2005 Annual Report - Investor Relations - Sherwin-Williams

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of dollars unless otherwise indicated)
NOTE 9 – CAPITAL STOCK
At December 31, 2005, there were 300,000,000
shares of common stock and 30,000,000 shares of
serial preferred stock authorized for issuance. Of the
authorized serial preferred stock, 3,000,000 shares are
designated as cumulative redeemable serial preferred
stock which may be issued pursuant to the Company’s
shareholders’ rights plan if the Company becomes the
target of coercive and unfair takeover tactics and
434,702 shares are designated as convertible participating
serial preferred stock (see Note 11). An aggregate of
16,241,480, 18,679,746 and 22,646,887 shares of
common stock at December 31, 2005, 2004 and 2003,
respectively, were reserved for future grants of restricted
stock and the exercise and future grants of stock options
(see Note 11). Common shares outstanding shown in
the following table included 475,628 shares of common
stock held in a revocable trust at December 31, 2005,
2004 and 2003, respectively. The revocable trust is used
to accumulate assets for the purpose of funding the
ultimate obligation of certain non-qualified benefit
plans. Transactions between the Company and the trust
are accounted for in accordance with Emerging Issues
Task Force (EITF) No. 97-14, “Accounting for Deferred
Compensation Arrangements Where Amounts Earned
Are Held in a Rabbi Trust and Invested,” which requires
the assets held by the trust be consolidated with the
Company’s accounts.
Common shares
in Treasury
Common shares
Outstanding
Balance at January 1, 2003................................................................ 60,925,312 148,910,487
Shares tendered as payment for options exercised ......................... 23,950 (23,950)
Shares issued for exercise of stock options .................................... 2,171,839
Shares tendered in connection with restricted stock grants ............ 75,669 (75,669)
Net shares issued under restricted stock grants.............................. 401,000
Treasury stock purchased .............................................................. 7,977,000 (7,977,000)
Balance at December 31, 2003 .......................................................... 69,001,931 143,406,707
Shares tendered as payment for options exercised ......................... 17,219 (17,219)
Shares issued for exercise of stock options .................................... 3,702,377
Net shares issued under restricted stock grants.............................. 285,250
Treasury stock purchased .............................................................. 6,600,000 (6,600,000)
Balance at December 31, 2004 .......................................................... 75,619,150 140,777,115
Shares tendered as payment for options exercised ......................... 28,817 (28,817)
Shares issued for exercise of stock options .................................... 2,344,543
Shares tendered in connection with restricted stock grants ............ 71,335 (71,335)
Net shares issued under restricted stock grants.............................. 193,875
Treasury stock purchased .............................................................. 8,076,000 (8,076,000)
Balance at December 31, 2005 .......................................................... 83,795,302 135,139,381
NOTE 10 – STOCK PURCHASE PLAN AND PREFERRED
STOCK
As of December 31, 2005, 20,287 employees contributed
to the Company’s ESOP, a voluntary defined contribution
plan available to all eligible salaried employees.
Participants are allowed to contribute, on a pretax basis
only, up to the lesser of 20 percent of their annual compensation
or the maximum dollar amount allowed under
the Internal Revenue Code. Such participant contributions
may be invested in a variety of mutual funds or a
Company common stock fund. Effective January 1, 2004,
the ESOP was amended to permit participants to diversify
100 percent of employee contributions previously allocated
to the Company common stock fund into a variety of
mutual funds. The Company matches current contributions
up to 6 percent of annual compensation. Company
matching contributions are required to be invested in the
Company common stock fund.
The Company made contributions to the ESOP on
behalf of participating employees, representing amounts
authorized by employees to be withheld from their earnings
on a pre-tax basis, of $58,579, $46,524 and
$40,662 in 2005, 2004 and 2003, respectively. The
Company’s matching contributions to the ESOP charged
to operations were $42,353, $35,573 and $31,331 for
2005, 2004 and 2003, respectively.
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