01—Abstract
Summary
Summary of the 10-K filed February 16, 2012. Cited figures are marked; the original filing is the authoritative source.
PPG Industries, Inc. reported 2011 net sales of $14,885 milliona, up 11 percent from $13,423 million in 2010, with higher volumes contributing just over 2 percent and higher selling prices adding 5 percent.
Net income attributable to PPG rose to $1,095 millionb, or $6.87 per share assuming dilution, compared with $769 million, or $4.63 per share, in 2010. The 2010 results included an $85 million, or $0.51 per share, charge from a change in U.S. tax law. Segment income increased across all six reportable segments, led by Commodity Chemicals ($370 million, up $181 million) and Industrial Coatings ($438 million, up from $378 million).
The effective tax rate was about 24 percent in 2011 versus about 32 percent in 2010. Raw material inflation was the central pressure point. Coatings raw material costs rose about 10 to 12 percent in 2011, an incremental cost of approximately $440 millionc, and management said higher selling prices did not fully offset this in the coatings segments.
The company plans additional pricing in 2012 to recover margin lost in 2011. Cash from operating activities was $1,436 milliond, and the company entered 2012 with about $1.5 billion in cash and short-term investments, with a stated target to end 2012 below $1 billion. It repurchased 10.2 million shares in 2011 for $858 million and acquired Dyrup and Colpisa in January 2012 for a combined cost of $193 million.
The principal legal and environmental exposures are the proposed asbestos settlement tied to Pittsburgh Corning Corporation, which remains subject to Bankruptcy Court proceedings, and environmental remediation, with reserves of $226 million at year-end 2011. PPG states that unreserved environmental losses could be as much as $200 million to $400 million, and that the outcome of current lawsuits is not expected to have a material effect on its consolidated financial position or liquidity.
02—Key points
Key Highlights
- Net sales rose 11 percent to $14,885 million in 2011, with volume contributing just over 2 percent and selling prices contributing 5 percent.
- Net income attributable to PPG increased to $1,095 million ($6.87 diluted EPS) from $769 million ($4.63) in 2010.
- Commodity Chemicals segment income rose $181 million to $370 million, driven by higher pricing and the EquaChlor acquisition.
- Coatings raw material costs inflated about 10 to 12 percent in 2011, an incremental cost of approximately $440 million; pricing did not fully offset the impact in coatings segments.
- Cash from operations was $1,436 million; the company repurchased $858 million of stock and paid $355 million in dividends in 2011.
- Asbestos settlement tied to Pittsburgh Corning remains subject to Bankruptcy Court approval, with a total obligation of $834 million recorded at December 31, 2011.
- Environmental reserves were $226 million at year-end 2011, with reasonably possible unreserved losses estimated at $200 million to $400 million.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 16, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $13.15B$13.42B | −2.0% |
| R&D Expenses | $443.00M$408.00M | +8.6% |
| SG&A Expenses | $3.12B$2.98B | +4.8% |
| Operating Income | $1.66B$1.72B | −3.8% |
| Interest Expense | $210.00M$189.00M | +11.1% |
| Net Income | $1.09B$769.00M | +42.4% |
| EPS (Basic) | $6.96$4.67 | +49.0% |
| EPS (Diluted) | $6.87$4.63 | +48.4% |
| Shares Outstanding (Basic) | 157.30M164.50M | −4.4% |
| Shares Outstanding (Diluted) | 159.30M165.90M | −4.0% |
05—Questions
Frequently Asked Questions
How did PPG's profitability change in 2011?
Net income attributable to PPG rose to $1,095 million, or $6.87 per diluted share, from $769 million, or $4.63 per diluted share, in 2010. The 2010 result included an $85 million charge related to a change in U.S. tax law. The effective tax rate fell to about 24 percent from about 32 percent.
What are the main cost pressures facing PPG?
Raw material inflation was the primary pressure. Coatings raw material costs rose about 10 to 12 percent in 2011, an incremental cost of approximately $440 million, with the largest impacts from titanium dioxide pigments and certain propylene-based resins. Ethylene costs also rose substantially. Natural gas unit costs fell 15 percent in the U.S. compared with 2010.
What is the status of the asbestos settlement?
The third amended Pittsburgh Corning plan of reorganization, including the 2009 PPG Settlement Arrangement, was denied confirmation by the Bankruptcy Court on June 16, 2011. Amendments were filed on September 23, 2011, and further hearings were scheduled for February 17, 2012. PPG has no payment obligation until the Funding Effective Date. Its total obligation under the arrangement was $834 million at December 31, 2011.
What does PPG expect for 2012?
Management expects overall higher demand in 2012 versus 2011, though growth is expected to vary by region, with Asia Pacific growing fastest and Europe expected to contract mildly in early 2012. PPG plans additional price increases to recover margin lost to 2011 inflation, expects 2012 capital spending of $450 million to $550 million, and expects share repurchases of $250 million to $500 million.
How is PPG deploying its cash?
PPG entered 2012 with about $1.5 billion in cash and short-term investments and targets ending 2012 with less than $1 billion. It completed the Dyrup and Colpisa acquisitions in January 2012 for a combined cost of $193 million, including assumed debt, and expects to make additional acquisitions in 2012. It also expects 2012 voluntary contributions of up to $60 million to U.S. pension plans and about $90 million in mandatory contributions to non-U.S. plans.
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