PPG Reports On Quarter, Takes Restructuring Charge
PITTSBURGH--April 19, 2001--PPG Industries' first quarter 2001 net income was $56 million, or 33 cents a share, including a pretax restructuring charge of $101 million. After-tax, the charge was $71 million, or 42 cents a share. Excluding the charge, net income was $127 million, or 75 cents a share. Sales for the quarter were $2.1 billion.First quarter 2000 net income was $139 million, or 79 cents a share, including an after-tax charge of $35 million, or 20 cents a share, to write off an equity investment. Excluding that charge, net income was $174 million, or 99 cents a share. Sales were $2.2 billion.
PPG's intent to record a significant restructuring charge in the first quarter was announced last year. The actions -- globally and across the company, with emphasis on the company's coatings businesses -- are designed to reduce costs, increase efficiency and accelerate performance.
"Likelihood of the difficult economy in which we now find ourselves became clear to us more than seven months ago," said Raymond W. LeBoeuf, chairman and chief executive. "As a result, we undertook a pragmatic, planned approach to accelerate efficiency and productivity-related actions that allow us to continue to provide the technological innovation, products and services our customers expect and require. Additional earnings realized through these actions should offset the cash costs of the restructuring -- about $70 million -- in about a year."
According to LeBoeuf, about two-thirds of the restructuring charge reflects a workforce reduction of nearly 1,500 people, about four percent of PPG's 2000 average global employment. The other third reflects asset write-downs for facility closings as well as production realignments to gain economies of scale. About 80 percent of the charge, as well as 80 percent of the workforce reduction, involves coatings operations. About half of the charge relates to operations outside North America.
"These actions involved many difficult decisions, but our recognition of continued market weakness requires an aggressive response to sustain PPG's competitiveness," LeBoeuf said. "We must also continue the year-in, year-out productivity increases that are a major PPG strength. In large measure, that is what enabled us to record sales of $8.6 billion in 2000 with about the same number of employees as 45 years ago when sales were one-half of a billion dollars."
Referring to this year's first quarter results, LeBoeuf said sales declined about 2.5 percent from the 2000 period, primarily on sharp volume declines in all segments in North America and the negative effects of currency translation. Acquisitions made a positive contribution.
Coatings segment sales and earnings declined, largely because of lower volumes for automotive original and industrial products. Volume gains were recorded in aerospace products and architectural coatings, while automotive refinish volumes were about equal to those of a year ago. Operating earnings benefited from manufacturing efficiencies, especially in auto refinish.
Despite a sharp volume decline in automotive original glass and lower fiber glass volumes, glass segment sales improved on strong performance by automotive replacement and flat glass.
Although commodity chemical prices improved from a year ago, overall chemical segment sales were flat because of sharply lower commodity volumes. Steep increases in raw material prices, especially for natural gas, contributed to lower operating earnings.
PPG INDUSTRIES AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENT OF OPERATIONS (unaudited)
(All amounts in millions except per-share data)
3 Months Ended
March 31
2001 2000
---- ----
Net sales $2,099 $2,152
Cost of sales 1,324 1,319
-------------------------------------------------------------
GROSS PROFIT 775 833
Other expenses (earnings):
Selling & other 418 397
Depreciation 94 93
Interest 48 43
Amortization 18 19
Business realignments 101 1
Other - net (18) 24
-------------------------------------------------------------
INCOME BEFORE INCOME TAXES &
MINORITY INTEREST 114 256
Income taxes 48 109
Minority interest 10 8
-------------------------------------------------------------
NET INCOME $ 56 $ 139
=============================================================
Earnings per common share $ 0.33 $ 0.80
=============================================================
Earnings per common share -
assuming dilution $ 0.33 $ 0.79
=============================================================
Average shares outstanding 168.3 174.1
=============================================================
Average shares outstanding -
assuming dilution 169.1 175.7
=============================================================
Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended by SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities." The adoption of these new standards resulted in a
cumulative after-tax increase in net earnings of less than $1 million
for the quarter ended March 31, 2001.
CONDENSED BALANCE SHEET (unaudited)
March 31 Dec. 31
2001 2000
---- ----
(millions)
Current assets:
Cash & cash equivalents $ 78 $ 111
Receivables - net 1,617 1,563
Inventories 1,141 1,121
Other 325 298
----------------------------------------------------------------
Total current assets 3,161 3,093
Investments 331 320
Property less accumulated depreciation 2,849 2,941
Goodwill & identifiable intangible
assets less accumulated amortization 1,595 1,648
Other assets 1,125 1,123
----------------------------------------------------------------
TOTAL $9,061 $9,125
================================================================
Current liabilities:
Short-term debt & current portion of
long-term debt $1,284 $1,161
Accounts payable & accrued liabilities 1,374 1,382
----------------------------------------------------------------
Total current liabilities 2,658 2,543
Long-term debt 1,701 1,810
Deferred income taxes 547 543
Accumulated provisions 1,010 1,004
Minority interest 131 128
Shareholders' equity 3,014 3,097
----------------------------------------------------------------
TOTAL $9,061 $9,125
================================================================
BUSINESS SEGMENT INFORMATION (unaudited)
3 Months Ended
March 31
2001 2000
---- ----
(millions)
Net sales
Coatings $1,106 $1,178
Glass 583 565
Chemicals 413 412
Intersegment net sales (3) (3)
-----------------------------------------------
TOTAL $2,099 $2,152
===============================================
Operating income
Coatings $ 61 $ 167
Glass 85 98
Chemicals 23 74
-----------------------------------------------
TOTAL 169 339
Interest - net (43) (40)
Other unallocated corporate
expense - net (2) (12) (43)
-----------------------------------------------
INCOME BEFORE INCOME TAXES &
MINORITY INTEREST (1) $ 114 $ 256
===============================================
(1) Income before income taxes and minority interest for the quarter
ended March 31, 2001, includes a charge for $101 million for
restructuring and other related activities, including severance
and other costs of $67 million and asset write-offs of $34
million. The amounts by business segment were as follows (in
millions):
Coatings $ 83
Glass 10
Chemicals 7
Corporate 1
----
$101
(2) Includes for the three months ended March 31, 2000, a pre-tax
charge of $39 million representing the write-off of an equity
investment in Pittsburgh Corning Corporation which filed for
reorganization under the federal bankruptcy code.