Pennsylvania
|
|
25-0730780
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
|
|
One PPG Place, Pittsburgh, Pennsylvania
|
|
15272
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Large accelerated filer
|
ý
|
Accelerated filer
|
o
|
Non-accelerated filer
|
o
|
Smaller reporting company
|
o
|
|
|
Emerging growth company
|
o
|
|
|
|
PAGE
|
|
||
Item 1.
|
|
|
|
||
|
||
|
||
|
||
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
|
||
Item 1.
|
||
Item 1A.
|
||
Item 2.
|
||
Item 6.
|
||
|
|
Three Months Ended
September 30 |
|
Nine Months Ended
September 30 |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
As Restated
|
|
|
|
As Restated
|
||||||||
Net sales
|
|
$3,817
|
|
|
|
$3,776
|
|
|
|
$11,729
|
|
|
|
$11,066
|
|
Cost of sales, exclusive of depreciation and amortization
|
2,253
|
|
|
2,104
|
|
|
6,813
|
|
|
6,089
|
|
||||
Selling, general and administrative
|
867
|
|
|
894
|
|
|
2,718
|
|
|
2,645
|
|
||||
Depreciation
|
89
|
|
|
85
|
|
|
267
|
|
|
245
|
|
||||
Amortization
|
33
|
|
|
32
|
|
|
103
|
|
|
95
|
|
||||
Research and development, net
|
110
|
|
|
114
|
|
|
336
|
|
|
335
|
|
||||
Interest expense
|
31
|
|
|
27
|
|
|
88
|
|
|
78
|
|
||||
Interest income
|
(6
|
)
|
|
(5
|
)
|
|
(18
|
)
|
|
(13
|
)
|
||||
Pension settlement charge
|
—
|
|
|
—
|
|
|
—
|
|
|
22
|
|
||||
Business restructuring
|
(12
|
)
|
|
—
|
|
|
71
|
|
|
—
|
|
||||
Other charges
|
25
|
|
|
18
|
|
|
72
|
|
|
51
|
|
||||
Other income
|
(24
|
)
|
|
(16
|
)
|
|
(72
|
)
|
|
(109
|
)
|
||||
Income from continuing operations before income taxes
|
|
$451
|
|
|
|
$523
|
|
|
|
$1,351
|
|
|
|
$1,628
|
|
Income tax expense
|
79
|
|
|
124
|
|
|
270
|
|
|
391
|
|
||||
Income from continuing operations
|
|
$372
|
|
|
|
$399
|
|
|
|
$1,081
|
|
|
|
$1,237
|
|
Income from discontinued operations, net of tax
|
10
|
|
|
217
|
|
|
16
|
|
|
222
|
|
||||
Net income attributable to controlling and noncontrolling interests
|
|
$382
|
|
|
|
$616
|
|
|
|
$1,097
|
|
|
|
$1,459
|
|
Less: Net income attributable to noncontrolling interests
|
(4
|
)
|
|
(6
|
)
|
|
(14
|
)
|
|
(16
|
)
|
||||
Net income (attributable to PPG)
|
|
$378
|
|
|
|
$610
|
|
|
|
$1,083
|
|
|
|
$1,443
|
|
Amounts attributable to PPG:
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations, net of tax
|
|
$368
|
|
|
|
$393
|
|
|
|
$1,067
|
|
|
|
$1,221
|
|
Income from discontinued operations, net of tax
|
10
|
|
|
217
|
|
|
16
|
|
|
222
|
|
||||
Net income (attributable to PPG)
|
|
$378
|
|
|
|
$610
|
|
|
|
$1,083
|
|
|
|
$1,443
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings per common share:
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations, net of tax
|
|
$1.52
|
|
|
|
$1.53
|
|
|
|
$4.34
|
|
|
|
$4.75
|
|
Income from discontinued operations, net of tax
|
0.04
|
|
|
0.85
|
|
|
0.07
|
|
|
0.86
|
|
||||
Net income (attributable to PPG)
|
|
$1.56
|
|
|
|
$2.38
|
|
|
|
$4.41
|
|
|
|
$5.61
|
|
Earnings per common share – assuming dilution:
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations, net of tax
|
|
$1.51
|
|
|
|
$1.52
|
|
|
|
$4.32
|
|
|
|
$4.72
|
|
Income from discontinued operations, net of tax
|
0.04
|
|
|
0.84
|
|
|
0.06
|
|
|
0.86
|
|
||||
Net income (attributable to PPG)
|
|
$1.55
|
|
|
|
$2.36
|
|
|
|
$4.38
|
|
|
|
$5.58
|
|
|
|
|
|
|
|
|
|
||||||||
Dividends per common share
|
|
$0.48
|
|
|
|
$0.45
|
|
|
|
$1.38
|
|
|
|
$1.25
|
|
|
Three Months Ended
September 30 |
|
Nine Months Ended
September 30 |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
As Restated
|
|
|
|
As Restated
|
||||||||
Net income attributable to the controlling and noncontrolling interests
|
|
$382
|
|
|
|
$616
|
|
|
|
$1,097
|
|
|
|
$1,459
|
|
Other comprehensive (loss) income, net of tax:
|
|
|
|
|
|
|
|
||||||||
Defined benefit pension and other postretirement benefits
|
(12
|
)
|
|
(29
|
)
|
|
(64
|
)
|
|
(63
|
)
|
||||
Unrealized foreign currency translation adjustments
|
89
|
|
|
26
|
|
|
(85
|
)
|
|
387
|
|
||||
Derivative financial instruments
|
(2
|
)
|
|
1
|
|
|
(2
|
)
|
|
(16
|
)
|
||||
Other comprehensive income (loss), net of tax
|
|
$75
|
|
|
|
($2
|
)
|
|
|
($151
|
)
|
|
|
$308
|
|
Total comprehensive income
|
|
$457
|
|
|
|
$614
|
|
|
|
$946
|
|
|
|
$1,767
|
|
Less: amounts attributable to noncontrolling interests:
|
|
|
|
|
|
|
|
||||||||
Net income
|
(4
|
)
|
|
(6
|
)
|
|
(14
|
)
|
|
(16
|
)
|
||||
Unrealized foreign currency translation adjustments
|
3
|
|
|
(2
|
)
|
|
11
|
|
|
(15
|
)
|
||||
Comprehensive income attributable to PPG
|
|
$456
|
|
|
|
$606
|
|
|
|
$943
|
|
|
|
$1,736
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
|
|
|
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
|
$1,103
|
|
|
|
$1,436
|
|
Short-term investments
|
57
|
|
|
55
|
|
||
Receivables (less allowance for doubtful accounts of $25 in each period)
|
3,217
|
|
|
2,903
|
|
||
Inventories
|
1,962
|
|
|
1,730
|
|
||
Other
|
402
|
|
|
353
|
|
||
Total current assets
|
|
$6,741
|
|
|
|
$6,477
|
|
Property, plant and equipment (net of accumulated depreciation of $3,880 and $3,770)
|
2,738
|
|
|
2,824
|
|
||
Goodwill
|
3,939
|
|
|
3,942
|
|
||
Identifiable intangible assets, net
|
2,004
|
|
|
2,045
|
|
||
Deferred income taxes
|
306
|
|
|
305
|
|
||
Investments
|
266
|
|
|
268
|
|
||
Other assets
|
724
|
|
|
677
|
|
||
Total
|
|
$16,718
|
|
|
|
$16,538
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable and accrued liabilities
|
|
$3,806
|
|
|
|
$3,781
|
|
Restructuring reserves
|
112
|
|
|
102
|
|
||
Short-term debt and current portion of long-term debt
|
15
|
|
|
12
|
|
||
Total current liabilities
|
|
$3,933
|
|
|
|
$3,895
|
|
Long-term debt
|
5,023
|
|
|
4,134
|
|
||
Accrued pensions
|
626
|
|
|
729
|
|
||
Other postretirement benefits
|
685
|
|
|
699
|
|
||
Deferred income taxes
|
460
|
|
|
442
|
|
||
Other liabilities
|
913
|
|
|
967
|
|
||
Total liabilities
|
|
$11,640
|
|
|
|
$10,866
|
|
Commitments and contingent liabilities (Note 17)
|
|
|
|
||||
Shareholders’ equity:
|
|
|
|
||||
Common stock
|
969
|
|
|
969
|
|
||
Additional paid-in capital
|
772
|
|
|
756
|
|
||
Retained earnings
|
17,987
|
|
|
17,140
|
|
||
Treasury stock, at cost
|
(12,551
|
)
|
|
(11,251
|
)
|
||
Accumulated other comprehensive loss
|
(2,197
|
)
|
|
(2,057
|
)
|
||
Total PPG shareholders’ equity
|
|
$4,980
|
|
|
|
$5,557
|
|
Noncontrolling interests
|
98
|
|
|
115
|
|
||
Total shareholders’ equity
|
|
$5,078
|
|
|
|
$5,672
|
|
Total
|
|
$16,718
|
|
|
|
$16,538
|
|
|
Nine Months Ended
September 30 |
||||||
($ in millions)
|
2018
|
|
2017
|
||||
|
|
|
As Restated
|
||||
Operating activities:
|
|
|
|
||||
Net income attributable to controlling and noncontrolling interests
|
|
$1,097
|
|
|
|
$1,459
|
|
Less: Income from discontinued operations
|
(16
|
)
|
|
(222
|
)
|
||
Income from continuing operations
|
|
$1,081
|
|
|
|
$1,237
|
|
Adjustments to reconcile net income to cash from operations:
|
|
|
|
||||
Depreciation and amortization
|
370
|
|
|
340
|
|
||
Pension expense
|
30
|
|
|
52
|
|
||
Pension settlement charge
|
—
|
|
|
22
|
|
||
Environmental remediation charges
|
34
|
|
|
—
|
|
||
Business restructuring charge
|
71
|
|
|
—
|
|
||
Impairment of a non-manufacturing asset
|
9
|
|
|
—
|
|
||
Stock-based compensation expense
|
21
|
|
|
26
|
|
||
Gain from the sale of a business
|
—
|
|
|
(25
|
)
|
||
Equity affiliate loss, net of dividends
|
3
|
|
|
—
|
|
||
Deferred income tax benefit
|
(5
|
)
|
|
(53
|
)
|
||
Cash contributions to pension plans
|
(89
|
)
|
|
(43
|
)
|
||
Cash used for restructuring actions
|
(48
|
)
|
|
(31
|
)
|
||
Change in certain asset and liability accounts:
|
|
|
|
||||
Receivables
|
(419
|
)
|
|
(350
|
)
|
||
Inventories
|
(285
|
)
|
|
(200
|
)
|
||
Other current assets
|
(5
|
)
|
|
(40
|
)
|
||
Accounts payable and accrued liabilities
|
102
|
|
|
229
|
|
||
Taxes and interest payable
|
51
|
|
|
(115
|
)
|
||
Noncurrent assets and liabilities, net
|
(144
|
)
|
|
(102
|
)
|
||
Other
|
(90
|
)
|
|
71
|
|
||
Cash from operating activities - continuing operations
|
|
$687
|
|
|
|
$1,018
|
|
Cash (used for) from operating activities - discontinued operations
|
(20
|
)
|
|
14
|
|
||
Cash from operating activities
|
|
$667
|
|
|
|
$1,032
|
|
Investing activities:
|
|
|
|
||||
Capital expenditures
|
(226
|
)
|
|
(207
|
)
|
||
Business acquisitions, net of cash balances acquired
|
(98
|
)
|
|
(69
|
)
|
||
Payments for acquisition of equity investment
|
—
|
|
|
(100
|
)
|
||
Proceeds from the disposition of a business
|
—
|
|
|
593
|
|
||
Payments for the settlement of cross currency swap contracts
|
(23
|
)
|
|
(34
|
)
|
||
Proceeds from the settlement of cross currency swap
|
20
|
|
|
37
|
|
||
Other
|
16
|
|
|
—
|
|
||
Cash (used for) from investing activities - continuing operations
|
|
($311
|
)
|
|
|
$220
|
|
Cash used for investing activities - discontinued operations
|
—
|
|
|
(4
|
)
|
||
Cash (used for) from investing activities
|
|
($311
|
)
|
|
|
$216
|
|
Financing activities:
|
|
|
|
||||
Net change in borrowing with maturities of three months or less
|
5
|
|
|
(6
|
)
|
||
Net payments on commercial paper and short-term debt
|
(1
|
)
|
|
(81
|
)
|
||
Proceeds from the issuance of debt, net of discounts and fees
|
992
|
|
|
—
|
|
||
Repayment of long-term debt
|
(5
|
)
|
|
(9
|
)
|
||
Purchase of treasury stock
|
(1,313
|
)
|
|
(413
|
)
|
||
Issuance of treasury stock
|
14
|
|
|
45
|
|
||
Dividends paid
|
(338
|
)
|
|
(321
|
)
|
||
Payments related to tax withholding on stock-based compensation awards
|
(14
|
)
|
|
(25
|
)
|
||
Other
|
(10
|
)
|
|
(41
|
)
|
||
Cash used for financing activities
|
|
($670
|
)
|
|
|
($851
|
)
|
Effect of currency exchange rate changes on cash and cash equivalents
|
(19
|
)
|
|
70
|
|
||
Net (decrease) increase in cash and cash equivalents
|
|
($333
|
)
|
|
|
$467
|
|
Cash and cash equivalents, beginning of period
|
1,436
|
|
|
1,820
|
|
||
Cash and cash equivalents, end of period
|
|
$1,103
|
|
|
|
$2,287
|
|
|
|
|
|
||||
Supplemental disclosures of cash flow information:
|
|
|
|
||||
Interest paid, net of amount capitalized
|
|
$68
|
|
|
|
$60
|
|
Taxes paid, net of refunds
|
|
$320
|
|
|
|
$481
|
|
1
.
|
Basis of Presentation
|
2
.
|
Restatement of Previously Reported Condensed Consolidated Quarterly Financial Statements
|
•
|
For the quarter ended September 30, 2017, net income from continuing operations increased
$1 million
, or
zero
cents per diluted share, and there was
no
impact to income from discontinued operations, net of tax.
|
•
|
For the nine months ended September 30, 2017, net income from continuing operations decreased
$3 million
, or
$0.01
per diluted share, and income from discontinued operations, net of tax, increased by
$2 million
, or
$0.01
per diluted share.
|
(a)
|
Pension Expense
|
(b)
|
Employee Vacation Pay
|
(c)
|
Compensation Expense
|
(d)
|
Health Care Claims
|
(e)
|
Customer Rebates
|
(f)
|
Stock-Based Compensation
|
(g)
|
Environmental Reserve
|
(h)
|
Classification of Continuing Operations and Discontinued Operations
|
(i)
|
Income Taxes
|
|
Three Months Ended
September 30, 2017 |
||||||||||||
|
As Previously Reported
|
|
Restatement Adjustment
|
|
Reference
|
|
As Restated
|
||||||
Cost of sales, exclusive of depreciation and amortization
|
2,100
|
|
|
1
|
|
|
(a)
|
|
2,101
|
|
|||
Selling, general and administrative
|
905
|
|
|
(3
|
)
|
|
(b),(c),(d)
|
|
902
|
|
|||
|
|
|
|
|
|
|
|
||||||
Income from continuing operations before income taxes
|
|
$521
|
|
|
|
$2
|
|
|
|
|
|
$523
|
|
Income tax expense
|
123
|
|
|
1
|
|
|
(i)
|
|
124
|
|
|||
Income from continuing operations
|
|
$398
|
|
|
|
$1
|
|
|
|
|
|
$399
|
|
Loss from discontinued operations, net of tax
|
217
|
|
|
—
|
|
|
|
|
217
|
|
|||
Net income attributable to the controlling and noncontrolling interests
|
|
$615
|
|
|
|
$1
|
|
|
|
|
|
$616
|
|
Less: Net income attributable to noncontrolling interests
|
(6
|
)
|
|
—
|
|
|
|
|
(6
|
)
|
|||
Net income (attributable to PPG)
|
|
$609
|
|
|
|
$1
|
|
|
|
|
|
$610
|
|
Amounts attributable to PPG:
|
|
|
|
|
|
|
|
||||||
Income from continuing operations, net of tax
|
|
$392
|
|
|
|
$1
|
|
|
|
|
|
$393
|
|
Loss from discontinued operations, net of tax
|
217
|
|
|
—
|
|
|
|
|
217
|
|
|||
Net income (attributable to PPG)
|
|
$609
|
|
|
|
$1
|
|
|
|
|
|
$610
|
|
|
|
|
|
|
|
|
|
||||||
Earnings per common share:
|
|
|
|
|
|
|
|
||||||
Income from continuing operations, net of tax
|
|
$1.53
|
|
|
|
$—
|
|
|
|
|
|
$1.53
|
|
Loss from discontinued operations, net of tax
|
0.85
|
|
|
—
|
|
|
|
|
0.85
|
|
|||
Net income (attributable to PPG)
|
|
$2.38
|
|
|
|
$—
|
|
|
|
|
|
$2.38
|
|
Earnings per common share – assuming dilution:
|
|
|
|
|
|
|
|
||||||
Income from continuing operations, net of tax
|
|
$1.52
|
|
|
|
$—
|
|
|
|
|
|
$1.52
|
|
Loss from discontinued operations, net of tax
|
0.84
|
|
|
—
|
|
|
|
|
0.84
|
|
|||
Net income (attributable to PPG)
|
|
$2.36
|
|
|
|
$—
|
|
|
|
|
|
$2.36
|
|
|
|
|
|
|
|
|
|
||||||
Dividends per common share
|
|
$0.45
|
|
|
|
$—
|
|
|
|
|
|
$0.45
|
|
|
Nine Months Ended
September 30, 2017 |
||||||||||||
|
As Previously Reported
|
|
Restatement Adjustment
|
|
Reference
|
|
As Restated
|
||||||
Net sales
|
|
$11,068
|
|
|
|
($2
|
)
|
|
(e)
|
|
|
$11,066
|
|
Cost of sales, exclusive of depreciation and amortization
|
6,087
|
|
|
1
|
|
|
(a)
|
|
6,088
|
|
|||
Selling, general and administrative
|
2,658
|
|
|
(2
|
)
|
|
(b),(c),(f)
|
|
2,656
|
|
|||
Other charges
|
39
|
|
|
—
|
|
|
(g)
|
|
39
|
|
|||
Other income
|
(112
|
)
|
|
3
|
|
|
(h)
|
|
(109
|
)
|
|||
|
|
|
|
|
|
|
|
||||||
Income from continuing operations before income taxes
|
|
$1,632
|
|
|
|
($4
|
)
|
|
|
|
|
$1,628
|
|
Income tax expense
|
392
|
|
|
(1
|
)
|
|
(i)
|
|
391
|
|
|||
Income from continuing operations
|
|
$1,240
|
|
|
|
($3
|
)
|
|
|
|
|
$1,237
|
|
Income from discontinued operations, net of tax
|
220
|
|
|
2
|
|
|
(h)
|
|
222
|
|
|||
Net income attributable to the controlling and noncontrolling interests
|
|
$1,460
|
|
|
|
($1
|
)
|
|
|
|
|
$1,459
|
|
Less: Net income attributable to noncontrolling interests
|
(16
|
)
|
|
—
|
|
|
|
|
(16
|
)
|
|||
Net income (attributable to PPG)
|
|
$1,444
|
|
|
|
($1
|
)
|
|
|
|
|
$1,443
|
|
Amounts attributable to PPG:
|
|
|
|
|
|
|
|
||||||
Income from continuing operations, net of tax
|
|
$1,224
|
|
|
|
($3
|
)
|
|
|
|
|
$1,221
|
|
Income from discontinued operations, net of tax
|
220
|
|
|
2
|
|
|
|
|
222
|
|
|||
Net income (attributable to PPG)
|
|
$1,444
|
|
|
|
($1
|
)
|
|
|
|
|
$1,443
|
|
|
|
|
|
|
|
|
|
||||||
Earnings per common share:
|
|
|
|
|
|
|
|
||||||
Income from continuing operations, net of tax
|
|
$4.76
|
|
|
|
($0.01
|
)
|
|
|
|
|
$4.75
|
|
Income from discontinued operations, net of tax
|
0.86
|
|
|
—
|
|
|
|
|
0.86
|
|
|||
Net income (attributable to PPG)
|
|
$5.62
|
|
|
|
($0.01
|
)
|
|
|
|
|
$5.61
|
|
Earnings per common share – assuming dilution:
|
|
|
|
|
|
|
|
||||||
Income from continuing operations, net of tax
|
|
$4.73
|
|
|
|
($0.01
|
)
|
|
|
|
|
$4.72
|
|
Income from discontinued operations, net of tax
|
0.85
|
|
|
0.01
|
|
|
|
|
0.86
|
|
|||
Net income (attributable to PPG)
|
|
$5.58
|
|
|
|
$—
|
|
|
|
|
|
$5.58
|
|
|
|
|
|
|
|
|
|
||||||
Dividends per common share
|
|
$1.25
|
|
|
|
$—
|
|
|
|
|
|
$1.25
|
|
3
.
|
New Accounting Standards
|
|
Three Months Ended September 30, 2017
|
||||||||||
($ in millions)
|
As Previously Reported
(1)
|
|
Reclassifications
|
|
As Revised
|
||||||
Cost of sales, exclusive of depreciation and amortization
|
|
$2,101
|
|
|
|
$3
|
|
|
|
$2,104
|
|
Selling, general and administrative
|
902
|
|
|
(8
|
)
|
|
894
|
|
|||
Research and development, net
|
114
|
|
|
—
|
|
|
114
|
|
|||
Other charges
|
13
|
|
|
5
|
|
|
18
|
|
|||
Income from continuing operations before income taxes
|
523
|
|
|
—
|
|
|
523
|
|
|
Nine Months Ended September 30, 2017
|
||||||||||
($ in millions)
|
As Previously Reported
(1)
|
|
Reclassifications
|
|
As Revised
|
||||||
Cost of sales, exclusive of depreciation and amortization
|
|
$6,088
|
|
|
|
$1
|
|
|
|
$6,089
|
|
Selling, general and administrative
|
2,656
|
|
|
(11
|
)
|
|
2,645
|
|
|||
Research and development, net
|
337
|
|
|
(2
|
)
|
|
335
|
|
|||
Other charges
|
39
|
|
|
12
|
|
|
51
|
|
|||
Income from continuing operations before income taxes
|
1,628
|
|
|
—
|
|
|
1,628
|
|
4
.
|
Revenue Recognition
|
($ in millions)
|
Performance Coatings
|
|
Industrial Coatings
|
|
Total Net Sales
|
|||||||||||||||
|
Three Months Ended
September 30 |
|
Three Months Ended
September 30 |
|
Three Months Ended
September 30 |
|||||||||||||||
|
2018
|
2017
|
|
2018
|
2017
|
|
2018
|
2017
|
||||||||||||
United States and Canada
|
|
$1,028
|
|
|
$1,063
|
|
|
|
$606
|
|
|
$542
|
|
|
|
$1,634
|
|
|
$1,605
|
|
EMEA
|
741
|
|
735
|
|
|
397
|
|
398
|
|
|
1,138
|
|
1,133
|
|
||||||
Asia-Pacific
|
272
|
|
250
|
|
|
380
|
|
398
|
|
|
652
|
|
648
|
|
||||||
Latin America
|
248
|
|
242
|
|
|
145
|
|
148
|
|
|
393
|
|
390
|
|
||||||
Total
|
|
$2,289
|
|
|
$2,290
|
|
|
|
$1,528
|
|
|
$1,486
|
|
|
|
$3,817
|
|
|
$3,776
|
|
($ in millions)
|
Performance Coatings
|
|
Industrial Coatings
|
|
Total Net Sales
|
|||||||||||||||
|
Nine Months Ended
September 30 |
|
Nine Months Ended
September 30 |
|
Nine Months Ended
September 30 |
|||||||||||||||
|
2018
|
2017
|
|
2018
|
2017
|
|
2018
|
2017
|
||||||||||||
|
|
As Restated
|
|
|
|
|
|
|
As Restated
|
|
||||||||||
United States and Canada
|
|
$3,175
|
|
|
$3,118
|
|
|
|
$1,836
|
|
|
$1,710
|
|
|
|
$5,011
|
|
|
$4,828
|
|
EMEA
|
2,259
|
|
2,104
|
|
|
1,338
|
|
1,205
|
|
|
3,597
|
|
3,309
|
|
||||||
Asia-Pacific
|
791
|
|
708
|
|
|
1,171
|
|
1,131
|
|
|
1,962
|
|
1,839
|
|
||||||
Latin America
|
722
|
|
676
|
|
|
437
|
|
414
|
|
|
1,159
|
|
1,090
|
|
||||||
Total
|
|
$6,947
|
|
|
$6,606
|
|
|
|
$4,782
|
|
|
$4,460
|
|
|
|
$11,729
|
|
|
$11,066
|
|
|
Three Months Ended September 30, 2018
|
||||||||||
($ in millions)
|
Without adoption
|
|
Adjustments
|
|
As Reported
|
||||||
Net sales
|
|
$3,825
|
|
|
|
($8
|
)
|
|
|
$3,817
|
|
Cost of sales, exclusive of depreciation and amortization
|
2,233
|
|
|
20
|
|
|
2,253
|
|
|||
Selling, general and administrative
|
897
|
|
|
(30
|
)
|
|
867
|
|
|||
Other income
|
(26
|
)
|
|
2
|
|
|
(24
|
)
|
|||
Income from continuing operations before income taxes
|
451
|
|
|
—
|
|
|
451
|
|
|
Nine Months Ended September 30, 2018
|
||||||||||
($ in millions)
|
Without adoption
|
|
Adjustments
|
|
As Reported
|
||||||
Net sales
|
|
$11,748
|
|
|
|
($19
|
)
|
|
|
$11,729
|
|
Cost of sales, exclusive of depreciation and amortization
|
6,753
|
|
|
60
|
|
|
6,813
|
|
|||
Selling, general and administrative
|
2,804
|
|
|
(86
|
)
|
|
2,718
|
|
|||
Other income
|
(79
|
)
|
|
7
|
|
|
(72
|
)
|
|||
Income from continuing operations before income taxes
|
1,351
|
|
|
—
|
|
|
1,351
|
|
5
.
|
Acquisitions and Divestitures
|
($ in millions)
|
Three Months Ended
September 30 |
|
Nine Months Ended
September 30 |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
|
|
|
|
As Restated
|
||||||||
Net sales
|
|
$—
|
|
|
|
$50
|
|
|
|
$—
|
|
|
|
$217
|
|
|
|
|
|
|
|
|
|
||||||||
Income from operations
|
|
$13
|
|
|
|
$5
|
|
|
|
$21
|
|
|
|
$26
|
|
Net gain on divestiture of North American fiber glass business
|
—
|
|
|
343
|
|
|
—
|
|
|
343
|
|
||||
Income tax expense
|
3
|
|
|
131
|
|
|
5
|
|
|
139
|
|
||||
Income from discontinued operations, net of tax
|
|
$10
|
|
|
|
$217
|
|
|
|
$16
|
|
|
|
$230
|
|
6
.
|
Inventories
|
($ in millions)
|
September 30, 2018
|
|
December 31, 2017
|
||||
Finished products
|
$1,221
|
|
|
|
$1,083
|
|
|
Work in process
|
205
|
|
|
177
|
|
||
Raw materials
|
502
|
|
|
437
|
|
||
Supplies
|
34
|
|
|
33
|
|
||
Total Inventories
|
|
$1,962
|
|
|
|
$1,730
|
|
7
.
|
Goodwill and Other Identifiable Intangible Assets
|
($ in millions)
|
Performance
Coatings
|
|
Industrial
Coatings
|
|
Total
|
||||||
January 1, 2018
|
|
$3,104
|
|
|
|
$838
|
|
|
|
$3,942
|
|
Acquisitions
|
54
|
|
|
(13
|
)
|
|
41
|
|
|||
Foreign currency impact
|
(30
|
)
|
|
(14
|
)
|
|
(44
|
)
|
|||
September 30, 2018
|
|
$3,128
|
|
|
|
$811
|
|
|
|
$3,939
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||||||||||||||||||
($ in millions)
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
|
||||||||||||
Trademarks - indefinite lives
|
|
$1,186
|
|
|
N/A
|
|
|
|
$1,186
|
|
|
|
$1,158
|
|
|
N/A
|
|
|
|
$1,158
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Customer-related intangibles
|
|
$1,416
|
|
|
|
($798
|
)
|
|
|
$618
|
|
|
|
$1,437
|
|
|
|
($762
|
)
|
|
|
$675
|
|
Acquired technology
|
630
|
|
|
(509
|
)
|
|
121
|
|
|
613
|
|
|
(489
|
)
|
|
124
|
|
||||||
Trade names
|
166
|
|
|
(94
|
)
|
|
72
|
|
|
166
|
|
|
(87
|
)
|
|
79
|
|
||||||
Other
|
43
|
|
|
(36
|
)
|
|
7
|
|
|
44
|
|
|
(35
|
)
|
|
9
|
|
||||||
Total
|
|
$3,441
|
|
|
|
($1,437
|
)
|
|
|
$2,004
|
|
|
|
$3,418
|
|
|
|
($1,373
|
)
|
|
|
$2,045
|
|
|
Three Months Ended
September 30 |
|
Nine Months Ended
September 30 |
||||||||||||
($ in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Amortization expense related to identifiable intangible assets
|
|
$33
|
|
|
|
$32
|
|
|
|
$103
|
|
|
|
$95
|
|
($ in millions)
|
Future Amortization Expense
|
||
Remaining three months of 2018
|
|
$27
|
|
2019
|
120
|
|
|
2020
|
110
|
|
|
2021
|
105
|
|
|
2022
|
105
|
|
|
2023
|
95
|
|
|
Thereafter
|
256
|
|
8
.
|
Business Restructuring
|
($ in millions, except for employees impacted)
|
Severance
and Other
Costs
|
|
Asset
Write-offs
|
|
Total
Reserve
|
|
Employees
Impacted
|
|||||||
Performance Coatings
|
|
$49
|
|
|
|
$3
|
|
|
|
$52
|
|
|
1,032
|
|
Industrial Coatings
|
21
|
|
|
—
|
|
|
21
|
|
|
298
|
|
|||
Corporate
|
10
|
|
|
—
|
|
|
10
|
|
|
348
|
|
|||
Total second quarter 2018 restructuring charge
|
|
$80
|
|
|
|
$3
|
|
|
|
$83
|
|
|
1,678
|
|
2018 Activity
|
(6
|
)
|
|
(3
|
)
|
|
(9
|
)
|
|
(435
|
)
|
|||
September 30, 2018
|
|
$74
|
|
|
|
$—
|
|
|
|
$74
|
|
|
1,243
|
|
($ in millions, except for employees impacted)
|
Severance and Other Costs
|
|
Employees Impacted
|
|||
December 31, 2017
|
|
$102
|
|
|
949
|
|
2018 Activity
|
(48
|
)
|
|
(680
|
)
|
|
Foreign currency impact
|
(3
|
)
|
|
—
|
|
|
September 30, 2018
|
|
$51
|
|
|
269
|
|
9
.
|
Borrowings
|
10
.
|
Earnings Per Share
|
|
Three Months Ended
September 30 |
|
Nine Months Ended
September 30 |
||||||||
(number of shares in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||
Weighted average common shares outstanding
|
242.2
|
|
|
256.4
|
|
|
245.8
|
|
|
257.0
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
||||
Stock options
|
0.7
|
|
|
1.0
|
|
|
0.8
|
|
|
1.0
|
|
Other stock compensation awards
|
0.7
|
|
|
0.8
|
|
|
0.7
|
|
|
0.8
|
|
Potentially dilutive common shares
|
1.4
|
|
|
1.8
|
|
|
1.5
|
|
|
1.8
|
|
Adjusted weighted average common shares outstanding
|
243.6
|
|
|
258.2
|
|
|
247.3
|
|
|
258.8
|
|
11
.
|
Income Taxes
|
|
Nine Months Ended
September 30 |
||||
|
2018
|
|
2017
|
||
|
|
|
As Restated
|
|
|
Effective tax rate on pre-tax income from continuing operations
|
20.0
|
%
|
|
24.0
|
%
|
12
.
|
Pensions and Other Postretirement Benefits
|
|
Pension
|
||||||||||||||
|
Three Months Ended
September 30 |
|
Nine Months Ended
September 30 |
||||||||||||
($ in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Service cost
|
|
$8
|
|
|
|
$9
|
|
|
|
$24
|
|
|
|
$26
|
|
Interest cost
|
23
|
|
|
25
|
|
|
71
|
|
|
74
|
|
||||
Expected return on plan assets
|
(37
|
)
|
|
(35
|
)
|
|
(113
|
)
|
|
(105
|
)
|
||||
Amortization of actuarial losses
|
16
|
|
|
19
|
|
|
48
|
|
|
57
|
|
||||
Pension settlement charge
|
—
|
|
|
—
|
|
|
—
|
|
|
22
|
|
||||
Net periodic benefit cost
|
|
$10
|
|
|
|
$18
|
|
|
|
$30
|
|
|
|
$74
|
|
|
Other Postretirement Benefits
|
||||||||||||||
|
Three Months Ended
September 30 |
|
Nine Months Ended
September 30 |
||||||||||||
($ in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Service cost
|
|
$2
|
|
|
|
$1
|
|
|
|
$7
|
|
|
|
$6
|
|
Interest cost
|
6
|
|
|
6
|
|
|
18
|
|
|
18
|
|
||||
Amortization of actuarial losses
|
5
|
|
|
3
|
|
|
14
|
|
|
9
|
|
||||
Amortization of prior service credit
|
(15
|
)
|
|
(14
|
)
|
|
(45
|
)
|
|
(44
|
)
|
||||
Net periodic benefit cost
|
|
($2
|
)
|
|
|
($4
|
)
|
|
|
($6
|
)
|
|
|
($11
|
)
|
|
Three Months Ended
September 30 |
|
Nine Months Ended
September 30 |
||||||||||||
($ in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
U.S. defined benefit pension contributions
|
|
$50
|
|
|
|
$—
|
|
|
|
$75
|
|
|
|
$29
|
|
Non-U.S. defined benefit pension mandatory contributions
|
|
$4
|
|
|
|
$6
|
|
|
|
$14
|
|
|
|
$14
|
|
13
.
|
Shareholders' Equity
|
($ in millions)
|
Total PPG Shareholders’ Equity
|
|
Non-controlling Interests
|
|
Total
|
||||||
January 1, 2018
|
|
$5,557
|
|
|
|
$115
|
|
|
|
$5,672
|
|
Net income
|
1,083
|
|
|
14
|
|
|
1,097
|
|
|||
Other comprehensive loss, net of tax
|
(140
|
)
|
|
(11
|
)
|
|
(151
|
)
|
|||
Reclassifications from other comprehensive income to retained earnings - Adoption ASU 2018-02
(a)
|
107
|
|
|
—
|
|
|
107
|
|
|||
Cash dividends
|
(338
|
)
|
|
(4
|
)
|
|
(342
|
)
|
|||
Issuance of treasury stock
|
38
|
|
|
—
|
|
|
38
|
|
|||
Stock repurchase program
|
(1,313
|
)
|
|
—
|
|
|
(1,313
|
)
|
|||
Stock-based compensation activity
|
(10
|
)
|
|
—
|
|
|
(10
|
)
|
|||
Other
|
(4
|
)
|
|
(16
|
)
|
|
(20
|
)
|
|||
September 30, 2018
|
|
$4,980
|
|
|
|
$98
|
|
|
|
$5,078
|
|
($ in millions)
|
Total PPG Shareholders’ Equity
|
|
Non-controlling Interests
|
|
Total
|
||||||
January 1, 2017
|
|
$4,828
|
|
|
|
$87
|
|
|
|
$4,915
|
|
Net income (As Restated)
|
1,443
|
|
|
16
|
|
|
1,459
|
|
|||
Other comprehensive income, net of tax
|
293
|
|
|
15
|
|
|
308
|
|
|||
Cash dividends
|
(321
|
)
|
|
—
|
|
|
(321
|
)
|
|||
Issuance of treasury stock
|
75
|
|
|
—
|
|
|
75
|
|
|||
Stock repurchase program
|
(413
|
)
|
|
—
|
|
|
(413
|
)
|
|||
Stock-based compensation activity (As Restated)
|
(8
|
)
|
|
—
|
|
|
(8
|
)
|
|||
Dividends paid on subsidiary common stock to noncontrolling interests
|
—
|
|
|
(5
|
)
|
|
(5
|
)
|
|||
Other
|
—
|
|
|
(5
|
)
|
|
(5
|
)
|
|||
September 30, 2017 (As Restated)
|
|
$5,897
|
|
|
|
$108
|
|
|
|
$6,005
|
|
(a)
|
See Note 3, "
New Accounting Standards
" for more information.
|
14
.
|
Accumulated Other Comprehensive Loss
|
($ in millions)
|
Unrealized Foreign Currency Translation Adjustments
|
|
Pension and Other Postretirement Benefit Adjustments, net of tax
|
|
Unrealized Gain (Loss) on Derivatives, net of tax
|
|
Accumulated Other Comprehensive (Loss) Income
|
||||||||||||||||||||
January 1, 2018
|
|
|
|
($1,567
|
)
|
|
|
|
|
($493
|
)
|
|
|
|
|
$3
|
|
|
|
|
|
($2,057
|
)
|
||||
Current year deferrals to AOCI
|
(172
|
)
|
(a)
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(172
|
)
|
|
|
||||||||
Current year deferrals to AOCI, net of tax
|
121
|
|
(b)
|
|
|
6
|
|
|
|
|
(6
|
)
|
(d)
|
|
|
121
|
|
|
|
||||||||
Reclassification from AOCI to Retained earnings - Adoption ASU 2018-02
|
(23
|
)
|
|
|
|
(84
|
)
|
|
|
|
—
|
|
|
|
|
(107
|
)
|
|
|
||||||||
Reclassifications from AOCI to net income
|
—
|
|
|
|
|
14
|
|
(c),(e)
|
|
|
4
|
|
(d),(e)
|
|
|
18
|
|
|
|
||||||||
Net change
|
|
|
|
($74
|
)
|
|
|
|
|
($64
|
)
|
|
|
|
|
($2
|
)
|
|
|
|
|
($140
|
)
|
||||
September 30, 2018
|
|
|
|
($1,641
|
)
|
|
|
|
|
($557
|
)
|
|
|
|
|
$1
|
|
|
|
|
|
($2,197
|
)
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
January 1, 2017
|
|
|
|
($1,798
|
)
|
|
|
|
|
($571
|
)
|
|
|
|
|
$13
|
|
|
|
|
|
($2,356
|
)
|
||||
Current year deferrals to AOCI
|
634
|
|
(a)
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
634
|
|
|
|
||||||||
Current year deferrals to AOCI, net of tax
|
(262
|
)
|
(b)
|
|
|
(93
|
)
|
|
|
|
(13
|
)
|
(d)
|
|
|
(368
|
)
|
|
|
||||||||
Reclassifications from AOCI to net income
|
—
|
|
|
|
|
30
|
|
(c),(e)
|
|
|
(3
|
)
|
(d),(e)
|
|
|
27
|
|
|
|
||||||||
Net change
|
|
|
|
$372
|
|
|
|
|
|
($63
|
)
|
|
|
|
|
($16
|
)
|
|
|
|
|
$293
|
|
||||
September 30, 2017
|
|
|
|
($1,426
|
)
|
|
|
|
|
($634
|
)
|
|
|
|
|
($3
|
)
|
|
|
|
|
($2,063
|
)
|
(a)
|
Unrealized foreign currency translation adjustments related to the translation of foreign denominated balance sheet account balances are not presented net of tax given that no deferred U.S. income taxes have been provided on the undistributed earnings of non-U.S. subsidiaries because they are deemed to be reinvested for an indefinite period of time.
|
(b)
|
The tax cost (benefit) related to unrealized foreign currency translation adjustments on cross currency swaps and debt instruments for the
nine
months ended
September 30, 2018
and
2017
was
$29 million
and
($157) million
, respectively.
|
(c)
|
The tax benefit related to the adjustment for pension and other postretirement benefits for the
nine
months ended
September 30, 2018
and
2017
was
($3) million
and
($27) million
, respectively.
|
(d)
|
The tax cost (benefit) related to the changes in the unrealized gain (loss) on derivatives for the
nine
months ended
September 30, 2018
and 2017 was
$2 million
and
($7) million
, respectively.
|
(e)
|
Reclassifications from AOCI are included in the computation of net periodic pension and other post-retirement benefit costs (See Note
12
, "Pensions and Other Postretirement Benefits") and in the gain recognized on cash flow hedges (See Note
15
, "Financial Instruments, Hedging Activities and Fair Value Measurements").
|
15
.
|
Financial Instruments, Hedging Activities and Fair Value Measurements
|
|
September 30, 2018
|
|
September 30, 2017
|
|
|
||||||||||||
($ in millions)
|
Gain (Loss) Deferred in OCI
|
|
Gain (Loss) Recognized
|
|
Loss Deferred in OCI
|
|
Gain Recognized
|
|
Caption In Condensed Consolidated Statement of Income
|
||||||||
Not Designated as Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
(1)
|
|
$—
|
|
|
|
$37
|
|
|
|
$—
|
|
|
|
$—
|
|
|
Other charges
|
Fair Value
|
|
|
|
|
|
|
|
|
|
||||||||
Interest rate swaps
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
Interest expense
|
||||
Cash Flow
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
7
|
|
|
(5
|
)
|
|
(20
|
)
|
|
4
|
|
|
Other charges and Cost of sales
|
||||
Total Cash Flow
|
|
$7
|
|
|
|
$35
|
|
|
|
($20
|
)
|
|
|
$4
|
|
|
|
Net Investment
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward contracts
|
|
$—
|
|
|
|
$—
|
|
|
|
($2
|
)
|
|
|
|
|
||
Cross currency swaps
|
7
|
|
|
8
|
|
|
(54
|
)
|
|
|
|
Interest expense
|
|||||
Foreign denominated debt
|
92
|
|
|
—
|
|
|
(363
|
)
|
|
|
|
|
|||||
Total Net Investment
|
|
$99
|
|
|
|
$8
|
|
|
|
($419
|
)
|
|
|
|
|
(1)
|
For the period ended
September 30, 2018
, the amounts excluded from effectiveness testing recognized in earnings based on an amortized approach was expense of
$3 million
, with a deferred loss balance of
$1 million
remaining in accumulated other comprehensive income as of
September 30, 2018
.
|
|
September 30, 2018
|
|
December 31, 2017
|
||||||||||||||||||||
($ in millions)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other current assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Marketable equity securities
|
|
$4
|
|
|
|
$—
|
|
|
|
$—
|
|
|
|
$4
|
|
|
|
$—
|
|
|
|
$—
|
|
Foreign currency forward contracts
(a)
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
||||||
Foreign currency forward contracts
(b)
|
—
|
|
|
66
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
||||||
Cross currency swaps
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
||||||
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Marketable equity securities
|
83
|
|
|
—
|
|
|
—
|
|
|
79
|
|
|
—
|
|
|
—
|
|
||||||
Other assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cross currency swaps
(d)
|
—
|
|
|
22
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Accounts payable and accrued liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign currency forward contracts
(a)
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||||
Foreign currency forward contracts
(b)
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
22
|
|
|
—
|
|
||||||
Other liabilities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest rate swaps
(c)
|
—
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(a) Cash flow hedges
|
(c) Fair value hedges
|
(b) Derivatives not designated as hedging instruments
|
(d) Net investment hedges
|
($ in millions)
|
September 30, 2018
(a)
|
|
December 31, 2017
(b)
|
||||
Long-term debt - carrying value
|
|
$5,014
|
|
|
|
$4,123
|
|
Long-term debt - fair value
|
|
$5,149
|
|
|
|
$4,341
|
|
16
.
|
Stock-Based Compensation
|
|
Three Months Ended
September 30 |
|
Nine Months Ended
September 30 |
||||||||||||
($ in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
|
|
|
|
As Restated
|
|
|||||||
Stock-based compensation
|
|
$3
|
|
|
|
$9
|
|
|
|
$21
|
|
|
|
$26
|
|
Income tax benefit recognized
|
|
$1
|
|
|
|
$4
|
|
|
|
$5
|
|
|
|
$9
|
|
Weighted average exercise price
|
|
$115.98
|
|
Risk-free interest rate
|
2.9
|
%
|
|
Expected life of option in years
|
6.5
|
|
|
Expected dividend yield
|
1.7
|
%
|
|
Expected volatility
|
21.0
|
%
|
17
.
|
Commitments and Contingent Liabilities
|
Environmental Reserves
|
|||||||
($ in millions)
|
September 30, 2018
|
|
December 31, 2017
|
||||
New Jersey Chrome
|
|
$130
|
|
|
|
$136
|
|
Legacy glass and chemical
|
70
|
|
|
71
|
|
||
Other
|
49
|
|
|
51
|
|
||
Total
|
|
$249
|
|
|
|
$258
|
|
Current portion
|
|
$67
|
|
|
|
$73
|
|
|
Three Months Ended
September 30 |
|
Nine Months Ended
September 30 |
||||||||||||
($ in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Environmental remediation pre-tax charges
|
|
$4
|
|
|
|
$3
|
|
|
|
$39
|
|
|
|
$5
|
|
Cash outlays for environmental remediation activities
|
|
$14
|
|
|
|
$14
|
|
|
|
$45
|
|
|
|
$36
|
|
18
.
|
Reportable Business Segment Information
|
|
Three Months Ended
September 30 |
|
Nine Months Ended
September 30 |
||||||||||||
($ in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
As Restated
|
|
|
|
As Restated
|
||||||||
Net sales:
|
|
|
|
|
|
|
|
||||||||
Performance Coatings
|
|
$2,289
|
|
|
|
$2,290
|
|
|
|
$6,947
|
|
|
|
$6,606
|
|
Industrial Coatings
|
1,528
|
|
|
1,486
|
|
|
4,782
|
|
|
4,460
|
|
||||
Total
|
|
$3,817
|
|
|
|
$3,776
|
|
|
|
$11,729
|
|
|
|
$11,066
|
|
Segment income:
(a)
|
|
|
|
|
|
|
|
||||||||
Performance Coatings
|
|
$331
|
|
|
|
$365
|
|
|
|
$1,039
|
|
|
|
$1,054
|
|
Industrial Coatings
|
169
|
|
|
225
|
|
|
631
|
|
|
765
|
|
||||
Total
|
|
$500
|
|
|
|
$590
|
|
|
|
$1,670
|
|
|
|
$1,819
|
|
Corporate
(a)
|
(26
|
)
|
|
(46
|
)
|
|
(92
|
)
|
|
(134
|
)
|
||||
Interest expense, net of interest income
|
(25
|
)
|
|
(22
|
)
|
|
(70
|
)
|
|
(65
|
)
|
||||
Legacy items
(a),(b)
|
—
|
|
|
1
|
|
|
5
|
|
|
(4
|
)
|
||||
Business restructuring
|
12
|
|
|
—
|
|
|
(71
|
)
|
|
—
|
|
||||
Accelerated depreciation related to restructuring actions
|
(4
|
)
|
|
—
|
|
|
(9
|
)
|
|
—
|
|
||||
Legacy legal settlements
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
18
|
|
||||
Accounting investigation costs
|
(2
|
)
|
|
—
|
|
|
(11
|
)
|
|
—
|
|
||||
Impairment of a non-manufacturing asset
|
—
|
|
|
—
|
|
|
(9
|
)
|
|
—
|
|
||||
Costs related to customer assortment change
|
(4
|
)
|
|
—
|
|
|
(18
|
)
|
|
—
|
|
||||
Environmental remediation charges
|
—
|
|
|
—
|
|
|
(34
|
)
|
|
—
|
|
||||
Gain from sale of a business
|
—
|
|
|
—
|
|
|
—
|
|
|
25
|
|
||||
Transaction-related costs
(c)
|
—
|
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
||||
Pension settlement charge
|
—
|
|
|
—
|
|
|
—
|
|
|
(22
|
)
|
||||
Income from continuing operations before income taxes
|
|
$451
|
|
|
|
$523
|
|
|
|
$1,351
|
|
|
|
$1,628
|
|
(a)
|
During the first quarter 2018, PPG recast 2017 segment income, legacy items and corporate to present the non-service cost components of pension and other post-retirement benefit costs as corporate costs. Segment income only includes the service cost component of pension and other post-retirement benefit costs for all periods presented. See Note 3, "
New Accounting Standards
" for more information.
|
(b)
|
Legacy items include current costs related to former operations of the Company, including pension and other postretirement benefit costs, certain charges for legal matters and environmental remediation costs, and certain other charges which are not associated with PPG's current business portfolio.
|
(c)
|
Transaction-related costs include advisory, legal, accounting, valuation and other professional or consulting fees incurred to effect significant acquisitions, as well as similar fees and other costs to effect disposals not classified as discontinued operations. These costs may also include the flow-through cost of sales for the step up to fair value of inventories acquired in acquisitions.
|
•
|
Net sales were approximately
$3.8 billion
, up
1.1%
compared to the prior year.
|
•
|
Cost of sales, exclusive of depreciation and amortization ("Cost of sales") was
$2.3 billion
, up
7.1%
versus prior year. As a percentage of sales, Cost of sales increased
3.3%
.
|
•
|
Selling, general and administrative ("SG&A") expense was
$867 million
, down
3.0%
year-over-year. As a percentage of sales, SG&A expense decreased
1.0%
.
|
•
|
Income before income taxes was
$451 million
.
|
•
|
The effective tax rate was
17.5%
.
|
•
|
Income from continuing operations, net of tax (attributable to PPG) was
$368 million
.
|
•
|
Earnings per diluted share from continuing operations was
$1.51
.
|
•
|
During the third quarter 2018, PPG increased its normal quarterly dividend by 7%, or $0.03 per share, to $0.48 per share
|
•
|
Cash flows from operating activities - continuing operations was
$687 million
, a decrease of
$331 million
year-over-year.
|
•
|
Capital expenditures, including acquisitions (net of cash acquired), was
$324 million
.
|
•
|
The Company paid
$338 million
in dividends and repurchased
$1,313 million
of its outstanding common stock.
|
|
Three Months Ended
September 30 |
|
Percent Change
|
|||||||
($ in millions, except percentages)
|
2018
|
|
2017
|
|
2018 vs. 2017
|
|||||
United States and Canada
|
|
$1,634
|
|
|
|
$1,605
|
|
|
1.8
|
%
|
Europe, Middle East and Africa (EMEA)
|
1,138
|
|
|
1,133
|
|
|
0.4
|
%
|
||
Asia-Pacific
|
652
|
|
|
648
|
|
|
0.6
|
%
|
||
Latin America
|
393
|
|
|
390
|
|
|
0.8
|
%
|
||
Total
|
|
$3,817
|
|
|
|
$3,776
|
|
|
1.1
|
%
|
2018 vs. 2017
|
Net sales increased $41 million due to the following:
|
● Higher selling prices (+2%)
|
● Net sales from acquired businesses (+1%)
|
Partially offset by:
|
● Unfavorable foreign currency translation (-2%)
|
In the United States and Canada region, sales volumes were lower by a low-single-digit percentage. Aerospace coatings, automotive original equipment manufacturer (OEM) coatings and packaging coatings had above-market sales volume performance driven by customers’ continuing adoption of PPG’s technology advantaged products. Architectural company-owned stores same store sales increased by a high-single-digit percentage, more than offset by lower volumes in the do-it-yourself (DIY) and independent dealer channel and the automotive refinish coatings business. The automotive OEM coatings, general industrial coatings and protective and marine coatings businesses had modest sales volume growth during the quarter.
|
In the Europe, Middle East and Africa (EMEA) region, sales volumes were flat. Strong sales volume growth in general industrial coatings, aerospace and marine coatings was offset by lower sales volumes in the automotive refinish, architectural, protective, packaging and automotive OEM businesses.
|
In the Asia-Pacific region, sales volumes grew a low-single-digit percentage with above market growth in aerospace coatings and protective and marine coatings partially offset by lower sales volumes in automotive OEM coatings.
|
In the Latin America region, sales volumes expanded by a mid-single-digit percentage versus the prior year led by automotive OEM coatings, general industrial coatings, packaging coatings and automotive refinish coatings. The architectural coatings business in Mexico grew organic sales by a high-single-digit percentage.
|
Net sales from acquired businesses, net of dispositions added approximately $40 million, primarily from The Crown Group.
|
Foreign currency translation decreased net sales approximately $80 million as the U.S. dollar strengthened against several foreign currencies versus the prior year, most notably the euro, Chinese yuan, and U.K. pound.
|
|
Three Months Ended
September 30 |
|
Percent Change
|
|||||||
($ in millions, except percentages)
|
2018
|
|
2017
|
|
2018 vs. 2017
|
|||||
|
|
|
As Restated
|
|
|
|
||||
Cost of sales, exclusive of depreciation and amortization
|
|
$2,253
|
|
|
|
$2,104
|
|
|
7.1
|
%
|
Cost of sales as a percentage of net sales
|
59.0
|
%
|
|
55.7
|
%
|
|
3.3
|
%
|
2018 vs. 2017
|
Cost of sales, exclusive of depreciation and amortization, increased $149 million primarily due to the following:
|
● Higher raw material costs
|
● Higher sales volumes
|
● Cost of sales attributable to acquired businesses
|
● Cost reclassifications associated with the adoption of the new revenue recognition standard. Refer to Note 4, "Revenue Recognition" within Part 1 of this 10-Q.
|
Partially offset by:
|
● Foreign currency translation
|
● Restructuring cost savings
|
|
Three Months Ended
September 30 |
|
Percent Change
|
|||||||
($ in millions, except percentages)
|
2018
|
|
2017
|
|
2018 vs. 2017
|
|||||
|
|
|
As Restated
|
|
|
|||||
Selling, general and administrative expenses (SG&A)
|
|
$867
|
|
|
|
$894
|
|
|
(3.0
|
)%
|
Selling, general and administrative expenses as a percentage of net sales
|
22.7
|
%
|
|
23.7
|
%
|
|
(1.0
|
)%
|
2018 vs. 2017
|
SG&A expense decreased $27 million primarily due to the following:
|
● Cost reclassifications associated with the adoption of the new revenue recognition standard. Refer to Note 4, "Revenue Recognition" within Part 1 of this 10-Q.
|
● Lower selling and advertising expense
|
● Foreign currency translation
|
● Restructuring cost savings
|
Partially offset by:
|
● Wage and other cost inflation
|
● SG&A expenses attributable to acquired businesses
|
|
Three Months Ended
September 30 |
|
Percent Change
|
|||||||
($ in millions, except percentages)
|
2018
|
|
2017
|
|
2018 vs. 2017
|
|||||
|
|
|
As Restated
|
|
|
|||||
Interest expense, net of Interest income
|
|
$25
|
|
|
|
$22
|
|
|
13.6
|
%
|
Other charges
|
|
$25
|
|
|
|
$18
|
|
|
38.9
|
%
|
Other income
|
|
($24
|
)
|
|
|
($16
|
)
|
|
50.0
|
%
|
|
Three Months Ended
September 30 |
|
Percent Change
|
|||||||
($ in millions, except percentages)
|
2018
|
|
2017
|
|
2018 vs. 2017
|
|||||
|
|
|
As Restated
|
|
|
|||||
Income tax expense
|
|
$79
|
|
|
|
$124
|
|
|
(36.3
|
)%
|
Effective tax rate
|
17.5
|
%
|
|
23.7
|
%
|
|
(6.2
|
)%
|
||
Adjusted effective tax rate, continuing operations*
|
20.5
|
%
|
|
23.7
|
%
|
|
(3.2
|
)%
|
||
|
|
|
|
|
|
|||||
Earnings per diluted share, continuing operations
|
|
$1.51
|
|
|
|
$1.52
|
|
|
(0.7
|
)%
|
Adjusted earnings per diluted share*
|
|
$1.45
|
|
|
|
$1.52
|
|
|
(4.6
|
)%
|
*See Regulation G Reconciliation below
|
|
Three Months Ended September 30, 2018
|
|||||||||||||||||
($ in millions, except percentages and per share amounts)
|
Income Before Income Taxes
|
|
Tax Expense
|
|
Effective Tax Rate
|
|
Net income from continuing operations (attributable to PPG)
|
|
Earnings per diluted share
|
|||||||||
As reported, continuing operations
|
|
$451
|
|
|
|
$79
|
|
|
17.5
|
%
|
|
|
$368
|
|
|
|
$1.51
|
|
Adjusted for:
|
|
|
|
|
|
|
|
|
|
|||||||||
Costs related to customer assortment change
|
4
|
|
|
1
|
|
|
24.3
|
%
|
|
3
|
|
|
0.01
|
|
||||
Release of business restructuring reserves
|
(12
|
)
|
|
(2
|
)
|
|
16.9
|
%
|
|
(10
|
)
|
|
(0.04
|
)
|
||||
Accelerated depreciation from restructuring actions
|
4
|
|
|
1
|
|
|
23.3
|
%
|
|
3
|
|
|
0.01
|
|
||||
Accounting investigation costs
|
2
|
|
|
—
|
|
|
24.3
|
%
|
|
2
|
|
|
0.01
|
|
||||
Tax benefit related to U.S. Tax Cuts and Jobs Act
|
—
|
|
|
13
|
|
|
N/A
|
|
|
(13
|
)
|
|
(0.05
|
)
|
||||
Adjusted, continuing operations, excluding certain items
|
|
$449
|
|
|
|
$92
|
|
|
20.5
|
%
|
|
|
$353
|
|
|
|
$1.45
|
|
As Restated
|
Three Months Ended September 30, 2017
|
|||||||||||||||||
($ in millions, except percentages and per share amounts)
|
Income Before Income Taxes
|
|
Tax Expense
|
|
Effective Tax Rate
|
|
Net income from continuing operations (attributable to PPG)
|
|
Earnings per share
|
|||||||||
As reported, continuing operations
|
|
$523
|
|
|
|
$124
|
|
|
23.7
|
%
|
|
|
$393
|
|
|
|
$1.52
|
|
|
Three Months Ended
September 30 |
|
$ Change
|
|
% Change
|
|||||||||
($ in millions, except per share amounts)
|
2018
|
|
2017
|
|
2018 vs. 2017
|
|
2018 vs. 2017
|
|||||||
|
|
|
As Restated
|
|
|
|
|
|||||||
Net sales
|
|
$2,289
|
|
|
|
$2,290
|
|
|
|
($1
|
)
|
|
—
|
%
|
Segment income
|
|
$331
|
|
|
|
$365
|
|
|
|
($34
|
)
|
|
(9.3)
|
%
|
2018 vs. 2017
|
Performance Coatings net sales decreased $1 million due to the following:
|
● Unfavorable foreign currency translation (-2%)
|
● Lower sales volumes (-1%)
|
Partially offset by:
|
● Higher selling prices (+3%)
|
Architectural coatings Americas and Asia-Pacific sales volumes were lower by a mid-single-digit percentage versus the prior year. Sales volumes were positive year-over-year in the U.S. and Canada company-owned store network, as well as in Mexico, Central America and China. The architectural coatings business in Mexico grew organic sales by a high-single-digit percentage as positive demand trends continued. Organic sales volumes increased by a high-single-digit percentage in the U.S. and Canada company-owned stores. This increase was more than offset by lower sales in the national retail channel, including the unfavorable impact from previously communicated customer assortment changes.
|
Architectural coatings - EMEA organic sales volumes increased by a low-single-digit percentage year-over-year. Modest sales volumes declines were more than offset by higher selling prices.
|
Automotive refinish coatings organic sales decreased by a low-single-digit percentage year-over-year. Sales volumes were impacted by lower sales in the U.S. and Europe stemming from a change in customer order patterns, as several customers have high inventory levels due to lower end-use demand. Collision claims in the U.S. were down in the third quarter of 2018 by one percent. Organic sales volumes in emerging regions continued to be solid.
|
Aerospace coatings sales volumes grew by a low-teen-percentage, including above-market volume growth in the U.S. and Asia-Pacific, supported by technology advantaged products. Aerospace sales grew across all major platforms.
|
Protective and marine coatings sales volumes increased by a mid-single-digit percentage driven by strong protective coatings sales volumes in China. Marine coatings sales volumes were higher year-over-year.
|
Segment income decreased $34 million year-over-year primarily due to lower sales volumes, raw material and logistics cost inflation and unfavorable foreign currency translation, partially offset by higher selling prices and benefits from prior business restructuring actions.
|
|
Three Months Ended
September 30 |
|
$ Change
|
|
% Change
|
|||||||||
($ in millions, except per share amounts)
|
2018
|
|
2017
|
|
2018 vs. 2017
|
|
2018 vs. 2017
|
|||||||
Net sales
|
|
$1,528
|
|
|
|
$1,486
|
|
|
|
$42
|
|
|
2.8
|
%
|
Segment income
|
|
$169
|
|
|
|
$225
|
|
|
|
($56
|
)
|
|
(24.9
|
)%
|
2018 vs. 2017
|
Industrial Coatings segment net sales increased $42 million due to the following:
|
● Acquisition-related sales (+2%)
|
● Higher sales volumes (+2%)
|
● Higher selling prices (+1%)
|
Partially offset by:
|
● Unfavorable foreign currency translation (-3%)
|
Sales volumes were flat in the automotive OEM coatings business versus the prior year period, which is slightly better than the overall global industry build rate. PPG’s sales volume growth was strongest in Latin America. Sales in the Asia-Pacific region were lower compared to the prior year primarily due to lower sales in Korea and the exiting of all remaining automotive OEM production in Australia which was completed late last year.
|
Aggregate industrial coatings and specialty coatings and materials sales volumes increased by a mid-single-digit percentage year-over-year. Sales volume growth was the strongest in Europe and Latin America driven by strong end-market demand for coil and heavy-duty equipment. Selling prices continued to improve. Acquisition-related sales from The Crown Group, acquired in October 2017, added approximately $30 million in sales below segment margins and in-line with the Company's expectations.
|
Packaging coatings sales volumes were up a mid-single-digit percentage versus the prior year due to ongoing adoption of PPG’s new can coating technologies in the U.S. and Latin America. Asia-Pacific region volumes were flat.
|
Segment income decreased $56 million year-over-year. Segment income benefited from improving selling prices and from prior business restructuring actions, which were more than offset by elevated raw material costs and logistics costs. Unfavorable foreign currency translation decreased segment income by $5 million, primarily related to the Chinese yuan, the euro and several emerging region currencies.
|
|
Nine Months Ended
September 30 |
|
Percent Change
|
|||||||
($ in millions, except percentages)
|
2018
|
|
2017
|
|
2018 vs. 2017
|
|||||
|
|
|
As Restated
|
|
|
|
||||
United States and Canada
|
|
$5,011
|
|
|
|
$4,828
|
|
|
3.8
|
%
|
Europe, Middle East and Africa (EMEA)
|
3,597
|
|
|
3,309
|
|
|
8.7
|
%
|
||
Asia-Pacific
|
1,962
|
|
|
1,839
|
|
|
6.7
|
%
|
||
Latin America
|
1,159
|
|
|
1,090
|
|
|
6.3
|
%
|
||
Total
|
|
$11,729
|
|
|
|
$11,066
|
|
|
6.0
|
%
|
2018 vs. 2017
|
Net sales increased $663 million due to the following:
|
● Favorable foreign currency translation (+2%)
|
● Higher selling prices (+2%)
|
● Higher sales volumes (+1%)
|
● Net sales from acquired businesses (+1%)
|
U.S. and Canada sales volumes increased modestly versus the prior year. Aerospace coatings and packaging coatings had above market sales volume growth reflecting continued adoption of PPG's technology advanced products. Organic sales in the automotive refinish coatings business grew year-over-year, despite slightly lower industry collision claims. Sales volumes in the industrial coatings business were slightly lower year-over-year. Our architectural coatings company-owned stores continued to perform well, as sales volumes were positive versus the prior year. These increases were more than offset by sales volumes declines in the architectural national retail DIY channel and independent dealer networks, including the unfavorable impact from the customer assortment change in the DIY channel.
|
In February 2018, PPG announced that Lowe’s will discontinue the sale of OLYMPIC® brand paints and stains in its U.S. retail stores, effective mid-2018. During the second quarter 2018, the Company launched its OLYMPIC® stain products at THE HOME DEPOT® U.S. retail stores, expanding our existing partnership arrangement; however, these incremental sales will not offset expected declines in the overall DIY and independent dealer network. PPG will continue to supply certain specialty building materials to Lowe’s stores.
|
Europe, Middle East and Africa (EMEA) sales volumes were flat versus the prior year. Strong sales volume growth in general industrial coatings, automotive refinish coatings, automotive OEM coatings and packaging coatings was offset by a low-single-digit percentage decrease in architectural coatings. Sales volumes in the protective and marine coatings business were lower due to customer project delays.
|
Asia-Pacific sales volumes were up a low-single-digit percentage from the comparable nine-month period, with growth in general industrial coatings, aerospace coatings, automotive refinish coatings and protective coatings offset by lower sales volumes in marine coatings, automotive OEM coatings and packaging coatings.
|
Latin American sales volumes grew by a high-single-digit percentage versus the prior year, led by our architectural coatings, industrial coatings and automotive OEM coatings businesses. PPG automotive OEM coatings continued to perform at above market levels, driven by new business secured in 2017.
|
Net sales from acquired businesses, net of dispositions added approximately $105 million, primarily from The Crown Group.
|
Foreign currency translation increased net sales by approximately $215 million as the U.S. dollar weakened against several foreign currencies versus the prior year, most notably the Mexican peso and the euro.
|
|
Nine Months Ended
September 30 |
|
Percent Change
|
|||||||
($ in millions, except percentages)
|
2018
|
|
2017
|
|
2018 vs. 2017
|
|||||
|
|
|
As Restated
|
|
|
|||||
Cost of sales, exclusive of depreciation and amortization
|
|
$6,813
|
|
|
|
$6,089
|
|
|
11.9
|
%
|
Cost of sales as a percentage of net sales
|
58.1
|
%
|
|
55.0
|
%
|
|
3.1
|
%
|
2018 vs. 2017
|
Cost of sales, exclusive of depreciation and amortization, increased $724 million primarily due to the following:
|
● Higher raw material costs
|
● Higher sales volumes
|
● Foreign currency translation
|
● Cost of sales attributable to acquired businesses
|
● Cost reclassifications associated with the adoption of the new revenue recognition standard. Refer to Note 4, "Revenue Recognition" within Part 1 of this Form 10-Q.
|
Partially offset by:
|
● Lower manufacturing costs, including restructuring cost savings
|
|
Nine Months Ended
September 30 |
|
Percent Change
|
|||||||
($ in millions, except percentages)
|
2018
|
|
2017
|
|
2018 vs. 2017
|
|||||
|
|
|
As Restated
|
|
|
|||||
Selling, general and administrative expenses (SG&A)
|
|
$2,718
|
|
|
|
$2,645
|
|
|
2.8
|
%
|
Selling, general and administrative expenses as a percentage of net sales
|
23.2
|
%
|
|
23.9
|
%
|
|
(0.7
|
)%
|
2018 vs. 2017
|
SG&A expense increased $73 million primarily due to the following:
|
● Foreign currency translation
|
● Wage and other cost inflation
|
● SG&A expenses attributable to acquired businesses
|
Partially offset by:
|
● Cost reclassifications associated with the adoption of the new revenue recognition standard. Refer to Note 4, "Revenue Recognition" within Part 1 of this Form 10-Q.
|
● Restructuring cost savings
|
|
Nine Months Ended
September 30 |
|
Percent Change
|
|||||||
($ in millions, except percentages)
|
2018
|
|
2017
|
|
2018 vs. 2017
|
|||||
|
|
|
As Restated
|
|
|
|||||
Interest expense, net of Interest income
|
|
$70
|
|
|
|
$65
|
|
|
7.7
|
%
|
Pension settlement charge
|
—
|
|
|
|
$22
|
|
|
(100.0
|
)%
|
|
Other charges
|
|
$72
|
|
|
|
$51
|
|
|
41.2
|
%
|
Other income
|
|
($72
|
)
|
|
|
($109
|
)
|
|
(33.9
|
)%
|
|
Nine Months Ended
September 30 |
|
Percent Change
|
|||||||
($ in millions, except percentages)
|
2018
|
|
2017
|
|
2018 vs. 2017
|
|||||
|
|
|
As Restated
|
|
|
|||||
Income tax expense
|
|
$270
|
|
|
|
$391
|
|
|
(30.9
|
)%
|
Effective tax rate
|
20.0
|
%
|
|
24.0
|
%
|
|
(4.0
|
)%
|
||
Adjusted effective tax rate, continuing operations*
|
21.2
|
%
|
|
24.4
|
%
|
|
(3.2
|
)%
|
||
|
|
|
|
|
|
|||||
Earnings per diluted share, continuing operations
|
|
$4.32
|
|
|
|
$4.72
|
|
|
(8.5
|
)%
|
Adjusted earnings per diluted share*
|
|
$4.75
|
|
|
|
$4.66
|
|
|
1.9
|
%
|
*See Regulation G Reconciliation below
|
|
Nine Months Ended September 30, 2018
|
|||||||||||||||||
($ in millions, except percentages and per share amounts)
|
Income Before Income Taxes
|
|
Tax Expense
|
|
Effective Tax Rate
|
|
Net income from continuing operations (attributable to PPG)
|
|
Earnings per diluted share
|
|||||||||
As reported, continuing operations
|
|
$1,351
|
|
|
|
$270
|
|
|
20.0
|
%
|
|
|
$1,067
|
|
|
|
$4.32
|
|
Adjusted for:
|
|
|
|
|
|
|
|
|
|
|||||||||
Costs related to customer assortment change
|
18
|
|
|
4
|
|
|
24.3
|
%
|
|
14
|
|
|
0.05
|
|
||||
Environmental remediation charges
|
34
|
|
|
8
|
|
|
25.1
|
%
|
|
26
|
|
|
0.10
|
|
||||
Business restructuring, net
|
71
|
|
|
18
|
|
|
25.4
|
%
|
|
53
|
|
|
0.21
|
|
||||
Accelerated depreciation from restructuring actions
|
9
|
|
|
2
|
|
|
24.0
|
%
|
|
7
|
|
|
0.02
|
|
||||
Legacy legal settlement
|
10
|
|
|
2
|
|
|
24.3
|
%
|
|
8
|
|
|
0.03
|
|
||||
Accounting investigation costs
|
11
|
|
|
2
|
|
|
24.3
|
%
|
|
9
|
|
|
0.04
|
|
||||
Impairment of non-manufacturing asset
|
9
|
|
|
2
|
|
|
24.3
|
%
|
|
7
|
|
|
0.03
|
|
||||
Tax benefit related to U.S. Tax Cuts and Jobs Act
|
—
|
|
|
13
|
|
|
N/A
|
|
|
(13
|
)
|
|
(0.05
|
)
|
||||
Adjusted, continuing operations, excluding certain items
|
|
$1,513
|
|
|
|
$321
|
|
|
21.2
|
%
|
|
|
$1,178
|
|
|
|
$4.75
|
|
As Restated
|
Nine Months Ended September 30, 2017
|
|||||||||||||||||
($ in millions, except percentages and per share amounts)
|
Income Before Income Taxes
|
|
Tax Expense
|
|
Effective Tax Rate
|
|
Net income from continuing operations (attributable to PPG)
|
|
Earnings per share
|
|||||||||
As reported, continuing operations
|
|
$1,628
|
|
|
|
$391
|
|
|
24.0
|
%
|
|
|
$1,221
|
|
|
|
$4.72
|
|
Adjusted for:
|
|
|
|
|
|
|
|
|
|
|||||||||
Transaction-related costs
(1)
|
9
|
|
|
3
|
|
|
37.9
|
%
|
|
6
|
|
|
0.02
|
|
||||
Pension settlement charge
|
22
|
|
|
8
|
|
|
37.9
|
%
|
|
14
|
|
|
0.05
|
|
||||
Gain on sale of Plaka business
|
(25
|
)
|
|
(1
|
)
|
|
3.2
|
%
|
|
(24
|
)
|
|
(0.09
|
)
|
||||
Legacy legal settlement
|
(18
|
)
|
|
(7
|
)
|
|
37.9
|
%
|
|
(11
|
)
|
|
(0.04
|
)
|
||||
Adjusted, continuing operations, excluding certain items
|
|
$1,616
|
|
|
|
$394
|
|
|
24.4
|
%
|
|
|
$1,206
|
|
|
|
$4.66
|
|
(1)
|
Transaction-related costs include advisory, legal, accounting, valuation and other professional or consulting fees incurred to effect significant acquisitions, as well as similar fees and other costs to effect disposals not classified as discontinued operations.
|
|
Nine Months Ended
September 30 |
|
$ Change
|
|
% Change
|
|||||||||
($ in millions, except per share amounts)
|
2018
|
|
2017
|
|
2018 vs. 2017
|
|
2018 vs. 2017
|
|||||||
|
|
|
As Restated
|
|
|
|
|
|||||||
Net sales
|
|
$6,947
|
|
|
|
$6,606
|
|
|
|
$341
|
|
|
5.2
|
%
|
Segment income
|
|
$1,039
|
|
|
|
$1,054
|
|
|
|
($15
|
)
|
|
(1.4)
|
%
|
2018 vs. 2017
|
Performance Coatings net sales increased $341 million due to the following:
|
● Higher selling prices (+2%)
|
● Favorable foreign currency translation (+2%)
|
● Higher sales volumes (+1%)
|
Architectural coatings - Americas and Asia-Pacific sales volumes declined by a low-single-digit percentage versus the prior year. Sales volumes were positive year-over-year in the U.S. and Canada company-owned store network as well as in Mexico, Central America, Australia and Brazil. The increase was more than offset by lower DIY and independent dealer network channel declines, including the unfavorable impact from a previously communicated customer assortment change in the U.S. architectural DIY channel.
|
Architectural coatings - EMEA sales volumes decreased by a low-single-digit percentage year-over-year consistent with the market. Sales volumes were impacted by harsh weather in the first quarter and soft consumer demand in the retail channel in the second and third quarters.
|
Automotive refinish coatings organic sales grew by a low-single-digit percentage year-over-year, despite weakening demand in the U.S. Organic sales increased in all other geographic regions as customers adopted PPG's industry leading technologies.
|
Aerospace coatings sales volumes grew by low-teen-digit percentage versus the prior year, including above-market volume growth in the U.S. and Asia. Strong growth was supported by positive industry demand fundamentals and market outperformance in the U.S. from technology advantaged products.
|
Protective and marine coatings sales volumes increased by a low-single-digit percentage year-over-year. Protective coatings sales volumes were up, driven by growth in China, and marine coatings sales volumes were slightly higher than prior year.
|
Segment income decreased $15 million year-over-year driven by increasing raw material costs and wage and other cost inflation. These cost increases were partially offset by higher selling prices, lower manufacturing costs and further benefits from the Company's 2016 restructuring program. Favorable foreign currency translation increased segment income by approximately $20 million, primarily related to the strengthening of the Mexican peso and the euro.
|
|
Nine Months Ended
September 30 |
|
$ Change
|
|
% Change
|
|||||||||
($ in millions, except per share amounts)
|
2018
|
|
2017
|
|
2018 vs. 2017
|
|
2018 vs. 2017
|
|||||||
Net sales
|
|
$4,782
|
|
|
|
$4,460
|
|
|
|
$322
|
|
|
7.2
|
%
|
Segment income
|
|
$631
|
|
|
|
$765
|
|
|
|
($134
|
)
|
|
(17.5
|
)%
|
2018 vs. 2017
|
Industrial Coatings segment net sales increased $322 million due to the following:
|
● Higher sales volumes (+2%)
|
● Favorable foreign currency translation (+2%)
|
● Acquisition-related sales (+2%)
|
● Higher selling prices (+1%)
|
Automotive OEM coatings sales volumes were slightly higher versus the prior year, consistent with the global automotive industry growth rate. Automotive OEM coatings sales volume growth was strongest in Latin America.
|
Industrial coatings and specialty coatings and materials sales volumes, in aggregate, continued to grow driven by strong end-market demand for coil, heavy-duty equipment and electronics materials. From a geographic perspective, sales volume growth was led by EMEA, Latin America and Asia-Pacific. Acquisition-related sales from The Crown Group added approximately $100 million in sales during the first nine months of 2018.
|
Packaging coatings sales volumes were up a mid-single-digit percentage year-over-year driven by ongoing customer adoption of PPG's new can coating technologies. From a geographic perspective, sales volumes in the developed regions grew a mid-to-high-single-digit percentage, led by the U.S. and Canada and Europe. In the Asia-Pacific region, sales volumes decreased by a low-single-digit percentage.
|
Segment income decreased $134 million year-over-year primarily due to continuing significant raw material and logistics cost inflation, higher overhead costs and wage inflation, partially offset by higher selling prices and lower manufacturing costs, including benefits from business restructuring actions. Favorable foreign currency translation added $12 million to segment income.
|
•
|
Capital expenditures, excluding acquisitions, of
$226 million
.
|
•
|
Business acquisition cash spending of
$98 million
.
|
•
|
Contributions to pension plans of
$89 million
.
|
•
|
Cash dividends paid of
$338 million
.
|
•
|
Share repurchases of
$1,313 million
.
|
($ in millions, except percentages)
|
September 30, 2018
|
|
December 31, 2017
|
|
September 30, 2017
|
||||||
|
|
|
|
|
As Restated
|
||||||
Trade Receivables, Net
|
|
$2,864
|
|
|
|
$2,559
|
|
|
|
$2,760
|
|
Inventories, FIFO
|
2,075
|
|
|
1,833
|
|
|
1,909
|
|
|||
Trade Creditors’ Liabilities
|
2,346
|
|
|
2,321
|
|
|
2,255
|
|
|||
Operating Working Capital
|
|
$2,593
|
|
|
|
$2,071
|
|
|
|
$2,414
|
|
Operating Working Capital as a % of Sales
|
17.0
|
%
|
|
14.1
|
%
|
|
16.0
|
%
|
|||
Days sales outstanding
|
61
|
|
|
57
|
|
|
59
|
|
|||
Days payable outstanding
|
97
|
|
|
96
|
|
|
95
|
|
|
Three Months Ended
September 30 |
|
Nine Months Ended
September 30 |
||||||||||||
($ in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Cash outlays for environmental remediation activities
|
|
$14
|
|
|
|
$14
|
|
|
|
$45
|
|
|
|
$36
|
|
($ in millions)
|
Remainder
of 2018
|
|
Annually
2019 - 2022
|
||
Projected future cash outlays for environmental remediation activities
|
|
$18
|
|
|
$25 - $75
|
•
|
The Company has terminated the employment of the former Vice President and Controller.
|
•
|
Two employees who acted under the direction of the former Vice President and Controller have been re-assigned to different positions within the Company where they do not have a Financial Reporting Oversight Role or a role in the design or operation of internal control over financial reporting, disclosure controls or accounting policy.
|
•
|
The Company appointed its former Director of Corporate Audit Services and former Assistant Controller, Financial Reporting as Acting Controller and on July 19, 2018 appointed him the Company’s permanent Vice President and Controller.
|
•
|
The Company’s Chairman and Chief Executive Officer has emphasized to all employees, and to the Company’s finance employees specifically, the importance of acting ethically and adhering to the Company’s Global Code of Ethics.
|
•
|
The Company re-emphasized (1) its commitment to ethical standards, (2) the requirements of the Company’s Code of Ethics, (3) reporting obligations and (4) non-retaliation policy for complaints;
|
•
|
The Company enhanced its corporate finance department by adding personnel with responsibility for areas identified in the investigation and enhanced segregation of duties in the finance department;
|
•
|
The Company enhanced policies and procedures relating to the preparation, approval and entry of journal entries;
|
•
|
The Company enhanced its process to evaluate and adjust certain significant expense accruals;
|
•
|
The Company enhanced its policies and procedures relating to inventory standard cost revaluations;
|
•
|
The Company enhanced its policies and procedures concerning accounting entries related to discontinued operations;
|
•
|
The Company now requires additional annual/onboarding education for finance staff;
|
•
|
The Company will conduct additional periodic risk assessments and targeted internal audit reviews; and
|
•
|
The Company separated the financial forecasting process from financial accounting.
|
Month
|
Total Number of Shares Purchased
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Programs
(1)
|
|
Maximum Number of Shares That May Yet Be Purchased Under the Programs
(1)
|
|||||
July 2018
|
|
|
|
|
|
|
|
|||||
Repurchase program
|
—
|
|
|
|
$—
|
|
|
—
|
|
|
22,534,973
|
|
August 2018
|
|
|
|
|
|
|
|
|||||
Repurchase program
|
282,382
|
|
|
|
$110.76
|
|
|
282,382
|
|
|
22,276,485
|
|
September 2018
|
|
|
|
|
|
|
|
|||||
Repurchase program
|
1,949,018
|
|
|
|
$112.17
|
|
|
1,949,018
|
|
|
20,560,992
|
|
Total quarter ended September 30, 2018
|
|
|
|
|
|
|
|
|||||
Repurchase program
|
2,231,400
|
|
|
|
$111.99
|
|
|
2,231,400
|
|
|
20,560,992
|
|
(1)
|
In December 2017, PPG's board of directors approved a $2.5 billion share repurchase program. This program is in addition to the company’s share repurchase authorization, which was approved in October 2016. The remaining shares yet to be
|
†*10.1
|
|
|
†*10.2
|
|
|
†12
|
|
|
†31.1
|
|
|
†31.2
|
|
|
††32.1
|
|
|
††32.2
|
|
|
101.INS**
|
|
XBRL Instance Document
|
101.SCH**
|
|
XBRL Taxonomy Extension Schema Document
|
101.CAL**
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF**
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB**
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE**
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
PPG INDUSTRIES, INC.
|
|
|
|
|
(Registrant)
|
|
|
|
|
|
Date:
|
October 19, 2018
|
By:
|
|
/s/ Vincent J. Morales
|
|
|
|
|
Vincent J. Morales
|
|
|
|
|
Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Duly Authorized Officer)
|
|
|
|
|
|
|
|
By:
|
|
/s/ William E. Schaupp
|
|
|
|
|
William E. Schaupp
|
|
|
|
|
Vice President and Controller
(Principal Accounting Officer and Duly Authorized Officer)
|
•
|
A grant of $1,000,000 comprised of 1/3 stock options, 1/3 performance based RSUs and 1/3 TSRs. The RSUs and TSRs will vest in February 2021, while the stock options will vest in June 2021; and
|
•
|
A time-based RSU grant of $3,145,000 with a vesting schedule of: $1,075,000 in December 2019, $1,500,000 in December 2020, $420,000 in December 2022, and $150,000 in December 2023.
|
1.
|
You remain employed and perform at a successful or above level for the 12 month period following the effective date of the appointment;
|
2.
|
Your resignation is effective immediately following the expiration of the 12 month period; and
|
3.
|
You sign PPG’s standard separation agreement.
|
•
|
Background Check:
After you have electronically accepted our offer of employment, you will receive instructions to initiate your background check and drug screen. Please initiate this process as soon as possible as the link expires after 48 hours.
|
•
|
Medical History Review:
The information you provide on the PPG Medical History Questionnaire is used to determine whether there are any medical conditions that might restrict you from safely performing the essential functions of the position; and if so, whether accommodations to those restrictions can be made.
|
•
|
Employment Agreement:
Based on your position, you are required to complete an Employment Agreement. Execution of this agreement must be completed prior to your first day of employment. We encourage you to review the employee agreement by clicking on the employee agreement task prior to accepting this offer of employment. The Employment Agreement will supersede the terms of this letter, if at all inconsistent.
|
•
|
Employment Eligibility:
On your first day of employment you will be expected to provide proof of citizenship or other authorization to work in the United States.
|
•
|
Employment Agreement
|
•
|
PPG Benefits Information
|
•
|
Relocation Package Information
|
•
|
Background Check:
After you have electronically accepted our offer of employment, you will receive instructions to initiate your background check and drug screen. Please initiate this process as soon as possible as the link expires after 48 hours.
|
•
|
Medical History Review:
The information you provide on the PPG Medical History Questionnaire is used to determine whether there are any medical conditions that might restrict you from safely performing the essential functions of the position; and if so, whether accommodations to those restrictions can be made.
|
•
|
Employment Agreement:
Based on your position, you are required to complete an Employment Agreement. Execution of this agreement must be completed prior to your first day of employment. We encourage you to review the employee agreement by clicking on the employee agreement task prior to accepting this offer of employment. The Employment Agreement will supersede the terms of this letter, if at all inconsistent.
|
•
|
Employment Eligibility:
On your first day of employment you will be expected to provide proof of citizenship or other authorization to work in the United States.
|
•
|
Employment Agreement
|
•
|
PPG Benefits Information
|
•
|
Relocation Package
|
|
Nine Months Ended
September 30 |
|
Year Ended December 31
|
||||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||||
|
|
|
As Restated
|
|
As Restated
|
|
|
|
|
|
|
||||||||||||
Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Earnings before income taxes and net earnings in equity affiliates
|
$
|
1,337
|
|
|
$
|
1,988
|
|
|
$
|
767
|
|
|
$
|
1,735
|
|
|
$
|
1,216
|
|
|
$
|
1,177
|
|
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed charges exclusive of capitalized interest
|
157
|
|
|
200
|
|
|
215
|
|
|
210
|
|
|
278
|
|
|
280
|
|
||||||
Amortization of capitalized interest
|
5
|
|
|
6
|
|
|
5
|
|
|
5
|
|
|
5
|
|
|
4
|
|
||||||
Adjustments for equity affiliates
|
15
|
|
|
8
|
|
|
7
|
|
|
73
|
|
|
5
|
|
|
1
|
|
||||||
Total
|
$
|
1,514
|
|
|
$
|
2,202
|
|
|
$
|
994
|
|
|
$
|
2,023
|
|
|
$
|
1,504
|
|
|
$
|
1,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed Charges:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expense including amortization of debt discount/premium and debt expense
|
$
|
88
|
|
|
$
|
105
|
|
|
$
|
125
|
|
|
$
|
125
|
|
|
$
|
187
|
|
|
$
|
196
|
|
Rentals - portion representative of interest
|
69
|
|
|
95
|
|
|
90
|
|
|
85
|
|
|
91
|
|
|
84
|
|
||||||
Fixed charges exclusive of capitalized interest
|
157
|
|
|
200
|
|
|
215
|
|
|
210
|
|
|
278
|
|
|
280
|
|
||||||
Capitalized interest
|
3
|
|
|
7
|
|
|
8
|
|
|
9
|
|
|
16
|
|
|
10
|
|
||||||
Total
|
$
|
160
|
|
|
$
|
207
|
|
|
$
|
223
|
|
|
$
|
219
|
|
|
$
|
294
|
|
|
$
|
290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Ratio of earnings to fixed charges
|
9.5
|
|
|
10.6
|
|
|
4.5
|
|
|
9.2
|
|
|
5.1
|
|
|
5.0
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of PPG Industries, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
October 19, 2018
|
/s/ Michael H. McGarry
|
|
|
Michael H. McGarry
Chairman and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of PPG Industries, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
October 19, 2018
|
/s/ Vincent J. Morales
|
|
|
Vincent J. Morales
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of PPG Industries, Inc.
|
/s/ Michael H. McGarry
|
Michael H. McGarry
Chairman and Chief Executive Officer |
October 19, 2018
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of PPG Industries, Inc.
|
/s/ Vincent J. Morales
|
Vincent J. Morales
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
|
October 19, 2018
|