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Letter to the Editor

Sherwin-Williams Reports Net Sales Up in 2003

Consolidated net sales increased 11.1 percent in the fourth quarter to $1.28 billion from $1.16 billion in last year's fourth quarter and increased 4.3 percent in 2003 to $5.41 billion from $5.18 billion in 2002. Net income increased 24.1 percent in the fourth quarter to $70.8 million from $57.1 million last year. For the 2003 year, income before cumulative effect of change in accounting principle increased 6.9 percent to $332.1 million from $310.7 million last year. Income before cumulative effect of change in accounting principle was negatively impacted by a reduction in the net pension credit of $13.3 million ($20.9 million before income taxes) for the year 2003 compared to 2002. Diluted net income per common share increased 26.3 percent in the fourth quarter to $.48 per share from $.38 per share in 2002 and increased 10.8 percent to $2.26 per share for the year from $2.04 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 year 2002 was $127.6 million or $.84 per common share.

Net sales in the Paint Stores Segment increased 9.7 percent in the fourth quarter to $829.8 million and 5.1 percent for the year to $3.5 billion. Net sales for the Consumer Segment increased 6.2 percent to $248.6 million in the fourth quarter of 2003 and 1.0 percent to $1.19 billion for the year compared to the same periods last year.

Net sales in the International Coatings Segment improved $31.3 million or 52.8 percent in the fourth quarter to $90.4 million and $41.0 million or 16.8 percent for the year to $285.3 million compared to a year ago.

The Automotive Finishes Segment's net sales increased 8.6 percent in the fourth quarter to $113.9 million and 0.6 percent for the year to $456.7 million. Sales results for the fourth quarter were aided by a change in a consolidated Brazilian subsidiary's fiscal year, described above, and favorable currency exchange fluctuations relative to last year. Sales results for the year were negatively impacted by unfavorable currency exchange fluctuations. The change in the fiscal year and impact of the currency exchange fluctuations increased net sales for the Segment $5.3 million for the quarter and decreased net sales $1.8 million for the year. This Segment's sales increases in the quarter and year resulted from sales improvement in the international operating units of the Segment that more than offset domestic sales declines. Operating profit in this Segment increased 20.5 percent in the quarter to $14.6 million but decreased 3.8 percent for the year to $52.4 million from $54.5 million last year. There was no significant impact on operating profit in the fourth quarter or the year from the fiscal year change or the impact of currency exchange fluctuations. The fourth quarter operating profit was favorably impacted by increased foreign sales that were partially offset by domestic unfavorable manufacturing and distribution absorption. Operating profit reduction in this Segment for the full year resulted primarily from low sales volume, related unfavorable manufacturing absorption and a reduction in the net pension credit compared to last year.

The Company purchased 2,977,000 shares of its common stock in the fourth quarter, bringing the total purchased to 7,977,000 shares in 2003. The Company had remaining authorization at December 31, 2003 to purchase 17,023,000 shares.

Commenting on the results for the fourth quarter and year 2003, Christopher M. Connor, Chairman and Chief Executive Officer said, "We were encouraged by the continued strength of the architectural paint sales in our Paint Stores Segment during the fourth quarter, particularly in the DIY customer sector, and by the sales volume increases that continue to be achieved by our Consumer Segment as the domestic economic recovery appears to be gaining steam. We are also optimistic that the beginning signs of recovery in the industrial maintenance and product finishes markets seen during the last half of the year will continue.

"We are also encouraged with the strengthening in the international automotive markets in which our Automotive Finishes Segment does business and we are pleased with the sales and operational performance of our International Coatings business units.

"The cost containment efforts implemented over the past few years in our Consumer, Automotive Finishes and International Coatings Segments contributed significantly to our operating profit improvement for the year in spite of a pre-tax reduction of nearly $21 million in the net pension credit. We foresee a long slow economic recovery in the U.S. industrial sector and we are planning accordingly. We have operated effectively in a sluggish economy and have positioned ourselves to take advantage of market opportunities in many different areas as the economic recovery gains momentum.

. "We expect our annual sales results for 2004 will be up in the mid-single digits again over 2003. With annual sales at that level, we anticipate diluted net income per common share for the year in the range of $2.45 to $2.55 per share compared to $2.26 per share earned in 2003. We anticipate that sales during the first quarter of 2004 will increase in the mid-to-high single digits over last year's level. With sales at the anticipated level, we expect diluted net income per common share for the first quarter of 2004 will be in the range of $.26 to $.30 per share compared to $.21 per share in the first quarter of 2003."

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