<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, 2000
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 - 163,753,280 shares as of April 28, 2000.
<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 March 31,
----------------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
Net sales $ 1,221,916 $ 1,127,867
Costs and expenses:
Cost of goods sold 705,672 650,781
Selling, general and administrative expenses 435,921 411,613
Interest expense 14,877 15,770
Interest and net investment income (1,039) (1,692)
Other expense - net 480 4,949
---------------- ----------------
1,155,911 1,081,421
---------------- ----------------
Income before income taxes 66,005 46,446
Income taxes 25,082 17,649
---------------- ----------------
Net income $ 40,923 $ 28,797
================ ================
Net income per common share:
Basic $ 0.25 $ 0.17
================ ================
Diluted $ 0.25 $ 0.17
================ ================
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
-2-
<PAGE> 3
THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Thousands of dollars
<TABLE>
<CAPTION>
MARCH 31, December 31, March 31,
2000 1999 1999
---------------- ---------------- ----------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,633 $ 18,623 $ 3,503
Accounts receivable, less allowance 708,206 606,046 652,430
Inventories:
Finished goods 619,792 591,912 575,196
Work in process and raw materials 112,160 111,476 109,193
--------------- --------------- ---------------
731,952 703,388 684,389
Deferred income taxes 127,059 128,177 117,233
Other current assets 161,694 141,143 157,569
--------------- --------------- ---------------
Total current assets 1,732,544 1,597,377 1,615,124
Goodwill 1,039,654 1,039,555 1,060,017
Intangible assets 270,869 274,924 286,817
Deferred pension assets 341,008 334,094 310,944
Other assets 99,973 94,464 77,471
Property, plant and equipment 1,486,153 1,447,927 1,444,533
Less allowances for depreciation and amortization 760,660 736,251 737,790
--------------- --------------- ---------------
725,493 711,676 706,743
--------------- --------------- ---------------
Total assets $ 4,209,541 $ 4,052,090 $ 4,057,116
=============== =============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 254,987 $ 160,719
Accounts payable 497,098 $ 458,919 415,353
Compensation and taxes withheld 90,332 140,934 105,549
Current portion of long-term debt 21,541 122,270 160,683
Other accruals 392,490 382,343 403,657
Accrued taxes 97,960 85,396 91,210
--------------- --------------- ---------------
Total current liabilities 1,354,408 1,189,862 1,337,171
Long-term debt 624,234 624,365 629,124
Postretirement benefits other than pensions 207,400 206,591 206,218
Other long-term liabilities 330,460 332,740 290,662
Shareholders' equity:
Common stock - $1.00 par value:
163,747,811, 165,663,601 and 170,052,428 shares
outstanding at March 31, 2000, Dec. 31, 1999
and March 31, 1999, respectively 206,393 206,309 206,030
Other capital 152,327 150,887 146,933
Retained earnings 2,039,399 2,020,851 1,806,360
Treasury stock, at cost (572,131) (533,891) (419,890)
Cumulative other comprehensive loss (132,949) (145,624) (145,492)
--------------- --------------- ---------------
Total shareholders' equity 1,693,039 1,698,532 1,593,941
--------------- --------------- ---------------
Total liabilities and shareholders' equity $ 4,209,541 $ 4,052,090 $ 4,057,116
=============== =============== ===============
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
-3-
<PAGE> 4
THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
Thousands of dollars
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------------------
2000 1999
----------------- -----------------
<S> <C> <C>
OPERATIONS
Net income $ 40,923 $ 28,797
Adjustments to reconcile net income to net operating cash:
Depreciation 26,314 24,816
Amortization of goodwill, intangibles, and other assets 12,466 12,499
Increase in deferred pension assets (6,914) (6,938)
Net increase in postretirement liability 809 1,455
Other 2,424 5,515
Change in current assets and liabilities-net (135,423) (82,095)
Other (2,461) 5,216
----------------- -----------------
Net operating cash (61,862) (10,735)
INVESTING
Capital expenditures (34,679) (37,212)
Acquisitions of assets (8,262)
Increase in other investments (8,746) (7,568)
Proceeds from sale of assets 6,537
Other (10,976) (124)
----------------- -----------------
Net investing cash (47,864) (53,166)
FINANCING
Net increase in short-term borrowings 254,987 160,719
Increase in long-term debt 1,837
Payments of long-term debt (102,707) (58,705)
Payments of cash dividends (22,374) (20,382)
Proceeds from stock options exercised 773 2,864
Treasury stock acquired (38,240) (33,425)
Other 229 321
----------------- -----------------
Net financing cash 94,505 51,392
----------------- -----------------
Effect of exchange rate changes on cash 231 (3,121)
----------------- -----------------
Net decrease in cash and cash equivalents (14,990) (15,630)
Cash and cash equivalents at beginning of year 18,623 19,133
----------------- -----------------
Cash and cash equivalents at end of period $ 3,633 $ 3,503
================= =================
Taxes paid on income $ 12,730 $ 16,470
Interest paid on debt 27,599 27,548
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
-4-
<PAGE> 5
THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Periods ended March 31, 2000 and 1999
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, 1999. 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, 2000 are
not necessarily indicative of the results to be expected for the fiscal year
ending December 31, 2000.
NOTE B--DIVIDENDS
Dividends paid on common stock during the first quarter of 2000 and 1999 were
$.135 per share and $.12 per share, respectively.
NOTE C--OTHER EXPENSE - NET
Significant items included in Other expense - net are as follows:
Three months ended
---------------------------
(Thousands of dollars) MARCH 31, March 31,
2000 1999
----------- ----------
Dividend and royalty income $ (1,408) $ (1,233)
Net expense from financing and
investing activities 1,968 3,014
Foreign currency exchange (gains) losses (1,285) 3,332
The net expense of financing and investing activities represents 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, net pre-tax
expense associated with the Company's investment in broad-based corporate owned
life insurance, and other related fees.
-5-
<PAGE> 6
NOTE D--COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income," during the first quarter of 1998. SFAS No. 130
establishes rules for the reporting and display of comprehensive income and its
components, which include net income and foreign currency translation
adjustments. Comprehensive income is summarized as follows:
(Thousands of dollars) Three months ended March 31,
---------------------------------
2000 1999
----------- -----------
Net income $ 40,923 $ 28,797
Foreign currency translation
adjustments 12,675 (100,565)
---------- -----------
Comprehensive income (loss) $ 53,598 $ (71,768)
========== ===========
NOTE E--RECLASSIFICATION
Certain amounts in the 1999 financial statements have been reclassified to
conform with the 2000 presentation.
-6-
<PAGE> 7
NOTE F--NET INCOME PER COMMON SHARE
<TABLE>
<CAPTION>
Three months ended March 31,
--------------------------------
(Thousands of dollars, except per share data) 2000 1999
------------ ------------
<S> <C> <C>
Basic
Average common shares outstanding 164,304,661 169,647,136
============ ============
Net income $ 40,923 $ 28,797
============ ============
Net income per common share $ 0.25 $ 0.17
============ ============
Diluted
Average common shares outstanding 164,304,661 169,647,136
Non-vested restricted stock grants 278,400 293,067
Stock options - treasury stock method 263,696 813,441
------------ ------------
Average common shares assuming dilution 164,846,757 170,753,644
============ ============
Net income $ 40,923 $ 28,797
============ ============
Net income per common share $ 0.25 $ 0.17
============ ============
</TABLE>
Net income per common share has been computed in accordance with SFAS No. 128.
-7-
<PAGE> 8
NOTE G--REPORTABLE SEGMENT INFORMATION
The Company reports segment information in accordance with SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
requires an enterprise to report segment information in the same way that
management internally organizes its business for assessing performance and
making decisions regarding allocation of resources. During the fourth quarter of
1999, following the appointment of a new chief operating decision maker, the
Company adopted revised segment reporting guidelines that changed the number and
composition of its reportable segments and changed the value of goods that are
transferred domestically between segments. The 1999 amounts displayed below have
been restated to conform to this new presentation.
Net External Sales/Operating Profit
- -----------------------------------
<TABLE>
<CAPTION>
Three months ended March 31,
-----------------------------------------------------------------
2000 1999
---------------------------- ----------------------------
(Thousands of dollars) NET SEGMENT Net Segment
EXTERNAL OPERATING External Operating
SALES PROFIT Sales Profit
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Paint Stores $ 700,056 $ 43,604 $ 634,473 $ 32,887
Consumer 325,387 37,072 302,689 35,431
Automotive Finishes 120,952 14,446 115,597 14,182
International Coatings 73,442 6,907 73,036 3,392
Administrative 2,079 (36,024) 2,072 (39,446)
---------- ---------- ---------- ----------
Consolidated totals $1,221,916 $ 66,005 $1,127,867 $ 46,446
========== ========== ========== ==========
</TABLE>
================================================================================
Intersegment Transfers
- ----------------------
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
(Thousands of dollars) 2000 1999
----------- -----------
<S> <C> <C>
Paint Stores $ 2,218 $ 2,072
Consumer 189,325 174,424
Automotive Finishes 8,747 7,143
International Coatings 77 57
Administrative 2,843 2,814
-------- --------
Segment totals $203,210 $186,510
======== ========
</TABLE>
================================================================================
Segment operating profit is total revenue, including intersegment transfers,
less operating costs and expenses. The Administrative Segment's expenses include
interest which is unrelated to certain financing activities of the Operating
Segments, certain foreign currency transaction losses related to dollar-
denominated debt and other financing activities, certain provisions for
disposition and termination of operations and environmental remediation which
are not directly associated with any Operating Segment, and other adjustments.
Net external sales and operating profits of all consolidated foreign
subsidiaries were $130.7 million and $13.4 million, respectively, for the first
quarter of 2000, and $117.9 million and $11.6 million, respectively, for the
first quarter of 1999. Long-lived assets of these subsidiaries totaled $253.7
million and $234.9 million, respectively, at March 31, 2000 and 1999. Domestic
operations account for the remaining net external sales, operating profits and
long-lived assets. The Administrative Segment's expenses do not include any
significant foreign operations. No single geographic area outside the United
States was significant relative to consolidated net external sales or
consolidated long-lived assets.
Export sales and sales to any individual customer were each less than 10% of
consolidated sales to unaffiliated customers during all periods presented.
Domestic intersegment transfers are accounted for at the approximate fully
absorbed manufactured cost plus distribution costs. International intersegment
transfers are accounted for at values comparable to normal unaffiliated customer
sales.
-8-
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net sales increased 8.3 percent during the first quarter of 2000 to
$1,221,916,000, over the comparable period in 1999. First quarter sales in the
Paint Stores Segment increased 10.3 percent from last year, to $700,056,000, due
primarily to higher volume retail and wholesale sales of paint products with
solid sales gains in all other sales categories. Comparable-store sales were 7.9
percent higher than last year for the quarter. The Consumer Segment's first
quarter net sales increased 7.5 percent from 1999, to $325,387,000, due
primarily to new product launches and additions to the customer base. The
Automotive Finishes Segment's net sales increased 4.6 percent, to $120,952,000,
in the first quarter as new marketing programs, initiated late in 1999, began to
take effect. First quarter net sales in the International Coatings Segment
increased slightly to $73,442,000, as compared to last year.
Consolidated gross profit as a percent of sales for the first quarter decreased
slightly to 42.2 percent from 42.3 percent in 1999. First quarter margins in the
Paint Stores Segment were higher than last year primarily due to increased
gallons sold to its retail customers. The Consumer, Automotive Finishes, and
International Coatings Segments' margins were all lower than last year due
primarily to increased customer promotions, new product launches, and new
customer start up costs.
Consolidated selling, general and administrative expenses as a percent of sales
were favorable to last year for the first quarter, primarily due to higher sales
volume. In the Paint Stores Segment, SG&A expenses as a percent of sales were
favorable to last year, primarily due to increased sales volume partially offset
by incremental increases in expenses associated with the increased number of
stores. The Consumer and Automotive Finishes Segments' SG&A ratios were
favorable to last year in the first quarter, primarily due to higher sales
volumes. First quarter SG&A expenses as a percent of sales were unfavorable in
the International Coatings Segment, primarily due to timing of discretionary
spending as compared to the first quarter of 1999.
The decrease in interest expense from the first quarter of 1999 occurred due to
lower average outstanding long-term debt balances, partially offset by higher
average short-term borrowings outstanding throughout the quarter. First quarter
average short-term borrowing rates were higher than last year.
Other expense - net was lower than last year for the first quarter primarily due
to foreign currency exchange gains in 2000 versus foreign currency exchange
losses in 1999, primarily as a result of the devaluation of the Brazilian real
in 1999.
Net income for the first quarter of 2000 increased 42.1 percent, to $40,923,000,
while diluted net income per common share increased to $.25 per share from $.17
per share in the first quarter of 1999.
-9-
<PAGE> 10
FINANCIAL CONDITION
During the first three months of 2000, cash and cash equivalents decreased $15.0
million, net long-term debt decreased $100.9 million and short-term borrowings
increased $255.0 million. Short-term borrowings outstanding primarily relate to
the Company's commercial paper program, which had unused borrowing availability
of $477.8 million at March 31, 2000. This program is backed by the Company's
revolving credit agreements. The decrease in long-term debt is primarily related
to the payment of 6.25% notes totaling $100.0 million during the first quarter.
The proceeds from the issuance of short-term borrowings were used for repayment
of long-term debt, normal operating needs for seasonally higher accounts
receivable and inventories, capital expenditures of $34.7 million, treasury
shares acquisition of $38.2 million, and cash dividends of $22.4 million. The
Company's current ratio declined to 1.28 from 1.34 at December 31, 1999. The
decrease in this ratio occurred primarily due to the increased short-term
borrowings.
Since March 31, 1999, cash and cash equivalents increased $0.1 million primarily
due to cash generated by operations of $434.0 million offset by capital
expenditures of $131.6 million, net reductions in short-term borrowings and net
long-term debt of $49.9 million, treasury shares acquired of $152.2 million,
payments of cash dividends of $82.9 million and normal working capital needs.
The Company expects to remain in a short-term borrowing position throughout most
of 2000.
Capital expenditures during the first quarter of 2000 represented primarily the
costs associated with new store openings in the Paint Stores Segment, the
purchase of land and building related to a technical lab facility for the
Automotive Finishes Segment, and plant and facility upgrades and expansions in
the Consumer Segment. We do not anticipate the need for any specific external
financing to support our capital programs during the remainder of 2000.
During the first quarter of 2000, the Company acquired 2,000,000 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. At March 31, 2000, the
Company has authorization to purchase an additional 18,000,000 shares of its
common stock.
The Company and certain other companies are defendants in a number of lawsuits,
including three purported class actions, separate actions brought by the State
of Rhode Island, and actions brought by other governmental entities, arising
from the manufacture and sale of lead pigments and lead paints. The plaintiffs
are seeking recovery based upon various legal theories, including negligence,
strict liability, breach of warranty, negligent misrepresentations and
omissions, fraudulent misrepresentations and omissions, concert of action, civil
conspiracy, violations of unfair trade practices and consumer protection laws,
enterprise liability, market share liability, nuisance, unjust enrichment and
other theories. The lawsuits seek various damages and relief, including personal
injury and property damage, costs involving the detection and abatement of lead
paint from buildings, costs associated with a public education campaign, medical
monitoring costs and others. The Company believes that such lawsuits are without
merit and is vigorously defending them. It is also possible that additional
lawsuits may be filed against the Company based upon similar or different legal
theories and seeking similar or different types of damages and relief.
-10-
<PAGE> 11
Litigation is inherently subject to many uncertainties. Adverse rulings or
determinations of liability, as well as changes in laws, could affect the lead
pigment and lead paint lawsuits against the Company and encourage an increase in
the number and nature of future claims and proceedings. Due to the uncertainties
involved, management is unable to predict the outcome of such lawsuits or the
number or nature of possible future claims and proceedings. In addition,
management cannot determine the scope or amount of the potential costs and
liabilities related to such lawsuits, claims or proceedings. However, based upon
the outcome of previous similar lawsuits, management does not currently believe
that the costs or 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 results of operations, liquidity 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 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, investigation and
remediation activities at some of its current and former sites (including former
sites which were previously owned and/or operated by businesses acquired by the
Company). The Company, together with other parties, has also been designated a
potentially responsible party under federal and state environmental protection
laws for the investigation and remediation of environmental contamination and
hazardous waste at a number of third-party sites, primarily Superfund sites. The
Company may be similarly designated with respect to additional third-party sites
in the future.
The Company accrues for environmental-related activities relating to its past
operations and third-party sites, including Superfund sites, for which costs or
minimum costs can be reasonably estimated. These estimated costs are determined
based on currently available facts regarding each site. The Company continuously
assesses its potential liability for investigation and remediation-related
activities and adjusts its environmental-related accruals as information becomes
available upon which more accurate costs can be reasonably estimated and as
additional accounting guidelines are issued which require changing the estimated
costs or the procedure utilized in estimating such costs. Actual costs incurred
may vary from these estimates due to the inherent uncertainties involved
including, among others, the number and financial condition of parties involved
with respect to any given site, the volumetric contribution which may be
attributed to the Company relative to that attributed to other parties, the
nature and magnitude of the wastes involved, the various technologies that can
be used for remediation and the determination of acceptable remediation with
respect to a particular site.
Pursuant to a Consent Decree entered into with the United States of America, on
behalf of the Environmental Protection Agency, filed in the United States
District Court for the Northern
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<PAGE> 12
District of Illinois, the Company has agreed, in part, to (i) conduct an
investigation at its southeast Chicago, Illinois facility to determine the
nature, extent and potential impact, if any, of environmental contamination at
the facility and (ii) implement remedial action measures, if required, to
address any environmental contamination identified pursuant to the
investigation. The Company is currently conducting its investigation of the
site.
The Company entered into a settlement agreement with PMC, Inc. settling a
lawsuit brought by PMC regarding the Company's former manufacturing facility in
Chicago, Illinois which was sold to PMC in 1985. Pursuant to the terms of the
settlement agreement, the Company agreed, in part, to investigate and remediate,
as necessary, certain soil and/or groundwater contamination caused by historical
disposal, discharges, releases or events occurring at the facility. In February,
1999, the People of the State of Illinois filed an amended complaint in a state
court action against PMC joining the Company and alleging, in part, that the
Company has caused certain soil and underground contamination at the facility
and seeking, in part, that the Company investigate and remediate, as necessary,
any such soil and groundwater contamination. The Company has entered into
discussions with the State of Illinois to address these allegations.
With respect to the Company's southeast Chicago, Illinois facility and the PMC
facility, the Company has evaluated its potential liability and, based upon its
preliminary evaluation, has accrued appropriate amounts. However, due to the
uncertainties surrounding these facilities, the Company's ultimate liability may
result in costs that are significantly higher than currently accrued. In such
event, the recording of any additional liability may result in a material impact
on net income for the annual or interim period during which the additional costs
are accrued.
The Company does not believe that any potential liability ultimately attributed
to the Company for its environmental-related matters will have a material
adverse effect on the Company's financial condition, liquidity, cash flow or,
except as set forth in the preceding paragraph, net income.
-12-
<PAGE> 13
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
necessarily subject to risks, uncertainties and other factors, many of which are
outside the control of the Company, that could cause actual results to differ
materially from such statements. These uncertainties and other factors include
such things as: general business conditions, strengths of retail economies and
the growth in the coatings industry; competitive factors, including pricing
pressures and product innovation and quality; raw material availability and
pricing; changes in the Company's relationships with customers and suppliers;
the ability of the Company to successfully integrate recent and future
acquisitions into its existing operations; changes in general domestic economic
conditions such as inflation rates, interest rates and tax rates; risk and
uncertainties associated with the Company's expansion into foreign markets,
including inflation rates, recessions, foreign currency exchange rates, foreign
investment and repatriation restrictions and other external economic and
political factors; increasingly stringent domestic and foreign governmental
regulations including those affecting the environment; inherent uncertainties
involved in assessing the Company's potential liability for environmental
remediation-related activities; the nature, cost, quantity and outcome of
pending and future litigation and other claims, including the lead pigment and
lead paint lawsuits; and unusual weather conditions.
Any forward-looking statement speaks only as of the date on which such
statement is made, and the Company undertakes no obligation to update any
forward-looking statement, whether as a result of new information, future events
or otherwise.
-13-
<PAGE> 14
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk through various financial instruments,
including fixed rate debt instruments. The Company does not believe that any
potential loss related to these financial instruments will have a material
adverse effect on the Company's financial condition, results of operations or
liquidity. There were no material changes in the Company's exposure to market
risk since December 31, 1999.
-14-
<PAGE> 15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits
(27) Financial Data Schedule for the period ended March 31, 2000
(filed herewith).
(b) Reports on Form 8-K. The Company filed a Current Report on Form
8-K, dated March 23, 2000, reporting under Item 5 expected sales and
earnings for the first quarter of 2000.
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 15, 2000 By: /s/ J.L. Ault
-------------------------------------
J.L. Ault
Vice President-Corporate Controller
May 15, 2000 By: /s/ L.E. Stellato
-------------------------------------
L.E. Stellato
Vice President, General Counsel and
Secretary
-15-
<PAGE> 16
INDEX TO EXHIBITS
-----------------
EXHIBIT NO. EXHIBIT
- ----------- -------
(27) Financial Data Schedule for the period ended March 31, 2000
(filed herewith).
-16-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE PERIOD ENDED MAR. 31, 2000 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,633
<SECURITIES> 0
<RECEIVABLES> 735,564
<ALLOWANCES> 27,358
<INVENTORY> 731,952
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0
0
<COMMON> 206,393
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<INCOME-TAX> 25,082
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</TABLE>
