PITTSBURGH — PPG Industries has reported record sales for the second quarter of $4.5 billion, surpassing the prior year’s second quarter results by 42 percent. Second quarter reported net income was $250 million, or $1.51 per share. Adjusted net income, excluding the operating results of the automotive glass and services (AG&S) business, which is pending sale, as well as unusual and one-time items, was $269 million, or $1.62 per share, exceeding the prior year’s quarter by 12 percent. Reported net income for the second quarter 2007 was $249 million, or $1.50 per share, and adjusted net income was $242 million, or $1.45 per share.

“We delivered double-digit-percent growth in sales and adjusted earnings per share despite continued inflationary pressures and steep recessions in several U.S. end-markets,” said Charles Bunch, PPG chairman and chief executive officer. “We are capitalizing on the strategic shift in our portfolio, the broadening of our geographic presence and the increased end-market diversity of our businesses that we’ve achieved over the past four years.”

Bunch highlighted several key elements of PPG’s financial performance in the quarter. “First, our core businesses – coatings and optical and specialty materials – grew combined segment earnings by more than 25 percent, aided by our acquisition of SigmaKalon and growth in emerging regions,” he said. “Second, our commodity chemicals business continued to deliver solid earnings. Last, we achieved one of the largest quarterly increases in our selling prices in the past several years.

“Our strong performance in today’s environment provides measurable evidence of our portfolio strength and our successful transformation into a global leader in coatings and specialty products,” Bunch said. “Looking ahead, we expect our growth to be sustained, due in part to these same factors,” Bunch said. He added that announced price increases in the commodity chemicals business are being implemented, along with price actions in other businesses, with the intent of offsetting further inflationary pressures. We expect our future operating results to remain solid and to compare favorably within our industry groups.”

PPG generated more than $300 million in cash from operations during the quarter, and on a year-to-date basis is approximately $125 million ahead of the previous year in cash generation.

PPG announced on July 8 an agreement with an affiliate of funds managed by Kohlberg & Co., LLC, under which PPG will divest its Automotive Glass and Services (AG&S) business to a new company formed by Kohlberg. PPG will receive $330 million in gross cash proceeds and a minority interest of approximately 40 percent in the new company as a result of the transaction. In accordance with generally accepted accounting principles (GAAP), the results of the AG&S business were classified as discontinued operations beginning in September 2007. However, because PPG will hold an ownership interest in the newly-formed company, it now will include this business in continuing operations in its historical and current financial statements.

Reported second quarter 2008 net income includes one-time, aftertax charges related to the pending sale of PPG’s AG&S business of $11 million, or 7 cents per share, to reflect a catch-up of depreciation expense, which was suspended when the business was previously classified as a discontinued operation, and $12 million, or 7 cents per share, relating to the impact of benefit changes including accelerated vesting negotiated as part of the sale. The company also recorded an after-tax charge of $2 million, or 1 cent per share, to reflect the net increase to current value of the company’s obligation under its proposed asbestos settlement agreement reported in May 2002, which is subject to pending court proceedings. Results also include after-tax earnings of $6 million, or 4 cents per share, relating to operating results of the AG&S business. Adjusted net income was $269 million, or $1.62 per share.

PPG’s sales for the second quarter 2007 were $3.2 billion. Second quarter 2007 net income was comprised of net income from continuing operations of $250 million, or $1.50 per share, and a loss from discontinued operations from the former fine chemicals business, net of tax, of $1 million. Net income from continuing operations included an after-tax charge of $6 million, or 3 cents per share, to reflect the net increase in the value of the company’s obligation under its proposed asbestos settlement agreement. Results also included after-tax earnings of $13 million, or 8 cents per share, relating to the operating results of the AG&S business. Adjusted net income was $242 million, or $1.45 per share.

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