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Letter to the Editor

The Sherwin-Williams Company Reports 2000 Year-End Financial Results

CLEVELAND -- The Sherwin-Williams Company has announced its financial results for the year and fourth quarter ended December 31, 2000.

Consolidated net sales were up 4.2 percent for the year to $5.2 billion and up 0.2 percent to $1.1 billion in the fourth quarter. The decelerating U.S. economy and harsh weather during the fourth quarter adversely impacted total sales. During the fourth quarter, the Company recognized an asset impairment charge of $352.0 million ($293.6 million after-tax or $1.80 per diluted share) in the Consumer Segment to reduce the carrying values of certain long-lived assets, primarily goodwill, to their estimated fair values. Accordingly, net income for 2000 was reduced to $16.0 million and net income per share was reduced to $.10 per diluted share. Cash flow will not be affected by this accounting charge. Excluding the asset impairment charge, net income for 2000 increased 1.9 percent to $309.7 million and net income per share increased 5.6 percent to $1.90 per diluted share. For the fourth quarter, excluding the asset impairment charge, net income declined 17.5 percent to $46.2 million and net income per share decreased 14.7 percent to $.29 per diluted share due primarily to lower than anticipated sales and the impact of increased raw material costs, inflated energy costs and higher distribution costs.

The Automotive Finishes Segment's net sales increased 4.8 percent to $493.4 million for the year and 1.9 percent to $116.1 million for the quarter. The soft domestic economy negatively impacted car and truck sales in the fourth quarter that curtailed this Segment's OEM sales. Operating profits for 2000 decreased to $61.3 million from $66.5 million in 1999 and declined to $8.8 million in the quarter compared to $16.7 million in last year's fourth quarter. The operating profit decline was due primarily to increased raw material costs, severance, moving costs and a fourth quarter provision of $6.8 million associated with the consolidation of the Segment's research and administrative operations into a newly acquired facility.

Net sales in the International Coatings Segment increased 2.6 percent to $307.0 million for the year and decreased 0.6 percent to $81.6 million in the quarter. Net sales for the year continued to be impacted by a shift in sales to lower priced products and competitive pricing. Continued economic problems in South America, particularly in Argentina, along with flooding in the United Kingdom adversely impacted fourth quarter sales. Operating profit decreased to $17.7 million for the year from $33.9 million last year and to $2.7 million in the fourth quarter from $12.4 million last year. Price competition, increased raw material costs and an unfavorable product sales mix to lower margin products put pressure on margins which adversely effected operating profits throughout South America.

Commenting on the results for 2000 and the fourth quarter, Christopher M. Connor, Chairman and Chief Executive Officer said, "Though the rate of increase in Automotive Finishes Segment sales was impacted in the fourth quarter by a significant slowing in a small portion of our business, we were encouraged by the improvement in our vehicle refinish business which helped this Segment achieve its strongest sales performance in the last five years. The International Coatings Segment continues to improve gallon and local currency sales in spite of poor economic conditions and heavy competitive pressures.

We believe the Company's stock is still undervalued and continued our open market purchasing program by acquiring an additional 1.6 million shares of the Company's common stock in the fourth quarter. These latest purchases bring the total number of treasury shares acquired in 2000 to 6.8 million shares. The Company had remaining authorization at December 31, 2000 to purchase 13.2 million shares of its common stock.

Due to raw material cost increases and cautious consumer spending, we expect that year-over-year sales and profit comparisons for our Company will be challenging through the first half of 2001. However, we plan to continue launching new products, improving the focus of our sales efforts, opening new stores and improving our profitability. We anticipate that our Company will achieve another year of sales and earnings improvement in 2001, which will be our twenty-fourth consecutive year of improved operating results."

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