PPG Reports On 3rd Quarter
19 October 2000
PPG Reports On 3rd Quarter
PITTSBURGH--Oct. 19, 2000--PPG Industries' third-quarter net income was $150 million, or 86 cents a share, including previously announced one-time after-tax charges of $3 million, or two cents a share, to rationalize the recently formed PPG Auto Glass automotive replacement glass distribution venture. Excluding the charges, net income was $153 million, or 88 cents a share. Sales were $2.08 billion, a record for a third quarter.This compares with third quarter 1999 net income of $99 million, or 56 cents a share, including after-tax charges of $57 million, or 33 cents a share, for acquisitions and restructuring. Excluding these charges, net income was $156 million, or 89 cents a share. Sales were $1.95 billion.
"Acquisitions and some pricing improvement were largely responsible for the six percent sales increase from 1999's third quarter," said Raymond W. LeBoeuf, chairman and chief executive.
"As we reported last month, softening demand has slowed volume growth," he said. "Volume growth increased sales revenues a little more than one percent in the third quarter, compared with nearly five percent for the first half. We saw the effect primarily in several industrial markets for coatings, new-car assembly and monomers for vinyl construction materials. Currency translation reduced sales revenues about two percent, offsetting price increases.
"Because this challenging business environment is unlikely to turn around near-term, and is aggravated by this year's extraordinarily high natural gas prices, growth in sales volume will probably remain low," LeBoeuf said. "It underscores the importance of raising performance of recent acquisitions and emphasizing ongoing productivity gains and business portfolio evaluation. We also must continue to control capital and costs, and maintain our leadership in innovative technologies and products that increase competitiveness of customers."
He added that PPG continues to generate strong cash flow. "We will, of course, evaluate opportunities for internal growth and acquisitions," LeBoeuf said, "but in today's environment the most appropriate use of excess cash is share repurchases."
PPG's nine-month net income was $494 million, or $2.82 a share, including the third-quarter charges and a first quarter charge of $35 million for the write-off of an equity investment. Excluding these charges, equaling 22 cents a share, net income was $532 million, or $3.04 a share. Sales were $6.38 billion.
This compares with nine-month 1999 net income of $406 million, or $2.31 a share, including charges of $77 million, or 44 cents a share for acquisitions and restructuring. Excluding the charges, net income was $483 million, or $2.75 a share. Sales were $5.70 billion.
Third-quarter 2000 sales in PPG's coatings segment were a record for the period, up five percent from the 1999 quarter. Operating earnings, also a record excluding one-time charges, increased 15 percent. The largest volume gains were in automotive original and industrial coatings.
PPG's glass segment posted an eight percent sales increase. Sales and operating earnings growth was led by automotive replacement glass and fiber glass products.
Chemicals segment sales increased seven percent from a year ago, largely on substantially stronger chlor-alkali pricing. Operating earnings declined slightly as natural gas costs more than offset improved prices.
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
2000 1999 2000 1999
---- ---- ---- ----
Net sales $2,078 $1,954 $6,375 $5,704
Cost of sales:
Recurring 1,271 1,187 3,852 3,455
Non-recurring - 19 - 19
------ ------ ------ ------
Total cost of sales 1,271 1,206 3,852 3,474
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GROSS PROFIT 807 748 2,523 2,230
Other expenses:
Selling & other 401 387 1,211 1,114
Depreciation 94 92 281 270
Interest 43 35 130 90
Amortization 18 15 55 32
Purchased in-process
research and
development - 40 - 40
Business divestitures
and realignments 6 19 6 43
Other earnings - net (4) (24) (8) (55)
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INCOME BEFORE INCOME TAXES
& MINORITY INTEREST 249 184 848 696
Income taxes 92 77 333 272
Minority interest 7 8 21 18
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NET INCOME $ 150 $ 99 $ 494 $ 406
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Earnings per common
share $ 0.87 $ 0.57 $ 2.85 $ 2.34
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Earnings per common
share - assuming
dilution $ 0.86 $ 0.56 $ 2.82 $ 2.31
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Avg. shares outstanding 172.8 173.7 173.5 173.8
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Avg. shares outstanding
- assuming dilution 174.2 175.4 174.9 175.5
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CONDENSED BALANCE SHEET (unaudited)
Sept. 30 Dec. 31
2000 1999
---- ----
(millions)
Current assets:
Cash & cash equivalents $ 135 $ 158
Receivables - net 1,652 1,594
Inventories 1,070 1,016
Other 286 294
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Total current assets 3,143 3,062
Investments 232 261
Property less accumulated depreciation 2,900 2,933
Goodwill and identifiable intangible
assets less accumulated amortization 1,638 1,662
Other assets 1,116 996
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TOTAL $9,029 $8,914
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Current liabilities:
Short-term debt & current portion of
long-term debt $1,024 $ 954
Accounts payable & accrued liabilities 1,436 1,430
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Total current liabilities 2,460 2,384
Long-term debt 1,820 1,836
Deferred income taxes 480 520
Accumulated provisions 996 970
Minority interest 134 98
Shareholders' equity 3,139 3,106
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TOTAL $9,029 $8,914
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BUSINESS SEGMENT INFORMATION (unaudited)
3 Months Ended 9 Months Ended
September 30 September 30
2000 1999 2000 1999
---- ---- ---- ----
(millions)
Net sales
Coatings $1,111 $1,055 $3,482 $3,027
Glass 582 538 1,709 1,624
Chemicals 385 361 1,184 1,053
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TOTAL $2,078 $1,954 $6,375 $5,704
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Operating income
Coatings(1) $ 164 $ 69 $ 536 $ 362
Glass (2) 94 85 304 285
Chemicals (3) 37 43 161 121
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TOTAL 295 197 1,001 768
Interest - net (41) (33) (122) (85)
Other unallocated
corporate income
(expense) - net (4) (5) 20 (31) 13
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INCOME BEFORE INCOME
TAXES & MINORITY
INTEREST $ 249 $ 184 $ 848 $ 696
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As previously announced, the aircraft transparency business of the glass segment was combined with the aerospace coatings and sealants business as part of the coatings segment. Net sales and operating income have been restated to reflect this change.
(1) Includes for the nine months ended Sept. 30, 2000, pretax charges of $2 million, representing the fair-market-value adjustment of acquired inventories that have been sold and $1 million related to cost reduction initiatives associated with the integration of the Imperial Chemical Industries PLC (ICI) businesses acquired in 1999.
Includes in each 1999 period, pretax charges of $40 million for purchased in-process research and development, $19 million representing the fair-market-value adjustment of acquired inventories that have been sold, and $15 million of restructuring costs, including the closure of a facility. The nine months ended Sept. 30, 1999 also includes a pre-tax restructuring charge of $24 million for disposal of a redundant European packaging coatings facility and work force reductions.
Each 1999 period also includes a pre-tax charge of $6 million related to the bankruptcy of a home-center chain.
(2) Includes for each 2000 period, pretax charges of $7 million for restructuring and one-time integration costs related to the recently formed PPG Auto Glass L.L.C. Also included is pretax income of $1 million arising from the reversal of a restructuring accrual.
The nine months ended Sept. 30, 2000, also includes an additional $1 million reversal of previously established restructuring reserves.
Includes in each 1999 period, a pre-tax restructuring charge of $3 million related to cost reduction initiatives.
(3) Includes in each 1999 period, a pre-tax restructuring charge of $1 million related to cost reduction initiatives.
(4) Includes for the nine months ended Sept. 30, 2000, a pretax charge of $39 million representing the write-off of an equity investment in Pittsburgh Corning Corp., which has filed for reorganization under the federal bankruptcy code. Also included is a $9 million pretax gain from the sale of corporate assets and net insurance recoveries of $4 million.