SHERWIN WILLIAMS CO (SHW)

CIK: 0000089800. SIC: 5200 Retail-Building Materials, Hardware, Garden Supply. Latest 10-K as of: 2026-02-19.

SIC breadcrumb: Retail Trade > Building Materials, Hardware, Garden Supply, And Mobile Home Dealers > SIC 5200 Retail-Building Materials, Hardware, Garden Supply

SEC company page: https://www.sec.gov/edgar/browse/?CIK=89800. Latest filing source: 0000089800-26-000008.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-19. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000089800.json. Derived margins are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Missing metrics are omitted rather than fabricated.

Financial Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance

Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization. Confidence: high. Filing date: 2026-02-19. Report date: 2025-12-31.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(dollars in millions, except as noted and per share data)

Company Background

The Sherwin-Williams Company, founded in 1866, and its consolidated 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 – Paint Stores Group, Consumer Brands Group and Performance Coatings Group (collectively, the Reportable Segments) – and an Administrative function, which is representative of the way it is internally organized for assessing performance and making decisions regarding the allocation of resources. See Note 22 to the consolidated financial statements in Item 8 for further information on the Company’s Reportable Segments.

Summary

•Consolidated Net sales increased 2.1% in the year to $23.574 billion

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

•Diluted net income per share decreased 2.7% to $10.26 per share in the year compared to $10.55 per share in the full year 2024

◦Adjusted diluted net income per share increased 0.9% to $11.43 per share in the year compared to $11.33 per share in the full year 2024

•Generated Net operating cash of $3.452 billion, or 14.6% of Net sales in the year

Outlook

Sherwin-Williams delivered strong 2025 results driven by solid core performance and a focus on operational discipline despite continued demand choppiness. Full year Net sales grew to a record level, and gross profit and gross margin expanded. The Company continued to generate strong cash flow from operations, which was used for investment in capital expenditures, funding acquisitions and returning cash to shareholders through dividends and repurchases of common stock. Although the softer-for-longer demand environment is expected to continue in 2026, we have confidence in our differentiated strategy, Success by Design, that continues to deliver innovative and productive solutions for our customers. Significant opportunities exist for each business, and we will continue to support our growth strategy by executing initiatives within our enterprise priorities, including talent, simplification, digitization, supply chain responsiveness and sustainability.

Within the Paint Stores and Consumer Brands groups, we anticipate continued economic pressures to impact customer buying behavior in 2026. Our investments in sales reps, training and digital tools, coupled with home builder relationships are expected to drive growth opportunities. The outlook for the Performance Coatings Group is varied by end market and region with an expectation that the core business remains flat, however, new account wins and favorable business sales mix should drive growth. At the business unit level, we expect modest growth in Automotive Refinish, Industrial Wood and General Industrial while Packaging sales are anticipated to be flattish. Coil sales are expected to be slightly negative due to demand softness. As it relates to consolidated expenses, raw material costs could be impacted by evolving tariff policies. We will continue to monitor changes and impacts to our operations as we navigate this uncertain environment. We expect these costs and employee-related expenses to contribute to a low-single digit percentage increase, offset by cost saving simplification efforts across our supply chain such as capacity and productivity improvements.

Our capital deployment strategy remains balanced and consistent. We have a strong liquidity position, with $207.2 million in cash and $3.649 billion of unused capacity under our credit facilities at December 31, 2025. We are, and expect to remain, in compliance with all financing covenants. Long-term debt maturities due in 2026 are $350.1 million, which were fully repaid in January 2026 with short-term borrowings. With the long-term debt maturities refinanced during 2025 and the interest related to the delayed draw term loans to fund the Suvinil acquisition, coupled with the incremental interest expense related to the new global headquarters and research and development center and the higher interest rates used to refinance the long-term debt maturities due in 2026, Interest expense is expected to increase by approximately $85 million in 2026. We plan to expand our footprint by opening 80 to 100 new stores in the United States and Canada in 2026, continue to evaluate acquisitions that align with our strategy and return value to our shareholders through the payment of dividends and repurchases of common stock.

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

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RESULTS OF OPERATIONS

The following discussion and analysis addresses comparisons of material changes in the consolidated financial statements for the years ended December 31, 2025 and 2024. For comparisons of the years ended December 31, 2024 and 2023, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed on February 20, 2025.

Net Sales

Year Ended December 31,

2025

2024

$ Change

% Change

Currency Impact

Acquisition and Divestiture Impact

Paint Stores Group

$

13,605.9 

$

13,188.0 

$

417.9 

3.2 

%

(0.1)

%

0.2 

%

Consumer Brands Group

3,166.4 

3,108.0 

58.4 

1.9 

%

(1.1)

%

5.3 

%

Performance Coatings Group

6,795.2 

6,797.3 

(2.1)

— 

%

0.4 

%

1.0 

%

Administrative

6.8 

5.2 

1.6 

30.8 

%

1.9 

%

— 

%

Total

$

23,574.3 

$

23,098.5 

$

475.8 

2.1 

%

(0.1)

%

1.1 

%

Consolidated Net sales for 2025 increased 2.1% primarily due to higher Net sales in the Paint Stores and Consumer Brands Groups. Net sales of all consolidated foreign subsidiaries increased to $4.615 billion in 2025 compared to $4.426 billion in 2024 primarily as a result of the higher Net sales in Latin America due to the October 2025 acquisition of Suvinil, partially offset by unfavorable foreign currency translation driven by Latin America. Net sales of all operations other than consolidated foreign subsidiaries increased to $18.959 billion for 2025 compared to $18.673 billion for 2024.

Net sales in the Paint Stores Group increased 3.2% primarily due to selling price increases, which impacted Net sales by a mid-single digit percentage, partially offset by a low-single digit decrease in sales volume. Net sales from stores in the Paint Stores Group open for more than twelve calendar months increased 1.7% in the year over the prior year comparable period. During 2025, the Paint Stores Group opened 83 new stores and closed 3 locations for a net increase of 80 stores. The total number of stores in operation at December 31, 2025 was 4,853 in the United States, Canada and the Caribbean region. The Paint Stores Group’s objective is to grow sales through the expansion of its store base by an approximate average of 2% each year. Sales of products other than paint increased 0.5% 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 in the Consumer Brands Group increased 1.9% in 2025 primarily due to the October 2025 acquisition of Suvinil, which contributed $164.5 million, or 5.3%, partially offset by 1.1% of unfavorable foreign currency translation driven by Latin America. In 2025, the Consumer Brands Group opened 13 new stores and closed 40 locations for a net decrease of 27 stores. The total number of stores in operation at December 31, 2025 was 307 in the Latin America region.

Net sales in the Performance Coatings Group were essentially flat in 2025 when compared to 2024 due to an offsetting favorable impact from acquisitions and foreign currency translation and an unfavorable impact from selling prices attributable to product mix. In 2025, the Performance Coatings Group opened 6 new branches and closed 13 branches for a net decrease of 7 branches, decreasing the total at December 31, 2025 to 317 branches.

Net sales in the Administrative function, which primarily consists of external leasing revenue, increased by an insignificant amount in 2025.

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Income Before Income Taxes

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

Year Ended December 31,

2025

2024

% of Net Sales

% of Net Sales

Net sales

$

23,574.3 

100.0 

%

$

23,098.5 

100.0 

%

Cost of goods sold

12,058.8 

51.2 

%

11,903.4 

51.5 

%

Gross profit

11,515.5 

48.8 

%

11,195.1 

48.5 

%

Selling, general and administrative expenses (SG&A)

7,695.0 

32.6 

%

7,422.1 

32.1 

%

Other general (income) expense - net

(10.2)

— 

%

(38.8)

(0.1)

%

Impairment

17.8 

0.1 

%

— 

— 

%

Interest expense

465.0 

1.9 

%

415.7 

1.8 

%

Interest income

(11.2)

(0.1)

%

(11.0)

— 

%

Other expense (income) - net

20.9 

0.1 

%

(44.7)

(0.2)

%

Income before income taxes

$

3,338.2 

14.2 

%

$

3,451.8 

14.9 

%

Consolidated Cost of goods sold increased $155.4 million, or 1.3% in 2025 compared to the same period in 2024 primarily due to the impact of the October 2025 Suvinil acquisition, partially offset by moderating raw material costs and lower sales volume.

Consolidated Gross profit increased $320.4 million, or 2.9% in 2025 compared to the same period in 2024 primarily due to favorable selling prices in the Paint Stores Group, the acquisition of Suvinil within the Consumer Brands Group and moderating raw material costs, partially offset by unfavorable product mix within the Performance Coatings Group. Consolidated Gross profit as a percent to consolidated Net sales increased to 48.8% in 2025 from 48.5% in 2024 for these same reasons.

The Paint Stores Group’s Gross profit for 2025 increased $364.2 million compared to the same period in 2024 primarily due to growth in Net sales from favorable selling prices and moderating raw material costs, partially offset by lower sales volume. The Paint Stores Group’s Gross profit as a percent of Net sales increased for these same reasons. The Consumer Brands Group’s Gross profit decreased $42.2 million in 2025 compared to the same period in 2024 primarily due to lower sales volumes and unfavorable currency translation impact, partially offset by the impact from the October 2025 acquisition of Suvinil. The Consumer Brands Group’s Gross profit as a percent of Net sales decreased for these same reasons. The Performance Coatings Group’s Gross profit decreased $38.1 million compared to the same period in 2024 primarily due to an unfavorable impact from selling prices attributable to product mix, partially offset by the impact of acquisitions and favorable foreign currency translation. The Performance Coatings Group’s Gross profit as a percent of Net sales decreased for these same reasons.

Consolidated SG&A increased by $272.9 million, or 3.7% in 2025 compared to the same period in 2024 primarily due to investments in long-term growth opportunities in the Paint Stores Group, including expenses to support net new store openings, costs related to the October 2025 Suvinil acquisition, costs related to the new global headquarters and research and development (R&D) center buildings, higher employee-related costs and other expenses associated with targeted restructuring actions. As a percent of Net sales, SG&A increased 50 basis points compared to the same period in 2024 for these same reasons.

The Paint Stores Group’s SG&A increased $183.7 million, or 4.2% for the year primarily due to higher employee-related costs and investments in long-term growth initiatives, including increased spending from net new store openings and costs to support higher sales. The Consumer Brands Group’s SG&A increased $32.8 million, or 3.8% for the year primarily due to costs related to the October 2025 Suvinil acquisition, increased marketing & advertising and higher employee-related costs. The Performance Coatings Group’s SG&A increased by $3.1 million, or 0.2% for the year primarily due to targeted restructuring activities and higher employee-related costs. The Administrative function’s SG&A increased $53.3 million, or 7.5% primarily due to targeted restructuring activities and costs related to the new global headquarters and R&D center buildings.

Other general (income) expense - net decreased by $28.6 million from income of $38.8 million in 2024 to income of $10.2 million in 2025. The change was primarily attributable to a gain recognized in 2024 from insurance recoveries related to environmental matters at a current manufacturing site. See Note 19 to the consolidated financial statements in Item 8 for further information.

Impairment of $17.8 million was recorded in 2025 related to restructuring activities which impacted certain trademarks in the Asia, Latin America and Europe regions. There was no impairment in 2024. For further information on impairment considerations, see Notes 3 and 6 to the consolidated financial statements in Item 8.

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Table of Contents

Interest expense increased $49.3 million in 2025 compared to 2024 primarily due to an increase in long-term debt, interest expense related to the new global headquarters and research and development center which were both placed into service in 2025 and an increase in short-term borrowings primarily to fund the October 2025 acquisition of Suvinil. See Note 7 to the consolidated financial statements in Item 8 for further information on the Company’s outstanding debt.

Other expense (income) - net changed by $65.6 million from income of $44.7 million in 2024 to expense of $20.9 million in 2025 primarily due to higher foreign currency transaction related losses in 2025 compared to 2024, including impacts from highly inflationary economies such as Argentina and an immaterial loss recognized in 2025 from a transaction to convert a foreign currency with limited liquidity to the U.S. dollar. The remaining change is due to miscellaneous other income and expense, none of which were individually significant. See Note 19 to the consolidated financial statements in Item 8 for further information related to Other expense (income) - net.

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

Year Ended December 31,

2025

2024

$ Change

% Change

Income Before Income Taxes:

Paint Stores Group

$

3,061.5

$

2,902.6

$

158.9 

5.5 

%

Consumer Brands Group

509.6

589.9

(80.3)

(13.6)

%

Performance Coatings Group

942.7

1,027.9

(85.2)

(8.3)

%

Administrative

(1,175.6)

(1,068.6)

(107.0)

(10.0)

%

Total

$

3,338.2

$

3,451.8

$

(113.6)

(3.3)

%

Income Before Income Taxes as a percent of Net sales:

Paint Stores Group

22.5 

%

22.0 

%

Consumer Brands Group

16.1 

%

19.0 

%

Performance Coatings Group

13.9 

%

15.1 

%

Administrative

nm

nm

Total

14.2 

%

14.9 

%

nm - not meaningful

Income Tax Expense

The effective income tax rate for 2025 was 23.1% compared to 22.3% in 2024. The increase in the effective rate was primarily due to less favorable impacts of tax benefits related to employee share-based payments. The other significant components of the Company’s effective tax rate were consistent year-over-year. See Note 20 to the consolidated financial statements in Item 8 for further information.

Net Income Per Share

Diluted net income per share for 2025 decreased to $10.26 per share from $10.55 per share in 2024. Currency translation rate changes decreased diluted net income per share by $0.06 per share in 2025. Diluted net income per share in 2025 included acquisition-related amortization expense of $0.78 per share, severance and other restructuring expenses of $0.34 per share, and impairment related to trademarks of $0.05 per share. Diluted net income per share for 2024 included acquisition-related amortization expense of $0.78 per share. See Notes 1, 6 and 21 to the consolidated financial statements in Item 8 for further information.

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Table of Contents

FINANCIAL CONDITION, LIQUIDITY AND CASH FLOW

Overview

The Company’s financial condition, liquidity and cash flow remained strong in 2025. The Company generated $3.452 billion in Net operating cash and invested approximately $1.15 billion in the acquisition of Suvinil and $797.6 million in capital expenditures. Cash of $2.446 billion was returned to shareholders in the form of cash dividends and share repurchases during the year.

During 2025, the Company generated Net income of $2.569 billion, EBITDA of $4.480 billion and Adjusted EBITDA of $4.609 billion. See the Non-GAAP Financial Measures section for the definitions and calculations of EBITDA and Adjusted EBITDA. As of December 31, 2025, the Company had Cash and cash equivalents of $207.2 million and total debt outstanding of $10.871 billion. Total debt, net of Cash and cash equivalents, was $10.664 billion and was 2.4 times the Company’s EBITDA in 2025.

Net Working Capital

Net working capital, defined as Total current assets less Total current liabilities, increased $495.0 million to a deficit of $912.9 million at December 31, 2025 compared to a deficit of $1.408 billion at December 31, 2024. The net working capital increase is primarily due to an increase in current assets, particularly Accounts receivable, net and Other current assets and a decrease in the Current portion of long-term debt, partially offset by an increase in Short-term borrowings and Accounts payable.

Current asset balances increased $606.6 million at December 31, 2025 compared to December 31, 2024 primarily due to an increase in Accounts receivable, net of $402.4 million, an increase in Other current assets of $177.3 million, primarily related to prepaid expenses and recoverable income taxes, and an increase in Inventories of $30.1 million. These increases were offset by a decrease in Cash and cash equivalents of $3.2 million.

Current liability balances increased $111.6 million at December 31, 2025 compared to December 31, 2024 primarily due to an increase in Short-term borrowings of $538.1 million, an increase in Other accruals of $148.7 million primarily related to increases in liabilities related to customer considerations, accrued severance, current portion of non-traded investments and miscellaneous other accruals, partially offset by a decrease in insurance payables, an increase in Accounts payable of $101.0 million, an increase in Current portion of operating lease liabilities of $13.2 million and an increase in Accrued taxes of $13.1 million. These increases were partially offset by a decrease in the Current portion of long-term debt of $699.1 million.

As a result of the net effect of these changes, the Company’s current ratio increased to 0.87 at December 31, 2025 from 0.79 at December 31, 2024. Accounts receivable as a percent of Net sales increased to 11.8% in 2025 from 10.3% in 2024. Accounts receivable days outstanding was 62 days in 2025 and 58 days in 2024. In 2025, the allowance for current expected credit losses increased $2.1 million, or 3.5%. Inventories as a percent of Net sales decreased to 9.8% in 2025 from 9.9% in 2024. Inventory days outstanding was 88 days in 2025 compared to 93 days in 2024. The Company has sufficient total available borrowing capacity to fund its current operating needs.

Property, Plant and Equipment

Property, plant and equipment, net increased $604.2 million to $4.137 billion at December 31, 2025 primarily due to capital expenditures of $745.9 million, assets acquired through business combinations of $153.7 million and foreign currency translation and other adjustments of $44.9 million, offset by depreciation expense of $340.3 million.

Buildings within Property, plant and equipment, net increased by $1.491 billion in the twelve months since December 31, 2024 primarily due to the new global headquarters and the R&D center meeting the criteria to be placed into service during 2025. An immaterial amount of capital expenditures related to finalizing the construction of the new global headquarters and R&D center will be placed into service during 2026. The new global headquarters and associated parking garage assets are depreciated over their useful lives of 60 and 45 years, respectively. Additionally, the R&D center asset is depreciated over its useful life of 60 years.

Also included in 2025 capital expenditures were expenditures related to manufacturing capacity expansion, operational efficiencies and maintenance projects in the Consumer Brands and Performance Coatings Groups and the opening of new paint stores and renovation and improvements in existing stores in the Paint Stores Group.

In 2026, the Company expects to spend less than 2025 for capital expenditures, which it will fund primarily through the generation of operating cash. Core capital expenditures are targeted to be approximately 2% of Net sales in 2026 and are expected to be for investments in various productivity improvement and maintenance projects at existing manufacturing, distribution and research and development facilities and new store openings.

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Table of Contents

Real Estate Financing

In December 2022, the Company closed a transaction to sell and subsequently lease back its new global headquarters. This transaction did not meet the criteria for recognition as an asset sale under U.S. generally accepted accounting principles (US GAAP) and as such, was accounted for as a real estate financing transaction. The Company received the final proceeds for the new global headquarters in 2025 for a total of $800 million. The initial lease term includes the construction period and extends for 30 years thereafter, and the Company has the right and option to extend the lease term. Lease payments over the next twelve months are expected to be approximately $51 million. The amount of the lease payments during the initial 30 year lease term is estimated to be approximately $1.938 billion. Refer to the Contractual and Other Obligations and Commercial Commitments section below for further information on the Company’s obligations.

The following table summarizes the activity related to this transaction and the corresponding balances recognized in the Consolidated Balance Sheets.

2025

2024

Activity:

Proceeds received

$

40.9 

$

244.2 

Capitalized interest

37.2 

45.2 

Balances:

Short-term liability

$

51.0 

$

49.7 

Long-term liability

762.0 

715.9 

Total liability

$

813.0 

$

765.6 

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

Goodwill and Intangible Assets

Goodwill, which represents the excess of cost over the fair value of net assets acquired in business combinations, increased $456.5 million to $8.037 billion at December 31, 2025, due to purchase accounting allocations of $306.8 million, primarily related to the Suvinil acquisition, and foreign currency translation rate fluctuations and other adjustments of $149.7 million.

Intangible assets increased $432.9 million to $3.966 billion at December 31, 2025 due to purchase price accounting allocations of $643.4 million, primarily related to the Suvinil acquisition, foreign currency translation rate fluctuations and other adjustments of $104.0 million and capitalization of software of $39.9 million, offset by amortization of finite-lived intangible assets of $336.6 million and trademark impairment of $17.8 million.

See Note 3 to the consolidated financial statements in Item 8 for further information related to acquisitions. See Note 6 to the consolidated financial statements in Item 8 for a description of goodwill, identifiable intangible assets, asset impairments and summaries of the remaining carrying values of goodwill and intangible assets.

Other Assets

Other assets increased $127.5 million to $1.759 billion at December 31, 2025. The increase was primarily due to an increase in non-traded investments and pension plan assets. See Notes 1 and 8 to the consolidated financial statements in Item 8 for further information.

Debt (including Short-term borrowings)

December 31,

December 31,

2025

2024

Long-term debt

$

9,670.8 

$

9,226.0 

Short-term borrowings

1,200.5 

662.4 

Total debt outstanding

$

10,871.3 

$

9,888.4 

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Total debt outstanding, including Short-term borrowings, increased by $982.9 million to $10.871 billion in 2025. Short-term borrowings are primarily comprised of amounts outstanding under the Company’s domestic commercial paper program, delayed draw term loans and various foreign credit facilities. The Company’s Long-term debt primarily consists of senior notes. The Company targets Net debt, which is total debt outstanding, net of Cash and cash equivalents, to be 2.0 to 2.5 times EBITDA. At December 31, 2025, Net debt was $10.664 billion and was 2.4 times the Company’s EBITDA in 2025. See the Non-GAAP Financial Measures section for the definition and calculation of EBITDA.

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, 2025, the Company had unused capacity under its various credit agreements of $3.649 billion.

See Note 7 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 Plans

In 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 increased $15.5 million to $83.3 million primarily due to changes in actuarial assumptions and the acquisition of a Suvinil defined benefit pension plan. The Company’s liability for domestic other postretirement benefits decreased $9.5 million to $125.6 million at December 31, 2025 primarily due to benefits paid and changes in actuarial assumptions.

The assumed discount rate used to determine the projected benefit obligation for the domestic defined benefit pension plan decreased to 5.7% at December 31, 2025 from 5.8% at December 31, 2024. The assumed discount rate used to determine the projected benefit obligation for foreign defined benefit pension plans of 5.5% remained substantially the same at December 31, 2025 and December 31, 2024. The assumed discount rate used to determine the benefit obligation for domestic other postretirement benefit obligations decreased to 5.4% at December 31, 2025 from 5.6% at December 31, 2024.

In determining the rates of compensation increases, management considered historical Company increases as well as expectations for future increases. The rate of compensation increases used to determine the projected benefit obligation at December 31, 2025 was 3.0% for the domestic pension plan and 3.2% for foreign pension plans, which was comparable to the rates used in the prior year.

In establishing the expected long-term rate of return on plan assets, management considered the historical rates of return, the nature of investments and an expectation for future investment strategies. The expected long-term rate of return on assets for the domestic defined benefit pension plan was 6.0% and 6.5% at December 31, 2025 and 2024, respectively. The expected long-term rate of return on assets for the foreign defined benefit pension plans was 5.1% and 4.8% at December 31, 2025 and 2024, respectively.

In developing the assumed health care cost trend rates, management considered industry data, historical Company experience and expectations for future health care costs. The assumed health care cost trend rates used to determine the benefit obligation for domestic other postretirement benefit obligations at December 31, 2025 were 6.0% and 11.0% for medical and prescription drug cost increases, respectively, both decreasing gradually to 4.5% in 2034. The assumed health care cost trend rates for medical and prescription costs used to determine the benefit obligation for domestic other postretirement benefit obligations at December 31, 2024 were 6.5% and 11.8%, respectively.

The respective year-end assumptions described above for the Company’s defined benefit plans are also used to determine expense for the next year. Net pension (credit) cost in 2026 for the domestic pension plan and foreign pension plans is expected to be approximately $(3.2) million and $6.1 million, respectively. Net periodic benefit cost in 2026 for domestic other postretirement benefits is expected to be approximately $2.6 million.

Employees and their eligible dependents in certain consolidated foreign subsidiaries of the Company are eligible for health care benefits upon retirement, subject to the terms of the plans, and are recorded as other postretirement benefits. The associated benefit obligation and net periodic benefit cost did not have a material impact on the Company’s consolidated financial statements.

See Note 8 to the consolidated financial statements in Item 8 for further information on the Company’s obligations and funded status of its defined benefit pension plans and other postretirement benefits.

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Deferred Income Taxes

Deferred income taxes at December 31, 2025 increased $157.8 million to $765.3 million primarily due to provisions of the One Big Beautiful Bill Act signed into law in 2025 which allows for the immediate expensing of certain domestic capital expenditures and domestic research and development costs, and the ability to accelerate previously capitalized domestic research and development costs, partially offset by the amortization of intangible assets in the current year. See Note 20 to the consolidated financial statements in Item 8 for further information on deferred taxes.

Other Long-Term Liabilities

Other long-term liabilities increased $266.4 million to $2.576 billion at December 31, 2025 primarily due to liabilities associated with net investment hedges, commitments related to non-traded investments and real estate financing. See Notes 1, 9, 10 and 16 to the consolidated financial statements in Item 8 for further information.

Environmental-Related Liabilities

The 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, regulations and requirements and has implemented various programs designed to help protect the environment and promote continued compliance. 

Depreciation 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 2025. 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 2026. See Note 10 to the consolidated financial statements in Item 8 for further information on environmental-related liabilities.

Contractual and Other Obligations and Commercial Commitments

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, 2025.

Payments Due by Period

Contractual and Other Obligations

Total

Less Than

1 Year

1–3 Years

3–5 Years

More Than

5 Years

Long-term debt

$

9,750.1 

$

350.1 

$

2,400.0 

$

1,800.0 

$

5,200.0 

Interest on Long-term debt

3,759.3 

293.9 

487.3 

404.8 

2,573.3 

Operating leases

2,342.0 

558.9 

856.0 

492.9 

434.2 

Finance leases

648.7 

11.9 

17.6 

18.5 

600.7 

Short-term borrowings

1,200.5 

1,200.5 

Real estate financing transactions

2,058.1 

66.7 

137.4 

141.8 

1,712.2 

Purchase obligations (1)

382.6 

382.6 

Other contractual obligations (2)

792.9 

125.0 

229.4 

187.4 

251.1 

Total contractual cash obligations

$

20,934.2 

$

2,989.6 

$

4,127.7 

$

3,045.4 

$

10,771.5 

(1)Relates to open purchase orders for raw materials at December 31, 2025.

(2)Relates primarily to estimated future capital contributions for investments in the U.S. affordable housing and historic renovation real estate partnerships and various other contractual obligations.

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Amount of Commitment Expiration Per Period

Commercial Commitments

Total

Less Than

1 Year

1–3 Years

3–5 Years

More Than

5 Years

Standby letters of credit

$

129.8 

$

129.8 

Surety bonds

215.0 

215.0 

Total commercial commitments

$

344.8 

$

344.8 

$

— 

$

— 

$

— 

Warranties

The 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 2025 and 2024, including customer satisfaction settlements during the year, were as follows:

2025

2024

Balance at January 1

$

46.4 

$

40.4 

Charges to expense

29.3 

34.2 

Settlements

(18.4)

(28.2)

Balance at December 31

$

57.3 

$

46.4 

Shareholders’ Equity

Shareholders’ equity increased $547.1 million to $4.598 billion at December 31, 2025 from $4.051 billion last year. The increase was primarily attributable to the generation of $2.569 billion of Net income, benefits from stock option exercises and the recognition of stock-based compensation expense of $242.9 million and a decrease in Accumulated other comprehensive income (loss) of $240.8 million mainly due to foreign currency translation adjustments. These increases were partially offset by the repurchase of $1.656 billion in Treasury stock and the payment of $789.8 million in cash dividends. During the fourth quarter of 2025, the Company retired 29.5 million common stock shares held in treasury stock, which resulted in decreases of Common stock, Other capital, Retained earnings and Treasury stock of $9.9 million, $578.5 million, $7.996 billion, and $8.584 billion, respectively. See the Statements of Consolidated Shareholders’ Equity and Statements of Consolidated Comprehensive Income in Item 8 for further information.

The Company purchased 4.8 million shares of its common stock for treasury purposes through open market purchases during 2025. 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. The Company had remaining authorization from its Board of Directors at December 31, 2025 to purchase 29.6 million shares of its common stock.

The Company’s 2025 annual cash dividend of $3.16 per share represented 30% of 2024 diluted net income per share. The 2025 annual dividend represented the 47th consecutive year of increased dividend payments. On January 26, 2026, the Board of Directors increased the quarterly cash dividend to $0.80 per share. This quarterly dividend, if approved in each of the remaining quarters of 2026, would result in an annual dividend for 2026 of $3.20 per share, or a 31% payout of 2025 diluted net income per share.

Cash Flow

Net operating cash increased $298.4 million in 2025 to a cash source of $3.452 billion from a cash source of $3.153 billion in 2024 primarily due to an increase in Deferred income taxes and lower cash requirements for working capital, partially offset by lower Net income. Net operating cash increased as a percent of Net sales to 14.6% in 2025 compared to 13.7% in 2024.

Net investing cash usage increased $870.0 million to a usage of $2.066 billion in 2025 from a usage of $1.196 billion in 2024 primarily due to an increase in cash used for the Suvinil acquisition in the current year, partially offset by a decrease in capital expenditures. See Note 3 to the consolidated financial statements in Item 8 for further information on acquisitions.

Net financing cash usage decreased $638.5 million to a usage of $1.379 billion in 2025 from a usage of $2.017 billion in 2024. This decrease was primarily due to proceeds from long-term debt, an increase in short-term borrowings in 2025 and a lower amount of treasury stock repurchased, partially offset by lower proceeds from real estate financing transactions related to the new global headquarters and lower proceeds from stock options exercised.

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In the normal course of business, the Company may receive proceeds related to claims for incurred damages under its insurance policies. No amounts have been recorded in the consolidated financial statements for any insurance proceeds that have not been received as of the balance sheet date and any future recoveries are indeterminable at this time.

Market Risk

The Company is exposed to market risk associated with interest rates, 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 2025 and 2024, 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. In addition, the Company entered into forward foreign currency exchange contracts during 2025 and 2024 primarily to hedge value changes in foreign currency. There were no material contracts outstanding at December 31, 2025. Lastly, the Company entered into interest rate lock contracts in 2025 to hedge the variability in the benchmark interest rate for the 2025 issuance of long-term fixed rate debt. The contracts were designated as cash flow hedges and settled in 2025. See Notes 1, 16 and 19 to the consolidated financial statements in Item 8 for further information on the use of derivative instruments. The Company believes it may experience losses from foreign currency translation and transactions, interest rate movement and commodity price fluctuations. However, the Company does not expect foreign currency translation or transactions, interest rate movement, commodity price fluctuations or hedging contract losses to have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

Financial Covenant

Certain borrowings contain a consolidated leverage covenant. The covenant states the Company’s consolidated leverage ratio is not to exceed 3.75 to 1.00; however, the Company may elect to temporarily increase the leverage ratio to 4.25 to 1.00 for a period of four consecutive fiscal quarters immediately following the consummation of a qualifying acquisition, as defined in the credit agreement dated July 31, 2024. 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), as defined in the credit agreement, for the 12-month period ended on the same date. Refer to the “Non-GAAP Financial Measures” section for a reconciliation of EBITDA to Net income. At December 31, 2025, the Company was in compliance with the covenant and expects to remain in compliance. The Company’s notes, debentures and revolving credit agreements contain various default and cross-default provisions. 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. See Note 7 to the consolidated financial statements in Item 8 for further information.

Defined Contribution Savings Plan

Participants in the Company’s defined contribution savings plan are allowed to contribute 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 and additionally, may elect to make discretionary contributions. The Company’s matching and discretionary contributions to the defined contribution savings plan charged to operations were $184.2 million in 2025 compared to $165.1 million in 2024. At December 31, 2025, there were 14,886,577 shares of the Company’s common stock being held by the defined contribution savings plan, representing 6.0% of the total number of voting shares outstanding. See Note 13 to the consolidated financial statements in Item 8 for further information concerning the Company’s defined contribution savings plan.

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NON-GAAP FINANCIAL MEASURES

Management utilizes certain financial measures that are not in accordance with 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 EBITDA

EBITDA is a non-GAAP financial measure defined as Net income before income taxes, Interest expense, depreciation and amortization. Adjusted EBITDA is a non-GAAP financial measure defined as EBITDA that excludes certain adjustments that management believes enhances investors’ understanding of the Company’s operating performance. 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 as an indicator of operating performance. The reader should refer to the determination of Net income in accordance with US GAAP disclosed in the Statements of Consolidated Income in Item 8.

The following table reconciles Net income computed in accordance with US GAAP to EBITDA and Adjusted EBITDA as calculated by management for the years indicated below:

2025

2024

Net income

$

2,568.5 

$

2,681.4 

Interest expense

465.0 

415.7 

Income taxes

769.7 

770.4 

Depreciation

340.3 

297.4 

Amortization

336.6 

326.6 

EBITDA

4,480.1 

4,491.5 

Severance and other restructuring expenses

111.0 

— 

Trademark impairment

17.8 

— 

Adjusted EBITDA

$

4,608.9 

$

4,491.5 

Free Cash Flow After Dividends

Free cash flow after dividends 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 on investment to its shareholders by the payments of cash dividends. Management considers Free cash flow after dividends 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 after dividends 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 after dividends as calculated by management for the years indicated below: 

2025

2024

Net operating cash

$

3,451.6 

$

3,153.2 

Capital expenditures

(797.6)

(1,070.0)

Cash dividends

(789.8)

(723.4)

Free cash flow after dividends

$

1,864.2 

$

1,359.8 

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Adjusted Diluted Net Income Per Share

Management believes investors’ understanding of the Company’s operating performance is enhanced by the disclosure of diluted net income per share excluding Valspar acquisition-related amortization expense and certain other adjustments. Valspar acquisition-related amortization expense is excluded from diluted net income per share due to its significance as a result of the purchase price assigned to finite-lived intangible assets at the date of acquisition and the related impact on underlying business performance and trends. While these intangible assets contribute to the Company’s revenue generation, the related revenue is not excluded. 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 Ended

December 31, 2025

Pre-Tax

Tax

Effect (1)

After-Tax

Diluted net income per share

$

10.26 

Acquisition-related amortization expense (2)

$

1.03 

$

.25 

.78 

Severance and other restructuring expenses

.44 

.10 

.34 

Trademark impairment

.07 

.02 

.05 

Adjusted diluted net income per share

$

11.43 

Year Ended

December 31, 2024

Pre-Tax

Tax

Effect (1)

After-Tax

Diluted net income per share

$

10.55 

Acquisition-related amortization expense (2)

$

1.02 

$

.24 

.78 

Adjusted diluted net income per share

$

11.33 

(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, which is included within Selling, general and administrative expenses, consists of the amortization of intangible assets related to the Valspar acquisition. These intangible assets are primarily customer relationships and intellectual property and are being amortized over their remaining useful lives.

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Adjusted Segment Profit

Management believes investors’ understanding of the Company’s operating performance is enhanced by the disclosure of Segment profit excluding Valspar acquisition-related amortization expense and certain other adjustments. Valspar acquisition-related amortization expense is excluded from Segment profit due to its significance as a result of the purchase price assigned to finite-lived intangible assets at the date of acquisition and the related impact on underlying business performance and trends. While these intangible assets contribute to the Company’s revenue generation, the related revenue is not excluded. 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, 2025

Paint

Stores

Group

Consumer Brands

Group

Performance Coatings

Group

Administrative

Total

Net sales

$

13,605.9

$

3,166.4

$

6,795.2

$

6.8 

$

23,574.3

Income before income taxes

$

3,061.5

$

509.6

$

942.7

$

(1,175.6)

$

3,338.2

Percent to Net sales

22.5 

%

16.1 

%

13.9 

%

nm

14.2 

%

Acquisition-related amortization expense (1)

62.0

196.3

258.3

Severance and other restructuring expenses

39.1

17.9

54.0 

111.0

Trademark impairment

17.8

17.8

Adjusted segment profit

$

3,061.5

$

610.7

$

1,174.7

$

(1,121.6)

$

3,725.3

Percent to Net sales

22.5 

%

19.3 

%

17.3 

%

nm

15.8 

%

Year Ended December 31, 2024

Paint

Stores

Group

Consumer Brands

Group

Performance Coatings

Group

Administrative

Total

Net sales

$

13,188.0

$

3,108.0

$

6,797.3

$

5.2 

$

23,098.5

Income before income taxes

$

2,902.6

$

589.9

$

1,027.9

$

(1,068.6)

$

3,451.8

Percent to Net sales

22.0 

%

19.0 

%

15.1 

%

nm

14.9 

%

Acquisition-related amortization expense (1)

63.8

196.3

260.1

Adjusted segment profit

$

2,902.6

$

653.7

$

1,224.2

$

(1,068.6)

$

3,711.9

Percent to Net sales

22.0 

%

21.0 

%

18.0 

%

nm

16.1 

%

nm    - not meaningful

(1)    Acquisition-related amortization expense, which is included within Selling, general and administrative expenses, consists of the amortization of intangible assets related to the Valspar acquisition. These intangible assets are primarily customer relationships and intellectual property and are being amortized over their remaining useful lives.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with 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 critical accounting policies and estimates described below. However, application of these critical accounting policies and estimates 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.

Inventories

In accordance with the Inventory Topic of the ASC, inventories are stated at the lower of cost or market with cost determined principally on the last-in, first-out (LIFO) method based on inventory quantities and costs determined during the fourth quarter and market representing current replacement cost, which is the cost to purchase or reproduce the inventory. Market shall not exceed net realizable value and shall not be less than net realizable value reduced by an allowance for an approximately normal profit margin. Inventory quantities are adjusted throughout the year as formal cycle counts are 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 records an estimate of the lower of cost or market whenever the utility of inventory is impaired by damage, deterioration, obsolescence, changes in price levels or other causes 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 current market price is provided for in the reserve for obsolescence. See Note 4 to the consolidated financial statements in Item 8 for further information regarding the impact of the LIFO inventory valuation and the reserve for obsolescence.

Goodwill and Intangible Assets

In 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 occurred on a more likely than not basis. An optional qualitative assessment allows companies to forego 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.

Management tests goodwill for impairment at the reporting unit level. Per the Segment Reporting Topic of the ASC, a reporting unit is an operating segment 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, the difference represents the amount of impairment attributable to the reporting unit. 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 a discount rate, growth rates, cash flow projections and a terminal value rate. 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 rate 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. 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 a long-term growth rate. 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 within a reasonable and supportable control premium.

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The Company had seven components, some of which are aggregated due to similar economic characteristics, to form three reporting units (also the reportable operating segments) with goodwill as of October 1, 2025, the date of the annual impairment test. The Company performed the optional qualitative impairment test as of October 1, 2025, and determined that there was no indication of impairment on a more likely than not basis in the Company’s reporting units.

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 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 a discount rate, a royalty rate, growth rates, sales projections, a terminal value rate and to a lesser extent, a tax rate. The discount rate used is similar to the rate developed by the WACC methodology considering any differences in Company-specific risk factors between reporting units and trademarks. The royalty rate is established by management and valuation experts and periodically substantiated by valuation experts. 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 a long-term growth rate. The royalty savings valuation methodology and calculations used in 2025 impairment testing are consistent with prior years. The Company performed the optional qualitative impairment test as of October 1, 2025, and determined that there was indication of impairment on a more likely than not basis in certain of the Company’s trademarks. The quantitative impairment tests performed as of October 1, 2025 resulted in $17.8 million of trademark impairment in the Performance Coatings Group primarily related to restructuring activities which impacted certain trademarks in the Asia, Latin America and Europe regions. No other impairments or risks for impairment were identified as a result of this review.

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 from the perspective of a market participant. See Note 6 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 Assets

In accordance with the Property, Plant and Equipment Topic of the ASC, if events or changes in circumstances indicate that the carrying value of long-lived assets, including operating and finance lease right-of-use assets, may not be recoverable or the useful life has changed, impairment tests are performed or the useful life is adjusted. Undiscounted cash flows are used to calculate the recoverable value of long-lived assets to determine if such assets are 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. If the usefulness of an asset is determined to be impaired, an updated useful life is assessed based on the period of time for projected use of the asset. Fair value approaches and changes in useful life are based on certain assumptions and information available at the time the valuation or determination is performed. 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. As of October 1, 2025, the Company performed an analysis and determined that there were no events or changes in circumstances to suggest the carrying value of each long-lived asset group is not recoverable and therefore, no further impairment tests were performed. 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.

Defined Benefit Pension and Other Postretirement Benefit Plans

To determine the Company’s ultimate obligation under its defined benefit pension and other postretirement benefit plans, management estimates the future cost of benefits and attributes that cost to the time period during which each covered employee works. To determine the obligations of the benefit plans, management uses actuaries to calculate such amounts using key assumptions which include discount rates, inflation rates, 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 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 and credits are recognized and recorded in Accumulated other comprehensive income (loss) (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 Net income over a period of years through the net pension and net periodic benefit costs. Based on facts and circumstances, the

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expense amounts recorded in AOCI can also have accelerated amortization due to certain plan changes, including those that result in a curtailment. See Note 8 to the consolidated financial statements in Item 8 for further information concerning the Company’s defined benefit pension plans and other postretirement benefit plans.

Environmental Matters

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). 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 routinely 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 10 to the consolidated financial statements in Item 8 for further information concerning the accrual for extended environmental-related activities and a discussion concerning unaccrued future loss contingencies.

Litigation and Other Contingent Liabilities

In the course of its business, the Company is subject to a variety of actual and potential claims, lawsuits, and other proceedings, including, but not limited to, litigation relating to product liability and warranty, raw materials used in our products, personal injury, environmental (including alleged natural resource damages), intellectual property, commercial, contractual and antitrust claims, that are inherently subject to many uncertainties regarding the possibility of a loss to the Company. In accordance with the Contingencies Topic of the ASC, management accrues for contingencies 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. 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, and the recording of the additional liability may result in a material impact on Net income for the annual or interim period during which such additional liability is accrued. In matters where no accrual is recorded because it is not probable that a liability will be incurred or the amount of any such loss cannot be reasonably estimated, any potential liability ultimately determined to be attributable to the Company arising out of any such claims, lawsuits or other proceedings, may result in a material adverse effect on the Company’s results of operations, liquidity or financial condition. See Note 11 to the consolidated financial statements in Item 8 for further information concerning litigation.

Income Taxes

The Company estimates income taxes for each jurisdiction in which it conducts operations. This involves 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.

The Company recognizes a 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.

The Company also considers both positive and negative evidence when measuring the realizability of our deferred tax assets and the need for a valuation allowance when it is more likely than not that all or a portion of such assets will not be realized. The weight given to the evidence is commensurate with the extent to which it may be objectively verified. The Company places significant weight on operating results during the most recent three-year period in its analysis. Future reversals of existing temporary differences are heavily weighted sources of objectively verifiable positive evidence. It is typical to only consider forecasts of future profitability when positive cumulative operating results exist in the most recent three-year period. If necessary and available, tax planning strategies could be implemented to accelerate taxable amounts to utilize expiring

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carryforwards. A valuation allowance is not required to the extent that, in the Company’s judgment, positive evidence exists with a magnitude and duration sufficient to result in a conclusion that is more likely than not that deferred tax assets will be realized. See Note 20 to the consolidated financial statements in Item 8 for further information concerning income taxes.

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