Regulators oppose Comex deal Mexican board affirms ruling blocking $2B acquisition

The Sherwin-Williams Co. remains optimistic about acquiring Mexican paint powerhouse Consorcio Comex, which Mexican regulators have twice blocked, but gave few details in Thursday morning's earnings report about the latest developments.

(courtesy Sherwin-Williams Co.)

CLEVELAND, Ohio -- Cleveland paint company Sherwin-Williams Co. announced Thursday morning that it had sold nearly $10.2 billion worth of paint and other products in 2013, up 6.8 percent, or $651.1 million, from 2012.

For the last three months of the year, net sales rose 10.6 percent to $2.46 billion, up $235.2 million from the fourth quarter of 2012.

Profits per share, expressed as diluted net income per common share, rose to $7.26 per share in 2013 from $6.02 per share the previous year. That includes a 47-cents-per-share charge related to an $80 million settlement of a Department of Labor investigation into its employee stock ownership plan, and a 21-cents-per-share charge because of $31.6 million in Brazilian tax assessments.

"We are pleased to report another year of record highs for multiple financial measures in 2013, including sales, earnings per share, net operating cash and earnings before interest, taxes, depreciation and amortization," Chairman and Chief Executive Christopher M. Connor said in a statement. "Net operating cash surpassed $1.0 billion for the first time in the Company's history."

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July 18, 2013:

June 1, 2013:

Nov. 12, 2012:

Conspicuously absent from the announcement was an update on the company's efforts to woo and eventually purchase the Mexican division of its North American rival, Consorcio Comex,

S.A. de C.V.,

other than a comment from Connor that "Our balance sheet is positioned well for the anticipated closing of the Comex acquisition and other investments in our business."

The company bought Comex's smaller U.S. and Canadian divisions in September, but has so far been unsuccessful in winning the approval of Mexican regulators to buy the rest. Sherwin-Williams told investors last quarter that it would have an update at the end of its calendar year.

Sean Hennessy, chief financial officer and senior vice president of finance, told analysts on Thursday that "We continue to believe this is going to be a very good acquisition for the company. We'll continue to work on a process that would allow us to close this acquisition.

"This process required us signing nondisclosure agreements with outside parties, which limits what we can say, but what we will say is we have an exclusive contract with the [controlling] Achar family through March 31, 2014," he said. "We have crafted our final remedy and are prepared to present to the proper authorities. We have not received a firm data of that presentation but fully expect it to occur in February, with a response from the commission sometime after that but close to the March 31st date."

One way or another, "I think that this is our final bite of the apple," Hennessy added.

For the fourth quarter that ended Dec. 31, diluted net income rose to $1.14 per share, up 49 cents from the 65-cents-per-share rate a year ago.

Net sales in its paint stores rose 17.6 percent to $1.46 billion for the quarter, and 10.9 percent to $6.0 billion for the year, because of higher sales volumes of architectural paint for homes and other structures.

Net sales at stores open at least a year, a key retail metric called same-store sales, rose 9.2 percent in the fourth quarter and 7.8 percent for the year.

Net sales in the company's Consumer Group rose 6.6 percent to $272.6 million for the quarter, and 1.5 percent to $1.34 billion for the year, again because of higher paint sales and acquisitions.

Net sales in the Global Finishes Group grew 2.0 percent to $496.9 million in the quarter, and 2.2 percent to $2.0 billion in the year, because of higher prices and acquisitions.

Net sales in the Latin American Coatings Group declined 4.0 percent to $222.2 million for the quarter, and slipped 0.4 percent to $832.5 million for the year, mostly because of unfavorable currency conversion rates.

Sherwin-Williams added 388 net new stores in 2013, including 306 from the U.S. and Canadian Comex division, to end the year with 3,908 stores.

Sherwin-Williams expects net sales to grow 7 percent to 12 percent in the first quarter of 2014, and diluted net income per common share of 95 cents to $1.15 per share. The U.S. and Canadian Comex stores are expected to contribute $97 million to $107 million to net sales.

The company expects an 8 percent to 13 percent growth in consolidated net sales for all of 2014, and diluted net income per common share of $8.12 to $8.32 per share.

Company executives said Thursday that they plan to file an appeal to the lead paint public nuisance claims brought by 10 cities and counties in California against Sherwin-Williams and other defendants. The decision, which was entered on Jan. 27, orders Sherwin-Williams, NL Industries and ConAgra to pay $1.15 billion into a fund to be administered by the Childhood Lead Prevention program branch, a state agency.

"We expect to file our appeal to the 6th District Court of Appeals within the next 60 days and believe the process is likely to take two to three years," said Bob Wells, senior vice president of corporate communications and public affairs.

Sherwin-Williams reported its results before the markets opened on Thursday. Its shares, which had closed at $189.12 on Wednesday, dropped by more than $5 a share to close at $183.74 on Thursday.