SHERWIN WILLIAMS CO - Quarter Report: 2022 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 2022


☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number 1-04851

THE SHERWIN-WILLIAMS COMPANY

(Exact name of registrant as specified in its charter)


Ohio		34-0526850
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

101 West Prospect Avenue
Cleveland,	Ohio	44115-1075
(Address of principal executive offices)		(Zip Code)

(216) 566-2000

(Registrant’s telephone number including area code)

Title of each class

Trading Symbol

Name of exchange on which registered

Common Stock, par value of $0.33-1/3 per share

SHW

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

Common Stock, $0.33-1/3 Par Value – 259,143,416 shares as of September 30, 2022.

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements			2
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
Item 3. Quantitative and Qualitative Disclosures About Market Risk			39
Item 4. Controls and Procedures			39

PART II. OTHER INFORMATION
Item 1. Legal Proceedings			40
Item 1A. Risk Factors			40
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			40
Item 5. Other Information			40
Item 6. Exhibits			41

SIGNATURES			42

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES

STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)


(in millions, except per share data)	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net sales	$	6,047.4		$	5,146.7		$	16,918.4		$	15,182.5
Cost of goods sold	3,458.0			3,007.1			9,827.1			8,519.5
Gross profit	2,589.4			2,139.6			7,091.3			6,663.0
Percent to net sales	42.8		%	41.6		%	41.9		%	43.9		%
Selling, general and administrative expenses	1,528.6			1,368.9			4,455.2			4,132.6
Percent to net sales	25.3		%	26.6		%	26.3		%	27.2		%
Other general (income) expense - net	(14.4)			(1.1)			(7.5)			111.2
Amortization	81.3			76.2			237.8			233.2

Interest expense	101.2			83.1			282.5			249.8
Interest income	(2.6)			(0.7)			(4.8)			(1.9)
Other expense (income) - net	18.1			1.7			49.9			(1.6)
Income before income taxes	877.2			611.5			2,078.2			1,939.7
Income taxes	192.1			109.3			444.4			379.3
Net income	$	685.1		$	502.2		$	1,633.8		$	1,560.4

Net income per common share:
Basic	$	2.66		$	1.92		$	6.33		$	5.92
Diluted	$	2.62		$	1.88		$	6.23		$	5.82

Weighted average shares outstanding:
Basic	257.7			261.6			258.2			263.4
Diluted	261.1			266.6			262.2			268.1

See notes to condensed consolidated financial statements.

THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (UNAUDITED)


(in millions)	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Net income	$	685.1	$	502.2	$	1,633.8	$	1,560.4

Other comprehensive loss, net of tax:

Foreign currency translation adjustments (1)	(148.0)		(86.2)		(364.7)		(69.9)

Pension and other postretirement benefit adjustments:

Amounts reclassified from AOCI (2)	1.0		1.4		3.5		4.6

Unrealized net gains on cash flow hedges:

Amounts reclassified from AOCI (3)	(0.9)		(0.7)		(2.9)		(3.1)

Other comprehensive loss	(147.9)		(85.5)		(364.1)		(68.4)

Comprehensive income	$	537.2	$	416.7	$	1,269.7	$	1,492.0

(1) The three months ended September 30, 2022 and 2021 include unrealized gains, net of taxes, of $30.9 million and $14.5 million, respectively, related to net investment hedges. The nine months ended September 30, 2022 and 2021 include unrealized gains, net of taxes, of $69.8 million and $31.6 million, respectively, related to net investment hedges. See Note 12 for additional information.

(2) Net of taxes of $(0.3) million and $(0.6) million in the three months ended September 30, 2022 and 2021, respectively. Net of taxes of $(1.1) million and $(1.7) million in the nine months ended September 30, 2022 and 2021, respectively.

(3) Net of taxes of $0.3 million and $0.6 million in the three months ended September 30, 2022 and 2021, respectively. Net of taxes of $1.0 million in the nine months ended September 30, 2022 and 2021.

See notes to condensed consolidated financial statements.

THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)


(in millions)	September 30, 2022		December 31, 2021		September 30, 2021
Assets
Current assets:
Cash and cash equivalents	$	130.5	$	165.7	$	313.3
Accounts receivable, net	2,897.6		2,352.4		2,598.0
Inventories	2,547.8		1,927.2		1,816.0
Other current assets	541.3		608.4		651.1
Total current assets	6,117.2		5,053.7		5,378.4
Property, plant and equipment, net	2,041.2		1,867.3		1,827.2
Goodwill	7,318.2		7,134.6		6,996.3
Intangible assets	3,958.3		4,001.5		4,068.8
Operating lease right-of-use assets	1,853.0		1,820.6		1,774.4
Other assets	957.9		789.0		691.5
Total assets	$	22,245.8	$	20,666.7	$	20,736.6

Liabilities and Shareholders’ Equity
Current liabilities:
Short-term borrowings	$	945.2	$	763.5	$	709.4
Accounts payable	2,808.4		2,403.0		2,675.4
Compensation and taxes withheld	650.6		716.6		692.1
Accrued taxes	205.3		160.3		181.3
Current portion of long-term debt	0.6		260.6		662.1
Current portion of operating lease liabilities	418.1		409.7		398.8
Other accruals	1,067.8		1,005.8		1,159.4
Total current liabilities	6,096.0		5,719.5		6,478.5
Long-term debt	9,588.9		8,590.9		7,604.9
Postretirement benefits other than pensions	256.5		259.4		271.8
Deferred income taxes	691.8		768.2		801.5
Long-term operating lease liabilities	1,492.4		1,470.7		1,433.9
Other long-term liabilities	1,522.4		1,420.8		1,455.7
Shareholders’ equity:
Common stock - $0.33-1/3 par value:
259.1 million, 261.1 million and 262.2 million shares outstanding
at September 30, 2022, December 31, 2021 and September 30, 2021, respectively	91.1		90.8		90.5
Other capital	3,919.6		3,793.0		3,688.1
Retained earnings	3,292.6		2,121.7		1,961.8
Treasury stock, at cost	(3,643.0)		(2,869.9)		(2,263.4)
Accumulated other comprehensive loss	(1,062.5)		(698.4)		(786.7)
Total shareholders' equity	2,597.8		2,437.2		2,690.3
Total liabilities and shareholders’ equity	$	22,245.8	$	20,666.7	$	20,736.6

See notes to condensed consolidated financial statements.

THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)


(in millions)	Nine Months Ended
	September 30, 2022		September 30, 2021
OPERATING ACTIVITIES
Net income	$	1,633.8	$	1,560.4
Adjustments to reconcile net income to net operating cash:
Depreciation	194.8		199.8
Non-cash lease expense	310.5		295.0
Amortization of intangible assets	237.8		233.2
Loss on divestiture of business	—		111.9


Amortization of credit facility and debt issuance costs	5.3		4.9
Stock-based compensation expense	80.0		64.9
Provisions for environmental-related matters	11.1		5.5
Defined benefit pension plans net cost	4.1		5.7
Deferred income taxes	(108.8)		(24.3)
Other	48.2		38.5
Change in working capital accounts - net	(818.2)		(166.0)
Change in operating lease liabilities	(312.8)		(297.2)
Costs incurred for environmental-related matters	(19.3)		(34.0)
Other	12.4		52.4
Net operating cash	1,278.9		2,050.7

INVESTING ACTIVITIES
Capital expenditures	(410.7)		(248.1)
Acquisitions of businesses, net of cash acquired	(626.8)		(25.3)
Proceeds from divestiture of business	—		122.5
Proceeds from sale of assets	33.2		14.8
Other	(46.2)		(90.6)
Net investing cash	(1,050.5)		(226.7)

FINANCING ACTIVITIES
Net increase in short-term borrowings	184.5		707.9
Proceeds from long-term debt	999.7		—
Payments of long-term debt	(260.3)		(24.6)
Payments for credit facility and debt issuance costs	(7.3)		(1.7)
Payments of cash dividends	(462.9)		(442.9)
Proceeds from stock options exercised	38.9		121.3
Treasury stock purchased	(751.1)		(2,076.5)
Proceeds from treasury stock issued	22.0		11.7

Other	(27.1)		(32.9)
Net financing cash	(263.6)		(1,737.7)

Effect of exchange rate changes on cash	—		0.4
Net (decrease) increase in cash and cash equivalents	(35.2)		86.7
Cash and cash equivalents at beginning of year	165.7		226.6
Cash and cash equivalents at end of period	$	130.5	$	313.3

Income taxes paid	$	430.2	$	423.9
Interest paid	266.9		238.5

See notes to condensed consolidated financial statements.

THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES

STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY (UNAUDITED)


(in millions, except per share data)	Common Stock		Other Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance at December 31, 2021	$	90.8	$	3,793.0	$	2,121.7	$	(2,869.9)	$	(698.4)	$	2,437.2
Net income					370.8						370.8
Other comprehensive loss									(43.6)		(43.6)
Treasury stock purchased							(407.1)				(407.1)
Treasury stock issued			11.0				11.0				22.0
Stock-based compensation activity	0.2		38.3				(32.9)				5.6
Other adjustments			0.4		(0.1)						0.3
Cash dividends -- $0.60 per share					(150.9)						(150.9)
Balance at March 31, 2022	$	91.0	$	3,842.7	$	2,341.5	$	(3,298.9)	$	(742.0)	$	2,234.3
Net income					577.9						577.9
Other comprehensive loss									(172.6)		(172.6)
Treasury stock purchased							(296.4)				(296.4)

Stock-based compensation activity			41.5								41.5
Other adjustments			(3.9)		0.1		(0.1)				(3.9)
Cash dividends -- $0.60 per share					(156.2)						(156.2)
Balance at June 30, 2022	$	91.0	$	3,880.3	$	2,763.3	$	(3,595.4)	$	(914.6)	$	2,224.6
Net income					685.1						685.1
Other comprehensive loss									(147.9)		(147.9)
Treasury stock purchased							(47.6)				(47.6)
Stock-based compensation activity	0.1		39.0				(0.1)				39.0
Other adjustments			0.3				0.1				0.4
Cash dividends -- $0.60 per share					(155.8)						(155.8)
Balance at September 30, 2022	$	91.1	$	3,919.6	$	3,292.6	$	(3,643.0)	$	(1,062.5)	$	2,597.8


(in millions, except per share data)	Common Stock		Other Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance at December 31, 2020	$	89.9	$	3,491.4	$	844.3	$	(96.5)	$	(718.3)	$	3,610.8
Net income					409.6						409.6
Other comprehensive loss									(45.5)		(45.5)
Treasury stock purchased							(775.4)				(775.4)
Stock-based compensation activity	0.3		51.5				(21.5)				30.3
Other adjustments			0.7								0.7
Cash dividends -- $0.55 per share					(151.8)						(151.8)
Balance at March 31, 2021	$	90.2	$	3,543.6	$	1,102.1	$	(893.4)	$	(763.8)	$	3,078.7
Net income					648.6						648.6
Other comprehensive income									62.6		62.6
Treasury stock purchased							(870.1)				(870.1)
Treasury stock issued			9.3				2.4				11.7
Stock-based compensation activity	0.4		54.6				(0.8)				54.2
Other adjustments			0.6								0.6
Cash dividends -- $0.55 per share					(145.9)						(145.9)
Balance at June 30, 2021	$	90.6	$	3,608.1	$	1,604.8	$	(1,761.9)	$	(701.2)	$	2,840.4
Net income					502.2						502.2
Other comprehensive loss									(85.5)		(85.5)
Treasury stock purchased							(501.5)				(501.5)
Stock-based compensation activity			80.2								80.2
Other adjustments	(0.1)		(0.2)								(0.3)
Cash dividends -- $0.55 per share					(145.2)						(145.2)
Balance at September 30, 2021	$	90.5	$	3,688.1	$	1,961.8	$	(2,263.4)	$	(786.7)	$	2,690.3

See notes to condensed consolidated financial statements.

THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(millions of dollars, unless otherwise noted)

Periods ended September 30, 2022 and 2021

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of The Sherwin-Williams Company and its wholly owned subsidiaries (collectively, the Company) have been prepared in accordance with U.S. generally accepted accounting principles (US GAAP) for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

There have been no significant changes in significant accounting policies since December 31, 2021. Accounting estimates were revised as necessary during the first nine months of 2022 based on new information and changes in facts and circumstances.

The Company has historically experienced, and expects to continue to experience, variability in quarterly results. The results of operations for the three and nine months ended September 30, 2022 are not indicative of the results to be expected for the full year as business is seasonal in nature with the majority of Net sales for the Reportable Segments traditionally occurring during the second and third quarters. However, periods of economic uncertainty can alter the Company's seasonal patterns.

NOTE 2 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Adopted

Effective January 1, 2022, the Company adopted Accounting Standards Update (ASU) 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance.” This ASU requires disclosures for material government assistance transactions during annual reporting periods. The disclosures include information about the nature of the transaction, the related accounting policies used to account for the government assistance, the effect of government assistance on the entity’s financial statements, and any significant terms and conditions. The adoption of ASU 2021-10 did not affect the Company’s financial position, results of operations or cash flows as the standard only impacts annual financial statement footnote disclosures.

Not Yet Adopted

In October 2021, the Financial Accounting Standards Board (FASB) issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Liabilities from Contracts with Customers.” This ASU requires an acquiring entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. The ASU is effective for fiscal years and interim periods beginning after December 15, 2022, with early adoption permitted. The Company is evaluating the impact of adopting this ASU.

NOTE 3 - ACQUISITIONS AND DIVESTITURES

Acquisitions

Closed in Prior Year

During the first quarter of 2022, the Company made certain adjustments to the preliminary purchase accounting adjustments associated with the net assets acquired in its 2021 acquisition of Specialty Polymers, Inc. The fair value of finite-lived intangible assets increased by $61.4 million and property, plant and equipment assets acquired increased by $11.0 million, offset by a corresponding net decrease in goodwill. There was no material impact on previously reported financial results from these adjustments. The Company expects to complete the preliminary purchase price allocation for the acquisition within the allowable measurement period.

Closed in Current Year

In April 2022, the Company completed the acquisition of the European industrial coatings business of Sika AG (Sika). This business engineers, manufactures and sells corrosion protection coating systems and fire protection coating systems. In July 2022, the Company completed the acquisitions of Gross & Perthun GmbH, a German-based developer, manufacturer, and distributor of coatings primarily for the heavy equipment and transportation industries, Dur-A-Flex, Inc., a domestic floor

coatings company, and Powdertech Oy Ltd., a Finland-based distributor of powder coatings and related products. The acquired businesses will be reported within the Company’s Performance Coatings Group.

The aggregate purchase price for the businesses acquired in the nine months ended September 30, 2022 was approximately $649.1 million, including amounts withheld as security for certain representations, warranties and obligations of the sellers. The purchase price for each acquisition was preliminarily allocated to identifiable assets and liabilities based on information available at the date of acquisition and may change as the Company completes its analysis of net assets acquired, primarily the identification and valuation of intangible assets. As of September 30, 2022, $214.2 million of intangible assets and $380.5 million of goodwill were recognized from these transactions. The Company expects to finalize the purchase price allocation for each of the acquisitions within the allowable measurement period. The results of operations for the acquisitions have been included in the consolidated financial statements since the respective acquisition dates. Pro forma results of operations have not been presented as the impact on the Company’s consolidated financial results is not material.

Pending

During the third quarter of 2022, the Company signed an agreement to acquire Industria Chimica Adriatica S.p.A. (ICA), an Italian designer, manufacturer and distributor of industrial wood coatings with global operations and production facilities in Italy and Poland. The transaction is subject to customary closing conditions and is expected to close by the end of 2022. The acquired business will be reported within the Company’s Performance Coatings Group.

Divestiture

On March 31, 2021, the Company divested Wattyl, an Australian and New Zealand manufacturer and seller of architectural and protective paint and coatings with annual revenue of approximately $200 million. The divestiture enabled the Company to focus its resources on global opportunities which better align with our long-term strategies. In connection with this transaction, the Company recognized a pre-tax loss of $111.9 million within Other general (income) expense - net (see Note 15). The Wattyl divestiture did not meet the criteria to be reported as discontinued operations in our consolidated financial statements as the Company’s decision to divest this business did not represent a strategic shift that will have a major effect on the Company’s operations and financial results.

NOTE 4 - INVENTORIES

Included in Inventories were the following:


	September 30,		December 31,		September 30,
	2022		2021		2021
Finished goods	$	1,925.6	$	1,378.8	$	1,276.6
Work in process and raw materials	622.2		548.4		539.4
Inventories	$	2,547.8	$	1,927.2	$	1,816.0

The Company primarily uses the last-in, first-out (LIFO) method of valuing inventory. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs are subject to the final year-end LIFO inventory valuation. In addition, interim inventory levels include management’s estimates of annual inventory losses due to shrinkage and other factors. For further information on the Company’s inventory valuation, see Note 4 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

NOTE 5 - LONG-LIVED ASSETS

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


	September 30,		December 31,		September 30,
	2022		2021		2021
Land	$	245.6	$	257.7	$	257.6
Buildings	1,133.6		1,157.8		1,077.6
Machinery and equipment	3,121.9		3,043.6		3,016.2
Construction in progress	453.2		205.4		231.6
Property, plant and equipment, gross	4,954.3		4,664.5		4,583.0
Less allowances for depreciation	2,913.1		2,797.2		2,755.8
Property, plant and equipment, net	$	2,041.2	$	1,867.3	$	1,827.2

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

NOTE 6 - DEBT

The following table summarizes the Company’s outstanding debt:


	September 30,		December 31,		September 30,
	2022		2021		2021
Long-term debt (including current portion)	$	9,589.5	$	8,851.5	$	8,267.0
Short-term borrowings	945.2		763.5		709.4
Total debt outstanding	$	10,534.7	$	9,615.0	$	8,976.4

Long-Term Debt

The Company’s long-term debt primarily consists of senior notes. In August 2022, the Company issued $600.0 million of 4.050% Senior Notes due 2024 and $400.0 million of 4.250% Senior Notes due 2025 in a public offering. The net proceeds from the issuance of these notes were used to repay borrowings outstanding under the Company’s credit agreement dated May 9, 2016, as amended, and domestic commercial paper program. For further details on the Company’s debt, including available credit facilities and related agreements, see Note 6 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Short-Term Borrowings

On May 23, 2022, the Company amended its credit agreement dated May 9, 2016, as amended, to extend the maturity of $150.0 million of the commitments available for borrowing or letters of credit.

On multiple dates during the third quarter of 2022, the Company amended its credit agreement dated August 2, 2021, as amended, to extend the maturities of $250.0 million, in the aggregate, of the commitments available for borrowing or letters of credit.

On August 30, 2022, the Company and two of its wholly-owned subsidiaries, Sherwin-Williams Canada Inc. (SW Canada) and Sherwin-Williams Luxembourg S.à r.l. (SW Luxembourg, together with the Company and SW Canada, the Borrowers), entered into a new five-year $2.250 billion credit agreement (New Credit Agreement). The New Credit Agreement may be used for general corporate purposes, including the financing of working capital requirements. The New Credit Agreement replaced the $2.000 billion credit agreement dated June 29, 2021, as amended, which was terminated effective August 30, 2022. The New Credit Agreement will mature on August 30, 2027 and provides that the Company may request to extend the maturity date of the facility for two additional one-year periods. In addition, the New Credit Agreement provides that the Borrowers may increase the aggregate size of the facility up to an additional amount of $750.0 million, subject to the discretion of each lender to participate in the increase, and the Borrowers may request letters of credit in an amount of up to $250.0 million.

The Company’s available capacity under its committed credit agreements is reduced for amounts outstanding under its domestic commercial paper program, various credit agreements and letters of credit. At September 30, 2022, the Company had unused

capacity under its various credit agreements of $2.826 billion. The following table summarizes the Company’s short-term borrowings:


	September 30,			December 31,			September 30,
	2022			2021			2021
Short-term borrowings:
Domestic commercial paper	$	889.3		$	739.9		$	694.9

Foreign facilities	55.9			23.6			14.5
Total	$	945.2		$	763.5		$	709.4

Weighted average interest rate:
Domestic commercial paper	3.3		%	0.3		%	0.2		%

Foreign facilities	4.4		%	9.5		%	4.7		%

NOTE 7 - PENSION AND OTHER POSTRETIREMENT BENEFITS

The following table summarizes the components of the Company’s net periodic benefit cost for domestic and foreign defined benefit pension plans and other postretirement benefits:


	Domestic Defined Benefit Pension Plan				Foreign Defined Benefit Pension Plans				Other Postretirement Benefits
	2022		2021		2022		2021		2022		2021
Three Months Ended September 30:
Net periodic benefit cost:
Service cost	$	1.3	$	1.3	$	1.6	$	1.9	$	0.3	$	0.3
Interest cost	0.8		0.6		1.9		1.4		1.4		1.2
Expected return on assets	(2.0)		(1.7)		(2.6)		(2.4)
Amortization of prior service cost (credit)	0.2		0.3						(0.1)		0.1
Amortization of actuarial losses					0.1		0.4		1.1		1.2
Net periodic benefit cost	$	0.3	$	0.5	$	1.0	$	1.3	$	2.7	$	2.8

Nine Months Ended September 30:
Net periodic benefit cost:
Service cost	$	3.8	$	3.8	$	4.9	$	5.6	$	0.9	$	1.0
Interest cost	2.4		2.0		4.8		4.2		4.4		3.8
Expected return on assets	(5.8)		(5.3)		(7.7)		(7.2)
Amortization of prior service cost (credit)	0.7		0.8		(0.1)				(0.3)		0.2
Amortization of actuarial losses					1.1		1.1		3.2		3.5
Ongoing net periodic benefit cost	1.1		1.3		3.0		3.7		8.2		8.5
Divestiture of business							0.7
Net periodic benefit cost	$	1.1	$	1.3	$	3.0	$	4.4	$	8.2	$	8.5

Service cost is recorded in Cost of goods sold and Selling, general and administrative expenses. All other components are recorded in Other expense (income) - net. For further details on the Company’s pension and other postretirement benefits, see Note 7 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

NOTE 8 - OTHER LONG-TERM 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.

The Company is involved with environmental investigation and remediation activities at some of its currently and formerly owned sites (including sites which were previously owned and/or operated by businesses acquired by the Company). In addition, the Company, together with other parties, has been designated a potentially responsible party under federal and state environmental protection laws for the investigation and remediation of environmental contamination and hazardous waste at a number of third-party sites, primarily Superfund sites. In general, these laws provide that potentially responsible parties may be held jointly and severally liable for investigation and remediation costs regardless of fault. The Company may be similarly designated with respect to additional third-party sites in the future.

The Company initially provides for estimated costs of environmental-related activities relating to its past operations and third-party sites for which commitments or clean-up plans have been developed and when such costs can be reasonably estimated based on industry standards and professional judgment. These estimated costs, which are mostly undiscounted, are determined based on currently available facts regarding each site. If the reasonably estimable costs can only be identified as a range and no specific amount within that range can be determined more likely than any other amount within the range, the minimum of the range is provided.

The Company continuously assesses its potential liability for investigation and remediation-related activities and adjusts its environmental-related accruals as information becomes available upon which more accurate costs can be reasonably estimated and as additional accounting guidelines are issued. At September 30, 2022 and 2021, the Company had accruals reported on the balance sheet as Other long-term liabilities of $268.0 million and $271.1 million, respectively. Estimated costs of current investigation and remediation activities of $45.9 million and $68.6 million are included in Other accruals at September 30, 2022 and 2021, respectively.

Actual costs incurred may vary from the accrued estimates due to the inherent uncertainties involved including, among others, the number and financial condition of parties involved with respect to any given site, the volumetric contribution which may be attributed to the Company relative to that attributed to other parties, the nature and magnitude of the wastes involved, the various technologies that can be used for remediation and the determination of acceptable remediation with respect to a particular site. If the Company's future loss contingency is ultimately determined to be at the unaccrued maximum of the estimated range of possible outcomes for every site for which costs can be reasonably estimated, the Company's accrual for environmental-related activities would be $92.6 million higher than the minimum accruals at September 30, 2022. Additionally, costs for environmental-related activities may not be reasonably estimable at early stages of investigation and therefore would not be included in the unaccrued maximum amount.

Four of the Company’s currently and formerly owned manufacturing sites (Major Sites) account for the majority of the accrual for environmental-related activities and the unaccrued maximum of the estimated range of possible outcomes at September 30, 2022. At September 30, 2022, $269.8 million, or 86.0% of the total accrual, related directly to the Major Sites. In the aggregate unaccrued maximum of $92.6 million at September 30, 2022, $70.7 million, or 76.4%, related to the Major Sites. The significant cost components of this liability continue to be related to remedy implementation, regulatory agency interaction, project management and other costs. While different for each specific environmental situation, these components generally each account for approximately 85%, 10%, and 5%, respectively, of the accrued amount and those percentages are subject to change over time. While environmental investigations and remedial actions are in different stages at these sites, additional investigations, remedial actions and monitoring will likely be required at each site.

The largest and most complex of the Major Sites is the Gibbsboro, New Jersey site (Gibbsboro) which comprises the substantial majority of the environmental-related accrual. Gibbsboro, a former manufacturing plant, and related areas, which ceased operations in 1978, has had various areas included on the National Priorities List since 1999. This location has soil, waterbodies, and groundwater contamination related to the historic operations of the facility. Gibbsboro has been divided by the Environmental Protection Agency (EPA) into six operable units (OUs) based on location and characteristics, whose investigation and remediation efforts are likely to occur over an extended period of time. Each of the OUs are in various phases of investigation and remediation with the EPA that provide enough information to reasonably estimate cost ranges and record environmental-related accruals. The most significant assumptions underlying the reliability and precision of remediation cost

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

The remaining three Major Sites comprising the majority of the accrual include (1) a multi-party Superfund site that has received a record of decision from the federal EPA and is currently in the remedial design phase for one OU and for which a remedial investigation/feasibility study has been submitted for another OU, (2) a closed paint manufacturing facility that is in the operation and maintenance phase of remediation under both federal and state EPA programs, and (3) a formerly-owned site containing warehouse and office space that is in the remedial investigation phase under a state EPA program. Each of these three Major Sites are in phases of investigation and remediation that provide sufficient information to reasonably estimate cost ranges and record environmental-related accruals.

Excluding the Major Sites discussed above, no sites are individually material to the total accrual balance. There are multiple, future events yet to occur, including further remedy selection and design, remedy implementation and execution, and securing applicable governmental agency approvals, all of which have the potential to contribute to the uncertainty surrounding these future events. As these events occur and to the extent that the cost estimates of the environmental remediation change, the existing reserve will be adjusted.

Management cannot presently estimate the ultimate potential loss contingencies related to these sites or other less significant sites until such time as a substantial portion of the investigation at the sites is completed and remedial action plans are developed. Unasserted claims could have a material effect on the Company's loss contingency as more information becomes available over time. At September 30, 2022, the Company did not have material loss contingency accruals related to unasserted claims. Management does not expect that a material portion of unrecognized loss contingencies will be recoverable through insurance, indemnification agreements or other sources. In the event any future loss contingency significantly exceeds the current amount accrued, the recording of the ultimate liability may result in a material impact on net income for the annual or interim period during which the additional costs are accrued. Moreover, management does not believe that any potential liability ultimately attributed to the Company for its environmental-related matters will have a material adverse effect on the Company’s financial condition, liquidity, or cash flow due to the extended length of time during which environmental investigation and remediation takes place. An estimate of the potential impact on the Company’s operations cannot be made due to the aforementioned uncertainties.

Management expects these contingent environmental-related liabilities to be resolved over an extended period of time. Management is unable to provide a more specific time frame due to the indeterminate amount of time to conduct investigation activities at any site, the indeterminate amount of time to obtain environmental agency approval, as necessary, with respect to investigation and remediation activities, and the indeterminate amount of time necessary to conduct remediation activities.

The Asset Retirement and Environmental Obligations Topic of the ASC requires a liability to be recognized for the fair value of a conditional asset retirement obligation if a settlement date and fair value can be reasonably estimated. The Company recognizes a liability for any conditional asset retirement obligation when sufficient information is available to reasonably estimate a settlement date to determine the fair value of such a liability. The Company has identified certain conditional asset retirement obligations at various current and closed manufacturing, distribution and store facilities. These obligations relate primarily to asbestos abatement, hazardous waste Resource Conservation and Recovery Act (RCRA) closures, well abandonment, transformers and used oil disposals and underground storage tank closures. Using investigative, remediation and disposal methods that are currently available to the Company, the estimated costs of these obligations were accrued and are not significant. The recording of additional liabilities for future conditional asset retirement obligations may result in a material impact on net income for the annual or interim period during which the costs are accrued. Management does not believe that any potential liability ultimately attributed to the Company for its conditional asset retirement obligations will have a material adverse effect on the Company’s financial condition, liquidity, or cash flow due to the extended period of time over which sufficient information may become available regarding the closure or modification of any one or group of the Company’s facilities. An estimate of the potential impact on the Company’s operations cannot be made due to the aforementioned uncertainties.

NOTE 9 - LITIGATION

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 that are inherently subject to many uncertainties regarding the possibility of a loss to the Company. These uncertainties will ultimately be resolved when one or more future events occur or fail to occur confirming the incurrence of a liability or the reduction of a liability. In accordance with the Contingencies Topic of the ASC, the Company accrues for these contingencies by a charge to income 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. In the event that the Company’s loss contingency is ultimately determined to be significantly higher than currently accrued, the recording of the additional liability may result in a material impact on the Company’s results of operations, liquidity or financial condition for the annual or interim period during which such additional liability is accrued. In those cases where no accrual is recorded because it is not probable that a liability has been incurred and the amount of any such loss cannot be reasonably estimated, any potential liability ultimately determined to be attributable to the Company may result in a material impact on the Company’s results of operations, liquidity or financial condition for the annual or interim period during which such liability is accrued. In those cases where no accrual is recorded or exposure to loss exists in excess of the amount accrued, the Contingencies Topic of the ASC requires disclosure of the contingency when there is a reasonable possibility that a loss or additional loss may have been incurred.

Lead pigment and lead-based paint litigation. The Company’s past operations included the manufacture and sale of lead pigments and lead-based paints. The Company, along with other companies, is and has been a defendant in a number of legal proceedings, including individual personal injury actions, purported class actions, and actions brought by various counties, cities, school districts and other government-related entities, arising from the manufacture and sale of lead pigments and lead-based paints. The plaintiffs’ claims have been based upon various legal theories, including negligence, strict liability, breach of warranty, negligent misrepresentations and omissions, fraudulent misrepresentations and omissions, concert of action, civil conspiracy, violations of unfair trade practice and consumer protection laws, enterprise liability, market share liability, public nuisance, unjust enrichment and other theories. The plaintiffs seek various damages and relief, including personal injury and property damage, costs relating to the detection and abatement of lead-based paint from buildings, costs associated with a public education campaign, medical monitoring costs and others. The Company has also been a defendant in legal proceedings arising from the manufacture and sale of non-lead-based paints that seek recovery based upon various legal theories, including the failure to adequately warn of potential exposure to lead during surface preparation when using non-lead-based paint on surfaces previously painted with lead-based paint. The Company believes that the litigation brought to date is without merit or subject to meritorious defenses and is vigorously defending such litigation. The Company expects that additional lead pigment and lead-based paint litigation may be filed against the Company in the future asserting similar or different legal theories and seeking similar or different types of damages and relief. The Company will continue to vigorously defend against any additional lead pigment and lead-based paint litigation that may be filed, including utilizing all avenues of appeal, if necessary.

Notwithstanding the Company’s views on the merits, litigation is inherently subject to many uncertainties, and the Company ultimately may not prevail. Adverse court rulings or determinations of liability, among other factors, could affect the lead pigment and lead-based paint litigation against the Company and encourage an increase in the number and nature of future claims and proceedings. In addition, from time to time, various legislation and administrative regulations have been enacted, promulgated or proposed to impose obligations on present and former manufacturers of lead pigments and lead-based paints respecting asserted health concerns associated with such products or to overturn the effect of court decisions in which the Company and other manufacturers have been successful.

Due to the uncertainties involved, management is unable to predict the outcome of the lead pigment and lead-based paint litigation, the number or nature of possible future claims and proceedings or the effect that any legislation and/or administrative regulations may have on the litigation or against the Company. In addition, management cannot reasonably determine the scope or amount of the potential costs and liabilities related to such litigation, or resulting from any such legislation and regulations. Except with respect to the litigation in California discussed below, the Company has not accrued any amounts for such litigation because the Company does not believe it is probable that a loss has occurred, and the Company believes it is not possible to estimate the range of potential losses as there is no substantive information upon which an estimate could be based. In addition, any potential liability that may result from any changes to legislation and regulations cannot reasonably be estimated. Due to the uncertainties associated with the amount of any such liability and/or the nature of any other remedy which may be imposed in such litigation, any potential liability determined to be attributable to the Company arising out of such litigation may have a material adverse effect on the Company’s results of operations, liquidity or financial condition. An estimate of the potential impact on the Company’s results of operations, cash flow, liquidity or financial condition cannot be made due to the aforementioned uncertainties.

Public Nuisance Claim Litigation. The Company and other companies are or were defendants in legal proceedings seeking recovery based on public nuisance liability theories, among other theories, brought by the State of Rhode Island; the City of St. Louis, Missouri; various cities and counties in the State of New Jersey; various cities in the State of Ohio and the State of Ohio; the City of Chicago, Illinois; the City of Milwaukee, Wisconsin; the County of Santa Clara, California, and other public entities in the State of California; and Lehigh and Montgomery Counties in Pennsylvania. Except for the Santa Clara County, California proceeding and the pending Pennsylvania proceedings, all of these legal proceedings have been concluded in favor of the Company and other defendants at various stages in the proceedings.

Santa Clara County, California Proceeding. The Santa Clara County, California proceeding was initiated in March 2000 in the Superior Court of the State of California, County of Santa Clara. After nearly twenty years of litigation, the Company and two other defendants (ConAgra Grocery Products Company and NL Industries, Inc.) reached an agreement in principle with the plaintiffs to resolve the litigation on July 17, 2019. The agreement provides that, in full and final satisfaction of any and all claims of the plaintiffs, the defendants collectively shall pay a total of $305.0 million, with the defendants each paying approximately $101.7 million as follows: (i) an initial payment of $25.0 million within sixty days after the entry of a dismissal order and judgment; (ii) subsequent annual payments of $12.0 million one year after the initial payment and for a period of four years thereafter; and (iii) a final payment of approximately $16.7 million on the sixth anniversary of the initial payment. Should NL Industries fail to make any of its payments required under the agreement, the Company has agreed to backstop and pay on behalf of NL Industries a maximum amount of $15.0 million. On July 24, 2019, the trial court approved the agreement, discharged the receiver, and granted a judgment of dismissal with prejudice in favor of the defendants. At September 30, 2022 and 2021, the Company had accruals for this agreement reported on the balance sheet of $40.7 million and $52.7 million, respectively, with $12.0 million included in Current liabilities and the remaining $28.7 million and $40.7 million, respectively, included in Other long-term liabilities.

Pennsylvania Proceedings. Two proceedings in Pennsylvania were initiated in October 2018. The Pennsylvania counties of Montgomery and Lehigh filed complaints against the Company and several other former lead-based paint and lead pigment manufacturers in the Courts of Common Pleas of Montgomery County, Pennsylvania and Lehigh County, Pennsylvania, respectively. In both actions, the counties request declaratory relief establishing the existence of a public nuisance and the defendants’ contribution to it, the abatement of an ongoing public nuisance arising from the presence of lead-based paint in housing throughout the applicable county, an injunction against future illicit conduct, and the costs of litigation and attorneys’ fees. After the defendants removed the actions to federal court and the actions were remanded to state court, the defendants filed preliminary objections on December 21, 2020, seeking to dismiss the complaints with prejudice.

In the Lehigh County action, the trial court denied the defendants’ preliminary objections on August 6, 2021. Defendants filed a motion to amend the order to allow an interlocutory appeal or, in the alternative, for reconsideration. The trial court denied the defendants’ motion on September 13, 2021. On September 27, 2021, the Company answered the complaint, asserted new matter and affirmative defenses, alleged counterclaims against Lehigh County, and filed a third-party complaint against certain County officials, other owners of pre-1980 housing, and lead abatement contractors who have been cited for violating state or local laws. On October 13, 2021, the defendants filed with the Superior Court, one of Pennsylvania’s intermediate appellate courts, a petition for permission to appeal the trial court’s order denying the defendants’ preliminary objections. On November 17, 2021, the Superior Court transferred the appeal to the Commonwealth Court, another one of Pennsylvania’s intermediate appellate courts.

In the Montgomery County action, the trial court denied the defendants’ preliminary objections on October 15, 2021. The defendants filed a motion to amend the order overruling their preliminary objections to allow an interlocutory appeal, which the trial court granted on November 9, 2021. On December 3, 2021, the defendants filed a petition for permission to appeal with the Commonwealth Court.

The Commonwealth Court granted the defendants’ petitions for permission to appeal in both the Montgomery County and Lehigh County actions on February 18, 2022, and stayed all proceedings in the trial courts pending the appellate court proceedings. The Company filed its opening appellate briefs in both actions on May 18, 2022. Montgomery County and Lehigh County filed their appellate briefs on July 21, 2022. The Company filed its reply briefs in both actions on September 9, 2022. Oral argument is tentatively scheduled to occur during the week of December 12, 2022.

Litigation seeking damages from alleged personal injury. The Company and other companies are defendants in a number of legal proceedings seeking monetary damages and other relief from alleged personal injuries. These proceedings include claims by children allegedly injured from ingestion of lead pigment or lead-containing paint and claims for damages allegedly incurred by the children’s parents or guardians. These proceedings generally seek compensatory and punitive damages, and seek other relief including medical monitoring costs. These proceedings include purported claims by individuals, groups of individuals and class actions.

The plaintiff in Thomas v. Lead Industries Association, et al., initiated an action in Wisconsin state court against the Company, other alleged former lead pigment manufacturers and the Lead Industries Association in September 1999. The claims against the defendants included strict liability, negligence, negligent misrepresentation and omissions, fraudulent misrepresentation and omissions, concert of action, civil conspiracy and enterprise liability. Implicit within these claims is the theory of “risk contribution” liability (Wisconsin’s theory is similar to market share liability, except that liability can be joint and several) due to the plaintiff’s inability to identify the manufacturer of any product that allegedly injured the plaintiff. The case ultimately proceeded to trial and, on November 5, 2007, the jury returned a defense verdict, finding that the plaintiff had ingested white lead carbonate, but was not brain damaged or injured as a result. The plaintiff appealed, and on December 16, 2010, the Wisconsin Court of Appeals affirmed the final judgment in favor of the defendants.

Wisconsin is the only jurisdiction to date to apply a theory of liability with respect to alleged personal injury (i.e., risk contribution/market share liability) that does not require the plaintiff to identify the manufacturer of the product that allegedly injured the plaintiff in the lead pigment and lead-based paint litigation. Although the risk contribution liability theory was applied during the Thomas trial, the constitutionality of this theory as applied to the lead pigment cases has not been judicially determined by the Wisconsin state courts. However, in an unrelated action filed in the United States District Court for the Eastern District of Wisconsin, Gibson v. American Cyanamid, et al., on November 15, 2010, the district court held that Wisconsin’s risk contribution theory as applied in that case violated the defendants’ right to substantive due process and is unconstitutionally retroactive. The district court’s decision in Gibson v. American Cyanamid, et al., was appealed by the plaintiff to the United States Court of Appeals for the Seventh Circuit. On July 24, 2014, the Seventh Circuit reversed the judgment and remanded the case back to the district court for further proceedings. On January 16, 2015, the defendants filed a petition for certiorari in the United States Supreme Court seeking review of the Seventh Circuit’s decision, and on May 18, 2015, the United States Supreme Court denied the defendants’ petition. The case is currently pending in the district court.

The United States District Court for the Eastern District of Wisconsin consolidated three cases (Ravon Owens v. American Cyanamid, et al., Cesar Sifuentes v. American Cyanamid, et al., and Glenn Burton, Jr. v. American Cyanamid, et al.) for purposes of trial. A trial was held in May 2019 and resulted in a jury verdict for the three plaintiffs in the amount of $2.0 million each for a total of $6.0 million against the Company and two other defendants (Armstrong Containers Inc. and E.I. du Pont de Nemours). After post-trial motions resulted in the damages award to plaintiff Glenn Burton, Jr. being reduced to $800,000, the Company filed a notice of appeal with the United States Court of Appeals for the Seventh Circuit. On April 15, 2021, the Seventh Circuit reversed the judgments and held that the Company was entitled to judgment as a matter of law on all claims filed by the three plaintiffs. The plaintiffs filed a petition with the Seventh Circuit on April 27, 2021, seeking a rehearing en banc and, in the alternative, a request for certification of questions to the Wisconsin Supreme Court. The plaintiffs’ petition was denied by the Seventh Circuit on May 12, 2021.

In Maniya Allen, et al. v. American Cyanamid, et al., also pending in the United States District Court for the Eastern District of Wisconsin, cases involving six of the 146 plaintiffs were selected for discovery. In Dijonae Trammell, et al. v. American Cyanamid, et al., also pending in the United States District Court for the Eastern District of Wisconsin, discovery for one of the three plaintiffs was consolidated with the six Allen cases referenced above. The parties selected four of the cases to proceed to expert discovery and to prepare for trial. The district court previously issued an order scheduling trial in the four cases to commence on June 15, 2020, but the trial date was continued due to the COVID-19 pandemic, and no new trial date has been scheduled.

On May 20, 2021, the Company and the three other defendants filed motions for summary judgment to dismiss the claims of all plaintiffs then pending in the district court as a result of the Seventh Circuit’s decision in favor of the Company in the Owens, Sifuentes and Burton cases. On March 3, 2022, the district court granted summary judgment in favor of the Company and the other defendants on all claims then pending in the district court.

On March 31, 2022, the plaintiffs filed a motion seeking to alter or amend the judgment. The Company and the other defendants opposed the motion on April 21, 2022. The plaintiffs filed a reply in support of the motion on May 6, 2022. On August 16, 2022, the district court denied the plaintiffs’ motion to alter or amend the judgment.

On September 15, 2022, the plaintiffs filed notices of appeal with the Seventh Circuit, seeking to appeal the district court’s summary judgment in favor of the Company and the other defendants.

On August 24, 2021, the plaintiff in Arrieona Beal v. Armstrong Containers, Inc., et al. filed an amended complaint in Milwaukee County Circuit Court, naming the Company and other alleged former lead pigment manufacturers as defendants pursuant to the risk contribution liability theory. The defendants answered the plaintiff’s complaint on December 17, 2021. On March 2, 2022, the plaintiff filed a motion for declaratory judgment seeking to clarify Wisconsin law following the Seventh Circuit’s decision in favor of the Company in the Owens, Sifuentes and Burton cases, to which the Company responded on April 15, 2022. Prior to filing its response to the declaratory judgment motion, the Company removed the case to the United

States District Court for the Eastern District of Wisconsin on March 25, 2022. The plaintiff filed a motion to remand the case to the state circuit court on April 7, 2022, the Company opposed the motion to remand on May 6, 2022, and the plaintiff filed a reply in support of the motion on May 12, 2022. On May 10, 2022, the plaintiff filed a motion for sanctions related to the Company’s removal of the case to federal court, to which the Company responded on May 27, 2022.

On May 10, 2022, select plaintiffs in the Wisconsin federal court cases filed a petition to take jurisdiction of the original action with the Supreme Court of Wisconsin, requesting that the Supreme Court provide guidance on certain legal questions involved in the plaintiffs’ pending federal court cases (the same questions presented in Beal’s declaratory judgment motion pending in the Eastern District of Wisconsin). On June 22, 2022, the Wisconsin Supreme Court ordered the defendants to file a response addressing whether the Supreme Court should take original jurisdiction. The Company and other defendants filed their response on July 20, 2022, to which the plaintiffs replied on August 4, 2022. On October 11, 2022, the Supreme Court denied the plaintiffs’ petition.

Other lead-based paint and lead pigment litigation. In Mary Lewis v. Lead Industries Association, et al. pending in the Circuit Court of Cook County, Illinois, parents seek to recover the cost of their children’s blood lead testing against the Company and three other defendants that made (or whose alleged corporate predecessors made) white lead pigments. The circuit court had certified a statewide class and a Chicago subclass of parents or legal guardians of children who lived in high-risk zip codes identified by the Illinois Department of Health and who were screened for lead toxicity between August 1995 and February 2008. Excluded from the class were those parents or guardians who have incurred no expense, liability or obligation to pay for the cost of their children’s blood lead testing. In 2017, the defendants moved for summary judgment on the grounds that the three named plaintiffs have not paid and have no obligation or liability to pay for their children’s blood lead testing because Medicaid paid for the children of two plaintiffs and private insurance paid for the third plaintiff without any evidence of a co-pay or deductible. The circuit court granted the motion, but on September 7, 2018, the appellate court reversed with respect to the two plaintiffs for whom Medicaid paid for their children’s testing. Defendants appealed to the Supreme Court of Illinois, and on May 21, 2020, the Supreme Court reversed the appellate court’s judgment, affirmed the circuit court’s summary judgment dismissing the claims of the two plaintiffs for whom Medicaid paid for their children’s testing, and remanded the case for further proceedings consistent with the Supreme Court’s decision. On August 19, 2020, the defendants filed their renewed motion for class decertification and entry of final judgment with the circuit court. The parties filed their respective briefs on the motion, and oral argument occurred on February 4, 2021.

On March 8, 2021, the Illinois Department of Healthcare and Family Services filed a petition to intervene and a proposed amended complaint, which would eliminate the class and all prior claims by individual plaintiffs and would propose a subrogation claim by the State agency to recover its expenditures for blood lead testing. Defendants opposed the petition to intervene, and briefing on the petition concluded. A hearing on the petition to intervene occurred on August 10, 2021.

On October 8, 2021, the circuit court entered an order granting the defendants’ motion for decertification of the class, denying the petition to intervene by the Department, and noting that an entry of final judgment in the defendants’ favor was now appropriate. On October 19, 2021, the circuit court entered final judgment in favor of the defendants. The Department appealed to the Appellate Court of Illinois, First District and filed its opening brief on May 25, 2022. The Company filed a response to the opening brief on July 13, 2022, to which the Department replied on August 10, 2022.

The appellate court entered an order on August 19, 2022, affirming the denial of the Department’s petition to intervene and the granting of the defendants’ motion for final judgment.

Insurance coverage litigation. The Company and its liability insurers, including certain underwriters at Lloyd’s of London, initiated legal proceedings against each other to determine, among other things, whether the costs and liabilities associated with the abatement of lead pigment are covered under certain insurance policies issued to the Company. The insurers’ action, which was filed on February 23, 2006 in the Supreme Court of the State of New York, County of New York, was dismissed. The Company’s action, filed on March 3, 2006 in the Common Pleas Court, Cuyahoga County, Ohio, previously was stayed and inactive. On January 9, 2019, the Company filed an unopposed motion to lift the stay with the trial court, which was granted, allowing the case to proceed. On June 28, 2019, the Company and its liability insurers each filed separate motions for summary judgment seeking various forms of relief. The trial court entered an order on December 4, 2020, granting the insurers’ motion for summary judgment, denying the Company’s motion, and entering final judgment in favor of the insurers. The trial court sided with the Company on all of the issues presented, except one. On December 21, 2020, the Company filed a notice of appeal to the Court of Appeals of Cuyahoga County, Ohio, Eighth Appellate District, and the insurers filed cross-appeals. Briefing on the issues concluded, and oral argument occurred on August 25, 2021. The insurers then filed on January 13, 2022, a motion for leave to file a supplemental brief to address the Eighth Appellate District’s recent decision in Cincinnati Ins. Co. v. Discount Drug Mart, Inc. The Company filed a response to the insurers’ motion on January 19, 2022. On March 25, 2022, the Company filed a notice of additional authority, submitting a March 24, 2022 decision from the New York Appellate Division, First Judicial Department in Certain Underwriters at Lloyd’s, London, et al., v. NL Industries, Inc., et al. The insurers filed a

response to the notice on April 1, 2022. On April 20, 2022, the insurers filed a notice of additional authority, submitting an April 19, 2022 decision from the California Court of Appeal, First Appellate Division in Certain Underwriters at Lloyd’s, London v. ConAgra Grocery Products Co. The Company filed a response to the notice on April 25, 2022.

On September 1, 2022, the appellate court reversed the trial court’s grant of summary judgment, finding in favor of the Company on its appeal and against the insurers on their cross-appeal, and remanded the case to the trial court for further proceedings. On September 12, 2022, the insurers applied to the appellate court for reconsideration of its decision, en banc review, or certification of an appeal to the Ohio Supreme Court. The Company filed its opposition to the applications on September 22, 2022. On September 30, 2022, the appellate court denied the insurers’ applications for reconsideration and certification. The parties are awaiting the appellate court’s decision on the insurers’ application for en banc review.

An ultimate loss in the insurance coverage litigation would mean that insurance proceeds could be unavailable under the policies at issue to mitigate any ultimate abatement related costs and liabilities. The Company has not recorded any assets related to these insurance policies or otherwise assumed that proceeds from these insurance policies would be received in estimating any contingent liability accrual. Therefore, an ultimate loss in the insurance coverage litigation without a determination of liability against the Company in the lead pigment or lead-based paint litigation will have no impact on the Company’s results of operation, liquidity or financial condition. As previously stated, however, except with respect to the litigation in California discussed above, the Company has not accrued any amounts for the lead pigment or lead-based paint litigation and any significant liability ultimately determined to be attributable to the Company relating to such litigation may result in a material impact on the Company’s results of operations, liquidity or financial condition for the annual or interim period during which such liability is accrued.

Other litigation. On December 18, 2019, the New Jersey Department of Environmental Protection, the Commissioner of the New Jersey Department of Environmental Protection, and the Administrator of the New Jersey Spill Compensation Fund filed a lawsuit against the Company in the Superior Court of New Jersey Law Division in Camden County, New Jersey. The plaintiffs seek to recover natural resource damages, punitive damages, and litigation fees and costs, as well as other costs, damages, declaratory relief, and penalties pursuant to New Jersey state statutes and common law theories in connection with the alleged discharge of hazardous substances and pollutants at the Company’s Gibbsboro, New Jersey site, a former manufacturing plant and related facilities. The court has scheduled a trial date of September 25, 2023.

NOTE 10 - SHAREHOLDERS' EQUITY

Dividends

The following table summarizes the dividends declared and paid on common stock:


	2022				2021
	Cash Dividend Per Share		Total Dividends (in millions)		Cash Dividend Per Share		Total Dividends (in millions)
First Quarter	$	0.60	$	150.9	$	0.55	$	151.8
Second Quarter	0.60		156.2		0.55		145.9
Third Quarter	0.60		155.8		$	0.55	145.2
Total	$	1.80	$	462.9	$	1.65	$	442.9

Treasury Stock

The Company acquires its common stock for general corporate purposes through its publicly announced share repurchase program. As of September 30, 2022, the Company had remaining authorization from its Board of Directors to purchase 45.8 million shares of its common stock. The table below summarizes share repurchases during the three and nine months ended September 30, 2022 and 2021:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Treasury stock purchases (millions of dollars)	$	47.6	$	501.5	$	751.1	$	2,147.0
Treasury stock purchases (shares)	200,000		1,675,000		2,750,000		8,075,000
Average price per share	$	237.81	$	299.37	$	273.12	$	265.88

In February 2022, the Company received proceeds of $22.0 million in conjunction with the issuance of treasury shares to fund Company contributions to the domestic defined contribution plan. In April 2021, the Company received proceeds of $11.7 million in conjunction with the issuance of shares to fund obligations related to a non-qualified benefit plan.

Other Activity

During the nine months ended September 30, 2022, 442,347 stock options were exercised at a weighted average price per share of $88.46. In addition, 356,743 restricted stock units vested during this period.

NOTE 11 - ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

The components of accumulated other comprehensive (loss) income (AOCI), including the reclassification adjustments for items that were reclassified from AOCI to net income, are shown below.


	Foreign Currency Translation Adjustments		Pension and Other Postretirement Benefits Adjustments		Unrealized Net Gains on Cash Flow Hedges		Total
Balance at December 31, 2021	$	(702.1)	$	(32.2)	$	35.9	$	(698.4)
Amounts recognized in AOCI	(364.7)						(364.7)
Amounts reclassified from AOCI			3.5		(2.9)		0.6
Balance at September 30, 2022	$	(1,066.8)	$	(28.7)	$	33.0	$	(1,062.5)


	Foreign Currency Translation Adjustments		Pension and Other Postretirement Benefits Adjustments		Unrealized Net Gains on Cash Flow Hedges		Total
Balance at December 31, 2020	$	(671.5)	$	(87.2)	$	40.4	$	(718.3)
Amounts recognized in AOCI	(69.9)						(69.9)
Amounts reclassified from AOCI			4.6		(3.1)		1.5
Balance at September 30, 2021	$	(741.4)	$	(82.6)	$	37.3	$	(786.7)

NOTE 12 - DERIVATIVES AND HEDGING

Net Investment Hedges

The Company has two U.S. Dollar to Euro cross currency swap contracts to hedge the Company's net investment in its European operations. During the term of the contracts, the Company will pay fixed-rate interest in Euros and receive fixed-rate interest in U.S. Dollars, thereby effectively converting a portion of the Company's U.S. Dollar denominated fixed-rate debt to Euro denominated fixed-rate debt. At December 31, 2021, the contracts had a notional value of $500.0 million and $244.0 million, respectively, and maturity dates of June 1, 2024 and June 1, 2027, respectively. In April 2022, the Company settled a portion of the $244.0 million contract, which reduced the outstanding notional value to $162.7 million. An immaterial loss was recognized in AOCI at the time of settlement.

The following table summarizes the balance sheet location of the cross currency swaps. See Note 13 for additional information on the fair value of these contracts.


	September 30,		December 31,		September 30,
	2022		2021		2021
Other assets	$	56.4	$	—	$	—
Other accruals	—		—		16.4
Other long-term liabilities	—		36.5		27.4

The changes in fair value of the cross currency swap contracts are recognized in the foreign currency translation adjustments component of AOCI. The following table summarizes the unrealized gains for the three and nine months ended September 30, 2022 and 2021.


	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2022		2021		2022		2021
Unrealized gains	$	41.0	$	19.4	$	92.5	$	42.0
Tax effect	(10.1)		(4.9)		(22.7)		(10.4)
Unrealized gains, net of taxes	$	30.9	$	14.5	$	69.8	$	31.6

Derivatives Not Designated as Hedging Instruments

The Company enters into foreign currency option and forward contracts with maturity dates less than twelve months primarily to hedge against value changes in foreign currency. The total notional value of foreign currency forward contracts outstanding at September 30, 2022 was $194.5 million. At September 30, 2022, the Company recorded a $3.1 million liability in Other accruals to recognize the fair value of these outstanding foreign currency contracts. There were no material foreign currency option and forward contracts outstanding at December 31, 2021 and September 30, 2021. The related gains and losses are recorded in Other expense (income) - net. See Note 15.

NOTE 13 - FAIR VALUE MEASUREMENTS

The Fair Value Measurements and Disclosures Topic of the ASC applies to the Company’s financial and non-financial assets and liabilities. The guidance applies when other standards require or permit the fair value measurement of assets and liabilities. Under the guidance, assets and liabilities measured at fair value are categorized as follows:

Level 1: Quoted prices in active markets for identical assets

Level 2: Significant other observable inputs

Level 3: Significant unobservable inputs

Except for the acquisition and divestiture-related fair value measurements described in Note 3, there were no assets and liabilities measured at fair value on a nonrecurring basis. The following table presents the Company’s financial assets and liabilities that are measured at fair value on a recurring basis, categorized using the fair value hierarchy.


	September 30, 2022								December 31, 2021
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Deferred compensation plan assets	$	70.3	$	41.4	$	28.9			$	80.4	$	43.1	$	37.3
Qualified Replacement Plan assets	28.4		28.4						98.8		98.8
Net investment hedge asset	56.4				56.4
	$	155.1	$	69.8	$	85.3	$	—	$	179.2	$	141.9	$	37.3	$	—

Liabilities:
Foreign currency forward contracts	$	3.1			$	3.1			$	—			$	—
Net investment hedge liability	—								36.5				36.5
	$	3.1	$	—	$	3.1	$	—	$	36.5	$	—	$	36.5

The deferred compensation plan assets consist of the investment funds maintained for the future payments under the Company’s executive deferred compensation plans, which are structured as rabbi trusts. The investments are marketable securities accounted for under the Debt and Equity Securities Topics of the ASC. The level 1 investments are valued using quoted market prices multiplied by the number of shares. The level 2 investments are valued based on vendor or broker models. The cost basis of the investment funds was $65.2 million and $63.0 million at September 30, 2022 and December 31, 2021, respectively.

The Qualified Replacement Plan assets consist of investment funds maintained for future contributions to the Company’s domestic defined contribution plan. See Note 7 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information. The investments are valued using quoted prices multiplied by the number of shares. The cost basis of the investment funds was $31.4 million and $86.9 million at September 30, 2022 and December 31, 2021, respectively.

The net investment hedge asset and liability represent the fair value of outstanding cross currency swaps (see Note 12). The fair value is based on a valuation model that uses observable inputs, including interest rate curves and foreign currency rates.

The foreign currency forward contracts liability represents the fair value of outstanding contracts (see Note 12). The fair value is based on a valuation model that uses observable inputs, including foreign currency forward rates.

The table below summarizes the carrying amounts and fair values of the Company's debt. The Company's publicly traded debt and non-publicly traded debt are classified as level 1 and level 2, respectively, in the fair value hierarchy.


	September 30, 2022				December 31, 2021
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Publicly traded debt	$	9,587.9	$	8,195.3	$	8,849.6	$	9,777.4
Non-publicly traded debt	1.6		1.5		1.9		1.9

NOTE 14 - REVENUE

The Company manufactures and sells paint, stains, supplies, equipment and floor covering through company-operated stores, branded and private label products through retailers, and a broad range of industrial coatings directly to global manufacturing customers through company-operated branches. A large portion of the Company’s revenue is recognized at a point in time and made to customers who are not engaged in a long-term supply agreement or any form of contract with the Company. These sales are paid for at the time of sale in cash, credit card or on account with the vast majority of customers having terms between 30 and 60 days, not to exceed one year. Many customers who purchase on account take advantage of early payment discounts offered by paying within 30 days of being invoiced. The Company estimates variable consideration for these sales on the basis of both historical information and current trends to estimate the expected amount of discounts to which customers are likely to be entitled.

The remaining revenue is governed by long-term supply agreements and related purchase orders (contracts) that specify shipping terms and aspects of the transaction price including rebates, discounts and other sales incentives, such as advertising support. Contracts are at standalone pricing. The performance obligation in these contracts is determined by each of the individual purchase orders and the respective stated quantities, with revenue being recognized at a point in time when obligations under the terms of the agreement are satisfied. This generally occurs with the transfer of control of our products to the customer. Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue.

Refer to Note 18 for the Company's disaggregation of Net sales by reportable segment. As the reportable segments are aligned by similar economic factors, trends and customers, this disaggregation best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Approximately 80% of the Company’s net external sales are in the Company’s North America region (which is comprised of the United States, Canada and the Caribbean region), slightly less than 10% in the EMEAI region (Europe, Middle East, Africa and India), with the remaining global regions accounting for the residual balance. No individual country outside of the United States is individually significant.

The Company has made payments or credits for rebates or incentives at the beginning of a long-term contract where future revenue is expected and before satisfaction of performance obligations. Under these circumstances, the Company recognizes a contract asset and amortizes these prepayments over the expected benefit life of the long-term contract typically on a straight-line basis.

The majority of variable consideration in the Company’s contracts include a form of volume rebate, discounts, and other incentives, where the customer receives a retrospective percentage rebate based on the amount of their purchases. In these situations, the rebates are accrued as a fixed percentage of sales and recorded as a reduction of net sales until paid to the customer per the terms of the contract. Forms of variable consideration such as tiered rebates, whereby a customer receives a retrospective price decrease dependent on the volume of their purchases, are calculated using a forecasted percentage to determine the most likely amount to accrue. Management creates a baseline calculation using historical sales and then utilizing forecast information, estimates the anticipated sales volume each quarter to calculate the expected reduction to sales. The remainder of the transaction price is fixed as agreed upon with the customer, limiting estimation of revenues including constraints.

The Company’s Accounts receivable and current and long-term contract assets and liabilities are summarized in the following table.


	Accounts Receivable, Less Allowance		Contract Assets (Current)		Contract Assets (Long-Term)		Contract Liabilities (Current)		Contract Liabilities (Long-Term)
Balance sheet caption	Accounts receivable		Other current assets		Other assets		Other accruals		Other liabilities
Balance at December 31, 2021	$	2,352.4	$	60.9	$	131.2	$	259.8	$	9.2
Balance at September 30, 2022	2,897.6		75.8		111.1		300.6		7.1

The difference between the opening and closing balances of the Company’s contract assets and contract liabilities primarily results from the timing difference between the Company’s performance and the customer’s payment.

Provisions for estimated returns are established and the expected costs continue to be recognized as contra-revenue per ASC 606 when the products are sold. The Company only offers an assurance type warranty on products sold, and there is no material service to the customer beyond fixing defects that existed at the time of sale and no warranties are sold separately.

Warranty liabilities are excluded from the table above. Amounts recognized during the quarter from deferred revenue were not material. The Company records a right of return liability within each of its operations to accrue for expected customer returns. Historical actual returns are used to estimate future returns as a percentage of current sales. Obligations for returns and refunds were not material individually or in the aggregate.

Allowance for Credit Losses

The Company's primary allowance for credit losses is the allowance for doubtful accounts. The allowance for doubtful accounts reduces the Accounts receivable balance to the net amount expected to be collected (estimated net realizable value). The Company reviews the collectibility of the Accounts receivable balance each reporting period and estimates the allowance based on historical bad debt experience, aging of accounts receivable, current creditworthiness of customers, current economic factors, as well as reasonable and supportable forward-looking information. Accounts receivable balances are written-off against the allowance if a final determination of uncollectibility is made. All provisions for allowances for doubtful accounts are included in Selling, general and administrative expenses.

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


	2022		2021
Balance at January 1	$	48.9	$	53.5
Bad debt expense	43.4		25.2
Uncollectible accounts written off, net of recoveries	(29.2)		(16.9)
Balance at September 30	$	63.1	$	61.8

NOTE 15 - OTHER

Other general (income) expense - net

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Provisions for environmental matters - net	$	6.4	$	0.5	$	11.1	$	5.5
Loss on divestiture of business (see Note 3)	—		—		—		111.9
Gain on sale or disposition of assets	(20.8)		(1.6)		(18.6)		(6.2)

Other general (income) expense - net	$	(14.4)	$	(1.1)	$	(7.5)	$	111.2

Provisions for environmental matters - net represent initial provisions for site-specific estimated costs of environmental investigation or remediation and increases or decreases to environmental-related accruals as information becomes available upon which more accurate costs can be reasonably estimated and as additional accounting guidelines are issued. Environmental-related accruals are not recorded net of insurance proceeds in accordance with the Offsetting Subtopic of the Balance Sheet Topic of the ASC. See Note 8 for further details on the Company’s environmental-related activities.

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

Other expense (income) - net

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Investment losses (gains)	$	1.1	$	—	$	16.0	$	(18.3)

Net expense from banking activities	3.1		2.6		9.0		7.7
Foreign currency transaction related losses (gains)	19.2		(1.2)		29.5		10.4
Miscellaneous pension expense	0.8		1.1		2.7		3.1
Other income	(8.5)		(6.9)		(26.4)		(19.4)
Other expense	2.4		6.1		19.1		14.9
Other expense (income) - net	$	18.1	$	1.7	$	49.9	$	(1.6)

Investment losses (gains) primarily relate to the change in market value of the investments held in the deferred compensation plan and Qualified Replacement Plan. See Note 13 for additional information on the fair value of these investments.

Foreign currency transaction related losses (gains) include the impact from foreign currency transactions and net realized losses (gains) from foreign currency option and forward contracts. See Note 12 for additional information regarding these foreign currency contracts.

Miscellaneous pension expense consists of the non-service components of Net periodic benefit cost. See Note 7.

Other income and Other expense included items of revenue, gains, expenses and losses that were unrelated to the primary business purpose of the Company. There were no other items within the Other income or Other expense caption that were individually significant.

NOTE 16 - INCOME TAXES

The effective tax rate was 21.9% and 21.4% for the third quarter and first nine months of 2022, respectively, compared to 17.9% and 19.6% for the third quarter and first nine months of 2021, respectively. The effective tax rate was less favorably impacted by tax benefits related to employee share based payments in the third quarter and first nine months of 2022 than in the same periods last year. The other significant components of the Company’s effective tax rate were consistent year over year.

At December 31, 2021, the Company had $228.5 million in unrecognized tax benefits, the recognition of which would have an effect of $218.9 million on the effective tax rate. Included in the balance of unrecognized tax benefits at December 31, 2021 was $13.7 million related to tax positions for which it is reasonably possible that the total amounts could significantly change during the next twelve months.

The Company classifies all income tax related interest and penalties as income tax expense. At December 31, 2021, the Company had accrued $26.4 million for the potential payment of income tax interest and penalties.

There were no significant changes to any of the balances of unrecognized tax benefits at December 31, 2021 during the nine months ended September 30, 2022.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. The IRS audited the Company's 2013, 2014, 2015 and 2016 income tax returns. As a result of these audits, certain adjustments have been assessed. The Company has filed a protest, submitted additional information for consideration, and is currently in the appeals process with the IRS. The Company continues to evaluate the adjustments and believes that it is adequately reserved for any potential exposure. The IRS is currently auditing the Company’s 2017, 2018 and 2019 income tax returns. As of September 30, 2022, the federal statute of limitations had not expired for the 2013 through 2021 tax years.

At September 30, 2022, the Company is subject to non-U.S. income tax examinations for the tax years of 2014 through 2021. In addition, the Company is subject to state and local income tax examinations for the tax years 1998 through 2021.

NOTE 17 - NET INCOME PER SHARE

Basic and diluted net income per share are calculated using the treasury stock method.


(in millions, except per share data)	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Basic
Net income	$	685.1	$	502.2	$	1,633.8	$	1,560.4
Average shares outstanding	257.7		261.6		258.2		263.4
Basic net income per share	$	2.66	$	1.92	$	6.33	$	5.92

Diluted
Net income	$	685.1	$	502.2	$	1,633.8	$	1,560.4
Average shares outstanding assuming dilution:
Average shares outstanding	257.7		261.6		258.2		263.4
Stock options and other contingently issuable shares (1)	3.4		5.0		4.0		4.7

Average shares outstanding assuming dilution	261.1		266.6		262.2		268.1
Diluted net income per share	$	2.62	$	1.88	$	6.23	$	5.82

(1)There were 1.9 million and 1.1 million stock options and other contingently issuable shares excluded due to their anti-dilutive effect for the three and nine months ended September 30, 2022, respectively. There were no stock options and other contingently issuable shares excluded due to their anti-dilutive effect for the three and nine months ended September 30, 2021.

NOTE 18 - REPORTABLE SEGMENT INFORMATION

The Company reports its segment information in the same way that management internally organizes its business for assessing performance and making decisions regarding allocation of resources in accordance with the Segment Reporting Topic of the ASC. The Company has determined that it has three reportable operating segments: The Americas Group, Consumer Brands Group and Performance Coatings Group (individually, a Reportable Segment and collectively, the Reportable Segments).


	Three Months Ended September 30, 2022
	The Americas Group		Consumer Brands Group		Performance Coatings Group		Administrative		Consolidated Totals
Net external sales	$	3,602.7	$	701.9	$	1,741.7	$	1.1	$	6,047.4
Intersegment transfers	—		1,513.2		55.7		(1,568.9)		—
Total net sales and intersegment transfers	$	3,602.7	$	2,215.1	$	1,797.4	$	(1,567.8)	$	6,047.4

Segment profit	$	764.1	$	94.9	$	236.3			$	1,095.3
Interest expense							$	(101.2)	(101.2)
Administrative expenses and other							(116.9)		(116.9)
Income before income taxes	$	764.1	$	94.9	$	236.3	$	(218.1)	$	877.2

	Three Months Ended September 30, 2021
	The Americas Group		Consumer Brands Group		Performance Coatings Group		Administrative		Consolidated Totals
Net external sales	$	2,967.0	$	646.7	$	1,532.5	$	0.5	$	5,146.7
Intersegment transfers	—		1,155.3		40.5		(1,195.8)		—
Total net sales and intersegment transfers	$	2,967.0	$	1,802.0	$	1,573.0	$	(1,195.3)	$	5,146.7

Segment profit	$	631.5	$	75.8	$	110.4			$	817.7
Interest expense							$	(83.1)	(83.1)
Administrative expenses and other							(123.1)		(123.1)
Income before income taxes	$	631.5	$	75.8	$	110.4	$	(206.2)	$	611.5


	Nine Months Ended September 30, 2022
	The Americas Group		Consumer Brands Group		Performance Coatings Group		Administrative		Consolidated Totals
Net external sales	$	9,589.9	$	2,139.2	$	5,186.1	$	3.2	$	16,918.4
Intersegment transfers	—		4,218.3		161.3		(4,379.6)		—
Total net sales and intersegment transfers	$	9,589.9	$	6,357.5	$	5,347.4	$	(4,376.4)	$	16,918.4

Segment profit	$	1,909.9	$	223.3	$	577.6			$	2,710.8
Interest expense							$	(282.5)	(282.5)
Administrative expenses and other							(350.1)		(350.1)
Income before income taxes	$	1,909.9	$	223.3	$	577.6	$	(632.6)	$	2,078.2

	Nine Months Ended September 30, 2021
	The Americas Group		Consumer Brands Group		Performance Coatings Group		Administrative		Consolidated Totals
Net external sales	$	8,563.5	$	2,156.3	$	4,461.3	$	1.4	$	15,182.5
Intersegment transfers	—		3,238.9		110.4		(3,349.3)		—
Total net sales and intersegment transfers	$	8,563.5	$	5,395.2	$	4,571.7	$	(3,347.9)	$	15,182.5

Segment profit	$	1,838.8	$	342.3	$	399.0			$	2,580.1
Interest expense							$	(249.8)	(249.8)
Administrative expenses and other							(390.6)		(390.6)
Income before income taxes	$	1,838.8	$	342.3	$	399.0	$	(640.4)	$	1,939.7

In the reportable segment financial information, Segment profit was total net sales and intersegment transfers less operating costs and expenses. Domestic intersegment transfers were accounted for at the approximate fully absorbed manufactured cost, based on normal capacity volumes, plus customary distribution costs. International intersegment transfers were accounted for at values comparable to normal unaffiliated customer sales. The Administrative segment includes the administrative expenses of the Company’s corporate headquarters site and the operations of a real estate management unit that is responsible for the ownership, management and leasing of non-retail properties held primarily for use by the Company, including the Company’s headquarters site, and disposal of idle facilities. Also included in the Administrative segment was interest expense, interest and investment income, certain expenses related to closed facilities and environmental-related matters, and other expenses that were not directly associated with the Reportable Segments. In addition, the Administrative segment includes the $111.9 million pre-tax loss on the Wattyl divestiture recognized during the nine months ended September 30, 2021. See Notes 3 and 15 for additional information on the Wattyl divestiture. Sales of this segment represented external leasing revenue of excess headquarters space or leasing of facilities no longer used by the Company in its primary businesses. The Administrative segment did not include any significant foreign operations. Gains and losses from the sale of property were not a significant operating factor in determining the performance of the Administrative segment.

Net external sales of all consolidated foreign subsidiaries were $1.064 billion and $1.019 billion for the three months ended September 30, 2022 and 2021, respectively. Net external sales of all consolidated foreign subsidiaries were $3.262 billion and $3.158 billion for the nine months ended September 30, 2022 and 2021, respectively. Long-lived assets of these subsidiaries totaled $2.839 billion and $2.772 billion at September 30, 2022 and 2021, respectively. Domestic operations accounted for the remaining net external sales and long-lived assets. No single geographic area outside the United States was significant relative to consolidated net external sales, income before taxes or consolidated long-lived assets. Export sales and sales to any individual customer were each less than 10% of consolidated sales in 2022 and 2021.

For further details on the Company's Reportable Segments, see Note 21 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

NOTE 19 - NON-TRADED INVESTMENTS

The Company has invested in the U.S. affordable housing and historic renovation real estate markets and certain other investments that have been identified as variable interest entities. However, because the Company does not have the power to direct the day-to-day operations of the investments and the risk of loss is limited to the amount of contributed capital, the Company is not considered the primary beneficiary. In accordance with the Consolidation Topic of the ASC, the investments are not consolidated. The carrying value of the investments is recorded in Other assets. The liabilities for the estimated future capital contributions are recorded in Other accruals and Other long-term liabilities. The following table summarizes the balances related to the investments:


	September 30,		December 31,		September 30,
	2022		2021		2021
Other assets	$	521.6	$	355.8	$	313.1
Other accruals	32.5		61.8		46.0
Other long-term liabilities	470.4		289.7		268.9

NOTE 20 - SUBSEQUENT EVENT

In October 2022, management approved an initial set of action plans to simplify the Company’s operating model and portfolio of brands within the Consumer Brands Group and to reduce costs in all regions in the Performance Coatings Group, Consumer Brands Group and the Administrative segment. These actions better position the Company to continue to add above market growth and long-term shareholder value. Key focus areas within the Consumer Brands Group include the China architectural business, aerosol portfolio and optimization of the overall retail portfolio. While management continues to develop the comprehensive set of actions expected to be taken, management currently expects the actions to result in pre-tax charges in the range of $160 million to $180 million during the next four quarters, with approximately half of the charges occurring in the fourth quarter of 2022. The amount of these expected charges is an estimate, and the amount and timing of actual charges may vary due to a variety of factors.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(dollars in millions, except as noted and per share data)

BACKGROUND

The Sherwin-Williams Company, founded in 1866, and its consolidated wholly owned 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 - The Americas Group, Consumer Brands Group and Performance Coatings Group (collectively, the Reportable Segments) - and an Administrative segment in the same way it is internally organized for assessing performance and making decisions regarding allocation of resources. See Note 18 of Item 1 for additional information on the Company's Reportable Segments.

SUMMARY

•Consolidated net sales increased 17.5% in the quarter to $6.047 billion

◦Net sales from stores in U.S. and Canada open more than twelve calendar months increased 20.7% in the quarter

•Diluted net income per share was $2.62 per share in the quarter compared to $1.88 per share in the third quarter 2021

•Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) increased to $1.124 billion, or 18.6% of sales, in the quarter

OUTLOOK

Demand remained strong during the third quarter as pricing initiatives were realized in each of our businesses and volumes increased in all architectural paint end markets in The Americas Group. In the Performance Coatings Group, sales grew in every division as a result of pricing actions and contributions from acquisitions. The Consumer Brands Group continued to gain momentum in North America with our retail partners. Consolidated gross margin and profit improved sequentially and year-over-year.

The Company expects the strong positive results we experienced in the third quarter to continue into the fourth quarter, driven by continued momentum in both The Americas Group and North American industrial end markets, continued price realization, good cost control, and softer year-over-year comparisons. In the near term, our team will continue to remain focused on new account growth, expanding product offerings to existing customers and managing expenses tightly, given interest rate actions designed to slow U.S. demand and the expectations of continued macro headwinds in Europe and China into next year. The trajectory of raw material costs is trending favorably as we exit the year, although the pace and level of potential relief next year is difficult to project. We remain confident in our strategy, our capabilities and solutions, and our people.

We maintained our disciplined capital allocation approach, focused on driving value for our customers and returns to our shareholders. We continue to pursue business acquisitions, transactions, and investments that fit our growth strategy, and we expect to use any excess cash to make open market purchases of our common stock. We have a strong liquidity position, with $130.5 million in cash and $2.826 billion of unused capacity under our credit facilities at September 30, 2022. We are in compliance with bank covenants and expect to remain in compliance.

RESULTS OF OPERATIONS

The following discussion and analysis addresses comparisons of material changes in the consolidated financial statements for the three and nine months ended September 30, 2022 and 2021.

Net Sales


	Three Months Ended September 30,								Nine Months Ended September 30,
	2022		2021		$ Change		% Change		2022		2021		$ Change		% Change
The Americas Group	$	3,602.7	$	2,967.0	$	635.7	21.4	%	$	9,589.9	$	8,563.5	$	1,026.4	12.0	%
Consumer Brands Group	701.9		646.7		55.2		8.5	%	2,139.2		2,156.3		(17.1)		(0.8)	%
Performance Coatings Group	1,741.7		1,532.5		209.2		13.7	%	5,186.1		4,461.3		724.8		16.2	%
Administrative	1.1		0.5		0.6		120.0	%	3.2		1.4		1.8		128.6	%
Total	$	6,047.4	$	5,146.7	$	900.7	17.5	%	$	16,918.4	$	15,182.5	$	1,735.9	11.4	%

Three Months Ended September 30, 2022

Consolidated net sales increased in the third quarter of 2022 primarily due to selling price increases in all segments and higher architectural sales volume in The Americas Group, partially offset by lower sales volume in the Consumer Brands Group. Currency translation rate changes decreased consolidated net sales by 2.1% in the third quarter. Net sales of all consolidated foreign subsidiaries increased 4.5% to $1.064 billion in the third quarter compared to $1.019 billion in the same period last year. The increase in net sales for all consolidated foreign subsidiaries in the third quarter was due primarily to selling price increases in the Latin America and APAC regions, partially offset by lower sales volumes in most end markets for the EMEAI region and unfavorable currency translation. Net sales of all operations other than consolidated foreign subsidiaries increased 20.7% to $4.983 billion in the third quarter compared to $4.128 billion in the same period last year.

Net sales in The Americas Group increased in the third quarter due primarily to higher architectural sales volume across all end markets and selling price increases. Net sales from stores open for more than twelve calendar months in the U.S. and Canada increased 20.7% in the third quarter compared to last year’s comparable period. Sales of non-paint products increased 4.9% compared to last year's third quarter. 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 of the Consumer Brands Group increased in the third quarter due primarily to selling price increases in all regions, partially offset by lower sales volume outside of North America and continued tightness in alkyd resins impacting certain product sales in North America. Currency translation rate changes decreased the Consumer Brands Group's net sales by 1.6% in the third quarter.

Net sales in the Performance Coatings Group increased in the third quarter due to higher sales volume in most end markets, primarily attributable to selling price increases and acquisitions, partially offset by lower sales volume outside of North America. Currency translation rate changes decreased the Performance Coatings Group's net sales by 5.1% in the third quarter.

Nine Months Ended September 30, 2022

Consolidated net sales increased in the first nine months of 2022 primarily due to selling price increases in all segments and higher architectural sales volume in The Americas Group, partially offset by lower sales volume outside of North America. Currency translation rate changes decreased net sales by 1.4% in the first nine months. Net sales of all consolidated foreign subsidiaries increased 3.3% to $3.262 billion in the first nine months compared to $3.158 billion in the same period last year. The increase in net sales for all consolidated foreign subsidiaries in the first nine months was due primarily to selling price increases in most end markets, partially offset by lower sales volume in the Consumer Brands Group as a result of the Wattyl divestiture and challenging prior year sales volume comparisons in the EMEAI and APAC regions, as well as unfavorable currency translation. Net sales of all operations other than consolidated foreign subsidiaries increased 13.6% to $13.656 billion in the first nine months compared to $12.025 billion in the same period last year.

Net sales in The Americas Group increased in the first nine months due primarily to selling price increases and higher sales volume in all professional end markets, partially offset by lower sales volume in DIY. Net sales from stores open for more than twelve calendar months in the U.S. and Canada increased 10.6% in the first nine months compared to last year’s comparable period. Sales of non-paint products increased 0.5% compared to last year's first nine months. 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 in the first nine months due primarily to the Wattyl divestiture and lower sales volumes outside of North America, partially offset by selling price increases. Currency translation rate changes decreased the Consumer Brands Group's net sales by 1.0% in the first nine months.

Net sales in the Performance Coatings Group increased in the first nine months due to higher sales in all end markets, primarily attributable to selling price increases and contributions from acquisitions. Currency translation rate changes decreased the Performance Coatings Group's net sales by 3.6% in the first nine months.

Income Before Income Taxes

The following table presents the components of income before income taxes as a percentage of net sales:


	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
			% of Net Sales				% of Net Sales				% of Net Sales				% of Net Sales
Net sales	$	6,047.4	100.0	%	$	5,146.7	100.0	%	$	16,918.4	100.0	%	$	15,182.5	100.0	%
Cost of goods sold	3,458.0		57.2	%	3,007.1		58.4	%	9,827.1		58.1	%	8,519.5		56.1	%
Gross profit	2,589.4		42.8	%	2,139.6		41.6	%	7,091.3		41.9	%	6,663.0		43.9	%
SG&A	1,528.6		25.3	%	1,368.9		26.6	%	4,455.2		26.3	%	4,132.6		27.2	%
Other general (income) expense - net	(14.4)		(0.2)	%	(1.1)		—	%	(7.5)		—	%	111.2		0.7	%
Amortization	81.3		1.3	%	76.2		1.5	%	237.8		1.4	%	233.2		1.5	%

Interest expense	101.2		1.6	%	83.1		1.6	%	282.5		1.6	%	249.8		1.7	%
Interest income	(2.6)		—	%	(0.7)		—	%	(4.8)		—	%	(1.9)		—	%
Other expense (income) - net	18.1		0.3	%	1.7		—	%	49.9		0.3	%	(1.6)		—	%
Income before income taxes	$	877.2	14.5	%	$	611.5	11.9	%	$	2,078.2	12.3	%	$	1,939.7	12.8	%

Three Months Ended September 30, 2022

Consolidated cost of goods sold increased $450.9 million, or 15.0%, in the third quarter of 2022 compared to the same period in 2021 primarily due to higher sales volume in The Americas Group and higher raw material costs (including titanium dioxide and petrochemical feedstock sources), freight and transportation, and other input costs, partially offset by lower sales volume outside of North America in the Consumer Brands Group and favorable currency translation rate changes. Currency translation rate changes decreased Cost of goods sold by 2.7% in the third quarter of 2022.

Consolidated gross profit increased $449.8 million in the third quarter of 2022 compared to the same period in 2021. Consolidated gross profit as a percent of consolidated net sales increased in the third quarter to 42.8% compared to 41.6% during the same period in 2021. Consolidated gross profit dollars increased primarily due to selling price increases in all Reportable Segments and higher sales volume in The Americas Group, partially offset by higher raw material costs in each Reportable Segment and lower sales volume in the Consumer Brands Group. The gross margin rate decreased primarily as a result of higher raw material costs and supply chain inefficiencies in each Reportable Segment.

The Americas Group’s gross profit in the third quarter was higher than the same period last year by $284.5 million due primarily to selling price increases and higher sales volume in all architectural paint end markets, partially offset by higher raw material costs. The Americas Group’s gross profit as a percent of net sales decreased in the third quarter compared to the same period in 2021 primarily due to higher raw material costs. The Consumer Brands Group’s gross profit increased by $18.3 million in the third quarter compared to the same period last year due primarily to selling price increases, partially offset by higher raw material costs, lower sales volume and supply chain inefficiencies. The Consumer Brands Group’s gross profit as a percent of net sales decreased in the third quarter compared to the same period last year for these same reasons. The Performance Coatings Group’s gross profit increased $141.1 million in the third quarter compared to the same period last year due primarily to selling price increases, partially offset by higher raw material costs and unfavorable currency translation rate changes. The Performance Coatings Group’s gross profit as a percent of net sales increased in the third quarter compared to the same period last year primarily due to selling price increases, partially offset by higher raw material costs.

Consolidated selling, general and administrative expenses (SG&A) increased $159.7 million in the third quarter versus the same period last year due primarily to increased expenses to support net new store openings and investments in digital technologies and system upgrades, partially offset by favorable currency translation rate changes. As a percent of net sales, consolidated SG&A decreased 130 basis points in the third quarter compared to the same period last year primarily due to good cost control.

The Americas Group’s SG&A increased $157.2 million in the third quarter compared to the same period last year due primarily to increased spending from new store openings and higher costs to serve our customers. The Consumer Brands Group’s SG&A decreased $1.2 million in the third quarter compared to the same period last year due to lower marketing spend and good cost

control. The Performance Coatings Group’s SG&A increased $10.7 million in the third quarter compared to the same period last year primarily due to acquisitions, partially offset by good cost control and favorable currency translation rate changes. The Administrative segment’s SG&A decreased $7.0 million in the third quarter compared to the same period last year due primarily to lower investments in digital technologies.

In the third quarter of 2022, Other general (income) expense - net improved $13.3 million compared to the same period in 2021 primarily due to higher gains from the sale and disposition of fixed assets, partially offset by an increase in provisions for environmental matters in the Administrative segment. See Note 15 of Item 1 for additional information.

Interest expense increased $18.1 million in the third quarter compared to the same period last year due primarily to higher interest rates and an increase in outstanding debt. See Note 6 of Item 1 for additional information on the Company’s outstanding debt.

In the third quarter of 2022, Other expense (income) - net declined $16.4 million compared to the same period in 2021 primarily due to higher foreign currency transaction related losses in the Administrative segment. See Note 15 of Item 1 for additional information.

Nine Months Ended September 30, 2022

Consolidated cost of goods sold increased $1.308 billion, or 15.3%, in the first nine months of 2022 compared to the same period in 2021 primarily due to higher sales volume in The Americas Group and higher raw material costs (including titanium dioxide and petrochemical feedstock sources), supply chain inefficiencies, freight and transportation, and other input costs, partially offset by lower sales volume in the Consumer Brands Group, as well as favorable currency translation rate changes. Currency translation rate changes decreased Cost of goods sold by 1.9% in the first nine months of 2022.

Consolidated gross profit increased $428.3 million in the first nine months of 2022 compared to the same period in 2021. Consolidated gross profit as a percent of consolidated net sales decreased in the first nine months to 41.9% compared to 43.9% during the same period in 2021. Consolidated gross profit dollars increased primarily due to selling price increases in each Reportable Segment and higher sales volume in The Americas Group, partially offset by higher raw material costs in each Reportable Segment and lower sales volumes in the Consumer Brands Group. The gross margin rate decreased primarily as a result of higher raw material costs in each Reportable Segment and supply chain inefficiencies in the Consumer Brands Group.

The Americas Group’s gross profit in the first nine months was higher than the same period last year by $263.9 million due primarily to selling price increases and higher sales volume, partially offset by higher raw material costs. The Americas Group’s gross profit as a percent of net sales decreased in the first nine months compared to the same period in 2021 primarily due to higher raw material costs. The Consumer Brands Group’s gross profit decreased by $84.2 million in the first nine months compared to the same period last year due primarily to lower sales volume (including the impact from the Wattyl divestiture), higher raw material costs and supply chain inefficiencies. The Consumer Brands Group’s gross profit as a percent of net sales decreased in the first nine months compared to the same period last year for these same reasons. The Performance Coatings Group’s gross profit increased $242.4 million in the first nine months compared to the same period last year due primarily to higher selling prices, partially offset by higher raw material costs and unfavorable currency translation rate changes. The Performance Coatings Group’s gross profit as a percent of net sales increased in the first nine months compared to the same period last year primarily due to higher selling prices, partially offset by higher raw material costs.

Consolidated SG&A increased $322.6 million in the first nine months versus the same period last year due primarily to increased expenses to support net new store openings and investments in digital technologies and system upgrades, partially offset by favorable currency translation rate changes. As a percent of net sales, consolidated SG&A decreased 90 basis points in the first nine months compared to the same period last year primarily due to good cost control.

The Americas Group’s SG&A increased $208.9 million in the first nine months compared to the same period last year due primarily to increased spending from new store openings, higher costs to serve our customers and investments in information systems. The Consumer Brands Group’s SG&A increased $40.7 million in the first nine months compared to the same period last year due to higher marketing spend and investments in customer programs. The Performance Coatings Group’s SG&A increased $47.6 million in the first nine months compared to the same period last year due primarily to acquisitions and to support higher sales levels, partially offset by good cost control and favorable currency translation rate changes. The Administrative segment’s SG&A increased $25.4 million in the first nine months compared to the same period last year due primarily to integration costs related to acquisitions and higher investments in digital technologies.

In the first nine months of 2022, Other general (income) expense - net improved $118.7 million compared to the same period in 2021 primarily due to the recognition of a $111.9 million loss on the Wattyl divestiture in the Administrative segment in the first quarter of 2021. See Note 15 of Item 1 for additional information.

For information on the amortization of acquired intangible assets and related impairment considerations, see Note 5 of Item 1 and Note 5 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Interest expense increased $32.7 million in the first nine months of 2022 compared to the same period last year due primarily to higher interest rates and an increase in outstanding debt. See Note 6 of Item 1 for additional information on the Company’s outstanding debt.

In the first nine months of 2022, Other expense (income) - net declined $51.5 million compared to the same period in 2021 primarily due to lower returns on investments held in the Administrative segment and higher foreign currency transaction related losses. See Note 15 of Item 1 for additional information.

The following table presents income before income taxes by segment and as a percentage of net sales by segment:


	Three Months Ended September 30,								Nine Months Ended September 30,
	2022			2021			% Change		2022			2021			% Change
Income Before Income Taxes:
The Americas Group	$	764.1		$	631.5		21.0	%	$	1,909.9		$	1,838.8		3.9	%
Consumer Brands Group	94.9			75.8			25.2	%	223.3			342.3			(34.8)	%
Performance Coatings Group	236.3			110.4			114.0	%	577.6			399.0			44.8	%
Administrative	(218.1)			(206.2)			(5.8)	%	(632.6)			(640.4)			1.2	%
Total	$	877.2		$	611.5		43.5	%	$	2,078.2		$	1,939.7		7.1	%

Income Before Income Taxes as a % of Net Sales:
The Americas Group	21.2		%	21.3		%			19.9		%	21.5		%
Consumer Brands Group	13.5		%	11.7		%			10.4		%	15.9		%
Performance Coatings Group	13.6		%	7.2		%			11.1		%	8.9		%
Administrative	nm			nm					nm			nm
Total	14.5		%	11.9		%			12.3		%	12.8		%

nm - not meaningful

Income Tax Expense

The effective tax rate was 21.9% for the third quarter of 2022 compared to 17.9% for the third quarter of 2021, and 21.4% for the first nine months of 2022 compared to 19.6% for the first nine months of 2021. The effective tax rate was less favorably impacted by tax benefits related to employee share based payments in the third quarter and first nine months of 2022 than in the same periods last year. The other significant components of the Company's tax rate were consistent year over year. See Note 16 of Item 1 for additional information.

Net Income Per Share

Diluted net income per share in the third quarter of 2022 increased 39.4% to $2.62 per share compared to $1.88 per share in the third quarter of 2021. Diluted net income per share for the third quarter of 2022 included a $0.21 per share charge for acquisition-related amortization expense. Diluted net income per share for the third quarter of 2021 included a $0.21 per share charge for acquisition-related amortization expense. Currency translation rate changes decreased diluted net income per share by $0.04 in the third quarter.

Diluted net income per share for the first nine months of 2022 increased 7.0% to $6.23 per share compared to $5.82 per share in the first nine months of 2021. Diluted net income per share for the first nine months of 2022 included a $0.61 per share charge for acquisition-related amortization expense. Diluted net income per share for the first nine months of 2021 included a $0.34 per share loss from the Wattyl divestiture and a $0.64 per share charge for acquisition-related amortization expense. Currency translation rate changes decreased diluted net income per share by $0.06 in the first nine months.

FINANCIAL CONDITION, LIQUIDITY AND CASH FLOW

Overview

The Company’s financial condition and liquidity remained strong at September 30, 2022. During the first nine months of 2022, the Company generated $1.279 billion in net operating cash despite increasing working capital requirements as a result of higher selling prices and raw material costs. During the first nine months of 2022, the Company’s EBITDA increased 6.5% to $2.793 billion. See the Non-GAAP Financial Measures section below for the definition and calculation of EBITDA.

Cash and cash equivalents decreased $35.2 million during the first nine months of 2022. Cash flow from operations, along with increased short-term borrowings and long-term debt, funded normal seasonal working capital increases and allowed the Company to return $1.214 billion to shareholders in the form of share buybacks and cash dividends, repay $260.3 million in long-term debt, and close acquisitions with an aggregate purchase price of $649.1 million during the first nine months of 2022.

At September 30, 2022, the Company had cash and cash equivalents of $130.5 million and total debt outstanding of $10.535 billion. Total debt, net of cash and cash equivalents, was $10.404 billion. The Company continues to maintain sufficient short-term borrowing capacity at reasonable rates, and the Company has sufficient cash on hand and total available borrowing capacity to fund its current operating needs.

Net Working Capital

Net working capital, defined as total current assets less total current liabilities, increased $1.121 billion to a surplus of $21.2 million at September 30, 2022 compared to a deficit of $1.100 billion at September 30, 2021. The net working capital increase is due to an increase in current assets and a decrease in current liabilities.

Current asset balances increased $738.8 million at September 30, 2022 compared to September 30, 2021 primarily due to an increase in inventories of $731.8 million due to higher raw material costs and an increase in accounts receivable of $299.6 million due to higher sales, partially offset by a decrease in cash and cash equivalents of $182.8 million and a decrease in other current assets of $109.8 million primarily related to prepaid expenses and refundable income taxes.

Current liability balances decreased $382.5 million at September 30, 2022 compared to September 30, 2021 primarily due to a decrease in current debt as current portion of long-term debt decreased $661.5 million, partially offset by an increase in short-term borrowings of $235.8 million. Excluding short-term borrowings and the current portion of long-term debt, current liabilities increased $43.2 million primarily due to the timing of payments related to accounts payable and accrued taxes. At September 30, 2022, the Company’s current ratio was 1.00 compared to 0.88 and 0.83 at December 31, 2021 and September 30, 2021, respectively.

Property, Plant and Equipment

Net property, plant and equipment increased $173.9 million in the first nine months of 2022 and increased $214.0 million in the twelve months since September 30, 2021. The increase in the first nine months was primarily due to capital expenditures of $397.5 million and incremental assets recognized through acquisitions of $46.9 million, partially offset by depreciation expense of $194.8 million, unfavorable changes in foreign currency translation of $52.8 million and the sale or disposition of fixed assets of $22.9 million. Since September 30, 2021, the increase was primarily due to capital expenditures of $521.5 million and incremental assets recognized through acquisition of $75.2 million, partially offset by depreciation expense of $258.1 million, unfavorable changes in foreign currency translation of $98.6 million and sale or disposition of fixed assets of $26.0 million.

Capital expenditures primarily represented expenditures in The Americas Group associated with the opening of new paint stores and renovation and improvements in existing stores, and expenditures associated with operational efficiencies, capacity, health and safety at sites currently in operation in the Consumer Brands and Performance Coatings Groups. The Administrative segment incurred capital expenditures primarily related to construction activities associated with expenditures related to the construction of our new headquarters and R&D center.

Goodwill and Intangible Assets

Goodwill and intangible assets increased $140.4 million from December 31, 2021 and increased $211.4 million from September 30, 2021. The net increase during the first nine months of 2022 was primarily due to incremental goodwill and intangible assets recognized from acquisitions of $600.7 million and capitalized software of $13.2 million, partially offset by amortization of $237.8 million and foreign currency translation of $235.7 million. The net increase over the twelve month period from September 30, 2021 was primarily due to incremental goodwill and intangible assets recognized from acquisitions of $765.9 million and capitalized software of $13.2 million, partially offset by amortization of $314.1 million and foreign currency translation of $253.6 million.

See Note 3 in Item 1 for additional information on the Company’s recognition of incremental goodwill and intangible assets in the current year in connection with recent acquisitions. See Note 6 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for more information concerning the Company's goodwill and intangible assets, including impairment testing of these assets.

Other Assets

Other assets increased $168.9 million from December 31, 2021 and increased $266.4 million from September 30, 2021. The increase in the first nine months was primarily due to an increase in other investments and the net investment hedge asset, partially offset by the sale of investments to fund the Company’s domestic defined contribution plan. The increase from September 30, 2021 was primarily due to an increase in other investments (including an increase in deferred pension assets), the net investment hedge asset and deferred tax assets, partially offset by the sale of investments to fund the Company’s domestic defined contribution plan. See Notes 13 and 19 in Item 1 for additional information on the Company’s investments.

Debt (including Short-term borrowings)


	September 30,		December 31,		September 30,
	2022		2021		2021
Long-term debt (including current portion)	$	9,589.5	$	8,851.5	$	8,267.0
Short-term borrowings	945.2		763.5		709.4
Total debt outstanding	$	10,534.7	$	9,615.0	$	8,976.4

The Company’s long-term debt primarily consists of senior notes as disclosed in Note 6 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. In August 2022, the Company issued $600.0 million of 4.050% Senior Notes due 2024 and $400.0 million of 4.250% Senior Notes due 2025 in a public offering. The net proceeds from the issuance of these notes were used to repay borrowings outstanding under the Company’s credit agreement dated May 9, 2016, as amended, and domestic commercial paper program.

The Company had unused capacity under its various credit agreements of $2.826 billion at September 30, 2022. See Note 6 in Item 1 of this report for additional information.

Defined Benefit Pension and Other Postretirement Benefit Plans

Long-term liabilities for defined benefit pension and other postretirement benefit plans did not change significantly from December 31, 2021 and September 30, 2021. See Note 7 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for more information concerning the Company’s benefit plan obligations.

Deferred Income Taxes

Deferred income taxes decreased $76.4 million from December 31, 2021, and decreased $109.7 million from September 30, 2021, primarily due to amortization of acquisition-related intangible assets.

Other Long-Term Liabilities

Environmental-Related Liabilities

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. 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.

Depreciation of capital expenditures and other expenses related to ongoing environmental compliance measures were included in the normal operating expenses of conducting business. The Company’s capital expenditures, depreciation and other expenses related to ongoing environmental compliance measures were not material to the Company’s financial condition, liquidity, cash flow or results of operations during the first nine months of 2022. Management does not expect that such capital expenditures, depreciation and other expenses will be material to the Company’s financial condition, liquidity, cash flow or results of operations in 2022. See Note 8 in Item 1 for further information on environmental-related long-term liabilities.

Contractual Obligations, Commercial Commitments and Warranties

During the first nine months of 2022, the Company completed the acquisition of a domestic floor coatings company and three European coatings companies. The acquired businesses will be reported within the Company’s Performance Coatings Group. The Company funded the acquisitions, totaling approximately $649.1 million, through cash generated from operating activities and borrowings under committed credit agreements.

Except for the acquisitions discussed above and in Note 3 of Item 1, and the debt transactions discussed above and in Note 6 of Item 1, there have been no other significant changes to the Company’s contractual obligations and commercial commitments in the first nine months of 2022 as summarized in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Litigation

See Note 9 in Item 1 for information concerning litigation.

Shareholders’ Equity


	September 30,		December 31,		September 30,
	2022		2021		2021
Total shareholders’ equity	$	2,597.8	$	2,437.2	$	2,690.3

Shareholders’ equity increased $160.6 million during the first nine months of 2022 as a result of net income of $1,633.8 million and an increase in Other capital of $126.6 million primarily associated with stock-based compensation expense and stock option exercises, partially offset by $773.1 million of Treasury stock activity primarily attributable to treasury stock repurchases, cash dividends paid on common stock of $462.9 million and a decrease in Accumulated other comprehensive loss of $364.1 million.

Shareholders’ equity decreased $92.5 million since September 30, 2021 as a result of $1.380 billion of Treasury stock activity primarily attributable to treasury stock repurchases and cash dividends paid on common stock of $607.1 million, partially offset by net income of $1.938 billion and an increase in Other capital of $231.5 million primarily associated with stock-based compensation expense and stock option exercises.

During the first nine months of 2022, the Company purchased 2.75 million shares of its common stock for treasury purposes through open market purchases. The Company acquires its common stock for general corporate purposes, and depending on its cash position and market conditions, it may acquire additional shares in the future. The Company had remaining authorization at September 30, 2022 to purchase 45.8 million shares of its common stock.

In February 2022, the Company's Board of Directors increased the quarterly cash dividend from $.55 per share to $.60 per share. This quarterly dividend was approved in all subsequent quarters and will result in an annual dividend for 2022 of $2.40 per share or a 34% payout of 2021 diluted net income per share.

Cash Flow

Net operating cash for the nine months ended September 30, 2022 was a cash source of $1.279 billion compared to a cash source of $2.051 billion for the same period in 2021. The decrease in net operating cash was primarily due to an increase in cash requirements for working capital.

Net investing cash usage increased $823.8 million in the first nine months of 2022 to a usage of $1.051 billion compared to a usage of $226.7 million for the same period in 2021 primarily due to an increase in cash used for acquisitions and capital expenditures, as well as the proceeds received from the Wattyl divestiture in the prior year. See Note 3 in Item 1 for additional information on acquisitions.

Net financing cash usage decreased $1.474 billion in the first nine months of 2022 to a usage of $263.6 million from a usage of $1.738 billion for the same period in 2021 primarily due to lower level of cash used for treasury stock purchases and an increase in net proceeds from debt (including short-term borrowings and long-term debt).

In the twelve month period from October 1, 2021 through September 30, 2022, the Company generated net operating cash of $1.473 billion, used $1,300.2 million in investing activities and used $359.9 million in financing activities.

Market Risk

See Note 12 in Item 1 for disclosures related to the $662.7 million of outstanding U.S. Dollar to Euro cross currency swap contracts designed to hedge the Company’s net investment in its European subsidiaries and $194.5 million of outstanding foreign currency forward contracts not designated as hedging instruments.

Financial Covenant

Certain borrowings contain a consolidated leverage covenant. The covenant states that the Company’s consolidated leverage ratio is not to exceed 3.75 to 1.00, however, the Company may elect to temporarily increase the leverage ratio to 4.25 to 1.00 for a period of four consecutive fiscal quarters immediately following the consummation of a qualifying acquisition, as defined in the credit agreement dated August 30, 2022. The leverage ratio is defined as the ratio of total indebtedness (the sum of Short-term borrowings, Current portion of long-term debt and Long-term debt) at the reporting date to consolidated “Earnings Before Interest, Taxes, Depreciation, and Amortization” (EBITDA), as defined in the credit agreement, for the 12-month period ended on the same date. Refer to the “Non-GAAP Financial Measures” section below for a reconciliation of EBITDA to Net income. At September 30, 2022, the Company was in compliance with the covenant and expects to remain in compliance. The Company’s notes, debentures and revolving credit agreements contain various default and cross-default provisions. 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 6 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for more information concerning the Company’s debt and related covenant.

Non-GAAP Financial Measures

Management utilizes certain financial measures that are not in accordance with U.S. generally accepted accounting principles (US GAAP) to analyze and manage the performance of the business. The required disclosures for these non-GAAP measures are shown below. The Company provides such non-GAAP information in reporting its financial results to give investors additional data to evaluate the Company's operations. Management does not, nor does it suggest investors should, consider such non-GAAP measures in isolation from, or in substitution for, financial information prepared in accordance with US GAAP.

EBITDA and Adjusted EBITDA

EBITDA is a non-GAAP financial measure defined as net income before income taxes and interest, depreciation and amortization. Adjusted EBITDA is a non-GAAP financial measure that excludes the loss on the divestiture of Wattyl in 2021. Management considers EBITDA and Adjusted EBITDA useful in understanding the operating performance of the Company. 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 Condensed Statements of Consolidated Cash Flows in Item 1.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income	$	685.1	$	502.2	$	1,633.8	$	1,560.4
Interest expense	101.2		83.1		282.5		249.8
Income taxes	192.1		109.3		444.4		379.3
Depreciation	64.5		63.4		194.8		199.8
Amortization	81.3		76.2		237.8		233.2
EBITDA	$	1,124.2	$	834.2	$	2,793.3	$	2,622.5
Loss on divestiture	—		—		—		111.9
Adjusted EBITDA	$	1,124.2	$	834.2	$	2,793.3	$	2,734.4

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (US GAAP) requires management to make estimates and assumptions that affect amounts reported in the accompanying consolidated unaudited interim financial statements. These determinations were made based upon management’s best estimates, judgments and assumptions that were believed to be reasonable under the circumstances, giving due consideration to materiality. We do not believe there is a great likelihood that materially different amounts would be reported under different conditions or using different assumptions related to the accounting policies described below. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates.

A comprehensive discussion of the Company’s critical accounting policies, management estimates and significant accounting policies followed in the preparation of the financial statements is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 1 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. There have been no significant changes in critical accounting policies, management estimates or accounting policies followed since the year ended December 31, 2021.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report constitute “forward-looking statements” within the meaning of the federal securities laws. These forward-looking statements are based upon management’s current expectations, predictions, estimates, assumptions and beliefs concerning future events and conditions and may discuss, among other things, anticipated future performance (including sales and earnings), expected growth, future business plans and the costs and potential liability for environmental-related matters and the lead pigment and lead-based paint litigation. Any statement that is not historical in nature is a forward-looking statement and may be identified by the use of words and phrases such as “believe,” “expect,” “may,” “will,” “should,” “project,” “could,” “plan,” “goal,” “target,” “potential,” “seek,” “intend,” “aspire” or “anticipate” or the negative thereof or comparable terminology.

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, performance and experience. These risks, uncertainties and other factors include such things as:

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

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

•changes in raw material and energy supplies and pricing;

•changes in our relationships with customers and suppliers;

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

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

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

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

•our ability to attain cost savings from productivity initiatives;

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

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

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

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

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

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

•adverse weather conditions or natural disasters, including due to the impacts of climate change; and

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

Readers are cautioned that it is not possible to predict or identify all of the risks, uncertainties and other factors that may affect future results and that the above list should not be considered a complete list. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as otherwise required by law.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk associated with interest rate, 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. The Company enters into option and forward currency exchange contracts and commodity swaps to hedge against value changes in foreign currency and commodities. The Company believes it may experience continuing losses from foreign currency translation and commodity price fluctuations. However, the Company does not expect currency translation, transaction, 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. There were no material changes in the Company’s exposure to market risk since the disclosure included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Item 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chairman and Chief Executive Officer and our Senior Vice President - Finance and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 and Rule 15d-15 of the Securities Exchange Act of 1934, as amended (“the Exchange Act”). Based upon that evaluation, our Chairman and Chief Executive Officer and our Senior Vice President - Finance and Chief Financial Officer concluded that as of the end of the period covered by this report our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and accumulated and communicated to our management including our Chairman and Chief Executive Officer and our Senior Vice President - Finance and Chief Financial Officer, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting identified in connection with the evaluation that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

The Securities and Exchange Commission regulations require disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that the Company reasonably believes will exceed a specified threshold. Pursuant to these regulations, the Company uses a threshold of $1 million for purposes of determining whether disclosure of any such proceedings is required.

For information regarding certain environmental-related matters and other legal proceedings, see the information included under the captions titled “Other Long-Term Liabilities” and “Litigation” of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Notes 8 and 9 of the “Notes to Condensed Consolidated Financial Statements.” The information contained in Note 9 to the Condensed Consolidated Financial Statements is incorporated herein by reference.

Item 1A. Risk Factors.

We face a number of risks that could materially and adversely affect our business, results of operations, cash flow, liquidity or financial condition. A discussion of our risk factors can be found in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2021. Readers should not interpret the disclosure of any risk factor to imply that the risk has not already materialized. During the nine months ended September 30, 2022, there were no material changes to our previously disclosed risk factors.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

A summary of the Company’s third quarter activity is as follows:


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan	Maximum Number of Shares That May Yet Be Purchased Under the Plan
July 1 - July 31
Share repurchase program (1)	50,000	$	241.09	50,000	45,975,000



August 1 - August 31
Share repurchase program (1)	100,000	$	238.22	100,000	45,875,000



September 1 - September 30
Share repurchase program (1)	50,000	$	233.70	50,000	45,825,000
Employee transactions (2)	277	$	233.48		N/A


Quarter Total
Share repurchase program (1)	200,000	$	237.81	200,000	45,825,000
Employee transactions (2)	277	$	233.48

(1)Shares were purchased through the Company’s publicly announced share repurchase program. There is no expiration date specified for the program.

(2)Shares were delivered to satisfy the exercise price and/or tax withholding obligations by employees who exercised stock options or had restricted stock units vest.

Item 5. Other Information.

None.

Item 6. Exhibits.



4.1			Indenture, dated August 10, 2022, by and between the Company and U.S. Bank Trust Company, National Association, as Trustee, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated August 10, 2022, and incorporated herein by reference.

4.2			First Supplemental Indenture, dated August 10, 2022, by and between the Company and U.S. Bank Trust Company, National Association, as Trustee (including Form of Note), filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated August 10, 2022, and incorporated herein by reference.

4.3			Second Supplemental Indenture, dated August 10, 2022, by and between the Company and U.S. Bank Trust Company, National Association, as Trustee (including Form of Note), filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K dated August 10, 2022, and incorporated herein by reference.

4.4			Credit Agreement, dated August 30, 2022, by and among the Company, Sherwin-Williams Canada Inc. and Sherwin-Williams Luxembourg S.à r.l., as borrowers, the lenders party thereto, the issuing lenders party thereto and Citibank, N.A., as administrative agent, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated August 31, 2022, and incorporated herein by reference.

4.5			Amendment No. 4 to the Amended and Restated Credit Agreement, dated August 15, 2022, by and among the Company, Goldman Sachs Bank USA, as administrative agent, Goldman Sachs Mortgage Company, as issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated August 15, 2022, and incorporated herein by reference.

4.6			Amendment No. 5 to the Amended and Restated Credit Agreement, dated August 26, 2022, by and among the Company, Goldman Sachs Bank USA, as administrative agent, Goldman Sachs Mortgage Company, as issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated August 26, 2022, and incorporated herein by reference.

4.7			Amendment No. 6 to the Amended and Restated Credit Agreement, dated September 8, 2022, by and among the Company, Goldman Sachs Bank USA, as administrative agent, Goldman Sachs Mortgage Company, as issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated September 8, 2022, and incorporated herein by reference.

4.8			Amendment No. 7 to the Amended and Restated Credit Agreement, dated September 14, 2022, by and among the Company, Goldman Sachs Bank USA, as administrative agent, Goldman Sachs Mortgage Company, as issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated September 14, 2022, and incorporated herein by reference.

31(a)			Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer (filed herewith).

31(b)			Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer (filed herewith).

32(a)			Section 1350 Certification of Chief Executive Officer (furnished herewith).

32(b)			Section 1350 Certification of Chief Financial Officer (furnished herewith).

101.INS			Inline XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

101.SCH			Inline XBRL Taxonomy Extension Schema Document

101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document

104			The cover page from this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2022, formatted in Inline XBRL and contained in Exhibit 101.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		THE SHERWIN-WILLIAMS COMPANY

October 25, 2022	By:	/s/ Jane M. Cronin
		Jane M. Cronin
		Senior Vice President -
		Enterprise Finance

October 25, 2022	By:	/s/ Allen J. Mistysyn
		Allen J. Mistysyn
		Senior Vice President - Finance
		and Chief Financial Officer