Financial Data and Key Metrics Changes - The company reported sales of $4.3 billion for Q1 2024, marking a solid performance despite a challenging macro environment, and achieved its sixth consecutive quarter of year-over-year segment margin increases [12] - Adjusted earnings per diluted share were $1.86, which is $0.02 above the midpoint of the previously provided range and the second-best Q1 adjusted EPS in the company's history [12] - Volumes were nearly flat year-over-year, continuing a positive volume trajectory over the last five quarters, with expectations for positive sales volumes in Q2 [13][18] Business Line Data and Key Metrics Changes - The Industrial segment margins improved by 100 basis points year-over-year, while Performance Coatings margins increased by about 40 basis points due to favorable pricing and moderating input costs [31] - The company experienced double-digit organic sales growth in China and India, with solid global organic sales growth in aerospace, specialty coatings, and protective and marine coatings businesses [13][55] Market Data and Key Metrics Changes - The company anticipates total selling prices to be slightly positive overall in 2024, with targeted structural selling price increases implemented in several Performance segment businesses [14] - The company expects mid-single-digit percentage raw material deflation in Q2 following high-single-digit percentage decreases in Q1, indicating a positive trend in input costs [56] Company Strategy and Development Direction - The company is focused on enterprise growth initiatives to drive higher sales volumes and improve operating margins, with a goal of transforming into a higher-growth, higher-margin company [33][20] - Strategic reviews of the architectural U.S. and Canada business and the global silicas product business are underway, with a target to communicate a path forward by Q3 [33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering positive sales volumes in each remaining quarter of 2024, supported by growth in China and India, and a strong order backlog in aerospace [35][34] - The company noted that while global industrial production remains low, it expects overall second quarter sales volumes to be positive by a low single-digit percentage [18] Other Important Information - The company repurchased approximately $150 million of its stock in Q1 and increased its share buyback authorization by an additional $2.5 billion, bringing the total to approximately $3.4 billion [32] - The company is experiencing stable supply chains and customer order patterns, with most suppliers having sufficient or excess capacity [30] Q&A Session Summary Question: What underlies the confidence for earnings improvement in the back half of the year? - Management highlighted proven margin and cash performance, strong volume momentum, and expectations for positive volume growth for the rest of the year [38] Question: What portion of the business is expected to see real pricing moving forward? - Management indicated that pricing comparisons include a transitory unfavorable impact from European energy surcharges, but they expect to see structural pricing improvements [40] Question: How is the architectural U.S. business performing since the announcement of strategic reviews? - Management reported minimal disruption to the business and strong interest in the assets, with ongoing engagement with key customers [46] Question: What is the outlook for the U.S. architectural business profitability? - Management acknowledged that the business has been barely profitable and emphasized the need for velocity through stores, with ongoing investments to improve profitability [105] Question: How does the company view the impact of macroeconomic factors on volume growth? - Management noted that while Q1 was weaker than expected, they are seeing a better order book and shipments in early April, indicating potential for recovery [114]

First Quarter 2024 Financial Results April 18, 2024 Sixth consecutive quarter of YOY segment margin improvement +2% Share Repurchases ~$150MM Note: All changes versus same quarter last year. See Appendix for reconciliation of Adjusted EPS and Segment Margin. Segment Margin defined as total segment income as a percentage of net sales. 3 Organic sales down 2% YOY impacted by PY customer load-in and Easter timing Load In ( Operating Environment Heading Into 2Q 2024 Positives 5 Highlights • Architectural USCA 1 ...

PPG Investor Contact: Jonathan Edwards Investor Relations +1-412-434-3466 jonathanedwards@ppg.com investor.ppg.com PITTSBURGH, April 18, 2024 – PPG (NYSE:PPG) today reported financial results for the first quarter 2024. Tim Knavish, PPG chairman and chief executive officer, commented on the quarter: year improvement. 2024 is expected to be another year of excellent cash flow, and our balance sheet remains strong, including lower inventories year over year, providing us with ongoing shareholder value creatio ...

Part I [Business Overview](index=3&type=section&id=Item%201.%20Business) PPG Industries, Inc. is a global manufacturer and distributor of paints, coatings, and specialty materials, operating through two main segments - PPG Industries, Inc. manufactures and distributes a broad range of paints, coatings, and specialty materials, incorporated in Pennsylvania in 1883, with a vision to be the first-choice partner for innovative solutions[11](index=11&type=chunk) - PPG operates globally with manufacturing facilities and equity affiliates in over 70 countries, serving diverse end-uses including industrial equipment, packaging, aircraft, marine, automotive, and architectural sectors[12](index=12&type=chunk)[13](index=13&type=chunk) - The business is comprised of two reportable segments: Performance Coatings and Industrial Coatings[14](index=14&type=chunk) [Performance Coatings Segment](index=4&type=section&id=PERFORMANCE%20COATINGS) The Performance Coatings segment supplies protective and decorative coatings, adhesives, and related chemicals, competing on product performance and brand recognition - The Performance Coatings segment supplies protective and decorative coatings, adhesives, sealants, finishes, pavement marking products, paint strippers, stains, related chemicals, transparencies, transparent armor, and paint films[16](index=16&type=chunk) - Major competitive factors include product performance, technology, quality, technical and customer service, price, customer productivity, distribution, and brand recognition[16](index=16&type=chunk) - Global competitors include Akzo Nobel N.V., Axalta Coating Systems Ltd., BASF Corporation, Benjamin Moore, Hempel A/S, Kansai Paints, the Jotun Group, Masco Corporation, Nippon Paint, RPM International Inc., The Sherwin-Williams Company, and 3M Company[16](index=16&type=chunk) [Industrial Coatings Segment](index=5&type=section&id=INDUSTRIAL%20COATINGS) The Industrial Coatings segment supplies protective and decorative coatings and specialty materials for automotive OEM, appliances, and consumer electronics - The Industrial Coatings segment primarily supplies protective and decorative coatings and finishes, adhesives, sealants, metal pretreatment products, optical monomers and coatings, low-friction coatings, precipitated silicas, and other specialty materials[18](index=18&type=chunk) - Key customers and end-uses include automotive original equipment (OEM), appliances, construction equipment, consumer electronics, building products, metal cans, and specialty applications like tires and e-passports[18](index=18&type=chunk) - Major competitive factors are product performance, technology, quality, technical and customer service, price, customer productivity, and distribution[18](index=18&type=chunk) [Research and Development](index=6&type=section&id=Research%20and%20Development) PPG's R&D aligns with macro trends, focusing on sustainability and productivity, leveraging core technology platforms to address market needs Research and Development Costs | ($ in millions, except percentages) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Research and development costs, including depreciation of research facilities | $456 | $470 | $463 | | % of annual net sales | 2.5 % | 2.7 % | 2.8 % | - PPG aligns product development with macro trends, focusing on sustainability and productivity, leveraging core technology platforms to address unmet market needs[19](index=19&type=chunk) [Raw Materials, Energy and Logistics](index=6&type=section&id=Raw%20Materials%2C%20Energy%20and%20Logistics) Raw materials are PPG's largest production cost, with moderating costs in 2023 and a strategic focus on renewable energy and alternative materials - Raw materials, primarily resins, reactants, solvents, titanium dioxide, epoxy, and emulsions, represent PPG's single largest production cost component[21](index=21&type=chunk) - Raw material costs moderated in 2023 compared to 2022, resulting in a decrease to operating costs of over **$500 million**, with no significant raw material inflation expected in 2024, though wage inflation is anticipated[24](index=24&type=chunk) - PPG is increasing renewable energy use and evaluating alternative raw materials for sustainability and circular economy benefits[22](index=22&type=chunk) [Global Operations](index=8&type=section&id=Global%20Operations) PPG's significant non-U.S. operations, representing **63% of 2023 net sales**, provide geographic diversification and favorable currency translation - PPG's significant non-U.S. operations (**63% of total net sales in 2023**) provide geographic diversification, lessening the impact of economic conditions in any single region[28](index=28&type=chunk)[61](index=61&type=chunk) - In 2023, favorable foreign currency translation increased Net sales by approximately **$102 million** and Income before income taxes by approximately **$25 million**[28](index=28&type=chunk) [Seasonality](index=8&type=section&id=Seasonality) PPG typically experiences higher Income before income taxes in Q2 and Q3, and greatest cash from operating activities in Q4, due to market seasonality - PPG typically experiences higher Income before income taxes in the second and third quarters and greatest Cash from operating activities in the fourth quarter due to end-use market seasonality, particularly in architectural coatings and traffic solutions[30](index=30&type=chunk) [Human Capital](index=8&type=section&id=Human%20Capital) PPG employed approximately **53,000 people globally** in 2023, focusing on culture, engagement, development, and pay equity, with a strong safety commitment - PPG employed approximately **53,000 people globally** in 2023, with **16,300** in the U.S. and **36,700** internationally[31](index=31&type=chunk) - The company's human capital management strategies focus on culture, engagement, development, and pay equity, overseen by the Board's Human Capital Management and Compensation Committee[33](index=33&type=chunk) - PPG reported an injury and illness rate of **0.32** for 2023, reflecting its commitment to environmental, health, and safety[34](index=34&type=chunk) [Environmental Matters](index=9&type=section&id=Environmental%20Matters) PPG is committed to sustainable operations, with **44% of 2023 sales** from sustainably-advantaged products and ambitious 2030 GHG emission reduction goals - PPG is committed to sustainable operations, with **44% of 2023 sales** from sustainably-advantaged products and processes[38](index=38&type=chunk) - The company announced near-term 2030 sustainability goals, including reducing absolute Scope 1 and 2 GHG emissions by **50%** and Scope 3 GHG emissions by **30%** from a 2019 base year[39](index=39&type=chunk) Capital Expenditures for Environmental Control Projects | ($ in millions) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Capital expenditures for environmental control projects | $26 | $22 | $17 | - PPG has reserved **$227 million** for environmental remediation efforts and may be subject to additional unreserved losses of approximately **$100 million to $200 million**[42](index=42&type=chunk) [Risk Factors](index=10&type=section&id=Item%201A.%20Risk%20Factors) PPG faces significant risks from raw material price volatility, global economic uncertainties, foreign currency fluctuations, intense competition, evolving environmental regulations, and cybersecurity threats - Increases in raw material prices and declines in availability, particularly for petroleum-derived and inorganic materials like titanium dioxide, could negatively impact financial results as they represent the largest production cost component[47](index=47&type=chunk)[49](index=49&type=chunk) - Global economic and geopolitical uncertainties, including higher interest rates, ongoing wars, commodity market volatility, and trade agreement changes, could negatively impact demand for PPG's products and services[50](index=50&type=chunk) - Fluctuations in foreign currency exchange rates, especially the strengthening or weakening of the U.S. dollar, can adversely affect Net sales, Net income, and balance sheet values[51](index=51&type=chunk) - The highly competitive coatings industry could lead to market share loss, reduced sales volumes, or margin compression due to pricing pressures[52](index=52&type=chunk) - Evolving environmental laws and regulations, including expanded reporting requirements, could necessitate substantial capital expenditures or operational modifications, increasing compliance costs[54](index=54&type=chunk) - The company relies extensively on global IT systems, making it vulnerable to cybersecurity threats like advanced persistent threats and ransomware, which could lead to financial loss, data breaches, or operational disruptions[63](index=63&type=chunk)[64](index=64&type=chunk) - Future growth depends on the ability to innovate existing products and introduce new ones, with failure to keep pace with product innovation or predict market demands potentially adversely affecting business results[69](index=69&type=chunk) [Unresolved Staff Comments](index=15&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments from the SEC - There are no unresolved staff comments[71](index=71&type=chunk) [Cybersecurity](index=15&type=section&id=Item%201C.%20Cybersecurity) PPG's risk-based cybersecurity program, aligned with NIST, includes training, controls, and incident response, with Board oversight, and has not materially affected the company - PPG's cybersecurity program is designed to protect networks, systems, and data confidentiality, integrity, and availability, based on the U.S. National Institute for Standards and Technology (NIST) cybersecurity framework[72](index=72&type=chunk) - The program includes ongoing employee training, access management, data encryption, monitoring software, vulnerability management, and a cyber incident response plan[72](index=72&type=chunk) - The Board of Directors, with the Audit Committee, has overall responsibility for cybersecurity risk oversight, receiving bi-annual reports and briefings from the CIO and CISO[75](index=75&type=chunk) - To date, cybersecurity threats have not materially affected the Company, which has significantly increased investments in cybersecurity safeguards[73](index=73&type=chunk)[74](index=74&type=chunk) [Properties](index=17&type=section&id=Item%202.%20Properties) PPG's global operations include owned manufacturing facilities and R&D centers, with leased headquarters and stores, all deemed suitable and adequate for current operations - PPG's corporate headquarters is in Pittsburgh, PA, with global manufacturing facilities, sales offices, research and development centers, and distribution centers[79](index=79&type=chunk) - Principal research and development centers are located in various global sites including Allison Park, PA; Tianjin, China; Cleveland, OH; Milan, Italy; and Vantaa, Finland[80](index=80&type=chunk) - Facilities are considered suitable and adequate, with sufficient capacity for upcoming year's business, and are primarily owned, except for leased headquarters, certain distribution centers, and company-owned paint stores[81](index=81&type=chunk) [Legal Proceedings](index=17&type=section&id=Item%203.%20Legal%20Proceedings) PPG is involved in various lawsuits and claims, including environmental and asbestos matters, but management believes the aggregate outcome will not materially affect financial position or liquidity - PPG is involved in numerous lawsuits and claims, both actual and potential, seeking substantial monetary damages related to contract, patent, environmental, product liability, asbestos exposure, antitrust, employment, and securities matters[82](index=82&type=chunk) - In Cadogan, PA, PPG settled injunctive relief claims with the Sierra Club and PennEnvironment, agreeing to cleanup plan enhancements and a **$250,000** donation, while vigorously defending against remaining claims for attorneys' fees and civil penalties[83](index=83&type=chunk) - Lead-related lawsuits in Pennsylvania were dismissed by the Supreme Court in November 2023, with the court ruling that the counties failed to plead valid causes of action[85](index=85&type=chunk) - Management believes the aggregate outcome of all current lawsuits and claims, including asbestos-related claims, will not have a material effect on PPG's consolidated financial position or liquidity[82](index=82&type=chunk) [Mine Safety Disclosures](index=20&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company states that this item is not applicable - This item is not applicable[89](index=89&type=chunk) Part II [Market for Common Equity, Stockholder Matters, and Issuer Purchases](index=21&type=section&id=Item%205.%20Market%20for%20the%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section details PPG's common equity market, stockholder matters, and share repurchase program, with approximately **$1 billion** remaining under current authorization - Market information, including PPG's stock exchange listing, quarterly stock market prices, dividends, holders of common stock, and the stock performance graph, is included in Exhibit 13.1[91](index=91&type=chunk) Issuer Purchases of Equity Securities - Fourth Quarter 2023 | Month | Total Number of Shares Purchased | Avg. Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs | Max. Number of Shares That May Yet Be Purchased Under the Programs | | :--- | :--- | :--- | :--- | :--- | | October 2023 | — | $— | — | 9,043,759 | | November 2023 | — | $— | — | 7,819,581 | | December 2023 | 673,638 | $148.61 | 673,638 | 6,754,871 | | Total quarter ended December 31, 2023 | 673,638 | $148.61 | 673,638 | 6,754,871 | - PPG's board of directors approved a **$2.5 billion** share repurchase program in December 2017, with approximately **$1.0 billion** remaining under the current authorization as of year-end 2023[92](index=92&type=chunk)[123](index=123&type=chunk)[164](index=164&type=chunk) [Reserved](index=21&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Management's Discussion and Analysis](index=21&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) PPG achieved record **net sales of $18.2 billion** and **adjusted EPS of $7.67** in 2023, driven by pricing and moderating raw material costs, anticipating uneven global economic activity in 2024 - Net sales were approximately **$18.2 billion** in 2023, an increase of **3%** compared to the prior year, driven by higher selling prices[94](index=94&type=chunk) - Income before income taxes was **$1,748 million** in 2023, an increase of **$367 million** compared to the prior year, primarily due to higher selling prices and lower raw material costs[95](index=95&type=chunk) - PPG achieved annual records for net sales, adjusted earnings per diluted share (**$7.67**, up **27%** YoY), and operating cash flow in 2023[112](index=112&type=chunk) - Raw material costs moderated in 2023, resulting in a favorable impact of more than **$500 million** to operating costs, with further easing expected in early 2024[24](index=24&type=chunk)[114](index=114&type=chunk)[119](index=119&type=chunk) - The company expects softening global economic activity in 2024, with anticipated volume increases in China, India, Mexico, and aerospace, but subdued demand for architectural coatings[115](index=115&type=chunk) [Performance Overview](index=21&type=section&id=Performance%20Overview) This section details PPG's 2023 financial performance, including net sales, cost of sales, SG&A, interest, and impairment charges, highlighting key drivers of change Net Sales by Region (2023 vs. 2022) | ($ in millions, except percentages) | 2023 | 2022 | % Change 2023 vs. 2022 | | :--- | :--- | :--- | :--- | | United States and Canada | $7,488 | $7,383 | 1.4% | | Europe, Middle East and Africa (EMEA) | 5,616 | 5,458 | 2.9% | | Asia Pacific | 2,874 | 2,824 | 1.8% | | Latin America | 2,268 | 1,987 | 14.1% | | Total | $18,246 | $17,652 | 3.4% | - Net sales increased by **$594 million**, driven by higher selling prices (**+5%**) partially offset by lower sales volumes (**-2%**)[96](index=96&type=chunk)[97](index=97&type=chunk) Cost of Sales, Exclusive of Depreciation and Amortization (2023 vs. 2022) | ($ in millions, except percentages) | 2023 | 2022 | % Change 2023 vs. 2022 | | :--- | :--- | :--- | :--- | | Cost of sales, exclusive of depreciation and amortization | $10,745 | $11,096 | (3.2)% | | Cost of sales as a % of net sales | 58.9 % | 62.9 % | (4.0)% | - Cost of sales decreased by **$351 million** due to moderating raw material costs and lower sales volume, partially offset by wage and other cost inflation[98](index=98&type=chunk)[99](index=99&type=chunk) Selling, General and Administrative Expenses (2023 vs. 2022) | ($ in millions, except percentages) | 2023 | 2022 | % Change 2023 vs. 2022 | | :--- | :--- | :--- | :--- | | Selling, general and administrative expenses | $4,222 | $3,842 | 9.9% | | Selling, general and administrative expenses as a % of net sales | 23.1 % | 21.8 % | 1.3% | - Selling, general and administrative expenses increased by **$380 million** primarily due to wage and other cost inflation, unfavorable foreign currency translation, higher performance-based compensation, and expenses from acquired businesses, partially offset by restructuring cost savings[99](index=99&type=chunk)[106](index=106&type=chunk) Other Charges and Other Income (2023 vs. 2022) | ($ in millions, except percentages) | 2023 | 2022 | % Change 2023 vs. 2022 | | :--- | :--- | :--- | :--- | | Interest expense | $247 | $167 | 47.9% | | Interest income | ($140) | ($54) | 159.3% | | Impairment and other related charges, net | $160 | $245 | (34.7)% | | Pension settlement charge | $190 | $— | N/A | | Other charges/(income), net | $83 | ($27) | (407.4)% | - Interest expense increased by **$80 million** due to higher interest rates on variable rate debt, while interest income increased by **$86 million** due to strong cash generation and higher interest rates[102](index=102&type=chunk)[103](index=103&type=chunk) - Impairment and other related charges, net, decreased to **$160 million** in 2023 (goodwill impairment for traffic solutions and indefinite-lived trademarks) from **$245 million** in 2022 (Russia operations wind-down, non-strategic business sales, and trademarks)[104](index=104&type=chunk)[105](index=105&type=chunk) - A **$190 million** non-cash pension settlement charge was recognized in March 2023 due to transferring U.S. pension benefit obligations to third-party insurers[108](index=108&type=chunk) [Effective Tax Rate and Earnings Per Diluted Share](index=23&type=section&id=Effective%20tax%20rate%20and%20earnings%20per%20diluted%20share%2C%20continuing%20operations) PPG's effective tax rate increased to **25.1%** in 2023, while adjusted EPS from continuing operations grew **23.6%** due to pricing and lower raw material costs Effective Tax Rate and Earnings Per Diluted Share (2023 vs. 2022) | ($ in millions, except percentages) | 2023 | 2022 | % Change 2023 vs. 2022 | | :--- | :--- | :--- | :--- | | Income tax expense | $439 | $325 | 35.1% | | Effective tax rate | 25.1 % | 23.5 % | 1.6% | | Adjusted effective tax rate, continuing operations* | 22.0 % | 22.0 % | —% | | Earnings per diluted share, continuing operations | $5.35 | $4.33 | 23.6% | | Adjusted earnings per diluted share, continuing operations* | $7.67 | $6.05 | 26.8% | - The effective tax rate increased to **25.1%** in 2023 from **23.5%** in 2022, partly due to a goodwill impairment charge with no tax benefit, while the adjusted effective tax rate remained stable at **22.0%**[110](index=110&type=chunk) - Earnings per diluted share from continuing operations increased by **23.6%** year-over-year, driven by increased selling prices, moderating raw material costs, and favorable foreign currency translation[111](index=111&type=chunk) [Review and Outlook](index=23&type=section&id=Review%20and%20Outlook) PPG achieved record net sales, adjusted EPS, and operating cash flow in 2023, with moderating raw material costs and strategic divestitures, forecasting uneven global economic activity for 2024 - PPG achieved annual records for net sales (**$18.2 billion**, **+3%** YoY), adjusted earnings per diluted share (**$7.67**, **+27%** YoY), and operating cash flow in 2023[112](index=112&type=chunk) - Organic sales increased **3%** in 2023, driven by strong growth in aerospace coatings and automotive OEM coatings, with record segment earnings in EMEA, Asia Pacific, and Latin America[112](index=112&type=chunk) - Raw material costs moderated in 2023 but remained above 2019 levels, with further easing expected in early 2024, while wage, logistics, and energy costs are expected to increase[114](index=114&type=chunk)[119](index=119&type=chunk) - For 2024, PPG anticipates softening global economic activity, with demand growth in China, India, and Mexico, and industry growth in aerospace and protective coatings, but subdued architectural coatings demand[115](index=115&type=chunk) - The company executed strategic initiatives, including divestitures of European and Australian traffic solutions businesses and a review of the silicas products business, and expects **$35 million** in restructuring savings in 2024[116](index=116&type=chunk)[117](index=117&type=chunk) - PPG ended 2023 with approximately **$1.6 billion** in cash and short-term investments, expecting strong cash generation in 2024, and deployed **$109 million** for acquisitions, **$549 million** for capital expenditures, and **$598 million** for dividends[123](index=123&type=chunk)[124](index=124&type=chunk) [Regulation G Reconciliations - Results from Operations](index=25&type=section&id=Regulation%20G%20Reconciliations%20-%20Results%20from%20Operations) PPG provides non-GAAP financial measures like adjusted net income and EPS to offer insight into ongoing performance by excluding non-recurring items - PPG provides non-GAAP financial measures (adjusted net income, adjusted EPS, adjusted effective tax rate) to offer insight into ongoing performance by excluding non-recurring or non-primary operational items[125](index=125&type=chunk) Adjusted Financial Performance (2023 vs. 2022) | ($ in millions, except percentages and per share amounts) | Income Before Income Taxes | Income Tax Expense | Effective Tax Rate | Net Income (attributable to PPG) | Earnings per Diluted Share | | :--- | :--- | :--- | :--- | :--- | :--- | | **Year-ended December 31, 2023** | | | | | | | As reported, continuing operations | $1,748 | $439 | 25.1 % | $1,270 | $5.35 | | Adjusted, continuing operations, excluding certain items | $2,389 | $526 | 22.0 % | $1,822 | $7.67 | | **Year-ended December 31, 2022** | | | | | | | As reported, continuing operations | $1,381 | $325 | 23.5 % | $1,028 | $4.33 | | Adjusted, continuing operations, excluding certain items | $1,877 | $413 | 22.0 % | $1,436 | $6.05 | - Adjustments for 2023 included acquisition-related amortization, business restructuring costs, impairment charges, portfolio optimization, environmental remediation, Argentina currency devaluation losses, insurance recoveries, and a pension settlement charge[127](index=127&type=chunk)[128](index=128&type=chunk) [Performance of Reportable Business Segments](index=26&type=section&id=Performance%20of%20Reportable%20Business%20Segments) Performance Coatings net sales increased **4.4%**, driven by pricing, while Industrial Coatings net sales grew **1.8%**, both impacted by volume changes and market demand Performance Coatings Segment Financials (2023 vs. 2022) | ($ in millions, except percentages) | 2023 | 2022 | $ Change 2023 vs. 2022 | % Change 2023 vs. 2022 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $11,164 | $10,694 | $470 | 4.4% | | Segment income | $1,709 | $1,399 | $310 | 22.2% | | Amortization expense | $114 | $123 | ($9) | (7.3)% | | Segment income, excluding amortization expense | $1,823 | $1,522 | $301 | 19.8% | - Performance Coatings net sales increased **4.4%** due to higher selling prices (**+5%**) and favorable foreign currency translation (**+1%**), partially offset by lower sales volumes (**-2%**) due to soft demand in Europe[130](index=130&type=chunk)[131](index=131&type=chunk)[137](index=137&type=chunk) - Aerospace coatings organic sales grew **20%** due to price and volume increases, while protective and marine coatings organic sales increased mid-single-digit, and traffic solutions organic sales decreased mid-single-digit[135](index=135&type=chunk)[136](index=136&type=chunk) Industrial Coatings Segment Financials (2023 vs. 2022) | ($ in millions, except percentages) | 2023 | 2022 | $ Change 2023 vs. 2022 | % Change 2023 vs. 2022 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $7,082 | $6,958 | $124 | 1.8% | | Segment income | $966 | $643 | $323 | 50.2% | | Amortization expense | $46 | $43 | $3 | 7.0% | | Segment income, excluding amortization expense | $1,012 | $686 | $326 | 47.5% | - Industrial Coatings net sales increased **1.8%** due to higher selling prices (**+4%**), offset by lower sales volumes (**-2%**) driven by lower global industrial production[139](index=139&type=chunk)[140](index=140&type=chunk) - Automotive OEM coatings organic sales increased high single-digit, led by EMEA and Asia Pacific, while industrial coatings, packaging coatings, and specialty coatings and materials all saw mid-single-digit organic sales decreases due to softening demand[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk) [Commitments and Contingent Liabilities, including Environmental Matters](index=27&type=section&id=Commitments%20and%20Contingent%20Liabilities%2C%20including%20Environmental%20Matters) PPG is involved in various lawsuits and environmental matters, maintaining significant reserves, but management believes the aggregate outcome will not materially affect financial position - PPG is involved in various lawsuits and claims, including environmental matters, but management believes the aggregate outcome will not materially affect financial position or liquidity, though it may impact periodic results[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk) - The company maintains significant reserves for environmental contingencies, accruing expenses when a liability is probable and estimable[147](index=147&type=chunk) [Accounting Standards Adopted in 2023](index=28&type=section&id=Accounting%20Standards%20Adopted%20in%202023) PPG adopted ASU No. 2022-04 on Supplier Finance Programs in 2023 to enhance transparency without affecting financial recognition or measurement - Effective January 1, 2023, PPG adopted ASU No. 2022-04, 'Liabilities - Supplier Finance Programs,' to enhance transparency around supplier finance programs without affecting recognition, measurement, or presentation of obligations[266](index=266&type=chunk) [Accounting Standards to be Adopted in Future Years](index=28&type=section&id=Accounting%20Standards%20to%20be%20Adopted%20in%20Future%20Years) Future accounting standards, including ASU No. 2023-07 and ASU No. 2023-09, will require additional disclosures on segment expenses and income taxes - ASU No. 2023-07 'Improvements to Reportable Segment Disclosures' (effective Dec 31, 2024) will require disclosures of significant segment expenses and CODM information[267](index=267&type=chunk) - ASU No. 2023-09 'Improvements to Income Tax Disclosures' (effective Dec 31, 2025) will require specific categories of information within the effective tax rate reconciliation and disaggregated income taxes paid by jurisdiction[268](index=268&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) PPG maintained sufficient financial resources in 2023, with **cash from operating activities increasing by $1.448 billion**, funding capital spending, acquisitions, and dividends - PPG had sufficient financial resources in the past two years to meet operating requirements, fund capital spending (including acquisitions, share repurchases, and pension plans), and pay increasing dividends[150](index=150&type=chunk) Cash and Short-term Investments (2023 vs. 2022) | ($ in millions) | 2023 | 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,514 | $1,099 | | Short-term investments | 75 | 55 | | Total | $1,589 | $1,154 | Cash from Operating Activities (2023 vs. 2022) | ($ in millions, except percentages) | 2023 | 2022 | % Change 2023 vs. 2022 | | :--- | :--- | :--- | :--- | | Cash from operating activities | $2,411 | $963 | 150.4% | - Cash from operating activities increased by **$1,448 million**, primarily due to higher net income from increased selling prices and moderating raw material costs, and favorable changes in working capital[153](index=153&type=chunk) Operating Working Capital (2023 vs. 2022) | ($ in millions, except percentages) | 2023 | 2022 | | :--- | :--- | :--- | | Trade receivables, net | $2,881 | $2,824 | | Inventories, FIFO | 2,376 | 2,544 | | Trade creditors' liabilities | 2,612 | 2,538 | | Operating working capital | $2,645 | $2,830 | | Operating working capital as a % of fourth quarter sales, annualized | 15.2 % | 16.9 % | | Days sales outstanding | 55 | 56 | | Inventory turnover | 4.4 | 4.5 | Cash Used for Investing Activities (2023 vs. 2022) | ($ in millions, except percentages) | 2023 | 2022 | % Change 2023 vs. 2022 | | :--- | :--- | :--- | :--- | | Cash used for investing activities | $556 | $461 | 20.6% | - Cash used for investing activities increased by **$95 million** due to higher capital expenditures and lower proceeds from asset sales[159](index=159&type=chunk) Capital Expenditures, Including Business Acquisitions (2023 vs. 2022) | ($ in millions, except percentages) | 2023 | 2022 | % Change 2023 vs. 2022 | | :--- | :--- | :--- | :--- | | Capital expenditures | $549 | $518 | 6.0% | | Business acquisitions, net of cash balances acquired | $109 | $114 | (4.4)% | | Total capital expenditures, including acquisitions | $658 | $632 | 4.1% | | Capital expenditures, excluding acquisitions, as a % of sales | 3.0 % | 2.9 % | 3.4% | Cash Used for Financing Activities (2023 vs. 2022) | ($ in millions, except percentages) | 2023 | 2022 | % Change 2023 vs. 2022 | | :--- | :--- | :--- | :--- | | Cash used for financing activities | ($1,550) | ($409) | 279.0% | - Cash used for financing activities increased by **$1,141 million**, primarily due to repayments of long-term debt and lower proceeds from debt issuance, partially offset by the absence of net payments on commercial paper[163](index=163&type=chunk) - PPG repurchased **0.6 million shares** for **$86 million** in 2023, with **$1.0 billion** remaining under the current authorization, and dividends paid totaled **$598 million** in 2023, marking the 52nd successive year of increased annual per-share dividend payments[164](index=164&type=chunk)[165](index=165&type=chunk) Contractual Obligations and Commitments (as of Dec 31, 2023) | ($ in millions) | Total | 2024 | 2025-2026 | 2027-2028 | Thereafter | | :--- | :--- | :--- | :--- | :--- | :--- | | Long-term debt | $6,050 | $302 | $2,239 | $1,446 | $2,063 | | Interest payments | $966 | $134 | $239 | $192 | $401 | | Operating leases | $896 | $216 | $313 | $183 | $184 | | Unconditional purchase commitments | $343 | $136 | $157 | $36 | $14 | [Critical Accounting Estimates](index=31&type=section&id=Critical%20Accounting%20Estimates) PPG's critical accounting estimates involve significant judgment in areas such as contingencies, pension benefits, business combinations, and goodwill impairment - Critical accounting estimates include contingencies (environmental remediation, litigation, tax matters), defined benefit pension and other postretirement benefits, business combinations, and goodwill and other identifiable intangible assets[176](index=176&type=chunk) - Estimates for contingencies involve judgment in assessing liability likelihood and potential loss amounts[177](index=177&type=chunk) - Pension and postretirement benefit accounting relies on assumptions about inflation, investment returns, mortality, and discount rates[178](index=178&type=chunk) - Business combinations require allocating acquisition costs to assets and liabilities based on fair values, impacting future operating results[179](index=179&type=chunk) - Goodwill and indefinite-lived intangible assets are tested for impairment annually using qualitative or quantitative methods, with fair values estimated via discounted cash flow models[181](index=181&type=chunk) [Currency](index=32&type=section&id=Currency) Consolidated net assets increased by **$508 million** in 2023 due to the U.S. dollar weakening against other currencies, favorably impacting income before taxes - Consolidated net assets increased by **$508 million** at December 31, 2023, compared to December 31, 2022, due to the U.S. dollar weakening against currencies in regions where PPG operates, notably the Mexican peso[183](index=183&type=chunk) - A favorable impact of approximately **$25 million** on full-year 2023 Income before income taxes resulted from the translation of foreign income into U.S. dollars, as the U.S. dollar weakened against certain currencies (Mexican peso, euro) and strengthened against others (Chinese yuan, Argentine peso)[184](index=184&type=chunk) [Forward-Looking Statements](index=32&type=section&id=Forward-Looking%20Statements) The report contains forward-looking statements subject to various factors, including global economic conditions and raw material costs, which could cause actual results to differ materially - The report contains forward-looking statements, which are subject to various factors that could cause actual results to differ materially, including global economic conditions, raw material costs, competition, and geopolitical issues[186](index=186&type=chunk) - Consequences of material differences could include lower sales or income, business disruption, operational problems, financial loss, and legal liability[189](index=189&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) PPG manages market risks from foreign currency and interest rates using derivative instruments, with sensitivity analyses indicating potential impacts from adverse market rate changes - PPG is exposed to market risks from changes in foreign currency exchange rates and interest rates, which are managed through derivative financial instrument transactions[190](index=190&type=chunk) - A **10%** adverse change in exchange rates on foreign currency hedge contracts could have reduced Income before income taxes by **$402 million** in 2023[192](index=192&type=chunk) - A **10%** increase in the euro's value against the U.S. dollar would have unfavorably affected cross currency swap contracts by reducing their value by **$46 million** at December 31, 2023[193](index=193&type=chunk) - A **10%** weakening of the U.S. dollar against European, Asian, and South American currencies would have resulted in unrealized translation losses of **$363 million** on non-U.S. dollar denominated debt as of December 31, 2023[194](index=194&type=chunk) - PPG uses interest rate swaps to convert fixed-rate debt to variable-rate debt; a **10%** increase in variable interest rates would have increased annual interest expense by **$2 million** in 2023[195](index=195&type=chunk) [Financial Statements and Supplementary Data](index=36&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents PPG's audited consolidated financial statements for 2021-2023, with unqualified opinions from the independent auditor, detailing critical accounting policies and segment information - PricewaterhouseCoopers LLP issued an unqualified opinion on PPG's consolidated financial statements and the effectiveness of its internal control over financial reporting as of December 31, 2023[199](index=199&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2023, based on COSO criteria[213](index=213&type=chunk) Consolidated Statement of Income (2023, 2022, 2021) | ($ in millions, except per share amounts) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net sales | $18,246 | $17,652 | $16,802 | | Income before income taxes | $1,748 | $1,381 | $1,815 | | Income tax expense | 439 | 325 | 374 | | Income from continuing operations | $1,309 | $1,056 | $1,441 | | Net income (attributable to PPG) | $1,270 | $1,026 | $1,439 | | Earnings per common share - assuming dilution | $5.35 | $4.32 | $6.01 | Consolidated Balance Sheet (as of Dec 31, 2023 and 2022) | ($ in millions) | 2023 | 2022 | | :--- | :--- | :--- | | **Assets** | | | | Total current assets | $7,431 | $7,173 | | Property, plant and equipment, net | 3,644 | 3,328 | | Goodwill | 6,200 | 6,078 | | Identifiable intangible assets, net | 2,424 | 2,414 | | Total Assets | $21,647 | $20,744 | | **Liabilities and Shareholders' Equity** | | | | Total current liabilities | $5,054 | $4,721 | | Long-term debt | 5,748 | 6,503 | | Total liabilities | $13,624 | $14,035 | | Total shareholders' equity | $8,023 | $6,709 | | Total Liabilities and Shareholders' Equity | $21,647 | $20,744 | Consolidated Statement of Cash Flows (2023, 2022, 2021) | ($ in millions) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Cash from operating activities | $2,411 | $963 | $1,562 | | Cash used for investing activities | ($555) | ($461) | ($2,404) | | Cash (used for)/from financing activities | ($1,550) | ($409) | $1,920 | | Net increase/(decrease) in cash and cash equivalents | $415 | $94 | ($821) | | Cash and cash equivalents, end of year | $1,514 | $1,099 | $1,005 | [Note 1. Summary of Significant Accounting Policies](index=44&type=section&id=1.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines PPG's significant accounting policies, including consolidation, revenue recognition, inventory valuation, derivative instruments, goodwill impairment, and future accounting standard adoptions - PPG's consolidated financial statements include PPG Industries, Inc. and its controlled subsidiaries, with equity method accounting for **20-50%** owned investments[224](index=224&type=chunk) - Revenue is recognized when performance obligations are satisfied, typically when control of products transfers to the customer[226](index=226&type=chunk) Advertising and R&D Costs | ($ in millions) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Advertising costs | $285 | $252 | $243 | | Research and development, net | $433 | $448 | $439 | - Inventories are valued at the lower of cost or net realizable value, with most U.S. inventories using LIFO and others using FIFO[241](index=241&type=chunk) - Derivative financial instruments are recognized at fair value, with accounting treatment depending on designation as cash flow, fair value, or net investment hedges[242](index=242&type=chunk)[243](index=243&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk) - Goodwill and indefinite-lived intangible assets are tested for impairment at least annually, or more frequently if impairment indicators arise, using qualitative or quantitative tests[250](index=250&type=chunk)[252](index=252&type=chunk) - PPG adopted ASU No. 2022-04 on Supplier Finance Programs in 2023 and will adopt ASU No. 2023-07 on Segment Disclosures and ASU No. 2023-09 on Income Tax Disclosures in future years, which will result in additional disclosures but no impact on financial position or cash flows[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk) [Note 2. Acquisitions](index=49&type=section&id=2.%20Acquisitions) PPG completed the acquisition of Tikkurila Oyj in 2021, a leading Nordic paint producer, with its results reported within the Performance and Industrial Coatings segments - On June 10, 2021, PPG completed the acquisition of Tikkurila Oyj, a leading Nordic producer of decorative paint and coatings, ultimately achieving **100%** ownership in Q4 2021[270](index=270&type=chunk) - Tikkurila's results are reported within the architectural coatings – EMEA (Performance Coatings) and industrial coatings (Industrial Coatings) segments[271](index=271&type=chunk) [Note 3. Working Capital Detail](index=50&type=section&id=3.%20Working%20Capital%20Detail) This note provides detailed components of working capital, including receivables, inventories, and accounts payable, highlighting LIFO inventory valuation Working Capital Components (as of Dec 31, 2023 and 2022) | ($ in millions) | 2023 | 2022 | | :--- | :--- | :--- | | **Receivables** | | | | Trade - net | $2,881 | $2,824 | | Other - net | 398 | 479 | | Total Receivables | $3,279 | $3,303 | | **Inventories** | | | | Finished products | $1,197 | $1,209 | | Work in process | 236 | 238 | | Raw materials | 640 | 784 | | Supplies | 54 | 41 | | Total Inventories | $2,127 | $2,272 | | **Accounts payable and accrued liabilities** | | | | Trade | $2,612 | $2,538 | | Accrued payroll | 674 | 501 | | Customer rebates | 414 | 377 | | Other postretirement and pension benefits | 96 | 77 | | Income taxes | 128 | 37 | | Other | 543 | 557 | | Total Accounts payable and accrued liabilities | $4,467 | $4,087 | - LIFO inventories comprised **20%** and **21%** of total gross inventory values in 2023 and 2022, respectively, and if FIFO were used, inventories would have been **$249 million** and **$272 million** higher[272](index=272&type=chunk) [Note 4. Property, Plant and Equipment](index=50&type=section&id=4.%20Property%2C%20Plant%20and%20Equipment) This note details PPG's property, plant, and equipment, net, by asset category, including land, buildings, machinery, and construction in progress Property, Plant and Equipment, Net (as of Dec 31, 2023 and 2022) | ($ in millions) | Useful Lives (years) | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Land and land improvements | 1-30 | $572 | $548 | | Buildings | 20-40 | 1,908 | 1,774 | | Machinery and equipment | 5-25 | 4,157 | 3,960 | | Other | 3-20 | 1,287 | 1,203 | | Construction in progress | | 683 | 492 | | Total | | $8,607 | $7,977 | | Less: accumulated depreciation | | 4,963 | 4,649 | | Net | | $3,644 | $3,328 | [Note 5. Investments](index=50&type=section&id=5.%20Investments) This note details PPG's investments, including equity affiliates and marketable equity securities, and its share of undistributed net earnings from affiliates Investments (as of Dec 31, 2023 and 2022) | ($ in millions) | 2023 | 2022 | | :--- | :--- | :--- | | Investments in equity affiliates | $141 | $134 | | Marketable equity securities | 74 | 61 | | Other | 44 | 49 | | Total | $259 | $244 | - PPG's share of undistributed net earnings from equity affiliates was **$21 million** in 2023, **$25 million** in 2022, and **$15 million** in 2021[275](index=275&type=chunk) [Note 6. Goodwill and Other Identifiable Intangible Assets](index=51&type=section&id=6.%20Goodwill%20and%20Other%20Identifiable%20Intangible%20Assets) This note details goodwill by segment and identifiable intangible assets, including a **$158 million** goodwill impairment charge for traffic solutions in Q4 2023 Goodwill by Segment (as of Dec 31, 2023 and 2022) | ($ in millions) | Performance Coatings | Industrial Coatings | Total | | :--- | :--- | :--- | :--- | | December 31, 2022 | $4,881 | $1,197 | $6,078 | | Acquisitions, including purchase accounting adjustments | 126 | 13 | 139 | | Divestitures | (5) | — | (5) | | Foreign currency impact | 150 | (4) | 146 | | Goodwill impairment | (158) | — | (158) | | December 31, 2023 | $4,994 | $1,206 | $6,200 | - In Q4 2023, a goodwill impairment charge of **$158 million** was recognized for the traffic solutions reporting unit, primarily due to an increased discount rate and a decline in long-term cash generation forecast[277](index=277&type=chunk) Identifiable Intangible Assets (as of Dec 31, 2023 and 2022) | ($ in millions) | December 31, 2023 Net | December 31, 2022 Net | | :--- | :--- | :--- | | Indefinite-Lived Identifiable Intangible Assets: Trademarks | $1,442 | $1,325 | | Definite-Lived Identifiable Intangible Assets: Acquired technology | $167 | $191 | | Definite-Lived Identifiable Intangible Assets: Customer-related | 674 | 743 | | Definite-Lived Identifiable Intangible Assets: Trade names | 139 | 153 | | Definite-Lived Identifiable Intangible Assets: Other | 2 | 2 | | Total Identifiable Intangible Assets | $2,424 | $2,414 | - Impairment charges of **$2 million** and **$4 million** were recognized in 2023 and 2022, respectively, for certain indefinite-lived trademarks in the Performance Coatings segment[279](index=279&type=chunk) Estimated Future Amortization Expense | ($ in millions) | 2024 | 2025 | 2026 | 2027 | 2028 | | :--- | :--- | :--- | :--- | :--- | :--- | | Estimated future amortization expense | $147 | $128 | $107 | $96 | $83 | [Note 7. Impairment and Other Related Charges, Net](index=52&type=section&id=7.%20Impairment%20and%20Other%20Related%20Charges%2C%20Net) This note details impairment and other related charges, including a **$158 million** goodwill impairment in 2023 and **$290 million** related to Russia operations in 2022 - In 2023, PPG recorded a **$158 million** goodwill impairment charge for the traffic solutions reporting unit and **$2 million** for indefinite-lived intangible assets[283](index=283&type=chunk)[277](index=277&type=chunk)[279](index=279&type=chunk) - In Q1 2022, PPG recognized **$290 million** in impairment and other related charges due to the wind-down of Russia operations, including **$201 million** for long-lived assets (indefinite-lived intangible assets, property, plant and equipment, definite-lived intangible assets) and **$89 million** for receivables and inventories[285](index=285&type=chunk)[286](index=286&type=chunk) - Subsequently, **$63 million** of income was recognized in 2022 due to the collection of certain trade receivables and realization of previously written-down inventories related to Russia operations[287](index=287&type=chunk) - PPG recorded impairment charges of **$14 million** in 2022 and **$21 million** in 2021 for certain smaller, non-strategic businesses classified as held for sale[289](index=289&type=chunk) [Note 8. Business Restructuring](index=53&type=section&id=8.%20Business%20Restructuring) PPG records restructuring liabilities for operational consolidations and headcount reductions, with new actions approved in 2023 expected to be completed by end of 2024 - PPG records restructuring liabilities for costs incurred from operational consolidations and headcount reductions, primarily severance and other cash costs, and accelerated depreciation[290](index=290&type=chunk) - In 2023, new restructuring actions were approved to reduce costs and improve profitability, with most expected to be completed by the end of 2024[291](index=291&type=chunk) Restructuring Reserve Activity (2023 vs. 2022) | ($ in millions) | 2023 | 2022 | | :--- | :--- | :--- | | January 1 | $169 | $231 | | Approved restructuring actions | 33 | 84 | | Release of prior reserves and other adjustments | (35) | (51) | | Cash payments | (57) | (85) | | Foreign currency impact | 3 | (10) | | December 31 | $113 | $169 | [Note 9. Leases](index=53&type=section&id=9.%20Leases) PPG leases various assets including retail stores, warehouses, and equipment, with total lease costs of **$269 million** in 2023 - PPG leases retail paint stores, warehouses, distribution facilities, office space, fleet vehicles, and equipment[294](index=294&type=chunk) Total Lease Cost (2023, 2022, 2021) | ($ in millions) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Total operating lease cost | $266 | $259 | $260 | | Total finance lease cost | $3 | $3 | $3 | | Total lease cost | $269 | $262 | $263 | Lease Liabilities Maturities (as of Dec 31, 2023) | ($ in millions) | Operating Leases | Finance Leases | | :--- | :--- | :--- | | 2024 | $216 | $2 | | 2025 | 176 | 2 | | 2026 | 137 | 2 | | 2027 | 103 | 1 | | 2028 | 80 | 1 | | Thereafter | 184 | 1 | | Total lease payments | $896 | $9 | | Less: Interest | 80 | 1 | | Total lease obligations | $816 | $8 | [Note 10. Borrowings and Lines of Credit](index=55&type=section&id=10.%20Borrowings%20and%20Lines%20of%20Credit) This note details PPG's long-term debt obligations, including a new **€500 million** Term Loan Credit Agreement in 2023 and a **$2.3 billion** revolving credit facility Long-term Debt Obligations (as of Dec 31, 2023 and 2022) | ($ in millions) | Maturity Date | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Term Loan Credit Agreement, due 2024 ($1,400) | 2024 | — | 1,099 | | 0.875% notes (€600) | 2025 | 660 | 639 | | 1.2% notes ($700) | 2026 | 696 | 694 | | Term Loan Credit Agreement, due 2026 (€500) | 2026 | 552 | — | | 3.75% notes ($800) | 2028 | 808 | 809 | | 2.75% notes (€700) | 2029 | 768 | 743 | | Total Long-term Debt | | $6,050 | $6,806 | | Less payments due within one year | | 302 | 303 | | Long-term debt | | $5,748 | $6,503 | - In April 2023, PPG entered into a **€500 million** Term Loan Credit Agreement due 2026, which was increased by **€250 million** in December 2023 (borrowed in January 2024)[167](index=167&type=chunk)[298](index=298&type=chunk) - The **$2.0 billion** Term Loan Credit Agreement from February 2021 was fully repaid as of December 31, 2023, with **$1.1 billion** repaid in 2023[168](index=168&type=chunk)[309](index=309&type=chunk) - PPG amended and restated its five-year credit agreement in July 2023, extending the term to July 27, 2028, providing a **$2.3 billion** unsecured revolving credit facility[169](index=169&type=chunk)[299](index=299&type=chunk) - As of December 31, 2023, PPG was in full compliance with restrictive covenants, maintaining a Total Indebtedness to Total Capitalization ratio of **42%** (below the **60%** limit)[170](index=170&type=chunk)[302](index=302&type=chunk)[310](index=310&type=chunk) Long-term Debt Maturities | ($ in millions) | Maturity per year | | :--- | :--- | | 2024 | $302 | | 2025 | $989 | | 2026 | $1,250 | | 2027 | $662 | | 2028 | $784 | | Thereafter | $2,063 | [Note 11. Financial Instruments, Hedging Activities and Fair Value Measurements](index=57&type=section&id=11.%20Financial%20Instruments%2C%20Hedging%20Activities%20and%20Fair%20Value%20Measurements) PPG uses derivative financial instruments like interest rate swaps and foreign currency forward contracts to hedge market risks, not for speculative purposes - PPG uses derivative financial instruments (interest rate swaps, cross currency swaps, foreign currency forward contracts, euro-denominated debt) to hedge foreign currency exchange rate and interest rate risks, not for speculative purposes[317](index=317&type=chunk)[318](index=318&type=chunk)[321](index=321&type=chunk)[324](index=324&type=chunk)[325](index=325&type=chunk)[326](index=326&type=chunk) - As of December 31, 2023, PPG had interest rate swaps converting **$375 million** of fixed-rate debt to variable-rate debt, with a fair value liability of **$14 million**[322](index=322&type=chunk) - PPG had U.S. dollar to euro cross currency swap contracts with a notional amount of **$475 million** and **€3.0 billion** of euro-denominated borrowings designated as net investment hedges for its European operations as of December 31, 2023[324](index=324&type=chunk)[325](index=325&type=chunk) - The company had **$2.5 billion** in underlying notional amounts for foreign currency forward contracts not designated as hedges, with net assets of **$23 million** as of December 31, 2023[326](index=326&type=chunk) Gains/Losses Deferred in Accumulated Other Comprehensive Loss (2023) | ($ in millions) | (Loss)/Gain Deferred in OCI | | :--- | :--- | | Fair Value: Interest rate swaps | ($10) | | Net Investment: Cross currency swaps | ($15) | | Net Investment: Foreign denominated debt | (89) | | Total Net Investment | ($104) | - The fair values of debt instruments are measured using Level 2 inputs, including discounted cash flows and current interest rates[336](index=336&type=chunk) [Note 12. Earnings Per Common Share](index=60&type=section&id=12.%20Earnings%20Per%20Common%20Share) This note details PPG's earnings per common share, with **$5.35** from continuing operations in 2023, and includes potentially dilutive common shares Earnings Per Common Share (2023, 2022, 2021) | ($ in millions, except per share amounts) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Income from continuing operations, net of tax | $1,270 | $1,028 | $1,420 | | Net income (attributable to PPG) | $1,270 | $1,026 | $1,439 | | Weighted average common shares outstanding | 236.0 | 236.1 | 237.6 | | Earnings per common share - assuming dilution | $5.35 | $4.33 | $5.93 | - Potentially dilutive common shares from stock options and other stock compensation plans totaled **1.2 million** in 2023 and 2022, and **1.8 million** in 2021[337](index=337&type=chunk) [Note 13. Income Taxes](index=61&type=section&id=13.%20Income%20Taxes) PPG's effective tax rate increased to **25.1%** in 2023, with details on deferred income tax assets and liabilities, and unrecognized tax benefits Total Income Tax Expense (2023, 2022, 2021) | ($ in millions) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Total current income tax expense | $622 | $482 | $339 | | Total deferred income tax (benefit)/expense | ($183) | ($157) | $35 | | Total income tax expense | $439 | $325 | $374 | Effective Income Tax Rate Reconciliation (2023, 2022, 2021) | | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | U.S. federal income tax rate | 21.0 % | 21.0 % | 21.0 % | | Effective income tax rate | 25.1 % | 23.5 % | 20.6 % | - The effective tax rate increased to **25.1%** in 2023 from **23.5%** in 2022, primarily due to taxes on non-U.S. earnings, changes in valuation allowance reserves, and impairment charges[338](index=338&type=chunk) Deferred Income Tax Assets and Liabilities (as of Dec 31, 2023 and 2022) | ($ in millions) | 2023 | 2022 | | :--- | :--- | :--- | | Deferred income tax assets related to Employee benefits | $273 | $275 | | Deferred income tax assets related to Operating loss and other carry-forwards | 279 | 218 | | Valuation allowance | (249) | (182) | | Deferred income tax liabilities related to Intangibles | 696 | 720 | | Deferred income tax liabilities – net | ($235) | ($406) | - PPG had **$5.8 billion** of undistributed earnings of non-U.S. subsidiaries as of December 31, 2023, with an estimated repatriation tax cost of **$123 million**[342](index=342&type=chunk) - The total amount of unrecognized tax benefits that would affect the effective tax rate was **$117 million** as of December 31, 2023[345](index=345&type=chunk) [Note 14. Employee Benefit Plans](index=62&type=section&id=14.%20Employee%20Benefit%20Plans) PPG sponsors global defined benefit pension plans, with a **$190 million** non-cash pension settlement charge in 2023, and details on funded status and asset allocation - PPG sponsors defined benefit pension plans globally, with U.S., Canada, Germany, Netherlands, and U.K. plans representing **93%** of the total projected benefit obligation[347](index=347&type=chunk) - In March 2023, PPG purchased group annuity contracts, transferring **$309 million** in U.S. pension benefit obligations to third-party insurers, resulting in a **$190 million** non-cash pension settlement charge[350](index=350&type=chunk) Defined Benefit Pension Plans Funded Status (as of Dec 31, 2023 and 2022) | ($ in millions) | 2023 | 2022 | | :--- | :--- | :--- | | Projected benefit obligation, December 31 | $2,216 | $2,386 | | Market value of plan assets, December 31 | $1,729 | $1,974 | | Funded Status | ($487) | ($412) | Other Postretirement Benefit Plans Net Liability (as of Dec 31, 2023 and 2022) | ($ in millions) | 2023 | 2022 | | :--- | :--- | :--- | | Projected benefit obligation, December 31 | $495 | $524 | | Net liability recognized | ($495) | ($524) | Net Periodic Benefit Cost/(Income) (2023, 2022, 2021) | ($ in millions) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Pensions Net periodic benefit cost/(income) | $221 | ($18) | $14 | | Other Postretirement Benefits Net periodic benefit cost/(income) | $21 | $25 | ($8) | Weighted Average Assumptions for Benefit Obligation (as of Dec 31, 2023 and 2022) | | 2023 | 2022 | | :--- | :--- | :--- | | Discount rate | 4.9 % | 5.2 % | | Rate of compensation increase | 2.8 % | 2.7 % | - The global expected return on plan assets assumption for 2024 net periodic pension expense will be **6.6%** (**7.7%** for U.S. plans)[361](index=361&type=chunk) Estimated Future Benefit Payments (2024-2033) | ($ in millions) | Pensions | Other Postretirement Benefits | | :--- | :--- | :--- | | 2024 | $152 | $45 | | 2025 | $137 | $44 | | 2026 | $140 | $41 | | 2027 | $145 | $40 | | 2028 | $146 | $40 | | 2029 to 2033 | $775 | $177 | Pension Plan Asset Allocation Targets (as of Dec 31, 2023 and 2022) | Asset Category | 2023 | 2022 | | :--- | :--- | :--- | | Equity securities | 15-45% | 15-45% | | Debt securities | 30-65% | 30-65% | | Real estate | 0-10% | 0-10% | | Other | 20-40% | 20-40% | - Company-matching contributions to Employee Savings Plans were **100%** in 2023, totaling **$61 million**[374](index=374&type=chunk)[375](index=375&type=chunk) - Defined contribution plan expense was **$90 million** in 2023[376](index=376&type=chunk) [Note 15. Commitments and Contingent Liabilities](index=69&type=section&id=15.%20Commitments%20and%20Contingent%20Liabilities) PPG is involved in various lawsuits and environmental matters, maintaining **$48 million** in asbestos-related reserves and **$227 million** for environmental remediation - PPG is involved in various lawsuits and claims, including asbestos-related claims, but management believes the aggregate outcome will not materially affect financial position or liquidity[381](index=381&type=chunk)[383](index=383&type=chunk) - Asbestos-related reserves totaled **$48 million** as of December 31, 2023, deemed sufficient to cover current and estimable future liabilities[387](index=387&type=chunk)[388](index=388&type=chunk) - In 2021, the asbestos-related claims reserve was reduced by **$133 million** based on a valuation analysis following the expiration of a U.S. Bankruptcy Court injunction[386](index=386&type=chunk)[387](index=387&type=chunk) Environmental Reserves (as of Dec 31, 2023 and 2022) | ($ in millions) | 2023 | 2022 | | :--- | :--- | :--- | | New Jersey Chrome | $53 | $58 | | Glass and chemical | 54 | 60 | | Other | 120 | 99 | | Total environmental reserves | $227 | $217 | | Current Portion | $52 | $50 | Total Pretax Environmental Charges and Cash Outlays (2023, 2022, 2021) | ($ in millions) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Total pretax environmental charges | $46 | $13 | $44 | | Cash outlays for environmental spending | $36 | $78 | $56 | - In Q4 2023, PPG recognized **$30 million** in pretax environmental charges, primarily due to increased estimated remediation costs at the Riverside Industrial Park Superfund Site and New Jersey Chrome sites[394](index=394&type=chunk) - Management expects cash outlays for environmental remediation to range from **$40 million to $60 million** in 2024, and **$20 million to $75 million** annually from 2025 through 2028[397](index=397&type=chunk) - In addition to reserved amounts, PPG may be subject to reasonably possible unreserved environmental loss contingencies estimated between **$100 million and $200 million**[405](index=405&type=chunk) [Note 16. Shareholders' Equity](index=75&type=section&id=16.%20Shareholders%27%20Equity) This note details common stock and treasury stock activity, with **$2.54** per share cash dividends paid in 2023 Common Stock and Treasury Stock Activity (2021-2023) | | Common Stock | Treasury Stock | Shares Outstanding | | :--- | :--- | :--- | :--- | | January 1, 2021 | 581,146,136 | (344,459,871) | 236,686,265 | | December 31, 2021 | 581,146,136 | (345,239,110) | 235,907,026 | | December 31, 2022 | 581,146,136 | (346,072,210) | 235,073,926 | | December 31, 2023 | 581,146,136 | (345,935,282) | 235,210,854 | - Per share cash dividends paid were **$2.54** in 2023, **$2.42** in 2022, and **$2.26** in 2021[408](index=408&type=chunk) [Note 17. Accumulated Other Comprehensive Loss (AOCL)](index=76&type=section&id=17.%20Accumulated%20Other%20Comprehensive%20Loss%20%28AOCL%29) AOCL decreased from **($2,810) million** in 2022 to **($2,239) million** in 2023, primarily due to foreign currency translation and pension adjustments Accumulated Other Comprehensive Loss (2021-2023) | ($ in millions) | Foreign Currency Translation Adjustments | Pension and Other Postretirement Benefit Adjustments, net of tax | Unrealized Gain on Derivatives, net of tax | Accumulated Other Comprehensive Loss | | :--- | :--- | :--- | :--- | :--- | | January 1, 2021 | ($1,663) | ($937) | $1 | ($2,599) | | December 31, 2021 | ($1,988) | ($763) | $1 | ($2,750) | | December 31, 2022 | ($2,254) | ($557) | $1 | ($2,810) | | December 31, 2023 | ($1,746) | ($494) | $1 | ($2,239) | - The AOCL decreased from **($2,810) million** in 2022 to **($2,239) million** in 2023, primarily due to current year deferrals and reclassifications related to foreign currency translation adjustments and pension/postretirement benefit adjustments[409](index=409&type=chunk) [Note 18. Other Charges/(Income), Net](index=76&type=section&id=18.%20Other%20Charges%2F%28Income%29%2C%20Net) Total other charges/(income), net, shifted to a **$83 million** charge in 2023, driven by increased environmental charges and pension non-service costs Other Charges/(Income), Net (2023, 2022, 2021) | ($ in millions) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Environmental charges | $46 | $13 | $44 | | Pension and other postretirement benefit plans, non-service cost components | 39 | (10) | (15) | | Share of net earnings of equity affiliates | (21) | (25) | (15) | | Loss/(gain) on sale of assets, net | 23 | (4) | (44) | | Argentina currency devaluation loss | 20 | — | — | | Royalty income | (10) | (8) | (8) | | Business restructuring (income)/charges, net | (2) | 33 | 31 | | Income from legal settlements | — | — | (22) | | Other, net | (12) | (26) | (83) | | Total other charges/(income), net | $83 | ($27) | ($112) | - Total other charges/(income), net, shifted from an income of **($27) million** in 2022 to a charge of **$83 million** in 2023, primarily due to increased environmental charges, non-service cost components of pension/postretirement benefits, and Argentina currency devaluation losses[411](index=411&type=chunk) [Note 19. Stock-Based Compensation](index=76&type=section&id=19.%20Stock-Based%20Compensation) PPG's stock-based compensation includes stock options, RSUs, and TSR awards, with total compensation expense of **$59 million** in 2023 - PPG's stock-based compensation includes stock options, restricted stock units (RSUs), and contingent share grants (TSR awards) under the PPG Amended Omnibus Incentive Plan[412](index=412&type=chunk) Total Stock-Based Compensation and Tax Benefit (2023, 2022, 2021) | ($ in millions) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Total stock-based compensation | $59 | $35 | $57 | | Income tax benefit recognized | $12 | $8 | $12 | - Stock options generally vest over **36 months** and have a **10-year term**, with fair value estimated using the Black-Scholes model[414](index=414&type=chunk)[415](index=415&type=chunk) - Unrecognized compensation cost for outstanding stock options was **$9 million** as of December 31, 2023, expected to be recognized over **1.7 years**[417](index=417&type=chunk) - RSUs have time or performance-based vesting over three years, with performance-based RSUs granted in 2021 vesting at **133%** and 2022/2023 grants assumed to vest at **100%**[419](index=419&type=chunk)[420](index=420&type=chunk) - TSR awards are granted annually, paid out based on PPG's total shareholder return percentile rank against the S&P 500 over a three-year period, with 2021 grants resulting in a **55.2%** payou

PPG Industries, Inc. (NYSE:PPG) Q4 2023 Earnings Conference Call January 19, 2024 8:00 AM ET Company Participants Jonathan Edwards - Director of IR Tim Knavish - President and CEO Vince Morales - SVP and CFO John Bruno - VP of Finance Conference Call Participants David Begleiter - Deutsche Bank John McNulty - BMO Ghansham Panjabi - Baird Duffy Fischer - Goldman Sachs Stephen Byrne - Bank of America/Merrill Lynch John Roberts - Mizuho Josh Spector - UBS Kevin McCarthy - VRP Michael Leithead - Barclays Jeff Z ...

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 or ☐ 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 ––––––––––––––– ...

Financial Data and Key Metrics Changes - The company reported adjusted EPS of $2.07, which is 25% higher year-over-year, benefiting from non-recurring favorable discrete income tax items that added $0.10 to EPS compared to guidance [3] - Year-to-date cash generation reached over $1.5 billion, a record for the company, with a significant reduction in working capital by about $300 million, mainly due to lower inventories [51][80] - Aggregate segment margins improved by 260 basis points year-over-year, marking the fourth consecutive quarter of margin improvement [81] Business Line Data and Key Metrics Changes - The Performance segment is expected to deliver organic growth, particularly in aerospace and PPG Comex businesses, while the Industrial segment anticipates lower volumes due to external factors like the UAW strike [24][111] - Powder coatings sales increased by approximately 15% compared to last year, driven by investments in manufacturing and technology capabilities [82] - The Industrial segment's margins improved by 300 basis points year-over-year, despite a 4% decline in volumes [89] Market Data and Key Metrics Changes - The company noted that European volumes were flat, indicating a potential stabilization in demand, while China is expected to recover, albeit at a slower pace than previously anticipated [27][38] - The U.S. architectural coatings demand is expected to slow due to high interest rates and reduced housing turnover, impacting overall market dynamics [111] Company Strategy and Development Direction - The company is focusing on selective pruning of its business portfolio, divesting non-core assets to concentrate on areas with competitive advantages [4][75] - There is an emphasis on cross-selling opportunities globally, particularly leveraging the strong distribution network in Mexico [9][110] - The company aims to achieve 8% to 12% EPS growth in 2024, supported by a combination of positive volume swings and capital deployment strategies [32][48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in swinging to positive volume growth in 2024, driven by recovery in key markets and segments [26][145] - The company anticipates that the impact of the UAW strikes will be limited, with expectations of recovering lost volumes in subsequent quarters [84][135] - There is a focus on maintaining pricing power and productivity to offset wage inflation, with confidence in achieving margin improvements [147] Other Important Information - The company plans to continue share repurchases reflecting its strong cash position and seasonal cash flow patterns [4] - Management highlighted the importance of innovation and digital initiatives, such as PPG Link, to enhance productivity and gain market share [95][124] Q&A Session Summary Question: What are the expectations for margins in the Industrial segment? - Management noted that margins in the Industrial segment are currently in the high 13% range, with expectations for improvement as volumes recover [12] Question: How is the company addressing the impact of the UAW strike? - The company has included an estimated financial impact of a few cents of EPS in its fourth quarter guidance due to the UAW strikes [60][135] Question: What is the outlook for pricing in 2024? - Management expects to maintain positive pricing in the Performance segment, with targeted pricing initiatives supporting growth [30][108] Question: How does the company view growth in the powder coatings market? - The company sees growth in powder coatings primarily as share gain rather than conversion from liquid coatings, indicating a strategic focus on higher-margin segments [45] Question: What is the company's strategy regarding acquisitions? - Management confirmed that acquisitions remain a core part of the strategy, with ongoing assessments of potential opportunities in the coatings space [19][139]

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: June 30, 2023 or ☐ 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. (NYSE:PPG) Q2 2023 Earnings Conference Call July 21, 2023 8:00 AM ET Company Participants John Bruno - VP of IR Tim Knavish - President and CEO Vince Morales - SVP and CFO Conference Call Participants Christopher Parkinson - Mizuho Ghansham Panjabi - Baird Josh Spector - UBS David Begleiter - Deutsche Bank Jeffrey Zekauskas - JPMorgan Stephen V. Byrne - Bank of America John McNulty - BMO Vincent Andrews - Morgan Stanley Duffy Fischer - Goldman Sachs Patrick Cunningham - Citigroup Michae ...

12 Reconciliation: ROS Segment Margin and Adjusted EPS Excluding Amortization | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |---------------------------------------------------|-------|-------|-------------|-------|-------|-------|-------|-------------|-------|-------------------------------------------------------------------------------------------------|-------| | $ in millions, except ROS % \nPerformance Segment | Q1 | Q2 | 2021 \nQ3 | Q4 | FY | Q1 | Q2 | 2022 \nQ3 | Q4 | FY ...