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PPG Reports First Quarter Results



  PPG Reports First Quarter Results

  * First quarter 2013 sales from continuing operations of $3.3 billion
  * First quarter adjusted earnings per diluted share from continuing
    operations of $1.58
  * Reported earnings per diluted share of $16.31, including large
    nonrecurring gain from commodity chemicals business separation
  * Aggregate coatings segment earnings increased 13 percent with growth in
    each region
  * Incremental restructuring savings of nearly $30 million realized in
    quarter
  * Cash deployed for share repurchases during quarter totaled $140 million
  * Increased synergy target following completion of AkzoNobel North American
    architectural coatings acquisition

Business Wire

PITTSBURGH -- April 18, 2013

PPG Industries (NYSE:PPG) today reported first quarter 2013 net sales from
continuing operations of $3.3 billion, equal with the prior year. Reported net
income and earnings per diluted share for the current and prior year include
several nonrecurring items, which are detailed in a reconciliation below.
First quarter 2013 adjusted net income and earnings per diluted share from
continuing operations, excluding nonrecurring charges, were $235 million and
$1.58 respectively. First quarter 2012 adjusted net income and earnings per
diluted share from continuing operations, excluding nonrecurring charges, were
$216 million and $1.41 respectively.

“During the quarter, we delivered strong performance in our coatings
portfolio, as we grew aggregate coatings segment earnings by 13 percent versus
last year’s record level,” said Charles E. Bunch, PPG chairman and CEO. “We
continued to experience notable demand divergence among the major regional
economies, with activity generally strong in North America, broad growth
improvement in Asia and persistent weakness in Europe.

“Despite these regional differences, our coatings earnings grew in each major
region aided principally by our proactive cost-management actions coupled with
the continued strength of several end-use markets, including automotive OEM,
aerospace and U.S. construction,” Bunch said.

Bunch commented that sales and earnings fell in the Optical and Specialty
Materials segment based on weaker consumer demand in the United States, which
was partly offset by volume growth from a strong new product introduction in
Europe in February. Glass segment earnings declined versus the prior year on
weaker fiber glass results, Bunch said.

“Strategically, we completed the acquisition of the AkzoNobel North American
architectural coatings business April 1. The acquired business, with 2012
sales of $1.5 billion, more than doubles our business serving the construction
and maintenance markets in the region,” Bunch said. “Since the acquisition
announcement in December 2012, teams have been working diligently to ensure
the integration is seamless for customers and successful in creating value for
our shareholders. These teams have identified additional cost-improvement
opportunities, and we have increased our synergy target by 25 percent. We now
expect to achieve $200 million in annual synergies within the first three full
years, including $60 million in annual cost reductions that we realized when
the transaction closed.

“Looking to the second quarter, we anticipate positive momentum in the United
States and Asia to continue, while conditions in Europe remain challenging
with limited prospects for near-term improvement,” Bunch said. “We expect our
earnings growth trend will continue based on our geographic and end-use market
diversity, additional cost improvements from our restructuring program, and
continued aggressive management of our businesses which is a hallmark of PPG.
Finally, we are working to capitalize on our strong balance sheet as we
continue to analyze opportunities to increase earnings though prudent cash
deployment.”

The company today reported that cash and short-term investments totaled
approximately $2.4 billion as of March 31, 2013. The company spent
approximately $140 million on share repurchases, primarily in the months of
February and March following the separation of PPG’s commodity chemicals
business. The company also repaid $600 million of term debt that matured near
the end of the first quarter. The payment on April 1, 2013, of about $950
million, including estimated closing adjustments, for the acquisition of the
AkzoNobel architectural coatings business will be reflected in the company’s
second quarter financial statements.

As announced January 28, 2013, the company completed the separation of its
commodity chemicals business and subsequent merger with a subsidiary of
Georgia Gulf Corporation into a combined company now named Axiall Corporation.
The merger closed following the expiration of the exchange offer under which
PPG reduced its shares outstanding by approximately 10.8 million shares, or
about 7 percent. Current year and prior year results for the former Commodity
Chemicals segment and a net gain on the separation transaction have been
reported as discontinued operations.

Reconciliation of year-over-year financial results:

First quarter 2013 net sales were $3.3 billion, with reported net income from
continuing operations of $219 million, or $1.48 per diluted share, and
adjusted net income from continuing operations of $235 million, or $1.58 per
diluted share. Nonrecurring after-tax charges were $21 million, or 14 cents
per diluted share, for settlement of legacy Canadian pension plans and legacy
chemical business environmental remediation charges, and $5 million, or 3
cents per diluted share, for acquisition-related costs. The quarter also
includes a nonrecurring after-tax benefit of $10 million, or 7 cents per
diluted share, for the retroactive impact of U.S. tax law changes that were
enacted in early 2013 and not included in previously reported 2012 earnings.
First quarter 2013 net income from discontinued operations of $2.2 billion, or
$14.83 per diluted share, is principally the gain on the separation and merger
of PPG’s commodity chemicals business. PPG’s tax rate on ongoing earnings from
continuing operations was 24 percent.

First quarter 2012 net sales were $3.3 billion, with reported net income
including nonrecurring charges of $13 million, or 8 cents per diluted share,
comprised of a net loss from continuing operations of $50 million, or 32 cents
per diluted share, and net income from discontinued operations, net of tax, of
$63 million, or 40 cents per diluted share. Nonrecurring after-tax charges for
the quarter were $266 million, or $1.73 per diluted share. Adjusted net income
and earnings per share, excluding the nonrecurring charges, were $279 million
and $1.81 per diluted share, comprised of net income from continuing
operations of $216 million, or $1.41 per diluted share, and net income from
discontinued operations, net of tax, of $63 million, or 40 cents per diluted
share.

A Regulation G Reconciliation of first quarter 2013 and first quarter 2012
adjusted net income and earnings per diluted share from continuing operations
and discontinued operations to reported net income and earnings per diluted
share from continuing operations and discontinued operations is included
below.

Reporting segment financial results:

Performance Coatings segment sales for the quarter were $1.1 billion, down 2
percent versus the prior year, as volumes declined 5 percent and were partly
offset by sales gains from acquisitions held for less than one year and
pricing. Segment sales benefited from continued growth in aerospace, where
industry demand remains solid. U.S. architectural coatings sales grew despite
two fewer sales days in the quarter and in comparison with a strong prior year
period when favorable weather resulted in an early start to the painting
season. Offsetting these gains was further notable weakening in marine
new-build activity due to continued lower industry demand. Volumes declined in
automotive refinish primarily due to European market weakness. Segment
earnings improved by 8 percent to $172 million due to strong operating
performance, as lower costs from restructuring actions and ongoing cost
management more than offset the impact of lower sales volumes and inflation.

Industrial Coatings segment sales for the quarter were $1.2 billion, advancing
10 percent, or $107 million, versus the prior year on higher volumes and
acquisitions. Automotive OEM (original equipment manufacturer) coatings
volumes achieved global growth of 8 percent, with growth achieved in all major
regions including modest growth in Europe. Industrial coatings demand varied
by region and end-use market, with solid Asia Pacific growth, consistent North
American results and broad declines in many European markets. Packaging
coatings grew modestly, largely due to emerging regions. Segment earnings for
the quarter were $178 million, an increase of 19 percent as gains from
improved sales were coupled with lower operating costs, including benefits
from ongoing cost management and restructuring-related savings.

Architectural Coatings – EMEA (Europe, Middle East and Africa) segment sales
for the quarter were $454 million, a decline of $63 million, or 12 percent,
versus the prior year due to volume declines. Volumes were negatively impacted
by broad weakness in economies throughout the region. Fewer sales days and
harsh weather conditions also contributed to the reduced activity. Despite
lower sales, segment earnings of $20 million grew by $4 million versus the
prior year, aided by aggressive cost-management actions and restructuring-cost
benefits.

Optical and Specialty Materials first quarter 2013 segment sales were $314
million, down $20 million, or 6 percent, versus a record prior-year period
that benefited from the optical industry recovery after late 2011 Thailand
flooding. The lower volumes reflected the return to a traditional seasonal
sales pattern along with somewhat lower optical consumer activity in the
United States. Partly offsetting this weakness was optical growth in Europe
due to the successful commercial introduction of Generation VII TRANSITIONS(R)
lenses in February, coupled with modest silica demand improvements. Segment
earnings of $99 million were down 9 percent, as the earnings impact of lower
sales was partly offset by lower costs.

Glass segment sales were $256 million for the quarter, matching the prior
year. Higher flat glass volumes were more than offset by lower fiber glass
pricing resulting from reduced demand. Segment earnings were $5 million, a
decrease of $3 million from the prior-year quarter, due to lower fiber glass
pricing, reduced equity earnings and the negative impact of inflation,
including higher natural gas costs, which offset strong manufacturing cost
improvements.

PPG: BRINGING INNOVATION TO THE SURFACE.(TM)

PPG Industries' vision is to continue to be the world’s leading coatings and
specialty products company. Through leadership in innovation, sustainability
and color, PPG helps customers in industrial, transportation, consumer
products, and construction markets and aftermarkets to enhance more surfaces
in more ways than does any other company. Founded in 1883, PPG has global
headquarters in Pittsburgh and operates in nearly 70 countries around the
world. Sales in 2012 were $15.2 billion. PPG shares are traded on the New York
Stock Exchange (symbol:PPG). For more information, visit www.ppg.com.

Additional Information

PPG will provide detailed commentary regarding its financial performance,
including presentation-slide content, on the PPG Investor Center at
www.ppg.com at 1 p.m. ET today, April 18. The company will hold a conference
call to review its first quarter 2013 financial performance today at 2 p.m.
ET. The dial-in numbers are: in the United States, 866-510-0707;
international, 617-597-5376; passcode 17763767. The conference call also will
be available in listen-only mode via Internet broadcast from the PPG Investor
Center at www.ppg.com (Windows Media Player). A telephone replay will be
available today, April 18, beginning at approximately 4 p.m. ET, through
Thursday, May 2, at 11:59 p.m. ET. The dial-in numbers for the replay are: in
the United States, 888-286-8010; international, 617-801-6888; passcode
68862015. A Web replay also will be available on the PPG Investor Center at
www.ppg.com, beginning at approximately 4 p.m. ET today, April 18, 2013,
through Friday, April 18, 2014.

Forward-Looking Statements

Statements in this news release relating to matters that are not historical
facts are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 reflecting the company’s current view
with respect to future events or objectives and financial or operational
performance or results. These matters involve risks and uncertainties as
discussed in PPG Industries’ periodic reports on Form 10-K and Form 10-Q, and
its current reports on Form 8-K, filed with the Securities and Exchange
Commission (SEC). Accordingly, many factors could cause actual results to
differ materially from the company’s forward-looking statements.

Among these factors are global economic conditions, increasing price and
product competition by foreign and domestic competitors, fluctuations in cost
and availability of raw materials, the ability to maintain favorable supplier
relationships and arrangements, the realization of anticipated cost savings
from restructuring initiatives, difficulties in integrating acquired
businesses and achieving expected synergies therefrom, the ability to
penetrate existing, developing or emerging foreign and domestic markets,
economic and political conditions in international markets, foreign exchange
rates and fluctuations in such rates, fluctuations in tax rates, the impact of
future legislation, the impact of environmental regulations, unexpected
business disruptions and the unpredictability of possible future litigation,
including litigation that could result if the asbestos settlement discussed in
PPG’s filings with the SEC does not become effective. However, it is not
possible to predict or identify all such factors.

Consequently, while the list of factors presented here is considered
representative, no such list should be considered to be a complete statement
of all potential risks and uncertainties. Unlisted factors may present
significant additional obstacles to the realization of forward-looking
statements.

Consequences of material differences in results as compared with those
anticipated in the forward-looking statements could include, among other
things, business disruption, operational problems, financial loss, legal
liability to third parties and similar risks, any of which could have a
material adverse effect on PPG’s consolidated financial condition, results of
operations or liquidity.

Forward-looking statements speak only as of the date of their initial
issuance, and PPG does not undertake any obligation to update or revise
publicly any forward-looking statement, whether as a result of new
information, future events or otherwise, except as otherwise required by
applicable law.

Regulation G Reconciliation

PPG Industries believes investors' understanding of the company's operating
performance is enhanced by the disclosure of net income and earnings per
diluted share adjusted for nonrecurring charges. PPG's management considers
this information useful in providing insight into the company’s ongoing
operating performance because it excludes the impact of items that cannot
reasonably be expected to recur on a quarterly basis. Net income and earnings
per diluted share adjusted for these items are not recognized financial
measures determined in accordance with U.S. generally accepted accounting
principles (GAAP) and should not be considered a substitute for net income or
earnings per diluted share or other financial measures as computed in
accordance with U.S. GAAP. In addition, adjusted net income and earnings per
diluted share may not be comparable to similarly titled measures as reported
by other companies.

The following is a reconciliation of reported and adjusted net income and
earnings per diluted share for the first quarter 2013 and first quarter 2012:

 
Regulation G Reconciliation – Net Income and Earnings per Diluted Share
($ in millions, except per-share amounts)
 
                        Continuing            Discontinued          Total PPG
                        Operations            Operations
                        $         EPS         $          EPS        $          EPS
March 31, 2013                                                                  
As reported             $219      $1.48       $2,191     $14.83     $2,410     $16.31
Legacy Pension and      21        0.14                              21         0.14
Environmental Costs
Acquisition-Related     5         0.03                              5          0.03
Costs
Retroactive Benefit
of U.S. Tax Law         (10)      (0.07)                            (10)       (0.07)
Change
Adjusted, excluding     $235      $1.58       $2,191     $14.83     $2,426     $16.41
nonrecurring items
                                                                                
March 31, 2012                                                                  
As reported             $(50)     $(0.32)     $63        $0.40      $13        $0.08
Business                163       1.06                              163        1.06
Restructuring
Environmental           99        0.64                              99         0.64
Remediation Costs
Acquisition-Related     4         0.03                              4          0.03
Costs
Adjusted, excluding     $216      $1.41       $63        $0.40      $279       $1.81
nonrecurring items
                                                                                

PPG INDUSTRIES AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENT OF OPERATIONS (unaudited)
(All amounts in millions except per-share data)
                                                         3 Months Ended
                                                         March 31
                                                         2013        2012
                                                                      
Net sales                                                $ 3,331     $ 3,333
Cost of sales, exclusive of depreciation and               1,947       1,946
amortization (Note A)
Selling, R&D and administrative expenses (Note B)          912         933
Depreciation                                               81          79
Amortization                                               26          29
Interest expense                                           53          51
Interest income                                            (10   )     (10   )
Asbestos settlement - net                                  3           3
Business restructuring                                     -           208
Other charges - net (Note C)                               1           141    
INCOME BEFORE INCOME TAXES                                 318         (47   )
Income tax expense (benefit) (Note D)                      64          (31   )
Income (loss) from continuing operations, net of           254         (16   )
income taxes
Income from discontinued operations, net of income         2,191       67     
taxes (Note E)
Net income attributable to the controlling and             2,445       51
noncontrolling interests
    Less: Net income attributable to noncontrolling        (35   )     (38   )
    interests
NET INCOME (ATTRIBUTABLE TO PPG)                         $ 2,410     $ 13     
                                                                      
Amounts attributable to PPG:                                          
    Income (loss) from continuing operations, net of     $ 219       $ (50   )
    tax
    Income from discontinued operations, net of tax      $ 2,191       63     
Net income (attributable to PPG)                         $ 2,410     $ 13     
                                                                      
Earnings per common share (attributable to PPG)                       
    Income (loss) from continuing operations, net of     $ 1.50      $ (0.33 )
    tax
    Income from discontinued operations, net of tax        14.99       0.41   
Net income (attributable to PPG)                         $ 16.49     $ 0.08   
                                                                      
Earnings per common share (attributable to PPG) -                     
assuming dilution
    Income (loss) from continuing operations, net of     $ 1.48        (0.32 )
    tax
    Income from discontinued operations, net of tax        14.83       0.40   
Net income (attributable to PPG)                         $ 16.31     $ 0.08   
                                                                      
Average shares outstanding                                 146.1       152.8  
                                                                      
Average shares outstanding - assuming dilution             147.7       154.5  
                                                                              

Note A:
     Cost of sales, exclusive of depreciation and amortization includes $16
     million for final settlement of certain legacy Canadian pension plans in
     2013 and the flow-through cost of sales of the step up to fair value of
     inventory acquired from Spraylat of $3 million in 2013 and Dyrup and
     Colpisa of $6 million in 2012.
Note B:
     Selling, R&D and administrative expenses includes $2 million for final
     settlement of certain legacy Canadian pension plans and $4 million for
     acquisition related charges in 2013.
Note C:
     The quarter ended March 31, 2013 includes a pretax charge of $12 million
     related to environmental remediation at a legacy manufacturing site. The
     quarter ended March 31, 2012 includes a pretax charge of $159 million,
     relating primarily to continued environmental remediation activities at
     PPG’s former Jersey City, N.J., manufacturing plant and associated sites.
Note D:
     The effective rate on pretax earnings from continuing operations for the
     quarter ended March 31, 2013 includes tax benefits of $5 million or 26.7
     percent for final settlement of legacy pension plans, $4 million or 37.4
     percent for a legacy environmental remediation charge, $2 million or 26.4
     percent for acquisition-related costs. The quarter also includes an
     after-tax benefit of $10 million for the retroactive impact of a US tax
     law change enacted in early 2013 and that was not included in previously
     reported 2012 earnings. The effective tax rate on the remaining pre-tax
     earnings from continuing operations was 24 percent resulting in tax
     expense of $85 million.
     The effective tax rate on pretax earnings from continuing operations for
     the quarter ended March 31, 2012 includes tax benefits of $60 million or
     37.7 percent for estimated environmental remediation costs primarily at
     sites in New Jersey, $45 million or 21.4 percent for business
     restructuring charges and $2 million or 28.6 percent for
     acquisition-related expenses stemming from the integration of Dyrup A/S
     in Europe and Colpisa in Latin America. The effective tax rate on the
     remaining pre-tax earnings from continuing operations was 23.5 percent
     resulting in tax expense of $76 million.
Note E:
     Income from discontinued operations includes the historical operating
     results of PPG's former Commodity Chemicals business that was separated
     on January 28, 2013. For the quarter ended March 31, 2013 income from
     discontinued operations includes a net gain on the separation transaction
     of $2.2 billion.
      

BALANCE SHEET HIGHLIGHTS (unaudited)                                
 
                                             March 31    March 31    Dec. 31
                                             2013        2012 (b)    2012 (b)
($ in millions)
Current assets:
  Cash and cash equivalents                  $ 2,021     $ 978       $ 1,306
  Short-term investments (a)                   359         56          1,087
  Receivables - net                            2,824       3,236       2,813
  Inventories                                  1,698       1,830       1,687
  Other                                        824         844         822    
  Total current assets                       $ 7,726     $ 6,944     $ 7,715  
                                                                      
Current liabilities:
  Short-term debt and current portion        $ 48        $ 669       $ 642
  of long-term debt
  Asbestos settlement                          680         610         683
  Accounts payable and accrued                 2,999       3,279       3,136  
  liabilities
  Total current liabilities                  $ 3,727     $ 4,558     $ 4,461  
                                                                      
Long-term debt                               $ 3,353     $ 2,988     $ 3,368  
                                                                      
PPG OPERATING METRICS (unaudited)
                                                                      
                                             March 31    March 31    Dec. 31
                                             2013        2012 (b)    2012 (b)
($ in millions)
Operating Working Capital (c)
  Amount                                     $ 2,837     $ 3,241     $ 2,878
  As a percent of quarter sales,               21.3  %     21.6  %     19.7  %
  annualized
                                                                              

      The increase in short-term investments from March 2012 to March 2013 is
(a)   partly due to proceeds received from the separation of PPG's commodity
      chemicals segment in January 2013.
       
(b)   Inclusive of PPG's former Commodity Chemicals business that was
      separated in January 2013.
      Excluding the Commodity Chemicals business, operating working capital
      was $2,989 or 22.4 percent at March 31, 2012 and $2,634 million or 20.3
      percent at December 31, 2012.
       
      Operating working capital includes (1) receivables from customers, net
(c)   of the allowance for doubtful accounts, plus (2) inventories on a
      first-in, first-out (FIFO) basis, less (3) the trade creditor's
      liability.
       

BUSINESS SEGMENT INFORMATION (unaudited)                    
                                               3 Months Ended
                                               March 31
                                               2013          2012
                                               (millions)
                                                              
Net sales
      Performance Coatings                     $ 1,124       $ 1,150
      Industrial Coatings                        1,183         1,076
      Architectural Coatings - EMEA              454           517
      Optical and Specialty Materials            314           334
      Glass                                      256           256    
      TOTAL                                    $ 3,331       $ 3,333  
                                                              
Segment income
      Performance Coatings                     $ 172         $ 160
      Industrial Coatings                        178           150
      Architectural Coatings - EMEA              20            16
      Optical and Specialty Materials            99            109
      Glass                                      5             8      
      TOTAL                                      474           443
Legacy items (Note A)                            (46   )       (175  )
Business restructuring (Note B)                  -             (208  )
Acquisition-related costs (Note C)               (7    )       (6    )
Interest expense, net of interest income         (43   )       (41   )
Other unallocated corporate expense              (60   )       (60   )
INCOME BEFORE INCOME TAXES                     $ 318         $ (47   )
                                                                      

Note A:
     Legacy items include current costs related to former operations of the
     company, including pension and other postretirement benefit costs,
     certain charges for legal matters and environmental remediation costs,
     and certain charges which are considered to be unusual or nonrecurring
     including the earnings impact of the proposed asbestos settlement. Legacy
     items also include equity earnings from PPG's approximate 40 percent
     investment in the former automotive glass and services business.
     The quarter ended March 31, 2013 includes pretax charges of $18 million
     charge for final settlement of certain legacy Canadian pension plans and
     $12 million for environmental remediation activities at a legacy
     operating plant site. The quarter ended March 31, 2012 includes a pretax
     charge of $159 million related primarily to continued environmental
     remediation activities at PPG’s former Jersey City, N.J., manufacturing
     plant and associated sites.
Note B:
     The quarter ended March 31, 2012 includes business restructuring charges
     of $65 million for the Performance Coatings segment, $46 million for the
     Industrial Coatings segment, $63 million for the Architectural Coatings -
     EMEA segment, $32 million for the Optical and Specialty Materials
     segment, and $2 million for Corporate. These costs are considered to be
     unusual and non-recurring and will not reduce the segment earnings used
     to evaluate the performance of the operating segments.
Note C:
     The three months ended March 31, 2013 includes $4 million of certain
     acquisition-related costs. In addition, the flow-through cost of sales of
     the step up to fair value of inventory acquired from Spraylat of $3
     million in 2013 and Dyrup and Colpisa of $6 million in 2012 are included
     in this line. These costs are considered to be unusual and non-recurring
     and will not reduce the segment earnings used to evaluate the performance
     of the operating segments.

 
Bringing innovation to the surface is a trademark of PPG Industries Ohio, Inc.
Transitions is a registered trademark of Transitions Optical, Inc.
 

Contact:

PPG Industries, Inc.
Jeremy Neuhart, PPG Corporate Communications, 412-434-3046
neuhart@ppg.com
or
Investors:
Vince Morales, PPG Investor Relations, 412-434-3740
vmorales@ppg.com
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