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