Date: 24 January 2008
Fourth quarter net income was $200 million, or $1.21 per share, and was comprised of net income from continuing operations of $193 million, or $1.17 per share, and income from discontinued operations, net of tax, of $7 million, or 4 cents per share. Fourth quarter earnings per share from continuing operations represents a 30-percent increase over the prior year’s quarter.
Reported net income from continuing operations includes an aftertax charge of $1 million, or 1 cent per share, to reflect the net increase in the current value of the company’s obligation under its proposed asbestos settlement agreement reported in May 2002, which is subject to pending court proceedings. Adjusted net income from continuing operations was $194 million, or $1.18 per share, as detailed below. The company’s tax rate on income from continuing operations for the quarter was 28 percent, which included a benefit of 4 cents per share due to the enactment of a reduction in the Canadian federal corporate income tax rate.
PPG’s sales for the fourth quarter of 2006 were $2.5 billion. Fourth quarter net income was $157 million, or 94 cents per share, and was comprised of net income from continuing operations of $150 million, or 90 cents per share, and income from discontinued operations, net of tax, of $7 million, or 4 cents per share. Net income from continuing operations included an aftertax charge of $3 million, or 2 cents per share, for the proposed asbestos settlement. Adjusted net income from continuing operations was $153 million, or 92 cents per share. The company’s tax rate on income from continuing operations was 31 percent.
“Our strong fourth quarter results capped one of the best annual financial performances in the company’s history,” said Charles E. Bunch, chairman and chief executive officer of PPG. “We achieved over 5 percent volume growth in the quarter, marking our best quarterly performance in three years despite a slowing economy, and each of our business segments increased sales for the quarter by at least 10 percent over the prior year.”
Bunch attributed the significant growth in sales and earnings per share to strategic actions taken to reshape the company, including expansion in emerging regions and acquisitions that broaden PPG’s geographic presence.
“Overall, 2007 was a milestone year in our transformation to focus on coatings and specialty products. Both coatings segments and our Optical and Specialty Materials segment are consistently delivering profitable growth. They represented just under 80 percent of our continuing operations in both sales and earnings in 2007, and this does not include the future impact of the SigmaKalon acquisition, which was completed on January 2, 2008.
“As PPG’s 2007 performance indicates,” Bunch added, “our past actions have us poised for continued success in 2008 despite economic challenges as the year begins.”
Performance Coatings segment sales in the fourth quarter increased $183 million, or 22 percent, as a result of increased sales from the 2007 Renner and Barloworld acquisitions, the positive impact of stronger foreign currencies, improved sales volumes, and increased selling prices. Sales volumes increased by 15 percent in the aerospace business and 4 percent in the automotive refinish business. In the architectural business, sales volumes were essentially flat. Segment earnings grew by $9 million due to solid volume growth partially offset by higher overhead costs, including selling and general administrative (SGA) costs tied to growth initiatives. The impact of inflation offset the benefit of higher selling prices.
Industrial Coatings segment sales for the quarter increased $86 million, or 10 percent, as a result of stronger foreign currencies and improved volumes in all businesses. Volume declines in North America were more than offset by improved volumes in all other regions. Segment earnings improved by $6 million due to higher sales volumes, the positive impact of stronger foreign currencies and lower other expenses. The earnings increase was moderated by the impact of inflation and higher SGA costs related to growth initiatives.
Optical and Specialty Materials segment sales for the quarter increased $29 million, or 14 percent, as a result of improved volumes, particularly in the optical products business, as well as stronger foreign currencies. Segment earnings were up $2 million due to higher sales volumes offset in part by higher advertising expenses related to optical volume growth initiatives in all regions and to the impending launch of Transitions Optical’s next-generation lens product in the first quarter of 2008.
Commodity Chemicals segment sales for the quarter increased $49 million, or 14 percent, due to improved volumes resulting from solid caustic sales and a healthy export market and increased selling prices. Segment earnings improved by $18 million, as higher selling prices and volumes combined with lower manufacturing costs and other expenses to more than offset the impact of inflation.
Glass segment sales increased $27 million, or 10 percent, due to improved volumes in the performance glazings and fiber glass businesses and the positive impact of stronger foreign currencies, which were slightly offset by lower selling prices in performance glazings. Segment earnings improved by $8 million due primarily to improved sales volumes offset somewhat by the impact of inflation. The impact of lower pricing was offset by higher other earnings.
For all of 2007, sales were $11.2 billion. Net income was $834 million, or $5.03 per share, and was comprised of net income from continuing operations of $815 million, or $4.91 per share, and income from discontinued operations, net of tax, of $19 million, or 12 cents per share. Reported net income from continuing operations includes aftertax charges of $4 million, or 3 cents per share, representing acquisition-related costs and $15 million, or 9 cents per share, for the proposed asbestos settlement. The reported income from discontinued operations includes an initial non-cash aftertax charge of $11 million, or 6 cents per share, related to pensions in the automotive glass businesses, and a $19 million, or 11 cents per share, aftertax charge representing the loss on divestiture of the fine chemicals business. Adjusted net income from continuing operations was $834 million, or $5.03 per share.
For all of 2006, sales were $9.9 billion. Net income was $711 million, or $4.27 per share, and was comprised of net income from continuing operations of $653 million, or $3.92 per share, and income from discontinued operations, net of tax, of $58 million, or 35 cents per share. Net income from continuing operations included aftertax charges of $106 million, or 64 cents per share, for legacy environmental remediation costs; $26 million, or 15 cents per share, for legal settlements; $22 million, or 13 cents per share, for business restructuring; and $17 million, or 10 cents per share, for the proposed asbestos settlement. Net income from continuing operations also included aftertax earnings of $24 million, or 14 cents per share, for insurance recoveries. Income from discontinued operations included an aftertax charge of $1 million, or 1 cent per share, for business restructuring. Adjusted net income from continuing operations was $800 million, or $4.80 per share.
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