PPG reported second quarter 2019 net sales of approximately $4 billion, down nearly three percent versus the prior year. Net sales in constant currencies were about one percent higher than the prior year driven by higher selling prices of more than two percent. Sales volumes were down about four percent versus the prior year in aggregate, including about 1.5 percent stemming from the previously announced U.S. architectural coatings customer-assortment changes. Unfavorable foreign currency translation impacted net sales by more than three percent, or about $130 million, and acquisition-related sales, net of divestitures, added more than two percent to sales growth.

Second quarter 2019 reported net income from continuing operations was $270 million, or $1.13 per diluted share. Adjusted net income from continuing operations was $441 million, or $1.85 per diluted share. Adjusted figures exclude an after-tax business restructuring charge of $133 million and other adjustments totaling $38 million, or 56 cents and 16 cents per diluted share, respectively. Second quarter 2018 reported net income from continuing operations was $371 million, or $1.51 per diluted share. Second quarter 2018 adjusted net income from continuing operations was $468 million, or $1.90 per diluted share. For the second quarter 2019, the reported and adjusted effective tax rates were about 24 percent - higher than the second quarter 2018 reported and adjusted effective tax rates of approximately 22 percent. Detailed reconciliations of the reported to adjusted figures are included below.

“We remain committed to recovering our operating margins and in the quarter delivered higher gross profit and segment operating margins compared to the prior year. This is despite weak global industrial production which impacted all major regions and several of our end-use markets including our general industrial and automotive OEM coatings businesses,” said Michael H. McGarry, PPG chairman and CEO. “We continued to benefit from solid growth in several of our businesses, including aerospace and protective and marine coatings.

“We were able to manage through the more challenging business environment with improved selling prices and continued, strong cost management,” McGarry continued. “In reflection of the economic backdrop and to further strengthen our cost position, we announced and began to implement a new cost management program in the second quarter, and we expect the program to deliver $125 million of savings upon completion. Also, we are quickly integrating our recent acquisitions of SEM, Whitford and Hemmelrath, with each exceeding early expectations.

“As we look ahead to the third quarter, we expect industry demand in many of our businesses to remain sluggish," the CEO said. "We expect the momentum of our margin recovery to continue as we work with our customers and suppliers to further offset the multi-year raw material cost inflation we have experienced. We will also remain focused on aggressively managing our businesses, including achieving our target of fully offsetting the earnings impact from the prior year architectural coatings customer assortment changes. Lastly, we continue to have strong financial flexibility and will remain disciplined in our cash deployment with a focus on long-term shareholder value creation.

“We currently expect third quarter earnings per diluted share to be in the range of $1.57 to $1.67,” McGarry added. “We reaffirm our full year 2019 adjusted earnings-per-share growth of 7% to 10% and expect full-year sales growth of a low-single-digit percentage, both excluding currency translation impacts.”

Second Quarter 2019 Reportable Segment Financial Results

Performance Coatings segment second quarter net sales were about $2.4 billion, down about $65 million, or nearly three percent, versus the prior year. Sales in constant currencies were even with the prior year quarter. Acquisition-related sales were approximately $15 million, primarily from the SEM acquisition. Segment volumes were lower by about three percent, including the prior year architectural customer-assortment changes, which reduced segment sales by more than two percent, or about $60 million, year-over-year. Unfavorable foreign currency translation lowered net sales by about $70 million, or nearly three percent.

Aerospace coatings sales volumes grew by a high-single-digit percentage in the quarter and are up a low double-digit percentage for the first six months of the year. Growth continues across all major technology platforms. Organic sales for automotive refinish declined by a low-single-digit percentage due to lower collision claim activity in 2019 and in comparison to strong sales volumes in the prior year quarter. Aggregate organic sales in the protective and marine coatings business increased by a high-single-digit percentage, with positive contributions from both segments. Year-over-year organic sales in architectural coatings – Americas and Asia-Pacific declined a mid-single-digit percentage, with differences by channel and region. In the U.S. and Canada, company-owned architectural coatings same-store sales were relatively flat as weather affected demand. Aggregate year-over-year volumes in the DIY national retail and independent dealer channels declined significantly driven by the customer-assortment changes, which reached the one-year anniversary at the end of the second quarter. Architectural EMEA and Latin American coatings organic sales grew by a low-single-digit percentage led by higher selling prices.

Segment income for the second quarter was $425 million, down $3 million, or about one percent, year-over-year, including unfavorable foreign currency translation impacts of about $10 million. Segment income benefited from higher selling prices, continued cost management and restructuring initiatives, offset by the impact of lower sales volumes.

Industrial Coatings segment second quarter net sales were about $1.6 billion, down about $40 million, or about two percent, versus the prior-year period. Higher selling prices of two percent and acquisition sales of nearly five percent partially offset lower sales volumes of five percent. Acquisition-related sales were approximately $75 million driven by Whitford and Hemmelrath. Unfavorable foreign currency translation lowered sales by about $60 million, or about four percent, versus the prior year.

Automotive OEM coatings net sales volumes decreased by a high-single-digit percentage year-over-year, consistent with lower global automotive industry production rates including notably lower demand in China and Europe. Automotive OEM selling prices were higher in each major region. Industrial coatings sales volumes decreased in most major sub-segments versus the prior year reflecting lower global industrial production demand. Packaging coatings organic sales decreased by a low single-digit percentage year-over-year in comparison to above-market growth in the prior year stemming from technology-based customer conversions.

Segment income for the second quarter was $235 million, up $12 million, or about five percent, year-over-year, including unfavorable foreign currency translation impacts of about $10 million. Segment income benefited from higher selling prices and strong cost management partially offset by the impact of lower sales volumes related.

All businesses continue to aggressively manage costs and execute previously announced cost- savings initiatives. These actions delivered nearly $20 million of savings in the second quarter, consistent with company targets. Second quarter corporate expenses were about $45 million and are expected to be $45 to $50 million in the third quarter.