The Sherwin-Williams Company Reports Second Quarter 2006 Earnings Results

The Sherwin-Williams Company (NYSE:SHW) announced its
financial results for the second quarter and first six months ended
June 30, 2006. Compared to the same periods in 2005, consolidated net
sales increased $164.6 million, or 8.4%, to $2.13 billion in the
quarter and $394.6 million, or 11.3%, to $3.90 billion in the first
six months due primarily to continuing strong domestic and
international paint sales. Consolidated net income increased $31.4
million, or 20.5%, to $184.6 million in the quarter and $61.7 million,
or 26.1%, to $298.3 million in the first six months. As a percent to
net sales, consolidated net income improved to 8.7% from 7.8% in the
quarter and to 7.7% from 6.8% in the first six months due primarily to
improved operations. Diluted net income per common share increased
23.1% in the quarter to $1.33 per share from $1.08 per share in 2005
and 30.1% in the first six months to $2.16 per share from $1.66 per
share last year.
Effective January 1, 2006, the Company changed its reportable
operating segments based on changes in its management structure to the
following segments: Paint Stores Group, Consumer Group and Global
Group. Historical business segment information has been updated to
reflect this change in reportable operating segments.
Net sales in the Paint Stores Group Segment increased $140.5
million, or 11.8%, to $1.33 billion in the quarter and $320.2 million,
or 15.5%, to $2.38 billion for the first six months due primarily to
continuing strong domestic architectural paint sales to contractor and
do-it-yourself (DIY) customers and improved industrial maintenance
product sales. Net sales from stores open for more than twelve
calendar months increased 9.6% in the quarter and 13.4% in the first
six months. Paint Stores Group Segment operating profit increased
$34.5 million, or 18.9%, to $217.2 million in the quarter and $72.8
million, or 28.3%, to $330.5 million in the first six months.
Operating profit as a percent to net sales increased to 16.3% from
15.4% in the quarter and to 13.9% from 12.5% in the first six months
due primarily to increased paint sales volume and effective SG&A
expense control.
Net sales of the Consumer Group Segment in the quarter decreased
$13.6 million, or 3.3%, to $400.9 million and in the first six months
decreased $10.0 million, or 1.4%, to $730.8 million. These sales
decreases were due to the elimination of a portion of a paint program
with a large retail customer partially offset by increased paint sales
volume and selling price increases. Operating profit of this Segment
increased $11.3 million, or 17.3%, to $76.3 million in the quarter and
$15.5 million, or 13.2%, to $133.0 million in the first six months. As
a percent to net sales, Consumer Group Segment operating profit
increased to 19.0% from 15.7% in the quarter and 18.2% from 15.9% in
the first six months due to selling price increases, tight spending
control and better factory utilization resulting from higher volume
shipments to the Paint Stores Group Segment that offset continuing raw
material cost increases.
The Global Group Segment's net sales in the quarter increased
$37.7 million, or 10.4%, to $398.8 million and in the first six months
increased $84.2 million, or 12.1%, to $779.4 million when stated in
U.S. dollars. This Segment's net sales stated in local currency
increased by 7.8% in the quarter and by 8.6% in the first six months
due primarily to architectural paint selling price increases and
volume gains in Mexico and South America and improved automotive and
product finishes sales. Operating profit of this Segment improved $8.6
million, or 33.7%, to $34.0 million in the quarter and $20.3 million,
or 43.8%, to $66.5 million in the first six months. Operating profit
as a percent to net sales increased to 8.5% from 7.1% in the quarter
and to 8.5% from 6.7% in the first six months. This Segment's
operating profit was favorably impacted by increased sales, improved
operating efficiencies related to additional manufacturing volume and
expense control. There was no significant impact on operating profit
in the quarter due to currency exchange fluctuations.
Commenting on the second quarter results, Christopher M. Connor,
Chairman, President and Chief Executive Officer, said, "We are pleased
that all our operating segments continue to achieve operating profit
growth on a year-over-year basis. We are encouraged by the ongoing
positive sales results generated by the Paint Stores Group and Global
Group Segments. Integration of the Duron and Paint Sundry Brands
acquisitions continues to go well, and those businesses are exceeding
our expectations of both net sales and operating profit. Our
management teams will continue to emphasize tight control over
selling, general and administrative expenses as another means to
improve operating profit.
"We expect to achieve continued growth in net operating cash flow
in part by maintaining control over working capital. Our net total of
accounts receivable plus inventories less accounts payable, as a
percent of net sales, was 13.9% at the end of the second quarter
versus 16.6% at the same time last year. We will continue to
opportunistically acquire our stock through open market purchases.
During the quarter, we acquired 850,000 shares of our common stock and
at the end of the quarter had remaining authorization to purchase
17,171,000 shares.
"During the third quarter of 2006, we anticipate achieving an
increase in consolidated net sales between 6% and 9% over last year's
third quarter. With sales at that level, we expect diluted net income
per common share for the third quarter to be in the range of $1.23 to
$1.28 per share compared to $1.07 per share last year. For the full
year 2006, we anticipate that the percentage increase in our
consolidated net sales will be in the high-single to low-double digits
over 2005. With annual sales at that level, we estimate diluted net
income per common share for 2006 will be in the range of $4.00 to
$4.10 per share, including an estimated $.08 per share charge for the
additional expense relating to stock options, compared to $3.28 per
share earned in 2005."
The Company will conduct a conference call to discuss its
financial results for the second quarter and its outlook for the third
quarter and full year 2006 at 11:00 a.m. ET on July 20, 2006. The
conference call will be webcast simultaneously in the listen only mode
by Vcall. To listen to the webcast on the Sherwin-Williams website,
www.sherwin.com, click on Press Room, then choose Corporate Press
Releases in the Corporate Information box and click on the webcast
icon following the reference to the July 20th release. The webcast
will also be available at Vcall's Investor Calendar website,
www.investorcalendar.com. An archived replay of the webcast will be
available at www.sherwin.com beginning approximately two hours after
the call ends and will be available until Tuesday, August 1, 2006 at
5:00 p.m. ET.

The Sherwin-Williams Company, founded in 1866, is one of the
world's leading companies engaged in the manufacture, distribution and
sale of coatings and related products to professional, industrial,
commercial and retail customers.

This press release contains certain "forward-looking statements",
as defined under U.S. federal securities laws, with respect to sales,
earnings and other matters. These forward-looking statements are based
upon management's current expectations, estimates, assumptions and
beliefs concerning future events and conditions. 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 the control
of the Company, that could cause actual results to differ materially
from such statements and from the Company's historical results and
experience. These risks, uncertainties and other factors include such
things as: general business conditions, strengths of retail and
manufacturing economies and the growth in the coatings industry;
changes in the Company's relationships with customers and suppliers;
changes in raw material availability and pricing; unusual weather
conditions; and other risks, uncertainties and factors described from
time to time in the Company's reports filed with the Securities and
Exchange Commission. Since it is not possible to predict or identify
all of the risks, uncertainties and other factors that may affect
future results, 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 the Company undertakes no obligation
to update or revise any forward-looking statement, whether as a result
of new information, future events or otherwise.

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The Sherwin-Williams Company and Subsidiaries
Statements of Consolidated Income (Unaudited)

Thousands of dollars, except per share data

Three months ended June 30, Six months ended June 30,
--------------------------- --------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------

Net sales $ 2,129,970 $ 1,965,358 $ 3,898,498 $ 3,503,903
Cost of goods
sold 1,193,382 1,127,192 2,190,499 2,004,963
Gross profit 936,588 838,166 1,707,999 1,498,940
Percent to
net sales 44.0% 42.6% 43.8% 42.8%
Selling,
general and
administrative
expenses 641,562 593,063 1,239,147 1,134,660
Percent to
net sales 30.1% 30.2% 31.8% 32.4%
Interest
expense 16,837 13,556 34,187 25,520
Interest and
net investment
income (5,856) (662) (11,693) (1,761)
Other expense -
net 14,920 12,641 15,322 13,310
------------ ------------ ------------ ------------
Income before
income taxes
and minority
interest 269,125 219,568 431,036 327,211
Income taxes 84,533 65,647 132,773 89,756
Minority
interest 700 940
------------ ------------ ------------ ------------

Net income $ 184,592 $ 153,221 $ 298,263 $ 236,515
============ ============ ============ ============

Net income per
common share:
Basic $ 1.37 $ 1.12 $ 2.22 $ 1.71

Diluted $ 1.33 $ 1.08 $ 2.16 $ 1.66

Average shares
outstanding -
basic 134,436,954 137,263,048 134,484,223 137,972,218
============ ============ ============ ============

Average shares
and
equivalents
outstanding -
diluted 138,441,559 141,490,236 138,359,486 142,447,833
============ ============ ============ ============

Additional information regarding the Company's financial results can
be found on the Internet at "www.sherwin.com", click on Press Room,
then choose Corporate Press Releases in the Corporate Information
box and click on the July 20th release.
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