SHW 10-K & 10-Q changes, risk factors and insider trading

We operate all over the world serving customers in more than 120 countries. Our business, operations and business plans and strategies are sensitive to global and regional business and economic conditions. Adverse changes in such conditions in the United States and worldwide have in the past impacted and may in the future reduce the demand for some of our products, adversely impact our ability to predict and meet any future changes in the demand for our products and impair the ability of those with whom we do business to satisfy their obligations to us, each of which could adversely affect our results of operations, cash flow, liquidity or financial condition. Changes in inflation rates, interest rates, tax rates, unemployment rates, labor costs, healthcare costs, recessionary conditions, geopolitical conditions, governmental policies, laws and regulations (including import and export requirements such as new or increased tariffs, sanctions, quotas or trade barriers), business disruptions due to cybersecurity incidents, terrorist activity, armed conflicts and wars (including the ongoing conflict between Russia and Ukraine and Israel and Hamas), public health crises, pandemics, outbreaks of disease, catastrophic events, adverse weather conditions or natural disasters (including those that may be related to climate change or otherwise), supply chain disruptions (including those caused by industry capacity constraints, labor shortages, raw material availability and transportation and logistics delays and constraints) and other economic factors have in the past and could in the future adversely affect demand for some of our products, our ability to predict and meet any future changes in the demand for our products, the availability, delivery or cost of raw materials, our ability to adequately staff and maintain operations at affected facilities and our results of operations, cash flow, liquidity or financial condition and that of our customers, vendors and suppliers.

In particular, high levels of ongoing global inflation havehas impacted consumer and manufacturing behavior in recent years. We expect inflationary pressure to continue to impact consumer and manufacturing customer behavior during 2025,2026, including in the United States housing market as a result of elevated mortgage rates and in global industrial markets as a result of softer demand. Such impacts could adversely affect the demand for some of our products and our results of operations, cash flow, liquidity or financial condition. In addition, market uncertainty and volatility in various geographies have been magnified as a result of potential shifts in U.S. and foreign trade, economic and other policies following the 2024 U.S. presidentialpolicies, and congressional elections, and any such actual shifts, including price increases on certain raw materials, orand changes in the availability of, or tariffs on certain imported raw materials, could continue to adversely impact our results of operations, cash flow, liquidity or financial condition.

Protracted duration of economic downturns in cyclical segments of the economy has in the past and may in the future depress the demand for some of our products and adversely affect our sales, earnings, cash flow or financial condition.

Interest rates, in particular, drive shifts in consumer behavior with respect to the housing market, and have in the past adversely affected and may in the future adversely affect demand for new residential homes, existing home turnover and new non-residential construction. These shifts in consumer behavior have in the past adversely impacted and may in the future adversely impact demand for some of our products, and our results of operations, cash flow, liquidity or financial condition. Although the Federal Reserve cut interest rates in 2024,2025, mortgage rates have remained high and we have not experienced meaningful positive impacts on demand for our products that serve these segments of the economy to date. Although changes in inflation, the interest rate environment and the mortgage market are difficult to predict, we expect the recent and continued combination of high interest rates and high inflation to continue to impact consumer and manufacturing customer behavior in 2025.2026. Any worsening in these segments will reduce the demand for some of our products and may adversely impact sales, earnings and cash flow.

In the U.S. construction and housing segments, labor markets are impacted by a number of factors, including high employment levels, unemployment programs and subsidies, immigration laws and volatility in general macroeconomic factors. We continuehave toin the past and may in the future see project backlogs in these segments due to contractors experiencing a shortage of skilled workers, resulting in an adverse effect on the growth rate of demand for our products. While we would typically expect to see higher demand for our products as project backlogs are reducedreduced, ininflation, theinterest future, inflationrates, and other economic conditions may delay a recovery in demand, which may result in theany such labor shortage and such other conditions adversely impacting our sales, earnings, cash flow or financial condition.

Unexpected shortages and increases in the cost of raw materials and energy have in the past and may in the future adversely affect our earnings or cash flow.

We purchase raw materials (including petrochemical-derived resins, latex and solvents, titanium dioxide and various additives) and energy for use in the manufacturing, distribution and sale of our products. Factors such as political instability, higher tariffs, import/export restrictions, supply chain disruptions, adverse weather conditions and natural disasters (including those that may be related to climate change or otherwise), armed conflicts and wars, or public health crises have impactedin the past adversely impacted, and may in the future adversely impactimpact, the availability and cost of raw materials and fuel supplies, our ability to meet customer demands for some of our products, adequately staff and maintain operations at affected facilities and our costs generally. In addition, environmental and social regulations, including regulations related to climate change or otherwise, have in the past and may in the future negatively impact us or our suppliers in terms of availability and cost of raw materials, as well as sources and supply of energy.

Although raw materials and energy supplies (including oil and natural gas) are generally available from various sources in sufficient quantities, unexpected shortages and increases in the cost of raw materials and energy, supplier capacity constraints, or any deterioration in our relationships withwith, or the financial viability ofof, our suppliers, may have an adverse effect on our earnings or cash flow. Although we generally have a number of suppliers, in some cases we have limited or single-sources of supply. We purchase raw materials globally from sources around the world, including in the Middle East, Central and South America and other areas that may be less politically stable than other areas. Wars, armed conflicts, political instability, civil disturbances and unrest, terrorist attacks and actions by governments in these areas (such as the ongoing conflict between Russia and Ukraine and Israel and Hamas and any expansion or increase in the severity and intensity of suchthe same) may decrease the supply and increase the price of raw materials that we use for our business, which could have a material adverse effect on our sales, earnings, cash flow or results of operations. For example, although we do not have significant operations in the region, in the past the conflict between Israel and Hamas has caused disruption, instability and volatility in supply chains and logistics, including shipping disruptions in the Red Sea and surrounding waterways.

If the cost of raw materials and energy increases, we may not be able to offset higher costs in a timely manner by sufficiently decreasing our operating costs or raising the prices of our products. Following two years of historic inflation, certain raw material and energy prices decreased in 2023 and 2024, and remained flat in 2025, particularly resins and solvents derived from petrochemical feedstock sources such as propylene and ethylene. Ongoing global supply and demand dynamics drive the cost of raw materials and energy, which could continue to experience periods of volatility in the future and may adversely affect our earnings and cash flow.

Our business is seasonal in nature, with the second and third quarters typically generating a higher proportion of sales and earnings than other quarters. From time to time, catastrophic events, adverse weather conditions and natural disasters (including those that may be related to climate change or otherwise) have caused business disruptions and have had an adverse effect on our sales, manufacture and distribution of paint, coatings and related products. Our facilities and systems are not fully redundant and our disaster recovery planning may not be sufficient to meet business needs in the event of disruptions. In the event of catastrophic events, adverse weather conditions or a natural disaster causing significant damage to any one or more of our principal manufacturing or distribution facilities, we may not be able to manufactureprovide the products needed to meet customer demand, which could have an adverse effect on our sales of certain paint, coatings and related products.

We rely on information technology systems to conduct our business. Information technology systems are important to many of our business-critical operating and financial processes, including production planning, manufacturing, distribution, communication with our employees, customers and suppliers, sales and customer service, research and development, recording and processing transactions and the production of accurate and timely reports on our financial and operating results. In connection with our digitization initiative, we haveare begunengaged in a multi-year phased process to upgrade and harmonize certain components of our information technology systems, including our financial processing systems. We are making significant investments in this complex, enterprise-wide initiative. Planned implementations will lead to changes in our operating and financial processes as well as our internal control over financial reporting. Disruptions to our information technology systems could occur if we do not effectively design or implement these systems solutions, or otherwise fail to manage resulting changes in processes and controls. This could adversely affect our operations, negatively impact our financial reporting and the effectiveness of our internal control over financial reporting and have a material adverse effect on our business, results of operations and financial condition.

Some of the information technology systems we rely on are maintained or operated by third-party providers, including cloud-based systems. Cybersecurity incidents, attacksthreats and cybersecurity threatsattacks are increasingly sophisticated, including due to advances in artificial intelligence (AI) capabilities, constantly evolvingevolving, and originate from many sources globallyglobally. andIn addition, often these incidents cannot be recognized or understood until the target has already been attacked. Despite our efforts to prevent these threats and disruptions to our information technology systems, these systems and those of our third-party providers may be affected by damage or interruption resulting from, among other causes, cybersecurity incidents, attacks, security breaches, power outages, system or operational failures or malware (including ransomware and other programs that operate with malicious intent). These risks are expected to continue to be magnified due to the increased reliance on information technology systems to conduct our business, including those used in furtherance of supporting remote and hybrid in-office work environments and managing our global operating and financial processes. Disruptions to these systems may impair our ability to conduct business and threaten the availability, confidentiality and integrity of our systems and information and have a material adverse effect on our business, results of operations and financial condition.

As part of our business, we collect and handle information about our business, customers, employees and suppliers. Despite the security measures we have in place, our facilities and systemssystems, and those of third parties we rely on or do business with, may be vulnerable toto, or affected by damage or interruption resulting from, cybersecurity incidents,issues, attacks,including cyber attacks (including AI-powered cyberattacks), security breaches, fraud (including through phishing or social engineering attempts), malware (including ransomware and other programs that operate with malicious intent), power outages, system failures, acts of vandalism, human or technical errors, fraud (including through phishing or other social engineering attempts) or other similar events or disruptions.

The domestic and international regulatory environment related to information security, data collection and transfer, digital marketing or telemarketing and privacy is increasingly rigorous and complex, with new and rapidly changing requirements applicable to our business, which often require changes to our business practices. Compliance with these requirements, including the European Union’s General Data Protection Regulation, China’s Personal Information Protection, Data Security and Cyber Security Laws, Brazil’s General Data Protection Law, the California Consumer Privacy Act as amended by the California Privacy Rights Act, other U.S. state privacy laws and a growing number of other international and domestic regulations, are costly and will result in additional costs in our efforts to continue to comply. These laws and regulations can provide for significant penalties for non-compliance, which could result in additional costs of compliance, enforcement actions, regulatory investigations and fines, individual or class action litigation, commercial litigation or reputational harm. Ongoing efforts to comply with these laws also may divert management and employee attention from other business and growth initiatives.

Our continued success depends in part on our ability to identify, attract and onboard qualified candidates with the requisite education, background, skills and experience and our ability to retain, develop, progress and engage qualified employees across our business, including our stores, fleet, manufacturing, research and development, information technology, corporate and other operations and functions. To the extent we are unable to remain competitive with our total rewards programs (which include compensation and benefits programs and practices), talent management strategy, workplace culture and strategies, initiatives, programs and practices that drive belonging and a positive employee experience, or if qualified candidates or employees become more difficult to attract or retain under reasonable terms, we have in the past and may in the future experience higher labor-related costscosts. andIf maywe beare unable to attract, retain, develop and progress a qualified global workforce, whichthis could adversely affect our business and future success and impair our ability to meet our strategic objectives and the needs of our customers.

A number of factors may adversely affect the labor force available to us or increase labor costs generally, including high employment levels, population migration, unemployment programs and subsidies, immigration laws and volatility in general macroeconomic factors impacting the labor market. Although we have not experienced any material labor shortage to date, over the past few years, we have experienced an increasingly competitive labor market.market and higher labor-related costs. A sustained labor shortage or increased turnover rates within our employee base (or within the employee base of key suppliers or third-party manufacturers), could negatively affect our supply chain or our ability to efficiently operate our manufacturing and distribution facilities and overall business.

We have historically made strategic acquisitions of businesses in the paint and coatings industry and likely will acquire additional businesses in the future as part of our long-term growth strategy and initiatives. In October 2025, we completed our acquisition of Suvinil, a leading provider of architectural paints in Brazil, with annual sales of approximately $525 million. The success of the Suvinil acquisition, and other past and future acquisitions depends in large part on our ability to integrate the operations and personnel of the acquired companies and manage challenges that may arise as a result of the acquisitions, particularly when the acquired businesses operate in new or foreign markets. In the event we do not successfully integrate such past and future acquisitions into our existing operations so as to realize the expected return on our investment, our results of operations, cash flow or financial condition could be adversely affected.

Net sales of our consolidated foreign subsidiaries totaled approximately 19.2%,19.6%, 19.2% and 19.4%19.2% of our total consolidated Net sales in 2024,2025, 20232024 and 2022,2023, respectively. Sales outside of the United States make up a significant part of our current business and future strategic plans. Our results of operations, cash flow, liquidity or financial condition have in the past and could in the future be adversely affected by a variety of domestic and international factors, including general economic conditions, political instability, inflation rates, recessions, sanctions, tariffs, foreign currency exchange rates, foreign currency exchange controls, interest rates, foreign investment and repatriation restrictions, legal and regulatory constraints, civil unrest, armed conflicts and wars (including the ongoing conflict between Russia and Ukraine and Israel and Hamas), difficulties in staffing and managing foreign operations and other economic and political factors. In addition, public health crises in foreign jurisdictions may temporarily reduce the demand for some of our products and adversely affect the availability and cost of raw materials. Our inability to successfully manage the risks and uncertainties relating to any of these factors could adversely affect our results of operations, cash flow, liquidity or financial condition.

Policy changes affecting international trade have in the past and could in the future adversely impact the demand for our products and our competitive position.

International, national and regional laws, regulations and policies that have the effect of restricting global trade and markets and restricting the import and export of products, services and technology, or those of our customers, or for the benefit of favored industries or sectors, have in the past, and could in the future, interfere with our operations, supply chain, manufacturing costs and customer relationships and harm our business. Due to the global scope of our operations, changes in government policies on foreign trade and investment have and may continue to affect the demand for our products and services, impact the competitive position of our products or prevent us from being able to sell products in certain countries. Expanding export controls or limits on foreign investment, for example, has in the past and could in the future impact the global supply of raw materials. Government actions taken in connection with the United States-China trade conflict hashave in the past and could in the future impact business, including sales, imports and exports. Our business benefits from free trade agreements, which may includeincluding the United States-Mexico-Canada Agreement and EU-UK Trade and Cooperation Agreement,Agreement. and effortsEfforts to withdraw from, or substantially modify such agreements, in addition to trends such as protectionism or nationalism and the implementation of more restrictive trade policies, such as more detailed inspections, higher tariffs, import or export licensing requirements, exchange controls or new barriers to entry, could have a material adverse effect on our results of operations, financial condition or cash flow and that of our customers, vendors and suppliers.

We have established strategies and expectations for our business relating to certain sustainability considerations, including regarding reducing greenhouse gas emissions, increasing energy efficiency, increasing use of electricity from renewable energy sources, reducing waste and improving safety performance. These strategies and expectations reflect our current business plans and aspirations, and there is no guarantee that they will be achieved. Our ability to achieve any such strategies or expectations is subject to numerous factors and conditions, many of which are outside of our control. Examples of such factors include, but are not limited to, evolving legal, regulatory and other standards, processes and assumptions; the pace of scientific and technological developments; increased costs; the availability of requisite suppliers, energy sources, or financing; and changes in carbon markets.markets Failuresand carbon accounting rules. The pursuit of our strategies or expectations, failures or delays (whether actual or perceived) in achieving our strategies or expectations or changes to our strategies or expectations related to these matters could expose us to potential liabilities, increased costs, reputational harm and other adverse effects on our business.

Furthermore, many governments, regulators, investors, employees, customers, media outlets and other stakeholders are focused on sustainability considerations relating to businesses, including climate change and greenhouse gas emissions, natural capital circularity, human capital and belonging, culture and employee experience. Our business may face scrutiny from such stakeholders and if our strategies or expectations relating to sustainability considerations do not meet stakeholder expectations and standards (including with respect to establishing science-based targets), which continue to evolve and may differ across jurisdictions in which we operate, our business, financial condition, results of operations and reputation could be adversely impacted. Similarly, our failure or perceived failure to pursue or fulfill our strategies and expectations; comply with federal, state, or international ethical, environmental, or other standards, regulations, or expectations; adhere to public statements; satisfy new and emerging reporting standards; or meet evolving and varied stakeholder expectations within the timelines we announce, or at all, could have adverse operational, reputational, financial and legal impacts.

Our reputation, image and recognized brands significantly contribute to our business and success, as they are critical to retaining and growing our customer base and our relationships with other stakeholders. Specifically, our ability to maintain a positive perception of us and our business, including through our guiding values.values, is of great importance. Significant negative claims or publicity involving us, our business or our products, services, culture, values, strategies and practices, including postings, articles, or comments on social media and the internet, undermine confidence in our Company, and could materially damage our reputation and image, even if such claims or publicity are inaccurate. Damage to our reputation and image could adversely impact our ability to attract new and retain existing customers, employees and other business and stakeholder relationships, and could adversely affect the demand for some of our products and adversely affect our sales, earnings, cash flow or financial condition.

Our competitive position and the value of our products and brands could be reduced and our business adversely affected if we are unable to maintain or adequately protect our intellectual property. We have numerous patents, trade secrets, trademarks, trade names copyrights and know-how that are valuable to our business. Despite our efforts to protect such intellectual property and other proprietary information from unauthorized use or disclosure, third parties may attempt to disclose, obtain or use our trademarks or such other intellectual property and information without our authorization. We also face attempts, including through cybersecurity attacks and social engineering tactics, to gain unauthorized access to our systems for the purpose of improperly acquiring our trade secrets or confidential business information. In addition, advances in artificial intelligenceAI technology and increasingly widespread use of generative artificial intelligenceAI tools may increase the risk of unauthorized access to intellectual property, may increase the risk that existing intellectual property law may not provide adequate protection and may introduce potential liability from the use of artificial intelligenceAI tools. The theft or unauthorized use or publication of our trade secrets and other confidential business information as a result of such incidents could adversely affect the value of our investment in research and development and our business. Although we rely on the patent, trademark, trade secret and copyright laws of the United States and other countries to protect our intellectual property rights, the laws of some countries may not protect such rights to the same extent as the laws of the United States. Unauthorized use of our intellectual property by third parties, the failure of foreign countries to have laws to protect our intellectual property rights, or an inability to effectively enforce such rights in foreign countries could have an adverse effect on our business.

Because of our international operations, we are exposed to risk associated with interest rates and value changes in foreign currencies, including as a result of inflation, central bank monetary policies, currency controls and other exchange restrictions, which may adversely affect our business. Historically, our reported netNet sales, earnings, cash flow and financial condition have been subjected to fluctuations in foreign exchange rates. Our primary exchange rate exposure is with the euro, the Mexican peso, the Brazilian real, the Canadian dollar, the Mexican peso, the British pound, the Chinese yuan, the Chilean peso and the Argentine peso, each against the U.S. dollar. While we actively manage the exposure of our foreign currency risk as part of our overall financial risk management policy, we have in the past and may in the future experience losses from foreign currency exchange rate fluctuations and currency controls and restrictions, and such losses could adversely affect our sales, earnings, cash flow, liquidity or financial condition. Currency controls or restrictions may limit our ability to convert foreign currencies into U.S. dollars, or to remit dividends and other payments from our subsidiaries or businesses located in or conducted within a country imposing such controls or restrictions. For example, we experienced a loss of $41.8 million in 2023 as a result of the significant devaluation of the Argentine peso in December 2023 as part of economic reforms implemented by the government of Argentina, and we may experience similar losses in the future.

The domestic and international regulatory environment related to information security, data collection and transfer, digital marketing or telemarketing, and privacy is increasingly rigorous and complex, with new and rapidly changing requirements applicable to our business, which often require changes to our business practices. Compliance with these requirements, including the European Union’s General Data Protection Regulation, China’s Personal Information Protection, Data Security, and Cyber Security Laws, Brazil’s General Data Protection Law, the California Consumer Privacy Act as amended by the California Privacy Rights Act, other U.S. state privacy laws, and a growing number of other international and domestic regulations, are costly and will result in additional costs in our efforts to continue to comply. These laws and regulations can provide for significant penalties for non-compliance, which could result in additional costs of compliance, enforcement actions, regulatory investigations, and fines, individual or class action litigation, commercial litigation, or reputational harm. Ongoing efforts to comply with these laws also may divert management and employee attention from other business and growth initiatives.

Global focus on climate change and chemical use and management may result in the imposition of new or additional regulations or requirements applicable to, and new or additional financial and transition risks for, our business and industry. A number of government authorities and agencies have introduced, or are contemplating, regulatory changes to address climate change, including the regulation and disclosure of greenhouse gas emissions and the management and use of chemicals in operations and products. For example, the European Union Corporate Sustainability Reporting Directive requires that we make expansive disclosures on various environmental- and social-related topics. Similarly, California has enacted legislation that will require broad disclosures, including of greenhouse gas emissions. Chemicals we use in our products, packaging and operations may be restricted or prohibited by initiatives to address new and existing chemicals under current laws and regulations or by emerging laws and regulations in domestic and foreign jurisdictions. The outcome of new and emerging legislation or regulation in the U.S., European Union and other jurisdictions in which we operate may result in fees or restrictions on certain activities or materials (including changes to our products or product packaging) and new or additional requirements, including to fund energy efficiency activities or renewable energy use and to disclose information regarding our greenhouse gas emissions performance, renewable energy usage and efficiency, waste generation and recycling rates, climate-related risks, opportunities and oversight and related strategies and initiatives across our global operations. Compliance with these climate change, chemical management and other initiatives has in the past and may in the future result in additional costs to us, including, among other things, increased production costs, additional taxes, additional investments in renewable energy use and other initiatives, reduced emission allowances, additional restrictions on production or operations and increased costs associated with reporting and data assurance. They may also require us to alter the contents of our products and/or product packaging, which may alter the performance and profitability of such products and packaging. We may not be able to timely recover the cost of compliance with such new or more stringent laws and regulations, which could adversely affect our results of operations, cash flow or financial condition. Despite our efforts to timely comply with such initiatives, implement measures to improve our operations and execute on our related strategies and initiatives, any actual or perceived failure to comply with new or additional requirements or meet stakeholder expectations with respect to the impacts of our operations on the environment or on our customers or employees and related strategies and initiatives may result in adverse publicity, increased litigation risk and adversely affect our business and reputation, which could adversely impact our results of operations, cash flow and financial condition.

In the course of our business, we are subject to a variety of claimsactual 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 claimsclaims, that are inherently subject to many uncertainties regarding the possibility of a loss to us. These uncertainties will ultimately be resolved when one or more future events occur or fail to occur confirming the incurrence of a liability or the avoidance or reduction of a liability. In accordance with the Contingencies Topic of the Accounting Standards Codification (ASC), we accrue for these contingencies by a charge to income 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. In the event a loss contingency is ultimately determined to be significantly higher than currently accrued, the recording of the additional liability may result in a material impact on our results of operations, liquidity or financial condition for the annual or interim period during which such additional liability is accrued. In those casesmatters where no accrual is recorded because it is not probable that a liability haswill beenbe incurred or the amount of any such loss cannot be reasonably estimated, any potential liability ultimately determined to be attributable to us may result in a material impact on our results of operations, liquidity or financial condition for the annual or interim period during which such liability is accrued.

For example, our past operations included the manufacture and sale of lead pigments and lead-based paints. Along with other companies, we are and have been a defendant in a number of legal proceedings, including individual personal injury actions, purported class actions and actions brought by various counties, cities, school districts and other government-related entities, arising from the manufacture and sale of lead pigments and lead-based paints. The plaintiffs’ claims have been based upon various legal theories, including negligence, strict liability, breach of warranty, negligent misrepresentations and omissions, fraudulent misrepresentations and omissions, concert of action, civil conspiracy, violations of unfair trade practice and consumer protection laws, enterprise liability, market share liability, public nuisance, unjust enrichment and other theories. The plaintiffs seekhave sought various damages and relief, including personal injury and property damage, costs relating to the detection and abatement of lead-based paint from buildings, costs associated with a public education campaign, medical monitoring costs and others. We have also been a defendant in legal proceedings arising from the manufacture and sale of non-lead-based paints that seek recovery based upon various legal theories, including the failure to adequately warn of potential exposure to lead during surface preparation when using non-lead-based paint on surfaces previously painted with lead-based paint. We are vigorously defending any such litigation.litigation that remains ongoing. We expect additional lead pigment and lead-based paint litigation may be filed against us in the future asserting similar or different legal theoriestheories, and seeking similar or different types of damages and relief. The Company will continue to vigorously defend against any additional lead pigment and lead-based paintsuch litigation that may be filed, including utilizing all avenues of appeal, if necessary.

Due to the uncertainties involved, management is unable to predict the outcome of the litigationclaims, lawsuits, and other proceedings against us, the number or nature of possible future claimsclaims, lawsuits, and proceedings, or the effect of any legislation and/or administrative regulations. Further, management cannot reasonably determine the scope or amount of the potential costs and liabilities related to such litigation,matters, or resulting from any such legislation and regulations. ExceptWe with respect to the California public nuisance litigation, wecurrently have not accrued any amounts for suchthe litigationpending lead pigment and lead-based paint litigation, because we do not believe it is probable that a loss haswill occurred,occur, andor we believe it is not possible to estimate the range of potential losses as there is no substantive information upon which an estimate could be based. In addition, any potential liability that may result from any changes to legislation and regulations cannot reasonably be estimated. Due to the uncertainties associated with the amount of any such liability and/or the nature of any other remedy which may be imposed in such litigation, any potential liability determined to be attributable to us arising out of such litigation may have a material adverse effect on our results of operations, cash flow, liquidity or financial condition. We discuss the risks and uncertainties related to litigation, including the lead pigment and lead-based paint litigation, in more detail in Note 11 to the consolidated financial statements in Item 8.

The Sherwin-Williams Company, founded in 1866, isand 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 functionfunction, inwhich is representative of the same 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 additionalfurther information on the Company’s Reportable Segments.

•Consolidated Net sales increased 2.1% in the year to a record $23.099$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 increaseddecreased 14.1%2.7% to $10.55$10.26 per share in the year compared to $9.25$10.55 per share in the full year 20232024 ◦Adjusted diluted net income per share increased 9.5%0.9% to $11.33$11.43 per share in the year compared to $10.35$11.33 per share in the full year 20232024

•AdjustedGenerated EarningsNet Beforeoperating Interest,cash Taxes,of Depreciation$3.452 andbillion, Amortizationor (Adjusted14.6% EBITDA)of increasedNet 6.0%sales in the year to $4.492 billion or 19.4% of Net sales Outlook Sherwin-Williams delivered strong 20242025 results driven by solid core performance and a focus on operational discipline despite continued choppydemand macroeconomic conditions.choppiness. Full year Net sales grew to a record level, and gross profit and gross margin expandedexpanded. andThe Diluted net income per share increased by a double-digit percentage. WeCompany continued to generate strong cash flow from operationsoperations, which was used for investment,investment anin acquisitioncapital expenditures, funding acquisitions and returning cash to shareholders through dividends and repurchases of our common stock. WeAlthough enterthe 2025softer-for-longer withdemand 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. Although we expect demand softness to persist in several end markets, we have significant above-market growthSignificant opportunities inexist for each business.business, Weand 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 Group and Consumer Brands Group,groups, we anticipate continued economic pressures to impact consumercustomer buying behavior in both North America and Europe in 2025.2026. Our recent investments in sales reps, training and digital tools, coupled with home builder relationships are expected to drive above-market growth opportunities. The outlook for the Performance Coatings Group is varied by end market and region with expectedan growthexpectation inthat Coilthe drivencore bybusiness significantremains flat, however, new account wins and Packagingfavorable asbusiness sales mix should drive growth. At the business unit level, we supportexpect customermodest conversions to our ValPure® coating which complies with European regulations. Demand softness is forecasted in General Industrial due to negative manufacturing trends in North America and Europe and choppiness is expectedgrowth in Automotive Refinish, ProtectiveIndustrial Wood and Marine andGeneral Industrial Wood.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 rawthese materialcosts and employee-related costsexpenses to becontribute up byto a low-single digit percentage,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 $210.4$207.2 million in cash and $3.274$3.649 billion of unused capacity under our credit facilities at December 31, 2024 and expect to end 2025 within our target debt-to-EBITDA leverage ratio of 2 to 2.5 times.2025. We are, and expect to remain, in compliance with all financing covenants. Long-term debt maturities due in 20252026 are $1.050$350.1 billionmillion, andwhich arewere expectedfully torepaid bein refinancedJanuary at higher interest rates. Together2026 with short-term borrowings. With the long-term debt maturities refinanced during 2024,2025 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 $40$85 million in 2025.2026. In addition, we expect to incur additional costs associated with the transition into our new global headquarters and research and development (R&D) center in 2025 of approximately $100 million, which includes approximately $80 million of Selling, general and administrative expenses and approximately $20 million of Interest expense. Lastly, weWe plan to expand our footprint by opening 80 to 100 new stores in the United States and Canada in 2025,2026, continue to evaluate acquisitions that align with our long-term growth strategy and return value to our shareholders through the payment of dividends and the reinvestment of excess cash for share repurchases of Companycommon 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.

Consolidated Net sales for 20242025 increased 0.2%2.1% primarily due to higher Net sales in the Paint Stores Group. This increase was partially offset by lower sales in theand Consumer Brands and Performance Coatings Groups. Net sales of all consolidated foreign subsidiaries decreasedincreased to $4.615 billion in 2025 compared to $4.426 billion in 2024 compared to $4.428 billion in 2023 primarily due to unfavorable currency translation impact in Latin America and lower Net sales in Asia as a result of the divestiture of the China architectural business, partially offset by higher Net sales in EuropeLatin asAmerica adue resultto the October 2025 acquisition of acquisitions.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 compared to $18.624 billion for 2023.2024.

Net sales in the Paint Stores Group increased 2.7%3.2% primarily due to sales volume growth and selling price increases, which both impacted Net sales by a mid-single digit percentage, partially offset by a low-single digit percentage.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 2024,2025, the Paint Stores Group opened 8483 new stores and closed 53 locations for a net increase of 7980 stores. The total number of stores in operation at December 31, 20242025 was 4,7734,853 in the United States, Canada and the Caribbean region. The Paint Stores Group’s objective is to expandgrow sales through the expansion of its store base by an approximate average of 2% each year, primarily through organic growth.year. Sales of products other than paint increased 0.6%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 decreasedincreased 7.7%1.9% in 20242025 primarily due to athe low-singleOctober digit2025 percentageacquisition salesof volumeSuvinil, declinewhich primarilycontributed due$164.5 tomillion, softor DIY5.3%, demandpartially inoffset Northby America,1.1% 2.9%of unfavorable foreign currency translation driven by Latin America and the impact from divestitures in the prior year.America. In 2024,2025, the Consumer Brands Group opened 1813 new stores and closed 240 locations for a net increasedecrease of 16 new27 stores. The total number of stores in operation at December 31, 20242025 was 334307 in the Latin America.America region.

Consolidated Cost of goods sold decreasedincreased $390.4$155.4 million, or 3.2%,1.3% in 20242025 compared to the same period in 20232024 primarily due to lowerthe salesimpact volume inof the ConsumerOctober Brands2025 GroupSuvinil andacquisition, partially offset by moderating raw material costs,costs partiallyand offset by higherlower sales volumes in the Paint Stores and Performance Coatings Groups.volume.

Consolidated Gross profit increased $437.0$320.4 million, or 4.1%,2.9% in 20242025 compared to the same period in 20232024 primarily due to higherfavorable salesselling volumesprices in the Paint Stores andGroup, Performancethe Coatingsacquisition Groupsof Suvinil within the Consumer Brands Group and moderating raw material costs, partially offset by lowerunfavorable salesproduct volumemix inwithin the ConsumerPerformance BrandsCoatings Group. Consolidated Gross profit as a percent to consolidated Net sales increased to 48.8% in 2025 from 48.5% in 2024 from 46.7% in 2023 for these same reasons.

The Paint Stores Group’s Gross profit for 20242025 increased $242.1$364.2 million compared to the same period in 20232024 primarily due to highergrowth in Net sales drivenfrom by sales volume growth,favorable selling price increasesprices and moderating raw material costs.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 increaseddecreased $181.1$42.2 million in 20242025 compared to the same period in 20232024 primarily due to higherlower fixedsales cost absorption in the manufacturingvolumes and distributionunfavorable operationscurrency withintranslation the segment and moderating raw material costs,impact, partially offset by lowerthe Netimpact sales.from the October 2025 acquisition of Suvinil. The Consumer Brands Group’s Gross profit as a percent of Net sales increaseddecreased for these same reasons. The Performance Coatings Group’s Gross profit increaseddecreased $13.6$38.1 million compared to the same period in 20232024 primarily due to moderatingan rawunfavorable materialimpact costs,from selling prices attributable to product mix, partially offset by lowerthe Netimpact sales.of acquisitions and favorable foreign currency translation. The Performance Coatings Group’s Gross profit as a percent of Net sales increaseddecreased for these same reasons.

Consolidated SG&A increased by $356.7$272.9 million, or 5.0%,3.7% in 20242025 compared to the same period in 20232024 primarily due to investments in long-term growth strategies,opportunities in the Paint Stores Group, including expenses to support net new store openingsopenings, costs related to the October 2025 Suvinil acquisition, costs related to the new global headquarters and digital technologiesresearch and development (R&D) center buildings, higher employee-related costs.costs and other expenses associated with targeted restructuring actions. As a percent of Net sales, SG&A increased 15050 basis points compared to the same period in 20232024 for these same reasons.

The Paint Stores Group’s SG&A increased $194.1$183.7 millionmillion, or 4.6%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 decreasedincreased $19.2$32.8 millionmillion, or 2.2%3.8% for the year primarily due to effectivecosts costrelated control in managingto the operationsOctober of2025 theSuvinil business,acquisition, partiallyincreased offsetmarketing by& advertising and higher employee-related costs. The Performance Coatings Group’s SG&A increased by $27.5$3.1 millionmillion, or 1.9%0.2% for the year primarily due to investmentstargeted inrestructuring long-term initiativesactivities and higher employee-related costs. The Administrative function’s SG&A increased $154.3$53.3 millionmillion, or 27.7%7.5% primarily due to highertargeted employee-relatedrestructuring costsactivities and increased expensescosts related to digitalthe technologiesnew global headquarters and systems.R&D center buildings.

Other general (income) expense - net changeddecreased by $105.9$28.6 million from expense of $67.1 million in 2023 to income of $38.8 million in 2024.2024 to income of $10.2 million in 2025. The change was primarily attributable to a decrease in provisions for environmental matters, net in the Administrative function and increased net gains on sale or disposition of assets. This activity was partially offset by the non-recurring gain recognized in 20232024 from insurance recoveries related to theenvironmental divestiturematters ofat a non-corecurrent domesticmanufacturing aerosol business.site. See Note 19 to the consolidated financial statements in Item 8 for additionalfurther information.

Interest expense decreasedincreased $1.8$49.3 million in 20242025 compared to 20232024 primarily due to aan decreaseincrease in long-term debt, partially offset by higher interest expense asrelated ato resultthe ofnew global headquarters and research and development center which were both placed into service in 2025 and an increase in short-term borrowings.borrowings primarily to fund the October 2025 acquisition of Suvinil. See Note 7 to the consolidated financial statements in Item 8 for additionalfurther information on the Company’s outstanding debt.

Other expense (income) expense - net changed by $110.2$65.6 million from expense of $65.5 million in 2023 to income of $44.7 million in 2024 to expense of $20.9 million in 2025 primarily due to lowerhigher foreign currency transaction related losses in 20242025 compared to 20232024, including impacts from highly inflationary economies such as Argentina and an increaseimmaterial loss recognized in miscellaneous2025 income.from Thea transaction to convert a foreign currency transactionwith relatedlimited lossesliquidity in 2023 included a $41.8 million unfavorable impact fromto the significantU.S. devaluationdollar. ofThe theremaining Argentinechange pesois indue December 2023 as part of economic reforms implemented by the government of Argentina. In addition, a $12.8 million loss on extinguishment of debt was recognized in 2023. This activity was partially offset by a decrease into miscellaneous pensionother income and investmentexpense, gains.none of which were individually significant. See Note 19 to the consolidated financial statements in Item 8 for additionalfurther information related to Other expense (income) expense - net.

The effective income tax rate for 20242025 was 22.3%23.1% compared to 23.2%22.3% in 2023.2024. The decreaseincrease in the effective rate was primarily due to a moreless favorable impactimpacts 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 additionalfurther information.

Diluted net income per share for 20242025 increaseddecreased to $10.26 per share from $10.55 per share from $9.25 per share in 2023.2024. Currency translation rate changes decreased diluted net income per share by $0.06 per share forin 2024.2025. Diluted net income per share in 2024 included acquisition-related amortization expense of $0.78 per share. Diluted net income per share for 20232025 included acquisition-related amortization expense of $0.78 per share, severance and other expenserestructuring expenses of $0.04$0.34 per share, expenses related to the divestiture of the China architectural business of $0.11 per share,and impairment related to trademarks of $0.07$0.05 per share. Diluted net income per share andfor 2024 included acquisition-related amortization expense related to the devaluation of the Argentine peso of $0.16 per share. These expenses were partially offset by a gain on the divestiture of a non-core domestic aerosol business of $0.06$0.78 per share. See Notes 3,1, 6 and 1921 to the consolidated financial statements in Item 8 for additionalfurther information.

The Company’s financial condition, liquidity and cash flow remained strong in 2024.2025. The Company generated $3.153$3.452 billion in Net operating cash and invested $1.014approximately $1.15 billion in capital expenditures and approximately $80 million in the acquisition of aSuvinil metaland packaging$797.6 coatingsmillion business.in Thecapital Companyexpenditures. also returned cashCash of $2.462$2.446 billion was returned to shareholders in the form of cash dividends and share repurchases during the year.

TheDuring Company’s2025, the Company generated Net income of $2.569 billion, EBITDA increasedof 8.2%$4.480 tobillion $4.492and Adjusted EBITDA of $4.609 billion. See the Non-GAAP Financial Measures section for the definitiondefinitions and calculationcalculations of EBITDA and Adjusted EBITDA. As of December 31, 2024,2025, the Company had Cash and cash equivalents of $210.4$207.2 million and total debt outstanding of $9.888$10.871 billion. Total debt, net of Cash and cash equivalents, was $9.678$10.664 billion and was 2.22.4 times the Company’s EBITDA in 2024.2025.

Net working capital, defined as Total current assets less Total current liabilities, decreasedincreased $293.9$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 compared to a deficit of $1.114 billion at December 31, 2023.2024. The net working capital decreaseincrease is primarily due to an increase in Short-term borrowings and a decrease in current assets, particularly Accounts receivable, net and Cash and cash equivalents, partially offset by an increase in 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 decreasedincreased $112.1$606.6 million at December 31, 20242025 compared to December 31, 20232024 primarily due to aan decreaseincrease in Accounts receivable, net of $79.1$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 $66.4 million and a decrease in Inventories of $41.7$3.2 million. These decreases were partially offset by an increase in Other current assets of $75.1 million, primarily related to prepaid expenses.

Current liability balances increased $181.8$111.6 million at December 31, 20242025 compared to December 31, 20232024 primarily due to an increase in Short-term borrowings of $288.2$538.1 million andmillion, an increase in Other accruals of $30.7$148.7 million primarily related to increases in liabilities related to insurance,customer considerations, accrued severance, current portion of non-traded investments in U.S. affordable housing and historicmiscellaneous renovationother real estate partnerships and contracts with customers,accruals, partially offset by a decrease in short-terminsurance environmentalpayables, liabilities.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 Accounts payable of $61.8 million, a decrease inthe Current portion of long-term debt of $49.6 million and a decrease in Accrued taxes of $23.1$699.1 million.

As a result of the net effect of these changes, the Company’s current ratio decreasedincreased to 0.87 at December 31, 2025 from 0.79 at December 31, 2024 from 0.83 at December 31, 2023.2024. Accounts receivable as a percent of Net sales decreasedincreased to 11.8% in 2025 from 10.3% in 2024 from 10.7% in 2023.2024. Accounts receivable days outstanding was 62 days in 2025 and 58 days in 2024 and 2023.2024. In 2024,2025, the allowance for current expected credit losses increased $0.8$2.1 million, or 1.3%.3.5%. Inventories as a percent of Net sales decreased to 9.8% in 2025 from 9.9% in 2024 from 10.1% in 2023.2024. Inventory days outstanding was 88 days in 2025 compared to 93 days in 2024 compared to 94 days in 2023.2024. The Company has sufficient total available borrowing capacity to fund its current operating needs.

Property, plant and equipment, net increased $696.4$604.2 million to $3.533$4.137 billion at December 31, 20242025 primarily due to capital expenditures of $1.014$745.9 billion andmillion, assets acquired through a business combinationcombinations of $32.9 million, partially offset by depreciation expense of $297.4$153.7 million and foreign currency translation and other adjustments of $52.6$44.9 million.million, Duringoffset 2023,by thedepreciation Company closed on a transaction to sell and subsequently lease back its current global headquarters and R&D center. In connection with the sale, proceedsexpense of $47.2$340.3 million were received and an immaterial gain was recognized.million.

Capital expenditures during 2024 included expenditures related to construction activities associated with the new global headquarters and R&D center in the Administrative function. Construction of the new global headquarters and R&D center is expected to be complete in 2025. Also included in 20242025 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 2025,2026, the Company expects to spend slightly less than 20242025 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. Additionally, the Company expects to complete construction of its new global headquarters and R&D center. Refer to the Real Estate Financing section herein for further information on the financing transaction for the new global headquarters.

In December 2022, the Company closed a transaction to sell and subsequently lease back its partially-constructed new global headquarters. As part of the terms of the transaction, the Company is contractually obligated for completing the construction of the building and related improvements at the new global headquarters. Construction is expected to complete in 2025. 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 expectsreceived to receive total proceeds approximating $800 million to $850 million, withthe final proceeds expectedfor the new global headquarters in the2025 firstfor quartera total of 2025.$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. The lease payment amounts during the construction period are dependent upon the timing and amount of total reimbursement of construction and other costs received by the Company. Lease payments over the next twelve months are expected to be approximately $50$51 million. The amount of the lease payments during the initial 30 year lease term willis estimated to be calculatedapproximately upon$1.938 completionbillion. ofRefer to the construction periodContractual and receiptOther of total reimbursement of constructionObligations and otherCommercial costs.Commitments Oncesection determinable,below thisfor isfurther expectedinformation to result in a significant increase inon the Company’s long-term contractual obligations.

The net proceeds from this transaction and other real estate financing transactions are recognized as proceedsProceeds 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 assetsassets, including any capitalized interest, within Property, plant and equipment, net on the Consolidated Balance Sheets under US GAAP.Sheets. These assets will beare 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, which represents the excess of cost over the fair value of net assets acquired in business combinations, decreasedincreased $45.9$456.5 million to $7.580$8.037 billion at December 31, 2024,2025, due to purchase accounting allocations of $306.8 million, primarily related to the Suvinil acquisition, and foreign currency translation rate fluctuations ofand $94.1other million, partially offset by purchase accounting allocationsadjustments of $48.2$149.7 million.

Intangible assets decreasedincreased $347.3$432.9 million to $3.533$3.966 billion at December 31, 20242025 due to amortizationpurchase price accounting allocations of finite-lived$643.4 intangiblemillion, assetsprimarily ofrelated $326.7to millionthe andSuvinil acquisition, foreign currency translation rate fluctuations and other adjustments of $75.9 million, partially offset by purchase accounting allocations of $28.0$104.0 million and capitalization of software of $27.3$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 additionalfurther information related to acquisitions. See Note 6 to the consolidated financial statements in Item 8 for a description of goodwill, identifiable intangible assets, historicalasset impairments and summaries of the remaining carrying values of goodwill and intangible assets.

Other assets increased $420.7$127.5 million to $1.632$1.759 billion at December 31, 2024.2025. The increase was primarily due to an increase in financenon-traded lease right-of-use (ROU) assets of $187.5 million, largely related to a new finance lease which commenced during 2024, an increase in assets related to contracts with customersinvestments and investmentspension inplan U.S. affordable housing and historic renovation real estate partnerships.assets. See Notes 1, 91 and 188 to the consolidated financial statements in Item 8 for additionalfurther information.

Total debt outstanding, including Short-term borrowings, increased by $37.5$982.9 million to $9.888$10.871 billion in 2024.2025. Short-term borrowings are primarily comprised of amounts outstanding under the Company’s domestic commercial paper programprogram, 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, 2024,2025, Net debt was $9.678$10.664 billion and was 2.22.4 times the Company’s EBITDA in 2024.2025. See the Non-GAAP Financial Measures section for the definition and calculation of EBITDA.

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 decreasedincreased $1.2$15.5 million to $67.8$83.3 million primarily due to changes in actuarial assumptions.assumptions and the acquisition of a Suvinil defined benefit pension plan. The Company’s liability for domestic other postretirement benefits decreased $12.1$9.5 million to $135.1$125.6 million at December 31, 20242025 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 increaseddecreased to 5.7% at December 31, 2025 from 5.8% at December 31, 2024 from 5.1% at December 31, 2023.2024. The assumed discount rate used to determine the projected benefit obligation for foreign defined benefit pension plans increased toof 5.5% remained substantially the same at December 31, 20242025 from 4.8% atand December 31, 2023.2024. The assumed discount rate used to determine the projected benefit obligation for domestic other postretirement benefit obligations increaseddecreased to 5.4% at December 31, 2025 from 5.6% at December 31, 2024 from 5.0% at December 31, 2023. The increase in the discount rates was primarily due to higher interest rates.2024.

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 6.5%6.0% and 6.3%6.5% at December 31, 20242025 and 2023,2024, 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, 20242025 and 2023.2024, 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 projected benefit obligation for domestic other postretirement benefit obligations at December 31, 20242025 were 6.5%6.0% and 11.8%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 projected benefit obligation for domestic other postretirement benefit obligations at December 31, 20232024 were 6.0%6.5% and 9.0%,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 20252026 for the domestic pension plan and foreign pension plans is expected to be approximately $(1.63.2) million and $5.3$6.1 million, respectively. Net periodic benefit creditcost in 2026 for domestic other postretirement benefits in 2025 is expected to be approximately $9.7$2.6 million. This credit is primarily due to the remaining amortization of the impact of a plan amendment executed in 2022. This impact will be fully amortized in 2025. See Note 8 to the consolidated financial statements in Item 8 for additional information on the Company’s obligations and funded status of its defined benefit pension plans and other postretirement benefits.

Deferred income taxes at December 31, 20242025 decreasedincreased $75.6$157.8 million to $607.5$765.3 million at December 31, 2024 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 additionalfurther information on deferred taxes.

Other long-term liabilities increased $401.4$266.4 million to $2.309$2.576 billion at December 31, 20242025 primarily due to liabilities associated with realnet estateinvestment financing transactions, finance leases andhedges, commitments related to non-traded investments in U.S. affordable housing and historic renovation real estate partnerships, partially offset by the impact of expected settlements related to tax positions over the next twelve months.financing. See Notes 1, 9, 10 and 2016 to the consolidated financial statements in Item 8.8 for further information.

The operations of the Company, like those of other companies in the sameits industry, are subject to various federal, statedomestic and localforeign 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 lawslaws, regulations and regulationsrequirements and has implemented various programs designed to help protect the environment and promote continued compliance.

Shareholders’ equity increased $335.4$547.1 million to $4.051$4.598 billion at December 31, 20242025 from $3.716$4.051 billion last year. The increase was primarily attributable to the generation of $2.681$2.569 billion of Net income andincome, benefits from stock option exercises and the recognition of stock-based compensation expense of $367.5 million. This was partially offset by the repurchase of $1.739 billion in Treasury stock, the payment of $723.4$242.9 million in cash dividends and a decrease in AOCIAccumulated other comprehensive income (loss) of $250.9$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 additionalfurther information.

The Company’s 20242025 annual cash dividend of $2.86$3.16 per share represented 31%30% of 20232024 diluted net income per share. The 20242025 annual dividend represented the 46th47th consecutive year of increased dividend payments. On FebruaryJanuary 19,26, 2025,2026, the Board of Directors increased the quarterly cash dividend to $0.79$0.80 per share. This quarterly dividend, if approved in each of the remaining quarters of 2025,2026, would result in an annual dividend for 20252026 of $3.16$3.20 per share, or a 30%31% payout of 20242025 diluted net income per share.

We face a number of risks that could materially and adversely affect our business, results of operations, cash flows, liquidity or financial condition. A discussion of our risk factors can be found in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025. Readers should not interpret the disclosure of any risk factor to imply that the risk has not already materialized. During the threesix months ended MarchJune 31,30, 2026, there were no material changes to our previously disclosed risk factors.

•Consolidated Net sales increased 6.8%7.5% to $5.667$6.789 billion in the quarter and increased 7.2% to $12.456 billion in the year to date period ◦Net sales from stores in the Paint Stores Group open more than twelve calendar months increased 2.4%4.2% and 3.4% in the quarter and year to date period, respectively

•Diluted net income per share increased 7.5%14.3% to $2.15$3.43 per share in the quarter compared to $2.00$3.00 per share in the firstsecond quarter of 2025 and increased 11.6% to $5.58 per share in the year to date period compared to $5.00 per share in the year to date period of 2025 ◦Adjusted diluted net income per share increased 4.4%9.5% to $2.35$3.70 per share in the quarter compared to $2.25$3.38 per share in the firstsecond quarter of 2025 and increased 7.7% to $6.05 per share in the year to date period compared to $5.62 per share in the year to date period of 2025

•Generated Net operating cash of $139.1$1.487 millionbillion in the quarteryear to date period compared to a$1.052 usage of $61.1 millionbillion in the firstyear quarterto date period of 2025

In an uncertain demand environment given current customer sentiment, our growth investments and execution on our differentiated strategy, Success by Design, continued to yield positive results. As the softer-for-longer demand environment continuesis expected to persistcontinue in the second half of 2026, coupled with potential inflation related toin raw materials, energy, logistics and packaging as a result of recent geopolitical events,packaging, we arecontinue focusingto focus on securing incremental volume, balanced with appropriate and decisive pricing and cost-out actions toin maintainall our businesses while maintaining the products, services and supply solutions which drive productivity and profitability 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.

We employ a disciplined capital deployment strategy, while maintaining a balanced approach toward driving value for our customers and returns for our shareholders. We continue to pursue business acquisitions, transactions and investments that fit our long-term growth strategy and will return value to our shareholders through the payment of dividends and the reinvestment of excess cash for sharethrough repurchases of Companyshares of our stock. We have a strong liquidity position, with $216.9$293.5 million in cash and $2.443cash equivalents and $1.969 billion of unused capacity under our credit facilities at MarchJune 31,30, 2026. We are, and expect to remain, in compliance with all financing covenants.

The Company has historically experienced, and expects to continue to experience, variability in quarterly results. The results of operations for the three and six months ended MarchJune 31,30, 2026 are not indicative of the results to be expected for the full year as our business is seasonal in nature, with the majority of Net sales for the Reportable Segments traditionally occurring during the second and third quarters. However, periods of economic uncertainty can alter the Company’s seasonal patterns.

The following discussion and analysis addresses comparisons of material changes in the condensed consolidated financial statements for the three and six months ended MarchJune 31,30, 2026 and 2025.

Consolidated Net sales increased by 6.8%7.5% in the firstsecond quarter of 2026 primarily due to higher Net sales in all reportable segments, inclusive of the October 2025 acquisition of Suvinil and a 1.7% impact from favorable foreign currency translation.Suvinil. Net sales of all consolidated foreign subsidiaries increased to $1.279$1.358 billion in the firstsecond quarter of 2026 compared to $1.045$1.155 billion in the same period last year. The increase in Net sales for all consolidated foreign subsidiaries was due to higher Net sales in all regions, led by Latin America, which is inclusive of the Suvinil acquisition. Net sales of all operations other than consolidated foreign subsidiaries increased to $4.388$5.431 billion in the firstsecond quarter of 2026 compared to $4.261$5.159 billion in the same period last year.

Net sales in the Paint Stores Group increased by 3.7%5.1% in the firstsecond quarter of 2026 primarily due to selling price increases, which impacted Net sales by a low-singlemid-single digit percentage, as well as low-single digit percentage sales volume growth. Net sales increased in all but one professional customer end market,markets, led by a double-digit percentage increase in protective and marinemarine, a high-single digit percentage increase in commercial and a mid-single digit percentage increase in residential repaint and commercial. New residential decreased by a low-single digit percentage.repaint. Net sales from stores open for more than twelve calendar months increased by 2.4%4.2% in the firstsecond quarter of 2026 compared to last year’s comparable period. Net sales of non-paint products increased 2.5%4.2% in the firstsecond quarter of 2026 compared to last year’s comparable period. A discussion of changes in volume versus pricing for sales of non-paint products is not pertinent due to the wide assortment of general merchandise sold.

Net sales in the Consumer Brands Group increased by 19.2%21.5% in the firstsecond quarter of 2026 primarily as a result of the acquisition of Suvinil, increased Net sales in North America and a 2.4%1.6% impact from favorable foreign currency translation and increased Net sales in Europe. These increases were partially offset by soft DIY demand in North America which decreased Net sales by a low-single digit percentage.translation.

Net sales in the Performance CoatingCoatings Group increased by 6.5%6.3% in the firstsecond quarter of 2026 primarily asdue to selling price increases, mainly attributable to product mix, which impacted Net sales by a resultlow-single ofdigit percentage, low-single digit percentage sales volume growth and a 4.1%2.0% impact from favorable foreign currency translation and low-single digit percentage sales volume growth.translation. Net sales increased in certainall business unitsbusinesses, led by General Industrial and Automotive Refinish, which each increased by a double-digit percentage, General Industrial and Packaging, which increased by high-single digit percentages,percentage, as well as Packaging, Industrial Wood and Coil, which each increased by a mid-single digit percentage.

Three Months Ended MarchJune 31,30, 2026

Consolidated Cost of goods sold increased $139.8$255.1 million, or 5.1%,8.0%, in the firstsecond quarter of 2026 compared to the same period in 2025 primarily due to thehigher impactNet sales, inclusive of the Suvinil acquisitionacquisition, a moderate rise in raw material costs and an unfavorable foreign currency translationrelated changes, which increased Cost of goods sold by 2.2%. These increases were partially offset by moderating raw material costs.impact.

Consolidated Gross profit increased $221.4$219.7 million in the firstsecond quarter of 2026 compared to the same period in 2025 primarily due to higher Net sales in all reportable segments, the acquisitioninclusive of the Suvinil withinacquisition, thepartially Consumeroffset Brandsby Group,a moderatingmoderate rise in raw material costs and favorable foreign currency translation.costs. Consolidated Gross profit as a percent of consolidated Net sales increased in the firstsecond quarter of 2026 decreased slightly to 49.1%49.2% compared to 48.2%49.4% during the same period in 2025 forprimarily thesedue sameto reasons.the dilutive impact of the Suvinil acquisition.

The Paint Stores Group’s Gross profit in the firstsecond quarter of 2026 was higher than the same period last year by $85.8$106.8 million due primarily to higher Net sales as a result of increased selling pricesprice increases and sales volume growth.growth, partially offset by a moderate rise in raw material costs. The Paint Stores Group’s Gross profit as a percent of Net sales increasedwas flat in the firstsecond quarter of 2026 compared to the same period last year for these same reasons. The Consumer Brands Group’s Gross profit increased by $99.8$73.0 million in the first quarter of 2026 compared to the same period last year due primarily to the acquisition of Suvinil and global supply chain efficiencies. The Consumer Brands Group’s Gross profit as a percent of Net sales increased in the first quarter of 2026 compared to the same period last year for these same reasons. The Performance Coatings Group’s Gross profit increased $40.2 million in the firstsecond quarter of 2026 compared to the same period last year primarily due to higher Net sales, inclusive of the Suvinil acquisition, favorable mix, supply chain efficiencies and favorable impacts from foreign currencycurrency, translationpartially andoffset by a moderate rise in raw material costs. The Consumer Brands Group’s Gross profit as a percent of Net sales decreased in the second quarter of 2026 compared to the same period last year related to the dilutive impact of the Suvinil acquisition. The Performance Coatings Group’s Gross profit increased $43.3 million in the second quarter of 2026 compared to the same period last year primarily due to higher Net sales as a result of selling price increases, primarily attributable to product mix, sales volume growth.growth and favorable foreign currency translation, partially offset by a moderate rise in raw material costs. The Performance Coatings Group’s Gross profit as a percent of Net sales increased modestly in the firstsecond quarter of 2026 compared to the same period last year for these same reasons.

Consolidated SG&A increased $175.8$92.1 million in the firstsecond quarter of 2026 versus the same period last year primarily due to an increase in employee-related costs and marketing and advertising to support higher Net sales, incremental SG&A expenses associated with the Suvinil acquisition,acquisition and higher costs in the Administrative function related to the new global headquarters and technology center and unfavorable foreign currency translation.center. As a percent of Net sales, consolidated SG&A increaseddecreased by 90 basis points in the firstsecond quarter of 2026 compared to the same period last year due to these same factors.year.

The Paint Stores Group’s SG&A increased $64.0$63.3 million in the firstsecond quarter of 2026 compared to the same period last year primarily due to increased costs to support higher sales, including higherinvestments employee-relatedin costsadditional sales reps and marketing and advertising.stores. The Consumer Brands Group’s SG&A increased $41.6$32.9 million in the firstsecond quarter of 2026 compared to the same period last year primarily due to incremental SG&A expenses associated with the Suvinil acquisition as well as higher employee-related and marketing costs to support higher sales.acquisition. The Performance Coatings Group’s SG&A increased $32.5$19.4 million in the firstsecond quarter of 2026 compared to the same period last year primarily due to higheran increase in employee-related costs.costs to support higher sales. The Administrative function’s SG&A increaseddecreased $37.7$23.5 million in the firstsecond quarter of 2026 compared to the same period last year due primarily due to lower employee costs related to non-recurring severance from the prior period, partially offset by increased costs related to the new global headquarters and technology center.

Other general expense - net decreased $2.6$2.9 million in the firstsecond quarter of 2026 compared to the same period last year primarily due to lower individually insignificant miscellaneous expenses, partially offset by a decreasemodest increase in site specific environmental-related accruals. See Note 15 in Item 1 for further information.

Interest expense increased $27.8$23.5 million in the firstsecond quarter of 2026 compared to the same period last year due to an increase in short-term borrowings and long-term debt and short-term borrowings as well as interest expense related to real estate financing associated with the new global headquarters and technology center.headquarters. See Note 6 in Item 1 for further information on the Company’s outstanding debt.

Other (income) expense - net was income of $4.0$12.1 million in the firstsecond quarter of 2026 compared to expense of $2.9$4.7 million in the same period last year primarily due to lower foreign currency transaction related net losses, higher investment gains inand thelower currentindividually periodinsignificant asmiscellaneous compared to net losses in the comparable prior year period,expenses, partially offset by unfavorablepension changesrelated expense in the marketsecond valuequarter of investments2026 heldcompared to pension related income in deferredthe compensationsecond plans.quarter of 2025. See Note 15 in Item 1 for further information.

The effective tax rate was 21.3%24.2% for the firstsecond quarter of 2026 compared to 22.8%23.4% for the second quarter of 2025, and 23.1% for the first quartersix months of 2026 compared to 23.2% for the first six months of 2025. The decreaseincrease in the effective tax rate for the second quarter of 2026 was primarily due to a moreless favorable impact from tax benefits related to employee share-based payments. The effective tax rate was essentially flat for the first six months of 2026 compared to the same period last year. The other significant components of the Company’s effective tax rate were consistent year-over-year.in both comparable periods. See Note 16 in Item 1 for further information.

Diluted net income per share increased 7.5%14.3% to $2.15$3.43 per share in the firstsecond quarter of 2026 compared to $2.00$3.00 per share in the firstsecond quarter of 2025. Diluted net income per share in the firstsecond quarter of 2026 included Valspar acquisition-related amortization expense of $0.20 per share and severance and other restructuring expenses of $0.07 per share. Diluted net income per share in the firstsecond quarter of 2025 included charges for Valspar acquisition-related amortization expense of $0.19$0.20 per share and severance and other restructuring expenses of $0.06$0.18 per share. Foreign currency translation rate changes increased diluted net income per share by $0.03$0.02 in the firstsecond quarter of 2026.

The Company’s financial condition and liquidity remained strong at MarchJune 31,30, 2026. The Company generated $139.1$1.487 millionbillion in Net operating cash during the first quarter of 2026 and returned cash of $772.7$2.232 millionbillion to its shareholders in the form of dividends and share repurchases during the first quartersix months of 2026. Net income increased 6.1%9.5% to $534.7$1.378 millionbillion and EBITDA increased 8.8%11.7% to $998.2$2.433 millionbillion for the first threesix months of 2026. Refer to the Non-GAAP Financial Measures section below for the definition and calculation of EBITDA.

At MarchJune 31,30, 2026, the Company had Cash and cash equivalents of $216.9$293.5 million and total debt outstanding of $11.700$12.072 billion. Total debt, net of Cash and cash equivalents, was $11.483$11.779 billion. The Company continues to maintain sufficient short-term borrowing capacity at reasonable rates, and has sufficient cash on hand and total available borrowing capacity to fund its current operating requirements.

Net working capital, defined as Total current assets less Total current liabilities, increaseddecreased $802.1$856.7 million to a deficit of $1.035$2.628 billion at MarchJune 31,30, 2026 compared to a deficit of $1.837$1.771 billion at MarchJune 31,30, 2025. The net working capital increasedecrease is due to an increase of $1.431 billion in Total current liabilities partially offset by an increase in Total current assets of $460.0$573.9 million and a decrease of $342.1 million in current liabilities.million.

Current asset balances increased $460.0$573.9 million at MarchJune 31,30, 2026 compared to MarchJune 31,30, 2025 due to an increase in Accounts receivable, net of $379.0$459.3 million, an increase in Other current assets of $105.9$45.8 million, primarily related to prepaid expenses and recoverable income taxes,taxes and prepaid expenses, an increase in Inventories of $45.1 million and an increase in Cash and cash equivalents of $17.1$23.7 million. These increases were offset by a decrease in Inventories of $42.0 million.

Current liability balances decreasedincreased $342.1$1.431 millionbillion at MarchJune 31,30, 2026 compared to MarchJune 31,30, 2025 due to aan decreaseincrease in Short-term borrowings of $539.7 million, an increase in the Current portion of long-term debt of $1.151 billion. This decrease was offset by an increase in Short-term borrowings of $578.1$347.7 million, an increase in Accounts payable of $90.5$256.4 million, an increase in Other accruals of $54.3 million primarily related to customer considerations, an increase in Accrued taxes of $45.8$149.6 million, an increase in Compensation and taxes withheld of $25.3$79.5 million, an increase in Other accruals of $51.9 million primarily related to increases in customer considerations and non-traded investments, partially offset by a decrease in accrued severance, and an increase in the Current portion of operating lease liabilities of $14.6$5.8 million. The Company’s current ratio was 0.86,0.73, 0.87 and 0.770.78 at MarchJune 31,30, 2026, December 31, 2025 and MarchJune 31,30, 2025, respectively.

Buildings within Property, plant and equipment, net increased $52.5$76.9 million in the first threesix months of 2026 and $1.523$1.032 billion in the twelve months since MarchJune 31,30, 2025. The increase in the first threesix months of 2026 was primarily due to capital expenditures related to finalizing the construction of the new global headquarters and technology center. Since MarchJune 31,30, 2025, the increase was primarily due to the new global headquarters and technology center meeting the criteria to be placed into service during 2025.

Goodwill decreased $33.2$13.4 million from December 31, 2025 and increased $295.0$215.6 million from MarchJune 31,30, 2025. The decrease during the first threesix months of 2026 was due to Suvinil purchase price allocation adjustments of $29.7 million and foreign currency translation fluctuations and other adjustments of $3.5$11.5 million and purchase price allocation adjustments of $1.9 million. The increase over the twelve month period from MarchJune 31,30, 2025 was due to purchase price allocation adjustments of $202.3$234.1 million, primarily related to the Suvinil acquisition, andpartially offset by foreign currency translation fluctuations and other adjustments of $92.7$18.5 million.

Intangible assets decreased $80.5$162.4 million from December 31, 2025 and increased $392.2$260.3 million from MarchJune 31,30, 2025. The decrease during the first threesix months of 2026 was due to amortization of $88.5$176.4 million and Suvinil purchase price allocation adjustments of $17.1$16.8 million, partially offset by foreign currency translation fluctuations and other adjustments of $23.6$24.8 million and capitalized software of $1.5$6.0 million. The increase over the twelve month period from MarchJune 31,30, 2025 was due to purchase price allocations of $626.0$591.6 million, primarily related to the Suvinil acquisition, capitalized software of $28.3 million and foreign currency translation fluctuations and other adjustments of $90.1 million and capitalized software of $38.0$6.8 million, partially offset by amortization of $344.1$348.6 million and 2025 trademark impairment of $17.8 million.

Other assets increased $17.7$87.0 million from December 31, 2025 and $18.4$75.9 million from MarchJune 31,30, 2025. The increase in the first threesix months of 2026 was primarily due to an increase in non-traded investments and assets related to cloud computing arrangements, partially offset by a decrease in customer considerations. The increase from MarchJune 31,30, 2025 was primarily due to an increase in non-traded investments, assets related to cloud computing arrangements,arrangements and deferred income tax assets and pension plan assets, partially offset by a decrease in customer considerations and non-traded investments.considerations. See Notes 11, 14 and 1416 in Item 1 and Notes 1, 8, 18 and 20 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 in for further information.

The Company’s long-term debt primarily consists of senior notes as disclosed in Note 7 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.2025 and periodically, amounts borrowed under its credit agreements. See Note 6 in Item 1 for further information concerning Long-term debt, Short-term borrowings and credit agreements.

Defined Benefit Pension and Other Postretirement Benefit Plans Long-term liabilities for defined benefit pension and other postretirement benefit plans did not change significantly from December 31, 2025. The changes from MarchJune 31,30, 2025 are primarily due to changes in actuarial assumptions and the acquisition of Suvinil. See Note 8 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 for further information concerning the Company’s liabilities for defined benefit pension and other postretirement benefit plans.

Deferred income taxes weredecreased effectively$8.1 flatmillion from December 31, 2025 and increased $179.4$196.3 million from MarchJune 31,30, 2025. The changesdecrease from MarchDecember 31, 2025 areis primarily due to the amortization of intangible assets. The increase from June 30, 2025 is primarily due to accelerated domestic research and development deductions recognized as a result of U.S. tax reform legislation known as the One Big Beautiful Bill Act. This increase was partially offset by amortization of acquisition-related intangible assets.

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 the first threesix months of 2026. Management also 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 for the remainder of 2026. See Notes 8 and 15 in Item 1 for further information on environmental-related long-term liabilities.

Contractual Obligations, Commercial Commitments and Warranties There have been no significant changes to the Company’s contractual obligations and commercial commitments in the first threesix months of 2026 as summarized in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

Shareholders’ equity decreased $167.2$743.6 million during the first threesix months of 2026 primarily as a result of $623.5$1.885 millionbillion of treasury stock activity mainly attributable to treasury stock repurchases and the payment of $197.1$394.6 million in cash dividends, partially offset by Net income of $534.7$1.378 million,billion, an increase in Other capital of $71.0$117.6 million mainly associated with stock-based compensation expense and stock option exercises and an increase in Other comprehensive income, net of tax of $47.6$40.3 million mainly due to foreign currency translation adjustments.

Shareholders’ equity increaseddecreased $301.0$546.2 million since MarchJune 31,30, 2025 primarily as a result of treasury stock activity mainly attributable to treasury stock repurchases of $2.623 billion and the payment of $786.1 million in cash dividends, partially offset by Net income of $2.599$2.688 billion, an increase in Other capital of $171.1 million mainly associated with stock-based compensation expense and stock option exercises and an increase in Other comprehensive income, net of tax of $186.1$3.8 million mainly due to foreign currency translation adjustments and an increase in Other capital of $182.4 million mainly associated with stock-based compensation expense and stock option exercises. The increase in Shareholders’ equity was partially offset by treasury stock activity mainly attributable to treasury stock repurchases of $1.880 billion and the payment of $786.5 million in cash dividends.adjustments. Additionally, 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. See Note 10 in Item 1 for further information concerning Shareholders’ Equity. See the Statements of Consolidated Shareholders’ Equity in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 for further information concerning the treasury stock retirement.

During the first threesix months of 2026, the Company purchased 1.65.6 million shares of its common stock for treasury purposes through open market purchases. 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 MarchJune 31,30, 2026 to purchase 28.024.0 million shares of its common stock.

In February 2026, the Company’s Board of Directors increased and approved the quarterly cash dividend from $0.79 per share to $0.80 per share. ThisIn April and July 2026, the Board of Directors approved the quarterly dividend,cash ifdividend of $0.80 per share for the respective quarters. If approved in each of the remainingfourth quartersquarter of 2026, it would result in an annual dividend for 2026 of $3.20 per share, or a 31% payout of 2025 diluted net income per share.

Net operating cash for the threesix months ended MarchJune 31,30, 2026 was a source of $139.1$1.487 millionbillion compared to a usagesource of $61.1$1.052 millionbillion for the same period in 2025. The improvement in Net operating cash was primarily due to lower cash requirements for working capital and deferred taxes,capital, higher Net income andincome, an increase in depreciation and amortization.a decrease in deferred income taxes.