PPG Industries (PPG) Q4 2003 earnings summary

Executive summary

• FY03 sales rose 9% to $8.756B; net income was $494M, or $2.89 diluted EPS, versus a $69M loss in FY02, which included a large asbestos-settlement charge.

• Sales gains reflected currency translation, stronger volumes across all segments and higher Chemicals pricing; Glass earnings weakened on lower prices and higher benefit and energy costs.

Financial highlights

• Gross profit was $3.235B and gross margin 36.9%, versus $3.001B and 37.2% in FY02.

• Operating income increased to $978M from $846M; reported net income improved by $563M, with significant listed charges accounting for $514M of the change.

• FY03 income before the $6M after-tax accounting-change effect was $500M; reported net income was $494M.

• Foreign currency translation favorably affected FY03 pretax earnings by ~$50M versus FY02; the weaker dollar increased consolidated net assets by $328M.

Outlook and guidance

• FY04 global real GDP growth was expected to reach its highest level since 2000, possibly exceeding 3%; U.S. growth was expected to continue, with stronger Asian demand, especially in China.

• FY04 capital spending, excluding acquisitions, was forecast at $250M–$300M; the effective tax rate was expected to remain near 35%.

• Pension expense was estimated slightly below FY03; other postretirement benefit costs were expected to rise ~$15M, before any potential Medicare Act benefit.

• SFAS 123 adoption was expected to add $10M after tax, or $0.06 per share, to FY04 stock-compensation expense; estimated per-share effects rise to $0.09 in 2005 and $0.12 in 2006.

• FY04 priorities included customer service, technology investment, manufacturing efficiency and cost reduction; cash flow was intended to continue funding debt reduction and other needs.