01—Abstract
Summary
Summary of the 10-K filed February 18, 2021. 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 2020, net sales fell to $13,834 milliona from $15,146 million in 2019, driven mainly by lower sales volumes tied to the COVID-19 pandemic. Income before income taxes was $1,362 million versus $1,661 million, and earnings per diluted share from continuing operations were $4.44 versus $5.22. Adjusted earnings per diluted share from continuing operations, which excludes restructuring, impairment and other items, were $5.70 versus $6.22.
The company's cash from operating activities from continuing operations rose to $2,129 millionb from $2,084 million. PPG ended 2020 with $1.92 billion in cash and short-term investments, but spent about $1.17 billion on business acquisitions, including Ennis-Flint, Alpha Coating Technologies and Industria Chimica Reggiana. Subsequent to year-end, the company announced agreements to acquire Wörwag, VersaFlex and Tikkurila.
Total debt was $5.35 billionc at year-end, and the company paid $496 million in dividends. No shares were repurchased in 2020, and about $1.5 billion remained under the share repurchase authorization.
Management expects 2021 regional growth to be higher than 2020 in all regions, with a 2021 effective tax rate of 22% to 24%. The company also highlighted a $300 milliond environmental remediation reserve, primarily for the New Jersey Chrome sites, and an SEC investigation into accounting matters that remained open at the filing date.
02—Key points
Key Highlights
- Net sales declined 8.7% to $13,834 million in 2020, with lower sales volumes (-10%) the largest factor, partly offset by higher selling prices (+1%) and acquisition-related sales (+1%).
- Performance Coatings net sales fell 6.0% to $8,495 million, and Industrial Coatings net sales fell 12.6% to $5,339 million.
- Diluted EPS from continuing operations was $4.44 versus $5.22 in 2019; adjusted diluted EPS from continuing operations was $5.70 versus $6.22.
- Cash from operating activities from continuing operations was $2,129 million, up 2.2% from $2,084 million; cash and short-term investments ended the year at $1,922 million.
- The company spent about $1,169 million on business acquisitions in 2020 and announced agreements to acquire Tikkurila, Wörwag and VersaFlex in early 2021.
- Impairment charges of $93 million and business restructuring charges of $174 million, net, were recorded in 2020, and the 2020 restructuring program had a pretax charge of $176 million.
- Management expects restructuring savings of at least $120 million in 2021 and a 2021 effective tax rate of 22% to 24%.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, PPG Industries kept $0.08.
- Revenue$13.83B100.0%
- Cost of revenue−$7.78B56.2%
- Gross profit$6.06B43.8%
- Operating costs−$3.95B28.5%
- Operating income$2.11B15.2%
- Interest, other & tax−$1.03B7.5%
- Net income$1.07B7.8%
Where FY2020 revenue went
$13.83B- Cost of revenue: $7.78B, 56% of revenue
- SG&A: $3.39B, 24% of revenue
- Net income: $1.07B, 7.8% of revenue
- R&D: $401.0M, 2.9% of revenue
- Other operating costs: $158.0M, 1.1% of revenue
- Interest, other & tax: $1.03B, 7.5% of revenue
Kept 7.8% as net incomeOther operating costs $158.0M · 1.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 18, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $13.83B$15.15B | −8.7% |
| Cost of Revenue | $7.78B$8.65B | −10.1% |
| Gross Profit | $6.06B$6.49B | −6.7% |
| R&D Expenses | $401.00M$456.00M | −12.1% |
| SG&A Expenses | $3.39B$3.60B | −6.0% |
| Operating Income | $2.11B$2.27B | −7.1% |
| Interest Expense | $138.00M$132.00M | +4.5% |
| Net Income | $1.07B$1.24B | −13.6% |
| EPS (Basic) | $4.47$5.25 | −14.9% |
| EPS (Diluted) | $4.45$5.22 | −14.8% |
| Shares Outstanding (Basic) | 236.80M236.90M | 0.0% |
| Shares Outstanding (Diluted) | 237.90M238.20M | −0.1% |
05—Questions
Frequently Asked Questions
Why did PPG's sales and earnings decline in 2020?
The filing attributes the decline mainly to lower sales volumes from the COVID-19 pandemic and reduced global economic activity. Unfavorable foreign currency translation reduced net sales by about $150 million, and sales volumes fell most in aerospace, automotive OEM and automotive refinish coatings.
How did PPG's cash position and capital deployment change in 2020?
PPG ended 2020 with about $1.9 billion in cash and short-term investments. It deployed nearly $1.2 billion on acquisitions, about $300 million on capital expenditures and about $495 million on dividends, and did not repurchase any shares in 2020.
What did management say about the outlook for 2021?
Management expects regional growth rates in 2021 to be higher than 2020 in all regions. It also expects raw material, logistics and certain other costs to be inflationary, and anticipates first-quarter 2021 sales volumes in Industrial Coatings to be higher than the prior-year quarter by a mid-to-high-single-digit percentage.
What legal and environmental matters could affect PPG?
PPG holds about $300 million of environmental remediation reserves, mainly for the New Jersey Chrome sites, and may face unreserved losses estimated at $100 million to $200 million. The SEC investigation into accounting matters remained ongoing, and the company settled a related securities class action for $25 million, which its insurers fully funded.
What dividend and share repurchase activity did PPG report?
PPG paid $2.10 per share in dividends in 2020, and the quarterly dividend was raised to $0.54 per share in September 2020, marking the 49th annual increase. About $1.5 billion remained under the share repurchase authorization at year-end.
06—Continue