OHIO | 34-0526850 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
101 West Prospect Avenue, Cleveland, Ohio | 44115-1075 | |
(Address of principal executive offices) | (Zip Code) |
Title of each class | Name of each exchange on which registered | |
Common Stock, Par Value $1.00 | New York Stock Exchange |
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(Do not check if a smaller reporting company) |
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• | Paint Stores Group: Sherwin-Williams®, ProMar®, SuperPaint®, A-100®, Duron®, MAB®, PrepRite®, Duration®, Duration Home®, ProGreen®, Harmony®, ProClassic®, Woodscapes®, Deckscapes®, Cashmere®, HGTV Home® by Sherwin-Williams, Emerald®, Duracraft™, Solo®, ProIndustrial™, ProPark®, Frazee®, Parker™ Paints, Kwal®, Color Wheel™ and General Paint™. |
• | Consumer Group: Dutch Boy®, Krylon®, Minwax®, Thompson’s® WaterSeal®, Pratt & Lambert®, Martin Senour®, H&C®, White Lightning®, Dupli-Color®, Rubberset®, Purdy®, Bestt Liebco®, Accurate Dispersions™, Uniflex®, VHT®, Kool Seal®, Snow Roof®, Altax™, Tri-Flow®, Sprayon®, Ronseal™, DuraSeal®, Geocel®, Conco®, Duckback®, Superdeck® and Mason's Select®, HGTV HOME® by Sherwin-Williams. |
• | Global Finishes Group: Sherwin-Williams®, Lazzuril®, Excelo®, Baco®, Planet Color®, AWX Performance Plus™, Ultra™, Ultra-Cure®, Martin Senour®, Kem Aqua®, Sher-Wood®, Powdura®, Polane®, Euronavy®, Inchem®, Sayerlack®, Becker Acroma®, Firetex®, Macropoxy®, Oece™, Arti™, Acrolon®, Sher-Nar®, PermaClad®, Heat-Flex®, Magnalux™, ATX™, Genesis®, Dimension®, Finish 1™, Lanet™, DFL™, Conely™, Envirolastic® and Fastline™. |
• | Latin America Coatings Group: Sherwin-Williams®, Marson®, Metalatex®, Novacor®, Loxon®, Colorgin®, Andina®, Napko™, Martin Senour®, Sumare®, Condor®, Euronavy®, Krylon®, Kem Tone®, Minwax® and Pratt & Lambert®. |
• | general business conditions, strengths of retail and manufacturing economies and the growth in the coatings industry; |
• | competitive factors, including pricing pressures and product innovation and quality; |
• | changes in raw material and energy supplies and pricing; |
• | changes in our relationships with customers and suppliers; |
• | our ability to attain cost savings from productivity initiatives; |
• | our ability to successfully integrate past and future acquisitions into our existing operations, including the recent acquisition of the Comex business in the United States and Canada, as well as the performance of the businesses acquired; |
• | changes in general domestic economic conditions such as inflation rates, interest rates, tax rates, unemployment rates, higher labor and healthcare costs, recessions, and changing government policies, laws and regulations; |
• | risks and uncertainties associated with our expansion into and our operations in Asia, Europe, South America and other foreign markets, including general economic conditions, inflation rates, recessions, foreign currency exchange rates, foreign investment and repatriation restrictions, legal and regulatory constraints, civil unrest and other external economic and political factors; |
• | the achievement of growth in foreign markets, such as Asia, Europe and South America; |
• | increasingly stringent domestic and foreign governmental regulations, including those affecting health, safety and the environment; |
• | inherent uncertainties involved in assessing our potential liability for environmental-related activities; |
• | other changes in governmental policies, laws and regulations, including changes in accounting policies and standards and taxation requirements (such as new tax laws and new or revised tax law interpretations); |
• | the nature, cost, quantity and outcome of pending and future litigation and other claims, including the lead pigment and lead-based paint litigation, and the effect of any legislation and administrative regulations relating thereto; and |
• | unusual weather conditions. |
CONSUMER GROUP | ||||
Manufacturing Facilities | ||||
Andover, Kansas | Owned | Homewood, Illinois | Owned | |
Arlington, Texas | Owned | Lawrenceville, Georgia | Owned | |
Baltimore, Maryland | Owned | Manchester, Georgia | Owned | |
Bedford Heights, Ohio | Owned | Memphis, Tennessee | Owned | |
Beltsville, Maryland | Owned | Morrow, Georgia | Owned | |
Chicago, Illinois | Owned | Ontario, California | Leased | |
Cincinnati, Ohio | Owned | Orlando, Florida | Owned | |
Columbus, Ohio | Owned | Plymouth, United Kingdom | Leased | |
Crisfield, Maryland | Leased | Portland, Oregon | Leased | |
Elkhart, Indiana | Owned | Rexdale, Ontario, Canada | Owned | |
Ennis, Texas | Owned | Richmond, Kentucky | Owned | |
Fernley, Nevada | Owned | Rockford, Illinois | Leased | |
Flora, Illinois | Owned | San Diego, California | Owned | |
Fort Erie, Ontario, Canada | Owned | Sheffield, United Kingdom | Owned | |
Garland, Texas | Owned | South Holland, Illinois | Owned | |
Greensboro, North Carolina (2) | Owned | Szamotuly, Poland | Owned | |
Grimsby, Ontario, Canada | Owned | Vancouver, British Columbia, Canada | Owned | |
Grove City, Ohio | Owned | Victorville, California | Owned | |
Holland, Michigan | Owned | |||
Distribution Facilities | ||||
Aurora, Colorado | Leased | Richmond, Kentucky | Owned | |
Buford, Georgia | Leased | Shawinigan, Quebec, Canada | Leased | |
Effingham, Illinois | Leased | Sheffield, United Kingdom | Owned | |
Fredericksburg, Pennsylvania | Owned | Swaffham, United Kingdom | Leased | |
Moreno Valley, California | Leased | Szamotuly, Poland | Owned | |
Plymouth, United Kingdom | Leased | Waco, Texas | Leased | |
Reno, Nevada | Leased | Winter Haven, Florida | Owned | |
GLOBAL FINISHES GROUP | ||||
Manufacturing Facilities | ||||
Bello, Sweden | Owned | Pianoro, Italy | Owned | |
Binh Duong Province, Vietnam | Owned | Saint Cheron, France | Owned | |
Bolton, United Kingdom | Owned | Sao Paulo, Brazil | Owned | |
Brantford, Ontario, Canada | Owned | Shanghai, China | Leased | |
Cavezzo, Italy | Owned | Texcoco, Mexico | Owned | |
Changzhou, China | Leased | Valencia, Spain | Owned | |
Mariano Comense, Italy | Owned | Wuppertal, Germany | Owned | |
Marsta, Sweden | Owned | Zhao Qing, China | Leased | |
Pasir Gudang, Johor, Malaysia | Owned | |||
Distribution Facilities | ||||
Bolton, United Kingdom | Owned | Nassjo, Sweden | Leased | |
Cavezzo, Italy | Leased | Sao Paulo, Brazil | Owned | |
Changzhou, China | Owned | Shanghai, China | Owned | |
Guadalajara, Mexico | Leased | Texcoco, Mexico | Owned | |
Lima, Peru | Leased | Quito, Ecuador | Owned | |
Mexico City, Mexico | Owned | |||
LATIN AMERICA COATINGS GROUP | ||||
Manufacturing Facilities | ||||
Buenos Aires, Argentina | Owned | Sao Paulo, Brazil (2) | Owned | |
Montevideo City, Uruguay | Owned | Sao Paulo, Brazil | Leased | |
Santiago, Chile | Owned | Quito, Ecuador | Owned | |
Santiago, Chile (2) | Leased | Vallejo, Mexico | Owned | |
Distribution Facilities | ||||
Buenos Aires, Argentina | Owned | Quito, Ecuador | Owned | |
Hermosillo, Mexico | Leased | Santa Catarina, Brazil | Leased | |
Lima, Peru | Leased | Santiago, Chile | Owned | |
Machala, Ecuador | Leased | Sao Paulo, Brazil (2) | Owned | |
Maceio, Brazil | Leased | Vallejo, Mexico | Owned | |
Montevideo City, Uruguay | Owned |
• | the Mid Western Division operated 1,026 paint stores primarily located in the midwestern and upper west coast states; |
• | the Eastern Division operated 803 paint stores along the upper east coast and New England states; |
• | the Canada Division operated 191 paint stores throughout Canada; |
• | the Southeastern Division operated a manufacturing and distribution facility in Jamaica and 1,031 paint stores principally covering the lower east and gulf coast states, Puerto Rico, Jamaica, Trinidad and Tobago, St. Maarten, Virgin Islands, Curacao, Aruba and St. Lucia; and |
• | the South Western Division operated 952 paint stores in the central plains and the lower west coast states. |
Name | Age | Present Position | Date When First Elected or Appointed |
Christopher M. Connor | 58 | Chairman and Chief Executive Officer, Director | 1994 |
John G. Morikis | 51 | President and Chief Operating Officer | 1999 |
Sean P. Hennessy | 57 | Senior Vice President – Finance and Chief Financial Officer | 2001 |
Thomas E. Hopkins | 57 | Senior Vice President – Human Resources | 1997 |
Catherine M. Kilbane | 51 | Senior Vice President, General Counsel and Secretary | 2013 |
Allen J. Mistysyn | 46 | Senior Vice President – Corporate Controller | 2010 |
Steven J. Oberfeld | 62 | Senior Vice President – Corporate Planning and Development | 2006 |
Robert J. Wells | 57 | Senior Vice President – Corporate Communications and Public Affairs | 2006 |
Robert J. Davisson | 54 | President, The Americas Group | 2010 |
David B. Sewell | 46 | President, Global Finishes Group | 2014 |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of a Publicly Announced Plan | Maximum Number of Shares that May Yet Be Purchased Under the Plan | |||||||||
October 1 – October 31 | |||||||||||||
Share repurchase program (a) | 6,825,000 | ||||||||||||
Employee transactions (b) | 70 | $ | 208.49 | NA | |||||||||
November 1 – November 30 | |||||||||||||
Share repurchase program (a) | 6,825,000 | ||||||||||||
December 1 – December 31 | |||||||||||||
Share repurchase program (a) | 1,600,000 | 246.62 | 1,600,000 | 5,225,000 | |||||||||
Employee transactions (b) | 162 | 191.19 | NA | ||||||||||
Total | |||||||||||||
Share repurchase program (a) | 1,600,000 | $246.62 | 1,600,000 | 5,225,000 | |||||||||
Employee transactions (b) | 232 | $196.41 | NA |
(a) | All shares were purchased through the Company’s publicly announced share repurchase program. On October 20, 2011, the Board of Directors of the Company authorized the Company to purchase an additional 20,000,000 shares of its common stock. The Company had remaining authorization at December 31, 2014 to purchase 5,225,000 shares. There is no expiration date specified for the program. The Company intends to repurchase stock under the program in the future. |
(b) | All shares were delivered to satisfy the exercise price and/or tax withholding obligations by employees who exercised stock options. |
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||
Operations | |||||||||||||||||||||
Net sales | $ | 11,130 | $ | 10,186 | $ | 9,534 | $ | 8,766 | $ | 7,776 | |||||||||||
Net income | 866 | 753 | 631 | 442 | 462 | ||||||||||||||||
Financial Position | |||||||||||||||||||||
Total assets | $ | 5,706 | $ | 6,383 | $ | 6,235 | $ | 5,229 | $ | 5,169 | |||||||||||
Long-term debt | 1,123 | 1,122 | 1,632 | 639 | 648 | ||||||||||||||||
Ratio of earnings to fixed charges (a) | 7.7x | 7.4x | 7.2x | 6.3x | 5.1x | ||||||||||||||||
Per Common Share Data | |||||||||||||||||||||
Net income — basic | $ | 8.95 | $ | 7.41 | $ | 6.15 | $ | 4.22 | $ | 4.28 | |||||||||||
Net income — diluted | 8.78 | 7.26 | 6.02 | 4.14 | 4.21 | ||||||||||||||||
Cash dividends | 2.20 | 2.00 | 1.56 | 1.46 | 1.44 |
(a) | For purposes of calculating the ratio of earnings to fixed charges, earnings represent income before income taxes plus fixed charges. Fixed charges consist of interest expense, net, including amortization of discount and financing costs and the portion of operating rental expense which management believes is representative of the interest component of rent expense. The following schedule includes the figures used to calculate the ratios: |
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||
Income before income taxes | $ | 1,258 | $ | 1,086 | $ | 907 | $ | 742 | $ | 678 | |||||||||||
Fixed charges: | |||||||||||||||||||||
Interest expense, net | 64 | 63 | 43 | 42 | 71 | ||||||||||||||||
Interest component of rent expense | 125 | 108 | 103 | 97 | 93 | ||||||||||||||||
Total fixed charges | 189 | 171 | 146 | 139 | 164 | ||||||||||||||||
Earnings | $ | 1,447 | $ | 1,257 | $ | 1,053 | $ | 881 | $ | 842 |
(a)(1) | Financial Statements |
(i) | Report of Management on the Consolidated Financial Statements (page 38 of our 2014 Annual Report); |
(ii) | Report of the Independent Registered Public Accounting Firm on the Consolidated Financial Statements (page 39 of our 2014 Annual Report); |
(iii) | Statements of Consolidated Income and Comprehensive Income for the years ended December 31, 2014, 2013 and 2012 (page 40 of our 2014 Annual Report); |
(iv) | Consolidated Balance Sheets at December 31, 2014, 2013 and 2012 (page 41 of our 2014 Annual Report); |
(v) | Statements of Consolidated Cash Flows for the years ended December 31, 2014, 2013 and 2012 (page 42 of our 2014 Annual Report); |
(vi) | Statements of Consolidated Shareholders’ Equity for the years ended December 31, 2014, 2013 and 2012 (page 43 of our 2014 Annual Report); and |
(vii) | Notes to Consolidated Financial Statements for the years ended December 31, 2014, 2013 and 2012 (pages 44 through 73 of our 2014 Annual Report). |
(2) | Financial Statement Schedule |
(thousands of dollars) | 2014 | 2013 | 2012 | ||||||||
Beginning balance | $ | 54,460 | $ | 47,667 | $ | 51,747 | |||||
Amount acquired through acquisitions | 896 | 226 | |||||||||
Bad debt expense | 34,810 | 31,192 | 20,922 | ||||||||
Uncollectible accounts written off, net of recoveries | (35,500 | ) | (25,295 | ) | (25,228 | ) | |||||
Ending balance | $ | 53,770 | $ | 54,460 | $ | 47,667 |
(3) | Exhibits |
THE SHERWIN-WILLIAMS COMPANY | ||
By: | /S/ | CATHERINE M. KILBANE |
Catherine M. Kilbane, Secretary |
* CHRISTOPHER M. CONNOR | Chairman and Chief Executive Officer, Director (Principal Executive Officer) | |
Christopher M. Connor | ||
* SEAN P. HENNESSY | Senior Vice President – Finance and Chief Financial Officer (Principal Financial Officer) | |
Sean P. Hennessy | ||
* ALLEN J. MISTYSYN | Senior Vice President – Corporate Controller (Principal Accounting Officer) | |
Allen J. Mistysyn | ||
* ARTHUR F. ANTON | Director | |
Arthur F. Anton | ||
* DAVID F. HODNIK | Director | |
David F. Hodnik | ||
* THOMAS G. KADIEN | Director | |
Thomas G. Kadien | ||
* RICHARD J. KRAMER | Director | |
Richard J. Kramer | ||
* SUSAN J. KROPF | Director | |
Susan J. Kropf | ||
* CHRISTINE A. POON | Director | |
Christine A. Poon | ||
* RICHARD K. SMUCKER | Director | |
Richard K. Smucker | ||
* JOHN M. STROPKI | Director | |
John M. Stropki | ||
* MATTHEW THORNTON III | Director | |
Matthew Thornton III |
* | The undersigned, by signing her name hereto, does sign this report on behalf of the designated officers and directors of the Company pursuant to powers of attorney executed on behalf of each such officer and director and filed as an exhibit to this report. |
By: | /S/ | CATHERINE M. KILBANE | February 25, 2015 | |
Catherine M. Kilbane, Attorney-in-fact |
3. | (a) | Amended and Restated Articles of Incorporation of the Company, as amended through February 18, 2015, filed as Exhibit 3 to the Company's Current Report on Form 8-K dated February 18, 2015, and incorporated herein by reference. |
(b) | Regulations of the Company, as amended and restated April 20, 2011, filed as Exhibit 3 to the Company's Current Report on Form 8-K dated April 20, 2011, and incorporated herein by reference. | |
4. | (a) | Indenture between the Company and The Bank of New York Mellon (as successor to Chemical Bank), as trustee, dated as of February 1, 1996, filed as Exhibit 4(a) to Form S-3 Registration Statement Number 333-01093 dated February 20, 1996, and incorporated herein by reference. |
(b) | First Supplemental Indenture between the Company and The Bank of New York Mellon, as trustee (including Form of Note), dated as of December 21, 2009, filed as Exhibit 4(b) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009, and incorporated herein by reference. | |
(c) | Second Supplemental Indenture by and between the Company and The Bank of New York Mellon, as trustee (including Form of Note), dated as of December 7, 2012, filed as Exhibit 4.1 to the Company's Current Report on Form 8-K dated December 4, 2012, and incorporated herein by reference. | |
(d) | Third Supplemental Indenture by and between the Company and The Bank of New York Mellon, as trustee (including Form of Note), dated as of December 7, 2012, filed as Exhibit 4.2 to the Company's Current Report on Form 8-K dated December 4, 2012, and incorporated herein by reference. | |
(e) | Indenture between Sherwin-Williams Development Corporation, as issuer, the Company, as guarantor, and Harris Trust and Savings Bank, as trustee, dated June 15, 1986, filed as Exhibit 4(b) to Form S-3 Registration Statement Number 33-6626 dated June 20, 1986, and incorporated herein by reference. | |
(f) | Credit Agreement, dated as of July 8, 2011, among the Company, the lenders party thereto, Bank of America, N.A., as administrative agent, Wells Fargo Bank, N.A., as syndication agent, and JPMorgan Chase Bank, N.A. and Citibank, N.A., as co-documentation agents, filed as Exhibit 4.1 to the Company's Current Report on Form 8-K dated July 8, 2011, and incorporated herein by reference. | |
(g) | Credit Agreement, dated as of June 29, 2012, among Sherwin-Williams Canada Inc., as borrower, the Company, as guarantor, the lenders party thereto, KeyBank National Association, as joint lead arranger, sole bookrunner and administrative agent, and PNC Bank National Association, as joint lead arranger and syndication agent, filed as Exhibit 4 to the Company's Current Report on Form 8-K dated June 29, 2012, and incorporated herein by reference. | |
(h) | First Amendment Agreement, dated as of March 18, 2013, among Sherwin-Williams Canada Inc., as borrower, the Company, as guarantor, the lenders party thereto, KeyBank National Association, as joint lead arranger, sole book runner and administrative agent, PNC Bank, National Association, as joint lead arranger and syndication agent, and Royal Bank of Canada, as joint lead arranger and documentation agent, filed as Exhibit 4 to the Company's Current Report on Form 8-K dated March 18, 2013, and incorporated herein by reference. | |
(i) | Credit Agreement, dated as of September 19, 2012, among Sherwin-Williams Luxembourg S.à r.l., as borrower, the Company, as guarantor, the lenders party thereto, J.P. Morgan Europe Limited, as administrative agent and L/C issuer, J.P. Morgan Securities LLC, Citigroup Global Markets Inc. and HSBC Securities (USA) Inc., as joint lead arrangers and bookrunners, and Citigroup Global Markets Inc. and HSBC Securities (USA) Inc., as syndication agents, filed as Exhibit 4 to the Company's Current Report on Form 8-K dated September 19, 2012, and incorporated herein by reference. | |
(j) | Five Year Credit Agreement, dated as of January 30, 2012, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders from time to time party thereto, filed as Exhibit 4.1 to the Company's Current Report on Form 8-K dated January 30, 2012, and incorporated herein by reference. | |
(k) | Agreement for Letter of Credit, dated as of January 30, 2012, by and between the Company and Citibank, N.A. filed as Exhibit 4.2 to the Company's Current Report on Form 8-K dated January 30, 2012, and incorporated herein by reference. | |
(l) | Five Year Credit Agreement Amendment No. 1, dated as of February 6, 2012, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders from time to time party thereto, filed as Exhibit 4 to the Company's Current Report on Form 8-K dated February 6, 2012, and incorporated herein by reference. | |
(m) | Five Year Credit Agreement Amendment No. 2, dated as of February 13, 2012, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders from time to time party thereto, filed as Exhibit 4 to the Company's Current Report on Form 8-K dated February 13, 2012, and incorporated herein by reference. | |
(n) | Five Year Credit Agreement Amendment No. 3, dated as of February 27, 2012, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders from time to time party thereto, filed as Exhibit 4 to the Company's Current Report on Form 8-K dated February 27, 2012, and incorporated herein by reference. | |
(o) | Five Year Credit Agreement, dated as of April 23, 2012, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company's Current Report on Form 8-K dated April 23, 2012, and incorporated herein by reference. | |
(p) | Agreement for Letter of Credit, dated as of April 23, 2012, by and between the Company and Citibank, N.A. filed as Exhibit 4.2 to the Company's Current Report on Form 8-K dated April 23, 2012, and incorporated herein by reference. | |
(q) | Five Year Credit Agreement Amendment No. 1, dated as of April 25, 2012, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4 to the Company's Current Report on Form 8-K dated April 25, 2012, and incorporated herein by reference. | |
(r) | Five Year Credit Agreement Amendment No. 2, dated as of May 7, 2012, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4 to the Company's Current Report on Form 8-K dated May 7, 2012, and incorporated herein by reference. | |
(s) | Three Year Credit Agreement, dated as of November 14, 2012, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company's Current Report on Form 8-K dated November 14, 2012, and incorporated herein by reference. | |
(t) | Agreement for Letter of Credit, dated as of November 14, 2012, by and between the Company and Citibank, N.A., filed as Exhibit 4.2 to the Company's Current Report on Form 8-K dated November 14, 2012, and incorporated herein by reference. | |
(u) | Three Year Credit Agreement Amendment No. 1, dated as of November 26, 2012, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4 to the Company's Current Report on Form 8-K dated November 26, 2012, and incorporated herein by reference. | |
(v) | Three Year Credit Agreement Amendment No. 2, dated as of December 3, 2012, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4 to the Company's Current Report on Form 8-K dated December 3, 2012, and incorporated herein by reference. | |
(w) | Three Year Credit Agreement Amendment No. 3, dated as of December 10, 2012, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4 to the Company's Current Report on Form 8-K dated December 10, 2012, and incorporated herein by reference. | |
10. | *(a) | Summary of Compensation Payable to Non-Employee Directors (filed herewith). |
*(b) | Summary of Base Salary and Annual Incentive Compensation Payable to Named Executive Officers (filed herewith). | |
*(c) | Forms of Amended and Restated Severance Agreements filed as Exhibit 10(e) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and incorporated herein by reference. | |
*(d) | Schedule of Executive Officers who are Parties to the Amended and Restated Severance Agreements in the forms referred to in Exhibit 10(c) above, filed as Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014, and incorporated herein by reference. | |
*(e) | The Sherwin-Williams Company 2005 Deferred Compensation Savings and Pension Equalization Plan (As Amended and Restated) filed as Exhibit 10(g) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and incorporated herein by reference. | |
*(f) | Amendment No. 1 to The Sherwin-Williams Company 2005 Deferred Compensation Savings and Pension Equalization Plan (As Amended and Restated) filed as Exhibit 10(h) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011, and incorporated herein by reference. | |
*(g) | Amendment No. 2 to The Sherwin-Williams Company 2005 Deferred Compensation Savings and Pension Equalization Plan (As Amended and Restated) filed as Exhibit 10(g) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013, and incorporated herein by reference. | |
*(h) | The Sherwin-Williams Company 2005 Key Management Deferred Compensation Plan (As Amended and Restated) filed as Exhibit 10(g) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009, and incorporated herein by reference. | |
*(i) | The Sherwin-Williams Company Director Deferred Fee Plan (1997 Amendment and Restatement) filed as Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997, and incorporated herein by reference. | |
*(j) | 2004-1 Amendment to The Sherwin-Williams Company Director Deferred Fee Plan (1997 Amendment and Restatement) filed as Exhibit 10(d) to the Company's Current Report on Form 8-K dated July 20, 2005, and incorporated herein by reference. | |
*(k) | The Sherwin-Williams Company 2005 Director Deferred Fee Plan (As Amended and Restated) filed as Exhibit 10(j) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009, and incorporated herein by reference. | |
*(l) | Amendment to The Sherwin-Williams Company 2005 Director Deferred Fee Plan (As Amended and Restated) filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, and incorporated herein by reference. | |
*(m) | The Sherwin-Williams Company Executive Disability Income Plan filed as Exhibit 10(g) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, and incorporated herein by reference. | |
*(n) | Amendment Number One to The Sherwin-Williams Company Executive Disability Income Plan filed as Exhibit 10(l) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009, and incorporated herein by reference. | |
*(o) | Summary of The Sherwin-Williams Company Revised Executive Disability Plan filed as Exhibit 10(o) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013, and incorporated herein by reference. | |
*(p) | The Sherwin-Williams Company 2008 Amended and Restated Executive Life Insurance Plan filed as Exhibit 10(m) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009, and incorporated herein by reference. | |
*(q) | The Sherwin-Williams Company 2003 Stock Plan filed as Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002, and incorporated herein by reference. | |
*(r) | Form of Stock Option Grant under The Sherwin-Williams Company 2003 Stock Plan filed as Exhibit 10(b) to the Company's Current Report on Form 8-K dated February 2, 2005, and incorporated herein by reference. | |
*(s) | The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan filed as Exhibit 10(b) to the Company's Current Report on Form 8-K dated April 19, 2006, and incorporated herein by reference. | |
*(t) | Form of Nonqualified Stock Option Award under The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan filed as Exhibit 10(y) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2007, and incorporated herein by reference. | |
*(u) | Form of Incentive Stock Option Award under The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan filed as Exhibit 10(z) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2007, and incorporated herein by reference. | |
*(v) | The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan (Amended and Restated as of April 21, 2010) filed as Exhibit 10(bb) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and incorporated herein by reference. | |
*(w) | First Amendment to The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan (Amended and Restated as of April 21, 2010) (filed herewith). | |
*(x) | Forms of Stock Option Award under The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan (Amended and Restated as of April 21, 2010) filed as Exhibit 10(b) to the Company's Current Report on Form 8-K dated April 20, 2010, and incorporated herein by reference. | |
*(y) | Forms of Stock Option Award under The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan (Amended and Restated as of April 21, 2010) filed as Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012, and incorporated herein by reference. | |
*(z) | Forms of Stock Option Award under The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan (Amended and Restated as of April 21, 2010) (filed herewith). | |
*(aa) | Form of Restricted Stock Grant under The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan (Amended and Restated as of April 21, 2010) filed as Exhibit 10(a) to the Company's Current Report on Form 8-K dated February 15, 2011, and incorporated herein by reference. | |
*(bb) | Form of Restricted Stock Grant under The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan (Amended and Restated as of April 21, 2010) filed as Exhibit 10 to the Company's Current Report on Form 8-K dated February 14, 2012, and incorporated herein by reference. | |
*(cc) | Form of Restricted Stock Grant under The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan (Amended and Restated as of April 21, 2010) filed as Exhibit 10(dd) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012, and incorporated herein by reference. | |
*(dd) | The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan (Amended and Restated as of February 17, 2015) (filed herewith). | |
*(ee) | Form of Restricted Stock Units Award Agreement under The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan (Amended and Restated as of February 17, 2015) (filed herewith). | |
*(ff) | The Sherwin-Williams Company 2006 Stock Plan for Nonemployee Directors filed as Exhibit 10(c) to the Company's Current Report on Form 8-K dated April 19, 2006, and incorporated herein by reference. | |
*(gg) | Form of Restricted Stock Grant under The Sherwin-Williams Company 2006 Stock Plan for Nonemployee Directors filed as Exhibit 10(d) to the Company's Current Report on Form 8-K dated April 20, 2010, and incorporated herein by reference. | |
*(hh) | The Sherwin-Williams Company 2006 Stock Plan for Nonemployee Directors (Amended and Restated as of February 17, 2015) (filed herewith). | |
*(ii) | Form of Restricted Stock Units Award Agreement under The Sherwin-Williams Company 2006 Stock Plan for Nonemployee Directors (Amended and Restated as of February 17, 2015) (filed herewith). | |
*(jj) | The Sherwin-Williams Company 2007 Executive Performance Bonus Plan (As Amended and Restated Effective January 1, 2012) filed as Exhibit 10(a) to the Company's Current Report on Form 8-K dated April 18, 2012, and incorporated herein by reference. | |
13. | Our 2014 Annual Report, portions of which are incorporated herein by reference (filed herewith). With the exception of those portions of our 2014 Annual Report that are specifically incorporated by reference in this report, our 2014 Annual Report shall not be deemed “filed” as part of this report. | |
21. | Subsidiaries (filed herewith). | |
23. | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm (filed herewith). | |
24. | (a) | Powers of Attorney (filed herewith). |
(b) | Certified Resolution Authorizing Signature by Power of Attorney (filed herewith). | |
31. | (a) | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer (filed herewith). |
(b) | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer (filed herewith). | |
32. | (a) | Section 1350 Certification of Chief Executive Officer (furnished herewith). |
(b) | Section 1350 Certification of Chief Financial Officer (furnished herewith). | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
* | Management contract or compensatory plan or arrangement. |
• | An annual cash retainer of $110,000; |
• | An additional annual cash retainer of $25,000 for the Lead Director; |
• | An additional annual cash retainer of $21,000 for the chair of the Audit Committee; |
• | An additional annual cash retainer of $21,000 for the chair of the Compensation and Management Development Committee; |
• | An additional annual cash retainer of $15,000 for the chair of the Nominating and Corporate Governance Committee; and |
• | A meeting fee of $1,750 for each Board or Committee meeting attended in excess of twelve meetings during a calendar year. For purposes of calculating the number of meetings during a calendar year, any Board and Committee meetings held within 24 hours shall constitute one meeting. |
Incentive Award as a Percentage of Base Salary | ||||||||
Named Executive Officer | Minimum | Target | Maximum | |||||
Christopher M. Connor | 0 | 135 | 270 | |||||
John G. Morikis | 0 | 80 | 160 | |||||
Sean P. Hennessy | 0 | 80 | 160 | |||||
Steven J. Oberfeld | 0 | 60 | 120 | |||||
Robert J. Davisson | 0 | 70 | 140 |
(i) | any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) is or becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of the combined voting power of the then-outstanding Voting Stock of the Company; provided, however, that: |
(A) | for purposes of this Section 2(f)(i), the following acquisitions will not constitute a Change of Control: (1) any acquisition of Voting Stock directly from the Company that is approved by a majority of the Incumbent Directors, (2) any acquisition of Voting Stock by the Company or any Subsidiary, (3) any acquisition of Voting Stock by the trustee or other fiduciary holding securities under any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, and (4) any acquisition of Voting Stock by any Person pursuant to a Business Transaction that complies with clauses (A), (B) and (C) of Section 2(f)(iii) below; |
(B) | if any Person is or becomes the beneficial owner of 30% or more of combined voting power of the then-outstanding Voting Stock as a result of a transaction described in clause (1) of Section 2(f)(i)(A) above and such Person thereafter becomes the beneficial owner of any additional shares of Voting Stock representing 1% or more of the then-outstanding Voting Stock, other than in an acquisition directly from the Company that is approved by a majority of the Incumbent Directors or other than as a result of a stock dividend, stock split or similar transaction effected by the Company in which all holders of Voting Stock are treated equally, such subsequent acquisition shall be treated as a Change of Control; |
(C) | a Change of Control will not be deemed to have occurred if a Person is or becomes the beneficial owner of 30% or more of the Voting Stock as a result of a reduction in the number of shares of Voting Stock outstanding pursuant to a transaction or series of transactions that is approved by a majority of the Incumbent Directors unless and until such Person thereafter becomes the beneficial owner of any additional shares of Voting Stock representing 1% or more of the then-outstanding Voting Stock, other than as a result of a |
(D) | if at least a majority of the Incumbent Directors determine in good faith that a Person has acquired beneficial ownership of 30% or more of the Voting Stock inadvertently, and such Person divests as promptly as practicable but no later than the date, if any, set by the Incumbent Directors a sufficient number of shares so that such Person beneficially owns less than 30% of the Voting Stock, then no Change of Control shall have occurred as a result of such Person’s acquisition; or |
(ii) | a majority of the Board ceases to be comprised of Incumbent Directors; or |
(iii) | the consummation of a reorganization, merger or consolidation, or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of the stock or assets of another corporation, or other transaction (each, a “Business Transaction”), unless, in each case, immediately following such Business Transaction (A) the Voting Stock outstanding immediately prior to such Business Transaction continues to represent (either by remaining outstanding or by being converted into voting stock of the surviving entity or any parent thereof), more than 50% of the combined voting power of the then outstanding shares of voting stock of the entity resulting from such Business Transaction (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries), (B) no Person (other than the Company, such entity resulting from such Business Transaction, or any employee benefit plan (or related trust) sponsored or maintained by the Company, any Subsidiary or such entity resulting from such Business Transaction) beneficially owns, directly or indirectly, 30% or more of the combined voting power of the then outstanding shares of voting stock of the entity resulting from such Business Transaction, and (C) at least a majority of the members of the board of directors of the entity resulting from such Business Transaction were Incumbent Directors at the time of the execution of the initial agreement or of the action of the Board providing for such Business Transaction; or |
(iv) | approval by the shareholders of the Company of a complete liquidation or dissolution of the Company, except pursuant to a Business Transaction that complies with clauses (A), (B) and (C) of Section 2(f)(iii). |
(v) | For purposes of this Section 2(f), the term “Incumbent Directors” shall mean, during any period of two consecutive years, individuals who at the beginning of such period constituted the Board and any new director (other than a director initially elected or nominated as a director as a result of an actual or threatened election contest with respect to directors or any other actual or threatened solicitation of proxies by or on behalf of such director) whose election by the Board or nomination for election by the Company's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved. |
(i) | Appreciation in value of shares; |
(ii) | Total shareholder return; |
(iii) | Earnings per share; |
(iv) | Operating income; |
(v) | Net income; |
(vi) | Pretax earnings; |
(vii) | Earnings before interest, taxes, depreciation and amortization; |
(viii) | Pro forma net income; |
(ix) | Return on equity; |
(x) | Return on designated assets; |
(xi) | Return on capital; |
(xii) | Economic value added; |
(xiii) | Revenues; |
(xiv) | Expenses; |
(xv) | Operating profit margin; |
(xvi) | Operating cash flow; |
(xvii) | Free cash flow; |
(xviii) | Cash flow return on investment; |
(xix) | Operating margin or net profit margin; or |
(xx) | Any of the above criteria as compared to the performance of a published or a special index deemed applicable by the Board, including, but not limited to, the Standard & Poor’s 500 Stock Index. |
(i) | Subject to adjustment as provided in Section 11 of this Plan, the number of shares of Common Stock that may be issued or transferred (A) upon the exercise of Option Rights or Appreciation Rights; (B) as Restricted Stock and released from substantial risks of forfeiture thereof; (C) in payment of Restricted Stock Units; (D) in payment of Performance Shares or Performance Units that have been earned; (E) as Other Awards or in payment of Other Awards, or (F) in payment of dividend equivalents paid with respect to awards made under this Plan will not exceed in the aggregate 19,200,000 shares of Common Stock (10,000,000 of which were approved by shareholders in 2006 and 9,200,000 of which were added upon approval by shareholders in 2010), plus any shares of Common Stock relating to awards that expire or are forfeited or are cancelled under this Plan. Such shares may be shares of original issuance or treasury shares or a combination of the foregoing. |
(ii) | Each share of Common Stock issued or transferred pursuant to an award of Option Rights or Appreciation Rights will reduce the aggregate plan limit described above in Section 3(a)(i) by one share of Common Stock. Each share of Common Stock issued or transferred (and in the case of Restricted Shares, released from all substantial risk of forfeiture) pursuant to an award other than Option Rights or Appreciation Rights shall reduce the aggregate plan limit described above in Section 3(a)(i) by (A) one share of Common Stock if issued or transferred pursuant to an award granted prior to April 21, 2010 and (B) 2 shares of Common Stock if issued or transferred pursuant to an award granted on or after April 21, 2010. Any shares of Common Stock that again become available for issuance pursuant to this Section 3 shall be added back to the aggregate plan limit in |
(iii) | Shares of Common Stock covered by an award granted under this Plan shall not be counted as used unless and until they are actually issued and delivered to a Participant and, therefore, the total number of shares available under this Plan as of a given date shall not be reduced by any shares relating to prior awards that have expired or have been forfeited or cancelled. Upon payment in cash of the benefit provided by any award granted under this Plan, any shares of Common Stock that were covered by that award will be available for issue or transfer hereunder. Notwithstanding anything to the contrary contained herein: (A) if shares of Common Stock are tendered or otherwise used in payment of the Option Price of an Option Right, the total number of shares covered by the Option Right being exercised shall count against the aggregate plan limit described above; (B) shares of Common Stock tendered or withheld by the Company to satisfy the tax withholding obligation shall count against the aggregate plan limit described above; (C) the number of shares of Common Stock that are repurchased by the Company with Option Right proceeds shall not increase the aggregate plan limit described above; and (D) the number of shares of Common Stock covered by an Appreciation Right, to the extent that it is exercised and settled in shares of Common Stock, whether or not all shares of Common Stock covered by the award are actually issued to the Participant upon exercise of the Appreciation Right, shall be considered issued or transferred pursuant to this Plan. If, under this Plan, a Participant has elected to give up the right to receive compensation in exchange for shares of Common Stock based on fair market value, such shares of Common Stock shall not count against the aggregate plan limit described above. |
(i) | No Participant shall be granted Option Rights or Appreciation Rights, in the aggregate, for more than 500,000 shares of Common Stock during any calendar year. |
(ii) | No Participant will be granted Qualified Performance-Based Awards of Restricted Stock, Restricted Stock Units or Performance Shares or in the form of Other Awards payable in Common Stock, in the aggregate, for more than 200,000 shares of Common Stock during any calendar year. |
(iii) | No Participant will receive in any calendar year a Qualified Performance-Based Award of Performance Units having an aggregate maximum value as of their respective Dates of Grant in excess of $5,000,000. |
(iv) | No Participant will receive in any calendar year a Qualified Performance-Based Award in the form of Other Awards payable in cash under Section 9(b) having an aggregate maximum value in excess of $5,000,000. |
(i) | Any grant may specify that the amount payable on exercise of an Appreciation Right may be paid by the Company in cash, in shares of Common Stock or in any combination thereof and may either grant to the Participant or retain in the Board the right to elect among those alternatives. |
(ii) | Any grant may specify that the amount payable on exercise of an Appreciation Right may not exceed a maximum specified by the Board at the Date of Grant. |
(iii) | Any grant may specify waiting periods before exercise and permissible exercise dates or periods. |
(iv) | Any grant may specify that such Appreciation Right may be exercised only in the event of, or earlier in the event of, the retirement, death or disability of the Participant or a Change of Control. |
(v) | Any grant of Appreciation Rights may specify Management Objectives that must be achieved as a condition of the exercise of such Appreciation Rights. The grant of such Appreciation Rights will specify that, before the exercise of such Appreciation Rights, the Board must determine that the Management Objectives have been satisfied. |
(vi) | Each grant of Appreciation Rights will be evidenced by an Evidence of Award, which Evidence of Award will describe such Appreciation Rights, identify the related Option Rights (if applicable), and contain such other terms and provisions, consistent with this Plan, as the Board may approve. |
(i) | Each grant will specify in respect of each Free-Standing Appreciation Right a Base Price, which may not be less than the Market Value Per Share on the Date of Grant; |
(ii) | Successive grants may be made to the same Participant regardless of whether any Free-Standing Appreciation Rights previously granted to the Participant remain unexercised; and |
(iii) | No Free-Standing Appreciation Right granted under this Plan may be exercised more than 10 years from the Date of Grant. |
(i) | Upon the occurrence of a Change of Control, any awards made under this Plan that are Assumed (as defined in Section 12(a)(v) below) by the entity effecting the Change of Control shall continue to vest and become exercisable in accordance with the terms of the original grant unless, during the three-year period commencing on the date of the Change of Control (“Post-CIC Period”): |
(A) | the Participant is involuntarily terminated for reasons other than for Cause (as defined in Section 12(a)(iii) below); or |
(B) | the Participant terminates his or her employment for Good Reason (as defined in Section 12(a)(iv) below). |
(ii) | If a Participant’s employment is terminated as described in Section 12(a)(i) above, any outstanding Option Rights and Appreciation Rights shall become fully vested and exercisable, any restrictions that apply to awards made pursuant to this Plan shall lapse, and awards made pursuant to this Plan that are subject to Management Objectives shall immediately be earned or vest and shall become immediately payable in accordance with their terms as if 100% of the Management Objectives have been achieved, on the date of termination; provided, that any Participant who terminates his or her employment for Good Reason must: |
(A) | provide the Company with a written notice of his or her intent to terminate employment for Good Reason within 60 days after the Participant becomes aware of the circumstances giving rise to Good Reason; and |
(B) | allow the Company thirty days to remedy such circumstances to the extent curable. |
(iii) | Solely for purposes of this Section 12(a), “Cause” shall mean that the Participant shall have: |
(A) | been convicted of a criminal violation involving, in each case, fraud, embezzlement or theft in connection with Participant’s duties or in the course of Participant’s employment with the Company or any subsidiary; |
(B) | committed intentional wrongful damage to property of the Company or any Subsidiary; or |
(C) | committed intentional wrongful disclosure of secret processes or confidential information of the Company or any Subsidiary; |
(iv) | Solely for purposes of this Section 12(a), “Good Reason” shall mean the occurrence, during the Post-CIC Period, of any of the following events without the Participant’s written consent: |
(A) | failure to elect or reelect or otherwise to maintain Participant in the office or the position, or a substantially equivalent or better office or position, of or with the Company and/or a Subsidiary (or any successor thereto by operation of law or otherwise), as the case may be, which Participant held immediately prior to a Change of Control, or the removal of Participant as a Director of the Company and/or a Subsidiary (or any successor thereto) if Participant shall have been a Director of the Company and/or a Subsidiary immediately prior to the Change of Control; |
(B) | failure of the Company to remedy any of the following within 10 calendar days after receipt by the Company of written notice thereof from Participant: 1) a significant adverse change |
(C) | the liquidation, dissolution, merger, consolidation or reorganization of the Company or the transfer of all or substantially all of its business and/or assets, unless the successor (by liquidation, merger, consolidation, reorganization, transfer or otherwise) to which all or substantially all of its business and/or assets have been transferred (by operation of law or otherwise) assumed all duties and obligations of the Company hereunder; or |
(D) | the Company requires Participant to have Participant’s principal location of work changed to any location that is in excess of 30 miles from the location thereof immediately prior to the Change of Control, or requires Participant to travel away from Participant’s office in the course of discharging Participant’s responsibilities or duties hereunder at least 20% more (in terms of aggregate days in any calendar year or in any calendar quarter when annualized for purposes of comparison to any prior year) than was required of Participant in any of the three full years immediately prior to the Change of Control. |
(E) | Definitions. As used in this Section 12(a), |
1) | “Base Pay” means Participant’s annual base salary rate as in effect from time to time. |
2) | “Incentive Pay” means an annual bonus, incentive or other payment of compensation, in addition to Base Pay, made or to be made in regard to services rendered in any year pursuant to any bonus, incentive, profit-sharing, performance, discretionary pay or similar agreement, policy, plan, program or arrangement (whether or not funded) of the Company or a Subsidiary, or any successor thereto. “Incentive Pay” does not include any stock option, stock appreciation, stock purchase, restricted stock, private equity, long-term incentive or similar plan, program, arrangement or grant, whether or not provided under a plan, program or arrangement described in the preceding sentence. |
3) | “Employee Benefits” means the perquisites, benefits and service credit for benefits as provided under any and all employee retirement income and welfare benefit policies, plans, programs or arrangements in which the Participant is entitled to participate, including without limitation any stock option, performance share, performance unit, stock purchase, stock appreciation, savings, pension, supplemental executive retirement, or other retirement income or welfare benefit, deferred compensation, incentive compensation, group or other life, health, medical/hospital or other insurance (whether funded by actual insurance or self-insured by the Company or a Subsidiary), disability, salary continuation, expense reimbursement and other employee benefit policies, plans, programs or arrangements that may now exist or any equivalent successor policies, plans, programs or arrangements that may be adopted hereafter by the Company or a Subsidiary, providing benefits and service credit for benefits at least as great in the aggregate as are payable thereunder immediately prior to a Change of Control. |
(v) | For purposes of this Section 12(a), an award shall be considered assumed (“Assumed”) if each of the following conditions are met: |
(A) | Option Rights, Appreciation Rights and Other Awards (to the extent such Other Awards are payable in cash and not subject to Management Objectives) are converted into replacement awards in a manner that complies with Section 409A of the Code; |
(B) | Restricted Stock Unit and Restricted Stock awards that are not subject to Management Objectives are converted into replacement awards covering a number of shares of the entity effecting the Change of Control (or a successor or parent corporation), as determined in a manner substantially similar to the treatment of an equal number of shares of Common Stock covered by the awards; provided, that to the extent that any portion of the consideration received by holders of shares of Common Stock in the Change Control transaction is not in the form of the common stock of such entity (or a successor or parent corporation), the number of shares covered by the replacement awards shall be based on the average of the high and low selling prices of the common stock of such entity (or a successor or parent corporation) on the established stock exchange on the trading day immediately preceding the date of the Change of Control; |
(C) | Performance Shares, Performance Units and all other awards subject to Management Objectives are converted into replacement awards that preserve the value of such awards at the time of the Change of Control; |
(D) | the replacement awards contain provisions for scheduled vesting and treatment on termination of employment (including the definition of Cause and Good Reason) that are no less favorable to the Participant than the underlying awards being replaced, and all other terms of the replacement awards (other than the security and number of shares represented by the replacement awards) are substantially similar to, or more favorable to the Participant than, the terms of the underlying awards; and |
(E) | the security represented by the replacement awards, if any, is of a class that is publicly held and widely traded on an established stock exchange. |
(i) | Upon the occurrence of a Change of Control, any awards made under this Plan that are not Assumed by the entity effecting the Change of Control shall become fully vested and exercisable on the date of the Change of Control or shall immediately vest and become immediately payable in accordance with their terms as if 100% of the applicable Management Objectives have been achieved, and any restrictions that apply to such awards shall lapse. |
(ii) | For each Option Right and Appreciation Right, the Participant shall receive a payment equal to the difference between the consideration (consisting of cash or other property (including securities of a successor or parent corporation)) received by holders of Common Stock in the Change of Control transaction and the exercise price of the applicable Option Right or Appreciation Right, if such difference is positive. Such payment shall be made in the same form as the consideration received by holders of Common Stock. Any Option Rights or Appreciation Rights with an exercise price that is higher than the per share consideration received by holders of Common Stock in connection with the Change of Control shall be cancelled for no additional consideration. |
(iii) | The Participant shall receive the consideration (consisting of cash or other property (including securities of a successor or parent corporation)) that such Participant would have received in the Change of Control transaction had he or she been, immediately prior to such transaction, a holder of the number of shares of Common Stock equal to the number of Restricted Stock Units and/or shares of Restricted Stock covered by the award and the number of shares of Common Stock payable under Section 12(b)(i) for awards subject to Management Objectives. |
(iv) | The payments contemplated by Sections 12(b)(ii) and 12(b)(iii) shall be made at the same time as consideration is paid to the holders of the Common Stock in connection with the Change of Control. |
(v) | Notwithstanding anything to the contrary in this Plan, if the Change of Control does not constitute a 409A Change of Control and the payment or benefit constitutes a deferral of compensation under Section 409A of the Code, then to the extent necessary to comply with Section 409A of the Code payment or delivery shall be made on the date of payment or delivery originally provided for such payment or benefit. |
Cumulative EPS | Vesting Percentage |
Equal to or greater than $ | 200% |
$ | 100% |
Less than $ | 0% |
Year 1 EPS | $4.00 |
Year 2 EPS | $4.20 |
Year 3 EPS | $4.40 |
Cumulative EPS | $12.60 |
Financial Summary | |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
Reports of Management and the Independent Registered Public Accounting Firm | |
Consolidated Financial Statements and Notes | |
Cautionary Statement Regarding Forward-Looking Information | |
Shareholder Information | |
Corporate Officers and Operating Management |
17 |
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
Operations | |||||||||||||||||||
Net sales | $ | 11,130 | $ | 10,186 | $ | 9,534 | $ | 8,766 | $ | 7,776 | |||||||||
Cost of goods sold | 5,965 | 5,569 | 5,328 | 5,021 | 4,295 | ||||||||||||||
Selling, general and administrative expenses | 3,823 | 3,468 | 3,260 | 2,961 | 2,728 | ||||||||||||||
Impairments and dissolution | 4 | 5 | 4 | ||||||||||||||||
Interest expense | 64 | 63 | 43 | 42 | 71 | ||||||||||||||
Income before income taxes | 1,258 | 1,086 | 907 | 742 | 678 | ||||||||||||||
Net income | 866 | 753 | 631 | 442 | 462 | ||||||||||||||
Financial Position | |||||||||||||||||||
Accounts receivable - net | $ | 1,131 | $ | 1,098 | $ | 1,033 | $ | 990 | $ | 917 | |||||||||
Inventories | 1,034 | 971 | 920 | 927 | 918 | ||||||||||||||
Working capital - net | (114 | ) | 630 | 1,273 | 99 | 150 | |||||||||||||
Property, plant and equipment - net | 1,021 | 1,021 | 966 | 957 | 952 | ||||||||||||||
Total assets | 5,706 | 6,383 | 6,235 | 5,229 | 5,169 | ||||||||||||||
Long-term debt | 1,123 | 1,122 | 1,632 | 639 | 648 | ||||||||||||||
Total debt | 1,805 | 1,722 | 1,705 | 993 | 1,045 | ||||||||||||||
Shareholders’ equity | 996 | 1,775 | 1,792 | 1,517 | 1,609 | ||||||||||||||
Per Common Share Information | |||||||||||||||||||
Average shares outstanding (thousands) | 96,190 | 100,898 | 101,715 | 103,471 | 107,022 | ||||||||||||||
Book value | $ | 10.52 | $ | 17.72 | $ | 17.35 | $ | 14.61 | $ | 15.04 | |||||||||
Net income - diluted (1) | 8.78 | 7.26 | 6.02 | 4.14 | 4.21 | ||||||||||||||
Net income - basic (1) | 8.95 | 7.41 | 6.15 | 4.22 | 4.28 | ||||||||||||||
Cash dividends | 2.20 | 2.00 | 1.56 | 1.46 | 1.44 | ||||||||||||||
Financial Ratios | |||||||||||||||||||
Return on sales | 7.8 | % | 7.4 | % | 6.6 | % | 5.0 | % | 5.9 | % | |||||||||
Asset turnover | 2.0 | x | 1.6 | x | 1.5 | x | 1.7 | x | 1.5 | x | |||||||||
Return on assets | 15.2 | % | 11.8 | % | 10.1 | % | 8.4 | % | 8.9 | % | |||||||||
Return on equity (2) | 48.8 | % | 42.0 | % | 41.6 | % | 27.5 | % | 31.0 | % | |||||||||
Dividend payout ratio (3) | 30.3 | % | 33.2 | % | 37.7 | % | 34.7 | % | 38.1 | % | |||||||||
Total debt to capitalization | 64.4 | % | 49.2 | % | 48.8 | % | 39.6 | % | 39.4 | % | |||||||||
Current ratio | 1.0 | 1.2 | 1.7 | 1.0 | 1.1 | ||||||||||||||
Interest coverage (4) | 20.6 | x | 18.3 | x | 22.2 | x | 18.4 | x | 10.6 | x | |||||||||
Net working capital to sales | (1.0 | )% | 6.2 | % | 13.3 | % | 1.1 | % | 1.9 | % | |||||||||
Effective income tax rate (5) | 31.2 | % | 30.7 | % | 30.4 | % | 40.4 | % | 31.8 | % | |||||||||
General | |||||||||||||||||||
Capital expenditures | $ | 201 | $ | 167 | $ | 157 | $ | 154 | $ | 125 | |||||||||
Total technical expenditures (6) | 155 | 144 | 140 | 130 | 103 | ||||||||||||||
Advertising expenditures | 299 | 263 | 247 | 227 | 218 | ||||||||||||||
Repairs and maintenance | 96 | 87 | 83 | 78 | 76 | ||||||||||||||
Depreciation | 169 | 159 | 152 | 151 | 140 | ||||||||||||||
Amortization of intangible assets | 30 | 29 | 27 | 30 | 35 | ||||||||||||||
Shareholders of record (total count) | 7,250 | 7,555 | 7,954 | 8,360 | 8,706 | ||||||||||||||
Number of employees (total count) | 39,674 | 37,633 | 34,154 | 32,988 | 32,228 | ||||||||||||||
Sales per employee (thousands of dollars) | $ | 281 | $ | 271 | $ | 279 | $ | 266 | $ | 241 | |||||||||
Sales per dollar of assets | 1.95 | 1.60 | 1.53 | 1.68 | 1.50 |
(1) | All earnings per share amounts are presented using the two-class method. See Note 15. |
(2) | Based on net income and shareholders’ equity at beginning of year. |
(3) | Based on cash dividends per common share and prior year’s diluted net income per common share. |
(4) | Ratio of income before income taxes and interest expense to interest expense. |
(5) | Based on income before income taxes. |
(6) | See Note 1, page 47 of this report, for a description of technical expenditures. |
18 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF | |
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
19 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF | |
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
20 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF | |
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
21 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF | |
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
22 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF | |
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
23 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF | |
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
24 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF | |
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
25 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF | |
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
26 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF | |
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
27 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF | |
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
(thousands of dollars) | Payments Due by Period | |||||||||||||||||||
Contractual Obligations | Total | Less than 1 Year | 1–3 Years | 3–5 Years | More than 5 Years | |||||||||||||||
Long-term debt | $ | 1,127,961 | $ | 3,265 | $ | 700,828 | $ | 309 | $ | 423,559 | ||||||||||
Operating leases | 1,314,773 | 296,875 | 459,506 | 270,463 | 287,929 | |||||||||||||||
Short-term borrowings | 679,436 | 679,436 | ||||||||||||||||||
Interest on Long-term debt | 494,395 | 30,744 | 61,078 | 42,166 | 360,407 | |||||||||||||||
Purchase obligations (a) | 151,535 | 151,535 | ||||||||||||||||||
Other contractual obligations (b) | 303,392 | 104,992 | 100,146 | 53,137 | 45,117 | |||||||||||||||
Total contractual cash obligations | $ | 4,071,492 | $ | 1,266,847 | $ | 1,321,558 | $ | 366,075 | $ | 1,117,012 |
(a) | Relate to open purchase orders for raw materials at December 31, 2014. |
(b) | Relate primarily to estimated future capital contributions to investments in the U.S. affordable housing and historic renovation real estate partnerships and various other contractual obligations. |
Amount of Commitment Expiration Per Period | ||||||||||||||||||||
Commercial Commitments | Total | Less than 1 Year | 1–3 Years | 3–5 Years | More than 5 Years | |||||||||||||||
Standby letters of credit | $ | 23,442 | $ | 23,442 | ||||||||||||||||
Surety bonds | 43,323 | 43,323 | ||||||||||||||||||
Other commercial commitments | 33,969 | 33,969 | ||||||||||||||||||
Total commercial commitments | $ | 100,734 | $ | 100,734 | $ | — | $ | — | $ | — |
(thousands of dollars) | 2014 | 2013 | 2012 | ||||||||
Balance at January 1 | $ | 26,755 | $ | 22,710 | $ | 22,071 | |||||
Charges to expense | 37,879 | 33,265 | 28,590 | ||||||||
Settlements | (36,911 | ) | (29,220 | ) | (27,951 | ) | |||||
Balance at December 31 | $ | 27,723 | $ | 26,755 | $ | 22,710 |
28 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF | |
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Year Ended December 31, | |||||||||||
(thousands of dollars) | 2014 | 2013 | 2012 | ||||||||
Net operating cash | $ | 1,081,528 | $ | 1,083,766 | $ | 887,886 | |||||
Capital expenditures | (200,545 | ) | (166,680 | ) | (157,112 | ) | |||||
Cash dividends | (215,263 | ) | (204,978 | ) | (160,939 | ) | |||||
Free cash flow | $ | 665,720 | $ | 712,108 | $ | 569,835 |
29 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF | |
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
30 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF | |
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Year Ended December 31, | ||||||||||
(thousands of dollars) | 2014 | 2013 | Change | |||||||
Net Sales: | ||||||||||
Paint Stores Group | $ | 6,851,581 | $ | 6,002,143 | 14.2 | % | ||||
Consumer Group | 1,420,757 | 1,341,689 | 5.9 | % | ||||||
Global Finishes Group | 2,080,854 | 2,004,530 | 3.8 | % | ||||||
Latin America Coatings Group | 771,378 | 832,450 | -7.3 | % | ||||||
Administrative | 4,963 | 4,720 | 5.1 | % | ||||||
Net sales | $ | 11,129,533 | $ | 10,185,532 | 9.3 | % | ||||
Year Ended December 31, | ||||||||||
(thousands of dollars) | 2014 | 2013 | Change | |||||||
Income Before Income Taxes: | ||||||||||
Paint Stores Group | $ | 1,201,420 | $ | 990,523 | 21.3 | % | ||||
Consumer Group | 252,859 | 242,061 | 4.5 | % | ||||||
Global Finishes Group | 201,129 | 170,591 | 17.9 | % | ||||||
Latin America Coatings Group | 40,469 | 38,645 | 4.7 | % | ||||||
Administrative | (437,651 | ) | (355,862 | ) | -23.0 | % | ||||
Income before income taxes | $ | 1,258,226 | $ | 1,085,958 | 15.9 | % |
31 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF | |
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
32 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF | |
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Year Ended December 31, | |||||||||||
(thousands of dollars) | 2014 | 2013 | 2012 | ||||||||
Net income | $ | 865,887 | $ | 752,561 | $ | 631,034 | |||||
Interest expense | 64,205 | 62,714 | 42,788 | ||||||||
Income taxes | 392,339 | 333,397 | 276,275 | ||||||||
Depreciation | 169,087 | 158,763 | 152,217 | ||||||||
Amortization | 29,858 | 29,031 | 26,985 | ||||||||
EBITDA | $ | 1,521,376 | $ | 1,336,466 | $ | 1,129,299 |
Year Ended December 31, | ||||||||||
(thousands of dollars) | 2013 | 2012 | Change | |||||||
Net Sales: | ||||||||||
Paint Stores Group | $ | 6,002,143 | $ | 5,409,947 | 10.9 | % | ||||
Consumer Group | 1,341,689 | 1,321,887 | 1.5 | % | ||||||
Global Finishes Group | 2,004,530 | 1,960,699 | 2.2 | % | ||||||
Latin America Coatings Group | 832,450 | 836,057 | -0.4 | % | ||||||
Administrative | 4,720 | 5,872 | -19.6 | % | ||||||
Net sales | $ | 10,185,532 | $ | 9,534,462 | 6.8 | % | ||||
Year Ended December 31, | ||||||||||
(thousands of dollars) | 2013 | 2012 | Change | |||||||
Income Before Income Taxes: | ||||||||||
Paint Stores Group | $ | 990,523 | $ | 861,763 | 14.9 | % | ||||
Consumer Group | 242,061 | 216,422 | 11.8 | % | ||||||
Global Finishes Group | 170,591 | 147,231 | 15.9 | % | ||||||
Latin America Coatings Group | 38,645 | 81,238 | -52.4 | % | ||||||
Administrative | (355,862 | ) | (399,345 | ) | 10.9 | % | ||||
Income before income taxes | $ | 1,085,958 | $ | 907,309 | 19.7 | % |
33 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF | |
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
34 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF | |
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
35 |
36 |
37 |
38 |
39 |
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Net sales | $ | 11,129,533 | $ | 10,185,532 | $ | 9,534,462 | |||||
Cost of goods sold | 5,965,049 | 5,568,966 | 5,328,236 | ||||||||
Gross profit (1) | 5,164,484 | 4,616,566 | 4,206,226 | ||||||||
Percent to net sales | 46.4 | % | 45.3 | % | 44.1 | % | |||||
Selling, general and administrative expenses (1) | 3,822,966 | 3,467,681 | 3,259,648 | ||||||||
Percent to net sales | 34.3 | % | 34.0 | % | 34.2 | % | |||||
Other general expense - net | 37,482 | 2,519 | 5,248 | ||||||||
Impairment of trademarks | 4,086 | ||||||||||
Interest expense | 64,205 | 62,714 | 42,788 | ||||||||
Interest and net investment income | (2,995 | ) | (3,242 | ) | (2,913 | ) | |||||
Other (income) expense - net | (15,400 | ) | 936 | (9,940 | ) | ||||||
Income before income taxes | 1,258,226 | 1,085,958 | 907,309 | ||||||||
Income taxes (1) | 392,339 | 333,397 | 276,275 | ||||||||
Net income | $ | 865,887 | $ | 752,561 | $ | 631,034 | |||||
Net income per common share: | |||||||||||
Basic | $ | 8.95 | $ | 7.41 | $ | 6.15 | |||||
Diluted | $ | 8.78 | $ | 7.26 | $ | 6.02 |
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Net income | $ | 865,887 | $ | 752,561 | $ | 631,034 | |||||
Other comprehensive (loss) income, net of tax: | |||||||||||
Foreign currency translation adjustments | (103,441 | ) | (46,748 | ) | (7,403 | ) | |||||
Employee benefit plans: | |||||||||||
Net actuarial (losses) gains and prior service costs | |||||||||||
arising during period (2) | (56,536 | ) | 85,051 | (6,192 | ) | ||||||
Less: amortization of net actuarial losses and | |||||||||||
prior service costs included in Net pension costs (3) | 8,980 | 10,933 | 10,973 | ||||||||
(47,556 | ) | 95,984 | 4,781 | ||||||||
Unrealized net gains on available-for-sale securities: | |||||||||||
Unrealized holding gains | |||||||||||
arising during period (4) | 366 | 134 | 123 | ||||||||
Less: reclassification adjustments for gains | |||||||||||
included in net income (5) | (283 | ) | (25 | ) | (12 | ) | |||||
83 | 109 | 111 | |||||||||
Other comprehensive (loss) income | (150,914 | ) | 49,345 | (2,511 | ) | ||||||
Comprehensive income | $ | 714,973 | $ | 801,906 | $ | 628,523 |
40 |
December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 40,732 | $ | 744,889 | $ | 862,590 | |||||
Accounts receivable, less allowance | 1,130,565 | 1,097,751 | 1,032,508 | ||||||||
Inventories: | |||||||||||
Finished goods | 841,784 | 779,057 | 732,359 | ||||||||
Work in process and raw materials | 191,743 | 191,758 | 187,965 | ||||||||
1,033,527 | 970,815 | 920,324 | |||||||||
Deferred income taxes | 109,087 | 104,496 | 126,730 | ||||||||
Other current assets | 252,869 | 240,766 | 207,086 | ||||||||
Total current assets | 2,566,780 | 3,158,717 | 3,149,238 | ||||||||
Goodwill | 1,158,346 | 1,178,687 | 1,156,005 | ||||||||
Intangible assets | 289,127 | 313,299 | 347,553 | ||||||||
Deferred pension assets | 250,144 | 302,446 | 249,911 | ||||||||
Other assets | 420,625 | 407,975 | 366,134 | ||||||||
Property, plant and equipment: | |||||||||||
Land | 125,691 | 125,131 | 102,336 | ||||||||
Buildings | 698,202 | 715,096 | 677,944 | ||||||||
Machinery and equipment | 1,952,037 | 1,838,590 | 1,750,729 | ||||||||
Construction in progress | 59,330 | 62,563 | 56,582 | ||||||||
2,835,260 | 2,741,380 | 2,587,591 | |||||||||
Less allowances for depreciation | 1,814,230 | 1,719,997 | 1,621,695 | ||||||||
1,021,030 | 1,021,383 | 965,896 | |||||||||
Total Assets | $ | 5,706,052 | $ | 6,382,507 | $ | 6,234,737 | |||||
Liabilities and Shareholders’ Equity | |||||||||||
Current liabilities: | |||||||||||
Short-term borrowings | $ | 679,436 | $ | 96,551 | $ | 69,035 | |||||
Accounts payable | 1,042,182 | 998,484 | 922,999 | ||||||||
Compensation and taxes withheld | 360,458 | 337,637 | 314,892 | ||||||||
Accrued taxes | 86,744 | 79,504 | 52,104 | ||||||||
Current portion of long-term debt | 3,265 | 502,948 | 3,689 | ||||||||
Other accruals | 508,581 | 513,433 | 513,717 | ||||||||
Total current liabilities | 2,680,666 | 2,528,557 | 1,876,436 | ||||||||
Long-term debt | 1,122,715 | 1,122,373 | 1,632,165 | ||||||||
Postretirement benefits other than pensions | 277,892 | 268,874 | 320,223 | ||||||||
Other long-term liabilities | 628,309 | 688,168 | 614,109 | ||||||||
Shareholders’ equity: | |||||||||||
Common stock - $1.00 par value: | |||||||||||
94,704,173, 100,129,380 and 103,270,067 shares outstanding | |||||||||||
at December 31, 2014, 2013 and 2012, respectively | 114,525 | 112,902 | 111,623 | ||||||||
Preferred stock - convertible, no par value: | |||||||||||
40,406 and 101,086 shares outstanding | |||||||||||
at December 31, 2013 and 2012, respectively | 40,406 | 101,086 | |||||||||
Unearned ESOP compensation | (40,406 | ) | (101,086 | ) | |||||||
Other capital | 2,079,639 | 1,847,801 | 1,673,788 | ||||||||
Retained earnings | 2,424,674 | 1,774,050 | 1,226,467 | ||||||||
Treasury stock, at cost | (3,150,410 | ) | (1,639,174 | ) | (849,685 | ) | |||||
Cumulative other comprehensive loss | (471,958 | ) | (321,044 | ) | (370,389 | ) | |||||
Total shareholders’ equity | 996,470 | 1,774,535 | 1,791,804 | ||||||||
Total Liabilities and Shareholders’ Equity | $ | 5,706,052 | $ | 6,382,507 | $ | 6,234,737 |
41 |
Year Ended December 31, | |||||||||||
Operating Activities | 2014 | 2013 | 2012 | ||||||||
Net income | $ | 865,887 | $ | 752,561 | $ | 631,034 | |||||
Adjustments to reconcile net income to net operating cash: | |||||||||||
Depreciation | 169,087 | 158,763 | 152,217 | ||||||||
Amortization of intangible assets | 29,858 | 29,031 | 26,985 | ||||||||
Impairment of trademarks and goodwill | 4,086 | ||||||||||
Provisions for environmental-related matters | 36,046 | (2,751 | ) | 6,736 | |||||||
Provisions for qualified exit costs | 13,578 | 4,682 | 2,734 | ||||||||
Deferred income taxes | (19,038 | ) | 27,775 | (10,422 | ) | ||||||
Defined benefit pension plans net cost | 990 | 20,641 | 20,309 | ||||||||
Stock-based compensation expense | 64,735 | 58,004 | 54,348 | ||||||||
Net (decrease) increase in postretirement liability | (718 | ) | 5,233 | 3,666 | |||||||
Decrease in non-traded investments | 63,365 | 57,261 | 72,861 | ||||||||
Loss on disposition of assets | 1,436 | 5,207 | 3,454 | ||||||||
Other | 203 | (27,214 | ) | (18,349 | ) | ||||||
Change in working capital accounts: | |||||||||||
(Increase) in accounts receivable | (80,252 | ) | (41,473 | ) | (33,578 | ) | |||||
(Increase) decrease in inventories | (101,112 | ) | 25,031 | 19,929 | |||||||
Increase (decrease) in accounts payable | 78,603 | 34,685 | (51,124 | ) | |||||||
Increase (decrease) in accrued taxes | 13,187 | 11,314 | (70,264 | ) | |||||||
Increase in accrued compensation and taxes withheld | 29,513 | 24,435 | 63,697 | ||||||||
(Decrease) increase in refundable income taxes | (36,601 | ) | 13,244 | (32,967 | ) | ||||||
DOL settlement accrual | (80,000 | ) | 80,000 | ||||||||
Other | (20,029 | ) | 43,804 | 11,000 | |||||||
Costs incurred for environmental-related matters | (9,676 | ) | (12,539 | ) | (31,689 | ) | |||||
Costs incurred for qualified exit costs | (10,882 | ) | (7,419 | ) | (4,577 | ) | |||||
Other | (6,652 | ) | (16,509 | ) | (12,200 | ) | |||||
Net operating cash | 1,081,528 | 1,083,766 | 887,886 | ||||||||
Investing Activities | |||||||||||
Capital expenditures | (200,545 | ) | (166,680 | ) | (157,112 | ) | |||||
Acquisitions of businesses, net of cash acquired | (79,940 | ) | (99,242 | ) | |||||||
Proceeds from sale of assets | 1,516 | 3,045 | 9,677 | ||||||||
Increase in other investments | (111,021 | ) | (94,739 | ) | (95,778 | ) | |||||
Net investing cash | (310,050 | ) | (338,314 | ) | (342,455 | ) | |||||
Financing Activities | |||||||||||
Net increase (decrease) in short-term borrowings | 591,423 | 31,634 | (284,839 | ) | |||||||
Proceeds from long-term debt | 1,474 | 473 | 999,697 | ||||||||
Payments of long-term debt | (500,661 | ) | (10,932 | ) | (14,000 | ) | |||||
Payments of cash dividends | (215,263 | ) | (204,978 | ) | (160,939 | ) | |||||
Proceeds from stock options exercised | 100,069 | 69,761 | 221,126 | ||||||||
Income tax effect of stock-based compensation exercises and vesting | 68,657 | 47,527 | 104,858 | ||||||||
Treasury stock purchased | (1,488,663 | ) | (769,271 | ) | (557,766 | ) | |||||
Other | (24,111 | ) | (17,522 | ) | (21,559 | ) | |||||
Net financing cash | (1,467,075 | ) | (853,308 | ) | 286,578 | ||||||
Effect of exchange rate changes on cash | (8,560 | ) | (9,845 | ) | (2,115 | ) | |||||
Net (decrease) increase in cash and cash equivalents | (704,157 | ) | (117,701 | ) | 829,894 | ||||||
Cash and cash equivalents at beginning of year | 744,889 | 862,590 | 32,696 | ||||||||
Cash and cash equivalents at end of year | $ | 40,732 | $ | 744,889 | $ | 862,590 | |||||
Taxes paid on income | $ | 310,039 | $ | 200,748 | $ | 223,329 | |||||
Interest paid on debt | 67,306 | 61,045 | 41,551 |
42 |
Common Stock | Preferred Stock | Unearned ESOP Compen-sation | Other Capital | Retained Earnings | Treasury Stock | Cumulative Other Comprehensive Loss | Total | ||||||||||||||||||||||||
Balance at January 1, 2012 | $ | 107,454 | $ | 160,273 | $ | (160,273 | ) | $ | 1,297,625 | $ | 756,372 | $ | (276,654 | ) | $ | (367,878 | ) | $ | 1,516,919 | ||||||||||||
Net income | 631,034 | 631,034 | |||||||||||||||||||||||||||||
Other comprehensive loss | (2,511 | ) | (2,511 | ) | |||||||||||||||||||||||||||
Treasury stock purchased | (557,766 | ) | (557,766 | ) | |||||||||||||||||||||||||||
Redemption of preferred stock | (59,187 | ) | 59,187 | ||||||||||||||||||||||||||||
Stock options exercised | 3,867 | 217,259 | (15,265 | ) | 205,861 | ||||||||||||||||||||||||||
Income tax effect of stock compensation | 104,858 | 104,858 | |||||||||||||||||||||||||||||
Restricted stock and stock option grants (net activity) | 302 | 54,046 | 54,348 | ||||||||||||||||||||||||||||
Cash dividends - $1.56 per common share | (160,939 | ) | (160,939 | ) | |||||||||||||||||||||||||||
Balance at December 31, 2012 | 111,623 | 101,086 | (101,086 | ) | 1,673,788 | 1,226,467 | (849,685 | ) | (370,389 | ) | 1,791,804 | ||||||||||||||||||||
Net income | 752,561 | 752,561 | |||||||||||||||||||||||||||||
Other comprehensive income | 49,345 | 49,345 | |||||||||||||||||||||||||||||
Treasury stock purchased | (769,271 | ) | (769,271 | ) | |||||||||||||||||||||||||||
Redemption of preferred stock | (60,680 | ) | 60,680 | ||||||||||||||||||||||||||||
Stock options exercised | 1,128 | 68,633 | (20,218 | ) | 49,543 | ||||||||||||||||||||||||||
Income tax effect of stock compensation | 47,527 | 47,527 | |||||||||||||||||||||||||||||
Restricted stock and stock option grants (net activity) | 151 | 57,853 | 58,004 | ||||||||||||||||||||||||||||
Cash dividends - $2.00 per common share | (204,978 | ) | (204,978 | ) | |||||||||||||||||||||||||||
Balance at December 31, 2013 | 112,902 | 40,406 | (40,406 | ) | 1,847,801 | 1,774,050 | (1,639,174 | ) | (321,044 | ) | 1,774,535 | ||||||||||||||||||||
Net income | 865,887 | 865,887 | |||||||||||||||||||||||||||||
Other comprehensive loss | (150,914 | ) | (150,914 | ) | |||||||||||||||||||||||||||
Treasury stock purchased | (1,488,663 | ) | (1,488,663 | ) | |||||||||||||||||||||||||||
Redemption of preferred stock | (40,406 | ) | 40,406 | ||||||||||||||||||||||||||||
Stock options exercised | 1,423 | 98,646 | (22,573 | ) | 77,496 | ||||||||||||||||||||||||||
Income tax effect of stock compensation | 68,657 | 68,657 | |||||||||||||||||||||||||||||
Restricted stock and stock option grants (net activity) | 200 | 64,535 | 64,735 | ||||||||||||||||||||||||||||
Cash dividends - $2.20 per common share | (215,263 | ) | (215,263 | ) | |||||||||||||||||||||||||||
Balance at December 31, 2014 | $ | 114,525 | $ | — | $ | — | $ | 2,079,639 | $ | 2,424,674 | $ | (3,150,410 | ) | $ | (471,958 | ) | $ | 996,470 |
43 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
December 31, | |||||||||||||||||||||||
2014 | 2013 | 2012 | |||||||||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||||||||
Publicly traded debt | $ | 1,120,924 | $ | 1,160,280 | $ | 1,620,646 | $ | 1,614,739 | $ | 1,630,056 | $ | 1,706,487 | |||||||||||
Non-traded debt | 5,056 | 4,812 | 4,675 | 4,430 | 5,798 | 5,600 |
44 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
Fair Value at December 31, 2014 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||
Assets: | |||||||||||||
Deferred compensation plan asset (a) | $ | 23,870 | $ | 1,140 | $ | 22,730 | |||||||
Liabilities: | |||||||||||||
Deferred compensation plan liability (b) | $ | 34,443 | $ | 34,443 |
(a) | The deferred compensation plan asset consists of the investment funds maintained for the future payments under the Company’s executive deferred compensation plan, which is structured as a rabbi trust. The investments are marketable securities accounted for under the Debt and Equity Securities Topic of the ASC. The level 1 investments are valued using quoted market prices multiplied by the number of shares. The level 2 investments are valued based on vendor or broker models. The cost basis of the investment funds is $22,715. |
(b) | The deferred compensation plan liability represents the value of the Company’s liability under its deferred compensation plan based on quoted market prices in active markets for identical assets. |
Useful Life | |
Finite-lived trademarks | 5 years |
Non-compete covenants | 3 – 5 years |
Certain intangible property rights | 3 – 19 years |
Buildings | 2.5% – 20.0% |
Machinery and equipment | 5.0% – 20.0% |
Furniture and fixtures | 10.0% – 33.3% |
Automobiles and trucks | 10.0% – 33.3% |
45 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
2014 | 2013 | 2012 | |||||||||
Balance at January 1 | $ | 26,755 | $ | 22,710 | $ | 22,071 | |||||
Charges to expense | 37,879 | 33,265 | 28,590 | ||||||||
Settlements | (36,911 | ) | (29,220 | ) | (27,951 | ) | |||||
Balance at December 31 | $ | 27,723 | $ | 26,755 | $ | 22,710 |
46 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
2014 | 2013 | ||||||
Net sales | $ | 11,129,533 | $ | 10,540,181 | |||
Net income | 865,887 | 725,774 | |||||
Net income per common share: | |||||||
Basic | 8.95 | 7.13 | |||||
Diluted | 8.78 | 6.98 |
47 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
2014 | 2013 | 2012 | |||||||||
Percentage of total inventories on LIFO | 76 | % | 75 | % | 75 | % | |||||
Excess of FIFO over LIFO | $ | 331,867 | $ | 337,214 | $ | 357,303 | |||||
Increase in net income due to LIFO | 3,230 | 12,299 | 13,365 | ||||||||
Increase in net income per common share due to LIFO | .03 | .12 | .13 |
48 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
Goodwill | Paint Stores Group | Consumer Group | Global Finishes Group | Latin America Coatings Group | Consolidated Totals | ||||||||||||||
Balance at January 1, 2012 (a) | $ | 286,998 | $ | 689,279 | $ | 120,350 | $ | 11,381 | $ | 1,108,008 | |||||||||
Acquisitions | 17,357 | 24,707 | 42,064 | ||||||||||||||||
Currency and other adjustments | (214 | ) | (344 | ) | 7,230 | (739 | ) | 5,933 | |||||||||||
Balance at December 31, 2012 (a) | 286,784 | 706,292 | 152,287 | 10,642 | 1,156,005 | ||||||||||||||
Acquisitions | 1,885 | 17,963 | 19,848 | ||||||||||||||||
Currency and other adjustments | (1,369 | ) | (2,941 | ) | 8,048 | (904 | ) | 2,834 | |||||||||||
Balance at December 31, 2013 (a) | 287,300 | 703,351 | 178,298 | 9,738 | 1,178,687 | ||||||||||||||
Currency and other adjustments | (1,866 | ) | (1,145 | ) | (17,287 | ) | (43 | ) | (20,341 | ) | |||||||||
Balance at December 31, 2014 (a) | $ | 285,434 | $ | 702,206 | $ | 161,011 | $ | 9,695 | $ | 1,158,346 |
(a) | Net of accumulated impairment losses of $8,904 ($8,113 in the Consumer Group and $791 in the Global Finishes Group). |
Finite-lived intangible assets | Trademarks with indefinite lives | Total intangible assets | |||||||||||||||||
Software | All other | Subtotal | |||||||||||||||||
December 31, 2014 | |||||||||||||||||||
Weighted-average amortization period | 8 years | 12 years | 11 years | ||||||||||||||||
Gross | $ | 126,258 | $ | 317,005 | $ | 443,263 | |||||||||||||
Accumulated amortization | (88,384 | ) | (215,518 | ) | (303,902 | ) | |||||||||||||
Net value | $ | 37,874 | $ | 101,487 | $ | 139,361 | $ | 149,766 | $ | 289,127 | |||||||||
December 31, 2013 | |||||||||||||||||||
Weighted-average amortization period | 8 years | 10 years | 9 years | ||||||||||||||||
Gross | $ | 114,404 | $ | 327,962 | $ | 442,366 | |||||||||||||
Accumulated amortization | (77,018 | ) | (202,084 | ) | (279,102 | ) | |||||||||||||
Net value | $ | 37,386 | $ | 125,878 | $ | 163,264 | $ | 150,035 | $ | 313,299 | |||||||||
December 31, 2012 | |||||||||||||||||||
Weighted-average amortization period | 8 years | 12 years | 11 years | ||||||||||||||||
Gross | $ | 107,779 | $ | 337,089 | $ | 444,868 | |||||||||||||
Accumulated amortization | (66,106 | ) | (193,959 | ) | (260,065 | ) | |||||||||||||
Net value | $ | 41,673 | $ | 143,130 | $ | 184,803 | $ | 162,750 | $ | 347,553 |
49 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
Exit Plan | Balance at December 31, 2013 | Provisions in Cost of goods sold or SG&A | Actual expenditures charged to accrual | Balance at December 31, 2014 | ||||||||||||
Paint Stores Group stores shutdown in 2014: | ||||||||||||||||
Other qualified exit costs | $ | 280 | $ | 280 | ||||||||||||
Consumer Group facilities shutdown in 2014: | ||||||||||||||||
Severance and related costs | 4,028 | $ | (1,296 | ) | 2,732 | |||||||||||
Other qualified exit costs | 781 | 781 | ||||||||||||||
Global Finishes Group exit of business in 2014: | ||||||||||||||||
Severance and related costs | 2,500 | (2,396 | ) | 104 | ||||||||||||
Other qualified exit costs | 2,267 | (1,187 | ) | 1,080 | ||||||||||||
Paint Stores Group facility shutdown in 2013: | ||||||||||||||||
Severance and related costs | $ | 977 | 2,126 | (2,449 | ) | 654 | ||||||||||
Other qualified exit costs | 1,499 | (294 | ) | 1,205 | ||||||||||||
Consumer Group facilities shutdown in 2013: | ||||||||||||||||
Severance and related costs | 598 | 97 | (695 | ) | ||||||||||||
Global Finishes Group stores shutdown in 2013: | ||||||||||||||||
Severance and related costs | 33 | (5 | ) | 28 | ||||||||||||
Other qualified exit costs | 220 | (82 | ) | 138 | ||||||||||||
Latin America Coatings Group facilities shutdown in 2013: | ||||||||||||||||
Severance and related costs | 123 | (123 | ) | |||||||||||||
Paint Stores Group stores shutdown in 2012: | ||||||||||||||||
Other qualified exit costs | 244 | (51 | ) | 193 | ||||||||||||
Global Finishes Group facilities shutdown in 2012: | ||||||||||||||||
Severance and related costs | 2,177 | (1,863 | ) | 314 | ||||||||||||
Other qualified exit costs | 83 | 83 | ||||||||||||||
Other qualified exit costs for facilities shutdown prior to 2012 | 1,365 | (441 | ) | 924 | ||||||||||||
Totals | $ | 5,820 | $ | 13,578 | $ | (10,882 | ) | $ | 8,516 |
50 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
Exit Plan | Balance at December 31, 2012 | Provisions in Cost of goods sold or SG&A | Actual expenditures charged to accrual | Adjustments to prior provisions in Other general expense - net | Balance at December 31, 2013 | |||||||||||||||
Paint Stores Group stores shutdown in 2013: | ||||||||||||||||||||
Severance and related costs | $ | 1,004 | $ | (27 | ) | $ | 977 | |||||||||||||
Consumer Group facilities shutdown in 2013: | ||||||||||||||||||||
Severance and related costs | 598 | 598 | ||||||||||||||||||
Global Finishes Group branches shutdown in 2013: | ||||||||||||||||||||
Severance and related costs | 278 | (25 | ) | 253 | ||||||||||||||||
Latin America Coatings Group facilities shutdown in 2013: | ||||||||||||||||||||
Severance and related costs | 123 | 123 | ||||||||||||||||||
Paint Stores Group stores shutdown in 2012: | ||||||||||||||||||||
Other qualified exit costs | $ | 313 | (68 | ) | $ | (1 | ) | 244 | ||||||||||||
Global Finishes Group facilities shutdown in 2012: | ||||||||||||||||||||
Severance and related costs | 2,236 | 2,533 | (2,592 | ) | 2,177 | |||||||||||||||
Other qualified exit costs | 3,430 | 83 | (3,530 | ) | 100 | 83 | ||||||||||||||
Global Finishes Group branches shutdown in 2011: | ||||||||||||||||||||
Other qualified exit costs | 290 | (222 | ) | 68 | ||||||||||||||||
Other qualified exit costs for facilities shutdown prior to 2011 | 2,288 | (955 | ) | (36 | ) | 1,297 | ||||||||||||||
Totals | $ | 8,557 | $ | 4,619 | $ | (7,419 | ) | $ | 63 | $ | 5,820 |
Exit Plan | Balance at January 1, 2012 | Provisions in Cost of goods sold or SG&A | Actual expenditures charged to accrual | Adjustments to prior provisions in Other general expense - net | Balance at December 31, 2012 | |||||||||||||||
Paint Stores Group stores shutdown in 2012: | ||||||||||||||||||||
Other qualified exit costs | $ | 313 | $ | 313 | ||||||||||||||||
Global Finishes Group facility shutdown in 2012: | ||||||||||||||||||||
Severance and related costs | 3,933 | $ | (1,697 | ) | 2,236 | |||||||||||||||
Other qualified exit costs | 3,430 | 3,430 | ||||||||||||||||||
Consumer Group manufacturing facilities shutdown in 2011: | ||||||||||||||||||||
Severance and related costs | $ | 197 | (133 | ) | $ | (64 | ) | |||||||||||||
Paint Stores Group stores shutdown in 2011: | ||||||||||||||||||||
Other qualified exit costs | 156 | (144 | ) | (12 | ) | |||||||||||||||
Global Finishes Group branches shutdown in 2011: | ||||||||||||||||||||
Severance and related costs | 129 | (134 | ) | 5 | ||||||||||||||||
Other qualified exit costs | 470 | (180 | ) | 290 | ||||||||||||||||
Global Finishes Group branches shutdown in 2010: | ||||||||||||||||||||
Other qualified exit costs | 955 | (133 | ) | 822 | ||||||||||||||||
Other qualified exit costs for facilities shutdown prior to 2010 | 8,493 | (2,156 | ) | (4,871 | ) | 1,466 | ||||||||||||||
Totals | $ | 10,400 | $ | 7,676 | $ | (4,577 | ) | $ | (4,942 | ) | $ | 8,557 |
51 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
52 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
Domestic Defined Benefit Pension Plans | Foreign Defined Benefit Pension Plans | ||||||||||||||||||||||
2014 | 2013 | 2012 | 2014 | 2013 | 2012 | ||||||||||||||||||
Net pension costs: | |||||||||||||||||||||||
Service costs | $ | 21,342 | $ | 23,176 | $ | 19,061 | $ | 5,261 | $ | 5,039 | $ | 3,654 | |||||||||||
Interest costs | 26,266 | 18,444 | 17,442 | 10,422 | 7,940 | 6,927 | |||||||||||||||||
Expected returns on plan assets | (51,293 | ) | (42,937 | ) | (44,841 | ) | (10,836 | ) | (7,487 | ) | (6,799 | ) | |||||||||||
Amortization of prior service costs | 1,837 | 1,823 | 1,591 | ||||||||||||||||||||
Amortization of actuarial losses | 13,147 | 22,205 | 1,413 | 1,716 | 1,022 | ||||||||||||||||||
Ongoing pension (credits) costs | (1,848 | ) | 13,653 | 15,458 | 6,260 | 7,208 | 4,804 | ||||||||||||||||
Settlement (credits) costs | (3,422 | ) | (220 | ) | 47 | ||||||||||||||||||
Net pension (credits) costs | (1,848 | ) | 13,653 | 15,458 | 2,838 | 6,988 | 4,851 | ||||||||||||||||
Other changes in plan assets and projected benefit obligation recognized in Cumulative other comprehensive loss (before taxes): | |||||||||||||||||||||||
Net actuarial losses (gains) arising during the year | 47,785 | (90,669 | ) | (26,459 | ) | 21,792 | (5,487 | ) | 14,131 | ||||||||||||||
Prior service costs during the year | 2,242 | 1,756 | 2,495 | ||||||||||||||||||||
Amortization of prior service costs | (1,837 | ) | (1,823 | ) | (1,591 | ) | |||||||||||||||||
Amortization of actuarial losses | (13,147 | ) | (22,205 | ) | (1,413 | ) | (1,716 | ) | (1,022 | ) | |||||||||||||
Exchange rate (loss) gain recognized during year | (7,988 | ) | 819 | 1,464 | |||||||||||||||||||
Total recognized in Cumulative other comprehensive loss | 48,190 | (103,883 | ) | (47,760 | ) | 12,391 | (6,384 | ) | 14,573 | ||||||||||||||
Total recognized in net pension costs (credits) and Cumulative other comprehensive loss | $ | 46,342 | $ | (90,230 | ) | $ | (32,302 | ) | $ | 15,229 | $ | 604 | $ | 19,424 |
53 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
Fair Value at December 31, 2014 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Investments at fair value: | |||||||||||||||
Short-term investments (a) | $ | 14,846 | $ | 14,846 | |||||||||||
Equity investments (b) | 739,358 | $ | 404,542 | 334,816 | |||||||||||
Fixed income investments (c) | 285,042 | 141,529 | 143,513 | ||||||||||||
Other assets (d) | 44,469 | 28,435 | $ | 16,034 | |||||||||||
$ | 1,083,715 | $ | 546,071 | $ | 521,610 | $ | 16,034 | ||||||||
Fair Value at December 31, 2013 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Investments at fair value: | |||||||||||||||
Short-term investments (a) | $ | 15,055 | $ | 1,941 | $ | 13,114 | |||||||||
Equity investments (b) | 736,873 | 419,779 | 317,094 | ||||||||||||
Fixed income investments (c) | 255,927 | 125,377 | 130,550 | ||||||||||||
Other assets (d) | 47,494 | 29,553 | $ | 17,941 | |||||||||||
$ | 1,055,349 | $ | 547,097 | $ | 490,311 | $ | 17,941 | ||||||||
Fair Value at December 31, 2012 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Investments at fair value: | |||||||||||||||
Short-term investments (a) | $ | 68,795 | $ | 68,795 | |||||||||||
Equity investments (b) | 490,993 | $ | 243,553 | 247,440 | |||||||||||
Fixed income investments (c) | 239,558 | 131,276 | 108,282 | ||||||||||||
Other assets (d) | 37,230 | 18,380 | $ | 18,850 | |||||||||||
$ | 836,576 | $ | 374,829 | $ | 442,897 | $ | 18,850 |
(a) | This category includes a full range of high quality, short-term money market securities. |
(b) | This category includes actively managed equity assets that track primarily to the S&P 500. |
(c) | This category includes government and corporate bonds that track primarily to the Barclays Capital Aggregate Bond Index. |
(d) | This category consists of venture capital funds. |
Balance at December 31, 2013 | Dispositions | Realized and Unrealized Gains | Balance at December 31, 2014 | ||||||||||||
Other assets | $ | 17,941 | $ | (4,320 | ) | $ | 2,413 | $ | 16,034 | ||||||
Balance at December 31, 2012 | Dispositions | Realized and Unrealized Gains | Balance at December 31, 2013 | ||||||||||||
Other assets | $ | 18,850 | $ | (4,068 | ) | $ | 3,159 | $ | 17,941 | ||||||
Balance at January 1, 2012 | Dispositions | Realized and Unrealized Gains | Balance at December 31, 2012 | ||||||||||||
Other assets | $ | 20,900 | $ | (3,827 | ) | $ | 1,777 | $ | 18,850 |
54 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
Domestic Defined Benefit Pension Plans | Foreign Defined Benefit Pension Plans | ||||||||||||||||||||||
2014 | 2013 | 2012 | 2014 | 2013 | 2012 | ||||||||||||||||||
Accumulated benefit obligations at end of year | $ | 648,480 | $ | 577,736 | $ | 460,591 | $ | 203,610 | $ | 187,670 | $ | 142,769 | |||||||||||
Projected benefit obligations: | |||||||||||||||||||||||
Balances at beginning of year | $ | 582,036 | $ | 466,827 | $ | 410,029 | $ | 222,996 | $ | 168,758 | $ | 141,465 | |||||||||||
Service costs | 21,342 | 23,176 | 19,061 | 5,261 | 5,039 | 3,654 | |||||||||||||||||
Interest costs | 26,266 | 18,444 | 17,442 | 10,422 | 7,940 | 6,927 | |||||||||||||||||
Actuarial losses (gains) | 68,748 | (5,488 | ) | 48,346 | 32,551 | 5,939 | 17,532 | ||||||||||||||||
Acquisitions of businesses and other | 2,242 | 113,174 | 2,496 | (10,062 | ) | 39,622 | (975 | ) | |||||||||||||||
Effect of foreign exchange | (18,987 | ) | 1,549 | 6,633 | |||||||||||||||||||
Benefits paid | (47,296 | ) | (34,097 | ) | (30,547 | ) | (7,657 | ) | (5,851 | ) | (6,478 | ) | |||||||||||
Balances at end of year | 653,338 | 582,036 | 466,827 | 234,524 | 222,996 | 168,758 | |||||||||||||||||
Plan assets: | |||||||||||||||||||||||
Balances at beginning of year | 870,386 | 703,563 | 614,463 | 184,963 | 133,013 | 118,060 | |||||||||||||||||
Actual returns on plan assets | 72,256 | 128,117 | 119,647 | 20,240 | 20,316 | 10,201 | |||||||||||||||||
Acquisitions of businesses and other | 725 | 72,803 | 3,958 | 36,106 | 6,205 | ||||||||||||||||||
Effect of foreign exchange | (13,859 | ) | 1,379 | 5,025 | |||||||||||||||||||
Benefits paid | (47,296 | ) | (34,097 | ) | (30,547 | ) | (7,657 | ) | (5,851 | ) | (6,478 | ) | |||||||||||
Balances at end of year | 896,071 | 870,386 | 703,563 | 187,645 | 184,963 | 133,013 | |||||||||||||||||
Excess (deficient) plan assets over projected benefit obligations | $ | 242,733 | $ | 288,350 | $ | 236,736 | $ | (46,879 | ) | $ | (38,033 | ) | $ | (35,745 | ) | ||||||||
Assets and liabilities recognized in the Consolidated Balance Sheets: | |||||||||||||||||||||||
Deferred pension assets | $ | 242,733 | $ | 288,350 | $ | 245,588 | $ | 7,411 | $ | 14,096 | $ | 4,323 | |||||||||||
Other accruals | (810 | ) | (1,126 | ) | (869 | ) | |||||||||||||||||
Other long-term liabilities | (8,852 | ) | (53,480 | ) | (51,003 | ) | (39,199 | ) | |||||||||||||||
$ | 242,733 | $ | 288,350 | $ | 236,736 | $ | (46,879 | ) | $ | (38,033 | ) | $ | (35,745 | ) | |||||||||
Amounts recognized in Cumulative other comprehensive loss: | |||||||||||||||||||||||
Net actuarial losses | $ | (107,057 | ) | $ | (59,272 | ) | $ | (163,088 | ) | $ | (47,574 | ) | $ | (35,183 | ) | $ | (41,567 | ) | |||||
Prior service costs | (6,448 | ) | (6,043 | ) | (6,110 | ) | |||||||||||||||||
$ | (113,505 | ) | $ | (65,315 | ) | $ | (169,198 | ) | $ | (47,574 | ) | $ | (35,183 | ) | $ | (41,567 | ) | ||||||
Weighted-average assumptions used to determine projected benefit obligations: | |||||||||||||||||||||||
Discount rate | 3.95 | % | 4.65 | % | 3.73 | % | 3.92 | % | 4.89 | % | 4.58 | % | |||||||||||
Rate of compensation increase | 4.00 | % | 4.00 | % | 4.00 | % | 3.70 | % | 4.31 | % | 4.08 | % | |||||||||||
Weighted-average assumptions used to determine net pension costs: | |||||||||||||||||||||||
Discount rate | 4.65 | % | 3.73 | % | 4.40 | % | 4.89 | % | 4.58 | % | 4.94 | % | |||||||||||
Expected long-term rate of return on assets | 6.00 | % | 6.00 | % | 7.50 | % | 5.58 | % | 5.67 | % | 6.04 | % | |||||||||||
Rate of compensation increase | 4.00 | % | 4.00 | % | 4.00 | % | 4.31 | % | 4.08 | % | 4.04 | % |
55 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
Postretirement Benefits Other than Pensions | |||||||||||
2014 | 2013 | 2012 | |||||||||
Benefit obligation: | |||||||||||
Balance at beginning of year - unfunded | $ | 286,651 | $ | 338,134 | $ | 316,795 | |||||
Service cost | 2,434 | 3,061 | 2,943 | ||||||||
Interest cost | 12,782 | 12,183 | 13,520 | ||||||||
Actuarial loss (gain) | 27,757 | (50,593 | ) | 18,961 | |||||||
Plan amendments | (19,043 | ) | (2,503 | ) | |||||||
Benefits paid | (15,432 | ) | (13,631 | ) | (14,085 | ) | |||||
Balance at end of year - unfunded | $ | 295,149 | $ | 286,651 | $ | 338,134 | |||||
Liabilities recognized in the Consolidated Balance Sheets: | |||||||||||
Postretirement benefits other than pensions | $ | (277,892 | ) | $ | (268,874 | ) | $ | (320,223 | ) | ||
Other accruals | (17,257 | ) | (17,777 | ) | (17,911 | ) | |||||
$ | (295,149 | ) | $ | (286,651 | ) | $ | (338,134 | ) | |||
Amounts recognized in Cumulative other comprehensive loss: | |||||||||||
Net actuarial losses | $ | (36,044 | ) | $ | (8,287 | ) | $ | (62,814 | ) | ||
Prior service costs | 21,043 | 2,503 | 328 | ||||||||
$ | (15,001 | ) | $ | (5,784 | ) | $ | (62,486 | ) | |||
Weighted-average assumptions used to determine benefit obligation: | |||||||||||
Discount rate | 3.90 | % | 4.60 | % | 3.70 | % | |||||
Health care cost trend rate - pre-65 | 7.00 | % | 7.50 | % | 8.00 | % | |||||
Health care cost trend rate - post-65 | 6.50 | % | 6.50 | % | 8.00 | % | |||||
Prescription drug cost increases | 6.50 | % | 7.00 | % | 8.00 | % | |||||
Employer Group Waiver Plan (EGWP) trend rate | 8.00 | % | |||||||||
Weighted-average assumptions used to determine net periodic benefit cost: | |||||||||||
Discount rate | 4.60 | % | 3.70 | % | 4.40 | % | |||||
Health care cost trend rate - pre-65 | 7.50 | % | 8.00 | % | 8.00 | % | |||||
Health care cost trend rate - post-65 | 6.50 | % | 8.00 | % | 8.00 | % | |||||
Prescription drug cost increases | 7.00 | % | 8.00 | % | 8.00 | % |
56 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
Postretirement Benefits Other than Pensions | |||||||||||
2014 | 2013 | 2012 | |||||||||
Net periodic benefit cost: | |||||||||||
Service cost | $ | 2,434 | $ | 3,061 | $ | 2,943 | |||||
Interest cost | 12,782 | 12,183 | 13,520 | ||||||||
Amortization of actuarial losses | 3,934 | 1,715 | |||||||||
Amortization of prior service credit | (503 | ) | (328 | ) | (656 | ) | |||||
Net periodic benefit cost | 14,713 | 18,850 | 17,522 | ||||||||
Other changes in projected benefit obligation recognized in Cumulative other comprehensive loss (before taxes): | |||||||||||
Net actuarial loss (gain) | 27,757 | (50,593 | ) | 18,961 | |||||||
Prior service credit arising during the year | (19,043 | ) | (2,503 | ) | |||||||
Amortization of actuarial losses | (3,934 | ) | (1,715 | ) | |||||||
Amortization of prior service credit | 503 | 328 | 656 | ||||||||
Total recognized in Cumulative other comprehensive loss | 9,217 | (56,702 | ) | 17,902 | |||||||
Total recognized in net periodic benefit cost and Cumulative other comprehensive loss | $ | 23,930 | $ | (37,852 | ) | $ | 35,424 |
One-Percentage Point | |||||||
Increase | (Decrease) | ||||||
Effect on total of service and interest cost components | $ | 23 | $ | (66 | ) | ||
Effect on the postretirement benefit obligation | $ | 734 | $ | (1,697 | ) |
Retiree Health Care Benefits | Government Reimbursement | Expected Cash Payments - Net | |||||||||
2015 | $ | 19,563 | $ | (2,305 | ) | $ | 17,258 | ||||
2016 | 20,759 | (2,474 | ) | 18,285 | |||||||
2017 | 22,000 | (2,667 | ) | 19,333 | |||||||
2018 | 22,884 | (2,888 | ) | 19,996 | |||||||
2019 | 23,486 | (3,107 | ) | 20,379 | |||||||
2020 through 2024 | 115,694 | (16,779 | ) | 98,915 | |||||||
Total expected benefit cash payments | $ | 224,386 | $ | (30,220 | ) | $ | 194,166 |
57 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
Due Date | 2014 | 2013 | 2012 | ||||||||||
1.35% Senior Notes | 2017 | $ | 699,460 | $ | 699,277 | $ | 699,091 | ||||||
4.00% Senior Notes | 2042 | 298,595 | 298,545 | 298,493 | |||||||||
7.375% Debentures | 2027 | 119,369 | 119,366 | 129,060 | |||||||||
7.45% Debentures | 2097 | 3,500 | 3,500 | 3,500 | |||||||||
2.02% to 8.00% Promissory Notes | Through 2029 | 1,791 | 1,685 | 2,109 | |||||||||
3.125% Senior Notes | 2014 | 499,912 | |||||||||||
$ | 1,122,715 | $ | 1,122,373 | $ | 1,632,165 |
58 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
59 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
60 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
61 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
62 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
63 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
Common Shares in Treasury | Common Shares Outstanding | ||||
Balance at January 1, 2012 | 3,601,159 | 103,854,234 | |||
Shares tendered as payment for option rights exercised | 7,766 | (7,766 | ) | ||
Shares issued for exercise of option rights | 4,140,822 | ||||
Shares tendered in connection with grants of restricted stock | 143,979 | (143,979 | ) | ||
Net shares issued for grants of restricted stock | 26,756 | ||||
Treasury stock purchased | 4,600,000 | (4,600,000 | ) | ||
Balance at December 31, 2012 | 8,352,904 | 103,270,067 | |||
Shares tendered as payment for option rights exercised | 2,697 | (2,697 | ) | ||
Shares issued for exercise of option rights | 1,127,942 | ||||
Shares tendered in connection with grants of restricted stock | 116,897 | (116,897 | ) | ||
Net shares issued for grants of restricted stock | 150,965 | ||||
Treasury stock purchased | 4,300,000 | (4,300,000 | ) | ||
Balance at December 31, 2013 | 12,772,498 | 100,129,380 | |||
Shares tendered as payment for option rights exercised | 7,229 | (7,229 | ) | ||
Shares issued for exercise of option rights | 1,423,395 | ||||
Shares tendered in connection with grants of restricted stock | 108,352 | (108,352 | ) | ||
Net shares issued for grants of restricted stock | 191,979 | ||||
Treasury stock purchased | 6,925,000 | (6,925,000 | ) | ||
Balance at December 31, 2014 | 19,813,079 | 94,704,173 |
64 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
2014 | 2013 | 2012 | |||
Risk-free interest rate | 1.47% | 1.37% | .78% | ||
Expected life of option rights | 5.10 years | 5.10 years | 5.11 years | ||
Expected dividend yield of stock | 1.19% | 1.32% | 1.43% | ||
Expected volatility of stock | .223 | .281 | .274 |
65 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
2014 | 2013 | 2012 | ||||||||||||||||||||||||||||||
Optioned Shares | Weighted- Average Exercise Price Per Share | Aggregate Intrinsic Value | Optioned Shares | Weighted- Average Exercise Price Per Share | Aggregate Intrinsic Value | Optioned Shares | Weighted- Average Exercise Price Per Share | Aggregate Intrinsic Value | ||||||||||||||||||||||||
Outstanding beginning of year | 6,484,592 | $ | 96.25 | 6,748,126 | $ | 79.39 | 9,857,695 | $ | 60.31 | |||||||||||||||||||||||
Granted | 672,565 | 224.65 | 898,728 | 179.67 | 1,089,240 | 152.93 | ||||||||||||||||||||||||||
Exercised | (1,421,045 | ) | 70.71 | (1,127,942 | ) | 61.46 | (4,140,822 | ) | 53.40 | |||||||||||||||||||||||
Forfeited | (31,617 | ) | 158.92 | (33,278 | ) | 115.24 | (57,730 | ) | 78.01 | |||||||||||||||||||||||
Expired | (4,603 | ) | 86.66 | (1,042 | ) | 79.73 | (257 | ) | 72.65 | |||||||||||||||||||||||
Outstanding end of year | 5,699,892 | $ | 117.31 | $ | 830,647 | 6,484,592 | $ | 96.25 | $ | 563,554 | 6,748,126 | $ | 79.39 | $ | 494,699 | |||||||||||||||||
Exercisable at end of year | 4,095,246 | $ | 87.79 | $ | 717,691 | 4,424,674 | $ | 71.86 | $ | 492,689 | 4,245,891 | $ | 61.43 | $ | 386,484 |
2014 | 2013 | 2012 | |||||||||
Restricted stock granted | 201,412 | 172,406 | 301,856 | ||||||||
Weighted-average per share fair value of restricted stock granted during the year | $ | 191.60 | $ | 163.63 | $ | 99.47 |
66 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
2014 | 2013 | 2012 | ||||||
Outstanding at beginning of year | 749,382 | 919,748 | 1,304,891 | |||||
Granted | 201,412 | 172,406 | 301,856 | |||||
Vested | (294,438 | ) | (334,750 | ) | (412,859 | ) | ||
Forfeited | (1,080 | ) | (8,022 | ) | (274,140 | ) | ||
Outstanding at end of year | 655,276 | 749,382 | 919,748 |
2014 | 2013 | 2012 | |||||||||
Provisions for environmental matters - net | $ | 36,046 | $ | (2,751 | ) | $ | 6,736 | ||||
Loss on disposition of assets | 1,436 | 5,207 | 3,454 | ||||||||
Net expense (income) of exit or disposal activities | 63 | (4,942 | ) | ||||||||
Total | $ | 37,482 | $ | 2,519 | $ | 5,248 |
2014 | 2013 | 2012 | |||||||||
Dividend and royalty income | $ | (4,864 | ) | $ | (5,904 | ) | $ | (4,666 | ) | ||
Net expense from financing activities | 11,367 | 9,829 | 9,220 | ||||||||
Foreign currency transaction related losses (gains) | 3,603 | 7,669 | (3,071 | ) | |||||||
Other income | (37,524 | ) | (22,684 | ) | (21,074 | ) | |||||
Other expense | 12,018 | 12,026 | 9,651 | ||||||||
Total | $ | (15,400 | ) | $ | 936 | $ | (9,940 | ) |
67 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
2014 | 2013 | 2012 | |||||||||
Deferred tax assets: | |||||||||||
Exit costs, environ-mental and other similar items | $ | 56,441 | $ | 45,322 | $ | 45,403 | |||||
Deferred employee benefit items | 55,765 | 32,600 | 93,039 | ||||||||
Other items (each less than 5 percent of total assets) | 85,841 | 53,727 | 73,388 | ||||||||
Total deferred tax assets | $ | 198,047 | $ | 131,649 | $ | 211,830 | |||||
Deferred tax liabilities: | |||||||||||
Depreciation and amortization | $ | 227,765 | $ | 214,696 | $ | 202,891 |
2014 | 2013 | 2012 | |||||||||
Current: | |||||||||||
Federal | $ | 308,283 | $ | 229,997 | $ | 207,791 | |||||
Foreign | 53,045 | 42,543 | 51,264 | ||||||||
State and local | 50,049 | 33,082 | 27,642 | ||||||||
Total current | 411,377 | 305,622 | 286,697 | ||||||||
Deferred: | |||||||||||
Federal | (14,974 | ) | 30,384 | 8,692 | |||||||
Foreign | (7,361 | ) | (9,041 | ) | (16,964 | ) | |||||
State and local | 3,297 | 6,432 | (2,150 | ) | |||||||
Total deferred | (19,038 | ) | 27,775 | (10,422 | ) | ||||||
Total provisions for income taxes | $ | 392,339 | $ | 333,397 | $ | 276,275 |
2014 | 2013 | 2012 | |||||||||
Domestic | $ | 1,113,527 | $ | 969,790 | $ | 712,873 | |||||
Foreign | 144,698 | 116,168 | 194,436 | ||||||||
$ | 1,258,225 | $ | 1,085,958 | $ | 907,309 |
2014 | 2013 | 2012 | ||||||
Statutory federal income tax rate | 35.0 | % | 35.0 | % | 35.0 | % | ||
Effect of: | ||||||||
State and local income taxes | 2.8 | 2.4 | 1.8 | |||||
Investment vehicles | (2.5 | ) | (2.1 | ) | (2.1 | ) | ||
Domestic production activities | (2.5 | ) | (2.2 | ) | (1.9 | ) | ||
Other - net | (1.6 | ) | (2.4 | ) | (2.4 | ) | ||
Effective tax rate | 31.2 | % | 30.7 | % | 30.4 | % |
68 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
2014 | 2013 | 2012 | |||||||||
Balance at beginning of year | $ | 30,997 | $ | 28,119 | $ | 29,666 | |||||
Additions based on tax positions related to the current year | 3,370 | 3,480 | 3,760 | ||||||||
Additions for tax positions of prior years | 4,428 | 5,059 | 7,392 | ||||||||
Reductions for tax positions of prior years | (2,349 | ) | (3,378 | ) | (6,583 | ) | |||||
Settlements | (4,089 | ) | (103 | ) | (1,139 | ) | |||||
Lapses of Statutes of Limitations | (797 | ) | (2,180 | ) | (4,977 | ) | |||||
Balance at end of year | $ | 31,560 | $ | 30,997 | $ | 28,119 |
2014 | 2013 | 2012 | |||||||||
Basic | |||||||||||
Average common shares outstanding | 96,190,101 | 100,897,512 | 101,714,901 | ||||||||
Net income | $ | 865,887 | $ | 752,561 | $ | 631,034 | |||||
Less net income allocated to unvested restricted shares | (4,892 | ) | (4,596 | ) | (5,114 | ) | |||||
Net income allocated to common shares | $ | 860,995 | $ | 747,965 | $ | 625,920 | |||||
Net income per common share | $ | 8.95 | $ | 7.41 | $ | 6.15 | |||||
Diluted | |||||||||||
Average common shares outstanding | 96,190,101 | 100,897,512 | 101,714,901 | ||||||||
Stock options and other contingently issuable shares (a) | 1,885,334 | 2,151,359 | 2,215,528 | ||||||||
Average common shares outstanding assuming dilution | 98,075,435 | 103,048,871 | 103,930,429 | ||||||||
Net income | $ | 865,887 | $ | 752,561 | $ | 631,034 | |||||
Less net income allocated to unvested restricted shares assuming dilution | (4,804 | ) | (4,509 | ) | (5,008 | ) | |||||
Net income allocated to common shares assuming dilution | $ | 861,083 | $ | 748,052 | $ | 626,026 | |||||
Net income per common share | $ | 8.78 | $ | 7.26 | $ | 6.02 |
(a) | Stock options and other contingently issuable shares excludes 608,477, 842,354 and 1,047,734 shares at December 31, 2014, 2013 and 2012, respectively, due to their anti-dilutive effect. |
69 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
2014 | |||||||||||||||||||
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | Full Year | |||||||||||||||
Net sales | $ | 2,366,556 | $ | 3,042,995 | $ | 3,150,570 | $ | 2,569,412 | $ | 11,129,533 | |||||||||
Gross profit | 1,065,901 | 1,409,653 | 1,470,955 | 1,217,975 | 5,164,484 | ||||||||||||||
Net income | 115,457 | 291,447 | 326,240 | 132,743 | 865,887 | ||||||||||||||
Net income per common share - basic | 1.16 | 3.00 | 3.42 | 1.40 | 8.95 | ||||||||||||||
Net income per common share - diluted | 1.14 | 2.94 | 3.35 | 1.37 | 8.78 |
2013 | |||||||||||||||||||
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | Full Year | |||||||||||||||
Net sales | $ | 2,167,168 | $ | 2,713,889 | $ | 2,847,417 | $ | 2,457,058 | $ | 10,185,532 | |||||||||
Gross profit | 962,851 | 1,233,579 | 1,295,958 | 1,124,178 | 4,616,566 | ||||||||||||||
Net income | 116,185 | 257,287 | 262,966 | 116,123 | 752,561 | ||||||||||||||
Net income per common share - basic | 1.13 | 2.51 | 2.61 | 1.16 | 7.41 | ||||||||||||||
Net income per common share - diluted | 1.11 | 2.46 | 2.55 | 1.14 | 7.26 |
2015 | $ | 296,875 | |
2016 | 254,608 | ||
2017 | 204,898 | ||
2018 | 156,495 | ||
2019 | 113,968 | ||
Later years | 287,929 | ||
Total minimum lease payments | $ | 1,314,773 |
70 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
71 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
72 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
(thousands of dollars unless otherwise indicated) |
(millions of dollars) | 2014 | ||||||||||||||||||||||
Paint Stores Group | Consumer Group | Global Finishes Group | Latin America Coatings Group | Administrative | Consolidated Totals | ||||||||||||||||||
Net external sales | $ | 6,852 | $ | 1,421 | $ | 2,081 | $ | 771 | $ | 5 | $ | 11,130 | |||||||||||
Intersegment transfers | 2,745 | 8 | 40 | (2,793 | ) | ||||||||||||||||||
Total net sales and intersegment transfers | $ | 6,852 | $ | 4,166 | $ | 2,089 | $ | 811 | $ | (2,788 | ) | $ | 11,130 | ||||||||||
Segment profit | $ | 1,201 | $ | 253 | $ | 201 | $ | 40 | $ | 1,695 | |||||||||||||
Interest expense | $ | (64 | ) | (64 | ) | ||||||||||||||||||
Administrative expenses and other | (373 | ) | (373 | ) | |||||||||||||||||||
Income before income taxes | $ | 1,201 | $ | 253 | $ | 201 | $ | 40 | $ | (437 | ) | $ | 1,258 | ||||||||||
Reportable segment margins | 17.5 | % | 6.1 | % | 9.6 | % | 4.9 | % | |||||||||||||||
Identifiable assets | $ | 1,602 | $ | 1,883 | $ | 874 | $ | 427 | $ | 920 | $ | 5,706 | |||||||||||
Capital expenditures | 87 | 45 | 16 | 8 | 45 | 201 | |||||||||||||||||
Depreciation | 58 | 48 | 28 | 9 | 26 | 169 | |||||||||||||||||
2013 | |||||||||||||||||||||||
Paint Stores Group | Consumer Group | Global Finishes Group | Latin America Coatings Group | Administrative | Consolidated Totals | ||||||||||||||||||
Net external sales | $ | 6,002 | $ | 1,342 | $ | 2,005 | $ | 832 | $ | 5 | $ | 10,186 | |||||||||||
Intersegment transfers | 2,409 | 9 | 39 | (2,457 | ) | ||||||||||||||||||
Total net sales and intersegment transfers | $ | 6,002 | $ | 3,751 | $ | 2,014 | $ | 871 | $ | (2,452 | ) | $ | 10,186 | ||||||||||
Segment profit | $ | 991 | $ | 242 | $ | 170 | $ | 39 | $ | 1,442 | |||||||||||||
Interest expense | $ | (63 | ) | (63 | ) | ||||||||||||||||||
Administrative expenses and other | (293 | ) | (293 | ) | |||||||||||||||||||
Income before income taxes | $ | 991 | $ | 242 | $ | 170 | $ | 39 | $ | (356 | ) | $ | 1,086 | ||||||||||
Reportable segment margins | 16.5 | % | 6.5 | % | 8.4 | % | 4.5 | % | |||||||||||||||
Identifiable assets | $ | 1,668 | $ | 1,762 | $ | 964 | $ | 485 | $ | 1,504 | $ | 6,383 | |||||||||||
Capital expenditures | 73 | 40 | 15 | 7 | 32 | 167 | |||||||||||||||||
Depreciation | 55 | 45 | 29 | 10 | 20 | 159 | |||||||||||||||||
2012 | |||||||||||||||||||||||
Paint Stores Group | Consumer Group | Global Finishes Group | Latin America Coatings Group | Administrative | Consolidated Totals | ||||||||||||||||||
Net external sales | $ | 5,410 | $ | 1,322 | $ | 1,961 | $ | 836 | $ | 5 | $ | 9,534 | |||||||||||
Intersegment transfers | 2,320 | 7 | 47 | (2,374 | ) | ||||||||||||||||||
Total net sales and intersegment transfers | $ | 5,410 | $ | 3,642 | $ | 1,968 | $ | 883 | $ | (2,369 | ) | $ | 9,534 | ||||||||||
Segment profit | $ | 862 | $ | 217 | $ | 147 | $ | 81 | $ | 1,307 | |||||||||||||
Interest expense | $ | (43 | ) | (43 | ) | ||||||||||||||||||
Administrative expenses and other | (357 | ) | (1) | (357 | ) | ||||||||||||||||||
Income before income taxes | $ | 862 | $ | 217 | $ | 147 | $ | 81 | $ | (400 | ) | $ | 907 | ||||||||||
Reportable segment margins | 15.9 | % | 6.0 | % | 7.5 | % | 9.2 | % | |||||||||||||||
Identifiable assets | $ | 1,374 | $ | 1,701 | $ | 987 | $ | 485 | $ | 1,688 | $ | 6,235 | |||||||||||
Capital expenditures | 67 | 47 | 14 | 9 | 20 | 157 | |||||||||||||||||
Depreciation | 49 | 43 | 30 | 10 | 20 | 152 |
(1) | Includes $80 pre-tax charge related to DOL Settlement. See Note 9. |
73 |
74 |
Annual Meeting The annual meeting of shareholders will be held in the Landmark Conference Center, 927 Midland Building, 101 W. Prospect Avenue, Cleveland, Ohio on Wednesday, April 15, 2015 at 9:00 A.M., local time. Headquarters 101 W. Prospect Avenue Cleveland, Ohio 44115-1075 (216) 566-2000 www.sherwin.com Investor Relations Robert J. Wells Senior Vice President - Corporate Communications and Public Affairs The Sherwin-Williams Company 101 W. Prospect Avenue Cleveland, Ohio 44115-1075 | Independent Registered Public Accounting Firm Ernst & Young LLP Cleveland, Ohio Stock Trading Sherwin-Williams Common Stock— Symbol, SHW—is traded on the New York Stock Exchange. Dividend Reinvestment Program A dividend reinvestment program is available to shareholders of common stock. For information, contact Wells Fargo Shareowner Services. Form 10-K The Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission, is available without charge. To obtain a copy, contact Investor Relations. | Transfer Agent & Registrar Our transfer agent, Wells Fargo Shareowner Services, maintains the records for our registered shareholders and can help with a wide variety of shareholder related services, including the direct deposit of dividends and online access to your account. Contact: Wells Fargo Shareowner Services P.O. Box 64856 St. Paul, MN 55164-0856 www.shareowneronline.com 1-800-468-9716 Toll-free 651-450-4064 outside the United States 651-450-4144 TDD |
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
High | $ | 266.25 | $ | 195.32 | $ | 159.80 | $ | 90.42 | $ | 84.99 | |||||||||
Low | 174.29 | 153.94 | 90.21 | 69.47 | 57.86 | ||||||||||||||
Close December 31 | 263.04 | 183.50 | 153.82 | 89.27 | 83.75 | ||||||||||||||
Shareholders of record | 7,250 | 7,555 | 7,954 | 8,360 | 8,706 | ||||||||||||||
Shares traded (thousands) | 152,913 | 186,854 | 282,397 | 286,276 | 316,582 |
2014 | 2013 | |||||||||||||||||||||||||
Quarter | High | Low | Dividend | Quarter | High | Low | Dividend | |||||||||||||||||||
1st | $ | 208.63 | $ | 174.29 | $ | .550 | 1st | $ | 172.41 | $ | 153.94 | $ | .500 | |||||||||||||
2nd | 208.00 | 188.25 | .550 | 2nd | 194.56 | 162.22 | .500 | |||||||||||||||||||
3rd | 222.53 | 201.47 | .550 | 3rd | 190.68 | 163.63 | .500 | |||||||||||||||||||
4th | 266.25 | 202.01 | .550 | 4th | 195.32 | 170.63 | .500 |
75 |
Corporate Officers | Operating Management | |||
Christopher M. Connor, 58* | Joel Baxter, 54 | Dennis H. Karnstein, 48 | ||
Chairman and Chief Executive Officer | President & General Manager | President & General Manager | ||
Global Supply Chain Division | Product Finishes Division | |||
John G. Morikis, 51* | Consumer Group | Global Finishes Group | ||
President and Chief Operating Officer | ||||
Paul R. Clifford, 51 | Cheri M. Phyfer, 43 | |||
Sean P. Hennessy, 57* | President & General Manager | President & General Manager | ||
Senior Vice President - Finance and | Canada Division | Diversified Brands Division | ||
Chief Financial Officer | The Americas Group | Consumer Group | ||
Thomas E. Hopkins, 57* | Robert J. Davisson, 54* | Ronald B. Rossetto, 48 | ||
Senior Vice President - | President | President & General Manager | ||
Human Resources | The Americas Group | Protective & Marine Coatings Division | ||
Global Finishes Group | ||||
Catherine M. Kilbane, 51* | Brian L. Gallagher, 43 | |||
Senior Vice President, General | President & General Manager | David B. Sewell, 46* | ||
Counsel and Secretary | Eastern Division | President | ||
The Americas Group | Global Finishes Group | |||
Timothy A. Knight, 50 | ||||
Senior Vice President - | Pablo Garcia-Casas, 54 | Todd V. Wipf, 50 | ||
Administration | President & General Manager | President & General Manager | ||
Latin America Division | Southeastern Division | |||
Allen J. Mistysyn, 46* | The Americas Group | The Americas Group | ||
Senior Vice President - | ||||
Corporate Controller | Monty J. Griffin, 54 | |||
President & General Manager | ||||
Steven J. Oberfeld, 62* | South Western Division | |||
Senior Vice President - | The Americas Group | |||
Corporate Planning and Development | ||||
Thomas C. Hablitzel, 52 | ||||
Robert J. Wells, 57* | President & General Manager | |||
Senior Vice President - Corporate | Automotive Division | |||
Communications and Public Affairs | Global Finishes Group | |||
Jeffrey J. Miklich, 40 | Peter J. Ippolito, 50 | |||
Vice President and Treasurer | President & General Manager | |||
Mid Western Division | ||||
Jane M. Cronin, 47 | The Americas Group | |||
Vice President - Corporate Audit | ||||
and Loss Prevention | ||||
Michael T. Cummins, 56 | ||||
Vice President - Taxes and | ||||
Assistant Secretary | ||||
* Executive Officer as defined by the Securities Exchange Act of 1934 |
76 |
Subsidiary | State of |
Incorporation | |
Comex North America, Inc. | DE |
Contract Transportation Systems Co. | DE |
CTS National Corporation | DE |
Omega Specialty Products & Services LLC | OH |
Sherwin-Williams Realty Holdings, Inc. | IL |
SWIMC, Inc. | DE |
The Sherwin-Williams Acceptance Corporation | NV |
Subsidiary | Country of |
Incorporation | |
Compania Sherwin-Williams, S.A. de C.V. | Mexico |
Geocel Limited | UK |
Jiangsu Pulanna Coating Co., Ltd. | China |
Oy Sherwin-Williams Finland Ab | Finland |
Pinturas Condor S.A. | Ecuador |
Pinturas Industriales S.A. | Uruguay |
Productos Quimicos y Pinturas, S.A. de C.V. | Mexico |
Przedsiêbiorstwo Altax Sp. z o.o | Poland |
Quetzal Pinturas, S.A. de C.V. | Mexico |
Ronseal (Ireland) Limited | Ireland |
Sherwin-Williams Argentina I.y C.S.A. | Argentina |
Sherwin-Williams Aruba VBA | Aruba |
Sherwin-Williams (Australia) Pty. Ltd. | Australia |
Sherwin-Williams Automotive Mexico S. de R.L. de C.V. | Mexico |
Sherwin-Williams Balkan S.R.L. | Romania |
Sherwin-Williams Bel | Belarus |
Sherwin-Williams (Belize) Limited | Belize |
Sherwin-Williams Benelux NV | Belgium |
Sherwin-Williams Canada Inc. | Canada |
Sherwin-Williams (Caribbean) N.V. | Curacao |
Sherwin-Williams Cayman Islands Limited | Grand Cayman |
Sherwin-Williams Chile S.A. | Chile |
Sherwin-Williams Coatings India Private Limited | India |
Sherwin-Williams Coatings S.a r.l. | Luxembourg |
Sherwin Williams Colombia S.A.S. | Colombia |
Sherwin-Williams Czech Republic spol. s r.o | Czech Republic |
Sherwin-Williams Denmark A/S | Denmark |
Sherwin-Williams Deutschland GmbH | Germany |
Sherwin-Williams Diversified Brands Limited | UK |
Sherwin-Williams do Brasil Industria e Comercio Ltda. | Brazil |
Sherwin-Williams France Finishes SAS | France |
Sherwin-Williams HK Limited | Hong Kong |
Sherwin-Williams (Ireland) Limited | Ireland |
Sherwin-Williams Italy S.r.l. | Italy |
Sherwin-Williams Luxembourg Investment Management Company S.a r.l. | Luxembourg |
Sherwin-Williams (Malaysia) Sdn. Bhd. | Malaysia |
Sherwin-Williams Norway AS | Norway |
Sherwin-Williams Paints Limited Liability Company | Russia |
Sherwin-Williams Peru S.R.L. | Peru |
Sherwin-Williams Pinturas de Venezuela S.A. | Venezuela |
Sherwin-Williams Poland Sp. z o.o | Poland |
Sherwin-Williams Protective & Marine Coatings | UK |
Sherwin-Williams (S) Pte. Ltd. | Singapore |
Sherwin-Williams Services (Malaysia) Sdn. Bhd. | Malaysia |
Sherwin-Williams (Shanghai) Limited | China |
Sherwin-Williams Spain Coatings S.L. | Spain |
Sherwin-Williams Sweden AB | Sweden |
Sherwin-Williams (Thailand) Co., Ltd. | Thailand |
Sherwin-Williams UK Automotive Limited | UK |
Sherwin-Williams Uruguay S.A. | Uruguay |
Sherwin-Williams (Vietnam) Limited | Vietnam |
Sherwin-Williams (West Indies) Limited | Jamaica |
SWIPCO - Sherwin Williams do Brasil Propriedade Intelectual Ltda. | Brazil |
The Sherwin-Williams Company Resources Limited | Jamaica |
TOB Becker Acroma Ukraine | Ukraine |
UAB Sherwin-Williams Lietuva | Lithuania |
ZAO Sherwin-Williams | Russia |
Zhao Qing Sherwin Williams Coatings Co., Ltd. | China |
Registration Number | Description |
333-166365 | The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan (as Amended and Restated as of April 21, 2010) Form S-8 Registration Statement |
333-152443 | The Sherwin-Williams Company Employee Stock Purchase and Savings Plan Form S-8 Registration Statement |
333-133419 | The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan and The Sherwin-Williams Company 2006 Stock Plan for Nonemployee Directors Form S-8 Registration Statement |
333-129582 | The Sherwin-Williams Company 2005 Deferred Compensation Savings and Pension Equalization Plan, The Sherwin-Williams 2005 Key Management Deferred Compensation Plan and The Sherwin-Williams Company 2005 Director Deferred Fee Plan Form S-8 Registration Statement |
333-105211 | The Sherwin-Williams Company Employee Stock Purchase and Savings Plan Form S-8 Registration Statement |
333-101229 | The Sherwin-Williams Company 2003 Stock Plan Form S-8 Registration Statement |
333-66295 | The Sherwin-Williams Company Deferred Compensation Savings Plan, The Sherwin-Williams Company Key Management Deferred Compensation Plan and The Sherwin-Williams Company Director Deferred Fee Plan Form S-8 Registration Statement |
Signature | Title | |||
/s/ Christopher M. Connor | Chairman and Chief Executive Officer, Director (Principal Executive Officer) | |||
Christopher M. Connor | ||||
/s/ Sean P. Hennessy | Senior Vice President – Finance and Chief Financial Officer (Principal Financial Officer) | |||
Sean P. Hennessy | ||||
/s/ Allen J. Mistysyn | Senior Vice President – Corporate Controller (Principal Accounting Officer) | |||
Allen J. Mistysyn | ||||
/s/ Arthur F. Anton | Director | |||
Arthur F. Anton | ||||
/s/ David F. Hodnik | Director | |||
David F. Hodnik | ||||
/s/ Thomas G. Kadien | Director | |||
Thomas G. Kadien | ||||
/s/ Richard J. Kramer | Director | |||
Richard J. Kramer | ||||
/s/ Susan J. Kropf | Director | |||
Susan J. Kropf | ||||
/s/ Christine A. Poon | Director | |||
Christine A. Poon | ||||
/s/ Richard K. Smucker | Director | |||
Richard K. Smucker | ||||
/s/ John M. Stropki | Director | |||
John M. Stropki | ||||
/s/ Matthew Thornton III | Director | |||
Matthew Thornton III |
1. | I have reviewed this annual report on Form 10-K of The Sherwin-Williams Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | February 25, 2015 | /s/ Christopher M. Connor | ||
Christopher M. Connor Chairman and Chief Executive Officer |
1. | I have reviewed this annual report on Form 10-K of The Sherwin-Williams Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | February 25, 2015 | /s/ Sean P. Hennessy | ||
Sean P. Hennessy Senior Vice President – Finance and Chief Financial Officer |
Dated: | February 25, 2015 | /s/ Christopher M. Connor | ||
Christopher M. Connor Chairman and Chief Executive Officer |
Dated: | February 25, 2015 | /s/ Sean P. Hennessy | ||
Sean P. Hennessy Senior Vice President – Finance and Chief Financial Officer |
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