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Letter to the Editor

Sherwin-Williams Q3 Net Income Up 8%

Income before cumulative effect of change in accounting principle increased 3.0 percent in the first nine months to $261.2 million from $253.6 million in the same period last year. Income before cumulative effect of change in accounting principle was negatively impacted by a reduction in the net pension credit of $3.8 million ($6.0 million before income taxes) in the third quarter of 2003 compared to 2002 and $11.4 million ($18.0 million before income taxes) during the first nine months. Diluted net income per common share increased 12.3 percent in the quarter to $.82 per share from $.73 per share in 2002 and increased 6.6 percent in the first nine months to $1.77 per share from $1.66 per share a year ago, before the cumulative effect of change in accounting principle.

In the first quarter of 2002, the company recorded an after-tax transitional impairment charge of $183.1 million, or $1.21 per share, as a cumulative effect of change in accounting principle for indefinite-lived intangible assets and goodwill. Net income, after cumulative effect of change in accounting principle, for the first nine months of 2002 was $70.5 million or $.46 per common share.

The Automotive Finishes Segment's net sales increased 1.2 percent to $115.1 million in the third quarter but declined 1.8 percent to $342.9 million in the first nine months versus the comparable periods last year. Sales results for the third quarter were essentially unaffected by favorable currency exchange fluctuations relative to last year. However, sales results for the first nine months relative to last year were negatively impacted by unfavorable currency exchange fluctuations. Excluding the impact of such fluctuations, net sales for the Segment increased 0.5 percent for the first nine months.

This Segment's sales increase in the third quarter resulted primarily from sales increases in the international operating units of the Segment. Operating profit in this Segment decreased to $12.4 million from $13.2 million in the third quarter and to $37.8 million from $42.4 million in the first nine months versus last year. This Segment's operating profit was negatively impacted in the third quarter and first nine months primarily by low sales volume, related unfavorable manufacturing absorption and a reduction in the net pension credit compared to last year.

The company purchased 1,472,045 shares of its common stock during the third quarter of 2003 bringing the total purchased to 5,000,000 shares for the first nine months. The company had remaining authorization at September 30, 2003 to purchase 5,300,000 shares.

Commenting on the company's operating results for the third quarter and first nine months of 2003, Christopher M. Connor, Chairman and Chief Executive Officer, said, "Our Automotive Finishes Segment is beginning to see some signs of strengthening in the international markets in which it does business although domestic sales continue to be hampered by soft automotive after-market industry conditions.

"We anticipate that the fourth quarter consolidated sales increase will be in the mid single-digits versus last year's fourth quarter. We expect diluted net income per common share in the fourth quarter will be in the range of $.39 to $.47 per share compared to $.38 per share earned in last year's fourth quarter. We commented on July 22, 2003 that we expected our annual sales would increase 1.5 to 3.0 percent over 2002. With relatively strong third quarter sales, we now expect our annual sales will finish in the upper part of that range or between 2.5 and 3.5 percent over 2002. Similarly, we are narrowing our expectations established on July 22, 2003 for diluted net income per common share for the year to be within the top part of the range provided at that time. We expect diluted net income per common share for the year will be in the range of $2.16 to $2.24 per share compared to $2.04 per share earned last year before cumulative effect of change in accounting principle."

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