PAINTS AND COATINGS
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Architectural Coatings EMEA
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Pittsburgh Glass Works, LLC
Solar Glass Products
PPG reports third quarter 2009 financial results
Difficult global economy continues to impact year-over-year sales and earnings comparisons
Sales and earnings trends improve versus first two quarters of 2009
PPG’s Asia/Pacific business posts record earnings
Cash on hand of $900 million based on strong cash generation
Debt reduction of about $700 million
PITTSBURGH, Oct. 15, 2009 –
PPG Industries (NYSE:PPG) today reported sales for the third quarter of $3.2 billion, a decline of 24 percent versus the prior year’s third quarter including a 5 percent decline resulting from a business divestiture in 2008. The company reported net income of $159 million, or 96 cents per share. Adjusted net income was $161 million, or 97 cents per share. Third quarter 2008 sales were $4.2 billion, reported net income was $117 million, or 70 cents per share, and adjusted net income was $227 million, or $1.37 per share.
The third quarter sales decline of $1 billion included a $229 million impact from the 2008 divestiture of a majority interest in the automotive glass and services (AG&S) business, and about a $150 million impact from negative foreign currency translation. Year-over-year sales volumes decreased by about $500 million, or 12 percent, with declines in most regions, except Asia/Pacific. Selling prices declined by about $150 million versus last year’s third quarter, primarily due to lower commodity chemicals pricing.
Third quarter 2009 net income includes an aftertax charge of $2 million, or 1 cent per share, to reflect the net increase in the current value of the company’s obligation under its proposed asbestos settlement, which is pending court proceedings. Reported third quarter 2008 net income included aftertax charges of $110 million, or 67 cents per share, for business restructuring and $3 million, or 2 cents per share, for the proposed asbestos settlement. Third quarter 2008 net income also included an aftertax gain of $3 million, or 2 cents per share, on the divestiture of the AG&S business.
“In the quarter, we continued to restore profitability and to deliver strong cash generation,” said Charles E. Bunch, PPG chairman and chief executive officer. “We benefited from our aggressive cost-reduction actions, as well as a modest improvement in demand versus the first half of 2009, stemming from a very gradual recovery in the global economy.”
Bunch said that PPG’s third quarter adjusted earnings per share showed ongoing growth over the first two quarters of 2009. The company reported adjusted earnings per share in the first and second quarters of 2009 of 19 cents and 91 cents, respectively.
Bunch said the company’s efforts to transform its business portfolio over the past several years were evident in the third quarter results. PPG’s combined coatings and Optical and Specialty Materials segments achieved 7 percent higher year-over-year earnings and collectively accounted for more than 95 percent of total segment earnings, according to Bunch. “Additionally, we capitalized on our expanded geographic footprint and posted record earnings in the Asia/Pacific region due to stronger year-over-year performance in China. These improved results partially offset lower year-over-year earnings in our Glass segment and in our Commodity Chemicals segment, a business that experienced record sales and earnings levels last year.
“Also, due to our focus on working capital management, we generated about $650 million of cash from operations in the quarter,” said Bunch. “This is about 40 percent more than last year’s third quarter. We repaid about $700 million of debt in the quarter, and we still have about $900 million of cash on hand.
“Looking ahead to the fourth quarter, we anticipate only modest improvement in the overall economy. We expect growth in Asia to continue, and we anticipate that global automotive production will remain at least at the third quarter levels, if not higher,” Bunch said. “Currency translation, which had been a headwind for PPG all year thus far, will likely shift to a tailwind. What’s more, many of our businesses will exhibit normal, slower seasonal demand patterns.”
Performance Coatings segment sales in the third quarter 2009 decreased $154 million, or 13 percent, versus the prior year’s quarter. Sales declined as a result of lower volumes across all businesses. Weaker foreign currency was also a factor, offset by pricing gains. Segment earnings increased $7 million, or 5 percent, due to lower overhead costs resulting from aggressive cost-management strategies and restructuring actions. Currency translation was a $6 million earnings headwind, while other factors generally countered one another.
Industrial Coatings segment sales for the quarter decreased $198 million, or 19 percent, due primarily to lower year-over-year volumes in the automotive coatings and industrial coatings businesses, reflecting the continued severe declines in global demand. Demand in the third quarter, however, improved from the first two quarters of 2009. Weaker foreign currencies were also a negative factor. Segment earnings for the quarter were $58 million, an increase of $10 million from the prior year’s third quarter, primarily as a result of aggressive cost-reduction actions. The negative effect from lower volumes was partially countered by more favorable pricing and input costs.
Architectural Coatings – Europe, Middle East and Africa (EMEA) segment sales for the quarter decreased $73 million, or 12 percent, with $50 million of the decline attributable to weaker foreign currencies. Slightly lower volumes contributed to the sales decline. Segment earnings decreased $2 million, as the slightly lower volumes were coupled with a negative $8 million attributable to foreign currency conversion. These declines slightly overshadowed the savings from cost-reduction initiatives.
Optical and Specialty Materials segment sales for the quarter decreased $33 million, or 11 percent, as a result of lower sales volumes. Segment earnings increased $6 million due largely to lower costs, which more than offset the negative impact of the lower volumes.
Commodity Chemicals segment sales for the quarter decreased $213 million, or 43 percent, due primarily to declines in year-over-year selling prices and volumes. Segment earnings decreased $97 million due to the lower selling prices, which were only partially offset by lower energy costs and other cost savings measures. In the quarter, selling prices improved in September, following declines in July and August.
Glass segment sales declined $329 million compared with the prior year due largely to the AG&S business divestiture, which was completed in September 2008. Other factors contributing to the sales decline were lower volumes because of reduced construction and general industrial demand and lower sales prices. The segment loss was $6 million, a decline of $23 million due to the lower volumes and lower sales prices. These decreases were tempered by lower manufacturing and input costs.
Last year’s third quarter results for the divested AG&S business were a loss of $5 million pretax, $3 million aftertax, or 2 cents per share.
Pittsburgh-based PPG is a global supplier of paints, coatings, optical products, specialty materials, chemicals, glass and fiber glass. The company has more than 140 manufacturing facilities and equity affiliates and operates in more than 60 countries. Sales in 2008 were $15.8 billion. PPG shares are traded on the New York Stock Exchange (symbol: PPG). For more information, visit
PPG will hold a conference call to review its third quarter financial performance today, Thursday, Oct. 15, at 10 a.m. ET. The company will provide commentary and host questions and answers. The dial-in numbers are: in the United States, 800-299-7635; international, 617-786-2901; passcode 67842100. The conference call will also be available in listen-only mode via Internet broadcast from
PPG’s Investor Center
(Windows Media Player). A telephone replay will be available beginning at approximately 1 p.m. ET, Thursday, Oct. 15, through Friday, Oct. 30. The dial-in numbers for the replay are: in the United States, 888-286-8010; international, 617-801-6888; passcode 82847307.
Statements in this news release relating to matters that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 reflecting the company’s current view with respect to future events or objectives and financial or operational performance or results. These matters involve risks and uncertainties as discussed in PPG Industries’ periodic reports on Form 10-K and Form 10-Q, and its current reports on Form 8-K, filed with the Securities and Exchange Commission (SEC). Accordingly, many factors could cause actual results to differ materially from the company’s forward-looking statements.
Among these factors are global economic conditions, increasing price and product competition by foreign and domestic competitors, fluctuations in cost and availability of raw materials, the ability to maintain favorable supplier relationships and arrangements, the realization of anticipated cost savings from restructuring initiatives, difficulties in integrating acquired businesses and achieving expected synergies therefrom, the ability to penetrate existing, developing or emerging foreign and domestic markets, and economic and political conditions in international markets, foreign exchange rates and fluctuations in such rates, the impact of environmental regulations, unexpected business disruptions and the unpredictability of possible future litigation, including litigation that could result if the asbestos settlement discussed in PPG’s filings with the SEC does not become effective. However, it is not possible to predict or identify all such factors. Consequently, while the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements.
Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on PPG’s consolidated financial condition, results of operations or liquidity.
Forward-looking statements speak only as of the date of their initial issuance, and PPG does not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise.
Regulation G Reconciliation
PPG Industries believes investors' understanding of the company's operating performance is enhanced by the disclosure of net income and earnings per common share (attributable to PPG) adjusted for nonrecurring charges. PPG's management considers this information useful in providing insight into the company’s ongoing operating performance because it excludes the impact of items that cannot reasonably be expected to recur on a quarterly basis. Net income and earnings per common share (attributable to PPG) adjusted for these items are not recognized financial measures determined in accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered a substitute for net income or earnings per common share (attributable to PPG) or other financial measures as computed in accordance with U.S. GAAP. In addition, adjusted net income and earnings per share may not be comparable to similarly titled measures as reported by other companies. The following is a reconciliation of reported and adjusted net income and earnings per share for the third quarter 2009 and 2008, and the first and second quarters of 2009:
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