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Letter to the Editor

PPG Q3 Earnings Up 37%

This compares with third quarter 2003 net income of $142 million, or 83 cents a share, including an aftertax charge of $5 million, or 3 cents a share, to reflect the net increase in the value of the asbestos settlement. Sales were $2.21 billion.

For the first nine months of 2004, PPG recorded net income of $500 million, or $2.89 a share, including aftertax charges of $13 million, or 8 cents a share, to reflect the net increase in the value of the company's obligation under the asbestos settlement and $10 million, or 6 cents a share, to reflect the expensing of stock options in 2004; and income of $13 million, or 7 cents a share, to reflect the benefit of Medicare legislation. Sales were $7.10 billion.

For the first nine months of 2003, PPG recorded net income of $372 million, or $2.18 a share, which includes aftertax charges of $6 million, or 3 cents a share, for the cumulative effect of a required change in the accounting for asset retirement obligations; $15 million, or 9 cents a share, to reflect the net increase in the value of the company's obligation under the asbestos settlement; and $2 million, or 1 cent a share, for restructuring. Sales for the first nine months of 2003 were $6.58 billion.

"Our strong performance this quarter continues to reflect the benefits of actions we have taken to improve the quality of our business portfolio aided by the continued expansion of the global industrial economy," said Raymond W. LeBoeuf, chairman and chief executive officer. "In addition, our results reflect our continued success in reducing costs and improving productivity. These PPG hallmarks will play a critical role in our performance amid the ongoing challenges of higher energy and raw material costs.

"While the rates of growth may vary from market to market and country to country, we believe the odds favor continued growth in the global economy," LeBoeuf added. "Under these conditions, we expect strong cash flow to continue. In the third quarter we generated about $350 million in cash from operations, enabling us to retire more than $300 million in debt and reduce our debt-to-total capital ratio to the lower end of our target range of 30 to 40 percent. Given our strong cash position, we will complete the purchase of $100 million of our stock by year end, as previously announced."

The effective tax rate for full year 2004 is estimated to be 31.5 percent compared with an estimate of 34 percent in the second quarter. The year-to-date impact of the change in the estimate has been reflected in the third quarter results of operations.

Coatings sales increased $97 million, or 8 percent, as stronger volumes across all businesses and the strengthening of foreign currencies were offset slightly by lower prices in the automotive business. Operating earnings were up $11 million. Improved volumes, lower pension and postretirement medical costs and the favorable effects of foreign currency translation increased operating earnings. The impact of cost inflation, including raw materials, and lower selling prices reduced operating earnings.

Glass sales increased $10 million, or two percent, as higher volumes in the fiber glass and flat glass businesses and the strengthening of foreign currencies more than offset lower selling prices across all businesses. Operating earnings were up $20 million. Improved manufacturing efficiencies, higher other income, increased volumes and lower pension and postretirement medical costs increased operating earnings. The impact of lower selling prices, cost inflation and higher energy costs reduced operating earnings.

Chemicals sales increased $96 million, or 22 percent, on higher volumes primarily for commodity and optical products, higher selling prices for commodity products and the strengthening of foreign currencies. Operating earnings were up $31 million as improved volumes, higher selling prices and lower environmental remediation costs more than offset higher energy and raw material costs.

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