A timely acquisition and an impressive global presence has bolstered PPG's growth despite a difficult economy, the company says. PPG recently reported record sales totaling $3.7 billion for the first quarter 2008, surpassing the prior year's results by 41 percent and setting an all-time record. The company also reported a first quarter net income of $100 million, or 61 cents per share, comprising net income from continuing operations of $87 million, or $.53 per share, and income from discontinued operations, net of tax, of $13 million, or $.08 cents per share.
"We are very pleased to have delivered solid organic growth despite a slowdown in the overall U.S. economy," says Charles E. Bunch, PPG chairman and chief executive officer. "We achieved this growth due, in part, to our prior investments in coatings, optical products and emerging regions, which have strengthened our overall portfolio. In addition, the recent acquisition of SigmaKalon contributed to our record first quarter results. This business, which we are successfully integrating, has exceeded our expectations."
Reported net income from continuing operations includes non-recurring acquisition-related costs of $89 million aftertax, or $.54 per share, stemming from the company's acquisition of the SigmaKalon Group in January. Adjusted net income from continuing operations was $176 million, or $1.07 per share, as detailed below. The company's tax rate on income from continuing operations for the quarter was 30 percent.
PPG's sales for the first quarter 2007 were $2.6 billion. First quarter net income was $194 million, or $1.17 per share, comprising net income from continuing operations of $176 million, or $1.06 per share, and income from discontinued operations, net of tax, of $18 million, or $.11 per share. Net income from continuing operations included an aftertax charge of $5 million, or $.03 per share, to reflect the net increase in the value of the company's obligation under its proposed asbestos settlement agreement, which is subject to pending court proceedings. Adjusted net income from continuing operations was $181 million, or $1.09 per share. The company's tax rate on income from continuing operations was 23 percent.
Bunch notes that a key measure of the company's growth is its total business segment earnings, which increased 17 percent.
"Looking ahead, while we will likely continue to experience a difficult North American economy, we remain confident in our ability to grow both sales and earnings. This is due to our leading products and technologies, and because we have significantly broadened our geographic presence. In fact, the United States and Canada now account for only about 45 percent of our total sales," Bunch says. "We are focused on improving our already strong cash generation, and we intend to use this cash to continue to grow earnings, initially through paying down debt."
Performance Coatings segment sales in the first quarter increased $259 million, or 30 percent, as a result of the SigmaKalon and Barloworld acquisitions, the positive impact of stronger foreign currencies, increased selling prices and improved volumes. Segment earnings were comparable to last year, as favorable manufacturing costs and currency were offset by growth-related expenses. Stronger price gains were offset by inflation in raw materials, transportation and other costs.
Industrial Coatings segment sales for the quarter increased $189 million, or 22 percent, as a result of the SigmaKalon acquisition, stronger foreign currencies and improved volumes in all businesses. The segment experienced volume declines in North America that were more than offset by improved volumes in all other regions. Segment earnings were flat. The positive impact of higher sales volumes, stronger foreign currencies, acquisitions and lower manufacturing costs were offset by inflation and higher costs to support growth.
Architectural Coatings EMEA (Europe, Middle East and Africa) is a newly formed segment comprising about 70 percent of acquired SigmaKalon sales. Segment sales for the quarter were $536 million. Historically, first quarter sales have represented about 20 percent of the annual sales of this business, and the level in 2008 reflects low- to mid-single-digit growth year over year, excluding the favorable impact of currency. Segment earnings were $9 million, which included most of the $20 million of amortization expense related to acquired intangible assets.
Optical and Specialty Materials segment sales for the quarter increased $44 million, or 18 percent, as a result of improved volumes, particularly in the optical products business. Stronger foreign currencies and increased selling prices also added to growth. Segment earnings were up $11 million due to higher sales volumes and despite higher advertising expenses related in part to the launch of Transitions Optical's next-generation lens product.
Commodity Chemicals segment sales for the quarter increased $52 million, or 14 percent, due primarily to increased selling prices. Segment earnings improved by $24 million, as higher selling prices and lower manufacturing costs more than offset the impact of inflation.
Glass segment sales increased $8 million, or 3 percent, based on the positive impact of stronger foreign currencies and increased selling prices. These were slightly moderated by lower sales volumes. Segment earnings improved by $13 million due to lower manufacturing costs. The absence of a prior year write-off of an investment in a fiber glass joint venture offset the negative impact of inflation.
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