<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 June 30, 1998
-------------
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 - 172,895,006 shares as of July 31, 1998.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
Thousands of dollars, except per share data
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
---------------------------- ----------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 1,377,785 $ 1,373,351 $ 2,481,932 $ 2,443,138
Costs and expenses:
Cost of goods sold 778,320 775,795 1,427,528 1,401,968
Selling, general and administrative expenses 418,557 419,013 812,779 806,889
Interest expense 19,428 21,339 38,015 42,137
Interest and net investment income (2,180) (2,078) (3,488) (5,038)
Other 3,257 6,491 6,053 6,466
----------- ----------- ----------- -----------
1,217,382 1,220,560 2,280,887 2,252,422
----------- ----------- ----------- -----------
Income before income taxes 160,403 152,791 201,045 190,716
Income taxes 60,953 59,588 76,397 74,379
----------- ----------- ----------- -----------
Net income $ 99,450 $ 93,203 $ 124,648 $ 116,337
=========== =========== =========== ===========
Net income per common share:
Basic $ 0.58 $ 0.54 $ 0.72 $ 0.68
=========== =========== =========== ===========
Diluted $ 0.57 $ 0.54 $ 0.71 $ 0.67
=========== =========== =========== ===========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE> 3
THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Thousands of dollars
<TABLE>
<CAPTION>
JUNE 30, Dec. 31, June 30,
1998 1997 1997
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 20,754 $ 3,530 $ 7,406
Accounts receivable, less allowance 725,850 546,314 688,732
Inventories
Finished goods 596,668 587,680 607,282
Work in process and raw materials 126,780 133,988 144,383
----------- ----------- -----------
723,448 721,668 751,665
Other current assets 269,945 260,741 240,320
----------- ----------- -----------
Total current assets 1,739,997 1,532,253 1,688,123
Goodwill 1,142,546 1,161,129 1,223,596
Intangible assets 301,075 310,221 315,149
Deferred pension assets 288,086 276,086 264,269
Other assets 73,845 63,854 71,227
Property, plant and equipment 1,419,806 1,357,844 1,285,114
Less allowances for depreciation and amortization 704,975 665,586 628,130
----------- ----------- -----------
714,831 692,258 656,984
----------- ----------- -----------
Total assets $ 4,260,380 $ 4,035,801 $ 4,219,348
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings $ 268,656 $ 106,913 $ 386,107
Accounts payable 452,402 424,184 462,760
Compensation and taxes withheld 97,375 118,709 89,783
Current portion of long-term debt 62,540 53,926 52,330
Other accruals 352,087 367,392 409,114
Accrued taxes 108,065 44,539 126,049
----------- ----------- -----------
Total current liabilities 1,341,125 1,115,663 1,526,143
Long-term debt 783,132 843,919 796,233
Postretirement benefits other than pensions 202,692 199,839 197,775
Other long-term liabilities 275,919 284,200 216,115
Shareholders' equity
Common stock - $1.00 par value:
172,805,155, 172,907,418 and 172,424,246 shares
outstanding at June 30, 1998, December 31, 1997
and June 30, 1997, respectively 205,477 204,538 204,019
Other capital 133,481 119,695 109,577
Retained earnings 1,688,529 1,602,882 1,492,344
Accumulated other comprehensive income (34,205) (33,517) (22,506)
Treasury stock, at cost (335,770) (301,418) (300,352)
----------- ----------- -----------
Total shareholders' equity 1,657,512 1,592,180 1,483,082
----------- ----------- -----------
Total liabilities and shareholders' equity $ 4,260,380 $ 4,035,801 $ 4,219,348
=========== =========== ===========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE> 4
THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
Thousands of dollars
<TABLE>
<CAPTION>
Six months ended June 30,
------------------------
1998 1997
--------- ---------
<S> <C> <C>
OPERATIONS
Net income $ 124,648 $ 116,337
Non-cash adjustments
Depreciation 47,062 41,831
Amortization of goodwill and intangible assets 24,881 24,535
Increase in deferred pension assets (12,000) (9,778)
Net increase in postretirement liability 2,853 2,798
Other 10,043 10,663
Change in current assets and liabilities-net (128,440) (121,843)
Proceeds of insurance settlement 53,883
Costs incurred for disposition of operations (5,450) (7,221)
Other (25,940) (13,224)
--------- ---------
Net operating cash 37,657 97,981
INVESTING
Capital expenditures (77,920) (72,298)
Acquisitions of assets (867,876)
Increase in other investments (6,993) (15,022)
Other 14,211 (12,712)
--------- ---------
Net investing cash (70,702) (967,908)
FINANCING
Net increase in short-term borrowings 161,743 217,502
Increase in long-term debt 705,767
Payments of long-term debt (52,913) (2,052)
Payments of cash dividends (39,001) (35,288)
Proceeds from stock options exercised 13,544 2,825
Treasury stock acquired (34,352)
Costs related to issuance of debt (14,253)
Other 1,248 952
--------- ---------
Net financing cash 50,269 875,453
--------- ---------
Net increase in cash and cash equivalents 17,224 5,526
Cash and cash equivalents at beginning of year 3,530 1,880
--------- ---------
Cash and cash equivalents at end of period $ 20,754 $ 7,406
========= =========
Taxes paid on income $ 12,758 $ 30,509
Interest paid on debt 38,136 22,897
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE> 5
THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Periods ended June 30, 1998 and 1997
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 Annual Report on Form 10-K for the fiscal year
ended December 31, 1997. 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
and six months ended June 30, 1998 are not necessarily indicative of the results
to be expected for the fiscal year ending December 31, 1998.
NOTE B--DIVIDENDS
Dividends paid on common stock during each of the first two quarters of 1998 and
1997 were $.1125 per share and $.10 per share, respectively.
NOTE C--INVESTMENT IN LIFE INSURANCE
The Company invests in broad-based corporate owned life insurance. The cash
surrender values of the policies, net of policy loans, are included in Other
Assets. The net expense associated with such investment is included in Other
Costs and Expenses.
NOTE D--OTHER COSTS AND EXPENSES
Significant items included in other costs and expenses are as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
(Thousands of dollars) June 30, June 30,
-------------------- --------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Dividend and royalty income $ 483 $ 954 $ 1,399 $ 1,868
Net income (expense) of financing
and investing activities 840 (884) 3,273 2,187
Foreign exchange loss (2,233) (6,006) (5,461) (7,567)
</TABLE>
The net income (expense) of financing and investing activities represents the
realized gains or losses associated with disposing of fixed assets, the net gain
or loss associated with the investment of certain long-term asset funds, the net
pre-tax expense associated with the Company's investment in broad-based
corporate owned life insurance and, in the six months ended June 30, 1998, the
net gain related to the sale of the Company's joint venture interest in American
Standox, Inc.
<PAGE> 6
NOTE E--COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 130, "Reporting Comprehensive Income". SFAS No. 130
establishes new rules for the reporting and display of comprehensive income and
its components; however, the adoption of this statement had no impact on the
Company's net income or shareholders' equity. SFAS No. 130 requires other
comprehensive income to include foreign currency translation adjustments and
minimum pension liability adjustments, which prior to adoption were reported
separately in shareholders' equity. The June 30, 1997 and December 31, 1997
financial statements have been reclassified to conform to the requirements of
SFAS No. 130.
Total comprehensive income, which includes net income and other comprehensive
income, amounted to $98,903,000 and $95,639,000 during the second quarter of
1998 and 1997, respectively, and $123,960,000 and $112,813,000 for the first six
months of 1998 and 1997, respectively.
NOTE F--RECLASSIFICATION
Certain amounts in the 1997 financial statements have been reclassified to
conform with the 1998 presentation.
<PAGE> 7
NOTE G--COMPUTATION OF NET INCOME PER COMMON SHARE
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
----------------------------- ------------------------------
1998 1997 1998 1997
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Basic
Average common shares outstanding 172,567,999 171,965,852 172,735,858 171,809,699
============ ============ ============ =============
Net income $ 99,450 $ 93,203 $ 124,648 $ 116,337
============ ============ ============ =============
Net income per common share $ 0.58 $ 0.54 $ 0.72 $ 0.68
============ ============ ============ =============
Diluted
Average common shares outstanding 172,567,999 171,965,852 172,735,858 171,809,699
Non-vested restricted stock grants 242,900 291,900 242,900 354,200
Stock options - treasury stock method 1,686,275 1,684,803 1,546,582 1,681,239
------------ ------------ ------------ -------------
Average common shares outstanding assuming
dilution 174,497,174 173,942,555 174,525,340 173,845,138
============ ============ ============ =============
Net income $ 99,450 $ 93,203 $ 124,648 $ 116,337
============ ============ ============ =============
Net income per common share $ 0.57 $ 0.54 $ 0.71 $ 0.67
============ ============ ============ =============
</TABLE>
Net income per common share has been computed in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128 adopted for the quarter ending
December 31, 1997. All net income per common share amounts shown for the three
months and six months ended June 30, 1997 have been restated to conform to SFAS
No. 128. The adoption of SFAS No. 128 for the three months ended June 30, 1997
had no effect on net income per common share from the previous method of
computing net income per common share. The adoption of SFAS No. 128 for the six
months ended June 30, 1997 increased basic net income per common share by $.01
from the previous method of computing net income per common share. There was no
effect on diluted net income per common share for the six-month period.
<PAGE> 8
NOTE H--BUSINESS SEGMENTS
Net External Sales/Operating Profit
- -----------------------------------
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------------------------------------------------------------------------------------
Thousands of dollars 1998 1997 1998 1997
----------------------- ----------------------- ----------------------- -----------------------
NET Net NET Net
EXTERNAL OPERATING External Operating EXTERNAL OPERATING External Operating
SALES PROFIT Sales Profit SALES PROFIT Sales Profit
---------- -------- ---------- ---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paint Stores $ 760,119 $ 70,303 $ 716,767 $ 64,453 $1,341,384 $ 81,550 $1,248,940 $ 71,580
Coatings 614,527 121,191 653,893 121,483 1,134,362 188,189 1,188,673 186,744
Other 3,139 4,002 2,691 2,977 6,186 7,158 5,525 5,925
---------- -------- ---------- ---------- ---------- ---------- ---------- ----------
Segment totals $1,377,785 195,496 $1,373,351 188,913 $2,481,932 276,897 $2,443,138 264,249
========== ========== ========== ==========
Corporate expenses-net (35,093) (36,122) (75,852) (73,533)
-------- ---------- ---------- ----------
Income before income taxes $160,403 $ 152,791 $ 201,045 $ 190,716
======== ========== ========== ==========
====================================================================================================================================
</TABLE>
Intersegment Transfers
- ----------------------
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
----------------------------------- ------------------------------------
Thousands of dollars 1998 1997 1998 1997
-------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Coatings $316,133 $ 296,492 $ 542,681 $ 502,596
Other 6,140 5,329 11,748 10,595
-------- ---------- ---------- ----------
Segment totals $322,273 $ 301,821 $ 554,429 $ 513,191
======== ========== ========== ==========
===================================================================================================================================
</TABLE>
Operating profit is total revenue, including realized profit on intersegment
transfers, less operating costs and expenses.
Net external sales and operating profits of consolidated foreign subsidiaries
were $140.5 million and $5.6 million, respectively, for the second quarter of
1998 compared to $139.6 million and $3.7 million, respectively, in the second
quarter of 1997. For the first six months of 1998, net external sales and
operating profits were $273.0 million and $8.3 million, respectively, and, for
the first six months of 1997, $264.4 million and $4.3 million, respectively.
Identifiable assets of these subsidiaries totaled $136.5 million and $110.5
million at June 30, 1998 and 1997, respectively. Domestic operations accounted
for the remaining net external sales, operating profits and identifiable assets.
Corporate expenses and identifiable assets do not include any significant
foreign operations. No single geographic area outside the United States was
significant relative to consolidated net external sales or consolidated
identifiable assets.
Export sales 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> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Consolidated net sales increased 0.3 percent in the second quarter and 1.6
percent in the first six months over the comparable 1997 periods. Net sales in
the Paint Stores Segment increased 6.0 percent in the second quarter and 7.4
percent in the first six months primarily due to increased paint gallons sold to
both retail and wholesale customers, combined with sales gains in each of the
remaining product lines (wallcoverings, floorcoverings, spray equipment and
associated products). Comparable-store sales were up 3.8 percent in the quarter
and 5.5 percent in the first six months. Net sales in the Coatings Segment
decreased 6.0 percent in the second quarter and 4.6 percent year-to-date due
principally to the continuing effects of the 1997 loss of certain coatings,
aerosol and detergent business due to pricing concessions the Company was
unwilling to make. A soft automotive refinish collision repair market due to the
mild winter throughout much of the nation curtailed automotive sales within the
Coatings Segment. Revenue generated by real estate operations in the Other
Segment increased 16.6 percent in the quarter and 12.0 percent in the first six
months, after large declines in 1997 due to the loss of a large tenant in one of
its office buildings, as vacated space was leased to new tenants.
Consolidated gross profit as a percent of sales remained at 43.5 percent for the
second quarter and declined slightly to 42.5 percent for the first six months
from 42.6 percent for the same period in 1997. The Paint Stores Segment's gross
profit margins were slightly higher than last year for the quarter as selective
price increases helped offset some of the raw material price increases, while
year-to-date margins were slightly lower than a year ago due primarily to an
unfavorable product mix. Gross profit margins in the Coatings Segment were lower
than last year for the second quarter and first six months due primarily to
increased raw material costs and the effects of the lost business partially
offset by selective selling price increases, the efficiencies of increased
volume and general and administrative cost reductions.
Consolidated selling, general and administrative expenses as a percent of sales
were slightly more favorable than last year for the second quarter and were 0.3
percent of sales more favorable than last year for the first six months. The
Paint Stores Segment's second quarter and year-to-date SG&A ratio was
essentially flat with last year. SG&A expenses as a percent of sales for the
second quarter and first six months in the Coatings Segment were favorable as
general and administrative cost reductions helped to mitigate the effect on
operating profits of the lost business.
Interest expense in the second quarter and first six months was lower than the
comparable periods of last year due to the reduction of total debt since the end
of June 1997. Average short-term borrowing rates were slightly higher than last
year.
Other costs and expenses were lower than last year for the quarter due primarily
to decreased
<PAGE> 10
foreign currency exchange losses. For the first six months of 1998, other costs
and expenses were slightly lower than last year as foreign currency exchange
losses were offset partially by a net gain on the sale of the Company's joint
venture interest in American Standox, Inc.
Net income for the second quarter of 1998 increased 6.7 percent over last year
to $99,450,000, or $.57 per common share - diluted, from $93,203,000, or $.54
per common share - diluted, in 1997. Year-to-date net income through June 30,
1998 increased 7.1 percent to $124,648,000, or $.71 per common share - diluted,
from $116,337,000, or $.67 per common share - diluted, in 1997.
FINANCIAL CONDITION
- -------------------
During the first six months of 1998, cash and cash equivalents increased $17.2
million, net long-term debt decreased $60.8 million and short-term borrowings
increased $161.7 million. Short-term borrowings incurred during the six months
relate to the Company's commercial paper program, which had unused borrowing
availability of $731.3 million at June 30, 1998. This program is backed by the
Company's revolving credit agreements, whose maximum borrowing amount is
$1,080.0 million. The decrease in long-term debt since December 31, 1997 is
primarily due to the payment of a $50.0 million floating rate note during the
first quarter. The increase in short-term borrowings since the end of last year
relates to capital expenditures of $77.9 million, cash dividends of $39.0
million and normal operating needs for seasonally higher accounts receivable and
inventories. The decrease in the Company's current ratio from 1.37 at December
31, 1997 to 1.30 at June 30, 1998 occurred primarily due to the increase in
short-term borrowings.
Since June 30, 1997, cash and cash equivalents increased $13.3 million,
short-term borrowings decreased $117.5 million and net long-term debt decreased
$13.1 million. Cash generated by operations during this period of $379.2 million
was used for capital expenditures of $169.6 million, payments of cash dividends
of $72.7 million and normal working capital needs. The Company expects to remain
in a borrowing position throughout 1998.
Capital expenditures during the first six months of 1998 represented primarily
the costs of upgrading or installing point-of-sale terminals at the paint
stores, upgrading and installing other computer hardware and construction,
capacity expansion or upgrade of distribution centers and manufacturing
facilities. We do not anticipate the need for any specific external financing to
support our capital programs.
During the first six months of 1998, the Company received approximately 32,500
shares of its common stock in exchange from the exercise of stock options.
During the second quarter of 1998, the Company acquired 1,000,000 shares of its
common stock through open market purchases for treasury purposes. The Company
acquires shares of its common stock for general corporate purposes and,
depending upon its cash position and market conditions, the Company may acquire
additional shares of its common stock in the future. The Company has
authorization to purchase an additional 9,000,000 shares of its common stock.
<PAGE> 11
The Company and certain other companies are 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 damage, along with costs involving the abatement
of lead related paint from buildings and medical monitoring costs. 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 operations of the Company, like those of other companies in our industry,
are subject to various federal, state and local environmental laws and
regulations. These laws and regulations not only govern our current operations
and products, but also impose potential liability on the Company for past
operations which were conducted utilizing practices and procedures that were
considered acceptable under the laws and regulations existing at that time. The
Company expects the environmental laws and regulations to impose increasingly
stringent requirements upon the Company and our industry in the future. The
Company believes it conducts its operations in compliance with applicable
environmental laws and regulations and has implemented various programs designed
to protect the environment and promote continued compliance.
The Company is involved with environmental compliance and remediation activities
at some of its current and former sites (including former sites which were
previously owned and/or operated by businesses acquired by the Company). The
Company, together with other parties, has also been designated a potentially
responsible party under federal and state environmental protection laws for the
remediation of hazardous waste at a number of third-party sites, primarily
Superfund sites. The Company may be similarly designated with respect to
additional third-party sites in the future.
The Company accrues for certain environmental remediation-related 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. The Company continuously
assesses its potential liability for remediation-related activities and adjusts
its environmental-related accruals as information becomes available upon which
more accurate costs can be reasonably estimated and as additional accounting
guidelines are issued. Actual costs incurred may vary from these estimates due
to the inherent uncertainties involved including, among others, the number and
financial condition of parties involved with respect to any given site, the
volumetric contribution which may be attributed to the Company relative to that
attributable to other parties, the nature and magnitude of the wastes involved,
the various technologies that can be used for remediation and the determination
of acceptable remediation with respect to a particular site. The Company does
not believe that any potential liability ultimately attributed to the Company
for its environmental-related matters will have a material adverse effect on the
Company's financial condition, liquidity or cash flow.
The Company is engaged in a company-wide project to prepare for the change in
date from the year 1999 to 2000. The Company has assembled a Year 2000 project
team consisting of Company employees and third party consultants. The goal of
the Year
<PAGE> 12
2000 project is to assure that there are no major interruptions in the Company's
business operations relating to the transition to the Year 2000. The scope of
the Company's Year 2000 project includes (a) identifying and taking appropriate
corrective action to remedy the Company's software, hardware and embedded
technology, (b) working with key third parties, including financial
institutions, customers and suppliers, with which the Company does business
electronically to ensure that such business is not adversely affected by the
Year 2000, and (c) contacting other key third parties and requesting assurances
that such third parties will be Year 2000 compliant.
The Company substantially has completed the inventory and risk assessment phases
for its mission critical systems and is in the process of remediating and
testing affected mission critical systems. The Company's target for completing
its Year 2000 project with regard to its mission critical systems is mid-1999.
The Company anticipates that some remediation and testing for other systems will
continue through the end of 1999.
The Company is in contact with certain key third parties, including financial
institutions, customers and suppliers with which the Company does business
electronically to address the compatibility of systems.
All costs and expenses incurred to address the Year 2000 issue are charged
against income on a current basis. The Company does not expect these costs and
expenses to be material to the Company's financial condition, annual results of
operation or cash flows.
Management's estimates regarding expected completion dates and costs involved in
the Company's Year 2000 project are based upon various assumptions regarding
future events, including the availability of resources, the success of third
parties in addressing their Year 2000 issues, and other factors. While
management believes that the Company is addressing the Year 2000 issue, there is
no guarantee that these estimated completion dates and costs will be achieved.
In the event that the estimated completion dates and costs differ materially
from the actual completion dates and costs, such could have a materially adverse
effect on the Company's financial condition and financial results. In addition,
the Company cannot reasonably estimate the impact of Year 2000 on the Company if
key third parties, including suppliers, customers, public utilities, and
governments, are unsuccessful in completing their Year 2000 efforts.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
- ----------------------------------------------------------
Certain statements contained in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and elsewhere in this report
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
These forward-looking statements are based upon management's expectations and
beliefs concerning future events and discuss, among other things, anticipated
future performance and revenues, expected growth and future business plans.
Words and phrases such as "expects", "anticipates", "believes", "will likely
result", "will continue", "plans to" and similar expressions are intended to
identify forward-looking statements. Readers are cautioned not to place undue
reliance on any forward-looking statements. Forward-looking statements are
<PAGE> 13
necessarily subject to risks, uncertainties and other factors, many of which are
outside the control of the Company, that could cause actual results to differ
materially from such statements. A discussion of these risks, uncertainties and
other factors is included in the Company's reports filed with the Securities and
Exchange Commission. Any forward-looking statement speaks only as of the date on
which such statement is made, and the Company undertakes no obligation to update
any forward-looking statement, whether as a result of new information, future
events or otherwise.
<PAGE> 14
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
A. The 1998 Annual Meeting of Shareholders of The Sherwin-Williams
Company was held on April 22, 1998. Holders of Common Stock of record at the
close of business on March 2, 1998 were the only shareholders entitled to vote
at the Annual Meeting of Shareholders.
B. The following persons were nominated to serve, and were elected, as
directors of the Company to serve until the next annual meeting and until their
successors are elected: J. M. Biggar, J. G. Breen, D. E. Collins, T. A. Commes,
D. E. Evans, R. W. Mahoney, W. G. Mitchell, A. M. Mixon, III, C. E. Moll, H. O.
Petrauskas and R. K. Smucker. The voting results of the Annual Meeting of
Shareholders for each such nominee were as follows:
<TABLE>
<CAPTION>
Name For Withheld
---- --- --------
<S> <C> <C>
J. M. Biggar 148,836,983 10,326,513
J. G. Breen 148,797,648 10,365,848
D. E. Collins 148,531,580 10,631,916
T. A. Commes 148,865,593 10,297,903
D. E. Evans 148,602,303 10,561,193
R. W. Mahoney 148,880,785 10,282,711
W. G. Mitchell 148,845,516 10,317,980
A. M. Mixon, III 148,861,642 10,301,854
C. E. Moll 148,868,213 10,295,283
H. O. Petrauskas 148,836,435 10,327,061
R. K. Smucker 148,828,741 10,334,755
</TABLE>
Item 5. Other Information.
-----------------
As set forth in the Company's Proxy Statement for the 1998 Annual
Meeting of Shareholders, shareholder proposals must be received at the Company's
headquarters on or before November 11, 1998 in order to be included in the proxy
materials relating to the 1999 Annual Meeting of Shareholders.
In accordance with recent amendments to Rule 14a-4(c)(1) under the
Securities Exchange Act of 1934, as amended, if a shareholder intends to present
a proposal at the 1999 Annual Meeting of Shareholders and does not notify the
Company of such proposal on or before January 25, 1999, then management proxies
will be permitted to use their discretionary voting authority to vote on the
proposal if the proposal is raised at the 1999 Annual Meeting of Shareholders.
<PAGE> 15
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(11) Computation of Net Income Per Common Share - See Note
G to Condensed Consolidated Financial Statements
(Unaudited).
(27) Financial Data Schedule for the period ended June 30,
1998 (filed herewith).
(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
August 14, 1998 By: /s/ J.L. Ault
-----------------------------
J.L. Ault
Vice President-Corporate Controller
August 14, 1998 By: /s/ L.E. Stellato
-----------------------------
L.E. Stellato
Vice President, General Counsel and Secretary
<PAGE> 16
INDEX TO EXHIBITS
-----------------
EXHIBIT NO. EXHIBIT
- -------------------
(11) Computation of Net Income Per Common Share - See Note G to Condensed
Consolidated Financial Statements (Unaudited).
(27) Financial Data Schedule for the period ended June 30, 1998 (filed
herewith).
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000089800
<NAME> THE SHERWIN-WILLIAMS COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 20,754
<SECURITIES> 0
<RECEIVABLES> 754,347
<ALLOWANCES> 28,497
<INVENTORY> 723,448
<CURRENT-ASSETS> 1,739,997
<PP&E> 1,419,806
<DEPRECIATION> 704,975
<TOTAL-ASSETS> 4,260,380
<CURRENT-LIABILITIES> 1,341,125
<BONDS> 783,132
0
0
<COMMON> 205,477
<OTHER-SE> 1,452,035
<TOTAL-LIABILITY-AND-EQUITY> 4,260,380
<SALES> 2,481,932
<TOTAL-REVENUES> 2,481,932
<CGS> 1,427,528
<TOTAL-COSTS> 1,427,528
<OTHER-EXPENSES> 6,053
<LOSS-PROVISION> 7,596
<INTEREST-EXPENSE> 38,015
<INCOME-PRETAX> 201,045
<INCOME-TAX> 76,397
<INCOME-CONTINUING> 124,648
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 124,648
<EPS-PRIMARY> 0.72<F1>
<EPS-DILUTED> 0.71<F2>
<FN>
<F1> Represents net income per common share - basic in accordance with
SFAS No. 128.
<F2> Represents net income per common share - diluted in accordance with
SFAS No. 128.
</FN>
</TABLE>
