Sherwin-Williams (SHW) 10-K risk factor changes: FY2020 vs FY2019

Adverse changes in such conditions in the United States and [removed: worldwide] [added: worldwide, including due to the COVID-19 pandemic,] may reduce the demand for some of our [removed: products] [added: products, adversely impact our ability to predict] and [added: meet any future changes in the demand for our products, and] impair the ability of those with whom we do business to satisfy their obligations to us, each of which could adversely affect our results of operations, cash flow, liquidity or financial condition.

Higher inflation rates, interest rates, tax rates and unemployment rates, higher labor and healthcare costs, recessions, changing governmental policies, laws and regulations, business disruptions due to cybersecurity incidents, terrorist activity, armed conflict, war, public health [removed: crises,] [added: crises (including the COVID-19 pandemic), impacts of climate change,] fires or other natural disasters, and other economic factors could also adversely affect demand for some of our products, [removed: availability] [added: our ability to predict] and [added: meet any future changes in the demand for our products, the availability, delivery or] cost of raw [removed: materials] [added: materials, our ability to adequately staff] and [added: maintain operations at affected facilities and] our results of operations, cash flow, liquidity or financial condition and that of our customers, vendors and suppliers.

A weakening [removed: or reversal] of [removed: the general economic recovery in the United States and other countries and regions in which we do business, or the continuation or worsening of economic downturns in other countries and regions,] [added: global credit markets] may adversely impact our net sales, the collection of accounts receivable, funding for working capital needs, expected cash flow generation from current and acquired businesses, [added: access to capital] and our investments, which may adversely impact our results of operations, cash flow, liquidity or financial condition.

Downgrades in these [removed: ratings] [added: ratings, including due to uncertainties regarding COVID-19,] will increase our cost of borrowing and could have an adverse effect on our access to the capital markets, including our access to the commercial paper market.

[removed: Increases] [added: Unexpected shortages and increases] in the cost of raw materials and energy may adversely affect our earnings or cash flow.

Factors such as political instability, higher [removed: tariffs] [added: tariffs, impacts of climate change] and adverse weather conditions, including [removed: hurricanes,] [added: hurricanes] and other natural [removed: disasters can] [added: disasters, or public health crises, including the COVID-19 pandemic, could] disrupt [added: the availability of] raw material and fuel [removed: supplies] [added: supplies, adversely impact our ability to adequately staff] and [added: maintain operations at affected facilities and] increase our costs.

[added: Although raw materials and energy supplies (including oil and natural gas) are generally available from various sources in sufficient quantities, unexpected] shortages and increases in the cost of raw materials and energy, or any deterioration in our relationships with or the financial viability of our suppliers, may have an adverse effect on our earnings or cash flow in the event we are unable to [added: obtain these raw materials and energy from other sources or] offset higher costs in a timely manner by sufficiently decreasing our operating costs or raising the prices of our products.

We have a large and varied customer base due to our extensive distribution [removed: network.][added: platform.]

During [removed: 2019,] [added: 2020,] no individual customer accounted for sales totaling more than ten percent of our sales.

Increased competition [added: or failure to keep pace with developments in key competitive areas of our business] may reduce our sales, earnings or cash flow performance.

Some of our competitors are larger than us [added: or operate more extensively in certain regions around the world] and have greater financial [added: or operational] resources to compete.

Technology, product quality, product innovation, breadth of product line, technical expertise, distribution, service and price are [removed: the] key competitive factors for our business.

Competition in any of these [removed: areas] [added: areas, or failure to keep pace with developments in any of these areas,] may reduce our sales and adversely affect our earnings or cash flow by resulting in decreased sales volumes, reduced prices and increased costs of manufacturing, distributing and selling our products.

At December 31, [removed: 2019,] [added: 2020,] we had total debt of approximately [removed: $8.7] [added: $8.292] billion, which is a decrease of [removed: $658.5] [added: $393.1] million since December 31, [removed: 2018.][added: 2019.]

Our ability to generate cash, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors beyond our [removed: control.][added: control, including public health crises, such as the COVID-19 pandemic, and related impacts.]

[removed: | • |] [added: -] require us to dedicate a substantial portion of our cash flow from operations to the payment of debt service, reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes; [removed: |]

[removed: | • |] [added: -] increase our vulnerability to adverse economic or industry conditions; [removed: |]

[removed: | • |] [added: -] limit our ability to obtain additional financing in the future to enable us to react to changes in our business; or [removed: |]

[removed: | • |] [added: -] place us at a competitive disadvantage compared to businesses in our industry that have less debt. [removed: |]

[removed: In addition,] [added: Further,] any payment of dividends, loans or advances by our subsidiaries could be subject to statutory or contractual restrictions.

[removed: In addition, even] [added: Even] if we are a creditor of any of our subsidiaries, our rights as a creditor would be subordinate to any security interest in the assets of our subsidiaries and any indebtedness of our subsidiaries senior to that held by us.

Net external sales of our consolidated foreign subsidiaries totaled approximately [removed: 20.6%, 23.0%] [added: 19.5%, 20.6%] and [removed: 19.8%] [added: 23.0%] of our total consolidated net sales in [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017,] [added: 2018,] respectively.

In addition, public health crises (including [removed: viral outbreaks, such as] the [removed: coronavirus)] [added: COVID-19 pandemic)] in foreign jurisdictions may temporarily reduce the demand for some of our products and adversely affect the availability and cost of raw materials.

Additionally, the results of the United Kingdom’s referendum on European Union membership, which resulted in the United [removed: Kingdom's] [added: Kingdom’s] exit from the European Union on January 31, [removed: 2020, has] [added: 2020 (“Brexit”),] caused [removed: and may continue to cause] significant volatility in global stock markets, currency exchange rate fluctuations and global economic uncertainty.

We are subject to a wide variety of complex domestic and foreign laws, rules and regulations, and legal compliance risks, including securities laws, tax laws, employment and pension-related laws, competition laws, U.S. and foreign export and trading laws, data [added: privacy and security laws, and laws governing improper business practices.]

[removed: These investigations,] examinations and other proceedings could subject us to significant liability and require us to take significant accruals or pay significant settlements, fines and penalties, which could have a material adverse effect on our results of operations, cash flow or financial condition.

[removed: In addition, unusually] [added: Unusually] cold and rainy weather could [added: also] have an adverse effect on sales of our exterior paint products.

[removed: Security breaches] [added: Cybersecurity incidents] and other disruptions to our information technology [removed: infrastructure] [added: systems] could interfere with our operations, [removed: compromise our information and] [added: result in] the [removed: information] [added: compromise or loss] of [removed: our customers] [added: critical] and [removed: suppliers] [added: confidential information] and severely harm our business.

As part of our business, we [removed: collect, process,] [added: collect] and [removed: retain] [added: handle] sensitive and confidential [removed: personal] information about our [added: business,] customers, employees and suppliers.

Despite the security measures we have in place, our facilities and systems, and those [removed: of the retailers, dealers, licensees and other third-party suppliers and vendors] [added: third-parties] with which we do business, may be vulnerable to [added: cyber attacks,] security breaches, [added: malware, viruses, ransomware, power outages, system failures, acts of vandalism or misconduct, human or technical errors or other similar events or disruptions.]

Any [removed: security breach] [added: such event] involving the misappropriation, loss or other unauthorized disclosure of [removed: confidential customer, employee, supplier or Company] information, whether [removed: caused by us, an unknown third party, or the retailers, dealers, licensees] [added: impacting us] or [removed: other third-party suppliers and vendors] [added: third-parties] with which we do business, could result in losses, [removed: severely] damage our reputation, expose us to the risks of [removed: litigation] [added: litigation, regulatory action] and liability, disrupt our operations and have a material adverse effect on our business, results of operations and financial condition.

The domestic and international regulatory environment related to information security, [removed: data] collection and privacy is increasingly rigorous and complex, with new and [removed: constantly] [added: rapidly] changing requirements applicable to our business.

Compliance with these requirements, including the European [removed: Union's] [added: Union’s] General Data Protection [removed: Regulation] [added: Regulation, the California Consumer Privacy Act] and other [removed: domestic and] international [added: and domestic] regulations, could result in additional costs and changes to our business practices.

[removed: Computer] [added: These information technology] systems are important to [added: many business-critical processes including, but not limited to,] production planning, manufacturing, finance, company [removed: operations] [added: operations, sales] and customer [removed: service, among other business-critical processes.][added: service.]

Despite [added: our] efforts to prevent disruptions to [removed: our computer] [added: these information technology] systems, [removed: our] [added: these] systems may be affected by damage or interruption [added: resulting] from, among other causes, [added: cyber attacks, security breaches, phishing, malware, viruses, ransomware,] power [removed: outages,] [added: outages or] system [removed: failures, computer viruses and other intrusions, including ransomware and other cyber attacks.][added: failures.]

We are required to comply with numerous complex and increasingly stringent domestic and foreign health, safety and environmental [removed: laws] [added: laws, regulations] and [removed: regulations,] [added: requirements,] the cost of which is likely to increase and may adversely affect our results of operations, cash flow or financial condition.

Our operations are subject to various domestic and foreign health, safety and environmental [removed: laws] [added: laws, regulations] and [removed: regulations,] [added: requirements,] including [removed: laws and regulations] related to climate [removed: change.][added: change and the COVID-19 pandemic.]

These [removed: laws and] [added: laws,] regulations [added: and requirements] not only govern our current operations and products, but also impose potential liability on us for our past operations.

We expect health, safety and environmental [removed: laws and] [added: laws,] regulations [added: and requirements] to [removed: impose] [added: be] increasingly stringent [removed: requirements] upon our industry and us in the future.

Our costs to comply with these [removed: laws and] [added: laws,] regulations [added: and requirements] may increase as [removed: these requirements] [added: they] become more stringent in the future, and these increased costs may adversely affect our results of operations, cash flow or financial condition.

ECONOMIC AND STRATEGIC RISKS

The COVID-19 pandemic has adversely impacted our business, results of operations, cash flow and financial condition, and the extent to which the COVID-19 pandemic will adversely impact our business, results of operations, cash flow, liquidity and financial condition in the future remains uncertain.

Beginning in early 2020, extraordinary and wide-ranging actions have been taken by international, federal, state, and local public health and governmental authorities to contain and combat the outbreak and spread of a novel strain of coronavirus (COVID-19).

These actions have included, and continue to include, quarantines, physical distancing, face coverings, restrictions on public gatherings and other health and safety protocols, stay-at-home orders, travel restrictions, mandatory business closures, and other mandates that have substantially restricted individuals’ daily activities and curtailed or ceased many businesses’ normal operations.

In response to the pandemic and these actions, we began implementing changes in our business in March 2020 designed to protect the health and well-being of our employees and customers and to support appropriate physical distancing and other health and safety protocols.

In late March 2020, we temporarily reduced store hours and closed our sales floors in our company-operated paint stores to the general public, requiring our customers to order product online or via phone and to access their products via curbside pickup or delivery.

We implemented remote, alternate and flexible work arrangements where possible, including implementing split shifts at facilities and remote work options for non-essential on-site functions, enhanced cleaning and sanitation procedures, transitioned some of our facilities to manufacture hand sanitizer for use in our facilities and surrounding communities, implemented domestic and international travel restrictions, implemented return to work and visitor screening protocols, and postponed or canceled hosting or attending large events.

We also enhanced certain employee benefits, such as tele-health, paid sick leave, family leave and voluntary leave of absence policies and programs.

In May 2020, we began the process of reinstituting regular store hours and re-opening the sales floors in our stores with appropriate health and safety protocols, which resulted in all of our stores in the U.S. and Canada being fully re-opened.

We also began the process of returning some of our employees who work in office environments to the office, although many employees continue to work remotely.

The necessary and appropriate measures we have taken have resulted in additional costs, including for COVID-related leave and related healthcare costs in support of our employees and their families, and have adversely impacted our business and financial performance.

We also face operational risks in connection with remote work arrangements, including but not limited to cybersecurity risks and increased vulnerability to damage or interruption resulting from, among other causes, cyber attacks, security breaches, phishing, malware, viruses, ransomware, power outages or system failures.

As our response to the pandemic continues and evolves, we expect to incur additional costs and are likely to experience further adverse impacts to our business, each of which may be significant.

The COVID-19 outbreak has surfaced in all regions around the world and has severely impacted the global economy, disrupted consumer spending and global supply chains, and created significant volatility and disruption of financial markets, all of which are expected to continue, and all of which have adversely affected, and are expected to continue to adversely affect, our business.

We continue to experience occasional, temporary disruptions and closures of some of our facilities due to COVID-19.

We also continue to see shifts in consumer behaviors and preferences, as well as impacts in the demand for some of our products.

Since the first quarter of 2020, we have experienced an unprecedented surge in do-it-yourself (DIY) demand due to some of our customers spending more time at home and focusing on home improvement projects.

As a result, our architectural business was quick to recover from the onset of the pandemic, while many of our industrial businesses are recovering at a slower pace as commercial and other industrial projects are delayed.

While we expect demand levels to return to more normalized levels eventually, our ability to predict and meet any future changes in the demand for our products due to the pandemic remains uncertain.

Although the raw materials used in the manufacturing, distribution, and sale of our products are typically available from various sources in sufficient quantities, and although we have not experienced significant raw material shortages, delays or increased costs to date, COVID-19 may result in increased costs and unexpected shortages or delays in the delivery of some raw materials, each of which could be significant.

We reduced spending in certain areas of our business, including through voluntary and involuntary leave programs and reductions in capital expenditures, temporarily suspending share repurchases and reducing discretionary spending, and we may need to take additional actions to reduce spending in the future.

While we are closely monitoring the impact of the pandemic on all aspects of our business, the extent of the impact on our results of operations, cash flow, liquidity, and financial performance, as well as our ability to execute near-term and long-term business strategies and initiatives, will depend on numerous evolving factors and future developments, which are highly uncertain and which we cannot predict or control, and some of which we are not currently aware, including, but not limited to:

(a) the duration, severity and scope of the pandemic, including additional waves, increases and spikes in the number of COVID-19 cases in certain areas; (b) rapidly-changing governmental and public health directives to contain and combat the outbreak, including the duration, degree and effectiveness of directives, as well as the easing, removal and potential reinstitution of directives; (c) the further development, availability, effectiveness and distribution of treatments and vaccines for COVID-19; (d) the extent and duration of the pandemic’s adverse and volatile effects on economic and social activity, consumer confidence, discretionary spending and preferences, labor and healthcare costs, and unemployment rates, any of which may reduce demand for some of our products and impair the ability of those with whom we do business to satisfy their obligations to us; (e) our ability to sell, provide and meet the demand for our services and products, including as a result of potential reinstitution of temporarily-reduced store hours and sales floor closures in our stores and continued travel restrictions, mandatory business closures, and stay-at-home or similar orders; (f) any temporary reduction in our workforce, closures of our offices and facilities and our ability to adequately staff and maintain our operations, including as a result of employees or their family members testing positive for COVID-19; (g) the ability of our customers and suppliers to continue their operations, which could affect our ability to sell, provide and meet the demand for our services and products and result in terminations of contracts, losses of revenue and adverse effects to our supply chain; and (h) any impairment in value of our tangible or intangible assets which could be recorded as a result of weaker economic conditions.

If the pandemic continues to create disruptions or turmoil in the credit or financial markets, or further impacts our credit ratings, it could adversely affect our ability to access capital on favorable terms and continue to meet our liquidity needs.

Given the inherent uncertainty surrounding COVID-19, we expect the pandemic will continue to create challenging operating environments and have an adverse impact on our business in the near term.

If these conditions persist for a prolonged period, the COVID-19 pandemic, including any of the above factors and others that are currently unknown, may have a material adverse effect on our business, results of operations, cash flow, liquidity, or financial condition.

FINANCIAL RISKS

A weakening of global credit markets may adversely affect our results of operations, cash flow, liquidity or financial condition.

OPERATIONAL RISKS

The transition period post-Brexit expired on December 31, 2020, and the United Kingdom and European Union entered into a free trade agreement that now governs the United Kingdom’s relationship with the European Union.

While the United Kingdom and European Union can generally continue to trade with each other without the imposition of tariffs for imports and exports, there are new customs requirements that require additional documentation and data, and there are also new controls on the movement and reporting of goods (including

chemicals).

We do not know the extent to which Brexit and the free trade agreement will ultimately impact the business and regulatory environment in the United Kingdom, the rest of the European Union or other countries, although it is possible there will be tighter controls and administrative requirements for imports and exports between the United Kingdom and the European Union or other countries, as well as increased regulatory complexities.

We rely on information technology systems to conduct our business, including recording and processing transactions, manufacturing and selling our products, maintaining and growing our competitive position, and supporting and communicating with our employees, customers, suppliers and other vendors.

Some of these systems are maintained or operated by third party providers.

These risks could be magnified due to the increased reliance on information technology systems because of the COVID-19 pandemic.

Disruptions to these systems may have a material adverse effect on our business, results of operations and financial condition.

We continue to mitigate these risks in a number of ways, including through additional investment, engagement of third-party experts and consultants, improving the security of our facilities and systems, providing training for employees, assessing the continued appropriateness of relevant insurance coverage and strengthening our controls to monitor and mitigate these threats.

LEGAL AND REGULATORY RISKS

These investigations,

A weakening or reversal of the general economic recovery in the United States and other countries and regions in which we do business, or the continuation or worsening of economic downturns in other countries and regions, may adversely affect our results of operations, cash flow, liquidity or financial condition.

Global economic uncertainty continues to exist.

Although raw materials and energy supplies (including oil and natural gas) are generally available from various sources in sufficient quantities, unexpected

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Although it is unknown what the terms of the United Kingdom’s future relationship with the European Union will be, it is possible there will be greater restrictions on imports and exports between the United Kingdom and the European Union and increased regulatory complexities.

privacy and security laws, and laws governing improper business practices.

cyber attacks, acts of vandalism or misconduct, computer viruses, ransomware, misplaced or lost data, programming and/or human errors or other similar events or intrusions.

As cyber security threats evolve in sophistication and become more prevalent in numerous industries worldwide, we continue to increase our sensitivity and attention to these threats, seek additional investments and resources to address these threats and enhance the security of our facilities and systems and strengthen our controls and procedures implemented to monitor and mitigate these threats.

Moreover, we rely heavily on computer systems to manage and operate our business, record and process transactions, and manage, support and communicate with our employees, customers, suppliers and other vendors.

Computer hardware and storage equipment that is integral to efficient operations, such as email, telephone and other functionality, is concentrated in certain physical locations in the various continents in which we operate.

Additionally, we rely on software applications, enterprise cloud storage systems and cloud computing services provided by third-party vendors.

If these third-party vendors, as well as our suppliers and other vendors, experience security breaches, cyber attacks, computer viruses, ransomware or other similar events or intrusions, our business may be adversely affected and such events or intrusions may have a material adverse effect on our business, results of operations and financial condition.

In the event a loss contingency is ultimately determined to be significantly higher than currently accrued, the recording

We have not settled any material lead pigment or lead-based paint litigation.

In the event any significant liability is determined to be attributable to us relating to such litigation, or any such liability is higher than any amount currently accrued for such litigation, the recording of the liability, or additional liability, as applicable, may result in a material impact on net income for the annual or interim period during which such liability is accrued.

See [removed: Notes 3 and] [added: Note] 21 to the Consolidated Financial Statements in Item 8 for additional information [removed: regarding the Valspar acquisition and] [added: on] the [removed: Company's] [added: Company’s] Reportable [removed: Segments, respectively.][added: Segments.]

The following discussion and analysis addresses comparisons of material changes in the consolidated financial statements for the years ended December 31, [removed: 2019] [added: 2020] and [removed: 2018.][added: 2019.]

For comparisons of the years ended December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] see [removed: Management's] [added: Management’s] Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of the [removed: Company's] [added: Company’s] Annual Report on Form 10-K for the fiscal year ended December 31, [removed: 2018] [added: 2019] filed on February [removed: 22, 2019.][added: 21, 2020.]

| | [added: | |] Year Ended December 31, | | | | | | | | | | [added: | | | | | | | | | | |]

| | [removed: 2019] | | [added: 2020] | | [removed: 2018] | | | | [added: 2019 | | | | | | $ Change | | | | | |] % Change | | [added: |]

[removed: | Net Sales: | | | | | | | | | | |][added: Net Sales]

| The Americas Group | [added: | |] $ | [removed: 10,171.9] [added: 10,383.2] | | | [added: | |] $ | [removed: 9,625.1] [added: 10,171.9] | | | [removed: 5.7] | [added: | $ | 211.3 | | | | | 2.1 | |] % |

| Consumer Brands Group | [removed: 2,676.8] | | [added: 3,053.4] | | [removed: 2,739.1] | | | | [removed: (2.3] [added: 2,676.8] | [removed: )%] | [added: | | | | 376.6 | | | | | | 14.1 | | % |]

| Performance Coatings Group | [removed: 5,049.2] | | [added: 4,922.4] | | [removed: 5,166.4] | | | | [removed: (2.3] [added: 5,049.2] | [removed: )%] | [added: | | | | (126.8) | | | | | | (2.5) | | % |]

Currency translation rate changes decreased [removed: 2019] [added: 2020] consolidated net sales by [removed: 1.4%.][added: 1.1%.]

Net sales of all consolidated foreign subsidiaries decreased [removed: 8.7%] [added: 2.7%] to [removed: $3.679] [added: $3.581] billion for [removed: 2019] [added: 2020] versus [removed: $4.028] [added: $3.679] billion for [removed: 2018] [added: 2019] due primarily to [removed: industrial market] [added: demand] softness [added: in certain industrial end markets globally] and [removed: macroeconomic pressures] [added: changes] in [removed: China] [added: The Americas Group’s store footprint outside of the U.S.] and [removed: Australia.][added: Canada.]

Net sales of all operations other than consolidated foreign subsidiaries increased [removed: 5.3%] [added: 3.9%] to [removed: $14.222] [added: $14.781] billion for [removed: 2019] [added: 2020] versus [removed: $13.507] [added: $14.222] billion for [removed: 2018.][added: 2019.]

Net sales from stores in U.S. and Canada open for more than twelve calendar months increased [removed: 5.3%] [added: 2.7%] in the year over last [removed: year's] [added: year’s] comparable period.

Currency translation rate changes reduced net sales by [removed: 0.9%] [added: 1.1%] compared to [removed: 2018.][added: 2019.]

During [removed: 2019,] [added: 2020,] The Americas Group opened [removed: 94] [added: 56] new stores and closed [removed: 32] [added: 40] redundant locations for a net increase of [removed: 62] [added: 16] stores, [removed: increasing the total number] [added: with a net increase] of [added: 38 new] stores in [removed: operation at December 31, 2019 to 4,758 in] the [removed: United States, Canada, Latin America] [added: U.S.] and [removed: the Caribbean.][added: Canada.]

Sales of products other than paint [removed: increased] [added: decreased] approximately [removed: 5.9%] [added: 2.0%] over last year.

In [removed: 2020,] [added: 2021,] the Consumer Brands Group plans to [removed: continue promotions of new and existing products and] expand its customer base and product assortment at existing customers.

The Performance Coatings Group’s net sales in [removed: 2019] [added: 2020] decreased due primarily to softer [removed: sales outside] [added: end market demand in most businesses, mostly due to the impacts] of [removed: North America] [added: COVID-19,] and unfavorable currency translation rate changes, partially offset by [removed: selling price increases.][added: increased sales in the packaging and coil divisions in all regions.]

Currency translation rate changes decreased net sales [removed: 2.3%] [added: 1.6%] compared to [removed: 2018.][added: 2019.]

In [removed: 2019,] [added: 2020,] the Performance Coatings Group opened [removed: 3] [added: 1] new [removed: branches and closed 4 locations decreasing] [added: location, increasing] the total [removed: from 282] to [removed: 281] [added: 282] branches open in the United States, Canada, Mexico, South America, Europe and Asia at [added: December 31, 2020.]

In [removed: 2020,] [added: 2021,] the Performance Coatings Group plans to continue expanding its worldwide [removed: presence and] [added: presence, including] improving its customer [removed: base.][added: base and product offering.]

Net sales in the Administrative segment, which primarily consists of external leasing revenue of excess headquarters space and leasing of facilities no longer used by the Company in its primary business, decreased by an insignificant amount in [removed: 2019.][added: 2020.]

Consolidated gross profit increased [removed: $617.5] [added: $646.5] million in [removed: 2019] [added: 2020] compared to the same period in [removed: 2018.][added: 2019.]

Consolidated gross profit as a percent to consolidated net sales increased to [removed: 44.9%] [added: 47.3%] in [removed: 2019] [added: 2020] from [removed: 42.3%] [added: 44.9%] in [removed: 2018.][added: 2019.]

Consolidated gross profit dollars and percent improved as a result of [removed: higher paint sales volume in North American stores, selling price increases, improved supply chain efficiencies,] [added: favorable customer and product mix and] moderating raw material costs, [removed: and lower acquisition-related amortization expense,] partially offset by unfavorable currency translation rate changes.

The Americas Group’s gross profit for [removed: 2019] [added: 2020] increased [removed: $384.2] [added: $388.2] million compared to the same period in [removed: 2018.][added: 2019.]

The Americas [removed: Group's] [added: Group’s] gross profit dollars and margin improved as a result of [removed: higher paint sales volume, selling price increases] [added: favorable customer] and [added: product mix and] moderating raw material costs.

The Consumer Brands Group’s gross profit increased [removed: $125.5] [added: $221.0] million in [removed: 2019] [added: 2020] compared to the same period in [removed: 2018.][added: 2019.]

The [removed: Consumer Brands Group's] [added: Performance Coatings Group’s] gross profit dollars and margin improved due primarily to [removed: improved supply chain efficiencies, synergies,] moderating raw material costs, [removed: and lower acquisition-related depreciation expense,] partially offset by [removed: lower paint sales volume.][added: unfavorable currency translation rate changes.]

The Performance Coatings Group’s gross profit for [removed: 2019] [added: 2020] increased [removed: $51.3] [added: $21.1] million compared to the same period in [removed: 2018.][added: 2019.]

Consolidated SG&A increased by [removed: $241.1] [added: $203.0] million due primarily to increased expenses to support higher sales levels and net new store openings, partially offset by good cost control.

The Americas [removed: Group's] [added: Group’s] SG&A increased [removed: $196.7] [added: $159.3] million for the year due primarily to increased spending [removed: due to the number of] [added: from] new store [removed: openings and general comparable store expenses to support higher] [added: openings, additional] sales [removed: levels.][added: reps and COVID-19 costs, partially offset by currency translation rate changes.]

The Consumer Brands Group’s SG&A increased by [removed: $12.7] [added: $28.3] million for the year primarily [removed: due] to [removed: increased expenses to] support [removed: new customer programs.][added: higher sales levels.]

The Administrative segment’s SG&A increased [removed: $32.6] [added: $6.7] million primarily due to [removed: increased investments in information systems and increased] [added: higher] compensation, including [added: incentive and] stock-based compensation.

Other general expense - net decreased [removed: $150.0] [added: $11.4] million in [removed: 2019] [added: 2020] compared to [removed: 2018.][added: 2019.]

See Notes [removed: 10] [added: 9] and 18 to the Consolidated Financial Statements in Item 8 for additional information concerning environmental matters and Other general expense - net, respectively.

As required by the Goodwill and Other Intangibles Topic of the ASC, management performed an annual impairment test of goodwill and indefinite-lived intangible assets as of October 1, [removed: 2019.][added: 2020.]

In the Performance Coatings Group, $75.6 million related to trademarks in North America directly associated with strategic decisions made to rebrand industrial products to the Sherwin-Williams® brand name, $25.7 million related to trademarks in the Asia Pacific region as a direct result of recent [removed: performance which reduced the long-term forecasted net sales and $15.7 million related to other recently acquired trademarks in various regions.]

Interest expense decreased [removed: $17.4] [added: $8.9] million in [removed: 2019] [added: 2020] primarily due to lower average debt levels.

[removed: Interest and net investment income increased $20.7 million in 2019 including] [added: The decrease is primarily due to the recognition of] an $18.8 million gain [removed: recognized] during the fourth quarter of 2019 after the Company received a favorable court decision in Brazil related to the recovery of certain indirect taxes previously paid over gross sales.

Outlook

Beginning in early 2020, extraordinary and wide-ranging actions have been taken by international, federal, state, and local public health and governmental authorities to contain and combat the outbreak and spread of a novel strain of coronavirus (COVID-19).

These actions have included, and continue to include, quarantines, physical distancing, face coverings, restrictions on public gatherings and other health and safety protocols, stay-at-home orders, travel restrictions, mandatory business closures, and other mandates that have substantially restricted individuals’ daily activities and curtailed or ceased many businesses’ normal operations.

We have worked with government and health authorities to continue to operate our business during this crisis, including our company-operated stores, manufacturing plants and other facilities, due to the essential nature of our products.

We have endeavored to follow recommended actions of government authorities and health officials in order to protect the health and well-being of our employees, customers and their families worldwide by implementing online and phone ordering of products, using curb side pickup or delivery, and implementing remote, alternate and flexible work arrangements where possible.

We will continue to work with government authorities and health officials in implementing appropriate safety measures, adapting as recommendations and safety protocols evolve so that we may maintain our operations, keep our stores open and continue to return employees who work in office environments.

The COVID-19 pandemic did not have a material adverse effect on our consolidated financial results for 2020.

We have a strong liquidity position, with $226.6 million in cash and $3.500 billion of unused capacity under our credit facilities at December 31, 2020.

The Company is in compliance with bank covenants and expects to remain in compliance.

During the first half of the year, we took actions to preserve liquidity and generate cash flow during the crisis.

As the circumstances around the COVID-19 pandemic remain fluid, we continue to actively monitor the pandemic’s impact to the Company worldwide, including our financial position, liquidity, results of operations and cash flow, while managing our response to the crisis through collaboration with employees, customers, suppliers, government authorities, health officials and other business partners.

Please see Item 1A “Risk Factors” in Part I of this Annual Report on Form 10-K for further information regarding the current and potential impact of the COVID-19 pandemic on the Company.

| | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Net Sales: | | | | | | | | | | | | | | | | | | | | | | | |

| Administrative | | | 2.7 | | | | | | 2.9 | | | | | | (0.2) | | | | | | (6.9) | | % |

| Total | | | $ | 18,361.7 | | | | | $ | 17,900.8 | | | | | $ | 460.9 | | | | | 2.6 | | % |

Consolidated net sales for 2020 increased due primarily to higher sales to most of the Consumer Brands Group’s retail customers in the U.S. and Europe, and higher sales in residential repaint, DIY and new residential in the U.S. and Canada paint stores in The Americas Group, partially offset by the impacts of COVID-19 on some end markets primarily served by the Performance Coatings Group.

Net sales in The Americas Group increased due primarily to higher residential repaint, DIY and new residential paint sales in the U.S. and Canada, partially offset by the impacts of COVID-19 on demand in some end markets served.

The total number of stores in operation at December 31, 2020 was 4,774 in the United States, Canada, Latin America and the Caribbean.

Net sales of the Consumer Brands Group increased in 2020 primarily due to higher volume sales to most of the group’s North American and European retail customers from strong DIY demand.

The following tables presents the components of income before income taxes as a percentage of net sales:

| | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| *(millions of dollars, except % of sales data)* | | | Year Ended December 31, | | | | | | | | | | | | | | | | | | | | |

| | | | 2020 | | | | | | | | | | | | 2019 | | | | | | | | |

| | | | | | | | | | % of Net Sales | | | | | | | | | | | | % of Net Sales | | |

| Gross profit | | | $ | 8,682.6 | | | | | 47.3 | | % | | | | $ | 8,036.1 | | | | | 44.9 | | % |

| Selling, general, and administrative expenses | | | 5,477.9 | | | | | | 29.8 | | % | | | | 5,274.9 | | | | | | 29.5 | | % |

| Other general expense - net | | | 27.7 | | | | | | 0.2 | | % | | | | 39.1 | | | | | | 0.2 | | % |

| Amortization | | | 313.4 | | | | | | 1.7 | | % | | | | 312.8 | | | | | | 1.7 | | % |

| Impairment of trademarks | | | 2.3 | | | | | | — | | % | | | | 122.1 | | | | | | 0.7 | | % |

| Interest expense | | | 340.4 | | | | | | 1.9 | | % | | | | 349.3 | | | | | | 2.0 | | % |

| Interest and net investment income | | | (3.6) | | | | | | — | | % | | | | (25.9) | | | | | | (0.1) | | % |

| California litigation expense | | | — | | | | | | — | | % | | | | (34.7) | | | | | | (0.2) | | % |

| Other expense - net | | | 5.3 | | | | | | — | | % | | | | 16.7 | | | | | | — | | % |

| Income before income taxes | | | $ | 2,519.2 | | | | | 13.7 | | % | | | | $ | 1,981.8 | | | | | 11.1 | | % |

The Consumer Brands Group’s gross profit dollars and margin improved due primarily to higher volume sales, product portfolio improvements and international cost reductions.

SG&A increased as a percent of sales to 29.8% in 2020 from 29.5% in 2019 as a result of higher costs to support our higher sales levels and investments in future growth initiatives.

The Performance Coatings Group’s SG&A increased by $8.7 million for the year primarily due to investments in information technology systems and expenses related to COVID-19, partially offset by currency translation rate changes.

| | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Administrative | 2.9 | | | | 3.9 | | | | (25.6 | )% |

| Total | $ | 17,900.8 | | | $ | 17,534.5 | | | 2.1 | % |

Consolidated net sales for 2019 increased due primarily to higher paint sales volume in The Americas Group and selling price increases.

Net sales in The Americas Group increased due primarily to higher paint sales volume across most end market segments and selling price increases.

Net sales of the Consumer Brands Group decreased in 2019 primarily due to the divestiture of the Guardsman insurance business and lower sales outside of North America in some end markets, partially offset by selling price increases and higher volume sales to some of the group's retail customers.

year-end.

The Performance Coatings Group's gross profit dollars and margin improved due primarily to selling price increases and moderating raw material costs, partially offset by unfavorable currency translation rate changes.

SG&A increased as a percent of sales to 29.5% in 2019 from 28.7% in 2018 as a result of softer sales outside of North America.

The Performance Coatings Group’s SG&A decreased by $0.9 million for the year related to softer sales outside of North America.

The decrease was mainly caused by a decrease of $147.6 million in the Administrative segment, which was primarily attributable to a decrease in expense recognized related to provisions for environmental matters.

The expense recognized related to environmental provisions decreased $153.3 million from the prior year.

This decrease was the result of the Company reaching a series of agreements in 2018 with the Environmental Protection Agency for remediation plans with cost estimates at one of the Company's four major sites which required significant environmental provisions to be recorded.

The impairment tests in 2018 did not result in any impairment.

During the third quarter of 2018, the Company recognized expense of $136.3 million related to the California litigation.

Other expense (income) - net decreased by $3.4 million in 2019 compared to 2018.

In addition, foreign currency related transaction losses increased $12.2 million in 2019, primarily in The Americas Group and Performance Coatings Group, which were offset by

other miscellaneous sources of income, including dividend and royalty income.

| Administrative | (827.0 | | ) | | (1,251.9 | | ) | | 33.9 | % |

| Total | $ | 1,981.8 | | | $ | 1,359.7 | | | 45.8 | % |

Consolidated Income before income taxes in 2019 increased $622.1 million to $1.982 billion, or 11.1% of net sales, compared to $1.360 billion, or 7.8% of net sales in 2018.

Income before income taxes increased $158.1 million and $112.1 million in The Americas Group and Consumer Brands Group, and decreased $73.0 million in the Performance Coatings Group when compared to 2018.

In 2019, the Administrative segment expenses favorably impacted Income before income taxes by $424.9 million when compared to 2018 primarily due to lower expense recognized related to environmental matters, benefits from the resolution of the California litigation as well as a Brazil indirect tax credit, and decreased acquisition-related expenses.

The increase in the effective rate in 2019 was primarily due to a $74.3 million tax credit investment loss recognized during the second quarter of 2019 related to the reversal of net tax benefits recognized in previous tax years from federal renewable energy tax credit funds.

Total other adjustments in 2018 included charges of $1.32 per share for environmental expense provisions, $1.09 per share for California litigation expense and $0.30 per share for pension settlement expense.

liabilities upon the adoption of the Leases Topic of the ASC (ASU 2016-02) as of January 1, 2019.

Accounts receivable increased $70.1 million, inventories increased $74.3 million primarily due to intentional inventory build to better service customers, other current assets increased $136.5 million primarily related to refundable income taxes and the surplus assets transferred from the Company's terminated domestic defined benefit pension plan as discussed in the deferred pension and other assets section below.

In addition to the increase in liabilities as a result of adopting ASU 2016-02, Accounts payable increased $76.9 million, partially offset by a decrease in the California litigation accrual of $124.3 million as a result of the terms of the settlement discussed in Note 11 of Item 8 and a decrease in Other accruals of $152.0 million due to timing of payments.

Inventories as a percent of Net sales increased to 10.6% in 2019 from 10.4% in 2018 primarily to support future growth.

The decrease in Deferred pension assets during 2019 of $227.7 million from $270.7 million last year was primarily due to the termination of the Company's domestic defined benefit pension plan.

Other assets decreased $22.6 million to $561.4 million at December 31, 2019 due primarily to a decrease in deferred tax assets.

The remaining change of $12.3 million is attributable to currency translation and other adjustments.

The Administrative segment incurred capital expenditures primarily for information systems hardware.

The plans are contingent upon completion of standard due diligence, approvals of economic development incentives and other matters at the state, county and city levels, and resolution of business and legal matters that accompany such major real estate investment projects.

Due to the remaining contingencies and uncertainties listed above, an estimate of the impact on the financial statements cannot be made at this time.

This was primarily attributable to the Company repurchasing $1.071 billion of its 2.25% Senior Notes due May 2020 and $490.0 million of its 2.75% Senior Notes due June 2022, partially offset by the Company issuing $800.0 million of 2.95% Senior Notes due 2029 and $550.0 million of 3.80% Senior Notes due 2049 (collectively the "New Notes") in a public offering during the third quarter of 2019.

The net proceeds from the issuance of the New Notes will be used for general corporate purposes.

This contract has been designated as a net investment hedge and will mature on January 15, 2022.

The fair value of the contract is included in Other assets on the balance sheet.

In [removed: 2019,] [added: 2019 and 2020,] the Company entered into [removed: a] U.S. Dollar to Euro cross currency swap [removed: contract] [added: contracts] to hedge the [removed: Company's] [added: Company’s] net investment in its European operations.

See Note [removed: 1] [added: 15] to the Consolidated Financial Statements in Item 8.

The Company entered into forward foreign currency exchange contracts during [removed: 2019] [added: 2020] to hedge against value changes in foreign currency.

There were no material contracts outstanding at December 31, [removed: 2019.][added: 2020.]

The contracts have been designated as net investment hedges and have various maturity dates.

This contract has been designated as a net investment hedge and will mature on January 15, 2022.

The CODM evaluates the performance of and allocates resources to the Reportable Segments based on [added: segment] profit or loss [removed: before income taxes] and cash generated from operations.

The Americas Group consisted of [removed: 4,758] [added: 4,774] company-operated specialty paint stores in the United States, Canada, Latin America and the Caribbean region at December 31, [removed: 2019.][added: 2020.]

[removed: The Americas Group company-operated] [added: These] stores market and sell Sherwin-Williams® and other controlled brand architectural paint and coatings, protective and marine products, OEM product finishes and related products.

At December 31, [removed: 2019,] [added: 2020,] The Americas Group consisted of operations from subsidiaries in 10 foreign countries.

Approximately [removed: 57%] [added: 55%] of the total sales of the Consumer Brands Group in [removed: 2019] [added: 2020] were intersegment transfers of products primarily sold through The Americas Group.

At December 31, [removed: 2019,] [added: 2020,] the Consumer Brands Group consisted of operations in the United States and subsidiaries in 6 foreign [removed: countries, including company-operated outlets in Australia and New Zealand.][added: countries.]

The Consumer Brands Group had sales to certain customers that, individually, may be a significant portion of the sales [added: and related profitability] of the segment.

Sherwin-Williams® and other controlled brand products are distributed through The Americas Group and this segment’s [removed: 281] [added: 282] company-operated branches and by a direct sales staff and outside sales representatives to retailers, dealers, jobbers, licensees and other third-party distributors.

At December 31, [removed: 2019,] [added: 2020,] the Performance Coatings Group consisted of operations in the United States and subsidiaries in [removed: 45] [added: 44] foreign countries.

There are sufficient suppliers of each product purchased for resale that none of the Reportable Segments anticipate any significant sourcing problems during [removed: 2020.][added: 2021.]

Customer recognition of [removed: our] trademarks and trade names [added: owned or licensed by the Company] collectively contribute significantly to our sales.

[removed: | *•* | *The] [added: *•The] Americas Group:* Sherwin-Williams®, Cashmere®, Colorgin®, Duration®, Emerald®, Harmony®, Kem Tone®, Loxon®, Metalatex®, Novacor®, Paint Shield®, ProClassic®, ProIndustrial™, ProMar®, SuperDeck®, SuperPaint®, Woodscapes® [removed: |]

[removed: | • |] [added: -] *Consumer Brands Group:* Cabot®, Duckback®, Dupli-Color®, Dutch Boy®, Geocel®, HGTV HOME® by Sherwin-Williams, Huarun®, Krylon®, Minwax®, Pratt & Lambert®, Purdy®, Ronseal®, Solver®, Thompson’s® WaterSeal®, Valspar®, Wattyl®, White Lightning® [removed: |]

[removed: | • |] [added: -] *Performance Coatings Group:* Sherwin-Williams®, Acrolon®, AcromaPro®, ATX®, AWX Performance Plus™, DeBeer®, Dimension®, Duraspar®, EcoDex®, Envirolastic®, Euronavy®, Excelo®, EzDex®, Fastline®, Firetex®, Fluropon®, Heat-Flex®, House of Kolor®, Huarun®, Kem Aqua®, Lazzuril®, Macropoxy®, Martin Senour®, ML Campbell®, [removed: Perma-Clad®,] [added: PermaClad®,] Planet Color®, Polane®, Powdura®, Sayerlack®, Sher-Wood®, Sumaré®, Ultra™, ValPure® , Valspar® [removed: |]

We believe that sufficient productive capacity currently exists to fulfill our needs for paint, coatings and related products through [removed: 2020.][added: 2021.]

For additional information regarding environmental-related matters, see Notes 1, [removed: 10] [added: 9] and 18 to the Consolidated Financial Statements in Item 8.

These forward-looking statements are based upon [removed: management's] [added: management’s] current expectations, estimates, assumptions and beliefs concerning future events and conditions and may discuss, among other things, anticipated future performance (including sales and [added: earnings), expected growth, future business plans and the costs and potential liability for environmental-related matters and the lead pigment and lead-based paint litigation.]

[removed: | • |] [added: -] general business conditions, strengths of retail and manufacturing economies and growth in the coatings industry; [removed: |]

[removed: | • |] [added: -] changes in general domestic [added: and international] economic conditions such as inflation rates, interest rates, tax rates, unemployment rates, higher labor and healthcare costs, recessions, and changing government policies, laws and regulations; [removed: |]

[removed: | • |] [added: -] changes in raw material and energy supplies and pricing; [removed: |]

[removed: | • |] [added: -] changes in our relationships with customers and suppliers; [removed: |]

[removed: | • |] [added: -] our ability to successfully integrate past and future acquisitions into our existing operations, as well as the performance of the businesses acquired; [removed: |]

[removed: | • |] [added: -] competitive factors, including pricing pressures and product innovation and quality; [removed: |]

[removed: | • |] [added: -] our ability to attain cost savings from productivity initiatives; [removed: |]

[removed: | • |] [added: -] risks and uncertainties associated with our expansion into and our operations in Asia, Europe, South America and other foreign markets, including general economic conditions, inflation rates, recessions, foreign currency exchange rates, foreign investment and repatriation restrictions, legal and regulatory constraints, civil unrest and other external economic and political factors; [removed: |]

[removed: | • |] [added: -] the achievement of growth in foreign markets, such as Asia, Europe and South America; [removed: |]

[removed: | • |] [added: -] increasingly stringent domestic and foreign governmental regulations, including those affecting health, safety and the environment; [removed: |]

[removed: | • |] [added: -] inherent uncertainties involved in assessing our potential liability for environmental-related activities; [removed: |]

[removed: | • |] [added: -] other changes in governmental policies, laws and regulations, including changes in tariff policies, as well as changes in accounting policies and standards and taxation requirements (such as new tax laws and new or revised tax law interpretations); [removed: |]

[removed: | • |] [added: -] the nature, cost, quantity and outcome of pending and future litigation and other claims, including the lead pigment and lead-based paint litigation, and the effect of any legislation and administrative regulations relating thereto; [removed: and |]

[removed: | • |] [added: -] adverse weather conditions or impacts of climate change, natural disasters and public health [removed: crises. |][added: crises, including the COVID-19 pandemic; and]

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 [removed: otherwise] [added: otherwise,] except as otherwise required by law.

However, periods of economic downturn can alter these seasonal patterns.

Human Capital

We believe our people are central to the foundation and future of the Company’s success.

Our culture and commitment to our people are important factors in attracting, retaining, developing and progressing qualified employees.

At December 31, 2020, we employed 61,031 people worldwide, of which 78% were in the United States and 22% were in other global regions.

*Culture and Engagement*.

The Company’s seven guiding values are the foundation of our culture of excellence—integrity, people, service, quality, performance, innovation and growth.

We value and support our people through, among other initiatives, our talent management, health and safety, employment practices and total rewards programs.

We are committed to fostering a culture of inclusion where differences are welcomed, appreciated and celebrated to positively impact our people and business, and where our people are engaged and encouraged to support the communities in which they live and work.

*Talent Management.* We are committed to providing our people with opportunities to learn, grow and be recognized for their achievements.

Through our integrated talent management strategy, we strive to attract, retain, develop and progress a workforce that embraces our culture of inclusion and reflects our diversity efforts.

The Company’s early talent programs, including our management trainee program, play a critical role in attracting and progressing a diverse pipeline of talent.

We are also committed to investing in our people by providing learning and employee networking opportunities to drive retention, progression and engagement and help them excel in their current and future roles.

*Health and Safety.* We are committed to providing safe and healthy working environments and taking reasonable preventative measures to protect the health and safety of our employees and customers.

We drive Environmental, Health and Safety (EHS) excellence across the Company and strive for incident-free workplaces — continuously assessing and developing the programs that are in place to help keep our employees, customers and communities safe.

In response to the COVID-19 pandemic, we have implemented significant changes to our business designed to protect the health and well-being of our employees and customers and to support appropriate physical distancing and other health and safety protocols.

These efforts continue to include: remote, alternate and flexible work arrangements where possible, such as split shifts at facilities and remote work options for non-essential on-site functions; enhanced cleaning and sanitation procedures; domestic and international travel restrictions; return to work and visitor screening protocols; and the postponement or cancellation of hosting or attending large events.

*Employment Practices and Total Rewards.* We are committed to the fair, consistent and equitable treatment of our employees in relation to working conditions, wages, benefits, policies and procedures.

To this end, the Company’s policies and programs are designed to respond to the needs of our employees in a manner that provides a safe, professional, efficient and rewarding workplace.

Our total rewards programs are designed to offer competitive compensation, comprehensive benefits and other programs to support employees’ growth, both personally and professionally, and the diverse needs and well-being of our employees worldwide.

During 2020, we enhanced certain of the Company’s benefits to support the health and well-being of our employees during the COVID-19 pandemic, including our tele-health, paid sick leave, family leave and voluntary leave of absence policies and programs.

For additional information regarding our response to the COVID-19 pandemic, see the information included within Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

- the duration, severity and scope of the COVID-19 pandemic and the actions implemented by international, federal, state and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19, which may exacerbate one or more of the aforementioned and/or other risks, uncertainties and factors more fully described in the Company’s reports filed with the Securities and Exchange Commission.

During 2019, this segment opened 62 net new stores, consisting of 94 new stores opened (83 in the United States, 7 in Canada, and 4 in South America) and 32 stores closed (6 in the United States, 17 in South America and 9 in Mexico).

In 2018 and 2017, this segment opened 76 and 101 net new stores, respectively.

However, the loss of any single customer would not have a material adverse effect on the overall profitability of the segment.

During 2019, this segment opened 3 new branches and closed 4 branches for a net decrease of 1 branch.

| | |

| --- | --- |

Employees

We employed 61,111 persons at December 31, 2019.

earnings), expected growth, future business plans and the costs and potential liability for environmental-related matters and the lead pigment and lead-based paint litigation.

For information regarding [added: certain] other environmental-related matters and other legal proceedings, see [added: the information included under the captions titled “Other Long-Term Liabilities” and “Litigation” of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and] Notes 1, [removed: 10, 11] [added: 9, 10] and 18 to the [added: “Notes to] Consolidated Financial [removed: Statements] [added: Statements”] in Item 8.

The information contained in Note [removed: 11] [added: 10] to the Consolidated Financial Statements is incorporated herein by reference.

As previously disclosed in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020, on July 1, 2020, the Company was notified by the California Department of Pesticide Regulation (“DPR”), alleging that the Company engaged in the delivery and/or sale of misbranded and/or unregistered pesticides in violation of the California Food and Agricultural Code.

DPR offered to settle the allegations for approximately $134,000.

Subsequently, the Company provided DPR with information in support of a reduction of the settlement amount.

On December 31, 2020, the Company and DPR reached a final settlement to resolve the matter, pursuant to which the Company agreed to pay a penalty of $90,401.

The Securities and Exchange Commission regulations require disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that the Company reasonably believes will exceed a specified threshold.

Pursuant to recent Securities and Exchange Commission amendments to this requirement that were not in effect prior to the filing of the Company’s most recent Quarterly Report on Form 10-Q, the Company will be using a threshold of $1 million for such proceedings.

Applying this threshold, there are no new environmental matters to disclose for this period.

As previously disclosed in the Company’s Form 10-K for the year ended December 31, 2018, the Company received a letter dated September 26, 2018 from the South Coast Air Quality Management District (“SCAQMD”) in California alleging excess emissions from non-compliant coatings and seeking a proposed penalty of approximately $1.5 million.

Settlement discussions regarding this matter have been unsuccessful to date, and SCAQMD filed a civil Complaint against the Company on November 30, 2018 in the Superior Court of California seeking civil penalties, costs and injunctive relief including an initial demand of $30 million.

The Company disputes the allegations in the Complaint and intends to vigorously defend this matter, if a mutually agreeable settlement cannot be reached.

In addition, as previously disclosed in the Company’s Form 10-Q for the quarterly period ended June 30, 2019, on April 4, 2019, SCAQMD notified the Company of its position that the Company was engaging in non-compliant sales of denatured alcohol.

The letter requested information regarding the Company’s sales of denatured alcohol and invited the Company to participate in settlement discussions to resolve the matter.

SCAQMD then issued an additional information request regarding denatured alcohol and other products.

The Company and SCAQMD are involved in discussions to resolve the aforementioned matters cooperatively and efficiently.

[removed: FORM 10-K][added: FORM 10-K]

For the fiscal year [removed: ended December] [added: ended December] 31, [removed: 2019][added: 2020]

Commission file [removed: number 1-04851][added: number 1-04851]

| Ohio | | | [added: | | |] 34-0526850 | [added: | |]

| (State or other jurisdiction of incorporation or organization) | | | [added: | | |] (I.R.S. Employer Identification No.) | [added: | |]

| 101 West Prospect Avenue | | | | [added: | | | | |]

| Cleveland, | [added: | |] Ohio | | [added: |] 44115-1075 | [added: | |]

| (Address of principal executive offices) | | | [added: | | |] (Zip Code) | [added: | |]

[removed: (216) 566-2000][added: (216) 566-2000]

| Title of each class | | [added: | | | |] Trading Symbol | | [added: | | | |] Name of each exchange on which registered | [added: | |]

| Common Stock, Par Value $1.00 | | [added: | | | |] SHW | | [added: | | | |] New York Stock Exchange | [added: | |]

| Large accelerated filer | [added: | |] ☒ | | [added: | | | |] Accelerated filer | [added: | |] ☐ | [added: | |]

| Non-accelerated filer | [added: | |] ☐ | | [added: | | | |] Smaller reporting company | [added: | |] ☐ | [added: | |]

| Emerging growth company | [added: | |] ☐ | | | | [added: | | | | | | | |]

At January 31, [removed: 2020, 92,227,704] [added: 2021, 89,601,869] shares of common stock were outstanding, net of treasury shares.

The aggregate market value of common stock held by non-affiliates of the Registrant at June [removed: 28, 2019] [added: 30, 2020] was [removed: $42,201,407,338] [added: $52,512,627,817] (computed by reference to the price at which the common stock was last sold on such date).

Portions of our Proxy Statement for the [removed: 2020] [added: 2021] Annual Meeting of Shareholders (“Proxy Statement”) to be filed with the Securities and Exchange Commission within 120 days of our fiscal year ended December 31, [removed: 2019] [added: 2020] are incorporated by reference into Part III of this report.

| | | [added: | | | |] Page | [added: | |]

| Item 1. | [removed: [Business](#s4C13786BD9B45D80A203A545E19F7844)] | [removed: [1](#s4C13786BD9B45D80A203A545E19F7844)] | [added: [Business](#i49a1606a43bd4252889ae41b10edea46_13) | | | [1](#i49a1606a43bd4252889ae41b10edea46_13) | | |]

| | [added: | |] [Cautionary Statement Regarding Forward-Looking [removed: Information](#s59A55FA8D7B45777906122BDC21DA7D3)] [added: Information](#i49a1606a43bd4252889ae41b10edea46_16)] | [removed: [3](#s59A55FA8D7B45777906122BDC21DA7D3)] | [added: | [5](#i49a1606a43bd4252889ae41b10edea46_16) | | |]

| Item 1A. | [added: | |] [Risk [removed: Factors](#sCA47046F12A8544F8413B5777BA621A9)] [added: Factors](#i49a1606a43bd4252889ae41b10edea46_19)] | [removed: [4](#sCA47046F12A8544F8413B5777BA621A9)] | [added: | [6](#i49a1606a43bd4252889ae41b10edea46_19) | | |]

| Item 1B. | [added: | |] [Unresolved Staff [removed: Comments](#sBD0C3CF91BBA5CC8BAD3457D7668B756)] [added: Comments](#i49a1606a43bd4252889ae41b10edea46_22)] | [removed: [10](#sBD0C3CF91BBA5CC8BAD3457D7668B756)] | [added: | [13](#i49a1606a43bd4252889ae41b10edea46_22) | | |]

| Item 2. | [removed: [Properties](#sDA87D9117F2F548EA0FAD476D528939C)] | [removed: [11](#sDA87D9117F2F548EA0FAD476D528939C)] | [added: [Properties](#i49a1606a43bd4252889ae41b10edea46_25) | | | [14](#i49a1606a43bd4252889ae41b10edea46_25) | | |]

| Item 3. | [added: | |] [Legal [removed: Proceedings](#s64B5F7E953765EA2A80D238753CB435E)] [added: Proceedings](#i49a1606a43bd4252889ae41b10edea46_28)] | [removed: [12](#s64B5F7E953765EA2A80D238753CB435E)] | [added: | [15](#i49a1606a43bd4252889ae41b10edea46_28) | | |]

| Item 4. | [added: | |] [Mine Safety [removed: Disclosures](#s0B7718789FD556FA96FEFF4D5DBB907C)] [added: Disclosures](#i49a1606a43bd4252889ae41b10edea46_31)] | [removed: [12](#s0B7718789FD556FA96FEFF4D5DBB907C)] | [added: | [15](#i49a1606a43bd4252889ae41b10edea46_31) | | |]

| | [added: | |] [Information About Our Executive [removed: Officers](#s7B0B6FA7D8EE5EA986A5A8CD977D135D)] [added: Officers](#i49a1606a43bd4252889ae41b10edea46_34)] | [removed: [12](#s7B0B6FA7D8EE5EA986A5A8CD977D135D)] | [added: | [16](#i49a1606a43bd4252889ae41b10edea46_34) | | |]

| Item 5. | [added: | |] [Market for Registrant’s Common Equity, Related Stockholder Matters and [removed: Issuer Purchases] [added: Issuer](#i49a1606a43bd4252889ae41b10edea46_40)[ ](#i49a1606a43bd4252889ae41b10edea46_40)[Purchases] of Equity [removed: Securities](#sD62FF0216C7256E29A278A741DBD7AFA)] [added: Securities](#i49a1606a43bd4252889ae41b10edea46_40)] | [removed: [14](#sD62FF0216C7256E29A278A741DBD7AFA)] | [added: | [18](#i49a1606a43bd4252889ae41b10edea46_40) | | |]

| Item 6. | [removed: [Selected] [added: | | Selected] Financial [removed: Data](#sC2A4BE37C5B35039B6C3397DBECD4B7D)] [added: Data] | [removed: [16](#s7822D04563FF5013A27E59982176E105)] | [added: | [20](#i49a1606a43bd4252889ae41b10edea46_43) | | |]

| Item 7. | [added: | |] [Management’s Discussion and Analysis of Financial Condition and Results [removed: of Operations](#sCE6029C49E375C87A7AF3387162480F2)] [added: of](#i49a1606a43bd4252889ae41b10edea46_49)[ ](#i49a1606a43bd4252889ae41b10edea46_49)[Operations](#i49a1606a43bd4252889ae41b10edea46_49)] | [removed: [22](#sCE6029C49E375C87A7AF3387162480F2)] | [added: | [26](#i49a1606a43bd4252889ae41b10edea46_49) | | |]

| Item 7A. | [added: | |] [Quantitative and Qualitative Disclosures About Market [removed: Risk](#s0B10C4F5CDBE56AEAF54F8E22F518E02)] [added: Risk](#i49a1606a43bd4252889ae41b10edea46_67)] | [removed: [33](#s0B10C4F5CDBE56AEAF54F8E22F518E02)] | [added: | [39](#i49a1606a43bd4252889ae41b10edea46_67) | | |]

| Item 8. | [added: | |] [Financial Statements and Supplementary [removed: Data](#sD73717B31F9E50CBA20A81867D6C128D)] [added: Data](#i49a1606a43bd4252889ae41b10edea46_70)] | [removed: [35](#sD73717B31F9E50CBA20A81867D6C128D)] | [added: | [41](#i49a1606a43bd4252889ae41b10edea46_70) | | |]

| Item 9. | [added: | |] [Changes in and Disagreements with Accountants on Accounting and [removed: Financial Disclosure](#s14C324EBACC95805B7970BD64B6765D8)] [added: Financial](#i49a1606a43bd4252889ae41b10edea46_196)[ ](#i49a1606a43bd4252889ae41b10edea46_196)[Disclosure](#i49a1606a43bd4252889ae41b10edea46_196)] | [removed: [85](#s14C324EBACC95805B7970BD64B6765D8)] | [added: | [89](#i49a1606a43bd4252889ae41b10edea46_196) | | |]

| Item 9A. | [added: | |] [Controls and [removed: Procedures](#s6618E6793F7D569E82CFEF8FDA309C87)] [added: Procedures](#i49a1606a43bd4252889ae41b10edea46_199)] | [removed: [85](#s6618E6793F7D569E82CFEF8FDA309C87)] | [added: | [89](#i49a1606a43bd4252889ae41b10edea46_199) | | |]

| Item 9B. | [added: | |] [Other [removed: Information](#sDC1CD9F1C3DD5BC29C8A79578978A710)] [added: Information](#i49a1606a43bd4252889ae41b10edea46_202)] | [removed: [85](#sDC1CD9F1C3DD5BC29C8A79578978A710)] | [added: | [89](#i49a1606a43bd4252889ae41b10edea46_202) | | |]

| [removed: [PART III](#s4AC3F2A9F9C15DE5B7C049B0D10740F4)] [added: [PART III](#i49a1606a43bd4252889ae41b10edea46_205)] | | | [added: | | | | | |]

| Item 10. | [added: | |] [Directors, Executive Officers and Corporate [removed: Governance](#sD02B8ABCB05B527AB3CE6A65AD0FAF52)] [added: Governance](#i49a1606a43bd4252889ae41b10edea46_208)] | [removed: [86](#sD02B8ABCB05B527AB3CE6A65AD0FAF52)] | [added: | [90](#i49a1606a43bd4252889ae41b10edea46_208) | | |]

| Item 11. | [added: | |] [Executive [removed: Compensation](#sE24C4DAA3E395F0A9F4314AA00CB8EC1)] [added: Compensation](#i49a1606a43bd4252889ae41b10edea46_211)] | [removed: [86](#sE24C4DAA3E395F0A9F4314AA00CB8EC1)] | [added: | [90](#i49a1606a43bd4252889ae41b10edea46_211) | | |]

| Item 12. | [added: | |] [Security Ownership of Certain Beneficial Owners and Management and [removed: Related Stockholder Matters](#sAF05B185B1055B2296811232E8FC8779)] [added: Related](#i49a1606a43bd4252889ae41b10edea46_214)[ ](#i49a1606a43bd4252889ae41b10edea46_214)[Stockholder Matters](#i49a1606a43bd4252889ae41b10edea46_214)] | [removed: [87](#sAF05B185B1055B2296811232E8FC8779)] | [added: | [91](#i49a1606a43bd4252889ae41b10edea46_214) | | |]

| Item 13. | [added: | |] [Certain Relationships and Related Transactions, and Director [removed: Independence](#s37A5EFDD74A35E5BAE6603BB642475EC)] [added: Independence](#i49a1606a43bd4252889ae41b10edea46_217)] | [removed: [87](#s37A5EFDD74A35E5BAE6603BB642475EC)] | [added: | [91](#i49a1606a43bd4252889ae41b10edea46_217) | | |]

| Item 14. | [added: | |] [Principal Accountant Fees and [removed: Services](#s107D2D4B57BB5945B0F2EB378447172B)] [added: Services](#i49a1606a43bd4252889ae41b10edea46_220)] | [removed: [87](#s107D2D4B57BB5945B0F2EB378447172B)] | [added: | [91](#i49a1606a43bd4252889ae41b10edea46_220) | | |]

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Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Yes ☒ No ☐

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| [PART I](#i49a1606a43bd4252889ae41b10edea46_10) | | | | | | | | |

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| [PART II](#i49a1606a43bd4252889ae41b10edea46_37) | | | | | | | | |

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| [PART IV](#i49a1606a43bd4252889ae41b10edea46_223) | | | | | | | | |

| | | | [Signatures](#i49a1606a43bd4252889ae41b10edea46_232) | | | [99](#i49a1606a43bd4252889ae41b10edea46_232) | | |

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| [PART I](#s535419F12B8759D5A4C1AAFA8EA72319) | | |

| [PART II](#sC055F433B744580CB1B1BEB81865ECD4) | | |

| [PART IV](#s50B94750AB345758972A1CA4ECB8664D) | | |

| | [Signatures](#sBBC91048FD4E5BE3ACA91178946195DD) | [94](#sBBC91048FD4E5BE3ACA91178946195DD) |

We believe our manufacturing and distribution facilities are well-maintained and are suitable and adequate, [removed: and have] [added: with] sufficient productive capacity, to meet our current needs.

| | | [added: | | | |] Manufacturing [added: (1)] | | | | [added: | | | | | | | |] Distribution [added: (1)] | | | [added: | | | | | |]

| | | [added: | | | |] Leased | [added: | |] Owned | [added: | |] Total | | [added: | | | |] Leased | [added: | |] Owned | [added: | |] Total | [added: | |]

| Consumer Brands Group | | | | | | | | | [added: | | | | | | | | | | | | | | | | | |]

| Asia | | [added: | | | |] 1 | [removed: 5] | [added: |] 6 | | [added: | 7 | | | | | |] 1 | [removed: 3] | [added: |] 4 | [added: | | 5 | | |]

| Australia and New Zealand | | | [added: | | | | | |] 3 | [added: | |] 3 | | [removed: 1] | [removed: 4] | [added: | | 2 | | | 3 | | |] 5 | [added: | |]

| Canada | | [removed: 1] | [removed: 2] | [added: | | | | |] 3 | | [added: | 3 | | | | | |] 1 | | [added: | | | |] 1 | [added: | |]

| Europe | | [removed: 1] | [added: | | | | | |] 3 | [removed: 4] | | [removed: 2] [added: 3] | [added: | | | | | 1 | | |] 3 | [removed: 5] | [added: | 4 | | |]

| Jamaica | | | [added: | | | | | |] 1 | [added: | |] 1 | | | [added: | | | | | |] 1 | [added: | |] 1 | [added: | |]

| Latin America | | [added: | | | |] 3 | [added: | |] 6 | [added: | |] 9 | | [added: | | | |] 4 | [added: | |] 5 | [added: | |] 9 | [added: | |]

| United States | | [removed: 5] | [added: | | | 6 | | |] 29 | [removed: 34] | | [removed: 8] [added: 35] | [removed: 3] | [added: | | | |] 11 | [added: | | 1 | | | 12 | | |]

| Total | | [removed: 11] | [removed: 49] | [removed: 60] | | [added: 10 | | | 51 | | | 61 | | | | | | 20 | | |] 17 | [removed: 19] | [removed: 36] | [added: 37 | | |]

| Performance Coatings Group | | | | | | | | | [added: | | | | | | | | | | | | | | | | | |]

| Africa | | | [added: | | | | | |] 1 | [added: | |] 1 | | | [added: | | | | | |] 1 | [added: | |] 1 | [added: | |]

| Asia | | [added: | | | |] 2 | [added: | | 3 | | |] 5 | [removed: 7] | | [added: | | |] 2 | [added: | | 2 | | |] 4 | [removed: 6] | [added: |]

| Europe | | [removed: 5] | [removed: 20] | [removed: 25] | | [removed: 5] [added: 2] | [removed: 13] | [removed: 18] | [added: 17 | | | 19 | | | | | | 4 | | | 12 | | | 16 | | |]

| Latin America | | | [removed: 5] | [added: | | 1 | | | 4 | | |] 5 | | [added: | | | |] 1 | [added: | | 6 | | |] 7 | [removed: 8] | [added: |]

| United States | | [removed: 1] | [added: | | | | | |] 9 | [removed: 10] | | [removed: 1] [added: 9] | [added: | | | | | | | |] 9 | [removed: 10] | [added: | 9 | | |]

| Total | | [removed: 8] | [removed: 40] | [removed: 48] | | [removed: 9] [added: 5] | [added: | |] 34 | [removed: 43] | [added: | 39 | | | | | | 7 | | | 30 | | | 37 | | |]

The operations of The Americas Group included [removed: one manufacturing and distribution facility in Uruguay and 4,758] [added: 4,774] company-operated specialty paint stores, of which 217 were owned, in the United States, Canada, Puerto Rico, Virgin Islands, Grenada, Trinidad and Tobago, St. Maarten, Jamaica, Curacao, Aruba, St. Lucia, Uruguay, Brazil, Chile, Peru, Mexico, Ecuador and Barbados at December 31, [removed: 2019.][added: 2020.]

At the end of [removed: 2019:][added: 2020:]

[removed: | • |] [added: -] the Mid Western Division operated [removed: 1,125] [added: 1,136] paint stores primarily located in the midwestern and upper west coast states; [removed: |]

[removed: | • |] [added: -] the Eastern Division operated [removed: 879] [added: 880] paint stores along the upper east coast and New England states; [removed: |]

[removed: | • |] [added: -] the Canada Division operated [removed: 248] [added: 243] paint stores throughout Canada; [removed: |]

[removed: | • |] [added: -] the Southeastern Division operated [removed: 1,143] [added: 1,163] paint stores principally covering the lower east and gulf coast states, Puerto Rico, Virgin Islands, Grenada, Trinidad and Tobago, St. Maarten, Jamaica, Curacao, Aruba, St. Lucia and Barbados; [removed: |]

[removed: | • |] [added: -] the South Western Division operated [removed: 1,043] [added: 1,054] paint stores in the central plains and the lower west coast states; and [removed: |]

[removed: | • |] [added: -] the Latin America Division operated [removed: 320] [added: 298] paint stores in Uruguay, Brazil, Chile, Peru, Mexico and Ecuador. [removed: |]

During [removed: 2019,] [added: 2020,] The Americas Group opened [removed: 62] [added: 16] net new stores, consisting of [removed: 94] [added: 56] new stores opened [removed: (83] [added: (53] in the United States, [removed: 7] [added: 1] in Canada, [removed: and 4] [added: 1] in South [removed: America)] [added: America] and [removed: 32] [added: 1 in Mexico) and 40] stores closed [removed: (6] [added: (10] in the United States, [added: 6 in Canada,] 17 in South America and [removed: 9] [added: 7] in Mexico).

The Performance Coatings Group operated 221 branches in the United States, of which 8 were owned, at December 31, [removed: 2019.][added: 2020.]

The Performance Coatings Group also operated [removed: 60] [added: 61] branches internationally, of which [removed: 6] [added: 7] were owned, at December 31, [removed: 2019,] [added: 2020,] consisting of branches in Canada (21), Europe (16), Chile (11), Mexico (5), Peru [removed: (4) and] [added: (4),] Vietnam [removed: (3).][added: (3) and Brazil (1).]

During [removed: 2019,] [added: 2020,] this segment opened [removed: 3] [added: 1] new [removed: branches] [added: branch] and [removed: closed 4] [added: did not close any] branches for a net [removed: decrease] [added: increase] of 1 branch.

For additional information regarding real property leases, see Note [removed: 9] [added: 8] to the Consolidated Financial Statements in Item 8.

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(1) Certain geographic locations may contain both manufacturing and distribution facilities.

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| Name | [added: | |] Age | [added: | |] Present Position | [added: | |]

| John G. Morikis | [removed: 56] | [added: | 57 | | |] Chairman and Chief Executive Officer, Director | [added: | |]

| David B. Sewell | [removed: 51] | [added: | 52 | | |] President and Chief Operating Officer | [added: | |]

| Allen J. Mistysyn | [removed: 51] | [added: | 52 | | |] Senior Vice President - Finance and Chief Financial Officer | [added: | |]

| Jane M. Cronin | [removed: 52] | [added: | 53 | | |] Senior Vice President - Corporate Controller | [added: | |]

| Mary L. Garceau | [removed: 47] | [added: | 48 | | |] Senior Vice President, General Counsel and Secretary | [added: | |]

| Thomas P. Gilligan | [removed: 59] | [added: | 60 | | |] Senior Vice President - Human Resources | [added: | |]

| James R. Jaye | [removed: 53] | [added: | 54 | | |] Senior Vice President - Investor Relations and Corporate Communications | [added: | |]

| [removed: Joel D. Baxter] [added: Joseph F. Sladek] | [removed: 59] | [added: | 50 | | |] President & General Manager, Global Supply Chain Division, Consumer Brands Group | [added: | |]

| [removed: Aaron M. Erter] [added: Justin T. Binns] | [removed: 46] | [added: | 45 | | |] President, Performance Coatings Group | [added: | |]

| Peter J. Ippolito | [removed: 55] | [added: | 56 | | |] President, The Americas Group | [added: | |]

Ms. Garceau served as Vice President, Deputy General Counsel and Assistant Secretary from June 2017 to August 2017, Associate General Counsel and Assistant Secretary from April 2017 to June [removed: 2017,] [added: 2017] and Associate General Counsel from February 2014 to April 2017.

Mr. [removed: Baxter] [added: Sladek] has served as President & General Manager, Global Supply Chain Division, Consumer Brands Group since [removed: September 2008.][added: January 2021.]

Mr. [removed: Baxter] [added: Young] has been employed with the Company since [removed: September 1990.][added: June 2017.]

Mr. [removed: Erter] [added: Binns] has served as President, Performance Coatings Group since [removed: March 2019.][added: November 2020.]

Prior to joining the Company in connection with the acquisition of The Valspar Corporation, Mr. [removed: Erter] [added: Young] served as [removed: Senior] Vice [removed: President] [added: President, Corporate Development] of Valspar from [removed: December] [added: October] 2015 to June [removed: 2017 and Vice President and General Manager, North America of Valspar from November 2011 to December 2015.][added: 2017.]

Mr. [removed: Erter] [added: Binns] has been employed with the Company since [removed: June 2017.][added: January 2001.]

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| Bryan J. Young | | | 45 | | | Vice President - Corporate Strategy and Development | | |

| Brian E. Padden | | | 49 | | | President, Consumer Brands Group | | |

Mr. Young has served as Vice President – Corporate Strategy and Development since June 2017.

Mr. Young was named Senior Vice President – Corporate Strategy and Development effective March 1, 2021 and will become an executive officer at that time.

Mr. Binns served as President & General Manager, Automotive Finishes Division, Performance Coatings Group from July 2018 to November 2020, President & General Manager, Eastern Division, The Americas Group from October 2016 to July 2018 and Vice President of Sales, The Americas Group from July 2014 to October 2016.

Mr. Padden has served as President, Consumer Brands Group since November 2020.

Mr. Padden served as Senior Vice President of Sales, International, Consumer Brands Group from November 2019 to November 2020, Senior Vice President & General Manager, EMEAI, Consumer Brands Group from January 2018 to November 2019 and Vice President of Sales, Retail National Accounts, Consumer Brands Group from January 2014 to December 2017.

Mr. Padden has been employed with the Company since January 1996.

Mr. Sladek served within the Global Supply Chain Division, Consumer Brands Group as Senior Vice President, Global Operations & Engineering from August 2020 to January 2021, Senior Vice President, International & Industrial Operations from April 2019 to August 2020, Vice President, Excellence Initiatives from March 2017 to March 2019 and Vice President, Engineering & Manufacturing Quality from June 2014 to March 2017.

Mr. Sladek has been employed with the Company since May 2007.

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Mr. Erter served as President, Consumer Brands Group from August 2017 to March 2019 and President & General Manager, Consumer Division, Consumer Brands Group from June 2017 to August 2017.

The number of shareholders of record at January 31, [removed: 2020] [added: 2021] was [removed: 5,656.][added: 5,431.]

The information [removed: with respect to] [added: regarding] securities authorized for issuance under the Company’s equity compensation plans is set forth [added: in our Proxy Statement] under the caption “Equity Compensation Plan Information” [removed: in our Proxy Statement, which] [added: and] is incorporated [removed: herein] by [removed: reference.][added: reference into Part III of this report.]

The following table sets forth a summary of the Company’s purchases of common stock during the fourth quarter of [removed: 2019.][added: 2020.]

| Period | | [added: | | | |] Total Number of Shares Purchased | | | [added: | | |] Average Price Paid per Share | | | | [added: | |] Total Number of Shares Purchased as Part of a Publicly Announced Plan | | | [added: | | |] Maximum Number of Shares that May Yet Be Purchased Under the Plan | | [added: |]

| October 1 – October 31 | | | | | | | | | | | | | | [added: | | | | | | | | | | | | |]

| Share repurchase program (1) | | [removed: 250,000] | | | [added: | 525,000 | | | | | |] $ | [removed: 576.00] [added: 724.82] | | | [removed: 250,000] | | [added: 525,000] | [removed: 8,550,000] | | [added: | | | 4,550,000 | | |]

| Employee transactions (2) | | [removed: 759] | | | [removed: $] | [removed: 562.89] | | | | | | [added: | | | | | | | | | | | |] N/A | | [added: |]

| November 1 – November 30 | | | | | | | | | | | | | | [added: | | | | | | | | | | | | |]

| Share repurchase program (1) | | [removed: 75,000] | | | [added: | 1,600,000 | | | | | |] $ | [removed: 569.25] [added: 719.73] | | | [removed: 75,000] | | [added: 1,600,000] | [removed: 8,475,000] | | [added: | | | 4,550,000 | | |]

| December 1 – December 31 | | | | | | | | | | | | | | [added: | | | | | | | | | | | | |]

| Share repurchase program (1) | | [removed: 25,000] | | | [added: | 975,092 | | | | | |] $ | [removed: 574.63] [added: 721.52] | | | [removed: 25,000] | | [added: 975,092] | [removed: 8,450,000] | | [added: | | | 5,075,000 | | |]

| Total | | | | | | | | | | | | | | [added: | | | | | | | | | | | | |]

[removed: | (2) | All] [added: (2)All] shares were delivered to satisfy the exercise price and/or tax withholding obligations by employees who exercised stock options or had shares of restricted stock vest. [removed: |]

The following graph compares the cumulative total shareholder return on Sherwin-Williams common stock with the cumulative five-year total return of the companies listed on the Standard & [removed: Poor's] [added: Poor’s] 500 Stock Index and [removed: a] [added: the] peer [removed: group] [added: groups] of companies selected on a line-of-business basis.

[added: For 2020, the Company revised its 2019 self-selected peer group to remove USG Corporation (as a result of its acquisition in 2019) and add Axalta Coating Systems Ltd.] The cumulative five-year total return assumes $100 was invested on December 31, [removed: 2014] [added: 2015] in Sherwin-Williams common stock, the S&P 500 and the [added: 2019 and 2020] peer [removed: group.][added: groups.]

The cumulative five-year total return, including reinvestment of dividends, represents the cumulative value through December 31, [removed: 2019.][added: 2020.]

[removed: ][added: ]

[removed: Peer] [added: 2019 peer] group of companies comprised of the following: Akzo Nobel N.V., BASF SE, Genuine Parts Company, H.B. Fuller Company, The Home Depot, Inc., [removed: Lowe's] [added: Lowe’s] Companies, Inc., Masco Corporation, Newell Brands Inc., PPG Industries, Inc., RPM International Inc., Stanley Black & [removed: Decker] [added: Decker,] Inc. and USG Corporation (included through April 2019 when it was acquired by Gebr.

| | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Share repurchase program (1) | | | | | | 99,908 | | | | | | $ | 675.47 | | | | | 99,908 | | | | | | 6,050,092 | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Employee transactions (2) | | | | | | 527 | | | | | | $ | 731.73 | | | | | | | | | | | N/A | | |

| Shares sold (3) | | | | | | (100,000) | | | | | | $ | 705.65 | | | | | | | | | | | N/A | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Employee transactions (2) | | | | | | 107 | | | | | | $ | 724.40 | | | | | | | | | | | N/A | | |

| Shares sold (3) | | | | | | (75,000) | | | | | | $ | 725.07 | | | | | | | | | | | N/A | | |

| Employee transactions (2) | | | | | | 634 | | | | | | $ | 730.49 | | | | | | | | | | | N/A | | |

| Shares sold (3) | | | | | | (175,000) | | | | | | $ | 713.97 | | | | | | | | | | | N/A | | |

(1)Shares were purchased through the Company’s publicly announced share repurchase program.

The Company had remaining authorization at December 31, 2020 to purchase 4,550,000 shares.

On February 17, 2021, the Board of Directors authorized the Company to purchase an additional 15,000,000 shares of the Company’s stock for treasury purposes.

There is no expiration date specified for the program.

(3)In 2019, 300,000 shares were transferred from the Company’s terminated domestic defined benefit plan surplus assets to a suspense account held within a trust for the qualified replacement plan.

In accordance with ASC 715, the transferred shares are treated as treasury stock.

In the three months ended December 31, 2020, 175,000 of the shares were sold.

2020 peer group of companies comprised of the following: Akzo Nobel N.V., Axalta Coating Systems Ltd., BASF SE, Genuine Parts Company, H.B. Fuller Company, The Home Depot, Inc., Lowe’s Companies, Inc., Masco Corporation, Newell Brands Inc., PPG Industries, Inc., RPM International Inc., and Stanley Black & Decker, Inc.

| | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Employee transactions (2) | | 1,282 | | | $ | 593.83 | | | | | | N/A | |

| Employee transactions (2) | | 657 | | | $ | 577.32 | | | | | | N/A | |

| Share repurchase program (1) | | 350,000 | | | $ | 574.46 | | | 350,000 | | | 8,450,000 | |

| Employee transactions (2) | | 2,698 | | | $ | 581.11 | | | | | | N/A | |

| | |

| --- | --- |

| (1) | All shares are purchased through the Company’s publicly announced share repurchase program. There is no expiration date specified for the program. The Company had remaining authorization at December 31, 2019 to purchase 8,450,000 shares. |

| *(millions of dollars, except per common share data)* | [removed: 2019] | | [added: 2020] | | [added: | | | | 2019 | | | | | |] 2018 | | | | [removed: 2017 (1)] | | [added: 2017 (1)] | | [removed: 2016] | | | | [removed: 2015] [added: 2016] | | |

| Operations | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | |]

| Net sales | [added: | |] $ | [removed: 17,900.8] [added: 18,361.7] | | | [added: | |] $ | [removed: 17,534.5] [added: 17,900.8] | | | [added: | |] $ | [removed: 14,983.8] [added: 17,534.5] | | | [added: | |] $ | [removed: 11,855.6] [added: 14,983.8] | | | [added: | |] $ | [removed: 11,339.3] [added: 11,855.6] | |

| Cost of goods sold | [removed: 9,864.7] | | [added: 9,679.1] | | [added: | | | | 9,864.7 | | | | | |] 10,115.9 | | | | [removed: 8,265.0] | | [added: 8,265.0] | | [removed: 5,934.3] | | | | [removed: 5,779.7] [added: 5,934.3] | | |

| Selling, general and administrative expenses | [removed: 5,274.9] | | [added: 5,477.9] | | [added: | | | | 5,274.9 | | | | | |] 5,033.8 | | | | [removed: 4,797.6] | | [added: 4,797.6] | | [removed: 4,140.3] | | | | [removed: 3,885.7] [added: 4,140.3] | | |

| Amortization | [removed: 312.8] | | [added: 313.4] | | [added: | | | | 312.8 | | | | | |] 318.1 | | | | [removed: 206.8] | | [added: 206.8] | | [removed: 25.4] | | | | [removed: 28.2] [added: 25.4] | | |

| Interest expense | [removed: 349.3] | | [added: 340.4] | | [added: | | | | 349.3 | | | | | |] 366.7 | | | | [removed: 263.5] | | [added: 263.5] | | [removed: 154.1] | | | | [removed: 61.8] [added: 154.1] | | |

| Income [removed: from continuing operations] before income taxes (2) | [removed: 1,981.8] | | [added: 2,519.2] | | [added: | | | | 1,981.8 | | | | | |] 1,359.7 | | | | [removed: 1,469.3] | | [added: 1,469.3] | | [removed: 1,595.2] | | | | [removed: 1,549.0] [added: 1,595.2] | | |

| Net income [removed: from continuing operations] (3) | [removed: 1,541.3] | | [added: 2,030.4] | | [added: | | | | 1,541.3 | | | | | |] 1,108.7 | | | | [removed: 1,769.5] | | [added: 1,769.5] | | [removed: 1,132.7] | | | | [removed: 1,053.8] [added: 1,132.7] | | |

| Financial Position | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | |]

| Accounts receivable - net | [added: | |] $ | [removed: 2,088.9] [added: 2,078.1] | | | [added: | |] $ | [removed: 2,018.8] [added: 2,088.9] | | | [added: | |] $ | [removed: 2,104.6] [added: 2,018.8] | | | [added: | |] $ | [removed: 1,231.0] [added: 2,104.6] | | | [added: | |] $ | [removed: 1,114.3] [added: 1,231.0] | |

| Inventories | [removed: 1,889.6] | | [added: 1,804.1] | | [added: | | | | 1,889.6 | | | | | |] 1,815.3 | | | | [removed: 1,742.5] | | [added: 1,742.5] | | [removed: 1,068.3] | | | | [removed: 1,018.5] [added: 1,068.3] | | |

| Working capital - net | [removed: 109.8] | | [added: (3.0)] | | [added: | | | | 109.8 | | | | | |] 46.8 | | | | [removed: 419.8] | | [added: 419.8] | | [removed: 798.1] | | | | [removed: 515.2] [added: 798.1] | | |

| Property, plant and equipment - net | [removed: 1,835.2] | | [added: 1,834.5] | | [added: | | | | 1,835.2 | | | | | |] 1,776.8 | | | | [removed: 1,877.1] | | [added: 1,877.1] | | [removed: 1,095.9] | | | | [removed: 1,041.8] [added: 1,095.9] | | |

| Total assets (4) | [removed: 20,496.2] | | [added: 20,401.6] | | [added: | | | | 20,496.2 | | | | | |] 19,134.3 | | | | [removed: 19,899.5] | | [added: 19,899.5] | | [removed: 6,752.5] | | | | [removed: 5,778.9] [added: 6,752.5] | | |

| Long-term debt | [removed: 8,050.7] | | [added: 8,266.9] | | [added: | | | | 8,050.7 | | | | | |] 8,708.1 | | | | [removed: 9,885.7] | | [added: 9,885.7] | | [removed: 1,211.3] | | | | [removed: 1,907.3] [added: 1,211.3] | | |

| Total debt | [removed: 8,685.2] | | [added: 8,292.1] | | [added: | | | | 8,685.2 | | | | | |] 9,343.7 | | | | [removed: 10,520.6] | | [added: 10,520.6] | | [removed: 1,952.5] | | | | [removed: 1,950.0] [added: 1,952.5] | | |

| Shareholders’ equity | [removed: 4,123.3] | | [added: 3,610.8] | | [added: | | | | 4,123.3 | | | | | |] 3,730.7 | | | | [removed: 3,647.9] | | [added: 3,647.9] | | [removed: 1,878.4] | | | | [removed: 867.7] [added: 1,878.4] | | |

| Per Share Information | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | |]

| Average shares outstanding - diluted (thousands) | [removed: 93,447] | | [added: 91,943] | | [added: | | | | 93,447 | | | | | |] 94,988 | | | | [removed: 94,927] | | [added: 94,927] | | [removed: 94,488] | | | | [removed: 94,543] [added: 94,488] | | |

| Book value | [added: | |] $ | [removed: 44.75] [added: 40.32] | | | [added: | |] $ | [removed: 40.07] [added: 44.75] | | | [added: | |] $ | [removed: 38.86] [added: 40.07] | | | [added: | |] $ | [removed: 20.20] [added: 38.86] | | | [added: | |] $ | [removed: 9.41] [added: 20.20] | |

| Net income [removed: from continuing operations] - diluted (5) | [removed: 16.49] | | [added: 22.08] | | [added: | | | | 16.49 | | | | | |] 11.67 | | | | [removed: 18.64] | | [added: 18.64] | | [removed: 11.99] | | | | [removed: 11.15] [added: 11.99] | | |

| Cash dividends | [removed: 4.52] | | [added: 5.36] | | [added: | | | | 4.52 | | | | | |] 3.44 | | | | [removed: 3.40] | | [added: 3.40] | | [removed: 3.36] | | | | [removed: 2.68] [added: 3.36] | | |

| Financial Ratios | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | |]

| Return on sales | [removed: 8.6] | [added: | 11.1 | |] % | | [added: | | 8.6 | | % | | | |] 6.3 | [added: |] % | | [added: | |] 11.8 | [added: |] % | | [removed: 9.6] | [removed: %] | [added: 9.6] | [removed: 9.3] | % |

| Asset turnover | [added: | |] 0.9 | [added: |] x | | [added: | |] 0.9 | [added: |] x | | [removed: 0.8] | [added: | 0.9 | |] x | | [removed: 1.8] | [added: | 0.8 | |] x | | [removed: 2.0] | [added: | 1.8 | |] x |

| Return on assets | [removed: 7.5] | [added: | 10.0 | |] % | | [added: | | 7.5 | | % | | | |] 5.8 | [added: |] % | | [added: | |] 8.9 | [added: |] % | | [removed: 16.8] | [removed: %] | [added: 16.8] | [removed: 18.2] | % |

| Return on equity (6) | [removed: 41.3] | [added: | 49.2 | |] % | | [added: | | 41.3 | | % | | | |] 30.4 | [added: |] % | | [added: | |] 94.2 | [added: |] % | | [removed: 130.5] | [removed: %] | [added: 130.5] | [removed: 105.8] | % |

| Dividend payout ratio (7) | [removed: 38.7] | [added: | 32.5 | |] % | | [added: | | 38.7 | | % | | | |] 18.5 | [added: |] % | | [added: | |] 28.4 | [added: |] % | | [removed: 30.1] | [removed: %] | [added: 30.1] | [removed: 30.6] | % |

| Total debt to capitalization | [removed: 67.8] | [added: | 69.7 | |] % | | [added: | | 67.8 | | % | | | |] 71.5 | [added: |] % | | [added: | |] 74.3 | [added: |] % | | [removed: 51.0] | [removed: %] | [added: 51.0] | [removed: 69.2] | % |