-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, RKYBV3V1CfztosFJkZB7z2sDGMkChQzjZiyN9ebXPzOO2P0SfCJCRJquPh2Xj0Fe i4mYYT9xesz9333efagcEQ== 0000950152-95-000337.txt : 19950615 0000950152-95-000337.hdr.sgml : 19950615 ACCESSION NUMBER: 0000950152-95-000337 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950315 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHERWIN WILLIAMS CO CENTRAL INDEX KEY: 0000089800 STANDARD INDUSTRIAL CLASSIFICATION: PAINTS, VARNISHES, LACQUERS, ENAMELS & ALLIED PRODUCTS [2851] IRS NUMBER: 340526850 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04851 FILM NUMBER: 95520829 BUSINESS ADDRESS: STREET 1: 101 PROSPECT AVE NW CITY: CLEVELAND STATE: OH ZIP: 44115 BUSINESS PHONE: 2165662200 10-K 1 SHERWIN WILLIAMS 10-K 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------------- FORM 10-K (MARK ONE) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE TRANSITION PERIOD FROM TO ----------- ----------- COMMISSION FILE NUMBER 1-4851 ----------------------------- THE SHERWIN-WILLIAMS COMPANY (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) OHIO 34-0526850 (State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.) organization) 101 PROSPECT AVENUE, N.W., CLEVELAND, OHIO 44115-1075 (Address of principal executive offices) (Zip Code)
(216) 566-2000 Registrant's telephone number, including area code ------------------------------------------------------ Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED - --------------------------------------------------- ------------------------------------ 9.875% Debentures due 2016 New York Stock Exchange 6.25% Convertible Subordinated Debentures due 1995 New York Stock Exchange Common Stock, Par Value $1.00 New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of January 31, 1995, 84,983,104 shares of the Registrant's Common Stock, with a par value of $1.00 each, were outstanding, net of treasury shares. The aggregate market value of such voting stock held by non-affiliates of the Registrant as of that date was $2,823,238,061. DOCUMENTS INCORPORATED BY REFERENCE Definitive Proxy Statement dated March 15, 1995, as regards the information required to be disclosed in Part III. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 THE SHERWIN-WILLIAMS COMPANY AND CONSOLIDATED SUBSIDIARIES As used in this Form 10-K, the terms "Company" and "Registrant" mean The Sherwin-Williams Company and its consolidated subsidiaries, taken as a whole, unless the context indicates otherwise. TABLE OF CONTENTS
ITEM NO. PAGE NO. - --------- -------- Part I 1. Business Segment Information a. General Development of Business 1 b. Narrative Description of Business 1 c. Financial Information About Business Segments 6 d. Foreign and Domestic Operations and Export Sales 6 2. Description of Property 7 3. Legal Proceedings 7 4. Submission of Matters to a Vote of Security Holders 8 Executive Officers of the Registrant 8 Part II 5. Market for Common Equity and Related Stockholder Matters 10 6. Selected Financial Data 10 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 8. Financial Statements and Supplementary Data 16 9. Changes in and Disagreements on Accounting and Financial Disclosure 17 Part III 10. Directors and Executive Officers of the Registrant 18 11. Executive Compensation 18 12. Security Ownership of Certain Beneficial Owners and Management 18 13. Certain Relationships and Related Transactions 18 Part IV 14. Financial Statement Schedule, Reports on Form 8-K and Exhibits a. Financial Statements, Financial Statement Schedule and Exhibits 19 b. Reports on Form 8-K 19 Signatures 37 Consent of Independent Auditors 43
NOTE ON INCORPORATION BY REFERENCE In Part III of this Form 10-K, various information and data are incorporated by reference from the Company's Definitive Proxy Statement dated March 15, 1995 ("Proxy Statement"). Any reference in this Form 10-K to disclosures in the Proxy Statement shall constitute incorporation by reference only of that specific information and data into this Form 10-K. 3 PART I ITEM 1. BUSINESS SEGMENT INFORMATION GENERAL DEVELOPMENT OF BUSINESS The Sherwin-Williams Company, which was first incorporated under the laws of the State of Ohio eighteen years after its founding in 1866, is engaged in the manufacture, distribution and sale of coatings and related products to professional, industrial, commercial and retail customers throughout North America. PAINT STORES SEGMENT The Paint Stores Segment exclusively distributes Sherwin-Williams(R) branded architectural coatings, industrial maintenance products, industrial finishes and related items produced by the Coatings Segment of the Company and others. Paint, wallcoverings, floorcoverings, window treatments, spray equipment and otherassociated products are marketed by store personnel and direct sale representatives to the do-it-yourself customer, professional painter, contractor, industrial and commercial maintenance customer, property manager, architect and manufacturer of products requiring a factory finish. Competitors of the Segment are other paint and wallpaper stores, mass merchandisers, home centers, independent hardware stores, hardware chains and manufacturer-operated outlets. Product quality, service and price determine the competitive advantage in the highly fragmented paint product market. The loss of any single customer would not have a material adverse effect on the business of the Segment. During 1994, the Company launched an extensive national advertising campaign, highlighting the many superior products available, including its revolutionary new product called EverClean(TM). Led by EverClean(TM), our new product introductions during 1994 exceeded expectations. In our continuing efforts to be AMERICA'S PAINT COMPANY, the Company became an official sponsor of major league baseball with exclusive rights in the paint category. The sponsorship includes regular advertising on the new baseball network, a joint venture between ABC and NBC. Baseball stadiums across the country have selected Sherwin-Williams to be their coatings supplier. New ballparks such as Jacobs Field in Cleveland, Ohio and The Ballpark in Arlington, Arlington, Texas used Sherwin-Williams' products during their construction. These and many other ballparks use a wide variety of Sherwin-Williams' products for ongoing touch-up and maintenance needs. In addition to these national efforts, advertising programs with many of the individual baseball teams were also implemented. Among other items, local sponsorship may include prominent stadium signage and extensive radio, television and print advertising. In 1995, in addition to the continued advertising campaigns, new product introductions and re-merchandising of paint stores, customer satisfaction and employee productivity will be enhanced by the configuration of an in-store computer network. This network will allow for the compilation of, and access to, store operations data by management. It will also seek to improve color accuracy and enhance inventory management by increasing the number of inventory turns and product availability while reducing obsolescence. COATINGS SEGMENT The five divisions within the Coatings Segment (Coatings, Consumer Brands, Automotive, Transportation Services and Specialty) participate in the manufacture, distribution or sale of coatings and related products. During 1994, the Segment's former International Group was realigned to allow the Segment's domestic expertise in the areas of manufacturing, product development, personnel and marketing to be applied to its international operations in efforts to better serve its customers. The Segment has sales to certain customers that, individually, may be a significant portion of its revenues. However, the loss of any single customer would not have a material adverse effect on the overall business of the Segment. All technical expenditures are sponsored by the Company and occur 1 4 in the Coatings Segment. The expenditures for research and development appear on page 24 of this report. COATINGS DIVISION The Coatings Division manufactures paint and paint-related products for the do-it-yourselfer, professional painter, contractor, industrial and commercial maintenance account and manufacturer of factory finished products. Sherwin-Williams(R) branded architectural and industrial finishes are manufactured exclusively for the Paint Stores Segment. Labels, color cards, traffic paint, adhesives, private label and other branded products are manufactured for the Paint Stores Segment, the Consumer Brands Division and others. Competitive factors for the Division are product innovation, manufactured product quality, service, distribution and price. Domestic competitors of the Division consist of other coatings manufacturers located throughout the United States. There are approximately 800 such manufacturers at the regional and national levels. As part of the realignment of the former International Group, the Coatings Division integrated the international operations which concentrated predominantly in the architectural paint business into their Division. There are many competitors in each of the foreign markets served as the Division sells its products around the world through subsidiaries and joint ventures and licenses technology, trademarks and trade names to foreign companies. At December 31, 1994, the Division had 44 licensing agreements in 36 foreign countries. The majority of the licensees' sales are in South America, the strongest market. New licensing agreements were signed in Bahamas, Belgium, Cyprus, India and Peoples Republic of China in 1994. New business development will take place following a predetermined regional approach for the establishment of subsidiaries, joint ventures and licensees in selected countries. The Coatings Division continues to strive to be the lowest cost producer of high quality coatings to gain an advantage over its competitors. During 1994, in conjunction with the Consumer Brands Division, the Coatings Division continued its commitment to customer service as evidenced by the installation of a toll-free telephone service established to receive customer comments and inquiries. The Division's emphasis on delivering high-quality products to its customers also continued in 1994 through the development of regional technical labs which have led to a reduction in product development cycle time. In 1995, the Coatings Division will concentrate on quality improvement projects and processes, focusing primarily on manufacturing consistency, production planning and process technology. Modifications within the manufacturing process that will improve service, increase effective capacity, enhance quality and reduce costs will be continually sought at each facility. CONSUMER BRANDS DIVISION The Consumer Brands Division is responsible for the sales and marketing of branded and private label products by a direct sales staff to unaffiliated home centers, mass merchandisers, independent dealers and distributors. Many of the country's leading retailers are among the Division's regional and national customers. The Division's competition for sales to these leading retailers comes from over 500 regional and national wholesale distributors of branded and private label paint and associated products. The competitive factors that will set the leaders apart from the rest are service, brand recognition, distribution and price. In 1994, the Consumer Brands Division launched its largest promotion of Dutch Boy(R) Paints ever. In conjunction with the National Basketball Association (NBA), USA Today and Healthy Families America, a non-profit child abuse prevention group, Dutch Boy(R) sponsored promotion of an "In The Paint" player of the week throughout the NBA season. The players selected were invited to join the Healthy Families Team to act as spokespeople in their local communities on behalf of Healthy Families America. Publication of the player selected was announced in the Tuesday edition of USA Today and on all Turner Network Television (TNT) NBA broadcasts. The campaign was well received by retailers and many provided additional support by matching our 50 cent per gallon donation for each gallon of Kid's Room(TM) Paint sold at their outlets. 2 5 During 1995, the Consumer Brands Division will continue expansion of its branded paint and stain products with strategic placement of premium products supported by award-winning point of sale materials and demographically-targeted marketing programs. In addition to traditional forms of brand promotion, including continued ventures with the NBA, TNT, American Telephone and Telegraph, USA Today and others, Dutch Boy(R) Paints will also sponsor and produce its own nationally-broadcast cable television show on decorating called Room by Room(TM). The show will air on the new Home and Garden Television Network on which Dutch Boy(R) has become a charter sponsor. Also, Martin-Senour(R) will, for the first time, introduce a celebrity spokesperson, Chi Chi Rodriguez, to promote its product line. AUTOMOTIVE DIVISION The Automotive Division develops and manufactures motor vehicle finish and refinish products which are marketed under the Sherwin-Williams(R) and other branded labels in the United States and Canada through its network of 139 company-operated branches. The branches are supported by a direct sales staff and products are also marketed through jobbers and wholesale distributors. The Division is the sole distributor of Standox(R) branded vehicle refinishing paints in the United States and Canada for American Standox, Inc., its joint venture with Herberts GmbH of Wuppertal, Germany. The Division sells directly to independent automotive body shops, automotive dealerships, fleet owners and refinishers, production shops, body builders and manufacturers requiring a factory finish (OEM). The Automotive Division has numerous competitors in its domestic and foreign markets with broad product offerings and several others with niche products. In the last several years, certain foreign competitors have entered the perceived lucrative U.S. automotive aftermarket. The Division assumed additional international responsibilities related to the automotive-related factory finish business in 1994 due to the former International Group's realignment within the Segment. A consolidated foreign subsidiary in Jamaica generally markets a full line of products. Products manufactured in Kingston, Jamaica are sold through 9 stores and other dealers and by a direct sales force to independent dealers, painters, contractors, automotive body shops and industrial and commercial maintenance accounts in Jamaica. A portion of the income for the Division comes from the licensing of technology, trademarks and trade names to foreign companies. The Division has 15 licensees in 14 foreign countries, including a new agreement signed in Syria in 1994. Key competitive factors for the Automotive Division are distribution, product quality, technology and service. Strong distribution and high quality products have been the Division's greatest competitive advantages. During 1994, the Automotive Division continued to strive to improve product quality and customer service, as servicing the Division's customers and meeting their objectives remains the highest priority. Evidencing the commitment to quality, ISO 9002 certification was achieved at the Richmond, Kentucky plant during the year. ISO standards now represent the Division's quality benchmark for the future. Reduction of order cycle times has led to better customer service and more efficient inventory management. The Division's plans for 1995 call for opening a new state-of-the-art distribution center in Richmond, Kentucky. This facility will enhance customer service capabilities while allowing for more efficient inventory and freight management. The ISO certification program will be expanded to additional facilities in 1995. Additionally, the Division plans to introduce the 3.5 Volatile Organic Compound (VOC) Single Stage Urethane System for vehicle refinishing. This new product significantly reduces the VOC contaminants to the environment and has been designed for the Vehicle Refinish and Fleet/OEM market segments. TRANSPORTATION SERVICES DIVISION The Transportation Services Division provides warehousing, truckload freight, pool assembly, freight brokerage and consolidation services primarily for the Company and for certain external manufacturers, distributors and retailers throughout the United States. This Division provides the Company with total logistics service support which allows increased delivery schedules, lower field inventory levels and fewer out-of-stocks. 3 6 The Transportation Services Division has many different and diverse competitors. In the trucking industry, there are a few large carriers having small or moderate market share while thousands of other carriers compete for the balance of the market. The warehousing and distribution service market is characterized by a large number of competitors with none having dominant share. Since the primary business of the Division is to provide services for the Company's other divisions, gaining market share is not of major significance. During 1994, testing and installation of an automated transportation planning system was completed at the Effingham distribution center. This technology improves the efficiency of routing and shipping procedures. Installation of the automated system is planned for all sites in 1995. ISO 9003 certification was achieved at three additional facilities in 1994 and the Division will continue to pursue this certification at the remaining centers in 1995. During 1995, the Division will expand its mission to the Company by consolidating the distribution and transportation requirements of the Specialty Division into its operations. Additional 1995 plans call for the opening of a new full-service distribution facility in Fredericksburg, Pennsylvania that will allow for consolidation of existing activity, leading to more efficient customer service in the surrounding region. SPECIALTY DIVISION The Specialty Division competes in three areas: custom and industrial aerosols; paint applicators; and retail and wholesale consumer aerosols. The Division participates in the retail and wholesale paint, automotive, homecare products, institutional, insecticide and industrial markets. A wide variety of aerosol products are filled, packaged and distributed to regional and national customers. Approximately 8.2 percent of the Division's total sales represent aerosols and paint applicators sold to the Paint Stores Segment. The remaining products are marketed through mass merchandisers, home centers, automotive chains and maintenance distribution channels. There are various primary competitors in each of the Division's product lines. The main competitive factors are technical know-how, quality, service and price. The Specialty Division has superior quality products, more efficient manufacturing and distribution, frequent customer contact and better customer service at competitive prices which distinguish it from its competitors. In 1994, the Specialty Division completed construction of the Dayton Valley, Nevada distribution center. This center is a state-of-the-art, safety compliant facility for aerosol products. In efforts to provide more efficient service to our customers, the responsibility for operation of this and other Specialty Division distribution centers will be assumed by the Transportation Services Division in 1995. In addition, in conjunction with the realignment of the former International Group in 1994, the Division assumed responsibility for exports and any potential international operations or licensees related to its product lines. During 1995, the Division will introduce Rust Tough(R) Latex for Metal under the Krylon(R) label. It will be our first latex rust preventative product offered to the retail market. The Division plans to promote this product through advertising programs aimed at retail customers. OTHER SEGMENT The Other Segment is responsible for the acquisition, development, leasing and management of properties for use by the Company and others. Obtaining real estate in the proper location at the appropriate cost is a critical component for achieving the desired operating success, particularly for paint stores and distribution centers. This segment has many competitors consisting of other real estate owners, developers and managers in certain states where we currently hold property. The main competitive factors are the availability of property and price. At the end of 1994, the Retail Properties Division owned or leased 209 properties, representing over 1,700,000 square feet of space, which are conducive to the sale of paint and associated products. Such properties include 127 freestanding buildings, for exclusive use by the Paint Stores Segment, and 82 multi-tenant properties, utilized when the basic needs of the paint store can be met and where 4 7 external rental opportunities can be profitably operated. The paint store must be easily accessible to professional painters and contractors with sufficient access to pickup and delivery areas. Multi-tenant properties are usually smaller "strip" shopping centers with adequate parking and, generally, the paint store will be located at the end of the shopping area for the most convenient access. In 1995, the Division anticipates continued growth in the number of retail properties needed by the Paint Stores Segment. Two freestanding locations currently under construction will be completed and one additional freestanding location will be developed. The occupancy rate for external space was 82.2 percent at December 31, 1994. The Non-Retail Properties Division owned or leased 19 properties approximating 2.6 million square feet. These properties consisted primarily of office buildings, manufacturing facilities and distribution centers at the end of 1994. Occasionally, such properties are acquired or developed to provide the lowest cost alternative for distribution or manufacturing expansion. Locations that have been utilized profitably in the past which can no longer contribute to the Company's future plans are currently offered for sale or lease. Locations that can continue to operate efficiently and achieve the desired rate of return will continue to be held by this segment. RAW MATERIALS AND PRODUCTS PURCHASED FOR RESALE With respect to the Paint Stores Segment, there are sufficient suppliers of each product purchased for resale that the Segment does not anticipate any significant sourcing problems. For the Coatings Segment, raw materials and fuel supplies are generally available from various sources in sufficient quantities that the Segment does not anticipate any significant sourcing problems during 1995. SEASONALITY The majority of the sales for the Paint Stores Segment and Coatings Segment traditionally occur during the second and third quarters. There is no significant seasonality in sales for the Other Segment. TRADEMARKS AND TRADE NAMES Customer recognition of trademarks and trade names collectively contribute significantly to the sales of the Company. The Paint Stores Segment is identified with names such as Sherwin-Williams(R), SuperPaint(R), Pro Mar(R), EverClean(TM), Glas-Clad(R), Perma-Clad(R) and Old Quaker(R). The Coatings Segment employs a variety of trade names and trademarks in marketing its products, such as Sherwin-Williams(R), Dutch Boy(R), Kem-Tone(R), Martin-Senour(R), Cuprinol(R), Old Quaker(R), Acme(R), Krylon(R), Color Works(R), Illinois Bronze(R), Rust Tough(R), Rubberset(R) and Dupli-Color(R). PATENTS Although patents and licenses are not of material importance to the business of the Company as a whole, the Automotive and Coatings Divisions' international operations derive a substantial part of their income from the license of technology, trademarks and trade names to foreign companies. BACKLOG AND PRODUCTIVE CAPACITY Backlog orders are not significant in the business of any Segment. Sufficient productive capacity currently exists to fulfill the Company's needs for paint products through 1995. EMPLOYEES The Company employed approximately 17,900 persons at December 31, 1994. ENVIRONMENTAL COMPLIANCE See Management's Discussion and Analysis of Financial Condition and Results of Operations, on pages 10 through 15 of this report, for further details on environmental compliance. 5 8 BUSINESS SEGMENTS
(MILLIONS OF DOLLARS) 1994 1993 1992 - -------------------------------------------------------------------------------------------- NET EXTERNAL SALES Paint Stores $1,986 $1,830 $1,682 Coatings 1,100 1,105 1,052 Other 14 14 14 - -------------------------------------------------------------------------------------------- Segment totals $3,100 $2,949 $2,748 INTERSEGMENT TRANSFERS Coatings $ 720 $ 655 $ 598 Other 18 17 16 - -------------------------------------------------------------------------------------------- Segment totals $ 738 $ 672 $ 614 OPERATING PROFITS Paint Stores $ 141 $ 117 $ 91 Coatings 201 194 174 Other 8 5 6 Corporate expenses -- net (51) (52) (45) - -------------------------------------------------------------------------------------------- Income from continuing operations before income taxes and cumulative effects of changes in accounting methods $ 299 $ 264 $ 226 IDENTIFIABLE ASSETS Paint Stores $ 517 $ 494 $ 464 Coatings 757 730 719 Other 44 51 58 Corporate 644 640 489 - -------------------------------------------------------------------------------------------- Consolidated totals $1,962 $1,915 $1,730 CAPITAL EXPENDITURES Paint Stores $ 26 $ 29 $ 23 Coatings 46 28 40 Other 1 1 1 Corporate 6 5 5 - -------------------------------------------------------------------------------------------- Consolidated totals $ 79 $ 63 $ 69 DEPRECIATION Paint Stores $ 23 $ 21 $ 19 Coatings 30 27 26 Other 3 3 2 Corporate 5 4 4 - -------------------------------------------------------------------------------------------- Consolidated totals $ 61 $ 55 $ 51
NOTES TO SEGMENT TABLES Operating profit is total revenue, including realized profit on intersegment transfers, less operating costs and expenses. Intersegment transfers are accounted for at values comparable to normal unaffiliated customer sales. Corporate expenses include interest which is unrelated to real estate leasing activities, certain provisions for disposition and termination of operations and environmental remediation which are not directly associated with or allocable to any operating segment, and other adjustments. Identifiable assets are those directly identified with each segment's operations. Corporate assets consist primarily of cash, investments, deferred pension assets and headquarters' property, plant and equipment. Export sales, sales of foreign subsidiaries and sales to any individual customer were each less than 10% of consolidated sales to unaffiliated customers during all years presented. 6 9 ITEM 2. DESCRIPTION OF PROPERTY The Company's corporate headquarters are located in Cleveland, Ohio. The Company's principal manufacturing and distribution facilities, operated by the Coatings Segment, are located as set forth below.
Leased Leased Manufacturing facilities or Owned Distribution facilities or Owned - --------------------------------- -------- --------------------------------- -------- Anaheim, California Owned Bedford Heights, Ohio Leased Baltimore, Maryland Owned Buford, Georgia Leased Bedford Heights, Ohio Owned Dayton Valley, Nevada Owned Chicago, Illinois Owned Effingham, Illinois Leased Coffeyville, Kansas Owned Greencastle, Indiana Owned Columbus, Ohio Owned Hunt Valley, Maryland Leased Crisfield, Maryland Leased Lagrange, Georgia Owned Deshler, Ohio Owned Reno, Nevada Leased Elk Grove, Illinois Owned Sparks, Nevada Leased Emeryville, California Owned Waco, Texas Leased Fort Wayne, Indiana Leased Winter Haven, Florida Owned Fountain Inn, South Carolina Owned York, Pennsylvania Owned Garland, Texas Owned Calgary, Alberta, Canada Leased Greensboro, North Carolina Owned Mississauga, Ontario, Canada Leased Holland, Michigan Owned Richmond Hill, Ontario, Canada Leased Morrow, Georgia Owned Scarborough, Ontario, Canada Owned Newark, New Jersey Owned San Juan, Puerto Rico Leased Orlando, Florida Owned Richmond, Kentucky Owned Victorville, California Owned Kingston, Jamaica Owned
In addition, the Coatings Segment operates 139 company-operated automotive branches, of which 1 is owned, in the United States and Canada and 9 leased stores in Jamaica. There were 2,046 company-operated paint stores in the forty-eight contiguous states, Canada and Puerto Rico which constitute the entire operations of the Paint Stores Segment. All stores are leased locations with 209 being leased from the Company's Retail Properties Division in the Other Segment. At the end of 1994, the Segment was comprised of four separate operating geographic divisions: the Mid Western Division with 576 stores primarily located in the midwestern and upper west coast states and western Canada; the Eastern Division which has 436 stores along the upper east coast and New England states and eastern Canada; the Southeastern Division which has 525 stores principally covering the lower east and gulf coast states and Puerto Rico; and the South Western Division with 509 stores in the plains and the lower west coast states. The Paint Stores Segment opened 35 new stores in 1994, closed 19, re-merchandised 492, and relocated 55. All property within the Other Segment is owned by the Company except for 2 land leases in the Retail Properties Division. ITEM 3. LEGAL PROCEEDINGS As previously reported in the Company's Quarterly Report for the period ended June 30, 1993, on July 16, 1993, the United States Department of Justice, on behalf of the United States Environmental 7 10 Protection Agency, filed a complaint against the Company in the United States District Court for the Northern District of Illinois. The complaint alleges violations under various environmental statutes concerning the Company's operations at its southeast Chicago facility. The relief sought demands an undetermined amount of civil penalties and further demands certain, unspecified corrective action be taken to clean up the site. On September 27, 1994, the United States Environmental Protection Agency instituted a civil administrative action against the Company alleging violations of the Emergency Planning and Community Right-to-Know Act (EPCRA). The action is pending before the Administrator of the EPA and was brought in response to voluntary disclosures made by the Company regarding its possible failure to submit certain reporting forms required by EPCRA. The relief sought by the EPA includes corrective measures and civil penalties, which, taking into effect the voluntary nature of the disclosures made by the Company, is reasonably expected to be less than $200,000. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth the names and ages of the current Executive Officers, the positions and offices with the Company held by them as of February 28, 1995 and the date when each was first elected or appointed an Executive Officer:
Date When First Elected Name Age Present Position or Appointed - ------------------------- --- ----------------------------------- -------------- John G. Breen 60 Chairman and Chief Executive 1979 Officer, Director Thomas A. Commes 52 President and Chief Operating 1979 Officer, Director John L. Ault 49 Vice President -- Corporate 1987 Controller Frank E. Butler 59 President & General Manager, 1994 Coatings Division Christopher M. Connor 38 President & General Manager, 1994 Specialty Division Conway G. Ivy 53 Vice President -- Corporate 1979 Planning and Development T. Scott King 42 President & General Manager, 1994 Consumer Brands Division Thomas Kroeger 46 Vice President -- Human Resources 1987 John C. Macatee 43 President, Paint Stores Group 1994 Larry J. Pitorak 48 Senior Vice President -- Finance, 1978 Treasurer and Chief Financial Officer Joseph M. Scaminace 41 President & General Manager, 1994 Automotive Division Louis E. Stellato 44 Vice President, General Counsel and 1989 Secretary
8 11 Following is a brief account of each Executive Officer's business experience with the Company during the last five year period: Mr. Breen has served as Chairman and Chief Executive Officer since June 1986 and has served as a Director since April 1979. Mr. Commes has served as President and Chief Operating Officer since June 1986 and has served as a Director since April 1980. Mr. Ault has served as Vice President -- Corporate Controller since January 1987. Mr. Butler has served as President & General Manager, Coatings Division since February 1992 prior to which he served as President & General Manager, Consumer Division commencing May 1984. Mr. Connor has served as President & General Manager, Specialty Division since April 1994 prior to which he served as Senior Vice President -- Marketing, Paint Stores Group commencing September 1992. From June 1986 to September 1992, Mr. Connor served as President & General Manager, Western Division, Paint Stores Group. Mr. Ivy has served as Vice President -- Corporate Planning and Development since April 1992 prior to which he served as Vice President and Treasurer commencing January 1989. Mr. King has served as President & General Manager, Consumer Brands Division since February 1992 prior to which he served as Vice President, Director of Sales and Marketing, Consumer Division commencing June 1987. Mr. Kroeger has served as Vice President -- Human Resources since October 1987. Mr. Macatee has served as President, Paint Stores Group since September 1992 prior to which he served as President & General Manager, South Central Division, Paint Stores Group commencing June 1986. Mr. Pitorak has served as Senior Vice President -- Finance, Treasurer and Chief Financial Officer since April 1992 prior to which he served as Senior Vice President -- Finance and Chief Financial Officer commencing July 1991. From February 1988 to July 1991, Mr. Pitorak served as Vice President, General Counsel and Secretary. Mr. Scaminace has served as President & General Manager, Automotive Division since April 1994 prior to which he served as President & General Manager, Specialty Division commencing September 1985. Mr. Stellato has served as Vice President, General Counsel and Secretary since July 1991 prior to which he served as Assistant Secretary and Corporate Director of Taxes commencing December 1989. There are no family relationships between any of the persons named. 9 12 PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Sherwin-Williams Common Stock is listed on the New York Stock Exchange and traded under the symbol SHW. QUARTERLY STOCK PRICES AND DIVIDENDS
Quarter High Low Dividend -------------------------------------------- 1994 1ST $35.750 $31.250 $ .14 2ND 32.500 29.500 .14 3RD 34.125 30.250 .14 4TH 33.375 29.750 .14 1993 1st $34.250 $30.000 $ .125 2nd 34.375 30.125 .125 3rd 36.125 29.875 .125 4th 37.500 32.750 .125
The number of shareholders of record for Sherwin-Williams Common Stock, par value $1.00 each, as of January 31, 1995 was 12,312. The closing market value per share as listed on the New York Stock Exchange as of the close of business January 31, 1995 was $33.500. ITEM 6. SELECTED FINANCIAL DATA (MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
1994 1993 1992 1991 1990 - --------------------------------------------------------------------------------------------------- OPERATIONS Net Sales $3,100 $2,949 $2,748 $2,541 $2,267 Income before cumulative effects of changes in accounting methods 187 165 145* 128 123 FINANCIAL POSITION Total assets $1,962 $1,915 $1,730 $1,612 $1,504 Long-term debt 20 38 60 72 138 PER COMMON SHARE DATA Income before cumulative effects of changes in accounting methods $ 2.15 $ 1.85 $ 1.63* $ 1.45 $ 1.41 Cash dividends .56 .50 .44 .42 .38 * Includes a reduction, beginning January 1, 1992, for the additional expense of accruing postretirement benefits. (See Note 6, page 29). Such additional expense was $5.7 million after income taxes ($.06 per share) in 1992.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION -- 1994 During 1994, the Company generated more than $250.5 million in cash flow from operations. This cash flow provided the opportunity to reduce long-term debt by repurchasing certain outstanding debentures, to purchase over four million shares of the Company's common stock for treasury and to 10 13 increase the annual dividend to shareholders. The Statements of Consolidated Cash Flows, on page 22 of this report, present more detailed cash flow information. Cash and short-term investments decreased $18.4 million from 1993 levels to $251.4 million. Increases and decreases in other components of working capital occurred primarily due to increased sales and the related increase in manufacturing activity. Current year reductions in long-term debt and growth in shareholders' equity lowered the debt-to-capitalization ratio to 2.0 percent at the end of 1994. Total assets, valued at over $1.9 billion, grew by $47.4 million during 1994. The current ratio decreased to 2.0 at December 31, 1994 from 2.1 at the end of 1993 primarily due to the decrease in cash and short-term investments. Net property, plant and equipment increased $15.1 million from 1993. Capital expenditures of $78.7 million were offset by depreciation expense of $60.6 million and certain retirements of assets. Capital expenditures in 1994 were principally for the opening, remodeling or relocating of paint stores and the construction and upgrade of facilities and equipment at manufacturing, distribution and research sites. In the Coatings Segment, capital expenditures were higher primarily due to expanding the manufacturing capacity at the Garland, Texas facility and the completion of a 180,000 square-foot distribution center in Dayton Valley, Nevada for use by the Transportation Services Division in consolidating certain distribution facilities on the west coast. There have been no significant acquisitions of property, plant and equipment during the past three years. In 1995, the most significant capital expenditures planned are the construction of a 1,000,000 square-foot distribution center in Fredericksburg, Pennsylvania and a 263,000 square-foot automotive products distribution center in Richmond, Kentucky. We plan to continue investing strategically in new facilities, improving or expanding existing facilities and in upgrading equipment. We do not anticipate the need for any external financing to specifically support our capital programs. Changes in intangible and other noncurrent assets during 1994 resulted primarily from the amortization of intangible assets associated with prior acquisitions totaling $13.2 million. The $226.0 million of deferred pension assets represents the excess fair market value of the assets of the defined benefit pension trusts. As of December 31, 1994, the assumed discount rate was raised to 8.25 percent from 7.25 percent, decreasing the projected benefit obligation and the unrecognized net loss. The higher interest rate environment during 1994 caused the actual return on plan assets in the defined benefit pension trusts to be less than the 8.5 percent assumption used in the actuarial calculation, even though the returns realized on the fixed income portfolios exceeded comparable benchmark indices. This shortfall in the actual return increased the net amortization and deferral component of the net pension credit and the unrecognized net loss at December 31, 1994. The unrecognized net loss is an accumulation of actuarial gains and losses which is amortized over the average remaining service lives of the plan participants beginning in the period after the change or difference occurred. Thus, the net pension credit in 1995 will be reduced by approximately $3.2 million from the increasing amount of unrecognized net loss. See Note 5, on page 27 of this report, for further clarification of the excess pension assets, unrecognized items and the components of the net pension credit. Long-term debt was reduced during 1994 when the Company acquired $13.1 million principal of certain outstanding 9.875 percent debentures in addition to normal maturities. As more fully explained in Note 7, on page 30 of this report, if a significant advantageous investing opportunity should arise, we have in place additional financing flexibility. We did not utilize any of our short-term borrowing capacity during 1994. Sufficient cash flows should be generated from operations to avoid any short-term borrowings in 1995. The current year change in the liability for postretirement benefits other than pensions resulted from the excess of the net postretirement benefit expense, as required by Statement of Financial Accounting Standards No. 106, less the costs for benefit claims incurred. The current portion of the postretirement benefits liability, amounting to $8.2 million, is included in other accruals. As of December 31, 1994, the assumed discount rate used to calculate the present value of the postretirement benefit plan obligation was raised to 8.25 percent from 7.25 percent, similar to the change in the assumption for determining the defined benefit pension plan liability. This change decreased the accumulated postretirement benefit obligation and the unrecognized net loss at 11 14 December 31, 1994. Because the resulting unrecognized net loss is within the boundaries of the amortization "corridor", the impact on future annual postretirement benefit expense is negligible. Plan amendments made January 1, 1993 significantly reduced the accumulated postretirement benefit obligation, creating an unrecognized prior service credit. The reduction of the annual postretirement benefit expense for these amendments began in 1993 and will continue through 2004. See Note 6, on page 29 of this report, for additional information concerning the Company's postretirement benefit obligations. Other long-term liabilities include accruals for environmental-related matters and other unrelated non-current liabilities. The decrease in the total accrual to $119.1 million was primarily due to the resolution of certain obligations sooner than anticipated and the reclassification of certain amounts to current liabilities. The Company and certain other companies were named defendants in a number of lawsuits arising from the manufacture and sale of lead pigments and lead paints. It is possible that additional lawsuits may be filed against the Company in the future with similar allegations. The various existing lawsuits seek damages for personal injuries and property damages, along with costs incurred to abate the lead related paint from buildings. The Company believes that such lawsuits are without merit and is vigorously defending them. The Company does not believe that any potential liability ultimately determined to be attributable to the Company arising out of such lawsuits will have a material adverse effect on the Company's business or financial condition. The operations of the Company, like those of other companies in our industry, are subject to various federal, state and local environmental laws and regulations. These laws and regulations not only govern our current operations and products, but also impose liability on the Company for past operations which were conducted utilizing practices and procedures considered acceptable under the laws and regulations existing at that time. The Company expects environmental laws and regulations to impose increasingly stringent requirements upon the Company and our industry in the future. The Company believes it conducts its operations in compliance with applicable environmental laws and regulations and has implemented various programs designed to protect the environment and ensure continued compliance. The Company is involved with environmental compliance and remediation activities at some of its current and former sites. The Company, together with other parties, has also been designated a potentially responsible party under federal and state environmental protection laws for the remediation of hazardous waste at a number of third-party sites, primarily Superfund sites. The Company may be similarly designated with respect to additional third-party sites in the future. Capital expenditures and expenses for ongoing compliance measures are included in the normal operating expenses of conducting business. The Company's capital expenditures and other expenses for ongoing compliance measures were not material to the Company's financial condition or net income during 1994, and the Company does not expect such capital expenditures and other expenses to be material to the Company's financial condition or net income in the future. The Company accrues for certain environmental remediation activities relating to its past operations and third-party sites, including Superfund sites, for which commitments or clean-up plans have been developed or for which costs or minimum costs can be reasonably estimated. The Company continuously assesses its potential liability for remediation activities with respect to its past operations and third-party sites. Any potential liability ultimately determined to be attributable to the Company, however, is subject to a number of uncertainties including, among others, the number of parties involved with respect to any given site, the volumetric contribution which may be attributed to the Company relative to that attributable to other parties, the nature and magnitude of the wastes involved, and the method and extent of remediation. The Company's environmental-related accruals are adjusted as information becomes available upon which more accurate costs can be reasonably estimated. 12 15 The Company is a defendant in a lawsuit filed by the United States Department of Justice, on behalf of the United States Environmental Protection Agency, regarding the Company's operations at its southeast Chicago facility. The lawsuit, which alleges violations under various environmental statutes, seeks an undeterminable amount of civil penalties and further demands that certain, unspecified, corrective action be taken to clean up the site. The Company is also a defendant in a lawsuit brought by PMC, Inc. regarding one of the Company's former Chemical Division's manufacturing facilities. This facility is located adjacent to the Company's southeast Chicago facility referenced above and was sold to PMC, Inc. in 1985. PMC, Inc. is seeking an undisclosed amount for environmental remediation costs and other damages based upon contractual and tort theories, and under various environmental laws. The Company is vigorously defending both of these lawsuits. With respect to the Company's southeast Chicago facility and its former manufacturing facility adjacent thereto, both referenced above, the Company has evaluated its potential liability and, based upon its preliminary evaluation, has accrued an appropriate amount. However, due to the uncertainties surrounding these facilities, the Company's ultimate liability may result in costs that are significantly higher than currently accrued. In such event, the recording of the liability may result in a significant impact on net income for the annual or interim period during which the additional costs are accrued. In the opinion of the Company's management, any potential liability ultimately attributed to the Company for its environmental-related matters will not have a material adverse effect on the Company's financial condition, liquidity or cash flow. See Note 9, on page 31 of this report, for discussion of the environmental-related accruals included in the Company's consolidated balance sheets. Shareholders' equity increased $20.2 million during 1994 due primarily to current year net income partially offset by dividends paid to shareholders and the purchase of treasury stock. The Company acquired 4,013,800 shares of its common stock and additional shares were received in exchange for certain other stock issued in accordance with the Company's stock plans. From time to time in the future, depending on our cash position and market conditions, we may acquire additional Company stock for general corporate purposes. At December 31, 1994, the Company had unfulfilled Board authorization to purchase up to 5,194,000 additional shares for treasury purposes. See the Statements of Consolidated Shareholders' Equity, on page 23 of this report, and Note 10, on page 32 of this report, for equity and capital stock detail. At a meeting held February 15, 1995, the Board of Directors increased the quarterly dividend to $.16 per share. This represents the sixteenth consecutive increase and a compounded rate of increase of 30.2 percent since the dividend was reinstated in the fourth quarter of 1979. The 1994 annual dividend of $.56 per share marked the fifteenth consecutive year that the dividend approximated our payout ratio target of 30 percent of the prior year's earnings. RESULTS OF OPERATIONS -- 1994 VS 1993 Consolidated net sales increased in 1994 by $150.8 million to $3.1 billion, an increase of 5.1 percent. The growth in sales was driven primarily by gains in the Paint Stores Segment. The Paint Stores Segment realized an 8.5 percent sales increase, despite continued sluggish retail sales, as all operating divisions achieved sales results better than the results of 1993. Comparable-store sales increased 7.8 percent. Strong emphasis was placed on store-level pricing discipline, however, continued competitive pressures allowed the implementation of only selective price increases during the year. Most of the Segment's sales increase resulted from increased paint gallons sold to wholesale customers, complemented by wholesale sales increases in most other major product lines. Wholesale customers include professional painters, contractors and industrial and commercial maintenance customers. Sales of the Coatings Segment were essentially flat for 1994. Reduced demand by certain large customers as they adjusted their inventories downward affected many of the divisions within the 13 16 Segment. The Consumer Brands Division also was impacted by the loss of a portion of the business of a home center account. New customers added to our distribution base during 1994 partially offset the effect of the above declines. Improved 1994 sales for the Automotive Division resulted primarily from sales growth in its branch distribution network and strong gains at original equipment manufacturers. Krylon(R) branded products provided the primary impetus for the improved sales results of the Specialty Division. Revenue for the real estate operations in the Other Segment was also flat in comparison to 1993. Consolidated gross profit dollars were 6.0 percent higher than last year while gross profit as a percent of sales increased to 42.8 percent from 42.5 percent in 1993. The Paint Stores Segment's 1994 gross margin remained constant in comparison to 1993. Despite continued sales mix shifts to lower-margin items in the Specialty and Automotive Divisions, manufacturing efficiencies, stable raw material costs for most of the year, cost containment and a favorable sales mix in the Segment's other divisions led to an increase in the Coatings Segment's 1994 gross margin. Consolidated selling, general and administrative expenses decreased as a percent of sales to 32.9 percent from 33.3 percent in 1993. The Paint Stores Segment's SG&A costs as a percent of sales were below last year due primarily to containment of selling and administrative expenses combined with the sales gain achieved. The Coatings Segment's SG&A expenditures were approximately the same in 1994 as in 1993. Due to this segment's flat sales, a slight increase in SG&A costs as a percent of sales resulted. As a result of the above, consolidated operating profits increased 14.0 percent over 1993. The Paint Stores Segment's operating profits improved 20.3 percent due primarily to volume gains and the containment of SG&A costs. Despite sluggish sales, the Coatings Segment's operating profits increased 3.4 percent due primarily to the favorable edge in gross margin. The operating profits of the Other Segment increased in comparison to 1993 due primarily to reduced interest expense on long-term debt allocable to the real estate operations of the Segment. The reduction is the result of various debt acquisitions. Corporate expenses, which are not directly associated with or allocable to any operating segment, were approximately the same as 1993. Refer to pages 1 through 6 of this report for additional Business Segment information. Total interest expense decreased 50.1 percent from last year due to repurchases of long-term debt and normal maturities. Correspondingly, our interest coverage improved to 93.8 times in 1994 compared to 42.0 times in 1993. Our fixed charge coverage, which is calculated using interest and rent expense, improved to 4.1 times in 1994 versus 3.7 times in 1993. Interest and net investment income increased 17.1 percent to $8.2 million primarily as a result of increased investment yields partially offset by reduced cash and short-term investment balances resulting primarily from the purchase of common stock for treasury purposes during the year. Other costs and expenses increased in 1994 primarily due to increased costs related to financing and investing activities which are further explained in Note 3 on page 26 of this report. As shown in Note 13, on page 33 of this report, the effective income tax rate remained the same in 1994 as in 1993. Net income increased 12.9 percent to $186.6 million and net income per share increased 16.2 percent to $2.15. Approximately $.04 of the increase in net income per share over 1993 was due to the purchase of common stock for treasury purposes at various times throughout 1994. RESULTS OF OPERATIONS -- 1993 VS 1992 Consolidated net sales increased 7.3 percent to $2.95 billion as all segments improved sales during the year. The Company's consolidated market share of gallons sold continued to increase as our gallons sold increased at a faster rate than total gallons sold for the paint industry, according to U.S. Government statistics. The Paint Stores Segment, which accounted for 73.7 percent of the Company's sales improvement, realized an 8.8 percent sales increase. Strong sales to wholesale customers were partially offset by continued soft retail sales in the first half of the year. Comparable-store sales increased 8.5 14 17 percent. Modest selling price increases within select product categories were partially offset by selling price adjustments on certain non-paint products to result in overall 1993 price levels remaining relatively constant with the prior year. Therefore, most of the Segment's sales increase resulted from increased paint gallons sold, complemented by volume increases in certain associated products. The Coatings Segment had a sales increase of 5.0 percent for 1993. The Consumer Brands Division increased its sales volume in 1993 over the prior year results primarily due to growth in the Dutch Boy(R) brand and increased gallons sold to certain national customers. The Automotive Division had steady sales growth in its domestic branches and the majority of its major product lines resulting in an overall sales increase for 1993. The sales results of the Specialty Division improved primarily due to growth in Krylon(R) brand products. Revenue for the real estate operations in the Other Segment was essentially the same as 1992. Consolidated gross profit as a percent of sales increased to 42.5 percent from 42.2 percent in 1992. The Paint Stores Segment's gross margin increased slightly. An increase in the Coatings Segment's gross margin was due primarily to continuing volume gains and the associated improvement in capacity utilization, overall stable raw material costs and cost containment. Consolidated selling, general and administrative expenses remained constant at 33.3 percent when comparing 1993 to 1992. Higher dollars spent occurred in the Coatings Segment as compared to last year due primarily to additional costs for market penetration efforts for new customers, increased promotional expenses associated with the introduction of new products and ongoing brand support. Consolidated operating profits increased 11.2 percent in comparison with 1992. Operating profits of the Paint Stores Segment increased 28.5 percent due primarily to volume gains. The Coatings Segment's operating profits increased 11.9 percent due primarily to gains in gross profit. The operating profits of the Other Segment decreased in comparison to 1992 due primarily to various provisions made for disposition of certain non-retail properties. Corporate expenses increased over 1992 as a result of changes in various provisions and other items which are not directly associated with or allocable to any operating segment. Refer to pages 1 through 6 of this report for additional Business Segment information. Interest expense decreased 24.8 percent from last year due to normal maturities and acquisitions of long-term debt and no short-term borrowings being utilized during 1993. Correspondingly, our interest coverage improved to 42.0 times in 1993 compared to 27.4 times in 1992 (based on income before income taxes and cumulative effects of changes in accounting methods). Our fixed charge coverage, which is calculated using interest and rent expense, improved to 3.7 times in 1993 versus 3.4 times in 1992 (based also on income before income taxes and cumulative effects of changes in accounting methods). Interest and net investment income increased 48.2 percent to $7.0 million primarily as a result of higher cash and short-term investment balances partially offset by lower effective yields. Other costs and expenses decreased to $7.3 million primarily due to reductions in the net adjustments to prior accruals relating to the disposition and termination of operations and in the provisions for environmental remediation. See Notes 3 and 4, on page 26 of this report, for further detail of other costs and expenses. The effective income tax rate increased in 1993 as compared to 1992, as shown in Note 13, on page 33 of this report, primarily due to an increase in the federal income tax rate legislated by Congress in the Omnibus Budget Reconciliation Act of 1993. Income before cumulative effects of changes in accounting methods increased 14.2 percent and income per share before cumulative effects of changes in accounting methods increased 13.6 percent. During 1993, the Company generated $256.0 million in cash flow from operations. This allowed us to acquire certain outstanding debentures, acquire additional common shares for treasury, increase the annual dividend and still increase our cash and short-term investments by more than $100 million. 15 18 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Directors The Sherwin-Williams Company Cleveland, Ohio We have audited the accompanying consolidated balance sheets of The Sherwin-Williams Company and subsidiaries as of December 31, 1994, 1993 and 1992, and the related statements of consolidated income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1994. Our audits also included the financial statement schedule listed at Item 14(a)(2) on page 19. The financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Sherwin-Williams Company and subsidiaries at December 31, 1994, 1993 and 1992, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. As discussed in Notes 6 and 13 to the consolidated financial statements, in 1992 the Company changed its methods of accounting for postretirement benefits other than pensions and income taxes, respectively. /s/ Ernst & Young LLP Cleveland, Ohio January 19, 1995 16 19 REPORT OF MANAGEMENT Shareholders The Sherwin-Williams Company We have prepared the accompanying consolidated financial statements and related information included herein for the years ended December 31, 1994, 1993 and 1992. The primary responsibility for the integrity of the financial information rests with management. This information is prepared in accordance with generally accepted accounting principles based upon our best estimates and judgments and giving due consideration to materiality. The Company maintains accounting and control systems which are designed to provide reasonable assurance that assets are safeguarded from loss or unauthorized use and which produce records adequate for preparation of financial information. There are limits inherent in all systems of internal control based on the recognition that the cost of such systems should not exceed the benefits to be derived. We believe our system provides this appropriate balance. The Board of Directors pursues its responsibility for these financial statements through the Audit Committee, composed exclusively of outside directors. The Committee meets periodically with management, internal auditors and our independent auditors to discuss the adequacy of financial controls, the quality of financial reporting and the nature, extent and results of the audit effort. Both the internal auditors and independent auditors have private and confidential access to the Audit Committee at all times. /s/ J. G. Breen /s/ L. J. Pitorak /s/ J. L. Ault - -------------------- -------------------------- ----------------------------- J. G. Breen L. J. Pitorak J. L. Ault Chairman and Senior Vice President -- Finance, Vice President -- Chief Executive Officer Treasurer and Chief Financial Officer Corporate Controller
FINANCIAL STATEMENTS See "Item 14 -- Financial Statement Schedule, Reports on Form 8-K and Exhibits" for the required Financial Statements. ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None 17 20 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by Item 10 regarding Directors is contained under the caption "Election of Directors" in the Proxy Statement which will be filed with the Securities and Exchange Commission, pursuant to Regulation 14A, not later than 120 days after the end of the fiscal year, which information under such caption is incorporated herein by reference. The information required by Item 10 regarding Executive Officers is contained under the caption "Executive Officers of the Registrant" in Part I of this Form 10-K which information under such caption is incorporated herein by reference. The information required by Item 10 regarding certain significant employees is contained under the captions "Corporate Officers of the Company" and "Operating Managers of the Company" (excluding the Executive Officers) in the Proxy Statement which information under such captions is incorporated herein by reference. The information required by Item 10 regarding Item 405 of Regulation S-K is contained under the caption "Section 16(a) Reporting Compliance" in the Proxy Statement which information under such caption is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information required by Item 11 is contained under certain captions and tables in the Proxy Statement which information under such captions and tables is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by Item 12 is contained under the caption "Security Ownership of Management" in the Proxy Statement which information under such caption is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None 18 21 PART IV ITEM 14. FINANCIAL STATEMENT SCHEDULE, REPORTS ON FORM 8-K AND EXHIBITS (a) (1) Financial Statements (i) Statements of Consolidated Income for the Years Ended December 31, 1994, 1993 and 1992 (ii) Consolidated Balance Sheets at December 31, 1994, 1993 and 1992 (iii) Statements of Consolidated Cash Flows for the Years Ended December 31, 1994, 1993 and 1992 (iv) Statements of Consolidated Shareholders' Equity for the Years Ended December 31, 1994, 1993 and 1992 (v) Notes to Consolidated Financial Statements for the Years Ended December 31, 1994, 1993 and 1992 (2) Financial Statement Schedule Financial Schedule No. II for the Years Ended December 31, 1994, 1993 and 1992 -- All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted. (3) Exhibits See Exhibit Index at page 39 of this report which is incorporated herein by reference.
(b) Reports on Form 8-K. The Company did not file any reports on Form 8-K during the quarter ended December 31, 1994. 19 22 STATEMENTS OF CONSOLIDATED INCOME (Thousands of Dollars Except Per Share Data)
1994 1993 1992 - ------------------------------------------------------------------------------------------ Net sales $3,100,069 $2,949,303 $2,747,843 Costs and expenses: Cost of goods sold 1,772,671 1,696,959 1,589,430 Selling, general and administrative expenses 1,018,470 981,268 914,660 Interest expense 3,217 6,453 8,576 Interest and net investment income (8,222) (7,020) (4,738) Other 15,420 7,279 13,921 - ------------------------------------------------------------------------------------------ 2,801,556 2,684,939 2,521,849 - ------------------------------------------------------------------------------------------ Income before income taxes and cumulative effects of changes in accounting methods 298,513 264,364 225,994 Income taxes 111,942 99,137 81,358 - ------------------------------------------------------------------------------------------ Income before cumulative effects of changes in accounting methods 186,571 165,227 144,636 Cumulative effect of change in accounting method for income taxes 18,057 Cumulative effect of change in accounting method for postretirement benefits other than pensions -- net of income taxes of $62,464 (99,828) - ------------------------------------------------------------------------------------------ Net income $ 186,571 $ 165,227 $ 62,865 =========================================================================================== Income per share: Before cumulative effects of changes in accounting methods $ 2.15 $ 1.85 $ 1.63 Cumulative effect of change in accounting method for income taxes .20 Cumulative effect of change in accounting method for postretirement benefits other than pensions -- net of taxes (1.12) - ------------------------------------------------------------------------------------------ Net income $ 2.15 $ 1.85 $ .71 ===========================================================================================
See notes to consolidated financial statements. 20 23 CONSOLIDATED BALANCE SHEETS (Thousands of Dollars)
1994 1993 1992 - ------------------------------------------------------------------------------------------ ASSETS Current assets: Cash and cash equivalents $ 251,415 $ 230,092 $ 164,701 Short-term investments 39,700 3,011 Accounts receivable, less allowance 310,984 297,527 277,314 Inventories: Finished goods 396,299 371,572 355,227 Work in process and raw materials 62,921 57,346 52,557 - ------------------------------------------------------------------------------------------ 459,220 428,918 407,784 Deferred income taxes 73,956 58,705 38,536 Other current assets 93,049 96,145 96,818 - ------------------------------------------------------------------------------------------ Total current assets 1,188,624 1,151,087 988,164 Deferred pension assets 225,962 214,583 189,974 Intangibles and other assets 138,243 154,925 163,803 Property, plant and equipment: Land 42,211 45,487 43,585 Buildings 227,390 219,395 210,157 Machinery and equipment 596,878 556,694 515,748 Construction in progress 26,074 17,178 17,393 - ------------------------------------------------------------------------------------------ 892,553 838,754 786,883 Less allowances for depreciation 483,351 444,684 398,969 - ------------------------------------------------------------------------------------------ 409,202 394,070 387,914 - ------------------------------------------------------------------------------------------ Total Assets $1,962,031 $1,914,665 $1,729,855 =========================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 258,930 $ 254,997 $ 231,539 Compensation and taxes withheld 79,110 71,476 66,399 Other accruals 218,240 187,324 170,751 Accrued taxes 40,768 39,804 21,434 - ------------------------------------------------------------------------------------------ Total current liabilities 597,048 553,601 490,123 Long-term debt 20,465 37,901 60,079 Postretirement benefits other than pensions 172,114 166,025 163,104 Other long-term liabilities 119,060 123,967 110,702 Shareholders' equity: Common stock -- $1.00 par value: 84,825,830, 88,506,337 and 88,380,906 shares outstanding at December 31, 1994, 1993 and 1992, respectively 100,370 99,994 99,374 Other capital 159,562 150,203 134,901 Retained earnings 1,096,066 957,858 828,851 Cumulative foreign currency translation adjustment (20,006) (20,384) (18,923) Treasury stock, at cost (282,648) (154,500) (138,356) - ------------------------------------------------------------------------------------------ Total shareholders' equity 1,053,344 1,033,171 905,847 - ------------------------------------------------------------------------------------------ Total Liabilities and Shareholders' Equity $1,962,031 $1,914,665 $1,729,855 ===========================================================================================
See notes to consolidated financial statements. 21 24 STATEMENTS OF CONSOLIDATED CASH FLOWS (Thousands of Dollars)
1994 1993 1992 - --------------------------------------------------------------------------------------- OPERATIONS Net income $186,571 $165,227 $ 62,865 Non-cash adjustments: Cumulative effect of changes in accounting methods 81,771 Depreciation 60,571 55,063 51,308 Deferred income tax expense (18,329) (21,873) (5,202) Provisions for disposition of operations 15,412 7,621 7,735 Provisions for environmental remediation 4,700 4,354 9,450 Amortization of intangible assets 13,153 13,753 14,960 Defined benefit pension plans net credit (11,379) (16,113) (15,896) Net postretirement benefit plans expense 5,139 2,921 8,834 Other 11,222 16,261 7,491 Change in current items-net: Increase in accounts receivable (11,606) (19,500) (30,185) Decrease (increase) in inventories (28,748) (19,553) 15,405 Increase in accounts payable 3,933 23,458 27,981 Increase (decrease) in accrued taxes 964 16,697 (7,968) Increase in accrued employee welfare costs 5,507 14,957 7,816 Other current items 22,882 13,946 (8,903) Costs incurred for dispositions of operations (6,949) (5,767) (10,366) Other (2,520) 4,528 (2,968) - --------------------------------------------------------------------------------------- Net operating cash 250,523 255,980 214,128 - --------------------------------------------------------------------------------------- INVESTING Capital expenditures (78,660) (62,985) (68,814) Decrease (increase) in short-term investments 39,700 (36,689) (3,011) Acquisitions of assets (9,215) (3,157) (2,985) Other 6,347 (5,213) (272) - --------------------------------------------------------------------------------------- Net investing cash (41,828) (108,044) (75,082) - --------------------------------------------------------------------------------------- FINANCING Payments of long-term debt (19,607) (33,711) (44,174) Payments of cash dividends (48,363) (44,373) (38,759) Proceeds from stock options exercised 6,301 9,535 13,101 Purchases of stock for treasury (128,148) (16,144) (4,349) Other 2,445 2,148 (930) - --------------------------------------------------------------------------------------- Net financing cash (187,372) (82,545) (75,111) - --------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 21,323 65,391 63,935 Cash and cash equivalents at beginning of year 230,092 164,701 100,766 - --------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $251,415 $230,092 $164,701 =========================================================================================== Taxes paid on income $132,573 $102,513 $ 89,297 Interest paid on debt 3,314 7,886 7,508 - ---------------------------------------------------------------------------------------
See notes to consolidated financial statements. 22 25 STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY (Thousands of Dollars)
Cumulative Common Other Retained Translation Treasury Stock Capital Earnings Adjustment Stock - ------------------------------------------------------------------------------------------------- Balance at January 1, 1992 $ 98,483 $116,683 $ 805,689 $(18,885) $(134,007) Treasury stock acquired (678) Stock issued 891 18,218 (3,671) Net income 62,865 Cash dividends -- $.44 per share (38,759) Increase in unfunded pension losses -- net of taxes (944) Current year translation adjustment (38) - ------------------------------------------------------------------------------------------------- Balance at December 31, 1992 99,374 134,901 828,851 (18,923) (138,356) Treasury stock acquired (13,841) Stock issued 620 15,302 (2,303) Net income 165,227 Cash dividends -- $.50 per share (44,373) Reduction in unfunded pension losses -- net of taxes 8,153 Current year translation adjustment (1,461) - ------------------------------------------------------------------------------------------------- Balance at December 31, 1993 99,994 150,203 957,858 (20,384) (154,500) Treasury stock acquired (126,794) Stock issued 376 9,359 (1,354) Net income 186,571 Cash dividends -- $.56 per share (48,363) Current year translation adjustment 378 - ------------------------------------------------------------------------------------------------- Balance at December 31, 1994 $100,370 $159,562 $1,096,066 $(20,006) $(282,648) =================================================================================================
See notes to consolidated financial statements. 23 26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Thousands of Dollars Unless Otherwise Indicated) NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES Consolidation. The consolidated financial statements include all significant controlled subsidiaries. Inter-company accounts and transactions have been eliminated. Business segments. Business segment information appears on pages 1 through 6 of this report. Foreign currency translation. All consolidated foreign operations use the local currency of the country of operation as the functional currency and translate the local currency asset and liability accounts at year-end exchange rates while income and expense accounts are translated at average exchange rates. The resulting translation adjustments are accumulated as a separate component of Shareholders' Equity titled "Cumulative foreign currency translation adjustment". Cash flows. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Property, plant and equipment. Property, plant and equipment is stated on the basis of cost. Depreciation is provided principally by the straight-line method. The major classes of assets and ranges of depreciation rates are as follows: Buildings 2% - 6 2/3% Machinery and equipment 4% - 20% Furniture and fixtures 5% - 20% Automobiles and trucks 10% - 33 1/3%
Investment in Life Insurance. The Company invests in broad-based corporate owned life insurance. The cash surrender value of the policies, net of policy loans, are included in Other Assets. The net expense associated with such investment is included in Other Costs and Expenses. Such expense is immaterial to income before income taxes. Intangibles. Intangible assets were $105,821, $115,765 and $128,222, net of accumulated amortization of $62,744, $49,562 and $35,986, at December 31, 1994, 1993 and 1992, respectively. These assets are amortized by the straight-line method over the expected period of benefit. Technical expenditures. Total technical expenditures include research and development costs, quality control, product formulation expenditures and other similar items. Research and development costs included in technical expenditures were $16,319, $17,190 and $15,661 for 1994, 1993 and 1992, respectively. Net income per share. Net income per share was computed based on the average number of shares and share equivalents outstanding during the year. See computation on page 41 of this report. Letters of credit. The Company occasionally enters into standby letter of credit agreements to guarantee various operating activities. These agreements, which expire in 1995, provide credit availability to the various beneficiaries if certain contractual events occur. Amounts outstanding under these agreements totaled $20,091, $24,656 and $29,882 at December 31, 1994, 1993 and 1992, respectively. Fair value of financial instruments. The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: Cash and cash equivalents: The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents approximate fair value. Short-term investments: The carrying amounts reported in the consolidated balance sheets for marketable debt and equity securities are based on quoted market prices and approximate fair value. 24 27 Investments in Securities: The Company maintains certain long-term investments in a fund to provide for payment of health care benefits of certain qualified employees. These investments are classified as held-to-maturity securities with the related carrying amounts included in Other Assets. The estimated fair values of these securities, shown below, are based on quoted market prices.
December 31, ----------------------------------------------------------------------------------------- 1994 1993 1992 ----------------------------------------------------------------------------------------- Carrying amount $37,726 $38,064 $39,027 Fair value 37,668 43,235 45,847 -----------------------------------------------------------------------------------------
Long-term debt (including current portion): The fair values of the Company's publicly traded debentures, shown below, are based on quoted market prices. The fair values of the Company's non-traded debt, also shown below, are estimated using discounted cash flow analyses, based on the Company's current incremental borrowing rates for similar types of borrowing arrangements.
December 31, --------------------------------------------------------------------------------------------- 1994 1993 1992 --------------------------------------------------------------------------------------------- CARRYING FAIR Carrying Fair Carrying Fair AMOUNT VALUE Amount Value Amount Value --------------------------------------------------------------------------------------------- Publicly traded debt $16,077 $17,643 $29,235 $37,071 $49,260 $55,538 Non-traded debt 5,083 3,243 10,084 7,446 23,722 19,931 ---------------------------------------------------------------------------------------------
Interest rate swaps. The Company occasionally enters into interest rate swaps primarily to hedge against interest rate risks. These agreements generally involve the exchange of fixed and floating rate interest payment obligations without the exchange of the underlying principal amounts. Counterparties of these agreements are major financial institutions. Management believes the risk of incurring losses related to credit risk is remote. The fair values for the Company's off-balance-sheet instruments, shown below, are based on pricing models or formulas using current assumptions for comparable instruments. All fair value amounts shown represent a liability position at the respective date.
December 31, ----------------------------------------------------------------------------------------- 1994 1993 1992 ----------------------------------------------------------------------------------------- Carrying amount $ 1,802 $ 2,309 $ 2,773 Fair value 1,996 1,094 2,722 Notional amount 9,446 35,009 85,421 Number of agreements outstanding 1 2 4 -----------------------------------------------------------------------------------------
Non-traded investments: It was not practicable to estimate the fair value of the Company's investment in certain non-traded investments because of the lack of quoted market prices and the inability to estimate fair values without incurring excessive costs. The carrying amounts, included in other assets, of $18,829, $25,778 and $21,431 at December 31, 1994, 1993 and 1992, respectively, represent the Company's best estimate of current economic values of these investments. Reclassification. Certain amounts in the 1993 and 1992 financial statements have been reclassified to conform with the 1994 presentation. 25 28 NOTE 2 -- INVENTORIES Inventories are stated at the lower of cost or market. Cost is determined principally on the last-in, first-out (LIFO) method which provides a better matching of current costs and revenues. The following presents the effect on inventories, net income and net income per share had the Company used the first-in, first-out (FIFO) and average cost methods of inventory valuation adjusted for income taxes at the statutory rate and assuming no other adjustments. This information is presented to enable the reader to make comparisons with companies using the FIFO method of inventory valuation.
1994 1993 1992 - ----------------------------------------------------------------------------------------------- Percentage of total inventories on LIFO 97% 97% 97% Excess of FIFO and average cost over LIFO $80,199 $80,094 $83,505 Increase (decrease) in net income due to LIFO (68) 2,217 (174) Increase in net income per share due to LIFO -- .02 -- - -----------------------------------------------------------------------------------------------
NOTE 3 -- OTHER COSTS AND EXPENSES A summary of significant items included in other costs and expenses is as follows:
1994 1993 1992 - ----------------------------------------------------------------------------------------------- Dividend and royalty income $(7,500) $(5,445) $(6,934) Net expense of financing and investing activities 12,660 4,155 2,323 Provisions for environmental remediation 4,700 4,354 9,450 Provisions for disposition and termination of operations (see Note 4) 1,812 2,621 7,310 Miscellaneous 3,748 1,594 1,772 - ----------------------------------------------------------------------------------------------- $15,420 $ 7,279 $13,921 ===============================================================================================
The net expense of financing and investing activities represents the realized gains or losses associated with disposing of fixed assets, the net gain or loss associated with the investment of certain long-term asset funds, the premium associated with the retirement or acquisition of certain outstanding 9.875 percent debentures and, in 1994, the net pre-tax expense associated with the Company's investment in broad-based corporate owned life insurance. During the three years ended December 31, 1994, provisions for environmental remediation reflect the increased estimated costs of environmental remediation at operating facilities, idle facilities and Superfund sites. NOTE 4 -- DISPOSITION AND TERMINATION OF OPERATIONS The Company is continually re-evaluating its operating facilities with regard to the long-term strategic goals established by management and the board of directors. Operating facilities which are not expected to contribute to the Company's future plans are closed or sold. At the time of the decision to close or sell a facility, a provision is made and the expense included in other costs and expenses to reduce property, plant and equipment to its estimated net realizable value. Similarly, provisions are made which reduce all other assets to their estimated net realizable values and provide for the estimated related costs of severance pay, environmental-related matters and other shutdown expenses and future operating losses to disposal date. The expenses associated with the related closing cost provisions are included in cost of goods sold. Adjustments to all previous accruals, as disposition occurs, are included in other costs and expenses. A portion of the ending accruals represents estimated expenditures for environmental-related matters which are anticipated to 26 29 occur beyond one year. Accordingly, that portion of the ending accruals has been classified as a long-term liability (see Note 9) with the remaining amount included in other current liabilities. The provisions made in 1994 represent additional estimated environmental remediation costs for property adjacent to a site closing and the costs associated with closing certain warehouses which are to be replaced by larger, more efficient facilities during 1995. In 1993, provisions were made for the closing of certain warehouses, small manufacturing facilities and selected unprofitable retail paint stores as part of production and distribution consolidations. In 1992, the provisions represented primarily the estimated increased operational losses to disposal date of closed facilities. A summary of the financial data related to the closing or sale of the facilities is as follows:
1994 1993 1992 - ----------------------------------------------------------------------------------------------- Beginning accruals -- January 1 $45,060 $43,206 $45,837 Provisions included in cost of goods sold 13,600 5,000 425 Provisions and adjustments to prior accruals included in costs and expenses -- other 1,812 2,621 7,310 - ----------------------------------------------------------------------------------------------- Total provision 15,412 7,621 7,735 Actual costs incurred (6,949) (5,767) (10,366) - ----------------------------------------------------------------------------------------------- Ending accruals -- December 31 $53,523 $45,060 $43,206 =============================================================================================== Net after-tax provision $10,018 $ 4,954 $ 5,105 Net after-tax provision per share $ .12 $ .05 $ .06 - -----------------------------------------------------------------------------------------------
NOTE 5 -- PENSION BENEFITS Substantially all employees of the Company participate in noncontributory defined benefit or defined contribution pension plans. Defined benefit plans covering salaried employees provide benefits that are based primarily on years of service and employees' compensation. The defined benefit plan covering hourly employees generally provides benefits of stated amounts for each year of service. Multi-employer plans are primarily defined benefit plans which provide benefits of stated amounts for union employees. Plan assets consist primarily of cash, equity and fixed-income securities. There were 969,400 shares of the Company's stock included in these assets at December 31, 1994, 1993 and 1992, respectively. On December 31, 1993, the hourly defined benefit pension plan was merged with a frozen participation salaried defined benefit pension plan associated with previously discontinued operations. The plan assets of the resulting merged plan, known as the Employees' Retirement Plan, exceed the projected benefit obligation. The Company's funding policy for defined benefit pension plans is to fund at least the minimum annual contribution required by applicable regulations. Due to increased rates of high quality long-term investments, the assumed discount rate was changed December 31, 1994, decreasing the projected benefit obligation. The increased interest rates during 1994 negatively impacted the return on plan assets in the defined benefit pension trusts. The effect of the change in the assumed discount rate and the reduced earnings on plan assets resulted in a net increase in the unrecognized net loss which will be amortized beginning in 1995. Changes in the assumed discount rate and rate of return on plan assets at December 31, 1993 previously increased the unrecognized net loss whose 1994 amortization reduced the net pension credit. 27 30 The net pension credit for defined benefit plans and its components was as follows:
1994 1993 1992 - ----------------------------------------------------------------------------------------------- Service cost $ 2,800 $ 2,489 $ 2,620 Interest cost 8,402 8,299 8,167 Actual return on plan assets 7,418 (25,731) (16,903) Net amortization and deferral (29,999) (1,170) (9,780) - ----------------------------------------------------------------------------------------------- Net pension credit $ (11,379) $ (16,113) $ (15,896) ===============================================================================================
Based on the latest actuarial information available, the following table sets forth the funded status and amounts recognized in the Company's consolidated balance sheets for the defined benefit pension plans:
1994 1993 1992 - ----------------------------------------------------------------------------------------------- Actuarial present value of benefit obligations: Vested benefit obligation $(103,860) $(105,530) $ (92,720) Accumulated benefit obligation $(105,480) $(107,530) $ (94,580) Projected benefit obligation $(111,650) $(117,970) $(102,480) Plan assets at fair value: Salaried employees' plan(s) $ 196,911 $ 203,222 $ 219,391 Employees' Retirement Plan 80,930 89,854 55,588 - ----------------------------------------------------------------------------------------------- 277,841 293,076 274,979 Plan assets in excess of (less than) projected benefit obligation: Salaried employees' plan(s) 157,661 166,622 181,011 Employees' Retirement Plan 8,530 8,484 (8,512) - ----------------------------------------------------------------------------------------------- 166,191 175,106 172,499 Unrecognized net asset at January 1, 1986, net of amortization (12,787) (15,708) (18,630) Unrecognized prior service cost 441 1,201 885 Unrecognized net loss 72,117 53,984 40,621 Adjustment required to recognize minimum liability for the Employees' Retirement Plan (13,515) - ----------------------------------------------------------------------------------------------- Net pension assets $ 225,962 $ 214,583 $ 181,860 =============================================================================================== Net pension assets recognized in the consolidated balance sheets: Deferred pension assets $ 225,962 $ 214,583 $ 189,974 Minimum liability included in long-term liabilities (6,489) Accrued pension liability included in current liabilities (1,625) - ----------------------------------------------------------------------------------------------- Net pension assets $ 225,962 $ 214,583 $ 181,860 =============================================================================================== Assumptions used in determining actuarial present value of benefit obligations: Discount rate 8.25% 7.25% 8.50% Weighted-average rate of increase in future compensation levels 5.00% 5.00% 5.00% Long-term rate of return on plan assets 8.50% 8.50% 10.00% - -----------------------------------------------------------------------------------------------
The Company's annual contribution for its defined contribution pension plans, which is based on a level percentage of compensation for covered employees, offset the pension credit by $20,193 for 28 31 1994, $19,809 for 1993 and $17,110 for 1992. The cost of multiemployer and foreign plans charged to income was immaterial for the three years ended December 31, 1994. NOTE 6 -- BENEFITS OTHER THAN PENSIONS In addition to providing pension benefits, the Company provides certain health care and life insurance benefits under company-sponsored plans for active and retired employees. The health care plans are contributory and contain cost-sharing features such as deductibles and coinsurance. Certain provisions of the plans concerning deductibles, coinsurance and eligibility were amended as of January 1, 1993. There were 14,160, 13,883 and 13,741 active employees entitled to receive benefits under these plans as of December 31, 1994, 1993 and 1992, respectively. The cost of these benefits for active employees is recognized as claims are incurred and amounted to $32,694, $35,597 and $35,047 for 1994, 1993 and 1992, respectively. The Company has a fund to provide for payment of health care benefits of certain qualified employees. Distributions from the fund amounted to $4,662 in 1994, $5,719 in 1993 and $35,447 in 1992. The Company last contributed to the fund in 1992 and does not intend to make any further contributions. Substantially all employees of the Company who are not members of a collective bargaining unit are eligible for certain health care and life insurance benefits upon retirement. There were 4,093, 4,126 and 4,201 retired employees entitled to receive benefits as of December 31, 1994, 1993 and 1992, respectively. The health care and life insurance plan amendments decreased the accumulated postretirement benefit obligation resulting in a net prior service credit which was first amortized beginning in 1993. The plans are unfunded. During the fourth quarter of 1992, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions", effective January 1, 1992. The Company recognized a one-time charge to consolidated income on January 1, 1992 of $99,828 ($1.12 per share) for the accumulated postretirement benefit obligation which was not recognized by the Company prior to the adoption of SFAS No. 106. The assumed discount rate used in determining the actuarial present value of the accumulated postretirement benefit obligation was 8.25%, 7.25% and 8.50% for 1994, 1993 and 1992, respectively. Due to the increased interest rates of high quality long-term investments, the assumed discount rate was changed December 31, 1994 decreasing the accumulated postretirement benefit obligation, the effect of which decreased the unrecognized net loss. The assumed weighted-average annual rate of increase in the per capita cost of covered benefits (i.e., the health care cost trend rate) is 9.5 percent for 1995 and decreases gradually to 5.5 percent for 2003 and thereafter. The assumed health care cost trend rate was lowered one percentage point at December 31, 1993 for each year thereafter, which decreased the accumulated postretirement benefit obligation. The health care cost trend rate has a significant effect on the amounts reported. To illustrate, increasing the assumed health care cost trend rate by one percentage point in each year would increase the accumulated postretirement benefit obligation as of December 31, 1994 by $12,174 and the aggregate service and interest cost components of net periodic postretirement benefit cost for 1994 by $1,064. 29 32 Based on the latest actuarial information available, the following table sets forth the amounts recognized in the Company's consolidated balance sheets for postretirement benefits other than pensions:
1994 1993 1992 - ----------------------------------------------------------------------------------------------- Actuarial present value of accumulated postretirement benefit obligation: Retirees $ (93,049) $ (94,000) $ (96,776) Fully eligible active participants (14,240) (19,900) (21,156) Other active participants (41,811) (40,680) (54,272) - ----------------------------------------------------------------------------------------------- (149,100) (154,580) (172,204) Effect of changes in the accumulated postretirement benefit obligation to be amortized over future years: Unrecognized prior service credit (26,961) (29,655) Unrecognized net (gain) loss (4,203) 9,110 - ----------------------------------------------------------------------------------------------- Total accrued postretirement benefit liability $(180,264) $(175,125) $(172,204) =============================================================================================== Accrued postretirement benefit liabilities recognized in the consolidated balance sheets: Amount included in current liabilities $ (8,150) $ (9,100) $ (9,100) Amount of long-term postretirement benefits other than pensions (172,114) (166,025) (163,104) - ----------------------------------------------------------------------------------------------- Total accrued postretirement benefit liability $(180,264) $(175,125) $(172,204) =============================================================================================== The expense for postretirement benefit plans and its components was as follows: Service cost $ 3,112 $ 2,450 $ 3,938 Interest cost 11,459 11,420 13,886 Net amortization of unrecognized prior service credit (2,693) (2,693) Net amortization and deferral 61 - ----------------------------------------------------------------------------------------------- Net postretirement benefit expense $ 11,939 $ 11,177 $ 17,824 ===============================================================================================
NOTE 7 -- LONG-TERM DEBT
Sinking Fund/Interim Payments Amount Outstanding ------------------------------------------ --------------------------------------- Due Date Amount Commence 1994 1993 1992 - ----------------------------------------------------------------------------------------------------------------------------- 9.875% Debentures 2016 $5,000 2007 $15,900 $29,000 $49,000 8% to 12% Mortgage Notes secured by Through Varies Payable currently 3,365 4,418 6,114 certain land and buildings and 2005 other 8.5% Promissory Note 2004 Varies 1996 1,000 Floating Rate Broward County 3,994 4,374 Industrial Revenue Bond 6.25% Convertible Subordinated 1995 235 260 Debentures (Convertible into common stock at $2.875 a share) Other Obligations 200 254 331 - ----------------------------------------------------------------------------------------------------------------------------- $20,465 $37,901 $60,079 =============================================================================================================================
Maturities of long-term debt are as follows for the next five years: $926 in 1995; $755 in 1996; $662 in 1997; $467 in 1998; and $506 in 1999. Interest expense on long-term debt amounted to $2,768, $6,136 and $7,438 for 1994, 1993 and 1992, respectively. There were no interest charges capitalized during the periods presented. 30 33 The Company had the following financing arrangements available, however there were no outstanding borrowings at December 31, 1994. Under a credit agreement with a group of eleven banks dated June 22, 1987, the Company may borrow up to $280,000. The termination date of the agreement is automatically extended by one year on each anniversary date, but shall not extend beyond the twentieth anniversary of the agreement. Amounts outstanding under the agreement may be converted into two-year term loans at any time. The credit agreement includes certain restrictive covenants regarding the working capital ratio. There are no compensating balance requirements. The Company has a commercial paper program under which $280,000 aggregate principal amount of unsecured short-term notes can be issued. Under a shelf registration with the Securities and Exchange Commission covering $200,000 of unsecured debt securities with maturities ranging from nine months to thirty years, the Company may issue securities from time to time in one or more series and will offer the securities on terms determined at the time of sale. NOTE 8 -- LEASES The Company leases stores, warehouses, office space and equipment. Renewal options are available on the majority of leases and, under certain conditions, options exist to purchase some properties. Rental expense for operating leases was $93,637, $91,672 and $86,944 for 1994, 1993 and 1992, respectively. Certain store leases require the payment of contingent rentals based on sales in excess of specified minimums. Contingent rentals included in rent expense were $8,985 in 1994, $9,234 in 1993 and $8,215 in 1992. Certain properties are subleased with various expiration dates. Rental income, as lessor, from real estate leasing activities and sublease rental income for all years presented was not significant. Following is a schedule, by year and in the aggregate, of future minimum lease payments under noncancellable operating leases having initial or remaining terms in excess of one year at December 31, 1994: 1995 $ 73,435 1996 61,982 1997 49,003 1998 36,250 1999 24,925 Later years 57,891 -------- Total minimum lease payments $303,486 ========
NOTE 9 -- OTHER LONG-TERM LIABILITIES Other long-term liabilities consist of the following:
1994 1993 1992 - -------------------------------------------------------------------------------------------- Environmental-related $ 71,049 $ 65,755 $ 53,252 Other 48,011 58,212 57,450 - -------------------------------------------------------------------------------------------- $119,060 $123,967 $110,702 ============================================================================================
The Company has provided for the estimated costs associated with environmental remediation activities at some of its current and former sites. Also, the Company, together with other parties, has been designated a potentially responsible party under federal and state environmental protection laws for the remediation of hazardous waste at a number of third-party sites, primarily Superfund sites. In general, these laws provide that potentially responsible parties may be held jointly and severally liable 31 34 for investigation and remediation costs regardless of fault. The Company provides for its estimated potential liability for investigation and remediation costs with respect to such third-party sites. The Company initially provides for the estimated cost of certain environmental-related activities relating to its current, former and third-party sites when minimum costs can be reasonably estimated. These estimates are determined based on currently-available facts regarding each site. If the best estimate of costs can only be identified within a range and no specific amount within that range can be determined more likely than any other amount within the range, the minimum of the range is accrued. Actual costs incurred may vary from these estimates due to the inherent uncertainties involved. The Company believes that any additional liability in excess of amounts provided which may result from the resolution of these matters will not have a material adverse effect on the financial condition, liquidity or cash flow of the Company. In addition to the long-term portion of environmental-related accruals shown above, current accruals for certain environmental-related liabilities associated with the disposition and termination of operations (see Note 4) and those associated with other current, former and third-party sites are included in other accruals in current liabilities on the balance sheet. NOTE 10 -- CAPITAL STOCK
Shares Shares in Treasury Outstanding - ------------------------------------------------------------------------------------------- Balance at January 1, 1992 10,839,716 87,643,066 Stock issued upon: Exercise of stock options 128,463 768,833 Conversion of 6.25% Convertible Subordinated Debentures 10,085 Cancellation of restricted stock grants (16,000) Treasury stock acquired 25,078 (25,078) - ------------------------------------------------------------------------------------------- Balance at December 31, 1992 10,993,257 88,380,906 Stock issued upon: Exercise of stock options 73,224 462,736 Conversion of 6.25% Convertible Subordinated Debentures 8,695 Restricted stock grants 75,500 Treasury stock acquired 421,500 (421,500) - ------------------------------------------------------------------------------------------- Balance at December 31, 1993 11,487,981 88,506,337 Stock issued upon: Exercise of stock options 42,292 319,124 Conversion of 6.25% Convertible Subordinated Debentures 20,169 Cancellation of restricted stock grants (6,000) Treasury stock acquired 4,013,800 (4,013,800) - ------------------------------------------------------------------------------------------- Balance at December 31, 1994 15,544,073 84,825,830 ==========================================================================================
An aggregate of 5,663,772, 4,087,364 and 4,707,520 shares of stock at December 31, 1994, 1993 and 1992, respectively, were reserved for conversion of convertible subordinated debentures, and exercise and future grants of stock options. At December 31, 1994, there were 300,000,000 shares of common stock and 30,000,000 shares of serial preferred stock authorized for issuance. The Company has a shareholders' rights plan which designates 1,000,000 shares of the authorized serial preferred stock as cumulative redeemable serial preferred stock which may be issued if the Company becomes the target of coercive and unfair takeover tactics. 32 35 NOTE 11 -- STOCK PURCHASE PLAN As of December 31, 1994, 10,918 employees participated through regular payroll deductions in the Company's Employee Stock Purchase and Savings Plan. The Company's contribution charged to income amounted to $22,242, $20,658 and $17,321 for 1994, 1993 and 1992, respectively. Additionally, the Company made contributions on behalf of participating employees, which represent salary reductions for income tax purposes, amounting to $11,456 in 1994, $10,335 in 1993 and $8,646 in 1992. At December 31, 1994, there were 12,848,911 shares of the Company's stock being held by this plan, representing 15.2 percent of the total number of shares outstanding. Shares of company stock credited to each member's account under the plan are voted by the trustee under confidential instructions from each individual plan member. Shares for which no instructions are received are voted by the trustee in the same proportion as those for which instructions are received. NOTE 12 -- STOCK PLAN The Company's stock plan permits the granting of stock options, stock appreciation rights and restricted stock to eligible employees. The 1994 Stock Plan succeeded the 1984 Stock Plan which expired on February 15, 1994. Although no further grants may be made under the 1984 Stock Plan, all rights granted under such plan remain. The 1994 Stock Plan authorized an additional 2,000,000 shares to be added to authorized shares of the 1984 Stock Plan which were not granted as of the 1984 Stock Plan's expiration date. Non-qualified and incentive stock options have been granted to certain officers and key employees under the plans at prices not less than fair market value of the shares, as defined by the plans, at the date of grant. The options generally become exercisable to the extent of one-third of the optioned shares for each full year of employment following the date of grant and generally expire ten years after the date of grant. Restricted stock grants, with an outstanding balance of 218,000 shares at December 31, 1994, were awarded to certain officers and key employees which require four years of continuous employment from the date of grant before receiving the shares without restriction. The number of shares to be received without restriction is based on the Company's performance relative to a peer group of companies. Unamortized deferred compensation expense with respect to the restricted stock amounted to $1,612 at December 31, 1994, $3,760 at December 31, 1993 and $3,456 at December 31, 1992 and is being amortized over the four-year vesting period. Deferred compensation expense aggregated $1,416, $3,271 and $1,366 in 1994, 1993 and 1992, respectively. No stock appreciation rights have been granted.
1994 1993 1992 - --------------------------------------------------------------------------------------------------------------------------- PRICE Price Price SHARES RANGE Shares Range Shares Range - --------------------------------------------------------------------------------------------------------------------------- Stock Options: Outstanding beginning of year 2,671,545 $ 7.72-$35.88 2,944,255 $ 7.72-$28.88 3,569,190 $ 6.63-$25.13 Granted 334,400 32.19- 35.06 327,000 30.75- 35.88 383,000 27.25- 28.88 Exercised (361,416) 7.72- 31.63 (535,960) 9.22- 28.38 (897,296) 6.63- 20.44 Canceled (38,070) 12.56- 33.25 (63,750) 10.94- 30.75 (110,639) 10.94- 28.38 - --------------------------------------------------------------------------------------------------------------------------- Outstanding end of year 2,606,459 $10.94-$35.88 2,671,545 $ 7.72-$35.88 2,944,255 $ 7.72-$28.88 - --------------------------------------------------------------------------------------------------------------------------- Exercisable 1,969,569 1,579,103 1,254,890 Reserved for future grants 2,995,630 1,333,963 1,672,713 - ---------------------------------------------------------------------------------------------------------------------------
NOTE 13 -- INCOME TAXES During 1992, the Company adopted Statement of Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes". Under SFAS No. 109, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are currently in effect. As of January 1, 1992, the Company recognized a one-time benefit to consolidated income of $18,057 ($.20 33 36 per share) from the change in accounting for income taxes from the deferred method to the liability method as required by SFAS No. 109. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of December 31, 1994, 1993 and 1992 are as follows:
1994 1993 1992 - ----------------------------------------------------------------------------------------------- Deferred tax liabilities: Depreciation $ 23,829 $30,580 $32,833 Deferred employee benefit items 26,494 24,109 19,140 - ----------------------------------------------------------------------------------------------- Total deferred tax liabilities $ 50,323 $54,689 $51,973 =============================================================================================== Deferred tax assets: Dispositions, terminations and other similar items $ 36,076 $30,044 $28,341 Other items 77,013 65,721 46,325 - ----------------------------------------------------------------------------------------------- Total deferred tax assets $113,089 $95,765 $74,666 ===============================================================================================
Significant components of the provisions for income taxes are as follows:
1994 1993 1992 - -------------------------------------------------------------------------------------------- Current: Federal $106,132 $100,121 $72,116 Foreign 1,775 1,483 1,732 State and Local 22,364 19,406 12,712 - -------------------------------------------------------------------------------------------- Total Current 130,271 121,010 86,560 Deferred: Federal (15,465) (18,467) (4,490) Foreign State and Local (2,864) (3,406) (712) - -------------------------------------------------------------------------------------------- Total Deferred (18,329) (21,873) (5,202) - -------------------------------------------------------------------------------------------- Total income tax expense $111,942 $ 99,137 $81,358 ============================================================================================
A reconciliation of the statutory federal income tax rate and the effective tax rate follows:
1994 1993 1992 - --------------------------------------------------------------------------------------------- Statutory tax rate 35.0% 35.0% 34.0% Effect of: State and local taxes 4.2 3.9 3.5 Investment vehicles (2.0) (1.1) (0.6) Other, net 0.3 (0.3) (0.9) - --------------------------------------------------------------------------------------------- Effective tax rate 37.5% 37.5% 36.0% =============================================================================================
It is the Company's intention to reinvest undistributed earnings of foreign subsidiaries; accordingly, no deferred income taxes have been provided thereon. At December 31, 1994, such undistributed earnings amounted to $3,941. 34 37 NOTE 14 -- SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
NET NET GROSS NET INCOME QUARTER SALES PROFIT INCOME PER SHARE - ------------------------------------------------------------------------------------ 1994 1ST $ 639,157 $ 261,890 $ 15,508 $.17 2ND 880,531 378,775 69,155 .80 3RD 876,743 377,529 71,229 .83 4TH 703,638 309,204 30,679 .36 - ------------------------------------------------------------------------------------ 1993 1st $ 618,289 $ 249,561 $ 13,810 $.15 2nd 824,162 344,240 60,613 .68 3rd 838,824 361,516 64,372 .72 4th 668,028 297,027 26,432 .30 - ------------------------------------------------------------------------------------
1994 Net income for the fourth quarter was reduced $809 ($.01 per share) due to certain year-end adjustments. A net decrease in cost of goods sold resulted from physical inventory adjustments of $19,017 ($12,361 after-tax, $.14 per share) which were partially offset by certain provisions for the disposition and termination of operations of $13,600 ($8,840 after-tax, $.10 per share). A net increase in administrative expenses due to other year-end adjustments of $2,150 ($1,398 after-tax, $.01 per share) and in other costs and expenses due to the remaining provisions for the disposition and termination of operations of $1,812 ($1,178 after-tax, $.02 per share) and provisions for environmental remediation at certain sites of $2,700 ($1,755 after-tax, $.02 per share) more than offset the gain in cost of goods sold. 1993 Fourth quarter adjustments reduced net income by $1,219 ($.01 per share). The effect on net income was due to a year-end decrease in cost of goods sold for adjustments of inventory quantities and prior quarters' LIFO expense of $15,547 ($.17 per share) primarily offset by increases in administrative and other costs and expenses by provisions for the disposition and termination of certain operations of $4,954 ($.05 per share), provisions for environmental remediation at certain sites of $2,830 ($.03 per share), and other year-end adjustments of $8,983 ($.10 per share). 35 38 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (SCHEDULE II) Changes in the allowance for doubtful accounts are as follows:
1994 1993 1992 - ----------------------------------------------------------------------------------------------- Beginning balance $ 8,589 $ 1,983 $ 2,573 Bad debt expense 11,801 16,514 9,905 Net uncollectible accounts written off (9,570) (9,908) (10,495) - ----------------------------------------------------------------------------------------------- Ending balance $ 10,820 $ 8,589 $ 1,983 ===============================================================================================
Activity related to other assets:
1994 1993 1992 - ----------------------------------------------------------------------------------------------- Beginning balance $54,079 $40,124 $24,403 Charges to expense 20,850 13,785 15,028 Other additions 5,924 170 693 - ----------------------------------------------------------------------------------------------- Ending balance $80,853 $54,079 $40,124 ===============================================================================================
Charges to expense consist primarily of amortization of intangibles and, in 1994, adjustments to reduce certain assets to their estimated net realizable values. Other additions consist primarily of actual costs incurred and balance sheet reclassifications. 36 39 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Cleveland, and State of Ohio, on the 15th day of March, 1995. THE SHERWIN-WILLIAMS COMPANY By: /s/ L. E. STELLATO ------------------------------------ L. E. Stellato, Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities indicated on March 15, 1995.
SIGNATURE - ---------------------------- J. G. BREEN Chairman and Chief Executive Officer, - ---------------------------- Director J. G. Breen T. A. COMMES President and Chief Operating Officer, - ---------------------------- Director T. A. Commes L. J. PITORAK Senior Vice President -- Finance, - ---------------------------- Treasurer and Chief Financial Officer L. J. Pitorak J. L. AULT Vice President -- Corporate Controller - ---------------------------- J. L. Ault J. M. BIGGAR Director - ---------------------------- J.M. Biggar L. CARTER Director - ---------------------------- L. Carter D. E. EVANS Director - ---------------------------- D. E. Evans R. W. MAHONEY Director - ---------------------------- R. W. Mahoney W. G. MITCHELL Director - ---------------------------- W. G. Mitchell A. M. MIXON, III Director - ---------------------------- A. M. Mixon, III H. O. PETRAUSKAS Director - ---------------------------- H. O. Petrauskas
37 40
SIGNATURE - ---------------------------- R. E. SCHEY Director - ---------------------------- R. E. Schey R. K. SMUCKER Director - ---------------------------- R. K. Smucker
The undersigned, by signing his name hereto, does sign this report on behalf of the designated Officers and Directors of The Sherwin-Williams Company pursuant to Powers of Attorney executed on behalf of each such Officer and Director. By: /s/ L. E. STELLATO March 15, 1995 -------------------------------- L. E. Stellato, Attorney-in-fact 38 41 EXHIBIT INDEX 2. Not applicable. 3. (a) Amended Articles of Incorporation, as amended April 28, 1993, filed as Exhibit 4(a) to Form S-8 Registration Statement No. 33-52227 dated February 10, 1994, and incorporated herein by reference. (b) Regulations of the Company, as amended, dated April 27, 1988, filed as Exhibit 4(b) to Post-Effective Amendment No. 1, dated April 29, 1988, to Form S-8 Registration Statement Number 2-91401, and incorporated herein by reference. 4. (a) Indenture between the Company and Chemical Bank, as Trustee, dated June 15, 1988, filed as Exhibit 4(b) to Form S-3 Registration Statement Number 33-22705, dated June 24, 1988, and incorporated herein by reference. (b) Revolving Credit Agreement, by and among the Company and several banking institutions, as amended and restated, effective December 15, 1993 and filed as Exhibit 4(f) to Form S-8 Registration Statement No. 33-52227 dated February 10, 1994, and incorporated herein by reference. (c) Indenture between Sherwin-Williams Development Corporation, as issuer, the Company, as guarantor, and Harris Trust and Savings Bank, as Trustee, dated June 15, 1986, filed as Exhibit 4(b) to Form S-3 Registration Statement Number 33-6626, dated June 20, 1986, and incorporated herein by reference. (d) Indenture between the Company and Central National Bank, dated March 1, 1970, filed as Exhibit 4 to Form S-7 Registration Statement Number 2-36240, and incorporated herein by reference. (e) Indenture between the Company and The Cleveland Trust Company, as Trustee, dated April 17, 1967, filed as Exhibit 2(a) to Amendment No. 1, dated April 18, 1967, to Form S-9 Registration Statement Number 2-26295, and incorporated herein by reference. (f) Rights Agreement between the Company and Ameritrust Company National Association, dated January 25, 1989, filed as Exhibit 2.1 to Form 8-A, dated January 26, 1989, and incorporated herein by reference. 9. Not applicable. 10. *(a) Form of Director and Officer Indemnification Agreement filed as Exhibit 28(a) to Form S-3 Registration Statement Number 33-22705 dated June 24, 1988, and incorporated herein by reference. *(b) Employment Agreements filed as Exhibit 28(b) to Form S-3 Registration Statement Number 33-22705 dated June 24, 1988, and incorporated herein by reference. *(c) Form of Severance Pay Agreements filed as Exhibit 10(c) to Form 10-K dated March 13, 1990, and incorporated herein by reference. *(d) The Sherwin-Williams Company Deferred Compensation Savings Plan filed as Exhibit 10(d) to Form 10-K dated March 13, 1992, and incorporated herein by reference. *(e) The Sherwin-Williams Company Key Management Deferred Compensation Plan filed as Exhibit 28(e) to Form S-3 Registration Statement Number 33-22705 dated June 24, 1988, and incorporated herein by reference. (f) Asset Purchase Agreement, dated July 17, 1990, as amended, between the Company and DeSoto, Inc., for the purchase of certain assets of DeSoto, Inc.'s U.S. Consumer Paint Business filed as Exhibit 10(g) to Form 10-K dated March 15, 1991, and incorporated herein by reference. *(g) Form of Executive Disability Income Plan filed as Exhibit 10(g) to Form 10-K dated March 13, 1992, and incorporated herein by reference. *(h) Form of Executive Life Insurance Plan filed as Exhibit 10(h) to Form 10-K dated March 13, 1992, and incorporated herein by reference.
39 42 *(i) Form of Directors' Deferred Fee Plan filed as Exhibit 10(i) to Form 10-K dated March 13, 1992, and incorporated herein by reference. (j) License Agreement, dated February 1, 1991, as amended, between the Company and SWIMC, Inc. filed as Exhibit 10(j) to Form 10-K dated March 15, 1993, and incorporated herein by reference. (k) License Agreement, dated February 1, 1991, as amended, between the Company and DIMC, Inc. filed as Exhibit 10(k) to Form 10-K dated March 15, 1993, and incorporated herein by reference. *(l) Form of The Sherwin-Williams Company Management Compensation Program (filed herewith). *(m) The Sherwin-Williams Company 1994 Stock Plan, as amended and restated in its entirety, effective April 27, 1994, filed as Exhibit 4(d) to Form S-8 Registration Statement No. 33-52227 dated February 10, 1994, and incorporated herein by reference. 11. Computation of Net Income Per Share -- Page 41. 12. Not applicable. 13. Not applicable. 16. Not applicable. 18. Not applicable. 21. Subsidiaries -- Page 42. 22. Not applicable. 23. Consent of Independent Auditors -- Page 43. 24. Powers of Attorney (filed herewith). 27. Financial Data Schedule. 28. Not applicable. 99. Not applicable. *Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
40 EX-10.L 2 SHERWIN WILLIAMS 10-K EXHIBIT 10(L) 1 Exhibit 10(l) SHERWIN-WILLIAMS MANAGEMENT COMPENSATION PROGRAM PURPOSE The purpose of the Sherwin-Williams Management Compensation Program is to establish and maintain a performance and achievement oriented management environment throughout the Company that results in improved profits and/or creativity. The primary emphasis is to develop Sherwin-Williams as a superior company that can achieve and sustain above average earnings growth and a company dedicated to excellence in management, products, services and product development. With this in mind, the Program is designed so that participating managers will earn higher than average total compensation for doing an above average job and have the opportunity to accumulate a significant estate if the Company's long-range earnings goals are achieved. TOTAL COMPENSATION Sherwin-Williams' base salary structure is so designed that a participant may receive a level of salary compensation which approximates the average of that paid an equivalent position in the same or similar industries, as reported by several outside executive compensation services. Those who participate in the Incentive Plan may be awarded additional compensation in the form of cash and deferred compensation for performance results that meet or exceed specified predetermined goals. Total compensation, therefore, may exceed that of comparable executive positions in the outside marketplace. I. BASE SALARY Sherwin-Williams' overall salary structure is reviewed annually to ensure that it remains competitive. Positions are classified within the salary structure on the basis of assigned responsibilities. The midpoint salary of a grade assigned to a position is the salary level which approximates the average salary paid an equivalent position in the same or similar industries. Data are obtained from the latest survey information available from various executive compensation data sources. Where salary information is not available for a particular position, the salary grade assigned is consistent with other positions having similar responsibilities in the Company and in similar industries. Individual salaries are reviewed at least annually, but it must be understood that salaries may not increase each year. Decisions relating to salary increases are based on guidelines provided by management. (See addendum for salary increase guidelines in effect.) II. S-W MANAGEMENT INCENTIVE PLAN (SWMIP) The second element of the compensation program is the Sherwin-Williams Management Incentive Plan. This incentive plan is designed to permit the total compensation of a key manager to reflect: A. The performance of a particular unit (profit center or department), and B. The results of individual efforts as related to established goals. Goals must require well above average performance and results should be difficult to attain and have a significant impact on the improvement of the organizational unit and/or the Company. ELIGIBILITY TO PARTICIPATE Eligibility to participate in the Plan is limited to Corporate, Group and Division key managers who are responsible for profit decisions and major policy direction. To remain a participant, one must remain an active employee in a participating job through the end of the plan year. Individuals employed in a participating job by October 1st of the plan year may become eligible to participate in -1- 2 that plan year upon approval of the Chief Executive Officer and/or the Compensation Committee of the Board of Directors. Division participants are selected and recommended by the Division President, Group President and Chief Operating Officer on an individual basis after careful consideration and evaluation and must be approved by the Chief Executive Officer. The potential of the position to contribute to the achievement of overall company goals is the major criterion for being approved as a plan participant. Participation at the Corporate level is limited to Officers and Major Department Heads. Certain limits are placed on the number of managers from any one Division that may be included in the plan as shown below. The numbers shown in parentheses represent additional participants who may be included in the plan if warranted by the responsibilities of the position.
DIVISION SALES NUMBER ELIGIBLE REC. POSITIONS - ----------------- ---------------- ------------------ Below $25MM 1 + (1) General Manager $25MM to $50MM 3 + (1) General Manager Marketing Manager Mfg. Manager $50MM to $150MM 4 + (2) General Manager Marketing Manager Mfg. Manager Controller Tech. Director $150MM to $300MM 5 + (2) General Manager Marketing Manager Mfg. Manager Controller $300MM to $600MM 6 + (3) Tech. Director Product Manager Personnel Dir. Merch. Manager $600MM & over 7 + (4) Region Director
INCENTIVE AWARDS The plan is designed to provide an award for improvement over prior year results. To be eligible for any award under the plan, a participant, Division or Department must attain at least 75% of the improvement portion of the major profit or program goal. For example, Prior Year Actual PBT: $13.0MM Plan Year PBT: $14.0MM Planned Improvement: $ 1.0MM The threshold for earning an award is an improvement of $0.750MM (75% of $1MM) or an actual PBT for the Plan Year of $13.75MM. Where an approved profit goal shows no improvement, or is considered to show insufficient improvement, the participant, Division or Department must attain the goal to earn any award. The achievement of this goal may result in an incentive award at the minimum payout level for the appropriate Incentive Group, provided that the Company achieves its overall goals. Generally, no additional incentive will be awarded unless the results exceed the prior year's actual results. As an example, Prior Year Actual PBT: $13.0MM Plan Year Goal PBT: $12.7MM -2- 3 Incentive payouts may be as follows, assuming the Company achieves its overall goals:
PLAN YEAR ACTUAL PBT INCENTIVE AWARD - -------------------- --------------------------------- <$12.7MM 0 $12.7MM Minimum Payout Per Incentive Gp. $12.8MM '' $12.9MM '' $13.0MM '' >$13.0MM Management Discretion
Participants are assigned to an Incentive Group (Exhibit A) which determines the potential percentage of base salary that may be awarded. Assignment to an Incentive Group is made by the Chief Executive Officer. Individual awards are based on the overall percentage of goal achievement as described in the Performance Results Evaluation section which follows and as approved by the Chief Executive Officer and/or the Compensation Committee of the Board of Directors. PERFORMANCE RESULTS EVALUATION Assuming the overall Company earnings performance is at least 75% of the planned improvement goal, individual performance is evaluated at the end of the year in terms of achievement of goals set by the participant and approved by management at the beginning of the year. If the Company does not meet the minimum earnings improvement, funds may not be available for awards, although special awards may be made under exceptional circumstances. The process for individual goal achievement evaluation is outlined in the following steps. In all cases, recommended awards must be approved by the Chief Executive Officer and/or the Compensation Committee of the Board of Directors. EXHIBIT A INCENTIVE AWARDS AS A PERCENTAGE OF BASE SALARY
OVERALL GROUP GROUP GROUP EVAL. I II III - ------- ----- ----- ----- 125%(Max) 60 70 95 120% 55 65 88 115% 50 60 81 110% 45 55 74 105% 40 50 67 100%(Target) 35 45 60 95% 32 40 54 90% 29 35 48 85% 26 30 42 80% 23 25 36 75%(Min) 20 20 30
PROCEDURES FOR EVALUATING GOAL ACHIEVEMENT 1. The goals are predetermined and agreed upon by the participant and immediate supervisor, reviewed by the Division President, Group President and/or Chief Operating Officer or Corporate Department Head and submitted to the Chief Executive Officer for approval. Strong emphasis is -3- 4 placed on improvement over the previous fiscal year, particularly where the goals relate to profits, profit margins and return on assets employed. 2. At the close of each fiscal year, participants review their own performance by recording achievements as related to predetermined goals. 3. The supervisor then determines a performance rating percentage for each quantitative goal by comparing the goal against supervisory appraisal of the achievement of that goal. For all Division participants, a performance rating percentage for each special goal and each strategic goal will be determined by the Division President, Group President and Chief Operating Officer. For Corporate participants, these performance rating percentages will be determined by the Chief Executive Officer. A percentage achievement rating is scaled as follows: - -- -- -- 125% --- --- --- Outstanding Performance -- -- -- - -- -- -- -- -- -- - -- -- -- -- -- -- - -- -- -- -- -- -- - -- -- -- -- -- -- - -- -- -- 100% --- --- --- Planned Results -- -- -- - -- -- -- -- -- -- - -- -- -- -- -- -- - -- -- -- -- -- -- - -- -- -- -- -- -- - -- -- -- 75% --- --- --- Minimum Acceptable -- -- -- - -- -- -- --- --- --- Performance -- -- -- - -- -- -- -- -- -- - -- -- -- -- -- -- - -- -- -- -- -- -- - -- -- -- 0% ------------------------------------------------ a. A "100% Objective Achieved" rating for any particular goal indicates that the participant met that goal right on target. b. A rating of 125% is the maximum rating for any particular goal, indicating outstanding achievement of that goal. c. A rating below 75% indicates less than acceptable performance, and since no credit is given for that particular goal, the performance rating is 0%. d. Because certain factors cannot be accurately measured in terms of a percentage, a direct arithmetic relationship may not necessarily exist between the established goal, the appraisal of results and the performance rating percentage of that goal. e. Incumbents in covered positions for less than the plan year being measured may be awarded incentive compensation on a pro-rata basis (i.e., participation for 6 months out of 12 months would result in 50% of the normal award).
4. The participant's appraisal and the supervisor's rating of each goal, together with any additional comments by the supervisor, form the basis for overall performance. The overall performance rating is then reviewed for approval by subsequent levels of management. The overall evaluation may not exceed 125%. 5. The Chief Executive Officer reviews the recommended incentive awards in terms of individual performance, the performance of the Division or Department and the overall performance of the -4- 5 Company, and, as appropriate, reviews his recommendations with the Compensation Committee of the Board of Directors. 6. After the recommendations and approvals are final, a review session is held with each participant, at which time the supervisor is to review the incentive award with the participant. 7. Fair, impartial judgment is in reality the major factor in the final determination, not arithmetic results. 8. The incentive award is determined as follows: a. The overall performance percentage is related to the applicable Incentive Group to determine the incentive award percentage. b. The participant's salary base is multiplied by the incentive award percentage to determine the total dollar incentive award. Incentive Plan award computations are based upon the total salary of the individual for the previous twelve months or for the time in the approved position if less than a full year. For example: 100% Performance of Goals Group II = 45% Salary = $140,000 Incentive Award = $140,000 X 0.45 = $63,000 GENERAL The employment relationship between employees and the Company is an at-will relationship; as such, an employee's employment may be terminated by the Company at any time and for any reason and the employee may leave his/her employment at any time for any reason. Any statements to the contrary are of no force and effect and are not to be relied upon, unless directed specifically to a particular employee and signed by a Corporate Officer. INCOME DEFERRAL The Company has a deferred compensation plan to provide greater flexibility in the method of payment of incentive awards. The payment of an incentive award may be deferred, in whole or in part, under the Company's Key Management Deferred Compensation Plan if that is an employee's election prior to the start of the Plan year. Otherwise, payment will be made in cash. -5- EX-11 3 SHERWIN WILLIAMS 10-K EXHIBIT 11 1 EXHIBIT 11 COMPUTATION OF NET INCOME PER SHARE (Thousands of Dollars Except Per Share Data)
1994 1993 1992 - ----------------------------------------------------------------------------------------------- FULLY DILUTED Average shares outstanding 86,295,514 88,716,976 88,106,534 Options -- treasury stock method 579,924 744,892 812,608 Assumed conversion of 6.25% Convertible Subordinated Debentures 70,870 84,899 92,406 - ----------------------------------------------------------------------------------------------- Average fully diluted shares 86,946,308 89,546,767 89,011,548 Income before cumulative effects of changes in accounting methods $ 186,571 $ 165,227 $ 144,636 Add 6.25% Convertible Subordinated Debentures interest -- net of tax 8 10 12 - ----------------------------------------------------------------------------------------------- Income before cumulative effects of changes in accounting methods applicable to fully diluted shares 186,579 165,237 144,648 Cumulative effects of changes in accounting methods (81,771) - ----------------------------------------------------------------------------------------------- Net income applicable to fully diluted shares $ 186,579 $ 165,237 $ 62,877 Income per share: Income before cumulative effects of changes in accounting methods $ 2.15 $ 1.85 $ 1.63 Cumulative effects of changes in accounting methods (.92) - ----------------------------------------------------------------------------------------------- Net income $ 2.15 $ 1.85 $ .71 =============================================================================================== PRIMARY Average shares outstanding 86,295,514 88,716,976 88,106,534 Options -- treasury stock method 566,222 718,920 798,421 - ----------------------------------------------------------------------------------------------- Average shares and equivalents 86,861,736 89,435,896 88,904,955 Income before cumulative effects of changes in accounting methods $ 186,571 $ 165,227 $ 144,636 Cumulative effects of changes in accounting methods (81,771) - ----------------------------------------------------------------------------------------------- Net income applicable to shares and equivalents $ 186,571 $ 165,227 $ 62,865 Income per share: Income before cumulative effects of changes in accounting methods $ 2.15 $ 1.85 $ 1.63 Cumulative effects of changes in accounting methods (.92) - ----------------------------------------------------------------------------------------------- Net income $ 2.15 $ 1.85 $ .71 ===============================================================================================
41 EX-21 4 SHERWIN WILLIAMS 10-K EXHIBIT 21 1 EXHIBIT 21 SUBSIDIARIES FOREIGN SUBSIDIARIES Sherwin-Williams do Brasil Industria e Comercio Ltda., Sao Paulo, Brazil* Sherwin-Williams Canada Inc., Toronto, Ontario, Canada 147926 Canada Inc., Gravenhurst, Ontario, Canada Compania Sherwin-Williams, S.A. de C.V., Mexico City, Mexico* Sherwin-Williams Cayman Islands Ltd., Grand Cayman* The Sherwin-Williams Co. Resources Limited, Kingston, Jamaica Sherwin-Williams (Caribbean) N.V., Curacao Sherwin-Williams (West Indies) Ltd., Kingston, Jamaica Sherwin-Williams Foreign Sales Corporation Limited, Charlotte Amalie, Virgin Islands UNITED STATES SUBSIDIARIES Contract Transportation Systems Company DIMC, Inc. Dupli-Color Products Company Interiors Guild, Inc. MTM Development Corporation Sherwin-Williams Acceptance Corporation Sherwin-Williams International Company SWIMC, Inc. *Unconsolidated 42 EX-23 5 SHERWIN WILLIAMS 10-K EXHIBIT 23 1 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS Shareholders and Board of Directors The Sherwin-Williams Company Cleveland, Ohio We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-28585) pertaining to The Sherwin-Williams Company 1984 Stock Plan, the Registration Statement (Form S-8 No. 33-52227) pertaining to The Sherwin-Williams Company 1994 Stock Plan, the Post-Effective Amendment Number 5 to the Registration Statement (Form S-8 No. 2-80510) pertaining to The Sherwin-Williams Company Employee Stock Purchase and Savings Plan, and the Registration Statement (Form S-3 No. 33-22705) of The Sherwin-Williams Company and in the related prospectuses of our report dated January 19, 1995, with respect to the consolidated financial statements and schedule of The Sherwin-Williams Company included in the Annual Report (Form 10-K) for the year ended December 31, 1994. /s/ Ernst & Young LLP CLEVELAND, OHIO MARCH 10, 1995 43 EX-24 6 SHERWIN WILLIAMS 10-K EXHIBIT 24 1 Exhibit 24 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ___________________________________ The undersigned Officer and Director of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities and Exchange Commission, a Form 10-K for the fiscal year ending December 31, 1994, hereby constitutes and appoints T. A. Commes, L. J. Pitorak and L. E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: January 23, 1995 /s/ J. G. Breen -------------------------------- J. G. Breen Chairman and Chief Executive Officer, Director 2 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ___________________________________ The undersigned Officer and Director of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities and Exchange Commission, a Form 10-K for the fiscal year ending December 31, 1994, hereby constitutes and appoints J. G. Breen, L. J. Pitorak and L. E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: January 19, 1995 /s/ T. A. Commes --------------------------- T. A. Commes President and Chief Operating Officer, Director 3 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ___________________________________ The undersigned Officer of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities and Exchange Commission, a Form 10-K for the fiscal year ending December 31, 1994, hereby constitutes and appoints J. G. Breen, T. A. Commes and L. E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: January 23, 1995 /s/ L. J. Pitorak ---------------------------- L. J. Pitorak Senior Vice President - Finance, Treasurer and Chief Financial Officer 4 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ___________________________________ The undersigned Officer of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities and Exchange Commission, a Form 10-K for the fiscal year ending December 31, 1994, hereby constitutes and appoints J. G. Breen, T. A. Commes, L. J. Pitorak and L. E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: January 19, 1995 /s/ J. L. Ault --------------------------- J. L. Ault Vice President - Corporate Controller 5 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ___________________________________ The undersigned Director of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities and Exchange Commission, a Form 10-K for the fiscal year ending December 31, 1994, hereby constitutes and appoints J. G. Breen, T. A. Commes, L. J. Pitorak and L. E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: January 21, 1995 /s/ James M. Biggar -------------------------- J. M. Biggar Director 6 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ___________________________________ The undersigned Director of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities and Exchange Commission, a Form 10-K for the fiscal year ending December 31, 1994, hereby constitutes and appoints J. G. Breen, T. A. Commes, L. J. Pitorak and L. E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: January 23, 1995 /s/ Leigh Carter -------------------------- L. Carter Director 7 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ___________________________________ The undersigned Director of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities and Exchange Commission, a Form 10-K for the fiscal year ending December 31, 1994, hereby constitutes and appoints J. G. Breen, T. A. Commes, L. J. Pitorak and L. E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: January 19, 1995 /s/ D. E. Evans ------------------------- D. E. Evans Director 8 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ___________________________________ The undersigned Director of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities and Exchange Commission, a Form 10-K for the fiscal year ending December 31, 1994, hereby constitutes and appoints J. G. Breen, T. A. Commes, L. J. Pitorak and L. E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: January 23, 1995 /s/ Robert W. Mahoney ----------------------------- R. W. Mahoney Director 9 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ___________________________________ The undersigned Director of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities and Exchange Commission, a Form 10-K for the fiscal year ending December 31, 1994, hereby constitutes and appoints J. G. Breen, T. A. Commes, L. J. Pitorak and L. E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: January 23, 1995 /s/ W. G. Mitchell ------------------------- W. G. Mitchell Director 10 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ___________________________________ The undersigned Director of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities and Exchange Commission, a Form 10-K for the fiscal year ending December 31, 1994, hereby constitutes and appoints J. G. Breen, T. A. Commes, L. J. Pitorak and L. E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: February 20, 1995 /s/ A. M. Mixon ---------------------------- A. M. Mixon Director 11 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ___________________________________ The undersigned Director of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities and Exchange Commission, a Form 10-K for the fiscal year ending December 31, 1994, hereby constitutes and appoints J. G. Breen, T. A. Commes, L. J. Pitorak and L. E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: January 23, 1995 /s/ H. O. Petrauskas -------------------------- H. O. Petrauskas Director 12 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ___________________________________ The undersigned Director of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities and Exchange Commission, a Form 10-K for the fiscal year ending December 31, 1994, hereby constitutes and appoints J. G. Breen, T. A. Commes, L. J. Pitorak and L. E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: January 20, 1995 /s/ R. E. Schey --------------------------- R. E. Schey Director 13 POWER OF ATTORNEY THE SHERWIN-WILLIAMS COMPANY ___________________________________ The undersigned Director of The Sherwin-Williams Company, an Ohio corporation, which corporation anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities and Exchange Commission, a Form 10-K for the fiscal year ending December 31, 1994, hereby constitutes and appoints J. G. Breen, T. A. Commes, L. J. Pitorak and L. E. Stellato, or any of them, with full power of substitution and resubstitution, as attorneys or attorney to sign for me and in my name, in the capacities indicated below, said proposed Form 10-K and any and all amendments, supplements, and exhibits thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission or any national securities exchange pertaining thereto, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the acts of said attorneys and any of them and any such substitute. Executed the date set opposite my name. Date: January 23, 1995 /s/ R. K. Smucker -------------------------- R. K. Smucker Director EX-27 7 SHERWIN WILLIAMS 10-K EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K FOR THE PERIOD ENDED DEC. 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 0000089800 THE SHERWIN-WILLIAMS COMPANY 1,000 YEAR DEC-31-1994 JAN-01-1994 DEC-31-1994 251,415 0 321,804 10,820 459,220 1,188,624 892,553 483,351 1,962,031 597,048 20,465 100,370 0 0 952,974 1,962,031 3,100,069 3,100,069 1,772,671 1,772,671 15,420 11,801 3,217 298,513 111,942 186,571 0 0 0 186,571 2.15 2.15
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