PPG Reports on Fourth Quarter
PITTSBURGH--Jan. 16, 2003--PPG Industries reported today fourth quarter net income of $94 million, or 55 cents a share, including an aftertax charge of $4 million, or 2 cents a share, to reflect the increase in value of PPG stock included in a previously reported asbestos settlement agreement. Excluding this charge, net income was $98 million, or 57 cents a share. Sales were $1.99 billion.This compares with fourth quarter 2001 net income of $83 million, or 49 cents a share, on sales of $1.91 billion.
For all of 2002, PPG recorded a net loss of $69 million, or 41 cents a share, including one-time aftertax charges of:
| -- | $484 million, or $2.85 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. |
Excluding these items, net income was $476 million, or $2.80 a share. Sales were $8.1 billion.
Net income for 2001 was $387 million, or $2.29 a share, including a $71 million aftertax restructuring charge. Excluding the charge, equaling 42 cents a share, income was $458 million, or $2.71 a share. Sales were $8.2 billion.
"We expect the global economic environment to be challenging once again in 2003," said Raymond W. LeBoeuf, PPG chairman and chief executive officer. "Nevertheless, we remain committed to further improvements in our cost structure and cash flow. Last year we lowered manufacturing and overhead costs by about $140 million, reduced debt by more than $400 million and increased our dividend payments for the 31st consecutive year. We expect another year of strong cash flow in 2003, which will allow us to reduce debt and increase our financial flexibility."
Consistent with previous disclosures, fourth 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.
Fourth quarter 2002 sales increased $35 million, or 3 percent, in the coatings segment due to stronger volumes in architectural and industrial coatings and the strengthening of foreign currencies. Operating earnings were up 7 percent as a result of higher prices, 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 increased slightly and earnings rose $7 million from overhead reductions and greater manufacturing efficiencies, despite lower prices and higher pension and retiree medical costs.
Chemicals sales increased 13 percent on stronger volumes in all businesses and higher prices for commodity products. Operating earnings for the fourth quarter were up $17 million largely because of stronger volumes, higher prices and improved manufacturing efficiencies. These were offset in part by higher energy costs, higher selling costs from the optical business and higher pension and retiree medical costs.
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Additional Information
Recorded comments by William H. Hernandez, senior vice president and chief financial officer, regarding fourth quarter 2002 results may be heard by telephone at 412-434-2816 between about 10 a.m. ET on Thursday, Jan. 16, and 5 p.m. ET on Friday, Jan. 24. 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' reports filed with the Securities and Exchange Commission, and the implementation of the asbestos settlement referenced above, also discussed in PPG's reports 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 12 Months Ended
December 31 December 31
2002 2001 2002 2001
------- ------- ------- -------
Net sales $ 1,990 $ 1,907 $ 8,067 $ 8,169
Cost of sales 1,261 1,210 5,066 5,137
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GROSS PROFIT 729 697 3,001 3,032
Other expenses (earnings):
Selling & other 437 420 1,692 1,661
Depreciation 91 94 366 375
Interest 29 32 128 169
Amortization 8 18 32 72
Asbestos settlement, net 7 -- 755 --
Business realignments -- -- 77 103
Other - net (1) (5) (21) (14)
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INCOME (LOSS) BEFORE
INCOME TAXES,
MINORITY INTEREST
& CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 158 138 (28) 666
Income tax expense (benefit) 57 50 (7) 247
Minority interest 7 5 39 32
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INCOME (LOSS) BEFORE
CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 94 83 (60) 387
Cumulative effect of
accounting change,
net of tax -- -- (9) --
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NET INCOME (LOSS) $ 94 $ 83 $ (69) $ 387
=====================================================================
Earnings (loss) per common share:
Income (loss) before
cumulative effect of
accounting change $ 0.56 $ 0.49 $ (0.36) $ 2.30
Cumulative effect of
accounting change,
net of tax -- -- (0.05) --
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Earnings (loss) per
common share $ 0.56 $ 0.49 $ (0.41) $ 2.30
=====================================================================
Earnings (loss) per common share
- assuming dilution:
Income (loss) before
cumulative effect of
accounting change $ 0.55 $ 0.49 $ (0.36) $ 2.29
Cumulative effect of
accounting change,
net of tax -- -- (0.05) --
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Earnings (loss) per
common share
- assuming dilution $ 0.55 $ 0.49 $ (0.41) $ 2.29
=====================================================================
Average shares outstanding 169.4 168.4 169.1 168.3
=====================================================================
Average shares outstanding
- assuming dilution 170.1 169.1 169.9 169.2
=====================================================================
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 aftertax, 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 fourth quarter
earnings by $8 million aftertax, or 5 cents a share, and $32 million
after-tax, or 20 cents a share, for the twelve months ended December
31, 2001.
CONDENSED BALANCE SHEET (unaudited)
Dec. 31 Dec. 31
2002 2001
------- ------
(millions)
Current assets:
Cash & cash equivalents $ 117 $ 108
Receivables - net 1,486 1,416
Inventories 942 904
Other 400 275
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Total current assets 2,945 2,703
Investments 262 305
Property less accumulated depreciation 2,632 2,752
Goodwill & identifiable intangible assets 1,561 1,542
Other assets (1) 463 1,150
---------------------------------------------------------------------
TOTAL $ 7,863 $ 8,452
=====================================================================
Current liabilities:
Short-term debt & current
portion of long-term debt $ 352 $ 696
Asbestos settlement 190 -
Accounts payable & accrued liabilities 1,378 1,259
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Total current liabilities 1,920 1,955
Long-term debt 1,699 1,699
Asbestos settlement 566 -
Deferred income taxes (1) 64 552
Accumulated provisions (1) 1,333 1,044
Minority interest 131 122
Shareholders' equity 2,150 3,080
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TOTAL $ 7,863 $ 8,452
=====================================================================
(1) The change in these amounts relates primarily to the minimum
pension liability adjustment recorded in December 2002, the net
effect of which reduced shareholders' equity by $726 million.
Information on the minimum pension liability was included in
Management's Discussion and Analysis in the Company's third
quarter 2002 Form 10-Q.
BUSINESS SEGMENT INFORMATION (unaudited)
3 Months Ended 12 Months Ended
December 31 December 31
2002 2001 2002 2001
------- ------- ------- -------
Net sales
Coatings $ 1,107 $ 1,072 $ 4,482 $ 4,410
Glass 493 491 2,071 2,236
Chemicals 390 344 1,514 1,523
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TOTAL $ 1,990 $ 1,907 $ 8,067 $ 8,169
====================================================================
Operating income (loss)
Coatings $ 145 $ 136 $ 605 $ 495
Glass 29 22 143 255
Chemicals 34 17 124 91
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TOTAL 208 175 872 841
Interest - net (26) (30) (119) (154)
Asbestos settlement (7) -- (755) --
Other unallocated
corporate expense - net (17) (7) (26) (21)
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INCOME (LOSS) BEFORE
INCOME TAXES,
MINORITY INTEREST
& CUMULATIVE EFFECT
OF ACCOUNTING CHANGE (2) $ 158 $ 138 $ (28) $ 666
====================================================================
(2) Income (loss) before income taxes, minority interest and
cumulative effect of accounting change for the twelve months ended
December 31, 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 twelve months ended December 31, 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 twelve
months ended December 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:
12 Months Ended
December 31
2002 2001
------- --------
Coatings $ 77 $ 83
Glass 1 10
Chemicals 1 7
Corporate 2 1
------- --------
$ 81 $ 101
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