SHERWIN WILLIAMS CO

Previous wording

The Sherwin-Williams Company, founded in 1866, and its consolidated wholly owned subsidiaries (collectively, the Company) are engaged in the development, manufacture, distribution and sale of paint, coatings and related products to professional, industrial, commercial and retail customers primarily in North and South America with additional operations in the Caribbean region and throughout Europe, Asia and Australia.

Current wording

The Sherwin-Williams Company, founded in 1866, is engaged in the development, manufacture, distribution and sale of paint, coatings and related products to professional, industrial, commercial and retail customers primarily in North and South America with additional operations in the Caribbean region and throughout Europe, Asia and Australia.

Previous wording

The Company is structured into three reportable segments – Paint Stores Group, Consumer Brands Group and Performance Coatings Group (collectively, the Reportable Segments) – and an Administrative segment in the same way it is internally organized for assessing performance and making decisions regarding the allocation of resources. Effective January 1, 2023, the Company changed its organizational structure to manage and report the Latin America architectural paint business within the Consumer Brands Group to more closely align demand and service model trends with its current business strategy. The Latin America business was formerly part of The Americas Group, which has become the Paint Stores Group concurrent with this change. The Company will report segment results for the newly realigned Paint Stores Group and Consumer Brands Group for both current and prior periods presented herein. See Note 23 to the Consolidated Financial Statements in Item 8 for additional information on the Company’s Reportable Segments.

Current wording

The Company is structured into three reportable segments – Paint Stores Group, Consumer Brands Group and Performance Coatings Group (collectively, the Reportable Segments) – and an Administrative function in the same way it is internally organized for assessing performance and making decisions regarding the allocation of resources. See Note 22 to the consolidated financial statements in Item 8 for additional information on the Company’s Reportable Segments.

Previous wording

•Consolidated Net sales increased 4.1% in the year to a record $23.052 billion

Current wording

•Consolidated Net sales increased in the year to a record $23.099 billion

Previous wording

◦Net sales from stores in the Paint Stores Group open more than twelve calendar months increased 6.8% in the year

Current wording

◦Net sales from stores in the Paint Stores Group open more than twelve calendar months increased 1.7% in the year

Previous wording

•Diluted net income per share increased 19.8% to $9.25 per share in the year compared to $7.72 per share in the full year 2022

Current wording

•Diluted net income per share increased 14.1% to $10.55 per share in the year compared to $9.25 per share in the full year 2023

Previous wording

◦Adjusted diluted net income per share increased to $10.35 per share in the year compared to $8.73 per share in the full year 2022

Current wording

◦Adjusted diluted net income per share increased 9.5% to $11.33 per share in the year compared to $10.35 per share in the full year 2023

Previous wording

•Generated Net operating cash of $3.522 billion, or 15.3% of net sales, in the year

Current wording

•Generated Net operating cash of $3.153 billion, or 13.7% of Net sales, in the year

Previous wording

•Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) increased 17.5% in the year to $4.239 billion or 18.4% of net sales

Current wording

•Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) increased 6.0% in the year to $4.492 billion or 19.4% of Net sales

Previous wording

Our capital deployment strategy remains balanced and consistent. Long-term debt maturities due in 2024 are $1.100 billion and are expected to be refinanced at higher interest rates. We have plans to continue to invest in the construction of new facilities, including our new global headquarters in downtown Cleveland, Ohio and new research and development center in the Cleveland suburb of Brecksville, and in the expansion of certain existing manufacturing and distribution facilities. We plan to expand our footprint by opening 80 to 100 new stores in the United States and Canada in 2024, and pursue acquisitions that align with our long-term growth strategy. We will also return value to our shareholders through the payment of dividends and the reinvestment of excess cash for share repurchases of Company stock.

Current wording

Our capital deployment strategy remains balanced and consistent. We have a strong liquidity position, with $210.4 million in cash and $3.274 billion of unused capacity under our credit facilities at December 31, 2024 and expect to end 2025 within our target debt-to-EBITDA leverage ratio of 2 to 2.5 times. We are, and expect to remain, in compliance with all financing covenants. Long-term debt maturities due in 2025 are $1.050 billion and are expected to be refinanced at higher interest rates. Together with the long-term debt maturities refinanced during 2024, Interest expense is expected to increase by approximately $40 million in 2025. In addition, we expect to incur additional costs associated with the transition into our new global headquarters and research and development (R&D) center in 2025 of approximately $100 million, which includes approximately $80 million of Selling, general and administrative expenses and approximately $20 million of Interest expense. Lastly, we plan to expand our footprint by opening 80 to 100 new stores in the United States and Canada in 2025, continue to evaluate acquisitions that align with our long-term growth strategy and return value to our shareholders through the payment of dividends and the reinvestment of excess cash for share repurchases of Company stock.

Previous wording

Please see Item 1A Risk Factors in Part I of this Annual Report on Form 10-K for further information regarding the current and potential impact of macroeconomic conditions on the Company, including those relating to supply chain disruptions, raw material availability, foreign currency and inflation.

Current wording

See Item 1A Risk Factors for further information regarding the current and potential impact of general business and macroeconomic conditions, including inflation rates and interest rates, supply chain disruptions, raw material availability and fluctuations in foreign currency.

Previous wording

The following discussion and analysis addresses comparisons of material changes in the consolidated financial statements for the years ended December 31, 2023 and 2022. For comparisons of the years ended December 31, 2022 and 2021, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed on February 22, 2023.

Current wording

The following discussion and analysis addresses comparisons of material changes in the consolidated financial statements for the years ended December 31, 2024 and 2023. For comparisons of the years ended December 31, 2023 and 2022, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed on February 20, 2024.

Previous wording

Consolidated Net sales for 2023 increased 4.1% primarily due to selling price increases, volume growth due to higher architectural sales volume in the Paint Stores Group and a 1.0% net increase from the impact of acquisitions and divestitures completed during the past twelve months, partially offset by sales volume decreases in the Consumer Brands and Performance Coatings Groups. Net sales of all consolidated foreign subsidiaries increased 3.1% to $4.428 billion for 2023 versus $4.294 billion for 2022 due primarily to growth in the Europe and Latin America regions, partially offset by lower net sales in the Asia region as a result of the divestiture of the China architectural business. Net sales of all operations other than consolidated foreign subsidiaries increased 4.3% to $18.624 billion for 2023 versus $17.855 billion for 2022.

Current wording

Consolidated Net sales for 2024 increased 0.2% primarily due to higher sales in the Paint Stores Group. This increase was partially offset by lower sales in the Consumer Brands and Performance Coatings Groups. Net sales of all consolidated foreign subsidiaries decreased to $4.426 billion in 2024 compared to $4.428 billion in 2023 primarily due to unfavorable currency translation impact in Latin America and lower Net sales in Asia as a result of the divestiture of the China architectural business, partially offset by higher Net sales in Europe as a result of acquisitions. Net sales of all operations other than consolidated foreign subsidiaries increased to $18.673 billion for 2024 compared to $18.624 billion for 2023.

Previous wording

Net sales in the Paint Stores Group increased 7.3% primarily due to mid-single digit sales volume growth and selling price increases, which impacted net sales by a low-single digit percentage. Net sales from stores in the Paint Stores Group open for more than twelve calendar months increased 6.8% in the year over the prior year comparable period. During 2023, the Paint Stores Group opened 76 new stores and closed 6 locations for a net increase of 70 stores. The total number of stores in operation at December 31, 2023 was 4,694 in the United States, Canada and the Caribbean region. The Paint Stores Group’s objective is to expand its store base by an approximate average of 2% each year, primarily through organic growth. Sales of products other than paint increased approximately 5.0% over last year. A discussion of changes in volume versus pricing for sales of products other than paint is not pertinent due to the wide assortment of general merchandise sold.

Current wording

Net sales in the Paint Stores Group increased 2.7% primarily due to sales volume growth and selling price increases, which both impacted Net sales by a low-single digit percentage. Net sales from stores in the Paint Stores Group open for more than twelve calendar months increased 1.7% in the year over the prior year comparable period. During 2024, the Paint Stores Group opened 84 new stores and closed 5 locations for a net increase of 79 stores. The total number of stores in operation at December 31, 2024 was 4,773 in the United States, Canada and the Caribbean region. The Paint Stores Group’s objective is to expand its store base by an approximate average of 2% each year, primarily through organic growth. Sales of products other than paint increased 0.6% over last year. A discussion of changes in volume versus pricing for sales of products other than paint is not pertinent due to the wide assortment of general merchandise sold.

Previous wording

Net sales in the Performance Coatings Group increased 0.7% in 2023 primarily due to selling price increases, which impacted net sales by a mid-single digit percentage, and a 4.1% increase from the impact of acquisitions completed during the past twelve months, partially offset by a high-single digit sales volume decrease. In 2023, the Performance Coatings Group added 5 net new branches, increasing the total to 322 branches open in the United States, Canada, Mexico, South America, Europe and Asia.

Current wording

Net sales in the Performance Coatings Group decreased 0.7% in 2024 primarily due to selling price decreases, largely attributable to product mix, which impacted Net sales by a low-single digit percentage and unfavorable foreign currency translation. These decreases were partially offset by low-single digit volume growth, inclusive of the acquisition of SIC Holding GmbH in 2023 and the acquisition of a metal packaging coatings business in 2024. In 2024, the Performance Coatings Group added 2 net new branches, increasing the total to 324 branches.

Previous wording

Net sales in the Administrative segment, which primarily consists of external leasing revenue, remained flat in 2023.

Current wording

Net sales in the Administrative function, which primarily consists of external leasing revenue, increased by an insignificant amount in 2024.

Previous wording

The following table presents the components of income before income taxes as a percentage of net sales:

Current wording

The following table presents the components of Income before income taxes as a percent of Net sales:

Previous wording

Consolidated Gross profit increased $1.433 billion, or 15.4%, in 2023 compared to the same period in 2022. Consolidated Gross profit as a percent to consolidated Net sales increased to 46.7% in 2023 from 42.1% in 2022. Consolidated gross profit dollars increased primarily due to selling price increases in all Reportable Segments, higher sales volume in the Paint Stores Group and moderating raw material costs, partially offset by lower sales volumes in the Consumer Brands and Performance Coatings Groups.

Current wording

Consolidated Gross profit increased $437.0 million, or 4.1%, in 2024 compared to the same period in 2023 primarily due to higher sales volumes in the Paint Stores and Performance Coatings Groups and moderating raw material costs, partially offset by lower sales volume in the Consumer Brands Group. Consolidated Gross profit as a percent to consolidated Net sales increased to 48.5% in 2024 from 46.7% in 2023 for these same reasons.

Previous wording

The Paint Stores Group’s gross profit for 2023 increased $908.6 million compared to the same period in 2022 primarily due to sales volume growth, selling price increases and moderating raw material costs. The Paint Stores Group’s gross profit as a percent of net sales increased for these same reasons. The Consumer Brands Group’s gross profit increased $139.3 million in 2023 compared to the same period in 2022 due primarily to selling price increases and moderating raw material costs, partially offset by a sales volume decrease and increases in wages and other employee-related expenses in manufacturing and distribution operations. The Consumer Brands Group’s gross profit as a percent of net sales increased for these same reasons. The Performance Coatings Group’s gross profit increased $402.2 million compared to the same period in 2022 due primarily to higher selling prices, moderating raw material costs and the impact of acquisitions, partially offset by lower sales volume and increases in wages and other employee-related expenses. The Performance Coatings Group’s gross profit as a percent of net sales increased for these same reasons.

Current wording

The Paint Stores Group’s Gross profit for 2024 increased $242.1 million compared to the same period in 2023 primarily due to higher Net sales driven by sales volume growth, selling price increases and moderating raw material costs. The Paint Stores Group’s Gross profit as a percent of Net sales increased for these same reasons. The Consumer Brands Group’s Gross profit increased $181.1 million in 2024 compared to the same period in 2023 primarily due to higher fixed cost absorption in the manufacturing and distribution operations within the segment and moderating raw material costs, partially offset by lower Net sales. The Consumer Brands Group’s Gross profit as a percent of Net sales increased for these same reasons. The Performance Coatings Group’s Gross profit increased $13.6 million compared to the same period in 2023 primarily due to moderating raw material costs, partially offset by lower Net sales. The Performance Coatings Group’s Gross profit as a percent of Net sales increased for these same reasons.

Previous wording

Consolidated SG&A increased by $733.8 million compared to the same period in 2022 primarily due to increased employee-related expenses, including incentive-based compensation expense, expenses to support higher sales levels and net new store openings. As a percent of Net sales, SG&A increased 200 basis points compared to the same period in 2022 for these same reasons.

Current wording

Consolidated SG&A increased by $356.7 million, or 5.0%, in 2024 compared to the same period in 2023 primarily due to investments in long-term growth strategies, including expenses to support net new store openings and digital technologies and higher employee-related costs. As a percent of Net sales, SG&A increased 150 basis points compared to the same period in 2023 for these same reasons.

Previous wording

The Paint Stores Group’s SG&A increased $401.4 million for the year due primarily to higher employee-related expenses, increased spending from new store openings, higher costs to serve customers, increased investments in technologies and costs to support higher sales levels, including the hiring of additional sales representatives. The Consumer Brands Group’s SG&A increased $64.5 million for the year primarily due to higher employee-related expenses and increased spending to support higher sales levels in Latin America. The Performance Coatings Group’s SG&A increased by $139.9 million for the year primarily due to higher employee-related expenses, costs from acquisitions and investments in technology. The Administrative segment’s SG&A increased $128.0 million primarily due to higher employee-related expenses, including stock-based and other incentive compensation, as well as increased expenses related to technology and systems.

Current wording

The Paint Stores Group’s SG&A increased $194.1 million or 4.6% for the year primarily due to higher employee-related costs and investments in long-term growth initiatives, including increased spending from net new store openings and costs to support higher sales. The Consumer Brands Group’s SG&A decreased $19.2 million or 2.2% for the year primarily due to effective cost control in managing the operations of the business, partially offset by higher employee-related costs. The Performance Coatings Group’s SG&A increased by $27.5 million or 1.9% for the year primarily due to investments in long-term initiatives and higher employee-related costs. The Administrative function’s SG&A increased $154.3 million or 27.7% primarily due to higher employee-related costs and increased expenses related to digital technologies and systems.

Previous wording

Other general expense (income) - net changed by $92.0 million from income of $(24.9) million in 2022 to an expense of $67.1 million in 2023. The change was primarily attributable to an increase in provisions for environmental matters - net due to new information which impacted the estimate of required remediation at certain Major Sites and other Company locations. In addition, the Company incurred a modest loss on the sale or disposition of assets versus a gain in the prior year. These decreases were offset by a gain on the sale of a non-core domestic aerosol business in 2023. See Note 20 to the Consolidated Financial Statements in Item 8 for additional information.

Current wording

Other general (income) expense - net changed by $105.9 million from expense of $67.1 million in 2023 to income of $38.8 million in 2024. The change was primarily attributable to a decrease in provisions for environmental matters, net in the Administrative function and increased net gains on sale or disposition of assets. This activity was partially offset by the non-recurring gain recognized in 2023 related to the divestiture of a non-core domestic aerosol business. See Note 19 to the consolidated financial statements in Item 8 for additional information.

Previous wording

For information on impairment considerations, see Note 7 to the Consolidated Financial Statements in Item 8.

Current wording

There was no impairment in 2024. Asset impairment of $34.0 million related to the divestiture of the China architectural business and impairment related to trademarks of $23.9 million primarily related to a trademark in Europe were recorded in 2023. For information on impairment considerations, see Notes 3 and 6 to the consolidated financial statements in Item 8.

Previous wording

Interest expense increased $26.7 million in 2023 compared to 2022 primarily due to higher interest rates, partially offset by a decrease in outstanding debt. See Note 8 to the Consolidated Financial Statements in Item 8 for additional information on the Company’s outstanding debt.

Current wording

Interest expense decreased $1.8 million in 2024 compared to 2023 primarily due to a decrease in long-term debt, partially offset by higher interest expense as a result of an increase in short-term borrowings. See Note 7 to the consolidated financial statements in Item 8 for additional information on the Company’s outstanding debt.

Previous wording

Other expense (income) - net increased $18.5 million in 2023 compared to 2022 primarily due to the significant devaluation of the Argentine Peso in December 2023 as part of economic reforms implemented by the government of Argentina. As a result of these actions in Argentina, the Company incurred a loss of $41.8 million. In addition, the Company incurred a loss on the extinguishment of its Debentures due 2027 and 2097 of $12.8 million. These increases were partially offset by gains on investments held in the Administrative segment and miscellaneous pension and benefit income. See Note 20 to the Consolidated Financial Statements in Item 8 for additional information related to Other expense (income) - net.

Current wording

Other (income) expense - net changed by $110.2 million from expense of $65.5 million in 2023 to income of $44.7 million in 2024 primarily due to lower foreign currency transaction related losses in 2024 compared to 2023 and an increase in miscellaneous income. The foreign currency transaction related losses in 2023 included a $41.8 million unfavorable impact from the significant devaluation of the Argentine peso in December 2023 as part of economic reforms implemented by the government of Argentina. In addition, a $12.8 million loss on extinguishment of debt was recognized in 2023. This activity was partially offset by a decrease in miscellaneous pension income and investment gains. See Note 19 to the consolidated financial statements in Item 8 for additional information related to Other (income) expense - net.

Previous wording

The following table presents income before income taxes by segment and as a percentage of net sales by segment:

Current wording

The following table presents Income before income taxes by segment and as a percent of Net sales by segment:

Previous wording

The effective income tax rate for 2023 was 23.2% compared to 21.5% in 2022. The increase in the effective rate was primarily due to an unfavorable change in the jurisdictional mix of earnings. See Note 21 to the Consolidated Financial Statements in Item 8 for additional information.

Current wording

The effective income tax rate for 2024 was 22.3% compared to 23.2% in 2023. The decrease in the effective rate was primarily due to a more favorable impact of tax benefits related to employee share-based payments. The other significant components of the Company’s effective tax rate were consistent year-over-year. See Note 20 to the consolidated financial statements in Item 8 for additional information.

Previous wording

Diluted net income per share for 2023 increased to $9.25 per share from $7.72 per share in 2022. Diluted net income per share in 2023 included acquisition-related amortization expense of $0.78 per share, severance and other expense of $0.04 per share, expenses related to the divestiture of the China architectural business of $0.11 per share, impairment related to trademarks of $0.07 per share and expense related to the devaluation of the Argentine Peso of $0.16 per share. These expenses were partially offset by a gain on the divestiture of a non-core domestic aerosol business of $0.06 per share. Currency translation rate changes increased diluted net income per share in the year by $0.05 per share. Diluted net income per share in 2022 included acquisition-related amortization expense of $0.81 per share, severance and other expense of $0.15 per share and impairment related to the Restructuring Plan of $0.05 per share. Refer to Notes 3, 4, 7 and 20 to the Consolidated Financial Statements in Item 8 for additional information.

Current wording

Diluted net income per share for 2024 increased to $10.55 per share from $9.25 per share in 2023. Currency translation rate changes decreased diluted net income per share by $0.06 per share for 2024. Diluted net income per share in 2024 included acquisition-related amortization expense of $0.78 per share. Diluted net income per share for 2023 included acquisition-related amortization expense of $0.78 per share, severance and other expense of $0.04 per share, expenses related to the divestiture of the China architectural business of $0.11 per share, impairment related to trademarks of $0.07 per share and expense related to the devaluation of the Argentine peso of $0.16 per share. These expenses were partially offset by a gain on the divestiture of a non-core domestic aerosol business of $0.06 per share. See Notes 3, 6 and 19 to the consolidated financial statements in Item 8 for additional information.

Previous wording

The Company’s financial condition, liquidity and cash flow continued to be strong in 2023. The Company generated $3.522 billion in Net operating cash, primarily due to higher net income and improved working capital management. This strong cash generation enabled the Company to invest $1.011 billion in capital expenditures and approximately $265 million in the acquisition of SIC Holding, reduce short-term borrowings and long-term debt by $718.8 million and return $2.056 billion to shareholders in the form of cash dividends and share repurchases during the year.

Current wording

The Company’s financial condition, liquidity and cash flow remained strong in 2024. The Company generated $3.153 billion in Net operating cash and invested $1.014 billion in capital expenditures and approximately $80 million in the acquisition of a metal packaging coatings business. The Company also returned cash of $2.462 billion to shareholders in the form of cash dividends and share repurchases during the year.

Previous wording

During 2023, the Company generated EBITDA of $4.150 billion and Adjusted EBITDA of $4.239 billion. See the Non-GAAP Financial Measures section for the definitions and calculations of EBITDA and Adjusted EBITDA. As of December 31, 2023, the Company had Cash and cash equivalents of $276.8 million and total debt outstanding of $9.851 billion. Total debt, net of Cash and cash equivalents, was $9.574 billion and was 2.3 times the Company’s Adjusted EBITDA in 2023.

Current wording

The Company’s EBITDA increased 8.2% to $4.492 billion. See the Non-GAAP Financial Measures section for the definition and calculation of EBITDA. As of December 31, 2024, the Company had Cash and cash equivalents of $210.4 million and total debt outstanding of $9.888 billion. Total debt, net of Cash and cash equivalents, was $9.678 billion and was 2.2 times the Company’s EBITDA in 2024.

Previous wording

Net working capital, defined as Total current assets less Total current liabilities, decreased $1.061 billion to a deficit of $1.114 billion at December 31, 2023 from a deficit of $53.0 million at December 31, 2022. The net working capital decrease was primarily due to an increase in the Current portion of long-term debt and a decrease in current assets, particularly Inventories, partially offset by a decrease in Short-term borrowings.

Current wording

Net working capital, defined as Total current assets less Total current liabilities, decreased $293.9 million to a deficit of $1.408 billion at December 31, 2024 compared to a deficit of $1.114 billion at December 31, 2023. The net working capital decrease is due to an increase in Short-term borrowings and a decrease in current assets, particularly Accounts receivable, net and Cash and cash equivalents, partially offset by an increase in Other current assets and a decrease in Accounts payable.

Previous wording

Comparing current asset balances at December 31, 2023 to December 31, 2022, Accounts receivable decreased $95.7 million, Inventories decreased $296.7 million due to lower inventory levels and moderating raw material costs and Other current assets decreased $80.4 million, primarily related to prepaid expenses and refundable income taxes. These decreases were partially offset by an increase in Cash and cash equivalents of $78.0 million.

Current wording

Current asset balances decreased $112.1 million at December 31, 2024 compared to December 31, 2023 primarily due to a decrease in Accounts receivable, net of $79.1 million, a decrease in Cash and cash equivalents of $66.4 million and a decrease in Inventories of $41.7 million. These decreases were partially offset by an increase in Other current assets of $75.1 million, primarily related to prepaid expenses.

Previous wording

Current liability balances increased $666.2 million at December 31, 2023 compared to December 31, 2022 primarily due an increase in the Current portion of long-term debt of $1.098 billion, an increase in Other Accruals of $191.2 million, primarily related to liabilities from contracts with customers, environmental-related liabilities and miscellaneous other current liabilities, and an increase in Compensation and taxes withheld of $78.2 million. These increases were partially offset by a decrease in Short-term borrowings of $603.9 million and Accounts payable of $121.5 million.

Current wording

Current liability balances increased $181.8 million at December 31, 2024 compared to December 31, 2023 primarily due to an increase in Short-term borrowings of $288.2 million and an increase in Other accruals of $30.7 million primarily related to liabilities related to insurance, investments in U.S. affordable housing and historic renovation real estate partnerships and contracts with customers, partially offset by a decrease in short-term environmental liabilities. These increases were partially offset by a decrease in Accounts payable of $61.8 million, a decrease in Current portion of long-term debt of $49.6 million and a decrease in Accrued taxes of $23.1 million.

Previous wording

As a result of the net effect of these changes, the Company’s current ratio decreased to 0.83 at December 31, 2023 from 0.99 at December 31, 2022. Accounts receivable as a percent of Net sales decreased to 10.7% in 2023 from 11.6% in 2022. Accounts receivable days outstanding was 58 days in 2023 and 2022. In 2023, provisions for the allowance for current expected credit losses increased $3.0 million, or 5.3%. Inventories as a percent of Net sales decreased to 10.1% in 2023 from 11.9% in 2022. Inventory days outstanding was 94 days in 2023 compared to 98 days in 2022. The Company has sufficient total available borrowing capacity to fund its current operating needs.

Current wording

As a result of the net effect of these changes, the Company’s current ratio decreased to 0.79 at December 31, 2024 from 0.83 at December 31, 2023. Accounts receivable as a percent of Net sales decreased to 10.3% in 2024 from 10.7% in 2023. Accounts receivable days outstanding was 58 days in 2024 and 2023. In 2024, the allowance for current expected credit losses increased $0.8 million, or 1.3%. Inventories as a percent of Net sales decreased to 9.9% in 2024 from 10.1% in 2023. Inventory days outstanding was 93 days in 2024 compared to 94 days in 2023. The Company has sufficient total available borrowing capacity to fund its current operating needs.

Previous wording

Net property, plant and equipment increased $629.8 million to $2.837 billion at December 31, 2023 due primarily to capital expenditures of $1.011 billion, partially offset by depreciation expense of $292.3 million, sale or disposition of assets with remaining net book value of $88.0 million, and currency translation and other adjustments of $(0.5) million. During 2023, the Company closed on a transaction to sell and subsequently lease back its current headquarters and research and development center. In connection with the sale, proceeds of $47.2 million were received and an immaterial gain was recognized.

Current wording

Property, plant and equipment, net increased $696.4 million to $3.533 billion at December 31, 2024 primarily due to capital expenditures of $1.014 billion and assets acquired through a business combination of $32.9 million, partially offset by depreciation expense of $297.4 million and foreign currency translation and other adjustments of $52.6 million. During 2023, the Company closed on a transaction to sell and subsequently lease back its current global headquarters and R&D center. In connection with the sale, proceeds of $47.2 million were received and an immaterial gain was recognized.

Previous wording

Capital expenditures during 2023 in the Paint Stores Group were primarily attributable to the opening of new paint stores and renovations and improvements in existing stores. In the Consumer Brands Group and the Performance Coatings Group, capital expenditures during 2023 were primarily related to ongoing environmental compliance measures, manufacturing capacity expansion, operational efficiencies and maintenance projects at sites currently in operation. The Administrative segment incurred capital expenditures primarily related to construction activities associated with the new headquarters and research and development center. Construction of the new headquarters and research and development center is expected to be completed in 2024 at the earliest.

Current wording

Capital expenditures during 2024 included expenditures related to construction activities associated with the new global headquarters and R&D center in the Administrative function. Construction of the new global headquarters and R&D center is expected to be complete in 2025. Also included in 2024 capital expenditures were expenditures related to manufacturing capacity expansion, operational efficiencies and maintenance projects in the Consumer Brands and Performance Coatings Groups and the opening of new paint stores and renovation and improvements in existing stores in the Paint Stores Group.

Previous wording

In 2024, the Company expects to spend approximately the same as 2023 for capital expenditures, which it will fund primarily through the generation of operating cash. Core capital expenditures are targeted to be less than 2% of Net sales in 2024 and are expected to be for investments in various productivity improvement and maintenance projects at existing manufacturing, distribution and research and development facilities and new store openings. Additionally, the Company will continue to construct its new headquarters and research and development center. Refer to the Real Estate Financing section herein for further information on the financing transaction for the new headquarters.

Current wording

In 2025, the Company expects to spend slightly less than 2024 for capital expenditures, which it will fund primarily through the generation of operating cash. Core capital expenditures are expected to be for investments in various productivity improvement and maintenance projects at existing manufacturing, distribution and research and development facilities and new store openings. Additionally, the Company expects to complete construction of its new global headquarters and R&D center. Refer to the Real Estate Financing section herein for further information on the financing transaction for the new global headquarters.

Previous wording

In December 2022, the Company closed a transaction to sell and subsequently lease back its partially-constructed new headquarters. As part of the terms of the transaction, the Company is contractually obligated for completing the construction of the building and related improvements at the new headquarters. This transaction did not meet the criteria for recognition as an asset sale under U.S. generally accepted accounting principles (US GAAP) and as such, was accounted for as a real estate financing transaction. The Company expects to receive proceeds approximating $800 million to $850 million on an incremental basis until the completion of construction. The initial lease term includes the construction period and extends for 30 years thereafter, and the Company has the right and option to extend the lease term. The lease payment amounts during the construction period are dependent upon the timing and amount of total reimbursement of construction and other costs received by the Company. Lease payments over the next twelve months, which is the remaining estimated construction period, are expected to be approximately $40 million. The amount of the lease payments during the initial 30 year lease term will be calculated upon completion of the construction period and receipt of total reimbursement of construction and other costs. Once determinable, this is expected to result in a significant increase in the Company’s long-term contractual obligations.

Current wording

In December 2022, the Company closed a transaction to sell and subsequently lease back its partially-constructed new global headquarters. As part of the terms of the transaction, the Company is contractually obligated for completing the construction of the building and related improvements at the new global headquarters. Construction is expected to complete in 2025. This transaction did not meet the criteria for recognition as an asset sale under U.S. generally accepted accounting principles (US GAAP) and as such, was accounted for as a real estate financing transaction. The Company expects to receive total proceeds approximating $800 million to $850 million, with final proceeds expected in the first quarter of 2025. The initial lease term includes the construction period and extends for 30 years thereafter, and the Company has the right and option to extend the lease term. The lease payment amounts during the construction period are dependent upon the timing and amount of total reimbursement of construction and other costs received by the Company. Lease payments over the next twelve months are expected to be approximately $50 million. The amount of the lease payments during the initial 30 year lease term will be calculated upon completion of the construction period and receipt of total reimbursement of construction and other costs. Once determinable, this is expected to result in a significant increase in the Company’s long-term contractual obligations.

Previous wording

In 2023 and 2022, the Company received $305.0 million and $210.0 million, respectively, pursuant to the transaction. The net proceeds from this transaction and other real estate financing transactions are recognized as proceeds from real estate financing transactions within the Financing Activities section of the Statements of Consolidated Cash Flows. The corresponding financing obligation for the new headquarters was $515.8 million and $207.0 million at December 31, 2023 and 2022, respectively, on the Consolidated Balance Sheets. The short-term portion of the liability recorded in Other accruals was $39.9 million and $20.0 million at December 31, 2023 and 2022, respectively. During 2023, $23.8 million of interest was capitalized with the long-term portion of the liability in Other long-term liabilities. The Company will continue to recognize the related assets within Property, plant and equipment, net on the Consolidated Balance Sheets under US GAAP. These assets will be subject to depreciation over their useful lives in accordance with the Company’s accounting policies. The Company will also allocate payments between interest and repayment of the financing liability over the life of the agreement.

Current wording

The net proceeds from this transaction and other real estate financing transactions are recognized as proceeds from real estate financing transactions within the Financing Activities section of the Statements of Consolidated Cash Flows. The Company will continue to recognize the related assets within Property, plant and equipment, net on the Consolidated Balance Sheets under US GAAP. These assets will be subject to depreciation over their useful lives in accordance with the Company’s accounting policies. The Company will also allocate payments between interest and repayment of the financing liability over the life of the agreement. See Note 10 to the consolidated financial statements within Item 8 for further information.

Previous wording

Goodwill, which represents the excess of cost over the fair value of net assets acquired in business combinations, increased $42.8 million in 2023, primarily due to foreign currency translation rate fluctuations and purchase accounting allocations of $8.3 million.

Current wording

Goodwill, which represents the excess of cost over the fair value of net assets acquired in business combinations, decreased $45.9 million to $7.580 billion at December 31, 2024, due to foreign currency translation rate fluctuations of $94.1 million, partially offset by purchase accounting allocations of $48.2 million.

Previous wording

Intangible assets decreased $121.5 million in 2023 primarily due to amortization of finite-lived intangible assets of $325.0 million, dispositions of $83.4 million and trademark impairment charges of $30.9 million, partially offset by purchase accounting allocations of $306.7 million and foreign currency translation rate fluctuations.

Current wording

Intangible assets decreased $347.3 million to $3.533 billion at December 31, 2024 due to amortization of finite-lived intangible assets of $326.7 million and foreign currency translation rate fluctuations and other adjustments of $75.9 million, partially offset by purchase accounting allocations of $28.0 million and capitalization of software of $27.3 million.