SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 2003
Commission File Number 1-1687
PPG INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
| Pennsylvania | 25-0730780 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| One PPG Place, Pittsburgh, Pennsylvania | 15272 | |
| (Address of principal executive offices) | (Zip Code) |
(412) 434-3131
(Registrant’s telephone number, including area code)
As of June 30, 2003, 169,731,960 shares of the Registrant’s common stock, par value $1.66-2/3 per share, were outstanding.
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes x No ¨
PPG INDUSTRIES, INC. AND SUBSIDIARIES
| PAGE(S) | ||||||
| Part I. Financial Information |
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| Item 1. Financial Statements (Unaudited): |
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| Condensed Statement of Income (Loss) | 2 | |||||
| Condensed Balance Sheet | 3 | |||||
| Condensed Statement of Cash Flows | 4 | |||||
| Notes to Condensed Financial Statements | 5-16 | |||||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17-23 | |||||
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
23 | |||||
| Item 4. Controls and Procedures |
23 | |||||
| Part II. Other Information |
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| 24 | ||||||
| Item 5. Other Information |
24 | |||||
| Item 6. Exhibits and Reports on Form 8-K |
24-26 | |||||
| 27 | ||||||
| Certifications |
28-31 | |||||
-1-
PART I. FINANCIAL INFORMATION
| Item 1. | Financial Statements |
PPG INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Statement of Income (Loss) (Unaudited)
(Millions, except per share amounts)
| Three Months Ended June 30 |
Six Months Ended June 30 |
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| 2003 |
2002 |
2003 |
2002 |
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| Net sales |
$ | 2,304 | $ | 2,134 | $ | 4,375 | $ | 4,009 | ||||||||
| Cost of sales |
1,445 | 1,325 | 2,787 | 2,514 | ||||||||||||
| Gross profit |
859 | 809 | 1,588 | 1,495 | ||||||||||||
| Other expenses (earnings): |
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| Selling, general and administrative |
389 | 359 | 766 | 701 | ||||||||||||
| Depreciation |
92 | 92 | 182 | 183 | ||||||||||||
| Research and development |
72 | 68 | 144 | 134 | ||||||||||||
| Interest |
28 | 33 | 56 | 66 | ||||||||||||
| Amortization |
8 | 9 | 15 | 17 | ||||||||||||
| Asbestos settlement—net (Note 13) |
11 | 772 | 16 | 772 | ||||||||||||
| Business restructuring (Note 5) |
3 | (4 | ) | 4 | 77 | |||||||||||
| Other—net |
(7 | ) | (2 | ) | (9 | ) | (21 | ) | ||||||||
| Total other expenses—net |
596 | 1,327 | 1,174 | 1,929 | ||||||||||||
| Income (loss) before income taxes, minority interest and cumulative effect of accounting change |
263 | (518 | ) | 414 | (434 | ) | ||||||||||
| Income tax expense (benefit) |
93 | (186 | ) | 148 | (153 | ) | ||||||||||
| Minority interest |
18 | 13 | 30 | 21 | ||||||||||||
| Income (loss) before cumulative effect of accounting change |
152 | (345 | ) | 236 | (302 | ) | ||||||||||
| Cumulative effect of accounting change, net of tax (Note 2) |
— | — | (6 | ) | (9 | ) | ||||||||||
| Net income (loss) |
$ | 152 | $ | (345 | ) | $ | 230 | $ | (311 | ) | ||||||
| Earnings (loss) per common share (Note 4): |
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| Income (loss) before cumulative effect of accounting change |
$ | 0.90 | $ | (2.04 | ) | $ | 1.39 | $ | (1.79 | ) | ||||||
| Cumulative effect of accounting change, net of tax |
— | — | (0.03 | ) | (0.05 | ) | ||||||||||
| Earnings (loss) per common share |
$ | 0.90 | $ | (2.04 | ) | $ | 1.36 | $ | (1.84 | ) | ||||||
| Earnings (loss) per common share—assuming dilution (Note 4): |
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| Income (loss) before cumulative effect of accounting change |
$ | 0.89 | $ | (2.03 | ) | $ | 1.38 | $ | (1.78 | ) | ||||||
| Cumulative effect of accounting change, net of tax |
— | — | (0.03 | ) | (0.05 | ) | ||||||||||
| Earnings (loss) per common share—assuming dilution |
$ | 0.89 | $ | (2.03 | ) | $ | 1.35 | $ | (1.83 | ) | ||||||
| Dividends per common share |
$ | 0.43 | $ | 0.42 | $ | 0.86 | $ | 0.84 | ||||||||
The accompanying notes to the condensed financial statements are an integral part of this consolidated statement.
-2-
PPG INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Balance Sheet (Unaudited)
| June 30 2003 |
Dec. 31 2002 |
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| (Millions) | ||||||||
| Assets |
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| Current assets: |
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| Cash and cash equivalents |
$ | 153 | $ | 117 | ||||
| Receivables-net |
1,773 | 1,486 | ||||||
| Inventories (Note 6) |
1,004 | 942 | ||||||
| Other |
393 | 400 | ||||||
| Total current assets |
3,323 | 2,945 | ||||||
| Property (less accumulated depreciation of $4,872 million and $4,638 million) |
2,610 | 2,632 | ||||||
| Investments |
276 | 262 | ||||||
| Goodwill (Note 7) |
1,104 | 1,047 | ||||||
| Identifiable intangible assets (Note 7) |
506 | 514 | ||||||
| Other assets |
507 | 463 | ||||||
| Total |
$ | 8,326 | $ | 7,863 | ||||
| Liabilities and Shareholders’ Equity |
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| Current liabilities: |
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| Short-term debt and current portion of long-term debt |
$ | 234 | $ | 352 | ||||
| Asbestos settlement (Note 13) |
289 | 190 | ||||||
| Accounts payable and accrued liabilities |
1,527 | 1,378 | ||||||
| Total current liabilities |
2,050 | 1,920 | ||||||
| Long-term debt |
1,684 | 1,699 | ||||||
| Asbestos settlement (Note 13) |
484 | 566 | ||||||
| Deferred income taxes |
71 | 64 | ||||||
| Accumulated provisions |
921 | 817 | ||||||
| Other postretirement benefits |
531 | 516 | ||||||
| Total liabilities |
5,741 | 5,582 | ||||||
| Commitments and contingent liabilities (Note 13) |
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| Minority interest |
155 | 131 | ||||||
| Shareholders’ equity: |
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| Common stock |
484 | 484 | ||||||
| Additional paid-in capital |
131 | 126 | ||||||
| Retained earnings |
6,282 | 6,197 | ||||||
| Treasury stock |
(3,463 | ) | (3,471 | ) | ||||
| Unearned compensation |
(71 | ) | (85 | ) | ||||
| Accumulated other comprehensive loss (Note 9) |
(933 | ) | (1,101 | ) | ||||
| Total shareholders’ equity |
2,430 | 2,150 | ||||||
| Total |
$ | 8,326 | $ | 7,863 | ||||
The accompanying notes to the condensed financial statements are an integral part of this consolidated statement.
-3-
PPG INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Statement of Cash Flows (Unaudited)
| Six Months Ended June 30 |
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| 2003 |
2002 |
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| (Millions) | ||||||||
| Cash from operating activities |
$ | 412 | $ | 361 | ||||
| Investing activities: |
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| Capital spending |
||||||||
| Additions to property and investments |
(105 | ) | (91 | ) | ||||
| Business acquisitions, net of cash balances acquired |
— | (9 | ) | |||||
| Other |
13 | 6 | ||||||
| Cash used for investing activities |
(92 | ) | (94 | ) | ||||
| Financing activities: |
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| Net change in borrowings with maturities of three months or less |
(113 | ) | (30 | ) | ||||
| Proceeds from other short-term debt |
10 | 52 | ||||||
| Repayment of other short-term debt |
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