CLEVELAND, Oct. 25, 2016
/PRNewswire/ -- The Sherwin-Williams Company (NYSE: SHW)
announced its financial results for the third quarter and nine
months ended September 30, 2016. Compared to the same periods
in 2015, consolidated net sales increased $127.2 million, or 4.0%, to $3.28 billion in the quarter and increased
$338.3 million, or 3.9%, to
$9.07 billion in nine months. These
increases were due primarily to higher paint sales volume in our
Paint Stores Group and the impact of a change in revenue
classification beginning in the third quarter related to grossing
up third-party service revenue and related costs which were
previously netted and immaterial in prior periods. The change in
revenue classification increased sales in the quarter and nine
months 2.3% and 0.8%, respectively. This prospective change
primarily impacts the Paint Stores and Global Finishes Groups. This
change had no impact on segment profit, but reduced the segment
profit as a percent to net sales of the affected Groups.
Unfavorable currency translation rate changes decreased
consolidated net sales 0.8% in the quarter and 1.6% in nine
months.
Diluted net income per common share in the quarter increased to
$4.08 per share, including a
$.24 per share charge from costs
associated with the anticipated acquisition of Valspar partially
offset by an increase of $.09 per
share related to a reduction in the income tax provision, from
$3.97 per share in 2015. Diluted net
income per common share in nine months increased to $9.85 per share, including a $.64 per share charge from costs associated with
the anticipated acquisition of Valspar partially offset by an
increase of $.37 per share related to
a reduction in the income tax provision, from $9.03 per share in 2015. The reduction in the
income tax provision for the quarter and nine months resulted from
the early adoption of a new accounting standard (ASU 2016-09). The
standard is related to the accounting for excess tax benefits for
share based payments that were previously recorded in other capital
on the balance sheet and now will be recognized in the income tax
provision on the income statement. The increase in third quarter
and nine months diluted net income per common share was due
primarily to improved operating results of the Paint Stores and
Global Finishes Groups. Currency translation rate changes decreased
diluted net income per common share by $.03 per share in the quarter and $.11 in nine months.
Net sales in the Paint Stores Group increased 6.7% to
$2.23 billion in the quarter and
increased 7.5% to $5.95 billion in
nine months due primarily to higher architectural paint sales
volume across most end market segments and the impact of the change
in revenue classification. Net sales from stores open for more than
twelve calendar months, excluding the change in revenue
classification, increased 2.1% in the quarter and increased 5.2% in
nine months over last year's comparable period. Paint Stores Group
segment profit increased $10.9
million to $518.3 million in
the quarter from $507.4 million last
year and increased $163.5 million to
$1.28 billion in nine months from
$1.12 billion last year due primarily
to higher paint sales volume. Segment profit as a percent to net
sales decreased in the quarter to 23.3% from 24.3% last year due
primarily to the change in revenue classification and higher
SG&A expenses related to new stores. Segment profit as a
percent to net sales increased in nine months to 21.5% from 20.2%
last year due primarily to higher paint sales volume.
Net sales of the Consumer Group decreased 2.1% to $412.9 million in the quarter due primarily to
lower volume sales to most of the Group's retail and commercial
customers. Net sales increased 0.4% to $1.27
billion in nine months due primarily to higher volume sales
to most of the Group's retail customers partially offset by
unfavorable currency translation rate changes. Segment profit
increased to $92.0 million in the
quarter from $88.3 million last year
due to improved operating efficiencies partially offset by lower
sales. Segment profit increased to $264.3
million in nine months from $257.9
million due primarily to improved operating efficiencies and
higher volume sales partially offset by increased SG&A
spending. As a percent to net external sales, segment profit
increased in the quarter to 22.3% from 20.9% last year and
increased in nine months to 20.8% from 20.4% last year due
primarily to improved operating efficiencies.
The Global Finishes Group's net sales stated in U.S. dollars
decreased 1.1% to $480.7 million in
the quarter and decreased 1.9% to $1.43
billion in nine months. Unfavorable currency translation
rate changes decreased net sales by 1.5% in the quarter and
decreased net sales by 2.9% in nine months. Stated in U.S. dollars,
segment profit increased in the quarter to $63.2 million from $55.1
million last year and increased in nine months to
$177.0 million from $151.3 million last year due primarily to
decreasing raw material costs and good cost control partially
offset by unfavorable currency translation rate changes.
Unfavorable currency translation rate changes decreased segment
profit $0.5 million in the quarter
and decreased segment profit $5.0
million in nine months. As a percent to net external sales,
segment profit increased in the quarter to 13.1% from 11.3% last
year and increased in nine months to 12.3% from 10.4% last
year.
The Latin America Coatings Group's net sales stated in U.S.
dollars increased 0.4% to $156.6
million in the quarter due primarily to selling price
increases partially offset by unfavorable foreign currency
translation rate changes and volume declines. Nine month net sales
stated in U.S. dollars decreased 12.1% to $415.1 million due primarily to unfavorable
currency translation rate changes and volume declines partially
offset by selling price increases. Unfavorable currency translation
rate changes decreased net sales by 8.2% in the quarter and 15.7%
in nine months. Stated in U.S. dollars, segment profit decreased in
the quarter to $1.0 million from
$2.1 million last year and decreased
in nine months to a loss of $9.6
million from a profit of $15.7
million last year due primarily to increasing raw material
costs and unfavorable currency translation rate changes partially
offset by selling price increases. Unfavorable currency translation
rate changes decreased segment profit $3.6
million in the quarter and $11.0
million in nine months. As a percent to net external sales,
segment profit decreased in the quarter to 0.6% from 1.4% last year
and decreased in nine months to a loss of 2.3% from a profit of
3.3% last year.
The Company made no open market purchases of its common stock in
the nine months ended September 30, 2016. At
September 30, 2016, the Company had cash on hand of
$702.6 million that will be utilized
to fund the Valspar acquisition.
Commenting on the financial results, John G. Morikis, President and Chief Executive
Officer, said, "Revenue growth on a comparable basis slowed
sequentially in the third quarter across most of our reportable
segments. Despite this slowdown, we remain bullish on future demand
across most of our end markets, and we continue to invest in areas
that will drive growth and productivity in the quarters and years
ahead. In the first nine months, we opened 55 net new store
locations in the Paint Stores Group. During the quarter, we
increased the dividend rate to $.84
from $.67 last year. Our balance
sheet remains flexible and is positioned well for the anticipated
Valspar acquisition and other investments in our business.
"Over the balance of the year, the input cost tailwinds are
likely to turn to headwinds and the slower pace of sales growth is
unlikely to fully offset our investments in new stores, territories
and retail programs already in place. For the fourth quarter, we
anticipate our core consolidated net sales will increase a low
single digit percentage compared to last year's fourth quarter. At
that anticipated sales level, we estimate diluted net income per
common share in the fourth quarter of 2016 to be in the range of
$1.45 to $1.55 per share, compared to
$2.12 per share earned in the fourth
quarter of 2015. Fourth quarter 2016 earnings per share includes
costs related to the anticipated acquisition of Valspar totaling
approximately $.71 per share and an
increase in EPS of approximately $.03
per share related to the decrease in the income tax
provision. For the full year 2016, we expect core
consolidated net sales to increase by a low single digit percentage
compared to full year 2015. With annual sales at that level, we are
updating our guidance for full year 2016 diluted net income per
common share to be in the range of $11.30 to
$11.40 per share, compared to $11.16 per share earned in 2015. Full year 2016
earnings per share includes costs related to the anticipated
acquisition of Valspar totaling approximately $1.35 per share and an increase in EPS of
approximately $.40 per share related
to the decrease in the income tax provision."
The Company will conduct a conference call to discuss its
financial results for the third quarter, and its outlook for the
fourth quarter and full year 2016, at 11:00
a.m. EDT on Tuesday, October 25, 2016. The conference
call will be webcast simultaneously in the listen only mode by
Issuer Direct. 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 October
25th release. The webcast will also be available at Issuer
Direct'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 November 14, 2016 at 5:00 p.m.
EST.
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®, HGTV
HOME® by 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
4,100 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
115 countries around the world. For more information, visit
www.sherwin.com.
Regulation G Reconciliation
Management of the Company believes that investors' understanding
of the Company's operating performance is enhanced by the
disclosure of diluted net income per common share excluding the
Valspar acquisition costs and the reduction in income tax provision
related to the adoption of a new accounting standard. This adjusted
earnings per share measurement is not in accordance with U.S.
generally accepted accounting principles (GAAP). It should not be
considered a substitute for earnings per share computed in
accordance with U.S. GAAP and may not be comparable to similarly
titled measures reported by other companies. The following table
reconciles diluted net income per common share computed in
accordance with U.S. GAAP to diluted net income per common share
excluding the Valspar acquisition costs and the reduction in income
tax provision related to the adoption of a new accounting standard
for the quarter and nine months ended September 30, 2016, and anticipated diluted net
income per common share computed in accordance with U.S. GAAP to
anticipated diluted net income per common share excluding the
Valspar acquisition costs and the reduction in income tax provision
related to the adoption of a new accounting standard for the
quarter and year ended December 31,
2016.
|
Three
|
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Nine
|
|
|
|
|
|
|
|
|
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Months
|
|
Months
|
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Three Months
Ended
|
|
Year Ended
|
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Ended
|
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Ended
|
|
December 31,
2016
|
|
December 31,
2016
|
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September
30,
|
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September
30,
|
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(guidance)
|
|
(guidance)
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2016
|
|
2016
|
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Low
|
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High
|
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Low
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High
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Consolidated diluted
net income per common share
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$
|
4.08
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$
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9.85
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$
|
1.45
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$
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1.55
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|
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$
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11.30
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$
|
11.40
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Valspar acquisition
costs diluted net charge per common share
|
$
|
.24
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|
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$
|
.64
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|
|
$
|
.71
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|
|
$
|
.71
|
|
|
$
|
1.35
|
|
|
$
|
1.35
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|
Reduction in income
tax provision net income per common share related to the adoption
of new accounting standard
|
$
|
(.09)
|
|
|
$
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(.37)
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|
|
$
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(.03)
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|
|
$
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(.03)
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$
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(.40)
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$
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(.40)
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Diluted net income
per common share excluding Valspar acquisition costs &
reduction in income tax provision
|
$
|
4.23
|
|
|
$
|
10.12
|
|
|
$
|
2.13
|
|
|
$
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2.23
|
|
|
$
|
12.25
|
|
|
$
|
12.35
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|
|
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 statements can
be identified by the use of forward-looking terminology such as
"believe," "expect," "may," "will," "should," "project," "could,"
"plan," "goal," "potential," "seek," "intend" or "anticipate" or
the negative thereof or comparable terminology. 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; the Company's ability
to complete the planned acquisition of The Valspar Corporation, or
Valspar, if at all, including the potential for regulatory
authorities to require divestitures in connection with the proposed
transaction; the Company's ability to successfully integrate past
and future acquisitions into its existing operations, including
Valspar, as well as the performance of the businesses acquired;
risks inherent in the achievement of cost synergies and the timing
thereof for the planned acquisition of Valspar; 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.
Investor Relations
Contact:
Bob Wells
Senior Vice
President, Corporate Communications and Public Affairs
Sherwin-Williams
Direct:
216.566.2244
rjwells@sherwin.com
|
Media
Contact:
Mike
Conway
Director, Corporate
Communications
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
September 30,
|
|
Nine Months Ended
September 30,
|
|
Thousands of dollars,
except per share data
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
3,279,462
|
|
$
|
3,152,285
|
|
$
|
9,073,011
|
|
$
|
8,734,708
|
|
Cost of goods
sold
|
|
|
1,643,173
|
|
|
1,577,733
|
|
|
4,539,184
|
|
|
4,497,721
|
|
Gross
profit
|
|
|
1,636,289
|
|
|
1,574,552
|
|
|
4,533,827
|
|
|
4,236,987
|
|
Percent to
net sales
|
|
|
49.9%
|
|
|
49.9%
|
|
|
50.0%
|
|
|
48.5%
|
|
Selling, general and
administrative expenses
|
|
|
1,058,128
|
|
|
993,625
|
|
|
3,114,455
|
|
|
2,922,046
|
|
Percent to
net sales
|
|
|
32.3%
|
|
|
31.5%
|
|
|
34.3%
|
|
|
33.5%
|
|
Other general expense
- net
|
|
|
813
|
|
|
9,117
|
|
|
21,100
|
|
|
17,415
|
|
Interest
expense
|
|
|
44,100
|
|
|
16,995
|
|
|
110,710
|
|
|
42,231
|
|
Interest and net
investment income
|
|
|
(1,647)
|
|
|
32
|
|
|
(3,086)
|
|
|
(943)
|
|
Other (income)
expense - net
|
|
|
(725)
|
|
|
4,061
|
|
|
(551)
|
|
|
4,493
|
|
Income before income
taxes
|
|
|
535,620
|
|
|
550,722
|
|
|
1,291,199
|
|
|
1,251,745
|
|
Income
taxes
|
|
|
148,887
|
|
|
176,231
|
|
|
361,526
|
|
|
395,913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
386,733
|
|
$
|
374,491
|
|
$
|
929,673
|
|
$
|
855,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
4.20
|
|
$
|
4.06
|
|
$
|
10.13
|
|
$
|
9.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
4.08
|
|
$
|
3.97
|
|
$
|
9.85
|
|
$
|
9.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares
outstanding - basic
|
|
|
91,992,854
|
|
|
92,196,458
|
|
|
91,752,482
|
|
|
92,398,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares and
equivalents outstanding - diluted
|
|
94,771,807
|
|
|
94,433,075
|
|
|
94,421,190
|
|
|
94,776,387
|
|
Additional information regarding the Company's financial
condition, operating segment results and other information can be
found on the Sherwin-Williams website, www.sherwin.com, by clicking
on About Us, choosing Investor Relations, then selecting Press
Releases and clicking on the reference to the October 25th release.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/the-sherwin-williams-company-reports-2016-third-quarter-financial-results-300350526.html
SOURCE The Sherwin-Williams Company