental matters - net | $0.4 | $(14.1) | | Gain on sale or disposition of assets | $(1.3) | $(19.8) | | Other | $7.2 | $0.3 | | **Other general expense (income) - net** | **$6.3** | **$(33.6)** | **Other General Expense (Income) - Net (Six Months Ended June 30, in millions)** | Category | 2025 | 2024 | | :--- | :--- | :--- | | Provisions for environmental matters - net | $3.5 | $(10.5) | | Gain on sale or disposition of assets | $(3.4) | $(23.2) | | Other | $15.1 | $2.1 | | **Other general expense (income) - net** | **$15.2** | **$(31.6)** | **Other Expense (Income) - Net (Three Months Ended June 30, in millions)** | Category | 2025 | 2024 | | :--- | :--- | :--- | | Net investment gains | $(6.3) | $(3.8) | | Net expense from banking activities | $4.2 | $4.4 | | Foreign currency transaction related losses (gains) - net | $13.1 | $(4.6) | | Miscellaneous pension and benefit income | $(3.4) | $(4.9) | | Other income | $(8.9) | $(25.2) | | Other expense | $6.0 | $2.1 | | **Other expense (income) - net** | **$4.7** | **$(32.0)** | **Other Expense (Income) - Net (Six Months Ended June 30, in millions)** | Category | 2025 | 2024 | | :--- | :--- | :--- | | Net investment gains | $(9.5) | $(8.9) | | Net expense from banking activities | $8.1 | $7.7 | | Foreign currency transaction related losses (gains) - net | $23.1 | $3.0 | | Miscellaneous pension and benefit income | $(6.8) | $(9.8) | | Other income | $(19.3) | $(34.2) | | Other expense | $12.0 | $2.5 | | **Other expense (income) - net** | **$7.6** | **$(39.7)** | [Note 16 - Income Taxes](index=23&type=section&id=NOTE%2016%20-%20INCOME%20TAXES) The effective tax rate decreased in Q2 2025 due to favorable tax benefits from share-based payments - The effective tax rate decreased to **23.4% in Q2 2025** from 24.2% in Q2 2024, primarily due to a more favorable impact from tax benefits related to employee share-based payments[104](index=104&type=chunk) - The effective tax rate for the first six months of 2025 was **23.2%**, essentially flat compared to 23.1% in the prior year period[104](index=104&type=chunk) - The 'One Big Beautiful Bill Act' (Tax Act), signed on July 4, 2025, is not anticipated to materially change the Company's effective tax rate for 2025, but its full impact is under evaluation[109](index=109&type=chunk) [Note 17 - Net Income Per Share](index=24&type=section&id=NOTE%2017%20-%20NET%20INCOME%20PER%20SHARE) Diluted net income per share decreased due to lower net income, partially offset by fewer weighted average shares **Net Income Per Common Share (Three Months Ended June 30)** | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Basic net income per share | $3.04 | $3.55 | | Diluted net income per share | $3.00 | $3.50 | | Weighted average shares outstanding (Basic, in millions) | 248.4 | 251.0 | | Weighted average shares outstanding (Diluted, in millions) | 251.3 | 254.2 | **Net Income Per Common Share (Six Months Ended June 30)** | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Basic net income per share | $5.06 | $5.54 | | Diluted net income per share | $5.00 | $5.47 | | Weighted average shares outstanding (Basic, in millions) | 248.9 | 251.8 | | Weighted average shares outstanding (Diluted, in millions) | 251.9 | 255.1 | - Diluted net income per share in Q2 2025 included charges for acquisition-related amortization expense of **$0.20 per share** and severance and other restructuring expenses of **$0.18 per share**[162](index=162&type=chunk) - Foreign currency translation rate changes decreased diluted net income per share by **$0.02 in Q2 2025** and **$0.05 for the first six months of 2025**[162](index=162&type=chunk)[163](index=163&type=chunk) [Note 18 - Reportable Segment Information](index=25&type=section&id=NOTE%2018%20-%20REPORTABLE%20SEGMENT%20INFORMATION) The Company operates through three reportable segments, with performance evaluated based on Income before income taxes - The Company has three reportable segments: Paint Stores Group, Consumer Brands Group, and Performance Coatings Group, with an Administrative function[114](index=114&type=chunk) - Segment profit or loss, representing Income before income taxes, is used by the Chief Operating Decision Maker (CODM) to evaluate performance and allocate resources[115](index=115&type=chunk) - Net sales of all consolidated foreign subsidiaries were **$1.155 billion in Q2 2025** (up from $1.143 billion in Q2 2024) and **$2.200 billion for the six months ended June 30, 2025** (down from $2.246 billion in the prior year period)[123](index=123&type=chunk) **Net Sales by Reportable Segment (Three Months Ended June 30, in millions)** | Segment | 2025 Net Sales | 2024 Net Sales | % Change | | :--- | :--- | :--- | :--- | | Paint Stores Group | $3,702.2 | $3,619.9 | 2.3% | | Consumer Brands Group | $809.4 | $844.3 | (4.1)% | | Performance Coatings Group | $1,801.1 | $1,806.4 | (0.3)% | | Administrative | $1.8 | $0.9 | 100.0% | | **Consolidated Totals** | **$6,314.5** | **$6,271.5** | **0.7%** | **Net Sales by Reportable Segment (Six Months Ended June 30, in millions)** | Segment | 2025 Net Sales | 2024 Net Sales | % Change | | :--- | :--- | :--- | :--- | | Paint Stores Group | $6,642.0 | $6,492.9 | 2.3% | | Consumer Brands Group | $1,571.6 | $1,655.3 | (5.1)% | | Performance Coatings Group | $3,403.1 | $3,488.3 | (2.4)% | | Administrative | $3.5 | $2.3 | 52.2% | | **Consolidated Totals** | **$11,620.2** | **$11,638.8** | **(0.2)%** | **Income Before Income Taxes by Reportable Segment (Three Months Ended June 30, in millions)** | Segment | 2025 Income Before Taxes | 2024 Income Before Taxes | % Change | | :--- | :--- | :--- | :--- | | Paint Stores Group | $916.5 | $907.1 | 1.0% | | Consumer Brands Group | $164.2 | $204.4 | (19.7)% | | Performance Coatings Group | $245.1 | $301.5 | (18.7)% | | Administrative | $(340.1) | $(239.6) | (41.9)% | | **Total** | **$985.7** | **$1,173.4** | **(16.0)%** | **Income Before Income Taxes by Reportable Segment (Six Months Ended June 30, in millions)** | Segment | 2025 Income Before Taxes | 2024 Income Before Taxes | % Change | | :--- | :--- | :--- | :--- | | Paint Stores Group | $1,457.7 | $1,400.3 | 4.1% | | Consumer Brands Group | $296.1 | $357.8 | (17.2)% | | Performance Coatings Group | $457.8 | $539.2 | (15.1)% | | Administrative | $(572.9) | $(483.9) | (18.4)% | | **Total** | **$1,638.7** | **$1,813.4** | **(9.6)%** | [Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Results%20of%20Operations%20and%20Financial%20Condition) Management discusses financial performance, condition, liquidity, and cash flows for the periods ended June 30, 2025 and 2024 [Background](index=29&type=section&id=BACKGROUND) - 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 the Caribbean, Europe, Asia, and Australia[125](index=125&type=chunk) - The Company is structured into three reportable segments: Paint Stores Group, Consumer Brands Group, and Performance Coatings Group, plus an Administrative function[126](index=126&type=chunk) [Summary & Outlook](index=29&type=section&id=SUMMARY) - Consolidated Net sales increased **0.7% to $6.315 billion** in Q2 2025 and decreased **0.2% to $11.620 billion** year-to-date[130](index=130&type=chunk) - Diluted net income per share decreased **14.3% to $3.00** in Q2 2025 and **8.6% to $5.00** year-to-date[130](index=130&type=chunk) - The Company is accelerating restructuring actions in response to a softer demand market, while continuing investments in customer relationships, market share, and digital technologies[128](index=128&type=chunk) - The Company maintains a strong liquidity position with **$269.8 million** in cash and **$2.235 billion** of unused credit capacity at June 30, 2025, and expects to remain in compliance with bank covenants[129](index=129&type=chunk) [Results of Operations](index=30&type=section&id=RESULTS%20OF%20OPERATIONS) [Net Sales](index=30&type=section&id=Net%20Sales) Consolidated Net sales increased 0.7% in Q2 2025, driven by the Paint Stores Group, but were flat for the first six months - Paint Stores Group net sales increased **2.3%** in Q2 2025 due to mid-single digit selling price increases, partially offset by a low-single digit decrease in sales volume[134](index=134&type=chunk) - Sales from stores open over twelve months increased **0.8%**[134](index=134&type=chunk) - Consumer Brands Group net sales decreased **4.1%** in Q2 2025 due to soft DIY demand in North America and a **1.6%** unfavorable foreign currency impact[135](index=135&type=chunk) - Performance Coatings Group net sales were flat in Q2 2025, with incremental sales from acquisitions offset by selling price decreases and product mix[136](index=136&type=chunk) - **Packaging led performance** with double-digit growth[136](index=136&type=chunk) **Consolidated Net Sales Performance (Three Months Ended June 30)** | Segment | 2025 Net Sales (in millions) | 2024 Net Sales (in millions) | $ Change | % Change | Currency Impact | Acquisition Impact | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Paint Stores Group | $3,702.2 | $3,619.9 | $82.3 | 2.3% | —% | —% | | Consumer Brands Group | $809.4 | $844.3 | $(34.9) | (4.1)% | (1.6)% | —% | | Performance Coatings Group | $1,801.1 | $1,806.4 | $(5.3) | (0.3)% | 0.3% | 1.3% | | Administrative | $1.8 | $0.9 | $0.9 | 100.0% | —% | —% | | **Total** | **$6,314.5** | **$6,271.5** | **$43.0** | **0.7%** | **(0.1)%** | **0.4%** | **Consolidated Net Sales Performance (Six Months Ended June 30)** | Segment | 2025 Net Sales (in millions) | 2024 Net Sales (in millions) | $ Change | % Change | Currency Impact | Acquisition Impact | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Paint Stores Group | $6,642.0 | $6,492.9 | $149.1 | 2.3% | (0.1)% | —% | | Consumer Brands Group | $1,571.6 | $1,655.3 | $(83.7) | (5.1)% | (2.4)% | —% | | Performance Coatings Group | $3,403.1 | $3,488.3 | $(85.2) | (2.4)% | (1.1)% | 1.0% | | Administrative | $3.5 | $2.3 | $1.2 | 52.2% | —% | —% | | **Total** | **$11,620.2** | **$11,638.8** | **$(18.6)** | **(0.2)%** | **(0.7)%** | **0.3%** | [Income Before Income Taxes](index=32&type=section&id=Income%20Before%20Income%20Taxes) Consolidated Income before income taxes decreased due to higher SG&A expenses and shifts in other income/expense categories - Consolidated gross profit increased **$54.9 million** in Q2 2025, with gross profit as a percent of net sales increasing to **49.4%** from 48.8%, primarily due to higher selling prices in the Paint Stores Group[144](index=144&type=chunk) - Consolidated SG&A expenses increased **$165.9 million** in Q2 2025, rising **250 basis points** as a percent of Net sales, mainly due to higher employee-related costs and costs for new global headquarters and R&D buildings[146](index=146&type=chunk) - Other general expense (income) - net shifted from income of **$33.6 million** in Q2 2024 to an expense of **$6.3 million** in Q2 2025, primarily due to lower gains on asset sales and non-recurring insurance recoveries[148](index=148&type=chunk) - Other expense (income) - net shifted from income of **$32.0 million** in Q2 2024 to an expense of **$4.7 million** in Q2 2025, mainly due to higher foreign currency transaction related losses and lower miscellaneous income[150](index=150&type=chunk) **Income Before Income Taxes as a Percentage of Net Sales** | Metric | Q2 2025 % | Q2 2024 % | 6M 2025 % | 6M 2024 % | | :--- | :--- | :--- | :--- | :--- | | Gross profit | 49.4% | 48.8% | 48.9% | 48.1% | | SG&A | 31.9% | 29.4% | 32.7% | 31.3% | | Other general expense (income) - net | 0.1% | (0.5)% | 0.1% | (0.3)% | | Interest expense | 1.8% | 1.8% | 1.9% | 1.8% | | Interest income | —% | —% | —% | (0.1)% | | Other expense (income) - net | —% | (0.6)% | 0.1% | (0.2)% | | **Income before income taxes** | **15.6%** | **18.7%** | **14.1%** | **15.6%** | [Income Tax Expense](index=34&type=section&id=Income%20Tax%20Expense) The effective tax rate decreased in Q2 2025 due to favorable tax benefits from employee share-based payments - The effective tax rate for the second quarter of 2025 was **23.4%**, down from 24.2% in the prior year, primarily due to a more favorable impact of tax benefits related to employee share-based payments[160](index=160&type=chunk) - The effective tax rate for the first six months of 2025 was **23.2%**, essentially flat compared to 23.1% in the same period last year[160](index=160&type=chunk) - The 'One Big Beautiful Bill Act' (Tax Act), signed on July 4, 2025, is not anticipated to materially change the Company's effective tax rate for 2025[161](index=161&type=chunk) [Net Income Per Share](index=34&type=section&id=Net%20Income%20Per%20Share) Diluted net income per share decreased, impacted by acquisition-related costs, restructuring, and unfavorable currency translation - Diluted net income per share decreased **14.3% to $3.00** in Q2 2025 compared to $3.50 in Q2 2024[162](index=162&type=chunk) - Diluted net income per share for the first six months of 2025 decreased **8.6% to $5.00** compared to $5.47 in the prior year period[163](index=163&type=chunk) - Q2 2025 diluted EPS included charges of **$0.20** for acquisition-related amortization and **$0.18** for severance and other restructuring expenses[162](index=162&type=chunk) - Foreign currency translation rate changes decreased diluted net income per share by **$0.02** in Q2 2025 and **$0.05** for the first six months of 2025[162](index=162&type=chunk)[163](index=163&type=chunk) [Financial Condition, Liquidity and Cash Flow](index=35&type=section&id=FINANCIAL%20CONDITION,%20LIQUIDITY%20AND%20CASH%20FLOW) [Overview](index=35&type=section&id=Overview) The Company maintained a strong financial position, generating $1.05 billion in operating cash and returning $1.27 billion to shareholders - The Company generated **$1.052 billion** in Net operating cash during the first six months of 2025[164](index=164&type=chunk) - Cash returned to shareholders through dividends and share repurchases totaled **$1.269 billion** in the first six months of 2025[164](index=164&type=chunk) - Net income decreased **9.8% to $1.259 billion** and EBITDA decreased **6.7% to $2.179 billion** for the first six months of 2025[164](index=164&type=chunk) - At June 30, 2025, the Company had **$269.8 million** in Cash and cash equivalents and total debt outstanding of **$10.686 billion**, with total debt, net of cash, at **$10.417 billion**[165](index=165&type=chunk) [Net Working Capital](index=35&type=section&id=Net%20Working%20Capital) Net working capital deficit increased to $1.77 billion, driven by a significant increase in current liabilities - Net working capital decreased **$355.1 million** to a deficit of **$1.771 billion** at June 30, 2025, compared to a deficit of **$1.416 billion** at June 30, 2024[166](index=166&type=chunk) - Current asset balances increased **$374.7 million**, primarily due to increases in Inventories (**$195.5 million**), Cash and cash equivalents (**$69.8 million**), and Accounts receivable, net (**$63.8 million**)[167](index=167&type=chunk) - Current liability balances increased **$729.8 million**, mainly due to increases in Short-term borrowings (**$348.4 million**), Current portion of long-term debt (**$301.0 million**), and Other accruals (**$92.4 million**), partially offset by a decrease in Accrued taxes (**$91.3 million**)[168](index=168&type=chunk) - The Company's current ratio was **0.78** at June 30, 2025, down from 0.81 at June 30, 2024[168](index=168&type=chunk) [Property, Plant and Equipment](index=35&type=section&id=Property,%20Plant%20and%20Equipment) Net property, plant and equipment increased by $272.7 million, driven by capital expenditures and the new R&D Center - Net property, plant and equipment increased **$272.7 million** in the first six months of 2025, driven by capital expenditures of **$363.0 million** and the new R&D Center being placed into service[169](index=169&type=chunk)[170](index=170&type=chunk) - Buildings within Property, plant and equipment, net increased by **$536.8 million** in the first six months of 2025, primarily due to the R&D Center meeting criteria to be placed into service[170](index=170&type=chunk) - The global headquarters construction is expected to be complete in 2025, with capital expenditures also supporting manufacturing capacity expansion, operational efficiencies, and new store openings[171](index=171&type=chunk) - The Company expects to spend slightly less on capital expenditures in 2025 compared to 2024, funded primarily through operating cash[172](index=172&type=chunk) [Real Estate Financing](index=36&type=section&id=Real%20Estate%20Financing) The Company received final proceeds for its new headquarters financing, which is accounted for as a financing transaction - The Company received the final proceeds for its new global headquarters in Q1 2025, totaling **$800 million**, from a sale-leaseback agreement accounted for as a real estate financing transaction[173](index=173&type=chunk) - The initial lease term includes the construction period and extends for 30 years thereafter, with lease payments expected to be approximately **$50 million** over the next twelve months[173](index=173&type=chunk) - The related assets remain recognized within Property, plant and equipment, net on the Consolidated Balance Sheets and will be depreciated over their useful lives[174](index=174&type=chunk) [Goodwill and Intangible Assets](index=36&type=section&id=Goodwill%20and%20Intangible%20Assets) Goodwill and intangible assets increased primarily due to foreign currency translation and purchase accounting allocations - Goodwill increased **$227.5 million** from December 31, 2024, primarily due to foreign currency translation fluctuations (**$156.7 million**) and purchase accounting allocations (**$70.8 million**)[175](index=175&type=chunk) - Intangible assets increased **$10.2 million** in the first six months of 2025, mainly due to currency translation fluctuations (**$122.0 million**), purchase accounting allocations (**$35.0 million**), and capitalized software (**$17.6 million**), partially offset by amortization (**$164.4 million**)[176](index=176&type=chunk) [Other Assets](index=36&type=section&id=Other%20Assets) Other assets increased by $138.6 million, mainly due to an increase in Non-Traded Investments - Other assets increased **$138.6 million** from December 31, 2024, primarily due to an increase in Non-Traded Investments, partially offset by a decrease in assets related to cross currency swap contracts[178](index=178&type=chunk) [Debt (including Short-term borrowings)](index=36&type=section&id=Debt%20(including%20Short-term%20borrowings)) Total debt increased to $10.69 billion due to higher short-term borrowings, with interest rate locks entered for future debt **Total Debt Outstanding (in millions)** | Category | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Long-term debt (including current portion) | $8,979.6 | $9,226.0 | $8,980.5 | | Short-term borrowings | $1,706.7 | $662.4 | $1,358.3 | | **Total debt outstanding** | **$10,686.3** | **$9,888.4** | **$10,338.8** | - In April 2025, the Company entered into interest rate lock contracts with an aggregate notional amount of **$300 million** in anticipation of a probable issuance of new long-term fixed rate debt[180](index=180&type=chunk) [Defined Benefit Pension and Other Postretirement Benefit Plans](index=37&type=section&id=Defined%20Benefit%20Pension%20and%20Other%20Postretirement%20Benefit%20Plans) Long-term liabilities for pension and postretirement plans remained stable compared to year-end 2024 - Long-term liabilities for defined benefit pension and other postretirement benefit plans did not change significantly from December 31, 2024[181](index=181&type=chunk) - Changes in these liabilities from June 30, 2024, are primarily due to changes in actuarial assumptions[181](index=181&type=chunk) [Deferred Income Taxes](index=37&type=section&id=Deferred%20Income%20Taxes) Deferred income taxes decreased due to the amortization of acquisition-related intangible assets - Deferred income taxes decreased **$46.6 million** from December 31, 2024, and **$81.1 million** from June 30, 2024, primarily due to amortization of acquisition-related intangible assets[182](index=182&type=chunk) [Environmental-Related Liabilities](index=37&type=section&id=Environmental-Related%20Liabilities) The Company believes its operations comply with environmental laws and does not expect related expenses to be material in 2025 - The Company's operations are subject to various domestic and foreign environmental laws and regulations, which impose potential liability for past operations[183](index=183&type=chunk) - Management believes the Company conducts its operations in compliance with applicable environmental laws and does not expect related capital expenditures or expenses to be material to its financial condition, liquidity, cash flow, or results of operations in 2025[183](index=183&type=chunk)[184](index=184&type=chunk) [Contractual Obligations, Commercial Commitments and Warranties](index=37&type=section&id=Contractual%20Obligations,%20Commercial%20Commitments%20and%20Warranties) No significant changes to contractual obligations and commercial commitments occurred in the first six months of 2025 - No significant changes to the Company's contractual obligations and commercial commitments occurred in the first six months of 2025[185](index=185&type=chunk) [Litigation](index=37&type=section&id=Litigation) Detailed information regarding litigation is provided in Note 9 to the Condensed Consolidated Financial Statements - Refer to Note 9 for detailed information concerning litigation[186](index=186&type=chunk) [Shareholders' Equity](index=37&type=section&id=Shareholders'%20Equity) Shareholders' equity increased by $349.7 million, driven by net income and AOCI gains, despite share repurchases - Shareholders' equity increased **$349.7 million** during the first six months of 2025, primarily due to Net income (**$1.259 billion**), an increase in AOCI (**$277.3 million**), and an increase in Other capital (**$104.0 million**), partially offset by treasury stock activity (**$892.1 million**) and cash dividends[187](index=187&type=chunk) - The Company purchased **2.5 million shares** of common stock for treasury purposes in the first six months of 2025, with **32.0 million shares** remaining authorized for repurchase[190](index=190&type=chunk) - In February 2025, the Board of Directors increased the quarterly cash dividend from $0.715 per share to **$0.79 per share**[191](index=191&type=chunk) **Total Shareholders' Equity (in millions)** | Date | Amount | | :--- | :--- | | June 30, 2025 | $4,400.9 | | December 31, 2024 | $4,051.2 | | June 30, 2024 | $3,751.8 | [Cash Flow](index=38&type=section&id=Cash%20Flow) Net operating cash decreased due to lower net income, while investing and financing cash usage also decreased - Net operating cash was **$1.052 billion** for the first six months of 2025, a decrease from $1.144 billion in the same period of 2024, primarily due to lower net income and higher cash requirements for working capital[193](index=193&type=chunk) - Net investing cash usage decreased **$24.8 million to $557.3 million**, mainly due to decreased capital expenditures, partially offset by business acquisitions[194](index=194&type=chunk) - Net financing cash usage decreased **$185.0 million to $442.8 million**, primarily due to increased short-term borrowings, decreased long-term debt payments, and reduced treasury stock purchases[195](index=195&type=chunk) [Market Risk](index=38&type=section&id=Market%20Risk) The Company uses derivative instruments to manage market risks from interest rate, currency, and commodity fluctuations - The Company is exposed to market risk associated with interest rate, foreign currency, and commodity fluctuations[197](index=197&type=chunk) - Derivative instruments (foreign currency option and forward contracts, cross currency swap contracts, interest rate lock contracts) are used for financial risk management, not speculative or trading purposes[197](index=197&type=chunk) - The Company does not expect market risk fluctuations or hedging contract losses to have a material adverse effect on its financial condition, results of operations, or cash flows[198](index=198&type=chunk) [Financial Covenant](index=38&type=section&id=Financial%20Covenant) The Company was in compliance with its consolidated leverage ratio covenant as of June 30, 2025 - The Company's consolidated leverage ratio covenant is not to exceed **3.75 to 1.00**, with a temporary increase option to 4.25 to 1.00 following a qualifying acquisition[199](index=199&type=chunk) - At June 30, 2025, the Company was in compliance with its financial covenant and expects to remain in compliance[199](index=199&type=chunk) [Non-GAAP Financial Measures](index=40&type=section&id=Non-GAAP%20Financial%20Measures) The Company uses non-GAAP measures like EBITDA and Adjusted EBITDA to provide additional insight into business performance - EBITDA is defined as Net income before income taxes, Interest expense, depreciation, and amortization[202](index=202&type=chunk) - Adjusted EBITDA excludes certain adjustments that management believes enhances investors' understanding of the Company's operating performance[202](index=202&type=chunk) **EBITDA and Adjusted EBITDA (in millions)** | Metric | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | $754.7 | $889.9 | $1,258.6 | $1,395.1 | | Interest expense | $112.4 | $110.8 | $216.2 | $213.8 | | Income taxes | $231.0 | $283.5 | $380.1 | $418.3 | | Depreciation | $79.3 | $71.8 | $159.2 | $142.9 | | Amortization | $83.4 | $81.5 | $164.4 | $163.6 | | **EBITDA** | **$1,260.8** | **$1,437.5** | **$2,178.5** | **$2,333.7** | | Severance and other restructuring expenses | $59.0 | — | $78.3 | — | | **Adjusted EBITDA** | **$1,319.8** | **$1,437.5** | **$2,256.8** | **$2,333.7** | [Critical Accounting Policies and Estimates](index=40&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) No significant changes were made to critical accounting policies or estimates since the end of fiscal year 2024 - The preparation of financial statements requires management to make estimates and assumptions that affect reported amounts[204](index=204&type=chunk) - There have been no significant changes in critical accounting policies, management estimates, or accounting policies since the year ended December 31, 2024[205](index=205&type=chunk) [Cautionary Statement Regarding Forward-Looking Information](index=41&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD-LOOKING%20INFORMATION) Forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from expectations[207](index=207&type=chunk) - Key risk factors include general business and economic conditions, inflation rates, raw material and energy costs, increased competition, disruptions to IT systems, and the nature and outcome of pending and future litigation[207](index=207&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Company's market risk exposure has not materially changed, and derivative instruments are used for hedging purposes - The Company is exposed to market risk associated with interest rate, foreign currency, and commodity fluctuations[209](index=209&type=chunk) - Derivative instruments are used for financial risk management (hedging), not for speculative or trading purposes[209](index=209&type=chunk) - The Company does not expect market risk fluctuations or hedging contract losses to have a material adverse effect on its financial condition, results of operations, or cash flows[209](index=209&type=chunk) - There were no material changes in the Company's exposure to market risk since the disclosure in the Annual Report on Form 10-K for the year ended December 31, 2024[209](index=209&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - The Company's disclosure controls and procedures were evaluated and concluded to be effective as of June 30, 2025[210](index=210&type=chunk) - No material changes in internal control over financial reporting were identified during the periods covered by this report[211](index=211&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) Information on legal proceedings is detailed in Notes 8 and 9 of the Condensed Consolidated Financial Statements - Disclosure of environmental matters is required when a governmental authority is a party and potential monetary sanctions exceed **$1 million**[213](index=213&type=chunk) - Information regarding legal proceedings is incorporated by reference from Notes 8 and 9 of the Condensed Consolidated Financial Statements[214](index=214&type=chunk) [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) There were no material changes to the Company's previously disclosed risk factors during the first six months of 2025 - The Company faces a number of risks that could materially and adversely affect its business, results of operations, cash flows, liquidity, or financial condition[215](index=215&type=chunk) - During the six months ended June 30, 2025, there were no material changes to the previously disclosed risk factors in the Annual Report on Form 10-K for the year ended December 31, 2024[215](index=215&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company repurchased 1.45 million shares for $518.5 million in Q2 2025 under its public repurchase program **Share Repurchase Activity (Quarter Ended June 30, 2025)** | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 1 - April 30 | 100,000 | $352.74 | | May 1 - May 31 | 1,050,000 | $359.53 | | June 1 - June 30 | 300,000 | $352.34 | | **Quarter Total (Share repurchase program)** | **1,450,000** | **$357.57** | | **Quarter Total (Employee transactions)** | **1,288** | **$339.18** | - Shares were purchased through the Company's publicly announced share repurchase program, which has no specified expiration date[216](index=216&type=chunk) - Employee transactions involved shares delivered to satisfy exercise price and/or tax withholding obligations for stock options exercised or restricted stock units vested[216](index=216&type=chunk) [Item 5. Other Information](index=44&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - None of the Company's directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025[217](index=217&type=chunk) [Item 6. Exhibits](index=45&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL documents - Exhibits include Rule 13a-14(a)/15d-14(a) Certifications of the Chief Executive Officer and Chief Financial Officer, and Section 1350 Certifications[218](index=218&type=chunk) - Various Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents) are also filed as exhibits[218](index=218&type=chunk) [Signatures](index=46&type=section&id=SIGNATURES) The report was duly signed on July 24, 2025, by the Senior Vice President - Finance and CFO and the Senior Vice President - Enterprise Finance and CAO - The report was signed on July 24, 2025, by J. Paul Lang, Senior Vice President - Enterprise Finance and Chief Accounting Officer, and Allen J. Mistysyn, Senior Vice President - Finance and Chief Financial Officer[222](index=222&type=chunk)

Core Insights - Sherwin-Williams Company held a conference call to discuss its Q2 2025 results and outlook for Q3 and the full year of 2025 [2] Company Overview - The call featured key executives including Heidi Petz (Chair, President, and CEO), Al Mistysyn (CFO), Paul Lang (Chief Accounting Officer), and Jim Jaye (Senior VP of Investor Relations and Communications) [2] Financial Performance - The conference call aimed to provide insights into the financial performance of Sherwin-Williams for the second quarter of 2025 [2]