Sherwin Williams Co.
04/28/2026 | Press release | Distributed by Public on 04/28/2026 12:39
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(dollars in millions, except as noted and per share data)
BACKGROUND
The Sherwin-Williams Company, founded in 1866, and its consolidated subsidiaries (collectively, the Company) are engaged in the development, manufacture, distribution and sale of paint, coatings and related products to professional, industrial, commercial and retail customers primarily in North and South America with additional operations in the Caribbean region and throughout Europe, Asia and Australia.
The Company is structured into three reportable segments - Paint Stores Group, Consumer Brands Group and Performance Coatings Group (collectively, the Reportable Segments) - and an Administrative function, which is representative of the way it is internally organized for assessing performance and making decisions regarding the allocation of resources. See Note 18 in Item 1 for further information on the Company's Reportable Segments.
SUMMARY
•Consolidated Net sales increased 6.8% to $5.667 billion in the quarter
◦Net sales from stores in the Paint Stores Group open more than twelve calendar months increased 2.4% in the quarter
•Diluted net income per share increased 7.5% to $2.15 per share in the quarter compared to $2.00 per share in the first quarter of 2025
◦Adjusted diluted net income per share increased 4.4% to $2.35 per share in the quarter compared to $2.25 per share in the first quarter of 2025
•Generated Net operating cash of $139.1 million in the quarter compared to a usage of $61.1 million in the first quarter of 2025
OUTLOOK
In an uncertain demand environment given current customer sentiment, our growth investments and execution on our differentiated strategy, Success by Design, continued to yield positive results. As the softer-for-longer demand environment continues to persist in 2026, coupled with potential inflation related to raw materials, energy, logistics and packaging as a result of recent geopolitical events, we are focusing on securing incremental volume, balanced with appropriate and decisive pricing and cost-out actions to maintain the products, services and supply solutions which drive productivity and profitability for our customers. Significant opportunities exist for each business, and we will continue to support our growth strategy by executing initiatives within our enterprise priorities, including talent, simplification, digitization, supply chain responsiveness and sustainability.
We employ a disciplined capital deployment strategy, while maintaining a balanced approach toward driving value for our customers and returns for our shareholders. We continue to pursue business acquisitions, transactions and investments that fit our long-term growth strategy and will return value to our shareholders through the payment of dividends and the reinvestment of excess cash for share repurchases of Company stock. We have a strong liquidity position, with $216.9 million in cash and $2.443 billion of unused capacity under our credit facilities at March 31, 2026. We are, and expect to remain, in compliance with all financing covenants.
RESULTS OF OPERATIONS
The Company has historically experienced, and expects to continue to experience, variability in quarterly results. The results of operations for the three months ended March 31, 2026 are not indicative of the results to be expected for the full year as our business is seasonal in nature, with the majority of Net sales for the Reportable Segments traditionally occurring during the second and third quarters. However, periods of economic uncertainty can alter the Company's seasonal patterns.
The following discussion and analysis addresses comparisons of material changes in the condensed consolidated financial statements for the three months ended March 31, 2026 and 2025.
Net Sales
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | Currency Impact | Acquisition and Divestiture Impact | ||||||||||||||||||||||||||||||
| Paint Stores Group | $ | 3,049.9 | $ | 2,939.8 | $ | 110.1 | 3.7 | % | 0.1 | % | 0.2 | % | |||||||||||||||||||||||
| Consumer Brands Group | 908.3 | 762.2 | 146.1 | 19.2 | % | 2.4 | % | 17.2 | % | ||||||||||||||||||||||||||
| Performance Coatings Group | 1,705.8 | 1,602.0 | 103.8 | 6.5 | % | 4.1 | % | 0.3 | % | ||||||||||||||||||||||||||
| Administrative | 2.9 | 1.7 | 1.2 | 70.6 | % | - | % | - | % | ||||||||||||||||||||||||||
| Total | $ | 5,666.9 | $ | 5,305.7 | $ | 361.2 | 6.8 | % | 1.7 | % | 2.7 | % | |||||||||||||||||||||||
Consolidated Net sales increased by 6.8% in the first quarter of 2026 primarily due to higher Net sales in all reportable segments, inclusive of the October 2025 acquisition of Suvinil and a 1.7% impact from favorable foreign currency translation. Net sales of all consolidated foreign subsidiaries increased to $1.279 billion in the first quarter of 2026 compared to $1.045 billion in the same period last year. The increase in Net sales for all consolidated foreign subsidiaries was due to higher Net sales in all regions, led by Latin America, which is inclusive of the Suvinil acquisition. Net sales of all operations other than consolidated foreign subsidiaries increased to $4.388 billion in the first quarter of 2026 compared to $4.261 billion in the same period last year.
Net sales in the Paint Stores Group increased by 3.7% in the first quarter of 2026 primarily due to selling price increases, which impacted Net sales by a low-single digit percentage, as well as low-single digit percentage sales volume growth. Net sales increased in all but one professional customer end market, led by a double-digit percentage increase in protective and marine and a mid-single digit percentage increase in residential repaint and commercial. New residential decreased by a low-single digit percentage. Net sales from stores open for more than twelve calendar months increased by 2.4% in the first quarter of 2026 compared to last year's comparable period. Net sales of non-paint products increased 2.5% in the first quarter of 2026 compared to last year's comparable period. A discussion of changes in volume versus pricing for sales of non-paint products is not pertinent due to the wide assortment of general merchandise sold.
Net sales in the Consumer Brands Group increased by 19.2% in the first quarter of 2026 primarily as a result of the acquisition of Suvinil, a 2.4% impact from favorable foreign currency translation and increased Net sales in Europe. These increases were partially offset by soft DIY demand in North America which decreased Net sales by a low-single digit percentage.
Net sales in the Performance Coating Group increased by 6.5% in the first quarter of 2026 primarily as a result of a 4.1% impact from favorable foreign currency translation and low-single digit percentage sales volume growth. Net sales increased in certain business units led by Automotive Refinish, which increased by a double-digit percentage, General Industrial and Packaging, which increased by high-single digit percentages, and Coil, which increased by a mid-single digit percentage.
Income Before Income Taxes
The following table presents the components of Income before income taxes as a percentage of Net sales:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
|
Percent to Net Sales |
Percent to Net Sales |
||||||||||||||||||||||
| Net sales | $ | 5,666.9 | 100.0 | % | $ | 5,305.7 | 100.0 | % | |||||||||||||||
| Cost of goods sold | 2,886.4 | 50.9 | % | 2,746.6 | 51.8 | % | |||||||||||||||||
| Gross profit | 2,780.5 | 49.1 | % | 2,559.1 | 48.2 | % | |||||||||||||||||
| Selling, general and administrative expenses (SG&A) | 1,969.6 | 34.8 | % | 1,793.8 | 33.8 | % | |||||||||||||||||
| Other general expense - net | 6.3 | 0.1 | % | 8.9 | 0.2 | % | |||||||||||||||||
| Interest expense | 131.6 | 2.3 | % | 103.8 | 1.9 | % | |||||||||||||||||
| Interest income | (2.8) | - | % | (3.3) | (0.1) | % | |||||||||||||||||
| Other (income) expense - net | (4.0) | (0.1) | % | 2.9 | 0.1 | % | |||||||||||||||||
| Income before income taxes | $ | 679.8 | 12.0 | % | $ | 653.0 | 12.3 | % | |||||||||||||||
Three Months Ended March 31, 2026
Consolidated Cost of goods sold increased $139.8 million, or 5.1%, in the first quarter of 2026 compared to the same period in 2025 primarily due to the impact of the Suvinil acquisition and foreign currency translation changes, which increased Cost of goods sold by 2.2%. These increases were partially offset by moderating raw material costs.
Consolidated Gross profit increased $221.4 million in the first quarter of 2026 compared to the same period in 2025 primarily due to higher Net sales in all reportable segments, the acquisition of Suvinil within the Consumer Brands Group, moderating raw material costs and favorable foreign currency translation. Consolidated Gross profit as a percent of consolidated Net sales increased in the first quarter of 2026 to 49.1% compared to 48.2% during the same period in 2025 for these same reasons.
The Paint Stores Group's Gross profit in the first quarter of 2026 was higher than the same period last year by $85.8 million due primarily to higher Net sales as a result of increased selling prices and sales volume growth. The Paint Stores Group's Gross profit as a percent of Net sales increased in the first quarter of 2026 compared to the same period last year for these same reasons. The Consumer Brands Group's Gross profit increased by $99.8 million in the first quarter of 2026 compared to the same period last year due primarily to the acquisition of Suvinil and global supply chain efficiencies. The Consumer Brands Group's Gross profit as a percent of Net sales increased in the first quarter of 2026 compared to the same period last year for these same reasons. The Performance Coatings Group's Gross profit increased $40.2 million in the first quarter of 2026 compared to the same period last year primarily due to favorable foreign currency translation and higher Net sales as a result of sales volume growth. The Performance Coatings Group's Gross profit as a percent of Net sales increased modestly in the first quarter of 2026 compared to the same period last year for these same reasons.
Consolidated SG&A increased $175.8 million in the first quarter of 2026 versus the same period last year primarily due to an increase in employee-related costs and marketing and advertising to support higher Net sales, incremental SG&A expenses associated with the Suvinil acquisition, higher costs in the Administrative function related to the new global headquarters and technology center and unfavorable foreign currency translation. As a percent of Net sales, consolidated SG&A increased in the first quarter of 2026 compared to the same period last year due to these same factors.
The Paint Stores Group's SG&A increased $64.0 million in the first quarter of 2026 compared to the same period last year primarily due to increased costs to support higher sales, including higher employee-related costs and marketing and advertising. The Consumer Brands Group's SG&A increased $41.6 million in the first quarter of 2026 compared to the same period last year primarily due to incremental SG&A expenses associated with the Suvinil acquisition as well as higher employee-related and marketing costs to support higher sales. The Performance Coatings Group's SG&A increased $32.5 million in the first quarter of 2026 compared to the same period last year primarily due to higher employee-related costs. The Administrative function's SG&A increased $37.7 million in the first quarter of 2026 compared to the same period last year due primarily to costs related to the new global headquarters and technology center.
Other general expense - net decreased $2.6 million in the first quarter of 2026 compared to the same period last year primarily due to a decrease in site specific environmental-related accruals. See Note 15 in Item 1 for further information.
Interest expense increased $27.8 million in the first quarter of 2026 compared to the same period last year due to an increase in long-term debt and short-term borrowings as well as interest expense related to the new global headquarters and technology center. See Note 6 in Item 1 for further information on the Company's outstanding debt.
Other (income) expense - net was income of $4.0 million in the first quarter of 2026 compared to expense of $2.9 million in the same period last year primarily due to foreign currency transaction related net gains in the current period as compared to net losses in the comparable prior year period, partially offset by unfavorable changes in the market value of investments held in deferred compensation plans. See Note 15 in Item 1 for further information.
The following table presents Income before income taxes by segment and as a percent of Net sales by segment:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Income Before Income Taxes: | |||||||||||||||||||||||
| Paint Stores Group | $ | 558.8 | $ | 541.2 | $ | 17.6 | 3.3 | % | |||||||||||||||
| Consumer Brands Group | 197.2 | 131.9 | 65.3 | 49.5 | % | ||||||||||||||||||
| Performance Coatings Group | 232.4 | 212.7 | 19.7 | 9.3 | % | ||||||||||||||||||
| Administrative | (308.6) | (232.8) | (75.8) | (32.6) | % | ||||||||||||||||||
| Total | $ | 679.8 | $ | 653.0 | $ | 26.8 | 4.1 | % | |||||||||||||||
| Income Before Income Taxes as a percent of Net sales: | |||||||||||||||||||||||
| Paint Stores Group | 18.3 | % | 18.4 | % | |||||||||||||||||||
| Consumer Brands Group | 21.7 | % | 17.3 | % | |||||||||||||||||||
| Performance Coatings Group | 13.6 | % | 13.3 | % | |||||||||||||||||||
| Administrative | nm | nm | |||||||||||||||||||||
| Total | 12.0 | % | 12.3 | % | |||||||||||||||||||
|
nm - not meaningful
|
|||||||||||||||||||||||
Income Tax Expense
The effective tax rate was 21.3% for the first quarter of 2026 compared to 22.8% for the first quarter of 2025. The decrease in the effective tax rate was primarily due to a more favorable impact from tax benefits related to employee share-based payments. The other significant components of the Company's effective tax rate were consistent year-over-year. See Note 16 in Item 1 for further information.
Net Income Per Share
Diluted net income per share increased 7.5% to $2.15 per share in the first quarter of 2026 compared to $2.00 per share in the first quarter of 2025. Diluted net income per share in the first quarter of 2026 included Valspar acquisition-related amortization expense of $0.20 per share. Diluted net income per share in the first quarter of 2025 included charges for Valspar acquisition-related amortization expense of $0.19 per share and severance and other restructuring expenses of $0.06 per share. Foreign currency translation rate changes increased diluted net income per share by $0.03 in the first quarter of 2026.
FINANCIAL CONDITION, LIQUIDITY AND CASH FLOW
Overview
The Company's financial condition and liquidity remained strong at March 31, 2026. The Company generated $139.1 million in Net operating cash during the first quarter of 2026 and returned cash of $772.7 million to its shareholders in the form of dividends and share repurchases during the first quarter of 2026. Net income increased 6.1% to $534.7 million and EBITDA increased 8.8% to $998.2 million for the first three months of 2026. Refer to the Non-GAAP Financial Measures section below for the definition and calculation of EBITDA.
At March 31, 2026, the Company had Cash and cash equivalents of $216.9 million and total debt outstanding of $11.700 billion. Total debt, net of Cash and cash equivalents, was $11.483 billion. The Company continues to maintain sufficient short-term borrowing capacity at reasonable rates, and has sufficient cash on hand and total available borrowing capacity to fund its current operating requirements.
Net Working Capital
Net working capital, defined as Total current assets less Total current liabilities, increased $802.1 million to a deficit of $1.035 billion at March 31, 2026 compared to a deficit of $1.837 billion at March 31, 2025. The net working capital increase is due to an increase in current assets of $460.0 million and a decrease of $342.1 million in current liabilities.
Current asset balances increased $460.0 million at March 31, 2026 compared to March 31, 2025 due to an increase in Accounts receivable, net of $379.0 million, an increase in Other current assets of $105.9 million, primarily related to prepaid expenses and recoverable income taxes, and an increase in Cash and cash equivalents of $17.1 million. These increases were offset by a decrease in Inventories of $42.0 million.
Current liability balances decreased $342.1 million at March 31, 2026 compared to March 31, 2025 due to a decrease in the Current portion of long-term debt of $1.151 billion. This decrease was offset by an increase in Short-term borrowings of $578.1 million, an increase in Accounts payable of $90.5 million, an increase in Other accruals of $54.3 million primarily related to customer considerations, an increase in Accrued taxes of $45.8 million, an increase in Compensation and taxes withheld of $25.3 million and an increase in the Current portion of operating lease liabilities of $14.6 million. The Company's current ratio was 0.86, 0.87 and 0.77 at March 31, 2026, December 31, 2025 and March 31, 2025, respectively.
Property, Plant and Equipment
Net property, plant and equipment increased $68.5 million in the first three months of 2026 and $542.5 million in the twelve months since March 31, 2025. The increase in the first three months was due to capital expenditures of $118.7 million, Suvinil purchase price allocation adjustments of $48.1 million and foreign currency translation and other adjustments of $1.5 million, offset by depreciation expense of $98.3 million and the sale or disposition of fixed assets of $1.5 million. Since March 31, 2025, the increase was due to capital expenditures of $683.7 million, assets acquired through business combinations of $193.7 million, foreign currency translation and other adjustments of $21.3 million and the sale or disposition of fixed assets of $2.5 million, offset by depreciation expense of $358.7 million.
Buildings within Property, plant and equipment, net increased $52.5 million in the first three months of 2026 and $1.523 billion in the twelve months since March 31, 2025. The increase in the first three months was primarily due to capital expenditures related to finalizing the construction of the new global headquarters and technology center. Since March 31, 2025, the increase was primarily due to the new global headquarters and technology center meeting the criteria to be placed into service during 2025.
Also included in 2026 capital expenditures were expenditures related to manufacturing capacity expansion, operational efficiencies and maintenance projects in the Consumer Brands and Performance Coatings Groups and the opening of new stores and renovation and improvements in existing stores in the Paint Stores Group.
In 2026, the Company expects to spend less than 2025 for capital expenditures, which it will fund primarily through the generation of operating cash. Core capital expenditures are targeted to be approximately 2% of Net sales in 2026 and are expected to be for investments in various productivity improvements and maintenance projects at existing manufacturing, distribution and technology facilities and new store openings.
Real Estate Financing
In December 2022, the Company closed a transaction to sell and subsequently lease back its new global headquarters. This transaction did not meet the criteria for recognition as an asset sale under U.S. generally accepted accounting principles (US GAAP) and as such, was accounted for as a real estate financing transaction. The Company received the final proceeds for the new global headquarters in 2025 for a total of $800 million. The initial lease term includes the construction period and extends for 30 years thereafter, and the Company has the right and option to extend the lease term.
The net proceeds from this transaction and other real estate financing transactions are recognized as Proceeds from real estate financing transactions within the Financing Activities section of the Statements of Condensed Consolidated Cash Flows. The Company will continue to recognize the related assets, including any capitalized interest, within Property, plant and equipment, net on the Consolidated Balance Sheets. These assets are subject to depreciation over their useful lives in accordance with the Company's accounting policies. The Company also allocates payments between interest and repayment of the financing liability over the life of the agreement. See Note 8 in Item 1 and Note 10 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 for further information concerning real estate financing.
Goodwill and Intangible Assets
Goodwill decreased $33.2 million from December 31, 2025 and increased $295.0 million from March 31, 2025. The decrease during the first three months of 2026 was due to Suvinil purchase price allocation adjustments of $29.7 million and foreign currency translation fluctuations and other adjustments of $3.5 million. The increase over the twelve month period from March 31, 2025 was due to purchase price allocation adjustments of $202.3 million, primarily related to the Suvinil acquisition, and foreign currency translation fluctuations and other adjustments of $92.7 million.
Intangible assets decreased $80.5 million from December 31, 2025 and increased $392.2 million from March 31, 2025. The decrease during the first three months of 2026 was due to amortization of $88.5 million and Suvinil purchase price allocation adjustments of $17.1 million, offset by foreign currency translation fluctuations and other adjustments of $23.6 million and capitalized software of $1.5 million. The increase over the twelve month period from March 31, 2025 was due to purchase price allocations of $626.0 million, primarily related to the Suvinil acquisition, foreign currency translation fluctuations and other adjustments of $90.1 million and capitalized software of $38.0 million, offset by amortization of $344.1 million and trademark impairment of $17.8 million.
See Note 5 in Item 1 and Note 6 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 for further information concerning the Company's Goodwill and Intangible assets.
Other Assets
Other assets increased $17.7 million from December 31, 2025 and $18.4 million from March 31, 2025. The increase in the first three months of 2026 was primarily due to an increase in non-traded investments partially offset by a decrease in customer considerations. The increase from March 31, 2025 was primarily due to an increase in assets related to cloud computing arrangements, deferred income tax assets and pension plan assets, partially offset by a decrease in customer considerations and non-traded investments. See Notes 1 and 14 in Item 1 and Notes 1, 8, 18 and 20 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 in for further information.
Debt (including Short-term borrowings)
| March 31, | December 31, | March 31, | |||||||||||||||
| 2026 | 2025 | 2025 | |||||||||||||||
| Long-term debt (including current portion) | $ | 9,323.2 | $ | 9,670.8 | $ | 8,977.9 | |||||||||||
| Short-term borrowings | 2,376.6 | 1,200.5 | 1,798.5 | ||||||||||||||
| Total debt outstanding | $ | 11,699.8 | $ | 10,871.3 | $ | 10,776.4 | |||||||||||
The Company's long-term debt primarily consists of senior notes as disclosed in Note 7 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2025.
See Note 6 in Item 1 for further information concerning debt.
Defined Benefit Pension and Other Postretirement Benefit Plans
Long-term liabilities for defined benefit pension and other postretirement benefit plans did not change significantly from December 31, 2025. The changes from March 31, 2025 are primarily due to changes in actuarial assumptions and the acquisition of Suvinil. See Note 8 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 for further information concerning the Company's liabilities for defined benefit pension and other postretirement benefit plans.
Deferred Income Taxes
Deferred income taxes were effectively flat from December 31, 2025 and increased $179.4 million from March 31, 2025. The changes from March 31, 2025 are primarily due to accelerated domestic research and development deductions recognized as a result of U.S. tax reform legislation known as the One Big Beautiful Bill Act. This increase was partially offset by amortization of acquisition-related intangible assets.
Environmental-Related Liabilities
The operations of the Company, like those of other companies in the same industry, are subject to various domestic and foreign environmental laws and regulations. These laws and regulations not only govern current operations and products, but also impose potential liability on the Company for past operations. Management expects environmental laws and regulations to impose increasingly stringent requirements upon the Company and the industry in the future. Management believes that the Company conducts its operations in compliance with applicable environmental laws, regulations and requirements and has implemented various programs designed to help protect the environment and promote continued compliance.
Depreciation of capital expenditures and other expenses related to ongoing environmental compliance measures were included in the normal operating expenses of conducting business. The Company's capital expenditures, depreciation and other expenses related to ongoing environmental compliance measures were not material to the Company's financial condition, liquidity, cash flow or results of operations during the first three months of 2026. Management also does not expect that such capital expenditures, depreciation and other expenses will be material to the Company's financial condition, liquidity, cash flow or results of operations for the remainder of 2026. See Notes 8 and 15 in Item 1 for further information on environmental-related long-term liabilities.
Contractual Obligations, Commercial Commitments and Warranties
There have been no significant changes to the Company's contractual obligations and commercial commitments in the first three months of 2026 as summarized in Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-K for the year ended December 31, 2025.
Litigation
See Note 9 in Item 1 for further information concerning litigation.
Shareholders' Equity
| March 31, | December 31, | March 31, | |||||||||||||||
| 2026 | 2025 | 2025 | |||||||||||||||
| Total shareholders' equity | $ | 4,431.1 | $ | 4,598.3 | $ | 4,130.1 | |||||||||||
Shareholders' equity decreased $167.2 million during the first three months of 2026 primarily as a result of $623.5 million of treasury stock activity mainly attributable to treasury stock repurchases and the payment of $197.1 million in cash dividends, partially offset by Net income of $534.7 million, an increase in Other capital of $71.0 million mainly associated with stock-based compensation expense and stock option exercises and an increase in Other comprehensive income, net of tax of $47.6 million mainly due to foreign currency translation adjustments.
Shareholders' equity increased $301.0 million since March 31, 2025 primarily as a result of Net income of $2.599 billion, an increase in Other comprehensive income, net of tax of $186.1 million mainly due to foreign currency translation adjustments and an increase in Other capital of $182.4 million mainly associated with stock-based compensation expense and stock option exercises. The increase in Shareholders' equity was partially offset by treasury stock activity mainly attributable to treasury stock repurchases of $1.880 billion and the payment of $786.5 million in cash dividends. Additionally, during the fourth quarter of 2025, the Company retired 29.5 million common stock shares held in treasury stock, which resulted in decreases of Common stock, Other capital, Retained earnings and Treasury stock. See Note 10 in Item 1 for further information concerning Shareholders' Equity. See the Statements of Consolidated Shareholders' Equity in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 for further information concerning the treasury stock retirement.
During the first three months of 2026, the Company purchased 1.6 million shares of its common stock for treasury purposes through open market purchases. The Company acquires its common stock for general corporate purposes, and depending on its cash position and market conditions, it may acquire shares in the future. The Company had remaining authorization from its Board of Directors at March 31, 2026 to purchase 28.0 million shares of its common stock.
In February 2026, the Company's Board of Directors increased the quarterly cash dividend from $0.79 per share to $0.80 per share. This quarterly dividend, if approved in each of the remaining quarters of 2026, would result in an annual dividend for 2026 of $3.20 per share, or a 31% payout of 2025 diluted net income per share.
Cash Flow
Net operating cash for the three months ended March 31, 2026 was a source of $139.1 million compared to a usage of $61.1 million for the same period in 2025. The improvement in Net operating cash was primarily due to lower cash requirements for working capital and deferred taxes, higher Net income and an increase in depreciation and amortization.
Net investing cash usage decreased $145.7 million in the first three months of 2026 compared to the same period in 2025 primarily due to cash used for an acquisition in the first three months of 2025 and a decrease in cash used for capital expenditures related to the new global headquarters and technology center.
Net financing cash source decreased $319.6 million in the first three months of 2026 compared to the same period in 2025 primarily due to an increase in treasury stock purchases, an increase in payments of long-term debt and a decrease in proceeds from real estate financing transactions, partially offset by an increase in short-term borrowings and proceeds from stock options exercised.
In the twelve month period from April 1, 2025 through March 31, 2026, the Company generated Net operating cash of $3.652 billion, used $1.921 billion in investing activities and used $1.698 billion in financing activities.
Market Risk
The Company is exposed to market risk associated with interest rates, foreign currency and commodity fluctuations. The Company occasionally utilizes derivative instruments as part of its overall financial risk management policy, but does not use derivative instruments for speculative or trading purposes. In 2026 and 2025, the Company utilized U.S. dollar to euro cross currency swap contracts to hedge the Company's net investment in its European operations. The contracts have been designated as net investment hedges and have various maturity dates. In addition, the Company entered into forward foreign currency exchange contracts during 2026 and 2025 primarily to hedge value changes in foreign currency. Lastly, the Company entered into interest rate lock contracts in 2025 to hedge the variability in the benchmark interest rate for the 2025 issuance of long-term fixed rate debt. See Notes 12 and 15 in Item 1 for further information related to the Company's use of derivative instruments. The Company believes it may experience losses from foreign currency translation and transactions, interest rate movement and commodity price fluctuations. However, the Company does not expect foreign currency translation or transactions, interest rate movement, commodity price fluctuations or hedging contract losses to have a material adverse effect on the Company's financial condition, results of operations or cash flows.
Financial Covenant
Certain borrowings contain a consolidated leverage covenant. The covenant states the Company's consolidated leverage ratio is not to exceed 3.75 to 1.00; however, the Company may elect to temporarily increase the leverage ratio to 4.25 to 1.00 for a period of four consecutive fiscal quarters immediately following the consummation of a qualifying acquisition, as defined in the credit agreement dated July 31, 2024. The leverage ratio is defined as the ratio of total indebtedness (the sum of Short-term borrowings, Current portion of long-term debt and Long-term debt) at the reporting date to consolidated "Earnings Before Interest, Taxes, Depreciation, and Amortization" (EBITDA), as defined in the credit agreement, for the 12-month period ended on the same date. Refer to the "Non-GAAP Financial Measures" section for a reconciliation of EBITDA to Net income. At March 31, 2026, the Company was in compliance with the covenant and expects to remain in compliance. The Company's notes, debentures and revolving credit agreements contain various default and cross-default provisions. In the event of default under any one of these arrangements, acceleration of the maturity of any one or more of these borrowings may result. See Note 6 in Item 1 and Note 7 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 for further information concerning the Company's debt and related covenants.
Reconciliation of Non-GAAP Financial Measures
Management utilizes certain financial measures that are not in accordance with US GAAP to analyze and manage the performance of the business. The required disclosures for these non-GAAP measures are shown below. The Company provides such non-GAAP information in reporting its financial results to give investors additional data to evaluate the Company's operations. Management does not, nor does it suggest investors should, consider such non-GAAP measures in isolation from, or in substitution for, financial information prepared in accordance with US GAAP.
EBITDA and Adjusted EBITDA
EBITDA is a non-GAAP financial measure defined as Net income before income taxes, Interest expense, depreciation and amortization. Adjusted EBITDA is a non-GAAP financial measure defined as EBITDA that excludes certain adjustments that management believes enhances investors' understanding of the Company's operating performance. Management considers EBITDA and Adjusted EBITDA useful in understanding the operating performance of the Company. The reader is cautioned that the Company's EBITDA and Adjusted EBITDA should not be compared to other entities unknowingly. Further, EBITDA and Adjusted EBITDA should not be considered alternatives to Net income as an indicator of operating performance. The reader should refer to the determination of Net income in accordance with US GAAP disclosed in the Statements of Consolidated Income in Item 1.
The following table reconciles Net income computed in accordance with US GAAP to EBITDA and Adjusted EBITDA as calculated by management for the periods indicated below:
|
Three Months Ended March 31, |
|||||||||||
| 2026 | 2025 | ||||||||||
| Net income | $ | 534.7 | $ | 503.9 | |||||||
| Interest expense | 131.6 | 103.8 | |||||||||
| Income taxes | 145.1 | 149.1 | |||||||||
| Depreciation | 98.3 | 79.9 | |||||||||
| Amortization | 88.5 | 81.0 | |||||||||
| EBITDA | $ | 998.2 | $ | 917.7 | |||||||
| Severance and other restructuring expenses | - | 19.3 | |||||||||
| Adjusted EBITDA | $ | 998.2 | $ | 937.0 | |||||||
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect amounts reported in the accompanying condensed consolidated financial statements. These determinations were made based upon management's best estimates, judgments and assumptions that were believed to be reasonable under the circumstances, giving due consideration to materiality. We do not believe there is a great likelihood that materially different amounts would be reported under different conditions or using different assumptions related to the accounting policies and estimates described below. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates.
A comprehensive discussion of the Company's critical accounting policies, management estimates and significant accounting policies followed in the preparation of the condensed consolidated financial statements is included in Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 1 in the Company's Annual Report on Form 10-K for the year ended December 31, 2025. There have been no significant changes in critical accounting policies, management estimates or significant accounting policies since the year ended December 31, 2025.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain statements contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this report constitute "forward-looking statements" within the meaning of federal securities laws. These forward-looking statements are based upon management's current expectations, predictions, estimates, assumptions and beliefs concerning future events and conditions and may relate to, among other things, anticipated future performance (including sales and earnings), expected growth, future business plans and the costs and potential liability for environmental-related matters and lead pigment and lead-based paint litigation. Any statement that is not historical in nature is a forward-looking statement and may be identified by the use of words and phrases such as "anticipate," "aspire," "believe," "could," "estimate," "expect," "goal," "intend," "may," "plan," "potential," "project," "seek," "should," "strive," "target," "will," or "would" or the negative thereof or comparable terminology.
Readers are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside our control, that could cause actual results to differ materially from such statements and from our historical results, performance and experience. These risks, uncertainties and other factors include such things as:
•general business and economic conditions in the United States and worldwide;
•inflation rates, interest rates, unemployment rates, labor costs, healthcare costs, recessionary conditions, geopolitical conditions, terrorist activity, armed conflicts and wars, public health crises, pandemics, outbreaks of disease and supply chain disruptions;
•shifts in consumer behavior driven by economic downturns in cyclical segments of the economy;
•shortages and increases in the cost of raw materials and energy;
•catastrophic events, adverse weather conditions and natural disasters (including those that may be related to climate change);
•disruptions to our information technology systems, including due to digitization efforts or cybersecurity incidents;
•our ability to attract, retain, develop and progress a qualified global workforce;
•the loss of any of our largest customers;
•increased competition or failure to keep pace with developments in key competitive areas of our business;
•our ability to successfully integrate past and future acquisitions, including Suvinil, into our existing operations;
•risks and uncertainties associated with our expansion into and our operations in South America, Asia, Europe and other foreign markets;
•policy changes affecting international trade, including import/export restrictions and tariffs;
•our ability to achieve our strategies or expectations relating to sustainability considerations, including as a result of evolving legal, regulatory and other standards, processes and assumptions, the pace of scientific and technological developments, increased costs, the availability of requisite suppliers, energy sources, or financing and changes in carbon markets and carbon accounting rules;
•damage to our business, reputation, image or brands due to negative publicity;
•the infringement or loss of our intellectual property rights or the theft or unauthorized use of our trade secrets or other confidential business information;
•a weakening of global credit markets or changes to our credit ratings;
•our ability to generate cash to service our indebtedness;
•fluctuations in foreign currency exchange rates and changing monetary policies;
•our ability to comply with a variety of complex U.S. and non-U.S. laws, rules and regulations;
•increases in tax rates, or changes in tax laws or regulations;
•our ability to comply with numerous, complex and increasingly stringent domestic and foreign health, safety and environmental laws, regulations and requirements;
•our liability related to environmental investigation and remediation activities at some of our currently- and formerly-owned sites;
•the nature, cost, quantity and outcome of pending and future litigation, including lead pigment and lead-based paint litigation; and
•the other risk factors discussed in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 and our other reports filed with the SEC.
Readers are cautioned that it is not possible to predict or identify all of the risks, uncertainties and other factors that may affect future results and that the above list should not be considered a complete list. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as otherwise required by law.
Sherwin Williams Co. published this content on April 28, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on April 28, 2026 at 18:39 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]