PPG Reports On Third Quarter
PITTSBURGH--Oct. 17, 2002--PPG Industries reported today third quarter net income of $148 million, or 87 cents a share, including aftertax income of $15 million, or 9 cents a share, to reflect the decline in value of PPG stock included in a previously reported asbestos settlement agreement. Excluding this income, net income was $133 million, or 78 cents a share. Sales were $2.07 billion. This compares with third-quarter 2001 net income of $93 million, or 55 cents a share, on sales of $2 billion.For the first nine months of 2002, PPG recorded a net loss of $163 million, or 96 cents a share, including one-time, aftertax charges of:
| -- | $480 million, or $2.83 a share, for the asbestos settlement; |
| -- | $52 million, or 31 cents a share, for restructuring; and |
| -- | $9 million, or 5 cents a share, for the cumulative effect of a required accounting change. |
"Although we are seeing some improvements, the global economy remains uncertain," said Raymond W. LeBoeuf, chairman and chief executive officer. "However, the strategic steps we have taken in recent years to improve our business mix have enabled us to increase earnings and the consistency of those earnings. In addition, our relentless focus on cost reductions and cash generation has enabled us to reduce our debt, and for the 31st consecutive year, increase dividends, which we announced last quarter.
"Amid the present economic uncertainty, which may continue into next year," LeBoeuf added, "I believe our actions over the past few years will enable PPG to continue its 30-year trend of generating higher and higher earnings per share with each business cycle."
Consistent with previous disclosures, third quarter 2002 earnings included approximately 11 cents a share of higher pension and retiree medical costs, which were partially offset by the required accounting change eliminating goodwill amortization of 5 cents a share.
Coatings sales increased 6 percent as volumes increased for every business except aerospace. The coatings segment generated record third-quarter earnings, up 45 percent from a year ago, on the strength of volume gains, lower raw material costs and the benefit of goodwill no longer being amortized. This was offset in part by higher pension and retiree medical costs and higher selling costs for the architectural business.
Glass sales and earnings were down on lower volumes and prices and higher pension and retiree medical costs, despite higher volumes in automotive OEM, overhead reductions in every business and greater manufacturing efficiencies.
Chemical sales increased on stronger volumes in all businesses, especially optical products. Earnings for the third quarter of 2002 benefited from stronger volumes, improved manufacturing efficiencies, lower energy costs and lower environmental remediation expenses. This was offset in part by lower selling prices in commodity chemicals, higher selling costs from the optical business and higher pension and retiree medical costs.
Additional Information
Recorded comments by William H. Hernandez, senior vice president and chief financial officer, regarding third quarter 2002 results may be heard by telephone at 412-434-2816 between about 7:30 a.m. ET on Thursday, Oct. 17, and 5 p.m. ET on Friday, Oct. 25. The commentary will also be available online at Financial, Financial Commentary, on PPG's Web site (www.ppg.com). 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 9 Months Ended
September 30 September 30
2002 2001 2002 2001
---- ---- ---- ----
Net sales $ 2,068 $ 1,999 $ 6,077 $ 6,262
Cost of sales 1,291 1,261 3,805 3,927
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GROSS PROFIT 777 738 2,272 2,335
Other expenses (earnings):
Selling & other 420 414 1,255 1,241
Depreciation 92 93 275 281
Interest 33 43 99 137
Amortization 7 18 24 54
Asbestos settlement (24) -- 748 --
Business realignments -- 2 77 103
Other - net 1 15 (20) (9)
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INCOME (LOSS) BEFORE
INCOME TAXES, MINORITY
INTEREST & CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 248 153 (186) 528
Income tax expense (benefit) 89 55 (64) 197
Minority interest 11 5 32 27
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INCOME (LOSS) BEFORE
CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 148 93 (154) 304
Cumulative effect of accounting
change, net of tax -- -- 9 --
----------------------------------------------------------------------
NET INCOME (LOSS) $ 148 $ 93 $ (163) $ 304
======================================================================
Earnings (loss) per
common share:
Income (loss) before
cumulative effect
of accounting change $ 0.87 $ 0.56 $ (0.92) $ 1.81
Cumulative effect of
accounting change,
net of tax -- -- (0.05) --
----------------------------------------------------------------------
Earnings (loss) per common share $ 0.87 $ 0.56 $ (0.97) $ 1.81
======================================================================
Earnings (loss) per
common share -
assuming dilution:
Income (loss) before
cumulative effect
of accounting change $ 0.87 $ 0.55 $ (0.91) $ 1.80
Cumulative effect of
accounting change,
net of tax -- -- (0.05) --
----------------------------------------------------------------------
Earnings (loss) per
common share -
assuming dilution $ 0.87 $ 0.55 $ (0.96) $ 1.80
======================================================================
Average shares outstanding 169.3 168.3 168.9 168.3
======================================================================
Average shares outstanding
- assuming dilution 170.4 169.3 169.9 169.2
======================================================================
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 third quarter
earnings by $8 million after-tax, or 5 cents a share, and $24 million
after-tax, or 15 cents a share for the nine months ended September 30,
2001.
CONDENSED BALANCE SHEET (unaudited)
Sept. 30 Dec. 31
2002 2001
------ ------
(millions)
Current assets:
Cash & cash equivalents $ 163 $ 108
Receivables - net 1,559 1,416
Inventories 957 904
Other 371 275
---------------------------------------------------------
Total current assets 3,050 2,703
Investments 252 305
Property less accumulated depreciation 2,606 2,752
Goodwill & identifiable intangible assets 1,532 1,542
Other assets 1,142 1,150
---------------------------------------------------------
TOTAL $8,582 $8,452
=========================================================
Current liabilities:
Short-term debt & current
portion of long-term debt $ 494 $ 696
Asbestos settlement 182 --
Accounts payable & accrued liabilities 1,392 1,259
---------------------------------------------------------
Total current liabilities 2,068 1,955
Long-term debt 1,707 1,699
Asbestos settlement 566 --
Deferred income taxes 346 552
Accumulated provisions 988 1,044
Minority interest 134 122
Shareholders' equity 2,773 3,080
---------------------------------------------------------
TOTAL $8,582 $8,452
=========================================================
BUSINESS SEGMENT INFORMATION (unaudited)
3 Months Ended 9 Months Ended
September 30 September 30
2002 2001 2002 2001
------- ------- ------- -------
Net sales
Coatings $ 1,136 $ 1,068 $ 3,375 $ 3,338
Glass 536 554 1,578 1,745
Chemicals 396 377 1,124 1,179
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TOTAL $ 2,068 $ 1,999 $ 6,077 $ 6,262
====================================================================
Operating income (loss)
Coatings $ 178 $ 123 $ 460 $ 359
Glass 45 49 114 233
Chemicals 41 25 90 74
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TOTAL 264 197 664 666
Interest - net (31) (37) (93) (124)
Asbestos settlement 24 -- (748) --
Other unallocated
corporate expense - net (9) (7) (9) (14)
--------------------------------------------------------------------
INCOME (LOSS) BEFORE
INCOME TAXES, MINORITY
INTEREST & CUMULATIVE EFFECT
OF ACCOUNTING CHANGE (1) $ 248 $ 153 $ (186) $ 528
====================================================================
(1) Income before income taxes, minority interest and cumulative
effect of accounting change for the nine months ended September
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 nine months
ended September 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 nine months ended September 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:
9 Months Ended
September 30
2002 2001
---- ----
Coatings $ 77 $ 83
Glass 1 10
Chemicals 1 7
Corporate 2 1
------- -------
$ 81 $ 101
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