Reportable Segment Information

12 Months Ended

Dec. 31, 2023

Segment Reporting [Abstract]

REPORTABLE SEGMENT INFORMATION

REPORTABLE SEGMENT INFORMATION

The Company reports its segment information in the same way that management internally organizes its business for assessing performance and making decisions regarding the allocation of resources in accordance with the Segment Reporting Topic of the ASC. During 2023, the Company realigned its organizational structure to manage the Latin America architectural paint business within the Consumer Brands Group due to the Latin America architectural demand and service models shifting to align more closely with the Consumer Brands Group’s strategy. Previously, the Latin America architectural paint business was managed within The Americas Group. As a result of this change, The Americas Group was renamed the Paint Stores Group. All reported segment results have been adjusted retrospectively to reflect this change.

The Company has three reportable operating segments: Paint Stores Group, Consumer Brands Group and Performance Coatings Group (individually, a Reportable Segment and collectively, the Reportable Segments). Factors considered in determining the three Reportable Segments of the Company include the nature of business activities, the management structure directly accountable to the Company’s CODM for operating and administrative activities, availability of discrete financial information and information presented to the Board of Directors. The Company reports all other business activities and immaterial operating segments that are not reportable in the Administrative segment.

The Company’s CODM has been identified as the Chief Executive Officer because they have the final authority over performance assessment and resource allocation decisions. Because of the diverse operations of the Company, the CODM regularly receives discrete financial information about each Reportable Segment as well as a significant amount of additional financial information about certain divisions, business units or subsidiaries of the Company. The CODM uses all such financial information for performance assessments and resource allocation decisions. The CODM evaluates the performance of and allocates resources to the Reportable Segments based on segment profit or loss and cash generated from operations. The accounting policies of the Reportable Segments are the same as those described in Note 1.

The Paint Stores Group consisted of 4,694 company-operated specialty paint stores in the United States, Canada, and the Caribbean region at December 31, 2023. Each store in this segment is engaged in servicing the needs of architectural and industrial paint contractors and do-it-yourself homeowners. These stores market and sell Sherwin-Williams® and other controlled brand architectural paint and coatings, protective and marine products, OEM product finishes and related products. The majority of these products are produced by manufacturing facilities in the Consumer Brands Group. In addition, each store sells select purchased associated products. The loss of any single customer would not have a material adverse effect on the business of this segment. During 2023, this segment opened 70 net new stores, consisting of 76 new stores opened and 6 stores closed. In 2022 and 2021, this segment opened 75 and 73 net new stores, respectively. The CODM uses discrete financial information about the Paint Stores Group, supplemented with information by geographic region, product type and customer type, to assess the performance of and allocate resources to the Paint Stores Group as a whole. In accordance with ASC

280-10-50-9, the Paint Stores Group as a whole is considered the operating segment, and because it meets the criteria in ASC 280-10-50-10, it is also considered a Reportable Segment.

The Consumer Brands Group manufactures and supplies a broad portfolio of branded and private-label architectural paint, stains, varnishes, industrial products, wood finishes products, wood preservatives, applicators, corrosion inhibitors, aerosols, caulks and adhesives to retailers, including home centers and hardware stores, dedicated dealers and distributors throughout North America, Latin America and Europe. During 2023, the Company divested a non-core domestic aerosol business and the China architectural business, both part of the Consumer Brands Group (see Note 3). In 2022, the Consumer Brands Group had a $15.5 million pre-tax loss for trademark impairments related to the Restructuring Plan (see Note 7). Sales and marketing of certain controlled brand and private-label products is performed by a direct sales staff. The products distributed through third-party customers are intended for resale to the ultimate end-user of the product. The Consumer Brands Group also consisted of 318 company-operated specialty paint stores in Latin America at December 31, 2023. Each store in this segment is engaged in servicing the needs of home, commercial and industrial projects to contractors and do-it-yourself customers in Latin America. These stores market and sell Sherwin-Williams® and other controlled brand architectural paint and coatings, protective and marine products, OEM product finishes and related products which are branded for the Latin America market. In addition, each store sells select purchased associated products. The Consumer Brands Group had sales to certain customers that, individually, may be a significant portion of the sales and related profitability of the segment. During 2023, the segment opened 11 net new stores, consisting of 17 stores opened and 6 stores closed. In 2022 and 2021, this segment (closed) opened (3) and 12 net new stores, respectively.

The Consumer Brands Group also supports the Company’s other businesses around the world with new product research and development, manufacturing, distribution and logistics. Approximately 61% of the total sales of the Consumer Brands Group in 2023 were intersegment transfers of products primarily sold through the Paint Stores Group. This segment incurred most of the Company’s capital expenditures related to ongoing environmental compliance measures, manufacturing capacity expansion, operational efficiencies and maintenance projects at sites currently in operation. The CODM uses discrete financial information about the Consumer Brands Group, supplemented with information by geographic region, product type and customer type, to assess the performance of and allocate resources to the Consumer Brands Group as a whole. In accordance with ASC 280-10-50-9, the Consumer Brands Group as a whole is considered the operating segment, and because it meets the criteria in ASC 280-10-50-10, it is also considered a Reportable Segment.

The Performance Coatings Group develops and sells industrial coatings for wood finishing and general industrial (metal and plastic) applications, automotive refinish, protective and marine coatings, coil coatings, packaging coatings and performance-based resins and colorants worldwide. This segment licenses certain technology and trade names worldwide, including Sherwin-Williams® and other controlled brand products which are distributed through the Paint Stores Group, this segment’s 322 company-operated branches and by a direct sales staff and outside sales representatives to retailers, dealers, jobbers, licensees and other third-party distributors. The Performance Coatings Group had sales to certain customers that, individually, may be a significant portion of the sales of the segment. However, the loss of any single customer would not have a material adverse effect on the overall profitability of the segment. During 2023, the segment added 5 net new branches, consisting of 8 opened or acquired branches and 3 branches closed. The CODM uses discrete financial information about the Performance Coatings Group, supplemented with information about geographic divisions, business units and subsidiaries, to assess the performance of and allocate resources to the Performance Coatings Group as a whole. In accordance with ASC 280-10-50-9, the Performance Coatings Group as a whole is considered the operating segment, and because it meets the criteria in ASC 280-10-50-10, it is also considered a Reportable Segment.

The Administrative segment includes the administrative expenses of the Company’s corporate headquarters site and the operations of a real estate management unit that is responsible for the ownership, management and leasing of non-retail properties held primarily for use by the Company, including the Company’s current global headquarters, and disposal of idle facilities. Also included in the Administrative segment was interest expense, interest and investment income, certain expenses related to closed facilities and environmental-related matters, and other expenses that were not directly associated with the Reportable Segments. The Administrative segment included a $20.1 million pre-tax gain on the divestiture of a non-core domestic aerosol business and a $27.1 million pre-tax loss for the impairment of assets related to the divestiture of China architectural business in 2023 and a $111.9 million pre-tax loss on the Wattyl divestiture in 2021. See Notes 3, 4 and 20 for additional information. Sales of this segment represented external leasing revenue. The Administrative segment did not include any significant foreign operations. Gains and losses from the sale of property were not a significant operating factor in determining the performance of the Administrative segment.

Net external sales of all consolidated foreign subsidiaries were $4.428 billion, $4.294 billion and $4.223 billion for 2023, 2022 and 2021, respectively.

Long-lived assets consisted of Property, plant and equipment, net, Goodwill, Intangible assets, net, Operating lease right-of-use assets, deferred pension assets and Other assets. The aggregate total of long-lived assets for the Company was $17.441 billion, $16.686 billion and $15.613 billion at December 31, 2023, 2022 and 2021, respectively. Long-lived assets of consolidated foreign subsidiaries totaled $3.586 billion, $3.369 billion and $2.785 billion at December 31, 2023, 2022 and 2021, respectively.

Total Assets of the Company were $22.954 billion, $22.594 billion and $20.667 billion at December 31, 2023, 2022 and 2021, respectively. Total assets of consolidated foreign subsidiaries were $5.718 billion, $5.337 billion and $4.653 billion, which represented 24.9%, 23.6% and 22.5% of the Company’s total assets at December 31, 2023, 2022 and 2021, respectively.

No single geographic area outside the United States was significant relative to consolidated Net sales or consolidated long-lived assets. Export sales and sales to any individual customer were each less than 10 percent of consolidated sales to unaffiliated customers during all years presented.

In the reportable segment financial information that follows, Segment profit represents each segment’s Income before income taxes. Due to the nature of the Company’s integrated manufacturing operations and centralized administrative and information technology support, a substantial amount of allocations are made to determine segment financial information. Domestic intersegment transfers are primarily accounted for at the approximate fully absorbed manufactured cost, based on normal capacity volumes, plus customary distribution costs for paint products. Non-paint domestic and all international intersegment transfers are primarily accounted for at values comparable to normal unaffiliated customer sales. All intersegment transfers are eliminated within the Administrative segment. In 2023, the absorbed manufactured cost standards utilized for domestic intersegment transfers were established inclusive of forecasted cost reductions from planned initiatives. Deviations from the forecasted cost reductions were recognized within the Consumer Brands Group. Identifiable assets were those directly identified with each Reportable Segment. The Administrative segment assets consisted primarily of cash and cash equivalents, investments, deferred pension assets and property, plant and equipment related to the new global headquarters currently under construction. The segment results in the tables below reflect the segment change described above.

	2023
	Paint Stores Group			Consumer Brands Group			Performance Coatings Group			Administrative		Consolidated Totals
Net sales	$	12,839.5		$	3,365.6		$	6,843.1		$	3.7	$	23,051.9
Intersegment transfers				5,234.0			197.8			(5,431.8)		—
Total net sales and intersegment transfers	$	12,839.5		$	8,599.6		$	7,040.9		$	(5,428.1)	$	23,051.9
Segment profit	$	2,860.8		$	309.3		$	991.6				$	4,161.7
Interest expense										$	(417.5)	(417.5)
Administrative expenses and other										(634.3)		(634.3)
Income before income taxes	$	2,860.8		$	309.3		$	991.6		$	(1,051.8)	$	3,109.9
% to net sales	22.3		%	9.2		%	14.5		%			13.5		%
Identifiable assets	$	5,745.3		$	6,631.8		$	8,266.6		$	2,310.7	$	22,954.4
Capital expenditures	111.4			309.6			32.6			434.8		888.4
Depreciation	79.0			151.4			26.0			35.9		292.3
Amortization	3.3			72.4			253.0			1.5		330.2

	2022
	Paint Stores Group			Consumer Brands Group			Performance Coatings Group			Administrative		Consolidated Totals
Net sales	$	11,963.3		$	3,388.4		$	6,793.5		$	3.7	$	22,148.9
Intersegment transfers				5,214.8			203.7			(5,418.5)		—
Total net sales and intersegment transfers	$	11,963.3		$	8,603.2		$	6,997.2		$	(5,414.8)	$	22,148.9
Segment profit	$	2,348.1		$	314.2		$	734.9				$	3,397.2
Interest expense										$	(390.8)	(390.8)
Administrative expenses and other										(433.3)		(433.3)
Income before income taxes	$	2,348.1		$	314.2		$	734.9		$	(824.1)	$	2,573.1
% to net sales	19.6		%	9.3		%	10.8		%			11.6		%
Identifiable assets	$	5,873.6		$	6,749.6		$	8,296.8		$	1,674.0	$	22,594.0
Capital expenditures	87.3			295.0			38.7			223.5		644.5
Depreciation	73.9			126.2			29.1			34.8		264.0
Amortization	3.3			79.8			232.0			2.0		317.1

	2021
	Paint Stores Group			Consumer Brands Group			Performance Coatings Group			Administrative		Consolidated Totals
Net sales	$	10,616.2		$	3,322.4		$	6,003.8		$	2.2	$	19,944.6
Intersegment transfers				4,183.6			149.7			(4,333.3)		—
Total net sales and intersegment transfers	$	10,616.2		$	7,506.0		$	6,153.5		$	(4,331.1)	$	19,944.6
Segment profit	$	2,182.2		$	415.3		$	486.2				$	3,083.7
Interest expense										$	(334.7)	(334.7)
Administrative expenses and other										(500.4)		(500.4)
Income before income taxes	$	2,182.2		$	415.3		$	486.2		$	(835.1)	$	2,248.6
% to net sales	20.6		%	12.5		%	8.1		%			11.3		%
Identifiable assets	$	5,501.3		$	5,287.7		$	8,388.6		$	1,489.1	$	20,666.7
Capital expenditures	77.6			125.5			90.8			78.1		372.0
Depreciation	71.3			88.8			66.2			36.8		263.1
Amortization	3.5			83.9			218.9			3.2		309.5