SHW_4Q_YE_2008
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  • 1. Christopher M. Connor Robert J. Wells Chairman & CEO Senior 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 – 4th Quarter / YE 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 – 4th Quarter / YE 2008
  • 4. Coatings Industry Global Demand (US$) 2008 Europe 6.9 Billion Gallons (-5.5%) Asia Pacific 31% 89 Billion Dollars (-3.9%) 35% Latin Other America 6% Canada 5% United States 3% 20% Source: International Paint & Printing Ink Council, Orr & Boss, December 2008, Company Data The Sherwin-Williams Company – 4th Quarter / YE 2008
  • 5. Coatings Industry Top Manufacturers - 2007 United States Worldwide 1 Akzo Nobel/ICI 1 Sherwin-Williams 2 PPG/SigmaKalon 2 PPG 3 Sherwin-Williams 3 Valspar 4 Dupont 4 Masco 5 Valspar 5 ICI 6 RPM 6 DuPont 7 BASF 7 RPM 8 Kansai 8 Comex 9 Nippon 9 Akzo Nobel 10 Sika 10 Benjamin Moore Source: Paint & Coatings Industry Source: Coatings World The Sherwin-Williams Company – 4th Quarter / YE 2008
  • 6. U.S. Coatings Industry Sales ($) Mix by Category 2008 1.20 Billion Gallons (- 9%) Special 18.48 Billion Dollars (- 4%) Purpose Architectural 31% Coatings 45% OEM Finishes 24% Source: Est. based on 3Q U.S. Department of Commerce data; Segment Percents Based on Dollars The Sherwin-Williams Company – 4th Quarter / YE 2008
  • 7. U.S. Construction Market Annual Growth Rates by Market (sq. ft.) 30% 20% 10% % Increase/Decrease 0% -10% -20% -30% -40% -50% -60% -70% 2004 2003 2005 2006 2007 2008 Jan. 2009 Residential Commercial/Ind. Institutional Source: DODGE Construction Potentials Bulletin – December 2008 & January 2009 The Sherwin-Williams Company – 4th Quarter / YE 2008
  • 8. U.S. Existing Home Sales Seasonally Adjusted 8,000 30% 7,000 Percentage change over Previous Year 20% Percentage Change Over previous year Sales in Thousands of Units 6,000 Sales in thousands of units 10% 5,000 4,000 0% 3,000 -10% 2,000 -20% 1,000 0 -30% . Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 EH Sales % Change in sales over previous year Source: National Association of Realtors The Sherwin-Williams Company – 4th Quarter / YE 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 756 Million Gallons 1997 647 Million Gallons Source: U.S. Dept of Commerce MA28F Report/Internal Estimates The Sherwin-Williams Company – 4th Quarter / YE 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 – 4th Quarter / YE 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 – 4th Quarter / YE 2008
  • 12. Company Overview Financial Highlights 2008 2007 Net Sales $7.980M $8.005M EBITDA $946M $1,148M Income $477M $616M % Sales 6.0% 7.7% Earnings Per Share $4.00 $4.70 Net Operating Cash $876M $875M Dividend Per Share $1.40 $1.26 Return on Assets 10.8% 12.7% The Sherwin-Williams Company – 4th Quarter / YE 2008
  • 13. Company Overview Revenue & Profit by Segment - 2008 Consumer Sales: $1.27 Billion Profit: $140.2 Million Paint Stores Profit %: 11.0 Global Sales: $4.83 Billion Sales: $1.87 Billion Profit: $647.9 Million Profit: $152.2 Million Profit %: 13.4 Profit %: 8.2 Controlled Distribution Accounts for 75% of Sales The Sherwin-Williams Company – 4th Quarter / YE 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 – 4th Quarter / YE 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 – 4th Quarter / YE 2008
  • 16. Controlled Distribution Top 10 Paint Store Chains – North America 2008 Est. 2002 Est. 3,346 2,643 ICI/Glidden 579 718 PPG 409 250 Comex/Pro Paint, Inc. 319 308 Kelly-Moore 165 160 1,872 1,807 Dunn Edwards 103 71 Cloverdale/Rodda 102 101 Diamond Vogel 79 85 Benjamin Moore 70 68 Vista 46 46 Gap: +1,474 +836 Source: Independent Research, Company Websites, Rauch Guide, Chain Store Guide The Sherwin-Williams Company – 4th Quarter / YE 2008
  • 17. Controlled Distribution Global Group • Company-Operated Branches for Architectural, Automotive and OEM Finishes • Added 22 Net New Locations in 2008 for a Total of 541 Branches The Sherwin-Williams Company – 4th Quarter / YE 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 – 4th Quarter / YE 2008
  • 19. Leading Technology Total Technical Expenditures 101.0 102.0 106.0 110 95.4 91.3 86.2 88.7 88.3 100 83.6 78.2 90 73.4 80 62.6 $ Millions 70 60 50 40 30 20 10 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 % 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 – 4th Quarter / YE 2008
  • 20. Leading Technology New Product Development • Productivity Enhancing • Sustainability • Color Technology • Safety and Security The Sherwin-Williams Company – 4th Quarter / YE 2008
  • 21. People Development & Retention Recognized Employer of Choice The Princeton Review “Best Entry Level Jobs” 2005 - 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 – 4th Quarter / YE 2008
  • 22. People Development & Retention Successful Recruiting Effort New MTP Hires in 2008: • Paint Stores Group 568 • Automotive Finishes 80 • Chemical Coatings 20 Total 668 The Sherwin-Williams Company – 4th Quarter / YE 2008
  • 23. People Development & Retention Voluntary Turnover Manager 4.4% Assistant Mgr. 9.3% Sales Rep 6.9% The Sherwin-Williams Company – 4th Quarter / YE 2008
  • 24. Growth by Acquisition • Completed 12 Transactions in the Last 24 Months for a Total Investment of $342 Million Generating Over $338 Million in Sales The Sherwin-Williams Company – 4th Quarter / YE 2008
  • 25. Consolidated Gross Profit $ Gross Profit 3598 3,499 3,700 3,413 % to Sales 3,080 3,200 2,701 2,455 2,700 2,249 2,308 2,220 2,339 2,097 2,130 $ Millions 2,200 45.4 1,700 45.1 44.9 44.9 44.2 44.3 43.7 43.8 43.8 43.2 43.0 42.8 1,200 700 200 -300 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 The Sherwin-Williams Company – 4th Quarter / YE 2008
  • 26. Selling, General & Admin Expense $ SG&A 3,000 2,644 2,597 % to Sales 2,513 2,326 2,500 2,069 1,882 1,785 2,000 $ Millions 1,500 34.8 34.4 33.8 33.1 32.4 32.2 32.4 1,000 500 0 2002 2003 2004 2005 2006 2007 2008 The Sherwin-Williams Company – 4th Quarter / YE 2008
  • 27. Working Capital Ratio (Accounts Receivable + Inventory – Payables)/Sales 20% 16.3% 13.8% 13.8% 15% 12.7% 12.5% 11.7% 11.5% 11.0% 11.2% 10% 5% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 The Sherwin-Williams Company – 4th Quarter / YE 2008
  • 28. Net Operating Cash 900 Uses of Cash 874.8 876.2 800 815.8 • Acquisitions 700 716.7 ($ in Millions) 600 • Capital Expenditures 544.7 500 593.9 • Buy Back Stock 546.6 400 460.0 460.0 • Manage Debt 300 340.9 • Pay Dividends 200 100 0 2004 2005 2006 2007 2008 Net Operating Cash less Cap. Ex. & Dividends Net Operating Cash The Sherwin-Williams Company – 4th Quarter / YE 2008
  • 29. Stock Repurchase 13.20 14.00 12.00 Millions of Shares 10.00 8.10 7.98 7.25 8.00 6.70 6.70 6.60 5.60 6.00 4.00 2.00 0.00 2001 2002 2003 2004 2005 2006 2007 2008 Avg. Common Shares Outstanding 156.9 152.4 147.0 144.7 141.1 137.3 130.9 116.8 (fully diluted / in millions) The Sherwin-Williams Company – 4th Quarter / YE 2008
  • 30. Total Debt : EBITDA Ratio 1500 84% 83% 88% 99% 73% 1148 ($ in Millions) 1047 1000 745 946 965 848 875 834 738 500 621 0 2004 2005 2006 2007 2008 Total Debt EBITDA The Sherwin-Williams Company – 4th Quarter / YE 2008
  • 31. Dividends Per Share 1979 – 2009E 1.40 1.42 $1.50 $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 .12 .13 .14 .16 $0.20 .08 .10 .04 .05 .06 $0.10 .01 $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 2008 2008E The Sherwin-Williams Company – 4th Quarter / YE 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 – 4th Quarter / YE 2008