What changed in this filing

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Item 1. Financial Statements

2024-04-30 compared with 2023-10-24 · 263 added, 399 removed, 483 unchanged (58% of the section changed)

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net sales $ 5,367.3 $ 5,442.4

4 unchanged sentences

Percent to net sales 33.5 % 31.1 %

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

Impairment — — 34.0 —

Other general expense - net 2.0 10.5

Interest expense 103.0 109.3

Interest income ( 6.1 ) ( 3.5 )

Other (income) expense - net ( 8.0 ) 18.1 ( 17.0 ) 49.9

Other income - net ( 7.7 ) ( 3.2 )

Income before income taxes 640.0 614.8

10 unchanged sentences

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (UNAUDITED)

(in millions) Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

(in millions) Three Months Ended

Net income $ 505.2 $ 477.4

Other comprehensive loss, net of tax:

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments (1)

6 unchanged sentences

( 0.9 ) ( 0.9 )

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

Other comprehensive (loss) income ( 80.7 ) 34.8

Comprehensive income $ 424.5 $ 512.2

(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.

(1) The three months ended March 31, 2024 and 2023 include unrealized gains (losses), net of taxes, of $ 18.3 million and $( 4.2 ) million, respectively, related to net investment hedges.

See Note 12 for additional information.

(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.

(2) Net of taxes of $ 1.5 million and $ 1.7 million for the three months ended March 31, 2024 and 2023, respectively.

(3) Net of taxes of $ 0.3 million for the three months ended March 31, 2024 and 2023.

See notes to condensed consolidated financial statements.

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions) September 30,

(in millions) March 31,

2024 December 31,

2022 September 30,

2023 March 31,

Current assets:

28 unchanged sentences

253.5 million, 254.5 million and 257.9 million shares outstanding

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

at March 31, 2024, December 31, 2023 and March 31, 2023, respectively

92.0 91.8 91.3

8 unchanged sentences

STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS (UNAUDITED)

(in millions) Nine Months Ended

September 30,

2023 September 30,

(in millions) Three Months Ended

2024 March 31,

OPERATING ACTIVITIES

4 unchanged sentences

Amortization of intangible assets 82.1 83.7

Gain on divestiture of businesses ( 20.1 ) —

Impairment 34.0 —

Stock-based compensation expense 24.6 22.5

12 unchanged sentences

Capital expenditures ( 283.8 ) ( 209.9 )

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

Proceeds from divestiture of businesses 103.7 —

Proceeds from sale of assets 49.0 33.2

Acquisition of business, net of cash acquired — ( 0.3 )

Other ( 37.5 ) ( 23.2 )

1 unchanged sentence

FINANCING ACTIVITIES

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 )

Net increase in short-term borrowings 882.5 503.0

Payments of cash dividends ( 182.5 ) ( 156.5 )

1 unchanged sentence

Treasury stock purchased ( 545.5 ) ( 301.7 )

Proceeds from treasury stock issued — 22.0

Proceeds from real estate financing transactions 77.0 66.5

2 unchanged sentences

Effect of exchange rate changes on cash ( 6.3 ) ( 0.3 )

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

Net decrease in cash and cash equivalents ( 96.9 ) ( 47.4 )

Cash and cash equivalents at beginning of year 276.8 198.8

13 unchanged sentences

Net income 505.2 505.2

Other comprehensive income 34.8 34.8

Treasury stock purchased ( 301.7 ) ( 301.7 )

Stock-based compensation activity 0.1 33.8 ( 23.5 ) 10.4

Other adjustments 0.3 0.3

Cash dividends -- $ 0.605 per share

( 156.5 ) ( 156.5 )

Balance at March 31, 2023 $ 91.3 $ 3,998.0 $ 3,844.1 $ ( 4,100.8 ) $ ( 665.8 ) $ 3,166.8

Net income 793.7 793.7

Other comprehensive income 14.5 14.5

Treasury stock purchased ( 234.2 ) ( 234.2 )

Stock-based compensation activity 0.1 47.5 ( 0.1 ) 47.5

Other adjustments ( 0.9 ) ( 0.9 )

Cash dividends -- $ 0.605 per share

( 156.3 ) ( 156.3 )

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 ( 80.7 ) ( 80.7 )

4 unchanged sentences

( 182.5 ) ( 182.5 )

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

Balance at March 31, 2024 $ 92.0 $ 4,298.8 $ 5,611.0 $ ( 5,793.1 ) $ ( 705.0 ) $ 3,503.7

(in millions, except per share data) Common

5 unchanged sentences

Net income 477.4 477.4

Other comprehensive loss ( 43.6 ) ( 43.6 )

Other comprehensive income 34.8 34.8

Treasury stock purchased ( 301.7 ) ( 301.7 )

Treasury stock issued

11.0 11.0 22.0

Stock-based compensation activity 0.1 33.8 ( 23.5 ) 10.4

3 unchanged sentences

Balance at March 31, 2023 $ 91.3 $ 3,998.0 $ 3,844.1 $ ( 4,100.8 ) $ ( 665.8 ) $ 3,166.8

Net income 577.9 577.9

Other comprehensive loss ( 172.6 ) ( 172.6 )

Treasury stock purchased ( 296.4 ) ( 296.4 )

Stock-based compensation activity 41.5 41.5

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

Cash dividends -- $ 0.60 per share

( 156.2 ) ( 156.2 )

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

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 September 30, 2023 and 2022

Periods ended March 31, 2024 and 2023

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 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.

The results of operations for the three months ended March 31, 2024 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 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.

Since December 31, 2023, a ccounting estimates were revised as necessary during the first three months of 2024 based on new information and changes in facts and circumstances.

Certain amounts in the condensed consolidated financial statements for the three months ended March 31, 2023 have been reclassified to conform to the 2024 presentation.

The following represents updates to certain significant accounting policy disclosures.

For further details on the Company’s significant accounting policies, see Note 1 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Reportable Segments

During the first quarter of 2023, the Company realigned its organizational structure to manage the Latin America architectural paint business within the Consumer Brands Group.

Previously, the Latin America architectural paint business was managed within The Americas Group;

however, Latin America architectural demand and service model trends are shifting to align more closely with the Consumer Brand Group’s strategy.

As a result of the change, The Americas Group has been renamed the Paint Stores Group which now focuses on the core U.S., Canada and Caribbean region stores business.

All reported segment information herein, including comparable prior periods, include the Latin America architectural paint business within the Consumer Brands Group.

See Notes 6 and 19 for additional information.

Real Estate Financing

The Company has entered into certain sale-leaseback agreements that do not qualify as asset sales and were accounted for as real estate financing transactions.

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

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.

For further details on the Company’s significant accounting policies and related disclosures, see Note 1 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Supply Chain Financing

As part of our strategy to manage working capital, we have entered into agreements with various financial institutions that act as intermediaries between the Company and certain suppliers.

The Company is not a party to agreements between the suppliers and the financial institutions.

These arrangements provide participating suppliers the option to settle outstanding Accounts payable incurred by the Company in the normal course of business early at a discount and do not impact our rights and obligations with suppliers, including amounts due and scheduled payment terms.

Under the terms of our agreements, the Company confirms the validity of each supplier invoice to the respective financial institution upon receipt.

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 $ 247.7 million, $ 258.1 million and $ 290.3 million at September 30, 2023, December 31, 2022 and September 30, 2022, respectively.

Liabilities associated with these arrangements are recorded in Accounts payable on the Consolidated Balance Sheets and amounted to $ 238.7 million, $ 213.1 million and $ 251.3 million at March 31, 2024, December 31, 2023 and March 31, 2023, respectively.

Non-Traded Investments

The Company has invested in the U.S.

affordable housing and historic renovation real estate markets and certain other investments that have been identified as variable interest entities which qualify for certain tax credits.

However, because the Company does not have the power to direct the day-to-day operations of the investments and the risk of loss is limited to the amount of contributed capital, the Company is not considered the primary beneficiary.

In accordance with the Consolidation Topic of the ASC, the investments are not consolidated.

The carrying value of the investments is recorded in Other assets.

The Company has invested in U.S.

affordable housing, historic renovation and other real estate investments (Non-Traded Investments) that have been identified as variable interest entities which qualify for certain tax credits and other tax benefits.

Since the Company does not have the power to direct the day-to-day operations of the Non-Traded Investments and the risk of loss is limited to the amount of contributed capital, the Company is not considered the primary beneficiary.

Therefore, in accordance with the Consolidation Topic of the Accounting Standards Codification (ASC), the Non-Traded Investments are not consolidated.

Under the Investments - Equity Method and Joint Ventures Topic of the ASC, the Company uses the proportional amortization method, whereby the initial cost and any subsequent changes in the level of investment of Non-Traded Investments is amortized in proportion to the receipt of related tax credits.

The Company reasonably expects amortization based on the receipt of tax credits would produce a measurement substantially similar to amortization based on the receipt of tax credits and other tax benefits.

Both the amortization and related tax credits and other tax benefits are recognized in Income tax expense on the Statements of Consolidated Net Income.

In the three months ended March 31, 2024, the Company received tax credits and other tax benefits of $ 21.8 million and proportionally recognized $ 20.1 million in the amortization of Non-Traded Investments.

In the three months ended March 31, 2023, the Company received tax credits and other tax benefits of $ 24.3 million and proportionally recognized $ 19.4 million in the amortization of Non-Traded Investments.

The tax credits and other tax benefits received are presented in Deferred income taxes and as a change in Accrued taxes within Operating activities on the Statements of Condensed Consolidated Cash Flows.

The carrying value of Non-Traded Investments is recorded in Other assets.

The liabilities for the estimated future capital contributions are recorded in Other accruals and Other long-term liabilities.

The following table summarizes the balances related to the investments:

September 30, December 31, September 30,

In addition, the associated impact of related tax credits and other tax benefits are recorded as a reduction of Accrued taxes and a net deferred tax asset within Deferred income taxes.

The following table summarizes the balances related to the Non-Traded Investments and related tax credits and other tax benefits:

March 31, December 31, March 31,

2024 2023 2023

2 unchanged sentences

Other long-term liabilities 592.1 568.2 482.1

Reduction of Accrued taxes 21.8 94.8 24.3

Net deferred income tax asset 24.6 19.4 25.8

NOTE 2 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Effective January 1, 2023, the Company adopted Accounting Standards Update (ASU) 2022-04, “Liabilities - Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations.” This ASU requires disclosure about an entity’s use of supplier finance programs, including the key terms of the programs and the obligations outstanding at the end of the reporting period.

The adoption of ASU 2022-04 did not affect the Company’s financial position, results of operations or cash flows as the standard only impacts financial statement footnote disclosures.

See Note 1 for additional information.

In addition, a required rollforward of activity within the programs will be disclosed prospectively beginning with the annual period ending December 31, 2024.

Effective January 1, 2023, the Company adopted ASU 2021-08, “Business Combinations (Topic 805):

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

The adoption of ASU 2021-08 did not have a material impact on the Company’s financial position, results of operations or cash flows.

Not Yet Adopted

In March 2023, the FASB issued ASU 2023-02, “Investments - Equity Method and Joint Ventures (Topic 323):

Effective January 1, 2024, the Company adopted Accounting Standards Update (ASU) 2023-02, “Investments - Equity Method and Joint Ventures (Topic 323):

Accounting for investments in tax credit structures using the proportional amortization method.” This ASU allows entities to apply the proportional amortization method to all tax equity investments if certain conditions are met.

In addition, the ASU requires certain disclosures about the nature and financial implications of tax equity investments on an entity’s financial position, results of operations and cash flows, including the impact of transition on the periods presented, if any.

This ASU is effective for fiscal years and interim periods beginning after December 15, 2023, with early adoption permitted.

The adoption of the ASU did not materially affect the Company’s financial position, results of operations or cash flows since the Company has historically applied the proportional amortization method to its Non-Traded Investments, however, certain disclosures have been added based on the requirements of the ASU.

See Note 1 for further details.

Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.” This ASU enhances reportable segment disclosures on both an annual and interim basis primarily in regards to the disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within the reported measure(s) of segment profit or loss.

In addition, the ASU requires disclosure, by segment, of other items included in the reported measure(s) of segment profit or loss, including qualitative information describing the composition, nature and type of each item.

The ASU also expands disclosure requirements related to the CODM, including how the reported measure(s) of segment profit or loss are used to assess segment performance and allocate resources, the method used to allocate overhead for significant segment expenses and others.

Lastly, all current required annual segment reporting disclosures under Topic 280 will be effective for interim periods.

The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is evaluating the impact of adopting this ASU.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.” This ASU enhances income tax disclosures by providing information to better assess how an entity’s operations, related tax risks, tax planning and operational opportunities affect its tax rate and prospects for future cash flows.

This ASU requires additional disclosures to the annual effective tax rate reconciliation including specific categories and further disaggregated reconciling items that meet the quantitative threshold.

Additionally, the ASU requires disclosures relating to income tax expense and payments made to federal, state, local and foreign jurisdictions.

This ASU is effective for fiscal years and interim periods beginning after December 15, 2024.

The Company is evaluating the impact of adopting this ASU.

NOTE 3 - ACQUISITIONS AND DIVESTITURES

Closed in Prior Year

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

In July 2022, the Company completed the acquisitions of Gross & Perthun GmbH, Dur-A-Flex, Inc.

and Powdertech Oy Ltd.

In December 2022, the Company completed the acquisition of Industria Chimica Adriatica S.p.A.

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

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, 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, 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.

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.

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

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 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.

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.

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.

The Company funded the acquisition with approximately $ 265 million in cash.

The purchase price is subject to certain closing conditions which are expected to be finalized in 2024.

The Company expects to finalize the purchase price allocation for the acquisition

within the allowable measurement period.

SIC Holding is reported within the Company’s Performance Coatings Group and the results of operations for the acquisition have been included in the consolidated financial statements since the acquisition date.

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

Closed in Prior Year

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

In the fourth quarter of 2022, the Company announced a business restructuring plan (Restructuring Plan) 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 Consumer Brands Group, Performance Coatings Group and the Administrative segment.

The actions taken under the Restructuring Plan better position the Company to continue to add 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.

Multiple alternatives were considered to determine the course of action related to the focus areas.

The Company ultimately determined that divestiture, rather than restructuring, of the China architectural business and a non-core domestic aerosol business was the highest and best use of resources to drive long-term shareholder value.

For more information on these divestitures, see Note 3.

As a result of continuing evaluation in the second quarter of 2023, the Company determined that these divestitures and previous actions under the Restructuring Plan achieved the original objectives of the focus areas.

Accordingly, and in conjunction with other restructuring actions during 2023, there is no additional expense expected to be incurred under the Restructuring Plan.

The following table summarizes the activity and remaining liabilities associated with the Restructuring Plan:

Consumer Brands

Group Performance

Group Administrative Total

Balance at January 1, 2023

$ 25.6 $ 16.1 $ — $ 41.7

Severance and related costs (1)

3.6 ( 0.2 ) 1.3 4.7

Other qualified costs (2)

10.6 — — 10.6

Total 14.2 ( 0.2 ) 1.3 15.3

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

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

Restructuring Plan Expense:

Total expense incurred to date $ 39.8 $ 22.0 $ 1.3 $ 63.1

Additional expense expected — — — —

Total expected expense $ 39.8 $ 22.0 $ 1.3 $ 63.1

(1) Severance and related costs were recorded in Selling, general and administrative expenses.

(2) Other qualified costs of $ 5.7 million were recorded in Selling, general and administrative expenses and the remaining $ 4.9 million was recorded in Cost of goods sold.

An immaterial working capital adjustment was finalized during the first quarter of 2024.

NOTE 4 - INVENTORIES

Included in Inventories were the following:

September 30, December 31, September 30,

March 31, December 31, March 31,

2024 2023 2023

9 unchanged sentences

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

September 30, December 31, September 30,

March 31, December 31, March 31,

2024 2023 2023

7 unchanged sentences

In accordance with the Goodwill and Other Intangibles Topic of the ASC, goodwill and indefinite-lived intangible assets are tested for impairment annually during the fourth quarter, and interim impairment tests are performed whenever an event occurs or circumstances change that indicate an impairment has more likely than not occurred.

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 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 6 - DEBT

The following table summarizes the Company’s outstanding debt:

September 30, December 31, September 30,

March 31, December 31, March 31,

2024 2023 2023

3 unchanged sentences

Short-Term Borrowings

On February 28, 2023, the Company amended its credit agreement dated August 2, 2021, as amended, to extend the maturity of $ 125.0 million of the commitments available for borrowing and obtaining the issuance, renewal, extension, and increase of a letter of credit under the credit agreement from June 20, 2023 to December 20, 2027.

On May 1, 2023, the Company amended its credit agreement dated May 9, 2016, as amended, to extend the maturity of $ 125.0 million of the commitments available for borrowing and obtaining the issuance, renewal, extension, and increase of a letter of credit under the credit agreement from June 20, 2023 to June 20, 2028.

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

At March 31, 2024 , the Company had unused capacity under its various credit agreements of $ 2.445 billion.

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

September 30, December 31, September 30,

March 31, December 31, March 31,

2024 2023 2023

15 unchanged sentences

2024 2023 2024 2023 2024 2023

Three Months Ended September 30:

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

Interest cost 1.1 0.8 2.9 1.9 1.9 1.4

Expected return on assets ( 1.8 ) ( 2.0 ) ( 3.1 ) ( 2.6 )

Amortization of prior service cost (credit) 0.3 0.2 ( 0.1 ) ( 6.0 ) ( 0.1 )

Amortization of actuarial (gains) losses ( 0.4 ) 0.1 1.1

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

Nine Months Ended September 30:

Three Months Ended March 31:

Service cost $ 0.9 $ 0.8 $ 1.2 $ 1.1 $ 0.1 $ 0.1

2 unchanged sentences

Amortization of prior service cost (credit) 0.5 0.3 ( 0.1 ) ( 6.0 ) ( 6.0 )

Amortization of actuarial (gains) losses ( 1.1 ) 1.1 0.1 3.2

Amortization of actuarial gains ( 0.1 ) ( 0.3 ) ( 0.4 ) ( 0.1 )

Net periodic benefit cost (credit) $ 0.5 $ 0.5 $ 1.1 $ 0.4 $ ( 4.3 ) $ ( 4.0 )

Service cost is recorded in Cost of goods sold and Selling, general and administrative expenses.

All other components are recorded in Other (income) expense - net.

All other components are recorded in Other income - net.

For further details on the Company’s pension and other postretirement benefits, see Note 9 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

NOTE 8 - OTHER LONG-TERM LIABILITIES

Environmental Matters

The operations of the Company, like those of other companies in its industry, are subject to various domestic and foreign environmental laws and regulations.

1 unchanged sentence

Management expects environmental laws and regulations to impose increasingly stringent requirements upon the Company and the industry in the future.

Management believes that the Company conducts its operations in compliance with applicable environmental laws, regulations and requirements and has implemented various programs designed to protect the environment and promote continued compliance.

The Company is involved with environmental investigation and remediation activities at some of its currently and formerly owned sites (including sites which were previously owned and/or operated by businesses acquired by the Company).

Management believes that the Company conducts its operations in compliance with applicable environmental laws, regulations and requirements and has implemented various programs designed to help protect the environment and promote continued compliance.

The Company is involved with environmental investigation and remediation activities at some of its currently and formerly owned sites (including sites that were previously owned and/or operated by businesses acquired by the Company).

In addition, the Company, together with other parties, has been designated a potentially responsible party under federal and state environmental protection laws for the investigation and remediation of environmental contamination and hazardous waste at a number of third-party sites, primarily Superfund sites.

2 unchanged sentences

The Company initially provides for estimated costs of environmental-related activities relating to its past operations and third-party sites for which commitments or clean-up plans have been developed and when such costs can be reasonably estimated based on industry standards and professional judgment.

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

Costs for environmental-related activities may not be reasonably estimable, particularly at early stages of investigation, and therefore would not be included in the accrued amount.

The costs which are estimable are mostly undiscounted and 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.

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 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.

The Company routinely 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 March 31, 2024 and 2023, the Company had accruals reported on the balance sheet as Other long-term liabilities of $ 224.8 million and $ 248.2 million , respectively.

Estimated costs of current investigation and remediation activities of $ 92.4 million and $ 50.2 million are included in Other accruals at March 31, 2024 and 2023 , 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 $ 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 September 30, 2023 .

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.

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 $ 92.9 million higher than the minimum accruals at March 31, 2024.

At March 31, 2024 , $ 268.6 million, or 84.7 % of the total accrual, related directly to the Major Sites.

In the aggregate unaccrued maximum of $ 92.9 million at March 31, 2024 , $ 68.9 million, or 74.2 %, 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.

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Gibbsboro, a former manufacturing plant, and related areas, which ceased operations in 1978, has had various areas included on the National Priorities List since 1999.

This location has soil, sediment, waterbodies, and groundwater contamination related to the historic operations of the facility.

This location has soil, sediment, surface water and groundwater contamination related to the historic operations of the facility.

Gibbsboro has been divided by the Environmental Protection Agency (EPA) into six operable units (OUs) based on location and characteristics, whose investigation and remediation efforts are likely to occur over an extended period of time.

Each of the OUs are in various phases of investigation and remediation with the EPA that provide enough information to reasonably estimate cost ranges and record environmental-related accruals.

The most significant assumptions underlying the reliability and precision of remediation cost

estimates for the Gibbsboro site are the type and extent of future remedies to be selected by the EPA and the costs of implementing those remedies.

The remaining three Major Sites comprising the majority of the accrual include (1) a multi-party Superfund site that (a) has received a record of decision from the federal EPA and is currently in the remedial design phase for one OU, (b) has received a record of decision from the federal EPA for an interim remedy for another OU, and (c) has a remedial investigation ongoing 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/design phase under a state EPA program.

To date, the Company has completed remedy construction on three of the six operable units.

While there are administrative tasks to be completed before final agency approval, the remediation phase of the work for these three OUs is effectively complete and future work for these OUs is anticipated to be limited.

OUs are in various phases of investigation and remediation with the EPA that provide enough

information to reasonably estimate cost ranges and record environmental-related accruals.

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

The remaining three Major Sites comprising the majority of the accrual include (1) a multi-party Superfund site that (a) has received a record of decision from the federal EPA and is currently in the remedial design phase for one OU, (b) has received a record of decision from the federal EPA for an interim remedy for another OU, and (c) has a remedial investigation ongoing 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/design investigation phase under a state EPA program.

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

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

At September 30, 2023 , the Company did not have material loss contingency accruals related to unasserted claims.

At March 31, 2024 , 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.

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Management is unable to provide a more specific time frame due to the indeterminate amount of time to conduct investigation activities at any site, the indeterminate amount of time to obtain environmental agency approval, as necessary, with respect to investigation and remediation activities, and the indeterminate amount of time necessary to conduct remediation activities.

Asset Retirement Obligation

The Asset Retirement and Environmental Obligations Topic of the ASC requires a liability to be recognized for the fair value of a conditional asset retirement obligation if a settlement date and fair value can be reasonably estimated.

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An estimate of the potential impact on the Company’s operations cannot be made due to the aforementioned uncertainties.

Real Estate Financing

The Company has entered into certain sale-leaseback agreements that do not qualify as asset sales and were accounted for as real estate financing transactions.

These arrangements primarily consist of the new headquarters currently under construction, for which the Company expects to receive total proceeds approximating $ 800 million to $ 850 million on an incremental basis until completion of construction.

During the first quarter of 2024 and 2023, the Company received $ 77.0 million and $ 66.5 million, respectively.

The net proceeds from this transaction and other real estate financing transactions are recognized within the Financing Activities section of the Statements of Consolidated Cash Flows.

The corresponding financing obligation for the new headquarters on the Consolidated Balance Sheets was $ 594.0 million and $ 274.2 million at March 31, 2024 and March 31, 2023, respectively.

The short-term portion of the liability recorded in Other accruals was $ 43.3 million and $ 24.8 million at March 31, 2024 and March 31, 2023, respectively.

During the three months ended March 31, 2024 and 2023, interest of $ 9.4 million and $ 4.0 million, respectively, was capitalized within the long-term portion of the liability in Other long-term liabilities.

See Note 11 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 for more information concerning real estate financing.

NOTE 9 - LITIGATION

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In the event that the Company’s loss contingency is ultimately determined to be significantly higher than currently accrued, the recording of the additional liability may result in a material impact on the Company’s results of operations, liquidity or financial condition for the annual or interim period during which such additional liability is accrued.

In those cases where no accrual is recorded because it is not probable that a liability has been incurred and the amount of any such loss cannot be reasonably estimated, any potential liability ultimately determined to be attributable to the Company may result in a material impact on the Company’s results of operations, liquidity or financial condition for the annual or interim period during which such liability is accrued.

In those cases where no accrual is recorded because it is not probable that a liability has been incurred or the amount of any such loss cannot be reasonably estimated, any potential liability ultimately determined to be attributable to the Company may result in a material impact on the Company’s results of operations, liquidity or financial condition for the annual or interim period during which such liability is accrued.

In those cases where no accrual is recorded or exposure to loss exists in excess of the amount accrued, the Contingencies Topic of the ASC requires disclosure of the contingency when there is a reasonable possibility that a loss or additional loss may have been incurred.

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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.

The Company is vigorously defending such litigation.

The Company expects that additional lead pigment and lead-based paint litigation may be filed against the Company in the future asserting similar or different legal theories and seeking similar or different types of damages and relief.

The Company will continue to vigorously defend against any additional lead pigment and lead-based paint litigation that may be filed, including utilizing all avenues of appeal, if necessary.

Notwithstanding the Company’s views on the merits, litigation is inherently subject to many uncertainties, and the Company ultimately may not prevail.

Adverse court rulings or determinations of liability, among other factors, could affect the lead pigment and lead-based paint litigation against the Company and encourage an increase in the number and nature of future claims and proceedings.

Litigation is inherently subject to many uncertainties, including costs, unpredictable court or jury decisions, and differing laws in jurisdictions where the Company operates, and the Company ultimately may not prevail.

Adverse court rulings or determinations of liability in a particular case, among other factors, could affect other lead pigment and lead-based paint litigation against the Company and encourage an increase in the number and nature of future claims and proceedings.

In addition, from time to time, various legislation and administrative regulations have been enacted, promulgated or proposed to impose obligations on present and former manufacturers of lead pigments and lead-based paints respecting asserted health concerns associated with such products or to overturn the effect of court decisions in which the Company and other manufacturers have been successful.

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In addition, management cannot reasonably determine the scope or amount of the potential costs and liabilities related to such litigation, or resulting from any such legislation and regulations.

Except with respect to the litigation in California discussed below, the Company has not accrued any amounts for such litigation because the Company does not believe it is probable that a loss has occurred, and the Company believes it is not possible to estimate the range of potential losses as there is no substantive information upon which an estimate could be based.

In addition, any potential liability that may result from any changes to legislation and regulations cannot reasonably be estimated.

Except with respect to the litigation in the California Proceedings, discussed below, the Company has not accrued any amounts for such litigation because the Company does not believe it is probable that a loss has occurred, or the Company believes it is not possible to estimate the range of potential losses.

In addition, any potential liability that may result from any changes to

legislation and regulations cannot reasonably be estimated.

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

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Public Nuisance Claim Litigation .

The Company and other companies are or were defendants in legal proceedings seeking recovery based on public nuisance liability theories, among other theories, brought by the State of Rhode Island;

The Company and other companies were defendants in legal proceedings seeking recovery based on public nuisance liability theories, among other theories, brought by the State of Rhode Island;

the City of St.

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the City of Milwaukee, Wisconsin;

the County of Santa Clara, California, and other public entities in the State of California;

and Lehigh and Montgomery Counties in Pennsylvania.

Except for the Santa Clara County, California proceeding in which the Company reached a court-approved agreement in 2019 after nearly twenty years of litigation, and the pending Pennsylvania proceedings, all of these legal proceedings have been concluded in favor of the Company and other defendants at various stages in the proceedings.

the County of Santa Clara, California, and other public entities in the State of California (the California Proceedings);

and Lehigh and Montgomery Counties in Pennsylvania (together, the Pennsylvania Proceedings).

Except for the California Proceedings in which the Company reached a court-approved agreement in 2019 after nearly twenty years of litigation, all of the legal proceedings have been concluded in favor of the Company and other defendants at various stages in the proceedings.

Pennsylvania Proceedings .

Two proceedings in Pennsylvania were initiated in October 2018.

The Pennsylvania Proceedings were initiated in October 2018.

The Pennsylvania counties of Montgomery and Lehigh filed complaints against the Company and several other former lead-based paint and lead pigment manufacturers in the Courts of Common Pleas of Montgomery County and Lehigh County, respectively.

In both actions, the counties request declaratory relief establishing the existence of a public nuisance and the defendants’ contribution to it, the abatement of an ongoing public nuisance arising from the presence of lead-based paint in housing throughout the applicable county, an injunction against future illicit conduct, and the costs of litigation and attorneys’ fees.

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

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

Defendants filed a motion to amend the order to allow an interlocutory appeal or, in the alternative, for reconsideration.

The trial court denied the defendants’ motion on September 13, 2021.

On September 27, 2021, the Company answered the complaint, asserted new matter and affirmative defenses, alleged counterclaims against Lehigh County, and filed a third-party complaint against certain County officials, other owners of pre-1980 housing, and lead abatement contractors who have been cited for violating state or local laws.

On October 13, 2021, the defendants filed with the Superior Court, one of Pennsylvania’s intermediate appellate courts, a petition for permission to appeal the trial court’s order denying the defendants’ preliminary objections.

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

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

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

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

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

In both actions, the counties requested declaratory relief establishing the existence of a public nuisance and the defendants’ contribution to it, the abatement of an ongoing public nuisance arising from the presence of lead-based paint in housing throughout the applicable county, an injunction against future illicit conduct, and the costs of litigation and attorneys’ fees.

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

The trial courts in both actions denied the defendants’ preliminary objections, and the defendants filed petitions for permission to appeal the trial courts’ orders to the Commonwealth Court, one of Pennsylvania’s intermediate appellate courts.

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

The parties filed their respective briefs in both actions, and o ral argument occurred on December 14, 2022.

On May 5, 2023, the Commonwealth Court reversed both trial courts’ orders denying the defendants’ preliminary objections and remanded the cases for entry of an order dismissing the actions.

On June 5, 2023, Montgomery and Lehigh Counties each filed a petition for allowance of appeal in the Supreme Court of Pennsylvania.

The Company filed its opposition briefs on June 20, 2023.

On May 5, 2023, the Commonwealth Court reversed both trial courts’ orders denying the defendants’ preliminary objections and remanded both actions to the trial courts for entry of orders dismissing both actions.

Montgomery and Lehigh Counties each filed a petition for allowance to appeal with the Supreme Court of Pennsylvania, both of which the Supreme Court of Pennsylvania denied on November 20, 2023.

Subsequently, the trial courts dismissed both the Montgomery County and the Lehigh County actions on January 9, 2024 and January 30, 2024, respectively.

Litigation seeking damages from alleged personal injury.

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The plaintiffs generally seek compensatory damages and have invoked Wisconsin’s risk contribution theory (which is similar to market share liability, except that liability can be joint and several) due to the plaintiff’s inability to identify the manufacturer of any product that allegedly injured the plaintiff.

The United States District Court for the Eastern District of Wisconsin consolidated three cases (Ravon Owens v.

Wisconsin Proceedings .

In April 2016, the United States District Court for the Eastern District of Wisconsin consolidated three cases (Ravon Owens v.

American Cyanamid, et al., Cesar Sifuentes v.

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du Pont de Nemours).

After post-trial motions resulted in the damages award to plaintiff Glenn Burton, Jr.

being reduced to $ 800,000 , the Company filed a notice of appeal with the Seventh Circuit.

Post-trial motions resulted in reduced damages award to one plaintiff.

Subsequently, the Company filed a notice of appeal with the Seventh Circuit with respect to each of the Owens, Sifuentes and Burton cases.

On April 15, 2021, the Seventh Circuit reversed the judgments and held that the Company was entitled to judgment as a matter of law on all claims filed by the three plaintiffs .

The plaintiffs filed a petition with the Seventh Circuit on April 27, 2021, seeking a rehearing en banc and, in the alternative, a request for certification of questions to the Wisconsin Supreme Court.

The plaintiffs’ petition was denied on May 12, 2021.

On May 20, 2021, the Company and the three other defendants filed motions for summary judgment to dismiss the claims of all plaintiffs then pending in the Eastern District of Wisconsin as a result of the Seventh Circuit’s decision in favor of the Company

in the Owens, Sifuentes and Burton cases.

The plaintiffs’ petition was denied.

On May 20, 2021, as a result of the Seventh Circuit’s decision in favor of the Company in the Owens, Sifuentes and Burton cases, the Company and the three other defendants filed motions for summary judgment to dismiss all claims of the approximately 150 plaintiffs then pending in the Eastern District of Wisconsin.

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

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

Briefing on the motion concluded, and the district court denied the plaintiffs’ motion to alter or amend the judgment on August 16, 2022.

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.

The plaintiffs filed their brief in support on December 9, 2022.

The defendants filed their brief in opposition on February 22, 2023.

On March 24, 2023, the plaintiffs filed their reply brief, which included a motion to certify issues to the Wisconsin Supreme Court.

On March 31, 2023, the defendants filed a motion to strike and response in opposition to plaintiffs’ motion to certify.

On April 7, 2023, the plaintiffs filed a response in opposition to defendants’ motion to strike.

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

Oral argument was held on September 26, 2023.

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

Armstrong Containers, Inc., et al.

filed an amended complaint in Milwaukee County Circuit Court, naming the Company and other alleged former lead pigment manufacturers as defendants pursuant to the risk contribution liability theory.

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

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

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.

As part of the plaintiffs’ appellate reply brief to the

Seventh Circuit, the plaintiffs included a motion to certify issues to the Wisconsin Supreme Court.

On February 9, 2024, the Seventh Circuit declined to certify any issues to the Wisconsin Supreme Court and affirmed the district court’s summary judgment in favor of the Company and the other defendants in all claims except involving those filed by three plaintiffs, whose cases were remanded to the district court for further proceedings.

On March 4, 2024, the Seventh Circuit denied all of the plaintiffs’ request for a stay pending a petition for writ of certiorari and issued its mandate on March 11, 2024.

Upon remand of the cases filed by the three remaining plaintiffs, the Company and the other defendants filed a motion for summary judgment on March 12, 2024.

On April 3, 2024, the three plaintiffs filed a motion to amend their pleadings and to stay defendants’ renewed motion for summary judgment.

On April 22, 2024, the district court granted plaintiffs’ motion to amend their pleadings to the extent that plaintiffs may file an amended complaint on or before May 7, 2024.

The district court denied plaintiffs’ motion to stay defendants’ summary judgment but extended plaintiffs’ deadline for responding to defendants’ summary judgment motion to June 13, 2024.

In a separate proceeding, on August 24, 2021, the plaintiff in Arrieona Beal v.

Hattie and Jerry Mitchell filed an amended complaint in Milwaukee County Circuit Court, naming the Company and other alleged former lead pigment manufacturers as defendants pursuant to the risk contribution liability theory.

Plaintiff previously had sued her landlords.

In March 2022, the Company removed the case to the Eastern District of Wisconsin.

The plaintiff filed a motion to remand the case to the state circuit court, and on September 30, 2023, the case was remanded to state court.

On January 3, 2024, the Company and some of the other manufacturing defendants filed a third-party complaint against NL Industries, Inc., and cross-claims against the landlord defendants.

On January 10, 2024, one of the landlord defendants filed a counterclaim and cross-claim against all parties.

The parties are conducting discovery, and the state court held a scheduling conference on April 22, 2024.

Plaintiff has reported that she would like to file a motion for partial judgment on the pleadings and a motion hearing has been scheduled for August 6, 2024.

Insurance coverage litigation.

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On December 21, 2020, the Company filed a notice of appeal to the Court of Appeals of Cuyahoga County, Ohio, Eighth Appellate District, and the insurers filed cross-appeals.

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, which the Company opposed.

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

On January 9, 2023, the appellate court denied the insurers’ application for en banc review.

On February 21, 2023, the insurers filed with the Ohio Supreme Court a notice of appeal and memorandum in support of jurisdiction, to which the Company responded in opposition on March 22, 2023.

The insurers subsequently filed a notice of appeal to the Ohio Supreme Court, to which the Company filed its response.

On May 9, 2023, the Ohio Supreme Court accepted the insurers’ appeal.

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

Oral argument was held on 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.

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Therefore, an ultimate loss in the insurance coverage litigation without a determination of liability against the Company in the lead pigment or lead-based paint litigation will have no impact on the Company’s results of operation, liquidity or financial condition.

As previously stated, however, except with respect to the litigation in California discussed above, the Company has not accrued any amounts for the lead pigment or lead-based paint litigation and any significant liability ultimately determined to be attributable to the Company relating to such litigation may result in a material impact on the Company’s results of operations, liquidity or financial condition for the annual or interim period during which such liability is accrued.

As previously stated, however, except with respect to the litigation in the California Proceedings discussed above, the Company has not accrued any amounts for the lead pigment or lead-based paint litigation and any significant liability ultimately determined to be attributable to the Company relating to such litigation may result in a material impact on the Company’s results of operations, liquidity or financial condition for the annual or interim period during which such liability is accrued.

Other litigation.

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.

The court has scheduled a trial date of September 16, 2024.

former manufacturing plant and related facilities.

The parties are conducting expert discovery.

Trial is scheduled to start on October 15, 2024.

NOTE 10 - SHAREHOLDERS' EQUITY

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First Quarter $ 0.715 $ 182.5 $ 0.605 $ 156.5

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

Treasury Stock

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

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

As of March 31, 2024, the Company had remaining authorization from its Board of Directors to purchase 37.9 million shares of its common stock.

The table below summarizes share repurchases during the three months ended March 31, 2024 and 2023:

Three Months Ended

Treasury stock purchases (in millions) $ 545.5 $ 301.7

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Average price per share $ 320.86 $ 232.08

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

Other Activity

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

During the three months ended March 31, 2024, 638,201 stock options were exercised at a weighted average price per share of $ 125.58 .

In addition, 119,141 restricted stock units vested during the same period.

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Amounts recognized in AOCI (1)

( 75.3 ) ( 75.3 )

Amounts reclassified from AOCI (2), (3)

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

( 4.5 ) ( 0.9 ) ( 5.4 )

Balance at March 31, 2024 $ ( 792.2 ) $ 59.8 $ 27.4 $ ( 705.0 )

(1) Foreign currency translation adjustments include changes in the fair value of cross currency swap contracts of $ 18.3 million during the three months ended March 31, 2024.

(2) Pension and other postretirement benefit adjustments are net of taxes of $ 1.5 million for the three months ended March 31, 2024.

(3) Unrealized net gains on cash flow hedges are net of taxes of $ 0.3 million for the three months ended March 31, 2024.

See Statements of Consolidated Comprehensive Income.

Adjustments Pension and

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Amounts reclassified from AOCI (2), (3)

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

( 4.5 ) ( 0.9 ) ( 5.4 )

Balance at March 31, 2023 $ ( 770.6 ) $ 73.8 $ 31.0 $ ( 665.8 )

(1) Foreign currency translation adjustments include changes in the fair value of cross currency swap contracts of $( 4.2 ) million during the three months ended March 31, 2023.

(2) Pension and other postretirement benefit adjustments are net of taxes of $ 1.7 million for the three months ended March 31, 2023.

(3) Unrealized net gains on cash flow hedges are net of taxes of $ 0.3 million for the three months ended March 31, 2023.

See Statements of Consolidated Comprehensive Income.

NOTE 12 - DERIVATIVES AND HEDGING

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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 September 30, 2023 are summarized in the table below.

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

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

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

The outstanding contracts as of March 31, 2024 are summarized in the table below.

Contract Date Notional

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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.

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

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

December 7, 2023 150.0 August 15, 2029

The following table summarizes amounts recognized in the Consolidated Balance Sheets for cross currency swap contracts.

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

September 30, December 31, September 30,

March 31, December 31, March 31,

2024 2023 2023

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Other assets 0.7 — 3.7

Other accruals — 12.0 —

Other long-term liabilities 3.4 12.4 0.2

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

The following table summarizes the unrealized gains for the three 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

Gains $ 32.1 $ 41.0 $ 15.2 $ 92.5

The following table summarizes the unrealized gains (losses) for the three months ended March 31, 2024 and 2023.

Three Months Ended

March 31, March 31,

Gains (losses) $ 24.3 $ ( 5.6 )

Tax effect ( 6.0 ) 1.4

Gains, net of taxes

Gains (losses), net of taxes

$ 18.3 $ ( 4.2 )

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 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.

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

There were no material foreign currency option and forward contracts outstanding at March 31, 2024, December 31, 2023 and March 31, 2023.

NOTE 13 - FAIR VALUE MEASUREMENTS

5 unchanged sentences

Significant unobservable inputs

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.

There were no assets and liabilities measured at fair value on a recurring basis classified as Level 3 at March 31, 2024 and December 31, 2023.

Except for the acquisition related fair value measurements described in Note 3, there were no assets and liabilities measured at fair value on a nonrecurring basis.

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

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

Deferred compensation plan assets $ 84.9 $ 47.1 $ 37.8 $ 74.1 $ 43.7 $ 30.4

Qualified replacement plan assets — 29.8 29.8

Net investment hedge asset 24.3 24.3 9.1 9.1

Deferred compensation plan $ 90.7 $ 90.7 $ 84.7 $ 84.7

Net investment hedges 3.3 3.3 —

Available-for-sale debt securities 4.7 4.7 —

$ 98.7 $ 90.7 $ 8.0 $ — $ 84.7 $ 84.7 $ — $ —

Net investment hedges $ 3.4 $ — $ 3.4 — $ 24.4 $ — $ 24.4 $ —

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.

1 unchanged sentence

The Level 1 investments are valued using quoted market prices multiplied by the number of shares.

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

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.

During the first quarter of 2023, the remaining balance was fully utilized to fund the Company’s domestic defined contribution pension plan.

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 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.

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.

September 30, 2023 December 31, 2022

The deferred compensation plan assets also include partnership funds measured using net asset value (or its equivalent) as a practical expedient, which are not classified in the fair value hierarchy.

As of March 31, 2024 and December 31, 2023, the fair value of the partnership funds was $ 6.6 million and $ 6.4 million, respectively.

The cost basis of all investments within the deferred compensation plan was $ 78.1 million and $ 76.3 million at March 31, 2024 and December 31, 2023, respectively.

The net investment hedges represent the fair value of outstanding cross currency swap contracts (see Note 12).

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

The available-for-sale debt securities consist of bonds issued by a foreign government and mature in 2027.

The fair value is based on pricing models that use observable data from a market with limited activity.

The cost basis at March 31, 2024 was $ 6.7 million.

The fair value of the Company’s publicly traded debt is based on quoted market prices.

The fair value of the Company’s non-publicly traded debt is estimated using discounted cash flow analyses, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements.

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

The following table summarizes the carrying amounts and fair values of the Company’s publicly traded debt and non-publicly traded debt.

March 31, 2024 December 31, 2023

Value Carrying

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As the Reportable Segments are aligned by similar economic factors, trends and customers, this disaggregation best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Approximately 80 % of the Company’s net external sales are in the Company’s North America region (which is comprised of the United States, Canada and the Caribbean region), slightly less than 10 % in the EMEAI region (Europe, Middle East, Africa and India), with the remaining global regions accounting for the residual balance.

Approximately 80 % of the Company’s net sales are in the Company’s North America region (which is comprised of the United States, Canada and the Caribbean region), slightly less than 10 % in the EMEAI region (Europe, Middle East, Africa and India), with the remaining global regions accounting for the residual balance.

No country outside of the United States is individually significant.

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Balance at December 31, 2023 $ 2,467.9 $ 46.2 $ 151.7 $ 365.7 $ 3.8

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

Balance at March 31, 2024 2,809.1 61.5 226.3 254.0 4.7

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.

Provisions for estimated returns are established and the expected costs continue to be recognized as contra-revenue when the products are sold.

Provisions for estimated returns are established and the expected costs continue to be recognized as contra-revenue per ASC 606 when the products are sold.

The Company only offers an assurance type warranty on products sold, and there is no material service to the customer beyond fixing defects that existed at the time of sale and no warranties are sold separately.

Warranty liabilities are excluded from the table above.

Amounts recognized from deferred revenue were not material.

Amounts recognized during the year from deferred revenue were not material.

The Company records a right of return liability within each of its operations to accrue for expected customer returns.

1 unchanged sentence

Obligations for returns and refunds were not material individually or in the aggregate.

Allowance for Credit Losses

The Company's primary allowance for credit losses is the allowance for doubtful accounts.

The allowance for doubtful accounts reduces the Accounts receivable balance to the estimated net realizable value.

The Company reviews the collectibility of the Accounts receivable balance each reporting period and estimates the allowance based on historical bad debt experience, aging of accounts receivable, current creditworthiness of customers, current economic factors, as well as reasonable and supportable forward-looking information.

Accounts receivable balances are written-off against the allowance if a final determination of uncollectibility is made.

All provisions for allowances for doubtful accounts are included in Selling, general and administrative expenses.

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

Nine Months Ended

September 30,

Allowance for Current Expected Credit Losses

Accounts receivable are recorded at the time of credit sales, net of an allowance for current expected credit losses.

The Company records an allowance for current expected credit losses to reduce Accounts receivable to the net amount expected to be collected (estimated net realizable value).

Under ASC 326, the Company reviews the collectibility of the Accounts receivable balance each reporting period and estimates the allowance for current expected credit losses based on historical bad debt experience, aging of accounts receivable, current creditworthiness of customers, current economic factors, as well as reasonable and supportable forward-looking information.

Accounts receivable balances are written-off against the allowance for current expected credit losses if a final determination of uncollectibility is made.

All provisions for the allowance for current expected credit losses are included in Selling, general and administrative expenses.

The following table summarizes the movement in the Company's allowance for current expected credit losses:

Three Months Ended

Beginning balance $ 59.6 $ 56.6

3 unchanged sentences

NOTE 15 - OTHER

Other general expense (income) - net

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

Other general expense - net

Included in Other general expense - net were the following:

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Provisions for environmental matters - net $ 3.6 $ 12.7

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 )

Gain on sale or disposition of assets ( 3.4 ) ( 4.6 )

Other 1.8 2.4

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

Other general expense - net $ 2.0 $ 10.5

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

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

The gain on sale or disposition of assets represents 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.

There were no items within the Other caption that were individually significant.

Other (income) expense - net

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

Other income - net

Included in Other income - net were the following:

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Investment (gains) losses $ ( 0.5 ) $ 1.1 $ ( 19.2 ) $ 16.0

Net investment gains $ ( 5.1 ) $ ( 3.2 )

Net expense from banking activities 3.3 3.9

Foreign currency transaction related losses 1.1 19.2 24.7 29.5

Miscellaneous pension (credit) expense ( 5.2 ) 0.8 ( 15.4 ) 2.7

Foreign currency transaction related losses - net 7.6 6.8

Miscellaneous periodic benefit income ( 4.9 ) ( 5.1 )

Other income ( 9.0 ) ( 14.6 )

Other expense 0.4 9.0

Other (income) expense - net $ ( 8.0 ) $ 18.1 $ ( 17.0 ) $ 49.9

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

Other income - net $ ( 7.7 ) $ ( 3.2 )

Net investment gains primarily relate to the change in market value of the investments held in the deferred compensation plan and bonds issued by a foreign government.

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 (gains) from foreign currency option and forward contracts.

Foreign currency transaction related losses - net include the impact from foreign currency transactions, including from highly inflationary economies such as Argentina, and net realized losses from foreign currency option and forward contracts.

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

Miscellaneous pension (credit) expense consists of the non-service components of net periodic benefit cost (credit).

Other income and Other expense includes items of revenue, gains, expenses and losses that were unrelated to the primary business purpose of the Company.

Miscellaneous periodic benefit income consists of the non-service components of pension and other postretirement benefit net periodic benefit cost (credit).

Other income and other expense include items of revenue, gains, expenses and losses that were unrelated to the primary business purpose of the Company.

There were no other items within the other income or other expense caption that were individually significant.

NOTE 16 - INCOME TAXES

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.

The effective tax rate was 21.1 % for the first quarter of 2024, compared to 22.3 % for the first quarter of 2023.

The decrease in the effective tax rate was primarily due to a more favorable impact of tax benefits related to employee share-based payments in the first quarter of 2024 compared to the same period last year.

This benefit was partially offset by unfavorable audit settlements in the first quarter of 2024.

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

At December 31, 2023, the Company had $ 121.8 million in unrecognized tax benefits, the recognition of which would have an effect of $ 109.4 million on the effective tax rate.

2 unchanged sentences

At December 31, 2023, the Company had accrued $ 20.4 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, 2022 during the nine months ended September 30, 2023.

There were no significant changes to any of the balances of unrecognized tax benefits at December 31, 2023 during the three months ended March 31, 2024.

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

federal jurisdiction and various state and foreign jurisdictions.

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 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.

The Company finalized the IRS audit for the 2013 through 2016 income tax returns in 2023 and paid the related assessments in the fourth quarter of 2023 and first quarter of 2024.

The Company finalized the IRS audit for the 2011 income tax return in 2023 and expects to pay the related assessment in 2024.

The IRS is currently auditing the Company’s 2017 through 2019 income tax returns.

As of March 31, 2024, the federal statute of limitations has not expired for the 2017 through 2023 tax years.

At March 31, 2024, the Company is subject to non-U.S.

income tax examinations for the tax years of 2014 through 2023.

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net income $ 505.2 $ 477.4

5 unchanged sentences

Stock options and other contingently issuable shares (1)

3.3 3.4 2.9 4.0

Average shares outstanding assuming dilution 255.8 259.7

Diluted net income per share $ 1.97 $ 1.84

(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.

(1) There were 0.1 million and 2.8 million of stock options and other contingently issuable shares excluded due to their anti-dilutive effect for the three months ended March 31, 2024 and 2023, respectively.

NOTE 18 - REPORTABLE SEGMENT INFORMATION

The Company reports its segment information in the same way that management internally organizes its business for assessing performance and making decisions regarding allocation of resources in accordance with the Segment Reporting Topic of the ASC.

As mentioned in Note 1, the Company realigned the Latin America architectural paint business during the first quarter of 2023.

While this changed the composition of certain reportable segments, the Company determined it continues to have three reportable segments:

Paint Stores Group (formerly known as The Americas Group), Consumer Brands Group and Performance Coatings Group (individually, a Reportable Segment and collectively, the Reportable Segments).

The Company reports its segment information in the same way that management internally organizes its business for assessing performance and making decisions regarding the allocation of resources in accordance with the Segment Reporting Topic of the ASC.

The Company determined it has three reportable segments:

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

Refer to Note 23 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 for further details on the Company's Reportable Segments.

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

Three Months Ended September 30, 2023

Group Consumer Brands

Group Performance

Group Administrative Consolidated

Net external sales $ 3,537.1 $ 854.8 $ 1,724.2 $ 0.6 $ 6,116.7

Intersegment transfers — 1,359.1 49.3 ( 1,408.4 ) —

Total net sales and intersegment transfers $ 3,537.1 $ 2,213.9 $ 1,773.5 $ ( 1,407.8 ) $ 6,116.7

Segment profit $ 917.5 $ 101.6 $ 279.7 $ 1,298.8

Interest expense $ ( 101.9 ) ( 101.9 )

Administrative expenses and other ( 187.9 ) ( 187.9 )

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

Three Months Ended September 30, 2022

Group Consumer Brands

Group Performance

Group Administrative Consolidated

Net external sales $ 3,414.0 $ 890.6 $ 1,741.7 $ 1.1 $ 6,047.4

Intersegment transfers — 1,435.6 55.7 ( 1,491.3 ) —

Total net sales and intersegment transfers $ 3,414.0 $ 2,326.2 $ 1,797.4 $ ( 1,490.2 ) $ 6,047.4

Segment profit $ 741.3 $ 117.7 $ 236.3 $ 1,095.3

Interest expense $ ( 101.2 ) ( 101.2 )

Administrative expenses and other ( 116.9 ) ( 116.9 )

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

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

Group Consumer Brands

1 unchanged sentence

Group Administrative Consolidated

Net external sales $ 9,894.9 $ 2,673.3 $ 5,228.9 $ 2.6 $ 17,799.7

Net sales $ 2,873.0 $ 811.0 $ 1,681.9 $ 1.4 $ 5,367.3

Intersegment transfers — 1,211.8 37.1 ( 1,248.9 ) —

4 unchanged sentences

Income before income taxes $ 493.2 $ 153.4 $ 237.7 $ ( 244.3 ) $ 640.0

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Group Consumer Brands

1 unchanged sentence

Group Administrative Consolidated

Net external sales $ 9,086.3 $ 2,642.8 $ 5,186.1 $ 3.2 $ 16,918.4

Net sales $ 2,859.1 $ 872.7 $ 1,709.8 $ 0.8 $ 5,442.4

Intersegment transfers — 1,253.4 48.5 ( 1,301.9 ) —

4 unchanged sentences

Income before income taxes $ 526.7 $ 93.8 $ 218.9 $ ( 224.6 ) $ 614.8

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

Domestic intersegment transfers were primarily accounted for at the approximate fully absorbed manufactured cost, based on normal capacity volumes, plus customary distribution costs for paint products.

Non-paint domestic and all international intersegment transfers were accounted for at values comparable to normal unaffiliated customer sales.

All intersegment transfers are eliminated within the Administrative segment.

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.

No single geographic area outside the United States was significant relative to consolidated net external sales, income before taxes or consolidated long-lived assets.

Export sales and sales to any individual customer were each less than 10% of consolidated sales in 2023 and 2022.

In the reportable segment financial information, Segment profit represents each reportable segment’s Income before income taxes.

Due to the nature of the Company’s integrated manufacturing operations and centralized administrative and information technology support, a substantial amount of allocations are made to determine segment financial information.

Domestic intersegment transfers are primarily accounted for at the approximate fully absorbed manufactured cost, based on normal capacity volumes, plus customary distribution costs for paint products.

Non-paint domestic and all international intersegment transfers are primarily accounted for at values comparable to normal unaffiliated customer sales.

All intersegment transfers are eliminated within the Administrative function.

In 2023, absorbed manufactured cost standards for domestic intersegment transfers were established inclusive of forecasted cost reductions from planned initiatives for which unfavorable deviations were recognized within the Consumer Brands Group.

The manufactured cost standards established at the beginning of 2024 did not include forecasted cost reductions.

Net sales of all consolidated foreign subsidiaries were $ 1.103 billion and $ 1.087 billion for the three months ended March 31, 2024 and 2023, respectively.

Long-lived assets of these subsidiaries totaled $ 3.524 billion and $ 3.458 billion at March 31, 2024 and 2023, respectively.

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

No single geographic area outside the United States was significant relative to consolidated Net sales, Income before income taxes or consolidated long-lived assets.

Export sales and sales to any individual customer were each less than 10% of consolidated Net sales in 2024 and 2023.

For further details on the Company's Reportable Segments, see Note 23 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

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