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Sean P. Hennessy Robert J. Wells - Investor Relations - Sherwin ...

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<strong>Sean</strong> P. <strong>Hennessy</strong> <strong>Robert</strong> J. <strong>Wells</strong><br />

Senior Vice President, Vice President,<br />

Finance & CFO Corporate Communications<br />

& Public Affairs


Forward-Looking Statements<br />

This presentation today will contain certain “forward-looking statements”, as defined<br />

under U.S. federal securities laws, with respect to sales, earnings and other matters.<br />

These forward-looking statements are based upon management’s current expectations,<br />

estimates, assumptions and beliefs concerning future events and conditions. Forwardlooking<br />

statements are necessarily subject to risks, uncertainties and other factors,<br />

many of which are outside the control of the Company, that could cause actual results<br />

to differ materially from such statements and from the Company’s historical results and<br />

experience. These risks, uncertainties and other factors include such things as:<br />

general business conditions, strengths of retail and manufacturing economies and the<br />

growth in the coatings industry; changes in the Company’s relationships with customers<br />

and suppliers; changes in raw material availability and pricing; unusual weather<br />

conditions; and other risks, uncertainties and other factors described from time to time<br />

in the Company’s reports filed with the Securities and Exchange Commission. Since it<br />

is not possible to predict or identify all of the risks, uncertainties and other factors that<br />

may affect future results, the above list should not be considered a complete list. Any<br />

forward-looking statement speaks only as of the date on which such statement is<br />

made, and the Company undertakes no obligation to update or revise any forwardlooking<br />

statement, whether as a result of new information, future events or otherwise.<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


Coatings Industry<br />

Global Demand<br />

Western<br />

Europe<br />

26%<br />

Africa/<br />

Mideast<br />

4%<br />

North America<br />

28%<br />

2006 Est.<br />

7.3 Billion Gallons<br />

88 Billion Dollars<br />

Eastern<br />

Europe<br />

7%<br />

China<br />

9%<br />

Japan<br />

8%<br />

Other Asia/<br />

Pacific<br />

15%<br />

Latin America<br />

4%<br />

Source: Euromonitor 2006<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


Top 10 Manufacturers<br />

By Rank, 2007 Est.<br />

Worldwide<br />

1 Akzo Nobel/ICI<br />

2 PPG/SigmaKalon<br />

3 <strong>Sherwin</strong>-Williams<br />

4 Dupont<br />

5 BASF<br />

6 Valspar<br />

7 RPM<br />

8 Nippon<br />

United States<br />

1 <strong>Sherwin</strong>-Williams<br />

2 PPG<br />

3 Valspar<br />

4 Masco<br />

5 ICI<br />

6 DuPont<br />

7 RPM<br />

8 Comex<br />

9 Akzo Nobel<br />

10 Benjamin Moore<br />

Source: Coatings World<br />

Source: Paint & Coatings Industry<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


U.S. Coatings Industry<br />

Sales Mix by Category<br />

2007<br />

1.28 Billion Gallons<br />

20.07 Billion Dollars<br />

Special<br />

Purpose<br />

29%<br />

Architectural<br />

48%<br />

Product<br />

Finishes<br />

23%<br />

Source: U.S. Department of Commerce; Segment Percents Based on Dollars<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


U.S. Coatings Industry<br />

Architectural Coatings - 2007<br />

2007 = $9.6 Billion<br />

New Construction<br />

- Residential<br />

- Commercial/<br />

Institutional<br />

80%<br />

20%<br />

Maintenance/Repaint<br />

- Residential<br />

- Commercial/<br />

Institutional<br />

Source: Proprietary Paint Industry Data, S-W Marketing<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


U.S. New Construction<br />

Mix of Construction Put In Place – 2007<br />

Residential<br />

46%<br />

Commercial &<br />

Institutional<br />

54%<br />

Total Value of Construction: $1,161.3 Billion<br />

Source: U.S. Census Bureau - February, 2008<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


New Construction<br />

<strong>Sherwin</strong>-Williams Sales vs Housing Starts<br />

% Increase/Decrease<br />

40%<br />

30%<br />

20%<br />

10%<br />

0%<br />

-10%<br />

-20%<br />

-30%<br />

-40%<br />

1Q-05 2Q-05 3Q-05 4Q-05 1Q-06 2Q-06 3Q-06 4Q-06 1Q-07 2Q-07 3Q-07 4Q-07p<br />

S-W Revenues<br />

Residential Starts<br />

Source: U.S. Census Bureau - April, 2006<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


Architectural Coatings<br />

Gallons in Millions<br />

PC<br />

49%<br />

DIY<br />

51%<br />

PC<br />

58%<br />

DIY<br />

42%<br />

PC<br />

61%<br />

DIY<br />

39%<br />

1987<br />

527 Million Gallons<br />

1997<br />

647 Million Gallons<br />

2007<br />

696 Million Gallons<br />

Source: U.S. Dept of Commerce MA28F Report/Internal Estimates<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


DIY Channel Share, U.S.<br />

Most Recent Purchase by Store Type<br />

2007<br />

Home Center /<br />

Lumber /<br />

Building<br />

Materials<br />

60%<br />

Mass<br />

Merchants<br />

16%<br />

Hardware Stores<br />

5%<br />

Paint<br />

Stores<br />

19%<br />

Source: Proprietary Paint Industry Data, S-W Marketing<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


Contractor Channel Share, U.S.<br />

Primary Outlet by Store Type<br />

2007<br />

Paint<br />

Stores<br />

92.3%<br />

Hardware<br />

Stores<br />

0.6%<br />

Home<br />

Centers<br />

2.4%<br />

Discount /<br />

Other<br />

4.7%<br />

Source: National Marketing Measures: 2007<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


Financial Highlights<br />

The <strong>Sherwin</strong>-Williams Company<br />

2007 2006<br />

Net Sales<br />

$8.01M $7,810M<br />

EBITDA<br />

$1,148M $1,050M<br />

Income $616M $576M<br />

% Sales 7.7% 7.4%<br />

Earnings Per Share $4.70 $4.19<br />

Return on Assets 12.7% 11.5%<br />

Return on Beginning Equity 30.9% 33.3%<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


Revenue by Segment<br />

The <strong>Sherwin</strong>-Williams Company - 2007<br />

Paint Stores<br />

62%<br />

$1.31 Billion<br />

Consumer<br />

16%<br />

$4.96 Billion $1.73 Billion<br />

Global<br />

22%<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


Distribution Mix<br />

The <strong>Sherwin</strong>-Williams Company - 2007<br />

Sales Through<br />

Controlled<br />

Distribution<br />

75%<br />

Sales<br />

Through<br />

External<br />

Channels<br />

25%<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


Operating Segment Profit<br />

Dollars & Percent of Sales - 2007<br />

Consumer<br />

17.1%<br />

Paint Stores<br />

15.5%<br />

$766.5 Million<br />

$224.2 Million<br />

$160.7 Million<br />

Global<br />

9.3%<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


Paint Stores Group<br />

2007 Sales $4.96 Billion<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


Paint Stores<br />

Company Operated Distribution<br />

North America 2007 Est. 2002 Est.<br />

<strong>Sherwin</strong>-Williams 3,325 2,643<br />

ICI/Glidden 662 718<br />

PPG 450 250<br />

Pro Paint, Inc. 372 308<br />

Benjamin Moore* 154 68<br />

Kelly-Moore 164 160<br />

Cloverdale/Rodda 109 101<br />

Dunn Edwards 83 71<br />

Diamond Vogel 77 85<br />

Vista 46 46<br />

* “Majority Owned”<br />

Source: Company Websites, Rauch Guide & Chain Store Guide<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


Diversified Customer Base<br />

DIY<br />

Residential<br />

Repaint<br />

New<br />

Residential<br />

Commercial<br />

Property<br />

Management<br />

Industrial &<br />

Marine<br />

OEM<br />

Finishes<br />

Architects &<br />

Designers<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


Consumer<br />

2007 Sales $1.31 Billion<br />

• Manufacturing & Distribution Arm<br />

of Company<br />

• Centralized Research & Development<br />

• Focus on Productivity<br />

• Operational Excellence – Six Sigma<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


Distribution<br />

Total Coatings Outlets, U.S.<br />

56,000<br />

Total U.S. Paint &<br />

Coatings Outlets<br />

38,000<br />

Consumer Segment<br />

Customers<br />

3,200<br />

<strong>Sherwin</strong>-Williams Stores<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


Consumer<br />

Leading Brands for Each Category<br />

Paint<br />

Aerosols<br />

Wood Care<br />

Applicators<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


Global<br />

2007 Sales $1.73 Billion<br />

OEM Product Finishes<br />

International Coatings<br />

Automotive Finishes<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


Consolidated Gross Profit<br />

2007 Year-End Results<br />

$ Millions<br />

3,700<br />

3,200<br />

2,700<br />

2,200<br />

1,700<br />

1,200<br />

700<br />

200<br />

-300<br />

$ Gross Profit<br />

3413 3,598<br />

% to Sales<br />

3,080<br />

2,097 2,130 2,249 2,308 2,220 2,339 2,455 2,701<br />

1,728<br />

44.9<br />

45.1 45.4<br />

44.3<br />

44.2<br />

44.9<br />

43.8<br />

43.0<br />

43.7<br />

43.2<br />

42.8<br />

41.8<br />

1996<br />

1997<br />

1998<br />

1999<br />

2000<br />

2001<br />

2002<br />

2003<br />

2004<br />

2005<br />

2006<br />

2007<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


Selling, General & Admin Expense<br />

2007 Year-End Results<br />

$ Millions<br />

3,000<br />

2,500<br />

2,000<br />

1,500<br />

1,000<br />

$ SG&A<br />

% to Sales<br />

1,730 1,785<br />

34.1 34.4<br />

1,882<br />

34.8<br />

2,069<br />

33.8<br />

2,326<br />

32.4<br />

2,513<br />

32.2<br />

2,597<br />

32.4<br />

500<br />

0<br />

2001 2002 2003 2004 2005 2006 2007<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


Working Capital Ratio<br />

(Accounts Receivable + Inventory – Payables)/Sales<br />

18%<br />

16.3%<br />

16%<br />

14%<br />

12%<br />

13.8%<br />

11.5% 11.0%<br />

13.8%<br />

12.5% 11.7%<br />

12.7%<br />

10%<br />

8%<br />

6%<br />

4%<br />

2%<br />

0%<br />

2000 2001 2002 2003 2004 2005 2006 2007<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


Net Operating Cash<br />

($ in Millions)<br />

900<br />

800<br />

700<br />

600<br />

500<br />

400<br />

300<br />

200<br />

100<br />

0<br />

874.8<br />

815.8<br />

716.7<br />

558.9 544.7<br />

546.6<br />

460.0 460.0<br />

351.7 340.9<br />

2003 2004 2005 2006 2007<br />

Uses of Cash<br />

• Acquisitions<br />

• Capital Expenditures<br />

• Buy Back Stock<br />

• Pay Dividends<br />

Net Operating Cash less Cap.Ex. & Dividends<br />

Net Operating Cash<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


Stock Repurchase<br />

14.00<br />

13.2<br />

12.00<br />

Millions of Shares<br />

10.00<br />

8.00<br />

6.00<br />

4.00<br />

6.70 6.70<br />

7.98<br />

6.60<br />

8.10<br />

5.60<br />

2.00<br />

0.00<br />

2001 2002 2003 2004 2005 2006 2007<br />

Avg. Common<br />

Shares Outstanding 156.9 152.4 147.0 144.7 141.1 137.3 130.9<br />

(fully diluted / in millions)<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


Debt : EBITDA Ratio<br />

($ in Millions)<br />

1500<br />

1000<br />

500<br />

76%<br />

99%<br />

678<br />

738<br />

745<br />

514<br />

621<br />

848<br />

73%<br />

1047<br />

875<br />

83%<br />

965<br />

84%<br />

1148<br />

0<br />

2003 2004 2005 2006 2007<br />

Debt<br />

EBITDA<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


Dividends Per Share<br />

1979 – 2008E<br />

$1.50<br />

$1.40<br />

$1.30<br />

$1.20<br />

$1.10<br />

$1.00<br />

$0.90<br />

$0.80<br />

$0.70<br />

$0.60<br />

$0.50<br />

$0.40<br />

$0.30<br />

$0.20<br />

$0.10<br />

$0.00<br />

.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<br />

1979<br />

1980<br />

1981<br />

1982<br />

1983<br />

1984<br />

1985<br />

1986<br />

1987<br />

1988<br />

1989<br />

1990<br />

* After adjustment for all common stock splits<br />

1991<br />

1992<br />

1993<br />

1994<br />

1995<br />

1996<br />

1997<br />

1998<br />

1999<br />

2000<br />

2001<br />

2002<br />

2003<br />

2004<br />

2005<br />

1.00<br />

2006<br />

1.26<br />

2007<br />

1.40<br />

2008E<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


Summary<br />

• Positioned for Growth<br />

– Controlled Distribution<br />

– Technological & Marketing Innovation<br />

– Strong Brands<br />

– Sales & Marketing Organization<br />

– Balance Sheet Liquidity<br />

– Strong Cash Flow<br />

– Growth Initiatives<br />

• Improved Earnings<br />

• Consistent Dividend Increases<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007


Questions & Answers<br />

Save the Date: 6.24.08<br />

Financial Community Presentation<br />

Cleveland<br />

<strong>Robert</strong> <strong>Wells</strong><br />

Vice President Corporate Communications and Public Affairs<br />

Direct: 216.566.2244<br />

rjwells@sherwin.com<br />

Mike Conway<br />

Director Corporate Communications and <strong>Investor</strong> <strong>Relations</strong><br />

Direct: 216.515.4393<br />

Pager: 216.422.3751<br />

mike.conway@sherwin.com<br />

The <strong>Sherwin</strong>-Williams Company – Full Year 2007

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