Document NEMXDm8QOoLbLxwb2JmykBYB8

*nnwl Mooting The annual meeting of shareholders will be held at 10 08 a m. Apnl 22,1987. at Stouffer's Tower City Plaza. Cleveland. Oho HsoOouartoro The Sherwm-Wiliams Company 101 ProspectAm.. N W. Cleveland. Ohio 44115-1075 (216)566-2000 Stoeklfcedfcif SharwoWiliams'Common Stock- Symbol SHW--a traded on the New York Stock Exchange. Trustees 5 45% Debentures 9.45% Debentures AmenTrust Company N A. Cleveland. Oho 625% Convertible Subordinated Debeniuree Society National Bank Cleveland. Oho 9.875% Debentures (SWOC) Harris Trust 4 Sasrogs Bank Chicago. Itfinoe Amarilhjst Company NA Oaveland, Ohio Ernst & Whmney Oaveland. Ohio oakValue Par Common Share Collars 15 Investor Relations Oanne B McCormick The Sherwin-Wltiams Company 101 Prospect Ave..N W Cleveland. Ohio 441151075 Mvtdand Wetwveetmewt A dividend reinvestmentprogram is avwiable to shareholders of common stock. For information, contact Investor Relatione office as desorbed above `neShewm-WlksmaCoflioany urtxind enpieiisiliebMquaMisdpMoisaviiMeie-- wXhoUr0SrOIO'rc, color c o m Muetoneongn. lunSeapi or ags o iny 0 79 80 81 82 83 84 85 86 0""..79....83 84 85 86 Common Stock TVsdlin tetteUce tvgh Low OowD<e(mbor3i Sharwiraasd d Mragtouttfanang ihaiet Numbwc0conviw* shtnhQidtfiol ncofd IMS sm 11'A are 2S.Stf.7M MU 11,M IMS 323 * 37 22*4 19910 200 43% 11384 1984 ..... 1983 $'% 114 14 23812800 S2% 315% 9% iy% 292MSOO 64% 9777 9841 1982 ....' $12% 4* 1 24 032 900 57% S 590 98 SS'v i4 5* '>084 900 .......36!s list 980 35 * 24 1X V i56 :co -5'i 9 9 0007--SWP--035501 0007-SWP-000116923 Thousand! ofdotan. weantm SwSea Yrtf*idrtOrtsme*r3l. Net sales* Income from continuing operations Income from centinuing operations excluding unusual items I960 $1,382,931 98.931 78,389 1988 $1,522,343 68.662 68,662 1984 81,451.877 62.751 62.751 income per common shareFrom consisting operations excluding unusual items From dscontmuad operations 1.8$ 1.40 1.37 .22 .13 .05 From unusual items Net income Cash dtvidands percommon share Book value percommon sham Average shams outstanting Return on sales' Return on common shareholder* equity: From continuing operator* From total operations Effective income tax rale* Debttoeapsalzaaon Times interest earned* 1.8$ .43 2.31 .80 11.18 48,784,780 L29b * 20.89b 2249b 44.99b 18.8H 18.1a 1.61 -- t.et .46 10.10 40.221,696 4.89b 1.42 -- 1.42 .38 8.97 45.849.648 4.39b 17.09b 18.59b 44.79b 23.89b 10.5x ' 1709b 1769b 47.1% 29.5% 9.5x Current ratio Fl&Oexpandsurea Advenreng expenditures* Number of common shareholders of record 1.8 COt 812,260 82,300 11.030 2.0 to 1 *11,117 61,851 11.384 19toi 311.077 56.530 9.777 Number ol employees* 13.700 12.970 13.092 Tha eoirpaity a <gaiaing to nl Itw Onig Suns Sagnwn wmiadadacoranuM 0pnMn4 Cmw i linanGni aa hr onor yMnlia boon mmc q ai conformwith fro 1968 piwramn Bart on corenuHig epmtona orty Who Wo Aire Sherwin-Williams wtabrated 120 yean of dong business in 1906. Thecompany's com business is the manufacture, (AstnbuDon and sale of coatings and related products. We sen Shenren-Wliams labeled architectural coaangs. industnal finishes and asaoaated supplies through 1.719 companyoperared pamtand watoovarmfl stores m 48 states. Wa also manufacture and setcoatings such as Outeh Soy. Martm-Senour. Kam-Tone, plus pnvats label brands to mdeoendars dealers, mass merohandnatsand home imprairemert centers. We Droduce coatings for original equipment manufacturers in a number of industries and special purpose coatings for the automotive aftermarket, mdustnal maintenance and traffic paint markets. 0007-SWP-035502 0007-SWP-000116924 1b Our SharaholdM'S* In 1986. earnings per share rose 16.8 percent from $1.61 to $188. exclud ing unusual items Reported earnings par share increased to $2.31 including a gain from the settlement of certain pen sion obligations (net of nonrecurring expenses) of 143 per common share ($19,595,000 after tax). Income, exclud ing unusual items, increased 15.7 pen centto S88.357.000from S74.638.000. while reported net income increased 42 percent to $105,952,000. Net sales, exdudng the Gray Drug Fair Demon which we have reported as a discon tinued operation, were up 2 percent at $1.552.931,000compared to 198S's Si .522348,000 Admsted for the June 1985 Chemicals Division dnrasature. this increasa was 4 4 percent Return on equity excluding unusual items, was 18 6 percent m 1986 varus 18.5 percent in 1905 1986 represents our egnth con secutive year of earnings improvement Overview of 1986 Our mam accomplishments m 1986. m addition to contmjmg to improve both the balance sheet and income statement, included the strengthen ing of our management team through internal promotions, the announced oivestture of the Gray Orug Fair Division, and the reorganization of the Pamt Stores business. Mr Thomas A Commas, formerly senior vice president, finance and chief financial officer, was promoted to prase dent and chief operating officer. Mr. Thomas R Mikkch, who joined the com pany m 1969. and was most recently serving as treasurer, succeeded Mr Commas as senior vice president, finance and chief financial officer. Mr. Larry J Pitorak was promoted to vee president secretary, treasurer and gen eral counsel Mr Pitorak. whojoined the company in 1973, previously served Sherwin-Williamsas controller kx the Paint StoresGroup and as corporate tax director. Mr. Wiiam B. Eldredge. who's experience and abikty hare been wel demonstrated during his 33 years with Sherwm-Wtfliams. reassumed the rams of our international Group These pro motions end others reaffirm our com mitment to promote Irom witfun our organization Developing, training and rewarding quality managers ensures our future. We announced the anticipated sale ofour Gray Orug Far Division on December22,1986. The Rite Aid Cor poration ofShremanstown, Pennsylvanre entered mto adefinitive agreement to purchase Gray Drug Fair s Floroa and Badmore. Maryland drug stores for cash. We are negotiating to set the balance of our Gray Drug Fair Division We expectthat both transactions will be for cash and result in a small gan The deoawn to sef this division was based on the conclusion that comoany resources would be more prafitaoly deployed m our coatings and related businesses. The Pant Stares Oivis-on was re structured m 1986 Th scnange-was designed to move management responsibility closer to tne marketplace The pnofregons are now estabi-shed as operating divisions, with `ml srorct and loss accountability Opera: ng pa-s 2 0007-SWP-035503 and budgets far each new division wn vata label brands Our goal ol becom sudmiitad and reviewed tha Wand ing the low-cost supplier wd require foey are olfto a very good start The efficient tmaly dtstnbubon. high-quality, president-general manager appomtments loweost products and aggressive mee ara as follows: Chnstophar M. Connor, chandreng and marketing techniques president and general manager, The purchase ol Lyons Group Inc. a Western Oivaxxv George R. Davenport lass than trucktoad common earner in preetiant and general manager, SouT- early 1987 w slrengsian our distribu eastem Otvison; John C. Macalee, tion capaNitytoourcustomers. president and general manager. Sour Tha Automotive Aftarmafkat Dm- Central Divwon; Jamas Eflenahavt son expenanced weak market condi presidant and general manager. tions mt986.lt a mportant that we Eastern Ovwwn; and Robert B. Verse*, continue to expand our channels ol president and general manager. Mid datnbutnn in orderto become mom Central Dtvaon. These individuals wd responsnreto changing market condi reportto David I. Puente. pmaidsril Paint tions. The number ol automotive StoresGroup who wd maintain a com branchee increased to 100. we plan to staff althegroup level to provide the divi increase tie number ol branches by sions with service* such as purchasing, 15 percent nextyear. advertising and merchandising. The Chemical Coalings Divaon's The Paint Stores Group exceeded external sale* were below budget but 1965 tor both sales and operating outperformed original equpment coat income. We gained marital shamm ing* industry data. Our targelad market 1988 as unit volume growth outper ing approach to speolic customer formed published industry data. To segments a deeded at increasing sales achieve our goal ol increased market and profits. share, the lime required tor new stores The Sprayon Oivaon hasmaev to reach prafitabfiiy must be reduced, tamed sales and increased profits mesize and productivity orour sales despite (he toss ofa large account force increased, and distribution Sales growth tor our DupitOoiorlmewS expanded by opening new stores. We racemespecial amphaaa m 1987. opened 92 net new stores m 1986. The Intamatnnal Group improved including 19 Hughes Decorating Stores tha year despat drffcuK condcons in o t Los Angeles (purchased in late the countries where foey operate, December). We den to open over 100 Instabttym several of foasa markets is new stores in 1987 expectedto continue for several years. The Consumer Division s operating income also surpassed 1965. The On* 1M7 and beyond sion made progress toward reaching We believe that 1987 win be another ther two pnmaiy goals; to snprave sluggish year for foe U.SL economy. The external brand market sham and attain the lowcost supplier position m the consumer has bean spending and bor. j, a ,,3^ ^ exports are industry New Outch Boy accounts in recovering, but too slowly; capnl the retail architectural market ham been spendsig should be tower due to added this yeas External brand gat- excesscapacity and the new tax reform lonage outperformed mdustry gains bd, our national deficitcontinues to lead by Dutch Boy. Kam-Tane and pn- increase, and Ihe pubic sectorwd be constrained due to tha need to rem in government spending. Weeonsnue to emphasize tight controls over inventory and operating attpansas. We have positioned our selves at Sherwin-Williams to grow in a more competitive anvxonment Oppor tuntwstor market share growth am avafabte to us. Greater manufacturing aflbencyt increased producSnty at our plants and from our sales representstivee end improving the relationship between product quality and price wd strengthen our efforts to improve market sham. Acquaitona wd be concentrated to thecoalings and related busness areas. They wd be working capital inten sive. Wa must have existing manage ment expertise and some larmliar-ty with foe buaness. We wd also grow through internal sales development Last yearwas a good year for us We aw stronger financially arid managenady which gives us confidence to tecs foefuture. We expect 1987 to be anofoer tough year, but fully expect our results to be better than m 1986. John G. Breen Chairman and Chief Executive Officer / /& &** ** *& Thomas A. Commes President and Chief Operating Officer........... 3 0007-SWP-035504 0007-SWP-000116926 1 *^------ ;--------------------------------------------------- ------------StMrwfn-WIHiaiMat aglancabyMgnMnt MntStWM Stoics Group CodUngd Consumer Orwawn Automaava Aftermarket Ovnwn Chemcal Coalings Omisran Sprayon Oivson Intomakonat Group Shamn-tMcma Canada SfmnMn-MHarns Manep' Shaman-iMam WbafMM SfwnMn-Hfltamsamr *unconsotdand MBolpl>w*iot __________ MaloaMarfcaia Sherwm-waiams branded aiehtacsjraf coeange, pant sundnaa and stduslral Kndftaa. vMfcoMMngs flaoraovanngs. windowtnatmenta. spray aqutpman and ottar dMootMd productsindtools. Profeaaonal partars. contractors, induatnafmartananca.homa builders. proparty managers, arcmtsea. dOHt-youradtara, smal-tomodhjm-saed manufacturers of produets raquwng a factory Brash. ArcMacturalVidros irdar SharwmVWams. Ouch Boy Maran-Sanour, Kam-Tonaand pnvala labal brandy ndudnal manunsnea products. brushes, rotors. iabaia.a(9msiiao. and cotar cards. Ratal Oont-yoursafars. mduatnaf and eomriwfodmntanarct account! and panbng contractors. Motorvahdaflnan and isflnan productsmarhstad uitdsrtc Shaman \AWams, Msrsn Sanour Acini, nopfi md Mm (fartry pacfcBQK)colon lofJbpantMcan) (Ml indapendertaulomosve body shops, detfenhpa. SestnfinnhefSi body bidders. truck OE. and manna ddmtflfkrtaocourfe ShamamWIIIamtlChatadindudnd finihwfor oiiQral tQupntnt manunduirs of irwalt piMB and wood products. Automoaua. cotcaatad butltSng products cornrnuncaaona qupnmnt. eorabucaon and tarni machinery maul and woodbriMurs and feduias. form and olf-road aqupmsnt Cudom and industrial aaroaof brands tar pass and ceMtgs, automosve. saritarysupply insbbdorat. past control and ndudnal products. OupiCotor touch-up parts and asaooatad products pnrnanly ter mater vawdaa Ratal andfcriahotasda part, auromesva. institutional, larvtary supply insacSridaa and mtluatrM markets. Archrtadurd cottngt. industrial and autornotva rapvnt ftntfiaa. part ftjndnatand a vaMiy d homa decor** Kama. Indapandart part dealers, parsing contractors, automosya Cody shops, commaroa and mdusstal mantsnanes accounts ongmat equipment manufacturers and dtwt- yoursdtars. Pmaral bwataaea daswleaaawiat--On Dacambsr 22. 1928 the comoany annauncad trm anhopaMd sue or me Drug Sums Segment. Haw metadata and fuel aappdea 'or at segments an ganarMy avwiatM >n sulkcmt* quinmaa and nom a variety or seurcas. IwyfcaiawaaUI aHaka The company has matte sgnAcart pragmas* N cqreerala-da program to taal underground srorage ma and to lemons androplees tankawhen necessary Th* company * expanding its continuing aHons associatsd atk tha dean-up at among and doeedddwn opsraoona Th# coat of thsaa and capital expenditures lor othar anwonmanw contrail wilt nor ba significant in IM7 Tha company adoptad a Hais/dous Material identification Systam to halo mast various smptoiM ngN-to-knowroguUOons. Cstamen aad baatdeg Tha toss d any angle eustsmar would not ham matsnstly adventsHecl on Smbuansaa of Smcompanyor my logman. BacMogofordeisisnciagnAcart n tha huansss of any sagmsnl of tha company Wtaals aad Isaasss an not of matanal nperunca m am bumnass of tha company. However. a suosamd pan ol tha incomo at #m lissmationalGraupadanvodliomthatconaaof lacrtiologytrademartii aidbade namesto other tampicampanas Plaaaalal rotates of mats asgmams ara ndudadon pagasMofthmiapeit Narobet of amplsgsas mdudod on pags1 dm* upon MMw tea Wad on pags 31 of Ihd roport. Tha matoray of am plans am ownsd by am company Thaoompany batatasteat am varoua preduckon fastest of amCoabnga Ssgmant am adaguaM to oparata at a agnitcandy highar vohnaaianinioae. tteeoaroh and daualapmant axoandtumt ara daaenbad on pags 20 Virtually an such acovaaswsra tpnnsniart by am company raamr man by customers. Inal Ottmr than ordinary roukna iil-gapon inadanttoaabuanaaa awcomparyisnotaoaity to any tagat procaadnga maiarui toousnessKnanadcondOon 4 0007-SWP-035505 0007-SWP-000116927 Ttse atierwkeMBiuii, Cam*any Distribution Through 1.719 companyoperaiad store* * 48 state*. The Pant Store* Group, mass merehtwssers. mdepandantdsalari. cfcstrbutors. homecenter chons. Competition Pont and walpapar storaa mass marchanMars. home cantata, mdapandaht hardware atoms, hardware chons and manufacturer operated outlets Market* highly fragmented and servree, price and quattyeompmva. leasanalty Season* with approromatsly 53 percent cl Stooocumngm (he second and third quarters. MoiaSwi 1.OOOcoatings menufactuiersal legmB and national level. Brand recognbon. quality, pnea. product mhbweon. dMtnbutnn and sanea am mortcompsMve factors. geaaond nwth major porticn of sales ooeumng at Ha second and third quartets. of 100 Shenen-MMams Uomoevs bmnehsa. tobbers end when--la aanbutcn centers. Four majorcompeatorswiti broad product offanngs and seuardsmalcompanaewith ntcha products. SbongdblnbuSon. product quality technology and serves ara key compatible hem. M|i--oavMy,-M----i-o--n--i . The Paint Store* Group and (Metto manulaclufsrs. Maps compaators bom national and region*. Kay eompewve Factor*mdud# technical eapaMty tor custom tormulaaon. aarwea. tachncal support product mnovaoori and pnc*. No(gitfcant seasonably Mass merchandiiers. grocery md drug store chons, automobv# chon*, sanrtary supply marketers, alectncd oonsbueton and general montananc* daaibiAon cnannela. Sawn pnmaiyeompsgm. Tscnnreal know how quaMy. mt v ic a. and pncaara mon compaaav# factors. No agnficam aaaaonaMy Own sabslore*, dwntutors and jobbers. Company-operated stores a* foaows: Mexico 7B. Jamoea 14. Tnmdad 6: Barbados 2: Puerto Fhco It Many campetioa inssch foreign msrkat SharvwnVWnmdeompasSvapootonw sgnHtcam only mMaweo and the Mat indies. Price, servica end quaMy senesw. No agnflcant seasonably Ask Sherwin-Williams r-e Ajx Snerwm Wll-ams sdsemaing and aramooon oragram tor our owiswes fargeted a' Homeowners da-4- /ou'satfi'S. and me oro'ess oner fide -- 'heiuding ountmg contractors bu4ders oranr owners architects ana cnamicai eoatingi user* This eomorehens.vi eamoaign emphaate* that Shenmn-WaumS storeschar aUhnedpant. Moorcovenng wallcovering and window irtsimemsalong wiei hnowiedgeMe nrveemat both the proMiiono and ratal cutsemar cannot ' no n cornsewtt oudata TSs peso campaign daa is cotnmurested to consumara v* heairy schedules .n broaden and n*wapapar vmuaiy every month throughout Ida yaar Trad* advattisng utikies over 30 trad* magannaa and over <2$ aa >nnftmfla through ma ydarto raacn our target audeneee end to communeue out oroductmenegea He WbrJcs HardFor Your Money The Ouch Bey advemsnp Siam* 'Ha works hod lor your money^' dsohr poanons the brand as on* that oilers high consumer value. Incmassngly product v*ue rmoecta consumer purchwedeoeone Th*aiemeSne tuida bn me uniQueness of the Outch Boy eheracter trademark Owr the yaers. conaumera nave lacogmiad th* tredamarti aa a symbol oMsgh quawy 3 0007-SWP-035506 0007-SWP-000116928 1 1MB Operating Review by Segment Operettne HtehlgtrUforiadd rHl vnvoo Store*Group Salesioeea.3percentandoperating prcfts8.6 percent, excluding unusual tons. Existing stores accounted for a majority of Resales improvement Raint Stores Group gainad marfcst sham In 1986 as part gaftonage increases outperformed thaindustry Targetmarketing programs toeuaad on heme butters, property managers, fatal do&yoursatos. painting conlracton and industrial maintenance and chemical ooaifngsaooounlaL. Remodeled 41 store*. opened M, relocated 56, cloeedd. Consumer Division Operating income surpassed lastyeat Salas mm impacted by lower than arsictoted volume In general products and highway coaangs. Ejtonslatchitaauralcoaangegalonage outperformedindustry data led by Dutch Boy KarrvToneartt private label brands. MartrvSencur introduced 'True Match." a rstadcomputercolormatching system dsaigntotohelp dealers improve customer service. Automotive Aftarmarkat Division Saleswere wreak due to soft marketcondWons. Distribution expanded through IheaddMoncf t6 SherrervWifams branches Estatttt^dstributlon in the marine sTternisrlret. ftirchsaedAutomotive ComputerGroup complete business management systems tor body shops to semecustomers mows eHedlvety _______________ ___________ Chemcal Costings Otarion External sales outperformed OEM coaangs industry data. Areas al strength included officeproducts, forest products, and corf products. Granted a patentfora high pressure iniection process usedto w-moid SprayonOMaon External sales increaaed through addition of nee customers in the coaangs market. Expanded sale* at among accounts with new products. Introduced new ine of upede down oatoscl marking paints tarthe' industnal market MCaJTBS L*n.tseteb*ttea llisrivtn wnasms stnrse i nest in rn--i msrklftm Srmiwiinos floarnovrtnow wkUow trestmsnt*. sprey spikpresnr and sasnrlsred products to QlY'srwarBfitocwalpsaitsrs.IndwSMiwintsnwwairtOOIsecognts. Wee srsMtsetursl prelettssssrsti osmsrpmss *eeid mpn--nonuotywc nMN^BIMteMfRMmiinpMMVItVIBpwWIPVyviBm AmureuUv* manures dlaiiaiut* ttrerwln StWsms tstwlsa pm*wis direct to SeSy snaps, ear Setfonfl--tt. OBt stimBas extthrwuati jeaters. ThsA.W.ttsuto'TtateitcsICsniarlaaqMlppaaemiatsla wtths sTtlsSaistary -- |to^usiaassmesst am*foaMMmfMAaamafr of Mot products f 2aitOOSiMrtfHt * 6 0007-SHP-035S07 0007-SWP-000116929 Paint Stores Stores Group Ensure smooth transman from a centrally-managed orgarxzalion to a geographical dwsonafczad organization. improve nwr store profitability by axpandbig sales represantattves in new markets. Focus on strengthening real estate programs to ensure continued growth ol store network. Develop defeated representativesand deagntfedfacades to increase chemeal coatings sales. Remodel27 stores open 126. refocats 77. dose 0._________ ________ Consumer Divtaon Create a dedcated sales forcetor each external brand tomcteasa market share. Maintain cammanenttp performance based on quality standards, improve engmeeredperformance and sustainmanufactured quabty. Continue product line mducaon/ralionalizabon. Become mom selFsuftaentmcriocdrion<ornmodityrav materials Automotive Aftermarket Owwon Add IS Shenwn-Wiliarns automotive branches and expand distnbuton in external brands. Grow mark** share in marine aftaimarkef and buck OE through execution or tocused market plans Improve sales representative productivity Chemical Coatings Division Introduce to cabinet and rumrtum makersSHEHTEC1000, a texture coating which sxnulates the appearance ol tamnatas Establish the Automotive Group in Detroit, strengthening our position in the OEM automotive market Sprayon Dmson Grow external sales at new and existing accounts through dedicated salee force and newmarketing programs Improve matenals requirements planning system and gam quickerturn around sme on orders with lover inventories Upgrade aerosol Nnes at a* plants to improve operating efficiency pr o duc t s Wets, toptobottom A-wo xi#rtef netLane House a mm Fates Outbest setang extorterMssoffers v---V----p-v-nJO-- r SIMUMlBaIfftIHVUnpstMeMffl JM|UHMwkM||||tulf WMlimmVSWehMIVlUiBl]uf--M--n^-I---w----l-W-i-W*-rB-rWnri-yi Dutch SoySUPtrt one cornextortorpelnr la epicleSy tormulews lormaximum PCtnKDOnHN BUTPBIIf|y t ntiliesHnpwwmAArMjanCse avbnawhna !viMHCMimiisbpbiIRb ^nsvsiVHseBieven^BwSibrAbvvbwbbwbvMq iemnoMfn^scemhw^ MrvdneniisiiikinlMg ncnnoiOQifIsnIkventBnAwieoteta^ r aB*teweteinfslHidiSi vihsaisn^phai MlIili wha^theten^np inimal nmnriha PMetrHeahs sfsf*^trle eiirlvHnmtMannv isvAulilkiMpiecfelsMsa^vi^Msa^PilaistmliviMrafeBmsfsM^Bbei^efri^ae iiAMlIeillMei^fblsl^i^ysiBiBielsi^M^^e^ibii^MreiBSdr^si^iaipf^tx merer nrvrenars SuperAerytle CONTROLSMUST Spray Cranial Is s tub Hus et aerosol serylle palmsSimincMss primers and metallies snd sueftenme fastdry, axeeNem MiMBkJIlBr VWwefmieaiBBjiaP m^^Im ^MleleBBB 7 0007-SWP-035508 i 0007-SWP-000116930  u s Imm Sagmwits V *i m s.m Thouaanda oldoNv* YMr*ended Decembers). 1999 WatiitamaHalea RantSwaa.................................... . $1,001,Ml Coaanga........................................ 549,990 Othar.............................................. -- SegmanttoWa................................ . 11.532,931 1995 5 931.302 555748 35 299 Si 522.349 1984 S 850.051 513134 88692 51 451 877 Opai Una awn PamtStoraa.................................... . a '90,999* 5 94.266 S 55.866 Coaanga ........................................ 129,139* 93.660 78,571 Othar.............................................. -- 3.509 10.964 Ssgnunt loMIt.................. ............. Corpora* tKpmai--ntf............ internal axpanae............................ 229,134 (33,979)' (13.391) 191,435 (24.246) (13.057) 143.401 (10.843) (13907) incom from coflftflunQopartaoflf bfltofS DCOfTWIIXML.................. 174*74 9 124.132 S 118.651 mSm*1. V"11.................. .9 Coaanga ........................................ Othar.............................................. 290,119 349*29 2*59 Sagmannowa................................ Corpora*.................................. OacontmuaOOoaraaona M1*09 203*59 240*99 91,145*47 S 257.973 331.104 2.947 592.024 231 540 232.249 51 055.913 5 228186 304 986 43041 576 213 219 829 209 354 51004 396 ftS5staa,f*,!^*,.MI!.*?............ . 9 12*29 S 15.870 5 16401 Coaanga........................................ 21*09 24 ttt 14 828 Othar............................................ 9 147 SSI SegmanttoWa.......... Corpora* .. Ooconanued Operators . 4*39 13*15 40.128 7705 10904 31 890 2 348 13 140 ContcWatedtowt... 5 50.990 5 58737 S 47 378 s^r" Coaanga Omar Sagmanttota* . Corpora*........................ Conanuing operators tetala I 3.911 S 8012 s 12*99 '0930 -- t 134 6 927 908' 3 432 20,979 3.993 20076 2 190 19*30 2131 1 34,559 S 22 266 5 2T571 Operettas Margin Coaanga 0*sr .. 9.0H 14*44 -- 694a 10 8ti 994a 664b 964o 1234b Segment towa........................ H.7H inpuPaa nm afdas Iron *w umeual itama 8 84a 82fi6 "The operating margin for each *gmenteDeaaduocn tow eKitriuai.->d mtaraegmera aanPeri Inwgmant trandoraaio accounne Varac wa^aacor-CMijit -3 norm* unpspea cunoffwr tana. utm Cnmm MaHiyw intersegment T'anj/art "nnS'sic im M W <M 'W a? * r* --MM gm we K-'i tats its* uia ti-'i c*v t 3 Hi Hi Hi : i .*# ttli au] h it 3 iasr wi i*H3 s;*-: SM* *:*e: 8 0007-SWP-035509 0007-SWP-000116931 TJmBIm wain Company 1983 1982 1981 1980 1979 1978 No im to StQfnmtTfcMts The Oliar Segmentconsrss of the Chemicals Oiumon S 724 374 i 621 032 5 SIS434 S 582.292 8 585.312 S 575.579 operabcne. me m)0y o *en wem disposed of m 484 503 490 894 554 378 485.740 414.300 385.932 Jun*1985,andllT*Sh4wii>.WamsCont*inw 186.682 199 202 229135 215.689 196,731 170.839 Corporation, ymch mi dupoead of dunng 91395.559 Si 311.128 SI 398.947 81.283.721 *1.196.343 $1,132,360 November 1963. Oparaong pmlttew lawwa. inetwSng laalizap pol* on rtersegmant frontiers, less operating cosa S 26.767 S 13.842 S 89.067 77.728 10479 11.354 121313 101904 16.176 56.597 7,622 80,595 8 7.805 8 45.059 23.582 78.426 5,779 8 39.066 16.247 81.092 (14.076) 40.048 21,679 47.849 and expeneoe. Ounng 1884. a change in intersegment trmator vatuae r--utadn inciaasari operating proto torlha Pont SWaa Segment wMamaCoanngsSeonwnopmng pram annio au do m# 91009 <x (15.589) (14,035) (21.403) (15.603) (11.437) (16.696) (9,523!) (11552) (8590) (19365) (ll2> (21.316) wuiaionjiicaitpn^ Mt^p*wma Me^pmUamn" efmlfaf^igB^qwin^PttmtmM^^.6 Damewu11n^0ar^l^t^^telpce 4i^r^wtieaiwne 1 S 98.709 8 85.918 S 52.262 8 48.381 8 33.438 8 unuaual lamawarn recorded (see Now 3) and 1589 dtambutad by aagmant The Wowing summarizes oparaing pralitaby eagment exduang lha aitact S 177905 S 143 665 S 166.711 S 159.342 S 165.694 8 179.390 oTMunuauwaama: 299.715 276.564 304 534 301480 289.137 310.637 53.426 131001 144.942 142.485 131507 123288 Ootmmo Protos 531046 205.450 203347 S 939.843 556.230 156.178 175 859 S 888 287 616.187 75.517 172 734 806287 590.336 180.305 121.396 - ---_ 811313 40.488 $ 664,438 8 768.592 8 711.734 8 651.799 ThouaandrorflMM PirtSiowi Coaenge otm Years ended Oecamoar 3* 1888 1965 '984 $ aa.ai* $ 64 266 5 35566 99,111 93 MO 737* 3509 i0 96* SigmMBWt . 198.918 161435 143 401 8 7.163 $ 5768 8 9.889 $ 5.91* 8 1.388 8 2.871 COfpQM9tt0iNII~ 11.742 1 487 a 947 6.413 9.949 19.781 6.194 10.107 3.287 5.959 9.804 m........................ 111.391) (24 246) |10B*3I 3.764 Intnme *pnmn . Unusual items--n (11991) (13 057) ;i3 3W* 33.7SS -- -- 20392 2.652 6664 21.125 4153 5 366 39.619 2.711 742 22.115 1.589 10.6141.253 16.239 1,035 Ineoma from commumg oonmbifoiv inconwouci 1174,974 8124 132 Sn$ 65i 5 31908 S 30 645 S 43.072 8 23.704 $ 11887 1 17.27* 8k byeagmic*mdude both assets 5,716 5518 1853 5.260 1226 4,ns (Mcty idanofiet) wen mcae operations ana an 8204 8 093 1331 8.463 1171 8.288 aaoeaetemartctpiniyueedaaaeto. Corpora# 6699 20619 1976 6569 20200 1.307 6.099 20 283 1.289 6.483 19.206 773 5,230 16.627 831 4 883 17.926 512 anatsOonant primarily oi cash, investments, headquarters property plant and eouipmeni. and canon property under eapw leasaa Expert awaa. latoe or tomgn sucatoiaries ana sales S 22595 S 21 507 5 21 572 $ 19.979 8 19.458 8 18.438 u any individual customer ware each lest trten iO percent or oonaeMatad solos to unalWiated customers 4 046 It 86 4946 7 646 2 2>6 10 706 5096 6 546 2 6<>6 6 946 30*6 4 646 1.396 5546 1446 1046 1.046 6 246 7196 4296 (2.496) 6 696 11046 3546 dung at years presented. Our buenaas segments attar cummers qupity oiacuea suchateieeabaamglheiagiataradrad^ariis Ou'en 8o*7Mamn-Sanoui*Kem-Tone**e>*? negrtf Gias- OeeyhmneCladyOuoli-Coib^PiqMarriOO 0utsn3oy SUPEItyOulqn Boy aW FKJHTEft* and own Omar quality cant productsart ottered under me waamarx SuperPirC* UfcOT ?x*n ViSow Cowsi Otm lyiiBn Vccsdft ms <9M CT Binder UFO (WMM0icnaanm RanCMMaOeanm M m m* utt m m me S 4 II*# 1 $*7 SI* (46 e <i ,a 11 ts - ( in iia 1*4 $23 159 1*21 Sit* MB w Sir - 't> -- 2 32*2 112 9 0007-SWP-035510 0007-SWP-000116932 HiMUtWlilft Placwlon and Anlyl at PkianeM Condition and Rmu Rs of Operations Tho GMnpMiyli iNQoCislffi0 tb mN tfi#0VU0Sfom SiQffiMil to eaalt. Thasaiaeam pieM id ba completed by the second quwto 0*1987. TheProg Store# 8lament hae been BnlQnV JVIIVj l IIR OW wln|Mnj fNM itmbvbi ol wcounUns fwbbfulofw ifMl MlllinMflli of OOflROb bMWM ObMQObOHOi AOBORfRQhfi pOfMlOVI oopovioo NHHiQRiivviinBi|iiiOTmvivmniviim ProvtslofW forunuMMf feMH worn Focofbvd InfOOO wMcb partiallyottaat Iho officto of tho gain on aatttamant of 1986 Cash decreased by SOB 3 mAon compand to 1985 pmariy due to the repurchase d 2.4 mAon *w n d common nock lor S63.1 mAon andeMpandturaa far acQuMona. Natcash too provided by operator*ha anabledthecompany lo fund id capaal needs without extamsl fmanong. The company use* external Snanong in Shmwffl*WMiflns Ocmtopmenl Corporamn i"SW0C"). an unrrnididalsd re* estate subsdaiy. to purchase and develop prepare** to be leased to the Part StoresSegment and othare. working capital The1986currentrabod18aloMiarlhan198Spninariyb*caum oMha decrease mcash and an mereaaa dharaociuals tawed to unusual items. The UFO method d inventory valuation tamtam a lower reported current ratio The current ratio on a FIFO bane would havn boon 19 in 1966.2 2 in 1985 and 2.1 * 1984. The company has had no domaatc short-tarm borrowings knot 1979. Our euner*cash poafton and anwpatod Mura cam flow provided by opanoons diauld ha suflbant to (inane* working eaprtdnaede. COplM Cxpondtofnw/AoouWttofw Caprtal expwxStueS am $30.9 mAon in 1908 compand to $58.7 mAon in 1985. aoidudmQ fixed assets acquired througn aoquMonad $1.9 matonm 1908 and $1.2 m*on in 1985 Caprtd axpanoturet relate pnmanly to the remodeling or adding tothanumDarof part stores as wel as renovation ol certain manufactunng. dstnbuton and naaaienfacilities. Reported eaprtd expenddxe* do not include SWDC expandtuat ol $24.1 mAon. External finaneaiganotantopaiaator 1987 a*cept(orSWOC's real estate acSvrtas. Uneeef Credit MHHBMi Thecompany has a $180 nmlion unusedhneol credit wiSi a groupd afaron banks. This credit agreement was entered mto as ol August31.1983. and *pias August 31.1988. No borrowings ware outstandng under Has kna olcrada dunng 1988 or 1985 Dunng 1986thecompany entand into aciadtagreamenlwtn The SherwrtWiiamt Company Salaried Employees Rssremsnt Huat when altowt borrowings up to thelesser ol $68,000 000 or 25 percent dthasssatsdth* trust until October 9 1992 No berramngi war*outdandmg under thre agreement dunng 1986. SWOC ha $78 mAon Imedcredt with a group d four banks Theagrsamari iinntaisdinto mol December 15 1983. and axpnaa Oacambar15.1998. Under aoommaieial papar program, wtach is baohad by a Mard end*. SWDC may borrow up to $50 mAon untl December15.1987 No borrowings were oulslandng under ties#agreements alOscarribef 31 1986 wltie $43 m*on waaouRtandmg ai December31.1985 10 0007--SWP--035511 0007-SWP-000116933 IMmw on >m. Amtimi XwmngOpMM'* 3X0 Oltlt KKHMKH Cvt&atnctunmmmmmmm The rate dded (including capad leases) to told capfialaanon was 19 6 percent at the and d 1986 compeied to 23 8 percent* the end d 1965. This mso has steacdyimpio*dsnce 1978 meufcng from mprwsd prohabSity. debt repurchases. conversions d 6.29 percent eenvemtla subordmsiaddeparture* mo common sock, ana other mductxms in tong-tarmitobiaNid to some aidant by purchases d ourcommon stock lor treasury Total oaot (mending capital isasas) waa Smr miihon at December 31 1966. ano $145 4 m*on at December 31.1965 At December 31.1978. total data amounted to S2S31 rriiScn. The decrease m total debt during 1986 itpnmariy attributed* to planned raducoons ol long-term dataoutstanding. During 1966 SWOC issued $50,000,000 of 9.375 percent guaranteed debentures when he* been unconditionally guaranteed by The Sharwm-Wiiianis Company. The debt was used pmopaiy to reoay outsanang oMSwng aada and commercial paper borrowings ot SWOC. we purchased snaree dour common stock during 1986 tar generd corporate purposes and. depenckngan ourcash position and market conditions, we may purchase atHMwnal shares ol common stock in 1967 Interest/Heed Charge Coverage Based on continuing operations, wneh include* imumid Hams, we na* unproved our meres coverage to 15.1 emaam 1906. from 10 5 tunes m 1985. and 9 5 dues *1964 Thefixed charge coverage lor conenung operations (couaraga d total rant expanseand ntatasb waa3 2 tmaa m 1966.2.6 nmas n 1985 and 30 tmes m 1964 The anprouementmthiSratio in 1986 is attributable to prioMaMty keeping pace wdi tent expense increases rentedto the pent store expansion program ano the net effect d unusual items on ncome from conorung operations. OMdandaHHHHi Thisa (ha dghtfi consectAna year we ha*increased the dudend as a isauko( tiecompany's ynpiCMd partormance the dMdand haa mcraaMd at a compounded rale d 29 percent snee 1979 The company's nyxoimd financial conctSon atoned lor Sit ramataiamant d Via dMdand in1979 and subsequent mcreasaa to a quarterly rSa dS.125 par Siamdunng 1966. The board d diectors. at a meeting held February 17 1987 dadamd a quarterly dmdand d $.14 par share. Our dmdand payout raw m 1966 was 311 percent d trailing annual earnings. Waaidta at OpiraHsaa 1986 vs 1985 Net UnMBMHI Ndsdeadeoriwung operator* incrosaed 2 0 percent <n 1986 Ad|ustsd lor fie June1965Chemicals Owiaon diwseturo. tut inoaaea waa 4.4 parcant The Rant Stores Segment with a s^gan d 8 3 percent, was pnmartymspon**tori*sd**increase Th*sa*sgn mailed from aggmss* promobonsl attwty and an increased number of atoms. TheCosftngt Segments salas aserasssaa i pareant Sales declines warn prmady due to weak market condaons ano ptannad salts daesnaa i certain buanaasat. n 0007-SWP-035512 0007-SWP-000116934 T own IWrkNI croMPnat GrcsepreliimaigmcfconfcnuingoperakonsinciBasedto4i.o percent m 196# from401 meantm 1985. Conaokdatod grace profit olconknungoperaaene was *636.0 m*on in 1986 comparedto *809.7million in 1985, an increase oM.3paicem Th unproved gross profit is larg^atnbutetXeto rhaFWxSlotwt Segment which eontnbuted mroutfi salat game. The Coating* Segment contributed to the unproved grass proM pnmaniy due tocoal leducaona. Selling. General and Admlnfctmtfvs Expense* SG4A expanses increased as a percentage of sales to 31.8 percent from 3GB percentin 1985. inereassdSG*A expense* tslaiepmierty to mafleni Stole* Segment which continue*to acme* safe* game through increased pramceonal activitiesand the additon ef new store*. General and admmatra&vecosts haw increased only modee#y as a resultof planned coat contammart strategies. The moMse in SG&Aenpenses as a percentage of saleiover 1985 also rellects the effects of me disposition of the maiorty ol the Chameds Dmrswn oparahona whoa* SG4A expenses warea s^niraney tower percentage of aaiea aacompared to consolidated totals fiwraennentfncamefInternet Expense toMBMtoMB investment incomedecieaeed to 39.6 miaon m 1986tram $112 irmson in 1985, pnmaniy due to tower average mvenment levels andlower income yields. interM expense deckned from *130m*on in 1965 toSl2.4 minion m 1986. refleeting conknued eomtorstona of 6.25 percent convenbto sutiorcknatad dabarmnetrap common snek and other planned reductions m long-term detJt Income from conanung operations increased to596 0m*on in 1988 frem 168.7 mfkcnm 1965. Admitted for me oHacs cl unusual items, income from conknumg operations increased 112 percent, to *78.4 rmion, si 1S66. Unusual earns increaaad income tom continuing operations by *19.6 nmHion (*.3 par common shaiel See Note 3 of the conaokdatad Unanoal statementstor a former oscusaon at unusual items Income komeonanuHig operations far 1936 and 1985 includes pronaensestabkmed lor the dapoelion and termination ot cerwnopwalKyis of SH.8 million and S8 6 rnilton raspeesvety Die adoptionof Rnanoel Accounting Standards 8oard Statement No 87, Employers Accounting tor Persons. as of January >. 1986 increased income Irpm continuingopera-ons By *3.5mfkon. Improved operakngprcWtorels in me Rant Stores Segment contributed agrWrcanKy to higher income from conanung operations due to salesgams and mpreved gross margins TheCotonga Segment alaa contnbutod to profct enprovamenis PecauM of cost raduenons and praducevity improvements income kom dsconenued operations increased out to higher sales levels and ynpioied grasmargms. Tha company's financial poelion and results ol operations may be toectad in the tonne by e proposal ot me financial Acoauntng Standvd* Board onaeeeunang lor mcome taxes because tower rates adopted m the Tax fletomi Act ol ' l986^Tlsi propoeft w^'*sub|e^ change, would favorably affect me company by reducing me rale at which oefened taxes would be recognized on me balance sheet, to ladeet me tower rates under the Act t2 0007-SWP-035513 0007-SWP-000116935 OMrtMfgeM OtMn Qum * 2X> 111 M ( 19V W W Sft>W Effects of MMon Tha 1966 modaraH inflation rm had a naghgtH* mpid an ih operating tisgiiadtnecompany Thesnpacidmlaliononinventoryiscurisnllyiacogrizadbirihe cOTpsny through theuse at the UFO method d inventory In general theccmpenyaftsetsanymcieeaedeoilsby achieving producsvsy improvements. W--utte at Opatatloni 1985 vs 1984 NetSelee MBBBBIBB Cansotda(ednataeiesdcontinuingooeraftonsincmased4 9 percent pnmaniy iwm iha Rpnt Stores Segment*sslasgamed 96parc*nt The Coalings Segment whose sales increased 8.3 percent, was favorably impacted by the ecQuisPon d the DupttCdor operations. The Other Segment's sales dedme>s due to the dnpoaeond the maionty d the Chamcats OwmoncpentensdumgJune 196S Grass Profit Gross profit marpnafromcommumg operations mcmaaad to 40i percentin 199S from 38 2 percent in 1964 Gross profit of continuing operations increased 9 9 percent The Pant Stoma Segment was largely responsible lor the mprcwsd gross proM through sates gams and price increases while the Coatings Segment conmbuied through higher productontods and related coat reductions. Sating. Osnersl and AdmaastrsUwe Ispewaee SG0A wparaasmcteassd S40 0 m*on compaied to 1904 and mcreasad as a percentaged salesto 30 8 percent Irom29 5 percentm 1904. The addPond newstores and increased promononslactivitiea to aehiem sates gams m the Pant Stores Segmentwere me mam comnOutons to the mcreasad SG&A sspeniMurBS The increase m SG8A expenses as a percentage d sales reflects theeffects of tlm dspeaeon d the maianty d the Chemcats Dnnson oparanons whose SG4A expenses ware a sgnhcantly lowsr percsntaged sales. Inveeamem income/Interest Expense investment income decreased to Sn 2 mitiionini985 from S130 mi*ionini904. prsnarty Cuetotower storage investment lends and lowsr income yddt. However, aftertax investment neome was approomaisfy squat to tha 1904to* due to increased use d tax advantaged investments m 1905. Interest expensedadmed shghflypnmarity due to continued ccnversona d 6.25 percenteonvertde subordinated oebenturesinto common stock and other planned leduoons n long term debt. Net Income 01 Income from continuing operations increased to S68 7 mHten an increase d 9 4 percent. Income from dacontnued operations increased principally because d salesgave. Income tram continuing operations tor 1985 and t904 .nctudes provdons eatabkahad (or iha di^osdon and termination d certain operands. The CovingsSeiners was the mam contributor to the profit increase panaly offset by a dedmein the Omar Segment as a result d the dnposcon d the matonty d the Chamicatt Oveon operations A reduced sttscsvemcome tax rate tor 1905 compared to r984 Mo had a favorable impact on income from continuing operations 0007-SWP-035514 0007-SWP-000116936 Financial Summary M*on of doian. e#p< par diaie data Yew* ended Deeemoer 31 1989 1989 1964 1983 1982 1981 n SSm""* Cosioi goods sold Selling and admirnstratum expenses * interna expense Income from confirming operations before income taxes income taxes Incomefrom continuing operations .. Net income ............................ Na cash Dow provided by operations ........................ nneeuiareeWee Inventories............................ Accountsrecenraple -- na .... Working capital...................... Property, plant and aqupment - net.................................. Tot* assets ..................... Long-term dew. Common shamnokMrs equey Total shareholders' equity . Per Cemmen Bftere Data ' Average snares outstanding {thousands) Book value .. Incomefrom conenutng operations ... . Net income Cash dividends Financial Ratfee Return on sales* Asset turnover* Return on assets* RelurnonfOuity(A) From continuing operations From total oparanons Dividend payout ratio OeOttocapiakaaton Current ratio Times interest earned (B)* Workingcapeal to sales* Effective income lax rate * Benerat Capital expenditures Research and development Advertising' Depreciation and amortization* Number of shareholders. Preferred Common Number of employees* . Sales per employee- Sales per doiar ol assets* . S 1.U3 917 494 12 174 79 99 109 99 1 410 190 393 239 1.149 * 120 493 492 45,799 9 11.19 2.09 2.31 .SO 6.2H i.a* 10.6H 30.IH 33.9M 21.3H 19.9H 1.1 let 19.1S 14.919 44.9H 3 51 12 3 29 11.930 ia.no S113J031.71 S 1922 913 469 13 124 55 69 75 100 9 367 64 372 230 1056 145 *65 465 46222 9 1010 148 1 SI 46 4 59 I9x apt t70 '85o 28 249 23 8*1 20lo 1 lOSx 19 4# 44 7*9 9 59 11 62 22 11384 12970 S117376 185 S 1.452 897 429 14 119 56 63 65 124 9 336 157 344 221 1004 169 404 404 45650 $ 897 137 142 38 43*9 1 9x 79** 17 009 17 6*9 26 5*0 29 5*9 1 9 to 1 95x 19 3* 471*9 5 47 11 57 22 -- 9777 13 092 5110 B95 183 $ 1395 896 394 14 $ 1311 881 356 16 S 1399 976 365 17 98 65 - 52 47 30 24 51 35 28 55 43 31 99 124 . .. .. 51 3 332 3 299 9 335 141 133 132 340 331 297 199 228 240 940 868 864 175 196 230 370 334 284 371 349 305 47839 S 812 t 08 116 30 41 607 S 759 83 101 25 39635 S 717 6B 77 20 37*# 1 9x 70*9 153*# 166*# 251*9 321*9 2 Om 1 8 Ox <88*# 47 9*# 27# t Bx 50*# 121*9 14 3*9 250*# 360*9 22:ot 5 2x 20 1# 464*9 20# >3x 3 7* 10 3*9 tl 6* 26 is# 43 0*9 20lot 4 IX 174*9 46 5*9 S 32 10 5t 23 40 9 641 13 172 5105 945 190 5 31 9 42 22 557 8590 14297 59* 708 85 5 43 <0 10 22 750 8858 15879 $88096 '37 * Based an continuing operations only (A) Bu m on common irmnaaers squuyaibepnrangoyssi (B) Ran of sn-ta* income horn continuing oosrawns betom -moms taoense 'o rcs'ist sxsense This urnnary should M wad n conyxiaion wnh tr knmea sammontiand noM on 9>QM it 2S afOMiHon t980 S 1264 668 344 19 48 23 25 25 103 5 237 131 312 211 769 213 263 287 39070 S 669 61 61 *5 20 * 7x 32# 98*# 96*# 2*6*0 43 5*# 23a 1 36< 2i73<i 48 6*# S 24 9 29 20 353 8638 -6303 S'5 *86 * 84 1979 <978 S 1 <96 829 323 19 S ' 132 795 3*2 2' 33 16 17 17 76 S 242 126 323 204 712 234 243 283 '0 5 5 40 $ 2u <35 3*7 2* J 554 219 '41 263 42 3r :2 *? 8 as 3 5 42 29 39 ;*3*"5 'y ! 363 * 6* 2 !;1 S3*: 43*# 47'*; 2 3*31 2*. I"0': 4"*) - 3 3 ' 5' * - Hi lie* * 34 :a :* 4' 3-*' S *2 9 95* 3*96 'o 3^2 >"0 307 5 *" .9 39* *JO*` *3 0*5 :o2 iSi 'i 14 0007-SWP--035515 0007-SWP-000116937 Wport of Managmmmnt Shareholders The Sherwin-Williams Company We have prepared the accompanying consolidated financial statements and related informaeon included herein for the years ended December 31.1986,1985 and 1984. The opinion of Ernst 8 Whinney, the company's independent audtars, on those financial statements is included. The primary responsbrfty for me integrityof the financial information included in this annual report rests witi management Ths information is prepared in accordancewith generally accepted accounting prinopiee. bated upon our beat eetmatee and judgments and gwmg due corwderalion to maternity The company maintains aooounong and control systems vrfsch we designed to provide reasonable assurancethat assets are safeguarded from loss or unauthorized use and which produce records adequate lor preparation of finanaal information. There are irrsta inherent in al systems of internal control based on the recognition thatthe coatof such systems should not exceed the benefits to bederived. We bafceve our system ptowdaa this appropriate bslance. The board of dxectors pursues its raaponsrtSSyfor these fnandai statements Ihrough the Audit Committee, composed exduavafy of outsdedirectors. Thecommittee meets periodically wrti management, internal audkors and our independent auction to discuss the adequacy of financial controls, the quality of financial reporting and the nature, extent and results of tie aud* effort Boa* the sitemd audtars and independent auditors hwe private and confidents! access to the Audtt Committee at ail tones. Chairman and Chief Executive Officer T. RMikSch SeniorVice Presxjent--Finance Chief Financial Officer J.LAult VicePnsxIant -- Corporate Cortrc*er Report of Intel A Whinney, Independent Auditors Shareholders and Board of Directors The Sherwin-Williams Company Cleveland. Oho we hare examined the consolidated financial statements of The Sherwm-Wdiams Company and subsidiaries listed m Item 14{a) of tha Index ori page 33. Our examinations ware made m accordance with generally accepted auditing standards and. accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our option, the consolidated financial statements listed m item 14(a) or the Index present fairly theconsolidated financial position of The Sherwm-WIliams Company and subsidiaries at December 31.1986.1985and 1984. and the consolidated results of their operators and cnanges m financial position for each of tie three years m the period ended December 31, 19B6, m conformity with generaly accepted accounting principles applied on aconsistent bass except for the change: with w4i*h we concur, m the method of accounting for person costs as described in Note 7 to the cansohdatad financial statements. ClwMM one Jsnu*ry30 1987 Stat*mnta of ConMlktatM meoim TKeuu/*%cidciai%.mcatttMmmaMt ' TIM igy, *ad 0cm6f 31 _____ __________________ 1986 1985 _____ Net sales........................... ...................................... ....................... ............. $1,552,931 11,522.348 51.451.877 Costs and expenses Cost of goods sold ............................ Selling, general and administrative expenses ........ Interest expense............................. ............... interest and net investmert mcome ... ............... Unusual items -- net .............................. ............. Income Item continuing operations before income taxes .. Income from discontinued operations--netof tax............. Net income........................................................................... ........... ........... ........... ......... ....... ........... ........... ........... ............. ............. 916,855 499)781 12)391 <9)7791 (sen (33.7951 1,378457 174474 78,119 912.609 468.707 13.057 (11.160) 15.003 1.398.216 124.132 55.470 897248 428 724 13 SO7 (`29811 6 328 "" 1.333226 118.651 55900 9)991 68.662 5,976 62.751 2.255 9 109,952 $ 74.638 S 650C6 Income per common share: From continuing operations From discontnued operations ... ... .. .. . . Net income................................................................... ... * ............. ... , 9 2.09 S .22 2.31 S 1.48 S 13 161 S t37 35 142 Sm new10contoMMd hand* MamMs 16 0007--SWP--035517 0007-SWP-000116939 ComoWrtwl Balane* Sh**ta Thousandterooiafe Dacamear 31 IBM 1985 1984 ASMtS Current assets Cash and short-temi investments................................................. Accounts receivable, less allowance ..................................... .............................. Inventories. Brushed goods . ............................................................ , ............................... Work in process and raw materials.......................................... .............................. Other current assets..................................................................................................... Total current assets.............................................................................. ............................. Deferred pension assets................................................................ .............. .............................. $ 170.025 S 166.233 110,197 164,116 157,486 374,043 33,033 403,373 31,377 733.433 104,333 33,303 330.487 36,127 366,614 47,309 746.064 -- 77,581 301.795 35,978 337,773 48,020 709.512 73.739 Property plant and equipment ............................. ............................. Machinery and equipment ...................................................... ............................. Construction m progress .............................................................. .......................... Less alloeences lor depreciation and amortization ............................. 7,043 31,730 347,380 0,937 438,903 320,970 9.839 97109 307.057 12.097 <26.102 195.934 9.558 108.313 309065 11 702 <38 638 217 493 334,333 230.168 221.145 Total assets ............................................................................. ............................ 31,148,347 31.055.813 Si .004 396 UsbltMeeandSharshoMers'lfeuity Current liabilities Accounts payable ... .............................* Compensation and taxes withheld ............................. Current portion of long-term debt............................. .................... Otheraccruals ........................................ Accrued taxes . ... ........................ 304,043 50,201 9,222 139,193 27.331 S 193.620 48.224 9.084 95.280 30.262 S 183 938 <8.728 11.760 97.098 23.737 Total current labilities ... .................... 430,290 376.470 365 259 Long term debt Deferred ncometaxes Other 'ong-term liabilities ........................................ ............. ............. ........... ............................. ..................... ............................. 113,713 78,833 23,200 145 437 36037 32 502 168.878 29 489 36 630 Shareholders equity Common stock ................ . .. Other capital ......... .................. ................ swa-ned earwigs ....................... .................... .................. Cumulative foreign currency translaton adjustment .................. Treasury stock, at cost .. 47,121 118,042 407,873 (12,200) 500,228 (M.88S) 26.372 153281 358.749 (12.552) 525.850 (60483) 25.852 145.402 305.175 (12.530) 463 399 (59 '59) To'snarehoider4 equity Tsta I'StnU-es and shareholders equity ....................... . .. . ... 481,5M 465367 404.140 91,146,847 S1.055.813 SI 004 396 '***'a JanjouMBd finance memenn 17 0Q07-SWP-035518 0007-SWP-000116940 1 i Statements of Consolidated Cash Flows Thousand efdotan f' vunandwt Oeeerrwr31 1988 1985 1984 Net cash Dow provided by (used for) operating activities: From continuing operations Income (nyn continuing operations ...................................... . .. Non-cash charges (credits) to income from continuing operations: Depreciation and amortization ..................................................................... ............. Equity n (income) losses of affiliates........................................................... Deferred income taxes.............................................................................................. Disposition of noncurrert assets.......................................... ............ Amortization of intangible assets................................................................... Noncurrent unusual items -- net................................................................... ............ From discontinued operations: Income from discontinued operations............................................................. . Non-cash charges to income Irom discontinued operations: Depreciation and amortization .............................. ........ Deterred income taxes................................................................................ . Amortization of ^tangible assets................................................................... (Incrsast) dscrease in current items..................................................................... Other ... ......................................................................................... ... . 8 99.961 $ 68.662 S 62.751 24,559 (HI) 40,321 5,353 (67,405) 22.266 3,718 3356 16.460 10 -- 21.571 5.020 3.154 4 125 -- _ 5.976 2.255 (16,950) (15,534) 4.061 995 2,729 (22.478) (5.842) 3 348 1 188 2 633 7 814 10.254 Net cash flow provided by operating activities....................................................... ........... 50,114 99.913 124113 Cash Nows provided by (used for) investing activities: Capital expentktures ................................................. increase m current items from business acquisitions ... Noncunem assets hem business acqwsrttons................................................... Net book value of noncurrent assets associated with dtsposons . . Investment in Canadian joint venture................................................................. Noncurrent items associated with sates of property to unconsolidated subsKkanes................... . ... Other . .. .. (50,990) (2,935) (5,575) -- (350) 5,757 493 (58.737) (1.071) (1.622) 7433 (379) -- (4.9t5) (47 3 78) ;6 566) (1637a -- (14 137) -- 3 665 Net cash used >or investing activities .... <52,50) (59291) i80 738) Cash flows provded by (used for) financing activities: Reductions m long-term debt and lease obtigakons Cash dividends Purchases of stock for treasury Other ...................................... (21.272) (22.594) (53,135) 5,110 (21 355) (21 064) -- 5589 (4 5211 (17211) 120 669) 4 902 Net cash used for knanong activities ................. .. (101,001) (36830) 137499) Net (decrease) increase n casn and shorf-tarm investments Cash and short-term investments Beginning of the year. ............. .......................... .......(M48S) '.....1792.. 5 826 170,025 166.233 160407 End at the year ........................ 3101,740 8170 025 5166 233 S* nan toeonwtdKM `narew taunftm 18 0007-SWP-035519 0007-SWP-000116941 Statement* of ConeoBdated Wi--hBfcton1 Equity ThouMndtldolars ** 11 11111 Vfflf i me ftttmimiy Send Pidoned Stock Common Stock CumuWne Other Ronmed Trandenen Eorrvnw Adiustment Tma&iry Slock Balance at Jentary 1.1984 .......................... .. Treasury stock acqurredlreSied .......................... Common slock issued ...................................... ... Net income ...................................................... Cash dividends: SenesAprefenedslock--$1.00 per share .. Common suck--$.38 par share................... Reduction in par valued common stock........... Currant year translation adjustment................... $ 388 (13) (373) $158,384 $ 6.220 *-- 2.310 -- 4.360 -- -- (134.822) -- mm mm 134,822 -- $257,527 (18) (129) 65.006 $(11,741) * -- -- (11) (17.200) -- -- -- -- (789) $(39 786) (20.638) 665 -- -- Balance at December 31,1984................. ,.. Common stock issued........................................ Net income ......................................................... Cash dividends on common stock-- $.48 per share................................................ Current year translation adjustment................... -- 25.852 520 _ " 145,402 7,879 ' _ -- 305,175 -- 74,638 (21.084) -- (12,530) -- (22) (59.759) (724) -- Balance at Decamber 31.1985............................ Two-forona stock spkt .................................. Treasury stock acquradftetiied ....................... Common stock issued.................................. Netmccme ...................................................... Cash dividends on common stock-- $.50 par share................................................ Current year translation adjustment................... -- 26.372 153.281 358.749 (12.552) (60 483) 23,433 (33,433) erne _ -- (3.000) (17,338) (34,234) -- (8.574) -- 326 5,522 -- -- 385 -- -- -- 108,983 -- __ mm (22,594) '-- -- -- (256) -- Balance at December 3t. 1986 ........................ . $ - S 47,131 $111,042 $407,873 $(i*;80if $(68,669) So* notes to eonooMotod`maned Mwmoni*. 19 0007-SWP-035520 0007-SWP-000116942 NtttM to ConsoJMatod Financial Stretmrents ThaWwiwIn m 'fclBf^0gTrt)w3M98ej985lind19W-- Hu 1--IlfliiWoiirt Accounting Mol Consolidation. The consolidated financal statements include al significant subsidiaries. Intercompany accounts and transactions neve been eliminated. Short-term investments. Short-term investments aw stated a the lower of aggregate cost or market value. Property plant4 equipment Property, plant and equipment is stated on the basis of cost. Depreciation s provided prmopaly by tie straghMme method. The mapr classes of assets and ranges of deprecation rates aie as follows: auttngt . Mawi*rYnd*qu*m*rr. .. SunwimandlbiwM AutemeW**and tuck* ..................... 2*eH .... MSM ................. 5*M0** . IOW-33'hH Intangibiaa. Intangible assets purchased m busness acqwsiterre ate amortized over theexpected period of benefit Research and rtsvefcpmenf costs. All research and development costsare charged to continwng operatans. and were S12.290.000, $11,117,000 and $11,077,000 for 1966. 1985 and1984, laspecsueiy! Netincomepercommon ihara. Net income per common share was computed based on the average number of common shams and common shareequivalents outstanding during the year. Stock spit The par value of additional shams ofcommon stock issued m connection with a two-tor-one stock split distributed dunng March. 1986. was credited to common stock and alike amount charged to othercapital. flscfassifilcafwrt Certain amounts m the1985 and 1964 financial statements h* been radasstied to conform with the 1986 presentation of discontinued operations. Hotel--Inventeriee Inventories aiestated at the tower of cost or market. Cost is determined principally on the lastm. first-out (UFO) method which piwidea 8 bettor matching of current costs and revenues. The fofomng presents the effect on inventories, net inooma and net income parcommon sham had the company used the RPO and average coat methods of inventory valuation sdjusted forincoma taxes atthe statutory rate and assuming no othar adjustments. This information is presented toenable the leaderto makecompanionswith companies usng Via FIFO method ofinventory valuation. ThouuntHolOoS**. VMr**ne*d 0*c*mb*r3i e*wp*rmweauiisss i9ss i9S4 h*icniB*cfMlinii*nien*en>JFO Cue-- a FIFO m1 Kfo* row eerUFO.. .............................. lnn--i (B*ei**| w iwr ream* due to UFO;......................................... From conimangocenoon*. > FromdUcomtimd opmm InciMM (dacrsM)m not mcom* p*r common mandu*io UFO From communeoemaion* FromdacommtMdBtmuton* 9SM 97H gga. 16*423 S6S112 S82287 30*2 (T50) ( 250 (2 682) (2 iSS) -2 *S3) 07 ( 02) . 33) 106) iQS) ,35i Dunng each year certan inventories were reduced. These raductxxw resulted mkquKjabons of LIFO inventories earned at the lower costs of prior years, as compared with current year cores. The effect ofthese tquidatiohs. which increased mcome from continuing operations, was immaterial lor each of the years presented. Nat* 8--Unusual Hams Dunng the fourth quarter of 1986. thecompany recognized a gain Iron the settlement of obligations tor one of its defined benefit pension plans (see Note 7). In addition, management's evaluation ofcertain long-term commitments resulted in prowwns tor antaptead lossesor expenses Provwons ware made for theanticipated costs-of terminating certain long-term contracts, the reduction in book value of various long-term assets, the need for initiating a program to ensure environmental protection and control at operat'ng facilities and the expenses of positioning certain manufacturing processes and othar items to enhance future growth. A summary of the net gam recognized of $33.785.000 ($.43 per common share) >s as folcws IhouundiardoKn GlMt OA MNiW 00 portion OQkQIMA T*mnifco*o#cows Bw)uioninlxiOkv*lij*iyiO(vr*rrf<****l Envuonrrwnm praMcton ma control M oonfrng racthtut Oth*r nonecumng Mm* .........rtvSnoM " 0*C*r"C*r3' '966 530 956 20 950) :'S37' 0 600) 9 250) 533 -58 20 0007-SWP-035521 0007-SWP-000116943 Noted --bwomeltaee Thousandsoldotais Tha component! of neom* *rom commune oparaiion* Mo* neon* iu m esnMOMiw lellowne Demme Fowgn Taw moon* hem eorenumg owmmWM mcometixe* .. *)>a component*el meom* tax tipana* ofccrtmvmg ooaraMn* a*a>fa*owt. Cur*ff Federal Start and locd 0**r*e Federal Foreign Total'ream*tee eeaome al saiwuing oewabont fee* ended Oecember31. IMS .1969 1984 9182.031 9117947 9119.812 120*3 9189 3.039 3174.074 8124.132 9118.881 s *9.492 29..423033 8 4542..414848103 S *981..232111394 99.129 52.114 52.748 19985 3358 3.181 -- 17) 19 985 3 358 3.154 9 78.M3 9 88*70 3 99900 The company has recognized the deterred tnoome tax liabilities and benefits resulting from timing differences between ifnanerai and nx accounting, Waeng pnmanly to depreciation, delened penswn gam and otherveluebon allowances. Its the company's intention id reinvest undistnbuted earnings of toragn subsidiaries; accordingly, no deferred income taxes have been provided thereon. At (December 31.1986. such undistributed earnings amounted toSl.755.000 investment tax credits from continuing operations (accounted tor by the Bow-through method) aggregated $1,142,000. S3.014.000 and S2.270.000 tor 1988.1985 and 1984. respectively. The source and deferred tax effect of luring differences for continuing operations are as follows: Thousands otdollars Olo*C4RVi Otfioaman* rerminreoni anaomar wnlai t*m* Oefarred cannon ram* Omar :tama(aacft un man 54* of are compuiaP "uptetad" lax amount) Y*a* anead D*etmMr3i. 19SS 1985 1984 S 3378 8 4.222 S 4.121 (32.141) (5.490) 51413 3.029 (518) 1.331 (2.887) 1.595 <1.780) 3 19985 3388 1 3,154 A reconctation of ihe statutory federal incometax rate and the affective tax rale ot continuing operations follows: Statutory tax rei* Effector Sun and local tax** Ganaral butmaaa tax ends* Omar --rw Effacav*lax rare Yawl andad 0*eamtwr3l 1888 1965 1984 *804* 48 m 4804* 19 (8) (2 a 44 94* 22 (2 71 <8> 44 7** 26 <221 5 47 14* Nele --Ptaoontfcmed OperHone In DecBnibar 1986 the company and Gray Drug Far. Inc entered into* dofintma agreementwith a third party to sen a portion ofthe Drug Stores Segment for cash. Th# company also isnegooebng to sel for ca*i the stock of Gray Drug Far. Inc., which anronpMeai tha balance of the Drug Stores Segmsirt The sateaareexpeefad to be completed by the second quarter of 1987. Assets and liabilities olihe dneonbnuadoperations wheh ire included in the conaoidatad balanca sheets aresummarised as Mows: Thousands ofdotO0$ ....... . . Ottur current tana*........................ CunantUMttt.............................. eodady. planand *quipm*i*-n*i (.mg mm daw............................... CHtier null andiabiMna ne......... Naraaaaraafdscoflenu*dOQ*raiona Oacamo*r3i Ilea 1985 '984 S1SAI28 9144661 $127 194 17443 22293 19 799 (78851) (908881 182 98.718 43.8*8 (9180) 12274 rftoee 48 284 (17 298 oiaa 93 878 *0271 (2329*1 12132 9145680 91 (5 944 S 93 017 Summarized operating results tor the discontinued operarons are as Mow* Thousands ofdoSsra Nu*x.......................... Opantngpiiet...................... Income (lore) baloreram* lax band* Incoma tax bantM . Income Sam dacmanuad optraftora--nnoftax Yaara andad Oaeamsw 31 1918 '985 '9B* *700 258 $872577 8623 31T 10.072 6983 32 8*48 1 543 4 506 -2 S4S) ? 470 4800 5 9 991 S 3978 91 2253 Mete I--Aoqulattlond end Dtapoetttona Owing the three year panod ended December 31.1986 the company purchased vanous ratal paint and drug stores, as we* ascertam paint manufacturers. Assets purchased consHted pnmariy of inventory accounts recaivabfe and fixed assets. The results of operaaons of these busmesses since the dates of acouanon were not material to conibMiced reauits. The company recawed cash and other securities appmxxnaeng net book valuem Junsi 1985 for the matonty of to Chemicals Oiwsion operrenns. the operations of which have been mctodedmfte company's Other Segment through sedate of dispewtion. The net effect of this deposition wasnot materialtotheconsoBdatad results ol operations. 21 0007-SWP-035522 ,-aWSWM MSS*.! 1f Not* 7 -- Retiremetit Itiulte Substankaty all employees d the companyparttapata in noneontnbulory defined benefit or defined contribution pertson plans*Oefined benefit plans covering salaried employees provide penson benefits mat are based primarily on years of service and employees' compensation. Defined benefit plans eovenng hourly employees gensrsly provide benefits of stated amounts lor each year of service. Mutiemptoyer plans are pnmanly defined benefit plans which provide benefits of stated amounts for each year of service for ur#on employees. The company's fundkigpobcy lor defined benefit plans is to kind theminimum annual contnbuton requited by applicable regulations. The foeoreng table sets torth tie funded statusand amounts recognized m me company* consolidated balance sheet forthe defined benefit penson plane: Aamndp--endueat benefit aefigdwre. UaaMbanaMate*an AeeunuWad tanafil afctgaben , . Pioteme Banafit ottgaaon Plan warnetervdue film a--i in near ot pmwcM banalaoBliQ--i Umacognnd nttaortrt January 1.19M. iwofinenaHen Umacograad nalleai Panaantaewymdudad * euna habMwa Oattnad aaneon mats OaeanwarSi. <9se srea.oeji S (66 707) S (95.65*1 216970 123 316 (37626) 17 666 108377 tare 6104 663 Plan assets consist pnmanly c< cash, aquty and fixed income securities. The assumed discount rate and the weghted-average assumed rateof increase in fuluiecompensation levels used m determining the actuarial present value of benefit obfiganons was 848 and 646. respectively. Thaassumad long-term rale of return on assets was KM*. The actuarial present value of accumulated plan benefits at January 1 1985was S223.095.000. induing vested benefits of S2i6.8i2.000 with net assets avartable for plan benefits of 5336.548.000. The actuarial presentvalue of accumulated plan benefits at January 1.1984 was S220.248.000. refuting vested benefits of 5210 676.000 w*h net assets available for plan benefits of S339.151.000. These amounts weie determined underthe poor penson accounting method and reflected an assumed rate of return of 8.54f> for both years. Plan assets offoign plans exceeded ihe actuanally computed vested benefits el these plans baaed on me latest actuanal computations avertable for 1986.1965 and 1984. Penson expense (cmdiQ for defined benefit plans or continuing operations was$(16,890,000). 5(5.028.000) and 5(1,148.000) tor 1988.1985 and 1984. respectively Effective January 1,1986 Ihe companyadopted financial Accounting Standards Board Statement No. 67. Employers Accounting for Pensons. The affoct of ms change in accounting pnnapia increased the perwon credit by S6.407.000 and increased income from continuing operations by S3.460.000 (S 08 per common share} Pension expense(cretfifl and idated information presented for 1985 and 1984 have not been retroactively restated. Thecomponents ol net pension expense (cradQ for mo defined benefit plans for 1986 were as follows: ThouMndkoraoWk Dewmbwai 1968 SeracecMt : ................ Ini--ICO*................................. Ae--nenpsnmm................ NatamcranaenanOd-- ... . NatpanacnewM.............. YMrwicM S 3348 IS 970 <3Si5Si (491 St is 39Q1 The company's annual contribution for defined contribution plana, whch based on a level percentage of compensation tor covered ampioyeea, offset mepenson credit for defined benefit plant by S8.550.000 for 1986.58.000.000 for 1985 and 53.500.000 tor 1984. Thecoal of mukamptayer and foreign planscharged to income from contnuing operations vvasimmalorial for the thweyeersendedOecember31,1986. During December1988. the company effected a settlement of $189,000,000 of me accumulated benefit obligaaon ter one of its defined benefit pension plans by purchaang annuity contracts As a result a settlement gam of $90,956,008 pursuant to financial Accounting Standards Board Statement No. 88. Employers' Accounting for Setrtemeris and Curtailments of Defined Benefit Pension Plans and tor Termination B*nehts. was recognized by me company In addition to providing penson benefits, me company provides certain hearth care and fife insurance benefits under company-sponsored plans for retired employees Substantial at of thecompany's employees who are not members ofa cpKacfivebargaining unit areeligible for these benefits upon retirement. Thecost of mesa benefits lor bom active end reared employees of continuing operations >s recognized as ctams are incurred and amounted to $20,068,000, S20.147.000 and S20.906.000 for 1986 1985 and 1984. respectively. There went11.042.10.781 and 10 747 active employees and 3.937,3,85i and 3.736 retied employees entitled to receive benefits under mess plans as of December31.1986.1985 and 1984. respectively 22 0007-SWP-035523 0007-SWP-000116945 Wot* >--Lont-TOrm Debt Thousands ofooton 5 Dsoanturvs 8 25*Convent* Subordnawd CMoankirM (ConvamosKWi common h o c * ai SS 73 ash**) 945*tO*bantum 9 379s* PmffunoryMore* iOSOreemmmaryNowt(lOH 1984) 5 90*911 *7549 IreuenW Hmn i Bonds 8 SOreAwmaory Notre. S12 000 pmep* amount funiitwiatfl^coofH&>Mdonrnpuatf numeral* o 16 549 S 125<9Mortgagor***35 22! pnnepal amount low unamonmd dscount bared on anpiiMd .ntsmarsnef levs mommy paymomtolSU 9234PTynissoryNare S6 500 or neo* amount ivu uraraniad oscoum hiwrt on imound nwmsrmorreShi Obligations unoareaoittl Wares--Woocurrant ooioon of S9S6n i9S6 Si 349m 1985and 52.482m 1901 bus Out 1992 teas 1999 1999 <999 through axe 1991 -- Sinking Fund/ Pisosvmsna Amours m Taneury OacamcarSl Amcura Omnanamg Natal Traitury Occambar 31 Amount Commons* 1991 96S 1994 TIM Ties 1904 52.000 2.000 2.000 3.325 2.997 Maras POyabW currn#y (Wyatt# CunanTy Fayaut curwnly Psysere eunvrty ftayatt* eutmnSy Payott* currently S MM s r.ase S 9896 * 13106 $16104 5 1$ 1(54 9.521 3.6SS -- -- 9.521 11521 4.969 5.565 ---- ---- 882 32.335 29.725 30.019 1248 33333 33375 36 009 3334 33335 36 700 390C6 rere -* 7293 7418 15 109 Fkyett* 1200 currently ---- re* -- re. -* -- 3827 <653 8732 -- -- 4106 4 143 1 >97 5 533 9189 3 213 $22,080 522062 529052 5119 716 $145 437 5'68 3*3 Certan covenants under the note agreements wqueettw company to mantan specified levels of working captal. km# the incurrence of debt, tease oMgaaons and investments, and restrict the payment of dividends and other datnbubons on thecompany's stock. The company may at any une. issue stock dividends or pay dividends on any outstandmg shares of preferred stock under the terms of the note agreements. At December 3t. 1966. $147,425.000was available for cash dividends on common stock. Thecompany has sufficient debentures m treasury to satisfy most smkmg fund requirements on pubkc debenture issues through 1986. Maturities of long-term debt exduawe of capital lease obkgattons and after the abovwmentioned reduction for sinking fund requirements to be satisfied from debentures on depose with the trustee, are ae follows for the next five years; 1987--$ 8.266.000 1966-$ 6.820.000 1969--$10,092,000 1990-910.092.000 1991-911,173.000 Interest expanse on long-term debtofcontinuing operators amounted to $11,837,000. $12,684,000 and $13,219,000 for 1986.1985 and 1984 respectively There were no interest charges capitalized during the periods presented Under a erecM agreement with a group of eleven banks, the company may borrow up to $150,000,000 unM August 31. 1988. Amounts outstanding under the agreement may be converted into five-year term loans at any time. The credit agreement indudes certain restrictive covenants regarding working capital levels and the working capital ratio. There are no compensaing balance requirements. Under a cred* agraamant with The Sherwin-Williams Company Salaried Employees' Retirement Trust, the company may borrow up to the lesser of $65,000 000 or 25 percent of the assets of the trust until October 9.1992 Revolving eradtamounts outstanding can be convened into five-year farm, ten-year term or sx-year installment loans at any fame. The credfagieament mdudes cenari restrictive covenants legardmg working capital levels and the working capital raeo. At Oecamber31.1986 there were no borrowings outstanckng under eaher of the above creax agreements. 23 0007--SWP--035524 0007-SWP-000116946 MsSe 6--Lessee TTie company leases stores, warehouses, office spaca and equipment Renewsl options are availableon the maionty of teases and. undercertain eondaona. options anst to purchase piopertes. In some instances, store leases require (he payment ofcontingent rentals based on sales in excessof speoliedminimums. Certain properties are subleasedwi!h VttKXJfl txoifd&on dlMML Property, plant and equipment includes the (blowing OTOuntstor capesl lessee, vtoich are amortesd by the stneghHine method overthe lease term: n*HMoO>otdo**9 ' oaeMfcirav IMS 19BS 1964 aufcsngs............. .... . .. srass s t at s teres B.20S 9.230 2096S LMsaw--nrelanrwitaieon........... .8,505 6.85$ l$52l S 1.703 t 2.374 S 5.465 Rental expense of continuing opereeons for operatingteases was $66075.000. S56.574.0tM and $45,959,000 for 1966. 1985 and 1964. respectively Contingentrentals included m rent expanse ofcontnumg operations were $5,106,000 m 1966. $4,688,000 m 1965 and $3,872,000 m 1964. Sublease rental incomeforal yean presented was not agnfearrt FoSoring is a schedule, byyear and in theaggregate, of future mmimMn lease payments under caprtai leases of total operations and noneancalaCia operating leases cfcontnumg operationshaving Wtial or remarang terms in excess of cm year st December 31,1966: PieuMnaeordbSwa 1157................. isse............. ................ CapM Lanas 1990 ................. 1901 ................. I war yaws........... TbMmnmummMp* AiNuftiipiiHffenQin EimAotyGMfti...... ............................ ......... sai) ttrmmmknntaaaapaymares .. > 8 *89 Oteeenneente S 35075 30.718 25*37 20102 14 888 33 782 S159950 Stole 16--Capital Stoek BWmca atJanuary 1.1984 Sue* uad noon Eiarcaaol aoe*oowm Rl4lff0llOAflfDfMffl(l6OCk Canvaraeno'caOnae woe* Convatsenoie 25*ConaittiiaSuberdffaM40abanturaa Contribution loMVSOW Traaauiy Week aeaieroa/iatirad BWaneaatOaconieor3l 1984 Stock teauoauoon Exoroaoei woe* ooton* Cenv*rsenofS25HCbrM*rWSuberdWwaO*b*niuiM Ceninbulien W WirSOW Traaau^ woek aequeod/routed Seanceai December 31 1985 Stock aauae upon Exoreaool woek oonon* Convrwiota 25HConvpnMo3uBardinwpit Ooborkuna Contribution nAAYSOP Daawirywoek aceured'i*MW Balance* Oacamber 31 1968 An aggregm of 2.909.413.3,296.694 and4.336,726 sham d common stock at December 31.1986. 1966 and 1964, respectively ware reaarvad torconversion of oonverebto subordinated debentures and axercmand future grams of stock opeoni During Apnl 1986 the shareholders approved an Amendment to tha Amended Amies of ineorporascn increase the authorized sham ol common slock tom 100.0010.000 shares io 200.000.000 shares. At Oscembsr31. 1986. therewere also 30.000.000 drereeof senal preterred Shares mtiaaaurv S4 00SanaaA tl 00 CtanuiafcveCarherwie Common Stock ShMi Omstmdtnia Nr of TVeMufv S4 00 Sene* A SI 00 Cumulative Convambte Common AiTmed Stock Stocx 371 -- -- -- -- -- <3TI) -- -- -- ............*......... S.110.854 (74.0001 -- -- -- (99.958 1.710 *88 0.691.400 SI 3--00 (703501 10 S.S72L374 10 SOS -- 18*5) (9.5581 -- -- -- __ -- _ -- -- *S 559 692 632 7--78 >33 259 335 67S 99 952 (1.718*69) *50*2 690 595 940 363 M2 70 350 ne> *5071826 22.779 300 551 -- -a 63625 "` -- (53.9331 -- 53 533 -- (3.99BJS2) -- 12*10 008) - 1051.030 - **079628 stock authorized lor isauance. The company catted tor redempsonal outstanding shares ofSermA preferred stockaffective Apri 1984 The redemption pnee wee $100 per share plus accrued dividends. Substantial al outstandino sham wareconverted nto common stock by toe redempson date. Sham of the Senes A prefsnsd stock wereconvertible at a base conversion price of $7.24135 per shareofcommon stock based on a valueof $100 per share ot preferred stocktor thrs purpose. 24 0007-SWP-035525 0007-SWP-000116947 Netefl --Stock Puadmse end Stock OpUQIft rMRS Currently 6.677 amployaes of conSnumg operations partopatatorough regular payroll deductions in toe company's Employee Stock Purchase and SaMngs Plan. The company's contribution charged to continuing oparationa amounted to $8,431,000. $8,059,000 and 16.778.000 tar . 1986.1985 and 1984. mspecbvefy. Additionally, thacompany rnadecontobusons on behalf of participating employees of continung operations, which represent salary leductiona far income tax purposes, amounting to S3.933.000in1966. S3.S90.000in 1985 and $3,275,000 in 1984. SubswtnaSy all company employees not catered by a coisetow bargaining agreemerx am eegtole to partopste equaly in Tha Sharwin-Wlfcarns Company Payroll Based Stock Ownership Plan ("WYSOP"). Tha company* contribution, tor employees of al operations, to the BkYSOP Of$1,499,000 tor1966, SI.417,000for 1985 and S1,3K>,000 far 1964 resutod in eqr?a*pondmg reductions of appicabto incometax (abMies. At Dscamber 31.1986 them wet* 7.242.473 shares of tne company's common stock bang heMI by these employee plana, representing 16%of toetotal number of common shame outstanding. Shams at company stock credited to each membersaccount under these plan* are voted by the trustee underconfidential instructions from each indvidual plan member. Non-quaKftod and ineanoueatock opsone have been granted tocertain officers and key employees under the companySstack option plane, el paces not tesathan fair market value olthe shares at the date of grant The options generally become axerdsable to the extent of one-third of the opaoned Shame for aach tut year of emptoymart following the date of grantand ganaraly expire tan years alter the aMdQrsre. A stock appmcntion nghta plan and a plan providing for puichaaea of reabMed stock by eligWe employees wen approred by the shareholder* in1964; however, no rights have bean granted under these plans Stack Ocean Plans Ocnmouannikng begmng ol y*ar Grantad Emiossd Canceled OceansouMandmg end cl year Eeaieeaew Reserved tar Kama gram* Employee cowrica Opacnt euteandvig Segnnmg el year Emoted Opeona cuMandmg end of year isaa ,*wm* Shw*a Pnce isas Snare* pic * <984 Snami *: 1GB8.S4S SI1 S42.000 taszaoo 3o.e2z.00o [323.6301 P. 173.0001 (9S.810I I1.9Z8.OOOI 2.022.200 S37.2S3.000 487.109 733759 -S -S - 1 461 514 S11Z50.000 329.000 3 290.000 (603040) P.4890001 (90.816! M 089.000) 1088.044 *11943000 461 194 1990 74S 74200 * 195000 174.2001 1190 0001 -S - 1632 904 S'0 331 SCO 053 000 13-6300 (5419781 i2 425 3001 (163 4'2l " 334 0C0- 1 461 5'4 5< 250 300 489 494 2 22' *24 US 000 5 380 000 170 3001 l * 35 3001 u 200 5 '95 000 Mete ia--P1ecceltlc end TermfoetlewefOcerUewe The company continually reevaluating 4s operating toeMee witfi regard to the long-term strategic goals established by management and the board oi directors. Opsrahng lacSities which are not expected to contribute to the company* future plans am doconlmuad. Summarized at right a tha financial data mated to toe decision to dose or salt certain piwits and operating units, inventory, property, plantand equipment and otherassets mousanSkoTdMue Beqnnng accrual -- January i ftrovmonincluded mcee d goods add Prowawn included mcoate and ticeraat--other Toutomneen . actual coeamcunedand apultmarw 10 pnaraccmala. have been mducad la toe* net realizable values. wMethe Erxtng accnad--Oeeemeer 31 mated costs tor severance pay shutdown expenses and estimatsd lutum operating losses to disposal data am Netaflsrtax provmen horn conanung opnm included rn current liabilities. The company expects to complete toe closing and saleofthe facilities at various dates Net atartair exovson par common anai* homcoAMwngopifMni through 1988. 1909 1985 9ftA 539 195 530-04 53* $39 17 587 4 288 3350 3 981 11583 1 997 21 S6S 15871 5 337 jessii Vf 3801 6 '721 142 212 529*95 530*04 S11647 5 5570 5 2 982 5 25 s < s OS 25 0007-SWP-03S526 I 0007-SWP-000116948 Note 13--Quarterly Data (Unaudited) Quarterly Common Sock Prces and Dividends isaa Ouirter ia 2nd 3rd 4tr> rlign $29* 32r. 23/. 30 LOW 321 (. 25' 223. 22* bvidand $125 125 125 125 1965 Summary ol Quanerty Results of Operations riwunna ol doiais. eacept pirthiie daft"" Vtar Ouirter Nm SUM W)W\Bngtj^rvisv * Gna Pr M IMS 1*1 3332274 5124.760 2nd 431.980 174.082 3rd 438203 '80402 #r\ 330436 156.791 1985 i 3323864 3122024 2nd 443003 ITS 168 3rd 421 359 171 755 4* 330722 140792 Income 3 5.322 27427 29889 33.343 3 4 076 26.265 27629 10.492 Quarter 1* 2nd 3rd 4th High *17% 19V 20 233 LOW *13* 15* 16% 17* Dviacna S*.t5 tiS "S 15 Nm Ineeme S 3.377 soiaaz 32288 36294 S 5.714 28.535 29.094 11 295 Pw Common Slaie income FmCominunc Opewcni Nm income % 11 58 66 75 S 'S ..... 65 71 8* S 09 57 60 22 S 12 62 63 24 1MB Effective January i,1966, the Company adopted Financial Accounting Standards Board Statement No. 67. Employer* Accounting far Pensions. The effectof this change m accounting principle increased income from continuing operabone by$1,186,000 ($.03 per common sharix *1,134.000(102 par common sham) and $324,000(101 per common sham) m ttie first, second and tfsrdquarters. fetptcMiy. Fourth quarter adjustments increased income from cononung opetaone by $29,468,000 ($.64 per common shareX This increase was due primarily to yaarend inventory and other yearend adjustments of $17510,000($.37 par common shareX the change in accounang torpensonB of $814,000 ($.02 percommon sharaj and ttie nacordng of unusual items cf $19,595,000 ($.43 per common shX The increase was partialy ortaat by provisions d $8,434,000 ($.18 parcommonshare) torthe dNpostton and tarminadon of cartam operations. 1985 Fourth quarter adjustments increased income from conbnung operations by $6.230,000($.13 per common shaieX This increase was due to yearwd inventory aQusmants of $10.163,000($.22 per common share) offset pnmanly by pRMSKXis of $4,084,000 ($.09 percommon share) forthe ekspoeMOrt and termination of certain operations. Mote 16--Matoses te--iewta Business segment information appears on pages 4,5.6 and 9 dlh6 report 26 I 0007--SWP--035527 0007-SWP-000116949 Note 19--UueowaoMatod Weal ilWi tublMlarv Sherwin-Williams Development Corporation ("SWDC'') is a wholly-owned unconsolidated subsdreiy earned on the equity bass This subsidiary and its wholly-owned affiliates own, develop and lease real estate for me company and others. The maiontyol the souare footage owned by SWOC released to unrelated parties. Under a revolving credit agreement the subsidiary may borrow up to575000.000 until December 15, 1995 Under acommeroal paper program, which a becked by a letterof creedUhe subsidiary may borrow upto 550.000,000 on a shortterm baas untt December 15,1987. The Sherwin-Williams Company haa not guaranteed either debt, however, the company and SWOC have amaintenance agreement mat raquuas the company to make payments to SWDC in amounts sufficient to maintain SWDC's tored charge coverage at specified mnmum levels. At December31,1986, there were no borrowings outstanding under the levofving ciedit agreement or commercial paper program. During July 1986 SWDC issued $50,000,000 of 9.B75% guaranteed debentures which are due in 2016 and have been unconditionally guaranteed by The Shavwm-Wiiarhs Company. Summarized consolidated finanoal data for SWDC and as affiliates as loiews: TmvunoioiacMi* Property Dtanundaqupmm--ne CmnaM Otar noneunes-uti .. . Toulaaaata . otewnewai......... isee nes i9S* S82.798 181.153 S4a.S76 iaai 1.489 1.53# I.ISf 475 849 S8S.8M snoer 549.083 Longonn dm ..................... . Curiamhaoama . . . Otar noncunentUbNN................... Bquty Tom u mw and souty . SS7.7S1 S4S.431 136.956 24 03$ 14,870 9.321 3.14# 2.171 1.388 _JSL__as. 1J91 m imi * < Total rovenuN Toufexpanaae-nat...................... Meieaa .................................... Fund* crowded by ocarNona. S11.11S S &2S3 9 B.559 n.ss 9.172 7,320 64 487 34# 3453 2.274 i.saa WHe 19 -- Wwondol Schedules Marketable Securities --* Other Investments tlO-K, Schedule I) The short-term investments at December 31.1988 consist of IhoustnaialOtmn .' nreurcMH 9Mienml$ Murvooe Noumea Otar Norma Tote S *2 500 28 390 30 850 St01 MQ Amounts Wooohrebls Pram hoisted Parties (10-K, Sehedule II) Included m other assetswere the following notes receivable from certain officers of me company nnuMflosorooMrt Oabajr lose T A Comma* C A Balm 1SSS JiG. Breen TA Comma* C A Been 1984 J G. Breen T A. Comma* C. A. Bain Beginning E-=-j Beane* Addeon* OadueM 3an S 160 160 s 320 _ S 722 8 732 S -60 -- 382 $ 342. S 560 8(500) _ 180 N. S *60 180 mm -- so S 880 S(560) S 320 * 800 180 160 S 880 _ ae N. -- _ $ 560 mm 160 160 -- $ 880 The outstanding amounts represent 5.0% Premmory Notes wth interest payable annualy and are due on July 28. 1988. Fabruary 10,1991 or wahm nmety days of termination of employment. 27 ^ 0007-SWP--035528 . 0007-SWP-000116950 Not* 18--Financial Schedules (conwiued) Charges to other assets consul pnmanly ol unusual items, Property, Plant and Bqulpm*"9 (KMC, tdwduto V and VI) P'operty plant ana equ oment classifications are disclosed in me balance sheet Additions and retrements of property, plant and eauipment were as follows amortization of intangibles and. for 1985. adtustments to pension assets Asset (deductions) additions consut pnmar iy of oalance sheet ^classifications. Activity related to ether long-term bawdies.___________ rneusanos piaoan .......................Yrj encua CUcamBw 3' mm ues t s &j T^ouSM^asofe/oms Bilne -- ol ToiaaddiiiaRsMeoti As*an*couw3 through KQuMont Tom iwiwn*1 eon RMudion, Out to OKeentent OWefChangas Bound -- andcl year Tea's ardad Oacambar 31 MM 19*5 1981 BaguvungbaUnea ' ..... ChvgettcmMxtnnpsnM S32SD3 S3S630 530638 7 297 (t 9u) .90') 54% 103 *438 538 *405.431 RaaaneidadueiicnOxldaion* 11*550) (2 2i*) 6 693 50 990 1949 58.737 47378 Endngttelsnee 1 174 9 805 535209 532502 536 630 (8 097) (8 5*7) (14278) - (833%) (14 935) (3575) - Charges (ciedts) to other long-term haMioea consist (13500)primarily of unusual items. adjustments to estimated pension S45SS0B *428 102 *438 838 liabilities and deferred compensation. Reserve (deductions) Other changes lor al years presented consist prmanty of additions Consul pnmanly d balance sheet reclassifications capitalized leases, the translation of foreign assets to U.S. dollars, the sale of property to unconsolidated subsidiaries, and tor 19S4. the sale ol property to various Canadian companies. Total accumulated depreciation and amortization of property, plant and equipment were as follows' Hurt-'IWm lemuHius (KMC, Schedule IX) hiouunasoreoMo Yaaraencaa bacar-s*' j' tees -ses '?i- Malta sayaUtn banka at December 31 5 253 . 5 -4? Thousands ot&m Balance -- begmng al year Tod enaiged to aieanae Hatiiaranu Aaduenon* dueto d locamon* Omarenanga* Baiand--ana ol year Vdsis andad Oacwnbar 31 MM 19SS ...1984 5195.934 S217493 5309 548 29.799 % 337 34 919 tSSIO) (47*3) 19900) -- (563601 -- 1847 13.334 (7.074) 3330 970 S19SS3* 8217 493 wughud enrage interact rauatOacambarai Mammurn amour* ousnndng arymoi*h-ond Amiga amour*ounundvig during me ganod WaghM Mrage lUaent Me during the ganod 230* 5 598 S 329 2SS*t S 89 $ 22 185*. T2 5 S -58 S -22 23 34j Oihet changes lor a# years presented consul prmarty of ' capitalized leases, reserves tor the duposmon and termination of operations, the sale of property to unconsolidated subsidiaries, and. tor 1984, the sale o( property to venous Canadian companaa. (KMC, Schedule VtlQ Changes n the atewanee lor doubtful accounts aieas fcjgwK Thousands oldolan OlQMWf MMI BiddMlspifM ...... . ......i. Hm uncotacrtteaceoyrtt wnfen off Ending OCance.................................. VMtssndsd Oeoambar 31, MM lees 1984 S3.798 93.780 93.350 SOU 9.136 104*1 (7.003) (9.0091 19.9121 tzm ' 93.759 Acovnyretotodtootheraseats: nwuaanda ordain MMended Dseambsr 31. MM 19S5 1984 BapnnngMsnei ChiroMtOMpcflW ............. . AMI(4MkJCDOfl^lOd(0fW . .. Errtaigtdance... . .. . 177.511 973.738 964.4*9 (23.411) (9.M0) P.099) n.wi 13.303 15.412 1S2.363 S77.SI1 573.739 Short-tenn borrowings are included in accounts payable on the balance sheet and pertain solely to foreign subackariea The swage amount outstanding uthe total d month-end outstandng balances divided by twelve morths. Thewe^hted average interest rate istheactual interest on shortterm debt divided by average shorHerm debt outstandng. Supplementary Inecme Itsterweit Udormotlon (K> K,6ohod*doX) TheuundiardbSM Yuanandad Oacambar 31. 1M 1995 1984 Martamnceand eeam... AdwrknngcaaU................. 919474 82.300 930.979 91.891 931 833 56 530 Amounts above rsiate to continuing operstons only and eKdudaS2.994.000. S1.992.000 and $2,270,000 tor mamwnanoeand repairs and >10.818.000. $13,483,000 and $12.419,000lor advertising costs aesocatad with ducortirwed operations in 1986.1985 and 1984. respectively. Amourmterdspiaciabonandariioriizaiiondintangibfe assets. praopamngcoat* and emilar deferrals, taxes other eiertp^rol and incometaws, and royaltiesa net pMeerted because such amounts am each leas than i% oftotal net taiee. . 28 I 0007-SWP-035529 0007-SWP-000116951 laMMt Index NtMIliMr 3 Articles of incorporation as amended MedheteMtn and regulator's fried as Exhibit 4(b) lo Form S-3 dated May t71982. and incorporated nerem by reference 4 Not apptcabie 9 Not applicable 10 Material Contracts -- incorporated by reference to pages 11-12 from the definrtwe Proxy Statement dated March 9 1987 ii Computation of Net income Per Common Sham. 12 Not applicable Pete 29 Murobtc 13 Not applicable 18 Not applicable. 19 Not applicable. 22 Subsdianes of the registrant 23 Not applicable. 24. Consent ot Independent Auditors. 25. Porrer of Attorney on He with the Securities and Exchange Commission. 28. Notappfcabie. 29 Not applicable. Peee 31 32 Camputation ol WtIncome >w Common llmo (ixtilbftft, fotw 1MQ TnoulMO* 01 SOWS * wr WI data My Mute* Avaraga Onoutsmtng Oorans -- treasury Sock mathOO Aswmadcanversoc of Sees A BiUtred Sack 6 254* ConvenbeSulMKtnMd Oabartima Av*rag*Ki>y aJuiaosftraa ineoma kom commune opanaont Md62SmConv*m*Sgbor*rmdOabenuM'flMNn(tofttx ' inecma kom eomnung ooarabom aepcaM w My Mj M man* incom*tam McomnedopeaDona Neincoimaixiiic*Mwiuyci*iMieiM ... Incoma par common Me From continuing oca*arena Frcm Mcomniad oparmon* .............................................. Ntfineomi .......... 0c*mtr31 iaaa 1965 45219324 582.1*9 _ ITS 841 4S.97S.3S4 45 763 690 4S7 590 317 BIO 46 559 090 8 95.9*1 31 95.992 9991 S105.9B3 $69682 54 68716 5979 S7 s* ; _-12f0t9... 1231 *147 13 SI so -9i 4523"2 597 i6C 36036 594 346 4639' 6'4 5627*1 65 62 9<6 2255 565 171 8135 OS Si 40 ^Aiuraga naiM nxauneng....................................................................... ............. OpW--n--utyoockmaeiod.................................................................... Aaraoeatomand aqunOana.............. ................................................... NumcomaappiiuaMtip lamaand aqwUam............................................. ............. IrtCflfWpflfCttNMI'lMM! FwmcetmeiQBpeelona......................................................................... ............. ............. Nameom*.......................................... .................................................. 45.219.324 8105.952 12.09 22 82.31 45.783.680 436.218 46221.886 *68.881 5.978 874.838 81.48 13 8181 45263 772 585 876 45.849646 882751 2255 888606 8137 05 81 42 29 I 0007-SWP-035530 j 0007-SWP-000116952 Directors and Offlewrs The BOOT* Of Dlroctara JwnMA.MtWOOd.S9 Chairman PnMMnunO Cnaf Onear iu ONY c nare aiSwvmt KaHtiS.Mnaon.68 ntMad istmanyExaeuti*# VcaPraadant F nanet andAommiwaaon Ogaoay Norton Company JotMQ.Braon.S2 Chatman and Clval EaacutvtOfcw ThaShwwirxWilliwnaCompany D. WOyno CaBcoray, Si Chairman and Cnw ExacutnaOMcar PaoaCo. me LatghCartac61 Praadam and Choi OparjtmgOftear ThaBFGoadnch Company ThowMA.Comnni.44 PraadanunaCnat Ooaraina Oftaar Tha Shanwn-waomtCompany OtRobartC. Ooban.63 SanorVca PWXdant Seoneaahd Tackneiogy' OuonaCornmg FibwauaCorpenken Allan C. HoOnao, 66 diwad. (omar Partnw Jonaa. Day Paavo & Pogua J.RobartKllpaek.64 Chaaman NaaondCtyCorporoion WNHom Q. MHchil. 55 Vea Chaaman CantaCorporwan RalOhE.Schay.62 Chairman tnd Char Exaeut*aOear. ThaSooi & FaoarComoany laeuthM Ofllearo vmBwn JotNiG.Braan.S2 Chairmanand Choi ExacutnaOhcar Thonwa A. Commaa, 44 Poaoant and Choi OparaangCttaar DtF. Thonwa Krotlna, 45 SarauVfcaAaadant Corpora* Pmmk ii and Daxatopmant Thonwa R. MUdkh, 39 Same* vcaPnodao. Rnanea andCwatrnancal OBiear David I. Wio w m.41 Paadani Part Stotaa Group Jehwl.. Aldt.41 VkaPitadart CorporataCoiaroiar Conway G. Ivy, 45 VietP'BMM.COfpOrM PianruhQindOawioomani Arthur D.MMn , 4? VcaProadara. Hunan Paaoucaa Larry J-PNorak, 40 VcaPiaadarL SaoaUryDaaauwrand Ganaw Ccunad Robort A. Tactionnan, 64 veaPraadam FaeMoaand AommavunaSancai FraneioC. Rcwrmo, 37 Ataauni Sacmiarr and Corporao Quacuy ot Taxa* Platalow WonooTn " Prank E-Budo* SO PoaaartAGanaruuannBa*, CoraumarOnxaiM BWMamB.gldradgo.g8 Piaaoani Inwmmonal Group Robart B.MatUck, 39 PoaaamAGaratuManago. MtdCanml OMOan ChrtotoohorM.Conno^X JohwC.Maoawo.3S Pintdam4 Ganarat Manapaf. PoadntAGaratal Manapar. WamtnOnmon SouOl CanM Owwen LaowwdA.Wwd.60 Paadtnt* Qanaral Managat. AummoaroAftarmirtotOwiacn QaorgwtL DovonportSi JwwME.Ronahow.39 PiaaidaniA Ganatal Managat PoadantAQararal Managat SoumaaawmOivaon EaMmOMuon JooaphM.OoVlttorki.S2 JoOMhH.SoandnOM.33 PiaoatntA QanarW Managat PoaroattAOanaral Managat ChamcOCoaongaOMaon SpraycnOvmon 30 !1 0007--SWP--035531 i 0007-SWP-000116953 Directory of Operations Tb therwtw-ttru--me Camaany and fneMlartaa Bran - Sherwin-Williams oo Brawl induatneaComsreo Ltd*.. Slo fiwo' Canada -- Snerwin-WJiains Canada Inc.. Grawnhurat -- Sherwm-Wiliains Automans Firahes. Inc. Mmuiigi Mexo--Company Snerwm-WiMnis. S A. d# C.V.. Mexico Cay' WasIndies -- ShermrvWiHiams Cayman IdandaUd.. Grand Cayman' -- Tne Sherwin-WiihamsCo. ftsaourose Umasd. KmgSon. Jamaica - Sherwm.Wlliami (Canbceen) NV, Curacao --snenwvWaiame(iMNt mdse) Ltd.. Kingson, Janwca --Snerw*vW#iame (Barbados) Ud.. Bndoelown, Barbados _^ -- sncrwr-WMiama FomigflSalee Corporanon Limited. Chertoae Amalia, Vaget idanda UW--Shanmn-Mpiami DevelopmentCorporation' --SWOC(OriioXlnc.* -- 5WDC(Virgins). Inc.* --Contract TraraponaconSytwma Co. --CT3 Brokerage, Inc. --Gry Drug Par. Inc. -- The ManhSI Drug Company --Gray Drug Stores. inc. -- OOF, Inc. --Drug Way Stoiae. Inc. -- Drug Fax, Inc. -- Drug FeeofPa . Inc. -- PnoaKing, Inc. --Dupacotor Pioduett Company tliaoiidn!i Iwknslvuwavsws Canada--BAPCQ Toronto. --128639 Canada. Inc.. Toronto Ecuador--SherwirvWisms del Ecuador FAbnca Naetonel daPrtmS A Guayaqui Ireland --FSW Coating* unwed. Out*n FS.W Pans ud.. Outdm Japan -- Nippon ShervMvtMlramt ChamcstaCoL. Ud.. Oaaka Panama-Sherwn-W*iamedePanemaS>..BinamaCity Saudi Arabia--ShanaaMMWame Saudi Arabia Ltd.. Jeddah United Kingdom - FS.W Ltd., Bradtord ArgerOna--Sherunn-WiHiameArgananalnduSnalyComeroal, SA --NatonaiLead.SA Belgium -- Startac N.V. Salma--FAbnca de Pmturw "Espnttrt`` SA CMe--PnuraeAndtna. 5A China--(P.R.C.)--ChawNabsnS ConiauctanCBrpeaaBon -- rmn PantGanatS Factory Coiombs--Ftonca Manorial da Hnturaa Sharmn-WBamade ColofntNiSA Cotta Rc*-- ShrMfvW*afm dtCovfe c, SA Oomncanflaputte--AcabadoaAuiamatriewSA B Sdvador--SherwsvtMKame daCanso America, SA daCJV. France--AlsoCaakngwSA Haw--Panama imataa. SA Honduras--SnsvwrvWaem da Honduras SA da C.V. inda--Ganaaia Pwns, Ud. Italy--AkaCoabnga. S.pA --Cdarddo TdeeanoSjiA. Japan--Atom Chemical Part, Ud. -NipponPartCompany Ud. --Dw Nippon TbryoCo., Ltd. Jordan--National POnti Factonea Co. Kona--Owhan Ink and PwraManutectumg Company Lebanon--Amar Parti Tradmg Esauahments --Unwraal friend Chemteal industries SAR.L "CHEMffAINT" NalhaHanda--SWranaGwftN.V. Paru-SharvwvWBiamaFVuana.SA Phipplnaa-- QtoCaam. Inc. Puerto Rico--EnooManufectumg Corporation SouhAfrica--AdvancedCoetngt PTY, Ltd. Spain-- frtdtwlriatOumeae Proeort SA --CaedngeCanbtoesn. SA --BamicseVWertina. SA Wwen(R.OlC.)--Yungjfao I*lnt4VfrmsnMlg. Co. Ud Thaland--Bmhok ChetaPrint Mfe Co. Ltd. VansMk-CA QukncaInMgrada --CAVtneaorinadePigrnarws --CAUMoarianadaPMune WasGarmany--AlanCoadngi GmpH PAINT BribmorwMD Chicago. IL Emaryvda, CA Petal Ptarea Eimni 34? MdCarmi 446 SeuSCaras 312 Tniah--arn 421 rnmm taa OTHER . Garland, TX.............. ........ Arshaen,CA............. Graanabora. NC BedfordHta.. OH Marrow GA CollayRa.KS Newark. NJ CnaMdLMO Richmond. KV OaahMr.OH EfeGtoue,lt FordaNJ Fbunlainlm,SC Grawnhws. Canada Scarborough* CirifiJi - INTERNATIONAL Gfuaywquf, Ecuador Jeddah. Saud Arabs KingSon. Jamaica MwocoOty Mexico PmamaCity Panema SloFfiJo, Brawl Toronto. Canada Wgatn. Ireland 31 00O7-SWP-O35S32 . 0007-SWP-000116954 I Conaant oftivdap m<i Uii*w Sharendoar* and Board ct Directors The Snanmi-WNiamCompany Cievaiano 0t*0 waconaemio me incorporation by mersncein PoB-Etieeive Amendmant Nunbar 3 sand Apriza.1986 nnagdvanon summon No 2 805'0 and Ragoraton Swaman Numbar 2-91001 on Eorm S-6 dated May 25.1*0 of our apon on tna eonabedatad ftnaraalammane inemoaa oi mammal report on Rom io-K a TnaSnanom Waurni Company lordid year ended Oacambar 31.19M fOt^CO Cleveland. Oho Marena 1982 Pursuant lo Hi# raquawnanis of Sedan 13 or 13(d) ol iha SacunHt Exchange Ad a 193*. tna ngmran has dulycanoed me report to ba signed on its baha* by ia underegned. thonaunio duly authorized. ai tie Cayol Cleveland, and Staiad Oh*, on mo Mh day of March. 1967 THE SHEfiWIN-WlUJAMS COMPANY . L J PITOBAK ** L.J frtorah. Secretary" Pursuant lo the isouramentid tie Securities ExchangeAct of 1934. w report has been egned beta* by tha Woemg poratins at *ia capaoms mdcaMd on Maren 9,1967 Officers and Oesdms at ThaShervw*-Wanis Company: 1G. SHEEN JG.Srsan- TA. DC J A, ATTWOOO J. A. Attwood JCS||KSSL K. S. Benson 0. W. CALLOWAY 0. W. Canoney L. CARTER L. Carter' RCOOBAN R. C.Ooban AC. HOLMES AC.Hatmas Jl RKJUJMCK CherExeeumeOMosc Orector ChefQpereSng Offioet Onaar Oncty Omctar Onaar Doctor Onaar Onaar OMdOf l WO UrfCHETL Dim** wasMohai R.E.SCHEY ft.E!neJ Onaar Thttwd>rintdbyiaTg>ohnfnihiii^dQttigftlhiiiportonb<hildttw daaiBratsdCdfcars and Oinecwol TheShegrin-waiarnaCompany pursuantto Powers of Aaomey ameuM onbahaHoTaatfi such Officer and Deader: . LJPtTOhAK * LiPaoratc.Aaamatrntact Mardi9.1967 a 32 0007-SWP-035533 i 0007-SWP-000116955 RmWI Pumuant Section 13 a 15(d) A** Securities Exchange Act *1934 For the Y* Ended December 31.1985 Commraaon Fra Numeerl-4851 Sacuntea and Exchange Commission W*hmgton.O.C 20549 t h e SMBIWtN-WItLUin COMPANY a n OHIO CORPORATION art UPLOYERIDENTIFICATION *4X34-0829880 101 Prosoect Arenue, N W damtand. Ohio 44115-1075 Telephone(216) S682000 Secure* Regarewd Purauam to Sacaen 12(13 *iha Act TNteeteealieleee Nans* swhiawes an whtah raalnarart 9.45% OebartuiosOue 1955 New Itorfc Stock Exchange S 25%Comertbie Subordinated Oebentur* Due 1995 New York Stock Exchange 545%DebeMume Due 1992 New York Stock Exchange Common Stock. RvYdueSI.00 New Ybrtt Stock Exchange SeeunbaaReg*amdPurauamoSacaoni2(g>o(thaAct Nona Pomona d ft* mport am not required by Form 18K and enoreo"*prt* Ihacompwvaio-K Only Vwaaeaont ntamncadmlhaindaitbalowam ,neorporedntfi*1<W< The Sacunat* and Exehanga Commreeon h* not approred or **pprered Viewport * pmaad upon a accuracy oradequacy The Regatmnt haaNed al wportarequredtobafiled by Saeienia or 15(d) of v m Secure* Exehanga Act at 1934 durngVie pmcedhg 12 manlia and haa baan aubiact to auch Mmg 8WWHi %Mre reiM* %>* l*8^R* |8M#*>Owfxllt8l8 The Ragetrarthad 44,220.815 aharee of common Nock, p* value St 00. ortsiandmg, net* Mary diene. * January 31.1957. Thaaadiems warn haldby 11.874 hddart * moord on Ihn data. Tha aggmgato mark* vakm* Viewhig Mock*January 31.1987 a 91.472.308.251. excluding Viawhig dock n*d by Via dwenre. Pam M-KHaneM K--He. 1 Buena* a. GenerNDamlopmefli of Butman.......................... * b. Rnencrt inlonnaaon Abort Duanaaa Segnami ...8-9 c. NamavaDeecnpaon * Buena*Sonants..........4-5 d. FowgnandPomaaDc Oparsftona and Export Sain... 9 2. Prepare*...................................... 31 3.Lagatftccaadnga........................... 4 5 Mark*tortheflagatrantfc Common EquayandRNatod Stockholder Maaam.... limdaFmt CamrtM 6. Sheeted Financw Dam.................. 14 7. ManagafnartbOacunamand Anhyde* Fkiaro* ConeHenwdAMutt ofOpareitone......................... 10-13 0. Rnano*Stammer* and SupplamartaryOaMu TtwmeponMtotiie VamaaubmAadin Nam 14*4* report 14. Exmo*, financial Stammer* Schedul*and Reportson FocmBX a. smmmanmctCensoiidamd Ineoma tar**Yiara Endad Oaeno*3i.i988,iMS and 1984 ....... .......16 ConaokdaMd BhsnceSherts atOtC4mb*3l, 1968,1989.............................................. and 1954 ......... .17 SmmmsnmdConsetdmsd Cahi Roaster viaYtara Endad December31.19851 1995 and 1984.................18 . . . StommenteotGonaolldemd Shamhold** Equity torVia Mam Endad Daoamb*31. 1986,198Sand 1984...... 18 Nonaid Conaoldmsd RnancM SMamartatortiaMamEndad OwnbvSla 1966b 1988and 1984 ........2028 llama Numb*10.11.12 and13 aia Finano*SehadutaaNaa.l.N.V.V1. incorporated by mtamnea >om via vn.KandXtortM*a dalntne Proxy Stammer* dated Endad Oacan**31.1958. March9.19B7.1l*d*4hVSeeuil* 198Sand 1984 ............27-28 and ExcnangaCimraalon pumuartto b. Report*on Form 6-K RagrtaionMA. Form6KBsdonOaeamb*23. Kama Numb* 4 and9 and doth* l988announting*wsatec* acnadrtaa (Noa . W. V*.. XH.xm and Vs Drug Stoma Sagmani Xtyfcrwtachpmiaanmmadaintha c. ExNbaa EuMhaimtai ' ippfcablt aecourttno regulation ottm 29 SaourMaandEachanoaCammaannam rw requiredund* to*mteiadln*iijchjn* * arereaprfcahla. and Vwwfere hire baanomHasL * | 0007-SWP-035534 0007-SWP-000116956 0007-SWP-000116957