Document k6qyqR82QNqxE7KqjxQw3pwYB

1963 THE SHERWIN-WILLIAMS COMPANY THE SHERWIN-WILLIAMS COMPANY AND CON SOLID AT ED SUBSIDIARIES ANNUAL REPORT 19 6 3 LETTER TO SHAREHOLDERS Herewith are presented the Consolidated Balance -Sheet and the Con solidated Income and Mirpius statements of The Sherwin-Williams Company and consolidated subsidiaries tor the fiscal year ended August 31, 1963. The consolidated earnings amounted to 315.022."40 as compared with $14,488,341 for 1962. After deducting 3436,"96 for Preferred Dividends, the earnings for 1963 are equivalent to S5.68 per share on the present out standing 2,569.332 shares of Common Stock, as compared with S5.46 last year. Consolidated net sales amounted to 3291,838,896. This is the highest sales total in the Company's history and is 1.54% over the previous high of last year. Principal sales increases were attributable to branch and industrial sales which advanced quite satisfactorily. Some sales were passed up where margins would have been completely unattractive. This was principally in the area of bid business. However, these were more than counterbalanced by the improved mix of sales which produced better margins of profit. The Pigments, Colors and Chemicals Division enjoyed the most profit able year in its history. Pension costs returned to a normal figure in contrast to last year's high cost which was caused by a necessary retroactive adjustment in mortality assumption by our actuary. The reduction in the reserve for pensions and other items is a result of the write-down of the investments in the South American subsidiaries, prior-year tax payments and a reclassification of other items to Current Liabilities. Expenses were well controlled. The only increased expenditures of consequence were in the areas of advertising and research and development. Advertising programs and expenditures will be further enlarged this year so as to maintain the prestige and leadership of our products in the marketplace and to stimulate increased retail sales. Heavy emphasis has been and is being placed on research and develop ment. This is essential in order to improve existing products, to develop new products to meet the ever-changing needs of consumers, professional painters and industrial users, and to assure increased future earnings. Principal accomplishments in the research and development area were an improved formula for Super Kem-Tone, further advances in acrylic finishes and in organosols for coating strip metals, the introduction of Acrylyd, a finish for trucks with outstanding gloss and gloss retention characteristics, and continued developmental progress in the field of wood finishes for appli cation at the factory. S-W 000360 During 1963, we increased the number of our Companv-operaced branches and, because of our continued success in this phase of our opera tions, will further expand our network in 1964. At the same time we expect to expand distribution through independent ly-owned outlets so that our products will be available wherever people want to buy them. Much has been accomplished in the area of gr wter efficiency in manu facturing facilities. The large consolidation of the Chicago paint manufac turing plant is well advanced and should be completed by the Summer of 1964. This project will vastly improve material handling, batch size pro duction, filling operations, quality control and costs in general. In other plants there is a continuing program to upgrade efficiency through the installation of modern equipment and better physical layouts. Substantial expenditures were made for improvements in several chemical processes and additions are being made to increase capacity of certain products where we have been unable to meet demand. The application of computers in factories has materially aided production planning, processing and quality control. This program will be expanded. Expenditures for plant additions during the year were $5,125,063. Con tinued additions and improvements will be made for the purpose of added production in existing units and the betterment of cost control, quality con trol and customer service. During the past year the Company formed The Sherwin-Williams Com pany of Puerto Rico, Inc. in San Juan, Puerto Rico and established a paint manufacturing facility which is just coming into operation. Also organized by the Company during the past year was SherwinWilliams (Europe) S. A. in Antwerp, Belgium. This is a sales organization operating from a warehouse stock in a free port. Its immediate aims are further to develop the sales of established distributors in Europe, to gain additional ones and to strengthen the Company's ultimate position in that market. The Board of Directors wishes to express its thanks to the staff in plants, offices and branches for their cooperation, industry and loyalty which have contributed immensely to this year's results. Chairman of the Board Cleveland, Ohio October 18, 1963 T President S-W 000361 THE SHERWIN-WILLIAMS COMPANY AIs Consolidated Balance Sheets, Augt Assets Current Assets Cash........................................... ... U. S. Treasury bills--at cost . . . Trade accounts receivable, less allow, ances for doubtful accounts of $611,611 in 1963 and $609,760 in 1962. . . . Inventories--principally 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 et s . . Investments and Other Assets Securities of unconsolidated Canadian subsidiary--at cost--Note A . . . . 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. . . T963 j 1962 | S 22,416,518 10,869,059 9*' - * $ 21,781,469 10.917.364 32,906,090 32,244,626 $ 50,947,734 23,866,935 S 74,814,669 $141,006,336 $ 45,912,813 21,565,681 $ 67,478,494 $132,421,953 $ 4,182,766 1,123,180 S 5,305,946 * $ 2,138,422 96,498,803 47,044,069 $ 51,593,156 $ 4,182,766 1,620,958 S 5,803,724 $ 2,135,324 93,101,784 44,348,096 $ 50,889,012 S 1,493,941 1,811,040 $ 3,304,981 $201,210,419 $ 1,601,778 1,525,014 $ 3,126,792 $192,241,481 S-W 000362 -IPANY AND CONSOLIDATED SUBSIDIARIES ince Sheets, August 31, 1963, and 1962 Liabilities, Capital Stoch,and Surplus 1963 1962 Current Liabilities 469 Trade accounts payable, compensation, 364 and miscellaneous items.................... Dividend payable on Preferred Stock 626 Deposits--employees and officers . . . Accrued taxes, other than federal' taxes on income . 813 Federal taxes on income........................ 681 494 953 To t a l Cu r r e n t Lia b il it ie s . . . Reserves For deferred federal taxes on income. . For pensions and other items................ 766 Capital Stock and Surplus 958 724 Capital stock: Preferred--authorized 395,500 shares, par value $100 per share: Cumulative Preferred 4% series (4,950 shares redeemable annu >4 ally at $105 a share): <4 Outstanding--107,157shares in 1963 and 110,571 shares >6 in 1962 . ................ i 2 Common--authorized 5,000,000 shares, par value $12.50 per share--NoteB: Outstanding 2,567,332 shares-- 778 stated capital. ... 914 Earned surplus........................... 792 481 See notes to financial statements. S-W 000363 THE SHERWIN -WILLIAMS COMPANY AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED INCOME AND EARNED SURPLUS Years Ended August 31, 1963, and 1962 Income Net sales............................................................... ... . Dividends received (net)from unconsolidated Canadian subsidiary--Note A....................... j Miscellaneous ............................................................ i ! ' | 1963 $291,838,896 133,224 671,053 $292,643,173 Deductions from income: Cost of products sold and selling, general, and administrative expenses.................................... Pensions ................. Depreciation ... ................................ Foreign taxes on income ........................................ Miscellaneous ............... $256,231,303 2,170,176 3,964,817 478,806 500,331 $263,345,433 In c o me Be f o r e Fe d e r a l Ta x e s On In c o me $ 29,297,740 Federal taxes on income (including deferred taxes of $980,000 in 1963 and $1,057,000 in 1962) . . . Ne t In c o me ................................................ .... . 14,275,000 S 15,022,740 1962 $287,423,317 134,524 930,879 S288,488,720 $252,719,404 2,750,000 3,771,318 421,017 288,640. $259,950,379 $ 28,538,341 14,050,000 S 14,488,341 Earned Surplus Balance at beginning of year....................... Net income for the year ............ Cash dividends declared: Preferred--$4.00 a share Common--$3.00 a share .................................... .................... Balance at end of year .................................... $118,110,429 15,022,740 $133,133,169 $ 436,796 7,701,996 $ 8,138,792 $124,994,377 $111,778,728 14,488,341 $126,267,069 $ 454,644 7,701,996 $ 8,156,640 $118,110,429 See notes to financial statements. S-W 000364 XOTES TO FINANCIAL STATEMENTS THE SHERWIN-WILLIAMS COMPANY AND CONSOLIDATED SUBSIDIARIES August 31, 1963 Note A-- Unconsolidated'Subsidiary: At August 31. 1 A'3. the Company's equity in the undistributed earnings of such subsidiary amounted to 35.283,000. including 3186.000 applicable to the current fiscal year. ! During the \ear. because of exchange restrictions and currency devaluation. , ; the cost of investments in subsidiaries in Brazil and Argentina was reduced, by a ; charge to a reserve previously provided, to the potential recoverable tax basis and , reclassified to ..miscellaneous other assets. Note B--Stock Options: Pursuant to a Plan, approved by the shareholders during the year. 100.000 shares of the Company's Common Stock are reserved for issuance to officers and key employees upon exercise of options which may be granted at prices not less than the fair market value of the shares at date of grant. Options run for a ten-year period and become exercisable after one year from date of grant to the extent of one-fifth of the optioned shares annually. During the year, options were granted for 41.900 shares. None of the options were exercisable at August 31. 1963. 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 approxi mately S", 500,000. ACCOUNTANTS' REPORT Board of Directors The Sherwin-Williams Company Cleveland. Ohio We have examined the consolidated financial statements of The SherwinWilliams Company and consolidated subsidiaries for the year ended August 31, 1963. 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 SherwinWilliams Company and consolidated subsidiaries at August 31, 1963, and the consolidated results o;''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. Cleveland, Ohio October 15, 1963 Er n s t & Er n s t S-W 00036 THE SHERWIN-WILLIAMS COMPANY Founded in 1866 101 Pr o s pec t Av e ., X. W., Cl e v e l an d , Oh io Manufacturers of Paints, Varnishes, Colors, Stains. Enamels, Lacquers, Zinc Pigments, Dyes, Chemicals, Lithopone, Linseed Oil, Dry Colors, Brushes, Roller Coaters, Cans, Insecticides. Main Plants Cleveland -Chicago-Dayton Detroit-Xewark -Pittsburgh Hubbard, Ohio; Oakland, Cal.: Bound Brook, X. J.; Gibbsboro. X.J.; Deshler, Ohio: Garland, Texas; Los Angeles: Coffeyville, Kan.; San Leandro, Cal.; Montreal, Toronto, Winnipeg, Vancouver and Gravenhurst, Canada Research Center Chicago, Illinois Directors E. C. Ba l d w in H. D. Les t er J. X. Ba u man - J. S. Pr es c o t t S. B. Co o l id g e A. W. St e v d e l E. A. Da n ie l s W. M. St u a r t C. S. Ea t o n B. M. Va n Cl e v e Ge o r g e Gu n d N. E. Va n St o n e R. F. He n n ig C. M. Wh it e - ft*? J. D. Wr ig h t . . - /?> MM . Q& Officers A. W. St e u d e l . E. C. Ba l d w in S. B. Co o l id g e . R. F. He n n ig . . R. H. Hil l . . . J. S. Pr es c o t t B. M. Va n Cl e v e N. E. Va n St o n e H. D. Les t er . . W. C. Fin e . . . V. A. Ho l l is . . Chairman of the Board and Chief Executive Officer ..........................President .................Vice President .....................Vice President ....................Vice President .....................Vice President .....................Vice President .....................Vice President . . . . . P . Treasurer .........................Secretary ...................Asst. Secretary aJLa j JL Transfer Agents Cl e v el a n d Tr u s t Co mp an y , Cleveland, Ohio Ba n k e r s Tr u s t Co mp a n y , New York, X. Y. Registrars Ce n t r a l Na t io n a l Ba n k , Cleveland, Ohio Mo r g a n Gu a r a n t y Tr u s t Co mpa n y , New York, N. Y. S-W 000366