The SherwinWilliams Company (SHW) filed Quarterly Report for the period ended 2009-09-30.
Sherwin-Williams Co. is a manufacturer distributor and retailer of paint coatings and related products. It is the one of largest paint companies in the United States and in the world. Well known brands include Sherwin- Williams Dutch Boy Pratt & Lambert Martin-Senour Thompson's Minwax and Krylon. (Company Press Release) The Sherwinwilliams Company has a market cap of $6.67 billion; its shares were traded at around $57.39 with a P/E ratio of 15.1 and P/S ratio of 0.8. The dividend yield of The Sherwinwilliams Company stocks is 2.5%. The Sherwinwilliams Company had an annual average earning growth of 9.7% over the past 10 years. GuruFocus rated The Sherwinwilliams Company the business predictability rank of 2.5-star.
Highlight of Business Operations:
Short-term borrowings decreased $105.4 million from December 31, 2008, due to the control over working capital, and all other current liabilities increased $54.8 million. Since September 30, 2008, Accounts receivable and Inventories were down $308.7 million and the remaining current assets decreased $45.4 million. Accounts Receivable and Inventories decreased $6.5 million from December 31, 2008 to September 30, 2009 when normal seasonal trends typically require significant growth in these categories. The use of a portion of Net operating cash to reduce Total current liabilities more than Total current assets improved the Company’s current ratio to 1.02 at September 30, 2009 from .94 at September 30, 2008 and compared to .99 at December 31, 2008. Total debt at September 30, 2009 decreased $315.8 million to $711.0 million from $1,026.8 million at September 30, 2008 and decreased as a percentage of total capitalization to 29.5 percent from 37.1 percent at the end of the third quarter last year. Total debt decreased $122.8 million and decreased from 34.2% of total capitalization at December 31, 2008. At September 30, 2009, the Company had remaining borrowing ability of $1.215 billion. Net operating cash increased $23.1 million in nine months of 2009 to $615.6 million from $592.6 million in 2008 primarily due to a net decrease in cash used to fund working capital requirements of $46.8 million that was partially offset by an increase in costs incurred for environmental matters of $14.1 million and a reduction in net income adjusted for non-cash items of $8.2 million. In the twelve month period from October 1, 2008 through September 30, 2009, the Company generated net operating cash of $899.3 million and invested $34.3 million in acquisitions, $89.0 million in capital additions and improvements, reduced its total debt $313.3 million, purchased $289.8 million in treasury stock and paid $165.6 million in cash dividends to its shareholders of common stock.
Results of operations for the Company in the third quarter and first nine months of 2009 continued to suffer from a decrease in end-market demand for coatings and other building materials caused by the effects of the expanding global economic downturn and a lingering depressed U.S. housing market. Consolidated net sales decreased 12.0 percent in the third quarter to $1.997 billion from $2.269 billion in the third quarter of 2008 and decreased 12.5 percent in the first nine months to $5.495 billion from $6.280 billion in the first nine months of 2008 due primarily to paint sales volume declines resulting from contracted demand in the domestic market for more than two years that expanded into the global markets beginning in the second half of 2008. Net sales in the Paint Stores Group decreased 13.5 percent in the quarter to $1.221 billion and decreased 13.4 percent to $3.289 billion in the first nine months due primarily to continuing weak residential and commercial architectural paint sales volume and lower sales in industrial coatings and non-paint categories partially offset by improving DIY customer sales. Net sales in the Paint Stores Group from stores open more than twelve calendar months decreased 13.5 percent in the quarter and 13.3 percent in the first nine months of 2009. Net sales in the Consumer Group decreased 7.1 percent to $330.5 million in the quarter and 4.0 percent to $985.1 million in the first nine months due primarily to lower volume sales to most of the Group’s retail customers. Net sales in the Global Finishes Group stated in U.S. dollars declined 11.3 percent in the quarter to $444.1 million and 16.2 percent to $1.216 billion in the first nine months due primarily to decreased paint volume sales and unfavorable currency translation rates partially offset by acquisitions and selling price increases. Gross profit as a percent of consolidated net sales increased in the third quarter to 46.5 percent from 42.3 percent in 2008 and increased to 45.6 percent from 43.2 percent in the first nine months due primarily to lower freight and other distribution costs, reduced expenses related to cost control initiatives and
favorable product sales mix partially offset by higher costs related to lower manufactured volume and unfavorable currency translation rates. Third quarter gross profit margins approached a more normal level in 2009 versus last year’s depressed gross profit margins caused by rapidly escalating raw material costs. Selling, general and administrative expenses (SG&A) increased as a percent of consolidated net sales to 32.8 percent from 30.0 percent in the third quarter of 2008 and increased to 34.9 percent from 32.0 percent in nine months due primarily to the sales decline as good expense control across all Reportable Operating Segments resulted in total SG&A spending that was $27.1 million lower than in the third quarter of 2008 and $93.9 million lower than in the first nine months last year. Other general expense — net increased in the third quarter and first nine months of 2009 due primarily to increased accruals for environmental-related matters and exit costs related to closed properties. Interest expense decreased $6.7 million in the third quarter and $20.0 million in the first nine months of 2009 due to lower short-term borrowings and borrowing rates. The effective income tax rate for third quarter 2009 was 32.3 percent compared to 33.5 percent in 2008 and the rate for the first nine months of 2009 was 31.6 percent compared to 32.8 percent in 2008. Diluted net income per common share increased to $1.51 per share for the third quarter 2009 from $1.50 per share a year ago and decreased to $3.17 per share from $3.57 per share in the first nine months.
The Company’s financial condition, liquidity and cash flow remained strong through the first nine months of 2009 in spite of continued challenging global economic conditions that included significant reductions in demand, increased manufacturing costs related to lower volume throughput, tight credit markets and significant fluctuations in foreign currency translation rates. Net working capital improved $170.6 million at September 30, 2009 compared to the end of the third quarter of 2008 due primarily to a larger proportional decrease in current liabilities than current assets. Short-term borrowings decreased $305.0 million from September 30, 2008 and all other current liabilities decreased $219.8 million. The Company was able to arrange sufficient short-term borrowing capacity at reasonable rates even as credit markets remained tight and the Company has sufficient total available borrowing capacity to fund its current operating needs. Short-term borrowings decreased $105.4 million from December 31, 2008 and all other current liabilities increased $54.8 million. Since September 30, 2008, Accounts receivable and Inventories were down $308.7 million and the remaining current assets decreased $45.4 million. Accounts Receivable and Inventories decreased $6.5 million from December 31, 2008 to September 30, 2009 when normal seasonal trends typically require growth in these categories. The use of a portion of Net operating cash to reduce Total current liabilities more than Total current assets improved the Company’s current ratio to 1.02 at September 30, 2009 from .94 at September 30, 2008 and compared to .99 at December 31, 2008. Total debt at September 30, 2009 decreased $315.8 million to $711.0 million from $1,026.8 million at September 30, 2008 and decreased as a percentage of total capitalization to 29.5 percent from 37.1 percent at the end of the third quarter last year. Total debt decreased $122.8 million and decreased from 34.2% of total capitalization at December 31, 2008. At September 30, 2009, the Company had remaining borrowing ability of $1.215 billion. Net operating cash increased $23.1 million in the third quarter of 2009 to $615.6 million from $592.6 million in 2008 primarily due to a net decrease in cash used to fund working capital requirements of $46.8 million that was partially offset by an increase in costs incurred for environmental matters of $14.1 million and a reduction in net income adjusted for non-cash items of $8.2 million. In the twelve month period from October 1, 2008 through September 30, 2009, the Company generated net operating cash of $899.3 million and invested $34.3 million in acquisitions, $89.0 million in capital additions and improvements, reduced its total debt $313.7 million, purchased $289.8 million in treasury stock and paid $165.6 million in cash dividends to its shareholders of common stock.
Goodwill and intangible assets increased $2.8 million from December 31, 2008 and decreased $30.7 million from September 30, 2008. The net increase during the nine months of 2009 was due to acquisitions and capitalization of software costs of $14.5 million partially offset by amortization and currency translation rate changes of $11.8 million. The net decrease over the twelve-month period from September 30, 2008 resulted from acquisitions and capitalization of software costs of $24.5 million and other adjustments, primarily currency translation rate changes of $56.0 million that were more than offset by impairments of $53.9 million and amortization of $57.3 million. See Note 3, on pages 50 to 52, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, for more information concerning goodwill and intangible assets.
Net property, plant and equipment decreased $27.5 million in the first nine months of 2009 and decreased $52.3 million in the twelve months since September 30, 2008. The reduction in the nine months of 2009 was primarily due to capital expenditures of $63.6 million and changes in currency translation rates that were more than offset by depreciation expense of $109.6 million and the disposition of assets with remaining book value. Since
SHW is in the portfolios of Richard Aster Jr of Meridian Fund, Andreas Halvorsen of Viking Global Investors LP, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC, Dodge & Cox, Ruane Cunniff of Ruane & Cunniff & Goldfarb Inc.Rate This Article: |
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