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Letter to the Editor

PPG's Q1 Sales Increase Record 41 Percent

Reported net income from continuing operations includes non-recurring acquisition-related costs of $89 million aftertax, stemming from the company’s January acquisition of the SigmaKalon Group. Adjusted net income from continuing operations was $176 million. The company’s tax rate on income from continuing operations for the quarter was 30 percent.

PPG’s sales for the first quarter 2007 were $2.6 billion. First quarter net income was $194 million, comprising net income from continuing operations of $176 million, and income from discontinued operations, net of tax, of $18 million.

Net income from continuing operations included an aftertax charge of $5 million, to reflect the net increase in the value of the company’s obligation under its proposed asbestos settlement agreement, which is subject to pending court proceedings. Adjusted net income from continuing operations was $181 million. The company’s tax rate on income from continuing operations was 23 percent.

“We are very pleased to have delivered solid organic growth despite a slowdown in the overall U.S. economy,” said Charles E. Bunch, PPG chairman and chief executive officer. “We achieved this growth due, in part, to our prior investments in coatings, optical products and emerging regions, which have strengthened our overall portfolio. In addition, the recent acquisition of SigmaKalon contributed to our record first quarter results. This business, which we are successfully integrating, has exceeded our expectations.”

Bunch noted that a key measure of the company’s growth is its total business segment earnings, which increased 17 percent.

“Looking ahead, while we will likely continue to experience a difficult North American economy, we remain confident in our ability to grow both sales and earnings. This is due to our leading products and technologies, and because we have significantly broadened our geographic presence. In fact, the United States and Canada now account for only about 45 percent of our total sales,” Bunch said. “We are focused on improving our already strong cash generation, and we intend to use this cash to continue to grow earnings, initially through paying down debt.”

Performance Coatings segment sales in the first quarter increased $259 million, or 30 percent, as a result of the SigmaKalon and Barloworld acquisitions, the positive impact of stronger foreign currencies, increased selling prices and improved volumes. Segment earnings were comparable to last year, as favorable manufacturing costs and currency were offset by growth-related expenses. Stronger price gains were offset by inflation in raw materials, transportation and other costs.

Glass segment sales increased $8 million, or three percent, based on the positive impact of stronger foreign currencies and increased selling prices. These were slightly moderated by lower sales volumes. Segment earnings improved by $13 million due to lower manufacturing costs. The absence of a prior year write-off of an investment in a fiber glass joint venture offset the negative impact of inflation.

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