Sherwin-williams Company (the) · NYSE:SHW
Sherwin-williams Company (the) — The Sherwin-Williams Company — Investor Day (June 2019)
31 slides from Sherwin-williams Company (the)'s investor day presentation, Jun 5, 2019
Slide 1: Financial Overview
FINANCIAL OVERVIEW AL M I S T Y S Y N SENIOR VICE PRESIDENT - FINANCE & CHIEF FINANCIAL OFFICER FINANCIAL COMMUNITY PRESENTATION – JUNE 5, 2019 1
Slide 2: Forward-Looking Statements
Forward-Looking Statements The presentations today will contain certain “forward-looking statements," within the meaning of the federal securities laws, with respect to anticipated future performance (including sales and earnings), expected growth, future business plans and other matters. These stat
Slide 3: Consolidated Sales
Consolidated Sales In Millions of Dollars $17,534 $14,984 $11,856 $11,130 $11,339 2014 2015 2016 2017 2018 Expect 4% to 6% Sales CAGR Through FY20 FINANCIAL COMMUNITY PRESENTATION – JUNE 5, 2019 3 Refer to Financial Appendix 1: Income Statement
Slide 4: Consolidated Gross Profit & One-Time Costs
Consolidated Gross Profit Excluding Acquisition Related & One-Time Costs Adjusted Gross Profit Adjusted Gross Margin Proforma Gross Margin $7,513 $ In Millions $6,886 $5,925 $5,559 $5,164 50.0% 49.0% 46.4% 46.0% 42.8% 45.9% 44.4% 44.6% 41.7% 2014 2015 2016 2017 2018 Expect Long Term Gross Margin Ran
Slide 5: SG&A Expense
SG&A Expense Excluding Acquisition Related & One-Time Costs Adjusted SG&A $4,969 Adjusted SG&A % to Sales $4,694 Proforma SG&A % to Sales $ In Millions $4,102 $3,823 $3,914 34.3% 34.5% 34.6% 31.3% 29.6% 30.1% 31.1% 29.9% 28.3% 2014 2015 2016 2017 2018 FINANCIAL COMMUNITY PRESENTATION – JUNE 5, 2019
Slide 6: Operating Income
Operating Income Excluding Acquisition Related & One-Time Costs Adjusted Operating Income Adjusted Operating % to Sales $2,544 Proforma Operating % to Sales $ In Millions $2,191 $1,824 $1,647 $1,342 14.5% 15.4% 14.6% 12.1% 14.8% 14.6% 14.5% 14.3% 12.1% 2014 2015 2016 2017 2018 FINANCIAL COMMUNITY PR
Slide 7: Profit Before & After Tax
Profit Before & After Tax Excluding Acquisition Related & One-Time Costs & Tax Reform Adjusted Profit Before Tax Adjusted Profit After Tax Continuing Operations $2,185 $ In Millions $1,957 $1,729 $1,760 $1,549 $1,430 $1,258 $1,214 $1,054 $866 2014 2015 2016 2017 2018 PBT % to Sales 11.3% 13.7% 14.6%
Slide 8: Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA)
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) Excluding Acquisition Related & One-Time Costs % to Sales Adjusted EBITDA $2,821 $ In Millions $2,456 $2,007 $1,809 $1,521 16.0% 16.9% 16.4% 16.1% 13.7% 2014 2015 2016 2017 2018 Medium Term Target EBITDA as a % to Sales of 18.8% t
Slide 9: First Quarter 2019 Highlights
First Quarter 2019 Highlights 1Q18 1Q19 % Chg. External Sales $3.97B $4.04B +1.9% US/Canada SSS +5.2% +3.6% Consolidated EPS, Excluding Acquisition $3.57 $3.60 +0.8% Related & One-Time Costs EBITDA, Excluding Acquisition $582M $575M -1.2% Related & One-Time Costs FINANCIAL COMMUNITY PRESENTATION – J
Slide 10: 2019 Adjusted EPS Guidance Reconciliation
2019 Adjusted EPS Guidance Reconciliation Full Year EPS 2019 FULL YEAR GUIDANCE MID-POINT • Reaffirmed FY19 Adjusted EPS Guidance of Diluted Net Income per Share $17.43 $20.40 to $21.40 per Share, Excluding Acquisition Related Costs & Pension Plan Pension Plan Settlement Expense $0.27 Settlement Exp
Slide 11: Consolidated Run Rate Synergies
Consolidated Run Rate Synergies Synergies Allocations ($415M) …Run Rate Synergies Expected To Be Realized Revenue Synergies 6% SG&A 43% $415M $380M $230M Raw Material 37% Manufacturing/ 2017 2018 Long-Term Distribution/R&D Annual Synergy 14% COGS Target • 2018 P&L synergies of $180M • Expect to incu
Slide 12: Working Capital Performance
Working Capital Performance Accounts Receivable + Inventory – Payables % to Sales Working Capital $ In Millions $2,439 $2,055 $2,035 $2,294 $1,971 $1,139 13.6% 13.8% $975 12.5% 12.4% 11.6% 10.2% 8.6% 2014 2015 2016* 2017** 2018 1Q18 1Q19 Target FY Working Capital as a % to Sales of 11% to 11.5% *PRO
Slide 13: Cash Flow Performance, as Reported
Cash Flow Performance, as Reported In Millions of Dollars Net Operating Cash Net Operating Less Cap. Ex. (FCF) $1,944 $1,884 $1,661 $1,693 Uses of Cash $1,447 $1,309 • Capital Expenditures $1,213 • Pay Dividends $1,082 $1,070 • Manage Debt $881 • Acquisitions • Buy Back Stock 2014 2015 2016 2017 201
Slide 14: Net Operating Cash Less CapEx, as Reported
Net Operating Cash Less CapEx, as Reported In Millions of Dollars 2,000 1,500 1,000 500 0 (500) 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Full Year 2015 (97) 359 483 469 1,213 2016 (132) 528 398 276 1,070 2017 190 312 613 546 1,661 2018 (2) 479 788 428 1,693 2019 (87) FINANCIAL COMMUNITY PRESENTATION – JUNE 5
Slide 15: Debt to EBITDA Ratio
Debt to EBITDA Ratio Excluding Acquisition Related & One-Time Costs Debt Debt to EBITDA Adjusted EBITDA $ In Millions $11,755 $10,521 $9,831 $9,344 4.5 4.3 3.3 3.5 2.8 $2,617 $2,821 $2,815 $2,456 @ Close - 6/1/2017 2017 2018 Q1 2019 2019F Targeting Long Term Debt to EBITDA Ratio of 2.0X to 2.5X FINA
Slide 16: Maturities of Long-Term Debt
Maturities of Long-Term Debt (as of December 31, 2018) SHW Acquisition - LT Debt VAL $ In Millions $1,650 $1,619 $1,500 $1,250 $1,250 $1,500 $650 $650 $500 $250 $250 $350 $300 $300 $300 $400 $400 $400 $119 $4 2018 2019 2020 2021 2022 … 2024 2025 2026 2027 … 2042 2045 2047 … 2097 Committed to Reducin
Slide 17: Consistent Capital Allocation Philosophy
Consistent Capital Allocation Philosophy Consistent Capital Allocation Philosophy WE WILL NOT HOLD CASH • Return Dividend to 30% of PY Earnings BALANCED CAPITAL KEY OBJECTIVES – FY19 Increased 31.4% ALLOCATION GOALS • BBB+ Target CAPEX Invest • Reduce Debt to EBITDA Leverage To Rating Below 3.0x - F
Slide 18: Rating Agencies
Rating Agencies Standard & Poor’s Rating Services May 2017 • Long-Term Rating at ‘BBB’ • Short-Term Rating at ‘A-2’ • Credit Watch Stable Moody’s Investors Services February 2019 • Long-Term Rating at ‘Baa3’ • Short-Term Rating at ‘P-3’ • Credit Watch Stable Fitch Ratings May 2017 • Long-Term Rating
Slide 19: Consolidated Net Operating Cash & Uses of Cash
Consolidated Net Operating Cash & Uses of Cash 5-Year Net Operating Cash: ~$7.7B 2014-2018 CASH DIVIDENDS USES OF CASH $2.4 DEBT REPAYMENT $3.1 • Capital Expenditures • Pay Dividends CAPITAL EXPENDITURES • Manage Debt • Acquisitions TREASURY STOCK PURCHASE • Buy Back Stock $1.1 $1.4 FINANCIAL COMMUN
Slide 20: Dividends Per Share
Dividends Per Share 2005 - 2019 +31.4% 2018 was 40th Consecutive Year of Dividend Increases $4.52* $3.36 $3.40 $3.44 $2.68 $2.20 $2.00 $1.46 $1.56 $1.40 $1.42 $1.44 $1.26 $1.00 $0.82 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Dividend Returned to 30% of Prior Year Ear
Slide 21: Treasury Stock Acquired
Treasury Stock Acquired 2010 - 1Q 2019 (000s) Average Price Avg. Shares Shares Per Share Total Dollars Outstanding 2010 5,000 $75.14 $375,700 108,786 2011 4,700 $78.16 $367,372 105,672 2012 4,600 $121.25 $557,766 103,930 2013 4,300 $178.90 $769,271 103,049 2014 6,925 $220.66 $1,528,074 98,741 2015 3
Slide 22: Summary Capitalization
Summary Capitalization Strong Financial Profile Provides Flexibility 1Q19 . • Liquidity Sources Increase $1.15B in 2018 Cash $0.09B • $2.7B Available at 3/31/19 Debt $9.8B • Expect to Maintain Balance Sheet Flexibility to Pursue Growth Opportunities Revolving Credit Facility $2.0B • Annual Cash Gene
Slide 23: FY20 Financial Target Update
FY20 Financial Target Update ORIGINAL FY20 TARGET UPDATE FY16 FY17 FY18 FY19 • Reaffirming Financial Targets PRO PRO ACTUAL GUIDANCE FY20 TARGETS FORMA FORMA • Timing Revised 4%-6% • Price Increases Implemented to Offset Net Sales $15.8B $16.6B $17.5B 4%-7% CAGR Growth Significant Raw Material Cost
Slide 24: A Strong Foundation on Which We Will Continue to Build
A STRONG FOUNDATION • Track Record of Financial Performance & Focused Execution • Large, Stable Revenue Base with Improving EBITDA Margins • Strong Balance Sheet & Getting Stronger • SHW Experienced & Determined Management Team …ON WHICH WE WILL CONTINUE TO BUILD • Grow Revenue Organically & through
Slide 25: Financial Appendix
g é §) SHERWIN-WILLIAMS. FINANCIAL APPENDIX
Slide 26: Appendix 1: Income Statement
Appendix 1: Income Statement (In Millions of Dollars) Excluding Acquisition Related Costs, Reconciliation to As Reported FY17 FY17 FY18 FY17 ACQUISTION EXCLUDING FY18 FY18 FY18 EXCLUDING ACQ AS ACQUISTION AS ONE TIME ACQUISITION RELATED COSTS REL & ONE TIME REPORTED (1) RELATED COSTS REPORTED COSTS
Slide 27: Appendix 2A: FY EBITDA
Appendix 2A: FY EBITDA (In Millions of Dollars) Excluding Acquisition Related Costs, Reconciliation to As Reported FY17 FY17 FY17 FY18 FY18 FY18 FY18 AS ACQUISITION EXCLUDING AS ONE TIME ACQUISITION EXCLUDING ACQ REPORTED RELATED ACQUISTION REPORTED COSTS RELATED COSTS REL & ONE TIME COSTS RELATED C
Slide 28: Appendix 2B: 1Q EBITDA
Appendix 2B: 1Q EBITDA (In Millions of Dollars) Excluding Acquisition Related Costs, Reconciliation to As Reported 1Q18 1Q18 1Q18 1Q18 1Q19 1Q19 1Q19 1Q19 AS REPORTED ONE TIME ACQUISTION EXCLUDING AS REPORTED ONE TIME ACQUISTION EXCLUDING COSTS RELATED ACQ REL & COSTS RELATED ACQUISTION ONE TIME REL
Slide 29: Appendix 3: 1Q Highlights
Appendix 3: 1Q Highlights (In Millions of Dollars) Regulation G Reconciliation 1Q18 1Q19 2018 2019 GUIDANCE ACTUAL ACTUAL ACTUAL LOW HIGH Diluted net income per common share $2.62 $2.62 $11.67 $16.93 $17.93 California litigation expense $1.09 Environmental expense provision $1.32 Pension plan settle
Slide 30: Appendix 4: 2017 Pro Forma
Appendix 4: 2017 PRO FORMA (In Millions of Dollars) FY17 FY17 FY17 FY17 FY17 AS ACQUISITION EXCLUDING PRO FORMA PRO FORMA REPORTED (1) RELATED COSTS ACQUISTION ADJUSTMENTS & TAX REFORM RELATED COSTS (2) BENEFITS (1) NET SALES $14,984 $14,984 $1,651 $16,635 INCOME BEFORE INCOME TAXES $1,469 ($488) $1
Slide 31: Appendix 5: Group Financials
Appendix 5: Group Financials (In Millions of Dollars) Excluding Acquisition Related Costs, Reconciliation to As Reported FY17 FY17 FY17 FY17 FY18 FY18 FY18 AS VAL PRO ACQUISITION PRO FORMA AS ACQUISITION PRO FORMA REPORTED FORMA RELATED REPORTED RELATED COSTS COSTS PCG Sales $3,706 $1,102 $4,808 $5,
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