CLEVELAND, April 24, 2018
/PRNewswire/ --
- Consolidated net sales increased 43.6% in the quarter to a
record $3.97 billion; Valspar sales
increased consolidated net sales in the quarter by $1.07 billion, or 38.6%
- Diluted net income per common share increased 3.6% to
$2.62 per share in the
quarter
-
- Consolidated EPS in the first quarter of 2018 and 2017,
excluding acquisition-related costs and purchase accounting
impacts in both quarters, was $3.57
and $2.61 per share,
respectively
- Charges of $.95 and
$.08 per share were recorded in the
first quarter of 2018 and 2017, respectively, for
acquisition-related costs and purchase accounting impacts
- Earnings Before Interest, Taxes, Depreciation and
Amortization (EBITDA) increased 44.0% in the quarter to
$551.8 million
- Revising FY18 EPS guidance to $14.95 to $15.45 per share to include an estimated
$.40 per share net reduction related
to an expanded customer agreement primarily impacting Valspar
operations, compared to $18.67 per
share in FY17
-
- Consolidated FY18 EPS guidance, excluding one-time impacts
and acquisition-related costs and purchase accounting
impacts, is $18.35 to $18.95 per share, versus $15.07 per share on a comparable basis in
FY17
- Consolidated FY18 EPS guidance includes charges of
$3.40 to $3.50 per share for acquisition-related costs and
purchase accounting impacts
- Consolidated FY17 EPS included a one-time benefit of
$7.04 per share from deferred income
tax reductions, partially offset by charges totaling $3.44 per share for discontinued operations,
acquisition-related costs and purchase accounting impacts
The Sherwin-Williams Company (NYSE: SHW) announced its financial
results for the first quarter ended March 31, 2018. Compared
to the same period in 2017, consolidated net sales increased
$1.20 billion, or 43.6%, to
$3.97 billion in the quarter due
primarily to the addition of Valspar sales, selling price increases
and higher paint sales volume in The Americas Group. Excluding
sales from Valspar, net sales from core Sherwin-Williams operations
increased 4.9% in the quarter. As a result of the new revenue
standard (ASC 606), certain advertising support that was previously
classified as selling, general and administrative expenses is now
classified as a reduction of revenue with no effect on net income.
The new revenue standard did not have a material impact on
consolidated net sales.
Diluted net income per common share in the quarter increased to
$2.62 per share from $2.53 per share in 2017. First quarter 2018
diluted net income per common share included a $.95 per share charge from acquisition-related
costs. Valspar operations increased EPS by $.68 per share in the quarter, including a
$.40 per share charge from interest
expense on new debt. Currency translation rate changes increased
diluted net income per common share in the quarter by $.03 per share. First quarter 2017 diluted net
income per common share included an $.08 per share charge from acquisition-related
costs.
Net sales in The Americas Group increased 6.6% to $2.08 billion in the quarter due primarily to
higher architectural paint sales volume across most end market
segments and selling price increases. Net sales from stores in U.S.
and Canada open for more than
twelve calendar months increased 5.2% in the quarter over last
year's comparable period. The Americas Group segment profit
increased $32.2 million to
$337.4 million in the quarter due
primarily to higher paint sales volume and selling price increases,
partially offset by increased raw material costs. Segment profit as
a percent to net sales increased in the quarter to 16.2% from 15.6%
last year.
Net sales of the Consumer Brands Group increased 103.0% to
$656.4 million in the quarter due
primarily to the inclusion of Valspar sales and selling price
increases, partially offset by lower volume sales to some of the
Group's retail customers. Valspar sales increased Group net sales
108.3% in the quarter. Currency translation rate changes increased
net sales by 1.6%. The revenue reclassification related to the
adoption of ASC 606 reduced net sales by 2.1%. Segment profit
increased to $74.2 million in the
quarter from $55.9 million last year
due primarily to the inclusion of Valspar and selling price
increases, partially offset by increased raw material costs. As a
percent to net external sales, segment profit decreased in the
quarter to 11.3% from 17.3% last year due primarily to
acquisition-related impacts and higher raw material costs,
partially offset by selling price increases. In the quarter,
segment profit was increased by Valspar operations profit of
$56.7 million, partially offset by
purchase accounting amortization expense of $31.8 million.
The Performance Coatings Group's net sales stated in U.S.
dollars increased 153.4% to $1.23
billion in the quarter due primarily to the inclusion of
Valspar sales and selling price increases. Valspar sales
contributed 148.1% to Group net sales in the quarter. Currency
translation rate changes increased net sales by 3.9%. Stated in
U.S. dollars, segment profit increased in the quarter to
$90.8 million from $57.1 million last year due primarily to the
inclusion of Valspar and selling price increases, partially offset
by increased raw material costs. Currency translation rate changes
increased segment profit $4.6 million
in the quarter. As a percent to net external sales, segment profit
decreased in the quarter to 7.4% from 11.8% last year. In the
quarter, segment profit was increased by Valspar operations profit
of $98.1 million, partially offset by
purchase accounting amortization expense of $57.5 million.
The Company purchased 600,000 shares of its common stock in the
three months ended March 31, 2018. At March 31, 2018, the
Company had remaining authorization to purchase 11.05 million
shares of its common stock through open market purchases.
Commenting on the first quarter, John G.
Morikis, Chairman, President and Chief Executive Officer,
said, "The Company performed well in the first quarter despite some
widely recognized headwinds, including a slow start to the painting
season in North America,
persistent raw material inflation and choppy global economic
growth. The contribution of the Valspar business to our
consolidated revenue and profit continues to build momentum, and we
saw positive sales volume, pricing and improving operating results
from each of our reportable segments. The Americas Group
posted another quarter of volume growth and profit improvement. Our
Consumer Brands Group finalized a significantly expanded
partnership with one of its largest retail customers which we
expect will be accretive to net sales this year. The
Performance Coatings Group had volume and sales growth across most
of their businesses. Both Consumer Brands and Performance
Coatings Groups have made great progress in integrating commercial
teams and key business processes relating to pricing, selling and
marketing programs.
"In the first three months, we opened 4 net new store locations
in The Americas Group. During the quarter, we increased the
dividend rate to $.86 from
$.85 last year. Our cash generation
remains strong, which has enabled us to resume open market treasury
stock purchases after suspending these purchases for the last 8
quarters.
"For the second quarter, we anticipate our Sherwin-Williams'
core net sales will increase a mid-to-high single digit percentage
compared to last year's second quarter. In addition, we expect
incremental sales from the Valspar acquisition to be approximately
$600 million for April and May in the
second quarter. For the full year 2018, we expect Sherwin-Williams'
core net sales to increase by a mid-to-high single digit percentage
compared to full year 2017. In addition, we expect incremental
sales from Valspar for the first five months to be approximately
$1.7 billion in 2018. With annual
sales at that level, we anticipate our 2018 diluted net income per
common share to be in the range of $14.95 to $15.45
per share, including an estimated $.40 per share net reduction related to an
expanded customer agreement, compared to $18.67 per share earned in 2017. Full year 2018
diluted net income per common share guidance includes a
$3.40 to $3.50 per share charge from costs associated with
the acquisition of Valspar, and an increase of $2.30 to $2.50 per
share from Valspar operations. The increase from Valspar operations
includes interest expense on new debt of $1.65 per share for the full year and a
$.40 per share net reduction related
to an expanded customer agreement. We continue to expect our 2018
effective tax rate to be in the low-to-mid twenty percent range.
Full year 2017 earnings per share included a one-time benefit of
$7.04 per share from deferred income
tax reductions, a one-time charge of $.44 per share for discontinued operations and a
charge of $3.00 per share for
acquisition-related cost and purchase accounting impacts."
The Company will conduct a conference call to discuss its
financial results for the first quarter, and its outlook for the
second quarter and full year 2018, at 11:00
a.m. EDT on Tuesday, April 24, 2018. 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 April
24th 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 May
14, 2018 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 paints,
coatings and related products to professional, industrial,
commercial, and retail customers. The company manufactures products
under well-known brands such as Sherwin-Williams®,
Valspar®, HGTV HOME® by
Sherwin-Williams, Dutch Boy®, Krylon®,
Minwax®, Thompson's® Water Seal®,
Cabot® and many more. With global headquarters in
Cleveland, Ohio,
Sherwin-Williams® branded products are sold exclusively
through a chain of more than 4,900 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 Performance Coatings Group
supplies a broad range of highly-engineered solutions for the
construction, industrial, packaging and transportation markets in
more than 110 countries around the world. Sherwin-Williams shares
are traded on the New York Stock Exchange (symbol: SHW). 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-related costs. 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 tables reconcile diluted
net income per common share computed in accordance with U.S. GAAP
to diluted net income per common share excluding the impact from
the Valspar acquisition.
|
Three
Months
|
|
Year Ended
|
|
Ended
|
|
December 31,
2018
|
|
March 31,
|
|
(guidance)
|
|
2018
|
|
Low
|
|
High
|
|
|
|
|
|
|
Diluted net income
per common share
|
$
|
2.62
|
|
|
$
|
14.95
|
|
|
$
|
15.45
|
|
|
|
|
|
|
|
Transaction and
integration costs
|
.24
|
|
|
.75
|
|
|
.85
|
|
Purchase accounting
impacts
|
.71
|
|
|
2.65
|
|
|
2.65
|
|
Total acquisition
costs
|
.95
|
|
|
3.40
|
|
|
3.50
|
|
|
|
|
|
|
|
Consolidated
excluding Valspar acquisition costs
|
3.57
|
|
|
18.35
|
|
|
18.95
|
|
|
|
|
|
|
|
Valspar operations
income
|
1.08
|
|
|
3.95
|
|
|
4.15
|
|
New debt interest
expense
|
(.40)
|
|
|
(1.65)
|
|
|
(1.65)
|
|
Total Valspar income
contribution
|
.68
|
|
|
2.30
|
|
|
2.50
|
|
|
|
|
|
|
|
Adjusted diluted net
income per common share
|
$
|
2.89
|
|
|
$
|
16.05
|
|
|
$
|
16.45
|
|
|
Three
Months
|
|
Three
Months
|
|
Six Months
|
|
Year
|
|
Ended
|
|
Ended
|
|
Ended
|
|
Ended
|
|
March 31,
|
|
June 30,
|
|
June 30,
|
|
December
31,
|
|
2017
|
|
2017
|
|
2017
|
|
2017
|
|
|
|
|
|
|
|
|
Diluted net income
per common share
|
$
|
2.53
|
|
|
$
|
3.36
|
|
|
$
|
5.90
|
|
|
$
|
18.67
|
|
One-time charge
related to discontinued operations
|
—
|
|
|
.44
|
|
|
.44
|
|
|
.44
|
|
Diluted net income
per common share from
continuing operations
|
2.53
|
|
|
3.80
|
|
|
6.34
|
|
|
19.11
|
|
|
|
|
|
|
|
|
|
One-time benefit from
deferred income tax
reductions
|
|
|
|
|
|
|
7.04
|
|
|
|
|
|
|
|
|
|
Transaction and
integration costs
|
.08
|
|
|
.30
|
|
|
.38
|
|
|
.88
|
|
Purchase accounting
impacts
|
|
|
.42
|
|
|
.42
|
|
|
2.12
|
|
Total acquisition
costs
|
.08
|
|
|
.72
|
|
|
.80
|
|
|
3.00
|
|
|
|
|
|
|
|
|
|
Consolidated
excluding Valspar acquisition costs
and one-time items
|
2.61
|
|
|
4.52
|
|
|
7.14
|
|
|
15.07
|
|
|
|
|
|
|
|
|
|
Valspar operations
income
|
|
|
$
|
.29
|
|
|
$
|
.29
|
|
|
1.72
|
|
New debt interest
expense
|
|
|
$
|
(.19)
|
|
|
$
|
(.19)
|
|
|
(.92)
|
|
Total Valspar income
contribution
|
—
|
|
|
.10
|
|
|
.10
|
|
|
.80
|
|
|
|
|
|
|
|
|
|
Adjusted diluted net
income per common share
|
$
|
2.61
|
|
|
$
|
4.42
|
|
|
$
|
7.04
|
|
|
$
|
14.27
|
|
Management of the Company believes that investors' understanding
of the Company's operating performance is enhanced by the
disclosure of earnings before interest, taxes, depreciation and
amortization (EBITDA) excluding the Valspar acquisition. This
measurement is not in accordance with U.S. GAAP. It should not be
considered a substitute for net income or net operating cash. The
following table reconciles net income computed in accordance with
U.S. GAAP to EBITDA excluding the impact from the Valspar
acquisition.
|
Three
Months
|
|
Three
Months
|
|
|
|
|
|
Ended
|
|
Ended
|
|
|
|
|
|
March 31,
2018
|
|
March 31,
2017
|
|
$ Change
|
|
% Change
|
|
|
|
|
|
|
|
|
Net income
|
$
|
250,127
|
|
|
$
|
239,152
|
|
|
$
|
10,975
|
|
|
4.6
|
%
|
Interest
expense
|
91,547
|
|
|
25,695
|
|
|
65,852
|
|
|
256.3
|
%
|
Income
taxes
|
53,459
|
|
|
67,453
|
|
|
(13,994)
|
|
|
-20.7
|
%
|
Depreciation
|
71,591
|
|
|
44,595
|
|
|
26,996
|
|
|
60.5
|
%
|
Amortization
|
85,049
|
|
|
6,170
|
|
|
78,879
|
|
|
1,278.4
|
%
|
EBITDA
|
551,773
|
|
|
383,065
|
|
|
168,708
|
|
|
44.0
|
%
|
Valspar EBITDA
*
|
137,922
|
|
|
(7,457)
|
|
|
145,379
|
|
|
|
EBITDA without
Valspar
|
$
|
413,851
|
|
|
$
|
390,522
|
|
|
$
|
23,329
|
|
|
6.0
|
%
|
|
|
|
|
|
|
|
|
* Valspar EBITDA for
2018 includes Valspar operations, purchase accounting items and
acquisition costs. Valspar EBITDA for 2017 includes acquisition
costs only.
|
Investor Relations
Contact:
Bob Wells
Senior Vice
President, Corporate Communications &
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
|
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 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
anticipated cost synergies resulting from the acquisition of
Valspar and the timing thereof; 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.
The
Sherwin-Williams Company and Subsidiaries
|
|
Statements of
Consolidated Income (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
Thousands of dollars,
except per share data
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
3,965,006
|
|
$
|
2,761,387
|
|
|
Cost of goods
sold
|
|
|
2,278,159
|
|
|
1,418,334
|
|
|
Gross
profit
|
|
|
1,686,847
|
|
|
1,343,053
|
|
|
Percent to
net sales
|
|
|
42.5%
|
|
|
48.6%
|
|
|
Selling, general and
administrative expenses
|
|
|
1,214,565
|
|
|
1,011,021
|
|
|
Percent to
net sales
|
|
|
30.6%
|
|
|
36.6%
|
|
|
Other general expense
- net
|
|
|
2,990
|
|
|
276
|
|
|
Amortization
|
|
|
85,049
|
|
|
6,170
|
|
|
Interest
expense
|
|
|
91,547
|
|
|
25,695
|
|
|
Interest and net
investment income
|
|
|
(1,618)
|
|
|
(1,280)
|
|
|
Other income -
net
|
|
|
(9,272)
|
|
|
(5,434)
|
|
|
Income before income
taxes
|
|
|
303,586
|
|
|
306,605
|
|
|
Income
taxes
|
|
|
53,459
|
|
|
67,453
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
250,127
|
|
$
|
239,152
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common
share - basic
|
|
$
|
2.68
|
|
$
|
2.58
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common
share - diluted
|
|
$
|
2.62
|
|
$
|
2.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares
outstanding - basic
|
|
|
93,339,564
|
|
|
92,550,559
|
|
|
|
|
|
|
|
|
|
|
|
Average shares and
equivalents outstanding - diluted
|
|
95,546,152
|
|
|
94,541,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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", choosing
Investor Relations, then selecting Press Releases and clicking on
the reference to the April
24th release.
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SOURCE The Sherwin-Williams Company