The Sherwin-Williams Company Annual Report 2021

Plain-text annual report

Solutions in Full Color The Sherwin-Williams Company 101 W. Prospect Avenue Cleveland, Ohio 44115-1075 www.sherwin-williams.com 81861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 1 2/21/22 10:47 AM 2021 ANNUAL REPORT The Sherwin-Williams Company The Company was founded by Henry Sherwin and Edward Williams in 1866. Today, we are a global leader in the development, manufacture, distribution and sale of paint, coatings and related products to professional, industrial, commercial and retail customers. Financial Highlights (millions of dollars, except per share data) Net sales Net income (1) Diluted net income per share (2) Cash dividends per share 2021 2020 2019 $ 19,944.6 $ 18,361.7 $ 17,900.8 $ 1,864.4 $ 2,030.4 $ 1,541.3 $ $ 6.98 2.20 $ $ 7.36 1.79 $ $ 5.50 1.51 Average shares outstanding – diluted (thousands) 267,088 275,828 280,341 Return on sales Return on assets Return on equity (3) Total debt to capitalization Interest coverage (4) 9.3% 9.0% 51.6% 79.8% 7.7x 11.1% 10.0% 49.2% 69.7% 8.4x 8.6% 7.5% 41.3% 67.8% 6.7x Net Sales millions of dollars Net Income(1) millions of dollars Diluted Net Income Per Share(2) Net Operating Cash millions of dollars 6 . 4 4 9 , 9 1 $ 7 . 1 6 3 , 8 1 $ 8 . 0 0 9 , 7 1 $ 4 . 0 3 0 , 2 $ 4 . 4 6 8 , 1 $ 3 . 1 4 5 , 1 $ 6 3 . 7 $ 8 9 . 6 $ 0 5 . 5 $ 6 . 8 0 4 , 3 $ 3 . 1 2 3 , 2 $ 6 . 4 4 2 , 2 $ 19 20 21 19 20 21 19 20 21 19 20 21 (1) 2021 includes after-tax acquisition-related amortization expense of $223.3 million and an after-tax loss on the divestiture of the Wattyl business of $89.5 million. 2020 includes after-tax acquisition-related amortization expense of $230.0 million. 2019 includes after-tax acquisition-related costs of $299.6 million, after-tax non-cash trademark impairment charges of $93.1 million, tax credit investment loss of $74.3 million and after-tax pension settlement expense of $25.0 million, partially offset by an after-tax Brazil indirect tax credit of $33.3 million and an after-tax benefit from the resolution of the California litigation of $26.1 million. (2) 2021 includes charges of $0.83 per share for acquisition-related amortization expense and a $0.34 per share loss on the divestiture of the Wattyl business. 2020 includes a charge of $0.83 per share for acquisition-related amortization expense. 2019 includes charges of $1.07 per share for acquisition-related costs, $0.33 per share for non-cash trademark impairment charges, a tax credit investment loss of $0.26 per share and pension plan settlement expense of $0.09 per share, partially offset by a Brazil indirect tax credit of $0.12 per share and a benefit from the resolution of the California litigation of $0.09 per share. (3) Based on net income and shareholders’ equity at beginning of year. (4) Ratio of income before income taxes and interest expense to interest expense. Note: All prior year share and per share information herein has been retroactively adjusted to reflect Sherwin-Williams’ three-for-one stock split effected March 31, 2021. Board of Directors Kerrii B. Anderson, 64 Retired, former Chief Executive Officer and President Wendy’s International, Inc. Arthur F. Anton, 64* Retired, former Chairman and Chief Executive Officer Swagelok Company Jeff M. Fettig, 65* Retired, former Chairman of the Board and Chief Executive Officer Whirlpool Corporation Richard J. Kramer, 58* Chairman of the Board, Chief Executive Officer and President The Goodyear Tire & Rubber Company John G. Morikis, 58 Chairman and Chief Executive Officer The Sherwin-Williams Company Christine A. Poon, 69 Retired, former Vice Chairman Johnson & Johnson Aaron M. Powell, 50* Chief Executive Officer Pizza Hut Division Yum! Brands, Inc. Marta R. Stewart, 64* Retired, former Executive Vice President and Chief Financial Officer Norfolk Southern Corporation Michael H. Thaman, 58 Retired, former Chairman and Chief Executive Officer Owens Corning Matthew Thornton III, 63* Retired, former Executive Vice President and Chief Operating Officer FedEx Freight FedEx Corporation Steven H. Wunning, 70 Lead Director Caterpillar Inc. Retired, former Group President * Audit Committee Member Corporate Officers Allen J. Mistysyn, 53* Senior Vice President – Finance and Chief Financial Officer Operating Management President & General Manager Coil Coatings Division Performance Coatings Group Justin T. Binns, 46* President The Americas Group Michael J. Bourdeau, 57 President & General Manager General Industrial Division Performance Coatings Group Jeremy T. Fow, 48 President & General Manager South Eastern Division The Americas Group John G. Morikis, 58* Jane M. Cronin, 54* James R. Jaye, 55* John D. Hullibarger, 41 Chairman and Chief Executive Officer Senior Vice President – Corporate Senior Vice President – Investor Vice President – Corporate Audit Heidi G. Petz, 47* Controller Relations and Communications and Loss Prevention President and Chief Operating Officer Mary L. Garceau, 49* Bryan J. Young, 46* Jeffrey J. Miklich, 47 Senior Vice President, General Senior Vice President – Corporate Vice President and Treasurer Counsel and Secretary Strategy and Development Thomas P. Gilligan, 61* Lawrence J. Boron, 63 Senior Vice President – Human Vice President – Taxes and Resources Assistant Secretary Stephen J. Perisutti, 59 Vice President, Deputy General Counsel and Assistant Secretary Joshua A. Bagshaw, 41 Brian L. Gallagher, 50 Karl J. Jorgenrud, 45* Jonathan N. Reid, 50 President & General Manager Packaging Division President & General Manager Automotive Finishes Division Performance Coatings Group Richard M. Gilmore, 53 Canada Division The Americas Group Nancy J. Hutchinson, 43 President & General Manager Mid Western Division The Americas Group Peter J. Ippolito, 57 President Performance Coatings Group T. Burt Marchman, 59 President & General Manager Performance Coatings Group Mark A. Provenson, 48 President & General Manager Eastern Division The Americas Group Todd D. Rea, 47* President President & General Manager Consumer Brands Group Industrial Wood Coatings Division Performance Coatings Group President & General Manager South Western Division The Americas Group Joseph F. Sladek, 51* President & General Manager Global Supply Chain Division Consumer Brands Group Todd A. Stephenson, 52 President & General Manager Protective & Marine Division Performance Coatings Group * Executive Officer as defined by the Securities Exchange Act of 1934 81861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 2 2/18/22 9:58 AM 1Letter to ShareholdersThe Sherwin-Williams Company delivered record sales in 2021, a year marked by unprecedented and industry-wide raw material shortages, relentless and historic cost inflation, and a resurgence of the COVID-19 virus late in the year. The 61,000 employees of Sherwin-Williams, our greatest asset, responded to these challenges with great determination. Rather than using the year’s obstacles as an excuse, we used them as an opportunity to get even closer to our customers, focusing on supporting them through innovation, value-added services and differentiated distribution. While the difficult operating environment impacted our profitability near term, we remain undaunted and expect to emerge from these trials as an even stronger Company. We remain highly confident in our strategy, our business model and our people going forward. In February, Winter Storm Uri swept through Texas and devastated our industry’s complex petrochemical and raw material supply chain. At the peak of the crisis, nearly 170 suppliers were offline, many for extended periods. In August, Hurricane Ida ripped through Louisiana, taking additional raw material suppliers offline for an extended period. The resulting shortages, coupled with strong demand in nearly every end market we serve, drove sustained raw material cost increases. Full-year inflation for the industry basket of raw materials exceeded 20%, far above the mid-single-digit range we anticipated at the start of the year. Labor and transportation costs also escalated during the year. The emergence of the COVID-19 omicron variant in the final quarter of the year further impacted the operations of our customers, our suppliers and our Company.left to right:Heidi G. Petz, President and Chief Operating OfficerJohn G. Morikis, Chairman and Chief Executive OfficerAllen J. Mistysyn, Senior Vice President – Finance and Chief Financial OfficerOur global team battled admirably through these challenges, leveraging all of our Company’s assets to focus on meeting customer needs. We also attacked rising costs with pricing actions in all businesses. Near-term pressure on our margins was significant, but we remain highly confident they will recover just as they have in past cycles, as sales grow, disciplined pricing actions take hold and commodity costs moderate. We also remained committed to our long-term success, investing in multiple growth initiatives including new stores, new products, capacity expansions, approximately 1,400 management trainees, our digital platform and targeted acquisitions. 81861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 181861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 12/17/22 3:00 PM2/17/22 3:00 PM2Selected 2021 financial results include:•Consolidated sales increased 8.6%, including an estimatedmid-single-digit percentage headwind related to rawmaterial availability, to a record $19.9 billion. It was the 11thconsecutive year we have grown the business. Pricing for theyear was in the mid-single-digit range.•Gross margin decreased to 42.8%, driven by lower salesvolume, raw material cost inflation outpacing our priceincreases near term, and supply chain inefficiencies.•GAAP diluted net income per share was $6.98 per share.Adjusted diluted net income per share, which excludesacquisition-related amortization expense and a loss on theWattyl divestiture, was $8.15 per share.•Adjusted EBITDA1 – or Earnings Before Interest, Taxes,Depreciation and Amortization – was $3.27 billion, or 16.4%of sales.•Net operating cash for the year was $2.2 billion, or 11.3%of sales.•We returned cash to shareholders by investing $2.8 billionin share repurchases and paying $587 million in dividends.We have raised our annual dividend per share for 43straight years.•We invested $372 million in our business through capitalexpenditures, including approximately $58 million for ourBuilding Our Future project.•We also announced three acquisitions that will add to ourcapabilities: the coatings business of the Tennant Company,the European industrial coatings business of Sika AG, andSpecialty Polymers, Inc.•Total return to shareholders in 2021 was 44.9%, whichoutpaced the S&P 500 and our peer group.Given the volatility of the macroeconomic environment overthe past two years, our combined results over the period are perhaps a better illustration of the underlying strength of our business. Since the end of 2019, consolidated net sales grew $2.0 billion or 11.4%, gross profit increased $507 million or 6.3%, adjusted EBITDA increased $211 million or 6.9%, GAAP diluted net income per share increased 26.9% to $6.98 per share, and adjusted diluted net income per share increased 15.8% to $8.15 per share.2 Over the two-year period, we’ve returned approximately $6.3 billion to shareholders in the form of dividends and share buybacks.Segment PerformanceThe Americas Group delivered another record year on the top line as net sales increased 8.0% to $11.2 billion. Raw material availability negatively impacted sales by an estimated mid-single-digit percentage. Same-store sales in our U.S. and Canada paint stores grew 6.0%. Segment profit decreased 2.4% due primarily to limited raw material availability, and increased raw material costs, partially offset by multiple selling price increases. Our team worked tirelessly and creatively to help customers prioritize their jobs and match limited supplies of paint to where and when they were most needed. Sales growth was highest in residential repaint, which increased by a double-digit percentage for the sixth consecutive year. Sales were up mid-to-high single-digit percentages in commercial, new residential, property maintenance and protective and marine. DIY (do-it-yourself) sales returned to more normal levels compared to the elevated pandemic-related sales of a year ago. In Latin America, sales grew by a double-digit percentage and return on sales improved. Across the Group, we remained committed to long-term success with continued investments in new stores, innovation, services, e-business and people.In the Consumer Brands Group, net sales decreased10.9% to $2.72 billion against a very challenging prior-year comparison, as DIY demand moderated to a more normal pace following the easing of COVID-19 lockdowns, consumers returning to work, and fewer home “nesting” projects. Sales also were negatively impacted by an estimated high-single-digit percentage related to raw material availability and by approximately 4 percentage points due to the divestiture of the non-strategic Wattyl business in Australia and New Zealand. Adjusted segment profit, which excludes acquisition-related amortization expense, decreased 34.2%.3 The decrease resulted from the lower sales, increased raw material costs and supply chain inefficiencies, partially offset by multiple selling price increases and good cost control. Despite the year’s challenges, we continued to see long-term opportunity here, and we 1 Adjusted EBITDA excludes a loss of $111.9 million on the divestiture of Wattyl.2 See Item 8 of the Annual Report on Form 10-K for 2021, 2020 and 2019 consolidated results.3 See Item 7 of the Annual Report on Form 10-K for adjusted segment profit reconciliation for 2021 and 2020.Over the last two years, we’ve returned approximately $6.3 billion to shareholders through dividends and share buybacks.81861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 281861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 22/17/22 9:32 AM2/17/22 9:32 AM3continued to invest with key retail partners on multiple initiatives, including the rapidly growing “Pros Who Paint” remodeler space. Kudos also must be given to our Global Supply Chain organization, which is managed within the Consumer Brands Group. Throughout the year, these dedicated professionals worked tirelessly to provide customer solutions to our commercial groups while also focusing on safety and continuous improvement. Performance Coatings Group sales grew 22.0% to a record $6.0 billion. Sales increased by a double-digit percentage in every business and every region. Sales grew fastest in the General Industrial and Industrial Wood divisions, followed by the Packaging, Coil, Automotive Refinish and Protective & Marine divisions, respectively. Adjusted segment profit, which excludes acquisition-related amortization expense, decreased 2.2%.3 The decrease was due primarily to increased raw material costs, where the rate of inflation was the highest in the Company, partially offset by higher volume and multiple selling price increases. We continued to make investments and improvements that will drive future performance including winning new accounts, commercializing new products, employing digital tools, rationalizing SKUs, leveraging our blending facilities, and further optimizing our operations.SustainabilitySustainability is ingrained in Sherwin-Williams’ values and how we conduct business. In 2021, we took another large step forward on our environmental, social and governance (ESG) journey by unveiling an exciting new framework for our efforts and committing to new goals – all designed to accelerate our progress and expand our positive impact on the world around us. Our new framework consists of three complementary pillars. Our environmental footprint sets goals for reducing greenhouse gas emissions, increasing renewable energy use, improving energy efficiency, and reducing waste. Our product blueprint centers around further implementing our Sustainability by Design product development process, expanding our portfolio of “sustainably advantaged products,” and developing a consistent process for measuring and assessing Scope 3 emissions. Our social imprint focuses on employee safety, inclusion, equity and diversity, talent acquisition, employee engagement, and continuing to give back to our communities. The Company’s overall approach to ESG rests on a strong foundation of Governance and Ethics to ensure broad engagement and appropriate oversight. Our efforts have not gone unnoticed. Investor’s Business Daily® recognized us as one of the 100 Best ESG Companies of 2021, including number 17 overall and number 3 among industrials. Newsweek® noted us as one of America’s Most Responsible Companies. And Forbes® named us one of the World’s Best Employers overall, in particular as a best employer for diversity, new graduates, women and veterans. We’re proud of our progress, and we will provide an in-depth ESG update in our annual sustainability report later this year. You can also learn more about our efforts by visiting sustainability.sherwin-williams.com.Sustainability is ingrained in Sherwin-Williams’ values and how we conduct business.81861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 381861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 32/18/22 8:37 AM2/18/22 8:37 AM4Outlook Our team has demonstrated remarkable resilience in fighting through the pandemic and supply chain challenges of the past two years. We’ve become a stronger company with even stronger customer relationships. We are battle-tested, and we begin 2022 with great confidence in our strategy, our capabilities and our people. There are so many reasons to believe our future is bright.We are encouraged by the demand environment, which remains robust across our end markets. Many external indicators, and more importantly our customers, remain highly positive. Backlogs remain strong, and jobs delayed by raw material availability issues in 2021 are expected to be completed in the quarters ahead rather than canceled. We brought on 50 million gallons of incremental architectural paint production capacity in 2021 to meet this demand. We also expect to add 80-100 paint stores this year.We expect raw material availability to continue improving, though the pace will remain choppy. We maintain close working relationships with our suppliers, and they are excited by the opportunity to grow with us. At the same time, we’re exploring ways to reduce future supply risk, including qualifying new suppliers, acquiring resin manufacturer Specialty Polymers, Inc., and pursuing other diversification initiatives. We are implementing additional price increases in response to sustained cost inflation. We are committed to continue along this path as necessary. As we have seen in past cycles, we expect raw material costs will ultimately moderate, which will enable recovery of our margins over time. We are adding and investing in talent. We again expect to add approximately 1,400 college graduates to our management trainee program this year. And in the current hyper-competitive job market, we continue to take the steps to ensure Sherwin-Williams retains our best and brightest. Over the last two years alone, we’ve invested millions of dollars in wage increases, bonuses, equity awards and health benefits. We’ve enhanced vacation and leave policies. We’ve added to well-being programs. We’ve continued to support continuous learning, training and tuition programs. We’ve established more employee resource groups, and we continue to drive inclusion, diversity and equity. We’ve also broken ground on our new Building Our Future headquarters and global R&D center projects. We’re committed to driving our employees’ personal and professional success. Across the business, we’ll continue our solutions-based approach for customers through innovation, value-added service and differentiated distribution. We expect to generate solid full-year growth in consolidated net sales and earnings in 2022 while executing on initiatives that will drive long-term success. We will remain disciplined in our capital allocation approach, focused on driving value for our customers and returns for our shareholders. Core capital expenditures, which excludes costs for our Building Our Future project, will remain modest at approximately 2% of sales. In terms of dividends, our Board of Directors recently approved a 9.1% increase to our quarterly dividend. This increase follows 43 consecutive years of dividend increases. We also will continue to pursue acquisitions that fit our strategy. We expect to use any excess cash to make open market purchases of Company stock. Our balance sheet remains strong, and we expect debt to EBITDA to approach the high end of our target 2.0 to 2.5 times range. The last two years have been challenging in so many respects. But I am truly convinced that Sherwin-Williams has navigated these near-term pressures better than anyone else. I believe nobody is better positioned as we look ahead. The growth opportunities in front of us are extensive, and we expect to continue outperforming the market. The dedicated employees of Sherwin-Williams will continue to be the difference. I continue to be amazed and humbled by the passion and care our global team demonstrates for our customers and each other. They have my deepest respect and appreciation.I am also grateful to be surrounded by an outstanding and diverse Board of Directors. Their continued partnership, wisdom and support remain invaluable. Finally, I offer my sincere thanks to you, our shareholders, for your continued trust and confidence in us. The best is ahead.Sincerely,John G. MorikisChairman and Chief Executive OfficerWe expect to generate solid full-year growth in consolidated net sales and earnings in 2022 while executing on initiatives that will drive long-term success. 81861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 481861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 42/16/22 3:15 PM2/16/22 3:15 PM5Shareholder ReturnsFive-Year ReturnThe stock performance graph at left assumes $100 was invested on December 31, 2016 in Sherwin-Williams common stock, the S&P 500 and the peer groups of companies selected on a line-of-business basis. The cumulative five-year total return, including reinvestment of dividends, represents the cumulative value through December 31, 2021. 2021 peer group of companies is comprised of the following: Akzo Nobel N.V., Axalta Coating Systems Ltd., BASFSE, Genuine Parts Company, H.B. Fuller Company, Lowe’s Companies, Inc., Masco Corporation, Newell Brands Inc., PPG Industries, Inc., RPM International Inc., Stanley Black & Decker, Inc. and The Home Depot, Inc.Returning Cash to ShareholdersWe have consistently returned a portion of our cash generated from operations to shareholders through cash dividends and share repurchases. In 2021, the Company increased its cash dividend 22.9% to $2.20 per share, marking the 43rd consecutive year we increased our dividend.Share repurchases are also an efficient way of returning cash to shareholders in that they return sellers’ investment at market value and maximize the value of the remaining shares outstanding. In 2021, we invested $2.8 billion to buy 10.1 million shares on the open market. We temporarily suspended share repurchases in 2016 and 2017, using cash to reduce total borrowings required to finance the Valspar transaction in 2016 and reducing debt by $1 billion in 2017. 0161284202420132012201420152016*2017*201820202019Stock Repurchase (millions of shares)2021Weighted Average Diluted Shares (split adjusted, in millions)311.8309.1296.2283.6283.5284.8285.0280.3275.8* No open market purchases in 2016 and 2017267.1Dividends Per Share$1.00$1.50$2.00$2.50$0.50$0.00808182838485868788899091929394959697989900010203040506070809101112131415161718192021$100$200$500$4002016201720182019202020212021 Peer GroupSherwin-Williams Co.S&P 500 IndexComparison of Cumulative Five-Year Total Return$0$30081861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 581861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 52/15/22 1:43 PM2/15/22 1:43 PM4,217 paint stores231 branches & facilities246 paint stores86 paint stores310 paint stores31 branches & facilities21 branches & facilities UNITED STATESCANADACARIBBEANLATIN AMERICA / SOUTH AMERICA17 facilities48 facilities4 facilities2facilities6The Americas Group operates the exclusive outlets for Sherwin-Williams® branded paints, stains, supplies, equipment and floor covering in the United States, Canada and the Caribbean. The Group also manufactures and sells architectural paints, industrial coatings and related products in Latin America through Company stores, dedicated dealers and selected retailers.PRODUCTS SOLD: Paints, stains, aerosols, applicators, caulks, varnishes, protective and marine coatings, spray equipment and related products in the United States, Canada, the Caribbean and Latin America. Wall covering and floor covering in the United States, Canada and the Caribbean. OEM product finishes in Latin AmericaCUSTOMERS SERVED: Professional painting contractors, home builders, property maintenance, healthcare, hospitality, architects, interior designers, do-it-yourselfers, industrial, marine, flooring and original equipment manufacturer (OEM) product finishersSELECTED BRANDS: Sherwin-Williams®, Cashmere®, Colorgin®, Condor®, Duration®, Emerald®, Harmony®, Kem Tone®, Loxon®, Metalatex®, Novacor®, PaintShield®, ProClassic®, ProCraft®, ProIndustrial™, ProMar®, SuperDeck®, SuperPaint®, Woodscapes®OUTLETS: 4,549 Sherwin-Williams paint stores in the United States, Canada and the Caribbean, and 310 in Brazil, Chile, Ecuador, Mexico and Uruguay. Dedicated dealers, home centers, distributors and hardware stores in Argentina, Brazil, Chile, Ecuador, Mexico and Uruguay. Licensee in El Salvador serves Central AmericaConsumer Brands Group sells one of the industry’s most recognized portfolios of branded and private-label products through retailers in North America, Europe and China. The Group also operates a highly efficient global supply chain for paint, coatings and related products.PRODUCTS SOLD: Branded, private-label and licensed brand paints, stains, varnishes, industrial products, wood finishing products, wood preservatives, applicators, corrosion inhibitors, aerosols, caulks and adhesives, and related productsCUSTOMERS SERVED: Do-it-yourselfers, professional painting contractors, industrial maintenance and flooring contractorsSELECTED BRANDS: Cabot®, Dupli-Color®, Dutch Boy®, Geocel®, HGTV HOME® by Sherwin-Williams, Huarun®, Krylon®, Minwax®, Purdy®, Ronseal®, Thompson’s® WaterSeal®, Valspar®, White Lightning®OUTLETS: Over 10,000 points of distribution with leading mass merchandisers, home centers, independent paint dealers, hardware stores, craft stores, fine art stores, automotive retailers and industrial distributors in the United States, Canada, Europe and ChinaThe Americas Group Consumer Brands Group Performance Coatings Group Corporate headquartersAt a Glance2021 Company Sales56%2021 Company Sales14%81861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 681861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 62/15/22 1:43 PM2/15/22 1:43 PMEMEAIASIA-PACIFICAUSTRALIA / NEW ZEALAND37 branches & facilities7 facilities7 branches & facilities7 facilities7Performance Coatings Group sells a broad range of coatings and finishing solutions to general industrial, industrial wood, protective and marine, automotive refinish, packaging and coil customers in more than 120 countries.PRODUCTS SOLD: Asset protection products, wood finishes, powder coatings, coatings for plastic and glass, aerosols, high-performance interior and exterior coatings for the automotive, aviation, fleet, packaging, heavy truck, material handling, agriculture and construction, and building products segmentsCUSTOMERS SERVED: Commercial construction, industrial maintenance, protective and marine, military, heavy equipment, appliances, electronics, building products, furniture, cabinetry and flooring, architects and specifiers, bridge & highway, water & waste water treatment, collision repair facilities, dealerships, auto interior, fleet owners, auto refinishers, production shops, metal packaging and manufacturersSELECTED BRANDS: Sherwin-Williams®, Acrolon®, AcromaPro®, ATX®, DeBeer Refinish®, Duraspar®, EcoDex®, Envirolastic®, Excelo®, EzDex®, Fastline®, Firetex®, Fluropon®, Heat-Flex®, House of Kolor®, Huarun®, Inver®, Kem Aqua®, Lazzuril®, Macropoxy®, Martin Senour®, Matrix EdgeTM, M.L. Campbell®, Octoral®, Perma-Clad®, Polane®, Powdura®, Sayerlack®, Sher-Wood®, Sumaré®, Ultra 9K®, Ultra 7000®, ValPure®, Valspar®OUTLETS: Company-operated branches and facilities serving automotive, general industrial, industrial wood and coil customers in the United States, Australia, Belarus, Belgium, Brazil, Canada, Chile, China, Czech Republic, Denmark, Finland, France, Germany, India, Indonesia, Ireland, Italy, Lithuania, Malaysia, Mexico, Norway, Peru, Poland, Portugal, Romania, Russia, Singapore, Spain, Sweden, Thailand, Ukraine, United Kingdom and Vietnam. Distribution in 44 other countries2021 Company Sales30%81861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 781861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 72/17/22 3:00 PM2/17/22 3:00 PM8The Americas GroupThe Americas Group posted record sales in a challenging year marked by industry-wide raw material availability issues, rapid cost inflation and a resurgence of the virus.81861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 881861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 82/16/22 3:15 PM2/16/22 3:15 PM9When natural disasters devastated the industry’s raw material supply chain in 2021, we intensified our focus on providing solutions to our customers. We employed the full range of Sherwin-Williams capabilities to keep our customers on the job and painting wherever possible. We sought alternate supplies of raw materials around the world. We prioritized manufacturing of our most needed products. We offered unmatched distribution through more than 4,500 North American stores. We expedited product shipments through our Company-owned fleet of tractors, trailers and delivery vehicles. We provided scheduling, logistics and technical assistance through thousands of field sales reps. We offered high transparency and extended support through our Pro app and e-business platform. In short, we did whatever we could to help our customers remain productive. While we couldn’t completely shield customers from industry supply chain impacts, our actions continued to earn trust, increase loyalty and deepen relationships. We saw growth in new accounts, our Net Promoter Score® remained at a solid level, and we received the highest score among Paint Retailers, Exterior Paint and Exterior Stains in the J.D. Power 2021 Paint Satisfaction Study of customer satisfaction from consumers who purchased and applied exterior stain, exterior paint, or purchased from a major paint retailer.Demand remained strong, and we implemented multiple price increases in response to rapid cost inflation. We grew in all pro segments, led by residential repaint, our largest customer segment. Do-It-Yourself sales were softer this year, as expected, following the relaxation of pandemic-related lockdowns.While meeting the year’s near-term challenges, we did not stop investing in our future. We launched innovative products such as Latitude® Exterior Acrylic, a moisture-resistant paint formulated with ClimateFlex Technology™ to extend the painting season. We opened 85 net new paint stores and added approximately 1,400 college graduates to our management trainee program. We also continued to add new sales reps, add new territories and expand our e-business platform. We are well-positioned for 2022 and beyond. * For J.D. Power 2021 award information, visit jdpower.com/awards• Deliver premier customer experience and tailored solutions. • Expand paint store footprint and differentiated services. • Accelerate product innovation while optimizing our portfolio.• Execute new-account and share-of-wallet growth initiatives. • Drive e-business initiatives and further enhance digital tools. • Develop, diversify and engage talent.What’s Ahead81861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 981861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 92/17/22 3:00 PM2/17/22 3:00 PM10Consumer Brands GroupAs Do-It-Yourself demand moderated from the pandemic-related levels of 2020, the Consumer Brands Group focused on long-term growth initiatives and business optimization, while also managing near-term raw material availability and inflation challenges.81861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 1081861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 102/15/22 1:43 PM2/15/22 1:43 PM11Do-it-yourselfers returned to work in 2021 after a year of home improvement projects done amid pandemic-related “nesting.” As expected, DIY paint demand moderated, resulting in lower sales against a very challenging comparison. Limited raw material availability across the industry also proved a headwind. We also implemented multiple price increases amid unprecedented raw material inflation.Despite the highly fluid environment, our team continued to engage our key retail partners at a high level and execute on initiatives to drive future success. Innovation remains core to what we do. This year, we introduced Valspar® Reserve® Paint + Primer, offering our most advanced protection with one-coat coverage for ultra-rich, fade-resistant color, premium stain-blocking and resistance against scuffs and scrubs. We also introduced Ovation® Plus interior paint and primer under the HGTV Home® by Sherwin-Williams label. This new offering brings consumers an exceptional blend of quality and reliability in a high-end brand at an introductory price point. While DIY customers make up the largest portion of Group revenue, we are also focused on the “Pros Who Paint” handyman/remodeler segment. We generated double-digit percentage sales growth with these customers this year as we continued to invest with our big box retail partners. Our efforts at optimizing our business also continued. We grew our European and Asian businesses while working to improve our offerings. We divested the non-core Wattyl business in Australia and New Zealand, which should improve Group profitability over time. We further optimized SKUs and brands. We are adjusting our organizational design, and we see many other opportunities for simplification. In addition, we could not be prouder of our Global Supply Chain organization, which is managed within the Group. This team performed heroically in supporting all business units this year through the industry’s unprecedented supply challenges. We also significantly increased our North American architectural manufacturing capacity. We expect the combination of returning growth, pricing actions, moderating inflation and business optimization to restore Group margins to a significantly higher level over time.• Drive success of major North America retail partners with “Hero Brands.”• Expand “Pros Who Paint” growth initiative.• Drive growth and performance in European and Asian businesses.• Execute on simplification, optimization and digital initiatives. • Execute ongoing capacity expansion, warehouse automation and fleet initiatives within Global Supply Chain. • Develop, diversify and engage talent. What’s Ahead81861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 1181861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 112/16/22 3:15 PM2/16/22 3:15 PM12Performance Coatings GroupThe Performance Coatings Group delivered a wide range of differentiated products and customer solutions to achieve record sales while managing historic cost inflation.81861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 1281861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 122/15/22 1:43 PM2/15/22 1:43 PM13Strong demand returned in 2021 as industrial customers emerged from the worst of the pandemic. We grew sales by a double- digit percentage in all businesses and regions, providing differentiated products and services to drive customer success. In General Industrial, we grew in heavy equipment, machinery and general finishing applications with innovations such as our Duraspar® Prime High Speed primer, which provides the superior corrosion protection of an epoxy with the cure speed and hardness of a urethane primer. Continued strength in housing was a tailwind for Industrial Wood, where our SHER-WOOD® HB Pigmented Conversion Varnish Tint bases are ideal for furniture, cabinets and other interior wood products. Demand for metal roofing, HVAC and appliances drove good growth in Coil. Our ApGard® polyester coatings provide premium resistance to scratching, abrasion and stains that heavily used appliances need. In Packaging, we delivered another strong growth year and expanded capacity for our valPure® V70 non-BPA epoxy coating to meet surging demand for metal food and beverage cans. In Automotive Refinish, miles driven and collision rates began returning to pre-pandemic levels. We generated good growth with productivity-enhancing products such as our Ultra 9K® waterborne basecoat system. Finally, we saw strong growth in Protective & Marine, including in oil and gas applications. Novaplate® 360 tank lining offers unparalleled protection for the interior of steel tanks and vessels and a return to service in as little as 24 hours. The Group experienced the highest raw material inflation in the Company, which pressured near-term margins. We remain confident in recovering and expanding these margins through new business wins, pricing actions, product mix improvements, simplification initiatives, facility optimization, acquisition integration and other continuous improvement activities.• Grow sales through differentiated segment-focused solutions. • Accelerate product innovation while reducing complexity.• Maximize operational and regional efficiencies.• Integrate recent acquisitions and pursue additional opportunities.• Drive adjusted segment margins to longer-term target levels. • Develop, diversify and engage talent. What’s Ahead81861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 1381861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 132/17/22 3:00 PM2/17/22 3:00 PM14Annual MeetingThe annual meeting of shareholders will be held in a virtual format on April 20, 2022 at 9:00 a.m. EDT. For more information on how to attend and participate, please see our 2022 Proxy Statement, available at investors.sherwin-williams.com.Headquarters101 W. Prospect Avenue Cleveland, Ohio 44115-1075 (216) 566-2000 www.sherwin.comInvestor RelationsJames R. Jaye Senior Vice President – Investor Relations and Communications The Sherwin-Williams Company 101 W. Prospect Avenue Cleveland, Ohio 44115-1075 investor.relations@sherwin.comIndependent Registered Public Accounting FirmErnst & Young LLP Cleveland, OhioStock TradingSherwin-Williams Common Stock – Symbol, SHW – is traded on the New York Stock Exchange. 2021 2020 2019 2018 2017High $ 352.16 $ 249.21 $ 197.82 $ 159.33 $ 138.11Low 219.85 132.23 126.80 121.75 91.51Close December 31 352.16 244.97 194.51 131.15 136.68Shareholders of record 5,370 5,468 5,659 6,244 6,488Shares traded (thousands) 308,574 426,521 412,987 542,703 464,4852020QUARTERHIGHLOWDIVIDEND1st $ 198.85 $ 132.23 $ 0.452nd 199.04 140.01 0.453rd 239.20 192.01 0.454th 249.21 223.46 0.452021QUARTERHIGHLOWDIVIDEND1st $ 253.01 $ 219.85 $ 0.552nd 288.65 249.75 0.553rd 308.70 273.09 0.554th 352.16 285.04 0.55Common Stock Trading StatisticsQuarterly Stock Prices and DividendsDividend Reinvestment ProgramA dividend reinvestment program is available to shareholders of common stock. For information, contact EQ Shareowner Services.Transfer Agent & RegistrarOur transfer agent, EQ Shareowner Services, maintains the records for our registered shareholders and can help with a wide variety of shareholder-related services, including the direct deposit of dividends and online access to your account. Contact:EQ Shareowner Services P.O. Box 64874 St. Paul, MN 55164-0874 www.shareowneronline.com 1-800-468-9716 toll-free 651-450-4064 outside the United States All prior year share and per share information herein has been retroactively adjusted to reflect Sherwin-Williams’ three-for-one stock split effected March 31, 2021. Sherwin-Williams is proud to be an Equal Employment Opportunity/Affirmative Action employer committed to an inclusive and diverse workplace. All qualified candidates will receive consideration for employment and will not be discriminated against based on race, color, religion, sex, sexual orientation, gender identity, national origin, protected veteran status, disability, age, pregnancy, genetic information, creed, marital status or any other consideration prohibited by law or by contract.Shareholder Information Share price and shares traded source: Factset81861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 1481861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 142/15/22 1:44 PM2/15/22 1:44 PMUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2021 Commission file number 1-04851 THE SHERWIN-WILLIAMS COMPANY (Exact name of registrant as specified in its charter)Ohio34-0526850(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)101 West Prospect AvenueCleveland,Ohio44115-1075(Address of principal executive offices)(Zip Code)(216)566-2000Registrant’s telephone number, including area codeSecurities registered pursuant to Section 12(b) of the Act:Title of each classTrading SymbolName of each exchange on which registeredCommon Stock, par value of $0.33-1/3 per shareSHWNew York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.Large accelerated filer☒Accelerated filer☐Non-accelerated filer☐Smaller reporting company☐Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒ No ☐ Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ The aggregate market value of common stock held by non-affiliates of the Registrant at June 30, 2021 was $71,612,872,106 (computed by reference to the price at which the common stock was last sold on such date).At January 31, 2022, 260,373,774 shares of common stock were outstanding, net of treasury shares. DOCUMENTS INCORPORATED BY REFERENCEPortions of our Proxy Statement for the 2022 Annual Meeting of Shareholders (“Proxy Statement”) to be filed with the Securities and Exchange Commission within 120 days of our fiscal year ended December 31, 2021 are incorporated by reference into Part III of this report. 81861IMPO.A (PDF_D SWOP) p15-118.indd 1581861IMPO.A (PDF_D SWOP) p15-118.indd 152/18/22 10:56 AM2/18/22 10:56 AMTHE SHERWIN-WILLIAMS COMPANYTable of ContentsPagePART IItem 1.15Item 1A.6Item 1B.14Item 2.16Item 3.17Item 4.1718PART IIItem 5.BusinessCautionary Statement Regarding Forward-Looking InformationRisk FactorsUnresolved Staff CommentsPropertiesLegal ProceedingsMine Safety DisclosuresInformation About Our Executive OfficersMarket for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities20Item 6.[Reserved]21Item 7.22Item 7A.38Item 8.39Item 9.89Item 9A.89Item 9B.89Item 9C.89PART IIIItem 10.90Item 11.90Item 12.91Item 13.91Item 14.91PART IVItem 15.92Item 16.98Management’s Discussion and Analysis of Financial Condition and Results of OperationsQuantitative and Qualitative Disclosures About Market RiskFinancial Statements and Supplementary DataChanges in and Disagreements with Accountants on Accounting and Financial DisclosureControls and ProceduresOther InformationDisclosure Regarding Jurisdictions that Prevent InspectionsDirectors, Executive Officers and Corporate GovernanceExecutive CompensationSecurity Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersCertain Relationships and Related Transactions, and Director Independence Principal Accountant Fees and ServicesExhibits and Financial Statement SchedulesForm 10-K SummarySignatures9981861IMPO.A (PDF_D SWOP) p15-118.indd 1681861IMPO.A (PDF_D SWOP) p15-118.indd 162/18/22 10:56 AM2/18/22 10:56 AMPART IITEM 1. BUSINESSIntroductionThe Sherwin-Williams Company, founded in 1866 and incorporated in Ohio in 1884, 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, Europe, Asia and Australia. Our principal executive offices are located at 101 West Prospect Avenue, Cleveland, Ohio 44115-1075, telephone (216)566-2000. As used in this report, the terms “Sherwin-Williams,” “Company,” “we” and “our” mean The Sherwin-Williams Company and its consolidated subsidiaries unless the context indicates otherwise.Available InformationWe make available free of charge on or through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the Securities and Exchange Commission. You may access these documents on our Investor Relations website, investors.sherwin-williams.com.We also make available free of charge on our website our Corporate Governance Guidelines, our Director Independence Standards, our Code of Conduct and the charters of our Audit Committee, our Compensation and Management Development Committee and our Nominating and Corporate Governance Committee. You may access these documents on our Investor Relations website, investors.sherwin-williams.com.Basis of Reportable SegmentsThe Company reports its segment information in the same way that management internally organizes its business for assessing performance and making decisions regarding allocation of resources. The Company has three reportable operating segments: The Americas Group, Consumer Brands Group and Performance Coatings Group (individually, a “Reportable Segment” and collectively, the “Reportable Segments”). The Company reports all other business activities and immaterial operating segments that are not reportable in the Administrative segment. For more information about the Reportable Segments, see Note 21 to the Consolidated Financial Statements in Item 8. The Americas GroupThe Americas Group consisted of 4,859 company-operated specialty paint stores in the United States, Canada, Latin America and the Caribbean region at December 31, 2021. Each store in this segment is engaged in servicing the needs of architectural and industrial paint contractors and do-it-yourself homeowners. These stores market and sell Sherwin-Williams® and other controlled brand architectural paint and coatings, protective and marine products, OEM product finishes and related products. The majority of these products are produced by manufacturing facilities in the Consumer Brands Group. In addition, each store sells select purchased associated products. In addition to our stores in the Latin America region, The Americas Group meets regional customer demands through developing, licensing, manufacturing, distributing and selling a variety of architectural paints, coatings and related products in North and South America. The loss of any single customer would not have a material adverse effect on the business of this segment. At December 31, 2021, The Americas Group consisted of operations from subsidiaries in 10 foreign countries.Consumer Brands GroupThe Consumer Brands Group supplies a broad portfolio of branded and private-label architectural paint, stains, varnishes, industrial products, wood finishes products, wood preservatives, applicators, corrosion inhibitors, aerosols, caulks and adhesives to retailers and distributors throughout North America, as well as in China and Europe. The Consumer Brands Group also supports the Company’s other businesses around the world with new product research and development, manufacturing, distribution and logistics. Approximately 62% of the total sales of the Consumer Brands Group in 2021 were intersegment transfers of products primarily sold through The Americas Group. At December 31, 2021, the Consumer Brands Group consisted of operations in the United States and subsidiaries in 5 foreign countries. Sales and marketing of certain controlled brand and private-label products is performed by a direct sales staff. The products distributed through third-party customers are intended for resale to the ultimate end-user of the product. The Consumer Brands Group had sales to certain customers that, individually, may be a significant portion of the sales and related profitability of the segment. This segment incurred most of the Company’s capital expenditures related to ongoing environmental compliance measures at sites currently in operation.Performance Coatings GroupThe Performance Coatings Group develops and sells industrial coatings for wood finishing and general industrial (metal and plastic) applications, automotive refinish, protective and marine coatings, coil coatings, packaging coatings and performance-181861IMPO.A (PDF_D SWOP) p15-118.indd 1781861IMPO.A (PDF_D SWOP) p15-118.indd 172/18/22 10:56 AM2/18/22 10:56 AMbased resins and colorants worldwide. This segment licenses certain technology and trade names worldwide. Sherwin-Williams® and other controlled brand products are distributed through The Americas Group and this segment’s 282 company-operated branches and by a direct sales staff and outside sales representatives to retailers, dealers, jobbers, licensees and other third-party distributors. The Performance Coatings Group had sales to certain customers that, individually, may be a significant portion of the sales of the segment. However, the loss of any single customer would not have a material adverse effect on the overall profitability of the segment. At December 31, 2021, the Performance Coatings Group consisted of operations in the United States and subsidiaries in 44 foreign countries.Administrative SegmentThe Administrative segment includes the administrative expenses of the Company’s corporate headquarters site. Also included in the Administrative segment is interest expense, interest and investment income, certain expenses related to closed facilities and environmental-related matters, and other expenses which are not directly associated with the Reportable Segments. The Administrative segment does not include any significant foreign operations. Also included in the Administrative segment is the operations of a real estate management unit that is responsible for the ownership, management, and leasing of non-retail properties held primarily for use by the Company, including the Company’s headquarters site, and disposal of idle facilities. Sales of this segment represent external leasing revenue of excess headquarters space or leasing of facilities no longer used by the Company in its primary businesses. Material gains and losses from the sale of property are infrequent and not a significant operating factor in determining the performance of the Administrative segment.Raw Materials and Products Purchased for ResaleRaw materials and products purchased for resale make up the majority of our consolidated cost of goods sold. Raw materials may vary considerably by the specific paint or coating being manufactured but can generally be divided into the following categories: resins and latex, pigments, additives, solvents, and metal or plastic containers. A significant portion of these raw materials are derived from various upstream petrochemical and related commodity feedstocks, notably propylene. Raw materials are sourced from multiple suppliers globally, typically within the geographic region where our products are being manufactured. A small portion of specialized resins and other products are manufactured in house. We also purchase a variety of products for resale that are highly complementary to our paint and coating offerings, notably spray equipment and parts, floorcovering, and assorted sundries. We attempt, if feasible, to mitigate our potential risk associated with the sourcing of our raw materials and other products through inventory management, strategic relationships with key suppliers, alternative sourcing strategies and long-term investments to expand our manufacturing capabilities. See Item 1A Risk Factors for more information regarding cost and sourcing of raw materials. SeasonalityThe majority of the sales for the Reportable Segments traditionally occur during the second and third quarters. However, periods of economic downturn can alter these seasonal patterns. There is no significant seasonality in sales for the Administrative segment. Working CapitalIn order to meet increased demand during the second and third quarters, the Company usually builds its inventories during the first quarter. Working capital items (inventories and accounts receivable) are generally financed through short-term borrowings, which include the use of lines of credit and the issuance of commercial paper. For a description of the Company’s liquidity and capital resources, see the “Financial Condition, Liquidity and Cash Flow” section in Item 7. Trademarks and Trade NamesCustomer recognition of trademarks and trade names owned or licensed by the Company collectively contribute significantly to our sales. The major trademarks and trade names used by each of the Reportable Segments are set forth below.•The Americas Group: Sherwin-Williams®, Cashmere®, Colorgin®, Condor®, Duration®, Emerald®, Harmony®,Kem Tone®, Loxon®, Metalatex®, Novacor®, PaintShield®, ProClassic®, ProCraft®, ProIndustrial™, ProMar®,SuperDeck®, SuperPaint®, Woodscapes®•Consumer Brands Group: Cabot®, Dupli-Color®, Dutch Boy®, Geocel®, HGTV HOME® by Sherwin-Williams,Huarun®, Krylon®, Minwax®, Purdy®, Ronseal®, Thompson’s® WaterSeal®, Valspar®, White Lightning®•Performance Coatings Group: Sherwin-Williams®, Acrolon®, AcromaPro®, ATX®, DeBeer Refinish®, Duraspar®,EcoDex®, Envirolastic®, Excelo®, EzDex®, Fastline®, Firetex®, Fluropon®, Heat-Flex®, House of Kolor®,Huarun®, Inver®, Kem Aqua®, Lazzuril®, Macropoxy®, Martin Senour®, Matrix Edge™, M.L. Campbell®,Octoral®, PermaClad®, Polane®, Powdura®, Sayerlack®, Sher-Wood®, Sumaré®, Ultra 9K®, Ultra 7000®,ValPure®, Valspar®281861IMPO.A (PDF_D SWOP) p15-118.indd 1881861IMPO.A (PDF_D SWOP) p15-118.indd 182/18/22 10:56 AM2/18/22 10:56 AMPatentsAlthough patents and licenses are not of material importance to our business as a whole or any segment, The Americas Group and the Performance Coatings Group derive a portion of their income from the licensing of technology, trademarks and trade names to foreign companies.Backlog and Productive CapacityBacklog orders are not typically significant in the business of any Reportable Segment since there is normally a short period of time between the placing of an order and shipment. During 2021, we experienced raw material shortages, labor constraints, and weather-related shutdowns that impacted our production and ability to meet customer orders. We believe that sufficient productive capacity currently exists to fulfill our needs for paint, coatings and related products during 2022.CompetitionWe experience competition from many local, regional, national and international competitors of various sizes in the manufacture, distribution and sale of our paint, coatings and related products. We are a leading manufacturer and retailer of paint, coatings and related products to professional, industrial, commercial and retail customers, however, our competitive position varies for our different products and markets.In The Americas Group, competitors include other paint and wallpaper stores, mass merchandisers, home centers, independent hardware stores, hardware chains and manufacturer-operated direct outlets. Product quality, product innovation, breadth of product line, technical expertise, service and price determine the competitive advantage for this segment.In the Consumer Brands Group, domestic and foreign competitors include manufacturers and distributors of branded and private-label paint and coatings products. Technology, product quality, product innovation, breadth of product line, technical expertise, distribution, service and price are the key competitive factors for this segment.The Performance Coatings Group has numerous competitors in its domestic and foreign markets with broad product offerings and several others with niche products. Key competitive factors for this segment include technology, product quality, product innovation, breadth of product line, technical expertise, distribution, service and price.The Administrative segment has many competitors consisting of other real estate owners, developers and managers in areas in which this segment owns property. The main competitive factors are the availability of property and price.Human Capital ResourcesWe believe our people are central to the foundation and future of the Company’s success. Our culture and commitment to our people are important factors in attracting, retaining, developing and progressing qualified talent. At December 31, 2021, we employed 61,626 people worldwide, of which 78% were in the United States and 22% were in other global regions.Purpose and Culture. Our commitment to our people is embedded in our corporate purpose and guiding values. Our purpose is to inspire and improve the world by coloring and protecting what matters. We fulfill this purpose through the development, manufacture, distribution and sale of innovative paint and coatings products, striving to deliver benefits for all major stakeholders, including our employees. The Company’s seven guiding values — integrity, people, service, quality, performance, innovation and growth — influence how we fulfill our purpose, emphasize our commitment to our people and serve as the foundation of our culture of excellence. We value and support our people through, among other initiatives, our inclusion, diversity and equity, talent acquisition, employee engagement, and occupational health and safety initiatives, and our employment practices and total rewards programs. Inclusion, Diversity and Equity. We are committed to fostering a culture of inclusion where differences are welcomed, appreciated and celebrated to positively impact our people and business. Reflected in the Company’s Code of Conduct and reinforced through our actions, training and attitudes, fostering an inclusive culture is a moral and business imperative. The building blocks of our inclusion, diversity and equity strategy include:•Educate and communicate to drive success: Building awareness of inclusive leadership behaviors to leverage theunique contributions of each employee to positively impact our people and business results.•Fill the pipeline with the best talent: Attracting the best talent pool that reflects the diversity of the communities inwhich we serve and do business.•Develop and engage talent by investing in our people: Investing in our people by providing networking and learningopportunities to drive retention, progression and engagement.•Progress talent by embedding equity into talent planning: Embedding equity into talent practices, processes, tools andresources at all levels.381861IMPO.A (PDF_D SWOP) p15-118.indd 1981861IMPO.A (PDF_D SWOP) p15-118.indd 192/18/22 10:56 AM2/18/22 10:56 AMOur continuous efforts to create a supportive, welcoming environment across our global footprint is the shared responsibility of all employees, including our senior leaders. Our senior leaders attend an inclusion, diversity and equity learning session to assist us in maintaining our commitment to leading with inclusion and embracing and leveraging the diversity of our workforce.Talent Acquisition and Employee Engagement. We are committed to providing our people with opportunities to learn, grow and be recognized for their achievements. Through our integrated talent management strategy, we strive to attract, retain, develop and progress a workforce that embraces our culture of inclusion and reflects our diversity efforts. The Company’s early talent programs, including our management trainee program, play a critical role in attracting and progressing a diverse pipeline of talent. During 2021, we hired approximately 1,400 talented people through our management trainee program as part of our long-term growth initiatives.We are also committed to investing in our people by providing learning and employee networking opportunities to drive retention, progression and engagement and help them excel in their current and future roles. During 2021, our employees completed thousands of hours of online and instructor-led courses across a broad range of categories, including leadership, inclusion, diversity and equity, professional skills, technical and compliance.Occupational Health and Safety. We are committed to providing safe and healthy working environments for our employees. We have a continued focus on Environmental, Health and Safety (EHS) excellence that involves enhancing employee health and safety, process safety, occupational health and taking reasonable preventative measures to reduce workplace injuries to protect the health and safety of our employees. We strive for incident-free workplaces — continuously assessing and developing the programs that are in place to help keep our employees, customers and communities safe. Since the onset of the pandemic, we have implemented significant modifications to our health and safety programs, which were designed to protect the health and well-being of our employees and customers from COVID-19. These efforts have included, but are not limited to: requiring social distancing; permitting remote, alternate and flexible work arrangements where possible; enhancing cleaning and sanitation procedures; restricting domestic and international travel; developing return to work and visitor screening protocols; and postponing or cancelling the hosting or attending of large events.Employment Practices and Total Rewards. We are committed to the fair, consistent and equitable treatment of our employees in relation to working conditions, wages, benefits, policies and procedures. To this end, the Company’s policies and programs are designed to respond to the needs of our employees in a manner that provides a safe, professional, efficient and rewarding workplace. Our total rewards programs are designed to offer competitive compensation, comprehensive benefits and other programs to support employees’ growth, both personally and professionally, and the diverse needs and well-being of our employees worldwide. Over the past two years, we enhanced certain of the Company’s benefits and practices to support the health and well-being of our employees through the challenges of the pandemic and significant supply chain disruptions caused by Winter Storm Uri and Hurricane Ida — two natural disasters that occurred during 2021. Our enhanced benefits have included tele-health, paid sick leave, family leave and voluntary leave of absence policies and programs. We also have rewarded our employees’ resiliency and hard work and made changes in our business to encourage retention, including wage increases, reduced store hours and employee benefits enhancements. For additional information regarding our response to the COVID-19 pandemic and supply chain disruptions, see the information included within Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Regulatory ComplianceFor additional information regarding environmental-related matters, see Notes 1, 9 and 18 to the Consolidated Financial Statements in Item 8.481861IMPO.A (PDF_D SWOP) p15-118.indd 2081861IMPO.A (PDF_D SWOP) p15-118.indd 202/18/22 10:56 AM2/18/22 10:56 AMCAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATIONCertain statements contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Letter to Shareholders” and elsewhere in this report constitute “forward-looking statements” within the meaning of the federal securities laws. These forward-looking statements are based upon management’s current expectations, predictions, estimates, assumptions and beliefs concerning future events and conditions and may discuss, among other things, anticipated future performance (including sales and earnings), expected growth, future business plans and the costs and potential liability for environmental-related matters and the lead pigment and lead-based paint litigation. Any statement that is not historical in nature is a forward-looking statement and may be identified by the use of words and phrases such as “believe,” “expect,” “may,” “will,” “should,” “project,” “could,” “plan,” “goal,” “target,” “potential,” “seek,” “intend,” “aspire” or “anticipate” or the negative thereof or comparable terminology.Readers are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside our control, that could cause actual results to differ materially from such statements and from our historical results, performance and experience. These risks, uncertainties and other factors include such things as:•general business conditions, strengths of retail and manufacturing economies and growth in the coatings industry;•changes in general domestic and international economic conditions such as inflation rates, interest rates, tax rates,unemployment rates, higher labor and healthcare costs, recessions, and changing government policies, laws andregulations;•changes in raw material and energy supplies and pricing;•changes in our relationships with customers and suppliers;•disruptions in the supply chain, including those caused by industry capacity constraints, labor shortages, raw materialavailability, and logistics delays and constraints;•our ability to successfully integrate past and future acquisitions into our existing operations, as well as the performanceof the businesses acquired;•competitive factors, including pricing pressures and product innovation and quality;•our ability to attain cost savings from productivity initiatives;•risks and uncertainties associated with our expansion into and our operations in Asia, Europe, South America andother foreign markets, including general economic conditions, inflation rates, recessions, foreign currency exchangerates, foreign investment and repatriation restrictions, legal and regulatory constraints, civil unrest and other externaleconomic and political factors;•the achievement of growth in foreign markets, such as Asia, Europe and South America;•increasingly stringent domestic and foreign governmental regulations, including those affecting health, safety and theenvironment;•inherent uncertainties involved in assessing our potential liability for environmental-related activities;•other changes in governmental policies, laws and regulations, including changes in tariff policies, as well as changes inaccounting policies and standards and taxation requirements (such as new tax laws and new or revised tax lawinterpretations);•the nature, cost, quantity and outcome of pending and future litigation and other claims, including the lead pigment andlead-based paint litigation, and the effect of any legislation and administrative regulations relating thereto;•adverse weather conditions or natural disasters, including due to the impacts of climate change, and public healthcrises, including the COVID-19 pandemic; and•the duration, severity and scope of the COVID-19 pandemic and the actions implemented by international, federal,state and local public health and governmental authorities to contain and combat the outbreak and spread ofCOVID-19, which may exacerbate one or more of the aforementioned and/or other risks, uncertainties and factorsmore fully described in the Company’s reports filed with the Securities and Exchange Commission.Readers are cautioned that it is not possible to predict or identify all of the risks, uncertainties and other factors that may affect future results and that the above list should not be considered to be a complete list. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as otherwise required by law.581861IMPO.A (PDF_D SWOP) p15-118.indd 2181861IMPO.A (PDF_D SWOP) p15-118.indd 212/18/22 10:56 AM2/18/22 10:56 AMITEM 1A. RISK FACTORSThe risks described below and in other documents we file from time to time with the Securities and Exchange Commission could materially and adversely affect our business, results of operations, cash flow, liquidity or financial condition. Although the risks are organized by headings, and each risk is discussed separately, many are interrelated. Readers should not interpret the disclosure of any risk factor to imply that the risk has not already materialized.ECONOMIC AND STRATEGIC RISKSThe COVID-19 pandemic has adversely impacted our business, results of operations, cash flow and financial condition, and the continuing effects of the COVID-19 pandemic remain highly unpredictable and could adversely impact our business, results of operations, cash flow, liquidity and financial condition in the future.Our business, results of operations, cash flow and financial condition have been, and may be in the future, adversely affected by the COVID-19 pandemic, including the impacts resulting from efforts by public health and governmental authorities to contain and combat the outbreak and spread of COVID-19. Since the onset of the pandemic, we have made changes in our business designed to support these efforts and protect the health and well-being of our employees and customers. The changes in our business have included: temporarily reducing store hours and closing our sales floors in our company-operated paint stores to the general public; requiring our customers to order product online or via phone and to access their products via curbside pickup or delivery; implementing remote, alternate and flexible work arrangements where possible; enhancing cleaning and sanitation procedures; implementing domestic and international travel restrictions and return to work and visitor screening protocols; postponing or canceling the hosting or attending of large events; and enhancing certain employee benefits, such as telehealth, paid sick leave, family leave and voluntary leave of absence policies and programs. We continue to evaluate the changes we have made in our business, consider new and further changes, and work with public health, government and other authorities and organizations to maintain our operations and support the health and well-being of our employees, customers and their families.The necessary and appropriate measures we have taken have resulted in additional costs, including for COVID-related leave and healthcare costs, and have adversely impacted our business and financial performance. As the pandemic continues and evolves, we may incur additional costs and experience further adverse impacts to our business, each of which may be significant. We also have faced, and may continue to face, operational risks in connection with remote and hybrid in-office work arrangements, including but not limited to cybersecurity risks and increased vulnerability to damage or interruption resulting from, among other causes, cyber attacks, security breaches, phishing, malware, viruses, ransomware, power outages or system failures. The COVID-19 pandemic has severely impacted the global economy, disrupted consumer spending and global supply chains, and created significant volatility and disruption of financial markets, all of which may continue, and all of which have adversely affected, and may continue to adversely affect, our business. We have experienced occasional, temporary disruptions and closures of some of our facilities, including more recently in connection with the Omicron variant and due to our employees or their family members testing positive for COVID-19. We also have seen shifts in consumer behaviors and preferences, as well as impacts in the demand for some of our products. While demand levels for our products have been returning to more normalized levels, our ability to predict and meet any future changes in the demand for our products due to the impacts of the pandemic remains uncertain. While we continue to closely monitor the impact of the pandemic on all aspects of our business, the extent of the impact on our results of operations, cash flow, liquidity, and financial performance, as well as our ability to execute near-term and long-term business strategies and initiatives, will depend on numerous evolving factors and future developments, which are highly uncertain and which we cannot predict or control, and some of which we are not currently aware, including, but not limited to: (a)the duration, severity and scope of the pandemic, including additional variants and waves of COVID-19 cases; (b) rapidly-changing governmental and public health directives to contain and combat the outbreak, including with respect to COVID-19vaccination and testing requirements, and the duration, degree, effectiveness and easing, removal or reinstitution of directives;(c)the further development, availability, effectiveness and distribution of COVID-19 treatments and vaccines; (d) the extentand duration of the pandemic’s adverse and/or volatile effects on economic and social activity, supply chain logistics,inflationary pressures, consumer confidence, discretionary spending and preferences, labor and healthcare costs, labor marketsand unemployment rates, any of which may reduce demand for some of our products, impact our ability to predict and meet anyfuture changes in the demand for our products, or impair the ability of those with whom we do business to satisfy theirobligations to us; (e) our ability to sell, provide and meet the demand for our services and products, including as a result of new,or the reinstitution of prior, directives; (f) any temporary reduction in our workforce or closures of our offices and facilities andour ability to adequately staff and maintain our operations, including as a result of employees or their family members testingpositive for COVID-19; (g) the ability of our customers and suppliers to continue their operations, which could affect ourability to sell, provide and meet the demand for our services and products and result in terminations of contracts, losses of681861IMPO.A (PDF_D SWOP) p15-118.indd 2281861IMPO.A (PDF_D SWOP) p15-118.indd 222/18/22 10:56 AM2/18/22 10:56 AMrevenue and adverse effects to our supply chain; and (h) any impairment in value of our tangible or intangible assets which could be recorded as a result of weaker economic conditions. If the pandemic continues to create disruptions or turmoil in the credit or financial markets or impacts our credit ratings in the future, it could adversely affect our ability to access capital on favorable terms and continue to meet our liquidity needs.Given the inherent uncertainty surrounding COVID-19, the pandemic may continue to create challenging operating environments and may have an adverse impact on our business in the near term. If these conditions persist or worsen for a prolonged period, the COVID-19 pandemic, including any of the above factors and others that are currently unknown, may also have a material adverse effect on our results of operations, cash flow, liquidity, or financial condition.Adverse changes in general business and economic conditions in the United States and worldwide may adversely affect our results of operations, cash flow, liquidity or financial condition.Our business is sensitive to global and regional business and economic conditions. Adverse changes in such conditions in the United States and worldwide, including due to the COVID-19 pandemic, may reduce the demand for some of our products, adversely impact our ability to predict and meet any future changes in the demand for our products, and impair the ability of those with whom we do business to satisfy their obligations to us, each of which could adversely affect our results of operations, cash flow, liquidity or financial condition. Higher inflation rates, interest rates, tax rates and unemployment rates, higher labor and healthcare costs, recessions, changing governmental policies, laws and regulations, business disruptions due to cybersecurity incidents, terrorist activity, armed conflict, war, public health crises (including the COVID-19 pandemic), impacts of climate change, fires or other natural disasters, supply chain disruptions, and other economic factors could also adversely affect demand for some of our products, our ability to predict and meet any future changes in the demand for our products, the availability, delivery or cost of raw materials, our ability to adequately staff and maintain operations at affected facilities and our results of operations, cash flow, liquidity or financial condition and that of our customers, vendors and suppliers.Protracted duration of economic downturns in cyclical segments of the economy may depress the demand for some of our products and adversely affect our sales, earnings, cash flow or financial condition.Portions of our business involve the sale of paint, coatings and related products to segments of the economy that are cyclical in nature, particularly segments relating to construction, housing, manufacturing and oil production, refining, storage and transportation. Our sales to these segments are affected by the levels of discretionary consumer and business spending in these segments. During economic downturns in these segments, the levels of consumer and business discretionary spending may decrease, and the recovery of these segments may lag behind the recovery of the overall economy. This decrease in spending likely will reduce the demand for some of our products and may adversely affect our sales, earnings, cash flow or financial condition.Although interest rates remain low by historical standards, any increase may adversely affect the demand for new residential homes, existing home turnover and new non-residential construction. A worsening in these segments will reduce the demand for some of our products and may adversely impact sales, earnings and cash flow.In the U.S. construction and housing segments, the recent demand for new construction has caused contractors to experience a shortage of skilled workers, resulting in related project backlogs and an adverse effect on the growth rate of demand for our products. While we expect to see higher demand for our products as project backlogs are reduced in the future, this labor shortage may adversely impact our sales, earnings, cash flow or financial condition.FINANCIAL RISKSA weakening of global credit markets could adversely affect our results of operations, cash flow, liquidity or financial condition.A weakening of global credit markets could adversely impact our net sales, the collection of accounts receivable, funding for working capital needs, expected cash flow generation from current and acquired businesses, access to capital and our investments, which could adversely impact our results of operations, cash flow, liquidity or financial condition.We finance a portion of our sales through trade credit. Credit markets remain tight, and some customers who require financing for their businesses have not been able to obtain, and may in the future have difficulty obtaining, necessary financing. A continuation or worsening of these conditions could limit our ability to collect our accounts receivable, which could adversely affect our results of operations, cash flow, liquidity or financial condition.We generally fund a portion of our seasonal working capital needs and obtain funding for other general corporate purposes through short-term borrowings backed by our revolving credit facility and other financing facilities. If any of the banks in these credit and financing facilities are unable to perform on their commitments, such inability could adversely impact our cash flow, liquidity or financial condition, including our ability to obtain funding for working capital needs and other general corporate purposes.781861IMPO.A (PDF_D SWOP) p15-118.indd 2381861IMPO.A (PDF_D SWOP) p15-118.indd 232/18/22 10:56 AM2/18/22 10:56 AMAlthough we have available credit facilities to fund our current operating needs, we cannot be certain we will be able to replace our existing credit facilities or refinance our existing or future debt when necessary. Our cost of borrowing and ability to access the capital markets are affected not only by market conditions, but also by our debt and credit ratings assigned by the major credit rating agencies. Downgrades in these ratings, including due to uncertainties regarding COVID-19, likely would increase our cost of borrowing and could have an adverse effect on our access to the capital markets, including our access to the commercial paper market. An inability to access the capital markets could have a material adverse effect on our results of operations, cash flow, liquidity or financial condition.We have goodwill and intangible assets recorded on our balance sheet. We periodically evaluate the recoverability of the carrying value of our goodwill and intangible assets whenever events or changes in circumstances indicate such value may not be recoverable. An impairment assessment involves judgment as to assumptions regarding future sales and cash flow and the impact of market conditions on those assumptions. Future events and changing market conditions may impact our assumptions and change our estimates of future sales and cash flow, resulting in us incurring substantial impairment charges, which would adversely affect our results of operations or financial condition.We hold investments in equity and debt securities in some of our defined benefit pension plans. A decrease in the value of plan assets resulting from a general financial downturn may cause a negative pension plan investment performance, which may adversely affect our results of operations, cash flow, liquidity or financial condition.We require a significant amount of cash to service the substantial amount of debt we have outstanding. Our ability to generate cash depends on many factors beyond our control. We also depend on the business of our subsidiaries to satisfy our cash needs. If we cannot generate the required cash, we may not be able to make the necessary payments required under our indebtedness.At December 31, 2021, we had total debt of approximately $9.615 billion, which is an increase of $1.323 billionsince December 31, 2020. We have the ability under our existing credit facilities to incur substantial additional indebtedness in the future. Our ability to make payments on our debt, fund our other liquidity needs, and make planned capital expenditures will depend on our ability to generate cash in the future. Our historical financial results have been, and we anticipate our future financial results will be, subject to fluctuations. Our ability to generate cash, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors beyond our control, including public health crises, such as the COVID-19 pandemic, adverse weather conditions or natural disasters, such as due to the impacts of climate change, supply chain disruptions and related impacts. We cannot guarantee our business will generate sufficient cash flow from our operations or future borrowings will be available to us in an amount sufficient to enable us to make payments of our debt, fund other liquidity needs and make planned capital expenditures.The degree to which we are leveraged could have important consequences for shareholders. For example, it could:•require us to dedicate a substantial portion of our cash flow from operations to the payment of debt service,reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and otherlong-term growth initiatives and general corporate purposes;•increase our vulnerability to adverse economic or industry conditions;•limit our ability to obtain additional financing in the future to enable us to react to changes in our business oreconomic or industry conditions; or•place us at a competitive disadvantage compared to businesses in our industry that have less debt.Additionally, any failure to comply with covenants in the instruments governing our debt could result in an event of default which, if not cured or waived, would have a material adverse effect on us.A significant portion of our operations are conducted through our subsidiaries. As a result, our ability to generate sufficient cash flow for our needs is dependent to some extent on the earnings of our subsidiaries and the payment of those earnings to us in the form of dividends, loans or advances and through repayment of loans or advances from us. Our subsidiaries are separate and distinct legal entities. Our subsidiaries have no obligation to pay any amounts due on our debt or to provide us with funds to meet our cash flow needs, whether in the form of dividends, distributions, loans or other payments. Further, any payment of dividends, loans or advances by our subsidiaries could be subject to statutory or contractual restrictions. Payments to us by our subsidiaries will also be contingent upon our subsidiaries’ earnings and business considerations. Our right to receive any assets of any of our subsidiaries upon their liquidation or reorganization will be effectively subordinated to the claims of that subsidiary’s creditors, including trade creditors. Even if we are a creditor of any of our subsidiaries, our rights as a creditor would be subordinate to any security interest in the assets of our subsidiaries and any indebtedness of our subsidiaries senior to that held by us. Finally, changes in the laws of foreign jurisdictions in which we operate may adversely affect the ability of some of our foreign subsidiaries to repatriate funds to us.881861IMPO.A (PDF_D SWOP) p15-118.indd 2481861IMPO.A (PDF_D SWOP) p15-118.indd 242/18/22 10:56 AM2/18/22 10:56 AMFluctuations in foreign currency exchange rates could adversely affect our results of operations, cash flow, liquidity or financial condition.Because of our international operations, we are exposed to risk associated with interest rates and value changes in foreign currencies, which may adversely affect our business. Historically, our reported net sales, earnings, cash flow and financial condition have been subjected to fluctuations in foreign exchange rates. Our primary exchange rate exposure is with the Euro, the Chinese yuan, the Canadian dollar, the Brazilian real, the British pound, and the Mexican peso, each against the U.S. dollar. While we actively manage the exposure of our foreign currency risk as part of our overall financial risk management policy, we believe we may experience losses from foreign currency exchange rate fluctuations, and such losses could adversely affect our sales, earnings, cash flow, liquidity or financial condition.OPERATIONAL RISKSAdverse weather conditions and natural disasters, including due to the impacts of climate change, may temporarily reduce the demand for some of our products, impact our ability to meet the demand for our products or cause supply chain disruptions and increased costs, and could have a negative effect on our sales, earnings or cash flow.Our business is seasonal in nature, with the second and third quarters typically generating a higher proportion of sales and earnings than other quarters. From time to time, adverse weather conditions and natural disasters, including due to the impacts of climate change, have had or may have an adverse effect on our sales, manufacture and distribution of paint, coatings and related products. In the event adverse weather conditions or a natural disaster cause significant damage to any one or more of our principal manufacturing or distribution facilities, we may not be able to manufacture the products needed to meet customer demand, which could have an adverse effect on our sales of certain paint, coatings and related products. The impact of these risks to our suppliers also have had or may have an adverse effect on our sales, manufacture and distribution of certain of our products. During 2021, Winter Storm Uri and Hurricane Ida caused significant damage to certain of our suppliers’ facilities in Texas and Louisiana, respectively. These natural disasters and their impacts to certain of our suppliers resulted in unprecedented industry-wide supply chain disruptions, increased raw material and other costs, and significantly hindered our ability to manufacture the products needed to fully meet customer demand. We discuss these natural disasters and their adverse impact to our business in more detail in the “Outlook” section in Item 7. In any of these instances, an adverse effect on sales may cause a reduction in our earnings or cash flow.Unexpected shortages and increases in the cost of raw materials and energy may adversely affect our earnings or cash flow.We purchase raw materials (including titanium dioxide and petrochemical feedstock sources, such as propylene and ethylene) and energy for use in the manufacturing, distribution and sale of our products. Factors such as political instability, higher tariffs, supply chain disruptions, adverse weather conditions and natural disasters (including hurricanes and severe winter or other storms due to the impacts of climate change) or public health crises (including the COVID-19 pandemic) could disrupt the availability of raw material and fuel supplies, adversely impact our ability to meet customer demands for some of our products or adequately staff and maintain operations at affected facilities and increase our costs. In addition, environmental and social regulations, including regulations related to climate change, may negatively impact us or our suppliers in terms of availability and cost of raw materials, as well as sources and supply of energy. Although raw materials and energy supplies (including oil and natural gas) are generally available from various sources in sufficient quantities, unexpected shortages and increases in the cost of raw materials and energy, or any deterioration in our relationships with or the financial viability of our suppliers, may have an adverse effect on our earnings or cash flow. In the event we experience supply chain disruptions from our suppliers, we may not be able to timely secure alternate sources in order to prevent significant impacts to our business, or we may experience quality issues with raw materials and energy sourced from alternate sources. If the cost of raw materials and energy increases, we may not be able to offset higher costs in a timely manner by sufficiently decreasing our operating costs or raising the prices of our products. In recent years, some raw material and energy prices have increased, particularly titanium dioxide and petrochemical feedstock sources, such as propylene and ethylene, as well as metal and plastic packaging. The cost of raw materials and energy could continue to experience periods of volatility in the future and may adversely affect our earnings and cash flow.Although we have an extensive customer base, the loss of any of our largest customers could adversely affect our sales, earnings or cash flow.We have a large and varied customer base due to our extensive distribution platform. During 2021, no individual customer accounted for sales totaling more than ten percent of our sales. However, we have some customers that, individually, purchase a large amount of products from us. Although our broad distribution channels help to minimize the impact of the loss of any one customer, the loss of any of these large customers could have an adverse effect on our sales, earnings or cash flow.981861IMPO.A (PDF_D SWOP) p15-118.indd 2581861IMPO.A (PDF_D SWOP) p15-118.indd 252/18/22 10:56 AM2/18/22 10:56 AMIncreased competition or failure to keep pace with developments in key competitive areas of our business may reduce our sales, earnings or cash flow performance.We face substantial competition from many international, national, regional and local competitors of various sizes in the manufacture, distribution and sale of our paint, coatings and related products. Some of our competitors operate more extensively in certain regions around the world and have greater financial or operational resources to compete internationally. Other competitors are smaller and may be able to offer more specialized products. Technology, product quality, product innovation, breadth of product line, technical expertise, distribution, service and price are key competitive factors for our business. Competition in any of these areas, or failure to keep pace with developments in any of these areas, may reduce our sales and adversely affect our earnings or cash flow by resulting in decreased sales volumes, reduced prices and increased costs of manufacturing, distributing and selling our products.Our results of operations, cash flow or financial condition may be negatively impacted if we do not successfully integrate future acquisitions into our existing operations and if the performance of the businesses we acquire do not meet our expectations.We have historically made strategic acquisitions of businesses in the paint and coatings industry and likely will acquire additional businesses in the future as part of our long-term growth strategy. The success of future acquisitions depends in large part on our ability to integrate the operations and personnel of the acquired companies and manage challenges that may arise as a result of the acquisitions, particularly when the acquired businesses operate in new or foreign markets. In the event we do not successfully integrate such future acquisitions into our existing operations so as to realize the expected return on our investment, our results of operations, cash flow or financial condition could be adversely affected.Risks and uncertainties associated with our expansion into and our operations in Asia, Europe, South America and other foreign markets could adversely affect our results of operations, cash flow, liquidity or financial condition.Net external sales of our consolidated foreign subsidiaries totaled approximately 21.2%, 19.5% and 20.6% of our total consolidated net sales in 2021, 2020 and 2019, respectively. Sales outside of the United States make up a significant part of our current business and future strategic plans. Our results of operations, cash flow, liquidity or financial condition could be adversely affected by a variety of domestic and international factors, including general economic conditions, political instability, inflation rates, recessions, tariffs, foreign currency exchange rates, foreign currency exchange controls, interest rates, foreign investment and repatriation restrictions, legal and regulatory constraints, civil unrest, difficulties in staffing and managing foreign operations and other external economic and political factors. In addition, public health crises (including the COVID-19 pandemic) in foreign jurisdictions may temporarily reduce the demand for some of our products and adversely affect the availability and cost of raw materials. Our inability to successfully manage the risks and uncertainties relating to any of these factors could adversely affect our results of operations, cash flow, liquidity or financial condition.In many foreign countries, it is not uncommon to engage in certain business practices we are prohibited from engaging in because of regulations applicable to us, such as the Foreign Corrupt Practices Act and the UK Bribery Act. Recent years have seen a substantial increase in anti-bribery law enforcement activity, with more frequent and aggressive investigations and enforcement proceedings by both U.S. and non-U.S. regulators, and an increase in criminal and civil proceedings brought against companies and individuals. Although we have internal control policies and procedures designed to ensure compliance with these regulations, there can be no assurance our policies and procedures will prevent a violation of these regulations. Any violation could cause an adverse effect on our results of operations, cash flow or financial condition.Policy changes affecting international trade could adversely impact the demand for our products and our competitive position.Due to the international scope of our operations, changes in government policies on foreign trade and investment may affect the demand for our products and services, impact the competitive position of our products or prevent us from being able to sell products in certain countries. Our business benefits from free trade agreements, which may include the United States-Mexico-Canada Agreement, and efforts to withdraw from, or substantially modify such agreements, in addition to the implementation of more restrictive trade policies, such as more detailed inspections, higher tariffs, import or export licensing requirements, exchange controls or new barriers to entry, could have a material adverse effect on our results of operations, financial condition or cash flow and that of our customers, vendors and suppliers. Additionally, the results of the United Kingdom’s referendum on European Union membership, which resulted in the United Kingdom’s exit from the European Union on January 31, 2020 (“Brexit”), caused significant volatility in global stock markets, currency exchange rate fluctuations and global economic uncertainty. The transition period post-Brexit expired on December 31, 2020, and the United Kingdom and European Union entered into a free trade agreement that now governs the United Kingdom’s relationship with the European Union. While the United Kingdom and European Union generally have continued to trade with each other without the imposition of tariffs for imports and exports, trades have been subject to new customs 1081861IMPO.A (PDF_D SWOP) p15-118.indd 2681861IMPO.A (PDF_D SWOP) p15-118.indd 262/18/22 10:56 AM2/18/22 10:56 AMrequirements that require additional documentation and data and new controls on the movement and reporting of goods (including chemicals). Although we have not experienced any material disruption in our business as a result of Brexit to date, we do not know the extent to which Brexit and the free trade agreement will ultimately impact the business and regulatory environment in the United Kingdom, the rest of the European Union or other countries, although it is possible there will be tighter controls and administrative requirements for imports and exports between the United Kingdom and the European Union or other countries, as well as increased regulatory complexities, as the transition continues. Any of these factors could adversely impact customer demand, our relationships with customers and suppliers and our results of operations.Cybersecurity incidents and other disruptions to our information technology systems could interfere with our operations, result in the compromise or loss of critical and confidential information and severely harm our business.We rely on information technology systems to conduct our business, including recording and processing transactions, manufacturing and selling our products, researching and developing new products, maintaining and growing our competitive position, and supporting and communicating with our employees, customers, suppliers and other vendors. These information technology systems are important to many business-critical processes including, but not limited to, production planning, manufacturing, finance, company operations, sales and customer service. Some of these systems are maintained or operated by third-party providers. Despite our efforts to prevent disruptions to these information technology systems, these systems may be affected by damage or interruption resulting from, among other causes, cyber attacks, security breaches, phishing, malware, viruses, ransomware, power outages or system failures. These risks could be magnified due to the increased reliance on information technology systems to conduct our business, including those used in furtherance of remote and hybrid in-office work environments. Disruptions to these systems may have a material adverse effect on our business, results of operations and financial condition. As part of our business, we collect and handle sensitive and confidential information about our business, customers, employees and suppliers. Despite the security measures we have in place, our facilities and systems, and those third parties with which we do business, may be vulnerable to cyber attacks, security breaches, malware, viruses, ransomware, power outages, system failures, acts of vandalism or misconduct, human or technical errors or other similar events or disruptions. Any such event involving the misappropriation, loss or other unauthorized disclosure of information, whether impacting us or third parties with which we do business, could result in losses, damage our reputation or relationships with customers and suppliers, expose us to the risks of litigation, regulatory action and liability, disrupt our operations and have a material adverse effect on our business, results of operations and financial condition. We continue to mitigate these risks in a number of ways, including through additional investment, engagement of third-party experts and consultants, improving the security of our facilities and systems, providing annual training for all employees (with more enhanced or frequent training based on role), assessing the continued appropriateness of relevant insurance coverage and strengthening our controls to monitor and mitigate these threats. The domestic and international regulatory environment related to information security, collection and privacy is increasingly rigorous and complex, with new and rapidly changing requirements applicable to our business. Compliance with these requirements, including the European Union’s General Data Protection Regulation, the California Consumer Privacy Act and other international and domestic regulations, could result in additional costs and changes to our business practices.Our ability to attract, retain, develop and progress a qualified workforce could adversely impact our business and impair our ability to meet our strategic objectives and the needs of our customers. Our continued success depends in part on our ability to identify, attract and onboard qualified candidates with the requisite education, background, skills and experience and our ability to retain, develop, progress and engage qualified employees across our business, including our stores, fleet, manufacturing, corporate and other operations and functions. Competition for talent is intense, and we are facing increased wage rates and labor shortages due to a tightened labor market and other macroeconomic conditions that have been exacerbated by the COVID-19 pandemic. To the extent we are unable to remain competitive with our compensation and benefits, talent management strategy, inclusive workplace culture and related initiatives, programs and practices, or if qualified candidates or employees become more difficult to attract or retain under reasonable terms, we may experience higher labor-related costs and may be unable to attract, retain, develop and progress a qualified workforce, which could adversely affect our business and future success and impair our ability to meet our strategic objectives and the needs of our customers.Inability to protect or enforce our material trademarks and other intellectual property rights could have an adverse effect on our business.We have numerous patents, trade secrets, trademarks, trade names and know-how that are valuable to our business. Despite our efforts to protect such intellectual property and other proprietary information from unauthorized use or disclosure, third parties may attempt to disclose, obtain or use our trademarks or such other intellectual property and information without our authorization. Although we rely on the patent, trademark, trade secret and copyright laws of the United States and other countries to protect our intellectual property rights, the laws of some countries may not protect such rights to the same extent as 1181861IMPO.A (PDF_D SWOP) p15-118.indd 2781861IMPO.A (PDF_D SWOP) p15-118.indd 272/18/22 10:56 AM2/18/22 10:56 AMthe laws of the United States. Unauthorized use of our intellectual property by third parties, the failure of foreign countries to have laws to protect our intellectual property rights, or an inability to effectively enforce such rights in foreign countries could have an adverse effect on our business.LEGAL AND REGULATORY RISKSWe are subject to a wide variety of complex domestic and foreign laws, rules and regulations, for which compliance could adversely affect our results of operations, cash flow or financial condition.We are subject to a wide variety of complex domestic and foreign laws, rules and regulations, and legal compliance risks, including securities laws, tax laws, employment and pension-related laws, competition laws, U.S. and foreign export and trading laws, data privacy and security laws, and laws governing improper business practices. We are affected by new laws and regulations, and changes to existing laws and regulations, including interpretations by courts and regulators. From time to time, our Company, our operations and the industries in which we operate may be reviewed or investigated by regulators, which could lead to enforcement actions or the assertion of private litigation claims and damages.Although we believe we have adopted appropriate risk management and compliance programs to mitigate these risks, the global and diverse nature of our operations means compliance risks will continue to exist. Investigations, examinations and other proceedings, the nature and outcome of which cannot be predicted, likely will arise from time to time. These investigations, examinations and other proceedings could subject us to significant liability and require us to take significant accruals or pay significant settlements, fines and penalties, which could have a material adverse effect on our results of operations, cash flow or financial condition.We are subject to tax laws and regulations in the United States and multiple foreign jurisdictions. We are affected by changes in tax laws and regulations, as well as changes in related interpretations and other tax guidance. In the ordinary course of our business, we are subject to examinations and investigations by various tax authorities and other regulators. In addition to existing examinations and investigations, there could be additional examinations and investigations in the future, and existing examinations and investigations could be expanded.For non-income tax risks, we estimate material loss contingencies and accrue for such loss contingencies as required by U.S. generally accepted accounting principles based on our assessment of contingencies where liability is deemed probable and reasonably estimable in light of the facts and circumstances known to us at a particular point in time. Subsequent developments may affect our assessment and estimates of the loss contingency. In the event the loss contingency is ultimately determined to be significantly higher than currently accrued, the recording of the additional liability may result in a material adverse effect on our results of operations or financial condition for the annual or interim period during which such additional liability is accrued. In those cases where no accrual is recorded because it is not probable a liability has been incurred and cannot be reasonably estimated, any potential liability ultimately determined to be attributable to us may result in a material adverse effect on our results of operations, cash flow or financial condition for the annual or interim period during which such liability is accrued or paid. For income tax risks, we recognize tax benefits based on our assessment that a tax benefit has a greater than 50% likelihood of being sustained upon ultimate settlement with the applicable taxing authority that has full knowledge of all relevant facts. For those income tax positions where we determine there is not a greater than 50% likelihood such tax benefits will be sustained, we do not recognize a tax benefit in our financial statements. Subsequent events may cause us to change our assessment of the likelihood of sustaining a previously-recognized benefit which could result in a material adverse effect on our results of operations, cash flow or financial position for the annual or interim period during which such liability is accrued or paid.We discuss risks and uncertainties with regard to taxes in more detail in Note 19 to the Consolidated Financial Statements in Item 8.We are required to comply with, and may become subject to additional, numerous complex and increasingly stringent domestic and foreign health, safety and environmental (including related to climate change) laws, regulations and requirements, the cost of which is likely to increase and may adversely affect our results of operations, cash flow or financial condition.Our operations are subject to various domestic and foreign health, safety and environmental laws, regulations and requirements, including those related to chemicals, climate change and the COVID-19 pandemic. These laws, regulations and requirements not only govern our current operations and products, but also impose potential liability on us for our past operations. Increased global focus on climate change may result in the imposition of new or additional regulations or requirements applicable to, and increased financial risks for, our business and industry. A number of government authorities and agencies have introduced or are contemplating regulatory changes to address climate change, including the regulation of greenhouse gas emissions. The outcome of new legislation or regulation in the U.S. and other jurisdictions in which we operate may result in new or additional requirements, including to fund energy efficiency activities or renewable energy use, and fees or restrictions 1281861IMPO.A (PDF_D SWOP) p15-118.indd 2881861IMPO.A (PDF_D SWOP) p15-118.indd 282/18/22 10:56 AM2/18/22 10:56 AMon certain activities or materials. Compliance with these climate change initiatives may also result in additional costs to us, including, among other things, increased production costs, additional taxes, additional investments in renewable energy use and other initiatives, reduced emission allowances or additional restrictions on production or operations. We may not be able to timely recover the cost of compliance with such new or more stringent laws and regulations, which could adversely affect our results of operations, cash flow or financial condition.We expect health, safety and additional environmental laws, regulations and requirements to be increasingly stringent upon our industry and us in the future. Our costs to comply with these laws, regulations and requirements may increase as they become more stringent in the future, and these increased costs may adversely affect our results of operations, cash flow or financial condition.We are involved with environmental investigation and remediation activities at some of our currently- and formerly-owned sites, as well as a number of third-party sites, for which our ultimate liability may exceed the current amount we have accrued.We are involved with environmental investigation and remediation activities at some of our currently- and formerly-owned sites and a number of third-party sites. We accrue for estimated costs of investigation and remediation activities at these sites for which commitments or clean-up plans have been developed and when such costs can be reasonably estimated based on industry standards and professional judgment. These estimated costs are based on currently available facts regarding each site. We continuously assess our potential liability for investigation and remediation activities and adjust our environmental-related accruals as information becomes available upon which more accurate costs can be reasonably estimated. Due to the uncertainties surrounding environmental investigation and remediation activities, our liability may result in costs that are significantly higher than currently accrued and may have an adverse effect on our earnings. We discuss these risks and uncertainties in more detail in the “Environmental-Related Liabilities” and “Environmental Matters” sections in Item 7 and in Note 9 to the Consolidated Financial Statements in Item 8.The nature, cost, quantity and outcome of pending and future litigation, such as litigation arising from the historical manufacture and sale of lead pigments and lead-based paint, could have a material adverse effect on our results of operations, cash flow, liquidity and financial condition.In the course of our business, we are subject to a variety of claims and lawsuits, including, but not limited to, litigation relating to product liability and warranty, personal injury, environmental (including natural resource damages), intellectual property, commercial, contractual and antitrust claims that are inherently subject to many uncertainties regarding the possibility of a loss to us. These uncertainties will ultimately be resolved when one or more future events occur or fail to occur confirming the incurrence of a liability or the reduction of a liability. In accordance with the Contingencies Topic of the ASC, we accrue for these contingencies by a charge to income when it is both probable that one or more future events will occur confirming the fact of a loss and the amount of the loss can be reasonably estimated. In the event a loss contingency is ultimately determined to be significantly higher than currently accrued, the recording of the additional liability may result in a material impact on our results of operations, liquidity or financial condition for the annual or interim period during which such additional liability is accrued. In those cases where no accrual is recorded because it is not probable that a liability has been incurred and the amount of any such loss cannot be reasonably estimated, any potential liability ultimately determined to be attributable to us may result in a material impact on our results of operations, liquidity or financial condition for the annual or interim period during which such liability is accrued. Our past operations included the manufacture and sale of lead pigments and lead-based paints. Along with other companies, we are and have been a defendant in a number of legal proceedings, including individual personal injury actions, purported class actions and actions brought by various counties, cities, school districts and other government-related entities, arising from the manufacture and sale of lead pigments and lead-based paints. The plaintiffs’ claims have been based upon various legal theories, including negligence, strict liability, breach of warranty, negligent misrepresentations and omissions, fraudulent misrepresentations and omissions, concert of action, civil conspiracy, violations of unfair trade practice and consumer protection laws, enterprise liability, market share liability, public nuisance, unjust enrichment and other theories. The plaintiffs seek various damages and relief, including personal injury and property damage, costs relating to the detection and abatement of lead-based paint from buildings, costs associated with a public education campaign, medical monitoring costs and others. We have also been a defendant in legal proceedings arising from the manufacture and sale of non-lead-based paints that seek recovery based upon various legal theories, including the failure to adequately warn of potential exposure to lead during surface preparation when using non-lead-based paint on surfaces previously painted with lead-based paint. We believe the litigation brought to date is without merit or subject to meritorious defenses and are vigorously defending such litigation. We expect additional lead pigment and lead-based paint litigation may be filed against us in the future asserting similar or different legal theories and seeking similar or different types of damages and relief. The Company will continue to vigorously defend against any additional lead pigment and lead-based paint litigation that may be filed, including utilizing all avenues of appeal, if necessary.1381861IMPO.A (PDF_D SWOP) p15-118.indd 2981861IMPO.A (PDF_D SWOP) p15-118.indd 292/18/22 10:56 AM2/18/22 10:56 AMNotwithstanding our views on the merits, litigation is inherently subject to many uncertainties, and we ultimately may not prevail. Adverse court rulings or determinations of liability, among other factors, could affect the lead pigment and lead-based paint litigation against us and encourage an increase in the number and nature of future claims and proceedings. From time to time, various legislation and administrative regulations have been enacted, promulgated or proposed to impose obligations on present and former manufacturers of lead pigments and lead-based paints respecting asserted health concerns associated with such products or to overturn the effect of court decisions in which we and other manufacturers have been successful.Due to the uncertainties involved, management is unable to predict the outcome of the lead pigment and lead-based paint litigation, the number or nature of possible future claims and proceedings, or the effect any legislation and/or administrative regulations may have on the litigation or against us. Further, management cannot reasonably determine the scope or amount of the potential costs and liabilities related to such litigation, or resulting from any such legislation and regulations. Except with respect to the California public nuisance litigation, we have not accrued any amounts for such litigation because we do not believe it is probable that a loss has occurred, and we believe it is not possible to estimate the range of potential losses as there is no substantive information upon which an estimate could be based. In addition, any potential liability that may result from any changes to legislation and regulations cannot reasonably be estimated. Due to the uncertainties associated with the amount of any such liability and/or the nature of any other remedy which may be imposed in such litigation, any potential liability determined to be attributable to us arising out of such litigation may have a material adverse effect on our results of operations, cash flow, liquidity or financial condition. We discuss the risks and uncertainties related to litigation, including the lead pigment and lead-based paint litigation, in more detail in Note 10 to the Consolidated Financial Statements in Item 8.ITEM 1B. UNRESOLVED STAFF COMMENTSNone.1481861IMPO.A (PDF_D SWOP) p15-118.indd 3081861IMPO.A (PDF_D SWOP) p15-118.indd 302/18/22 10:56 AM2/18/22 10:56 AM[THIS PAGE INTENTIONALLY LEFT BLANK]1581861IMPO.A (PDF_D SWOP) p15-118.indd 3181861IMPO.A (PDF_D SWOP) p15-118.indd 312/18/22 10:56 AM2/18/22 10:56 AMITEM 2. PROPERTIESWe own our world headquarters located in Cleveland, Ohio, which includes the world headquarters for The Americas Group, Consumer Brands Group and Performance Coatings Group. Our principal manufacturing and distribution facilities are located as set forth below. We believe our manufacturing and distribution facilities are well-maintained and are suitable and adequate, with sufficient productive capacity, to meet our current needs.Manufacturing (1)Distribution (1)LeasedOwnedTotalLeasedOwnedTotalConsumer Brands GroupAsia156134Canada3311Europe33134Jamaica1111Latin America268459United States6313711112Total94958181331Performance Coatings GroupAfrica1111Asia235224Europe1171841216Latin America145167United States101099Total4353973037(1) Certain geographic locations may contain both manufacturing and distribution facilities.The operations of The Americas Group included a leased distribution facility in Uruguay and 4,859 company-operated specialty paint stores, of which 217 were owned, in the United States, Canada, Puerto Rico, Virgin Islands, Grenada, Trinidad and Tobago, St. Maarten, Jamaica, Curacao, Aruba, St. Lucia, Uruguay, Brazil, Chile, Peru, Mexico, Ecuador and Barbados at December 31, 2021. These paint stores are divided into six separate operating divisions that are responsible for the sale of predominantly architectural, protective and marine and related products through the paint stores located within their geographical region. At the end of 2021:•the Mid Western Division operated 1,156 paint stores primarily located in the midwestern and upper west coast states;•the Eastern Division operated 891 paint stores along the upper east coast and New England states;•the Canada Division operated 246 paint stores throughout Canada;•the Southeastern Division operated 1,151 paint stores principally covering the lower east and gulf coast states,Puerto Rico, Virgin Islands, Grenada, Trinidad and Tobago, St. Maarten, Jamaica, Curacao, Aruba, St. Lucia andBarbados;•the South Western Division operated 1,105 paint stores in the central plains and the lower west coast states; and•the Latin America Division operated 310 paint stores in Uruguay, Brazil, Chile, Peru, Mexico and Ecuador.During 2021, The Americas Group opened 85 net new stores, consisting of 92 new stores opened (76 in the United States, 3 in Canada, 3 in South America and 10 in Mexico) and 7 stores closed (6 in the United States and 1 in South America).1681861IMPO.A (PDF_D SWOP) p15-118.indd 3281861IMPO.A (PDF_D SWOP) p15-118.indd 322/18/22 10:56 AM2/18/22 10:56 AMThe Performance Coatings Group operated 221 branches in the United States, of which 8 were owned, at December 31, 2021. The Performance Coatings Group also operated 61 branches internationally, of which 6 were owned, at December 31, 2021, consisting of branches in Canada (21), Europe (15), Chile (11), Mexico (5), Peru (4), Vietnam (3), Ecuador (1), and Brazil (1). During 2021, this segment opened one new branch and closed one branch for no net change in the number of branches operated.All real property within the Administrative segment is owned by us. For additional information regarding real property within the Administrative segment, see the information set forth in Item 1 of this report, which is incorporated herein by reference.For additional information regarding real property leases, see Note 8 to the Consolidated Financial Statements in Item 8.ITEM 3. LEGAL PROCEEDINGSSecurities and Exchange Commission regulations require disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that the Company reasonably believes will exceed a specified threshold. Pursuant to these regulations, the Company uses a threshold of $1 million for purposes of determining whether disclosure of any such proceedings is required.For information regarding certain environmental-related matters and other legal proceedings, see the information included under the captions titled “Other Long-Term Liabilities” and “Litigation” of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Notes 1, 9, 10 and 18 to the “Notes to Consolidated Financial Statements” in Item 8. The information contained in Note 10 to the Consolidated Financial Statements is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURESNot applicable.1781861IMPO.A (PDF_D SWOP) p15-118.indd 3381861IMPO.A (PDF_D SWOP) p15-118.indd 332/18/22 10:56 AM2/18/22 10:56 AMINFORMATION ABOUT OUR EXECUTIVE OFFICERSThe following is the name, age and position of each of our executive officers and all persons chosen to become executive officers, as well as all prior positions held by each person during the last five years. Executive officers are generally elected annually by the Board of Directors and hold office until their successors are elected and qualified or until their earlier death, resignation or removal. NameAgePositionJohn G. Morikis58Chairman and Chief Executive Officer, DirectorHeidi G. Petz47President and Chief Operating OfficerAllen J. Mistysyn53Senior Vice President - Finance and Chief Financial OfficerJane M. Cronin54Senior Vice President - Corporate ControllerMary L. Garceau49Senior Vice President, General Counsel and SecretaryThomas P. Gilligan61Senior Vice President - Human ResourcesJames R. Jaye55Senior Vice President - Investor Relations and Corporate CommunicationsBryan J. Young46Senior Vice President - Corporate Strategy and DevelopmentJustin T. Binns46President, The Americas GroupKarl J. Jorgenrud45President, Performance Coatings GroupTodd D. Rea47President, Consumer Brands GroupJoseph F. Sladek51President & General Manager, Global Supply Chain Division, Consumer Brands GroupMr. Morikis has served as Chairman since January 2017, President since March 2021, and Chief Executive Officer since January 2016. Mr. Morikis served as President from October 2006 to March 2019 and Chief Operating Officer from October 2006 to January 2016. Mr. Morikis has served as a Director since October 2015 and has been employed with the Company since December 1984. Effective March 1, 2022, Mr. Morikis will serve as Chairman and Chief Executive Officer. Ms. Petz has served as President, The Americas Group since March 2021. Ms. Petz served as Senior Vice President, Marketing, The Americas Group from November 2020 to March 2021 and President, Consumer Brands Group from September 2020 to November 2020. Also within the Consumer Brands Group, Ms. Petz served as President & General Manager, Retail North America from March 2019 to September 2020 and Senior Vice President, Marketing from June 2017 to March 2019. Prior to joining the Company in connection with the Valspar acquisition, Ms. Petz served as Vice President of Marketing, Consumer Business of Valspar from June 2013 to June 2017. Ms. Petz has been employed with the Company since June 2017. Effective March 1, 2022, Ms. Petz will serve as President and Chief Operating Officer.Mr. Mistysyn has served as Senior Vice President - Finance and Chief Financial Officer since January 2017. Mr. Mistysyn has been employed with the Company since June 1990.Ms. Cronin has served as Senior Vice President - Corporate Controller since October 2016. Ms. Cronin has been employed with the Company since September 1989.Ms. Garceau has served as Senior Vice President, General Counsel and Secretary since August 2017. Ms. Garceau served as Vice President, Deputy General Counsel and Assistant Secretary from June 2017 to August 2017, Associate General Counsel and Assistant Secretary from April 2017 to June 2017 and Associate General Counsel from February 2014 to April 2017. Ms. Garceau has been employed with the Company since February 2014.Mr. Gilligan has served as Senior Vice President - Human Resources since January 2016. Mr. Gilligan has been employed with the Company since October 1983.Mr. Jaye has served as Senior Vice President - Investor Relations and Corporate Communications since June 2019. Mr. Jaye served as Vice President - Investor Relations from October 2017 to June 2019. Prior to joining the Company, Mr. Jaye served as Senior Director, Communications and Investor Relations at Nordson Corporation, manufacturer of dispensing products and systems, from October 2007 to October 2017. Mr. Jaye has been employed with the Company since October 2017.Mr. Young has served as Senior Vice President - Corporate Strategy and Development since March 2021. Mr. Young served as Vice President - Corporate Strategy and Development from June 2017 to February 2021. Prior to joining the Company in 1881861IMPO.A (PDF_D SWOP) p15-118.indd 3481861IMPO.A (PDF_D SWOP) p15-118.indd 342/18/22 10:56 AM2/18/22 10:56 AMconnection with the acquisition of The Valspar Corporation, Mr. Young served as Vice President, Corporate Development of Valspar from October 2015 to June 2017. Mr. Young has been employed with the Company since June 2017. Mr. Binns has served as President, Performance Coatings Group since November 2020. Mr. Binns served as President & General Manager, Automotive Finishes Division, Performance Coatings Group from July 2018 to November 2020 and President & General Manager, Eastern Division, The Americas Group from October 2016 to July 2018. Mr. Binns has been employed with the Company since August 1997. Effective March 1, 2022, Mr. Binns will serve as President, The Americas Group.Mr. Jorgenrud has served as President & General Manager, General Industrial Division, Performance Coatings Group since January 2020. Mr. Jorgenrud served as President & General Manager, Protective & Marine Division, Performance Coatings Group from June 2017 to December 2019. Prior to joining the Company in connection with the Valspar acquisition, Mr. Jorgenrud served as Vice President and General Manager, Global Functional Coatings of Valspar from September 2013 to June 2017. Mr. Jorgenrud has been employed with the Company since June 2017. Effective March 1, 2022, Mr. Jorgenrud will serve as President, Performance Coatings Group and will become an executive officer at that time.Mr. Rea has served as President, Consumer Brands Group since November 2021. Mr. Rea served within the Consumer Brands Group as President of North America Sales from November 2020 to November 2021, Senior Vice President of Sales, Retail and National Accounts from November 2019 to November 2020, Senior Vice President of Sales, Lowe’s Business Unit from March 2018 to November 2019, Senior Vice President of Sales, National Accounts from August 2017 to February 2018, and Vice President of Sales, National Accounts from April 2016 to August 2017. Mr. Rea has been employed with the Company since April 1993.Mr. Sladek has served as President & General Manager, Global Supply Chain Division, Consumer Brands Group since January 2021. Mr. Sladek served within the Global Supply Chain Division, Consumer Brands Group as Senior Vice President, Global Operations & Engineering from August 2020 to January 2021, Senior Vice President, International & Industrial Operations from April 2019 to August 2020, Vice President, Excellence Initiatives from March 2017 to March 2019 and Vice President, Engineering & Manufacturing Quality from June 2014 to March 2017. Mr. Sladek has been employed with the Company since May 2007.1981861IMPO.A (PDF_D SWOP) p15-118.indd 3581861IMPO.A (PDF_D SWOP) p15-118.indd 352/18/22 10:56 AM2/18/22 10:56 AMPART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESOur common stock is listed on the New York Stock Exchange and traded under the symbol SHW. The number of shareholders of record at January 31, 2022 was 5,365. The information regarding securities authorized for issuance under the Company’s equity compensation plans is set forth in our Proxy Statement under the caption “Equity Compensation Plan Information” and is incorporated by reference into Part III of this report. Common Stock SplitDuring the first quarter of 2021, the Company’s Board of Directors approved and declared a three-for-one stock split to shareholders of record at the close of business on March 23, 2021 (the Stock Split). The Stock Split was effected on March 31, 2021. All share and per share information herein has been retroactively adjusted to reflect the Stock Split.Issuer Purchases of Equity SecuritiesThe following table sets forth a summary of the Company’s purchases of common stock during the fourth quarter of 2021. PeriodTotalNumber ofSharesPurchasedAverage PricePaid perShareTotal Numberof SharesPurchased asPart of aPubliclyAnnounced PlanMaximum Numberof Sharesthat MayYet BePurchased Underthe PlanOctober 1 – October 31Share repurchase program (1)1,475,000 $ 290.20 1,475,000 49,100,000 Employee transactions (2)2,423 $ 294.85 N/ANovember 1 – November 30Share repurchase program (1)200,000 $ 333.69 200,000 48,900,000 Employee transactions (2)715 $ 330.67 N/ADecember 1 – December 31Share repurchase program (1)325,000 $ 340.09 325,000 48,575,000 Employee transactions (2)603 $ 342.05 N/ATotalShare repurchase program (1)2,000,000 $ 302.66 2,000,000 48,575,000 Employee transactions (2)3,741 $ 309.30 N/A(1)Shares were purchased through the Company’s publicly announced share repurchase program. On February 17, 2021, the Board of Directorsauthorized the Company to purchase an additional 45,000,000 shares of the Company’s stock for treasury purposes. The Company had remaining authorization at December 31, 2021 to purchase 48,575,000 shares. There is no expiration date specified for the program.(2)All shares were delivered to satisfy the exercise price and/or tax withholding obligations by employees who exercised stock options or had shares of restricted stock vest.2081861IMPO.A (PDF_D SWOP) p15-118.indd 3681861IMPO.A (PDF_D SWOP) p15-118.indd 362/18/22 10:56 AM2/18/22 10:56 AMComparison of Cumulative Total ReturnThe following graph compares the cumulative total shareholder return on Sherwin-Williams common stock with the cumulative five-year total return of the companies listed on the Standard & Poor’s 500 Stock Index and the peer groups of companies selected on a line-of-business basis. The cumulative five-year total return assumes $100 was invested on December 31, 2016 in Sherwin-Williams common stock, the S&P 500 and the peer group. The cumulative five-year total return, including reinvestment of dividends, represents the cumulative value through December 31, 2021.Comparison of Cumulative Five-Year ReturnSherwin-Williams Co.S&P 500 IndexPeer Group201620172018201920202021$100$200$300$400$500Peer group of companies comprised of the following: Akzo Nobel N.V., Axalta Coating Systems Ltd., BASF SE, Genuine Parts Company, H.B. Fuller Company, The Home Depot, Inc., Lowe’s Companies, Inc., Masco Corporation, Newell Brands Inc., PPG Industries, Inc., RPM International Inc., and Stanley Black & Decker, Inc. ITEM 6. [Reserved]2181861IMPO.A (PDF_D SWOP) p15-118.indd 3781861IMPO.A (PDF_D SWOP) p15-118.indd 372/18/22 10:56 AM2/18/22 10:56 AMITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(dollars in millions, except as noted and per share data)Company BackgroundThe 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. The Company is structured into three reportable segments – The Americas 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 allocation of resources. See Note 21 to the Consolidated Financial Statements in Item 8 for additional information on the Company’s Reportable Segments.Summary•Consolidated net sales increased 8.6% in the year to a record $19.94 billion◦Net sales from stores in U.S. and Canada open more than twelve calendar months increased 6.0% in the year◦Raw material availability issues negatively impacted full year sales by a mid-single digit percentage•Diluted net income per share decreased to $6.98 per share in the year compared to $7.36 per share in the full year 2020◦Adjusted diluted net income per share decreased to $8.15 per share in the year compared to $8.19 per share inthe full year 2020•Completed a three-for-one stock split to improve accessibility to a broader base of investors•Finalized the divestiture of our Wattyl business in Australia and New Zealand•Continued to invest in acquisitions expanding our product offerings and manufacturing capacityOutlookThe Company navigated many uncertainties during 2021, including unprecedented raw material inflation, industry-wide supply chain disruptions, as well as temporary changes in the demand for our products due to the impacts of the COVID-19 pandemic earlier in the year and the Omicron variant later in the year. Despite the uncertainties, our businesses continue to be well-positioned, and we have confidence in our long-term outlook.The COVID-19 pandemic continues to evolve and disrupt normal activities in many segments of the global economy. We continue to work with government and health authorities to operate our business, including our company-operated stores, manufacturing plants and other facilities. We also continue to follow recommended actions of government authorities and health officials in order to protect the health and well-being of our employees, customers and their families worldwide.As we look to 2022, we are encouraged by the demand environment, which remains robust across our end markets. Our customers remain positive, and we expect that jobs delayed by raw material availability issues in 2021 will be completed in the quarters ahead rather than cancelled. We brought on 50 million gallons of incremental architectural paint production capacity in 2021 to meet this demand and will continue to add paint stores in 2022. We expect raw material availability to continue improving. We are implementing additional price increases to offset to the sustained cost inflation and expect raw material costs will ultimately moderate, enabling the recovery of our margins over time.We intend to remain disciplined in our capital allocation approach, focused on driving value for our customers and returns for our shareholders. Capital expenditures, excluding our new global headquarters, will remain modest at approximately 2 percent of sales and we will continue to pursue acquisitions that fit our strategy. We expect to use any excess cash to make open market purchases of Company stock. Our balance sheet remains strong, and we expect debt to EBITDA to approach the high end of our target of 2.0 to 2.5 times range.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 the COVID-19 pandemic and the potential impact of supply chain disruptions and raw material inflation on the Company.2281861IMPO.A (PDF_D SWOP) p15-118.indd 3881861IMPO.A (PDF_D SWOP) p15-118.indd 382/18/22 10:56 AM2/18/22 10:56 AMCommon Stock SplitDuring the first quarter of 2021, the Company’s Board of Directors approved and declared a three-for-one stock split to shareholders of record at the close of business on March 23, 2021 (the Stock Split). The Stock Split was effected on March 31, 2021. All share and per share information herein has been retroactively adjusted to reflect the Stock Split.RESULTS OF OPERATIONS The following discussion and analysis addresses comparisons of material changes in the consolidated financial statements for the years ended December 31, 2021 and 2020. For comparisons of the years ended December 31, 2020 and 2019, 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, 2020 filed on February 19, 2021.Net SalesYear Ended December 31,20212020$ Change% ChangeNet Sales:The Americas Group$ 11,217.0 $ 10,383.2 $ 833.8 8.0 %Consumer Brands Group2,721.6 3,053.4 (331.8) (10.9) %Performance Coatings Group6,003.8 4,922.4 1,081.4 22.0 %Administrative2.2 2.7 (0.5) (18.5) %Total$ 19,944.6 $ 18,361.7 $ 1,582.9 8.6 %Consolidated net sales for 2021 increased due primarily to selling price increases in all Reportable Segments and higher product sales volume in the Performance Coatings Group, partially offset by lower sales volume in the Consumer Brands Group. Currency translation rate changes increased 2021 consolidated net sales by 0.8%. Net sales of all consolidated foreign subsidiaries increased 17.9% to $4.223 billion for 2021 versus $3.581 billion for 2020 due primarily to returning demand in most industrial end markets globally. Net sales of all operations other than consolidated foreign subsidiaries increased 6.4% to $15.722 billion for 2021 versus $14.781 billion for 2020.Net sales in The Americas Group increased due primarily to selling price increases in all end markets, while sales volume remained flat as a result of raw material availability challenges. Net sales from stores in U.S. and Canada open for more than twelve calendar months increased 6.0% in the year over last year’s comparable period. Currency translation rate changes reduced net sales by 0.1% compared to 2020. During 2021, The Americas Group opened 92 new stores and closed 7 redundant locations for a net increase of 85 stores, with a net increase of 73 new stores in the U.S. and Canada. The total number of stores in operation at December 31, 2021 was 4,859 in the United States, Canada, Latin America and the Caribbean. The Americas Group’s objective is to expand its store base an average of 2% each year, primarily through organic growth. Sales of products other than paint increased approximately 12.5% 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.Net sales of the Consumer Brands Group decreased in 2021 primarily due to lower volume sales to most of the group’s retail customers as DIY demand returned to more normal levels, raw material availability issues, and the Wattyl divestiture, partially offset by selling price increases. In 2022, the Consumer Brands Group is focused on meeting customer needs through product development, building inventory, and optimizing the product assortment at existing customers.The Performance Coatings Group’s net sales in 2021 increased due primarily to higher sales volumes in most end markets and selling price increases. Currency translation rate changes increased net sales 2.2% compared to 2020. At December 31, 2021, the Performance Coatings Group had 282 branches open in the United States, Canada, Mexico, South America, Europe and Asia. In 2022, the Performance Coatings Group plans to continue expanding its worldwide presence, including improving its customer base and product offering.Net sales in the Administrative segment, which primarily consists of external leasing revenue of excess headquarters space and leasing of facilities no longer used by the Company in its primary business, decreased by an insignificant amount in 2021.2381861IMPO.A (PDF_D SWOP) p15-118.indd 3981861IMPO.A (PDF_D SWOP) p15-118.indd 392/18/22 10:56 AM2/18/22 10:56 AMIncome Before Income TaxesThe following table presents the components of income before income taxes as a percentage of net sales:Year Ended December 31,20212020% of Net Sales% of Net SalesNet sales$ 19,944.6 100.0 %$ 18,361.7 100.0 %Cost of goods sold11,401.9 57.2 %9,679.1 52.7 %Gross profit8,542.7 42.8 %8,682.6 47.3 %Selling, general, and administrative expenses (SG&A)5,572.5 27.9 %5,477.9 29.8 %Other general expense - net101.8 0.5 %27.7 0.2 %Amortization309.5 1.5 %313.4 1.7 %Impairment of trademarks— — %2.3 — %Interest expense334.7 1.7 %340.4 1.9 %Interest and net investment income(4.9) — %(3.6) — %Other (income) expense - net(19.5) (0.1) %5.3 — %Income before income taxes$ 2,248.6 11.3 %$ 2,519.2 13.7 %Consolidated cost of goods sold increased $1.723 billion, or 17.8% in 2021 compared to the same period in 2020 primarily due to higher raw material costs (including titanium dioxide and petrochemical feedstock sources) and unfavorable currency translation rate changes, partially offset by lower sales volumes primarily as a result of raw material availability issues during the second half of 2021. Currency translation rate changes increased Cost of goods sold by 1.1% in the current year. Consolidated gross profit decreased $139.9 million in 2021 compared to the same period in 2020. Consolidated gross profit as a percent to consolidated net sales decreased to 42.8% in 2021 from 47.3% in 2020. Consolidated gross profit dollars decreased primarily due to higher raw material costs in each Reportable Segment and lower sales volume in the Consumer Brands Group, partially offset by selling price increases in each Reportable Segment as well as higher sales volume in The Performance Coatings Group and The Americas Group. The gross margin rate decreased primarily as a result of higher raw material costs in each Reportable Segment.The Americas Group’s gross profit for 2021 increased $134.7 million compared to the same period in 2020. The Americas Group’s gross profit dollars increased primarily as a result of selling price increases, partially offset by higher raw material costs. The America’s Group gross margin rate decreased primarily due to higher raw material costs. The Consumer Brands Group’s gross profit decreased $327.8 million in 2021 compared to the same period in 2020. The Consumer Brands Group’s gross profit dollars and margin rate decreased primarily as a result of lower sales volume, the Wattyl divestiture, higher raw material costs and supply chain inefficiencies. The Performance Coatings Group’s gross profit for 2021 increased $58.6 million compared to the same period in 2020. The Performance Coatings Group’s gross profit dollars increased due to higher sales and favorable currency translation rate changes, partially offset by higher raw material costs. The Performance Coatings Group’s gross margin rate decreased primarily due to higher raw material costs, partially offset by higher sales volumes and selling price increases.Consolidated SG&A increased by $94.6 million due primarily to increased expenses to support higher sales levels and net new store openings, partially offset by good cost control. As a percent of net sales, SG&A decreased 190 basis points compared to the same period in 2020 as a result of good cost control, partially offset by increased spending from new store openings and costs to support higher sales levels.The Americas Group’s SG&A increased $196.3 million for the year due primarily to increased spending from new store openings and costs to support higher sales levels, including the hiring of additional sales representatives. The Consumer Brands Group’s SG&A decreased by $104.9 million for the year primarily due to good sales and marketing cost control in line with a return to more normal DIY sales levels. The Performance Coatings Group’s SG&A increased by $75.4 million for the year primarily to support higher sales levels and unfavorable currency translation rate changes, partially offset by good cost control. The Administrative segment’s SG&A decreased $72.2 million primarily due to lower compensation, including incentive compensation.2481861IMPO.A (PDF_D SWOP) p15-118.indd 4081861IMPO.A (PDF_D SWOP) p15-118.indd 402/18/22 10:56 AM2/18/22 10:56 AMOther general expense - net increased $74.1 million in 2021 compared to 2020. The increase was primarily attributable to the recognition of a $111.9 million loss on the Wattyl divestiture in March 2021, partially offset by a $41.1 million decrease in provisions for environmental matters in the Administrative segment. See Notes 3, 9 and 18 to the Consolidated Financial Statements in Item 8 for additional information concerning the Wattyl divestiture, environmental matters and Other general expense - net, respectively.For information on the amortization of acquired intangible assets and related impairment considerations, see Note 5 to the Consolidated Financial Statements in Item 8.Interest expense decreased $5.7 million in 2021 primarily due to lower expense associated with short-term borrowings. See Note 6 to the Consolidated Financial Statements in Item 8 for additional information on the Company’s outstanding debt.Other (income) expense - net improved $24.8 million in 2021 compared to 2020 primarily due to the $21.3 million loss recognized upon extinguishment of debt in 2020 in the Administrative segment. See Notes 6 and 18 to the Consolidated Financial Statements in Item 8 for additional information related to debt and Other (income) expense - net, respectively.The following table presents income before income taxes by segment and as a percentage of net sales by segment:Year Ended December 31,20212020$ Change% ChangeIncome Before Income Taxes:The Americas Group$ 2,239.1 $ 2,294.1 $ (55.0) (2.4) %Consumer Brands Group358.4 579.6 (221.2) (38.2) %Performance Coatings Group486.2 500.1 (13.9) (2.8) %Administrative(835.1) (854.6) 19.5 2.3 %Total$ 2,248.6 $ 2,519.2 $ (270.6) (10.7) %Income Before Income Taxes as a % of Net Sales:The Americas Group 20.0 % 22.1 %Consumer Brands Group 13.2 % 19.0 %Performance Coatings Group 8.1 % 10.2 %AdministrativenmnmTotal 11.3 % 13.7 %nm - not meaningfulIncome Tax ExpenseThe effective income tax rate for 2021 was 17.1% compared to 19.4% in 2020. The decrease in the effective rate was primarily due to an increase in tax benefits related to employee share-based payments and the net favorable impact of various other tax benefits received by the Company in the current year. See Note 19 to the Consolidated Financial Statements in Item 8 for additional information.Net Income Per ShareDiluted net income per share for 2021 decreased to $6.98 per share from $7.36 per share for 2020. Diluted net income per share in 2021 included acquisition-related amortization expense of $0.83 per share and a $0.34 per share loss from the Wattyl divestiture. See Note 3 to the Consolidated Financial Statements in Item 8 for additional information regarding the Wattyl divestiture. Currency translation rate changes decreased diluted net income per share in the year by $0.05 per share. Diluted net income per share in 2020 included acquisition-related amortization expense of $0.83 per share. 2581861IMPO.A (PDF_D SWOP) p15-118.indd 4181861IMPO.A (PDF_D SWOP) p15-118.indd 412/18/22 10:56 AM2/18/22 10:56 AMFINANCIAL CONDITION, LIQUIDITY AND CASH FLOWOverviewThe Company’s financial condition, liquidity and cash flow continued to be strong in 2021. The Company generated $2.245 billion in net operating cash despite ongoing and industry-wide raw material availability issues which negatively impacted total sales and gross margins. The net operating cash generation was primarily attributable to operating results as consolidated income before income taxes was $2.249 billion or 11.3% of net sales. The strong cash generation, along with an increase in our short-term borrowings and long-term debt, allowed the Company to invest $372.0 million in capital expenditures and return $3.339 billion to shareholders in the form of cash dividends and share buybacks during the year. During 2021, the Company generated EBITDA of $3.156 billion and Adjusted EBITDA of $3.268 billion. See the Non-GAAP Financial Measures section in Item 7 for definition and calculation of EBITDA and Adjusted EBITDA. As of December 31, 2021, the Company had Cash and cash equivalents of $165.7 million and total debt outstanding of $9.615 billion. Total debt, net of Cash and cash equivalents, was $9.449 billion and was 2.9 times the Company’s Adjusted EBITDA in 2021. Net Working CapitalNet working capital, defined as Total current assets less Total current liabilities, decreased $662.8 million to a deficit of $665.8 million at December 31, 2021 from a deficit of $3.0 million at December 31, 2020. The net working capital decrease is due to an increase in current liabilities, partially offset by an increase in current assets. Comparing current asset balances at December 31, 2021 to December 31, 2020, Accounts receivable increased $274.3 million due to higher sales, Inventories increased $123.1 million due to higher raw material costs, and Other current assets increased $125.8 million primarily related to refundable income taxes and prepaid expenses. Current liability balances increased $1.125 billion at December 31, 2021 compared to December 31, 2020 primarily due to a $763.4 million increase in Short-term borrowings and $235.5 million increase in the Current portion of long-term debt. Excluding Short-term borrowings and the Current portion of long-term debt, current liabilities increased $126.2 million primarily due to the timing of payments related to accounts payable, partially offset by lower accruals, including compensation.As a result of the net effect of these changes, the Company’s current ratio decreased to 0.88 at December 31, 2021 from 1.00 at December 31, 2020. Accounts receivable as a percent of net sales increased to 11.8% in 2021 from 11.3% in 2020. Accounts receivable days outstanding remained unchanged at 57 days in 2021. In 2021, provisions for allowance for doubtful collection of accounts decreased $4.6 million, or 8.6%. Inventories as a percent of net sales decreased to 9.7% in 2021 from 9.8% in 2020. Inventory days outstanding was 75 days in 2021 compared to 74 days in 2020. The Company has sufficient total available borrowing capacity to fund its current operating needs. Property, Plant and EquipmentNet property, plant and equipment increased $32.8 million to $1.867 billion at December 31, 2021 due primarily to capital expenditures of $372.0 million, assets acquired through business combinations of $33.5 million, partially offset by depreciation expense of $263.1 million, sale or disposition of assets with remaining net book value of $53.1 million, and other adjustments of $56.5 million, which includes government incentives associated with the construction of our new global headquarters (new headquarters) in downtown Cleveland, Ohio and new research and development (R&D) center in the Cleveland suburb of Brecksville and currency translation.Capital expenditures during 2021 in The Americas Group were primarily attributable to the opening of new paint stores and renovation and improvements in existing stores. In the Consumer Brands Group and the Performance Coatings Group, capital expenditures during 2021 were primarily attributable to operational efficiencies, capacity, health and safety at sites currently in operation. The Administrative segment incurred capital expenditures primarily related to construction activities associated with the new headquarters and new R&D center. The Company has committed to spend a minimum of $600 million of capital expenditures to build both the new headquarters and R&D center. Construction on the new headquarters and R&D center is expected to continue in 2022, with completion in 2024 at the earliest. The Company has not made any decisions regarding the disposition of the Company’s current Cleveland-area headquarters and R&D centers, which are all owned by the Company. In 2022, the Company expects to spend more than 2021 for capital expenditures. The predominant share of the capital expenditures in 2022 is expected to be for various productivity improvement and maintenance projects at existing manufacturing, distribution and research and development facilities, new store openings, new or upgraded information systems hardware and the new headquarters and R&D center in Ohio. The Company does not anticipate the need for any specific long-term external financing to support these capital expenditures.2681861IMPO.A (PDF_D SWOP) p15-118.indd 4281861IMPO.A (PDF_D SWOP) p15-118.indd 422/18/22 10:56 AM2/18/22 10:56 AMGoodwill and Intangible AssetsGoodwill, which represents the excess of cost over the fair value of net assets acquired in purchase business combinations, increased $85.5 million in 2021 primarily due to incremental goodwill recognized in 2021 acquisitions of $155.6 million, partially offset by foreign currency translation rate fluctuations and the Wattyl divestiture. Intangible assets decreased $469.7 million in 2021 primarily due to amortization of finite-lived intangible assets of $309.5 million, dispositions of $148.5 million primarily related to Wattyl divestiture, and foreign currency translation rate fluctuations of $37.2 million, partially offset by finite-lived intangible assets recognized in 2021 through acquisitions of $25.5 million.See Note 3 to the Consolidated Financial Statements in Item 8 for additional information related to acquisitions and divestitures. See Note 5 to the Consolidated Financial Statements in Item 8 for a description of goodwill, identifiable intangible assets and asset impairments recognized in accordance with the Goodwill and Other Intangibles Topic of the ASC and summaries of the remaining carrying values of goodwill and intangible assets.Other AssetsOther assets increased $94.7 million to $789.0 million at December 31, 2021. The increase was primarily due to incremental deposits and investments (including an increase in deferred pension assets), partially offset by the sale of investments to fund the Company’s domestic defined contribution plan. See Note 7 to the Consolidated Financial Statements in Item 8 for additional information related to the domestic defined contribution plan.Debt (including Short-term borrowings)December 31,December 31,20212020Long-term debt$ 8,851.5 $ 8,292.0 Short-term borrowings763.5 0.1 Total debt outstanding$ 9,615.0 $ 8,292.1 Total debt including Short-term borrowings increased by $1.323 billion to $9.615 billion in 2021. Short-term borrowings are primarily comprised of amounts outstanding under the Company’s domestic commercial paper program and various foreign credit facilities. The Company’s long-term debt primarily consists of senior notes. In November 2021, the Company issued $500.0 million of 2.20% Senior Notes due March 2032 and $500.0 million of 2.90% Senior Notes due March 2052 in a public offering. The net proceeds from the issuance of these notes were used to repay outstanding borrowings under the Company’s domestic commercial paper program.In October 2021, the Company redeemed the entire outstanding $400.0 million aggregate principal amount of its 4.20% Senior Notes due 2022 and its 4.20% Notes due 2022 initially issued by The Valspar Corporation (collectively, the 4.20% Senior Notes) after exercising its optional redemption rights. The 4.20% Senior Notes were redeemed at a redemption price equal to 100% of the principal amount, plus accrued interest, and resulted in a gain of $1.4 million recorded in Other (income) expense - net.On June 29, 2021, the Company and two of its wholly-owned subsidiaries, Sherwin-Williams Canada Inc. (SW Canada) and Sherwin-Williams Luxembourg S.à r.l. (SW Luxembourg, together with the Company and SW Canada, the Borrowers), entered into a new five-year $2.000 billion credit agreement (New Credit Agreement). The New Credit Agreement may be used for general corporate purposes, including the financing of working capital requirements. The New Credit Agreement replaced the $2.000 billion credit agreement dated July 19, 2018, as amended, which was terminated effective June 29, 2021. The New Credit Agreement will mature on June 29, 2026 and provides that the Company may request to extend the maturity date of the facility for two additional one-year periods. In addition, the New Credit Agreement provides that the Borrowers may increase the aggregate amount of the facility to $2.750 billion, subject to the discretion of each lender to participate in the increase, and the Borrowers may request letters of credit in an amount of up to $250.0 million. At December 31, 2021 and 2020, there were no short-term borrowings under these credit agreements.On August 2, 2021, the Company entered into an amended and restated $625.0 million credit agreement (August 2021 Credit Agreement), which amends and restates the five-year credit agreement entered into in September 2017. The August 2021 Credit Agreement was subsequently amended on multiple dates to extend the maturity of commitments available for borrowing or letters of credit under the agreement. On May 9, 2016, the Company entered into a five-year credit agreement (May 2016 Credit Agreement), subsequently amended on multiple dates to extend the maturity of commitments available for borrowing or letters of credit under the agreement. The May 2016 credit agreement gives the Company the right to borrow and obtain letters of 2781861IMPO.A (PDF_D SWOP) p15-118.indd 4381861IMPO.A (PDF_D SWOP) p15-118.indd 432/18/22 10:56 AM2/18/22 10:56 AMcredit up to an aggregate availability of $875.0 million. Both of these credit agreements are being used for general corporate purposes. At December 31, 2021 and 2020, there were no borrowings outstanding under these credit agreements.The Company’s available capacity under its committed credit agreements is reduced for amounts outstanding under its domestic commercial paper program and letters of credit. At December 31, 2021, the Company had unused capacity under its various credit agreements of $2.725 billion. See Note 6 to the Consolidated Financial Statements in Item 8 for a detailed description and summary of the Company’s outstanding debt, short-term borrowings and other available financing programs.Defined Benefit Pension and Other Postretirement Benefit PlansIn accordance with the accounting prescribed by the Retirement Benefits Topic of the ASC, the Company’s total liability for unfunded or underfunded defined benefit pension plans decreased $31.3 million to $79.0 million primarily due to changes in the actuarial assumptions. The Company’s liability for other postretirement benefits decreased $15.2 million to $276.4 million at December 31, 2021 due primarily to changes in the actuarial assumptions.The assumed discount rate used to determine the projected benefit obligation for domestic defined benefit pension plans was 3.1% at December 31, 2021 and 2.9% at December 31, 2020. The assumed discount rate used to determine the projected benefit obligation for foreign defined benefit pension plans increased to 2.3% at December 31, 2021 from 1.6% at December 31, 2020. The increase in the discount rates for both the domestic and foreign defined benefit pension plans was primarily due to higher interest rates. The assumed discount rate used to determine the projected benefit obligation for other postretirement benefit obligations increased to 2.8% at December 31, 2021 from 2.5% at December 31, 2020 for the same reason. The rate of compensation increases used to determine the projected benefit obligations at December 31, 2021 was 3.0% for the domestic pension plan and 3.3% for foreign pension plans, which was comparable to the rates used in the prior year. In deciding on the rate of compensation increases, management considered historical Company increases as well as expectations for future increases. The expected long-term rate of return on assets remained 5.0% at December 31, 2021 for the domestic pension plan and was slightly lower for most foreign plans. In establishing the expected long-term rate of return on plan assets for 2021, management considered the historical rates of return, the nature of investments and an expectation for future investment strategies. The assumed health care cost trend rates used to determine the net periodic benefit cost of other postretirement benefits for 2021 were 5.1% and 8.3%, respectively, for medical and prescription drug cost increases, both decreasing gradually to 4.5% in 2029. In developing the assumed health care cost trend rates, management considered industry data, historical Company experience and expectations for future health care costs.For 2022 net pension cost for the ongoing domestic pension plan, the Company will use a discount rate of 3.1%, an expected long-term rate of return on assets of 5.0% and a rate of compensation increase of 3.0%. Lower discount rates and expected long-term rates of return on plan assets will be used for most foreign plans. For 2022 net periodic benefit costs for other postretirement benefits, the Company will use a discount rate of 2.8%. Net pension cost in 2022 for the ongoing domestic pension plan is expected to be approximately $1.5 million. Net periodic benefit costs for other postretirement benefits in 2022 is expected to be approximately $11.0 million. See Note 7 to the Consolidated Financial Statements in Item 8 for additional information on the Company’s obligations and funded status of its defined benefit pension plans and other postretirement benefits.Deferred Income TaxesDeferred income taxes at December 31, 2021 decreased $77.9 million from the prior year primarily due to the change in deferred taxes as a result of the amortization of intangible assets in the current year. See Note 19 to the Consolidated Financial Statements in Item 8 for additional information on deferred taxes.Other Long-Term LiabilitiesOther long-term liabilities increased $47.1 million during 2021 due primarily to an increase in long-term commitments related to affordable housing and historic real estate properties, partially offset by the payment of U.S. federal payroll withholding taxes in accordance with the terms of the legislatively authorized tax payment deferral mechanisms established in 2020.Environmental-Related LiabilitiesThe operations of the Company, like those of other companies in the same industry, are subject to various federal, state and local environmental laws and regulations. These laws and regulations not only govern current operations and products, but also impose potential liability on the Company for past operations. Management expects environmental laws and regulations to impose increasingly stringent requirements upon the Company and the industry in the future. Management believes that the Company conducts its operations in compliance with applicable environmental laws and regulations and has implemented various programs designed to protect the environment and promote continued compliance. 2881861IMPO.A (PDF_D SWOP) p15-118.indd 4481861IMPO.A (PDF_D SWOP) p15-118.indd 442/18/22 10:56 AM2/18/22 10:56 AMDepreciation of capital expenditures and other expenses related to ongoing environmental compliance measures were included in the normal operating expenses of conducting business. The Company’s capital expenditures, depreciation and other expenses related to ongoing environmental compliance measures were not material to the Company’s financial condition, liquidity, cash flow or results of operations during 2021. Management does not expect that such capital expenditures, depreciation and other expenses will be material to the Company’s financial condition, liquidity, cash flow or results of operations in 2022. See Note 9 to the Consolidated Financial Statements in Item 8 for further information on environmental-related long-term liabilities.Contractual and Other Obligations and Commercial CommitmentsDuring 2021, the Company signed agreements related to various acquisitions, including related to the European industrial coatings business of Sika AG (Sika). The Sika transaction is expected to close in the first quarter of 2022. Refer to Note 3 for additional information. The Company has certain obligations and commitments to make future payments under contractual and other obligations and commercial commitments. The Company believes that cash generated from operating activities and borrowings available under long-term and short-term debt, including its committed credit agreements and commercial paper program, will be sufficient for it to meet its contractual and other obligations and commercial commitments. The following tables summarize such obligations and commitments as of December 31, 2021.Payments Due by PeriodContractual and Other ObligationsTotalLess Than1 Year1–3 Years3–5 YearsMore Than5 YearsLong-term debt$ 8,935.0 $ 260.8 $ 501.1 $ 1,000.2 $ 7,172.9 Interest on Long-term debt4,265.4 285.9 556.7 500.2 2,922.6 Operating leases2,035.4 455.2 735.3 470.3 374.6 Short-term borrowings763.5 763.5 California litigation accrual52.7 12.0 24.0 16.7 Real estate financing transactions 191.4 14.2 30.4 30.7 116.1 Purchase obligations (1)630.0 630.0 Other contractual obligations (2)355.5 65.7 66.5 64.3 159.0 Total contractual cash obligations$ 17,228.9 $ 2,487.3 $ 1,914.0 $ 2,082.4 $ 10,745.2 (1)Relate to open purchase orders for raw materials at December 31, 2021.(2)Relate primarily to estimated future capital contributions to investments in the U.S. affordable housing and historic renovation real estate partnershipsand various other contractual obligations.Amount of Commitment Expiration Per PeriodCommercial CommitmentsTotalLess Than1 Year1–3 Years3–5 YearsMore Than5 YearsStandby letters of credit$ 89.2 $ 89.2 Surety bonds151.7 151.7 Total commercial commitments$ 240.9 $ 240.9 $ — $ — $ — WarrantiesThe Company offers product warranties for certain products. The specific terms and conditions of such warranties vary depending on the product or customer contract requirements. Management estimated the costs of unsettled product warranty claims based on historical results and experience and included an amount in Other accruals. Management periodically assesses the adequacy of the accrual for product warranty claims and adjusts the accrual as necessary. Changes in the Company’s accrual for product warranty claims during 2021 and 2020, including customer satisfaction settlements during the year, were as follows:20212020Balance at January 1$ 43.3 $ 42.3 Charges to expense27.5 38.1 Settlements(35.6) (37.1) Balance at December 31$ 35.2 $ 43.3 2981861IMPO.A (PDF_D SWOP) p15-118.indd 4581861IMPO.A (PDF_D SWOP) p15-118.indd 452/18/22 10:56 AM2/18/22 10:56 AMShareholders’ EquityShareholders’ equity decreased $1.174 billion to $2.437 billion at December 31, 2021 from $3.611 billion last year. The decrease was primarily attributable to the Company repurchasing $2.752 billion in Treasury stock and declaring $587.1 million in cash dividends, partially offset by $1.864 billion of net income and an increase of $268.3 million associated with stock option exercises and the recognition of stock-based compensation expense. See the Statements of Consolidated Shareholders’ Equity and Statements of Consolidated Comprehensive Income in Item 8 for additional information.The Company purchased 10.1 million shares of its common stock for treasury purposes through open market purchases during 2021. The Company acquires its common stock for general corporate purposes, and depending on its cash position and market conditions, it may acquire shares in the future. On February 17, 2021, the Board of Directors authorized the Company to purchase an additional 45.0 million shares of the Company’s stock for treasury purposes. The Company had remaining authorization from its Board of Directors at December 31, 2021 to purchase 48.6 million shares of its common stock. The Company’s 2021 annual cash dividend of $2.20 per share represented 30% of 2020 diluted net income per share. The 2021 annual dividend represented the 43rd consecutive year of increased dividend payments since the dividend was suspended in 1978. On February 16, 2022, the Board of Directors increased the quarterly cash dividend to $0.60 per share. This quarterly dividend, if approved in each of the remaining quarters of 2022, would result in an annual dividend for 2022 of $2.40 per share or a 34% payout of 2021 diluted net income per share.Cash FlowNet operating cash decreased $1.164 billion in 2021 to a cash source of $2.245 billion from $3.409 billion in 2020 due primarily to incremental working capital requirements and a decrease in net income, partially offset by favorable changes in non-cash items associated with the Wattyl divestiture and deferred taxes when compared to 2020. Net operating cash decreased as a percent to sales to 11.3% in 2021 compared to 18.6% in 2020.Net investing cash usage increased $154.0 million to a usage of $476.4 million in 2021 from a usage of $322.4 million in 2020 due primarily to cash used for acquisitions and an increase in capital expenditures, partially offset by higher proceeds received from the sale of businesses and assets (including the Wattyl divestiture). See Note 3 to the Consolidated Financial Statements in Item 8 for additional information on acquisitions and divestitures.Net financing cash usage decreased $1.186 billion to a usage of $1.834 billion in 2021 from a usage of $3.020 billion in 2020 due primarily to $1.746 billion of incremental cash provided by short-term borrowings and long-term debt, partially offset by an increase of $405.1 million, or 13.8%, in cash returned to shareholders in the form of cash dividends and share buybacks during the year and lower proceeds from treasury stock issuances. LitigationSee Note 10 to the Consolidated Financial Statements in Item 8 for information concerning litigation.Market RiskThe Company is exposed to market risk associated with interest rate, foreign currency and commodity fluctuations. The Company occasionally utilizes derivative instruments as part of its overall financial risk management policy, but does not use derivative instruments for speculative or trading purposes. In 2021 and 2020, the Company entered into foreign currency forward contracts with maturity dates of less than twelve months primarily to hedge against value changes in foreign currency and cross currency swap contracts to hedge its net investment in European operations. See Notes 1, 15 and 18 to the Consolidated Financial Statements in Item 8 for additional information related to the Company’s use of derivative instruments.The Company believes it may be exposed to continuing market risk from foreign currency exchange rate and commodity price fluctuations. However, the Company does not expect that foreign currency exchange rate and commodity price fluctuations or hedging contract losses will have a material adverse effect on the Company’s financial condition, results of operations or cash flows.Financial CovenantCertain borrowings contain a consolidated leverage covenant. The covenant states the Company’s leverage ratio is not to exceed 3.75 to 1.00. The leverage ratio is defined as the ratio of total indebtedness (the sum of Short-term borrowings, Current portion of long-term debt and Long-term debt) at the reporting date to consolidated “Earnings Before Interest, Taxes, Depreciation and Amortization” (EBITDA) for the 12-month period ended on the same date. Refer to the “Non-GAAP Financial Measures” section in Item 7 for a reconciliation of EBITDA to net income. At December 31, 2021, the Company was in compliance with the covenant. The Company’s Notes, Debentures and revolving credit agreement contain various default and cross-default provisions. In the event of default under any one of these arrangements, acceleration of the maturity of any 3081861IMPO.A (PDF_D SWOP) p15-118.indd 4681861IMPO.A (PDF_D SWOP) p15-118.indd 462/18/22 10:57 AM2/18/22 10:57 AMone or more of these borrowings may result. See Note 6 to the Consolidated Financial Statements in Item 8 for additional information.Employee Stock Ownership PlanParticipants in the Company’s employee stock ownership plan (ESOP) are allowed to contribute up to the lesser of 50% of their annual compensation and the maximum dollar amount allowed under the Internal Revenue Code. The Company matches 6% of eligible employee contributions. The Company’s matching contributions to the ESOP charged to operations were $133.7 million in 2021 compared to $120.0 million in 2020. At December 31, 2021, there were 20,639,085 shares of the Company’s common stock being held by the ESOP, representing 7.9% of the total number of voting shares outstanding. See Note 12 to the Consolidated Financial Statements in Item 8 for additional information concerning the Company’s ESOP.3181861IMPO.A (PDF_D SWOP) p15-118.indd 4781861IMPO.A (PDF_D SWOP) p15-118.indd 472/18/22 10:57 AM2/18/22 10:57 AMNON-GAAP FINANCIAL MEASURESManagement utilizes certain financial measures that are not in accordance with U.S. generally accepted accounting principles (US GAAP) to analyze and manage the performance of the business. The required disclosures for these non-GAAP measures are shown below. The Company provides such non-GAAP information in reporting its financial results to give investors additional data to evaluate the Company’s operations. Management does not, nor does it suggest investors should, consider such non-GAAP measures in isolation from, or in substitution for, financial information prepared in accordance with US GAAP.EBITDA and Adjusted EBITDAEarnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP financial measure defined as net income before income taxes and interest, depreciation and amortization. Adjusted EBITDA is a non-GAAP financial measure that excludes the loss on the Wattyl divestiture. Management considers EBITDA and Adjusted EBITDA useful in understanding the operating performance of the Company. The reader is cautioned that the Company’s EBITDA and Adjusted EBITDA should not be compared to other entities unknowingly. Further, EBITDA and Adjusted EBITDA should not be considered alternatives to net income or net operating cash as an indicator of operating performance or as a measure of liquidity. The reader should refer to the determination of net income and net operating cash in accordance with US GAAP disclosed in the Statements of Consolidated Income and Statements of Consolidated Cash Flows in Item 8.The following table summarizes EBITDA and Adjusted EBITDA as calculated by management for the years indicated below:(millions of dollars)Year Ended December 31,20212020Net income$ 1,864.4 $ 2,030.4 Interest expense334.7 340.4 Income taxes384.2 488.8 Depreciation263.1 268.0 Amortization309.5 313.4 EBITDA3,155.9 3,441.0 Loss on Wattyl divestiture111.9 — Adjusted EBITDA$ 3,267.8 $ 3,441.0 Free Cash FlowFree Cash Flow is a non-GAAP financial measure defined as Net operating cash, as shown in the Statements of Consolidated Cash Flows, less the amount reinvested in the business for Capital expenditures and the return of investment to its shareholders by the payment of cash dividends. Management considers Free Cash Flow to be a useful tool in its determination of appropriate uses of the Company’s Net operating cash. The reader is cautioned that the Free Cash Flow measure should not be compared to other entities unknowingly as it may not be comparable and it does not consider certain non-discretionary cash flows, such as mandatory debt and interest payments. The amount shown below should not be considered an alternative to Net operating cash or other cash flow amounts provided in accordance with US GAAP as disclosed in the Statements of Consolidated Cash Flows in Item 8. The following table summarizes Free Cash Flow as calculated by management for the years indicated below: (millions of dollars)Year Ended December 31,20212020Net operating cash$ 2,244.6 $ 3,408.6 Capital expenditures(372.0) (303.8) Cash dividends(587.1) (488.0) Free cash flow$ 1,285.5 $ 2,616.8 3281861IMPO.A (PDF_D SWOP) p15-118.indd 4881861IMPO.A (PDF_D SWOP) p15-118.indd 482/18/22 10:57 AM2/18/22 10:57 AMAdjusted Diluted Net Income Per ShareManagement of the Company believes that investors’ understanding of the Company’s operating performance is enhanced by the disclosure of diluted net income per share excluding the loss on divestiture of Wattyl and Valspar acquisition-related amortization expense. This adjusted earnings per share measurement is not in accordance with US GAAP. It should not be considered a substitute for earnings per share in accordance with US GAAP and may not be comparable to similarly titled measures reported by other companies. The following tables reconcile diluted net income per share computed in accordance with US GAAP to adjusted diluted net income per share.Year EndedDecember 31, 2021Pre-TaxTax Effect (1)After-TaxDiluted net income per share$ 6.98 Loss on Wattyl divestiture$ .41 $ .07 .34 Acquisition-related amortization expense (2)1.10 .27 .83 Adjusted diluted net income per share$ 8.15 Year EndedDecember 31, 2020Pre-TaxTax Effect (1)After-TaxDiluted net income per share$ 7.36 Acquisition-related amortization expense (2)1.10 .27 .83 Adjusted diluted net income per share$ 8.19 (1)The tax effect is calculated based on the statutory rate and the nature of the item, unless otherwise noted.(2)Acquisition-related amortization expense consists primarily of the amortization of intangible assets related to the Valspar acquisitionand is included in Amortization.3381861IMPO.A (PDF_D SWOP) p15-118.indd 4981861IMPO.A (PDF_D SWOP) p15-118.indd 492/18/22 10:57 AM2/18/22 10:57 AMAdjusted Segment ProfitManagement of the Company believes that investors’ understanding of the Company’s operating performance is enhanced by the disclosure of segment profit excluding the loss on divestiture of Wattyl and Valspar acquisition-related amortization expense. This adjusted segment profit measurement is not in accordance with US GAAP. It should not be considered a substitute for segment profit in accordance with US GAAP and may not be comparable to similarly titled measures reported by other companies. The following tables reconcile segment profit computed in accordance with US GAAP to adjusted segment profit.Year Ended December 31, 2021The Americas GroupConsumer Brands GroupPerformance Coatings GroupAdministrativeTotalNet external sales$ 11,217.0 $ 2,721.6 $ 6,003.8 $ 2.2 $ 19,944.6 Income before income taxes$ 2,239.1 $ 358.4 $ 486.2 $ (835.1) $ 2,248.6 as a % of Net external sales 20.0 % 13.2 % 8.1 % 11.3 %Loss on Wattyl divestiture— — — 111.9 111.9 Acquisition-related amortization expense (1)— 82.8 211.2 — 294.0 Adjusted segment profit$ 2,239.1 $ 441.2 $ 697.4 $ (723.2) $ 2,654.5 as a % of Net external sales 20.0 % 16.2 % 11.6 % 13.3 %Year Ended December 31, 2020The Americas GroupConsumer Brands GroupPerformance Coatings GroupAdministrativeTotalNet external sales$ 10,383.2 $ 3,053.4 $ 4,922.4 $ 2.7 $ 18,361.7 Income before income taxes$ 2,294.1 $ 579.6 $ 500.1 $ (854.6) $ 2,519.2 as a % of Net external sales 22.1 % 19.0 % 10.2 % 13.7 %Acquisition-related amortization expense (1)— 90.5 213.1 0.9 304.5 Adjusted segment profit$ 2,294.1 $ 670.1 $ 713.2 $ (853.7) $ 2,823.7 as a % of Net external sales 22.1 % 21.9 % 14.5 % 15.4 %(1)Acquisition-related amortization expense consists primarily of the amortization of intangible assets related to the Valspar acquisitionand is included in Amortization.3481861IMPO.A (PDF_D SWOP) p15-118.indd 5081861IMPO.A (PDF_D SWOP) p15-118.indd 502/18/22 10:57 AM2/18/22 10:57 AMCRITICAL ACCOUNTING POLICIES AND ESTIMATESThe preparation of financial statements in conformity with U.S. generally accepted accounting principles (US GAAP) requires management to make estimates and assumptions that affect amounts reported in the accompanying consolidated financial statements. These determinations were made based upon management’s best estimates, judgments and assumptions that were believed to be reasonable under the circumstances, giving due consideration to materiality. We do not believe there is a great likelihood that materially different amounts would be reported under different conditions or using different assumptions related to the accounting policies described below. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates.All of the significant accounting policies that were followed in the preparation of the consolidated financial statements are disclosed in Note 1 to the Consolidated Financial Statements in Item 8. Management believes that the following critical accounting policies and estimates have a significant impact on our consolidated financial statements.InventoriesInventories were stated at the lower of cost or net realizable value with cost determined principally on the last-in, first-out (LIFO) method based on inventory quantities and costs determined during the fourth quarter. Inventory quantities were adjusted throughout the year as formal cycle counts were completed, or during the fourth quarter as a result of annual physical inventory counts. If inventories accounted for on the LIFO method are reduced on a year-over-year basis, then liquidation of certain quantities carried at costs prevailing in prior years occurs. Management recorded the best estimate of net realizable value for obsolete and discontinued inventories based on historical experience and current trends through reductions to inventory cost by recording a provision included in Cost of goods sold. If management estimates that the reasonable market value is below cost or determines that future demand was lower than current inventory levels, based on historical experience, current and projected market demand, current and projected volume trends and other relevant current and projected factors associated with the current economic conditions, a reduction in inventory cost to estimated net realizable value is provided for in the reserve for obsolescence. See Note 4 to the Consolidated Financial Statements in Item 8 for more information regarding the impact of the LIFO inventory valuation and the reserve for obsolescence.Goodwill and Intangible AssetsIn accordance with the Goodwill and Other Intangibles Topic of the ASC, management performs impairment tests of goodwill and indefinite-lived intangible assets on an annual basis, as well as whenever an event occurs or circumstances change that indicate impairment has more likely than not occurred. An optional qualitative assessment allows companies to skip the annual quantitative test if it is not more likely than not that impairment has occurred based on monitoring key Company financial performance metrics and macroeconomic conditions. The qualitative assessment is performed when deemed appropriate.In accordance with the Goodwill and Other Intangibles Topic of the ASC, management tests goodwill for impairment at the reporting unit level. A reporting unit is an operating segment per the Segment Reporting Topic of the ASC or one level below the operating segment (component level) as determined by the availability of discrete financial information that is regularly reviewed by operating segment management or an aggregate of component levels of an operating segment having similar economic characteristics. At the time of goodwill impairment testing (if performing a quantitative assessment), management determines fair value through the use of a discounted cash flow valuation model incorporating discount rates commensurate with the risks involved for each reporting unit. If the calculated fair value is less than the current carrying value, then impairment of the reporting unit exists. The use of a discounted cash flow valuation model to determine estimated fair value is common practice in impairment testing. The key assumptions used in the discounted cash flow valuation model for impairment testing include discount rates, growth rates, cash flow projections and terminal value rates. Discount rates are set by using the Weighted Average Cost of Capital (“WACC”) methodology. The WACC methodology considers market and industry data as well as Company-specific risk factors for each reporting unit in determining the appropriate discount rates to be used. The discount rate utilized for each reporting unit is indicative of the return an investor would expect to receive for investing in such a business. Operational management, considering industry and Company-specific historical and projected data, develops growth rates, sales projections and cash flow projections for each reporting unit. Terminal value rate determination follows common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant WACC and low long-term growth rates. As an indicator that each reporting unit has been valued appropriately through the use of the discounted cash flow valuation model, the aggregate of all reporting units’ fair value is reconciled to the total market capitalization of the Company. The Company had seven components, some of which are aggregated due to similar economic characteristics, to form three reporting units (also the operating segments) with goodwill as of October 1, 2021, the date of the annual impairment test. The annual impairment review performed as of October 1, 2021 did not result in any of the reporting units having impairment or deemed at risk for impairment.3581861IMPO.A (PDF_D SWOP) p15-118.indd 5181861IMPO.A (PDF_D SWOP) p15-118.indd 512/18/22 10:57 AM2/18/22 10:57 AMIn accordance with the Goodwill and Other Intangibles Topic of the ASC, management tests indefinite-lived intangible assets for impairment at the asset level, as determined by appropriate asset valuations at acquisition. Management utilizes the royalty savings method and valuation model to determine the estimated fair value for each indefinite-lived intangible asset or trademark. In this method, management estimates the royalty savings arising from the ownership of the intangible asset. The key assumptions used in estimating the royalty savings for impairment testing include discount rates, royalty rates, growth rates, sales projections, terminal value rates and, to a lesser extent, tax rates. Discount rates used are similar to the rates developed by the WACC methodology considering any differences in Company-specific risk factors between reporting units and trademarks. Royalty rates are established by management and valuation experts and periodically substantiated by valuation experts. Operational management, considering industry and Company-specific historical and projected data, develops growth rates and sales projections for each significant trademark. Terminal value rate determination follows common methodology of capturing the present value of perpetual sales estimates beyond the last projected period assuming a constant WACC and low long-term growth rates. The royalty savings valuation methodology and calculations used in 2021 impairment testing are consistent with prior years. The annual impairment review performed as of October 1, 2021 did not result in any of the reporting units having impairment or deemed at risk for impairment.The discounted cash flow and royalty savings valuation methodologies require management to make certain assumptions based upon information available at the time the valuations are performed. Actual results could differ from these assumptions. Management believes the assumptions used are reflective of what a market participant would have used in calculating fair value considering the current economic conditions. See Note 5 to the Consolidated Financial Statements in Item 8 for a discussion of goodwill and intangible assets and the impairment tests performed in accordance with the Goodwill and Other Intangibles Topic of the ASC.Valuation of Long-Lived AssetsIn accordance with the Property, Plant and Equipment Topic of the ASC, if events or changes in circumstances indicated that the carrying value of long-lived assets, including Operating lease right-of-use assets, may not be recoverable or the useful life had changed, impairment tests were performed or the useful life was adjusted. Undiscounted cash flows were used to calculate the recoverable value of long-lived assets to determine if such assets were not recoverable. If the carrying value of the assets was deemed to not be recoverable, the impairment to be recognized is the amount by which the carrying value of the assets exceeds the estimated fair value of the assets as determined in accordance with the Fair Value Topic of the ASC. If the usefulness of an asset was determined to be impaired, then management estimated a new useful life based on the period of time for projected uses of the asset. Fair value approaches and changes in useful life required management to make certain assumptions based upon information available at the time the valuation or determination was performed. Actual results could differ from these assumptions. Management believes the assumptions used are reflective of what a market participant would have used in calculating fair value or useful life considering the current economic conditions. All tested long-lived assets or groups of long-lived assets had undiscounted cash flows that were substantially in excess of their carrying value. See Note 5 to the Consolidated Financial Statements in Item 8 for a discussion of the reductions in carrying value or useful life of long-lived assets in accordance with the Property, Plant and Equipment Topic of the ASC. See Note 1 to the Consolidated Financial Statements in Item 8 for the Property, Plant and Equipment accounting policy. Defined Benefit Pension and Other Postretirement Benefit PlansTo determine the Company’s ultimate obligation under its defined benefit pension plans and other postretirement benefit plans, management must estimate the future cost of benefits and attribute that cost to the time period during which each covered employee works. To determine the obligations of such benefit plans, management uses actuaries to calculate such amounts using key assumptions such as discount rates, inflation, long-term investment returns, mortality, employee turnover, rate of compensation increases and medical and prescription drug costs. Management reviews all of these assumptions on an ongoing basis to ensure that the most current information available is being considered. An increase or decrease in the assumptions or economic events outside management’s control could have a direct impact on the Company’s results of operations or financial condition.In accordance with the Retirement Benefits Topic of the ASC, the Company recognizes each plan’s funded status as an asset for overfunded plans and as a liability for unfunded or underfunded plans. Actuarial gains and losses and prior service costs are recognized and recorded in AOCI. The amounts recorded in AOCI will continue to be modified as actuarial assumptions and service costs change, and all such amounts will be amortized to expense over a period of years through the net pension and net periodic benefit costs.In 2022, pension costs are expected to decrease slightly and other postretirement benefit plan costs are expected to increase slightly based on the actuarial assumptions being applied. See Note 7 to the Consolidated Financial Statements in Item 8 for information concerning the Company’s defined benefit pension plans and other postretirement benefit plans.3681861IMPO.A (PDF_D SWOP) p15-118.indd 5281861IMPO.A (PDF_D SWOP) p15-118.indd 522/18/22 10:57 AM2/18/22 10:57 AMEnvironmental MattersThe Company is involved with environmental investigation and remediation activities at some of its currently and formerly owned sites (including sites which were previously owned and/or operated by businesses acquired by the Company). The Company initially provides for estimated costs of environmental-related activities relating to its past operations and third-party sites for which commitments or clean-up plans have been developed and when such costs can be reasonably estimated based on industry standards and professional judgment. These estimated costs, which are mostly undiscounted, are determined based on currently available facts regarding each site. If the reasonably estimable costs can only be identified as a range and no specific amount within that range can be determined more likely than any other amount within the range, the minimum of the range is provided. The Company continuously assesses its potential liability for investigation and remediation-related activities and adjusts its environmental-related accruals as information becomes available upon which more accurate costs can be reasonably estimated and as additional accounting guidelines are issued. Actual costs incurred may vary from the accrued estimates due to the inherent uncertainties involved. See Note 9 to the Consolidated Financial Statements in Item 8 for information concerning the accrual for extended environmental-related activities and a discussion concerning unaccrued future loss contingencies.Litigation and Other Contingent LiabilitiesIn the course of its business, the Company is subject to a variety of claims and lawsuits, including, but not limited to, litigation relating to product liability and warranty, personal injury, environmental, intellectual property, commercial, contractual and antitrust claims. Management believes that the Company has properly accrued for all known liabilities that existed and those where a loss was deemed probable for which a fair value was available or an amount could be reasonably estimated in accordance with US GAAP. However, because litigation is inherently subject to many uncertainties and the ultimate result of any present or future litigation is unpredictable, the Company’s ultimate liability may result in costs that are significantly higher than currently accrued. In the event that the Company’s loss contingency is ultimately determined to be significantly higher than currently accrued, the recording of the liability may result in a material impact on net income for the annual or interim period during which such liability is accrued. Additionally, due to the uncertainties involved, any potential liability determined to be attributable to the Company arising out of such litigation may have a material adverse effect on the Company’s results of operations, liquidity or financial condition. See Note 10 to the Consolidated Financial Statements in Item 8 for information concerning litigation.Income TaxesThe Company estimated income taxes for each jurisdiction that it operated in. This involved estimating taxable earnings, specific taxable and deductible items, the likelihood of generating sufficient future taxable income to utilize deferred tax assets and possible exposures related to future tax audits. To the extent these estimates change, adjustments to deferred and accrued income taxes will be made in the period in which the changes occur. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. These assessments of uncertain tax positions contain judgments related to the interpretation of tax regulations in the jurisdictions in which we transact business. The judgments and estimates made at a point in time may change based on the outcome of tax audits, expiration of statutes of limitations, as well as changes to, or further interpretations of, tax laws and regulations. Income tax expense is adjusted in our Statements of Consolidated Income in the period in which these events occur. See Note 19 to the Consolidated Financial Statements in Item 8 for information concerning income taxes.3781861IMPO.A (PDF_D SWOP) p15-118.indd 5381861IMPO.A (PDF_D SWOP) p15-118.indd 532/18/22 10:57 AM2/18/22 10:57 AMITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKWe are exposed to market risk associated with interest rates, foreign currency and commodity fluctuations. We occasionally utilize derivative instruments as part of our overall financial risk management policy, but do not use derivative instruments for speculative or trading purposes. In 2021 and 2020, the Company utilized U.S. Dollar to Euro cross currency swap contracts to hedge the Company’s net investment in its European operations. The contracts have been designated as net investment hedges and have various maturity dates. See Note 15 to the Consolidated Financial Statements in Item 8. The Company entered into forward foreign currency exchange contracts during 2021 to hedge against value changes in foreign currency. There were no material contracts outstanding at December 31, 2021. Forward foreign currency exchange contracts are described in Note 18 to the Consolidated Financial Statements in Item 8. We believe we may experience continuing losses from foreign currency fluctuations. However, we do not expect currency translation, transaction or hedging contract losses to have a material adverse effect on our financial condition, results of operations or cash flows. 3881861IMPO.A (PDF_D SWOP) p15-118.indd 5481861IMPO.A (PDF_D SWOP) p15-118.indd 542/18/22 10:57 AM2/18/22 10:57 AMIndex to Consolidated Financial StatementsPageReport of Management on Internal Control Over Financial Reporting40Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting41Report of Management on the Consolidated Financial Statements42Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements (PCAOB ID: 42)43Statements of Consolidated Income46Statements of Consolidated Comprehensive Income47Consolidated Balance Sheets48Statements of Consolidated Cash Flows49Statements of Consolidated Shareholders’ Equity50Notes to Consolidated Financial Statements51ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA3981861IMPO.A (PDF_D SWOP) p15-118.indd 5581861IMPO.A (PDF_D SWOP) p15-118.indd 552/18/22 10:57 AM2/18/22 10:57 AMReport of Management On Internal Control Over Financial ReportingShareholders of The Sherwin-Williams CompanyWe are responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. We recognize that internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and is subject to the possibility of human error or the circumvention or the overriding of internal control. Therefore, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, we believe we have designed into the process safeguards to reduce, though not eliminate, this risk. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.In order to ensure that the Company’s internal control over financial reporting was effective as of December 31, 2021, we conducted an assessment of its effectiveness under the supervision and with the participation of our management group, including our principal executive officer and principal financial officer. This assessment was based on the criteria established in the 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.Based on our assessment of internal control over financial reporting under the criteria established in Internal Control – Integrated Framework, we have concluded that, as of December 31, 2021, the Company’s internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Our internal control over financial reporting as of December 31, 2021 has been audited by Ernst & Young LLP, an independent registered public accounting firm, and their report on the effectiveness of our internal control over financial reporting is included on page 41 of this report.J. G. MorikisChairman, President and Chief Executive OfficerA. J. MistysynSenior Vice President - Finance and Chief Financial OfficerJ.M. CroninSenior Vice President - Corporate Controller4081861IMPO.A (PDF_D SWOP) p15-118.indd 5681861IMPO.A (PDF_D SWOP) p15-118.indd 562/18/22 10:57 AM2/18/22 10:57 AMReport of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors of The Sherwin-Williams Company Opinion on Internal Control over Financial ReportingWe have audited The Sherwin-Williams Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, The Sherwin-Williams Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of The Sherwin-Williams Company as of December 31, 2021, 2020, and 2019, the related statements of consolidated income, comprehensive income, cash flows and shareholders’ equity for each of the three years in the period ended December 31, 2021, and the related notes and the financial statement schedule listed in Item 15(a) and our report dated February 17, 2022 expressed an unqualified opinion thereon. Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.Cleveland, OhioFebruary 17, 2022 4181861IMPO.A (PDF_D SWOP) p15-118.indd 5781861IMPO.A (PDF_D SWOP) p15-118.indd 572/18/22 10:57 AM2/18/22 10:57 AMReport of Management On the Consolidated Financial StatementsShareholders of The Sherwin-Williams Company We are responsible for the preparation and fair presentation of the consolidated financial statements, accompanying notes and related financial information included in this report of The Sherwin-Williams Company and its consolidated subsidiaries (collectively, the “Company”) as of December 31, 2021, 2020 and 2019 and for the years then ended in accordance with U.S. generally accepted accounting principles. The consolidated financial information included in this report contains certain amounts that were based upon our best estimates, judgments and assumptions that we believe were reasonable under the circumstances.We have conducted an assessment of the effectiveness of internal control over financial reporting based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As discussed in the Report of Management on Internal Control Over Financial Reporting on page 40 of this report, we concluded that the Company’s internal control over financial reporting was effective as of December 31, 2021.The Board of Directors pursues its responsibility for the oversight of the Company’s accounting policies and procedures, financial statement preparation and internal control over financial reporting through the Audit Committee, comprised exclusively of independent directors. The Audit Committee is responsible for the appointment and compensation of the independent registered public accounting firm. The Audit Committee meets at least quarterly with financial management, internal auditors and the independent registered public accounting firm to review the adequacy of financial controls, the effectiveness of the Company’s internal control over financial reporting and the nature, extent and results of the audit effort. Both the internal auditors and the independent registered public accounting firm have private and confidential access to the Audit Committee at all times.We believe that the consolidated financial statements, accompanying notes and related financial information included in this report fairly reflect the form and substance of all material financial transactions and fairly present, in all material respects, the consolidated financial position, results of operations and cash flows as of and for the periods presented.J. G. MorikisChairman, President and Chief Executive OfficerA. J. MistysynSenior Vice President - Finance and Chief Financial OfficerJ.M. CroninSenior Vice President - Corporate Controller4281861IMPO.A (PDF_D SWOP) p15-118.indd 5881861IMPO.A (PDF_D SWOP) p15-118.indd 582/18/22 10:57 AM2/18/22 10:57 AMReport of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of The Sherwin-Williams CompanyOpinion on the Financial Statements We have audited the accompanying consolidated balance sheets of The Sherwin-Williams Company (the “Company”) as of December 31, 2021, 2020 and 2019, the related statements of consolidated income, comprehensive income, cash flows and shareholders’ equity for each of the three years in the period ended December 31, 2021, and the related notes and the financial statement schedule listed in Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 17, 2022 expressed an unqualified opinion thereon.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit MatterThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.4381861IMPO.A (PDF_D SWOP) p15-118.indd 5981861IMPO.A (PDF_D SWOP) p15-118.indd 592/18/22 10:57 AM2/18/22 10:57 AMGibbsboro environmental-related accrualDescription of the MatterAs described in Note 9 to the consolidated financial statements, the Company had short-term and long-term accruals for environmental-related activities of $45.9 million and $277.4 million, respectively, at December 31, 2021. The Company’s largest and most complex site is the Gibbsboro, New Jersey site (“Gibbsboro”) and the substantial majority of the environmental-related accrual relates to this site. Gibbsboro consists of six operable units which contain a combination of soil, waterbodies and groundwater contamination, and are in various phases of investigation and remediation with the Environmental Protection Agency (“EPA”). The Company’s estimated environmental-related accrual for Gibbsboro is based on industry standards and professional judgement, and the most significant assumptions underlying the estimated cost of remediation efforts reserved for Gibbsboro are the types and extent of contamination.Auditing the Company’s environmental-related accrual at the Gibbsboro site required complex judgement due to the inherent challenges in identifying the type and extent of future remedies and the costs of implementing those remedies in determining the probable and reasonably estimable loss for which the Company will be responsible. How We Addressed the Matter in Our AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company's processes to estimate the Gibbsboro environmental-related accrual. For example, we tested controls over management’s review of the environmental loss calculations and the key assumptions affecting those calculations as described above. To test the Gibbsboro environmental-related accrual, our audit procedures included, among others, a review of correspondence with the EPA supporting the Company’s assessment of the type and extent of contamination at the Gibbsboro site for which the Company is responsible. We involved our environmental specialists to confirm our understanding of the remediation plans for the most significant operable units within the Gibbsboro site and to evaluate the Company's methodology and assumptions to estimate the unit cost and extent of contamination in accordance with industry practice, applicable laws and regulations. We recalculated the remediation cost estimate based on unit cost and estimated extent of remediation required. We reconciled types and extent of contamination identified in communications between the Company and the EPA to the Company’s remediation cost estimates recorded for Gibbsboro and confirmed a sample of underlying cost estimates with third-parties. We also conducted a search for publicly available information that might indicate facts contrary to the types and extent of contamination currently identified in the Company’s remediation cost estimates recorded for Gibbsboro. We have served as the Company’s auditor since 1908.Cleveland, OhioFebruary 17, 2022 4481861IMPO.A (PDF_D SWOP) p15-118.indd 6081861IMPO.A (PDF_D SWOP) p15-118.indd 602/18/22 10:57 AM2/18/22 10:57 AM[THIS PAGE INTENTIONALLY LEFT BLANK]4581861IMPO.A (PDF_D SWOP) p15-118.indd 6181861IMPO.A (PDF_D SWOP) p15-118.indd 612/18/22 10:57 AM2/18/22 10:57 AMTHE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIESSTATEMENTS OF CONSOLIDATED INCOME(in millions, except per share data)Year Ended December 31,202120202019Net sales$ 19,944.6 $ 18,361.7 $ 17,900.8 Cost of goods sold 11,401.9 9,679.1 9,864.7 Gross profit 8,542.7 8,682.6 8,036.1 Percent to net sales 42.8 % 47.3 % 44.9 %Selling, general and administrative expenses 5,572.5 5,477.9 5,274.9 Percent to net sales 27.9 % 29.8 % 29.5 %Other general expense - net101.8 27.7 39.1 Amortization309.5 313.4 312.8 Impairment of trademarks— 2.3 122.1 Interest expense334.7 340.4 349.3 Interest and net investment income(4.9) (3.6) (25.9) Other (income) expense - net(19.5) 5.3 (18.0) Income before income taxes 2,248.6 2,519.2 1,981.8 Income tax expense384.2 488.8 440.5 Net income $ 1,864.4 $ 2,030.4 $ 1,541.3 Net income per share:Basic$ 7.10 $ 7.48 $ 5.60 Diluted$ 6.98 $ 7.36 $ 5.50 Weighted average shares outstanding:Basic262.5 271.3 275.4 Diluted267.1 275.8 280.3 See notes to consolidated financial statements.4681861IMPO.A (PDF_D SWOP) p15-118.indd 6281861IMPO.A (PDF_D SWOP) p15-118.indd 622/18/22 10:57 AM2/18/22 10:57 AMTHE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIESSTATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME(in millions)Year Ended December 31,202120202019Net income $ 1,864.4 $ 2,030.4 $ 1,541.3 Other comprehensive income (loss), net of tax:Foreign currency translation adjustments (1)(30.6) (14.1) (49.8) Pension and other postretirement benefit adjustments:Amounts recognized in Other comprehensive income (loss) (2)48.7 (19.4) (5.1) Amounts reclassified from Other comprehensive income (loss) (3)6.3 1.4 22.3 55.0 (18.0) 17.2 Unrealized net gains on cash flow hedges:Amounts reclassified from Other comprehensive income (loss) (4)(4.5) (6.7) (8.7) Other comprehensive income (loss), net of tax19.9 (38.8) (41.3) Comprehensive income$ 1,884.3 $ 1,991.6 $ 1,500.0 (1)The years ended December 31, 2021, 2020 and 2019 include unrealized gains (losses), net of taxes, of $37.1 million, $(54.0) million and $1.1 million,respectively, related to net investment hedges. See Note 15.(2)Net of taxes of $(12.6) million, $3.4 million and $1.3 million in 2021, 2020 and 2019, respectively.(3)Net of taxes of $(2.1) million, $(0.4) million and $(7.3) million in 2021, 2020 and 2019, respectively.(4)Net of taxes of $1.0 million, $2.2 million and $2.8 million in 2021, 2020 and 2019, respectively.See notes to consolidated financial statements.4781861IMPO.A (PDF_D SWOP) p15-118.indd 6381861IMPO.A (PDF_D SWOP) p15-118.indd 632/18/22 10:57 AM2/18/22 10:57 AMTHE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(in millions)December 31,202120202019AssetsCurrent assets:Cash and cash equivalents$ 165.7 $ 226.6 $ 161.8 Accounts receivable, less allowance2,352.4 2,078.1 2,088.9 Inventories1,927.2 1,804.1 1,889.6 Other current assets608.4 482.6 491.4 Total current assets5,053.7 4,591.4 4,631.7 Property, plant and equipment, net1,867.3 1,834.5 1,835.2 Goodwill7,134.6 7,049.1 7,004.8 Intangible assets4,001.5 4,471.2 4,734.5 Operating lease right-of-use assets1,820.6 1,761.1 1,685.6 Other assets789.0 694.3 604.4 Total Assets $ 20,666.7 $ 20,401.6 $ 20,496.2 Liabilities and Shareholders’ EquityCurrent liabilities:Short-term borrowings$ 763.5 $ 0.1 $ 204.7 Accounts payable2,403.0 2,117.8 1,876.3 Compensation and taxes withheld716.6 752.7 552.7 Accrued taxes160.3 183.5 85.7 Current portion of long-term debt260.6 25.1 429.8 Current portion of operating lease liabilities409.7 387.3 371.6 Other accruals1,005.8 1,127.9 1,001.1 Total current liabilities5,719.5 4,594.4 4,521.9 Long-term debt8,590.9 8,266.9 8,050.7 Postretirement benefits other than pensions259.4 275.6 263.0 Deferred income taxes 768.2 846.1 969.9 Long-term operating lease liabilities1,470.7 1,434.1 1,370.7 Other long-term liabilities1,420.8 1,373.7 1,196.7 Shareholders’ equity:Common stock - $0.33 par value: 261.1, 268.7, and 276.4 million shares outstanding at December 31, 2021, 2020 and 2019, respectively90.8 89.9 119.4 Other capital3,793.0 3,491.4 3,153.0 Retained earnings 2,121.7 844.3 7,366.9 Treasury stock, at cost(2,869.9) (96.5) (5,836.5) Accumulated other comprehensive loss(698.4) (718.3) (679.5) Total shareholders’ equity 2,437.2 3,610.8 4,123.3 Total Liabilities and Shareholders’ Equity $ 20,666.7 $ 20,401.6 $ 20,496.2 See notes to consolidated financial statements.4881861IMPO.A (PDF_D SWOP) p15-118.indd 6481861IMPO.A (PDF_D SWOP) p15-118.indd 642/18/22 10:57 AM2/18/22 10:57 AMTHE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIESSTATEMENTS OF CONSOLIDATED CASH FLOWS(in millions)Year Ended December 31,202120202019Operating ActivitiesNet income $ 1,864.4 $ 2,030.4 $ 1,541.3 Adjustments to reconcile net income to net operating cash:Depreciation263.1 268.0 262.1 Non-cash lease expense400.7 381.3 370.8 Amortization of intangible assets309.5 313.4 312.8 Loss on divestiture of business111.9 — — (Gain) loss on extinguishment of debt(1.4) 21.3 14.8 Impairment of trademarks— 2.3 122.1 Amortization of credit facility and debt issuance costs6.4 7.2 9.2 Provisions for environmental-related matters(4.0) 37.1 23.0 Deferred income taxes (80.3) (145.3) (131.1) Defined benefit pension plans net cost6.8 7.6 43.1 Stock-based compensation expense97.7 95.9 101.7 Decrease in non-traded investments53.6 84.8 82.3 (Gain) loss on sale or disposition of assets(6.1) (9.4) 16.1 Other(6.4) (6.9) 10.2 Change in working capital accounts:(Increase) decrease in accounts receivable(287.8) 10.3 (73.2) (Increase) decrease in inventories(228.1) 84.4 (75.5) Increase in accounts payable346.1 227.2 36.2 (Decrease) increase in accrued taxes(32.7) 99.2 5.1 (Decrease) increase in accrued compensation and taxes withheld(10.9) 197.7 49.6 (Increase) decrease in refundable income taxes(38.5) 40.6 (47.8) Other(46.8) (62.0) (40.8) Change in operating lease liabilities(401.4) (371.4) (368.4) Costs incurred for environmental-related matters(41.3) (39.0) (26.1) Other(29.9) 133.9 83.8 Net operating cash2,244.6 3,408.6 2,321.3 Investing ActivitiesCapital expenditures(372.0) (303.8) (328.9) Acquisitions of businesses, net of cash acquired(210.9) — (77.3) Proceeds from divestiture of business122.5 — — Proceeds from sale of assets14.8 60.7 6.9 Other(30.8) (79.3) (63.3) Net investing cash(476.4) (322.4) (462.6) Financing ActivitiesNet increase (decrease) in short-term borrowings763.9 (204.6) (122.8) Proceeds from long-term debt994.8 999.0 1,332.8 Payments of long-term debt(422.9) (1,204.7) (1,875.8) Payments for credit facility and debt issuance costs(11.5) (10.0) (13.6) Payments of cash dividends(587.1) (488.0) (420.8) Proceeds from stock options exercised192.8 182.7 154.6 Treasury stock purchased(2,752.3) (2,446.3) (778.8) Proceeds from treasury stock issued11.7 182.4 Other(23.4) (30.6) (122.0) Net financing cash(1,834.0) (3,020.1) (1,846.4) Effect of exchange rate changes on cash4.9 (1.3) (6.0) Net (decrease) increase in cash and cash equivalents(60.9) 64.8 6.3 Cash and cash equivalents at beginning of year226.6 161.8 155.5 Cash and cash equivalents at end of year$ 165.7 $ 226.6 $ 161.8 Taxes paid on income$ 466.3 $ 437.2 $ 407.5 Interest paid on debt338.8 340.8 336.1 See notes to consolidated financial statements. 4981861IMPO.A (PDF_D SWOP) p15-118.indd 6581861IMPO.A (PDF_D SWOP) p15-118.indd 652/18/22 10:57 AM2/18/22 10:57 AMTHE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIESSTATEMENTS OF CONSOLIDATED SHAREHOLDERS’ EQUITY(in millions, except per share data)CommonStockOtherCapitalRetainedEarningsTreasuryStockAccumulatedOtherComprehensiveLossTotalBalance at January 1, 2019$ 118.4 $ 2,896.4 $ 6,246.5 $ (4,900.7) $ (629.9) $ 3,730.7 Net income 1,541.3 1,541.3 Other comprehensive loss(41.3) (41.3) Adjustment to initially adopt ASU 2016-02(8.4) (8.4) Adjustment to initially adopt ASU 2018-028.3 (8.3) — Treasury stock purchased(778.8) (778.8) Treasury stock transferred from defined benefit pension plan(131.8) (131.8) Stock-based compensation activity1.0 254.5 (25.2) 230.3 Other adjustments2.1 2.1 Cash dividends -- $1.5067 per share(420.8) (420.8) Balance at December 31, 2019119.4 3,153.0 7,366.9 (5,836.5) (679.5) 4,123.3 Net income2,030.4 2,030.4 Other comprehensive loss(38.8) (38.8) Adjustment to initially adopt ASU 2016-13(3.0) (3.0) Treasury stock purchased(2,446.3) (2,446.3) Treasury stock issued61.6 120.8 182.4 Treasury stock retired(30.6) (8,061.6) 8,092.2 — Stock-based compensation activity1.1 276.4 (26.7) 250.8 Other adjustments0.4 (0.4) — Cash dividends -- $1.7867 per share(488.0) (488.0) Balance at December 31, 202089.9 3,491.4 844.3 (96.5) (718.3) 3,610.8 Net income1,864.4 1,864.4 Other comprehensive income19.9 19.9 Treasury stock purchased(2,752.3) (2,752.3) Treasury stock issued9.3 2.4 11.7 Stock-based compensation activity0.9 290.9 (23.5) 268.3 Other adjustments1.4 0.1 1.5 Cash dividends -- $2.20 per share(587.1) (587.1) Balance at December 31, 2021$ 90.8 $ 3,793.0 $ 2,121.7 $ (2,869.9) $ (698.4) $ 2,437.2 See notes to consolidated financial statements.5081861IMPO.A (PDF_D SWOP) p15-118.indd 6681861IMPO.A (PDF_D SWOP) p15-118.indd 662/18/22 10:57 AM2/18/22 10:57 AMTHE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(millions of dollars, unless otherwise noted)NOTE 1 – SIGNIFICANT ACCOUNTING POLICIESConsolidation The consolidated financial statements include the accounts of The Sherwin-Williams Company and its wholly owned subsidiaries (collectively, the Company). Inter-company accounts and transactions have been eliminated. Use of EstimatesThe preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (US GAAP) requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those amounts.Nature of Operations The Company 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, Europe, Asia and Australia.Reportable SegmentsSee Note 21 for further details.Cash EquivalentsManagement considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.Accounts Receivable and Allowance for Doubtful AccountsAccounts receivable were recorded at the time of credit sales net of allowance for credit losses. The Company recorded an allowance for doubtful accounts of $48.9 million, $53.5 million and $36.5 million at December 31, 2021, 2020 and 2019, respectively, to reduce Accounts receivable to the net amount expected to be collected (estimated net realizable value). Effective January 1, 2020, the Company adopted Accounting Standards Update (ASU) 2016-13, “Measurement of Credit Losses on Financial Instruments” (ASC 326) using the modified retrospective transition method, electing to not restate prior periods. This ASU replaced the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. As a result of the transition method elected, the required comparative period disclosures are prepared in accordance with the incurred loss impairment methodology. Under ASC 326, the Company reviews the collectibility of the Accounts receivable balance each reporting period and estimates the allowance based on historical bad debt experience, aging of accounts receivable, current creditworthiness of customers, current economic factors, as well as reasonable and supportable forward-looking information. Accounts receivable balances are written-off against the allowance if a final determination of uncollectibility is made. All provisions for allowances for doubtful accounts are included in Selling, general and administrative expenses. See Note 17 for further details.Property, Plant and Equipment Property, plant and equipment (including leasehold improvements) is stated on the basis of cost. Depreciation is charged to expense using the straight-line method over the assets’ estimated useful lives which range from 5 to 25 years for buildings and 3 to 15 years for machinery and equipment. Depreciation and amortization are included in the appropriate Cost of goods sold or Selling, general and administrative expenses caption on the Statements of Consolidated Income.5181861IMPO.A (PDF_D SWOP) p15-118.indd 6781861IMPO.A (PDF_D SWOP) p15-118.indd 672/18/22 10:57 AM2/18/22 10:57 AMGoodwill and Intangible AssetsGoodwill represents the cost in excess of fair value of net assets acquired in business combinations accounted for by the purchase method. Intangible assets include trademarks, customer relationships and intellectual property. In accordance with the Goodwill and Other Intangibles Topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC), goodwill and indefinite-lived trademarks are not amortized, but instead are tested for impairment on an annual basis, as well as whenever an event occurs or circumstances change that indicate impairment has more likely than not occurred. Finite-lived intangible assets are amortized on a straight-line basis over the expected period of benefit, which ranges primarily from 15 to 20 years. See Note 5 for further details.Impairment of Long-Lived Assets In accordance with the Property, Plant and Equipment Topic of the ASC, management evaluates the recoverability and remaining lives of long-lived assets (including right-of-use assets) whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or the useful life has changed. See Note 5 for further details.Derivative InstrumentsThe Company utilizes derivative instruments to mitigate certain risk exposures as part of its overall financial risk management policy and accounts for these instruments in accordance with the Derivatives and Hedging Topic of the ASC. Derivatives are recorded as assets or liabilities in the consolidated balance sheets at fair value. Changes in fair value of the derivative instruments are recognized immediately in earnings unless the derivative instrument qualifies for and is designated in an effective hedging relationship.The Company entered into foreign currency forward contracts with maturity dates of less than twelve months in 2021, 2020, and 2019, primarily to hedge against value changes in foreign currency. There were no material foreign currency option and forward contracts outstanding at December 31, 2021, 2020 and 2019. See Note 18 for further details. The Company also entered into cross currency swap contracts to hedge its net investment in European operations in 2021, 2020, and 2019. These contracts qualified for and were designated as net investment hedges as permitted under US GAAP. The changes in fair value for the cross currency swaps are recognized in the foreign currency translation adjustments component of AOCI. The cash flow impact of these instruments is classified as an investing activity in the consolidated statement of cash flows. See Note 15 for further details.Non-Traded InvestmentsThe Company has investments in the U.S. affordable housing and historic renovation real estate markets and certain other investments that have been identified as variable interest entities. However, because the Company does not have the power to direct the day-to-day operations of the investments and the risk of loss is limited to the amount of contributed capital, the Company is not considered the primary beneficiary. In accordance with the Consolidation Topic of the ASC, the investments are not consolidated. For affordable housing investments entered into prior to the January 1, 2015 adoption of ASU 2014-01, the Company uses the effective yield method to determine the carrying value of the investments. Under the effective yield method, the initial cost of the investments is amortized to income tax expense over the period that the tax credits are recognized. For affordable housing investments entered into on or after the January 1, 2015 adoption of ASU 2014-01, the Company uses the proportional amortization method. Under the proportional amortization method, the initial cost of the investments is amortized to income tax expense in proportion to the tax credits and other tax benefits received. The carrying value of the investments are recorded in Other assets. The liabilities for the estimated future capital contributions are recorded in Other accruals and Other long-term liabilities. The following table summarizes the balances related to the investments at December 31, 2021, 2020 and 2019, respectively.202120202019Other assets$ 355.8 $ 198.2 $ 176.2 Other accruals61.889.087.3 Other long-term liabilities289.7127.387.1 Standby Letters of Credit The Company occasionally enters into standby letter of credit agreements to guarantee various operating activities. These agreements provide credit availability to the various beneficiaries if certain contractual events occur. Amounts outstanding under these agreements totaled $89.2 million, $51.3 million and $61.2 million at December 31, 2021, 2020 and 2019, respectively.5281861IMPO.A (PDF_D SWOP) p15-118.indd 6881861IMPO.A (PDF_D SWOP) p15-118.indd 682/18/22 10:57 AM2/18/22 10:57 AMProduct Warranties The Company offers assurance type product warranties for certain products. The specific terms and conditions of such warranties vary depending on the product or customer contract requirements. Management estimated the costs of unsettled product warranty claims based on historical results and experience and included an amount in Other accruals. Management periodically assesses the adequacy of the accrual for product warranty claims and adjusts the accrual as necessary. Changes in the Company’s accrual for product warranty claims during 2021, 2020 and 2019, including customer satisfaction settlements during the year, were as follows:202120202019Balance at January 1$ 43.3 $ 42.3 $ 57.1 Charges to expense27.5 38.1 32.5 Settlements(35.6) (37.1) (47.3) Balance at December 31$ 35.2 $ 43.3 $ 42.3 Defined Benefit Pension and Other Postretirement Benefit Plans The Company accounts for its defined benefit pension and other postretirement benefit plans in accordance with the Retirement Benefits Topic of the ASC, which requires the recognition of a plan’s funded status as an asset for overfunded plans and as a liability for unfunded or underfunded plans. See Note 7 for further details.Environmental MattersCapital expenditures for ongoing environmental compliance measures were recorded in Property, plant and equipment, and related expenses were included in the normal operating expenses of conducting business. The Company accrued for environmental-related activities for which commitments or clean-up plans have been developed and when such costs could be reasonably estimated based on industry standards and professional judgment. Accrued amounts were primarily recorded on an undiscounted basis and have not been recorded net of insurance proceeds in accordance with the Offsetting Subtopic of the Balance Sheet Topic of the ASC. Environmental-related expenses included direct costs of investigation and remediation and indirect costs such as compensation and benefits for employees directly involved in the investigation and remediation activities and fees paid to outside engineering, consulting and law firms. See Notes 9 and 18 for further details.ESOPThe Company accounts for its employee stock ownership plan (ESOP), in accordance with the Employee Stock Ownership Plans Subtopic of the Compensation – Stock Ownership Topic of the ASC. The Company recognized compensation expense for amounts contributed to the ESOP. See Note 12 for further details.Stock-Based Compensation The cost of the Company’s stock-based compensation is recorded in accordance with the Stock Compensation Topic of the ASC. See Note 13 for further details.Other LiabilitiesThe Company retains risk for certain liabilities, primarily workers’ compensation claims, employee medical and disability benefits, and automobile, property, general and product liability claims. Estimated amounts were accrued for certain workers’ compensation, employee medical and disability benefits, automobile and property claims filed but unsettled, and estimated claims incurred but not reported. Estimates were based upon management’s estimated aggregate liability for claims incurred using historical experience, actuarial assumptions followed in the insurance industry and actuarially-developed models for estimating certain liabilities. Certain estimated general and product liability claims filed but unsettled were accrued based on management’s best estimate of ultimate settlement or actuarial calculations of potential liability using industry experience and actuarial assumptions developed for similar types of claims.Foreign Currency TranslationAll consolidated non-highly inflationary foreign operations use the local currency of the country of operation as the functional currency and translated the local currency asset and liability accounts at year-end exchange rates while income and expense accounts were translated at average exchange rates. The resulting translation adjustments were included in accumulated other comprehensive income (loss) (AOCI), a component of Shareholders’ equity.5381861IMPO.A (PDF_D SWOP) p15-118.indd 6981861IMPO.A (PDF_D SWOP) p15-118.indd 692/18/22 10:57 AM2/18/22 10:57 AMRevenue RecognitionThe Company recognized revenue when performance obligations under the terms of the agreement were satisfied. This generally occurs with the transfer of control of our products to the customer. Collectibility of amounts recorded as revenue was probable at the time of recognition. See Note 17 for further details.Customer and Vendor ConsiderationThe Company offered certain customers rebate and sales incentive programs which were classified as reductions in net sales. Such programs were in the form of volume rebates, rebates that constituted a percentage of sales or rebates for attaining certain sales goals. The Company received consideration from certain suppliers of raw materials in the form of volume rebates or rebates that constituted a percentage of purchases. These rebates were recognized on an accrual basis by the Company as a reduction of the purchase price of the raw materials and a subsequent reduction of Cost of goods sold when the related product was sold.Costs of Goods Sold Included in Costs of goods sold were costs for materials, manufacturing, distribution and related support. Distribution costs included expenses related to the distribution of products including inbound freight charges, purchase and receiving costs, warehousing costs, internal transfer costs and other costs incurred to ship products. Also included in Costs of goods sold were total technical expenditures, which included research and development costs, quality control, product formulation expenditures and other similar items. Research and development costs included in technical expenditures were $115.9 million, $97.1 million and $103.1 million for 2021, 2020 and 2019, respectively.Selling, General and Administrative Expenses Selling costs included advertising expenses, marketing costs, employee and store costs and sales commissions. The cost of advertising was expensed as incurred. The Company incurred $311.9 million, $363.4 million and $355.2 million in advertising costs during 2021, 2020 and 2019, respectively. General and administrative expenses included human resources, legal, finance and other support and administrative functions.Earnings Per Share Common stock held in a revocable trust (see Note 11) was not included in outstanding shares for basic or diluted income per share calculations. Basic and diluted net income per share were calculated using the treasury stock method in accordance with the Earnings Per Share Topic of the ASC. Basic net income per share amounts were computed based on the weighted-average number of shares outstanding during the year. Diluted net income per share amounts were computed based on the weighted-average number of shares outstanding plus all dilutive securities potentially outstanding during the year. See Note 20 for further details.Reclassifications Certain amounts in the consolidated financial statements and notes to the consolidated financial statements for 2019 and 2020 have been reclassified to conform to the 2021 presentation.5481861IMPO.A (PDF_D SWOP) p15-118.indd 7081861IMPO.A (PDF_D SWOP) p15-118.indd 702/18/22 10:57 AM2/18/22 10:57 AMNOTE 2 – RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTSAdopted in 2021Effective January 1, 2021, the Company adopted Accounting Standards Update (ASU) 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740. It also improves consistent application of and simplifies U.S. GAAP for other areas of ASC 740 by clarifying and amending existing guidance. The amendments are being applied prospectively. The adoption of ASU 2019-12 did not have a material impact on the Company’s financial position, results of operations or cash flows.Not Yet AdoptedIn October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Liabilities from Contracts with Customers.” This ASU requires an acquiring entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. The ASU is effective for fiscal years and interim periods beginning after December 15, 2022, with early adoption permitted. The Company is evaluating the impact of adopting this ASU.In November 2021, the FASB issued ASU 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance.” This ASU requires disclosures for material government assistance transactions during annual reporting periods. The disclosures include information about the nature of the transaction, the related accounting policies used to account for the government assistance, the effect of government assistance on the entity’s financial statements, and any significant terms and conditions. The ASU is effective for the Company as of January 1, 2022 and will not affect the Company’s financial position, results of operations or cash flows as the standard only impacts annual financial statement footnote disclosures. NOTE 3 – ACQUISITIONS AND DIVESTITURESDuring the third quarter of 2021, the Company signed an agreement to acquire the European industrial coatings business of Sika AG (Sika). Sika’s European industrial coatings business engineers, manufactures and sells corrosion protection coating systems and fire protection coating systems. The transaction is subject to customary closing conditions and is expected to close in the first quarter of 2022. The acquired business will be reported within the Company’s Performance Coatings Group.During the fourth quarter of 2021, the Company completed the acquisition of Specialty Polymers, Inc. (Specialty Polymers), a leading manufacturer and developer of water-based polymers used in architectural and industrial coatings and other applications. The acquisition added to the Company’s existing internal resin manufacturing capabilities. Specialty Polymers will be reported within the Company’s Performance Coatings Group.During the first quarter of 2021, the Company completed the acquisition of a domestic coatings company. The acquisition expanded the Performance Coatings Group’s platform for growth and portfolio of brands and technologies.The aggregate purchase price for acquisitions closed in 2021 was approximately $227.0 million, including amounts withheld as security for certain representations, warranties and obligations of the sellers. The purchase price for each acquisition was preliminarily allocated to identifiable assets and liabilities based on information available at the date of acquisition and may change as the Company completes its analysis of net assets acquired, primarily the valuation of intangible assets. As of December 31, 2021, $155.6 million of goodwill and $11.3 million of intangible assets were recognized from these transactions. The preliminary purchase price allocation for each acquisition is expected to be finalized within the allowable measurement period. The results of operations for the acquisitions have been included in the consolidated financial statements since the respective acquisition dates. Pro forma results of operations have not been presented as the impact on the Company’s consolidated financial results is not material.On March 31, 2021, the Company divested Wattyl, an Australian and New Zealand manufacturer and seller of architectural and protective paint and coatings with annual revenue of approximately $200 million. The divestiture will enable the Company to focus its resources on global opportunities which better align with our long-term strategies. In connection with this transaction, the Company recognized a pre-tax loss of $111.9 million within Other general (income) expense - net (see Note 15). The Wattyl divestiture does not meet the criteria to be reported as discontinued operations in our consolidated financial statements as the Company’s decision to divest this business did not represent a strategic shift that will have a major effect on the Company’s operations and financial results. 5581861IMPO.A (PDF_D SWOP) p15-118.indd 7181861IMPO.A (PDF_D SWOP) p15-118.indd 712/18/22 10:57 AM2/18/22 10:57 AMDuring 2019, the Company completed the acquisition of a domestic packaging company and two European coatings companies for an aggregate purchase price of $84.4 million, including amounts withheld as security for certain representations, warranties and obligations of the sellers. These acquisitions support the growth of the Performance Coatings Group by providing new technologies and an expanded global platform. The acquisitions have been accounted for as business combinations. The results of operations of these companies have been included in the consolidated financial statements since the date of acquisition. Pro forma results of operations have not been presented as the impact on the Company’s consolidated financial results was not material.NOTE 4 – INVENTORIESIncluded in Inventories were the following:202120202019Finished goods$ 1,378.8 $ 1,427.6 $ 1,509.6 Work in process and raw materials548.4 376.5 380.0 Inventories$ 1,927.2 $ 1,804.1 $ 1,889.6 Inventories were stated at the lower of cost or net realizable value, with cost primarily determined on the last-in, first-out (LIFO) method. Management believes that the use of LIFO results in a better matching of costs and revenues. The following table summarizes the extent to which the Company’s Inventories use the LIFO cost method, and presents the effect on Inventories had the Company used the first-in, first-out (FIFO) inventory valuation method.202120202019Percentage of total inventories on LIFO 70 % 72 % 72 %Excess of FIFO over LIFO$ 593.0 $ 312.1 $ 339.8 During 2021, certain inventories accounted for on the LIFO method were reduced, resulting in the liquidation of certain quantities carried at costs prevailing in prior years. The 2021 liquidation increased net income by $25.8 million.The Company recorded a reserve for obsolescence of $118.6 million, $125.8 million and $115.4 million at December 31, 2021, 2020 and 2019, respectively, to reduce Inventories to their estimated net realizable value.5681861IMPO.A (PDF_D SWOP) p15-118.indd 7281861IMPO.A (PDF_D SWOP) p15-118.indd 722/18/22 10:57 AM2/18/22 10:57 AMNOTE 5 – LONG-LIVED ASSETS, INCLUDING GOODWILL AND INTANGIBLE ASSETSIncluded in Property, plant and equipment, net were the following:202120202019Land$ 257.7 $ 283.5 $ 242.1 Buildings1,157.8 1,098.0 1,044.2 Machinery and equipment3,043.6 3,026.8 2,952.1 Construction in progress205.4 140.5 144.0 Property, plant and equipment, gross4,664.5 4,548.8 4,382.4 Less allowances for depreciation2,797.2 2,714.3 2,547.2 Property, plant and equipment, net$ 1,867.3 $ 1,834.5 $ 1,835.2 In accordance with the Property, Plant and Equipment Topic of the ASC, whenever events or changes in circumstances indicate that the carrying value of long-lived assets may not be recoverable or the useful life may have changed, impairment tests are to be performed. Undiscounted cash flows are used to calculate the recoverable value of long-lived assets to determine if such assets are not recoverable. If the carrying value of the assets is deemed to not be recoverable, the impairment to be recognized is the amount by which the carrying value of the assets exceeds the estimated fair value of the assets as determined in accordance with the Fair Value Topic of the ASC. No material impairments of long-lived assets were recorded in 2021, 2020 or 2019.During 2021, the Company acquired two companies which resulted in the recognition of goodwill of $155.6 million and finite-lived intangibles of $11.3 million. During 2019, the Company acquired three companies which resulted in the recognition of goodwill of $14.2 million and finite-lived intangibles of $34.9 million. In addition, during 2021, the Company divested its Wattyl business in Australia and New Zealand. See Note 3 for additional information related to the acquisitions and divestiture.In accordance with the Goodwill and Other Intangibles Topic of the ASC, goodwill and indefinite-lived intangible assets are tested for impairment annually at the reporting unit level, and interim impairment tests are performed whenever an event occurs or circumstances change that indicate an impairment has more likely than not occurred. October 1 has been established for the annual impairment review. At the time of impairment testing, values are estimated separately for goodwill and trademarks with indefinite lives using a valuation model, incorporating discount rates commensurate with the risks involved for each group of assets. An optional qualitative assessment may alleviate the need to perform the quantitative goodwill impairment test when impairment is unlikely. The annual impairment review performed as of October 1, 2021 did not result in any trademark or goodwill impairment. The annual impairment review performed as of October 1, 2020 resulted in trademark impairment of $2.3 million in the Performance Coatings Group related to lower than anticipated sales of an acquired brand and no goodwill impairment. During the fourth quarter of 2019, the Company performed a strategic review of its business lines as part of the annual planning cycle. Decisions were made during this review related to certain brands which resulted in a reduction to the long-term forecasted net sales for certain indefinite-lived trademarks acquired in the Valspar acquisition within the Performance Coatings and Consumer Brands Groups. As a result of the strategic decisions made at that time and in conjunction with the annual impairment review performed as of October 1, 2019, the Company recognized non-cash pre-tax impairment charges totaling $122.1 million related to certain recently acquired indefinite-lived trademarks. These charges included impairments totaling $117.0 million in the Performance Coatings Group and $5.1 million in the Consumer Brands Group. In the Performance Coatings Group, $75.6 million related to trademarks in North America directly associated with strategic decisions made to rebrand industrial products to the Sherwin-Williams® brand name, $25.7 million related to trademarks in the Asia Pacific region as a direct result of recent performance that reduced the long-term forecasted net sales and $15.7 million related to other recently acquired trademarks in various regions.The annual impairment review did not result in any goodwill impairment.5781861IMPO.A (PDF_D SWOP) p15-118.indd 7381861IMPO.A (PDF_D SWOP) p15-118.indd 732/18/22 10:57 AM2/18/22 10:57 AMA summary of changes in the Company’s carrying value of goodwill by Reportable Segment is as follows:GoodwillThe Americas GroupConsumer BrandsGroupPerformance CoatingsGroupConsolidatedTotalsBalance at January 1, 2019 (1)$ 2,256.6 $ 1,753.8 $ 2,946.3 $ 6,956.7 Acquisitions14.2 14.2 Currency and other adjustments0.1 33.8 33.9 Balance at December 31, 2019 (1)2,256.6 1,753.9 2,994.3 7,004.8 Currency and other adjustments0.7 43.6 44.3 Balance at December 31, 2020 (1)2,256.6 1,754.6 3,037.9 7,049.1 Acquisitions155.6 155.6 Currency and other adjustments(45.7) (24.4) (70.1) Balance at December 31, 2021 (1)$ 2,256.6 $ 1,708.9 $ 3,169.1 $ 7,134.6 (1)Net of accumulated impairment losses of $19.4 million ($10.5 million in The Americas Group, $8.1 million in the Consumer Brands Group and $0.8million in the Performance Coatings Group).A summary of the Company’s carrying value of intangible assets is as follows: Finite-Lived Intangible AssetsTrademarksWith IndefiniteLives (1)TotalIntangibleAssetsSoftwareCustomer RelationshipsIntellectual PropertyAll OtherSubtotalDecember 31, 2021Gross$ 166.0 $ 3,005.7 $ 1,730.3 $ 303.5 $ 5,205.5 Accumulated amortization(149.3) (961.6) (396.5) (279.7) (1,787.1) Net value$ 16.7 $ 2,044.1 $ 1,333.8 $ 23.8 $ 3,418.4 $ 583.1 $ 4,001.5 December 31, 2020Gross$ 166.8 $ 3,181.6 $ 1,730.3 $ 306.8 $ 5,385.5 Accumulated amortization(142.8) (804.7) (310.0) (273.4) (1,530.9) Net value$ 24.0 $ 2,376.9 $ 1,420.3 $ 33.4 $ 3,854.6 $ 616.6 $ 4,471.2 December 31, 2019Gross$ 166.4 $ 3,062.8 $ 1,730.3 $ 312.9 $ 5,272.4 Accumulated amortization(134.8) (527.5) (223.5) (260.5) (1,146.3) Net value$ 31.6 $ 2,535.3 $ 1,506.8 $ 52.4 $ 4,126.1 $ 608.4 $ 4,734.5 (1)Trademarks are net of accumulated impairment losses of $124.4 million as of December 31, 2021 and 2020, and $122.1 million as of December 31,2019.Amortization of finite-lived intangible assets is estimated as follows for the next five years: $299.1 million in 2022, $297.3 million in 2023, $294.0 million in 2024, $286.7 million in 2025 and $282.3 million in 2026.Although the Company believes its estimates of fair value related to reporting units and indefinite-lived trademarks are reasonable, actual financial results could differ from those estimates due to the inherent uncertainty involved in making such estimates. Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact and future impairment charges may be required.5881861IMPO.A (PDF_D SWOP) p15-118.indd 7481861IMPO.A (PDF_D SWOP) p15-118.indd 742/18/22 10:57 AM2/18/22 10:57 AMNOTE 6 – DEBTThe table below summarizes the carrying value of the Company’s outstanding debt, net of capitalized debt issuance costs:Due Date2021202020193.45% Senior Notes 2027$ 1,490.4 $ 1,488.6 $ 1,486.8 4.50% Senior Notes 20471,231.6 1,230.8 1,230.1 2.95% Senior Notes2029792.6 791.7 790.7 3.80% Senior Notes2049543.0 542.8 542.5 3.125% Senior Notes2024498.3 497.7 497.0 2.30% Senior Notes 2030496.2 495.8 — 3.30% Senior Notes 2050493.9 493.7 — 2.20% Senior Notes2032493.6 — — 2.90% Senior Notes2052491.3 — — 3.45% Senior Notes2025398.7 398.3 398.0 4.55% Senior Notes2045394.7 394.5 394.3 3.95% Senior Notes 2026356.2 357.8 359.3 4.00% Senior Notes2042296.7 296.6 296.4 2.75% Senior Notes2022260.0 259.6 757.1 3.30% Senior Notes 2025249.6 249.5 249.4 4.40% Senior Notes 2045240.0 239.6 239.2 7.375% Debentures2027119.2 119.1 119.1 7.45% Debentures20973.5 3.5 3.5 0.53% to 8.00% Promissory NotesThrough 20262.0 2.3 2.9 4.20% Senior Notes 2022— 405.7 411.3 0.92% Fixed Rate Loan2021— 24.4 22.4 Floating Rate Loan2021— — 251.9 2.25% Senior Notes 2020— — 428.6 Total (1)8,851.5 8,292.0 8,480.5 Less amounts due within one year260.6 25.1 429.8 Long-term debt$ 8,590.9 $ 8,266.9 $ 8,050.7 (1)Net of capitalized debt issuance costs of $57.6 million, $52.9 million and $50.6 million at December 31, 2021, 2020 and 2019, respectively.Maturities of long-term debt are as follows for the next five years: $260.8 million in 2022; $0.9 million in 2023; $500.2 million in 2024, $650.1 million in 2025 and $350.1 million in 2026. Interest expense on long-term debt was $320.4 million, $320.5 million and $321.3 million for 2021, 2020 and 2019, respectively.Among other restrictions, the Company’s notes, debentures and revolving credit agreement contain certain covenants relating to liens, ratings changes, merger and sale of assets, consolidated leverage and change of control, as defined in the agreements. In the event of default under any one of these arrangements, acceleration of the maturity of any one or more of these borrowings may result. The Company was in compliance with all covenants for all years presented.In November 2021, the Company issued $500.0 million of 2.20% Senior Notes due March 2032 and $500.0 million of 2.90% Senior Notes due March 2052 in a public offering. The net proceeds from the issuance of these notes were used to repay outstanding borrowings under the Company’s domestic commercial paper program. In October 2021, the Company exercised its optional redemption rights to redeem the entire outstanding $400.0 million aggregate principal amount of its 4.20% Senior Notes due 2022 and its 4.20% Notes due 2022 initially issued by The Valspar Corporation (collectively, the 4.20% Senior Notes) after exercising its optional redemption rights. The 4.20% Senior Notes were redeemed at a redemption price equal to 100% of the principal amount, plus accrued interest, and resulted in a gain of $1.4 million recorded in Other (income) expense - net. See Note 18.5981861IMPO.A (PDF_D SWOP) p15-118.indd 7581861IMPO.A (PDF_D SWOP) p15-118.indd 752/18/22 10:57 AM2/18/22 10:57 AMIn March 2020, the Company issued $500.0 million of 2.30% Senior Notes due May 2030 and $500.0 million of 3.30% Senior Notes due May 2050 in a public offering. The net proceeds from the issuance of these notes were used to repurchase a portion of the 2.75% Senior Notes due 2022 and redeem the 2.25% Senior Notes due May 2020. The repurchase of the 2.75% Senior Notes due 2022 during the first quarter of 2020 resulted in a loss of $21.3 million recorded in Other (income) expense - net. See Note 18.In August 2019, the Company issued $800.0 million of 2.95% Senior Notes due 2029 and $550.0 million of 3.80% Senior Notes due 2049 in a public offering. The net proceeds from the issuance of these notes were used for general corporate purposes.In August 2019, the Company repurchased $1.010 billion of its 2.25% Senior Notes due 2020 and $490.0 million of its 2.75% Senior Notes due 2022. These repurchases resulted in a loss of $14.8 million recorded in Other (income) expense - net. See Note 18.In June 2019, the Company repurchased $60.9 million of its 2.25% Senior Notes due May 2020. This repurchase resulted in an insignificant gain. Short-Term BorrowingsOn June 29, 2021, the Company and two of its wholly-owned subsidiaries, Sherwin-Williams Canada Inc. (SW Canada) and Sherwin-Williams Luxembourg S.à r.l. (SW Luxembourg, together with the Company and SW Canada, the Borrowers), entered into a new five-year $2.000 billion credit agreement (New Credit Agreement). The New Credit Agreement may be used for general corporate purposes, including the financing of working capital requirements. The New Credit agreement replaced the $2.000 billion credit agreement dated July 19, 2018, as amended, which was terminated effective June 29, 2021. The New Credit Agreement will mature on June 29, 2026 and provides that the Company may request to extend the maturity date of the facility for two additional one-year periods. In addition, the New Credit Agreement provides that the Borrowers may increase the aggregate amount of the facility to $2.750 billion, subject to the discretion of each lender to participate in the increase, and the Borrowers may request letters of credit in an amount of up to $250.0 million. At December 31, 2021, 2020 and 2019, there were no short-term borrowings under these credit agreements.On August 2, 2021, the Company entered into an amended and restated $625.0 million credit agreement (August 2021 Credit Agreement), which amends and restates the five-year credit agreement entered into in September 2017. The August 2021 Credit Agreement was subsequently amended on multiple dates to extend the maturity of commitments available for borrowing or letters of credit under the agreement. On May 9, 2016, the Company entered into a five-year credit agreement (May 2016 Credit Agreement), subsequently amended on multiple dates to extend the maturity of commitments available for borrowing or letters of credit under the agreement. The May 2016 credit agreement gives the Company the right to borrow and obtain letters of credit up to an aggregate availability of $875.0 million. These credit agreements are being used for general corporate purposes. At December 31, 2021, 2020 and 2019, there were no borrowings outstanding under these credit agreements.The Company’s available capacity under its committed credit agreements is reduced for amounts outstanding under its domestic commercial paper program and letters of credit. At December 31, 2021, the Company had unused capacity under its various credit agreements of $2.725 billion. The table below summarizes the Company’s short-term borrowings:202120202019Domestic commercial paper$ 739.9 $ — $ 191.9 Foreign facilities23.6 0.1 12.8 Total$ 763.5 $ 0.1 $ 204.7 Weighted average interest rate:Domestic 0.3 % — % 2.1 %Foreign 9.5 % 0.2 % 4.3 %6081861IMPO.A (PDF_D SWOP) p15-118.indd 7681861IMPO.A (PDF_D SWOP) p15-118.indd 762/18/22 10:57 AM2/18/22 10:57 AMNOTE 7 – PENSION, HEALTH CARE AND OTHER POSTRETIREMENT BENEFITSThe Company provides pension benefits to substantially all full-time employees through primarily noncontributory defined contribution or defined benefit plans and certain health care and life insurance benefits to domestic active employees and eligible retirees. In accordance with the Retirement Benefits Topic of the ASC, the Company recognizes an asset for overfunded defined benefit pension or other postretirement benefit plans and a liability for unfunded or underfunded plans. In addition, actuarial gains and losses and prior service costs of such plans are recorded in AOCI. The amounts recorded in AOCI will continue to be modified as actuarial assumptions and service costs change, and all such amounts will be amortized to expense over a period of years through the net pension cost (credit) and net periodic benefit cost (credit).Health Care Plans The Company provides certain domestic health care plans that are contributory and contain cost-sharing features such as deductibles and coinsurance. There were 29,016, 27,782 and 27,030 active employees entitled to receive benefits under these plans at December 31, 2021, 2020 and 2019, respectively. The cost of these benefits for active employees, which includes claims incurred but not reported, amounted to $336.0 million, $298.8 million and $301.6 million for 2021, 2020 and 2019, respectively.Defined Contribution Pension PlansThe Company’s annual contribution for its domestic defined contribution pension plan was $85.3 million, $77.0 million and $72.7 million for 2021, 2020 and 2019, respectively. The contribution percentage ranges from two percent to seven percent of compensation for covered employees based on an age and service formula. Assets in employee accounts of the domestic defined contribution pension plan are invested in various investment funds as directed by the participants. These investment funds did not own a significant number of shares of the Company’s common stock for any year presented. The Company’s annual contributions for its foreign defined contribution pension plans, which are based on various percentages of compensation for covered employees up to certain limits, were $17.9 million, $22.5 million and $24.5 million for 2021, 2020 and 2019, respectively. Assets in employee accounts of the foreign defined contribution pension plans are invested in various investment funds. These investment funds did not own a significant number of shares of the Company’s common stock for any year presented.Defined Benefit Pension PlansIn 2018, the Company’s domestic defined benefit pension plan was split into two separate overfunded plans: one that will continue to operate, and one that was frozen and subsequently terminated during 2018 (Terminated Plan). Active participants in the Terminated Plan were moved to the Company’s domestic defined contribution plan (Qualified Replacement Plan). The Company settled the liabilities of the Terminated Plan through a combination of (i) lump sum payments to eligible participants who elected to receive them and (ii) the purchase of annuity contracts for participants who either did not elect lump sums or were already receiving benefit payments. The lump sum payments were paid in December 2018. During the first quarter of 2019, the Company purchased annuity contracts to settle the remaining liabilities of the Terminated Plan. The annuity contract purchase resulted in a settlement charge of $32.4 million in the first quarter of 2019. The remaining surplus of the Terminated Plan is being used, as prescribed in the applicable regulations, to fund Company contributions to the Qualified Replacement Plan. During 2019, the Company transferred the remaining surplus of $242.2 million to a suspense account held within a trust for the Qualified Replacement Plan. This amount included $131.8 million of Company common stock (900,000 shares). The shares are treated as treasury stock in accordance with ASC 715. See Note 11. The remaining surplus consists of investment funds held at fair value. See Note 16.At December 31, 2021, the domestic defined benefit pension plan was overfunded, with a projected benefit obligation of $120.8 million, fair value of plan assets of $155.2 million and excess plan assets of $34.4 million. The plan was funded in accordance with all applicable regulations at December 31, 2021. The Company has thirty-three foreign defined benefit pension plans. At December 31, 2021, twenty-seven of the Company’s foreign defined benefit pension plans were unfunded or underfunded, with combined accumulated benefit obligations, projected benefit obligations, fair values of net assets and deficiencies of plan assets of $95.2 million, $108.5 million, $29.5 million and $79.0 million, respectively.The Company expects to make the following benefit payments for all domestic and foreign defined benefit pension plans: $15.2 million in 2022; $14.8 million in 2023; $16.1 million in 2024; $16.9 million in 2025; $23.1 million in 2026; and $105.4 million in 2027 through 2031. The Company expects to contribute $5.8 million to the foreign plans in 2022.The estimated net actuarial losses and prior service credits for the defined benefit pension plans that are expected to be amortized from AOCI into the net pension costs in 2022 are $0.3 million and $(0.2) million, respectively.6181861IMPO.A (PDF_D SWOP) p15-118.indd 7781861IMPO.A (PDF_D SWOP) p15-118.indd 772/18/22 10:57 AM2/18/22 10:57 AMThe following table summarizes the components of the net pension costs and AOCI related to the defined benefit pension plans:DomesticDefined Benefit Pension PlanForeignDefined Benefit Pension Plans202120202019202120202019Net pension cost:Service cost$ 4.9 $ 4.4 $ 3.5 $ 7.4 $ 6.8 $ 5.9 Interest cost2.7 3.2 4.8 5.7 6.9 9.4 Expected return on plan assets(7.1) (6.3) (5.3) (9.6) (10.0) (10.3) Amortization of prior service cost1.1 1.4 1.4 (0.1) Amortization of actuarial losses1.5 1.0 1.0 Ongoing pension cost1.6 2.7 4.4 4.9 4.7 6.0 Settlement costs32.4 0.3 0.2 0.3 Net pension cost1.6 2.7 36.8 5.2 4.9 6.3 Other changes in plan assets and projected benefit obligation recognized in AOCI (before taxes):Net actuarial (gains) losses arising during the year(10.5) (4.5) (22.0) (44.9) 7.0 13.2 Prior service cost (credit) arising during the year1.4 0.2 3.1 (1.0) (0.5) Amortization of actuarial losses(1.5) (1.0) (1.0) Amortization of prior service cost(1.1) (1.4) (1.4) 0.1 Loss recognized for settlement(32.4) (0.3) (0.2) (0.3) Gain arising from curtailment(0.7) Exchange rate (loss) gain recognized during the year(0.6) 1.7 1.0 Total recognized in AOCI(10.2) (5.7) (52.7) (48.2) 7.0 12.2 Total recognized in net pension cost and AOCI$ (8.6) $ (3.0) $ (15.9) $ (43.0) $ 11.9 $ 18.5 Service cost is recorded in Cost of goods sold and Selling, general and administrative expense. All other components of Net pension costs are recorded in Other (income) expense - net. The Company employs a total return investment approach for the domestic and foreign defined benefit pension plan assets. A mix of equities and fixed income investments are used to maximize the long-term return of assets for a prudent level of risk. In determining the expected long-term rate of return on defined benefit pension plan assets, management considers the historical rates of return, the nature of investments and an expectation of future investment strategies. The target allocations for plan assets are 35% – 65% equity securities, 35% – 55% fixed income securities and 0% – 10% other (including alternative investments and cash).6281861IMPO.A (PDF_D SWOP) p15-118.indd 7881861IMPO.A (PDF_D SWOP) p15-118.indd 782/18/22 10:57 AM2/18/22 10:57 AMThe following tables summarize the fair value of the defined benefit pension plan assets at December 31, 2021, 2020 and 2019. The presentation is in accordance with the Retirement Benefits Topic of the ASC.Fair value at December 31, 2021Quoted Pricesin Active Markets for Identical Assets (Level 1)Significant OtherObservable Inputs(Level 2)SignificantUnobservable Inputs(Level 3)Investments at fair value:Equity investments (1)$ 133.1 $ 13.5 $ 119.6 Fixed income investments (2)172.1 172.1 Other assets (3)36.7 36.7 Total investments in fair value hierarchy341.9 $ 13.5 $ 328.4 Investments measured at NAV or its equivalent (4)141.7 Total investments$ 483.6 Fair value at December 31, 2020Quoted Prices in Active Markets for Identical Assets (Level 1)Significant OtherObservable Inputs(Level 2)SignificantUnobservable Inputs(Level 3)Investments at fair value:Equity investments (1)$ 134.9 $ 13.9 $ 121.0 Fixed income investments (2)182.3 24.3 158.0 Other assets (3)39.2 39.2 Total investments in fair value hierarchy356.4 $ 38.2 $ 318.2 Investments measured at NAV or its equivalent (4)106.1 Total investments$ 462.5 Fair value at December 31, 2019Quoted Prices in Active Markets for Identical Assets (Level 1)Significant OtherObservable Inputs(Level 2)SignificantUnobservable Inputs(Level 3)Investments at fair value:Equity investments (1)$ 115.7 $ 7.9 $ 107.8 Fixed income investments (2)173.4 29.7 143.7 Other assets (3)36.6 36.6 Total investments in fair value hierarchy325.7 $ 37.6 $ 288.1 Investments measured at NAV or its equivalent (4)88.3 Total investments$ 414.0 (1)This category includes actively managed equity assets that track primarily to the S&P 500.(2)This category includes government and corporate bonds that track primarily to the Barclays Capital Aggregate Bond Index.(3)This category includes real estate and pooled investment funds.(4)This category includes pooled investment funds and private equity funds that are measured at NAV or its equivalent using the practical expedient.Therefore, these investments are not classified in the fair value hierarchy.6381861IMPO.A (PDF_D SWOP) p15-118.indd 7981861IMPO.A (PDF_D SWOP) p15-118.indd 792/18/22 10:57 AM2/18/22 10:57 AMThe following table summarizes the obligations, plan assets and assumptions used for the defined benefit pension plans, which are all measured as of December 31:DomesticDefined Benefit Pension PlanForeignDefined Benefit Pension Plans202120202019202120202019Accumulated benefit obligations at end of year$ 117.0 $ 114.2 $ 97.2 $ 334.8 $ 370.2 $ 331.7 Projected benefit obligations:Balances at beginning of year$ 118.6 $ 103.0 $ 524.7 $ 401.1 $ 360.7 $ 315.8 Service cost4.9 4.4 3.5 7.4 6.8 5.9 Interest cost2.7 3.2 4.8 5.7 6.9 9.4 Actuarial (gains) losses(2.8) 11.0 4.4 (26.0) 25.3 36.2 Contributions and other1.4 0.2 3.1 (4.6) (0.1) 0.7 Settlements(429.3) (1.7) (4.3) (6.6) Effect of foreign exchange(9.8) 16.0 7.8 Benefits paid(4.0) (3.2) (8.2) (9.4) (10.2) (8.5) Balances at end of year120.8 118.6 103.0 362.7 401.1 360.7 Plan assets:Balances at beginning of year144.3 125.9 777.0 318.2 288.1 253.5 Actual returns on plan assets14.9 21.6 31.7 27.9 28.9 33.3 Contributions and other(1.1) 5.9 7.7 Settlements(429.3) (1.7) (4.3) (6.6) Transfer related to plan termination(245.3) Effect of foreign exchange(5.5) 9.8 8.7 Benefits paid(4.0) (3.2) (8.2) (9.4) (10.2) (8.5) Balances at end of year155.2 144.3 125.9 328.4 318.2 288.1 Excess (deficient) plan assets over projected benefit obligations$ 34.4 $ 25.7 $ 22.9 $ (34.3) $ (82.9) $ (72.6) Assets and liabilities recognized in the Consolidated Balance Sheets:Deferred pension assets$ 34.4 $ 25.7 $ 22.9 $ 44.7 $ 27.4 $ 20.1 Other accruals(3.3) (2.5) (2.3) Other long-term liabilities(75.7) (107.8) (90.4) $ 34.4 $ 25.7 $ 22.9 $ (34.3) $ (82.9) $ (72.6) Amounts recognized in AOCI:Net actuarial gains (losses)$ 13.0 $ 2.5 $ (2.0) $ 1.9 $ (45.4) $ (37.9) Prior service (costs) credits(6.5) (6.2) (7.4) 1.4 0.5 $ 6.5 $ (3.7) $ (9.4) $ 3.3 $ (44.9) $ (37.9) Weighted-average assumptions used to determine projected benefit obligations:Discount rate 3.12 % 2.85 % 3.44 % 2.26 % 1.63 % 2.17 %Rate of compensation increase 3.00 % 3.00 % 3.00 % 3.25 % 2.91 % 3.09 %Weighted-average assumptions used to determine net pension cost:Discount rate 2.85 % 3.44 % 3.60 % 1.63 % 2.17 % 3.04 %Expected long-term rate of return on assets 5.00 % 5.00 % 5.00 % 3.17 % 3.62 % 4.09 %Rate of compensation increase 3.00 % 3.00 % 3.17 % 2.91 % 3.09 % 3.65 %6481861IMPO.A (PDF_D SWOP) p15-118.indd 8081861IMPO.A (PDF_D SWOP) p15-118.indd 802/18/22 10:57 AM2/18/22 10:57 AMOther Postretirement BenefitsEmployees of the Company hired in the United States prior to January 1, 1993 who are not members of a collective bargaining unit, and certain groups of employees added through acquisitions, are eligible for health care and life insurance benefits upon retirement, subject to the terms of the unfunded plans. There were 3,410, 3,465 and 3,481 retired employees entitled to receive such postretirement benefits at December 31, 2021, 2020 and 2019, respectively.The following table summarizes the obligation and the assumptions used for other postretirement benefits:Other Postretirement Benefits202120202019Benefit obligation:Balance at beginning of year - unfunded$ 291.6 $ 280.5 $ 274.6 Service cost1.4 1.5 1.5 Interest cost4.9 7.6 11.2 Actuarial (gain) loss(4.1) 19.7 12.8 Plan amendments(2.2) 1.0 Benefits paid(15.2) (18.7) (19.6) Balance at end of year - unfunded$ 276.4 $ 291.6 $ 280.5 Liabilities recognized in the Consolidated Balance Sheets:Other accruals$ (17.0) $ (16.0) $ (17.5) Postretirement benefits other than pensions(259.4) (275.6) (263.0) $ (276.4) $ (291.6) $ (280.5) Amounts recognized in AOCI:Net actuarial losses$ (54.0) $ (62.8) $ (45.1) Prior service credit (cost)1.6 (0.9) 1.1 $ (52.4) $ (63.7) $ (44.0) Weighted-average assumptions used to determine benefit obligation:Discount rate 2.83 % 2.49 % 3.22 %Health care cost trend rate - pre-65 6.38 % 6.06 % 6.38 %Health care cost trend rate - post-65 5.13 % 5.13 % 5.25 %Prescription drug cost increases 8.25 % 8.25 % 9.00 %Employer Group Waiver Plan (EGWP) trend rate 8.25 % 8.25 % 9.00 %Weighted-average assumptions used to determine net periodic benefit cost:Discount rate 2.49 % 3.22 % 4.21 %Health care cost trend rate - pre-65 6.06 % 6.38 % 6.69 %Health care cost trend rate - post-65 5.13 % 5.25 % 4.94 %Prescription drug cost increases 8.25 % 9.00 % 9.75 %6581861IMPO.A (PDF_D SWOP) p15-118.indd 8181861IMPO.A (PDF_D SWOP) p15-118.indd 812/18/22 10:57 AM2/18/22 10:57 AMThe following table summarizes the components of the net periodic benefit cost and AOCI related to postretirement benefits other than pensions:Other Postretirement Benefits202120202019Net periodic benefit cost:Service cost$ 1.4 $ 1.5 $ 1.5 Interest cost4.9 7.6 11.2 Amortization of actuarial losses4.7 2.0 0.5 Amortization of prior service cost (credit)0.3 (1.1) (5.0) Net periodic benefit cost 11.3 10.0 8.2 Other changes in projected benefit obligation recognized in AOCI (before taxes):Net actuarial (gain) loss arising during the year(4.1) 19.7 12.8 Prior service (credit) cost arising during the year(2.2) 0.9 Amortization of actuarial losses(4.7) (2.0) (0.5) Amortization of prior service credit(0.3) 1.1 5.0 Total recognized in AOCI(11.3) 19.7 17.3 Total recognized in net periodic benefit cost and AOCI$ — $ 29.7 $ 25.5 The estimated net actuarial losses and prior service credits for other postretirement benefits that are expected to be amortized from AOCI into net periodic benefit cost in 2022 are $4.2 million and $(0.4) million, respectively.The assumed health care cost trend rate and prescription drug cost increases used to determine the net periodic benefit cost for postretirement health care benefits for 2022 both decrease in each successive year until reaching 4.5% in 2029.The Company expects to make retiree health care benefit cash payments as follows:2022$ 17.1 202317.8 202418.5 202519.2 202619.1 2027 through 203185.1 Total expected benefit cash payments$ 176.8 6681861IMPO.A (PDF_D SWOP) p15-118.indd 8281861IMPO.A (PDF_D SWOP) p15-118.indd 822/18/22 10:57 AM2/18/22 10:57 AMNOTE 8 – LEASESThe Company leases retail stores, manufacturing and distribution facilities, office space and equipment under operating lease agreements. Operating lease right-of-use (ROU) assets and lease liabilities are recognized based on the present value of lease payments over the lease term. The majority of the ROU asset and lease liability balances relate to the retail operations of The Americas Group. Most leases include one or more options to renew. The exercise of lease renewal options is at the Company’s discretion and is not reasonably certain at lease commencement. The Company does not account for lease and non-lease components of contracts separately for any underlying asset class. Some leases have variable payments, however, because they are not based on an index or rate, they are not included in the ROU assets and liabilities. Variable payments for real estate leases relate primarily to common area maintenance, insurance, taxes and utilities associated with the properties. Variable payments for equipment leases relate primarily to hours, miles, or other quantifiable usage factors which are not determinable at the time the lease agreement is entered into by the Company. The Company has made an accounting policy election by underlying asset class to not apply the recognition requirements of ASC 842 to short-term leases. As a result, certain leases with a term of 12 months or less are not recorded on the balance sheet and expense is recognized on a straight-line basis over the lease term. Most leases do not contain an implicit discount rate. Therefore, the Company’s estimated incremental borrowing rate based on information available at the time of lease inception is used to discount lease payments to present value. Additional lease information is summarized below:202120202019Operating lease cost $ 478.0 $ 464.5 $ 452.9 Short-term lease cost 43.8 41.1 39.7 Variable lease cost84.4 80.7 73.6 Operating cash outflows from operating leases$ 461.4 $ 446.1 $ 430.9 Leased assets obtained in exchange for new operating lease liabilities $ 505.2 $ 469.9 $ 346.4 Weighted average remaining lease term 5.8 years6.0 years6.0 yearsWeighted average discount rate 3.0 % 3.4 % 3.9 %The following table reconciles the undiscounted cash flows for each of the next five years and thereafter to the operating lease liabilities recognized on the balance sheet as of December 31, 2021. The reconciliation excludes short-term leases that are not recorded on the balance sheet. Year Ending December 31,2022$ 455.2 2023398.1 2024337.2 2025271.7 2026198.6 Thereafter374.6 Total lease payments2,035.4 Amount representing interest(155.0) Present value of operating lease liabilities$ 1,880.4 6781861IMPO.A (PDF_D SWOP) p15-118.indd 8381861IMPO.A (PDF_D SWOP) p15-118.indd 832/18/22 10:57 AM2/18/22 10:57 AMNOTE 9 – OTHER LONG-TERM LIABILITIESThe operations of the Company, like those of other companies in its industry, are subject to various domestic and foreign environmental laws and regulations. These laws and regulations not only govern current operations and products, but also impose potential liability on the Company for past operations. Management expects environmental laws and regulations to impose increasingly stringent requirements upon the Company and the industry in the future. Management believes that the Company conducts its operations in compliance with applicable environmental laws and regulations and has implemented various programs designed to protect the environment and promote continued compliance.The Company is involved with environmental investigation and remediation activities at some of its currently and formerly owned sites (including sites which were previously owned and/or operated by businesses acquired by the Company). In addition, the Company, together with other parties, has been designated a potentially responsible party under federal and state environmental protection laws for the investigation and remediation of environmental contamination and hazardous waste at a number of third-party sites, primarily Superfund sites. In general, these laws provide that potentially responsible parties may be held jointly and severally liable for investigation and remediation costs regardless of fault. The Company may be similarly designated with respect to additional third-party sites in the future.The Company initially provides for estimated costs of environmental-related activities relating to its past operations and third-party sites for which commitments or clean-up plans have been developed and when such costs can be reasonably estimated based on industry standards and professional judgment. These estimated costs, which are mostly undiscounted, are determined based on currently available facts regarding each site. If the reasonably estimable costs can only be identified as a range and no specific amount within that range can be determined more likely than any other amount within the range, the minimum of the range is provided.The Company continuously assesses its potential liability for investigation and remediation-related activities and adjusts its environmental-related accruals as information becomes available upon which more accurate costs can be reasonably estimated and as additional accounting guidelines are issued. At December 31, 2021, 2020 and 2019, the Company had accruals reported on the balance sheet as Other long-term liabilities of $277.4 million, $300.5 million and $314.8 million, respectively. Estimated costs of current investigation and remediation activities of $45.9 million, $68.6 million and $57.6 million are included in Other accruals at December 31, 2021, 2020 and 2019, respectively. Actual costs incurred may vary from the accrued estimates due to the inherent uncertainties involved including, among others, the number and financial condition of parties involved with respect to any given site, the volumetric contribution which may be attributed to the Company relative to that attributed to other parties, the nature and magnitude of the wastes involved, the various technologies that can be used for remediation and the determination of acceptable remediation with respect to a particular site. If the Company’s future loss contingency is ultimately determined to be at the unaccrued maximum of the estimated range of possible outcomes for every site for which costs can be reasonably estimated, the Company’s accrual for environmental-related activities would be $101.4 million higher than the minimum accruals at December 31, 2021. Additionally, costs for environmental-related activities may not be reasonably estimable at early stages of investigation and therefore would not be included in the unaccrued maximum amount. Four of the Company’s currently and formerly owned manufacturing sites (“Major Sites”) account for the majority of the accrual for environmental-related activities and the unaccrued maximum of the estimated range of possible outcomes at December 31, 2021. At December 31, 2021, $278.5 million, or 86.1% of the total accrual, related directly to the Major Sites. In the aggregate unaccrued maximum of $101.4 million at December 31, 2021, $78.7 million, or 77.6%, related to the Major Sites. The significant cost components of this liability continue to be related to remedy implementation, regulatory agency interaction, project management and other costs. While different for each specific environmental situation, these components generally each account for approximately 85%, 10%, and 5%, respectively, of the accrued amount and those percentages are subject to change over time. While environmental investigations and remedial actions are in different stages at these sites, additional investigations, remedial actions and monitoring will likely be required at each site.The largest and most complex of the Major Sites is the Gibbsboro, New Jersey site (“Gibbsboro”) which comprises the substantial majority of the environmental-related accrual. Gibbsboro, a former manufacturing plant, and related areas, which ceased operations in 1978, has had various areas included on the National Priorities List since 1999. This location has soil, waterbodies, and groundwater contamination related to the historic operations of the facility. Gibbsboro has been divided by the Environmental Protection Agency (“EPA”) into six operable units (“OUs”) based on location and characteristics, whose investigation and remediation efforts are likely to occur over an extended period of time. Each of the OUs are in various phases of investigation and remediation with the EPA that provide enough information to reasonably estimate cost ranges and record environmental-related accruals. The most significant assumptions underlying the reliability and precision of remediation cost 6881861IMPO.A (PDF_D SWOP) p15-118.indd 8481861IMPO.A (PDF_D SWOP) p15-118.indd 842/18/22 10:57 AM2/18/22 10:57 AMestimates for the Gibbsboro site are the type and extent of future remedies to be selected by the EPA and the costs of implementing those remedies.The remaining three Major Sites comprising the majority of the accrual include (1) a multi-party Superfund site that has received a record of decision from the federal EPA and is currently in the remedial design phase for one operable unit and for which a remedial investigation/feasibility study has been submitted for another operable unit, (2) a closed paint manufacturing facility that is in the operation and maintenance phase of remediation under both federal and state EPA programs, and (3) a formerly-owned site containing warehouse and office space that is in the remedial investigation phase under a state EPA program. Each of these three Major Sites are in phases of investigation and remediation that provide sufficient information to reasonably estimate cost ranges and record environmental-related accruals.Excluding the Major Sites discussed above, no sites are individually material to the total accrual balance. There are multiple, future events yet to occur, including further remedy selection and design, remedy implementation and execution, and securing applicable governmental agency approvals, all of which have the potential to contribute to the uncertainty surrounding these future events. As these events occur and to the extent that the cost estimates of the environmental remediation change, the existing reserve will be adjusted.Management cannot presently estimate the ultimate potential loss contingencies related to these sites or other less significant sites until such time as a substantial portion of the investigation at the sites is completed and remedial action plans are developed. Unasserted claims could have a material effect on the Company’s loss contingency as more information becomes available over time. At December 31, 2021, the Company did not have material loss contingency accruals related to unasserted claims. Management does not expect that a material portion of unrecognized loss contingencies will be recoverable through insurance, indemnification agreements or other sources. In the event any future loss contingency significantly exceeds the current amount accrued, the recording of the ultimate liability may result in a material impact on net income for the annual or interim period during which the additional costs are accrued. Moreover, management does not believe that any potential liability ultimately attributed to the Company for its environmental-related matters will have a material adverse effect on the Company’s financial condition, liquidity, or cash flow due to the extended length of time during which environmental investigation and remediation takes place. An estimate of the potential impact on the Company’s operations cannot be made due to the aforementioned uncertainties.Management expects these contingent environmental-related liabilities to be resolved over an extended period of time. Management is unable to provide a more specific time frame due to the indeterminate amount of time to conduct investigation activities at any site, the indeterminate amount of time to obtain environmental agency approval, as necessary, with respect to investigation and remediation activities, and the indeterminate amount of time necessary to conduct remediation activities.The Asset Retirement and Environmental Obligations Topic of the ASC requires a liability to be recognized for the fair value of a conditional asset retirement obligation if a settlement date and fair value can be reasonably estimated. The Company recognizes a liability for any conditional asset retirement obligation when sufficient information is available to reasonably estimate a settlement date to determine the fair value of such a liability. The Company has identified certain conditional asset retirement obligations at various current and closed manufacturing, distribution and store facilities. These obligations relate primarily to asbestos abatement, hazardous waste Resource Conservation and Recovery Act (RCRA) closures, well abandonment, transformers and used oil disposals and underground storage tank closures. Using investigative, remediation and disposal methods that are currently available to the Company, the estimated costs of these obligations were accrued and are not significant. The recording of additional liabilities for future conditional asset retirement obligations may result in a material impact on net income for the annual or interim period during which the costs are accrued. Management does not believe that any potential liability ultimately attributed to the Company for its conditional asset retirement obligations will have a material adverse effect on the Company’s financial condition, liquidity, or cash flow due to the extended period of time over which sufficient information may become available regarding the closure or modification of any one or group of the Company’s facilities. An estimate of the potential impact on the Company’s operations cannot be made due to the aforementioned uncertainties.6981861IMPO.A (PDF_D SWOP) p15-118.indd 8581861IMPO.A (PDF_D SWOP) p15-118.indd 852/18/22 10:57 AM2/18/22 10:57 AMNOTE 10 – LITIGATIONIn the course of its business, the Company is subject to a variety of claims and lawsuits, including, but not limited to, litigation relating to product liability and warranty, personal injury, environmental, intellectual property, commercial, contractual and antitrust claims that are inherently subject to many uncertainties regarding the possibility of a loss to the Company. These uncertainties will ultimately be resolved when one or more future events occur or fail to occur confirming the incurrence of a liability or the reduction of a liability. In accordance with the Contingencies Topic of the ASC, the Company accrues for these contingencies by a charge to income when it is both probable that one or more future events will occur confirming the fact of a loss and the amount of the loss can be reasonably estimated. In the event that the Company’s loss contingency is ultimately determined to be significantly higher than currently accrued, the recording of the additional liability may result in a material impact on the Company’s results of operations, liquidity or financial condition for the annual or interim period during which such additional liability is accrued. In those cases where no accrual is recorded because it is not probable that a liability has been incurred and the amount of any such loss cannot be reasonably estimated, any potential liability ultimately determined to be attributable to the Company may result in a material impact on the Company’s results of operations, liquidity or financial condition for the annual or interim period during which such liability is accrued. In those cases where no accrual is recorded or exposure to loss exists in excess of the amount accrued, the Contingencies Topic of the ASC requires disclosure of the contingency when there is a reasonable possibility that a loss or additional loss may have been incurred.Lead pigment and lead-based paint litigation. The Company’s past operations included the manufacture and sale of lead pigments and lead-based paints. The Company, along with other companies, is and has been a defendant in a number of legal proceedings, including individual personal injury actions, purported class actions, and actions brought by various counties, cities, school districts and other government-related entities, arising from the manufacture and sale of lead pigments and lead-based paints. The plaintiffs’ claims have been based upon various legal theories, including negligence, strict liability, breach of warranty, negligent misrepresentations and omissions, fraudulent misrepresentations and omissions, concert of action, civil conspiracy, violations of unfair trade practice and consumer protection laws, enterprise liability, market share liability, public nuisance, unjust enrichment and other theories. The plaintiffs seek various damages and relief, including personal injury and property damage, costs relating to the detection and abatement of lead-based paint from buildings, costs associated with a public education campaign, medical monitoring costs and others. The Company has also been a defendant in legal proceedings arising from the manufacture and sale of non-lead-based paints that seek recovery based upon various legal theories, including the failure to adequately warn of potential exposure to lead during surface preparation when using non-lead-based paint on surfaces previously painted with lead-based paint. The Company believes that the litigation brought to date is without merit or subject to meritorious defenses and is vigorously defending such litigation. The Company expects that additional lead pigment and lead-based paint litigation may be filed against the Company in the future asserting similar or different legal theories and seeking similar or different types of damages and relief. The Company will continue to vigorously defend against any additional lead pigment and lead-based paint litigation that may be filed, including utilizing all avenues of appeal, if necessary.Notwithstanding the Company’s views on the merits, litigation is inherently subject to many uncertainties, and the Company ultimately may not prevail. Adverse court rulings or determinations of liability, among other factors, could affect the lead pigment and lead-based paint litigation against the Company and encourage an increase in the number and nature of future claims and proceedings. In addition, from time to time, various legislation and administrative regulations have been enacted, promulgated or proposed to impose obligations on present and former manufacturers of lead pigments and lead-based paints respecting asserted health concerns associated with such products or to overturn the effect of court decisions in which the Company and other manufacturers have been successful.Due to the uncertainties involved, management is unable to predict the outcome of the lead pigment and lead-based paint litigation, the number or nature of possible future claims and proceedings or the effect that any legislation and/or administrative regulations may have on the litigation or against the Company. In addition, management cannot reasonably determine the scope or amount of the potential costs and liabilities related to such litigation, or resulting from any such legislation and regulations. Except with respect to the litigation in California discussed below, the Company has not accrued any amounts for such litigation because the Company does not believe it is probable that a loss has occurred, and the Company believes it is not possible to estimate the range of potential losses as there is no substantive information upon which an estimate could be based. In addition, any potential liability that may result from any changes to legislation and regulations cannot reasonably be estimated. Due to the uncertainties associated with the amount of any such liability and/or the nature of any other remedy which may be imposed in such litigation, any potential liability determined to be attributable to the Company arising out of such litigation may have a material adverse effect on the Company’s results of operations, liquidity or financial condition. An estimate of the potential impact on the Company’s results of operations, cash flow, liquidity or financial condition cannot be made due to the aforementioned uncertainties.7081861IMPO.A (PDF_D SWOP) p15-118.indd 8681861IMPO.A (PDF_D SWOP) p15-118.indd 862/18/22 10:57 AM2/18/22 10:57 AMPublic Nuisance Claim Litigation. The Company and other companies are or were defendants in legal proceedings seeking recovery based on public nuisance liability theories, among other theories, brought by the State of Rhode Island; the City of St. Louis, Missouri; various cities and counties in the State of New Jersey; various cities in the State of Ohio and the State of Ohio; the City of Chicago, Illinois; the City of Milwaukee, Wisconsin; the County of Santa Clara, California, and other public entities in the State of California; and Lehigh and Montgomery Counties in Pennsylvania. Except for the Santa Clara County, California proceeding and the pending Pennsylvania proceedings, all of these legal proceedings have been concluded in favor of the Company and other defendants at various stages in the proceedings.Santa Clara County, California Proceeding. The Santa Clara County, California proceeding was initiated in March 2000 in the Superior Court of the State of California, County of Santa Clara. After nearly twenty years of litigation, the Company and two other defendants (ConAgra Grocery Products Company and NL Industries, Inc.) reached an agreement in principle with the plaintiffs to resolve the litigation on July 17, 2019. The agreement provides that, in full and final satisfaction of any and all claims of the plaintiffs, the defendants collectively shall pay a total of $305.0 million, with the defendants each paying approximately $101.7 million as follows: (i) an initial payment of $25.0 million within sixty days after the entry of a dismissal order and judgment; (ii) subsequent annual payments of $12.0 million one year after the initial payment and for a period of four years thereafter; and (iii) a final payment of approximately $16.7 million on the sixth anniversary of the initial payment. Should NL Industries fail to make any of its payments required under the agreement, the Company has agreed to backstop and pay on behalf of NL Industries a maximum amount of $15.0 million. On July 24, 2019, the trial court approved the agreement, discharged the receiver, and granted a judgment of dismissal with prejudice in favor of the defendants. At December 31, 2021 and 2020, the Company had accruals for this agreement reported on the balance sheet of $52.7 million and $64.7 million, respectively, with $12.0 million included in Current liabilities and the remaining $40.7 million and $52.7 million, respectively, included in Other long-term liabilities.Pennsylvania Proceedings. Two proceedings in Pennsylvania were initiated in October 2018. The Pennsylvania counties of Montgomery and Lehigh filed complaints against the Company and several other former lead-based paint and lead pigment manufacturers in the Courts of Common Pleas of Montgomery County, Pennsylvania and Lehigh County, Pennsylvania, respectively. In both actions, the counties request declaratory relief establishing the existence of a public nuisance and the defendants’ contribution to it, the abatement of an ongoing public nuisance arising from the presence of lead-based paint in housing throughout the applicable county, an injunction against future illicit conduct, and the costs of litigation and attorneys’ fees. After the defendants removed the actions to federal court and the actions were remanded to state court, the defendants filed preliminary objections on December 21, 2020, seeking to dismiss the complaints with prejudice. The briefing associated with the preliminary objections concluded on February 23, 2021.In the Lehigh County action, the trial court denied the defendants’ preliminary objections on August 6, 2021. Defendants filed a motion to amend the order to allow an interlocutory appeal or, in the alternative, for reconsideration. The trial court denied the defendants’ motion on September 13, 2021. On September 27, 2021, the Company answered the complaint, asserted new matter and affirmative defenses, alleged counterclaims against Lehigh County, and filed a third-party complaint against certain County officials, other owners of pre-1980 housing, and lead abatement contractors who have been cited for violating state or local laws. On October 13, 2021, the defendants filed with the Superior Court, one of Pennsylvania’s intermediate appellate courts, a petition for permission to appeal the trial court’s order denying the defendants’ preliminary objections. On November 17, 2021, the Superior Court transferred the appeal to the Commonwealth Court, another one of Pennsylvania’s intermediate appellate courts. Lehigh County filed its answer to defendants’ petition for permission to appeal on January 7, 2022. All deadlines and discovery in the Lehigh County action will be held in abeyance pending the appellate court proceedings.In the Montgomery County action, the trial court denied the defendants’ preliminary objections on October 15, 2021. The defendants filed a motion to amend the order overruling their preliminary objections to allow an interlocutory appeal, which the trial court granted on November 9, 2021. On December 3, 2021, the defendants filed a petition for permission to appeal with the Commonwealth Court. On January 18, 2022, Montgomery County filed its answer to defendants’ petition for permission to appeal. All deadlines and discovery in the Montgomery County action will be held in abeyance pending the appellate court proceedings.Litigation seeking damages from alleged personal injury. The Company and other companies are defendants in a number of legal proceedings seeking monetary damages and other relief from alleged personal injuries. These proceedings include claims by children allegedly injured from ingestion of lead pigment or lead-containing paint and claims for damages allegedly incurred by the children’s parents or guardians. These proceedings generally seek compensatory and punitive damages, and seek other relief including medical monitoring costs. These proceedings include purported claims by individuals, groups of individuals and class actions.The plaintiff in Thomas v. Lead Industries Association, et al., initiated an action in Wisconsin state court against the Company, other alleged former lead pigment manufacturers and the Lead Industries Association in September 1999. The claims against 7181861IMPO.A (PDF_D SWOP) p15-118.indd 8781861IMPO.A (PDF_D SWOP) p15-118.indd 872/18/22 10:57 AM2/18/22 10:57 AMthe defendants included strict liability, negligence, negligent misrepresentation and omissions, fraudulent misrepresentation and omissions, concert of action, civil conspiracy and enterprise liability. Implicit within these claims is the theory of “risk contribution” liability (Wisconsin’s theory is similar to market share liability, except that liability can be joint and several) due to the plaintiff’s inability to identify the manufacturer of any product that allegedly injured the plaintiff. The case ultimately proceeded to trial and, on November 5, 2007, the jury returned a defense verdict, finding that the plaintiff had ingested white lead carbonate, but was not brain damaged or injured as a result. The plaintiff appealed, and on December 16, 2010, the Wisconsin Court of Appeals affirmed the final judgment in favor of the defendants.Wisconsin is the only jurisdiction to date to apply a theory of liability with respect to alleged personal injury (i.e., risk contribution/market share liability) that does not require the plaintiff to identify the manufacturer of the product that allegedly injured the plaintiff in the lead pigment and lead-based paint litigation. Although the risk contribution liability theory was applied during the Thomas trial, the constitutionality of this theory as applied to the lead pigment cases has not been judicially determined by the Wisconsin state courts. However, in an unrelated action filed in the United States District Court for the Eastern District of Wisconsin, Gibson v. American Cyanamid, et al., on November 15, 2010, the district court held that Wisconsin’s risk contribution theory as applied in that case violated the defendants’ right to substantive due process and is unconstitutionally retroactive. The district court’s decision in Gibson v. American Cyanamid, et al., was appealed by the plaintiff to the United States Court of Appeals for the Seventh Circuit. On July 24, 2014, the Seventh Circuit reversed the judgment and remanded the case back to the district court for further proceedings. On January 16, 2015, the defendants filed a petition for certiorari in the United States Supreme Court seeking review of the Seventh Circuit’s decision, and on May 18, 2015, the United States Supreme Court denied the defendants’ petition. The case is currently pending in the district court.The United States District Court for the Eastern District of Wisconsin consolidated three cases (Ravon Owens v. American Cyanamid, et al., Cesar Sifuentes v. American Cyanamid, et al., and Glenn Burton, Jr. v. American Cyanamid, et al.) for purposes of trial. A trial was held in May 2019 and resulted in a jury verdict for the three plaintiffs in the amount of $2.0 million each for a total of $6.0 million against the Company and two other defendants (Armstrong Containers Inc. and E.I. du Pont de Nemours). After post-trial motions resulted in the damages award to plaintiff Glenn Burton, Jr. being reduced to $800,000, the Company filed a notice of appeal with the United States Court of Appeals for the Seventh Circuit. On April 15, 2021, the Seventh Circuit reversed the judgments and held that the Company was entitled to judgment as a matter of law on all claims filed by the three plaintiffs. The plaintiffs filed a petition with the Seventh Circuit on April 27, 2021, seeking a rehearing en banc and, in the alternative, a request for certification of questions to the Wisconsin Supreme Court. The plaintiffs’ petition was denied by the Seventh Circuit on May 12, 2021.In Maniya Allen, et al. v. American Cyanamid, et al., also pending in the United States District Court for the Eastern District of Wisconsin, cases involving six of the 146 plaintiffs were selected for discovery. In Dijonae Trammell, et al. v. American Cyanamid, et al., also pending in the United States District Court for the Eastern District of Wisconsin, discovery for one of the three plaintiffs was consolidated with the six Allen cases referenced above. The parties selected four of the cases to proceed to expert discovery and to prepare for trial. The district court previously issued an order scheduling trial in the four cases to commence on June 15, 2020, but the trial date was continued due to the COVID-19 pandemic, and no new trial date has been scheduled.On May 20, 2021, the Company and the three other defendants filed motions for summary judgment to dismiss the claims of all plaintiffs currently pending in the district court as a result of the Seventh Circuit’s decision in favor of the Company in the Owens, Sifuentes and Burton cases. The plaintiffs filed their briefs in opposition to the defendants’ motions for summary judgment on November 22, 2021. The defendants filed replies in support of their motions for summary judgment on December 22, 2021. The parties are awaiting the district court’s decision.On August 24, 2021, the plaintiff in Arrieona Beal v. Armstrong Containers, Inc., et al. filed an amended complaint in Milwaukee County Circuit Court, naming the Company and other alleged former lead pigment manufacturers as defendants pursuant to the risk contribution liability theory. The defendants answered the plaintiff’s complaint on December 17, 2021. The Company intends to vigorously defend this litigation.Other lead-based paint and lead pigment litigation. In Mary Lewis v. Lead Industries Association, et al. pending in the Circuit Court of Cook County, Illinois, parents seek to recover the cost of their children’s blood lead testing against the Company and three other defendants that made (or whose alleged corporate predecessors made) white lead pigments. The circuit court had certified a statewide class and a Chicago subclass of parents or legal guardians of children who lived in high-risk zip codes identified by the Illinois Department of Health and who were screened for lead toxicity between August 1995 and February 2008. Excluded from the class were those parents or guardians who have incurred no expense, liability or obligation to pay for the cost of their children’s blood lead testing. In 2017, the defendants moved for summary judgment on the grounds that the three named plaintiffs have not paid and have no obligation or liability to pay for their children’s blood lead testing because Medicaid paid for the children of two plaintiffs and private insurance paid for the third plaintiff without any evidence 7281861IMPO.A (PDF_D SWOP) p15-118.indd 8881861IMPO.A (PDF_D SWOP) p15-118.indd 882/18/22 10:57 AM2/18/22 10:57 AMof a co-pay or deductible. The circuit court granted the motion, but on September 7, 2018, the appellate court reversed with respect to the two plaintiffs for whom Medicaid paid for their children’s testing. Defendants appealed to the Supreme Court of Illinois, and on May 21, 2020, the Supreme Court reversed the appellate court’s judgment, affirmed the circuit court’s summary judgment dismissing the claims of the two plaintiffs for whom Medicaid paid for their children’s testing, and remanded the case for further proceedings consistent with the Supreme Court’s decision. On August 19, 2020, the defendants filed their renewed motion for class decertification and entry of final judgment with the circuit court. The parties filed their respective briefs on the motion, and oral argument occurred on February 4, 2021. On March 8, 2021, the Illinois Department of Healthcare and Family Services filed a petition to intervene and a proposed amended complaint, which would eliminate the class and all prior claims by individual plaintiffs and would propose a subrogation claim by the State agency to recover its expenditures for blood lead testing. Defendants opposed the petition to intervene, and briefing on the petition concluded. A hearing on the petition to intervene occurred on August 10, 2021.On October 8, 2021, the circuit court entered an order granting the defendants’ motion for decertification of the class, denying the petition to intervene by the Illinois Department of Healthcare and Family Services, and noting that an entry of final judgment in the defendants’ favor was now appropriate. On October 19, 2021, the circuit court entered final judgment in favor of the defendants. On November 5, 2021, the Illinois Department of Healthcare and Family Services filed a Notice of Appeal with the Appellate Court of Illinois, First District. Insurance coverage litigation. The Company and its liability insurers, including certain underwriters at Lloyd’s of London, initiated legal proceedings against each other to determine, among other things, whether the costs and liabilities associated with the abatement of lead pigment are covered under certain insurance policies issued to the Company. The insurers’ action, which was filed on February 23, 2006 in the Supreme Court of the State of New York, County of New York, has been dismissed.The Company’s action, filed on March 3, 2006 in the Common Pleas Court, Cuyahoga County, Ohio, previously was stayed and inactive. On January 9, 2019, the Company filed an unopposed motion to lift the stay with the trial court, which was granted, allowing the case to proceed. On June 28, 2019, the Company and its liability insurers each filed separate motions for summary judgment seeking various forms of relief. The trial court entered an order on December 4, 2020, granting the insurers’ motion for summary judgment, denying the Company’s motion, and entering final judgment in favor of the insurers. The trial court sided with the Company on all of the issues presented, except one. On December 21, 2020, the Company filed a notice of appeal to the Court of Appeals of Cuyahoga County, Ohio, Eighth Appellate District, and the insurers filed cross-appeals. Briefing on the issues concluded, and oral argument occurred on August 25, 2021. The insurers then filed on January 13, 2022, a motion for leave to file a supplemental brief to address the Eighth Appellate District’s recent decision in Cincinnati Ins. Co. v. Discount Drug Mart, Inc. The Company filed a response to the insurers’ motion on January 19, 2022. The parties are awaiting the appellate court’s decision.An ultimate loss in the insurance coverage litigation would mean that insurance proceeds could be unavailable under the policies at issue to mitigate any ultimate abatement related costs and liabilities. The Company has not recorded any assets related to these insurance policies or otherwise assumed that proceeds from these insurance policies would be received in estimating any contingent liability accrual. Therefore, an ultimate loss in the insurance coverage litigation without a determination of liability against the Company in the lead pigment or lead-based paint litigation will have no impact on the Company’s results of operation, liquidity or financial condition. As previously stated, however, except with respect to the litigation in California discussed above, the Company has not accrued any amounts for the lead pigment or lead-based paint litigation and any significant liability ultimately determined to be attributable to the Company relating to such litigation may result in a material impact on the Company’s results of operations, liquidity or financial condition for the annual or interim period during which such liability is accrued.Other litigation. On December 18, 2019, the New Jersey Department of Environmental Protection, the Commissioner of the New Jersey Department of Environmental Protection, and the Administrator of the New Jersey Spill Compensation Fund filed a lawsuit against the Company in the Superior Court of New Jersey Law Division in Camden County, New Jersey. The plaintiffs seek to recover natural resource damages, punitive damages, and litigation fees and costs, as well as other costs, damages, declaratory relief, and penalties pursuant to New Jersey state statutes and common law theories in connection with the alleged discharge of hazardous substances and pollutants at the Company’s Gibbsboro, New Jersey site, a former manufacturing plant and related facilities. On February 21, 2020, the Company filed a motion to dismiss. Briefing concluded, and a hearing on the motion to dismiss occurred. The trial court entered an order on August 26, 2021, granting and denying the Company’s motion in part. On September 15, 2021, the Company filed a petition for leave to appeal the trial court’s ruling regarding the refusal to dismiss plaintiffs’ statutory penalty claims. On October 21, 2021, the Appellate Division of the Superior Court of New Jersey denied the petition. The Company also answered the plaintiffs’ complaint on September 21, 2021.7381861IMPO.A (PDF_D SWOP) p15-118.indd 8981861IMPO.A (PDF_D SWOP) p15-118.indd 892/18/22 10:57 AM2/18/22 10:57 AMNOTE 11 – CAPITAL STOCKDuring the first quarter of 2021, the Company’s Board of Directors approved and declared a three-for-one stock split to shareholders of record at the close of business on March 23, 2021 (the Stock Split). The Stock Split was effected on March 31, 2021. All share and per share information herein has been retroactively adjusted to reflect the Stock Split.At December 31, 2021, there were 900,000,000 shares of common stock and 90,000,000 shares of serial preferred stock authorized for issuance. Of the authorized serial preferred stock, 9,000,000 shares are designated as cumulative redeemable serial preferred and 3,000,000 shares are designated as convertible serial preferred stock. Under the 2006 Equity and Performance Incentive Plan (2006 Employee Plan), 71,100,000 shares may be issued or transferred. An aggregate of 19,135,222, 21,007,911 and 24,776,304 shares of common stock at December 31, 2021, 2020 and 2019, respectively, were reserved for the exercise and future grants of option rights and future grants of restricted stock and restricted stock units. See Note 13 for additional information related to stock-based compensation. Shares outstanding shown in the following table included 1,426,883, 1,469,712 and 1,469,349 shares of common stock held in a revocable trust at December 31, 2021, 2020 and 2019, respectively. The revocable trust is used to accumulate assets for the purpose of funding the ultimate obligation of certain non-qualified benefit plans. Transactions between the Company and the trust are accounted for in accordance with the Deferred Compensation – Rabbi Trusts Subtopic of the Compensation Topic of the ASC, which requires the assets held by the trust be consolidated with the Company’s accounts.Sharesin TreasurySharesOutstandingBalance at January 1, 201975,765,108 279,350,286 Shares issued for exercise of option rights2,705,634 Shares tendered as payment for option rights exercised11,514 (11,514) Shares issued for vesting of restricted stock units480,396 Shares tendered in connection with vesting of restricted stock units165,285 (165,285) Treasury stock purchased5,025,000 (5,025,000) Shares transferred from defined benefit pension plan (1)900,000 (900,000) Balance at December 31, 201981,866,907 276,434,517 Shares issued for exercise of option rights2,873,646 Shares tendered as payment for option rights exercised10,140 (10,140) Shares issued for vesting of restricted stock units386,685 Shares tendered in connection with vesting of restricted stock units133,077 (133,077) Treasury stock purchased11,700,000 (11,700,000) Treasury stock retired(91,746,432) Shares sold (1)(825,000) 825,000 Balance at December 31, 20201,138,692 268,676,631 Shares issued for exercise of option rights2,365,168 Shares tendered as payment for option rights exercised4,324 (4,324) Shares issued for vesting of restricted stock units276,948 Shares tendered in connection with vesting of restricted stock units95,618 (95,618) Treasury stock purchased10,075,000 (10,075,000) Balance at December 31, 202111,313,634 261,143,805 (1)During the year ended December 31, 2019, 900,000 shares were transferred from the Company’s terminated domestic defined benefit pension plansurplus assets in connection with the plan’s termination as described in Note 7. In accordance with ASC 715, the transferred shares are treated astreasury stock. During the year ended December 31, 2020, the Company received proceeds of $182.4 million in conjunction with the issuance of 825,000 treasury shares to fund Company contributions to the domestic defined contribution plan.7481861IMPO.A (PDF_D SWOP) p15-118.indd 9081861IMPO.A (PDF_D SWOP) p15-118.indd 902/18/22 10:57 AM2/18/22 10:57 AMNOTE 12 – ESOPAs of December 31, 2021, 42,721 employees contributed to the Company’s ESOP, a voluntary defined contribution plan available to all eligible salaried employees. Participants are allowed to contribute, on a pretax or after-tax basis, up to the lesser of fifty percent of their annual compensation or the maximum dollar amount allowed under the Internal Revenue Code. The Company matches one hundred percent of all contributions up to six percent of eligible employee contributions. Such participant contributions may be invested in a variety of investment funds or a Company common stock fund and may be exchanged between investments as directed by the participant. Participants are permitted to diversify both future and prior Company matching contributions previously allocated to the Company common stock fund into a variety of investment funds. The Company made contributions to the ESOP on behalf of participating employees, representing amounts authorized by employees to be withheld from their earnings, of $224.3 million, $196.5 million and $180.5 million in 2021, 2020 and 2019, respectively. The Company’s matching contributions to the ESOP charged to operations were $133.7 million, $120.0 million and $111.9 million for 2021, 2020 and 2019, respectively. At December 31, 2021, there were 20,639,085 shares of the Company’s common stock being held by the ESOP, representing 7.9% of the total number of voting shares outstanding. Shares of Company common stock credited to each member’s account under the ESOP are voted by the trustee under instructions from each individual plan member. Shares for which no instructions are received are voted by the trustee in the same proportion as those for which instructions are received.NOTE 13 – STOCK-BASED COMPENSATIONThe 2006 Employee Plan authorizes the Board of Directors, or a committee of the Board of Directors, to issue or transfer up to an aggregate of 71,100,000 shares of common stock, plus any shares relating to awards that expire, are forfeited or canceled. The Company issues new shares upon exercise of option rights and vesting of restricted stock units (RSUs). The 2006 Employee Plan permits the granting of option rights, appreciation rights, restricted stock, RSUs, performance shares and performance units to eligible employees. At December 31, 2021, no appreciation rights, performance shares or performance units had been granted under the 2006 Employee Plan. Shares available for future grants under the 2006 Employee Plan were 9,923,164 at December 31, 2021. The 2006 Stock Plan for Nonemployee Directors (Nonemployee Director Plan) authorizes the Board of Directors, or a committee of the Board of Directors, to issue or transfer up to an aggregate of 600,000 shares of common stock, plus any shares relating to awards that expire, are forfeited or canceled. The Nonemployee Director Plan permits the granting of option rights, appreciation rights, restricted stock and RSUs to members of the Board of Directors who are not employees of the Company. At December 31, 2021, no option rights or appreciation rights had been granted under the Nonemployee Director Plan. Shares available for future grants under the Nonemployee Director Plan were 229,123 at December 31, 2021.The cost of the Company’s stock-based compensation is recorded in accordance with the Stock Compensation Topic of the ASC. At December 31, 2021, the Company had total unrecognized stock-based compensation expense of $149.8 million that is expected to be recognized over a weighted-average period of 1.06 years. Stock-based compensation expense during 2021, 2020 and 2019 was $97.7 million, $95.9 million and $101.7 million, respectively. The related tax benefit was $24.1 million, $23.6 million and $25.1 million during 2021, 2020 and 2019, respectively. Excess tax benefits from share-based payments are recognized as an income tax benefit in the statement of consolidated income when options are exercised and RSUs vest. For the years ended December 31, 2021, 2020 and 2019, the Company’s excess tax benefit from options exercised and RSUs vested reduced the income tax provision by $108.7 million, $94.7 million, and $65.2 million respectively. Option RightsThe fair value of the Company’s option rights was estimated at the date of grant using a Black-Scholes-Merton option-pricing model with the following weighted-average assumptions for all options granted:202120202019Risk-free interest rate 1.11 % .39 % 1.64 %Expected life of option rights5.05 years5.05 years5.05 yearsExpected dividend yield of stock .75 % .88 % .87 %Expected volatility of stock 26.8 % 26.7 % 23.2 %7581861IMPO.A (PDF_D SWOP) p15-118.indd 9181861IMPO.A (PDF_D SWOP) p15-118.indd 912/18/22 10:57 AM2/18/22 10:57 AMThe risk-free interest rate is based upon the U.S. Treasury yield curve at the time of grant. The expected life of option rights was calculated using a scenario analysis model. Historical data was used to aggregate the holding period from actual exercises, post-vesting cancellations and hypothetical assumed exercises on all outstanding option rights. The expected dividend yield of stock is the Company’s best estimate of the expected future dividend yield. Expected volatility of stock was calculated using historical and implied volatilities.Grants of option rights for non-qualified and incentive stock options have been awarded to certain officers and key employees under the 2006 Employee Plan. The option rights generally become exercisable to the extent of one-third of the optioned shares for each full year following the date of grant and generally expire ten years after the date of grant. Unrecognized compensation expense with respect to option rights granted to eligible employees amounted to $79.5 million at December 31, 2021. The unrecognized compensation expense is being amortized on a straight-line basis over the three-year vesting period, net of estimated forfeitures based on historical activity, and is expected to be recognized over a weighted-average period of 1.09 years.The weighted-average per share grant date fair value of options granted during 2021, 2020 and 2019 was $68.63, $46.56 and $38.80, respectively. The total intrinsic value of option rights exercised during 2021, 2020, and 2019 was $485.8 million, $407.9 million and $285.8 million, respectively. The total fair value of options vested during 2021, 2020 and 2019 was $53.2 million, $51.0 million and $43.2 million, respectively. There were no outstanding option rights for nonemployee directors at December 31, 2021, 2020 and 2019.A summary of the Company’s non-qualified and incentive stock option right activity is shown in the following table:202120202019OptionedSharesWeighted-AverageExercisePricePer ShareAggregateIntrinsicValue(in millions)OptionedSharesWeighted-AverageExercisePricePer ShareAggregateIntrinsicValue(in millions)OptionedSharesWeighted-AverageExercisePricePer ShareAggregateIntrinsicValue(in millions)Outstanding at beginning of year 10,503,378 $ 120.34 12,119,187 $ 96.82 13,455,747 $ 79.51 Granted972,575 292.15 1,373,793 213.39 1,496,658 183.11 Exercised (2,362,173) 82.50 (2,872,836) 63.63 (2,706,498) 57.12 Forfeited(124,967) 195.90 (113,715) 170.80 (120,936) 126.71 Expired(5,878) 141.27 (3,051) 139.55 (5,784) 115.23 Outstanding at end of year 8,982,935 $ 147.83 $ 1,835.5 10,503,378 $ 120.34 $ 1,309.1 12,119,187 $ 96.82 $ 1,184.0 Exercisable at end of year 6,713,727 $ 116.32 $ 1,583.4 7,681,440 $ 95.07 $ 1,151.5 8,920,968 $ 75.50 $ 1,061.7 The weighted-average remaining term for options outstanding at the end of 2021, 2020 and 2019 was 6.09, 6.12 and 6.02 years, respectively. The weighted-average remaining term for options exercisable at the end of 2021, 2020 and 2019 was 5.12, 5.06 and 4.95 years, respectively. RSUsGrants of RSUs, which generally require three years of continuous employment from the date of grant before vesting and receiving the stock without restriction, have been awarded to certain officers and key employees under the 2006 Employee Plan. The February 2021, 2020 and 2019 grants consisted of performance-based awards that vest at the end of a three-year period based on the Company’s achievement of specified financial and operating performance goals relating to earnings per share and return on net assets employed.Unrecognized compensation expense with respect to grants of RSUs to eligible employees amounted to $68.6 million at December 31, 2021 and is being amortized on a straight-line basis over the vesting period and is expected to be recognized over a weighted-average period of 0.91 years.Grants of RSUs have been awarded to nonemployee directors under the Nonemployee Director Plan. These grants generally vest and stock is received without restriction to the extent of one-third of the RSUs for each year following the date of grant. Unrecognized compensation expense with respect to grants of RSUs to nonemployee directors amounted to $1.7 million at December 31, 2021 and is being amortized on a straight-line basis over the three-year vesting period and is expected to be recognized over a weighted-average period of 0.94 years.7681861IMPO.A (PDF_D SWOP) p15-118.indd 9281861IMPO.A (PDF_D SWOP) p15-118.indd 922/18/22 10:57 AM2/18/22 10:57 AMA summary of the Company’s RSU activity for the years ended December 31 is shown in the following table:202120202019Outstanding at beginning of year625,383 744,516 871,206 Granted 196,526 287,919 393,825 Vested(276,948) (386,685) (506,190) Forfeited(34,281) (20,367) (14,325) Outstanding at end of year510,680 625,383 744,516 The weighted-average per share fair value of RSUs granted during 2021, 2020 and 2019 was $238.89, $193.79 and $144.18, respectively.NOTE 14 – ACCUMULATED OTHER COMPREHENSIVE LOSSThe components of AOCI, including the reclassification adjustments for items that were reclassified from AOCI to net income, are shown below. Foreign Currency Translation AdjustmentsPension and Other Postretirement Benefits AdjustmentsUnrealized Net Gains on Cash Flow HedgesTotalBalance at January 1, 2019$ (607.6) $ (67.1) $ 44.8 $ (629.9) Reclassifications from AOCI to Retained earnings for adoption of ASU 2018-02(19.3) 11.0 (8.3) Amounts recognized in AOCI(49.8) (5.1) (54.9) Amounts reclassified from AOCI22.3 (8.7) 13.6 Balance at December 31, 2019(657.4) (69.2) 47.1 (679.5) Amounts recognized in AOCI(14.1) (19.4) (33.5) Amounts reclassified from AOCI1.4 (6.7) (5.3) Balance at December 31, 2020(671.5) (87.2) 40.4 (718.3) Amounts recognized in AOCI(30.6) 48.7 18.1 Amounts reclassified from AOCI6.3 (4.5) 1.8 Balance at December 31, 2021$ (702.1) $ (32.2) $ 35.9 $ (698.4) NOTE 15 – DERIVATIVES AND HEDGINGIn February 2020, the Company entered into two U.S. Dollar to Euro cross currency swap contracts to hedge the Company’s net investment in its European operations. The contracts, which were designated as net investment hedges, have a notional value of $500.0 million and $244.0 million, respectively, with maturity dates of June 1, 2024 and November 15, 2021, respectively. During the term of the $500.0 million contract, the Company will pay fixed-rate interest in Euros and receive fixed-rate interest in U.S. Dollars, thereby effectively converting a portion of the Company’s U.S. Dollar denominated fixed-rate debt to Euro denominated fixed-rate debt. During the term of the $244.0 million contract, the Company paid floating-rate interest in Euros and received floating-rate interest in U.S. Dollars. Prior to the maturity of the $244.0 million floating-rate contract in November 2021, the Company entered into a new $244.0 million U.S. Dollar to Euro cross currency swap contract with a maturity date of June 1, 2027 to effectively amend and extend the original contract. During the term of this $244.0 million fixed-rate contract, which is designated as a net investment hedge, the Company will pay fixed-rate interest in Euros and receive fixed-rate interest in U.S. Dollars, thereby effectively converting a portion of the Company’s U.S. Dollar denominated fixed-rate debt to Euro denominated fixed-rate debt.7781861IMPO.A (PDF_D SWOP) p15-118.indd 9381861IMPO.A (PDF_D SWOP) p15-118.indd 932/18/22 10:57 AM2/18/22 10:57 AMOn May 9, 2019, the Company entered into a U.S. Dollar to Euro cross currency swap contract with a total notional amount of $400.0 million to hedge the Company’s net investment in its European operations. This contract was designated as a net investment hedge and had a maturity date of January 15, 2022. During the term of the contract, the Company paid fixed-rate interest in Euros and received fixed-rate interest in U.S. Dollars, thereby effectively converting a portion of the Company’s U.S. Dollar denominated fixed-rate debt to Euro denominated fixed-rate debt. In February 2020, the Company settled its $400.0 million U.S. Dollar to Euro cross currency swap contract. At the time of the settlement, an unrealized gain of $11.8 million, net of tax, was recognized in AOCI. The following table summarizes the balance sheet location of the cross currency swaps. See Note 16 for additional information on the fair value of these contracts. December 31,December 31,December 31,202120202019Other assets$ — $ — $ 1.5 Other accruals— 31.0 — Other long-term liabilities36.5 54.8 — The changes in fair value of the cross currency swap contracts are recognized in the foreign currency translation adjustments component of AOCI. The following table summarizes the unrealized gains (losses) for the years ended December 31:202120202019Unrealized gain (loss)$ 49.3 $ (71.7) $ 1.5 Tax effect(12.2) 17.7 (0.4) Unrealized gain (loss), net of taxes$ 37.1 $ (54.0) $ 1.1 NOTE 16 – FAIR VALUE MEASUREMENTSThe Fair Value Measurements and Disclosures Topic of the ASC applies to the Company’s financial and non-financial assets and liabilities. The guidance applies when other standards require or permit the fair value measurement of assets and liabilities. Under the guidance, assets and liabilities measured at fair value are categorized as follows:Level 1: Quoted prices in active markets for identical assetsLevel 2: Significant other observable inputsLevel 3: Significant unobservable inputsThere were no assets and liabilities measured at fair value on a recurring basis classified as Level 3 at December 31, 2021, 2020 and 2019. Except for the acquisition and divestiture-related fair value measurements described in Note 3, there were no assets and liabilities measured at fair value on a nonrecurring basis. The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis, categorized using the fair value hierarchy. December 31, 2021December 31, 2020December 31, 2019TotalLevel 1Level 2TotalLevel 1Level 2TotalLevel 1Level 2Assets:Deferred compensation plan assets$ 80.4 $ 43.1 $ 37.3 $ 69.2 $ 37.9 $ 31.3 $ 61.1 $ 29.9 $ 31.2 Qualified Replacement Plan assets98.8 98.8 161.5 161.5 46.6 46.6 Net investment hedge asset— — 1.5 1.5 $ 179.2 $ 141.9 $ 37.3 $ 230.7 $ 199.4 $ 31.3 $ 109.2 $ 76.5 $ 32.7 Liabilities:Net investment hedge liability$ 36.5 $ 36.5 $ 85.8 $ 85.8 $ — 7881861IMPO.A (PDF_D SWOP) p15-118.indd 9481861IMPO.A (PDF_D SWOP) p15-118.indd 942/18/22 10:57 AM2/18/22 10:57 AMThe deferred compensation plan assets consist of the investment funds maintained for the future payments under the Company’s executive deferred compensation plans, which are structured as rabbi trusts. The investments are marketable securities accounted for under the Debt and Equity Securities Topic of the ASC. The level 1 investments are valued using quoted market prices multiplied by the number of shares. The level 2 investments are valued based on vendor quotes. The cost basis of the investment funds was $63.0 million, $58.1 million, and $54.8 million at December 31, 2021, 2020 and 2019, respectively.The Qualified Replacement Plan assets consist of investment funds maintained for future contributions to the Company’s domestic defined contribution plan. See Note 7. The investments are marketable securities accounted for under the Debt and Equity Securities Topic of the ASC. The investments are valued using quoted market prices multiplied by the number of shares. The cost basis of the investment funds was $86.9 million, $159.6 million and $46.7 million at December 31, 2021, 2020 and 2019, respectively.The net investment hedge liability is the fair value of the cross currency swaps (see Note 15). The fair value is based on a valuation model that uses observable inputs, including interest rate curves and foreign currency rate.The carrying amounts reported for Cash and cash equivalents and Short-term borrowings approximate fair value.The fair value of the Company’s publicly traded debt is based on quoted market prices. The fair value of the Company’s non-publicly traded debt is estimated using discounted cash flow analyses, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. The Company’s publicly traded debt and non-traded debt are classified as level 1 and level 2, respectively, in the fair value hierarchy. The following table summarizes the carrying amounts and fair values of the Company’s publicly traded debt and non-traded debt. December 31,202120202019Carrying AmountFairValueCarrying AmountFairValueCarrying AmountFair ValuePublicly traded debt$ 8,849.6 $ 9,777.4 $ 8,265.2 $ 9,707.0 $ 8,203.2 $ 8,735.8 Non-traded debt1.9 1.9 26.8 26.5 277.3 270.7 NOTE 17 – REVENUEThe Company manufactures and sells paint, stains, supplies, equipment and floor covering through company-operated stores, branded and private label products through retailers, and a broad range of industrial coatings directly to global manufacturing customers through company-operated branches. A large portion of the Company’s revenue is recognized at a point in time and made to customers who are not engaged in a long-term supply agreement or any form of contract with the Company. These sales are paid for at the time of sale in cash, credit card or on account with the vast majority of customers having terms between 30 and 60 days, not to exceed one year. Many customers who purchase on account take advantage of early payment discounts offered by paying within 30 days of being invoiced. The Company estimates variable consideration for these sales on the basis of both historical information and current trends to estimate the expected amount of discounts to which customers are likely to be entitled.The remaining revenue is governed by long-term supply agreements and related purchase orders (“contracts”) that specify shipping terms and aspects of the transaction price including rebates, discounts and other sales incentives, such as advertising support. Contracts are at standalone pricing. The performance obligation in these contracts is determined by each of the individual purchase orders and the respective stated quantities, with revenue being recognized at a point in time when obligations under the terms of the agreement are satisfied. This generally occurs with the transfer of control of our products to the customer. Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. Refer to Note 21 for the Company’s disaggregation of net sales by reportable segment. As the reportable segments are aligned by similar economic factors, trends and customers, this disaggregation best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Approximately 80% of the Company’s net external sales are in the Company’s North America region (which is comprised of the United States, Canada and the Caribbean region), slightly less than 10% in the EMEAI region (Europe, Middle East, Africa and India), with the remaining global regions accounting for the residual balance. No individual country outside of the United States is individually significant.7981861IMPO.A (PDF_D SWOP) p15-118.indd 9581861IMPO.A (PDF_D SWOP) p15-118.indd 952/18/22 10:57 AM2/18/22 10:57 AMThe Company has made payments or credits for rebates or incentives at the beginning of a long-term contract where future revenue is expected and before satisfaction of performance obligations. Under these circumstances, the Company recognizes a contract asset and amortizes these prepayments over the expected benefit life of the long-term contract typically on a straight-line basis. The majority of variable consideration in the Company’s contracts include a form of volume rebate, discounts, and other incentives, where the customer receives a retrospective percentage rebate based on the amount of their purchases. In these situations, the rebates are accrued as a fixed percentage of sales and recorded as a reduction of net sales until paid to the customer per the terms of the contract. Forms of variable consideration such as tiered rebates, whereby a customer receives a retrospective price decrease dependent on the volume of their purchases, are calculated using a forecasted percentage to determine the most likely amount to accrue. Management creates a baseline calculation using historical sales and then utilizing forecast information, estimates the anticipated sales volume each quarter to calculate the expected reduction to sales. The remainder of the transaction price is fixed as agreed upon with the customer, limiting estimation of revenues including constraints. The Company’s Accounts receivable and current and long-term contract assets and liabilities are summarized in the following table.Accounts Receivable, Less AllowanceContract Assets (Current)Contract Assets (Long-Term)Contract Liabilities (Current)Contract Liabilities (Long-Term)Balance sheet caption:Accounts receivableOther current assetsOther assetsOther accrualsOther liabilitiesBalance at December 31, 2020$ 2,078.1 $ 52.0 $ 170.7 $ 266.3 $ 8.2 Balance at December 31, 20212,352.4 60.9 131.2 259.8 9.2 The difference between the opening and closing balances of the Company’s contract assets and contract liabilities primarily results from the timing difference between the Company’s performance and the customer’s payment. Provisions for estimated returns are established and the expected costs continue to be recognized as contra-revenue per ASC 606 when the products are sold. The Company only offers an assurance type warranty on products sold, and there is no material service to the customer beyond fixing defects that existed at the time of sale and no warranties are sold separately. Warranty liabilities are excluded from the table above. Amounts recognized during the year from deferred revenue were not material. The Company records a right of return liability within each of its operations to accrue for expected customer returns. Historical actual returns are used to estimate future returns as a percentage of current sales. Obligations for returns and refunds were not material individually or in the aggregate.Allowance for Credit LossesThe Company’s primary allowance for credit losses is the allowance for doubtful accounts. The allowance for doubtful accounts reduces the Accounts receivable balance to the estimated net realizable value. The Company reviews the collectibility of the Accounts receivable balance each reporting period and estimates the allowance based on historical bad debt experience, aging of accounts receivable, current creditworthiness of customers, current economic factors, as well as reasonable and supportable forward-looking information. Accounts receivable balances are written-off against the allowance if a final determination of uncollectibility is made. All provisions for allowances for doubtful accounts are included in Selling, general and administrative expenses. The following table summarizes the movement in the Company’s allowance for doubtful accounts:202120202019Beginning balance$ 53.5 $ 36.5 $ 45.9 Adjustment upon adoption of ASU 2016-13(1)3.0 Bad debt expense33.8 56.8 53.1 Uncollectible accounts written off, net of recoveries(38.4) (42.8) (62.5) Ending balance$ 48.9 $ 53.5 $ 36.5 (1)The Company adopted ASU 2016-13 effective January 1, 2020, using the modified retrospective transition method, electing to not restate priorperiods. Refer to Note 1 for additional detail.8081861IMPO.A (PDF_D SWOP) p15-118.indd 9681861IMPO.A (PDF_D SWOP) p15-118.indd 962/18/22 10:57 AM2/18/22 10:57 AMNOTE 18 – OTHER EXPENSE (INCOME)Other General Expense - Net Included in Other general expense - net were the following:202120202019Provisions for environmental matters - net$ (4.0) $ 37.1 $ 23.0 Loss on divestiture (see Note 3)111.9 — — (Gain) loss on sale or disposition of assets(6.1) (9.4) 16.1 Total$ 101.8 $ 27.7 $ 39.1 Provisions for environmental matters–net represent initial provisions for site-specific estimated costs of environmental investigation or remediation and increases or decreases to environmental-related accruals as information becomes available upon which more accurate costs can be reasonably estimated and as additional accounting guidelines are issued. See Note 9 for further details on the Company’s environmental-related activities.The (gain) loss on sale or disposition of assets represents the net realized (gain) loss associated with the sale or disposal of property, plant and equipment and intangible assets previously used in the conduct of the primary business of the Company.Other (Income) Expense - Net Included in Other (income) expense - net were the following:202120202019Investment and royalty income$ (30.4) $ (16.4) $ (12.0) (Gain) loss on extinguishment of debt (see Note 6)(1.4) 21.3 14.8 Net expense from banking activities10.3 10.4 10.7 Foreign currency transaction related losses12.0 7.2 19.7 Domestic pension plan settlement expense— — 32.4 Miscellaneous pension expense4.4 4.9 8.0 Indirect tax credits— — (38.7) California litigation expense (see Note 10)— — (34.7) Other income(29.0) (44.7) (32.8) Other expense14.6 22.6 14.6 Total$ (19.5) $ 5.3 $ (18.0) Foreign currency transaction related losses include the impact from foreign currency transactions and net realized (gains) losses from foreign currency option and forward contracts. There were no material foreign currency option and forward contracts outstanding at December 31, 2021, 2020 and 2019.Miscellaneous pension expense consists of the non-service components of net pension costs. See Note 7 for information on the Domestic pension plan settlement expense and Miscellaneous pension expense.Indirect tax credits includes a gain of $33.5 million recognized by Sherwin-Williams do Brasil Industria e Comercio Ltda. (Sherwin-Williams Brazil) in the fourth quarter of 2019 related to the recovery of certain social contribution (PIS/COFINS) taxes paid over gross sales including ICMS receipts, a type of state level value-added tax in Brazil. In 2014, Sherwin-Williams Brazil filed a lawsuit against the Brazilian tax authorities to challenge the inclusion of ICMS on the PIS/COFINS tax base. During 2019, Sherwin-Williams Brazil received a favorable final, non-appealable decision against the Brazilian tax authorities. Upon clarification regarding monetization of the credits, the Company recognized the benefit.Other income and Other expense included items of revenue, gains, expenses and losses that were unrelated to the primary business purpose of the Company. There were no items within Other income or Other expense that were individually significant in December 31, 2021, 2020 and 2019.8181861IMPO.A (PDF_D SWOP) p15-118.indd 9781861IMPO.A (PDF_D SWOP) p15-118.indd 972/18/22 10:57 AM2/18/22 10:57 AMNOTE 19 – INCOME TAXESIn response to the COVID-19 outbreak, global legislation concerning income taxes was passed throughout 2020. The Company assessed the applicability of the stimulus elements within the global legislation, and it did not have a material impact on the Company’s consolidated financial statements in 2020 or 2021. The primary benefit to the Company was the delay of payment of U.S. federal and state income taxes as well as U.S. federal payroll withholding taxes until subsequent periods.During 2019, the Company recorded an increase to the tax provision of $74.3 million related to the reversal of all net tax benefits recognized in previous tax years from federal renewable energy tax credit funds with DC Solar Solutions, Inc. and certain of its affiliates. The facts relating to the Company’s investments in the funds continue to be developed. There were no adjustments recognized in the Company’s tax provision for this matter in 2020 or 2021.Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes using the enacted tax rates and laws that are currently in effect. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2021, 2020 and 2019 were as follows:202120202019Deferred tax assets:Environmental and other similar items$ 73.2 $ 82.9 $ 83.5 Employee related and benefit items170.3 166.6 129.3 Operating lease liabilities463.1 448.9 430.6 Other items 192.0 232.8 204.0 Total deferred tax assets898.6 931.2 847.4 Deferred tax liabilities:Intangible assets and Property, plant, and equipment1,053.7 1,156.4 1,232.6 LIFO inventories68.6 87.6 80.5 Operating lease right-of-use assets448.4 434.0 417.8 Other items 33.3 31.7 28.1 Total deferred tax liabilities1,604.0 1,709.7 1,759.0 Net deferred tax liabilities $ 705.4 $ 778.5 $ 911.6 As of December 31, 2021, the Company’s net deferred income tax liability relates primarily to deferred tax liabilities recorded for intangible assets acquired through the Valspar acquisition.Netted against the Company’s other deferred tax assets were valuation allowances of $97.2 million, $104.6 million and $84.6 million at December 31, 2021, 2020 and 2019, respectively. The decrease in the valuation allowance in 2021 is primarily due to the utilization of certain foreign tax credits during the year. The Company has $17.6 million of domestic net operating loss carryforwards acquired through acquisitions that have expiration dates through the tax year 2037, foreign tax credits of $15.3 million that expire in calendar years 2028 through 2031 and foreign net operating losses of $327.5 million. The foreign net operating losses are related to various jurisdictions that provide for both indefinite carryforward periods and others with carryforward periods that range from the tax years 2021 to 2041.8281861IMPO.A (PDF_D SWOP) p15-118.indd 9881861IMPO.A (PDF_D SWOP) p15-118.indd 982/18/22 10:57 AM2/18/22 10:57 AMSignificant components of the provisions for income taxes were as follows:202120202019Current:Federal$ 331.2 $ 457.7 $ 440.1 Foreign86.5 92.0 71.1 State and local46.8 84.4 60.4 Total current464.5 634.1 571.6 Deferred:Federal(36.5) (102.7) (83.7) Foreign(40.4) (19.0) (32.3) State and local(3.4) (23.6) (15.1) Total deferred(80.3) (145.3) (131.1) Total provisions for income taxes$ 384.2 $ 488.8 $ 440.5 Under provisions of the Tax Cuts and Jobs Act (Tax Act), the Company received an income tax benefit of $12.2 million, $12.0 million and $10.4 million in 2021, 2020 and 2019, respectively, related to foreign derived intangible income and incurred income tax expense of $2.7 million, $7.0 million and $7.9 million in 2021, 2020 and 2019, respectively, related to Global Intangible Low Taxed Income (GILTI). The Company has made an accounting policy election to record GILTI as a period cost.Significant components of income before income taxes as used for income tax purposes, were as follows:202120202019Domestic$ 2,106.8 $ 2,317.9 $ 1,899.6 Foreign141.8 201.3 82.2 $ 2,248.6 $ 2,519.2 $ 1,981.8 A reconciliation of the statutory federal income tax rate to the effective tax rate follows: 202120202019Statutory federal income tax rate 21.0 % 21.0 % 21.0 %Effect of:State and local income taxes 2.2 2.5 2.3 Investment vehicles (0.8) (0.8) (1.3) Employee share-based payments (4.8) (3.8) (3.3) Research and development credits (0.6) (0.5) (1.1) Amended returns and refunds 0.2 0.3 0.1 Tax credit reversal — — 3.7 Other - net (0.1) 0.7 0.8 Reported effective tax rate 17.1 % 19.4 % 22.2 %The decrease in the effective tax rate for 2021 compared to 2020 was primarily due to an increase in tax benefits related to employee share-based payments and the net favorable impact of various other tax benefits received by the Company in 2021 compared to 2020. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. The IRS is currently auditing the Company’s 2013, 2014, 2015 and 2016 income tax returns. As a result of these audits, certain adjustments have been assessed. The Company has filed a protest, submitted additional information for consideration, and is currently in the appeals process with the IRS. The Company continues to evaluate the adjustments and believes that it is adequately reserved for any potential exposure. As of December 31, 2021, the U.S. federal statute of limitations has not expired for the 2013 through 2020 tax years.As of December 31, 2021, the Company is subject to non-U.S. income tax examinations for the tax years of 2014 through 2020. In addition, the Company is subject to state and local income tax examinations for the tax years 1998 through 2021.8381861IMPO.A (PDF_D SWOP) p15-118.indd 9981861IMPO.A (PDF_D SWOP) p15-118.indd 992/18/22 10:57 AM2/18/22 10:57 AMA reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:202120202019Balance at beginning of year$ 227.0 $ 203.0 $ 89.5 Additions based on tax positions related to the current year14.0 13.8 14.9 Additions for tax positions of prior years23.1 16.4 107.9 Reductions for tax positions of prior years(22.1) (3.3) (3.6) Settlements(5.6) (2.0) — Lapses of statutes of limitations(7.9) (0.9) (5.7) Balance at end of year$ 228.5 $ 227.0 $ 203.0 The increase in unrecognized tax benefits was primarily related to the reversal of benefits recognized in previous tax years from federal research and development credits, partially offset by a number of positions taken on prior year income tax returns filed in the U.S. and various foreign jurisdictions that were no longer deemed to be at risk. At December 31, 2021, 2020 and 2019, the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $218.9 million, $216.3 million and $195.3 million, respectively.Included in the balance of unrecognized tax benefits at December 31, 2021 is $13.7 million related to tax positions for which it is reasonably possible that the total amounts could significantly change during the next twelve months. This amount represents a decrease in unrecognized tax benefits comprised primarily of items related to federal audits of partnership investments and expiring statutes in federal, foreign and state jurisdictions.The Company classifies all income tax related interest and penalties as income tax expense. During the year ended December 31, 2021, there was a decrease in income tax interest and penalties of $2.7 million. During the years ended December 31, 2020 and 2019, there was an increase in income tax interest and penalties of $4.0 million and $1.6 million, respectively. The Company accrued $26.4 million, $30.3 million and $26.2 million at December 31, 2021, 2020 and 2019, respectively, for the potential payment of interest and penalties.NOTE 20 – NET INCOME PER SHARE Basic and diluted net income per share are calculated using the treasury stock method. (in millions, except per share data)202120202019BasicNet income$ 1,864.4 $ 2,030.4 $ 1,541.3 Average shares outstanding262.5 271.3 275.4 Basic net income per share$ 7.10 $ 7.48 $ 5.60 DilutedNet income$ 1,864.4 $ 2,030.4 $ 1,541.3 Average shares outstanding assuming dilution:Average shares outstanding262.5 271.3 275.4 Stock options and other contingently issuable shares (1)4.6 4.5 4.8 Non-vested restricted stock grants— — 0.1 Average shares outstanding assuming dilution267.1 275.8 280.3 Diluted net income per share$ 6.98 $ 7.36 $ 5.50 (1)Stock options and other contingently issuable shares excludes 0.9 million, 1.0 million and 1.3 million shares at December 31, 2021, 2020 and 2019,respectively, due to their anti-dilutive effect.8481861IMPO.A (PDF_D SWOP) p15-118.indd 10081861IMPO.A (PDF_D SWOP) p15-118.indd 1002/18/22 10:57 AM2/18/22 10:57 AMNOTE 21 – REPORTABLE SEGMENT INFORMATIONThe Company reports its segment information in the same way that management internally organizes its business for assessing performance and making decisions regarding allocation of resources in accordance with the Segment Reporting Topic of the ASC. The Company has three reportable operating segments: The Americas Group, Consumer Brands Group and Performance Coatings Group (individually, a Reportable Segment and collectively, the Reportable Segments). Factors considered in determining the three Reportable Segments of the Company include the nature of business activities, the management structure directly accountable to the Company’s chief operating decision maker (CODM) for operating and administrative activities, availability of discrete financial information and information presented to the Board of Directors. The Company reports all other business activities and immaterial operating segments that are not reportable in the Administrative segment. The Company’s CODM has been identified as the Chief Executive Officer because he has final authority over performance assessment and resource allocation decisions. Because of the diverse operations of the Company, the CODM regularly receives discrete financial information about each Reportable Segment as well as a significant amount of additional financial information about certain divisions, business units or subsidiaries of the Company. The CODM uses all such financial information for performance assessment and resource allocation decisions. The CODM evaluates the performance of and allocates resources to the Reportable Segments based on segment profit or loss and cash generated from operations. The accounting policies of the Reportable Segments are the same as those described in Note 1 of this report.The Americas Group consisted of 4,859 company-operated specialty paint stores in the United States, Canada, Latin America and the Caribbean region at December 31, 2021. Each store in this segment is engaged in servicing the needs of architectural and industrial paint contractors and do-it-yourself homeowners. These stores market and sell Sherwin-Williams® and other controlled brand architectural paint and coatings, protective and marine products, OEM product finishes and related products. The majority of these products are produced by manufacturing facilities in the Consumer Brands Group. In addition, each store sells select purchased associated products. The Americas Group sells a variety of architectural paints, coatings and related products through dedicated dealers, home centers, distributors, hardware stores and other retailers throughout Latin America. The Americas Group meets regional customer demands through developing, licensing, manufacturing, distributing and selling a variety of architectural paints, coatings and related products in North and South America. The loss of any single customer would not have a material adverse effect on the business of this segment. At December 31, 2021, The Americas Group consisted of operations from subsidiaries in 10 foreign countries. During 2021, this segment opened 85 net new stores, consisting of 92 new stores opened (76 in the United States, 3 in Canada, 10 in Mexico and 3 in South America) and 7 stores closed (6 in the United States and 1 in South America). In 2020 and 2019, this segment opened 16 and 62 net new stores, respectively. The CODM uses discrete financial information about The Americas Group, supplemented with information by geographic region, product type and customer type, to assess performance of and allocate resources to The Americas Group as a whole. In accordance with ASC 280-10-50-9, The Americas Group as a whole is considered the operating segment, and because it meets the criteria in ASC 280-10-50-10, it is also considered a Reportable Segment.The Consumer Brands Group supplies a broad portfolio of branded and private-label architectural paint, stains, varnishes, industrial products, wood finishes products, wood preservatives, applicators, corrosion inhibitors, aerosols, caulks and adhesives to retailers and distributors throughout North America, as well as in China and Europe. The Consumer Brands Group also supports the Company’s other businesses around the world with new product research and development, manufacturing, distribution and logistics. Approximately 62% of the total sales of the Consumer Brands Group in 2021 were intersegment transfers of products primarily sold through The Americas Group. At December 31, 2021, the Consumer Brands Group consisted of operations in the United States and subsidiaries in 5 foreign countries. Sales and marketing of certain controlled brand and private-label products is performed by a direct sales staff. The products distributed through third-party customers are intended for resale to the ultimate end-user of the product. The Consumer Brands Group had sales to certain customers that, individually, may be a significant portion of the sales and related profitability of the segment. This segment incurred most of the Company’s capital expenditures related to operational efficiencies, capacity, health and safety at sites currently in operation. The CODM uses discrete financial information about the Consumer Brands Group, supplemented with information by product type and customer type, to assess performance of and allocate resources to the Consumer Brands Group as a whole. In accordance with ASC 280-10-50-9, the Consumer Brands Group as a whole is considered the operating segment, and because it meets the criteria in ASC 280-10-50-10, it is also considered a Reportable Segment.The Performance Coatings Group develops and sells industrial coatings for wood finishing and general industrial (metal and plastic) applications, automotive refinish, protective and marine coatings, coil coatings, packaging coatings and performance-based resins and colorants worldwide. This segment licenses certain technology and trade names worldwide. Sherwin-Williams® and other controlled brand products are distributed through The Americas Group and this segment’s 282 company-operated branches and by a direct sales staff and outside sales representatives to retailers, dealers, jobbers, licensees and other third-party distributors. The Performance Coatings Group had sales to certain customers that, individually, may be a significant portion of the sales of the segment. However, the loss of any single customer would not have a material adverse effect on the 8581861IMPO.A (PDF_D SWOP) p15-118.indd 10181861IMPO.A (PDF_D SWOP) p15-118.indd 1012/18/22 10:57 AM2/18/22 10:57 AMoverall profitability of the segment. During 2021, this segment opened 1 new branch and closed 1 branch for no net change in the number of branches operated. At December 31, 2021, the Performance Coatings Group consisted of operations in the United States and subsidiaries in 44 foreign countries. The CODM uses discrete financial information about the Performance Coatings Group, supplemented with information about geographic divisions, business units and subsidiaries, to assess performance of and allocate resources to the Performance Coatings Group as a whole. In accordance with ASC 280-10-50-9, the Performance Coatings Group as a whole is considered the operating segment, and because it meets the criteria in ASC 280-10-50-10, it is also considered a Reportable Segment.The Administrative segment includes the administrative expenses of the Company’s corporate headquarters site and the operations of a real estate management unit that is responsible for the ownership, management and leasing of non-retail properties held primarily for use by the Company, including the Company’s headquarters site, and disposal of idle facilities. Also included in the Administrative segment was interest expense, interest and investment income, certain expenses related to closed facilities and environmental-related matters, and other expenses that were not directly associated with the Reportable Segments. In addition, the Administrative segment includes the $111.9 million pre-tax loss on the Wattyl divestiture recognized during the year ended December 31, 2021. See Notes 3 and 18 for additional information on the Wattyl divestiture. Sales of this segment represented external leasing revenue of excess headquarters space or leasing of facilities no longer used by the Company in its primary businesses. The Administrative segment did not include any significant foreign operations. Gains and losses from the sale of property were not a significant operating factor in determining the performance of the Administrative segment.Net external sales of all consolidated foreign subsidiaries were $4.223 billion, $3.581 billion and $3.679 billion for 2021, 2020 and 2019, respectively.Long-lived assets consisted of Property, plant and equipment, Goodwill, Intangible assets, Operating lease right-of-use assets, Deferred pension assets and Other assets. The aggregate total of long-lived assets for the Company was $15.613 billion, $15.810 billion and, $15.865 billion at December 31, 2021, 2020 and 2019, respectively. Long-lived assets of consolidated foreign subsidiaries totaled $2.785 billion, $3.167 billion and $3.211 billion at December 31, 2021, 2020 and 2019, respectively.Total Assets of the Company were $20.667 billion, $20.402 billion and $20.496 billion at December 31, 2021, 2020 and 2019, respectively. Total assets of consolidated foreign subsidiaries were $4.653 billion, $4.834 billion and $4.829 billion, which represented 22.5%, 23.7% and 23.6% of the Company’s total assets at December 31, 2021, 2020 and 2019, respectively. No single geographic area outside the United States was significant relative to consolidated net external sales or consolidated long-lived assets. Export sales and sales to any individual customer were each less than 10 percent of consolidated sales to unaffiliated customers during all years presented.In the reportable segment financial information that follows, Segment profit was total net sales and intersegment transfers less operating costs and expenses. Identifiable assets were those directly identified with each reportable segment. The Administrative segment assets consisted primarily of cash and cash equivalents, investments, deferred pension assets and headquarters property, plant and equipment. The margin for each reportable segment was based upon total net sales and intersegment transfers. Domestic intersegment transfers were primarily accounted for at the approximate fully absorbed manufactured cost, based on normal capacity volumes, plus customary distribution costs for paint products. Non-paint domestic and all international intersegment transfers were accounted for at values comparable to normal unaffiliated customer sales. All intersegment transfers are eliminated within the Administrative segment. 8681861IMPO.A (PDF_D SWOP) p15-118.indd 10281861IMPO.A (PDF_D SWOP) p15-118.indd 1022/18/22 10:57 AM2/18/22 10:57 AM2021The Americas GroupConsumer BrandsGroupPerformance Coatings GroupAdministrativeConsolidatedTotalsNet external sales$ 11,217.0 $ 2,721.6 $ 6,003.8 $ 2.2 $ 19,944.6 Intersegment transfers— 4,411.8 149.7 (4,561.5) — Total net sales and intersegment transfers$ 11,217.0 $ 7,133.4 $ 6,153.5 $ (4,559.3) $ 19,944.6 Segment profit$ 2,239.1 $ 358.4 $ 486.2 $ 3,083.7 Interest expense$ (334.7) (334.7) Administrative expenses and other(500.4) (500.4) Income before income taxes$ 2,239.1 $ 358.4 $ 486.2 $ (835.1) $ 2,248.6 % to net external sales 20.0 % 13.2 % 8.1 % 11.3 %Identifiable assets$ 5,627.9 $ 5,161.1 $ 8,388.6 $ 1,489.1 $ 20,666.7 Capital expenditures79.2 123.9 90.8 78.1 372.0 Depreciation73.4 86.7 66.2 36.8 263.1 Amortization3.7 83.7 218.9 3.2 309.5 2020The Americas GroupConsumer BrandsGroupPerformance Coatings GroupAdministrativeConsolidatedTotalsNet external sales$ 10,383.2 $ 3,053.4 $ 4,922.4 $ 2.7 $ 18,361.7 Intersegment transfers— 3,688.4 137.1 (3,825.5) — Total net sales and intersegment transfers$ 10,383.2 $ 6,741.8 $ 5,059.5 $ (3,822.8) $ 18,361.7 Segment profit$ 2,294.1 $ 579.6 $ 500.1 $ 3,373.8 Interest expense$ (340.4) (340.4) Administrative expenses and other(514.2) (514.2) Income before income taxes$ 2,294.1 $ 579.6 $ 500.1 $ (854.6) $ 2,519.2 % to net external sales 22.1 % 19.0 % 10.2 % 13.7 %Identifiable assets$ 5,386.6 $ 5,387.4 $ 8,071.1 $ 1,556.5 $ 20,401.6 Capital expenditures63.9 89.8 43.0 107.1 303.8 Depreciation73.0 87.6 69.1 38.3 268.0 Amortization4.5 90.0 213.9 5.0 313.4 8781861IMPO.A (PDF_D SWOP) p15-118.indd 10381861IMPO.A (PDF_D SWOP) p15-118.indd 1032/18/22 10:57 AM2/18/22 10:57 AM2019The Americas GroupConsumer BrandsGroupPerformance Coatings GroupAdministrativeConsolidatedTotalsNet external sales$ 10,171.9 $ 2,676.8 $ 5,049.2 $ 2.9 $ 17,900.8 Intersegment transfers— 3,607.0 116.2 (3,723.2) — Total net sales and intersegment transfers$ 10,171.9 $ 6,283.8 $ 5,165.4 $ (3,720.3) $ 17,900.8 Segment profit$ 2,056.5 $ 373.2 $ 379.1 $ 2,808.8 Interest expense$ (349.3) (349.3) Administrative expenses and other(477.7) (477.7) Income before income taxes$ 2,056.5 $ 373.2 $ 379.1 $ (827.0) $ 1,981.8 % to net external sales 20.2 % 13.9 % 7.5 % 11.1 %Identifiable assets$ 5,399.1 $ 5,600.8 $ 8,175.6 $ 1,320.7 $ 20,496.2 Capital expenditures73.3 133.4 84.2 38.0 328.9 Depreciation72.2 81.1 70.9 37.9 262.1 Amortization4.8 90.3 212.9 4.8 312.8 NOTE 22 – SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The following tables summarize the unaudited quarterly results of operations for the years ended December 31, 2021 and 2020.20211st Quarter2nd Quarter3rd Quarter4th QuarterFull Year (1)Net sales$ 4,656.0 $ 5,379.8 $ 5,146.7 $ 4,762.1 $ 19,944.6 Gross profit2,112.0 2,411.4 2,139.6 1,879.7 8,542.7 Net income 409.6 648.6 502.2 304.0 1,864.4 Net income per share:Basic$ 1.54 $ 2.47 $ 1.92 $ 1.17 $ 7.10 Diluted$ 1.51 $ 2.42 $ 1.88 $ 1.15 $ 6.98 20201st Quarter2nd Quarter3rd Quarter4th QuarterFull Year (1)Net sales$ 4,146.7 $ 4,604.0 $ 5,122.2 $ 4,488.8 $ 18,361.7 Gross profit1,889.7 2,208.9 2,455.3 2,128.7 8,682.6 Net income321.7 595.9 705.8 407.0 2,030.4 Net income per share:Basic$ 1.18 $ 2.20 $ 2.60 $ 1.51 $ 7.48 Diluted$ 1.15 $ 2.16 $ 2.55 $ 1.49 $ 7.36 (1)The sum of the quarterly earnings per share data may not equal the full year amount as the computations of the weighted average shares outstandingfor each quarter and the full year are calculated independently.8881861IMPO.A (PDF_D SWOP) p15-118.indd 10481861IMPO.A (PDF_D SWOP) p15-118.indd 1042/18/22 10:57 AM2/18/22 10:57 AMITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENone.ITEM 9A. CONTROLS AND PROCEDURESDisclosure Controls and ProceduresAs of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chairman, President and Chief Executive Officer and our Senior Vice President – Finance and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 and Rule 15d-15 of the Securities Exchange Act of 1934, as amended (“Exchange Act”). Based upon that evaluation, our Chairman, President and Chief Executive Officer and our Senior Vice President – Finance and Chief Financial Officer concluded that as of the end of the period covered by this report our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and accumulated and communicated to our management, including our Chairman, President and Chief Executive Officer and our Senior Vice President – Finance and Chief Financial Officer, to allow timely decisions regarding required disclosure. Internal Control Over Financial ReportingThe “Report of Management on Internal Control over Financial Reporting” and the “Report of the Independent Registered Public Accounting Firm on Internal Control over Financial Reporting” are set forth in Item 8.There were no changes in our internal control over financial reporting identified in connection with the evaluation that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone.ITEM 9C. DISCLOSURE REGARDING JURISDICTIONS THAT PREVENT INSPECTIONSNot applicable.8981861IMPO.A (PDF_D SWOP) p15-118.indd 10581861IMPO.A (PDF_D SWOP) p15-118.indd 1052/18/22 10:57 AM2/18/22 10:57 AMPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEDirectorsThe information regarding our directors and director nominees is set forth in our Proxy Statement under the caption “Proposal 1 – Election of 11 Directors” and is incorporated herein by reference.There were no material changes to the procedures by which security holders may recommend nominees to our Board of Directors during 2021. Please refer to the information set forth in our Proxy Statement under the caption “Board Committees,” which is incorporated herein by reference.Executive OfficersThe information regarding our executive officers is set forth under the caption “Information About Our Executive Officers” in Part I of this report, which is incorporated herein by reference.Section 16(a) Beneficial Ownership Reporting ComplianceTo the extent disclosure of any delinquent form under Section 16(a) of the Securities Exchange Act of 1934 is made by the Company, such disclosure will be set forth in our Proxy Statement under the caption “Delinquent Section 16(a) Reports” and is incorporated herein by reference.Audit CommitteeThe information regarding the Audit Committee of our Board of Directors and audit committee financial experts is set forth in our Proxy Statement under the caption “Board Committees” and is incorporated herein by reference.Code of EthicsWe have adopted a Code of Conduct, which applies to all directors and employees, including our executive officers, of Sherwin-Williams and our subsidiaries wherever located. Our Code of Conduct contains the general guidelines and principles for conducting Sherwin-Williams’ business consistent with the highest standards of business ethics. Under our Code of Ethics for Senior Financial Management, our chief executive officer, chief financial officer and senior financial management are responsible for creating and maintaining a culture of high ethical standards and of commitment to compliance throughout our Company to ensure the fair and timely reporting of Sherwin-Williams’ financial results and condition. Senior financial management includes the controller, the treasurer, the principal financial/accounting personnel in our operating groups and divisions, and all other financial/accounting personnel within our corporate departments and operating groups and divisions with staff supervision responsibilities. Please refer to the information set forth in our Proxy Statement under the caption “Code of Conduct,” which is incorporated herein by reference. Our Code of Conduct and Code of Ethics for Senior Financial Management are available on our Investor Relations website, investors.sherwin-williams.com. We intend to disclose on our Investor Relations website, investors.sherwin-williams.com, any amendment to, or waiver from, a provision of our Code of Conduct or Code of Ethics for Senior Financial Management that applies to our directors and executive officers, including our principal executive officer, principal financial officer, principal accounting officer or controller, or any persons performing similar functions, and that is required to be publicly disclosed pursuant to the rules of the SEC.ITEM 11. EXECUTIVE COMPENSATIONThe information required by this item is set forth in our Proxy Statement under the captions “2021 Director Compensation Table,” “Director Compensation Program,” “Executive Compensation” and “Executive Compensation Tables” and is incorporated herein by reference.9081861IMPO.A (PDF_D SWOP) p15-118.indd 10681861IMPO.A (PDF_D SWOP) p15-118.indd 1062/18/22 10:57 AM2/18/22 10:57 AMITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSThe information regarding security ownership of certain beneficial owners and management is set forth in our Proxy Statement under the captions “Security Ownership of Management, Directors and Director Nominees” and “Security Ownership of Certain Beneficial Owners” and is incorporated herein by reference.The information regarding securities authorized for issuance under the Company’s equity compensation plans is set forth in our Proxy Statement under the caption “Equity Compensation Plan Information” and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by this item is set forth in our Proxy Statement under the captions “Certain Relationships and Transactions with Related Persons” and “Director Independence” and is incorporated herein by reference.ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this item is set forth in our Proxy Statement under the caption “Matters Relating to the Independent Registered Public Accounting Firm” and is incorporated herein by reference.9181861IMPO.A (PDF_D SWOP) p15-118.indd 10781861IMPO.A (PDF_D SWOP) p15-118.indd 1072/18/22 10:57 AM2/18/22 10:57 AMPART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES(a)(1)Financial Statements Page Number in Form 10-KStatements of Consolidated Income46Statements of Consolidated Comprehensive Income47Consolidated Balance Sheets48Statements of Consolidated Cash Flows49Statements of Consolidated Shareholders’ Equity50Notes to Consolidated Financial Statements51(2)Financial Statement ScheduleSchedule II — Valuation and Qualifying Accounts and Reserves for the years ended December 31, 2021, 2020 and 2019 is set forth below. All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.Valuation and Qualifying Accounts and Reserves(Schedule II)Changes in deferred tax asset valuation allowances were as follows:(millions of dollars)202120202019Beginning balance$ 104.6 $ 84.6 $ 73.5 (Deductions) additions (1)(7.4) 20.0 7.4 Acquired balances— — 3.7 Ending balance$ 97.2 $ 104.6 $ 84.6 (1)(Deductions) additions did not have a material impact on the Income Statement in 2021, 2020 or 2019.9281861IMPO.A (PDF_D SWOP) p15-118.indd 10881861IMPO.A (PDF_D SWOP) p15-118.indd 1082/18/22 4:59 PM2/18/22 4:59 PM(3)Exhibits2.Agreement and Plan of Merger, among the Company, Viking Merger Sub, Inc., and The Valspar Corporation, dated as of March 19, 2016, filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K dated March 19, 2016, and incorporated herein by reference.3.(a) Amended and Restated Articles of Incorporation of the Company, as amended through February 18, 2015,filed as Exhibit 3 to the Company's Current Report on Form 8-K dated February 18, 2015, and incorporated herein by reference.(b)Amendment to the Amended and Restated Articles of Incorporation of the Company, as amended through February 18, 2015, filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated March 3, 2021, and incorporated herein by reference.(c)Regulations of the Company, as amended and restated October 17, 2018, filed as Exhibit 3.1 to the Company's Current Report on Form 8-K dated October 17, 2018, and incorporated herein by reference.4. (a) Description of Securities Registered under Section 12 of the Securities Exchange Act of 1934 (filedherewith).(b)Indenture between the Company and The Bank of New York Mellon (as successor to Chemical Bank), as trustee, dated as of February 1, 1996, filed as Exhibit 4(a) to Form S-3 Registration Statement Number333-01093 dated February 20, 1996, and incorporated herein by reference.(c)Second Supplemental Indenture by and between the Company and The Bank of New York Mellon, as trustee (including Form of Note), dated as of December 7, 2012, filed as Exhibit 4.1 to the Company's Current Report on Form 8-K dated December 4, 2012, and incorporated herein by reference.(d)Third Supplemental Indenture by and between the Company and The Bank of New York Mellon, as trustee (including Form of Note), dated as of December 7, 2012, filed as Exhibit 4.2 to the Company's Current Report on Form 8-K dated December 4, 2012, and incorporated herein by reference.(e)Indenture by and between the Company and Wells Fargo Bank, National Association, as trustee, dated July 31, 2015, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated July 28, 2015, and incorporated herein by reference.(f)First Supplemental Indenture by and between the Company and Wells Fargo Bank, National Association, as trustee, dated July 31, 2015, (including Form of Note), filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated July 28, 2015, and incorporated herein by reference.(g)Second Supplemental Indenture by and between the Company and Wells Fargo Bank, National Association, as trustee, dated July 31, 2015, (including Form of Note), filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K dated July 28, 2015, and incorporated herein by reference.(h)Third Supplemental Indenture by and between the Company and Wells Fargo Bank, National Association, as trustee, dated May 16, 2017 (including Form of Note), filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated May 16, 2017, and incorporated herein by reference.(i)Fourth Supplemental Indenture by and between the Company and Wells Fargo Bank, National Association, as trustee, dated May 16, 2017 (including Form of Note), filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated May 16, 2017, and incorporated herein by reference.(j)Fifth Supplemental Indenture by and between the Company and Wells Fargo Bank, National Association, as trustee, dated May 16, 2017 (including Form of Note), filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K dated May 16, 2017, and incorporated herein by reference.(k)Sixth Supplemental Indenture by and between the Company and Wells Fargo Bank, National Association, as trustee, dated May 16, 2017 (including Form of Note), filed as Exhibit 4.4 to the Company’s Current Report on Form 8-K dated May 16, 2017, and incorporated herein by reference.(l)Seventh Supplemental Indenture by and between the Company and Wells Fargo Bank, National Association, as trustee, dated May 16, 2017 (including Form of Note), filed as Exhibit 4.5 to the Company’s Current Report on Form 8-K dated May 16, 2017, and incorporated herein by reference.(m)Eighth Supplemental Indenture by and between the Company and Wells Fargo Bank, National Association, as trustee, dated June 2, 2017 (including Form of Note), filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated June 2, 2017, and incorporated herein by reference.(n)Ninth Supplemental Indenture by and between the Company and Wells Fargo Bank, National Association, as trustee, dated June 2, 2017 (including Form of Note), filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated June 2, 2017, and incorporated herein by reference.9381861IMPO.A (PDF_D SWOP) p15-118.indd 10981861IMPO.A (PDF_D SWOP) p15-118.indd 1092/18/22 5:15 PM2/18/22 5:15 PM(o)Tenth Supplemental Indenture by and between the Company and Wells Fargo Bank, National Association, as trustee, dated June 2, 2017 (including Form of Note), filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K dated June 2, 2017, and incorporated herein by reference.(p)Eleventh Supplemental Indenture by and between the Company and Wells Fargo Bank, National Association, as trustee, dated June 2, 2017 (including Form of Note), filed as Exhibit 4.4 to the Company’s Current Report on Form 8-K dated June 2, 2017, and incorporated herein by reference.(q)Twelfth Supplemental Indenture by and between the Company and Wells Fargo Bank, National Association, as trustee, dated June 2, 2017 (including Form of Note), filed as Exhibit 4.5 to the Company’s Current Report on Form 8-K dated June 2, 2017, and incorporated herein by reference.(r)Thirteenth Supplemental Indenture by and between the Company and Wells Fargo Bank, National Association, as trustee, dated August 26, 2019 (including Form of Note), filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated August 26, 2019, and incorporated herein by reference.(s)Fourteenth Supplemental Indenture by and between the Company and Wells Fargo Bank, National Association, as trustee, dated August 26, 2019 (including Form of Note), filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated August 26, 2019, and incorporated herein by reference.(t)Fifteenth Supplemental Indenture by and between the Company and Wells Fargo Bank, National Association, as trustee, dated March 17, 2020 (including Form of Note), filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated March 17, 2020, and incorporated herein by reference.(u)Sixteenth Supplemental Indenture by and between the Company and Wells Fargo Bank, National Association, as trustee, dated March 17, 2020 (including Form of Note), filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated March 17, 2020, and incorporated herein by reference.(v)Seventeenth Supplemental Indenture by and between the Company and U.S. Bank National Association, as trustee, dated November 10, 2021 (including Form of Note), filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated November 10, 2021, and incorporated herein by reference.(w)Eighteenth Supplemental Indenture by and between the Company and U.S. Bank National Association, as Trustee, dated November 10, 2021 (including Form of Note), filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated November 10, 2021, and incorporated herein by reference.(x)Credit Agreement, dated as of June 29, 2021, by and among the Company, Sherwin-Williams Canada Inc. and Sherwin-Williams Luxembourg S.à r.l., as borrowers, the lenders party thereto, the issuing lenders party thereto and Citibank, N.A., as administrative agent, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated June 29, 2021, and incorporated herein by reference.(y)Credit Agreement, dated as of May 9, 2016, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated May 9, 2016, and incorporated herein by reference.(z)Agreement for Letter of Credit, dated as of May 9, 2016, by and between the Company and Citibank, N.A. filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated May 9, 2016, and incorporated herein by reference.(aa) Amendment No. 1 to the Credit Agreement, dated as of May 12, 2016, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated May 12, 2016, and incorporated herein by reference.(bb) Amendment No. 2 to the Credit Agreement, dated as of June 20, 2016, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated June 20, 2016, and incorporated herein by reference.(cc) Amendment No. 3 to the Credit Agreement, dated as of August 1, 2016, by and among the Company,Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated August 1, 2016, and incorporated herein by reference.(dd) Amendment No. 4 to the Credit Agreement, dated as of January 31, 2017, by and among the Company,Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated January 31, 2017, and incorporated herein by reference.9481861IMPO.A (PDF_D SWOP) p15-118.indd 11081861IMPO.A (PDF_D SWOP) p15-118.indd 1102/18/22 10:57 AM2/18/22 10:57 AM(ee) Amendment No. 5 to the Credit Agreement, dated as of February 13, 2017, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated February 13, 2017, and incorporated herein by reference.(ff) Amendment No. 6 to the Credit Agreement, dated as of February 27, 2017, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated February 27, 2017, and incorporated herein by reference.(gg) Amendment No. 7 to the Credit Agreement, dated as of May 8, 2017, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated May 8, 2017, and incorporated herein by reference.(hh) Amendment No. 8 to the Credit Agreement, dated as of May 11, 2017, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated May 11, 2017, and incorporated herein by reference.(ii) Amendment No. 9 to the Credit Agreement, dated as of February 27, 2018, by and among the Company,Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated February 27, 2018, and incorporated herein by reference.(jj) Amendment No. 10 to the Credit Agreement, dated as of July 26, 2018, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated July 26, 2018, and incorporated herein by reference.(kk) Amendment No. 11 to the Credit Agreement, dated as of September 14, 2020, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated September 14, 2020, and incorporated herein by reference.(ll) Amendment No. 12 to the Credit Agreement, dated as of November 9, 2020, by and among the Company,Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated November 9, 2020, and incorporated herein by reference.(mm) Amendment No. 13 to the Credit Agreement, dated as of December 7, 2020, by and among the Company,Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated December 7, 2020, and incorporated herein by reference.(nn) Amendment No. 14 to the Credit Agreement, dated as of February 16, 2021, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated February 16, 2021, and incorporated herein by reference.(oo) Amendment No. 15 to the Credit Agreement, dated as of May 3, 2021, by and among the Company, Citicorp USA, Inc., as administrative agent and issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated May 3, 2021, and incorporated herein by reference.(pp) Amendment No. 1 to the Agreement for Letter of Credit, dated as of July 26, 2018, by and between the Company and Citibank, N.A., filed as Exhibit 4.4 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018, and incorporated herein by reference.(qq) Amended and Restated Credit Agreement, dated as of August 2, 2021, by and among the Company, Goldman Sachs Bank USA, as administrative agent, Goldman Sachs Mortgage Company, as issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated August 2, 2021, and incorporated herein by reference.(rr) Amendment No. 1 to the Amended and Restated Credit Agreement, dated as of August 6, 2021, by and among the Company, Goldman Sachs Bank USA, as administrative agent, Goldman Sachs Mortgage Company, as issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated August 6, 2021, and incorporated herein by reference.9581861IMPO.A (PDF_D SWOP) p15-118.indd 11181861IMPO.A (PDF_D SWOP) p15-118.indd 1112/18/22 10:57 AM2/18/22 10:57 AM(ss) Amendment No. 2 to the Amended and Restated Credit Agreement, dated as of November 18, 2021, by and among the Company, Goldman Sachs Bank USA, as administrative agent, Goldman Sachs Mortgage Company, as issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated November 18, 2021, and incorporated herein by reference.(tt) Amendment No. 3 to the Amended and Restated Credit Agreement, dated as of November 30, 2021, by and among the Company, Goldman Sachs Bank USA, as administrative agent, Goldman Sachs Mortgage Company, as issuing bank, and the lenders party thereto, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated November 30, 2021, and incorporated herein by reference.10. **(a) Forms of Amended and Restated Severance Agreements filed as Exhibit 10(e) to the Company's AnnualReport on Form 10-K for the fiscal year ended December 31, 2010, and incorporated herein by reference.**(b) Schedule of Executive Officers who are Parties to the Amended and Restated Severance Agreements in the forms referred to in Exhibit 10(a) above (filed herewith).**(c) Amended and Restated Aircraft Time Sharing Agreement between the Company and John G. Morikis, dated October 1, 2019, filed as Exhibit 10(c) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and incorporated herein by reference.**(d) The Sherwin-Williams Company 2005 Deferred Compensation Savings and Pension Equalization Plan (Amended and Restated Effective as of January 1, 2016) filed as Exhibit 10(e) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015, and incorporated herein by reference.**(e) The Sherwin-Williams Company 2005 Key Management Deferred Compensation Plan (Amended and Restated Effective as of January 1, 2016) filed as Exhibit 10(f) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015, and incorporated herein by reference.**(f) Adoption Agreement for The Valspar Corporation Nonqualified Deferred Compensation Plan filed as Exhibit 10.1 to The Valspar Corporation’s Current Report on Form 8-K dated May 15, 2014, and incorporated herein by reference.**(g) The Valspar Corporation Nonqualified Deferred Compensation Plan filed as Exhibit 10.2 to The Valspar Corporation’s Current Report on Form 8-K dated May 15, 2014, and incorporated herein by reference.**(h) Amendment to Valspar Corporation Nonqualified Deferred Compensation Plan and Adoption Agreement filed as Exhibit 10.1 to The Valspar Corporation’s Current Report on Form 8-K dated September 27, 2016, and incorporated herein by reference.**(i) The Sherwin-Williams Company 2005 Director Deferred Fee Plan (Amended and Restated Effective as of January 1, 2019) filed as Exhibit 10(l) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and incorporated herein by reference.**(j) The Sherwin-Williams Company Executive Disability Income Plan filed as Exhibit 10(g) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1991 (SEC File Number 001-04851), and incorporated herein by reference.**(k) Amendment Number One to The Sherwin-Williams Company Executive Disability Income Plan filed as Exhibit 10(l) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009, and incorporated herein by reference.**(l) Summary of The Sherwin-Williams Company Revised Executive Disability Plan filed as Exhibit 10(o) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013, and incorporated herein by reference.**(m) The Sherwin-Williams Company 2008 Amended and Restated Executive Life Insurance Plan filed as Exhibit 10(m) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009, and incorporated herein by reference.**(n) The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan (Amended and Restated as of April 19, 2017) filed as Exhibit 10(k) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017, and incorporated herein by reference.**(o) Forms of Stock Option Award under The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan filed as Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012, and incorporated herein by reference.**(p) Forms of Stock Option Award under The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan filed as Exhibit 10(z) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, and incorporated herein by reference.9681861IMPO.A (PDF_D SWOP) p15-118.indd 11281861IMPO.A (PDF_D SWOP) p15-118.indd 1122/18/22 4:59 PM2/18/22 4:59 PM**(q) Forms of Stock Option Award under The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan filed as Exhibit 10(x) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015, and incorporated herein by reference.**(r) Forms of Stock Option Award under The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017, and incorporated herein by reference.**(s) Forms of Stock Option Award under The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan filed as Exhibit 10(p) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017, and incorporated herein by reference.**(t) Forms of Stock Option Award under The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan filed as Exhibit 10(x) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and incorporated herein by reference.**(u) Form of Restricted Stock Units Award Agreement under The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan filed as Exhibit 10(s) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, and incorporated herein by reference.**(v) Form of Restricted Stock Units Award Agreement under The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan filed as Exhibit 10(aa) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and incorporated herein by reference.**(w) Form of Restricted Stock Units Award Agreement under The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan (filed herewith).**(x) The Sherwin-Williams Company 2006 Stock Plan for Nonemployee Directors (Amended and Restated as of April 20, 2016) filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016, and incorporated herein by reference.**(y) Form of Restricted Stock Units Award Agreement under The Sherwin-Williams Company 2006 Stock Plan for Nonemployee Directors filed as Exhibit 10(gg) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, and incorporated herein by reference.**(z) The Sherwin-Williams Company 2007 Executive Annual Performance Bonus Plan (Amended and Restated as of April 19, 2017) filed as Exhibit 10(w) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, and incorporated herein by reference.**(aa) The Sherwin-Williams Company Key Employee Separation Plan as Amended and Restated Effective March 1, 2022 (filed herewith).21. Subsidiaries (filed herewith).23.Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm (filed herewith).24.(a) Powers of Attorney (filed herewith).(b)Certified Resolution Authorizing Signature by Power of Attorney (filed herewith).25.(a) Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer (filed herewith).(b) Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer (filed herewith).32. (a) Section 1350 Certification of Chief Executive Officer (furnished herewith).(b) Section 1350 Certification of Chief Financial Officer (furnished herewith).9781861IMPO.A (PDF_D SWOP) p15-118.indd 11381861IMPO.A (PDF_D SWOP) p15-118.indd 1132/18/22 10:57 AM2/18/22 10:57 AM101.INSInline XBRL Instance Document - the instance document does not appear in the interactive data filebecause its XBRL tags are embedded within the Inline XBRL document.101.SCHInline XBRL Taxonomy Extension Schema Document101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document101.LABInline XBRL Taxonomy Extension Label Linkbase Document101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document104The cover page from this Annual Report on Form 10-K for the fiscal year ended December 31, 2021, formatted in Inline XBRL and contained in Exhibit 101. *Certain exhibits and schedules have been omitted and the Company agrees to furnish supplementally to theSecurities and Exchange Commission a copy of any omitted exhibits and schedules upon request.**Management contract or compensatory plan or arrangement.ITEM 16. FORM 10-K SUMMARYNone.9881861IMPO.A (PDF_D SWOP) p15-118.indd 11481861IMPO.A (PDF_D SWOP) p15-118.indd 1142/18/22 10:57 AM2/18/22 10:57 AMSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 17, 2022.THE SHERWIN-WILLIAMS COMPANYBy:/S/MARY L. GARCEAUMary L. Garceau, SecretaryPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 17, 2022.*JOHN G. MORIKISChairman, President and Chief Executive Officer, Director(Principal Executive Officer) John G. Morikis*ALLEN J. MISTYSYNSenior Vice President – Finance and Chief Financial Officer (Principal Financial Officer) Allen J. Mistysyn*JANE M. CRONINSenior Vice President – Corporate Controller(Principal Accounting Officer) Jane M. Cronin*KERRII B. ANDERSONDirector Kerrii B. Anderson*ARTHUR F. ANTONDirector Arthur F. Anton *JEFF M. FETTIGDirector Jeff M. Fettig*RICHARD J. KRAMERDirector Richard J. Kramer*CHRISTINE A. POONDirector Christine A. Poon*AARON M. POWELLDirector Aaron M. Powell*MARTA R. STEWARTDirector Marta R. Stewart*MICHAEL H. THAMANDirector Michael H. Thaman*MATTHEW THORNTON IIIDirector Matthew Thornton III*STEVEN H. WUNNINGDirector Steven H. Wunning*The undersigned, by signing her name hereto, does sign this report on behalf of the designated officers and directors ofthe Company pursuant to powers of attorney executed on behalf of each such officer and director and filed as an exhibitto this report.By:/S/MARY L. GARCEAUFebruary 17, 2022Mary L. Garceau, Attorney-in-fact9981861IMPO.A (PDF_D SWOP) p15-118.indd 11581861IMPO.A (PDF_D SWOP) p15-118.indd 1152/18/22 10:57 AM2/18/22 10:57 AM[THIS PAGE INTENTIONALLY LEFT BLANK] 81861IMPO.A (PDF_D SWOP) p15-118.indd 11681861IMPO.A (PDF_D SWOP) p15-118.indd 1162/18/22 10:57 AM2/18/22 10:57 AM[THIS PAGE INTENTIONALLY LEFT BLANK] 81861IMPO.A (PDF_D SWOP) p15-118.indd 11781861IMPO.A (PDF_D SWOP) p15-118.indd 1172/18/22 10:57 AM2/18/22 10:57 AM[THIS PAGE INTENTIONALLY LEFT BLANK] 81861IMPO.A (PDF_D SWOP) p15-118.indd 11881861IMPO.A (PDF_D SWOP) p15-118.indd 1182/18/22 10:57 AM2/18/22 10:57 AMThe Sherwin-Williams Company The Company was founded by Henry Sherwin and Edward Williams in 1866. Today, we are a global leader in the development, manufacture, distribution and sale of paint, coatings and related products to professional, industrial, commercial and retail customers. Financial Highlights (millions of dollars, except per share data) Net sales Net income (1) Diluted net income per share (2) Cash dividends per share Return on sales Return on assets Return on equity (3) Total debt to capitalization Interest coverage (4) 2021 2020 2019 $ 19,944.6 $ 18,361.7 $ 17,900.8 $ 1,864.4 $ 2,030.4 $ 1,541.3 $ $ 6.98 2.20 $ $ 7.36 1.79 $ $ 5.50 1.51 9.3% 9.0% 51.6% 79.8% 7.7x 11.1% 10.0% 49.2% 69.7% 8.4x 8.6% 7.5% 41.3% 67.8% 6.7x Average shares outstanding – diluted (thousands) 267,088 275,828 280,341 Net Sales millions of dollars Net Income(1) millions of dollars Diluted Net Income Per Share(2) Net Operating Cash millions of dollars 6 . 4 4 9 , 9 1 $ 7 . 1 6 3 , 8 1 $ 8 . 0 0 9 , 7 1 $ 4 . 0 3 0 , 2 $ 4 . 4 6 8 , 1 $ 3 . 1 4 5 , 1 $ 6 3 . 7 $ 8 9 . 6 $ 0 5 . 5 $ 6 . 8 0 4 , 3 $ 3 . 1 2 3 , 2 $ 6 . 4 4 2 , 2 $ 19 20 21 19 20 21 19 20 21 19 20 21 (1) 2021 includes after-tax acquisition-related amortization expense of $223.3 million and an after-tax loss on the divestiture of the Wattyl business of $89.5 million. 2020 includes after-tax acquisition-related amortization expense of $230.0 million. 2019 includes after-tax acquisition-related costs of $299.6 million, after-tax non-cash trademark impairment charges of $93.1 million, tax credit investment loss of $74.3 million and after-tax pension settlement expense of $25.0 million, partially offset by an after-tax Brazil indirect tax credit of $33.3 million and an after-tax benefit from the resolution of the California litigation of $26.1 million. (2) 2021 includes charges of $0.83 per share for acquisition-related amortization expense and a $0.34 per share loss on the divestiture of the Wattyl business. 2020 includes a charge of $0.83 per share for acquisition-related amortization expense. 2019 includes charges of $1.07 per share for acquisition-related costs, $0.33 per share for non-cash trademark impairment charges, a tax credit investment loss of $0.26 per share and pension plan settlement expense of $0.09 per share, partially offset by a Brazil indirect tax credit of $0.12 per share and a benefit from the resolution of the California litigation of $0.09 per share. (3) Based on net income and shareholders’ equity at beginning of year. (4) Ratio of income before income taxes and interest expense to interest expense. Board of Directors Kerrii B. Anderson, 64 Retired, former Chief Executive Officer and President Wendy’s International, Inc. Arthur F. Anton, 64* Retired, former Chairman and Chief Executive Officer Swagelok Company Jeff M. Fettig, 65* Retired, former Chairman of the Board and Chief Executive Officer Whirlpool Corporation Richard J. Kramer, 58* Chairman of the Board, Chief Executive Officer and President The Goodyear Tire & Rubber Company John G. Morikis, 58 Chairman and Chief Executive Officer The Sherwin-Williams Company Christine A. Poon, 69 Retired, former Vice Chairman Johnson & Johnson Aaron M. Powell, 50* Chief Executive Officer Pizza Hut Division Yum! Brands, Inc. Marta R. Stewart, 64* Retired, former Executive Vice President and Chief Financial Officer Norfolk Southern Corporation Michael H. Thaman, 58 Retired, former Chairman and Chief Executive Officer Owens Corning Matthew Thornton III, 63* Retired, former Executive Vice President and Chief Operating Officer FedEx Freight FedEx Corporation Steven H. Wunning, 70 Lead Director Retired, former Group President Caterpillar Inc. * Audit Committee Member Corporate Officers John G. Morikis, 58* Jane M. Cronin, 54* James R. Jaye, 55* John D. Hullibarger, 41 Chairman and Chief Executive Officer Heidi G. Petz, 47* Senior Vice President – Corporate Controller Senior Vice President – Investor Relations and Communications Vice President – Corporate Audit and Loss Prevention President and Chief Operating Officer Mary L. Garceau, 49* Bryan J. Young, 46* Jeffrey J. Miklich, 47 Allen J. Mistysyn, 53* Senior Vice President – Finance and Chief Financial Officer Senior Vice President, General Counsel and Secretary Senior Vice President – Corporate Strategy and Development Thomas P. Gilligan, 61* Senior Vice President – Human Resources Lawrence J. Boron, 63 Vice President – Taxes and Assistant Secretary Vice President and Treasurer Stephen J. Perisutti, 59 Vice President, Deputy General Counsel and Assistant Secretary Operating Management Joshua A. Bagshaw, 41 Brian L. Gallagher, 50 Karl J. Jorgenrud, 45* Jonathan N. Reid, 50 President & General Manager Coil Coatings Division Performance Coatings Group Justin T. Binns, 46* President The Americas Group Michael J. Bourdeau, 57 President & General Manager General Industrial Division Performance Coatings Group Jeremy T. Fow, 48 President & General Manager South Eastern Division The Americas Group President & General Manager Automotive Finishes Division Performance Coatings Group Richard M. Gilmore, 53 President & General Manager Canada Division The Americas Group Nancy J. Hutchinson, 43 President & General Manager Mid Western Division The Americas Group Peter J. Ippolito, 57 President & General Manager Industrial Wood Coatings Division Performance Coatings Group President Performance Coatings Group T. Burt Marchman, 59 President & General Manager Packaging Division Performance Coatings Group Mark A. Provenson, 48 President & General Manager Eastern Division The Americas Group Todd D. Rea, 47* President Consumer Brands Group President & General Manager South Western Division The Americas Group Joseph F. Sladek, 51* President & General Manager Global Supply Chain Division Consumer Brands Group Todd A. Stephenson, 52 President & General Manager Protective & Marine Division Performance Coatings Group Note: All prior year share and per share information herein has been retroactively adjusted to reflect Sherwin-Williams’ three-for-one stock split effected March 31, 2021. * Executive Officer as defined by the Securities Exchange Act of 1934 81861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 2 2/18/22 9:58 AM Solutions in Full Color The Sherwin-Williams Company 101 W. Prospect Avenue Cleveland, Ohio 44115-1075 www.sherwin-williams.com 81861IMPO.A (PDF_D GRACOL) covers, 1-14.indd 1 2/21/22 10:47 AM 2021 ANNUAL REPORT

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