PPG Industries forecast pension costs rise in annual report

Glass, fiberglass and coatings maker PPG Industries Inc. (PPG) said it anticipates pension and other post-retirement benefit costs to rise by about USD 130 million in 2003.
According to the company“…

Glass, fiberglass and coatings maker PPG Industries Inc. (PPG) said it anticipates pension and other post-retirement benefit costs to rise by about USD 130 million in 2003. According to the company“s annual report filed 21 February 2003 with the Securities and Exchange Commission, the increase in benefit costs will decrease its earnings by about USD 0.50 a share in 2003. PPG Industries said the increase is due to decreases in the market value of its pension plan assets; a reduction in the assumption of its expected rate of return on plan assets to 8.75% for 2003; increasing medical costs; and a lower discount rate assumption. In spite of the forecast rises in these costs, the company does not believe that it will have a mandatory funding requirement under US Pension Benefit Guaranty Corp. or Internal Revenue Service regulations in the short term, so there will only be a minor effect on cash flows in 2003 from these factors, the filing said. Also in the filing, PPG Industries said it is negotiating with various government agencies about 94 current and former manufacturing sites, and offsite waste disposal locations, including 23 sites on the national priority list. The company said that the number of sites under examination is comparable with 2002. While it is not generally a major contributor of wastes at these offsite waste disposal locations, each party could be held for joint and individual liability, the filing said. The company said a final allocation of costs will be based on relative contributions of wastes at the sites. PPG Industries said reserves had been set aside for those sites where it is probable that a liability has been incurred and the amount can be reasonably estimated. As of 31 December 2002, the company said it had reserves of USD 87 million for environmental contingencies . Pretax charges against income for environmental remediation costs in 2002 totalled USD 15 million, according to the filing. PPG Industries also said it expects capital spending, excluding for acquisitions, to be USD 250 million to USD 300 million during 2003. The company did not say how it will allocate the capital expenditure for 2003. In 2002, the company“s capital spending totaled USD 260 million, against USD 301 million in 2001. The capital spending in 2002 related to business acquisitions, plant upgrades, expansion of existing businesses, and environmental control projects, according to the filing.