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Letter to the Editor

Sherwin-Williams Company Reports Q1 2002 Earnings Results

The Sherwin-Williams Company has announced its financial results for the first quarter ended March 31, 2002.

Consolidated net sales for the quarter decreased 0.8 percent to $1.15 billion from $1.16 billion in the first quarter of 2001. Poor economic conditions in South America, weakening currency exchange rates in Argentina and Brazil and a continuing sluggish domestic industrial sector impacted sales. In the first quarter of 2002, net income before accounting changes declined $2.1 million, or 5.8 percent, to $34.8 million from $36.9 million in 2001 due primarily to lower sales.

The Automotive Finishes Segment's net sales decreased 3.7 percent to $111.6 million in the first quarter from $115.8 million last year. The slowly recovering domestic economy continued to curtail this Segment's OEM sales and a mild winter restrained growth in collision repair sales. Operating profit of $11.4 million for the first quarter of 2002 was essentially flat with last year's $11.6 million. This Segment's operating profit was negatively impacted by lower sales volume and the related manufacturing absorption that was partially offset by moderating raw material, distribution and energy costs compared to last year.

Net sales in the International Coatings Segment were down $8.1 million to $61.4 million in the first three months of 2002 from $69.5 million a year ago. The sales decrease in U.S. dollars of 11.6 percent was due primarily to unfavorable currency exchange rates in the Brazilian real and Argentine peso. Excluding the effects of currency exchange fluctuations relative to last year, net sales for the Segment increased 2.6 percent for the quarter and gallon sales were up slightly. The International Coatings Segment realized an operating loss during the first quarter of $8.5 million - down from an operating profit of $4.3 million a year ago.

Commenting on the first quarter results, Christopher M. Connor, Chairman and Chief Executive Officer, said, "Although some signs of a strengthening domestic economy are beginning to appear in certain markets in which we participate, I believe the broader economic recovery will be slow and will continue to impact our sales and profit improvements... Soft economic conditions and mild winter weather hampered sales of the Automotive Finishes Segment. The International Coatings Segment continued to improve local operations in spite of mixed economic conditions... Our total debt at the end of the first quarter 2002 is significantly below last year's total debt. We continued our open market purchases of the Company's common stock, acquiring 1,762,800 shares in the first quarter of 2002, and had remaining authorization at March 31, 2002 to purchase approximately 15.2 million shares.

"We expect that year-over-year sales and profit comparisons for our Company will continue to be challenging through the remainder of the first half and into the second half of 2002, as we anticipate only a slow pick up in the industrial and OEM markets. However, we plan to continue launching new products, opening stores, promoting our new color system, enhancing the shopping experience in our stores and increasing the productivity of operations to improve sales and operating income. We anticipate that second quarter sales will be flat to up slightly over last year's second quarter... As we had previously forecasted for the year 2002, we expect sales will finish flat to up slightly from 2001."

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