PPG Reports On Second Quarter
PITTSBURGH--July 18, 2002--As a result of a charge for a previously announced asbestos settlement agreement, PPG Industries today reported a net loss of $345 million, or a loss per share of $2.03, for the second quarter.Excluding the $495 million aftertax charge, net income was $150 million or 89 cents a share. Sales were $2.13 billion.
The settlement, announced May 14, would cover all current and future personal injury claims against PPG and Pittsburgh Corning for asbestos products manufactured, distributed or sold by the companies. The settlement would become effective after Pittsburgh Corning's bankruptcy plan of reorganization, incorporating the settlement, is approved by a court order that is no longer subject to appeal.
In the second quarter last year, net income was $155 million, or 92 cents a share, on sales of $2.16 billion.
For the first six months of 2002, PPG recorded a net loss of $311 million, or a loss per share of $1.83, including one-time, aftertax charges in the first quarter of $55 million, or 33 cents a share, for restructuring and $9 million, or 5 cents a share, for the cumulative effect of a required accounting change, and the second-quarter charge for the asbestos settlement. Excluding these charges, net income was $248 million, or $1.47 a share. Sales were $4.0 billion.
First-half 2001 net income was $211 million or $1.25 a share, including an aftertax restructuring charge of $71 million. Excluding the charge, net income was $282 million, or $1.67 a share. Sales were $4.3 billion.
"The settlement announced two months ago will enable us to put all of our asbestos product claims exposure behind us," said Raymond W. LeBoeuf, chairman and chief executive officer. "Excluding the charge, our strong results in the quarter, particularly record earnings in coatings, reflect a series of actions we took to reduce costs and generate cash beginning in late 2000 in anticipation of the North American recession. As a result, excluding the charge, we have successfully lowered our debt-to-total-capital ratio to 42 percent, which is 6 percentage points lower than a year ago and the lowest it has been in three years.
"We remain cautious about the second half because of the fragile North American economy resulting from slow job growth, high household debt levels and the potential impact of continued weak stock markets on consumer confidence," LeBoeuf said. "Nevertheless, our focus on generating cash and managing costs will continue to serve us well during this uncertain economic period."
Second quarter 2002 earnings included approximately 11 cents a share of higher pension and retiree medical benefits costs, which were partially offset by the required accounting change eliminating goodwill amortization of 5 cents a share.
The coatings segment generated record operating earnings because of lower costs and increased margins. Sales grew 2 percent from the year-ago quarter with contributions from volume gains, currency translation and modest price increases.
Glass sales were down as lower volumes and prices were only partially offset by manufacturing efficiencies and overhead reductions throughout the segment.
Chemical sales were flat and earnings declined despite significant growth in specialty chemicals, particularly optical products. Falling commodity chemical prices were only partially offset by volume gains and manufacturing efficiencies in all businesses.
Additional Information
Recorded comments by William H. Hernandez, senior vice president and chief financial officer, regarding 2002 second quarter results may be heard by telephone at 412-434-2816 until 5 p.m. ET on Friday, July 26. The commentary is also available online at PPG's Web site (www.ppg.com). Click on "Financial," and then "Financial Commentary." The commentary may include forward-looking statements or other material information. Additional information, including historical performance, is also available at Financial on PPG's Web site.
Forward-Looking Statement
Statements in this news release relating to matters that are not historical facts are forward-looking statements reflecting the company's current view with respect to future events and financial performance. These matters involve risks and uncertainties that affect the company's operations, as discussed in PPG Industries' Annual Report on Form 10-K filed with the Securities and Exchange Commission, and the implementation of the asbestos settlement referenced above, as discussed in PPG's Form 8-K dated May 14, 2002, also filed with the Commission. Accordingly, many factors could cause actual results to differ materially from the company's forward-looking statements.
Among these factors are 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, economic and political conditions in international markets, the ability to penetrate existing, developing and emerging foreign and domestic markets, which also depends on economic and political conditions, foreign exchange rates and fluctuations in those rates, and the unpredictability of possible future litigation, including litigation that could result if the asbestos settlement does not become effective. Further, 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 the company's consolidated financial condition, operations or liquidity.
PPG INDUSTRIES AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENT OF OPERATIONS (unaudited)
(All amounts in millions except per-share data)
3 Months Ended 6 Months Ended
June 30 June 30
2002 2001 2002 2001
---- ---- ---- ----
Net sales $ 2,134 $ 2,164 $4,009 $4,263
Cost of sales 1,325 1,342 2,514 2,666
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GROSS PROFIT 809 822 1,495 1,597
Other expenses (earnings):
Selling & other 427 409 835 827
Depreciation 92 94 183 188
Interest 33 46 66 94
Amortization 9 18 17 36
Asbestos settlement 772 -- 772 --
Business realignments (4) -- 77 101
Other - net (2) (6) (21) (24)
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(LOSS) INCOME BEFORE
INCOME TAXES,
MINORITY INTEREST &
CUMULATIVE EFFECT
OF ACCOUNTING CHANGE (518) 261 (434) 375
Income tax (benefit) expense (186) 94 (153) 142
Minority interest 13 12 21 22
----------------------------------------------------------------------
(LOSS) INCOME BEFORE
CUMULATIVE EFFECT
OF ACCOUNTING CHANGE (345) 155 (302) 211
Cumulative effect of
accounting change, net of tax -- -- 9 --
----------------------------------------------------------------------
NET (LOSS) INCOME $ (345) $ 155 $ (311) $ 211
======================================================================
(Loss) earnings per
common share:
(Loss) income before
cumulative effect of
accounting change $ (2.04) $ 0.92 $(1.79) $ 1.25
Cumulative effect of
accounting change,
net of tax -- -- (0.05) --
----------------------------------------------------------------------
(Loss) earnings per
common share $ (2.04) $ 0.92 $(1.84) $ 1.25
======================================================================
(Loss) earnings per common
share - assuming dilution:
(Loss) income before
cumulative effect of
accounting change $ (2.03) $ 0.92 $(1.78) $ 1.25
Cumulative effect of
accounting change,
net of tax -- -- (0.05) --
----------------------------------------------------------------------
(Loss) earnings per common
share - assuming dilution $ (2.03) $ 0.92 $(1.83) $ 1.25
Average shares outstanding 168.9 168.3 168.8 168.3
======================================================================
Average shares outstanding
- assuming dilution 170.1 169.3 169.7 169.1
======================================================================
Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets."
The adoption of this new standard resulted in a cumulative effect of
an accounting change of $9 million after-tax, or 5 cents a share, in
the first quarter of 2002 to reflect an impairment in the carrying
value of certain trademarks within the coatings segment. Also, in
accordance with the new standard, the carrying value of goodwill and
trademarks will no longer be amortized and will instead be tested for
impairment annually. Such amortization reduced 2001 second quarter
earnings by $8 million after-tax, or 5 cents a share, and $16 million
after-tax, or 10 cents a share for the six months ended June 30, 2001.
CONDENSED BALANCE SHEET (unaudited)
June 30 Dec. 31
2002 2001
---- ----
(millions)
Current assets:
Cash & cash equivalents $ 136 $ 108
Receivables - net 1,640 1,416
Inventories 962 904
Other 356 275
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Total current assets 3,094 2,703
Investments 294 305
Property less accumulated depreciation 2,674 2,752
Goodwill & identifiable intangible assets 1,549 1,542
Other assets 1,142 1,150
------------------------------------------------------------------
TOTAL $8,753 $8,452
==================================================================
Current liabilities:
Short-term debt & current portion
of long-term debt $ 627 $ 696
Asbestos settlement 206 -
Accounts payable & accrued liabilities 1,411 1,259
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Total current liabilities 2,244 1,955
Long-term debt 1,690 1,699
Asbestos settlement 566 -
Deferred income taxes 349 552
Accumulated provisions 1,045 1,044
Minority interest 134 122
Shareholders' equity 2,725 3,080
------------------------------------------------------------------
TOTAL $8,753 $8,452
==================================================================
BUSINESS SEGMENT INFORMATION (unaudited)
3 Months Ended 6 Months Ended
June 30 June 30
2002 2001 2002 2001
---- ---- ---- ----
Net sales
Coatings $ 1,187 $ 1,165 $2,239 $2,270
Glass 554 608 1,042 1,191
Chemicals 393 391 728 802
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TOTAL $ 2,134 $ 2,164 $4,009 $4,263
======================================================================
Operating (loss) income
Coatings $ 211 $ 175 $ 282 $ 236
Glass 49 99 69 184
Chemicals 22 26 49 49
----------------------------------------------------------------------
TOTAL 282 300 400 469
Interest - net (31) (44) (62) (87)
Asbestos settlement (772) - (772) -
Other unallocated corporate
income (expense) - net 3 5 - (7)
----------------------------------------------------------------------
(LOSS) INCOME BEFORE INCOME TAXES,
MINORITY INTEREST &
CUMULATIVE EFFECT
OF ACCOUNTING CHANGE (1) $ (518) $ 261 $ (434) $ 375
======================================================================
(1) Income before income taxes, minority interest and cumulative
effect of accounting change for the six months ended June 30,
2002, includes a charge for $81 million for restructuring and
other related activities, including severance and other costs of
$66 million and asset write-offs of $15 million. The three
months and six months ended June 30, 2002 also include a
reversal of $4 million of coatings restructuring reserve
originally recorded in 2001. Income before income taxes,
minority interest and cumulative effect of accounting change for
the six months ended June 30, 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:
6 Months Ended
June 30
2002 2001
Coatings $ 77 $ 83
Glass 1 10
Chemicals 1 7
Corporate 2 1
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$ 81 $ 101
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