Sherwin-Williams(US:SHW)2022-02-17 21:32Financial Performance - The Sherwin-Williams Company reported net sales of $19,944.6 million for the year ended December 31, 2021, an increase of 8.6% from $18,361.7 million in 2020[276]. - Gross profit for 2021 was $8,542.7 million, representing 42.8% of net sales, down from 47.3% in 2020[276]. - Net income for 2021 was $1,864.4 million, a decrease of 8.2% compared to $2,030.4 million in 2020[276]. - Comprehensive income for 2021 was $1,884.3 million, compared to $1,991.6 million in 2020[279]. - Cash and cash equivalents decreased to $165.7 million in 2021 from $226.6 million in 2020, a decline of 26.8%[284]. - Total current liabilities rose to $5,719.5 million in 2021, an increase of 24.5% from $4,594.4 million in 2020[282]. - Shareholders' equity decreased to $2,437.2 million in 2021 from $3,610.8 million in 2020, a decline of 32.4%[282]. - The company incurred $587.1 million in cash dividends in 2021, an increase from $488.0 million in 2020, representing a growth of 20.3%[284]. - The company experienced a loss on divestiture of business amounting to $111.9 million in 2021[284]. Debt and Liquidity - The company reported total debt of approximately $9.615 billion as of December 31, 2021, an increase of $1.323 billion since December 31, 2020[63]. - Long-term debt increased to $8,590.9 million in 2021, up from $8,266.9 million in 2020, reflecting a growth of 3.9%[282]. - The Company issued $500.0 million of 2.20% Senior Notes due March 2032 and $500.0 million of 2.90% Senior Notes due March 2052 in November 2021, with proceeds used to repay outstanding borrowings[345]. - The Company redeemed $400.0 million of its 4.20% Senior Notes due 2022 in October 2021, resulting in a gain of $1.4 million recorded in Other (income) expense - net[346]. - As of December 31, 2021, the company had unused capacity under its credit agreements of $2.725 billion, with total short-term borrowings amounting to $763.5 million[352]. Operational Challenges - The ongoing COVID-19 pandemic has caused significant disruptions in consumer spending and global supply chains, adversely affecting the company's business operations[49]. - The company has implemented various measures to adapt to the pandemic, including reducing store hours and enhancing cleaning procedures, which have resulted in additional costs[48]. - The company anticipates that the duration and severity of the pandemic will continue to impact its financial performance and operational strategies[50]. - Economic downturns in cyclical segments, particularly in construction and housing, may depress demand for the company's products, adversely affecting sales and earnings[54]. - The company faces risks related to supply chain disruptions, including labor shortages and raw material availability, which could impact its ability to meet product demand[44]. - The company is closely monitoring inflationary pressures and their potential effects on consumer confidence and discretionary spending[50]. - The company has experienced shifts in consumer behavior and preferences due to the pandemic, leading to uncertainty in predicting future product demand[49]. - The company is exposed to risks associated with cybersecurity incidents and operational challenges due to remote work arrangements[48]. Regulatory and Compliance Risks - The company’s operations are subject to various domestic and international regulatory environments, which could result in additional costs and changes to business practices[82]. - The company expects health, safety, and environmental laws to become increasingly stringent, potentially increasing compliance costs and adversely affecting financial condition[94]. - The company has adopted risk management and compliance programs to mitigate legal compliance risks, but investigations and proceedings may still arise, leading to significant liabilities[87]. - The company is subject to a variety of complex domestic and foreign laws, which could adversely affect its results of operations, cash flow, or financial condition[86]. - The company is subject to various claims and lawsuits, including product liability and environmental claims, which could materially affect its results of operations and financial condition[96]. Environmental and Legal Liabilities - The company is involved in environmental investigation and remediation activities, with potential liabilities that may exceed current accruals, impacting earnings[95]. - The Company had short-term and long-term accruals for environmental-related activities of $45.9 million and $277.4 million, respectively, at December 31, 2021[268]. - The company recognizes tax benefits based on a greater than 50% likelihood of sustaining them upon settlement with tax authorities, which may change based on subsequent events[89]. - The company estimates material loss contingencies and accrues for such contingencies based on the probability and reasonable estimability of liability, which may lead to significant additional liabilities[89]. Employee and Pension Obligations - The company’s ability to attract and retain qualified employees is critical for meeting strategic objectives, with increased labor costs and shortages due to macroeconomic conditions[83]. - The company reported a cost of domestic health care benefits for active employees of $336.0 million in 2021, an increase from $298.8 million in 2020[354]. - The annual contribution for the domestic defined contribution pension plan was $85.3 million in 2021, up from $77.0 million in 2020[355]. - The company expects to make benefit payments of $15.2 million in 2022 for its defined benefit pension plans[360]. - The total investments in defined benefit pension plans at fair value were $483.6 million as of December 31, 2021[366]. - The company recorded a net pension cost of $36.8 million for the domestic defined benefit pension plan in 2021[362]. Acquisitions and Investments - The aggregate purchase price for acquisitions closed in 2021 was approximately $227.0 million, with $155.6 million of goodwill and $11.3 million of intangible assets recognized from these transactions[326]. - The balance of other assets related to investments in affordable housing and historic renovation real estate markets increased to $355.8 million in 2021 from $176.2 million in 2019, reflecting a growth of 102%[304]. Inventory and Asset Management - Inventories totaled $1,927.2 million in 2021, compared to $1,804.1 million in 2020 and $1,889.6 million in 2019[329]. - The Company recorded a reserve for obsolescence of $118.6 million, $125.8 million, and $115.4 million at December 31 for 2021, 2020, and 2019, respectively[332]. - The Company’s property, plant, and equipment, net was $1,867.3 million in 2021, compared to $1,834.5 million in 2020 and $1,835.2 million in 2019[334]. - The percentage of total inventories on the LIFO method was 70% in 2021, down from 72% in 2020 and 2019[331]. Lease Obligations - Operating lease cost increased to $478.0 million in 2021 from $464.5 million in 2020, reflecting a growth of 3.7%[374]. - Total lease payments over the next five years and thereafter amount to $2,035.4 million, with the present value of operating lease liabilities at $1,880.4 million[375].