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What changed in Sherwin-Williams's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Sherwin-Williams's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+386 added−350 removedSource: 10-K (2024-02-20) vs 10-K (2023-02-22)

Top changes in Sherwin-Williams's 2023 10-K

386 paragraphs added · 350 removed · 293 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

46 edited+7 added−6 removed14 unchanged
Biggest changeThese risks, uncertainties and other factors include such things as: • general business conditions, strengths of retail and manufacturing economies and growth in the coatings industry; • changes in general domestic and international economic conditions, including due to higher inflation rates, interest rates, tax rates and unemployment rates, higher labor and healthcare costs, recessions and changing government policies, laws and regulations; • changes in raw material and energy supplies and pricing; • disruptions in the supply chain, including those caused by industry capacity constraints, labor shortages, raw material availability, and transportation and logistics delays and constraints; • adverse weather conditions or natural disasters, including those that may be related to climate change or otherwise, and public health crises, including the COVID-19 pandemic; • losses of or changes in our relationships with customers and suppliers; • competitive factors, including pricing pressures and product innovation and quality; • our ability to successfully integrate past and future acquisitions into our existing operations, as well as the performance of the businesses acquired; • our ability to achieve expected benefits of restructuring and productivity initiatives; • weakening of global credit markets and our ability to generate cash to service our indebtedness; • risks and uncertainties associated with our expansion into and our operations in Asia, Europe, South America and other foreign markets, including general economic conditions, policy changes affecting international trade, political instability, inflation rates, recessions, sanctions, foreign currency exchange rates and controls, foreign investment and repatriation restrictions, legal and regulatory constraints, civil unrest, armed conflict (including the ongoing conflict between Russia and Ukraine), war and other economic and political factors; • the achievement of growth in foreign markets, such as Asia, Europe and South America; • cybersecurity incidents and other disruptions to our information technology systems and operations; • our ability to protect or enforce our material trademarks and other intellectual property rights; • our ability to attract, retain, develop and progress a qualified global workforce; • damage to our business, reputation, image or brands due to negative publicity; • increasingly stringent domestic and foreign governmental regulations, including those affecting health, safety and the environment; • inherent uncertainties involved in assessing our potential liability for environmental-related activities; • other changes in governmental policies, laws and regulations, including changes in tariff policies, as well as changes in accounting policies and standards and taxation requirements (such as new or revised tax laws or interpretations); and 5 Table of Contents • the nature, cost, quantity and outcome of pending and future litigation and other claims, including the lead pigment and lead-based paint litigation, and the effect of any legislation and administrative regulations relating thereto.
Biggest changeThese risks, uncertainties and other factors include such things as: • general business conditions, including the strength of retail and manufacturing economies and growth in the coatings industry; • changes in general domestic and international economic conditions, including due to changes in inflation rates, interest rates, tax rates, unemployment rates, labor costs, healthcare costs, recessionary conditions, geopolitical conditions, government policies, laws and regulations; • weakening of global credit markets and our ability to generate cash to service our indebtedness; • fluctuations in foreign currency exchange rates, including as a result of inflation, central bank monetary policies, currency controls and other exchange restrictions; • any disruption in the availability of, or increases in the price of, raw material and energy supplies; • disruptions in the supply chain, including those related to industry capacity constraints, raw material availability, transportation and logistics delays and constraints, political instability or civil unrest; • catastrophic events, adverse weather conditions and natural disasters, including those that may be related to climate change or otherwise; • losses of or changes in our relationships with customers and suppliers; • competitive factors, including pricing pressures and product innovation and quality; • our ability to successfully integrate past and future acquisitions into our existing operations, as well as the performance of the businesses acquired; • risks and uncertainties associated with our expansion into and our operations in Asia, Europe, South America and other foreign markets, including general economic conditions, policy changes affecting international trade, political instability, inflation rates, recessions, sanctions, foreign currency exchange rates and controls, foreign investment and repatriation restrictions, legal and regulatory constraints, civil unrest, armed conflicts and wars (including the ongoing conflict between Russia and Ukraine and the Israel-Hamas war) and other economic and political factors; • cybersecurity incidents and other disruptions to our information technology systems, and our reliance on information technology systems; • our ability to attract, retain, develop and progress a qualified global workforce; • our ability to execute on our business strategies related to sustainability matters, and achieve related expectations, including as a result of evolving regulatory and other standards, processes, and assumptions, the pace of scientific and technological developments, increased costs and the availability of requisite financing, and changes in carbon markets; • damage to our business, reputation, image or brands due to negative publicity; • our ability to protect or enforce our material trademarks and other intellectual property rights; • our ability to comply with numerous and evolving U.S. and non-U.S. laws, rules, and regulations and the effectiveness of our compliance efforts; • adverse changes to our tax positions in U.S. and non-U.S. jurisdictions, including as a result of new or revised tax laws or interpretations; • increasingly stringent domestic and foreign governmental regulations, including those affecting health, safety and the environment; • inherent uncertainties involved in assessing our potential liability for environmental-related activities; 5 Table of Contents • other changes in governmental policies, laws and regulations, including changes in tariff policies, accounting policies and standards; and • the nature, cost, quantity and outcome of pending and future litigation and other claims, including the lead pigment and lead-based paint litigation, and the effect of any legislation and administrative regulations relating thereto.
Seasonality The majority of the sales for the Reportable Segments traditionally occur during the second and third quarters. However, periods of economic downturn can alter these seasonal patterns. There is no significant seasonality in sales for the Administrative segment.
Seasonality The majority of the sales for the Reportable Segments traditionally occur during the second and third quarters. Periods of economic downturn, however, can alter these seasonal patterns. There is no significant seasonality in sales for the Administrative segment.
Our principal executive offices are located at 101 West Prospect Avenue, Cleveland, Ohio 44115-1075, telephone (216) 566-2000. As used in this report, the terms “Sherwin-Williams,” “Company,” “we” and “our” mean The Sherwin-Williams Company and its consolidated subsidiaries unless the context indicates otherwise.
Our principal executive offices are located at 101 West Prospect Avenue, Cleveland, Ohio 44115-1075, telephone (216) 566-2000. As used in this report, the terms “Sherwin-Williams,” “Company,” “we”, “us” and “our” mean The Sherwin-Williams Company and its consolidated subsidiaries unless the context indicates otherwise.
Occupational Health and Safety. Providing safe and healthy working environments for our employees is a core value. We have a consistent focus on Environmental, Health and Safety excellence that promotes employee health and safety, process safety, and occupational health, including evaluation and implementation of reasonable preventative measures to reduce workplace injuries and illness.
Occupational Health and Safety. Providing safe and healthy working environments for our employees is a core value. We have a consistent focus on Environmental, Health and Safety excellence that promotes employee health and safety, process safety and occupational health, including evaluation and implementation of preventative measures to reduce workplace injuries and illness.
We invest in our people by providing learning and employee networking opportunities, including through our ERGs, to drive retention, development and engagement and help employees excel in their current and future roles. During 2022, our employees completed thousands of hours of online and instructor-led courses across a broad range of categories, including leadership, ID&E, professional skills, technical and compliance.
We invest in our people by providing learning and employee networking opportunities, including through our ERGs, to drive retention, development and engagement and help employees excel in their current and future roles. During 2023, our employees completed thousands of hours of online and instructor-led courses across a broad range of categories, including leadership, professional skills, technical skills and compliance.
Any statement that is not historical in nature is a forward-looking statement and may be identified by the use of words and phrases such as “believe,” “expect,” “may,” “will,” “should,” “project,” “could,” “plan,” “goal,” “target,” “potential,” “seek,” “intend,” “aspire,” “strive” or “anticipate” or the negative thereof or comparable terminology.
Any statement that is not historical in nature is a forward-looking statement and may be identified by the use of words and phrases such as “believe,” “expect,” “estimate,” “project,” “plan,” “goal,” “target,” “potential,” “intend,” “aspire,” “strive,” “may,” “will,” “should,” “could,” “would,” “seek,” or “anticipate” or the negative thereof or comparable terminology.
The Company’s early talent programs, including our management trainee program and similar programs across our global business, play a critical role in attracting, developing and advancing a diverse pipeline of talent. During 2022, we hired approximately 1,400 college graduates through our management trainee program as part of our long-term growth initiatives.
The Company’s early talent programs, including our management trainee program and similar programs across our global business, play a critical role in attracting, developing and advancing a pipeline of talent with diverse skills, backgrounds and experiences. During 2023, we hired approximately 1,400 college graduates through our management trainee program as part of our long-term growth initiatives.
The major trademarks and trade names used by each of the Reportable Segments are set forth below. • The Americas Group: Sherwin-Williams®, A-100®, Builders Solution®, Captivate®, Cashmere®, Colorgin®, Condor®, Duration®, Emerald®, Kem Tone®, Latitude®, Loxon®, Metalatex®, Novacor®, Painters Edge Plus™, ProClassic®, ProCraft®, Pro Industrial™, ProMar®, SuperDeck®, SuperPaint®, Woodscapes® • Consumer Brands Group: Cabot®, Dupli-Color®, Dutch Boy®, Geocel®, HGTV HOME® by Sherwin-Williams, Huarun®, Krylon®, Minwax®, Purdy®, Ronseal®, Thompson’s® WaterSeal®, Valspar®, White Lightning® • Performance Coatings Group: Sherwin-Williams®, Acrolon®, AcromaPro®, ATX®, DeBeer Refinish®, Duraspar®, EcoDex®, Envirolastic®, Excelo®, EzDex®, Fastline®, Firetex®, Fluropon®, Heat-Flex®, House of Kolor®, Huarun®, Inver®, Kem Aqua®, Lazzuril®, Macropoxy®, Martin Senour®, Matrix Edge®, M.L.
The major trademarks and trade names used by each of the Reportable Segments are set forth below. • Paint Stores Group: Sherwin-Williams®, A-100®, Builders Solution®, Captivate®, Cashmere®, Duration®, Emerald®, Gallery Series™, Kem Tone®, Latitude®, Loxon®, Metalatex®, Novacor®, Painters Edge Plus™, ProClassic®, ProCraft®, Pro Industrial™, ProMar®, Scuff Tuff®, SuperDeck®, SuperPaint®, Woodscapes® • Consumer Brands Group: Cabot®, Colorgin®, Condor®, Dupli-Color®, Dutch Boy®, Geocel®, HGTV HOME® by Sherwin-Williams, Krylon®, Minwax®, Purdy®, Ronseal®, Thompson’s® WaterSeal®, Valspar®, White Lightning® • Performance Coatings Group: Sherwin-Williams®, Acrolon®, AcromaPro®, ATX®, DeBeer Refinish®, Duraspar®, EcoDex®, Envirolastic®, Excelo®, EzDex®, Fastline®, Firetex®, Fluropon®, Gross & Perthun™, Heat-Flex®, House of Kolor®, Huarun®, ICA®, Inver®, Kem Aqua®, Klumpp Coatings™, Lazzuril®, Macropoxy®, Martin 2 Table of Contents Senour®, Matrix Edge®, M.L.
This strategy connects major milestones in the employee journey, including talent acquisition, onboarding, performance management, leadership and management development, succession and career progression, and is supported by our focus on employee engagement, ID&E, workforce analytics and human resources information technology governance.
This strategy connects major milestones in the employee journey, including talent acquisition, onboarding, performance management, leadership and management development, succession and career progression, and is supported by our focus on employee engagement, culture, workforce analytics and information technology governance.
ERGs bring together employees from various groups, divisions and functional teams to foster more inclusive workplaces, create greater synergy around business objectives and serve as a hub for professional development and mentorship opportunities that enable our employees to thrive and find long-term success at Sherwin-Williams. Talent Acquisition and Employee Engagement.
We have over 300 chapters globally that bring together employees from various groups, divisions and functional teams to foster more inclusive workplaces, create greater synergy around business objectives and serve as a hub for professional development and mentorship opportunities that enable our employees to thrive and find long-term success at Sherwin-Williams. Talent Acquisition and Employee Engagement.
Through our integrated talent management strategy, we strive to attract, retain, develop and progress a workforce that embraces our culture of inclusion and reflects our diversity efforts.
We strive to attract, retain, develop and progress a workforce that embraces our culture of inclusion through an integrated talent management strategy.
For a description of the Company’s liquidity and capital resources, see the “Financial Condition, Liquidity and Cash Flow” section in Item 7. Trademarks and Trade Names Customer recognition of trademarks and trade names owned or licensed by the Company collectively contribute significantly to our sales.
For a description of the Company’s liquidity and capital resources, see Item 7 Financial Condition, Liquidity and Cash Flow. Trademarks and Trade Names Customer recognition of trademarks and trade names owned or licensed by the Company collectively contribute significantly to our sales.
Over the past few years, we have enhanced certain of the Company’s benefits and practices to support the health and well-being of our employees through the COVID-19 pandemic and other challenges. Our enhanced benefits have included tele-health, paid sick leave, family leave and voluntary leave of absence policies and programs.
Over the past few years, we have enhanced certain of the Company’s benefits and practices to support the health and well-being of our employees. Our enhanced benefits have included tele-health, paid sick leave, family leave and voluntary leave of absence policies and programs.
For more information about the Reportable Segments, see Note 23 to the Consolidated Financial Statements in Item 8. The Americas Group The Americas Group consisted of 4,931 company-operated specialty paint stores in the United States, Canada, Latin America and the Caribbean region at December 31, 2022.
For more information about the Reportable Segments, see Note 23 to the Consolidated Financial Statements in Item 8. Paint Stores Group Paint Stores Group consisted of 4,694 company-operated specialty paint stores in the United States, Canada and the Caribbean region at December 31, 2023.
The Company has three reportable operating segments: The Americas Group, Consumer Brands Group and Performance Coatings Group (individually, a “Reportable Segment” and collectively, the “Reportable Segments”). The Company reports all other business activities and immaterial operating segments that are not reportable in the Administrative segment.
The Company has three reportable operating segments: Paint Stores Group, Consumer Brands Group and Performance Coatings Group (individually, a Reportable Segment and collectively, the Reportable Segments). The Company reports all other business activities and immaterial operating segments that are not reportable in the Administrative segment.
Campbell®, Octoral®, PermaClad®, Polane®, Powdura®, Sayerlack®, Sher-Wood®, Sumaré®, Ultra 9K®, Ultra 7000®, ValPure®, Valspar® 2 Table of Contents Patents Although patents and licenses are not of material importance to our business as a whole or any segment, The Americas Group and the Performance Coatings Group derive a portion of their income from the licensing of technology, trademarks and trade names to foreign companies.
Campbell®, Octoral®, Oskar Nolte™, PermaClad®, Polane®, Powdura®, Sayerlack®, Sher-Wood®, Sumaré®, Ultra 9K®, Ultra 7000®, ValPure®, Valspar® Patents Although patents and licenses are not of material importance to our business as a whole or any segment, the Performance Coatings Group derives a portion of its income from the licensing of technology, trademarks and trade names to foreign companies.
This segment incurred most of the Company’s capital expenditures related to ongoing environmental compliance measures at sites currently in operation. Performance Coatings Group The Performance Coatings Group develops and sells industrial coatings for wood finishing and general industrial (metal and plastic) applications, automotive refinish, protective and marine coatings, coil coatings, packaging coatings and performance-based resins and colorants worldwide.
This segment incurred most of the Company’s capital expenditures related to ongoing environmental compliance measures, manufacturing capacity expansion, operational efficiencies and maintenance projects at sites currently in operation. 1 Table of Contents Performance Coatings Group The Performance Coatings Group develops and sells industrial coatings for wood finishing and general industrial (metal and plastic) applications, automotive refinish, protective and marine coatings, coil coatings, packaging coatings and performance-based resins and colorants worldwide.
We measure our progress toward creating an inclusive culture that empowers employees to learn, grow and achieve their aspirations by conducting periodic pulse surveys and our global engagement survey, which we first conducted during 2021 and expect to conduct every other year. We are focused on using these survey results to drive continued progress with our efforts.
We measure our progress toward creating a culture of belonging that empowers employees to learn, grow and achieve their aspirations by conducting periodic pulse surveys and a global engagement survey, which we conducted in 2023 and expect to conduct every other year. We are focused on using these survey results to drive continued progress with our efforts.
Also included in the Administrative segment is the operations of a real estate management unit that is responsible for the ownership, management, and leasing of non-retail properties held primarily for use by the Company, including the Company’s headquarters site, and disposal of idle facilities.
Also included in the Administrative segment is the operations of a real estate management unit that is responsible for the ownership, management and leasing of non-retail properties held primarily for use by the Company and disposal of idle facilities. Sales of this segment represent external leasing revenue.
Human Capital Resources The success of our business and ability to execute on our strategy depend in large part on our ability to attract, retain, develop and progress a diverse population of qualified employees at all levels of our organization.
The success of our business and our ability to execute on our strategy depend in large part on our ability to attract, retain, develop and progress qualified employees with diverse skills, experiences and perspectives at all levels of our organization.
Consumer Brands Group The Consumer Brands Group manufactures and supplies a broad portfolio of branded and private-label architectural paint, stains, varnishes, industrial products, wood finishes products, wood preservatives, applicators, corrosion inhibitors, aerosols, caulks and adhesives to retailers and distributors throughout North America, as well as in China and Europe.
Consumer Brands Group The Consumer Brands Group manufactures and distributes a broad portfolio of branded and private-label architectural paint, stains, varnishes, industrial products, wood finishes products, wood preservatives, applicators, corrosion inhibitors, aerosols, caulks and adhesives to retailers, including home centers and hardware stores, dedicated dealers and distributors throughout North America, Latin America and Europe.
The Consumer Brands Group also supports the Company’s other businesses around the world with new product research and development, manufacturing, distribution and logistics. Approximately 67% of the total sales of the Consumer Brands Group in 2022 were intersegment transfers of products primarily sold through The Americas Group.
In addition, each store sells select purchased associated products. The Consumer Brands Group also supports the Company’s other businesses around the world with new product research and development, manufacturing, distribution and logistics. Approximately 61% of the total sales of the Consumer Brands Group in 2023 were intersegment transfers of products primarily sold through the Paint Stores Group.
Our total rewards programs are designed to offer competitive compensation, comprehensive benefits and other programs to support employees’ growth, both personally and professionally, and the diverse needs and well-being of our employees worldwide.
The Company’s policies and programs are designed to respond to the needs of our employees in a manner that provides a safe, professional, efficient and rewarding workplace. Our total rewards programs are designed to offer competitive compensation, comprehensive benefits and other programs to support employees’ growth, both personally and professionally, and the diverse needs and well-being of our employees worldwide.
We also have rewarded our employees’ resiliency and hard work and made changes in our business to encourage retention, including through wage increases, reduced store hours and employee benefits enhancements. During 2022, we continued enhancing the benefits we provide to our employees, including by extending our employee assistance program to our global workforce.
We also have rewarded our employees’ resiliency and hard work and made changes in our business to encourage retention, including through wage increases, reduced store hours and employee benefits enhancements.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION Certain statements contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Letter to Shareholders” and elsewhere in this report constitute “forward-looking statements” within the meaning of federal securities laws.
Regulatory Compliance For additional information regarding environmental-related matters, see Notes 1, 11 and 20 to the Consolidated Financial Statements in Item 8. 4 Table of Contents CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION Certain statements contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Letter to Shareholders” and elsewhere in this report constitute “forward-looking statements” within the meaning of federal securities laws.
Our employees are instrumental in fulfilling this purpose through the development, manufacture, distribution and sale of innovative paint and coatings products. The Company’s seven guiding values — integrity, people, service, quality, performance, innovation and growth — drive how we fulfill our purpose, emphasize the importance of our global workforce and serve as the foundation of our culture of excellence .
The Company’s seven guiding values — integrity, people, service, quality, performance, innovation and growth — drive how we fulfill our purpose, emphasize the importance of our global workforce and serve as the foundation of our culture of excellence.
The loss of any single customer would not have a material adverse effect on the business of this segment.
In addition, each store sells select purchased associated products. The loss of any single customer would not have a material adverse effect on the business of this segment.
The Performance Coatings Group had sales to certain customers that, individually, may be a significant portion of the sales of the segment. However, the loss of any single customer would not have a material adverse effect on the overall profitability of the segment. Administrative Segment The Administrative segment includes the administrative expenses of the Company’s corporate headquarters site.
However, the loss of any single customer would not have a material adverse effect on the overall profitability of the segment. Administrative Segment The Administrative segment includes the administrative expenses of the Company’s corporate headquarters site.
This segment licenses certain technology and trade names worldwide. Sherwin-Williams ® and other controlled brand products are distributed through The Americas Group and this segment’s 317 company- 1 Table of Contents operated branches and by a direct sales staff and outside sales representatives to retailers, dealers, jobbers, licensees and other third-party distributors.
Sherwin-Williams ® and other controlled brand products are distributed through the Paint Stores Group, this segment’s 322 company-operated branches, a direct sales staff and outside sales representatives to retailers, dealers, jobbers, licensees and other third-party distributors. The Performance Coatings Group had sales to certain customers that, individually, may be a significant portion of the sales of the segment.
Backlog and Productive Capacity Backlog orders are not typically significant in the business of any Reportable Segment since there is normally a short period of time between the placing of an order and shipment. During 2022 , we experienced raw material shortages and labor constraints that impacted our production and ability to meet customer orders.
Backlog and Productive Capacity Backlog orders are not typically significant in the business of any Reportable Segment since there is normally a short period of time between the placing of an order and shipment. We believe that sufficient productive capacity currently exists to fulfill our needs for paint, coatings and related products during 2024.
We also partner with various colleges and universities, including Historically Black Colleges and Universities and Hispanic-Serving Institutions, to attract women, underrepresented racial or ethnic groups, individuals with disabilities, veterans and other candidates into the talent pipeline.
We also collaborate with various colleges and universities to continue to broaden our talent pipeline with qualified women, underrepresented racial or ethnic groups, individuals with disabilities, veterans and other candidates.
During 2022, we held our annual CEO Forums on Inclusion, which are designed to encourage open discussions with employees that are led by our Chief Executive Officer and other senior leaders about opportunities to advance our culture of inclusion and belonging.
Our senior leaders attend an education and training session every year, and we hold CEO Forums on Inclusion, led by our CEO and other senior leaders, designed to encourage open discussions with employees about opportunities to advance our culture of belonging.
We also purchase a variety of products for resale that are highly complementary to our paint and coating offerings, notably spray equipment and parts, floorcovering, and assorted sundries.
Raw materials are sourced from multiple suppliers globally, typically within the geographic region where our products are being manufactured. A portion of specialized resins and other products are manufactured in house. We also purchase a variety of products for resale that are highly complementary to our paint and coating offerings, notably spray equipment and parts, floorcovering and assorted sundries.
These strategies, objectives and measures are advanced through programs, policies and initiatives focused on inclusion, diversity and equity (ID&E), talent acquisition and employee engagement, occupational health and safety and total rewards, which includes compensation and benefits programs and practices. Inclusion, Diversity and Equity .
To deliver on these objectives, we have developed key programs, policies and initiatives focused on belonging and culture, talent acquisition and employee engagement, occupational health and safety and total rewards, which includes compensation and benefits programs and practices. Belonging and Culture .
Raw Materials and Products Purchased for Resale Raw materials and products purchased for resale make up the majority of our consolidated cost of goods sold. Raw materials may vary considerably by the specific paint or coating being manufactured but can generally be divided into the following categories: resins and latex, pigments, additives, solvents, and metal or plastic containers.
Raw materials may vary considerably by the specific paint or coating being manufactured but can generally be divided into the following categories: resins and latex, pigments, additives, solvents, and metal or plastic containers. A significant portion of these raw materials are derived from various upstream petrochemical and related commodity feedstocks, notably propylene.
We also continued our focus on driving allyship and empathy through conscious inclusion training across our global workforce and elevating the visibility and prominence of our Employee Resource Groups (ERGs). These voluntary, employee-led networks are organized around a shared underrepresented demographic, and membership spans across 250 chapters globally.
In 2023, we also continued our focus on driving allyship and empathy through conscious inclusion training and elevating the visibility and prominence of our Employee Resource Groups (ERGs). These are voluntary, employee-led communities with a shared purpose of developing connections between and among employees and allies with diverse backgrounds.
We are a leading manufacturer and retailer of paint, coatings and related products to professional, industrial, commercial and retail customers, however, our competitive position varies for our different products and markets. In The Americas Group, competitors include other paint and wallpaper stores, mass merchandisers, home centers, independent hardware stores, hardware chains and manufacturer-operated direct outlets.
Competition We experience competition from many local, regional, national and international competitors of various sizes in the manufacture, distribution and sale of our paint, coatings and related products. We are a leading manufacturer and retailer of paint, coatings and related products to professional, industrial, commercial and retail customers, however, our competitive position varies for our different products and markets.
We strive to foster a culture of inclusion and belonging where differences are welcomed, appreciated and celebrated to positively impact our people and business. Reflected in the Company’s Code of Conduct and reinforced through our actions, training and attitudes, fostering an inclusive culture is a moral and business imperative.
We strive to foster a culture of belonging to drive employee engagement and performance while attracting, retaining, developing and progressing a diverse pipeline of talent that reflects the communities in which we operate. As reflected in our Code of Conduct and reinforced through our actions, training and attitudes, fostering an inclusive culture is a moral and business imperative.
Product quality, product innovation, breadth of product line, technical expertise, service and price determine the competitive advantage for this segment. In the Consumer Brands Group, domestic and foreign competitors include manufacturers and distributors of branded and private-label paint and coatings products.
In the Paint Stores Group, competitors include other paint and wallpaper stores, mass merchandisers, home centers, independent hardware stores, hardware chains and manufacturer-operated direct outlets. Product quality, product innovation, breadth of product line, technical expertise, service and price determine the competitive advantage for this segment.
Sales and marketing of certain controlled brand and private-label products is performed by a direct sales staff. The products distributed through third-party customers are intended for resale to the ultimate end-user of the product. The Consumer Brands Group had sales to certain customers that, individually, may be a significant portion of the sales and related profitability of the segment.
The Consumer Brands Group had sales to certain customers that, individually, may be a significant portion of the sales and related profitability of the segment.
At December 31, 2022, we employed 64,366 people worldwide, of which 75% were in the United States and 25% were in other global regions. Our commitment to our people is embedded in the Company’s corporate purpose and guiding values. Through our purpose, we strive to inspire and improve the world by coloring and protecting what matters.
At December 31, 2023, we employed 64,088 people worldwide, of which approximately 75% were in the United States and 25% were in other global regions.
Creating a supportive, welcoming environment across our global footprint is the shared responsibility of all employees, including our senior leaders. Each year, our senior leaders attend an ID&E education and training session to assist us in maintaining our commitment to leading with inclusion and leveraging the diversity of our workforce.
While our commitment starts at the top, with a Board of Directors with diverse skills, backgrounds and experiences, creating a supportive, welcoming environment across our global footprint is the shared responsibility of all of our employees, including our senior leaders.
These efforts have included, and may continue to include where necessary and appropriate, enhanced cleaning and sanitation procedures and return to work protocols. These efforts also continue to include permitting remote, alternate and flexible work arrangements where possible to promote increased flexibility and support employee health and safety, while maintaining our focus on innovation, collaboration, and engagement. Total Rewards.
Additionally, in 2023, we continued to permit remote, alternate and flexible work arrangements where possible to promote increased flexibility and support employee health and well-being, while maintaining our focus on collaboration and engagement.
We prioritize the fair, consistent and equitable treatment of our employees in relation to working conditions, wages, benefits, policies and procedures. The Company’s policies and programs are designed to respond to the needs of our employees in a manner that provides a safe, professional, efficient and rewarding workplace.
We strive for incident-free workplaces and are continuously assessing and improving the programs that are in place to help keep our employees, customers and communities safe, including by improving our global management systems, standards and performance measures. Total Rewards. We prioritize the fair, consistent and equitable treatment of our employees in relation to working conditions, wages, benefits, policies and procedures.
Sales of this segment represent external leasing revenue of excess headquarters space or leasing of facilities no longer used by the Company in its primary businesses. Material gains and losses from the sale of property are infrequent and not a significant operating factor in determining the performance of the Administrative segment.
Material gains and losses from the sale of property are infrequent and not a significant operating factor in determining the performance of the Administrative segment. Raw Materials and Products Purchased for Resale Raw materials and products purchased for resale make up the majority of our consolidated Cost of goods sold.
The building blocks of our ID&E strategy include: • Educate and communicate to drive success: Building awareness of inclusive leadership behaviors to leverage the unique contributions of each employee to positively impact our people and business results. • Fill the pipeline with the best talent: Attracting the best talent pool that reflects the diversity of the communities in which we serve and do business. • Develop and engage talent by investing in our people: Investing in our people by providing networking and learning opportunities to drive retention, progression and engagement. 3 Table of Contents • Progress talent by embedding equity into talent planning: Embedding equity into talent practices, processes, tools and resources at all levels.
The building blocks of our culture include: • Communicating impact: Sharing the Company story, goals and priorities at all levels, and educating our workforce on allyship and belonging. • Leading with inclusion: Creating a culture where we are open and leverage the unique contributions of each employee to positively impact our people and business results. 3 Table of Contents • Empowering everyone: Investing in our people by providing collaboration, development and learning opportunities to drive retention, progression and engagement. • Committing to action: Empowering and engaging leaders to use tools and resources to take meaningful action to foster a culture of belonging for all employees.
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In addition, each store sells select purchased associated products. In addition to our stores in the Latin America region, The Americas Group meets regional customer demands through developing, licensing, manufacturing, distributing and selling a variety of architectural paints, coatings and related products in North and South America.
Added
During 2023, the Company divested a non-core domestic aerosol business and the China architectural business, both part of the Consumer Brands Group. See Note 3 to the Consolidated Financial Statements in Item 8 for more information. Sales and marketing of certain controlled brand and private-label products is performed by a direct sales staff.
Removed
A significant portion of these raw materials are derived from various upstream petrochemical and related commodity feedstocks, notably propylene. Raw materials are sourced from multiple suppliers globally, typically within the geographic region where our products are being manufactured. A portion of specialized resins and other products are manufactured in house.
Added
The products distributed through third-party customers are intended for resale to the ultimate end-user of the product. The Consumer Brands Group also consisted of 318 company-operated specialty paint stores in Latin America at December 31, 2023.
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We believe that sufficient productive capacity currently exists to fulfill our needs for paint, coatings and related products during 2023. Competition We experience competition from many local, regional, national and international competitors of various sizes in the manufacture, distribution and sale of our paint, coatings and related products.
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Each store in this segment is engaged in servicing the needs of home, commercial and industrial projects to contractors and do-it-yourself customers in Latin America. These stores market and sell Sherwin-Williams ® and other controlled brand architectural paint and coatings, protective and marine products, OEM product finishes and related products which are branded for the Latin America market.
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We have developed key strategies, objectives and measures as part of the overall management of our business that support our global workforce and enable us to attract, retain, develop and progress top talent in a competitive labor market.
Added
This segment licenses certain technology and trade names worldwide. During 2023, the Company acquired German-based SIC Holding GmbH which is part of the Performance Coatings Group. See Note 3 to the Consolidated Financial Statements in Item 8 for more information.
Removed
We strive for incident-free workplaces — continuously assessing and improving the programs that are in place to help keep our employees, customers and communities safe. Since the onset of the COVID-19 pandemic, we have implemented modifications throughout our business and health and safety programs designed to protect the health and well-being of our employees and customers.
Added
In the Consumer Brands Group, domestic and foreign competitors include manufacturers and distributors of branded and private-label paint and coatings products as well as other paint and wallpaper stores, mass merchandisers, home centers, independent hardware stores, hardware chains and manufacturer-operated direct outlets.
Removed
The program provides mental 4 Table of Contents health and well-being, family, career, lifestyle, legal and financial resources, tools and services designed to support our employees across all aspects of their lives. Regulatory Compliance For additional information regarding environmental-related matters, see Notes 1, 11 and 20 to the Consolidated Financial Statements in Item 8.
Added
Human Capital Resources Our commitment to our people is embedded in the Company’s corporate purpose and guiding values. Through the development, manufacture, distribution and sale of innovative paint and coatings products, our employees are instrumental in fulfilling our corporate purpose to inspire and improve the world by coloring and protecting what matters.
Added
We strive to ensure our senior leaders have the resources they need to foster inclusion and belonging and ultimately leverage the diversity of our workforce to deliver customer-focused differentiated products, services and solutions.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

81 edited+37 added−19 removed65 unchanged
Biggest changeLEGAL AND REGULATORY RISKS We are subject to a wide variety of complex domestic and foreign laws, rules and regulations, compliance with which could adversely affect our results of operations, cash flow or financial condition.
Biggest changeUnauthorized use of our intellectual property by third parties, the failure of foreign countries to have laws to protect our intellectual property rights, or an inability to effectively enforce such rights in foreign countries could have an adverse effect on our business. 12 Table of Contents LEGAL AND REGULATORY RISKS We are subject to a wide variety of complex U.S. and non-U.S. laws, rules and regulations, as well as compliance risks related to new and existing laws and regulations, compliance with which could increase our costs and could adversely affect our results of operations, cash flow or financial condition.
From time to time, various legislation and administrative regulations have been enacted, promulgated or proposed to impose obligations on present and former manufacturers of lead pigments and lead-based paints respecting asserted health concerns associated with such products or to overturn the effect of court decisions in which we and other manufacturers have been successful.
In addition, from time to time, various legislation and administrative regulations have been enacted, promulgated or proposed to impose obligations on present and former manufacturers of lead pigments and lead-based paints respecting asserted health concerns associated with such products or to overturn the effect of court decisions in which we and other manufacturers have been successful.
These information technology systems are important to many business-critical processes including, but not limited to, production planning, manufacturing, finance, company operations, research and development, sales and customer service. Some of these systems are maintained or operated by third-party providers, including cloud-based systems.
These information technology systems are important to many business-critical processes including, but not limited to, production planning, manufacturing, distribution, finance, company operations, research and development, sales and customer service. Some of these systems are maintained or operated by third-party providers, including cloud-based systems.
Any such event involving the misappropriation, loss or other unauthorized disclosure of information, whether impacting us or third parties with which we do business, could result in losses, damage our reputation or relationships with customers and suppliers, expose us to the risks of litigation, regulatory action and liability, disrupt our operations and have a material adverse effect on our business, results of operations and financial condition.
Any such event involving the misappropriation, loss or other unauthorized disclosure of information, whether impacting us or third parties we rely on or do business with, could result in losses, damage our reputation or relationships with customers and suppliers, expose us to the risks of litigation, regulatory action and liability, disrupt our operations and have a material adverse effect on our business, results of operations and financial condition.
Also from time to time, the impact of these risks to our suppliers have had or may have an adverse effect on our sales, manufacture and distribution of certain of our products.
Also from time to time, the impact of these risks to our suppliers has had or may have an adverse effect on our sales, manufacture and distribution of certain of our products.
In the event adverse weather conditions or a natural disaster cause significant damage to any one or more of our principal manufacturing or distribution facilities, we may not be able to manufacture the products needed to meet customer demand, which could have an adverse effect on our sales of certain paint, coatings and related products.
In the event of catastrophic events, adverse weather conditions or a natural disaster cause significant damage to any one or more of our principal manufacturing or distribution facilities, we may not be able to manufacture the products needed to meet customer demand, which could have an adverse effect on our sales of certain paint, coatings and related products.
Adverse weather conditions and natural disasters, including those that may be related to climate change or otherwise, may temporarily reduce the demand for some of our products, impact our ability to meet the demand for our products or cause supply chain disruptions and increased costs, and could have a negative effect on our sales, earnings or cash flow.
Catastrophic events, adverse weather conditions and natural disasters (including those that may be related to climate change or otherwise) may temporarily reduce the demand for some of our products, impact our ability to meet the demand for our products or cause supply chain disruptions and increased costs, and could have a negative effect on our sales, earnings or cash flow.
These estimated costs are based on currently available facts regarding each site. We continuously assess our potential liability for investigation and remediation activities and adjust our environmental-related accruals as information becomes available, including as a result of sites progressing through investigation and remediation-related activities, upon which more accurate costs can be reasonably estimated.
These estimated costs are based on currently available facts regarding each site. We routinely assess our potential liability for investigation and remediation activities and adjust our environmental-related accruals as information becomes available, including as a result of sites progressing through investigation and remediation-related activities, upon which more accurate costs can be reasonably estimated.
In those cases where no accrual is recorded because it is not probable a liability has been incurred and cannot be reasonably estimated, any potential liability ultimately determined to be attributable to us may result in a material adverse effect on our 12 Table of Contents results of operations, cash flow or financial condition for the annual or interim period during which such liability is accrued or paid.
In those cases where no accrual is recorded because it is not probable a liability has been incurred and cannot be reasonably estimated, any potential liability ultimately determined to be attributable to us may result in a material adverse effect on our results of operations, cash flow or financial condition for the annual or interim period during which such liability is accrued or paid.
Due to the international scope of our operations, changes in government policies on foreign trade and investment may affect the demand for our products and services, impact the competitive position of our products or prevent us from being able to sell products in certain countries.
Due to the global scope of our operations, changes in government policies on foreign trade and investment may affect the demand for our products and services, impact the competitive position of our products or prevent us from being able to sell products in certain countries.
Adverse changes in such conditions in the United States and worldwide may reduce the demand for some of our products, adversely impact our ability to predict and meet any future changes in the demand for our products, and impair the ability of those with whom we do business to satisfy their obligations to us, each of which could adversely affect our results of operations, cash flow, liquidity or financial condition.
Adverse changes in such conditions in the United States and worldwide have in the past impacted and may in the future reduce the demand for some of our products, adversely impact our ability to predict and meet any future changes in the demand for our products, and impair the ability of those with whom we do business to satisfy their obligations to us, each of which could adversely affect our results of operations, cash flow, liquidity or financial condition.
Our results of operations, cash flow, liquidity or financial condition could be adversely affected by a variety of domestic and international factors, including general economic conditions, political instability, inflation rates, recessions, sanctions, tariffs, foreign currency exchange rates, foreign currency exchange controls, interest rates, foreign investment and repatriation restrictions, legal and regulatory constraints, civil unrest, armed conflict (including the ongoing conflict between Russia and Ukraine), war, difficulties in staffing and managing foreign operations and other economic and political factors.
Our results of operations, cash flow, liquidity or financial condition could be adversely affected by a variety of domestic and international factors, including general economic conditions, political instability, inflation rates, recessions, sanctions, tariffs, foreign currency exchange rates, foreign currency exchange controls, interest rates, foreign investment and repatriation restrictions, legal and regulatory constraints, civil unrest, armed conflicts and wars (including the ongoing conflict between Russia and Ukraine and the Israel-Hamas war), difficulties in staffing and managing foreign operations and other economic and political factors.
Although raw materials and energy supplies (including oil and natural gas) are generally available from various sources in sufficient quantities, unexpected shortages and increases in the cost of raw materials and energy, or any deterioration in our relationships with or the financial viability of our suppliers, may have an adverse effect on our earnings or cash flow.
Although raw materials and energy supplies (including oil and natural gas) are generally available from various sources in sufficient quantities, unexpected shortages and increases in the cost of raw materials and energy, supplier capacity constraints, or any deterioration in our relationships with or the financial viability of our suppliers, may have an adverse effect on our earnings or cash flow.
During 2022, no individual customer accounted for sales totaling more than ten percent of our sales. However, we have some customers that, individually, purchase a large amount of products from us.
During 2023, no individual customer accounted for sales totaling more than ten percent of our sales. However, we have some customers that, individually, purchase a large amount of products from us.
In accordance with the Contingencies Topic of the ASC, we accrue for these contingencies by a charge to income when it is both probable that one or more future events will occur confirming the fact of a loss and the amount of the loss can be reasonably estimated.
In accordance with the Contingencies Topic of the Accounting Standards Codification (ASC), we accrue for these contingencies by a charge to income when it is both probable that one or more future events will occur confirming the fact of a loss and the amount of the loss can be reasonably estimated.
Adverse weather conditions or natural disasters and their impacts have resulted, and may in the future result, in industry-wide supply chain disruptions, increased raw material and other costs, and our hindered ability to manufacture the products needed to fully meet customer demand.
Catastrophic events, adverse weather conditions or natural disasters and their impacts have in the past resulted, and may in the future result, in industry-wide supply chain disruptions, increased raw material and other costs, and our hindered ability to manufacture the products needed to fully meet customer demand.
Factors such as political instability, higher tariffs, supply chain disruptions, adverse weather conditions and natural disasters (including those that may be related to climate change or otherwise), or public health crises have disrupted, and may in the future disrupt, the availability of raw material and fuel supplies, adversely impact our ability to meet customer demands for some of our products or adequately staff and maintain operations at affected facilities and increase our costs.
Factors such as political instability, higher tariffs, supply chain disruptions, adverse weather conditions and natural disasters (including those that may be related to climate change or otherwise), armed conflicts and wars, or public health crises have impacted and may in the future disrupt the availability of raw material and fuel supplies, adversely impact our ability to meet customer demands for some of our products or adequately staff and maintain operations at affected facilities, and increase our costs.
In the course of our business, we are subject to a variety of claims and lawsuits, including, but not limited to, litigation relating to product liability and warranty, personal injury, environmental (including natural resource damages), intellectual property, commercial, contractual and antitrust claims that are inherently subject to many uncertainties regarding the possibility of a loss to us.
In the course of our business, we are subject to a variety of claims and lawsuits, including, but not limited to, litigation relating to product liability and warranty, raw materials used in our products, personal injury, environmental (including natural resource damages), intellectual property, commercial, contractual and antitrust claims that are inherently subject to many uncertainties regarding the possibility of a loss to us.
Risks and uncertainties associated with our expansion into and our operations in Asia, Europe, South America and other foreign markets could adversely affect our results of operations, cash flow, liquidity or financial condition. Net external sales of our consolidated foreign subsidiaries totaled approximately 19.4%, 21.2% and 19.5% of our total consolidated net sales in 2022, 2021 and 2020, respectively.
Risks and uncertainties associated with our expansion into and our operations in Asia, Europe, South America and other foreign markets could adversely affect our results of operations, cash flow, liquidity or financial condition. Net sales of our consolidated foreign subsidiaries totaled approximately 19.2%, 19.4% and 21.2% of our total consolidated Net sales in 2023, 2022 and 2021, respectively.
A weakening of global credit markets could adversely impact our net sales, the collection of accounts receivable, funding for working capital needs, expected cash flow generation from current and acquired businesses, access to capital and our investments, which could adversely impact our results of operations, cash flow, liquidity or financial condition.
A weakening of global credit markets has in the past and could in the future adversely impact our net sales, the collection of accounts receivable, funding for working capital needs, expected cash flow generation from current and acquired businesses, access to capital and our investments, which has in the past and could in the future adversely impact our results of operations, cash flow, liquidity or financial condition.
Our operations are subject to various domestic and foreign health, safety and environmental laws, regulations and requirements, including those related to climate change, chemicals registration and management and the COVID-19 pandemic. These laws, regulations and requirements not only govern our current operations and products, but also may impose potential liability on us for our past operations.
Our operations are subject to various domestic and foreign health, safety and environmental laws, regulations and requirements, including those related to climate change and chemicals registration and management. These laws, regulations and requirements not only govern our current operations and products, but also may impose potential liability on us for our past operations.
We continue to mitigate these risks in a number of ways, including through additional investment, engagement of third-party experts and consultants, improving the security of our facilities and systems (including through upgrades to our security and information technology systems), providing annual training for all employees (with more enhanced or frequent training based on role or responsibility), assessing the continued appropriateness of relevant insurance coverage and strengthening our controls and procedures to monitor, mitigate and respond appropriately to these threats.
We continue to mitigate these risks in a number of ways, including through additional investment, engagement of third-party experts and consultants, improving the security of our facilities and systems (including through upgrades to our security and information technology systems), providing annual training for all employees (with more enhanced or frequent training based on role or responsibility), assessing the continued appropriateness of relevant insurance coverage and strengthening our controls and procedures to identify, detect, protect against, respond to and mitigate these threats.
Technology, product quality, product innovation and development (including relating to increased customer interest in the sustainability attributes of products and our related key strategies and initiatives for expanding our product offerings), breadth of product line, technical expertise, distribution, service and price are key competitive factors for our business.
Technology, product quality, product composition, raw material sourcing, product innovation and development (including relating to increased customer interest in the sustainability attributes of products and our related key strategies and initiatives for expanding our product offerings), breadth of product line, technical expertise, distribution, service and price are key competitive factors for our business.
We have also been a defendant in legal proceedings arising from the manufacture and sale of non-lead-based paints that seek recovery based upon various legal theories, including the failure to adequately warn of potential exposure to lead during surface preparation when using non-lead-based paint on surfaces previously painted with lead-based paint.
We have also been a defendant in legal proceedings arising from the manufacture and sale of non-lead-based paints that seek recovery based upon various legal theories, including the failure to adequately warn of potential exposure to lead during surface preparation when using non-lead-based paint on surfaces previously painted with lead-based paint. We are vigorously defending such litigation.
While we would typically expect to see higher demand for our products as project backlogs are reduced in the future, rising inflation and other economic 6 Table of Contents conditions may delay a recovery in demand, which may result in the labor shortage and such other conditions adversely impacting our sales, earnings, cash flow or financial condition.
While we would typically expect to see higher demand for our products as project backlogs are reduced in the future, inflation and other economic conditions may delay a recovery in demand, which may result in the labor shortage and such other conditions adversely impacting our sales, earnings, cash flow or financial condition.
To the extent we are unable to remain competitive with our total rewards programs (which includes compensation and benefits programs and practices), talent management strategy, inclusive workplace culture and related inclusion, diversity and equity and employee engagement strategies, initiatives, programs and practices, or if qualified candidates or employees become more difficult to attract or retain under reasonable terms, we may experience higher labor-related costs and may be unable to attract, retain, develop and progress a qualified global workforce, which could adversely affect our business and future success and impair our ability to meet our strategic objectives and the needs of our customers. 11 Table of Contents Our business, reputation, image and brands could be damaged by negative publicity.
To the extent we are unable to remain competitive with our total rewards programs (which include compensation and benefits programs and practices), talent management strategy, 11 Table of Contents inclusive workplace culture and related inclusion, diversity and equity and employee engagement strategies, initiatives, programs and practices, or if qualified candidates or employees become more difficult to attract or retain under reasonable terms, we may experience higher labor-related costs and may be unable to attract, retain, develop and progress a qualified global workforce, which could adversely affect our business and future success and impair our ability to meet our strategic objectives and the needs of our customers.
Adverse court rulings or determinations of liability, among other factors, could affect the lead pigment and lead-based paint litigation against us and encourage an increase in the number and nature of future claims and proceedings.
Adverse court rulings, determinations of liability, or third-party funding of litigation, among other factors, could affect litigation against us, including the lead pigment and lead-based paint litigation, and encourage an increase in the number and nature of future claims and proceedings.
The Company will continue to vigorously defend against any additional lead pigment and lead-based paint litigation that may be filed, including utilizing all avenues of appeal, if necessary. Notwithstanding our views on the merits, litigation is inherently subject to many uncertainties, and we ultimately may not prevail.
The Company will continue to vigorously defend against any additional lead pigment and lead-based paint litigation that may be filed, including utilizing all avenues of appeal, if necessary. Litigation is inherently subject to many uncertainties, and we ultimately may not prevail.
Our past operations included the manufacture and sale of lead pigments and lead-based paints.
For example, our past operations included the manufacture and sale of lead pigments and lead-based paints.
From time to time, adverse weather conditions and natural disasters, including those that may be related to climate change or otherwise, have had or may have an adverse effect on our sales, manufacture and distribution of paint, coatings and related products.
From time to time, catastrophic events, adverse weather conditions and natural disasters (including those that may be related to climate change or otherwise) have caused business disruptions and have had an adverse effect on our sales, manufacture and distribution of paint, coatings and related products.
Higher inflation rates, interest rates, tax rates and unemployment rates, higher labor and healthcare costs, recessions, changing governmental policies, laws and regulations, business disruptions due to cybersecurity incidents, terrorist activity, armed conflict (including the ongoing conflict between Russia and Ukraine), war, public health crises (including the COVID-19 pandemic), adverse weather conditions or natural disasters (including those that may be related to climate change or otherwise), supply chain disruptions (including those caused by industry capacity constraints, labor shortages, raw material availability, and transportation and logistics delays and constraints), and other economic factors have in the past and could in the future adversely affect demand for some of our products, our ability to predict and meet any future changes in the demand for our products, the availability, delivery or cost of raw materials, our ability to adequately staff and maintain operations at affected facilities and our results of operations, cash flow, liquidity or financial condition and that of our customers, vendors and suppliers.
Changes in inflation rates, interest rates, tax rates, unemployment rates, labor costs, healthcare costs, recessionary conditions, geopolitical conditions, governmental policies, laws and regulations, business disruptions due to cybersecurity incidents, terrorist activity, armed conflicts and wars (including the ongoing conflict between Russia and Ukraine and the Israel-Hamas war), public health crises, pandemics, outbreaks of disease, catastrophic events, adverse weather conditions or natural disasters (including those that may be related to climate change or otherwise), supply chain disruptions (including those caused by industry capacity constraints, labor shortages, raw material availability, and transportation and logistics delays and constraints), and other economic factors have in the past and could in the future adversely affect demand for some of our products, our ability to predict and meet any future changes in the demand for our products, the availability, delivery or cost of raw materials, our ability to adequately staff and maintain operations at affected facilities and our results of operations, cash flow, liquidity or financial condition and that of our customers, vendors and suppliers.
Finally, changes in the laws of foreign jurisdictions in which we operate may adversely affect the ability of some of our foreign subsidiaries to repatriate funds to us. Fluctuations in foreign currency exchange rates could adversely affect our results of operations, cash flow, liquidity or financial condition.
Finally, changes in the laws of foreign jurisdictions in which we operate have in the past and may in the future adversely affect the ability of some of our foreign subsidiaries to repatriate funds to us. Fluctuations in foreign currency exchange rates and changing monetary policies could adversely affect our results of operations, cash flow, liquidity or financial condition.
The domestic and international regulatory environment related to information security, collection and privacy is increasingly rigorous and complex, with new and rapidly changing requirements applicable to our business, which often require changes to our business practices.
The domestic and international regulatory environment related to information security, data collection and transfer, digital marketing or telemarketing, and privacy is increasingly rigorous and complex, with new and rapidly changing requirements applicable to our business, which often require changes to our business practices.
In addition, environmental and social regulations, including regulations related to climate change or otherwise, may negatively impact us or our suppliers in terms of availability and cost of raw materials, as well as sources and supply of energy.
In addition, environmental and social 8 Table of Contents regulations, including regulations related to climate change or otherwise, have in the past and may in the future negatively impact us or our suppliers in terms of availability and cost of raw materials, as well as sources and supply of energy.
Due to the uncertainties involved, management is unable to predict the outcome of the lead pigment and lead-based paint litigation, the number or nature of possible future claims and proceedings, or the effect any legislation and/or administrative regulations may have on the litigation or against us.
Due to the uncertainties involved, management is unable to predict the outcome of the litigation against us, the number or nature of possible future claims and proceedings, or the effect of any legislation and/or administrative regulations.
We discuss the risks and uncertainties related to litigation, including the lead pigment and lead-based paint litigation, in more detail in Note 12 to the Consolidated Financial Statements in Item 8. 14 Table of Contents
We discuss the risks and uncertainties related to litigation, including the lead pigment and lead-based paint litigation, in more detail in Note 12 to the Consolidated Financial Statements in Item 8. 15 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Our business and brands depend on our ability to maintain a positive perception of us and our business, including through our seven guiding values of integrity, people, service, quality, performance, innovation, and growth.
Specifically, our ability to maintain a positive perception of us and our business, including through our seven guiding values of integrity, people, service, quality, performance, innovation, and growth, influences our success.
We discuss these risks and uncertainties in more detail in the “Environmental-Related Liabilities” and “Environmental Matters” sections in Item 7 and in Note 11 to the Consolidated Financial Statements in Item 8. 13 Table of Contents The nature, cost, quantity and outcome of pending and future litigation, such as litigation arising from the historical manufacture and sale of lead pigments and lead-based paint, could have a material adverse effect on our results of operations, cash flow, liquidity and financial condition.
We discuss these risks and uncertainties in more detail in the “Environmental-Related Liabilities” and “Environmental Matters” sections in Item 7 and in Note 11 to the Consolidated Financial Statements in Item 8. 14 Table of Contents The nature, cost, quantity and outcome of pending and future litigation could have a material adverse effect on our results of operations, cash flow, liquidity and financial condition.
FINANCIAL RISKS A weakening of global credit markets could adversely affect our results of operations, cash flow, liquidity or financial condition.
FINANCIAL RISKS A weakening of global credit markets or changes to our credit ratings may adversely affect our results of operations, cash flow, liquidity or financial condition.
Our business benefits from free trade agreements, which may include the United States-Mexico-Canada Agreement and EU-UK Trade and Cooperation Agreement, and efforts to withdraw from, or substantially modify such agreements, in addition to the implementation of more restrictive trade policies, such as more detailed inspections, higher 10 Table of Contents tariffs, import or export licensing requirements, exchange controls or new barriers to entry, could have a material adverse effect on our results of operations, financial condition or cash flow and that of our customers, vendors and suppliers.
Our business benefits from free trade agreements, which may include the United States-Mexico-Canada Agreement and EU-UK Trade and Cooperation Agreement, and efforts to withdraw from, or substantially modify such agreements, in addition to trends such as protectionism or nationalism, and the implementation of more restrictive trade policies, such as more detailed inspections, higher tariffs, import or export licensing requirements, exchange controls or new barriers to entry, could have a material adverse effect on our results of operations, financial condition or cash flow and that of our customers, vendors and suppliers. 10 Table of Contents Cybersecurity incidents and other disruptions to our information technology systems may interfere with our operations, result in the compromise or loss of critical and confidential information and severely harm our business.
Our information, facilities and systems could also be impacted by the intentional or unintentional improper conduct of our employees, vendors or others who have access to and may misappropriate sensitive and confidential information.
Our information, facilities and systems and those hosted or supported by third parties on our behalf could also be impacted by the intentional or unintentional improper conduct of our employees, vendors or others who have access to and may mishandle or misappropriate sensitive and confidential information.
If these shortages continue or worsen, and we are unable to offset the shortages through internal production or alternate sources, we may experience adverse impacts to our business, including adverse effects to our earnings and cash flow.
If we are unable to offset such disruptions through internal production or alternate sources, we may experience adverse impacts to our business, including adverse effects to our earnings and cash flow.
Rising interest rates and any such shift in consumer behavior may adversely affect the demand for new residential homes, existing home turnover and new non-residential construction. A worsening in these segments will reduce the demand for some of our products and may adversely impact sales, earnings and cash flow.
Rising interest rates and shifts in consumer behavior have adversely affected and may continue to adversely 6 Table of Contents affect the demand for new residential homes, existing home turnover and new non-residential construction. Any worsening in these segments will reduce the demand for some of our products and may adversely impact sales, earnings and cash flow.
Despite the security measures we have in place, our facilities and systems, and those third parties with which we do business, may be vulnerable to cyber attacks, security breaches, malware, viruses, ransomware, power outages, system failures, acts of vandalism, human or technical errors or other similar events or disruptions.
Despite the security measures we have in place, our facilities and systems, and those of third parties we rely on or do business with, may be vulnerable to cyber attacks, security breaches, malware (including but not limited to ransomware and other programs that operate with malicious intent), power outages, system failures, acts of vandalism, human or technical errors or other similar events or disruptions.
We have historically made strategic acquisitions of businesses in the paint and coatings industry and likely will acquire additional businesses in the future as part of our long-term growth strategy and initiatives. During 2022, we invested $1.003 billion to complete five acquisitions.
We have historically made strategic acquisitions of businesses in the paint and coatings industry and likely will acquire additional businesses in the future as part of our long-term growth strategy and initiatives.
These investigations, examinations and other proceedings could subject us to significant liability and require us to take significant accruals or pay significant settlements, fines and penalties, which could have a material adverse effect on our results of operations, cash flow or financial condition. We are subject to tax laws and regulations in the United States and multiple foreign jurisdictions.
These investigations, examinations and other proceedings could subject us to significant liability and require us to take significant accruals or pay significant settlements, fines and penalties, which could have a material adverse effect on our results of operations, cash flow or financial condition.
We are required to comply with, and may become subject to additional, numerous complex and increasingly stringent domestic and foreign health, safety and environmental (including related to climate change) laws, regulations and requirements, the cost of which is likely to increase and may adversely affect our results of operations, cash flow or financial condition.
We discuss risks and uncertainties with regard to taxes in more detail in Note 21 to the Consolidated Financial Statements in Item 8. 13 Table of Contents We are required to comply with, and may become subject to additional, numerous complex and increasingly stringent domestic and foreign health, safety and environmental (including related to climate change) laws, regulations and requirements, the cost of which is likely to increase and may adversely affect our results of operations, cash flow or financial condition.
Downgrades in these ratings likely would increase our cost of borrowing and could have an adverse effect on our access to the capital markets, including our access to the commercial paper market. An inability to access the capital markets could have a material adverse effect on our results of operations, cash flow, liquidity or financial condition.
Downgrades in these ratings likely would increase our cost of borrowing and could have an adverse effect on our access to the capital markets, including our access to the commercial paper market.
Our ability to generate cash, to a certain extent, is subject to general business, economic, financial, competitive, legislative, regulatory and other factors beyond our control, including public health crises, such as the COVID-19 pandemic, adverse weather conditions or natural disasters (including those that may be related to climate change or otherwise), supply chain disruptions, changes in raw material and energy supplies and pricing and related impacts.
Our ability to generate cash, to a certain extent, is subject to general business, economic, 7 Table of Contents financial, competitive, legislative, regulatory and other factors beyond our control, including supply chain disruptions, adverse weather conditions or natural disasters, armed conflicts and wars, changes in raw material and energy supplies, public health crises and pricing and related impacts.
Cyber attacks and cybersecurity threats are increasingly sophisticated, constantly evolving and originate from many sources globally, and often cannot be recognized until launched against a target.
Cyber attacks and cybersecurity threats are increasingly sophisticated, constantly evolving and originate from many sources globally, and often cannot be recognized or understood until the target has already been attacked.
While we actively manage the exposure of our foreign currency risk as part of our overall financial risk management policy, we believe we may experience losses from foreign currency exchange rate fluctuations, and such losses could adversely affect our sales, earnings, cash flow, liquidity or financial condition. 8 Table of Contents OPERATIONAL RISKS Unexpected shortages and increases in the cost of raw materials and energy may adversely affect our earnings or cash flow.
While we actively manage the exposure of our foreign currency risk as part of our overall financial risk management policy, we have in the past and may in the future experience losses from foreign currency exchange rate fluctuations, and currency controls and restrictions, and such losses could adversely affect our sales, earnings, cash flow, liquidity or financial condition.
We purchase raw materials (including petrochemical-derived resins, latex and solvents, titanium dioxide and various additives) and energy for use in the manufacturing, distribution and sale of our products.
OPERATIONAL RISKS Unexpected shortages and increases in the cost of raw materials and energy may adversely affect our earnings or cash flow. We purchase raw materials (including petrochemical-derived resins, latex and solvents, titanium dioxide and various additives) and energy for use in the manufacturing, distribution and sale of our products.
Compliance with these requirements, including the European Union’s General Data Protection Regulation, the California Consumer Privacy Act, the California Privacy Rights Act and other international and domestic regulations, are costly and will result in additional costs in our efforts to continue to comply.
Compliance with these requirements, including the European Union’s General Data Protection Regulation, China’s Personal Information Protection, Data Security, and Cyber Security Laws, the California Consumer Privacy Act as amended by the California Privacy Rights Act, a growing number of other U.S. comprehensive state privacy laws, and other international and domestic regulations, are costly and will result in additional costs in our efforts to continue to comply.
Our reputation, image and recognized brands significantly contribute to our business and success. Our reputation and image is critical to retaining and growing our customer base and our relationships with other stakeholders.
Our business, reputation, image and brands could be damaged by negative publicity. Our reputation, image and recognized brands significantly contribute to our business and success, as they are critical to retaining and growing our customer base and our relationships with other stakeholders.
Despite our efforts to protect such intellectual property and other proprietary information from unauthorized use or disclosure, third parties may attempt to disclose, obtain or use our trademarks or such other intellectual property and information without our authorization.
We have numerous patents, trade secrets, trademarks, trade names and know-how that are valuable to our business. Despite our efforts to protect such intellectual property and other proprietary information from unauthorized use or disclosure, third parties may attempt to disclose, obtain or use our trademarks or such other intellectual property and information without our authorization.
We believe the litigation brought to date is without merit or subject to meritorious defenses and are vigorously defending such litigation. We expect additional lead pigment and lead-based paint litigation may be filed against us in the future asserting similar or different legal theories and seeking similar or different types of damages and relief.
We expect additional lead pigment and lead-based paint litigation may be filed against us in the future asserting similar or different legal theories and seeking similar or different types of damages and relief.
A decrease in the value of plan assets resulting from a general financial downturn may cause a negative pension plan investment performance, which may adversely affect our results of operations, cash flow, liquidity or financial condition. We require a significant amount of cash to service the substantial amount of debt we have outstanding.
We hold investments in equity and debt securities in some of our defined benefit pension plans. A decrease in the value of plan assets resulting from a general financial downturn may cause a negative pension plan investment performance, which may adversely affect our results of operations, cash flow, liquidity or financial condition.
Our ability to make payments on our debt, fund our other liquidity needs, and make planned capital expenditures will depend on our ability to generate cash in the future. Our historical financial results have been, and we anticipate our future financial results will be, subject to fluctuations.
We have the ability under our existing credit facilities to incur substantial additional indebtedness in the future. Our ability to make payments on our debt, fund other liquidity needs and make planned capital expenditures will depend on our ability to generate cash in the future.
Despite our efforts to prevent these threats and disruptions to our information technology systems, these systems may be affected by damage or interruption resulting from, among other causes, cyber attacks, security breaches, power outages, system failures or malware that take the form of phishing and other computer viruses, ransomware, worms, Trojan horses, spyware, adware, rogue software and other programs that act against the system user.
Despite our efforts to prevent these threats and disruptions to our information technology systems, these systems may be affected by damage or interruption resulting from, among other causes, cyber attacks, security breaches, power outages, system failures or malware (including but not limited to ransomware and other programs that operate with malicious intent).
We are subject to a wide variety of complex domestic and foreign laws, rules and regulations, and legal compliance risks, including securities laws, tax laws, employment and pension-related laws, competition laws, U.S. and foreign export and trading laws, data privacy and cybersecurity laws, and laws governing improper business practices.
We are subject to a wide variety of complex U.S. and non-U.S. federal, state and local laws, rules and regulations, and legal compliance risks, including laws, rules and regulations involving securities, tax, employment and pensions, competition, environmental, export and trade, intellectual property, data privacy and cybersecurity, and improper business practices, such as anti-bribery and corruption.
Competition for talent is intense, and we are facing increased wage rates and labor shortages due to a tightened labor market and other macroeconomic conditions.
We continue to face elevated wage rates and intense competition for talent due to the ongoing impacts of a tightened labor market and other macroeconomic conditions.
Our inability to successfully manage the risks and uncertainties relating to any of these factors could adversely affect our results of operations, cash flow, liquidity or financial condition.
In addition, public health crises in foreign jurisdictions may temporarily reduce the demand for some of our products and adversely affect the availability and cost of raw materials. Our inability to successfully manage the risks and uncertainties relating to any of these factors could adversely affect our results of operations, cash flow, liquidity or financial condition.
Our primary exchange rate exposure is with the Euro, the Chinese yuan, the Canadian dollar, the Brazilian real, the British pound, and the Mexican peso, each against the U.S. dollar.
Historically, our reported net sales, earnings, cash flow and financial condition have been subjected to fluctuations in foreign exchange rates. Our primary exchange rate exposure is with the Euro, the Brazilian Real, the Mexican Peso, the Canadian Dollar, the Chinese Yuan, the British Pound, and the Argentine Peso, each against the U.S. Dollar.
We have goodwill and intangible assets recorded on our balance sheet. We periodically evaluate the recoverability of the carrying value of our goodwill and intangible assets whenever events or changes in circumstances indicate such value may not be recoverable.
We periodically evaluate the recoverability of the carrying value of our goodwill and intangible assets whenever events or changes in circumstances indicate such value may not be recoverable. An impairment assessment involves judgment as to assumptions regarding future sales and cash flow and the impact of market conditions on those assumptions.
Some of our competitors operate more extensively in certain regions around the world and have greater financial or operational resources to compete internationally. 9 Table of Contents Other competitors are smaller and may be able to offer more specialized products.
Some of our competitors operate more 9 Table of Contents extensively in certain regions around the world and have greater financial or operational resources to compete internationally. They may secure better terms from certain vendors, adopt more aggressive pricing, and devote more resources to certain product lines or parts of their business.
Significant negative claims or publicity involving us, our business or our products, services, culture, values, strategies and practices, undermine confidence, and could materially damage our reputation and image, even if such claims are inaccurate. Damage to our reputation and image could adversely impact our ability to attract new and retain existing customers, employees and other business and stakeholder relationships.
Significant negative claims or publicity involving us, our business or our products, services, culture, values, strategies and practices, including postings, articles, or comments on social media and the internet, undermine confidence in our Company, and could materially damage our reputation and image, even if such claims or publicity are inaccurate.
While we have started to see a decline in some raw material prices in recent months, the cost of raw materials and energy could continue to experience periods of volatility in the future and may adversely affect our earnings and cash flow.
Ongoing global supply and demand dynamics drive the cost of raw materials and energy, which could continue to experience periods of volatility in the future and may adversely affect our earnings and cash flow.
Although we believe we have adopted appropriate risk management and compliance programs to mitigate these risks, the global and diverse nature of our operations means compliance risks will continue to exist. Investigations, examinations and other proceedings, the nature and outcome of which cannot be predicted, likely will arise from time to time.
Although we believe we have adopted appropriate risk management and compliance programs to mitigate these risks, the global and diverse nature of our operations means compliance risks will continue to exist. We face liability and reputational risks even if we comply with all laws and regulations.
Future events and changing market conditions may impact our assumptions 7 Table of Contents and change our estimates of future sales and cash flow, resulting in us incurring substantial impairment charges, which would adversely affect our results of operations or financial condition. We hold investments in equity and debt securities in some of our defined benefit pension plans.
Future events, such as the integration or rebranding of trademarks acquired in acquisitions and changing market conditions may impact our assumptions and change our estimates of future sales and cash flow, including our ability to track trademark specific sales and cash flow, resulting in us incurring substantial impairment charges, which could adversely affect our results of operations or financial condition.
With respect to inflation in particular, we expect inflationary pressure to impact consumer behavior during 2023, including in the United States and Europe housing markets and as a result of elevated mortgage rates. Any such shift in consumer behavior could adversely affect the demand for some of our products and our results of operations, cash flow, liquidity or financial condition.
With respect to inflation in particular, high levels of inflation impacted consumer behavior in 2023. We expect inflationary pressure to continue to impact consumer and manufacturing customer behavior during 2024, including in the United States housing market as a result of elevated mortgage rates and in global industrial markets as a result of softer demand.
Because of our international operations, we are exposed to risk associated with interest rates and value changes in foreign currencies, which may adversely affect our business. Historically, our reported net sales, earnings, cash flow and financial condition have been subjected to fluctuations in foreign exchange rates.
Because of our international operations, we are exposed to risk associated with interest rates and value changes in foreign currencies, including as a result of inflation, central bank monetary policies, currency controls and other exchange restrictions, which may adversely affect our business.
Our ability to generate cash depends on many factors beyond our control. We also depend on the business of our subsidiaries to satisfy our cash needs. If we cannot generate the required cash, we may not be able to make the necessary payments required under our indebtedness.
We require a significant amount of cash to service the substantial amount of debt we have outstanding. Our ability to generate cash depends on many factors beyond our control. We also depend on the business of our subsidiaries to satisfy our cash needs.
Inability to protect or enforce our material trademarks and other intellectual property rights could have an adverse effect on our business. We have numerous patents, trade secrets, trademarks, trade names and know-how that are valuable to our business.
Inability to protect or enforce our material trademarks and other intellectual property rights could have an adverse effect on our business. Our competitive position and the value of our products and brands could be reduced and our business adversely affected if we are unable to maintain or adequately protect our intellectual property.
During economic downturns in these segments, the levels of consumer and business discretionary spending may decrease, and the recovery of these segments may lag behind the recovery of the overall economy. This decrease in spending likely will reduce the demand for some of our products and may adversely affect our sales, earnings, cash flow or financial condition.
A decrease in consumer and business discretionary spending has in the past and could in the future reduce the demand for some of our products and has in the past and could in the future adversely affect our sales, earnings, cash flow or financial condition. Interest rates increased substantially in 2022 and 2023 and may continue to increase.
Disruptions to these systems may impair our ability to conduct business and have a material adverse effect on our business, results of operations and financial condition. As part of our business, we collect and handle sensitive and confidential information about our business, customers, employees and suppliers.
As part of our business, we collect and handle sensitive and confidential information about our business, customers, employees and suppliers.
Additionally, negative or inaccurate postings, articles, or comments on social media and the internet about us could generate negative publicity that could damage our business, reputation, image and brands. Damage to our business, reputation or image, or negative publicity, could adversely affect the demand for some of our products and adversely affect our sales, earnings, cash flow or financial condition.
Damage to our reputation and image could adversely impact our ability to attract new and retain existing customers, employees and other business and stakeholder relationships, and could adversely affect the demand for some of our products and adversely affect our sales, earnings, cash flow or financial condition.
We are continuing to evaluate the impact this new law may have on our results of operations, cash flow or financial condition. In addition, in the ordinary course of our business, we are subject to examinations and investigations by various tax authorities and other regulators.
In addition, the increasingly complex global tax environment has in the past and may in the future result in higher compliance costs. In the ordinary course of our business, we are subject to examinations and investigations by various tax authorities and other regulators.
In recent years, some raw material and energy prices have increased, particularly titanium dioxide and petrochemical feedstock sources, such as propylene and ethylene, as well as metal and plastic packaging.
Following two years of historic inflation, some raw material and energy prices decreased in 2023, particularly resins and solvents derived from petrochemical feedstock sources such as propylene and ethylene.
Cybersecurity incidents and other disruptions to our information technology systems could interfere with our operations, result in the compromise or loss of critical and confidential information and severely harm our business.
We and third parties we rely on or do business with have experienced cybersecurity attacks and incidents in the past, some of which have resulted in unauthorized access to our information and systems and other disruptions to our business operations, and we could in the future experience similar incidents.
We are affected by new laws and regulations, and changes to existing laws and regulations, including interpretations by courts and regulators. From time to time, our Company, our operations and the industries in which we operate may be reviewed or investigated by regulators, which could lead to enforcement actions or the assertion of private litigation claims and damages.
We are affected by new laws and regulations, and changes to existing laws and regulations, including interpretations by courts and regulators.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeDuring 2022, The Americas Group opened 72 net new stores, consisting of 89 new stores opened (71 in the United States, 11 in Mexico, 6 in Canada and 1 in South America) and 17 stores closed (2 in the United States, 14 in South America and 1 in Mexico). 16 Table of Contents The Performance Coatings Group operated 223 branches in the United States, of which 8 were owned, at December 31, 2022.
Biggest changeDuring 2023, the Consumer Brands Group opened 11 net new stores, consisting of 17 new stores opened and 6 stores closed. 18 Table of Contents The Performance Coatings Group operated 224 branches in the United States and 98 branches internationally at December 31, 2023.
At the end of 2022: • the Mid Western Division operated 1,172 paint stores primarily located in the midwestern and upper west coast states; • the Eastern Division operated 901 paint stores along the upper east coast and New England states; • the Canada Division operated 252 paint stores throughout Canada; • the Southeastern Division operated 1,171 paint stores principally covering the lower east and gulf coast states, Puerto Rico, Virgin Islands, Grenada, Trinidad and Tobago, St.
At the end of 2023: • the Mid Western Division operated 1,189 paint stores primarily located in the midwestern and upper west coast states; • the Eastern Division operated 911 paint stores along the upper east coast and New England states; • the Canada Division operated 256 paint stores throughout Canada; • the Southeastern Division operated 1,188 paint stores principally covering the lower east and gulf coast states, Puerto Rico, Virgin Islands, Grenada, Trinidad and Tobago, St.
Manufacturing (1) Distribution (1) Leased Owned Total Leased Owned Total Consumer Brands Group Africa 1 1 1 1 Asia 3 4 7 3 2 5 Canada 3 3 1 1 Europe 1 17 18 3 15 18 Jamaica 1 1 1 1 Latin America 3 10 13 5 10 15 United States 6 40 46 11 10 21 Total 13 76 89 23 39 62 Performance Coatings Group Europe 1 5 6 4 2 6 United States 2 2 3 3 Total 1 7 8 7 2 9 (1) Certain geographic locations may contain both manufacturing and distribution facilities.
Manufacturing (1) Distribution (1) Leased Owned Total Leased Owned Total Consumer Brands Group Africa 1 1 1 1 Asia 3 6 9 3 3 6 Canada 3 3 1 1 Europe 2 17 19 3 15 18 Jamaica 1 1 1 1 Latin America 12 12 6 10 16 United States 6 42 48 11 12 23 Total 11 82 93 24 42 66 Performance Coatings Group Asia 2 2 2 2 Europe 1 7 8 4 4 8 United States 1 1 3 3 Total 3 8 11 9 4 13 (1) Certain geographic locations may contain both manufacturing and distribution facilities.
The operations of The Americas Group included a leased distribution facility in Uruguay and 4,931 company-operated specialty paint stores, of which 216 were owned, in the United States, Canada, Puerto Rico, Virgin Islands, Grenada, Trinidad and Tobago, St. Maarten, Jamaica, Curacao, Aruba, St. Lucia, Uruguay, Brazil, Chile, Peru, Mexico, Ecuador and Barbados at December 31, 2022.
The operations of the Paint Stores Group included 4,694 company-operated specialty paint stores, of which 205 were owned, in the United States, Canada, Puerto Rico, Virgin Islands, Grenada, Trinidad and Tobago, St. Maarten, Jamaica, Curacao, Aruba, St. Lucia and Barbados at December 31, 2023.
These paint stores are divided into six separate operating divisions that are responsible for the sale of predominantly architectural, protective and marine and related products through the paint stores located within their geographical region.
These paint stores are divided into five separate operating divisions based on their geographical region and are responsible for the sale of predominantly Sherwin-Williams ® and other controlled brand architectural paint and coatings, protective and marine products, OEM product finishes and related products.
Refer to Item 7 for further information on the construction of our new headquarters and research and development center. Our principal manufacturing and distribution facilities are located as set forth below. We believe our manufacturing and distribution facilities are well-maintained and are suitable and adequate, with sufficient productive capacity, to meet our current needs.
Construction of the Company’s new global headquarters and research and development center is expected to be completed in 2024. Refer to Item 7 for further information on the construction of our new global headquarters and research and development center. Our principal manufacturing and distribution facilities are located as set forth below.
ITEM 2. PROPERTIES We own our world headquarters located in Cleveland, Ohio, which includes the world headquarters for The Americas, Consumer Brands and Performance Coatings Groups and the Administrative segment. The Company has entered into an agreement to sell its current headquarters and its research and development center. The sale is expected to be completed during 2023.
ITEM 2. PROPERTIES The Company’s global headquarters, which includes the global headquarters for the Paint Stores, Consumer Brands and Performance Coatings Groups and the Administrative segment, is located in Cleveland, Ohio. During 2023, the Company closed on a transaction to sell and subsequently lease back its current headquarters and research and development center.
All real property within the Administrative segment is owned by us. For additional information regarding real property within the Administrative segment, see the information set forth in Item 1 of this report, which is incorporated herein by reference. For additional information regarding real property leases, see Note 10 to the Consolidated Financial Statements in Item 8.
All real property within the Administrative segment is owned with the exception of the current global headquarters, current research and development center and new global headquarters currently under construction. For additional information regarding real property within the Administrative segment, see information set forth in Item 1 and Item 7 of this report, which are incorporated herein by reference.
The Performance Coatings Group also operated 94 branches internationally, of which 7 were owned, at December 31, 2022, consisting of branches in Europe (47), Canada (22), Chile (11), Mexico (5), Peru (3), Vietnam (3), Ecuador (2), and Brazil (1). During 2022, this segment added 35 net new branches, consisting of 39 opened or acquired branches and 4 branches closed.
International locations consisted of branches in Europe (47), Canada (22), Chile (11), Mexico (5), Peru (3), Ecuador (2), Brazil (2), Thailand (2), Indonesia (2), Vietnam (1) and China (1). During 2023, this segment added 5 net new branches, consisting of 8 opened or acquired branches and 3 branches closed.
Maarten, Jamaica, Curacao, Aruba, St. Lucia and Barbados; • the Southwestern Division operated 1,128 paint stores in the central plains and the lower west coast states; and • the Latin America Division operated 307 paint stores in Uruguay, Brazil, Chile, Peru, Mexico and Ecuador.
Maarten, Jamaica, Curacao, Aruba, St. Lucia and Barbados; and • the Southwestern Division operated 1,150 paint stores in the central plains and lower west coast states. During 2023, the Paint Stores Group opened 70 net new stores, consisting of 76 new stores opened and 6 stores closed.
Added
We believe our manufacturing and distribution facilities are well-maintained, suitable and adequate, with sufficient productive capacity, to meet our current needs.
Added
The Consumer Brands Group operated 318 specialty paint stores in Latin America at December 31, 2023. These stores market and sell Sherwin-Williams ® and other controlled brand architectural paint and coatings, protective and marine products, OEM product finishes and related products which are branded for the Latin America market.
Added
These paint stores are located in Mexico (162), Chile (58), Brazil (50), Ecuador (37) and Uruguay (11).
Added
For additional information regarding real property leases, see Note 10 to the Consolidated Financial Statements in Item 8.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeGarceau has served as Senior Vice President, General Counsel and Secretary since August 2017. Ms. Garceau has been employed with the Company since February 2014. Mr. Jaye has served as Senior Vice President - Investor Relations and Corporate Communications since June 2019. Mr. Jaye served as Vice President - Investor Relations from October 2017 to June 2019. Mr.
Biggest changeJaye has served as Senior Vice President – Investor Relations and Corporate Communications since June 2019. Mr. Jaye served as Vice President – Investor Relations from October 2017 to June 2019. Mr. Jaye has been employed with the Company since October 2017. Mr. Sofish has served as Senior Vice President – Human Resources since January 2023. Mr.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 17 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following is the name, age and position of each of our executive officers and all prior positions held by each person during the last five years.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 19 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following is the name, age and position of each of our executive officers and all prior positions held by each person during the last five years.
Morikis has served as Chairman since January 2017 and Chief Executive Officer since January 2016. Mr. Morikis also served as President from March 2021 to March 2022 and October 2006 to March 2019 and Chief Operating Officer from October 2006 to January 2016. Mr.
Morikis has served as Chairman since January 2017, serving as Executive Chairman since January 2024. Mr. Morikis served as Chief Executive Officer from January 2016 to January 2024, President from March 2021 to March 2022 and October 2006 to March 2019 and Chief Operating Officer from October 2006 to January 2016. Mr.
Executive officers are generally elected annually by the Board of Directors and hold office until their successors are elected and qualified or until their earlier death, resignation or removal. Name Age Position John G. Morikis 59 Chairman and Chief Executive Officer, Director Heidi G. Petz 48 President and Chief Operating Officer Allen J.
Executive officers are generally elected annually by the Board of Directors and hold office until their successors are elected and qualified or until their earlier death, resignation or removal. Name Age Position John G. Morikis 60 Executive Chairman, Director Heidi G. Petz 49 President and Chief Executive Officer, Director Allen J.
Morikis has served as a Director since October 2015 and has been employed with the Company since December 1984. Ms. Petz has served as President and Chief Operating Officer since March 2022. Ms.
Morikis has served as a Director since October 2015 and has been employed with the Company since December 1984. Ms. Petz has served as President since March 2022 and Chief Executive Officer since January 2024. Ms.
Mistysyn 54 Senior Vice President - Finance and Chief Financial Officer Jane M. Cronin 55 Senior Vice President - Enterprise Finance Mary L. Garceau 50 Senior Vice President, General Counsel and Secretary James R. Jaye 56 Senior Vice President - Investor Relations and Corporate Communications Gregory P. Sofish 57 Senior Vice President - Human Resources Bryan J.
Mistysyn 55 Senior Vice President – Finance and Chief Financial Officer Jane M. Cronin 56 Senior Vice President – Enterprise Finance Mary L. Garceau 51 Senior Vice President – Chief Legal Officer and Secretary James R. Jaye 57 Senior Vice President – Investor Relations and Corporate Communications Gregory P. Sofish 58 Senior Vice President – Human Resources Bryan J.
Petz served as President, The Americas Group from March 2021 to March 2022, Senior Vice President, Marketing, The Americas Group from November 2020 to March 2021 and President, Consumer Brands Group from September 2020 to November 2020. Also within the Consumer Brands Group, Ms.
Petz served as Chief Operating Officer from March 2022 to January 2024, President, The Americas Group from March 2021 to March 2022, Senior Vice President, Marketing, The Americas Group from November 2020 to March 2021 and President, Consumer Brands Group from September 2020 to November 2020. Also within the Consumer Brands Group, Ms.
Mr. Jorgenrud has served as President, Performance Coatings Group since March 2022. Mr. Jorgenrud served as President & General Manager, General Industrial Division, Performance Coatings Group from January 2020 to March 2022 and President & General Manager, Protective & Marine Division, Performance Coatings Group from June 2017 to December 2019. Mr.
Jorgenrud served as President, Performance Coatings Group from March 2022 to January 2024, President & General Manager, General Industrial Division, Performance Coatings Group from January 2020 to March 2022 and President & General Manager, Protective & Marine Division, Performance Coatings Group from June 2017 to January 2020. Mr.
Petz served as President & General Manager, Retail North America from March 2019 to September 2020 and Senior Vice President, Marketing from June 2017 to March 2019. Ms. Petz joined the Company in June 2017 in connection with the Valspar acquisition. Mr. Mistysyn has served as Senior Vice President - Finance and Chief Financial Officer since January 2017. Mr.
Petz served as President & General Manager, Retail North America from March 2019 to September 2020 and Senior Vice President, Marketing from June 2017 to March 2019. Ms. Petz has served as a Director since October 2023 and joined the Company in June 2017 in connection with the Valspar acquisition. Mr.
Mistysyn has been employed with the Company since June 1990. Ms. Cronin has served as Senior Vice President - Enterprise Finance since July 2022. Ms. Cronin served as Senior Vice President - Corporate Controller from October 2016 to July 2022. Ms. Cronin has been employed with the Company since September 1989. Ms.
Mistysyn has served as Senior Vice President – Finance and Chief Financial Officer since January 2017. Mr. Mistysyn has been employed with the Company since June 1990. Ms. Cronin has served as Senior Vice President – Enterprise Finance since July 2022. Ms. Cronin served as Senior Vice President – Corporate Controller from October 2016 to July 2022. Ms.
Jaye has been employed with the Company since October 2017. Mr. Sofish has served as Senior Vice President - Human Resources since January 2023. Mr. Sofish served as Vice President, Total Rewards from August 2019 to January 2023 and Vice President, Executive Compensation from March 2015 to August 2019. Mr. Sofish has been employed with the Company since September 1996.
Sofish served as Vice President, Total Rewards from August 2019 to January 2023 and Vice President, Executive Compensation from March 2015 to August 2019. Mr. Sofish has been employed with the Company since September 1996. Mr. Young has served as Senior Vice President – Corporate Strategy and Development since March 2021. Mr.
Rea served within the Consumer Brands Group as President of North America Sales from November 2020 to November 2021, Senior Vice President of Sales, Retail and National Accounts from November 2019 to November 2020, Senior Vice President of Sales, Lowe’s Business Unit from March 2018 to November 2019 and Senior Vice President of Sales, National Accounts from August 2017 to February 2018.
Rea served within the Consumer Brands Group as President of North America Sales from November 2020 to November 2021, Senior Vice President of Sales, Retail and National Accounts from November 2019 to November 2020 and Senior Vice President of Sales, Lowe’s Business Unit from March 2018 to November 2019. Mr. Rea has been employed with the Company since April 1993.
Mr. Young has served as Senior Vice President - Corporate Strategy and Development since March 2021. Mr. Young served as Vice President - Corporate Strategy and Development from June 2017 to March 2021. Mr. Young joined the Company in June 2017 in connection with the Valspar acquisition. Mr. Binns has served as President, The Americas Group since March 2022. Mr.
Young served as Vice President – Corporate Strategy and Development from June 2017 to March 2021. Mr. Young joined the Company in June 2017 in connection with the Valspar acquisition. 20 Table of Contents Mr. Binns has served as President, Global Architectural since January 2024. Mr.
Young 47 Senior Vice President - Corporate Strategy and Development Justin T. Binns 47 President, The Americas Group Karl J. Jorgenrud 46 President, Performance Coatings Group Todd D. Rea 48 President, Consumer Brands Group Joseph F. Sladek 52 President & General Manager, Global Supply Chain Division, Consumer Brands Group Mr.
Young 48 Senior Vice President – Corporate Strategy and Development Justin T. Binns 48 President, Global Architectural Karl J. Jorgenrud 47 President, Global Industrial Todd D. Rea 49 President, Consumer Brands Group Colin M. Davie 54 President & General Manager, Global Supply Chain Division, Consumer Brands Group Mr.
Mr. Rea has been employed with the Company since April 1993. Mr. Sladek has served as President & General Manager, Global Supply Chain Division, Consumer Brands Group since January 2021. Mr.
Mr. Davie has served as President & General Manager, Global Supply Chain Division, Consumer Brands Group since January 2024. Mr.
Binns served as President, Performance Coatings Group from November 2020 to March 2022, President & General Manager, Automotive Finishes Division, 18 Table of Contents Performance Coatings Group from July 2018 to November 2020 and President & General Manager, Eastern Division, The Americas Group from October 2016 to July 2018. Mr. Binns has been employed with the Company since August 1997.
Binns served as President, Paint Stores Group from January 2023 to January 2024, President, The Americas Group from March 2022 to January 2023, President, Performance Coatings Group from November 2020 to March 2022 and President & General Manager, Automotive Finishes Division, Performance Coatings Group from July 2018 to November 2020. Mr.
Removed
Sladek served within the Global Supply Chain Division, Consumer Brands Group as Senior Vice President, Global Operations & Engineering from August 2020 to January 2021, Senior Vice President, International & Industrial Operations from April 2019 to August 2020 and Vice President, Excellence Initiatives from March 2017 to March 2019. Mr.
Added
Cronin has been employed with the Company since September 1989. Ms. Garceau has served as Senior Vice President – Chief Legal Officer and Secretary since February 2024. Ms. Garceau served as Senior Vice President, General Counsel and Secretary from August 2017 to February 2024. Ms. Garceau has been employed with the Company since February 2014. Mr.
Removed
Sladek has been employed with the Company since May 2007. 19 Table of Contents PART II
Added
Binns has been employed with the Company since August 1997. Mr. Jorgenrud has served as President, Global Industrial since January 2024. Mr.
Added
Davie served as Senior Vice President and Chief Procurement Officer from March 2022 to January 2024, Senior Vice President – Purchasing from October 2021 to March 2022, President & General Manager, Industrial Wood Division, Performance Coatings Group from March 2019 to October 2021 and President & General Manager, Engineered Polymer Solutions, Performance Coatings Group from June 2017 to March 2019.
Added
Mr. Davie joined the Company in June 2017 in connection with the Valspar acquisition. 21 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePeriod Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of a Publicly Announced Plan Maximum Number of Shares that May Yet Be Purchased Under the Plan October 1 – October 31 Share repurchase program (1) 150,000 $ 223.07 150,000 45,675,000 Employee transactions (2) 2,281 $ 211.09 N/A November 1 – November 30 Share repurchase program (1) 450,000 $ 219.24 450,000 45,225,000 Employee transactions (2) — $ — N/A December 1 – December 31 Share repurchase program (1) — $ — — 45,225,000 Employee transactions (2) 37 $ 252.23 N/A Total Share repurchase program (1) 600,000 $ 220.20 600,000 45,225,000 Employee transactions (2) 2,318 $ 211.75 N/A (1) Shares were purchased through the Company’s publicly announced share repurchase program.
Biggest changePeriod Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of a Publicly Announced Plan Maximum Number of Shares that May Yet Be Purchased Under the Plan October 1 – October 31 Share repurchase program (1) 350,000 $ 240.35 350,000 41,075,000 Employee transactions (2) 593 $ 249.50 N/A November 1 – November 30 Share repurchase program (1) 950,000 $ 268.86 950,000 40,125,000 Employee transactions (2) 1,829 $ 261.55 N/A December 1 – December 31 Share repurchase program (1) 500,000 $ 292.87 500,000 39,625,000 Employee transactions (2) 1,461 $ 290.10 N/A Total Share repurchase program (1) 1,800,000 $ 269.99 1,800,000 39,625,000 Employee transactions (2) 3,883 $ 270.45 N/A (1) Shares were purchased through the Company’s publicly announced share repurchase program.
Issuer Purchases of Equity Securities The following table sets forth a summary of the Company’s purchases of common stock during the fourth quarter of 2022.
Issuer Purchases of Equity Securities The following table sets forth a summary of the Company’s purchases of common stock during the fourth quarter of 2023.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the New York Stock Exchange and traded under the symbol SHW. The number of shareholders of record at January 31, 2023 was 5,232.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the New York Stock Exchange and traded under the symbol SHW. The number of shareholders of record at January 31, 2024 was 5,064.
The cumulative five-year total return assumes $100 was invested on December 31, 2017 in Sherwin-Williams common stock, the S&P 500 and the peer group. The cumulative five-year total return, including reinvestment of dividends, represents the cumulative value through December 31, 2022.
The cumulative five-year total return assumes $100 was invested on December 31, 2018 in Sherwin-Williams common stock, the S&P 500 and the peer group. The cumulative five-year total return, including reinvestment of dividends, represents the cumulative value through December 31, 2023.
(2) All shares were delivered to satisfy the exercise price and/or tax withholding obligations by employees who exercised stock options or had restricted stock units vest. 20 Table of Contents Comparison of Cumulative Total Return The following graph compares the cumulative total shareholder return on Sherwin-Williams common stock with the cumulative five-year total return of the companies listed on the Standard & Poor’s 500 Stock Index and the peer groups of companies selected on a line-of-business basis.
(2) All shares were delivered to satisfy the exercise price and/or tax withholding obligations by employees who exercised stock options or had restricted stock units vest. 22 Table of Contents Comparison of Cumulative Total Return The following graph compares the cumulative total shareholder return on the Company’s common stock (NYSE: SHW) with the cumulative five-year total return of the companies listed on the Standard & Poor’s 500 Stock Index and the peer groups of companies selected on a line-of-business basis.
The Company had remaining authorization at December 31, 2022 to purchase 45,225,000 shares. There is no expiration date specified for the program.
The Company had remaining authorization at December 31, 2023 to purchase 39,625,000 shares. There is no expiration date specified for the program.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear Ended December 31, 2022 The Americas Group Consumer Brands Group Performance Coatings Group Administrative Total Net external sales $ 12,661.0 $ 2,690.7 $ 6,793.5 $ 3.7 $ 22,148.9 Income before income taxes $ 2,436.6 $ 225.7 $ 734.9 $ (824.1) $ 2,573.1 as a % of Net external sales 19.2 % 8.4 % 10.8 % 11.6 % Restructuring expense — 41.1 22.2 — 63.3 Acquisition-related amortization expense (1) — 76.2 200.1 — 276.3 Adjusted segment profit $ 2,436.6 $ 343 $ 957.2 $ (824.1) $ 2,912.7 as a % of Net external sales 19.2 % 12.7 % 14.1 % 13.2 % Year Ended December 31, 2021 The Americas Group Consumer Brands Group Performance Coatings Group Administrative Total Net external sales $ 11,217.0 $ 2,721.6 $ 6,003.8 $ 2.2 $ 19,944.6 Income before income taxes $ 2,239.1 $ 358.4 $ 486.2 $ (835.1) $ 2,248.6 as a % of Net external sales 20.0 % 13.2 % 8.1 % 11.3 % Loss on Wattyl divestiture — — — 111.9 111.9 Acquisition-related amortization expense (1) — 82.8 211.2 — 294.0 Adjusted segment profit $ 2,239.1 $ 441.2 $ 697.4 $ (723.2) $ 2,654.5 as a % of Net external sales 20.0 % 16.2 % 11.6 % 13.3 % (1) Acquisition-related amortization expense consists primarily of the amortization of intangible assets related to the Valspar acquisition and is included in Amortization. 34 Table of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect amounts reported in the accompanying consolidated financial statements.
Biggest changeYear Ended December 31, 2023 Paint Stores Group Consumer Brands Group Performance Coatings Group Administrative Total Net sales $ 12,839.5 $ 3,365.6 $ 6,843.1 $ 3.7 $ 23,051.9 Income before income taxes $ 2,860.8 $ 309.3 $ 991.6 $ (1,051.8) $ 3,109.9 as a % of Net sales 22.3 % 9.2 % 14.5 % 13.5 % Items related to Restructuring Plan: Severance and other 14.2 (0.2) 1.3 15.3 Impairment of assets related to China divestiture 6.9 27.1 34.0 Gain on divestiture of domestic aerosol business (20.1) (20.1) Total — 21.1 (0.2) 8.3 29.2 Impairment related to trademarks 23.9 23.9 Devaluation of the Argentine Peso 30.8 11.0 41.8 Acquisition-related amortization expense (1) 69.3 196.8 266.1 Adjusted segment profit $ 2,860.8 $ 454.4 $ 1,199.2 $ (1,043.5) $ 3,470.9 as a % of Net sales 22.3 % 13.5 % 17.5 % 15.1 % Year Ended December 31, 2022 Paint Stores Group Consumer Brands Group Performance Coatings Group Administrative Total Net sales $ 11,963.3 $ 3,388.4 $ 6,793.5 $ 3.7 $ 22,148.9 Income before income taxes $ 2,348.1 $ 314.2 $ 734.9 $ (824.1) $ 2,573.1 as a % of Net sales 19.6 % 9.3 % 10.8 % 11.6 % Items related to Restructuring Plan: Severance and other 25.6 22.2 47.8 Impairment 15.5 15.5 Total — 41.1 22.2 — 63.3 Acquisition-related amortization expense (1) 76.2 200.1 276.3 Adjusted segment profit $ 2,348.1 $ 431.5 $ 957.2 $ (824.1) $ 2,912.7 as a % of Net sales 19.6 % 12.7 % 14.1 % 13.2 % (1) Acquisition-related amortization expense consists of the amortization of intangible assets related to the Valspar acquisition and is included in Selling, general and administrative expenses. 36 Table of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect amounts reported in the accompanying consolidated financial statements.
A reporting unit is an operating segment per the Segment Reporting Topic of the ASC or one level below the operating segment (component level) as determined by the availability of discrete financial information that is regularly reviewed by operating segment management or an aggregate of component levels of an operating segment having similar economic characteristics.
Per the Segment Reporting Topic of the ASC, a reporting unit is an operating segment or one level below the operating segment (component level) as determined by the availability of discrete financial information that is regularly reviewed by operating segment management or an aggregate of component levels of an operating segment having similar economic characteristics.
Operational management, considering industry and Company-specific historical and projected data, develops growth rates, sales projections and cash flow projections for each reporting unit. Terminal value rate determination follows common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant WACC and low long-term growth rates.
Operational management, considering industry and Company-specific historical and projected data, develops growth rates, sales projections and cash flow projections for each reporting unit. Terminal value rate determination follows common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant WACC and a low long-term growth rate.
These determinations were made based upon management’s best estimates, judgments and assumptions that were believed to be reasonable under the circumstances, giving due consideration to materiality. We do not believe there is a great likelihood that materially different amounts would be reported under different conditions or using different assumptions related to the accounting policies described below.
These determinations were made based upon management’s best estimates, judgments and assumptions that were believed to be reasonable under the circumstances, giving due consideration to materiality. We do not believe there is a great likelihood that materially different amounts would be reported under different conditions or using different assumptions related to the critical accounting policies and estimates described below.
The WACC methodology considers market and industry data as well as Company-specific risk factors for each reporting unit in determining the appropriate discount rates to be used. The discount rate utilized for each reporting unit is indicative of the return an investor would expect to receive for investing in such a business.
The WACC methodology considers market and industry data as well as Company-specific risk factors for each reporting unit in determining the appropriate discount rate to be used. The discount rate utilized for each reporting unit is indicative of the return an investor would expect to receive for investing in such a business.
Goodwill and Intangible Assets In accordance with the Goodwill and Other Intangibles Topic of the ASC, management performs impairment tests of goodwill and indefinite-lived intangible assets on an annual basis, as well as whenever an event occurs or circumstances change that indicate impairment has more likely than not occurred.
Goodwill and Intangible Assets In accordance with the Goodwill and Other Intangibles Topic of the ASC, management performs impairment tests of goodwill and indefinite-lived intangible assets on an annual basis, as well as whenever an event occurs or circumstances change that indicate impairment has occurred on a more likely than not basis.
Defined Contribution Savings Plan Participants in the Company’s salaried defined contribution savings plan are allowed to contribute up to the lesser of fifty percent of their annual compensation or the maximum dollar amount allowed under the Internal Revenue Code. The Company matches one hundred percent of all contributions up to six percent of eligible employee contributions.
Defined Contribution Savings Plan Participants in the Company’s defined contribution savings plan are allowed to contribute up to the lesser of fifty percent of their annual compensation or the maximum dollar amount allowed under the Internal Revenue Code. The Company matches one hundred percent of all contributions up to six percent of eligible employee contributions.
If the carrying value of the assets was deemed to not be recoverable, the impairment to be recognized is the amount by which the carrying value of the assets exceeds the estimated fair value of the assets as determined in accordance with the Fair Value Topic of the ASC.
If the carrying value of the assets is deemed to not be recoverable, the impairment to be recognized is the amount by which the carrying value of the assets exceeds the estimated fair value of the assets as determined in accordance with the Fair Value Topic of the ASC.
The reader should refer to the determination of net income and net operating cash in accordance with US GAAP disclosed in the Statements of Consolidated Income and Statements of Consolidated Cash Flows in Item 8.
The reader should refer to the determination of Net income and Net operating cash in accordance with US GAAP disclosed in the Statements of Consolidated Income and Statements of Condensed Consolidated Cash Flows in Item 8.
See Note 14 to the Consolidated Financial Statements in Item 8 for additional information concerning the Company’s defined contribution savings plan. 31 Table of Contents NON-GAAP FINANCIAL MEASURES Management utilizes certain financial measures that are not in accordance with US GAAP to analyze and manage the performance of the business. The required disclosures for these non-GAAP measures are shown below.
See Note 14 to the Consolidated Financial Statements in Item 8 for additional information concerning the Company’s defined contribution savings plan. 33 Table of Contents NON-GAAP FINANCIAL MEASURES Management utilizes certain financial measures that are not in accordance with US GAAP to analyze and manage the performance of the business. The required disclosures for these non-GAAP measures are shown below.
The Company continuously assesses its potential liability for investigation and remediation-related activities and adjusts its environmental-related accruals as information becomes available upon which more accurate costs can be reasonably estimated and as additional accounting guidelines are issued. Actual costs incurred may vary from the accrued estimates due to the inherent uncertainties involved.
The Company routinely assesses its potential liability for investigation and remediation-related activities and adjusts its environmental-related accruals as information becomes available upon which more accurate costs can be reasonably estimated and as additional accounting guidelines are issued. Actual costs incurred may vary from the accrued estimates due to the inherent uncertainties involved.
The Company believes that cash generated from operating activities and borrowings available under long-term and short-term debt, including its committed credit agreements and commercial paper program, will be sufficient for it to meet its contractual and other obligations and commercial commitments. The following tables summarize such obligations and commitments as of December 31, 2022.
The Company believes that cash generated from operating activities and borrowings available under long-term and short-term debt, including its committed credit agreements and commercial paper program, will be sufficient for it to meet its contractual and other obligations and commercial commitments. The following tables summarize such obligations and commitments as of December 31, 2023.
See Notes 1, 17 and 20 to the Consolidated Financial Statements in Item 8 for additional information related to the Company’s use of derivative instruments. 30 Table of Contents The Company believes it may be exposed to continuing market risk from foreign currency exchange rate and commodity price fluctuations.
See Notes 1, 17 and 20 to the Consolidated Financial Statements in Item 8 for additional information related to the Company’s use of derivative instruments. 32 Table of Contents The Company believes it may be exposed to continuing market risk from foreign currency exchange rate and commodity price fluctuations.
An optional qualitative assessment allows companies to skip the annual quantitative test if it is not more likely than not that impairment has occurred based on monitoring key Company financial performance metrics and macroeconomic conditions. The qualitative assessment is performed when deemed appropriate.
An optional qualitative assessment allows companies to forego the annual quantitative test if it is not more likely than not that impairment has occurred based on monitoring key Company financial performance metrics and macroeconomic conditions. The qualitative assessment is performed when deemed appropriate.
In 2022 and 2021, the Company entered into foreign currency forward contracts with maturity dates of less than twelve months primarily to hedge against value changes in foreign currency and cross currency swap contracts to hedge its net investment in European operations.
In 2023 and 2022, the Company entered into foreign currency forward contracts with maturity dates of less than twelve months primarily to hedge against value changes in foreign currency and cross currency swap contracts to hedge its net investment in European operations.
Management recorded the best estimate of net realizable value for obsolete and discontinued inventories based on historical experience and current trends through reductions to inventory cost by recording a provision included in Cost of goods sold.
Management records the best estimate of net realizable value for obsolete and discontinued inventories based on historical experience and current trends through reductions to inventory cost by recording a provision included in Cost of goods sold.
See Note 9 to the Consolidated Financial Statements in Item 8 for information concerning the Company’s defined benefit pension plans and other postretirement benefit plans. Environmental Matters The Company is involved with environmental investigation and remediation activities at some of its currently and formerly owned sites (including sites which were previously owned and/or operated by businesses acquired by the Company).
See Note 9 to the Consolidated Financial Statements in Item 8 for information concerning the Company’s defined benefit pension plans and other postretirement benefit plans. 38 Table of Contents Environmental Matters The Company is involved with environmental investigation and remediation activities at some of its currently and formerly owned sites (including sites which were previously owned and/or operated by businesses acquired by the Company).
The Company had seven components, some of which are aggregated due to similar economic characteristics, to form three reporting units (also the operating segments) with goodwill as of October 1, 2022, the date of the annual impairment test.
The Company had seven components, some of which are aggregated due to similar economic characteristics, to form three reporting units (also the operating segments) with goodwill as of October 1, 2023, the date of the annual impairment test.
No other impairments or risks for impairment were identified as a result of this review. The discounted cash flow and royalty savings valuation methodologies require management to make certain assumptions based upon information available at the time the valuations are performed. Actual results could differ from these assumptions.
No other impairments or risks for impairment were identified as a result of this review. The discounted cash flow and royalty savings valuation methodologies require management to make certain assumptions based upon information available at the time the valuations are performed from the perspective of a market participant. Actual results could differ from these assumptions.
The Company will also allocate payments between interest and repayment of the financing liability over the life of the agreement. Refer to Note 1 to the Consolidated Financial Statements within Item 8 for further information.
The Company will also allocate payments between interest and repayment of the financing liability over the life of the agreement. Refer to Note 11 to the Consolidated Financial Statements within Item 8 for further information.
The assumed health care cost trend rates for medical and prescription costs used to determine the projected benefit obligation for other postretirement benefit obligations at December 31, 2021 were 5.1% and 8.3%, respectively. The respective year-end assumptions described above for the Company’s defined benefit plans are also used to determine expense for the next year.
The assumed health care cost trend rates for medical and prescription costs used to determine the projected benefit obligation for other postretirement benefit obligations at December 31, 2022 were 5.5% and 8.3%, respectively. The respective year-end assumptions described above for the Company’s defined benefit plans are also used to determine expense for the next year.
To determine the obligations of such benefit plans, management uses actuaries to calculate such amounts using key assumptions such as discount rates, inflation, long-term investment returns, mortality, employee turnover, rate of compensation increases and medical and prescription drug costs. Management reviews all of these assumptions on an ongoing basis to ensure that the most current information available is being considered.
To determine the obligations of the benefit plans, management uses actuaries to calculate such amounts using key assumptions which include discount rates, inflation rates, long-term investment returns, mortality, employee turnover, rate of compensation increases and medical and prescription drug costs. Management reviews all of these assumptions on an ongoing basis to ensure that the most current information available is considered.
Environmental-Related Liabilities The operations of the Company, like those of other companies in the same industry, are subject to various federal, state and local environmental laws and regulations. These laws and regulations not only govern current operations and products, but also impose potential liability on the Company for past operations.
Environmental Matters The operations of the Company, like those of other companies in the same industry, are subject to various federal, state and local environmental laws and regulations. These laws and regulations not only govern current operations and products, but also impose potential liability on the Company for past operations.
The Company is structured into three reportable segments – The Americas Group, Consumer Brands Group and Performance Coatings Group (collectively, the Reportable Segments) – and an Administrative segment in the same way it is internally organized for assessing performance and making decisions regarding allocation of resources.
The Company is structured into three reportable segments – Paint Stores Group, Consumer Brands Group and Performance Coatings Group (collectively, the Reportable Segments) – and an Administrative segment in the same way it is internally organized for assessing performance and making decisions regarding the allocation of resources.
See Note 6 to the Consolidated Financial Statements in Item 8 for a discussion of the reductions in carrying value or useful life of long-lived assets in accordance with the Property, Plant and Equipment Topic of the ASC. See Note 1 to the Consolidated Financial Statements in Item 8 for the Property, Plant and Equipment accounting policy.
See Note 6 to the Consolidated Financial Statements in Item 8 for a discussion of the reductions in carrying value or useful life of long-lived assets in accordance with the Property, Plant and Equipment Topic of the ASC.
Refer to “Real Estate Financing” section herein for further information. (2) Relate to open purchase orders for raw materials at December 31, 2022. (3) Relate primarily to estimated future capital contributions to investments in the U.S. affordable housing and historic renovation real estate partnerships and various other contractual obligations.
Refer to “Real Estate Financing” section herein for further information. (2) Relates to open purchase orders for raw materials at December 31, 2023. (3) Relates primarily to estimated future capital contributions for investments in the U.S. affordable housing and historic renovation real estate partnerships and various other contractual obligations.
The rate of compensation increases used to determine the projected benefit obligation at December 31, 2022 was 3.0% for the domestic pension plan and 3.4% for foreign pension plans, which was comparable to the rates used in the prior year.
The rate of compensation increases used to determine the projected benefit obligation at December 31, 2023 was 3.0% for the domestic pension plan and 3.3% for foreign pension plans, which was comparable to the rates used in the prior year.
We have plans to invest in the construction of new facilities, including our new global headquarters (new headquarters) in downtown Cleveland, Ohio and new research and development (R&D) center in the Cleveland suburb of Brecksville, and in the expansion of certain existing manufacturing and distribution facilities.
We have plans to continue to invest in the construction of new facilities, including our new global headquarters in downtown Cleveland, Ohio and new research and development center in the Cleveland suburb of Brecksville, and in the expansion of certain existing manufacturing and distribution facilities.
Refer to the “Non-GAAP Financial Measures” section in Item 7 for a reconciliation of EBITDA to net income. At December 31, 2022, the Company was in compliance with the covenant and expects to remain in compliance. The Company’s notes, debentures and revolving credit agreements contain various default and cross-default provisions.
Refer to the “Non-GAAP Financial Measures” section for a reconciliation of EBITDA to Net income. At December 31, 2023, the Company was in compliance with the covenant and expects to remain in compliance. The Company’s notes, debentures and revolving credit agreements contain various default and cross-default provisions.
See Note 21 to the Consolidated Financial Statements in Item 8 for information concerning income taxes. 37 Table of Contents
See Note 21 to the Consolidated Financial Statements in Item 8 for information concerning income taxes. 39 Table of Contents
We plan to expand our footprint by opening 80 to 100 new stores in the United States and Canada in 2023, and pursue acquisitions that align with our long-term growth strategy. We will also return value to our shareholders through the payment of dividends and the reinvestment of excess cash for share repurchases of Company stock.
We plan to 24 Table of Contents expand our footprint by opening 80 to 100 new stores in the United States and Canada in 2024, and pursue acquisitions that align with our long-term growth strategy. We will also return value to our shareholders through the payment of dividends and the reinvestment of excess cash for share repurchases of Company stock.
For comparisons of the years ended December 31, 2021 and 2020, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed on February 17, 2022.
For comparisons of the years ended December 31, 2022 and 2021, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed on February 22, 2023.
This quarterly dividend, if approved in each of the remaining quarters of 2023, would result in an annual dividend for 2023 of $2.42 per share or a 31% payout of 2022 diluted net income per share.
This quarterly dividend, if approved in each of the remaining quarters of 2024, would result in an annual dividend for 2024 of $2.86 per share, or a 31% payout of 2023 diluted net income per share.
The Company acquires its common stock for general corporate purposes, and depending on its cash position and market conditions, it may acquire shares in the future. The Company had remaining authorization from its Board of Directors at December 31, 2022 to purchase 45.2 million shares of its common stock.
The Company acquires its common stock for general corporate purposes, and depending on its cash position and market conditions, it may acquire shares in the future. The Company had remaining authorization from its Board of Directors at December 31, 2023 to purchase 39.6 million shares of its common stock.
Defined Benefit Pension and Other Postretirement Benefit Plans To determine the Company’s ultimate obligation under its defined benefit pension plans and other postretirement benefit plans, management must estimate the future cost of benefits and attribute that cost to the time period during which each covered employee works.
Defined Benefit Pension and Other Postretirement Benefit Plans To determine the Company’s ultimate obligation under its defined benefit pension plans and other postretirement benefit plans, management estimates the future cost of benefits and attributes that cost to the time period during which each covered employee works.
The increase in the discount rates was primarily due to higher interest rates. In deciding on the rates of compensation increases, management considered historical Company increases as well as expectations for future increases.
The decrease in the discount rates was primarily due to lower interest rates. In deciding on the rates of compensation increases, management considered historical Company increases as well as expectations for future increases.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
Undiscounted cash flows were used to calculate the recoverable value of long-lived assets to determine if such assets were not recoverable.
Undiscounted cash flows are used to calculate the recoverable value of long-lived assets to determine if such assets are recoverable.
See the Statements of Consolidated Shareholders’ Equity and Statements of Consolidated Comprehensive Income in Item 8 for additional information. The Company purchased 3.4 million shares of its common stock for treasury purposes through open market purchases during 2022.
See the Statements of Consolidated Shareholders’ Equity and Statements of Consolidated Comprehensive Income in Item 8 for additional information. The Company purchased 5.6 million shares of its common stock for treasury purposes through open market purchases during 2023.
Valuation of Long-Lived Assets In accordance with the Property, Plant and Equipment Topic of the ASC, if events or changes in circumstances indicated that the carrying value of long-lived assets, including Operating lease right-of-use assets, may not be recoverable or the useful life had changed, impairment tests were performed or the useful life was adjusted.
Valuation of Long-Lived Assets In accordance with the Property, Plant and Equipment Topic of the ASC, if events or changes in circumstances indicate that the carrying value of long-lived assets, including Operating lease right-of-use assets, may not be recoverable or the useful life has changed, impairment tests are performed or the useful life is adjusted.
Defined Benefit Pension and Other Postretirement Benefit Plans In accordance with the accounting prescribed by the Retirement Benefits Topic of the ASC, the Company’s total liability for unfunded or underfunded defined benefit pension plans decreased $20.5 million to $58.5 million primarily due to changes in the actuarial assumptions.
Defined Benefit Pension and Other Postretirement Benefit Plans In accordance with the accounting prescribed by the Retirement Benefits Topic of the ASC, the Company’s total liability for unfunded or underfunded defined benefit pension plans increased $10.5 million to $69.0 million primarily due to changes in actuarial assumptions.
The assumed health care cost trend rates used to determine the projected benefit obligation for other postretirement benefit obligations at December 31, 2022 were 5.5% and 8.3% for medical and prescription drug cost increases, respectively, both decreasing gradually to 4.5% in 2032.
The assumed health care cost trend rates used to determine the projected benefit obligation for other postretirement benefit obligations at December 31, 2023 were 6.0% and 9.0% for medical and prescription drug cost increases, respectively, both decreasing gradually to 4.5% in 2032.
As an indicator that each reporting unit has been valued appropriately through the use of the discounted cash flow valuation model, the aggregate of all reporting units’ fair value is reconciled to the total market capitalization of the Company.
As an indicator that each reporting unit has been valued appropriately through the use of the discounted cash flow valuation model, the aggregate of all reporting units’ fair value is reconciled to the total market capitalization of the Company within a reasonable and supportable control premium.
The expected long-term rate of return on assets for the foreign defined benefit pension plans increased to 5.6% at December 31, 2022 from 3.2% at December 31, 2021. In developing the assumed health care cost trend rates, management considered industry data, historical Company experience and expectations for future health care costs.
The expected long-term rate of return on assets for the foreign defined benefit pension plans decreased to 4.8% at December 31, 2023 from 5.5% at December 31, 2022. In developing the assumed health care cost trend rates, management considered industry data, historical Company experience and expectations for future health care costs.
The total number of stores in operation at December 31, 2022 was 4,931 in the United States, Canada, Latin America and the Caribbean. The Americas Group’s objective is to expand its store base by an average of 2% each year, primarily through organic growth. Sales of products other than paint increased approximately 0.2% over last year.
The total number of stores in operation at December 31, 2023 was 4,694 in the United States, Canada and the Caribbean region. The Paint Stores Group’s objective is to expand its store base by an approximate average of 2% each year, primarily through organic growth. Sales of products other than paint increased approximately 5.0% over last year.
Management believes that the Company has properly accrued for all known liabilities that existed and those where a loss was deemed probable for which a fair value was available or an amount could be reasonably estimated in accordance with US GAAP.
Management accrues for all known liabilities that existed and those where a loss was deemed probable for which a fair value was available or an amount could be reasonably estimated in accordance with US GAAP.
In establishing the expected long-term rate of return on plan assets, management considered the historical rates of return, the nature of investments and an expectation for future investment strategies. The expected long-term rate of return on assets for the domestic defined benefit pension plan increased to 6.3% at December 31, 2022 from 5.0% at December 31, 2021.
In establishing the expected long-term rate of return on plan assets, management considered the historical rates of return, the nature of investments and an expectation for future investment strategies. The expected long-term rate of return on assets for the domestic defined benefit pension plan was 6.3% at December 31, 2023 and 2022.
See Notes 23 and 24 to the Consolidated Financial Statements in Item 8 for additional information on the Company’s Reportable Segments.
See Note 23 to the Consolidated Financial Statements in Item 8 for additional information on the Company’s Reportable Segments.
At the time of goodwill impairment testing (if performing a quantitative assessment), management determines fair value through the use of a discounted cash flow valuation model incorporating discount rates commensurate with the risks involved for each reporting unit. If the calculated fair value is less than the current carrying value, then impairment of the reporting unit exists.
At the time of goodwill impairment testing (if performing a quantitative assessment), management determines fair value through the use of a discounted cash flow valuation model incorporating discount rates commensurate with the risks involved for each reporting unit.
The assumed discount rate used to determine the projected benefit obligation for foreign defined benefit pension plans increased to 5.1% at December 31, 2022 from 2.3% at December 31, 2021. The assumed discount rate used to determine the projected benefit obligation for other postretirement benefit obligations increased to 5.2% at December 31, 2022 from 2.8% at December 31, 2021.
The assumed discount rate used to determine the projected benefit obligation for foreign defined benefit pension plans decreased to 4.8% at December 31, 2023 from 5.1% at December 31, 2022. The assumed discount rate used to determine the projected benefit obligation for other postretirement benefit obligations decreased to 5.0% at December 31, 2023 from 5.2% at December 31, 2022.
The use of a discounted cash flow valuation model to determine estimated fair value is common practice in impairment testing. The key assumptions used in the discounted cash flow valuation model for impairment testing include discount rates, growth rates, cash flow projections and terminal value rates. Discount rates are set by using the Weighted Average Cost of Capital (WACC) methodology.
The key assumptions used in the discounted cash flow valuation model for impairment testing include a discount rate, growth rates, cash flow projections and a terminal value rate. Discount rates are set by using the Weighted Average Cost of Capital (WACC) methodology.
Income Taxes The Company estimated income taxes for each jurisdiction that it operated in. This involved estimating taxable earnings, specific taxable and deductible items, the likelihood of generating sufficient future taxable income to utilize deferred tax assets and possible exposures related to future tax audits.
Income Taxes The Company estimates income taxes for each jurisdiction in which it conducts operations. This involves estimating taxable earnings, specific taxable and deductible items, the likelihood of generating sufficient future taxable income to utilize deferred tax assets and possible exposures related to future tax audits.
The Company’s liability for other postretirement benefits decreased $122.6 million to $153.8 million at December 31, 2022 due primarily to a plan amendment and changes in the actuarial assumptions. The assumed discount rate used to determine the projected benefit obligation for the domestic defined benefit pension plan increased to 5.3% at December 31, 2022 from 3.1% at December 31, 2021.
The Company’s liability for other postretirement benefits decreased $6.6 million to $147.2 million at December 31, 2023 due primarily to changes in the actuarial assumptions. The assumed discount rate used to determine the projected benefit obligation for the domestic defined benefit pension plan decreased to 5.1% at December 31, 2023 from 5.3% at December 31, 2022.
Market Risk The Company is exposed to market risk associated with interest rate, foreign currency and commodity fluctuations. The Company occasionally utilizes derivative instruments as part of its overall financial risk management policy, but does not use derivative instruments for speculative or trading purposes.
Litigation See Note 12 to the Consolidated Financial Statements in Item 8 for information concerning litigation. Market Risk The Company is exposed to market risk associated with interest rate, foreign currency and commodity fluctuations. The Company occasionally utilizes derivative instruments as part of its overall financial risk management policy, but does not use derivative instruments for speculative or trading purposes.
The Company’s matching contributions to the defined contribution savings plan charged to operations were $140.0 million in 2022 compared to $133.7 million in 2021. At December 31, 2022, there were 19,689,197 shares of the Company’s common stock being held by the defined contribution savings plan, representing 7.6% of the total number of voting shares outstanding.
The Company’s matching contributions to the defined contribution savings plan charged to operations were $153.9 million in 2023 compared to $140.0 million in 2022. At December 31, 2023, there were 18,680,108 shares of the Company’s common stock being held by the defined contribution savings plan, representing 7.3% of the total number of voting shares outstanding.
Total debt, net of Cash and cash equivalents, was $10.371 billion and was 2.9 times the Company’s Adjusted EBITDA in 2022. Net Working Capital Net working capital, defined as Total current assets less Total current liabilities, increased $612.8 million to a deficit of $53.0 million at December 31, 2022 from a deficit of $665.8 million at December 31, 2021.
Total debt, net of Cash and cash equivalents, was $9.574 billion and was 2.3 times the Company’s Adjusted EBITDA in 2023. Net Working Capital Net working capital, defined as Total current assets less Total current liabilities, decreased $1.061 billion to a deficit of $1.114 billion at December 31, 2023 from a deficit of $53.0 million at December 31, 2022.
The increase was primarily attributable to the generation of $2.020 billion of net income and benefits from stock option exercises and the recognition of stock-based compensation expense of $134.0 million. This was partially offset by the repurchase of $883.2 million in Treasury stock and the payment of $618.5 million in cash dividends.
The increase was primarily attributable to the generation of $2.389 billion of Net income and benefits from stock option exercises and the recognition of stock-based compensation expense of $203.9 million. This was partially offset by the repurchase of $1.432 billion in Treasury stock and the payment of $623.7 million in cash dividends.
Amount of Commitment Expiration Per Period Commercial Commitments Total Less Than 1 Year 1–3 Years 3–5 Years More Than 5 Years Standby letters of credit $ 149.8 $ 149.8 Surety bonds 240.7 240.7 Total commercial commitments $ 390.5 $ 390.5 $ — $ — $ — 29 Table of Contents Warranties The Company offers product warranties for certain products.
Amount of Commitment Expiration Per Period Commercial Commitments Total Less Than 1 Year 1–3 Years 3–5 Years More Than 5 Years Standby letters of credit $ 146.2 $ 146.2 Surety bonds 230.4 230.4 Total commercial commitments $ 376.6 $ 376.6 $ — $ — $ — 31 Table of Contents Warranties The Company offers product warranties for certain products.
See Note 9 to the Consolidated Financial Statements in Item 8 for additional information on the Company’s obligations and funded status of its defined benefit pension plans and other postretirement benefits.
The credit for 2024 is primarily due to amortization of the impact of a plan amendment executed in 2022. See Note 9 to the Consolidated Financial Statements in Item 8 for additional information on the Company’s obligations and funded status of its defined benefit pension plans and other postretirement benefits.
Changes in the Company’s accrual for product warranty claims during 2022 and 2021, including customer satisfaction settlements during the year, were as follows: 2022 2021 Balance at January 1 $ 35.2 $ 43.3 Charges to expense 30.1 27.5 Settlements (29.1) (35.6) Balance at December 31 $ 36.2 $ 35.2 Shareholders’ Equity Shareholders’ equity increased $664.9 million to $3.102 billion at December 31, 2022 from $2.437 billion last year.
Changes in the Company’s accrual for product warranty claims during 2023 and 2022, including customer satisfaction settlements during the year, were as follows: 2023 2022 Balance at January 1 $ 36.2 $ 35.2 Charges to expense 37.0 30.1 Settlements (32.8) (29.1) Balance at December 31 $ 40.4 $ 36.2 Shareholders’ Equity Shareholders’ equity increased $613.7 million to $3.716 billion at December 31, 2023 from $3.102 billion last year.
The Company will continue to recognize the related assets within Property, plant and equipment, net on the Consolidated Balance Sheets under US GAAP. These assets will be subject to depreciation over their useful lives in accordance with the Company’s accounting policies.
During 2023, $23.8 million of interest was capitalized with the long-term portion of the liability in Other long-term liabilities. The Company will continue to recognize the related assets within Property, plant and equipment, net on the Consolidated Balance Sheets under US GAAP. These assets will be subject to depreciation over their useful lives in accordance with the Company’s accounting policies.
The Company’s 2022 annual cash dividend of $2.40 per share represented 34% of 2021 diluted net income per share. The 2022 annual dividend represented the 44 th consecutive year of increased dividend payments. On February 15, 2023, the Board of Directors increased the quarterly cash dividend to $0.605 per share.
The Company’s 2023 annual cash dividend of $2.42 per share represented 31% of 2022 diluted net income per share. The 2023 annual dividend represented the 45 th consecutive year of increased dividend payments. On February 14, 2024, the Board of Directors increased the quarterly cash dividend to $0.715 per share.
If the usefulness of an asset was determined to be impaired, then management estimated a new useful life based on the period of time for projected uses of the asset. Fair value approaches and changes in useful life required management to make certain assumptions based upon information available at the time the valuation or determination was performed.
If the usefulness of an asset is determined to be impaired, an updated useful life is assessed based on the period of time for projected use of the asset. Fair value approaches and changes in useful life are based on certain assumptions and information available at the time the valuation or determination is performed.
The following table summarizes Free cash flow as calculated by management for the years indicated below: Year Ended December 31, 2022 2021 Net operating cash $ 1,919.9 $ 2,244.6 Capital expenditures (644.5) (372.0) Cash dividends (618.5) (587.1) Free cash flow $ 656.9 $ 1,285.5 32 Table of Contents Adjusted Diluted Net Income Per Share Management of the Company believes that investors’ understanding of the Company’s operating performance is enhanced by the disclosure of diluted net income per share excluding Valspar acquisition-related amortization expense in 2022 and 2021, restructuring expense in 2022, and the loss on the divestiture of Wattyl in 2021.
The following table summarizes free cash flow as calculated by management for the years indicated below: Year Ended December 31, 2023 2022 Net operating cash $ 3,521.9 $ 1,919.9 Capital expenditures (888.4) (644.5) Cash dividends (623.7) (618.5) Free cash flow $ 2,009.8 $ 656.9 34 Table of Contents Adjusted Diluted Net Income Per Share Management of the Company believes that investors’ understanding of the Company’s operating performance is enhanced by the disclosure of diluted net income per share excluding Valspar acquisition-related amortization expense and certain other adjustments.
See Note 21 to the Consolidated Financial Statements in Item 8 for additional information on deferred taxes. 28 Table of Contents Other Long-Term Liabilities Other long-term liabilities increased $185.6 million during 2022 due primarily to an increase in long-term commitments related to investments in U.S. affordable housing and historic renovation real estate partnerships and liabilities associated with real estate financing transactions, partially offset by the impact of expected settlements related to tax positions over the next twelve months as disclosed in Note 21 to the Consolidated Financial Statements in Item 8, favorable fair value movements related to the Company’s outstanding cross currency swap contracts and favorable employee benefit plan experience.
Other Long-Term Liabilities Other long-term liabilities increased $301.6 million during 2023 due primarily to liabilities associated with real estate financing transactions and an increase in long-term commitments related to investments in U.S. affordable housing and historic 30 Table of Contents renovation real estate partnerships, partially offset by the impact of expected settlements related to tax positions over the next twelve months as disclosed in Note 21 to the Consolidated Financial Statements in Item 8.
See Note 7 to the Consolidated Financial Statements in Item 8 for a description of goodwill, identifiable intangible assets and asset impairments recognized in accordance with the Goodwill and Other Intangibles Topic of the ASC and summaries of the remaining carrying values of goodwill and intangible assets.
See Note 3 to the Consolidated Financial Statements in Item 8 for additional information related to acquisitions and divestitures. See Note 7 to the Consolidated Financial Statements in Item 8 for a description of goodwill, identifiable intangible assets and asset impairments and summaries of the remaining carrying values of goodwill and intangible assets.
Actual results could differ from these assumptions. Management believes the assumptions used are reflective of what a market participant would have used in calculating fair value or useful life considering the current economic conditions. All tested long-lived assets or groups of long-lived assets had undiscounted cash flows that were substantially in excess of their carrying value.
Actual results could differ from these assumptions. Management believes the assumptions used are reflective of what a market participant would have used in calculating fair value or useful life considering the current economic conditions.
Other Assets Other assets increased $238.3 million to $1.027 billion at December 31, 2022. The increase was primarily due to non-traded investments. See Note 1 to the Consolidated Financial Statements in Item 8 for additional information.
Other Assets Other assets increased $183.5 million to $1.211 billion at December 31, 2023. The increase was primarily due to an increase in non-traded investments and other assets related to contracts with customers and deposits. See Note 1 to the Consolidated Financial Statements in Item 8 for additional information.
The following table summarizes EBITDA and Adjusted EBITDA as calculated by management for the years indicated below: Year Ended December 31, 2022 2021 Net income $ 2,020.1 $ 1,864.4 Interest expense 390.8 334.7 Income taxes 553.0 384.2 Depreciation 264.0 263.1 Amortization 317.1 309.5 EBITDA 3,545.0 3,155.9 Restructuring and impairment 62.8 — Loss on Wattyl divestiture — 111.9 Adjusted EBITDA $ 3,607.8 $ 3,267.8 Free Cash Flow Free cash flow is a non-GAAP financial measure defined as Net operating cash, as shown in the Statements of Consolidated Cash Flows, less the amount reinvested in the business for Capital expenditures and the return of investment to its shareholders by the payment of cash dividends.
The following table summarizes EBITDA and Adjusted EBITDA as calculated by management for the years indicated below: Year Ended December 31, 2023 2022 Net income $ 2,388.8 $ 2,020.1 Interest expense 417.5 390.8 Income taxes 721.1 553.0 Depreciation 292.3 264.0 Amortization 330.2 317.1 EBITDA 4,149.9 3,545.0 Restructuring expense 9.6 47.3 Impairment related to Restructuring Plan 34.0 15.5 Gain on divestiture of domestic aerosol business (20.1) — Impairment related to trademarks 23.9 — Devaluation of the Argentine Peso 41.8 — Adjusted EBITDA $ 4,239.1 $ 3,607.8 Free Cash Flow Free cash flow is a non-GAAP financial measure defined as Net operating cash, as shown in the Statements of Consolidated Cash Flows, less the amount reinvested in the business for capital expenditures and the return on investment to its shareholders by the payments of cash dividends.
Refer to “Real Estate Financing” section below for further information on the financing transaction for the new headquarters. Real Estate Financing In December 2022, the Company closed a transaction to sell and subsequently lease back its partially-constructed new headquarters.
Additionally, the Company will continue to 28 Table of Contents construct its new headquarters and research and development center. Refer to the Real Estate Financing section herein for further information on the financing transaction for the new headquarters. Real Estate Financing In December 2022, the Company closed a transaction to sell and subsequently lease back its partially-constructed new headquarters.
Depreciation of capital expenditures and other expenses related to ongoing environmental compliance measures were included in the normal operating expenses of conducting business. The Company’s capital expenditures, depreciation and other expenses related to ongoing environmental compliance measures were not material to the Company’s financial condition, liquidity, cash flow or results of operations during 2022.
The Company’s capital expenditures, depreciation and other expenses related to ongoing environmental compliance measures were not material to the Company’s financial condition, liquidity, cash flow or results of operations during 2023. Management does not expect that such capital expenditures, depreciation and other expenses will be material to the Company’s financial condition, liquidity, cash flow or results of operations in 2024.
However, the Company does not expect that foreign currency exchange rate and commodity price fluctuations or hedging contract losses will have a material adverse effect on the Company’s financial condition, results of operations or cash flows. Financial Covenant Certain borrowings contain a consolidated leverage covenant.
However, the Company does not expect that foreign currency exchange rate and commodity price fluctuations or hedging contract losses will have a material adverse effect on the Company’s financial condition, results of operations or cash flows. See Notes 1 and 20 to the Consolidated Financial Statements in Item 8 for additional information related to foreign currency translation.
Year Ended December 31, 2022 Pre-Tax Tax Effect (1) After-Tax Diluted net income per share $ 7.72 Restructuring expense: Severance and other $ .18 $ .03 .15 Impairment .06 .01 .05 Total .24 .04 .20 Acquisition-related amortization expense (2) 1.06 .25 .81 Adjusted diluted net income per share $ 8.73 Year Ended December 31, 2021 Pre-Tax Tax Effect (1) After-Tax Diluted net income per share $ 6.98 Loss on divestiture $ .41 $ .07 .34 Acquisition-related amortization expense (2) 1.10 .27 .83 Adjusted diluted net income per share $ 8.15 (1) The tax effect is calculated based on the statutory rate and the nature of the item, unless otherwise noted.
Year Ended December 31, 2023 Pre-Tax Tax Effect (1) After-Tax Diluted net income per share $ 9.25 Items related to Restructuring Plan: Severance and other $ .06 $ .02 .04 Impairment of assets related to China divestiture .13 .08 .05 Gain on divestiture of domestic aerosol business (.08) (.02) (.06) Discrete income tax expense related to China divestiture (1) — (.06) .06 Total .11 .02 .09 Impairment related to trademarks .09 .02 .07 Devaluation of the Argentine Peso .16 — .16 Acquisition-related amortization expense (2) 1.03 .25 .78 Adjusted diluted net income per share $ 10.35 Year Ended December 31, 2022 Pre-Tax Tax Effect (1) After-Tax Diluted net income per share $ 7.72 Items related to Restructuring Plan: Severance and other $ .18 $ .03 .15 Impairment .06 .01 .05 Total .24 .04 .20 Acquisition-related amortization expense (2) 1.06 .25 .81 Adjusted diluted net income per share $ 8.73 (1) The tax effect is calculated based on the statutory rate and the nature of the item, unless otherwise noted.
The following table presents income before income taxes by segment and as a percentage of net sales by segment: Year Ended December 31, 2022 2021 $ Change % Change Income Before Income Taxes: The Americas Group $ 2,436.6 $ 2,239.1 $ 197.5 8.8 % Consumer Brands Group 225.7 358.4 (132.7) (37.0) % Performance Coatings Group 734.9 486.2 248.7 51.2 % Administrative (824.1) (835.1) 11.0 1.3 % Total $ 2,573.1 $ 2,248.6 $ 324.5 14.4 % Income Before Income Taxes as a % of Net Sales: The Americas Group 19.2 % 20.0 % Consumer Brands Group 8.4 % 13.2 % Performance Coatings Group 10.8 % 8.1 % Administrative nm nm Total 11.6 % 11.3 % nm - not meaningful Income Tax Expense The effective income tax rate for 2022 was 21.5% compared to 17.1% in 2021.
The following table presents income before income taxes by segment and as a percentage of net sales by segment: Year Ended December 31, 2023 2022 $ Change % Change Income Before Income Taxes: Paint Stores Group $ 2,860.8 $ 2,348.1 $ 512.7 21.8 % Consumer Brands Group 309.3 314.2 (4.9) (1.6) % Performance Coatings Group 991.6 734.9 256.7 34.9 % Administrative (1,051.8) (824.1) (227.7) (27.6) % Total $ 3,109.9 $ 2,573.1 $ 536.8 20.9 % Income Before Income Taxes as a % of Net Sales: Paint Stores Group 22.3 % 19.6 % Consumer Brands Group 9.2 % 9.3 % Performance Coatings Group 14.5 % 10.8 % Administrative nm nm Total 13.5 % 11.6 % nm - not meaningful Income Tax Expense The effective income tax rate for 2023 was 23.2% compared to 21.5% in 2022.
(2) Acquisition-related amortization expense consists primarily of the amortization of intangible assets related to the Valspar acquisition and is included in Amortization. 33 Table of Contents Adjusted Segment Profit Management of the Company believes that investors’ understanding of the Company’s operating performance is enhanced by the disclosure of segment profit excluding Valspar acquisition-related amortization expense in 2022 and 2021, restructuring expense in 2022, and the loss on the divestiture of Wattyl in 2021.
(2) Acquisition-related amortization expense consists of the amortization of intangible assets related to the Valspar acquisition and is included within Selling, general and administrative expenses. 35 Table of Contents Adjusted Segment Profit Management of the Company believes that investors’ understanding of the Company’s operating performance is enhanced by the disclosure of segment profit excluding Valspar acquisition-related amortization expense and certain other adjustments.
The amounts recorded in AOCI will continue to be modified as actuarial assumptions and service costs change, and all such amounts will be amortized to expense over a period of years through the net pension and net periodic benefit costs. 36 Table of Contents In 2023, pension and other postretirement benefit plan costs are expected to decrease based on the actuarial assumptions being applied.
Actuarial gains and losses and prior service costs are recognized and recorded in Accumulated other comprehensive income (AOCI). The amounts recorded in AOCI will continue to be modified as actuarial assumptions and service costs change, and all such amounts will be amortized to expense over a period of years through the net pension and net periodic benefit costs.
Debt (including Short-term borrowings) December 31, December 31, 2022 2021 Long-term debt $ 9,591.6 $ 8,851.5 Short-term borrowings 978.1 763.5 Total debt outstanding $ 10,569.7 $ 9,615.0 Total debt outstanding including Short-term borrowings increased by $954.7 million to $10.570 billion in 2022.
Debt (including Short-term borrowings) December 31, December 31, 2023 2022 Long-term debt $ 9,476.7 $ 9,591.6 Short-term borrowings 374.2 978.1 Total debt outstanding $ 9,850.9 $ 10,569.7 Total debt outstanding, including Short-term borrowings, decreased by $718.8 million to $9.851 billion in 2023.
Net pension cost in 2023 for the domestic pension plan and foreign pension plans is expected to be approximately $1.9 million and $1.6 million, respectively. Net periodic benefit credit for other postretirement benefits in 2023 is expected to be approximately $15.8 million. The credit for 2023 is primarily due to amortization of the impact of a plan amendment.
Net pension cost in 2024 for the domestic pension plan and foreign pension plans is expected to be approximately $1.8 million and $4.4 million, respectively. Net periodic benefit credit for other postretirement benefits in 2024 is expected to be approximately $17.0 million.
See the Non-GAAP Financial Measures section in Item 7 for the definitions and calculations of EBITDA and Adjusted EBITDA. As of December 31, 2022, the Company had Cash and cash equivalents of $198.8 million and total debt outstanding of $10.570 billion.
During 2023, the Company generated EBITDA of $4.150 billion and Adjusted EBITDA of $4.239 billion. See the Non-GAAP Financial Measures section for the definitions and calculations of EBITDA and Adjusted EBITDA. As of December 31, 2023, the Company had Cash and cash equivalents of $276.8 million and total debt outstanding of $9.851 billion.
Inventory quantities were adjusted throughout the year as formal cycle counts were completed, or during the fourth quarter as a result of annual physical inventory counts. If inventories accounted for on the LIFO method are reduced on a year-over-year basis, then liquidation of certain quantities carried at costs prevailing in prior years occurs.
If inventories accounted for on the LIFO method are reduced on a year-over-year basis, then liquidation of certain quantities carried at costs prevailing in prior years occurs.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed1 unchanged
Biggest changeThe Company entered into forward foreign currency exchange contracts during 2022 to hedge against value changes in foreign currency. There were no material contracts outstanding at December 31, 2022. Forward foreign currency exchange contracts are described in Note 20 to the Consolidated Financial Statements in Item 8. We believe we may experience continuing losses from foreign currency fluctuations.
Biggest changeThe Company entered into forward foreign currency exchange contracts during 2023, 2022 and 2021 to hedge against value changes in foreign currency. There were no material contracts outstanding at December 31, 2023. Forward foreign currency exchange contracts are described in Note 20 to the Consolidated Financial Statements in Item 8.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risk associated with interest rates, foreign currency and commodity fluctuations. We occasionally utilize derivative instruments as part of our overall financial risk management policy, but do not use derivative instruments for speculative or trading purposes. In 2022 and 2021, the Company utilized U.S.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risk associated with interest rates, foreign currency and commodity fluctuations. We occasionally utilize derivative instruments as part of our overall financial risk management policy, but do not use derivative instruments for speculative or trading purposes. In 2023, 2022 and 2021, the Company utilized U.S.
However, we do not expect currency translation, transaction or hedging contract losses to have a material adverse effect on our financial condition, results of operations or cash flows. 38 Table of Contents
We believe we may experience continuing losses from foreign currency fluctuations. However, we do not expect currency translation, transaction or hedging contract losses to have a material adverse effect on our financial condition, results of operations or cash flows. 40 Table of Contents

Other SHW 10-K year-over-year comparisons