01—Abstract
Summary
Summary of the 10-K filed February 20, 2020. Cited figures are marked; the original filing is the authoritative source.
PPG Industries, Inc. manufactures and distributes paints, coatings and specialty materials through two reportable segments, Performance Coatings and Industrial Coatings.
For 2019, net sales were $15.146 billiona, down from $15.374 billion in 2018, with the decline attributed mainly to lower sales volumes and unfavorable foreign currency translation, partly offset by higher selling prices and acquisition-related sales. Income from continuing operations attributable to PPG was $1.243 billion, and diluted earnings per share from continuing operations were $5.22, compared with $5.40 in 2018. Adjusted diluted earnings per share from continuing operations, a non-GAAP measure reconciled in the filing, were $6.22, up from $5.92.
Results were affected by $176 millionb of net business restructuring charges and $98 million of other charges, mostly environmental remediation. Cash from operating activities of continuing operations rose to $2.084 billion from $1.487 billion, and the company ended 2019 with $1.273 billion in cash and short-term investments. Cash used for acquisitions was $643 million, and the company repurchased $325 million of stock and paid $468 million in dividends.
Total debt, including finance leases, was 49% of total debt and equity at year-end, down from 52%. The company reported approximately $1.5 billionc remaining under its share repurchase authorization. Looking ahead, management expects modest global market growth in 2020 that is uneven by region, with the softest conditions expected in EMEA.
It guided to a 2020 effective tax rate of 22% to 24%, expects aggregate restructuring savings of at least $75 milliond, and is monitoring the coronavirus outbreak in China. The filing also discloses a 2018 restatement of prior financial statements, a settled SEC matter with no financial penalty, and pending litigation including a $25 million securities class action settlement that insurers have agreed to cover.
02—Key points
Key Highlights
- Net sales declined 1.5% to $15.146 billion, with lower sales volumes (-3%) and unfavorable currency translation (-2%) partially offset by higher selling prices (+2%) and acquisitions (+2%).
- Reported diluted EPS from continuing operations was $5.22, down from $5.40, while adjusted diluted EPS rose 5.1% to $6.22.
- Cash from operating activities of continuing operations increased 40.1% to $2.084 billion, driven mainly by favorable working capital changes.
- Performance Coatings segment income rose to $1.409 billion from $1.300 billion on net sales of $9.034 billion; Industrial Coatings segment income rose to $862 million from $818 million on net sales of $6.112 billion.
- A $184 million global restructuring program was initiated in June 2019, with aggregate restructuring savings expected to be at least $75 million in 2020.
- Acquisitions totaled $643 million in 2019, including Whitford, Hemmelrath, Dexmet and Texstars, with Industria Chimica Reggiana closed on January 31, 2020.
- The 2020 effective tax rate is expected to be 22% to 24%, and the company is monitoring coronavirus-related risks in China.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, PPG Industries kept $0.08.
- Revenue$15.15B100.0%
- Cost of revenue−$8.65B57.1%
- Gross profit$6.49B42.9%
- Operating costs−$4.22B27.9%
- Operating income$2.27B15.0%
- Interest, other & tax−$1.03B6.8%
- Net income$1.24B8.2%
Where FY2019 revenue went
$15.15B- Cost of revenue: $8.65B, 57% of revenue
- SG&A: $3.60B, 24% of revenue
- Net income: $1.24B, 8.2% of revenue
- R&D: $456.0M, 3.0% of revenue
- Other operating costs: $162.0M, 1.1% of revenue
- Interest, other & tax: $1.03B, 6.8% of revenue
Kept 8.2% as net incomeOther operating costs $162.0M · 1.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 20, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $15.15B$15.37B | −1.5% |
| Cost of Revenue | $8.65B$9.00B | −3.9% |
| Gross Profit | $6.49B$6.37B | +1.9% |
| R&D Expenses | $456.00M$464.00M | −1.7% |
| SG&A Expenses | $3.60B$3.57B | +0.9% |
| Operating Income | $2.27B$2.12B | +7.2% |
| Interest Expense | $132.00M$118.00M | +11.9% |
| Net Income | $1.24B$1.34B | −7.3% |
| EPS (Basic) | $5.25$5.50 | −4.5% |
| EPS (Diluted) | $5.22$5.47 | −4.6% |
| Shares Outstanding (Basic) | 236.90M243.90M | −2.9% |
| Shares Outstanding (Diluted) | 238.20M245.40M | −2.9% |
05—Questions
Frequently Asked Questions
How did PPG perform financially in 2019?
Net sales were $15.146 billion, down from $15.374 billion in 2018. Income from continuing operations attributable to PPG was $1.243 billion, and reported diluted EPS from continuing operations was $5.22 versus $5.40 a year earlier. Adjusted diluted EPS, a non-GAAP measure reconciled in the filing, was $6.22.
What drove the change in net sales?
Net sales decreased $228 million due to lower sales volumes (-3%) and unfavorable foreign currency translation (-2%). These were partially offset by higher selling prices (+2%) and acquisition-related sales (+2%). U.S. and Canada sales were relatively flat, while EMEA, Asia Pacific and Latin America each declined.
How much cash did PPG generate and how was it used?
Cash from operating activities of continuing operations was $2.084 billion. The company used $643 million for business acquisitions, $413 million for capital expenditures, $325 million to repurchase stock and $468 million for dividends. Cash and short-term investments ended the year at $1.273 billion.
What legal and environmental matters could affect PPG?
A $25 million shareholder securities class action settlement received final court approval, with insurers confirming coverage for the full amount and payment expected in 2020. PPG holds $304 million in environmental remediation reserves, with reasonably possible unreserved losses estimated at $100 million to $200 million. The SEC settled with the company with no financial penalty, and the U.S. Attorney's Office informed PPG it will not pursue action against the company.
What is management's outlook for 2020?
Management expects modest global market growth that is uneven by region, with the softest conditions in EMEA. Acquisitions are forecast to add about $25 million of Performance Coatings net sales and about $60 million of Industrial Coatings net sales. Management expects aggregate restructuring savings of at least $75 million and is monitoring the coronavirus outbreak in China.
06—Continue