What changed in this filing

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Item 1. Financial Statements

2022-10-25 compared with 2022-07-27 · 184 added, 115 removed, 711 unchanged (30% of the section changed)

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

5 unchanged sentences

Percent to net sales 25.3 % 26.6 % 26.3 % 27.2 %

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

Other general (income) expense - net ( 14.4 ) ( 1.1 ) ( 7.5 ) 111.2

Amortization 81.3 76.2 237.8 233.2

14 unchanged sentences

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (UNAUDITED)

(in millions) Three Months Ended Six Months Ended

June 30, June 30,

(in millions) Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Net income $ 685.1 $ 502.2 $ 1,633.8 $ 1,560.4

Other comprehensive (loss) income, net of tax:

Other comprehensive loss, net of tax:

Foreign currency translation adjustments (1)

6 unchanged sentences

( 0.9 ) ( 0.7 ) ( 2.9 ) ( 3.1 )

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

Other comprehensive loss ( 147.9 ) ( 85.5 ) ( 364.1 ) ( 68.4 )

Comprehensive income $ 537.2 $ 416.7 $ 1,269.7 $ 1,492.0

(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.

(1) The three months ended September 30, 2022 and 2021 include unrealized gains, net of taxes, of $ 30.9 million and $ 14.5 million, respectively, related to net investment hedges.

The nine months ended September 30, 2022 and 2021 include unrealized gains, net of taxes, of $ 69.8 million and $ 31.6 million, respectively, related to net investment hedges.

See Note 12 for additional information.

(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.

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

Net of taxes of $( 1.1 ) million and $( 1.7 ) million in the nine months ended September 30, 2022 and 2021, respectively.

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

Net of taxes of $ 1.0 million in the nine months ended September 30, 2022 and 2021.

See notes to condensed consolidated financial statements.

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions) June 30,

(in millions) September 30,

2022 December 31,

2021 June 30,

2021 September 30,

Current assets:

28 unchanged sentences

259.1 million, 261.1 million and 262.2 million shares outstanding

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

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

91.1 90.8 90.5

8 unchanged sentences

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)

(in millions) Six Months Ended

2022 June 30,

(in millions) Nine Months Ended

September 30,

2022 September 30,

OPERATING ACTIVITIES

25 unchanged sentences

Net increase in short-term borrowings 184.5 707.9

Proceeds from long-term debt 999.7 —

Payments of long-term debt ( 260.3 ) ( 24.6 )

7 unchanged sentences

Effect of exchange rate changes on cash — 0.4

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

Net (decrease) increase in cash and cash equivalents ( 35.2 ) 86.7

Cash and cash equivalents at beginning of year 165.7 226.6

29 unchanged sentences

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

Net income 685.1 685.1

Other comprehensive loss ( 147.9 ) ( 147.9 )

Treasury stock purchased ( 47.6 ) ( 47.6 )

Stock-based compensation activity 0.1 39.0 ( 0.1 ) 39.0

Other adjustments 0.3 0.1 0.4

Cash dividends -- $ 0.60 per share

( 155.8 ) ( 155.8 )

Balance at September 30, 2022 $ 91.1 $ 3,919.6 $ 3,292.6 $ ( 3,643.0 ) $ ( 1,062.5 ) $ 2,597.8

(in millions, except per share data) Common

21 unchanged sentences

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

Net income 502.2 502.2

Other comprehensive loss ( 85.5 ) ( 85.5 )

Treasury stock purchased ( 501.5 ) ( 501.5 )

Stock-based compensation activity 80.2 80.2

Other adjustments ( 0.1 ) ( 0.2 ) ( 0.3 )

Cash dividends -- $ 0.55 per share

( 145.2 ) ( 145.2 )

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

See notes to condensed consolidated financial statements.

2 unchanged sentences

(millions of dollars, unless otherwise noted)

Periods ended June 30, 2022 and 2021

Periods ended September 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 six months of 2022 based on new information and changes in facts and circumstances.

Accounting estimates were revised as necessary during the first nine 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 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.

The results of operations for the three and nine months ended September 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.

10 unchanged sentences

NOTE 3 - ACQUISITIONS AND DIVESTITURES

Closed in Prior Year

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.

2 unchanged sentences

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

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.

Closed in Current Year

In April 2022, 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.

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.

In July 2022, the Company completed the acquisitions of Gross & Perthun GmbH, a German-based developer, manufacturer, and distributor of coatings primarily for the heavy equipment and transportation industries, Dur-A-Flex, Inc., a domestic floor

coatings company, and Powdertech Oy Ltd., a Finland-based distributor of powder coatings and related products.

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

The aggregate purchase price for the businesses acquired in the nine months ended September 30, 2022 was approximately $ 649.1 million, including amounts withheld as security for certain representations, warranties and obligations of the sellers.

The purchase price for each acquisition was preliminarily allocated to identifiable assets and liabilities based on information available at the date of acquisition and may change as the Company completes its analysis of net assets acquired, primarily the identification and valuation of intangible assets.

As of September 30, 2022, $ 214.2 million of intangible assets and $ 380.5 million of goodwill were recognized from these transactions.

The Company expects to finalize the purchase price allocation for each of the acquisitions within the allowable measurement period.

The results of operations for the acquisitions have been included in the consolidated financial statements since the respective acquisition dates.

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

During the third quarter of 2022, the Company signed an agreement to acquire Industria Chimica Adriatica S.p.A.

(ICA), an Italian designer, manufacturer and distributor of industrial wood coatings with global operations and production facilities in Italy and Poland.

The transaction is subject to customary closing conditions and is expected to close by the end of 2022.

The acquired business 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 (income) - net (see Note 15).

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

The Wattyl divestiture 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:

June 30, December 31, June 30,

September 30, December 31, September 30,

2022 2021 2021

9 unchanged sentences

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

June 30, December 31, June 30,

September 30, December 31, September 30,

2022 2021 2021

9 unchanged sentences

The following table summarizes the Company’s outstanding debt:

June 30, December 31, June 30,

September 30, December 31, September 30,

2022 2021 2021

2 unchanged sentences

Total debt outstanding $ 10,534.7 $ 9,615.0 $ 8,976.4

Long-Term Debt

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

In August 2022, the Company issued $ 600.0 million of 4.050 % Senior Notes due 2024 and $ 400.0 million of 4.250 % Senior Notes due 2025 in a public offering.

The net proceeds from the issuance of these notes were used to repay borrowings outstanding under the Company’s credit agreement dated May 9, 2016, as amended, and domestic commercial paper program.

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, 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:

June 30, December 31, June 30,

Short-Term Borrowings

On May 23, 2022, the Company amended its credit agreement dated May 9, 2016, as amended, to extend the maturity of $ 150.0 million of the commitments available for borrowing or letters of credit.

On multiple dates during the third quarter of 2022, the Company amended its credit agreement dated August 2, 2021, as amended, to extend the maturities of $ 250.0 million, in the aggregate, of the commitments available for borrowing or letters of credit.

On August 30, 2022, 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 $ 2.250 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 June 29, 2021, as amended, which was terminated effective August 30, 2022.

The New Credit Agreement will mature on August 30, 2027 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 size of the facility up to an additional amount of $ 750.0 million, 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.

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

At September 30, 2022 , the Company had unused

capacity under its various credit agreements of $ 2.826 billion.

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

September 30, December 31, September 30,

2022 2021 2021

1 unchanged sentence

Domestic commercial paper $ 889.3 $ 739.9 $ 694.9

Revolving credit facility 250.0 — —

Foreign facilities 55.9 23.6 14.5

2 unchanged sentences

Domestic commercial paper 3.3 % 0.3 % 0.2 %

Revolving credit facility 2.6 % — % — %

Foreign facilities 4.4 % 9.5 % 4.7 %

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 June 30:

Three Months Ended September 30:

Net periodic benefit cost:

5 unchanged sentences

Net periodic benefit cost $ 0.3 $ 0.5 $ 1.0 $ 1.3 $ 2.7 $ 2.8

Six Months Ended June 30:

Nine Months Ended September 30:

Net periodic benefit cost:

2 unchanged sentences

Expected return on assets ( 5.8 ) ( 5.3 ) ( 7.7 ) ( 7.2 )

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

Amortization of prior service cost (credit) 0.7 0.8 ( 0.1 ) ( 0.3 ) 0.2

Amortization of actuarial losses 1.1 1.1 3.2 3.5

16 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 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.

At September 30, 2022 and 2021, the Company had accruals reported on the balance sheet as Other long-term liabilities of $ 268.0 million and $ 271.1 million , respectively.

Estimated costs of current investigation and remediation activities of $ 45.9 million and $ 68.6 million are included in Other accruals at September 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 $ 94.5 million higher than the minimum accruals at June 30, 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 $ 92.6 million higher than the minimum accruals at September 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 June 30, 2022 .

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.

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, 2022 .

At September 30, 2022 , $ 269.8 million, or 86.0 % of the total accrual, related directly to the Major Sites.

In the aggregate unaccrued maximum of $ 92.6 million at September 30, 2022 , $ 70.7 million, or 76.4 %, 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.

6 unchanged sentences

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 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 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.

5 unchanged sentences

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

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

insurance, indemnification agreements or other sources.

At September 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 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.

23 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.

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

30 unchanged sentences

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

At June 30, 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 September 30, 2022 and 2021, the Company had accruals for this agreement reported on the balance sheet of $ 40.7 million and $ 52.7 million, respectively, with $ 12.0 million included in Current liabilities and the remaining $ 28.7 million and $ 40.7 million, respectively, included in Other long-term liabilities.

Pennsylvania Proceedings .

15 unchanged sentences

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

The Company filed its reply briefs in both actions on September 9, 2022.

Oral argument is tentatively scheduled to occur during the week of December 12, 2022.

Litigation seeking damages from alleged personal injury.

40 unchanged sentences

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

On August 16, 2022, the district court denied the plaintiffs’ motion to alter or amend the judgment.

On September 15, 2022, the plaintiffs filed notices of appeal with the Seventh Circuit, seeking to appeal the district court’s summary judgment in favor of the Company and the other defendants.

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

3 unchanged sentences

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, to which the Company responded on April 15, 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.

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 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, requesting that the Supreme Court 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.

The Company and other defendants filed their response on July 20, 2022, to which the plaintiffs replied on August 4, 2022 .

On October 11, 2022, the Supreme Court denied the plaintiffs’ petition.

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.

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.

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 Department, 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.

The Department 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, to which the Department replied on August 10, 2022.

The appellate court entered an order on August 19, 2022, affirming the denial of the Department’s petition to intervene and the granting of the defendants’ motion for final judgment.

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 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, was dismissed.

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

10 unchanged sentences

NL Industries, Inc., et al.

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

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.

1 unchanged sentence

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

The parties are awaiting the appellate court’s decision.

On September 1, 2022, the appellate court reversed the trial court’s grant of summary judgment, finding in favor of the Company on its appeal and against the insurers on their cross-appeal, and remanded the case to the trial court for further proceedings.

On September 12, 2022, the insurers applied to the appellate court for reconsideration of its decision, en banc review, or certification of an appeal to the Ohio Supreme Court.

The Company filed its opposition to the applications on September 22, 2022.

On September 30, 2022, the appellate court denied the insurers’ applications for reconsideration and certification.

The parties are awaiting the appellate court’s decision on the insurers’ application for en banc review.

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

14 unchanged sentences

Second Quarter 0.60 156.2 0.55 145.9

Third Quarter 0.60 155.8 $ 0.55 145.2

Total $ 1.80 $ 462.9 $ 1.65 $ 442.9

1 unchanged sentence

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

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,

As of September 30, 2022, the Company had remaining authorization from its Board of Directors to purchase 45.8 million shares of its common stock.

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

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

5 unchanged sentences

Other Activity

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

During the nine months ended September 30, 2022, 442,347 stock options were exercised at a weighted average price per share of $ 88.46 .

In addition, 356,743 restricted stock units vested during this period.

7 unchanged sentences

Amounts reclassified from AOCI 3.5 ( 2.9 ) 0.6

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

Balance at September 30, 2022 $ ( 1,066.8 ) $ ( 28.7 ) $ 33.0 $ ( 1,062.5 )

Adjustments Pension and

4 unchanged sentences

Amounts reclassified from AOCI 4.6 ( 3.1 ) 1.5

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

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

NOTE 12 - DERIVATIVES AND HEDGING

Net Investment Hedges

The Company has two U.S.

8 unchanged sentences

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

June 30, December 31, June 30,

September 30, December 31, September 30,

2022 2021 2021

3 unchanged sentences

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

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

Three Months Ended Six Months Ended

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

The following table summarizes the unrealized gains for the three and nine months ended September 30, 2022 and 2021.

Three Months Ended Nine Months Ended

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

2022 2021 2022 2021

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

Unrealized gains $ 41.0 $ 19.4 $ 92.5 $ 42.0

Tax effect ( 10.1 ) ( 4.9 ) ( 22.7 ) ( 10.4 )

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

Unrealized gains, net of taxes $ 30.9 $ 14.5 $ 69.8 $ 31.6

Derivatives Not Designated as Hedging Instruments

The Company enters into foreign currency option and forward contracts with maturity dates less than twelve months primarily to hedge against value changes in foreign currency.

The total notional value of foreign currency forward contracts outstanding at September 30, 2022 was $ 194.5 million.

At September 30, 2022, the Company recorded a $ 3.1 million liability in Other accruals to recognize the fair value of these outstanding foreign currency contracts.

There were no material foreign currency option and forward contracts outstanding at December 31, 2021 and September 30, 2021.

The related gains and losses are recorded in Other expense (income) - net.

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.

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

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

3 unchanged sentences

$ 155.1 $ 69.8 $ 85.3 $ — $ 179.2 $ 141.9 $ 37.3 $ —

Foreign currency forward contracts $ 3.1 $ 3.1 $ — $ —

Net investment hedge liability — 36.5 36.5

$ 3.1 $ — $ 3.1 $ — $ 36.5 $ — $ 36.5

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 $ 65.2 million and $ 63.0 million at June 30, 2022 and December 31, 2021, respectively.

The cost basis of the investment funds was $ 65.2 million and $ 63.0 million at September 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 $ 31.2 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 cost basis of the investment funds was $ 31.4 million and $ 86.9 million at September 30, 2022 and December 31, 2021, respectively.

The net investment hedge asset and liability represent the fair value of outstanding 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.

The foreign currency forward contracts liability represents the fair value of outstanding contracts (see Note 12).

The fair value is based on a valuation model that uses observable inputs, including foreign currency forward rates.

The table below summarizes the carrying amounts and fair values of the Company's debt.

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Value Carrying

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

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

Balance at September 30, 2022 2,897.6 75.8 111.1 300.6 7.1

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 ( 29.2 ) ( 16.9 )

Balance at June 30 $ 71.8 $ 66.6

Balance at September 30 $ 63.1 $ 61.8

NOTE 15 - OTHER

Other general expense (income) - net

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

Other general (income) expense - net

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

1 unchanged sentence

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

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

Gain on sale or disposition of assets ( 20.8 ) ( 1.6 ) ( 18.6 ) ( 6.2 )

Other general (income) expense - net $ ( 14.4 ) $ ( 1.1 ) $ ( 7.5 ) $ 111.2

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 (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.

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

Other expense (income) - net

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

1 unchanged sentence

Net expense from banking activities 3.1 2.6 9.0 7.7

Foreign currency transaction related losses 6.2 9.1 10.3 11.6

Foreign currency transaction related losses (gains) 19.2 ( 1.2 ) 29.5 10.4

Miscellaneous pension expense 0.8 1.1 2.7 3.1

4 unchanged sentences

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 June 30, 2022 and 2021.

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

See Note 12 for additional information regarding these foreign currency contracts.

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 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 effective tax rate was 21.9 % and 21.4 % for the third quarter and first nine months of 2022, respectively, compared to 17.9 % and 19.6 % for the third quarter and first nine months of 2021, respectively.

The effective tax rate was less favorably impacted by tax benefits related to employee share based payments in the third quarter and first nine 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 six months ended June 30, 2022.

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

The IRS is currently auditing the Company’s 2017, 2018 and 2019 income tax returns.

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

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

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

3 unchanged sentences

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

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

9 unchanged sentences

Diluted net income per share $ 2.62 $ 1.88 $ 6.23 $ 5.82

(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.

(1) There were 1.9 million and 1.1 million stock options and other contingently issuable shares excluded due to their anti-dilutive effect for the three and nine months ended September 30, 2022, respectively.

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.

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 June 30, 2022

Three Months Ended September 30, 2022

Group Consumer Brands

8 unchanged sentences

Income before income taxes $ 764.1 $ 94.9 $ 236.3 $ ( 218.1 ) $ 877.2

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Group Consumer Brands

8 unchanged sentences

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

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Group Consumer Brands

8 unchanged sentences

Income before income taxes $ 1,909.9 $ 223.3 $ 577.6 $ ( 632.6 ) $ 2,078.2

Six Months Ended June 30, 2021

Nine Months Ended September 30, 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 six months ended June 30, 2021.

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

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

2 unchanged sentences

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

Net external sales of all consolidated foreign subsidiaries were $ 1.121 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.

Net external sales of all consolidated foreign subsidiaries were $ 1.064 billion and $ 1.019 billion for the three months ended September 30, 2022 and 2021, respectively.

Net external sales of all consolidated foreign subsidiaries were $ 3.262 billion and $ 3.158 billion for the nine months ended September 30, 2022 and 2021, respectively.

Long-lived assets of these subsidiaries totaled $ 2.839 billion and $ 2.772 billion at September 30, 2022 and 2021, respectively.

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

10 unchanged sentences

The following table summarizes the balances related to the investments:

June 30, December 31, June 30,

September 30, December 31, September 30,

2022 2021 2021

2 unchanged sentences

Other long-term liabilities 470.4 289.7 268.9

NOTE 20 - SUBSEQUENT EVENT

In October 2022, management approved an initial set of action plans to simplify the Company’s operating model and portfolio of brands within the Consumer Brands Group and to reduce costs in all regions in the Performance Coatings Group, Consumer Brands Group and the Administrative segment.

These actions better position the Company to continue to add above market growth and long-term shareholder value.

Key focus areas within the Consumer Brands Group include the China architectural business, aerosol portfolio and optimization of the overall retail portfolio.

While management continues to develop the comprehensive set of actions expected to be taken, management currently expects the actions to result in pre-tax charges in the range of $ 160 million to $ 180 million during the next four quarters, with approximately half of the charges occurring in the fourth quarter of 2022.

The amount of these expected charges is an estimate, and the amount and timing of actual charges may vary due to a variety of factors.

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