What changed in this filing

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Item 1. Financial Statements

2022-04-26 compared with 2021-10-26 · 181 added, 262 removed, 552 unchanged (45% of the section changed)

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net sales $ 4,998.7 $ 4,656.0

4 unchanged sentences

Percent to net sales 28.2 % 28.5 %

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

Other general expense - net 2.5 117.5

Amortization 78.0 79.2

Interest expense 88.4 83.2

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

Interest income ( 0.9 ) ( 0.6 )

Other expense (income) - net 16.3 ( 2.2 )

11 unchanged sentences

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (UNAUDITED)

(in millions) Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

(in millions) Three Months Ended

Net income $ 370.8 $ 409.6

Other comprehensive (loss) income, net of tax:

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments (1)

2 unchanged sentences

Amounts reclassified from AOCI (2)

1.4 0.6 4.6 1.9

Unrealized net gains on cash flow hedges:

1 unchanged sentence

( 1.0 ) ( 1.0 )

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

Other comprehensive loss ( 43.6 ) ( 45.5 )

Comprehensive income $ 327.2 $ 364.1

(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.

(1) The three months ended March 31, 2022 and 2021 include unrealized gains, net of taxes, of $ 8.1 million and $ 23.1 million, respectively, related to net investment hedges.

See Note 12 for additional information.

(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.

(2) Net of taxes of $( 0.2 ) million and $( 0.8 ) million in the three months ended March 31, 2022 and 2021, respectively.

(3) Net of taxes of $ 0.3 million in the three months ended March 31, 2022 and 2021.

See notes to condensed consolidated financial statements.

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions) September 30,

(in millions) March 31,

2022 December 31,

2020 September 30,

2021 March 31,

Current assets:

28 unchanged sentences

260.1 million, 261.1 million and 265.9 million shares outstanding

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

at March 31, 2022, December 31, 2021 and March 31, 2021, respectively

91.0 90.8 90.2

8 unchanged sentences

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)

(in millions) Nine Months Ended

September 30,

2021 September 30,

(in millions) Three Months Ended

2022 March 31,

OPERATING ACTIVITIES

5 unchanged sentences

Loss on divestiture of business — 111.9

Loss on extinguishment of debt — 21.3

Amortization of credit facility and debt issuance costs 1.7 1.5

14 unchanged sentences

Proceeds from sale of assets 10.8 0.9

Increase in other investments ( 90.6 ) ( 21.6 )

Other ( 99.7 ) ( 34.3 )

Net investing cash ( 195.6 ) ( 6.4 )

FINANCING ACTIVITIES

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

Proceeds from long-term debt — 999.0

Payments of long-term debt ( 24.6 ) ( 1,204.7 )

Payments for credit facility and debt issuance costs ( 1.7 ) ( 10.0 )

Net increase in short-term borrowings 972.2 818.0

Payments of cash dividends ( 150.9 ) ( 151.8 )

22 unchanged sentences

Treasury stock purchased ( 407.1 ) ( 407.1 )

Stock-based compensation activity 0.3 51.5 ( 21.5 ) 30.3

Other adjustments 0.7 0.7

Cash dividends -- $ 0.55 per share

( 151.8 ) ( 151.8 )

Balance at March 31, 2021 $ 90.2 $ 3,543.6 $ 1,102.1 $ ( 893.4 ) $ ( 763.8 ) $ 3,078.7

Net income 648.6 648.6

Other comprehensive income 62.6 62.6

Treasury stock purchased ( 870.1 ) ( 870.1 )

Treasury stock issued

Stock-based compensation activity 0.4 54.6 ( 0.8 ) 54.2

Other adjustments 0.6 0.6

Cash dividends -- $ 0.55 per share

11.0 11.0 22.0

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 0.2 38.3 ( 32.9 ) 5.6

2 unchanged sentences

( 150.9 ) ( 150.9 )

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

Balance at March 31, 2022 $ 91.0 $ 3,842.7 $ 2,341.5 $ ( 3,298.9 ) $ ( 742.0 ) $ 2,234.3

(in millions, except per share data) Common

6 unchanged sentences

Other comprehensive loss ( 45.5 ) ( 45.5 )

Adjustment to initially adopt

ASU 2016-13 ( 3.0 ) ( 3.0 )

Treasury stock purchased ( 775.4 ) ( 775.4 )

Treasury stock issued 13.5 43.9 57.4

Stock-based compensation activity 0.3 51.5 ( 21.5 ) 30.3

3 unchanged sentences

Balance at March 31, 2021 $ 90.2 $ 3,543.6 $ 1,102.1 $ ( 893.4 ) $ ( 763.8 ) $ 3,078.7

Net income 595.9 595.9

Other comprehensive income 33.9 33.9

Stock-based compensation activity 0.3 73.3 ( 0.3 ) 73.3

Other adjustments 0.3 0.1 0.4

Cash dividends -- $ 0.4467 per share

( 122.7 ) ( 122.7 )

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 September 30, 2021 and 2020

Periods ended March 31, 2022 and 2021

NOTE 1 - BASIS OF PRESENTATION

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There have been no significant changes in significant accounting policies since December 31, 2021 .

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.

Accounting estimates were revised as necessary during the first three months of 2022 based on new information and changes in facts and circumstances.

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

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.

During the first quarter of 2021, the Company’s Board of Directors approved and declared a three -for-one stock split to shareholders of record at the close of business on March 23, 2021 (the Stock Split).

The Stock Split was effected on March 31, 2021.

All prior year share and per share information herein has been retroactively adjusted to reflect the Stock Split.

The results of operations for the three months ended March 31, 2022 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 uncertainty can alter the Company's seasonal patterns.

NOTE 2 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Effective January 1, 2021, the Company adopted Accounting Standards Update (ASU) 2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.” This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740.

It also improves consistent application of and simplifies U.S.

GAAP for other areas of ASC 740 by clarifying and amending existing guidance.

The amendments are being applied prospectively.

The adoption of ASU 2019-12 did not have a material impact on the Company’s financial position, results of operations or cash flows.

Effective January 1, 2022, the Company adopted Accounting Standards Update (ASU) 2021-10, “Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance.” This ASU requires disclosures for material government assistance transactions during annual reporting periods.

The disclosures include information about the nature of the transaction, the related accounting policies used to account for the government assistance, the effect of government assistance on the entity’s financial statements, and any significant terms and conditions.

The adoption of ASU 2021-10 did not affect the Company’s financial position, results of operations or cash flows as the standard only impacts annual financial statement footnote disclosures.

Not Yet Adopted

In October 2021, the Financial Accounting Standards Board (FASB) issued ASU 2021-08, “Business Combinations (Topic 805):

Accounting for Contract Assets and Liabilities from Contracts with Customers.” This ASU requires an acquiring entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606.

The ASU is effective for fiscal years and interim periods beginning after December 15, 2022, with early adoption permitted.

The Company is evaluating the impact of adopting this ASU.

NOTE 3 - ACQUISITIONS AND DIVESTITURES

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.

During the first quarter of 2022, the Company made certain adjustments to the preliminary purchase accounting adjustments associated with the net assets acquired in its 2021 acquisition of Specialty Polymers, Inc.

The fair value of finite-lived intangible assets increased by $ 61.4 million and property, plant and equipment assets acquired increased by $ 11.0 million, offset by a corresponding net decrease in goodwill.

There was no material impact on previously reported financial results from these adjustments.

The Company expects to complete the preliminary purchase price allocation for the acquisition within the allowable measurement period.

Subsequent to quarter end, the Company completed the acquisition of the European industrial coatings business of Sika AG (Sika).

This business engineers, manufactures and sells corrosion protection coating systems and fire protection coating systems.

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 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.

On March 31, 2021, the Company divested Wattyl, an Australian and New Zealand manufacturer and seller of architectural and protective paint and coatings with annual revenue of approximately $ 200 million.

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).

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.

The divestiture enabled the Company to focus its resources on global opportunities which better 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 expense - net (see Note 15).

The Wattyl divestiture did 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.

NOTE 4 - INVENTORIES

Included in Inventories were the following:

September 30, December 31, September 30,

March 31, December 31, March 31,

2022 2021 2021

7 unchanged sentences

For further information on the Company’s inventory valuation, see Note 4 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 .

NOTE 5 — GOODWILL, INTANGIBLE AND LONG-LIVED ASSETS

NOTE 5 - LONG-LIVED ASSETS

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

September 30, December 31, September 30,

March 31, December 31, March 31,

2022 2021 2021

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.

(SW Canada) and Sherwin-Williams Luxembourg S.à r.l.

(SW Luxembourg, together with the Company and SW Canada, the Borrowers), entered into a new five-year $ 2.000 billion credit agreement (New Credit Agreement).

The New Credit Agreement may be used for general corporate purposes, including the financing of working capital requirements.

The New Credit Agreement replaced the $ 2.000 billion credit agreement dated July 19, 2018, as amended, which was terminated effective June 29, 2021.

The New Credit Agreement will mature on June 29, 2026 and provides that the Company may request to extend the maturity date of the facility for two additional one-year periods.

In addition, the New Credit Agreement provides that the Borrowers may increase the aggregate amount of the facility to $ 2.750 billion, subject to the discretion of each lender to participate in the increase, and the Borrowers may request letters of credit in an amount of up to $ 250.0 million.

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 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 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.

The following table summarizes the Company’s outstanding debt:

March 31, December 31, March 31,

2022 2021 2021

Long-term debt (including current portion) $ 8,853.0 $ 8,851.5 $ 8,290.9

Short-term borrowings 1,739.7 763.5 818.1

Total debt outstanding $ 10,592.7 $ 9,615.0 $ 9,109.0

The Company’s long-term debt primarily consists of senior notes.

For further details on the Company’s debt, including available credit facilities and related agreements, see Note 6 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

The Company’s available capacity under its committed credit agreements is reduced for amounts outstanding under its domestic commercial paper program and letters of credit.

At March 31, 2022 , the Company had unused capacity under its various credit agreements of $ 1.814 billion.

The table below summarizes the Company’s short-term borrowings:

March 31, December 31, March 31,

2022 2021 2021

Domestic commercial paper $ 1,651.5 $ 739.9 $ 816.9

Foreign facilities 88.2 23.6 1.2

Total $ 1,739.7 $ 763.5 $ 818.1

Weighted average interest rate:

Domestic 0.8 % 0.3 % 0.3 %

Foreign 7.6 % 9.5 % 3.0 %

NOTE 7 - PENSION AND OTHER POSTRETIREMENT BENEFITS

6 unchanged sentences

2022 2021 2022 2021 2022 2021

Three Months Ended September 30:

Net periodic benefit cost:

Service cost $ 1.3 $ 1.2 $ 1.9 $ 1.7 $ 0.3 $ 0.3

Interest cost 0.6 0.8 1.4 1.9 1.2 2.0

Expected return on assets ( 1.7 ) ( 1.6 ) ( 2.4 ) ( 2.6 )

Recognition of:

Unrecognized prior service cost (credit) 0.3 0.3 0.1 ( 0.3 )

Unrecognized actuarial loss 0.4 0.3 1.2 0.5

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

Nine Months Ended September 30:

Three Months Ended March 31:

Net periodic benefit cost:

2 unchanged sentences

Expected return on assets ( 1.9 ) ( 1.8 ) ( 2.6 ) ( 2.5 )

Recognition of:

Unrecognized prior service cost (credit) 0.8 1.0 0.2 ( 0.8 )

Unrecognized actuarial loss 1.1 0.7 3.5 1.5

Ongoing pension cost 1.3 2.1 3.7 3.7 8.5 7.5

Amortization of prior service cost (credit) 0.2 0.3 ( 0.1 ) ( 0.1 )

Amortization of actuarial losses 0.1 0.4 1.1 1.2

Ongoing net periodic benefit cost 0.4 0.4 1.0 1.2 2.7 2.8

Divestiture of business 0.7

14 unchanged sentences

These estimated costs, which are mostly undiscounted, are determined based on currently available facts regarding each site.

If the reasonably estimable costs can only be identified as a range and no specific amount within that range can be determined more likely than any other amount within the range, the minimum of the range is provided.

If the reasonably estimable costs can only be identified as a range and no

specific amount within that range can be determined more likely than any other amount within the range, the minimum of the range is provided.

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 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.

At March 31, 2022 and 2021, the Company had accruals reported on the balance sheet as Other long-term liabilities of $ 272.5 million and $ 293.3 million , respectively.

Estimated costs of current investigation and remediation activities of $ 45.9 million and $ 68.6 million are included in Other accruals at March 31, 2022 and 2021 , 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 $ 105.2 million higher than the minimum accruals at September 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 $ 100.4 million higher than the minimum accruals at March 31, 2022.

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 September 30, 2021 .

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.

At March 31, 2022 , $ 274.4 million, or 86.2 % of the total accrual, related directly to the Major Sites.

In the aggregate unaccrued maximum of $ 100.4 million at March 31, 2022 , $ 77.2 million, or 76.9 %, 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.

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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.

The most significant assumptions underlying the reliability and precision of remediation cost estimates for the Gibbsboro site are the type and extent of future remedies to be selected by the EPA and the costs of implementing those remedies.

The remaining three Major Sites comprising the majority of the accrual include (1) a multi-party Superfund site that has received a record of decision from the federal EPA and is currently in the remedial design phase for one operable unit and for which a remedial investigation/feasibility study has been submitted for another operable unit, (2) a closed paint manufacturing facility that is in the operation and maintenance phase of remediation under both federal and state EPA programs, and (3) a formerly-owned site containing warehouse and office space that is in the remedial investigation phase under a state EPA program.

The remaining three Major Sites comprising the majority of the accrual include (1) a multi-party Superfund site that has received a record of decision from the federal EPA and is currently in the remedial design phase for one OU and for which a remedial investigation/feasibility study has been submitted for another OU, (2) a closed paint manufacturing facility that is in the operation and maintenance phase of remediation under both federal and state EPA programs, and (3) a formerly-owned site containing warehouse and office space that is in the remedial investigation phase under a state EPA program.

Each of these three Major Sites are in phases of investigation and remediation that provide sufficient information to reasonably estimate cost ranges and record environmental-related accruals.

4 unchanged sentences

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

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.

At March 31, 2022 , 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.

In the event any future loss contingency significantly exceeds the current amount accrued, the recording of the ultimate liability may result in a material impact on net income for the annual or interim period during which the additional costs are accrued.

13 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.

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.

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.

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.

7 unchanged sentences

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.

The Company has 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.

surfaces previously painted with lead-based paint.

The Company believes that the litigation brought to date is without merit or subject to meritorious defenses and is vigorously defending such litigation.

9 unchanged sentences

Due to the uncertainties associated with the amount of any such liability and/or the nature of any other remedy which may be imposed in such litigation, any potential liability determined to be attributable to the Company arising out of such litigation may have a material adverse effect on the Company’s results of operations, liquidity or financial condition.

An estimate of the potential impact on the Company’s results of operations, liquidity or financial condition cannot be made due to the aforementioned uncertainties.

An estimate of the potential impact on the Company’s results of operations, cash flow, liquidity or financial condition cannot be made due to the aforementioned uncertainties.

Public Nuisance Claim Litigation .

11 unchanged sentences

The Santa Clara County, California proceeding was initiated in March 2000 in the Superior Court of the State of California, County of Santa Clara.

On July 17, 2019, after nearly twenty years of litigation, the Company and two other defendants (ConAgra Grocery Products Company and NL Industries, Inc.) reached an agreement in principle with the plaintiffs to resolve the litigation.

After nearly twenty years of litigation, the Company and two other defendants (ConAgra Grocery Products Company and NL Industries, Inc.) reached an agreement in principle with the plaintiffs to resolve the litigation on July 17, 2019.

The agreement provides that, in full and final satisfaction of any and all claims of the plaintiffs, the defendants collectively shall pay a total of $ 305.0 million, with the defendants each paying approximately $ 101.7 million as follows:

4 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 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.

At March 31, 2022 and 2021, 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 .

3 unchanged sentences

After the defendants removed the actions to federal court and the actions were remanded to state court, the defendants filed preliminary objections on December 21, 2020, seeking to dismiss the complaints with prejudice.

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

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

3 unchanged sentences

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.

On November 17, 2021, the Superior Court transferred the appeal to the Commonwealth Court, another one of Pennsylvania’s intermediate appellate courts.

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

The defendants filed a motion to amend the order overruling their preliminary objections to allow an interlocutory appeal, which the trial court granted on November 9, 2021.

On December 3, 2021, the defendants filed a petition for permission to appeal with the Commonwealth Court.

The Commonwealth Court granted the defendants’ petitions for permission to appeal in both the Montgomery County and Lehigh County actions on February 18, 2022, and stayed all proceedings in the trial courts pending the appellate court proceedings.

The Company’s opening appellate briefs in both actions are due on May 18, 2022.

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.

21 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 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 May 20, 2021, the Company and the three other defendants filed motions for summary judgment to dismiss the claims of all plaintiffs then 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.

On March 3, 2022, the district court granted summary judgment in favor of the Company and the other defendants on all claims then pending in the district court.

On March 31, 2022, the plaintiffs filed a motion seeking to alter or amend the judgment.

The Company and the other defendants opposed the motion on April 21, 2022.

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

1 unchanged sentence

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.

The defendants answered the plaintiff’s complaint on December 17, 2021.

On March 2, 2022, the plaintiff filed a motion for declaratory judgment seeking to clarify Wisconsin law following the Seventh Circuit’s decision in favor of the Company in the Owens, Sifuentes and Burton cases.

On March 25, 2022, the Company removed the case to the United States District Court for the Eastern District of Wisconsin.

The plaintiff filed a motion to remand the case to the state circuit court on April 7, 2022.

The Company’s response to the declaratory judgment motion was filed in federal court on April 15, 2022, and the Company’s opposition to the motion to remand is due to be filed on April 28, 2022.

Other lead-based paint and lead pigment litigation.

12 unchanged sentences

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.

On November 5, 2021, the Illinois Department of Healthcare and Family Services filed a Notice of Appeal with the Appellate Court of Illinois, First District.

Insurance coverage litigation.

The Company and its liability insurers, including certain underwriters at Lloyd’s of London, initiated legal proceedings against each other to determine, among other things, whether the costs and liabilities associated with the abatement of lead pigment are covered under certain insurance policies issued to the Company.

The liability insurers’ action, which was filed on February 23, 2006 in the Supreme Court of the State of New York, County of New York, has been dismissed.

The insurers’ action, which was filed on February 23, 2006 in the Supreme Court of the State of New York, County of New York, has been dismissed.

The Company’s action, filed on March 3, 2006 in the Common Pleas Court, Cuyahoga County, Ohio, previously was stayed and inactive.

On January 9, 2019, the Company filed an unopposed motion to lift the stay with the trial court, which was granted, allowing the case to proceed.

On June 28, 2019, the Company and its liability insurers each filed separate motions for summary judgment seeking various forms of relief.

The trial court entered an order on December 4, 2020, granting the liability insurers’ motion for summary judgment, denying the Company’s motion, and entering final judgment in favor of the liability insurers.

On June 28, 2019, the Company and its liability insurers each filed separate motions for

summary judgment seeking various forms of relief.

The trial court entered an order on December 4, 2020, granting the insurers’ motion for summary judgment, denying the Company’s motion, and entering final judgment in favor of the insurers.

The trial court sided with the Company on all of the issues presented, except one.

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.

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 insurers filed cross-appeals.

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

The insurers then filed on January 13, 2022, a motion for leave to file a supplemental brief to address the Eighth Appellate District’s recent decision in Cincinnati Ins.

Discount Drug Mart, Inc.

The Company filed a response to the insurers’ motion on January 19, 2022.

On March 25, 2022, the Company filed a notice of additional authority, submitting a March 24, 2022 decision from the New York Appellate Division, First Judicial Department in Certain Underwriters at Lloyd’s, London, et al., v.

NL Industries, Inc., et al.

The insurers filed a response to the notice on April 1, 2022.

On April 20, 2022, the insurers filed a notice of additional authority, submitting an April 19, 2022 decision from the California Court of Appeal, First Appellate Division in Certain Underwriters at Lloyd’s, London v.

ConAgra Grocery Products Co.

The Company filed a response to the notice on April 25, 2022.

The parties are awaiting the appellate court’s decision.

6 unchanged sentences

The plaintiffs s eek to recover natural resource damages, punitive damages, and litigation fees and costs, as well as other costs, damages, declaratory relief, and penalties pursuant to New Jersey state statutes and common law theories in connection with the alleged discharge of hazardous substances and pollutants at the Company’s Gibbsboro, New Jersey site, a former manufacturing plant and related facilities.

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

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.

The court has scheduled a trial date of September 25, 2023.

NOTE 10 - SHAREHOLDERS' EQUITY

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.

In April 2021, the Company received proceeds of $ 11.7 million in conjunction with the issuance of treasury shares to fund obligations related to a non-qualified benefit plan.

The following table summarizes the dividends declared and paid on common stock:

Per Share Total

(in millions) Cash

Per Share Total

(in millions)

First Quarter $ 0.60 $ 150.9 $ 0.55 $ 151.8

Treasury Stock

The Company acquires its common stock for general corporate purposes through its publicly announced share repurchase program.

As of March 31, 2022, the Company had remaining authorization from its Board of Directors to purchase 47.1 million shares of its common stock.

The table below summarizes share repurchases during the three months ended March 31, 2022 and 2021:

Three Months Ended

Treasury stock purchases (millions of dollars) $ 407.1 $ 775.4

Treasury stock purchases (shares) 1,450,000 3,300,000

Average price per share $ 280.77 $ 234.96

In February 2022, the Company received proceeds of $ 22.0 million in conjunction with the issuance of treasury shares to fund Company contributions to the domestic defined contribution plan.

Other Activity

During the three months ended March 31, 2022, 129,981 stock options were exercised at a weighted average price per share of $ 90.18 .

In addition, 355,581 restricted stock units vested during this period.

NOTE 11 - ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

6 unchanged sentences

Amounts reclassified from AOCI 1.0 ( 1.0 ) —

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

Balance at March 31, 2022 $ ( 745.7 ) $ ( 31.2 ) $ 34.9 $ ( 742.0 )

Adjustments Pension and

4 unchanged sentences

Amounts reclassified from AOCI 1.8 ( 1.0 ) 0.8

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

Balance at March 31, 2021 $ ( 717.8 ) $ ( 85.4 ) $ 39.4 $ ( 763.8 )

NOTE 12 - DERIVATIVES AND HEDGING

In February 2020, the Company entered into two U.S.

The Company has two U.S.

Dollar to Euro cross currency swap contracts to hedge the Company's net investment in its European operations.

The contracts have a notional value of $ 500.0 million and $ 244.0 million, respectively, and mature on June 1, 2024 and November 15, 2021, respectively.

During the term of the $ 500.0 million contract, the Company will pay fixed-rate interest in Euros and receive fixed-rate interest in U.S.

The contracts have a notional value of $ 500.0 million and $ 244.0 million, respectively, and mature on June 1, 2024 and June 1, 2027, respectively.

During the term of the contracts, the Company will pay fixed-rate interest in Euros and receive fixed-rate interest in U.S.

Dollars, thereby effectively converting a portion of the Company's U.S.

Dollar denominated fixed-rate debt to Euro denominated fixed-rate debt.

During the term of the $ 244.0 million contract, the Company will pay floating-rate interest in Euros and receive floating-rate interest in U.S.

In February 2020, the Company settled its $ 400.0 million U.S.

Dollar to Euro cross currency swap contract entered into in May 2019 to hedge the Company's net investment in its European operations.

At the time of the settlement, an unrealized gain of $ 11.8 million, net of tax, was recognized in AOCI.

The following table summarizes the balance sheet location of the cross currency swaps.

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

September 30, December 31, September 30,

March 31, December 31, March 31,

2022 2021 2021

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 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

Unrealized gain (loss) $ 19.4 $ ( 35.0 ) $ 42.0 $ ( 35.1 )

The following table summarizes the unrealized gains for the three months ended March 31, 2022 and 2021.

Three Months Ended

March 31, March 31,

Unrealized gains $ 10.7 $ 30.6

Tax effect ( 2.6 ) ( 7.5 )

Unrealized gain (loss), net of taxes $ 14.5 $ ( 26.3 ) $ 31.6 $ ( 26.4 )

Unrealized gains, net of taxes $ 8.1 $ 23.1

NOTE 13 - FAIR VALUE MEASUREMENTS

5 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 nine months ended September 30, 2021.

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

Except for the acquisition and divestiture-related fair value measurements described in Note 3, 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.

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

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

2 unchanged sentences

$ 110.7 $ 75.8 $ 34.9 $ — $ 179.2 $ 141.9 $ 37.3 $ —

Deferred compensation plan liabilities $ 85.3 $ 85.3 $ 92.2 $ 92.2

Net investment hedge liability $ 25.8 $ 25.8 $ 36.5 $ 36.5

$ 129.1 $ 85.3 $ 43.8 $ — $ 178.0 $ 92.2 $ 85.8 $ —

The deferred compensation plan assets consist of the investment funds maintained for the future payments under the Company’s executive deferred compensation plans, which are structured as rabbi trusts.

2 unchanged sentences

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

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 cost basis of the investment funds was $ 63.9 million and $ 63.0 million at March 31, 2022 and December 31, 2021, respectively.

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

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.

See Note 7 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information.

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

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.

The cost basis of the investment funds was $ 31.0 million and $ 86.9 million at March 31, 2022 and December 31, 2021, respectively.

The net investment hedge liability is the fair value of the cross currency swaps (see Note 12).

2 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.

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Value Carrying

22 unchanged sentences

Management creates a baseline calculation using historical sales and then utilizing forecast information, estimates the anticipated sales volume each quarter to calculate the expected reduction to sales.

The remainder of the transaction price is fixed as agreed upon with the customer, limiting estimation of revenues including constraints.

remainder of the transaction price is fixed as agreed upon with the customer, limiting estimation of revenues including constraints.

The Company’s Accounts receivable and current and long-term contract assets and liabilities are summarized in the following table.

4 unchanged sentences

(Current) Contract Liabilities

Balance sheet caption Accounts receivable Other

current assets Other

accruals Other

Balance at December 31, 2021 $ 2,352.4 $ 60.9 $ 131.2 $ 259.8 $ 9.2

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

Balance at March 31, 2022 2,783.6 68.3 118.0 211.1 7.4

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.

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Balance at January 1 $ 48.9 $ 53.5

Adjustment upon adoption of ASU 2016-13 — 3.0

Bad debt expense 12.6 6.4

Uncollectible accounts written off, net of recoveries ( 3.9 ) ( 1.1 )

Balance at September 30 $ 61.8 $ 77.1

Balance at March 31 $ 57.6 $ 58.8

NOTE 15 - OTHER

Other general (income) expense - net

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

Other general expense - net

Included in Other general expense - net were the following:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Provisions for environmental matters - net $ 0.6 $ 2.5

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

(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

Loss on sale or disposition of assets 1.9 3.1

Other general expense - net $ 2.5 $ 117.5

Provisions for environmental matters - net represent initial provisions for site-specific estimated costs of environmental investigation or remediation and increases or decreases to environmental-related accruals as information becomes available upon which more accurate costs can be reasonably estimated and as additional accounting guidelines are issued.

1 unchanged sentence

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

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.

The loss on sale or disposition of assets represents net realized 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

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Investment and royalty income $ — $ ( 3.1 ) $ ( 18.3 ) $ ( 5.7 )

Loss on extinguishment of debt (see Note 6)

Investment losses (gains) $ 6.7 $ ( 6.5 )

Net expense from banking activities 2.9 2.6

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

Foreign currency transaction related losses 4.1 2.5

Miscellaneous pension expense 0.9 0.9

2 unchanged sentences

Other expense (income) - net $ 16.3 $ ( 2.2 )

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.

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 March 31, 2022 and 2021.

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 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 effective tax rate was 19.6 % for the first quarter of 2022 compared to 19.5 % for the first quarter of 2021.

The effective tax rate was favorably impacted by tax benefits related to employee share based payments during the first quarter of 2022 and 2021.

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

3 unchanged sentences

At December 31, 2021, the Company had accrued $ 26.4 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 nine months ended September 30, 2021.

There were no significant changes to any of the balances of unrecognized tax benefits at December 31, 2021 during the three months ended March 31, 2022.

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

federal jurisdiction, and various state and foreign jurisdictions.

The IRS is currently auditing the Company's 2013, 2014, 2015 and 2016 income tax returns.

The IRS audited the Company's 2013, 2014, 2015 and 2016 income tax returns.

As a result of these audits, certain adjustments have been assessed.

The Company has filed a protest and submitted additional information for consideration.

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

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.

The Company has filed a protest, submitted additional information for consideration, and is currently in the appeals process with the IRS.

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

As of March 31, 2022, the federal statute of limitations had not expired for the 2013 through 2021 tax years.

At March 31, 2022, the Company is subject to non-U.S.

income tax examinations for the tax years of 2013 through 2021.

3 unchanged sentences

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

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net income $ 370.8 $ 409.6

5 unchanged sentences

Stock options and other contingently issuable shares (1)

5.0 4.7 4.7 4.6

Average shares outstanding assuming dilution 263.1 270.6

Diluted net income per share $ 1.41 $ 1.51

(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.

(1) There were 1.0 million stock options and other contingently issuable shares excluded due to their anti-dilutive effect for the three months ended March 31, 2022.

There were no stock options and other contingently issuable shares excluded due to their anti-dilutive effect for the three months ended March 31, 2021.

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 September 30, 2021

Group Consumer Brands

Group Performance

Group Administrative Consolidated

Net external sales $ 2,967.0 $ 646.7 $ 1,532.5 $ 0.5 $ 5,146.7

Intersegment transfers — 1,155.3 40.5 ( 1,195.8 ) —

Total net sales and intersegment transfers $ 2,967.0 $ 1,802.0 $ 1,573.0 $ ( 1,195.3 ) $ 5,146.7

Segment profit $ 631.5 $ 75.8 $ 110.4 $ 817.7

Interest expense $ ( 83.1 ) ( 83.1 )

Administrative expenses and other ( 123.1 ) ( 123.1 )

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

Three Months Ended September 30, 2020

Group Consumer Brands

Group Performance

Group Administrative Consolidated

Net external sales $ 2,978.3 $ 838.1 $ 1,305.3 $ 0.5 $ 5,122.2

Intersegment transfers — 1,024.3 28.7 ( 1,053.0 ) —

Total net sales and intersegment transfers $ 2,978.3 $ 1,862.4 $ 1,334.0 $ ( 1,052.5 ) $ 5,122.2

Segment profit $ 747.4 $ 198.3 $ 155.3 $ 1,101.0

Interest expense $ ( 83.3 ) ( 83.3 )

Administrative expenses and other ( 142.1 ) ( 142.1 )

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

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Group Consumer Brands

8 unchanged sentences

Income before income taxes $ 445.4 $ 64.9 $ 144.5 $ ( 193.7 ) $ 461.1

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

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 nine months ended September 30, 2021.

In addition, the Administrative segment includes the $ 111.9 million pre-tax loss on the Wattyl divestiture recognized during the three months ended March 31, 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 $ 1.019 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.

Net external sales of all consolidated foreign subsidiaries were $ 1.078 billion and $ 1.037 billion for the three months ended March 31, 2022 and 2021, respectively.

Long-lived assets of these subsidiaries totaled $ 2.796 billion and $ 2.820 billion at March 31, 2022 and 2021, 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 September 30, 2021, December 31, 2020 and September 30, 2020.

September 30, December 31, September 30,

The following table summarizes the balances related to the investments at March 31, 2022, December 31, 2021 and March 31, 2021.

March 31, December 31, March 31,

2022 2021 2021

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