Sherwin-Williams Reports Q3 Financial Results; Increases Guidance For Q4 And Full-Year 2017

The Sherwin-Williams Company (NYSE: SHW) announced favorable financial results for the third quarter ended September 30, 2017 enhanced by the June acquisition of Valspar.

About SHW

Founded in 1866, The Sherwin-Williams Company is a global leader in the manufacture, development, distribution, and sale of paints, coatings and
related products to professional, industrial, commercial, and retail customers such as Sherwin-Williams^®, Valspar^®, HGTV HOME^® by Sherwin-Williams, Dutch Boy^®, Krylon^®, Minwax^®, Thompson's^® Water Seal^®, Cabot^® and many more.

With global headquarters in Cleveland, Ohio, Sherwin-Williams^® branded products are sold exclusively through a chain of more than 4,100 company-operated stores and facilities, while the company's other brands are sold through leading mass merchandisers, home centers, independent paint dealers, hardware stores, automotive retailers, and industrial distributors. The Sherwin-Williams Performance Coatings Group also supplies a broad range of
highly-engineered solutions for the construction, industrial, packaging and transportation markets in more than 120 countries around the world.

Q3 Financial Highlights

• Consolidated net sales: UP 37.4% in the quarter to a record $4.51 billion, and increased 21.3% in the nine months to a record $11.00 billion, including Valspar sales since the month of June, which increased consolidated net sales in the quarter by 32.8%.
  • The Americas Group: UP 6.5%
  • Latin America Region: UP 4.9%
  • Consumer Brands Group: UP 81.6% due primarily to the inclusion of Valspar sales since the month of June, partially offset by lower volume sales to some of the Group's retail customers.
  • Performance Coatings Group: UP 68.4% due primarily to the inclusion of Valspar sales, higher paint sales volumes and selling price increases.
• Net sales from stores in U.S. and Canada open more than twelve calendar months: UP 5.2% in the quarter and 5.7% in the nine months.
• Diluted net income per common share: DOWN 18.4% to $3.33 per share in the quarter, including a $1.42 per share charge for acquisition-related costs such as inventory purchase accounting adjustments and increased amortization of intangibles. Valspar operations increased EPS by $.49 per share in the quarter, including a $.39 per share charge from interest expense on new debt.
• Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) from continuing operations: UP 9.6% in nine months to $1.70 billion and increased 4.3% without the impact from the Valspar Acquisition

 Q4 & Full-year Guidance

• SHW expects incremental sales from the Valspar acquisition to be approximately $1.0 billion in the fourth quarter. At that anticipated sales level, they estimate diluted net income per common share in the fourth quarter of 2017 to be in the range of $1.97 to $2.27 per share, including a $0.98 per share charge from costs associated with the Valspar acquisition, and an EPS increase of $.15 to $.25 per share from Valspar operations.
• For the full year 2017, Sherwin-Williams expects core net sales to increase by a mid single digit percentage compared to full year 2016. In addition, SHW expects incremental sales from the Valspar acquisition to be approximately $2.5 billion in 2017. With annual sales at that level, the company is updating its guidance for full year 2017 diluted net income per common share to be in the range of $11.20 to $11.50 per share compared to $11.99 per share earned in 2016. Full year 2017 diluted net income per common share guidance includes a $3.21 per share charge from costs associated with the acquisition of Valspar, and includes an EPS increase of $.75 to $.85 per share from Valspar operations.

Commenting on the third quarter, John G. Morikis, Chairman, President and Chief Executive Officer, said:

"The string of natural disasters impacting Texas, Florida, the Caribbean and Mexico in recent months was unprecedented and  disproportionately affected profitability in the quarter as lost sales and gross profit could not be offset by reduced operating expenses.

The Valspar integration plans and synergy progress is in line with our expectations.

We remain focused on strengthening the performance of our core businesses and our newly acquired businesses. We have implemented appropriate pricing initiatives to offset increasing raw material costs, and continue to focus on volume improvements in all businesses and all regions.

Our success in driving improvements in our operating results and implementing integration plans will create a highly differentiated enterprise better equipped to serve paint and coatings customers around the corner and across the globe."