Sherwin-Williams Announces Agreement with U.S. Department of Labor

      Sherwin-Williams Announces Agreement with U.S. Department of Labor

Reports Subsequent Event to 2012 Fiscal Year Results

PR Newswire

CLEVELAND, Feb. 20, 2013

CLEVELAND, Feb. 20, 2013 /PRNewswire/ -- The Sherwin-Williams Company (the
"Company") (NYSE: SHW) announced that is has reached an agreement with the
U.S. Department of Labor (the "DOL") to settle the previously disclosed
investigation of transactions related to the Company's employee stock
ownership plan ("ESOP").  This agreement fully resolves all DOL claims
regarding the Company's ESOP transactions. The DOL had notified the Company,
certain current and former directors of the Company, and the ESOP trustee of
potential enforcement claims asserting breaches of fiduciary obligations and
sought compensatory and equitable remedies, including monetary damages to the
ESOP for alleged losses to the ESOP relating to third-party valuation of the
Company's convertible serial preferred stock.

The Company believes that the DOL's claims are without merit and strongly
disagrees with the allegation that ESOP plan participants sustained losses of
any kind as a result of these transactions.  The Company's position is
supported by internal audits and audits by an independent third-party and the
DOL.  Following a nine-month negotiation with the DOL, the Company's
management and Board of Directors have decided that it would be in the best
interest of the Company and its shareholders to enter into this agreement to
resolve these claims and avoid potentially costly litigation. 

The Company agreed to resolve all ESOP related claims with the DOL by making a
one-time payment of $80.0 million to the ESOP, which will result in an
after-tax charge to earnings of $49.2 million ($.47 per diluted common share)
in the Company's fourth quarter and year ended December 31, 2012. In
accordance with U.S. generally accepted accounting principles, the Company is
required to recognize this agreement as a subsequent event in its 2012 fiscal
year results because the event is related to conditions that existed at the
balance sheet date of December 31, 2012.  The Company's financial results for
the quarter and year ended December 31, 2012, as reported on January 31, 2013,
are being revised to reflect the agreement. The revised condensed consolidated
income statements are attached to this press release. As a result of recording
this accrual, diluted net income per common share decreased $.47 per share for
both the year and quarter ended December 31, 2012, resulting in diluted net
income per common share of $6.02 per share for the year and $.65 per share for
the quarter. In addition, Cost of goods sold increased $16.0 million and
Selling, general and administrative expense increased $64.0 million while
income tax expense decreased $30.8 million for both the quarter and year ended
December 31, 2012 as a result of recording this accrual. Cash flow from
operations remained at $887.9 million for the year ended 2012.  Although this
agreement will not have an effect on full year 2013 earnings guidance issued
on January 31, 2013, cash flow from operations will be impacted when this
settlement payment is made.

Investor Relations Contact:
Bob Wells
Senior Vice President, Corporate Communications and Public Affairs
Sherwin-Williams
Direct:  216.566.2244
rjwells@sherwin.com

Media Contact:
Mike Conway
Director, Corporate Communications
Sherwin-Williams
Direct:  216.515.4393
Pager:  216.422.3751
mike.conway@sherwin.com

The table below details the impact of this adjustment to the revised condensed
consolidated income statements:

 

STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)

Thousands of dollars, except per share data
                   Three Months Ended December 31,   Year Ended December 31,
                   As Reported      Revised          As Reported   Revised
                   2012             2012             2012          2012
Net sales          $    2,221,870   $   2,221,870    $             $  
                                                      9,534,462     9,534,462
Cost of goods sold 1,210,362        1,226,362        5,312,236     5,328,236
Gross profit *     1,011,508        995,508          4,222,226     4,206,226
     Percent to    45.5%            44.8%            44.3%         44.1%
net sales
Selling, general
and administrative 827,976          891,976          3,195,648     3,259,648
expenses *
     Percent to    37.3%            40.1%            33.5%         34.2%
net sales
Other general
(income) expense - (3,998)          (3,998)          5,248         5,248
net
Impairment of
trademarks and     4,086            4,086            4,086         4,086
goodwill
Interest expense   11,863           11,863           42,788        42,788
Interest and net   (953)            (953)            (2,913)       (2,913)
investment income
Other income - net (1,659)          (1,659)          (9,940)       (9,940)
Income before      174,193          94,193           987,309       907,309
income taxes
Income taxes *     56,978           26,141           307,112       276,275
Net income         $     117,215    $      68,052    $             $    
                                                     680,197       631,034
Net income per
common share:
     Basic         $                $                $             $          
                   1.14             0.66             6.63          6.15
     Diluted       $                $                $             $          
                   1.12             0.65             6.49          6.02
Average shares
outstanding -      101,816,954      101,816,954      101,714,901   101,714,901
basic
Average shares and
equivalents        104,133,772      104,133,772      103,930,429   103,930,429
outstanding -
diluted
* - Revised amounts include DOL Settlement of $49,163, net of tax (Cost of
goods sold $16,000, Selling, general and administrative $64,000, and Income
tax benefit of $30,837), or $.47 per share, for both the Three months and Year
ended December 31, 2012.

 

SOURCE The Sherwin-Williams Company