Friday May 4
The Sherwin-Williams Company Reports First Quarter 2001 Earnings Results
CLEVELAND -- The Sherwin-Williams Company announced its financial results for the first quarter ended March 31, 2001. Consolidated net sales for the quarter decreased 5.2 percent to $1.16 billion from $1.22 billion in the first quarter of 2000. The poor U. S. economic conditions, harsh winter weather and previously announced discontinued paint programs at certain customers impacted sales. Net income in the first quarter of 2001 declined $4.0 million, or 9.8 percent, to $36.9 million from $40.9 million in 2000 due primarily to lower sales. Diluted net income per common share for the quarter decreased to $.23 per share from $.25 per share in 2000.
Net sales in the Paint Stores Segment decreased 0.9 percent to $694.1 million in the first quarter of 2001 from $700.1 million in 2000 due primarily to sales shortfalls in associated product categories partially offset by slightly higher paint sales for the quarter. Excluding the leap year effect of the first quarter 2000, sales of this Segment would have been essentially flat. Sales were impacted by the sluggish U.S. economy, unseasonable weather and high energy costs that may have deferred consumer spending. In addition, the harsh weather affected contractors' ability to work on jobs. Comparable-store sales declined 3.5 percent in the quarter. The Paint Stores Segment operating profit increased $3.4 million, or 7.8 percent, to $47.0 million during the first three months of 2001 due primarily to selling price increases, sales of certain fixed assets and SG&A cost containment.
The Automotive Finishes Segment's net sales decreased 4.2 percent to $115.8 million in the first quarter from $121.0 million last year. Excluding the leap year effect of the first quarter 2000, sales of this Segment would have declined 2.6 percent. The negative impact of the soft domestic economy curtailed this Segment's OEM sales that were only partially offset by stronger collision repair sales. Operating profit for the first quarter of 2001 in this Segment decreased $2.9 million to $11.6 million. This Segment's operating profit was negatively impacted by lower sales and increased costs of the Segment's newly acquired research and administrative facility.
Net sales in the International Coatings Segment were down slightly to $73.3 million in the first three months of 2001 from $73.4 million a year ago. The sales decrease in U.S. dollars of 0.2 percent was due primarily to unfavorable currency exchange rates. Sales volume gains were achieved despite the continued soft economic conditions in the United Kingdom and Argentina and the marginally improved economies of Brazil and Chile. Operating profit in U.S. dollars for the International Coatings Segment fell to $4.6 million from $6.9 million a year ago. The operating profit decline was due primarily to currency rate fluctuations, price competition in local currencies and an unfavorable product sales mix to lower margin products putting pressure on margins that adversely effected operating profits throughout South America.
Commenting on the first quarter results, Christopher M. Connor, Chairman and Chief Executive Officer said, "The soft domestic economy continued to hamper our sales and profit improvements. In addition, the extremely favorable sales and earnings results of the 2000 first quarter make year-over-year comparisons with 2001 first quarter results difficult. In spite of the soft paint market, the Paint Stores Segment continues to open new stores. We are disappointed by the greater-than-anticipated sales and profit decline in the Consumer Segment. Though sales in the Automotive Finishes Segment were impacted in the first quarter by the ongoing softness in sales in the smaller OEM portion of our business, we continued to be encouraged by the strengthening in our collision repair business. The International Coatings Segment continued to improve its local operations in spite of mixed economic conditions and heavy competitive pressures.
As a result of the working capital intensive nature of our business, we are pleased that our organization has been able to reduce inventory levels to reflect current market conditions and we are prepared to continue to service our customers as the economy improves and the weather becomes more favorable. In addition, we are pleased that even with our store expansion program our total SG&A expenses are below last year's level."
Connor continued, "For the year 2001, sales may finish flat to slightly down from 2000 due to the soft domestic economy. Thus, our expectations for diluted net income per share for the year are in the range of $1.85 to $1.95 per share compared to $1.90 per share earned last year. This is a reduction from our previous estimates of $2.00 to $2.05 per share."
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