What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-19 compared with 2025-02-20 · 182 added, 214 removed, 319 unchanged (55% of the section changed)

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Company Background

The Sherwin-Williams Company, founded in 1866, is engaged in the development, manufacture, distribution and sale of paint, coatings and related products to professional, industrial, commercial and retail customers primarily in North and South America with additional operations in the Caribbean region and throughout Europe, Asia and Australia.

The Company is structured into three reportable segments – Paint Stores Group, Consumer Brands Group and Performance Coatings Group (collectively, the Reportable Segments) – and an Administrative function in the same way it is internally organized for assessing performance and making decisions regarding the allocation of resources.

See Note 22 to the consolidated financial statements in Item 8 for additional information on the Company’s Reportable Segments.

• Consolidated Net sales increased in the year to a record $23.099 billion

The Sherwin-Williams Company, founded in 1866, and its consolidated subsidiaries (collectively, the Company) are engaged in the development, manufacture, distribution and sale of paint, coatings and related products to professional, industrial, commercial and retail customers primarily in North and South America with additional operations in the Caribbean region and throughout Europe, Asia and Australia.

The Company is structured into three reportable segments – Paint Stores Group, Consumer Brands Group and Performance Coatings Group (collectively, the Reportable Segments) – and an Administrative function, which is representative of the way it is internally organized for assessing performance and making decisions regarding the allocation of resources.

See Note 22 to the consolidated financial statements in Item 8 for further information on the Company’s Reportable Segments.

• Consolidated Net sales increased 2.1% in the year to $23.574 billion

◦ Net sales from stores in the Paint Stores Group open more than twelve calendar months increased 1.7% in the year

• Diluted net income per share increased 14.1% to $10.55 per share in the year compared to $9.25 per share in the full year 2023

• Diluted net income per share decreased 2.7% to $10.26 per share in the year compared to $10.55 per share in the full year 2024

◦ Adjusted diluted net income per share increased 0.9% to $11.43 per share in the year compared to $11.33 per share in the full year 2024

• Generated Net operating cash of $3.452 billion, or 14.6% of Net sales in the year

• Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) increased 6.0% in the year to $4.492 billion or 19.4% of Net sales

Sherwin-Williams delivered strong 2024 results despite continued choppy macroeconomic conditions.

Full year Net sales grew to a record level, gross margin expanded and Diluted net income per share increased by a double-digit percentage.

We continued to generate strong cash flow from operations which was used for investment, an acquisition and returning cash to shareholders through dividends and repurchases of our common stock.

We enter 2025 with confidence in our differentiated strategy, Success by Design, that continues to deliver innovative and productive solutions for our customers.

Although we expect demand softness to persist in several end markets, we have significant above-market growth opportunities in each business.

We will continue to support our growth strategy by executing initiatives within our enterprise priorities, including talent, simplification, digitization, supply chain responsiveness and sustainability.

Within Paint Stores Group and Consumer Brands Group, we anticipate continued economic pressures to impact consumer behavior in both North America and Europe in 2025.

Our recent investments in sales reps, training and digital tools, coupled with home builder relationships are expected to drive above-market growth opportunities.

The outlook for the Performance Coatings Group is varied by end market and region with expected growth in Coil driven by significant new account wins and Packaging as we support customer conversions to our ValPure® coating which complies with European regulations.

Demand softness is forecasted in General Industrial due to negative manufacturing trends in North America and Europe and choppiness is expected in Automotive Refinish, Protective and Marine and Industrial Wood.

As it relates to consolidated expenses, we expect raw material and employee-related costs to be up by a low-single digit percentage, offset by cost saving simplification efforts across our supply chain such as capacity and productivity improvements.

Sherwin-Williams delivered strong 2025 results driven by solid core performance and a focus on operational discipline despite continued demand choppiness.

Full year Net sales grew to a record level, and gross profit and gross margin expanded.

The Company continued to generate strong cash flow from operations, which was used for investment in capital expenditures, funding acquisitions and returning cash to shareholders through dividends and repurchases of common stock.

Although the softer-for-longer demand environment is expected to continue in 2026, we have confidence in our differentiated strategy, Success by Design, that continues to deliver innovative and productive solutions for our customers.

Significant opportunities exist for each business, and we will continue to support our growth strategy by executing initiatives within our enterprise priorities, including talent, simplification, digitization, supply chain responsiveness and sustainability.

Within the Paint Stores and Consumer Brands groups, we anticipate continued economic pressures to impact customer buying behavior in 2026.

Our investments in sales reps, training and digital tools, coupled with home builder relationships are expected to drive growth opportunities.

The outlook for the Performance Coatings Group is varied by end market and region with an expectation that the core business remains flat, however, new account wins and favorable business sales mix should drive growth.

At the business unit level, we expect modest growth in Automotive Refinish, Industrial Wood and General Industrial while Packaging sales are anticipated to be flattish.

Coil sales are expected to be slightly negative due to demand softness.

As it relates to consolidated expenses, raw material costs could be impacted by evolving tariff policies.

We will continue to monitor changes and impacts to our operations as we navigate this uncertain environment.

We expect these costs and employee-related expenses to contribute to a low-single digit percentage increase, offset by cost saving simplification efforts across our supply chain such as capacity and productivity improvements.

Our capital deployment strategy remains balanced and consistent.

We have a strong liquidity position, with $210.4 million in cash and $3.274 billion of unused capacity under our credit facilities at December 31, 2024 and expect to end 2025 within our target debt-to-EBITDA leverage ratio of 2 to 2.5 times.

We have a strong liquidity position, with $207.2 million in cash and $3.649 billion of unused capacity under our credit facilities at December 31, 2025.

We are, and expect to remain, in compliance with all financing covenants.

Long-term debt maturities due in 2025 are $1.050 billion and are expected to be refinanced at higher interest rates.

Together with the long-term debt maturities refinanced during 2024, Interest expense is expected to increase by approximately $40 million in 2025.

In addition, we expect to incur additional costs associated with the transition into our new global headquarters and research and development (R&D) center in 2025 of approximately $100 million, which includes approximately $80 million of Selling, general and administrative expenses and approximately $20 million of Interest expense.

Lastly, we plan to expand our footprint by opening 80 to 100 new stores in the United States and Canada in 2025, continue to evaluate acquisitions that align with our long-term growth strategy and return value to our shareholders through the payment of dividends and the reinvestment of excess cash for share repurchases of Company stock.

See Item 1A Risk Factors for further information regarding the current and potential impact of general business and macroeconomic conditions, including inflation rates and interest rates, supply chain disruptions, raw material availability and fluctuations in foreign currency.

Long-term debt maturities due in 2026 are $350.1 million, which were fully repaid in January 2026 with short-term borrowings.

With the long-term debt maturities refinanced during 2025 and the interest related to the delayed draw term loans to fund the Suvinil acquisition, coupled with the incremental interest expense related to the new global headquarters and research and development center and the higher interest rates used to refinance the long-term debt maturities due in 2026, Interest expense is expected to increase by approximately $85 million in 2026.

We plan to expand our footprint by opening 80 to 100 new stores in the United States and Canada in 2026, continue to evaluate acquisitions that align with our strategy and return value to our shareholders through the payment of dividends and repurchases of common stock.

See Item 1A Risk Factors for further information regarding the current and potential impact of general business and macroeconomic conditions, including inflation rates and interest rates, tariffs, supply chain disruptions, raw material availability and fluctuations in foreign currency.

RESULTS OF OPERATIONS

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Total $ 23,574.3 $ 23,098.5 $ 475.8 2.1 % (0.1) % 1.1 %

Consolidated Net sales for 2024 increased 0.2% primarily due to higher sales in the Paint Stores Group.

This increase was partially offset by lower sales in the Consumer Brands and Performance Coatings Groups.

Net sales of all consolidated foreign subsidiaries decreased to $4.426 billion in 2024 compared to $4.428 billion in 2023 primarily due to unfavorable currency translation impact in Latin America and lower Net sales in Asia as a result of the divestiture of the China architectural business, partially offset by higher Net sales in Europe as a result of acquisitions.

Consolidated Net sales for 2025 increased 2.1% primarily due to higher Net sales in the Paint Stores and Consumer Brands Groups.

Net sales of all consolidated foreign subsidiaries increased to $4.615 billion in 2025 compared to $4.426 billion in 2024 primarily as a result of the higher Net sales in Latin America due to the October 2025 acquisition of Suvinil, partially offset by unfavorable foreign currency translation driven by Latin America.

Net sales of all operations other than consolidated foreign subsidiaries increased to $18.959 billion for 2025 compared to $18.673 billion for 2024.

Net sales in the Paint Stores Group increased 2.7% primarily due to sales volume growth and selling price increases, which both impacted Net sales by a low-single digit percentage.

Net sales in the Paint Stores Group increased 3.2% primarily due to selling price increases, which impacted Net sales by a mid-single digit percentage, partially offset by a low-single digit decrease in sales volume.

Net sales from stores in the Paint Stores Group open for more than twelve calendar months increased 1.7% in the year over the prior year comparable period.

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The total number of stores in operation at December 31, 2025 was 4,853 in the United States, Canada and the Caribbean region.

The Paint Stores Group’s objective is to expand its store base by an approximate average of 2% each year, primarily through organic growth.

The Paint Stores Group’s objective is to grow sales through the expansion of its store base by an approximate average of 2% each year.

Sales of products other than paint increased 0.5% over last year.

A discussion of changes in volume versus pricing for sales of products other than paint is not pertinent due to the wide assortment of general merchandise sold.

Net sales in the Consumer Brands Group decreased 7.7% in 2024 primarily due to a low-single digit percentage sales volume decline primarily due to soft DIY demand in North America, 2.9% unfavorable foreign currency translation driven by Latin America and the impact from divestitures in the prior year.

In 2024, the Consumer Brands Group opened 18 new stores and closed 2 locations for a net increase of 16 new stores.

The total number of stores in operation at December 31, 2024 was 334 in Latin America.

Net sales in the Performance Coatings Group decreased 0.7% in 2024 primarily due to selling price decreases, largely attributable to product mix, which impacted Net sales by a low-single digit percentage and unfavorable foreign currency translation.

These decreases were partially offset by low-single digit volume growth, inclusive of the acquisition of SIC Holding GmbH in 2023 and the acquisition of a metal packaging coatings business in 2024.

In 2024, the Performance Coatings Group added 2 net new branches, increasing the total to 324 branches.

Net sales in the Consumer Brands Group increased 1.9% in 2025 primarily due to the October 2025 acquisition of Suvinil, which contributed $164.5 million, or 5.3%, partially offset by 1.1% of unfavorable foreign currency translation driven by Latin America.

In 2025, the Consumer Brands Group opened 13 new stores and closed 40 locations for a net decrease of 27 stores.

The total number of stores in operation at December 31, 2025 was 307 in the Latin America region.

Net sales in the Performance Coatings Group were essentially flat in 2025 when compared to 2024 due to an offsetting favorable impact from acquisitions and foreign currency translation and an unfavorable impact from selling prices attributable to product mix.

In 2025, the Performance Coatings Group opened 6 new branches and closed 13 branches for a net decrease of 7 branches, decreasing the total at December 31, 2025 to 317 branches.

Net sales in the Administrative function, which primarily consists of external leasing revenue, increased by an insignificant amount in 2025.

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Interest income (11.2) (0.1) % (11.0) — %

Other (income) expense - net (44.7) (0.2) % 65.5 0.3 %

Other expense (income) - net 20.9 0.1 % (44.7) (0.2) %

Income before income taxes $ 3,338.2 14.2 % $ 3,451.8 14.9 %

Consolidated Cost of goods sold decreased $390.4 million, or 3.2%, in 2024 compared to the same period in 2023 primarily due to lower sales volume in the Consumer Brands Group and moderating raw material costs, partially offset by higher sales volumes in the Paint Stores and Performance Coatings Groups.

Consolidated Gross profit increased $437.0 million, or 4.1%, in 2024 compared to the same period in 2023 primarily due to higher sales volumes in the Paint Stores and Performance Coatings Groups and moderating raw material costs, partially offset by lower sales volume in the Consumer Brands Group.

Consolidated Cost of goods sold increased $155.4 million, or 1.3% in 2025 compared to the same period in 2024 primarily due to the impact of the October 2025 Suvinil acquisition, partially offset by moderating raw material costs and lower sales volume.

Consolidated Gross profit increased $320.4 million, or 2.9% in 2025 compared to the same period in 2024 primarily due to favorable selling prices in the Paint Stores Group, the acquisition of Suvinil within the Consumer Brands Group and moderating raw material costs, partially offset by unfavorable product mix within the Performance Coatings Group.

Consolidated Gross profit as a percent to consolidated Net sales increased to 48.8% in 2025 from 48.5% in 2024 for these same reasons.

The Paint Stores Group’s Gross profit for 2024 increased $242.1 million compared to the same period in 2023 primarily due to higher Net sales driven by sales volume growth, selling price increases and moderating raw material costs.

The Paint Stores Group’s Gross profit for 2025 increased $364.2 million compared to the same period in 2024 primarily due to growth in Net sales from favorable selling prices and moderating raw material costs, partially offset by lower sales volume.

The Paint Stores Group’s Gross profit as a percent of Net sales increased for these same reasons.

The Consumer Brands Group’s Gross profit increased $181.1 million in 2024 compared to the same period in 2023 primarily due to higher fixed cost absorption in the manufacturing and distribution operations within the segment and moderating raw material costs, partially offset by lower Net sales.

The Consumer Brands Group’s Gross profit as a percent of Net sales increased for these same reasons.

The Performance Coatings Group’s Gross profit increased $13.6 million compared to the same period in 2023 primarily due to moderating raw material costs, partially offset by lower Net sales.

The Performance Coatings Group’s Gross profit as a percent of Net sales increased for these same reasons.

Consolidated SG&A increased by $356.7 million, or 5.0%, in 2024 compared to the same period in 2023 primarily due to investments in long-term growth strategies, including expenses to support net new store openings and digital technologies and higher employee-related costs.

The Consumer Brands Group’s Gross profit decreased $42.2 million in 2025 compared to the same period in 2024 primarily due to lower sales volumes and unfavorable currency translation impact, partially offset by the impact from the October 2025 acquisition of Suvinil.

The Consumer Brands Group’s Gross profit as a percent of Net sales decreased for these same reasons.

The Performance Coatings Group’s Gross profit decreased $38.1 million compared to the same period in 2024 primarily due to an unfavorable impact from selling prices attributable to product mix, partially offset by the impact of acquisitions and favorable foreign currency translation.

The Performance Coatings Group’s Gross profit as a percent of Net sales decreased for these same reasons.

Consolidated SG&A increased by $272.9 million, or 3.7% in 2025 compared to the same period in 2024 primarily due to investments in long-term growth opportunities in the Paint Stores Group, including expenses to support net new store openings, costs related to the October 2025 Suvinil acquisition, costs related to the new global headquarters and research and development (R&D) center buildings, higher employee-related costs and other expenses associated with targeted restructuring actions.

As a percent of Net sales, SG&A increased 50 basis points compared to the same period in 2024 for these same reasons.

The Paint Stores Group’s SG&A increased $183.7 million, or 4.2% for the year primarily due to higher employee-related costs and investments in long-term growth initiatives, including increased spending from net new store openings and costs to support higher sales.

The Consumer Brands Group’s SG&A decreased $19.2 million or 2.2% for the year primarily due to effective cost control in managing the operations of the business, partially offset by higher employee-related costs.

The Performance Coatings Group’s SG&A increased by $27.5 million or 1.9% for the year primarily due to investments in long-term initiatives and higher employee-related costs.

The Administrative function’s SG&A increased $154.3 million or 27.7% primarily due to higher employee-related costs and increased expenses related to digital technologies and systems.

Other general (income) expense - net changed by $105.9 million from expense of $67.1 million in 2023 to income of $38.8 million in 2024.

The change was primarily attributable to a decrease in provisions for environmental matters, net in the Administrative function and increased net gains on sale or disposition of assets.

This activity was partially offset by the non-recurring gain recognized in 2023 related to the divestiture of a non-core domestic aerosol business.

See Note 19 to the consolidated financial statements in Item 8 for additional information.

The Consumer Brands Group’s SG&A increased $32.8 million, or 3.8% for the year primarily due to costs related to the October 2025 Suvinil acquisition, increased marketing & advertising and higher employee-related costs.

The Performance Coatings Group’s SG&A increased by $3.1 million, or 0.2% for the year primarily due to targeted restructuring activities and higher employee-related costs.

The Administrative function’s SG&A increased $53.3 million, or 7.5% primarily due to targeted restructuring activities and costs related to the new global headquarters and R&D center buildings.

Other general (income) expense - net decreased by $28.6 million from income of $38.8 million in 2024 to income of $10.2 million in 2025.

The change was primarily attributable to a gain recognized in 2024 from insurance recoveries related to environmental matters at a current manufacturing site.

See Note 19 to the consolidated financial statements in Item 8 for further information.

Impairment of $17.8 million was recorded in 2025 related to restructuring activities which impacted certain trademarks in the Asia, Latin America and Europe regions.

There was no impairment in 2024.

Asset impairment of $34.0 million related to the divestiture of the China architectural business and impairment related to trademarks of $23.9 million primarily related to a trademark in Europe were recorded in 2023.

For information on impairment considerations, see Notes 3 and 6 to the consolidated financial statements in Item 8.

Interest expense decreased $1.8 million in 2024 compared to 2023 primarily due to a decrease in long-term debt, partially offset by higher interest expense as a result of an increase in short-term borrowings.

See Note 7 to the consolidated financial statements in Item 8 for additional information on the Company’s outstanding debt.

Other (income) expense - net changed by $110.2 million from expense of $65.5 million in 2023 to income of $44.7 million in 2024 primarily due to lower foreign currency transaction related losses in 2024 compared to 2023 and an increase in miscellaneous income.

The foreign currency transaction related losses in 2023 included a $41.8 million unfavorable impact from the significant devaluation of the Argentine peso in December 2023 as part of economic reforms implemented by the government of Argentina.

In addition, a $12.8 million loss on extinguishment of debt was recognized in 2023.

This activity was partially offset by a decrease in miscellaneous pension income and investment gains.

See Note 19 to the consolidated financial statements in Item 8 for additional information related to Other (income) expense - net.

For further information on impairment considerations, see Notes 3 and 6 to the consolidated financial statements in Item 8.

Interest expense increased $49.3 million in 2025 compared to 2024 primarily due to an increase in long-term debt, interest expense related to the new global headquarters and research and development center which were both placed into service in 2025 and an increase in short-term borrowings primarily to fund the October 2025 acquisition of Suvinil.

See Note 7 to the consolidated financial statements in Item 8 for further information on the Company’s outstanding debt.

Other expense (income) - net changed by $65.6 million from income of $44.7 million in 2024 to expense of $20.9 million in 2025 primarily due to higher foreign currency transaction related losses in 2025 compared to 2024, including impacts from highly inflationary economies such as Argentina and an immaterial loss recognized in 2025 from a transaction to convert a foreign currency with limited liquidity to the U.S.

The remaining change is due to miscellaneous other income and expense, none of which were individually significant.

See Note 19 to the consolidated financial statements in Item 8 for further information related to Other expense (income) - net.

The following table presents Income before income taxes by segment and as a percent of Net sales by segment:

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The effective income tax rate for 2025 was 23.1% compared to 22.3% in 2024.

The decrease in the effective rate was primarily due to a more favorable impact of tax benefits related to employee share-based payments.

The increase in the effective rate was primarily due to less favorable impacts of tax benefits related to employee share-based payments.

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

See Note 20 to the consolidated financial statements in Item 8 for additional information.

See Note 20 to the consolidated financial statements in Item 8 for further information.

Net Income Per Share

Diluted net income per share for 2024 increased to $10.55 per share from $9.25 per share in 2023.

Currency translation rate changes decreased diluted net income per share by $0.06 per share for 2024.

Diluted net income per share in 2024 included acquisition-related amortization expense of $0.78 per share.

Diluted net income per share for 2023 included acquisition-related amortization expense of $0.78 per share, severance and other expense of $0.04 per share, expenses related to the divestiture of the China architectural business of $0.11 per share, impairment related to trademarks of $0.07 per share and expense related to the devaluation of the Argentine peso of $0.16 per share.

These expenses were partially offset by a gain on the divestiture of a non-core domestic aerosol business of $0.06 per share.

See Notes 3, 6 and 19 to the consolidated financial statements in Item 8 for additional information.

Diluted net income per share for 2025 decreased to $10.26 per share from $10.55 per share in 2024.

Currency translation rate changes decreased diluted net income per share by $0.06 per share in 2025.

Diluted net income per share in 2025 included acquisition-related amortization expense of $0.78 per share, severance and other restructuring expenses of $0.34 per share, and impairment related to trademarks of $0.05 per share.

Diluted net income per share for 2024 included acquisition-related amortization expense of $0.78 per share.

See Notes 1, 6 and 21 to the consolidated financial statements in Item 8 for further information.

FINANCIAL CONDITION, LIQUIDITY AND CASH FLOW

The Company’s financial condition, liquidity and cash flow remained strong in 2025.

The Company generated $3.153 billion in Net operating cash and invested $1.014 billion in capital expenditures and approximately $80 million in the acquisition of a metal packaging coatings business.

The Company also returned cash of $2.462 billion to shareholders in the form of cash dividends and share repurchases during the year.

The Company’s EBITDA increased 8.2% to $4.492 billion.

See the Non-GAAP Financial Measures section for the definition and calculation of EBITDA.

The Company generated $3.452 billion in Net operating cash and invested approximately $1.15 billion in the acquisition of Suvinil and $797.6 million in capital expenditures.

Cash of $2.446 billion was returned to shareholders in the form of cash dividends and share repurchases during the year.

During 2025, the Company generated Net income of $2.569 billion, EBITDA of $4.480 billion and Adjusted EBITDA of $4.609 billion.

See the Non-GAAP Financial Measures section for the definitions and calculations of EBITDA and Adjusted EBITDA.

As of December 31, 2025, the Company had Cash and cash equivalents of $207.2 million and total debt outstanding of $10.871 billion.

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Net Working Capital

Net working capital, defined as Total current assets less Total current liabilities, decreased $293.9 million to a deficit of $1.408 billion at December 31, 2024 compared to a deficit of $1.114 billion at December 31, 2023.

The net working capital decrease is due to an increase in Short-term borrowings and a decrease in current assets, particularly Accounts receivable, net and Cash and cash equivalents, partially offset by an increase in Other current assets and a decrease in Accounts payable.

Current asset balances decreased $112.1 million at December 31, 2024 compared to December 31, 2023 primarily due to a decrease in Accounts receivable, net of $79.1 million, a decrease in Cash and cash equivalents of $66.4 million and a decrease in Inventories of $41.7 million.

These decreases were partially offset by an increase in Other current assets of $75.1 million, primarily related to prepaid expenses.

Current liability balances increased $181.8 million at December 31, 2024 compared to December 31, 2023 primarily due to an increase in Short-term borrowings of $288.2 million and an increase in Other accruals of $30.7 million primarily related to liabilities related to insurance, investments in U.S.

affordable housing and historic renovation real estate partnerships and contracts with customers, partially offset by a decrease in short-term environmental liabilities.

These increases were partially offset by a decrease in Accounts payable of $61.8 million, a decrease in Current portion of long-term debt of $49.6 million and a decrease in Accrued taxes of $23.1 million.

As a result of the net effect of these changes, the Company’s current ratio decreased to 0.79 at December 31, 2024 from 0.83 at December 31, 2023.

Accounts receivable as a percent of Net sales decreased to 10.3% in 2024 from 10.7% in 2023.

Accounts receivable days outstanding was 58 days in 2024 and 2023.

Net working capital, defined as Total current assets less Total current liabilities, increased $495.0 million to a deficit of $912.9 million at December 31, 2025 compared to a deficit of $1.408 billion at December 31, 2024.

The net working capital increase is primarily due to an increase in current assets, particularly Accounts receivable, net and Other current assets and a decrease in the Current portion of long-term debt, partially offset by an increase in Short-term borrowings and Accounts payable.

Current asset balances increased $606.6 million at December 31, 2025 compared to December 31, 2024 primarily due to an increase in Accounts receivable, net of $402.4 million, an increase in Other current assets of $177.3 million, primarily related to prepaid expenses and recoverable income taxes, and an increase in Inventories of $30.1 million.

These increases were offset by a decrease in Cash and cash equivalents of $3.2 million.

Current liability balances increased $111.6 million at December 31, 2025 compared to December 31, 2024 primarily due to an increase in Short-term borrowings of $538.1 million, an increase in Other accruals of $148.7 million primarily related to increases in liabilities related to customer considerations, accrued severance, current portion of non-traded investments and miscellaneous other accruals, partially offset by a decrease in insurance payables, an increase in Accounts payable of $101.0 million, an increase in Current portion of operating lease liabilities of $13.2 million and an increase in Accrued taxes of $13.1 million.

These increases were partially offset by a decrease in the Current portion of long-term debt of $699.1 million.

As a result of the net effect of these changes, the Company’s current ratio increased to 0.87 at December 31, 2025 from 0.79 at December 31, 2024.

Accounts receivable as a percent of Net sales increased to 11.8% in 2025 from 10.3% in 2024.

Accounts receivable days outstanding was 62 days in 2025 and 58 days in 2024.

In 2025, the allowance for current expected credit losses increased $2.1 million, or 3.5%.

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Property, Plant and Equipment

Property, plant and equipment, net increased $696.4 million to $3.533 billion at December 31, 2024 primarily due to capital expenditures of $1.014 billion and assets acquired through a business combination of $32.9 million, partially offset by depreciation expense of $297.4 million and foreign currency translation and other adjustments of $52.6 million.

During 2023, the Company closed on a transaction to sell and subsequently lease back its current global headquarters and R&D center.

In connection with the sale, proceeds of $47.2 million were received and an immaterial gain was recognized.

Capital expenditures during 2024 included expenditures related to construction activities associated with the new global headquarters and R&D center in the Administrative function.

Construction of the new global headquarters and R&D center is expected to be complete in 2025.

Property, plant and equipment, net increased $604.2 million to $4.137 billion at December 31, 2025 primarily due to capital expenditures of $745.9 million, assets acquired through business combinations of $153.7 million and foreign currency translation and other adjustments of $44.9 million, offset by depreciation expense of $340.3 million.

Buildings within Property, plant and equipment, net increased by $1.491 billion in the twelve months since December 31, 2024 primarily due to the new global headquarters and the R&D center meeting the criteria to be placed into service during 2025.

An immaterial amount of capital expenditures related to finalizing the construction of the new global headquarters and R&D center will be placed into service during 2026.

The new global headquarters and associated parking garage assets are depreciated over their useful lives of 60 and 45 years, respectively.

Additionally, the R&D center asset is depreciated over its useful life of 60 years.

Also included in 2025 capital expenditures were expenditures related to manufacturing capacity expansion, operational efficiencies and maintenance projects in the Consumer Brands and Performance Coatings Groups and the opening of new paint stores and renovation and improvements in existing stores in the Paint Stores Group.

In 2025, the Company expects to spend slightly less than 2024 for capital expenditures, which it will fund primarily through the generation of operating cash.

Core capital expenditures are expected to be for investments in various productivity improvement and maintenance projects at existing manufacturing, distribution and research and development facilities and new store openings.

Additionally, the Company expects to complete construction of its new global headquarters and R&D center.

Refer to the Real Estate Financing section herein for further information on the financing transaction for the new global headquarters.

In 2026, the Company expects to spend less than 2025 for capital expenditures, which it will fund primarily through the generation of operating cash.

Core capital expenditures are targeted to be approximately 2% of Net sales in 2026 and are expected to be for investments in various productivity improvement and maintenance projects at existing manufacturing, distribution and research and development facilities and new store openings.

Real Estate Financing

In December 2022, the Company closed a transaction to sell and subsequently lease back its partially-constructed new global headquarters.

As part of the terms of the transaction, the Company is contractually obligated for completing the

construction of the building and related improvements at the new global headquarters.

Construction is expected to complete in 2025.

In December 2022, the Company closed a transaction to sell and subsequently lease back its new global headquarters.

This transaction did not meet the criteria for recognition as an asset sale under U.S.

generally accepted accounting principles (US GAAP) and as such, was accounted for as a real estate financing transaction.

The Company expects to receive total proceeds approximating $800 million to $850 million, with final proceeds expected in the first quarter of 2025.

The Company received the final proceeds for the new global headquarters in 2025 for a total of $800 million.

The initial lease term includes the construction period and extends for 30 years thereafter, and the Company has the right and option to extend the lease term.

The lease payment amounts during the construction period are dependent upon the timing and amount of total reimbursement of construction and other costs received by the Company.

Lease payments over the next twelve months are expected to be approximately $51 million.

The amount of the lease payments during the initial 30 year lease term will be calculated upon completion of the construction period and receipt of total reimbursement of construction and other costs.

Once determinable, this is expected to result in a significant increase in the Company’s long-term contractual obligations.

The amount of the lease payments during the initial 30 year lease term is estimated to be approximately $1.938 billion.

Refer to the Contractual and Other Obligations and Commercial Commitments section below for further information on the Company’s obligations.

The following table summarizes the activity related to this transaction and the corresponding balances recognized in the Consolidated Balance Sheets.

2024 2023 2022

Proceeds received $ 40.9 $ 244.2

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

The Company will continue to recognize the related assets within Property, plant and equipment, net on the Consolidated Balance Sheets under US GAAP.

These assets will be subject to depreciation over their useful lives in accordance with the Company’s accounting policies.

The Company will continue to recognize the related assets, including any capitalized interest, within Property, plant and equipment, net on the Consolidated Balance Sheets.

These assets are subject to depreciation over their useful lives in accordance with the Company’s accounting policies.

The Company will also allocate payments between interest and repayment of the financing liability over the life of the agreement.

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Goodwill and Intangible Assets

Goodwill, which represents the excess of cost over the fair value of net assets acquired in business combinations, decreased $45.9 million to $7.580 billion at December 31, 2024, due to foreign currency translation rate fluctuations of $94.1 million, partially offset by purchase accounting allocations of $48.2 million.

Intangible assets decreased $347.3 million to $3.533 billion at December 31, 2024 due to amortization of finite-lived intangible assets of $326.7 million and foreign currency translation rate fluctuations and other adjustments of $75.9 million, partially offset by purchase accounting allocations of $28.0 million and capitalization of software of $27.3 million.

See Note 3 to the consolidated financial statements in Item 8 for additional information related to acquisitions.

See Note 6 to the consolidated financial statements in Item 8 for a description of goodwill, intangible assets, historical impairments and summaries of the remaining carrying values of goodwill and intangible assets.

Goodwill, which represents the excess of cost over the fair value of net assets acquired in business combinations, increased $456.5 million to $8.037 billion at December 31, 2025, due to purchase accounting allocations of $306.8 million, primarily related to the Suvinil acquisition, and foreign currency translation rate fluctuations and other adjustments of $149.7 million.

Intangible assets increased $432.9 million to $3.966 billion at December 31, 2025 due to purchase price accounting allocations of $643.4 million, primarily related to the Suvinil acquisition, foreign currency translation rate fluctuations and other adjustments of $104.0 million and capitalization of software of $39.9 million, offset by amortization of finite-lived intangible assets of $336.6 million and trademark impairment of $17.8 million.

See Note 3 to the consolidated financial statements in Item 8 for further information related to acquisitions.

See Note 6 to the consolidated financial statements in Item 8 for a description of goodwill, identifiable intangible assets, asset impairments and summaries of the remaining carrying values of goodwill and intangible assets.

Other assets increased $127.5 million to $1.759 billion at December 31, 2025.

The increase was primarily due to an increase in finance lease right-of-use (ROU) assets of $187.5 million, largely related to a new finance lease which commenced during 2024, an increase in assets related to contracts with customers and investments in U.S.

affordable housing and historic renovation real estate partnerships.

See Notes 1, 9 and 18 to the consolidated financial statements in Item 8 for additional information.

The increase was primarily due to an increase in non-traded investments and pension plan assets.

See Notes 1 and 8 to the consolidated financial statements in Item 8 for further information.

Debt (including Short-term borrowings)

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Total debt outstanding, including Short-term borrowings, increased by $982.9 million to $10.871 billion in 2025.

Short-term borrowings are primarily comprised of amounts outstanding under the Company’s domestic commercial paper program and various foreign credit facilities.

Short-term borrowings are primarily comprised of amounts outstanding under the Company’s domestic commercial paper program, delayed draw term loans and various foreign credit facilities.

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

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See the Non-GAAP Financial Measures section for the definition and calculation of EBITDA.

In August 2024, the Company repaid principal of $600.0 million related to the Company’s 4.05% senior notes due August 8, 2024 using commercial paper and subsequently issued $400.0 million of 4.55% senior notes due 2028 and $450.0 million of 4.80% senior notes due 2031 in a public offering.

The net proceeds from the issuance of these notes were used to repay outstanding borrowings under the Company’s domestic commercial paper program and for general corporate purposes.

The newly issued senior notes contain customary qualitative covenants as defined in their respective agreements.

During the second quarter of 2024, the Company repaid the principal of $500.0 million related to its 3.125% senior notes due June 1, 2024 using commercial paper.

In December 2023, the Company exercised its call provision to make-whole the entire outstanding $119.4 million aggregate principal amount of its 7.38% Debentures due 2027 and the entire outstanding $3.5 million aggregate principal amount of its 7.45% Debentures due 2097.

The retirement of the Debentures resulted in a loss of $12.8 million recorded in Other general (income) expense - net.

See Note 19 to the consolidated financial statements in Item 8 for additional information.

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

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Defined Benefit Pension and Other Postretirement Benefit Plans

In accordance with the accounting prescribed by the Retirement Benefits Topic of the ASC, the Company’s total liability for unfunded or underfunded defined benefit pension plans decreased $1.2 million to $67.8 million primarily due to changes in actuarial assumptions.

The Company’s liability for other postretirement benefits decreased $12.1 million to $135.1 million at December 31, 2024 primarily due to benefits paid and changes in actuarial assumptions.

The assumed discount rate used to determine the projected benefit obligation for the domestic defined benefit pension plan increased to 5.8% at December 31, 2024 from 5.1% at December 31, 2023.

The assumed discount rate used to determine the projected benefit obligation for foreign defined benefit pension plans increased to 5.5% at December 31, 2024 from 4.8% at December 31, 2023.

The assumed discount rate used to determine the projected benefit obligation for other postretirement benefit obligations increased to 5.6% at December 31, 2024 from 5.0% at December 31, 2023.

The increase in the discount rates was primarily due to higher interest rates.

In accordance with the accounting prescribed by the Retirement Benefits Topic of the ASC, the Company’s total liability for unfunded or underfunded defined benefit pension plans increased $15.5 million to $83.3 million primarily due to changes in actuarial assumptions and the acquisition of a Suvinil defined benefit pension plan.

The Company’s liability for domestic other postretirement benefits decreased $9.5 million to $125.6 million at December 31, 2025 primarily due to benefits paid and changes in actuarial assumptions.

The assumed discount rate used to determine the projected benefit obligation for the domestic defined benefit pension plan decreased to 5.7% at December 31, 2025 from 5.8% at December 31, 2024.

The assumed discount rate used to determine the projected benefit obligation for foreign defined benefit pension plans of 5.5% remained substantially the same at December 31, 2025 and December 31, 2024.

The assumed discount rate used to determine the benefit obligation for domestic other postretirement benefit obligations decreased to 5.4% at December 31, 2025 from 5.6% at December 31, 2024.

In determining the rates of compensation increases, management considered historical Company increases as well as expectations for future increases.

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The expected long-term rate of return on assets for the domestic defined benefit pension plan was 6.0% and 6.5% at December 31, 2025 and 2024, respectively.

The expected long-term rate of return on assets for the foreign defined benefit pension plans was 4.8% at December 31, 2024 and 2023.

The expected long-term rate of return on assets for the foreign defined benefit pension plans was 5.1% and 4.8% at December 31, 2025 and 2024, respectively.

In developing the assumed health care cost trend rates, management considered industry data, historical Company experience and expectations for future health care costs.

The assumed health care cost trend rates used to determine the projected benefit

obligation for other postretirement benefit obligations at December 31, 2024 were 6.5% and 11.8% for medical and prescription drug cost increases, respectively, both decreasing gradually to 4.5% in 2034.

The assumed health care cost trend rates for medical and prescription costs used to determine the projected benefit obligation for other postretirement benefit obligations at December 31, 2023 were 6.0% and 9.0%, respectively.

The assumed health care cost trend rates used to determine the benefit obligation for domestic other postretirement benefit obligations at December 31, 2025 were 6.0% and 11.0% for medical and prescription drug cost increases, respectively, both decreasing gradually to 4.5% in 2034.

The assumed health care cost trend rates for medical and prescription costs used to determine the benefit obligation for domestic other postretirement benefit obligations at December 31, 2024 were 6.5% and 11.8%, respectively.

The respective year-end assumptions described above for the Company’s defined benefit plans are also used to determine expense for the next year.

Net pension (credit) cost in 2026 for the domestic pension plan and foreign pension plans is expected to be approximately $(3.2) million and $6.1 million, respectively.

Net periodic benefit credit for other postretirement benefits in 2025 is expected to be approximately $9.7 million.

This credit is primarily due to the remaining amortization of the impact of a plan amendment executed in 2022.

This impact will be fully amortized in 2025.

See Note 8 to the consolidated financial statements in Item 8 for additional information on the Company’s obligations and funded status of its defined benefit pension plans and other postretirement benefits.

Net periodic benefit cost in 2026 for domestic other postretirement benefits is expected to be approximately $2.6 million.

Employees and their eligible dependents in certain consolidated foreign subsidiaries of the Company are eligible for health care benefits upon retirement, subject to the terms of the plans, and are recorded as other postretirement benefits.

The associated benefit obligation and net periodic benefit cost did not have a material impact on the Company’s consolidated financial statements.

See Note 8 to the consolidated financial statements in Item 8 for further information on the Company’s obligations and funded status of its defined benefit pension plans and other postretirement benefits.

Deferred Income Taxes

Deferred income taxes at December 31, 2024 decreased $75.6 million to $607.5 million at December 31, 2024 primarily due to amortization of intangible assets in the current year.

See Note 20 to the consolidated financial statements in Item 8 for additional information on deferred taxes.

Deferred income taxes at December 31, 2025 increased $157.8 million to $765.3 million primarily due to provisions of the One Big Beautiful Bill Act signed into law in 2025 which allows for the immediate expensing of certain domestic capital expenditures and domestic research and development costs, and the ability to accelerate previously capitalized domestic research and development costs, partially offset by the amortization of intangible assets in the current year.

See Note 20 to the consolidated financial statements in Item 8 for further information on deferred taxes.

Other Long-Term Liabilities

Other long-term liabilities increased $401.4 million to $2.309 billion at December 31, 2024 primarily due to liabilities associated with real estate financing transactions, finance leases and commitments related to investments in U.S.

affordable housing and historic renovation real estate partnerships, partially offset by the impact of expected settlements related to tax positions over the next twelve months.

See Notes 1, 9, 10 and 20 to the consolidated financial statements in Item 8.

Environmental Matters

The operations of the Company, like those of other companies in the same industry, are subject to various federal, state and local environmental laws and regulations.

Other long-term liabilities increased $266.4 million to $2.576 billion at December 31, 2025 primarily due to liabilities associated with net investment hedges, commitments related to non-traded investments and real estate financing.

See Notes 1, 9, 10 and 16 to the consolidated financial statements in Item 8 for further information.

Environmental-Related Liabilities

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

These laws and regulations not only govern current operations and products, but also impose potential liability on the Company for past operations.

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 and regulations and has implemented various programs designed to protect the environment and promote continued compliance.

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.

Depreciation of capital expenditures and other expenses related to ongoing environmental compliance measures were included in the normal operating expenses of conducting business.

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Real estate financing transactions 2,058.1 66.7 137.4 141.8 1,712.2

148.1 15.7 31.7 33.3 67.4

Purchase obligations (1)

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Total contractual cash obligations $ 20,934.2 $ 2,989.6 $ 4,127.7 $ 3,045.4 $ 10,771.5

(1) Excludes real estate financing transactions related to the new global headquarters.

Refer to “Real Estate Financing” section herein for further information.

(1) Relates to open purchase orders for raw materials at December 31, 2025.

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affordable housing and historic renovation real estate partnerships and various other contractual obligations.

Additionally, the Company has an obligation with respect to an agreement signed in February 2025 to acquire the Brazilian decorative paints business of BASF SE, which is excluded from the preceding table.

The timing and amount of this obligation is uncertain as the transaction is expected to close in the second half of 2025 and is subject to customary closing conditions, including Brazilian regulatory approval and post-closing adjustments.

Refer to Note 3 to the consolidated financial statements in Item 8 for further information.

Amount of Commitment Expiration Per Period

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Shareholders’ equity increased $547.1 million to $4.598 billion at December 31, 2025 from $4.051 billion last year.

The increase was primarily attributable to the generation of $2.681 billion of Net income and benefits from stock option exercises and the recognition of stock-based compensation expense of $367.5 million.

This was partially offset by the repurchase of $1.739 billion in Treasury stock, the payment of $723.4 million in cash dividends and a decrease in AOCI of $250.9 million mainly due to foreign currency translation adjustments.

See the Statements of Consolidated Shareholders’ Equity and Statements of Consolidated Comprehensive Income in Item 8 for additional information.

The increase was primarily attributable to the generation of $2.569 billion of Net income, benefits from stock option exercises and the recognition of stock-based compensation expense of $242.9 million and a decrease in Accumulated other comprehensive income (loss) of $240.8 million mainly due to foreign currency translation adjustments.

These increases were partially offset by the repurchase of $1.656 billion in Treasury stock and the payment of $789.8 million in cash dividends.

During the fourth quarter of 2025, the Company retired 29.5 million common stock shares held in treasury stock, which resulted in decreases of Common stock, Other capital, Retained earnings and Treasury stock of $9.9 million, $578.5 million, $7.996 billion, and $8.584 billion, respectively.

See the Statements of Consolidated Shareholders’ Equity and Statements of Consolidated Comprehensive Income in Item 8 for further information.

The Company purchased 4.8 million shares of its common stock for treasury purposes through open market purchases during 2025.

The Company acquires its common stock for general corporate purposes, and depending on its cash position and market

conditions, it may acquire shares in the future.

The Company acquires its common stock for general corporate purposes, and depending on its cash position and market conditions, it may acquire shares in the future.

The Company had remaining authorization from its Board of Directors at December 31, 2025 to purchase 29.6 million shares of its common stock.

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The 2025 annual dividend represented the 47 th consecutive year of increased dividend payments.

On February 19, 2025, the Board of Directors increased the quarterly cash dividend to $0.79 per share.

On January 26, 2026, the Board of Directors increased the quarterly cash dividend to $0.80 per share.

This quarterly dividend, if approved in each of the remaining quarters of 2026, would result in an annual dividend for 2026 of $3.20 per share, or a 31% payout of 2025 diluted net income per share.

Net operating cash decreased $368.7 million in 2024 to a cash source of $3.153 billion from a cash source of $3.522 billion in 2023 primarily due to higher cash requirements for working capital partially offset by higher Net income.

Net operating cash decreased as a percent of Net sales to 13.7% in 2024 compared to 15.3% in 2023.

Net investing cash usage increased $157.0 million to a usage of $1.196 billion in 2024 from a usage of $1.039 billion in 2023 primarily due to an increase in cash used for capital expenditures, proceeds from the divestiture of a business in 2023 and reduced proceeds from the sale of assets, partially offset by lower cash used for acquisitions.

See Note 3 to the consolidated financial statements in Item 8 for additional information on acquisitions and divestitures.

Net operating cash increased $298.4 million in 2025 to a cash source of $3.452 billion from a cash source of $3.153 billion in 2024 primarily due to an increase in Deferred income taxes and lower cash requirements for working capital, partially offset by lower Net income.

Net operating cash increased as a percent of Net sales to 14.6% in 2025 compared to 13.7% in 2024.

Net investing cash usage increased $870.0 million to a usage of $2.066 billion in 2025 from a usage of $1.196 billion in 2024 primarily due to an increase in cash used for the Suvinil acquisition in the current year, partially offset by a decrease in capital expenditures.

See Note 3 to the consolidated financial statements in Item 8 for further information on acquisitions.

Net financing cash usage decreased $638.5 million to a usage of $1.379 billion in 2025 from a usage of $2.017 billion in 2024.

This decrease was primarily due to a net increase in short-term borrowings, proceeds from long-term debt in 2024 and higher proceeds from stock options exercised, partially offset by an increase in payments of long-term debt, treasury stock purchases and payment of cash dividends.

The Company is exposed to market risk associated with interest rate, foreign currency and commodity fluctuations.

This decrease was primarily due to proceeds from long-term debt, an increase in short-term borrowings in 2025 and a lower amount of treasury stock repurchased, partially offset by lower proceeds from real estate financing transactions related to the new global headquarters and lower proceeds from stock options exercised.

In the normal course of business, the Company may receive proceeds related to claims for incurred damages under its insurance policies.

No amounts have been recorded in the consolidated financial statements for any insurance proceeds that have not been received as of the balance sheet date and any future recoveries are indeterminable at this time.

The Company is exposed to market risk associated with interest rates, foreign currency and commodity fluctuations.

The Company occasionally utilizes derivative instruments as part of its overall financial risk management policy, but does not use derivative instruments for speculative or trading purposes.

In 2024 and 2023, the Company entered into foreign currency forward contracts with maturity dates of less than twelve months primarily to hedge against value changes in foreign currency and cross currency swap contracts to hedge its net investment in European operations.

See Notes 1, 16 and 19 to the consolidated financial statements in Item 8 for additional information related to the Company’s use of derivative instruments.

The Company believes it may be exposed to continuing market risk from foreign currency exchange rate and commodity price fluctuations.

However, the Company does not expect that foreign currency exchange rate and commodity price fluctuations or hedging contract losses will have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

See Notes 1 and 19 to the consolidated financial statements in Item 8 for additional information related to foreign currency translation.

In 2025 and 2024, the Company utilized U.S.

dollar to euro cross currency swap contracts to hedge the Company’s net investment in its European operations.

The contracts have been designated as net investment hedges and have various maturity dates.

In addition, the Company entered into forward foreign currency exchange contracts during 2025 and 2024 primarily to hedge value changes in foreign currency.

There were no material contracts outstanding at December 31, 2025.

Lastly, the Company entered into interest rate lock contracts in 2025 to hedge the variability in the benchmark interest rate for the 2025 issuance of long-term fixed rate debt.

The contracts were designated as cash flow hedges and settled in 2025.

See Notes 1, 16 and 19 to the consolidated financial statements in Item 8 for further information on the use of derivative instruments.

The Company believes it may experience losses from foreign currency translation and transactions, interest rate movement and commodity price fluctuations.

However, the Company does not expect foreign currency translation or transactions, interest rate movement, commodity price fluctuations or hedging contract losses to have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

Financial Covenant

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In the event of default under any one of these arrangements, acceleration of the maturity of any one or more of these borrowings may result.

See Note 7 to the consolidated financial statements in Item 8 for additional information.

See Note 7 to the consolidated financial statements in Item 8 for further information.

Defined Contribution Savings Plan

Participants in the Company’s defined contribution savings plan are allowed to contribute up to the lesser of fifty percent of their annual compensation or the maximum dollar amount allowed under the Internal Revenue Code.

The Company matches one hundred percent of all contributions up to six percent of eligible employee contributions.

The Company’s matching contributions to the defined contribution savings plan charged to operations were $165.1 million in 2024 compared to $153.9 million in 2023.

The Company matches one hundred percent of all contributions up to six percent of eligible employee contributions and additionally, may elect to make discretionary contributions.

The Company’s matching and discretionary contributions to the defined contribution savings plan charged to operations were $184.2 million in 2025 compared to $165.1 million in 2024.

At December 31, 2025, there were 14,886,577 shares of the Company’s common stock being held by the defined contribution savings plan, representing 6.0% of the total number of voting shares outstanding.

See Note 13 to the consolidated financial statements in Item 8 for additional information concerning the Company’s defined contribution savings plan.

See Note 13 to the consolidated financial statements in Item 8 for further information concerning the Company’s defined contribution savings plan.

NON-GAAP FINANCIAL MEASURES

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The reader is cautioned that the Company’s EBITDA and Adjusted EBITDA should not be compared to other entities unknowingly.

Further, EBITDA and Adjusted EBITDA should not be considered alternatives to Net income or Net operating cash as an indicator of operating performance or as a measure of liquidity.

The reader should refer to the determination of Net income and Net operating cash in accordance with US GAAP disclosed in the Statements of Consolidated Income and Statements of Consolidated Cash Flows in Item 8.

The following table summarizes EBITDA and Adjusted EBITDA as calculated by management for the years indicated below:

Year Ended December 31,

Further, EBITDA and Adjusted EBITDA should not be considered alternatives to Net income as an indicator of operating performance.

The reader should refer to the determination of Net income in accordance with US GAAP disclosed in the Statements of Consolidated Income in Item 8.

The following table reconciles Net income computed in accordance with US GAAP to EBITDA and Adjusted EBITDA as calculated by management for the years indicated below:

Net income $ 2,568.5 $ 2,681.4

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EBITDA 4,480.1 4,491.5

Restructuring expense — 9.6

Impairment related to Restructuring Plan — 34.0

Gain on divestiture of domestic aerosol business — (20.1)

Impairment related to trademarks — 23.9

Devaluation of the Argentine peso — 41.8

Severance and other restructuring expenses 111.0 —

Trademark impairment 17.8 —

Adjusted EBITDA $ 4,608.9 $ 4,491.5

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The following table summarizes Free cash flow after dividends as calculated by management for the years indicated below:

Year Ended December 31,

Net operating cash $ 3,451.6 $ 3,153.2

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$ 1.03 $ .25 .78

Severance and other restructuring expenses .44 .10 .34

Trademark impairment .07 .02 .05

Adjusted diluted net income per share $ 11.43

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Diluted net income per share $ 10.55

Items related to Restructuring Plan:

Severance and other $ .06 $ .02 .04

Impairment of assets related to China divestiture .13 .08 .05

Gain on divestiture of domestic aerosol business (.08) (.02) (.06)

Discrete income tax expense related to China divestiture (1)

Total .11 .02 .09

Impairment related to trademarks .09 .02 .07

Devaluation of the Argentine peso .16 — .16

Acquisition-related amortization expense (2)

$ 1.02 $ .24 .78

Adjusted diluted net income per share $ 11.33

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Income before income taxes $ 3,061.5 $ 509.6 $ 942.7 $ (1,175.6) $ 3,338.2

as a percent of Net sales 22.0 % 19.0 % 15.1 % nm 14.9 %

Acquisition-related amortization

Percent to Net sales 22.5 % 16.1 % 13.9 % nm 14.2 %

Acquisition-related amortization expense (1)

62.0 196.3 258.3

Severance and other restructuring expenses 39.1 17.9 54.0 111.0

Trademark impairment 17.8 17.8

Adjusted segment profit $ 3,061.5 $ 610.7 $ 1,174.7 $ (1,121.6) $ 3,725.3

as a percent of Net sales 22.0 % 21.0 % 18.0 % nm 16.1 %

Percent to Net sales 22.5 % 19.3 % 17.3 % nm 15.8 %

Year Ended December 31, 2024

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Income before income taxes $ 2,902.6 $ 589.9 $ 1,027.9 $ (1,068.6) $ 3,451.8

as a percent of Net sales 22.3 % 9.2 % 14.5 % nm 13.5 %

Items related to Restructuring Plan:

Severance and other 14.2 (0.2) 1.3 15.3

Impairment of assets related to

China divestiture

6.9 27.1 34.0

Gain on divestiture of domestic aerosol business (20.1) (20.1)

Total — 21.1 (0.2) 8.3 29.2

Impairment related to trademarks 23.9 23.9

Devaluation of the Argentine peso 30.8 11.0 41.8

Acquisition-related amortization

Percent to Net sales 22.0 % 19.0 % 15.1 % nm 14.9 %

Acquisition-related amortization expense (1)

63.8 196.3 260.1

Adjusted segment profit $ 2,902.6 $ 653.7 $ 1,224.2 $ (1,068.6) $ 3,711.9

as a percent of Net sales 22.3 % 13.5 % 17.5 % nm 15.1 %

Percent to Net sales 22.0 % 21.0 % 18.0 % nm 16.1 %

nm - not meaningful

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Management believes that the following critical accounting policies and estimates have a significant impact on our consolidated financial statements.

Inventories are stated at the lower of cost or market with cost determined principally on the last-in, first-out (LIFO) method based on inventory quantities and costs determined during the fourth quarter and market representing current replacement cost, which is the cost to purchase or reproduce the inventory.

In accordance with the Inventory Topic of the ASC, inventories are stated at the lower of cost or market with cost determined principally on the last-in, first-out (LIFO) method based on inventory quantities and costs determined during the fourth quarter and market representing current replacement cost, which is the cost to purchase or reproduce the inventory.

Market shall not exceed net realizable value and shall not be less than net realizable value reduced by an allowance for an approximately normal profit margin.

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If management estimates that the reasonable market value is below cost or determines that future demand was lower than current inventory levels, based on historical experience, current and projected market demand, current and projected volume trends and other relevant current and projected factors associated with the current economic conditions, a reduction in inventory cost to current market price is provided for in the reserve for obsolescence.

See Note 4 to the consolidated financial statements in Item 8 for more information regarding the impact of the LIFO inventory valuation and the reserve for obsolescence.

See Note 4 to the consolidated financial statements in Item 8 for further information regarding the impact of the LIFO inventory valuation and the reserve for obsolescence.

Goodwill and Intangible Assets

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Management, considering industry and Company-specific historical and projected data, develops growth rates and sales projections for each significant trademark.

Terminal value rate determination follows common methodology of capturing the present value of perpetual sales estimates beyond the last projected period assuming a constant WACC and a low long-term growth rate.

The royalty savings valuation methodology and calculations used in 2025 impairment testing are consistent with prior years.

The Company performed the optional qualitative impairment test as of October 1, 2025, and determined that there was indication of impairment on a more likely than not basis in certain of the Company’s trademarks.

The resulting quantitative impairment test performed as of October 1, 2024 did not result in any trademark impairment.

The quantitative impairment tests performed as of October 1, 2025 resulted in $17.8 million of trademark impairment in the Performance Coatings Group primarily related to restructuring activities which impacted certain trademarks in the Asia, Latin America and Europe regions.

No other impairments or risks for impairment were identified as a result of this review.

The discounted cash flow and royalty savings valuation methodologies require management to make certain assumptions based upon information available at the time the valuations are performed from the perspective of a market participant.

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In accordance with the Retirement Benefits Topic of the ASC, the Company recognizes each plan’s funded status as an asset for overfunded plans and as a liability for unfunded or underfunded plans.

Actuarial gains and losses and prior service costs are recognized and recorded in Accumulated other comprehensive income (AOCI).

The amounts recorded in AOCI will continue to be modified as actuarial assumptions and service costs change, and all such amounts will be amortized to expense over a period of years through the net pension and net periodic benefit costs.

Based on facts and circumstances, the expense amounts recorded in AOCI can also have accelerated amortization due to certain plan changes, including those that result in a

See Note 8 to the consolidated financial statements in Item 8 for information concerning the Company’s defined benefit pension plans and other postretirement benefit plans.

Actuarial gains and losses and prior service costs and credits are recognized and recorded in Accumulated other comprehensive income (loss) (AOCI).

The amounts recorded in AOCI will continue to be modified as actuarial assumptions and service costs change, and all such amounts will be amortized to Net income over a period of years through the net pension and net periodic benefit costs.

Based on facts and circumstances, the

expense amounts recorded in AOCI can also have accelerated amortization due to certain plan changes, including those that result in a curtailment.

See Note 8 to the consolidated financial statements in Item 8 for further information concerning the Company’s defined benefit pension plans and other postretirement benefit plans.

Environmental Matters

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Actual costs incurred may vary from the accrued estimates due to the inherent uncertainties involved.

See Note 10 to the consolidated financial statements in Item 8 for information concerning the accrual for extended environmental-related activities and a discussion concerning unaccrued future loss contingencies.

See Note 10 to the consolidated financial statements in Item 8 for further information concerning the accrual for extended environmental-related activities and a discussion concerning unaccrued future loss contingencies.

Litigation and Other Contingent Liabilities

In the course of its business, the Company is subject to a variety of claims and lawsuits, including, but not limited to, litigation relating to product liability and warranty, personal injury, environmental, intellectual property, commercial, contractual and antitrust claims.

Management accrues for all known liabilities that existed and those where a loss was deemed probable for which a fair value was available or an amount could be reasonably estimated in accordance with US GAAP.

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

Additionally, due to the uncertainties involved, 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.

See Note 11 to the consolidated financial statements in Item 8 for information concerning litigation.

In the course of its business, the Company is subject to a variety of actual and potential claims, lawsuits, and other proceedings, including, but not limited to, litigation relating to product liability and warranty, raw materials used in our products, personal injury, environmental (including alleged natural resource damages), intellectual property, commercial, contractual and antitrust claims, that are inherently subject to many uncertainties regarding the possibility of a loss to the Company.

In accordance with the Contingencies Topic of the ASC, management accrues for contingencies when it is both probable that one or more future events will occur confirming the fact of a loss and the amount of the loss can be reasonably estimated.

However, because litigation is inherently subject to many uncertainties and the ultimate result of any present or future litigation is unpredictable, the Company’s ultimate liability may result in costs that are significantly higher than currently accrued, and the recording of the additional liability may result in a material impact on Net income for the annual or interim period during which such additional liability is accrued.

In matters where no accrual is recorded because it is not probable that a liability will be incurred or the amount of any such loss cannot be reasonably estimated, any potential liability ultimately determined to be attributable to the Company arising out of any such claims, lawsuits or other proceedings, may result in a material adverse effect on the Company’s results of operations, liquidity or financial condition.

See Note 11 to the consolidated financial statements in Item 8 for further information concerning litigation.

The Company estimates income taxes for each jurisdiction in which it conducts operations.

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Income tax expense is adjusted in our Statements of Consolidated Income in the period in which these events occur.

See Note 20 to the consolidated financial statements in Item 8 for information concerning income taxes.

The Company also considers both positive and negative evidence when measuring the realizability of our deferred tax assets and the need for a valuation allowance when it is more likely than not that all or a portion of such assets will not be realized.

The weight given to the evidence is commensurate with the extent to which it may be objectively verified.

The Company places significant weight on operating results during the most recent three-year period in its analysis.

Future reversals of existing temporary differences are heavily weighted sources of objectively verifiable positive evidence.

It is typical to only consider forecasts of future profitability when positive cumulative operating results exist in the most recent three-year period.

If necessary and available, tax planning strategies could be implemented to accelerate taxable amounts to utilize expiring

carryforwards.

A valuation allowance is not required to the extent that, in the Company’s judgment, positive evidence exists with a magnitude and duration sufficient to result in a conclusion that is more likely than not that deferred tax assets will be realized.

See Note 20 to the consolidated financial statements in Item 8 for further information concerning income taxes.

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What changed 10-K

Item 7. Management’s Discussion and Analysis