SHERWIN WILLIAMS CO - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

COMMISSION FILE NUMBER 1-4851

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THE SHERWIN-WILLIAMS COMPANY
(Exact name of registrant as specified in its charter)

OHIO
(State or other jurisdiction of incorporation or organization)

34-0526850
(I.R.S. Employer Identification No.)

101 PROSPECT AVENUE, N.W., CLEVELAND, OHIO
(Address of principal executive offices)

44115-1075
(Zip Code)

(216) 566-2000
Registrant's telephone number, including area code
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Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

At January 31, 2002, 152,578,617 shares of common stock were outstanding,
net of treasury shares. The aggregate market value of such voting stock held by
non-affiliates on January 31, 2002 was $4,213,552,266.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report to Shareholders for the fiscal year ended
December 31, 2001 ("2001 Annual Report") are incorporated by reference into
Parts I, II and IV of this report.

Portions of the Proxy Statement for the 2002 Annual Meeting of Shareholders
("Proxy Statement") are incorporated by reference into Part III of this report.

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PART I

ITEM 1. BUSINESS

GENERAL DEVELOPMENT OF BUSINESS

The Sherwin-Williams Company, founded in 1866 and incorporated in Ohio in
1884, is engaged in the manufacture, distribution and sale of coatings and
related products to professional, industrial, commercial and retail customers
primarily in North and South America. Its principal executive offices are
located at 101 Prospect Avenue, N.W., Cleveland, Ohio 44115-1075, telephone
(216) 566-2000. As used in this report, the terms "Sherwin-Williams" and
"Company" mean The Sherwin-Williams Company and its consolidated subsidiaries
unless the context indicates otherwise.

BASIS OF REPORTABLE SEGMENTS

The Company reports its segment information in five reportable
segments -- the Paint Stores, Consumer, Automotive Finishes, International
Coatings (collectively, the "Operating Segments") and Administrative
Segments -- in accordance with Statement of Financial Accounting Standards
(SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 131 requires an enterprise to report segment information
in the same way that management internally organizes its business for assessing
performance and making decisions regarding allocation of resources.

The Company's chief operating decision maker has been identified as the
Chief Executive Officer because he has final authority over performance
assessment and resource allocation decisions. Because of the global, diverse
operations of the Company, the chief operating decision maker regularly receives
discrete financial information about each reportable segment as well as a
significant amount of additional financial information about certain aggregated
divisions, operating units and subsidiaries of the Company. The chief operating
decision maker uses all such financial information for performance assessment
and resource allocation decisions. Factors considered in determining the five
reportable segments of the Company include the nature of the business
activities, existence of managers responsible for the operating and
administrative activities and information presented to the Board of Directors.
The Company evaluates the performance of Operating Segments and allocates
resources based on profit or loss and cash generated from operations before
income taxes, excluding corporate expenses and financing gains and losses. The
accounting policies of the reportable segments are the same as those described
in Note 1 of the Notes to Consolidated Financial Statements on pages 33 through
35 of the 2001 Annual Report, which is incorporated herein by reference.

PAINT STORES SEGMENT

The Paint Stores Segment consists of 2,573 company-operated specialty paint
stores in the United States, Canada, Virgin Islands, Puerto Rico and Mexico.
Each division and business unit of the Segment is engaged in the related
business activity of selling the Company's own manufactured coatings and related
products to end-use customers. During 2001, this Segment opened or acquired 85
net new stores, remodeled 6 and relocated 38. The net new stores consisted of 83
stores in the United States, 2 in Canada, and 1 in Puerto Rico along with 1
closing in Mexico. In 2000, there were 92 net new stores opened or acquired (79
in the United States). In 1999, 73 net new stores were opened (66 in the United
States). This Segment also manufactures original equipment manufacturer (OEM)
product finishes sold through the paint stores and by direct outside sales
representatives. In addition to stores, operations in Mexico include a
manufacturing facility, distribution activities and outside selling functions to
dealers and other distributors.

The Paint Stores Segment is the exclusive North American marketer and
seller of Sherwin-Williams(R) branded architectural coatings, industrial and
marine products, OEM product finishes and related items produced by its Mexican
operations, its product finishes manufacturing and by the Consumer Segment. The
loss of any single customer would not have a material adverse effect on the
business of this Segment.

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CONSUMER SEGMENT

The Consumer Segment develops, manufactures and distributes a variety of
paint, coatings and related products to third party customers and the Paint
Stores Segment. Approximately 44 percent of the total sales of the Consumer
Segment in 2001, including inter-segment transfers, represented products sold
through the Paint Stores Segment. Sales and marketing of certain control-branded
and private labeled products is performed by a direct sales staff. The products
distributed through third party customers are intended for resale to the
ultimate end-user of the product. The Consumer Segment has sales to certain
customers that, individually, may be a significant portion of the sales of the
Segment. However, the loss of any single customer would not have a material
adverse effect on the overall profitability of the Segment. This Segment incurs
most of the Company's capital expenditures related to ongoing environmental
compliance measures.

AUTOMOTIVE FINISHES SEGMENT

The Automotive Finishes Segment develops, manufactures and distributes a
variety of motor vehicle finish, refinish and touch-up products primarily
throughout North and South America, the Caribbean Islands and Italy. This
Segment also licenses certain technology and trade names worldwide.
Sherwin-Williams(R) branded automotive finish and refinish products are
distributed throughout North America solely through this Segment's network of
124 company-operated automotive branches in the United States and 17 in Canada.
Additional automotive branches in Jamaica (14) and Chile (19) complete this
Segment's worldwide network. At December 31, 2001, this Segment included 11
foreign wholly-owned subsidiaries in 8 foreign countries and 10 licensing
agreements in 14 foreign countries.

INTERNATIONAL COATINGS SEGMENT

The International Coatings Segment develops, licenses, manufactures and
distributes a variety of paint, coatings and related products worldwide. The
majority of the sales from licensees and subsidiaries occur in South America,
the Segment's most important international market. This Segment sells its
products through 33 company-operated specialty paint stores in Chile and 19 in
Brazil and by outside selling functions to dealers and other distributors. At
December 31, 2001, this Segment included 12 foreign wholly-owned subsidiaries in
8 foreign countries, 4 foreign joint ventures and 30 licensing agreements in 21
foreign countries.

ADMINISTRATIVE SEGMENT

The Administrative Segment includes the administrative expenses of the
Company's and certain consolidated subsidiaries' headquarters sites. This
Segment includes interest expense which is unrelated to retail real estate
leasing activities, investment income, certain foreign currency transaction
losses related to dollar-denominated debt and foreign currency option and
forward contracts, certain expenses related to closed facilities and
environmental-related matters, and other expenses which are not directly
associated with any Operating Segment. Administrative expenses do not include
any significant foreign operations. Also included in the Administrative Segment
is a real estate management unit that is responsible for the ownership,
management and leasing of non-retail properties held primarily for use by the
Company, including the Company's headquarters site, and disposal of idle
facilities. Sales of the Administrative Segment represent external leasing
revenue of excess headquarters space or leasing of facilities no longer used by
the Company in its operations. Gains and losses from the sale of property are
not a significant operating factor in determining the performance of this
Segment.

SEGMENT FINANCIAL INFORMATION

For financial information regarding the Company's reportable segments,
including net external sales, operating profit, identifiable assets and other
information by segment, see Note 16 of the Notes to Consolidated Financial
Statements on pages 44 through 46 of the 2001 Annual Report, which is
incorporated herein by reference.

2

DOMESTIC AND FOREIGN OPERATIONS

Financial and other information regarding domestic and foreign operations
is set forth in Note 16 of the Notes to Consolidated Financial Statements on
page 45 of the 2001 Annual Report, which is incorporated by reference.

Additional information regarding risks attendant to foreign operations is
set forth on pages 22 and 24 of the 2001 Annual Report under the caption
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operation," which is incorporated herein by reference.

BUSINESS DEVELOPMENTS

For additional information regarding the Company's business and business
developments, see page 2 and pages 8 through 15 of the 2001 Annual Report and
the "Letter to Shareholders" on pages 5 through 7 of the 2001 Annual Report,
which is incorporated herein by reference.

RAW MATERIALS AND PRODUCTS PURCHASED FOR RESALE

Raw materials and fuel supplies are generally available from various
sources in sufficient quantities that none of the Segments anticipate any
significant sourcing problems during 2002. There are sufficient suppliers of
each product purchased for resale that none of the Segments anticipate any
significant sourcing problems during 2002.

SEASONALITY

The majority of the sales for the Paint Stores, Consumer and Automotive
Finishes Segments traditionally occur during the second and third quarters. The
International Coatings Segment's fourth quarter sales have traditionally been
greater than the sales for any of the first three quarters. There is no
significant seasonality in sales for the Administrative Segment.

TRADEMARKS AND TRADE NAMES

Customer recognition of Company trademarks and trade names collectively
contribute significantly to the sales of the Company. The major trademarks and
tradenames used by each Operating Segment are set forth below.

Paint Stores Segment: Sherwin-Williams(R), Old Quaker(TM), Mautz(R),
Pro-Line(R), SeaGuard(R), Con-Lux(R), Mercury(R), Brod-Dugan(R), ArmorSeal(R),
Kem(R) Hi-Temp, Cook(TM), Sher-Wood(R), Powdura(R), Polane(R) and Kem Aqua(R).

Consumer Segment: Thompson's(R), Dutch Boy(R), Martin Senour(R),
Cuprinol(R), Pratt & Lambert(R), H&C(TM), Rubberset(R), Dupli-Color(R),
Minwax(R), White Lightning(R), Krylon(R), Formby's(R) and Red Devil(R).

Automotive Finishes Segment: Sherwin-Williams(R), Martin Senour(R),
Western(R), Lazzuril(TM), Excelo(TM), Baco(TM) and ScottWarren(TM).

International Coatings Segment: Sherwin-Williams(R), Dutch Boy(R),
Krylon(R), Kem-Tone(R), Pratt & Lambert(R), Minwax(R), Ronseal(TM),
Colorgin(TM), Globo(TM), Pulverlack(R), Sumare(TM), Andina(TM), Marson(TM) and
Martin Senour(R).

PATENTS

Although patents and licenses are not of material importance to the
business of the Company as a whole or any Segment, the International Coatings
Segment and the international operations of the Automotive Finishes Segment
derive a portion of their income from the licensing of technology, trademarks
and trade names to foreign companies.

3

BACKLOG AND PRODUCTIVE CAPACITY

Backlog orders are not significant in the business of any Segment since
there is normally a short period of time between the placing of an order and
shipment. Sufficient productive capacity currently exists to fulfill the
Company's needs for paint and coatings products through 2002.

RESEARCH AND DEVELOPMENT

For information regarding costs of research and development included in
technical expenditures, see Note 1 of the Notes to Consolidated Financial
Statements on page 34 of the 2001 Annual Report, which is incorporated herein by
reference.

COMPETITION

The Company experiences competition from many local, regional, national and
international competitors of various sizes in the manufacture, distribution and
sale of its coatings and related products. The Company is a leading manufacturer
and retailer of coatings and related products to professional, industrial,
commercial and retail customers, however, the Company's competitive position
varies for its different products and markets.

In the Paint Stores Segment, competitors include other paint and wallpaper
stores, mass merchandisers, home centers, independent hardware stores, hardware
chains and manufacturer-operated direct outlets. Product quality, service and
price determine the competitive advantage for this Segment.

In the Consumer and International Coatings Segments, domestic and foreign
competitors include manufacturers and distributors of branded and private
labeled coatings products. Technology, product quality, product innovation,
breadth of product line, technical expertise, distribution, service and price
are the key competitive factors for these Segments.

The Automotive Finishes Segment has numerous competitors in its domestic
and foreign markets with broad product offerings and several others with niche
products. Key competitive factors for this Segment include technology, product
quality, distribution, service and price.

The Administrative Segment has many competitors consisting of other real
estate owners, developers and managers in areas in which this Segment owns
property. The main competitive factors are the availability of property and
price.

EMPLOYEES

The Company employed 25,789 persons at December 31, 2001.

ENVIRONMENTAL COMPLIANCE

For additional information regarding environmental-related matters, see
pages 22 through 24 of the 2001 Annual Report under the caption entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Notes 1, 4 and 9 of the Notes to Consolidated Financial
Statements on pages 34, 35 and 39, respectively, of the 2001 Annual Report,
which is incorporated herein by reference.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements contained in "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business" and elsewhere in this
report constitute "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. These forward-looking statements are based upon management's current
expectations, estimates, assumptions and beliefs concerning future events and
conditions and may discuss, among other things, anticipated future performance
(including sales and earnings), expected growth and future business plans. Any
statement that is not historical in nature is a forward-looking statement and
may be identified by the use of words and phrases such as "expects,"
"anticipates," "believes," "will likely result," "will continue," "plans to" and
similar expressions. Readers are cautioned not to place undue reliance on any
forward-looking statements. Forward-looking statements are necessarily subject
to risks, uncertainties and other factors, many of which are outside the control

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of the Company, that could cause actual results to differ materially from such
statements. These risks, uncertainties and other factors include such things as:
general business conditions, strengths of retail economies and the growth in the
coatings industry; competitive factors, including pricing pressures and product
innovation and quality; changes in raw material availability and pricing;
changes in the Company's relationships with customers and suppliers; the ability
of the Company to successfully integrate past and future acquisitions into its
existing operations, as well as the performance of the businesses acquired; the
ability of the Company to successfully complete planned divestitures; changes in
general domestic economic conditions such as inflation rates, interest rates and
tax rates; risks and uncertainties associated with the Company's expansion into
foreign markets, including inflation rates, recessions, foreign currency
exchange rates, foreign investment and repatriation restrictions and other
external economic and political factors; the achievement of growth in developing
markets, such as Mexico and South America; increasingly stringent domestic and
foreign governmental regulations including those affecting the environment;
inherent uncertainties involved in assessing the Company's potential liability
for environmental remediation-related activities; the nature, cost, quantity and
outcome of pending and future litigation and other claims, including the lead
pigment and lead-based paint litigation and the affect of any legislation and
administrative regulations relating thereto; and unusual weather conditions.

Any forward-looking statement speaks only as of the date on which such
statement is made, and the Company undertakes no obligation to update any
forward-looking statement, whether as a result of new information, future events
or otherwise.

ITEM 2. DESCRIPTION OF PROPERTY

The Company owns its world headquarters located in Cleveland, Ohio, which
includes the world headquarters for the Paint Stores, Consumer and International
Coatings Segments. The Company also owns the world headquarters for the
Automotive Finishes Segment located in Warrensville Heights, Ohio. The Company's
principal manufacturing and distribution facilities are located as set forth
below. The Company believes its manufacturing and distribution facilities are
well-maintained and are suitable and adequate, and have sufficient productive
capacity, to meet its current needs.

PAINT STORES SEGMENT

Manufacturing Facilities
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Arlington, Texas Owned
Calgary, Alberta, Canada Leased
Cincinnati, Ohio Owned
Columbus, Ohio Owned
Greensboro, North Carolina Owned
Grimsby, Ontario, Canada Owned
Harrisburg, Pennsylvania Leased
Memphis, Tennessee Owned
Mexico City, Mexico Owned
Ontario, California Leased
Rockford, Illinois Leased
San Diego, California Leased
Spartanburg, South Carolina Leased
Sylmar, California Leased
Wichita, Kansas Owned

Distribution Facilities
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Mexico City, Mexico Owned
Vancouver, Alberta, Canada Leased

CONSUMER SEGMENT

Manufacturing Facilities
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Baltimore, Maryland Owned
Bedford Heights, Ohio Owned
Chicago, Illinois Owned
Coffeyville, Kansas Owned
Crisfield, Maryland Leased
Deshler, Ohio Owned
Elk Grove, Illinois Owned
Emeryville, California Owned
Ennis, Texas Leased
Flora, Illinois Owned

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Fort Erie, Ontario, Canada Owned
Garland, Texas Owned
Greensboro, North Carolina Owned
Holland, Michigan Owned
Lawrenceville, Georgia Owned
Morrow, Georgia Owned
Olive Branch, Mississippi Owned
Orlando, Florida Owned
Victorville, California Owned

Distribution Facilities
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Bedford Heights, Ohio Leased
Buford, Georgia Leased
Effingham, Illinois Leased
Fredericksburg, Pennsylvania Owned
Reno, Nevada Owned
San Juan, Puerto Rico Leased
Vaughan, Ontario, Canada Leased
Waco, Texas Leased
Winter Haven, Florida Owned

AUTOMOTIVE FINISHES SEGMENT

Manufacturing Facilities
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Aprilia, Italy Leased
Arica, Chile Owned
Kingston, Jamaica Owned
Richmond, Kentucky Owned
Santiago, Chile* Owned
Sao Paulo, Brazil Owned
Texcocco, Mexico Owned

Distribution Facilities
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Aprilia, Italy Leased
Kingston, Jamaica Owned
Reno, Nevada Leased
Richmond, Kentucky Owned
Santiago, Chile* Owned
Sao Paulo, Brazil Owned
Zaragoza, Mexico Owned

INTERNATIONAL COATINGS SEGMENT

Manufacturing Facilities
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Buenos Aires, Argentina Owned
Santa Catarina, Brazil Owned
Santiago, Chile* Owned
Sao Paulo, Brazil(3) Owned
Sheffield, England Owned

Distribution Facilities
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Buenos Aires, Argentina Owned
Dublin, Ireland Owned
Santa Catarina, Brazil Leased
Santiago, Chile* Owned
Santiago, Chile Leased
Sao Paulo, Brazil(3) Owned
Lima, Peru Leased

* This facility is shared between the Automotive Finishes and International
Coatings Segments.

The operations of the Paint Stores Segment included 2,573 company-operated
paint stores, of which 211 were owned, in the United States, Canada, Virgin
Islands, Puerto Rico and Mexico at December 31, 2001. These paint stores are
divided into four separate operating divisions, each of which is responsible for
the paint stores located within its geographical region, and operations in
Mexico. At the end of 2001, the Mid Western Division operated 712 paint stores
primarily located in the midwestern and upper west coast states, the Eastern
Division operated 514 paint stores along the upper east coast and New England
states and Canada, the Southeastern Division operated 617 paint stores
principally covering the lower east and gulf coast states, Puerto Rico and the
U.S. Virgin Islands, and the South Western Division operated 653 paint stores in
the plains and the lower west coast states. The Paint Stores Segment also
included 77 paint stores in Mexico. The Paint Stores Segment opened or acquired
85 net new paint stores in 2001 and relocated 38.

The Automotive Finishes Segment included 124 company-operated automotive
branches, of which one was owned, in the United States and 50 leased
company-operated stores and branches in Canada (17), Chile (19) and Jamaica (14)
at December 31, 2001. The International Coatings Segment included 52
company-operated specialty

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paint stores, of which 24 were owned, in Chile (33) and Brazil (19). All real
property within the Administrative Segment is owned by the Company except for
one warehouse lease. For additional information regarding real property within
the Administrative Segment, see the information set forth in Item 1 of this
report, which is incorporated herein by reference. For additional information
regarding real property leases, see Note 8 of the Notes to Consolidated
Financial Statements on page 39 of the 2001 Annual Report, which is incorporated
herein by reference.

ITEM 3. LEGAL PROCEEDINGS

For information regarding environmental-related matters and other legal
proceedings, see pages 22 through 24 of the 2001 Annual Report under the caption
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Notes 1, 4 and 9 of the Notes to Consolidated
Financial Statements on pages 34, 35 and 39, respectively, of the 2001 Annual
Report, which is incorporated herein by reference.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company's security holders
during the fourth quarter of 2001.

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EXECUTIVE OFFICERS OF THE REGISTRANT

The following is the name, age and present position of each of the
Executive Officers on March 14, 2002, as well as all prior positions held by
each during the last five years and the date when each was first elected or
appointed as an Executive Officer. Executive Officers are generally elected
annually by the Board of Directors and hold office until their successors are
elected and qualified or until their earlier death, resignation or removal.

Mr. Connor has served as Chairman since April 2000 and Chief Executive
Officer since October 1999. Mr. Connor served as Vice Chairman from October 1999
to April 2000, President, Paint Stores Group from August 1997 to October 1999
and President & General Manager, Diversified Brands Division from April 1994 to
August 1997. Mr. Connor has served as a Director since October 1999. Mr. Connor
has been employed with the Company since January 1983.

Mr. Scaminace has served as President and Chief Operating Officer since
October 1999. Mr. Scaminace served as President, Consumer Group from July 1998
to October 1999, President & General Manager, Coatings Division from June 1997
to July 1998, and President & General Manager, Automotive Division from April
1994 to June 1997. Mr. Scaminace has served as a Director since October 1999.
Mr. Scaminace has been employed with the Company since April 1983.

Mr. Hennessy has served as Senior Vice President -- Finance, Treasurer and
Chief Financial Officer since August 2001. Mr. Hennessy served as Vice
President -- Controller, Consumer Group from February 2000 to August 2001,
Senior Vice President & Director, Chemical Coatings, Paint Stores Group from
February 1999 to February 2000, Vice President & Director, Chemical Coatings,
Paint Stores Group from August 1997 to February 1999 and Vice
President -- Controller, Coatings Division from September 1996 to August 1997.
Mr. Hennessy has been employed with the Company since September 1984.

Mr. Hopkins has served as Senior Vice President -- Human Resources since
February 2002. Mr. Hopkins served as Vice President -- Human Resources from
August 1997 to February 2002 and Vice President -- Human Resources, Paint Stores
Group from February 1996 to August 1997. Mr. Hopkins has been employed with the
Company since September 1981.

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Mr. Ivy has served as Senior Vice President -- Corporate Planning and
Development since February 2002. Mr. Ivy served as Vice President -- Corporate
Planning and Development from April 1992 to February 2002. Mr. Ivy has been
employed with the Company since March 1979.

Mr. Ault has served as Vice President -- Corporate Controller since January
1987. Mr. Ault has been employed with the Company since June 1976.

Mr. Galasso has served as President & General Manager, International
Division since September 2000. Mr. Galasso served as President & General
Manager, Automotive Division from June 1997 to September 2000 and Vice President
& Director -- Operations, Automotive Division from May 1992 to June 1997. Mr.
Galasso has been employed with the Company since June 1971.

Mr. Morikis has served as President, Paint Stores Group since October 1999.
Mr. Morikis served as President & General Manager, Eastern Division, Paint
Stores Group from July 1998 to October 1999, Senior Vice President &
Director -- Marketing, Paint Stores Group from September 1997 to July 1998 and
Division Vice President -- Sales, Eastern Division, Paint Stores Group from
April 1994 to September 1997. Mr. Morikis has been employed with the Company
since December 1984.

Mr. Nandor has served as President & General Manager, Automotive Division
since September 2000. Mr. Nandor served as Executive Vice
President -- Marketing, Paint Stores Group from August 1998 to September 2000
and Vice President and Director -- Marketing, Automotive Division from November
1996 to August 1998. Mr. Nandor has been employed with the Company since
November 1996.

Mr. Seitz has served as President & General Manager, Consumer Division
since January 2001. Mr. Seitz served as President, Consumer Group from October
1999 to January 2001, Vice President of Operations, Consumer Group from July
1998 to October 1999 and Vice President of Operations, Coatings Division from
December 1995 to July 1998. Mr. Seitz has been employed with the Company since
June 1970.

Mr. Stellato has served as Vice President, General Counsel and Secretary
since July 1991. Mr. Stellato has been employed with the Company since July
1981.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Sherwin-Williams common stock is listed on the New York Stock Exchange and
traded under the symbol SHW. The number of shareholders of record at February
25, 2002 was 10,229. Information regarding market prices and dividend
information with respect to Sherwin-Williams common stock is set forth on page
48 of the 2001 Annual Report, which is incorporated herein by reference.

ITEM 6. SELECTED FINANCIAL DATA
(Millions of Dollars, except per share data)

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(a) Amount includes an impairment of long-lived assets charge of $294 million
($1.80 per share) after tax. See Note 2 of the Notes to Consolidated
Financial Statements on page 35 of the 2001 Annual Report, which is
incorporated herein by reference.

(b) For purposes of calculating the ratio of earnings to fixed charges, earnings
represent income before income taxes plus fixed charges. Fixed charges
consist of interest expense, net, including amortization of discount and
financing costs and the portion of operating rental expense which management
believes is representative of the interest component of rent expense.

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

The information required by this item is set forth on pages 21 through 27
of the 2001 Annual Report under the caption entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations," which is
incorporated herein by reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company is exposed to market risk associated with interest rates and
foreign currency exposure. The Company utilizes derivative instruments as part
of its overall financial risk management policy, but does not use derivative
instruments for speculative or trading purposes. The Company has partially
hedged risks associated with fixed interest rate debt by entering into various
interest rate swap agreements. Interest rate swap agreements are described in
detail in Note 7 of the Notes to Consolidated Financial Statements on page 38 of
the 2001 Annual Report. The Company does not believe that any potential loss
related to interest rate exposure will have a material adverse effect on the
Company's financial condition, results of operations or cash flows. The Company
also entered into foreign currency option and forward contracts to hedge against
value changes in foreign currency. Foreign currency option and forward contracts
are described in detail in Note 4 of the Notes to Consolidated Financial
Statements on pages 35 and 36 of the 2001 Annual Report. The Company believes it
may experience continuing losses from foreign currency translation. However, the
Company does not expect currency translation, transaction or hedging contract
losses to have a material adverse effect on the Company's financial condition,
results of operations or cash flows.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Information required by this item is set forth on pages 29 through 46 of
the 2001 Annual Report under the captions entitled "Statements of Consolidated
Income," "Consolidated Balance Sheets," "Statements of Consolidated Cash Flows,"
"Statements of Consolidated Shareholders' Equity," and "Notes to Consolidated
Financial Statements," which is incorporated herein by reference. Unaudited
quarterly data is set forth in Note 14 of the Notes to Consolidated Financial
Statements on page 43 of the 2001 Annual Report, which is incorporated herein by
reference. The Report of Independent Auditors is set forth on page 12 of this
report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information regarding Directors is set forth under the caption entitled
"Election of Directors" in the Proxy Statement, which is incorporated herein by
reference.

The information regarding Executive Officers is set forth under the caption
entitled "Executive Officers of the Registrant" in Part I of this report, which
is incorporated herein by reference.

10

The information regarding compliance with Section 16 of the Securities
Exchange Act of 1934 is set forth under the caption entitled "Section 16(a)
Beneficial Ownership Reporting Compliance" in the Proxy Statement, which is
incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is set forth on pages 7 through 16 of
the Proxy Statement and under the caption entitled "Compensation of Directors"
in the Proxy Statement, which is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

The information required by this item is set forth under the captions
entitled "Security Ownership of Management" and "Security Ownership of Certain
Beneficial Owners" in the Proxy Statement, which is incorporated herein by
reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is set forth under the captions
entitled "Certain Relationships and Related Transactions," "Compensation of
Directors" and "Compensation Committee Interlocks and Insider Participation" in
the Proxy Statement, which information is incorporated herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) (1) Financial Statements
The following consolidated financial statements of the Company
included in the 2001 Annual Report are incorporated by reference in
Item 8. The Report of Independent Auditors is set forth on page 12
of this report.
(i) Statements of Consolidated Income for the years ended
December 31, 2001, 2000 and 1999 (page 29 of the 2001 Annual
Report)
(ii) Consolidated Balance Sheets at December 31, 2001, 2000 and
1999 (page 30 of the 2001 Annual Report)
(iii) Statements of Consolidated Cash Flows for the years ended
December 31, 2001, 2000 and 1999 (page 31 of the 2001 Annual
Report)
(iv) Statements of Consolidated Shareholders' Equity for the
years ended December 31, 2001, 2000 and 1999 (page 32 of the
2001 Annual Report)
(v) Notes to Consolidated Financial Statements for the years
ended December 31, 2001, 2000 and 1999 (pages 33 through 46
of the 2001 Annual Report)
(2) Financial Statement Schedule
Schedule II -- Valuation and Qualifying Accounts and
Reserves for the years ended December 31, 2001, 2000 and
1999 is set forth on page 12 of this report. All other
schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange
Commission are not required under the related instructions
or are inapplicable and therefore have been omitted.
(3) Exhibits
See the Exhibit Index on pages 15 and 16 of this report.

(b) Reports on Form 8-K -- The Company did not file any Reports on Form 8-K
during the fourth quarter of 2001.

11

REPORT OF INDEPENDENT AUDITORS

Shareholders and Board of Directors
The Sherwin-Williams Company
Cleveland, Ohio

We have audited the consolidated balance sheets of The Sherwin-Williams
Company and subsidiaries as of December 31, 2001, 2000 and 1999, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 2001 incorporated by
reference from the Company's Annual Report. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
The Sherwin-Williams Company and subsidiaries at December 31, 2001, 2000 and
1999, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 2001, in conformity
with accounting principles generally accepted in the United States. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.

/s/ Ernst & Young LLP
Cleveland, Ohio
January 25, 2002

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(SCHEDULE II)

Changes in the allowance for doubtful accounts are as follows:

Activity related to other asset reserves is as follows:

Charges to expense consist primarily of amortization of goodwill and
intangibles. Other additions (deductions) consist primarily of actual costs
incurred, balance sheet reclassifications, and foreign currency translation
adjustments. See Note 2 of the Notes to Consolidated Financial Statements on
page 35 of the 2001 Annual Report for information on Impairment charges in 2000,
which is incorporated herein by reference.

12

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 14th day of
March, 2002.

THE SHERWIN-WILLIAMS COMPANY

By: /s/ L. E. STELLATO
---------------------------------
L. E. Stellato, Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities
indicated on March 14, 2002.

* C. M. CONNOR Chairman and Chief Executive Officer,
- ----------------------------------------------------------- Director (Principal Executive Officer)
C. M. Connor

* J. M. SCAMINACE President and Chief Operating Officer,
- ----------------------------------------------------------- Director
J. M. Scaminace

* S. P. HENNESSY Senior Vice President -- Finance,
- ----------------------------------------------------------- Treasurer and Chief Financial Officer
S. P. Hennessy (Principal Financial Officer)

* J. L. AULT Vice President -- Corporate Controller
- ----------------------------------------------------------- (Principal Accounting Officer)
J. L. Ault

* J. C. BOLAND Director
- -----------------------------------------------------------
J. C. Boland

* J. G. BREEN Director
- -----------------------------------------------------------
J. G. Breen

* D. E. COLLINS Director
- -----------------------------------------------------------
D. E. Collins

* D. E. EVANS Director
- -----------------------------------------------------------
D. E. Evans

* R. W. MAHONEY Director
- -----------------------------------------------------------
R. W. Mahoney

* G. E. McCULLOUGH Director
- -----------------------------------------------------------
G. E. McCullough

* A. M. MIXON, III Director
- -----------------------------------------------------------
A. M. Mixon, III

* C. E. MOLL Director
- -----------------------------------------------------------
C. E. Moll

13

* R. K. SMUCKER Director
- -----------------------------------------------------------
R. K. Smucker

* The undersigned, by signing his name hereto, does sign this report on behalf
of the designated officers and directors of The Sherwin-Williams Company
pursuant to Powers of Attorney executed on behalf of each such officer and
director and filed as exhibits to this report.

By: /s/ L. E. STELLATO March 14, 2002
- -----------------------------------------------------------
L. E. Stellato, Attorney-in-fact

14

EXHIBIT INDEX

3. (a) Amended and Restated Articles of Incorporation of the
Company, as amended through May 1, 2001 (filed herewith).
(b) Regulations of the Company, as amended, dated April 27,
1988, filed as Exhibit 4(b) to Post-Effective Amendment No.
1, dated April 29, 1988, to Form S-8 Registration Statement
Number 2-91401, and incorporated herein by reference.
4. (a) Indenture between the Company and Chemical Bank, as Trustee,
dated as of February 1, 1996, filed as Exhibit 4(a) to Form
S-3 Registration Statement 333-01093, dated February 20,
1996, and incorporated herein by reference.
(b) Amended and Restated 364-Day Revolving Credit Agreement,
dated December 31, 1999, among the Company, The Chase
Manhattan Bank, as Administrative Agent and Competitive
Advance Facility Agent, and the financial institutions which
are signatories thereto, filed as Exhibit 4(b) to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999, and incorporated herein by
reference.
(c) Amendment No. 1 to Amended and Restated 364-Day Revolving
Credit Agreement, dated December 1, 2000, among the Company,
The Chase Manhattan Bank, as Administrative Agent and
Competitive Advance Facility Agent, and the financial
institutions which are signatories thereto, filed as Exhibit
4(c) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000, and incorporated herein
by reference.
(d) Amendment No. 2 to Amended and Restated 364-Day Revolving
Credit Agreement, dated December 28, 2001, among the
Company, The Chase Manhattan Bank, as Administrative Agent
and Competitive Advance Facility Agent, and the financial
institutions which are signatories thereto (filed herewith).
(e) Amended and Restated Five Year Revolving Credit Agreement,
dated January 3, 2000, among the Company, The Chase
Manhattan Bank, as Administrative Agent and Competitive
Advance Facility Agent, and the financial institutions which
are signatories thereto, filed as Exhibit 4(c) to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999, and incorporated herein by
reference.
(f) Amendment No. 1 to Amended and Restated Five Year Revolving
Credit Agreement, dated December 1, 2000, among the Company,
The Chase Manhattan Bank, as Administrative Agent and
Competitive Advance Facility Agent, and the financial
institutions which are signatories thereto, filed as Exhibit
4(e) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000, and incorporated herein
by reference.
(g) Indenture between Sherwin-Williams Development Corporation,
as issuer, the Company, as guarantor, and Harris Trust and
Savings Bank, as Trustee, dated June 15, 1986, filed as
Exhibit 4(b) to Form S-3 Registration Statement Number
33-6626, dated June 20, 1986, and incorporated herein by
reference.
(h) Rights Agreement between the Company and The Bank of New
York, as successor Rights Agent to KeyBank National
Association, dated April 23, 1997, filed as Exhibit 1 to
Form 8-A, dated April 24, 1997, and incorporated herein by
reference.
10. *(a) Form of Director and Corporate Officer Indemnity Agreement
filed as Exhibit 10(a) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997, and
incorporated herein by reference.
*(b) Employment Agreement between C.G. Ivy and the Company filed
as Exhibit 28(b) to Form S-3 Registration Statement Number
33-22705, dated June 24, 1988, and incorporated herein by
reference.
*(c) Amendment to Employment Agreement between C.G. Ivy and the
Company filed as Exhibit 10(c) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1995, and incorporated herein by reference.

15

*(d) Forms of Severance Pay Agreements, filed as Exhibit 10(b) to
the Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1997, and incorporated
herein by reference.
*(e) Schedule of Certain Executive Officers who are Parties to
the Severance Pay Agreements in the forms referred to in
Exhibit 10(d) filed as Exhibit 10(a) to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2001, and incorporated herein by reference.
*(f) The Sherwin-Williams Company Deferred Compensation Savings
Plan (1997/1999 Amendment and Restatement) filed as Exhibit
10(f) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999, and incorporated herein
by reference.
*(g) The Sherwin-Williams Company Key Management Deferred
Compensation Plan (1997/1999 Amendment and Restatement)
filed as Exhibit 10(g) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999, and
incorporated herein by reference.
*(h) Form of Executive Disability Income Plan filed as Exhibit
10(g) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991, and incorporated herein
by reference.
*(i) Form of Executive Life Insurance Plan filed as Exhibit 10(h)
to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1991, and incorporated herein by
reference.
*(j) Form of The Sherwin-Williams Company Management Compensation
Program filed as Exhibit 10(j) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1999, and incorporated herein by reference.
*(k) The Sherwin-Williams Company 1994 Stock Plan, as amended and
restated in its entirety, effective July 26, 2000, filed as
Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 2000, and
incorporated herein by reference.
*(l) The Sherwin-Williams Company 1997 Stock Plan for Nonemployee
Directors, dated April 23, 1997, filed as Exhibit 10(b) to
the Company's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1997, and incorporated
herein by reference.
*(m) The Sherwin-Williams Company Director Deferred Fee Plan
(1997 Amendment and Restatement), dated April 23, 1997,
filed as Exhibit 10(a) to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1997, and
incorporated herein by reference.
*(n) Consulting Agreement, dated May 1, 2000, between John G.
Breen and the Company filed as Exhibit 10(b) to the
Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2000, and incorporated herein by
reference.
*(o) Amended and Restated Split-Dollar Life Insurance Agreement,
dated August 18, 2000, among the Company, National City Bank
and John G. Breen filed as Exhibit 10(c) to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2000, and incorporated herein by reference.
*(p) Salary Continuation and Death Benefit Plan Agreement, dated
August 18, 2000, filed as Exhibit 10(d) to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2000, and incorporated herein by reference.
*(q) Employment Agreement, dated August 13, 2001, between Larry
J. Pitorak and the Company (filed herewith).
13. The 2001 Annual Report, portions of which are incorporated
herein by reference (filed herewith). With the exception of
those portions of the 2001 Annual Report which are
specifically incorporated by reference in this report, the
2001 Annual Report shall not be deemed "filed" as part of
this report.
21. Subsidiaries (filed herewith).
23. Consent of Ernst & Young LLP, Independent Auditors (filed
herewith).
24. (a) Powers of Attorney (filed herewith).
(b) Certified Resolution Authorizing Signature by Power of
Attorney (filed herewith).

*Management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to Item 14(c) of Form 10-K.