UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-Q

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

For the quarterly period ended: March 31, ~~2020~~2021

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

For the transition period from _______ to _______

Commission file number 1-1687

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PPG INDUSTRIES INC.

(Exact name of registrant as specified in its charter)

25-0730780

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

Pennsylvania

(State or Other Jurisdiction of Incorporation or Organization)

One PPG Place, Pittsburgh, Pennsylvania

(Address of Principal Executive Offices)

15272

(Zip Code)

(412) 434-3131

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

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

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $1.66 ^2/3

PPG

New York Stock Exchange

0.875% Notes due 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

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

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

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


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

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

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

As of March 31, ~~2020, 235,923,428~~2021, 237,091,179 shares of the Registrant’s common stock, par value $1.66 2/3 per share, were outstanding.

PPG INDUSTRIES, INC. AND SUBSIDIARIES

INDEX

Table of Contents

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 March 31				Three Months Ended March 31
		2020	2019		2021	2020
Net sales	Net sales	$3,377	$3,624	Net sales	$3,881	$3,377
Cost of sales, exclusive of depreciation and amortization	Cost of sales, exclusive of depreciation and amortization	1,908	2,073	Cost of sales, exclusive of depreciation and amortization	2,232	1,908
Selling, general and administrative	Selling, general and administrative	905	889	Selling, general and administrative	891	905
Depreciation	Depreciation	93	86	Depreciation	90	93
Amortization	Amortization	36	32	Amortization	39	36
Research and development, net	Research and development, net	101	105	Research and development, net	102	101
Interest expense	Interest expense	32	31	Interest expense	30	32
Interest income	Interest income	(9)	(6)	Interest income	(6)	(9)

Business restructuring, net		7	(3)

Other charges	Other charges	3	14	Other charges	17	10
Other income	Other income	(18)	(16)	Other income	(13)	(18)
Income before income taxes	Income before income taxes	$319	$419	Income before income taxes	$499	$319
Income tax expense	Income tax expense	71	102	Income tax expense	114	71

Net income attributable to controlling and noncontrolling interests	Net income attributable to controlling and noncontrolling interests	$248	$317	Net income attributable to controlling and noncontrolling interests	$385	$248
Less: Net income attributable to noncontrolling interests		(5)	(5)
Net income attributable to noncontrolling interests				Net income attributable to noncontrolling interests	(7)	(5)
Net income (attributable to PPG)	Net income (attributable to PPG)	$243	$312	Net income (attributable to PPG)	$378	$243

Earnings per common share (attributable to PPG)	Earnings per common share (attributable to PPG)	$1.03	$1.32	Earnings per common share (attributable to PPG)	$1.59	$1.03

Earnings per common share (attributable to PPG) - assuming dilution	Earnings per common share (attributable to PPG) - assuming dilution	$1.02	$1.31	Earnings per common share (attributable to PPG) - assuming dilution	$1.58	$1.02

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

Condensed Consolidated Statement of Comprehensive ~~Income~~Income/(Loss) (Unaudited)

($ in millions)


		Three Months Ended March 31				Three Months Ended March 31
		2020	2019		2021	2020
Net income attributable to the controlling and noncontrolling interests	Net income attributable to the controlling and noncontrolling interests	$248	$317	Net income attributable to the controlling and noncontrolling interests	$385	$248
Other comprehensive (loss)/income, net of tax:
Other comprehensive(loss)/income, net of tax:				Other comprehensive(loss)/income, net of tax:
Defined benefit pension and other postretirement benefits	Defined benefit pension and other postretirement benefits	1	(6)	Defined benefit pension and other postretirement benefits	(5)	1
Unrealized foreign currency translation adjustments	Unrealized foreign currency translation adjustments	(706)	81	Unrealized foreign currency translation adjustments	(128)	(706)
Derivative financial instruments	Derivative financial instruments	3	—	Derivative financial instruments	0	3
Other comprehensive (loss)/income, net of tax		($702)	$75
Total comprehensive (loss)/income		($454)	$392
Other comprehensive loss, net of tax				Other comprehensive loss, net of tax	($133)	($702)
Total comprehensive income/(loss)				Total comprehensive income/(loss)	$252	($454)
Less: amounts attributable to noncontrolling interests:	Less: amounts attributable to noncontrolling interests:			Less: amounts attributable to noncontrolling interests:
Net income	Net income	(5)	(5)	Net income	(7)	(5)
Unrealized foreign currency translation adjustments	Unrealized foreign currency translation adjustments	10	1	Unrealized foreign currency translation adjustments	2	10
Comprehensive (loss)/income attributable to PPG		($449)	$388
Comprehensive income/(loss) attributable to PPG				Comprehensive income/(loss) attributable to PPG	$247	($449)

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

Table of Contents

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheet (Unaudited)

($ in millions)


		March 31, 2020	December 31, 2019			March 31, 2021	December 31, 2020
Assets	Assets				Assets
Current assets:	Current assets:				Current assets:
Cash and cash equivalents	Cash and cash equivalents	$1,886	$1,216		Cash and cash equivalents	$1,808	$1,826
Short-term investments	Short-term investments	50	57		Short-term investments	120	96
Receivables, net	Receivables, net	2,804	2,756		Receivables, net	3,034	2,726
Inventories	Inventories	1,859	1,710		Inventories	1,914	1,735
Other current assets	Other current assets	467	431		Other current assets	463	415
Total current assets	Total current assets	$7,066	$6,170		Total current assets	$7,339	$6,798
Property, plant and equipment (net of accumulated depreciation of $4,065 and $4,082)		2,863	2,983
Property, plant and equipment (net of accumulated depreciation of $4,367 and $4,349)					Property, plant and equipment (net of accumulated depreciation of $4,367 and $4,349)	3,052	3,127
Goodwill	Goodwill	4,243	4,470		Goodwill	5,153	5,102
Identifiable intangible assets, net	Identifiable intangible assets, net	1,918	2,131		Identifiable intangible assets, net	2,301	2,351
Deferred income taxes	Deferred income taxes	183	220		Deferred income taxes	334	379
Investments	Investments	245	258		Investments	429	267
Operating lease right-of-use assets	Operating lease right-of-use assets	784	782	��	Operating lease right-of-use assets	851	847
Other assets	Other assets	762	694		Other assets	680	685
Total	Total	$18,064	$17,708		Total	$20,139	$19,556
Liabilities and Shareholders’ Equity	Liabilities and Shareholders’ Equity				Liabilities and Shareholders’ Equity
Current liabilities:	Current liabilities:				Current liabilities:
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	$3,367	$3,496		Accounts payable and accrued liabilities	$3,815	$3,792
Restructuring reserves	Restructuring reserves	206	196		Restructuring reserves	244	281
Short-term debt and current portion of long-term debt	Short-term debt and current portion of long-term debt	1,456	513		Short-term debt and current portion of long-term debt	881	578
Current portion of operating lease liabilities	Current portion of operating lease liabilities	166	170		Current portion of operating lease liabilities	180	180
Total current liabilities	Total current liabilities	$5,195	$4,375		Total current liabilities	$5,120	$4,831
Long-term debt	Long-term debt	4,751	4,539		Long-term debt	5,336	5,171
Operating lease liabilities	Operating lease liabilities	627	622		Operating lease liabilities	676	677
Accrued pensions	Accrued pensions	737	745		Accrued pensions	927	945
Other postretirement benefits	Other postretirement benefits	656	661		Other postretirement benefits	728	733
Deferred income taxes	Deferred income taxes	399	452		Deferred income taxes	422	435
Other liabilities	Other liabilities	862	911		Other liabilities	961	949
Total liabilities	Total liabilities	$13,227	$12,305		Total liabilities	$14,170	$13,741
Commitments and contingent liabilities (Note 16)
Commitments and contingent liabilities (Note 14)					Commitments and contingent liabilities (Note 14)
Shareholders’ equity:	Shareholders’ equity:				Shareholders’ equity:
Common stock	Common stock	$969	$969		Common stock	$969	$969
Additional paid-in capital	Additional paid-in capital	954	950		Additional paid-in capital	1,029	1,008
Retained earnings	Retained earnings	19,029	18,906		Retained earnings	19,719	19,469
Treasury stock, at cost	Treasury stock, at cost	(13,187)	(13,191)		Treasury stock, at cost	(13,148)	(13,158)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(3,042)	(2,350)		Accumulated other comprehensive loss	(2,730)	(2,599)
Total PPG shareholders’ equity	Total PPG shareholders’ equity	$4,723	$5,284		Total PPG shareholders’ equity	$5,839	$5,689
Noncontrolling interests	Noncontrolling interests	114	119		Noncontrolling interests	130	126
Total shareholders’ equity	Total shareholders’ equity	$4,837	$5,403		Total shareholders’ equity	$5,969	$5,815
Total	Total	$18,064	$17,708		Total	$20,139	$19,556

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

Table of Contents

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Shareholders' Equity (Unaudited)

($ in millions)


		Common Stock	Additional Paid-In Capital	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive Loss	Total PPG	Non-controlling Interests	Total		Common Stock	Additional Paid-In Capital	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive Loss	Total PPG	Non-controlling Interests	Total
January 1, 2020		$969	$950	$18,906	($13,191)	($2,350)	$5,284	$119	$5,403
January 1, 2021										January 1, 2021	$969	$1,008	$19,469	($13,158)	($2,599)	$5,689	$126	$5,815
Net income attributable to the controlling and noncontrolling interests	Net income attributable to the controlling and noncontrolling interests	—	—	243	—	—	$243	5	$248	Net income attributable to the controlling and noncontrolling interests	—	—	378	—	—	$378	7	$385
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax	—	—	—	—	(692)	($692)	(10)	($702)	Other comprehensive loss, net of tax	—	—	—	—	(131)	($131)	(2)	($133)
Cash dividends	Cash dividends	—	—	(120)	—	—	($120)	—	($120)	Cash dividends	—	—	(128)	—	—	($128)	—	($128)

Issuance of treasury stock	Issuance of treasury stock	—	12	—	4	—	$16	—	$16	Issuance of treasury stock	—	25	—	10	—	$35	—	$35
Stock-based compensation activity	Stock-based compensation activity	—	(8)	—	—	—	($8)	—	($8)	Stock-based compensation activity	—	(4)	—	—	—	($4)	—	($4)

March 31, 2020		$969	$954	$19,029	($13,187)	($3,042)	$4,723	$114	$4,837
Reductions in noncontrolling interests										Reductions in noncontrolling interests	—	—	—	—	—	—	(1)	(1)
March 31, 2021										March 31, 2021	$969	$1,029	$19,719	($13,148)	($2,730)	$5,839	$130	$5,969


		Common Stock	Additional Paid-In Capital	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive (Loss)/Income	Total PPG	Non-controlling Interests	Total		Common Stock	Additional Paid-In Capital	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive Loss	Total PPG	Non-controlling Interests	Total
January 1, 2019		$969	$788	$18,131	($12,958)	($2,300)	$4,630	$102	$4,732
January 1, 2020										January 1, 2020	$969	$950	$18,906	($13,191)	($2,350)	$5,284	$119	$5,403
Net income attributable to the controlling and noncontrolling interests	Net income attributable to the controlling and noncontrolling interests	—	—	312	—	—	$312	5	$317	Net income attributable to the controlling and noncontrolling interests	—	—	243	—	—	$243	5	$248
Other comprehensive income/(loss), net of tax		—	—	—	—	76	$76	(1)	$75
Other comprehensive loss, net of tax										Other comprehensive loss, net of tax	—	—	—	—	(692)	($692)	(10)	($702)
Cash dividends	Cash dividends	—	—	(113)	—	—	($113)	—	($113)	Cash dividends	—	—	(120)	—	—	($120)	—	($120)
Purchase of treasury stock		—	—	—	(175)	—	($175)	—	($175)

Issuance of treasury stock	Issuance of treasury stock	—	121	—	63	—	$184	—	$184	Issuance of treasury stock	—	12	—	4	—	$16	—	$16
Stock-based compensation activity	Stock-based compensation activity	—	(10)	—	—	—	($10)	—	($10)	Stock-based compensation activity	—	(8)	—	—	—	($8)	—	($8)

March 31, 2019		$969	$899	$18,330	($13,070)	($2,224)	$4,904	$106	$5,010
March 31, 2020										March 31, 2020	$969	$954	$19,029	($13,187)	($3,042)	$4,723	$114	$4,837

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

Table of Contents

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Cash Flows (Unaudited)


		Three Months Ended March 31				Three Months Ended March 31
($ in millions)	($ in millions)	2020	2019	($ in millions)	2021	2020
Operating activities:	Operating activities:			Operating activities:
Net income attributable to controlling and noncontrolling interests	Net income attributable to controlling and noncontrolling interests	$248	$317	Net income attributable to controlling and noncontrolling interests	$385	$248

Adjustments to reconcile net income to cash from operations:	Adjustments to reconcile net income to cash from operations:			Adjustments to reconcile net income to cash from operations:
Depreciation and amortization	Depreciation and amortization	129	118	Depreciation and amortization	129	129
Pension expense	Pension expense	10	12	Pension expense	(9)	10

Environmental remediation charges	Environmental remediation charges	8	10	Environmental remediation charges	16	8
Business restructuring, net	Business restructuring, net	7	(3)	Business restructuring, net	0	7

Stock-based compensation expense	Stock-based compensation expense	7	9	Stock-based compensation expense	17	7

Equity affiliate income, net of dividends	Equity affiliate income, net of dividends	(4)	(4)	Equity affiliate income, net of dividends	(1)	(4)
Deferred income taxes	Deferred income taxes	(4)	(32)	Deferred income taxes	(7)	(4)
Cash contributions to pension plans	Cash contributions to pension plans	(2)	(3)	Cash contributions to pension plans	(1)	(2)
Cash used for restructuring actions	Cash used for restructuring actions	(18)	(15)	Cash used for restructuring actions	(26)	(18)
Change in certain asset and liability accounts (net of acquisitions):	Change in certain asset and liability accounts (net of acquisitions):			Change in certain asset and liability accounts (net of acquisitions):
Receivables	Receivables	(58)	(299)	Receivables	(354)	(58)
Inventories	Inventories	(206)	(152)	Inventories	(189)	(206)
Other current assets	Other current assets	(28)	(56)	Other current assets	(37)	(28)
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	(87)	(24)	Accounts payable and accrued liabilities	110	(87)
Taxes and interest payable	Taxes and interest payable	(28)	42	Taxes and interest payable	22	(28)
Noncurrent assets and liabilities, net	Noncurrent assets and liabilities, net	(27)	(22)	Noncurrent assets and liabilities, net	(32)	(27)
Other	Other	(106)	36	Other	(46)	(106)

Cash used for operating activities	Cash used for operating activities	($159)	($66)	Cash used for operating activities	($23)	($159)
Investing activities:	Investing activities:			Investing activities:
Capital expenditures	Capital expenditures	(37)	(47)	Capital expenditures	(80)	(37)
Business acquisitions, net of cash balances acquired	Business acquisitions, net of cash balances acquired	(44)	(57)	Business acquisitions, net of cash balances acquired	(356)	(44)

Payments for the settlement of cross currency swap contracts	Payments for the settlement of cross currency swap contracts	(2)	(6)	Payments for the settlement of cross currency swap contracts	(3)	(2)
Proceeds from the settlement of cross currency swap contracts	Proceeds from the settlement of cross currency swap contracts	10	16	Proceeds from the settlement of cross currency swap contracts	9	10
Other	Other	14	8	Other	6	14

Cash used for investing activities	Cash used for investing activities	($59)	($86)	Cash used for investing activities	($424)	($59)
Financing activities:	Financing activities:			Financing activities:

Proceeds on commercial paper and short-term debt, net of payments	Proceeds on commercial paper and short-term debt, net of payments	371	309	Proceeds on commercial paper and short-term debt, net of payments	300	371
Repayment of term loan				Repayment of term loan	(400)	0
Proceeds from revolving credit facility	Proceeds from revolving credit facility	800	—	Proceeds from revolving credit facility	0	800

Proceeds from the issuance of debt, net of discounts and fees				Proceeds from the issuance of debt, net of discounts and fees	692	0
Repayment of long-term debt	Repayment of long-term debt	(5)	(1)	Repayment of long-term debt	(1)	(5)
Repayment of acquired debt	Repayment of acquired debt	(8)	—	Repayment of acquired debt	(3)	(8)
Purchase of treasury stock		—	(175)

Issuance of treasury stock	Issuance of treasury stock	5	7	Issuance of treasury stock	20	5
Dividends paid on PPG common stock	Dividends paid on PPG common stock	(120)	(113)	Dividends paid on PPG common stock	(128)	(120)

Payments related to tax withholding on stock-based compensation awards	Payments related to tax withholding on stock-based compensation awards	(7)	(8)	Payments related to tax withholding on stock-based compensation awards	(11)	(7)
Other	Other	(24)	13	Other	0	(24)

Cash from financing activities	Cash from financing activities	$1,012	$32	Cash from financing activities	$469	$1,012
Effect of currency exchange rate changes on cash and cash equivalents	Effect of currency exchange rate changes on cash and cash equivalents	(124)	2	Effect of currency exchange rate changes on cash and cash equivalents	(40)	(124)
Net increase/(decrease) in cash and cash equivalents		$670	($118)
Net (decrease)/increase in cash and cash equivalents				Net (decrease)/increase in cash and cash equivalents	($18)	$670
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	1,216	902	Cash and cash equivalents, beginning of period	1,826	1,216
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$1,886	$784	Cash and cash equivalents, end of period	$1,808	$1,886

Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:			Supplemental disclosures of cash flow information:
Interest paid, net of amount capitalized	Interest paid, net of amount capitalized	$48	$40	Interest paid, net of amount capitalized	$52	$48
Taxes paid, net of refunds	Taxes paid, net of refunds	$90	$94	Taxes paid, net of refunds	$97	$90

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.

Table of Contents

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.Basis of Presentation

The condensed consolidated financial statements included herein are unaudited and have been prepared following the requirements of the Securities and Exchange Commission (the "SEC") and accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim reporting. Under these rules, certain footnotes and other financial information that are normally required for annual financial statements can be condensed or omitted. These statements include all adjustments, consisting only of normal, recurring adjustments, necessary for a fair presentation of the financial position and shareholders' equity of PPG as of March 31, ~~2020,~~2021 and the results of its operations and cash flows for the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020. 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 ~~2019~~2020 Annual Report on Form 10-K (the ~~"2019~~"2020 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 months ended March 31, ~~2020~~2021 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.

2.New Accounting Standards

Accounting Standards Adopted in ~~2020~~2021

Effective January 1, ~~2020,~~2021, PPG adopted Accounting Standards Update ~~(“ASU”~~("ASU") No. ~~2016-13, "Financial Instruments~~2019-12, "Income Taxes - ~~Credit Losses.~~Simplifying the Accounting for Income Taxes." This ASU ~~requires an organization~~is intended to ~~measure all expected credit losses~~simplify various aspects of accounting for ~~financial assets, including trade receivables, held at~~income taxes by eliminating certain exceptions within Accounting Standards Codification Topic 740, "Income Taxes" and to clarify certain aspects of the ~~reporting date based on historical experience,~~ current conditions, and reasonable and supportable information. Organizations will now use forward-looking information to better estimate their credit losses. PPG adopted this ASU using a modified retrospective approach. Under this method of adoption, PPG determined that there was no cumulative-effect adjustment to beginning Retained earnings on the condensed consolidated balance sheet.accounting guidance. Adoption of this standard did not materially impact ~~PPG’s Income before income taxes and had no impact on the condensed~~PPG's consolidated ~~statement~~financial position, results of ~~cash flows. See Note 3, “Allowance for Credit Losses” for further details.~~

Effective January 1, 2020, PPG adopted ASU No. 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to developoperations or obtain internal-use software (and hosting arrangements that include an internal-use software license). PPG adopted this ASU prospectively. Under this method of adoption, PPG determined there was not a material impact to the condensed consolidated balance sheet, Income before income taxes or the condensed consolidated statement of cash flows.

Accounting Standards to be Adopted in Future Years

In ~~March~~August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40).” This ASU simplifies the accounting for convertible debt instruments by removing certain accounting separation models as well as the accounting for debt instruments with embedded conversion features that are not required to be accounted for as derivative instruments. The ASU also updates and improves the consistency of earnings per share calculations for convertible instruments. The amendments in this ASU are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. PPG is currently assessing the potential impacts this ASU may have on its consolidated financial position, results of operations and cash flows.

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform." This ASU provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as the London Interbank Offered Rate ("LIBOR"). The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued. The amendments in this ASU are effective through December 31, 2022. PPG is currently assessing the potential impacts this ASU may have on its consolidated financial position, results of operations and cash flows.

3.Acquisitions and Divestitures

Acquisitions

On December ~~2019,~~18, 2020, PPG announced that it entered into a definitive agreement to acquire Tikkurila in an all-cash transaction. On February 4, 2021, PPG and Tikkurila entered into an amendment to the ~~FASB issued ASU No. 2019-12, "Income Taxes - Simplifying~~previously announced definitive combination agreement. Tikkurila is a leading Nordic producer and distributor of decorative paint and coatings. Under the Accounting for Income Taxes." This ASU is intended to simplify various aspects related to accounting for income taxes by eliminating certain exceptions within Accounting Standards Codification Topic 740, "Income Taxes" and clarifies certain aspectsterms of the ~~current accounting guidance.~~amended agreement, PPG has commenced a tender offer to acquire all of the issued and outstanding stock of Tikkurila. As of March 31, 2021, PPG owned 9.32% of the outstanding shares of Tikkurila. The ~~amendments~~transaction is expected to close in this ASU are effective for fiscal years beginning after December 15, 2020 and for interim periods therein with early adoption permitted. PPG does not believe this ASU will have a material impact on its consolidated financial position, results of operations or cash flows.the second quarter, subject to customary closing conditions.

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3.~~Allowance for Credit Losses~~

All trade receivables are reported on the condensed consolidated balance sheet at the outstanding principal amount adjusted for any allowance for credit losses and any charge offs. PPG provides an allowance for credit losses to reduce trade receivables to their estimated net realizable value equal to the amount that is expected to be collected. This allowance is estimated based on historical collection experience, current regional economic and market conditions, the aging of accounts receivable, assessments of current creditworthiness of customers, and forward-looking information. The use of forward-looking information is based on certain macroeconomic and microeconomic indicators including, but not limited to, regional business environment risk, political risk, and commercial and financing risks.

~~PPG reviews its reserves for credit losses on a quarterly basis to ensure its reserves for credit losses reflect regional risk trends as well as current and future global operating conditions.~~

In March 2020, PPG recorded estimated future credit losses for trade receivables of $30 million related to the potential financial impacts of the COVID-19 pandemic. These amounts were estimated based on regional business information, including certain forward-looking information and other considerations. As new information becomes available, PPG will monitor the adequacy of this reserve.

~~The following table summarizes the activity for the allowance for credit losses for the three months ended March 31, 2020:~~


~~($ in millions)~~			~~Trade Receivables Allowance for Credit Losses~~
~~January 1, 2020~~			~~$22~~
~~Current-period provision for credit losses~~			33
~~Trade receivables written off as uncollectible, net of recoveries~~			~~(4)~~
~~Foreign currency impact~~			~~(1)~~
~~March 31, 2020~~			~~$50~~

4.~~Acquisitions~~

On ~~March 2, 2020,~~February 22, 2021, PPG completed the acquisition of ~~Alpha Coating Technologies, LLC,~~VersaFlex, a manufacturer ~~of powder~~specializing in polyurea, epoxy and polyurethane coatings for ~~light~~water and waste water infrastructure, flooring, transportation infrastructure, and industrial ~~applications and heat sensitive substrates.~~applications. 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 business segment.~~

~~On January 31, 2020, PPG completed the acquisition of Industria Chimica Reggiana S.p.A ("ICR"), an Italian manufacturer of automotive refinish products. The pro-forma impact on PPG's sales~~protective 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 refinishmarine coatings business within the Performance Coatings reportable business segment.

On ~~April 16, 2019,~~January 11, 2021, PPG ~~completed the acquisition of Hemmelrath,~~announced that it had reached a definitive agreement to acquire Wörwag, a global manufacturer of coatings for industrial and automotive ~~original equipment manufacturers ("OEMs").~~applications. The ~~pro-forma impact~~company specializes in developing sustainable liquid, powder and film coatings. The transaction is expected to close in the second quarter of 2021, subject to customary closing conditions.

Divestitures

In December 2020, PPG committed to a plan to sell certain entities in smaller, non-strategic countries. The planned sale is expected to occur in 2021. The assets and liabilities of these entities are reported as held for sale in Other current assets and Accounts payable and accrued liabilities, respectively, on ~~PPG's sales~~the accompanying consolidated balance sheet as of March 31, 2021 and ~~results of operations, including the pro-forma effect of events that are directly attributable to the acquisition, was not significant.~~December 31, 2020. The results of ~~this business since the date of acquisition have been~~these entities are reported within the ~~automotive OEM coatings business within the Industrial~~Performance Coatings reportable business segment.

~~On March 1, 2019,~~The major classes of assets and liabilities of these entities included in the 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 operates 10 manufacturing facilities globally. The pro-forma impact on PPG's sales and results of operations, including the proforma effect of events thatconsolidated balance sheet 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 business segment.as as follows:


($ in millions)	March 31, 2021	December 31, 2020
Cash and cash equivalents	$22	$20
Receivables	5	5
Inventories	5	5
Assets held for sale	$32	$30
Accounts payable and accrued liabilities	$13	$14
Operating lease liabilities	6	6
Deferred income taxes	3	3
Other liabilities	1	1
Liabilities held for sale	$23	$24

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5.4.Inventories


($ in millions)	($ in millions)	March 31, 2020	December 31, 2019	($ in millions)	March 31, 2021	December 31, 2020
Finished products	Finished products	$1,138	$1,047	Finished products	$1,100	$1,021
Work in process	Work in process	204	197	Work in process	210	187
Raw materials	Raw materials	482	431	Raw materials	566	490
Supplies	Supplies	35	35	Supplies	38	37
Total Inventories	Total Inventories	$1,859	$1,710	Total Inventories	$1,914	$1,735

Most U.S. inventories are valued using the last-in, first-out method. These inventories represented approximately ~~36%~~31% and ~~34%~~33% of total inventories at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. If the first-in, first-out method of inventory valuation had been used, inventories would have been ~~$120~~$113 million and ~~$124~~$110 million higher as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

6.5.Goodwill and Other Identifiable Intangible Assets

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

Although it was determined that a triggering event had not occurred as of March 31, 2021, the Company will continue to monitor the impacts of the COVID-19 pandemic on the Company and significant changes in key assumptions that could result in future period impairment charges. The Company did not identify an indication of impairment for each of its reporting units and indefinite-lived intangible assets as of March 31, 2021.

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The change in the carrying amount of goodwill attributable to each reportable segment for the three months ended March 31, ~~2020~~2021 was as follows:


($ in millions)	($ in millions)	Performance Coatings	Industrial Coatings	Total	($ in millions)	Performance Coatings	Industrial Coatings	Total
January 1, 2020		$3,442	$1,028	$4,470
January 1, 2021					January 1, 2021	$4,023	$1,079	$5,102
Acquisitions, including purchase accounting adjustments	Acquisitions, including purchase accounting adjustments	4	16	20	Acquisitions, including purchase accounting adjustments	143	(2)	141

Foreign currency impact	Foreign currency impact	(218)	(29)	(247)	Foreign currency impact	(70)	(20)	(90)
March 31, 2020		$3,228	$1,015	$4,243
March 31, 2021					March 31, 2021	$4,096	$1,057	$5,153

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


		March 31, 2020					December 31, 2019						March 31, 2021			December 31, 2020
($ in millions)	($ in millions)	Gross Carrying Amount	Accumulated Amortization	Net	Gross Carrying Amount	Accumulated Amortization	Net	($ in millions)	Gross Carrying Amount	Accumulated Amortization	Net	Gross Carrying Amount	Accumulated Amortization	Net
Indefinite-Lived Identifiable Intangible Assets	Indefinite-Lived Identifiable Intangible Assets														Indefinite-Lived Identifiable Intangible Assets
Trademarks	Trademarks	$1,012	N/A	$1,012	$1,167	N/A	$1,167	Trademarks	$1,079	N/A	$1,079	$1,101	N/A	$1,101
Definite-Lived Identifiable Intangible Assets	Definite-Lived Identifiable Intangible Assets														Definite-Lived Identifiable Intangible Assets
Acquired technology	Acquired technology	$709	($550)	$159	$710	($549)	$161	Acquired technology	$798	($589)	$209	$813	($585)	$228
Customer-related	Customer-related	1,508	(866)	642	1,578	(885)	693	Customer-related	1,865	(997)	868	1,849	(994)	855
Trade names	Trade names	205	(109)	96	210	(111)	99	Trade names	269	(130)	139	277	(129)	148
Other	Other	48	(39)	9	51	(40)	11	Other	51	(45)	6	64	(45)	19
Total Definite Lived Intangible Assets	Total Definite Lived Intangible Assets	$2,470	($1,564)	$906	$2,549	($1,585)	$964	Total Definite Lived Intangible Assets	$2,983	($1,761)	$1,222	$3,003	($1,753)	$1,250
Total Identifiable Intangible Assets	Total Identifiable Intangible Assets	$3,482	($1,564)	$1,918	$3,716	($1,585)	$2,131	Total Identifiable Intangible Assets	$4,062	($1,761)	$2,301	$4,104	($1,753)	$2,351

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

As of March 31, ~~2020,~~2021, estimated future amortization expense of identifiable intangible assets is as follows:


($ in millions)	($ in millions)	Future Amortization Expense	($ in millions)	Future Amortization Expense
Remaining nine months of 2020		$99
2021		$125
Remaining nine months of 2021			Remaining nine months of 2021	$140
2022	2022	$125	2022	$175
2023	2023	$110	2023	$165
2024	2024	$90	2024	$150
2025	2025	$85	2025	$140
2026			2026	$135
Thereafter	Thereafter	$272	Thereafter	$317

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7.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 certain other cash costs. As a result of these programs, the Company will also incur incremental non-cash accelerated depreciation expense for certain assets due to their reduced expected asset life. These charges are not allocated to the Company’s reportable business segments. Refer to Note 1816 Reportable Business Segment Information for additional information.

~~2019~~2020 Restructuring Program

In June 2020, the Company approved a business restructuring plan which included actions to reduce its global cost structure. The program addresses weakened global economic conditions stemming from the COVID-19 pandemic and related pace of recovery in a few end-use markets along with further opportunities to optimize supply chain and functional costs. The plan included a voluntary separation program that was offered in the U.S. and Canada. The majority of these restructuring actions are expected to be completed by the end of 2021.

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2019 and 2018 Restructuring Programs

As a result of the COVID-19 pandemic, the Company expects delays in the timing of certain previously recorded restructuring actions. Program completion dates may differ from the originally targeted timeline, as noted below.

In June 2019, the Company approved a business restructuring plan which 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. The majority of restructuring actions are expected to be completed by the end of the ~~fourth~~second quarter ~~2020~~2021 with the remainder of the actions expected to be completed in 2022.

~~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 customer assortment 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 product demand, as well as reductions in various global functional and administrative costs. The majority of restructuring actions are expected to be completed by the end of the second quarter of ~~2020.~~2021.

The following table summarizes the reserve activity for the three months ended March 31, ~~2020~~2021 and ~~2019:~~2020:


		Total Reserve				Total Reserve
($ in millions)	($ in millions)	2020	2019	($ in millions)	2021	2020
January 1	January 1	$224	$110	January 1	$293	$224
Newly approved restructuring actions		22	—
Release of prior reserves		(15)	(3)
Approved restructuring actions				Approved restructuring actions	0	22
Release of prior reserves and other adjustments				Release of prior reserves and other adjustments	0	(15)
Cash payments	Cash payments	(18)	(15)	Cash payments	(26)	(18)
Foreign currency impact	Foreign currency impact	(3)	(1)	Foreign currency impact	(11)	(3)
March 31	March 31	$210	$91	March 31	$256	$210

8.7.Borrowings

In March 2021, PPG completed a public offering of $700 million aggregate principal amount of 1.200% notes due 2026. These notes were issued pursuant to PPG’s existing shelf registration statement and pursuant to the Indenture between the Company and the Bank of New York Mellon Trust Company, N.A., as trustee, as supplemented (the "Indenture"). 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 the 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 $692 million.

In February 2021, PPG entered into a $2.0 billion Term Loan Credit Agreement (the "Term Loan Credit Agreement"). The Term Loan Credit Agreement provides the Company with the ability to borrow up to an aggregate principal amount of $2.0 billion on an unsecured basis. The Company may borrow term loans under the Term Loan Credit Agreement to finance cash consideration for the Company’s pending acquisition of up to all of the equity interests of Tikkurila, and to pay fees, costs and expenses related thereto. Following the Closing Date and from time to time prior to December 31, 2021, the Company may make up to eleven additional borrowings of term loans under the Term Loan Credit Agreement, which may be used for working capital and general corporate purposes. The Term Loan Credit Agreement contains covenants that are usual and customary restrictive covenants for facilities of its type, which include, with specified exceptions, limitations on the Company’s ability to create liens or other encumbrances, to enter into sale and leaseback transactions and to enter into consolidations, mergers or transfers of all or substantially all of its assets. The Term Loan Credit Agreement matures and all outstanding borrowings are due and payable on the third anniversary of the date of the initial borrowing under the Agreement. There were no amounts outstanding under the Term Loan Credit Agreement as of March 31, 2021.

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and customary restrictive covenants for facilities of its type, which include, with specified exceptions, limitations on the Company’s ability to create liens or other encumbrances, to enter into sale and leaseback transactions and to enter into consolidations, mergers or transfers of all or substantially all of its assets. In 2020, PPG repaid $1.1 billion of the Term Loan using cash on hand. In the first quarter 2021, PPG repaid the remaining $400 million of the Term Loan using cash on hand.

In August 2019, PPG amended and restated its five-year credit agreement (the “Credit Agreement”) with several banks and financial institutions. The Credit Agreement provides for a $2.2 billion unsecured revolving credit facility. The Company has the ability to increase the size of the Credit Agreement by up to an additional $750 million, subject to the receipt of lender commitments and other conditions precedent. The Credit Agreement will terminate on August 30, 2024. The Company has the right, subject to certain conditions set forth in the Credit Agreement, to designate certain subsidiaries of the Company as borrowers under the Credit Agreement. In connection with any such designation, the Company is required to guarantee the obligations of any such subsidiaries under the Credit Agreement. In March 2020, PPG borrowed $800 million under the Credit Agreement ~~which is classified as short-term based on PPG's intent to repay these borrowings within one year.~~and repaid that amount in full in April 2020. There were no amounts outstanding under the credit agreement as of ~~December 31, 2019.~~

The Credit Agreement also supports the Company’s commercial paper borrowings which are classified as long-term based on PPG’s intent and ability to refinance these borrowings on a long-term basis. Commercial paper borrowings of $307 million and $100 million were outstanding as of March 31, ~~2020~~2021 and December 31, ~~2019, respectively.~~2020.

~~On April 14, 2020, PPG entered into a $1.5 billion 364-Day~~The Term Loan Credit Agreement ~~(the “Term Loan”).The Term Loan contains covenants that are consistent with those in the~~and Credit Agreement ~~and that are usual and customary restrictive covenants for facilities of its type, which include, with specified exceptions, limitations on~~require the Company’s ability to create liens or other encumbrances, to enter into sale and leaseback transactions and to enter into consolidations, mergers or transfers of all or substantially all of its assets. The Term Loan also requires the

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Company to maintain a ratio of Total Indebtedness to Total Capitalization, as defined in the Term Loan Credit Agreement and Credit Agreement, of 60% or less; provided, that for any fiscal quarter in which the Company has made an acquisition for consideration in excess of $1 billion and for the next five fiscal quarters thereafter, the ratio of Total Indebtedness to Total Capitalization may not exceed 65% at any time. ~~The Term Loan terminates and all amounts outstanding are payable on April 13, 2021.~~ As of March 31, ~~2020,~~2021, Total Indebtedness to Total Capitalization as defined under the Credit Agreement and Term Loan Credit Agreement was ~~53%~~48%.

9.~~Leases~~

~~PPG leases certain retail paint stores, warehouses, distribution facilities, office space, fleet vehicles and equipment.~~

The ~~components~~Credit Agreement also supports the Company’s commercial paper borrowings which are classified as long-term based on PPG’s intent and ability to refinance these borrowings on a long-term basis. Commercial paper borrowings of ~~lease expense~~$550 million and $250 million were ~~as follows:~~

Three Months Ended
March 31
($ in millions) Classification in the Condensed Consolidated Statement of Income 2020 2019
Operating lease cost:
Operating lease cost Cost of sales, exclusive of depreciation and amortization $8 $9
Operating lease cost Selling, general and administrative 53 48
Total operating lease cost $61 $57
Finance lease cost:
Amortization of right-of-use assets Depreciation $1 $1
Total lease cost $62 $58

~~Total operating lease cost is inclusive of the following:~~

Three Months Ended
March 31
($ in millions) 2020 2019
Variable lease costs $5 $4
Short-term lease costs $3 $1

($ in millions) Classification on the Condensed Consolidated Balance Sheet March 31, 2020 December 31, 2019
Assets:
Operating Operating lease right-of-use assets $784 $782
Finance ^(a)
Property, plant, and equipment, net 13 17
Total leased assets $797 $799
Liabilities:
Current
Operating Current portion of operating lease liabilities $166 $170
Finance Short-term debt and current portion of long-term debt 2 3
Noncurrent
Operating Operating lease liabilities $627 $622
Finance Long-term debt 7 8
Total lease liabilities $802 $803

~~(a) Net of accumulated depreciation of $11 million~~outstanding as of March 31, ~~2020~~2021 and December 31, ~~2019.~~

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Three Months Ended
March 31
($ in millions) 2020 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases $52 $52
Financing cash flows paid for finance leases $1 $1
Right-of-use assets obtained in exchange for lease obligations:
Operating leases $61 $34

March 31, 2020 December 31, 2019
Weighted-average remaining lease term (in years)
Operating leases 7.6 7.4
Finance leases 6.3 6.2
Weighted-average discount rate
Operating leases 3.0 % 3.0 %
Finance leases 9.3 % 9.4 %

~~As of March 31,~~ 2020, ~~maturities of lease liabilities were as follows:~~

($ in millions) Operating Leases Finance Leases
Remaining nine months of 2020 $145 $2
2021 158 2
2022 125 2
2023 97 2
2024 76 1
Thereafter 290 2
Total lease payments $891 $11
Less: Interest 98 2
Total lease obligations $793 $9
respectively.

~~10.~~8.Earnings Per Common Share

The effect of dilutive securities on the weighted average common shares outstanding included in the calculation of earnings per diluted common share for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 were as follows:


		Three Months Ended March 31				Three Months Ended March 31
(number of shares in millions)	(number of shares in millions)	2020	2019	(number of shares in millions)	2021	2020
Weighted average common shares outstanding	Weighted average common shares outstanding	236.5	236.7	Weighted average common shares outstanding	237.4	236.5
Effect of dilutive securities:	Effect of dilutive securities:			Effect of dilutive securities:
Stock options	Stock options	0.5	0.7	Stock options	0.9	0.5
Other stock compensation plans	Other stock compensation plans	0.7	0.6	Other stock compensation plans	0.7	0.7
Potentially dilutive common shares	Potentially dilutive common shares	1.2	1.3	Potentially dilutive common shares	1.6	1.2
Adjusted weighted average common shares outstanding	Adjusted weighted average common shares outstanding	237.7	238.0	Adjusted weighted average common shares outstanding	239.0	237.7

Dividends per common share	Dividends per common share	$0.51	$0.48	Dividends per common share	$0.54	$0.51

Excluded from the computation of earnings per diluted share due to their antidilutive effect were ~~1.5 million~~0 and ~~1.6~~1.5 million outstanding stock options for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively.

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~~11.~~9.Income Taxes

Three Months Ended
March 31
2020 2019
Effective tax rate on pretax income 22.3 % 24.3 %


	Three Months Ended March 31
	2021		2020
Effective tax rate on pretax income	22.8	%	22.3	%

The effective tax rate of ~~22.3%~~22.8% for the three months ended March 31, ~~2020~~2021 reflects a ~~benefit~~benefit of ~~$11~~$5 million of discrete items associated with PPG's U.S. and foreign jurisdictions. Income tax expense for the first three months of ~~2020~~2021 is based on an estimated annual effective rate, which requires management to make its best estimate of annual pretax income or loss. Income tax expense for the three months ended March 31, ~~2019~~2020 reflects $2$11 million ~~for~~of discrete items associated with PPG's U.S. and foreign locations and implementation of updated regulations associated with the 2017 Tax Cuts and Jobs Act for Global Intangible Low Taxed Income.

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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 ~~2020~~2021 pretax results for U.S. and foreign income or loss vary from estimates, the actual Income tax expense recognized in ~~2020~~2021 could be different from the forecasted amount used to estimate the Income tax expense for the three months ended March 31, ~~2020.~~2021.

~~12.~~10.Pensions and Other Postretirement Benefits

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 recorded in Other charges in the accompanying condensed consolidated statements of income.

The net periodic pension and other postretirement benefit costs for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 were as follows:


		Pension			Other Postretirement Benefits				Pension		Other Postretirement Benefits
		Three Months Ended March 31			Three Months Ended March 31				Three Months Ended March 31		Three Months Ended March 31
($ in millions)	($ in millions)	2020	2019	2020	2019	($ in millions)	2021	2020	2021	2020
Service cost	Service cost	$6	$6	$2	$2	Service cost	$3	$6	$3	$2
Interest cost	Interest cost	22	26	5	6	Interest cost	16	22	3	5
Expected return on plan assets	Expected return on plan assets	(36)	(35)	—	—	Expected return on plan assets	(38)	(36)	—	—
Amortization of actuarial losses	Amortization of actuarial losses	18	15	4	2	Amortization of actuarial losses	10	18	6	4
Amortization of prior service credit	Amortization of prior service credit	—	—	(15)	(14)	Amortization of prior service credit	—	—	(14)	(15)
Net periodic benefit cost	Net periodic benefit cost	$10	$12	($4)	($4)	Net periodic benefit cost	($9)	$10	($2)	($4)

PPG expects ~~its 2020~~2021 net periodic pension and other postretirement benefit cost ~~will~~to be income of approximately ~~$25~~$45 million, with pension ~~expense~~and other postretirement benefits representing income of approximately $40 million and ~~other postretirement~~$5 million, respectively. In 2020, PPG's U.S. and Canadian defined benefit ~~cost representing a benefit~~plans were frozen for all participants. As of ~~approximately $15 million.~~January 1, 2021, these plans are mostly inactive and as such, the accumulated net actuarial losses amortization period is now the average remaining life expectancy of the plan participants. This change in amortization period reduces future pension expense for PPG.

Contributions to Defined Benefit Pension Plans


		Three Months Ended March 31				Three Months Ended March 31
($ in millions)	($ in millions)	2020	2019	($ in millions)	2021	2020

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

PPG expects to make ~~mandatory~~ contributions to its ~~non-U.S.~~defined benefit pension plans in the range of $10 million to $15 million during the remaining nine months of ~~2020.~~2021. PPG may make voluntary contributions to its defined benefit pension plans in ~~2020~~2021 and beyond.

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~~13.~~11.Accumulated Other Comprehensive Loss


($ in millions)	($ in millions)	Unrealized Foreign Currency Translation Adjustments			Pension and Other Postretirement Benefit Adjustments, net of tax (c)			Unrealized Gain on Derivatives, net of tax					Accumulated Other Comprehensive Loss			($ in millions)	Unrealized Foreign Currency Translation Adjustments		Pension and Other Postretirement Benefit Adjustments, net of tax (c)		Unrealized Gain on Derivatives, net of tax	Accumulated Other Comprehensive Loss
January 1, 2021											January 1, 2021			($1,663)			($937)		$1		($2,599)
Current year deferrals to AOCI (a)											Current year deferrals to AOCI (a)	83			0			0		83
Current year deferrals to AOCI, net of tax (b)											Current year deferrals to AOCI, net of tax (b)	(209)			(7)			0		(216)
Reclassifications from AOCI to net income											Reclassifications from AOCI to net income	0			2			0		2
Period change											Period change			($126)			($5)		$0		($131)
March 31, 2021											March 31, 2021			($1,789)			($942)		$1		($2,730)

January 1, 2020	January 1, 2020		($1,627)		($724)		$1			($2,350)	January 1, 2020			($1,627)			($724)		$1		($2,350)
Current year deferrals to AOCI (a)	Current year deferrals to AOCI (a)	(758)		—		—			(758)		Current year deferrals to AOCI (a)	(758)			0			0		(758)
Current year deferrals to AOCI, net of tax (b)	Current year deferrals to AOCI, net of tax (b)	62		(4)		3			61		Current year deferrals to AOCI, net of tax (b)	62			(4)			3		61
Reclassifications from AOCI to net income	Reclassifications from AOCI to net income	—		5		—			5		Reclassifications from AOCI to net income	0			5			0		5
Period change	Period change		($696)		$1		$3			($692)	Period change			($696)			$1		$3		($692)
March 31, 2020	March 31, 2020		($2,323)		($723)		$4			($3,042)	March 31, 2020			($2,323)			($723)		$4		($3,042)

January 1, 2019			($1,734)		($568)		$2			($2,300)
Current year deferrals to AOCI (a)		31		—		—			31
Current year deferrals to AOCI, net of tax (b)		51		(8)		—			43
Reclassifications from AOCI to net income		—		2		—			2
Period change			$82		($6)		$—			$76
March 31, 2019			($1,652)		($574)		$2			($2,224)

(a)Except for income taxes, of ~~$7 million~~ ~~and $6~~which were less than $1 million as of March 31, ~~2020~~2021 and ~~2019, respectively,~~$7 million as of March 31, 2020, related to foreign currency impacts of certain unasserted earnings, unrealized foreign currency translation adjustments related to translation of foreign denominated balance sheets are not presented net of tax given that no deferred U.S. income taxes have been provided on undistributed earnings of non-U.S. subsidiaries because they are deemed to be reinvested for an indefinite period of time.

(b)The tax cost related to unrealized foreign currency translation adjustments on tax inter-branch transactions and net investment hedges as of March 31, 2021 and 2020 ~~and 2019~~ was~~$19 million~~ $30 million and ~~$17~~$19 million, respectively.

(c)The tax cost related to the adjustment for pension and other postretirement benefits as of March 31, 2021 and 2020 ~~and 2019 was~~ wa$2s $1 million and $1$2 million, respectively. Reclassifications from AOCI are included in the computation of net periodic benefit costs (See Note ~~12,~~10, "Pensions and Other Postretirement Benefits").

~~14.~~12.Financial Instruments, Hedging Activities and Fair Value Measurements

Financial instruments include cash and cash equivalents, short-term investments, cash held in escrow, marketable equity securities, accounts receivable, company-owned life insurance, accounts payable, short-term and long-term debt instruments, and derivatives. The fair values of these financial instruments approximated their carrying values at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, in the aggregate, except for long-term debt instruments.

Hedging Activities

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

PPG’s policies do not permit speculative use of derivative financial instruments. PPG enters into derivative financial instruments with high credit quality counterparties and diversifies its positions among such counterparties in order to reduce its exposure to credit losses. The Company did not realize a credit loss on derivatives during the three month periods ended March 31, ~~2020~~2021 and ~~2019.~~2020.

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

There were no derivative instruments de-designated or discontinued as hedging instruments during the three month periods ended March 31, ~~2020~~2021 and ~~2019~~2020 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

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taxes in the condensed consolidated statement of income in the three month periods ended March 31, ~~2020~~2021 and ~~2019~~2020 related to hedges of anticipated transactions that were no longer expected to occur.

Fair Value Hedges

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

PPG has interest rate swaps which converted $525 million of fixed rate debt to variable rate debt. These swaps are designated as fair value hedges and are carried at fair value. Changes in the fair value of these swaps and changes in the fair value of the related debt are recorded in interest expense in the accompanying condensed consolidated ~~state~~statement of income. The fair value of these interest rate swaps was ~~$76~~$44 million and ~~$35~~$67 million at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

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~~ There were ~~$18 million~~no outstanding cash flow hedges at March 31, ~~2020 and $43 million at December 31, 2019, respectively. As of March 31, 2020~~2021 and December 31, ~~2019, the fair value of all foreign currency forward contracts designated as cash flow hedges was an asset of~~ ~~$3 million~~ ~~and a liability of $1 million, respectively.~~2020.

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, as follows:

As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, PPG ~~has~~had U.S. dollar to euro cross currency swap contracts with a total notional amount of $875 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 payment in U.S. dollars and make payments in euros to the counterparties. As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the fair value of the U.S. dollar to euro cross currency swap contracts was ana net asset of ~~$90~~$19 million and a net ~~asset~~liability of ~~$48~~$8 million, respectively.

As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, PPG had designated ~~€2.0~~€2.0 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 March 31, ~~2020~~2021 and December 31, ~~2019~~2020 was ~~$2.2~~$2.3 billion ~~for both periods.~~and $2.4 billion, respectively.

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 ~~$3.4~~$1.7 billion and ~~$2.8~~$1.4 billion at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. As of March 31, ~~2020~~2021 and December 31, ~~2019~~2020, the fair value of these contracts ~~were~~was a net ~~liabilities~~asset and a net liability of ~~$14~~ $9 million ~~and $6~~and $2 million, respectively.

Gains/Losses Deferred in Accumulated Other Comprehensive Loss

As of March 31, ~~2020,~~2021, the Company had accumulated pretax unrealized 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 $~~313~~103 million. As of December 31, ~~2019,~~2020, the Company had accumulated pretax unrealized translation ~~gains~~losses of ~~$235~~$22 million.

The following table summarizes the location within the condensed consolidated financial statements and amount of gains/(losses) related to derivative and debt financial instruments for the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020. All dollar amounts are shown on a pretax basis.

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		March 31, 2020			March 31, 2019					March 31, 2021		March 31, 2020	Caption In Condensed Consolidated Statement of Income
($ in millions)	($ in millions)	Gain Deferred in OCI	Gain Recognized	Gain Deferred in OCI	Gain/(Loss) Recognized	Caption In Condensed Consolidated Statement of Income	($ in millions)	Gain Deferred in OCI	Gain/(Loss) Recognized	Gain Deferred in OCI	Gain Recognized	Caption In Condensed Consolidated Statement of Income
Economic	Economic						Economic
Foreign currency forward contracts	Foreign currency forward contracts	$—	$16	$—	$6	Other charges	Foreign currency forward contracts	$—	($3)	$—	$16	Other charges
Fair Value	Fair Value						Fair Value
Interest rate swaps	Interest rate swaps	—	2	—	—	Interest expense	Interest rate swaps	—	4	—	2	Interest expense
Cash Flow	Cash Flow						Cash Flow
Foreign currency forward contracts	Foreign currency forward contracts	4	—	—	(1)	Other charges and Cost of sales	Foreign currency forward contracts	0	0	4	0	Other charges and Cost of sales
Total Cash Flow	Total Cash Flow	$4	$18	$—	$5		Total Cash Flow	$0	$1	$4	$18
Net Investment	Net Investment						Net Investment

Cross currency swaps	Cross currency swaps	$42	$5	$13	$4	Interest expense	Cross currency swaps	$28	$4	$42	$5	Interest expense
Foreign denominated debt	Foreign denominated debt	36	—	57	—		Foreign denominated debt	97	—	36	—
Total Net Investment	Total Net Investment	$78	$5	$70	$4		Total Net Investment	$125	$4	$78	$5

Fair Value Measurements

The Company follows a fair value measurement hierarchy to measure its assets and liabilities. As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, 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,~~14, "Employee Benefit Plans" under Item 8 in the ~~2019~~2020 Form 10-K for further details). The Company's financial assets and liabilities are measured using inputs from the following three levels:

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

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

Level 3 inputs are unobservable inputs employed for measuring the fair value of assets or liabilities. The Company does not have any recurring financial assets or liabilities that are recorded in its condensed consolidated balance sheets as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 that are classified as Level 3 inputs.

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


		March 31, 2020					December 31, 2019						March 31, 2021		December 31, 2020
($ in millions)	($ in millions)	Level 1	Level 2	Level 3	Level 1	Level 2	Level 3	($ in millions)	Level 1	Level 2	Level 3	Level 1	Level 2	Level 3
Assets:	Assets:							Assets:
Other current assets:	Other current assets:							Other current assets:
Marketable equity securities	Marketable equity securities	$5	$—	$—	$5	$—	$—	Marketable equity securities	$6	$0	$0	$6	$0	$0

Foreign currency forward contracts^(a)	Foreign currency forward contracts^(a)	—	33	—	—	14	—	Foreign currency forward contracts (a)	0	25	0	0	8	0

Foreign currency forward contracts ^(d)		—	3	—	—	—	—

Investments:	Investments:							Investments:
Marketable equity securities	Marketable equity securities	$68	$—	$—	$80	$—	$—	Marketable equity securities	$259	$0	$0	$97	$0	$0
Other assets:	Other assets:							Other assets:
Cross currency swaps^(b)	Cross currency swaps^(b)	$—	$90	$—	$—	$52	$—	Cross currency swaps (b)	$0	$32	$0	$0	$13	$0
Interest rate swaps ^(c)	Interest rate swaps ^(c)	—	76	—	—	35	—	Interest rate swaps (c)	0	44	0	0	67	0
Liabilities:	Liabilities:							Liabilities:
Accounts payable and accrued liabilities:	Accounts payable and accrued liabilities:							Accounts payable and accrued liabilities:
Foreign currency forward contracts ^(d)		$—	$—	$—	$—	$1	$—
Foreign currency forward contracts^(a)	Foreign currency forward contracts^(a)	—	47	—	—	20	—	Foreign currency forward contracts (a)	$0	$16	$0	$0	$6	$0
Cross currency swaps (b)								Cross currency swaps (b)	0	4	0	0	8	0

Other liabilities:	Other liabilities:							Other liabilities:
Cross currency swap^(b)	Cross currency swap^(b)	$—	$—	$—	$—	$4	$—	Cross currency swap (b)	$0	$9	$0	$0	$13	$0


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

Long-Term Debt

($ in millions)

March 31, 2020 ^(a)

December 31, 2019 ^(b)

($ in millions)

March 31, 2021 (a)

December 31, 2020 (b)

Long-term debt - carrying value

$5,246

$5,031

Long-term debt - carrying value

$6,201

$5,296

Long-term debt - fair value

$5,443

$5,363

Long-term debt - fair value

$6,616

$5,875

(a) Excluding finance lease obligations of $9$11 million and short-term borrowings of $~~952~~5 million as of March 31, ~~2020.~~2021.

(b) Excluding finance lease obligations of ~~$11~~$12 million and short-term borrowings of ~~$10~~$403 million as of December 31, ~~2019.~~2020.

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.

~~15.~~13.Stock-Based Compensation

The Company’s stock-based compensation includes stock options, restricted stock units (“RSUs”) and grants of contingent shares that are earned based on achieving targeted levels of total shareholder return. All current grants of stock options, RSUs and contingent shares are made under the PPG Industries, Inc. Amended and Restated Omnibus Incentive Plan (“PPG Amended Omnibus Plan”), which was amended and restated effective April 21, 2016. Shares available for future grants under the PPG Amended Omnibus Plan were ~~6.4~~6.5 million as of March 31, ~~2020.~~2021.

Stock-based compensation and the income tax benefit recognized during the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 were as follows:


		Three Months Ended March 31				Three Months Ended March 31
($ in millions)	($ in millions)	2020	2019	($ in millions)	2021	2020
Stock-based compensation	Stock-based compensation	$7	$9	Stock-based compensation	$17	$7
Income tax benefit recognized	Income tax benefit recognized	$2	$2	Income tax benefit recognized	$4	$2

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Grants of stock-based compensation during the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 were as follows:


		Three Months Ended March 31								Three Months Ended March 31
		2020			2019				2021		2020
Grant Details	Grant Details	Shares	Fair Value	Shares	Fair Value	Grant Details	Shares	Fair Value	Shares	Fair Value
Stock options	Stock options	659,835	$21.93	588,870	$22.50	Stock options	527,464	$29.27	659,835	$21.93
Restricted stock units	Restricted stock units	182,276	$112.99	179,564	$103.35	Restricted stock units	162,601	$129.64	182,276	$112.99
Contingent shares (a)	Contingent shares (a)	54,648	$119.52	51,850	$109.74	Contingent shares (a)	55,540	$136.60	54,648	$119.52

(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 three months ended March 31, ~~2020~~2021 was calculated with the following weighted average assumptions:


Weighted average exercise price	$~~119.52~~136.60
Risk free interest rate	~~1.6~~1.0	%
Expected life of option in years	6.5
Expected dividend yield	~~1.5~~1.6	%
Expected volatility	~~20.0~~25.3	%

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

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

For awards granted in 2021 and 2020, the amount paid upon vesting of performance-based RSUs may range from 0% to 200% of the original grant, based upon the level of earnings per share growth achieved and frequency with which the annual ~~earnings per share growth and~~ cash flow return on capital performance ~~targets are~~target is met over the three calendar year periods comprising the vesting period. For awards granted in 2019, ~~and 2018,~~ the amount paid upon vesting of performance-based RSUs may range from 0% to 180% of the original grant.

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 performance period excluding any companies that have been removed from the index because they ceased to be publicly traded during the performance period. For awards granted in 2021 and 2020, the payment of awards following the three-year award period will be based on performance achieved in accordance with the scale set forth in the plan agreement and may range from 0% to 200% of the initial grant. For awards granted in 2019, ~~and 2018,~~ the amount paid following the three-year award period may range from 0% to 220% of the initial grant. 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 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.

~~16.~~14.Commitments and Contingent Liabilities

PPG is involved in a number of lawsuits and claims, both actual and potential, including some that it has asserted against others, in which substantial monetary damages are sought. These lawsuits and claims may relate to contract, patent, environmental, product liability, asbestos exposure, antitrust, employment, securities and other

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matters arising out of the conduct of PPG’s current and past business activities. To the extent that these lawsuits and claims involve personal injury, property damage, and certain other claims, PPG believes it has adequate insurance; however, certain of PPG’s insurers are contesting coverage with respect to some of these claims, and other insurers, as they had prior to the asbestos settlement described below, may contest coverage with respect to some of the asbestos claims. PPG’s lawsuits and claims against others include claims against insurers and other third parties with respect to actual and contingent losses related to environmental, asbestos and other matters.

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

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, asserted 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 related 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 the proposed settlement amount of $25 million. On November 22, 2019, the Court entered final judgment approving the settlement. PPG’s insurance carriers ~~confirmed~~fully funded the settlement escrow account and the court-approved settlement payments to class members were fully distributed by the ~~Company insurance coverage for the full amount~~claims administrator as of ~~the settlement. Settlement payments are expected to occur in 2020.~~March 31, 2021.

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 prior to April 27, 2016).

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. 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 prior: (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 Bankruptcy Court's 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”~~

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“Trust”). The Trust is the sole recourse for holders of PC Relationship Claims. PPG and its affiliates have no further

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liability or responsibility for, and are 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".

Non-PC relationship claims

With respect to the asbestos-related claims pending against the Company 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 non-PC Relationship Claims against it.

Current open and active claims post-Pittsburgh Corning bankruptcy

As of March 31, ~~2020,~~2021, the Company was aware of approximately ~~530~~1,190 open and active asbestos-related claims pending against the Company and certain of its subsidiaries. These claims consist of non-PC Relationship Claims against PPG and claims against a PPG subsidiary the Company acquired on April 1, 2013. The Company is defending these open and active claims vigorously.

PPG has established reserves totaling approximately $190 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 estimable potential future asbestos liabilities. These reserves, which are included within Other liabilities on the accompanying condensed consolidated balance sheets, represent PPG’s best estimate of its liability for these claims.

These reserves include a $162 million reserve established in 2009 in connection with an amendment to the PC plan of reorganization for non-PC Relationship Claims other than claims arising from premises-related exposures. 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.

These reserves also include PPG’s best estimate, following an analysis performed in 2019 of its claims history and discussions with consultants and its counsel, of the value of the Company’s potential liability for premises-related non-PC Relationship Claims against it and claims against PPG’s subsidiary acquired on April 1, 2013 that are presently pending, and that are projected to be asserted through December 31, 2028.

PPG monitors the activity associated with its asbestos claims and evaluates, 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.

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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,~~15, "Commitments and Contingent Liabilities," under Item 8 of the ~~2019~~2020 Form 10-K for additional descriptions of the following environmental matters.

As remediation at certain legacy environmental sites progresses, PPG continues to refine its assumptions underlying the estimates of the expected future costs of its remediation programs. PPG’s ongoing evaluation may result in additional charges against income to increase the reserves for these sites. Remediation activities at our legacy sites are not related to the ongoing operations of PPG. In ~~2020~~2021 and ~~2019,~~2020, certain charges have been recorded based on updated estimates to increase existing reserves for these sites. ~~Certain~~Certain other charges related to environmental remediation actions are also expensed as incurred.

As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, PPG had reserves for environmental contingencies associated with PPG’s former chromium manufacturing plant in Jersey City, New Jersey (“New Jersey Chrome”), glass and chemical manufacturing sites, and for other environmental contingencies, including current manufacturing locations and National Priority List sites. These reserves are reported as Accounts payable and accrued liabilities and Other liabilities in the accompanying condensed consolidated balance sheet.


Environmental Reserves	Environmental Reserves						Environmental Reserves
($ in millions)	($ in millions)	March 31, 2020	December 31, 2019	($ in millions)	March 31, 2021	December 31, 2020
New Jersey Chrome	New Jersey Chrome	$116	$134	New Jersey Chrome	$114	$102
Glass and chemical	Glass and chemical	100	96	Glass and chemical	105	106
Other	Other	83	74	Other	91	92
Total	Total	$299	$304	Total	$310	$300
Current portion	Current portion	$71	$62	Current portion	$101	$99

Pretax charges against income for environmental remediation costs are included in Other charges in the accompanying condensed consolidated statement of income. The pretax charges and cash outlays related to such environmental remediation for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 were as follows:


		Three Months Ended March 31				Three Months Ended March 31
($ in millions)	($ in millions)	2020	2019	($ in millions)	2021	2020
Environmental remediation pretax charges	Environmental remediation pretax charges	$11	$16	Environmental remediation pretax charges	$19	$11
Cash outlays for environmental remediation activities	Cash outlays for environmental remediation activities	$25	$16	Cash outlays for environmental remediation activities	$9	$25

In ~~the first quarter of 2019,~~Q1 2021, PPG recognized a ~~one-time~~$16 million pretax charge ~~was taken~~ to increase anthe existing ~~legacy~~ reserve ~~classified within "Other" sites above by $10 million.~~for New Jersey Chrome based on updated estimates of the underlying factors as described below largely related to groundwater remediation.

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 196 soil sites and 12 groundwater 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

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nature of disposal required. Remediation of chromium contaminated soils at the location of the former manufacturing site has been completed pursuant to approved remedial action work plans. Remediation of chromium contaminated soils at certain other smaller sites is ongoing and is expected to continue until 2022. PPG regularly evaluates the assessments of costs incurred to date versus current

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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 the former Garfield Avenue chromium manufacturing site and five adjacent sites is expected to occur over several ~~years after NJDEP's approval of the work plan. Ongoing groundwater monitoring will be utilized to develop a final~~years. A groundwater remedial action work plan ~~which is currently expected to be~~was submitted to NJDEP in ~~2020.~~the first quarter of 2021.

PPG’s financial reserve for remediation of all New Jersey Chrome sites was ~~$116~~$114 million at March 31, ~~2020.~~2021. 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 18%, ~~14%~~15% and ~~33%~~30% 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. Further resolution of these events is expected to occur over the next several years. As these events occur and to the extent that the cost estimates of the environmental remediation remedies change, the existing reserve for this environmental remediation matter will continue to be adjusted.

Remediation: Glass, Chemicals and Other Sites

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

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

Remediation: Reasonably Possible Matters

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

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

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Other Matters

The Company had outstanding letters of credit and surety bonds of ~~$134~~$132 million and guarantees of $9 million as of March 31, ~~2020.~~2021. The Company does not believe any loss related to such guarantees is likely.

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~~17.~~15.Revenue Recognition

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

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

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 months ended March 31, ~~2020~~2021 and ~~2019,~~2020, service revenue constituted approximately 5% of total revenue.

Net sales by segment and region for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 were as follows:


		Performance Coatings			Industrial Coatings			Total Net Sales
		Three Months Ended March 31			Three Months Ended March 31			Three Months Ended March 31			Three Months Ended March 31
($ in millions)	($ in millions)	2020	2019	2020	2019	2020	2019	($ in millions)	2021	2020
Performance Coatings								Performance Coatings
United States and Canada	United States and Canada	$927	$953	$582	$613	$1,509	$1,566	United States and Canada	$998	$927
Europe, Middle East and Africa ("EMEA")	Europe, Middle East and Africa ("EMEA")	665	688	396	426	1,061	1,114	Europe, Middle East and Africa ("EMEA")	811	665
Asia Pacific	Asia Pacific	199	243	260	340	459	583	Asia Pacific	276	199
Latin America	Latin America	217	224	131	137	348	361	Latin America	234	217
Total	Total	$2,008	$2,108	$1,369	$1,516	$3,377	$3,624	Total	$2,319	$2,008
Industrial Coatings								Industrial Coatings
United States and Canada								United States and Canada	$571	$582
EMEA								EMEA	445	396
Asia Pacific								Asia Pacific	406	260
Latin America								Latin America	140	131
Total								Total	$1,562	$1,369
Total Net Sales								Total Net Sales
United States and Canada								United States and Canada	$1,569	$1,509
EMEA								EMEA	1,256	1,061
Asia Pacific								Asia Pacific	682	459
Latin America								Latin America	374	348
Total PPG								Total PPG	$3,881	$3,377

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Allowance for Credit Losses

PPG reviews its reserves for credit losses on a quarterly basis to ensure its reserves for credit losses reflect regional risk trends as well as current and future global operating conditions.

The following table summarizes the activity for the allowance for credit losses for the three months ended March 31, 2021 and 2020:


	Trade Receivables Allowance for Credit Losses
($ in millions)	2021	2020
January 1	$44	$22
Current-period provision for credit losses	0	33
Trade receivables written off as uncollectible, net of recoveries	(3)	(4)
Foreign currency impact	0	(1)
March 31	$41	$50

In March 2020, PPG recorded estimated future credit losses for trade receivables of $30 million related to the potential financial impacts of the COVID-19 pandemic. These amounts were estimated based on regional business information, including certain forward-looking information and other considerations. As of March 31, 2021, $21 million remains in the reserve for future COVID-19-related matters. PPG will continue to monitor the adequacy of this reserve as new information becomes available.

~~18.~~16.Reportable Business Segment Information

PPG is a multinational manufacturer with 910 operating segments (which the Company refers to as “strategic business units”) that are organized based on the Company’s major products lines. The Company’s reportable business segments include the following 2 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.

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

The Industrial Coatings reportable business segment is comprised of the automotive OEM coatings, industrial coatings, packaging coatings, and the specialty coatings and materials operating segments. This reportable business 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 and other specialty materials.

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Reportable business segment net sales and segment income for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 were as follows:


		Three Months Ended March 31				Three Months Ended March 31
($ in millions)	($ in millions)	2020	2019	($ in millions)	2021	2020
Net sales:	Net sales:			Net sales:
Performance Coatings	Performance Coatings	$2,008	$2,108	Performance Coatings	$2,319	$2,008
Industrial Coatings	Industrial Coatings	1,369	1,516	Industrial Coatings	1,562	1,369
Total	Total	$3,377	$3,624	Total	$3,881	$3,377
Segment income:	Segment income:			Segment income:
Performance Coatings	Performance Coatings	$272	$297	Performance Coatings	$386	$272
Industrial Coatings	Industrial Coatings	181	218	Industrial Coatings	245	181
Total	Total	$453	$515	Total	$631	$453
Corporate	Corporate	(60)	(47)	Corporate	(52)	(60)
Interest expense, net of interest income	Interest expense, net of interest income	(23)	(25)	Interest expense, net of interest income	(24)	(23)
Acquisition-related costs (a)				Acquisition-related costs (a)	(24)	0
Environmental remediation charges				Environmental remediation charges	(16)	(8)
Expenses incurred due to natural disasters(b)				Expenses incurred due to natural disasters(b)	(12)	0
Business restructuring-related costs, net (c)				Business restructuring-related costs, net (c)	(4)	(13)

Increase in allowance for doubtful accounts related to COVID-19	Increase in allowance for doubtful accounts related to COVID-19	(30)	—	Increase in allowance for doubtful accounts related to COVID-19	0	(30)
Business restructuring-related costs, net ^(a)		(13)	(3)
Environmental remediation charges		(8)	(10)
Acquisition-related costs ^(b)		—	(7)
Litigation matters		—	(4)

Income before income taxes	Income before income taxes	$319	$419	Income before income taxes	$499	$319

(a)Included in business restructuring-related costs, net are business restructuring charges, accelerated depreciation of certain assets and other related costs, offset by releases related to previously approved programs.

~~(b)~~Acquisition-related costs include advisory, legal, accounting, valuation, ~~and~~ other professional or consulting fees, and certain internal costs directly incurred to effect acquisitions. These costs are included in Selling, general and administrative expense in the condensed consolidated statement of income. Acquisition-related costs also include the impact for the step up to fair value of inventory acquired in certain acquisitions which are included in Cost of Sales, exclusive of depreciation and amortization in the condensed consolidated statement of income.

(b)In the second half of 2020, Hurricanes Laura and Delta damaged a southern U.S. factory supporting the Company's specialty coatings and materials business. In the first quarter of 2021, a winter storm further damaged that factory as well as other Company factories in the southern U.S. Incremental expenses incurred in the first quarter of 2021 due to these storms included costs related to maintenance and repairs of damaged property, freight and utility premiums and other incremental expenses directly related to the impacted areas. These incremental expenses largely related to the Company's specialty coatings and materials business.

(c)Included in business restructuring-related costs, net are business restructuring charges, accelerated depreciation of certain assets and other related costs, offset by releases related to previously approved programs.

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 ~~2019~~2020 Form 10-K.

Executive Overview

~~COVID-19~~

Our first quarter results reflect a sudden and wide-ranging deterioration in global demand as a result of the COVID-19 pandemic beginning with the impacts of the economic shutdown in China during February and continuing across the world during the month of March. As the COVID-19 pandemic spread, we remained focused on and prioritized protecting our people, customers and all of our stakeholders. While we cannot determine the precise impact of the COVID-19 outbreak on our first quarter results, we estimate that net sales and earnings per diluted share were unfavorably impacted from the effects of the COVID-19 pandemic by approximately $225 million and $0.35, respectively. From a financial perspective, our businesses through early March, with the exception of those in China, were mostly performing at or above the financial targets we had set at the outset of the year, and we were pacing toward low-double-digit percentage EPS growth. We had solid performance in our global architectural and packaging coatings businesses and continued growth in the aerospace coatings business. In the last two weeks of March, however, many of our larger original equipment manufacturer ("OEM") customers were forced to shut down; a number of architectural paint stores in certain countries were mandated to close; and miles driven and flown throughout the world fell sharply as many countries imposed stay-at-home mandates. For our reportable business segments, the impact was more significant in the Industrial Coatings segment as company sales in China are weighted more to those businesses.

In addition, in March 2020, PPG recorded estimated future credit losses for trade receivables of $30 million, or $0.10 per-diluted-share, related to the potential financial impacts of the COVID-19 pandemic. These amounts were

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estimated based on a regional business perspective including certain forward-looking information and other considerations. As new information becomes available, PPG will monitor the adequacy of this reserve.

We have taken immediate and broad steps to adapt to the current business climate, including decisive cost actions and an increased focus on cash generation and liquidity. These include announced salary reductions for senior leaders, shutdowns of some manufacturing and distribution operations, temporary employee furloughs at the most severely demand-impacted businesses, reduced spending across all businesses and functions, and deferred capital expenditures. In addition, we continued to execute our previously announced restructuring programs, achieving about $20 million of savings in the first quarter. We are continuing to assess and manage through the crisis, and will determine if further cost or restructuring actions are warranted.

In mid-March, the company borrowed $800 million under its revolving credit facility reflecting an abundance of caution and the anticipated uncertainty in the debt capital markets, including the commercial paper market. Subsequently, in April, the company entered into a $1.5 billion 364-day term loan and utilized a portion of the proceeds to fully repay the revolver borrowing. These strategic actions bolstered the company’s liquidity.

The company expects that second quarter sales volumes will be down 30% to 35%, presuming that demand begins to improve in June. We anticipate that the automotive OEM, automotive refinish, and aerospace coatings businesses along with certain architectural coatings businesses will be most impacted in the second quarter. Our operations in China are now fully operational, and regional economic activity is returning toward pre-crisis levels. We expect that for certain other business, including packaging coatings, do-it-yourself ("DIY") architectural coatings, long-cycle protective coatings and military products, that the impact will be less severe and may in some cases drive greater demand for PPG products.

~~Due to the heightened level of uncertainty over global economic demand, the company is withdrawing all of its previously communicated full year sales and earnings guidance.~~

Below are our key financial results for the three months ended March 31, ~~2020:~~2021:

•Net sales were approximately ~~$3.4~~$3.9 billion, ~~down 6.8%~~up 14.9% compared to the prior year.

•Cost of sales, exclusive of depreciation and amortization ("Cost of sales") was ~~$1.9~~$2.2 billion, ~~down 8.0%~~up 17.0% versus prior year primarily due to ~~lower~~higher sales ~~volumes as a result of COVID-19 and foreign currency translation.~~volumes. As a percentage of sales, Cost of sales ~~decreased 0.7%~~increased 1.0%.

•Selling, general and administrative ("SG&A") expense was ~~$905~~$891 million, ~~up 1.8%~~down 1.5% year-over-year primarily due to ~~a $30 million increase in the allowance for uncollectible accounts related to COVID-19 and wage and other~~ cost ~~inflation.~~mitigation initiatives. As a percentage of sales, SG&A expense ~~increased 2.3%~~decreased 3.8%.

•Income before income taxes was ~~$319~~$499 million.

•The reported effective tax rate was ~~22.3%~~22.8%. The adjusted effective tax rate was ~~22.4%~~23.1%.

•Net income attributable to PPG was ~~$243~~$378 million.

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•Earnings per diluted share attributable to PPG was ~~$1.02.~~$1.58.

For the three months ended March 31, 2021:

•Cash flows used for operating activities was ~~$159~~$23 million, ~~an increase~~a decrease of ~~$93~~$136 million year-over-year.

•Capital expenditures, including business acquisitions (net of cash acquired), was ~~$81~~$436 million.

•The Company paid ~~$120~~$128 million in dividends.

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Performance in the first quarter of ~~2020~~2021 compared to the first quarter of ~~2019~~2020

Performance Overview

Net Sales by Region


		Three Months Ended March 31						Percent Change	Three Months Ended March 31			Percent Change
($ in millions, except percentages)	($ in millions, except percentages)	2020	2019	2020 vs. 2019		($ in millions, except percentages)	2021		2020	2021 vs. 2020
United States and Canada	United States and Canada	$1,509	$1,566	(3.6)	%	United States and Canada	$1,569		$1,509	4.0	%
Europe, Middle East and Africa ("EMEA")	Europe, Middle East and Africa ("EMEA")	1,061	1,114	(4.8)	%	Europe, Middle East and Africa ("EMEA")	1,256		1,061	18.4	%
Asia Pacific	Asia Pacific	459	583	(21.3)	%	Asia Pacific	682		459	48.6	%
Latin America	Latin America	348	361	(3.6)	%	Latin America	374		348	7.5	%
Total	Total	$3,377	$3,624	(6.8)	%	Total	$3,881		$3,377	14.9	%

Net sales ~~decreased $247~~increased $504 million due to the following:

● ~~Lower~~Higher sales volumes ~~(-8%~~(7%)

● ~~Unfavorable~~Favorable foreign currency translation ~~(-2%~~(3%)

~~Partially offset by:~~

● Acquisition-related sales ~~(2%~~(3%)

● Higher selling prices ~~(1%~~(2%)

As a result of COVID-19 and slowing of the global economy, sales volumes and unfavorable foreign currency translation lowered net sales in each region and in both reportable business segments. Slightly higher selling prices and acquisition-related sales partially offset this downturn.

Foreign currency translation decreased net sales approximately $75 million as the U.S. dollar strengthened against several foreign currencies versus the prior year, most notably the Mexican peso and euro.

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 March 31								Percent Change		Three Months Ended March 31				Percent Change
($ in millions, except percentages)	($ in millions, except percentages)	2020		2019		2020 vs. 2019		($ in millions, except percentages)	2021			2020		2021 vs. 2020
Cost of sales, exclusive of depreciation and amortization	Cost of sales, exclusive of depreciation and amortization	$1,908		$2,073		(8.0)	%	Cost of sales, exclusive of depreciation and amortization	$2,232			$1,908		17.0	%
Cost of sales as a percentage of net sales	Cost of sales as a percentage of net sales	56.5	%	57.2	%	(0.7)	%	Cost of sales as a percentage of net sales	57.5		%	56.5	%	1.0	%

Cost of sales, exclusive of depreciation and amortization, ~~decreased $165~~increased $324 million primarily due to the following:

● ~~Lower~~Higher sales volumes

~~● Foreign currency translation~~

~~Partially offset by:~~

● Cost of sales attributable to acquired businesses

● Unfavorable foreign currency translation

● Raw material inflation

Selling, general and administrative expenses


		Three Months Ended March 31								Percent Change		Three Months Ended March 31				Percent Change
($ in millions, except percentages)	($ in millions, except percentages)	2020		2019		2020 vs. 2019		($ in millions, except percentages)	2021			2020		2021 vs. 2020
Selling, general and administrative expenses (SG&A)	Selling, general and administrative expenses (SG&A)	$905		$889		1.8	%	Selling, general and administrative expenses (SG&A)	$891			$905		(1.5)	%
Selling, general and administrative expenses as a percentage of net sales	Selling, general and administrative expenses as a percentage of net sales	26.8	%	24.5	%	2.3	%	Selling, general and administrative expenses as a percentage of net sales	23.0		%	26.8	%	(3.8)	%

SG&A expense ~~increased $16~~decreased $14 million primarily due to the following:

● ~~Charge for uncollectible accounts related to COVID-19~~

~~● Wage and other cost inflation~~

~~Partially offset by:~~

~~● Restructuring cash~~Cost savings initiatives, including restructuring actions

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~~● Foreign currency translation~~

Other costs and other income


		Three Months Ended March 31						Percent Change	Three Months Ended March 31			Percent Change
($ in millions, except percentages)	($ in millions, except percentages)	2020	2019	2020 vs. 2019		($ in millions, except percentages)	2021		2020	2021 vs. 2020
Interest expense, net of Interest income	Interest expense, net of Interest income	$23	$25	(8.0)	%	Interest expense, net of Interest income	$24		$23	4.3	%
Other charges	Other charges	$3	$14	(78.6)	%	Other charges	$17		$10	70.0	%
Other income	Other income	($18)	($16)	12.5	%	Other income	($13)		($18)	(27.8)	%

Other charges

Other charges ~~were~~for the three months ended March 31, 2021 includes a decline in fair value of certain marketable equity securities.

Other income

Other income was lower in the three months ended March 31, ~~2020~~2021 compared to prior year primarily due to slightly lower ~~environmental remediation charges during the quarter.~~equity earnings compared to prior year.

Effective tax rate and earnings per diluted share


		Three Months Ended March 31								Percent Change		Three Months Ended March 31					Percent Change
($ in millions, except percentages)	($ in millions, except percentages)	2020		2019		2020 vs. 2019		($ in millions, except percentages)	2021			2020		2021 vs. 2020
Income tax expense	Income tax expense	$71		$102		(30.4)	%	Income tax expense	$114			$71		60.6		%
Effective tax rate	Effective tax rate	22.3	%	24.3	%	(2.0)	%	Effective tax rate	22.8		%	22.3	%	0.5		%
Adjusted effective tax rate*		22.4	%	24.4	%	(2.0)	%
Adjusted effective tax rate, continuing operations*								Adjusted effective tax rate, continuing operations*	23.1		%	22.4	%	0.7		%

Earnings per diluted share		$1.02		$1.31		(22.1)	%
Earnings per diluted share, continuing operations								Earnings per diluted share, continuing operations	$1.58			$1.02		54.9		%
Adjusted earnings per diluted share*	Adjusted earnings per diluted share*	$1.19		$1.38		(13.8)	%	Adjusted earnings per diluted share*	$1.88			$1.31		43.5		%
*See Regulation G Reconciliation below	*See Regulation G Reconciliation below														*See Regulation G Reconciliation below

The effective tax rate for the three months ~~ending~~ended March 31, ~~2020~~2021 and ~~2019~~2020 reflects the impact of certain discrete tax items for the quarter. The Company expects that its ~~full year 2020 adjusted~~second quarter 2021 effective tax rate will be between ~~22%~~23% and 24%., including potential favorable discrete tax items.

Adjusted earnings per diluted share for the three months ended March 31, ~~2020 decreased~~2021 increased year-over-year primarily due to ~~the mix of pretax earnings and items described further in the Regulation G reconciliation.~~higher sales volumes.

Regulation G Reconciliations - Results from Operations

PPG believes ~~investor's~~investors' understanding of the Company’s performance is enhanced by the disclosure of net income from continuing operations, earnings per diluted share ~~and~~from continuing operations, PPG's effective tax rate and segment income adjusted for certain items. PPG’s management considers this information useful in providing insight into the Company’s ongoing 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 from continuing operations, earnings per diluted share ~~and~~from continuing operations, the effective tax rate and segment income 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 from continuing operations, earnings per diluted share from continuing operations, the effective tax rate, segment income or other financial measures as computed in accordance with U.S. GAAP. In addition, adjusted net income, adjusted earnings per diluted share, ~~and~~ the adjusted effective tax rate and segment income may not be comparable to similarly titled measures as reported by other companies.

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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 and net income (attributable to PPG) and earnings per share – assuming dilution (attributable to PPG) are reconciled to adjusted net income (attributable to PPG) and adjusted earnings per share – assuming dilution below:

Three Months Ended March 31, 2020
($ in millions, except percentages and per share amounts) Income Before Income Taxes Tax Expense Effective Tax Rate Net income (attributable to PPG)
Earnings per diluted share^(a)
As reported $319 $71 22.3 % $243 $1.02
Adjusted for:
Increase in allowance for doubtful accounts related to COVID-19 30 7 23.2 % 23 0.10
Business restructuring-related costs, net ^(b)
13 3 22.4 % 10 0.04
Environmental remediation charges 8 2 24.3 % 6 0.03
Adjusted, excluding certain items $370 $83 22.4 % $282 $1.19


	Three Months Ended March 31, 2021
($ in millions, except percentages and per share amounts)	Income Before Income Taxes	Tax Expense	Effective Tax Rate		Net income (attributable to PPG)	Earnings per diluted share(a)
As reported, continuing operations	$499	$114	22.8	%	$378	$1.58
Adjusted for:
Acquisition-related amortization expense	39	10	25.2	%	29	0.12
Acquisition-related costs	24	5	23.5	%	19	0.08
Environmental remediation charges	16	4	24.3	%	12	0.05
Expenses incurred due to natural disasters (b)	12	3	24.3	%	9	0.04
Business restructuring-related costs, net (c)	4	1	25.0	%	3	0.01
Adjusted, continuing operations, excluding certain items	$594	$137	23.1	%	$450	$1.88

Three Months Ended March 31, 2019
($ in millions, except percentages and per share amounts) Income Before Income Taxes Tax Expense Effective Tax Rate Net income (attributable to PPG)
Earnings per diluted share^(a)
As reported $419 $102 24.3 % $312 $1.31
Adjusted for:
Acquisition-related costs 7 2 23.4 % 5 0.02
Environmental remediation charge 10 2 24.3 % 8 0.03
Litigation matters 4 1 24.3 % 3 0.01
Business restructuring-related costs, net ^(b)
3 1 24.4 % 2 0.01
Adjusted, excluding certain items $443 $108 24.4 % $330 $1.38


	Three Months Ended March 31, 2020
($ in millions, except percentages and per share amounts)	Income Before Income Taxes	Tax Expense	Effective Tax Rate		Net income (attributable to PPG)	Earnings per diluted share(a)
As reported, continuing operations	$319	$71	22.3	%	$243	$1.02
Adjusted for:
Acquisition-related amortization expense	36	8	22.3	%	28	0.12
Increase in allowance for doubtful accounts related to COVID-19	30	7	23.2	%	23	0.10
Business restructuring-related costs, net (c)	13	3	22.4	%	10	0.04
Environmental remediation charges, net	8	2	24.3	%	6	0.03


Adjusted, continuing operations, excluding certain items	$406	$91	22.4	%	$310	$1.31

(a) Earnings per diluted share is calculated based on unrounded numbers. Figures in the table may not recalculate due to rounding.

(b) ~~For~~In the ~~three months ended March 31,~~second half of 2020, Hurricanes Laura and ~~2019,~~Delta damaged a southern U.S. factory supporting the Company's specialty coatings and materials business. In the first quarter of 2021, a winter storm further damaged that factory as well as other Company factories in the southern U.S. Incremental expenses incurred in the first quarter of 2021 due to these storms included costs related to maintenance and repairs of damaged property, freight and utility premiums and other incremental expenses directly related to the impacted areas. These incremental expenses largely related to the Company's specialty coatings and materials business.

(c) Included in business restructuring-related costs, net are business restructuring charges, accelerated depreciation of certain assets and other related costs, offset by releases related to previously approved programs.

Performance of Reportable Business Segments

Performance Coatings


		Three Months Ended March 31			$ Change				% Change	Three Months Ended March 31		$ Change		% Change
($ in millions, except per share amounts)	($ in millions, except per share amounts)	2020	2019	2020 vs. 2019	2020 vs. 2019		($ in millions, except per share amounts)	2021		2020	2021 vs. 2020	2021 vs. 2020
Net sales	Net sales	$2,008	$2,108	($100)	(4.7)	%	Net sales	$2,319		$2,008	$311	15.5	%
Segment income	Segment income	$272	$297	($25)	(8.4)	%	Segment income	$386		$272	$114	41.9	%
Amortization expense							Amortization expense	$29		$26	$3	11.5	%
Segment income, excluding amortization expense							Segment income, excluding amortization expense	$415		$298	$117	39.3	%

Performance Coatings net sales ~~decreased~~increased due to the following:

● ~~Lower~~Higher sales volumes ~~(-6%~~(5%)

● ~~Unfavorable~~Acquisition-related sales (5%)

● Favorable foreign currency translation ~~(-2%~~(3%)

~~Partially offset by:~~

● Higher selling prices (2%)

~~● Acquisition-related sales (1%)~~

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Architectural coatings - Americas and Asia Pacific net sales, excluding the impact of currency and acquisitions ("organic sales") increased by a ~~low-single-digit~~high-single-digit percentage with differences by channel and region. ~~Higher selling prices offset lower~~Sales volume growth was strong in all regions. In Mexico, PPG Comex architectural coatings business organic sales ~~volumes. DIY sales volumes were higher~~increased by a ~~mid-single-digit~~high-single-digit percentage ~~and Mexican~~compared to the prior year as the concessionaire network sell-out of PPG ~~Comex organic sales grew by a mid-single-digit percentage.~~

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products continued to be strong throughout the quarter.

Architectural coatings – EMEA organic sales ~~decreased~~increased by ~~a low-single-digit percentage as positive organic~~about 20%, driven by strong sales ~~trends~~volume growth year-over-year in ~~the first two months of the quarter were more than offset~~most countries. This performance was led by ~~lower~~strong consumer demand ~~in southern Europe where various~~for residential repaint and do-it-yourself ("DIY") products after many countries ~~mandated the closures of retail paint stores in March.~~imposed additional, or stricter, stay-at-home mandates.

~~Net sales~~Sales volumes for automotive refinish coatings ~~were down~~increased by a ~~low-teen~~high-teen percentage ~~as higher selling prices~~compared to prior year, driven by continued demand improvement in the Asia Pacific region and ~~acquisition-related sales were more than offset by~~some customer restocking in the U.S. region. In Europe, congestion and miles driven in major cities remained at lower ~~sales volumes in each region reflecting a sharp decline in global miles driven.~~levels. In the U.S., body shop activity modestly improved during the first quarter.

Aerospace coatings sales volumes ~~were higher~~decreased nearly 30% year-over-year, ~~through~~slightly better than year-over-year levels experienced in the ~~first two months of the~~fourth quarter, ~~but fell~~as sharp declines continued in ~~March~~commercial OEM and after-market demand due to ~~customer production shutdowns and softening commercial after-market~~lower airline activity. Net sales benefited from consistent military demand ~~resulting in sales volumes being down a low-single-digit percentage for the quarter.~~year-over-year.

Sales volumes in the protective and marine coatings business were ~~down~~higher by a low-single-digit percentage driven by ~~lower sales volumes~~strong demand in ~~China related to mandated shutdowns.~~the Asia Pacific region.

The first quarter was the first full quarter for the traffic solutions business after the closing of the Ennis-Flint acquisition in December 2020.

Segment income ~~decreased $25~~increased $114 million year-over-year ~~including unfavorable foreign currency translation impacts~~due to higher selling prices, the earnings impact of ~~$7 million. Segment income was impacted by lower~~higher sales volumes, ~~related to~~ the ~~pandemic~~execution of cost-mitigation actions and ~~unfavorable foreign currency translation~~restructuring savings, partially offset by ~~higher selling prices, execution of cost-mitigation efforts and restructuring initiatives.~~raw material cost inflation.

Looking Ahead

Looking ahead industry demand levels in the second quarter are expected to be significantly lower year-over-year especially in the automotive refinish coatings, aerospace coatings, and certain architectural coatings regions. Completed acquisitions are expected to add about $25 million of net sales primarily from Dexmet, Texstars, and ICR. Net sales for the Performance Coatings segment, ~~are~~raw material cost inflation is expected to be ~~lower by 25% to 35%~~higher in the second quarter compared to the ~~second~~first quarter. Further selling price increases have been secured or are in progress during the quarter. Second quarter ~~of 2019. Based~~year-over-year sales growth will be aided by easier sales comparisons in most businesses due to the pandemic’s impact on ~~current exchange rates,~~demand last year. Supply disruptions have caused some challenges with certain raw material availability, which we expect will have a modest impact on sales activity during the quarter, particularly impacting the architectural coatings businesses. Finally, foreign currency translation is expected to have ~~an unfavorable~~a favorable impact on segment sales and earnings of about ~~$90 million.~~$100 million and approximately $15 million, respectively, based on recent exchange rates.

Industrial Coatings


		Three Months Ended March 31			$ Change				% Change	Three Months Ended March 31		$ Change		% Change
($ in millions, except per share amounts)	($ in millions, except per share amounts)	2020	2019	2020 vs. 2019	2020 vs. 2019		($ in millions, except per share amounts)	2021		2020	2021 vs. 2020	2021 vs. 2020
Net sales	Net sales	$1,369	$1,516	($147)	(9.7)	%	Net sales	$1,562		$1,369	$193	14.1	%
Segment income	Segment income	$181	$218	($37)	(17.0)	%	Segment income	$245		$181	$64	35.4	%
Amortization expense							Amortization expense	$10		$10	$—	—	%
Segment income, excluding amortization expense							Segment income, excluding amortization expense	$255		$191	$64	33.5	%

Industrial Coatings segment net sales ~~decreased~~increased due to the following:

● ~~Lower~~Higher sales volumes ~~(-11%~~(10%)

● ~~Unfavorable~~Favorable foreign currency translation ~~(-2%~~(3%)

~~Partially offset by:~~

● ~~Acquisition-related sales (3%~~Higher selling prices (1%)

Automotive OEM coatings sales volumes ~~decreased~~increased by a ~~high-teen~~low-teen percentage year-over-year, driven by strong year-over-year retail sales in China. In the ~~significant downturn in global~~U.S., automotive ~~industry~~retail dealer inventories decreased to historically low levels as consumer demand remained robust while production ~~rates.~~levels were constrained due to a shortage of computer chips.

For the industrial coatings business, ~~net~~ sales ~~decreased~~volumes increased by a ~~mid-single-digit percentage. Acquisition-related sales were more than offset by lower~~low-teen percentage year-over-year as global industrial production ~~demand in most regions due~~continued to ~~customer shutdowns.~~improve compared to the start of the pandemic. Electronic materials, heavy duty equipment and cookware had strong year-over-year growth.

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Packaging coatings organic sales ~~decreased~~increased by a ~~low-single-digit~~low-teen percentage year-over-year ~~as modestly~~due to sales volume growth in the Asia-Pacific region, Europe, and Latin America, with strong growth across the beverage and canned food segments.

Segment income increased $64 million year-over-year due to the earnings impact of higher sales volumes, the execution of cost-mitigation actions and restructuring savings, and higher selling prices, ~~were offset by lower sales volumes stemming from pandemic-related China customer shutdowns.~~

Segment income decreased $37 million year-over-year, including unfavorable foreign currency translation impacts of about $5 million. Segment income was impacted by lower sales volumes driven by customer shutdowns related to the pandemic, partially offset by ~~cost-mitigation actions, restructuring~~raw material cost ~~savings, and modestly higher selling prices.~~inflation.

Looking ahead

Looking ahead ~~industry demand levels~~for the Industrial Coatings segment, sales volumes are expected to be significantly ~~lower in~~higher than the prior-year second quarter, ~~compared~~due to ~~prior year, especially in the automotive OEM coatings and the~~considerably lower global industrial ~~coatings businesses. Net sales for the Industrial Coatings segment are expected to be lower by about 30% to 35% compared to~~activity during the second quarter of ~~2019. Based on current exchange rates,~~2020 stemming from the pandemic. The Company has been actively working with customers to secure selling price increases in all businesses. Due to the rapid increase in raw material costs, the second quarter will likely have an unfavorable net impact from higher raw material and logistics costs offsetting selling price increases. Finally, foreign currency translation is expected to have ~~an unfavorable~~a favorable impact on

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segment sales and earnings of about ~~$50 million. In China, customer demand is expected to continue to recover~~$30 million and ~~turn positive in the second half of 2020.~~$5 million, respectively, based on recent exchange rates.

Liquidity and Capital Resources

PPG had cash and short-term investments totaling $1.9 billion ~~and $1.3 billion~~ at both March 31, ~~2020~~2021 and December 31, ~~2019, respectively.~~2020.

Cash used for operating activities from continuing operations for the three months ended March 31, 2021 and 2020 ~~and 2019~~ was ~~$159~~$23 million and ~~$66~~$159 million, respectively. Operating cash flow ~~decreased~~increased primarily due to ~~lower~~higher net ~~sales~~income, partially offset by ~~improvement~~unfavorable changes in working capital in the first ~~three months of 2020~~quarter 2021 compared to the prior year.

Other uses of cash during the three months ended March 31, ~~2020~~2021 included:

•Capital expenditures, excluding acquisitions, of ~~$37~~$80 million.

•Business acquisition cash spending (net of ~~$44~~cash acquired) of $356 million.

•Cash dividends paid of ~~$120~~$128 million.

The Company's commercial paper borrowings are supported by the five-year revolving credit agreement (the "Credit Agreement") entered into in 2019. As a result, the commercial paper borrowings are classified as long-term debt based on PPG's intent and ability to refinance these borrowings on a long-term basis. As of March 31, 2020 and December 31, 2019, there were $307 million and $100 million of commercial paper borrowings outstanding, respectively.

In March ~~2020,~~2021, PPG ~~borrowed $800~~completed a public offering of $700 million ~~under~~aggregate principal amount of 1.200% notes due 2026. These notes were issued pursuant to PPG’s existing shelf registration statement and pursuant to the ~~Credit Agreement, which is classified~~Indenture between the Company and the Bank of New York Mellon Trust Company, N.A., as ~~short-term based on PPG's intent~~trustee, as supplemented (the "Indenture"). The Indenture governing these notes contains covenants that limit the Company’s ability to, ~~repay~~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 ~~borrowings within one year. There were no amounts outstanding under~~notes also require the ~~Credit agreement as~~Company to make an offer to repurchase the notes upon a Change of ~~December 31, 2019.~~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 $692 million.

~~On April 14, 2020,~~In February 2021, PPG entered into a ~~$1.5~~$2.0 billion ~~364-Day~~ Term Loan Credit Agreement (the ~~“Term Loan”~~"Term Loan Credit Agreement").The Term Loan ~~contains covenants that are consistent with those in the~~ Credit Agreement provides the Company with the ability to borrow up to an aggregate principal amount of $2.0 billion on an unsecured basis. The Company may borrow term loans under the Term Loan Credit Agreement to finance cash consideration for the Company’s pending acquisition of up to all of the equity interests of Tikkurila, and to pay fees, costs and expenses related thereto. Following the Closing Date and from time to time prior to December 31, 2021, the Company may make up to eleven additional borrowings of term loans under the Term Loan Credit Agreement, which may be used for working capital and general corporate purposes. The Term Loan Credit Agreement contains covenants that are usual and customary restrictive covenants for facilities of its type, which include, with specified exceptions, limitations on the Company’s ability to create liens or other encumbrances, to enter into sale and leaseback transactions and to enter into consolidations, mergers or transfers of all or substantially all of its assets. The Term Loan ~~also requires~~Credit Agreement matures and all outstanding borrowings are due and payable on the third anniversary of the date of the initial borrowing under the Agreement. There were no amounts outstanding under the Term Loan Credit Agreement as of March 31, 2021.

In April 2020, PPG entered into a $1.5 billion 364-Day Term Loan Credit Agreement (the “Term Loan”). The Term Loan contains covenants that are consistent with those in the Credit Agreement discussed below and that are usual and customary restrictive covenants for facilities of its type, which include, with specified exceptions, limitations on the Company’s ability to create liens or other encumbrances, to enter into sale and leaseback transactions and to enter into consolidations, mergers or transfers of all or substantially all of its assets. In 2020, PPG repaid $1.1 billion

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of the Term Loan using cash on hand. In the first quarter 2021, PPG repaid the remaining $400 million of the Term Loan using cash on hand.

In August 2019, PPG amended and restated its five-year credit agreement (the “Credit Agreement”) with several banks and financial institutions. The Credit Agreement provides for a $2.2 billion unsecured revolving credit facility. The Company has the ability to increase the size of the Credit Agreement by up to an additional $750 million, subject to the receipt of lender commitments and other conditions precedent. The Credit Agreement will terminate on August 30, 2024. The Company has the right, subject to certain conditions set forth in the Credit Agreement, to designate certain subsidiaries of the Company as borrowers under the Credit Agreement. In connection with any such designation, the Company is required to guarantee the obligations of any such subsidiaries under the Credit Agreement. In March 2020, PPG borrowed $800 million under the Credit Agreement and repaid that amount in full in April 2020. There were no amounts outstanding under the credit agreement as of March 31, 2021 and December 31, 2020.

The Term Loan Credit Agreement and Credit Agreement require the Company to maintain a ratio of Total Indebtedness to Total Capitalization, as defined in the Term Loan Credit Agreement and Credit Agreement, of 60% or less; provided, that for any fiscal quarter in which the Company has made an acquisition for consideration in excess of $1 billion and for the next five fiscal quarters thereafter, the ratio of Total Indebtedness to Total Capitalization may not exceed 65% at any time. ~~On April 14, 2020, the Company borrowed $1.5 billion~~As of March 31, 2021, Total Indebtedness to Total Capitalization as defined under the Credit Agreement and Term Loan ~~and used a portion of the proceeds to repay in full~~Credit Agreement was 48%.

The Credit Agreement also supports the Company’s ~~$800~~commercial paper borrowings which are classified as long-term based on PPG’s intent and ability to refinance these borrowings on a long-term basis. Commercial paper borrowings of $550 million and $250 million were outstanding as of ~~borrowings under its revolving Credit Agreement. The Term Loan terminates~~March 31, 2021 and ~~all amounts outstanding are payable on April 13, 2021.~~December 31, 2020, respectively.

Total capital spending in ~~2020~~2021 is expected to be ~~in the range~~approximately $450 million, reflecting a return to pre-pandemic levels of ~~$200 million to $250 million. The Company has deferred non-essential capital~~ spending in ~~response to lower industry demand conditions.~~support of future organic growth opportunities. PPG expects to make mandatory contributions to its non-U.S. pension plans in the range of $10 million to $15 million during the remaining nine months of ~~2020.~~2021. PPG may make voluntary contributions to its defined benefit pension plans in ~~2020~~2021 and beyond.

A primary focus for the Company in ~~2020~~2021 will continue to be cash deployment focused on shareholder value creation, with a preference for business acquisitions. The near-term cash deployment priority will be to ~~maintain appropriate balance sheet flexibility, including~~complete the announced acquisitions using a combination of cash on hand ~~due to the uncertain nature~~ and ~~unpredictable timing of the COVID-19 pandemic.~~

As of March 31, 2020, Total Indebtedness to Total Capitalization as defined under the Credit Agreement and the Term Loan was 53%. The Credit Agreement and Term Loan require the Company to maintain a ratio of Total Indebtedness to Total Capitalization of 60% or less.

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external financing.

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 our working capital management is operating working capital as a percentage of sales (current quarter sales annualized).


($ in millions, except percentages)	($ in millions, except percentages)	March 31, 2020		December 31, 2019		March 31, 2019		($ in millions, except percentages)	March 31, 2021		December 31, 2020		March 31, 2020
Trade receivables, net	Trade receivables, net	$2,436		$2,479		$2,832		Trade receivables, net	$2,706		$2,412		$2,436
Inventories, FIFO	Inventories, FIFO	1,979		1,834		2,091		Inventories, FIFO	2,027		1,845		1,979
Trade creditors’ liabilities	Trade creditors’ liabilities	2,141		2,098		2,316		Trade creditors’ liabilities	2,441		2,259		2,141
Operating working capital	Operating working capital	$2,274		$2,215		$2,607		Operating working capital	$2,292		$1,998		$2,274
Operating working capital as a % of Sales	Operating working capital as a % of Sales	16.8	%	15.1	%	18.0	%	Operating working capital as a % of Sales	14.8	%	13.3	%	16.8	%
Days sales outstanding	Days sales outstanding	60		56		63		Days sales outstanding	57		54		60
Days payable outstanding		95		94		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 significant contractual obligations.

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Environmental


		Three Months Ended March 31				Three Months Ended March 31
($ in millions)	($ in millions)	2020	2019	($ in millions)	2021	2020
Cash outlays for environmental remediation activities	Cash outlays for environmental remediation activities	$25	$16	Cash outlays for environmental remediation activities	$9	$25

($ in millions)

Remainder of
~~2020~~2021

Annually
~~2021~~2022 - ~~2024~~2025

Projected future cash outlays for environmental remediation activities

$5570 - ~~$75~~

$90

$20 - $50

Restructuring

In ~~April 2018,~~June 2020, PPG initiated ~~an $83~~a $176 million ~~global~~ restructuring program. The program ~~is largely centered around~~addresses weakened global economic conditions stemming from the ~~change~~COVID-19 pandemic and related pace of recovery in ~~customer assortment related~~a few end-use markets along with further opportunities to optimize supply chain and functional costs. The plan includes a voluntary separation program that was offered in the U.S. ~~architectural coatings DIY business.~~and Canada. PPG recognized ~~$55~~$45 million of savings from this program in ~~2019.~~2020. We expect to achieve annualized cost savings from the ~~2018~~2020 program of ~~$85~~$160 to $170 million ~~once fully implemented~~by the expected completion date in ~~2020.~~2021.

In June 2019, PPG initiated a $184 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. PPG recognized ~~$15~~$60 million of savings from this program in ~~2019.~~2020. The 2019 program is expected to achieve approximately $125 million of annualized cost savings by the expected completion date in 2022.

In April 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 $10 million of savings from this program in 2020. We expect to achieve annualized cost savings from the 2018 program of $85 million once fully implemented in 2021.

Aggregate restructuring savings related to the 2020, 2019 and 2018 programs was approximately $35 million in the first quarter of 2021. Total restructuring savings are expected to be ~~between $80 million and $90~~at least $120 million in ~~2020.~~2021. In addition, the Company continues to review its cost structure to identify additional cost savings opportunities. See Note 7,6, “Business Restructuring,” to the accompanying condensed consolidated financial statements for further details on the Company's business restructuring programs.

Currency

Comparing spot exchange rates at December 31, ~~2019~~2020 and at March 31, ~~2020,~~2021, the U.S. dollar strengthened against currencies of ~~most~~many countries within the regions PPG operates. As a result, consolidated net assets at March 31, ~~2020~~2021 decreased by ~~$696~~$126 million compared to December 31, ~~2019~~2020 primarily driven by the Euro and the Mexican ~~peso~~.peso.

Comparing average exchange rates during the first three months of ~~2020~~2021 to those of the first three ~~months~~months of ~~2019,~~2020, the U.S. dollar ~~strengthened~~ weakened against currencies of most countries within the EMEA and Asia Pacific regions PPG ~~operates, including~~ ~~EMEA, Asia Pacific, and Latin America.~~operates. This had ~~an unfavorable impact~~a favorable impact on Income before income taxes for the three months ended March 31, ~~2020~~2021 of $1213 million from the translation of these foreign earnings into U.S. dollars.

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New Accounting Standards

See Note 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 ~~16,~~14, “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 ~~16,~~14, 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

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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 ~~16,~~14, PPG has significant reserves for environmental contingencies. Please refer to the Environmental Matters section of Note 1614 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~~There are multiple, future events yet to ~~analyze, assess~~occur, including further remedy selection and ~~remediate~~design, remedy implementation and execution and applicable governmental agency or community organization approvals. Considerable uncertainty exists regarding the timing of these future events for the New Jersey Chrome sites. Further resolution of these events is expected to occur over the next several years. As these events occur and to the extent that the cost estimates of the environmental ~~issues associated with New Jersey Chrome. Information~~remediation remedies change, the existing reserve for this environmental remediation matter 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 in 2020.adjusted.

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

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 ("SEC"). 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 statements related to the expected effects on our business of the COVID-19 pandemic and the pace of recovery from the pandemic, 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, 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, the timing and expected benefits of our acquisitions, difficulties in integrating acquired businesses and achieving expected synergies therefrom, economic and political conditions in 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, the effectiveness of our internal control over financial reporting, the results of governmental investigations, 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, in the 2020 Form 10-K under Item 1A and in ~~the 2019~~this Form ~~10-K~~10-Q under Item 1A is 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 income, business disruption, operational problems,

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financial loss, legal liability to third parties, other factors set forth in Item 1A of the ~~2019~~2020 Form 10-K and in Item 1A of this Form 10-Q 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

At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, PPG had non-U.S. dollar denominated borrowings outstanding of $2.4 ~~billion a~~billion. ~~nd $2.3 billion, respectively.~~ 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 $~~267~~265 million at March 31, ~~2020~~2021 and ~~$255~~$273 million at December 31, ~~2019,~~2020, respectively.

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The fair ~~value~~values of foreign currency forward contracts outstanding at March 31, ~~2020~~2021 and December 31, ~~2019 was a~~2020 were net ~~liability~~assets of ~~$11~~$9 million and~~and $7~~ $2 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 ~~period~~three months ended March 31, ~~2020~~2021 was $~~203~~277 million and ~~$357~~$226 million for the ~~period~~year ended December 31, ~~2019.~~2020.

PPG has U. S. dollar to euro cross currency swap contracts with a total notional amount of $875 million outstanding, resulting in ana net asset of ~~$90~~$19 million and a net ~~asset~~liability of ~~$48~~$8 million at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, 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 ~~$86~~$91 million and ~~$87~~$95 million at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

Interest Rate Risk

The Company manages its interest rate risk of fixed and variable rates while attempting to minimize its interest costs. PPG has interest rate swaps which converted $525 million of fixed rate debt to variable rate debt. The fair ~~value~~values of these contracts ~~was an asset~~were assets of ~~$76~~$44 million and ~~$35~~$67 million atas of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. An increase in variable interest rates of 10% would lower the fair ~~value~~values of these swaps and increase interest expense by ~~$5 million and $7~~$1 million for ~~the~~both periods ended March 31, ~~2020~~2021 and December 31, ~~2019, respectively.~~2020. A 10% increase in interest rates in the U.S., Canada, Mexico and Europe and a 20% increase in interest rates in Asia and South America would have had an insignificant effect on PPG's variable rate debt obligations and interest expense for the periods ended March 31, ~~2020~~2021 and December 31, ~~2019.~~2020. Further a 10% reduction in interest rates would have increased the fair value of the Company's fixed rate debt by approximately ~~$75~~$60 million and ~~$67~~$48 million at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively; however, such changes would not have had an effect on PPG's income before income taxes or cash flows.

There were no other material changes in the Company’s exposure to market risk from December 31, ~~2019~~2020 to March 31, ~~2020.~~2021. See Note ~~14,~~12, “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. Based on their evaluation as of the end of the period covered by this Form 10-Q, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and 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.

b. Changes in internal control over financial reporting. There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter 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 ("the Company") 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

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other matters arising out of the conduct of PPG’s current and past business activities. To the extent these lawsuits and claims involve personal injury, property damage and certain other claims, PPG believes it has adequate insurance; however, certain of PPG’s insurers are contesting coverage with respect to some of these claims, and other insurers may contest coverage. 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.

As previously disclosed, the SEC is conducting a non-public investigation of accounting matters described in the Explanatory Note and in Note 2, “Restatement of Previously Reported Consolidated Annual Financial Statements" under Item 8 of the Company’s 2017 Form 10-K/A. On September 26, 2019, PPG announced a final settlement

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with the SEC as to the Company. Without admitting or denying the findings in the SEC’s administrative cease-and-desist order, the Company consented to the entry of the order, which imposed no financial penalty. The Company continues to cooperate fully with the SEC’s ongoing investigation relating to these accounting matters. The Company is 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 (“USAO”). As previously disclosed, the USAO has informed PPG that it will not pursue any action as to the Company.

Between January and early April 2020, the Company, as a nominal defendant, and certain of its current or former officers and directors were named as defendants in four shareholder derivative actions. All of the actions were filed in Pittsburgh, three in the U.S. District Court for the Western District of Pennsylvania and one in the Court of Common Pleas for Allegheny County. The plaintiffs in these actions allege breach of fiduciary duty, unjust enrichment and/or corporate waste arising out of various alleged acts, and alleged failures to act, by the individually named defendants following financial restatements by the Company. One of the federal court actions also alleges breach of fiduciary duty and unjust enrichment claims arising out of certain environmental liabilities the Company incurred, and continues to incur, related to its former Ford City glass plant. The court consolidated the three federal court derivative actions, ordered a stay of any discovery in these actions until further notice and tolled the Company’s obligation to respond to the Complaints until May 29, 2020. It is anticipated that a similar stay request will be made in the recently filed state court 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, asserted 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 related 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~~court a Petition for Preliminary Approval of the proposed settlement, including the proposed settlement amount of $25 million. On November 22, 2019, the ~~Court~~court entered final judgment approving the settlement. PPG’s insurance carriers ~~confirmed~~fully funded the settlement escrow account and the court-approved settlement payments to class members were fully distributed by the ~~Company insurance coverage for the full amount~~claims administrator as of ~~the settlement. Settlement payments are expected to occur in 2020.~~March 31, 2021.

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 and the plaintiffs settled plaintiffs’ claims for injunctive relief and PPG agreed to enhancements to the DEP approved cleanup plan and a $250,000 donation to a Pennsylvania nonprofit organization. This settlement has been memorialized by an amendment to the CO&A which was appended to a Consent Agreement between PPG and the plaintiffs which has been entered by the federal Court. The remaining claims in the case for attorneys’ fees and a civil penalty are not affected by this settlement. PPG believes that the ~~citizen’s suit is~~remaining claims are without merit and intends to defend itself against these claims 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 ~~16,~~14, “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~~

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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

~~Except for the effects of COVID-19 as a result of its negative impact to the global economy as described below, there~~There were no material changes in the Company’s risk factors from the risks disclosed in the ~~2019~~2020 Form 10-K.

~~The effects of the recent COVID-19 outbreak are negatively impacting, and are expected to continue to adversely impact our financial condition and results of operations.~~

The effects of the public health crisis caused by the COVID-19 outbreak have interfered with the ability of PPG, our suppliers, customers, and others to conduct business and have negatively affected consumer confidence and the global economy. Public health officials have recommended or mandated certain precautions to mitigate the spread of COVID-19, including prohibitions on congregating in groups, shelter-in-place orders or similar measures. Preventative and protective actions that public health officials, governments or PPG have taken with respect to COVID-19 have and will continue to adversely impact our business, suppliers, distribution channels, and customers, including business shutdowns or disruptions for an indefinite period of time, reduced operations, reduced ability to supply products, or reduced demand for our products. Our financial condition, liquidity and results of operations have been and will continue to be adversely impacted by these preventative actions and the disruption to our business and that of our suppliers and customers. As we cannot predict the duration or scope of the COVID-19 pandemic, the negative financial impact to our results cannot be reasonably estimated, but could be material.

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

Issuer Purchases of Equity Securities

No shares were repurchased in the three months ended March 31, ~~2020~~2021 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 ~~18,066,464~~10,051,620 shares as of March 31, ~~2020.~~2021. This repurchase program has no expiration date.

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Item 6. Exhibits

See the Index to Exhibits on page 35.

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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.


~~3.1~~10.1						~~Amended and Restated Bylaws of~~Term Loan Credit Agreement among PPG Industries, Inc., the lenders parties thereto, BNP Paribas, as ~~amended on March 20, 2020,~~administrative agent, PNC Bank, National Association as syndication agent and BNP Paribas Securities Corp. and PNC Capital Markets LLC as co-lead arrangers and co-bookrunners was filed as Exhibit ~~3.1~~10.1 to the Registrant’s Current Report on Form 8-K filed on ~~March 26, 2020.~~February 23, 2021.
†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*						Inline XBRL Instance Document
101.SCH**						Inline XBRL Taxonomy Extension Schema Document
101.CAL**						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE**						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104						Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set.

† Filed herewith.

†† Furnished herewith.

*The instance document does not appear in the Interactive Data File because its XBRL (Extensible Business Reporting Language) tags are embedded within the Inline XBRL document.

**Attached as Exhibit 101 to this report are the following documents formatted in Inline XBRL: (i) the Condensed Consolidated Statement of Income for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, (ii) the Condensed Consolidated Balance Sheet at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, (iii) the Condensed Consolidated Statement of Cash Flows for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, and (iv) Notes to Condensed Consolidated Financial Statements for the three months ended March 31, ~~2020.~~2021.

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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:

April ~~28, 2020~~16, 2021

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)


		PAGE
Part I. Financial Information
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Statement of Income	2
	Condensed Consolidated Statement of Comprehensive Income/(Loss) Income	2
	Condensed Consolidated Balance Sheet	3
	Condensed Consolidated Statement of Shareholders' Equity	4
	Condensed Consolidated Statement of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3231
Item 4.	Controls and Procedures	32
Part II. Other Information
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	3433
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3433

Item 6.	Exhibits	34
~~Signature~~Signatures		36


		Three Months Ended March 31
($ in millions)	Classification in the Condensed Consolidated Statement of Income	2020	2019
Operating lease cost:
Operating lease cost	Cost of sales, exclusive of depreciation and amortization	$8	$9
Operating lease cost	Selling, general and administrative	53	48
Total operating lease cost		$61	$57
Finance lease cost:
Amortization of right-of-use assets	Depreciation	$1	$1


Total lease cost		$62	$58


($ in millions)	Classification on the Condensed Consolidated Balance Sheet	March 31, 2020	December 31, 2019
Assets:
Operating	Operating lease right-of-use assets	$784	$782
Finance ^(a)	Property, plant, and equipment, net	13	17
Total leased assets		$797	$799
Liabilities:
Current
Operating	Current portion of operating lease liabilities	$166	$170
Finance	Short-term debt and current portion of long-term debt	2	3
Noncurrent
Operating	Operating lease liabilities	$627	$622
Finance	Long-term debt	7	8
Total lease liabilities		$802	$803


	March 31, 2020		December 31, 2019
Weighted-average remaining lease term (in years)
Operating leases	7.6		7.4
Finance leases	6.3		6.2
Weighted-average discount rate
Operating leases	3.0	%	3.0	%
Finance leases	9.3	%	9.4	%


	Three Months Ended March 31, 2019
($ in millions, except percentages and per share amounts)	Income Before Income Taxes	Tax Expense	Effective Tax Rate		Net income (attributable to PPG)	Earnings per diluted share^(a)
As reported	$419	$102	24.3	%	$312	$1.31
Adjusted for:
Acquisition-related costs	7	2	23.4	%	5	0.02
Environmental remediation charge	10	2	24.3	%	8	0.03
Litigation matters	4	1	24.3	%	3	0.01
Business restructuring-related costs, net ^(b)	3	1	24.4	%	2	0.01
Adjusted, excluding certain items	$443	$108	24.4	%	$330	$1.38