2005 Annual Report - Investor Relations - Sherwin-Williams

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of dollars unless otherwise indicated)
NOTE 12 – OTHER EXPENSE - NET
Included in the Other expense - net caption of the
Statements of Consolidated Income were the following:
2005 2004 2003
Dividend and royalty
income.............................. $(3,329) $(2,498) $(2,877)
Net expense of financing
and investing activities...... 5,762 6,614 10,383
(Gain) loss on disposition
of assets............................ (3,621) 526 (1,312)
Loss on disposition of joint
venture investment............ 7,858
Foreign currency related
losses .............................. 1,354 1,699 1,460
Provisions for environmental
matters - net .................... 24,920 13,953 10,237
Other income ...................... (4,794) (4,458) (1,429)
Other expense ...................... 2,789 2,029 2,169
$30,939 $17,865 $18,631
The net expense from financing and investing activities
includes the net gain or loss relating to the change
in the Company’s investment in certain long-term asset
funds and financing fees and in 2003, the net pretax
expense associated with the Company’s investment in
broad-based corporate owned life insurance.
The (gain) loss on disposition of assets represents
realized gains or losses associated with the disposal of
fixed assets.
The loss on disposition of joint venture investment
represents a realized loss resulting from the sale at less
than carrying value of the Company’s majority ownership
of Kinlita, a joint venture in China included in the
Automotive Finishes Segment.
Foreign currency related losses included foreign
currency transaction gains and losses and realized and
unrealized gains and losses from foreign currency option
and forward contracts. The Company had no foreign
currency option or forward contracts outstanding at
December 31, 2005 and 2004. All foreign currency
option and forward contracts outstanding at December
31, 2003 had maturity dates of less than twelve months
and were undesignated hedges with changes in fair value
being recognized in earnings in accordance with FAS No.
133. These derivative instrument values were included in
either Other current assets or Other accruals and were
immaterial at December 31, 2003.
Provisions for environmental matters represent
adjustments to environmental-related accruals as information
becomes available upon which more accurate
costs can be reasonably estimated and as additional
accounting guidelines are issued. See Note 8.
Other income and Other expense included items of
revenue, gains, expenses and losses that were unrelated
to the primary business purpose of the Company. Each
individual item within the other income or other
expense caption was immaterial; no single category
of items exceeded $1,000.
NOTE 13 – INCOME TAXES
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes using the
enacted tax rates and laws that are currently in effect.
Significant components of the Company’s deferred tax
assets and liabilities as of December 31, 2005, 2004
and 2003 were as follows:
2005 2004 2003
Deferred tax assets:
Dispositions,
environmental
and other
similar items.......... $ 54,683 $ 51,859 $ 47,941
Other items (each
less than 5 percent
of total assets) ...... 135,952 110,955 105,660
Total deferred
tax assets .......... $ 190,635 $ 162,814 $ 153,601
Deferred tax liabilities:
Depreciation and
amortization.......... $ 82,931 $ 75,573 $ 49,634
Deferred employee
benefit items .......... 46,723 59,892 61,981
Total deferred
tax liabilities ...... $ 129,654 $ 135,465 $ 111,615
Netted against the Company’s other deferred tax
assets were valuation reserves of $5,658, $14,930
and $17,643 at December 31, 2005, 2004 and 2003,
respectively, resulting from the uncertainty as to the
realization of the tax benefits from certain foreign net
operating losses and certain other foreign assets.
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