PPG shares tumble on accounting investigation

Shares in PPG fell by more than 3 percent Thursday after the Downtown-based paints producer said it was investigating possible improper accounting practices in its first-quarter results.

The stock closed at $109.64, down $3.55, after PPG said in its first-quarter earnings release that up to $5 million in expenses may not have been properly accrued.

As the report was being prepared, the company — through its internal reporting system — identified about $1.4 million in expenses that should have been accrued and the earnings release issued Thursday morning reflects those expenses.

The audit committee of PPG’s board of directors is investigating along with outside counsel, the company said.

During a conference call with analysts, Michael McGarry, PPG’s chairman and chief executive, declined to go into detail about the expense figures but said he was thankful the issue surfaced as the report was being finalized.

“At PPG, we hold ourselves to a very high standard of business … our reputation as an ethical company is a competitive advantage. We take this matter very seriously,” he said.

Mr. McGarry said he couldn’t predict when the investigation would conclude or its outcome.

For the first quarter, sales jumped by almost 9 percent, to $3.8 billion, on higher prices and strong volume growth in PPG’s industrial and packaging coatings.

Net income from continuing operations was $347 million, or $1.38 per share.

Adjusted net income totaled $350 million, or $1.39 per share — in line with analysts’ estimates tracked by Bloomberg.

Not included in adjusted income are after-tax charges for a cost realignment that occurred after Lowe’s home improvement stores in February said the chain would stop selling PPG’s Olympic brand paints and stains later this year. Rival paint company Sherwin-Williams of Cleveland will be Lowe’s exclusive supplier.

But PPG hopes to make up at least some of that loss through an expanded deal with Home Depot to sell its Olympic stains.

Home Depot already carries PPG premium paints and its Glidden brand and it will add several Olympic stains including Olympic SmartGuard — a