What changed in this filing

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Item 1. Financial Statements

2021-10-26 compared with 2021-07-27 · 163 added, 115 removed, 651 unchanged (30% of the section changed)

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

9 unchanged sentences

Interest and net investment income ( 0.7 ) ( 1.4 ) ( 1.9 ) ( 2.6 )

Other (income) expense - net ( 1.1 ) 6.4 ( 3.3 ) 28.8

Other expense (income) - net 1.7 1.8 ( 1.6 ) 30.6

Income before income taxes 611.5 875.6 1,939.7 2,015.3

10 unchanged sentences

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (UNAUDITED)

(in millions) Three Months Ended Six Months Ended

June 30, June 30,

(in millions) Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Net income $ 502.2 $ 705.8 $ 1,560.4 $ 1,623.4

Other comprehensive income (loss), net of tax:

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments (1)

1 unchanged sentence

Pension and other postretirement benefit adjustments:

Amounts reclassified from Other comprehensive income (loss) (2)

Amounts reclassified from AOCI (2)

1.4 0.6 4.6 1.9

Unrealized net gains on cash flow hedges:

Amounts reclassified from Other comprehensive income (loss) (3)

Amounts reclassified from AOCI (3)

( 0.7 ) ( 0.9 ) ( 3.1 ) ( 5.6 )

Other comprehensive income (loss) 62.6 33.9 17.1 ( 187.7 )

Other comprehensive (loss) income ( 85.5 ) 74.9 ( 68.4 ) ( 112.8 )

Comprehensive income $ 416.7 $ 780.7 $ 1,492.0 $ 1,510.6

(1) The three months ended June 30, 2021 includes unrealized losses of $( 6.0 ) million, net of taxes of $ 2.0 million, related to net investment hedges.

The three months ended June 30, 2020 includes unrealized losses of $( 9.3 ) million, net of taxes of $ 2.9 million, related to net investment hedges.

The six months ended June 30, 2021 includes unrealized gains of $ 17.1 million, net of taxes of $( 5.5 ) million, related to net investment hedges.

The six months ended June 30, 2020 includes unrealized losses of $( 0.1 ) million related to net investment hedges.

(1) The three months ended September 30, 2021 includes unrealized gains of $ 14.5 million, net of taxes of $( 4.9 ) million, related to net investment hedges.

The three months ended September 30, 2020 includes unrealized losses of $( 26.3 ) million, net of taxes of $ 8.7 million, related to net investment hedges.

The nine months ended September 30, 2021 includes unrealized gains of $ 31.6 million, net of taxes of $( 10.4 ) million, related to net investment hedges.

The nine months ended September 30, 2020 includes unrealized losses of $( 26.4 ) million, net of taxes $ 8.7 million, related to net investment hedges.

See Note 12 for additional information.

(2) Net of taxes of $( 0.3 ) million and $( 0.1 ) million in the three months ended June 30, 2021 and 2020, respectively.

Net of taxes of $( 1.1 ) million and $( 0.3 ) million in the six months ended June 30, 2021 and 2020, respectively.

(3) Net of taxes of $ 0.1 million and $ 0.2 million in the three months ended June 30, 2021 and 2020, respectively.

Net of taxes of $ 0.4 million and $ 1.4 million in the six months ended June 30, 2021 and 2020, respectively.

(2) Net of taxes of $( 0.6 ) million and $( 0.2 ) million in the three months ended September 30, 2021 and 2020, respectively.

Net of taxes of $( 1.7 ) million and $( 0.5 ) million in the nine months ended September 30, 2021 and 2020, respectively.

(3) Net of taxes of $ 0.6 million and $ 0.4 million in the three months ended September 30, 2021 and 2020, respectively.

Net of taxes of $ 1.0 million and $ 1.8 million in the nine months ended September 30, 2021 and 2020, respectively.

See notes to condensed consolidated financial statements.

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions) June 30,

(in millions) September 30,

2021 December 31,

2020 June 30,

2020 September 30,

Current assets:

28 unchanged sentences

262.2 million, 268.7 million and 272.5 million shares outstanding

at June 30, 2021, December 31, 2020 and June 30, 2020, respectively

at September 30, 2021, December 31, 2020 and September 30, 2020, respectively

90.5 89.9 120.4

8 unchanged sentences

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)

(in millions) Six Months Ended

2021 June 30,

(in millions) Nine Months Ended

September 30,

2021 September 30,

OPERATING ACTIVITIES

25 unchanged sentences

FINANCING ACTIVITIES

Net increase in short-term borrowings 761.9 355.0

Net increase (decrease) in short-term borrowings 707.9 ( 204.5 )

Proceeds from long-term debt — 999.0

8 unchanged sentences

Effect of exchange rate changes on cash 0.4 ( 12.9 )

Net (decrease) increase in cash and cash equivalents ( 7.0 ) 26.3

Net increase in cash and cash equivalents 86.7 458.1

Cash and cash equivalents at beginning of year 226.6 161.8

28 unchanged sentences

Balance at June 30, 2021 $ 90.6 $ 3,608.1 $ 1,604.8 $ ( 1,761.9 ) $ ( 701.2 ) $ 2,840.4

Net income 502.2 502.2

Other comprehensive loss ( 85.5 ) ( 85.5 )

Treasury stock purchased ( 501.5 ) ( 501.5 )

Stock-based compensation activity 80.2 80.2

Other adjustments ( 0.1 ) ( 0.2 ) ( 0.3 )

Cash dividends -- $ 0.55 per share

( 145.2 ) ( 145.2 )

Balance at September 30, 2021 $ 90.5 $ 3,688.1 $ 1,961.8 $ ( 2,263.4 ) $ ( 786.7 ) $ 2,690.3

(in millions, except per share data) Common

22 unchanged sentences

Balance at June 30, 2020 $ 120.0 $ 3,289.1 $ 8,036.0 $ ( 6,708.0 ) $ ( 867.2 ) $ 3,869.9

Net income 705.8 705.8

Other comprehensive loss 74.9 74.9

Treasury stock purchased ( 404.4 ) ( 404.4 )

Stock-based compensation activity 0.4 84.5 ( 1.2 ) 83.7

Other adjustments ( 0.3 ) ( 0.1 ) ( 0.4 )

Cash dividends -- $ 0.4467 per share

( 122.2 ) ( 122.2 )

Balance at September 30, 2020 $ 120.4 $ 3,373.3 $ 8,619.5 $ ( 7,113.6 ) $ ( 792.3 ) $ 4,207.3

See notes to condensed consolidated financial statements.

2 unchanged sentences

(millions of dollars, unless otherwise noted)

Periods ended June 30, 2021 and 2020

Periods ended September 30, 2021 and 2020

NOTE 1— BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S.

The accompanying unaudited condensed consolidated financial statements of The Sherwin-Williams Company and its wholly owned subsidiaries (collectively, the Company) have been prepared in accordance with U.S.

generally accepted accounting principles (US GAAP) for interim financial information and the instructions to Form 10-Q.

2 unchanged sentences

There have been no significant changes in significant accounting policies since December 31, 2020 .

Accounting estimates were revised as necessary during the first six months of 2021 based on new information and changes in facts and circumstances.

Accounting estimates were revised as necessary during the first nine months of 2021 based on new information and changes in facts and circumstances.

Certain amounts in the 2020 condensed consolidated financial statements have been reclassified to conform to the 2021 presentation.

The Company has historically experienced, and expects to continue to experience, variability in quarterly results.

The results of operations for the three and six months ended June 30, 2021 are not indicative of the results to be expected for the full year as business is seasonal in nature with the majority of Net sales for the Reportable Segments traditionally occurring during the second and third quarters.

The results of operations for the three and nine months ended September 30, 2021 are not indicative of the results to be expected for the full year as business is seasonal in nature with the majority of Net sales for the Reportable Segments traditionally occurring during the second and third quarters.

However, periods of economic downturn can alter the Company's seasonal patterns.

10 unchanged sentences

NOTE 3— ACQUISITIONS AND DIVESTITURES

During the first quarter of 2021, the Company completed the acquisition of a domestic coatings company for $ 27 million, including amounts held as security for certain representations, warranties and obligations of the sellers.

During the third quarter of 2021, the Company signed an agreement to acquire Specialty Polymers, Inc.

(Specialty Polymers), a leading manufacturer and developer of water-based polymers used in architectural and industrial coatings and other applications.

The transaction is subject to customary closing conditions and is expected to close in the fourth quarter of 2021.

Specialty Polymers will be reported within the Company’s Performance Coatings Group and will add to the Company’s existing internal resin manufacturing capability.

During the third quarter of 2021, the Company also signed an agreement to acquire the European industrial coatings business of Sika AG (Sika).

Sika’s European industrial coatings business engineers, manufactures and sells corrosion protection coating systems and fire protection coating systems.

The transaction is subject to customary closing conditions and is expected to close in the first quarter of 2022.

The acquired business will be reported within the Company’s Performance Coatings Group.

During the first quarter of 2021, the Company completed the acquisition of a domestic coatings company for approximately $ 27 million, including amounts held as security for certain representations, warranties and obligations of the sellers.

This acquisition expands the Performance Coatings Group’s platform for growth and portfolio of brands and technologies.

The preliminary purchase price allocation is expected to be finalized within the allowable measurement period.

The results of operations of this acquisition have been included in the consolidated financial statements since the acquisition date.

The results of operations for this acquisition have been included in the consolidated financial statements since the acquisition date.

Pro forma results of operations have not been presented as the impact on the Company’s consolidated financial results is not material.

1 unchanged sentence

The divestiture will allow the Company to focus its resources on global opportunities which align with our long-term strategies.

In connection with this transaction, the Company recognized a pre-tax loss of $ 111.9 million within Other general (income) expense - net (see Note 15).

In connection with this transaction, the

Company recognized a pre-tax loss of $ 111.9 million within Other general (income) expense - net (see Note 15).

The Wattyl divestiture does not meet the criteria to be reported as discontinued operations in our consolidated financial statements as the Company’s decision to divest this business did not represent a strategic shift that will have a major effect on the Company’s operations and financial results.

1 unchanged sentence

Included in Inventories were the following:

June 30, December 31, June 30,

September 30, December 31, September 30,

2021 2020 2020

9 unchanged sentences

Included in Property, plant and equipment, net were the following:

June 30, December 31, June 30,

September 30, December 31, September 30,

2021 2020 2020

8 unchanged sentences

NOTE 6 — DEBT

On September 15, 2021, the Company elected to exercise its optional redemption rights to redeem the entire outstanding $ 400.0 million aggregate principal amount of its 4.20 % Senior Notes due 2022 and its 4.20 % Notes due 2022 initially issued by The Valspar Corporation (collectively, the 4.20 % Senior Notes).

The Company redeemed the 4.20 % Senior Notes on October 15, 2021 at a redemption price equal to 100 % of the principal amount, plus accrued interest.

As of September 30, 2021, the 4.20 % Senior Notes were classified as a current liability in the Consolidated Balance Sheet.

On August 2, 2021, the Company entered into an amended and restated $ 625.0 million credit agreement (August 2021 Credit Agreement), which amends and restates the five-year credit agreement entered into in September 2017 (Existing Credit Agreement), to extend the maturity of $ 75.0 million of the commitments available for borrowing or letters of credit under the Existing Credit Agreement from December 20, 2022 to June 20, 2026.

The August 2021 Credit Agreement will be used for general corporate purposes.

On August 6, 2021, the Company amended its August 2021 Credit Agreement to extend the maturity of $ 50.0 million of the commitments available for borrowing or letters of credit under the August 2021 Credit Agreement from December 20, 2022 to June 20, 2026.

On June 29, 2021, the Company and two of its wholly-owned subsidiaries, Sherwin-Williams Canada Inc.

6 unchanged sentences

On May 3, 2021 and February 16, 2021, the Company amended its five-year credit agreement entered into in May 2016 and subsequently amended on multiple dates.

The May 3, 2021 and February 16, 2021 amendments extend the maturity of $ 75.0 million of the commitments available for borrowing and obtaining the issuance, renewal, extension and increase of letters of credit from December 20, 2021 to June 20, 2026 and December 21, 2021 to December 20, 2025, respectively.

The May 3, 2021 and February 16, 2021 amendments extend the maturity of $ 75.0 million of the commitments available for borrowing from December 20, 2021 to June 20, 2026 and December 21, 2021 to December 20, 2025, respectively.

In March 2020, the Company issued $ 500.0 million of 2.30 % Senior Notes due May 2030 and $ 500.0 million of 3.30 % Senior Notes due May 2050 in a public offering.

The net proceeds from the issuance of the notes were used to repurchase a portion of

the 2.75 % Senior Notes due 2022 and redeem the 2.25 % Senior Notes due May 2020.

The repurchase of the 2.75 % Senior Notes due 2022 during the first quarter of 2020 resulted in a loss of $ 21.3 million recorded in Other (income) expense - net.

The net proceeds from the issuance of the notes were used to repurchase a portion of the 2.75 % Senior Notes due 2022 and redeem the 2.25 % Senior Notes due May 2020.

The repurchase of the 2.75 % Senior Notes due 2022 during the first quarter of 2020 resulted in a loss of $ 21.3 million recorded in Other expense (income) - net.

For further details on the Company’s debt, see Note 6 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

7 unchanged sentences

2021 2020 2021 2020 2021 2020

Three Months Ended June 30:

Three Months Ended September 30:

Net periodic benefit cost:

6 unchanged sentences

Net periodic benefit cost $ 0.5 $ 0.7 $ 1.3 $ 1.3 $ 2.8 $ 2.5

Six Months Ended June 30:

Nine Months Ended September 30:

Net periodic benefit cost:

9 unchanged sentences

Service cost is recorded in Cost of goods sold and Selling, general and administrative expenses.

All other components are recorded in Other (income) expense - net.

All other components are recorded in Other expense (income) - net.

For further details on the Company’s pension and other postretirement benefits, see Note 7 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

6 unchanged sentences

In addition, the Company, together with other parties, has been designated a potentially responsible party under federal and state environmental protection laws for the investigation and remediation of environmental contamination and hazardous waste at a number of third-party sites, primarily Superfund sites.

In general, these laws provide that potentially responsible parties may be

held jointly and severally liable for investigation and remediation costs regardless of fault.

In general, these laws provide that potentially responsible parties may be held jointly and severally liable for investigation and remediation costs regardless of fault.

The Company may be similarly designated with respect to additional third-party sites in the future.

3 unchanged sentences

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.

At June 30, 2021 and 2020, the Company had accruals reported on the balance sheet as Other long-term liabilities of $ 283.8 million and $ 311.1 million , respectively.

Estimated costs of current investigation and remediation activities of $ 68.6 million and $ 57.6 million are included in Other accruals at June 30, 2021 and 2020 , respectively.

At September 30, 2021 and 2020, the Company had accruals reported on the balance sheet as Other long-term liabilities of $ 271.1 million and $ 310.5 million , respectively.

Estimated costs of current investigation and remediation activities of $ 68.6 million and $ 57.6 million are included in Other accruals at September 30, 2021 and 2020 , respectively.

Actual costs incurred may vary from the accrued estimates due to the inherent uncertainties involved including, among others, the number and financial condition of parties involved with respect to any given site, the volumetric contribution which may be attributed to the Company relative to that attributed to other parties, the nature and magnitude of the wastes involved, the various technologies that can be used for remediation and the determination of acceptable remediation with respect to a particular site.

If the Company's future loss contingency is ultimately determined to be at the unaccrued maximum of the estimated range of possible outcomes for every site for which costs can be reasonably estimated, the Company's accrual for environmental-related activities would be $ 108.7 million higher than the minimum accruals at June 30, 2021.

If the Company's future loss contingency is ultimately determined to be at the unaccrued maximum of the estimated range of possible outcomes for every site for which costs can be reasonably estimated, the Company's accrual for environmental-related activities would be $ 105.2 million higher than the minimum accruals at September 30, 2021.

Additionally, costs for environmental-related activities may not be reasonably estimable at early stages of investigation and therefore would not be included in the unaccrued maximum amount.

Four of the Company’s currently and formerly owned manufacturing sites (“Major Sites”) account for the majority of the accrual for environmental-related activities and the unaccrued maximum of the estimated range of possible outcomes at June 30, 2021 .

At June 30, 2021 , $ 298.8 million, or 84.8 % of the total accrual, related directly to the Major Sites.

In the aggregate unaccrued maximum of $ 108.7 million at June 30, 2021 , $ 86.0 million, or 79.1 %, related to the Major Sites.

At September 30, 2021 , $ 287.9 million, or 84.8 % of the total accrual, related directly to the Major Sites.

In the aggregate unaccrued maximum of $ 105.2 million at September 30, 2021 , $ 82.2 million, or 78.1 %, related to the Major Sites.

The significant cost components of this liability continue to be related to remedy implementation, regulatory agency interaction, project management and other costs.

4 unchanged sentences

This location has soil, waterbodies, and groundwater contamination related to the historic operations of the facility.

Gibbsboro has been divided by the Environmental Protection Agency (“EPA”) into six operable units (“OUs”) based on location and characteristics, whose investigation and remediation efforts are likely to occur over an extended period of time.

Gibbsboro has been divided by the

Environmental Protection Agency (“EPA”) into six operable units (“OUs”) based on location and characteristics, whose investigation and remediation efforts are likely to occur over an extended period of time.

Each of the OUs are in various phases of investigation and remediation with the EPA that provide enough information to reasonably estimate cost ranges and record environmental-related accruals.

3 unchanged sentences

Excluding the Major Sites discussed above, no sites are individually material to the total accrual balance.

There are multiple, future events yet to occur, including further remedy selection and design, remedy implementation and execution, and securing applicable governmental agency approvals, all of which have the potential to contribute to the uncertainty surrounding these

future events.

As these events occur and to the extent that the cost estimates of the environmental remediation change, the existing reserve will be adjusted.

1 unchanged sentence

Unasserted claims could have a material effect on the Company's loss contingency as more information becomes available over time.

At June 30, 2021 , the Company did not have material loss contingency accruals related to unasserted claims.

At September 30, 2021 , the Company did not have material loss contingency accruals related to unasserted claims.

Management does not expect that a material portion of unrecognized loss contingencies will be recoverable through insurance, indemnification agreements or other sources.

14 unchanged sentences

In the course of its business, the Company is subject to a variety of claims and lawsuits, including, but not limited to, litigation relating to product liability and warranty, personal injury, environmental, intellectual property, commercial, contractual and antitrust claims that are inherently subject to many uncertainties regarding the possibility of a loss to the Company.

These uncertainties will ultimately be resolved when one or more future events occur or fail to occur confirming the incurrence of a liability or the reduction of a liability.

uncertainties will ultimately be resolved when one or more future events occur or fail to occur confirming the incurrence of a liability or the reduction of a liability.

In accordance with the Contingencies Topic of the ASC, the Company accrues 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.

5 unchanged sentences

The Company, along with other companies, is and has been a defendant in a number of legal proceedings, including individual personal injury actions, purported class actions, and actions brought by various counties, cities, school districts and other government-related entities, arising from the manufacture and sale of lead pigments and lead-based paints.

The plaintiffs’ claims have been based upon various legal theories, including negligence, strict liability, breach of

warranty, negligent misrepresentations and omissions, fraudulent misrepresentations and omissions, concert of action, civil conspiracy, violations of unfair trade practice and consumer protection laws, enterprise liability, market share liability, public nuisance, unjust enrichment and other theories.

The plaintiffs’ claims have been based upon various legal theories, including negligence, strict liability, breach of warranty, negligent misrepresentations and omissions, fraudulent misrepresentations and omissions, concert of action, civil conspiracy, violations of unfair trade practice and consumer protection laws, enterprise liability, market share liability, public nuisance, unjust enrichment and other theories.

The plaintiffs seek various damages and relief, including personal injury and property damage, costs relating to the detection and abatement of lead-based paint from buildings, costs associated with a public education campaign, medical monitoring costs and others.

32 unchanged sentences

On July 24, 2019, the trial court approved the agreement, discharged the receiver, and granted a judgment of dismissal with prejudice in favor of the defendants.

At June 30, 2021 and 2020, the Company had accruals for this agreement reported on the balance sheet of $ 64.7 million and $ 76.7 million, respectively, with $ 12.0 million included in Current liabilities and the remaining $ 52.7 million and $ 64.7 million, respectively, included in Other long-term liabilities.

At September 30, 2021 and 2020, the Company had accruals for this agreement reported on the balance sheet of $ 52.7 million and $ 64.7 million, respectively, with $ 12.0 million included in Current liabilities and the remaining $ 40.7 million and $ 52.7 million, respectively, included in Other long-term liabilities.

Pennsylvania Proceedings .

Two proceedings in Pennsylvania were initiated in October 2018.

The Pennsylvania counties of Montgomery and Lehigh filed complaints against the Company and several other former lead-based paint and lead pigment

manufacturers in the Courts of Common Pleas of Montgomery County, Pennsylvania and Lehigh County, Pennsylvania, respectively.

The Pennsylvania counties of Montgomery and Lehigh filed complaints against the Company and several other former lead-based paint and lead pigment manufacturers in the Courts of Common Pleas of Montgomery County, Pennsylvania and Lehigh County, Pennsylvania, respectively.

In both actions, the counties request declaratory relief establishing the existence of a public nuisance and the defendants’ contribution to it, the abatement of an ongoing public nuisance arising from the presence of lead-based paint in housing throughout the applicable county, an injunction against future illicit conduct, and the costs of litigation and attorneys’ fees.

1 unchanged sentence

The briefing associated with the preliminary objections concluded on February 23, 2021.

Oral argument for the Lehigh County action occurred on April 14, 2021.

The parties are awaiting the trial courts’ decisions.

In the Lehigh County action, the trial court denied the defendants’ preliminary objections on August 6, 2021.

Defendants filed a motion to amend the order to allow an interlocutory appeal or, in the alternative, for reconsideration.

The trial court denied the defendants’ motion on September 13, 2021.

On September 27, 2021, the Company answered the complaint, asserted new matter and affirmative defenses, alleged counterclaims against Lehigh County, and filed a third-party complaint against certain County officials, other owners of pre-1980 housing, and lead abatement contractors who have been cited for violating state or local laws.

On October 13, 2021, the defendants filed with the Superior Court, one of Pennsylvania’s intermediate appellate courts, a petition for permission to appeal the trial court’s order denying the defendants’ preliminary objections.

On October 25, 2021, the Superior Court entered a per curiam order requesting that defendants show cause as to why the petition should not be transferred to the Commonwealth Court, the other Pennsylvania intermediate appellate court.

All deadlines and discovery in the action will be held in abeyance until after defendants’ petition is resolved.

In the Montgomery County action, the trial court denied the defendants’ preliminary objections on October 15, 2021.

Litigation seeking damages from alleged personal injury.

11 unchanged sentences

Although the risk contribution liability theory was applied during the Thomas trial, the constitutionality of this theory as applied to the lead pigment cases has not been judicially determined by the Wisconsin state courts.

However, in an unrelated action filed in the United States District Court for the Eastern District of Wisconsin, Gibson v.

However, in an unrelated action filed in the United States District Court for the

Eastern District of Wisconsin, Gibson v.

American Cyanamid, et al., on November 15, 2010, the district court held that Wisconsin’s risk contribution theory as applied in that case violated the defendants’ right to substantive due process and is unconstitutionally retroactive.

2 unchanged sentences

On July 24, 2014, the Seventh Circuit reversed the judgment and remanded the case back to the district court for further proceedings.

On January 16, 2015, the defendants filed a petition for certiorari in the United States Supreme Court seeking that Court’s review of the Seventh Circuit’s decision, and on May 18, 2015, the United States Supreme Court denied the defendants’ petition.

On January 16, 2015, the defendants filed a petition for certiorari in the United States Supreme Court seeking review of the Seventh Circuit’s decision, and on May 18, 2015, the United States Supreme Court denied the defendants’ petition.

The case is currently pending in the district court.

16 unchanged sentences

The district court previously issued an order scheduling trial in the four cases to commence on June 15, 2020, but the trial date was continued due to the COVID-19 pandemic, and no new trial date has been scheduled.

On May 20, 2021, the Company and the three other defendants filed motions for summary judgment to dismiss the claims of all of the plaintiffs in the Allen and Trammell cases in light of the Seventh Circuit’s decision in favor of the Company in the Owens, Sifuentes and Burton cases.

On May 20, 2021, the Company and the three other defendants filed motions for summary judgment to dismiss the claims of all plaintiffs currently pending in the district court as a result of the Seventh Circuit’s decision in favor of the Company in the Owens, Sifuentes and Burton cases.

The plaintiffs’ responses to the defendants’ motions for summary judgment are due on November 22, 2021.

On August 24, 2021, the plaintiff in Arrieona Beal v.

Armstrong Containers, Inc., et al.

filed an amended complaint in Milwaukee County Circuit Court, naming the Company and other alleged former lead pigment manufacturers as defendants pursuant to the risk contribution liability theory.

The Company intends to vigorously defend this litigation.

Other lead-based paint and lead pigment litigation.

2 unchanged sentences

pending in the Circuit Court of Cook County, Illinois, parents seek to recover the cost of their children’s blood lead testing against the Company and three other defendants that made (or whose alleged corporate predecessors made) white lead pigments.

The Circuit Court has certified a statewide class and a Chicago subclass of parents or legal guardians of children who lived in high-risk zip codes identified by the Illinois Department of Health and who were screened for lead toxicity between August 1995 and February 2008.

Excluded from the class are those parents or guardians who have incurred no expense, liability or obligation to pay for the cost of their children’s blood lead testing.

The circuit court had certified a statewide class and a Chicago subclass of parents or legal guardians of children who lived in high-risk zip codes identified by the Illinois Department of Health and who were screened for lead toxicity between August 1995 and February 2008.

Excluded from the class were those parents or guardians who have incurred no expense, liability or obligation to pay for the cost of their children’s blood lead testing.

In 2017, the defendants moved for summary judgment on the grounds that the three named plaintiffs have not paid and have no obligation or liability to pay for their children’s blood lead testing because Medicaid paid for the children of two plaintiffs and private insurance paid for the third plaintiff without any evidence of a co-pay or deductible.

3 unchanged sentences

The parties filed their respective briefs on the motion, and oral argument occurred on February 4, 2021.

The parties are awaiting the Circuit Court’s decision.

On March 8, 2021, the Illinois Department of Healthcare and Family Services filed a petition to intervene and a proposed amended complaint, which would eliminate the class and all prior claims by individual plaintiffs and would propose a subrogation claim by the State agency to recover its expenditures for blood lead testing.

Defendants opposed the petition to intervene, and briefing on the petition has concluded.

A hearing on the petition to intervene is scheduled for August 10, 2021.

Defendants opposed the petition to intervene, and briefing on the petition concluded.

A hearing on the petition to intervene occurred on August 10, 2021.

On October 8, 2021, the circuit court entered an order granting the defendants’ motion for decertification of the class, denying the petition to intervene by the Illinois Department of Healthcare and Family Services, and noting that an entry of final

judgment in the defendants’ favor was now appropriate.

On October 19, 2021, the circuit court entered final judgment in favor of the defendants.

Insurance coverage litigation.

7 unchanged sentences

On December 21, 2020, the Company filed a notice of appeal to the Court of Appeals of Cuyahoga County, Ohio, Eighth Appellate District, and the liability insurers filed cross-appeals.

Briefing on the issues has concluded, and oral argument is scheduled for August 25, 2021.

Briefing on the issues concluded, and oral argument occurred on August 25, 2021.

The parties are awaiting the appellate court’s decision.

An ultimate loss in the insurance coverage litigation would mean that insurance proceeds could be unavailable under the policies at issue to mitigate any ultimate abatement related costs and liabilities.

6 unchanged sentences

On February 21, 2020, the Company filed a motion to dismiss.

On April 7, 2020, the plaintiffs filed a brief in opposition.

The Company filed a reply brief on April 20, 2020.

A hearing on the motion to dismiss occurred on January 29, 2021 and was continued on July 13-14, 2021.

Briefing concluded, and a hearing on the motion to dismiss occurred.

The trial court entered an order on August 26, 2021, granting and denying the Company’s motion in part.

On September 15, 2021, the Company filed a petition for leave to appeal the trial court’s ruling regarding the refusal to dismiss plaintiffs’ statutory penalty claims.

On October 21, 2021, the Appellate Division of the Superior Court of New Jersey denied the petition.

The Company also answered the plaintiffs’ complaint on September 21, 2021.

NOTE 10— SHAREHOLDERS' EQUITY

Dividends paid on common stock during each of the first two quarters of 2021 and 2020 were $ 0.55 per share and $ 0.4467 per share, respectively.

During the six months ended June 30, 2021, 846,315 stock options were exercised at a weighted average price per share of $ 80.91 .

Dividends paid on common stock during each of the first three quarters of 2021 and 2020 were $ 0.55 per share and $ 0.4467 per share, respectively.

During the nine months ended September 30, 2021, 1,418,382 stock options were exercised at a weighted average price per share of $ 86.55 .

In addition, 271,371 restricted stock units vested during this period.

9 unchanged sentences

Amounts reclassified from AOCI 4.6 ( 3.1 ) 1.5

Balance at June 30, 2021 $ ( 655.2 ) $ ( 84.0 ) $ 38.0 $ ( 701.2 )

Balance at September 30, 2021 $ ( 741.4 ) $ ( 82.6 ) $ 37.3 $ ( 786.7 )

Adjustments Pension and

4 unchanged sentences

Amounts reclassified from AOCI 1.9 ( 5.6 ) ( 3.7 )

Balance at June 30, 2020 $ ( 841.7 ) $ ( 67.9 ) $ 42.4 $ ( 867.2 )

Balance at September 30, 2020 $ ( 766.5 ) $ ( 67.3 ) $ 41.5 $ ( 792.3 )

NOTE 12 — DERIVATIVES AND HEDGING

11 unchanged sentences

See Note 13 for additional information on the fair value of these contracts.

June 30, December 31, June 30,

September 30, December 31, September 30,

2021 2020 2020

2 unchanged sentences

The changes in fair value of the cross currency swap contracts are recognized in the foreign currency translation adjustments component of AOCI.

The following table summarizes the unrealized gains (losses) for the three and six months ended June 30, 2021 and 2020.

Three Months Ended Six Months Ended

June 30, June 30, June 30, June 30,

The following table summarizes the unrealized gains (losses) for the three and nine months ended September 30, 2021 and 2020.

Three Months Ended Nine Months Ended

September 30, September 30, September 30, September 30,

2021 2020 2021 2020

9 unchanged sentences

Significant unobservable inputs

Except for the acquisition and divestiture-related fair value measurements described in Note 3, the Company did not have any fair value measurements for its non-financial assets and liabilities during the six months ended June 30, 2021.

There were no assets and liabilities measured at fair value on a nonrecurring basis.

The following table presents the Company’s financial assets and liabilities that are measured at fair value on a recurring basis, categorized using the fair value hierarchy.

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3

9 unchanged sentences

The level 2 investments are valued based on vendor or broker models.

The cost basis of the investment funds was $ 60.6 million and $ 58.1 million at June 30, 2021 and December 31, 2020, respectively.

The cost basis of the investment funds was $ 59.3 million and $ 58.1 million at September 30, 2021 and December 31, 2020, respectively.

The Qualified Replacement Plan assets consist of investment funds maintained for future contributions to the Company’s domestic defined contribution plan.

1 unchanged sentence

The investments are valued using quoted prices multiplied by the number of shares.

The cost basis of the investment funds was $ 84.5 million and $ 159.6 million at June 30, 2021 and December 31, 2020, respectively.

The cost basis of the investment funds was $ 84.9 million and $ 159.6 million at September 30, 2021 and December 31, 2020, respectively.

The Company’s liabilities under its deferred compensation plans represent the fair value of the participant shadow accounts, and the value is based on quoted market prices in active markets for identical assets.

3 unchanged sentences

The Company's publicly traded debt and non-publicly traded debt are classified as level 1 and level 2, respectively, in the fair value hierarchy.

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Value Carrying

30 unchanged sentences

Balance at December 31, 2020 $ 2,078.1 $ 52.0 $ 170.7 $ 266.3 $ 8.2

Balance at June 30, 2021 2,590.6 59.1 143.4 228.1 8.7

Balance at September 30, 2021 2,598.0 61.4 142.5 268.9 11.2

The difference between the opening and closing balances of the Company’s contract assets and contract liabilities primarily results from the timing difference between the Company’s performance and the customer’s payment.

17 unchanged sentences

Uncollectible accounts written off, net of recoveries ( 16.9 ) ( 26.0 )

Balance at June 30 $ 66.6 $ 77.7

Balance at September 30 $ 61.8 $ 77.1

NOTE 15— OTHER

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

1 unchanged sentence

Loss on divestiture of business (see Note 3) — — 111.9 —

Gain on sale or disposition of assets ( 7.7 ) ( 9.6 ) ( 4.6 ) ( 8.1 )

(Gain) loss on sale or disposition of assets ( 1.6 ) 0.4 ( 6.2 ) ( 7.7 )

Other general (income) expense - net $ ( 1.1 ) $ 10.5 $ 111.2 $ 13.1

2 unchanged sentences

See Note 8 for further details on the Company’s environmental-related activities.

The gain on sale or disposition of assets represents net realized gains associated with the sale or disposal of property, plant and equipment and intangible assets previously used in the conduct of the primary business of the Company.

Other (income) expense - net

Included in Other (income) expense - net were the following:

The (gain) loss on sale or disposition of assets represents net realized (gains) losses associated with the sale or disposal of property, plant and equipment and intangible assets previously used in the conduct of the primary business of the Company.

Other expense (income) - net

Included in Other expense (income) - net were the following:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

2 unchanged sentences

Net expense from banking activities 2.6 2.6 7.7 7.8

Foreign currency transaction related losses 9.1 6.5 11.6 10.4

Foreign currency transaction related (gains) losses ( 1.2 ) ( 0.1 ) 10.4 10.3

Miscellaneous pension expense 1.1 1.3 3.1 3.6

1 unchanged sentence

Other expense 6.1 9.5 14.9 12.8

Other (income) expense - net $ ( 1.1 ) $ 6.4 $ ( 3.3 ) $ 28.8

Foreign currency transaction related losses include the impact from foreign currency transactions and net realized losses from foreign currency option and forward contracts.

There were no material foreign currency option and forward contracts outstanding at June 30, 2021 and 2020.

Other expense (income) - net $ 1.7 $ 1.8 $ ( 1.6 ) $ 30.6

Foreign currency transaction related (gains) losses include the impact from foreign currency transactions and net realized (gains) losses from foreign currency option and forward contracts.

There were no material foreign currency option and forward contracts outstanding at September 30, 2021 and 2020.

Miscellaneous pension expense consists of the non-service components of Net periodic benefit cost.

2 unchanged sentences

NOTE 16— INCOME TAXES

The effective tax rate was 20.8 % and 20.3 % for the second quarter and first six months of 2021, respectively, compared to 20.3 % and 19.5 % for the second quarter and first six months of 2020, respectively.

The effective tax rate was favorably impacted by tax benefits related to employee share based payments during the first six months of 2021 and 2020.

The effective tax rate was 17.9 % and 19.6 % for the third quarter and first nine months of 2021, respectively, compared to 19.4 % for the third quarter and first nine months of 2020.

The effective tax rate was favorably impacted by tax benefits related to employee share based payments during the first nine months of 2021 and 2020.

The other significant components of the Company’s effective tax rate were consistent year over year.

3 unchanged sentences

At December 31, 2020, the Company had accrued $ 30.3 million for the potential payment of income tax interest and penalties.

There were no significant changes to any of the balances of unrecognized tax benefits at December 31, 2020 during the six months ended June 30, 2021.

There were no significant changes to any of the balances of unrecognized tax benefits at December 31, 2020 during the nine months ended September 30, 2021.

The Company and its subsidiaries file income tax returns in the U.S.

4 unchanged sentences

The Company is evaluating the adjustments and believes that it is adequately reserved for any potential exposure.

As of June 30, 2021, the federal statute of limitations had not expired for the 2013 through 2020 tax years.

At June 30, 2021, the Company is subject to non-U.S.

As of September 30, 2021, the federal statute of limitations had not expired for the 2013 through 2020 tax years.

At September 30, 2021, the Company is subject to non-U.S.

income tax examinations for the tax years of 2013 through 2020.

3 unchanged sentences

(in millions, except per share data) Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

7 unchanged sentences

5.0 4.7 4.7 4.6

Non-vested restricted stock grants — 0.1 — 0.1

Average shares outstanding assuming dilution 266.6 276.3 268.1 276.7

Diluted net income per share $ 1.88 $ 2.55 $ 5.82 $ 5.87

(1) There were no stock options and other contingently issuable shares excluded due to their anti-dilutive effect for the three and six months ended June 30, 2021.

There were 1.4 million stock options and other contingently issuable shares excluded due to their anti-dilutive effect for the three and six months ended June 30, 2020 .

(1) There were no stock options and other contingently issuable shares excluded due to their anti-dilutive effect for the three and nine months ended September 30, 2021.

There were no stock options and other contingently issuable shares excluded due to their anti-dilutive effect for the three months ended September 30, 2020, and 0.2 million for the nine months ended September 30, 2020.

NOTE 18— REPORTABLE SEGMENT INFORMATION

2 unchanged sentences

The Americas Group, Consumer Brands Group and Performance Coatings Group (individually, a Reportable Segment and collectively, the Reportable Segments).

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Group Consumer Brands

8 unchanged sentences

Income before income taxes $ 631.5 $ 75.8 $ 110.4 $ ( 206.2 ) $ 611.5

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Group Consumer Brands

8 unchanged sentences

Income before income taxes $ 747.4 $ 198.3 $ 155.3 $ ( 225.4 ) $ 875.6

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Group Consumer Brands

8 unchanged sentences

Income before income taxes $ 1,838.8 $ 342.3 $ 399.0 $ ( 640.4 ) $ 1,939.7

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Group Consumer Brands

13 unchanged sentences

Also included in the Administrative segment was interest expense, interest and investment income, certain expenses related to closed facilities and environmental-related matters, and other expenses that were not directly associated with the Reportable Segments.

In addition, the Administrative segment includes the $ 111.9 million pre-tax loss on the Wattyl divestiture recognized during the six months ended June 30, 2021.

In addition, the Administrative segment includes the $ 111.9 million pre-tax loss on the Wattyl divestiture recognized during the nine months ended September 30, 2021.

See Notes 3 and 15 for additional information on the Wattyl divestiture.

2 unchanged sentences

Gains and losses from the sale of property were not a significant operating factor in determining the performance of the Administrative segment.

Net external sales of all consolidated foreign subsidiaries were $ 1.102 billion and $ 776.2 million for the three months ended June 30, 2021 and 2020, respectively.

Net external sales of all consolidated foreign subsidiaries were $ 2.139 billion and $ 1.604 billion for the six months ended June 30, 2021 and 2020, respectively.

Long-lived assets of these subsidiaries totaled $ 2.844 billion and $ 3.026 billion at June 30, 2021 and 2020, respectively.

Net external sales of all consolidated foreign subsidiaries were $ 1.019 billion and $ 967.6 million for the three months ended September 30, 2021 and 2020, respectively.

Net external sales of all consolidated foreign subsidiaries were $ 3.158 billion and $ 2.572 billion for the nine months ended September 30, 2021 and 2020, respectively.

Long-lived assets of these subsidiaries totaled $ 2.772 billion and $ 3.077 billion at September 30, 2021 and 2020, respectively.

Domestic operations accounted for the remaining net external sales and long-lived assets.

9 unchanged sentences

The liabilities for the estimated future capital contributions are recorded in Other accruals and Other long-term liabilities.

The following table summarizes the balances related to the investments at June 30, 2021, December 31, 2020 and June 30, 2020.

June 30, December 31, June 30,

The following table summarizes the balances related to the investments at September 30, 2021, December 31, 2020 and September 30, 2020.

September 30, December 31, September 30,

2021 2020 2020

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements