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Transcript of SHW_JPMorgan_060408
Christopher M. ConnorChairman & CEO
The Sherwin-Williams Company – 1st Quarter 2008
Forward-Looking Statements
This presentation today will contain certain “forward-looking statements”, as defined under U.S. federal securities laws, with respect to sales, earnings and other matters. These forward-looking statements are based upon management’s current expectations, estimates, assumptions and beliefs concerning future events and conditions. Forward-looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of the Company, that could cause actual results to differ materially from such statements and from the Company’s historical results and experience. These risks, uncertainties and other factors include such things as: general business conditions, strengths of retail and manufacturing economies and the growth in the coatings industry; changes in the Company’s relationships with customers and suppliers; changes in raw material availability and pricing; unusual weather conditions; and other risks, uncertainties and other factors described from time to time in the Company’s reports filed with the Securities and Exchange Commission. Since it is not possible to predict or identify all of the risks, uncertainties and other factors that may affect future results, the above list should not be considered a complete list. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
The Sherwin-Williams Company – 1st Quarter 2008
Coatings IndustryGlobal Demand
7.3 Billion Gallons81 Billion Dollars
United States26%
Latin America
11%
Europe32%
Asia Pacific23%
Canada4%
Other4%
Source: U.S. Census Bureau, July 2007/CHEMARK
The Sherwin-Williams Company – 1st Quarter 2008
Coatings IndustryTop Manufacturers
Source: Coatings World
1 Sherwin-Williams2 PPG3 Valspar4 Masco 5 ICI6 DuPont 7 RPM8 Comex 9 Akzo Nobel
10 Benjamin Moore
1 Akzo Nobel/ICI2 PPG/SigmaKalon3 Sherwin-Williams4 Dupont5 Valspar 6 RPM 7 BASF8 Kansai9 Nippon
10 Sika
Worldwide United States
Source: Paint & Coatings Industry
The Sherwin-Williams Company – 1st Quarter 2008
U.S. Coatings IndustrySales ($) Mix by Category
Source: U.S. Department of Commerce; Segment Percents Based on Dollars
ArchitecturalCoatings
48%
Special Purpose
29%
OEM Finishes
23%
20071.28 Billion Gallons
20.07 Billion Dollars
The Sherwin-Williams Company – 1st Quarter 2008
U.S. Architectural CoatingsGallons in Millions
2007 696 Million Gallons
DIY39%PC
61%
1987527 Million Gallons
DIY51%PC
49%
1997647 Million Gallons
DIY42%PC
58%
Source: U.S. Dept of Commerce MA28F Report/Internal Estimates
The Sherwin-Williams Company – 1st Quarter 2008
DIY Channel Share, U.S.Most Recent Purchase by Store Type
Mass Merchants
16%
Paint Stores
19%Hardware Stores
5%
Home Center / Lumber / Building Materials
60%
Source: Proprietary Paint Industry Data, S-W Marketing
2007
The Sherwin-Williams Company – 1st Quarter 2008
Contractor Channel Share, U.S.Primary Outlet by Store Type
Source: National Marketing Measures: 2007
Paint Stores92.3%
HomeCenters
2.4%
Discount / Other4.7%
Hardware Stores
0.6%
2007
The Sherwin-Williams Company – 1st Quarter 2008
Company OverviewFinancial Highlights
Net Sales $8.01M $7,810MEBITDA $1,148M $1,050MIncome $616M $576M
% Sales 7.7% 7.4% Earnings Per Share $4.70 $4.19 Net Operating Cash $875M $816MDividend Per Share $1.26 $1.00Return on Assets 12.7% 11.5%
2007 2006
The Sherwin-Williams Company – 1st Quarter 2008
Company OverviewRevenue & Profit by Segment - 2007
Sales: $4.96 BillionProfit: $767 MillionProfit %: 15.5%
Sales: $1.31 BillionProfit: $224.2 MillionProfit %: 17.1%
Sales: $1.73 BillionProfit: $160.7 MillionProfit %: 9.3%
Paint StoresGlobal
Consumer
Controlled Distribution Accounts for 75% of Sales
The Sherwin-Williams Company – 1st Quarter 2008
Competitive Strengths
• Diversified Customer Base• Controlled Distribution• Channel/Brand Strategy• Leading Technology• People Development & Retention• Growth from Acquisitions• Financial Strength
The Sherwin-Williams Company – 1st Quarter 2008
Architectural Coatings
• Residential DIY• Residential Repaint (Pro)• New Residential• New Commercial &
Institutional• Property Maintenance• Architects & Designers
Diversified Customer BaseResidential-Commercial-Industrial
Special Purpose Coatings
• Industrial Maintenance • Traffic Marking• Automotive Refinish• Marine• Aerosol Paints• Miscellaneous Special Purpose
OEM Finishes
• Kitchen Cabinets• Residential Furniture• Office Furniture• Wood Building Products• Metal Building Products• Heavy Equipment• Electronics• Military
The Sherwin-Williams Company – 1st Quarter 2008
3,325 2,643
ICI/Glidden 662 718PPG 450 250Comex/Pro Paint, Inc. 372 308Kelly-Moore 164 160Benjamin Moore 154 68 Cloverdale/Rodda 109 101Dunn Edwards 83 71Diamond Vogel 77 85Vista 46 46
Gap: +1,208 +836
Source: Company Websites, Rauch Guide & Chain Store Guide
Controlled DistributionTop 10 Paint Store Chains – North America
2007 Est. 2002 Est.
2,117 1,807
The Sherwin-Williams Company – 1st Quarter 2008
Paint
Aerosols
Wood Care
Applicators
Channel-Brand Strategy Leading Brands by Category and Channel
Sherwin-Williams Paint Store
Paint Dealer/Hardware
Mass Merchant/Department Specialty
PAINT STORES GROUP CONSUMER GROUP
The Sherwin-Williams Company – 1st Quarter 2008
53.462.6
73.4 78.283.6 86.2 88.7 88.3 91.3 95.4 101.0 102.0
0102030405060708090
100110
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Leading TechnologyTotal Technical Expenditures$
Mill
ions
% of Sales 1.3 1.3 1.5 1.6 1.6 1.7 1.7 1.6 1.5 1.3 1.3 1.3
The Sherwin-Williams Company – 1st Quarter 2008
Leading TechnologyNew Product Development
• Productivity Enhancing
• Sustainability
• Color Technology
• Safety and Security
The Sherwin-Williams Company – 1st Quarter 2008
People Development & RetentionRecognized Employer of Choice
FORTUNE FORTUNE ““100 Best Companies 100 Best Companies
to Work Forto Work For””2005, 2006 & 20082005, 2006 & 2008
The PrincetonThe PrincetonReviewReview
““Best Entry LevelBest Entry LevelJobsJobs””
2005, 2006, 20072005, 2006, 2007& 2008& 2008
BusinessWeekBusinessWeek““100 Best Places to 100 Best Places to Launch A CareerLaunch A Career””
2007 & 20082007 & 2008
The Sherwin-Williams Company – 1st Quarter 2008
Growth by Acquisition
• Completed 7 Transactions in 2007 for a Total Investment of $282 Million Generating Over $258 Million in Sales
• Completed 13 Transactions Over Last Five Years for a Total Investment of $940 Million Generating Over $870 Million in Sales
The Sherwin-Williams Company – 1st Quarter 2008
Profit Before & After Tax
PBT % to Sales 9.7 9.5 9.1 10.7 11.4 PAT % to Sales 6.1 6.4 6.4 7.4 7.7
-5050
150250350450550650750850950
1050
$ M
illio
ns
2003 2004 2005 2006 2007
Profit Before TaxProfit After Tax
580.2
393.3
522.9
332.1
656.2
463.3
834.3
576.1
913.0
616.0
The Sherwin-Williams Company – 1st Quarter 2008
Net Operating Cash
Uses of Cash
• Acquisitions
• Capital Expenditures
• Buy Back Stock
• Manage Debt
• Pay Dividends
0100200300400500600700800900
2003 2004 2005 2006 2007
Net Operating Cash less Cap. Ex. & DividendsNet Operating Cash
( $ i n
Mil li
ons)
558.9 544.7
716.7
351.7 340.9460.0 460.0
815.8874.8
546.6
The Sherwin-Williams Company – 1st Quarter 2008
Stock Repurchase
6.70 6.707.98
6.608.10
5.60
13.2
4.1
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00M
illio
ns o
f Sha
res
2001 2002 2003 2004 2005 2006 2007 2008Avg. Common Shares Outstanding 156.9 152.4 147.0 144.7 141.1 137.3 130.9 122.1(fully diluted / in millions)
(1Q)
The Sherwin-Williams Company – 1st Quarter 2008
Debt : EBITDA Ratio
678 745848
10471148
514738
621
875965
0
500
1000
1500
2003 2004 2005 2006 2007
Debt EBITDA
($ in
Milli
ons) 76% 99% 73%
83%84%
The Sherwin-Williams Company – 1st Quarter 2008
Dividends Per Share1979 – 2008E
.01 .04 .05 .06 .08 .10 .12.13 .14 .16 .18 .19 .21 .22 .25 .28 .32.35.40.45 .48 .54 .58 .60 .62 .68
.82
1.00
1.261.40
$0.00$0.10$0.20$0.30$0.40$0.50$0.60$0.70$0.80$0.90$1.00$1.10$1.20$1.30$1.40$1.50
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
E
Questions & Answers
Save the Date:Financial Community PresentationCleveland, OhioJune 24, 2008