Your Source for Up-To-Date News and Research on the Collision Repair Industry 

 

click here to subscribe to the FREE INSIGHT Editor's Desk News Alert Email

SUBSCRIBERS-ONLY
Today's News
INSIGHT This Month
INSIGHT Archives
Survey Center
Letter to the Editor

Business Tools
Subscription Information
CSI Reporting
Financial Analysis
IRS Audit Guide

Management/
Technical Info
Market Watch Rates
INSIGHT Inside this month's issue...

Feedback
Letter to the Editor

The Sherwin-Williams Company Reports Good Q2 2005 Earnings Results

Consolidated net sales increased 21.5 percent to $1.97 billion in the quarter and 19.3 percent to $3.50 billion in the first six months versus 2004. Diluted net income per common share increased 24.1 percent in the quarter to $1.08 per share from $.87 per share in 2004 and 36.1 percent in the first six months to $1.66 per share from $1.22 per share a year ago.

The net sales gains in both the quarter and first six months were due primarily to strong sales performances by stores open for more than twelve calendar months, acquisitions in the Paint Stores and Consumer Segments and improvement in the Automotive Finishes and International Coatings Segments. Acquisitions completed since the comparable periods of 2004, including Duron, Inc. and Paint Sundry Brands Corporation acquired in September 2004, added $144.1 million, or 8.9 percent, to net sales in the second quarter and $265.0 million, or 9.0 percent, to net sales in the first six months of 2005.

Net sales in the Automotive Finishes Segment increased 9.2 percent in the quarter to $143.6 million and 8.6 percent in the first six months to $273.5 million. The sales increases were due primarily to the impact of favorable currency exchange rates and selling price increases. The impact of favorable currency exchange rates increased net sales of this Segment by 3.1 percent in the quarter and 2.2 percent in the first half. In addition, the April 2004 acquisition of a majority interest in an automotive coatings company in China added 2.4 percent to net sales in the first half.

Operating profit of this Segment improved 7.6 percent to $17.5 million in the quarter and 15.1 percent to $32.5 million in the first six months. This Segment's operating profit in the first half of the year increased as a percent to net sales to 11.9 percent from 11.2 percent last year.

This Segment's operating profit was favorably impacted by effective expense control and increased sales that partially offset significant increases in raw material costs. There was no significant impact on operating profit in the quarter or first six months due to currency exchange fluctuations. The Chinese acquisition was slightly accretive to this Segment's operating profit in the first six months.

The company acquired 1,000,100 shares of its common stock through open market purchases during the quarter and had remaining authorization at June 30, 2005 to purchase 6,722,900 shares.

Commenting on the second quarter results, Christopher M. Connor, Chairman, President and Chief Executive Officer, said, "We are pleased that we were able to increase our diluted net income per share an additional $.21 per share in the quarter for a total of $.44 per share increase year-to-date in spite of continuing higher raw material costs. Though significant raw material cost increases continue to adversely impact our gross margins, the implementation of certain price increases and tight control over expenses will support our continued earnings improvement. The Duron and Paint Sundry Brands acquisitions continue to have a favorable impact on both net sales and operating profit.

"We are encouraged by the strong architectural paint sales in our Paint Stores Segment that continue to mitigate much of the significant raw material cost increases. We remain concerned about the sluggish paint sales in the Consumer Segment and the negative impact on margins of raw material costs. Although the Consumer Segment's operating profit felt the impact of reduced gross margins during the quarter, we continue to be optimistic that this Segment will manage through raw material cost increases and improve sales. We are encouraged by the steady improvements in sales and operational performance of our Automotive Finishes and International Coatings Segments.

"We anticipate achieving a mid-teens percentage increase in third quarter consolidated net sales over last year's third quarter. With sales at that level, we expect diluted net income per common share for the third quarter to be in the range of $1.06 to $1.10 per share compared to $.92 per share last year. We expect consolidated net sales in the fourth quarter will increase in the more moderate high single digit range over last year as we annualize the Duron and Paint Sundry Brands acquisitions. We expect fourth quarter profit before taxes to be up relative to last year's fourth quarter but diluted earnings per share will be down slightly from last year's $.57 per share due to a significantly higher tax rate in the fourth quarter 2005 compared to the fourth quarter 2004. The effective tax rate for the full year 2005 will be slightly below the rate for the full year 2004. We anticipate that the percentage increase in our annual consolidated net sales for 2005 will be in the mid-to-high-teens over 2004 and, with annual sales at that level, we anticipate diluted net income per common share for the year 2005 in the range of $3.20 to $3.30 per share compared to $2.72 per share earned in 2004."

©2005 Collision Repair Industry INSIGHT
All Rights Reserved

FEATURED
LINKS:

INSIGHT Supports the NABC!
Do You?