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PPG Reports Record Fourth Quarter And Full-Year 2013 Results

Stocks in this article: PPG

The following is a reconciliation of reported and adjusted net income and earnings per diluted share for the fourth quarter and full year:

 
Regulation G Reconciliation – Net Income and Earnings per Diluted Share

($ in millions, except per-share amounts)

         
    Fourth Quarter 2013     Full Year 2013
    $   EPS     $     EPS
Reported net income from continuing operations   $ 254   $ 1.78     $ 1,034   $ 7.13
Acquisition-related costs 4 0.03 28 0.19
Business restructuring costs - - 73 0.50
Legacy environmental reserve increases - - 64 0.44
Legacy pension settlement costs - - 13 0.09
U.S. tax law change enacted in 2013     -     -       (10 )     (0.07 )
Adjusted, excluding nonrecurring items   $ 258   $ 1.81     $ 1,202     $ 8.28  
         
    Fourth Quarter 2012     Full Year 2012
    $   EPS     $     EPS
Reported net income from continuing operations $ 191 $ 1.23 $ 726 $ 4.69
Acquisition-related costs 3 0.02 7 0.05
Business restructuring costs - - 163 1.06
Legacy environmental reserve increases     -     -       99       0.64  
Adjusted, excluding nonrecurring items   $ 194   $ 1.25     $ 995     $ 6.44  
 
 
PPG INDUSTRIES AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENT OF OPERATIONS (unaudited)
(All amounts in millions except per-share data)
    3 Months ended   Year ended
Dec. 31 Dec. 31

2013

 

2012

2013

 

2012

 
Net sales $ 3,702 $ 3,243 $ 15,108 $ 13,512
Cost of sales, exclusive of depreciation and amortization (Note A) 2,108 1,910 8,636 7,905
Selling, R&D and administrative expenses (Note B) 1,083 924 4,187 3,653
Depreciation (Note B) 94 79 356 312
Amortization (Note B) 31 27 119 109
Interest expense 48 55 196 210
Interest income (13 ) (10 ) (43 ) (39 )
Asbestos settlement - net 2 3 11 12
Business restructuring - - 98 208
Other (income)/charges - net (Note C)     (24 )     (21 )     59       85  
INCOME BEFORE INCOME TAXES 373 276 1,489 1,057
Income tax expense (Note D)     91       62       333       221  
Income from continuing operations, net of income taxes 282 214 1,156 836
Income from discontinued operations, net of income taxes (Note E)     -       39       2,197       228  
Net income attributable to the controlling and noncontrolling interests 282 253 3,353 1,064
  Less: Net income attributable to noncontrolling interests     (28 )     (26 )     (122 )     (123 )
NET INCOME (ATTRIBUTABLE TO PPG)   $ 254     $ 227     $ 3,231     $ 941  
                   
Amounts attributable to PPG:                
Income from continuing operations, net of tax $ 254 $ 191 $ 1,034 $ 726
  Income from discontinued operations, net of tax     -       36       2,197       215  
Net income (attributable to PPG)   $ 254     $ 227     $ 3,231     $ 941  
                   
Earnings per common share (attributable to PPG)                
Income from continuing operations, net of tax $ 1.80 $ 1.24 $ 7.21 $ 4.73
  Income from discontinued operations, net of tax     -       0.23       15.32       1.40  
Net income (attributable to PPG)   $ 1.80     $ 1.47     $ 22.53     $ 6.13  
                   
Earnings per common share (attributable to PPG) - assuming dilution                
Income from continuing operations, net of tax $ 1.78 $ 1.23 $ 7.13 $ 4.69
  Income from discontinued operations, net of tax     -       0.23       15.14       1.37  
Net income (attributable to PPG)   $ 1.78     $ 1.46     $ 22.27     $ 6.06  
 
Average shares outstanding     140.8       154.1       143.4       153.4  
 
Average shares outstanding - assuming dilution     142.6       156.1       145.1       155.1  
 
Note A:
  Cost of sales, exclusive of depreciation and amortization for the year ended December 31, 2013 includes $16 million for final settlement of certain legacy Canadian pension plans and $16 million of flow-through cost of sales for the inventory step up to fair value related to 2013 acquisitions. The year ended December 31, 2012 includes $6 million of flow-through cost of sales for the inventory step up to fair value related to 2012 acquisitions.
 
Note B:
Selling, R&D and administrative expenses includes $7 million of acquisition-related charges for the quarter ended December 31, 2013. For the year ended December 31, 2013, the caption includes $2 million for final settlement of certain legacy Canadian pension plans and $26 million for acquisition-related charges. Selling and administrative expenses, depreciation and amortization are higher in 2013 compared to 2012 primarily due to the increased impact from acquisitions.
 
Note C:
The years ended December 31, 2013 and 2012 include pretax charges of $101 million and $159 million, respectively, for environmental remediation activities.
 
Note D:
The effective rate on pretax earnings from continuing operations for the quarter ended December 31, 2013 includes tax benefits of $3 million for acquisition-related costs. The effective tax rate on the remaining pre-tax earnings from continuing operations was 24.6 percent resulting in tax expense of $93 million. The effective rate on pretax earnings from continuing operations for the quarter ended December 31, 2012 includes tax benefits of $2 million for acquisition-related costs. The effective tax rate on the remaining pretax earnings from continuing operations was approximately 23 percent resulting in tax expense of $64 million.
 
The effective rate on pretax earnings from continuing operations for the year ended December 31, 2013 includes tax benefits of $37 million or approximately 37 percent for estimated environmental remediation costs, $25 million or approximately 25 percent for business restructuring charges, $14 million or approximately 33 percent for acquisition related costs, and $5 million or approximately 27 percent for final settlement of legacy pension plans. The year also includes an after-tax benefit of $10 million for the retroactive impact of a U.S. tax law change enacted in early 2013 that was not included in previously reported 2012 earnings. The effective tax rate on the remaining pre-tax earnings from continuing operations was 24.2 percent resulting in tax expense of $424 million.
 
The effective rate on pretax earnings from continuing operations for the year ended December 31, 2012 includes tax benefits of $45 million or approximately 22 percent for business restructuring charges, $60 million or approximately 38 percent for estimated environmental remediation costs, and $4 million or approximately 36 percent for acquisition related costs. The effective tax rate on the remaining pre-tax earnings from continuing operations was approximately 23 percent resulting in tax expense of $330 million.
 
Note E:
Income from discontinued operations includes the historical operating results of PPG's former Commodity Chemicals business that was separated on January 28, 2013. For the year ended December 31, 2013 income from discontinued operations includes a net gain on the separation transaction of $2.2 billion.
 
 
PPG INDUSTRIES AND CONSOLIDATED SUBSIDIARIES
BALANCE SHEET HIGHLIGHTS (unaudited)
(All amounts in millions)
              Dec. 31   Dec. 31

2013

2012 (b)

Current assets:
Cash and cash equivalents (a) $ 1,116 $ 1,306
Short-term investments (a) 629 1,087
Receivables - net 2,736 2,813
Inventories 1,824 1,687
Other   909     822  
Total current assets $ 7,214   $ 7,715  
 
Current liabilities:
Short-term debt and current portion of long-term debt (a) $ 34 $ 642
Asbestos settlement 763 683
Accounts payable and accrued liabilities   3,338     3,136  
Total current liabilities $ 4,135   $ 4,461  
   
Long-term debt $ 3,372   $ 3,368  
 
PPG OPERATING METRICS (unaudited)
(All amounts in millions)
Dec. 31 Dec. 31

2013

2012 (b)

Operating Working Capital (c)
Amount $ 2,678 $ 2,878
As a percent of quarter sales, annualized 18.1 % 19.7 %
 
(a)   The decrease in cash and cash equivalents and short-term investments is primarily a result of the repayment of $600 million of long-term debt in March of 2013.
 
(b)

All 2012 balances include PPG's former Commodity Chemicals business that was separated in January 2013. Excluding the Commodity Chemicals business, operating working capital was $2,634 million or 20.3 percent at December 31, 2012.

 
(c) 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.
 
 
PPG INDUSTRIES AND CONSOLIDATED SUBSIDIARIES
BUSINESS SEGMENT INFORMATION (unaudited)
(All amounts in millions)   3 Months ended   Year ended
  Dec. 31 Dec. 31

2013

 

2012

2013

 

2012

(millions) (millions)
 
Net sales
Performance Coatings $ 1,441 $ 1,151 $ 5,872 $ 4,752
Industrial Coatings 1,222 1,114 4,845 4,379
Architectural Coatings - EMEA 466 465 2,062 2,147
Optical and Specialty Materials 309 272 1,262 1,202
Glass 264   241   1,067   1,032
  TOTAL   $ 3,702   $ 3,243   $15,108   $13,512
 
Segment income
Performance Coatings $ 179 $ 177 $ 858 $ 744
Industrial Coatings 174 144 724 590
Architectural Coatings - EMEA 22 9 184 145
Optical and Specialty Materials 85 68 368 348
Glass 22   8   56   63
TOTAL 482 406 2,190 1,890
 
Items not allocated to segments
Legacy items (Note A) (9) (14) (165) (217)
Business restructuring costs - - (98) (208)
Acquisition-related costs (7) (5) (42) (11)
Interest expense, net of interest income (Note B) (35) (45) (153) (171)
Other corporate expense (58)   (66)   (243)   (226)
 
INCOME BEFORE INCOME TAXES   $ 373   $ 276   $ 1,489   $ 1,057
 
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 year ended December 31, 2013 includes pretax charges of $18 million for final settlement of certain legacy Canadian pension plans. In addition, the years ended December 31, 2013 and 2012 include pretax charges for environmental remediation activities of $101 million and $159 million, respectively. These charges primarily relate to environmental remediation activities at the Company's former Jersey City, N.J., manufacturing plant and associated sites.
 
Note B:
Interest expense, net of interest income, is lower for the both the three months ended and the year ended December 31, 2013 compared to the same periods a year ago primarily as a result of the repayment of the $600 million 5.75% notes in March 2013.
 
 

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

Copyright Business Wire 2010
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