01—Abstract
Summary
Summary of the 10-K filed February 20, 2014. Cited figures are marked; the original filing is the authoritative source.
PPG Industries, Inc. reported 2013 net sales of $15.108 billiona, up $1.596 billion (12%) from $13.512 billion in 2012, driven mainly by acquisitions.
Acquired businesses added roughly 10% to net sales, led by the North American architectural coatings business of Akzo Nobel, acquired April 1, 2013. Income from continuing operations attributable to PPG was $1.034 billionb, or $7.13 per diluted share, versus $726 million ($4.69) in 2012. Net income attributable to PPG was $3.231 billion ($22.27 per diluted share), inflated by a $2.2 billion pretax gain from the January 28, 2013 separation and merger of the commodity chemicals business with Georgia Gulf.
Segment income rose in most segments, though Glass declined. Total segment income was $2.190 billionc. The filing also describes the pending sale of PPG's 51% interest in Transitions Optical and its optical sunlens business to Essilor International, at an enterprise value of about $3.4 billion, with cash at closing of $1.73 billion pretax (about $1.5 billion after tax).
The transaction is expected to close in the first half of 2014. PPG stated its intention to deploy between $3.0 billiond and $4.0 billion of incremental cash over an 18 to 24 month period beginning January 2014, focused on earnings accretion initiatives including return of cash to shareholders. Liquidity remained solid, with cash from continuing operations of $1.809 billion in 2013 and a debt-to-capitalization ratio of 41% at year-end, down from 50%.
Key risks include a $310 million environmental remediation reserve, with reasonably possible unreserved losses of $100 million to $200 million, mostly related to the former Jersey City chromium plant (New Jersey Chrome). The asbestos settlement, under which PPG would pay about $825 million in aggregate cash plus 1,388,889 PPG shares, remains subject to court appeals. Management believes that, in the aggregate, pending litigation will not have a material effect on consolidated financial position or liquidity.
02—Key points
Key Highlights
- Net sales rose 12% to $15.108 billion in 2013, with acquisitions contributing approximately 10 percentage points of growth.
- Diluted EPS from continuing operations was $7.13, up from $4.69 in 2012; total diluted EPS including discontinued operations was $22.27, boosted by the commodity chemicals separation gain.
- Performance Coatings net sales increased 24% to $5.872 billion, and Industrial Coatings net sales increased 11% to $4.845 billion.
- Pending sale of the Transitions Optical 51% interest and optical sunlens business to Essilor, at an enterprise value of about $3.4 billion, expected to close in the first half of 2014.
- Planned deployment of $3.0 to $4.0 billion of incremental cash over 18 to 24 months beginning January 2014, with a focus on earnings accretion and cash returns to shareholders.
- Environmental reserves of $310 million, with reasonably possible unreserved losses of $100 million to $200 million; 2013 remediation charges included $89 million for New Jersey Chrome.
- Asbestos settlement obligation of $1.008 billion recorded at year-end, subject to pending court appeals.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 20, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $14.27B$12.69B | +12.4% |
| R&D Expenses | $479.00M$444.00M | +7.9% |
| SG&A Expenses | $3.49B$2.99B | +16.7% |
| Operating Income | $1.92B$1.63B | +18.0% |
| Interest Expense | $196.00M$210.00M | −6.7% |
| Net Income | $3.23B$941.00M | +243.4% |
| EPS (Basic) | $11.27$6.13 | +83.8% |
| EPS (Diluted) | $11.13$6.06 | +83.7% |
| Shares Outstanding (Basic) | 286.80M153.40M | +87.0% |
| Shares Outstanding (Diluted) | 290.20M155.10M | +87.1% |
05—Questions
Frequently Asked Questions
How did PPG's 2013 performance compare with 2012?
Net sales increased $1.596 billion, or 12%, to $15.108 billion, mainly due to acquired businesses. Income from continuing operations attributable to PPG rose to $1.034 billion ($7.13 per diluted share) from $726 million ($4.69). Net income attributable to PPG was $3.231 billion, including discontinued operations from the commodity chemicals separation.
What were the major acquisitions and divestitures in 2013?
PPG acquired the North American architectural coatings business of Akzo Nobel on April 1, 2013, for $954 million net of cash acquired, and Deft, an aerospace coatings business, in May 2013. The commodity chemicals business was separated and merged with Georgia Gulf on January 28, 2013. PPG also agreed in July 2013 to sell its 51% interest in Transitions Optical and its optical sunlens business to Essilor.
What is the status of the asbestos liability?
PPG's obligation under the 2009 PPG Settlement Arrangement totaled $1.008 billion at December 31, 2013, of which $763 million was current. The arrangement requires aggregate pretax cash payments of approximately $825 million plus 1,388,889 PPG shares. It will not become effective until the amended Pittsburgh Corning plan of reorganization is finally approved and no longer subject to appellate review. Notices of appeal have been filed by remaining objectors.
How much environmental exposure does PPG face?
PPG held $310 million in reserves for environmental contingencies at December 31, 2013. It may also face unreserved losses estimated at $100 million to $200 million, which the filing describes as reasonably possible but not probable. The largest component is the former chromium plant in Jersey City, New Jersey, for which a $89 million reserve adjustment was recorded in the third quarter of 2013.
What did PPG say about its capital deployment plans?
PPG expects to deploy between $3.0 billion and $4.0 billion of incremental cash over an 18 to 24 month period starting January 2014. The focus is on incremental earnings accretion initiatives, including return of cash to shareholders. The company also expects about $1.5 billion in after-tax proceeds from the pending Transitions Optical sale and had about 2.2 million shares remaining under its repurchase authorization.
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