SHW 10-Q: Smart Summary

• Seasonality: The results for the three months ended March 31, 2026 are not indicative of full-year results; the majority of Net sales for the reportable segments traditionally occur in the second and third quarters, though periods of economic uncertainty can alter seasonal patterns.
• Supply chain financing: Liabilities under supply chain financing arrangements (recorded in Accounts payable) were $216.1M at March 31, 2026, $206.1M at December 31, 2025, and $211.5M at March 31, 2025.
• Non-Traded Investments — activity: Amortization of Non-Traded Investments was $31.4M for the three months ended March 31, 2026 (vs. $28.7M in the prior-year period); tax credits and other tax benefits received were $35.6M (vs. $31.5M), both recognized in Income tax expense. Tax credits and other tax benefits reduced Accrued taxes by $35.6M, $128.3M, and $31.5M at March 31, 2026, December 31, 2025, and March 31, 2025, respectively.
• Non-Traded Investments — balance sheet: The carrying value in Other assets was $866.2M at March 31, 2026 ($826.1M at December 31, 2025; $885.3M at March 31, 2025); related future capital contribution liabilities were $120.4M in Other accruals and $710.7M in Other long-term liabilities at March 31, 2026; the net deferred income tax asset was $4.4M.

• ASU 2025-06 (internal-use software): Issued September 2025, this update clarifies accounting for internal-use software costs by removing references to prescriptive sequential development stages, clarifies the capitalization threshold, and requires Subtopic 360-10 disclosures for all capitalized internal-use software costs regardless of presentation; effective for fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is evaluating the impact.
• ASU 2024-03 (expense disaggregation): Issued November 2024, this update requires public entities to disclose, in tabular format, purchases of inventory, employee compensation, depreciation, intangible asset amortization and depletion for each income statement line item containing those expenses, plus disclosure of total selling expenses and the entity's definition of selling expenses; as clarified by ASU 2025-01, effective for annual periods beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is evaluating the impact.

• Company acquired Suvinil (BASF SE's Brazilian decorative paints business, closed October 2025): Total consideration of approximately $1.1B, subject to a contractual working capital adjustment expected to be finalized in 2026; the business develops, manufactures and sells products under the Suvinil and Glasu! brand names to professional painters, designers, architects and consumers, and operates two manufacturing facilities in the Northeast and Southeast regions of Brazil; reported within the Consumer Brands Group. During Q1 2026, the purchase price allocation was adjusted to reflect an increase in Property, plant and equipment of $48.1M, a decrease in Goodwill of $29.7M, and a decrease in finite-lived intangibles of $17.3M; allocation remains subject to further revision within the allowable measurement period.
• Company acquired a domestic regional floor covering provider (closed June 2025): Immaterial purchase price; reported within the Paint Stores Group; purchase price allocation not yet finalized.
• Company acquired a European coil and industrial coatings company (closed March 2025): Total consideration of approximately $80M; reported within the Performance Coatings Group; purchase price allocation was finalized during Q1 2026.

LIFO method: The Company primarily uses the last-in, first-out (LIFO) method of valuing inventory; interim LIFO calculations are based on management's estimates of expected year-end inventory levels and costs, and are subject to the final year-end LIFO inventory valuation. Interim inventory levels also include management's estimates of annual inventory losses due to shrinkage and other factors.

Impairment testing policy: Goodwill and indefinite-lived intangible assets are tested for impairment annually during the fourth quarter, with interim tests performed whenever an event or circumstance indicates impairment has more likely than not occurred.

• Total debt outstanding: Rose to $11.7B at March 31, 2026, up from $10.9B at December 31, 2025 and $10.8B at March 31, 2025, driven primarily by higher short-term borrowings ($2.4B vs. $1.2B at year-end).
• Long-term debt repayment: In January 2026, the Company repaid the $350M principal of its 3.95% senior notes using commercial paper; remaining long-term debt (including current portion) was $9.3B at March 31, 2026.
• Credit agreement amendment: In February 2026, the Company amended its credit agreement dated November 17, 2025 to extend the maturity of $75M of commitments from June 20, 2026 to December 20, 2030; unused capacity under various credit agreements stood at $2.4B at March 31, 2026.
• Short-term borrowing rates: Weighted average interest rate on domestic short-term borrowings was 4.1% at March 31, 2026 (vs. 4.4% at December 31, 2025 and 4.6% at March 31, 2025); foreign rate was 2.8% at March 31, 2026 and December 31, 2025 (vs. 3.1% at March 31, 2025).

Classification of components: Service cost is recorded in Cost of goods sold and Selling, general and administrative expenses; all other components are recorded in Other (income) expense - net.

Domestic defined benefit: Net periodic pension credit widened to ($800,000) in Q1 2026 from ($400,000) in Q1 2025, driven by a larger expected return on assets of ($2.5M) vs. ($2.4M) and larger actuarial gain amortization of ($700,000) vs. ($500,000), partially offset by lower amortization of prior service cost of $400,000 vs. $500,000.

Foreign defined benefit: Net periodic pension cost increased to $1.5M in Q1 2026 from $1.3M in Q1 2025, as higher interest cost ($3.5M vs. $3.1M) and service cost ($1.3M vs. $1.1M) outpaced a larger expected return on assets of ($3M) vs. ($2.6M).

Domestic other postretirement benefits: Net periodic cost swung to $600,000 in Q1 2026 from a credit of ($2.4M) in Q1 2025, primarily because the prior-year period included a ($3.6M) amortization of prior service credit that did not recur in 2026.

• Environmental accruals: At March 31, 2026, the Company had $217.4M accrued in Other long-term liabilities for environmental-related activities (vs. $223.8M at March 31, 2025), with an additional $52.7M (vs. $65.9M at March 31, 2025) in Other accruals for current investigation and remediation activities; if the unaccrued maximum of the estimated range were ultimately realized, the accrual would be $78.6M higher than the minimum accruals at March 31, 2026.
• Major Sites concentration: Four Major Sites account for $227.6M, or 84.6%, of the total accrual at March 31, 2026, and $56.2M, or 71.5%, of the $78.6M aggregate unaccrued maximum; the largest is the Gibbsboro, New Jersey site, a former manufacturing plant that ceased operations in 1978 and has been on the National Priorities List since 1999, divided by the EPA into six operable units (OUs) with remedy construction completed on three of the six OUs.
• Real estate financing liabilities: The Company has sale-leaseback agreements accounted for as real estate financing transactions, including its new global headquarters for which it received $40.9M of final proceeds (total $800M) and capitalized $13.6M of related interest in Q1 2025; the short-term liability (recorded in Other accruals) was $51.2M at March 31, 2026 ($51M at December 31, 2025; $50.3M at March 31, 2025), and the long-term liability (recorded in Other long-term liabilities) was $763.5M ($762M at December 31, 2025; $757.8M at March 31, 2025), for a total liability of $814.7M at March 31, 2026.

Legal Proceedings

• Lead pigment and lead-based paint litigation (ongoing): Company defends multiple proceedings based on negligence, public nuisance, and other theories arising from past manufacture of lead pigments and lead-based paints; no amounts accrued.
• Wisconsin Litigation — Gibson and Valoe (federal, E.D. Wis.): 3 plaintiffs allege strict liability, negligence, and public nuisance under Wisconsin risk contribution theory; Valoe stayed as of April 6, 2026; Gibson discovery closes December 15, 2026.
• Wisconsin Litigation — Beal (Milwaukee County Circuit Court): Single plaintiff alleges personal injury via risk contribution theory; Company filed motion for partial summary judgment April 27, 2026; trial scheduled January 15, 2027–March 31, 2027.
• NJ DEP v. Sherwin-Williams (filed Dec 18, 2019): NJ DEP seeks natural resource damages, punitive damages, and penalties tied to Gibbsboro, NJ former manufacturing site; February 2026 trial date adjourned, new date not yet scheduled.
• Carboline Global Inc. v. Company (filed Sep 2, 2025, E.D. Mo.): Carboline alleges false advertising under the Lanham Act related to Firetex FX9502 listing change, seeking actual damages, treble damages, fees, and injunctive relief; Company moved to dismiss amended complaint November 28, 2025.
• Firetex FX9502 and Design Estimator claims (from July 2024): Third-Party Provider listing change and DFT software overestimation have generated customer and competitor claims; Company investigation ongoing, potential remedial action includes additional product application.

• Dividends: The Company declared and paid a cash dividend of $0.80 per share ($197.1M total) in Q1 2026, compared to $0.79 per share ($200.4M total) in Q1 2025.
• Share repurchases: The Company repurchased 1,600,000 shares for $575.6M at an average price of $359.72 per share in the three months ended March 31, 2026, versus 1,000,000 shares for $351.7M at $351.68 per share in the prior-year period; remaining Board authorization stood at 28.0 million shares as of March 31, 2026.
• Equity awards: During the three months ended March 31, 2026, 317,573 stock options were exercised at a weighted average exercise price of $151.45 per share, and 345,759 restricted stock units vested.

AOCI balance improvement: Total AOCI improved from ($634.4M) at December 31, 2025 to ($586.8M) at March 31, 2026, driven by $49.6M recognized in AOCI within Foreign Currency Translation Adjustments and ($2M) reclassified from AOCI to Net income (comprised of ($900,000) from Pension and Other Postretirement Benefits and ($1.1M) from Unrealized Net Gains on Cash Flow Hedges).

• Net investment hedges: The Foreign Currency Translation Adjustments component includes changes in the fair value of net investment hedges, net of taxes, of $26.3M for the three months ended March 31, 2026, compared to ($36.3M) for the three months ended March 31, 2025.
• Prior-year comparable: Total AOCI improved from ($875.2M) at December 31, 2024 to ($772.9M) at March 31, 2025, with $106.6M recognized in AOCI and ($4.3M) reclassified from AOCI to Net income during the three months ended March 31, 2025.

• Net investment hedge structure: The Company holds U.S. dollar to euro cross currency swap contracts designated as net investment hedges under US GAAP, under which it pays fixed-rate interest in euros and receives fixed-rate interest in U.S. dollars, effectively converting a portion of U.S. dollar denominated fixed-rate debt to euro denominated fixed-rate debt; cash flow impacts are classified as investing activities.
• Outstanding notional exposure: Total notional value of $1.7B as of March 31, 2026, spread across five contracts maturing between June 1, 2027 and September 1, 2031 ($687.7M, $100M, $200M, $525M, and $200M, respectively).
• Balance sheet carrying values: Contracts are carried in Other long-term liabilities at $87.7M (March 31, 2026), $122.6M (December 31, 2025), and $3.6M (March 31, 2025); prior-year asset positions of $1M in Other current assets and $3.3M in Other assets had fully unwound by year-end 2025.
• Period gains/losses: For the three months ended March 31, 2026, net investment hedges produced pre-tax gains of $34.9M ($26.3M net of an $8.6M tax effect), versus pre-tax losses of ($48.2M) (($36.3M) net of an $11.9M tax benefit) in the comparable prior-year period; changes in fair value are recognized in the foreign currency translation adjustments component of AOCI.
• Non-designated derivatives: The Company also enters into foreign currency option and forward contracts with maturities under twelve months to hedge foreign currency value changes, with related gains and losses recorded in Other (income) expense - net.

• Fair value hierarchy: No assets or liabilities measured at fair value on a recurring basis were classified as Level 3 at March 31, 2026, December 31, 2025, or March 31, 2025; no nonrecurring fair value measurements existed except acquisition-related items described in Note 3.
• Deferred compensation plan assets: Valued at $95M (March 31, 2026), $101M (December 31, 2025), and $99.2M (March 31, 2025), all classified as Level 1; partnership fund assets measured at net asset value (excluded from hierarchy) were $7.7M, $7.7M, and $6.9M at the respective dates; cost basis of all plan investments was $75.6M, $80.7M, and $84.8M at those same dates.
• Net investment hedges: Cross currency swaps carried as a liability of $87.7M (March 31, 2026), $122.6M (December 31, 2025), and $3.6M (March 31, 2025), all Level 2; a $4.3M asset existed at March 31, 2025 only; fair value is derived from a model using observable inputs including interest rate curves and the euro foreign currency rate.
• Debt fair values: Publicly traded debt (Level 1) had a carrying amount of $9.3B versus fair value of $8.3B at March 31, 2026, compared to carrying amount of $9.7B / fair value of $8.8B at December 31, 2025, and $9B / $8B at March 31, 2025; non-publicly traded debt (Level 2) carried at $100,000 approximated fair value at all three dates.

Revenue recognition: A large portion of revenue is recognized at a point in time for customers not under long-term supply agreements, with payment at time of sale in cash, credit card, or on account with terms between 30 and 60 days, not to exceed one year; remaining revenue is governed by long-term supply agreements and purchase orders where the performance obligation is each individual purchase order, with control transfer determining recognition.

Geographic mix: Approximately 80% of Net sales are in the North America region (United States, Canada and the Caribbean region), slightly less than 10% in the EMEAI region (Europe, Middle East, Africa and India), with remaining global regions accounting for the residual balance; no individual country outside of the United States is individually significant.

Contract balances: Accounts receivable, net was $3.2B at March 31, 2026 (vs. $2.8B at December 31, 2025 and $2.8B at March 31, 2025); current contract assets were $117.1M, long-term contract assets $208.8M, current contract liabilities $294.5M, and long-term contract liabilities $9.2M at March 31, 2026; deferred revenue and related amounts recognized as Net sales during the first three months of 2026 were not material.

Credit loss allowance: The allowance for current expected credit losses increased from $62.5M at the beginning of Q1 2026 to $74.8M at March 31, 2026, driven by bad debt expense of $18.8M partially offset by net write-offs of $6.5M; the comparable Q1 2025 allowance moved from $60.4M to $68.4M on bad debt expense of $11.9M and net write-offs of $3.9M.

Other general expense - net: Totaled $6.3M in Q1 2026 vs. $8.9M in Q1 2025, with the decline driven primarily by a drop in environmental provisions from $3.1M to $100,000; gains on asset sales were ($1.9M) vs. ($2.1M), and no individual item within the 'Other' caption was significant.

• Other (income) expense - net: Swung to ($4M) income in Q1 2026 from $2.9M expense in Q1 2025, with the primary drivers being a shift in foreign currency transaction results from a $10M loss to a ($5.8M) gain and the absence of the $9.9M 'Other expense' item that appeared in Q1 2025; no individual item within 'Other income' or 'Other expense' was individually significant.
• Investment losses (gains): Moved to a $3.3M loss in Q1 2026 from a ($3.2M) gain in Q1 2025, primarily reflecting the change in market value of investments held in deferred compensation plans.
• Miscellaneous pension and benefit: Swung to $100,000 expense in Q1 2026 from ($3.4M) income in Q1 2025, representing the non-service components of Net periodic pension and benefit (credit) cost.

• Effective tax rate: The rate was 21.3% for the first quarter of 2026, down from 22.8% for the first quarter of 2025, primarily due to a more favorable impact from tax benefits related to employee share-based payments; other significant components were consistent year-over-year.
• Unrecognized tax benefits: At December 31, 2025, unrecognized tax benefits totaled $106.9M, of which $91.9M would affect the effective tax rate if recognized; no significant changes to these balances occurred during the first three months of 2026.
• Interest and penalties: At December 31, 2025, the Company had accrued $23.9M for potential income tax interest and penalties, classified as income tax expense.
• Open audit years: The IRS is auditing the 2020 through 2022 returns; the federal statute of limitations remains open for 2020 through 2025, non-U.S. examinations cover 2014 through 2025, and state and local examinations cover 2016 through 2025.

Anti-dilutive shares: Stock options and other contingently issuable shares excludes 1.8 million and 1.0 million shares at March 31, 2026 and 2025, respectively, due to their anti-dilutive effect. Method: Basic and diluted net income per share are calculated using the treasury stock method.

• Segment structure: The Company has 3 reportable segments — Paint Stores Group, Consumer Brands Group, and Performance Coatings Group — plus an Administrative category. Segment profit is defined as each segment's Income before income taxes.
• Intersegment transfers: Consumer Brands Group had intersegment transfers of $1.3B (Q1 2026) and $1.2B (Q1 2025), primarily reflecting internal sales to other segments; these are eliminated in consolidation.
• Foreign operations: Net sales of all consolidated foreign subsidiaries were $1.3B and $1B for the three months ended March 31, 2026 and 2025, respectively; long-lived assets of these subsidiaries totaled $4.8B and $3.6B at March 31, 2026 and 2025, respectively. No single geographic area outside the United States was significant relative to consolidated Net sales, Income before income taxes, or consolidated long-lived assets.
• Export/customer concentration: Export sales and sales to any individual customer were each less than 10% of consolidated Net sales in 2026 and 2025.

Business description: The Sherwin-Williams Company, founded in 1866, develops, manufactures, distributes and sells 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.

• Segment structure: The Company is structured into 3 reportable segments — Paint Stores Group, Consumer Brands Group and Performance Coatings Group — plus an Administrative function, reflecting its internal organization for performance assessment and resource allocation decisions.

• Net sales: Consolidated net sales increased 6.8% to $5.7B in the quarter; net sales from Paint Stores Group stores open more than twelve calendar months increased 2.4%.
• EPS: Diluted net income per share increased 7.5% to $2.15 per share compared to $2.00 per share in the first quarter of 2025; adjusted diluted net income per share increased 4.4% to $2.35 per share compared to $2.25 per share in the first quarter of 2025.
• Operating cash: Generated net operating cash of $139.1M in the quarter compared to a usage of $61.1M in the first quarter of 2025.

• Demand environment: Management characterizes the current environment as "softer-for-longer" persisting into 2026, with potential inflation in raw materials, energy, logistics, and packaging from recent geopolitical events; the company is focusing on securing incremental volume balanced with pricing and cost-out actions under its "Success by Design" strategy.
• Liquidity position: The company has $216.9M in cash and $2.4B of unused capacity under its credit facilities at March 31, 2026, and states it is, and expects to remain, in compliance with all financing covenants.
• Capital deployment: Management is pursuing business acquisitions and investments aligned with its long-term growth strategy while returning value to shareholders through dividends and share repurchases of excess cash.

• Consolidated growth drivers: Net sales rose 6.8% to $5.7B in Q1 2026 from $5.3B in Q1 2025, with favorable foreign currency translation contributing 1.7% and acquisitions/divestitures contributing 2.7%; foreign subsidiary sales grew to $1.3B from $1B, led by Latin America including the October 2025 Suvinil acquisition, while domestic/other operations grew to $4.4B from $4.3B.
• Paint Stores Group: Net sales rose 3.7% to $3B, driven by low-single digit selling price increases and low-single digit volume growth; same-store sales (open 12+ months) increased 2.4% and non-paint product sales increased 2.5%; protective and marine led end-market growth with a double-digit percentage increase, while new residential declined by a low-single digit percentage.
• Consumer Brands Group: Net sales rose 19.2% to $908.3M, with the Suvinil acquisition accounting for 17.2% of the gain and favorable foreign currency translation adding 2.4%; increased sales in Europe also contributed, partially offset by soft DIY demand in North America, which reduced Net sales by a low-single digit percentage.
• Performance Coatings Group: Net sales rose 6.5% to $1.7B, driven by a 4.1% favorable foreign currency impact and low-single digit volume growth; Automotive Refinish led with a double-digit percentage increase, followed by General Industrial and Packaging (high-single digit) and Coil (mid-single digit).

• Net sales & margin: Net sales grew to $5.7B in the three months ended March 31, 2026 from $5.3B in the prior-year period, with gross profit margin expanding to 49.1% from 48.2%.
• SG&A pressure: SG&A of $2B (34.8% of net sales) increased from $1.8B (33.8% of net sales), widening as a share of net sales by 100 basis points year over year.
• Interest expense: Interest expense rose to $131.6M (2.3% of net sales) from $103.8M (1.9% of net sales), partially offset by a shift in Other (income) expense — net from $2.9M expense to $4M income.
• Pre-tax income: Income before income taxes increased to $679.8M (12.0% of net sales) from $653M (12.3% of net sales), reflecting dollar growth but modest margin compression at the pre-tax line.

• Gross profit: Consolidated Gross profit increased $221.4M in Q1 2026, with the margin expanding to 49.1% from 48.2% in Q1 2025, driven by higher Net sales across all reportable segments, the Suvinil acquisition within the Consumer Brands Group, moderating raw material costs, and favorable foreign currency translation; Cost of goods sold rose $139.8M (5.1%), with the Suvinil acquisition and foreign currency translation accounting for 2.2% of that increase, partially offset by moderating raw material costs.
• SG&A: Consolidated SG&A increased $175.8M in Q1 2026 versus the same period last year, driven by higher employee-related costs and marketing and advertising, incremental expenses from the Suvinil acquisition, higher Administrative costs related to the new global headquarters and technology center, and unfavorable foreign currency translation; segment increases were Paint Stores Group +$64M, Consumer Brands Group +$41.6M, Performance Coatings Group +$32.5M, and Administrative +$37.7M.
• Interest & other: Interest expense increased $27.8M in Q1 2026 due to higher long-term debt, short-term borrowings, and interest related to the new global headquarters and technology center; Other (income) expense - net swung to income of $4M from expense of $2.9M in Q1 2025, primarily reflecting foreign currency transaction net gains versus prior-year net losses, partially offset by unfavorable changes in market value of deferred compensation plan investments.
• Segment profitability: Consumer Brands Group Income before income taxes surged 49.5% to $197.2M (21.7% of Net sales vs. 17.3% in Q1 2025), primarily driven by the Suvinil acquisition; Administrative segment drag widened by $75.8M to ($308.6M; total Income before income taxes rose $26.8M (4.1%) to $679.8M, though the total margin edged down to 12.0% from 12.3%.

• Effective tax rate: The effective tax rate was 21.3% for the first quarter of 2026, down from 22.8% for the first quarter of 2025, with the decrease primarily driven by a more favorable impact from tax benefits related to employee share-based payments; all other significant components of the effective tax rate were consistent year-over-year.

• Diluted EPS growth: Diluted net income per share increased 7.5% to $2.15 per share in the first quarter of 2026 compared to $2.00 per share in the first quarter of 2025.
• Acquisition-related amortization: Diluted net income per share in Q1 2026 included Valspar acquisition-related amortization expense of $0.20 per share, versus $0.19 per share of the same charge in Q1 2025.
• Restructuring charges (prior year only): Q1 2025 diluted EPS also included severance and other restructuring expenses of $0.06 per share, with no comparable charge in Q1 2026.
• FX impact: Foreign currency translation rate changes increased diluted net income per share by $0.03 in the first quarter of 2026.

• Operating cash and shareholder returns: The Company generated $139.1M in net operating cash during Q1 2026 and returned $772.7M to shareholders via dividends and share repurchases during the same period.
• Earnings growth: Net income increased 6.1% to $534.7M and EBITDA increased 8.8% to $998.2M for the three months ended March 31, 2026.
• Liquidity position: At March 31, 2026, Cash and cash equivalents stood at $216.9M against total debt outstanding of $11.7B (net debt of $11.5B); management states sufficient short-term borrowing capacity and available cash to fund current operating requirements.

• Net working capital: Improved $802.1M to a deficit of $1B at March 31, 2026 from a deficit of $1.8B at March 31, 2025, driven by a $460M increase in current assets and a $342.1M decrease in current liabilities; the current ratio was 0.86 at March 31, 2026, compared to 0.87 at December 31, 2025 and 0.77 at March 31, 2025.
• Current asset changes: The $460M increase in current assets was led by a $379M rise in Accounts receivable, net, a $105.9M increase in Other current assets (primarily prepaid expenses and recoverable income taxes), and a $17.1M increase in Cash and cash equivalents, partially offset by a $42M decrease in Inventories.
• Current liability changes: The $342.1M decrease in current liabilities was driven by a $1.2B reduction in the Current portion of long-term debt, partially offset by a $578.1M increase in Short-term borrowings, a $90.5M increase in Accounts payable, a $54.3M increase in Other accruals (primarily customer considerations), a $45.8M increase in Accrued taxes, a $25.3M increase in Compensation and taxes withheld, and a $14.6M increase in the Current portion of operating lease liabilities.

• Net PP&E increase: Net property, plant and equipment increased $68.5M in the first three months of 2026, driven by capital expenditures of $118.7M, Suvinil purchase price allocation adjustments of $48.1M, and foreign currency translation and other adjustments of $1.5M, partially offset by depreciation expense of $98.3M and sale or disposition of fixed assets of $1.5M.
• Buildings: Buildings within Property, plant and equipment, net increased $52.5M in the first three months of 2026, primarily due to capital expenditures related to finalizing construction of the new global headquarters and technology center; over the twelve months since March 31, 2025, Buildings increased $1.5B, primarily due to the new global headquarters and technology center meeting the criteria to be placed into service during 2025.
• Other capex activity: 2026 capital expenditures also included manufacturing capacity expansion, operational efficiencies and maintenance projects in the Consumer Brands and Performance Coatings Groups, and new store openings, renovations and improvements in existing stores in the Paint Stores Group.
• 2026 capex outlook: The Company expects to spend less than 2025 for capital expenditures, funded primarily through operating cash generation; core capital expenditures are targeted at approximately 2% of Net sales for investments in productivity improvements, maintenance projects, and new store openings.

• Transaction structure: In December 2022, the Company closed a sale-leaseback of its new global headquarters that failed to qualify as an asset sale under US GAAP and is instead accounted for as a real estate financing transaction; the Company received final proceeds in 2025 totaling $800M.
• Lease terms: The initial lease term covers the construction period and extends 30 years thereafter, with the Company retaining the right and option to extend.
• Accounting treatment: Net proceeds appear as "Proceeds from real estate financing transactions" in Financing Activities; the related assets remain on the balance sheet within Property, plant and equipment, net and are depreciated over their useful lives, while payments are allocated between interest and repayment of the financing liability over the life of the agreement.

• Goodwill movement: Goodwill decreased $33.2M from December 31, 2025, driven by Suvinil purchase price allocation adjustments of $29.7M and foreign currency translation and other adjustments of $3.5M; over the twelve-month period from March 31, 2025, goodwill increased $295M, primarily from $202.3M in purchase price allocation adjustments related to the Suvinil acquisition and $92.7M in foreign currency translation and other adjustments.
• Intangible assets movement: Intangible assets decreased $80.5M from December 31, 2025, as amortization of $88.5M and Suvinil purchase price allocation adjustments of $17.1M were partially offset by foreign currency translation and other adjustments of $23.6M and capitalized software of $1.5M; over the twelve-month period from March 31, 2025, intangibles increased $392.2M, with $626M in purchase price allocations (primarily Suvinil) and $90.1M in foreign currency and other adjustments more than offsetting amortization of $344.1M, a trademark impairment of $17.8M, and net other items.

• Sequential increase: Other assets increased $17.7M from December 31, 2025, primarily driven by an increase in non-traded investments, partially offset by a decrease in customer considerations.
• Year-over-year increase: Other assets increased $18.4M from March 31, 2025, driven by increases in assets related to cloud computing arrangements, deferred income tax assets, and pension plan assets, partially offset by decreases in customer considerations and non-traded investments.

• Year-over-year change: Deferred income taxes were effectively flat from December 31, 2025 and increased $179.4M from March 31, 2025.
• Primary driver: The increase from March 31, 2025 is primarily attributable to accelerated domestic research and development deductions recognized as a result of U.S. tax reform legislation known as the One Big Beautiful Bill Act, partially offset by amortization of acquisition-related intangible assets.

• Equity movement (Q1 2026): Shareholders' equity decreased $167.2M during the first three months of 2026 to $4.4B, driven by $623.5M of treasury stock activity (primarily repurchases) and $197.1M in cash dividends, partially offset by net income of $534.7M, a $71M increase in Other capital (stock-based compensation and option exercises), and a $47.6M increase in Other comprehensive income (foreign currency translation).
• Year-over-year equity change: Shareholders' equity rose $301M since March 31, 2025, with net income of $2.6B, a $186.1M increase in Other comprehensive income, and a $182.4M increase in Other capital partially offset by $1.9B in treasury stock repurchases and $786.5M in cash dividends; during Q4 2025 the Company also retired 29.5 million common stock shares held in treasury.
• Buyback activity and authorization: During Q1 2026, the Company purchased 1.6 million shares through open market purchases; remaining Board authorization at March 31, 2026 stood at 28.0 million shares.
• Dividend increase: In February 2026, the Board raised the quarterly cash dividend from $0.79 to $0.80 per share; if approved each remaining quarter, the 2026 annual dividend would be $3.20 per share, representing a 31% payout of 2025 diluted net income per share.

• Operating cash flow: Net operating cash was a source of $139.1M for the three months ended March 31, 2026, versus a usage of $61.1M in the same period of 2025, driven by lower working capital and deferred tax requirements, higher Net income, and increased depreciation and amortization.
• Investing cash flow: Net investing cash usage decreased $145.7M year-over-year, primarily because the prior-year period included cash used for an acquisition and higher capital expenditures related to the new global headquarters and technology center.
• Financing cash flow: Net financing cash source decreased $319.6M year-over-year, mainly due to higher treasury stock purchases, increased long-term debt payments, and lower proceeds from real estate financing transactions, partially offset by higher short-term borrowings and proceeds from stock options exercised.
• Trailing twelve months: For the twelve-month period from April 1, 2025 through March 31, 2026, the Company generated Net operating cash of $3.7B, used $1.9B in investing activities, and used $1.7B in financing activities.

• Derivatives used: The Company utilized U.S. dollar to euro cross currency swap contracts in 2026 and 2025, designated as net investment hedges with various maturity dates, to hedge its net investment in European operations; it also entered into forward foreign currency exchange contracts in 2026 and 2025 primarily to hedge value changes in foreign currency, and interest rate lock contracts in 2025 to hedge the benchmark interest rate variability for the 2025 issuance of long-term fixed rate debt.
• Risk exposures: The Company is exposed to market risk from interest rates, foreign currency, and commodity fluctuations, and believes it may experience losses from these sources, but does not expect any of them — or hedging contract losses — to have a material adverse effect on its financial condition, results of operations, or cash flows.
• Policy restriction: The Company does not use derivative instruments for speculative or trading purposes.

• Leverage covenant: Certain borrowings contain a consolidated leverage covenant limiting the ratio of total indebtedness to trailing 12-month EBITDA to no more than 3.75 to 1.00, with an option to temporarily increase to 4.25 to 1.00 for four consecutive fiscal quarters immediately following a qualifying acquisition, as defined in the credit agreement dated July 31, 2024.
• Compliance status: At March 31, 2026, the Company was in compliance with the covenant and expects to remain in compliance.
• Cross-default provisions: Notes, debentures, and revolving credit agreements contain various default and cross-default provisions, under which an event of default on any one arrangement may trigger acceleration of maturity on one or more borrowings.

• Definition and use: EBITDA is defined as net income before income taxes, interest expense, depreciation and amortization; Adjusted EBITDA further excludes items management believes enhance understanding of operating performance. Management cautions that these non-GAAP measures should not be compared across entities and are not alternatives to net income under US GAAP.
• EBITDA: EBITDA grew to $998.2M in the three months ended March 31, 2026 from $917.7M in the prior-year period, driven by higher net income ($534.7M vs. $503.9M), higher interest expense ($131.6M vs. $103.8M), and higher depreciation ($98.3M vs. $79.9M) and amortization ($88.5M vs. $81M), partially offset by lower income taxes ($145.1M vs. $149.1M).
• Adjusted EBITDA: Adjusted EBITDA was $998.2M for Q1 2026 versus $937M for Q1 2025; the only reconciling item between EBITDA and Adjusted EBITDA was severance and other restructuring expenses of $0 in 2026 versus $19.3M in 2025.