CLEVELAND, April 20, 2017
/PRNewswire/ --
- Consolidated net sales increased 7.3% in the quarter to a
record $2.76 billion, including the
change in revenue classification, which increased sales in the
quarter 2.2%
- Net sales from stores open more than twelve calendar months
increased 7.5% in the quarter
- Diluted net income per common share increased 44.6% to
$2.53 per share in the quarter,
including a $.34 per share increase
from a reduction in the income tax provision partially offset by an
$.08 per share charge for acquisition
costs
- Establishing 2Q17 EPS range of $4.15
to $4.35, including approximately $.25 per share for acquisition
costs
- Updating FY17 EPS guidance to $13.65
to $13.85 per share, including approximately
$.40 per share charge for
acquisition costs, vs. $11.99 per
share in 2016, which included an $.86 per share charge for acquisition
costs
The Sherwin-Williams Company (NYSE: SHW) announced its financial
results for the first quarter ended March 31, 2017. Compared
to the same period in 2016, consolidated net sales increased
$187.4 million, or 7.3%, to
$2.76 billion in the quarter due
primarily to higher paint sales volume in our Paint Stores Group
and the previously announced change in revenue classification which
increased sales in the quarter 2.2%. This change primarily impacted
the Paint Stores and Global Finishes Groups. This change had no
impact on segment profit, but reduced the segment profit as a
percent to net sales of the affected Groups.
Diluted net income per common share in the quarter increased to
$2.53 per share from $1.75 per share in 2016, as restated due to the
adoption of a new accounting standard (ASU 2016-09). First quarter
2017 diluted net income per common share includes an increase of
$.34 per share related to a reduction
in the income tax provision partially offset by an $.08 per share charge from costs associated with
the anticipated acquisition of Valspar. First quarter 2016 diluted
net income per common share included a $.24 per share charge from acquisition costs
partially offset by an increase of $.18 per share related to a reduction in the
income tax provision. The increase in first quarter 2017 diluted
net income per common share was due primarily to improved operating
results of the Paint Stores and Global Finishes Groups. Currency
translation rate changes did not have a significant impact on
diluted net income per common share in the quarter.
Net sales in the Paint Stores Group increased 12.1% to
$1.81 billion in the quarter due
primarily to higher architectural paint sales volume across all end
market segments, selling price increases, and the impact of the
change in revenue classification. Net sales from stores open for
more than twelve calendar months, excluding the change in revenue
classification, increased 7.5% in the quarter over last year's
comparable period. Paint Stores Group segment profit increased
$50.5 million to $304.1 million in the quarter from $253.5 million last year due primarily to higher
paint sales volume and selling price increases partially offset by
increased raw material costs. Segment profit as a percent to net
sales increased in the quarter to 16.8% from 15.7% last year.
Net sales of the Consumer Group decreased 10.7% to $337.5 million in the quarter due primarily to
lower volume sales to most of the Group's retail and commercial
customers. Segment profit decreased to $60.6
million in the quarter from $64.0
million last year primarily due to lower sales and
increasing raw material costs partially offset by improved
operating efficiencies, good cost control, and selling price
increases. As a percent to net external sales, segment profit
increased in the quarter to 18.0% from 16.9% last year due
primarily to improved operating efficiencies and reduced SG&A
expenses.
The Global Finishes Group's net sales stated in U.S. dollars
increased 3.6% to $470.3 million in
the quarter primarily due to higher paint sales volume and selling
price increases. Stated in U.S. dollars, segment profit increased
in the quarter to $52.4 million from
$48.6 million last year due primarily
to higher paint sales volume and selling price increases partially
offset by raw material cost increases. Currency translation rate
changes had a minimal impact on segment profit in the quarter. As a
percent to net external sales, segment profit increased in the
quarter to 11.1% from 10.7% last year.
The Latin America Coatings Group's net sales stated in U.S.
dollars increased 12.9% to $141.4
million in the quarter due primarily to selling price
increases and favorable foreign currency translation rate changes.
Favorable currency translation rate changes increased net sales by
5.7% in the quarter. Stated in U.S. dollars, segment profit
increased in the quarter to a profit of $1.2
million from a loss of $0.9
million last year due primarily to selling price increases
partially offset by increasing raw material costs. Currency
translation rate changes had a minimal impact on segment profit in
the quarter. As a percent to net external sales, segment profit
increased in the quarter to 0.8% from a loss of 0.7% last year.
The Company made no open market purchases of its common stock in
the three months ended March 31, 2017. At March 31, 2017,
the Company had cash on hand of $1.02
billion that will be utilized to fund the Valspar
acquisition.
Commenting on the financial results, John G. Morikis, Chairman, President and Chief
Executive Officer, said, "We are pleased to report record sales and
earnings per share from the continued positive sales volume and
strong operating results of our Paint Stores Group and operating
margin improvement in our Global Finishes Group. Our Paint Stores
Group posted another quarter of improved operating results and
architectural volume growth. The Consumer Group improved their
operating margins through improved operating efficiencies. Our
Global Finishes Group improved their operating results through
higher paint sales volume and selling price increases. The Latin
America Coatings Group continues to see the positive impact of
previous investments partially offsetting weak end market demand in
some geographies. All of our operating segment management teams
continue to control costs and implement price increases to offset
rising raw material costs."
"In the first three months, we opened 10 net new store locations
in the Paint Stores Group. During the quarter, we increased the
dividend rate to $.85 from
$.84 last year. Our balance sheet
remains flexible and is positioned well for the anticipated Valspar
acquisition and other investments in our business.
"On April 12, 2017, the Company
and Valspar announced that we have entered into a definitive
agreement with Axalta Coating Systems to sell the assets related to
Valspar's North American Industrial Wood Coatings business to
Axalta for $420 million in cash.
Valspar's North American Industrial Wood Coatings business had
revenues of approximately $225
million in 2016. The companies are divesting the business in
connection with the reviews by the Federal Trade Commission (FTC)
and Canadian Competition Bureau (CCB) of the proposed acquisition
of Valspar by Sherwin-Williams. The sale of Valspar's North
American Industrial Wood Coatings business to Axalta is subject to
the closing of the Valspar and Sherwin-Williams merger, as well as
customary closing conditions and regulatory approvals, including
the approval of the FTC and the CCB.
"For the second quarter, we anticipate our consolidated net
sales will increase a mid to high single digit percentage compared
to last year's second quarter. At that anticipated sales level, we
estimate diluted net income per common share in the second quarter
of 2017 to be in the range of $4.15 to
$4.35 per share, including a $.25 per share charge from costs associated with
the anticipated acquisition of Valspar, compared to $3.99 per share earned in the second quarter of
2016. Second quarter 2016 earnings per share includes costs related
to the anticipated acquisition of Valspar totaling $.16 per share. For the full year 2017, we expect
consolidated net sales to increase by a mid single digit percentage
compared to full year 2016. With annual sales at that level, we are
updating our guidance for full year 2017 diluted net income per
common share to be in the range of $13.65 to
$13.85 per share compared to $11.99 per share earned in 2016. Full year 2017
diluted net income per common share guidance includes a
$.40 per share charge from costs
associated with the anticipated acquisition of Valspar. The 2017
diluted net income per common share guidance improved by
$.65 per share due to a $.40 per share reduction in acquisition
costs and an additional $.25 per
share benefit to the income tax provision from the accounting
change. Full year 2016 earnings per share included $.86 per share related to the Valspar
acquisition."
The Company will conduct a conference call to discuss its
financial results for the first quarter, and its outlook for the
second quarter and full year 2017, at 11:00
a.m. EDT on Thursday, April 20, 2017. The conference
call will be webcast simultaneously in the listen only mode by
Issuer Direct. To listen to the webcast on the Sherwin-Williams
website, www.sherwin.com, click on About Us, choose Investor
Relations, then select Press Releases and click on the webcast icon
following the reference to the April
20th release. The webcast will also be available at Issuer
Direct's Investor Calendar website,
www.investorcalendar.com. An archived replay of the live
webcast will be available at www.sherwin.com beginning
approximately two hours after the call ends and will be available
until May 10, 2017 at 5:00 p.m. EDT.
Founded in 1866, The Sherwin-Williams Company is a global leader
in the manufacture, development, distribution, and sale of coatings
and related products to professional, industrial, commercial, and
retail customers. The company manufactures products under
well-known brands such as Sherwin-Williams®, HGTV
HOME® by Sherwin-Williams, Dutch Boy®,
Krylon®, Minwax®, Thompson's® Water Seal®,
and many more. With global headquarters in Cleveland, Ohio, Sherwin-Williams®
branded products are sold exclusively through a chain of more than
4,100 company-operated stores and facilities, while the company's
other brands are sold through leading mass merchandisers, home
centers, independent paint dealers, hardware stores, automotive
retailers, and industrial distributors. The Sherwin-Williams Global
Finishes Group distributes a wide range of products in more than
115 countries around the world. For more information, visit
www.sherwin.com.
Regulation G Reconciliation
Management of the Company believes that investors' understanding
of the Company's operating performance is enhanced by the
disclosure of diluted net income per common share excluding the
Valspar acquisition costs. This adjusted earnings per share
measurement is not in accordance with U.S. generally accepted
accounting principles (GAAP). It should not be considered a
substitute for earnings per share computed in accordance with U.S.
GAAP and may not be comparable to similarly titled measures
reported by other companies. The following tables reconcile diluted
net income per common share computed in accordance with U.S. GAAP
to diluted net income per common share excluding the Valspar
acquisition costs.
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Three Months
Ended
|
|
Year Ended
|
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Three
Months
|
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June 30,
2017
|
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December 31,
2017
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|
Ended
|
|
(guidance)
|
|
(guidance)
|
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March 31,
2017
|
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Low
|
|
High
|
|
Low
|
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High
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Consolidated diluted
net income per common share
|
$
|
2.53
|
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$
|
4.15
|
|
|
$
|
4.35
|
|
$
|
13.65
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|
$
|
13.85
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Valspar acquisition
costs diluted net charge per common share
|
$
|
.08
|
|
$
|
.25
|
|
|
$
|
.25
|
|
$
|
.40
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$
|
.40
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Diluted net income
per common share excluding Valspar acquisition costs
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$
|
2.61
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$
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4.40
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|
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$
|
4.60
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$
|
14.05
|
|
$
|
14.25
|
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Three
Months
|
|
Three
Months
|
|
Year Ended
|
|
Ended
|
|
Ended
|
|
December
31,
|
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March 31,
2016
|
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June 30,
2016
|
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2016
|
|
|
|
|
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Consolidated diluted
net income per common share
|
$
|
1.75
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|
$
|
3.99
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|
$
|
11.99
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Valspar acquisition
costs diluted net charge per common share
|
$
|
.24
|
|
$
|
.16
|
|
$
|
.86
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Diluted net income
per common share excluding Valspar acquisition costs
|
$
|
1.99
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|
$
|
4.15
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$
|
12.85
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This press release contains certain "forward-looking statements,"
as defined under U.S. federal securities laws, with respect to
sales, earnings and other matters. These statements can be
identified by the use of forward-looking terminology such as
"believe," "expect," "may," "will," "should," "project," "could,"
"plan," "goal," "potential," "seek," "intend" or "anticipate" or
the negative thereof or comparable terminology. These
forward-looking statements are based upon management's current
expectations, estimates, assumptions and beliefs concerning future
events and conditions. 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 and from the Company's historical results and
experience. These risks, uncertainties and other factors include
such things as: general business conditions; the Company's ability
to complete the planned acquisition of The Valspar Corporation, or
Valspar, if at all, including the potential for regulatory
authorities to require divestitures in connection with the proposed
transaction; the Company's ability to successfully integrate past
and future acquisitions into its existing operations, including
Valspar, as well as the performance of the businesses acquired;
risks inherent in the achievement of cost synergies and the timing
thereof for the planned acquisition of Valspar; strengths of retail
and manufacturing economies and the growth in the coatings
industry; changes in the Company's relationships with customers and
suppliers; changes in raw material availability and pricing;
unusual weather conditions; and other risks, uncertainties and
factors described from time to time in the Company's reports filed
with the Securities and Exchange Commission. Since it is not
possible to predict or identify all of the risks, uncertainties and
other factors that may affect future results, the above list should
not be considered a complete list. Any forward-looking statement
speaks only as of the date on which such statement is made, and the
Company undertakes no obligation to update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise.
Investor Relations
Contact:
Bob Wells
Senior Vice
President, Corporate Communications &
Public
Affairs
Sherwin-Williams
Direct:
216.566.2244
rjwells@sherwin.com
|
Media
Contact:
Mike
Conway
Director, Corporate
Communications
Sherwin-Williams
Direct:
216.515.4393
Pager:
216.422.3751
mike.conway@sherwin.com
|
The
Sherwin-Williams Company and Subsidiaries
|
Statements of
Consolidated Income (Unaudited)
|
|
|
Three Months Ended
March 31,
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Thousands of dollars,
except per share data
|
2017
|
|
2016
(1)
|
|
|
|
|
|
|
Net sales
|
$
|
2,761,387
|
|
$
|
2,574,024
|
Cost of goods
sold
|
|
1,418,247
|
|
|
1,312,279
|
Gross
profit
|
|
1,343,140
|
|
|
1,261,745
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Percent to
net sales
|
|
48.6%
|
|
|
49.0%
|
Selling, general and
administrative expenses
|
|
1,016,211
|
|
|
1,002,355
|
Percent to
net sales
|
|
36.8%
|
|
|
38.9%
|
Other general expense
- net
|
|
276
|
|
|
17,554
|
Interest
expense
|
|
25,695
|
|
|
25,732
|
Interest and net
investment income
|
|
(1,280)
|
|
|
(487)
|
Other (income)
expense - net
|
|
(4,367)
|
|
|
226
|
Income before income
taxes
|
|
306,605
|
|
|
216,365
|
Income
taxes
|
|
67,453
|
|
|
51,489
|
|
|
|
|
|
|
Net income
|
$
|
239,152
|
|
$
|
164,876
|
|
|
|
|
|
|
Net income per common
share:
|
|
|
|
|
|
Basic
|
$
|
2.58
|
|
$
|
1.80
|
|
|
|
|
|
|
Diluted
|
$
|
2.53
|
|
$
|
1.75
|
|
|
|
|
|
|
Average shares
outstanding - basic
|
|
92,550,559
|
|
|
91,475,860
|
|
|
|
|
|
|
Average shares and
equivalents outstanding - diluted
|
|
94,541,859
|
|
|
94,114,114
|
|
|
|
|
(1) First
quarter 2016 income taxes, net income, basic and diluted net income
per common share and diluted average shares and equivalents
outstanding are restated due to the adoption of ASU No. 2016-09 in
the second quarter of 2016.
|
Additional information regarding the Company's financial
condition, operating segment results and other information can be
found on the Sherwin-Williams website, "www.sherwin.com", by
clicking on About Us, choosing Investor Relations, then selecting
Press Releases and clicking on the reference to the April 20th release.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/the-sherwin-williams-company-reports-2017-first-quarter-financial-results-300442427.html
SOURCE The Sherwin-Williams Company