The Sherwin-Williams Company Reports 2011 Second Quarter and First Six Months Financial Results

-- Consolidated net sales increased 9.9% to a record $2.36 billion in 2Q11 and 13.5% to a record $4.21 billion in six months

-- Diluted net income per common share increased 1.2% in the second quarter to a record $1.66 per share from $1.64 in 2Q10

-- Diluted net income per common share increased 18.0% in first six months 2011 to $2.29 per share from $1.94 last year

-- EPS range $1.65 to $1.75 for 3Q11; updating FY EPS guidance to $4.65 to $4.85 per share

21 Jul, 2011, 08:00 ET from Sherwin-Williams Company

CLEVELAND, July 21, 2011 /PRNewswire/ -- The Sherwin-Williams Company (NYSE: SHW) announced its financial results for the second quarter and six months ended June 30, 2011. Compared to the same periods in 2010, consolidated net sales increased $211.7 million, or 9.9%, to $2.36 billion in the quarter and increased $501.8 million, or 13.5%, to $4.21 billion in six months due to selling price increases, acquisitions and strong organic sales growth by the Global Finishes Group. Favorable currency translation rate changes increased consolidated net sales 1.7% in the quarter and 1.4% in six months. Acquisitions increased consolidated net sales 5.1% in the quarter and 6.7% in six months.

Diluted net income per common share in the quarter increased to $1.66 per share from $1.64 per share in 2010. The second quarter 2010 diluted net income per common share included charges of $.08 per share relating to costs to repurchase $84.9 million in long-term debt. In six months, diluted net income per common share increased to $2.29 per share from $1.94 per share last year. The six month increase in diluted net income per common share was due primarily to higher sales in the Global Finishes Group, selling price increases, and good cost control partially offset by raw material cost increases. The six months 2010 diluted net income per common share included the charges of $.18 per share relating to the repurchase of debt and an increase in income tax expense related to the Health Care and Education Reconciliation Act of 2010. Acquisitions had no impact on diluted net income per common share in the quarter or first six months. Favorable currency translation rate changes increased diluted net income per common share by $.03 per share in the quarter and first six months.

Net sales in the Paint Stores Group increased 4.3% to $1.30 billion in the quarter and 6.3% to $2.23 billion in six months due primarily to selling price increases and improving domestic architectural paint sales to DIY and residential repaint customers. Net sales from stores open for more than twelve calendar months increased 4.0% in the quarter and 6.0% in six months over last year's comparable periods. Paint Stores Group segment profit decreased to $206.6 million in the quarter from $212.0 million last year due primarily to continuing raw material cost increases only partially offset by selling price increases. Segment profit increased to $275.5 million in six months from $259.7 million last year due primarily to sales driven by selling price increases partially offset by raw material cost increases and increases in selling, general, and administrative expenses to maintain customer service. Segment profit as a percent to net sales decreased in the quarter to 15.9% from 17.0% last year and remained flat at 12.4% in six  months.

Net sales of the Consumer Group decreased 8.4% to $375.6 million in the quarter and decreased 4.5% to $670.6 million in six months due primarily to the elimination of a portion of a paint program with a large retail customer partially offset by selling price increases. Segment profit decreased to $61.4 million in the quarter from $80.7 million last year and decreased to $102.5 million in six months from $118.2 million last year. Segment profit in the quarter decreased as a percent to net external sales to 16.3% from 19.7% last year and decreased in six months to 15.3% from 16.8% due primarily to increasing raw material costs partially offset by selling price increases.    

The Global Finishes Group's net sales stated in U.S. dollars increased 39.5% to $678.9 million in the quarter and increased 44.2% to $1.31 billion in six months due primarily to acquisitions, selling price increases, higher paint sales volume, and favorable currency translation rate changes. In the quarter and six months, acquisitions increased net sales in U.S. dollars by 22.5% and 27.5%, respectively, and favorable currency translation rate changes increased net sales by 5.9% and 4.8%, respectively. Stated in U.S. dollars, Global Finishes Group segment profit in the quarter increased to $46.1 million from $40.0 million and increased in six months to $82.9 million from $63.0 million last year due primarily to increased paint sales volume and favorable foreign currency translation rate changes. Favorable foreign currency translation had a positive effect of $3.3 million on segment profit in the quarter and $4.5 million in six months. Acquisitions had no significant impact on segment profit in the quarter or first six months. As a percent to net external sales, segment profit declined to 6.8% in the quarter versus 8.2% last year and 6.3% in six months compared to 6.9% in 2010 due primarily to acquisitions diluting the segment's profit as a percent to net external sales and higher raw material costs.  

The Company acquired 0.5 million shares of its common stock through open market purchases in the quarter and 1.6 million shares in six months. The Company had remaining authorization at June 30, 2011 to purchase 4.15 million shares.

Commenting on the second quarter and six months financial results, Christopher M. Connor, Chairman and Chief Executive Officer, said, "Earnings in the quarter were at the low end of our guidance range due to high raw material costs versus the timing of our price increases. Although domestic demand remains soft, we continue to invest in selling, general and administrative expenses to maintain customer service and are encouraged by the improvement in domestic DIY and protective and marine sales in the Paint Stores Group. We are pleased with the continued growth of our architectural, protective and marine, OEM, and automotive finishes sales in the Global Finishes Group.  Our operating segments continue to control costs and implement price increases in an effort to keep pace with rising raw material costs.

"We are continuing to invest in our business. In the first six months, Paint Stores Group opened 18 net new locations. For the year, we expect our Paint Stores Group to open 50 to 60 new stores. Our Global Finishes Group acquired three companies over the past twelve months, including Acroma and Sayerlack in Europe and Pinturas Condor in Ecuador. Although these acquisitions had a small impact on our second quarter and first six months consolidated net income, they expand our global reach and provide important assets to support our world-wide business. In July, we completed the acquisition of Leighs Paints, a leading UK protective and marine and fire protection coatings innovator. During the quarter, we used our cash to buy shares of our stock and pay a cash dividend of $.365 per common share. Our balance sheet remains flexible and is positioned for future acquisitions and investments in our business.

"For the third quarter, we anticipate our consolidated net sales will increase ten to fifteen percent compared to last year's third quarter. We expect diluted net income per common share for the third quarter to be in the range of $1.65 to $1.75 per share compared to $1.60 per share in 2010. For the full year 2011, we expect consolidated net sales to increase above 2010 levels by a high single digit to low teen percentage. With annual sales at that level, we are updating our full year guidance for diluted net income per common share for 2011 to be in the range of $4.65 to $4.85 per share, compared to $4.21 per share earned in 2010."

The Company will conduct a conference call to discuss its financial results for the second quarter and first six months and its outlook for the third quarter and full year 2011 at 11:00 a.m. ET on Thursday, July 21, 2011. The conference call will be webcast simultaneously in the listen only mode by Vcall. To listen to the webcast on the Sherwin-Williams website, www.sherwin.com, click on About Us, choose Investor Relations, then select Press Releases and click on the webcast icon following the reference to the July 21st release. The webcast will also be available at Vcall's Investor Calendar website, www.investorcalendar.com. An archived replay of the live webcast will be available at www.sherwin.com beginning approximately two hours after the call ends and will be available until Wednesday, August 10, 2011 at 5:00 p.m. ET.

Founded in 1866, The Sherwin-Williams Company is a global leader in the manufacture, development, distribution, and sale of coatings and related products to professional, industrial, commercial, and retail customers. The company manufactures products under well-known brands such as Sherwin-Williams®, Dutch Boy®, Krylon®, Minwax®, Thompson's® Water Seal®, and many more. With global headquarters in Cleveland, Ohio, Sherwin-Williams® branded products are sold exclusively through a chain of more than 3,900 company-operated stores and facilities, while the company's other brands are sold through leading mass merchandisers, home centers, independent paint dealers, hardware stores, automotive retailers, and industrial distributors. The Sherwin-Williams Global Finishes Group distributes a wide range of products in more than 109 countries around the world. For more information, visit www.sherwin.com.

This press release contains certain "forward-looking statements", as defined under U.S. federal securities laws, with respect to sales, earnings and other matters.  These forward-looking statements are based upon management's current expectations, estimates, assumptions and beliefs concerning future events and conditions.  Readers are cautioned not to place undue reliance on any forward-looking statements.  Forward-looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of the Company, that could cause actual results to differ materially from such statements and from the Company's historical results and experience.  These risks, uncertainties and other factors include such things as: general business conditions, strengths of retail and manufacturing economies and the growth in the coatings industry; changes in the Company's relationships with customers and suppliers; changes in raw material availability and pricing; unusual weather conditions; and other risks, uncertainties and factors described from time to time in the Company's reports filed with the Securities and Exchange Commission.  Since it is not possible to predict or identify all of the risks, uncertainties and other factors that may affect future results, the above list should not be considered a complete list.  Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Contacts: Bob Wells Senior Vice President, Corporate Communications and Public Affairs Sherwin-Williams Direct:  216.566.2244 rjwells@sherwin.com Mike Conway Director, Corporate Communications and Investor Relations Sherwin-Williams Direct:  216.515.4393 Pager:  216.422.3751 mike.conway@sherwin.com

The Sherwin-Williams Company and Subsidiaries

Statements of Consolidated Income (Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

Thousands of dollars, except per share data

2011 

2010 

2011 

2010 

Net sales

$

2,354,751

$

2,143,064

$

4,210,337

$

3,708,546

Cost of goods sold

1,331,996

1,171,171

2,390,174

2,044,685

Gross profit

1,022,755

971,893

1,820,163

1,663,861

 Percent to net sales

43.4%

45.4%

43.2%

44.9%

Selling, general and administrative expenses

755,555

691,215

1,446,678

1,304,090

 Percent to net sales

32.1%

32.3%

34.4%

35.2%

Other general (income) expense - net

(698)

5,125

474

7,031

Interest expense  

11,747

26,340

22,422

37,909

Interest and net investment income

(808)

(480)

(1,131)

(1,119)

Other income - net

(57)

(9,555)

(9)

(2,757)

Income before income taxes

257,016

259,248

351,729

318,707

Income taxes  

77,901

77,542

104,298

104,398

Net income

$

179,115

$

181,706

$

247,431

$

214,309

Net income per common share:

      Basic

$

1.69

$

1.67

$

2.33

$

1.97

      Diluted

$

1.66

$

1.64

$

2.29

$

1.94

Average shares outstanding - basic

104,676,477

107,686,335

104,833,745

107,822,967

Average shares and equivalents outstanding - diluted

106,876,461

109,832,652

107,104,025

109,460,619

The Sherwin-Williams Company and Subsidiaries

Business Segments (Unaudited)

Thousands of dollars

2011 

2010 

Net

Segment

Net

Segment

External

Profit

External

Profit

Sales

(Loss)

Sales

(Loss)

Three Months Ended June 30:

Paint Stores Group

$

1,299,047

$

206,631

$

1,244,979

$

211,959

Consumer Group

375,634

61,371

410,216

80,694

Global Finishes Group

678,871

46,070

486,547

39,954

Administrative

1,199

(57,056)

1,322

(73,359)

Consolidated totals

$

2,354,751

$

257,016

$

2,143,064

$

259,248

Six Months Ended June 30:

Paint Stores Group

$

2,228,314

$

275,488

$

2,095,892

$

259,715

Consumer Group

670,564

102,462

702,365

118,159

Global Finishes Group

1,309,037

82,880

907,646

62,956

Administrative

2,422

(109,101)

2,643

(122,123)

Consolidated totals

$

4,210,337

$

351,729

$

3,708,546

$

318,707

The Sherwin-Williams Company and Subsidiaries

Consolidated Financial Position (Unaudited)

Thousands of dollars

June 30,

2011 

2010 

Cash  

$

71,563

$

48,401

Accounts receivable

1,183,825

986,327

Inventories

1,067,011

793,828

Other current assets

315,783

311,366

Short-term borrowings

(571,130)

(199,487)

Current portion of long-term debt

(9,507)

(9,269)

Accounts payable

(1,019,310)

(881,141)

Other current liabilities

(789,865)

(743,644)

Working capital

248,370

306,381

Net property, plant and equipment

958,306

827,513

Deferred pension assets

253,117

248,959

Goodwill and intangibles

1,433,472

1,288,378

Other non-current assets

350,692

235,514

Long-term debt

(644,255)

(699,815)

Postretirement benefits other than pensions

(296,778)

(284,660)

Other long-term liabilities

(556,112)

(391,044)

Shareholders' equity

$

1,746,812

$

1,531,226

Selected Information (Unaudited)

Thousands of dollars

Three Months Ended June 30,

Six Months Ended June 30,

2011 

2010 

2011 

2010 

Paint Stores Group - net new stores

11

3

18

6

Paint Stores Group - total stores

3,408

3,360

3,408

3,360

Global Finishes Group - net new branches

(3)

(4)

(4)

(3)

Global Finishes Group - total branches

560

536

560

536

Depreciation

$

37,475

$

33,103

$

74,807

$

66,206

Capital expenditures

41,978

22,030

68,929

47,453

Cash dividends

38,845

39,415

77,849

78,783

Amortization of intangibles

6,733

6,459

13,127

13,206

Significant components of Other general (income) expense - net:

  Provision for environmental related matters - net

(702)

2,785

4,650

4,722

  Loss (gain) on disposition of assets

10

2,681

(4,399)

2,922

  Adjustments to prior provisions for qualified exit costs

(6)

(341)

223

(613)

Significant components of Other income - net:

  Dividend and royalty income

(1,660)

(1,527)

(2,985)

(2,493)

  Net expense from financing activities

1,826

2,839

3,949

4,571

  Foreign currency related losses (gains)

1,605

(8,376)

2,919

(2,374)

  Other *  

(1,828)

(2,491)

(3,892)

(2,461)

Intersegment transfers:

   Consumer Group

576,422

515,886

**

994,570

869,722

**

   Global Finishes Group

6,621

4,542

**

12,492

8,999

**

   Administrative

2,443

2,538

5,015

5,052

*  Consists of items of revenue, gains, expenses and losses unrelated to the primary business purpose of the Company.  No items are individually significant.

**  Updated to conform to the 2011 presentation.

SOURCE Sherwin-Williams Company



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