01—Abstract
Summary
Summary of the 10-K filed February 17, 2011. Cited figures are marked; the original filing is the authoritative source.
PPG Industries, Inc. reported 2010 net sales of $13.4 billiona, up from $12.2 billion in 2009, with the filing stating the sales increase totaled 10%: 8% from higher sales volumes in all reportable segments except Architectural Coatings - EMEA, 1% from higher selling prices, and the remainder from foreign currency and acquisitions.
Net income attributable to PPG was $769 millionb, or $4.63 per diluted share, compared with $336 million, or $2.03 per diluted share, in 2009. The 2010 results include an $85 million charge, or $0.51 per share, from a change in U.S. tax law related to retiree prescription drug costs. Cash from operating activities was $1.31 billion in 2010, and the company entered 2011 with about $2 billion in cash and short-term investments, which it described as a historically high level, including proceeds from a $1 billion debt offering in November 2010.
The Industrial Coatings segment showed the strongest recovery, with sales up $640 millionc or 21% and segment income up $219 million. Performance Coatings sales rose 5% and Glass sales rose 16%, while Architectural Coatings - EMEA sales fell 4%. Raw material inflation was a key headwind: coatings raw material costs rose about $210 million in 2010 after a $150 million decline in 2009, and the company said it expects persistent raw material inflation to continue in early 2011, with pricing actions and cost reductions planned to offset it.
Management expects higher demand in 2011 and an ongoing tax rate of 26% to 27%. The filing also highlights significant legal and environmental exposures. PPG reported environmental reserves of $272 milliond at December 31, 2010, and the filing states that losses may be as much as $200 million to $400 million above those reserves, which are reasonably possible but not probable.
The proposed asbestos settlement under the third amended Pittsburgh Corning plan of reorganization remains subject to court approval, with aggregate PPG cash payments of approximately $825 million plus 1,388,889 PPG shares. Management stated that these matters are not expected to have a material effect on consolidated financial position or liquidity, though they may be material to results of a particular period.
02—Key points
Key Highlights
- Net sales rose to $13.4 billion in 2010 from $12.2 billion in 2009, a 10% increase driven mainly by higher volumes in all segments except Architectural Coatings - EMEA.
- Net income attributable to PPG was $769 million ($4.63 diluted EPS) versus $336 million ($2.03) in 2009, including an $85 million ($0.51 per share) one-time tax charge tied to U.S. healthcare legislation.
- Industrial Coatings sales increased 21% to $3.7 billion, with segment income up $219 million; Glass sales rose 16% and Optical and Specialty Materials sales rose 14%.
- Coatings raw material costs increased by about $210 million in 2010, and the company expects persistent raw material inflation in early 2011, to be offset through price increases and cost actions.
- Cash from operations was $1.31 billion in 2010; year-end cash and short-term investments totaled about $2 billion, supported by a $1 billion debt offering in November 2010.
- Environmental reserves were $272 million at December 31, 2010, with reasonably possible additional losses estimated at $200 million to $400 million.
- The proposed asbestos settlement involves aggregate PPG cash payments of about $825 million plus 1,388,889 PPG shares, and remains subject to court approval.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 17, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $13.42B$12.24B | +9.7% |
| R&D Expenses | $408.00M$403.00M | +1.2% |
| SG&A Expenses | $2.98B$2.94B | +1.5% |
| Operating Income | $1.72B$1.19B | +45.2% |
| Interest Expense | $189.00M$193.00M | −2.1% |
| Net Income | $769.00M$336.00M | +128.9% |
| EPS (Basic) | $4.67$2.04 | +128.9% |
| EPS (Diluted) | $4.63$2.03 | +128.1% |
| Shares Outstanding (Basic) | 164.50M164.80M | −0.2% |
| Shares Outstanding (Diluted) | 165.90M165.50M | +0.2% |
05—Questions
Frequently Asked Questions
How did PPG's sales and earnings change in 2010?
Net sales were $13.4 billion, up from $12.2 billion, a 10% increase: 8% from higher volumes, 1% from higher selling prices, and the remainder from currency and acquisitions. Net income attributable to PPG rose to $769 million, or $4.63 per diluted share, from $336 million, or $2.03, in 2009. The 2010 results include an $85 million one-time tax charge.
Which business segments drove growth in 2010?
Industrial Coatings led with sales up $640 million or 21% and segment income up $219 million, mainly from higher automotive OEM and emerging-region volumes. Glass sales rose 16% and Optical and Specialty Materials sales rose 14%. Architectural Coatings - EMEA sales fell 4% to $1.87 billion.
What are the main cost pressures PPG faces?
Coatings raw material costs rose about $210 million in 2010 after a $150 million decline in 2009, driven by tight supply and stronger demand. The company expects persistent raw material inflation in early 2011 and plans to offset it with higher selling prices and cost reductions. Natural gas costs averaged nearly $5.50 per mmbtu in 2010, and each one-dollar change in natural gas price affects annual operating costs by $60 million to $70 million.
What are PPG's largest legal and environmental exposures?
PPG carried $272 million of environmental remediation reserves at year-end 2010, mostly for the former chromium plant in Jersey City, N.J. The filing says additional losses of $200 million to $400 million are reasonably possible but not probable. The proposed asbestos settlement tied to Pittsburgh Corning requires aggregate cash payments of about $825 million plus 1,388,889 PPG shares and remains subject to court approval. Management does not expect these matters to have a material effect on financial position or liquidity.
How strong is PPG's liquidity and capital position?
The company ended 2010 with cash and cash equivalents of $1.34 billion and short-term investments of $637 million. Total debt was $4.05 billion, and the debt-to-total-capital ratio rose to 53% from 47%, mainly from a November 2010 offering of notes with net proceeds of $983 million. PPG paid $360 million in dividends in 2010 and repurchased shares for $586 million.
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