PPG INDUSTRIES INC [PPG] Filings

10-Q 1 ppg-20230930.htm 10-Q ppg-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

–––––––––––––––––––––––––––––––––––––––––––––––––

FORM 10-Q

–––––––––––––––––––––––––––––––––––––––––––––––––

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission file number 1-1687

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

PPG INDUSTRIES INC.

(Exact name of registrant as specified in its charter)

25-0730780

(I.R.S. Employer Identification No.)

Pennsylvania

(State or Other Jurisdiction of Incorporation or Organization)

One PPG Place, Pittsburgh, Pennsylvania

(Address of Principal Executive Offices)

15272

(Zip Code)

(412) 434-3131

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $1.66 2/3

PPG

New York Stock Exchange

0.875% Notes due 2025

PPG 25

New York Stock Exchange

1.875% Notes due 2025

PPG 25A

New York Stock Exchange

1.400% Notes due 2027

PPG 27

New York Stock Exchange

2.750% Notes due 2029

PPG 29A

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☑	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

As of September 30, 2023, 235.8 million shares of the Registrant’s common stock, par value $1.66 2/3 per share, were outstanding.

PPG INDUSTRIES, INC. AND SUBSIDIARIES

INDEX


		PAGE
Part I. Financial Information
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Statement of Income	2
	Condensed Consolidated Statement of Comprehensive Income	3
	Condensed Consolidated Balance Sheet	4
	Condensed Consolidated Statement of Shareholders' Equity	5
	Condensed Consolidated Statement of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	34
Part II. Other Information
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 5.	Other Information	35
Item 6.	Exhibits	35
Signatures		37

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Income (Unaudited)


	Three Months Ended September 30		Nine Months Ended September 30
($ in millions, except per share amounts)	2023	2022	2023	2022
Net sales	$4,644	$4,468	$13,896	$13,467
Cost of sales, exclusive of depreciation and amortization	2,752	2,821	8,214	8,473
Selling, general and administrative	1,047	931	3,108	2,887
Depreciation	102	95	287	296
Amortization	40	40	121	125
Research and development, net	108	110	322	340
Interest expense	64	46	190	114
Interest income	(39)	(14)	(96)	(34)
Impairment and other related charges, net	—	—	—	230
Pension settlement charge	—	—	190	—

Other charges/(income), net	13	21	4	(26)

Income before income taxes	$557	$418	$1,556	$1,062
Income tax expense	121	79	350	252
Income from continuing operations	$436	$339	$1,206	$810
Loss from discontinued operations, net of tax	—	—	—	(2)
Net income attributable to controlling and noncontrolling interests	$436	$339	$1,206	$808
Net income attributable to noncontrolling interests	(10)	(10)	(26)	(20)
Net income (attributable to PPG)	$426	$329	$1,180	$788
Amounts attributable to PPG:
Income from continuing operations, net of tax	$426	$329	$1,180	$790
Loss from discontinued operations, net of tax	—	—	—	(2)
Net income (attributable to PPG)	$426	$329	$1,180	$788

Earnings per common share:
Income from continuing operations, net of tax	$1.80	$1.40	$5.00	$3.34
Loss from discontinued operations, net of tax	—	—	—	(0.01)
Earnings per common share (attributable to PPG)	$1.80	$1.40	$5.00	$3.33

Earnings per common share – assuming dilution:
Income from continuing operations, net of tax	$1.79	$1.39	$4.97	$3.33
Loss from discontinued operations, net of tax	—	—	—	(0.01)
Earnings per common share (attributable to PPG) - assuming dilution	$1.79	$1.39	$4.97	$3.32

The accompanying notes to the condensed consolidated financial statements are an integral part of this condensed consolidated statement.

Table of Contents

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Comprehensive Income (Unaudited)


	Three Months Ended September 30		Nine Months Ended September 30
($ in millions)	2023	2022	2023	2022
Net income attributable to controlling and noncontrolling interests	$436	$339	$1,206	$808
Other comprehensive (loss)/income, net of tax:
Defined benefit pension and other postretirement benefits	(1)	2	138	11
Unrealized foreign currency translation adjustments	(174)	(353)	199	(543)

Other comprehensive (loss)/income, net of tax	($175)	($351)	$337	($532)
Total comprehensive income/(loss)	$261	($12)	$1,543	$276
Less: amounts attributable to noncontrolling interests:
Net income	(10)	(10)	(26)	(20)
Unrealized foreign currency translation adjustments	2	7	1	16
Comprehensive income/(loss) attributable to PPG	$253	($15)	$1,518	$272

The accompanying notes to the condensed consolidated financial statements are an integral part of this condensed consolidated statement.

Table of Contents

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheet (Unaudited)


($ in millions)	September 30, 2023	December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$1,218	$1,099
Short-term investments	64	55
Receivables, net	3,612	3,303
Inventories	2,217	2,272
Other current assets	441	444
Total current assets	$7,552	$7,173
Property, plant and equipment (net of accumulated depreciation of $4,815 and $4,649)	3,406	3,328
Goodwill	6,181	6,078
Identifiable intangible assets, net	2,416	2,414
Deferred income taxes	229	95
Investments	264	244
Operating lease right-of-use assets	825	829
Other assets	628	583
Total	$21,501	$20,744
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$4,210	$4,087
Restructuring reserves	95	138
Short-term debt and current portion of long-term debt	606	313
Current portion of operating lease liabilities	189	183
Total current liabilities	$5,100	$4,721
Long-term debt	5,596	6,503
Operating lease liabilities	622	636
Accrued pensions	564	566
Other postretirement benefits	466	476
Deferred income taxes	566	501
Other liabilities	652	632
Total liabilities	$13,566	$14,035
Commitments and contingent liabilities (Note 14)
Shareholders’ equity:
Common stock	$969	$969
Additional paid-in capital	1,193	1,130
Retained earnings	21,563	20,828
Treasury stock, at cost	(13,502)	(13,525)
Accumulated other comprehensive loss	(2,472)	(2,810)
Total PPG shareholders’ equity	$7,751	$6,592
Noncontrolling interests	184	117
Total shareholders’ equity	$7,935	$6,709
Total	$21,501	$20,744

The accompanying notes to the condensed consolidated financial statements are an integral part of this condensed consolidated statement.

Table of Contents

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Shareholders' Equity (Unaudited)


($ in millions)	Common Stock	Additional Paid-In Capital	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive Loss	Total PPG	Non-controlling Interests	Total
January 1, 2023	$969	$1,130	$20,828	($13,525)	($2,810)	$6,592	$117	$6,709
Net income attributable to controlling and noncontrolling interests	—	—	264	—	—	264	9	273
Other comprehensive income, net of tax	—	—	—	—	402	402	1	403
Cash dividends	—	—	(146)	—	—	(146)	—	(146)

Issuance of treasury stock	—	21	—	10	—	31	—	31
Stock-based compensation activity	—	(1)	—	—	—	(1)	—	(1)
Dividends paid on subsidiary common stock to noncontrolling interests	—	—	—	—	—	—	(1)	(1)
Reductions in noncontrolling interests	—	—	—	—	—	—	(15)	(15)
March 31, 2023	$969	$1,150	$20,946	($13,515)	($2,408)	$7,142	$111	$7,253
Net income attributable to the controlling and noncontrolling interests	—	—	490	—	—	490	7	497
Other comprehensive income, net of tax	—	—	—	—	109	109	—	109
Cash dividends	—	—	(146)	—	—	(146)	—	(146)

Issuance of treasury stock	—	7	—	3	—	10	—	10
Stock-based compensation activity	—	9	—	—	—	9	—	9
Dividends paid on subsidiary common stock to noncontrolling interests	—	—	—	—	—	—	(10)	(10)
Acquisition of noncontrolling interests	—	—	—	—	—	—	70	70

June 30, 2023	$969	$1,166	$21,290	($13,512)	($2,299)	$7,614	$178	$7,792
Net income attributable to the controlling and noncontrolling interests	—	—	426	—	—	426	10	436
Other comprehensive loss, net of tax	—	—	—	—	(173)	(173)	(2)	(175)
Cash dividends	—	—	(153)	—	—	(153)	—	(153)

Issuance of treasury stock	—	18	—	10	—	28	—	28
Stock-based compensation activity	—	9	—	—	—	9	—	9
Dividends paid on subsidiary common stock to noncontrolling interests	—	—	—	—	—	—	(2)	(2)


September 30, 2023	$969	$1,193	$21,563	($13,502)	($2,472)	$7,751	$184	$7,935

Table of Contents


($ in millions)	Common Stock	Additional Paid-In Capital	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive Loss	Total PPG	Non-controlling Interests	Total
January 1, 2022	$969	$1,081	$20,372	($13,386)	($2,750)	$6,286	$125	$6,411
Net income attributable to controlling and noncontrolling interests	—	—	18	—	—	18	5	23
Other comprehensive income/(loss), net of tax	—	—	—	—	36	36	(3)	33
Cash dividends	—	—	(139)	—	—	(139)	—	(139)

Issuance of treasury stock	—	24	—	5	—	29	—	29
Stock-based compensation activity	—	(12)	—	—	—	(12)	—	(12)
Dividends paid on subsidiary common stock to noncontrolling interests	—	—	—	—	—	—	(1)	(1)
Reductions in noncontrolling interests	—	—	—	—	—	—	(11)	(11)
March 31, 2022	$969	$1,093	$20,251	($13,381)	($2,714)	$6,218	$115	$6,333
Net income attributable to the controlling and noncontrolling interests	—	—	441	—	—	441	5	446
Other comprehensive loss, net of tax	—	—	—	—	(208)	(208)	(6)	(214)
Cash dividends	—	—	(140)	—	—	(140)	—	(140)
Purchase of treasury stock	—	—	—	(150)	—	(150)	—	(150)
Issuance of treasury stock	—	6	—	3	—	9	—	9
Stock-based compensation activity	—	9	—	—	—	9	—	9
Dividends paid on subsidiary common stock to noncontrolling interests	—	—	—	—	—	—	(6)	(6)



Other	—	3	—	—	—	3	1	4
June 30, 2022	$969	$1,111	$20,552	($13,528)	($2,922)	$6,182	$109	$6,291
Net income attributable to the controlling and noncontrolling interests	—	—	329	—	—	329	10	339
Other comprehensive loss, net of tax	—	—	—	—	(344)	(344)	(7)	(351)
Cash dividends	—	—	(145)	—	—	(145)	—	(145)

Issuance of treasury stock	—	2	—	1	—	3	—	3
Stock-based compensation activity	—	9	—	—	—	9	—	9
Dividends paid on subsidiary common stock to noncontrolling interests	—	—	—	—	—	—	(1)	(1)

Other	—	—	—	—	—	—	(1)	(1)
September 30, 2022	$969	$1,122	$20,736	($13,527)	($3,266)	$6,034	$110	$6,144

The accompanying notes to the condensed consolidated financial statements are an integral part of this condensed consolidated statement.

Table of Contents

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Cash Flows (Unaudited)


	Nine Months Ended September 30
($ in millions)	2023	2022
Operating activities:
Income from continuing operations	$1,206	$810
Adjustments to reconcile net income to cash from operations:
Depreciation and amortization	408	421

Pension settlement charge	190	—


Impairment and other related charges, net	—	230
Stock-based compensation expense	42	27


Deferred income taxes	(131)	(129)

Cash used for restructuring actions	(44)	(63)
Change in certain asset and liability accounts (net of acquisitions):
Receivables	(358)	(644)
Inventories	70	(458)
Other current assets	(70)	(68)
Accounts payable and accrued liabilities	72	340
Taxes and interest payable	92	67
Noncurrent assets and liabilities, net	(133)	(41)
Other	169	(116)


Cash from operating activities	$1,513	$376
Investing activities:
Capital expenditures	($381)	($368)
Business acquisitions, net of cash balances acquired	(108)	(43)
Proceeds from asset sales	25	116





Proceeds from the settlement of cross currency swap contracts	60	27
Other	5	22


Cash used for investing activities	($399)	($246)
Financing activities:
Net payments on commercial paper and short-term debt	$—	($439)
Net change in borrowing with maturities of three months or less	(16)	8
Proceeds from Term Loan	550	—
Repayment of Term Loan Credit Agreement	(800)	(100)



Proceeds from the issuance of debt, net of discounts and fees	—	1,116
Repayment of long-term debt	(300)	—

Purchase of treasury stock	—	(190)

Dividends paid on PPG common stock	(445)	(424)


Other	6	(27)


Cash used for financing activities	($1,005)	($56)
Effect of currency exchange rate changes on cash and cash equivalents	10	(50)
Net increase in cash and cash equivalents	$119	$24
Cash and cash equivalents, beginning of period	1,099	1,005
Cash and cash equivalents, end of period	$1,218	$1,029

Supplemental disclosures of cash flow information:
Interest paid, net of amount capitalized	$181	$119
Taxes paid, net of refunds	$378	$343

Supplemental disclosure of noncash investing and financing activities:
Capital expenditures accrued within Accounts payable and accrued liabilities at period-end	$75	$76

The accompanying notes to the condensed consolidated financial statements are an integral part of this condensed consolidated statement.

Table of Contents

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.Basis of Presentation

The condensed consolidated financial statements included herein are unaudited and have been prepared following the requirements of the Securities and Exchange Commission (the "SEC") and accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim reporting. Under these rules, certain footnotes and other financial information that are normally required for annual financial statements can be condensed or omitted. These statements include all adjustments, consisting only of normal, recurring adjustments, necessary for a fair presentation of the financial position and shareholders' equity of PPG as of September 30, 2023, the results of its operations for the three and nine months ended September 30, 2023 and 2022 and cash flows for the nine months ended September 30, 2023 and 2022. All intercompany balances and transactions have been eliminated. Material subsequent events are evaluated through the report issuance date and disclosed where applicable. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in PPG's 2022 Annual Report on Form 10-K (the "2022 Form 10-K").

Net sales, expenses, assets and liabilities can vary during each quarter of the year. Accordingly, the results of operations for the three and nine months ended September 30, 2023 and the trends in these unaudited condensed consolidated financial statements may not necessarily be indicative of the results to be expected for the full year.

Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on our previously reported Net income, total assets, cash flows or shareholders’ equity.

2.New Accounting Standards

Accounting Standards Adopted in 2023

Effective January 1, 2023, PPG adopted Accounting Standards Update ("ASU") No. 2022-04, “Liabilities - Supplier Finance Programs." This ASU is intended to enhance the transparency surrounding the use of supplier finance programs. The guidance does not affect the recognition, measurement, or financial statement presentation of obligations covered by supplier finance programs.

PPG has certain voluntary supply chain finance programs with financial intermediaries which provide participating suppliers the option to be paid by the intermediary earlier than the original invoice due date. PPG’s responsibility is limited to making payments on the terms originally negotiated with the suppliers, regardless of whether the intermediary pays the supplier in advance of the original due date. The range of payment terms PPG negotiates with suppliers are consistent, regardless of whether a supplier participates in a supply chain finance program. The total amount due to financial intermediaries to settle supplier invoices under supply chain finance programs was $208 million and $390 million as of September 30, 2023 and December 31, 2022, respectively. These amounts are included within Accounts payable and accrued liabilities on the accompanying condensed consolidated balance sheet.

Recently Issued Accounting Standards

There were no accounting pronouncements promulgated prior to September 30, 2023 that are not effective until a future date which are expected to have a material impact on PPG's consolidated financial position, results of operations or cash flows.

3. Inventories


($ in millions)	September 30, 2023	December 31, 2022
Finished products	$1,201	$1,209
Work in process	256	238
Raw materials	710	784
Supplies	50	41
Total Inventories	$2,217	$2,272

Most U.S. inventories are valued using the last-in, first-out method. These inventories represented approximately 16% and 21% of total inventories at September 30, 2023 and December 31, 2022, respectively. If the first-in, first-out ("FIFO") method of inventory valuation had been used, inventories would have been $262 million and $272 million higher as of September 30, 2023 and December 31, 2022, respectively.

Table of Contents

4. Goodwill and Other Identifiable Intangible Assets

The Company tests indefinite-lived intangible assets and goodwill for impairment by performing either a qualitative evaluation or a quantitative test at least annually, or more frequently if an indication of impairment arises. The qualitative evaluation is an assessment of factors to determine whether it is more likely than not that the fair value of a reporting unit or asset is less than its carrying amount.

The Company did not identify an indication of goodwill impairment for any of its reporting units or an indication of impairment of any of its indefinite-lived intangible assets during the nine months ended September 30, 2023.

The change in the carrying amount of goodwill attributable to each reportable segment for the nine months ended September 30, 2023 was as follows:


($ in millions)	Performance Coatings	Industrial Coatings	Total
January 1, 2023	$4,881	$1,197	$6,078
Acquisitions, including purchase accounting adjustments	125	11	136

Foreign currency impact	(16)	(17)	(33)
September 30, 2023	$4,990	$1,191	$6,181

A summary of the carrying value of the Company's identifiable intangible assets is as follows:


	September 30, 2023			December 31, 2022
($ in millions)	Gross Carrying Amount	Accumulated Amortization	Net	Gross Carrying Amount	Accumulated Amortization	Net
Indefinite-Lived Identifiable Intangible Assets
Trademarks	$1,405	$—	$1,405	$1,325	$—	$1,325
Definite-Lived Identifiable Intangible Assets
Acquired technology	$839	($664)	$175	$827	($636)	$191
Customer-related	1,882	(1,190)	692	1,855	(1,112)	743
Trade names	313	(171)	142	311	(158)	153
Other	49	(47)	2	50	(48)	2
Total Definite-Lived Intangible Assets	$3,083	($2,072)	$1,011	$3,043	($1,954)	$1,089
Total Identifiable Intangible Assets	$4,488	($2,072)	$2,416	$4,368	($1,954)	$2,414

The Company’s identifiable intangible assets with definite lives are being amortized over their estimated useful lives.

As of September 30, 2023, estimated future amortization expense of identifiable intangible assets is as follows:


($ in millions)			Future Amortization Expense
Remaining three months of 2023			$30
2024			$132
2025			$120
2026			$98
2027			$90
2028			$78
Thereafter			$463

5. Business Restructuring

The Company records restructuring liabilities that represent charges incurred in connection with consolidations of certain operations, including both operations from acquisitions and headcount reduction programs. These charges consist primarily of severance costs and certain other cash costs. As a result of these programs, the Company also incurs incremental non-cash accelerated depreciation expense for certain assets due to their reduced expected useful life. These charges are not allocated to the Company’s reportable business segments. Refer to Note 16, "Reportable Business Segment Information" for additional information.

Table of Contents

The following table summarizes restructuring reserve activity for the nine months ended September 30, 2023 and 2022:


	Total Reserve
($ in millions)	2023	2022
January 1	$169	$231
Approved restructuring actions	12	84
Release of prior reserves and other adjustments(a)	(16)	(48)
Cash payments	(44)	(63)
Foreign currency impact	(2)	(23)
September 30	$119	$181

(a)Certain releases were recorded to reflect the current estimate of costs to complete planned business restructuring actions.

The majority of the approved business restructuring actions and associated cash outlays are expected to be completed in 2023 and 2024.

6. Borrowings

Credit Agreements

In April 2023, PPG entered into a €500 million term loan credit agreement (the "Term Loan"). The Term Loan provides the Company with the ability to increase the size of the loan by an amount not to exceed €250 million. The Term Loan contains covenants that are consistent with those in the Credit Agreement discussed below and that are usual and customary restrictive covenants for facilities of its type, which include, with specified exceptions, limitations on the Company’s ability to create liens or other encumbrances, to enter into sale and leaseback transactions and to enter into consolidations, mergers or transfers of all or substantially all of its assets. The Term Loan terminates and all amounts outstanding are payable in April 2026. In April 2023, PPG borrowed €500 million under the Term Loan. The Term Loan is denominated in euro and has been designated as a hedge of the net investment in the Company’s European operations. For more information, refer to Note 12 “Financial Instruments, Hedging Activities and Fair Value Measurements.”

In February 2021, PPG entered into a $2.0 billion term loan credit agreement (the "Term Loan Credit Agreement") to finance the Company’s acquisition of Tikkurila, and to pay fees, costs and expenses related thereto. The Term Loan Credit Agreement provided the Company with the ability to borrow up to an aggregate principal amount of $2.0 billion on an unsecured basis. In addition to the amounts borrowed to finance the acquisition of Tikkurila, the Term Loan Credit Agreement allowed the Company to make up to eleven additional borrowings prior to December 31, 2021, to be used for working capital and general corporate purposes. The Term Loan Credit Agreement contains covenants that are consistent with those in the Credit Agreement discussed below and that are usual and customary restrictive covenants for facilities of its type, which include, with specified exceptions, limitations on the Company’s ability to create liens or other encumbrances, to enter into sale and leaseback transactions and to enter into consolidations, mergers or transfers of all or substantially all of its assets. The Term Loan Credit Agreement matures and all outstanding borrowings are due and payable on the third anniversary of the date of the initial borrowing under the Agreement. In March 2023, PPG amended the Term Loan Credit Agreement to replace the LIBOR-based reference interest rate option with a reference interest rate option based upon Term Secured Overnight Financing Rate ("SOFR"). The other terms of the Term Loan Credit Agreement remain unchanged. In June 2021, PPG borrowed $700 million under the Term Loan Credit Agreement to finance the Company’s acquisition of Tikkurila, and to pay fees, costs and expenses related thereto. In December 2021, PPG borrowed an additional $700 million under the Term Loan Credit Agreement. In 2022 and 2023, PPG repaid $300 million and $800 million, respectively, of the Term Loan Credit Agreement using cash on hand. Borrowings of $300 million and $1.1 billion were outstanding under the Term Loan Credit Agreement as of September 30, 2023 and December 31, 2022, respectively.

In March 2023, PPG amended its five-year credit agreement (the “Credit Agreement”) dated as of August 30, 2019. The amendments to the Credit Agreement replace the LIBOR-based reference interest rate option with a reference interest rate option based upon Term SOFR. The other terms of the Credit Agreement remain unchanged. In July 2023, PPG amended and restated the Credit Agreement, extending the term through July 27, 2028. The amended and restated Credit Agreement provides for a $2.3 billion unsecured revolving credit facility. The Company has the ability to increase the size of the Credit Agreement by up to an additional $750 million, subject to the receipt of lender commitments and other conditions precedent. The Company has the right, subject to certain conditions set forth in the Credit Agreement, to designate certain subsidiaries of the Company as borrowers under the Credit Agreement. In connection with any such designation, the Company is required to guarantee the obligations of any

Table of Contents

such subsidiaries under the Credit Agreement. There were no amounts outstanding under the Credit Agreement as of September 30, 2023 and December 31, 2022.

The Term Loan, Term Loan Credit Agreement and Credit Agreement require the Company to maintain a ratio of Total Indebtedness to Total Capitalization, as defined in the Term Loan, Term Loan Credit Agreement and Credit Agreement, of 60% or less; provided, that for any fiscal quarter in which the Company has made an acquisition for consideration in excess of $1 billion and for the next five fiscal quarters thereafter, the ratio of Total Indebtedness to Total Capitalization may not exceed 65% at any time. As of September 30, 2023, Total Indebtedness to Total Capitalization as defined under the Term Loan, Term Loan Credit Agreement and Credit Agreement was 43%.

The Credit Agreement also supports the Company’s commercial paper borrowings which are classified as long-term based on PPG’s intent and ability to refinance these borrowings on a long-term basis. There were no commercial paper borrowings outstanding as of September 30, 2023 and December 31, 2022.

As of September 30, 2023, PPG was in full compliance with the restrictive covenants under its various credit agreements, loan agreements and indentures.

Other Debt Issued and Repaid

In March 2023, PPG's $300 million 3.2% notes matured, and the Company repaid this obligation using cash on hand.

In May 2022, PPG completed a public offering of €300 million 1.875% Notes due 2025 and €700 million 2.750% Notes due 2029. These notes were issued pursuant to PPG’s existing shelf registration statement and pursuant to an indenture between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee, as supplemented (the "2022 Indenture"). The 2022 Indenture governing these notes contains covenants that limit the Company’s ability to, among other things, incur certain liens securing indebtedness, engage in certain sale-leaseback transactions, and enter into certain consolidations, mergers, conveyances, transfers or leases of all or substantially all the Company’s assets. The terms of these notes also require the Company to make an offer to repurchase Notes upon a Change of Control Triggering Event (as defined in the 2022 Indenture) at a price equal to 101% of their principal amount plus accrued and unpaid interest. The Company may issue additional debt from time to time pursuant to the Indenture. The aggregate cash proceeds from the notes, net of discounts and fees, were $1,061 million. The notes are denominated in euro and have been designated as hedges of net investments in the Company’s European operations. For more information, refer to Note 12 “Financial Instruments, Hedging Activities and Fair Value Measurements.”

In March 2022, PPG privately placed a 15-year €50 million 1.95% fixed interest note. This note contains covenants materially consistent with the 1.875% Notes discussed above. This debt arrangement is denominated in euros and has been designated as a net investment hedge of the Company's European operations. Refer to Note 12 "Financial Instruments, Hedging Activities and Fair Value Measurements" for additional information.

Letters of Credit and Surety Bonds

The Company had outstanding letters of credit and surety bonds of $235 million as of September 30, 2023.

7. Impairment and Other Related Charges, Net

In the first quarter 2022, Russian military forces invaded Ukraine. This military action had significant and immediate adverse economic impacts on businesses operating in Russia and Ukraine. Based on deteriorating business conditions and regulatory restrictions, including the impact of economic sanctions imposed on Russia by the United States, the European Union and other governments, PPG immediately ceased sales to Russian state-owned entities, announced that the Company would cease all new investments in Russia and commenced actions to wind down most of the Company’s operations in Russia.

Based on this change in facts and circumstances, the long-term cash flow forecast for the Company’s operations in Russia was significantly reduced. This reduction in the long-term cash flow forecast indicated that the carrying amounts of long-lived assets and certain indefinite-lived intangible assets associated with the Company’s operations in Russia may not be recoverable, and the carrying value of these assets was tested for impairment. Additionally, the Company evaluated trade receivables for estimated future credit losses, inventories for declines in net realizable value and other current assets for impairment in light of the deteriorating economic conditions in Russia and Ukraine. As a result, during the three months ended March 31, 2022, the Company recognized $290 million of Impairment and other related (income)/charges, net in the condensed consolidated statement of income, comprised of $201 million of long-lived asset impairment charges and $89 million of other related charges.

Table of Contents

The $201 million of long-lived asset impairment charges recorded during first quarter 2022 was comprised of $124 million related to indefinite-lived intangible assets, $54 million related to property, plant and equipment, net and $23 million related to definite-lived intangible assets. The $89 million of other related charges represented reserves established for receivables and other current assets and the write-down of inventories impacted by the adverse economic consequences of the Russian invasion of Ukraine.

In the second quarter 2022, the Company released a portion of the previously established reserves due to the collection of certain trade receivables and recorded recoveries due to the realization of certain previously written-down inventories, resulting in recognition of income of $60 million within Impairment and other related (income)/charges, net.

The Company divested its legacy industrial Russian operations during the third quarter 2023 and continues to explore various options to complete its exit from Russia, including a possible sale of its remaining Russia business or controlled withdrawal from the Russia market.

During the three and nine months ended September 30, 2023 and the twelve months ended December 31, 2022, net sales in Russia represented approximately 1% of PPG net sales.

8. Earnings Per Common Share

The effect of dilutive securities on the weighted average common shares outstanding included in the calculation of earnings per diluted common share for the three and nine months ended September 30, 2023 and 2022 was as follows:


	Three Months Ended September 30		Nine Months Ended September 30
(number of shares in millions)	2023	2022	2023	2022
Weighted average common shares outstanding	236.2	235.5	236.0	236.2
Effect of dilutive securities:
Stock options	0.6	0.4	0.5	0.6
Other stock compensation plans	0.7	0.7	0.7	0.7
Potentially dilutive common shares	1.3	1.1	1.2	1.3
Adjusted weighted average common shares outstanding	237.5	236.6	237.2	237.5

Dividends per common share	$0.65	$0.62	$1.89	$1.80

Antidilutive securities(a):
Stock options	0.4	0.9	0.9	0.9

(a)Excluded from the computation of earnings per diluted share due to their antidilutive effect.

9. Income Taxes


	Nine Months Ended September 30
	2023		2022
Effective tax rate on pretax income	22.5	%	23.7	%

The effective tax rate of 23.7% for the nine months ended September 30, 2022 reflected a tax benefit of $27 million on the $230 million net charges associated with PPG's operations in Russia.

Income tax expense for the nine months ended September 30, 2023 and 2022 is based on an estimated annual effective rate, which requires management to make its best estimate of annual pretax income or loss. During the year, PPG management regularly updates forecasted annual pretax results for the various countries in which PPG operates based on changes in factors such as prices, shipments, product mix, raw material inflation and manufacturing operations. To the extent that actual 2023 pretax results for U.S. and foreign income or loss vary from estimates, the actual Income tax expense recognized in 2023 could be different from the forecasted amount used to estimate Income tax expense for the nine months ended September 30, 2023.

Table of Contents

10. Pensions and Other Postretirement Benefits

In March 2023, the Company purchased group annuity contracts that transferred to third-party insurance companies pension benefit obligations for certain of the Company’s retirees in the U.S. who were receiving their monthly retirement benefit payments from the U.S. pension plan. The amount of each affected retiree’s annuity payment is equal to the amount of such individual’s pension benefit. The purchase of group annuity contracts was funded directly by the assets of the U.S. plans. By transferring the obligations and assets to the insurance companies, the Company reduced its overall pension projected benefit obligation by $309 million and recognized a non-cash Pension settlement charge of $190 million.

The service cost component of net periodic pension benefit cost/(income) and other postretirement benefit cost is included in Cost of sales, exclusive of depreciation and amortization, Selling, general and administrative, and Research and development, net in the accompanying condensed consolidated statement of income. Except for the Pension settlement charge in the quarter ended March 31, 2023, all other components of net periodic benefit cost are recorded in Other charges/(income), net in the accompanying condensed consolidated statement of income.

Net periodic pension benefit cost/(income) and other postretirement benefit cost for the three and nine months ended September 30, 2023 and 2022 were as follows:


	Pension
	Three Months Ended September 30		Nine Months Ended September 30
($ in millions)	2023	2022	2023	2022
Service cost	$2	$3	$6	$7
Interest cost	28	18	83	55
Expected return on plan assets	(28)	(35)	(83)	(106)
Amortization of actuarial losses	6	8	16	25

Settlements	—	—	191	—
Net periodic benefit cost/(income)	$8	($6)	$213	($19)


	Other Postretirement Benefits
	Three Months Ended September 30		Nine Months Ended September 30
($ in millions)	2023	2022	2023	2022
Service cost	$1	$2	$3	$6
Interest cost	7	4	20	12

Amortization of actuarial losses/(gains)	—	3	(1)	9
Amortization of prior service credit	(2)	(3)	(5)	(8)

Net periodic benefit cost	$6	$6	$17	$19

Net periodic pension cost was higher for both the three and nine months ended September 30, 2023 compared to 2022, primarily due the Pension settlement charge recognized in the first quarter 2023 and higher interest cost driven by an increase in discount rates. In addition, declines in the market value of pension investments during 2022 resulted in a lower asset base to generate returns on plan assets in 2023.

PPG expects 2023 full year net periodic pension cost of approximately $220 million, which includes the impact of the $190 million Pension settlement charge recognized during the first quarter 2023. PPG expects 2023 full year net periodic other postretirement benefit cost of approximately $25 million.


	Three Months Ended September 30		Nine Months Ended September 30
($ in millions)	2023	2022	2023	2022

Non-U.S. defined benefit pension mandatory contributions	$1	$—	$3	$2

PPG does not expect to be required to make significant mandatory contributions to its defined benefit pension plans during the remaining three months of 2023. In addition to any mandatory contributions, PPG may elect to make voluntary contributions to its defined benefit pension plans in 2023 and beyond.

Table of Contents

11. Accumulated Other Comprehensive Loss (AOCL)


($ in millions)	Foreign Currency Translation Adjustments (a)	Pension and Other Postretirement Benefit Adjustments, net of tax (b)	Unrealized Gain on Derivatives, net of tax	Accumulated Other Comprehensive Loss
January 1, 2022	($1,988)	($763)	$1	($2,750)
Current year deferrals to AOCL	(537)	(9)	—	(546)
Reclassifications from AOCL to net income	10	20	—	30
September 30, 2022	($2,515)	($752)	$1	($3,266)

January 1, 2023	($2,254)	($557)	$1	($2,810)
Current year deferrals to AOCL	170	(14)	—	156
Reclassifications from AOCL to net income	30	152	—	182
September 30, 2023	($2,054)	($419)	$1	($2,472)

(a)The tax cost related to unrealized foreign currency translation adjustments on net investment hedges was $85 million and $96 million as of September 30, 2023 and 2022, respectively.

(b)The tax (benefit)/cost related to the adjustment for pension and other postretirement benefits was $(47) million and $6 million for the nine months ended September 30, 2023 and 2022, respectively. Reclassifications from AOCL are included in the computation of net periodic benefit cost (See Note 10, "Pensions and Other Postretirement Benefits").

12. Financial Instruments, Hedging Activities and Fair Value Measurements

Financial instruments include cash and cash equivalents, short-term investments, cash held in escrow, marketable equity securities, accounts receivable, company-owned life insurance, accounts payable, short-term and long-term debt instruments, and derivatives. The fair values of these financial instruments approximated their carrying values at September 30, 2023 and December 31, 2022, in the aggregate, except for long-term debt instruments.

Hedging Activities

The Company has exposure to market risk from changes in foreign currency exchange rates and interest rates. As a result, financial instruments, including derivatives, have been used to hedge a portion of these underlying economic exposures. Certain of these instruments may qualify as fair value, cash flow, and net investment hedges upon meeting the requisite criteria, including effectiveness of offsetting hedged or underlying exposures. Changes in the fair value of derivatives that do not qualify for hedge accounting are recognized in Income before income taxes in the period incurred.

PPG’s policies do not permit speculative use of derivative financial instruments. PPG enters into derivative financial instruments with high credit quality counterparties and diversifies its positions among such counterparties in order to reduce its exposure to credit losses. The Company did not realize a credit loss on derivatives during the three and nine months ended September 30, 2023 and 2022.

All of PPG's outstanding derivative instruments are subject to accelerated settlement in the event of PPG’s failure to meet its debt or payment obligations under the terms of the instruments’ contractual provisions. In addition, if the Company would be acquired and its payment obligations under its derivative instruments’ contractual arrangements are not assumed by the acquirer, or if PPG would enter into bankruptcy, receivership or reorganization proceedings, its outstanding derivative instruments would also be subject to accelerated settlement.

There were no derivative instruments de-designated or discontinued as hedging instruments during the three and nine months ended September 30, 2023 and 2022, and there were no gains or losses deferred in Accumulated other comprehensive loss on the condensed consolidated balance sheet that were reclassified to Income before income taxes in the condensed consolidated statement of income in the nine months ended September 30, 2023 and 2022 related to hedges of anticipated transactions that were no longer expected to occur.

Fair Value Hedges

The Company uses interest rate swaps from time to time to manage its exposure to changing interest rates. When outstanding, the interest rate swaps are typically designated as fair value hedges of certain outstanding debt obligations of the Company and are recorded at fair value.

PPG has interest rate swaps which converted $375 million and $525 million of fixed rate debt to variable rate debt as of September 30, 2023 and December 31, 2022, respectively. These swaps are designated as fair value hedges

Table of Contents

and are carried at fair value. Changes in the fair value of these swaps and changes in the fair value of the related debt are recorded in interest expense in the accompanying condensed consolidated statement of income. The fair value of these interest rate swaps was a liability of $27 million and $20 million at September 30, 2023 and December 31, 2022, respectively.

Cash Flow Hedges

At times, PPG designates certain foreign currency forward contracts as cash flow hedges of the Company’s exposure to variability in exchange rates on third party transactions denominated in foreign currencies. There were no outstanding cash flow hedges at September 30, 2023 and December 31, 2022.

Net Investment Hedges

PPG uses cross currency swaps and foreign currency euro-denominated debt to hedge a portion of its net investment in its European operations, as follows:

PPG had U.S. dollar to euro cross currency swap contracts with total notional amounts of $475 million and $775 million as of September 30, 2023 and December 31, 2022, respectively, and designated these contracts as hedges of the Company's net investment in its European operations. During the term of these contracts, PPG will receive payments in U.S. dollars and make payments in euros to the counterparties. As of September 30, 2023 and December 31, 2022, the fair value of the U.S. dollar to euro cross currency swap contracts were net assets of $50 million and $88 million, respectively.

As of September 30, 2023 and December 31, 2022, PPG had designated €3.0 billion and €2.5 billion, respectively, of euro-denominated borrowings as hedges of a portion of its net investment in the Company's European operations. The carrying value of these instruments were $3.1 billion and $2.6 billion as of September 30, 2023 and December 31, 2022, respectively.

Other Financial Instruments

PPG uses foreign currency forward contracts to manage certain net transaction exposures that either have not been elected, or do not qualify for hedge accounting; therefore, the change in the fair value of these instruments is recorded in Other charges/(income), net in the condensed consolidated statement of income in the period of change. Underlying notional amounts related to these foreign currency forward contracts were $2.4 billion and $1.8 billion at September 30, 2023 and December 31, 2022, respectively. The fair values of these contracts was a net liability of $18 million and a net asset of $24 million as of September 30, 2023 and December 31, 2022, respectively.

Gains/Losses Deferred in Accumulated Other Comprehensive Loss

The following table summarizes the amount of gains/(losses) deferred in Other comprehensive income ("OCI") and the amount and location of gains/(losses) recognized within the condensed consolidated statement of income related to derivative and debt financial instruments for the nine months ended September 30, 2023 and 2022. All amounts are shown on a pretax basis.


	September 30, 2023		September 30, 2022		Caption In Condensed Consolidated Statement of Income
($ in millions)	Gain Deferred in OCI	Gain/(Loss) Recognized	Gain Deferred in OCI	Gain Recognized
Economic
Foreign currency forward contracts	$—	$37	$—	$34	Other charges/(income), net
Fair Value
Interest rate swaps	—	(7)	—	7	Interest expense


Total forward contracts and interest rate swaps	$—	$30	$—	$41
Net Investment

Cross currency swaps	$2	$10	$89	$11	Interest expense
Foreign denominated debt	48	—	307	—
Total Net Investment	$50	$10	$396	$11

Table of Contents

Fair Value Measurements

The Company follows a fair value measurement hierarchy to measure its assets and liabilities. As of September 30, 2023 and December 31, 2022, the assets and liabilities measured at fair value on a recurring basis were cash equivalents, equity securities and derivatives. In addition, the Company measures its pension plan assets at fair value (see Note 14, "Employee Benefit Plans" under Item 8 in the 2022 Form 10-K for further details). The Company's financial assets and liabilities are measured using inputs from the following three levels:

Level 1 inputs are quoted prices in active markets for identical assets and liabilities that the Company has the ability to access at the measurement date. Level 1 inputs are considered to be the most reliable evidence of fair value as they are based on unadjusted quoted market prices from various financial information service providers and securities exchanges.

Level 2 inputs are directly or indirectly observable prices that are not quoted on active exchanges, which include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means. The fair values of the derivative instruments reflect the instruments' contractual terms, including the period to maturity, and uses observable market-based inputs, including forward curves.

Level 3 inputs are unobservable inputs employed for measuring the fair value of assets or liabilities. The Company did not have any recurring financial assets or liabilities recorded in its condensed consolidated balance sheet as of September 30, 2023 and December 31, 2022 that were measured using Level 3 inputs.

Assets and liabilities reported at fair value on a recurring basis


	September 30, 2023			December 31, 2022
($ in millions)	Level 1	Level 2	Level 3	Level 1	Level 2	Level 3
Assets:
Other current assets:
Marketable equity securities	$9	$—	$—	$9	$—	$—
Foreign currency forward contracts (a)	$—	$3	$—	$—	$27	$—
Cross currency swaps (b)	$—	$5	$—	$—	$39	$—

Investments:
Marketable equity securities	$68	$—	$—	$61	$—	$—
Other assets:
Cross currency swaps (b)	$—	$45	$—	$—	$49	$—

Liabilities:
Accounts payable and accrued liabilities:
Foreign currency forward contracts (a)	$—	$21	$—	$—	$3	$—
Interest rate swaps (c)	$—	$—	$—	$—	$1	$—

Other liabilities:
Interest rate swaps (c)	$—	$27	$—	$—	$19	$—

(a)Derivatives not designated as hedging instruments

(b)Net investment hedges

(c)Fair value hedges

Long-Term Debt


($ in millions)	September 30, 2023 (a)	December 31, 2022 (b)
Long-term debt - carrying value	$6,189	$6,796
Long-term debt - fair value	$5,736	$6,375

(a)Excludes finance lease obligations of $9 million and short-term borrowings of $4 million as of September 30, 2023.

(b)Excludes finance lease obligations of $10 million and short-term borrowings of $10 million as of December 31, 2022.

The fair values of the debt instruments were measured using Level 2 inputs, including discounted cash flows and interest rates then currently available to the Company for instruments of the same remaining maturities.

Table of Contents

13. Stock-Based Compensation

The Company’s stock-based compensation includes stock options, restricted stock units (“RSUs”) and grants of contingent shares that are earned based on achieving targeted levels of total shareholder return ("TSR"). All current grants of stock options, RSUs and contingent shares are made under the PPG Industries, Inc. Amended and Restated Omnibus Incentive Plan (“PPG Amended Omnibus Plan”), which was amended and restated effective April 21, 2016.

Stock-based compensation expense and the associated income tax benefit recognized during the three and nine months ended September 30, 2023 and 2022 were as follows:


	Three Months Ended September 30		Nine Months Ended September 30
($ in millions)	2023	2022	2023	2022
Stock-based compensation expense	$8	$9	$42	$27
Income tax benefit recognized	$2	$2	$9	$6

Grants of stock-based compensation during the nine months ended September 30, 2023 and 2022 were as follows:


	Nine Months Ended September 30
	2023		2022
	Shares	Fair Value	Shares	Fair Value
Stock options	410,001	$38.55	487,277	$36.52
Restricted stock units	289,573	$125.79	223,729	$141.50
Contingent shares (a)	52,389	$129.03	57,134	$151.87

(a)The number of contingent shares represents the target value of the award.

Stock options are generally exercisable 36 months after being granted and have a maximum term of 10 years. Compensation expense for stock options is recorded over the vesting period based on the fair value on the date of grant. The fair value of the stock options granted during the nine months ended September 30, 2023 was calculated with the following weighted average assumptions:


Weighted average exercise price	$130.08
Risk-free interest rate	3.9	%
Expected life of option in years	6.5
Expected dividend yield	1.7	%
Expected volatility	27.8	%

The risk-free interest rate is determined by using the U.S. Treasury yield curve at the date of the grant and using a maturity equal to the expected life of the option. The expected life of options is calculated using the average of the vesting term and the maximum term, as prescribed by accounting guidance on the use of the simplified method for determining the expected term of an employee share option. The expected dividend yield and volatility are based on historical stock prices and dividend amounts over past time periods equal in length to the expected life of the options.

Time-based RSUs generally vest over the three-year period following the date of grant, unless forfeited, and will be paid out in the form of stock, cash or a combination of both at the Company’s discretion at the end of the vesting period. Performance-based RSUs vest based on achieving specific annual performance targets for adjusted earnings per diluted share growth and cash flow return on capital over the three calendar year-end periods following the date of grant. Unless forfeited, the performance-based RSUs will be paid out in the form of stock, cash or a combination of both at the Company’s discretion at the end of the three-year performance period if PPG meets the performance targets.

The amount paid upon vesting of performance-based RSUs may range from 0% to 200% of the original grant, based upon the level of adjusted earnings per share growth achieved and frequency with which the annual cash flow return on capital performance target is met over the three calendar year periods comprising the vesting period. Performance against the earnings per share growth and the cash flow return on capital target is calculated annually, and the annual payout for each goal is weighted equally over the three-year period.

Table of Contents

The Company also provides grants of contingent shares to selected key executives that may be earned based on PPG's TSR over the three-year period following the date of grant. Contingent share grants (referred to as “TSR awards”) are made annually and are paid out at the end of each three-year period based on the Company’s stock performance. Performance is measured by determining the percentile rank of the TSR of PPG common stock in relation to the TSR of the S&P 500 Index for the three-year period following the date of grant. This comparison group represents the entire S&P 500 Index as it existed at the beginning of the performance period, excluding any companies that were removed from the index because they ceased to be publicly traded. The payment of awards following the three-year award period is based on performance achieved in accordance with the scale set forth in the plan agreement and may range from 0% to 200% of the initial grant. A payout of 100% is earned if target performance is achieved. Contingent share awards earn dividend equivalents for the award period, which are paid to participants or credited to the participants’ deferred compensation plan accounts with the award payout at the end of the period based on the actual number of contingent shares that are earned. Any payments made at the end of the award period may be in the form of stock, cash or a combination of both. The TSR awards are classified as liability awards, and compensation expense is recognized over the three-year award period based on the fair value of the awards (giving consideration to the Company’s percentile rank of TSR) remeasured in each reporting period until settlement of the awards.

14. Commitments and Contingent Liabilities

PPG is involved in a number of lawsuits and claims, both actual and potential, including some that it has asserted against others, in which substantial monetary damages are sought. These lawsuits and claims may relate to contract, patent, environmental, product liability, antitrust, employment and other matters arising out of the conduct of PPG’s current and past business activities. To the extent that these lawsuits and claims involve personal injury, property damage and certain other claims, PPG believes it has adequate insurance; however, certain of PPG’s insurers are contesting coverage with respect to some of these claims, and other insurers may contest coverage with respect to some of the claims in the future. PPG’s lawsuits and claims against others include claims against insurers and other third parties with respect to actual and contingent losses related to environmental, asbestos and other matters.

The results of any current or future litigation and claims are inherently unpredictable. However, management believes that, in the aggregate, the outcome of all lawsuits and claims involving PPG will not have a material effect on PPG’s consolidated financial position or liquidity; however, such outcome may be material to the results of operations of any particular period in which costs, if any, are recognized.

Asbestos Matters

As of September 30, 2023, the Company was aware of certain asbestos-related claims pending against the Company and certain of its subsidiaries. The Company is defending these asbestos-related claims vigorously. The asbestos-related claims consist of claims against the Company alleging:

•exposure to asbestos or asbestos-containing products manufactured, sold or distributed by the Company or its subsidiaries (“Products Claims”);

•personal injury caused by asbestos on premises presently or formerly owned, leased or occupied by the Company (“Premises Claims”); and

•asbestos-related claims against a subsidiary the Company acquired in 2013 (“Subsidiary Claims”).

The Company monitors and reviews the activity associated with its asbestos claims and evaluates, on a periodic basis, its estimated liability for such claims and all underlying assumptions to determine whether any adjustment to the reserves for these claims is required. Additionally, as a supplement to its periodic monitoring and review, the Company conducts discussions with counsel and engages valuation consultants to analyze its claims history and estimate the amount of the Company’s potential liability for asbestos-related claims. The Company's asbestos-related reserves totaled $48 million and $51 million as of September 30, 2023 and December 31, 2022, respectively.

The Company believes that, based on presently available information, the total reserves of $48 million for asbestos-related claims will be sufficient to encompass all of the Company’s current and estimable potential future asbestos liabilities. These reserves, which are included within Other liabilities on the accompanying consolidated balance sheets, involve significant management judgment and represent the Company’s current best estimate of its liability for these claims.

The amount reserved for asbestos-related claims by its nature is subject to many uncertainties that may change over time, including (i) the ultimate number of claims filed; (ii) whether closed, dismissed or dormant claims are

Table of Contents

reinstituted, reinstated or revived; (iii) the amounts required to resolve both currently known and future unknown claims; (iv) the amount of insurance, if any, available to cover such claims; (v) the unpredictable aspects of the tort system, including a changing trial docket and the jurisdictions in which trials are scheduled; (vi) the outcome of any trials, including potential judgments or jury verdicts; (vii) the lack of specific information in many cases concerning exposure for which the Company is allegedly responsible, and the claimants’ alleged diseases resulting from such exposure; and (viii) potential changes in applicable federal and/or state tort liability law. All of these factors may have a material effect upon future asbestos-related liability estimates. While the ultimate outcome of the Company’s asbestos litigation cannot be predicted with certainty, the Company believes that any financial exposure resulting from its asbestos-related claims will not have a material adverse effect on the Company’s consolidated financial position, liquidity or results of operations.

Environmental Matters

In management’s opinion, the Company operates in an environmentally sound manner and the outcome of the Company’s environmental contingencies will not have a material effect on PPG’s financial position or liquidity; however, any such outcome may be material to the results of operations of any particular period in which costs, if any, are recognized. Management anticipates that the resolution of the Company’s environmental contingencies will occur over an extended period of time.

As remediation at certain environmental sites progresses, PPG continues to refine its assumptions underlying the estimates of the expected future costs of its remediation programs. PPG’s ongoing evaluation may result in additional charges against income to adjust the reserves for these sites. In 2023 and 2022, certain charges have been recorded based on updated estimates to increase existing reserves for these sites. Certain other charges related to environmental remediation actions are expensed as incurred.

As of September 30, 2023 and December 31, 2022, PPG had reserves for environmental contingencies associated with PPG’s former chromium manufacturing plant in Jersey City, New Jersey (“New Jersey Chrome”), glass and chemical manufacturing sites, and for other environmental contingencies, including current manufacturing locations and National Priority List sites. These reserves are reported as Accounts payable and accrued liabilities and Other liabilities in the accompanying condensed consolidated balance sheet.


Environmental Reserves
($ in millions)	September 30, 2023	December 31, 2022
New Jersey Chrome	$48	$58
Glass and chemical	57	60
Other	99	99
Total	$204	$217
Current portion	$53	$50

Pretax charges against income for environmental remediation costs are included in Other charges/(income), net in the accompanying condensed consolidated statement of income. The pretax charges and cash outlays related to such environmental remediation for the three and nine months ended September 30, 2023 and 2022 were as follows:


	Three Months Ended September 30		Nine Months Ended September 30
($ in millions)	2023	2022	2023	2022
Environmental remediation pretax charges	$3	$3	$16	$11
Cash outlays for environmental remediation activities	$12	$18	$28	$65

Remediation: New Jersey Chrome

In June 2009, PPG entered into a settlement agreement with the New Jersey Department of Environmental Protection (“NJDEP”) and Jersey City, New Jersey (which had asserted claims against PPG for lost tax revenue) which was in the form of a Partial Consent Judgement (the "JCO"). Under the JCO, PPG accepted sole responsibility for the remediation activities at its former chromium manufacturing location in Jersey City and a number of additional surrounding sites. Remediation of the New Jersey Chrome sites requires PPG to remediate soil and groundwater contaminated by hexavalent chromium, as well as perform certain other environmental remediation activities. The most significant assumptions underlying the estimate of remediation costs for all New Jersey Chrome sites relate to the extent and concentration of chromium in the soil.

Table of Contents

PPG regularly evaluates the assessments of costs incurred to date versus current progress and the potential cost impacts of the most recent information, including the extent of impacted soils and groundwater, engineering, administrative and other associated costs. Based on these assessments, the reserve is adjusted accordingly. As of September 30, 2023 and December 31, 2022, PPG's reserve for remediation of all New Jersey Chrome sites was $48 million and $58 million, respectively. The major cost components of this liability are related to PPG's remedial obligations under the JCO for soil, as well as long term monitoring. These components each account for approximately 70% and 10%, respectively, of the amount accrued at September 30, 2023.

There are multiple, future events yet to occur, including further remedy selection and design, remedy implementation and execution and applicable governmental agency or community organization approvals. Considerable uncertainty exists regarding the timing of these future events for the New Jersey Chrome sites. Further resolution of these events is expected to occur over the next several years. As these events occur and to the extent that the cost estimates of the environmental remediation remedies change, the existing reserve for this environmental remediation matter will continue to be adjusted.

Remediation: Glass, Chemicals and Other Sites

Among other sites at which PPG is managing environmental liabilities, remedial actions are occurring at a chemical manufacturing site in Barberton, Ohio where PPG has completed a Facility Investigation and Corrective Measure Study under the United States Environmental Protection Agency's Resource Conservation and Recovery Act Corrective Action Program. PPG has also been addressing the impacts from a legacy plate glass manufacturing site in Kokomo, Indiana under the Voluntary Remediation Program of the Indiana Department of Environmental Management and a site associated with a legacy plate glass manufacturing site near Ford City, Pennsylvania under the Pennsylvania Land Recycling Program under the oversight of the Pennsylvania Department of Environmental Protection. PPG is currently performing additional investigation and remedial activities at these locations.

With respect to certain other waste sites, the financial condition of other potentially responsible parties also contributes to the uncertainty of estimating PPG’s final costs. Although contributors of waste to sites involving other potentially responsible parties may face governmental agency assertions of joint and several liability, in general, final allocations of costs are made based on the relative contributions of wastes to such sites. PPG is generally not a major contributor to such sites.

Remediation: Reasonably Possible Matters

In addition to the amounts currently reserved for environmental remediation, the Company may be subject to loss contingencies related to environmental matters estimated to be as much as $100 million to $200 million. Such unreserved losses are reasonably possible but are not currently considered to be probable of occurrence. These reasonably possible unreserved losses relate to environmental matters at a number of sites, none of which are individually significant. The loss contingencies related to these sites include significant unresolved issues such as the nature and extent of contamination at these sites and the methods that may have to be employed to remediate them.

The impact of evolving programs, such as natural resource damage claims, industrial site re-use initiatives and domestic and international remediation programs, also adds to the present uncertainties with regard to the ultimate resolution of this unreserved exposure to future loss. The Company’s assessment of the potential impact of these environmental contingencies is subject to considerable uncertainty due to the complex, ongoing and evolving process of investigation and remediation, if necessary, of such environmental contingencies, and the potential for technological and regulatory developments.

15. Revenue Recognition

The Company recognizes revenue when control of the promised goods or services is transferred to the customer and in amounts that the Company expects to collect. The timing of revenue recognition takes into consideration the various shipping terms applicable to the Company’s sales. For most transactions, control passes in accordance with agreed upon delivery terms.

The Company delivers products to company-owned stores, home centers and other regional or national consumer retail outlets, paint dealers, concessionaires and independent distributors, company-owned distribution networks, and directly to manufacturing companies and retail customers. Each product delivered to a third-party customer is considered to satisfy a performance obligation. Performance obligations generally occur at a point in time and are satisfied when control of the goods passes to the customer. The Company is entitled to collection of the sales price under normal credit terms in the regions in which it operates. Accounts receivable are recognized when there is an unconditional right to consideration. Payment terms vary from customer to customer, depending on creditworthiness, prior payment history and other considerations.

Table of Contents

The Company also provides services by applying coatings to customers' manufactured parts and assembled products and by providing technical support to certain customers. Performance obligations are satisfied over time as critical milestones are met and as services are provided. PPG is entitled to payment as the services are rendered. For the three and nine months ended September 30, 2023 and 2022, service revenue constituted less than 5% of total revenue.

Net sales by segment and region for the three and nine months ended September 30, 2023 and 2022 were as follows:


	Three Months Ended September 30		Nine Months Ended September 30
($ in millions)	2023	2022	2023	2022
Performance Coatings
United States and Canada	$1,287	$1,268	$3,807	$3,660
Europe, Middle East and Africa ("EMEA")