01—Abstract
Summary
Summary of the 10-K filed February 18, 2010. Cited figures are marked; the original filing is the authoritative source.
PPG Industries, Inc. reported 2009 net sales of $12.24 billiona, down from $15.85 billion in 2008, as the global recession reduced volumes across all reportable segments.
Net income attributable to PPG fell to $336 millionb ($2.03 diluted EPS) from $538 million ($3.25) in 2008, after a $186 million business restructuring charge in 2009. Cash from operating activities was $1.345 billion, and the company entered 2010 with over $1 billion of cash on hand, which the filing describes as a historically high level. Management cites working capital reductions and a second-highest-on-record year of cash generation as supporting its outlook for gradual recovery in 2010.
The filing highlights several material contingencies. The company carries $287 millionc of environmental reserves, and it reports reasonably possible unreserved environmental losses of $200 million to $300 million. A modified asbestos settlement tied to the Pittsburgh Corning bankruptcy plan carries a total obligation of $772 million, of which $534 million is current.
The plan's court hearing is scheduled for April 2010. Management states that the outcome of lawsuits and claims will not have a material effect on consolidated financial position or liquidity, though results could be material in a given period. Balance sheet leverage improved over the year.
Total debt to total capitalization was 47% at December 31, 2009, versus 54% a year earlier, and the company repaid $646 milliond of debt in 2009. Capital spending fell to $265 million from $2.06 billion in 2008, which included the SigmaKalon acquisition. Pension contributions were about $450 million in 2009, and management expects about $240 million in 2010.
02—Key points
Key Highlights
- Net sales fell 23% to $12.24 billion in 2009 from $15.85 billion, with sales volumes down 13% and the absence of automotive glass sales contributing 5%.
- Net income attributable to PPG declined to $336 million ($2.03 diluted EPS) from $538 million ($3.25) in 2008, including a $186 million business restructuring charge in 2009.
- Cash from operating activities was $1.345 billion in 2009, and the company ended the year with $1.057 billion in cash and cash equivalents.
- Total debt to total capitalization improved to 47% at December 31, 2009, from 54% at year-end 2008, after $646 million of debt repayments.
- Environmental reserves totaled $287 million, with reasonably possible unreserved losses estimated at $200 million to $300 million.
- The proposed asbestos settlement tied to the Pittsburgh Corning bankruptcy carries a total obligation of $772 million, and the court hearing is scheduled for April 2010.
- The company paid $353 million in dividends in 2009, marking the 38th consecutive year of increased annual dividend payments, and set a 2010 quarterly dividend of 54 cents per share.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 18, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $12.24B$15.85B | −22.8% |
| R&D Expenses | $403.00M$468.00M | −13.9% |
| SG&A Expenses | $2.94B$3.43B | −14.5% |
| Operating Income | $1.19B$538.00M | +120.4% |
| Interest Expense | $193.00M$254.00M | −24.0% |
| Net Income | $336.00M$538.00M | −37.5% |
| EPS (Basic) | $2.04$3.27 | −37.6% |
| EPS (Diluted) | $2.03$3.25 | −37.5% |
| Shares Outstanding (Basic) | 164.80M164.60M | +0.1% |
| Shares Outstanding (Diluted) | 165.50M165.40M | +0.1% |
05—Questions
Frequently Asked Questions
Why did PPG's sales and earnings decline in 2009?
The filing attributes the sales decline mainly to lower sales volumes in all reportable segments due to the global recession, along with weaker foreign currency, the divestiture of the automotive glass and services business, and lower selling prices. Segment income fell in most segments, most sharply in Commodity Chemicals and Glass, and the company also recorded a $186 million restructuring charge.
How much debt did PPG reduce, and how is its leverage position?
PPG repaid $646 million of debt during 2009, and its ratio of total debt, including capital leases, to total debt and equity fell to 47% at December 31, 2009, from 54% at December 31, 2008. Long-term debt was $3.07 billion at year-end 2009, and the company states that its revolving credit covenant requires total indebtedness not exceed 60% of total capitalization, with the company at 40% on its covenant measure.
What is the status of PPG's asbestos exposure?
PPG has a proposed settlement tied to the Pittsburgh Corning bankruptcy plan. Its total obligation under the 2009 settlement arrangement is $772 million at December 31, 2009, with $534 million classified as current. The filing notes that the plan must still be approved by the Bankruptcy Court, with a hearing scheduled for April 2010, and that the settlement will not take effect until the plan is finally approved. PPG also holds a $162 million reserve for non-channeled asbestos claims it will retain.
What does PPG expect for 2010?
Management expects gradual year-over-year improvement in many industrial sectors and some recovery in demand in 2010 compared with 2009, while noting the recovery is uncertain and somewhat fragile. The company expects annual savings of about $250 million from its restructuring actions, including about $100 million of incremental savings in 2010, and projects a 2010 tax rate of 30%. It also expects 2010 pension contributions of about $240 million and environmental remediation cash outlays of about $70 million.
06—Continue