<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Period Ended March 31, 1994
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period
from_______________________________________ to _____________________________
Commission file number 1-4851
-------
THE SHERWIN-WILLIAMS COMPANY
------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
OHIO 34-0526850
- - ---------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 Prospect Avenue, N.W., Cleveland, Ohio 44115-1075
- - ------------------------------------------- -----------------------------------
(Address of principal executive offices) (Zip Code)
(216) 566-2000
------------------------------------------------------------------------------
(Registrant's telephone number including area code)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $1.00 Par Value -- 86,944,421 shares as of April 30, 1994.
<PAGE> 2
PART I. FINANCIAL INFORMATION
<TABLE>
Item 1. Financial Statements
THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
Thousands of dollars, except per share data.
<CAPTION>
Three months ended March 31,
--------------------------------------------
1994 1993
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 639,157 $ 618,289
Costs and expenses:
Cost of goods sold 377,267 368,728
Selling, general and administrative expenses 237,882 228,554
Interest expense 987 1,700
Interest and net investment income (1,818) (1,483)
Other (378) (1,130)
- - ---------------------------------------------------------------------------------------------------
613,940 596,369
- - ---------------------------------------------------------------------------------------------------
Income before income taxes 25,217 21,920
Income taxes 9,709 8,110
- - ---------------------------------------------------------------------------------------------------
Net income $ 15,508 $ 13,810
===================================================================================================
Net income per share $ 0.17 $ 0.15
===================================================================================================
<FN>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE> 3
<TABLE>
THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Thousands of dollars.
<CAPTION>
March 31, Dec. 31, March 31,
1994 1993 1993
- - ------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C> <C>
Current assets
Cash and cash equivalents $ 115,880 $ 230,092 $ 95,200
Short-term investments 18,000 39,700 3,000
Accounts receivable, less allowance 346,507 297,527 331,623
Inventories:
Finished goods 415,083 371,572 395,315
Work in process and raw materials 60,115 57,346 60,344
- - ------------------------------------------------------------------------------------------------------
475,198 428,918 455,659
Other current assets 167,345 154,850 132,891
- - ------------------------------------------------------------------------------------------------------
Total current assets 1,122,930 1,151,087 1,018,373
Deferred pension assets 217,602 214,583 194,531
Other assets 157,807 154,925 164,229
Property, plant and equipment 855,490 838,754 798,563
Less allowances for depreciation and
amortization 457,565 444,684 411,347
- - ------------------------------------------------------------------------------------------------------
397,925 394,070 387,216
- - ------------------------------------------------------------------------------------------------------
Total assets $ 1,896,264 $ 1,914,665 $ 1,764,349
======================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 248,896 $ 254,997 $ 245,786
Compensation and taxes withheld 53,431 71,476 45,904
Other accruals 231,342 201,224 213,138
Accrued taxes 35,512 39,804 26,949
- - ------------------------------------------------------------------------------------------------------
Total current liabilities 569,181 567,501 531,777
Long-term debt 36,713 37,901 58,827
Postretirement benefits other than pensions 166,625 166,025 164,904
Other long-term liabilities 108,150 110,067 94,590
Shareholders' equity
Common stock - $1.00 par value:
87,917,714, 88,506,337 and 88,705,630
shares outstanding at March 31, 1994,
December 31, 1993 and March 31, 1993,
respectively 100,113 99,994 99,739
Other capital 152,603 150,203 141,371
Retained earnings 961,076 957,858 831,578
Cumulative foreign currency translation
adjustment (20,635) (20,384) (18,846)
Treasury stock, at cost (177,562) (154,500) (139,591)
- - ------------------------------------------------------------------------------------------------------
Total shareholders' equity 1,015,595 1,033,171 914,251
- - ------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 1,896,264 $ 1,914,665 $ 1,764,349
======================================================================================================
<FN>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE> 4
<TABLE>
THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
Thousands of Dollars
<CAPTION>
Three months ended March 31,
-----------------------------
1994 1993
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net income $ 15,508 $ 13,810
Non-cash adjustments:
Depreciation and amortization 14,110 13,177
Amortization of intangible assets 3,228 3,374
Increase in deferred pension assets (3,019) (4,557)
Other 2,450 6,450
Change in current assets and liabilities-net (106,251) (74,424)
Other (1,264) 90
- - -------------------------------------------------------------------------------------------------------
Net operating cash (75,238) (42,080)
INVESTING
Capital expenditures (17,971) (12,031)
Short-term investments 21,700 11
Other (7,410) (5,976)
- - -------------------------------------------------------------------------------------------------------
Net investing cash (3,681) (17,996)
FINANCING
Payments or acquisitions of long-term debt (1,183) (1,555)
Payments of cash dividends (12,291) (11,083)
Treasury stock acquired (23,062) (1,235)
Proceeds from stock options exercised 1,894 4,975
Other (651) (527)
- - -------------------------------------------------------------------------------------------------------
Net financing cash (35,293) (9,425)
- - -------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (114,212) (69,501)
Cash and cash equivalents at beginning of year 230,092 164,701
- - -------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 115,880 $ 95,200
=======================================================================================================
Taxes paid on income $ 16,461 $ 2,131
Interest paid on debt 550 1,033
<FN>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE> 5
THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Periods ended March 31, 1994 and 1993
Note A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Form 10-K for the fiscal year ended
December 31, 1993. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. The consolidated results for the three months ended March 31,
1994 are not necessarily indicative of the results to be expected for the
fiscal year ending December 31, 1994.
Note B--DIVIDENDS
Dividends paid on common stock during the first quarter of 1994 and 1993 were
$.14 per share and $.125 per share, respectively.
Note C--INVESTMENT IN LIFE INSURANCE
The Company invests in broad-based corporate owned life insurance. The policy
loans are netted against premiums and included in Other Assets. The net
expense associated with such investment is included in Other Costs and
Expenses. Such expense is immaterial to income before income taxes.
Note D--OTHER COSTS AND EXPENSES
Significant items included in other costs and expenses are as follows:
Three months ended
--------------------------
Thousands of dollars. March 31, March 31,
1994 1993
-------- --------
Dividend and royalty income $ 1,512 $ 1,814
Net loss on financing and
investing activities (447) (131)
The net loss on financing and investing activities represents the realized
gains or losses associated with disposing of fixed assets, the investment of
certain long-term asset funds and the net expense associated with the Company's
investment in broad-based corporate owned life insurance.
Note E--RECLASSIFICATION
Certain amounts in the 1993 financial statements have been reclassified to
conform with the 1994 presentation.
<PAGE> 6
<TABLE>
Note F--COMPUTATION OF NET INCOME PER SHARE
<CAPTION>
Three months ended
---------------------------------
Thousands of dollars, except per share data. March 31, March 31,
1994 1993
--------- ---------
<S> <C> <C>
Fully Diluted
Average shares outstanding 88,323,196 88,635,648
Options - treasury stock method 661,660 758,577
Assumed conversion of 6.25% convertible
subordinated debentures 78,957 87,073
------------ ------------
Average fully diluted shares 89,063,813 89,481,298
============ ============
Net income $ 15,508 $ 13,810
Add 6.25% Convertible Subordinated Debentures
interest -net of tax 3 3
------------ ------------
Net income applicable to fully diluted shares $ 15,511 $ 13,813
============ ============
Net income per share $ 0.17 $ 0.15
============ ============
Primary
Average shares outstanding 88,323,196 88,635,648
Options - treasury stock method 654,857 741,459
------------ ------------
Average shares and equivalents 88,978,053 89,377,107
============ ============
Net income $ 15,508 $ 13,810
============ ============
Net income per share $ 0.17 $ 0.15
============ ============
</TABLE>
<PAGE> 7
<TABLE>
Note G--BUSINESS SEGMENTS
Net External Sales/Operating Profit (Loss)
- - ------------------------------------------
<CAPTION>
Three months ended March 31,
-------------------------------------------------------------------------------------
Thousands of dollars. 1994 1993
----------------------------------------- --------------------------------------
Net Operating Net Operating
External Profit External Profit
Sales (Loss) Sales (Loss)
----------------- ------------------ ----------------- ------------------
<S> <C> <C> <C> <C>
Paint Stores $ 391,891 $ (942) $ 362,576 $ (5,523)
Coatings 243,757 35,416 252,106 36,606
Other 3,509 1,468 3,607 1,509
-------------- ----------- ------------- -----------
Segment totals $ 639,157 35,942 $ 618,289 32,592
============== =============
Corporate expenses - net (10,725) (10,672)
----------- -----------
Income before income taxes $ 25,217 $ 21,920
=========== ===========
==============================================================================================================================
Intersegment Transfers
- - ----------------------
Three months ended March 31,
--------------------------------------
Thousands of dollars. 1994 1993
------------ ------------
Coatings $ 143,827 $ 128,080
Other 4,265 4,047
------------ ------------
Segment totals $ 148,092 $ 132,127
============ ============
==============================================================================================================================
</TABLE>
Operating profit is total revenue, including realized profit on intersegment
transfers, less operating costs and expenses.
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 periods presented.
Intersegment transfers are accounted for at values comparable to normal
unaffiliated customer sales.
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- - ---------------------
Consolidated net sales increased 3.4 percent to $639,157,000 during the first
quarter of 1994 from last year's $618,289,000. The Paint Stores Segment's
sales improved 8.1 percent, as all operating regions achieved sales results
above first quarter 1993 and several new products were successfully introduced.
Wholesale product sales, which include professional, contractor, industrial and
commercial customers, remained strong. However, retail sales shortfalls due to
continued sluggish demand for do-it-yourself products and severe weather
throughout most of the country partially offset the wholesale gains.
Comparable-store sales were up 7.8 percent for the quarter. Sales for the
Coatings Segment decreased 3.3 percent from the first quarter of 1993. The
sales decline was largely due to weather-related reduced retail demand as well
as the loss of a portion of the business of a home center account. Revenue
generated by real estate operations in the Other Segment decreased 2.7 percent
from 1993.
Consolidated gross profit as a percent of sales increased in the quarter to
41.0 percent over last year's 40.4 percent. The Paint Stores Segment's gross
margins increased from last year due to improved store level pricing discipline
and a shift in product sales to higher margin products. The Coatings Segment's
gross margins decreased slightly from last year due to sales mix changes in the
Automotive and Specialty Divisions which were partially offset by overall
production efficiencies.
Consolidated selling, general and administrative expenses as a percent of sales
were slightly higher than 1993 for the first quarter. The Paint Stores
Segment's SG&A costs as a percent of sales were below last year due primarily
to the sales gains achieved in the first quarter. In the Coatings Segment,
SG&A expenses as a percent of sales were higher than last year due primarily to
the sales decline and increased market penetration efforts for new customers
and continued brand support in the Consumer Brands Division despite the lower
sales.
Interest expense decreased by 41.9 percent from the first quarter of 1993 due
to the normal maturities of long-term debt and the acquisition of certain
outstanding long-term debentures at the end of the third quarter in 1993. Net
investment income was above last year primarily as a result of higher average
cash balances.
Net income for the first quarter of 1994 increased to $15,508,000 or $.17 per
share from $13,810,000 or $.15 per share in 1993.
FINANCIAL CONDITION
- - -------------------
The Company's financial position continues to be strong at the end of the first
quarter of 1994. Our current ratio improved to 1.97 from 1.92 at March 31,
1993, primarily due to an increase in cash, cash equivalents and short-term
investments. Working capital as a percent of sales decreased to 19.3 percent
from 19.5 percent last year. Cash and cash equivalents decreased $114.2 million
since year end due primarily to capital expenditures of $18.0 million, cash
dividends of $12.3 million, treasury stock acquisitions of $23.1 million and
normal operating needs for seasonally higher accounts receivable and
inventories. Since March 31, 1993, cash and cash equivalents increased $20.7
million, primarily due to cash generated by operations of $213.8 million
partially offset by capital expenditures of $68.9 million, payments of cash
dividends totaling $45.6 million, reduction in long-term
<PAGE> 9
debt of $33.3 million, treasury stock acquisitions of $38.0 million and normal
working capital needs. Short-term borrowings were not utilized during the
first quarter of 1994. The Company believes that sufficient cash flows should
be generated from operations to remain in an investment position for the
remainder of 1994. Subsequent to the end of the first quarter of 1994, the
Company retired $13.1 million principal of outstanding 9.875 percent
debentures.
Capital expenditures during the first quarter of 1994 represented primarily the
cost of remerchandising, remodeling or relocating paint stores and the
continued upgrade at manufacturing and research facilities. We do not
anticipate the need for any external financing to support our capital programs.
During the first quarter of 1994, 707,700 shares of our own stock were acquired
through open market purchases. During April 1994, an additional 988,100
shares of stock were purchased. We acquire our own stock for general corporate
purposes and, depending upon our cash position and market conditions, we may
acquire additional shares of stock in the future.
The Company and certain other companies are defendants in 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 which may ultimately be 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 potential liability on the Company for past
operations which were conducted utilizing practices and procedures that were
considered acceptable under the laws and regulations existing at 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. 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. In the opinion of the Company's
<PAGE> 10
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.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(A) Exhibits
2. Not Applicable.
4. (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.
(c) 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.
(d) 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.
(e) 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.
(f) 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.
(g) 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.
(h) 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.
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.
<PAGE> 11
(e) The Sherwin-Williams Company Key Management Deferred
Compensation Plan filed as Exhibit 28(e) to Form S-3
Registration Statement Number 33-22705 dated June 24, 1988,
and incorporated herein by reference.
(f) Asset Purchase Agreement, dated July 17, 1990, as amended,
between the Company and DeSoto, Inc., for the purchase of
certain assets of DeSoto, Inc.'s U.S. Consumer Paint Business
filed as Exhibit 10(g) to Form 10-K dated March 15, 1991, and
incorporated herein by reference.
(g) Form of Executive Disability Income Plan filed as Exhibit
10(g) to Form 10-K dated March 13, 1992, and incorporated
herein by reference.
(h) Form of Executive Life Insurance Plan filed as Exhibit 10(h)
to Form 10-K dated March 13, 1992, and incorporated herein by
reference.
(i) Form of Director's Deferred Fee Plan filed as Exhibit 10(i) to
Form 10-K dated March 13, 1992, and incorporated herein by
reference.
(j) License Agreement, dated February 1, 1991, as amended, between
the Company and SWIMC, Inc. filed as Exhibit 10(j) to Form
10-K dated March 15, 1993, and incorporated herein by
reference.
(k) License Agreement, dated February 1, 1991, as amended, between
the Company and DIMC, Inc. filed as Exhibit 10(k) to Form 10-K
dated March 15, 1993, and incorporated herein by reference.
(l) Form of The Sherwin-Williams Company Management Incentive Plan
filed as Exhibit 10(l) to Form 10-K dated March 15, 1993, and
incorporated herein by reference.
(m) The Sherwin-Williams Company 1984 Stock Plan, as amended and
restated in its entirety, effective April 26, 1989, filed as
Exhibit 4(e) to Form S-8 Registration Statement No. 33-28585
dated April 28, 1989, and incorporated herein by reference.
(n) The Sherwin-Williams Company 1994 Stock Plan, as amended and
restated in its entirety, effective April 27, 1994 (filed
herewith).
11. Computation of Net Income Per Share - See Note F to Condensed
Consolidated Financial Statements (unaudited).
15. Not Applicable.
18. Not Applicable.
19. Not Applicable.
22. Not Applicable.
23. Not Applicable.
24. Not Applicable.
27. Not Applicable.
(B) Reports on Form 8-K - None.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE SHERWIN-WILLIAMS COMPANY
May 16, 1994 By: /s/J.L. Ault
------------------------
J.L. Ault
Vice President-
Corporate Controller
May 16, 1994 By: /s/L.E. Stellato
------------------------
L.E. Stellato
Vice President, General
Counsel and Secretary
<PAGE> 12
EXHIBIT INDEX
Exhibit Number Exhibit Description
- - -------------- -----------------------------------------------------
4. (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.
(c) 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.
(d) 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.
(e) 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.
(f) 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.
(g) 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.
(h) 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.
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.
<PAGE> 13
(e) The Sherwin-Williams Company Key Management Deferred
Compensation Plan filed as Exhibit 28(e) to Form S-3
Registration Statement Number 33-22705 dated June 24,
1988, and incorporated herein by reference.
(f) Asset Purchase Agreement, dated July 17, 1990, as
amended, between the Company and DeSoto, Inc., for the
purchase of certain assets of DeSoto, Inc.'s U.S.
Consumer Paint Business filed as Exhibit 10(g) to Form
10-K dated March 15, 1991, and incorporated herein by
reference.
(g) Form of Executive Disability Income Plan filed as
Exhibit 10(g) to Form 10-K dated March 13, 1992, and
incorporated herein by reference.
(h) Form of Executive Life Insurance Plan filed as Exhibit
10(h) to Form 10-K dated March 13, 1992, and
incorporated herein by reference.
(i) Form of Director's Deferred Fee Plan filed as Exhibit
10(i) to Form 10-K dated March 13, 1992, and
incorporated herein by reference.
(j) License Agreement, dated February 1, 1991, as amended,
between the Company and SWIMC, Inc. filed as Exhibit
10(j) to Form 10-K dated March 15, 1993, and
incorporated herein by reference.
(k) License Agreement, dated February 1, 1991, as amended,
between the Company and DIMC, Inc. filed as Exhibit
10(k) to Form 10-K dated March 15, 1993, and
incorporated herein by reference.
(l) Form of The Sherwin-Williams Company Management
Incentive Plan filed as Exhibit 10(l) to Form 10-K
dated March 15, 1993, and incorporated herein by
reference.
(m) The Sherwin-Williams Company 1984 Stock Plan, as
amended and restated in its entirety, effective April
26, 1989, filed as Exhibit 4(e) to Form S-8
Registration Statement No. 33-28585 dated April 28,
1989, and incorporated herein by reference.
(n) The Sherwin-Williams Company 1994 Stock Plan, as
amended and restated in its entirety, effective April
27, 1994 (filed herewith).
11. Computation of Net Income Per Share - See Note F to
Condensed Consolidated Financial Statements
(unaudited).
<PAGE> 1
EXHIBIT 10(n)
<PAGE> 2
THE SHERWIN-WILLIAMS COMPANY
1994 STOCK PLAN
(AMENDED AND RESTATED APRIL 27, 1994)
The Sherwin-Williams Company 1994 Stock Plan (the "Plan") is amended and
restated effective as of April 27, 1994. The Plan was established effective as
of 12:00:01 a.m. on February 16, 1994. The purpose of the Plan is to attract and
retain key executive, managerial, technical and professional personnel for The
Sherwin-Williams Company and its subsidiaries by providing incentives and
rewards for superior performance by such personnel.
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the following respective
meanings unless the context clearly indicates otherwise:
1.01 APPRECIATION RIGHT. A right to receive from the Company, upon
surrender of the related stock option, an amount equal to the Spread in
accordance with Article IV.
1.02 BOARD OF DIRECTORS. The Board of Directors of the Company.
1.03 CODE. The Internal Revenue Code of 1986, as the same has been or may
be amended from time-to-time.
1.04 COMMITTEE. The Compensation and Management Development Committee of
the Board of Directors or such other committee composed of not less than three
(3) non-employee directors appointed by the Board of Directors.
1.05 COMMON STOCK. Common Stock of the Company or any security into which
such Common Stock may be changed by reason of any transaction or event of the
type described in Article VIII.
1.06 COMPANY. The Sherwin-Williams Company, or its corporate successor or
successors.
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1.07 DATE OF GRANT. The date specified by the Board of Directors on which
a grant of Option Rights or Appreciation Rights or a grant or sale of Restricted
Stock shall become effective (which date shall not be earlier than the date on
which the Board of Directors takes action with respect thereto).
1.08 ELIGIBLE EMPLOYEES. Persons who are selected by the Board of
Directors and who are, at the time such persons are selected, officers
(including officers who are members of the Board of Directors) or other key
employees of the Company or any of its subsidiaries.
1.09 FAIR MARKET VALUE. The average between the highest and the lowest
quoted selling price of the Company's Common Stock on the New York Stock
Exchange or any successor exchange.
1.10 ISO. An "incentive stock option" within the meaning of section 422 of
the Code.
1.11 OPTION RIGHT. The right to purchase a share of Common Stock upon
exercise of an option granted pursuant to Article III.
1.12 PARTICIPANT. An Eligible Employee named in an agreement evidencing an
outstanding Option Right, Appreciation Right, sale or grant of Restricted Stock
or stock option granted under any stock option plan heretofore or hereafter
approved by the shareholders of the Company.
1.13 PLAN. The Sherwin-Williams Company 1994 Stock Plan, as the same may
be amended from time-to-time.
1.14 RESTRICTED STOCK. Shares of Common Stock granted or sold pursuant to
Article V as to which neither the substantial risk of forfeiture nor the
prohibition or restriction on transfer referenced to therein has lapsed,
terminated or been cancelled.
1.15 SECTION 16. Section 16 of the Securities Exchange Act of 1934, as the
same has been and may be amended from time-to-time.
1.16 SPREAD. The excess of the Fair Market Value per share of Common Stock
on the date when an Appreciation Right is exercised over the option price
provided for in the related stock option.
1.17 SUBSIDIARY. Any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if, at the time
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of the granting of the Option Right, Appreciation Right or the grant or sale of
Restricted Stock, each of the corporations other than the last corporation in
the unbroken chain owns stock possessing 50 percent or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
1.18 TAX DATE. The date upon which the tax is first determinable.
ARTICLE II
COMMON STOCK AVAILABLE
2.01 NUMBER OF SHARES. The shares of Common Stock which may be (a) sold
upon the exercise of Option Rights, (b) delivered upon the exercise of
Appreciation Rights, or (c) awarded or sold as Restricted Stock and released
from substantial risks of forfeiture thereof shall not exceed in the aggregate
2,000,000 shares plus the number of shares of Common Stock authorized pursuant
to the 1984 Stock Plan which are not granted pursuant to the 1984 Stock Plan as
of the expiration thereof, all subject to adjustment as provided in Articles VII
and VIII. Such shares may be shares of original issuance or treasury shares or a
combination of the foregoing.
2.02 REUSE OF SHARES. If an Option Right or portion thereof shall expire
or terminate for any reason without having been exercised in full, or if the
rights of a Participant in Restricted Stock shall terminate prior to the lapse
of the substantial risk of forfeiture relating thereto, the shares covered by
such Option Right or Restricted Stock grant not transferred to the Participant
shall be available for future grants of Option Rights and/or Restricted Stock.
In the event of a cancellation or amendment of Option Rights or Restricted Stock
grants, the Board of Directors may authorize the granting of new Option Rights
or Restricted Stock (which may or may not cover the same number of shares which
had been the subject of the prior grant) in such manner, at such price and
subject to the same terms, conditions and discretions as, under the Plan, would
have been applicable had the cancelled Option Rights or Restricted Stock not
been granted.
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ARTICLE III
OPTION RIGHTS
3.01 AUTHORIZATION AND TERMS. The Board of Directors may, from
time-to-time and upon such terms and conditions as it may determine, consistent
with the terms of the Plan, authorize the granting of options to Eligible
Employees to purchase shares of Common Stock. Each such grant may utilize any or
all of the authorizations and shall be subject to all of the applicable
limitations set forth in the Plan, including the following:
(A) Each grant shall specify the number of shares of Common Stock to
which it pertains;
(B) Each grant shall specify an option price per share equal to the
Fair Market Value per share on the Date of Grant, and that such option
price shall be payable in full at the time of exercise of the option either
(i) in cash, (ii) by exchanging for the shares to be issued hereunder
pursuant to the exercise of the option previously acquired shares of the
Company's Common Stock held for such period of time, if any, as the Board
of Directors may require and reflect in the stock option certificate
(valued at an amount equal to the Fair Market Value of such stock on the
date of exercise), or (iii) by a combination of the payment methods
specified in clauses (i) and (ii) hereof. The proceeds of sale of Common
Stock subject to Option Rights are to be added to the general funds of the
Company or to the shares of the Common Stock held in treasury and used for
the Company's corporate purposes as the Board of Directors shall determine;
(C) Successive grants may be made to the same Eligible Employee
whether or not any Option Rights previously granted to such Eligible
Employee remain unexercised;
(D) Each grant shall specify the period or periods of continuous
employment by the Participant with the Company or any Subsidiary which is
necessary before the Option Rights or installments thereof will become
exercisable;
(E) The Option Rights may be either (i) options which are intended to
qualify under particular provisions of the Code, as in effect from
time-to-time, including, but not limited to, ISOs, (ii) options which
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are not intended to so qualify or (iii) any combination of separate grants
of both (i) and (ii) above;
(F) The aggregate Fair Market Value of the stock (determined as of the
time the option with respect to such stock is granted) for which any
Eligible Employee may be granted options which are intended to qualify as
ISOs and which are exercisable for the first time by such Participants
during any calendar year (under all plans of the Company and its parent and
Subsidiary corporations, if any) shall not exceed $100,000;
(G) No Option Right shall be exercisable more than ten years from the
Date of Grant;
(H) Each grant of Option Rights shall be evidenced by an agreement
executed on behalf of the Company by an officer and delivered to and
accepted by the Eligible Employee and containing such terms and provisions,
consistent with the Plan, as the Board of Directors may approve; and
(I) The maximum number of shares for which Option Rights may be
granted to any Eligible Employee during any calendar year shall not exceed
500,000.
ARTICLE IV
APPRECIATION RIGHTS
4.01 GENERALLY. The Board of Directors may from time-to-time grant
Appreciation Rights in respect of any or all stock options heretofore or
hereafter granted (including stock options simultaneously granted) pursuant to
any stock option plan or employment agreement of the Company now or hereafter in
effect, whether or not such stock options are at such time exercisable, to the
extent that such stock options at such time have not been exercised and have not
been terminated. The Board of Directors may define the terms and provisions of
such Appreciation Rights, subject to the limitations and provisions of the Plan.
The amount which may be due the Participant at the time of the exercise of an
Appreciation Right may be paid by the Company in whole shares of Common Stock
(taken at their fair
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market value at the time of exercise), in cash or a combination thereof, as the
Board of Directors shall determine.
4.02 EXERCISE OF APPRECIATION RIGHTS. An Appreciation Right may be
exercised at any time when the related stock option may be exercised by the
surrender to the Company, unexercised, of the related stock option. Shares
covered by stock options so surrendered shall not be available for the granting
of further stock options under any stock option plan of the Company or a
Subsidiary, anything in such plan to the contrary notwithstanding.
4.03 LIMITATION ON PAYMENTS. The amount payable on the exercise of any
Appreciation Rights may not exceed 100% (or such lesser percentage as the Board
of Directors may determine) of the excess of (i) the Fair Market Value of the
shares of Common Stock covered by the related option as determined on the date
such Appreciation Right is exercised over (ii) the aggregate option price
provided for in the related stock option.
4.04 TERMINATION OF APPRECIATION RIGHT. An Appreciation Right shall
terminate and may no longer be exercised upon the earlier of (i) exercise or
termination of the related stock option or (ii) any termination date specified
by the Board of Directors at the time of grant of such Appreciation Right.
4.05 LIMITATION ON NUMBER OF APPRECIATION RIGHTS. The maximum number of
shares for which Appreciation Rights may be granted to any Eligible Employee
during any calendar year shall not exceed 500,000.
ARTICLE V
RESTRICTED STOCK
5.01 AUTHORIZATION AND TERMS. The Board of Directors may, from
time-to-time and upon such terms and conditions as it may determine, authorize
the granting or sale to Eligible Employees of Restricted Stock. Each grant or
sale may utilize any or all of the authorizations and shall be subject to all of
the following limitations:
(A) Each such grant or sale shall constitute an immediate transfer of
the ownership of shares of Common Stock to the Participant in
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consideration of the performance of services and shall entitle such
Participant to voting, dividend and other ownership rights, as the Board of
Directors may determine, subject, however, to a substantial risk of
forfeiture and restrictions on transfer as the Board of Directors may
determine;
(B) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that is
less than the Fair Market Value per share at the Date of Grant;
(C) Each such grant or sale shall provide that the shares of
Restricted Stock covered by such grant or sale are subject to a
"substantial risk of forfeiture" within the meaning of Section 83 of the
Code and the regulations thereunder;
(D) Each such grant or sale shall provide that during the period for
which the substantial risk of forfeiture is to continue, the
transferability of the Restricted Stock shall be prohibited or restricted
in the manner and to the extent prescribed by the Board of Directors at the
Date of Grant; and
(E) Each grant or sale of Restricted Stock shall be evidenced by an
agreement executed on behalf of the Company by an officer and delivered to
and accepted by the Participant and shall contain such terms and
provisions, consistent with the Plan, as the Board of Directors may
approve.
(F) Each grant or sale shall be subject to a vesting requirement. The
percentage of the number of shares of Restricted Stock granted to any
Participant that such Participant shall be entitled to receive without
restriction shall be based upon a comparison of the average return on
average equity of the Company and a group of other companies. The number of
shares of Restricted Stock which a Participant shall be
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entitled to receive without restriction shall be determined in accordance
with the following table:
<TABLE>
<CAPTION>
AVERAGE RETURN ON
AVERAGE EQUITY PERCENTILE RANKING
OF THE COMPANY COMPARED PERCENTAGE OF
TO GROUP OF OTHER COMPANIES SHARES VESTING
- - -------------------------------------------------------- --------------
<S> <C>
80th to 100th Percentile........................... 100%
75th to 80th Percentile............................ 90%
70th to 75th Percentile............................ 80%
65th to 70th Percentile............................ 70%
60th to 65th Percentile............................ 60%
55th to 60th Percentile............................ 50%
50th to 55th Percentile............................ 40%
Less than 50th Percentile.......................... 0%
</TABLE>
The maximum number of shares of Restricted Stock that may be granted
to any Eligible Employee during any calendar year shall not exceed 500,000.
ARTICLE VI
ADMINISTRATION OF THE PLAN
6.01 GENERALLY. The Plan shall be administered by the Board of Directors,
which may from time-to-time delegate all or any part of its authority under the
Plan to a Committee. The members of the Committee shall not be eligible and
shall not have been eligible for a period of at least one year prior to their
appointment, to participate in the Plan or in any other plan of the Company or
any Subsidiary entitling the participants therein to acquire Restricted Stock,
Option Rights or Stock Appreciation Rights. A majority of the Board of Directors
or the Committee, if applicable, shall constitute a quorum, and the action of
the members present at any meeting at which a quorum is present, or acts
unanimously approved in writing, shall be the acts of the Board of Directors or
the Committee, as applicable. No Restricted Stock, Option Right or Appreciation
Right shall be granted or sold to any member of the Committee so long as his
membership continues.
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6.02 INTERPRETATION AND CONSTRUCTION. The interpretation and construction
by the Board of Directors of any provision of the Plan or of any agreement,
notification or document evidencing the grant of Restricted Stock, Option Rights
or Appreciation Rights and any determination by the Board of Directors pursuant
to any provision of the Plan or of any such agreement, notification or document,
made in good faith, shall be final and conclusive. No member of the Board of
Directors shall be liable for any such action or determination made in good
faith.
ARTICLE VII
AMENDMENT AND TERMINATION
7.01 AMENDMENT OF THE PLAN. The Plan may be amended from time-to-time by
the Board of Directors without further approval by the shareholders of the
Company unless such amendment (i) increases the maximum number of shares
specified in Article II (except that adjustments authorized by Section 8.02
shall not be limited by this provision), (ii) changes the definition of
"Eligible Employees" or (iii) causes Rule 16b-3 issued under the Securities
Exchange Act of 1934 (or any successor rule to the same effect) to cease to be
applicable to the Plan.
7.02 AMENDMENT OF THE AGREEMENTS. The Board of Directors may cancel or
amend any agreement evidencing Restricted Stock, Option Rights or Appreciation
Rights granted under the Plan provided that the terms and conditions of each
such agreement as amended are not inconsistent with the Plan.
7.03 AUTOMATIC TERMINATION. The Plan will terminate at midnight on
February 16, 2003; provided, however, that Option Rights and Appreciation Rights
granted on or before that date may extend beyond that date and restrictions
imposed on Restricted Stock transferred on or before that date may extend beyond
such date.
ARTICLE VIII
MISCELLANEOUS
8.01 TRANSFERABILITY. No Option Right or Appreciation Right shall be
transferable by a Participant other than by will or the laws of descent and
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distribution. Option Rights and Appreciation Rights shall be exercisable during
the Participant's lifetime only by the Participant. No right or interest of any
Participant granted under the Plan shall be subject to alienation, anticipation,
encumbrance, garnishment, attachment, any lien, obligation or liability of such
Participant, or execution or levy of any kind, voluntary or involuntary, except
as provided herein or required by law.
8.02 ADJUSTMENTS. The Board of Directors may make or provide for such
adjustments in the exercise price, sale price and the number or kind of shares
of the Company's Common Stock or other securities covered by outstanding Option
Rights, Appreciation Rights or Restricted Stock grants as such Board of
Directors in its sole discretion, exercised in good faith, may determine is
equitably required to prevent dilution or enlargement of the rights of
Participants that would otherwise result from (i) any stock dividend, stock
split, combination of shares, recapitalization or other change in the capital
structure of the Company, (ii) any merger, consolidation, separation,
reorganization or partial or complete liquidation, or (iii) any other corporate
transaction or event having an effect similar to any of the foregoing. The Board
of Directors may also make or provide for such adjustments in the number or kind
of shares of the Company's Common Stock or other securities which may be sold or
transferred under the Plan and in the maximum number of shares that may be
purchased or received by any person, as such Board of Directors in its sole
discretion, exercised in good faith, may determine is appropriate to reflect any
event of the type described in clauses (i) and/or (ii) of the preceding
sentence.
8.03 FRACTIONAL SHARES. The Company shall not be required to sell or
transfer any fractional share of Common Stock pursuant to the Plan. The Board of
Directors may provide for the elimination of fractions or for the settlement of
fractions in cash.
8.04 WITHHOLDING TAXES. The Company shall have the right to deduct from
any transfer of shares or other payment under this Plan an amount equal to the
Federal, state and local income taxes and employment taxes required to be
withheld by it with respect to such transfer and payment and, if the cash
portion of any such payment is less than the amount of taxes required to be
withheld, to require the Participant or other person receiving such transfer or
payment, to pay to the Company the balance of
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such taxes so required to be withheld. Notwithstanding the foregoing, when a
Participant is required to pay to the Company an amount required to be withheld
under applicable income and employment tax laws, the Participant may elect to
satisfy the obligation, in whole or in part, by electing to have withheld, from
the shares required to be delivered to the Participant, shares of Common Stock
having a value equal to the amount required to be withheld (except in the case
of Restricted Stock where an election under Section 83(b) of the Code has been
made), or by delivering to the Company other shares of Common Stock held by such
Participant. The shares used for tax withholding settlement will be valued at an
amount equal to the Fair Market Value of such Common Stock on the Tax Date.
Election by a Participant to have shares withheld or to deliver other shares of
Common Stock for this purpose will be subject to the following restrictions: (i)
such election must be made prior to the Tax Date, (ii) such election will be
irrevocable (subject to certain exceptions), (iii) such election will be subject
to the disapproval of the Board of Directors, (iv) if a Participant is an
officer of the Company within the meaning of Section 16, no election shall be
effective for a Tax Date which occurs within six (6) months of the grant (except
that this limitation will not apply in the event death or disability of the
Participant occurs prior to the expiration of the six (6) month period) and (v)
if a Participant is an officer of the Company within the meaning of Section 16,
such election must be made (subject to certain exceptions) either six (6) or
more months prior to the Tax Date or during the period beginning on the third
business day following the date of the release for publication of quarterly or
annual reports of the Company containing summary statements of sales and
earnings and ending on the twelfth business day following such date.
8.05 NOT AN EMPLOYMENT CONTRACT. This Plan shall not confer upon any
Eligible Employee or Participant any right with respect to continuance of
employment with the Company or any Subsidiary, nor shall it interfere in any way
with any right such Eligible Employee, Participant, the Company or any
Subsidiary would otherwise have to terminate such Participant or Eligible
Employee's employment at any time.
8.06 INVALIDITY OF PROVISIONS. Should any part of the Plan for any reason
be declared by any court of competent jurisdiction to be invalid, such decision
shall not affect the validity of any remaining portion, which
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remaining portion shall continue in full force and effect as if the Plan had
been adopted with the invalid portion hereof eliminated, it being the intention
of the Company that it would have adopted the remaining portion of the Plan
without including any such part, parts or portion which may for any reason be
hereafter declared invalid.
8.07 EFFECTIVE DATE. The Plan became effective at 12:00:01 a.m. on
February 16, 1994 following its approval at the April 28, 1993 Annual Meeting of
Shareholders of the Company by the affirmative vote of the holders of a majority
of the shares of Common Stock present, in person or by proxy, and entitled to
vote thereat. The Plan shall be deemed to have been adopted on the date of such
meeting.
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