What changed in this filing

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Item 1. Financial Statements

2022-07-27 compared with 2022-04-26 · 180 added, 87 removed, 646 unchanged (29% of the section changed)

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Net sales $ 5,872.3 $ 5,379.8 $ 10,871.0 $ 10,035.8

4 unchanged sentences

Percent to net sales 25.9 % 26.7 % 26.9 % 27.5 %

Other general expense - net 2.5 117.5

Other general expense (income) - net 4.4 ( 5.2 ) 6.9 112.3

Amortization 78.5 77.8 156.5 157.0

14 unchanged sentences

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (UNAUDITED)

(in millions) Three Months Ended

(in millions) Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

Net income $ 577.9 $ 648.6 $ 948.7 $ 1,058.2

Other comprehensive income (loss), net of tax:

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments (1)

2 unchanged sentences

Amounts reclassified from AOCI (2)

1.5 1.4 2.5 3.2

Unrealized net gains on cash flow hedges:

1 unchanged sentence

( 1.0 ) ( 1.4 ) ( 2.0 ) ( 2.4 )

Other comprehensive loss ( 43.6 ) ( 45.5 )

Other comprehensive (loss) income ( 172.6 ) 62.6 ( 216.2 ) 17.1

Comprehensive income $ 405.3 $ 711.2 $ 732.5 $ 1,075.3

(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.

(1) The three months ended June 30, 2022 and 2021 include unrealized gains (losses), net of taxes, of $ 30.8 million and $( 6.0 ) million, respectively, related to net investment hedges.

The six months ended June 30, 2022 and 2021 include unrealized gains, net of taxes, of $ 38.9 million and $ 17.1 million, respectively, related to net investment hedges.

See Note 12 for additional information.

(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.

(2) Net of taxes of $( 0.6 ) million and $( 0.3 ) million in the three months ended June 30, 2022 and 2021, respectively.

Net of taxes of $( 0.8 ) million and $( 1.1 ) million in the six months ended June 30, 2022 and 2021, respectively.

(3) Net of taxes of $ 0.4 million and $ 0.1 million in the three months ended June 30, 2022 and 2021, respectively.

Net of taxes of $ 0.7 million and $ 0.4 million in the six months ended June 30, 2022 and 2021, respectively.

See notes to condensed consolidated financial statements.

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions) March 31,

(in millions) June 30,

2022 December 31,

2021 March 31,

2021 June 30,

Current assets:

28 unchanged sentences

259.2 million, 261.1 million and 263.3 million shares outstanding

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

at June 30, 2022, December 31, 2021 and June 30, 2021, respectively

91.0 90.8 90.6

8 unchanged sentences

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)

(in millions) Three Months Ended

2022 March 31,

(in millions) Six Months Ended

2022 June 30,

OPERATING ACTIVITIES

25 unchanged sentences

Net increase in short-term borrowings 1,248.5 761.9

Payments of long-term debt ( 260.2 ) —

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

Payments of cash dividends ( 307.1 ) ( 297.7 )

5 unchanged sentences

Effect of exchange rate changes on cash ( 10.9 ) ( 10.5 )

Net increase in cash and cash equivalents 235.4 88.1

Net increase (decrease) in cash and cash equivalents 146.9 ( 7.0 )

Cash and cash equivalents at beginning of year 165.7 226.6

21 unchanged sentences

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

Net income 577.9 577.9

Other comprehensive loss ( 172.6 ) ( 172.6 )

Treasury stock purchased ( 296.4 ) ( 296.4 )

Stock-based compensation activity 41.5 41.5

Other adjustments ( 3.9 ) 0.1 ( 0.1 ) ( 3.9 )

Cash dividends -- $ 0.60 per share

( 156.2 ) ( 156.2 )

Balance at June 30, 2022 $ 91.0 $ 3,880.3 $ 2,763.3 $ ( 3,595.4 ) $ ( 914.6 ) $ 2,224.6

(in millions, except per share data) Common

12 unchanged sentences

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 9.3 2.4 11.7

Stock-based compensation activity 0.4 54.6 ( 0.8 ) 54.2

Other adjustments 0.6 0.6

Cash dividends -- $ 0.55 per share

( 145.9 ) ( 145.9 )

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

See notes to condensed consolidated financial statements.

2 unchanged sentences

(millions of dollars, unless otherwise noted)

Periods ended March 31, 2022 and 2021

Periods ended June 30, 2022 and 2021

NOTE 1 - BASIS OF PRESENTATION

4 unchanged sentences

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

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

Accounting estimates were revised as necessary during the first six 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 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.

The results of operations for the three and six months ended June 30, 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.

14 unchanged sentences

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).

During the second quarter of 2022, the Company completed the acquisition of the European industrial coatings business of Sika AG (Sika) for $ 211.4 million.

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.

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

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

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

In July 2022, the Company completed the acquisition of a domestic floor coatings company and a European coatings company for an aggregate purchase price of approximately $ 425 million.

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

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 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).

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

1 unchanged sentence

Included in Inventories were the following:

March 31, December 31, March 31,

June 30, December 31, June 30,

2022 2021 2021

9 unchanged sentences

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

March 31, December 31, March 31,

June 30, December 31, June 30,

2022 2021 2021

9 unchanged sentences

The following table summarizes the Company’s outstanding debt:

March 31, December 31, March 31,

June 30, December 31, June 30,

2022 2021 2021

4 unchanged sentences

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

At June 30, 2022 , the Company had unused capacity under its various credit agreements of $ 1.506 billion.

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

March 31, December 31, March 31,

June 30, December 31, June 30,

2022 2021 2021

Short-term borrowings:

Domestic commercial paper $ 1,708.8 $ 739.9 $ 758.9

Revolving credit facility 250.0 — —

Foreign facilities 53.2 23.6 3.2

1 unchanged sentence

Weighted average interest rate:

Domestic 0.8 % 0.3 % 0.3 %

Foreign 7.6 % 9.5 % 3.0 %

Domestic commercial paper 1.7 % 0.3 % 0.2 %

Revolving credit facility 2.6 % — % — %

Foreign facilities 6.5 % 9.5 % 4.0 %

On May 23, 2022, the Company amended its credit agreement entered into on May 9, 2016 and subsequently amended on multiple dates to extend the maturity of $ 150.0 million of the commitments available for borrowing or letters of credit from June 20, 2022 to June 20, 2027.

NOTE 7 - PENSION AND OTHER POSTRETIREMENT BENEFITS

6 unchanged sentences

2022 2021 2022 2021 2022 2021

Three Months Ended March 31:

Three Months Ended June 30:

Net periodic benefit cost:

4 unchanged sentences

Amortization of actuarial losses 0.9 0.3 1.0 1.1

Net periodic benefit cost $ 0.4 $ 0.4 $ 1.0 $ 1.2 $ 2.8 $ 2.9

Six Months Ended June 30:

Net periodic benefit cost:

Service cost $ 2.5 $ 2.5 $ 3.3 $ 3.7 $ 0.6 $ 0.7

Interest cost 1.6 1.4 2.9 2.8 3.0 2.6

Expected return on assets ( 3.8 ) ( 3.6 ) ( 5.1 ) ( 4.8 )

Amortization of prior service cost 0.5 0.5 ( 0.1 ) ( 0.2 ) 0.1

Amortization of actuarial losses 1.0 0.7 2.1 2.3

Ongoing net periodic benefit cost 0.8 0.8 2.0 2.4 5.5 5.7

18 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 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.

At June 30, 2022 and 2021, the Company had accruals reported on the balance sheet as Other long-term liabilities of $ 269.2 million and $ 283.8 million , respectively.

Estimated costs of current investigation and remediation activities of $ 45.9 million and $ 68.6 million are included in Other accruals at June 30, 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 $ 100.4 million higher than the minimum accruals at March 31, 2022.

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 $ 94.5 million higher than the minimum accruals at June 30, 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 March 31, 2022 .

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.

At June 30, 2022 , $ 269.8 million, or 85.6 % of the total accrual, related directly to the Major Sites.

In the aggregate unaccrued maximum of $ 94.5 million at June 30, 2022 , $ 71.0 million, or 75.1 %, 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.

14 unchanged sentences

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

At March 31, 2022 , the Company did not have material loss contingency accruals related to unasserted claims.

At June 30, 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

59 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 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.

At June 30, 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 .

13 unchanged sentences

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.

The Company filed its opening appellate briefs in both actions on May 18, 2022.

Montgomery County and Lehigh County filed their appellate briefs on July 21, 2022.

Litigation seeking damages from alleged personal injury.

39 unchanged sentences

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

The plaintiffs filed a reply in support of the motion on May 6, 2022.

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

2 unchanged sentences

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.

Prior to filing its response to the declaratory judgment motion, the Company removed the case to the United States District Court for the Eastern District of Wisconsin on March 25, 2022.

The plaintiff filed a motion to remand the case to the state circuit court on April 7, 2022, the Company opposed the motion to remand on May 6, 2022, and the plaintiff filed a reply in support of the motion on May 12, 2022.

On May 10, 2022, the plaintiff filed a motion for sanctions related to the Company’s removal of the case to federal court, to which the Company responded on May 27, 2022.

On May 10, 2022, select plaintiffs in the Wisconsin federal court cases filed a petition to take jurisdiction of the original action with the Supreme Court of Wisconsin.

The petition requests the Supreme Court to provide guidance on certain legal questions involved in the plaintiffs’ pending federal court cases (the same questions presented in Beal’s declaratory judgment motion pending in the Eastern District of Wisconsin).

On June 22, 2022, the Wisconsin Supreme Court ordered the defendants to file a response addressing whether the Supreme Court should take original jurisdiction.

The Company and other defendants filed their response on July 20, 2022.

Other lead-based paint and lead pigment litigation.

13 unchanged sentences

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.

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

of the defendants.

The Illinois Department of Healthcare and Family Services appealed to the Appellate Court of Illinois, First District and filed its opening brief on May 25, 2022.

The Company filed a response to the opening brief on July 13, 2022.

Insurance coverage litigation.

3 unchanged sentences

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.

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.

27 unchanged sentences

First Quarter $ 0.60 $ 150.9 $ 0.55 $ 151.8

Second Quarter 0.60 156.2 0.55 145.9

Total $ 1.20 $ 307.1 $ 1.10 $ 297.7

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

As of June 30, 2022, the Company had remaining authorization from its Board of Directors to purchase 46.0 million shares of its common stock.

The table below summarizes share repurchases during the three and six months ended June 30, 2022 and 2021:

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

Treasury stock purchases (millions of dollars) $ 296.4 $ 870.1 $ 703.5 $ 1,645.5

2 unchanged sentences

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.

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

During the six months ended June 30, 2022, 280,974 stock options were exercised at a weighted average price per share of $ 93.63 .

In addition, 356,551 restricted stock units vested during this period.

7 unchanged sentences

Amounts reclassified from AOCI 2.5 ( 2.0 ) 0.5

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

Balance at June 30, 2022 $ ( 918.8 ) $ ( 29.7 ) $ 33.9 $ ( 914.6 )

Adjustments Pension and

4 unchanged sentences

Amounts reclassified from AOCI 3.2 ( 2.4 ) 0.8

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

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

NOTE 12 - DERIVATIVES AND HEDGING

1 unchanged sentence

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 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.

1 unchanged sentence

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

At December 31, 2021, the contracts had a notional value of $ 500.0 million and $ 244.0 million, respectively, and maturity dates of June 1, 2024 and June 1, 2027, respectively.

In April 2022, the Company settled a portion of the $ 244.0 million contract, which reduced the outstanding notional value to $ 162.7 million.

An immaterial loss was recognized in AOCI at the time of settlement.

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.

March 31, December 31, March 31,

June 30, December 31, June 30,

2022 2021 2021

Other assets $ 15.4 $ — $ —

Other accruals — — 22.8

1 unchanged sentence

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 for the three months ended March 31, 2022 and 2021.

Three Months Ended

March 31, March 31,

Unrealized gains $ 10.7 $ 30.6

The following table summarizes the unrealized gains (losses) for the three and six months ended June 30, 2022 and 2021.

Three Months Ended Six Months Ended

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

2022 2021 2022 2021

Unrealized gains (losses) $ 40.8 $ ( 8.0 ) $ 51.5 $ 22.6

Tax effect ( 10.0 ) 2.0 ( 12.6 ) ( 5.5 )

Unrealized gains, net of taxes $ 8.1 $ 23.1

Unrealized gains (losses), net of taxes $ 30.8 $ ( 6.0 ) $ 38.9 $ 17.1

NOTE 13 - FAIR VALUE MEASUREMENTS

7 unchanged sentences

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.

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

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

1 unchanged sentence

Qualified Replacement Plan assets 29.6 29.6 98.8 98.8

Net investment hedge asset 15.4 15.4

$ 117.0 $ 71.4 $ 45.6 $ — $ 179.2 $ 141.9 $ 37.3 $ —

4 unchanged sentences

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

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 cost basis of the investment funds was $ 65.2 million and $ 63.0 million at June 30, 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.

1 unchanged sentence

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

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).

The cost basis of the investment funds was $ 31.2 million and $ 86.9 million at June 30, 2022 and December 31, 2021, respectively.

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

The fair value is based on a valuation model that uses observable inputs, including interest rate curves and foreign currency rates.

1 unchanged sentence

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.

March 31, 2022 December 31, 2021

June 30, 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.

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

The 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.

2 unchanged sentences

(Current) Contract

(Long-Term) Contract Liabilities

(Current) Contract Liabilities

(Long-Term) Contract

(Current) Contract

Balance sheet caption Accounts receivable Other

2 unchanged sentences

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

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

Balance at June 30, 2022 2,982.5 65.1 110.4 252.7 7.2

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.

16 unchanged sentences

Uncollectible accounts written off, net of recoveries ( 13.6 ) ( 4.9 )

Balance at March 31 $ 57.6 $ 58.8

Balance at June 30 $ 71.8 $ 66.6

NOTE 15 - OTHER

Other general expense - net

Included in Other general expense - net were the following:

Other general expense (income) - net

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

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Provisions for environmental matters - net $ 4.1 $ 2.5 $ 4.7 $ 5.0

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

Loss on sale or disposition of assets 1.9 3.1

Other general expense - net $ 2.5 $ 117.5

Loss (gain) on sale or disposition of assets 0.3 ( 7.7 ) 2.2 ( 4.6 )

Other general expense (income) - net $ 4.4 $ ( 5.2 ) $ 6.9 $ 112.3

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 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.

The loss (gain) on sale or disposition of assets represents net realized losses (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 expense (income) - net

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Investment losses (gains) $ 8.2 $ ( 11.8 ) $ 14.9 $ ( 18.3 )

5 unchanged sentences

Other expense (income) - net $ 15.5 $ ( 1.1 ) $ 31.8 $ ( 3.3 )

Investment losses (gains) primarily relate to the change in market value of the investments held in the deferred compensation plan and Qualified Replacement Plan.

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

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.

There were no material foreign currency option and forward contracts outstanding at June 30, 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 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 effective tax rate was 21.9 % and 21.0 % for the second quarter and first six months of 2022, respectively, compared to 20.8 % and 20.3 % for the second quarter and first six months of 2021, respectively.

The effective tax rate was less favorably impacted by tax benefits related to employee share based payments in the second quarter and first six months of 2022 than in the same periods last year.

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, 2021 during the three months ended March 31, 2022.

There were no significant changes to any of the balances of unrecognized tax benefits at December 31, 2021 during the six months ended June 30, 2022.

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

4 unchanged sentences

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.

As of June 30, 2022, the federal statute of limitations had not expired for the 2013 through 2021 tax years.

At June 30, 2022, the Company is subject to non-U.S.

income tax examinations for the tax years of 2014 through 2021.

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

June 30, Six Months Ended

2022 2021 2022 2021

Net income $ 577.9 $ 648.6 $ 948.7 $ 1,058.2

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Stock options and other contingently issuable shares (1)

3.7 5.0 4.0 4.7

Average shares outstanding assuming dilution 261.8 267.8 262.5 269.0

Diluted net income per share $ 2.21 $ 2.42 $ 3.61 $ 3.93

(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.

(1) There were 1.0 million stock options and other contingently issuable shares excluded due to their anti-dilutive effect for the three and six months ended June 30, 2022.

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.

NOTE 18 - REPORTABLE SEGMENT INFORMATION

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

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

Group Consumer Brands

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Income before income taxes $ 700.4 $ 63.5 $ 196.8 $ ( 220.8 ) $ 739.9

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Group Consumer Brands

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Income before income taxes $ 727.3 $ 122.8 $ 144.8 $ ( 175.7 ) $ 819.2

Six Months Ended June 30, 2022

Group Consumer Brands

Group Performance

Group Administrative Consolidated

Net external sales $ 5,987.2 $ 1,437.3 $ 3,444.4 $ 2.1 $ 10,871.0

Intersegment transfers — 2,705.1 105.6 ( 2,810.7 ) —

Total net sales and intersegment transfers $ 5,987.2 $ 4,142.4 $ 3,550.0 $ ( 2,808.6 ) $ 10,871.0

Segment profit $ 1,145.8 $ 128.4 $ 341.3 $ 1,615.5

Interest expense $ ( 181.3 ) ( 181.3 )

Administrative expenses and other ( 233.2 ) ( 233.2 )

Income before income taxes $ 1,145.8 $ 128.4 $ 341.3 $ ( 414.5 ) $ 1,201.0

Six Months Ended June 30, 2021

Group Consumer Brands

Group Performance

Group Administrative Consolidated

Net external sales $ 5,596.5 $ 1,509.6 $ 2,928.8 $ 0.9 $ 10,035.8

Intersegment transfers — 2,083.6 69.9 ( 2,153.5 ) —

Total net sales and intersegment transfers $ 5,596.5 $ 3,593.2 $ 2,998.7 $ ( 2,152.6 ) $ 10,035.8

Segment profit $ 1,207.3 $ 266.5 $ 288.6 $ 1,762.4

Interest expense $ ( 166.7 ) ( 166.7 )

Administrative expenses and other ( 267.5 ) ( 267.5 )

Income before income taxes $ 1,207.3 $ 266.5 $ 288.6 $ ( 434.2 ) $ 1,328.2

In the reportable segment financial information, Segment profit was total net sales and intersegment transfers less operating costs and expenses.

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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 three months ended March 31, 2021.

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.

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

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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 $ 1.078 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.

Net external sales of all consolidated foreign subsidiaries were $ 1.121 billion and $ 1.102 billion for the three months ended June 30, 2022 and 2021, respectively.

Net external sales of all consolidated foreign subsidiaries were $ 2.198 billion and $ 2.139 billion for the six months ended June 30, 2022 and 2021, respectively.

Long-lived assets of these subsidiaries totaled $ 2.833 billion and $ 2.844 billion at June 30, 2022 and 2021, respectively.

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

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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 March 31, 2022, December 31, 2021 and March 31, 2021.

March 31, December 31, March 31,

The following table summarizes the balances related to the investments:

June 30, December 31, June 30,

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