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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
<TABLE>
<CAPTION>
(MARK ONE)
<S> <C>
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
[NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM _______________TO_______________
</TABLE>
COMMISSION FILE NUMBER 1-4851
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THE SHERWIN-WILLIAMS COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO
(State or other jurisdiction of incorporation or organization)
34-0526850
(I.R.S. Employer Identification No.)
101 PROSPECT AVENUE, N.W., CLEVELAND, OHIO
(Address of principal executive offices)
44115-1075
(Zip Code)
(216) 566-2000
Registrant's telephone number, including area code
------------------------------------------------------
Securities registered pursuant to Section 12(b) of the Act:
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<CAPTION>
NAME OF EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
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<S> <C>
9.875% Debentures due 2016 New York Stock Exchange
6.25% Convertible Subordinated Debentures due 1995 New York Stock Exchange
Common Stock, Par Value $1.00 New York Stock Exchange
</TABLE>
Securities Registered Pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
As of January 31, 1994, 88,541,364 shares of the Registrant's Common Stock,
with a par value of $1.00 each, were outstanding, net of treasury shares. The
aggregate market value of such voting stock held by non-affiliates of the
Registrant as of that date was $3,018,773,278.
DOCUMENTS INCORPORATED BY REFERENCE
Definitive Proxy Statement dated March 15, 1994, as regards the information
required to be disclosed in Part III.
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<PAGE> 2
THE SHERWIN-WILLIAMS COMPANY
AND CONSOLIDATED SUBSIDIARIES
As used in this Form 10-K, the terms "Company" and "Registrant" mean The
Sherwin-Williams Company and its consolidated subsidiaries, taken as a whole,
unless the context indicates otherwise.
TABLE OF CONTENTS
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ITEM NO. PAGE NO.
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Part I
1. Business Segment Information
a. General Development of Business 1
b. Narrative Description of Business 1
c. Financial Information About Business Segments 7
d. Foreign and Domestic Operations and Export Sales 7
2. Description of Property 8
3. Legal Proceedings 9
4. Submission of Matters to a Vote of Security Holders 9
Part II
5. Market for Common Equity and Related Stockholder Matters 9
6. Selected Financial Data 10
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
8. Financial Statements and Supplementary Data 16
9. Changes in and Disagreements on Accounting and Financial Disclosure 17
Part III
10. Directors and Executive Officers of the Registrant 18
11. Executive Compensation 18
12. Security Ownership of Certain Beneficial Owners and Management 18
13. Certain Relationships and Related Transactions 18
Part IV
14. Financial Statement Schedules, Reports on Form 8-K and Exhibits
a. Financial Statements, Financial Statement Schedules and Exhibits 19
b. Reports on Form 8-K 19
Signatures 36
Consent of Independent Auditors 42
</TABLE>
NOTE ON INCORPORATION BY REFERENCE
In Part III of this Form 10-K, various information and data are
incorporated by reference from the Company's Definitive Proxy Statement dated
March 15, 1994 ("Proxy Statement"). Any reference in this Form 10-K to
disclosures in the Proxy Statement shall constitute incorporation by reference
only of that specific information and data into this Form 10-K.
<PAGE> 3
PART I
ITEM 1. BUSINESS SEGMENT INFORMATION
GENERAL DEVELOPMENT OF BUSINESS
In 1993, The Sherwin-Williams Company celebrated 127 years of doing
business. The Company was incorporated under the laws of the State of Ohio
eighteen years after its founding in 1866. Its core business is the manufacture,
distribution and sale of coatings and related products. The expansion of market
coverage and increased market share in North America continued in 1993 through
the opening of commercial and retail sales outlets, new product introductions
and attraction of some of the country's largest retailers as customers.
PAINT STORES SEGMENT
The Paint Stores Segment exclusively distributes Sherwin-Williams
registered trademark branded architectural coatings, industrial maintenance
products, industrial finishes and related items produced by the Coatings
Segment of the Company and others. Paint, wallcoverings, floorcoverings, window
treatments, spray equipment and other associated products are marketed by store
personnel and direct sale representatives to the do-it-yourself customer,
professional painter, contractor, industrial and commercial maintenance
customer, property manager, architect and manufacturer of products requiring a
factory finish. Competitors of the Segment are other paint and wallpaper
stores, mass merchandisers, home centers, independent hardware stores, hardware
chains and manufacturer-operated outlets. Product quality, service and price
determine the competitive advantage in the highly fragmented paint product
market. The loss of any single customer would not have a material adverse
effect on the business of the Segment.
During 1993, the Segment began a long-term project to re-merchandise all of
its stores. The project includes implementing new store staffing and equipment
models with new interior color schemes, customer informational signage and new
sales floor layouts. The result of the complete store re-merchandising is a more
appealing customer shopping experience and increased efficiency of store
personnel. Additionally, many stores have installed the proprietary new
Sher-Tint trademark color matching and tinting system. This new system
represents the latest technology in color matching and tinting and is more
accurate and much faster than conventional systems. Other technological
improvements within the Paint Stores Segment included the installation of a new
Executive Information System to provide management with instant access to store
operations data.
In 1994, as part of the Company's continuing emphasis on improving the
quality of existing products and on new product development, many new products
will be introduced through our national distribution network of stores including
a new product called EverClean trademark. This product is a premium latex
interior wall paint with superior stain resistance and washability
characteristics. EverClean trademark will be launched as part of a national
advertising campaign which will be the largest in our Company's history. The
advertising campaign will highlight the many other superior quality products
available and excellent service customers receive at reasonable prices in their
neighborhood Sherwin-Williams stores.
COATINGS SEGMENT
The Coatings Segment consists of the following six operating units which
participate in the manufacture, distribution or sale of coatings and related
products: the Coatings, Consumer Brands, Automotive, Transportation Services and
Specialty Divisions, and the International Group.
The Segment has sales to certain customers that, individually, may be a
significant portion of its revenues. However, the loss of any single customer
would not have a material adverse effect on the overall business of the Segment.
All technical expenditures are sponsored by the Company and occur in the
Coatings Segment. The expenditures for research and development appear on page
24 of this report.
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COATINGS DIVISION
The Coatings Division manufactures paint and paint related products for the
do-it-yourselfer, professional painter, contractor, industrial and commercial
maintenance account and manufacturer of factory finished products.
Sherwin-Williams registered trademark branded architectural and industrial
finishes are manufactured exclusively for the Paint Stores Segment. Labels,
color cards, traffic paint, adhesives, private label and other branded products
are manufactured for the Paint Stores Segment, the Consumer Brands Division and
others. Competitive factors for the Division are product innovation,
manufactured product quality, service, distribution and price. Competitors of
the Division consist of other coatings manufacturers located throughout the
United States. There are approximately 500 such manufacturers at the regional
and national levels. The Coatings Division continues to strive to be the lowest
cost producer of high quality coatings to gain an advantage over its
competitors.
The Division's already significant emphasis on delivering high quality
products and services to its customers grew even stronger in 1993. This
commitment to quality and fulfilling customer objectives was highlighted by the
certification of all of the Division's manufacturing and technical laboratories
under the International Standards Organization's internationally accepted series
of guidelines and standards for quality systems. This process, more commonly
known as ISO 9000 certification, involves an audit by an independent third party
of the Division's documentation of the quality systems in place and adherence to
such documentation to gain assurance that customer objectives are being met.
Annual independent reviews are subsequently performed to ensure continued
compliance with the certification requirements.
In 1994, the Division's emphasis will be placed on shortening product
development cycle time and improving response to customer issues. The formation
of regional technical labs will enhance the ability to achieve these goals.
Modifications within the manufacturing process that will improve service,
increase effective capacity, enhance quality and reduce costs will be
continually sought at each facility.
CONSUMER BRANDS DIVISION
The Consumer Brands Division is responsible for the sales and marketing of
branded and private label products by a direct sales staff to unaffiliated home
centers, mass merchandisers, independent dealers and distributors. Most of the
country's leading retailers are among the Division's regional and national
customers. The Division's competition for sales to these leading retailers comes
from over 500 regional and national wholesale distributors of branded and
private label paint and associated products. The competitive factors that will
set the leaders apart from the rest are service, brand recognition, distribution
and price.
In 1993, the Consumer Brands Division made great strides in new technology
and product marketing. The Division continues to pursue its mission to supply
its customers with the highest quality products, services and programs available
in the marketplace. In 1993, the Division developed innovative technology known
as Tint-a-Color trademark (automated tinting equipment) and Sense-a-Color
trademark (a spectral color analyzer) and successfully introduced them to its
retail customers. The Division's introduction of Kids Room trademark paint and
the Renaissance registered trademark paint family has resulted in significant
incremental volume gains and has helped to further establish the Dutch Boy
registered trademark brand as innovative and a market leader. The Division also
strives to assist its retail customers with developing and implementing
marketing strategies.
During 1994, new customers and the expansion of product lines to existing
customers will further establish Dutch Boy registered trademark as the national
market leader in the home center and mass merchandiser segments. In support of
this new growth, the Dutch Boy group will begin a promotional venture involving
the McDonald Corporation, the National Basketball Association, Turner Network
Television, USA Today, Family Circle and Healthy Families America (a national
not-for-profit organization for the prevention of child abuse).
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AUTOMOTIVE DIVISION
The Automotive Division develops and manufactures motor vehicle finish and
refinish products which are marketed under the Sherwin-Williams registered
trademark and other branded labels in the United States and Canada through
its network of 144 company-operated branches. The branches are supported by
a direct sales staff and products are also marketed through jobbers and
wholesale distributors. The Division is the sole distributor of Standox
registered trademark branded vehicle refinishing paints in the United States
and Canada for American Standox, Inc., its joint venture with Herberts GmbH
of Wuppertal, Germany. The Division sells directly to independent automotive
body shops, automotive dealerships, fleet owners and refinishers, production
shops, body builders and manufacturers requiring a factory finish (OEM).
The Automotive Division has numerous competitors with broad product offerings
and several others with niche products. In the last several years, certain
foreign competitors have entered the perceived lucrative U.S. automotive
aftermarket. Key competitive factors are distribution, product quality,
technology and service. Strong distribution and high quality products
have been the Division's greatest competitive advantages.
During 1993, the Automotive Division sought to improve product quality and
customer service in several ways. ISO 9002 guidelines and standards were
implemented throughout the Division. Cross functional teams were organized to
work on coordination of specific issues involved with improving quality and
service to the Division's customers and meeting their objectives. The Division
also completed assimilation of all passenger car OEM paint production into the
Richmond, Kentucky plant.
The Division's plans for 1994 call for continuing focus on quality and
reduction of order cycle time. This will increase plant capacity, reduce working
capital requirements and improve customer service. Further, the Division plans
to introduce the 3.5 VOC "Plan C" Urethane system and the Waterborne Basecoat
for vehicle refinishing. Both of these new products will be designed for the
Vehicle Refinish and Fleet/OEM market segments.
TRANSPORTATION SERVICES DIVISION
The Transportation Services Division provides warehousing, truckload
freight, pool assembly, freight brokerage and consolidation services primarily
for the Company and for certain external manufacturers, distributors and
retailers throughout the United States. This Division provides the Company with
total logistics service support which allows increased delivery schedules, lower
field inventory levels and fewer out-of-stocks.
The Transportation Services Division has many different and diverse
competitors. In the trucking industry, there are a few large carriers having
small or moderate market share while thousands of other carriers compete for the
balance of the market. The warehousing and distribution service market is
characterized by a large number of competitors with none having dominant share.
Since the primary business of the Division is to provide services for the
Company's other divisions, gaining market share is not of major significance.
Installation of the Automated Warehouse Control System (AWCS) was completed
in all the full service warehouses during 1993. The AWCS technology, which is
proprietary to the Company, improves the efficiency of the order picking process
in the warehouses and significantly reduces the manpower necessary to complete a
shipping order. Bar code technology is currently being developed for use in
conjunction with the AWCS system and for use in other divisions of the Company
for manufacturing, shipping, receiving, stocking and selling. Complete
implementation of the bar code technology throughout the Company will take
several years. The technology is being developed first through the AWCS system
by the Transportation Services Division so they will be among the first
divisions to have the capability of bar code efficiency.
The Division achieved ISO 9000 certification for two of its operations in
1993 and will continue to implement procedures to achieve this certification at
the remaining centers during 1994. As safety has
3
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always been of utmost importance, the trucking subsidiary of the Company was
proud to achieve first place, for the second straight year, in the National
Industrial Safe Fleet Contest.
During 1994, the Division will seek to evaluate and install new software to
improve shipping and routing procedures currently in place to further provide
the Division a competitive advantage.
SPECIALTY DIVISION
The Specialty Division competes in three areas: custom and industrial
aerosols; paint applicators; and retail and wholesale consumer aerosols. The
Division participates in the retail and wholesale paint, automotive, sanitary
supply, institutional, insecticide and industrial markets. A wide variety of
aerosol products are filled, packaged and distributed to regional and national
customers. Approximately 7.7 percent of the Division's total sales represent
aerosols and paint applicators sold to the Paint Stores Segment. The remaining
products are marketed through mass merchandisers, home centers, automotive
chains, sanitary supply marketers and maintenance distribution channels. There
are various primary competitors in each of the Division's product lines. The
main competitive factors are technical know-how, quality, service and price. The
Specialty Division has superior quality products, more efficient manufacturing
and distribution, frequent customer contact and better customer service at
competitive prices which distinguish it from its competitors.
In 1993, the Specialty Division expanded distribution of the Stonecraft
trademark and Marblecraft trademark product lines to major retailers with
additional retailers and homecenters expected in 1994. In addition, production
capabilities were successfully expanded at the Holland, Michigan manufacturing
site to enable the Division to better meet future demand.
During 1994, the Division plans to complete construction of its Dayton
Valley, Nevada warehouse. The completion of this warehouse will permit the
Company to consolidate much of its West Coast distribution. The Division also
plans the introduction of a new product line consisting of one-ounce bottles of
paint and three-ounce aerosol cans that will be targeted for the school supply
and arts and craft customer.
INTERNATIONAL GROUP
Products carrying the Sherwin-Williams registered trademark, Kem-Tone
registered trademark and related trade names are manufactured and sold around
the world through subsidiaries, joint ventures and licensees. A consolidated
foreign subsidiary in Jamaica generally markets a full line of products
including architectural coatings, industrial maintenance products, automotive
repaint finishes, industrial finishes and a variety of home decorative items.
Products manufactured in Kingston, Jamaica are sold through 13 stores and other
dealers and by a direct sales force to independent dealers, painters,
contractors, automotive body shops and industrial and commercial maintenance
accounts in Jamaica. The International Group has many competitors in each of
its foreign markets. Service, quality and price are the primary competitive
factors in the markets served.
The Group has 48 licensees in 37 countries. The majority of the licensees'
sales are in South America, the strongest market. New licensing agreements were
signed in Bermuda, Indonesia, Israel, Malaysia, Panama, Japan and Syria in 1993.
New business development will take place following a predetermined regional
approach for the establishment of subsidiaries, joint ventures and licensees in
selected countries. The International Group derives a substantial part of its
income from the licensing of technology, trademarks and trade names to foreign
companies.
An unconsolidated subsidiary in Panama was sold by the Company during 1993
to our long-standing licensee in El Salvador, thereby reinforcing our current
position in Central America. During the fourth quarter of 1993, our subsidiary
in Mexico introduced a new tinting system, Color Selector trademark, through its
exclusive dealers. This system will serve to increase the competitiveness of
operations by fulfilling customer needs as well as strengthening the dealer
organization in Mexico.
A new logistics system, currently under development, will be implemented in
Mexico in 1994 to provide improved service levels and establish a sound
foundation for future expansion. The Interna-
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tional Group plans to further consolidate all export operations in 1994 to focus
its efforts and maximize efficiencies.
OTHER SEGMENT
The Other Segment is responsible for the acquisition, development, leasing
and management of properties for use by the Company and others. Obtaining real
estate in the proper location at the appropriate cost is a critical component
for achieving the desired operating success, particularly for paint stores and
warehouses. This Segment has many competitors consisting of other real estate
owners, developers and managers in certain states where we currently hold
property. The main competitive factors are the availability of property and
price.
At the end of 1993, the Retail Properties Division owned or leased 207
properties, representing over 1,665,000 square feet of space, which are
conducive to the sale of paint and associated products. Such properties include
127 freestanding buildings, for exclusive use by the Paint Stores Segment, and
80 multi-tenant properties, utilized when the basic needs of the paint store can
be met and where external rental opportunities can be operated profitably. The
paint store must be easily accessible to professional painters and contractors
with sufficient access to pickup and delivery areas. Multi-tenant properties are
usually smaller "strip" shopping centers with adequate parking, and generally,
the paint store will be located at the end of the shopping area for the most
convenient access. In 1994, the Division does not anticipate any need to acquire
or develop additional locations. The occupancy rate for external space was 78.4
percent at December 31, 1993.
The Non-Retail Properties Division owned or leased 21 properties
approximating 2.6 million square feet. These properties consisted primarily of
office buildings, manufacturing facilities and warehouses at the end of 1993.
Occasionally, such properties are acquired or developed to provide the lowest
cost alternative for warehouse or manufacturing expansion. Locations that have
been utilized profitably in the past which can no longer contribute to the
Company's future plans are currently offered for sale or lease. Locations that
can continue to operate efficiently and achieve the desired rate of return will
continue to be held by this Segment.
RAW MATERIALS AND PRODUCTS PURCHASED FOR RESALE
With respect to the Paint Stores Segment, there are sufficient suppliers of
each product purchased for resale that the Segment does not anticipate any
significant sourcing problems. For the Coatings Segment, raw materials and fuel
supplies are generally available from various sources in sufficient quantities
that the Segment does not anticipate any significant sourcing problems during
1994.
SEASONALITY
The majority of the sales for the Paint Stores Segment and Coatings Segment
traditionally occur during the second and third quarters. There is no
significant seasonality in sales for the Other Segment.
TRADEMARKS AND TRADE NAMES
Customer recognition of trademarks and trade names contribute significantly
to the sales of the Company. The Paint Stores Segment is identified with names
such as Sherwin-Williams registered trademark, SuperPaint registered trademark,
Pro Mar registered trademark, Glas-Clad registered trademark and Perma-
Clad registered trademark. The Coatings Segment employs a variety of trade
names and trademarks in marketing its products, such as Sherwin-Williams
registered trademark, Dutch Boy registered trademark, Kem-Tone registered
trademark, Martin-Senour registered trademark, Cuprinol registered trademark,
Acme registered trademark, Krylon registered trademark, Color Works registered
trademark, Illinois Bronze registered trademark, Rust Tough registered
trademark, Rubberset registered trademark and Dupli-Color registered trademark.
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PATENTS
Although patents and licenses are not of material importance to the
business of the Company as a whole, the International Group derives a
substantial part of its income from the license of technology, trademarks and
trade names to foreign companies.
BACKLOG AND PRODUCTIVE CAPACITY
Backlog orders are not significant in the business of any Segment.
Sufficient productive capacity currently exists to fulfill the Company's needs
for paint products through 1994.
EMPLOYEES
The Company employed approximately 17,200 persons at December 31, 1993.
ENVIRONMENTAL COMPLIANCE
See Management's Discussion and Analysis of Financial Condition and Results
of Operations, on pages 10 through 16 of this report, for details on
environmental compliance.
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BUSINESS SEGMENTS
<TABLE>
<CAPTION>
(MILLIONS OF DOLLARS) 1993 1992 1991
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<S> <C> <C> <C>
NET EXTERNAL SALES
Paint Stores $ 1,830 $1,682 $1,495
Coatings 1,105 1,052 1,032
Other 14 14 14
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Segment totals $ 2,949 $2,748 $2,541
INTERSEGMENT TRANSFERS
Coatings $ 655 $ 598 $ 523
Other 17 16 16
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Segment totals $ 672 $ 614 $ 539
OPERATING PROFITS
Paint Stores $ 117 $ 91* $ 82
Coatings 194 174* 140
Other 5 6* 8
Corporate expenses -- net (52) (45)* (31)
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Income from continuing operations before income taxes and
cumulative effects of changes in accounting methods $ 264 $ 226* $ 199
IDENTIFIABLE ASSETS
Paint Stores $ 494 $ 464 $ 449
Coatings 730 719 713
Other 51 58 55
Corporate 640 489 395
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Consolidated totals $ 1,915 $1,730 $1,612
CAPITAL EXPENDITURES
Paint Stores $ 28 $ 21 $ 18
Coatings 24 40 21
Other 6 3 9
Corporate 5 5 3
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Consolidated totals $ 63 $ 69 $ 51
DEPRECIATION
Paint Stores $ 19 $ 17 $ 16
Coatings 25 24 22
Other 7 6 6
Corporate 4 4 4
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Consolidated totals $ 55 $ 51 $ 48
</TABLE>
* Beginning January 1, 1992, additional expenses associated with postretirement
benefits reduced operating profits $9 million. For comparative purposes with
prior years, Paint Stores' Operating Profit for 1992 was $96 million and
Coatings' was $178 million, excluding the effects of such additional expenses.
NOTES TO SEGMENT TABLES
Operating profit is total revenue, including realized profit on
intersegment transfers, less operating costs and expenses. Intersegment
transfers are accounted for at values comparable to normal unaffiliated customer
sales. Corporate expenses include interest which is unrelated to real estate
leasing activities, certain provisions for disposition and termination of
operations and environmental remediation which are not directly associated with
or allocable to any operating segment, and other adjustments.
Identifiable assets are those directly identified with each Segment's
operations. Corporate assets consist primarily of cash, investments, deferred
pension assets, headquarters property, plant and equipment and certain property
under capital leases.
Export sales, sales of foreign subsidiaries and sales to any individual
customer were each less than 10% of consolidated sales to unaffiliated customers
during all years presented.
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ITEM 2. DESCRIPTION OF PROPERTY
The Company's corporate headquarters are located in Cleveland, Ohio. The
Company's principal manufacturing and distribution facilities, operated by the
Coatings Segment, are located as set forth below.
<TABLE>
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LEASED LEASED
MANUFACTURING FACILITIES OR OWNED DISTRIBUTION FACILITIES OR OWNED
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Anaheim, California Owned Buford, Georgia Leased
Baltimore, Maryland Owned Columbus, Ohio Leased
Bedford Heights, Ohio Owned Effingham, Illinois Leased
Chicago, Illinois Owned Greencastle, Indiana Owned
Coffeyville, Kansas Owned Hayward, California Leased
Columbus, Ohio Owned Hunt Valley, Maryland Leased
Crisfield, Maryland Leased Lagrange, Georgia Owned
Deshler, Ohio Owned Reno, Nevada Leased
Elk Grove, Illinois Owned Sparks, Nevada Leased
Emeryville, California Owned Waco, Texas Leased
Fountain Inn, South Carolina Owned Winter Haven, Florida Owned
Garland, Texas Owned York, Pennsylvania Owned
Greensboro, North Carolina Owned Calgary, Alberta, Canada Leased
Holland, Michigan Owned Mississauga, Ontario, Canada Leased
Morrow, Georgia Owned Richmond Hills, Ontario, Canada Leased
Newark, New Jersey Owned Scarborough, Ontario, Canada Owned
Orlando, Florida Owned San Juan, Puerto Rico Leased
Richmond, Kentucky Owned
Kingston, Jamaica Owned
</TABLE>
In addition, the Coatings Segment operates 144 company-operated automotive
branches, of which 2 are owned, in the United States and Canada and 13 leased
stores in Jamaica.
There were 2,030 company-operated paint stores in the forty-eight
contiguous states, Canada and Puerto Rico which constitute the entire operations
of the Paint Stores Segment. All stores are leased locations with 207 being
leased from the Company's Retail Properties Division in the Other Segment. At
the end of 1993, the Segment was comprised of four separate operating geographic
divisions: the Mid Western Division with 568 stores primarily located in the
midwestern and upper west coast states and western Canada; the Eastern Division
which has 441 stores along the upper east coast, New England and eastern Canada;
the Southeastern Division which has 516 stores principally covering the lower
east and gulf coasts and Puerto Rico; and the South Western Division with 505
stores in the plains states and the lower west coast. The Paint Stores Segment
opened 26 new stores in 1993, closed 20, re-merchandised 859 and relocated 66.
All property within the Other Segment is owned by the Company except for 2
land leases in the Retail Properties Division and a leased warehouse that is
sublet to a tenant not associated with the Company.
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ITEM 3. LEGAL PROCEEDINGS
On June 10, 1993, the People of the State of California ex. rel. Daniel E.
Lungren, Attorney General of the State of California, filed a complaint against
the Company and its subsidiary, Dupli-Color Products Company (collectively,
"Company"), in the Superior Court of the State of California, County of San
Francisco. The Complaint alleges violations of California's Safe Drinking Water
and Toxic Enforcement Act of 1986, generally referred to as Proposition 65, and
Business and Professions Code. Specifically, the Complaint alleges the Company
failed to adequately warn California consumers that certain spray paints,
primers and other coatings manufactured by the Company contain a chemical known
to the State of California to cause birth defects or other reproductive harm.
The relief sought demands an undetermined amount of civil penalties and
injunctive relief. Pursuant to a Settlement Agreement entered into recently with
the State, the Company has agreed to a civil penalty in the amount of
$1,022,000. The penalty is subject to certain credits for development costs
incurred by the Company associated with the introduction of water based aerosol
paint products. Pursuant to the Agreement, the penalty, assuming adjustment for
all credits, shall not exceed $675,000. The Settlement Agreement is subject to
Court approval.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Sherwin-Williams Common Stock is listed on the New York Stock Exchange and
traded under the symbol SHW.
QUARTERLY STOCK PRICES AND DIVIDENDS
<TABLE>
<CAPTION>
Quarter High Low Dividend
--------------------------------------------
<S> <C> <C> <C> <C>
1993 1ST $34.250 $30.000 $ .125
2ND 34.375 30.125 .125
3RD 36.125 29.875 .125
4TH 37.500 32.750 .125
1992 1st $29.875 $25.375 $ .11
2nd 30.250 26.625 .11
3rd 30.875 26.750 .11
4th 32.875 27.000 .11
</TABLE>
The number of shareholders of record for Sherwin-Williams Common Stock, par
value $1.00 each, as of January 31, 1994 was 11,853. The closing market value
per share as listed on the New York Stock Exchange as of the close of business
January 31, 1994 was $34.125.
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ITEM 6. SELECTED FINANCIAL DATA
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
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<S> <C> <C> <C> <C> <C>
OPERATIONS
Net sales $2,949 $2,748 $2,541 $2,267 $2,123
Income before cumulative effects of changes
in accounting methods 165 145* 128 123 109
FINANCIAL POSITION
Total assets $1,915 $1,730 $1,612 $1,504 $1,375
Long-term debt 38 60 72 138 105
PER COMMON SHARE DATA
Income before cumulative effects of changes
in accounting methods $ 1.85 $ 1.63* $ 1.45 $ 1.41 $ 1.26
Cash dividends .50 .44 .42 .38 .35
</TABLE>
* Includes a reduction, beginning January 1, 1992, for the additional expense of
accruing postretirement benefits. (See Note 6, page 28). Such additional
expense was $5.7 million after income taxes ($.06 per share) in 1992.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION -- 1993
During 1993, the Company continued to enhance its financial strength by
improving on an already strong balance sheet. Cash and short-term investments
increased $102.1 million over 1992 levels to $269.8 million due primarily to
1993's net operating cash flow of over $254 million. The Statements of
Consolidated Cash Flows, on page 22 of this report, present more detailed cash
flow information. Increases and decreases in other components of working capital
occurred primarily due to increased sales and the related increase in
manufacturing activity. Reductions in long-term debt combined with the growth in
shareholders' equity during the past fourteen years have lowered the
debt-to-capitalization ratio from 47.4 percent at the end of 1979 to 3.7 percent
at the end of 1993. Total assets, valued at over $1.9 billion, grew by $184.8
million during 1993. The current ratio remained constant at 2.0 when comparing
year ends 1993 and 1992.
Net property, plant and equipment increased $6.2 million from 1992. Capital
expenditures of $63.0 million were offset by depreciation expense of $55.1
million and certain retirements of assets. Capital expenditures in 1993
represented principally the opening, remodeling, relocating or re-merchandising
of paint stores and the continued upgrade of facilities and equipment at
manufacturing, distribution and research sites. Capital expenditures were higher
in the Paint Stores Segment due to the upgrading of existing POS devices and the
re-merchandising project that began in 1993. In the Coatings Segment, capital
expenditures were lower due to the completion in 1992 of the Winter Haven,
Florida distribution center. There have been no significant acquisitions of
property, plant and equipment during the past three years. In 1994, we plan to
continue investing strategically in new facilities, improving or expanding
existing facilities and in upgrading equipment. The timing of capital
expenditures is anticipated to coincide generally with our operating cash flow.
Therefore, we do not anticipate the need for any external financing to
specifically support our capital programs.
Changes in intangible and other assets during 1993 resulted primarily from
the amortization of intangible assets associated with prior acquisitions
totaling $13.8 million. The deferred pension assets, recorded at $214.6 million,
represent the excess fair market value of the assets of the defined benefit
pension plans and certain unamortized net losses over the actuarially determined
projected plan obligations. The 1993 increase in the deferred pension assets of
$24.6 million represents the recognition of the current year net pension credit
and the effect of merging the hourly employees'
10
<PAGE> 13
defined benefit pension plan with a frozen participation salaried defined
benefit pension plan associated with previously discontinued operations. The
merged defined benefit pension plan was overfunded at December 31, 1993. See
Note 5, on page 26 of this report, for further clarification of the excess
pension assets and the components of asset recognition. As of December 31, 1993,
the assumed discount rate, used in actuarial calculations to determine the
present value of benefit obligations, was lowered from 8.5 percent to 7.25
percent to reflect current economic conditions. The effect of this adjustment
increased the projected benefit obligation and the unrecognized net loss, which
is an accumulation of actuarial gains and losses arising from changes in
assumptions and other changes. The unrecognized net loss is amortized over the
average remaining service lives of the plan participants beginning in the period
after the change was made. The incremental annual pension cost in 1994 resulting
from the change in the assumed discount rate will approximate $2.5 million.
Additionally, the assumed long-term rate of return on plan assets was lowered
from 10.0 percent to 8.5 percent. While this change will result in approximately
$4.3 million less annual earnings on plan assets, it also reduces potential
future exposure for additional unrecognized net losses for any excess assumed
return over the actual plan asset earnings.
Long-term debt was reduced significantly during 1993 when the Company, in
addition to normal debt maturities, acquired $20 million principal of certain
outstanding 9.875 percent debentures. If a significant advantageous investing
opportunity should arise, we have in place additional financing flexibility,
more fully explained in Note 7 on page 29 of this report. We did not utilize any
of our short-term borrowing capacity during 1993. Sufficient cash flows should
be generated from operations to avoid any short-term borrowings in 1994.
The current year change in the liability for postretirement benefits other
than pensions resulted from the excess of the net postretirement benefit
expense, as required by Statement of Financial Accounting Standards (SFAS) No.
106, less the costs for benefit claims incurred. The current portion of the
postretirement benefits liability, amounting to $9.1 million, is included in
other accruals. The assumed discount rate used to calculate the present value of
the postretirement benefit plan obligation was lowered from 8.5 percent to 7.25
percent and the assumed weighted-average annual rate of increase of covered
benefits (i.e., the health care cost trend rate) was reduced one percentage
point in each year, effective December 31, 1993. These changes increased the
unrecognized net loss at December 31, 1993. Because the resulting unrecognized
net loss is within the boundaries of the amortization "corridor", the impact on
future annual postretirement benefit expense is negligible. Plan amendments made
January 1, 1993 significantly reduced the accumulated postretirement benefit
obligation creating an unrecognized prior service credit. The reduction of the
annual postretirement benefit expense began in 1993 and will continue through
2004. See Note 6, on page 28 of this report, for additional information
concerning the Company's postretirement benefit obligations.
Other long-term liabilities include accruals for environmental related
matters and other non-current liabilities. The increase in the total for these
accruals to $92.4 million was the result of an increase in the accruals for
environmental related matters and certain reclassifications from current
liabilities.
Shareholders' equity increased $127.3 million during 1993 due primarily to
current year net income partially offset by dividends paid to shareholders.
Treasury stock of 421,500 shares was acquired in 1993 and additional shares were
received in exchange for stock issued in accordance with the Company's 1984
Stock Plan. Occasionally, we acquire Company stock for general corporate
purposes and, depending on our cash position and market conditions, we may
purchase additional shares of stock in the future. See the Statements of
Consolidated Shareholders' Equity, on page 23 of this report, and Note 9, on
page 31 of this report, for equity and capital stock detail.
At a meeting held February 16, 1994, the Board of Directors declared a
regular quarterly dividend of $.14 per share. This dividend represents the
fifteenth consecutive yearly increase and a compounded rate of increase of 31.3
percent since the dividend was reinstated in the fourth quarter of 1979. The
1993 annual dividend of $.50 per share marked the fourteenth consecutive year
that the dividend approximated our payout ratio target of 30 percent of the
prior year's earnings.
11
<PAGE> 14
The Company and certain other companies were named defendants in a number
of lawsuits arising from the manufacture and sale of lead pigments and lead
paints. It is possible that additional lawsuits may be filed against the Company
in the future with similar allegations. The various existing lawsuits seek
damages for personal injuries and property damages, along with costs incurred to
abate the lead related paint from buildings. The Company believes that such
lawsuits are without merit and is vigorously defending them. The Company does
not believe that any potential liability ultimately determined to be
attributable to the Company arising out of such lawsuits will have a material
adverse effect on the Company's business or financial condition.
The Company believes that it conducts its operations in compliance with the
applicable environmental laws and regulations and has implemented various
programs designed to protect the environment and ensure continued compliance.
The operations of the Company, like those of other companies in our
industry, are subject to various federal, state and local environmental laws and
regulations. These laws and regulations not only govern our current operations
and products, but also impose liability on the Company for past operations which
were conducted utilizing practices and procedures that were considered
acceptable under the laws and regulations existing at the time these operations
were conducted. The Company expects the environmental laws and regulations to
impose increasingly stringent requirements upon the Company and our industry in
the future.
The Company is involved with environmental compliance and remediation
activities at some of its current and former sites. Capital expenditures and
expenses for ongoing compliance measures are included in the normal operating
expenses of conducting business. These capital expenditures and other expenses
were not material to the Company's financial condition or net income during
1993, and the Company does not expect these capital expenditures and other
expenses to be material to the Company's financial condition or net income in
the future.
The Company, together with other parties, has also been designated a
potentially responsible party under federal and state environmental protection
laws for the remediation of hazardous waste at a number of third-party sites,
primarily Superfund sites. In general, these laws provide that potentially
responsible parties may be held jointly and severally liable for investigation
and remediation costs regardless of fault. The Company may be similarly
designated with respect to additional third-party sites in the future.
Although the Company continuously assesses its potential liability for
remediation activities with respect to its past operations and third-party
sites, any potential liability ultimately determined to be attributable to the
Company is subject to a number of uncertainties including, among others, the
number of parties involved with respect to any given site, the volumetric
contribution which may be attributed to the Company relative to that
attributable to other parties, the nature and magnitude of the wastes involved,
and the method and extent of remediation. The Company has accrued for certain
environmental remediation activities relating to its past operations and
third-party sites, including Superfund sites, for which commitments or clean-up
plans have been developed or for which costs or minimum costs can be reasonably
estimated.
As disclosed in the Company's quarterly report filed on Form 10-Q for the
quarter ended June 30, 1993, the Company was named a defendant in a lawsuit
filed on July 16, 1993 by the United States Department of Justice, on behalf of
the United States Environmental Protection Agency, regarding the Company's
operations at its southeast Chicago facility. The lawsuit, which alleges
violations under various environmental statutes, seeks an undetermined amount of
civil penalties and further demands that certain, unspecified, corrective action
be taken to clean up the site. The Company is vigorously contesting the
allegations.
During 1993, the Company was also named a defendant in a lawsuit brought by
PMC, Inc. regarding one of the Company's former Chemical Division's
manufacturing facilities. This facility is located adjacent to the Company's
southeast Chicago facility referenced in the prior paragraph and was sold to
PMC, Inc. in 1985. PMC, Inc. is seeking an undisclosed amount for environmental
12
<PAGE> 15
remediation costs and other damages based upon contractual and tort theories,
and under various environmental laws. The Company is vigorously defending this
lawsuit.
With respect to the Company's southeast Chicago facility and its former
manufacturing facility adjacent thereto, both referenced above, the Company has
evaluated its potential liability and, based upon its preliminary evaluation,
has accrued an appropriate amount. However, due to the uncertainties surrounding
these facilities, the Company's ultimate liability may result in costs that are
significantly higher than currently accrued. In such event, the recording of the
liability may result in a significant impact on net income for the annual or
interim period during which the additional costs are accrued.
At December 31, 1993, the Company had various environmental related
accruals of $61.4 million, compared with $51.9 million at December 31, 1992 and
$44.9 million at December 31, 1991. These environmental related accruals are
contained in the current liabilities and other long-term liabilities portions of
the Company's consolidated balance sheets and are adjusted as information
becomes available upon which more accurate estimated costs can be made. In the
opinion of the Company's management, any potential liability ultimately
attributed to the Company for its environmental related matters will not have a
material adverse effect on the Company's financial condition, liquidity or cash
flow.
In addition to the accrual for environmental related matters discussed
above, the Company maintains accruals for the disposition and termination of
operations. Some of these costs are environmentally related. See Note 4 on page
26 of this report.
RESULTS OF OPERATIONS -- 1993 VS 1992
Consolidated net sales increased in 1993 by $201.5 million to $2.95
billion, an increase of 7.3 percent. The Paint Stores Segment accounted for
$148.6 million, or 73.7 percent, of the consolidated sales increase. The
Company's consolidated market share of gallons sold continued to increase as our
gallons sold increased at a faster rate than total gallons sold for the paint
industry, according to the latest U.S. Government statistics.
The Paint Stores Segment realized an 8.8 percent sales increase as all
operating divisions achieved sales results better than the results of 1992.
Comparable-store sales increased 8.5 percent. Modest selling price increases
within select product categories were partially offset by selling price
adjustments on certain non-paint products to result in overall 1993 price levels
remaining relatively constant with the prior year. Therefore, most of the
Segment's sales increase resulted from increased paint gallons sold,
complemented by volume increases in associated products. Strong sales to
wholesale customers, which includes professional painters, contractors, and
industrial and commercial maintenance customers, were partially offset by
continued soft retail sales in the first half of the year.
The Coatings Segment had a sales increase of 5.0 percent for 1993. The
Consumer Brands Division increased its sales volume in 1993 over the prior year
results primarily due to growth in the Dutch Boy registered trademark brand
and increased gallons sold to certain national customers. The growth of major
customers in our distribution base continued throughout 1993. The Automotive
Division had steady sales growth in its domestic branches and the majority of
its major product lines resulting in an overall sales increase for 1993. Sales
of external paint gallons and certain related products increased compared to
1992. The sales results of the Specialty Division improved primarily due to
growth in Krylon registered trademark brand products. Revenue for the real
estate operations in the Other Segment was slightly higher in comparison to
1992.
Consolidated gross profit dollars were 8.1 percent higher than last year as
gross profit as a percent of sales increased to 42.5 percent from 42.2 percent
in 1992. An increase in the Coatings Segment's gross margin was due primarily to
continuing volume gains and the associated improvement in capacity utilization,
overall stable raw material costs and cost containment. The Paint Stores
Segment's gross margin increased slightly as overall 1993 pricing was flat
compared to 1992.
13
<PAGE> 16
Consolidated selling, general and administrative expenses remained constant
at 33.3 percent when comparing 1993 to 1992. Higher dollars spent occurred in
the Coatings Segment as compared to last year due primarily to additional costs
for market penetration efforts for new customers, increased promotional expenses
associated with the introduction of new products and ongoing brand support.
Consolidated operating profits increased 11.2 percent in comparison with
1992. Operating profits of the Paint Stores Segment increased 28.5 percent due
primarily to volume gains. The Coatings Segment's operating profits increased
11.9 percent due primarily to manufacturing efficiencies due to volume gains,
stable raw material costs and ongoing cost containment. The operating profits of
the Other Segment decreased in comparison to 1992 due primarily to various
provisions made for certain non-retail properties. Corporate expenses increased
over 1992 as a result of changes in various provisions and other items which are
not directly associated with or allocable to any remaining operating segment.
Refer to pages 1 through 7 of this report for additional Business Segment
information.
Interest expense decreased 24.8 percent from last year due to normal
maturities and acquisitions of long-term debt and no short-term borrowings being
utilized during 1993. Correspondingly, our interest coverage improved to 42.0
times in 1993 compared to 27.4 times in 1992 (based on income before income
taxes and cumulative effects of changes in accounting methods). Our fixed charge
coverage, which is calculated using interest and rent expense, improved to 3.7
times in 1993 versus 3.4 times in 1992 (based also on income before income taxes
and cumulative effects of changes in accounting methods).
Interest and net investment income increased 48.2 percent to $7.0 million
primarily as a result of higher cash and short-term investment balances
partially offset by lower effective yields. Other costs and expenses decreased
to $7.3 million primarily due to reductions in the net adjustments to prior
accruals relating to the disposition and termination of operations and in the
provisions for environmental remediation. See Notes 3 and 4, on pages 25 and 26,
respectively, of this report, for further detail of other costs and expenses.
Income tax expense increased in 1993 as compared to 1992 primarily due to an
increase in the federal income tax rate legislated by Congress in the Omnibus
Budget Reconciliation Act of 1993. Income before cumulative effects of changes
in accounting methods increased 14.2 percent and income per share before
cumulative effects of changes in accounting methods increased 13.6 percent.
During 1993, the Company generated $254.3 million in cash flow from
operations. This allowed us to acquire certain outstanding debentures, acquire
additional common shares for treasury and increase the annual dividend.
The Company will be required to adopt SFAS No. 112, "Employers' Accounting
for Postemployment Benefits", effective January 1, 1994. This new accounting
standard requires accrual accounting for postemployment benefits instead of
recognizing the expense when the benefit is paid. Company postemployment
benefits available to certain individuals include disability benefits, severance
benefits, health and life insurance, outplacement counseling, etc. The effect of
adopting SFAS No. 112 is not expected to be material to the Company's financial
position or results of its operations. There will be no effect on the Company's
cash flow from operations due to this change in accounting.
RESULTS OF OPERATIONS -- 1992 VS 1991
Consolidated net sales in 1992 increased more than $206 million to $2.75
billion, an 8.1 percent increase. The Paint Stores Segment accounted for more
than $186 million of the consolidated sales increase. The Company's consolidated
market share of gallons sold continued to increase as our gallons sold increased
at a faster rate than total gallons sold for the paint industry, according to
the latest 1992 U.S. Government statistics available.
The Paint Stores Segment realized a 12.4 percent sales increase as all
operating divisions achieved sales results significantly above the sluggish
results of 1991. Comparable store sales increased 11.5 percent. Adjusting for
the July 1991 reorganization of the Chemical Coatings business and the
14
<PAGE> 17
1991 acquisition of Cook Paint and Varnish Company, segment sales improved 10.3
percent with a comparable store sales gain of 9.8 percent for the year. Overall,
selling prices remained flat due to competitive price pressures. Thus, most of
the Segment's sales increase resulted from increased paint gallons sold,
complemented by volume increases in all other product lines. Strong sales to
wholesale customers, which includes professional painters, contractors, and
industrial and commercial maintenance customers, were partially offset by soft
retail sales.
The Coatings Segment realized a sales increase of 1.9 percent for 1992.
Adjusting for the reorganization of the Chemical Coatings business and the
acquisitions of the Cuprinol registered trademark brand, the Holland Division
of Guardsman Products, Inc., and Cook Paint and Varnish Company in 1991, sales
for the Segment improved 2.3 percent over the prior year. The Consumer Brands
Division, formed in early 1992, increased its sales volume in 1992 over
comparable prior year numbers, primarily in the Dutch Boy registered trademark
brand and select private label brands. The Automotive Division showed steady
sales growth in its domestic branches and all major wholesale product lines.
However, due to sales mix between paint gallons and related products, gallons
sold decreased slightly while overall dollars for all product lines increased.
The Specialty Division had improved sales results primarily due to the growth
in Krylon registered trademark brand products. Revenue for the real estate
operations in the Other Segment was up slightly in comparison to 1991.
Consolidated gross profit as a percent of sales increased to 42.2 percent
from 41.0 percent in 1991 and gross profit dollars increased 11.3 percent. The
increase in gross margin was due primarily to continuing volume gains and the
associated improvement in capacity utilization, overall stable raw material
costs, the ongoing improvement of acquired businesses and cost reductions
associated with the Chemical Coatings reorganization. Competitive price
pressures on select product lines and higher employee benefit expenses,
particularly health care expenses, partially offset the improvements noted.
Consolidated selling, general and administrative expenses increased as a
percent of sales to 33.3 percent from 32.5 percent in 1991. These expenses were
higher primarily due to the additional 1992 postretirement benefits expense
created by the adoption of SFAS No. 106. Also contributing to higher levels of
expense were increased promotional expenses associated with the introduction of
new products and other increased advertising expenditures.
Consolidated operating profits increased 13.7 percent in comparison with
1991. Operating profits of the Paint Stores Segment increased 11.1 percent due
primarily to volume gains partially offset by continuing competitive price
pressures. Excluding the current year effect of SFAS No. 106, Paint Stores
Segment operating profits would have increased 16.8 percent. The Coatings
Segment's operating profits increased 24.3 percent due primarily to lower costs
and improvement of acquired businesses as detailed above. Excluding the current
year effect of SFAS No. 106, this segment's operating profits increased 27.2
percent. The operating profits of the Other Segment decreased due to 1992
provisions for the disposition of certain unprofitable non-retail properties.
Corporate expenses increased over 1991 as a result of changes in various
provisions and other items which are not directly associated with or allocable
to any remaining operating segment. Refer to pages 1 through 7 of this report
for more Business Segment information.
Interest expense decreased 30.4 percent from last year due to normal
maturities and prepayments of long-term debt. Less short-term borrowings
utilized and lower average interest rates paid on short-term borrowings also
reduced interest expense as compared to 1991. Our interest coverage improved to
27.4 times in 1992 (based on income before income taxes and cumulative effects
of changes in accounting methods) compared to 17.1 times in 1991. Our fixed
charge coverage, which is calculated using interest and rent expense, improved
to 3.4 times in 1992 (based also on income before income taxes and cumulative
effects of changes in accounting methods) versus 3.1 times in 1991.
Interest and net investment income decreased 7.4 percent to $4.7 million
due to lower yields realized than in 1991. Other costs and expenses increased
$4.7 million primarily due to an increase in the accrual for disposition and
termination of certain operations in 1992. See Notes 3 and 4, on pages 25 and
26, respectively, of this report for further detail of other costs and expenses.
An increase in the effective income tax rate is due generally to the reduction
in tax-favored investments and other items
15
<PAGE> 18
realized by the Company. Net income decreased 51.0 percent to $62.9 million and
net income per share decreased 51.4 percent to $.71. Excluding the cumulative
one-time charge of adopting SFAS No. 106 and SFAS No. 109, net income increased
12.8 percent to $144.6 million and net income per share increased 11.9 percent
to $1.63.
During 1992, the Company generated $214.1 million in cash flow from
operations. This allowed us to invest in capital programs, prepay certain
outstanding debt, increase the annual dividend, and still retain $167.7 million
in cash and short-term investments at the end of the year.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
The Sherwin-Williams Company
Cleveland, Ohio
We have audited the accompanying consolidated balance sheets of The
Sherwin-Williams Company and subsidiaries as of December 31, 1993, 1992 and
1991, and the related statements of consolidated income, shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1993. Our audits also included the financial statement schedules listed at Item
14(a)(2) on page 19. These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
The Sherwin-Williams Company and subsidiaries at December 31, 1993, 1992 and
1991, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1993, in conformity
with generally accepted accounting principles. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
As discussed in Notes 6 and 12 to the consolidated financial statements, in
1992 the Company changed its methods of accounting for postretirement benefits
other than pensions and income taxes, respectively.
/s/ Ernst & Young
Cleveland, Ohio
January 20, 1994
16
<PAGE> 19
REPORT OF MANAGEMENT
Shareholders
The Sherwin-Williams Company
We have prepared the accompanying consolidated financial statements and
related information included herein for the years ended December 31, 1993, 1992
and 1991. The primary responsibility for the integrity of the financial
information rests with management. This information is prepared in accordance
with generally accepted accounting principles based upon our best estimates and
judgments and giving due consideration to materiality.
The Company maintains accounting and control systems which are designed to
provide reasonable assurance that assets are safeguarded from loss or
unauthorized use and which produce records adequate for preparation of financial
information. There are limits inherent in all systems of internal control based
on the recognition that the cost of such systems should not exceed the benefits
to be derived. We believe our system provides this appropriate balance.
The Board of Directors pursues its responsibility for these financial
statements through the Audit Committee, composed exclusively of outside
directors. The Committee meets periodically with management, internal auditors
and our independent auditors to discuss the adequacy of financial controls, the
quality of financial reporting and the nature, extent and results of the audit
effort. Both the internal auditors and independent auditors have private and
confidential access to the Audit Committee at all times.
<TABLE>
<S> <C> <C>
J.G. Breen L.J. Pitorak J.L. Ault
Chairman and Senior Vice President -- Finance, Vice President --
Chief Executive Officer Treasurer and Chief Financial Corporate Controller
Officer
</TABLE>
FINANCIAL STATEMENTS
See "Item 14 -- Financial Statement Schedules, Reports on Form 8-K and
Exhibits" for the required Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
17
<PAGE> 20
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT
The information required by Item 10 regarding Directors is contained under
the caption "Election of Directors" in the Proxy Statement which will be filed
with the Securities and Exchange Commission, pursuant to Regulation 14A, not
later than 120 days after the end of the fiscal year, which information under
such caption is incorporated herein by reference.
The information required by Item 10 regarding Executive Officers is
contained under the caption "Executive Officers of the Company" in the Proxy
Statement which information under such caption is incorporated herein by
reference.
The information required by Item 10 regarding certain significant employees
is contained under the caption "Operating Managers of the Company" in the Proxy
Statement which information under such caption is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is contained under certain captions and
tables in the Proxy Statement which information under such captions and tables
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The information required by Item 12 is contained under certain captions in
the Proxy Statement which information under such captions is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
18
<PAGE> 21
PART IV
ITEM 14. FINANCIAL STATEMENT SCHEDULES, REPORTS ON FORM 8-K AND EXHIBITS
(a)
(1) Financial Statements
(i) Statements of Consolidated Income for the Years Ended
December 31, 1993, 1992 and 1991
(ii) Consolidated Balance Sheets at December 31, 1993, 1992 and 1991
(iii) Statements of Consolidated Cash Flows for the Years Ended
December 31, 1993, 1992 and 1991
(iv) Statements of Consolidated Shareholders' Equity for the Years
Ended December 31, 1993, 1992 and 1991
(v) Notes to Consolidated Financial Statements for the Years Ended
December 31, 1993, 1992 and 1991
(2) Financial Statement Schedules
Financial Schedules Nos. VIII and X for the Years Ended
December 31, 1993, 1992 and 1991
(3) Exhibits
See Exhibits on page 38 of this report
(b) Reports on Form 8-K. The Company did not file any reports on Form 8-K during
the quarter ended December 31, 1993.
19
<PAGE> 22
STATEMENTS OF CONSOLIDATED INCOME
(Thousands of Dollars Except Per Share data)
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------
Net sales $2,949,303 $2,747,843 $2,541,446
Costs and expenses:
Cost of goods sold 1,696,959 1,589,430 1,500,298
Selling, general and administrative
expenses 981,268 914,660 825,859
Interest expense 6,453 8,576 12,326
Interest and net investment income (7,020) (4,738) (5,114)
Other 7,279 13,921 9,266
- ------------------------------------------------------------------------------------------
2,684,939 2,521,849 2,342,635
- ------------------------------------------------------------------------------------------
Income before income taxes and cumulative
effects of changes in accounting methods 264,364 225,994 198,811
Income taxes 99,137 81,358 70,578
- ------------------------------------------------------------------------------------------
Income before cumulative effects of changes
in accounting methods 165,227 144,636 128,233
Cumulative effect of change in accounting
method for income taxes 18,057
Cumulative effect of change in accounting
method for postretirement benefits other
than pensions -- net of income taxes of
$62,464 (99,828)
- ------------------------------------------------------------------------------------------
Net income $ 165,227 $ 62,865 $ 128,233
==========================================================================================
Income per share:
Before cumulative effects of changes in
accounting methods $ 1.85 $ 1.63 $ 1.45
Cumulative effect of change in
accounting method for income taxes .20
Cumulative effect of change in
accounting method for postretirement
benefits other than pensions -- net of
taxes (1.12)
- ------------------------------------------------------------------------------------------
Net income $ 1.85 $ .71 $ 1.45
==========================================================================================
</TABLE>
See notes to consolidated financial statements.
20
<PAGE> 23
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 230,092 $ 164,701 $ 100,766
Short-term investments 39,700 3,011
Accounts receivable, less allowance 297,527 277,314 246,547
Inventories:
Finished goods 371,572 355,227 356,721
Work in process and raw materials 57,346 52,557 65,083
- ------------------------------------------------------------------------------------------
428,918 407,784 421,804
Other current assets 154,850 135,354 118,020
- ------------------------------------------------------------------------------------------
Total current assets 1,151,087 988,164 887,137
Deferred pension assets 214,583 189,974 172,430
Intangibles and other assets 154,925 163,803 175,249
Property, plant and equipment:
Land 45,487 43,585 43,300
Buildings 219,395 210,157 200,484
Machinery and equipment 556,694 515,748 473,995
Construction in progress 17,178 17,393 17,100
- ------------------------------------------------------------------------------------------
838,754 786,883 734,879
Less allowances for depreciation 444,684 398,969 357,789
- ------------------------------------------------------------------------------------------
394,070 387,914 377,090
- ------------------------------------------------------------------------------------------
Total Assets $1,914,665 $1,729,855 $1,611,906
==========================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 254,997 $ 231,539 $ 203,558
Compensation and taxes withheld 71,476 66,399 60,212
Current portion of long-term debt 1,745 13,303 43,151
Other accruals 199,479 173,148 152,099
Accrued taxes 39,804 21,434 29,402
- ------------------------------------------------------------------------------------------
Total current liabilities 567,501 505,823 488,422
Long-term debt 37,901 60,079 71,768
Deferred income taxes 17,629 15,843 99,793
Postretirement benefits other than pensions 166,025 163,104
Other long-term liabilities 92,438 79,159 83,960
Shareholders' equity:
Common stock -- $1.00 par value:
88,506,337, 88,380,906 and 87,643,066
shares outstanding at December 31,
1993, 1992 and 1991, respectively 99,994 99,374 98,483
Other capital 150,203 134,901 116,683
Retained earnings 957,858 828,851 805,689
Cumulative foreign currency translation
adjustment (20,384) (18,923) (18,885)
Treasury stock, at cost (154,500) (138,356) (134,007)
- ------------------------------------------------------------------------------------------
Total shareholders' equity 1,033,171 905,847 867,963
- ------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $1,914,665 $1,729,855 $1,611,906
==========================================================================================
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 24
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Thousands of Dollars)
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
OPERATIONS
Net income $ 165,227 $ 62,865 $ 128,233
Non-cash adjustments:
Cumulative effects of changes in accounting
methods 81,771
Depreciation 55,063 51,308 47,879
Deferred income tax expense (21,873) (5,202) (3,832)
Provisions for disposition of operations 7,621 7,735 5,432
Provisions for environmental remediation 4,354 9,450 10,520
Amortization of intangible assets 13,753 14,960 12,068
Defined benefit pension plans net credit (16,113) (15,896) (13,220)
Net postretirement benefit plans expense 2,921 8,834
Other 16,261 7,491 (1,683)
Change in current items -- net:
Increase in accounts receivable (19,500) (30,185) (13,292)
Decrease (increase) in inventories (19,553) 15,405 (42,300)
Increase in accounts payable 23,458 27,981 703
Increase (decrease) in accrued taxes 16,697 (7,968) 5,789
Increase in accrued employee welfare costs 14,957 7,816 3,702
Other current items 13,946 (8,903) 5,327
Costs incurred for dispositions of operations (5,767) (10,366) (5,066)
Other 2,836 (2,968) (4,780)
- ---------------------------------------------------------------------------------------
Net operating cash 254,288 214,128 135,480
- ---------------------------------------------------------------------------------------
INVESTING
Capital expenditures (62,985) (68,814) (50,956)
Decrease (increase) in short-term investments (36,689) (3,011) 3,000
Acquisitions of assets (3,157) (2,985) (37,072)
Other (3,521) (272) (3,494)
- ---------------------------------------------------------------------------------------
Net investing cash (106,352) (75,082) (88,522)
- ---------------------------------------------------------------------------------------
FINANCING
Payments of long-term debt (33,711) (44,174) (28,044)
Payments of cash dividends (44,373) (38,759) (36,727)
Proceeds from stock options exercised 12,626 17,709 13,360
Purchases of stock for treasury (16,144) (4,349) (1,327)
Other (943) (5,538) 10,569
- ---------------------------------------------------------------------------------------
Net financing cash (82,545) (75,111) (42,169)
- ---------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 65,391 63,935 4,789
Cash and cash equivalents at beginning of
year 164,701 100,766 95,977
- ---------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 230,092 $ 164,701 $ 100,766
=======================================================================================
Taxes paid on income $ 102,513 $ 89,297 $ 70,260
Interest paid on debt 7,886 7,508 12,715
- ---------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 25
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(Thousands of Dollars)
<TABLE>
<CAPTION>
CUMULATIVE
COMMON OTHER RETAINED TRANSLATION TREASURY
STOCK CAPITAL EARNINGS ADJUSTMENT STOCK
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Balance at January 1, 1991 $ 48,759 $ 150,661 $ 712,233 $ (15,269) $ (132,680)
Two-for-one stock split 48,982 (48,982)
Stock issued 742 15,004 (1,327)
Net income 128,233
Cash dividends -- $.42 per share (36,727)
Reduction in unfunded pension
losses -- net of taxes 1,950
Current year translation adjustment (3,616)
- --------------------------------------------------------------------------------------------------------
Balance at December 31, 1991 98,483 116,683 805,689 (18,885) (134,007)
Treasury stock acquired (678)
Stock issued 891 18,218 (3,671)
Net income 62,865
Cash dividends -- $.44 per share (38,759)
Increase in unfunded pension losses
-- net of taxes (944)
Current year translation adjustment (38)
- --------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 99,374 134,901 828,851 (18,923) (138,356)
Treasury stock acquired (13,841)
Stock issued 620 15,302 (2,303)
Net income 165,227
Cash dividends -- $.50 per share (44,373)
Reduction in unfunded pension
losses -- net of taxes 8,153
Current year translation adjustment (1,461)
- --------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 $ 99,994 $ 150,203 $ 957,858 $ (20,384) $ (154,500)
========================================================================================================
</TABLE>
See notes to consolidated financial statements.
23
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of Dollars Unless Otherwise Indicated)
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION. The consolidated financial statements include all significant
controlled subsidiaries. Inter-company accounts and transactions have been
eliminated.
BUSINESS SEGMENTS. Business segment information appears on pages 1 through 7 of
this report.
FOREIGN CURRENCY TRANSLATION. All consolidated foreign operations use the local
currency of the country of operation as the functional currency and translate
the local currency asset and liability accounts at year-end exchange rates while
income and expense accounts are translated at average exchange rates. The
resulting translation adjustments are accumulated as a separate component of
Shareholders' Equity titled "Cumulative foreign currency translation
adjustment."
CASH FLOWS. The Company considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment is stated on the
basis of cost. Depreciation is provided principally by the straight-line method.
The major classes of assets and ranges of depreciation rates are as follows:
<TABLE>
<S> <C>
Buildings 2%-6 2/3%
Machinery and equipment 4%-20%
Furniture and fixtures 5%-20%
Automobiles and trucks 10%-33 1/3%
</TABLE>
INTANGIBLES. Intangible assets were $115,765, $128,222 and $143,038, net of
accumulated amortization of $49,562, $35,986 and $19,715, at December 31, 1993,
1992 and 1991, respectively. These assets are amortized by the straight-line
method over the expected period of benefit.
TECHNICAL EXPENDITURES. Total technical expenditures include research and
development costs, quality control, product formulation expenditures and other
similar items. Research and development costs included in technical expenditures
were $17,190, $15,661 and $18,387 for 1993, 1992 and 1991, respectively.
INTEREST RATE SWAPS. The Company occasionally enters into interest rate swaps
primarily to hedge against interest rate risks. These agreements generally
involve the exchange of fixed and floating rate interest payment obligations
without the exchange of the underlying principal amounts.
NET INCOME PER SHARE. Net income per share was computed based on the average
number of shares and share equivalents outstanding during the year. See
computation on page 40 of this report.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The following methods and assumptions were
used by the Company in estimating its fair value disclosures for financial
instruments:
CASH AND CASH EQUIVALENTS: The carrying amounts reported in the
consolidated balance sheets for cash and cash equivalents approximate fair
value.
SHORT-TERM INVESTMENTS: The carrying amounts reported in the consolidated
balance sheets for marketable debt and equity securities are based on
quoted market prices and approximate fair value.
LONG-TERM DEBT (INCLUDING CURRENT PORTION): The fair values of the
Company's publicly traded debentures, shown below, are based on quoted
market prices. The fair values of the Company's non-traded debt, also shown
below, are estimated using discounted cash flow analyses, based on the
Company's current incremental borrowing rates for similar types of
borrowing arrangements.
24
<PAGE> 27
<TABLE>
<CAPTION>
DECEMBER 31, 1993 December 31, 1992
---------------------------------------------------------------------------------------
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Publicly traded debt $ 29,235 $ 37,071 $ 49,260 $ 55,538
Non-traded debt 10,084 7,446 23,722 19,931
---------------------------------------------------------------------------------------
</TABLE>
INTEREST RATE SWAPS: The fair values for the Company's off balance sheet
instruments, based on pricing models or formulas using current assumptions
for comparable instruments, totaled $1,094 and $2,722 at December 31, 1993
and 1992, respectively.
NON-TRADED INVESTMENTS: It was not practicable to estimate the fair value
of the Company's investment in certain non-traded investments because of
the lack of quoted market prices and the inability to estimate fair values
without incurring excessive costs. The carrying amounts, included in other
assets, of $25,778 and $21,431 at December 31, 1993 and 1992, respectively,
represent the Company's best estimate of current economic values of these
investments.
RECLASSIFICATION. Certain amounts in the 1992 and 1991 financial statements have
been reclassified to conform with the 1993 presentation.
NOTE 2 -- INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
principally on the last-in, first-out (LIFO) method which provides a better
matching of current costs and revenues. The following presents the effect on
inventories, net income and net income per share had the Company used the
first-in, first-out (FIFO) and average cost methods of inventory valuation
adjusted for income taxes at the statutory rate and assuming no other
adjustments. This information is presented to enable the reader to make
comparisons with companies using the FIFO method of inventory valuation.
<TABLE>
<CAPTION>
1993 1992 1991
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Percentage of total inventories on LIFO 97% 97% 97%
Excess of FIFO and average cost over LIFO $ 80,094 $ 83,505 $ 83,241
Increase (decrease) in net income due to LIFO 2,217 (174) (1,344)
Increase (decrease) in net income per share due to LIFO .02 -- (.02)
- -----------------------------------------------------------------------------------------------
</TABLE>
NOTE 3 -- OTHER COSTS AND EXPENSES
A summary of significant items included in other costs and expenses is as
follows:
<TABLE>
<CAPTION>
1993 1992 1991
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend and royalty income $ (5,445) $ (6,934) $ (5,403)
Net expense of financing and investing activities 4,155 2,323 872
Provisions for environmental remediation 4,354 9,450 10,520
Provisions for disposition and termination of operations
(see Note 4) 2,621 7,310 872
Miscellaneous 1,594 1,772 2,405
- -----------------------------------------------------------------------------------------------
$ 7,279 $ 13,921 $ 9,266
===============================================================================================
</TABLE>
The net expense of financing and investing activities represents the
realized gains or losses associated with disposing of fixed assets, the
investment income of certain long-term asset funds and the premium associated
with the acquisition of $20,000 principal of outstanding 9.875 percent
debentures.
25
<PAGE> 28
During the three years ended December 31, 1993, provisions for
environmental remediation reflect the increased estimated costs of continued
compliance with applicable regulations at operating facilities, idle facilities
and Superfund sites.
NOTE 4 -- DISPOSITION AND TERMINATION OF OPERATIONS
The Company is continually re-evaluating its operating facilities with
regard to the long-term strategic goals established by management and the board
of directors. Operating facilities which are not expected to contribute to the
Company's future plans are closed or sold.
At the time of the decision to close or sell a facility, a provision is
made and the expense included in other costs and expenses to reduce property,
plant and equipment to its estimated net realizable value. Similarly, provisions
are made which reduce all other assets to their estimated net realizable values
and provide for the estimated related costs of severance pay, environmental
related matters and other shutdown expenses and future operating losses to
disposal date. The expenses associated with the related cost provisions are
included in cost of goods sold. Adjustments to all previous accruals, as
disposition occurs, are included in other costs and expenses.
During 1993, provisions were made for the closing of certain warehouses,
small manufacturing facilities and selected unprofitable retail paint stores as
part of production and distribution consolidations. In 1992, the provisions
represented primarily the estimated increased operational losses to disposal
date of closed facilities. In 1991, provisions were made for the closing of
certain operating facilities primarily related to the reorganization of the
Chemical Coatings Division.
A summary of the financial data related to the closing or sale of the
facilities, expected to be completed by 1995, is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning accrual -- January 1 $ 43,206 $ 45,837 $ 45,471
Provisions included in cost of goods sold 5,000 425 4,560
Provisions and adjustments to prior accruals included in
costs and expenses -- other 2,621 7,310 872
- -----------------------------------------------------------------------------------------------
Total provision 7,621 7,735 5,432
Actual costs incurred (5,767) (10,366) (5,066)
- -----------------------------------------------------------------------------------------------
Ending accrual -- December 31 $ 45,060 $ 43,206 $ 45,837
Net after-tax provision $ 4,954 $ 5,105 $ 3,585
Net after-tax provision per share $ .05 $ .06 $ .04
- -----------------------------------------------------------------------------------------------
</TABLE>
NOTE 5 -- PENSION BENEFITS
Substantially all employees of the Company participate in noncontributory
defined benefit or defined contribution pension plans. Defined benefit plans
covering salaried employees provide benefits that are based primarily on years
of service and employees' compensation. The defined benefit plan covering hourly
employees generally provides benefits of stated amounts for each year of
service. Multiemployer plans are primarily defined benefit plans which provide
benefits of stated amounts for union employees. On December 31, 1993, the hourly
defined benefit pension plan was merged with a frozen participation salaried
defined benefit pension plan associated with previously discontinued operations.
Based on the latest actuarial information available, plan assets of the
resulting merged plan, known as the Employees' Retirement Plan, exceeded the
projected benefit obligation.
A change in the assumed discount rate at December 31, 1993 increased the
projected benefit obligation. The effect of the change in the assumed discount
rate, which increases the unrecognized net loss shown below, will be amortized
over future periods beginning in 1994. The assumed long-term rate of return on
plan assets was also reduced at December 31, 1993. The effect of this change
will
26
<PAGE> 29
reduce the net pension credit in 1994. The Company's funding policy for defined
benefit pension plans is to fund at least the minimum annual contribution
required by applicable regulations.
The net pension credit for defined benefit plans and its components was as
follows:
<TABLE>
<CAPTION>
1993 1992 1991
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 2,489 $ 2,620 $ 2,646
Interest cost 8,299 8,167 7,906
Actual return on plan assets (25,731) (16,903) (27,734)
Net amortization and deferral (1,170) (9,780) 3,962
- -----------------------------------------------------------------------------------------------
Net pension credit $ (16,113) $ (15,896) $ (13,220)
- -----------------------------------------------------------------------------------------------
</TABLE>
Based on the latest actuarial information available, the following table
sets forth the funded status and amounts recognized in the Company's
consolidated balance sheets for the defined benefit pension plans:
<TABLE>
<CAPTION>
1993 1992 1991
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ (105,530) $ (92,720) $ (88,490)
Accumulated benefit obligation $ (107,530) $ (94,580) $ (90,155)
Projected benefit obligation $ (117,970) $ (102,480) $ (99,635)
Plan assets (consisting primarily of cash, equity
and fixed income securities) at fair value:
Salaried employees' plan(s) 203,222 219,391 209,415
Employees' Retirement Plan 89,854 55,588 55,022
- -----------------------------------------------------------------------------------------------
293,076 274,979 264,437
Plan assets in excess of (less than) projected
benefit obligation:
Salaried employees' plan(s) 166,622 181,011 173,310
Employees' Retirement Plan 8,484 (8,512) (8,508)
- -----------------------------------------------------------------------------------------------
175,106 172,499 164,802
Unrecognized net asset at January 1, 1986, net of
amortization (15,708) (18,630) (21,552)
Unrecognized prior service cost 1,201 885 850
Unrecognized net loss 53,984 40,621 32,192
Adjustment required to recognize minimum liability
for the Employees' Retirement Plan (13,515) (11,902)
- -----------------------------------------------------------------------------------------------
Net pension assets $ 214,583 $ 181,860 $ 164,390
===============================================================================================
Net pension assets recognized in the consolidated
balance sheets:
Deferred pension assets $ 214,583 $ 189,974 $ 172,430
Minimum liability included in long-term
liabilities (6,489) (6,169)
Accrued pension liability included in current
liabilities (1,625) (1,871)
- -----------------------------------------------------------------------------------------------
Net pension assets $ 214,583 $ 181,860 $ 164,390
===============================================================================================
Assumptions used in determining actuarial present
value of benefit obligations:
Discount rate 7.25% 8.50% 8.50%
Weighted-average rate of increase in future
compensation levels 5.00% 5.00% 5.00%
Long-term rate of return on plan assets 8.50% 10.00% 10.00%
- -----------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 30
The Company's annual contribution for its defined contribution pension
plans, which is based on a level percentage of compensation for covered
employees, offset the pension credit by $19,809 for 1993, $17,110 for 1992 and
$16,000 for 1991. The cost of multiemployer and foreign plans charged to income
was immaterial for the three years ended December 31, 1993.
NOTE 6 -- BENEFITS OTHER THAN PENSIONS
In addition to providing pension benefits, the Company provides certain
health care and life insurance benefits under company-sponsored plans for active
and retired employees. The health care plans are contributory and contain
cost-sharing features such as deductibles and coinsurance. Certain provisions of
the plans concerning deductibles, coinsurance and eligibility were amended as of
January 1, 1993. There were 13,883, 13,741 and 13,533 active employees entitled
to receive benefits under these plans as of December 31, 1993, 1992 and 1991,
respectively. The cost of these benefits for active employees is recognized as
claims are incurred and amounted to $35,597, $35,047 and $29,662 for 1993, 1992
and 1991, respectively. The Company has a fund to provide for payment of health
care benefits of certain qualified employees. Contributions, exclusive of
employee contributions, of $34,000 and $27,500 were made to the fund in 1992 and
1991, respectively. Distributions from the fund amounted to $5,719 in 1993,
$35,447 in 1992 and $29,703 in 1991. The Company does not plan to make any
further contributions to this fund.
Substantially all employees of the Company who are not members of a
collective bargaining unit are eligible for certain health care and life
insurance benefits upon retirement. There were 4,126, 4,201 and 4,205 retired
employees entitled to receive benefits as of December 31, 1993, 1992 and 1991,
respectively. The health care and life insurance plan amendments decreased the
accumulated postretirement benefit obligation resulting in a net prior service
credit which is being amortized over future years beginning in 1993. The plans
are unfunded.
During the fourth quarter of 1992, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions", effective January 1, 1992. The
Company recognized a one-time charge to consolidated income on January 1, 1992
of $99,828 ($1.12 per share) for the accumulated postretirement benefit
obligation which was not recognized by the Company prior to the adoption of SFAS
No. 106. The effect of adopting SFAS No. 106 decreased 1992 income before
cumulative effects of changes in accounting methods by $5,654 ($.06 per share).
Previously, the Company recognized postretirement benefit costs as claims were
incurred which amounted to $7,626 in 1991. Costs for benefit claims expensed
when incurred have not been restated for years prior to 1992.
The assumed discount rate used in determining the actuarial present value
of the accumulated postretirement benefit obligation was 7.25% for 1993 and 8.5%
for 1992. The change in the assumed discount rate increased the accumulated
postretirement benefit obligation at December 31, 1993. The assumed
weighted-average annual rate of increase in the per capita cost of covered
benefits (i.e., the health care cost trend rate) is 10.5 percent for 1994 and
decreases gradually to 5.5 percent for 2003 and thereafter. The assumed health
care cost trend rate is one percentage point lower in each year than last year's
assumption resulting in a decrease to the accumulated postretirement benefit
obligation at December 31, 1993. The effect of the changes in the assumed
discount rate and health care cost trend rate created an unrecognized net loss
which will be amortized over future periods beginning in 1994. The health care
cost trend rate has a significant effect on the amounts reported. To illustrate,
increasing the assumed health care cost trend rate by one percentage point in
each year would increase the accumulated postretirement benefit obligation as of
December 31, 1993 by $11,763 and the aggregate service and interest cost
components of net periodic postretirement benefit cost for 1993 by $1,057.
28
<PAGE> 31
Based on the latest actuarial information available, the following table
sets forth the amounts recognized in the Company's consolidated balance sheets
for postretirement benefits other than pensions:
<TABLE>
<CAPTION>
1993 1992
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of accumulated postretirement benefit
obligation:
Retirees $ (94,000) $ (96,776)
Fully eligible active participants (19,900) (21,156)
Other active participants (40,680) (54,272)
- ---------------------------------------------------------------------------------------------
(154,580) (172,204)
Effect of changes in the accumulated postretirement benefit
obligation to be amortized over future years:
Unrecognized prior service credit (29,655)
Unrecognized net loss 9,110
- ---------------------------------------------------------------------------------------------
Total accrued postretirement benefit liability $ (175,125) $ (172,204)
=============================================================================================
Accrued postretirement benefit liabilities recognized in the
consolidated balance sheets:
Amount included in current liabilities $ (9,100) $ (9,100)
Amount of long-term postretirement benefits other than
pensions (166,025) (163,104)
- ---------------------------------------------------------------------------------------------
Total accrued postretirement benefit liability $ (175,125) $ (172,204)
=============================================================================================
The expense for postretirement benefit plans and its components
was as follows:
Service cost $ 2,450 $ 3,938
Interest cost 11,420 13,886
Net amortization of unrecognized prior service credit (2,693)
- ---------------------------------------------------------------------------------------------
Net postretirement benefit expense $ 11,177 $ 17,824
=============================================================================================
</TABLE>
NOTE 7 -- LONG-TERM DEBT
<TABLE>
<CAPTION>
Sinking Fund/Interim Payments Amount Outstanding
----------------------------- ---------------------------------------
Due Date Amount Commence 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
9.875% Debentures 2016 $5,000 2007 $ 29,000 $ 49,000 $ 50,000
6.25% Convertible Subordinated 1995 2,000 Payable currently 235 260 289
Debentures (Convertible into
common stock at $2.875 a share)
Floating Rate Broward County Through Varies Payable currently 3,994 4,374 4,755
Industrial Revenue Bond 2005
8% to 12% Mortgage Notes secured by Through Varies Payable currently 4,418 6,114 6,318
certain land and buildings, and 2005
other
8.78% Promissory Notes 10,000
Obligations under capital 254 331 406
leases--less current portion of
$72 in 1993
- -----------------------------------------------------------------------------------------------------------------------------
$ 37,901 $ 60,079 $ 71,768
=============================================================================================================================
</TABLE>
Maturities of long-term debt, exclusive of capital lease obligations, are
as follows for the next five years: $1,673 in 1994; $1,668 in 1995; $1,113 in
1996; $949 in 1997; and $745 in 1998.
Interest expense on long-term debt amounted to $6,136, $7,438 and $10,997
for 1993, 1992 and 1991, respectively. There were no interest charges
capitalized during the periods presented.
29
<PAGE> 32
At December 31, 1993, the Company had two interest rate swap agreements
outstanding. These agreements generally involve the exchange of fixed and
floating rate interest payment obligations without the exchange of the
underlying principal amounts. The underlying principal amounts of these
agreements totaled $35,009 with $25,000 expiring in 1995 and $10,009 in 1997.
Counterparties of these agreements are major financial institutions. Management
believes the risk of incurring losses related to credit risk is remote.
At December 31, 1993, the Company had standby letters of credit outstanding
totaling $24,656 which guarantee various operating activities.
The Company had the following financing arrangements available, however
there were no outstanding borrowings at December 31, 1993.
Under a credit agreement with a group of eleven banks dated June 22, 1987,
the Company may borrow up to $280,000. The termination date of the agreement is
automatically extended by one year on each anniversary date, but shall not
extend beyond the twentieth anniversary of the agreement. Amounts outstanding
under the agreement may be converted into two-year term loans at any time. The
credit agreement includes certain restrictive covenants regarding the working
capital ratio. There are no compensating balance requirements.
The Company has a commercial paper program under which $280,000 aggregate
principal amount of unsecured short-term notes can be issued.
Under a shelf registration with the Securities and Exchange Commission
covering $200,000 of unsecured debt securities with maturities ranging from nine
months to thirty years, the Company may issue securities from time to time in
one or more series and will offer the securities on terms determined at the time
of sale.
NOTE 8 -- LEASES
The Company leases stores, warehouses, office space and equipment. Renewal
options are available on the majority of leases and, under certain conditions,
options exist to purchase some properties. Rental expense for operating leases
was $91,672, $86,944 and $82,755 for 1993, 1992 and 1991, respectively. Certain
store leases require the payment of contingent rentals based on sales in excess
of specified minimums. Contingent rentals included in rent expense were $9,234
in 1993, $8,215 in 1992 and $7,832 in 1991. Certain properties are subleased
with various expiration dates. Rental income, as lessor, from real estate
leasing activities and sublease rental income for all years presented was not
significant.
Property, plant and equipment includes the following amounts for capital
leases, which are amortized by the straight-line method over the lease term:
<TABLE>
<CAPTION>
1993 1992 1991
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Buildings $ 841 $ 992 $2,660
Machinery and Equipment 236 236 404
- ---------------------------------------------------------------------------------------------
1,077 1,228 3,064
Less allowance for amortization 807 903 2,621
- ---------------------------------------------------------------------------------------------
$ 270 $ 325 $ 443
=============================================================================================
</TABLE>
30
<PAGE> 33
Following is a schedule, by year and in the aggregate, of future minimum
lease payments under capital leases and noncancellable operating leases having
initial or remaining terms in excess of one year at December 31, 1993:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
- --------------------------------------------------------------------------------------------
<S> <C> <C>
1994 $ 114 $ 69,156
1995 81 59,739
1996 65 49,054
1997 57 36,774
1998 20 24,834
Later years 135 60,211
- --------------------------------------------------------------------------------------------
Total minimum lease payments $ 472 $299,768
Amount representing interest (129)
Executory costs (17)
- --------------------------------------------------------------------------------------------
Present value of net minimum lease payments $ 326
============================================================================================
</TABLE>
NOTE 9 -- CAPITAL STOCK
<TABLE>
<CAPTION>
SHARES SHARES
IN TREASURY OUTSTANDING
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Balance at January 1, 1991 10,779,262 86,738,836
Stock issued upon:
Exercise of stock options 60,454 763,494
Conversion of 6.25% Convertible Subordinated Debentures 17,736
Restricted stock grants 123,000
- ---------------------------------------------------------------------------------------------
Balance at December 31, 1991 10,839,716 87,643,066
Stock issued upon:
Exercise of stock options 128,463 768,833
Conversion of 6.25% Convertible Subordinated Debentures 10,085
Cancellation of restricted stock grants (16,000)
Treasury stock acquired 25,078 (25,078)
- ---------------------------------------------------------------------------------------------
Balance at December 31, 1992 10,993,257 88,380,906
Stock issued upon:
Exercise of stock options 73,224 462,736
Conversion of 6.25% Convertible Subordinated Debentures 8,695
Restricted stock grants 75,500
Treasury stock acquired 421,500 (421,500)
- ---------------------------------------------------------------------------------------------
Balance at December 31, 1993 11,487,981 88,506,337
=============================================================================================
</TABLE>
An aggregate of 4,087,364, 4,707,520 and 5,598,903 shares of stock at
December 31, 1993, 1992 and 1991, respectively, were reserved for conversion of
convertible subordinated debentures, future grants of restricted stock, and
exercise and future grants of stock options. At December 31, 1993, there were
300,000,000 shares of common stock and 30,000,000 shares of serial preferred
stock authorized for issuance.
The Company has a shareholders' rights plan which designates 1,000,000
shares of the authorized serial preferred stock as cumulative redeemable serial
preferred stock which may be issued if the Company becomes the target of
coercive and unfair takeover tactics.
31
<PAGE> 34
NOTE 10 -- STOCK PURCHASE PLAN
As of December 31, 1993, 10,935 employees participated through regular
payroll deductions in the Company's Employee Stock Purchase and Savings Plan.
The Company's contribution charged to income amounted to $20,658, $17,321 and
$14,620 for 1993, 1992 and 1991, respectively. Additionally, the Company made
contributions on behalf of participating employees, which represent salary
reductions for income tax purposes, amounting to $10,335 in 1993, $8,646 in 1992
and $7,078 in 1991.
At December 31, 1993, there were 12,751,338 shares of the Company's stock
being held by this plan, representing 14.4 percent of the total number of shares
outstanding. Shares of company stock credited to each member's account under the
plan are voted by the trustee under confidential instructions from each
individual plan member. Shares for which no instructions are received are voted
by the trustee in the same proportion as those for which instructions are
received.
NOTE 11 -- STOCK PLAN
The Company's stock plan permits the granting of stock options, stock
appreciation rights and restricted stock to eligible employees. Non-qualified
and incentive stock options have been granted to certain officers and key
employees under the current plan at prices not less than fair market value of
the shares at the date of grant. The options generally become exercisable to the
extent of one-third of the optioned shares for each full year of employment
following the date of grant and generally expire ten years after the date of
grant.
Restricted stock grants, with an outstanding balance of 224,000 shares at
December 31, 1993, were awarded to certain officers and key employees which
require four years of continuous employment from the date of grant before
receiving the shares without restriction. The number of shares to be received
without restriction is based on the Company's performance relative to a peer
group of companies. Unamortized deferred compensation expense with respect to
the restricted stock amounted to $3,760 at December 31, 1993, $3,456 at December
31, 1992 and $4,204 at December 31, 1991 and is being amortized over the
four-year vesting period. Deferred compensation expense aggregated $3,271,
$1,366 and $2,185 in 1993, 1992 and 1991, respectively. No stock appreciation
rights have been granted.
<TABLE>
<CAPTION>
1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------
PRICE Price Price
SHARES RANGE Shares Range Shares Range
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stock Options:
Outstanding beginning of
year 2,944,255 $ 7.72-$28.88 3,569,190 $ 6.63-$25.13 2,616,152 $ 5.05-$20.31
Granted 327,000 30.75- 35.88 383,000 27.25- 28.88 1,908,400 19.13- 25.13
Exercised (535,960) 9.22- 28.38 (897,296) 6.63- 20.44 (823,948) 5.05- 20.31
Canceled (63,750) 10.94- 30.75 (110,639) 10.94- 28.38 (131,414) 10.94- 20.31
- ------------------------------------------------------------------------------------------------------------------------
Outstanding end of year 2,671,545 $ 7.72-$35.88 2,944,255 $ 7.72-$28.88 3,569,190 $ 6.63-$25.13
- ------------------------------------------------------------------------------------------------------------------------
Exercisable 1,579,103 1,254,890 1,192,283
Reserved for future grants 1,333,963 1,672,713 1,929,074
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 12 -- INCOME TAXES
During the fourth quarter of 1992, the Company adopted Statement of
Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income
Taxes," effective January 1, 1992. Under SFAS No. 109, deferred tax assets and
liabilities are determined based on differences between financial reporting and
tax bases of assets and liabilities and are measured using the enacted tax rates
and laws that will be in effect when the differences are expected to reverse. As
of January 1, 1992, the Company recognized a one-time benefit to consolidated
income of $18,057 ($.20 per share) from the change in accounting for income
taxes from the deferred method to the liability method as required by SFAS No.
109. The benefit was reflected in net income for the first quarter of 1992. Tax
expense for 1991 has not been restated.
32
<PAGE> 35
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of December 31, 1993 and
1992 are as follows:
<TABLE>
<CAPTION>
1993 1992
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax liabilities:
Depreciation $ 30,580 $ 32,833
Deferred employee benefit items 24,109 19,140
- ----------------------------------------------------------------------------------------------
Total deferred tax liabilities $ 54,689 $ 51,973
Deferred tax assets:
Dispositions, terminations and other similar
items $ 30,044 $ 28,341
Other items (each less than 5% of total assets) 65,721 46,325
- ----------------------------------------------------------------------------------------------
Total deferred tax assets $ 95,765 $ 74,666
- ----------------------------------------------------------------------------------------------
</TABLE>
For financial reporting purposes, income before income taxes and cumulative
effects of changes in accounting methods includes the following components:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Domestic $ 260,435 $ 218,248 $ 191,274
Foreign 3,929 7,746 7,537
- -----------------------------------------------------------------------------------------------
$ 264,364 $ 225,994 $ 198,811
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
Significant components of the provisions for income taxes are as follows:
<TABLE>
<CAPTION>
Liability Deferred
Method Method
- -----------------------------------------------------------------------------------------------
1993 1992 1991
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 100,121 $ 72,116 $ 61,993
Foreign 1,483 1,732 1,417
State and Local 19,406 12,712 11,000
- -----------------------------------------------------------------------------------------------
Total Current 121,010 86,560 74,410
Deferred:
Federal (18,467) (4,490) (3,832)
Foreign
State and Local (3,406) (712)
- -----------------------------------------------------------------------------------------------
Total Deferred (21,873) (5,202) (3,832)
- -----------------------------------------------------------------------------------------------
Total income tax expense $ 99,137 $ 81,358 $ 70,578
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
The components of the provision for deferred income taxes for the year
ended December 31, 1991 are as follows:
<TABLE>
<CAPTION>
1991
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Depreciation $ (282)
Dispositions, terminations and other similar items (2,286)
Deferred employee benefit items 8,005
Other items (each less than 5% of the computed
"expected" tax amount) (9,269)
- -----------------------------------------------------------------------------------------------
$ (3,832)
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE> 36
A reconciliation of the statutory federal income tax rate and the effective
tax rate follows:
<TABLE>
<CAPTION>
Liability Deferred
Method Method
- ----------------------------------------------------------------------------------------------
1993 1992 1991
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory tax rate 35.0% 34.0% 34.0%
Effect of:
State and local taxes 3.9 3.5 3.7
Other, net (1.4) (1.5) (2.2)
- ----------------------------------------------------------------------------------------------
Effective tax rate 37.5% 36.0% 35.5%
==============================================================================================
</TABLE>
It is the Company's intention to reinvest undistributed earnings of foreign
subsidiaries; accordingly, no deferred income taxes have been provided thereon.
At December 31, 1993, such undistributed earnings amounted to $3,021.
NOTE 13 -- SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Income per Share
Income Before --------------------------------
Cumulative Effects Before Cumulative
Net Gross of Changes in Net Effects of Changes in Net
Quarter Sales Profit Accounting Methods Income Accounting Methods Income
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 1ST $618,289 $249,561 $ 13,810 $13,810 $ .15 $ .15
2ND 824,162 344,240 60,613 60,613 .68 .68
3RD 838,824 361,516 64,372 64,372 .72 .72
4TH 668,028 297,027 26,432 26,432 .30 .30
- -----------------------------------------------------------------------------------------------------------------------------------
1992 1st $594,561 $234,014 $ 11,628 $(70,143) $ .13 $(.80 )
2nd 772,549 315,640 53,650 53,650 .60 .60
3rd 772,793 326,944 55,912 55,912 .63 .63
4th 607,940 281,815 23,446 23,446 .26 .26
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1993
Fourth quarter adjustments reduced net income by $1,219 ($.01 per share).
The effect on net income was due to a year-end decrease in cost of goods sold
for adjustments of inventory quantities and prior quarters' LIFO expense of
$15,547 ($.17 per share) primarily offset by increases in administrative and
other costs and expenses by provisions for the disposition and termination of
certain operations of $4,954 ($.05 per share), provisions for environmental
remediation at certain sites of $2,830 ($.03 per share) and other year-end
adjustments of $8,983 ($.10 per share).
1992
Results for the first three quarters of 1992 were restated to reflect the
fourth quarter adoptions of SFAS No. 106 and SFAS No. 109 retroactive to January
1, 1992. The adoption of SFAS No. 106 decreased previously reported income
before cumulative effects of changes in accounting methods on a per share basis
by $.02, $.02 and $.01 for the first, second and third quarters, respectively.
The cumulative effects of SFAS No. 106 and SFAS No. 109 were reflected in net
income in the first quarter of 1992.
Net income in the fourth quarter was reduced $1,500 ($.02 per share) due to
the current year effect of the adoption of SFAS No. 106. Fourth quarter net
income was unaffected by year-end adjustments of inventory and prior quarters'
LIFO expense of $18,536 ($.21 per share) which were offset by provisions for
environmental remediation of $6,237 ($.07 per share), provisions for disposition
and termination of operations of $5,105 ($.06 per share) and other year-end
adjustments of $6,847 ($.08 per share).
34
<PAGE> 37
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(SCHEDULE VIII)
Changes in the allowance for doubtful accounts are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Beginning balance $ 1,983 $ 2,573 $ 2,483
Bad debt expense 16,514 9,905 11,045
Net uncollectible accounts written off (9,908) (10,495) (10,955)
- -----------------------------------------------------------------------------------------------
Ending balance $ 8,589 $ 1,983 $ 2,573
===============================================================================================
</TABLE>
Activity related to other assets:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Beginning balance $163,803 $ 175,249 $ 149,740
Charges to expense (15,753) (19,009) (16,715)
Asset additions 6,875 7,563 42,224
- -----------------------------------------------------------------------------------------------
Ending balance $154,925 $ 163,803 $ 175,249
===============================================================================================
</TABLE>
Charges to expense consist primarily of amortization of intangibles. Asset
additions consist primarily of long-term investments in 1993 and 1992 and the
acquisition of intangibles and goodwill in 1991.
Activity related to other long-term liabilities:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Beginning balance $ 79,159 $ 83,960 $ 72,475
Charges to expense 17,021 13,473 5,816
Accrual additions (deductions) (3,742) (18,274) 5,669
- -----------------------------------------------------------------------------------------------
Ending balance $ 92,438 $ 79,159 $ 83,960
===============================================================================================
</TABLE>
Charges to expense consist primarily of adjustments to estimated
liabilities and, in 1991, deferred compensation. Accrual additions (deductions)
consist primarily of actual costs incurred and balance sheet reclassifications.
SUPPLEMENTARY INCOME STATEMENT INFORMATION
(SCHEDULE X)
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Maintenance and repairs $ 29,886 $ 28,195 $ 27,154
Advertising costs 144,778 133,082 118,980
- -----------------------------------------------------------------------------------------------
</TABLE>
Amounts for depreciation and amortization of intangible assets,
preoperating costs and similar deferrals, taxes other than payroll and income
taxes, and royalties are not presented because such amounts are each less than
1% of total net sales or are separately disclosed in the consolidated financial
statements.
35
<PAGE> 38
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Cleveland, and State of Ohio, on the 15th day of March, 1994.
THE SHERWIN-WILLIAMS COMPANY
by L. E. STELLATO
----------------------------
L. E. Stellato, Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities
indicated on March 15, 1994.
Officers and Directors of The Sherwin-Williams Company:
<TABLE>
<CAPTION>
SIGNATURE
- --------------------------------------------------------------------------------
<S> <C>
J. G. BREEN Chairman and Chief Executive Officer,
- ------------------------ Director
J. G. Breen
T. A. COMMES President and Chief Operating Officer,
- ------------------------ Director
T. A. Commes
L. J. PITORAK Senior Vice President -- Finance,
- ------------------------ Treasurer and Chief Financial Officer
L. J. Pitorak
J. L. AULT Vice President -- Corporate Controller
- ------------------------
J. L. Ault
J. M. BIGGAR Director
- ------------------------
J. M. Biggar
L. CARTER Director
- ------------------------
L. Carter
R. C. DOBAN Director
- ------------------------
R. C. Doban
D. E. EVANS Director
- ------------------------
D. E. Evans
W. G. MITCHELL Director
- ------------------------
W. G. Mitchell
A. M. MIXON, III Director
- ------------------------
A. M. Mixon, III
</TABLE>
36
<PAGE> 39
<TABLE>
<CAPTION>
SIGNATURE
- -------------------------------------------------
<S> <C>
H. O. PETRAUSKAS Director
- ------------------------------
H. O. Petrauskas
R. E. SCHEY Director
- ------------------------------
R. E. Schey
R. K. SMUCKER Director
- ------------------------------
R. K. Smucker
W. W. WILLIAMS Director
- ------------------------------
W. W. Williams
</TABLE>
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.
<TABLE>
<S> <C> <C>
by L. E. STELLATO March 15, 1994
-----------------------------------
L. E. Stellato, Attorney-in-fact
</TABLE>
37
<PAGE> 40
EXHIBITS:
<TABLE>
<C> <C> <S>
2. Not applicable.
3. (a) Amended Articles of Incorporation, as amended April 28, 1993, filed as Exhibit
4(a) to Form S-8 Registration Statement No. 33-52227 dated February 10, 1994, and
incorporated herein by reference.
(b) Regulations of the Company, as amended, dated April 27, 1988, filed as Exhibit
4(b) to Post-Effective Amendment No. 1, dated April 29, 1988, to Form S-8
Registration Statement Number 2-91401, and incorporated herein by reference.
4. (a) Indenture between the Company and Chemical Bank, as Trustee, dated June 15, 1988,
filed as Exhibit 4(b) to Form S-3 Registration Statement Number 33-22705, dated
June 24, 1988, and incorporated herein by reference.
(b) Revolving Credit Agreement, by and among the Company and several banking
institutions, as amended and restated, effective December 15, 1993 and filed as
Exhibit 4(f) to Form S-8 Registration Statement No. 33-52227 dated February 10,
1994, and incorporated herein by reference.
(c) Indenture between Sherwin-Williams Development Corporation, as issuer, the
Company, as guarantor, and Harris Trust and Savings Bank, as Trustee, dated June
15, 1986, filed as Exhibit 4(b) to Form S-3 Registration Statement Number 33-6626,
dated June 20, 1986, and incorporated herein by reference.
(d) Indenture between the Company and Central National Bank, dated March 1, 1970,
filed as Exhibit 4 to Form S-7 Registration Statement Number 2-36240, and
incorporated herein by reference.
(e) Indenture between the Company and The Cleveland Trust Company, as Trustee, dated
April 17, 1967, filed as Exhibit 2(a) to Amendment No. 1, dated April 18, 1967, to
Form S-9 Registration Statement Number 2-26295, and incorporated herein by
reference.
(f) Rights Agreement between the Company and Ameritrust Company National Association,
dated January 25, 1989, filed as Exhibit 2.1 to Form 8-A, dated January 26, 1989,
and incorporated herein by reference.
9. Not applicable.
10. (a) Form of Director and Officer Indemnification Agreement filed as Exhibit 28(a) to
Form S-3 Registration Statement Number 33-22705 dated June 24, 1988, and
incorporated herein by reference.
(b) Employment Agreements filed as Exhibit 28(b) to Form S-3 Registration Statement
Number 33-22705 dated June 24, 1988, and incorporated herein by reference.
(c) Form of Severance Pay Agreements filed as Exhibit 10(c) to Form 10-K dated March
13, 1990, and incorporated herein by reference.
(d) The Sherwin-Williams Company Deferred Compensation Savings Plan filed as Exhibit
10(d) to Form 10-K dated March 13, 1992, and incorporated herein by reference.
(e) The Sherwin-Williams Company Key Management Deferred Compensation Plan filed as
Exhibit 28(e) to Form S-3 Registration Statement Number 33-22705 dated June 24,
1988, and incorporated herein by reference.
(f) Form of Executive Disability Income Plan filed as Exhibit 10(g) to Form 10-K dated
March 13, 1992, and incorporated herein by reference.
(g) Form of Executive Life Insurance Plan filed as Exhibit 10(h) to Form 10-K dated
March 13, 1992, and incorporated herein by reference.
(h) Form of Directors' Deferred Fee Plan filed as Exhibit 10(i) to Form 10-K dated
March 13, 1992, and incorporated herein by reference.
</TABLE>
38
<PAGE> 41
<TABLE>
<C> <C> <S>
(i) License Agreement, dated February 1, 1991, as amended, between the Company and
SWIMC, Inc. filed as Exhibit 10(j) to Form 10-K dated March 15, 1993, and
incorporated herein by reference.
(j) License Agreement, dated February 1, 1991, as amended, between the Company and
DIMC, Inc. filed as Exhibit 10(k) to Form 10-K dated March 15, 1993, and
incorporated herein by reference.
(k) Form of The Sherwin-Williams Company Management Incentive Plan filed as Exhibit
10(l) to Form 10-K dated March 15, 1993 and incorporated herein by reference.
11. Computation of Net Income Per Share -- Page 40.
12. Not applicable.
13. Not applicable.
16. Not applicable.
18. Not applicable.
21. Subsidiaries -- Page 41.
22. Item 4, Part II of Form 10-Q dated August 11, 1993, and incorporated herein by
reference.
23. Consent of Independent Auditors -- Page 42.
24. Powers of Attorney (filed herewith).
27. Not applicable.
28. Not applicable.
99. Not applicable.
</TABLE>
39
<PAGE> 1
EXHIBIT 11
COMPUTATION OF NET INCOME PER SHARE
(Thousands of Dollars Except Per Share Data)
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
FULLY DILUTED
Average shares outstanding 88,716,976 88,106,534 87,441,898
Options -- treasury stock method 744,892 812,608 915,248
Assumed conversion of 6.25% Convertible
Subordinated Debentures 84,899 92,406 108,261
- ---------------------------------------------------------------------------------------------
Average fully diluted shares 89,546,767 89,011,548 88,465,407
Income before cumulative effects of changes
in accounting methods $165,227 $144,636 $128,233
Add 6.25% Convertible Subordinated Debentures
interest -- net of tax 10 12 13
- ---------------------------------------------------------------------------------------------
Income before cumulative effects of changes
in accounting methods applicable to fully
diluted shares 165,237 144,648 128,246
Cumulative effects of changes in accounting
methods (81,771)
- ---------------------------------------------------------------------------------------------
Net income applicable to fully diluted shares $165,237 $ 62,877 $128,246
Income per share:
Income before cumulative effects of
changes in accounting methods $ 1.85 $ 1.63 $ 1.45
Cumulative effects of changes in
accounting methods (.92)
- ---------------------------------------------------------------------------------------------
Net Income $ 1.85 $ .71 $ 1.45
=============================================================================================
PRIMARY
Average shares outstanding 88,716,976 88,106,534 87,441,898
Options -- treasury stock method 718,920 798,421 739,628
- ---------------------------------------------------------------------------------------------
Average shares and equivalents 89,435,896 88,904,955 88,181,526
Income before cumulative effects of changes
in accounting methods $165,227 $144,636 $128,233
Cumulative effects of changes in accounting
methods (81,771)
- ---------------------------------------------------------------------------------------------
Net income applicable to shares and
equivalents $165,227 $ 62,865 $128,233
Income per share:
Income before cumulative effects of
changes in accounting methods $ 1.85 $ 1.63 $ 1.45
Cumulative effects of changes in
accounting methods (.92)
- ---------------------------------------------------------------------------------------------
Net income $ 1.85 $ .71 $ 1.45
=============================================================================================
</TABLE>
40
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES
FOREIGN SUBSIDIARIES
Sherwin-Williams do Brasil Industria e Comercio Ltda., Sao Paulo, Brazil*
Sherwin-Williams Canada Inc., Toronto, Ontario, Canada
147926 Canada Inc., Gravenhurst, Ontario, Canada
Compania Sherwin-Williams, S.A. de C.V., Mexico City, Mexico*
Sherwin-Williams Cayman Islands Ltd., Grand Cayman*
The Sherwin-Williams Co. Resources Limited, Kingston, Jamaica
Sherwin-Williams (Caribbean) N.V., Curacao
Sherwin-Williams (West Indies) Ltd., Kingston, Jamaica
Sherwin-Williams Foreign Sales Corporation Limited, Charlotte Amalie,
Virgin Islands
UNITED STATES SUBSIDIARIES
Contract Transportation Systems Co.
DIMC, Inc.
Dupli-Color Products Company
Sherwin-Williams International Company
SWIMC, Inc.
*Unconsolidated
41
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
The Sherwin-Williams Company
Cleveland, Ohio
We consent to the incorporation by reference in Registration Statement
Number 33-28585 on Form S-8 dated April 28, 1989, Registration Statement Number
33-52227 on Form S-8 dated February 10, 1994, Post-Effective Amendment Number 5
dated April 28, 1989 to Registration Statement Number 2-80510 on Form S-8, and
Registration Statement Number 33-22705 on Form S-3 dated June 24, 1988 of The
Sherwin-Williams Company and in the related prospectuses of our report dated
January 20, 1994, with respect to the consolidated financial statements and
schedules of The Sherwin-Williams Company included in the Annual Report (Form
10-K) for the year ended December 31, 1993.
/s/ Ernst & Young
CLEVELAND, OHIO
MARCH 11, 1994
42
<PAGE> 1
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
___________________________________
The undersigned Officer and Director of The Sherwin-Williams Company,
an Ohio corporation, which corporation anticipates filing with the Securities
and Exchange Commission, Washington, D.C., under the provisions of the
Securities and Exchange Commission, a Form 10-K for the fiscal year ending
December 31, 1993, hereby constitutes and appoints T. A. Commes, L. J. Pitorak
and L. E. Stellato, or any of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for me and in my name, in the
capacities indicated below, said proposed Form 10-K and any and all amendments,
supplements, and exhibits thereto, and any and all applications or other
documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 26, 1994 /s/ J. G. Breen
----------------------------
J. G. Breen
Chairman and Chief Executive
Officer, Director
<PAGE> 2
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
___________________________________
The undersigned Officer and Director of The Sherwin-Williams Company,
an Ohio corporation, which corporation anticipates filing with the Securities
and Exchange Commission, Washington, D.C., under the provisions of the
Securities and Exchange Commission, a Form 10-K for the fiscal year ending
December 31, 1993, hereby constitutes and appoints J. G. Breen, L. J. Pitorak
and L. E. Stellato, or any of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for me and in my name, in the
capacities indicated below, said proposed Form 10-K and any and all amendments,
supplements, and exhibits thereto, and any and all applications or other
documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 24, 1994 /s/ T. A. Commes
-----------------------------
T. A. Commes
President and Chief Operating
Officer, Director
<PAGE> 3
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
___________________________________
The undersigned Officer of The Sherwin-Williams Company, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
and Exchange Commission, a Form 10-K for the fiscal year ending December 31,
1993, hereby constitutes and appoints J. G. Breen, T. A. Commes and L. E.
Stellato, or any of them, with full power of substitution and resubstitution,
as attorneys or attorney to sign for me and in my name, in the capacities
indicated below, said proposed Form 10-K and any and all amendments,
supplements, and exhibits thereto, and any and all applications or other
documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 26, 1994 /s/ L. J. Pitorak
--------------------------------
L. J. Pitorak
Senior Vice President - Finance,
Treasurer and Chief Financial
Officer
<PAGE> 4
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
___________________________________
The undersigned Officer of The Sherwin-Williams Company, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
and Exchange Commission, a Form 10-K for the fiscal year ending December 31,
1993, hereby constitutes and appoints J. G. Breen, T. A. Commes, L. J. Pitorak
and L. E. Stellato, or any of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for me and in my name, in the
capacities indicated below, said proposed Form 10-K and any and all amendments,
supplements, and exhibits thereto, and any and all applications or other
documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 26, 1994 /s/ J. L. Ault
--------------------------
J. L. Ault
Vice President - Corporate
Controller
<PAGE> 5
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
___________________________________
The undersigned Director of The Sherwin-Williams Company, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
and Exchange Commission, a Form 10-K for the fiscal year ending December 31,
1993, hereby constitutes and appoints J. G. Breen, T. A. Commes, L. J. Pitorak
and L. E. Stellato, or any of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for me and in my name, in the
capacities indicated below, said proposed Form 10-K and any and all amendments,
supplements, and exhibits thereto, and any and all applications or other
documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 25, 1994 /s/ James M. Biggar
---------------------------
J. M. Biggar
Director
<PAGE> 6
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
___________________________________
The undersigned Director of The Sherwin-Williams Company, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
and Exchange Commission, a Form 10-K for the fiscal year ending December 31,
1993, hereby constitutes and appoints J. G. Breen, T. A. Commes, L. J. Pitorak
and L. E. Stellato, or any of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for me and in my name, in the
capacities indicated below, said proposed Form 10-K and any and all amendments,
supplements, and exhibits thereto, and any and all applications or other
documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 25, 1994 /s/ Leigh Carter
----------------------------
L. Carter
Director
<PAGE> 7
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
___________________________________
The undersigned Director of The Sherwin-Williams Company, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
and Exchange Commission, a Form 10-K for the fiscal year ending December 31,
1993, hereby constitutes and appoints J. G. Breen, T. A. Commes, L. J. Pitorak
and L. E. Stellato, or any of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for me and in my name, in the
capacities indicated below, said proposed Form 10-K and any and all amendments,
supplements, and exhibits thereto, and any and all applications or other
documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 24, 1994 /s/ Robert C. Doban
-------------------------------
R. C. Doban
Director
<PAGE> 8
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
___________________________________
The undersigned Director of The Sherwin-Williams Company, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
and Exchange Commission, a Form 10-K for the fiscal year ending December 31,
1993, hereby constitutes and appoints J. G. Breen, T. A. Commes, L. J. Pitorak
and L. E. Stellato, or any of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for me and in my name, in the
capacities indicated below, said proposed Form 10-K and any and all amendments,
supplements, and exhibits thereto, and any and all applications or other
documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 24, 1994 /s/ Daniel E. Evans
------------------------------
D. E. Evans
Director
<PAGE> 9
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
___________________________________
The undersigned Director of The Sherwin-Williams Company, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
and Exchange Commission, a Form 10-K for the fiscal year ending December 31,
1993, hereby constitutes and appoints J. G. Breen, T. A. Commes, L. J. Pitorak
and L. E. Stellato, or any of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for me and in my name, in the
capacities indicated below, said proposed Form 10-K and any and all amendments,
supplements, and exhibits thereto, and any and all applications or other
documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 26, 1994 /s/ W. G. Mitchell
------------------------------
W. G. Mitchell
Director
<PAGE> 10
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
___________________________________
The undersigned Director of The Sherwin-Williams Company, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
and Exchange Commission, a Form 10-K for the fiscal year ending December 31,
1993, hereby constitutes and appoints J. G. Breen, T. A. Commes, L. J. Pitorak
and L. E. Stellato, or any of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for me and in my name, in the
capacities indicated below, said proposed Form 10-K and any and all amendments,
supplements, and exhibits thereto, and any and all applications or other
documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 26, 1994 /s/ A. M. Mixon
------------------------------
A. M. Mixon
Director
<PAGE> 11
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
___________________________________
The undersigned Director of The Sherwin-Williams Company, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
and Exchange Commission, a Form 10-K for the fiscal year ending December 31,
1993, hereby constitutes and appoints J. G. Breen, T. A. Commes, L. J. Pitorak
and L. E. Stellato, or any of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for me and in my name, in the
capacities indicated below, said proposed Form 10-K and any and all amendments,
supplements, and exhibits thereto, and any and all applications or other
documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 27, 1994 /s/ H. O. Petrauskas
--------------------------------
H. O. Petrauskas
Director
<PAGE> 12
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
___________________________________
The undersigned Director of The Sherwin-Williams Company, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
and Exchange Commission, a Form 10-K for the fiscal year ending December 31,
1993, hereby constitutes and appoints J. G. Breen, T. A. Commes, L. J. Pitorak
and L. E. Stellato, or any of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for me and in my name, in the
capacities indicated below, said proposed Form 10-K and any and all amendments,
supplements, and exhibits thereto, and any and all applications or other
documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 26, 1994 /s/ R. E. Schey
------------------------------
R. E. Schey
Director
<PAGE> 13
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
___________________________________
The undersigned Director of The Sherwin-Williams Company, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
and Exchange Commission, a Form 10-K for the fiscal year ending December 31,
1993, hereby constitutes and appoints J. G. Breen, T. A. Commes, L. J. Pitorak
and L. E. Stellato, or any of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for me and in my name, in the
capacities indicated below, said proposed Form 10-K and any and all amendments,
supplements, and exhibits thereto, and any and all applications or other
documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 25, 1994 /s/ R. K. Smucker
------------------------------
R. K. Smucker
Director
<PAGE> 14
POWER OF ATTORNEY
THE SHERWIN-WILLIAMS COMPANY
___________________________________
The undersigned Director of The Sherwin-Williams Company, an Ohio
corporation, which corporation anticipates filing with the Securities and
Exchange Commission, Washington, D.C., under the provisions of the Securities
and Exchange Commission, a Form 10-K for the fiscal year ending December 31,
1993, hereby constitutes and appoints J. G. Breen, T. A. Commes, L. J. Pitorak
and L. E. Stellato, or any of them, with full power of substitution and
resubstitution, as attorneys or attorney to sign for me and in my name, in the
capacities indicated below, said proposed Form 10-K and any and all amendments,
supplements, and exhibits thereto, and any and all applications or other
documents to be filed with the Securities and Exchange Commission or any
national securities exchange pertaining thereto, with full power and authority
to do and perform any and all acts and things whatsoever required and necessary
to be done in the premises, hereby ratifying and approving the acts of said
attorneys and any of them and any such substitute.
Executed the date set opposite my name.
Date: January 24, 1994 /s/ Walter W. Williams
------------------------------
W. W. Williams
Director
