2005 Annual Report - Investor Relations - Sherwin-Williams

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(thousands of dollars unless otherwise indicated)
foreign countries. A map on page 16 of this report
shows the number of automotive branches and their
geographical location.
The International Coatings Segment develops,
licenses, manufactures and distributes a variety of paint,
coatings and related products worldwide. The majority
of the sales from licensees and subsidiaries occurred in
South America, the Segment’s most important international
market. This Segment sold its products through
30 company-operated specialty paint stores in Chile,
36 in Brazil, 6 in Uruguay and 1 in Argentina and by
outside selling functions to dealers and other distributors.
At December 31, 2005, this Segment included
consolidated operations in 7 foreign countries, 4 foreign
joint ventures and income from licensing agreements in
12 foreign countries.
The Administrative Segment included the administrative
expenses of the Company’s corporate headquarters
site. This Segment also included interest expense which
was unrelated to retail real estate leasing activities,
investment income, certain foreign currency transaction
losses related to dollar-denominated debt and foreign
currency option and forward contracts, certain expenses
related to closed facilities and environmental-related
matters, and other expenses which were not directly
associated with any Operating Segment. Administrative
expenses did not include any significant foreign operations.
Also included in the Administrative Segment was
a real estate management unit that is responsible for the
ownership, management, leasing of non-retail properties
held primarily for use by the Company, including the
Company’s headquarters site, and disposal of idle facilities.
Sales of the Administrative Segment represented
external leasing revenue of excess headquarters space or
leasing of facilities no longer used by the Company in its
operations. Gains and losses from the sale of property
were not a significant operating factor in determining
the performance of this Segment.
Net external sales of all consolidated foreign subsidiaries
were $746,789, $637,137 and $546,472 for
2005, 2004 and 2003, respectively. Operating profits
of all consolidated foreign subsidiaries were $44,886,
$46,516 and $14,340 for 2005, 2004 and 2003, respectively.
Domestic operations account for the remaining
net sales and operating profits. Long-lived assets consist
of net property, plant and equipment, goodwill, intangibles,
deferred pension assets and other long-term assets.
Long-lived assets of consolidated foreign subsidiaries
totaled $145,689, $149,037 and $130,188 at December
31, 2005, 2004 and 2003, respectively. The consolidated
total of long-lived assets for the Company was
$2,474,810, $2,492,223 and $1,967,464 at December
31, 2005, 2004 and 2003, respectively. Total assets of
consolidated foreign subsidiaries at December 31, 2005
were $440,570, which represented 10.1 percent of the
Company’s total assets. No single geographic area outside
the United States was significant relative to consolidated
net sales or operating profits. 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, operating profit was total revenue, including
inter-segment transfers, less operating costs and
expenses. Identifiable assets were those directly identified
with each reportable segment. Administrative Segment
assets consisted primarily of cash and cash
equivalents, investments, deferred pension assets, and
headquarters property, plant and equipment. The operating
margin for each Operating Segment was based
upon total net sales and inter-segment transfers. Domestic
inter-segment transfers were accounted for at the
approximate fully absorbed manufactured cost plus
distribution costs. International inter-segment transfers
were accounted for at values comparable to normal
unaffiliated customer sales.
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