Notes on Sherwin-Williams' Earnings Call

Some interesting notables from Sherwin William's (SHW) earnings call.

CFO Sean Hennessy had some of the more interesting disclosures:

* $220 million stock repurchased at an average cost of $53.69.

* Debt Expense:

Saul Ludwig – Keybanc: "I don’t understand why your interest expense, just gross interest expense that you write for the amount of debt and the rate that you pay was down in the first quarter when your debt had to be up $250 million."

Sean Hennessy: "I think when you take a look at the interest rates we went out there with some of the liquidity instruments that we have that are at favorable LIBOR rates."

Saul Ludwig – Keybanc: "So it was rates that did it?"

Sean Hennessy: "Yes."

* Total debt will be in the $950 million range vs $1.35 billion currently.

International:

Analyst for Don Carson – Merrill Lynch: "A final question on the Global Group, obviously you bought Nicco Paints last year and you have commented that would be a platform for growth in India. I was wondering if you had any further developments in any of the Asian regions, coupled with your purchase in Singapore?"

Chris Connor: "A lot of work happening in our Nicco business in India. I think it is a little premature to comment on the next steps but as Sean said, we are pleased with these acquisitions and they are continuing to move in the right direction."

Not much else. Consumer price increases go into effect in May which is why the second half of the year looks stronger than the first. The estimates given take into real pessimistic outlooks for both the residential and commercial markets for the remainder of 2008.

Lead paint received a brief discussion of current status. The only notable here is that the list is 1/5 what is was at this time last year.

Disclosure: Long SHW

Comments

[User 153029]

Do you know the percentage of SHW revenues that come from outside the US? I could not find this easily in the 10-K.

thanks - Ed Roche, Freedom Mountain Investments

[todd su]

ed,

i believe the last I saw was 25% - 28%

that will grow dramatically after the acquisitions at the end of last year are fully integrated..

[Coffeygrinds]

Sean,
We are seeing heavy put action in Sherwin Williams going in to expiration this week, but point out that this appears to be a roll, or calendar spread. When someone has positions in one month and wants to stick with the position for another month, quarter etc, they sell their expiring options and buy the other month, usually at the same strike price. Thus they are "buying time", so this is frequently referred to as a time spread, or calendar spread. It is not indicitive of anyting other than the person(s) want continued protection, and or exposure for longer than their expiring position would provide. It is not the same a fresh money being committed.
Are you still long SHW?
Ac

The roll is from the May 55 puts to the June 55 puts and is about 6,000 contracts of each.