PPG Posts Record Sales for Any Quarter; Net Income up 24 Percent in Second Quarter
PITTSBURGH--July 21, 2005--PPG Industries reported today second quarter net income of $231 million, or $1.34 a share, including aftertax charges of $12 million, or 7 cents a share, for a previously announced debt refinancing, and $2 million, or 1 cent a share, to reflect the net increase in the current value of the company's obligation under its asbestos settlement agreement reported in May 20, 200502. Sales were $2.66 billion, a record for any quarter.That compares with second quarter 2004 net income of $187 million, or $1.08 a share, which includes an aftertax charge of $6 million, or 3 cents a share, to reflect the net increase in the value of the company's obligation under the asbestos settlement agreement. Sales for the second quarter of 2004 were $2.43 billion.
For the first six months of 2005, PPG recorded net income of $326 million, or $1.89 a share, which includes aftertax charges of $91 million, or 52 cents a share, for a nonrecurring legal settlement; $12 million, or 7 cents a share, for debt refinancing; and $7 million, or 4 cents a share, to reflect the increase in the value of the company's obligation under the asbestos settlement agreement. Sales for the first half of 2005 were $5.15 billion.
For the first six months of 2004, PPG recorded net income of $306 million, or $1.77 a share, which includes an aftertax charge of $9 million, or 5 cents a share, to reflect the increase in the value of the company's obligation under the asbestos settlement agreement. Sales for the first half of 2004 were $4.69 billion.
"We not only generated record sales for any quarter, we also enjoyed one of our best quarterly earnings performances ever," said Charles E. Bunch, chairman and chief executive officer. "In addition, we made progress in restoring our coatings margins and expect this improvement to accelerate the remainder of the year.
"While the global economy shows signs of moderating, we see continued strength in our coatings and chemicals segments, which achieved record sales each of the past two quarters. This measurable proof validates our earnings growth strategies and positions PPG to continue generating shareholder returns."
Coatings sales increased $96 million, or 7 percent, as a result of improved selling prices across all businesses except automotive, the impact of foreign currencies and higher volumes in architectural, aerospace and automotive. Operating earnings were down $14 million largely because of the impact of inflation, primarily raw materials, which exceeded the benefits of higher selling prices, higher volumes, slightly better costs and the impact of foreign currencies.
Glass sales decreased $3 million, or 1 percent, as lower selling prices and lower volumes across all businesses except automotive replacement glass exceeded the impact of foreign currencies. Despite improved manufacturing efficiencies, operating earnings were down $18 million as a result of inflation, including higher energy costs; lower selling prices; and lower other income.
Chemicals sales increased $134 million, or 27 percent, on higher selling prices for chlor-alkali products, higher volumes in optical and the impact of foreign currencies. Operating earnings were up $102 million primarily due to higher selling prices and improved volumes. These increases exceeded the impact of higher energy and other inflation costs and higher overhead expenses, related primarily to optical advertising.
Additional Information
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
2005 2004 2005 2004
------ ------- ------ -------
Net sales $2,656 $2,429 $5,149 $4,693
Cost of sales 1,650 1,519 3,208 2,957
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GROSS PROFIT 1,006 910 1,941 1,736
Other expenses (earnings):
Selling and other 537 497 1,064 999
Depreciation 85 90 172 180
Interest 20 25 41 48
Amortization 8 8 16 15
Asbestos settlement - net 3 10 12 15
Other - net (Note A) (7) (22) 131 (25)
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INCOME BEFORE INCOME TAXES AND MINORITY
INTEREST 360 302 505 504
Income tax expense 111 99 145 168
Minority interest 18 16 34 30
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NET INCOME (Note A) $231 $187 $326 $306
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Earnings per common share $1.35 $1.09 $1.90 $1.78
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Earnings per common share - assuming
dilution $1.34 $1.08 $1.89 $1.77
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Average shares outstanding 171.1 171.6 171.7 171.4
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Average shares outstanding - assuming
dilution 172.6 172.9 173.2 172.8
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Note A:
The three and six months ended June 30, 2005, includes debt
refinancing costs of $19 million pretax ($12 million aftertax). The
six months ended June 30, 2005 also includes a $150 million pretax
charge ($91 million aftertax) for a nonrecurring legal settlement.
The Medicare Prescription Drug, Improvement and Modernization Act of
2003 was enacted in December 2003. During the third quarter of 2004,
PPG concluded its evaluation of the provisions of this act and decided
to maintain the Company's retiree medical benefits program and take
the subsidy available under the Medicare Act. The benefit of this
decision was applied retroactively to January 1, 2004. As a result,
the three and six months ended June 30, 2004 have been increased by $4
million and $0.02 per share, and $8 million and $0.04 per share,
respectively, from the amounts previously reported.
CONDENSED BALANCE SHEET (unaudited)
June 30 Dec. 31
2005 2004
-------- -------
(millions)
Current assets:
Cash and cash equivalents $470 $659
Short-term investments - 50
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Total cash, cash equivalents and short-term
investments 470 709
Receivables - net 1,987 1,797
Inventories 1,105 1,076
Other 495 472
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Total current assets 4,057 4,054
Property less accumulated depreciation 2,356 2,471
Investments 322 298
Goodwill and identifiable intangible assets 1,654 1,713
Other assets 401 396
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TOTAL $8,790 $8,932
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Current liabilities:
Short-term debt and current portion of long-term
debt $164 $166
Asbestos settlement 479 404
Accounts payable and accrued liabilities 1,590 1,651
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Total current liabilities 2,233 2,221
Long-term debt 1,188 1,184
Asbestos settlement 372 440
Deferred income taxes 131 145
Accumulated provisions 1,332 1,274
Minority interest 121 96
Shareholders' equity 3,413 3,572
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TOTAL $8,790 $8,932
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BUSINESS SEGMENT INFORMATION (unaudited)
3 Months Ended 6 Months Ended
June 30 June 30
2005 2004 2005 2004
------ ------- ------ -------
(millions)
Net sales
Coatings $1,450 $1,354 $2,782 $2,628
Glass 581 584 1,135 1,121
Chemicals 625 491 1,232 944
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TOTAL $2,656 $2,429 $5,149 $4,693
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Operating income
Coatings (Note A) $210 $224 $219 $410
Glass 52 70 93 95
Chemicals 152 50 307 91
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TOTAL 414 344 619 596
Interest expense - net (17) (22) (34) (43)
Asbestos settlement - net (3) (10) (12) (15)
Compensation cost associated with stock
options (8) (4) (15) (11)
Other unallocated corporate expense - net
(Note B) (26) (6) (53) (23)
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INCOME BEFORE INCOME TAXES AND MINORITY
INTEREST $360 $302 $505 $504
======================================================================
Note A:
The six months ended June 30, 2005, includes a $150 million pretax
charge for a nonrecurring legal settlement.
Note B:
The three and six months ended June 30, 2005, includes debt
refinancing costs of $19 million pretax.
The Medicare Prescription Drug, Improvement and Modernization Act of
2003 was enacted in December 2003. During the third quarter of 2004,
PPG concluded its evaluation of the provisions of this act and decided
to maintain the Company's retiree medical benefits program and take
the subsidy available under the Medicare Act. The benefit of this
decision was applied retroactively to January 1, 2004. As a result,
operating income for coatings, glass and chemicals for the three and
six months ended June 30, 2004, has been increased by $1 million, $2
million and $1 million, and $2 million, $4 million and $2 million,
respectively, from the amounts previously reported.