Sherwin-Williams (SHW) 10-K risk factor changes: FY2021 vs FY2020

The COVID-19 pandemic has adversely impacted our business, results of operations, cash flow and financial condition, and the [removed: extent to which] [added: continuing effects of] the COVID-19 pandemic [removed: will] [added: remain highly unpredictable and could] adversely impact our business, results of operations, cash flow, liquidity and financial condition in the [removed: future remains uncertain.][added: future.]

[removed: In response to] [added: Since] the [removed: pandemic and these actions,] [added: onset of the pandemic,] we [removed: began implementing] [added: have made] changes in our business [removed: in March 2020] designed to [added: support these efforts and] protect the health and well-being of our employees and [removed: customers and to support appropriate physical distancing and other health and safety protocols.][added: customers.]

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

We also [removed: face] [added: have faced, and may continue to face,] operational risks in connection with remote [added: and hybrid in-office] 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 [removed: our response to] the pandemic continues and evolves, we [removed: expect to] [added: may] incur additional costs and [removed: are likely to] experience further adverse impacts to our business, each of which may be significant.

The COVID-19 [removed: outbreak has surfaced in all regions around the world and] [added: pandemic] 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 [removed: are expected to] [added: may] continue, and all of which have adversely affected, and [removed: are expected to] [added: may] continue to adversely affect, our business.

We also [removed: continue to see] [added: have seen] shifts in consumer behaviors and preferences, as well as impacts in the demand for some of our products.

While [removed: we expect] demand levels [removed: to return] [added: for our products have been returning] to more normalized [removed: levels eventually,] [added: levels,] our ability to predict and meet any future changes in the demand for our products due to the [added: impacts of the] pandemic remains uncertain.

[added: While we continue to closely monitor 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 [removed: waves, increases] [added: variants] and [removed: spikes in the number] [added: waves] of COVID-19 [removed: cases in certain areas;] [added: cases;] (b) rapidly-changing governmental and public health directives to contain and combat the outbreak, including [added: with respect to COVID-19 vaccination and testing requirements, and] the duration, [removed: degree and] [added: degree,] effectiveness [removed: of directives, as well as the] [added: and] easing, removal [removed: and potential] [added: or] reinstitution of directives; (c) the further development, availability, effectiveness and distribution of [added: COVID-19] treatments and [removed: vaccines for COVID-19;] [added: vaccines;] (d) the extent and duration of the pandemic’s adverse [removed: and] [added: and/or] volatile effects on economic and social activity, [added: supply chain logistics, inflationary pressures,] consumer confidence, discretionary spending and preferences, labor and healthcare costs, [added: labor markets] and unemployment rates, any of which may reduce demand for some of our [removed: products] [added: products, impact our ability to predict] and [added: meet any future changes in the demand for our products, or] 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 [removed: potential] [added: new, or the] reinstitution of [removed: 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;] [added: prior, directives;] (f) any temporary reduction in our [removed: workforce,] [added: workforce or] 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 [removed: 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 [removed: markets,] [added: markets] or [removed: further] impacts our credit [removed: ratings,] [added: ratings in the future,] 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, [removed: we expect] the pandemic [removed: will] [added: may] continue to create challenging operating environments and [added: may] have an adverse impact on our business in the near term.

If these conditions persist [added: or worsen] for a prolonged period, the COVID-19 pandemic, including any of the above factors and others that are currently unknown, may [added: also] have a material adverse effect on our [removed: business,] 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 crises (including the COVID-19 pandemic), impacts of climate change, fires or other natural disasters, [added: supply chain disruptions,] and other economic factors could also adversely affect demand for some of our products, our ability to predict and meet any future changes in the demand for our products, the availability, delivery or cost of raw materials, our ability to adequately staff and maintain operations at affected facilities and our results of operations, cash flow, liquidity or financial condition and that of our customers, vendors and suppliers.

This decrease in spending [removed: will] likely [added: will] reduce the demand for some of our products and may adversely affect our sales, earnings, cash flow or financial condition.

In the U.S. construction and housing segments, the recent demand for new construction has caused contractors to experience a shortage of skilled workers, resulting in [added: related] project backlogs and an adverse effect on the growth rate of demand for our products.

Adverse weather conditions [removed: or] [added: and natural disasters, including due to the] impacts of climate [removed: change and natural disasters] [added: change,] may temporarily reduce the demand for some of our [added: products, impact our ability to meet the demand for our] products [added: or cause supply chain disruptions] and [added: increased costs, and] could have a negative effect on our sales, earnings or cash flow.

From time to time, adverse weather conditions [removed: or] [added: and natural disasters, including due to the] impacts of climate [removed: change and natural disasters] [added: change,] have had or may have an adverse effect on our [removed: sales] [added: sales, manufacture and distribution] of paint, coatings and related products.

[removed: An] [added: In any of these instances, an] adverse effect on sales may cause a reduction in our earnings or cash flow.

A weakening of global credit markets [removed: may] [added: could] adversely affect our results of operations, cash flow, liquidity or financial condition.

A weakening of global credit markets [removed: may] [added: could] adversely impact our net sales, the collection of accounts receivable, funding for working capital needs, expected cash flow generation from current and acquired businesses, access to capital and our investments, which [removed: may] [added: could] adversely impact our results of operations, cash flow, liquidity or financial condition.

Credit markets remain tight, and some customers who require financing for their businesses have not been able to [removed: obtain] [added: obtain, and may in the future have difficulty obtaining,] necessary financing.

Although we [removed: currently] have available credit facilities to fund our current operating needs, we cannot be certain we will be able to replace our existing credit facilities or refinance our existing or future debt when necessary.

Downgrades in these ratings, including due to uncertainties regarding COVID-19, [removed: will] [added: likely would] 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.

At December 31, [removed: 2020,] [added: 2021,] we had total debt of approximately [removed: $8.292] [added: $9.615] billion, which is [removed: a decrease] [added: an increase] of [removed: $393.1 million] [added: $1.323 billion] since December 31, [removed: 2019.][added: 2020.]

Our ability to generate cash, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors beyond our control, including public health crises, such as the COVID-19 pandemic, [added: adverse weather conditions or natural disasters, such as due to the impacts of climate change, supply chain disruptions] and related impacts.

The degree to which we are [removed: currently] leveraged could have important consequences for shareholders.

- 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 [added: long-term growth initiatives and] general corporate purposes;

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

Our primary exchange rate exposure is with the Euro, the Chinese yuan, the [removed: Brazilian real, the] Canadian dollar, the [added: Brazilian real, the] British pound, [removed: the Mexican peso, the Australian dollar] and the [removed: Argentine] [added: Mexican] peso, each against the U.S. dollar.

Factors such as political instability, higher tariffs, [removed: impacts of climate change and] [added: supply chain disruptions,] adverse weather [removed: conditions, including] [added: conditions and natural disasters (including] hurricanes and [added: severe winter or] other [removed: natural disasters,] [added: storms due to the impacts of climate change)] or public health [removed: crises, including] [added: crises (including] the COVID-19 [removed: pandemic,] [added: pandemic)] could disrupt the availability of raw material and fuel supplies, adversely impact our ability to [added: meet customer demands for some of our products or] adequately staff and maintain operations at affected facilities and increase our costs.

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 [removed: flow in the event we are unable to 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.][added: flow.]

The cost of raw materials and energy [removed: has in the past experienced, and likely will in the future] [added: could] continue to [removed: experience,] [added: experience] periods of [removed: volatility.][added: volatility in the future and may adversely affect our earnings and cash flow.]

During [removed: 2020,] [added: 2021,] no individual customer accounted for sales totaling more than ten percent of our sales.

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

We have historically made strategic acquisitions of businesses in the paint and coatings industry and [removed: will] likely [added: will] acquire additional businesses in the future as part of our long-term growth strategy.

Net external sales of our consolidated foreign subsidiaries totaled approximately [removed: 19.5%, 20.6%] [added: 21.2%, 19.5%] and [removed: 23.0%] [added: 20.6%] of our total consolidated net sales in [removed: 2020, 2019] [added: 2021, 2020] and [removed: 2018,] [added: 2019,] respectively.

In many foreign countries, it is [removed: acceptable] [added: not uncommon] to engage in certain business practices we are prohibited from engaging in because of regulations applicable to us, such as the Foreign Corrupt Practices Act and the UK Bribery Act.

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

[removed: We] [added: Although we have not experienced any material disruption in our business as a result of Brexit to date, 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 [removed: complexities.][added: complexities, as the transition continues.]

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

Although the risks are organized by headings, and each risk is discussed separately, many are interrelated.

Readers should not interpret the disclosure of any risk factor to imply that the risk has not already materialized.

Our business, results of operations, cash flow and financial condition have been, and may be in the future, adversely affected by the COVID-19 pandemic, including the impacts resulting from efforts by public health and governmental authorities to contain and combat the outbreak and spread of COVID-19.

The changes in our business have included: temporarily reducing store hours and closing 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; implementing remote, alternate and flexible work arrangements where possible; enhancing cleaning and sanitation procedures; implementing domestic and international travel restrictions and return to work and visitor screening protocols; postponing or canceling the hosting or attending of large events; and enhancing certain employee benefits, such as telehealth, paid sick leave, family leave and voluntary leave of absence policies and programs.

We continue to evaluate the changes we have made in our business, consider new and further changes, and work with public health, government and other authorities and organizations to maintain our operations and support the health and well-being of our employees, customers and their families.

We have experienced occasional, temporary disruptions and closures of some of our facilities, including more recently in connection with the Omicron variant and due to our employees or their family members testing positive for COVID-19.

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.

In the event adverse weather conditions or a natural disaster cause significant damage to any one or more of our principal manufacturing or distribution facilities, we may not be able to manufacture the products needed to meet customer demand, which could have an adverse effect on our sales of certain paint, coatings and related products.

The impact of these risks to our suppliers also have had or may have an adverse effect on our sales, manufacture and distribution of certain of our products.

During 2021, Winter Storm Uri and Hurricane Ida caused significant damage to certain of our suppliers’ facilities in Texas and Louisiana, respectively.

These natural disasters and their impacts to certain of our suppliers resulted in unprecedented industry-wide supply chain disruptions, increased raw material and other costs, and significantly hindered our ability to manufacture the products needed to fully meet customer demand.

We discuss these natural disasters and their adverse impact to our business in more detail in the “Outlook” section in Item 7.

In the event we experience supply chain disruptions from our suppliers, we may not be able to timely secure alternate sources in order to prevent significant impacts to our business, or we may experience quality issues with raw materials and energy sourced from alternate sources.

If the cost of raw materials and energy increases, we may not be able to offset higher costs in a timely manner by sufficiently decreasing our operating costs or raising the prices of our products.

requirements that require additional documentation and data and new controls on the movement and reporting of goods (including chemicals).

Our ability to attract, retain, develop and progress a qualified workforce could adversely impact our business and impair our ability to meet our strategic objectives and the needs of our customers.

Our continued success depends in part on our ability to identify, attract and onboard qualified candidates with the requisite education, background, skills and experience and our ability to retain, develop, progress and engage qualified employees across our business, including our stores, fleet, manufacturing, corporate and other operations and functions.

Competition for talent is intense, and we are facing increased wage rates and labor shortages due to a tightened labor market and other macroeconomic conditions that have been exacerbated by the COVID-19 pandemic.

To the extent we are unable to remain competitive with our compensation and benefits, talent management strategy, inclusive workplace culture and related initiatives, programs and practices, or if qualified candidates or employees become more difficult to attract or retain under reasonable terms, we may experience higher labor-related costs and may be unable to attract, retain, develop and progress a qualified workforce, which could adversely affect our business and future success and impair our ability to meet our strategic objectives and the needs of our customers.

the laws of the United States.

Increased global focus on climate change may result in the imposition of new or additional regulations or requirements applicable to, and increased financial risks for, our business and industry.

A number of government authorities and agencies have introduced or are contemplating regulatory changes to address climate change, including the regulation of greenhouse gas emissions.

The outcome of new legislation or regulation in the U.S. and other jurisdictions in which we operate may result in new or additional requirements, including to fund energy efficiency activities or renewable energy use, and fees or restrictions

on certain activities or materials.

Compliance with these climate change initiatives may also result in additional costs to us, including, among other things, increased production costs, additional taxes, additional investments in renewable energy use and other initiatives, reduced emission allowances or additional restrictions on production or operations.

We may not be able to timely recover the cost of compliance with such new or more stringent laws and regulations, which could adversely affect our results of operations, cash flow or financial condition.

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 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.

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

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.

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:

Unusually cold and rainy weather could also have an adverse effect on sales of our exterior paint products.

chemicals).

These investigations,

commercial, contractual and antitrust claims that are inherently subject to many uncertainties regarding the possibility of a loss to us.

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

We [removed: have endeavored] [added: also continue] 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 [removed: 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.][added: worldwide.]

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 [added: and the potential impact of supply chain disruptions and raw material inflation] on the Company.

The following discussion and analysis addresses comparisons of material changes in the consolidated financial statements for the years ended December 31, [removed: 2020] [added: 2021] and [removed: 2019.][added: 2020.]

For comparisons of the years ended December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] see Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, [removed: 2019] [added: 2020] filed on February [removed: 21, 2020.][added: 19, 2021.]

| | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | | | | | $ Change | | | | | | % Change | | |

| The Americas Group | | | $ | [removed: 10,383.2] [added: 11,217.0] | | | | | $ | [removed: 10,171.9] [added: 10,383.2] | | | | | $ | [removed: 211.3] [added: 833.8] | | | | | [removed: 2.1] [added: 8.0] | | % |

| Consumer Brands Group | | | [removed: 3,053.4] [added: 2,721.6] | | | | | | [removed: 2,676.8] [added: 3,053.4] | | | | | | [removed: 376.6] [added: (331.8)] | | | | | | [removed: 14.1] [added: (10.9)] | | % |

| Performance Coatings Group | | | [removed: 4,922.4] [added: 6,003.8] | | | | | | [removed: 5,049.2] [added: 4,922.4] | | | | | | [removed: (126.8)] [added: 1,081.4] | | | | | | [removed: (2.5)] [added: 22.0] | | % |

Currency translation rate changes [removed: decreased 2020] [added: increased 2021] consolidated net sales by [removed: 1.1%.][added: 0.8%.]

Net sales of all consolidated foreign subsidiaries [removed: decreased 2.7%] [added: increased 17.9%] to [removed: $3.581] [added: $4.223] billion for [removed: 2020] [added: 2021] versus [removed: $3.679] [added: $3.581] billion for [removed: 2019] [added: 2020] due primarily to [added: returning] demand [removed: softness] in [removed: certain] [added: most] industrial end markets [removed: globally and changes in The Americas Group’s store footprint outside of the U.S. and Canada.][added: globally.]

Net sales of all operations other than consolidated foreign subsidiaries increased [removed: 3.9%] [added: 6.4%] to [removed: $14.781] [added: $15.722] billion for [removed: 2020] [added: 2021] versus [removed: $14.222] [added: $14.781] billion for [removed: 2019.][added: 2020.]

Net sales from stores in U.S. and Canada open for more than twelve calendar months increased [removed: 2.7%] [added: 6.0%] in the year over last year’s comparable period.

Currency translation rate changes reduced net sales by [removed: 1.1%] [added: 0.1%] compared to [removed: 2019.][added: 2020.]

During [removed: 2020,] [added: 2021,] The Americas Group opened [removed: 56] [added: 92] new stores and closed [removed: 40] [added: 7] redundant locations for a net increase of [removed: 16] [added: 85] stores, with a net increase of [removed: 38] [added: 73] new stores in the U.S. and Canada.

The total number of stores in operation at December 31, [removed: 2020] [added: 2021] was [removed: 4,774] [added: 4,859] in the United States, Canada, Latin America and the Caribbean.

The Americas Group’s objective is to expand its store base an average of 2% each year, primarily through [removed: internal] [added: organic] growth.

Sales of products other than paint [removed: decreased] [added: increased] approximately [removed: 2.0%] [added: 12.5%] over last year.

In [removed: 2021,] [added: 2022,] the Consumer Brands Group [removed: plans to expand its] [added: is focused on meeting] customer [removed: base] [added: needs through product development, building inventory,] and [added: optimizing the] product assortment at existing customers.

Currency translation rate changes [removed: decreased] [added: increased] net sales [removed: 1.6%] [added: 2.2%] compared to [removed: 2019.][added: 2020.]

[removed: In 2020,] [added: At December 31, 2021,] the Performance Coatings Group [removed: opened 1 new location, increasing the total to] [added: had] 282 branches open in the United States, Canada, Mexico, South America, Europe and [removed: Asia at December 31, 2020.][added: Asia.]

In [removed: 2021,] [added: 2022,] the Performance Coatings Group plans to continue expanding its worldwide presence, including improving its customer 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: 2020.][added: 2021.]

The following [removed: tables] [added: table] presents the components of income before income taxes as a percentage of net sales:

| *(millions of [removed: dollars, except % of sales data)*] [added: dollars)*] | | | Year Ended December 31, | | | | | | | | | [removed: | | | | | | | | | | | |]

| Gross profit | | | [removed: $] [added: 8,542.7] | [removed: 8,682.6] | | | | | [removed: 47.3] [added: 42.8] | | % | | | | [removed: $] [added: 8,682.6] | [removed: 8,036.1] | | | | | [removed: 44.9] [added: 47.3] | | % |

| Selling, general, and administrative expenses [added: (SG&A)] | | | [removed: 5,477.9] [added: 5,572.5] | | | | | | [removed: 29.8] [added: 27.9] | | % | | | | [removed: 5,274.9] [added: 5,477.9] | | | | | | [removed: 29.5] [added: 29.8] | | % |

| Other general expense - net | | | [removed: 27.7] [added: 101.8] | | | | | | [removed: 0.2] [added: 0.5] | | % | | | | [removed: 39.1] [added: 27.7] | | | | | | 0.2 | | % |

| Amortization | | | [removed: 313.4] [added: 309.5] | | | | | | [removed: 1.7] [added: 1.5] | | % | | | | [removed: 312.8] [added: 313.4] | | | | | | 1.7 | | % |

| Impairment of trademarks | | | [removed: 2.3] [added: —] | | | | | | — | | % | | | | [removed: 122.1] [added: 2.3] | | | | | | [removed: 0.7] [added: —] | | % |

| Interest expense | | | [removed: 340.4] [added: 334.7] | | | | | | [removed: 1.9] [added: 1.7] | | % | | | | [removed: 349.3] [added: 340.4] | | | | | | [removed: 2.0] [added: 1.9] | | % |

| Interest and net investment income | | | [removed: (3.6)] [added: (4.9)] | | | | | | — | | % | | | | [removed: (25.9)] [added: (3.6)] | | | | | | [removed: (0.1)] [added: —] | | % |

| Other [added: (income)] expense - net | | | [removed: 5.3] [added: (19.5)] | | | | | | [removed: —] [added: (0.1)] | | % | | | | [removed: 16.7] [added: 5.3] | | | | | | — | | % |

| Income before income taxes | | | $ | [removed: 2,519.2] [added: 2,248.6] | | | | | [removed: 13.7] [added: 11.3] | | % | | | | $ | [removed: 1,981.8] [added: 2,519.2] | | | | | [removed: 11.1] [added: 13.7] | | % |

Consolidated gross profit [removed: increased $646.5] [added: decreased $139.9] million in [removed: 2020] [added: 2021] compared to the same period in [removed: 2019.][added: 2020.]

Consolidated gross profit as a percent to consolidated net sales [removed: increased] [added: decreased] to [removed: 47.3%] [added: 42.8%] in [removed: 2020] [added: 2021] from [removed: 44.9%] [added: 47.3%] in [removed: 2019.][added: 2020.]

The Americas Group’s gross profit for [removed: 2020] [added: 2021] increased [removed: $388.2] [added: $134.7] million compared to the same period in [removed: 2019.][added: 2020.]

The Consumer Brands Group’s gross profit [removed: increased $221.0] [added: decreased $327.8] million in [removed: 2020] [added: 2021] compared to the same period in [removed: 2019.][added: 2020.]

The Performance Coatings Group’s gross profit for [removed: 2020] [added: 2021] increased [removed: $21.1] [added: $58.6] million compared to the same period in [removed: 2019.][added: 2020.]

The Performance Coatings Group’s gross profit dollars [removed: and margin improved] [added: increased] due [removed: primarily] to [removed: moderating raw material costs, partially offset by unfavorable] [added: higher sales and favorable] currency translation rate [removed: changes.][added: changes, partially offset by higher raw material costs.]

Summary

- Consolidated net sales increased 8.6% in the year to a record $19.94 billion

◦Net sales from stores in U.S. and Canada open more than twelve calendar months increased 6.0% in the year

◦Raw material availability issues negatively impacted full year sales by a mid-single digit percentage

- Diluted net income per share decreased to $6.98 per share in the year compared to $7.36 per share in the full year 2020

◦Adjusted diluted net income per share decreased to $8.15 per share in the year compared to $8.19 per share in the full year 2020

- Completed a three-for-one stock split to improve accessibility to a broader base of investors

- Finalized the divestiture of our Wattyl business in Australia and New Zealand

- Continued to invest in acquisitions expanding our product offerings and manufacturing capacity

The Company navigated many uncertainties during 2021, including unprecedented raw material inflation, industry-wide supply chain disruptions, as well as temporary changes in the demand for our products due to the impacts of the COVID-19 pandemic earlier in the year and the Omicron variant later in the year.

Despite the uncertainties, our businesses continue to be well-positioned, and we have confidence in our long-term outlook.

The COVID-19 pandemic continues to evolve and disrupt normal activities in many segments of the global economy.

As we look to 2022, we are encouraged by the demand environment, which remains robust across our end markets.

Our customers remain positive, and we expect that jobs delayed by raw material availability issues in 2021 will be completed in the quarters ahead rather than cancelled.

We brought on 50 million gallons of incremental architectural paint production capacity in 2021 to meet this demand and will continue to add paint stores in 2022.

We expect raw material availability to continue improving.

We are implementing additional price increases to offset to the sustained cost inflation and expect raw material costs will ultimately moderate, enabling the recovery of our margins over time.

We intend to remain disciplined in our capital allocation approach, focused on driving value for our customers and returns for our shareholders.

Capital expenditures, excluding our new global headquarters, will remain modest at approximately 2 percent of sales and we will continue to pursue acquisitions that fit our strategy.

We expect to use any excess cash to make open market purchases of Company stock.

Our balance sheet remains strong, and we expect debt to EBITDA to approach the high end of our target of 2.0 to 2.5 times range.

Common Stock Split

The Stock Split was effected on March 31, 2021.

All share and per share information herein has been retroactively adjusted to reflect the Stock Split.

| Administrative | | | 2.2 | | | | | | 2.7 | | | | | | (0.5) | | | | | | (18.5) | | % |

| Total | | | $ | 19,944.6 | | | | | $ | 18,361.7 | | | | | $ | 1,582.9 | | | | | 8.6 | | % |

Consolidated net sales for 2021 increased due primarily to selling price increases in all Reportable Segments and higher product sales volume in the Performance Coatings Group, partially offset by lower sales volume in the Consumer Brands Group.

Net sales in The Americas Group increased due primarily to selling price increases in all end markets, while sales volume remained flat as a result of raw material availability challenges.

Net sales of the Consumer Brands Group decreased in 2021 primarily due to lower volume sales to most of the group’s retail customers as DIY demand returned to more normal levels, raw material availability issues, and the Wattyl divestiture, partially offset by selling price increases.

The Performance Coatings Group’s net sales in 2021 increased due primarily to higher sales volumes in most end markets and selling price increases.

| | | | 2021 | | | | | | | | | | | | 2020 | | | | | | | | |

| Net sales | | | $ | 19,944.6 | | | | | 100.0 | | % | | | | $ | 18,361.7 | | | | | 100.0 | | % |

| Cost of goods sold | | | 11,401.9 | | | | | | 57.2 | | % | | | | 9,679.1 | | | | | | 52.7 | | % |

Consolidated cost of goods sold increased $1.723 billion, or 17.8% in 2021 compared to the same period in 2020 primarily due to higher raw material costs (including titanium dioxide and petrochemical feedstock sources) and unfavorable currency translation rate changes, partially offset by lower sales volumes primarily as a result of raw material availability issues during the second half of 2021.

Currency translation rate changes increased Cost of goods sold by 1.1% in the current year.

Consolidated gross profit dollars decreased primarily due to higher raw material costs in each Reportable Segment and lower sales volume in the Consumer Brands Group, partially offset by selling price increases in each Reportable Segment as well as higher sales volume in The Performance Coatings Group and The Americas Group.

The gross margin rate decreased primarily as a result of higher raw material costs in each Reportable Segment.

The Americas Group’s gross profit dollars increased primarily as a result of selling price increases, partially offset by higher raw material costs.

The America’s Group gross margin rate decreased primarily due to higher raw material costs.

The Consumer Brands Group’s gross profit dollars and margin rate decreased primarily as a result of lower sales volume, the Wattyl divestiture, higher raw material costs and supply chain inefficiencies.

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 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.

| 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.

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 Performance Coatings Group’s net sales in 2020 decreased due primarily to softer end market demand in most businesses, mostly due to the impacts of COVID-19, and unfavorable currency translation rate changes, partially offset by increased sales in the packaging and coil divisions in all regions.

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

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

Consolidated gross profit dollars and percent improved as a result of favorable customer and product mix and moderating raw material costs, partially offset by unfavorable currency translation rate changes.

The Americas Group’s gross profit dollars and margin improved as a result of favorable customer and product mix and moderating raw material costs.

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 Consumer Brands Group’s SG&A increased by $28.3 million for the year primarily to support higher sales levels.

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, 2020.

During the fourth quarter of 2020, the Company recognized non-cash pre-tax impairment charges totaling $2.3 million related to recently acquired trademarks in the Performance Coatings Group as a direct result of recent performance which reduced the long-term forecasted net sales in the Asia Pacific region.

During the fourth quarter of 2019, the Company recognized non-cash pre-tax impairment charges totaling $122.1 million related to recently acquired trademarks.

These charges included impairments totaling $117.0 million in the Performance Coatings Group and $5.1 million in the Consumer Brands Group.

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

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 $8.9 million in 2020 primarily due to lower average debt levels.

Interest and net investment income decreased $22.3 million in 2020 to $3.6 million.

The decrease is primarily due to the recognition of an $18.8 million gain 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.

During the third quarter of 2019, the Company recognized a benefit of $34.7 million related to the California litigation.

Other expense - net decreased by $11.4 million in 2020 compared to 2019 primarily due to a decrease in foreign currency transaction related losses primarily in the Performance Coatings Group.

In 2020, the Administrative segment recognized a $21.3 million loss related to the extinguishment of the 2.75% Senior Notes due 2022.

In 2019, the Administrative segment recognized a $32.4 million charge for a domestic pension plan settlement and $14.8 million in losses related to the extinguishment of the 2.25% Senior Notes due 2020 and 2.75% Senior Notes due 2022, partially offset by a $38.7 million gain related to the recognition of indirect tax credits.

There were no other items within Other income or Other expense that were individually significant at December 31, 2020 or 2019.

| Administrative | | | (854.6) | | | | | | (827.0) | | | | | | (27.6) | | | | | | (3.3) | | % |

| Total | | | $ | 2,519.2 | | | | | $ | 1,981.8 | | | | | $ | 537.4 | | | | | 27.1 | | % |

The decrease in the effective rate was primarily due to the recognition of a $74.3 million tax credit investment loss in 2019 related to the reversal of certain partnership tax credits, partially offset by a reduction in research and development credits.

The tax credit investment loss negatively impacted the 2019 effective tax rate by 370 basis points.

Diluted net income per share in 2019 included charges for acquisition-related costs of $3.21 per share and other adjustments totaling $1.42 per share.

In [removed: 2019] [added: 2021] and 2020, the Company [removed: entered into] [added: utilized] U.S. Dollar to Euro cross currency swap contracts to hedge the Company’s net investment in its European operations.

The Company entered into forward foreign currency exchange contracts during [removed: 2020] [added: 2021] to hedge against value changes in foreign currency.

There were no material contracts outstanding at December 31, [removed: 2020.][added: 2021.]

\[THIS PAGE INTENTIONALLY LEFT BLANK\]

The Company reports its segment information in the same way that management internally organizes its business for assessing performance and making decisions regarding allocation of [removed: resources in accordance with the Segment Reporting Topic of the Accounting Standards Codification (ASC).][added: resources.]

The Americas Group consisted of [removed: 4,774] [added: 4,859] company-operated specialty paint stores in the United States, Canada, Latin America and the Caribbean region at December 31, [removed: 2020.][added: 2021.]

At December 31, [removed: 2020,] [added: 2021,] The Americas Group consisted of operations from subsidiaries in 10 foreign countries.

The Consumer Brands Group supplies a broad portfolio of branded and private-label architectural paint, stains, varnishes, industrial products, wood finishes products, wood preservatives, applicators, corrosion inhibitors, aerosols, caulks and adhesives to retailers and distributors throughout North America, as well as in [removed: Australia, New Zealand,] China and Europe.

Approximately [removed: 55%] [added: 62%] of the total sales of the Consumer Brands Group in [removed: 2020] [added: 2021] were intersegment transfers of products primarily sold through The Americas Group.

At December 31, [removed: 2020,] [added: 2021,] the Consumer Brands Group consisted of operations in the United States and subsidiaries in [removed: 6] [added: 5] foreign countries.

The Performance Coatings Group develops and sells industrial coatings for wood finishing and general industrial (metal and plastic) applications, automotive refinish, protective and marine coatings, coil coatings, packaging coatings and [removed: performance-based resins and colorants worldwide.][added: performance-]

At December 31, [removed: 2020,] [added: 2021,] the Performance Coatings Group consisted of operations in the United States and subsidiaries in 44 foreign countries.

Also included in the Administrative segment is [added: the operations of] a real estate management unit that is responsible for the ownership, management, and leasing of non-retail properties held primarily for use by the Company, including the Company’s headquarters site, and disposal of idle facilities.

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

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

[removed: - *Performance] [added: *•Performance] Coatings Group:* Sherwin-Williams®, Acrolon®, AcromaPro®, ATX®, [removed: AWX Performance Plus™, DeBeer®, Dimension®,] [added: DeBeer Refinish®,] Duraspar®, EcoDex®, Envirolastic®, [removed: Euronavy®,] Excelo®, EzDex®, Fastline®, Firetex®, Fluropon®, Heat-Flex®, House of Kolor®, Huarun®, [added: Inver®,] Kem Aqua®, Lazzuril®, Macropoxy®, Martin Senour®, [removed: ML] [added: Matrix Edge™, M.L.] Campbell®, [added: Octoral®,] PermaClad®, [removed: Planet Color®,] Polane®, Powdura®, Sayerlack®, Sher-Wood®, Sumaré®, [removed: Ultra™, ValPure® ,] [added: Ultra 9K®, Ultra 7000®, ValPure®,] Valspar®

Backlog orders are not [added: typically] significant in the business of any Reportable Segment since there is normally a short period of time between the placing of an order and shipment.

We believe that sufficient productive capacity currently exists to fulfill our needs for paint, coatings and related products [removed: through 2021.][added: during 2022.]

Human Capital [added: Resources]

Our culture and commitment to our people are important factors in attracting, retaining, developing and progressing qualified [removed: employees.][added: talent.]

At December 31, [removed: 2020,] [added: 2021,] we employed [removed: 61,031] [added: 61,626] people worldwide, of which 78% were in the United States and 22% were in other global regions.

[removed: *Culture] [added: *Purpose] and [removed: Engagement*.][added: Culture*.]

The Company’s seven guiding values [removed: are the foundation of our culture of excellence—integrity,] [added: — integrity,] people, service, quality, performance, innovation and [removed: growth.][added: growth — influence how we fulfill our purpose, emphasize our commitment to our people and serve as the foundation of our culture of excellence.]

We value and support our people through, among other initiatives, our [added: inclusion, diversity and equity,] talent [removed: management,] [added: acquisition, employee engagement, and occupational] health and [removed: safety,] [added: safety initiatives, and our] 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 [removed: business, and where our people are engaged and encouraged to support the communities in which they live and work.][added: business.]

*Talent [removed: Management.*] [added: Acquisition and Employee Engagement.*] We are committed to providing our people with opportunities to learn, grow and be recognized for their achievements.

[removed: *Health] [added: *Occupational Health] and Safety.* We are committed to providing safe and healthy working environments [removed: and taking reasonable preventative measures to protect the health and safety of] [added: for] our [removed: employees and customers.][added: employees.]

We [removed: 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.

[removed: In response to] [added: Since] the [removed: COVID-19] [added: onset of the] pandemic, we have implemented significant [removed: changes] [added: modifications] to our [removed: business] [added: health and safety programs, which were] designed to protect the health and well-being of our employees and customers [removed: and to support appropriate physical distancing and other health and safety protocols.][added: from COVID-19.]

These efforts [removed: continue to include:] [added: have included, but are not limited to: requiring social distancing; permitting] remote, alternate and flexible work arrangements where [removed: possible, such as split shifts at facilities and remote work options for non-essential on-site functions; enhanced] [added: possible; enhancing] cleaning and sanitation procedures; [added: restricting] domestic and international [removed: travel restrictions;] [added: travel; developing] return to work and visitor screening protocols; and [removed: the postponement] [added: postponing] or [removed: cancellation of] [added: cancelling the] hosting or attending [added: of] large events.

[removed: During 2020, we] [added: Our] enhanced [removed: certain of the Company’s] benefits [removed: to support the health and well-being of our employees during the COVID-19 pandemic, including our] [added: have included] 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 [removed: pandemic,] [added: pandemic and supply chain disruptions,] see the information included within Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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

Any statement that is not historical in nature is a forward-looking statement and may be identified by the use of words and phrases such as “believe,” “expect,” “may,” “will,” “should,” “project,” “could,” “plan,” “goal,” [added: “target,”] “potential,” “seek,” [removed: “intend”] [added: “intend,” “aspire”] or “anticipate” or the negative thereof or comparable terminology.

Forward-looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside our control, that could cause actual results to differ materially from such statements and from our historical [removed: results] [added: results, performance] and experience.

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

based resins and colorants worldwide.

Raw materials and products purchased for resale make up the majority of our consolidated cost of goods sold.

Raw materials may vary considerably by the specific paint or coating being manufactured but can generally be divided into the following categories: resins and latex, pigments, additives, solvents, and metal or plastic containers.

A significant portion of these raw materials are derived from various upstream petrochemical and related commodity feedstocks, notably propylene.

Raw materials are sourced from multiple suppliers globally, typically within the geographic region where our products are being manufactured.

A small portion of specialized resins and other products are manufactured in house.

We also purchase a variety of products for resale that are highly complementary to our paint and coating offerings, notably spray equipment and parts, floorcovering, and assorted sundries.

We attempt, if feasible, to mitigate our potential risk associated with the sourcing of our raw materials and other products through inventory management, strategic relationships with key suppliers, alternative sourcing strategies and long-term investments to expand our manufacturing capabilities.

During 2021, we experienced raw material shortages, labor constraints, and weather-related shutdowns that impacted our production and ability to meet customer orders.

Our commitment to our people is embedded in our corporate purpose and guiding values.

Our purpose is to inspire and improve the world by coloring and protecting what matters.

We fulfill this purpose through the development, manufacture, distribution and sale of innovative paint and coatings products, striving to deliver benefits for all major stakeholders, including our employees.

*Inclusion, Diversity and Equity*.

Reflected in the Company’s Code of Conduct and reinforced through our actions, training and attitudes, fostering an inclusive culture is a moral and business imperative.

The building blocks of our inclusion, diversity and equity strategy include:

- *Educate and communicate to drive success:* Building awareness of inclusive leadership behaviors to leverage the unique contributions of each employee to positively impact our people and business results.

- *Fill the pipeline with the best talent:* Attracting the best talent pool that reflects the diversity of the communities in which we serve and do business.

- *Develop and engage talent by investing in our people:* Investing in our people by providing networking and learning opportunities to drive retention, progression and engagement.

- *Progress talent by embedding equity into talent planning:* Embedding equity into talent practices, processes, tools and resources at all levels.

Our continuous efforts to create a supportive, welcoming environment across our global footprint is the shared responsibility of all employees, including our senior leaders.

Our senior leaders attend an inclusion, diversity and equity learning session to assist us in maintaining our commitment to leading with inclusion and embracing and leveraging the diversity of our workforce.

During 2021, we hired approximately 1,400 talented people through our management trainee program as part of our long-term growth initiatives.

During 2021, our employees completed thousands of hours of online and instructor-led courses across a broad range of categories, including leadership, inclusion, diversity and equity, professional skills, technical and compliance.

We have a continued focus on Environmental, Health and Safety (EHS) excellence that involves enhancing employee health and safety, process safety, occupational health and taking reasonable preventative measures to reduce workplace injuries to protect the health and safety of our employees.

Over the past two years, we enhanced certain of the Company’s benefits and practices to support the health and well-being of our employees through the challenges of the pandemic and significant supply chain disruptions caused by Winter Storm Uri and Hurricane Ida — two natural disasters that occurred during 2021.

We also have rewarded our employees’ resiliency and hard work and made changes in our business to encourage retention, including wage increases, reduced store hours and employee benefits enhancements.

Regulatory Compliance

- disruptions in the supply chain, including those caused by industry capacity constraints, labor shortages, raw material availability, and logistics delays and constraints;

Factors considered in determining the three Reportable Segments of the Company include the nature of business activities, the management structure directly accountable to the Company’s chief operating decision maker (CODM) for operating and administrative activities, availability of discrete financial information and information presented to the Board of Directors.

The Company’s CODM has been identified as the Chief Executive Officer because he has final authority over performance assessment and resource allocation decisions.

Because of the diverse operations of the Company, the CODM regularly receives discrete financial information about each Reportable Segment as well as a significant amount of additional financial information about certain divisions, business units or subsidiaries of the Company.

The CODM uses all such financial information for performance assessment and resource allocation decisions.

The CODM evaluates the performance of and allocates resources to the Reportable Segments based on segment profit or loss and cash generated from operations.

The accounting policies of the Reportable Segments are the same as those described in Note 1 of the Notes to Consolidated Financial Statements in Item 8.

The CODM uses discrete financial information about The Americas Group, supplemented with information by geographic region, product type and customer type, to assess performance of and allocate resources to The Americas Group as a whole.

In accordance with ASC 280-10-50-9, The Americas Group as a whole is considered the operating segment, and because it meets the criteria in ASC 280-10-50-10, it is also considered a Reportable Segment.

The CODM uses discrete financial information about the Consumer Brands Group, supplemented with information by product type and customer type, to assess performance of and allocate resources to the Consumer Brands Group as a whole.

In accordance with ASC 280-10-50-9, the Consumer Brands Group as a whole is considered the operating segment, and because it meets the criteria in ASC 280-10-50-10, it is also considered a Reportable Segment.

The CODM uses discrete financial information about the Performance Coatings Group, supplemented with information about geographic divisions, business units and subsidiaries, to assess performance of and allocate resources to the Performance Coatings Group as a whole.

In accordance with ASC 280-10-50-9, the Performance Coatings Group as a whole is considered the operating segment, and because it meets the criteria in ASC 280-10-50-10, it is also considered a Reportable Segment.

We believe we generally have adequate sources of raw materials and fuel supplies used in our business.

There are sufficient suppliers of each product purchased for resale that none of the Reportable Segments anticipate any significant sourcing problems during 2021.

Environmental Compliance

[removed: 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.

For information regarding certain [removed: other] environmental-related matters and other legal proceedings, see 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, 9, 10 and 18 to the “Notes to Consolidated Financial Statements” in Item 8.

Pursuant to these regulations, the Company uses a threshold of $1 million for purposes of determining whether disclosure of any such proceedings is required.

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.

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.

For the fiscal year ended December 31, [removed: 2020][added: 2021]

| Common Stock, [removed: Par Value $1.00] [added: par value of $0.33-1/3 per share] | | | | | | SHW | | | | | | New York Stock Exchange | | |

The aggregate market value of common stock held by non-affiliates of the Registrant at June 30, [removed: 2020] [added: 2021] was [removed: $52,512,627,817] [added: $71,612,872,106] (computed by reference to the price at which the common stock was last sold on such date).

At January 31, [removed: 2021, 89,601,869] [added: 2022, 260,373,774] shares of common stock were outstanding, net of treasury shares.

Portions of our Proxy Statement for the [removed: 2021] [added: 2022] 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: 2020] [added: 2021] are incorporated by reference into Part III of this report.

| Item 1. | | | [removed: [Business](#i49a1606a43bd4252889ae41b10edea46_13)] [added: [Business](#i36b8a0d7661241fb8fcef70177a5caef_13)] | | | [removed: [1](#i49a1606a43bd4252889ae41b10edea46_13)] [added: [1](#i36b8a0d7661241fb8fcef70177a5caef_13)] | | |

| | | | [Cautionary Statement Regarding Forward-Looking [removed: Information](#i49a1606a43bd4252889ae41b10edea46_16)] [added: Information](#i36b8a0d7661241fb8fcef70177a5caef_16)] | | | [removed: [5](#i49a1606a43bd4252889ae41b10edea46_16)] [added: [5](#i36b8a0d7661241fb8fcef70177a5caef_16)] | | |

| Item 1A. | | | [Risk [removed: Factors](#i49a1606a43bd4252889ae41b10edea46_19)] [added: Factors](#i36b8a0d7661241fb8fcef70177a5caef_19)] | | | [removed: [6](#i49a1606a43bd4252889ae41b10edea46_19)] [added: [6](#i36b8a0d7661241fb8fcef70177a5caef_19)] | | |

| Item 1B. | | | [Unresolved Staff [removed: Comments](#i49a1606a43bd4252889ae41b10edea46_22)] [added: Comments](#i36b8a0d7661241fb8fcef70177a5caef_22)] | | | [removed: [13](#i49a1606a43bd4252889ae41b10edea46_22)] [added: [14](#i36b8a0d7661241fb8fcef70177a5caef_22)] | | |

| Item 2. | | | [removed: [Properties](#i49a1606a43bd4252889ae41b10edea46_25)] [added: [Properties](#i36b8a0d7661241fb8fcef70177a5caef_25)] | | | [removed: [14](#i49a1606a43bd4252889ae41b10edea46_25)] [added: [16](#i36b8a0d7661241fb8fcef70177a5caef_25)] | | |

| Item 3. | | | [Legal [removed: Proceedings](#i49a1606a43bd4252889ae41b10edea46_28)] [added: Proceedings](#i36b8a0d7661241fb8fcef70177a5caef_28)] | | | [removed: [15](#i49a1606a43bd4252889ae41b10edea46_28)] [added: [17](#i36b8a0d7661241fb8fcef70177a5caef_28)] | | |

| Item 4. | | | [Mine Safety [removed: Disclosures](#i49a1606a43bd4252889ae41b10edea46_31)] [added: Disclosures](#i36b8a0d7661241fb8fcef70177a5caef_31)] | | | [removed: [15](#i49a1606a43bd4252889ae41b10edea46_31)] [added: [17](#i36b8a0d7661241fb8fcef70177a5caef_31)] | | |

| | | | [Information About Our Executive [removed: Officers](#i49a1606a43bd4252889ae41b10edea46_34)] [added: Officers](#i36b8a0d7661241fb8fcef70177a5caef_34)] | | | [removed: [16](#i49a1606a43bd4252889ae41b10edea46_34)] [added: [18](#i36b8a0d7661241fb8fcef70177a5caef_34)] | | |

| Item 5. | | | [Market for Registrant’s Common Equity, Related Stockholder Matters and [removed: Issuer](#i49a1606a43bd4252889ae41b10edea46_40)[ ](#i49a1606a43bd4252889ae41b10edea46_40)[Purchases] [added: Issuer](#i36b8a0d7661241fb8fcef70177a5caef_40)[ ](#i36b8a0d7661241fb8fcef70177a5caef_40)[Purchases] of Equity [removed: Securities](#i49a1606a43bd4252889ae41b10edea46_40)] [added: Securities](#i36b8a0d7661241fb8fcef70177a5caef_40)] | | | [removed: [18](#i49a1606a43bd4252889ae41b10edea46_40)] [added: [20](#i36b8a0d7661241fb8fcef70177a5caef_40)] | | |

| Item 7. | | | [Management’s Discussion and Analysis of Financial Condition and Results [removed: of](#i49a1606a43bd4252889ae41b10edea46_49)[ ](#i49a1606a43bd4252889ae41b10edea46_49)[Operations](#i49a1606a43bd4252889ae41b10edea46_49)] [added: of](#i36b8a0d7661241fb8fcef70177a5caef_46)[ ](#i36b8a0d7661241fb8fcef70177a5caef_46)[Operations](#i36b8a0d7661241fb8fcef70177a5caef_46)] | | | [removed: [26](#i49a1606a43bd4252889ae41b10edea46_49)] [added: [22](#i36b8a0d7661241fb8fcef70177a5caef_46)] | | |

| Item 7A. | | | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#i49a1606a43bd4252889ae41b10edea46_67)] [added: Risk](#i36b8a0d7661241fb8fcef70177a5caef_64)] | | | [removed: [39](#i49a1606a43bd4252889ae41b10edea46_67)] [added: [38](#i36b8a0d7661241fb8fcef70177a5caef_64)] | | |

| Item 8. | | | [Financial Statements and Supplementary [removed: Data](#i49a1606a43bd4252889ae41b10edea46_70)] [added: Data](#i36b8a0d7661241fb8fcef70177a5caef_67)] | | | [removed: [41](#i49a1606a43bd4252889ae41b10edea46_70)] [added: [39](#i36b8a0d7661241fb8fcef70177a5caef_67)] | | |

| Item 9. | | | [Changes in and Disagreements with Accountants on Accounting and [removed: Financial](#i49a1606a43bd4252889ae41b10edea46_196)[ ](#i49a1606a43bd4252889ae41b10edea46_196)[Disclosure](#i49a1606a43bd4252889ae41b10edea46_196)] [added: Financial](#i36b8a0d7661241fb8fcef70177a5caef_181)[ ](#i36b8a0d7661241fb8fcef70177a5caef_181)[Disclosure](#i36b8a0d7661241fb8fcef70177a5caef_181)] | | | [removed: [89](#i49a1606a43bd4252889ae41b10edea46_196)] [added: [89](#i36b8a0d7661241fb8fcef70177a5caef_181)] | | |

| Item 9A. | | | [Controls and [removed: Procedures](#i49a1606a43bd4252889ae41b10edea46_199)] [added: Procedures](#i36b8a0d7661241fb8fcef70177a5caef_184)] | | | [removed: [89](#i49a1606a43bd4252889ae41b10edea46_199)] [added: [89](#i36b8a0d7661241fb8fcef70177a5caef_184)] | | |

| Item 9B. | | | [Other [removed: Information](#i49a1606a43bd4252889ae41b10edea46_202)] [added: Information](#i36b8a0d7661241fb8fcef70177a5caef_187)] | | | [removed: [89](#i49a1606a43bd4252889ae41b10edea46_202)] [added: [89](#i36b8a0d7661241fb8fcef70177a5caef_187)] | | |

| Item 10. | | | [Directors, Executive Officers and Corporate [removed: Governance](#i49a1606a43bd4252889ae41b10edea46_208)] [added: Governance](#i36b8a0d7661241fb8fcef70177a5caef_193)] | | | [removed: [90](#i49a1606a43bd4252889ae41b10edea46_208)] [added: [90](#i36b8a0d7661241fb8fcef70177a5caef_193)] | | |

| Item 11. | | | [Executive [removed: Compensation](#i49a1606a43bd4252889ae41b10edea46_211)] [added: Compensation](#i36b8a0d7661241fb8fcef70177a5caef_196)] | | | [removed: [90](#i49a1606a43bd4252889ae41b10edea46_211)] [added: [90](#i36b8a0d7661241fb8fcef70177a5caef_196)] | | |

| Item 12. | | | [Security Ownership of Certain Beneficial Owners and Management and [removed: Related](#i49a1606a43bd4252889ae41b10edea46_214)[ ](#i49a1606a43bd4252889ae41b10edea46_214)[Stockholder Matters](#i49a1606a43bd4252889ae41b10edea46_214)] [added: Related](#i36b8a0d7661241fb8fcef70177a5caef_199)[ ](#i36b8a0d7661241fb8fcef70177a5caef_199)[Stockholder Matters](#i36b8a0d7661241fb8fcef70177a5caef_199)] | | | [removed: [91](#i49a1606a43bd4252889ae41b10edea46_214)] [added: [91](#i36b8a0d7661241fb8fcef70177a5caef_199)] | | |

| Item 13. | | | [Certain Relationships and Related Transactions, and Director [removed: Independence](#i49a1606a43bd4252889ae41b10edea46_217)] [added: Independence](#i36b8a0d7661241fb8fcef70177a5caef_202)] | | | [removed: [91](#i49a1606a43bd4252889ae41b10edea46_217)] [added: [91](#i36b8a0d7661241fb8fcef70177a5caef_202)] | | |

| Item 14. | | | [Principal Accountant Fees and [removed: Services](#i49a1606a43bd4252889ae41b10edea46_220)] [added: Services](#i36b8a0d7661241fb8fcef70177a5caef_205)] | | | [removed: [91](#i49a1606a43bd4252889ae41b10edea46_220)] [added: [91](#i36b8a0d7661241fb8fcef70177a5caef_205)] | | |

| Item 15. | | | [Exhibits and Financial Statement [removed: Schedules](#i49a1606a43bd4252889ae41b10edea46_226)] [added: Schedules](#i36b8a0d7661241fb8fcef70177a5caef_211)] | | | [removed: [92](#i49a1606a43bd4252889ae41b10edea46_226)] [added: [92](#i36b8a0d7661241fb8fcef70177a5caef_211)] | | |

| Item 16. | | | [Form 10-K [removed: Summary](#i49a1606a43bd4252889ae41b10edea46_229)] [added: Summary](#i36b8a0d7661241fb8fcef70177a5caef_214)] | | | [removed: [98](#i49a1606a43bd4252889ae41b10edea46_229)] [added: [98](#i36b8a0d7661241fb8fcef70177a5caef_214)] | | |

| [PART I](#i36b8a0d7661241fb8fcef70177a5caef_10) | | | | | | | | |

| [PART II](#i36b8a0d7661241fb8fcef70177a5caef_37) | | | | | | | | |

| Item 6. | | | [\[Reserved\]](#i36b8a0d7661241fb8fcef70177a5caef_43) | | | [21](#i36b8a0d7661241fb8fcef70177a5caef_43) | | |

| Item 9C. | | | [Disclosure Regarding Jurisdictions that Prevent Inspection](#i36b8a0d7661241fb8fcef70177a5caef_1840)[s](#i36b8a0d7661241fb8fcef70177a5caef_1840) | | | [89](#i36b8a0d7661241fb8fcef70177a5caef_1840) | | |

| [PART III](#i36b8a0d7661241fb8fcef70177a5caef_190) | | | | | | | | |

| [PART IV](#i36b8a0d7661241fb8fcef70177a5caef_208) | | | | | | | | |

| | | | [Signatures](#i36b8a0d7661241fb8fcef70177a5caef_217) | | | [99](#i36b8a0d7661241fb8fcef70177a5caef_217) | | |

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

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

| Item 6. | | | Selected Financial Data | | | [20](#i49a1606a43bd4252889ae41b10edea46_43) | | |

| [PART III](#i49a1606a43bd4252889ae41b10edea46_205) | | | | | | | | |

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

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

\[THIS PAGE INTENTIONALLY LEFT BLANK\]

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

| Latin America | | | | | | [removed: 3] [added: 2] | | | 6 | | | [removed: 9] [added: 8] | | | | | | 4 | | | 5 | | | 9 | | |

| United States | | | | | | 6 | | | [removed: 29] [added: 31] | | | [removed: 35] [added: 37] | | | | | | 11 | | | 1 | | | 12 | | |

| Total | | | | | | [removed: 10] [added: 9] | | | [removed: 51] [added: 49] | | | [removed: 61] [added: 58] | | | | | | [removed: 20] [added: 18] | | | [removed: 17] [added: 13] | | | [removed: 37] [added: 31] | | |

| Europe | | | | | | [removed: 2] [added: 1] | | | 17 | | | [removed: 19] [added: 18] | | | | | | 4 | | | 12 | | | 16 | | |

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

| Total | | | | | | [removed: 5] [added: 4] | | | [removed: 34] [added: 35] | | | 39 | | | | | | 7 | | | 30 | | | 37 | | |

The operations of The Americas Group included [removed: 4,774] [added: a leased distribution facility in Uruguay and 4,859] 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: 2020.][added: 2021.]

At the end of [removed: 2020:][added: 2021:]

- the Mid Western Division operated [removed: 1,136] [added: 1,156] paint stores primarily located in the midwestern and upper west coast states;

- the Eastern Division operated [removed: 880] [added: 891] paint stores along the upper east coast and New England states;

- the Canada Division operated [removed: 243] [added: 246] paint stores throughout Canada;

- the Southeastern Division operated [removed: 1,163] [added: 1,151] 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;

- the South Western Division operated [removed: 1,054] [added: 1,105] paint stores in the central plains and the lower west coast states; and

- the Latin America Division operated [removed: 298] [added: 310] paint stores in Uruguay, Brazil, Chile, Peru, Mexico and Ecuador.

During [removed: 2020,] [added: 2021,] The Americas Group opened [removed: 16] [added: 85] net new stores, consisting of [removed: 56] [added: 92] new stores opened [removed: (53] [added: (76] in the United States, [removed: 1] [added: 3] in Canada, [removed: 1] [added: 3] in South America and [removed: 1] [added: 10] in Mexico) and [removed: 40] [added: 7] stores closed [removed: (10] [added: (6] in the United [removed: States, 6 in Canada, 17 in South America] [added: States] and [removed: 7] [added: 1] in [removed: Mexico).][added: South America).]

The Performance Coatings Group operated 221 branches in the United States, of which 8 were owned, at December 31, [removed: 2020.][added: 2021.]

The Performance Coatings Group also operated 61 branches internationally, of which [removed: 7] [added: 6] were owned, at December 31, [removed: 2020,] [added: 2021,] consisting of branches in Canada (21), Europe [removed: (16),] [added: (15),] Chile (11), Mexico (5), Peru (4), Vietnam [removed: (3)] [added: (3), Ecuador (1),] and Brazil (1).

During [removed: 2020,] [added: 2021,] this segment opened [removed: 1] [added: one] new branch and [removed: did not close any branches] [added: closed one branch] for [removed: a] [added: no] net [removed: increase] [added: change in the number] of [removed: 1 branch.][added: branches operated.]

| Australia and New Zealand | | | | | | | | | 3 | | | 3 | | | | | | 2 | | | 3 | | | 5 | | |

The following is the name, age and [removed: present] position of each of our executive officers and all persons chosen to become executive officers, as well as all prior positions held by each person during the last five years.

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

| John G. Morikis | | | [removed: 57] [added: 58] | | | Chairman and Chief Executive Officer, Director | | |

| [removed: David B. Sewell] [added: Heidi G. Petz] | | | [removed: 52] [added: 47] | | | President and Chief Operating Officer | | |

| Allen J. Mistysyn | | | [removed: 52] [added: 53] | | | Senior Vice President - Finance and Chief Financial Officer | | |

| Jane M. Cronin | | | [removed: 53] [added: 54] | | | Senior Vice President - Corporate Controller | | |

| Mary L. Garceau | | | [removed: 48] [added: 49] | | | Senior Vice President, General Counsel and Secretary | | |

| Thomas P. Gilligan | | | [removed: 60] [added: 61] | | | Senior Vice President - Human Resources | | |

| James R. Jaye | | | [removed: 54] [added: 55] | | | Senior Vice President - Investor Relations and Corporate Communications | | |

| Bryan J. Young | | | [removed: 45] [added: 46] | | | [added: Senior] Vice President - Corporate Strategy and Development | | |

| Justin T. Binns | | | [removed: 45] [added: 46] | | | President, [removed: Performance Coatings] [added: The Americas] Group | | |

| [removed: Brian E. Padden] [added: Todd D. Rea] | | | [removed: 49] [added: 47] | | | President, Consumer Brands Group | | |

| Joseph F. Sladek | | | [removed: 50] [added: 51] | | | President & General Manager, Global Supply Chain Division, Consumer Brands Group | | |

Mr. Morikis has served as Chairman since January [removed: 2017] [added: 2017, President since March 2021,] and Chief Executive Officer since January 2016.

Mr. [removed: Sewell] [added: Binns] has been employed with the Company since [removed: February 2007.][added: August 1997.]

Mr. Young has served as [added: Senior] Vice President [removed: –] [added: -] Corporate Strategy and Development since [removed: June 2017.][added: March 2021.]

[removed: Prior to joining the Company in] connection with the acquisition of The Valspar Corporation, Mr. Young served as Vice President, Corporate Development of Valspar from October 2015 to June 2017.

[removed: Mr. Young was named Senior Vice President – Corporate Strategy and Development effective] [added: Effective] March 1, [removed: 2021] [added: 2022, Mr. Jorgenrud will serve as President, Performance Coatings Group] 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 [removed: 2020,] [added: 2020 and] President & General Manager, Eastern Division, The Americas Group from October 2016 to July [removed: 2018 and Vice President of Sales, The Americas Group from July 2014 to October 2016.][added: 2018.]

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

[removed: Mr. Ippolito] [added: Ms. Petz] has served as President, The Americas Group since [removed: January 2018.][added: March 2021.]

Mr. [removed: Ippolito] [added: Rea] has been employed with the Company since [removed: May 1986.][added: April 1993.]

Mr. [removed: Padden] [added: Rea] has served as President, Consumer Brands Group since November [removed: 2020.][added: 2021.]

Mr. [removed: Padden] [added: Rea] served [added: within the Consumer Brands Group] as [added: President of North America Sales from November 2020 to November 2021,] Senior Vice President of Sales, [removed: International, Consumer Brands Group] [added: Retail and National Accounts] from November 2019 to November 2020, Senior Vice President [removed: & General Manager, EMEAI, Consumer Brands Group] [added: of Sales, Lowe’s Business Unit] from [removed: January] [added: March] 2018 to November [removed: 2019] [added: 2019, Senior Vice President of Sales, National Accounts from August 2017 to February 2018,] and Vice President of Sales, [removed: Retail] National [removed: Accounts, Consumer Brands Group] [added: Accounts] from [removed: January 2014] [added: April 2016] to [removed: December] [added: August] 2017.

[removed: Mr. Padden] [added: Ms. Petz] has been employed with the Company since [removed: January 1996.][added: June 2017.]

| Karl J. Jorgenrud | | | 45 | | | President, Performance Coatings Group | | |

Effective March 1, 2022, Mr. Morikis will serve as Chairman and Chief Executive Officer.

Ms. Petz served as Senior Vice President, Marketing, The Americas Group from November 2020 to March 2021 and President, Consumer Brands Group from September 2020 to November 2020.

Also within the Consumer Brands Group, Ms. Petz served as President & General Manager, Retail North America from March 2019 to September 2020 and Senior Vice President, Marketing from June 2017 to March 2019.

Prior to joining the Company in connection with the Valspar acquisition, Ms. Petz served as Vice President of Marketing, Consumer Business of Valspar from June 2013 to June 2017.

Effective March 1, 2022, Ms. Petz will serve as President and Chief Operating Officer.

Mr. Young served as Vice President - Corporate Strategy and Development from June 2017 to February 2021.

Prior to joining the Company in

Effective March 1, 2022, Mr. Binns will serve as President, The Americas Group.

Mr. Jorgenrud has served as President & General Manager, General Industrial Division, Performance Coatings Group since January 2020.

Mr. Jorgenrud served as President & General Manager, Protective & Marine Division, Performance Coatings Group from June 2017 to December 2019.

Prior to joining the Company in connection with the Valspar acquisition, Mr. Jorgenrud served as Vice President and General Manager, Global Functional Coatings of Valspar from September 2013 to June 2017.

| Peter J. Ippolito | | | 56 | | | President, The Americas Group | | |

Mr. Sewell has served as President and Chief Operating Officer since March 2019.

Mr. Sewell served as President, Performance Coatings Group from August 2014 to March 2019.

Mr. Mistysyn served as Senior Vice President - Finance from October 2016 to January 2017 and Senior Vice President - Corporate Controller from October 2014 to October 2016.

Ms. Cronin served as Vice President - Corporate Audit and Loss Prevention from September 2013 to October 2016.

Mr. Gilligan served as Senior Vice President, Human Resources, The Americas Group from August 2014 to January 2016.

Mr. Ippolito served as President & General Manager, Mid Western Division, The Americas Group from November 2010 to January 2018.

The number of shareholders of record at January 31, [removed: 2021] [added: 2022] was [removed: 5,431.][added: 5,365.]

The following table sets forth a summary of the Company’s purchases of common stock during the fourth quarter of [removed: 2020.][added: 2021.]

| Employee transactions (2) | | | | | | [added: 2,423] | | | | | | [added: $] | [added: 294.85] | | | | | | | | | | | N/A | | |

| Share repurchase program (1) | | | | | | [removed: 975,092] [added: 2,000,000] | | | | | | $ | [removed: 721.52] [added: 302.66] | | | | | [removed: 975,092] [added: 2,000,000] | | | | | | [removed: 5,075,000] [added: 48,575,000] | | |

| Share repurchase program (1) | | | | | | [removed: 525,000] [added: 1,475,000] | | | | | | $ | [removed: 724.82] [added: 290.20] | | | | | [removed: 525,000] [added: 1,475,000] | | | | | | [removed: 4,550,000] [added: 49,100,000] | | |

| Share repurchase program (1) | | | | | | [removed: 1,600,000] [added: 200,000] | | | | | | $ | [removed: 719.73] [added: 333.69] | | | | | [removed: 1,600,000] [added: 200,000] | | | | | | [removed: 4,550,000] [added: 48,900,000] | | |

The Company had remaining authorization at December 31, [removed: 2020] [added: 2021] to purchase [removed: 4,550,000] [added: 48,575,000] shares.

On February 17, 2021, the Board of Directors authorized the Company to purchase an additional [removed: 15,000,000] [added: 45,000,000] shares of the Company’s stock for treasury purposes.

[removed: 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: 2015] [added: 2016] in Sherwin-Williams common stock, the S&P 500 and the [removed: 2019 and 2020] peer [removed: groups.][added: group.]

The cumulative five-year total return, including reinvestment of dividends, represents the cumulative value through December 31, [removed: 2020.][added: 2021.]

[removed: ][added: ]

[removed: 2020 peer] [added: 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.

Common Stock Split

During the first quarter of 2021, the Company’s Board of Directors approved and declared a three-for-one stock split to shareholders of record at the close of business on March 23, 2021 (the Stock Split).

The Stock Split was effected on March 31, 2021.

All share and per share information herein has been retroactively adjusted to reflect the Stock Split.

| Employee transactions (2) | | | | | | 715 | | | | | | $ | 330.67 | | | | | | | | | | | N/A | | |

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

| Share repurchase program (1) | | | | | | 325,000 | | | | | | $ | 340.09 | | | | | 325,000 | | | | | | 48,575,000 | | |

| Employee transactions (2) | | | | | | 603 | | | | | | $ | 342.05 | | | | | | | | | | | N/A | | |

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

| Employee transactions (2) | | | | | | 3,741 | | | | | | $ | 309.30 | | | | | | | | | | | N/A | | |

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

| 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 | | |

(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.

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., Lowe’s Companies, Inc., Masco Corporation, Newell Brands Inc., PPG Industries, Inc., RPM International Inc., Stanley Black & Decker, Inc. and USG Corporation (included through April 2019 when it was acquired by Gebr.

Knauf KG).

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

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

| *(millions of dollars, except per common share data)* | | | 2020 | | | | | | 2019 | | | | | | 2018 | | | | | | 2017 (1) | | | | | | 2016 | | |

| Operations | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Net sales | | | $ | 18,361.7 | | | | | $ | 17,900.8 | | | | | $ | 17,534.5 | | | | | $ | 14,983.8 | | | | | $ | 11,855.6 | |

| Cost of goods sold | | | 9,679.1 | | | | | | 9,864.7 | | | | | | 10,115.9 | | | | | | 8,265.0 | | | | | | 5,934.3 | | |

| Selling, general and administrative expenses | | | 5,477.9 | | | | | | 5,274.9 | | | | | | 5,033.8 | | | | | | 4,797.6 | | | | | | 4,140.3 | | |

| Amortization | | | 313.4 | | | | | | 312.8 | | | | | | 318.1 | | | | | | 206.8 | | | | | | 25.4 | | |

| Interest expense | | | 340.4 | | | | | | 349.3 | | | | | | 366.7 | | | | | | 263.5 | | | | | | 154.1 | | |

| Income before income taxes (2) | | | 2,519.2 | | | | | | 1,981.8 | | | | | | 1,359.7 | | | | | | 1,469.3 | | | | | | 1,595.2 | | |

| Net income (3) | | | 2,030.4 | | | | | | 1,541.3 | | | | | | 1,108.7 | | | | | | 1,769.5 | | | | | | 1,132.7 | | |

| Financial Position | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Accounts receivable - net | | | $ | 2,078.1 | | | | | $ | 2,088.9 | | | | | $ | 2,018.8 | | | | | $ | 2,104.6 | | | | | $ | 1,231.0 | |

| Inventories | | | 1,804.1 | | | | | | 1,889.6 | | | | | | 1,815.3 | | | | | | 1,742.5 | | | | | | 1,068.3 | | |

| Working capital - net | | | (3.0) | | | | | | 109.8 | | | | | | 46.8 | | | | | | 419.8 | | | | | | 798.1 | | |

| Property, plant and equipment - net | | | 1,834.5 | | | | | | 1,835.2 | | | | | | 1,776.8 | | | | | | 1,877.1 | | | | | | 1,095.9 | | |

| Total assets (4) | | | 20,401.6 | | | | | | 20,496.2 | | | | | | 19,134.3 | | | | | | 19,899.5 | | | | | | 6,752.5 | | |

| Long-term debt | | | 8,266.9 | | | | | | 8,050.7 | | | | | | 8,708.1 | | | | | | 9,885.7 | | | | | | 1,211.3 | | |

| Total debt | | | 8,292.1 | | | | | | 8,685.2 | | | | | | 9,343.7 | | | | | | 10,520.6 | | | | | | 1,952.5 | | |

| Shareholders’ equity | | | 3,610.8 | | | | | | 4,123.3 | | | | | | 3,730.7 | | | | | | 3,647.9 | | | | | | 1,878.4 | | |

| Per Share Information | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Average shares outstanding - diluted (thousands) | | | 91,943 | | | | | | 93,447 | | | | | | 94,988 | | | | | | 94,927 | | | | | | 94,488 | | |

| Book value | | | $ | 40.32 | | | | | $ | 44.75 | | | | | $ | 40.07 | | | | | $ | 38.86 | | | | | $ | 20.20 | |

| Net income - diluted (5) | | | 22.08 | | | | | | 16.49 | | | | | | 11.67 | | | | | | 18.64 | | | | | | 11.99 | | |

| Cash dividends | | | 5.36 | | | | | | 4.52 | | | | | | 3.44 | | | | | | 3.40 | | | | | | 3.36 | | |

| Financial Ratios | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Return on sales | | | 11.1 | | % | | | | 8.6 | | % | | | | 6.3 | | % | | | | 11.8 | | % | | | | 9.6 | | % |

| Asset turnover | | | 0.9 | | x | | | | 0.9 | | x | | | | 0.9 | | x | | | | 0.8 | | x | | | | 1.8 | | x |

| Return on assets | | | 10.0 | | % | | | | 7.5 | | % | | | | 5.8 | | % | | | | 8.9 | | % | | | | 16.8 | | % |

| Return on equity (6) | | | 49.2 | | % | | | | 41.3 | | % | | | | 30.4 | | % | | | | 94.2 | | % | | | | 130.5 | | % |

| Dividend payout ratio (7) | | | 32.5 | | % | | | | 38.7 | | % | | | | 18.5 | | % | | | | 28.4 | | % | | | | 30.1 | | % |

| Total debt to capitalization | | | 69.7 | | % | | | | 67.8 | | % | | | | 71.5 | | % | | | | 74.3 | | % | | | | 51.0 | | % |

| Current ratio | | | 1.0 | | | | | | 1.0 | | | | | | 1.0 | | | | | | 1.1 | | | | | | 1.3 | | |

| Interest coverage (8) | | | 8.4 | | x | | | | 6.7 | | x | | | | 4.7 | | x | | | | 6.6 | | x | | | | 11.4 | | x |

| Net working capital to sales | | | — | | % | | | | 0.6 | | % | | | | 0.3 | | % | | | | 2.8 | | % | | | | 6.7 | | % |

| Effective income tax rate (9) | | | 19.4 | | % | | | | 22.2 | | % | | | | 18.5 | | % | | | | 25.1 | | % | | | | 29.0 | | % |

| General | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Earnings before interest, taxes, depreciation and amortization (EBITDA) (10) | | | $ | 3,441.0 | | | | | $ | 2,906.0 | | | | | $ | 2,322.7 | | | | | $ | 2,224.6 | | | | | $ | 1,946.8 | |

| Capital expenditures | | | 303.8 | | | | | | 328.9 | | | | | | 251.0 | | | | | | 222.8 | | | | | | 239.0 | | |

| Total technical expenditures (11) | | | 200.0 | | | | | | 224.6 | | | | | | 253.9 | | | | | | 215.7 | | | | | | 153.3 | | |

| Report of Management on Internal Control Over Financial Reporting | | | [removed: [42](#i49a1606a43bd4252889ae41b10edea46_73)] [added: [40](#i36b8a0d7661241fb8fcef70177a5caef_70)] | | |

| Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting | | | [removed: [43](#i49a1606a43bd4252889ae41b10edea46_76)] [added: [41](#i36b8a0d7661241fb8fcef70177a5caef_73)] | | |

| Report of Management on the Consolidated Financial Statements | | | [removed: [44](#i49a1606a43bd4252889ae41b10edea46_79)] [added: [42](#i36b8a0d7661241fb8fcef70177a5caef_79)] | | |

| Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements [added: (PCAOB ID: 42)] | | | [removed: [45](#i49a1606a43bd4252889ae41b10edea46_82)] [added: [43](#i36b8a0d7661241fb8fcef70177a5caef_82)] | | |

| Statements of Consolidated Income | | | [removed: [48](#i49a1606a43bd4252889ae41b10edea46_85)] [added: [46](#i36b8a0d7661241fb8fcef70177a5caef_85)] | | |

| Statements of Consolidated Comprehensive Income | | | [removed: [49](#i49a1606a43bd4252889ae41b10edea46_88)] [added: [47](#i36b8a0d7661241fb8fcef70177a5caef_88)] | | |

| Consolidated Balance Sheets | | | [removed: [50](#i49a1606a43bd4252889ae41b10edea46_91)] [added: [48](#i36b8a0d7661241fb8fcef70177a5caef_91)] | | |

| Statements of Consolidated Cash Flows | | | [removed: [51](#i49a1606a43bd4252889ae41b10edea46_97)] [added: [49](#i36b8a0d7661241fb8fcef70177a5caef_94)] | | |

| Statements of Consolidated Shareholders’ Equity | | | [removed: [52](#i49a1606a43bd4252889ae41b10edea46_100)] [added: [50](#i36b8a0d7661241fb8fcef70177a5caef_97)] | | |

| Notes to Consolidated Financial Statements | | | [removed: [53](#i49a1606a43bd4252889ae41b10edea46_106)] [added: [51](#i36b8a0d7661241fb8fcef70177a5caef_100)] | | |

In order to ensure that the Company’s internal control over financial reporting was effective as of December 31, [removed: 2020,] [added: 2021,] we conducted an assessment of its effectiveness under the supervision and with the participation of our management group, including our principal executive officer and principal financial officer.

Based on our assessment of internal control over financial reporting under the criteria established in Internal Control – Integrated Framework, we have concluded that, as of December 31, [removed: 2020,] [added: 2021,] the Company’s internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Our internal control over financial reporting as of December 31, [removed: 2020] [added: 2021] has been audited by Ernst & Young LLP, an independent registered public accounting firm, and their report on the effectiveness of our internal control over financial reporting is included on page [removed: 43] [added: 41] of this report.

[removed: ][added: ]

[removed: Chairman] [added: Chairman, President] and Chief Executive Officer

[removed: ][added: ]

[removed: ][added: ]

To the Shareholders and Board of Directors [removed: and Shareholders] of The Sherwin-Williams Company

We have audited The Sherwin-Williams Company’s internal control over financial reporting as of December 31, [removed: 2020,] [added: 2021,] based on criteria established in Internal [removed: Control-Integrated] [added: Control—Integrated] Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, The Sherwin-Williams Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2020,] [added: 2021,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of The Sherwin-Williams Company as of December 31, [added: 2021,] 2020, [removed: 2019,] and [removed: 2018,] [added: 2019,] the related statements of consolidated income, comprehensive income, cash flows and shareholders’ equity for each of the three years in the period ended December 31, [removed: 2020,] [added: 2021,] and the related notes and the financial statement schedule listed in Item 15(a) and our report dated February [removed: 19, 2021] [added: 17, 2022] expressed an unqualified opinion thereon.

[removed: ][added: ]

We are responsible for the preparation and fair presentation of the consolidated financial statements, accompanying notes and related financial information included in this report of The Sherwin-Williams Company and its consolidated subsidiaries (collectively, the “Company”) as of December 31, [removed: 2020, 2019] [added: 2021, 2020] and [removed: 2018] [added: 2019] and for the years then ended in accordance with U.S. generally accepted accounting principles.

As discussed in the Report of Management on Internal Control Over Financial Reporting on page [removed: 42] [added: 40] of this report, we concluded that the Company’s internal control over financial reporting was effective as of December 31, [removed: 2020.][added: 2021.]

We have audited the accompanying consolidated balance sheets of The Sherwin-Williams Company (the “Company”) as of December 31, [removed: 2020, 2019] [added: 2021, 2020] and [removed: 2018,] [added: 2019,] the related statements of consolidated income, comprehensive income, cash flows and shareholders’ equity for each of the three years in the period ended December 31, [removed: 2020,] [added: 2021,] and the related notes and the financial statement schedule listed in Item 15(a) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, [removed: 2020, 2019] [added: 2021, 2020] and [removed: 2018,] [added: 2019,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2020,] [added: 2021,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, [removed: 2020,] [added: 2021,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February [removed: 19, 2021] [added: 17, 2022] expressed an unqualified opinion thereon.

| *Description of the Matter* | | | As described in Note 9 to the consolidated financial statements, the Company had short-term and long-term accruals for environmental-related activities of [removed: $68.6] [added: $45.9] million and [removed: $300.5] [added: $277.4] million, respectively, at December 31, [removed: 2020.] [added: 2021.] The Company’s largest and most complex site is the Gibbsboro, New Jersey site (“Gibbsboro”) and the substantial majority of the environmental-related accrual relates to this site. Gibbsboro consists of six operable units which contain a combination of soil, waterbodies and groundwater contamination, and are in various phases of investigation and remediation with the Environmental Protection Agency (“EPA”). The Company’s estimated environmental-related accrual for Gibbsboro is based on industry standards and professional judgement, and the most significant assumptions underlying the estimated cost of remediation efforts reserved for Gibbsboro are the types and extent of contamination. Auditing the Company’s environmental-related accrual at the Gibbsboro site required complex judgement due to the inherent challenges in identifying the type and extent of future remedies and the costs of implementing those remedies in determining the probable and reasonably estimable loss for which the Company will be responsible. | | |

| [removed: *(millions of dollars,] [added: *(in millions,] except per share data)* | | | Year Ended December 31, | | | | | | | | | | | | | | |

| | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | | | | | [removed: 2018] [added: 2019] | | |

| Net sales | | | $ | [removed: 18,361.7] [added: 19,944.6] | | | | | $ | [removed: 17,900.8] [added: 18,361.7] | | | | | $ | [removed: 17,534.5] [added: 17,900.8] | |

| Cost of goods sold | | | [removed: 9,679.1] [added: 11,401.9] | | | | | | [removed: 9,864.7] [added: 9,679.1] | | | | | | [removed: 10,115.9] [added: 9,864.7] | | |

| Gross profit | | | [removed: 8,682.6] [added: 8,542.7] | | | | | | [removed: 8,036.1] [added: 8,682.6] | | | | | | [removed: 7,418.6] [added: 8,036.1] | | |

| *Percent to net sales* | | | [removed: 47.3] [added: 42.8] | | % | | | | [removed: *44.9*] [added: *47.3*] | | *%* | | | | [removed: *42.3*] [added: *44.9*] | | *%* |

| Selling, general and administrative expenses | | | [removed: 5,477.9] [added: 5,572.5] | | | | | | [removed: 5,274.9] [added: 5,477.9] | | | | | | [removed: 5,033.8] [added: 5,274.9] | | |

| *Percent to net sales* | | | [removed: 29.8] [added: 27.9] | | % | | | | [removed: *29.5*] [added: *29.8*] | | *%* | | | | [removed: *28.7*] [added: *29.5*] | | *%* |

| Other general expense - net | | | [removed: 27.7] [added: 101.8] | | | | | | [removed: 39.1] [added: 27.7] | | | | | | [removed: 189.1] [added: 39.1] | | |

| Amortization | | | [removed: 313.4] [added: 309.5] | | | | | | [removed: 312.8] [added: 313.4] | | | | | | [removed: 318.1] [added: 312.8] | | |

| Impairment of trademarks | | | [removed: 2.3] [added: —] | | | | | | [removed: 122.1] [added: 2.3] | | | | | | [removed: —] [added: 122.1] | | |

| Interest expense | | | [removed: 340.4] [added: 334.7] | | | | | | [removed: 349.3] [added: 340.4] | | | | | | [removed: 366.7] [added: 349.3] | | |

February 17, 2022


Chairman, President and Chief Executive Officer




February 17, 2022

| Basic | | | $ | 7.10 | | | | | $ | 7.48 | | | | | $ | 5.60 | |

| Diluted | | | $ | 6.98 | | | | | $ | 7.36 | | | | | $ | 5.50 | |

| Basic | | | 262.5 | | | | | | 271.3 | | | | | | 275.4 | | |

| Diluted | | | 267.1 | | | | | | 275.8 | | | | | | 280.3 | | |

See Note 15.

| *(in millions)* | | | December 31, | | | | | | | | | | | | | | |

| Other assets | | | 789.0 | | | | | | 694.3 | | | | | | 604.4 | | |

| Other accruals | | | 1,005.8 | | | | | | 1,127.9 | | | | | | 1,001.1 | | |

| *(in millions)* | | | Year Ended December 31, | | | | | | | | | | | | | | |

| Net income | | | $ | 1,864.4 | | | | | $ | 2,030.4 | | | | | $ | 1,541.3 | |

| Loss on divestiture of business | | | 111.9 | | | | | | — | | | | | | — | | |

| Other | | | (46.8) | | | | | | (62.0) | | | | | | (40.8) | | |

| Proceeds from divestiture of business | | | 122.5 | | | | | | — | | | | | | — | | |

| Other | | | (23.4) | | | | | | (30.6) | | | | | | (122.0) | | |

| Net income | | | | | | | | | | | | | | | 1,864.4 | | | | | | | | | | | | | | | | | | 1,864.4 | | |

| Other comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | 19.9 | | | | | | 19.9 | | |

| Treasury stock issued | | | | | | | | | 9.3 | | | | | | | | | | | | 2.4 | | | | | | | | | | | | 11.7 | | |

| Stock-based compensation activity | | | 0.9 | | | | | | 290.9 | | | | | | | | | | | | (23.5) | | | | | | | | | | | | 268.3 | | |

| Other adjustments | | | | | | | | | 1.4 | | | | | | 0.1 | | | | | | | | | | | | | | | | | | 1.5 | | |

| Balance at December 31, 2021 | | | $ | 90.8 | | | | | $ | 3,793.0 | | | | | $ | 2,121.7 | | | | | $ | (2,869.9) | | | | | $ | (698.4) | | | | | $ | 2,437.2 | |

Depreciation is charged to expense using the straight-line method over the assets’ estimated useful lives which range from 5 to 25 years for buildings and 3 to 15 years for machinery and equipment.

The carrying value of the investments are recorded in Other assets.

The liabilities for the estimated future capital contributions are recorded in Other accruals and Other long-term liabilities.

The following table summarizes the balances related to the investments at December 31, 2021, 2020 and 2019, respectively.

| Other assets | | | $ | 355.8 | | | | | $ | 198.2 | | | | | $ | 176.2 | |

| Other accruals | | | 61.8 | | | | | | 89.0 | | | | | | 87.3 | | |

| Other long-term liabilities | | | 289.7 | | | | | | 127.3 | | | | | | 87.1 | | |

Adopted in 2021

The amendments are being applied prospectively.

In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Liabilities from Contracts with Customers.” This ASU requires an acquiring entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606.

The Company is evaluating the impact of adopting this ASU.

In November 2021, the FASB issued ASU 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance.” This ASU requires disclosures for material government assistance transactions during annual reporting periods.

The disclosures include information about the nature of the transaction, the related accounting policies used to account for the government assistance, the effect of government assistance on the entity’s financial statements, and any significant terms and conditions.

| | | | | | |

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

On Internal Control Over Financial Reporting

February 19, 2021

On the Consolidated Financial Statements

| Basic | | | $ | 22.45 | | | | | $ | 16.79 | | | | | $ | 11.92 | |

| Diluted | | | $ | 22.08 | | | | | $ | 16.49 | | | | | $ | 11.67 | |

| Basic | | | 90,425,861 | | | | | | 91,803,528 | | | | | | 92,992,457 | | |

| Diluted | | | 91,942,623 | | | | | | 93,446,842 | | | | | | 94,988,070 | | |

| Deferred pension assets | | | 53.1 | | | | | | 43.0 | | | | | | 270.7 | | |

| Other assets | | | 641.2 | | | | | | 561.4 | | | | | | 584.0 | | |

| California litigation accrual | | | 12.0 | | | | | | 12.0 | | | | | | 136.3 | | |

| Other accruals | | | 1,115.9 | | | | | | 989.1 | | | | | | 1,141.1 | | |

| (Decrease) increase in California litigation accrual | | | (12.0) | | | | | | (59.6) | | | | | | 136.3 | | |

| Other | | | (50.0) | | | | | | 18.8 | | | | | | (46.7) | | |

| Proceeds from real estate financing transactions | | | | | | | | | 7.2 | | | | | | 225.3 | | |

| Other | | | (30.6) | | | | | | (129.2) | | | | | | 32.2 | | |

| Balance at January 1, 2018 | | | $ | 117.6 | | | | | $ | 2,723.2 | | | | | $ | 5,458.4 | | | | | $ | (4,266.4) | | | | | $ | (384.9) | | | | | $ | 3,647.9 | |

| Stock-based compensation activity | | | 0.8 | | | | | | 172.4 | | | | | | | | | | | | (21.0) | | | | | | | | | | | | 152.2 | | |

| Other comprehensive loss | | | | | | | | | | | | | | | | | | | | | | | | | | | (38.8) | | | | | | (38.8) | | |

| Other adjustments | | | | | | | | | 0.4 | | | | | | (0.4) | | | | | | | | | | | | | | | | | | — | | |

This ASU replaced the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

Depreciation is provided by the straight-line method.

The major classes of assets and ranges of annual depreciation rates are:

| Buildings | | | 4.0% – 20.0% | | |

| Machinery and equipment | | | 10.0% – 20.0% | | |

| Furniture and fixtures | | | 6.7% – 33.3% | | |

| Automobiles and trucks | | | 10.0% – 33.3% | | |

The carrying amounts of the investments, included in Other assets, were $198.2 million, $176.2 million and $181.2 million at December 31, 2020, 2019 and 2018, respectively.

The liabilities recorded on the balance sheets for estimated future capital contributions to the investments were $216.3 million, $174.4 million and $183.0 million at December 31, 2020, 2019 and 2018, respectively.

| Divestiture and other adjustments | | | | | | | | | | | | | | | (68.2) | | |

Warranty accruals acquired in connection with the Valspar acquisition include warranties for certain products under extended furniture protection plans.

The decrease in the accrual for product warranty claims in the year ended December 31, 2018 was primarily due to the divestiture of the furniture protection plan business in the third quarter of 2018.

Adopted in 2020

Effective January 1, 2020, the Company adopted ASU 2016-13, “Measurement of Credit Losses on Financial Instruments” (ASC 326).

In addition, new disclosures are required.

The Company adopted ASU 2016-13 using the modified retrospective transition method.

See Note 17 for additional information.

The adoption of ASU 2019-12 is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

In connection with the sale, we expect to incur a loss in the first quarter of 2021 that is not material.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our [removed: Chairman] [added: Chairman, President] and Chief Executive Officer and our Senior Vice President – Finance and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 and Rule 15d-15 of the Securities Exchange Act of 1934, as amended (“Exchange Act”).

Based upon that evaluation, our [removed: Chairman] [added: Chairman, President] and Chief Executive Officer and our Senior Vice President – Finance and Chief Financial Officer concluded that as of the end of the period covered by this report our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and accumulated and communicated to our management, including our [removed: Chairman] [added: Chairman, President] and Chief Executive Officer and our Senior Vice President – Finance and Chief Financial Officer, to allow timely decisions regarding required disclosure.

PART III

Not applicable.

PART III

The information regarding our directors and director nominees is set forth in our Proxy Statement under the [removed: captions] [added: caption] “Proposal 1 – Election of [added: 11] Directors” and [removed: “Director Compensation” and] is incorporated herein by reference.

There were no material changes to the procedures by which security holders may recommend nominees to our Board of Directors during [removed: 2020.][added: 2021.]

Please refer to the information set forth in our Proxy Statement under the caption “Board [removed: Meetings and] Committees,” which [removed: information] is incorporated herein by reference.

The information regarding the Audit Committee of our Board of Directors and audit committee financial experts is set forth in our Proxy Statement under the caption “Board [removed: Meetings and] Committees” and is incorporated herein by reference.

Please refer to the information set forth in our Proxy Statement under the caption [removed: “Corporate Governance – Code] [added: “Code] of Conduct,” which [removed: information] is incorporated herein by reference.

The information required by this item is set forth in our Proxy Statement under the captions [added: “2021 Director Compensation Table,”] “Director [removed: Compensation,” “Compensation Committee Report,” “Compensation Risk Assessment,” “Compensation Discussion and Analysis” and] [added: Compensation Program,”] “Executive Compensation” and [added: “Executive Compensation Tables” and] is incorporated herein by reference.

The information regarding security ownership of certain beneficial owners and management is set forth in our Proxy Statement under the captions “Security Ownership of [removed: Certain Beneficial Owners”] [added: Management, Directors] and [added: Director Nominees” and] “Security Ownership of [removed: Management”] [added: Certain Beneficial Owners”] and is incorporated herein by reference.

The information required by this item is set forth in our Proxy Statement under the captions “Certain Relationships and Transactions with Related Persons” and [removed: “Independence of Directors”] [added: “Director Independence”] and is incorporated herein by reference.

| Statements of Consolidated Income | | | [removed: [48](#i49a1606a43bd4252889ae41b10edea46_85)] [added: [46](#i36b8a0d7661241fb8fcef70177a5caef_85)] | | |

| Statements of Consolidated Comprehensive Income | | | [removed: [49](#i49a1606a43bd4252889ae41b10edea46_88)] [added: [47](#i36b8a0d7661241fb8fcef70177a5caef_88)] | | |

| Consolidated Balance Sheets | | | [removed: [50](#i49a1606a43bd4252889ae41b10edea46_91)] [added: [48](#i36b8a0d7661241fb8fcef70177a5caef_91)] | | |

| Statements of Consolidated Cash Flows | | | [removed: [51](#i49a1606a43bd4252889ae41b10edea46_97)] [added: [49](#i36b8a0d7661241fb8fcef70177a5caef_94)] | | |

| Statements of Consolidated Shareholders’ Equity | | | [removed: [52](#i49a1606a43bd4252889ae41b10edea46_100)] [added: [50](#i36b8a0d7661241fb8fcef70177a5caef_97)] | | |

| Notes to Consolidated Financial Statements | | | [removed: [53](#i49a1606a43bd4252889ae41b10edea46_106)] [added: [51](#i36b8a0d7661241fb8fcef70177a5caef_100)] | | |

Schedule II — Valuation and Qualifying Accounts and Reserves for the years ended December 31, [removed: 2020, 2019] [added: 2021, 2020] and [removed: 2018] [added: 2019] is set forth below.

| *(millions of dollars)* | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | | | | | [removed: 2018] [added: 2019] | | |

| Beginning balance | | | $ | [removed: 84.6] [added: 104.6] | | | | | $ | [removed: 73.5] [added: 84.6] | | | | | $ | [removed: 44.1] [added: 73.5] | |

| [removed: Additions (deductions)] [added: (Deductions) additions] (1) | | | [removed: 20.0] [added: (7.4)] | | | | | | [removed: 7.4] [added: 20.0] | | | | | | [removed: 10.6] [added: 7.4] | | |

| Acquired balances | | | — | | | | | | [removed: 3.7] [added: —] | | | | | | [removed: 18.8] [added: 3.7] | | |

| Ending balance | | | $ | [removed: 104.6] [added: 97.2] | | | | | $ | [removed: 84.6] [added: 104.6] | | | | | $ | [removed: 73.5] [added: 84.6] | |

(1) [removed: Additions (deductions)] [added: (Deductions) additions] did not have a material impact on the Income Statement in [removed: 2020, 2019] [added: 2021, 2020] or [removed: 2018.][added: 2019.]

| | | | [removed: (b)] [added: (c)] | | | [Regulations of the Company, as amended and restated October 17, 2018, filed as Exhibit 3.1 to the Company's Current Report on Form 8-K dated October 17, 2018, and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/89800/000119312518301088/d628968dex31.htm) | | |

| 4. | | | (a) | | | [Description of Securities Registered under Section 12 of the Securities Exchange Act of [removed: 1934](https://www.sec.gov/Archives/edgar/data/89800/000008980020000005/shw-12312019xex4a.htm)[, filed a](https://www.sec.gov/Archives/edgar/data/89800/000008980020000005/shw-12312019xex4a.htm)[s Exhibit 4(a) to the Company](https://www.sec.gov/Archives/edgar/data/89800/000008980020000005/shw-12312019xex4a.htm)[’](https://www.sec.gov/Archives/edgar/data/89800/000008980020000005/shw-12312019xex4a.htm)[s Annual Report on Form 10-K for the fiscal year ended December 3](https://www.sec.gov/Archives/edgar/data/89800/000008980020000005/shw-12312019xex4a.htm)[1](https://www.sec.gov/Archives/edgar/data/89800/000008980020000005/shw-12312019xex4a.htm)[, 20](https://www.sec.gov/Archives/edgar/data/89800/000008980020000005/shw-12312019xex4a.htm)[19](https://www.sec.gov/Archives/edgar/data/89800/000008980020000005/shw-12312019xex4a.htm)[, and inco](https://www.sec.gov/Archives/edgar/data/89800/000008980020000005/shw-12312019xex4a.htm)[rporated herein by reference](https://www.sec.gov/Archives/edgar/data/89800/000008980020000005/shw-12312019xex4a.htm)[.](https://www.sec.gov/Archives/edgar/data/89800/000008980020000005/shw-12312019xex4a.htm)] [added: 1934 (filed herewith).](https://www.sec.gov/Archives/edgar/data/89800/000008980022000007/shw-12312021xex4a.htm)] | | |

| | | | (r) | | | [Thirteenth Supplemental Indenture by and between the Company and Wells Fargo Bank, National Association, [removed: as](http://www.sec.gov/Archives/edgar/data/89800/000119312519228827/d793881dex41.htm) [](http://www.sec.gov/Archives/edgar/data/89800/000119312519228827/d793881dex41.htm)[trustee,] [added: as trustee,] dated August 26, 2019 (including Form of Note), filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated August 26, 2019, and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/89800/000119312519228827/d793881dex41.htm) | | |

| | | | (t) | | | [removed: [F](https://www.sec.gov/Archives/edgar/data/89800/000119312520075832/d893614dex41.htm)[ifteen](https://www.sec.gov/Archives/edgar/data/89800/000119312520075832/d893614dex41.htm)[th] [added: [Fifteenth] Supplemental Indenture by and between the Company and Wells Fargo Bank, National Association, as trustee, [removed: dated](https://www.sec.gov/Archives/edgar/data/89800/000119312520075832/d893614dex41.htm) [March 1](https://www.sec.gov/Archives/edgar/data/89800/000119312520075832/d893614dex41.htm)[7, 2020](https://www.sec.gov/Archives/edgar/data/89800/000119312520075832/d893614dex41.htm) [(including] [added: dated March 17, 2020 (including] Form of Note), filed as Exhibit [removed: 4.](https://www.sec.gov/Archives/edgar/data/89800/000119312520075832/d893614dex41.htm)[1](https://www.sec.gov/Archives/edgar/data/89800/000119312520075832/d893614dex41.htm) [to] [added: 4.1 to] the Company’s Current Report on Form 8-K [removed: dated](https://www.sec.gov/Archives/edgar/data/89800/000119312520075832/d893614dex41.htm) [March] [added: dated March] 17, [removed: 2020](https://www.sec.gov/Archives/edgar/data/89800/000119312520075832/d893614dex41.htm)[,] [added: 2020,] and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/89800/000119312520075832/d893614dex41.htm) | | |

| | | | (u) | | | [removed: [Sixteen](https://www.sec.gov/Archives/edgar/data/89800/000119312520075832/d893614dex42.htm)[th] [added: [Sixteenth] Supplemental Indenture by and between the Company and Wells Fargo Bank, National Association, as trustee, dated March 17, 2020 (including Form of Note), filed as Exhibit [removed: 4.](https://www.sec.gov/Archives/edgar/data/89800/000119312520075832/d893614dex42.htm)[2](https://www.sec.gov/Archives/edgar/data/89800/000119312520075832/d893614dex42.htm) [to] [added: 4.2 to] the Company’s Current Report on Form 8-K dated March 17, 2020, and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/89800/000119312520075832/d893614dex42.htm) | | |

| | | | [removed: (v)] [added: (x)] | | | [Credit Agreement, dated as of [removed: July 19, 2018,] [added: June 29, 2021,] by and among the Company, Sherwin-Williams Canada [removed: Inc.,] [added: Inc. and] Sherwin-Williams Luxembourg S.à [removed: r.l. and Sherwin-Williams UK Holding Limited,] [added: r.l.,] as borrowers, the lenders party thereto, the issuing lenders party thereto and Citibank, N.A., as administrative agent, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated [removed: July 19, 2018,] [added: June 29, 2021,] and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/89800/000119312518221881/d550417dex41.htm)] [added: reference.](https://www.sec.gov/Archives/edgar/data/0000089800/000119312521203271/d482163dex41.htm)] | | |

| | | | [removed: (w)] [added: (aa)] | | | [Amendment No. 1 to [added: the] Credit Agreement, dated as of [removed: October 8, 2019,] [added: May 12, 2016,] by and among the [removed: Company,](http://www.sec.gov/Archives/edgar/data/89800/000119312519266472/d816843dex41.htm) [](http://www.sec.gov/Archives/edgar/data/89800/000119312519266472/d816843dex41.htm)[Sherwin-Williams Canada] [added: Company, Citicorp USA,] Inc., [removed: Sherwin-Williams Luxembourg S.à r.l. and Sherwin-Williams UK Holding Limited,] as [removed: borrowers,] [added: administrative agent and issuing bank, and] the lenders party thereto, [removed: the issuing lenders party thereto and Citibank, N.A. as administrative agent,] filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated [removed: October 11, 2019,] [added: May 12, 2016,] and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/89800/000119312519266472/d816843dex41.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/89800/000119312516588294/d165099dex41.htm)] | | |

| | | | [removed: (x)] [added: (y)] | | | [Credit Agreement, dated as of May 9, 2016, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated May 9, 2016, and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/89800/000119312516583086/d193656dex41.htm) | | |

| | | | [removed: (y)] [added: (z)] | | | [Agreement for Letter of Credit, dated as of May 9, 2016, by and between the Company and Citibank, N.A. filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated May 9, 2016, and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/89800/000119312516583086/d193656dex42.htm) | | |

| | | | [removed: (z)] [added: (bb)] | | | [Amendment No. [removed: 1] [added: 2] to the Credit Agreement, dated as of [removed: May 12,] [added: June 20,] 2016, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated [removed: May 12,] [added: June 20,] 2016, and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/89800/000119312516588294/d165099dex41.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/89800/000119312516625987/d176864dex41.htm)] | | |

| | | | [removed: (aa)] [added: (cc)] | | | [Amendment No. [removed: 2] [added: 3] to the Credit Agreement, dated as of [removed: June 20,] [added: August 1,] 2016, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated [removed: June 20,] [added: August 1,] 2016, and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/89800/000119312516625987/d176864dex41.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/89800/000119312516665989/d233122dex41.htm)] | | |

| | | | [removed: (bb)] [added: (dd)] | | | [Amendment No. [removed: 3] [added: 4] to the Credit Agreement, dated as of [removed: August 1, 2016,] [added: January 31, 2017,] by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated [removed: August 1, 2016,] [added: January 31, 2017,] and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/89800/000119312516665989/d233122dex41.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/89800/000119312517025101/d278235dex41.htm)] | | |

| | | | [removed: (cc)] [added: (ee)] | | | [Amendment No. [removed: 4] [added: 5] to the Credit Agreement, dated as of [removed: January 31,] [added: February 13,] 2017, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated [removed: January 31,] [added: February 13,] 2017, and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/89800/000119312517025101/d278235dex41.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/89800/000119312517039530/d266583dex41.htm)] | | |