Third quarter 2014 reported net income from continuing operations was $377 million, or $2.70 per diluted share. Third quarter 2014 adjusted net income from continuing operations was $394 million, or $2.82 per diluted share, which excludes asset divestiture gains of $73 million after-tax, or 52 cents per diluted share; and charges of $86 million after-tax, or 61 cents per diluted share for an increase to legacy environmental reserves; acquisition-related costs of $2 million after-tax, or 2 cents per diluted share; and a pension settlement charge of $2 million after-tax, or 1 cent per diluted share.
Third quarter 2013 reported sales, net income and earnings per diluted share from continuing operations were $3.77 billion, $204 million and $1.41, respectively. Adjusted third quarter 2013 net income from continuing operations was $336 million, with earnings of $2.32 per diluted share, which excluded business restructuring costs of $73 million, or 50 cents per diluted share; a charge of $56 million, or 39 cents per diluted share, for an increase to legacy environmental reserves; and acquisition-related costs of $3 million, or 2 cents per diluted share.
“We continue to benefit from customer adoption of our leading technologies,” said Charles E. Bunch, PPG chairman and chief executive officer. “In the quarter, net sales increased 4 percent, which was consistent with the prior quarter, and earnings grew in each major region. Our sales performance was driven by continued gains in aerospace, automotive OEM coatings and automotive refinish, where our growth this quarter matched or exceeded recent quarters.
“Results remained uneven across major regions,” Bunch added. “In North America, sales gains were supported by continued moderate economic expansion. European sales improved slightly, but results remained mixed as demand improvement in some countries was offset by weaker conditions in other parts of the region. Our growth rate in emerging regions accelerated slightly in comparison with recent quarters, led by improved PPG results in Asia and Latin America.
“Our adjusted earnings per diluted share from continuing operations improved 22 percent versus the prior year, stemming from higher sales, an improved business mix, our ongoing disciplined cost focus, and attainment of further acquisition-related synergies,” Bunch added. “Our regional earnings expansion was largest in Europe, which advanced 17 percent despite the uneven regional economic performance. Earnings increased by 10 percent in the other major regions as well.
“Strategically in the quarter, we continued to work on customary actions related to our pending acquisition of Comex, which we still expect to close during the fourth quarter,” Bunch said. “Additionally, we completed the sale of a North American flat glass manufacturing facility, and our automotive glass equity affiliate sold one of its business lines, with both divestiture transactions generating one-time gains.
“Looking forward, while we are watchful of the pace of global economic expansion, we remain confident in our ability to deliver continued, solid earnings growth driven by the ongoing momentum we have established in many key end-use markets. Additionally, we are just now beginning to benefit from an initial recovery in several long-cycle industries, including North American commercial construction and marine new-build, which had previously detracted from our overall growth. The fourth quarter is historically our slowest quarter seasonally, and we anticipate normal seasonal trends will occur in our businesses this year,” Bunch said.
“The fourth quarter is also traditionally our strongest cash-generation period, and we continue to maintain a high degree of financial flexibility. We remain focused on opportunities to deploy cash for earnings accretion. We have a very active acquisition pipeline and expect share repurchases will remain an integral part of our cash allocation. Including the pending acquisition of Comex, we will likely spend at or above the top end of our previously communicated range of $3 billion to $4 billion of cash in years 2014 and 2015 combined on acquisitions and share repurchases,” Bunch concluded.
PPG today reported cash and short-term investments totaling $3.0 billion at quarter-end. The company repurchased $150 million, or about 740,000 shares, of PPG stock during the quarter. PPG also reported year-to-date cash uses as follows: $358 million for capital spending, $269 million for dividends paid, $114 million on acquisition transactions that have closed, and $450 million on share repurchases totaling approximately 2.4 million shares.
PPG announced June 30 it had reached an agreement to acquire Consorcio Comex, a leading Latin American architectural and industrial coatings company, in a transaction valued at $2.3 billion. The company indicated then that it expected the transaction to close in four to six months.