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The Sherwin-Williams (SHW) John G. Morikis on Q1 2016 Results - Earnings Call Transcript

Q1 2016 Earnings Call

April 21, 2016 11:00 am ET


Robert J. Wells - SVP-Communications & Public Affairs, IR Contact

John G. Morikis - President, Chief Executive Officer & Director

Sean P. Hennessy - Chief Financial Officer & Senior Vice President


Ghansham Panjabi - Robert W. Baird & Co., Inc. (Broker)

Christopher S. Parkinson - Credit Suisse Securities (NYSE:USA) LLC (Broker)

Robert Andrew Koort - Goldman Sachs & Co.

Duffy Fischer - Barclays Capital, Inc.

Vincent Stephen Andrews - Morgan Stanley & Co. LLC

Don Carson - Susquehanna Financial Group LLLP

Arun Viswanathan - RBC Capital Markets LLC

P.J. Juvekar - Citigroup Global Markets, Inc. (Broker)

Michael Joseph Harrison - Seaport Global Securities LLC

Nils-Bertil Wallin - CLSA Americas LLC

Dmitry Silversteyn - Longbow Research LLC

Charles Cerankosky - Northcoast Research Partners LLC

Ivan M. Marcuse - KeyBanc Capital Markets, Inc.

Rosemarie Jeanne Morbelli - Gabelli & Company

Scott Rednor - Zelman & Associates

Jay McCanless - Sterne Agee

Gregory S. Melich - Evercore ISI

John Roberts - UBS Securities LLC


Good afternoon. Thank you for joining The Sherwin-Williams Company's review of First Quarter Results for 2016. With us on today's call are John Morikis, President and CEO; Sean Hennessy, CFO; Al Mistysyn, Senior Vice President, Corporate Controller; and Bob Wells, Senior Vice President, Corporate Communications.

This conference call is being webcast simultaneously in listen-only mode by Issuer Direct via the Internet at An archived replay of this webcast will be available at beginning approximately two hours after this conference call concludes and will be available until Thursday, May 12, at 5:00 PM Eastern Time.

This conference call will include certain forward-looking statements as defined under U.S. Federal Securities Laws with respect to sales, earnings and other matters. Any forward-looking statements speak only as of the day on which such statement is made and the company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

A full declaration regarding forward-looking statements is provided in the company's earnings release transmitted earlier this morning. After the company's prepared remarks, we will open the session to questions.

I will now turn the call over to Bob Wells.

Robert J. Wells - SVP-Communications & Public Affairs, IR Contact

Thanks, Jessie. Good morning, everyone, and thanks for joining us. In the interest of time, we provided some balance sheet items and other select financial information on our website, under Investor Relations, April 21 press release. I'll begin by highlighting overall company performance for the first quarter 2016 compared to the first quarter 2015, and then comment on each reportable segment.

Consolidated net sales increased 5.1% to a record $2.57 billion, driven primarily by higher paint sales volume in our Paint Stores Group and Consumer Group. Unfavorable currency translation decreased consolidated net sales 2.8% in the quarter. Consolidated gross profit dollars increased $129.3 million in the quarter to $1.26 billion.

Our consolidated gross margin increased 280 basis points in the quarter to 49% of sales from 46.2% in the first quarter last year. Most of the gross margin improvement in the quarter resulted from the positive mix effect of Paint Stores Group, our highest gross margin segment, outpacing the growth of the other segments, coupled with increased operating leverage from higher production and distribution volume.

Selling, general and administrative expenses increased $73.2 million over the first quarter last year to $1 billion. As a percent of sales, SG&A increased to 38.9% in the first quarter this year, from 37.9% last year. Roughly half of this increase was from acquisition-related costs.