PITTSBURGH--(BUSINESS WIRE)--PPG (NYSE:PPG) today reported second quarter 2016 net sales of $4.1 billion, down less than 1 percent versus the prior year. Net sales in local currencies grew by more than 1 percent year-over-year, and acquisition-related sales contributed more than 1 percent. Sales volumes and selling prices were flat versus the prior-year period. Unfavorable foreign currency translation impacted net sales by more than 2 percent, or about $95 million.

Second quarter 2016 reported net income was $370 million, or $1.37 per diluted share. Second quarter 2016 adjusted net income was $498 million, or $1.85 per diluted share. Adjusted net income excludes net after-tax charges totaling $128 million, or 48 cents per diluted share, including: asbestos settlement funding-related taxes of $128 million, or 48 cents per diluted share; asset write-downs of $8 million, or 3 cents per diluted share; transaction-related costs of $5 million, or 2 cents per diluted share; and a gain on the sale of the company’s minority ownership interest in Pittsburgh Glass Works of $13 million, or 5 cents per diluted share. The effective tax rate was 44.1 percent for the second quarter, and the adjusted effective tax rate was 25.0 percent.

Second quarter 2015 reported net income and earnings per diluted share were $337 million and $1.23, respectively. Adjusted net income was $458 million, or $1.67 per diluted share, including after-tax charges for business restructuring of $106 million, or 39 cents per diluted share, and transaction-related costs of $15 million, or 5 cents per diluted share. The effective tax rate was 24.3 percent for the second quarter 2015, and the adjusted effective tax rate was 24.5 percent.

“During the quarter, we continued to deliver strong financial results and to execute on our strategic initiatives,” said Michael H. McGarry, PPG president and chief executive officer. “We achieved 11 percent adjusted-earnings-per-share growth, marking 14 consecutive quarters of double-digit percentage growth. This consistent performance over an extended period of time is attributable to several factors, including our successful commercialization of innovative new products, aggressive management of our businesses and cost structure, and earnings-accretive cash deployment,” McGarry said.

“In the quarter, overall sales volumes were consistent with the prior year, reflecting modest growth rates in major economies. Sales volumes grew in our Industrial Coatings segment, driven by above-market growth in general industrial and packaging coatings. Performance Coatings segment sales volumes declined, with lower global architectural coatings volumes partially offset by gains in automotive refinish and a return to growth in our aerospace business. In total, local-currency sales grew year-over-year in the vast majority of our businesses, and in several businesses we outpaced end-use market demand,” McGarry continued.

“Geographically, our European volume growth continued to exceed regional gross domestic product growth, with higher year-over-year results across most end-use markets. Sales volumes accelerated in Asia, supported by growth in China and India that aided both coatings segments. In the U.S. and Canada, net sales declined in comparison to the prior year primarily due to lower architectural coatings volumes. Volumes improved in Latin America on the strength of architectural coatings growth in Mexico and expansion into Central America,” McGarry said.

“In addition, we continued to execute on our strategic objectives during the quarter, including the announced sale of our European fiber glass business, completion of the sale of our minority ownership interest in Pittsburgh Glass Works, and the acquisition of MetoKote, a leading coatings services company. Also during the quarter, we fully funded our portion of the Pittsburgh Corning Asbestos Settlement Trust and announced the annuitization of a sizable portion of our pension obligations, both significant actions to mitigate risk and reduce future earnings volatility,” McGarry commented.

“Looking ahead, we anticipate an acceleration of volume growth in the third quarter, as several of our recent growth initiatives begin to provide benefit. We will maintain discipline regarding our cost structure, including continued focus on realizing targeted benefits from our previously announced business restructuring,” McGarry said.

“Finally, we anticipate accelerated cash deployment in the second half of the year, and we expect total deployment for 2015 and 2016 combined to be toward the upper end of our previously announced earnings-accretive cash deployment targets,” McGarry concluded.

PPG reiterated its commitment to deploy $2.0 billion to $2.5 billion of cash, in years 2015 and 2016 combined, on acquisitions and share repurchases. The company has spent $1.6 billion toward that target to date, including for the MetoKote Corporation acquisition that closed July 1.

During the quarter, the company utilized more than $800 million to fully fund its portion of the Pittsburgh Corning Asbestos Settlement Trust. No share repurchases were completed during the quarter, given the trust-funding obligation and the company’s decision to take advantage of a 5.5 percent per annum prepayment discount on all future trust-funding requirements in the quarter. The company has approximately $770 million remaining under its current share repurchase authorization. PPG reported today that cash and short-term investments totaled approximately $1.7 billion at the end of the second quarter 2016, versus about $1.2 billion for the prior-year period.

Second Quarter 2016 Reportable Segment Financial Results

• Performance Coatings segment second quarter net sales were $2.34 billion, down $72 million, or 3 percent, versus the prior-year period. Sales in local currencies were down less than 1 percent year-over-year. Acquisition-related sales, of about $25 million, and improved selling prices were offset by lower sales volumes, which declined about 2 percent. Unfavorable foreign currency translation impacted net sales by more than 2 percent, or about $60 million.

  Local-currency sales growth continued in automotive refinish coatings at a mid-single-digit percentage rate, reflecting PPG market outperformance and higher industry demand. Aerospace returned to sales volume growth, increasing by a low-single-digit percentage versus the prior year. Protective and marine coatings sales volumes declined primarily due to further marine new-build end-use market weakness. Sales volumes declined slightly in architectural coatings - EMEA (Europe, Middle East and Africa), after improving in the prior three sequential quarters, mainly due to the impact from unfavorable weather patterns and flooding across Western Europe. Architectural coatings - Americas and Asia Pacific sales volumes were lower by a mid-single-digit percentage, including declines in both China and Brazil of more than 20 percent. Architectural coatings volumes also declined in the U.S. and Canada, stemming from continued contraction of the independent dealer channel and lower aggregate volumes at national retailers compared to solid prior-year results, coupled with current-year customer initiatives to permanently reduce inventory levels. Sales volumes in company-owned stores in the U.S. and Canada were up modestly versus the prior year. Local-currency architectural coatings sales growth in Mexico was more than double the country’s GDP growth rate due to improved market penetration and robust store-count growth. Strong architectural coatings volume growth in Central America resulted from the continuing effort to successfully establish a presence in the region.

  Segment income for the second quarter was $428 million, up $17 million, or 4 percent, year-over-year. Factors contributing to this increase included continued strong cost management, with additional business-restructuring benefits, and acquisition-related income. These were partially offset by the impact of lower sales volumes. Foreign currency translation negatively impacted segment income by about $10 million.

• Industrial Coatings segment second quarter net sales were $1.44 billion, up $33 million, or more than 2 percent, versus the prior-year period. Sales in local currencies were up more than 4 percent due to sales volume growth of about 3 percent and acquisition-related sales of approximately $40 million, or about 3 percent. Unfavorable foreign currency translation impacted net sales by 2 percent, or about $30 million.

  Automotive original equipment manufacturer (OEM) coatings sales volumes increased by a low-single-digit percentage, in line with continued modest global automotive industry production growth rates. Industrial coatings and specialty coatings and materials both delivered solid low- to mid-single-digit percentage sales volume growth year-over-year, outpacing global industrial production particularly in Europe and Asia. Packaging coatings continued to deliver above-industry growth rates, as sales volumes increased by a high-single-digit percentage driven primarily by new-technology-related customer conversions.

  Segment income for the second quarter was $292 million, up $32 million, or about 12 percent, year-over-year. This improvement was due to increased income leverage from higher sales volumes, lower total costs that included manufacturing cost efficiencies and increased benefits from business restructuring, and acquisition-related income. Foreign currency translation negatively impacted segment income by approximately $5 million.

• Glass segment net sales were $282 million for the second quarter, up $3 million, or about 1 percent, versus the prior-year period. The increase in sales was primarily due to higher selling prices, which were partially offset by the impact of unfavorable foreign currency translation. Aggregate segment sales volumes were flat year-over-year.

  Flat glass sales volumes declined modestly, mainly early in the quarter, due to the impact of a facility that returned to production in April following a scheduled maintenance outage in the first quarter. Flat glass industry demand remained solid. Fiber glass sales volumes grew slightly, with modest variation by region.

  Segment income of $43 million was up $6 million versus the prior year primarily due to the benefits of higher net sales and cost improvements, which were partially offset by $3 million of flat glass facility repair-related and startup-related expenses and lower equity earnings from Asian joint ventures.

  In the second quarter, PPG announced the sale of its European fiber glass business with annual revenues of approximately $150 million. The transaction is expected close in the second half of 2016.

PPG: WE PROTECT AND BEAUTIFY THE WORLD™

At PPG (NYSE:PPG), we work every day to develop and deliver the paints, coatings and materials that our customers have trusted for more than 130 years. Through dedication and creativity, we solve our customers’ biggest challenges, collaborating closely to find the right path forward. With headquarters in Pittsburgh, we operate and innovate in more than 70 countries and reported net sales of $15.3 billion in 2015. We serve customers in construction, consumer products, industrial and transportation markets and aftermarkets. To learn more, 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, July 21. The company will hold a conference call to review its second quarter 2016 financial performance today at 2 p.m. ET. Participants can pre-register for the conference by navigating tohttp://dpregister.com/10088686. Those participants unable to pre-register may dial: in the United States, 866-777-2509; international, +1-412-317-5413. 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, July 21, beginning at approximately 4:30 p.m. ET, through August 5 at 11:59 p.m. ET. The dial-in numbers for the replay are: in the United States, 877-344-7529; international, +1-412-317-0088; passcode 10088686. A Web replay also will be available on the PPG Investor Center at www.ppg.com, beginning at approximately 4:30 p.m. ET today, July 21, 2016, through July 20, 2017.