Document N2148po5OKR0bDQ3bnMqekB5E

f 1970 SHERIillN-IUIlllAlllS SHAREHOLDERS N11585 gWP-000005622 TABLE OF CONTENTS 1 Financial Highlights 2 Latter to ShamhoMcn S Serving., .in many ways II Operating Review 19 Financial Review 20 Consolidated Income 21 ConsolidaVed Balance Sheet 23 Source and Application of Fundi 24 Consolidated Shanholden' Equity 23 Notes to Financial Si 27 Accountants' Report 29 Five Year Financial Summary 30 Canadian Subsidiary Financial Summary 32 Divisions, SubskUams and Licensees 33 Products and Plants 34 Directors and (Mean TRANSFER. AGENTS The Cleveland That Company Cleveland. Ohio Bankers Tnat Company New York. New York REGISTRARS Central National Bank of Cleveland Cleveland, Ohio Morgan Guaranty Tnat Company of New York New York, New York TRUSTEES 343% Deicaterer Dm 1992 The Cleveland Tnat Company Cleveland, Ohio 6.23% Conrtrtibit Tuherdlaeied Dtbtmmtt Ota 1993 Central National Bank of Cleveland Cleveland, Ohio Annual Meeting The annual meeting of Shareholders will be held at 10:30 A.M., December 16, 1970, nt the SheretonCievcland HoteL Public Sqimit, Cleveland, Ohio. 0007-SWP-000005623 Financial Highlights Net sales . ............................... ... .... ....... Income before income taxes and extraordinary credit . Income taxes--United States and foreign........................... ... Income before extraordinary credit .... Extraordinary credit--net gain resulting from the sale of securities of Berger, Jenson & Nicholson Limited less applicable income taxes Net income . . . . .... ... . . . . . . . . . . . . . . Cash dividends declared: Preferred................................................................................................ Common................... ... .... .... . . . . .................... Per Common Share: Net income....................... ... . .'..... . . . . . Cash flour . .............................................................................. Dividends paid...................................................................... Working capital................... ............................................................. Ratio of current assets to current liabilities . . Provisions for depreciation............................... ....................... August 31 1970 1969 $525,787,767 $495,139,134 29,029,995 30,471,731 14,487,082 11,829,912 14,542.913 18,641,819 534,482 15,077.395 18.641,819 1,109,583 10,656,715 1,045,175 10,650.863 2.62* 4,69 2.00 184,209,262 4.25 to 1 15,485,604 10,645.666 3.29 5.18 2.00 169,675,484 4.78 to 1 30,721,718 9,265,119 'Includes SO.10 extraordinary credit. 0007-SWP-000005624 JL Shareholders Following a discouraging first half in our 1970 fiscal year, our operations began to improve in the third quarter and this improvement continued at an accelerated pace during the final quarter. Sales for the year amounted to S525.787.767. the first time they have exceeded the halfbillion dollar mark, compared with S495.139.134 last year. Net earnings for the year were 515.077.395. or S2.62 per common share, compared to SI8.64I.819. or S3.29 per common share last year. A comparison of fourth quarter net income from opera tions this year with that of a year ago is particularly en couraging. Net income during the 1970 fourth quarter was S8.20l.25l, or SI.49 per share, including an investment tax credit of S0.04 per share. Comparable figures for the last quarter of 1969 were: net income, 57,999,365, or Sl.44 per share. including an investment tax credit of S0.5I per share. Our 1970 fourth quarter sales were 5158,726,347, up 7.7% from the same period last year. It would appear that consumers do not now have the same reluctance to buy that they exhibited during the last pare of calendar. 1969 and the first five months of 1970. The excellent sales volume has required high levels of operations for our plants, with the result that costs have been satisfactory. Since there is a lag time of four to six months between housing starts and paint used on new houses, the pickup in residential housing that has been recorded in recent months has not yet been reflected in additional sales volume.' If the recent pickup is sustained, it will, of course, be of materia) help to us.. As indicated to you in interim reports, the major start-up costs of new facilities are now behind us so that we are now benefiting and will continue to do so from the production coming from them. Our current paint manufacturing capac ity will permit us to support a significantly larger volume of sales without major capital investment. , If you examine our balance sheet, you will quickly >ee that as a result of the long-term financing accomplished on a favorable basis in the spring of 1970 our financial position is very strong. In total, our overall liquidity places us in a very favorable position to meet our current problems and take advantage of the many opportunities of the future. We hope in reading through our report you will concur that the position of Sherwin-Williams is indeed strong by virtue of ability to meet the many needs of our customers in their daily lives. At the organization meeting ofthe Board held immediately after the annual shareholders meeting in December 1969. the following important management changes were made: E. Colin Baldwin Chairman and Chief Executive Officer Walter O. Spencer .President Richard G. Bull Executive Vice President--Marketing William Moonan Vice President--Auxiliary Divisions G. F. Schlaudecker Vice President--Chemical Operations Richard R. Crow Vice President--Personnel These assignments are consistent with our long range organi zational planning. 2 O7-SWp. OO0005625 After long end distinguished careen. Mr. John S. Prescott, former Senior Vice President, and Mr. Henry D. Lester, Senior Vice President--Finance, have retired and. consistent with normal policy, have, submitted their resignations as Directors. At the Directon' meeting held October 22, 1970, the Board elected as Directon. George F. Schlaudecker, Vice President -- Chemical Operations, and William Moonan. Vice President -- Auxiliary Divisions, to fill the respective vacancies. The Board also elected William C. Fine, who has been Vice President--Financial Operations, as Vice PresidentFinance, and Virgil A. Hollis, who has been Assistant Vice President--Financial Operations, as Assistant Vice Presi dent--Finance. Although we faced severe problems during the fiscal year ended August 31, 1970, it appears that real progress has been achieved and that we can look forward to '70-*71 with confidence. On behalf of our Directors, we want to thank all of our employees for their help and cooperation. . Cisttmn tf tbt Btmd Pruultmt / SERVING.. - IN MANY WAYS Business exists to serve people: to serve customers by providing what they need and want: to serve employees by creating avenues to per-* tonal grow th and financial reward: to serve owners by earning a 'ottsfoctory return on their investment. Thefirst-named/unction is paramount. Success infulfilling ir makes the other two possible.' This is true in allfields, but particularly m those areas where chang ing modes ofliving spur new needs and wants. To keep pace, business has to anticipate people's changing tastes and preferences. Existing products must be continually re-evaluated. Sew products must be de veloped. Thescope ofservices has to be expanded. But not only tastes and preferences have a bearing here. Technology "v> also plays an important rote. Inventions, innovations, improvements change the priorities--even the direction--ofpeople's needs and wants. * It is within this framework that the products and seruces of The v: Sherwm- Williams Co. are brought to the marketplace. From the readily apparent esthetic impact of new color in the home, to tar less evident : ; ingredients offood preservatives--our products serve people in both obvious and subtleways. From industrial environmental color styling that promotes employee safety and efficiency, to new coating applica tion methods that help improve quality andreduce costs ofmanufactured .. 7. items--ourservices contribute constructively to the lives ofmany people. Thefollowing briefreview outlines the roles ofa number ofour pro ducts and services in fulfilling the service-to-people function. Space does not permit a complete catalog. But the examples discussed and illustrated here do reflect the scope, ofour commitment to meeting the needs and wants ofpeople. J The inviting room at left reveals many facets of Sherwin-Williams. The colorful paint on cupboards, shelves and woodwork, the hand some patina of the pre-finished wood paneling and beams, the in credibly durable finish on furniture and appliances--all originated in our paint, varnish and lacquer laboratories. The eye-catching design in the draperies was achieved through the use of Sher-dye. our well-known textile printing material. Sherwin-Williams colors from the Chemicals Division show up again in the floor tile and in the, leather-like plastic upholstery of the lounge chair and hassocks. Un seen. but no less important, are the safety and dependability of Sherwin-Williams electrical insulation materials used in many elec trical appliances. 5 0007-SWP-000005628 PROFESSIONAL PAINTING CONTRACTORS rely on SherwinWilliams to provide their customers with wide freedom of choice in color and type of finish they want in and bn their homes. Bringing highly skilled craftsmanship to a task that is generations-old, pro fessional painters readily satisfy the more discriminating tastes and insistence on quality typical of today's home-owner. Still another product of our manufacture, barium carbonate, protects architec tural brick such as that used in the foundation of this house against unsightly efflorescence. 6 '' 0007-SWP-000005629 SERVING ... IN MANY WAYS METAL BUILDING COMPONENTS ate important elements in new construction, remodeling and renovation. Sherwin-Williams finishes, applied to the metal before it is formed into such intricate shapes as siding, rain carrying equipment and window sash, serve well the needs of both producers and users of these components. The finishes withstand the stresses of metal forming-.operations dur ing manufacture; provide users a wide range of colors that keep their sparkling appearance for many, many years. 70007-SWP-000005630 FOR MANY CHILDREN, school days e surrounded by SherwinWilliams products. High visibility finishes for school buses, traffic lane and crosswalk marking paints, and finishes for directional signs all play a pan in getting youngsters to and from school safely. School rooms are painted to make them more attractive and conducive to teaming. Specialized finishes on desks, laboratory benches, library furniture and other equipment resist the hazardi of daily use. Even the roads to school can be improved by Sherwin-Williams products: concrete curing compounds that lower the cost of road construction; anti-spawling materials that make concrete roads last longer. 8 0007-SWP-000005631 FARMERS SERVE PEOPLE and Sherwin-Williams serves farmers. Highly efficient equipment, like this "Uni-Sheller" that picks and shells three raws of corn at a time, is protected against the elements by tough, durable industrial finishes. Farm vehicles, like their city / counterparts, keep their new look longer, thanks to Sherwin-Williams automotive finishes. Farm buildings are painted to protect and beautify them. Fertilizers are fortified with Sherwin-Williams zinc sulfate to correct zinc deficiency in the ,, .1 and assure higher yields. Other products of the Chemicals Division are used by the tire manufactur ing industry to insure longer life for rubber tires. 0007-SWP-000005632 9 0007-SWP-000005633 SERVING... IN MANY WAYS MORE AND MORE PEOPLE are enjoying leisure time activities. Sherwin-Williams helps extend their hours of pleasure by providing care-l'ree finishes for recreational equipment. For example: longlived, eye-catching coatings for boats: durable paints for swimming pools: weather-resistant finishes for hunting equipment: and color ful* rugged coatings for snowmobiles. Other materials we manufac ture are found in or on such diverse sporting goods as golf balls, diving gear, tennis rackets, snow and water skis to name a few, For those whose leisure time pursuits include the care and enjoyment of animals, we also produce ingredients of veterinary medicines that help keep pets and working animals healthy. it 0007-SWP-000005634 T SERVING ... IN MANY WAYS COLOR STYLING PLANS we develop for industrial and commercial buildings have as their goal- improvement in safety, employee morale and housekeepingsall of which contribute directly to increased efficiency. The Western Electric Service Center, Los Angeles, pictured above, recently underwent a color face lifting. The color combinations used achieve the aims of management and please employees. BLACK PRINTING INK is made blacker by the addition of our alkali blue pigment when the ink is being made. We also sup* ply ink manufacturers a variety of other colors to provide a full spectrum. The colors are available in many different types of dis persions that make them adaptable for inks used in most printing processes. Special purpose ink ingredients are another group of products supplied to the printing industry. TOOLS OF PRODUCTION are safer, often easier to operate when color is put to work as on the centerless' grinder at left. To speed such grinding operations, our Osborn Manufacturing Co. subsidiary produces the "Ramron" polyurethane grinding wheel. This new development removes more metal more quickly than conventional grinding wheels: meets mounting needs for more efficient, lower cost operations. 0007-SWP-000005635 SERVING... IN MANY WAYS SHERWIN-WILLIAMS BRANCHES are more than sources of. material supply. They are also sources of product and appli cation information and decorating inspiration. Visual aids help customers identify paint problems they may encounter and sug gest workable solutions. Easy-to-read charts spell out the proper product for specific applications; Color samples from the Color Boutique and other color selection aids take the guesswork out of color choice. All branches offer will coverings other than paint; many provide floor coverings, drapery materials and dec orative accessories. All this to the end that people may find what they need and want for their homes close at hand. 0007-SWP-000005636 0007-SWP-000005637 MATCHING NEW COLORS tor can m automotive rennishet an important Company scnvitv. Some of the latest renrmhinc color* are here feeina checked in a test spray booth. Operating Review We were able to achieve a considerable "turn-around" in operating earnings for the fourth quarter, as compared to disappointing results for the first nine months of fiscal 1970. The fourth quarter profited significantly from substan tial sales increases and higher operating levels in the paint, varnish and lacquer segment. Rigid but sound control of costs and expenses in all divisions of the Company also made an important contribution. Paint. Varnish d Lacquer Sales in this largest segment of our business increased 5.2 % this year. In total it accounted for 61.9% of consoli dated sales in 1970. While sales increased in all markets, a major portion of the gain came in the consumer market and in the automotive refinishes market. For the year as a whole/ the only soft area of sales to contractors centered around the continued low level of new home construction. However, this gives promise of im provement in the year ahead. We continue to build and strengthen our Companyoperated branch distribution system. During the year 33 . new branches were opened. 93 were relocated and 43 were closed to keep pace with changes in the marketplace, leaving 1,959 branches'in operation at year end. This re flects, in part, the continuation of our program of enlarging, modernizing and consolidating some units into complete decorating centers. In addition to increased paint sales, branch operations were materially enhanced this year by increased sales of painting tools, wallpaper, hard floor coverings, carpeting, draperies, decorative accessories, unpainted furniture and related items. Such non-paint materials accounted for 20% of consolidated sales. Although 42 new leased departments were added to our network during the year, the total of such leased depart ments! decreased from 323 to 310. This was occasioned by a change in policy on the part of some retailers who have elected to operate the departments heretofore leased to us. However, wreontinue to supply the paint to these depart ments, Despite the feet that the number of leased depart ments operated by us declined during the year, total sales through leased departments for the year increased 6.3%. Sa|es to dealers declined slightly during the year. This was dqe largely to competitive pressures for distribution through uealers as the number of buying units continues to decrease. In the past several years many smaller outlets who bought all of their own goods directly have been re placed by fewer but larger multiple-unit establishments and dealer-owned buying organizations. In response to this shift in the distribution pattern, we have been stepping up sales effort and developing new merchandising programs for this important market. In the professional painter and industrial maintenance market, sales continued to grow. Several factors contributed to this, such as greater attention being given to serving the professional needs of the architect and the introduction of highly specialized products that enabled us to penetrate more segments of this market. More aggressive selling and expanded services also played an important role in the sales growth. Our color styling service for industrial plants and'other large structures was given more emphasis and an increasing number of cus tomers availed themselves of it. Seminars for industrial maintenance customers stimulated sales by providing authoritative information in such areas as corrosion control. Both of these services will continue to be expanded. Although sales gains in industrial finishes fell short of projections for the year, an increase was realized. This was accomplished despite a significant softening of the capital goods industry, a succession of strikes in customers* plants, and the work stoppage in the trucking industry. The new Chemical Coatings Service Center, at Fort Smith; Arkansas, is now rendering a custom color and technical service to fabricators of wood, metal and plastic products in that area. Feasibility studies for other service centers are now under way. A consolidation of two Chemi cal Coatings Sales Zones in the southeastern part of the country is designed to increase marketing effectiveness there. Considerable market research is being carried on in the field of modular building in which the-use of industrial finishes will be highly significant. Spurred by HL'D's "Operation Breakthrough", interest in this mode of con struction is growing rapidly, indications are that it will be an important area of construction activity in the near future. Sales of automotive . ` lishes continued the excellent growth pattern of the last several years. This was one of the brightest spots in our entire sales picture. Materials for 0007-SWP-000005638 15 ! Operating Review these markets are sold by Sherwin-Williams, and by the Acme, Martin-Senour and Rogers Divisions. AH had very gratifying sales incruses. Continued growth in automotive refinishes seems assured 'in view of the increasing number of cars and trucks. In order to participate more fully in a rapidly growing seg ment of this market, plans are now being implemented to make available a complete line of color matches for import ed car colors. An important aspect of our efforts to increase profitability in Paint, Varnish A Lacquer, operations is the continuing program of individual product evaluation carried on by ; our Corporate Products Department. A decision to intro duce, continue. or discontinue any item is made on the basis of profitability and inventory movement. Every new product must meet these criteria. As slow-moving items with a low return on investment are eliminated, warehouse and production facilities are able to provide better service on the products which are in strong demand. Because of the volume of statistics required to support such a program, this would not have been economically feasible before the advent of modem computers. With the plant expansion program essentially completed. Paint, Varnish A Lacquer factories are in a strong position to support the considerable increase in unit sales which we are confident will come, All plants are now equipped to produce, virtually all product lines required in the geogra phical area which each serves. The advantages of expanded plant capacity were demon strated clearly in the fourth quarter of the fiscal year when sales increased markedly, In this period, production of some product lines was more than doubled over the comparable period a year ago. In addition to meeting the increased sales demand, this stepped-up volume had a very salutary effect On Operating costs. For the year as a whole, units of out put were up approximately 5%. To capitalize further on the expanded production capacity and to coordinate this with speed of delivery to the field, we are exploring the feasibility of establishing distribution service centers with leased truck fleets. A warehouse built to our specifications has been (eased in the WashingtonBaltimore area where the new distribution concept will be tested early in the new fiscal year. Chemicals Sales of the Chemicals Division showed improvement in 1970. The Division accounted for 10,1 %-of consolidated sales. Internally, shipments to our paint, varnish and lacquer manufacturing plants increased markedly due principally to the increased production at the titanium dioxide plant. In its first full year, the new titanium dioxide plant made an operating profit. In the fourth quarter this plant reached - rated capacity and continued profitability of this unit is expected throughout fiscal 1971. The quality of the plant's product is excellent and reflects itself in the quality of the paints in which it is being used. Extensive technical and supervisory attention at the Alkali Blue Plant in Chicago throughout the year resulted in very significant improvement in quality and output. Recent price increases and a continuing technical program for further cost reduction and product improvement should result in a substantial increase in profit contribution from this plant in 1971. The October 1969 cyclamate ban by the FDA caused an initial increase in Saccharin usage due to product reformu lations. In spite pf subsequent adverse publicity aimed at synthetic sweeteners and food additives, saccharin sales have continued unexpectedly high. - Marketing efforts of the Chemicals Division have been - 'reorganized to achieve maximum effectiveness in both near- term and long-range profit planning by product groups and functional markets. The Division's current businesses are defined as pigments, organic chemicals, inorganic chemi cals. vegetable oil products, consumer specialty products, and contract custom manufacturing. Profit improvement plans in each of these areas are being coordinated by mar keting managers, and a five-year plan has been developed for each area and for the Division. A Commercial Develop ment Department was established to seek new profit op portunities for the Division. Metal Containers Growth in sales of the Container Division continued dur ing the fiscal year. Sales amounted to 4.6% of total consoli dated sales. As in each of the past several years, the Division increased total container production, enabling it to expand sales to out side customers while continuing to meet internal requirements. During 1970, 61.8% of all shipments went to out side customers. In 1969 that figure was 61.4%. 16 0007-SWP-000005639 Operating Review Other Operations Sales-of The Osborn Manufacturing Company, which accounted for 3.4% of total consolidated sales in 1970, showed a gain over the previous year. During the year, ex pansion of the Schmitz Sl Ludwig plant at Frankenberg. Germany, (acquired by Osborn in 1969) was completed, and production ofOsborn power-driven brushes there was begun. The Rubberset Company (Ohio), Sprayon Products. Inc. and the Deshier Products Division, all of whose sales are included in the total of Paint. Varnish & Lacquer sales, also scored sales gains during the year. Rubberset. in particular, had excellent growth in external sales, while continuing to provide a broad line of products for internal distribution through dealers and Companyoperated branches. The 14% gain in external sales resulted largely from the introduction of new packag ing and point of sale display racks. Rubberset completed a licensing agreement with a European brush manufac turer to produce nylon brushes in France. Sprayon strengthened its position in the industrial supply and automotive!specialties markets and is planning further moves into the1 adhesives and janitorial supply markets. Deshier made marked gains in production of paint rollers and tack cloths [during the year, and plans to introduce a new line of paint rollers designed to simplify roller selection for customers. international,Operations Income from operations abroad declined somewhat from the previous year. A major factor in the modest decline was the continued unsettled economic climate in Brazil that precluded payment of dividends from our subsidiary there. Additionally^ relatively high costs were encountered in re aligning operations of Verffabrieken Ralston N.V. in the Netherlands during its first full year as a consolidated sub sidiary. Royalty payments from licensees in three countries were delayed, or otherwise affected; due to economic and monetary conditions. These negative factors were partially offset by improved, earnings in Mexico and modest increases in royalties from some of our long-established, licensees. During the year a license agreement covering production of coil coatings was negotiated with Shinto Paint Co.. Ltd. of Amagasaki. Japan. Negotiations with paint producers in other countries were initiated and we expect successful completion of some of these to be reached in the year ahead. A full listing of present licensees will be found on page 32 of this report. Increasing emphasis is being placed on this aspect of our business in light of the promising possibilities and opportunities that exist. We look for steady growth in royalties from our newer licensees as they become more firmly established. Our plans include further expansion of both full-line and specialized licensees. We are also actively studying the feasibility of acquiring equity positions in paint companies in several countries, . Capital Expenditures A considerable reduction in expenditures for plant and equipment was planned for 1970 as a result of the nearcompletion of the extensive expansion program carried through in previous years. In view of general economic con ditions, expenditures were deliberately and significantly re duced further. Total capital expenditures in fiscal 1970 were SI 3,485,604 as contrasted to $30,721,718 for fiscal year 1969. Major projects that were completed during the year, or that will be completed in the near future, include: improve ments in operating efficiencies at Chicago: plant additions for Sprayon Products at both Bedford Heights, Ohio, and Anaheim. California; installation ofan alternate fuel system at the Ashtabula. Ohio, titanium dioxide plant to prevent recurrence of the difficulties caused last winter by short ages of natural gas in periods of extreme cold weather; and consolidation of Azo dye and dry color production facilities at Chicago.' Additionally, the 80,000 square-foot expansion of the Elgin, Illinois, container plant is practically completed. Bar ring further equipment delivery delays, certain of the ex panded facilities are expected to be operational in fiscal 1971. Research and Development In our business particularly, research and development is vitally important--currently and for the future. As a result, it receives heavy support with dollars, time and talent. We are continuing to devote considerable effort to the elimination of volatile hydrocarbon components in products by seeking, where possible, to develop substitute systems. This is being done to remove one source of air pollution and to make our products easier to use. Recent develop ments along this line include Kem-Namel, a water-based semi-gloss latex enamel, and Kem-l-Coat latex house paint. The former has been on the market for some months now and the latter is being test marketed. 0007^SWP-000005640 17 Operating Review Compartblc progress has been made in the development of Kemsperse, a textile printing system. This product con tains no volatile hydrocarbons to evaporate into the air. Fabrics printed with it require no solvent removal treatment after printing, nor are solvents required to clean up printing equipment during and after production. Hence, no hydro* carbon solvents enter sewage disposal systems or contribute to water pollution. Marked progress has also been made in the development of flame retardant polyester resins. These are expected to And wide application in molded products, particularly com ponents in modular construction; In addition to flame re sistance, products formed from these resins have the added advantage of integral color and require finishing only when a color change is desired. In recent years, computers have become effective tools in improving paint, varnish and lacquer formulas; New pro grams based on recently developed mathematical concepts are now being written to enhance further our capabilities in controlling costs and increasing product performance. As the componentsiofour products become more numerous and more complex, the variables in formulating increase in geometric progression. The computer program will provide formuiators a more complete understanding of the inter actions of the components and lead to more precise design of products for specific applications. The establishment of a new laboratory to test and evalu ate brushes, rollers and other paint applicators puts us in the unique position of being able to give our customers the best possible combination of paint product and applicator. In the Chemicals Division, the Technical Department has been reorganized to achieve more effective results in support of its long-range profit improvement plans for each mar keting area. Research laboratory objectives have been rede fined, and the five major laboratories of the Division have been regrouped into four units designed to specialia in research on pigments, organic chemicals, inorganic chemi cals and chemical specialties. The Cincinnati laboratory will continue to support custom manufacturing and high punty organic chemical products. A Process Engineering Section has been organized to support all divisional labora tories; Engineering Services Groups have been established at four ofthe six factories of the Division. Long-range prod uct improvement and cost reduction programs are being planned in cooperation with the divisional marketing and manufacturing managements. Environmental Control During the year we created the new position of Corporate Director of Environmental Control. This was done to co 18 ordinate efforts and improve our capabilities to handle pollution control at all Company installations. This has become increasingly important as the degree of control required is constantly changing. Our objective is to keep pace with these changing requirements and with the develop ing technology of environmental quality control itself. We have been actively pursuing the goals of prevention and elimination of water, air and noise pollution for more than a score of years. Controls have been designed into all new facilities and considerable effort has been devoted to upgrading controls in existing plants where requirements have changed since control equipment was initially installed. More than SI.000.000 was invested for this purpose tn major control projects that became operational in fiscal 1970. Labor Relations and Manpower Development Employment at year end totalled 20.46$ people. Plans developed in 1969 to predetermine our labor costs in 1970 and 1971 have materialized. Our labor contracts at Chicago. Detroit; Dayton, Cleveland, Newark and Gibbsboro. New Jersey, and Coffeyville, Kansas, due to expire between May 1970 and January 1971. were extended for a period of two years. The settlement consisted of an upward adjustment of wage rates during the last year of the existing contracts and additional increases in wage rates and fringe benefits during the two-year extension; The economic package tgreed upon is considered eminently fair to the employees and the Company. With the West Coast plant contracts already closed until 1972, and the Garland, Texas, contract expiring in October 1971, we anticipate steady production throughoutifiscal 1971. During the year, we trained and placed 100 hard-core un employed in permanent jobs under the National Alliance of Businessmen program. Our retention rate was again better than the national average. These results were particu larly gratifying since they came at a time when many com panies found it necessary to curtail their efforts in the program. Continuation of our participation reaffirms our commitment to work on the social problems that face us. We stepped up our programs of "in-service" training. An Assessment Program was established as one more tool to help in the identification and development.of our young managers; 'Seminars were held'to improve skills in the areas of expense budgeting, manpower reviews, more effective supervision, union relations and recruiting. Much progress has been made and will continue to be made tn this very important goal of assisting all of our people to achieve their maximum potential. 0007-SWP-000005S41 Financial Review ^ * Sales Consolidated net sales crossed the half-billion dollar mark for the first time in the Company's history, reaching S525.787.767 compared to S495.139.134 in fiscal 1969--an increase of 6.2%. All major divisions of the business con tributed to the increase. Earnings Consolidated net eamrngr totalled S15.077.395. including an after-tax gain of $534,482 from the sale of securities of Berger. Jenson & Nicholson Limited. After provision for preferred dividends., net earnings per common share were S2.62, as compared to S3.29 last year. Pre-tax earnings this year, excluding the effect of the Berger. Jenson & Nicholson Limited transanion, were S29.029.995 against S30.47I.73l. - Taxes U.S. and foreign taxes on regular income this year were S14.487.082 plus S552.000 relative to the Berger, Jenson Nicholson Limited transaction for a total of SI 5,039.082 as compared to SI 1,829,912 last year. A substantial reduc tion in the investment tax credit in 1970, which decreased to $218,000 from S2.722.000 last year, contributed to a much higher and more normal effective tax rate in the current year. Taxes other than federal, all of which are absorbed in regular operations, continued to rise. In fiscal 1970 these taxes amounted to S13.402.332, up from S12.308.667 in 1969. Dividends A total of SI 1.766.298 in dividends was declared in fiscal 1970, of which S10,656.715 was applicable to common stock at the annual rate of S2.O0 pet share. Capital-Expenditures Having largely completed a major plant modernization and expansion program, expenditures in 1970 dropped to $15,485,604 from $30,721,718 in 1969, S31,303,399 in 1968 and S26.998.2S6 in 1967. Depreciation in 1970 totalled S 10,645,666, up from $9,265,119 in 1969. . 1971 expenditures tentatively have been budgeted at S12.000.000. This amount could be somewhat higher if certain projects currently under study appear to be eco nomically feasible during this next year. . General Financial Condition During the year, a $40,000,000 issue of25-year convertible subordinated debentures was sold to provide a larger base of long-term and permanent capital. S25.000.000 of the proceeds were used to repay outstanding bank loans and the balance was added to the Company's general resources. The working capital position remains strong, having risen to SI84.209.262 in 1970 from SI69.675.484 in 1969, The current ratio at year: end of 4.25 to l also gives an indication of financial strength. Cash; and cash equivalents increased, partially due to the financing mentioned above and at year end totalled 523,833.723, equal to 42.1% of current liabilities. Accounts receivable continue to besoundly managed and inventories effectively controlled. The seasonal nature of certain portions of the Company's business requires short-term borrowings during the year to finance operations efficiently. By virtue of a strong and well-balanced financial condition, there is adequate capacity to obtain such funds as may be needed. Retirement Plans Substantially all employees of the Company and its do mestic subsidiaries participate in noncontributory pension plans. The Company contributed S4.430.636 in 1970 to the various plans. Employee Stock Purchase Plan r Just over 7,000 salaried employees currently are partici pating, through regular payroll deductions, in the plan which was started on April 1.1969. The individual employee has the option of having all of his contribution invested in the Company's common stock, or of having a portion of it invested in a government securities fund. The Company's contribution--presently 25 % of the total amount invested by the employee--is used to purchase additional stock. At August 31, 1970, 114;299 shares of Common stock, representing 2.1 % of the total number of shares outstand ing, were owned by this employee fund. 0 0 07-SWP-00,0005642 19 THE SHERWIN-WILLIAMS COMPANY And Consolidated Subsidiaries Statement of Consolidated Income Net teles . . , ..................................................................................... Other income--net . . . ....................................s.................................. Costs and expenses (including depreciation computed principally on the straight-line method of $10,643,666 in 1970 and $9,265,119 in 1969) : Cost of products sold . . Selling, general and administrative expenses .... Pensions--Note F . Interest . . . . . ............................................................................. Income Before Income Taxes and Extraordinary Credit Income taxes: United States--Note B: Payable currently " 'Deferred.''....."......................... ... v.' Foreign....................... ... . . . ... ..... Income Before Extraordinary Credit Extraordinary credit--net gain resulting from the sale of securities of Berger, Jenson Jt Nicholson Limited less applicable income taxes of $552,000. ...... Net income per common share--Note E: Assuming no ddutipn: Income before extraordinary credit . Extraordinary credit....................... Netincome ........................... . . . , . . Net Income . .. ... ................ Assuming full dilution: Income before extraordinary credit ............................................... Extraordinary credit ............................... Net income ........................ See notes to consolidated financial statements. Year Ended August 31 1970 $525,787,767 1.130,959 526,918,726 1969 $495,139,134 1.318.643 496,457,777 332.386,375 154,312,500 4,430,636 ' 6.759,220 497,888,731 29,029,995 13,048,000 380,053 1,059,029 14,487,082 14,542,913 534,482 $ 15,077,395 $ 2.52 .10 $ 2.62 $ 2.43 .09 $ 2.52 310,852.298 144,629,247 4,740,312 5.764.189 465.986.046 30,471,731 9.825,000 805,775 1,199,137 11.829.912 18,641,819 --0-- $ 18,641,819 S 3.29 --0-- S 3.29 $ 3.23 ...Q-- $ . 3.23 0007-SWP-000005643 k Consolidated August 31 Cerrtat Assets Cash . . ..................................................................................... ... . Short-term investments--at cost (approximate market) . Trade accounts receivable, less allowances ($1,288,000 in 1970; SI,292,000 in 1969). . . . Inventories--at lower of cost (average or first-in, first-out method) or market: Finished merchandise............................................................... Work in process, raw materials and supplies . . Prepaid expenses......................................................................... Recoverable federal income taxes . Deferred federal income taxes--Note B....................................... Invtitmmts and Other Aiuts Total Current Assets Common shares of The Sherwin-Williams Company of Canada, Limited--at cost--Note A . Receivables, advances and miscellaneous other assets ...... Prtperty, Pleat and Equipment--on the basis of cost i Land . . . . . . . . . . . . . .... . , ....... Buildings , . . . , . . . . . . . . .... Machinery and ei)uipmeat. / Less allowances for depreciation ..... . . 1970 S 12.833,723 11,000,000 63,444,163 104,314,963 41.498.693 145,813,656 5,201.275 : --0-- 1 2,524,283 240,817,100 4,182,766 4.494,671 8,677,437 5,369,650 73,826,032 150,918,221 230,113,903 91,501,975 138.611,928 V*8,106,465 1969 S 11.400,515 -0-- 56,755,891 100,270,879 35,723,641 135,994,520 5,955,478 2,188,749 2,209,185 214,504,338 4,182,766 3,899,921 8.082,687 5,141,679 62,062,159 150,350,084 217,553,922 82,766,450 134,787,472' $357,374,497 0007 -SWP-000005644 2t InTHE SHERWIN-WILLIAMS COMPANY And Consolidated Subsidiaries idated Balance Sheet 515 D-- 391 579 541 520 478 749 185 538 66 21 37 ,79 . 59 )84 m 150 172 i?7 ' 21 Liabilities and Shareholders' Equity Gtrrtnt Liubilitits Notes payable . . ........................... Trade accounts payable . . . . . . :. Payrolls, compensation and amounts withheld ........ . Pension, interest and other accruals ... Dividends payable on preferred stock . Taxes, other than income taxes . Income taxes. . . . ... . . . . Total Current Liabilities ' Long-Term Debt--Nat* C 5.45% Debentures . . . . .................... 6.25 % Convertible Subordinated Debentures . .. Revolving credit notes; payable . ...................................................... Deferred Federal Interne Texet--Note B................................... Reserves--for pensions end other items . Shareholders Equity Capital stock--Notes D and H: Serial preferred--without par value . ............................................... Common--S6.2S par value, .... Other capital. . . . ...... Retained earnings . Less cost of common shares in treasury .... See notes to consolidated financial statements. August 31 1970 S 2,817,030 14.643.685 13,346,413 13,034.166 277,428 3.549,483 8,939,633 56,607,838 50,000,000 40,000,000 -0-- 90,000,000 7.098,909 3,163,153 1969 5 2.817.030 13.582.390 14.405,914 10.640.635 277.324 3,105,561 '-044,828.854 50,000.000 -0-- 25,000.000 75.000,000 6.403,758 2,674,934 9,198,742 33.348.037 1,289,236 188,090,409 231,926,424 689,859 231,236,565 5388,106,465 9,195.438 33,342.156 1,247,841 - 184.779,312 228,564,747 97,796 228,466.951 5357,374,497 0007-SWP-000005645 22 THE SHERWIN-WILLIAMS COMPANY And Consolidated Subsidiaries Statement of Consolidated Source and Application of Funds Source oj Funds From operations: Net income . . ... . . . . ..... . ..... . . . Provision for depreciation................ Increase in noncurrem deferred federal income taxes . . . Proceeds from sale of 6.25% Convertible Subordinated Debentures . Increase (decrease) in revolving credit notes . Proceeds from sale of stock issued under stock option plan............................................................................. Year Ended August 31 1970 515,077,395 10.645,666 695,151 26,418,212 40,000.000 (25,000,000) 15,000,000 50,625 541,468.837 1969 518,641,819 9,265.119 650.572 28,557,510 --0-- 22,000,000 22.000,000 644.736 551,202,246 Applicssthn of Fstnds Cash dividends declared............................... ............ Additions to property, plant and equipment. net of retirements .................................................. Purchase of common sham for treasury . ........................... Noncuncnt assets acquired through acquisitions . .. Addition to working capital ................. Other--net. . . . ............................................................................. , St 1,766,298 14,470,122 592,063 --0-* 14,533,778 106,576 $41,468,837 511,696,038 30,025,394 58,763 2,041,806 6,756,835 623.410 $51,202,246 See notes to consolidated financial statements. 0007-S'WP-000005646 THE SHERWIN-WILLIAMS COMPANY And Consolidated Subsidiaries Statement of Consolidated Shareholders' Equity t ' * - Serial Preferred Stock Balanet atStpttmbar l, 1968 ....................... $9,344,360 Series B preferred stock : 375 shares issued upon-exercise of stock options Cash in lieu of fractional shares--145 shares . 13,322 (5,151) Common stock issued: 918 shares upon conversion of 551 shares of ! Series A preferred stock . . ... 6,192 shares upon conversion of 3.871 shares of Series B preferred stock. . . 13,914 shares upon exercise of stock options . Net income........................... ... (19,575) (137,518) -- Cash dividends declared: Senes A preferred stock--S4.00 per share . Series B preferred stock--at an annual rate of S4.40 per share , , .......... Common--S2.00 per share. . . .................... _ -- Purchase of 1,100 common shares for treasury . . Balanct at August 31, 1969 . 9,195,438 Series B preferred stock: 125 shares issued upon exercise ofstock options . 4,441 Common: stock issued: 41. shares upon conversion of 25 shares of Series A preferred stock ........ 11 shares upon conversion of 7 shares of Series B preferred stock. .. 889 shares upon exercise of stock options ... (888) (249) --' Other. , . ............................................................... -- --- Cash dividends declared: Series A^preferred stock--$4.00 per share . Series B preferred stock--$4.40 per share . Common--S2.00 per share. . . .. --` -- Purchase of 20.600 common shares for treasury. . -- Balanct at August 31, 1970 . . $9,198,742 See notes to consolidated financial statements. 24 Common Stock $33,210,756 -- 5,738 38,700 86,962 --,, -^ -- . -- 33,342.156 256 69 5,556 .-- ' --" '-- -- $33,348,037 Other Capital S 600,173 Retained Earnings - Common Stock m Treasury $177,833,531 $ (39,033) 14,241 (9,439) -- -- 13,837 98,818 530.211 .' --. -- 18,641,819 ..... -- -- _ -- -- 1.247.841 (297,247) (747,928) (10,650,863) -- 184,779,312 -- (58,763) (97,796) 4,746 632 180 35,882 (45) -- -- , -- 15,077,395 --" .-- - -- -- -- $1,289,236 (296,096) (813,487) (10,656.715) -- $188,090,409 - --. -- (592.063) $(689.859) 0007-SWP-000005647 Notes to Consolidated Financial Statements M* August 31. 1970 NOTE A --PRINCIPLES OF CONSOLIDATION The consolidated financial statements include all signifi cant subsidiaries except The Sherwin-Williams Company of Canada. Limited (majority owned). At August 31, 1970, the Company's equity in the consolidated net assets of that subsidiary amounted to S8.97t.000. representing an increase during the year of S 1.520,000, after deducting SI 16,000 of dividends received which are included in other income. The increase consists of SI,254,000, representing the Com pany's equity in the subsidiary's earnings for the year ended August 31, 1970. and a gain from conversion into United States dollars of S382.000. Equity in earnings included S1.2H.000 extraordinary credit resulting from the sale of a division. Intercompany transactions have been eliminated. Appro priate rates of exchange have been used to translate foreign currency amounts into United States dollars, and the effect, which was not significant, was included in consolidated income. NOTE B-INCOME TAXES The income tax provision has been reduced by invests ment tax credits of approximately $218,000 in 1970 and S2.722.000 ml969 using the flow-through method. The Company has recognized the deferred income tax liabilities and benefits resulting from timing differences be tween financial and tax accounting. The principal differences relate to depreciation and reserves. NOTE C - LONG-TERM DEBT The 5.45 % Debentures due 1992 and the 6.25 % Convert ible Subordinated Debentures due 1993 are redeemable in whole or in part at the option of the Company at the rates of 104% and 106.25% respectively and at declining rates to 100% in 1987 and 1990 respectively. The related inden tures-require annual sinking fund payments of S2.000.000 for each of the issues, commencing in 1973 for the 5.45 % Debentures and in 1981 for the 6.25% Debentures. - The Convertible Subordinated Debentures are convertible into Common Stock at a conversion price of S46 a share. NOTE D --CAPITAL STOCK. The following table sets forth the authorized and issued shares of the various classes of stock at August 31, 1970: SHARES Authorized Issued Serial Preferred Stock: 1,500,000 54.00 Cumulative Convertible Preferred Stock. Series A 74,024 $4.40 Cumulative Convertible Preferred Stock, Series B 184,913 Common Stock (including 22,500 shares held in treasury) 13.000,000 5.335.686 The shares Of Series A and Series fi preferred stock are convertible at base conversion prices of S57.93 and S62.50. per share of Common Stock, respectively, taking each share of preferred stock at S100 for this purpose. The holders of the preferred stock are entitled to one vote for each share. 0007-SVJP-000005648 25 Notes to Consolidated Financial Statements August 31, 1970 The Company my redeem the Sene* A preferred stock commencing in 1972 at $104 pet shut and at a declining amount each year to $100 per share in 1980 and thereafter, and the Series B preferred stock at St 10.30 until December, 1970, and at declining amounts to $100 in 1981 and there after. The aggregate preference of the Serial Preferred Stock in involuntary liquidation is $23,893,700.: At August 31, 1970, in aggregate of 1,432,779 shares of Common Stock were reserved-for conversion of Serial Pre ferred Stock, conversion ofConvertible Subordinated Deb entures and exercise of stock options. NOTE E-NET INCOME PER COMMON SHARE Net income per common share assuming no dilution bat been computed based on the averega number of shares out standing during the year after the dividend re quirements of the Serial Pretend Stock. Net income per common share assuming ftslldilution Ires been computed assuming tht conversion of the Series A preferred stock and the 633% Convertible Subordinated Debentures, as of the data of issuance, after adding to net income interest on the debentures net of income taxes. For the year ended August 31. 1970, the conversion of the Series B preferred stock, and the exercise of stock options would have had a beneficial effect on net income per common share assuming full dilution, and as a conse quence have been excluded from the computation. 26 NOTE F-RETIREMENT PLANS Substantially all employees of the Company and its domestic subsidiaries, who meet certain requirements as to age and length of service, participate in noncontributory pension plans. The Company's policy is to accrue contri butions for its pension funds representing normal cost and amortization of unfunded prior service costs oyer 30 years. At the most recent actuarial determination dates, the assets of the pension funds and the balance sheet accrual exceeded the actuarially computed value of vested benefits. NOTE G-LEASES Branches, offices, and certain warehouses and plants are leased for various periods. The rental expense of leased premises for the year ended August 31, 1970, aggregated approximately $16,100,000. Approximately 83% of these rentals relate to leases expiring in five yesrs or less. NOTE H-STOCK OPTIONS At August 31, 1970, there were 136,618 common shares reserved for issuance to officers and key employees under e stock option plan. Options are granted at prices not less than ter market value of the shares at date of grant. The options are exercisable to the extent of one-half or one-fifUl of the optioned shares for each full year of employment following the date of grant, and expire five or ten yean after date of grant. 0007-SWP-000005649 '1 THE SHERWIN-WILLIAMS COMPANY And Consolidated Subsidiaries \ .* A summary of the option transactions during the year follows: At beginning of year: Options outstanding................... ... Reserved for future options , . . Changes during the year: Options becoming exercisable ................ Options exercised . . ... Options canceled . . At end of year: Options outstanding . Options exercisable . . Reserved for future options .................... ...... Shares 136,912 595 28,225 8,000 128.023 118,673 8,595 OPTION PRICES Per Sham Total S40.25 to 550.50 56,402,841 45.625 to 50.50 40.25 to 49.50 40,25 to 50.50 40.25 to 50.50 40.25 to 50.50 1,325,603 41,438 371,469 5,989,934 5,525,503 Market Prices SI.351,984 47.019 Accountants'Report Board of Diractoi* ' The Sherwin-Williame Company Cleveland, Ohio Wc have rrnmined the oomolideted financial statements of The Sherwin-Williems Company and consolidated subeidiariMfortbeyearended Augustll, 1970. Our cxaminatioe was made in accordance with generally accepted auditins standard* and eecordingiy indudad such ton of the accounting records and such other auditing pro cedure* as we considered nacmeary in the cticumstaaoee. We previously,made a similar examination of the con solidated financial ttaistmnts for the preceding year. In our opinion, the accompanying balance sheet and statements of income, shareholders' equity, and source and application of fund* present fairly the consolideted financial position of The Sherwin-Williams Company and consolidated subsidiaries at August 31, 1970, and the consolidated results of their Operations, changes in sherehoMen' equity, and source and application of funds for the year then ended, in conformity with gener ally accepted accounting principles applied on a besis consistent with that of the preceding ycer. Cleveland, Ohio October 14,1970 0007-SWP-000005650 27 T THE SHERWIN-WILLIAMS COMPANY And Consolidated Subsidiaries CalfWv IN MILLIONS t* 1MT INI I9C9 IV* IS ASKINGS MVMNDi vm ivsr i mi im wit D^i*il^hf|plitwi IN MILLIONS IMS mt IM IV* l* v. Year Ended August 31 1970 1969 1968 1967 1966 Net sales. ......... Income before income taxes and extraordinary items . . Income taxer--United States and foreign. ...... $525,787,767 29,029,995 14,487,082 $495,1'39,134 $452,526,660 $417,409420 $403,930,885 30,471,731 36,271,098 36,526,914 41.813,333 11,829,912 17481435 17,161,621 19,249,085 Net income . ... .. . . 15.077.395(A) 18,641,819 18,989,863 19465493 2Z56444S F.ming* per share of Common Stock...... 2.62(A) 3.29 3.36 3.44 4.06 W Cash flow per share of Common Stock. 4t69 5.18 5.11 4.88 549 Earnings as percent of sales. . 3.76% 440% 4.64% 5.59% Return on invested capital-- Common Stock (B).... 689% . 93)1 % 9.55% 10.19% 12.91% Cash dividends declared: Preferred. . Common . . .................... S 1,109,583 10,656,715 S 1.045.175 10,630,863 S 299,444 10,616410 S 278,057 10,585.957 $ -09,860,431 Cash dividends per share of Common Stock. 2.00 ZOO ZOO 2.00 1.90 Number of shareholders: Preferred. . . ................ Common 1,078 8,996(0 1,075 8.278(0 1480 8452 93 8,094 96 7,583 Prefened and common shareholders' equity.... $231,236,563 $228,466,931 $220,949,787 $213466,737 $205415,089 Common shareholders' equity. 205,342,863 202,582,551 194.646.187 186,940,337 178.91Z689 Per share................... ,-3i53;,' 38.05 ' 36.64 35.25 33.87 Capital expenditures. . ... Provirion, for deprerisriw^r 15,483,604 10,645,666 30,721,718 9,265,119 31,303,399 7,885471 26,998456 6,578,007 1Z469.661 5,516,715 Working capital (current flMB less current liabilities) . 184,209,262 169,675.484 16Z918.649 144421,514 129,987,314 Ratio of current Mien to cuireot liabilities ..... 4.25 to 1 4.78 to 1 4.93 to 1 4.77 to 1 4.55 to 1 Total assets ........ $388,106,465 $357,374,497 $324,434101 $308,873,794 $248,074,434 Number ofemployed .... >' / ! 20,465 20^42 Abcft rtfltcu acquisitions rteorded at pooling* ofinterim. 19,403 18,633 18,257 (A) Includes 1334,482 net gun after taxes, equal to $0.10 a share, from the sale of securities of Berger, Jenson A Nicholson Limited. (B) Based on common shareholders* equity at beginning of year. (C) In addition to the registered shareholders, there were beneficial shareholders participating in the Company's Stock Purchase iand Savings Plan for salaried employees (7,068 in 1970 and 7420 in 1969). 0007-SWP-000005652 29. The Sherwia-Williams Conaolidased Balance Sheet Aumst 31 Assets Cmrrtmt Amt$ Cash . . r . ........ , . . ........................... Trade accounts movable, less allowances (S167.700 in 1970: $153,000 in 1969) . . Other accounts receivable . Inventories--tt the lower of eoel (iveiase or Am-ia,fintout method) or market: Finished merchandise . . ....................................... Work in proem, raw materials aad supplies................ Prepaid expenses................................................................. Recoverable income taxes . . ............................... Imutaumt smi Otktr Amtt Total Currant Assets Common shams ofThe Carter White Land Company of Canada Limited (30% owned)--at coat....................... Miscellaneous mceivabias aad advances............................... Pnptrty, Ptmmt mmd Eysfrueenr--on the basis of cost Lsnd . . . . . . . .......................................................... RuiMtngt _ .............................................. Machinery and equipment. . ....................... Less allowances for depreciation . ................................... CMrrtni LiskiUtits Liabilities and Shareholders' Equity Owing to bank......................................................................... Trade accoouta payable .... ............................... Payrolls, coapeamtioa aad other accruals . Taxes, other than income taxes.............................................. Advaoce received on account of the sals ofa divisioe of the Compeay. ,:"i Total Current I.iebiKtim Uafndtd Ftmm Carts KeriSeeW se m Nrt tf Tmx B*m Drferrmi hwwr Traces. . ................ SkmnbMcrt Eqmk] Capital stock: Preferred, 7% cumulative, per value 5100 per sham: Authorize! --40,000 shams Outstanding--34,600 shams . . .. Common, mo per value: Authorized --225,000 shares Outstanding--224,720 shame. ....................................... Retained earnings. . ................ .................................. 30 1970 $ 674,8*9 5375,071 92323 8393,006 2,614306 10.907312 485,450 284,507 18.419352 200,000 66,410 266,410 607,442 5.667,497 8.010.756 14385,695 9.717.230 4.568,465 $23354327 $ --O--' 4,085,524 512,034 566,435 -05,163,993 1,610,565 568,250 1969 $ 56.675 8.546,150 249,953 8,459,240 2.818,007 11,277,247 528,652 272.544 20,931321 200,000 45,414 245.414 607,442 5.614,776 8.100,873 14.323,091 9,685,746 4,637345 $25,813,980 $ 4,029,707 3,346,953 795,796 447,829 500,000 9,120.285 1,729383 591,000 1 3,460,000 3,460,000 224,720 12.226,699 15,911,419 $23354327 224,720 j 10.688.692 14,373,412 $25,813,980 1 .. i1 0007-SWP-000005653 >f Canada, Limited and Subsidiaries la Canadian Dollars Statements o Consolidated Income and Retained Earnings Income Retained Earnings Net sales .... Dividends received Costs end expenses (including depreciation computed principally on a declining balance method of $434,759 in 1970 and $449,313 in 1969): ' Cost of products sold . Selling, general and administrative experisee . Company and government pension cost . Interest expense . .... Directors' remuneration . . Income Before Income Taxes and Extraordinary Credit Income taxes . . . .. Income Before Extraordinary Credit Extraordinary credit: Proceeds from the sale of the Green Cross Division on September 1,1969 in excess of the net carrying value of the tangible assets sold net of the income tax eHect . . . Net Income Balance at beginning of year Net income for the year . . . Cash dividends declared: Preferred $7 aer shire. Common $0.75 per share (1969--$1) Balance at end of year; Year Ended Auimt 31 1970 v $35,578,432 60,000 35.638.432 1969 S42.630.420 60.000 42.690,420 21.423.564 12.835.431 492,015 250,617 35.145,685 492.747 206.000 286,747 27.050.236 13,658.115 520.574 422.399 115.358 41,766.682 923.738 345.000 578,738 1 j 1,662.000 5 1.948.747 $10,688,692 1.948,747 12,637,439 242,200 168.540 410.740 $12,226,699 , : -0S 578,738 $10,576,874 578,738 11,155,612 242,200 224,720 466,920 $10,688,692 . Accountants' Report To the The Shmain*' (Inrnrpoaamd aMdar the laee ft Cseads). W hem anaeMed the contobdatad helmet sheet of Tha Sharwm-Williiisn Company of Ctnam. Limited and its subaidiarimaecf Aapnt JI, 19WH. and tha teltMdmttaain of raineniirtired income aad retained aaminji for tha year than such im of the i In m opinion, thaaa ronaoEdtitd *- --*' iratiinm pitewt fairly the conaofcUred financial position of The Shttwitt* Williams Cnmpeny of Canada, Limitsd aad in subsidiaries at Auaust 31. 1970, aad tha results of their opanuioaa for the year than ended, in conformity with pararslly accaptad srrmmritu prinriplea applied on a baaw rnnaiaiaot with that of die Montreal. Quebec October 2,1970 Chartered Accountants 0007-SWP-000005654 31 Divisions. Subsidiaries and licensees Acme Quality Paints Deshler Products W. W. Lawrence k. Company Divisions The Lowe Brothers Company John Lucas & Company The Martin-Senour Company Rogers Paint Products Sherwin-Williams Chemicals Sherwin-Williams Containers Consolidated Subsidiaries The Osborn Manufacturing Company Domestic Sprayon Products, Inc. Foreign: Rubbcnes Company Compania Sherwin-Williams, S. A. de C. V. Mexico City, D. F., Mexico The Sherwin-Williams Co. of Puerto Rico, Inc. San Juan, Puerto Rico Rubberset Company (Canada) Limited Cravenhurst, Ontario. Canada The Sherwin-Williams Co. (West Indies) Ltd. Kingston, Jamaica Verffabrieken Ralston N. V. Zeist, Netherlands Sherwin-Williams (Europe) Societe Anonyms Antwerp, Belgium Schmitz * Ludwig und Comp. Fabrik Technischcr Butstcn GmbH. Frankenberg, Germany Unconsolidated Subsidiaries Sherwin-Williams do Brasil S/A Tinas e Vernizas ...... . Sao Paulo, Brazil The Sherwin-Williams Company of Canada, Limited . v.. . . Montreal, Canada The Canada Paint Company Limited...................................................... Montreal, Canada The E. Harris Company Limited.............................................................. Toronto. Canada The Lowe Brothers Company, t-imiarf.................................................. Toronto, The Martin-Senour Company Limited.................................................. Montreal, The Winnipeg Paint A Clan Company, Limited...................................Winnipeg, The Carter Whits Lead Company of Canada Limited (50% owned--unconsolidated), . ... . . MontreaL Canada Licensees Akticbolagst Syd-ferniss (Sweden) Astral SmdePetatures. Verniset Enema DTmpmnsne (Franca) Fabricn Nacional de Pinturas Sherwin-Williams de ColomWa S. A. Sherwin-Williams del Ecuador Fabrica Nacional de Pintum S, A. 'Donald Macphanon Croup, Ltd. (England) Sherwin-Williams Peruana S. A. Fabrica Nacional de Pinturas "EsputboT S.^A. (Bolivia) Montecatini Ediron S. p. A- (Italy) Sherwin-Williams, Philippines, Inc. Sherwin-Williams de Centro America, S. A. Sherwin-Williams Espanol^ S. A. Nippon Paint Comply, Ltd. (Japmt) sherwin-Wiliimn. Venetians C. A. Pintures Andina S. A. (Chite) Sherwin-Williams Argentina Industrial y Comercial S. A. .Shinto Paint Co.. Ltd. (Japmi) Coil Coatings 32 0007-SWP-000005655 Products and Plants Principal Products Faints Enamels Varnishes Lacquers Sums Aerosol Specialties Zinc Pigments Lithopone Linseed Oil Metal Containers Industrial Power-Driven and Maintenance Brushes Barium Chemicals . Colored Pigments Synthetic Para Cresol Saccharin Strontium Chemicals Foundry Machinery and Equipment Finishing Machinery and Grinding Wheels Organic Chemicals Titanium Dioxide Pigments Textile Printing and Dyeing Colon Paint Brushes Rollers and Other Painting Accessories Domestic Plants Anaheim, California i Ashtabula, Ohio (two) Bedford Heights, Ohio Bound Brook, New Jersey Chicago, Illinois (four) Cincinnati, Ohio Cleveland, Ohio (three) Coffiqrrille, Kansas Crisfield, Maryland Dayton', Ohio Deshler, Ohio Detroit, Michigan Foreign Pknss Bayamon, Puerto Rico Frankenberg, Germany Gravenhurst, Canada Mexico City, Mexico MontreaL Canada Elgin, Illinois Garland, Texas Gibbsboro, New Jersey Greensboro, North Carolina Henderson, Kentucky Hubbard, Ohio Los Angeles, California Morrow, Georgia Newark, New Jersey Oakland; California Pittsburgh, Pennsylvania San Leandro, California Sao Paulo, Brazil Toronto, Canada Vancouver, Canada Winnipeg, Canada Zeist, Netherlands Printing Division North Olmsted, Ohio Research Center Chicago, Illinois The A. w. Steudel Technical Center Chicago, Illinois Container Division Technical Center Countryside, IHiaois 0007-SWP-000005656 33  THE SHERWIN-WILLIAMS COMPANY Founded in 1866 IP!EXECUTIVE OFFICES lOt Prospect Avenue. > i. W,, Cievciand. Ohio +-*11? Directors E. Colin Baldwin Chairman of the Board end Chief Execuliet Officer John N. Bauman Chairman ofthe Board White Motor Corpontion Keith S. Benson Eremin* Kir* President Diemond ShtmrocS Cotporatioa Chairman Pickandi Matter A Co. Willis B. Boyer President H i Republic Steel Corporation Richard G. Bull Ewriuivt Her President--Marketing William C. Fine Vice President--Finance Robert F. Hennig Vice President--Purchasing John A. Hill President Hospital,Corporation of America Allen C. Holmes Partner Jones. Day, Coddey A kesvia Attorneys Victor Holt, Jr. President The Goodyear Tim A RubberCompany William Moonan Vice Prtsidem--Ancillary OMwn Robert W. Ramsdell Chairman and ChiefExecnrirt Officer The East Ohio Gas Company George F. Schlaudccker Viet President Chemical Operations Walter O. Spencer President John Ds Wright Director s,,,. TRW lac. Arthur W. Steudel Honorary Director Officers E. Colin Baldwin Chairman of the Board and Chief Executive Officer ' Walter O. Spencer President Richard G. Bull Executive Vice President--Marketing William C. Fine Vice President--Finance Robert F. Hennig Vice President--Purchasing William Moonan Vice President--Auxiliary Dirisiaat George F. Schlaudecker Vice President--Chemical Operations Richard R. Crow Viet President--Personnel ArthurB. Holton Vice President and v.; Technical Adviser to the President Virgil A. Hollis Assistant Vice President--Finance James F. Cole Alan D. Childs Secretary and Central Counsel Frank H. Clark Assistant Treestaer end Assistant Secretary Frank C. Kollath Assistant Treasnrtr William P. Inman Assistant Secretary 0007-SWP-000005657 A* in yaar* put, thii Annual Rapedwai printed at (beSharate*William Prsntiat Divisioo, North OtmMMS, Ohio. Many of tha ink* uaad in it* production contain piftnaat* supplied by tha Sharwin-William Chaaieala Diviwon. 0007-SWP-000005658 The Sherwin-Williams Company 101 Prospect Av*nu, N. W.. Clovoi.n* Ohio 44115 / 007-sw-ooooosisS',