What changed in this filing

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Item 1. Business

2022-02-17 compared with 2021-02-19 · 67 added, 47 removed, 100 unchanged (53% of the section changed)

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Basis of Reportable Segments

The Company reports its segment information in the same way that management internally organizes its business for assessing performance and making decisions regarding allocation of resources in accordance with the Segment Reporting Topic of the Accounting Standards Codification (ASC).

The Company reports its segment information in the same way that management internally organizes its business for assessing performance and making decisions regarding allocation of resources.

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”).

Factors considered in determining the three Reportable Segments of the Company include the nature of business activities, the management structure directly accountable to the Company’s chief operating decision maker (CODM) for operating and administrative activities, availability of discrete financial information and information presented to the Board of Directors.

The Company reports all other business activities and immaterial operating segments that are not reportable in the Administrative segment.

For more information about the Reportable Segments, see Note 21 to the Consolidated Financial Statements in Item 8.

The Company’s CODM has been identified as the Chief Executive Officer because he has final authority over performance assessment and resource allocation decisions.

Because of the diverse operations of the Company, the CODM regularly receives discrete financial information about each Reportable Segment as well as a significant amount of additional financial information about certain divisions, business units or subsidiaries of the Company.

The CODM uses all such financial information for performance assessment and resource allocation decisions.

The CODM evaluates the performance of and allocates resources to the Reportable Segments based on segment profit or loss and cash generated from operations.

The accounting policies of the Reportable Segments are the same as those described in Note 1 of the Notes to Consolidated Financial Statements in Item 8.

The Americas Group

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At December 31, 2021, The Americas Group consisted of operations from subsidiaries in 10 foreign countries.

The CODM uses discrete financial information about The Americas Group, supplemented with information by geographic region, product type and customer type, to assess performance of and allocate resources to The Americas Group as a whole.

In accordance with ASC 280-10-50-9, The Americas Group as a whole is considered the operating segment, and because it meets the criteria in ASC 280-10-50-10, it is also considered a Reportable Segment.

Consumer Brands Group

The Consumer Brands Group 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 Australia, New Zealand, China 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.

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This segment incurred most of the Company’s capital expenditures related to ongoing environmental compliance measures at sites currently in operation.

The CODM uses discrete financial information about the Consumer Brands Group, supplemented with information by product type and customer type, to assess performance of and allocate resources to the Consumer Brands Group as a whole.

In accordance with ASC 280-10-50-9, the Consumer Brands Group as a whole is considered the operating segment, and because it meets the criteria in ASC 280-10-50-10, it is also considered a Reportable Segment.

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.

based resins and colorants worldwide.

This segment licenses certain technology and trade names worldwide.

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At December 31, 2021, the Performance Coatings Group consisted of operations in the United States and subsidiaries in 44 foreign countries.

The CODM uses discrete financial information about the Performance Coatings Group, supplemented with information about geographic divisions, business units and subsidiaries, to assess performance of and allocate resources to the Performance Coatings Group as a whole.

In accordance with ASC 280-10-50-9, the Performance Coatings Group as a whole is considered the operating segment, and because it meets the criteria in ASC 280-10-50-10, it is also considered a Reportable Segment.

Administrative Segment

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The Administrative segment does not include any significant foreign operations.

Also included in the Administrative segment is 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, including the Company’s headquarters site, and disposal of idle facilities.

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.

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Raw Materials and Products Purchased for Resale

We believe we generally have adequate sources of raw materials and fuel supplies used in our business.

There are sufficient suppliers of each product purchased for resale that none of the Reportable Segments anticipate any significant sourcing problems during 2021.

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.

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 small 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.

We attempt, if feasible, to mitigate our potential risk associated with the sourcing of our raw materials and other products through inventory management, strategic relationships with key suppliers, alternative sourcing strategies and long-term investments to expand our manufacturing capabilities.

See Item 1A Risk Factors for more information regarding cost and sourcing of raw materials.

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• The Americas Group:

Sherwin-Williams®, Cashmere®, Colorgin®, Duration®, Emerald®, Harmony®, Kem Tone®, Loxon®, Metalatex®, Novacor®, Paint Shield®, ProClassic®, ProIndustrial™, ProMar®, SuperDeck®, SuperPaint®, Woodscapes®

Sherwin-Williams®, Cashmere®, Colorgin®, Condor®, Duration®, Emerald®, Harmony®, Kem Tone®, Loxon®, Metalatex®, Novacor®, PaintShield®, ProClassic®, ProCraft®, ProIndustrial™, ProMar®, SuperDeck®, SuperPaint®, Woodscapes®

• Consumer Brands Group:

Cabot®, Duckback®, Dupli-Color®, Dutch Boy®, Geocel®, HGTV HOME® by Sherwin-Williams, Huarun®, Krylon®, Minwax®, Pratt & Lambert®, Purdy®, Ronseal®, Solver®, Thompson’s® WaterSeal®, Valspar®, Wattyl®, White Lightning®

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®, AWX Performance Plus™, DeBeer®, Dimension®, Duraspar®, EcoDex®, Envirolastic®, Euronavy®, Excelo®, EzDex®, Fastline®, Firetex®, Fluropon®, Heat-Flex®, House of Kolor®, Huarun®, Kem Aqua®, Lazzuril®, Macropoxy®, Martin Senour®, ML Campbell®, PermaClad®, Planet Color®, Polane®, Powdura®, Sayerlack®, Sher-Wood®, Sumaré®, Ultra™, ValPure® , Valspar®

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.

Campbell®, Octoral®, PermaClad®, Polane®, Powdura®, Sayerlack®, Sher-Wood®, Sumaré®, Ultra 9K®, Ultra 7000®, ValPure®, Valspar®

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.

Backlog and Productive Capacity

Backlog orders are not 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 through 2021.

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 2021, we experienced raw material shortages, labor constraints, and weather-related shutdowns that impacted our production and ability to meet customer orders.

We believe that sufficient productive capacity currently exists to fulfill our needs for paint, coatings and related products during 2022.

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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The main competitive factors are the availability of property and price.

Human Capital

Human Capital Resources

We believe our people are central to the foundation and future of the Company’s success.

Our culture and commitment to our people are important factors in attracting, retaining, developing and progressing qualified employees.

Our culture and commitment to our people are important factors in attracting, retaining, developing and progressing qualified talent.

At December 31, 2021, we employed 61,626 people worldwide, of which 78% were in the United States and 22% were in other global regions.

Culture and Engagement .

The Company’s seven guiding values are the foundation of our culture of excellence—integrity, people, service, quality, performance, innovation and growth.

We value and support our people through, among other initiatives, our talent management, health and safety, employment practices and total rewards programs.

We are committed to fostering a culture of inclusion where differences are welcomed, appreciated and celebrated to positively impact our people and business, and where our people are engaged and encouraged to support the communities in which they live and work.

Talent Management.

Purpose and Culture .

Our commitment to our people is embedded in our corporate purpose and guiding values.

Our purpose is to inspire and improve the world by coloring and protecting what matters.

We fulfill this purpose through the development, manufacture, distribution and sale of innovative paint and coatings products, striving to deliver benefits for all major stakeholders, including our employees.

The Company’s seven guiding values — integrity, people, service, quality, performance, innovation and growth — influence how we fulfill our purpose, emphasize our commitment to our people and serve as the foundation of our culture of excellence.

We value and support our people through, among other initiatives, our inclusion, diversity and equity, talent acquisition, employee engagement, and occupational health and safety initiatives, and our employment practices and total rewards programs.

Inclusion, Diversity and Equity .

We are committed to fostering a culture of inclusion 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.

The building blocks of our inclusion, diversity and equity 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.

• Progress talent by embedding equity into talent planning:

Embedding equity into talent practices, processes, tools and resources at all levels.

Our continuous efforts to create a supportive, welcoming environment across our global footprint is the shared responsibility of all employees, including our senior leaders.

Our senior leaders attend an inclusion, diversity and equity learning session to assist us in maintaining our commitment to leading with inclusion and embracing and leveraging the diversity of our workforce.

Talent Acquisition and Employee Engagement.

We are committed to providing our people with opportunities to learn, grow and be recognized for their achievements.

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The Company’s early talent programs, including our management trainee program, play a critical role in attracting and progressing a diverse pipeline of talent.

During 2021, we hired approximately 1,400 talented people through our management trainee program as part of our long-term growth initiatives.

We are also committed to investing in our people by providing learning and employee networking opportunities to drive retention, progression and engagement and help them excel in their current and future roles.

Health and Safety.

We are committed to providing safe and healthy working environments and taking reasonable preventative measures to protect the health and safety of our employees and customers.

We drive Environmental, Health and Safety (EHS) excellence across the Company and strive for incident-free workplaces — continuously assessing and developing the programs that are in place to help keep our employees, customers and communities safe.

In response to the COVID-19 pandemic, we have implemented significant changes to our business designed to protect the health and well-being of our employees and customers and to support appropriate physical distancing and other health and safety protocols.

These efforts continue to include:

remote, alternate and flexible work arrangements where possible, such as split shifts at facilities and remote work options for non-essential on-site functions;

enhanced cleaning and sanitation procedures;

domestic and international travel restrictions;

return to work and visitor screening protocols;

and the postponement or cancellation of hosting or attending large events.

During 2021, our employees completed thousands of hours of online and instructor-led courses across a broad range of categories, including leadership, inclusion, diversity and equity, professional skills, technical and compliance.

Occupational Health and Safety.

We are committed to providing safe and healthy working environments for our employees.

We have a continued focus on Environmental, Health and Safety (EHS) excellence that involves enhancing employee health and safety, process safety, occupational health and taking reasonable preventative measures to reduce workplace injuries to protect the health and safety of our employees.

We strive for incident-free workplaces — continuously assessing and developing the programs that are in place to help keep our employees, customers and communities safe.

Since the onset of the pandemic, we have implemented significant modifications to our health and safety programs, which were designed to protect the health and well-being of our employees and customers from COVID-19.

These efforts have included, but are not limited to:

requiring social distancing;

permitting remote, alternate and flexible work arrangements where possible;

enhancing cleaning and sanitation procedures;

restricting domestic and international travel;

developing return to work and visitor screening protocols;

and postponing or cancelling the hosting or attending of large events.

Employment Practices and Total Rewards.

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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.

During 2020, we enhanced certain of the Company’s benefits to support the health and well-being of our employees during the COVID-19 pandemic, including our tele-health, paid sick leave, family leave and voluntary leave of absence policies and programs.

For additional information regarding our response to the COVID-19 pandemic, see the information included within Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Environmental Compliance

Over the past two years, we enhanced certain of the Company’s benefits and practices to support the health and well-being of our employees through the challenges of the pandemic and significant supply chain disruptions caused by Winter Storm Uri and Hurricane Ida — two natural disasters that occurred during 2021.

Our enhanced benefits have included tele-health, paid sick leave, family leave and voluntary leave of absence policies and programs.

We also have rewarded our employees’ resiliency and hard work and made changes in our business to encourage retention, including wage increases, reduced store hours and employee benefits enhancements.

For additional information regarding our response to the COVID-19 pandemic and supply chain disruptions, see the information included within Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Regulatory Compliance

For additional information regarding environmental-related matters, see Notes 1, 9 and 18 to the Consolidated Financial Statements in Item 8.

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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 the federal securities laws.

These forward-looking statements are based upon management’s current expectations, estimates, assumptions and beliefs concerning future events and conditions and may discuss, among other things, anticipated future performance (including sales and earnings), expected growth, future business plans and the costs and potential liability for environmental-related matters and the lead pigment and lead-based paint litigation.

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,” “potential,” “seek,” “intend” or “anticipate” or the negative thereof or comparable terminology.

These forward-looking statements are based upon management’s current expectations, predictions, estimates, assumptions and beliefs concerning future events and conditions and may discuss, among other things, anticipated future performance (including sales and earnings), expected growth, future business plans and the costs and potential liability for environmental-related matters and the lead pigment and lead-based paint litigation.

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” or “anticipate” or the negative thereof or comparable terminology.

Readers are cautioned not to place undue reliance on any forward-looking statements.

Forward-looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside our control, that could cause actual results to differ materially from such statements and from our historical results and experience.

These risks, uncertainties and other factors include such things as:

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• changes in our relationships with customers and suppliers;

• disruptions in the supply chain, including those caused by industry capacity constraints, labor shortages, raw material availability, and logistics delays and constraints;

• our ability to successfully integrate past and future acquisitions into our existing operations, as well as the performance of the businesses acquired;

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• 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;

• adverse weather conditions or impacts of climate change, natural disasters and public health crises, including the COVID-19 pandemic;

• adverse weather conditions or natural disasters, including due to the impacts of climate change, and public health crises, including the COVID-19 pandemic;

• the duration, severity and scope of the COVID-19 pandemic and the actions implemented by international, federal, state and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19, which may exacerbate one or more of the aforementioned and/or other risks, uncertainties and factors more fully described in the Company’s reports filed with the Securities and Exchange Commission.

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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-K

Item 1. Business