-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Kt03kz5o3ZBpsO1Ir40mQnEs7+tf+oPJ2GDnsNLfleOoZfCMRyslD0zhhyV4ENWb 6L4MR3nIntjKJZ8bbOmPMg== 0000950152-01-500336.txt : 20010314 0000950152-01-500336.hdr.sgml : 20010314 ACCESSION NUMBER: 0000950152-01-500336 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010313 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: SEC FILE NUMBER: 001-04851 FILM NUMBER: 1567015 BUSINESS ADDRESS: STREET 1: 101 PROSPECT AVE NW CITY: CLEVELAND STATE: OH ZIP: 44115 BUSINESS PHONE: 2165662200 10-K 1 l85264be10-k.txt THE SHERWIN-WILLIAMS COMPANY FORM 10-K 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 COMMISSION FILE NUMBER 1-4851 ---------------------------- THE SHERWIN-WILLIAMS COMPANY (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) OHIO (State or other jurisdiction of incorporation or organization) 34-0526850 (I.R.S. Employer Identification No.) 101 PROSPECT AVENUE, N.W., CLEVELAND, OHIO (Address of principal executive offices) 44115-1075 (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 Common Stock, Par Value $1.00 New York Stock Exchange Preferred Stock Purchase Rights 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. [ ] At January 31, 2001, 159,776,823 shares of common stock were outstanding, net of treasury shares. The aggregate market value of such voting stock held by non-affiliates on January 31, 2001 was $4,263,541,169. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Shareholders for the fiscal year ended December 31, 2000 ("2000 Annual Report") are incorporated by reference into Parts I, II and IV of this report. Portions of the Proxy Statement for the 2001 Annual Meeting of Shareholders ("Proxy Statement") are incorporated by reference into Part III of this report. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART I ITEM 1. BUSINESS GENERAL DEVELOPMENT OF BUSINESS The Sherwin-Williams Company, founded in 1866 and incorporated in 1884, is engaged in the manufacture, distribution and sale of coatings and related products to professional, industrial, commercial and retail customers primarily in North and South America. As used in this report, the terms "Sherwin-Williams" and "Company" mean The Sherwin-Williams Company and its consolidated subsidiaries unless the context indicates otherwise. BASIS OF REPORTABLE SEGMENTS The Company reports its segment information in five reportable segments -- the Paint Stores, Consumer, Automotive Finishes, International Coatings (collectively, the "Operating Segments") and Administrative Segments -- in accordance with Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131 requires an enterprise to report segment information in the same way that management internally organizes its business for assessing performance and making decisions regarding allocation of resources. The Company's chief operating decision maker has been identified as the Chief Executive Officer because he has final authority over performance assessment and resource allocation decisions. Because of the global, diverse operations of the Company, the chief operating decision maker regularly receives discrete financial information about each reportable segment as well as a significant amount of additional financial information about certain aggregated divisions, operating units and subsidiaries of the Company. The chief operating decision maker uses all such financial information for performance assessment and resource allocation decisions. Factors considered in determining the five reportable segments of the Company include the nature of the business activities, existence of managers responsible for the operating and administrative activities and information presented to the Board of Directors. The Company evaluates the performance of operating segments and allocates resources based on profit or loss and cash generated from operations before income taxes, excluding corporate expenses and financing gains and losses. The accounting policies of the reportable segments are the same as those described in Note 1 of the Notes to Consolidated Financial Statements on pages 27 and 28 of the 2000 Annual Report, which is incorporated herein by reference. PAINT STORES SEGMENT The Paint Stores Segment consists of 2,488 company-operated specialty paint stores in the United States, Canada, Virgin Islands, Puerto Rico and Mexico. Each of the stores has the same business activity of selling identical national and similar regional products to similar types of customers. During 2000, this Segment opened or acquired 92 net new stores, remodeled 52 and relocated 36. The net new stores consisted of 79 stores in the United States, 3 in Canada, 1 in the Virgin Islands, 4 in Puerto Rico and 5 in Mexico. In 1999, there were 73 net new stores opened (66 in the United States). In 1998, 64 net new stores were opened (55 in the United States). This Segment also manufactures original equipment manufacturer (OEM) product finishes sold through the paint stores and by direct outside sales representatives. In addition to stores, operations in Mexico include a manufacturing facility, distribution activities and outside selling functions to dealers and other distributors. The Paint Stores Segment is the exclusive North American marketer and seller of Sherwin-Williams(R) branded architectural coatings, industrial and marine products, OEM product finishes and related items produced by its Mexican operations, its product finishes manufacturing and by the Consumer Segment. The loss of any single customer would not have a material adverse effect on the business of this Segment. CONSUMER SEGMENT The Consumer Segment develops, manufactures and distributes a variety of paint, coatings and related products to third party customers and the Paint Stores Segment. Approximately 41 percent of the total sales of the Consumer Segment in 2000, including inter-segment transfers, represented products sold through the Paint Stores 1 3 Segment. Sales and marketing of certain control-branded and private labeled products is performed by a direct sales staff. The products distributed through third party customers are intended for resale to the ultimate end-user of the product. The Consumer Segment has sales to certain customers that, individually, may be a significant portion of the sales of the Segment. However, the loss of any single customer would not have a material adverse effect on the overall profitability of the Segment. This Segment incurs most of the Company's capital expenditures related to ongoing environmental compliance measures. AUTOMOTIVE FINISHES SEGMENT The Automotive Finishes Segment develops, manufactures and distributes a variety of motor vehicle finish, refinish and touch-up products primarily throughout North and South America, the Caribbean Islands and Italy. This Segment also licenses certain technology and trade names worldwide. Sherwin-Williams(R) branded automotive finish and refinish products are distributed throughout North America solely through this Segment's network of 127 company-operated automotive branches in the United States and 17 in Canada. Additional automotive branches in Jamaica (14) and Chile (17) complete this Segment's worldwide network. At December 31, 2000, this Segment included 11 foreign wholly-owned subsidiaries in 8 foreign countries and 11 licensing agreements in 15 foreign countries. During 2000, the Automotive Finishes Segment opened or acquired three net new branches worldwide. INTERNATIONAL COATINGS SEGMENT The International Coatings Segment develops, licenses, manufactures and distributes a variety of paint, coatings and related products worldwide. The majority of the sales from licensees and subsidiaries occur in South America, the Segment's most important international market. This Segment sells its products through 29 company-operated specialty paint stores in Chile and 16 in Brazil and by outside selling functions to dealers and other distributors. At December 31, 2000, this Segment included 12 foreign wholly-owned subsidiaries in 8 foreign countries, 4 foreign joint ventures and 29 licensing agreements in 20 foreign countries. ADMINISTRATIVE SEGMENT The Administrative Segment includes the administrative expenses of the Company's and certain consolidated subsidiaries' headquarters sites. This Segment includes interest expense which is unrelated to retail real estate leasing activities, investment income, certain foreign currency transaction losses related to dollar-denominated debt, certain provisions for disposition and environmental-related matters, and other expenses which are not directly associated with any Operating Segment. Administrative expenses do not include any significant foreign operations. Also included in the Administrative Segment is a real estate management unit that is responsible for the ownership, management and leasing of non-retail properties held primarily for use by the Company, including the Company's headquarters site, and disposal of idle facilities. Sales of the Administrative Segment represent external leasing revenue of excess headquarters space or leasing of facilities no longer used by the Company in its operations. Gains and losses from the sale of property are not a significant operating factor in determining the performance of this Segment. Reportable segment financial information is presented in Note 17 of the Notes to Consolidated Financial Statements on pages 35 through 37 of the 2000 Annual Report, which is incorporated herein by reference. For additional information regarding the Company's business and business developments, see page 1 of the 2000 Annual Report and the "Letter to Shareholders" on pages 3 through 5 of the 2000 Annual Report, which is incorporated herein by reference. RAW MATERIALS AND PRODUCTS PURCHASED FOR RESALE Raw materials and fuel supplies are generally available from various sources in sufficient quantities that none of the Segments anticipates any significant sourcing problems during 2001. There are sufficient suppliers of each product purchased for resale that none of the Segments anticipates any significant sourcing problems during 2001. 2 4 SEASONALITY The majority of the sales for the Paint Stores, Consumer and Automotive Finishes Segments traditionally occur during the second and third quarters. The International Coatings Segment's fourth quarter sales have traditionally been greater than the sales for any of the first three quarters. There is no significant seasonality in sales for the Administrative Segment. TRADEMARKS AND TRADE NAMES Customer recognition of Company 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), Old Quaker(TM), Pro-Line(R), SeaGuard(R), JetGlo(R), AcryGlo(R), Con-Lux(R), Mercury(TM), Brod-Dugan(TM), ArmorSeal(R), Kem(R) Hi-Temp, Cook(R), Sher-Wood(R), Powdura(R), Polane(R) and Kem Aqua(R). The Consumer Segment employs a variety of trade names and trademarks in marketing its products, such as Thompson's(R), Dutch Boy(R), Martin Senour(R), Cuprinol(R), Pratt & Lambert(R), H&C(TM), Rubberset(R), Dupli-Color(R), Minwax(R), White Lightning(R), Krylon(R), Formby's(R) and Red Devil(R). The Automotive Finishes Segment utilizes various trade names and trademarks in pursuit of its business, including Sherwin-Williams(R), Martin Senour(R), Western(R), Lazzuril(TM), Excelo(TM), Marson(TM) and ScottWarren(TM). The International Coatings Segment uses trade names and trademarks in the conduct of its business including Sherwin-Williams(R), Dutch Boy(R), Krylon(R), Kem-Tone(R), Pratt & Lambert(R), Minwax(R), Ronseal(TM), Colorgin(TM), Globo(TM), Pulverlack(R), Sumare(TM), Andina(TM) and Marson(TM). PATENTS Although patents and licenses are not of material importance to the business of the Company as a whole or any Segment, the International Coatings Segment and the international operations of the Automotive Finishes Segment derive a portion 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 since there is normally a short period of time between the placing of an order and shipment. Sufficient productive capacity currently exists to fulfill the Company's needs for paint and coatings products through 2001. COMPETITION The Company experiences competition from many local, regional, national and international competitors of various sizes in the manufacture, distribution and sale of its coatings and related products. The Company is a leading manufacturer and retailer of coatings and related products to professional, industrial, commercial and retail customers, however, the Company's competitive position varies for its different products and markets. In the Paint Stores Segment, competitors include other paint and wallpaper stores, mass merchandisers, home centers, independent hardware stores, hardware chains and manufacturer-operated direct outlets. Product quality, service and price determine the competitive advantage for this Segment. In the Consumer and International Coatings Segments, domestic and foreign competitors include manufacturers and distributors of branded and private labeled coatings products. Technology, product quality, product innovation, breadth of product line, technical expertise, distribution, service and price are the key competitive factors for these Segments. The Automotive Finishes Segment has numerous competitors in its domestic and foreign markets with broad product offerings and several others with niche products. Key competitive factors for this Segment include technology, product quality, distribution, service and price. The Administrative Segment has many competitors consisting of other real estate owners, developers and managers in areas in which this Segment owns property. The main competitive factors are the availability of property and price. 3 5 EMPLOYEES The Company employed 26,095 persons at December 31, 2000. ENVIRONMENTAL COMPLIANCE For additional information regarding environmental-related matters, see pages 14 through 16 of the 2000 Annual Report under the caption entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Notes 1, 4 and 9 of the Notes to Consolidated Financial Statements on pages 28, 29 and 32, respectively, of the 2000 Annual Report, which is incorporated herein by reference. SEGMENT INFORMATION AND FOREIGN OPERATIONS For additional information regarding the Company's Reportable Segments and foreign operations, see Note 17 on pages 35 through 37 of the 2000 Annual Report, which is incorporated herein by reference. Additional information regarding risks attendant to foreign operations is set forth on pages 15 and 17 of the 2000 Annual Report under the caption entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations," which is incorporated herein by reference. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION Certain statements contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and elsewhere in this report constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based upon management's current expectations, estimates, assumptions and beliefs concerning future events and conditions and may discuss, among other things, anticipated future performance (including sales and earnings), expected growth and future business plans. Any statement that is not historical in nature is a forward-looking statement and may be identified by the use of words and phrases such as "expects," "anticipates," "believes," "will likely result," "will continue," "plans to" and similar expressions. Readers are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of the Company, that could cause actual results to differ materially from such statements. These risks, uncertainties and other factors include such things as: general business conditions, strengths of retail economies and the growth in the coatings industry; competitive factors, including pricing pressures and product innovation and quality; changes in raw material availability and pricing; changes in the Company's relationships with customers and suppliers; the ability of the Company to successfully integrate past and future acquisitions into its existing operations, as well as the performance of the businesses acquired; the ability of the Company to successfully complete planned divestitures; changes in general domestic economic conditions such as inflation rates, interest rates and tax rates; risks and uncertainties associated with the Company's expansion into foreign markets, including inflation rates, recessions, foreign currency exchange rates, foreign investment and repatriation restrictions and other external economic and political factors; the achievement of growth in developing markets, such as Mexico and South America; increasingly stringent domestic and foreign governmental regulations including those affecting the environment; inherent uncertainties involved in assessing the Company's potential liability for environmental remediation-related activities; the nature, cost, quantity and outcome of pending and future litigation and other claims, including the lead pigment and lead-based paint litigation and the affect of any legislation and administrative regulations relating thereto; and unusual weather conditions. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. ITEM 2. DESCRIPTION OF PROPERTY The Company owns its corporate headquarters located in Cleveland, Ohio. The Company's principal manufacturing and distribution facilities are located as set forth below. The Company believes its manufacturing and distribution facilities are well-maintained and are suitable and adequate, and have sufficient productive capacity, to meet its current needs. 4 6 PAINT STORES SEGMENT Manufacturing Facilities ------------------------- Arlington, Texas Owned Calgary, Alberta, Canada Leased Cincinnati, Ohio Owned Columbus, Ohio Owned Edison, New Jersey Owned Fort Wayne, Indiana Leased Greensboro, North Carolina Owned Grimsby, Ontario, Canada Owned Harrisburg, Pennsylvania Leased Memphis, Tennessee Owned Mexico City, Mexico Owned Ontario, California Leased Portsmouth, Virginia Owned Rockford, Illinois Leased San Diego, California Leased Spartanburg, South Carolina Leased Sylmar, California Leased Wichita, Kansas Owned Distribution Facilities ---------------------- Mexico City, Mexico Owned Vancouver, Alberta, Canada Leased CONSUMER SEGMENT Manufacturing Facilities ------------------------- Baltimore, Maryland Owned Bedford Heights, Ohio Owned Chicago, Illinois Owned Coffeyville, Kansas Owned Crisfield, Maryland Leased Deshler, Ohio Owned Elk Grove, Illinois Owned Emeryville, California Owned Ennis, Texas Leased Flora, Illinois Owned Fort Erie, Ontario, Canada Owned Garland, Texas Owned Greensboro, North Carolina Owned Holland, Michigan Owned Lawrenceville, Georgia Owned Morrow, Georgia Owned Olive Branch, Mississippi Owned Orlando, Florida Owned Victorville, California Owned Distribution Facilities ---------------------- Bedford Heights, Ohio Leased Buford, Georgia Leased Effingham, Illinois Leased Fredericksburg, Pennsylvania Owned Reno, Nevada Owned San Juan, Puerto Rico Leased Vaughan, Ontario, Canada Leased Waco, Texas Leased Winter Haven, Florida Owned AUTOMOTIVE FINISHES SEGMENT Manufacturing Facilities ------------------------ Aprilia, Italy Leased Arica, Chile Owned Kingston, Jamaica Owned Richmond, Kentucky Owned Santiago, Chile* Owned Sao Paulo, Brazil Owned Texcocco, Mexico Owned Distribution Facilities ---------------------- Aprilia, Italy Leased Kingston, Jamaica Owned Reno, Nevada Leased Richmond, Kentucky Owned Santiago, Chile* Owned Sao Paulo, Brazil Owned Zaragoza, Mexico Owned 5 7 INTERNATIONAL COATINGS SEGMENT Manufacturing Facilities ------------------------- Buenos Aires, Argentina Owned Santiago, Chile* Owned Santa Catarina, Brazil Owned Sao Paulo, Brazil(4) Owned Sheffield, England Owned Distribution Facilities ---------------------- Buenos Aires, Argentina Owned Dublin, Ireland Owned Santiago, Chile* Owned Santiago, Chile Leased Santa Catarina, Brazil Owned Sao Paulo, Brazil(4) Owned Lima, Peru Leased * This facility is shared between the Automotive Finishes and International Coatings Segments. The operations of the Paint Stores Segment included 2,488 company-operated paint stores, of which 212 were owned, in the United States, Canada, Virgin Islands, Puerto Rico and Mexico at December 31, 2000. The Paint Stores Segment is divided into four separate operating divisions and certain operations in Mexico, each of which is responsible for the paint stores located within its geographical region. At the end of 2000, the Mid Western Division operated 666 paint stores primarily located in the midwestern and upper west coast states, the Eastern Division operated 498 paint stores along the upper east coast and New England states and Canada, the Southeastern Division operated 658 paint stores principally covering the lower east and gulf coast states, Puerto Rico and the U.S. Virgin Islands, and the South Western Division operated 588 paint stores in the plains and the lower west coast states. The Paint Stores Segment also included 78 paint stores in Mexico. The Paint Stores Segment opened 92 net new paint stores in 2000 and relocated 36. The Automotive Finishes Segment included 127 company-operated automotive branches, of which one was owned, in the United States and 48 leased company-operated stores and branches in Canada, Chile and Jamaica at December 31, 2000. The International Coatings Segment included 45 company-operated specialty paint stores, of which 6 were owned, in Chile and Brazil. All real property within the Administrative Segment is owned by the Company except for one warehouse lease. For additional information regarding real property within the Administrative Segment, see the information set forth in Item 1 of this report, which is incorporated herein by reference. For additional information regarding real property leases, see Note 8 of the Notes to Consolidated Financial Statements on page 31 of the 2000 Annual Report, which is incorporated herein by reference. ITEM 3. LEGAL PROCEEDINGS For information regarding environmental-related matters and other legal proceedings, see pages 14 through 16 of the 2000 Annual Report under the caption entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Notes 1, 4 and 9 of the Notes to Consolidated Financial Statements on pages 28, 29 and 32, respectively, of the 2000 Annual Report, which is incorporated herein by reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's security holders during the fourth quarter of 2000. 6 8 EXECUTIVE OFFICERS OF THE REGISTRANT The following is the name, age and present position of each of the Executive Officers at March 13, 2001, as well as all prior positions held by each during the last five years. Executive Officers are generally elected annually by the Board of Directors and hold office until their successors are elected and qualified or until their earlier resignation or removal.
Name Age Present Position ---- --- ---------------- Christopher M. Connor 44 Chairman and Chief Executive Officer, Director Joseph M. Scaminace 47 President and Chief Operating Officer, Director Larry J. Pitorak 54 Senior Vice President -- Finance, Treasurer and Chief Financial Officer John L. Ault 55 Vice President -- Corporate Controller Michael A. Galasso 53 President & General Manager, International Division Thomas E. Hopkins 43 Vice President -- Human Resources Conway G. Ivy 59 Vice President -- Corporate Planning and Development John G. Morikis 37 President, Paint Stores Group Ronald P. Nandor 41 President & General Manager, Automotive Division Thomas W. Seitz 52 President & General Manager, Consumer Division Louis E. Stellato 50 Vice President, General Counsel and Secretary
Mr. Connor has served as Chairman since April 2000 and Chief Executive Officer since October 1999. Mr. Connor served as Vice Chairman from October 1999 to April 2000, President, Paint Stores Group from August 1997 to October 1999 and President & General Manager, Diversified Brands Division from April 1994 to August 1997. Mr. Connor has served as a Director since October 1999. Mr. Scaminace has served as President and Chief Operating Officer since October 1999. Mr. Scaminace served as President, Consumer Group from July 1998 to October 1999, President & General Manager, Coatings Division from June 1997 to July 1998, and President & General Manager, Automotive Division from April 1994 to June 1997. Mr. Scaminace has served as a Director since October 1999. Mr. Pitorak has served as Senior Vice President -- Finance, Treasurer and Chief Financial Officer since April 1992. Mr. Ault has served as Vice President -- Corporate Controller since January 1987. Mr. Galasso has served as President & General Manager, International Division since September 2000. Mr. Galasso served as President & General Manager, Automotive Division from June 1997 to September 2000 and Vice President & Director -- Operations, Automotive Division from May 1992 to June 1997. Mr. Hopkins has served as Vice President -- Human Resources since August 1997. Mr. Hopkins served as Vice President -- Human Resources, Paint Stores Group from February 1996 to August 1997. Mr. Ivy has served as Vice President -- Corporate Planning and Development since April 1992. Mr. Morikis has served as President, Paint Stores Group since October 1999. Mr. Morikis served as President & General Manager, Eastern Division, Paint Stores Group from July 1998 to October 1999, Senior Vice President & Director -- Marketing, Paint Stores Group from September 1997 to July 1998 and Division Vice President -- Sales, Eastern Division, Paint Stores Group from April 1994 to September 1997. Mr. Nandor has served as President & General Manager, Automotive Division since September 2000. Mr. Nandor served as Executive Vice President -- Marketing, Paint Stores Group from August 1998 to September 2000 and Vice President and Director -- Marketing, Automotive Division from November 1996 to August 1998. Prior to joining Sherwin-Williams in November 1996, Mr. Nandor was Director -- Sales of the Automotive Refinish Business Unit of PPG Industries, Inc. 7 9 Mr. Seitz has served as President & General Manager, Consumer Division since January 2001. Mr. Seitz served as President, Consumer Group from October 1999 to January 2001, Vice President of Operations, Consumer Group from July 1998 to October 1999 and Vice President of Operations, Coatings Division from December 1995 to July 1998. Mr. Stellato has served as Vice President, General Counsel and Secretary since July 1991. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Sherwin-Williams common stock is listed on the New York Stock Exchange and traded under the symbol SHW. The number of shareholders of record at March 1, 2001 was 10,708. Information regarding market prices and dividend information with respect to Sherwin-Williams common stock is set forth on page 39 of the 2000 Annual Report under the caption entitled "Shareholder Information," which is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA (Millions of Dollars, except per share data)
2000 1999 1998 1997 1996(a) - ------------------------------------------------------------------------- OPERATIONS Net sales $5,212 $5,004 $4,934 $4,881 $4,133 Net income 16(b) 304 273 261 229 FINANCIAL POSITION Total assets $3,751(b) $4,033 $4,051 $4,036 $2,995 Long-term debt 624 624 730 844 143 Ratio of earnings to fixed charges(c) 2.4X(b) 5.8x 5.0x 4.6x 7.3x PER COMMON SHARE DATA Net income -- basic(d) $ .10(b) $ 1.81 $ 1.58 $ 1.51 $ 1.34 Net income -- diluted(d) .10(b) 1.80 1.57 1.50 1.33 Cash dividends .54 .48 .45 .40 .35
(a) Pre-acquisition amounts for Thompson Minwax Holding Corp., acquired on January 7, 1997 using the purchase method of accounting, are not included. Therefore, amounts are not comparable to 1997 and beyond. (b) Amount includes an impairment of long-lived assets charge of $294 million ($1.80 per share) after tax. See Note 2 of the Notes to Consolidated Financial Statements on page 28 of the 2000 Annual Report, which is incorporated herein by reference. (c) For purposes of calculating the ratio of earnings to fixed charges, earnings represent income before income taxes plus fixed charges. Fixed charges consist of interest expense, net, including amortization of discount and financing costs and the portion of operating rental expense which management believes is representative of the interest component of rent expense. (d) Amounts reflect adoption of Statement of Financial Accounting Standards No. 128, "Earnings Per Share," effective December 31, 1997. Amounts shown for 1996 have been restated. See Note 1 and Note 15 of the Notes to Consolidated Financial Statements on pages 28 and 35, respectively, of the 2000 Annual Report, which are incorporated herein by reference, for further per share information. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this item is set forth on pages 13 through 20 of the 2000 Annual Report under the caption entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations," which is incorporated herein by reference. 8 10 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company is exposed to market risk through various financial instruments, including fixed rate debt instruments. The Company does not believe that any potential loss related to these financial instruments will have a material adverse effect on the Company's financial condition, results of operations or liquidity. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Information required by this item is set forth on pages 23 through 37 of the 2000 Annual Report under the captions entitled "Statements of Consolidated Income," "Consolidated Balance Sheets," "Statements of Consolidated Cash Flows," "Statements of Consolidated Shareholders' Equity," and "Notes to Consolidated Financial Statements," which is incorporated herein by reference. Unaudited quarterly data is set forth in Note 14 of the Notes to Consolidated Financial Statements on pages 34 and 35 of the 2000 Annual Report, which is incorporated herein by reference. The Report of Independent Auditors is set forth on page 11 of this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information regarding Directors is set forth under the caption entitled "Election of Directors" in the Proxy Statement, which is incorporated herein by reference. The information regarding Executive Officers is set forth under the caption entitled "Executive Officers of the Registrant" in Part I of this report, which is incorporated herein by reference. The information regarding compliance with Section 16 of the Securities Exchange Act of 1934 is set forth under the caption entitled "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement, which is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is set forth on pages 7 through 15 of the Proxy Statement and under the caption entitled "Compensation of Directors" in the Proxy Statement, which is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is set forth under the captions entitled "Security Ownership of Management" and "Security Ownership of Certain Beneficial Owners" in the Proxy Statement, which is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is set forth under the captions entitled "Certain Relationships and Related Transactions," "Compensation of Directors" and "Compensation Committee Interlocks and Insider Participation" in the Proxy Statement, which information is incorporated herein by reference. 9 11 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) Financial Statements The following consolidated financial statements of the Company included in the 2000 Annual Report are incorporated by reference in Item 8. The Report of Independent Auditors is set forth on page 11 of this report. (i) Statements of Consolidated Income for the years ended December 31, 2000, 1999 and 1998 (page 23 of the 2000 Annual Report) (ii) Consolidated Balance Sheets at December 31, 2000, 1999 and 1998 (page 24 of the 2000 Annual Report) (iii) Statements of Consolidated Cash Flows for the years ended December 31, 2000, 1999 and 1998 (page 25 of the 2000 Annual Report) (iv) Statements of Consolidated Shareholders' Equity for the years ended December 31, 2000, 1999 and 1998 (page 26 of the 2000 Annual Report) (v) Notes to Consolidated Financial Statements for the years ended December 31, 2000, 1999 and 1998 (pages 27 through 37 of the 2000 Annual Report) (2) Financial Statement Schedule Schedule II -- Valuation and Qualifying Accounts and Reserves for the years ended December 31, 2000, 1999 and 1998 is set forth on page 11 of this report. 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 the Exhibit Index on pages 14 and 15 of this report.
(b) Reports on Form 8-K -- The Company filed (a) a Current Report on Form 8-K, dated October 12, 2000, reporting under Item 5 the Company's expectations regarding earnings for the third quarter of 2000 and full year 2000 and (b) a Current Report on Form 8-K, dated December 4, 2000, reporting under Item 5 the Company's expectations for sales and earnings for the full year 2000. 10 12 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, 2000, 1999 and 1998, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2000. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. 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, 2000, 1999 and 1998, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. 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. /s/ Ernst & Young LLP Cleveland, Ohio January 26, 2001 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (SCHEDULE II) Changes in the allowance for doubtful accounts are as follows:
2000 1999 1998 - -------------------------------------------------------------------------------------------- Beginning balance $ 23,592 $ 25,393 $ 26,891 Bad debt expense 29,387 32,819 15,176 Net uncollectible accounts written off (31,161) (34,620) (16,674) - -------------------------------------------------------------------------------------------- Ending balance $ 21,818 $ 23,592 $ 25,393 - -------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------
Bad debt expense increase for 2000 and 1999 as compared to 1998 is primarily due to increased activity in accounts doubtful of collection and charges to expense to reconcile open prior years' accounts receivable balances of certain customers. Activity related to other asset reserves is as follows:
2000 1999 1998 - -------------------------------------------------------------------------------------------- Beginning balance $247,810 $203,606 $153,580 Charges to expense 58,169 53,063 52,103 Impairment charges (58,518) Other additions (deductions) (1,075) (8,859) (2,077) - -------------------------------------------------------------------------------------------- Ending balance $246,386 $247,810 $203,606 - -------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------
Charges to expense consist primarily of amortization of goodwill and intangibles. Other additions (deductions) consist primarily of actual costs incurred and balance sheet reclassifications and removal of fully-amortized items. See Note 2 of the Notes to Consolidated Financial Statements on page 28 of the 2000 Annual Report, which is incorporated herein by reference. 11 13 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 13th day of March, 2001. 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 13, 2001. * C. M. CONNOR Chairman and Chief Executive Officer, - ----------------------------------------------------------- Director (Principal Executive Officer) C. M. Connor * J. M. SCAMINACE President and Chief Operating Officer, - ----------------------------------------------------------- Director J. M. Scaminace * L. J. PITORAK Senior Vice President -- Finance, - ----------------------------------------------------------- Treasurer and Chief Financial Officer L. J. Pitorak (Principal Financial Officer) * J. L. AULT Vice President -- Corporate Controller - ----------------------------------------------------------- (Principal Accounting Officer) J. L. Ault * J. C. BOLAND Director - ----------------------------------------------------------- J. C. Boland * J. G. BREEN Director - ----------------------------------------------------------- J. G. Breen * D. E. COLLINS Director - ----------------------------------------------------------- D. E. Collins * 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 * C. E. MOLL Director - ----------------------------------------------------------- C. E. Moll
12 14 * H. O. PETRAUSKAS Director - ----------------------------------------------------------- H. O. Petrauskas * 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 13, 2001 - ----------------------------------------------------------- L. E. Stellato, Attorney-in-fact
13 15 EXHIBIT INDEX 3. (a) Amended Articles of Incorporation, as amended April 25, 1997, filed as Exhibit 3(i) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1997, 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 as of February 1, 1996, filed as Exhibit 4(a) to Form S-3 Registration Statement 333-01093, dated February 20, 1996, and incorporated herein by reference. (b) Amended and Restated 364-Day Revolving Credit Agreement, dated December 31, 1999, among the Company, The Chase Manhattan Bank, as Administrative Agent and Competitive Advance Facility Agent, and the financial institutions which are signatories thereto, filed as Exhibit 4(b) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and incorporated herein by reference. (c) Amendment No. 1 to Amended and Restated 364-Day Revolving Credit Agreement, dated December 1, 2000, among the Company, The Chase Manhattan Bank, as Administrative Agent and Competitive Advance Facility Agent, and the financial institutions which are signatories thereto (filed herewith). (d) Amended and Restated Five Year Revolving Credit Agreement, dated January 3, 2000, among the Company, The Chase Manhattan Bank, as Administrative Agent and Competitive Advance Facility Agent, and the financial institutions which are signatories thereto, filed as Exhibit 4(c) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and incorporated herein by reference. (e) Amendment No. 1 to Amended and Restated Five Year Revolving Credit Agreement, dated December 1, 2000, among the Company, The Chase Manhattan Bank, as Administrative Agent and Competitive Advance Facility Agent, and the financial institutions which are signatories thereto (filed herewith). (f) 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. (g) Rights Agreement between the Company and The Bank of New York, as successor Rights Agent to KeyBank National Association, dated April 23, 1997, filed as Exhibit 1 to Form 8-A, dated April 24, 1997, and incorporated herein by reference. 10. *(a) Form of Director and Corporate Officer Indemnity Agreement filed as Exhibit 10(a) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, and incorporated herein by reference. *(b) Employment Agreement with C.G. Ivy filed as Exhibit 28(b) to Form S-3 Registration Statement Number 33-22705, dated June 24, 1988, and incorporated herein by reference. *(c) Amendment to Employment Agreement with C.G. Ivy filed as Exhibit 10(c) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, and incorporated herein by reference. *(d) Forms of Severance Pay Agreements, filed as Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997, and incorporated herein by reference. *(e) Schedule of Certain Executive Officers who are Parties to the Severance Pay Agreements in the forms referred to in Exhibit 10(d) filed as Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2000, and incorporated herein by reference.
14 16 *(f) The Sherwin-Williams Company Deferred Compensation Savings Plan (1997/1999 Amendment and Restatement) filed as Exhibit 10(f) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and incorporated herein by reference. *(g) The Sherwin-Williams Company Key Management Deferred Compensation Plan (1997/1999 Amendment and Restatement) filed as Exhibit 10(g) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and incorporated herein by reference. *(h) Form of Executive Disability Income Plan filed as Exhibit 10(g) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, and incorporated herein by reference. *(i) Form of Executive Life Insurance Plan filed as Exhibit 10(h) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, and incorporated herein by reference. *(j) Form of The Sherwin-Williams Company Management Compensation Program filed as Exhibit 10(j) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and incorporated herein by reference. *(k) The Sherwin-Williams Company 1994 Stock Plan, as amended and restated in its entirety, effective July 26, 2000, filed as Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2000, and incorporated herein by reference. *(l) The Sherwin-Williams Company 1997 Stock Plan for Nonemployee Directors, dated April 23, 1997, filed as Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1997, and incorporated herein by reference. *(m) The Sherwin-Williams Company Director Deferred Fee Plan (1997 Amendment and Restatement), dated April 23, 1997, filed as Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997, and incorporated herein by reference. *(n) Consulting Agreement, dated May 1, 2000, between John G. Breen and the Company filed as Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2000, and incorporated herein by reference. *(o) Amended and Restated Split-Dollar Life Insurance Agreement, dated August 18, 2000, among the Company, National City Bank and John G. Breen filed as Exhibit 10(c) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2000, and incorporated herein by reference. *(p) Salary Continuation and Death Benefit Plan Agreement, dated August 18, 2000, filed as Exhibit 10(d) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2000, and incorporated herein by reference. 13. Portions of the 2000 Annual Report incorporated herein by reference (filed herewith). With the exception of those portions of the 2000 Annual Report which are specifically incorporated by reference in this report, the 2000 Annual Report shall not be deemed "filed" as part of this report. 21. Subsidiaries (filed herewith). 23. Consent of Ernst & Young LLP, Independent Auditors (filed herewith). 24. (a) Powers of Attorney (filed herewith). (b) Certified Resolution Authorizing Signature by Power of Attorney (filed herewith). *Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
15 EX-4.C 2 l85264bex4-c.txt EXHIBIT 4(C) 1 EXHIBIT 4(c) AMENDMENT NO. 1 dated as of December 1, 2000 (this "AMENDMENT"), to the AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT dated as of December 31, 1999 (the "CREDIT AGREEMENT"), among THE SHERWIN-WILLIAMS COMPANY (the "COMPANY"), the Lenders referred to therein and THE CHASE MANHATTAN BANK, as Administrative Agent and Competitive Advance Facility Agent. The Company has requested that certain terms of the Credit Agreement be amended, and the Lenders are willing, on the terms and subject to the conditions set forth herein, to agree to amend the Credit Agreement. Accordingly, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as set forth below. Capitalized terms used but not defined herein shall have the meanings assigned to them in the Credit Agreement. SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT. (a) The Credit Agreement is hereby amended to add Citicorp USA, Inc. (the "NEW LENDER") as a "Lender" under the Credit Agreement, with an initial Commitment of $10,000,000. After giving effect to this Amendment, the Commitments of all Lenders (other than the New Lender) will remain the same as before giving effect to this Amendment, and each Lender's Commitment and percentage of the aggregate Commitments will be as set forth on Schedule 1 hereto. (b) Article X of the Credit Agreement is hereby amended by inserting the following new section at the end thereof: "SECTION 10.16. SHARING OF PAYMENTS, ETC. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Revolving Credit Loans owing to it (other than pursuant to Article III) in excess of its ratable share of payments on account of the Revolving Credit Loans obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Revolving Credit Loans owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Company agrees that any Lender so purchasing a participation from another Lender pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including any right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Company in the amount of such participation." 2 SECTION 2. REPRESENTATIONS AND WARRANTIES. To induce the other parties hereto to enter into this Amendment, the Company represents and warrants to each of the Lenders and the Administrative Agent that: (a) This Amendment has been duly authorized, executed and delivered by the Company, and each of this Amendment and the Credit Agreement, after giving effect to this Amendment, constitutes the legal, valid and binding obligation of the Company enforceable in accordance with its terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium and similar laws affecting the enforcement of creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law). (b) The representations and warranties contained in Article IV of the Credit Agreement, after giving effect to this Amendment, are true and correct on and as of the date hereof, except to the extent that such representations and warranties expressly relate to an earlier date. (c) No Possible Default or Event of Default has occurred and is continuing or would result from the execution and delivery of this Amendment. SECTION 3. EFFECTIVENESS. This Amendment shall become effective as of the date set forth above (the "AMENDMENT EFFECTIVE DATE") on the date that the Administrative Agent or its counsel shall have received counterparts of this Amendment that, when taken together, bear the signatures of the Company, the New Lender and the Lenders. SECTION 4. LIMITED EFFECT OF AMENDMENT. Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Lenders or the Administrative Agent under the Credit Agreement, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement, which is ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle the Company to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement in similar or different circumstances. This Amendment shall apply and be effective only with respect to the provisions of the Credit Agreement specifically referred to herein. After the date hereof, any reference to the Credit Agreement shall mean the Credit Agreement, as modified hereby. SECTION 5. COUNTERPARTS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same contract. Delivery of an executed counterpart of a signature page of this Amendment by facsimile transmission shall be as effective as delivery of a manually executed counterpart hereof. SECTION 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF OHIO. 3 SECTION 7. HEADINGS. The headings of this Amendment are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written. THE SHERWIN-WILLIAMS COMPANY, by /s/ -------------------------- Name: Title: by /s/ -------------------------- Name: Title: THE CHASE MANHATTAN BANK, individually, and as Administrative Agent and Competitive Advance Facility Agent, by /s/ -------------------------- Name: Title: 5 Citicorp USA, Inc. hereby agrees to each of the terms and conditions of the Credit Agreement, a copy of which has been delivered by the Company to Citicorp USA, Inc. AMOUNT OF COMMITMENT: CITICORP USA, INC., - -------------------- $10,000,000.00 by /s/ ------------------------------ Name: Title: 6 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT DATED AS OF DECEMBER 31, 1999 NAME OF INSTITUTION: BANK ONE, NA by /s/ ------------------------------ Name: Title: 7 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT DATED AS OF DECEMBER 31, 1999 NAME OF INSTITUTION: THE BANK OF NEW YORK by /s/ ------------------------------ Name: Title: 8 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT DATED AS OF DECEMBER 31, 1999 NAME OF INSTITUTION: WACHOVIA BANK OF GEORGIA, N.A. by /s/ ------------------------------ Name: Title: 9 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT DATED AS OF DECEMBER 31, 1999 NAME OF INSTITUTION: MELLON BANK, N.A. by /s/ ------------------------------ Name: Title: 10 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT DATED AS OF DECEMBER 31, 1999 NAME OF INSTITUTION: FIFTH THIRD BANK by /s/ ------------------------------ Name: Title: 11 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT DATED AS OF DECEMBER 31, 1999 NAME OF INSTITUTION: SUNTRUST BANK by /s/ ------------------------------ Name: Title: 12 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT DATED AS OF DECEMBER 31, 1999 NAME OF INSTITUTION: ABN AMRO BANK N.V. by /s/ ------------------------------ Name: Title: by /s/ ------------------------------ Name: Title: 13 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT DATED AS OF DECEMBER 31, 1999 NAME OF INSTITUTION: THE BANK OF NOVA SCOTIA by /s/ ------------------------------ Name: Title: 14 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT DATED AS OF DECEMBER 31, 1999 NAME OF INSTITUTION: BANCA COMMERCIALE ITALIANA CHICAGO BRANCH by /s/ ------------------------------ Name: Title: by /s/ ------------------------------ Name: Title: 15 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT DATED AS OF DECEMBER 31, 1999 NAME OF INSTITUTION: FLEET NATIONAL BANK by /s/ ------------------------------ Name: Title: 16 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT DATED AS OF DECEMBER 31, 1999 NAME OF INSTITUTION: NATIONAL CITY BANK by /s/ ------------------------------ Name: Title: 17 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT DATED AS OF DECEMBER 31, 1999 NAME OF INSTITUTION: BANK OF AMERICA, N.A. by /s/ ------------------------------ Name: Title: 18 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT DATED AS OF DECEMBER 31, 1999 NAME OF INSTITUTION: FIRST UNION NATIONAL BANK by /s/ ------------------------------ Name: Title: 19 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT DATED AS OF DECEMBER 31, 1999 NAME OF INSTITUTION: KEYBANK NATIONAL ASSOCIATION by /s/ ------------------------------ Name: Title: 20 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT DATED AS OF DECEMBER 31, 1999 NAME OF INSTITUTION: WELLS FARGO BANK, NATIONAL ASSOCIATION by /s/ ------------------------------ Name: Title: by /s/ ------------------------------ Name: Title: 21 364-Day Credit Agreement Schedule 1
LENDER PERCENTAGE OF COMMITMENTS COMMITMENT - ------ ------------------------- ---------- The Chase Manhattan Bank 7.72% $10,000,000 ABN AMRO Bank N.V. 7.72% $10,000,000 National City Bank 7.72% $10,000,000 Wells Fargo Bank, N.A. 7.72% $10,000,000 Wachovia Bank of Georgia, N.A. 5.86% $7,600,000 SunTrust Bank, Atlanta 7.72% $10,000,000 Banca Commerciale Italiana Chicago Branch 3.70% $4,800,000 The Bank of New York 7.72% $10,000,000 Bank One, N.A. 7.72% $10,000,000 The Bank of Nova Scotia 3.70% $4,800,000 Bank of America 7.72% $10,000,000 First Union National Bank 7.72% $10,000,000 Mellon Bank, N.A. 5.86% $7,600,000 Fifth Third Bank 3.70% $4,800,000 Citicorp USA, Inc. 7.72% $10,000,000 ------- ----------- Total 100.00% $129,600,000
EX-4.E 3 l85264bex4-e.txt EXHIBIT 4(E) 1 EXHIBIT 4(e) AMENDMENT NO. 1 dated as of December 1, 2000 (this "AMENDMENT"), to the AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT dated as of January 3, 2000 (the "CREDIT AGREEMENT"), among THE SHERWIN-WILLIAMS COMPANY (the "COMPANY"), the Lenders referred to therein and THE CHASE MANHATTAN BANK, as Administrative Agent and Competitive Advance Facility Agent. The Company has requested that certain terms of the Credit Agreement be amended, and the Lenders are willing, on the terms and subject to the conditions set forth herein, to agree to amend the Credit Agreement. Accordingly, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as set forth below. Capitalized terms used but not defined herein shall have the meanings assigned to them in the Credit Agreement. SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT. (a) The Credit Agreement is hereby amended to add Citicorp USA, Inc. (the "NEW LENDER") as a "Lender" under the Credit Agreement, with an initial Commitment of $40,000,000. After giving effect to this Amendment, the Commitments of all Lenders (other than the New Lender) will remain the same as before giving effect to this Amendment, and each Lender's Commitment and percentage of the aggregate Commitments will be as set forth on Schedule 1 hereto. (b) Article X of the Credit Agreement is hereby amended by inserting the following new section at the end thereof: "SECTION 10.16. SHARING OF PAYMENTS, ETC. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Revolving Credit Loans or Term Loans owing to it (other than pursuant to Article III) in excess of its ratable share of payments on account of the Revolving Credit Loans or Term Loans (as the case may be) obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Revolving Credit Loans or Term Loans owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Company agrees that any Lender so purchasing a participation from another Lender pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including any right of set-off) with respect to such 2 participation as fully as if such Lender were the direct creditor of the Company in the amount of such participation." SECTION 2. REPRESENTATIONS AND WARRANTIES. To induce the other parties hereto to enter into this Amendment, the Company represents and warrants to each of the Lenders and the Administrative Agent that: (a) This Amendment has been duly authorized, executed and delivered by the Company, and each of this Amendment and the Credit Agreement, after giving effect to this Amendment, constitutes the legal, valid and binding obligation of the Company enforceable in accordance with its terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium and similar laws affecting the enforcement of creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law). (b) The representations and warranties contained in Article IV of the Credit Agreement, after giving effect to this Amendment, are true and correct on and as of the date hereof, except to the extent that such representations and warranties expressly relate to an earlier date. (c) No Possible Default or Event of Default has occurred and is continuing or would result from the execution and delivery of this Amendment. SECTION 3. EFFECTIVENESS. This Amendment shall become effective as of the date set forth above (the "AMENDMENT EFFECTIVE DATE") on the date that the Administrative Agent or its counsel shall have received counterparts of this Amendment that, when taken together, bear the signatures of the Company, the New Lender and the Lenders. SECTION 4. LIMITED EFFECT OF AMENDMENT. Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Lenders or the Administrative Agent under the Credit Agreement, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement, which is ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle the Company to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement in similar or different circumstances. This Amendment shall apply and be effective only with respect to the provisions of the Credit Agreement specifically referred to herein. After the date hereof, any reference to the Credit Agreement shall mean the Credit Agreement, as modified hereby. SECTION 5. COUNTERPARTS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same contract. Delivery of an executed counterpart of a signature page of this Amendment by facsimile transmission shall be as effective as delivery of a manually executed counterpart hereof. 3 SECTION 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF OHIO. SECTION 7. HEADINGS. The headings of this Amendment are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written. THE SHERWIN-WILLIAMS COMPANY, by /S/ ---------------------------------- Name: Title: by /S/ ---------------------------------- Name: Title: THE CHASE MANHATTAN BANK, individually, and as Administrative Agent and Competitive Advance Facility Agent, by /S/ ---------------------------------- Name: Title: 4 Citicorp USA, Inc. hereby agrees to each of the terms and conditions of the Credit Agreement, a copy of which has been delivered by the Company to Citicorp USA, Inc. AMOUNT OF COMMITMENT: CITICORP USA, INC., - -------------------- $40,000,000.00 by /S/ --------------------------- Name: Title: 5 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT DATED AS OF JANUARY 3, 2000 NAME OF INSTITUTION: BANK ONE, NA by /S/ --------------------------------- Name: Title: 6 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT DATED AS OF JANUARY 3, 2000 NAME OF INSTITUTION: THE BANK OF NEW YORK by /S/ --------------------------------- Name: Title: 7 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT DATED AS OF JANUARY 3, 2000 NAME OF INSTITUTION: WACHOVIA BANK OF GEORGIA, N.A. by /S/ --------------------------------- Name: Title: 8 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT DATED AS OF JANUARY 3, 2000 NAME OF INSTITUTION: MELLON BANK, N.A. by /S/ --------------------------------- Name: Title: 9 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT DATED AS OF JANUARY 3, 2000 NAME OF INSTITUTION: FIFTH THIRD BANK by /S/ --------------------------------- Name: Title: 10 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT DATED AS OF JANUARY 3, 2000 NAME OF INSTITUTION: SUNTRUST BANK by /S/ --------------------------------- Name: Title: 11 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT DATED AS OF JANUARY 3, 2000 NAME OF INSTITUTION: ABN AMRO BANK N.V. by /S/ --------------------------------- Name: Title: by /S/ --------------------------------- Name: Title: 12 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT DATED AS OF JANUARY 3, 2000 NAME OF INSTITUTION: THE BANK OF NOVA SCOTIA by /S/ --------------------------------- Name: Title: 13 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT DATED AS OF JANUARY 3, 2000 NAME OF INSTITUTION: BANCA COMMERCIALE ITALIANA CHICAGO BRANCH by /S/ --------------------------------- Name: Title: by /S/ --------------------------------- Name: Title: 14 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT DATED AS OF JANUARY 3, 2000 NAME OF INSTITUTION: FLEET NATIONAL BANK by /S/ --------------------------------- Name: Title: 15 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT DATED AS OF JANUARY 3, 2000 NAME OF INSTITUTION: NATIONAL CITY BANK by /S/ --------------------------------- Name: Title: 16 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT DATED AS OF JANUARY 3, 2000 NAME OF INSTITUTION: BANK OF AMERICA, N.A. by /S/ --------------------------------- Name: Title: 17 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT DATED AS OF JANUARY 3, 2000 NAME OF INSTITUTION: FIRST UNION NATIONAL BANK by /S/ --------------------------------- Name: Title: 18 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT DATED AS OF JANUARY 3, 2000 NAME OF INSTITUTION: KEY BANK NATIONAL ASSOCIATION by /S/ --------------------------------- Name: Title: 19 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT DATED AS OF JANUARY 3, 2000 NAME OF INSTITUTION: WELLS FARGO BANK, NATIONAL ASSOCIATION by /S/ --------------------------------- Name: Title: by /S/ --------------------------------- Name: Title: 20 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT DATED AS OF JANUARY 3, 2000 NAME OF INSTITUTION: PNC BANK NATIONAL ASSOCIATION by /S/ --------------------------------- Name: Title: 21 SIGNATURE PAGE TO AMENDMENT NO. 1 DATED AS OF DECEMBER 1, 2000, TO THE SHERWIN-WILLIAMS COMPANY AMENDED AND RESTATED FIVE YEAR CREDIT AGREEMENT DATED AS OF JANUARY 3, 2000 NAME OF INSTITUTION: ROYAL BANK OF CANADA by /S/ --------------------------------- Name: Title: 22 Five Year Credit Agreement Schedule 1
LENDER % OF COMMITMENTS COMMITMENT TERMINATION - ------ ---------------- ---------- ----------- The Chase Manhattan Bank 6.27% $40,000,000 January 3, 2006 ABN AMRO Bank N.V. 6.27% $40,000,000 January 3, 2006 Fleet National Bank 3.01% $19,200,000 January 3, 2005 National City Bank 6.27% $40,000,000 January 3, 2006 Wells Fargo Bank, N.A. 6.27% $40,000,000 January 3, 2005 PNC Bank, National Association 4.76% $30,400,000 January 3, 2003 Wachovia Bank of Georgia, N.A. 4.76% $30,400,000 January 3, 2005 SunTrust Bank, Atlanta 6.27% $40,000,000 January 3, 2006 Banca Commerciale Italiana Chicago Branch 3.01% $19,200,000 January 3, 2006 The Bank of New York 6.27% $40,000,000 January 3, 2006 Bank One, N.A. 6.27% $40,000,000 January 3, 2006 The Bank of Nova Scotia 3.01% $19,200,000 January 3, 2006 Bank of America 6.27% $40,000,000 January 3, 2006 Keybank National Association 6.27% $40,000,000 January 3, 2005 First Union National Bank 6.27% $40,000,000 January 3, 2006 Mellon Bank, N.A. 4.76% $30,400,000 January 3, 2005 Royal Bank of Canada 4.76% $30,400,000 January 3, 2005 Fifth Third Bank 3.01% $19,200,000 January 3, 2006 Citicorp USA, Inc. 6.27% $40,000,000 January 3, 2006 ------- ------------ Total 100.00% $638,400,000
EX-13 4 l85264bex13.txt EXHIBIT 13 1 EXHIBIT 13 PORTIONS OF THE 2000 ANNUAL REPORT TO SHAREHOLDERS INTRODUCTION - ------------ ask. How are we structured to maximize market opportunity? Sherwin-Williams is a manufacturer, distributor and retailer of coatings and other related products, with annual sales in excess of $5.2 billion. More than half of our worldwide revenue is generated by our network of North American company-operated paint stores and automotive branches. We also market branded, private label and licensed brand products through a variety of other channels. These include mass merchandisers, home centers, hardware stores, independent paint dealers, industrial and marine distributors, automotive distributors and body shops, joint ventures, and licensees of technology, trademarks and trade names. Our Company is organized into four operating segments. These segments allow us to closely tailor our technology, distribution and service to the needs of a particular marketplace. TABLE OF CONTENTS - ----------------- Highlights .................................................................................. 2 Letter to Shareholders....................................................................... 3-5 Company Overview............................................................................. 6-11 Financial Summary............................................................................ 12 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................ 13-20 Report of Management and Cautionary Statement Regarding Forward-Looking Information............................................................... 21 Report of Independent Auditors............................................................... 22 Consolidated Financial Statements and Notes.................................................. 23-37 Directors, Officers, Managers................................................................ 38 Shareholder Information...................................................................... 39 Subsidiaries................................................................................. 40
The Sherwin-Williams company recruits, selects and hires the best qualified people available - without discrimination based on race, religion, color, creed, sex, national origin, age, disability, status as a special disabled veteran, veteran of the Vietnam era or any other unlawful consideration. Inside front cover | The Sherwin-Williams Company 2000 Annual Report 2 OUR FOUR OPERATING SEGMENTS [Photo of paint store] PAINT STORES SEGMENT - -------------------- PRODUCTS SOLD: Paints, stains, caulks, applicators, wallcoverings, floorcoverings, spray equipment and related products MARKETS SERVED: Do-It-Yourselfers, professional painting contractors, home builders, property managers, architects, interior designers, industrial, marine, aviation, flooring and OEM product finishes MAJOR BRANDS SOLD: Sherwin-Williams(R), Con-Lux(R), Old Quaker(TM), Mercury(TM), Broad Dugan(TM), Pro-Line(R), SeaGuard(R), ArmorSeal(R), Kem(R)Hi-Temp, Cook(TM), Sher-Wood(R), Powdura(R), Polane(R), Kem Aqua(R) OUTLETS: 2,488 Sherwin-Williams stores in North America [Photo of cans of paint] CONSUMER SEGMENT - ---------------- PRODUCTS SOLD: Branded, private label and licensed brand paints, stains, varnishes, industrial products, wood finishing products, applicators, corrosion inhibitors, aerosols and related products MARKETS SERVED: Do-It-Yourselfers, professional painting contractors and industrial maintenance MAJOR BRANDS SOLD: Dutch Boy(R), Krylon(R), Minwax(R), Cuprinol(R), Thompson's(R), Formby's(R), Red Devil(R), Pratt & Lambert(R), Martin Senour(R), H&C(TM), White Lightning(R), Dupli-Color(R)and Rubberset(R) OUTLETS: Leading mass merchandisers, home centers, independent paint dealers, hardware stores and industrial distributors [Photo of car] AUTOMOTIVE FINISHES SEGMENT - --------------------------- PRODUCTS SOLD: High performance interior and exterior coatings for the automotive and fleet industries, and automotive and heavy truck original equipment manufacturer (OEM) markets; as well as thousands of associated products. MARKETS SERVED: Automotive jobbers, wholesale distributors, collision repair facilities, dealerships, fleet owners and refinishers, production shops, body builders and original equipment manufacturers (OEM). MAJOR BRANDS SOLD: Sherwin-Williams(R), Martin Senour(R), Western(R), Lazzuril(R), Excelo(TM), Marson(TM)and ScottWarren(TM) OUTLETS: 175 company-operated branches worldwide, including operations in the United States, Canada, Mexico, Brazil, Jamaica, Chile and Italy. [Photo of paint store] INTERNATIONAL COATINGS SEGMENT - ------------------------------ PRODUCTS SOLD: Architectural paints, stains, varnishes, industrial maintenance products, aerosols, product finishes, wood finishing products and related products. MARKETS SERVED: Do-It-Yourselfers, professional painting contractors, independent dealers, industrial maintenance and OEM product finishes MAJOR BRANDS SOLD: Sherwin-Williams(R), Dutch Boy(R), Krylon(R), Kem-Tone(R), Pratt & Lambert(R), Minwax(R), Sumare(TM), Ronseal(TM), Globo(TM), Pulverlack(R), Colorgin(TM), Andina(TM)and Marson(TM) OUTLETS: Distribution in more than 20 foreign countries through wholly-owned subsidiaries, joint ventures and licensees of technology, trademarks and tradenames, including 45 company-operated architectural and industrial stores in Chile and Brazil The Sherwin-Williams Company 2000 Annual Report | 1 3 LETTER TO SHAREHOLDERS ---------------------- to our shareholders In 2000, The Sherwin-Williams Company posted record sales of $5.2 billion representing a 4.2 percent improvement over last year, our strongest sales performance in the past several years. Our net income, excluding a one-time charge for the impairment of long-lived assets, also set a new high at $309.7 million, a 1.9 percent increase over 1999's performance. Earnings per share from operations, prior to the asset impairment charge, improved 5.6 percent from $1.80 in 1999 to $1.90 in 2000. This represents our 23rd consecutive year of improvement in earnings from operations. This past year we also increased the dividend for our 22nd consecutive year. As a sign of the Company's confidence in our future and in the value of our stock, we purchased 6.8 million shares of our stock on the open market for treasury. The price of our stock at year-end compared to last year was up over 25 percent. Despite these positive results, we were disappointed with our performance in 2000. We expected to do better and fell short in a number of areas. This past year we experienced significant raw material cost increases driven by a sharp run up in the price of oil. Management reacted quickly by implementing selective mid-year price increases in some of our operating segments and making tough cuts in spending in all of our segments. However, we were not able, in the short term, to overcome the severity of these increases and margins suffered. We also experienced a slow down in the demand for our products over the second half of the year. Even though we believe that we continued to gain market share in most product categories, our sales results lagged behind our expectations. There were a number of positive results in our operating segments that give us confidence as we begin 2001. PAINT STORES SEGMENT - ------------------------------------------------------------------------------- 2000 marked the twentieth consecutive year of improved sales results from our Paint Stores Segment. Net sales increased 6.1 percent to $3.2 billion while comparable store net sales improved by 3.7 percent. Operating profit rose 9.2 percent to $411.5 million. Gallon gains were posted in the architectural, industrial and marine and chemical coatings categories. While servicing do-it-yourself customers remains an important part of our architectural coatings mission, we are increasingly focused on the professional painting contractor market. There has been a significant increase in the purchase of architectural gallons by painting contractors. This shift is driven by the demographic changes in our country as our population ages and has less-free time to tackle major projects around the home. We are further encouraged by the fact that painting contractors continue to purchase almost all of their product requirements from the paint store channel. Our 2,488 company paint stores throughout North America give us a significant advantage over all other paint store competitors serving professional painting contractors. As a critical component of this contractor focused strategy, we remain committed to expanding our network of company paint stores. This past year, we opened 92 net new stores, providing more convenient access to every customer in these neighborhoods. Included in this number are nine stores acquired from the Norfolk Paint Company in Norfolk, Virginia that now proudly offer Sherwin-Williams(R) products. In addition to new stores, this Segment added 70 new sales representatives and launched 35 new products, strengthening our commitment to be the service and technology leader in our industry. This past year, our industrial and marine business continued to be an important growing part of our Company. The acquisition of the business of General Polymers Corporation added a full line of industrial floor coatings to our existing broad line of industrial products. Our chemical coatings business also posted improved results as we accelerated our original equipment manufacturer specification approval process, launched new products and successfully grew our powder coatings business. We believe the internet will play an increasing role in helping paint customers choose a supplier. Last year, The Sherwin - Williams Company 2000 Annual Report | 3 4 we made substantial progress in evolving our award-winning web site from a comprehensive information source to an e-business platform for professional customers. A select group of diverse professional customers took part in a pilot program to help us design a site that serves a broad range of their business needs. In the years ahead, we will continue to enhance this site and expand the service to a significant number of our professional customers. CONSUMER SEGMENT - ------------------------------------------------------------------------------- Net sales for our Consumer Segment ended the year at $1.2 billion, essentially flat with last year's performance. More disappointing, operating profit declined 8.0 percent to $142.5 million, excluding the asset impairment charge. Our poor performance in this Segment reflects our lackluster sales and inability to pass on raw material cost increases to our customers in a timely fashion. In addition, certain parts of our Consumer Segment, specifically Pratt & Lambert, Thompson's and Cleaning Solutions, lacked the past financial performance or management's expectations of future cash flow to support the carrying value of certain long-lived assets, particularly goodwill, resulting in a $293.6 million after-tax write-off for impaired long-lived assets ($1.80 per diluted share on an annual basis). This one-time charge had no cash effect on our Company in 2000. After a year like this, it is important that management reacts, makes changes and moves in a different direction. We have done that. We have made organization and management changes to reduce the complexity of our operation, gain greater focus on individual product lines and further reduce costs. As a result, we have created three operating units within this Segment. The Wood Care Business Unit will be responsible for the sales, marketing, manufacturing and technical development of our Thompson's(R), Minwax(R) and Formby's(R) product lines. Harvey Sass, Senior Vice President - Wood Care, will head this organization. Our Diversified Brands Business Unit will be responsible for the sales, marketing, manufacturing and technical development of our Krylon(R) and Red Devil(R) brands of aerosol and small package paint, our industrial, automotive and custom-filled aerosol products, our White Lightning(R) brand of caulks and sealants and our applicator business. This business will be managed by Tim Knight, Senior Vice President- Diversified Brands. The Consumer Division will be responsible for the sales and marketing of our branded and private label architectural coatings other than the Sherwin-Williams(R) brand. These names include Dutch Boy(R), Pratt& Lambert(R) and Martin Senour(R), as well as nationally recognized private label and licensed brands. This Division will continue to be responsible for the manufacturing and technical development for all architectural and industrial and marine coatings for our Company domestically. Tom Seitz, President & General Manager, Consumer Division, will lead this team. In addition to these organizational changes, two non-core business units in the Consumer Segment are currently being marketed for potential divestiture. We believe the Cleaning Solutions and Graphic Arts businesses will perform better within an organization where their focus relates more closely to the core function of a potential acquirer. The Consumer Segment has a portfolio of outstanding brand names and relation- ships with the top retailers in our country. We expect these changes will improve our ability to react quickly to changing market conditions and bring a heightened sense of urgency to required improvements. AUTOMOTIVE FINISHES SEGMENT - ------------------------------------------------------------------------------- The Automotive Finishes Segment ended the year with $493.4 million in net sales for a 4.8 percent improvement. Operating profit declined to $61.3 million from $66.5 million in 1999. Operating profit was negatively impacted in 2000 by a $6.8 million provision for the disposition of the Chicago and Troy technical facilities as the Segment moved to its new state-of-the-art automotive technology center in Warrensville Heights, Ohio. This new facility will improve the efficiency and productivity of our automotive finishes product development effort. In 2000, the Automotive Finishes Segment expanded its distribution network through both company branches and independent distributors. Three net new Sherwin-Williams branches were opened or acquired bringing our total to 175 facilities. The acquisition of Scott Warren S.p.A. in Italy, a manufacturer of automotive coatings for the collision repair market, provides a solid base upon which to grow our presence in Europe and enhances our color match capability for all European automobile makes. The Automotive Finishes Segment begins 2001 under new leadership. Ron Nandor has been promoted back into this Segment to the position of President & General Manager, Automotive Division, after a successful assignment as Executive Vice President - Marketing of our Paint Stores Group. INTERNATIONAL COATINGS SEGMENT - -------------------------------------------------------------------------------- 2000 proved to be another difficult year for our International Coatings Segment. Net sales improved 2.6 percent to $307.0 million, but operating profit declined by 47.9 percent to finish at $17.7 million. A harsh economic climate in South America negatively impacted our performance in the entire region, most notably in Argentina. In the United Kingdom, an extended truck strike, poor weather and rising oil prices took their toll on our Ronseal operations. Despite our results in this Segment, we remain optimistic about our growth prospects in these markets over time. Last year, Sherwin-Williams and our subsidiaries introduced 60 products to meet specific coatings needs in these countries, with much of the technology transferred from our domestic operations. In Brazil, the acquisition of Pulverlack Tintas Ltda., 4 | The Sherwin - Williams Company 2000 Annual Report 5 a powder coatings manufacturer, strengthens our industrial position in this region. A key management change was made in our International Coatings Segment as well. Mike Galasso was named President, International Division after his successful assignment as President & General Manager of our Automotive Division. OUTLOOK FOR 2001 While the economic climate does not look promising at the beginning of this new year, we look forward with optimism and confidence. This optimism and confidence comes from sound strategic plans in support of each of our Segments, a track record of past success and 26,000 employees committed to making this year better. We are focused on the significant opportunities we have to gain market share in every business segment regardless of the economic environment. MANAGEMENT CHANGES This past year, we said goodbye to two long-time leaders of our Company. Don Fields retired after 46 years of service, most recently as President of our International Division. Don's steady hand touched many different divisions at Sherwin-Williams over his impressive career and he has made numerous significant contributions. We wish Don and his wife Joyce many years of continued good health and happiness. Our long-time Chairman, Jack Breen, completed the last phase of the Company's orderly management succession plan as he stepped down from his position as Chairman of our Board of Directors. The legacy Jack leaves behind is impressive, beginning with the consecutive years of earnings growth and strong stock performance throughout his tenure. But more lasting for those of us who had the pleasure of knowing and working for him, will be the manner in which Jack conducted his personal and business affairs. Words like integrity, honesty and morality are ingrained in this Company as a result of Jack's leadership. While he is missed on a daily basis, Jack continues to play an important role as an active member of our Board of Directors. We wish Jack and Mary Jane an active life, full of adventure, good health and happiness. Every day our hard working team arrives at Sherwin-Williams commited to improving your Company. We are blessed with the most dedicated and talented employees in our industry. We are thankful for the loyalty of our customers and the support of our suppliers. We are excited about our future, proud of our past and most appreciative of your continuing trust. Christopher M. Connor Chairman and Chief Executive Officer Joseph M. Scaminace President and Chief Operating Officer The Sherwin - Williams Company 2000 Annual Report | 5 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ------------------------------------------------------------------------------- FINANCIAL CONDITION - 2000 Net operating cash flow generated by the Company during 2000 was $461.1 million, while net proceeds from short-term borrowings were $106.9 million. This cash flow provided the funds to invest in property, plant and equipment, reduce long-term debt, acquire treasury stock, increase the annual dividend, complete several acquisitions and make other long-term investments. The Company's current ratio increased to 1.39 at December 31, 2000 from 1.38 at the end of 1999. The Company's Consolidated Balance Sheets and Statements of Consolidated Cash Flows, on pages 24 and 25 of this report, provide more detailed information on the Company's financial position and cash flows. Borrowings outstanding under the Company's commercial paper program are included in Short-term borrowings on the balance sheet. Such borrowings had a weighted-average interest rate of 6.6 percent. Borrowings under the commercial paper program are fully backed by and limited to the borrowing availability under the Company's revolving credit agreements which aggregated $768.0 million effective January 3, 2001. The current portion of long-term debt decreased $102.9 million due primarily to the payment of 6.5% notes totaling $100.0 million during the first quarter of 2000. The $19.4 million balance in Current portion of long-term debt at December 31, 2000 related to various promissory notes and other obligations. Increases and decreases in components of net working capital were primarily due to timing during 2000. Deferred pension assets of $364.4 million at December 31, 2000 represent the excess of the fair market value of the assets in the Company's defined benefit pension plans over the actuarially-determined projected benefit obligations. The 2000 increase in deferred pension assets of $30.3 million represents primarily the recognition of the current year net pension credit, described in Note 6 on pages 29 to 31 of this report. The assumed discount rate used to compute the actuarial present value of projected benefit obligations was decreased from 7.25 percent to 7.00 percent at December 31, 2000 due to decreased rates of high-quality, long-term investments. The decrease in the actual return on plan assets during 2000 was primarily the result of returns on equity investments that were below the assumed return of 8.5 percent. Goodwill, which represents the excess of cost over the fair value of net assets acquired in purchase business combinations, decreased $334.0 million in 2000. Intangible assets, which represent items such as trademarks and patents, decreased $15.8 million in 2000. These decreases were due primarily to a total charge for the impairment of long-lived assets of $352.0 million, of which $342.5 million related to goodwill, as described in Note 2 on page 28 of this report. In addition, amortization expense of $47.3 million and foreign currency translation adjustments decreased goodwill and intangible assets, offset by increases resulting from acquisitions completed in 2000. An increase in Other assets of $53.3 million was primarily due to the capitalization of costs incurred, net of amortization, related to designing, developing, obtaining and implementing internal use software in accordance with Statement of Position 98-1, "Accounting for the Cost of Computer Software Developed or Obtained for Internal Use." Other long-term investments, related to certain marketing programs of the Company, also increased Other assets. Net property, plant and equipment increased $10.7 million to $722.4 million at December 31, 2000. The increase results primarily from capital expenditures of $132.8 million, partially offset by depreciation expense of $108.9 million and a portion of the total charge for the impairment of long-lived assets. Provisions for disposition or retirement of certain assets and foreign currency translation adjustments further offset capital expenditures. Capital expenditures in 2000 represented primarily the costs of purchasing and remodeling the automotive technology center in Warrensville Heights, Ohio, upgrading information systems equipment, the capacity expansion or upgrade of manufacturing and distribution centers and costs related to opening new paint stores. Capital expenditures during 2000 in the Paint Stores Segment were primarily attributable to opening new paint stores and store relocations along with normal replacement and upgrading store equipment. Capital expenditures in the Consumer and The Sherwin - Williams Company 2000 Annual Report | 13 7 International Coatings Segments during 2000 were primarily related to capacity expansions, efficiency improvements in production facilities and information systems hardware. Capital expenditures during 2000 in the Automotive Finishes Segment primarily related to the purchase and remodeling of the automotive technology center, capacity expansions and equipment upgrades. In 2001, the Company expects that its most significant capital expenditures will relate to various capacity and productivity improvement projects at manufacturing facilities, continued new store openings, and new or upgraded information systems equipment. The Company does not anticipate the need for any specific long-term external financing to support these capital programs. Long-term debt decreased during the year to $623.6 million at December 31, 2000, resulting primarily from current debt maturities of $19.4 million that were partially offset by increased debt associated with acquired companies. The Company expects to remain in a borrowing position throughout 2001. The increase in the Company's long-term postretirement benefit liability occurred due to the excess of the net postretirement benefit expense over the costs for benefit claims incurred. The current portion of the accrued postretirement liability, amounting to $13.2 million at December 31, 2000, is included in Other accruals. The assumed discount rate used to calculate the actuarial present value of the postretirement benefit obligations was decreased from 7.25 percent to 7.00 percent at December 31, 2000 due to the reduced rates of high-quality, long-term investments. The assumed health care cost trend rates, first established in 1992 during the adoption of SFAS No. 106, were revised during 2000 for years 2001 through 2009. The revised rates reflect escalating health care costs that continue to exceed the assumed cost trend rates. The trend rate for 2001 was revised from the previous 5.5 percent annual increase to a more representative 9.5 percent annual increase. The trend rate will decrease gradually to 5.5 percent in 2010 - the same trend rate as previously estimated for 2010. The net effect of these changes is expected to increase the net postretirement benefit expense approximately 15 percent for 2001 as the cumulative unrecognized net loss is above the threshold for required amortization. See Note 6, on pages 29 to 31 of this report, for further information on the Company's postretirement benefit obligations. Other long-term liabilities include accruals for environmental-related liabilities and other non-current items. The decrease of $31.1 million in other long-term liabilities during 2000 primarily related to a reduction in certain tax liabilities resulting from timing items and to a decrease in the accrual for environmental-related liabilities. See Note 9, on page 32 of this report, for additional information concerning the Company's other long-term liabilities. The Company's past operations included the manufacture and sale of lead pigments and lead-based paints. The Company, along with other companies, is a defendant in a number of legal proceedings, including purported class actions, separate actions brought by the State of Rhode Island, and actions brought by other governmental entities, arising from the manufacture and sale of lead pigments and lead-based paints. The plaintiffs are seeking recovery based upon various legal theories, including negligence, strict liability, breach of warranty, negligent misrepresentations and omissions, fraudulent misrepresentations and omissions, concert of action, civil conspiracy, violations of unfair trade practices and consumer protection laws, enterprise liability, market share liability, nuisance, unjust enrichment and other theories. The plaintiffs seek various damages and relief, including personal injury and property damage, costs relating to the detection and abatement of lead-based paint from buildings, costs associated with a public education campaign, medical monitoring costs and others. The Company believes that the litigation is without merit and is vigorously defending such litigation. Considering the Company's past operations relating to lead pigments and lead-based paints, it is possible that additional lead pigment and lead-based paint litigation may be filed against the Company based upon similar or different legal theories and seeking similar or different types of damages and relief. Litigation is inherently subject to many uncertainties. Adverse court rulings or determinations of liability could affect the lead pigment and lead-based paint litigation against the Company and encourage an increase in the number and nature of future claims and proceedings. In 14 | The Sherwin - Williams Company 2000 Annual Report 8 addition, from time to time, various legislation and administrative regulations have been enacted or proposed to impose obligations on present and former manufacturers of lead pigments and lead-based paints respecting asserted health concerns associated with such products and to overturn court decisions in which the Company and other manufacturers have been successful. Due to the uncertainties involved, management is unable to predict the outcome of such litigation or the number or nature of possible future claims and proceedings, or the affect of any such legislation and administrative regulations. In addition, management cannot reasonably determine the scope or amount of the potential costs and liabilities related to such litigation, or such legislation and regulations. The Company has not accrued any amounts for such litigation. Any potential liability that may result from such litigation or such legislation and regulations cannot reasonably be estimated. However, based upon, among other things, the outcome of such litigation to date, management does not currently believe that the costs or potential liability ultimately determined to be attributable to the Company arising out of such litigation will have a material adverse effect on the Company's results of operations, liquidity 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 potential liability on the Company for past operations which were conducted utilizing practices and procedures that were 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 that it conducts its operations in compliance with applicable environmental laws and regulations and has implemented various programs designed to protect the environment and promote continued compliance. Depreciation of capital expenditures and other expenses related to ongoing environmental compliance measures are included in the normal operating expenses of conducting business. The Company's capital expenditures, depreciation and other expenses related to ongoing environmental compliance measures were not material to the Company's financial condition, results of operations or liquidity during 2000, and the Company does not expect that such capital expenditures and other expenses will be material to the Company's financial condition, results of operations or liquidity in 2001. The Company is involved with environmental compliance, investigation and remediation activities at some of its current and former sites (including former sites which were previously owned and/or operated by businesses acquired by the Company). The Company, together with other parties, has also been designated a potentially responsible party under federal and state environmental protection laws for the investigation and remediation of environmental contamination and 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. The Company accrues for environmental-related activities relating to its past operations and third-party sites, including Superfund sites, for which commitments or clean-up plans have been developed and for which costs can be reasonably estimated. These estimated costs are determined based on currently available facts regarding each site. The Company continuously assesses its potential liability for investigation and remediation-related activities and adjusts its environmental-related accruals as information becomes available upon which more accurate costs can be reasonably estimated and as additional accounting guidelines are issued which require changing the estimated costs or the procedure utilized in estimating such costs. Actual costs incurred may vary from these estimates due to the inherent uncertainties involved including, among others, the number and financial condition of parties involved with respect to any given site, the volumetric contribution which may be attributed to the Company relative to that attributed to other parties, the nature and magnitude of the wastes involved, the various technologies that can be used for remediation and the determination of acceptable remediation with respect to a particular site. The Company's environmental-related contingencies are The Sherwin - Williams Company 2000 Annual Report | 15 9 expected to be resolved over an extended period of time. Pursuant to a Consent Decree entered into with the United States of America in 1997, on behalf of the Environmental Protection Agency, filed in the United States District Court for the Northern District of Illinois, the Company has agreed, in part, to (i) conduct an investigation at its southeast Chicago, Illinois facility to determine the nature, extent and potential impact, if any, of environmental contamination at the facility and (ii) implement remedial action measures, if required, to address any environmental contamination identified pursuant to the investigation. While the Company continues to investigate this site, certain initial remedial actions have occurred at this site. In 1999, the Company entered into a settlement agreement with PMC, Inc. settling a lawsuit brought by PMC regarding the Company's former manufacturing facility in Chicago, Illinois which was sold to PMC in 1985. Pursuant to the terms of the settlement agreement, the Company agreed, in part, to investigate and remediate, as necessary, certain soil and/or ground water contamination caused by historical disposals, discharges, releases and/or events occurring at this facility. In 2000, the Company entered into a Consent Decree with the People of the State of Illinois settling an action brought by the State of Illinois against the Company regarding the PMC facility. Under the Consent Decree, the Company agreed, in part, to investigate and remediate, as necessary, certain soil and/or groundwater contamination caused by historical disposals, discharges, releases and/or events occurring at this facility. The Company is currently conducting its investigation of this facility. With respect to the Company's southeast Chicago, Illinois facility and the PMC facility, the Company has evaluated its potential liability and, based upon its investigations to date, has accrued appropriate amounts. 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 material impact on net income for the annual or interim period during which the additional costs are accrued. The Company expects the contingent liabilities related to these facilities to be resolved over an extended period of time. The Company does not believe that any potential liability ultimately attributed to the Company for its environmental-related matters will have a material adverse effect on the Company's financial condition, liquidity, cash flow or, except as set forth in the preceding paragraph, net income. See Note 9, on page 32 of this report, for discussion of the environmental-related accruals included in the Company's Consolidated Balance Sheets. Shareholders' equity decreased $226.7 million during 2000 to $1,471.9 million due primarily to the purchase of 6,800,000 shares of Company stock for treasury at a cost of $146.9 million. The Company acquires its own stock for general corporate purposes and, depending on its future cash position and market conditions, it may acquire additional shares in the future. The Company had remaining authorization at December 31, 2000 to purchase 13,200,000 shares of its common stock. Also contributing to the decrease in shareholders' equity were cash dividends paid of $88.1 million and other comprehensive losses related to foreign currency translations of $18.0 million. These decreases were partially offset by current year net income of $16.0 million. Comprehensive loss is comprised of net income and the components of other comprehensive income or loss including foreign currency translation adjustments. The 2000 increase of $18.0 million in Cumulative other comprehensive loss was attributed to weakness in several foreign operation's functional currencies, while the 1999 increase of $100.7 million occurred primarily due to the devaluation of the Brazilian real. In January 1999, the Brazilian Central Bank eliminated its governmental policy of supporting and tightly managing the trading band of the real and allowed it to trade freely in the open market against other currencies. Shortly after this announcement, the Brazilian real weakened significantly in trading with the U.S. dollar and other foreign currencies and has only partially recovered since that time. As a result of the floating exchange rate of certain foreign currencies, the Company believes it may experience continuing losses from foreign currency translation. The Company does 16 | The Sherwin - Williams Company 2000 Annual Report 10 not expect any devaluation or other currency translation losses to have a material adverse effect on the Company's financial condition, results of operations or cash flows. See Note 16, on page 35 of this report. The Company is exposed to market risk through various financial instruments, including fixed rate debt instruments. The Company does not believe that any potential loss related to these financial instruments will have a material adverse effect on the Company's financial condition, results of operations or cash flows. The 2000 annual dividend of $.54 per share approximated our payout ratio target of 30.0 percent of the prior year's earnings. This annual dividend represented the twenty-first consecutive year that the dividend has increased and a compounded annual rate of increase of 24.5 percent since the dividend was reinstated in the fourth quarter of 1979. At a meeting held on February 7, 2001, the Board of Directors increased the quarterly dividend to $.145 per share. RESULTS OF OPERATIONS - 2000 vs 1999 - ------------------------------------------------------------------------------- Consolidated net sales increased 4.2 percent to $5.2 billion in 2000, primarily due to increased sales in the Paint Stores, Automotive Finishes and International Coatings Segments that were partially offset by decreased sales in the Consumer Segment. Net external sales in the Paint Stores Segment during 2000 increased 6.1 percent to $3.2 billion as higher volume sales of paint products outpaced increases in the stores' other product lines (wallcoverings, floorcoverings, spray equipment and associated products) with sales to professional painters and industrial users showing the greatest gains. Comparable-store sales increased 3.7 percent in 2000. This Segment ended 2000 with 2,488 stores in operation compared to 2,396 stores in operation at the end of the prior year. It is the objective of the Paint Stores Segment to expand its store base an average of three percent each year. In 2000, the Segment added 92 net new stores and expects to add 65 to 70 net new stores in 2001. External sales in the Consumer Segment decreased 0.4 percent during 2000 to $1.2 billion primarily due to a sluggish domestic do-it-yourself market. New product launches, sales to new customers and increased sales to certain existing customers could not offset the effects of the sluggish retail market. The Company expects that additional Consumer Segment sales in 2001 from new product introductions, expansion of its presence at certain retailers and new customer accounts will not be sufficient to offset the effects of lost business and customer accounts in 2000. In addition, a sluggish domestic do-it-yourself market is expected to continue through at least the first half of 2001 and adversely impact year-over-year sales comparisons with 2000. External sales in the Automotive Finishes Segment increased 4.8 percent during 2000 to $493.4 million due primarily to the sales of vehicle refinish products. The soft fourth quarter domestic economy negatively impacted this Segment's OEM sales. The Company expects that sales from new product and color introductions, a stronger vehicle refinish market and an increase in the number of automotive branches will result in a sales increase for this Segment in 2001. External sales in the International Coatings Segment increased 2.6 percent to $307.0 million due primarily to increased gallons sold. Sales in local currencies were up 6.5 percent, while U.S. dollar comparisons were affected by currency conversions. Net sales for the year continued to be impacted by a shift in sales to lower priced products and competitive pricing due to poor market conditions in South America, particularly in Argentina. The Company expects to realize sales improvements in the International Coatings Segment in 2001 as economic conditions are expected to improve in most South American countries in which we operate. Consolidated gross profit as a percent of sales decreased to 44.3 percent from 44.9 percent in 1999. The Company's gross profit margin was impacted by raw material cost increases, inflated energy costs and higher distribution costs. The Paint Stores Segment's 2000 gross profit margin was slightly higher than last year primarily due to increased paint volume sales, a favorable product sales mix and selective selling price increases. Gross profit margin in the Consumer Segment was lower than last year as competitive pricing pressures prohibited selling price increases sufficient to offset increased raw material costs and higher distribution costs. In addition, costs associated with The Sherwin - Williams Company 2000 Annual Report | 17 11 new product launches and new customer start-ups could not be offset by volume related manufacturing efficiencies and certain cost reductions. Gross profit margin decreased in the Automotive Finishes Segment and was also unfavorably impacted by increased raw material costs. Gross profit margin in the International Coatings Segment decreased primarily due to price competition, increased raw material costs and an unfavorable product sales mix to lower margin products. Consolidated selling, general and administrative (SG&A) expenses remained flat as a percent of sales at 33.4 percent. Increased expenses in 2000 related to new store openings, new products, new customers and the consolidation of two research facilities and division administrative functions into the automotive technology center. Offsetting these increased expenses was the reduction in costs in 2000 due to the completion in 1999 of the Company's Year 2000 compliance project. The Paint Stores Segment's SG&A ratio was slightly unfavorable compared to last year primarily due to increased expenses related to 92 net new store openings. The Paint Stores Segment continued its investment in expanding its business in spite of the soft domestic economy during the latter part of the year. A slightly favorable SG&A ratio in the Consumer Segment for 2000 as compared to last year was primarily a result of certain administrative cost reductions partially offset by decreased sales and increased costs of new product launches and new customer start-ups. The Automotive Finishes Segment's SG&A ratio was also slightly favorable compared to last year primarily due to higher sales volume partially offset by severance and moving costs associated with the consolidation of the Segment's research and administrative functions into the newly purchased automotive technology center. The International Coatings Segment's SG&A ratio was unfavorable primarily due to higher commissions in Brazil relating to increased sales, partially offset by overall sales increases. During the fourth quarter of 2000, the Company recognized an asset impairment charge of $352.0 million ($293.6 million after-tax or $1.80 per diluted share) in the Consumer Segment to reduce the carrying values of certain long-lived assets, primarily goodwill, to their estimated fair values. Cash flow in 2000 was not affected by this accounting charge which is more fully described in Note 2 on page 28 of this report. Accordingly, consolidated segment operating profit for the year was reduced to 2.8 percent of sales compared to 9.8 percent of sales in 1999. Excluding the asset impairment charge, consolidated segment operating profit increased 1.1 percent but declined as a percent of sales to 9.5 percent from 9.8 percent last year. Segment operating profit of the Paint Stores Segment increased 9.2 percent to 12.9 percent of sales, as increased paint volume sales, a favorable product mix and selective selling price increases more than offset increased expenses related to new store openings. The Consumer Segment's operating profit, excluding the effects of the asset impairment charge, declined 8.0 percent primarily due to competitive pricing pressures that did not allow recovery of all increased raw material costs and higher distribution costs. Segment operating profit of the Automotive Finishes Segment decreased $5.3 million or 7.9 percent primarily due to increased raw material costs and a $6.8 million provision for the disposition of two research centers idled by the consolidation into the new automotive technology center. See Note 5, on page 29 of this report, for additional disposition and termination of operations information. Segment operating profit of the International Coatings Segment decreased to $17.7 million from $33.9 million last year primarily due to increased price competition, increased raw material costs and an unfavorable product sales mix to lower margin products. There are certain risks in transacting business internationally, such as changes in applicable laws and regulatory requirements, political instability, general economic and labor conditions, fluctuations in currency exchange rates and expatriation restrictions, which could adversely affect the financial condition or results of operation of the Company's consolidated foreign subsidiaries. Corporate expenses decreased in 2000 primarily due to the reduction in certain information systems expenses, including the completion of the Company's Year 2000 compliance project in 1999, partially offset by increased interest expense and certain unallocated employee benefit expenses. Refer to Note 17, on pages 35 through 37 of this report, for additional reportable segment information. Interest expense increased slightly in 2000 primarily due to higher average short-term debt outstanding and 18 | The Sherwin - Williams Company 2000 Annual Report 12 rates, partially offset by lower average long-term debt outstanding. As a result, interest coverage, excluding the effects of the asset impairment charge, remained unchanged from 1999 at 9.0 times. Interest coverage in 2000, after recording the effects of the asset impairment charge, decreased to 3.3 times. Fixed charge coverage, excluding the effects of the asset impairment charge, which is calculated using interest and rent expense, decreased to 4.5 times from 5.8 times in 1999. Fixed charge coverage in 2000, after recording the effects of the asset impairment charge, was 1.2 times. Interest and net investment income decreased in 2000 primarily due to lower average cash and short-term investment balances, partially offset by higher average yields. See Note 4, on page 29 of this report, for further detail on Other expense - net. As shown in Note 13, on page 34 of this report, the effective income tax rate was 88.9 percent in 2000 due to the effect of a portion of the asset impairment charge that was not deductible for tax purposes. Excluding the effects of the asset impairment charge, the effective tax rate declined to 37.5 percent from 38.0 percent in 1999. Net income decreased in 2000 to $16.0 million from $303.9 million in 1999 due primarily to the effects of the asset impairment charge. Net income per share-diluted was reduced to $.10 per share from $1.80 last year. See Note 15, on page 35 of this report, for detailed computations. Excluding the effects of the asset impairment charge, net income for 2000 increased 1.9 percent to $309.7 million, and net income per share increased 5.6 percent to $1.90 per diluted share. RESULTS OF OPERATIONS - 1999 vs 1998 - ------------------------------------------------------------------------------- Consolidated net sales increased 1.4 percent to $5.0 billion in 1999, primarily due to increased sales in the Paint Stores Segment which were partially offset by decreased sales in each of the other reportable segments. Net external sales in the Paint Stores Segment during 1999 increased 6.3 percent primarily due to higher volume sales of paint products, combined with sales gains in each of the remaining major product lines (wallcoverings, floor coverings, spray equipment and associated products). Comparable-store sales increased 4.0 percent in 1999. The Company launched its web site, "www.sherwin-williams.com" in 1999. A portion of the web site provides Paint Stores Segment customers, painting contractors, and others with product information and store locations along with do-it-yourself instruction. External sales in the Consumer Segment decreased 4.5 percent during 1999 primarily due to the bankruptcy and subsequent liquidation of a large retail customer, the anticipated sales losses due to the closing of a Cleaning Solutions plant in the fourth quarter of 1998, and slow do-it-yourself coatings sales at certain customers. External sales in the Automotive Finishes Segment declined 0.6 percent. The sales decrease in this Segment was primarily due to the effects of foreign currency translation losses and, to a lesser extent, a soft domestic automotive refinish market. External sales in the International Coatings Segment declined 14.0 percent. Sales declines in the International Coatings Segment resulted primarily from the first quarter 1999 devaluation of the Brazilian real and continuing poor market conditions in South America. Gallons sold and sales in local currencies were up in most market areas. Consolidated gross profit as a percent of sales increased to 44.9 percent from 43.2 percent in 1998. The Paint Stores Segment's 1999 gross profit margin was slightly higher than 1998 primarily due to a favorable product sales mix. Gross profit margin in the Consumer Segment was higher than 1998 as increased factory efficiencies and cost reductions associated with closing four manufacturing plants early in 1999 took effect. Gross profit margin in the Automotive Finishes Segment increased slightly due to product sales mix. Gross profit margin in the International Coatings Segment increased primarily due to increased factory efficiencies and cost reduction efforts. SG&A expenses as a percent of sales increased to 33.4 percent in 1999 from 32.4 percent in 1998 resulting primarily from increased expenses related to new store openings, bad debts, certain employee benefits and information systems, partially offset by decreased SG&A expenses in the Consumer Segment primarily resulting from the consolidation of administrative functions of The Sherwin - Williams Company 2000 Annual Report | 19 13 four separate operating divisions into one. The Paint Stores Segment's SG&A ratio was slightly unfavorable compared to 1998 primarily due to increased expenses related to new store openings. A slightly unfavorable SG&A ratio in the Consumer Segment for 1999 as compared to 1998 was primarily a result of decreased sales and increased bad debt expense, partially offset by the consolidation of administrative functions. Automotive Finishes Segment's SG&A ratio was slightly unfavorable compared to 1998 primarily due to increases in bad debt expense and reduced sales volume. International Coatings Segment's SG&A ratio was unfavorable primarily due to reduced sales. Consolidated operating profits increased 11.4 percent in 1999. Operating profits of the Paint Stores Segment increased 8.6 percent, primarily due to increased sales volume and gross profit margins. The Consumer Segment's operating profits were 23.7 percent higher than 1998 primarily due to decreased SG&A expenses and increased gross profit margins, partially offset by lower sales volume. Operating profits of the Automotive Finishes Segment increased 2.0 percent primarily due to increased gross profit margins, partially offset by slightly lower sales and increased SG&A expenses. Operating profits of the International Coatings Segment increased 40.3 percent primarily due to decreased foreign currency transaction losses associated with U.S. dollar denominated debt that was reduced and improved gross profit margins, partially offset by decreased sales and increased SG&A expenses. Corporate expenses increased in 1999 primarily due to the increase in certain unallocated employee benefit and information systems expenses, partially offset by decreased interest expense. Additionally, the 1998 Corporate expenses included a net gain related to the sale of the Company's joint venture interest in American Standox, Inc. Interest expense decreased in 1999 primarily due to lower average outstanding debt balances. As a result, interest coverage increased to 9.0 times from 7.1 times in 1998. Fixed charge coverage, which is calculated using interest and rent expense, increased to 3.7 times from 3.3 times in 1998. Interest and net investment income decreased in 1999 primarily due lower average yields, partially offset by slightly higher average cash and short-term investment balances. See Note 4, on page 29 of this report, for further detail on Other expense - net. As shown in Note 13, on page 34 of this report, the effective income tax rate in 1999 remained unchanged from 1998 at 38 percent. Net income increased 11.4 percent in 1999 to $303.9 million from $272.9 million in 1998. Net income per share-diluted increased 14.6 percent to $1.80 from $1.57. See Note 15, on page 35 of this report for detailed computations. 20 | The Sherwin - Williams Company 2000 Annual Report 14 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, 2000, 1999 and 1998. The primary responsibility for the integrity of the financial information rests with management. This information is prepared in accordance with accounting principles generally accepted in the United States, 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 systems provide this appropriate balance. The Board of Directors pursues its responsibility for these financial statements through the Audit Committee, composed exclusively of independent 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/ C. M. Connnor C. M. Connor Chairman and Chief Executive Officer /s/ L. J. Pitorak L. J. Pitorak Senior Vice President - Finance, Treasurer and Chief Financial Officer /s/ J. L. Ault J. L. Ault Vice President - Corporate Controller CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION - ------------------------------------------------------------------------------- Certain statements contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Letter to Shareholders," and elsewhere in this report constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based upon management's current expectations, estimates, assumptions and beliefs concerning future events and conditions and may discuss, among other things, anticipated future performance (including sales and earnings), expected growth and future business plans. Any statement that is not historical in nature is a forward-looking statement and may be identified by the use of words and phrases such as "expects," "anticipates," "believes," "will likely result," "will continue," "plans to," and similar expressions. Readers are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of the Company, that could cause actual results to differ materially from such statements. These risks, uncertainties and other factors include such things as: general business conditions, strengths of retail economies and the growth in the coatings industry; competitive factors, including pricing pressures and product innovation and quality; changes in raw material availability and pricing; changes in the Company's relationships with customers and suppliers; the ability of the Company to successfully integrate past and future acquisitions into its existing operations, as well as the performance of the businesses acquired; the ability of the Company to successfully complete planned divestitures; changes in general domestic economic conditions such as inflation rates, interest rates and tax rates; risk and uncertainties associated with the Company's expansion into foreign markets, including inflation rates, recessions, foreign currency exchange rates, foreign investment and repatriation restrictions and other external economic and political factors; the achievement of growth in developing markets, such as Mexico and South America; increasingly stringent domestic and foreign governmental regulations including those affecting the environment; inherent uncertainties involved in assessing the Company's potential liability for environmental remediation-related activities; the nature, cost, quantity and outcome of pending and future litigation and other claims, including the lead pigment and lead-based paint litigation and the affect of any legislation and administrative regulations relating thereto; and unusual weather conditions. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. The Sherwin - Williams Company 2000 Annual Report | 21 15 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, 2000, 1999 and 1998, and the related statements of consolidated income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. 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, 2000, 1999 and 1998, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Cleveland, Ohio January 26, 2001 22 | The Sherwin - Williams Company 2000 Annual Report 16 STATEMENTS OF CONSOLIDATED INCOME - ------------------------------------------------------------------------------- (Thousands of Dollars Except Per Share Data)
YEAR ENDED DECEMBER 31, ----------------------------------------------------- 2000 1999 1998 ---- ---- ---- Net sales ................................. $ 5,211,624 $ 5,003,837 $ 4,934,430 Cost of goods sold ........................ 2,904,013 2,755,323 2,804,459 Gross profit .............................. 2,307,611 2,248,514 2,129,971 Percent to net sales .................... 44.3% 44.9% 43.2% Selling, general and administrative expenses ................................ 1,740,367 1,673,449 1,598,333 Percent to net sales .................... 33.4% 33.4% 32.4% Impairment of long-lived assets ........... 352,040 Operating income .......................... 215,204 575,065 531,638 Percent to net sales .................... 4.1% 11.5% 10.8% Interest expense .......................... 62,026 61,168 71,971 Interest and net investment income ........ (4,981) (5,761) (6,482) Other expense - net ....................... 14,753 29,540 26,046 ----------- ----------- ----------- Income before income taxes ................ 143,406 490,118 440,103 Income taxes .............................. 127,380 186,258 167,239 ----------- ----------- ----------- Net income ........ ....................... $ 16,026 $ 303,860 $ 272,864 =========== =========== =========== Net income per share: Basic ................................... $ .10 $ 1.81 $ 1.58 =========== =========== =========== Diluted ................................. $ .10 $ 1.80 $ 1.57 =========== =========== ===========
See notes to consolidated financial statements. The Sherwin - Williams Company 2000 Annual Report | 23 17 CONSOLIDATED BALANCE SHEETS - -------------------------------------------------------------------------------- (Thousands of Dollars)
DECEMBER 31, ---------------------------------------------------- 2000 1999 1998 ---- ---- ---- Assets Current assets: Cash and cash equivalents ................................ $ 2,896 $ 18,623 $ 19,133 Accounts receivable, less allowance ...................... 594,162 606,046 604,516 Inventories: Finished goods ......................................... 597,472 591,912 568,328 Work in process and raw materials ...................... 106,255 111,476 114,195 ----------- ----------- ----------- 703,727 703,388 682,523 Deferred income taxes .................................... 104,662 108,899 102,818 Other current assets ..................................... 146,092 141,143 123,398 ----------- ----------- ----------- Total current assets ................................... 1,551,539 1,578,099 1,532,388 Goodwill ................................................... 705,547 1,039,555 1,123,128 Intangible assets .......................................... 259,085 274,924 291,715 Deferred pension assets .................................... 364,351 334,094 304,006 Other assets ............................................... 147,769 94,464 80,466 Property, plant and equipment: Land ..................................................... 65,546 62,517 67,567 Buildings ................................................ 431,524 431,802 422,902 Machinery and equipment .................................. 980,560 913,346 906,501 Construction in progress ................................. 52,779 40,262 43,274 ----------- ----------- ----------- 1,530,409 1,447,927 1,440,244 Less allowances for depreciation ......................... 808,030 736,251 721,387 ----------- ----------- ----------- 722,379 711,676 718,857 ----------- ----------- ----------- Total Assets ............................................... $ 3,750,670 $ 4,032,812 $ 4,050,560 =========== =========== =========== Liabilities and Shareholders' Equity Current liabilities: Short-term borrowings .................................... $ 106,854 Accounts payable ......................................... 448,799 $ 458,919 $ 408,144 Compensation and taxes withheld .......................... 137,211 140,934 125,698 Current portion of long-term debt ........................ 19,376 122,277 118,184 Other accruals ........................................... 328,435 333,363 345,191 Accrued taxes ............................................ 74,568 85,396 76,804 ----------- ----------- ----------- Total current liabilities .............................. 1,115,243 1,140,889 1,074,021 Long-term debt ............................................. 623,587 624,365 730,283 Postretirement benefits other than pensions ................ 208,673 206,591 204,763 Other long-term liabilities ................................ 331,303 362,435 325,553 Shareholders' equity: Common stock- $1.00 par value: 159,558,335, 165,663,601 and 171,033,231 shares outstanding at December 31, 2000, 1999 and 1998, respectively ............................ 206,848 206,309 205,701 Other capital ............................................ 158,650 150,887 143,686 Retained earnings ........................................ 1,948,753 2,020,851 1,797,945 Treasury stock, at cost .................................. (678,778) (533,891) (386,465) Cumulative other comprehensive loss ...................... (163,609) (145,624) (44,927) ----------- ----------- ----------- Total shareholders' equity ............................. 1,471,864 1,698,532 1,715,940 ----------- ----------- ----------- Total Liabilities and Shareholders' Equity ................. $ 3,750,670 $ 4,032,812 $ 4,050,560 =========== =========== ===========
See notes to consolidated financial statements. 24 | The Sherwin - Williams Company 2000 Annual Report 18 STATEMENTS OF CONSOLIDATED CASH FLOWS - -------------------------------------------------------------------------------- (Thousands of Dollars)
YEAR ENDED DECEMBER 31, -------------------------------------------- 2000 1999 1998 ---- ---- ---- Operating Activities Net income ............................................... $ 16,026 $ 303,860 $ 272,864 Adjustments to reconcile net income to net operating cash: Impairment of long-lived assets ........................ 352,040 Depreciation ........................................... 108,906 105,350 97,821 Deferred income taxes .................................. (26,886) 21,170 30,557 Provisions for disposition of operations ............... 8,023 7,640 23,557 Provisions for environmental-related matters ........... 16,334 4,295 Amortization of intangible assets ...................... 51,124 50,394 50,067 Defined benefit pension plans net credit ............... (29,629) (28,083) (30,851) Net increase in post retirement liability .............. 3,682 3,428 5,424 Foreign currency transaction losses .................... 2,115 3,333 11,773 Other .................................................. 7,744 13,594 554 Change in working capital accounts: Decrease (increase) in accounts receivable ............. 21,264 (28,212) (65,679) Decrease (increase) in inventories ..................... 6,188 (24,420) 35,130 (Decrease) increase in accounts payable ................ (21,790) 60,487 (12,272) (Decrease) increase in accrued taxes ................... (11,744) 6,019 32,449 Other .................................................. (22,645) 3,650 35,175 Increase in long-term accrued taxes ...................... 10,005 15,715 8,211 Costs incurred for environmental-related matters ......... (9,105) (15,808) (14,275) Costs incurred for disposition of operations ............. (6,173) (15,529) (5,322) Other .................................................... 1,963 (13,808) (10,721) --------- --------- --------- Net operating cash ..................................... 461,108 485,114 468,757 --------- --------- --------- Investing Activities Capital expenditures ..................................... (132,778) (134,171) (146,129) Acquisitions of businesses ............................... (60,108) (15,427) Increase in other investments ............................ (51,163) (23,435) (19,281) Other .................................................... (8,989) 9,111 6,478 --------- --------- --------- Net investing cash ..................................... (253,038) (163,922) (158,932) --------- --------- --------- Financing Activities Net increase (decrease) in short-term borrowings ......... 106,854 (106,913) Increase in long-term debt ............................... 16,931 4,559 Payments of long-term debt ............................... (120,316) (102,046) (54,673) Payments of cash dividends ............................... (88,124) (80,954) (77,801) Proceeds from stock options exercised .................... 6,419 7,107 16,818 Treasury stock purchased ................................. (146,857) (145,806) (83,791) Other .................................................... 1,662 2,791 7,579 --------- --------- --------- Net financing cash ..................................... (223,431) (318,908) (294,222) --------- --------- --------- Effect of exchange rate changes on cash .................. (366) (2,794) --------- --------- Net (decrease) increase in cash and cash equivalents ..... (15,727) (510) 15,603 Cash and cash equivalents at beginning of year ........... 18,623 19,133 3,530 --------- --------- --------- Cash and cash equivalents at end of year ................. $ 2,896 $ 18,623 $ 19,133 ========= ========= ========= Taxes paid on income ..................................... $ 156,514 $ 153,890 $ 85,746 Interest paid on debt .................................... 64,400 61,868 71,970
See notes to consolidated financial statements. The Sherwin - Williams Company 2000 Annual Report | 25 19 STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY - -------------------------------------------------------------------------------- (Thousands of Dollars Except Per Share Data)
Cumulative Other Common Other Retained Treasury Comprehensive Stock Capital Earnings Stock Loss Total --------- --------- ----------- --------- --------- ---------- Balance at January 1, 1998 ............... $ 204,538 $ 119,695 $ 1,602,882 $(301,418) $ (33,517) $1,592,180 Comprehensive income: Net income ............................. 272,864 272,864 Other comprehensive loss ............... (11,410) (11,410) ---------- Comprehensive income ................. 261,454 Treasury stock purchased ................. (83,791) (83,791) Stock issued (tendered) for exercise of options ................ 1,201 23,103 (1,256) 23,048 Restricted stock grants (net activity).... (38) 2,128 2,090 Stock acquired for trust ................. (1,240) (1,240) Cash dividends-- $.45 per share .......... (77,801) (77,801) --------- --------- ----------- --------- --------- ---------- Balance at December 31, 1998 ............. 205,701 143,686 1,797,945 (386,465) (44,927) 1,715,940 Comprehensive income: Net income ............................. 303,860 303,860 Other comprehensive loss ............... (100,697) (100,697) ---------- Comprehensive income ................. 203,163 Treasury stock purchased ................. (145,806) (145,806) Stock issued (tendered) for exercise of options ................ 463 8,597 (252) 8,808 Stock tendered in connection with restricted stock grants ........... (1,368) (1,368) Restricted stock grants (net activity) ... 145 (69) 76 Stock acquired for trust ................. (1,327) (1,327) Cash dividends-- $.48 per share .......... (80,954) (80,954) --------- --------- ----------- --------- --------- ---------- Balance at December 31, 1999 ............. 206,309 150,887 2,020,851 (533,891) (145,624) 1,698,532 Comprehensive income: Net income ............................. 16,026 16,026 Other comprehensive loss ............... (17,985) (17,985) ---------- Comprehensive loss ................... (1,959) Treasury stock purchased ................. (146,857) (146,857) Stock issued (tendered) for exercise of options ................ 534 8,121 (192) 8,463 Stock tendered in connection with restricted stock grants ........... (173) (173) Restricted stock grants (net activity) ... 5 3,176 3,181 Stock acquired for trust ................. (1,199) (1,199) Treasury stock transferred to trust ...... (2,335) 2,335 Cash dividends-- $.54 per share .......... (88,124) (88,124) --------- --------- ----------- --------- --------- ---------- Balance at December 31, 2000 ............. $ 206,848 $ 158,650 $ 1,948,753 $(678,778) $(163,609) $1,471,864 ========= ========= =========== ========= ========= ==========
See notes to consolidated financial statements. 26 | The Sherwin - Williams Company 2000 Annual Report 20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Thousands of Dollars Unless Otherwise Indicated) NOTE 1-SIGNIFICANT ACCOUNTING POLICIES - -------------------------------------------------------------------------------- CONSOLIDATION. The consolidated financial statements include all controlled subsidiaries. Inter-company accounts and transactions have been eliminated. USE OF ESTIMATES. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. NATURE OF OPERATIONS. The Company is engaged in the manufacture, distribution and sale of coatings and related products to professional, industrial, commercial and retail customers primarily in North and South America. REPORTABLE SEGMENTS. See Note 17. CASH FLOWS. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. 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. INVESTMENTS IN SECURITIES: The Company maintains certain long-term investments, classified as available for sale securities, in a fund to provide for payment of health care benefits of certain qualified employees. The estimated fair values of these securities, included in Other assets, of $15,913, $21,093, and $25,523 at December 31, 2000, 1999, and 1998, respectively, are based on quoted market prices. 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, ----------------------------------------------------------- 2000 1999 1998 ---------------- ----------------- ----------------- Carrying Fair Carrying Fair Carrying Fair Amount Value Amount Value Amount Value -------- ----- -------- ----- -------- ----- Publicly traded debt ....... $613,709 $592,113 $726,017 $698,031 $764,806 $825,989 Non-traded debt ....... 29,179 26,203 20,536 18,969 83,559 80,929 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 to these agreements are major financial institutions. Management believes the risk of incurring losses related to credit risk is remote. There were no interest rate swaps outstanding at December 31, 2000 and 1999. 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 $25,143, $15,860, and $20,034 at December 31, 2000, 1999, and 1998, respectively, represent the Company's best estimate of current economic values of these investments. INVESTMENT IN LIFE INSURANCE. The Company invests in broad-based corporate owned life insurance. The cash surrender values of the policies, net of policy loans, are included in Other assets. The net expense associated with such investment is included in Other expense - net. Such expense is immaterial to Income before income taxes. IMPAIRMENT OF LONG-LIVED ASSETS. The Company evaluates the recoverability of long-lived assets and the related estimated remaining lives at each balance sheet date. The Company records an impairment or change in useful life whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or the useful life has changed in accordance with Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." See Note 2. GOODWILL. Goodwill represents the cost in excess of fair value of net assets acquired in business combinations accounted for by the purchase method and is amortized on a straight-line basis over the expected period of benefit ranging from 10 to 40 years. Accumulated amortization of goodwill was $84,827, $107,365 and $78,983 at December 31, 2000, 1999, and 1998, respectively. See Note 2. INTANGIBLES. Intangible assets include non-compete covenants, operating rights, patents, and trademarks. These assets are amortized on a straight-line basis over the expected period of benefit ranging from 2 to 40 years. Accumulated amortization of intangible assets was $129,320, $119,125, and $102,359 at December 31, 2000, 1999, and 1998, respectively. 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: The Sherwin - Williams Company 2000 Annual Report | 27 21 Buildings ................... 2% - 6-2/3% Machinery and equipment ..... 4% - 20% Furniture and fixtures ...... 5% - 33-1/3% Automobiles and trucks ...... 10% - 33-1/3% LETTERS OF CREDIT. The Company occasionally enters into standby letter of credit agreements to guarantee various operating activities. These agreements, which expire in 2001, provide credit availability to the various beneficiaries if certain contractual events occur. Amounts outstanding under these agreements totaled $12,230, $14,177, and $15,042 at December 31, 2000, 1999, and 1998, respectively. FOREIGN CURRENCY TRANSLATION. All consolidated non-highly inflationary 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 included in Cumulative other comprehensive loss, a component of Shareholders' equity. REVENUE RECOGNITION. Substantially all revenues are recognized when products are shipped and title has passed to unaffiliated customers. 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 $33,927, $27,200, and $23,955 for 2000, 1999, and 1998, respectively. ADVERTISING EXPENSES. The cost of advertising is expensed as incurred. The Company incurred $276,078, $265,411, and $282,817 in advertising costs during 2000, 1999, and 1998, respectively. ENVIRONMENTAL MATTERS. Capital expenditures for ongoing environmental compliance measures are recorded in the consolidated balance sheets, and related expenses are included in the normal operating expenses of conducting business. The Company is involved with environmental compliance, investigation and remediation activities at some of its current and former sites and at a number of third-party sites. The Company accrues for certain environmental remediation-related activities for which commitments or clean-up plans have been developed and for which costs can be reasonably estimated. All accrued amounts are recorded on an undiscounted basis. Accrued environmental remediation-related expenses include direct costs of remediation and indirect costs related to the remediation effort, such as compensation and benefits for employees directly involved in the remediation activities and fees paid to outside engineering, consulting and law firms. See Notes 4 and 9. STOCK-BASED COMPENSATION. The Company uses the intrinsic value method of accounting for stock-based compensation in accordance with Accounting Principles Board Opinion (APBO) No. 25. See Note 12 for pro forma disclosure of net income and earnings per share under the fair value method of accounting for stock-based compensation as prescribed by SFAS No. 123, "Accounting for Stock-Based Compensation." EARNINGS PER SHARE. Basic net income per share is computed based on the weighted-average number of shares outstanding during the year. Diluted net income per share is computed based on the weighted-average number of shares outstanding plus all dilutive securities potentially outstanding during the year. See Note 15. All references to earnings or losses per share throughout this report are stated on a diluted per share basis unless otherwise indicated. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS. Financial Accounting Standards Board (FASB) SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended, is effective for all fiscal years beginning after June 15, 2000. SFAS No. 133 requires all derivative instruments to be recorded as either assets or liabilities at fair value. Gains or losses resulting from changes in the values of those derivative instruments may be recognized immediately or deferred depending on the use of the derivative or whether it qualifies as a hedge. The Company will comply with the requirements of SFAS No. 133 beginning January 1, 2001, as required. The impact of complying with this statement is not expected to have a material effect on the Company's financial condition, results of operations or cash flows. RECLASSIFICATION. Certain amounts in the 1999 and 1998 consolidated financial statements have been reclassified to conform with the 2000 presentation. NOTE 2-IMPAIRMENT OF LONG-LIVED ASSETS - -------------------------------------------------------------------------------- During the fourth quarter of 2000, the Company recognized an impairment charge of $352,040 ($293,628 after tax or $1.80 per share) to reduce the carrying values of certain long-lived assets to their estimated fair values. Charges of $342,522 reduced goodwill while the remaining portion of the charge primarily reduced fixed assets. The impaired assets are part of the Consumer Segment related to the previous acquisitions of Thompson Minwax Holding Corp. and Pratt & Lambert United, Inc., and the assets of Sunshine Quality Products, Inc. and the Household and Professional Products Division of Grow Group, Inc. Current year losses, cash flow deficiencies and cash flow shortfalls from expectations indicated an impairment review was necessary. Undiscounted future cash flows estimated by management established that impairment existed at December 31, 2000. The amount of impairment was estimated using a discounted cash flow valuation technique incorporating a discount rate commensurate with the risks involved for each group of assets. NOTE 3-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 in periods of inflation. The following presents the effect on inventories, net income and net income per share had the Company used the first-in, first-out (FIFO) 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. 28 | The Sherwin - Williams Company 2000 Annual Report 22
2000 1999 1998 ---- ---- ---- Percentage of total inventories on LIFO ................. 89% 90% 91% Excess of FIFO over LIFO ................................ $110,124 $97,953 $96,235 Increase (decrease) in net income due to LIFO ........... (7,916) (894) 4,685 Increase (decrease) in net income per share due to LIFO.. (.05) (.01) .03
NOTE 4 - OTHER EXPENSE - NET - -------------------------------------------------------------------------------- A summary of significant items included in Other expense - net is as follows:
2000 1999 1998 ---- ---- ---- Dividend and royalty income................... $(4,144) $(4,692) $(3,069) Net expense of financing and investing activities ....................... 10,926 7,084 2,542 Provisions for environmental matters- net(see Note 9) ................... 15,402 695 Provisions for disposition and termination of operations (see Note 5) ..... 6,968 3,830 12,290 Foreign currency exchange losses ............. 2,115 3,333 11,773 Other (income) expense ....................... (1,112) 4,583 1,815 ------- ------- ------- $14,753 $29,540 $26,046 ======= ======= =======
The net expense of financing and investing activities represents the net realized gains or losses from disposing of fixed assets, the net gain or loss associated with the investment in certain long-term asset funds, the net pre-tax expense associated with the Company's investment in broad-based corporate owned life insurance, other related fees and, in 1998, the net gain related to the sale of the Company's joint venture interest in American Standox, Inc. The provisions for environmental matters represent the net charge necessary to record the most current estimates of potential costs of environmental remediation at current, former and third-party sites. See Note 9. The provision for 1998 was partially offset by settlements with certain insurance carriers totaling $3,600. The provisions for disposition and termination of operations reduce property, plant and equipment at closed facilities to estimated net realizable value and adjust previous provisions to current estimates as closure or disposition occurs. See Note 5. NOTE 5-DISPOSITION AND TERMINATION OF OPERATIONS - -------------------------------------------------------------------------------- The Company is continually re-evaluating its operating facilities against its long-term strategic goals. Upon cessation of operations, a provision is made to reduce property, plant and equipment to its estimated net realizable value. The expense is included in Other expense - net. Similarly, provisions are made, and included in Cost of goods sold, to provide for all qualified exit costs such as lease cancellation penalties, post-closure rent expenses, incremental post-closure expenses and the estimated costs of employee terminations. During 2000, provisions were made to reduce certain assets to their net realizable value for two research centers idled by the Automotive Finishes Segment, resulting from the consolidation of its research operations into a newly purchased facility, and for a closed distribution center. Provisions were made for qualified exit costs associated with the shut down of these facilities, primarily incremental post-closure costs. In 1999, provisions were made to reduce certain assets to their net realizable value and to accrue qualified exit costs for two idle manufacturing facilities and a leased warehouse and for four redundant manufacturing facilities in 1998. Adjustments are made to prior accruals as information becomes available upon which more accurate costs can be reasonably estimated. Approximately 45 percent of the ending accrual at December 31, 2000 consisted of reductions in property, plant and equipment to estimated net realizable values. Approximately one-half of the reduction to net realizable value relates to facilities closed in 2000 while the other half relates primarily to facilities that ceased operations prior to 1998. The remaining portion of the ending accrual at December 31, 2000 relates primarily to post-closure demolition expenses, continued lease payments or cancellation penalties, and ongoing contractual expenses relating to facilities whose operations ceased prior to 1998. The Company is involved in ongoing environmental-related activities at certain owned facilities that have been closed and cannot reasonably estimate when such matters will be concluded to allow for disposition. As sale of the facilities occurs, following the completion of the environmental-related activities or at time of demolition, the realized loss from carrying value to net realizable value will be charged to the accrual. Most remaining demolition expenses are expected to be incurred during 2001. A summary of the financial data related to the closing or sale of the facilities is as follows: 2000 1999 1998 ---- ---- ---- Beginning accruals- January 1 .............. $34,883 $ 56,097 $47,111 Provisions included in Cost of goods sold... 1,055 3,810 11,267 Provisions included in Other expense - net ...................... 6,990 278 14,094 Prior accrual adjustments included in Other expense - net ................... (22) 3,552 (1,804) ------- -------- ------- Total charges included in Other expense - net ................. 6,968 3,830 12,290 Actual expenditures charged to accrual ..... (6,173) (15,529) (5,322) Realized losses charged to accrual ......... (4,459) (13,325) (9,249) ------- -------- ------- Ending accruals- December 31 ............... $32,274 $ 34,883 $56,097 ======= ======== ======= Net after-tax charges to current operations ..................... $ 5,215 $ 4,966 $15,312 Net after-tax charges per share ............ $ .03 $ .03 $ .09 NOTE 6 - PENSION AND OTHER BENEFITS - -------------------------------------------------------------------------------- The Company provides pension benefits to substantially all employees through noncontributory defined benefit or defined contribution plans. The Company's annual contribution for its defined contribution pension plans, which is based on a level percentage of compensation for covered employees, was $33,043, $31,512, and $27,004 in 2000, 1999, and 1998, respectively. The Company provides certain health care benefits for active employees. The plans are contributory and contain cost-sharing features such as deductibles and coinsurance. There were 16,811, 16,081, and 15,894, active employees entitled to receive benefits The Sherwin - Williams Company 2000 Annual Report | 29 23 under these plans as of December 31, 2000, 1999, and 1998, respectively. The cost of these benefits for active employees is recognized as claims are incurred and amounted to $58,782, $52,640, and $47,563 for 2000, 1999, and 1998, respectively. The Company has a fund, to which it no longer intends to contribute, that provides for payment of health care benefits of certain qualified employees. Distributions from the fund amounted to $7,410, $6,421, and $4,928 in 2000, 1999, and 1998, respectively. Employees of the Company who were hired prior to January 1, 1993 and who are not members of a collective bargaining unit, and certain groups of employees added through acquisitions, are eligible for certain health care and life insurance benefits upon retirement from active service, subject to the terms, conditions and limitations of the applicable plans. There were 4,855, 4,831, and 4,800 retired employees entitled to receive benefits as of December 31, 2000, 1999, and 1998, respectively. The plans are unfunded.
DEFINED BENEFIT PENSION PLANS OTHER POSTRETIREMENT BENEFITS ---------------------------------- ------------------------------------- 2000 1999 1998 2000 1999 1998 ---- ---- ---- ---- ---- ---- BENEFIT OBLIGATION: Balance at beginning of year ................ $170,632 $169,099 $175,204 $ 225,686 $ 217,627 $ 206,007 Service cost ................................ 2,990 3,237 2,564 3,821 4,215 3,877 Interest cost ............................... 12,504 11,516 11,942 15,649 14,467 13,909 Actuarial loss (gain) ....................... 8,957 (1,106) 1,702 15,930 966 3,184 Plan amendments ............................. 738 2,003 Plan mergers ................................ 9,446 Other - net ................................. 208 181 Benefits paid ............................... (10,596) (12,295) (24,316) (13,150) (11,589) (9,350) -------- -------- -------- --------- --------- --------- Balance at end of year ...................... 194,879 170,632 169,099 247,936 225,686 217,627 PLAN ASSETS: Balance at beginning of year ................ 523,453 492,384 446,271 Actual return on plan assets ................ 25,534 44,859 71,188 Plan mergers ................................ 17,017 Other - net ................................. (954) (1,495) (759) Benefits paid ............................... (10,596) (12,295) (24,316) -------- -------- -------- Balance at end of year ...................... 554,454 523,453 492,384 EXCESS(DEFICIENT) PLAN ASSETS: Balance at end of year ...................... 359,575 352,821 323,285 (247,936) (225,686) (217,627) Unrecognized net asset ...................... (1,279) (2,792) Unrecognized actuarial loss (gain) .......... 2,080 (20,262) (20,348) 37,752 21,993 20,171 Unrecognized prior service cost (credit) .... 2,320 2,404 2,330 (11,689) (14,498) (17,307) -------- -------- -------- --------- --------- --------- NET ASSET (LIABILITY) RECOGNIZED IN THE CONSOLIDATED BALANCE SHEETS ................. $363,975 $333,684 $302,475 $(221,873) $(218,191) $(214,763) ======== ======== ======== ========= ========= ========= NET ASSET (LIABILITY) RECOGNIZED IN THE CONSOLIDATED BALANCE SHEETS CONSISTS OF: Prepaid benefit cost ...................... $364,351 $334,094 $304,006 Accrued benefit liability ................. $(208,673) $(206,591) $(204,763) Amount included in current liabilities .... (376) (410) (1,531) (13,200) (11,600) (10,000) -------- -------- -------- --------- --------- --------- $363,975 $333,684 $302,475 $(221,873) $(218,191) $(214,763) ======== ======== ======== ========= ========= ========= WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31: Discount rate ............................... 7.00% 7.25% 6.75% 7.00% 7.25% 6.75% Expected long-term rate of return on assets . 8.50% 8.50% 8.50% Rate of compensation increase ............... 5.00% 5.00% 5.00% Health care cost trend rate ................. 6.00% 6.40% 6.70% NET PERIODIC BENEFIT (CREDIT) COST: Service and interest cost ................... $ 15,494 $ 14,753 $ 14,506 $ 19,470 $ 18,682 $ 17,786 Net amortization and deferral ............... (490) (699) (2,524) (2,814) (2,768) (2,809) Expected return on assets ................... (44,633) (42,137) (37,531) Settlement gain ............................. (5,302) -------- -------- -------- --------- --------- --------- Net periodic benefit (credit) cost .......... $(29,629) $(28,083) $(30,851) $ 16,656 $ 15,914 $ 14,977 ======== ======== ======== ========= ========= =========
30 | The Sherwin - Williams Company 2000 Annual Report 24 Plan assets included 2,338,800 shares of the Company's common stock at December 31, 2000 with a market value of $61,541. Dividends received during the year from Company stock was $1,155. The assumed health care cost trend rate was revised during the year ended December 31, 2000, to 9.5 percent for 2001 decreasing gradually to 5.5 percent for 2010 and thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one-percentage-point change in assumed health care cost trend rates would have the following effects as of December 31, 2000: One-Percentage-Point ----------------------- Increase (Decrease) -------- ---------- Effect on total of service and interest cost components .................... $ 580 $ (565) Effect on the post retirement benefit obligation ......................... $8,137 $(7,900) NOTE 7-LONG-TERM DEBT - --------------------------------------------------------------------------------
Amount Outstanding ------------------------------------------------------------ Due Date 2000 1999 1998 -------- ---- ---- ---- 6.85% Notes ......................... 2007 $199,807 $199,775 $199,742 7.375% Debentures ................... 2027 149,910 149,907 149,903 7.45% Debentures .................... 2097 149,408 149,402 149,396 6.5% Notes .......................... 2002 99,989 99,978 99,966 6.25% Notes ......................... 2000 99,974 9.875% Debentures ................... 2007 to 2016 11,500 15,900 15,900 5% to 9% Promissory Notes............ Through 2005 8,882 5,752 10,623 8% to 12% Promissory Notes partially secured by certain land and buildings ................. Through 2005 2,259 3,569 3,884 4.75% Promissory Note ............... 2000 800 Other Obligations ................... 1,832 82 95 -------- -------- -------- $623,587 $624,365 $730,283 ======== ======== ========
Maturities of long-term debt are as follows for the next five years: $19,368 in 2001; $106,616 in 2002; $5,632 in 2003; $405 in 2004, and $204 in 2005. Interest expense on long-term debt was $46,569, $55,415, and $59,137 for 2000, 1999, and 1998, respectively. The Company has renewable 364-day and five-year amended revolving credit agreements. The current agreements with effective dates of December 29, 2000 and January 3, 2001 reflect the following: 1) a 364-day annually renewable agreement aggregating $129,600 expiring on December 28, 2001; and 2) a five-year rolling agreement aggregating $638,400, with $30,400, $190,400, and $417,600 expiring on January 3, 2003, 2005, and 2006, respectively. There were no borrowings outstanding under any revolving credit agreement during all years presented. The Company uses the revolving credit agreements to satisfy its commercial paper program's dollar for dollar liquidity requirement. At December 31, 2000, borrowings outstanding under the commercial paper program totaled $106,854 and are included in Short-term borrowings on the balance sheet. The weighted-average interest rate related to these borrowings was 6.6% at December 31, 2000. There were no borrowings outstanding under this program at December 31, 1999 and 1998, respectively. Effective January 3, 2001, this program is limited to $768,000, which equals the new aggregate maximum borrowing capacity under the revolving credit agreements. On October 6, 1997, the Company issued $50,000 of debt securities remaining under a previously existing shelf registration with the Securities and Exchange Commission consisting of 5.5% notes, due October 15, 2027, with provisions that the holders, individually or in the aggregate, may exercise a put option on October 15, 1999 and annually thereafter that would require the Company to repay the securities. On October 15, 2000 and 1999, individual debt security holders exercised put options requiring the Company to repay $7,960 and $38,945 of these debt securities. The remaining balance of $3,095 at December 31, 2000 and $11,055 at December 31, 1999 of these debt securities are included in Current portion of long-term debt on the balance sheets. On December 24, 1997, the Company filed a shelf registration with the Securities and Exchange Commission covering $150,000 of unsecured debt securities with maturities greater than nine months from the date of issue. The Company may issue these securities from time to time in one or more series and will offer the securities on terms determined at the time of sale. There were no borrowings outstanding under this registration at December 31, 2000, 1999, and 1998. On August 18, 1998, the Company filed a universal shelf registration statement with the Securities and Exchange Commission to issue debt securities, common stock and warrants up to $1,500,000. The registration was effective September 8, 1998. There were no borrowings outstanding under this registration at December 31, 2000, 1999, and 1998. NOTE 8-LEASES - -------------------------------------------------------------------------------- The Company leases certain stores, warehouses, manufacturing facilities, office space and equipment. Renewal options are available on the majority of leases and, under certain conditions, options exist to purchase certain properties. Rental expense for operating leases was $130,552, $123,084, and $117,762 for 2000, 1999, and 1998, 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 $12,423, $11,530, and $10,329 in 2000, 1999, and 1998, respectively. 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, 2000: 2001 ............................. $ 98,001 2002 ............................. 81,919 2003 ............................. 62,376 2004 ............................. 46,533 2005 ............................. 30,805 Later years ...................... 81,959 -------- Total minimum lease payments ..... $401,593 ======== The Sherwin - Williams Company 2000 Annual Report | 31 25 NOTE 9--OTHER LONG-TERM LIABILITIES - -------------------------------------------------------------------------------- Included in Other long-term liabilities at December 31, 2000, 1999, and 1998 were accruals for extended environmental-related activities of $116,594, $124,096 and $127,613, respectively. The accrual for extended environmental-related activities represents the Company's provisions for estimated costs associated with 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 for investigation and remediation costs regardless of fault. The Company provides for, and includes in long-term liabilities, its estimated potential long-term liability for investigation and remediation costs with respect to such third-party sites. The Company initially provides for the estimated cost of environmental-related activities relating to its current, former and third-party sites when 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 as 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 such matters will not have a material adverse effect on the financial condition, liquidity or cash flow of the Company. Current environmental-related liabilities are included in Other accruals on the consolidated balance sheets. NOTE 10-STOCK PURCHASE PLAN - -------------------------------------------------------------------------------- As of December 31, 2000, 14,611 employees participated in the Company's Employee Stock Purchase and Savings Plan. The Company's contribution charged to operations was $28,070, $36,535, and $32,679 for 2000, 1999, and 1998, respectively. Additionally, the Company made contributions on behalf of participating employees, representing amounts authorized by employees to be withheld from their earnings, of $26,636, $22,581, and $20,250 in 2000, 1999, and 1998, respectively. At December 31, 2000, there were 25,345,026 shares of the Company's stock being held by this plan, representing 15.9 percent of the total number of voting shares outstanding. Shares of company stock credited to each member's account under the plan are voted by the trustee under instructions from each individual plan member. Shares for which no instructions are received, along with any unallocated shares held in the plan, are voted by the trustee in the same proportion as those for which instructions are received. NOTE 11-CAPITAL STOCK - --------------------------------------------------------------------------------
Shares Shares in Treasury Outstanding ----------- ----------- Balance at January 1, 1998 ...................... 31,630,255 172,907,418 Shares tendered as payment for options exercised .......................... 37,663 (37,663) Shares issued for exercise of stock options .. 1,201,476 Shares cancelled under previous restricted stock grants .................... (38,000) Treasury stock purchased ..................... 3,000,000 (3,000,000) ----------- ------------ Balance at December 31, 1998 .................... 34,667,918 171,033,231 Shares tendered as payment for options exercised .......................... 8,392 (8,392) Shares issued for exercise of stock options... 462,598 Shares tendered in connection with restricted stock grants .................... 44,236 (44,236) Net shares issued under restricted stock grants ..................... 145,400 Treasury stock purchased ..................... 5,925,000 (5,925,000) ----------- ------------ Balance at December 31, 1999 .................... 40,645,546 165,663,601 Shares tendered as payment for options exercised .......................... 8,757 (8,757) Shares issued for exercise of stock options .............................. 533,991 Shares transferred to revocable trust ........ (165,000) 165,000 Net shares issued under restricted stock grants .................... 4,500 Treasury stock purchased ..................... 6,800,000 (6,800,000) ----------- ------------ Balance at December 31, 2000 .................... 47,289,303 159,558,335 =========== ============
An aggregate of 19,184,038 shares, 19,722,529 shares, and 20,389,127 shares of stock at December 31, 2000, 1999 and 1998, respectively, were reserved for future grants of restricted stock and the exercise and future grants of stock options. Shares outstanding include 432,518 shares, 215,150 shares, and 159,800 shares of stock held in a revocable trust at December 31, 2000, 1999, and 1998, respectively. At December 31, 2000, there were 300,000,000 shares of common stock and 30,000,000 shares of serial preferred stock authorized for issuance (3,000,000 shares of the authorized serial preferred stock have been designated as cumulative redeemable serial preferred stock which may be issued pursuant to the Company's shareholders' rights plan if the Company becomes the target of coercive and unfair takeover tactics). NOTE 12-STOCK PLAN - -------------------------------------------------------------------------------- The Company's 1994 Stock Plan permits the granting of restricted stock, stock appreciation rights and stock options 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 Company's 1997 Stock Plan for Nonemployee Directors provides for the granting of restricted stock and stock options to members of the Board of Directors who are not employees of the Company. There were 400,000 shares authorized as available for grant under the 1997 Stock Plan. Grants made pursuant to the 1997 Stock Plan are authorized by the Board of Directors. 32 | The Sherwin - Williams Company 2000 Annual Report 26 Restricted stock grants, which generally require four years of continuous employment from the date of grant before vesting and receiving the shares without restriction, have been awarded to certain officers and key employees under the 1994 Stock Plan. The number of shares to be received without restriction is based on the Company's performance relative to a peer group of companies. Shares of restricted stock that vested and were delivered to officers and employees amounted to 120,400 during 1999. No shares of restricted stock vested during 2000 or 1998. At December 31, 2000, there were 352,500 shares of restricted stock outstanding. Unamortized deferred compensation expense with respect to the restricted stock grants amounted to $3,036, $4,249, and $2,781 at December 31, 2000, 1999, and 1998, respectively, and is being amortized over the four-year vesting period. Deferred compensation expense aggregated $3,180, $77, and $2,090 in 2000, 1999, and 1998, respectively. No stock appreciation rights have been granted. A summary of restricted stock granted during 2000, 1999, and 1998 is as follows: 2000 1999 1998 ---- ---- ---- Shares granted ............................. 4,500 204,000 4,000 Weighted-average fair value of restricted shares granted during year.... $19.63 $ 23.77 $33.06 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 following the date of grant and generally expire ten years after the date of grant. The number of options and any period of service required before the options may be exercised is determined by the Board of Directors at the time of grant. No options may be exercised more than ten years from the date of the grant. The Company has elected to follow APBO No. 25, "Accounting for Stock Issued to Employees," and related interpretations, in accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under SFAS No. 123, "Accounting for Stock-Based Compensation," requires use of highly subjective assumptions in option valuation models. Under APBO No. 25, because the exercise price of the Company's employee stock options is not less than fair market price of the shares at the date of grant, no compensation expense is recognized in the financial statements. Pro forma information regarding net income and earnings per share, determined as if the Company had accounted for its employee stock options under the fair value method of SFAS No. 123, is required by that statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for all options granted: 2000 1999 1998 ---- ---- ---- Risk-free interest rate ........... 6.29% 5.34% 5.14% Expected life of option ........... 3 years 3 years 3 years Expected dividend yield of stock .. 2.00% 2.00% 2.00% Expected volatility of stock ...... 0.305 0.265 0.194 The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, it is management's opinion that the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. The amounts below represent the pro forma information calculated through use of the Black-Scholes model. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. 2000 1999 1998 ---- ---- ---- Pro forma net income .......... $9,617 $297,107 $269,838 PRO FORMA NET INCOME PER SHARE: Basic ...................... $ .06 $ 1.77 $ 1.57 Diluted .................... $ .06 $ 1.76 $ 1.56 A summary of the Company's stock option activity and related information for the years ended December 31, 2000, 1999 and 1998 is shown in the following table:
2000 1999 1998 --------------------- -------------------- ---------------------- Weighted- Weighted- Weighted- Average Average Average Optioned Exercise Optioned Exercise Optioned Exercise Shares Price Shares Price Shares Price -------- -------- -------- -------- -------- -------- Outstanding beginning of year .............................. 10,724,653 $22.78 6,259,702 $22.89 5,810,471 $18.47 Granted .................................................... 2,820,900 19.75 5,292,350 22.33 1,867,500 29.10 Exercised .................................................. (533,991) 12.02 (462,598) 15.36 (1,201,476) 14.00 Canceled ................................................... (423,252) 24.62 (364,801) 27.69 (216,793) 26.68 ---------- ------ ---------- ------ --------- ------ Outstanding end of year .................................... 12,588,310 $22.47 10,724,653 $22.78 6,259,702 $22.89 ========== ====== ========== ====== ========= ====== Exercisable at end of year ................................. 5,923,537 $23.31 3,971,139 $21.09 3,019,873 $17.77 Weighted-average fair value of options granted during year.. $4.72 $4.67 $5.12 Reserved for future grants ................................. 6,595,728 8,997,876 14,129,425
The Sherwin - Williams Company 2000 Annual Report | 33 27 Exercise prices for optioned shares outstanding as of December 31, 2000 ranged from $9.56 to $35.34. A summary of these options by range of exercise prices is as follows:
Outstanding Exercisable ------------------------------------ ------------------------ Weighted- Weighted- Average Weighted- Average Remaining Average Range of Optioned Exercise Contractual Optioned Exercise Exercise Prices Shares Price Life (years) Shares Price --------------- --------- --------- ------------ --------- ----------- less than $16.00 .... 390,829 $12.86 1.80 390,829 $12.86 $16.00 - $19.99 .... 3,241,788 19.03 9.38 557,988 16.51 $20.00 - $26.00 .... 6,128,196 22.00 8.01 2,701,625 21.74 greater than $26.00.. 2,827,497 28.77 6.96 2,273,095 28.65 ---------- ------ ---- --------- ------ 12,588,310 $22.47 7.67 5,923,537 $23.31 ========== ====== ==== ========= ======
NOTE 13-INCOME TAXES - -------------------------------------------------------------------------------- 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 using the enacted tax rates and laws that are currently in effect. Significant components of the Company's deferred tax assets and liabilities as of December 31, 2000, 1999 and 1998 are as follows: 2000 1999 1998 ---- ---- ---- DEFERRED TAX ASSETS: Dispositions, environmental and other similar items ............ $ 55,220 $ 56,123 $ 61,857 Other items (each less than 5% of total assets) .................. 98,107 94,196 88,432 -------- -------- -------- Total deferred tax assets ... $153,327 $150,319 $150,289 ======== ======== ======== DEFERRED TAX LIABILITIES: Depreciation and amortization .... $ 35,691 $ 66,374 $ 51,997 Deferred employee benefit items .. 50,333 42,785 35,163 -------- -------- -------- Total deferred tax liabilities . $ 86,024 $109,159 $ 87,160 ======== ======== ======== Significant components of the provisions for income taxes are as follows: 2000 1999 1998 ---- ---- ---- CURRENT: Federal ................ $125,393 $128,185 $106,538 Foreign ................ 6,211 11,787 6,982 State and Local ........ 22,662 25,116 23,162 -------- -------- -------- Total Current ........ 154,266 165,088 136,682 DEFERRED: Federal ................ (27,386) 14,388 20,946 Foreign ................ 6,213 3,851 5,587 State and Local ........ (5,713) 2,931 4,024 -------- -------- -------- Total Deferred ....... (26,886) 21,170 30,557 -------- -------- -------- Total income tax expense... $127,380 $186,258 $167,239 ======== ======== ======== Significant components of income before income taxes as used for income tax purposes, are as follows: 2000 1999 1998 ---- ---- ---- Domestic.............. $ 90,412 $411,626 $382,469 Foreign............... 52,994 78,492 57,634 -------- -------- -------- $143,406 $490,118 $440,103 ======== ======== ======== A reconciliation of the statutory federal income tax rate and the effective tax rate follows: 2000 1999 1998 ---- ---- ---- Statutory tax rate ................... 35.0% 35.0% 35.0% EFFECT OF: State and local taxes ............. 7.7 3.7 4.0 Investment vehicles ............... (7.3) (1.5) (2.7) Impairment of long-lived assets.... 51.0 Other - net ....................... 2.5 0.8 1.7 ---- ---- ---- Effective tax rate ................... 88.9% 38.0% 38.0% ==== ==== ==== A portion of the impairment of long-lived assets charge in 2000 related to goodwill was not deductible for tax purposes. The effect on the statutory federal income tax rate is shown separately in the previous table. The state and local tax effect is not shown separately. The remaining portion of the impairment charge created federal, state and local deferred tax benefits due to the significant temporary differences between the reduced financial carrying amounts and amounts used for tax purposes. The provisions for income taxes includes estimated taxes payable on that portion of retained earnings of foreign subsidiaries expected to be received by the Company. A provision was not made with respect to $5,647 of retained earnings at December 31, 2000 that have been invested by foreign subsidiaries. It is not practicable to estimate the amount of unrecognized deferred tax liability for undistributed foreign earnings. Netted against the Company's other deferred tax assets are valuation reserves of $9,082, $16,211 and $16,703 at December 31, 2000, 1999, and 1998, respectively, resulting from the uncertainty as to the realization of the tax benefits from certain foreign net operating losses and certain other foreign assets. NOTE 14-SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (Unaudited) - -------------------------------------------------------------------------------- 2000 - -------------------------------------------------------------------------------- Net Income Net Income Net Income (Loss) per (Loss) per Quarter Net Sales Gross Profit (Loss) Share - Basic Share - Diluted - ------- --------- ------------ ----------- ------------- --------------- 1st $1,221,916 $516,244 $ 40,923 $ .25 $ .25 2nd 1,429,267 641,474 115,843 .71 .71 3rd 1,411,903 626,095 106,719 .66 .66 4th 1,148,538 523,798 (247,459) (1.55) (1.55) The fourth quarter net loss resulted from an after-tax charge for the impairment of long-lived assets of $293,628 or $1.84 per share ($1.80 per share for the year due to the effect of dilution and higher average shares outstanding). Net income in the fourth quarter of $46,169, excluding the impairment charge, was decreased by $484, no per share impact, due to certain year-end adjustments. Gross profit increased by $8,666 ($5,633 after-tax, $.04 per share) primarily as a result of physical inventory adjustments of $9,889 ($6,428 after-tax, $.04 per share) partially offset by fourth quarter provisions for closing costs associated with certain operations of $1,055 ($686 after-tax, no per share 34 | The Sherwin - Williams Company 2000 Annual Report 28 impact). Administrative expenses increased $1,288 ($838 after-tax, $.01 per share) due to other year-end adjustments. Other expense-net increased $8,122 ($5,279 after-tax, $.03 per share) due primarily to fourth quarter provisions for the reduction to net realizable value of certain fixed assets related to site closings of $6,968 ($4,529 after-tax, $.03 per share). 1999 - -------------------------------------------------------------------------------- Net Income Net Income per per Quarter Net Sales Gross Profit Net Income Share - Basic Share - Diluted - ------- --------- ------------ ---------- ------------- --------------- 1st $1,127,867 $477,086 $ 28,797 $.17 $.17 2nd 1,384,070 610,390 107,594 .64 .63 3rd 1,345,483 609,834 111,482 .67 .66 4th 1,146,416 551,204 55,987 .34 .34 Net income during the fourth quarter decreased by $1,751 ($.01 per share) due to certain year-end adjustments. Gross profit increased by $23,006 ($14,953 after-tax, $.09 per share) as a result of physical inventory adjustments of $32,659 ($21,228 after-tax, $.12 per share). These adjustments were partially offset by other year-end adjustments of $5,843 ($3,798 after-tax, $.02 per share) and by provisions for the closing costs associated with certain operations of $3,810 ($2,477 after-tax, $.01 per share). Administrative expenses decreased $703 ($457 after-tax, no per share effect) due to other year-end adjustments. Other expense - net increased $26,403 ($17,162 after-tax, $.10 per share) due to the net provisions for environmental-related matters at current, former and third-party sites of $16,860 ($10,959 after-tax, $.07 per share), the provision of $3,830 ($2,490 after-tax, $.01 per share) for the adjustment to net realizable value of certain net fixed assets related to site closings, and due to other year-end adjustments of $5,713 ($3,713 after-tax, $.02 per share). NOTE 15-NET INCOME PER SHARE - --------------------------------------------------------------------------------
2000 1999 1998 ---- ---- ---- BASIC Average shares outstanding ......... 161,911,789 167,924,660 172,162,472 ============ ============ ============ Net income ......................... $ 16,026 $ 303,860 $ 272,864 ============ ============ ============ Net income per share ............... $ .10 $ 1.81 $ 1.58 ============ ============ ============ DILUTED Average shares outstanding ......... 161,911,789 167,924,660 172,162,472 Non-vested restricted stock grants . 279,300 263,567 235,317 Stock options- treasury stock method ............ 503,982 838,069 1,137,890 ------------ ------------ ------------ Average shares assuming dilution ... 162,695,071 169,026,296 173,535,679 ============ ============ ============ Net income ......................... $ 16,026 $ 303,860 $ 272,864 ============ ============ ============ Net income per share ............... $ .10 $ 1.80 $ 1.57 ============ ============ ============
NOTE 16-COMPREHENSIVE INCOME - -------------------------------------------------------------------------------- Cumulative other comprehensive loss consists of the following components: Foreign Minimum Cumulative Currency Pension Other Translation Liability Comprehensive Adjustments Adjustments Loss ----------- ----------- ------------- Balance at January 1, 1998 ... $ (33,089) $(428) $(33,517) Other comprehensive loss ..... (11,838) 428 (11,410) --------- ----- -------- Balance at December 31, 1998.. (44,927) $ 0 (44,927) ===== Other comprehensive loss ..... (100,697) (100,697) --------- --------- Balance at December 31, 1999.. (145,624) (145,624) Other comprehensive loss ..... (17,985) (17,985) --------- --------- Balance at December 31, 2000.. $(163,609) $(163,609) ========= ========= NOTE 17 - REPORTABLE SEGMENT INFORMATION - -------------------------------------------------------------------------------- The Company reports its segment information in five reportable segments - the Paint Stores, Consumer, Automotive Finishes, International Coatings (collectively, the "Operating Segments") and Administrative Segments - in accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131 requires an enterprise to report segment information in the same way that management internally organizes its business for assessing performance and making decisions regarding allocation of resources. See the inside front cover and page 1 of this report for more information about reportable segments. The Company's chief operating decision maker has been identified as the Chief Executive Officer because he has final authority over performance assessment and resource allocation decisions. Because of the global, diverse operations of the Company, the chief operating decision maker regularly receives discrete financial information about each reportable segment as well as a significant amount of additional financial information about certain aggregated divisions, operating units and subsidiaries of the Company. The chief operating decision maker uses all such financial information for performance assessment and resource allocation decisions. Factors considered in determining the five reportable segments of the Company include the nature of the business activities, existence of managers responsible for the operating and administrative activities and information presented to the Board of Directors. The Company evaluates the performance of operating segments and allocates resources based on profit or loss and cash generated from operations before income taxes, excluding corporate expenses and financing gains and losses. The accounting policies of the reportable segments are the same as those described in Note 1. The Paint Stores Segment consists of 2,488 company-operated specialty paint stores in the United States, Canada, Virgin Islands, Puerto Rico and Mexico. Each of the stores has the same business activity of selling identical national and similar regional products to similar types of customers. During 2000, this Segment opened or acquired 92 net new stores, remodeled 52 and relocated 36. The net new stores consisted of 79 stores in the United States, 3 in Canada, 1 in the Virgin Islands, 4 in Puerto Rico and 5 in Mexico. In 1999, there were 73 net new stores opened (66 in the The Sherwin - Williams Company 2000 Annual Report | 35 29 United States). In 1998, 64 net new stores were opened (55 in the United States). This Segment also manufactures original equipment manufacturer (OEM) product finishes sold through the paint stores and by direct outside sales representatives. In addition to stores, operations in Mexico include a manufacturing facility, distribution activities and outside selling functions to dealers and other distributors. The Paint Stores Segment is the exclusive North American marketer and seller of Sherwin-Williams(R) branded architectural coatings, industrial and marine products, OEM product finishes and related items produced by its Mexican operations, its product finishes manufacturing and by the Consumer Segment. The loss of any single customer would not have a material adverse effect on the business of this Segment. A map on the inside back cover of this report shows the number of paint stores and their geographical locations. The Consumer Segment develops, manufactures and distributes a variety of paint, coatings and related products to third party customers and the Paint Stores Segment. Approximately 41 percent of the total sales of the Consumer Segment in 2000, including inter-segment transfers, represented products sold through the Paint Stores Segment. Sales and marketing of certain control-branded and private labeled products is performed by a direct sales staff. The products distributed through third party customers are intended for resale to the ultimate end-user of the product. The Consumer Segment has sales to certain customers that, individually, may be a significant portion of the sales of the Segment. However, the loss of any single customer would not have a material adverse effect on the overall profitability of the Segment. This Segment incurs most of the Company's capital expenditures related to ongoing environmental compliance measures. The Automotive Finishes Segment develops, manufactures and distributes a variety of motor vehicle finish, refinish and touch-up products primarily throughout North and South America, the Caribbean Islands, and Italy. This Segment also licenses certain technology and trade names worldwide. Sherwin-Williams(R) branded automotive finish and refinish products are distributed throughout North America solely through this Segment's network of 127 company-operated automotive branches in the United States and 17 in Canada. Additional automotive branches in Jamaica (14) and Chile (17) complete this Segment's worldwide network. At December 31, 2000, this Segment included 11 foreign wholly-owned subsidiaries in 8 foreign countries and 11 licensing agreements in 15 foreign countries. During 2000, the Automotive Finishes Segment opened or acquired three net new branches worldwide. A map on the inside back cover of this report shows the number of branches and their geographical locations. The International Coatings Segment develops, licenses, manufactures and distributes a variety of paint, coatings and related products worldwide. The majority of the sales from licensees and subsidiaries occur in South America, the Segment's most important international market. This Segment sells its products through 29 company-operated specialty paint stores in Chile and 16 in Brazil and by outside selling functions to dealers and other distributors. At December 31, 2000, this Segment included 12 foreign wholly-owned subsidiaries in 8 foreign countries, 4 foreign joint ventures and 29 licensing agreements in 20 foreign countries. The Administrative Segment includes the administrative expenses of the Company's and certain consolidated subsidiaries' headquarters sites. This Segment includes interest expense which is unrelated to retail real estate leasing activities, investment income, certain foreign currency transaction losses related to dollar-denominated debt, certain provisions for disposition and environmental-related matters, and other expenses which are not directly associated with any Operating Segment. Administrative expenses do not include any significant foreign operations. Also included in the Administrative Segment is a real estate management unit that is responsible for the ownership, management, leasing of non-retail properties held primarily for use by the Company, including the Company's headquarters site, and disposal of idle facilities. Sales of the Administrative Segment represent external leasing revenue of excess headquarters space or leasing of facilities no longer used by the Company in its operations. Gains and losses from the sale of property are not a significant operating factor in determining the performance of this Segment. Net external sales of all consolidated foreign subsidiaries were $540 million, $497 million, and $521 million for 2000, 1999, and 1998, respectively. Operating profits of all consolidated foreign subsidiaries were $32 million, $70 million, and $47 million for 2000, 1999, and 1998, respectively. Domestic operations account for the remaining net sales and operating profits. Long-lived assets consist of net property, plant and equipment, goodwill, and intangibles. Long-lived assets of consolidated foreign subsidiaries totaled $245 million, $242 million, and $312 million at December 31, 2000, 1999, and 1998, respectively. The consolidated total of long-lived assets for the Company was $1,687 million, $2,026 million, and $2,134 million at December 31, 2000, 1999, and 1998, respectively. No single geographic area outside the United States was significant relative to consolidated net external sales or operating profits. Export sales and sales to any individual customer were each less than 10 percent of consolidated sales to unaffiliated customers during all years presented. In the reportable segment financial information that follows, operating profit is total revenue, including inter-segment transfers, less operating costs and expenses. Identifiable assets are those directly identified with each reportable segment. Administrative Segment assets consist primarily of cash, investments, deferred pension assets, headquarters property, plant and equipment, and other real estate. The operating margin for each Operating Segment is based upon total external sales and inter-segment transfers. Domestic inter-segment transfers are accounted for at the approximate fully absorbed manufactured cost plus distribution costs. International inter-segment transfers are accounted for at values comparable to normal unaffiliated customer sales. 36 | The Sherwin - Williams Company 2000 Annual Report 30 Reportable Segment Financial Information - -------------------------------------------------------------------------------- (Millions of Dollars)
2000 1999 1998 1997 1996 ------ ------ ------ ------ ------ NET EXTERNAL SALES Paint Stores .................... $3,185 $3,002 $2,822 $2,639 $2,414 Consumer ........................ 1,219 1,224 1,282 1,409 1,162 Automotive Finishes ............. 493 471 474 476 434 International Coatings .......... 307 299 348 350 114 Administrative .................. 8 8 8 7 9 ------ ------ ------ ------ ------ Consolidated totals ............. $5,212 $5,004 $4,934 $4,881 $4,133 OPERATING PROFITS Paint Stores .................... $ 411 $ 377 $ 347 $ 315 $ 277 Consumer ........................ (210)* 155 125 167 126 Automotive Finishes ............. 61 67 65 64 52 International Coatings .......... 18 34 24 36 20 Administrative: Interest Expense .............. (60) (59) (70) (79) (22) Corporate expenses and other (77) (84) (51) (76) (78) ------ ------ ------ ------ ------ Income before income taxes ...... $ 143* $ 490 $ 440 $ 427 $ 375 IDENTIFIABLE ASSETS Paint Stores .................... $1,018 $ 930 $ 881 $ 832 $ 757 Consumer ........................ 1,360* 1,804 1,850 1,938 1,122 Automotive Finishes ............. 349 279 275 274 274 International Coatings .......... 298 294 356 312 194 Administrative .................. 726 726 689 680 648 ------ ------ ------ ------ ------ Consolidated totals ............. $3,751* $4,033 $4,051 $4,036 $2,995 CAPITAL EXPENDITURES Paint Stores .................... $ 48 $ 49 $ 57 $ 56 $ 49 Consumer ........................ 40 40 37 57 44 Automotive Finishes ............. 29 10 8 14 10 International Coatings .......... 6 11 15 13 12 Administrative .................. 10 24 29 24 8 ------ ------ ------ ------ ------ Consolidated totals ............. $ 133 $ 134 $ 146 $ 164 $ 123 DEPRECIATION Paint Stores .................... $ 45 $ 42 $ 38 $ 40 $ 35 Consumer ........................ 28 29 30 24 21 Automotive Finishes ............. 9 8 8 7 7 International Coatings .......... 6 6 6 6 1 Administrative .................. 21 20 16 13 12 ------ ------ ------ ------ ------ Consolidated totals ............. $ 109 $ 105 $ 98 $ 90 $ 76 OPERATING SEGMENT MARGINS Paint Stores .................... 12.9% 12.5% 12.3% 11.9% 11.5% Consumer ........................ (10.1%) 7.6% 6.1% 8.0% 7.0% Automotive Finishes ............. 11.5% 13.3% 12.8% 12.5% 11.1% International Coatings .......... 5.9% 11.4% 6.9% 10.2% 17.5% ------ ------ ------ ------ ------ Operating segment totals ........ 4.6%* 10.8% 9.8% 10.4% 9.9% INTERSEGMENT TRANSFERS Paint Stores .................... $ 10 $ 8 $ 5 Consumer ........................ 860 817 771 $ 666 $ 645 Automotive Finishes ............. 36 31 34 37 33 International Coatings .......... 2 Administrative .................. 11 12 11 9 9 ------ ------ ------ ------ ------ Segment totals .................. $ 917 $ 868 $ 821 $ 714 $ 687
* Includes charge and reduction in asset value of $352 in 2000 for impairment of long-lived assets. See note 2. The Sherwin - Williams Company 2000 Annual Report | 37 31 DIRECTORS, OFFICERS, MANAGERS - -------------------------------------------------------------------------------- BOARD OF DIRECTORS JAMES C. BOLAND, 61* President and Chief Executive Officer CAVS/Gund Arena Company JOHN G. BREEN, 66 Retired, former Chairman, Chief Executive Officer and President The Sherwin-Williams Company DUANE E. COLLINS, 64 Chairman and Chief Executive Officer Parker-Hannifin Corporation CHRISTOPHER M. CONNOR, 44 Chairman and Chief Executive Officer The Sherwin-Williams Company DANIEL E. EVANS, 64 Chairman Bob Evans Farms, Inc. ROBERT W. MAHONEY, 64 Retired, former Chairman, Chief Executive Officer and President Diebold, Incorporated WILLIAM G. MITCHELL, 70* Retired, former Vice Chairman Centel Corporation A. MALACHI MIXON, III, 60 Chairman and Chief Executive Officer Invacare Corporation CURTIS E. MOLL, 61* Chairman and Chief Executive Officer MTD Products, Inc. HELEN O. PETRAUSKAS, 56* Vice President-Environmental and Safety Engineering Ford Motor Company JOSEPH M. SCAMINACE, 47 President and Chief Operating Officer The Sherwin-Williams Company RICHARD K. SMUCKER, 52* President The J. M. Smucker Company CORPORATE OFFICERS CHRISTOPHER M. CONNOR, 44** Chairman and Chief Executive Officer JOSEPH M. SCAMINACE, 47** President and Chief Operating Officer LARRY J. PITORAK, 54** Senior Vice President - Finance, Treasurer and Chief Financial Officer JOHN L. AULT, 55** Vice President - Corporate Controller CYNTHIA D. BROGAN, 49 Vice President and Assistant Treasurer MARK J. DVOROZNAK, 42 Vice President - Corporate Audit and Loss Prevention THOMAS E. HOPKINS, 43** Vice President - Human Resources CONWAY G. IVY, 59** Vice President - Corporate Planning and Development JAMES J. SGAMBELLONE, 43 Vice President - Taxes and Assistant Secretary LOUIS E. STELLATO, 50** Vice President, General Counsel and Secretary RICHARD M. WEAVER, 46 Vice President - Administration OPERATING MANAGERS THOMAS S. BRUMMETT, 55 President & General Manager Eastern Division Paint Stores Group ROBERT J. DAVISSON, 40 President & General Manager Southeastern Division Paint Stores Group MICHAEL A. GALASSO, 53** President & General Manager International Division BLAIR P. LACOUR, 54 President & General Manager Mid Western Division Paint Stores Group JOHN G. MORIKIS, 37** President Paint Stores Group RONALD P. NANDOR, 41** President & General Manager Automotive Division STEVEN J. OBERFELD, 48 President & General Manager South Western Division Paint Stores Group THOMAS W. SEITZ, 52** President & General Manager Consumer Division ROBERT A. TAYLOR, 47 President & General Manager Chemical Coatings Business Unit Paint Stores Group * Audit Committee Member ** Executive Officer as defined by the Securities Exchange Act of 1934 38 | The Sherwin - Williams Company 2000 Annual Report 32 SHAREHOLDER INFORMATION - -------------------------------------------------------------------------------- Annual Meeting The annual meeting of shareholders will be held at 10:00 A.M., April 25, 2001 in the Landmark Conference Center, Room 927, Midland Building, 101 Prospect Avenue, N.W., Cleveland, Ohio. Investor Relations Conway G. Ivy The Sherwin-Williams Company 101 Prospect Avenue, N.W. Cleveland, Ohio 44115-1075 Internet: www.sherwin.com Form 10-K The Company's Annual Report on Form 10-K, filed with the Securities and Exchange Commission, is available without charge. To obtain a copy, contact the Investor Relations Office. Dividend Reinvestment Program A dividend reinvestment program is available to shareholders of common stock. For information, contact our transfer agent, The Bank of New York. Headquarters The Sherwin-Williams Company 101 Prospect Avenue, N.W. Cleveland, Ohio 44115-1075 (216) 566-2000 Independent Auditors Ernst & Young LLP Cleveland, Ohio Stock Trading Sherwin-Williams Common Stock-Symbol, SHW-is traded on the New York Stock Exchange. Transfer Agent& Registrar The Bank of New York Shareholder Relations Department-11E P.O. Box 11258 Church Street Station New York, NY 10286 1-800-432-0140 E-mail address: Shareowner-svcs@Email.bony.com COMMON STOCK TRADING STATISTICS
2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- High ......................... $ 27.625 $ 32.875 $ 37.875 $33.375 $28.875 Low .......................... 17.125 18.750 19.438 24.125 19.500 Close December 31 ............ 26.313 21.000 29.375 27.750 28.000 Shareholders of record ....... 10,813 11,475 11,929 11,964 11,933 Shares traded (thousands)..... 158,349 161,118 128,942 98,855 72,638
QUARTERLY STOCK PRICES AND DIVIDENDS
2000 1999 - -------------------------------------------------- --------------------------------------------- Quarter High Low Dividend Quarter High Low Dividend - ------- ---- --- -------- ------- ---- --- -------- 1st $23.000 $17.125 $.135 1st $30.688 $23.063 $.12 2nd 27.625 21.172 .135 2nd 32.875 27.000 .12 3rd 24.625 19.875 .135 3rd 30.000 19.438 .12 4th 26.563 18.875 .135 4th 23.125 18.750 .12
The Sherwin - Williams Company 2000 Annual Report |39 33 [MAP] Map shows the approximate geographical separation of each domestic division and the number of paint stores and automotive branches in each state or province and in the Virgin Islands, Puerto Rico, Mexico and South America. Map also shows the United Kingdom and Italy. EX-21 5 l85264bex21.txt EXHIBIT 21 1 EXHIBIT 21
STATE OR JURISDICTION OF INCORPORATION OR SUBSIDIARIES ORGANIZATION ------------ --------------------- DOMESTIC SUBSIDIARIES Contract Transportation Systems Co. Delaware DIMC, Inc. Delaware Dupli-Color Products Company Delaware Sherwin-Williams Automotive Finishes Corp. Delaware SWIMC, Inc. Delaware The Sherwin-Williams Acceptance Corporation Nevada Thompson Minwax International Corp. Delaware FOREIGN SUBSIDIARIES Compania Sherwin-Williams, S.A. de C.V. Mexico Distribuidores Pinturas del Mundo S.r.L. Peru Eurofinish S.r.L. Italy Kriesol, S.A. Uruguay Marson Chilena, S.A. Chile Productos Quimicos y Pinturas, S.A. de C.V. Mexico Proquipsa, S.A. de C.V. Mexico Pulverlack Tintas Ltda. Brazil Quetzal Pinturas, S.A. de C.V. Mexico Ronseal (Ireland) Limited Ireland Ronseal Limited United Kingdom ScottWarren S.p.A. Italy Sherwin-Williams Argentina I.y C.S.A. Argentina Sherwin-Williams do Brasil Industria e Comercio Ltda. Brazil Sherwin-Williams Canada Inc. Canada Sherwin-Williams (Caribbean) N.V. Curacao Sherwin-Williams Cayman Islands Limited Cayman Islands Sherwin-Williams Chile S.A. Chile Sherwin-Williams Foreign Sales Corporation Limited U.S. Virgin Islands Sherwin-Williams Japan Co., Ltd. Japan Sherwin-Williams (West Indies) Limited Jamaica SW Paints Ltda. Brazil The Sherwin-Williams Company Resources Limited Jamaica
EX-23 6 l85264bex23.txt EXHIBIT 23 1 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of The Sherwin-Williams Company of our report dated January 26, 2001, included in the 2000 Annual Report to Shareholders of The Sherwin-Williams Company. We also consent to the incorporation by reference in the following Registration Statements and related Prospectuses of our report dated January 26, 2001, with respect to the consolidated financial statements and schedule included in this Annual Report (Form 10-K) of The Sherwin-Williams Company:
REGISTRATION NUMBER DESCRIPTION - ------------ ----------- 333-66295 The Sherwin-Williams Company Deferred Compensation Savings Plan, The Sherwin-Williams Company Key Management Deferred Compensation Plan and The Sherwin-Williams Company Director Deferred Fee Plan Form S-8 Registration Statement 333-61735 The Sherwin-Williams Company Form S-3 Registration Statement 333-41659 The Sherwin-Williams Company Form S-3 Registration Statement 333-25671 The Sherwin-Williams Company 1997 Stock Plan for Nonemployee Directors Form S-8 Registration Statement 333-25669 The Sherwin-Williams Company 1994 Stock Plan Form S-8 Registration Statement 333-25607 The Sherwin-Williams Company S-4 Registration Statement 333-01093 The Sherwin-Williams Company Form S-3 Registration Statement 333-00725 The Sherwin-Williams Company Form S-4 Registration Statement 33-62229 The Sherwin-Williams Company Employee Stock Purchase and Savings Plan Form S-8 Registration Statement 2-80510 Post-Effective Amendment Number 5 to Form S-8 Registration Statement relating to The Sherwin-Williams Company Employee Stock Purchase and Savings Plan 33-52227 The Sherwin-Williams Company 1994 Stock Plan Form S-8 Registration Statement 33-28585 The Sherwin-Williams Company 1984 Stock Plan Form S-8 Registration Statement 33-22705 The Sherwin-Williams Company Form S-3 Registration Statement
Cleveland, Ohio March 9, 2001 ERNST & YOUNG LLP EX-24.A 7 l85264bex24-a.txt EXHIBIT 24(A) 1 EXHIBIT 24(a) 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 under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, an Annual Report on Form 10-K for the fiscal year ended December 31, 2000, hereby constitutes and appoints J.M. Scaminace, 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 Annual Report on 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 2, 2001 /S/ C. M. CONNOR ------------------------- -------------------------- C.M. Connor 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 under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, an Annual Report on Form 10-K for the fiscal year ended December 31, 2000, hereby constitutes and appoints C.M. Connor, 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 Annual Report on 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 2, 2001 /S/ J. M. SCAMINACE -------------------------- ----------------------------- J.M. Scaminace 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 under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, an Annual Report on Form 10-K for the fiscal year ended December 31, 2000, hereby constitutes and appoints C.M. Connor, J.M. Scaminace 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 Annual Report on 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 2, 2001 /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 under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, an Annual Report on Form 10-K for the fiscal year ended December 31, 2000, hereby constitutes and appoints C.M. Connor, J.M. Scaminace, 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 Annual Report on 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 2, 2001 /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 under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, an Annual Report on Form 10-K for the fiscal year ended December 31, 2000, hereby constitutes and appoints C.M. Connor, J.M. Scaminace, 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 Annual Report on 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 6, 2001 /S/ J. C. BOLAND --------------------------- -------------------------- J. C. Boland 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 under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, an Annual Report on Form 10-K for the fiscal year ended December 31, 2000, hereby constitutes and appoints C.M. Connor, J.M. Scaminace, 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 Annual Report on 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 7, 2001 /S/ J. G. BREEN ----------------------------- ------------------------- J. G. Breen 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 under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, an Annual Report on Form 10-K for the fiscal year ended December 31, 2000 hereby constitutes and appoints C.M. Connor, J.M. Scaminace, 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 Annual Report on 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 3, 2001 /S/ D. E. COLLINS ----------------------------- --------------------------- D. E. Collins 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 under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, an Annual Report on Form 10-K for the fiscal year ended December 31, 2000, hereby constitutes and appoints C.M. Connor, J.M. Scaminace, 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 Annual Report on 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 6, 2001 /S/ D. E. EVANS --------------------------- ------------------------- D. E. Evans 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 under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, an Annual Report on Form 10-K for the fiscal year ended December 31, 2000, hereby constitutes and appoints C.M. Connor, J.M. Scaminace, 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 Annual Report on 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 5, 2001 /S/ R. W. MAHONEY --------------------------- --------------------------- R. W. Mahoney 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 under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, an Annual Report on Form 10-K for the fiscal year ended December 31, 2000, hereby constitutes and appoints C.M. Connor, J.M. Scaminace, 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 Annual Report on 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 7, 2001 /S/ W. G. MITCHELL --------------------------- ---------------------------- W. G. Mitchell 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 under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, an Annual Report on Form 10-K for the fiscal year ended December 31, 2000, hereby constitutes and appoints C.M. Connor, J.M. Scaminace, 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 Annual Report on 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 5, 2001 /S/ A. M. MIXON, III --------------------------- ------------------------------ A. M. Mixon, III 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 under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, an Annual Report on Form 10-K for the fiscal year ended December 31, 2000, hereby constitutes and appoints C.M. Connor, J.M. Scaminace, 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 Annual Report on 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 2, 2001 /S/ C. E. MOLL ----------------------------- ------------------------ C. E. Moll 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 under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, an Annual Report on Form 10-K for the fiscal year ended December 31, 2000, hereby constitutes and appoints C.M. Connor, J.M. Scaminace, 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 Annual Report on 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 7, 2001 /S/ H. O. PETRAUSKAS --------------------------- ------------------------------ H. O. Petrauskas Director 14 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 under the provisions of the Securities Exchange Act of 1934, as amended, and any rules and regulations of the Securities and Exchange Commission, an Annual Report on Form 10-K for the fiscal year ended December 31, 2000, hereby constitutes and appoints C.M. Connor, J.M. Scaminace, 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 Annual Report on 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 6, 2001 /S/ R. K. SMUCKER --------------------------- --------------------------- R. K. Smucker Director EX-24.B 8 l85264bex24-b.txt EXHIBIT 24(B) 1 EXHIBIT 24(b) CERTIFICATE ----------- I, the undersigned, Secretary of The Sherwin-Williams Company (the "Company"), hereby certify that attached hereto is a true and complete copy of a resolution of the Board of Directors of the Company, duly adopted at a meeting held on February 7, 2001, and that such resolution is in full force and effect and has not been amended, modified, revoked or rescinded as of the date hereof. IN WITNESS WHEREOF, I have executed this certificate as of this 13th day of March, 2001. /S/ L. E. STELLATO --------------------------------- L.E. Stellato, Secretary 2 RESOLVED, that the appropriate officers of the Company are each hereby authorized to execute and deliver a power of attorney appointing C.M. Connor, J.M. Scaminace, L.J. Pitorak and L.E. Stellato or any of them, with full power of substitution and resubstitution, to act as attorneys-in-fact for the Company and for such officers for the purpose of executing and filing with the Securities and Exchange Commission ("SEC") and any national securities exchange, on behalf of the Company, the Annual Report on Form 10-K for the fiscal year ended December 31, 2000 and any and all amendments, exhibits and other documents in connection therewith, and to take other action deemed necessary and appropriate to effect the filing of such Annual Report on Form 10-K and any and all such amendments, exhibits and other documents in connection therewith. -----END PRIVACY-ENHANCED MESSAGE-----