01—Abstract
Summary
Summary of the 10-K filed February 19, 1999. Cited figures are marked; the original filing is the authoritative source.
PPG Industries, Inc. reported 1998 net sales of $7.51 billiona, up from $7.38 billion in 1997, with net income rising to $801 million ($4.48 per share, assuming dilution) from $714 million ($3.94) a year earlier.
The filing attributes the earnings increase to an $82 millionb after-tax gain from the sale of its European flat and automotive glass businesses, a significant reduction in business divestiture and realignment charges, insurance recoveries of certain past environmental costs, and higher sales volumes. Sales growth was driven by an 8% increase in volumes, largely from acquisitions in the coatings segment, partly offset by divestitures, lower chlor-alkali prices and currency translation. By segment, coatings sales rose 13% to $3.5 billion, but operating income fell to $546 million from $561 million amid growth-initiative expenses, inflation and the General Motors strike.
Glass sales declined 5% to $2.5 billion while operating income rose to $478 millionc from $286 million, helped by the $85 million divestiture gain. Chemicals sales fell 7% to $1.5 billion and operating income dropped to $354 million from $428 million on weaker chlor-alkali prices. Management expects continued Asian economic weakness to pressure chlor-alkali and some glass prices in 1999, while anticipating volume growth from new products, acquisitions and a full year of 1998 acquisitions.
Balance sheet strengthened, with shareholders' equity rising to $2.88 billiond from $2.51 billion and total debt-to-capital falling to 37% from 40%. Cash from operations was $942 million, capital spending totaled $877 million (including $390 million for acquisitions), and the company paid $252 million in dividends and repurchased shares. Environmental reserves were $94 million, and the filing discloses a possible additional exposure of $200 million to $400 million; antitrust suits alleging price-fixing in certain glass products are pending but are described as in an early stage.
02—Key points
Key Highlights
- Net sales of $7.51 billion in 1998, up 2% from $7.38 billion in 1997, with volumes up 8%
- Net income of $801 million, or $4.48 per diluted share, compared with $714 million, or $3.94, in 1997
- $82 million after-tax gain from the sale of the European flat and automotive glass businesses to Glaverbel S.A. for $266 million in cash
- Coatings sales rose 13% to $3.5 billion through acquisitions, including Courtaulds' U.S. architectural coatings and Orica's technical coatings businesses
- Chemicals operating income fell to $354 million from $428 million on significantly lower chlor-alkali prices
- Total debt-to-capital ratio improved to 37% from 40%; shareholders' equity rose to $2.88 billion
- Environmental reserves of $94 million, with possible additional unreserved losses estimated at $200 million to $400 million; glass price-fixing antitrust suits pending
03—Questions
Frequently Asked Questions
How did PPG's earnings change in 1998?
Net income rose to $801 million, or $4.48 per diluted share, from $714 million, or $3.94, in 1997. The filing attributes the increase to an $82 million after-tax gain on the sale of the European glass businesses, lower business divestiture and realignment charges, insurance recoveries of past environmental costs, and higher sales volumes.
Which business segments drove results?
Coatings sales increased 13% to $3.5 billion on acquisitions and volume growth, although operating income declined to $546 million from $561 million. Glass operating income rose to $478 million from $286 million, aided by the divestiture gain. Chemicals sales fell 7% to $1.5 billion and operating income dropped to $354 million due to lower chlor-alkali prices.
What outlook did management give for 1999?
Management expects volume growth from new products, market expansion, a full year of 1998 acquisitions and further acquisitions in 1999. It expects Asian economic weakness to continue, which may keep pressure on chlor-alkali and some glass prices, and notes that Brazilian economic weakness will adversely affect its automotive coatings and refinish operations there.
What environmental and legal risks does the filing disclose?
PPG had $94 million in environmental reserves at December 31, 1998, and estimated reasonably possible unreserved losses of $200 million to $400 million. The company is named in antitrust lawsuits alleging price-fixing and market allocation for certain glass products, which are at an early stage. Management believes the outcome of all lawsuits will not have a material effect on its financial position.
How strong is PPG's financial position?
Shareholders' equity increased to $2.88 billion from $2.51 billion, and the debt-to-capital ratio fell to 37% from 40%. Cash from operations was $942 million, against capital spending of $877 million, including $390 million for acquisitions. The company paid $252 million in dividends and repurchased common stock for $217 million in cash flow terms during 1998.
04—Continue