UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

~~________________________________________~~

~~FORM 10-Q~~

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

FORM 10-Q

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

☑ QUARTERLY REPORT ~~UNDER~~PURSUANT TO SECTION 13 orOR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For ~~Quarter Ended~~ the quarterly period ended: June 30, ~~2018~~2019

☐ 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~~ file number 1-1687

~~____________________________________________________________~~ ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

PPG INDUSTRIES ~~INC.~~INC.

(Exact name of registrant as specified in its charter)

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

25-0730780

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

Pennsylvania

(State or Other Jurisdiction of Incorporation or Organization)

One PPG Place, Pittsburgh, Pennsylvania

(Address of Principal Executive Offices)

15272

(Zip Code)

(412) 434-3131

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

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

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



~~Pennsylvania~~Title of each class	~~25-0730780~~Trading Symbol(s)	Name of each exchange on which registered
~~(State or other jurisdiction of~~ ~~incorporation or organization)~~Common Stock, par value $1.66 ^2/3	~~(I.R.S. Employer~~ ~~Identification No.)~~
PPG	New York Stock Exchange
~~One PPG Place, Pittsburgh, Pennsylvania~~0.000% Notes due 2019	~~15272~~
~~(Address of principal executive offices)~~PPG 19	~~(Zip Code)~~New York Stock Exchange
0.875% Notes due 2022	PPG 22	New York Stock Exchange
0.875% Notes due 2025	PPG 25	New York Stock Exchange
1.400% Notes due 2027	PPG 27	New York Stock Exchange

~~(412) 434-3131~~

~~(Registrant’s telephone number, including area code)~~

~~––––––––––––––––––––––––––––––––––––––––––––––––––––––~~

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

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yesý☑No¨☐

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



Large ~~accelerated filer~~Accelerated Filer	ý☑	Accelerated ~~filer~~Filer	o☐
Non-accelerated ~~filer~~Filer	o~~(Do not check if a smaller reporting company)~~☐	Smaller ~~reporting company~~Reporting Company	o☐
		Emerging ~~growth company~~Growth Company	o☐

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

Indicate by check mark whether the ~~Registrant~~registrant is a shell company (as defined in Rule 12b-2 of the ~~Exchange~~ Act). Yes¨☐Noý☑

As of June 30, ~~2018, 242,018,104~~2019, 236,292,889 shares of the Registrant’s common stock, par value $1.66 2/3 per share, were outstanding.

~~EXPLANATORY NOTE~~

As described in additional detail in the Explanatory Note to its amended Annual Report on Form 10-K/A for the year ended December 31, 2017 (the “2017 Form 10-K/A”), PPG Industries, Inc. (together with its subsidiaries, the "Company" or "PPG") restated its audited consolidated financial statements for the years ended December 31, 2017 and 2016 and certain unaudited quarterly results related to the quarters ended December 31, 2016, March 31, 2017, June 30, 2017, September 30, 2017 and December 31, 2017, including the six months ended June 30, 2017, in its 2017 Form 10-K/A as a result of certain misstatements identified by the Company. The impact of the restatement on the Company's condensed consolidated financial statements included herein is further described in Note 2, "~~Restatement of Previously Reported Condensed Consolidated Quarterly Financial Statements~~."

~~Table of Contents~~

PPG INDUSTRIES, INC. AND SUBSIDIARIES

INDEX

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Income (Unaudited)

($ in millions, except per share amounts)


	Three Months Ended June 30						Six Months Ended June 30
	2018			2017			2018			2017			Three Months Ended June 30						Six Months Ended June 30
				As Restated						As Restated			2019			2018			2019			2018
Net sales		$4,131			$3,804			$7,912			$7,290		$4,024				$4,131		$7,648				$7,912
Cost of sales, exclusive of depreciation and amortization	2,379			2,083			4,560			3,985			2,288			2,379			4,361			4,560
Selling, general and administrative	945			876			1,851			1,751			934			945			1,823			1,851
Depreciation	91			81			178			160			91			91			177			178
Amortization	34			32			70			63			35			34			67			70
Research and development, net	114			112			226			221			111			114			216			226
Interest expense	31			26			57			51			35			31			66			57
Interest income	(7		)	(4		)	(12		)	(8		)	(7		)	(7		)	(13		)	(12		)
Pension settlement charge	—			—			—			22
Business restructuring	83			—			83			—
Business restructuring, net													176			83			173			83
Other charges	6			8			47			33			29			6			43			47
Other income	(24		)	(69		)	(48		)	(93		)	(31		)	(24		)	(47		)	(48		)
Income from continuing operations before income taxes		$479			$659			$900			$1,105
Income before income taxes														$363			$479			$782			$900
Income tax expense	104			157			191			267			86			104			188			191
Income from continuing operations		$375			$502			$709			$838			$277			$375			$594			$709
(Loss)/Income from discontinued operations, net of tax	—			(1		)	6			5
Income from discontinued operations, net of tax													2			—			2			6
Net income attributable to controlling and noncontrolling interests		$375			$501			$715			$843			$279			$375			$596			$715
Less: Net income attributable to noncontrolling interests	(4		)	(5		)	(10		)	(10		)	(7		)	(4		)	(12		)	(10		)
Net income (attributable to PPG)		$371			$496			$705			$833			$272			$371			$584			$705
Amounts attributable to PPG:
Income from continuing operations, net of tax		$371			$497			$699			$828			$270			$371			$582			$699
(Loss)/Income from discontinued operations, net of tax	—			(1		)	6			5
Income from discontinued operations, net of tax													2			—			2			6
Net income (attributable to PPG)		$371			$496			$705			$833			$272			$371			$584			$705

Earnings per common share:
Income from continuing operations, net of tax		$1.51			$1.93			$2.83			$3.22			$1.14			$1.51			$2.46			$2.83
Income from discontinued operations, net of tax	—			—			0.02			0.02			0.01			—			0.01			0.02
Net income (attributable to PPG)		$1.51			$1.93			$2.85			$3.24			$1.15			$1.51			$2.47			$2.85
Earnings per common share – assuming dilution:
Income from continuing operations, net of tax		$1.51			$1.92			$2.81			$3.19			$1.13			$1.51			$2.44			$2.81
Income from discontinued operations, net of tax	—			—			0.02			0.02			0.01			—			0.01			0.02
Net income (attributable to PPG)		$1.51			$1.92			$2.83			$3.21			$1.14			$1.51			$2.45			$2.83

Dividends per common share		$0.45			$0.40			$0.90			$0.80

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

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Comprehensive Income (Unaudited)

($ in millions)


	Three Months Ended June 30						Six Months Ended June 30
	2018			2017			2018			2017			Three Months Ended June 30						Six Months Ended June 30
				As Restated						As Restated			2019			2018			2019			2018
Net income attributable to the controlling and noncontrolling interests		$375			$501			$715			$843			$279			$375			$596			$715
Other comprehensive (loss) income, net of tax:
Defined benefit pension and other postretirement benefits	15			(55		)	(52		)	(34		)	12			15			6			32
Unrealized foreign currency translation adjustments	(297		)	82			(174		)	361			(15		)	(297		)	66			(151		)
Derivative financial instruments	2			(4		)	—			(17		)	(1		)	2			(1		)	—
Other comprehensive (loss) income, net of tax		($280	)		$23			($226	)		$310			($4	)		($280	)		$71			($119	)
Total comprehensive income		$95			$524			$489			$1,153			$275			$95			$667			$596
Less: amounts attributable to noncontrolling interests:
Net income	(4		)	(5		)	(10		)	(10		)	(7		)	(4		)	(12		)	(10		)
Unrealized foreign currency translation adjustments	10			(6		)	8			(13		)	(2		)	10			(1		)	8
Comprehensive income attributable to PPG		$101			$513			$487			$1,130			$266			$101			$654			$594

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

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheet (Unaudited)

($ in millions)


	June 30, 2018			December 31, 2017
							June 30, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents		$1,020			$1,436			$963			$902
Short-term investments	63			55			53			61
Receivables (less allowance for doubtful accounts of $23 and $25)	3,438			2,903
Receivables (less allowance for doubtful accounts of $26 and $24)							3,332			2,845
Inventories	1,956			1,730			1,945			1,783
Other	402			353
Other current assets							414			370
Total current assets		$6,879			$6,477			$6,707			$5,961
Property, plant and equipment (net of accumulated depreciation of $3,848 and $3,770)	2,738			2,824
Property, plant and equipment (net of accumulated depreciation of $3,963 and $3,828)							2,929			2,805
Goodwill	3,920			3,942			4,312			4,070
Identifiable intangible assets, net	1,986			2,045			2,081			1,972
Deferred income taxes	290			305			199			229
Investments	258			268			251			251
Operating lease right-of-use assets (Note 3)							731			—
Other assets	723			677			745			727
Total		$16,794			$16,538			$17,955			$16,015
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities		$3,893			$3,781			$3,746			$3,623
Restructuring reserves	132			102			139			99
Short-term debt and current portion of long-term debt	22			12			654			651
Current portion of operating lease liabilities (Note 3)							167			—
Total current liabilities		$4,047			$3,895			$4,706			$4,373
Long-term debt	5,048			4,134			4,845			4,365
Operating lease liabilities (Note 3)							572			—
Accrued pensions	674			729			637			645
Other postretirement benefits	688			699			621			629
Deferred income taxes	425			442			382			429
Other liabilities	929			967			1,005			842
Total liabilities		$11,811			$10,866			$12,768			$11,283
Commitments and contingent liabilities (Note 17)
Commitments and contingent liabilities (Note 15)
Shareholders’ equity:
Common stock	969			969			969			969
Additional paid-in capital	769			756			913			788
Retained earnings	17,725			17,140			18,488			18,131
Treasury stock, at cost	(12,304		)	(11,251		)	(13,061		)	(12,958		)
Accumulated other comprehensive loss	(2,275		)	(2,057		)	(2,230		)	(2,300		)
Total PPG shareholders’ equity		$4,884			$5,557			$5,079			$4,630
Noncontrolling interests	99			115			108			102
Total shareholders’ equity		$4,983			$5,672			$5,187			$4,732
Total		$16,794			$16,538			$17,955			$16,015

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

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Shareholders' Equity (Unaudited)

($ in millions)



	Common Stock		Additional Paid-In Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive (Loss)/Income			Total PPG			Non-controlling Interests			Total
January 1, 2019		$969		$788			$18,131			($12,958	)		($2,300	)		$4,630			$102			$4,732
Net income attributable to the controlling and noncontrolling interests	—		—			312			—			—			312			5			317
Other comprehensive income, net of tax	—		—			—			—			76			76			(1		)	75
Cash dividends	—		—			(113		)	—			—			(113		)	—			(113		)
Purchase of treasury stock	—		—			—			(175		)	—			(175		)	—			(175		)
Issuance of treasury stock	—		121			—			63			—			184			—			184
Stock-based compensation activity	—		(10		)	—			—			—			(10		)	—			(10		)
March 31, 2019		$969		$899			$18,330			($13,070	)		($2,224	)		$4,904			$106			$5,010
Net income attributable to the controlling and noncontrolling interests	—		—			272			—			—			272			7			279
Other comprehensive income, net of tax	—		—			—			—			(6		)	(6		)	2			(4		)
Cash dividends	—		—			(114		)	—			—			(114		)	—			(114		)
Issuance of treasury stock	—		7			—			9			—			16			—			16
Stock-based compensation activity	—		7			—			—			—			7			—			7
Dividends paid on subsidiary common stock to noncontrolling interests	—		—			—			—			—			—			(5		)	(5		)
Reductions in noncontrolling interests	—		—			—			—			—			—			(2		)	(2		)
June 30, 2019		$969		$913			$18,488			($13,061	)		($2,230	)		$5,079			$108			$5,187

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

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Shareholders' Equity (Unaudited)

($ in millions)



	Common Stock		Additional Paid-In Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive (Loss)/Income			Total PPG			Non-controlling Interests			Total
January 1, 2018		$969		$756			$17,140			($11,251	)		($2,057	)		$5,557			$115			$5,672
Net income attributable to the controlling and noncontrolling interests	—		—			334			—			—				$334		6				$340
Other comprehensive loss, net of tax	—		—			—			—			159				$159		2				$161
Cash dividends	—		—			(112		)	—			—				($112	)	—				($112	)
Purchase of treasury stock	—		—			—			(600		)	—				($600	)	—				($600	)
Issuance of treasury stock	—		24			—			7			—				$31		—				$31
Stock-based compensation activity	—		(19		)	—			—			—				($19	)	—				($19	)
Reductions in noncontrolling interests	—		—			—			—			—				$—		(2		)		($2	)
Reclassification from other comprehensive income to retained earnings - Adoption of ASU 2018-02	—		—			107			—			(107		)		$—		—				$—
Adjustment to retained earnings - Adoption of ASU 2016-16	—		—			(4		)	—			—				($4	)	—				($4	)
March 31, 2018		$969		$761			$17,465			($11,844	)		($2,005	)		$5,346			$121			$5,467
Net income attributable to the controlling and noncontrolling interests	—		—			371			—			—			371			4			375
Other comprehensive loss, net of tax	—		—			—			—			(270		)	(270		)	(10		)	(280		)
Cash dividends	—		—			(110		)	—			—			(110		)	—			(110		)
Purchase of treasury stock	—		—			—			(463		)	—			(463		)	—			(463		)
Issuance of treasury stock	—		1			—			2			—			3			—			3
Stock-based compensation activity	—		7			—			—			—			7			—			7
Dividends paid on subsidiary common stock to noncontrolling interests	—		—			—			—			—			—			(2		)	(2		)
Reductions in noncontrolling interests	—		—			—			—			—			—			(14		)	(14		)
June 30, 2018		$969		$769			$17,726			($12,305	)		($2,275	)		$4,884			$99			$4,983

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

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Cash Flows (Unaudited)


	Six Months Ended June 30						Six Months Ended June 30
($ in millions)	2018			2017			2019			2018
				As Restated
Operating activities:
Net income attributable to controlling and noncontrolling interests		$715			$843			$596			$715
Less: Income from discontinued operations	(6		)	(5		)	(2		)	(6		)
Income from continuing operations		$709			$838			$594			$709
Adjustments to reconcile net income to cash from operations:
Depreciation and amortization	248			223			244			248
Pension expense	20			34			25			20
Pension settlement charge	—			22
Environmental remediation charges	34			—
Business restructuring charge	83			—
Environmental remediation charges, net							40			34
Business restructuring, net							173			83
Impairment of a non-manufacturing asset	9			—			—			9
Stock-based compensation expense	18			17			19			18
Gain from the sale of a business	—			(25		)
Equity affiliate loss, net of dividends	6			3			6			6
Deferred income tax benefit	(13		)	(40		)	(7		)	(13		)
Cash contributions to pension plans	(35		)	(37		)	(6		)	(35		)
Cash used for restructuring actions	(34		)	(20		)	(23		)	(34		)
Change in certain asset and liability accounts:
Receivables	(626		)	(406		)	(431		)	(626		)
Inventories	(270		)	(185		)	(97		)	(270		)
Other current assets	(5		)	(49		)	(70		)	(5		)
Accounts payable and accrued liabilities	198			147			60			198
Taxes and interest payable	(130		)	(128		)	(21		)	(130		)
Noncurrent assets and liabilities, net	(30		)	(14		)	(10		)	(30		)
Other	(51		)	52			(10		)	(51		)
Cash from operating activities - continuing operations		$131			$432			$486			$131
Cash from operating activities - discontinued operations	—			14
Cash used for operating activities - discontinued operations							(4		)	—
Cash from operating activities		$131			$446			$482			$131
Investing activities:
Capital expenditures	(118		)	(135		)	(133		)	(118		)
Business acquisitions, net of cash balances acquired	(98		)	(62		)	(361		)	(98		)
Payments for acquisition of equity investment	—			(100		)
Proceeds from the disposition of a business	—			52
Payments for the settlement of cross currency swap contracts	(17		)	(34		)	(6		)	(17		)
Proceeds from the settlement of cross currency swap and foreign currency contracts	3			19
Proceeds from the settlement of cross currency swap							19			3
Other	13			2			24			13
Cash used for investing activities - continuing operations		($217	)		($258	)
Cash used for investing activities - discontinued operations	—			(3		)
Cash used for investing activities		($217	)		($261	)		($457	)		($217	)
Financing activities:
Net change in borrowing with maturities of three months or less	11			(3		)	6			11
Net payments on commercial paper and short-term debt	(1		)	(61		)
Net proceeds/(payments) on commercial paper and short-term debt							470			(1		)
Proceeds from the issuance of debt, net of discounts and fees	992			—			—			992
Repayment of long-term debt	(3		)	(8		)	(2		)	(3		)
Repayment of acquired debt							(23		)	—
Purchase of treasury stock	(1,063		)	(163		)	(175		)	(1,063		)
Issuance of treasury stock	10			20			22			10
Dividends paid	(222		)	(205		)	(227		)	(222		)
Payments related to tax withholding on stock-based compensation awards	(13		)	(20		)	(12		)	(13		)
Other	(16		)	(50		)	(27		)	(16		)
Cash used for financing activities		($305	)		($490	)
Cash from/(used for) financing activities								$32			($305	)
Effect of currency exchange rate changes on cash and cash equivalents	(25		)	54			4			(25		)
Net decrease in cash and cash equivalents		($416	)		($251	)		$61			($416	)
Cash and cash equivalents, beginning of period	1,436			1,820			902			1,436
Cash and cash equivalents, end of period		$1,020			$1,569			$963			$1,020

Supplemental disclosures of cash flow information:
Interest paid, net of amount capitalized		$53			$52			$68			$53
Taxes paid, net of refunds		$234			$326			$194			$234

Supplemental disclosure of noncash investing activities:
Reissuance of common stock for business acquisition								$164			$—

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

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)


1.	Basis of Presentation

The condensed consolidated financial statements included herein are unaudited and have been prepared following the requirements of the Securities and Exchange ~~Committee~~Commission (the "SEC") and accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim reporting. Under these rules, certain footnotes and other financial information that are normally required for annual financial statements can be condensed or omitted. These statements include all adjustments, consisting only of normal, recurring adjustments, necessary for a fair presentation of the financial position and shareholders' equity of PPG as of June 30, ~~2018,~~2019, and the results of its operations and cash flows for the three and six months ended June 30, ~~2018~~2019 and ~~2017.~~2018. All intercompany balances and transactions have been eliminated. Material subsequent events are evaluated through the report issuance date and disclosed where applicable. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in PPG's ~~2017~~2018 Annual Report on Form ~~10-K/A~~ 10-K (the "2018 Form 10-K").

Net sales, expenses, assets and liabilities can vary during each quarter of the year. Accordingly, the results of operations for the three and six months ended June 30, ~~2018~~2019 and the trends in these unaudited condensed consolidated financial statements may not necessarily be indicative of the results to be expected for the full year.

Certain prior period amounts have been reclassified to conform to the current period presentation and reflect the adoption of certain accounting standard updates, including the information presented for our reportable segments. These reclassifications had no impact on our previously reported net income, total assets, cash flows or shareholders’ equity.


2.	~~Restatement of Previously Reported Condensed Consolidated Quarterly Financial Statements~~New Accounting Standards

~~As described~~Accounting Standards Adopted in ~~additional detail~~2019

Effective January 1, 2019, PPG adopted Accounting Standards Update (“ASU”) No. 2016-02, "Leases." This ASU requires substantially all leases be recorded on the balance sheet as right of use assets and lease obligations. The Company adopted the ASU using a retrospective adoption method at January 1, 2019, as outlined in the Explanatory Note to its 2017 Form 10-K/A, the Company restated its audited consolidated financial statements for the years ended December 31, 2017 and 2016 and certain unaudited quarterly results relatedASU No. 2018-11, "Leases - Targeted Improvements." Under this method of adoption, there is no impact to the ~~quarters ended December 31, 2016, March 31, 2017, June 30, 2017, September 30, 2017 and December 31, 2017, including the six months ended June 30, 2017.~~

On April 16, 2018, PPG received a report through the Company’s internal reporting system alleging violations of the Company’s accounting policies and procedures regarding the failure to accrue certain specified expenses in the first quarter of 2018. Based on the Company’s initial review at that time, the Company identified approximately $1.4 million of expenses (including legal fees, property taxes and performance-based compensation) that should have been accrued in the first quarter of 2018 and that were then reflected in PPG’s earnings for the quarter ended March 31, 2018, released on April 19, 2018. In addition, the report alleged that there may have been other unspecified expenses, potentially up to $5 million in the aggregate, that were improperly not accrued in the first quarter.

The Audit Committee of the Board of Directors (the "Audit Committee") oversaw an investigation of the matters set forth in the internal report, with the assistance of outside counsel and forensic accountants. The investigation identified the following items with respect to the quarter ended March 31, 2018, in addition to the approximately $1.4 million of expenses described above: (1) failure to record amortization expense in the amount of $1.4 million to correct for amortization of an intangible asset that was inadvertently not recorded over a three-year period and discovered in March 2018; (2) understatement of a health insurance accrued liability in the amount of $0.5 million; and (3) failure to record an adjustment increasing the value of inventory in PPG’s Europe, Middle East and Africa region in the amount of $2.2 million due to inflation of raw materials costs which, when corrected, had a positive effect on income in the first quarter of 2018. These three items resulted in a net increase to income from continuing operations before income taxes of approximately $0.3 million.

The investigation also identified certain inadvertent errors with respect to the quarter ended March 31, 2018. Correction of such inadvertent errors, together with the matters discussed in the immediately preceding paragraph, resulted in a net decrease in income from continuing operations before income taxes of $5.7 million for the quarter ended March 31, 2018.

The investigation identified the following items with respect to the year ended December 31, 2017: (1) improper reclassifications of gains from income from discontinued operations to income from continuing operations in total pre-tax amounts of $2.5 million in the quarter ended June 30, 2017 and $4.7 million in the quarter ended December 31, 2017; (2) improper shifting of pre-tax expenses between quarterly periods in 2017, including a total of $3.5 million in compensation expense recorded in the third and fourth quarters of 2017 that should have been recorded in the quarter ended June 30, 2017; an additional expense accrual for health care claims in the amount of $3.5 million recorded in

the third quarter of 2017 that should have been recorded in the quarter ended June 30, 2017; and additional expense for paid vacation in the amount of $2.2 million recorded in the quarter ended December 31, 2017 that should have been recorded in the second and third quarters of 2017.

The investigation also identified an improper reduction in the payout assumption for certain performance-based restricted stock units that had the impact of recognizing a $6.8 million reduction in stock based compensation expense in the fourth quarter of 2016. In the first quarter of 2017, the payout assumption for these same performance-based restricted stock units was increased, resulting in $6.8 million of stock-based compensation expense in the first quarter of 2017 that would not have been recorded if the payout assumption had not been reduced in the fourth quarter of 2016.

On May 10, 2018, management, in consultation with the Audit Committee and the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP ("PwC"), concluded that the Company’s consolidated financial statements for the year ended December 31, 2017 included in the Company's originally filed 2017 Annual Report on Form 10-K and the related report of PwC, and for the quarterly and year-to-date periods in 2017, should no longer be relied upon because of certain misstatements contained in those financial statements.

On June 27, 2018, the Audit Committee determined that its investigation was complete, and authorized the filing of our restated audited consolidated financial statements for the years ended December 31, 2017 and 2016 and certain quarterly periods within those fiscal years in order to correct our previously issued financial statements.

~~Impact of the Restatement~~

As a result of the restatement, reported net income from continuing operations and earnings per diluted share from continuing operations was adjusted for the interim period ended June 30, 2017 as follows:

For the quarter ended June 30, 2017, net income from continuing operations decreased $7 million, or $0.03 per diluted share, and income from discontinued operations, net of tax, increased by $2 million, or $0.01 per diluted share.

For the six months ended June 30, 2017, net income from continuing operations decreased $4 million, or $0.02 per diluted share, and income from discontinued operations, net of tax, increased by $2 million, or$0.01 per diluted share.

~~The categories of misstatements and their impact on previously reported condensed consolidated financial statements are described below:~~


~~(a)~~	~~Customer Rebates~~

The Company did not properly recognize expense associated with certain customer rebates, resulting in a misstatement of Net sales in the first and second quarters of 2017. The misstatements overstated previously reported Income from continuing operations before income taxes by $1.4 million and $1.8 million for the three and six months ended June 30, 2017, respectively.


~~(b)~~	~~Employee Vacation Pay~~

The Company did not properly recognize expense associated with a change in the Company’s vacation policy in the second and third quarters of 2017. Rather, the entire amount of expense associated with this change was recognized in the fourth quarter of 2017, resulting in a misstatement of expense in the second, third and fourth quarters of 2017. The misstatements overstated previously reported Income from continuing operations before income taxes by $0.9 million for the three and six months ended June 30, 2017.


~~(c)~~	~~Compensation Expense~~

The Company did not properly record compensation expense related to a payment made to an employee upon his separation from the Company in the second quarter of 2017. Rather, the expense associated with this payment was recognized in the second, third and fourth quarters of 2017 resulting in a misstatement of expense in each of these periods. The misstatements overstated previously reported Income from continuing operations before income taxes by $3.5 million for the three and six months ended June 30, 2017.


~~(d)~~	~~Health Care Claims~~

The Company did not properly recognize expense associated with the Company’s liability for employee health care claims in the second quarter of 2017. Rather, this expense was recognized in the third quarter of 2017, resulting in a misstatement of expense in the second and third quarters of 2017. The misstatements overstated previously reported Income from continuing operations before income taxes by $3.5 million for the three and six months ended June 30, 2017.


~~(e)~~	~~Classification of Continuing Operations and Discontinued Operations~~

Certain items of income related to PPG’s former Glass segment were inappropriately recorded in continuing operations rather than in discontinued operations. The misstatements overstated previously reported Income from continuing operations before income taxes by $2.5 million for the three and six months ended June 30, 2017. The misstatements understated previously recorded Income from discontinued operations, net of tax, by $1.5 million for the three and six months ended June 30, 2017.


~~(f)~~	~~Stock-Based Compensation~~

In the fourth quarter of 2016, the Company improperly reduced the payout assumption for the 2015 grant of performance-based restricted stock units from 150% to 100%, which had the effect of reducing stock-based compensation expense in that period by $6.8 million. In the first quarter of 2017, the Company increased the payout assumption for these same restricted stock units from 100% back to 150%. These improper changes to the payout assumption for these restricted stock units resulted in a misstatement of stock-based compensation expense in the first quarter of 2017. The misstatements understated previously reported Income from continuing operations before income taxes by $6.8 million for the six months ended June 30, 2017.


~~(g)~~	~~Environmental Reserve~~

In the first quarter of 2017, the Company failed to appropriately update the discount rate used to calculate a long-term environmental remediation reserve, which had the effect of understating Other expense by $0.5 million in the quarter. The misstatement overstated previously reported Income from continuing operations before taxes by $0.5 million for the six months ended June 30, 2017.


~~(h)~~	~~Income Taxes~~

~~Adjustments related to the income tax effects of other restatement adjustments noted above.~~

The financial statements included in this Form 10-Q have been restated to reflect the adjustments described above. The tables below summarizes the effects of the restatement on the Condensed Consolidated Statements of Income for the three and six months ended June 30, 2017.

~~Condensed Consolidated Statement of Income (unaudited) - Summary of Restatement~~

Three Months Ended
June 30, 2017
As Previously Reported Restatement Adjustment Reference As Restated
Net sales
$3,806

($2 ) (a)
$3,804
Selling, general and administrative 865
7
(b),(c),(d) 872
Other income (72 ) 3
(e) (69 )

Income from continuing operations before income taxes
$671

($12 )
$659
Income tax expense 162
(5 ) (h) 157
Income from continuing operations
$509

($7 )
$502
Loss from discontinued operations, net of tax (3 ) 2
(e) (1 )
Net income attributable to the controlling and noncontrolling interests
$506

($5 )
$501
Less: Net income attributable to noncontrolling interests (5 ) —
(5 )
Net income (attributable to PPG)
$501

($5 )
$496
Amounts attributable to PPG:
Income from continuing operations, net of tax
$504

($7 )
$497
Loss from discontinued operations, net of tax (3 ) 2
(1 )
Net income (attributable to PPG)
$501

($5 )
$496

Earnings per common share:
Income from continuing operations, net of tax
$1.96

($0.03 )
$1.93
Loss from discontinued operations, net of tax (0.01 ) 0.01
—
Net income (attributable to PPG)
$1.95

($0.02 )
$1.93
Earnings per common share – assuming dilution:
Income from continuing operations, net of tax
$1.95

($0.03 )
$1.92
Loss from discontinued operations, net of tax (0.01 ) 0.01
—
Net income (attributable to PPG)
$1.94

($0.02 )
$1.92

Dividends per common share
$0.40

$—

$0.40

Six Months Ended
June 30, 2017
As Previously Reported Restatement Adjustment Reference As Restated
Net sales
$7,292

($2 ) (a)
$7,290
Selling, general and administrative 1,753
1
(b),(c),(d),(f) 1,754
Other charges 26
—
(g) 26
Other income (96 ) 3
(e) (93 )

Income from continuing operations before income taxes
$1,111

($6 )
$1,105
Income tax expense 269
(2 ) (h) 267
Income from continuing operations
$842

($4 )
$838
Income from discontinued operations, net of tax 3
2
(e) 5
Net income attributable to the controlling and noncontrolling interests
$845

($2 )
$843
Less: Net income attributable to noncontrolling interests (10 ) —
(10 )
Net income (attributable to PPG)
$835

($2 )
$833
Amounts attributable to PPG:
Income from continuing operations, net of tax
$832

($4 )
$828
Income from discontinued operations, net of tax 3
2
5
Net income (attributable to PPG)
$835

($2 )
$833

Earnings per common share:
Income from continuing operations, net of tax
$3.23

($0.01 )
$3.22
Income from discontinued operations, net of tax 0.01
0.01
0.02
Net income (attributable to PPG)
$3.24

$—

$3.24
Earnings per common share – assuming dilution:
Income from continuing operations, net of tax
$3.21

($0.02 )
$3.19
Income from discontinued operations, net of tax 0.01
0.01
0.02
Net income (attributable to PPG)
$3.22

($0.01 )
$3.21

Dividends per common share
$0.80

$—

$0.80

~~Quarterly Condensed Consolidated Statement of Comprehensive Income (unaudited) - Summary of Restatement~~

~~In the~~comparative condensed consolidated statement of ~~comprehensive~~ income ~~for~~and condensed consolidated balance sheet. PPG determined that there was no cumulative-effect adjustment to beginning Retained earnings on the ~~three~~condensed consolidated balance sheet. PPG will continue to report periods prior to January 1, 2019 in its financial statements under prior guidance as outlined in Accounting Standards Codification Topic 840, "Leases". In addition, PPG elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed carry forward of historical lease classifications.

Adoption of this standard did not materially impact PPG’s Income before income taxes and ~~six months ended June 30, 2017, Net income attributable to the controlling and noncontrolling interests reflects the impact of the restatement adjustments. The restatement adjustments~~ had no impact ~~to the previously disclosed components of Other comprehensive income, net of tax.~~

~~Quarterly Condensed Consolidated Statement of Cash Flows (unaudited) - Summary of Restatement~~

~~There was no net impact of the restatement adjustments~~ on ~~net cash provided by operating activities, net cash provided by investing activities or net cash used in financing activities in~~ the condensed consolidated statement of cash ~~flows~~flows. See Note 3, “Leases” for ~~the six months ended June 30, 2017. The adjustments only had an impact on certain captions within cash from operating activities.~~further details.


3.	~~New Accounting Standards~~

Accounting Standards to be Adopted in ~~2018~~

Effective January 1, 2018, PPG adopted Accounting Standard Updates (“ASU”) No. 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." This ASU requires the service cost component of these costs to be disaggregated from all other components and to be reported in the same line item or items as other compensation costs. The other components of these costs are required to be presented in the income statement separately from the service cost component. This ASU required retrospective adoption for all prior periods presented.

~~The effect of the retrospective adoption on the condensed consolidated statement of income related to the net periodic pension and other postretirement benefit costs was as follows:~~

Three Months Ended June 30, 2017
($ in millions)
As Previously Reported⁽¹⁾
Reclassifications As Revised
Cost of sales, exclusive of depreciation and amortization
$2,082

$1

$2,083
Selling, general and administrative 872
4
876
Research and development, net 113
(1 ) 112
Other charges 12
(4 ) 8
Income from continuing operations before income taxes 659
—
659

Six Months Ended June 30, 2017
($ in millions)
As Previously Reported ⁽¹⁾
Reclassifications As Revised
Cost of sales, exclusive of depreciation and amortization
$3,987

($2 )
$3,985
Selling, general and administrative 1,754
(3 ) 1,751
Research and development, net 223
(2 ) 221
Other charges 26
7
33
Income from continuing operations before income taxes 1,105
—
1,105

~~(1) Previously reported amounts reflect the impact of the restatement as described in Note 2, "Restatement of Previously Reported Condensed Consolidated Quarterly Financial Statements" and in the 2017 Form 10-K/A~~Future Years

In ~~February~~August 2018, the Financial Accounting Standards Board ~~(“FASB”~~("FASB") issued ASU No. ~~2018-02, “Reclassification of Certain Tax Effects from Accumulated~~2018-15, "Intangibles - Goodwill and Other ~~Comprehensive Income.”~~- Internal-Use Software." This ASU ~~allows~~requires capitalization of certain implementation costs incurred in a ~~reclassification from Accumulated other comprehensive income to Retained earnings~~cloud computing arrangement that is a service contract. The amendments in this ASU are effective for ~~stranded tax effects resulting from the Tax Cuts~~fiscal years beginning after December 15, 2019 and ~~Jobs Act.~~for interim periods therein with early adoption permitted. PPG ~~early adopted~~does not believe this ~~standard in the first quarter of 2018 using the specific identification method and recorded a reclassification from other comprehensive income to retained earnings of $107 million.~~

~~Effective January 1, 2018, PPG adopted~~ ASU ~~No. 2014-09, “Revenue from Contracts with Customers: Topic 606.” See Note 4, “Revenue Recognition” for further details regarding the impact of adoption of this standard.~~

~~PPG’s adoption of the following ASU's in 2018 did not~~will have a ~~significant~~material impact on ~~PPG's~~its consolidated financial position, results of operations or cash ~~flows:~~



~~Accounting Standard Update~~
~~2017-12~~	~~Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities~~
~~2017-09~~	~~Stock Compensation - Scope of Modification Accounting~~
~~2016-16~~	~~Intra-Entity Transfers of Assets Other Than Inventory~~
~~2016-05~~	~~Classification of Certain Cash Receipts and Cash Payments~~
~~2016-01~~	~~Recognition and Measurement of Financial Assets and Liabilities~~

~~Accounting Standards to be Adopted in Future Years~~flows.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses.” This ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019 and for interim periods therein. Entities may choose to

adopt the new ASU as of its fiscal year beginning after December 15, 2018. PPG did not early adopt this standard. PPG does not believe this ASU will have a material impact on its consolidated financial position, results of operations or cash flows.

~~In February 2016,~~


3.	Leases

PPG leases certain retail paint stores, warehouses, distribution facilities, office space and equipment, including fleet vehicles. PPG determines if a contract is a lease at the ~~FASB issued ASU No. 2016-02, “Leases.” This ASU requires~~inception of the arrangement. PPG reviews all ~~lessees~~options to ~~recognize~~extend, terminate, or purchase its right of use assets at the inception of the lease and accounts for these options when they are reasonably certain of being exercised. Certain real estate leases contain lease and non-lease components, which are accounted for separately. For certain equipment leases, lease and non-lease components are accounted for as a single lease component.

Leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance ~~sheet right to use~~sheet. Lease expense for these leases is recognized on a straight-line basis over the lease term.

The components of lease expense were as follows:



($ in millions)	Classification in the Condensed Consolidated Statement of Income	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Operating lease cost	Cost of sales, exclusive of depreciation and amortization		$9		$18
Operating lease cost	Selling, general and administrative	49		97
Total operating lease cost			$58		$115
Finance lease cost:
Amortization of right-of-use assets	Depreciation		$—		$1
Interest on lease liabilities	Interest Expense	1		1
Total finance lease cost			$1		$2
Total lease cost			$59		$117

Total operating lease cost is inclusive of the following:



($ in millions)	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Variable lease costs		$3		$7
Short-term lease costs		$2		$3

Variable lease expense is based on contractual arrangements with PPG’s lessors determined based on external indices or other relevant market factors. In addition, PPG’s variable lease expense also includes elements of a contract that do not represent a good or service but for which the lessee is responsible for paying.



($ in millions)	Classification on the Condensed Consolidated Balance Sheet	June 30, 2019
Assets:
Operating	Operating lease right-of-use assets		$731
Finance ^(a)	Property, plant, and equipment	20
Total leased assets			$751
Liabilities:
Current
Operating	Current portion of operating lease liabilities		$167
Finance	Short-term debt and current portion of long-term debt	3
Noncurrent
Operating	Operating lease liabilities	572
Finance	Long-term debt	9
Total lease liabilities			$751


(a)	Net of accumulated depreciation of $11 million.



($ in millions)	Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		$105
Operating cash flows from finance leases		$—
Financing cash flows from finance leases		$3
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		$80
Finance leases		$1



	As of June 30, 2019
Weighted-average remaining lease term (in years)
Operating leases	7.4
Finance leases	6.1
Weighted-average discount rate
Operating leases	3.2	%
Finance leases	9.1	%

Nearly all of PPG’s lease contracts do not provide a readily determinable implicit rate. For these contracts, PPG’s estimated incremental borrowing rate is based on information available at the inception of the lease.

As of June 30, 2019, maturities of lease liabilities for the rights and obligations created by lease arrangements with terms greater than 12 months. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and for interimwere as follows:



($ in millions)	Operating Leases		Finance Leases
Remaining six months of 2019		$100		$2
2020	164		3
2021	125		3
2022	98		2
2023	75		2
Thereafter	272		4
Total lease payments		$834		$16
Less: Interest	95		3
Total lease obligations		$739		$13

Disclosures related to periods ~~therein. PPG is in the process of assessing the impact the~~prior to adoption of ~~this~~ ASU ~~will have on its consolidated financial position, results~~2016-02

The Company adopted ASU 2016-02 using a retrospective adoption method at January 1, 2019 as noted in Note 2. "New Accounting Standards." As required, the following disclosure is provided for periods prior to adoption. Minimum lease commitments as of ~~operations and cash flows. At a minimum, total assets and total liabilities will increase in the period the ASU is adopted. Early adoption of this ASU is permitted. At~~ December 31, ~~2017, PPG’s undiscounted future minimum payments outstanding for~~2018 that have initial or remaining lease ~~obligations were approximately $840 million.~~terms in excess of one year are as follows:



($ in millions)	Operating Leases		Capital Leases
2019		$207		$3
2020	157		3
2021	116		1
2022	93		1
2023	76		1
Beyond 2023		$244		$3


4.	~~Revenue Recognition~~

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers: Topic 606.” This ASU replaces nearly all existing U.S. GAAP guidance on revenue recognition. The standard prescribes a five-step model for recognizing revenue, the application of which may require significant judgment. The new guidance requires PPG to evaluate the transfer of promised goods or services to customers and recognize revenue in an amount that reflects the consideration which the Company expects to be entitled to receive in exchange for those goods and services.

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

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

The Company also provides services by applying coatings to customers' manufactured parts and assembled products and by providing technical support to certain customers. Performance obligations are satisfied over time as critical milestones are met and as services are provided. PPG is entitled to payment as the services are rendered. For the three and six months ended June 30, 2018 and 2017, service revenue constituted approximately 5% of total revenue, while the balance constituted standard ship and bill, retail or consignment arrangements. Accounts receivable are recognized when there is an unconditional right to consideration. Payment terms vary from customer to customer, depending on creditworthiness, prior payment history and other considerations.

~~Net sales by segment and region for the three and six months ended June 30, 2018 and 2017 were as follows:~~

($ in millions) Performance Coatings Industrial Coatings Total Net Sales
Three Months Ended
June 30 Three Months Ended
June 30 Three Months Ended
June 30
2018 2017 2018 2017 2018 2017
As Restated
As Restated
United States and Canada
$1,173

$1,093

$619

$588

$1,792

$1,681
EMEA 811
740
468
412
1,279
1,152
Asia-Pacific 277
238
403
370
680
608
Latin America 237
228
143
135
380
363
Total
$2,498

$2,299

$1,633

$1,505

$4,131

$3,804

($ in millions) Performance Coatings Industrial Coatings Total Net Sales
Six Months Ended
June 30 Six Months Ended
June 30 Six Months Ended
June 30
2018 2017 2018 2017 2018 2017
As Restated
As Restated
United States and Canada
$2,147

$2,055

$1,230

$1,169

$3,377

$3,224
EMEA 1,518
1,369
941
806
2,459
2,175
Asia-Pacific 519
458
791
733
1,310
1,191
Latin America 474
434
292
266
766
700
Total
$4,658

$4,316

$3,254

$2,974

$7,912

$7,290

The Company adopted the ASU using the modified retrospective approach which required the financial statements to reflect the new standard as of January 1, 2018, and as a result, contracts that ended prior to January 1, 2018 were not included within the Company’s assessment. Accordingly, the amounts in the comparative condensed consolidated statements of income and condensed consolidated balance sheet have not been recast. The ASU also provided additional clarity that resulted in reclassifications to or from Net sales, Cost of sales, exclusive of depreciation and amortization, Selling, general and administrative and Other income. Certain costs historically reported in Selling, general and administrative costs will now be recorded in Cost of sales, exclusive of depreciation and amortization in the condensed consolidated statement of income, as they represent costs incurred in satisfaction of performance obligations. In addition, the cost of certain customer incentives are now recorded as a reduction of Net sales rather than Cost of sales, exclusive of depreciation and amortization or Selling, general and administrative costs.

~~The following table summarizes the impact of the adoption of this ASU on the condensed consolidated statement of income for the three and six months ended June 30, 2018:~~

Three Months Ended June 30, 2018
($ in millions) Without adoption Adjustments As Reported
Net sales
$4,134

($3 )
$4,131
Cost of sales, exclusive of depreciation and amortization 2,360
19
2,379
Selling, general and administrative 963
(18 ) 945
Other income (26 ) 2
(24 )
Income from continuing operations before income taxes 479
—
479

Six Months Ended June 30, 2018
($ in millions) Without adoption Adjustments As Reported
Net sales
$7,919

($7 )
$7,912
Cost of sales, exclusive of depreciation and amortization 4,517
43
4,560
Selling, general and administrative 1,892
(41 ) 1,851
Other income (53 ) 5
(48 )
Income from continuing operations before income taxes 900
—
900


5.	Acquisitions and Divestitures

Acquisitions

On April 16, 2019, PPG completed the acquisition of Hemmelrath, an automotive coatings manufacturer. Headquartered in Klingenberg, Germany, Hemmelrath is a global manufacturer of coatings for automotive original equipment manufacturers ("OEMs"). The pro-forma impact on PPG's sales and results of operations, including the pro forma effect of events that are directly attributable to the acquisition, was not significant. The results of this business since the date of acquisition have been reported within the automotive original equipment manufacturer ("OEM") coatings business within the Industrial Coatings reportable segment.

On March 1, 2019, PPG completed the acquisition of Whitford Worldwide Company ("Whitford"), a global manufacturer that specializes in low-friction and nonstick coatings for industrial applications and consumer products. Whitford employs more than 700 people and operates 10 manufacturing facilities globally. The pro-forma impact on PPG's sales and results of operations, including the pro forma effect of events that are directly attributable to the acquisition, was not significant. The results of this business since the date of acquisition have been reported within the industrial coatings business within the Industrial Coatings reportable segment.

In January 2018, PPG acquired ProCoatings, a leading architectural paint and coatings wholesaler located in The Netherlands. ProCoatings, established in 2001, distributes a large portfolio of well-known professional paint brands through its network of 23 multi-brand stores.

~~In January 2017, PPG completed~~ The company employs nearly 100 people. The pro-forma impact on PPG's sales and results of operations, including the pro forma effect of events that are directly attributable to the acquisition, was not significant.The results of ~~DEUTEK S.A., a leading Romanian paint and~~this business since the date of acquisition have been reported within the architectural coatings ~~manufacturer, from~~- Europe, Middle East and Africa (EMEA) business within the ~~Emerging Europe Accession Fund. DEUTEK, established in 1993, manufactures and markets a large portfolio of well-known professional and consumer paint brands, including OSKAR~~^® ~~and DANKE!~~^®~~. The company’s products are sold in more than 120 do-it-yourself stores and 3,500 independent retail outlets in Romania.~~

In January 2017, PPG also acquired certain assets of automotive refinish coatings company Futian Xinshi ("Futian"), an automotive refinish coatings company based in the Guangdong province of China. Futian distributes its products in China through a network of more than 200 distributors.

~~Taiwan Chlorine Industries~~

Taiwan Chlorine Industries (“TCI”) was established in 1986 as a joint venture between PPG and China Petrochemical Development Corporation (“CPDC”) to produce chlorine-based products in Taiwan, at which time PPG owned 60 percent of the venture. In conjunction with the 2013 separation of its commodity chemicals business, PPG conveyed to Axiall Corporation ("Axiall") its 60% ownership interest in TCI. Under PPG’s agreement with CPDC, if certain post-closing conditions were not met following the three year anniversary of the separation, CPDC had the option to sell its 40% ownership interest in TCI to Axiall for $100 million. In turn, Axiall had a right to designate PPG as its designee to purchase the 40% ownership interest of CPDC. In April 2016, Axiall announced that CPDC had decided to sell its ownership interest in TCI to Axiall. In June 2016, Axiall formally designated PPG to purchase the 40% ownership interest in TCI. In August 2016, Westlake Chemical Corporation acquired Axiall, which became a wholly-owned subsidiary of Westlake. On April 11, 2017, PPG finalized its purchase of CPDC’s 40% ownership interest in TCI. The difference between the acquisition date fair value and the purchase price of PPG’s 40% ownership interest in TCI was recorded as a loss in discontinued operations during the second quarter 2017.Performance Coatings reportable segment.

Divestitures

Glass Segment

The ~~net~~Net sales and ~~income~~Income from discontinued operations, net of tax related to the former Glass reportable business segment for the ~~three and~~ six months ended June 30, ~~2017~~2018 were as follows:



($ in millions)	Six Months Ended June 30, 2018
Income from operations		$8
Income tax expense	2
Income from discontinued operations, net of tax		$6

($ in millions) Three Months Ended
June 30, 2017 Six Months Ended
June 30, 2017
As Restated As Restated
Net sales
$84

$167

Income from operations
$12

$21
Income tax expense 4
8
Income from discontinued operations, net of tax
$8

$13


6.5.	Inventories



($ in millions)	June 30, 2019		December 31, 2018
Finished products		$1,216		$1,105
Work in process	213		193
Raw materials	482		452
Supplies	34		33
Total Inventories		$1,945		$1,783

($ in millions) June 30, 2018 December 31, 2017
Finished products
$1,218

$1,083
Work in process 204
177
Raw materials 500
437
Supplies 34
33
Total Inventories
$1,956

$1,730

Most U.S. inventories are valued using the last-in, first-out method. These inventories represented approximately 33% and ~~34%~~36% of total inventories at June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. If the first-in, first-out method of inventory valuation had been used, inventories would have been ~~$113~~$126 million and ~~$103~~$113 million higher as of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.


7.6.	Goodwill and Other Identifiable Intangible Assets

The change in the carrying amount of goodwill attributable to each reportable segment for the six months ended June 30, ~~2018~~2019 was as follows:



($ in millions)	Performance Coatings		Industrial Coatings		Total
January 1, 2019		$3,266		$804		$4,070
Acquisitions, including purchase accounting adjustments	1		231		232
Foreign currency impact	9		1		10
June 30, 2019		$3,276		$1,036		$4,312

($ in millions)
Performance
Coatings

Industrial
Coatings
Total
January 1, 2018
$3,104

$838

$3,942
Acquisitions 53
1
54
Foreign currency (62 ) (14 ) (76 )
June 30, 2018
$3,095

$825

$3,920

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



	June 30, 2019							December 31, 2018
($ in millions)	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Indefinite-Lived Identifiable Intangible Assets
Trademarks		$1,156	N/A				$1,156		$1,140	N/A				$1,140
Definite-Lived Identifiable Intangible Assets
Acquired technology		$686		($533	)		$153		$648		($515	)		$133
Customer-related	1,511		(848		)	663		1,396		(798		)	598
Trade names	206		(104		)	102		190		(96		)	94
Other	46		(39		)	7		44		(37		)	7
Total Definite Lived Intangible Assets		$2,449		($1,524	)		$925		$2,278		($1,446	)		$832
Total Identifiable Intangible Assets		$3,605		($1,524	)		$2,081		$3,418		($1,446	)		$1,972

June 30, 2018 December 31, 2017
($ in millions)
Gross
Carrying
Amount

Accumulated
Amortization
Net
Gross
Carrying
Amount

Accumulated
Amortization
Net
Trademarks - indefinite lives
$1,142
N/A

$1,142

$1,158
N/A

$1,158

Customer-related intangibles
$1,414

($781 )
$633

$1,437

($762 )
$675
Acquired technology 630
(502 ) 128
613
(489 ) 124
Trade names 166
(91 ) 75
166
(87 ) 79
Other 43
(35 ) 8
44
(35 ) 9
Total
$2,253

($1,409 )
$1,986

$3,418

($1,373 )
$2,045

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

Three Months Ended
June 30 Six Months Ended
June 30
($ in millions) 2018 2017 2018 2017
Amortization expense related to identifiable intangible assets
$34

$32

$70

$63

As of June 30, ~~2018,~~2019, estimated future amortization expense of identifiable intangible assets is as follows:



($ in millions)	Future Amortization Expense
Remaining six months of 2019		$58
2020	105
2021	100
2022	90
2023	85
2024	70
Thereafter	417

($ in millions) Future Amortization Expense
Remaining six months of 2018
$60
2019 120
2020 110
2021 105
2022 105
2023 95
Thereafter 249


87.	Business Restructuring

The Company records restructuring liabilities that represent charges incurred in connection with consolidations of certain operations, including operations from acquisitions, as well as headcount reduction programs. These charges consist primarily of severance costs and asset write-downs.

~~On April 23, 2018,~~2019 Restructuring Program

In June 2019, the Company approved a business restructuring plan which ~~includes~~included actions to reduce its global cost structure. The program is the result of a comprehensive internal operational assessment to identify further opportunities to improve the profitability of the overall business portfolio. This program includes further manufacturing optimization; targeted pruning of low-profit business in certain regions; exiting certain smaller product lines that are not meeting profitability objectives; reorganization of certain business unit cost structures based on the current economic climate; and certain redundancy actions related to recent acquisitions.

A pretax restructuring charge of $184 million was recorded in PPG's second quarter 2019 financial results. This charge represents employee severance and other cash costs. The majority of restructuring actions are expected to be completed by the end of the fourth quarter 2020 with the remainder of the actions expected to be completed in 2022. There was no material activity on this reserve during the second quarter.

2018 Restructuring Program

In April 2018, the Company approved a business restructuring plan which included actions to reduce its global cost structure. The program was in response to the impacts of a customer assortment ~~change~~changes in our U.S. architectural coatings business during the first quarter 2018 and sustained, elevated raw material inflation. The program aims to further right-size employee headcount and production capacity in certain businesses based on ~~current~~ product demand, as well as reductions in various global functional and administrative costs.

A pretax restructuring charge of $83 million was recorded in PPG's second quarter 2018 financial results, of which $80 million represents employee severance and other cash costs. The remainder of the charge represents the write-down of certain assets. In addition, other cash costs of approximately $25 million will be incurred, consisting of approximately $10 million of incremental restructuring-related cash costs for certain items that are required to be expensed on an as-incurred basis and approximately $15 million for items which are expected to be capitalized. The Company also expects approximately $20 million of incremental non-cash accelerated depreciation expense for certain assets due to their reduced expected asset life as a result of this program, $5 million of which was recognized in the second quarter of 2018. Substantially all actions from this business restructuring plan are expected to be complete by the end of the ~~second~~first quarter of ~~2019.~~2020.

~~The 2018 restructuring charge and the reserve activity for the quarter ended June 30, 2018 were as follows:~~

($ 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 (2 ) (3 ) (5 ) (358 )
Foreign currency impact (2 ) —
(2 ) —
June 30, 2018
$76

$—

$76
1,320
2016 Restructuring Program

In December 2016, PPG’s Board of Directors approved a business restructuring program which includes actions necessary to reduce the Company's global cost structure. The program is focused on certain regions and end-use markets where business conditions ~~are~~were the weakest, as well as reductions in production capacity and various global functional and administrative costs. Substantially all actions from this business restructuring plan are expected to be complete by the end of the third quarter of 2019.

The ~~restructuring actions will result~~following table summarizes the reserve activity for the six months ended June 30, 2019:



($ in millions)	Total Reserve
December 31, 2018		$110
Second quarter 2019 restructuring charge	184
Cash payments	(23		)
Release of prior reserves	(11		)
Foreign currency impact	1
June 30, 2019		$261

Adjustments of approximately $8 million and $11 million were recorded in the ~~net reduction of approximately 2,000 positions, with substantially all actions to be completed in 2018.~~

~~In the first quarter of 2018, adjustments of approximately $17 million were recorded~~three and six months ended June 30, 2019, respectively, to reduce the remaining restructuring reserves ~~established in 2016~~ to reflect the current estimate of the costs to complete these actions. ~~Also in the first quarter of 2018, some additional restructuring actions were approved and charges of approximately $17 million were recorded.~~

~~The following table summarizes the reserve activity related to the 2016 restructuring charge for the six months ended June 30, 2018:~~

($ in millions, except for employees impacted) Severance and Other Costs Employees Impacted
December 31, 2017
$102
949
2018 Activity (30 ) (491 )
Foreign currency (3 ) —
June 30, 2018
$69
458


9.8.	Borrowings

During the six months of 2019, PPG issued $470 million of commercial paper. The Company's commercial paper borrowings are supported by the five-year credit agreement (the "Credit Agreement") entered into in 2015. As a result, the commercial paper borrowings as of June 30, 2019 are classified as long-term debt based on PPG's intent and ability to refinance these borrowings on a long-term basis.

In February 2018, PPG completed a public offering of $300 million aggregate principal amount of 3.2% notes due 2023 and $700 million aggregate principal amount of 3.75% notes due 2028. These notes were issued pursuant to PPG’s existing shelf registration statement and pursuant to an indenture between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee, as supplemented. The Indenture governing these notes contains covenants that limit the Company’s ability to, among other things, incur certain liens securing indebtedness, engage in certain sale-leaseback transactions, and enter into certain consolidations, mergers, conveyances, transfers or leases of all or substantially all the Company’s assets. The terms of these notes also require the Company to make an offer to repurchase ~~Notes~~notes upon a Change of Control Triggering Event (as defined in the Indenture) at a price equal to 101% of their principal amount plus accrued and unpaid interest. The Company may issue additional debt from time to time pursuant to the Indenture.

The aggregate cash proceeds from the notes, net of discounts and fees, was $992 million. A portion of the notes were converted from a fixed interest rate to a floating interest rate using interest rate swap contracts. For more information, refer to Note ~~15,~~13, “Financial Instruments, Hedging Activities and Fair Value Measurements.”


~~10.~~9.	Earnings Per Common Share

The effect of dilutive securities on the weighted average common shares outstanding included in the calculation of earnings per diluted common share for the three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018 were as follows:



	Three Months Ended June 30				Six Months Ended June 30
(number of shares in millions)	2019		2018		2019		2018
Weighted average common shares outstanding	236.9		244.9		236.8		247.4
Effect of dilutive securities:
Stock options	0.7		0.8		0.7		0.8
Other stock compensation plans	0.7		0.7		0.6		0.7
Potentially dilutive common shares	1.4		1.5		1.3		1.5
Adjusted weighted average common shares outstanding	238.3		246.4		238.1		248.9

Dividends per common share		$0.48		$0.45		$0.96		$0.90

Three Months Ended
June 30 Six Months Ended
June 30
(number of shares in millions) 2018 2017 2018 2017
Weighted average common shares outstanding 244.9
257.1
247.4
257.4
Effect of dilutive securities:
Stock options 0.8
1.1
0.8
1.1
Other stock compensation awards 0.7
0.8
0.7
0.8
Potentially dilutive common shares 1.5
1.9
1.5
1.9
Adjusted weighted average common shares outstanding 246.4
259.0
248.9
259.3

Excluded from the computation of earnings per diluted share due to their antidilutive effect were 1.0 million outstanding stock options for the three and six months ended June 30, 2019, and 1.1 million outstanding stock options for the three and six months ended June 30, 2018.


10.	Income Taxes



	Six Months Ended June 30
	2019		2018
Effective tax rate on pre-tax income from continuing operations	24.0	%	21.2	%

The effective tax rate of 24.0% for the six months ended June 30, 2019 reflects a benefit of $3 million of discrete items associated with PPG's U.S. and foreign jurisdictions. For the six months ended June 30, 2018, ~~and 0.6~~the effective tax rate was 21.2% inclusive of a $38 million ~~outstanding stock options~~benefit for discrete items. Income tax expense for the ~~three~~first six months of 2019 is based on an estimated annual effective rate, which requires management to make its best estimate of annual pretax income or loss.

During the year, PPG management regularly updates forecasted annual pretax results for the various countries in which PPG operates based on changes in factors such as prices, shipments, product mix, raw material inflation and manufacturing operations. To the extent that actual 2019 pretax results for U.S. and foreign income or loss vary from estimates, the actual Income tax expense recognized in 2019 could be different from the forecasted amount used to estimate the Income tax expense for the six months ended June 30, ~~2017.~~2019.


11.	~~Income Taxes~~

Six Months Ended
June 30
2018 2017
As Restated
Effective tax rate on pre-tax income from continuing operations 21.2 % 24.2 %

The effective tax rate for the six months ended June 30, 2018 was slightly higher than the U.S. federal statutory rate primarily due to earnings in foreign jurisdictions which were taxed at higher rates than the U.S. statutory rate and the impact of state and local income tax expense in the U.S. These impacts were partially offset by discrete tax benefits recognized in the first and second quarters of 2018, including the release of reserves for uncertain tax positions related to settlements of certain tax returns. The effective tax rate for 2017 of 24.2% was lower than the U.S. federal statutory rate in effect at that time primarily due to earnings in foreign jurisdictions which were taxed at rates lower than the U.S. statutory rate and the impact of certain U.S. tax incentives.

In December 2017, the U.S. enacted the Tax Cuts and Jobs Act (“the Act”) which, among other things, lowered the U.S. corporate statutory income tax rate from 35% to 21%, eliminated certain deductible items and added other deductible items for corporations, imposed a tax on unrepatriated foreign earnings and eliminated U.S. taxes on most future foreign earnings. PPG recorded a provisional amount as of December 31, 2017, which represented the Company’s best estimate as of February 1, 2018. The Company anticipates U.S. regulatory agencies will issue further regulations during 2018, which may alter this estimate. The Company is still evaluating among other things, its position with respect to permanent reinvestment of foreign earnings overseas and other related outside basis difference considerations and the amount of tax owed on unrepatriated earnings by subsidiaries. The Company believes its remeasurement of its U.S deferred tax assets and liabilities is complete, except for changes in estimates that can result from finalizing the filing of our 2017 U.S. income tax return, which are not anticipated to be material, and changes that may be a direct impact of other provisional amounts recorded due to the enactment of the Act. The Company will refine its estimates to incorporate new or better information as it becomes available through the filing date of its 2017 U.S. income tax returns in the fourth quarter of 2018.

The tax owed by PPG on its unrepatriated foreign earnings is payable over eight years and is subject to a prescriptive calculation to determine the portion payable in 2018 and beyond. PPG’s current estimate, using this prescriptive method, indicates its tax payable will be increased by approximately $1 million to $3 million per year through 2025. As such, the portion of the tax on unrepatriated foreign earnings not payable within the next 12 months is presented within “Other liabilities” on the consolidated balance sheet.

The Company files federal, state and local income tax returns in numerous domestic and foreign jurisdictions. In most tax jurisdictions, returns are subject to examination by the relevant tax authorities for a number of years after the returns have been filed. The Company is no longer subject to examinations by tax authorities in any major tax jurisdiction for years before 2007. In addition, the Internal Revenue Service has completed its examination of the Company’s U.S. federal income tax returns filed for years through 2013.


~~12.~~	Pensions and Other Postretirement Benefits

~~Effective January 1, 2018, PPG adopted ASU No. 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." See Note 3, "New Accounting Standards" for more information.~~

Service cost for net periodic pension and other postretirement benefit costs is included in Cost of sales, exclusive of depreciation and amortization, Selling, general and administrative, and Research and development, net in the accompanying condensed consolidated statements of income. All other components of net periodic benefit cost are now recorded in Other charges, except for pension settlement charges, in the accompanying condensed consolidated statements of income.

The net periodic pension and other postretirement benefit costs for the three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018 were as follows:



	Pension
	Three Months Ended June 30						Six Months Ended June 30
($ in millions)	2019			2018			2019			2018
Service cost		$5			$8			$11			$16
Interest cost	27			24			53			48
Expected return on plan assets	(35		)	(38		)	(70		)	(76		)
Amortization of actuarial losses	16			16			31			32
Net periodic benefit cost		$13			$10			$25			$20

Pension
Three Months Ended
June 30 Six Months Ended
June 30
($ in millions) 2018 2017 2018 2017
Service cost
$8

$8

$16

$17
Interest cost 24
25
48
49
Expected return on plan assets (38 ) (36 ) (76 ) (70 )
Amortization of actuarial losses 16
19
32
38
Pension settlement charge —
—
—
22
Net periodic benefit cost
$10

$16

$20

$56



	Other Postretirement Benefits
	Three Months Ended June 30						Six Months Ended June 30
($ in millions)	2019			2018			2019			2018
Service cost		$2			$3			$4			$5
Interest cost	7			6			13			12
Amortization of actuarial losses	2			4			4			9
Amortization of prior service credit	(15		)	(15		)	(29		)	(30		)
Net periodic benefit cost		($4	)		($2	)		($8	)		($4	)

Other Postretirement Benefits
Three Months Ended
June 30 Six Months Ended
June 30
($ in millions) 2018 2017 2018 2017
Service cost
$3

$3

$5

$5
Interest cost 6
5
12
12
Amortization of actuarial losses 4
1
9
6
Amortization of prior service credit (15 ) (17 ) (30 ) (30 )
Net periodic benefit cost
($2 )
($8 )
($4 )
($7 )

PPG expects its ~~2018~~2019 net periodic pension and other postretirement benefit cost to be approximately ~~$30~~$35 million, with pension expense representing approximately ~~$40~~$50 million and other postretirement benefit cost representing a benefit of approximately ~~$10~~$15 million.

Contributions to Defined Benefit Pension Plans



	Three Months Ended June 30				Six Months Ended June 30
($ in millions)	2019		2018		2019		2018
U.S. defined benefit pension contributions		$—		$—		$—		$25
Non-U.S. defined benefit pension mandatory contributions		$3		$5		$6		$10

Three Months Ended
June 30 Six Months Ended
June 30
($ in millions) 2018 2017 2018 2017
U.S. defined benefit pension contributions
$—

$—

$25

$29
Non-U.S. defined benefit pension mandatory contributions
$5

$3

$10

$8

PPG made a voluntary contribution of $25 million ~~voluntary contribution~~ to its U.S. defined benefit pension plans in January 2018. PPG expects to make mandatory contributions to its non-U.S. pension plans in the range of $10 million to $20 million during the remaining 6six months of ~~2018 and~~2019. PPG may make voluntary contributions to its defined benefit pension plans in ~~2018~~2019 and beyond.

~~U.S. Non-qualified Pension~~

In the first quarter 2017, PPG made lump-sum payments to certain retirees who had participated in PPG's U.S. non-qualified pension plan (the "Nonqualified Plan") totaling approximately $40 million. As the lump-sum payments were in excess of the expected 2017 service and interest costs for the Nonqualified Plan, PPG remeasured the periodic benefit obligation of the Nonqualified Plan as of March 1, 2017 and recorded a settlement charge totaling $22 million million ($14 million after-tax).


~~13.~~ 12.	~~Shareholders' Equity~~Accumulated Other Comprehensive Loss

~~Changes to shareholders’ equity for the six months ended June 30, 2018 and 2017 were as follows:~~



($ in millions)	Unrealized Foreign Currency Translation Adjustments					Pension and Other Postretirement Benefit Adjustments, net of tax (c)					Unrealized Gain (Loss) on Derivatives, net of tax (d)					Accumulated Other Comprehensive Loss
January 1, 2019				($1,734	)				($568	)				$2					($2,300	)
Current year deferrals to AOCI (a)	44					—					—					44
Current year deferrals to AOCI, net of tax (b)	21					(1	)				(2	)				18
Reclassifications from AOCI to net income	—					7					1					8
Period change				$65					$6					($1	)				$70
June 30, 2019				($1,669	)				($562	)				$1					($2,230	)

January 1, 2018				($1,567	)				($493	)				$3					($2,057	)
Current year deferrals to AOCI	(257	)				—					—					(257	)
Current year deferrals to AOCI, net of tax (b)	114					24					(1	)				137
Reclassifications from AOCI to net income	—					8					1					9
Period change				($143	)				$32					$—					($111	)
Reclassification from AOCI to Retained earnings - Adoption ASU 2018-02			(23		)			(84		)			—					(107		)
June 30, 2018				($1,733	)				($545	)				$3					($2,275	)

($ in millions) Total PPG Shareholders’ Equity Non-controlling Interests Total
January 1, 2018
$5,557

$115

$5,672
Net income 705
10
715
Other comprehensive income, net of tax (218 ) (8 ) (226 )
Reclassifications from other comprehensive income to retained earnings - Adoption ASU 2018-02^(a)
107
—
107
Cash dividends (222 ) (2 ) (224 )
Issuance of treasury stock 33
—
33
Stock repurchase program (1,063 ) —
(1,063 )
Stock-based compensation activity (12 ) —
(12 )
Other (3 ) (16 ) (19 )
June 30, 2018
$4,884

$99

$4,983

($ in millions) Total PPG Shareholders’ Equity Non-controlling Interests Total
January 1, 2017
$4,828

$87

$4,915
Net income (As Restated) 833
10
843
Other comprehensive income, net of tax 297
13
310
Cash dividends (205 ) —
(205 )
Issuance of treasury stock 49
—
49
Stock repurchase program (163 ) —
(163 )
Stock-based compensation activity (As Restated) (16 ) —
(16 )
Other —
(5 ) (5 )
June 30, 2017 (As Restated)
$5,623

$105

$5,728


(a)	~~See Note 3, "New Accounting Standards~~"Except 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 (257 )
^(a)
—
—
(257 )
Current year deferrals to AOCI, net of tax 114
^(b)
24
(1 )
^(d)
137

Reclassification from AOCI to Retained earnings - Adoption ASU 2018-02 (23 ) (84 ) —
(107 )
Reclassifications from AOCI to net income —
8
^(c),(e)
1
^(d),(e)
9

Net change
($166 )
($52 )
$—

($218 )
June 30, 2018
($1,733 )
($545 )
$3

($2,275 )

January 1, 2017
($1,798 )
($571 )
$13

($2,356 )
Current year deferrals to AOCI 530
^(a)
—
—
530

Current year deferrals to AOCI, net of tax (182 )
^(b)
(59 ) (13 )
^(d)
(254 )
Reclassifications from AOCI to net income —
25
^(c),(e)
(4 )
^(d),(e)
21

Net change
$348

($34 )
($17 )
$297
June 30, 2017
($1,450 )
($605 )
($4 )
($2,059 )

~~(a)~~

~~Unrealized~~income taxes of $9 million related to foreign currency impacts of certain unasserted earnings, unrealized foreign currency translation adjustments related to ~~the~~ translation of foreign denominated balance ~~sheet account balances~~sheets 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~~tax inter-branch transactions and ~~debt instruments~~net investment hedges for the six months ended June 30, 2019 and 2018 ~~and 2017~~ was ~~$31~~$7 million and ~~($113)~~$31 million, respectively.


(c)	The tax ~~benefit~~cost (benefit) related to the adjustment for pension and other postretirement benefits for the six months ended June 30, 2019 and 2018 ~~and 2017~~ was ~~($3)~~$2 million and ($~~14)~~1) million, respectively. Reclassifications from AOCI are included in the computation of net periodic benefit costs (See Note 11, "Pensions and Other Postretirement Benefits").


(d)	The tax ~~benefit~~cost (benefit) related to the changes in the unrealized gain (loss) on derivatives for the six months ended June 30, 2019 and 2018 ~~and 2017~~ was ~~$(1)~~$2 million and ($8)1) 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~~13, "Financial Instruments, Hedging Activities and Fair Value ~~Measurements"~~Measurements").


~~15.~~13.	Financial Instruments, Hedging Activities and Fair Value Measurements

Financial instruments include cash and cash equivalents, short-term investments, cash held in escrow, marketable equity securities, accounts receivable, company-owned life insurance, accounts payable, short-term and long-term debt instruments, and derivatives. The fair values of these financial instruments approximated their carrying values at June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, in the aggregate, except for long-term debt instruments.

Hedging Activities

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

PPG’s policies do not permit speculative use of derivative financial instruments. PPG enters into derivative financial instruments with high credit quality counterparties and diversifies its positions among such counterparties in order to reduce its exposure to credit losses. The Company did not realize a credit loss on derivatives during the three and six month periods ended June 30, ~~2018~~2019 and ~~2017.~~2018.

All of PPG's outstanding derivative instruments are subject to accelerated settlement in the event of PPG’s failure to meet its debt or payment obligations under the terms of the instruments’ contractual provisions. In addition, ~~should~~if the

Company would be acquired and its payment obligations under ~~the~~its derivative instruments’ contractual arrangements are not be assumed by the acquirer, or ~~should~~if PPG would enter into bankruptcy, receivership or reorganization proceedings, ~~the~~its outstanding derivative instruments would also be subject to accelerated settlement.

There were no derivative instruments de-designated or discontinued as hedging instruments during the three and six month periods ended June 30, ~~2018~~2019 and ~~2017~~2018 and there were no gains or losses deferred in Accumulated other comprehensive loss on the condensed consolidated balance sheet that were reclassified to Income before income ~~from continuing operations during~~taxes in the condensed consolidated income statement in the six month periods ended June 30, ~~2018~~2019 and ~~2017~~2018 related to hedges of anticipated transactions that were no longer expected to occur.

~~Cash Flow Hedges~~

PPG designates certain foreign currency forward contracts as cash flow hedges of the Company’s exposure to variability in exchange rates on intercompany and third party transactions denominated in foreign currencies.

Fair Value Hedges

The Company ~~manages its~~uses interest rate risk by balancing its exposure to fixed and variable rates while attempting to minimize its interest costs. PPG principally manages its fixed and variable interest rate risk by retiring and issuing long-term and short-term debtswaps from time to time ~~and occasionally through~~to manage it’s exposure to changing interest rates. When outstanding, the ~~use of~~ interest rate ~~swaps.~~ swaps are typically designated as fair value hedges of certain outstanding debt obligations of the Company and are recorded at fair value.

In February of 2018, PPG entered into interest rate swaps which converted $525 million of fixed rate debt to variable rate debt. The swaps are designated as fair value ~~hedges. As such, these swaps~~hedges and are carried at fair value. Changes in the fair value of these swaps and ~~that~~changes in the fair value of the related debt are recorded in Interest expense in the accompanying condensed consolidated statement of income.

Cash Flow Hedges

PPG designates certain foreign currency forward contracts as cash flow hedges of the Company’s exposure to variability in exchange rates on third party transactions denominated in foreign currencies. Underlying notional amounts related to these foreign currency forward contracts were $71 million at June 30, 2019 and $50 million at December 31, 2018, respectively.

Net Investment Hedges

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

In February 2018, PPG entered into U.S. dollar to euro cross currency swap contracts with a total notional amount of $575 million and designated these contracts as hedges of the Company's net investment in its European operations. During the term of these contracts, PPG will receive payments in U.S. dollars and make payments in euros to the counterparties. ~~The~~Also in February 2018, the Company ~~also~~ settled outstanding U.S. dollar to euro cross currency swap contracts with a total notional amount of $560 ~~million in February 2018.~~million.

As of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, PPG had designated €2.3 billion of euro-denominated borrowings as hedges of a portion of its net investment in the Company's European operations. The carrying value of these instruments as of June 30, ~~2018~~2019 and December 31, ~~2017~~2018 was $2.6 billion for both periods.

Other Financial Instruments

PPG uses foreign currency forward contracts to manage net transaction exposures that do not qualify for hedge accounting; therefore, the change in the fair value of these instruments is recorded in Other charges in the condensed consolidated statement of income in the period of change. Underlying notional amounts related to these foreign currency forward contracts were $2.7 ~~billion.~~billion and $2.5 billion at June 30, 2019 and December 31, 2018, respectively.

Gains/Losses Deferred in Accumulated Other Comprehensive Loss

As of June 30, ~~2018,~~2019, the Company had accumulated pre-tax unrealized ~~net foreign currency~~ translation gains in Accumulated other comprehensive loss on the condensed consolidated balance sheet related to the euro-denominated borrowings, foreign currency forward contracts and the cross currency swaps of ~~$95~~$188 million. As of December 31, ~~2017,~~2018, the Company had accumulated pre-tax unrealized ~~net foreign currency~~ translation gains of ~~$16~~$161 million.

The following table summarizes the location within the condensed consolidated financial statements and amount of gains (losses) related to derivative financial instruments activity for the six months ended June 30, ~~2018~~2019 and ~~2017.~~2018. All dollar amounts are shown on a pre-tax basis.



	June 30, 2019						June 30, 2018
($ in millions)	(Loss)/ Gain Deferred in OCI			Gain/(Loss) Recognized			(Loss)/Gain Deferred in OCI			Gain/(Loss) Recognized			Caption In Condensed Consolidated Statement of Income
Economic
Foreign currency forward contracts		$—			$32			$—			$23		Other charges
Fair Value
Interest rate swaps	—			1			—			2			Interest expense
Cash Flow
Foreign currency forward contracts⁽¹⁾	(3		)	(4		)	(3		)	(3		)	Other charges and Cost of sales
Total Cash Flow		($3	)		$29			($3	)		$22
Net Investment
Cross currency swaps		$6			$8			$5			$5		Interest expense
Foreign denominated debt	22			—			74			—
Total Net Investment		$28			$8			$79			$5

June 30, 2018 June 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⁾

$23

$—
Other charges
Fair Value
Interest rate swaps
2
—
Interest expense
Cash Flow
Foreign currency forward contracts
($3 ) (3 )
($20 ) 6
Other charges and Cost of sales
Total Cash Flow
($3 )

$22

($20 )
$6

Net Investment
Foreign currency forward contracts

($3 )
Cross currency swaps
$5

$5

($38 ) Interest expense
Foreign denominated debt 74
(254 )
Total Net Investment
$79

$5

($295 )


(1)	For the period ended June 30, ~~2018,~~2019, the amounts excluded from effectiveness testing recognized in earnings based on an amortized approach was expense of ~~$2 million, with a deferred loss balance of~~ $1 ~~million remaining in accumulated other comprehensive income as of June 30, 2018.~~million.

Fair Value Measurements

The Company follows a fair value measurement hierarchy to measure its assets and liabilities. As of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the assets and liabilities measured at fair value on a recurring basis were cash equivalents, equity securities and derivatives. In addition, the Company measures its pension plan assets at fair value (see Note 13, "Employee Benefit Plans" under Item 8 in the ~~2017~~2018 Form ~~10-K/A~~10-K for further details). The Company's financial assets and liabilities are measured using inputs from the following three levels:

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

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

Level 3 inputs are unobservable inputs employed for measuring the fair value of assets or liabilities. The Company does not have any recurring financial assets or liabilities that are recorded in its consolidated balance sheets as of June 30, ~~2018~~2019 and December 31, ~~2017~~2018 that are classified as Level 3 inputs.

Assets and liabilities reported at fair value on a recurring basis:



	June 30, 2019						December 31, 2018
($ 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)	—		19		—		—		45		—
Investments:
Marketable equity securities	78		—		—		69		—		—
Other assets:
Cross currency swaps^(b)	—		41		—		—		35		—
Interest rate swaps ^(c)	—		35		—		—		8		—
Liabilities:
Accounts payable and accrued liabilities:
Foreign currency forward contracts ^(d)	—		—		—		—		1		—
Foreign currency forward contracts^(a)	—		10		—		—		9		—

June 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)
—
2
—
—
4
—
Foreign currency forward contracts^(b)
—
64
—
—
2
—
Cross currency swaps —
—
—
—
2
—
Investments:
Marketable equity securities 79
—
—
79
—
—
Other assets
Cross currency swaps^(d)
—
20
—
—
—
—
Liabilities:
Accounts payable and accrued liabilities:
Foreign currency forward contracts ^(a)
—
2
—
—
1
—
Foreign currency forward contracts^(b)
—
4
—
—
22
—
Other liabilities
Interest rate swaps ^(c)
—
2
—
—
—
—



(a) ~~Cash flow hedges~~Derivatives not designated as hedging instruments	(c) Fair value hedges
(b) ~~Derivatives not designated as hedging instruments~~	~~(d)~~ Net investment hedges	(d) Cash flow hedges

Long-Term Debt


($ in millions)	June 30, 2018 ^(a)		December 31, 2017 ^(b)		June 30, 2019 ^(a)		December 31, 2018 ^(b)
Long-term debt - carrying value		$5,038		$4,123		$5,478		$5,000
Long-term debt - fair value		$5,204		$4,341		$5,666		$5,101

(a) Excluding ~~capital~~finance lease obligations of ~~$14~~$11 million and short term borrowings of ~~$18~~$10 million as of June 30, ~~2018.~~2019.

(b) Excluding capital lease obligations of ~~$15~~$12 million and short term borrowings of $8$4 million as of December 31, ~~2017.~~2018.

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


~~16.~~14.	Stock-Based Compensation

The Company’s stock-based compensation includes stock options, restricted stock units (“RSUs”) and grants of contingent shares that are earned based on achieving targeted levels of total shareholder return. All current grants of stock options, RSUs and contingent shares are made under the PPG Industries, Inc. Amended and Restated Omnibus Incentive Plan ~~(the “PPG~~(“PPG Amended Omnibus Plan”), which was amended and restated effective April 21, 2016. Shares available for future grants under the PPG Amended Omnibus Plan were ~~7.4~~7.2 million as of June 30, ~~2018.~~2019.

Stock-based compensation and the income tax benefit recognized during the three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018 were as follows:



	Three Months Ended June 30				Six Months Ended June 30
($ in millions)	2019		2018		2019		2018
Stock-based compensation		$10		$9		$19		$18
Income tax benefit recognized		$2		$2		$4		$4

Three Months Ended
June 30 Six Months Ended
June 30
($ in millions) 2018 2017 2018 2017
As Restated
Stock-based compensation
$9

$8

$18

$17
Income tax benefit recognized
$2

$2

$4

$5

Grants of stock-based compensation during the six months ended June 30, ~~2018~~2019 and ~~2017~~2018 were as follows:


	Six Months Ended June 30						Six Months Ended June 30
	2018			2017			2019			2018
Grant Details	Shares	Fair Value		Shares	Fair Value		Shares	Fair Value		Shares	Fair Value
Stock options	532,705		$25.27	590,058		$21.15	588,870		$22.50	532,705		$25.27
Restricted stock units	230,363		$107.73	215,105		$97.48	208,602		$104.46	230,363		$107.73
Contingent shares (a)	52,450		$115.64	57,817		$110.20	51,850		$109.74	52,450		$115.64

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

Stock options are generally exercisable 36 months after being granted and have a maximum term of 10 years. Compensation expense for stock options is recorded over the vesting period based on the fair value on the date of grant. The fair value of the stock option grants issued during the six months ended June 30, ~~2018~~2019 was calculated with the following weighted average assumptions:



Weighted average exercise price		$~~115.98~~109.74
Risk-free interest rate	~~2.9~~2.6		%
Expected life of option in years	6.5
Expected dividend yield	~~1.7~~1.6		%
Expected volatility	~~21.0~~20.0		%

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

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

The amount paid upon vesting of performance-based RSUs may range from 0% to 180% of the original grant, based upon the frequency with which the annual earnings per share growth and cash flow return on capital performance targets are met over the three calendar year periods comprising the vesting period.

Contingent share grants (referred to as “TSR awards”) are made annually and are paid out at the end of each three-year period following the date of grant based on PPG's performance. Performance is measured by determining the percentile rank of the total shareholder return of PPG common stock in relation to the total shareholder return of the S&P 500 as it existed at the beginning of the ~~three-year~~three-year performance period excluding any companies that have been removed from the index because they ceased to be publicly traded during the performance period. Any payments made at the end of the award period may be in the form of stock, cash or a combination of both at the Company's discretion. The TSR awards qualify as liability awards, and compensation expense is recognized over the ~~three-year~~three-year award period based on the fair value of the awards (giving consideration to the Company’s percentile rank of total shareholder return) remeasured in each reporting period until settlement of the awards.


~~17.~~15.	Commitments and Contingent Liabilities

PPG is involved in a number of lawsuits and claims, both actual and potential, including some that it has asserted against others, in which substantial monetary damages are sought. These lawsuits and claims may relate to contract, patent, environmental, product liability, ~~asbestos exposure,~~ antitrust, employment ~~securities~~ and other matters arising out of the conduct of PPG’s current and past business activities. To the extent that these lawsuits and claims involve personal injury and property damage, PPG believes it has adequate insurance; however, certain of PPG’s insurers are contesting coverage with respect to some of these claims, and other insurers, as they had prior to the asbestos settlement described below, may contest coverage inwith respect to some of the ~~future.~~asbestos claims if the settlement is not implemented. PPG’s lawsuits

and claims against others include claims against insurers and other third parties with respect to actual and contingent losses related to environmental, asbestos and other matters.

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

Shareholder Class Action

On May 20, 2018, a putative securities class action lawsuit was filed in the U.S. District Court for the Central District of California against the Company and three of its current and former officers. On September 21, 2018, an Amended Class Action Complaint was filed in the lawsuit. The Amended Complaint, captioned Trevor Mild v. PPG Industries, Inc., Michael H. McGarry, Vincent J. Morales, and Mark C. Kelly, asserts securities fraud claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 on behalf of a putative class of persons who purchased or otherwise acquired stock of the Company between January 19, 2017 and May 10, 2018. The allegations relate to, among other things, allegedly false and misleading statements and/or failures to disclose information about the Company’s business, operations and prospects. The parties reached a settlement in principal on May 1, 2019. On June 2, 2019, the plaintiff filed with the Court a Petition for Preliminary Approval of the proposed settlement, including a proposed settlement amount of $25 million. The parties await the Court’s ruling on the Petition. If preliminary approval is granted, the parties will proceed with the remaining procedures required to obtain final approval of the settlement. PPG’s insurance carriers confirmed to the Company insurance coverage for the full amount of the proposed settlement.

As of June 30, 2019, PPG recorded an accrued liability of $25 million for the proposed settlement amount and a corresponding asset for the insurance coverage of $25 million within Accounts payable and accrued liabilities and Other current assets, respectively.

Asbestos Matters

Prior to 2000, the Company had been named as a defendant in numerous claims alleging bodily injury from (i) exposure to asbestos-containing products allegedly manufactured, sold or distributed by the Company, its subsidiaries, or for which they are otherwise alleged to be liable; (ii) exposure to asbestos allegedly present at a facility owned or leased by the Company; or (iii) exposure to asbestos-containing products of Pittsburgh Corning Corporation (“PC”) for which the Company was alleged to be liable under a variety of legal theories (the Company and Corning Incorporated were each 50% shareholders in PC).

Pittsburgh Corning Corporation asbestos bankruptcy

In 2000, PC filed for Chapter 11 in the U.S. Bankruptcy Court for the Western District of Pennsylvania in an effort to permanently and comprehensively resolve all of its pending and future asbestos-related liability claims. At the time of the bankruptcy filing, the Company had been named as one of many defendants in approximately 114,000 open claims. The Bankruptcy Court subsequently entered a series of orders preliminarily enjoining the prosecution of asbestos litigation against PPG until after the effective date of a confirmed PC plan of reorganization. During the pendency of this preliminary injunction staying asbestos litigation against PPG, PPG and certain of its historical liability insurers negotiated a settlement with representatives of present and future asbestos claimants. That settlement was incorporated into a PC plan of reorganization that was confirmed by the Bankruptcy Court on May 24, 2013 and ultimately became effective on April 27, 2016. With the effectiveness of the plan, the preliminary injunction staying the prosecution of asbestos litigation against PPG expired by its own terms on May 27, 2016. In accordance with the settlement, the Bankruptcy Court issued a permanent channeling injunction under Section 524(g) of the Bankruptcy Code that prohibits present and future claimants from asserting claims against PPG that arise, in whole or in part, out of exposure to asbestos or asbestos-containing products manufactured, sold and/or distributed by PC or asbestos on or emanating from any PC premises. The channeling injunction, by its terms, also prohibits codefendants in cases that are subject to the channeling injunction from asserting claims against PPG for contribution, indemnification or other recovery. The channeling injunction also precludes the prosecution of claims against PPG arising from alleged exposure to asbestos or asbestos-containing products to the extent that a claimant is alleging or seeking to impose liability, directly or indirectly, for the conduct of, claims against, or demands on PC by reason of PPG’s: (i) ownership of a financial interest in PC; (ii) involvement in the management of PC, or service as an officer, director or employee of PC or a related party; (iii) provision of insurance to PC or a related party; or (iv) involvement in a financial transaction affecting the financial condition of PC or a related party. The foregoing PC related claims are referred to as “PC Relationship Claims.”

The channeling injunction channels the Company’s liability for PC Relationship Claims to a trust funded in part by PPG and its participating insurers for the benefit of current and future PC asbestos claimants (the “Trust”). The Trust is the

sole recourse for holders of PC Relationship Claims. PPG and its affiliates have no further liability or responsibility for, and will be permanently protected from, pending and future PC Relationship Claims. The channeling injunction does not extend to present and future claims against PPG that arise out of alleged exposure to asbestos or asbestos-containing products historically manufactured, sold and/or distributed by PPG or its subsidiaries or for which they are alleged to be liable that are not PC Relationship Claims, and does not extend to claims against PPG alleging personal injury allegedly caused by asbestos on premises presently or formerly owned, leased or occupied by PPG. These claims are referred to as non-PC Relationship Claims.

In accordance with the PC plan of reorganization, PPG's equity interest in PC was canceled. PPG satisfied its funding obligations to the Trust on June 9, 2016, when it conveyed to the Trust the stock it owned in Pittsburgh Corning Europe and 2,777,778 shares of PPG’s common stock and made a cash payment to the Trust in the amount of $764 million. PPG’s historical insurance carriers participating in the PC plan of reorganization are required to make cash payments to the Trust of approximately $1.7 billion, subject to a right of prepayment at a 5.5% discount rate.

On October 13, 2016, the Bankruptcy Court issued an order entering a final decree and closing the Chapter 11 case. That order provided that the Bankruptcy Court retained jurisdiction to enforce any order issued in the case and any agreements approved by the court, enforce the terms and conditions of the modified third amended Plan, and consider any requests to reopen the case.

Non-PC relationship asbestos claims

At the time PC filed for bankruptcy, PPG had been named as one of many defendants in one or more of the categories of asbestos-related claims identified above. Over the course of the 16 years during which the PC bankruptcy proceedings, and corresponding preliminary injunction staying the prosecution of asbestos-related claims against PPG, were pending, certain plaintiffs alleging premises claims filed motions seeking to lift the stay with respect to more than 1,000 individually-identified premises claims. The Bankruptcy Court granted motions to lift the stay in respect to certain of these premises claims and directed PPG to engage in a process to address any additional premises claims that were the subject of pending or anticipated lift-stay motions. As a result of the overall process as directed by the Bankruptcy Court involving more than 1,000 premises claims between 2006 and May 27, 2016, hundreds of these claims were withdrawn or dismissed without payment and approximately 650 premises claims were dismissed upon agreements by PPG and its insurers to resolve such claims in exchange for monetary payments.

With respect to the remaining claims still reportable within the inventory of 114,000 asbestos-related claims at the time PC filed for bankruptcy, the Company considers such claims to fall within one or more of the following categories: (1) claims that have been closed or dismissed as a result of processes undertaken during the bankruptcy; (2) claims that may have been previously filed on the dockets of state and federal courts in various jurisdictions, but are inactive as to the Company; and (3) claims that are subject, in whole or in part, to the channeling injunction and thus will be resolved, in whole or in part, in accordance with the Trust procedures established under the PC bankruptcy reorganization plan. As a result of the foregoing, the Company does not consider these three categories of claims to be open or active litigation against it, although the Company cannot now determine whether, or the extent to which, any of these claims may in the future be reinstituted, reinstated, or revived such that they may become open and active asbestos-related claims against it.

Current open and active claims post-Pittsburgh Corning bankruptcy

As of June 30, ~~2018,~~2019, the Company was aware of approximately ~~420~~490 open and active asbestos-related claims pending against the Company and certain of its subsidiaries. These claims consist primarily of non-PC Relationship Claims and claims against a subsidiary of PPG. The Company is defending the remaining open and active claims vigorously.

Since April 1, 2013, a subsidiary of PPG has been implicated in claims alleging death or injury caused by asbestos-containing products manufactured, distributed or sold by a North American architectural coatings business or its predecessors which was acquired by PPG. All such claims have been either served upon or tendered to the seller for defense and indemnity pursuant to obligations undertaken by the seller in connection with the Company’s purchase of the North American architectural coatings business. The seller has accepted the defense of these claims subject to the terms of various agreements between the Company and the seller. The seller’s defense and indemnity obligations in connection with newly filed claims ceased with respect to claims filed after April 1, 2018.

PPG has established reserves totaling approximately $180 million for asbestos-related claims that would not be channeled to the Trust which, based on presently available information, we believe will be sufficient to encompass all of PPG’s current and potential future asbestos liabilities. These reserves include a $162 million reserve established in 2009 in connection with an amendment to the PC plan of reorganization. These reserves, which are included within ~~"Other liabilities"~~Other liabilities on the accompanying condensed consolidated balance sheets, represent PPG’s best estimate of its liability for these claims. PPG does not have sufficient current claim information or settlement history on which to base

a better estimate of this liability in light of the fact that the Bankruptcy Court’s injunction staying most asbestos claims against the Company was in effect from April 2000 through May 2016. PPG will monitor the activity associated with its remaining asbestos claims and evaluate, on a periodic basis, its estimated liability for such claims, its insurance assets then available, and all underlying assumptions to determine whether any adjustment to the reserves for these claims is required.

The amount reserved for asbestos-related claims by its nature is subject to many uncertainties that may change over time, including (i) the ultimate number of claims filed; (ii) the amounts required to resolve both currently known and future unknown claims; (iii) the amount of insurance, if any, available to cover such claims; (iv) the unpredictable aspects of the litigation process, including a changing trial docket and the jurisdictions in which trials are scheduled; (v) the outcome of any trials, including potential judgments or jury verdicts; (vi) the lack of specific information in many cases concerning exposure for which PPG is allegedly responsible, and the claimants’ alleged diseases resulting from such exposure; and (vii) potential changes in applicable federal and/or state tort liability law. All of these factors may have a material effect upon future asbestos-related liability estimates. As a potential offset to any future asbestos financial exposure, under the PC plan of reorganization PPG retained, for its own account, the right to pursue insurance coverage from certain of its historical insurers that did not participate in the PC plan of reorganization. While the ultimate outcome of PPG’s asbestos litigation cannot be predicted with certainty, PPG believes that any financial exposure

resulting from its asbestos-related claims will not have a material adverse effect on PPG’s consolidated financial position, liquidity or results of operations.

Environmental Matters

It is PPG’s policy to accrue expenses for environmental contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Reserves for environmental contingencies are exclusive of claims against third parties and are generally not discounted. In management’s opinion, the Company operates in an environmentally sound manner and the outcome of the Company’s environmental contingencies will not have a material effect on PPG’s financial position or liquidity; however, any such outcome may be material to the results of operations of any particular period in which costs, if any, are recognized. Management anticipates that the resolution of the Company’s environmental contingencies will occur over an extended period of time. See Note 14, "Commitments and Contingent Liabilities," under Item 8 of the ~~2017~~2018 Form ~~10-K/A~~10-K for additional descriptions of the following environmental matters.

As of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, PPG had reserves for environmental contingencies associated with PPG’s former chromium manufacturing plant in Jersey City, N.J. ~~and associated sites~~ (“New Jersey Chrome”), legacy glass and chemical manufacturing sites, and for other environmental contingencies, including current manufacturing locations and National Priority List ~~sites and legacy glass and chemical manufacturing~~ sites. These reserves are ~~included in~~reported as Accounts payable and accrued liabilities and Other liabilities in the accompanying condensed consolidated balance sheet.



Environmental Reserves
($ in millions)	June 30, 2019		December 31, 2018
New Jersey Chrome		$148		$151
Glass and chemical	73		90
Other	72		50
Total		$293		$291
Current portion		$110		$105

Environmental Reserves
($ in millions) June 30, 2018 December 31, 2017
New Jersey Chrome
$141

$136
Legacy glass and chemical 71
71
Other 47
51
Total
$259

$258
Current portion
$67

$73

Pre-tax charges against income for environmental remediation costs are included in Other charges in the accompanying condensed consolidated statement of income. The pre-tax charges and cash outlays related to such environmental remediation for the three and six months ended June 30, 2019 and 2018 were as follows:



	Three Months Ended June 30				Six Months Ended June 30
($ in millions)	2019		2018		2019		2018
Environmental remediation pre-tax charges		$35		$1		$51		$35
Cash outlays for environmental remediation activities		$20		$14		$36		$31

During the three months ended June 30, 2019, charges were taken to increase the existing reserve for New Jersey Chrome based on updated estimates of the underlying factors as described below and an existing glass and chemical

site reserve based on changes in estimates of future costs. In the first quarter of 2019, a one-time charge was taken to increase an existing reserve related to a manufacturing site.

During the six months ended June 30, ~~2018 and 2017 were as follows:~~

Three Months Ended
June 30 Six Months Ended
June 30
($ in millions) 2018 2017 2018 2017
Environmental remediation pre-tax charges
$1

$1

$35

$2
Cash outlays for environmental remediation activities
$14

$10

$31

$22

~~Environmental remediation of the NJ Chrome sites and our legacy glass and chemical sites is ongoing. In the first quarter~~ 2018, charges were taken to increase the existing ~~reserves~~reserve for ~~the NJ~~New Jersey Chrome and for reserves associated with legacy ~~glass~~Glass and chemical ~~sites by $26 million and $8 million, respectively.~~ sites.

Remediation: New Jersey Chrome

In June 2009, PPG entered into a settlement agreement with the New Jersey Department of Environmental Protection (“NJDEP”) and Jersey City, New Jersey (which had asserted claims against PPG for lost tax revenue) which was in the form of a Judicial Consent Order (the "JCO"). Under the JCO, PPG accepted sole responsibility for the remediation activities at its former chromium manufacturing location in Jersey City and 19 additional sites. The principal contaminant of concern is hexavalent chromium. The JCO also provided for the appointment of a court-approved Site Administrator who is responsible for establishing a master schedule for the remediation of the 20 PPG sites which existed at that time. One site was subsequently removed from the JCO process during 2014 and will be remediated separately at a future date. A total of 19 sites remain subject to the JCO process.

The most significant assumptions underlying the estimate of remediation costs for all New Jersey Chrome sites are those related to the extent and concentration of chromium impacts in the soil, as these determine the quantity of soil that must be treated in place, the quantity that will have to be excavated and transported for offsite disposal, and the nature of disposal required. PPG regularly evaluates the assessments of costs incurred to date versus current progress and the potential cost impacts of the most recent information, including the extent of impacted soils, percentage of hazardous versus non-hazardous soils, daily soil excavation rates, and engineering, administrative and other associated costs. Based on these assessments, the reserve is adjusted accordingly. Principal factors affecting costs include refinements in the estimate of the mix of hazardous to non-hazardous soils to be excavated, an overall increase in soil volumes to be excavated, enhanced water management requirements, decreased daily soil excavation rates due to site conditions, initial estimates for remedial actions related to groundwater, and oversight and management costs. The reserve adjustments for the estimated costs to remediate all New Jersey Chrome sites are exclusive of any third party indemnification, as the recovery of any such amounts is uncertain.

Groundwater remediation at ~~PPG's~~the former Garfield Avenue chromium manufacturing site ~~in Jersey City~~ and five adjacent sites is expected to occur over several years after NJDEP's approval of athe work plan. Ongoing groundwater monitoring will be utilized to develop a final groundwater remedial action work plan which is currently expected to be submitted to NJDEP in 2021.

PPG’s financial reserve for remediation of all New Jersey Chrome sites is ~~$141~~$148 million at June 30, ~~2018.~~2019. The major cost components of this liability continue to be related to excavation, transportation and disposal of impacted soil, as well as construction services. These components each account for approximately ~~22%~~18%, ~~25%~~17% and ~~29%~~28% of the accrued amount, respectively.

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

Remediation: Glass, Chemical and Other ~~Legacy~~ Sites

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

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

Remediation: Reasonably Possible Matters

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

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

Other Matters

The Company had outstanding letters of credit and surety bonds of ~~$162~~$147 million and guarantees of $14 million as of June 30, ~~2018.~~2019. The Company does not believe any loss related to such guarantees is likely.


~~18.~~16.	Revenue Recognition

Net sales by segment and region for the three and six months ended June 30, 2019 and 2018 were as follows:



($ in millions)	Performance Coatings				Industrial Coatings				Total Net Sales
	Three Months Ended June 30				Three Months Ended June 30				Three Months Ended June 30
	2019		2018		2019		2018		2019		2018
United States and Canada		$1,110		$1,173		$623		$619		$1,733		$1,792
EMEA	793		811		462		468		1,255		1,279
Asia-Pacific	283		277		360		403		643		680
Latin America	244		237		149		143		393		380
Total		$2,430		$2,498		$1,594		$1,633		$4,024		$4,131



($ in millions)	Performance Coatings				Industrial Coatings				Total Net Sales
	Six Months Ended June 30				Six Months Ended June 30				Six Months Ended June 30
	2019		2018		2019		2018		2019		2018
United States and Canada		$2,063		$2,147		$1,236		$1,230		$3,299		$3,377
EMEA	1,481		1,518		888		941		2,369		2,459
Asia-Pacific	526		519		700		791		1,226		1,310
Latin America	468		474		286		292		754		766
Total		$4,538		$4,658		$3,110		$3,254		$7,648		$7,912


17.	Reportable Business Segment Information

PPG is a multinational manufacturer with 9 operating segments (which the Company refers to as “strategic business units”) that are organized based on the Company’s major ~~product~~products lines. ~~These operating~~The Company’s reportable business segments ~~are also~~include the ~~Company’s reporting units for purposes of testing goodwill for impairment.~~following two segments: Performance Coatings and Industrial Coatings. The operating segments have been aggregated based on economic similarities, the nature of their products, production processes, end-use markets and methods of ~~distribution into two reportable business segments.~~

Effective January 1, 2018, the coatings services operating segment was merged into the industrial coatings operating segment to achieve operational efficiencies and to realign management teams and operations to better deliver the Company's total value proposition and provide optimal solutions to its customers.

distribution.

The Performance Coatings reportable segment is comprised of the automotive refinish coatings, aerospace coatings, architectural coatings – Americas and Asia-Pacific, architectural coatings - EMEA, and protective and marine coatings operating segments. This reportable segment primarily supplies a variety of protective and decorative coatings, sealants and finishes along with paint strippers, stains and related chemicals, as well as transparencies and transparent armor.

The Industrial Coatings reportable segment is comprised of the automotive original equipment manufacturer (“OEM”) coatings, industrial coatings, packaging coatings, and the specialty coatings and materials operating segments. This reportable segment primarily supplies a variety of protective and decorative coatings and finishes along with adhesives, sealants, metal pretreatment products, optical monomers and coatings, precipitated silicas, ~~Teslin®~~and other specialty ~~materials, and coatings services.~~materials.

Reportable segment net sales and segment income for the three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018 were as follows:

Three Months Ended
June 30 Six Months Ended
June 30
($ in millions) 2018 2017 2018 2017
As Restated As Restated
Net sales:
Performance Coatings
$2,498

$2,299

$4,658

$4,316
Industrial Coatings 1,633
1,505
3,254
2,974
Total
$4,131

$3,804

$7,912

$7,290
Segment income: ^(a)

Performance Coatings
$428

$405

$708

$689
Industrial Coatings 223
264
462
540
Total
$651

$669

$1,170

$1,229
Corporate ^(a)
(23 ) (27 ) (66 ) (88 )
Interest expense, net of interest income (24 ) (22 ) (45 )
(43 )
Legacy items ^(a),(b)
1
1
5
(5 )
Business restructuring charge (83 ) —
(83 ) —
Accelerated depreciation related to restructuring actions (5 ) —
(5 ) —
Legacy legal settlements (10 ) 18
(10 ) 18
Accounting investigation costs (9 ) —
(9 ) —
Impairment of a non-manufacturing asset (9 ) —
(9 ) —
Costs related to customer assortment change (10 ) —
(14 ) —
Environmental remediation charges —
—
(34 ) —
Gain from sale of a business —
25
—
25
Transaction-related costs ^(c)
—
(5 ) —
(9 )
Pension settlement charge —
—
—
(22 )
Income from continuing operations before income taxes
$479

$659

$900

$1,105



	Three Months Ended June 30						Six Months Ended June 30
($ in millions)	2019			2018			2019			2018
Net sales:
Performance Coatings		$2,430			$2,498			$4,538			$4,658
Industrial Coatings	1,594			1,633			3,110			3,254
Total		$4,024			$4,131			$7,648			$7,912
Segment income:
Performance Coatings		$425			$428			$722			$708
Industrial Coatings	235			223			453			462
Total		$660			$651			$1,175			$1,170
Corporate	(45		)	(23		)	(90		)	(66		)
Interest expense, net of interest income	(28		)	(24		)	(53		)	(45		)
Legacy items ^(a)	1			1			(1		)	5
Business restructuring, net	(176		)	(83		)	(173		)	(83		)
Costs associated with accounting investigations	(3		)	(9		)	(7		)	(9		)
Environmental remediation charges, net	(30		)	—			(40		)	(34		)
Acquisition-related costs ^(b)	(10		)	—			(17		)	—
Accelerated depreciation and other costs from restructuring actions	(6		)	(5		)	(12		)	(5		)
Impairment of a non-manufacturing asset	—			(9		)	—			(9		)
Legacy legal settlement	—			(10		)	—			(10		)
Costs related to customer assortment changes	—			(10		)	—			(14		)
Income before income taxes		$363			$479			$782			$900

(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 certain environmental remediation costs, and certain other charges which are not associated with PPG's current business portfolio.

~~(c)~~(b)

~~Transaction-related~~Acquisition-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~~divestitures 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~~inventory acquired in acquisitions.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and the notes thereto included in the condensed consolidated financial statements in Part I, Item 1, “Financial Statements,” of this report and in conjunction with the ~~2017~~2018 Form 10-K/A. As described in Note 2, “Restatement of Previously Reported Consolidated Annual and Condensed Consolidated Quarterly (unaudited) Financial Statements,” we restated our audited consolidated financial statements for the years ended December 31, 2017 and 2016. We have also restated certain unaudited quarterly results related to the three months ended December 31, 2016, March 31, 2017, June 30, 2017 (and six months ended), September 30, 2017 (and nine months ended) and December 31, 2017. The impact of the restatement is reflected below in Management's Discussion and Analysis of Financial Condition and Results of Operations.10-K.

Executive Overview

Below are our key financial results for the three months ended June 30, ~~2018:~~2019:

Net sales were approximately ~~$4.1~~$4.0 billion, ~~up 8.6%~~down 2.6% compared to the prior year.

Cost of sales, exclusive of depreciation and amortization ("Cost of sales") was ~~$2.4~~$2.3 billion, ~~up 14.2%~~down 3.8% versus prior year. As a percentage of sales, Cost of sales ~~increased 2.8%~~decreased 0.7%.

Selling, general and administrative ("SG&A") expense was ~~$0.9 billion, up 7.9%~~$934 million, down 1.2% year-over-year. As a percentage of sales, SG&A expense ~~decreased 0.1%~~increased 0.3%.

Income before income taxes was ~~$479~~$363 million.

The reported effective tax rate was ~~21.7%~~23.7%. The adjusted effective tax rate was 23.8%.

Income from continuing operations, net of tax (attributable to PPG) was ~~$371~~$270 million.

Earnings per diluted share from continuing operations was ~~$1.51.~~$1.13.

~~For~~Below are our key financial results for the six months ended June 30, ~~2018:~~2019:

Net sales were approximately $7.6 billion, down 3.3% compared to the prior year.

Cost of sales was $4.4 billion, down 4.4% versus prior year. As a percentage of sales, Cost of sales decreased 0.6%.

SG&A expense was $1.8 billion, down 1.5% year-over-year. As a percentage of sales, SG&A expense increased 0.4%.

Income before income taxes was $782 million.

The reported effective tax rate was 24.0%. The adjusted effective tax rate was 24.1%.

Income from continuing operations, net of tax (attributable to PPG) was $582 million.

Earnings per diluted share from continuing operations was $2.44.

For the six months ended June 30, 2019:

Cash flows ~~from~~used by operating activities - continuing operations was ~~$131~~$486 million, ~~a decrease~~an increase of ~~$301~~$355 million year-over-year.

Capital expenditures, including business acquisitions (net of cash acquired), was ~~$216~~$494 million.

The Company paid ~~$222~~$227 million in dividends and repurchased ~~$1,063~~$175 million of its outstanding common stock.

Performance in the second quarter of ~~2018~~2019 compared to the second quarter of ~~2017~~2018

Performance Overview

Net Sales by Region



	Three Months Ended June 30				Percent Change
($ in millions, except percentages)	2019		2018		2019 vs. 2018
United States and Canada		$1,733		$1,792	(3.3	)%
Europe, Middle East and Africa (EMEA)	1,255		1,279		(1.9	)%
Asia-Pacific	643		680		(5.4	)%
Latin America	393		380		3.4	%
Total		$4,024		$4,131	(2.6	)%

Three Months Ended
June 30 Percent Change
($ in millions, except percentages) 2018 2017 2018 vs. 2017
As Restated

United States and Canada
$1,792

$1,681
6.6 %
Europe, Middle East and Africa (EMEA) 1,279
1,152
11.0 %
Asia-Pacific 680
608
11.8 %
Latin America 380
363
4.7 %
Total
$4,131

$3,804
8.6 %
Net sales decreased $107 million due to the following:

● Lower sales volumes (-4%)

~~2018 vs. 2017~~

~~Net sales increased $327 million due to the following:~~

~~● Higher sales volumes (+3%~~● Unfavorable foreign currency translation (-3%)

~~● Favorable foreign currency translation (+2%)~~

~~● Higher selling prices (+2%)~~

~~● Net sales from acquired businesses (+1%)~~

In the United States and Canada region, sales volumes were higher by a low-single-digit percentage. Aerospace coatings, automotive refinish 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 and architectural national retail (DIY) sales were up modestly aided by the launch of PPG OLYMPIC® stain at The Home Depot®. Lower sales volumes in the architectural independent dealer channel partially offset these gains. 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 modestly higher. Strong sales volume growth in general industrial 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 continued to be lower due to customer project delays.

In the Asia-Pacific region, sales volumes grew a mid-single-digit percentage with above market growth in aerospace coatings, automotive refinish coatings, general industrial coatings and protective and marine coatings partially offset by lower sales volume growth in packaging coatings.

In the Latin America region, sales volumes expanded by a high-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 grew organic sales by a high-single-digit percentage driven by strong waterborne product and project sales. 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 $30 million, primarily from The Crown Group.~~

Foreign currency translation increased net sales approximately $90 million as the U.S. dollar weakened against several foreign currencies versus the prior year, most notably the Mexican peso and the euro.

Partially offset by:

● Higher selling prices (+2%)

● Higher acquisition-related sales, net of dispositions (+2%)

Higher selling prices were achieved across all businesses, reflecting the value of our products and services. These increases helped to offset other cost inflation.

U.S and Canada net sales decreased, primarily due to lower sales volumes.

Europe, Middle East and Africa ("EMEA") net sales decreased, primarily due to unfavorable foreign currency translation.

Asia-Pacific net sales decreased, due to unfavorable foreign currency translation and lower sales volumes.

Latin America net sales increased, primarily due to higher selling prices.

Foreign currency translation decreased net sales approximately $130 million as the U.S. dollar strengthened against several foreign currencies versus the prior year, most notably the euro, Mexican peso and Chinese yuan.

For specific business results see the Performance of Reportable Business Segments section within Item 2 of this Form 10-Q.

Cost of Sales, exclusive of depreciation and amortization


	Three Months Ended June 30						Percent Change		Three Months Ended June 30						Percent Change
($ in millions, except percentages)	2018			2017			2018 vs. 2017		2019			2018			2019 vs. 2018
Cost of sales, exclusive of depreciation and amortization		$2,379			$2,083		14.2	%		$2,288			$2,379		(3.8	)%
Cost of sales as a percentage of net sales	57.6		%	54.8		%	2.8	%	56.9		%	57.6		%	(0.7	)%

Cost of sales, exclusive of depreciation and amortization, decreased $91 million primarily due to the following:

~~2018 vs. 2017~~

~~Cost of sales, exclusive of depreciation and amortization, increased $296 million primarily due to the following:~~

~~● Higher raw material costs~~

~~● Foreign currency translation~~

~~● Higher~~● Lower sales volumes

~~● 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.~~

~~● Cost of sales attributable to acquired businesses~~

~~Partially offset by:~~

~~● Lower manufacturing costs, including restructuring cost savings~~

● Foreign currency translation

Partially offset by:

● Cost of sales attributable to acquired businesses

● Other cost inflation

Selling, general and administrative expenses


	Three Months Ended June 30						Percent Change		Three Months Ended June 30						Percent Change
($ in millions, except percentages)	2018			2017			2018 vs. 2017		2019			2018			2019 vs. 2018
				As Restated
Selling, general and administrative expenses (SG&A)		$945			$876		7.9	%		$934			$945		(1.2	)%
Selling, general and administrative expenses as a percentage of net sales	22.9		%	23.0		%	(0.1	)%	23.2		%	22.9		%	0.3	%

SG&A expense decreased $11 million primarily due to the following:

~~2018 vs. 2017~~

~~SG&A expense increased $69 million primarily due to the following:~~

~~● Foreign currency translation~~

~~● Wage and other cost inflation~~

● Foreign currency translation

Partially offset by:

● 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 10-Q.~~

~~● Restructuring cost savings~~

~~● Lower selling and advertising expense~~

Other costs and income


	Three Months Ended June 30						Percent Change		Three Months Ended June 30						Percent Change
($ in millions, except percentages)	2018			2017			2018 vs. 2017		2019			2018			2019 vs. 2018
				As Restated
Interest expense, net of Interest income		$24			$22		9.1	%		$28			$24		16.7	%
Other charges		$6			$8		(25.0	)%		$29			$6		383.3	%
Other income		($24	)		($69	)	(65.2	)%		($31	)		($24	)	29.2	%

Other ~~income~~charges

Other ~~income was lower~~charges were higher in the ~~second quarter of 2018~~three months ended June 30, 2019 compared to prior year due to ~~the absence of the gain on the sale of the Plaka business of $25 million and income from a legacy legal settlement of $18 million recorded in the second quarter of 2017.~~

environmental remediation charges.

Effective tax rate and earnings per diluted share


	Three Months Ended June 30						Percent Change		Three Months Ended June 30						Percent Change
($ in millions, except percentages)	2018			2017			2018 vs. 2017		2019			2018			2019 vs. 2018
				As Restated
Income tax expense		$104			$157		(33.8	)%		$86			$104		(17.3	)%
Effective tax rate	21.7		%	23.8		%	(2.1	)%	23.7		%	21.7		%	2.0	%
Adjusted effective tax rate, continuing operations*	22.0		%	24.3		%	(2.3	)%	23.8		%	22.0		%	1.8	%

Earnings per diluted share, continuing operations		$1.51			$1.92		(21.4	)%		$1.13			$1.51		(25.2	)%
Adjusted earnings per diluted share*		$1.90			$1.80		5.6	%		$1.85			$1.90		(2.6	)%
*See Regulation G Reconciliation below

The effective tax rate for the three months ending June 30, ~~2018~~2019 reflects the benefit of U.S. tax legislation enacted in December 2017 as well as the impact of certain discrete tax items. The Company expects that its full year ~~2018~~2019 adjusted effective tax rate will be between ~~23.0%~~23% and ~~24.0%~~25%.

~~Earnings~~Adjusted earnings per diluted share from continuing operations for the three months ended June 30, 2019 and 2018 decreased year-over-year due to ~~the business restructuring charge as well as other~~ items ~~included in Other income as~~ described further in the Regulation G reconciliation. ~~The Company benefited from the 9.6 million shares repurchased in the first half of 2018 and 5.8 million shares repurchased in the third and fourth quarters of 2017.~~

Regulation G Reconciliation - Results from Operations

PPG ~~Industries~~believes investors’ understanding of the Company’s operating performance is enhanced by the disclosure of net income, earnings per diluted share and the effective tax rate adjusted for certain charges. PPG’s management considers this information useful in providing insight into the Company’s ongoing operating performance because it excludes the impact of items that cannot reasonably be expected to recur on a quarterly basis or that are not attributable to our primary operations. Net income, earnings per diluted share and the effective tax rate adjusted for these items are not recognized financial measures determined in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and should not be considered a substitute for net income, earnings per diluted share, the effective tax rate or other financial measures as computed in accordance with U.S. GAAP. In addition, adjusted net income, earnings per

diluted share and the effective tax rate may not be comparable to similarly titled measures as reported by other companies.

Income before income taxes from continuing operations is reconciled to adjusted income before income taxes from continuing operations, the effective tax rate from continuing operations is reconciled to the adjusted effective tax rate from continuing operations and net income from continuing operations (attributable to PPG) and earnings per share – assuming dilution (attributable to PPG) are reconciled to adjusted net income from continuing operations (attributable to PPG) and adjusted earnings per share – assuming dilution below:



	Three Months Ended June 30, 2019
($ 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		$363		$86	23.7	%		$270		$1.13
Adjusted for:
Business restructuring, net	176		43		24.4	%	133		0.56
Accelerated depreciation and other costs from restructuring actions	6		1		17.8	%	5		0.02
Costs associated with accounting investigations	3		1		24.3	%	2		0.01
Environmental remediation charges, net	30		7		24.3	%	23		0.10
Acquisition-related costs	10		2		23.8	%	8		0.03
Adjusted, continuing operations, excluding certain items		$588		$140	23.8	%		$441		$1.85



	Three Months Ended June 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		$479		$104	21.7	%		$371		$1.51
Adjusted for:
Business restructuring, net	83		20		24.2	%	63		0.25
Costs related to customer assortment changes	10		2		24.3	%	8		0.03
Accelerated depreciation from restructuring actions	5		1		23.8	%	4		0.02
Legacy legal settlement	10		2		24.3	%	8		0.03
Costs associated with accounting investigations	9		2		24.3	%	7		0.03
Impairment of a non-manufacturing asset	9		2		24.3	%	7		0.03
Adjusted, continuing operations, excluding certain items		$605		$133	22.0	%		$468		$1.90

Performance of Reportable Business Segments

Performance Coatings



	Three Months Ended June 30				$ Change			% Change
($ in millions, except per share amounts)	2019		2018		2019 vs. 2018			2019 vs. 2018
Net sales		$2,430		$2,498		($68	)	(2.7	)%
Segment income		$425		$428		($3	)	(0.7)	%

Performance Coatings net sales decreased due to the following:

● Lower sales volumes (-3%)

● Unfavorable foreign currency translation (-3%)

Partially offset by:

● Higher selling prices (+3%)

● Slightly higher acquisition-related sales, net of dispositions

Higher selling prices were achieved across all businesses. Unfavorable foreign currency translation impacted all businesses.

Architectural coatings - Americas and Asia-Pacific organic sales were lower by a high-single-digit percentage primarily driven by certain previously announced customer assortment changes in the U.S. Do-it-yourself ("DIY") channel. U.S. and Canada company-owned stores sales were relatively flat due to wetter than normal weather. The PPG-Comex architectural coatings businesses had slightly higher organic sales and continued to open new concessionaire locations.

Architectural coatings - EMEA organic sales increased by a low-single-digit percentage year-over-year driven by higher selling prices. Sales volumes were down in certain countries driven by wetter than normal weather conditions.

Automotive refinish coatings sales volumes decreased by a mid-single-digit percentage year-over-year due to strong sales volumes in the U.S. and Europe in the prior year. U.S. industry demand was soft evidenced by lower collision claims during the quarter.

Aerospace coatings sales volumes grew by a high-single-digit percentage in the quarter. This increase was supported by technology-advantaged products, above-market volume growth and sales growth across all major technology platforms.

Protective and marine coatings sales volumes increased by a mid-single-digit percentage driven by strong sales volumes in China and Europe.

Segment income decreased $3 million year-over-year due to the earnings impact of lower sales volumes, other cost inflation and unfavorable foreign currency translation of approximately $10 million, partially offset by higher selling prices.

Looking Ahead

Looking ahead, industry demand levels are expected to be similar to those experienced in the second quarter. Sales will be sequentially modestly lower due to normal seasonality. Acquisition-related sales are forecast to add about $15 million of sales growth primarily from the SEM acquisition. Based on current exchange rates, foreign currency translation is expected to have a modest unfavorable impact on segment sales of approximately $15 to $25 million.

From a business perspective, continued strong performance is expected in aerospace coatings in the third quarter. For architectural coatings - EMEA, third quarter net sales are expected to be lower sequentially due to normal seasonal patterns. Protective and marine coatings sales volume growth is expected to continue in the third quarter with more moderate sales year-over-year. In automotive refinish coatings, improved year-over-year sales volumes are expected in the third quarter due to the unfavorable impact of PPG-specific customer inventory destocking in the prior year.

Industrial Coatings



	Three Months Ended June 30				$ Change			% Change
($ in millions, except per share amounts)	2019		2018		2019 vs. 2018			2019 vs. 2018
Net sales		$1,594		$1,633		($39	)	(2.4	)%
Segment income		$235		$223		$12		5.4	%

Industrial Coatings segment net sales decreased due to the following:

● Lower sales volumes (-5%)

● Unfavorable foreign currency translation (-4%)

Partially offset by:

● Higher acquisition-related sales, net of dispositions (+5%)

● Higher selling prices (+2%)

Higher selling prices were achieved across all businesses. Unfavorable foreign currency translation affected all businesses.

Sales volumes decreased a high-single-digit percentage in the automotive OEM coatings business versus the prior year, which was consistent with the overall global industry automotive build rate largely driven by China. Partially offsetting the lower sales volumes were higher selling prices in all major regions.

Industrial coatings sales volumes were down a low-single-digit percentage in the second quarter. Sales volumes were impacted by lower coil, general finishes, appliances and transportation end-use demand. Selling prices continued to increase during the quarter.

Packaging coatings organic sales were down a low-single-digit percentage versus the prior year, as year-over-year growth moderated due to more modest customer adoption rates for new technologies. Sales volumes increased in Latin America due to recent customer wins in the region.

Segment income increased $12 million year-over-year, including unfavorable foreign currency translation of approximately $10 million related to the Chinese yuan and the euro. Segment income benefited from improving selling prices and cost savings initiatives, which were offset by the earnings impact of lower sales volumes.

Looking ahead

Looking ahead, we expect that global industrial demand will remain subdued through the third quarter with inconsistencies by region. Sales volume trends are expected to remain similar in the third quarter and modestly improve in the fourth quarter. The company will continue to prioritize implementing selling price increases and operating margin recovery. In addition, acquisition-related sales are forecast to add about $80 million of sales growth from Whitford and Hemmelrath. Based on current exchange rates, foreign currency translation is expected to have a modest unfavorable impact on segment sales of approximately $15 to $25 million.

From a business perspective, industrial coatings sales volumes are anticipated to be similar in the third quarter due to the expected continuation of weak industrial production activity. Packaging coatings sales volume growth will continue to be modest due to lower customer adoption rates for new technologies and the anniversary of prior-year customer conversions. Global automotive industry demand is expected to remain soft in the third quarter for most regions with greater volatility expected in China.

Performance in the first six months of 2019 compared to the first six months of 2018

Performance Overview

Net Sales by Region



	Six Months Ended June 30				Percent Change
($ in millions, except percentages)	2019		2018		2019 vs. 2018
United States and Canada		$3,299		$3,377	(2.3	)%
Europe, Middle East and Africa (EMEA)	2,369		2,459		(3.7	)%
Asia-Pacific	1,226		1,310		(6.4	)%
Latin America	754		766		(1.6	)%
Total		$7,648		$7,912	(3.3	)%

Net sales decreased due to the following:

● Unfavorable foreign currency translation (-4%)

● Lower sales volumes (-3%)

Partially offset by:

● Higher selling prices (+2%)

● Higher acquisition-related sales, net of dispositions (+2%)

Higher selling prices were achieved across all businesses, reflecting the value of our products and services. These increases helped to offset other cost inflation.

U.S. and Canada net sales decreased, primarily due to by lower sales volumes.

EMEA net sales decreased, primarily due to unfavorable foreign currency translation.

Asia-Pacific net sales decreased, due to unfavorable foreign currency translation and lower sales volumes.

Latin America net sales decreased, due to unfavorable foreign currency translation and lower sales volumes.

Foreign currency translation decreased net sales approximately $290 million as the U.S. dollar strengthened against several foreign currencies versus the prior year, most notably the euro, Mexican peso and Chinese yuan.

For specific business results see the Performance of Reportable Business Segments section within Item 2 of this Form 10-Q.

Cost of Sales, exclusive of depreciation and amortization



	Six Months Ended June 30						Percent Change
($ in millions, except percentages)	2019			2018			2019 vs. 2018
Cost of sales, exclusive of depreciation and amortization		$4,361			$4,560		(4.4	)%
Cost of sales as a percentage of net sales	57.0		%	57.6		%	(0.6	)%

Cost of sales, exclusive of depreciation and amortization, decreased $199 million primarily due to the following:

● Foreign currency translation

● Lower sales volumes

● Restructuring cost savings

Partially offset by:

● Cost of sales attributable to acquired businesses

● Raw materials and other cost inflation

Selling, general and administrative expenses



	Six Months Ended June 30						Percent Change
($ in millions, except percentages)	2019			2018			2019 vs. 2018
Selling, general and administrative expenses (SG&A)		$1,823			$1,851		(1.5	)%
Selling, general and administrative expenses as a percentage of net sales	23.8		%	23.4		%	0.4	%

SG&A expense decreased $28 million primarily due to the following:

● Foreign currency translation

● Restructuring cost savings

Partially offset by:

● Wage and other cost inflation

● SG&A expenses attributable to acquired businesses

Other costs and income



	Six Months Ended June 30						Percent Change
($ in millions, except percentages)	2019			2018			2019 vs. 2018
Interest expense, net of Interest income		$53			$45		17.8	%
Other charges		$43			$47		(8.5	)%
Other income		($47	)		($48	)	(2.1	)%

Other charges

Other charges were lower in the six months ended June 30, 2019 compared to prior year due to foreign currency impacts.

Other income

Other income in the six months ended June 30, 2019 was relatively flat compared to the prior year.

Effective tax rate and earnings per diluted share



	Six Months Ended June 30						Percent Change
($ in millions, except percentages)	2019			2018			2019 vs. 2018
Income tax expense		$188			$191		(1.6	)%
Effective tax rate	24.0		%	21.2		%	2.8	%
Adjusted effective tax rate, continuing operations*	24.1		%	21.5		%	2.6	%

Earnings per diluted share, continuing operations		$2.44			$2.81		(13.2	)%
Adjusted earnings per diluted share*		$3.23			$3.31		(2.4	)%
*See Regulation G Reconciliation below

The effective tax rate for the six months ending June 30, 2019 reflects the benefit of U.S. tax legislation enacted in December 2017 as well as the impact of certain discrete tax items. The Company expects that its full year 2019 adjusted effective tax rate will be between 23% and 25%.

Adjusted earnings per diluted share from continuing operations for the six months ended June 30, 2019 and 2018 decreased year-over-year due to items described further in the Regulation G reconciliation.

Regulation G Reconciliation - Results from Operations

PPG believes investors’ understanding of the Company’s operating performance is enhanced by the disclosure of net income, earnings per diluted share and the effective tax rate adjusted for certain charges. PPG’s management considers this information useful in providing insight into the Company’s ongoing operating performance because it excludes the impact of items that cannot reasonably be expected to recur on a quarterly basis or that are not attributable to our primary operations. Net income, earnings per diluted share and the effective tax rate adjusted for these items are not recognized financial measures determined in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and should not be considered a substitute for net income, earnings per diluted share, the effective tax rate or other financial measures as computed in accordance with U.S. GAAP. In addition, adjusted net income, earnings per diluted share and the effective tax rate may not be comparable to similarly titled measures as reported by other companies.

Three Months Ended June 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
$479

$104
21.7 %
$371

$1.51
Adjusted for:
Costs related to customer assortment change 10
2
24.3 % 8
0.03
Business restructuring charge 83
20
24.2 % 63
0.25
Accelerated depreciation from restructuring actions 5
1
23.8 % 4
0.02
Legacy legal settlement 10
2
24.3 % 8
0.03
Accounting investigation costs 9
2
24.3 % 7
0.03
Impairment of non-manufacturing asset 9
2
24.3 % 7
0.03
Adjusted, continuing operations, excluding certain items
$605

$133
22.0 %
$468

$1.90



	Six Months Ended June 30, 2019
($ 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		$782		$188	24.0	%		$582		$2.44
Adjusted for:
Business restructuring, net	173		42		24.4	%	131		0.55
Costs associated with accounting investigations	7		2		24.3	%	5		0.02
Environmental remediation charges, net	40		9		24.3	%	31		0.13
Acquisition-related costs	17		4		23.8	%	13		0.05
Accelerated depreciation and other costs from restructuring actions	12		3		17.8	%	9		0.04
Adjusted, continuing operations, excluding certain items		$1,031		$248	24.1	%		$771		$3.23


As Restated	Three Months Ended June 30, 2017
															Six Months Ended June 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 share			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		$659			$157		23.8	%		$497			$1.92			$900		$191	21.2	%		$699		$2.81
Adjusted for:
Transaction-related costs⁽¹⁾	5			2			37.9	%	3			0.01
Gain on sale of the Plaka business	(25		)	(1		)	3.2	%	(24		)	(0.09		)
Costs related to customer assortment changes															14		3		24.3	%	11		0.04
Environmental remediation charges															34		8		25.1	%	26		0.10
Business restructuring, net															83		20		24.2	%	63		0.25
Accelerated depreciation from restructuring actions															5		1		23.8	%	4		0.02
Legacy legal settlement	(18		)	(7		)	37.9	%	(11		)	(0.04		)	10		2		24.3	%	8		0.03
Costs associated with accounting investigations															9		2		24.3	%	7		0.03
Impairment of a non-manufacturing asset															9		2		24.3	%	7		0.03
Adjusted, continuing operations, excluding certain items		$621			$151		24.3	%		$465			$1.80			$1,064		$229	21.5	%		$825		$3.31


~~(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.

Performance of Reportable Business Segments

Performance Coatings


	Three Months Ended June 30				$ Change		% Change		Six Months Ended June 30				$ Change			% Change
($ in millions, except per share amounts)	2018		2017		2018 vs. 2017		2018 vs. 2017		2019		2018		2019 vs. 2018			2019 vs. 2018
			As Restated
Net sales		$2,498		$2,299		$199	8.7	%		$4,538		$4,658		($120	)	(2.6	)%
Segment income		$428		$405		$23	5.7	%		$722		$708		$14		2.0	%

Performance Coatings net sales decreased due to the following:

~~2018 vs. 2017~~

~~Performance Coatings net sales increased $199 million due to the following:~~

~~● Higher sales volumes (+4%)~~

~~● Higher selling prices (+3%)~~

~~● Favorable foreign currency translation (+2%)~~

Architectural coatings Americas and Asia Pacific sales volumes were slightly higher versus the prior year. This business benefited from one additional shipping day compared to the prior year second quarter. 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 driven by strong waterborne products, roof coatings and project sales. Organic sales volumes increased by a high-single-digit percentage in the U.S. and Canada company-owned stores. This increase was partially offset by lower independent dealer network sales volumes. The DIY channel was slightly higher than the prior year supported by the launch of OLYMPIC® stain brand at THE HOME DEPOT® during the second quarter of 2018.

~~Architectural coatings - EMEA sales volumes declined by a low-single-digit percentage year-over-year. Sales volumes were better than the first quarter but impacted by soft regional consumer demand.~~

Automotive refinish coatings organic sales grew by a mid-single-digit percentage year-over-year, led by above-market performance in all key geographical regions as customers continue to adopt PPG’s industry leading technologies. Collision claims in the U.S. and Canada were down in the second quarter of 2018 and miles driven were flat.

~~Aerospace coatings sales volumes grew slightly more than 10 percent, including above-market volume growth in the U.S. and Asia-Pacific. Aerospace sales grew across all major platforms.~~

Protective and marine coatings sales volumes increased by a low-single-digit percentage driven by strong protective coatings sales volumes in China. Marine coatings sales volumes were higher year-over-year.

Segment income increased $23 million year-over-year primarily due to strong sales volumes, higher selling prices, and restructuring savings partly offset by inflation in raw material and logistics costs. Favorable foreign currency translation increased segment income by approximately $10 million primarily driven by the Mexican peso and the euro.

~~Looking Ahead~~

In the third quarter of 2018, we expect raw material costs to remain elevated at similar levels experienced in the second quarter. There will be no material benefit from acquisition-related sales in the segment, and based on current exchange rates,● Unfavorable foreign currency translation ~~is expected~~(-3%)

● Lower sales volumes (-3%)

Partially offset by:

● Higher selling prices (+3%)

● Slightly higher acquisition-related sales, net of dispositions

Higher selling prices were achieved across all businesses. Unfavorable foreign currency translation affected all businesses.

Architectural coatings - Americas and Asia-Pacific organic sales were lower by a high-single-digit percentage primarily driven by certain previously announced customer assortment changes in the U.S. DIY channel. The U.S. and Canada company-owned stores network was relatively flat compared to ~~have an unfavorable impact on segment~~the prior year. The PPG-Comex architectural coatings businesses had slightly higher organic sales and ~~income in the third quarter. We anticipate additional year-over-year growth-related spending of up~~continued to ~~$5 million in the third quarter.~~open new concessionaire locations.

From a business perspective, we anticipate lower sales volumes in the DIY channel in the third quarter due to the previously communicated customer assortment change within the Architectural coatings Americas and Asia Pacific business. In Architectural coatings - EMEA ~~we expect demand patterns to be similar to those experienced~~organic sales increased by a mid-single-digit percentage year-over-year, including volume growth in ~~the second quarter of 2018 with the potential for lower~~all key countries.

Automotive refinish coatings organic sales decreased by a low-single-digit percentage year-over-year. Sales volumes were impacted by softer U.S. industry demand inevidenced by lower collision claims during the U.K. due to consumer apprehension surrounding the “Brexit” process. In automotive refinish coatings, we expect sales volumes to increase at a more modest pace in the third quarter, primarily driven by the U.S. and Canada region. In aerospace coatings, we anticipate a continuation of the trends seen in the second quarter of 2018. Marineyear.

Aerospace coatings sales volumes ~~are expected~~grew by over 10%. This increase was supported by market outperformance in all major platforms stemming from technology-advantaged products and robust industry demand.

Protective and marine coatings sales volumes increased by a high-single-digit percentage driven by strong sales volumes in China and Europe.

Segment income increased $14 million year-over-year due to ~~generally trend modestly positive in~~higher selling prices and continued cost management offset by the ~~third quarter.~~

earnings impact of lower sales volumes, other cost inflation and unfavorable foreign currency translation of approximately $20 million.

Industrial Coatings


	Three Months Ended June 30				$ Change			% Change		Six Months Ended June 30				$ Change			% Change
($ in millions, except per share amounts)	2018		2017		2018 vs. 2017			2018 vs. 2017		2019		2018		2019 vs. 2018			2019 vs. 2018
Net sales		$1,633		$1,505		$128		8.5	%		$3,110		$3,254		($144	)	(4.4	)%
Segment income		$223		$264		($41	)	(15.5	)%		$453		$462		($9	)	(1.9	)%

Industrial Coatings segment net sales decreased due to the following:

~~2018 vs. 2017~~

~~Industrial Coatings segment net sales increased $128 million due to the following:~~

~~● Higher sales volumes (+3%)~~

~~● Favorable foreign currency translation (+3%)~~

~~● Acquisition-related sales (+2%)~~

~~● Higher selling prices (+1%)~~

Sales volumes were up a low-single-digit percentage in the automotive OEM coatings business versus the prior year period, which is consistent with the overall global industry build rate. PPG’s sales volume growth was strongest in Latin America. Sales in the Asia Pacific region were flat 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 in late 2017. Sales volumes in China were consistent with automotive industry builds in the region.

Aggregate industrial coatings and specialty coatings and materials sales volumes grew year-over-year. Sales volumes were the strongest in Europe, Asia Pacific and Latin America driven by strong end-market demand for coil, heavy-duty equipment and electronic materials. 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. Sales volumes increased by~~● Lower sales volumes (-5%)

● Unfavorable foreign currency translation (-4%)

Partially offset by:

● Higher acquisition-related sales, net of dispositions (+3%)

● Higher selling prices (+2%)

Higher selling prices were achieved across all businesses. Unfavorable foreign currency translation affected all businesses.

Sales volumes decreased a high-single-digit percentage ~~in the U.S., Europe and Latin America. Asia-Pacific region volumes decreased stemming from prioritizing selling price increases over volume in the region.~~

Segment income decreased $41 million year-over-year. Segment income benefited from improving selling prices, restructuring savings and lower manufacturing costs, which were more than offset by elevated raw material costs and logistics costs. Favorable foreign currency translation added $5 million to segment income, primarily related to the Chinese yuan, the euro and the Mexican peso.

~~Looking ahead~~

~~In the third quarter of 2018, we expect modestly lower sequential sales due to seasonal patterns, most notably~~ in the automotive OEM coatings ~~where normal annual production shutdowns are planned. There is greater risk of~~business versus the prior year, which was consistent with the overall global industry automotive build rate. Partially offsetting the lower sales volumes were higher selling prices in all major regions.

Aggregate industrial ~~demand being~~coatings and specialty coatings and materials sales volumes were down a low-single-digit percentage. Sales volumes were impacted by lower coil and general finishes end-use demand. Selling prices increased during the year.

Packaging coatings sales volumes were down a low-single-digit percentage versus the prior year, as year-over-year growth moderated due to ~~uncertainties regarding global trade policies. We anticipate that the raw material and logistics cost inflationary environment will continue~~more modest customer adoption rates for new technologies. Sales volumes increased in Latin America due to recent customer wins in the ~~third quarter at similar levels as experienced in~~region.

Segment income decreased $9 million year-over-year. Segment income benefited from improving selling prices and from prior business restructuring actions, which were more than offset by the ~~second quarter. The company will continue to prioritize selling price increases~~earnings impact of lower sales volumes and ~~operating margin recovery, both of which are expected to improve in the third quarter. Based on current exchange rates,~~unfavorable foreign currency translation ~~is expected to have a negative impact on~~which decreased segment ~~sales and~~ income ~~in the third quarter 2018.~~

~~From a business perspective, global automotive industry growth in the third quarter is expected to be similar~~by approximately $15 million, primarily related to the second quarter of 2018. We anticipate continued favorable general industrial demand growth trends in aggregate. In packaging coatings, we anticipate sales volume growth will continue due to the ongoing industry conversion to BPA-non-intent interior can coatings with PPG’s year-over-year aggregate growth rates continuing at an above-market level.

~~Performance in the first six months of 2018 compared to the first six months of 2017~~

~~Performance Overview~~

~~Net Sales~~

Six Months Ended
June 30 Percent Change
($ in millions, except percentages) 2018 2017 2018 vs. 2017
As Restated

United States and Canada
$3,377

$3,224
4.7 %
Europe, Middle East and Africa (EMEA) 2,459
2,175
13.1 %
Asia-Pacific 1,310
1,191
10.0 %
Latin America 766
700
9.4 %
Total
$7,912

$7,290
8.5 %

~~2018 vs. 2017~~

~~Net sales increased $622 million due to the following:~~

~~● Favorable foreign currency translation (+4%)~~

~~● Higher selling prices (+2%)~~

~~● Higher sales volumes (+2%)~~

~~● 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 a 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 mid-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 six-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 $65 million, primarily from The Crown Group.~~

~~Foreign currency translation increased net sales by approximately $300 million as the U.S. dollar weakened against several foreign currencies versus the prior year, most notably the~~Chinese yuan, Mexican peso and the euro.

~~Cost of Sales, exclusive of depreciation and amortization~~

Six Months Ended
June 30 Percent Change
($ in millions, except percentages) 2018 2017 2018 vs. 2017
Cost of sales, exclusive of depreciation and amortization
$4,560

$3,985
14.4 %
Cost of sales as a percentage of net sales 57.6 % 54.7 % 2.9 %

~~2018 vs. 2017~~

~~Cost of sales, exclusive of depreciation and amortization, increased $575 million primarily due to the following:~~

~~● Foreign currency translation~~

~~● Higher raw material costs~~

~~● Higher sales volumes~~

~~● 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.~~

~~● Cost of sales attributable to acquired businesses~~

~~Partially offset by:~~

~~● Lower manufacturing costs, including restructuring cost savings~~

~~Selling, general and administrative expenses~~

Six Months Ended
June 30 Percent Change
($ in millions, except percentages) 2018 2017 2018 vs. 2017
As Restated
Selling, general and administrative expenses (SG&A)
$1,851

$1,751
5.7 %
Selling, general and administrative expenses as a percentage of net sales 23.4 % 24.0 % (0.6 )%

~~2018 vs. 2017~~

~~SG&A expense increased $100 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~~

~~● Lower selling and advertising expense~~

~~Other costs and income~~

Six Months Ended
June 30 Percent Change
($ in millions, except percentages) 2018 2017 2018 vs. 2017
As Restated
Interest expense, net of Interest income
($45 )
($43 ) 4.7 %
Pension settlement charge —

$22
(100.0 )%
Other charges
$47

$33
42.4 %
Other income
($48 )
($93 ) (48.4 )%

~~Pension settlement charge~~

During the first quarter of 2017, PPG made lump-sum payments to certain retirees who had participated in PPG's U.S. non-qualified pension plan (the "Nonqualified Plan") totaling approximately $40 million. As the lump-sum payments were in excess of the expected annual service and interest costs for the Nonqualified Plan, PPG remeasured the periodic benefit obligation of the Nonqualified Plan as of March 1, 2017 and recorded a corresponding settlement charge totaling $22 million.

~~Other charges~~

Other charges were higher in the six months ended June 30, 2018 compared to the comparable prior year period due to environmental remediation charges of $34 million. Offsetting this increase, the non-service components of net periodic pension and post-retirement benefit costs were lower by $10 million in the six months ended June 30, 2018 compared to the comparable prior year period due to higher expected return on assets and lower amortization of actuarial losses. We expect this trend to continue for the remainder of 2018.

~~Other income~~

Other income was lower in the six months ended June 30, 2018 due to the absence of a gain on the sale of a business of $25 million and income from a legacy legal settlement of $18 million recorded in 2017.

~~Effective tax rate and earnings per diluted share~~

Six Months Ended
June 30 Percent Change
($ in millions, except percentages) 2018 2017 2018 vs. 2017
As Restated
Income tax expense
$191

$267
(28.5 )%
Effective tax rate 21.2 % 24.2 % (3.0 )%
Adjusted effective tax rate, continuing operations* 21.5 % 24.7 % (3.2 )%

Earnings per diluted share, continuing operations
$2.81

$3.19
(11.9 )%
Adjusted earnings per diluted share*
$3.31

$3.13
5.8 %
*See Regulation G Reconciliation below

The effective tax rate for the six months ending June 30, 2018 reflects the benefit of U.S. tax legislation enacted in December 2017 as well as the impact of certain discrete tax items. The Company expects its full year 2018 effective tax rate will be between 23.0% and 24.0%.

Earnings per diluted share from continuing operations for the six months ended June 30, 2018 decreased year-over-year due to the business restructuring charge, as well as other items included in Other income as described further in the Regulation G reconciliation. The Company benefited from the 9.6 million shares repurchased in the first half of 2018 and 5.8 million shares repurchased in the third and fourth quarters of 2017.

~~Regulation G Reconciliation - Results from Operations~~

PPG Industries believes investors’ understanding of the Company’s operating performance is enhanced by the disclosure of net income, earnings per diluted share and the effective tax rate adjusted for certain charges. PPG’s management considers this information useful in providing insight into the Company’s ongoing operating performance because it excludes the impact of items that cannot reasonably be expected to recur on a quarterly basis or that are not attributable to our primary operations. Net income, earnings per diluted share and the effective tax rate adjusted

for these items are not recognized financial measures determined in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and should not be considered a substitute for net income, earnings per diluted share, the effective tax rate or other financial measures as computed in accordance with U.S. GAAP. In addition, adjusted net income, earnings per diluted share and the effective tax rate may not be comparable to similarly titled measures as reported by other companies.

Six Months Ended June 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
$900

$191
21.2 %
$699

$2.81
Adjusted for:
Costs related to customer assortment change 14
3
24.3 % 11
0.04
Environmental remediation charges 34
8
25.1 % 26
0.10
Business restructuring charge 83
20
24.2 % 63
0.25
Accelerated depreciation from restructuring actions 5
1
23.8 % 4
0.02
Legacy legal settlement 10
2
24.3 % 8
0.03
Accounting investigation costs 9
2
24.3 % 7
0.03
Impairment of non-manufacturing asset 9
2
24.3 % 7
0.03
Adjusted, continuing operations, excluding certain items
$1,064

$229
21.5 %
$825

$3.31

For the three months ended March 31, 2018, PPG determined that a portion of the Company’s reserve for unrecognized tax benefits should be released discretely in the first quarter, rather than be included in the effective tax rate to be applied over the course of the full year, reducing income tax expense for the first quarter by $15 million. In the first quarter Form 10-Q, this was shown as an adjustment to net income from continuing operations, excluding non-recurring items. In the second quarter of 2018, there is an additional $23 million of various tax items that should be treated as discrete items rather than be included in the annual effective tax rate.

PPG has determined that such tax items are likely to be incurred on a regular basis and will be part of PPG’s on-going tax expense and should not be treated as adjustments to net income from continuing operations. As such, PPG will not include the $15 million reserve release or similar recurring tax items going forward as an adjustment to net income from continuing operations.

As Restated Six Months Ended June 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
$1,105

$267
24.2 %
$828

$3.19
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
$1,093

$270
24.7 %
$813

$3.13


~~(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.

~~Performance of Reportable Business Segments~~

~~Performance Coatings~~

Six Months Ended
June 30 $ Change % Change
($ in millions, except per share amounts) 2018 2017 2018 vs. 2017 2018 vs. 2017
As Restated
Net sales
$4,658

$4,316

$342
7.9 %
Segment income
$708

$689

$19
2.8 %

~~2018 vs. 2017~~

~~Performance Coatings net sales increased $342 million due to the following:~~

~~● Favorable foreign currency translation (+4%)~~

~~● Higher selling prices (+2%)~~

~~● Higher sales volumes (+2%)~~

Architectural coatings - Americas and Asia Pacific sales volumes were flat 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 offset by lower DIY and independent dealer network channel declines, including the unfavorable impact from a 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 quarter.

~~Automotive refinish coatings organic sales grew by a mid-single-digit percentage year-over-year, with growth in all key 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 advantaged technology products.

Protective and marine coatings sales volumes increased by a mid-single-digit percentage year-over-year. Protective coatings sales volumes were up, driven by growth in China. These increases were somewhat offset by moderating decreases in marine coatings.

Segment income increased $19 million year-over-year despite significantly increasing raw material costs and wage and other cost inflation. These cost increases were offset by higher selling prices and lower manufacturing and overhead costs generated from disciplined cost management actions, including further benefits from the Company's 2016 restructuring program. Favorable foreign currency translation increased segment income by approximately $25 million, primarily related to the strengthening of the Mexican peso and the euro.

~~Industrial Coatings~~

Six Months Ended
June 30 $ Change % Change
($ in millions, except per share amounts) 2018 2017 2018 vs. 2017 2018 vs. 2017
Net sales
$3,254

$2,974

$280
9.4 %
Segment income
$462

$540

($78 ) (14.4 )%

~~2018 vs. 2017~~

~~Industrial Coatings segment net sales increased $280 million due to the following:~~

~~● Favorable foreign currency translation (+4%)~~

~~● Higher sales volumes (+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. PPG’s sales volume growth was strongest in Mexico and South America.

Industrial coatings and specialty coatings and materials sales volumes, in aggregate, continued to grow driven by strong end-market demand for heavy-duty equipment and electronics materials. From a geographic perspective, sales volumes growth was led by EMEA, Latin America and Asia Pacific. Acquisition-related sales from The Crown Group added approximately $60 million in sales during the first half 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 Europe and the U.S. and Canada. In the Asia Pacific region, sales volumes decreased.

Segment income decreased $78 million year-over-year primarily due to continuing significant raw material and logistics cost inflation, higher overhead costs and wage inflation, partially offset by lower manufacturing costs, including benefits from business restructuring actions and higher selling prices. Favorable foreign currency translation added $17 million to segment income.

Liquidity and Capital Resources

PPG had cash and short-term investments totaling ~~$1.1 billion and $1.5~~$1.0 billion at June 30, ~~2018~~2019 and December 31, ~~2017, respectively.~~2018.

Cash from operating activities - continuing operations for the six months ended June 30, ~~2018~~2019 was ~~$131~~$486 million. Cash from operating activities - continuing operations was ~~$432~~$131 million for the six months ended June 30, ~~2017.~~2018. Operating cash flow ~~decreased~~increased primarily due to ~~higher~~less growth in working ~~capital.~~capital in the first six months of 2019 compared to the prior year.

Other uses of cash during the six months ended June 30, ~~2018~~2019 included:

Capital expenditures, excluding acquisitions, of ~~$118~~$133 million.

Business acquisition cash spending of ~~$98 million.~~

~~Contributions to pension plans of $35~~$361 million.

Cash dividends paid of ~~$222~~$227 million.

Share repurchases of ~~$1,063~~$175 million.

During the year, PPG issued $470 million of commercial paper borrowings. The Company's commercial paper borrowings are supported by the five-year credit agreement entered into in 2015. As a result, the commercial paper borrowings as of June 30, 2019 are classified as long-term debt based on PPG's intent and ability to refinance these borrowings on a long-term basis. In February 2018, PPG completed a public debt offering of $300 million aggregate principal amount of 3.2% notes due 2023 and $700 million aggregate principal amount of 3.75% notes due 2028 and received aggregate net proceeds of $992 million.

Total capital spending in ~~2018~~2019 is expected to be up to 3.0% of full year sales. ~~PPG made a $25 million voluntary contribution to its U.S. defined benefit pension plans in January 2018.~~ PPG expects to make mandatory contributions to its non-U.S. pension plans in the range of $10 million to $20 million during the remaining six months of ~~2018 and~~2019. PPG may make voluntary contributions to its defined benefit pension plans in ~~2018~~2019 and beyond.

~~We intend~~A primary focus for the Company in 2019 will continue to ~~deploy our cash in a timely, disciplined manner with a continued emphasis on incremental earnings accretive initiatives, including additional acquisitions and share repurchases. The Company expects~~be cash deployment ~~for acquisitions and share repurchases of at least $2.4 billion for 2018.~~focused on long-term shareholder value creation.

PPG's ratio of total debt, ~~to equity ratio (total debt,~~ including ~~capital~~finance leases, to total debt and ~~PPG shareholders’ equity)~~equity was ~~51%~~52% at June 30, ~~2018~~2019 and ~~43% at~~ December 31, ~~2017.~~2018.

Operating Working Capital is a subset of total working capital and represents (1) trade receivables – net of the allowance for doubtful accounts, (2) FIFO inventories and (3) trade liabilities. We believe Operating Working Capital represents the key components of working capital under the operating control of our businesses. A key metric we use to measure improvement in our working capital management is Operating Working Capital as a percentage of sales (current quarter sales annualized).


($ in millions, except percentages)	June 30, 2018			December 31, 2017			June 30, 2017			June 30, 2019			December 31, 2018			June 30, 2018
							As Restated
Trade Receivables, Net		$3,094			$2,559			$2,785			$3,028			$2,505			$3,094
Inventories, FIFO	2,069			1,833			1,868			2,071			1,896			2,069
Trade Creditors’ Liabilities	2,464			2,321			2,187			2,319			2,177			2,464
Operating Working Capital		$2,699			$2,071			$2,466			$2,780			$2,224			$2,699
Operating Working Capital as a % of Sales	16.3		%	14.1		%	16.2		%	17.3		%	15.3		%	16.3		%
Days sales outstanding	60			57			59			62			56			60
Days payable outstanding	97			96			95			96			96			97

Other Liquidity Information

The Company continues to believe that cash on hand and short term investments, cash from operations and the Company's access to capital markets will continue to be sufficient to fund our operating activities, capital spending, acquisitions, dividend payments, debt service, share repurchases, contributions to pension plans and PPG's contractual obligations.

Environmental


	Three Months Ended June 30				Six Months Ended June 30				Three Months Ended June 30				Six Months Ended June 30
($ in millions)	2018		2017		2018		2017		2019		2018		2019		2018
Cash outlays for environmental remediation activities		$14		$10		$31		$22		$20		$14		$36		$31



($ in millions)	Remainder of ~~of 2018~~2019		Annually ~~2019~~2020 - ~~2022~~2023
Projected future cash outlays for environmental remediation activities		$34	45 - $65	$2520 - ~~$75~~$50

Restructuring

The 2016 restructuring actions ~~have anticipated annual~~expect to achieve annualized cost savings of approximately $125 million once fully ~~implemented. The company expects to achieve at least $60 million in savings in 2018.~~

A pretax restructuring charge of $83 million was recorded in PPG's second quarter 2018 financial results, of which $80 million represents employee severance and other cash costs. The remainder of the charge represents the write-down of certain assets. In addition, other cash costs of approximately $25 million will be incurred, consisting of approximately $10 million of incremental restructuring-related cash costs for certain items that are required to be expensed on an as-incurred basis and approximately $15 million for items which are expected to be capitalized. The Company also expects approximately $20 million of incremental non-cash accelerated depreciation expense for certain assets due to their reduced expected asset life as a result of this program, $5 million of which was recognized in the second quarter of 2018. Substantially all actions from this business restructuring plan are expected to be completeimplemented by the end of the ~~second~~third quarter 2019.

In May 2018, PPG initiated an $83 million global restructuring program. The program is largely centered around the change in customer assortment related to the U.S. architectural coatings DIY business. PPG recognized $18 million of ~~2019. The company expects~~savings from this program in 2018. We expect to achieve ~~annual~~annualized cost savings from the 2018 program of $85 million ~~upon full implementation.~~once fully implemented in 2020.

In June 2019, PPG initiated an approximately $185 million restructuring program. This program is a result of a comprehensive internal operational assessment to identify further opportunities to improve the profitability of the overall business portfolio. The 2019 program is expected to achieve approximately $125 million of annualized cost savings by the expected completion date in 2022.

Total restructuring savings are expected to be between $75 million and $85 million in 2019. In addition, the Company continues to review its cost structure to identify additional cost savings opportunities. See Note 7, “Business Restructuring,” to the accompanying condensed consolidated financial statements for further details on the Company's business restructuring programs.

Currency

Comparing exchange rates as of December 31, ~~2017~~2018 to June 30, ~~2018,~~2019, the U.S. dollar ~~strengthened~~weakened against ~~numerous~~certain currencies in which PPG operates, most notably the Canadian dollar and the Mexican ~~peso and euro.~~peso. As a result, consolidated net assets at June 30, ~~2018 decreased~~2019 increased by ~~$166~~$65 million compared to December 31, ~~2017.~~2018.

Comparing exchange rates during the first six months of ~~2018~~2019 to those of the first six months of ~~2017,~~2018, the U.S. dollar ~~weakened~~strengthened against the currencies of most countries in which PPG operates, most notably in South America, Europe Russia, the ~~euro, Mexican peso~~Middle East, South Africa, Asia, and ~~British pound.~~Australia. This had ~~a favorable~~an unfavorable impact on ~~income from continuing operations~~Income before income taxes for the six months ended June 30, ~~2018~~2019 of ~~$43~~$35 million from the translation of these foreign earnings into U.S. dollars.

New Accounting Standards

See Note 3,2, “New Accounting Standards,” to the accompanying condensed consolidated financial statements for further details on recently issued accounting guidance.

Commitments and Contingent Liabilities, including Environmental Matters

PPG is involved in a number of lawsuits and claims, both actual and potential, including some that it has asserted against others, in which substantial monetary damages are sought. See Part II, Item 1, “Legal Proceedings” of this Form 10-Q and Note ~~17,~~15, “Commitments and Contingent Liabilities,” to the accompanying condensed consolidated financial statements for a description of certain of these lawsuits.

As discussed in Part II, Item 1 and Note ~~17,~~15, although the result of any future litigation of such lawsuits and claims is inherently unpredictable, management believes that, in the aggregate, the outcome of all lawsuits and claims involving PPG, including asbestos-related claims, will not have a material effect on PPG's consolidated financial position or liquidity; however, any such outcome may be material to the results of operations of any particular period in which costs, if any, are recognized.

As also discussed in Note ~~17,~~15, PPG has significant reserves for environmental contingencies. Please refer to the Environmental Matters section of Note 1715 for details of these reserves. A significant portion of our reserves for environmental contingencies relate to ongoing remediation at PPG's former chromium manufacturing plant in Jersey City, N.J. and associated sites ("New Jersey Chrome"). The Company continues to analyze, assess and remediate

the environmental issues associated with New Jersey Chrome. Information will continue to be generated from the ongoing groundwater remedial investigation activities related to New Jersey Chrome and will be incorporated into a

final draft remedial action work plan for groundwater expected to be submitted to the New Jersey Department of Environmental Protection no later than ~~2020.~~2021.

It is possible that technological, regulatory and enforcement developments, the results of environmental studies and other factors could alter the Company’s expectations with respect to future charges against income and future cash outlays. Specifically, the level of expected future remediation costs and cash outlays is highly dependent upon activity related to New Jersey Chrome.

Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of the Company. Management’s Discussion and Analysis and other sections of this Quarterly Report contain forward-looking statements that reflect the Company’s current views with respect to future events and financial performance. You can identify forward-looking statements by the fact that they do not relate strictly to current or historic facts. Forward-looking statements are identified by the use of the words “aim,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “outlook,” “forecast” and other expressions that indicate future events and trends. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward looking statement, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our reports to the Securities and Exchange Commission. Also, note the following cautionary statements.

Many factors could cause actual results to differ materially from the Company’s forward-looking statements. Such factors include global economic conditions, increasing price and product competition by foreign and domestic competitors, fluctuations in cost and availability of raw materials, the ability to achieve selling price increases, the ability to recover margins, ~~the~~customer inventory levels, our ability to maintain favorable supplier relationships and arrangements, the timing of and the realization of anticipated cost savings from restructuring initiatives, the ability to identify additional cost savings opportunities, difficulties in integrating acquired businesses and achieving expected synergies therefrom, economic and political conditions in ~~international~~the markets we serve, the ability to penetrate existing, developing and emerging foreign and domestic markets, foreign exchange rates and fluctuations in such rates, fluctuations in tax rates, the impact of future legislation, the impact of environmental regulations, unexpected business disruptions, ~~our ability to successfully remediate the material weakness in our internal control over financial reporting disclosed in this report within the time periods and in the manner currently anticipated,~~ the effectiveness of our internal control over financial reporting, ~~including the identification of additional control deficiencies, further expenditures related to our restatement,~~ the results of governmental actions relating to pending investigations, the results of shareholder actions relating to the restatement of our financial statements and the unpredictability of existing and possible future litigation. However, it is not possible to predict or identify all such factors.

Consequently, while the list of factors presented here and in the ~~2017~~2018 Form ~~10-K/A~~10-K under ~~the caption “Item~~Item 1A ~~Risk Factors”~~ are considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements.

Consequences of material differences in the results compared with those anticipated in the forward-looking statements could include, among other things, lower sales or ~~earnings,~~income, business disruption, operational problems, financial loss, legal liability to third parties, other factors set forth in ~~“Item 1A. Risk Factors”~~Item 1A of the ~~2017~~2018 Form ~~10-K/A~~10-K and similar risks, any of which could have a material adverse effect on the Company’s consolidated financial condition, results of operations or liquidity.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Risk

As of June 30, 2019 and December 31, 2018, PPG had non-U.S. dollar denominated borrowings outstanding of $2.6 billion. A weakening of the U.S. dollar by 10% against European currencies and by 20% against Asian and South American currencies would have resulted in unrealized translation losses on these borrowings of $297 million as of June 30, 2019 and $299 million as of December 31, 2018, respectively.

The fair value of foreign currency forward contracts outstanding as of June 30, 2019 and December 31, 2018 was an asset of $9 million and $36 million, respectively. The potential reduction in PPG's Income before income taxes resulting from the impact of adverse changes in exchange rates on the fair value of its outstanding foreign currency hedge contracts of 10% for European and Canadian currencies and 20% for Asian and Latin American currencies for the three months ended June 30, 2019 was $306 million and $291 million for the period ended December 31, 2018.

In February 2018, PPG entered into U.S. dollar to euro cross currency swap contracts with a total notional amount of $575 million outstanding, ~~which had~~resulting in an asset with a fair value of ~~a net asset of $20~~$41 million and $35 million as of June 30, ~~2018. As of~~2019 and December 31, ~~2017, PPG had U.S. dollar to euro cross currency swap contracts with a total notional amount of $560 million outstanding, which had a fair value of a net asset of $2 million.~~2018, respectively. A 10% increase in the value of the euro to the U.S. dollar would have had an

unfavorable effect on the fair value of these swap contracts by reducing the value of these instruments by ~~$58~~$57 million at June 30, ~~2018~~2019 and December 31, ~~2017.~~2018.

Interest Rate Risk

In March of 2018, PPG entered into interest rate swaps which converted $525 million of fixed rate debt to variable rate debt. The fair value of these contracts was ~~a liability~~an asset of $2$35 million and $8 million as of June 30, ~~2018.~~2019 and December 31, 2018, respectively. An increase in variable interest rates of 10% would lower the fair value of these swaps and increase interest expense by $9 million ~~over~~and $10 million for the ~~term~~periods ended June 30, 2019 and December 31, 2018. A 10% increase in the interest rates in the U.S., Canada, Mexico and Europe and a 20% increase in the interest rates in Asia and South America would have an insignificant effect on PPG's variable rate debt obligations and interest expense for the periods ended June 30, 2019 and December 31, 2018, respectively. Further a 10% reduction in interest rates would have increased the present value of the ~~instrument.~~Company's fixed rate debt by approximately $72 million and $84 million as of June 30, 2019 and December 31, 2018, respectively; however, such changes would not have had an effect on PPG's income before taxes or cash flows for the periods ended June 30, 2019 and December 31, 2018.

There were no other material changes in the Company’s exposure to market risk from December 31, ~~2017~~2018 to June 30, ~~2018.~~2019. See Note ~~15,~~13, “Financial Instruments, Hedging Activities and Fair Value Measurements” for a description of our instruments subject to market risk.

Item 4. Controls and Procedures

a. Evaluation of disclosure controls and procedures. ~~The~~ Based on their evaluation as of the end of the period covered by this Form 10-Q, the Company’s ~~management is responsible for establishing~~principal executive officer and ~~maintaining adequate~~principal financial officer have concluded that the Company’s disclosure controls and procedures as(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ~~as amended~~ (the ~~"Exchange Act"~~“Exchange Act”)~~. Disclosure controls and procedures means controls and other procedures of the Company that~~) are ~~designed~~effective to ensure that information required to be disclosed by the Company in ~~the~~ reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in ~~the SEC’s~~Securities and Exchange Commission rules and ~~forms. Disclosure controls~~forms and ~~procedures include, without limitation, controls and procedures designed~~ to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

The Company’s principal executive officer and principal financial officer have evaluated the effectiveness of the Company’s disclosure controls and procedures as of June 30, 2018 and, due to the existence of the material weakness in internal control over financial reporting described below, the Company’s principal executive and principal financial officers have determined that such disclosure controls and procedures were not effective as of such date. In light of the material weakness, the Company performed additional analysis and other post-closing procedures to ensure the Company’s condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. Accordingly, the Company’s management, including its principal executive and principal financial officers, has concluded that the condensed consolidated financial statements included in this Form 10-Q present fairly, in all material respects, the Company’s financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

~~Material Weakness~~

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

As described in additional detail in the 2017 Form 10-K/A, the Company did not maintain effective controls within its financial close process. Until this material weakness is remediated, it could result in material misstatements of the Company’s financial statements that would not be prevented or detected.

~~Remediation of Material Weakness~~

~~In connection with the investigation described in Note 2, “Restatement of Previously Reported Condensed Consolidated Quarterly Financial Statements~~,” the Company identified and implemented, and continues to identify and implement, actions to improve the effectiveness of its internal control over financial reporting and disclosure controls and procedures, including plans to enhance the Company’s resources and training with respect to financial reporting and disclosure responsibilities. Management reviewed and will continue to review such actions with the Audit Committee. To date, the following steps have been taken towards the remediation of the Company’s material weakness:

The Company has terminated the employment of the former Vice President and Controller. Two employees who acted under his direction have been re-assigned to different positions within the Company where they do not have a role in the Company’s internal control over financial reporting or its disclosure controls and procedures.

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 is committed to maintaining a strong internal control environment and to ensuring that a proper, consistent tone is communicated throughout the organization, including the expectation that previously existing deficiencies will be remediated through the implementation of processes and controls to ensure strict compliance with generally accepted accounting principles. In addition to the steps set forth above, the Company plans to take other remedial measures as described below:

~~The Company will re-emphasize (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 will enhance its corporate finance department by adding personnel with responsibility for areas identified in the investigation and enhance segregation of duties in the finance department;~~

~~The Company will enhance policies and procedures relating to the preparation, approval and entry of journal entries;~~

~~The Company will enhance its process to evaluate and adjust certain significant expense accruals;~~

~~The Company will enhance its policies and procedures relating to inventory standard cost revaluations;~~

~~The Company will enhance its policies and procedures concerning accounting entries related to discontinued operations;~~

~~The Company will require additional annual/onboarding education for finance staff;~~

~~The Company will conduct additional periodic risk assessments and targeted internal audit reviews; and~~

~~The Company will separate the financial forecasting process from financial accounting.~~

As the Company continues to evaluate and work to improve internal control over financial reporting, the Company may determine to take additional measures to strengthen its internal control environment or modify the remediation efforts described above. Until the remediation efforts discussed above, including any additional remediation efforts that the Company identifies as necessary, are implemented, tested and deemed to be operating effectively, the material weakness described above will continue to exist.

b. Changes in internal control. ~~Other than the changes noted above under the heading "Remediation of Material Weakness," there~~ There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter ~~ended June 30, 2018~~ that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

The Company has self-reported to the SEC information concerning the internal investigation of accounting matters described in the Explanatory Note and in Note 2, “~~Restatement~~“Restatement of Previously Reported ~~Condensed~~ Consolidated ~~Quarterly~~Annual Financial ~~Statements~~"Statements" under Item 18 of ~~this~~the 2017 Form ~~10-Q~~.10-K/A. The ~~Company's cooperation~~Company continues to cooperate fully with the SEC’s ongoing investigation relating to these accounting matters. The Company is ~~continuing.~~also cooperating fully with an investigation into the same accounting matters commenced by the U.S. Attorney’s Office for the Western District of Pennsylvania.

On May 20, 2018, a putative securities class action lawsuit was filed in the U.S. District Court for the ~~District for the~~ Central District of California against the Company and ~~certain~~three of its current orand former officers. ~~This action,~~On September 21, 2018, an Amended Class Action Complaint was filed in the lawsuit. The Amended Complaint, captioned Trevor Mild v. PPG Industries, Inc., Michael H. McGarry, Vincent J. Morales, and Mark C. Kelly,, asserts securities fraud claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 on behalf of a putative ~~classes~~class of persons who purchased or otherwise acquired stock of the Company ~~during various time periods~~ between ~~April 24,~~January 19, 2017 and May 10, 2018. The allegations relate to, among other things, allegedly false and misleading statements and/or failures to disclose information about the Company’s business, operations and prospects. ~~This action remains pending.~~ The parties reached a settlement in principal on May 1, 2019. On June 2, 2019, the plaintiff filed with the Court a Petition for Preliminary Approval of the proposed settlement, including a proposed settlement amount of $25 million. The parties await the Court’s ruling on the Petition. If preliminary approval is granted, the parties will proceed with the remaining procedures required to obtain final approval of the settlement. PPG’s insurance carriers confirmed to the Company insurance coverage for the full amount of the proposed settlement.

From the late 1880’s until the early 1970’s, PPG owned property located in Cadogan and North Buffalo Townships, Pennsylvania which was used for the disposal of solid waste from PPG’s former glass manufacturing facility in Ford City, Pennsylvania. In October 2018, the Pennsylvania Department of Environmental Protection (the “DEP”) approved PPG’s cleanup plan for the Cadogan Property. In April 2019, PPG and the DEP entered into a consent order and agreement (“CO&A”) which incorporated PPG’s approved cleanup plan and a draft final permit for the collection and discharge of seeps emanating from the former disposal area. The CO&A includes a civil penalty of $1.2 million for alleged past unauthorized discharges. PPG’s former disposal area is also the subject of a citizens’ suit filed by the Sierra Club and PennEnvironment seeking remedial measures beyond the measures specified in PPG’s approved cleanup plan, a civil penalty in addition to the penalty included in the CO&A and plaintiffs’ attorneys fees. PPG believes ~~this action~~that the citizen’s suit is without merit and intends to defend itself ~~vigorously~~.vigorously.

For many years, PPG has been a defendant in lawsuits involving claims alleging personal injury from exposure to asbestos. For a description of asbestos litigation affecting the Company, see Note ~~17,~~15, “Commitments and Contingent Liabilities” to the accompanying condensed consolidated financial statements under Part I, Item 1 of this Form 10-Q.

In the past, the Company and others have been named as defendants in several cases in various jurisdictions claiming damages related to exposure to lead and remediation of lead-based coatings applications. PPG has been dismissed as a defendant from most of these lawsuits and has never been found liable in any of these cases. After having not been named in a new lead-related lawsuit for 15 years, PPG was named as a defendant in two new Pennsylvania state court lawsuits filed by Montgomery County and Lehigh County in the respective counties on October 4, 2018 and October 12, 2018. Both suits seek declaratory relief arising out of alleged public nuisances in the counties associated with the presence of lead paint on various buildings constructed prior to 1980. The Company believes these actions are without merit and intends to defend itself vigorously.

Item 1A. Risk Factors

There were no material changes in the Company’s risk factors from the risks disclosed in the ~~2017~~2018 Form ~~10-K/A.~~10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

~~The following table summarizes~~No shares were repurchased in the ~~Company's stock repurchase activity for the~~ three months ended June 30, ~~2018:~~

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⁾
April 2018
Repurchase program 1,383,817

$109.66
1,383,817
26,487,022
May 2018
Repurchase program 1,526,907

$104.19
1,526,907
26,212,461
June 2018
Repurchase program 1,457,280

$104.06
1,457,280
24,040,491
Total quarter ended June 30, 2018
Repurchase program 4,368,004

$105.88
4,368,004
24,040,491

~~(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 purchased under the programs have been calculated using PPG’s closing stock price on the last business day of the respective month. These repurchase programs have no expiration date.

2019 under the current $2.5 billion share repurchase program approved in December 2017. The maximum number of shares that may yet be purchased under this program is 14,226,341 shares as of June 30, 2019. This repurchase program has no expiration date.

Item 6. Exhibits

See the Index to Exhibits on ~~Page 50.~~page 43.

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Index to Exhibits

The following exhibits are filed as part of, or incorporated by reference into, this Form 10-Q.



†12		~~Computation of Ratio of Earnings to Fixed Charges for the Six Months Ended June 30, 2018 and for the Five Years Ended December 31, 2017.~~
†31.1		Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
†31.2		Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
††32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
††32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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

† Filed herewith.

†† Furnished herewith.

*The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

**Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statement of Income for the six months ended June 30, ~~2018~~2019 and ~~2017,~~2018, (ii) the Condensed Consolidated Balance Sheet at June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, (iii) the Condensed Consolidated Statement of Cash Flows for the six months ended June 30, ~~2018~~2019 and ~~2017,~~2018, and (iv) Notes to Condensed Consolidated Financial Statements for the six months ended June 30, ~~2018.~~

**Management contract, compensatory plan or arrangement required to be filed as an exhibit hereto pursuant to Item 601 of Regulation S-K.

2019.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



			PPG INDUSTRIES, INC.
			(Registrant)

Date:	July ~~20, 2018~~19, 2019	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)

5144



		PAGE
Part I. Financial Information
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Statement of Income	2
	Condensed Consolidated Statement of Comprehensive Income	3
	Condensed Consolidated Balance Sheet	4
	Condensed Consolidated Statement of ~~Cash Flows~~Shareholders' Equity	5
	Condensed Consolidated Statement of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	68
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3027
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4539
Item 4.	Controls and Procedures	4640
Part II. Other Information
Item 1.	Legal Proceedings	4841
Item 1A.	Risk Factors	4841
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4842
Item 6.	Exhibits	4942
Signature		5144



	Three Months Ended June 30, 2017
	As Previously Reported			Restatement Adjustment			Reference	As Restated
Net sales		$3,806			($2	)	(a)		$3,804
Selling, general and administrative	865			7			(b),(c),(d)	872
Other income	(72		)	3			(e)	(69		)

Income from continuing operations before income taxes		$671			($12	)			$659
Income tax expense	162			(5		)	(h)	157
Income from continuing operations		$509			($7	)			$502
Loss from discontinued operations, net of tax	(3		)	2			(e)	(1		)
Net income attributable to the controlling and noncontrolling interests		$506			($5	)			$501
Less: Net income attributable to noncontrolling interests	(5		)	—				(5		)
Net income (attributable to PPG)		$501			($5	)			$496
Amounts attributable to PPG:
Income from continuing operations, net of tax		$504			($7	)			$497
Loss from discontinued operations, net of tax	(3		)	2				(1		)
Net income (attributable to PPG)		$501			($5	)			$496

Earnings per common share:
Income from continuing operations, net of tax		$1.96			($0.03	)			$1.93
Loss from discontinued operations, net of tax	(0.01		)	0.01				—
Net income (attributable to PPG)		$1.95			($0.02	)			$1.93
Earnings per common share – assuming dilution:
Income from continuing operations, net of tax		$1.95			($0.03	)			$1.92
Loss from discontinued operations, net of tax	(0.01		)	0.01				—
Net income (attributable to PPG)		$1.94			($0.02	)			$1.92

Dividends per common share		$0.40			$—				$0.40



	Six Months Ended June 30, 2017
	As Previously Reported			Restatement Adjustment			Reference	As Restated
Net sales		$7,292			($2	)	(a)		$7,290
Selling, general and administrative	1,753			1			(b),(c),(d),(f)	1,754
Other charges	26			—			(g)	26
Other income	(96		)	3			(e)	(93		)

Income from continuing operations before income taxes		$1,111			($6	)			$1,105
Income tax expense	269			(2		)	(h)	267
Income from continuing operations		$842			($4	)			$838
Income from discontinued operations, net of tax	3			2			(e)	5
Net income attributable to the controlling and noncontrolling interests		$845			($2	)			$843
Less: Net income attributable to noncontrolling interests	(10		)	—				(10		)
Net income (attributable to PPG)		$835			($2	)			$833
Amounts attributable to PPG:
Income from continuing operations, net of tax		$832			($4	)			$828
Income from discontinued operations, net of tax	3			2				5
Net income (attributable to PPG)		$835			($2	)			$833

Earnings per common share:
Income from continuing operations, net of tax		$3.23			($0.01	)			$3.22
Income from discontinued operations, net of tax	0.01			0.01				0.02
Net income (attributable to PPG)		$3.24			$—				$3.24
Earnings per common share – assuming dilution:
Income from continuing operations, net of tax		$3.21			($0.02	)			$3.19
Income from discontinued operations, net of tax	0.01			0.01				0.02
Net income (attributable to PPG)		$3.22			($0.01	)			$3.21

Dividends per common share		$0.80			$—				$0.80



	Three Months Ended June 30, 2017
($ in millions)	As Previously Reported⁽¹⁾		Reclassifications			As Revised
Cost of sales, exclusive of depreciation and amortization		$2,082		$1			$2,083
Selling, general and administrative	872		4			876
Research and development, net	113		(1		)	112
Other charges	12		(4		)	8
Income from continuing operations before income taxes	659		—			659



	Six Months Ended June 30, 2017
($ in millions)	As Previously Reported ⁽¹⁾		Reclassifications			As Revised
Cost of sales, exclusive of depreciation and amortization		$3,987		($2	)		$3,985
Selling, general and administrative	1,754		(3		)	1,751
Research and development, net	223		(2		)	221
Other charges	26		7			33
Income from continuing operations before income taxes	1,105		—			1,105



	Three Months Ended June 30, 2018
($ in millions)	Without adoption			Adjustments			As Reported
Net sales		$4,134			($3	)		$4,131
Cost of sales, exclusive of depreciation and amortization	2,360			19			2,379
Selling, general and administrative	963			(18		)	945
Other income	(26		)	2			(24		)
Income from continuing operations before income taxes	479			—			479



($ in millions)	Future Amortization Expense
Remaining six months of 2018		$60
2019	120
2020	110
2021	105
2022	105
2023	95
Thereafter	249



($ 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	(2		)	(3		)	(5		)	(358	)
Foreign currency impact	(2		)	—			(2		)	—
June 30, 2018		$76			$—			$76		1,320



($ in millions, except for employees impacted)	Severance and Other Costs			Employees Impacted
December 31, 2017		$102		949
2018 Activity	(30		)	(491	)
Foreign currency	(3		)	—
June 30, 2018		$69		458



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⁾
April 2018
Repurchase program	1,383,817		$109.66	1,383,817	26,487,022
May 2018
Repurchase program	1,526,907		$104.19	1,526,907	26,212,461
June 2018
Repurchase program	1,457,280		$104.06	1,457,280	24,040,491
Total quarter ended June 30, 2018
Repurchase program	4,368,004		$105.88	4,368,004	24,040,491