CLEVELAND, July 21, 2016
/PRNewswire/ -- The Sherwin-Williams Company (NYSE: SHW)
announced its financial results for the second quarter and six
months ended June 30, 2016. Compared to the same periods in
2015, consolidated net sales increased $87.4
million, or 2.8%, to $3.22
billion in the quarter and increased $211.1 million or 3.8% to $5.79 billion in six months due primarily to
higher paint sales volume in our Paint Stores Group. Unfavorable
currency translation rate changes decreased consolidated net sales
1.5% in the quarter and decreased 2.0% in six months.
Diluted net income per common share in the quarter increased to
$3.99 per share, including a
$.16 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
$3.70 per share in 2015. Diluted net
income per common share in six months increased to $5.76 per share, including a $.40 per share charge from costs associated with
the anticipated acquisition of Valspar partially offset by an
increase of $.28 per share related to
a reduction in the income tax provision, from $5.07 per share in 2015. The reduction in the
income tax provision for the quarter and six 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 second quarter
and six 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 $.02 per share in the quarter and $.08 in six months.
Net sales in the Paint Stores Group increased 6.2% to
$2.11 billion in the quarter and
increased 8.0% to $3.72 billion in
six months due primarily to higher architectural paint sales volume
across all end market segments. Net sales from stores open for more
than twelve calendar months increased 5.2% in the quarter and
increased 7.0% in six months over last year's comparable period.
Paint Stores Group segment profit increased $75.6 million to $509.0
million in the quarter from $433.4
million last year and increased $152.6 million to $762.5
million in six months from $610.0
million last year due primarily to higher paint sales
volume. Segment profit as a percent to net sales increased in the
quarter to 24.1% from 21.8% last year and increased in six months
to 20.5% from 17.7% last year.
Net sales of the Consumer Group decreased 2.6% to $477.5 million in the quarter due primarily to
the initial shipments of the HGTV Home® by
Sherwin-Williams paint to Lowe's stores in the second quarter last
year. Net sales increased 1.6% to $855.6
million in six months due primarily to higher volume sales
to most of the Group's retail customers. Segment profit decreased
to $108.3 million in the quarter from
$114.2 million last year due to lower
sales and increased S,G&A spending partially offset by improved
operating efficiencies. Segment profit increased to $172.3 million in six months from $169.7 million due primarily to improved
operating efficiencies and higher volume sales. As a percent to net
external sales, segment profit decreased in the quarter to 22.7%
from 23.3% last year and decreased in six months to 20.1% from
20.2% last year.
The Global Finishes Group's net sales stated in U.S. dollars
decreased 1.3% to $499.2 million in
the quarter and decreased 2.3% to $953.3
million in six months. Unfavorable currency translation rate
changes decreased net sales by 2.6% in the quarter and decreased
net sales by 3.6% in six months. Stated in U.S. dollars, segment
profit increased in the quarter to $65.2
million from $57.3 million
last year and increased in six months to $113.8 million from $96.2
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 $1.5
million in the quarter and decreased segment profit
$4.5 million in six 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 six months
to 11.9% from 9.9% last year.
The Latin America Coatings Group's net sales stated in U.S.
dollars decreased 11.2% to $133.3
million in the quarter and decreased 18.3% to $258.5 million in six months 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 16.4% in the
quarter and 19.4% in six months. Stated in U.S. dollars, segment
profit decreased in the quarter to a loss of $9.6 million from a profit of $4.0 million last year and decreased in six
months to a loss of $10.6 million
from a profit of $13.5 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 $1.3 million in the
quarter and $7.4 million in six
months. As a percent to net external sales, segment profit
decreased in the quarter to a loss of 7.2% from 2.7% profit last
year and decreased in six months to a loss of 4.1% from 4.3% profit
last year.
The Company made no open market purchases of its common stock in
the six months ended June 30, 2016. At June 30, 2016, the
Company had cash on hand of $402.7
million that will be utilized to fund the Valspar
acquisition.
Commenting on the financial results, John G. Morikis, President and Chief Executive
Officer, said, "We are pleased to report record sales and earnings
per share from the continued positive sales volume and strong
operating results of our Paint Stores Group and operating margin
improvements in our Global Finishes Group. Our Paint Stores Group
posted another quarter of positive operating results and
architectural volume growth. Consumer Group continues to invest in
customer programs to increase sales and improved its six month
operating results through improved operating efficiencies. Our
Global Finishes Group improved its operating results through
improved operating efficiencies and good cost control. The Latin
America Coatings Group continues to manage through the negative
effects of currency devaluation and weak end market demand in some
geographies.
"We continued to invest in our business by opening 31 net new
locations in the Paint Stores Group in the first six months. During
the quarter, we increased the dividend rate to $.84 from $.67 last
year. Our balance sheet remains flexible and is positioned well for
future acquisitions and other investments in our business.
"For the third quarter, we anticipate our consolidated net sales
will increase a low to mid single digit percentage compared to last
year's third quarter. At that anticipated sales level, we estimate
diluted net income per common share in the third quarter of 2016 to
be in the range of $4.10 to $4.30 per
share, compared to $3.97 per share
earned in the third quarter of 2015. Third quarter 2016
earnings per share includes costs related to the anticipated
acquisition of Valspar totaling approximately $.20 per share and an increase in EPS of
approximately $.10 per share related to the decrease in the
income tax provision. For the full year 2016, we expect
consolidated net sales to increase by a low single digit percentage
compared to full year 2015. With annual sales at that level, we are
raising our guidance for full year 2016 diluted net income per
common share to be in the range of $11.65 to
$11.85 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 $1.30 per share and an increase in EPS of
approximately $.45 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 second quarter, and its outlook for the
third quarter and full year 2016, at 11:00
a.m. EDT on Thursday, July 21, 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 July
21st 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 August
10, 2016 at 5:00 p.m. EDT.
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 six months ended
June 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 September 30,
2016 and December 31, 2016,
respectively.
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Three
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Six
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Months
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Months
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Three Months
Ended
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Year Ended
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Ended
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Ended
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September 30,
2016
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December 31,
2016
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June 30,
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June 30,
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(guidance)
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(guidance)
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2016
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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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Consolidated diluted
net income per common share
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$
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3.99
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$
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5.76
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$
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4.10
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$
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4.30
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$
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11.65
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$
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11.85
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Valspar acquisition
costs diluted net charge per common share
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$
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.16
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$
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.40
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$
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.20
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$
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.20
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$
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1.30
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$
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1.30
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Reduction in income
tax provision net income per common share related to the adoption
of new accounting standard
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$
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(.09)
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$
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(.28)
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$
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(.10)
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$
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(.10)
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$
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(.45)
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$
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(.45)
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Diluted net income
per common share excluding Valspar
acquisition costs & reduction in income tax
provision
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$
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4.06
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$
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5.88
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$
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4.20
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$
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4.40
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$
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12.50
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$
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12.70
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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.
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Investor Relations
Contact:
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Media
Contact:
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Bob Wells
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Mike
Conway
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Senior Vice
President, Corporate Communications and Public Affairs
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Director, Corporate
Communications
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Sherwin-Williams
|
Sherwin-Williams
|
Direct:
216.566.2244
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Direct:
216.515.4393
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rjwells@sherwin.com
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Pager:
216.422.3751
|
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mike.conway@sherwin.com
|
The
Sherwin-Williams Company and Subsidiaries
|
Statements of
Consolidated Income (Unaudited)
|
|
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Three Months Ended
June 30,
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Six Months Ended June
30,
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Thousands of dollars,
except per share data
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
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Net sales
|
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$
|
3,219,525
|
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$
|
3,132,139
|
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$
|
5,793,549
|
|
$
|
5,582,423
|
Cost of goods
sold
|
|
|
1,583,732
|
|
|
1,602,153
|
|
|
2,896,011
|
|
|
2,919,988
|
Gross
profit
|
|
|
1,635,793
|
|
|
1,529,986
|
|
|
2,897,538
|
|
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2,662,435
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Percent to
net sales
|
|
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50.8%
|
|
|
48.8%
|
|
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50.0%
|
|
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47.7%
|
Selling, general and
administrative expenses
|
|
|
1,053,972
|
|
|
999,224
|
|
|
2,056,327
|
|
|
1,928,421
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Percent to
net sales
|
|
|
32.7%
|
|
|
31.9%
|
|
|
35.5%
|
|
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34.5%
|
Other general expense
- net
|
|
|
2,733
|
|
|
9,971
|
|
|
20,287
|
|
|
8,298
|
Interest
expense
|
|
|
40,878
|
|
|
12,885
|
|
|
66,610
|
|
|
25,236
|
Interest and net
investment income
|
|
|
(952)
|
|
|
(553)
|
|
|
(1,439)
|
|
|
(975)
|
Other (income)
expense - net
|
|
|
(52)
|
|
|
677
|
|
|
174
|
|
|
432
|
Income before income
taxes
|
|
|
539,214
|
|
|
507,782
|
|
|
755,579
|
|
|
701,023
|
Income
taxes
|
|
|
161,150
|
|
|
157,845
|
|
|
212,639
|
|
|
219,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
378,064
|
|
$
|
349,937
|
|
$
|
542,940
|
|
$
|
481,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common
share:
|
|
|
|
|
|
|
|
|
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Basic
|
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$
|
4.12
|
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$
|
3.79
|
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$
|
5.93
|
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$
|
5.20
|
|
|
|
|
|
|
|
|
|
|
|
|
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Diluted
|
|
$
|
3.99
|
|
$
|
3.70
|
|
$
|
5.76
|
|
$
|
5.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares
outstanding - basic
|
|
|
91,788,734
|
|
|
92,260,367
|
|
|
91,632,297
|
|
|
92,500,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares and
equivalents outstanding - diluted
|
|
94,669,751
|
|
|
94,592,057
|
|
|
94,305,997
|
|
|
94,927,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 July 21st release.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/the-sherwin-williams-company-reports-2016-second-quarter-financial-results-300302003.html
SOURCE The Sherwin-Williams Company