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TheStreet Open House

PPG Reports Record Third Quarter Earnings Per Share

Stocks in this article: PPG

The following is a reconciliation of reported and adjusted net income and earnings per diluted share for the third quarter 2012:

Regulation G Reconciliation – Results from Operations($ in millions, except per-share amounts)

Third Quarter 2012            

$

 

      EPS  
Reported net income   $ 339       $ 2.18
Business separation/merge costs     9         0.06  
Adjusted net income   $ 348       $ 2.24  

Bringing innovation to the surface is a trademark of PPG Industries Ohio, Inc. Transitions is a registered trademark of Transitions Optical, Inc.

   
PPG INDUSTRIES AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENT OF OPERATIONS (unaudited)
(All amounts in millions except per-share data)
    3 Months Ended 9 Months Ended
Sept. 30 Sept. 30

2012

 

2011

2012

2011

 
Net sales $ 3,845 $ 3,849 $ 11,552 $ 11,368
Cost of sales, exclusive of depreciation and amortization (Note A) 2,288 2,353 6,869 6,897
Selling, R&D and administrative expenses (Note A) 929 914 2,825 2,753
Depreciation 89 86 265 260
Amortization 27 30 83 92
Interest expense 54 51 155 159
Interest income (10 ) (11 ) (29 ) (32 )
Asbestos settlement - net 3 3 9 9
Business restructuring - - 208 -
Other (earnings)/charges - net (Note B)     (21 )     (39 )     103       (83 )
INCOME BEFORE INCOME TAXES 486 462 1,064 1,313
Income tax expense (Note C)     122       120       253       340  
Net income attributable to the controlling and noncontrolling interests 364 342 811 973
  Less: Net income attributable to noncontrolling interests     (25 )     (31 )     (97 )     (94 )
NET INCOME (ATTRIBUTABLE TO PPG)     339       311       714       879  
                   
Earnings per common share (attributable to PPG)   $ 2.21     $ 1.98     $ 4.66     $ 5.55  
                   
Earnings per common share (attributable to PPG) - assuming dilution   $ 2.18     $ 1.96     $ 4.61     $ 5.48  
 
Average shares outstanding     153.7       156.8       153.2       158.5  
 
Average shares outstanding - assuming dilution     155.5       158.6       154.8       160.5  
Note A:
  Includes charges during the nine months ended September 30, 2011, associated with an Architectural Coatings - EMEA (Europe, Middle East and Africa) customer bankruptcy. The charges totaled approximately $9 million.
 
Note B:
The nine months ended September 30, 2012 includes a pretax charge of $159 million. The charge primarily relates to continued environmental remediation activities at PPG’s former Jersey City, N.J., manufacturing plant and associated sites.
 
The nine months ended September 30, 2011 includes a $9 million net benefit stemming primarily from a bargain purchase gain, reflecting the excess of the fair value of the net assets acquired from Equa-Chlor over the price paid.
 
Note C:
The calculated tax rate of approximately 24 percent on pretax earnings for the nine months ended September 30, 2012 includes tax benefits of about $60 million or 38 percent for estimated environmental remediation costs primarily at sites in New Jersey, approximately $45 million or about 21 percent for business restructuring charges, and $2 million or approximately 29 percent for acquisition-related expenses stemming from the integration of Dyrup A/S in Europe and Colpisa in Latin America and $1 million or approximately 8 percent for certain business separation and merger costs. The effective tax rate on the remaining pretax earnings was approximately 25 percent.
 
The calculated tax rate for the nine months ended September 30, 2011 of 25.9 percent includes the benefit from the nontaxable bargain purchase gain of approximately $9 million resulting from an acquisition. The effective rate on the remaining 2011 pretax earnings was 26 percent.
 
BALANCE SHEET HIGHLIGHTS (unaudited)
 
Sept. 30 Sept. 30 Dec. 31

2012

2011

2011

($ in millions)
Current assets:
Cash and cash equivalents $ 1,392 $ 1,301 $ 1,457
Short-term investments (a) 619 37 25
Receivables - net 3,190 3,088 2,830
Inventories 1,777 1,737 1,607
Other   799     777     775  
Total current assets $ 7,777   $ 6,940   $ 6,694  
 

(a) 

The increase in short-term investments is driven by PPG's $400 million debt issuance in July 2012.

 
Current liabilities:
Short-term debt and current portion of long-term debt $ 636 $ 102 $ 108
Asbestos settlement 654 575 593
Accounts payable and accrued liabilities   3,200     3,111     3,001  
Total current liabilities $ 4,490   $ 3,788   $ 3,702  
     
Long-term debt $ 3,365   $ 3,590   $ 3,574  
 
 
PPG OPERATING METRICS (unaudited)
 
Sept. 30 Sept. 30 Dec. 31

2012

2011

2011

($ in millions)
Operating Working Capital (b)
Amount $ 3,247 $ 3,094 $ 2,739
As a percent of quarter sales, annualized 21.1 % 20.1 % 19.5 %

(b) 

Operating working capital includes (1) receivables from customers, net of the allowance for doubtful accounts, plus (2) inventories on a first-in, first-out (FIFO) basis, less (3) the trade creditor's liability.
 
BUSINESS SEGMENT INFORMATION (unaudited)        
 
3 Months Ended 9 Months Ended
Sept. 30 Sept. 30

2012

2011

2012

2011

(millions) (millions)
 
Net sales
Performance Coatings $ 1,210 $ 1,208 $ 3,601 $ 3,490
Industrial Coatings 1,090 1,039 3,265 3,139
Architectural Coatings - EMEA 564 573 1,682 1,655
Optical and Specialty Materials 282 311 930 945
Commodity Chemicals 437 445 1,283 1,334
Glass   262       273       791       805  
  TOTAL   $ 3,845     $ 3,849     $ 11,552     $ 11,368  
 
Segment income
Performance Coatings $ 203 $ 190 $ 567 $ 533
Industrial Coatings 153 101 446 332
Architectural Coatings - EMEA 56 53 136 115
Optical and Specialty Materials 76 93 280 273
Commodity Chemicals 94 104 300 307
Glass   24       23       55       78  
TOTAL 606 564 1,784 1,638
Legacy items (Note A) (14 ) (15 ) (204 ) (52 )
Business restructuring (Note B) - - (208 ) -
Acquisition-related (costs) gain, net (Note C) - - (6 ) 9
Business separation and merger costs (Note D) (9 ) - (13 ) -
Interest expense, net of interest income (44 ) (40 ) (126 ) (127 )
Other unallocated corporate expense   (53 )     (47 )     (163 )     (155 )
INCOME BEFORE INCOME TAXES   $ 486     $ 462     $ 1,064     $ 1,313  
Note A:
  Legacy items include current costs related to former operations of the company, including pension and other postretirement benefit costs, certain charges for legal matters and environmental remediation costs, and certain charges that are considered to be unusual or nonrecurring including the earnings impact of the proposed asbestos settlement. Legacy items also include equity earnings from PPG's approximately 40 percent investment in the former automotive glass and services business. The nine months ended September 30, 2012 includes a pretax charge of $159 million. The charge primarily relates to continued environmental remediation activities at PPG’s former Jersey City, N.J., manufacturing plant and associated sites.
 
Note B:
The nine months ended September 30, 2012, includes business restructuring charges of $65 million for the Performance Coatings segment, $46 million for the Industrial Coatings segment, $63 million for the Architectural Coatings - EMEA segment, $32 million for the Optical and Specialty Materials segment, $1 million for the Commodity Chemicals segment and $1 million for Corporate. These costs are considered to be unusual and nonrecurring and will not reduce the segment earnings used to evaluate the performance of the operating segments.
 
Note C:
The nine months ended September 30, 2012 includes the $6 million flow-through cost of sales of the step up to fair value of inventory acquired from Dyrup A/S and Colpisa. These costs are considered to be unusual and nonrecurring and will not reduce the segment earnings used to evaluate the performance of the operating segments.
 
The nine months ended September 30, 2011 includes a net benefit stemming primarily from a bargain purchase gain, reflecting the excess of the fair value of the net assets acquired from Equa-Chlor over the price paid.
 
Note D:
The three and nine months ended September 30, 2012 include $9 million and $13 million of certain business separation and merger costs, respectively. These costs are considered to be unusual and nonrecurring.




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