01—Abstract
Summary
Summary of the 10-K filed February 21, 2008. Cited figures are marked; the original filing is the authoritative source.
PPG Industries, Inc. reported 2007 net sales of $11.21 billiona, up 14% from $9.86 billion in 2006, with 6% of the increase from acquisitions, 4% from volumes and 4% from foreign currency translation.
Net income rose to $834 millionb ($5.03 per diluted share) from $711 million ($4.27 per diluted share), though 2007 results include charges for asbestos settlement adjustments and gains or losses tied to discontinued operations. Income from continuing operations was $815 million, and the effective tax rate on continuing operations was 28.6%, compared with 25.1% in 2006. Cash from operating activities was $996 million, capital spending was $584 million, and dividends paid were $335 million.
The most significant development for investors is the January 2, 2008 completion of the SigmaKalon acquisition for a total transaction value of approximately $3.2 billionc, consisting of $1,673 million of cash paid to the seller and $1,517 million of debt assumed. The filing states PPG expects SigmaKalon to contribute about $3 billion of 2008 sales, that the deal is not expected to be accretive to 2008 earnings, and that it is expected to be accretive in 2009. Financing relied on bridge loans and a revolving credit facility, and the ratio of total debt to total capitalization rose to 42% at December 31, 2007 from 28% a year earlier.
Total short-term debt was $1,818 milliond at year-end 2007. The filing also highlights ongoing legal and environmental exposures. Environmental reserves totaled $276 million at year-end 2007, and the company may face additional unreserved losses estimated at $200 million to $300 million.
Asbestos liabilities remain tied to the PPG Settlement Arrangement, which is still subject to court proceedings in the Pittsburgh Corning bankruptcy, and several new flat glass antitrust class actions were filed in early 2008. The company also sought to sell its automotive glass businesses after a sale agreement with Platinum Equity was terminated, and it intends to sell those businesses during 2008.
02—Key points
Key Highlights
- Net sales rose 14% to $11.21 billion in 2007, with 6% from acquisitions, 4% from higher volumes and 4% from currency translation.
- Diluted earnings per share were $5.03 in 2007 versus $4.27 in 2006; income from continuing operations was $815 million.
- The SigmaKalon acquisition closed January 2, 2008 for approximately $3.2 billion in total transaction value, with PPG expecting about $3 billion of 2008 sales from the business.
- Total debt to total capitalization rose to 42% at December 31, 2007 from 28% at December 31, 2006, primarily due to borrowing to fund SigmaKalon.
- Environmental reserves were $276 million at year-end 2007, with reasonably possible unreserved losses estimated at $200 million to $300 million.
- Cash from operating activities was $996 million in 2007, compared with $1,115 million in 2006.
- Dividends paid were $335 million in 2007, and 2007 marked the 36th consecutive year of increased dividend payments.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2007filed February 21, 2008Financial Statements
05—Questions
Frequently Asked Questions
What drove PPG's sales growth in 2007?
Net sales increased 14% to $11.21 billion. The filing attributes 6 percentage points to acquisitions, 4 points to increased volumes and 4 points to positive foreign currency translation. Performance Coatings sales rose 23% and Industrial Coatings sales rose 13%.
How significant is the SigmaKalon acquisition for PPG?
PPG completed the acquisition of SigmaKalon on January 2, 2008 for approximately $3.2 billion, including $1,673 million of cash paid to the seller and $1,517 million of assumed debt. PPG expects about $3 billion of 2008 sales from the business. The filing says the deal is not expected to be accretive to 2008 earnings but is expected to be accretive in 2009.
How did PPG finance the SigmaKalon acquisition and what is the effect on leverage?
PPG used bridge loan agreements, including a €1 billion facility and a $500 million facility, along with commercial paper and a €650 million revolving credit facility. Short-term debt was $1,818 million at December 31, 2007. The ratio of total debt including capital leases to total debt and equity rose to 42% from 28% a year earlier. The company stated it is in compliance with its debt covenants.
What are the main ongoing legal and environmental risks?
Environmental reserves totaled $276 million at December 31, 2007, and the company may be subject to additional losses estimated at $200 million to $300 million. Asbestos claims are addressed by the PPG Settlement Arrangement, which remains subject to Bankruptcy Court proceedings for Pittsburgh Corning. New flat glass antitrust class actions were filed in early 2008. Management believes the aggregate outcome of lawsuits will not have a material effect on financial position or liquidity.
What happened with the automotive glass business sale?
PPG agreed in 2007 to sell its automotive glass businesses to Platinum Equity for about $500 million, but Platinum later terminated the agreement after filing suit. PPG has sued Platinum for damages, including a $25 million breakup fee. The businesses remain classified as held for sale and as discontinued operations, and management stated it intends to sell them during 2008.
06—Continue