UNITED STATES
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
For the fiscal year ended December 31, 20052006
Commission file number 1-04851
THE SHERWIN-WILLIAMS COMPANY
OHIO
34-0526850
101 Prospect Avenue, N.W., Cleveland, Ohio
44115-1075
(216) 566-2000
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Name of each exchange on which registered | |
| 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 if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yesx Noo
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yeso Nox
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. Yesx Noo
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.xo
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one): Large accelerated filerx Accelerated filero Non-accelerated filero
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Nox
At January 31, 2006, 135,249,3932007, 134,452,953 shares of common stock were outstanding, net of treasury shares. The aggregate market value of common stock held by non-affiliates of the Registrant at June 30, 20052006 was $6,513,856,714$6,421,419,020 (computed by reference to the price at which the common stock was last sold on such date).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of our Annual Report to Shareholders for the fiscal year ended December 31, 20052006 (“20052006 Annual Report”) are incorporated by reference into Parts I, II and IV of this report.
Portions of our Proxy Statement for the 20062007 Annual Meeting of Shareholders (“Proxy Statement”) to be filed with the Securities and Exchange Commission within 120 days of our fiscal year ended December 31, 20052006 are incorporated by reference into Part III of this report.
THE SHERWIN-WILLIAMS COMPANY
Table of Contents
PART I
ITEM 1. BUSINESS
Introduction
The Sherwin-Williams Company, founded in 1866 and incorporated in Ohio in 1884, is engaged in the manufacture, distribution and sale of paint, coatings and related products to professional, industrial, commercial and retail customers primarily in North and South America. Our principal executive offices are located at 101 Prospect Avenue, N.W., Cleveland, Ohio 44115-1075, telephone (216) 566-2000. As used in this report, the terms “Sherwin-Williams,” “Company,” “we” and “our” mean The Sherwin-Williams Company and its consolidated subsidiaries unless the context indicates otherwise.
Available Information
We make available free of charge on or through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the Securities and Exchange Commission. You may access these documents on the “Investor Relations” page of our website at www.sherwin.com.
We also make available free of charge on our website our Corporate Governance Guidelines, our Director Independence Standards, our Business Ethics Policy and the charters of our Audit Committee, our Compensation and Management Development Committee, and our Nominating and Corporate Governance Committee. You may access these documents in the “Corporate Governance” section on the “Investor Relations” page of our website at www.sherwin.com. Any person may receive a copy of any of these documents free of charge by writing to us at The Sherwin-Williams Company, 101 Prospect Avenue, N.W., Cleveland, Ohio 44115, Attention: Investor Relations.
Basis of Reportable Segments
We report our segment information in five reportable segments — Paint Stores, Consumer, Automotive Finishes, International Coatings (collectively, the “Operating Segments”)same way that management internally organizes its business for assessing performance and Administrative —making decisions regarding allocation of resources in accordance with Statement of Financial Accounting Standards (FAS) No. 131, “Disclosures about Segments of an Enterprise and Related Information.” FAS No. 131 requires an enterprise to report segment informationEffective January 1, 2006, we changed our reportable operating segments based on organizational changes in our management structure. Our reportable operating segments now are: Paint Stores Group, Consumer Group and Global Group (collectively, the “Reportable Operating Segments”). The Global Group consists of certain business units with foreign or worldwide operations that were reported in the same way that management internally organizes its business for assessing performanceprevious Paint Stores, Consumer, Automotive Finishes and making decisions regarding allocation of resources.International Coatings segments. Amounts previously reported have been reclassified to conform with the 2006 presentation. Factors considered in determining the five reportable segments of the Companyour three Reportable Operating Segments 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. We report all other business activities and immaterial operating segments that are not reportable in the Administrative segment.
The Company’s chief operating decision maker (CODM) 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 CODM regularly receives discrete financial information about each reportable operating segment as well as a significant amount of additional financial information about certain aggregated divisions, business units andor subsidiaries of the Company. The CODM uses all such financial information for performance assessment and resource allocation decisions. The CODM evaluates the performance of the Operating Segments and allocates resources to the Reportable Operating Segments based on profit or loss and cash generated from operations before income taxes, excluding corporate expenses and financing gains and losses.taxes. The accounting policies of the reportable segmentsReportable Operating Segments are the same as those described in Note 1 of the Notes to Consolidated Financial Statements on pages 4647 through 51 of our 20052006 Annual Report, which is incorporated herein by reference.
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Paint Stores SegmentGroup
The Paint Stores SegmentGroup consisted of 3,0813,046 company-operated specialty paint stores in the United States, Canada, Virgin Islands and Puerto Rico and Mexico at December 31, 2005.2006. Each division of the Segmentstore in this segment is engaged in the related business activity of selling the Company’s own manufactured paint, coatings and related products to end-use customers. During 2005, this Segment opened 98 net new stores, consisting of 91 stores in the United
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The Paint Stores SegmentGroup markets and sells Sherwin-Williams® branded architectural paint and coatings, industrial and marine products, OEM product finishes and related items throughout North America and the Caribbean.items. These products are produced by this Segment’s manufacturing facilities and those in the Consumer Segment.and Global Groups. In addition, each store sells selected purchased associated products. During 2006, this segment opened 117 net new stores, consisting of 113 stores in the United States and 4 in Canada. In 2005, there were 95 net new stores opened (88 in the United States). In 2004, there were 297 net new stores opened or acquired (294 in the United States). The loss of any single customer would not have a material adverse effect on the business of this Segment.segment.
Consumer SegmentGroup
The Consumer SegmentGroup develops, manufactures and distributes a variety of paint, coatings and related products to third party customers and the Paint Stores Segment.Group primarily in the United States and Canada. The acquisition of KST Coatings Manufacturing, Inc., KST CoatingsSusannah Dobbs Company LLC and Uniflex LLC (“KST”) in 20052006 was included in this Segment.segment. Approximately 5255 percent of the total sales of the Consumer SegmentGroup in 2005,2006, including inter-segment transfers, represented products sold through the Paint Stores Segment.Group. Sales and marketing of certain controlled brand 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 SegmentGroup had sales to certain customers that, individually, may be a significant portion of the sales of the Segment.segment. However, the loss of any single customer would not have a material adverse effect on the overall profitability of the Segment.segment. This Segmentsegment incurred most of the Company’s capital expenditures related to ongoing environmental compliance measures.
Automotive Finishes SegmentGlobal Group
The Automotive Finishes SegmentGlobal Group develops, licenses, manufactures, distributes and distributessells a variety of motor vehicle finish,architectural paint and coatings, industrial and marine products, automotive finishes and refinish products, OEM coatings and touch-uprelated products primarily throughoutin North and South America, Jamaica, the Caribbean Islands,United Kingdom, Europe and Europe.China. This Segment alsosegment meets the demands of its customers for a consistent worldwide product development, manufacturing and distribution presence and approach to doing business. This segment licenses certain technology and trade names worldwide. Sherwin-Williams® branded automotive finish and refinishother controlled brand products are distributed throughout North America solely through the Paint Stores Group and this Segment’ssegment’s network of 153469 company-operated automotive branches — 237 in the United States, and 1984 in Canada. Additional automotive branches in Jamaica (15), Chile (14) and Peru (2) complete this Segment’s worldwide network. At December 31, 2005, this Segment included consolidated operations in 10 foreign countries and realized income from licensing agreements in 9 foreign countries.
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 occurred in South America, the Segment’s most important international market. This Segment sold its products through 30 company-operated specialty paint storesMexico, 44 in Chile, 3656 in Brazil, 23 in Canada, 16 in Jamaica, 6 in Uruguay, and2 in Argentina, 1 in ArgentinaPeru — and by a direct sales staff and outside selling functionssales representatives to retailers, dealers, jobbers, licensees and other third party distributors. At December 31, 2005, this Segment included consolidated2006, the Global Group consisted of operations in 7the United States, 14 foreign countries, 43 foreign joint ventures and income from licensing agreements in 1214 foreign countries.
Administrative Segment
The Administrative Segment includedsegment includes the administrative expenses of the Company’s corporate headquarters site. This Segment alsoAlso included in the Administrative segment was interest expense which was unrelated to retail real estate leasing activities, investment income, certain foreign currency transaction losses related to dollar-denominated debt and foreign currency option and forward contracts, certain expenses related to closed facilities and environmental-related matters, and other expenses which were not directly associated with any Reportable Operating Segment. The Administrative expensessegment did not include any significant foreign operations. Also included in the Administrative Segmentsegment was a real estate management unit that is responsible for the ownership, management, and leasing of non-retail
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Segment Financial Information
For financial information regarding our reportable segments,Reportable Operating Segments, including net external sales, operatingsegment profit, identifiable assets and other information by segment, see Note 1718 of the Notes to Consolidated Financial Statements on pages 6975 through 7178 of our 20052006 Annual Report, which is incorporated herein by reference.
Domestic and Foreign Operations
Financial and other information regarding domestic and foreign operations is set forth in Note 1718 of the Notes to Consolidated Financial Statements on page 7077 of our 20052006 Annual Report, which is incorporated herein by reference.
Additional information regarding risks attendant to foreign operations is set forth on page 3233 of our 20052006 Annual Report under the caption entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” which is incorporated herein by reference.
Business Developments
For additional information regarding our business and business developments, see pages 6 through 1513 of our 20052006 Annual Report and the “Letter to Shareholders” on pages 2 through 5 of our 20052006 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 Reportable Operating Segments anticipate any significant sourcing problems during 2006.2007. There are sufficient suppliers of each product purchased for resale that none of the Reportable Operating Segments anticipate any significant sourcing problems during 2006.2007.
Seasonality
The majority of the sales for the Paint Stores Group, Consumer Group and Automotive Finishes SegmentsGlobal Group 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.segment.
Working Capital
In order to meet increased demand during the second and third quarters, the Company usually builds its inventories during the first quarter. Working capital items (inventory and receivables) are generally financed through short-term borrowings, which include the use of lines of credit and the issuance of commercial paper. For a description of the Company’s liquidity and capital resources, see pages 2423 through 3233 of our 20052006 Annual Report under the caption entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is incorporated herein by reference.
Trademarks and Trade Names
Customer recognition of our trademarks and trade names collectively contribute significantly to our sales. The major trademarks and trade names used by each Reportable Operating Segment are set forth below.
| • | Paint Stores |
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| • | Consumer | |
| • | ||
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| Sher-Wood®, Powdura®, Polane®, Ronseal™, Colorgin™, Pulverlack™, Sumare™, Andina™, Marson™, Tri-Flow®, Thompson’s® WaterSeal®, Martin Senour®, Metalatex®, Novacor® and Loxon®. |
Patents
Although patents and licenses are not of material importance to our business as a whole or any segment, the International Coatings Segment and the international operations of the Automotive Finishes SegmentGlobal Group derive a portion of theirits income from the licensing of technology, trademarks and trade names to foreign companies.
Backlog and Productive Capacity
Backlog orders are not significant in the business of any Reportable Operating 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 our needs for paint, coatings and related products through 2006.2007.
Research and Development
For information regarding our costs of research and development included in technical expenditures, see Note 1 of the Notes to Consolidated Financial Statements on page 4850 of our 20052006 Annual Report, which is incorporated herein by reference.
Competition
We experience competition from many local, regional, national and international competitors of various sizes in the manufacture, distribution and sale of our paint, coatings and related products. We are a leading manufacturer and retailer of paint, coatings and related products to professional, industrial, commercial and retail customers, however, our competitive position varies for our different products and markets.
In the Paint Stores Segment,Group, 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.segment.
In the Consumer and International Coatings Segments,Group, domestic and foreign competitors include manufacturers and distributors of branded and private labeled paint and 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.this segment.
The Automotive Finishes SegmentGlobal Group has numerous competitors in its domestic and foreign markets with broad product offerings and several others with niche products. Key competitive factors for this Segmentsegment include technology, product quality, product innovation, breadth of product line, technical expertise, distribution, service and price.
The Administrative Segmentsegment has many competitors consisting of other real estate owners, developers and managers in areas in which this Segmentsegment owns property. The main competitive factors are the availability of property and price.
Employees
We employed 29,43430,767 persons at December 31, 2005.
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2006.
Environmental Compliance
For additional information regarding environmental-related matters, see pages 2625 through 2827 of our 20052006 Annual Report under the caption entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Notes 1, 8 and 1213 of the Notes to Consolidated Financial Statements on pages 48, 6149, 63 through 65, and 62,72 and 66,73, respectively, of our 20052006 Annual Report, which is incorporated herein by reference.
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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, future business plans and the costs and potential liability for environmental-related matters and the lead pigment and lead-based paint litigation. 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,” “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 our control, that could cause actual results to differ materially from such statements and from our historical results and experience. These risks, uncertainties and other factors include such things as:
| • | general business conditions, strengths of retail and manufacturing economies and the growth in the coatings industry; | |
| • | competitive factors, including pricing pressures and product innovation and quality; | |
| • | changes in raw material and energy supplies and pricing; | |
| • | changes in our relationships with customers and suppliers; | |
| • | our ability to attain cost savings from productivity initiatives; | |
| • | our ability to successfully integrate past and future acquisitions into our existing operations, as well as the performance of the businesses | |
| • | changes in general domestic economic conditions such as inflation rates, interest rates, tax rates, unemployment rates, higher labor and healthcare costs, recessions, and changing government policies, laws and regulations; | |
| • | risks and uncertainties associated with our expansion into and our operations in China, South America and other foreign markets, including general economic conditions, inflation rates, recessions, foreign currency exchange rates, foreign investment and repatriation restrictions, legal and regulatory constraints, civil unrest and other external economic and political factors; | |
| • | the achievement of growth in developing markets, such as China, Mexico and South America; | |
| • | increasingly stringent domestic and foreign governmental regulations including those affecting the environment; | |
| • | inherent uncertainties involved in assessing our potential liability for environmental-related activities; | |
| • | other changes in governmental policies, laws and regulations, including changes in accounting policies and standards and taxation requirements (such as new tax laws and new or revised tax law interpretations); |
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| • | 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 effect of any legislation and administrative regulations relating thereto; and | |
| • | unusual weather conditions. |
Readers are cautioned that it is not possible to predict or identify all of the risks, uncertainties and other factors that may affect future results and that the above list should not be considered to be a complete list. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no
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ITEM 1A. RISK FACTORS
Described below and elsewhere in this report and other documents that we file from time to time with the Securities and Exchange Commission are risks, uncertainties and other factors that can adversely affect our business, results of operation and financial condition. The following are some of the more important of these risks, uncertainties and other factors. Additional risks, uncertainties and other factors that are currently not known to us or we believe are not currently material may also adversely affect our business, results of operation and financial condition.
Adverse changes in general business conditions in the United States and worldwide may adversely affect our results of operations and financial condition.
Adverse changes in general business conditions in the United States and worldwide may reduce the demand for some of our products and adversely affect our results of operations and financial condition. Higher inflation rates, interest rates, tax rates and unemployment rates, higher labor and healthcare costs, recessions, changing governmental policies, laws and regulations, and other economic factors that adversely affect the demand for our paint, coatings and related products could adversely affect our results of operations and financial condition.
Economic downturns in cyclical segments of the economy may reduce the demand for some of our products and adversely affect our sales and earnings.
Portions of our business involve the sale of paint, coatings and related products to segments of the economy that are cyclical in nature, particularly segments relating to construction, housing and manufacturing. Our sales to these segments are affected by the levels of discretionary consumer and business spending in these segments. During economic downturns in these segments, the levels of consumer and business discretionary spending may decrease. This decrease in spending will likely reduce the demand for some of our products and adversely affect our sales and earnings.
Increases in the cost of raw materials and energy may adversely affect our earnings.
We purchase raw materials and energy for use in the manufacturing, distribution and sale of our products. Factors such as adverse weather conditions, including hurricanes, and other disasters can disrupt raw material and fuel supplies and increase our costs. Although raw materials and energy supplies are generally available from various sources in sufficient quantities, unexpected shortages and increases in the cost of raw materials and energy may have an adverse effect on our earnings in the event we are unable to offset these costs by sufficiently decreasing our operating costs or raising the prices of our products. Many of our paint and coatings products utilize titanium dioxide, which is widely used as a white pigment for paint. During 2005,2006, we experienced significant cost increases in energy and raw materials, particularly titanium dioxide and petroleum-based materials, which adversely impacted our earnings.
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Although we have an extensive customer base, the loss of any of our largest customers could adversely affect our sales and earnings.
We have a large and varied customer base due to our extensive distribution network. During 2005,2006, no individual customer accounted for sales totaling more than ten percent of our sales. However, we have some customers that, individually, purchase a large amount of products from us. Although our broad distribution channels would help to minimize the impact of the loss of any one customer, the loss of any of these large customers could have an adverse effect on our sales and earnings.
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Adverse weather conditions may reduce the demand for some of our products and could have a negative effect on our sales.
From time to time, adverse weather conditions in certain parts of the United States have had an adverse effect on our sales of paint, coatings and related products. For example, unusually cold and rainy weather, especially during the exterior painting season, could have an adverse effect on sales of our exterior paint products.
Increased competition may reduce our sales and earnings performance.
We face substantial competition from many international, national, regional and local competitors of various sizes in the manufacture, distribution and sale of our paint, coatings and related products. Some of our competitors are larger than us and have greater financial resources to compete. Other competitors are smaller and may be able to offer more specialized products. Technology, product quality, product innovation, breadth of product line, technical expertise, distribution, service and price are the key competitive factors for our business. Competition in any of these areas may reduce our sales and adversely affect our earnings by resulting in decreased sales volumes, reduced prices and increased costs of manufacturing, distributing and selling our products.
Our operating results and financial condition may be negatively impacted if we do not successfully integrate past and future acquisitions into our existing operations and if the performance of the businesses we acquire do not meet our expectations.
We have historically made strategic acquisitions of businesses in the paint and coatings industry and will likely acquire additional businesses in the future as part of our long term growth strategy. These acquisitions involve significant challenges and risks. In the event that we do not successfully integrate these acquisitions into our existing operations so as to realize the expected return on our investment, our operating results and financial condition could be adversely affected.
Risks and uncertainties associated with our expansion into and our operations in China, South America and other foreign markets could adversely affect our sales and earnings.
Net external sales of our consolidated foreign subsidiaries totaled approximately $747$831 million in 2005,2006, or 10.4%10.6% of our total consolidated net sales. Sales outside of the United States make up an important part of our current business and future strategic plans. Our sales and earnings could be adversely affected by a variety of international factors, including general economic conditions, inflation rates, recessions, foreign currency exchange rates, foreign investment and repatriation restrictions, legal and regulatory constraints, civil unrest, difficulties in staffing and managing foreign operations and other external economic and political factors. Our inability to successfully manage the risks and uncertainties relating to these factors could adversely affect our sales and earnings.
In many foreign countries, it is acceptable to engage in certain business practices that we are prohibited from engaging in because of regulations that are applicable to us, such as the Foreign Corrupt Practices Act. Although we have internal control policies and procedures designed to ensure compliance with these regulations, there can be no assurance that our policies and procedures will prevent a violation of these regulations. Any violation could cause an adverse effect on our results of operations.
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Fluctuations in foreign currency exchange rates could adversely affect our sales and earnings.
Because of our international operations, we are exposed to market risk associated with interest rates and value changes in foreign currencies, which may adversely affect our business. Historically, our reported net sales and net earnings have been subjected to fluctuations in foreign exchange rates. Our primary exchange rate exposure is with the British pound, the Argentine peso, the Brazilian real, the Chilean peso, the Canadian dollar and the Mexican peso against the U.S. dollar. While we actively manage the exposure of our foreign currency market risk as part of our overall financial risk management policy, we believe we may experience continuing losses from foreign currency translation, and such losses could adversely affect our sales and earnings.
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We are required to comply with increasingly stringent federal, state and local environmental laws and regulations, the cost of which is likely to increase and may adversely affect our earnings.
Our operations 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 us for our past operations. We expect environmental laws and regulations to impose increasingly stringent requirements upon our industry and us in the future. Our costs to comply with these laws and regulations may increase as these requirements become more stringent in the future, and these increased costs may adversely affect our earnings.
We are involved with environmental investigation and remediation activities at some of our current and former sites, as well as a number of third-party sites, for which our ultimate liability may exceed the current amount we have accrued.
We are involved with environmental investigation and remediation activities at some of our current and former sites and a number of third-party sites. We accrue for estimated costs of investigation and remediation activities at these sites for which commitments or clean-up plans have been developed and when such costs can be reasonably estimated based on industry standards and professional judgment. These estimated costs are based on currently available facts regarding each site. We continuously assess our potential liability for investigation and remediation activities and adjust our environmental-related accruals as information becomes available upon which more accurate costs can be reasonably estimated. Due to the uncertainties surrounding environmental investigation and remediation activities, our liability may result in costs that are significantly higher than currently accrued and may have an adverse affect on our earnings.
The nature, cost, quantity and outcome of pending and future litigation, such as litigation arising from the manufacture and sale of lead pigments and lead-based paint, could have a material adverse effect on our results of operations, liquidity and financial condition.
In the course of our business, we are subject to a variety of claims and lawsuits, including litigation relating to product liability and warranty, personal injury, environmental, intellectual property, commercial, contractual and antitrust claims. We accrue for these contingencies consistent withwhen it is probable that one or more future events will occur confirming the policy stated on page 30fact of our 2005 Annual Report undera loss and the caption entitled “Contingent Liabilities”amount of “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”the loss can be reasonably estimated. However, because litigation is inherently subject to many uncertainties and the ultimate result of any present or future litigation is unpredictable, our ultimate liability may result in costs that are significantly higher than currently accrued. In the event that our loss contingency is ultimately determined to be significantly higher than currently accrued, the recording of the liability may result in a material impact on net income for the annual or interim period during which such liability is accrued. Additionally, due to the uncertainties involved, any potential liability determined to be attributable to us arising out of such litigation may have a material adverse effect on our results of operations, liquidity or financial condition.
Our past operations included the manufacture and sale of lead pigments and lead-based paints. Along with other companies, we are 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 various counties, cities, school districts and other government-related entities, arising from the manufacture and sale of lead pigments and lead-based paints. We are also a defendant in legal proceedings arising from the manufacture and sale of non-lead-based paints,
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During September 2002, a jury trial commenced in the first phase of the action brought by the State of Rhode Island against us and the other defendants. The sole issue before the court in this first phase was whether lead pigment in paint constitutes a public nuisance under Rhode Island law. In October 2002, the court declared a mistrial as the jury, which was split four to two in favor of the defendants, was unable to reach a unanimous decision.
The State of Rhode Island retried the case and on February 22, 2006, the jury returned a verdict, finding that (1) the cumulative presence of lead pigment in paints and coatings on buildings in the State of Rhode Island
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This wasverdict and the first legal proceeding against us to go to trial relating to the lead pigment and lead-based paint litigation. We believe it is possible that additional legal proceedings could be scheduled for trial in 2006 and in subsequent years in other jurisdictions.Court’s decision.
Litigation is inherently subject to many uncertainties. Adverse court rulings, such as the Rhode Island jury verdict and the Wisconsin State Supreme Court’s determination in July 2005 that Wisconsin’s risk contribution theory appliesmay apply to the lead pigment litigation, or determinations of liability, among other factors, could affect the lead pigment and lead-based paint litigation against us and encourage an increase in the number and nature of future claims and proceedings. In 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 we and other manufacturers have been successful. We cannot reasonably determine the impact that the State of Rhode Island decision and determination of liability will have on the number or nature of present or future claims and proceedings against us.
Due to the uncertainties involved, management is unable to predict the outcome of the lead pigment and lead-based paint litigation, the number or nature of possible future claims and proceedings, or the effect that any legislation and/or administrative regulations may have on the litigation or against us. In addition, management cannot reasonably determine the scope or amount of the potential costs and liabilities related to such litigation, or any such legislation and regulations. We have 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. In the event any significant liability is determined to be attributable to us relating to such litigation, the recording of the liability may result in a material impact on net income for the annual or interim period during which such liability is accrued. Additionally, due to the uncertainties associated with the amount of any such liability and/or the nature of any other remedy which may be imposed in such litigation, any potential liability determined to be attributable to us arising out of such litigation may have a material adverse effect on our results of operations, liquidity or financial condition. An estimate of the potential impact on our results of operations, liquidity or financial condition cannot be made due to the aforementioned uncertainties.
We discuss thisthe risks and uncertainties related to litigation, including the lead pigment and lead-based paint litigation, in more detail on pages 3121 and 3222 of our 20052006 Annual Report under the caption entitled “Litigation”“Litigation and Other Contingent Liabilities,” and pages 29 through 33 of our 2006 Annual Report under the caption “Litigation,” of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 189 of the Notes to Consolidated Financial Statements on page 72pages 65 through 68 of our 20052006 Annual Report.
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The costs or potential liability ultimately determined to be attributable to us through our ownership of Life Shield could have an adverse effect on our results of operations, liquidity or financial condition.
We own a 25% interest in Life Shield Engineered Systems, LLC and are obligated to acquire an additional 24% interest in Life Shield in October 2007. Life Shield is a start-up company that develops and manufactures blast and fragment mitigating systems and ballistic resistant systems. The blast and fragment mitigating systems and ballistic resistant systems create a potentially higher level of product liability for us than is normally associated with coatings and related products we manufacture, distribute and sell. Depending upon the extent of any potential liability ultimately determined to be attributable to us relating to Life Shield, such liability could have an adverse effect on our results of operations, liquidity and financial condition. We discuss thethese risks and uncertainties relating to our ownership of Life Shield in more detail on page 3029 of our 20052006 Annual Report under the caption entitled “Contingent Liabilities” of “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We own our world headquarters located in Cleveland, Ohio, which includes the world headquarters for the Paint Stores Group, Consumer Group and International Coatings Segments. We also own the world headquarters for the Automotive Finishes Segment located in Warrensville Heights, Ohio.Global Group. Our principal manufacturing and distribution facilities are located as set forth below. We believe our manufacturing and distribution facilities are well-maintained and are suitable and adequate, and have sufficient productive capacity, to meet our current needs.
PAINT STORES SEGMENTGROUP
Manufacturing Facilities
Atlanta, Georgia | Owned | Owned |
Distribution Facilities
| Atlanta, Georgia | Owned | Beltsville, Maryland | Owned |
CONSUMER SEGMENTGROUP
Manufacturing Facilities
| Andover, Kansas Baltimore, Maryland Bedford Heights, Ohio Chicago, Illinois Cincinnati, Ohio Coffeyville, Kansas Crisfield, Maryland Deshler, Ohio Ennis, Texas Fernley, Nevada Flora, Illinois Fort Erie, Ontario, Canada Garland, Texas Greensboro, North Carolina | Owned Owned Owned Owned Owned Owned Leased Owned Owned Owned Owned Owned Owned Owned | Holland, Michigan Largo, Florida Memphis, Tennessee Morrow, Georgia Norfolk, Virginia Olive Branch, Mississippi Orlando, Florida Portland, Oregon Reno, Nevada San Diego, California South Holland, Illinois Twinsburg, Ohio | Owned Owned Owned Owned Owned Owned Leased Owned Owned Leased Owned Leased Owned Owned |
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Distribution Facilities
| Atlanta, Georgia Effingham, Illinois Fredericksburg, Pennsylvania Memphis, Tennessee | Leased Leased Owned Leased Leased | San Juan, Puerto Rico Swaffham, England Vaughan, Ontario, Canada Waco, Texas Winter Haven, Florida | Leased Leased Leased Leased Leased |
AUTOMOTIVE FINISHES SEGMENTGLOBAL GROUP
Manufacturing Facilities
| Aprilia, Italy Arica, Chile Arlington, Texas Buenos Aires, Argentina Columbus, Ohio Greensboro, North Carolina Grimsby, Ontario, Canada Kingston, Jamaica Ontario, California Richmond, Kentucky | Leased Owned Owned Owned Owned Owned Owned Owned Leased Owned | Rio Grande do Sul, Brazil Rockford, Illinois Santiago, Santiago, Chile Sao Paulo, Shanghai, China Spartanburg, South Carolina Sheffield, England Texcoco, Mexico Vallejo, Mexico | Leased Leased Leased Owned Owned Owned Leased Owned Owned Owned |
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| Aprilia, Italy Buenos Aires, Argentina Guadalajara, Mexico Hermosilla, Kingston, Jamaica Lima, Peru Mechelen, Belgium Mexico City, Mexico Monterrey, Mexico Perpignan, France | Leased Owned Leased Leased Owned Leased Leased Owned Leased Leased | Richmond, Kentucky Rio Grande do Sul, Brazil Santiago, Santiago, Chile Sao Paulo, Shanghai, China Texcoco, Mexico Valencia, Venezuela Zaragoza, Mexico | Owned Leased Leased Owned Owned Owned Leased Leased Owned |
INTERNATIONAL COATINGS SEGMENT
Manufacturing Facilities
Distribution Facilities
* This facility is shared between the Automotive Finishes and International Coatings Segments.
The operations of the Paint Stores SegmentGroup included 3,0813,046 company-operated specialty paint stores, of which 218120 were owned, in the United States, Canada, Virgin Islands, Puerto Rico and Mexico at December 31, 2005.2006. These paint stores are divided into fivefour separate operating divisions. The Chemical Coatings division is responsible for the manufacture of OEM product finishes and the sale of those products mainly through their 73 stores in the United States, Canada and Mexico. The remaining four divisions that are responsible for the sale of predominantly architectural, industrial maintenance and related products through the paint stores located within their geographical region. At the end of 2005:2006:
| • | the Mid Western Division operated | |
| • | the Eastern Division operated | |
| • | the Southeastern Division operated | |
| • | the South Western Division operated |
In 2005,2006, the Paint Stores SegmentGroup opened 98117 net new paint stores.
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The Automotive Finishes Segment included 153 company-operated automotiveGlobal Group operated 237 branches in the United States, of which one was owned, inat December 31, 2006. The Global Group also operated 232 branches outside of the United States, of which six were owned and 50226 were leased company-operated branches in Mexico (84), Brazil (56), Chile (44), Canada (19)(23), Jamaica (15), Chile (14) and Peru (2) at December 31, 2005.
The International Coatings Segment included 73 company-operated specialty paint stores, of which 5 were owned, in Brazil (36), Chile (30)(16), Uruguay (6), Argentina (2) and ArgentinaPeru (1) at December 31, 2005.2006.
Except for two idle warehouse facilities, all real property within the Administrative Segmentsegment is owned by us. For additional information regarding real property within the Administrative Segment,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 16 of the Notes to Consolidated Financial Statements on page 6875 of our 20052006 Annual Report, which is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS
On January 27, 2006, the Company received correspondence from the United States Attorney’s Office in Los Angeles, California informing the Company that it is a target of a grand jury investigation into potential violations of the Resource Conservation and Recovery Act (“RCRA”). The investigation involves the transportation of hazardous materials and hazardous waste from the Company’s Garland, Texas manufacturing facility. The United States Attorney alleges that the Company shipped drums from its Garland, Texas facility that contained trace amounts of residue without complying with the manifest requirements for hazardous materials and hazardous waste under RCRA. The Company has also received a grand jury subpoena from the United States Attorney seeking documents and information relating to the Company’s use, handling and transportation of hazardous materials or hazardous waste at the Company’s Garland, Texas manufacturing facility. The Company believes the allegations are without merit and cannot predict the outcome of this matter.
For information regarding environmental-related matters and other legal proceedings, see pages 2625 through 28,27, and 31 and 32,29 through 33, of our 20052006 Annual Report under the caption entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Notes 1, 8, 129 and 1813 of the Notes to Consolidated Financial Statements on pages 48, 6149, 63 through 65, 65 through 68, and 62, 66 and 72,73, respectively, of our 20052006 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 our security holders during the fourth quarter of 2005.2006.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The following is the name, age and present position of each of our executive officers on March 7, 2006,at February 21, 2007, as well as all prior positions held by each during the last five years and the date when each was first elected or appointed as an executive officer. 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 death, resignation or removal.
| Date When | Date When | |||||||||||||||||||
| First Elected | First Elected | |||||||||||||||||||
| Name | Age | Present Position | or Appointed | Age | Present Position | or Appointed | ||||||||||||||
| Christopher M. Connor | 49 | Chairman, President and Chief Executive Officer, Director | 1994 | 50 | Chairman and Chief Executive Officer, Director | 1994 | ||||||||||||||
| John G. Morikis | 43 | President and Chief Operating Officer | 1999 | |||||||||||||||||
| Sean P. Hennessy | 48 | Senior Vice President — Finance and Chief Financial Officer | 2001 | 49 | Senior Vice President — Finance and Chief Financial Officer | 2001 | ||||||||||||||
| Thomas E. Hopkins | 48 | Senior Vice President — Human Resources | 1997 | 49 | Senior Vice President — Human Resources | 1997 | ||||||||||||||
| Conway G. Ivy | 64 | Senior Vice President — Corporate Planning and Development | 1979 | 65 | Senior Vice President — Corporate Planning and Development | 1979 | ||||||||||||||
| Timothy A. Knight | 42 | Senior Vice President — Corporate Planning and Development | 2005 | |||||||||||||||||
| Thomas W. Seitz | 58 | Senior Vice President — Strategic Excellence Initiatives | 1999 | |||||||||||||||||
| John L. Ault | 60 | Vice President — Corporate Controller | 1987 | 60 | Vice President — Corporate Controller | 1987 | ||||||||||||||
| Timothy A. Knight | 41 | President, Global Group | 2005 | |||||||||||||||||
| John G. Morikis | 42 | President, Paint Stores Group | 1999 | |||||||||||||||||
| Thomas W. Seitz | 57 | President, Consumer Group | 1999 | |||||||||||||||||
| Steven J. Oberfeld | 54 | President, Paint Stores Group | 2006 | |||||||||||||||||
| Louis E. Stellato | 55 | Vice President, General Counsel and Secretary | 1989 | 56 | Vice President, General Counsel and Secretary | 1989 | ||||||||||||||
| Robert J. Wells | 48 | Vice President — Corporate Communications & Public Affairs | 2006 | 49 | Vice President — Corporate Communications & Public Affairs | 2006 | ||||||||||||||
Mr. Connor has served as Chairman since April 2000 President since July 2005, and Chief Executive Officer since October 1999. Mr. Connor served as Vice ChairmanPresident from July 2005 to October 1999 to April 2000.2006. Mr. Connor has served as a Director since October 1999. Mr. Connor has been employed with the Company since January 1983.
Mr. Morikis has served as President and Chief Operating Officer since October 2006. Mr. Morikis served as President, Paint Stores Group from October 1999 to October 2006. Mr. Morikis has been employed with the Company since December 1984.
Mr. Hennessy has served as Senior Vice President — Finance and Chief Financial Officer since August 2001 and also served as Treasurer from August 2001 to August 2002. Mr. Hennessy served as Vice President — Controller, Consumer Group from February 2000 to August 2001. Mr. Hennessy has been employed with the Company since September 1984.
Mr. Hopkins has served as Senior Vice President — Human Resources since February 2002. Mr. Hopkins served as Vice President — Human Resources from August 1997 to February 2002. Mr. Hopkins has been employed with the Company since September 1981.
Mr. Ivy has served as Senior Vice President — Corporate Planning and Development since February 2002. Mr. Ivy served as Vice President — Corporate Planning and Development from April 1992 to February 2002. Mr. Ivy has been employed with the Company since March 1979.
Mr. Knight has served as Senior Vice President — Corporate Planning and Development since February 2007. Mr. Knight served as President, Global Group from August 2005 to February 2007, President & General Manager, Diversified Brands Division from February 2002 to August 2005 and Senior Vice President, Diversified Brands Division, Consumer Group from January 2001 to February 2002. Mr. Knight has been employed with the Company since December 1994.
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Mr. Seitz has served as Senior Vice President — Strategic Excellence Initiatives since February 2007. Mr. Seitz served as President, Consumer Group from August 2005 to February 2007 and President & General Manager, Consumer Division from January 2001 to August 2005. Mr. Seitz has been employed with the Company since June 1970.
Mr. Ault has served as Vice President — Corporate Controller since January 1987. Mr. Ault has been employed with the Company since June 1976.
Mr. Knight has served as President, Global Group since August 2005. Mr. Knight served as President & General Manager, Diversified Brands Division from February 2002 to August 2005, Senior Vice President, Diversified Brands Division, Consumer Group from January 2001 to February 2002 and Senior Vice President, Sales and Marketing, Consumer Group from June 1999 to January 2001. Mr. Knight has been employed with the Company since December 1994.
Mr. MorikisOberfeld has served as President, Paint Stores Group since October 1999.2006. Mr. MorikisOberfeld served as President & General Manager, South Western Division, Paint Stores Group from September 1992 to October 2006. Mr. Oberfeld has been employed with the Company since DecemberOctober 1984.
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Mr. Seitz has served as President, Consumer Group since August 2005, Mr. Seitz served as President & General Manager, Consumer Division from January 2001 to August 2005 and President, Consumer Group from October 1999 to January 2001. Mr. Seitz has been employed with the Company since June 1970.
Mr. Stellato has served as Vice President, General Counsel and Secretary since July 1991. Mr. Stellato has been employed with the Company since July 1981.
Mr. Wells has served as Vice President — Corporate Communications & Public Affairs since January 2006. Mr. Wells served as Vice President — Corporate Planning and Communication from July 2002 to January 2006 and Vice President — Marketing Communications, Stores Group from January 1999 to July 2002. Mr. Wells has been employed with the Company since May 1998.
PART II
| ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Our common stock is listed on the New York Stock Exchange and traded under the symbol SHW. The number of shareholders of record at February 28, 20061, 2007 was 10,975.10,152.
Information regarding market prices and dividend information with respect to our common stock is set forth on page 7379 of our 20052006 Annual Report, which is incorporated herein by reference.
Issuer Purchases of Equity Securities
The following table sets forth a summary of the Company’s repurchasepurchases of common stock during the fourth quarter of 2005.2006.
| Total Number | Total Number | |||||||||||||||||||||||||||||||||
| of Shares | Maximum | of Shares | Maximum | |||||||||||||||||||||||||||||||
| Total | Purchased as | Number of Shares | Total | Purchased as | Number of Shares | |||||||||||||||||||||||||||||
| Number of | Average | Part of Publicly | That May Yet Be | Number of | Average | Part of Publicly | That May Yet Be | |||||||||||||||||||||||||||
| Shares | Price Paid | Announced | Purchased Under | Shares | Price Paid | Announced | Purchased Under | |||||||||||||||||||||||||||
| Period | Period | Purchased | Per Share | Plan | the Plan | Period | Purchased | Per Share | Plan | the Plan | ||||||||||||||||||||||||
| October 1 – October 31 | October 1 – October 31 | October 1 – October 31 | ||||||||||||||||||||||||||||||||
Share repurchase program(1) | 827,041 | $ | 42.47 | 827,041 | 19,644,300 | Share repurchase program(1) | 2,176,900 | $ | 61.07 | 2,176,900 | 13,294,170 | |||||||||||||||||||||||
Employee transactions(2) | N/A | Employee transactions(2) | 2,238 | $ | 58.66 | N/A | ||||||||||||||||||||||||||||
| November 1 – November 30 | November 1 – November 30 | November 1 – November 30 | ||||||||||||||||||||||||||||||||
Share repurchase program(1) | 347,230 | $ | 42.73 | 347,230 | 19,297,070 | Share repurchase program(1) | 423,100 | $ | 60.39 | 423,100 | 12,871,070 | |||||||||||||||||||||||
Employee transactions(2) | 937 | $ | 44.20 | N/A | Employee transactions(2) | N/A | ||||||||||||||||||||||||||||
| December 1 – December 31 | December 1 – December 31 | December 1 – December 31 | ||||||||||||||||||||||||||||||||
Share repurchase program(1) | 876,000 | $ | 43.87 | 876,000 | 18,421,070 | Share repurchase program(1) | 50,000 | $ | 61.95 | 50,000 | 12,821,070 | |||||||||||||||||||||||
Employee transactions(2) | 2,828 | $ | 44.31 | N/A | Employee transactions(2) | 2,778 | $ | 62.70 | N/A | |||||||||||||||||||||||||
| �� | ||||||||||||||||||||||||||||||||||
| Total | Total | Total | ||||||||||||||||||||||||||||||||
Share repurchase program(1) | 2,050,271 | $ | 43.11 | 2,050,271 | 18,421,070 | Share repurchase program(1) | 2,650,000 | $ | 60.98 | 2,650,000 | 12,821,070 | |||||||||||||||||||||||
Employee transactions(2) | 3,765 | $ | 44.28 | N/A | Employee transactions(2) | 5,016 | $ | 60.90 | N/A | |||||||||||||||||||||||||
| (1) | All shares were purchased through the Company’s publicly announced share repurchase |
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| expiration date specified for the program. The Company intends to repurchase stock under the program in the future. |
| (2) | All shares were delivered to satisfy the exercise price and/or tax withholding obligations by employees who exercised stock options. |
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ITEM 6. SELECTED FINANCIAL DATA
| 2005 | 2004 | 2003 | 2002 | 2001 | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||||||||||||||||||
Operations | ||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 7,191 | $ | 6,114 | $ | 5,408 | $ | 5,185 | $ | 5,066 | $ | 7,810 | $ | 7,191 | $ | 6,114 | $ | 5,408 | $ | 5,185 | ||||||||||||||||||||
| Income before cumulative effect of change in accounting principle | 463 | 393 | 332 | 311 | 263 | 576 | 463 | 393 | 332 | 311 | ||||||||||||||||||||||||||||||
| Cumulative effect of change in accounting principle | (183 | ) | (183 | ) | ||||||||||||||||||||||||||||||||||||
| Net income | 463 | 393 | 332 | 128 | 263 | 576 | 463 | 393 | 332 | 128 | ||||||||||||||||||||||||||||||
Financial Position | ||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 4,369 | $ | 4,274 | $ | 3,683 | $ | 3,432 | $ | 3,628 | $ | 4,995 | $ | 4,369 | $ | 4,274 | $ | 3,683 | $ | 3,432 | ||||||||||||||||||||
| Long-term debt | 487 | 488 | 503 | 507 | 504 | 292 | 487 | 488 | 503 | 507 | ||||||||||||||||||||||||||||||
| Ratio of earnings to fixed charges (a) | 6.7 | x | 7.0 | x | 6.8 | x | 6.5 | x | 5.2 | x | 7.0 | x | 6.7 | x | 7.0 | x | 6.8 | x | 6.5 | x | ||||||||||||||||||||
Per Common Share Data | ||||||||||||||||||||||||||||||||||||||||
| Income before cumulative effect of change in accounting principle — basic | $ | 3.39 | $ | 2.79 | $ | 2.29 | $ | 2.07 | $ | 1.69 | $ | 4.31 | $ | 3.39 | $ | 2.79 | $ | 2.29 | $ | 2.07 | ||||||||||||||||||||
| Income before cumulative effect of change in accounting principle — diluted | 3.28 | 2.72 | 2.26 | 2.04 | 1.68 | 4.19 | 3.28 | 2.72 | 2.26 | 2.04 | ||||||||||||||||||||||||||||||
| Net income — basic | 3.39 | 2.79 | 2.29 | .85 | 1.69 | 4.31 | 3.39 | 2.79 | 2.29 | .85 | ||||||||||||||||||||||||||||||
| Net income — diluted | 3.28 | 2.72 | 2.26 | .84 | 1.68 | 4.19 | 3.28 | 2.72 | 2.26 | .84 | ||||||||||||||||||||||||||||||
| Cash dividends | .82 | .68 | .62 | .60 | .58 | 1.00 | .82 | .68 | .62 | .60 | ||||||||||||||||||||||||||||||
| (a) | For purposes of calculating the ratio of earnings to fixed charges, earnings |
| 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||||
| Earnings | $ | 834 | $ | 656 | $ | 580 | $ | 523 | $ | 497 | |||||||||||
| Fixed charges: | |||||||||||||||||||||
| Interest expense, net | 67 | 50 | 40 | 39 | 40 | ||||||||||||||||
| Interest component of rent expense | 72 | 65 | 57 | 51 | 50 | ||||||||||||||||
| Total fixed charges | 139 | 115 | 97 | 90 | 90 | ||||||||||||||||
| Earnings and fixed charges | $ | 973 | $ | 771 | $ | 677 | $ | 613 | $ | 587 | |||||||||||
| 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 2018 through 3637 of our 20052006 Annual Report under the caption entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk associated with interest rates, and foreign currency exposure.and commodity fluctuations. We occasionally utilize derivative instruments as part of our overall financial risk management policy, but do not
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item is set forth on page 3738 and pages 4142 through 7278 of our 20052006 Annual Report under the captions entitled “Report of Management on the Consolidated Financial Statements,” “Report
15
| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None.
| ITEM 9A. | CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chairman President and Chief Executive Officer and our Senior Vice President — Finance and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 and Rule 15d-15 of the Securities Exchange Act of 1934, as amended.amended (“Exchange Act”). Based upon that evaluation, our Chairman President and Chief Executive Officer and our Senior Vice President — Finance and Chief Financial Officer concluded that as of the end of the period covered by this report our disclosure controls and procedures arewere effective in timely alerting them to materialensure that information relating to the Company (including its consolidated subsidiaries) required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and accumulated and communicated to our periodic SEC reports.management including our Chairman and Chief Executive Officer and our Senior Vice President — Finance and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Internal Control Over Financial Reporting
The Report of Management on Internal Control over Financial Reporting is set forth on page 3839 of our 20052006 Annual Report, which is incorporated herein by reference.
The Report of the Independent Registered Public Accounting Firm on Internal Control over Financial Reporting is set forth on pages 3940 and 4041 of our 20052006 Annual Report, which is incorporated herein by reference.
There were no changes in our internal control over financial reporting identified in connection with the evaluation that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| ITEM 9B. | OTHER INFORMATION |
None.
15
PART III
| ITEM 10. | DIRECTORS, |
Directors
The information regarding our directors is set forth under the caption entitled “Election of Directors (Proposal 1)” in our Proxy Statement, which is incorporated herein by reference.
There were no material changes to the procedures by which security holders may recommend nominees to our Board of Directors during 2005.2006. At its July 2006 meeting, the Nominating and Corporate Governance Committee amended these procedures to require additional information about nominees who are recommended by security holders. Please refer to the information set forth under the caption “Board Meetings and Committee Membership — Nominating and Corporate Governance Committee” in our Proxy Statement, which is incorporated herein by reference.
16
Executive Officers
The information regarding our 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.
Section 16(a) Beneficial Ownership Reporting Compliance
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 our Proxy Statement, which is incorporated herein by reference.
Audit Committee
The information regarding the Audit Committee of our Board of Directors and the information regarding “audit committee financial experts” are set forth under the caption entitled “Board Meetings and Committee Membership” in our Proxy Statement, which is incorporated herein by reference.
Code of Ethics
We have adopted a Business Ethics Policy, which applies to all of our directors, officers and employees. Our Business Ethics Policy includes additional ethical obligations for our senior financial management (which includes our chief executive officer, our chief financial officer, and the controller, treasurer and principal financial and accounting personnel in our operating groups and corporate departments). Please refer to the information set forth under the caption “Corporate Governance — Business Ethics Policy” in our Proxy Statement, which is incorporated herein by reference. Our Business Ethics Policy is available in the “Corporate Governance” section on the “Investor Relations” page of our website at www.sherwin.com. Any person may receive a copy without charge by writing to us at: The Sherwin-Williams Company, 101 Prospect Avenue, N.W., Cleveland, Ohio, 44115, Attention: Investor Relations.
We intend to disclose on our website any amendment to, or waiver from, a provision of our Business Ethics Policy that applies to our directors and executive officers, including our principal executive officer, principal financial officer, principal accounting officer or controller, or any persons performing similar functions, and that is required to be publicly disclosed pursuant to the rules of the Securities and Exchange Commission.
| ITEM 11. | EXECUTIVE COMPENSATION |
The information required by this item is set forth on pages 1324 through 2537 of our Proxy Statement and under the captioncaptions entitled “Compensation of Directors”Committee Report,” “Compensation Discussion and Analysis,” “2006 Director Compensation Table” and “Director Compensation Program” in our Proxy Statement, which is incorporated herein by reference.
16
| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
The information regarding security ownership of certain beneficial owners and management is set forth under the captions entitled “Security Ownership of Management” and “Security Ownership of Certain Beneficial Owners” in our Proxy Statement, which is incorporated herein by reference.
The information regarding securities authorized for issuance under the Company’s equity compensation plans is set forth under the caption entitled “Equity Compensation Plan Information” in our Proxy Statement, which is incorporated herein by reference.
| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
The information required by this item is set forth under the captions entitled “Certain Relationships and Transactions with Related Transactions,Persons,” “Compensation of Directors” and “Independence of Directors” in our Proxy Statement, which is incorporated herein by reference.
17
| ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
The information required by this item is set forth under the caption entitled “Matters Relating to the Independent Registered Public Accounting Firm” in our Proxy Statement, which is incorporated herein by reference.
During the quarter ended December 31, 2005,2006, the Audit Committee of theour Board of Directors of the Company approved non-audit services to be performed by Ernst & Young LLP, the Company’sour independent registered public accounting firm. These non-audit services related to advisory services provided to the Company related to financial aspects of life insurance policies.policies maintained by the Company.
1817
PART IV
| ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES |
| (a) | (1) | Financial Statements | ||||
| The following consolidated financial statements of the Company included in our | ||||||
| (i) | Report of Management on the Consolidated Financial Statements (page | |||||
| (ii) | Report of the Independent Registered Public Accounting Firm on the Consolidated Financial Statements (page | |||||
| (iii) | Statements of Consolidated | |||||
| (iv) | ||||||
| (v) | Statements of Consolidated Cash Flows for the years ended December 31, 2006, 2005 and 2004 | |||||
| (vi) | Statements of Consolidated Shareholders’ Equity and Comprehensive Income for the years ended December 31, 2006, 2005 and 2004 | |||||
| (vii) | Notes to Consolidated Financial Statements for the years ended December 31, 2006, 2005 and 2004 | |||||
| (2) | Financial Statement Schedule | |||||
| Schedule II — Valuation and Qualifying Accounts and Reserves for the years ended December 31, 2006, 2005 | ||||||
Valuation and Qualifying Accounts and Reserves
| (Schedule II) | |
| Changes in the allowance for doubtful accounts were as follows: |
| (thousands of dollars) | 2005 | 2004 | 2003 | 2006 | 2005 | 2004 | ||||||||||||||||||
| Beginning balance | $ | 30,742 | $ | 26,978 | $ | 26,405 | $ | 22,734 | $ | 30,742 | $ | 26,978 | ||||||||||||
| Amount acquired through acquisitions | 4,260 | 4,260 | ||||||||||||||||||||||
| Bad debt expense | 27,915 | 23,169 | 22,273 | 26,154 | 27,915 | 23,169 | ||||||||||||||||||
| Uncollectible accounts written off, net of recoveries | (35,923 | ) | (23,665 | ) | (21,700 | ) | (25,816 | ) | (35,923 | ) | (23,665 | ) | ||||||||||||
| Ending balance | $ | 22,734 | $ | 30,742 | $ | 26,978 | $ | 23,072 | $ | 22,734 | $ | 30,742 | ||||||||||||
| Increased bad debt expense and uncollectible accounts written off in 2005 and 2004 were primarily related to accounts of acquired businesses. |
| (3) | Exhibits | |||||
| See the Exhibit Index on pages | ||||||
1918
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 March 7, 2006.February 28, 2007.
| 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 on behalf of the registrant and in the capacities indicated on March 7, 2006.February 28, 2007.
| * C. M. CONNOR C. M. Connor | Chairman | |
| * S. P. HENNESSY S. P. Hennessy | Senior Vice President — Finance and Chief Financial Officer (Principal Financial Officer) | |
| * J. L. AULT J. L. Ault | Vice President — Corporate Controller (Principal Accounting Officer) | |
| * | Director | |
| * | Director | |
| * D. E. EVANS D. E. Evans | Director | |
| * D. F. HODNIK D. F. Hodnik | Director | |
| * S. J. KROPF S. J. Kropf | Director | |
| * R. W. MAHONEY R. W. Mahoney | Director | |
| * G. E. McCULLOUGH G. E. McCullough | Director | |
| * A. M. MIXON, III A. M. Mixon, III | Director | |
| * C. E. MOLL C. E. Moll | Director | |
2019
| * R. K. SMUCKER R. K. Smucker | Director | |
| * | 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 and filed as exhibits to this report. |
| By: /s/ L. E. STELLATO L. E. Stellato, Attorney-in-fact |
2120
EXHIBIT INDEX
| 3. | (a) | Amended and Restated Articles of Incorporation of the Company, as amended through | ||
| (b) | ||||
| Regulations of the Company, as amended and restated April 28, 2004, filed as Exhibit 3 to the Company’s Current Report on Form 8-K dated June 10, 2004, 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 Number 333-01093, dated February 20, 1996, and incorporated herein by reference. | ||
| (b) | 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. | |||
| (c) | 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. | |||
| (d) | Second Amendment and Restatement Agreement, dated as of December 8, 2005, in respect of the Five-Year Competitive Advance and Revolving Credit Facility Agreement, dated as of July 19, 2004, as amended and restated as of July 20, 2005, among the Company, JPMorgan Chase Bank, as Administrative Agent, and the Lenders party thereto, filed as Exhibit 4 to the Company’s Current Report on Form 8-K dated December 8, 2005, and incorporated herein by reference. | |||
| Modification, dated as of March 15, 2006, to the Second Amended and Restated Credit Agreement, dated as of December 8, 2005, by and among the Company, the Lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent, filed as Exhibit 4 to the Company’s Current Report on Form 8-K dated March 15, 2006, and incorporated herein by reference. | ||||
| (f) | Credit Agreement, dated as of April 17, 2006, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, the Lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as paying agent, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated April 17, 2006, and incorporated herein by reference. | |||
| (g) | Agreement for Letter of Credit, dated as of April 17, 2006, by and between the Company and Citibank, N.A., filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated April 17, 2006, and incorporated herein by reference. | |||
| (h) | Credit Agreement Amendment, dated as of April 25, 2006, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, the Lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as paying agent, filed as Exhibit 4 to the Company’s Current Report on Form 8-K dated April 25, 2006, and incorporated herein by reference. | |||
| (i) | Credit Agreement Amendment No. 2, dated as of May 8, 2006, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, the Lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as paying agent, filed as Exhibit 4 to the Company’s Current Report on Form 8-K dated May 8, 2006, and incorporated herein by reference. | |||
| (j) | Five Year Credit Agreement, dated as of May 23, 2006, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, the Lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as paying agent, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated May 23, 2006, and incorporated herein by reference. | |||
| (k) | Agreement for Letter of Credit, dated as of May 23, 2006, by and between the Company and Citibank, N.A., filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated May 23, 2006, and incorporated herein by reference. |
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| (l) | Five Year Credit Agreement Amendment, dated as of July 24, 2006, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, the Lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as paying agent, filed as Exhibit 4 to the Company’s Current Report of Form 8-K dated July 24, 2006, and incorporated herein by reference. | |||
| (m) | Purchase and Contribution Agreement, dated as of February 1, 2006, between the Company, as Originator, and SWC Receivables Funding LLC, as Purchaser, filed as Exhibit 4(a) to the Company’s Current Report on Form 8-K dated February 1, 2006, and incorporated herein by reference. | |||
| Loan and Servicing Agreement, dated as of February 1, 2006, among SWC Receivables Funding LLC, as Borrower; the Company, as Servicer; Citicorp North America, Inc., as Program Agent; and the Lenders party thereto, filed as Exhibit 4(b) to the Company’s Current Report on Form 8-K dated February 1, 2006, and incorporated herein by reference. | ||||
| 10. | *(a) | Form of Director, Executive Officer 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) | ||||
| Summary of Compensation Payable to Non-Employee Directors (filed herewith). | ||||
| * | Summary of Base Salary and Annual Incentive Compensation Payable to Named Executive Officers (filed herewith). | |||
| * | Forms of Severance | |||
| * | Schedule of |
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| 10(d) filed as Exhibit 10(c) to the Company’s Current Report on Form 8-K dated February 21, 2007, and incorporated herein by reference. | ||||
| * | The Sherwin-Williams Company Deferred Compensation Savings and Pension Equalization Plan, dated July 24, 2002, filed as Exhibit 10(b) to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2002, and incorporated herein by reference. | |||
| * | 2004-2 Amendment to The Sherwin-Williams Company Deferred Compensation Savings and Pension Equalization Plan filed as Exhibit 10(b) to the Company’s Current Report on Form 8-K dated July 20, 2005, and incorporated herein by reference. | |||
| * | The Sherwin-Williams Company 2005 Deferred Compensation Savings and Pension Equalization Plan filed as Exhibit 10(e) to the Company’s Current Report on Form 8-K dated July 20, 2005, and incorporated herein by reference. | |||
| * | The Sherwin-Williams Company Revised Key Management Deferred Compensation Plan, dated July 24, 2002, filed as Exhibit 10(d) to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2002, and incorporated herein by reference. | |||
| * | 2004-1 Amendment to The Sherwin-Williams Company Revised Key Management Deferred Compensation Plan filed as Exhibit 10(c) to the Company’s Current Report on Form 8-K dated July 20, 2005, and incorporated herein by reference. | |||
| * | The Sherwin-Williams Company 2005 Key Management Deferred Compensation Plan filed as Exhibit 10(f) to the Company’s Current Report on Form 8-K dated July 20, 2005, and incorporated herein by reference. | |||
| * | 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. | |||
| * | 2004-1 Amendment to The Sherwin-Williams Company Director Deferred Fee Plan (1997 Amendment and Restatement) filed as Exhibit 10(d) to the Company’s Current Report on Form 8-K dated July 20, 2005, and incorporated herein by reference. | |||
| * | The Sherwin-Williams Company 2005 Director Deferred Fee Plan filed as Exhibit 10(g) to the Company’s Current Report on Form 8-K dated July 20, 2005, and incorporated herein by reference. |
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| * | The Sherwin-Williams Company 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. | |||
| * | The Sherwin-Williams Company 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. | |||
| * | The Sherwin-Williams Company Management Compensation Program filed as Exhibit 10 to the Company’s Current Report on Form 8-K dated October 21, 2005, and incorporated herein by reference. | |||
| * | 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 September 30, 2000, and incorporated herein by reference. | |||
| * | The Sherwin-Williams Company 2003 Stock Plan, dated January 1, 2003, filed as Exhibit 10(a) to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002, and incorporated herein by reference. | |||
| * | Form of Restricted Stock Grant under The Sherwin-Williams Company 2003 Stock Plan filed as Exhibit 10(a) to the Company’s Current Report on Form 8-K dated February 2, 2005, and incorporated herein by reference. | |||
| * | Form of Stock Option Grant under The Sherwin-Williams Company 2003 Stock Plan filed as Exhibit 10(b) to the Company’s Current Report on Form 8-K dated February 2, 2005, and incorporated herein by reference. | |||
| * | 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. |
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| * | Form of Restricted Stock Grant under The Sherwin-Williams Company 1997 Stock Plan for Nonemployee Directors, filed as Exhibit 10(a) to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2004, and incorporated herein by reference. | |||
| * | Form of Stock Option Grant under The Sherwin-Williams Company 1997 Stock Plan for Nonemployee Directors, filed as Exhibit 10(b) to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2004, and incorporated herein by reference. | |||
| *(y) | The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan filed as Exhibit 10(b) to the Company’s Current Report on Form 8-K dated April 19, 2006, and incorporated herein by reference. | |||
| *(z) | Form of Nonqualified Stock Option Award under The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan filed as Exhibit 10(a) to the Company’s Current Report on Form 8-K dated July 19, 2006, and incorporated herein by reference. | |||
| *(aa) | Form of Incentive Stock Option Award under The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan filed as Exhibit 10(b) to the Company’s Current Report on Form 8-K dated July 19, 2006, and incorporated herein by reference. | |||
| *(bb) | Form of Restricted Stock Grant under The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan filed as Exhibit 10(c) to the Company’s Current Report on Form 8-K dated July 19, 2006, and incorporated herein by reference. | |||
| *(cc) | The Sherwin-Williams Company 2006 Stock Plan for Nonemployee Directors filed as Exhibit 10(c) to the Company’s Current Report on Form 8-K dated April 19, 2006, and incorporated herein by reference. | |||
| *(dd) | Form of Restricted Stock Grant under The Sherwin-Williams Company 2006 Stock Plan for Nonemployee Directors filed as Exhibit 10(d) to the Company’s Current Report on Form 8-K dated July 19, 2006, and incorporated herein by reference. | |||
| *(ee) | Form of Individual Grantor Trust Participation Agreement filed as Exhibit 10(a) to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2003, and incorporated herein by reference. |
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| * | Schedule of Certain Executive Officers who are Parties to the Individual Grantor Trust Participation Agreements in the form referred to in Exhibit 10(aa) (filed herewith). | |||
| * | The Sherwin-Williams Company Business Travel Accident Insurance Plan filed as Exhibit 10(z) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, and incorporated herein by reference. | |||
| *(hh) | The Sherwin-Williams Company 2007 Executive Performance Bonus Plan filed as Exhibit 10(a) to the Company’s Current Report on Form 8-K dated February 21, 2007, and incorporated herein by reference. | |||
| 13. | Our | |||
| 21. | Subsidiaries (filed herewith). | |||
| 23. | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm (filed herewith). | |||
| 24. | (a) | Powers of Attorney (filed herewith). | ||
| (b) | Certified Resolution Authorizing Signature by Power of Attorney (filed herewith). | |||
| 31. | (a) | Rule 13a-14(a)(15d-14(a) Certification of Chief Executive Officer (filed herewith). | ||
| (b) | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer (filed herewith). | |||
| 32. | (a) | Section 1350 Certification of Chief Executive Officer (filed herewith). | ||
| (b) | Section 1350 Certification of Chief Financial Officer (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. | ||||
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