01—Abstract
Summary
Summary of the 10-K filed February 21, 2013. Cited figures are marked; the original filing is the authoritative source.
PPG Industries, Inc. reported 2012 net sales of $15.2 billiona, up from $14.885 billion in 2011, with higher selling prices and acquisitions offsetting a 3% negative currency impact.
Net income attributable to PPG was $941 millionb, or $6.06 per diluted share, compared with $1.095 billion, or $6.87 per diluted share, in 2011. Results included a $208 million business restructuring charge and a $159 million environmental remediation charge; excluding these and other separation and acquisition costs, adjusted diluted EPS was $7.94. Cash from operations reached $1.787 billion, and the company entered 2013 with about $2.4 billion in cash and short-term investments.
The most significant structural change was the January 28, 2013 separation of the commodity chemicals business and its merger with Georgia Gulf, creating Axiall Corporation. PPG received $900 millionc in cash and 35.2 million Axiall shares and holds no ownership interest in Axiall. Going forward, PPG reports six segments: Performance Coatings, Industrial Coatings, Architectural Coatings-EMEA, Optical and Specialty Materials, and Glass, with the commodity chemicals results moving to discontinued operations in 2013.
PPG also agreed in December 2012 to acquire the North American architectural coatings business of Akzo Nobel N.V. for $1.05 billiond, expected to close in the first half of 2013. Key investor watch items include environmental reserves of $332 million, reasonably possible unreserved environmental losses of $100 million to $275 million, and the proposed Pittsburgh Corning asbestos settlement, which is still subject to court approval. Management states that these contingencies are not expected to have a material effect on financial position or liquidity, though they may be material to results in a particular period.
02—Key points
Key Highlights
- Net sales rose to $15.2 billion in 2012 from $14.885 billion in 2011, driven by higher selling prices (2%), volume (1%) and acquisitions (2%), partly offset by a 3% currency impact.
- Diluted EPS was $6.06 versus $6.87 in 2011; adjusted diluted EPS excluding restructuring, environmental, and separation-related charges was $7.94.
- A $208 million business restructuring charge and a $159 million environmental remediation charge (related primarily to New Jersey Chrome) weighed on 2012 reported results.
- Commodity Chemicals was separated and merged with Georgia Gulf on January 28, 2013 into Axiall Corporation; PPG received $900 million in cash and 35.2 million Axiall shares and retains no ownership interest.
- Agreed in December 2012 to acquire the North American architectural coatings business of Akzo Nobel N.V. for $1.05 billion, expected to close in the first half of 2013.
- Cash from operating activities was $1.787 billion in 2012, and the company ended the year with about $2.4 billion in cash and short-term investments.
- Environmental reserves totaled $332 million at year-end 2012, with reasonably possible unreserved losses estimated at $100 million to $275 million; the asbestos settlement remains subject to court approval.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 21, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $12.69B$13.15B | −3.6% |
| R&D Expenses | $444.00M$443.00M | +0.2% |
| SG&A Expenses | $2.99B$3.12B | −4.3% |
| Operating Income | $1.63B$1.66B | −1.7% |
| Interest Expense | $210.00M$210.00M | 0.0% |
| Net Income | $941.00M$1.09B | −14.1% |
| EPS (Basic) | $6.13$6.96 | −11.9% |
| EPS (Diluted) | $6.06$6.87 | −11.8% |
| Shares Outstanding (Basic) | 153.40M157.30M | −2.5% |
| Shares Outstanding (Diluted) | 155.10M159.30M | −2.6% |
05—Questions
Frequently Asked Questions
How did PPG's 2012 results compare with 2011?
Net sales increased 2% to $15.2 billion from $14.885 billion. Net income attributable to PPG fell to $941 million ($6.06 per diluted share) from $1.095 billion ($6.87 per diluted share), largely due to the $208 million restructuring charge and $159 million environmental charge. Excluding these and related costs, adjusted diluted EPS was $7.94.
What happened to the Commodity Chemicals business?
On January 28, 2013, PPG completed the separation of its commodity chemicals business and its merger with a subsidiary of Georgia Gulf Corporation. The combined company is named Axiall Corporation. PPG received $900 million in cash and 35.2 million shares of Axiall common stock, which were distributed to PPG shareholders through an exchange offer. PPG holds no ownership interest in Axiall, and the segment will be reported as discontinued operations beginning in 2013.
What is the pending acquisition and when is it expected to close?
In December 2012, PPG agreed to acquire the North American architectural coatings business of Akzo Nobel N.V. for $1.05 billion, including a number of leading brands and approximately 600 paint stores in the United States, Canada and the Caribbean. The Hart-Scott-Rodino waiting period expired February 1, 2013; Canadian competition clearance and Investment Canada Act approval remained pending. Closing is currently expected in the first half of 2013.
What are the main environmental and legal exposures?
PPG had environmental reserves of $332 million at December 31, 2012, including $221 million for New Jersey Chrome. Reasonably possible unreserved environmental losses could be as much as $100 million to $275 million. The company is also a defendant in long-running asbestos litigation tied to Pittsburgh Corning Corporation, and a proposed settlement remains subject to court approval. Management believes the aggregate outcome of these matters will not have a material effect on financial position or liquidity, though results in a particular period could be affected.
How is PPG's capital position and shareholder return?
PPG ended 2012 with about $2.4 billion in cash and short-term investments and a debt-to-capital ratio of 50%, down from 53% in 2011. Dividends paid totaled $358 million, and the company has paid uninterrupted annual dividends since 1899. Management anticipated spending $500 million to $750 million on share repurchases in 2013 and reinitiated buybacks in the first quarter of 2013.
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