What changed in this filing

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Item 1. Financial Statements

2023-10-24 compared with 2023-07-25 · 148 added, 135 removed, 734 unchanged (28% of the section changed)

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

5 unchanged sentences

Percent to net sales 28.7 % 26.6 % 29.3 % 27.7 %

Other general (income) expense - net ( 32.5 ) 4.4 ( 22.0 ) 6.9

Other general expense (income) - net 61.9 ( 14.4 ) 39.9 ( 7.5 )

Impairment — — 34.0 —

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,

2023 2022 2023 2022

Net income $ 761.5 $ 685.1 $ 2,032.6 $ 1,633.8

Other comprehensive income (loss), net of tax:

Other comprehensive loss, net of tax:

Foreign currency translation adjustments (1)

6 unchanged sentences

( 0.9 ) ( 0.9 ) ( 2.7 ) ( 2.9 )

Other comprehensive income (loss) 14.5 ( 172.6 ) 49.3 ( 216.2 )

Other comprehensive loss ( 105.1 ) ( 147.9 ) ( 55.8 ) ( 364.1 )

Comprehensive income $ 656.4 $ 537.2 $ 1,976.8 $ 1,269.7

(1) The three months ended June 30, 2023 and 2022 include unrealized (losses) gains, net of taxes, of $( 8.6 ) million and $ 30.8 million, respectively, related to net investment hedges.

The six months ended June 30, 2023 and 2022 include unrealized (losses) gains, net of taxes, of $( 12.8 ) million and $ 38.9 million, respectively, related to net investment hedges.

(1) The three months ended September 30, 2023 and 2022 include unrealized gains, net of taxes, of $ 24.2 million and $ 30.9 million, respectively, related to net investment hedges.

The nine months ended September 30, 2023 and 2022 include unrealized gains, net of taxes, of $ 11.4 million and $ 69.8 million, respectively, related to net investment hedges.

See Note 13 for additional information.

(2) Net of taxes of $ 1.3 million and $( 0.6 ) million for the three months ended June 30, 2023 and 2022, respectively.

Net of taxes of $ 3.0 million and $( 0.8 ) million for the six months ended June 30, 2023 and 2022, respectively.

(3) Net of taxes of $ 0.3 million and $ 0.4 million for the three months ended June 30, 2023 and 2022, respectively.

Net of taxes of $ 0.6 million and $ 0.7 million for the six months months ended June 30, 2023 and 2022, respectively.

(2) Net of taxes of $ 1.6 million and $( 0.3 ) million for the three months ended September 30, 2023 and 2022, respectively.

Net of taxes of $ 4.6 million and $( 1.1 ) million for the nine months ended September 30, 2023 and 2022, respectively.

(3) Net of taxes of $ 0.3 million for the three months ended September 30, 2023 and 2022, respectively.

Net of taxes of $ 0.9 million and $ 1.0 million for the nine months ended September 30, 2023 and 2022, respectively.

See notes to condensed consolidated financial statements.

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions) June 30,

(in millions) September 30,

2023 December 31,

2022 June 30,

2022 September 30,

Current assets:

28 unchanged sentences

256.0 million, 258.9 million and 259.1 million shares outstanding

at June 30, 2023, December 31, 2022 and June 30, 2022, respectively

at September 30, 2023, December 31, 2022 and September 30, 2022, respectively

91.7 91.2 91.1

8 unchanged sentences

STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS (UNAUDITED)

(in millions) Six Months Ended

2023 June 30,

(in millions) Nine Months Ended

September 30,

2023 September 30,

OPERATING ACTIVITIES

4 unchanged sentences

Amortization of intangible assets 250.2 237.8

Gain on divestiture of business ( 20.1 ) —

Gain on divestiture of businesses ( 20.1 ) —

Impairment 34.0 —

Amortization of credit facility and debt issuance costs 4.5 3.3

Stock-based compensation expense 72.8 80.0

Amortization of non-traded investments 60.3 31.7

(Gain) loss on sale or disposition of assets ( 20.8 ) 2.2

Gain on sale or disposition of assets ( 8.1 ) ( 11.5 )

Provisions for environmental-related matters 52.7 11.1

Provisions for restructuring 15.3 —

Defined benefit pension plans net cost 1.7 2.8

Other postretirement benefit plan net cost ( 13.5 ) —

9 unchanged sentences

Acquisitions of businesses, net of cash acquired ( 23.2 ) ( 626.8 )

Proceeds from divestiture of business 33.0 —

Proceeds from divestiture of businesses 103.7 —

Proceeds from sale of assets 49.0 33.2

3 unchanged sentences

Net (decrease) increase in short-term borrowings ( 639.2 ) 184.5

Proceeds from long-term debt — 999.7

Payments of long-term debt ( 0.6 ) ( 260.3 )

Payments for credit facility and debt issuance costs — ( 7.3 )

Payments of cash dividends ( 468.4 ) ( 462.9 )

6 unchanged sentences

Effect of exchange rate changes on cash ( 4.6 ) —

Net increase in cash and cash equivalents 10.6 146.9

Net increase (decrease) in cash and cash equivalents 304.6 ( 35.2 )

Cash and cash equivalents at beginning of year 198.8 165.7

Cash and cash equivalents at end of period $ 503.4 $ 130.5

Supplemental cash flow information

Income taxes paid $ 523.0 $ 430.2

25 unchanged sentences

Balance at June 30, 2023 $ 91.4 $ 4,044.6 $ 4,481.5 $ ( 4,335.1 ) $ ( 651.3 ) $ 3,631.1

Net income 761.5 761.5

Other comprehensive loss ( 105.1 ) ( 105.1 )

Treasury stock purchased ( 410.1 ) ( 410.1 )

Stock-based compensation activity 0.3 58.7 ( 1.4 ) 57.6

Other adjustments 0.6 0.6

Cash dividends -- $ 0.605 per share

( 155.6 ) ( 155.6 )

Balance at September 30, 2023 $ 91.7 $ 4,103.9 $ 5,087.4 $ ( 4,746.6 ) $ ( 756.4 ) $ 3,780.0

(in millions, except per share data) Common

22 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

See notes to condensed consolidated financial statements.

2 unchanged sentences

(millions of dollars, unless otherwise noted)

Periods ended June 30, 2023 and 2022

Periods ended September 30, 2023 and 2022

NOTE 1 - BASIS OF PRESENTATION

4 unchanged sentences

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, 2023 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, 2023 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.

Since December 31, 2022, a ccounting estimates were revised as necessary during the first six months of 2023 based on new information and changes in facts and circumstances.

Certain amounts in the condensed consolidated financial statements for the three and six months ended June 30, 2022 have been reclassified to conform to the 2023 presentation.

Since December 31, 2022, a ccounting estimates were revised as necessary during the first nine months of 2023 based on new information and changes in facts and circumstances.

Certain amounts in the condensed consolidated financial statements for the three and nine months ended September 30, 2022 have been reclassified to conform to the 2023 presentation.

The following represents updates to certain significant accounting policy disclosures.

10 unchanged sentences

These arrangements primarily consist of our new headquarters currently under construction.

During the second quarter of 2023, the Company received $ 72.2 million pursuant to the transaction for a total amount in 2023 of $ 138.7 million.

During the third quarter of 2023, the Company received $ 87.4 million pursuant to the transaction for a total amount in 2023 of $ 226.1 million.

See Note 1 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 for more information concerning real estate financing.

5 unchanged sentences

On the invoice due date, the Company settles the outstanding amount with the respective financial institution.

Liabilities associated with these arrangements are recorded in Accounts payable on the Consolidated Balance Sheets and amounted to $ 242.3 million, $ 258.1 million and $ 267.1 million at June 30, 2023, December 31, 2022 and June 30, 2022, respectively.

Liabilities associated with these arrangements are recorded in Accounts payable on the Consolidated Balance Sheets and amounted to $ 247.7 million, $ 258.1 million and $ 290.3 million at September 30, 2023, December 31, 2022 and September 30, 2022, respectively.

Non-Traded Investments

6 unchanged sentences

The following table summarizes the balances related to the investments:

June 30, December 31, June 30,

September 30, December 31, September 30,

2023 2022 2022

18 unchanged sentences

NOTE 3 - ACQUISITIONS AND DIVESTITURES

Acquisitions Closed in Prior Year

Closed in Prior Year

In April 2022, the Company completed the acquisition of the European industrial coatings business of Sika AG.

4 unchanged sentences

During 2023, the Company revised the purchase price allocation from Goodwill to the various net assets acquired through its 2022 acquisition of ICA.

Goodwill decreased $ 149.6 million and deferred tax liabilities increased $ 59.0 million, offset by an increase in finite-lived intangible assets of $ 192.7 million, with the remaining purchase price allocated to various other assets acquired and liabilities assumed in the transaction.

Goodwill decreased $ 149.6 million and deferred tax liabilities increased $ 59.0 million, partially offset by an increase in finite-lived intangible assets of $ 192.7 million, with the remaining purchase price allocated to various other assets acquired and liabilities assumed in the transaction.

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

Furthermore, in accordance with certain purchase agreements, the Company paid $ 22.9 million in 2023 related to holdbacks for acquisitions completed in prior years.

The Company has finalized the purchase price allocation for Sika AG and expects to complete this process for the remaining 2022 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.

The Company has finalized the purchase price allocation for Sika AG, Gross & Perthun GmbH, Dur-A-Flex, Inc.

and Powdertech Oy Ltd.

and expects to complete this process for ICA 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.

Pending Acquisition

During the fourth quarter of 2022, the Company signed an agreement to acquire German-based Specialized Industrial Coatings Holding (SIC Holding), a Peter Möhrle Holding and GP Capital UG venture comprised of Oskar Nolte GmbH and Klumpp Coatings GmbH.

The transaction is subject to customary closing conditions and is expected to close in 2023.

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

Subsequent Event

In October 2023, the Company completed the acquisition of the German-based SIC Holding GmbH, a Peter Möhrle Holding venture comprised of Oskar Nolte GmbH and Klumpp Coatings GmbH.

This business specializes in foil coatings as well as radiation-cured and waterbased industrial wood coatings for the board, furniture and flooring industry.

The acquired business will be reported within the Company’s Performance Coatings Group and the Company expects to complete the preliminary purchase price allocation for the acquisition within the allowable measurement period.

The Company completed the divestiture of a non-core domestic aerosol business within the Consumer Brands Group in April 2023.

This transaction resulted in the recognition of a $ 20.1 million gain within the Administrative segment.

This gain was recorded within the Other general (income) expense - net caption in the Statements of Consolidated Income during the second quarter of 2023.

In April 2023, the Company signed a definitive agreement to divest the Consumer Brand Group’s China architectural business with annual revenue of approximately $ 100 million and 300 employees.

The divestiture will enable the Company to focus its resources on opportunities which better align with its long-term strategies.

The transaction is subject to customary closing conditions.

Refer to Note 4 for further information regarding the assets and liabilities held for sale as of June 30, 2023.

NOTE 4 - HELD FOR SALE

During the second quarter of 2023, the Company determined the China architectural business within the Consumer Brands Group reportable segment met the criteria to be classified as held for sale in accordance with the Property, Plant, and Equipment Topic of the ASC.

The assets and liabilities held for sale as of June 30, 2023 are measured at the lower of carrying value or fair value less cost to sell and were determined to not meet the criteria of a discontinued operation as the pending divestiture did not represent a strategic shift for the Company.

Depreciation and amortization expense was not recorded for the period in which the long-lived assets were classified as held for sale.

This gain was recorded within the Other general expense (income) - net caption in the Statements of Consolidated Income during the second quarter of 2023.

During the second quarter of 2023, the Company signed a definitive agreement to divest the China architectural business within the Consumer Brands Group, with annual revenue of approximately $ 100 million and 300 employees.

The associated net assets were classified as held for sale at June 30, 2023 in accordance with the Property, Plant, and Equipment Topic of the ASC.

Following the prescribed order of impairment testing, the Company first reviewed individual tangible and intangible assets under their applicable Topic of the ASC to determine if their carrying value was higher than their respective fair value.

As a result, the Company recorded an impairment charge of $ 6.9 million within the Consumer Brands Group related to China architectural trademarks using the royalty savings valuation method.

For more information on the Company’s Goodwill and Intangible Assets critical accounting policy, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 1 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

As a result, the Company recorded an impairment charge of $ 6.9 million within the Consumer Brands Group related to China architectural trademarks.

The Company then compared the updated carrying value of the assets and liabilities comprising the disposal group as a whole to its respective fair value which was determined to be equal to the selling price, less costs to sell.

As a result of this comparison, the Company recorded an additional impairment charge of $ 27.1 million within the Administrative segment in the second quarter of 2023 and classified the remaining assets as Other current assets and remaining liabilities as Other accruals at June 30, 2023.

The disposal group is classified as level 2 in the fair value hierarchy as it is based on a specific price and other observable inputs for similar items with no active market.

The assets, liabilities and valuation adjustment held for sale at June 30, 2023 were as follows:

June 30, 2023

Tangible assets $ 22.5

Intangible assets 93.3

Valuation adjustment ( 27.1 )

Total assets $ 88.7

Total liabilities $ 20.9

The fair value of the disposal group was classified as level 2 in the fair value hierarchy as it was based on a specific price and other observable inputs for similar items with no active market.

As a result of this comparison, the Company recorded an additional impairment charge of $ 27.1 million within the Administrative segment.

During the third quarter of 2023, the Company completed the divestiture of the China architectural business.

The Company expects to finalize an immaterial working capital adjustment in the fourth quarter.

NOTE 4 – RESTRUCTURING

19 unchanged sentences

Payments, currency and other adjustments ( 37.5 ) ( 12.7 ) ( 1.3 ) ( 51.5 )

Balance at June 30, 2023 $ 8.0 $ 7.1 $ — $ 15.1

Balance at September 30, 2023 $ 2.3 $ 3.2 $ — $ 5.5

Restructuring Plan Expense:

6 unchanged sentences

Included in Inventories were the following:

June 30, December 31, June 30,

September 30, December 31, September 30,

2023 2022 2022

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,

2023 2022 2022

8 unchanged sentences

As a result of the Latin America architectural paint business moving to the Consumer Brands Group reportable segment, the Company performed a quantitative impairment analysis for the impacted reporting units and determined both before and after the change, there was no indication of impairment.

In addition, see Note 4 for information on the impairment test performed as a result of the China architectural business classification change to held for sale.

In addition, see Note 3 for information on the impairment tests performed in the second quarter of 2023 for the assets held for sale prior to the divestiture of the China architectural business.

NOTE 7 - DEBT

The following table summarizes the Company’s outstanding debt:

June 30, December 31, June 30,

September 30, December 31, September 30,

2023 2022 2022

6 unchanged sentences

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 June 30, 2023 , the Company had unused capacity under its various credit agreements of $ 2.874 billion.

At September 30, 2023 , the Company had unused capacity under its various credit agreements of $ 3.342 billion.

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

June 30, December 31, June 30,

September 30, December 31, September 30,

2023 2022 2022

1 unchanged sentence

Domestic commercial paper $ 338.5 $ 938.5 $ 889.3

Revolving credit facility — — 250.0

Foreign facilities 0.1 39.6 55.9

2 unchanged sentences

Domestic commercial paper 5.5 % 4.6 % 3.3 %

Revolving credit facility — % — % 2.6 %

Foreign facilities 6.2 % 6.7 % 4.4 %

8 unchanged sentences

2023 2022 2023 2022 2023 2022

Three Months Ended June 30:

Three Months Ended September 30:

Service cost $ 0.9 $ 1.3 $ 1.1 $ 1.6 $ 0.1 $ 0.3

4 unchanged sentences

Net periodic benefit cost (credit) $ 0.5 $ 0.3 $ 0.4 $ 1.0 $ ( 4.0 ) $ 2.7

Six Months Ended June 30:

Nine Months Ended September 30:

Service cost $ 2.5 $ 3.8 $ 3.2 $ 4.9 $ 0.4 $ 0.9

20 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, including as a result of sites progressing through investigation and remediation-related activities, upon which more accurate costs can be reasonably estimated and as additional accounting guidelines are issued.

At June 30, 2023 and 2022, the Company had accruals reported on the balance sheet as Other long-term liabilities of $ 240.7 million and $ 269.2 million , respectively.

Estimated costs of current investigation and remediation activities of $ 50.2 million and $ 45.9 million are included in Other accruals at June 30, 2023 and 2022 , respectively.

At September 30, 2023 and 2022, the Company had accruals reported on the balance sheet as Other long-term liabilities of $ 260.1 million and $ 268.0 million , respectively.

Estimated costs of current investigation and remediation activities of $ 50.2 million and $ 45.9 million are included in Other accruals at September 30, 2023 and 2022 , 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 $ 85.9 million higher than the minimum accruals at June 30, 2023.

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 $ 92.4 million higher than the minimum accruals at September 30, 2023.

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, 2023 .

At June 30, 2023 , $ 248.6 million, or 85.4 % of the total accrual, related directly to the Major Sites.

In the aggregate unaccrued maximum of $ 85.9 million at June 30, 2023 , $ 60.9 million, or 70.9 %, related to the Major Sites.

At September 30, 2023 , $ 266.7 million, or 86.0 % of the total accrual, related directly to the Major Sites.

In the aggregate unaccrued maximum of $ 92.4 million at September 30, 2023 , $ 69.6 million, or 75.3 %, related to the Major Sites.

The significant cost components of this liability continue to be related to remedy implementation, regulatory agency interaction, and project management and other costs.

15 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, 2023 , the Company did not have material loss contingency accruals related to unasserted claims.

At September 30, 2023 , 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.

94 unchanged sentences

On April 14, 2023, the defendants filed a reply in support of their motion to strike.

Oral argument is set for September 26, 2023.

Oral argument was held on September 26, 2023.

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

6 unchanged sentences

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 September 30, 2023, the federal court granted the plaintiff’s motion to remand, awarded the plaintiff costs and actual expenses in connection with the notice of removal, but denied the plaintiff’s motion for sanctions.

Insurance coverage litigation.

14 unchanged sentences

The insurers filed their merit brief with the Ohio Supreme Court on July 17, 2023.

Briefing is scheduled to be completed in September 2023.

The Company filed its merit brief on September 5, 2023.

The insurers filed their reply brief on October 13, 2023.

Oral argument is scheduled for October 24, 2023.

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.

3 unchanged sentences

Other litigation.

(collectively, the NJ DEP) filed a lawsuit against the Company in the Superior Court of New Jersey Law Division in Camden County, New Jersey.

On December 18, 2019, the New Jersey Department of Environmental Protection, the Commissioner of the New Jersey Department of Environmental Protection, and the Administrator of the New Jersey Spill Compensation Fund (collectively, the NJ DEP) filed a lawsuit against the Company in the Superior Court of New Jersey Law Division in Camden County, New Jersey.

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

8 unchanged sentences

Second Quarter 0.605 156.3 0.60 156.2

Third Quarter 0.605 155.6 0.60 155.8

Total $ 1.815 $ 468.4 $ 1.80 $ 462.9

1 unchanged sentence

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

As of June 30, 2023, the Company had remaining authorization from its Board of Directors to purchase 42.9 million shares of its common stock.

The table below summarizes share repurchases during the three and six months ended June 30, 2023 and 2022:

Three Months Ended Six Months Ended

June 30, June 30,

As of September 30, 2023, the Company had remaining authorization from its Board of Directors to purchase 41.4 million shares of its common stock.

The table below summarizes share repurchases during the three and nine months ended September 30, 2023 and 2022:

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

4 unchanged sentences

Other Activity

During the six months ended June 30, 2023, 384,767 stock options were exercised at a weighted average price per share of $ 92.75 .

During the nine months ended September 30, 2023, 705,945 stock options were exercised at a weighted average price per share of $ 96.23 .

In addition, 301,843 restricted stock units vested during the same period.

7 unchanged sentences

Amounts reclassified from AOCI ( 13.6 ) ( 2.7 ) ( 16.3 )

Balance at June 30, 2023 $ ( 750.7 ) $ 69.3 $ 30.1 $ ( 651.3 )

Balance at September 30, 2023 $ ( 850.3 ) $ 64.7 $ 29.2 $ ( 756.4 )

Adjustments Pension and

4 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 )

NOTE 13 - DERIVATIVES AND HEDGING

2 unchanged sentences

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

The outstanding contracts as of June 30, 2023 are summarized in the table below.

The outstanding contracts as of September 30, 2023 are summarized in the table below.

Contract Date Notional

4 unchanged sentences

June 28, 2023 200.0 August 8, 2025

August 1, 2023 100.0 February 1, 2027

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

3 unchanged sentences

See Note 14 for additional information on the fair value of these contracts.

June 30, December 31, June 30,

September 30, December 31, September 30,

2023 2022 2022

Other current assets $ 14.7 $ — $ —

Other assets 9.6 9.1 56.4

Other accruals 5.0 — —

Other long-term liabilities 2.8 — —

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 (losses) gains for the three and six months ended June 30, 2023 and 2022.

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, 2023 and 2022.

Three Months Ended Nine Months Ended

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

2023 2022 2023 2022

(Losses) gains $ ( 11.3 ) $ 40.8 $ ( 16.9 ) $ 51.5

Gains $ 32.1 $ 41.0 $ 15.2 $ 92.5

Tax effect ( 7.9 ) ( 10.1 ) ( 3.8 ) ( 22.7 )

(Losses) gains, net of taxes

Gains, net of taxes

$ 24.2 $ 30.9 $ 11.4 $ 69.8

1 unchanged sentence

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.

There were no material foreign currency option and forward contracts outstanding at June 30, 2023, December 31, 2022 and June 30, 2022.

There were no material foreign currency option and forward contracts outstanding at September 30, 2023 and December 31, 2022.

The total notional value of foreign currency forward contracts outstanding as of 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.

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

6 unchanged sentences

Significant unobservable inputs

Except for the acquisition related fair value measurements described in Note 3, the assets held for sale described in Note 4, and the reporting unit impairment analysis described in Note 7, there were no assets and liabilities measured at fair value on a nonrecurring basis.

The following table presents the Company’s financial assets and liabilities that are measured at fair value on a recurring basis, categorized using the fair value hierarchy.

June 30, 2023 December 31, 2022

Except for the acquisition related fair value measurements and assets held for sale prior to divestiture described in Note 3 and the reporting unit impairment analysis described in Note 6, there were no assets and liabilities measured at fair value on a nonrecurring basis.

The following table presents the Company’s financial assets that are measured at fair value on a recurring basis, categorized using the fair value hierarchy.

September 30, 2023 December 31, 2022

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

3 unchanged sentences

$ 109.2 $ 47.1 $ 62.1 $ — $ 113.0 $ 73.5 $ 39.5 $ —

Net investment hedge liability $ 7.8 $ 7.8 $ —

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

2 unchanged sentences

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

The cost basis of the investment funds was $ 75.0 million and $ 67.2 million at June 30, 2023 and December 31, 2022, respectively.

The cost basis of the investment funds was $ 74.3 million and $ 67.2 million at September 30, 2023 and December 31, 2022, respectively.

The qualified replacement plan assets consisted of investment funds maintained for future contributions to the Company’s domestic defined contribution pension plan.

1 unchanged sentence

The cost basis of the investment funds was $ 29.8 million at December 31, 2022 and the fair value was based on quoted prices multiplied by the number of shares.

The net investment hedge asset and liability represent the fair value of outstanding cross currency swaps (see Note 14).

The net investment hedge asset represents the fair value of outstanding cross currency swap contracts (see Note 13).

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.

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Value Carrying

34 unchanged sentences

Balance at December 31, 2022 $ 2,563.6 $ 43.8 $ 117.7 $ 292.9 $ 7.1

Balance at June 30, 2023 3,117.8 46.0 141.4 267.2 8.6

Balance at September 30, 2023 2,940.9 43.4 152.3 325.3 8.3

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 contractual performance obligation and the associated payment.

13 unchanged sentences

The following table summarizes the movement in the Company's allowance for doubtful accounts:

Six Months Ended

Nine Months Ended

September 30,

Beginning balance $ 56.6 $ 48.9

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NOTE 16 - OTHER

Other general (income) expense - net

Included in Other general (income) 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

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Provisions for environmental matters - net $ 39.4 $ 6.4 $ 52.7 $ 11.1

Gain on divestiture of business (see Note 3) ( 20.1 ) — ( 20.1 ) —

(Gains) losses on sale or disposition of assets ( 16.2 ) 0.3 ( 20.8 ) 2.2

Gain on divestiture of businesses (see Note 3) ( 20.1 )

Losses (gains) on sale or disposition of assets 12.7 ( 20.8 ) ( 8.1 ) ( 18.6 )

Other 9.8 15.4

Other general (income) expense - net $ ( 32.5 ) $ 4.4 $ ( 22.0 ) $ 6.9

Other general expense (income) - net $ 61.9 $ ( 14.4 ) $ 39.9 $ ( 7.5 )

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

Environmental-related accruals are not recorded net of insurance proceeds in accordance with the Offsetting Subtopic of the Balance Sheet Topic of the ASC.

During the third quarter of 2023, provisions for environmental matters - net increased primarily due to new information which impacted the estimate of required remediation at certain Major Sites and other Company locations.

See Note 9 for further details on the Company’s environmental-related activities.

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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See Note 14 for additional information on the fair value of these investments.

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.

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

See Note 13 for additional information regarding these foreign currency contracts.

3 unchanged sentences

NOTE 17 - INCOME TAXES

The effective tax rate was 21.6 % and 21.9 % for the second quarter and first six months of 2023, respectively, compared to 21.9 % and 21.0 % for the second quarter and first six months of 2022, respectively.

The effective tax rate was less favorably impacted by tax benefits related to employee share based payments in the first six months of 2023 than in the same period last year.

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

The effective tax rate was 24.5 % and 22.9 % for the third quarter and first nine months of 2023, respectively, compared to 21.9 % and 21.4 % for the third quarter and first nine months of 2022, respectively.

The increase in the effective tax rate for the third quarter was primarily due to a $ 14.7 million discrete tax expense related to the divestiture of the China architectural business and an unfavorable change in the jurisdictional mix of earnings.

For the first nine months, the increase in the effective tax rate was primarily related to an unfavorable change in the jurisdictional mix of earnings.

The other significant components of the Company’s effective tax rate were consistent in both comparable periods.

At December 31, 2022, the Company had $ 242.4 million in unrecognized tax benefits, the recognition of which would have an effect of $ 230.3 million on the effective tax rate.

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At December 31, 2022, the Company had accrued $ 36.6 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, 2022 during the six months ended June 30, 2023.

There were no significant changes to any of the balances of unrecognized tax benefits at December 31, 2022 during the nine months ended September 30, 2023.

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

federal jurisdiction, and various state and foreign jurisdictions.

The IRS audited the Company's 2013 through 2016 income tax returns.

As a result of these audits, certain adjustments have been agreed upon with the IRS.

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

The Company finalized the IRS audit for the 2013 through 2016 income tax returns and is adequately reserved for the assessment, which is expected to be paid in the fourth quarter.

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

As of June 30, 2023, the federal statute of limitations had not expired for the 2013 through 2022 tax years.

At June 30, 2023, the Company is subject to non-U.S.

As of September 30, 2023, the federal statute of limitations had not expired for the 2013 through 2022 tax years.

At September 30, 2023, the Company is subject to non-U.S.

income tax examinations for the tax years of 2014 through 2022.

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

9 unchanged sentences

Diluted net income per share $ 2.95 $ 2.62 $ 7.85 $ 6.23

(1) There were 2.0 million and 2.8 million of stock options and other contingently issuable shares excluded due to their anti-dilutive effect for the three and six months ended June 30, 2023, respectively.

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

(1) There were 1.1 million and 2.0 million of stock options and other contingently issuable shares excluded due to their anti-dilutive effect for the three and nine months ended September 30, 2023, respectively.

There were 1.9 million and 1.1 million of 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.

NOTE 19 - REPORTABLE SEGMENT INFORMATION

5 unchanged sentences

Certain information within the Form 10-K Reportable Segment Information Note impacted by the realignment has been revised herein.

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Group Consumer Brands

8 unchanged sentences

Income before income taxes $ 917.5 $ 101.6 $ 279.7 $ ( 289.8 ) $ 1,009.0

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Group Consumer Brands

8 unchanged sentences

Income before income taxes $ 741.3 $ 117.7 $ 236.3 $ ( 218.1 ) $ 877.2

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Group Consumer Brands

8 unchanged sentences

Income before income taxes $ 2,293.5 $ 305.7 $ 771.3 $ ( 734.6 ) $ 2,635.9

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Group Consumer Brands

12 unchanged sentences

All intersegment transfers are eliminated within the Administrative segment.

Net external sales of all consolidated foreign subsidiaries were $ 1.150 billion and $ 1.121 billion for the three months ended June 30, 2023 and 2022, respectively.

Net external sales of all consolidated foreign subsidiaries were $ 2.237 billion and $ 2.198 billion for the six months ended June 30, 2023 and 2022, respectively.

Long-lived assets of these subsidiaries totaled $ 3.348 billion and $ 2.833 billion at June 30, 2023 and 2022, respectively.

Net external sales of all consolidated foreign subsidiaries were $ 1.105 billion and $ 1.064 billion for the three months ended September 30, 2023 and 2022, respectively.

Net external sales of all consolidated foreign subsidiaries were $ 3.342 billion and $ 3.262 billion for the nine months ended September 30, 2023 and 2022, respectively.

Long-lived assets of these subsidiaries totaled $ 3.217 billion and $ 2.839 billion at September 30, 2023 and 2022, respectively.

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

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