1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Period Ended March 31, 2001
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
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Commission file number 1-4851
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THE SHERWIN-WILLIAMS COMPANY
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(Exact name of registrant as specified in its charter)
OHIO 34-0526850
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 Prospect Avenue, N.W., Cleveland, Ohio 44115-1075
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(Address of principal executive offices) (Zip Code)
(216) 566-2000
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(Registrant's telephone number including area code)
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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $1.00 Par Value - 156,664,813 shares as of April 30, 2001.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
Thousands of dollars, except per share data
Three months ended March 31,
--------------------------------------
2001 2000
---------------- ----------------
Net sales $ 1,158,370 $ 1,221,916
Costs and expenses:
Cost of goods sold 669,347 705,672
Selling, general and administrative expenses 421,659 435,921
Interest expense 15,206 14,877
Interest and net investment income (1,405) (1,039)
Other expense - net (5,046) 480
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1,099,761 1,155,911
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Income before income taxes 58,609 66,005
Income taxes 21,685 25,082
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Net income $ 36,924 $ 40,923
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Net income per common share:
Basic $ 0.23 $ 0.25
================ ================
Diluted $ 0.23 $ 0.25
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SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Thousands of dollars
MARCH 31, December 31, March 31,
2001 2000 2000
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ASSETS
Current assets:
Cash and cash equivalents $ 1,151 $ 2,896 $ 3,633
Accounts receivable, less allowance 637,304 594,162 708,206
Inventories:
Finished goods 610,248 597,472 619,792
Work in process and raw materials 99,527 106,255 112,160
---------------- ---------------- ----------------
709,775 703,727 731,952
Deferred income taxes 104,728 104,662 107,304
Other current assets 174,048 146,092 161,694
---------------- ---------------- ----------------
Total current assets 1,627,006 1,551,539 1,712,789
Goodwill 697,966 705,547 1,039,654
Intangible assets 255,283 259,085 270,869
Deferred pension assets 371,495 364,351 341,008
Other assets 157,586 147,769 99,973
Property, plant and equipment 1,536,364 1,530,409 1,486,153
Less allowances for depreciation and amortization 825,132 808,030 760,660
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711,232 722,379 725,493
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Total assets $ 3,820,568 $ 3,750,670 $ 4,189,786
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 360,868 $ 106,854 $ 254,987
Accounts payable 462,131 448,799 497,098
Compensation and taxes withheld 89,150 137,211 90,332
Current portion of long-term debt 114,969 19,376 21,548
Other accruals 265,766 328,435 342,211
Accrued taxes 88,103 74,568 97,960
---------------- ---------------- ----------------
Total current liabilities 1,380,987 1,115,243 1,304,136
Long-term debt 521,816 623,587 624,234
Postretirement benefits other than pensions 209,836 208,673 207,400
Other long-term liabilities 257,839 331,303 360,977
Shareholders' equity:
Common stock - $1.00 par value:
158,589,049, 159,558,335 and 163,747,811 shares
outstanding at March. 31, 2001, Dec. 31, 2000
and March 31, 2000, respectively 207,378 206,848 206,393
Other capital 163,670 158,650 152,327
Retained earnings 1,962,476 1,948,753 2,039,399
Treasury stock, at cost (716,652) (678,778) (572,131)
Cumulative other comprehensive loss (166,782) (163,609) (132,949)
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Total shareholders' equity 1,450,090 1,471,864 1,693,039
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Total liabilities and shareholders' equity $ 3,820,568 $ 3,750,670 $ 4,189,786
================ ================ ================
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
Thousands of dollars
Three months ended March 31,
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2001 2000
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OPERATIONS
Net income $ 36,924 $ 40,923
Adjustments to reconcile net income to net operating cash:
Depreciation 26,556 26,314
Amortization of goodwill, intangibles, and other assets 9,772 12,466
Increase in deferred pension assets (7,144) (6,914)
Net increase in postretirement liability 1,163 809
Other 40 2,424
Change in current assets and liabilities-net (126,109) (135,423)
Unusual tax-related payments and timing items (105,093)
Other (3,570) (2,461)
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Net operating cash (167,461) (61,862)
INVESTING
Capital expenditures (22,612) (34,679)
Increase in other investments (9,580) (8,746)
Proceeds from sale of assets 9,866 6,537
Other (3,791) (10,976)
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Net investing cash (26,117) (47,864)
FINANCING
Net increase in short-term borrowings 254,014 254,987
Increase in long-term debt 436 1,837
Payments of long-term debt (6,135) (102,707)
Payments of cash dividends (23,200) (22,374)
Proceeds from stock options exercised 5,195 773
Treasury stock purchased (37,874) (38,240)
Other (238) 229
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Net financing cash 192,198 94,505
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Effect of exchange rate changes on cash (365) 231
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Net decrease in cash and cash equivalents (1,745) (14,990)
Cash and cash equivalents at beginning of year 2,896 18,623
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Cash and cash equivalents at end of period $ 1,151 $ 3,633
================== =================
Taxes paid on income $ 5,281 $ 12,843
Interest paid on debt 25,474 27,599
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Periods ended March 31, 2001 and 2000
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Form 10-K for the fiscal year ended December
31, 2000. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. The consolidated results for the three months ended March 31, 2001 are
not necessarily indicative of the results to be expected for the fiscal year
ending December 31, 2001.
NOTE B--DIVIDENDS
Dividends paid on common stock during the first quarter of 2001 and 2000 were
$.145 per share and $.135 per share, respectively.
NOTE C--OTHER EXPENSE - NET
Significant items included in Other expense - net are as follows:
Three months ended
----------------------------
(Thousands of dollars) MARCH 31, March 31,
2001 2000
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Dividend and royalty income $ (1,255) $ (1,408)
Net (income) expense from financing and
investing activities (5,101) 1,968
Foreign currency exchange losses (gains) 587 (1,285)
The net (income) expense of financing and investing activities represents
realized gains or losses associated with selling and disposing of fixed assets,
the net gain or loss associated with the investment of certain long-term asset
funds, net pre-tax expense associated with the Company's investment in
broad-based corporate owned life insurance, and other related fees.
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NOTE D--COMPREHENSIVE INCOME
Comprehensive income is summarized as follows:
(Thousands of dollars) Three months ended March 31,
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2001 2000
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Net income $ 36,924 $ 40,923
Foreign currency translation adjustments (3,173) 12,675
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Comprehensive income $ 33,751 $ 53,598
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NOTE E--RECLASSIFICATION AND SUBSEQUENT EVENT
Certain amounts in the 2000 financial statements have been reclassified to
conform with the 2001 presentation.
On April 18, 2001, the Company issued 250,000 shares of convertible
participating serial preferred stock (preferred stock), no par value with
cumulative quarterly dividends of $10.00 per share, for $250.0 million to The
Sherwin-Williams Company Employee Stock Purchase and Savings Plan (ESOP). The
ESOP financed the acquisition of the preferred stock by borrowing $250.0 million
from the Company. Each share of preferred stock is entitled to one vote upon all
matters presented to the Company's shareholders and generally vote with the
common stock together as one class. The preferred stock will be held in an
unallocated suspense account by the ESOP until ESOP compensation expense is
earned and contributions are credited to the members' accounts. The preferred
stock is convertible and redeemable at any time at the option of the ESOP.
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NOTE F--NET INCOME PER COMMON SHARE
Three months ended March 31,
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(Thousands of dollars, except per share data) 2001 2000
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Basic
Average common shares outstanding 158,422,735 164,304,661
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Net income $ 36,923 $ 40,923
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Net income per common share $ 0.23 $ 0.25
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Diluted
Average common shares outstanding 158,422,735 164,304,661
Non-vested restricted stock grants 375,600 278,400
Stock options - treasury stock method 1,365,498 263,696
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Average common shares assuming dilution 160,163,833 164,846,757
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Net income $ 36,923 $ 40,923
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Net income per common share $ 0.23 $ 0.25
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Net income per common share has been computed in accordance with SFAS No. 128.
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NOTE G--REPORTABLE SEGMENT INFORMATION
The Company reports segment information in accordance with SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
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.
Net External Sales/Operating Profit
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Three months ended March 31,
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2001 2000
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(Thousands of dollars) Net Segment Net Segment
External Operating External Operating
Sales Profit Sales Profit
--------------- --------------- -------------- ---------------
Paint Stores $ 694,103 $ 47,002 $ 700,056 $ 43,604
Consumer 273,401 25,014 325,387 37,072
Automotive Finishes 115,826 11,557 120,952 14,446
International Coatings 73,274 4,602 73,442 6,907
Administrative 1,766 (29,566) 2,079 (36,024)
--------------- --------------- -------------- ---------------
Consolidated totals $ 1,158,370 $ 58,609 $ 1,221,916 $ 66,005
=============== =============== ============== ===============
===========================================================================================================================
Intersegment Transfers
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Three months ended March 31,
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(Thousands of dollars) 2001 2000
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Paint Stores $ 2,687 $ 2,218
Consumer 182,200 189,325
Automotive Finishes 7,996 8,747
International Coatings 37 77
Administrative 2,652 2,843
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Segment totals $ 195,572 $ 203,210
=============== ==============
===========================================================================================================================
Segment operating profit is total revenue, including intersegment transfers,
less operating costs and expenses. The Administrative Segment's expenses include
interest which is unrelated to certain financing activities of the Operating
Segments, certain foreign currency transaction losses related to
dollar-denominated debt and other financing activities, certain provisions for
disposition and termination of operations and environmental remediation which
are not directly associated with any Operating Segment, and other adjustments.
Net external sales and operating profits of all consolidated foreign
subsidiaries were $128.6 million and $7.4 million, respectively, for the first
quarter of 2001, and $130.7 million and $7.9 million, respectively, for the
first quarter of 2000. Long-lived assets of these subsidiaries totaled $236.9
million and $253.7 million, respectively, at March 31, 2001 and 2000. Domestic
operations account for the remaining net external sales, operating profits and
long-lived assets. The Administrative Segment's expenses do not include any
significant foreign operations. No single geographic area outside the United
States was significant relative to consolidated net external sales or
consolidated long-lived assets.
Export sales and sales to any individual customer were each less than 10% of
consolidated sales to unaffiliated customers during all periods presented.
Domestic intersegment transfers are accounted for at the approximate fully
absorbed manufactured cost plus distribution costs. International intersegment
transfers are accounted for at values comparable to normal unaffiliated customer
sales.
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ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
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Consolidated net sales for the quarter decreased 5.2 percent to $1.16 billion
from $1.22 billion in the first quarter of 2000. The poor U.S. economic
conditions, harsh winter weather and previously announced discontinued paint
programs at certain customers impacted sales. Net sales in the Paint Stores
Segment decreased 0.9 percent to $694.1 million in the first quarter of 2001
from $700.1 million in 2000 due primarily to sales shortfalls in associated
product categories, partially offset by slightly higher paint sales for the
quarter. Sales were impacted by the sluggish U.S. economy and unseasonable
weather that may have affected contractors' ability to work on jobs.
Comparable-store sales declined 3.5 percent in the quarter. Net sales of the
Consumer Segment decreased 16.0 percent to $273.4 million in the first quarter
from $325.4 million last year. Excluding the previously announced discontinued
paint programs at certain customers, net sales for this Segment would have
decreased 9.7 percent. Increased sales to certain existing customers in the
first quarter of 2001 could not offset the poor domestic do-it-yourself market
and the impact of new product launches and sales to new customers during the
first quarter of 2000. The soft domestic economy impacted store traffic at many
retailers, reduced out-the-door sales of paint and caused some retailers to
defer building seasonal inventory levels, adversely affecting first quarter
year-over-year sales comparisons of the Consumer Segment. The Automotive
Finishes Segment's net sales decreased 4.2 percent to $115.8 million in the
first quarter from $121.0 million last year. The negative impact of the soft
domestic economy curtailed this Segment's OEM sales that were only partially
offset by stronger collision repair sales. Net sales in the International
Coatings Segment were down slightly to $73.3 million in the first three months
of 2001 from $73.4 million a year ago. The sales decrease in U.S. dollars of 0.2
percent was due primarily to unfavorable currency exchange rates. Sales volume
gains were achieved despite the continued soft economic conditions in the United
Kingdom and Argentina and the marginally improved economies of Brazil and Chile.
Consolidated gross profit as a percent of sales for the first quarter 2001
versus 2000 was flat at 42.2 percent. First quarter margins in the Paint Stores
Segment were higher than last year primarily due to selective selling price
increases. The Consumer, Automotive Finishes, and International Coatings
Segments' margins were all lower than last year due primarily to lower volume,
higher raw material costs, and product sales mix.
Consolidated selling, general and administrative expenses as a percent of sales
were unfavorable to last year for the first quarter primarily due to lower
sales, partially offset by lower SG&A spending. In the Paint Stores Segment,
SG&A expenses as a percent of sales were unfavorable to last year, primarily due
to decreased sales volume and incremental increases in expenses associated with
the increased number of stores. The Consumer Segment's SG&A ratio was
unfavorable to last year in the first quarter primarily due to lower sales,
partially offset by cost cutting efforts aimed at mitigating the effects of the
expected lower sales levels. First quarter SG&A expenses as a percent of sales
were unfavorable in the Automotive Finishes primarily due
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to lower sales. International Coatings Segment SG&A ratio was favorable to last
year in the first quarter primarily due to lower discretionary spending.
The increase in interest expense from the first quarter of 2001 versus 2000
occurred due to higher average outstanding short-term debt balances, partially
offset by lower average short-term borrowing rates.
Other expense - net for the first quarter of 2001 was income primarily due to
gains from the sale of certain assets in 2001, partially offset by foreign
currency exchange losses.
Net income in the first quarter of 2001 declined $4.0 million, or 9.8 percent,
to $36.9 million from $40.9 million in 2000 due primarily to lower sales.
Diluted net income per common share for the quarter decreased to $.23 per share
from $.25 per share in 2000.
FINANCIAL CONDITION
- -------------------
Cash and cash equivalents decreased $1.7 million during the first three months
of 2001. Cash used by operating activities of $167.5 million was impacted by
unusual tax-related payments and unrelated timing items. The unusual tax-related
payments were made to the U.S. Internal Revenue Service for contested tax issues
plus accrued interest. These payments were made to prevent the imposition of
above-market interest charges while the contested issues are being resolved. The
unrelated timing items represent first quarter payments of prior year accruals
for the Company's Employee Stock Purchase and Savings Plan and defined
contribution pension plans that have been historically paid in the beginning of
the second quarter.
During the first three months of 2001, net long-term debt decreased $5.7 million
and short-term borrowings increased $254.0 million. Short-term borrowings
primarily relate to the Company's commercial paper program, which had unused
borrowing availability of $514.0 million at March 31, 2001. This program is
backed by the Company's revolving credit agreements. The proceeds from the
issuance of short-term borrowings were used for normal seasonal operating needs,
unusual tax-related payments and unrelated timing items, capital expenditures of
$22.6 million, treasury shares acquisition of $37.9 million, and cash dividends
of $23.2 million. The Company's current ratio declined to 1.18 from 1.39 at
December 31, 2000. The decrease in this ratio occurred primarily due to the
increased short-term borrowings.
Since March 31, 2000, cash and cash equivalents decreased $2.5 million primarily
due to cash generated by operations of $355.5 million and net increases in
short-term borrowings and long-term debt of $97.7 million, offset by capital
expenditures of $120.7 million, treasury shares acquired of $146.5 million,
payments of cash dividends of $89.0 million, acquisitions of businesses of $60.1
million, increases in other investments of $52.0 million and normal working
capital needs. The Company expects to remain in a short-term borrowing position
throughout most of 2001.
Capital expenditures during the first quarter of 2001 represented primarily the
costs associated with new store openings in the Paint Stores Segment, plant and
facility upgrades in the Consumer Segment, and improvements and upgrades to the
automotive technology center for the
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Automotive Finishes Segment. We do not anticipate the need for any specific
external financing to support our capital programs during the remainder of 2001.
During the first quarter of 2001, the Company acquired 1,500,000 shares of its
common stock through open market purchases for treasury purposes. The Company
acquires shares of its common stock for general corporate purposes and,
depending upon its cash position and market conditions, the Company may acquire
additional shares of its common stock in the future. At March 31, 2001, the
Company has authorization to purchase an additional 11,700,000 shares of its
common stock. In April, 2001, the Company purchased an additional 1,850,000
shares of its common stock through open market purchases for treasury purposes.
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 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.
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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.
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 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
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Company agreed, in part, to investigate and remediate, as necessary, certain
soil and/or groundwater contamination caused by historical disposal, discharges,
releases 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.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
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Certain statements contained in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" 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
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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.
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ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES 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. There were no material changes in the Company's exposure to market
risk since December 31, 2000.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
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(a) Exhibits - none.
(b) Reports on Form 8-K. The Company filed a Current Report on Form
8-K, dated January 22, 2001, reporting under Item 5 that the Company
had announced that its 2000 year end results would reflect a charge to
operations for impairment of long-lived assets.
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE SHERWIN-WILLIAMS COMPANY
May 15, 2001 By: /s/ J.L. Ault
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J.L. Ault
Vice President-Corporate Controller
May 15, 2001 By: /s/ L.E. Stellato
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L.E. Stellato
Vice President, General Counsel and
Secretary
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