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“This transaction is another positive step forward in our portfolio transformation,” said Charles E. Bunch, PPG chairman and chief executive officer. “It enables us to focus more on coatings and specialty products, and significantly reduces PPG’s exposure to the U.S. automotive market.”
The company stated that the net cash proceeds from the transaction will be utilized for general corporate purposes. In accordance with generally accepted accounting principles, the results of the automotive glass and services business were reported as discontinued operations beginning in September 2007, and, because PPG will hold an ownership interest in the newly formed company, it will reclassify the business into continuing operations in the company’s historical and current financial statements.
In the second quarter, the company will record a one-time, non-cash charge to reflect a catch-up of depreciation expense, which was suspended when the business was classified as a discontinued operation. In addition, the company will also record a one-time charge relating to the impact of benefit changes, including accelerated vesting, negotiated as part of the transaction. The total of these two second quarter charges is estimated to be approximately $25 million after tax, with the final amount pending completed actuarial calculations.
The closing is subject to customary closing conditions, including receipt of any required regulatory approvals. PPG is expecting to record a slight book gain upon closing, which is anticipated in the third quarter. Also, PPG will retain certain liabilities for pension and post-employment benefits earned for service up to the date of divestiture, and there may be one-time charges in future periods related to these obligations. After completing the divestiture, PPG will account for its remaining interest in the new company under the equity method of accounting.
The automotive glass and services business supplies automotive OEM windshields, rear and side windows, sunroofs, and assemblies for auto and truck manufacturers, and it supplies and distributes replacement automotive glass products for use in the aftermarket. It also provides insurance claim services through its LYNX Services subsidiary, glass management software through its GTS subsidiary, and e-business solutions through its GLAXIS division.
The business manufactures and fabricates automotive glass products in nine North American plants located in Berea, Ky.; Creighton, Meadville and Tipton, Pa.; Crestline, Ohio; Evansville, Ind.; Evart, Mich.; and Hawkesbury and Oshawa, Ontario, Canada. In addition, there are nine satellite parts assembly plants, and LYNX Services claims management centers are located in Fort Myers, Fla., and Paducah, Ky. Combined, the businesses employ approximately 4400 people.
For more information, visit www.ppg.com.