Document ga1Dxaj623p4wBaJjJReOxbLL

h e Sh e r w in -Wil l ia ms Co. n4 rZ < : <*> t ft t f i i . ! 33 n <S) H O r > (/) </) 2 > r S-W 000401 196 REPORT TO SHAREHOLDERS THE SHERWIN-WILLIAMS COMPANY S-W 000402 CONTENTS 1 Financial Highlights 2 Message To Shareholders 5 Consolidated Income and Earned Surplus 6 Consolidated Balance Sheet 8 Notes to Financial Statements 9 Source and Application of Funds 9 Accountant's Report 10 Financial Graphs 12 Five-Year Comparison 14 Directors and Officers. 15 Principal Products 15 Manufacturing and Research Locations 16 Subsidiary and Licensee Companies 17 Sherwin-Williams of Canada, Ltd. --Financial Statements Annual Meeting December 13,1966 The Annual Meeting of Shareholders will be held at 11 A.M. December 13, 1966i at the Sheraton-Cleveland Hotel, Public Square, Cleveland, Ohio. Share holders unable to attend the meeting are urged to exercise their right to vote by proxy. Proxy cards, proxy statements, and return envelopes will be sent to ail holders of Sherwin-Williams' common stock on or about November 9, 1966. TRANSFER AGENTS Th e Cl e v e l a n d Tr u s t Co mp a n y , Cleveland, Ohio Ba n k e r s Tr u s t Co mp a n y , New York, N.Y. REGISTRARS Ce n t r a l Na t io n a l Ba n k o f Cl e v e l a n d , Cleveland, Ohio Mo r g a n Gu a r a n t y Tr u s t Co mp a n y o f Ne w Yo r k , New York, N.Y. $-W 000403 T 4Uit 19^o arc* Net sales.................................................................. Income before income taxes.......................... Income taxes--United States and foreign Net income......................................................... Cash dividends declared: Preferred ................................... Common......................................................... Per Common Share: Net income..................................................... Dividends paid ................................................. Working capital................................................ Ratio of current assets to current liabilities . Capital expenditures...................... Provisions for depreciation ........ 1966 5386,062,160 1965 5344,783,077 38,757,790 36,759,449 17.854,085 17,494,519 20,903,705 ' -0- ' 9,860,431 : ; 3.96 1.90 19,264,930 379,129 8,754,195 3.66 1.70 123,374,147 j 124,105.729 4.57 to 1 11,506,661 i | i 4.81 to 1 6,527,549 4,916,575 ; 4,322,747 *Adjusted for 2 for 1 stock split effective December 9, 1964 S-W 000404 TO OUR SHAREHOLDERS We present herewith the Consolidated Bal ance Sheet and the Consolidated Income and Earned Surplus Statements of The SficrwinHiiliams Company and consolidated subsidi aries for the fiscal year ended August 31. 1966, together with other financial statistics of interest. The consolidated earnings applicable to Common shares amounted to S20,903,~05 as compared with Si8.885.801 for 1%5. The earnings for 1966 are equivalent to S3.96 per share on the 5,281,583 shares of Common Stock outstanding at August 31. as compared with S3.66 last year. This is an increase of 8.20^. Consolidated net sales amounted to S386, 062,160. Both net income and the level of sales were the highest in the Company's his tory, as were last year's. E. Colin Baldwin President Arthur W. Steudel Chairman of the Board All major divisions contributed to the sain in sales. In the large Trade Sales area, sains were attributable to the increase in the number of sales service outlets, added manpower n.u the success of our promotional program..', 's.i.e> in the Chemical Coatings. Transportation and Pigments. Colors &. Chemicals ends of the business continued to rise. Technical improve ments in formulation and production have en abled us to meet the increasingly specialized demands of customers in these fields. During the year a separate sales division for metai containers was set up to insure more concentrated attention to this large and grow ing market. Ail divisions of the business continue to be supported with expanded effort and large out lays for Research and Development. Expen ditures in this area rose 10.6^x over last year. During the year the Company acquired the assets of the Maumee Chemical Company-- Toledo. Ohio. Maumee is engaged in the de velopment. production and distribution of organic chemicals and intermediates. Many of these are the outgrowth of their research and development, leading to products with exist ing broad markets, manufactured with original technology. In addition, they are engaged in custom manufacturing of a wide range of products for chemical and drug producers, detergent manufacturers and agricultural chemical producers. Although the product lines do not overlap, Maumee and Sherwin-Williams technology is quite closely related. Maumee's experience in developing and marketing new chemicals and in engineering new processes will strengthen further our growing position in the chemical industry. On August 4. P06 the Company entered into an Agreement of Merger with Sprayon Products. Inc. of Bedford Heights. Ohio. This transaction is described in detail in the Proxy Statement recently sene you. In a Special Meeting of Shareholders heid on September 2~. the Agreement of Merger was approved by shareholders by an affirmative vote of 89.5% of the shares entitled to vote and 99.5Cc of chose voting. Sprayon Products is a well-known supplier of high-quality aerosol products--paints, lubri cants. chemicals and other liquids packaged in spray cans under pressure. This company fits nicely into our program of expanding our base and serving ail types of customers who are interested in finishes. Sprayon's main plant is in Bedford Heights, Ohio. Another plant in Anaheim, California began operations about five months ago to serve the West Coast market. Despite record production in all of our manufacturing facilities, demand outran our ability to supply, even with operations at forced draft. As a result of this increasing demand for our goods in all the markets we serve, our manufacturing facilities must be expanded ap preciably. This is essential if we are to realize our maximum sales opportunities and obtain the lowest possible costs in manufacturing. Page S-W 000406 If current schedules for engineering, con structing and equipping are met, our capital expenditures in the coming year will be slight ly in excess of $30,000,000. These will center around a large additional metal container plant at Elgin, Illinois; a Pigment & Chemical complex at Ashtabula, Ohio'; expansion of colors and chemicals facilities at Chicago, Illinois; a new paint plant at Atlanta, Georgia; a furniture finishes plant at Friendship, North Carolina; a program of expansion and modern ization in existing paint plants at Cleveland, Detroit, Newark, Oakland, Garland and Dayton; an addition to the Chicago Research Center; and the initial costs of a new Chicago Technical Service Laboratory. In anticipation of this large program of ex pansion and modernization and by reason of having retired all of our Preferred Stock for cash ($8,000,000), we have negotiated a Re volving and Term Loan Agreement to supple ment funds which can be generated internally. This loan agreement with ten major banks can provide us with a total of $35,000,000 for capi tal needs and gives us latitude for an additional $15,000,000 for seasonal borrowings. When viewed in the light of our traditional capital expenditures, the program referred to above appears, and is, very large. However, each individual project has been carefully evaluated in the light of its measured return on investment. Moreover, the immediate, short and long-range interests of the business make the program imperative if we are to maintain our position of leadership in our industry. The fiscal year beginning September 1, 1966 is off to a good start. Sales continue to rise at a 'satisfactory rate. The outlook for our industry and our Company in the year ahead remains encouraging. On behalf of the Directors we take pleasure in expressing grateful appreciation to our 17,500 employees for their dedicated efforts in the interests of the Company and its continued progress in this, our 100th year. Cleveland, Ohio October 20, 1966 President Page 4 T S-W 000407 v = \\J :>^\E0 l7 * - Net sales.......................................................................... Dividends received................................................. Interest income ........................ ..................... Miscellaneous............................................. Deductions from income: Cost of products sold............................................. Selling, general, and administrative expenses . . Pensions .................................................................. Interest expense Miscellaneous......................................................... In c o me Be f o r e In c o me Ta x e s Income taxes: United States: Payable currently .............................................. Deferred ........................... .................................. Foreign...................................................................... Ne t In c o me Provisions for depreciation included in cost and expenses amounted to 54,916,575 in 1966 and $4,322,747 in 1965 Earned Surplus Balance at beginning of year ..................................... Earned surplus of merged businesses at September 1, 1965, less dividends paid to date of merger-- Note A..................................... .... Net income for the year............................... . Deductions: Cash dividends declared: Preferred............................. ........................ Common--51.90 a share in 1966 and $1.70 a share in 1965 ......................................... Excess of cost over par value of preferred shares redeemed......................................... .................... Net transfer to capital stock accounts in connection with mergers..................................... Balance at end of year ............................................. See notes to financial statements on page 8. 1966 5386,062,160 405,478 236,146 1,077,141 $387,780,925 5234,188,706 110,848,140 3,055,473 474,498 456,318 $349,023,135 $ 38,757,790 $ 15,950,000 977,000 927,085 $ 17,854,085 $ 20,903,705 1965 5344,783,077 262,613 200,024 681,430 $345,927,144 $205,618,940 100,398,730 2,421,264 81,259 647,502 $309,167,695 $ 36,759,449 . $ 15,725,000 930,000 839,519 $ 17,494,519 $ 19,264,930 $144,078,344 $133,946,738 2,345,082 20,903,705 5167,327,131 -019,264,930 $153,211,668 $ -0- 9,860,431 452,826 5,016,930 $ 15,330,187 $151,996,944 $ 379,129 8,754,195 -0- --0-- $ 9,133,324 $144,078,344 Page 5 S-W 000408 T Current Assets Cash ...................... ...................... U. S. Treasury bills.................................... Trade accounts receivable, less allowances of $665.1 *00 in 1966 and $615,000 in 19o5 ................................... Inventories--at lower of cost (average or first-in. first-out method) or market: Finished merchandise ...... Work in process, raw materials, and supplies To t a l Cu r r e n t As s e t s Investment and Other Assets Common shares of The Sherwin-Williams Company of Canada, Limited-- accost--Note B....................................... Receivables, advances, and miscellaneous other assets............................................ Property, Plant, and Equipment -- on the basis of cost Land.......................... .............................. Buildings ............................................ Machinery and equipment................. Less allowances for depreciation. . . Deferred Charges Advertising stock and supplies .... Prepaid insurance and other items. . . 1966 S 12.908.5''6 _o~ ' 43.621.1 "2 1965 $ P.681T12 9.860.36" 38.441.444 S 71.420,354 29.922.041 3101.342,395 $157,962,143 $ 62,644.403 23.053.683 S 90.698.086 5156,681.609 S 4.182.766 1,885.497 S 6,068,263 S 4,182,"66 1,368.935 S 5,551,701 S 3,070.236 35,282,740 84,007,458 57,131,829 $ 65,228,605 $ 2,092,522 1,939,704 S ' 4,032,226 S233.291.237 S 2,836,024 33,506,152 73,307,756 52,182,728 S 57,467,204 S 1,919,348 1,781,864 S 3,701,212 $223,401,726 Page 6 S-W 000409. Current Liabilities Trade account'pj'. able Payrolls, compensation, and other accruals . Dividend payable on Preferred Stock Deposits--employees and officers '. . Taxes, other than income taxes . . Income taxes- .To t a l Cu r r e n t Lia b il it ie s Reserves For deferred United States income taxes For pensions and other items .... Capital Stock and Surplus Capital stock--Notes C and D: Serial Preferred--authorized 500.000 shares, without par value: $4.00 Cumulative Convertible Preferred. Series A: Outstanding--'4.948 shares Cumulative Preferred, 4^. series Common--authorized'. 500.000shares, par value S6.25 per share: Outstanding--5.281,589 shares in 1966 fat par); 5,156,621 shares in 1965 (at stated amount) . . Earned surplus ............................................ See notes to financial statements on page 8. 5 1 5.o~5.54 ! --i i-- ool.SoI 2.005.133 0.233.634 5 34.58'.996 1565 S 6.3 .523 12.S5'b.58') U.~4I '46.950 l.S55.0"8 10.042.3^0 5 32.5~5.$30 S 4.5"8.100 1.623.466 $ 6.201,566 S 3.601.100 1.396,~28 $ 4.99'. 828 5 '.494.800 --0-- S -0'.OSTIOO 33.009,931 151.996,944 S192.501.675 S233.291.237 34,062.574 144.078.344 S185,828,018 3223,401,726 Page S-W 000410 \ F \ V -.i " v_ > Note A--Mergers: Pursuant to an Agreement of Merger dated in August, 1966, the Company issued '*,948 shares of $4.00 Cumu lative Convertible Preferred Stock, Series A, in September, 1966, in exchange for the net assets and business of Sprayon Products, Inc. Such preferred shares have been treated as outstanding as of August 31, 1966. Earlier in 1966, the Com pany acquired substantially all the assets and business of Maumee Chemical Company for 115,298 common shares. These transactions have been accounted for as poolings of interests and, accordingly, the results of operations of Sprayon and Maumee are included in the statement of consolidated income for the entire fiscal year. The statement of consolidated income for the year ended August 31, 1965, has not been restated to include the accounts of these com panies since the effect on consolidated operations would not be significant. Note B--The Sherwin-Williams Company of Canada, Limited: The Company's equity in the consolidated net assets of the Canadian subsidiary amounted to $7,075,831 at August 31, 1966, which includes undistributed earnings since acquisition of $4,371,576. For the year ended August 31, 1966, the Company's equity in undistributed earnings of this subsidiary amounted to $36,142. See pages t7 to 20, inclusive, for the consolidated financial statements of The Sherwin-Williams Company of Canada, Limited and subsidiaries. NoteC--Capital Stock: The Company may redeem the $4.00 Cumulative Convertible Preferred Stock, Series A, commencing in 1972, at $104 a share and at a declining amount each year to $100 a share in 1980 and thereafter. Such preferred shares are convertible, at the option of the holder, into common shares at a base conversion price of $60 per share of common, and 125,000 unissued common shares have been reserved for such conversion. The holders of the preferred shares are entitled to one vote for each share of such stock. Note D--Stock Options: At August 31, 1966, there were 168,373 common shares reserved for issuance to officers and key employees under a stock option plan. Options are granted at prices not less than the fair market value of the shares at date of grant. In general, the options are exercisable to the extent of one-half or one-fifth of the optioned shares for each full year of employment following the date of grant, and expire five or ten years after date of grant. A summary of the option transactions during the year follows: At beginning of year: Options outstanding................................. Reserved for future options..................... ...... ................. Shares 77,223 100,820 Changes during the year: Options granted .......................................... Options becoming exercisable................. Options exercised...................................... Options canceled...................................... ................. ................. ................. ................. 53,500 19,120 9,670 3,800 At end of year: Options outstanding .................................. ................. 117,253 Reserved for future options..................... ................. 51,120 Option Prices________ Per Share Total $40.25 or $45,625 $3,229,459 49.50 40.25 or 40.25 or 40.25 or 45.625 45.625 45.625 40.25 to 49.50 2,648,785 794,842 397,334 156,712 5,324,198 Market Prices $2,648,785 994,240 486,912 Note E--Revolving Credit: Under the terms of a Credit Agreement/ten banks have made available to the Company a revolving credit in the aggregate amount of $35,000,000 until June 1, 1969. On or before June 1, 1969, the Company may replace any outstanding revolving credit notes with term notes payable in eight equal semiannual installments at an interest rate that may vary from 5% to 6% per annum. The Credit Agreement requires, among other things, that the Company maintain consolidated net current assets of not less than $75,000,000. Note F--Long-term Leases: Branches and offices of the companies are leased for various periods ranging generally from three to ten years. The annual rental expense aggregates approximately $9,700,000. Page 8 S-W 000411 Source of Funds From operations: Net income ................................... Provisions for depreciation....................................... Provisions for deferred United States income taxes Proceeds from sale of Common Stock issued under stock option plan ................................... Working capital provided bv merged businesses . . Application of Funds Cash dividends declared................................................ Additions to property, plant, and equipment, net of retirements. . ............................... Cost of Preferred Stock retired............................... Added to (reduction in) working capital................. Other--net...................................................................... 1966 1965 S20,903.~05 4,916.5~5 97UOOO 526,797.280 397,334 1,027,963 S28,222.577 519.264,930 4,322.747 930,000 524,517,677 482,030 --0-- S24.999,707 S 9,860.431 10,798,572 8,139,926 (731,582) 155,230 528,222,577 S 9,133,324 5,540,283 2,221,978 7,719,169 384,953 524.999,707 ACCOUNTANTS' REPORT Board of Directors The Sherwin-Williams Company Cleveland, Ohio We have examined the consolidated financial statements of The Sherwin-Williams Company and consoli dated subsidiaries for the year ended August 31, 1966. Our examination was made in 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 opinion, the accompanying balance sheet and statements of income and earned surplus present fairly the consolidated financial position of The Sherwin-Williams Company and consolidated subsidiaries at August 31, 1966, and the consolidated results of their operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with' that of the preceding year. Further, it is our opinion that the accompanying statement of source and application of funds presents fairly the infor mation therein shown. . ______ Cleveland, Ohio October 14, 1966 Page 9 S-W 000412 EARNINGS AND [DIVIDENDS PER COMMON SHARE 3.96 4 00 3.66 3.24 3.00 2.00 1.00 CASH FLOW IN MILLIONS 24.5 26.8 30 25 20 1962* 1963* 1964* 1965 1966 'Earnings and Dividends per Common Share adjusted for the 2 for 1 split effective December 9, 1964. Earnings Dividanda DISPOSITION OF TOTAL INCOME IN MILLIONS 1962 1963 1964 1965 DEFERRED FEDERAL TAXES DEPRECIATION NET INCOME 1966 CAPITAL EXPENDITURES AND DEPRECIATION IN MILLIONS 1962 1963 1964 1965 1966 TAXES ON INCOME M DIVIDENDS RETAINED INCOME 1962 1963 B DEPRECIATION 1964 1965 1966 CAPITAL EXPENDITURES Page 10 S-W 000413 DISTRIBUTION OF TOTAL REVENUE VE.AR ENDED AUGUST 31. 1966 A. 56.54% Materials, services and other costs of I doing business B. 31.15% Wages, salaries and employee benefits C. 5.65% .Taxes (other than payroll taxes) D. 2.85% Retained in business E. 2.54% Dividends to shareholders F. 1.27% Depreciation CONSOLIDATED NET SALES IN MILLIONS 400 300 f 200 il 100 1941 1946 1951 1956 1961 1966 Page 1 S-W 000414 Page 12 Net sales Income before income taxes . ...................... ... /96o S386.062.lo0 38."5".~f>0 Income taxes--United States and foreig. ' ... 1 ".854.085 Net income............................................................................... 20.903."05 Earnings per share of Common Scock.......................... 3.96 Earnings as percent of sales....................................... 5.42cc Return on invested capital--Common 2)...................... 11. Cash dividends declared: Preferred.......................... ....................................... Common................. ..................................... $ --Q-- 9,860. A31 Cash dividends per share: Preferred .......................... .............................. Common............................................................................... --0-- 1.90 Number of shareholders: Preferred....................................... Common.......................... 96 7,583 Preferred and Common shareholders' equity ..... SI92.501,675 Common shareholders'equity................................... Per share.......................... . . . 184.707,083 34.97 Capital expenditures...................... 11,506,661 Provisions for depreciation.............................. 4,916,575 Working capital (current assets less current liabilities) . 123,374,147 Ratio of current assets to current liabilities ...... 4.57 to 1 Total assets..................................................... $233,291,237 Number of employees.............................................................. 17,510 (1) Adjusted for 2 for 1 stock split effective December 9, 1964 (2) Based on Common shareholders' equity at beginning of year S-W 000415 . ' ' ' ' - ^ 1965 S344,783,077 36.759.440 17,494,519 19,264,930 3.66 5.59% 11.31% S 379.129 8,754.195 1964 S313.518.226 33.619.81" 16,552."63 r.06~054 3-24 (1) 5.44% 10.57% S 406,401 7,708,292 5291.538.806 20.385.814 14.863.0"4 15.022."40 2.84 (1) 5.15% 9.68% 5 436,"96 ".701,996 1962 528".423.31" ' 29.080.514 14.592.P3 14.488.341 2.73 (1) 5.04% 9.72% S 454,644 7.701,996 4.00 1.70 (1) 4.00 1.50 (1) 4.00 1.50 (1) 4.00 1.50 (1) 251 7,435 S185,828,018 177,756,563 34.47 6,527,549 4,322,747 124,105,729 4.81 to 1 $223,401,726 16,195 255 6,577 $177,438,282 167,031,732 32.47 (1) 9,395,018 4,082,493 116,386,560 4.94 to 1 $210,958,283 15,497 276 6,286 $168,882,728 157,631,243 30.70 (1) < 5.125.063 3,964,817 112,026,735 4.87 to 1 $201,210,419 15,115 276 6,390 $162,340,180 150,730,225 29.36 (1) 5,829.336 3,771,318 108,070,353 5.44 to 1 $192,241,481 15,055 S-W 000416 Page 13 E. Co l in Ba l d w in />,, Jo h n X. Ba u ma n Prer: C'C'f ExecUUt C Cjfcr r White Motor Corporation Ric h a r d G. Bu l l Vice-President So l l a c e B. Co o l id g e . Jr . i hce-P-esideni Ed w in A. Da n ie l s P`- - ;jt nt The Lowe Brothers Compare. Cy r u s S. Ea t o n Chairman of the Board The Chesapeake and Ohio Railway Company Ge o r g e Gu n d Chairman of the Board The Cleveland Trust Company Ar t h u r W. St e u d e l Chairman of the Board E. Co l in Ba l d w in President Ric h a r d G. Bu l l Vice-President and Corporate Director of Marketing So l l a c e B. Co o l id g e , Jr . Vice President and Director of Auxiliaries Ro b e r t F. He n n ig 1 'ice-President and Director of Purchases Ro b e r t H, Hil l Vice-President and Dir-etor of Sales Wa d e X. Ha r r is '>-.... ............. B :rd Mici.mc-!< ." CCorporation R' ! ERT F. He n n k ; F' .-Pr, < :, He n r y D. Le s t e r i tie-President i"J T'-I t'-r Jo h n S. Pr e s c o t t Executtie I --Pr.d-'nt Ro b e r t W. Ra ms d e l l Chairman ;rd Chi--: .w,e (,dfar The East Onio Gas C'ompnro Ar t h u r W. St e u d e l Chairman of the Board Ch a r l e s M. Wh it e Former;', Chairman and C-nrrL'ant Republic Steel Corporation Jo h n D. Wr ig h t Chairman md Chef Exeattite Ojf.cer TRW Inc. He n r y D. Le s t e r Vice-President and Treasurer Sid n e y Lin g Vice-President -- Internationai Operations Jo h n S. Pr e s c o t t Exeattire Vice-President and Director of Manufacturing Wil l ia m C. Fin e Secretary Ja me s F. Co l e Assistant Secretary Vir g il A. Ho l l is Assistant Secretary Page 14 T S-W 000417 Pa in t s En a me l s Va r n is h e s La c o v e r s .St a in s Zin c Pig me n t s - Dr y Cn /'s s Lit h c -p o n e Or g a n ic C h e m:- -:- (. - .a : Ta r a n d Pe Er-M In t e r me d : \;t .s Ba r iu m Ch e mi> a l > I.:-.'.-.: : Me t a ;. ("\v s * Ae R'< ii.-Sp e c ia l t ie s I.NSECTK IDES Bk - m!T R I Eft-S \ND OTHER PAINTING ACCESSORIES. An a h e im. Ca l if o r n ia Be d f o r d He ig h t s . Oh io Bo u n d Br o o k . Ne w Je r s e y Ch ic a g o . Il l in o is own) Cl e v e l a n d . Oh io (t w o ; Co FFEYVILLE. K.ANSAS Da y t o n . Oh io De s h l e r . Oh io De t r o it , Mic h ig a n Ea s t Ne w a r k . Ne w Je r s e y Ga r l a n d . Te x a s Gib b s b o r o , Ne w Je r s e y Hu b b a r d , Oh io Lo s An g e l e s , Ca l if o r n ia Ne w a r k , Ne w Je r s e y Oa k l a n d , Ca l if o r n ia Pit t s b u r g h , Pe n n s y l v a n ia Sa n Le a n d r o , Ca l if o r n ia St . Be r n a r d , Oh io Ba y a u o n . Pu e r t o Ric o Gr a v e n h u r s t . Ca n a d a Me x ic o Cit y . Me x ic o Mo n t r e a l , Ca n a d a (t w o ; Sa o Pa u l o , Br a z il To r o n t o . Ca n a d a Va n c o u v e r , Ca n a d a Win n ip e g , Ca n a d a RE'Ea Ri -H (..ENTER Ch ic a g o , Il l in o is PRINTING DIVISION No r t h Ol ms t e d , Oh io S-W 000413 Page Ac me Qu a l it y Pa in t s . In c . Ro g e r s Pa in t Pr o d u c t s . In c . Th e Ca r l Gr a h a m Pa in t & VV\; i p a p e r Co mp a n y Co MPANIA Sh ERWIN-Wil I IAM-. s.A DE C.V Detroit. .Michigan Detroit. Michigan Wichita. Kansas Mexico City. Mexico De s h l e r Pr o d u c t s . In c . . Deshler, Ohio Th e Lo w e Br o t h e r s Co mp a n y .............................. Dayton. Ohio Jo h n Lu c a s & Co mp a n y .In c o r p o r a t e d Philadelphia. Pennsylvania Th e Ma r t in -Se n o u r Co mp a n y . Chicago, Illinois Ma u me e Ch e mic a l Co mp a n y ......................... Toledo, Ohio Ru b b e r s e t Co mp a n y .................... East \eu ark. ,\Vw Jersey Ru b b e r s e t Co mp a n y (Ca n a d a ) Limit e d .............................. Gravenhurst, Canada Sh e r w in -Wil l ia ms ^Eu r o p e ) So c ie t e An o n y me .... . Antwerp, Belgium Th e Sh e r w in -Wil l ia ms Co . o f Pu e r t o Ric o . In c .. Son luan. Puerto Rico Th e Sh e r w in AVil l ia ms Co . (We s t In d ie s ) Lt d . ...................................................Kingston, Jamaica Sp r a y o n Pr o d u c t s Co mp a n y . In c . Bedford Heights. Ohm :'Ni >' -.ill.' .oi, '. Sh e r w in -Wil l ia ms d o Br a s il S.'A Tin t a s e Ve r n iz e s ...................................Sao Paulo. Brazil Th e Sh e r w in -Wil l ia ms Co mp a n y o f Ca n a d a , Limit e d .................................. Montreal, Canada Th e Ca n a d a Pa in t Co mp a n y Limit e d . .................... ...................................Montreal, Canada Th e E. Ha r r is Co mp a n y Limit e d .................... ................................................. Toronto, Canada Th e Lo w e Br o t h e r s Co mp a n y , Limit e d ......................................................... Toronto, Canada Th e Ma r t in -Se n o u r Co mp a n y Limit e d ......................... .Montreal, Canada Th e Win n ip e g Pa in t & Gl a s s Co mp a n y , Limit e d . .............................. Winnipeg, Canada Th e Ca r t e r Wh it e Le a d Co mp a n y o f Ca n a d a Limit e d (50% o w n e d --u n c o n s o l id a t e d ) ........................................ Montreal, Canada LICENSEES Sh e r w in -Wil l ia ms Ar g e n t in a , In d u s t r ia l y Co me r c ia l , S.A. Sh e r w in -Wil l ia ms d e Co l o mb ia S.A. Sh e r w in -Wil l ia ms , Ph il ip p in e s . In c . Sh e r w in -Wil l ia ms d e l Ec u a d o r S.A. Sh e r w in -Wil l ia ms o e Ce n t r o Ame r ic a . S.A. Sh e r w in -Wil l ia ms d e l Pe r u S.A. Sh e r w in -Wil l ia ms Es p a n o l a . S.A. Sh e r w in -Wil l ia ms Ve n e z o l a n a C.A. Page 16 S-W 000419 Net sales.................... ......................... Dividends received.................... ............................. Miscellaneous " Deductions from income: Cost of products sold................................................. Selling, general and administrative expenses . . . Companv and government pension cost................ Interest expense'.......................................................... Remuneration of officers and directors' fees .. In c o me Be f o r e . In c o me Ta x e s Income taxes: Payable currently Recoverable due to loss carrv-back . . ... Deferred ....................................................................... Ne t In c o me Provisions for depreciation included above amount to 5378,890 in 1966 and 5363,098 in 1965 1966 S3-. 368.092 50.000 --0-- 537.418.092 524,179,728 11,428,493 504,835 285,830 "6,092 536,474,978 S 943,114 1965 536. !20.4"1 50.000 28."96 536.199.26" 523,156,329 10.960.448 314.5~8 197,707' 101.846 534,730,908 , 5 1.468,359 S 180,250 (31 ",000) 369,000 S 232,250 5 710.864 S 518,550 --0-- 124.450 S 643.000 S 825,359 Luma Surf'lttf Balance at beginning of year......................... Deduct amount of unfunded pension costs reduced to a net of tax basis.......................................................... Net income for the year . . .......................................... Cash dividends declared: Preferred--$7.00 per share ................................. Common--$1.80 per share (1965--S1.70) .... Balance at end of vear................ ........................ S10.035,760 SI 1,934,625 -0- 2.100,000 S10,035,760 5 9,834,625 710,864 825,359 S10,746,624 . S10,659,984 $ 242,200 404,496 S 646,696 510.099,928 $ 242,200 382,024 S 624,224 SI 0.035,760 See note to the consolidated financial statement on page 20. S-W 000420 Page T Current Assets Cash ...... ............................................ Trade accounts receivable, less allowances for doubt ful accounts of 5142."00 in 1966 and 5142.000 in 1965 .......................... .................................................... Inventories--principally at the lower of cost (.average or rirst-in, ftrst-out method) or market: Finished merchandise............................... Work in process, raw materials and supplies Recoverable income taxes .......................... To t a l Cc r r e n t As s e t s Investment and Other Assets Common shares of The Carter White Lead Company of Canada Limited (50% owned)--at cost . Miscellaneous receivables and advances................. Property, Plant, and Equipment -- on the basis of cost: Land................................... .... .............................. Buildings.......................... Machinerv and equipment ........................................ Less allowances for depreciation.......................... Deferred Charges Advertising stock and supplies Prepaid insurance and other items...................... 1D&> ` - 52.200 ',518,883 5 ".135,842 2.399,300 S 9.535.142 296.905 517,403.135 S 200,000 58.896 S 258.896 S 607.442 5.608.""' 7,685.494 8.982.4"" S 4,919.236 S 188,299 135.880 S 324.ro S22.905.446 See note to the consolidated financial statement on page 20. /955 51.500 ",018,828 s ".366.467 2.399,986 S 9. "66,453 --o-- 516.836."81 S 200,000 58.094 5 258,094 S 591.893 4,524.308 7,398,541 8T14.636 s 3.800.106 $ 180,748 127.098 S 307.846 521.202.827 Page IS S-W 000421 1966 1965 Current Liabilities Owing ;o bank .................................................... . Trade accounts pavable................................................ Payrolls, compensation and other accruals .... Taxes, other than income taxes................................... Income taxes.................................................... To t a l Cu r r e n t Lia b il it ie s S 1.347.015 3.505.508 80~. 104 383.852 42.125 S 6.587.694 5 568.9S8 3,453.716 714.181 372,952 186,310 S 5,296.14' Unfunded Pension Costs Reduced to a .Vet of Tax Basis .................. ...................... Deferred Income Taxes ...................... 2.039,654 493.450 2.100.000 56.200 Capital Stock and Surplus Capital stock: Preferred shares, 7% cumulative par value SI00 per share: Authorized--40,000 shares Outstanding--34,600 shares............. Common shares, no par value: Authorized--225,000 shares Outstanding--224,720 shares ........ Earned surplus .... ........................................ S 3.460,000 ; 3 3,460,000 ! 224,720 i 10,099,928 ' i 313,784,648 ! 224,720 10,035,760 313,720,480 322,905,446 ! 321,202,827 S-W 000422 vvCi'jVi* V\\ OF C V'iMDA. LIMITED WD n (' .' O \~-.0 Fi\A\C! v_ y.T\Tv\7 -v Note--During the year ended August 31, 1966, the Company elected to record tax reductions (permitted under Section 72A of the Income Tax Act) as income in the year received rather than to amortize such tax reductions over the lives of certain research facilities. This election had the effect of increasing net income for the year 1966 by $258,750 of which amount $38,250 applied to the year 1965. ACCOUS TAMS' REPORT To the Shareholders, The Sherwin-Williams Company of Canada, Limited. We have examined the consolidated financial statement of The Sherwin-Williams Com pany of Canada, Limited and its subsidiaries for the year ended August 31, 1966, comprising the consolidated balance sheet as at that date and the statements of consolidated income and earned surplus for the year then ended. Our examination was made in accordance with generally accepted audidng standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the accompanying consolidated financial statement presents fairly the consolidated financial posidon of The Sherwin-Williams Company of Canada, Limited and its subsidiaries at August 31, 1966, and the consolidated results of their operations for the year then ended, in conformity with generally accepted accounting principles which, except for the change, in which we concur, in the treatment of certain tax reductions as described in the note to the financial statement, have been applied on a basis consistent with that of the preceding year. Er n s t & Er n s t Chartered Accountants Montreal, Quebec September 28, 1966 Page 20 S-W 00042 THE SHERWIN-WILLIAMS COMPANY S-W 000424