PPG Delivers Record Fourth Quarter and Full Year Sales; Annual Sales Surpass $10 Billion
PITTSBURGH--Jan. 19, 2006--PPG Industries reported today fourth quarter net income of $113 million, or 68 cents a share, including aftertax charges of $17 million, or 10 cents a share, for the impairment of certain assets in the company's specialty chemicals business; $10 million, or 6 cents a share, for direct costs related to the impact of hurricanes Katrina and Rita; and $3 million, or 2 cents a share, to reflect the net increase in the current value of the company's obligation under its asbestos settlement agreement reported in May 2002. The company estimates aftertax earnings were also reduced by approximately $11 million, or 6 cents a share, due to lower sales volumes resulting from the hurricanes. Sales of $2.51 billion were a record for any fourth quarter.In the fourth quarter 2004, PPG reported net income of $183 million, or $1.06 a share. This included aftertax charges of $6 million, or 3 cents a share, to reflect the net increase in the value of the company's asbestos settlement agreement. Sales were $2.41 billion.
For all of 2005, PPG recorded net income of $596 million, or $3.49 per share, including aftertax charges of $117 million, or 68 cents a share, for legal settlements net of insurance recoveries; $21 million, or 12 cents a share, for direct costs related to the impact of hurricanes Katrina and Rita; $17 million, or 10 cents a share, for the impairment of certain assets in the company's specialty chemicals business; $12 million, or 7 cents a share, for debt refinancing; and $13 million, or 8 cents a share, to reflect the net increase in the value of the company's obligation under its asbestos settlement agreement. The company estimates aftertax earnings were also reduced by approximately $17 million, or 10 cents a share, due to lower sales volumes resulting from the hurricanes. Sales for 2005 were $10.2 billion, a record for any year.
For all of 2004, PPG recorded net income of $683 million, or $3.95 per share. This included aftertax charges of $19 million, or 11 cents a share, to reflect the net increase in the value of the company's asbestos settlement agreement. Sales were $9.51 billion.
"We faced many notable headwinds this quarter and during the entire year, including the economic fallout from the hurricanes, historical peaks in energy costs and demanding conditions in some of the markets we serve," said Charles E. Bunch, PPG's chairman and chief executive officer. "Despite these challenges, we achieved record annual and fourth quarter sales, which were supported by all-time high chlor-alkali pricing. In addition, in the quarter we delivered on our commitment made earlier this year to fully recover our coatings margins to the prior year level.
"As we look ahead to 2006, we see continued profitable growth opportunities, but also see continued pressure due to the high energy and raw material pricing environment. As a result, in addition to the annual cost reductions that we consistently deliver, we are finalizing plans to take severance and restructuring actions to further streamline our operations that would result in first-quarter charges in the range of $50 million to $70 million.
"Our focus on profitable growth, meanwhile, remains unchanged. We anticipate continued organic growth, as evidenced by the performance of many of our businesses in 2005, including optical products, architectural coatings and aerospace products. Furthermore, we want to accelerate that growth through potential acquisitions, leveraging our strong balance sheet and consistent free cash flow. This growth will position us to continue our tradition of rewarding shareholders."
Coatings sales for the quarter increased $59 million, or 4 percent, as a result of improved selling prices across most businesses and higher volumes across all businesses. These increases were slightly offset by the impact of weakening foreign currencies. Operating earnings were up $12 million due to the benefits of the higher selling prices and volumes as well as improved manufacturing efficiencies. These increases were substantially offset by the negative impact of inflation, primarily raw materials costs.
Fourth quarter glass sales increased $24 million, or 5 percent, due to higher volumes across most businesses and higher selling prices, which were partially offset by the impact of weakening foreign currencies. The glass businesses posted an operating loss of $1 million for the quarter, down $29 million due to the impact of inflation, including $28 million in higher energy costs, and lower other income. These decreases were partially offset by improved volumes and selling prices, as well as lower manufacturing and overhead costs.
Chemicals sales for the quarter increased $11 million, or 2 percent, due to higher selling prices for chlor-alkali products of $75 million. These increases were partially offset by lower volumes for chlor-alkali products due primarily to the unfavorable impact of the hurricanes. Operating earnings were down $82 million primarily due to the impact of higher inflation, principally higher energy and ethylene costs of $72 million; $27 million due to the impairment of certain specialty chemical assets; $16 million due to direct facility start-up and equipment repair costs associated with the hurricanes; and higher environmental charges. These decreases were partially offset by the higher selling prices discussed above.
Additional Information
Recorded comments by William H. Hernandez, senior vice president and chief financial officer, regarding fourth quarter 2005 results may be heard by telephone at 412-434-2816 until 5 p.m. ET on Friday, Jan. 27, 2006. 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.
PPG INDUSTRIES AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENT OF OPERATIONS (unaudited)
(All amounts in millions except per-share data)
3 Months Ended 12 Months Ended
Dec. 31 Dec. 31
2005 2004 2005 2004
------ ------- ------- -------
Net sales $2,505 $2,411 $10,201 $9,513
Cost of sales 1,651 1,526 6,473 5,999
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GROSS PROFIT 854 885 3,728 3,514
Other expenses (earnings):
Selling and other 502 523 2,080 2,018
Depreciation 84 89 340 357
Interest 19 20 81 90
Amortization 8 8 32 31
Asbestos settlement - net 6 11 22 32
Other - net (Note A) 48 (31) 226 (77)
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INCOME BEFORE INCOME TAXES AND MINORITY
INTEREST 187 265 947 1,063
Income tax expense 60 72 282 322
Minority interest 14 10 69 58
----------------------------------------------------------------------
NET INCOME (Note B) $113 $183 $596 $683
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Earnings per common share $0.68 $1.07 $3.51 $3.98
======================================================================
Earnings per common share - assuming
dilution $0.68 $1.06 $3.49 $3.95
======================================================================
Average shares outstanding 166.0 172.1 169.6 171.7
======================================================================
Average shares outstanding - assuming
dilution 167.1 173.6 170.9 173.0
======================================================================
Note A:
The three months ended December 31, 2005, includes pretax charges of
$27 million related to impairment of certain assets in our
specialty chemicals business and $16 million for direct costs
related to hurricanes. The twelve months ended December 31, 2005,
includes pretax charges of $193 million for legal settlements net
of insurance, $34 million for direct costs related to hurricanes,
$27 million related to impairment of certain assets in our
specialty chemicals business and $19 million for debt refinancing
costs.
Note B:
The three months ended December 31, 2005, includes aftertax charges
of $17 million related to impairment of certain assets in our
specialty chemicals business and $10 million for direct costs
related to hurricanes. The twelve months ended December 31, 2005,
includes aftertax charges of $117 million for legal settlements net
of insurance, $21 million for direct costs related to hurricanes,
$17 million related to impairment of certain assets in our
specialty chemicals business and $12 million for debt refinancing
costs.
CONDENSED BALANCE SHEET (unaudited)
Dec. 31 Dec. 31
2005 2004
--------- ---------
(millions)
Current assets:
Cash and cash equivalents $466 $659
Short-term investments - 50
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Total cash, cash equivalents and short-term
investments 466 709
Receivables - net 1,871 1,797
Inventories 1,119 1,076
Other 563 472
----------------------------------------------------------------------
Total current assets 4,019 4,054
Property less accumulated depreciation 2,304 2,471
Investments 311 298
Goodwill and identifiable intangible assets 1,654 1,713
Other assets 393 396
----------------------------------------------------------------------
TOTAL $8,681 $8,932
======================================================================
Current liabilities:
Short-term debt and current portion of long-term
debt $101 $166
Asbestos settlement 472 404
Accounts payable and accrued liabilities 1,776 1,651
----------------------------------------------------------------------
Total current liabilities 2,349 2,221
Long-term debt 1,169 1,184
Asbestos settlement 385 440
Deferred income taxes 90 145
Accumulated provisions 1,527 1,274
Minority interest 108 96
Shareholders' equity 3,053 3,572
----------------------------------------------------------------------
TOTAL $8,681 $8,932
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BUSINESS SEGMENT INFORMATION (unaudited)
3 Months Ended 12 Months Ended
Dec. 31 Dec. 31
2005 2004 2005 2004
------ ------- ------- -------
(millions)
Net sales
Coatings $1,388 $1,329 $5,566 $5,275
Glass 548 524 2,237 2,204
Chemicals 569 558 2,398 2,034
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TOTAL $2,505 $2,411 $10,201 $9,513
======================================================================
Operating income (loss)
Coatings (Note A) $180 $168 $609 $777
Glass (Note B) (1) 28 56 169
Chemicals (Note C) 23 105 451 291
----------------------------------------------------------------------
TOTAL 202 301 1,116 1,237
Interest expense - net (16) (16) (68) (78)
Asbestos settlement - net (6) (11) (22) (32)
Compensation cost associated with stock
options (6) (5) (28) (20)
Other unallocated corporate income
(expense) - net (Note D) 13 (4) (51) (44)
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INCOME BEFORE INCOME TAXES AND MINORITY
INTEREST $187 $265 $947 $1,063
======================================================================
Note A:
The twelve months ended December 31, 2005, includes pretax charges
of $132 million for legal settlements net of insurance.
Note B:
The twelve months ended December 31, 2005, includes pretax charges
of $61 million for legal settlements.
Note C:
The three months ended December 31, 2005, includes pretax charges of
$16 million for direct costs related to hurricanes and $27 million
related to impairment of certain assets in our specialty chemicals
business. The twelve months ended December 31, 2005, includes
pretax charges of $34 million related to hurricanes and $27 million
related to impairment of certain assets in our specialty chemicals
business.
Note D:
The twelve months ended December 31, 2005, includes pretax charges
of $19 million for debt refinancing costs.