Sherwin Williams Co.

07/28/2026 | Press release | Distributed by Public on 07/28/2026 11:54

Quarterly Report for Quarter Ending June 30, 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 7.5% to $6.789 billion in the quarter and increased 7.2% to $12.456 billion in the year to date period
◦Net sales from stores in the Paint Stores Group open more than twelve calendar months increased 4.2% and 3.4% in the quarter and year to date period, respectively
•Diluted net income per share increased 14.3% to $3.43 per share in the quarter compared to $3.00 per share in the second quarter of 2025 and increased 11.6% to $5.58 per share in the year to date period compared to $5.00 per share in the year to date period of 2025
◦Adjusted diluted net income per share increased 9.5% to $3.70 per share in the quarter compared to $3.38 per share in the second quarter of 2025 and increased 7.7% to $6.05 per share in the year to date period compared to $5.62 per share in the year to date period of 2025
•Generated Net operating cash of $1.487 billion in the year to date period compared to $1.052 billion in the year to date period 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 is expected to continue in the second half of 2026, coupled with inflation in raw materials, energy, logistics and packaging, we continue to focus on securing incremental volume, balanced with appropriate and decisive pricing and cost-out actions in all our businesses while maintaining 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 through repurchases of shares of our stock. We have a strong liquidity position, with $293.5 million in cash and cash equivalents and $1.969 billion of unused capacity under our credit facilities at June 30, 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 and six months ended June 30, 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 and six months ended June 30, 2026 and 2025.
Net Sales
Three Months Ended June 30, 2026
Three Months Ended June 30,
2026 2025 $ Change % Change Currency Impact Acquisition and Divestiture Impact
Paint Stores Group $ 3,890.0 $ 3,702.2 $ 187.8 5.1 % - % 0.2 %
Consumer Brands Group 983.5 809.4 174.1 21.5 % 1.6 % 16.0 %
Performance Coatings Group 1,913.8 1,801.1 112.7 6.3 % 2.0 % - %
Administrative 2.0 1.8 0.2 11.1 % - % - %
Total $ 6,789.3 $ 6,314.5 $ 474.8 7.5 % 0.8 % 2.2 %
Consolidated Net sales increased by 7.5% in the second quarter of 2026 primarily due to higher Net sales in all reportable segments, inclusive of the October 2025 acquisition of Suvinil. Net sales of all consolidated foreign subsidiaries increased to $1.358 billion in the second quarter of 2026 compared to $1.155 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 $5.431 billion in the second quarter of 2026 compared to $5.159 billion in the same period last year.
Net sales in the Paint Stores Group increased by 5.1% in the second quarter of 2026 primarily due to selling price increases, which impacted Net sales by a mid-single digit percentage, as well as low-single digit percentage sales volume growth. Net sales increased in all professional customer end markets, led by a double-digit percentage increase in protective and marine, a high-single digit percentage increase in commercial and a mid-single digit percentage increase in residential repaint. Net sales from stores open for more than twelve calendar months increased by 4.2% in the second quarter of 2026 compared to last year's comparable period. Net sales of non-paint products increased 4.2% in the second 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 21.5% in the second quarter of 2026 primarily as a result of the acquisition of Suvinil, increased Net sales in North America and a 1.6% impact from favorable foreign currency translation.
Net sales in the Performance Coatings Group increased by 6.3% in the second quarter of 2026 primarily due to selling price increases, mainly attributable to product mix, which impacted Net sales by a low-single digit percentage, low-single digit percentage sales volume growth and a 2.0% impact from favorable foreign currency translation. Net sales increased in all businesses, led by General Industrial and Automotive Refinish, which each increased by a high-single digit percentage, as well as Packaging, Industrial Wood and Coil, which each increased by a mid-single digit percentage.
Six Months Ended June 30, 2026
Six Months Ended June 30,
2026 2025 $ Change % Change Currency Impact Acquisition
and
Divestiture Impact
Paint Stores Group $ 6,939.9 $ 6,642.0 $ 297.9 4.5 % - % 0.2 %
Consumer Brands Group 1,891.8 1,571.6 320.2 20.4 % 2.0 % 16.6 %
Performance Coatings Group 3,619.6 3,403.1 216.5 6.4 % 3.0 % 0.1 %
Administrative 4.9 3.5 1.4 40.0 % - % - %
Total $ 12,456.2 $ 11,620.2 $ 836.0 7.2 % 1.2 % 2.4 %
Consolidated Net sales increased by 7.2% in the first six months of 2026 due to higher sales in all reportable segments, inclusive of the October 2025 acquisition of Suvinil and a 1.2% impact from favorable currency translation. Net sales of all consolidated foreign subsidiaries increased to $2.637 billion in the first six months of 2026 compared to $2.200 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 4.2% to $9.819 billion in the first six months of 2026 compared to $9.420 billion in the same period last year.
Net sales in the Paint Stores Group increased by 4.5% in the first six months of 2026 primarily due to selling price increases, which impacted Net sales by a low-single digit percentage, as well as a 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 mid-single digit percentage increases in commercial and residential repaint. New residential decreased by a low-single digit percentage, as expected. Net sales from stores open for more than twelve calendar months increased 3.4% in the first six months of 2026 compared to last year's comparable period. Net sales of non-paint products increased 3.4% in the first six months of 2026 compared to last year's comparable period. A discussion of changes in volume versus pricing for sales of products other than paint is not pertinent due to the wide assortment of general merchandise sold.
Net sales in the Consumer Brands Group increased by 20.4% in the first six months of 2026 primarily as a result of the acquisition of Suvinil, increased Net sales in North America and a 2.0% favorable impact from foreign currency translation.
Net sales in the Performance Coatings Group increased by 6.4% in the first six months of 2026 primarily attributable to low-single digit percentage sales volume growth, selling price increases, primarily attributable to product mix, which impacted Net sales by a low-single digit percentage, and a 3.0% favorable impact from foreign currency translation. Net sales increased in all businesses, led by a double-digit percentage increase in General Industrial, a high-single digit percentage increase in Automotive Refinish and mid-single digit percentage increases in Packaging and Coil.
Income Before Income Taxes
The following table presents the components of Income before income taxes as a percentage of Net sales:
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Percent to
Net Sales 		Percent to
Net Sales 		Percent to
Net Sales 		Percent to
Net Sales
Net sales $ 6,789.3 100.0 % $ 6,314.5 100.0 % $ 12,456.2 100.0 % $ 11,620.2 100.0 %
Cost of goods sold 3,451.3 50.8 % 3,196.2 50.6 % 6,337.7 50.9 % 5,942.8 51.1 %
Gross profit 3,338.0 49.2 % 3,118.3 49.4 % 6,118.5 49.1 % 5,677.4 48.9 %
Selling, general and administrative expenses (SG&A) 2,103.7 31.0 % 2,011.6 31.9 % 4,073.3 32.7 % 3,805.4 32.7 %
Other general expense - net 3.4 0.1 % 6.3 0.1 % 9.7 0.1 % 15.2 0.1 %
Interest expense 135.9 2.0 % 112.4 1.8 % 267.5 2.1 % 216.2 1.9 %
Interest income (5.4) (0.1) % (2.4) - % (8.2) (0.1) % (5.7) - %
Other (income) expense - net (12.1) (0.2) % 4.7 - % (16.1) (0.1) % 7.6 0.1 %
Income before income taxes $ 1,112.5 16.4 % $ 985.7 15.6 % $ 1,792.3 14.4 % $ 1,638.7 14.1 %
Three Months Ended June 30, 2026
Consolidated Cost of goods sold increased $255.1 million, or 8.0%, in the second quarter of 2026 compared to the same period in 2025 primarily due to higher Net sales, inclusive of the Suvinil acquisition, a moderate rise in raw material costs and an unfavorable foreign currency related impact.
Consolidated Gross profit increased $219.7 million in the second quarter of 2026 compared to the same period in 2025 primarily due to higher Net sales in all reportable segments, inclusive of the Suvinil acquisition, partially offset by a moderate rise in raw material costs. Consolidated Gross profit as a percent of consolidated Net sales in the second quarter of 2026 decreased slightly to 49.2% compared to 49.4% during the same period in 2025 primarily due to the dilutive impact of the Suvinil acquisition.
The Paint Stores Group's Gross profit in the second quarter of 2026 was higher than the same period last year by $106.8 million due primarily to higher Net sales as a result of selling price increases and sales volume growth, partially offset by a moderate rise in raw material costs. The Paint Stores Group's Gross profit as a percent of Net sales was flat in the second quarter of 2026 compared to the same period last year for these same reasons. The Consumer Brands Group's Gross profit increased by $73.0 million in the second quarter of 2026 compared to the same period last year primarily due to higher Net sales, inclusive of the Suvinil acquisition, favorable mix, supply chain efficiencies and favorable impacts from foreign currency, partially offset by a moderate rise in raw material costs. The Consumer Brands Group's Gross profit as a percent of Net sales decreased in the second quarter of 2026 compared to the same period last year related to the dilutive impact of the Suvinil acquisition. The Performance Coatings Group's Gross profit increased $43.3 million in the second quarter of 2026 compared to the same period last year primarily due to higher Net sales as a result of selling price increases, primarily attributable to product mix, sales volume growth and favorable foreign currency translation, partially offset by a moderate rise in raw material costs. The Performance Coatings Group's Gross profit as a percent of Net sales increased modestly in the second quarter of 2026 compared to the same period last year for these same reasons.
Consolidated SG&A increased $92.1 million in the second quarter of 2026 versus the same period last year primarily due to an increase in employee-related costs to support higher Net sales, incremental SG&A expenses associated with the Suvinil acquisition and higher costs in the Administrative function related to the new global headquarters and technology center. As a percent of Net sales, consolidated SG&A decreased by 90 basis points in the second quarter of 2026 compared to the same period last year.
The Paint Stores Group's SG&A increased $63.3 million in the second quarter of 2026 compared to the same period last year primarily due to increased costs to support higher sales, including investments in additional sales reps and stores. The Consumer Brands Group's SG&A increased $32.9 million in the second quarter of 2026 compared to the same period last year primarily due to incremental SG&A expenses associated with the Suvinil acquisition. The Performance Coatings Group's SG&A increased $19.4 million in the second quarter of 2026 compared to the same period last year primarily due to an increase in employee-related costs to support higher sales. The Administrative function's SG&A decreased $23.5 million in the second quarter of 2026 compared to the same period last year due primarily due to lower employee costs related to non-recurring severance from the prior period, partially offset by increased costs related to the new global headquarters and technology center.
Other general expense - net decreased $2.9 million in the second quarter of 2026 compared to the same period last year primarily due to lower individually insignificant miscellaneous expenses, partially offset by a modest increase in site specific environmental-related accruals. See Note 15 in Item 1 for further information.
Interest expense increased $23.5 million in the second quarter of 2026 compared to the same period last year due to an increase in short-term borrowings and long-term debt as well as interest expense related to real estate financing associated with the new global headquarters. See Note 6 in Item 1 for further information on the Company's outstanding debt.
Other (income) expense - net was income of $12.1 million in the second quarter of 2026 compared to expense of $4.7 million in the same period last year primarily due to lower foreign currency transaction related net losses, higher investment gains and lower individually insignificant miscellaneous expenses, partially offset by pension related expense in the second quarter of 2026 compared to pension related income in the second quarter of 2025. See Note 15 in Item 1 for further information.
Six Months Ended June 30, 2026
Consolidated Cost of goods sold increased $394.9 million, or 6.6%, in the first six months of 2026 compared to the same period in 2025 primarily due to higher sales volume, inclusive of the Suvinil acquisition, a moderate rise in raw material costs and an unfavorable foreign currency related impact.
Consolidated gross profit increased $441.1 million in the first six months of 2026 compared to the same period in 2025 primarily due to higher Net sales in all reportable segments, inclusive of the Suvinil acquisition, partially offset by a moderate
rise in raw material costs. Consolidated gross profit as a percent of consolidated Net sales increased in the first six months of 2026 to 49.1% compared to 48.9% during the same period in 2025 for these same reasons, including the dilutive impact of the Suvinil acquisition.
The Paint Stores Group's gross profit in the first six months of 2026 was higher than the same period last year by $192.6 million due primarily to higher Net sales as a result of selling price increases and sales volume growth, partially offset by a moderate rise in raw material costs. The Paint Stores Group's gross profit as a percent of Net sales increased in the first six months of 2026 compared to the same period in 2025 for these same reasons. The Consumer Brands Group's gross profit increased by $172.8 million in the first six months of 2026 compared to the same period last year due primarily to higher Net sales, inclusive of the Suvinil acquisition, and favorable impacts from foreign currency, partially offset by a moderate rise in raw material costs. The Consumer Brands Group's gross profit as a percent of Net sales increased in the first six months of 2026 compared to the same period last year for these same reasons, inclusive of the dilutive impact of the Suvinil acquisition. The Performance Coatings Group's gross profit increased $83.5 million in the first six months of 2026 compared to the same period last year primarily due to higher Net sales as a result of sales volume growth, selling price increases, primarily attributable to product mix, and favorable foreign currency translation. The Performance Coatings Group's gross profit as a percent of Net sales increased modestly in the first six months of 2026 compared to the same period last year for these same reasons.
Consolidated SG&A increased $267.9 million in the first six months of 2026 versus the same period last year primarily due to an increase in employee-related costs to support higher Net sales, incremental SG&A expenses associated with the Suvinil acquisition and higher costs in the Administrative function related to the new global headquarters and technology center. As a percent of Net sales, consolidated SG&A was flat in the first six months of 2026 compared to the same period last year for these same reasons.
The Paint Stores Group's SG&A increased $127.3 million in the first six months of 2026 compared to the same period last year primarily due to higher employee-related costs related to investments in additional sales reps and stores. The Consumer Brands Group's SG&A increased $74.5 million in the first six months 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 costs to support higher sales. The Performance Coatings Group's SG&A increased $51.9 million in the first six months of 2026 compared to the same period last year due primarily to higher employee-related costs to support higher sales. The Administrative function's SG&A increased $14.2 million in the first six months of 2026 compared to the same period last year due primarily to costs related to the new global headquarters and technology center, partially offset by a decrease in employee-related costs related to non-recurring severance from the prior period.
Other general expense - net decreased $5.5 million in the first six months of 2026 compared to the same period last year primarily due to lower individually insignificant miscellaneous expenses, partially offset by an decrease in the gain on sale or disposition of assets. See Note 15 in Item 1 for further information.
Interest expense increased $51.3 million in the first six months of 2026 compared to the same period last year due to an increase in short-term borrowings and long-term debt as well as interest expense related to real estate financing associated with the new global headquarters. See Note 6 in Item 1 for further information on the Company's outstanding debt.
Other (income) expense - net was income of $16.1 million in the first six months of 2026 compared to expense of $7.6 million in the same period last year primarily due to foreign currency transaction related net gains in the second quarter of 2026, which were in a net loss position in the second quarter of 2025, and lower individually insignificant miscellaneous expenses, partially offset by pension related expense in the current period as compared to pension related income in the prior year period and lower investment gains. 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 June 30, Six Months Ended June 30,
2026 2025 $ Change % Change 2026 2025 $ Change % Change
Income Before Income Taxes:
Paint Stores Group $ 957.6 $ 916.5 $ 41.1 4.5 % $ 1,516.4 $ 1,457.7 $ 58.7 4.0 %
Consumer Brands Group 212.9 164.2 48.7 29.7 % 410.1 296.1 114.0 38.5 %
Performance Coatings Group 273.3 245.1 28.2 11.5 % 505.7 457.8 47.9 10.5 %
Administrative (331.3) (340.1) 8.8 2.6 % (639.9) (572.9) (67.0) (11.7) %
Total $ 1,112.5 $ 985.7 $ 126.8 12.9 % $ 1,792.3 $ 1,638.7 $ 153.6 9.4 %
Income Before Income Taxes as a percent of Net sales:
Paint Stores Group 24.6 % 24.8 % 21.9 % 21.9 %
Consumer Brands Group 21.6 % 20.3 % 21.7 % 18.8 %
Performance Coatings Group 14.3 % 13.6 % 14.0 % 13.5 %
Administrative nm nm nm nm
Total 16.4 % 15.6 % 14.4 % 14.1 %
nm - not meaningful
Income Tax Expense
The effective tax rate was 24.2% for the second quarter of 2026 compared to 23.4% for the second quarter of 2025, and 23.1% for the first six months of 2026 compared to 23.2% for the first six months of 2025. The increase in the effective tax rate for the second quarter of 2026 was primarily due to a less favorable impact from tax benefits related to employee share-based payments. The effective tax rate was essentially flat for the first six months of 2026 compared to the same period last year. The other significant components of the Company's effective tax rate were consistent in both comparable periods. See Note 16 in Item 1 for further information.
Net Income Per Share
Diluted net income per share increased 14.3% to $3.43 per share in the second quarter of 2026 compared to $3.00 per share in the second quarter of 2025. Diluted net income per share in the second quarter of 2026 included Valspar acquisition-related amortization expense of $0.20 per share and severance and other restructuring expenses of $0.07 per share. Diluted net income per share in the second quarter of 2025 included charges for Valspar acquisition-related amortization expense of $0.20 per share and severance and other restructuring expenses of $0.18 per share. Foreign currency translation rate changes increased diluted net income per share by $0.02 in the second quarter of 2026.
Diluted net income per share for the first six months of 2026 increased 11.6% to $5.58 per share compared to $5.00 per share in the first six months of 2025. Diluted net income per share for the first six months of 2026 included charges for Valspar acquisition-related amortization expense of $0.40 per share and severance and other restructuring expenses of $0.07 per share. Diluted net income per share in the first six months of 2025 included a charge for Valspar acquisition-related amortization expense of $0.38 per share and severance and other restructuring expenses of $0.24 per share. Foreign currency translation rate changes increased diluted net income per share by $0.06 in the first six months of 2026.
FINANCIAL CONDITION, LIQUIDITY AND CASH FLOW
Overview
The Company's financial condition and liquidity remained strong at June 30, 2026. The Company generated $1.487 billion in Net operating cash and returned cash of $2.232 billion to its shareholders in the form of dividends and share repurchases during the first six months of 2026. Net income increased 9.5% to $1.378 billion and EBITDA increased 11.7% to $2.433 billion for the first six months of 2026. Refer to the Non-GAAP Financial Measures section below for the definition and calculation of EBITDA.
At June 30, 2026, the Company had Cash and cash equivalents of $293.5 million and total debt outstanding of $12.072 billion. Total debt, net of Cash and cash equivalents, was $11.779 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, decreased $856.7 million to a deficit of $2.628 billion at June 30, 2026 compared to a deficit of $1.771 billion at June 30, 2025. The net working capital decrease is due to an increase of $1.431 billion in Total current liabilities partially offset by an increase in Total current assets of $573.9 million.
Current asset balances increased $573.9 million at June 30, 2026 compared to June 30, 2025 due to an increase in Accounts receivable, net of $459.3 million, an increase in Other current assets of $45.8 million, primarily related to recoverable income taxes and prepaid expenses, an increase in Inventories of $45.1 million and an increase in Cash and cash equivalents of $23.7 million.
Current liability balances increased $1.431 billion at June 30, 2026 compared to June 30, 2025 due to an increase in Short-term borrowings of $539.7 million, an increase in the Current portion of long-term debt of $347.7 million, an increase in Accounts payable of $256.4 million, an increase in Accrued taxes of $149.6 million, an increase in Compensation and taxes withheld of $79.5 million, an increase in Other accruals of $51.9 million primarily related to increases in customer considerations and non-traded investments, partially offset by a decrease in accrued severance, and an increase in the Current portion of operating lease liabilities of $5.8 million. The Company's current ratio was 0.73, 0.87 and 0.78 at June 30, 2026, December 31, 2025 and June 30, 2025, respectively.
Property, Plant and Equipment
Net property, plant and equipment increased $82.0 million in the first six months of 2026 and $413.5 million in the twelve months since June 30, 2025. The increase in the first six months was due to capital expenditures of $230.1 million and assets acquired through business combinations of $55.5 million, primarily related to the Suvinil acquisition, partially offset by depreciation expense of $196.8 million, sales or dispositions of fixed assets of $3.4 million, and foreign currency translation and other adjustments of $3.4 million. Since June 30, 2025, the increase was due to capital expenditures of $613.0 million and assets acquired through business combinations of $197.0 million, partially offset by depreciation expense of $377.9 million and foreign currency translation and other adjustments of 18.6 million.
Buildings within Property, plant and equipment, net increased $76.9 million in the first six months of 2026 and $1.032 billion in the twelve months since June 30, 2025. The increase in the first six months of 2026 was primarily due to capital expenditures related to finalizing the construction of the new global headquarters and technology center. Since June 30, 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 $13.4 million from December 31, 2025 and increased $215.6 million from June 30, 2025. The decrease during the first six months of 2026 was due to foreign currency translation fluctuations and other adjustments of $11.5 million and purchase price allocation adjustments of $1.9 million. The increase over the twelve month period from June 30, 2025 was due to purchase price allocation adjustments of $234.1 million, primarily related to the Suvinil acquisition, partially offset by foreign currency translation fluctuations and other adjustments of $18.5 million.
Intangible assets decreased $162.4 million from December 31, 2025 and increased $260.3 million from June 30, 2025. The decrease during the first six months of 2026 was due to amortization of $176.4 million and purchase price allocation adjustments of $16.8 million, partially offset by foreign currency translation fluctuations and other adjustments of $24.8 million and capitalized software of $6.0 million. The increase over the twelve month period from June 30, 2025 was due to purchase price allocations of $591.6 million, primarily related to the Suvinil acquisition, capitalized software of $28.3 million and foreign currency translation fluctuations and other adjustments of $6.8 million, partially offset by amortization of $348.6 million and 2025 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 $87.0 million from December 31, 2025 and $75.9 million from June 30, 2025. The increase in the first six months of 2026 was primarily due to an increase in non-traded investments and assets related to cloud computing arrangements, partially offset by a decrease in customer considerations. The increase from June 30, 2025 was primarily due to an increase in non-traded investments, assets related to cloud computing arrangements and deferred income tax assets, partially offset by a decrease in customer considerations. See Notes 1, 14 and 16 in Item 1 and Notes 1, 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 for further information.
Debt (including Short-term borrowings)
June 30, December 31, June 30,
2026 2025 2025
Long-term debt (including current portion) $ 9,825.7 $ 9,670.8 $ 8,979.6
Short-term borrowings 2,246.4 1,200.5 1,706.7
Total debt outstanding $ 12,072.1 $ 10,871.3 $ 10,686.3
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 and periodically, amounts borrowed under its credit agreements. See Note 6 in Item 1 for further information concerning Long-term debt, Short-term borrowings and credit agreements.
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 June 30, 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 decreased $8.1 million from December 31, 2025 and increased $196.3 million from June 30, 2025. The decrease from December 31, 2025 is primarily due to the amortization of intangible assets. The increase from June 30, 2025 is 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 six 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 six 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
June 30, December 31, June 30,
2026 2025 2025
Total shareholders' equity $ 3,854.7 $ 4,598.3 $ 4,400.9
Shareholders' equity decreased $743.6 million during the first six months of 2026 primarily as a result of $1.885 billion of treasury stock activity mainly attributable to treasury stock repurchases and the payment of $394.6 million in cash dividends, partially offset by Net income of $1.378 billion, an increase in Other capital of $117.6 million mainly associated with stock-based compensation expense and stock option exercises and an increase in Other comprehensive income, net of tax of $40.3 million mainly due to foreign currency translation adjustments.
Shareholders' equity decreased $546.2 million since June 30, 2025 primarily as a result of treasury stock activity mainly attributable to treasury stock repurchases of $2.623 billion and the payment of $786.1 million in cash dividends, partially offset by Net income of $2.688 billion, an increase in Other capital of $171.1 million mainly associated with stock-based compensation expense and stock option exercises and an increase in Other comprehensive income, net of tax of $3.8 million mainly due to foreign currency translation adjustments. 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 six months of 2026, the Company purchased 5.6 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 June 30, 2026 to purchase 24.0 million shares of its common stock.
In February 2026, the Company's Board of Directors increased and approved the quarterly cash dividend from $0.79 per share to $0.80 per share. In April and July 2026, the Board of Directors approved the quarterly cash dividend of $0.80 per share for the respective quarters. If approved in the fourth quarter of 2026, it would result in an annual dividend of $3.20 per share, or a 31% payout of 2025 diluted net income per share.
Cash Flow
Net operating cash for the six months ended June 30, 2026 was a source of $1.487 billion compared to a source of $1.052 billion for the same period in 2025. The improvement in Net operating cash was primarily due to lower cash requirements for working capital, higher Net income, an increase in depreciation and a decrease in deferred income taxes.
Net investing cash usage decreased $179.1 million in the first six months of 2026 compared to the same period in 2025 primarily due to cash used for an acquisition in the first six months of 2025 and a decrease in cash used for capital expenditures related to the new global headquarters and technology center.
Net financing cash usage increased $573.6 million in the first six 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 proceeds from long-term debt.
In the twelve month period from July 1, 2025 through June 30, 2026, the Company generated Net operating cash of $3.887 billion, used $1.887 billion in investing activities and used $1.952 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 June 30, 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 Interest expense, Income taxes, 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
June 30, 		Six Months Ended
June 30,
2026 2025 2026 2025
Net income $ 843.6 $ 754.7 $ 1,378.3 $ 1,258.6
Interest expense 135.9 112.4 267.5 216.2
Income taxes 268.9 231.0 414.0 380.1
Depreciation 98.5 79.3 196.8 159.2
Amortization 87.9 83.4 176.4 164.4
EBITDA $ 1,434.8 $ 1,260.8 $ 2,433.0 $ 2,178.5
Severance and other restructuring expenses 23.8 59.0 23.8 78.3
Adjusted EBITDA $ 1,458.6 $ 1,319.8 $ 2,456.8 $ 2,256.8
Adjusted Diluted Net Income Per Share
Management believes investors' understanding of the Company's operating performance is enhanced by the disclosure of diluted net income per share excluding Valspar acquisition-related amortization expense and certain other adjustments. Valspar acquisition-related amortization expense is excluded from diluted net income per share due to its significance as a result of the purchase price assigned to finite-lived intangible assets at the date of acquisition and the related impact on underlying business performance and trends. While these intangible assets contribute to the Company's revenue generation, the related revenue is not excluded. This adjusted earnings per share measurement is not in accordance with US GAAP. It should not be considered a substitute for earnings per share in accordance with US GAAP and may not be comparable to similarly titled measures reported by other companies. The following tables reconcile diluted net income per share computed in accordance with US GAAP to adjusted diluted net income per share.
Three Months Ended June 30,
2026 2025
Pre-Tax
Tax
Effect (1)
After-Tax Pre-Tax
Tax
Effect (1)
After-Tax
Diluted net income per share $ 3.43 $ 3.00
Acquisition-related amortization expense (2)
$ .27 $ .07 .20 $ .26 $ .06 .20
Severance and other restructuring expenses .10 .03 .07 .23 .05 .18
Adjusted diluted net income per share $ 3.70 $ 3.38
Six Months Ended June 30,
2026 2025
Pre-Tax
Tax
Effect (1)
After-Tax Pre-Tax
Tax
Effect (1)
After-Tax
Diluted net income per share $ 5.58 $ 5.00
Acquisition-related amortization expense (2)
$ .53 $ .13 .40 $ .51 $ .13 .38
Severance and other restructuring expenses .10 .03 .07 .31 .07 .24
Adjusted diluted net income per share $ 6.05 $ 5.62
(1) The tax effect is calculated based on the statutory rate and the nature of the item, unless otherwise noted.
(2) Acquisition-related amortization expense, which is included within Selling, general and administrative expenses, consists of the amortization of intangible assets related to the Valspar acquisition. These intangible assets are primarily customer relationships and intellectual property and are being amortized over their remaining useful lives.
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 July 28, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on July 28, 2026 at 17:54 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]