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Letter to the Editor

PPG Reports Record Q3 Sales

On Sept. 26, following Hurricane Rita, PPG declared force majeure for products produced at its Lake Charles, La., chemical complex. The damage caused by Hurricane Rita resulted in the shutdown of the Lake Charles facility for a total of eight days in September. On Oct. 6, the facility resumed production at reduced operating rates and has increased production throughout the month.

The majority of the net charges for legal and insurance settlements relate to a settlement reached this week on a civil glass antitrust matter. The case was first filed in 1997 and is pending in federal court. The settlement remains subject to the court's final approval.

Sales were $2.55 billion, a record for the third quarter. That compares with third quarter 2004 net income of $194 million, or $1.12 a share, including an aftertax charge of $4 million, or 3 cents a share, to reflect the net increase in the current value of the company's obligation under its asbestos settlement agreement. Sales were $2.41 billion.

For the first nine months of 2005, PPG recorded net income of $483 million, or $2.81 a share, which includes aftertax charges of $116 million, or 67 cents a share, for net legal and insurance settlements; $11 million, or 6 cents a share, for direct costs related to the impact of hurricanes Katrina and Rita; $12 million, or 7 cents a share, for debt refinancing; and $10 million, or 6 cents a share, to reflect the net increase in the value of the company's obligation under the asbestos settlement agreement. The company estimates that aftertax earnings were also reduced by approximately $6 million, or 4 cents a share, due to lower sales volumes resulting from the hurricanes. Sales for the first nine months of 2005 were $7.70 billion.

For the first nine months of 2004, PPG recorded net income of $500 million, or $2.89 a share, including an aftertax charge 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. Sales were $7.10 billion.

"We delivered record third-quarter sales, and our operating performance was outstanding, despite a variety of significant economic headwinds," said Charles E. Bunch, chairman and chief executive officer. "This is the tenth consecutive quarter we've generated year-over-year record sales. In fact, all six of our coatings businesses and our chemicals segment set third-quarter sales records.

"We remain excited about our growth prospects, fueled by a strong array of products and a growing presence in emerging markets. We believe this will enable us to continue generating strong cash flows, which have been and will be used to benefit our shareholders."

Coatings sales increased $78 million, or six percent, as a result of improved selling prices across most businesses, strengthening foreign currencies and higher volumes, primarily in aerospace and architectural. Operating earnings were up $11 million due to the benefits of higher selling prices, higher other income due to the favorable impact of several insurance settlements and higher volumes, which more than offset the negative impact of inflation, primarily high raw materials costs.

Glass sales decreased $5 million, or one percent, due to lower volumes across all businesses except automotive replacement glass and lower selling prices, which were partially offset by the impact of strengthening foreign currencies. Operating earnings were down $82 million largely due to the adverse impact from the settlement of the civil glass antitrust matter. Additionally, inflation, including higher energy costs, and lower volumes exceeded the benefits from improved manufacturing efficiencies.

Chemicals sales increased $65 million, or 12 percent, due primarily to higher selling prices for chlor-alkali products. These increases were slightly offset by lower volumes for chlor-alkali products including the unfavorable impact of the hurricanes. Operating earnings were up $26 million primarily due to higher selling prices, which exceeded the impact of higher energy costs, lower manufacturing efficiencies and the impact of the hurricanes.

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