al mistysyn...financial community presentation –june 5, 2019 forward-looking statements the...

F I N A N C I A L C O M M U N I T Y P R E S E N T A T I O N – J U N E 5 , 2 0 1 9

FINANCIAL OVERVIEW

AL MISTYSYN

SENIOR VICE PRESIDENT -

FINANCE & CHIEF FINANCIAL OFFICER

1


Forward-Looking Statements

The presentations today will contain certain “forward-looking statements," within the meaning of the federal securities laws, with

respect to anticipated future performance (including sales and earnings), expected growth, future business plans and other matters.

These statements may be identified by the use of words and phrases such as "believe," "expect," "may," "will," "should," "target,"

"project," "could," "plan," "goal," "potential," "seek," "intend" or "anticipate" or the negative thereof or comparable terminology. These

statements are based upon management's current expectations, estimates, assumptions and beliefs concerning future events and

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

necessarily subject to risks, uncertainties and other factors, many of which are outside our control that could cause actual results to

differ materially from such statements and from our historical results and experience. These risks, uncertainties and other factors

include such things as: general business conditions, strengths of retail and manufacturing economies and the growth in the coatings

industry; changes in raw material and energy supplies and pricing; changes in our relationships with customers and suppliers; our

ability to successfully integrate past and future acquisitions into our existing operations, including Valspar, as well as the performance

of the businesses acquired; risks inherent in the achievement of additional anticipated cost synergies resulting from the acquisition of

Valspar and the timing thereof; competitive factors, including pricing pressures and product innovation and quality; the nature, cost,

quantity and outcome of pending and future litigation and other claims, including the lead pigment and lead-based paint litigation, and

the effect of any legislation and administrative regulations relating thereto; adverse weather conditions and natural disasters; and

other risks, uncertainties and factors described from time to time in our reports filed with the SEC. Since it is not possible to predict or

identify all of the risks, uncertainties and other factors that may affect future results, the above list should not be considered a

complete list. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no

obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

2


Consolidated SalesIn Millions of Dollars

$11,339

2014

$11,856

20172015 2016 2018

$11,130

$14,984

$17,534

Refer to Financial Appendix 1: Income Statement3

Expect 4% to 6% Sales CAGR Through FY20


2014

$5,559

201820172015 2016

$5,925

$5,164

$6,886

$7,513

44.4%

49.0%

46.4% 46.0%

45.9%

41.7%

50.0%

44.6%

42.8%

Consolidated Gross ProfitExcluding Acquisition Related & One-Time Costs

4

Adjusted Gross Margin

Proforma Gross Margin

Expect Long Term Gross Margin Range of 45% to 48%

$ In Millions

Refer to Financial Appendix 1: Income Statement

Adjusted Gross Profit


$4,102

2014

$3,823

2016 20182015 2017

$4,969

$3,914

$4,694

31.3%34.3%

31.1%

34.6%

29.6%

34.5%

30.1% 29.9%28.3%

SG&A ExpenseExcluding Acquisition Related & One-Time Costs

5

$ In Millions


Adjusted SG&A

Proforma SG&A % to Sales

Adjusted SG&A % to Sales


$1,342

2014 20182017

$1,647

20162015

$2,544

$1,824

$2,191

14.3%

14.5%12.1%

12.1%

15.4%

14.6%14.8%

14.6%

14.5%

Operating IncomeExcluding Acquisition Related & One-Time Costs

6

Adjusted Operating % to Sales

Proforma Operating % to Sales

$ In Millions


Adjusted Operating Income


Profit Before & After TaxExcluding Acquisition Related & One-Time Costs & Tax Reform

7

$1,258

20152014 2016 2017

$866

2018

$1,549

$1,054

$1,729

$1,214

$1,957

$1,430

$2,185

$1,760

Adjusted Profit Before Tax

Adjusted Profit After Tax Continuing Operations

PBT % to Sales 11.3% 13.7% 14.6% 13.1% 12.5%

PAT % to Sales 7.8% 9.3% 10.2% 9.5% 10.0%

$ In Millions



16.9%

$1,809

2018

13.7%

20172016

$2,821

16.0%

2014 2015

16.4% 16.1%

$1,521

$2,007

$2,456

Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA)

Excluding Acquisition Related & One-Time Costs

8

% to Sales

Adjusted EBITDA

$ In Millions

Refer to Financial Appendix 2A: FY EBITDA

Medium Term Target EBITDA as a % to Sales of 18.8% to 21.0%


First Quarter 2019 Highlights

9

1Q18 1Q19 % Chg.

External Sales $3.97B $4.04B +1.9%

US/Canada SSS +5.2% +3.6%

Consolidated EPS, Excluding Acquisition Related & One-Time Costs

$3.57 $3.60 +0.8%

EBITDA, Excluding Acquisition Related & One-Time Costs

$582M $575M -1.2%

Refer to Financial Appendix 2B: 1Q EBITDA & Appendix 3: 1Q Highlights


2019 Adjusted EPS Guidance ReconciliationFull Year EPS

Diluted Net Income per Share $17.43

Pension Plan Settlement Expense $0.27

Transaction & Integration Costs $0.56

Purchase Accounting Impacts $2.64

Total Acquisition Costs $3.20

Adjusted Diluted Net Income per Share $20.90

% Chg. Vs. Prior Year +12.8%

2019 FULL YEAR GUIDANCE MID-POINT

10

• Reaffirmed FY19 Adjusted EPS Guidance of

$20.40 to $21.40 per Share, Excluding

Acquisition Related Costs & Pension Plan

Settlement Expense

• Material Other Non-Operating Expenses,

Transaction & Integration Costs, & Purchase

Accounting Will Continue to be Disclosed

• Regulation G Reconciliation Table Over Time

Not Required


…Run Rate Synergies Expected To Be Realized

COGS

Raw Material

37%

Manufacturing/

Distribution/R&D14%

SG&A

43%

$230M

$380M $415M

2017 2018 Long-Term

Annual SynergyTarget

• 2018 P&L synergies of $180M

• 2019 P&L synergies approx. $70M to $80M

• Expect to incur majority of costs to achieve

by end of 2019

Consolidated Run Rate Synergies

Revenue Synergies

6%

Synergies Allocations ($415M)

11

Sherwin-Williams has Successfully Acquired and Integrated 21 Businesses

In the Ten Years Prior to Valspar


Working Capital PerformanceAccounts Receivable + Inventory – Payables

12.5%

$2,055

10.2%8.6%

2015

12.4%

$1,971

2014 2016*

$1,139

2017**

11.6%

2018

$975

$2,035

% to Sales

Working Capital

*PRO FORMA

**% TO PRO FORMA SALES

$ In Millions

1Q18 1Q19

$2,294

$2,439

13.6% 13.8%

12

Target FY Working Capital as a % to Sales of 11% to 11.5%


Cash Flow Performance, as ReportedIn Millions of Dollars

13

Uses of Cash

• Capital Expenditures

• Pay Dividends

• Manage Debt

• Acquisitions

• Buy Back Stock

2015

$881

20182014 2017

$1,447

2016

$1,082

$1,213$1,309

$1,070

$1,884

$1,661

$1,944

$1,693

Net Operating Cash

Net Operating Less Cap. Ex. (FCF)

Targeting Steady State Future Free Cash Flow of Greater Than 11.0% of Sales


Net Operating Cash Less CapEx, as ReportedIn Millions of Dollars

14

(500)

0

500

1,000

1,500

2,000

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year

2015 (97) 359 483 469 1,213

2016 (132) 528 398 276 1,070

2017 190 312 613 546 1,661

2018 (2) 479 788 428 1,693

2019 (87)


$ In Millions

Debt to EBITDA RatioExcluding Acquisition Related & One-Time Costs

4.5 4.3

3.3 3.5

2.8

$2,617

@ Close - 6/1/2017

$10,521

2019F2017

$11,755

2018 Q1 2019

$2,456

$9,344

$2,821 $2,815

$9,831

Debt

Adjusted EBITDA

Debt to EBITDA

15

Targeting Long Term Debt to EBITDA Ratio of 2.0X to 2.5X


$300

$1,500

$300

$400

$500

$400

$350

$119

$300

$400

$1,250

$4

$1,250

$250

$1,500

$250

20212018 20222019 2020 …

$650

$1,619

2024 2025 2026 2027 … 2042 2045 2047 … 2097

$1,650

$650

$ In Millions

Maturities of Long-Term Debt (as of December 31, 2018)

SHW

VAL

Acquisition - LT Debt

16

Committed to Reducing Total Debt $600M in 2019


Consistent Capital Allocation Philosophy

KEY OBJECTIVES

• BBB+ Target

Rating

• Debt to

EBITDA Leverage

2.0x to 2.5x

• Maintain Financial

Flexibility

BALANCED CAPITAL

ALLOCATION GOALS

CAPEX Invest

Dividend 30% of PY

Earnings

Strategic M&A

Share Repurchase

• Return Dividend to 30% of PY Earnings

– FY19 Increased 31.4%

• Reduce Debt to EBITDA Leverage To

Below 3.0x - FY19

• Maintain CAPEX to Below 2% of Sales

– FY18 & FY19

• Absent Strategic M&A

• Opportunistic Share Repurchase

17

Consistent Capital Allocation Philosophy

WE WILL NOT HOLD CASH


Rating Agencies

Standard & Poor’s Rating ServicesMay 2017

• Long-Term Rating at ‘BBB’

• Short-Term Rating at ‘A-2’

• Credit Watch Stable

Moody’s Investors ServicesFebruary 2019

• Long-Term Rating at ‘Baa3’

• Short-Term Rating at ‘P-3’


Fitch RatingsMay 2017

• Long-Term Rating at ‘BBB’

• Short-Term Rating at ‘F-3’


18


Consolidated Net Operating Cash & Uses of Cash

2014-2018

5-Year Net Operating Cash: ~$7.7B

USES OF CASH

• Capital Expenditures

• Pay Dividends

• Manage Debt

• Acquisitions

• Buy Back Stock

CASH DIVIDENDS

DEBT REPAYMENT

CAPITAL EXPENDITURES

TREASURY STOCK PURCHASE

$3.1

$1.4

$1.1

$2.4

19


Dividends Per Share2005 - 2019

$2.68

20112007

$0.82

2005 2006 2008 2010

$3.36

$1.42

2013 2014 2015 2016

$3.44

$2.00

2017 2018 201920122009

$1.00

$2.20

$1.26$1.40

$3.40

$1.44 $1.46 $1.56

$4.52*

+31.4%

2018 was 40th Consecutive Year

of Dividend Increases

20 *Management Recommendation Board approval required

Dividend Returned to 30% of Prior Year Earnings in 2019


Treasury Stock Acquired2010 - 1Q 2019 (000s)

Shares

Average Price

Per Share Total Dollars

Avg. Shares

Outstanding

2010 5,000 $75.14 $375,700 108,786

2011 4,700 $78.16 $367,372 105,672

2012 4,600 $121.25 $557,766 103,930

2013 4,300 $178.90 $769,271 103,049

2014 6,925 $220.66 $1,528,074 98,741

2015 3,575 $278.57 $995,880 94,544

2016 0 $0.00 $0 94,488

2017 0 $0.00 $0 94,927

2018 1,525 $402.17 $613,312 94,988

1Q 2019 750 $406.86 $305,146 93,669

Balance of Authorization at 3/31/19: 9,375,000 Shares21


Summary Capitalization

• Liquidity Sources Increase $1.15B in 2018

• $2.7B Available at 3/31/19

• Expect to Maintain Balance Sheet

Flexibility to Pursue Growth Opportunities

• Annual Cash Generation Comfortably

Supports Anticipated Funding Needs

• Reduce Debt $600M FY19

1Q19 .

Cash $0.09B

Debt $9.8B

Revolving Credit Facility $2.0B

LOC CDS $1.5B

Total Liquidity Available $3.5B

Strong Financial Profile Provides Flexibility

22


FY20 Financial Target Update

FY16PRO

FORMA

FY17PRO

FORMA

FY18ACTUAL

FY19GUIDANCE

ORIGINAL

FY20TARGETS

Net Sales $15.8B $16.6B $17.5B 4%-7% 4%-6%CAGR Growth

EBITDA Margin 16.6% 16.2% 16.1%

18.8%-

21.0%Margin

Expansion

Free Cash Flow

% to Sales8.9% 8.9% 9.7% >11%

Core EPS* $16.57 $15.65 $18.53$20.90

At MidPoint

11.0%-

14.0%4 YRS EPS

CAGR

FY20 TARGET UPDATE• Reaffirming Financial Targets

• Timing Revised

• Price Increases Implemented to Offset

Significant Raw Material Cost Increases

• Dilutive to EBITDA Margin and EPS

EBITDA MARGIN• Leverage From Organic Growth

• P&L Synergies 2017 to 2019 Estimate

of $315M

CORE EPS• 2019 Guidance $20.90/Share at MidPoint

Increase of 12.8%

• Implied GM/EBITDA Expansion

*Excluding Acquisition Related Costs and One-Time Costs,,

2016 Valspar Restructuring Costs & Purchase Accounting Items.23


A STRONG FOUNDATION

• Track Record of Financial Performance & Focused Execution

• Large, Stable Revenue Base with Improving EBITDA Margins

• Strong Balance Sheet & Getting Stronger

• SHW Experienced & Determined Management Team

…ON WHICH WE WILL CONTINUE TO BUILD

• Grow Revenue Organically & through Acquisitions

• Continue to Invest in our Controlled Distribution Platform

• Significant Cost Synergies & Operational Efficiencies to Expand

EBITDA Margins

• Improved Free Cash Flow as % to Sales

• Disciplined Capital Allocation to Maximize Shareholder Returns

• Management Incentives Aligned with Multi-Industry Metrics

24

FINANCIAL APPENDIX

25


Appendix 1: Income Statement (In Millions of Dollars)

Excluding Acquisition Related Costs, Reconciliation to As Reported

26

FY17 AS

REPORTED (1)

FY17ACQUISTION

RELATED COSTS

(1)

FY17EXCLUDING

ACQUISTION

RELATED COSTS

(2)

FY18AS

REPORTED

FY18ONE TIME

COSTS

FY18ACQUISITION

RELATED COSTS

FY18EXCLUDING ACQ

REL & ONE TIME

COSTS

Sales $14,984 $14,984 $17,534 $17,534

Gross Profit $6,719 ($167) $6,886 $7,419 $0 ($95) $7,513

% to Sales 44.8% 46.0% 42.3% 42.8%

SG&A $5,004 $310 $4,694 $5,351 $0 $382 $4,969

% to Sales 33.4% 31.3% 30.5% 28.3%

OPERATING INCOME $1,714 ($477) $2,191 $2,067 $0 ($477) $2,544

% to Sales 11.4% 14.6% 11.8% 14.5%

PBT $1,469 ($488) $1,957 $1,360 ($341) ($484) $2,185

% to Sales 9.8% 13.1% 7.8% 12.5%

PAT $1,101 ($330) $1,430 $1,109 ($257) ($394) $1,760

% to Sales 7.3% 9.5% 6.3% 10.0%

TAX REFORM $669

DISC OPS ($42)

PAT AS REPORTED $1,728

11.5%

(1) 2017 as reported and acquisition related costs has been adjusted for an inventory change made in 2018.

(2) 2017 excluding acquisition related costs has been adjusted for the adoption of ASU No. 2017-07 (no PBT impact).


Appendix 2A: FY EBITDA (In Millions of Dollars)


27

FY17 AS

REPORTED

FY17 ACQUISITION

RELATED

COSTS

FY17EXCLUDING

ACQUISTION

RELATED

COSTS

FY18AS

REPORTED

FY18ONE TIME

COSTS

FY18ACQUISITION

RELATED COSTS

FY18EXCLUDING ACQ

REL & ONE TIME

COSTS

Net Income from

Continuing

Operations

$1,769 ($330) $2,099 $1,109 ($257) ($394) $1,760

Interest Expense $263 $9 $254 $367 $0 $0 $367

Income Taxes ($300) ($159) ($141) $251 ($85) ($90) $425

Depreciation $285 $65 $220 $278 $0 $38 $241

Amortization $207 $183 $24 $318 $0 $290 $28

EBITDA $2,225 ($232) $2,456 $2,323 ($341) ($157) $2,821

% to Sales 14.8% 16.4% 13.2% 16.1%


Appendix 2B: 1Q EBITDA (In Millions of Dollars)


28

1Q18AS REPORTED

1Q18ONE TIME

COSTS

1Q18ACQUISTION

RELATED

1Q18EXCLUDING

ACQ REL &

ONE TIME

COSTS

1Q19AS REPORTED

1Q19ONE TIME

COSTS

1Q19ACQUISTION

RELATED

1Q19EXCLUDING

ACQUISTION

RELATED

COSTS

Net Income $250 $0 ($91) $341 $245 ($25) ($67) $337

Interest

Expense$92 $0 $0 $92 $91 $0 $0 $91

Income Taxes $53 $0 ($29) $82 $54 ($7) ($20) $81

Depreciation $72 $0 $12 $60 $65 $0 $5 $60

Amortization $85 $0 $78 $7 $79 $0 $72 $6

EBITDA $552 ($30) $582 $533 ($32) ($9) $575


Appendix 3: 1Q Highlights (In Millions of Dollars)

Regulation G Reconciliation

29

1Q18ACTUAL

1Q19ACTUAL

2018ACTUAL

2019 GUIDANCE

LOW HIGH

Diluted net income per common share $2.62 $2.62 $11.67 $16.93 $17.93

California litigation expense $1.09

Environmental expense provision $1.32

Pension plan settlement expense $0.27 $.30 $.27 $.27

Other non-operating expenses $0.27 $2.71 $.27 $.27

Transaction and integration costs $0.24 $0.08 $1.55 $0.56 $0.56

Purchase accounting impacts $0.71 $0.63 $2.60 $2.64 $2.64

Total acquisition costs $0.95 $0.71 $4.15 $3.20 $3.20

Consolidated excluding Valspar acquisition

costs and one-time items$3.57 $3.60 $18.53 $20.40 $21.40


Appendix 4: 2017 PRO FORMA (In Millions of Dollars)

30

(1) 2017 as reported and acquisition related costs has been adjusted for an inventory accounting change made in 2018.

(2) Pro Forma Adjustments include January to May 2017 Valspar Operations and January to May 2017 New Debt Interest Expense.

FY17AS

REPORTED (1)

FY17ACQUISITION

RELATED COSTS

& TAX REFORM

BENEFITS (1)

FY17 EXCLUDING

ACQUISTION

RELATED COSTS

FY17PRO FORMA

ADJUSTMENTS

(2)

FY17PRO FORMA

NET SALES $14,984 $14,984 $1,651 $16,635

INCOME BEFORE INCOME TAXES $1,469 ($488) $1,957 $75 $2,033

TAXES ($259) ($786) $527 $20 $548

NET INCOME $1,728 $298 $1,430 $55 $1,485

EPS $18.20 $3.13 $15.07 $0.58 $15.65


Appendix 5: Group Financials (In Millions of Dollars)


31

FY17AS

REPORTED

FY17VAL PRO

FORMA

FY17ACQUISITION

RELATED

COSTS

FY17PRO FORMA

FY18AS

REPORTED

FY18ACQUISITION

RELATED

COSTS

FY18PRO FORMA

PCG Sales $3,706 $1,102 $4,808 $5,166 $5,166

PCG Segment Profit $263 $172 $(219) $653 $452 $(216) $668

CBG Sales $2,155 $547 $2,701 $2,739 $2,739

CBG Segment Profit $203 $60 $(131) $394 $261 $(111) $372

1Q18AS

REPORTED

1Q18ACQUISITION

RELATED

COSTS

1Q18PRO FORMA

1Q19AS

REPORTED

1Q19ACQUISITION

RELATED COSTS

1Q19PRO FORMA

PCG Sales $1,228 $1,228 $1,231 $1,231

PCG Segment Profit $91 $(58) $148 $99 $(54) $153

CBG Sales $656 $656 $655 $655

CBG Segment Profit $74 $(32) $106 $88 $(23) $111

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