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SHW_3Q_2008
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  • 1. Christopher M. Connor Sean P. Hennessy Chairman & CEO Senior Vice President, Finance & CFO Robert J. Wells Vice President, Corporate Communications & Public Affairs
  • 2. Forward-Looking Statements This presentation today will contain certain “forward-looking statements”, as defined under U.S. federal securities laws, with respect to sales, earnings and other matters. These forward-looking statements are based upon management’s current expectations, estimates, assumptions and beliefs concerning future events and conditions. Forward- looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of the Company, that could cause actual results to differ materially from such statements and from the Company’s historical results and experience. These risks, uncertainties and other factors include such things as: general business conditions, strengths of retail and manufacturing economies and the growth in the coatings industry; changes in the Company’s relationships with customers and suppliers; changes in raw material availability and pricing; unusual weather conditions; and other risks, uncertainties and other factors described from time to time in the Company’s reports filed with the Securities and Exchange Commission. Since it is not possible to predict or identify all of the risks, uncertainties and other factors that may affect future results, the above list should not be considered a complete list. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update or revise any forward- looking statement, whether as a result of new information, future events or otherwise. The Sherwin-Williams Company – 3rd Quarter 2008
  • 3. Discussion Outline • Coatings Market Overview • Sherwin-Williams Overview • Sherwin-Williams Investment Rationale – Diversified Customer Base – Controlled Distribution – Channel/Brand Strategy – Leading Technology – People Development & Retention – Growth from Acquisitions – Financial Strength The Sherwin-Williams Company – 3rd Quarter 2008
  • 4. Coatings Industry Global Demand Asia Pacific Europe 7.3 Billion Gallons 23% 32% 81 Billion Dollars Latin America 11% Other 4% Canada 4% United States 26% Source: U.S. Census Bureau, July 2007/CHEMARK The Sherwin-Williams Company – 3rd Quarter 2008
  • 5. Coatings Industry Top Manufacturers United States Worldwide 1 Akzo Nobel/ICI 1 Sherwin-Williams 2 PPG/SigmaKalon 2 PPG 3 Sherwin-Williams 3 Valspar 4 Dupont 4 Masco 5 Valspar 5 ICI 6 RPM 6 DuPont 7 BASF 7 RPM 8 Kansai 8 Comex 9 Nippon 9 Akzo Nobel 10 Sika 10 Benjamin Moore Source: Paint & Coatings Industry Source: Coatings World The Sherwin-Williams Company – 3rd Quarter 2008
  • 6. U.S. Coatings Industry Sales ($) Mix by Category 2007 1.28 Billion Gallons Special 20.07 Billion Dollars Purpose 29% Architectural Coatings 48% OEM Finishes 23% Source: U.S. Department of Commerce; Segment Percents Based on Dollars The Sherwin-Williams Company – 3rd Quarter 2008
  • 7. U.S. Construction Market Annual Growth Rates by Market (sq. ft.) 30% 20% % Increase/Decrease 10% 0% -10% -20% -30% -40% -50% 2004 2003 2005 2006 2007 2008 YTD August ‘08 Residential Commercial/Ind. Institutional Source: DODGE Construction Potentials Bulletin – August 2008 The Sherwin-Williams Company – 3rd Quarter 2008
  • 8. U.S. Existing Home Sales Seasonally Adjusted 8,000 30% % Change over Previous Year 7,000 20% Sales in Thousands of Units 6,000 10% 5,000 4,000 0% 3,000 -10% 2,000 -20% 1,000 0 -30% . Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun -01 -01 -02 -02 -03 -03 -04 -04 -05 -05 -06 -06 -07 -07 -08 Source: National Association of Realtors The Sherwin-Williams Company – 3rd Quarter 2008
  • 9. U.S. Architectural Coatings Gallons in Millions DIY DIY PC 39% PC 51% DIY 49% 61% 42% PC 58% 1987 2007 527 Million Gallons 696 Million Gallons 1997 647 Million Gallons Source: U.S. Dept of Commerce MA28F Report/Internal Estimates The Sherwin-Williams Company – 3rd Quarter 2008
  • 10. DIY Channel Share, U.S. Most Recent Purchase by Store Type 2007 Home Center Mass Lumber Merchants Building 16% Materials 60% Paint Stores Hardware Stores 19% 5% Source: Proprietary Paint Industry Data, S-W Marketing The Sherwin-Williams Company – 3rd Quarter 2008
  • 11. Contractor Channel Share, U.S. Primary Outlet by Store Type 2007 Paint Hardware Stores Stores 92.3% 0.6% Home Centers 2.4% Discount / Other 4.7% Source: National Marketing Measures: 2007 The Sherwin-Williams Company – 3rd Quarter 2008
  • 12. Company Overview Financial Highlights 2007 2006 Net Sales $8,005M $7,810M EBITDA $1,148M $1,050M Income $616M $576M % Sales 7.7% 7.4% Earnings Per Share $4.70 $4.19 Net Operating Cash $875M $816M Dividend Per Share $1.26 $1.00 Return on Assets 12.7% 11.5% The Sherwin-Williams Company – 3rd Quarter 2008
  • 13. Company Overview Revenue & Profit by Segment - 2007 Consumer Sales: $1.31 Billion Profit: $224.2 Million Paint Stores Profit %: 17.1 Global Sales: $4.96 Billion Sales: $1.73 Billion Profit: $767 Million Profit: $160.7 Million Profit %: 15.5 Profit %: 9.3 Controlled Distribution Accounts for 75% of Sales The Sherwin-Williams Company – 3rd Quarter 2008
  • 14. Diversified Customer Base Residential-Commercial-Industrial Special Purpose Coatings Architectural Coatings OEM Finishes • Residential DIY • Kitchen Cabinets • Industrial Maintenance • Residential Repaint (Pro) • Residential Furniture • Traffic Marking • New Residential • Office Furniture • Automotive Refinish • New Commercial & • Wood Building Products • Marine Institutional • Metal Building Products • Aerosol Paints • Property Maintenance • Miscellaneous • Architects & Designers • Heavy Equipment • Electronics • Military The Sherwin-Williams Company – 3rd Quarter 2008
  • 15. Controlled Distribution Competitive Advantages • Direct Relationship with Customer / End-User • Control Over Brands, Pricing, Inventory, Staffing • Control Pace and Place of Growth The Sherwin-Williams Company – 3rd Quarter 2008
  • 16. Controlled Distribution Top 10 Paint Store Chains – North America 2008 Est. 2002 Est. 3,308 2,643 ICI/Glidden 638 718 PPG 450 250 Comex/Pro Paint, Inc. 397 308 Kelly-Moore 165 160 2,050 1,807 Benjamin Moore 70 68 Cloverdale/Rodda 102 101 Dunn Edwards 103 71 Diamond Vogel 79 85 Vista 46 46 Gap: +1,258 +836 Source: Company Websites, Rauch Guide, Chain Store Guide, Independent Research The Sherwin-Williams Company – 3rd Quarter 2008
  • 17. Controlled Distribution Global Group • Company-Operated Branches for Architectural, Automotive and OEM Finishes • Added 22 Net New Locations YTD 2008 for a Total of 541 Branches The Sherwin-Williams Company – 3rd Quarter 2008
  • 18. Channel-Brand Strategy Leading Brands by Category and Channel PAINT STORES GROUP CONSUMER GROUP Paint Dealer/ Mass Merchant/ Sherwin-Williams Specialty Hardware Department Paint Store Paint Aerosols Wood Care Applicators The Sherwin-Williams Company – 3rd Quarter 2008
  • 19. Leading Technology Total Technical Expenditures 101.0 102.0 110 95.4 91.3 88.7 88.3 100 83.6 86.2 78.2 90 73.4 80 62.6 70 53.4 $ Millions 60 50 40 30 20 10 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 % of 1.3 1.3 1.5 1.6 1.6 1.7 1.7 1.6 1.5 1.3 1.3 1.3 Sales The Sherwin-Williams Company – 3rd Quarter 2008
  • 20. Leading Technology New Product Development • Productivity Enhancing • Sustainability • Color Technology • Safety and Security The Sherwin-Williams Company – 3rd Quarter 2008
  • 21. People Development & Retention Recognized Employer of Choice The Princeton Review “Best Entry Level Jobs” 2005, 2006, 2007 & 2008 FORTUNE BusinessWeek “100 Best Companies “100 Best Places to to Work For” Launch A Career” 2007 & 2008 2005, 2006 & 2008 The Sherwin-Williams Company – 3rd Quarter 2008
  • 22. People Development & Retention Successful Recruiting Effort New MTP Hires in 2007: • Paint Stores Group 707 • Automotive Finishes 55 • Chemical Coatings Division 18 • Paint & Coatings Division 2 Total 782 The Sherwin-Williams Company – 3rd Quarter 2008
  • 23. People Development & Retention Voluntary Turnover Manager 4.4% Assistant Mgr. 9.3% Sales Rep 6.9% The Sherwin-Williams Company – 3rd Quarter 2008
  • 24. Growth by Acquisition • Completed 7 Transactions in 2007 for a Total Investment of $282 Million Generating Over $258 Million in Sales • Completed 13 Transactions Over Last Five Years for a Total Investment of $940 Million Generating Over $870 Million in Sales The Sherwin-Williams Company – 3rd Quarter 2008
  • 25. Consolidated Gross Profit $ Gross Profit 3,598 3,413 3,700 % to Sales 3,080 3,200 2,701 2,455 2,700 2,339 2,249 2,308 2,220 2,097 2,130 $ Millions 2,200 1,728 1,700 45.1 45.4 44.9 44.9 44.2 44.3 43.8 43.7 43.0 42.8 43.2 41.8 1,200 700 200 -300 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 The Sherwin-Williams Company – 3rd Quarter 2008
  • 26. Selling, General & Admin Expense $ SG&A 3,000 2,597 % to Sales 2,513 2,326 2,500 2,069 1,882 1,785 2,000 1,730 $ Millions 1,500 34.8 34.4 34.1 33.8 32.4 32.4 1,000 32.2 500 0 2001 2002 2003 2004 2005 2006 2007 The Sherwin-Williams Company – 3rd Quarter 2008
  • 27. Working Capital Ratio (Accounts Receivable + Inventory – Payables)/Sales 18% 16.3% 16% 13.8% 13.8% 14% 12.7% 12.5% 11.7% 11.5% 11.0% 12% 10% 8% 6% 4% 2% 0% 2000 2001 2002 2003 2004 2005 2006 2007 The Sherwin-Williams Company – 3rd Quarter 2008
  • 28. Net Operating Cash 900 Uses of Cash 874.8 800 815.8 • Acquisitions 700 716.7 ($ in Millions) 600 • Capital Expenditures 558.9 544.7 500 • Buy Back Stock 546.6 400 460.0 460.0 • Manage Debt 300 351.7 340.9 • Pay Dividends 200 100 0 2003 2004 2005 2006 2007 Net Operating Cash less Cap. Ex. & Dividends Net Operating Cash The Sherwin-Williams Company – 3rd Quarter 2008
  • 29. Stock Repurchase 13.2 14.00 12.00 Millions of Shares 10.00 8.10 7.98 7.0 8.00 6.70 6.70 6.60 5.60 6.00 4.00 2.00 0.00 2008 (3Q) 2001 2002 2003 2004 2005 2006 2007 Avg. Common Shares Outstanding 156.9 152.4 147.0 144.7 141.1 137.3 130.9 118.2 (fully diluted / in millions) The Sherwin-Williams Company – 3rd Quarter 2008
  • 30. Debt : EBITDA Ratio 1500 84% 83% 1148 73% 99% ($ in Millions) 1047 1000 76% 965 848 875 745 678 738 500 621 514 0 2003 2004 2005 2006 2007 EBITDA Debt The Sherwin-Williams Company – 3rd Quarter 2008
  • 31. Dividends Per Share 1979 – 2008E $1.50 1.40 $1.40 1.26 $1.30 $1.20 $1.10 1.00 $1.00 .82 $0.90 $0.80 .68 .60 .62 $0.70 .54 .58 .48 $0.60 .40.45 $0.50 .32.35 $0.40 .25 .28 .18 .19 .21 .22 $0.30 .13 .14 .16 .10 .12 $0.20 .05 .06 .08 $0.10 .01 .04 $0.00 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008E The Sherwin-Williams Company – 3rd Quarter 2008
  • 32. Summary • Sherwin-Williams Investment Rationale – Diversified Customer Base – Controlled Distribution – Channel/Brand Strategy – Leading Technology – People Development & Retention – Growth from Acquisitions – Financial Strength The Sherwin-Williams Company – 3rd Quarter 2008