First quarter 2010 adjusted net income was $115 million. First quarter 2010 net income included an after tax charge of $85 million as a result of a change in U.S. tax law that was part of the U.S. Patient Protection and Affordable Care Act enacted in March 2010. A Regulation G Reconciliation of adjusted net income to reported net income is included below.
“We’ve continued our strong earnings momentum and have posted our third consecutive quarterly record,” said Charles Bunch, PPG chairman and chief executive. “Each of our reporting segments delivered higher year-over-year earnings driven by continued volume growth from a broadening global industrial recovery, including strengthening conditions in Europe.
“Our coatings segments have continued to deliver strong results. In addition to demand improvements, higher pricing in each of our coatings businesses and continued aggressive cost management have buffered the impact of persistent raw material cost increases,” he said. “Operating margins in the Performance Coatings, Industrial Coatings and Architectural Coatings - Europe, Middle East and Africa (EMEA) segments matched those of the previous year, and total coatings segment earnings grew by nearly 12 percent versus the prior year results.”
Bunch stated that construction activity remained low in developed regions and that there were no signs of imminent improvement. Despite this market weakness, the company achieved modest year-over-year volume gains in these markets. Bunch also said that volume growth contributed to record results in the Optical and Specialty Materials segment, and that the company’s Commodity Chemicals and Glass segments benefited from higher pricing resulting in substantially higher earnings versus the recession-impacted first quarter of last year.
“We have continued to deploy our cash for earnings accretion,” he said. While PPG’s recent acquisition activity has been minimal, Bunch said, the company repurchased about $275 million of stock in the quarter, bringing its total repurchases over the past nine months to about $700 million.
“Looking ahead,” Bunch said, “we remain optimistic and expect similar economic trends in the second quarter, which is seasonally our strongest sales quarter of the year. We anticipate further pricing gains in every segment as we continue to confront raw material cost inflation. Finally, we continue to work on initiatives to deploy our cash to grow earnings. We will continue to apply our disciplined approach toward evaluating acquisitions, and we expect to announce several small- to medium-sized bolt-on acquisitions over the next six to nine months.”
Performance Coatings segment sales in the first quarter 2011 increased $87 million, or nine percent, versus last year’s first quarter as a result of higher selling prices and volumes that improved in every region. Sales were aided by strong sales growth in the aerospace and automotive refinish businesses. The protective and marine coatings and architectural coatings - Americas and Asia/Pacific businesses also achieved sales gains. Segment earnings grew $12 million to a first quarter record of $139 million, as volume and pricing gains and a lower cost structure offset increased raw material costs.
Industrial Coatings segment sales for the quarter rose $132 million, or 15 percent, versus improving prior year results. Volumes continued to recover in each region and in many end-use markets. Each business in the segment also realized higher pricing and favorable currency translation that modestly aided sales. Segment earnings for the quarter were $116 million, an increase of $15 million from the prior year’s first quarter due to the volume improvement. The adverse effect of raw material cost inflation was partially countered with higher pricing, aggressive cost management and further efforts to expand raw material sourcing.
Sales for the Architectural Coatings - EMEA segment for the quarter increased $35 million, or eight percent, versus the prior year as a result of positive volumes and pricing. Segment earnings were $12 million for the quarter, an increase of $1 million from the prior year’s first quarter on the improved volumes. Raw material cost inflation is being combated by higher selling prices and product reformulation efforts, including using different polymer technologies and Chinese-produced titanium dioxide.