What changed in this filing

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Item 1. Business

2023-02-22 compared with 2022-02-17 · 63 added, 59 removed, 108 unchanged (53% of the section changed)

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Available Information

We make available free of charge on or through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the Securities and Exchange Commission.

You may access these documents on our Investor Relations website, investors.sherwin-williams.com.

You may access these documents on our Investor Relations website, investors.sherwin.com.

We also make available free of charge on our website our Corporate Governance Guidelines, our Director Independence Standards, our Code of Conduct and the charters of our Audit Committee, our Compensation and Management Development Committee and our Nominating and Corporate Governance Committee.

You may access these documents on our Investor Relations website, investors.sherwin-williams.com.

You may access these documents on our Investor Relations website, investors.sherwin.com.

Basis of Reportable Segments

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The loss of any single customer would not have a material adverse effect on the business of this segment.

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

Consumer Brands Group

The Consumer Brands Group supplies a broad portfolio of branded and private-label architectural paint, stains, varnishes, industrial products, wood finishes products, wood preservatives, applicators, corrosion inhibitors, aerosols, caulks and adhesives to retailers and distributors throughout North America, as well as in China and Europe.

The Consumer Brands Group manufactures and supplies a broad portfolio of branded and private-label architectural paint, stains, varnishes, industrial products, wood finishes products, wood preservatives, applicators, corrosion inhibitors, aerosols, caulks and adhesives to retailers and distributors throughout North America, as well as in China and Europe.

The Consumer Brands Group also supports the Company’s other businesses around the world with new product research and development, manufacturing, distribution and logistics.

Approximately 67% of the total sales of the Consumer Brands Group in 2022 were intersegment transfers of products primarily sold through The Americas Group.

At December 31, 2021, the Consumer Brands Group consisted of operations in the United States and subsidiaries in 5 foreign countries.

Sales and marketing of certain controlled brand and private-label products is performed by a direct sales staff.

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Performance Coatings Group

The Performance Coatings Group develops and sells industrial coatings for wood finishing and general industrial (metal and plastic) applications, automotive refinish, protective and marine coatings, coil coatings, packaging coatings and performance-

based resins and colorants worldwide.

This segment licenses certain technology and trade names worldwide.

Sherwin-Williams ® and other controlled brand products are distributed through The Americas Group and this segment’s 282 company-operated branches and by a direct sales staff and outside sales representatives to retailers, dealers, jobbers, licensees and other third-party distributors.

Sherwin-Williams ® and other controlled brand products are distributed through The Americas Group and this segment’s 317 company-

operated branches and by a direct sales staff and outside sales representatives to retailers, dealers, jobbers, licensees and other third-party distributors.

The Performance Coatings Group had sales to certain customers that, individually, may be a significant portion of the sales of the segment.

However, the loss of any single customer would not have a material adverse effect on the overall profitability of the segment.

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

Administrative Segment

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Raw materials are sourced from multiple suppliers globally, typically within the geographic region where our products are being manufactured.

A small portion of specialized resins and other products are manufactured in house.

A portion of specialized resins and other products are manufactured in house.

We also purchase a variety of products for resale that are highly complementary to our paint and coating offerings, notably spray equipment and parts, floorcovering, and assorted sundries.

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• The Americas Group:

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

Sherwin-Williams®, A-100®, Builders Solution®, Captivate®, Cashmere®, Colorgin®, Condor®, Duration®, Emerald®, Kem Tone®, Latitude®, Loxon®, Metalatex®, Novacor®, Painters Edge Plus™, ProClassic®, ProCraft®, Pro Industrial™, ProMar®, SuperDeck®, SuperPaint®, Woodscapes®

• Consumer Brands Group:

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Backlog orders are not typically significant in the business of any Reportable Segment since there is normally a short period of time between the placing of an order and shipment.

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

During 2022 , we experienced raw material shortages and labor constraints that impacted our production and ability to meet customer orders.

We believe that sufficient productive capacity currently exists to fulfill our needs for paint, coatings and related products during 2023.

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Human Capital Resources

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

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

The success of our business and ability to execute on our strategy depend in large part on our ability to attract, retain, develop and progress a diverse population of qualified employees at all levels of our organization.

At December 31, 2022, we employed 64,366 people worldwide, of which 75% were in the United States and 25% were in other global regions.

Purpose and Culture .

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

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

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

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

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

Our commitment to our people is embedded in the Company’s corporate purpose and guiding values.

Through our purpose, we strive to inspire and improve the world by coloring and protecting what matters.

Our employees are instrumental in fulfilling this purpose through the development, manufacture, distribution and sale of innovative paint and coatings products.

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

We have developed key strategies, objectives and measures as part of the overall management of our business that support our global workforce and enable us to attract, retain, develop and progress top talent in a competitive labor market.

These strategies, objectives and measures are advanced through programs, policies and initiatives focused on inclusion, diversity and equity (ID&E), talent acquisition and employee engagement, occupational health and safety and total rewards, which includes compensation and benefits programs and practices.

Inclusion, Diversity and Equity .

We are committed to fostering a culture of inclusion where differences are welcomed, appreciated and celebrated to positively impact our people and business.

We strive to foster a culture of inclusion and belonging where differences are welcomed, appreciated and celebrated to positively impact our people and business.

Reflected in the Company’s Code of Conduct and reinforced through our actions, training and attitudes, fostering an inclusive culture is a moral and business imperative.

The building blocks of our inclusion, diversity and equity strategy include:

The building blocks of our ID&E strategy include:

• Educate and communicate to drive success:

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

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

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

Creating a supportive, welcoming environment across our global footprint is the shared responsibility of all employees, including our senior leaders.

Each year, our senior leaders attend an ID&E education and training session to assist us in maintaining our commitment to leading with inclusion and leveraging the diversity of our workforce.

During 2022, we held our annual CEO Forums on Inclusion, which are designed to encourage open discussions with employees that are led by our Chief Executive Officer and other senior leaders about opportunities to advance our culture of inclusion and belonging.

We also continued our focus on driving allyship and empathy through conscious inclusion training across our global workforce and elevating the visibility and prominence of our Employee Resource Groups (ERGs).

These voluntary, employee-led networks are organized around a shared underrepresented demographic, and membership spans across 250 chapters globally.

ERGs bring together employees from various groups, divisions and functional teams to foster more inclusive workplaces, create greater synergy around business objectives and serve as a hub for professional development and mentorship opportunities that enable our employees to thrive and find long-term success at Sherwin-Williams.

Talent Acquisition and Employee Engagement.

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

Through our integrated talent management strategy, we strive to attract, retain, develop and progress a workforce that embraces our culture of inclusion and reflects our diversity efforts.

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

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

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

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

This strategy connects major milestones in the employee journey, including talent acquisition, onboarding, performance management, leadership and management development, succession and career progression, and is supported by our focus on employee engagement, ID&E, workforce analytics and human resources information technology governance.

The Company’s early talent programs, including our management trainee program and similar programs across our global business, play a critical role in attracting, developing and advancing a diverse pipeline of talent.

During 2022, we hired approximately 1,400 college graduates through our management trainee program as part of our long-term growth initiatives.

We also partner with various colleges and universities, including Historically Black Colleges and Universities and Hispanic-Serving Institutions, to attract women, underrepresented racial or ethnic groups, individuals with disabilities, veterans and other candidates into the talent pipeline.

We invest in our people by providing learning and employee networking opportunities, including through our ERGs, to drive retention, development and engagement and help employees excel in their current and future roles.

During 2022, our employees completed thousands of hours of online and instructor-led courses across a broad range of categories, including leadership, ID&E, professional skills, technical and compliance.

We measure our progress toward creating an inclusive culture that empowers employees to learn, grow and achieve their aspirations by conducting periodic pulse surveys and our global engagement survey, which we first conducted during 2021 and expect to conduct every other year.

We are focused on using these survey results to drive continued progress with our efforts.

Occupational Health and Safety.

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

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

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

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

These efforts have included, but are not limited to:

requiring social distancing;

permitting remote, alternate and flexible work arrangements where possible;

enhancing cleaning and sanitation procedures;

restricting domestic and international travel;

developing return to work and visitor screening protocols;

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

Employment Practices and Total Rewards.

We are committed to the fair, consistent and equitable treatment of our employees in relation to working conditions, wages, benefits, policies and procedures.

To this end, the Company’s policies and programs are designed to respond to the needs of our employees in a manner that provides a safe, professional, efficient and rewarding workplace.

Providing safe and healthy working environments for our employees is a core value.

We have a consistent focus on Environmental, Health and Safety excellence that promotes employee health and safety, process safety, and occupational health, including evaluation and implementation of reasonable preventative measures to reduce workplace injuries and illness.

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

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

These efforts have included, and may continue to include where necessary and appropriate, enhanced cleaning and sanitation procedures and return to work protocols.

These efforts also continue to include permitting remote, alternate and flexible work arrangements where possible to promote increased flexibility and support employee health and safety, while maintaining our focus on innovation, collaboration, and engagement.

Total Rewards.

We prioritize the fair, consistent and equitable treatment of our employees in relation to working conditions, wages, benefits, policies and procedures.

The Company’s policies and programs are designed to respond to the needs of our employees in a manner that provides a safe, professional, efficient and rewarding workplace.

Our total rewards programs are designed to offer competitive compensation, comprehensive benefits and other programs to support employees’ growth, both personally and professionally, and the diverse needs and well-being of our employees worldwide.

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

Over the past few years, we have enhanced certain of the Company’s benefits and practices to support the health and well-being of our employees through the COVID-19 pandemic and other challenges.

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

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

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

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

During 2022, we continued enhancing the benefits we provide to our employees, including by extending our employee assistance program to our global workforce.

The program provides mental

health and well-being, family, career, lifestyle, legal and financial resources, tools and services designed to support our employees across all aspects of their lives.

Regulatory Compliance

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Letter to Shareholders” and elsewhere in this report constitute “forward-looking statements” within the meaning of the federal securities laws.

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

Any statement that is not historical in nature is a forward-looking statement and may be identified by the use of words and phrases such as “believe,” “expect,” “may,” “will,” “should,” “project,” “could,” “plan,” “goal,” “target,” “potential,” “seek,” “intend,” “aspire” or “anticipate” or the negative thereof or comparable terminology.

Any statement that is not historical in nature is a forward-looking statement and may be identified by the use of words and phrases such as “believe,” “expect,” “may,” “will,” “should,” “project,” “could,” “plan,” “goal,” “target,” “potential,” “seek,” “intend,” “aspire,” “strive” or “anticipate” or the negative thereof or comparable terminology.

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

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• general business conditions, strengths of retail and manufacturing economies and growth in the coatings industry;

• changes in general domestic and international economic conditions such as inflation rates, interest rates, tax rates, unemployment rates, higher labor and healthcare costs, recessions, and changing government policies, laws and regulations;

• changes in general domestic and international economic conditions, including due to higher inflation rates, interest rates, tax rates and unemployment rates, higher labor and healthcare costs, recessions and changing government policies, laws and regulations;

• changes in raw material and energy supplies and pricing;

• changes in our relationships with customers and suppliers;

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

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

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

• adverse weather conditions or natural disasters, including those that may be related to climate change or otherwise, and public health crises, including the COVID-19 pandemic;

• losses of or changes in our relationships with customers and suppliers;

• competitive factors, including pricing pressures and product innovation and quality;

• our ability to attain cost savings from productivity initiatives;

• risks and uncertainties associated with our expansion into and our operations in Asia, Europe, South America and other foreign markets, including general economic conditions, inflation rates, recessions, foreign currency exchange rates, foreign investment and repatriation restrictions, legal and regulatory constraints, civil unrest and other external economic and political factors;

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

• our ability to achieve expected benefits of restructuring and productivity initiatives;

• weakening of global credit markets and our ability to generate cash to service our indebtedness;

• risks and uncertainties associated with our expansion into and our operations in Asia, Europe, South America and other foreign markets, including general economic conditions, policy changes affecting international trade, political instability, inflation rates, recessions, sanctions, foreign currency exchange rates and controls, foreign investment and repatriation restrictions, legal and regulatory constraints, civil unrest, armed conflict (including the ongoing conflict between Russia and Ukraine), war and other economic and political factors;

• the achievement of growth in foreign markets, such as Asia, Europe and South America;

• cybersecurity incidents and other disruptions to our information technology systems and operations;

• our ability to protect or enforce our material trademarks and other intellectual property rights;

• our ability to attract, retain, develop and progress a qualified global workforce;

• damage to our business, reputation, image or brands due to negative publicity;

• increasingly stringent domestic and foreign governmental regulations, including those affecting health, safety and the environment;

• inherent uncertainties involved in assessing our potential liability for environmental-related activities;

• other changes in governmental policies, laws and regulations, including changes in tariff policies, as well as changes in accounting policies and standards and taxation requirements (such as new tax laws and new or revised tax law interpretations);

• the nature, cost, quantity and outcome of pending and future litigation and other claims, including the lead pigment and lead-based paint litigation, and the effect of any legislation and administrative regulations relating thereto.

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

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

Readers are cautioned that it is not possible to predict or identify all of the risks, uncertainties and other factors that may affect future results and that the above list should not be considered to be a complete list.

Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as otherwise required by law.

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

What changed 10-K

Item 1. Business