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Press release from PR Newswire

Sherwin-Williams Announces Agreement with U.S. Department of Labor

Wednesday, February 20, 2013

Sherwin-Williams Announces Agreement with U.S. Department of Labor19:00 EST Wednesday, February 20, 2013Reports Subsequent Event to 2012 Fiscal Year ResultsCLEVELAND, Feb. 20, 2013 /PRNewswire/ -- The Sherwin-Williams Company (the "Company") (NYSE: SHW) announced that is has reached an agreement with the U.S. Department of Labor (the "DOL") to settle the previously disclosed investigation of transactions related to the Company's employee stock ownership plan ("ESOP").  This agreement fully resolves all DOL claims regarding the Company's ESOP transactions. The DOL had notified the Company, certain current and former directors of the Company, and the ESOP trustee of potential enforcement claims asserting breaches of fiduciary obligations and sought compensatory and equitable remedies, including monetary damages to the ESOP for alleged losses to the ESOP relating to third-party valuation of the Company's convertible serial preferred stock. The Company believes that the DOL's claims are without merit and strongly disagrees with the allegation that ESOP plan participants sustained losses of any kind as a result of these transactions.  The Company's position is supported by internal audits and audits by an independent third-party and the DOL.  Following a nine-month negotiation with the DOL, the Company's management and Board of Directors have decided that it would be in the best interest of the Company and its shareholders to enter into this agreement to resolve these claims and avoid potentially costly litigation.  The Company agreed to resolve all ESOP related claims with the DOL by making a one-time payment of $80.0 million to the ESOP, which will result in an after-tax charge to earnings of $49.2 million ($.47 per diluted common share) in the Company's fourth quarter and year ended December 31, 2012. In accordance with U.S. generally accepted accounting principles, the Company is required to recognize this agreement as a subsequent event in its 2012 fiscal year results because the event is related to conditions that existed at the balance sheet date of December 31, 2012.  The Company's financial results for the quarter and year ended December 31, 2012, as reported on January 31, 2013, are being revised to reflect the agreement. The revised condensed consolidated income statements are attached to this press release. As a result of recording this accrual, diluted net income per common share decreased $.47 per share for both the year and quarter ended December 31, 2012, resulting in diluted net income per common share of $6.02 per share for the year and $.65 per share for the quarter. In addition, Cost of goods sold increased $16.0 million and Selling, general and administrative expense increased $64.0 million while income tax expense decreased $30.8 million for both the quarter and year ended December 31, 2012 as a result of recording this accrual. Cash flow from operations remained at $887.9 million for the year ended 2012.  Although this agreement will not have an effect on full year 2013 earnings guidance issued on January 31, 2013, cash flow from operations will be impacted when this settlement payment is made.Investor Relations Contact:Bob WellsSenior Vice President, Corporate Communications and Public AffairsSherwin-WilliamsDirect:  216.566.2244rjwells@sherwin.comMedia Contact:Mike ConwayDirector, Corporate CommunicationsSherwin-WilliamsDirect:  216.515.4393Pager:  216.422.3751mike.conway@sherwin.comThe table below details the impact of this adjustment to the revised condensed consolidated income statements: STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED) Thousands of dollars, except per share data Three Months Ended December 31,Year Ended December 31,As ReportedRevisedAs ReportedRevised2012201220122012Net sales$    2,221,870$   2,221,870$    9,534,462$    9,534,462Cost of goods sold1,210,3621,226,3625,312,2365,328,236Gross profit *1,011,508995,5084,222,2264,206,226     Percent to net sales45.5%44.8%44.3%44.1%Selling, general and administrative expenses *827,976891,9763,195,6483,259,648     Percent to net sales37.3%40.1%33.5%34.2%Other general (income) expense - net(3,998)(3,998)5,2485,248Impairment of trademarks and goodwill4,0864,0864,0864,086Interest expense11,86311,86342,78842,788Interest and net investment income(953)(953)(2,913)(2,913)Other income - net(1,659)(1,659)(9,940)(9,940)Income before income taxes174,19394,193987,309907,309Income taxes *56,97826,141307,112276,275Net income$     117,215$      68,052$     680,197$     631,034Net income per common share:     Basic$           1.14$           0.66$           6.63$           6.15     Diluted$           1.12$           0.65$           6.49$           6.02Average shares outstanding - basic101,816,954101,816,954101,714,901101,714,901Average shares and equivalents outstanding - diluted104,133,772104,133,772103,930,429103,930,429* - Revised amounts include DOL Settlement of $49,163, net of tax (Cost of goods sold $16,000, Selling, general and administrative $64,000, and Income tax benefit of $30,837), or $.47 per share, for both the Three months and Year ended December 31, 2012.  SOURCE The Sherwin-Williams Company