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: June 30, ~~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 June 30, ~~2020, 235,977,363~~2021, 237,356,580 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 June 30			Six Months Ended June 30				Three Months Ended June 30		Six Months Ended June 30
		2020	2019	2020	2019		2021	2020	2021	2020
Net sales	Net sales	$3,015	$4,024	$6,392	$7,648	Net sales	$4,359	$3,015	$8,240	$6,392
Cost of sales, exclusive of depreciation and amortization	Cost of sales, exclusive of depreciation and amortization	1,703	2,288	3,611	4,361	Cost of sales, exclusive of depreciation and amortization	2,629	1,703	4,861	3,611
Selling, general and administrative	Selling, general and administrative	766	934	1,671	1,823	Selling, general and administrative	955	766	1,846	1,671
Depreciation	Depreciation	91	91	184	177	Depreciation	96	91	186	184
Amortization	Amortization	32	35	68	67	Amortization	41	32	80	68
Research and development, net	Research and development, net	86	111	187	216	Research and development, net	107	86	209	187
Interest expense	Interest expense	41	35	73	66	Interest expense	31	41	61	73
Interest income	Interest income	(5)	(7)	(14)	(13)	Interest income	(6)	(5)	(12)	(14)

Business restructuring, net	Business restructuring, net	165	176	172	173	Business restructuring, net	(21)	165	(21)	172
Other charges	Other charges	21	29	24	43	Other charges	11	21	28	24
Other income	Other income	(11)	(31)	(29)	(47)	Other income	(77)	(11)	(90)	(29)
Income before income taxes	Income before income taxes	$126	$363	$445	$782	Income before income taxes	$593	$126	$1,092	$445
Income tax expense	Income tax expense	29	86	100	188	Income tax expense	160	29	274	100
Income from continuing operations	Income from continuing operations	$97	$277	$345	$594	Income from continuing operations	$433	$97	$818	$345
Income from discontinued operations, net of tax	Income from discontinued operations, net of tax	3	2	3	2	Income from discontinued operations, net of tax	0	3	0	3
Net income attributable to controlling and noncontrolling interests	Net income attributable to controlling and noncontrolling interests	$100	$279	$348	$596	Net income attributable to controlling and noncontrolling interests	$433	$100	$818	$348
Net loss/(income) attributable to noncontrolling interests		2	(7)	(3)	(12)
Net (income)/loss attributable to noncontrolling interests						Net (income)/loss attributable to noncontrolling interests	(2)	2	(9)	(3)
Net income (attributable to PPG)	Net income (attributable to PPG)	$102	$272	$345	$584	Net income (attributable to PPG)	$431	$102	$809	$345
Amounts attributable to PPG:	Amounts attributable to PPG:					Amounts attributable to PPG:
Income from continuing operations, net of tax	Income from continuing operations, net of tax	$99	$270	$342	$582	Income from continuing operations, net of tax	$431	$99	$809	$342
Income from discontinued operations, net of tax	Income from discontinued operations, net of tax	3	2	3	2	Income from discontinued operations, net of tax	0	3	0	3
Net income (attributable to PPG)	Net income (attributable to PPG)	$102	$272	$345	$584	Net income (attributable to PPG)	$431	$102	$809	$345

Earnings per common share:	Earnings per common share:					Earnings per common share:
Income from continuing operations, net of tax	Income from continuing operations, net of tax	$0.42	$1.14	$1.45	$2.46	Income from continuing operations, net of tax	$1.81	$0.42	$3.40	$1.45
Income from discontinued operations, net of tax	Income from discontinued operations, net of tax	0.01	0.01	0.01	0.01	Income from discontinued operations, net of tax	0	0.01	0	0.01
Earnings per common share (attributable to PPG)	Earnings per common share (attributable to PPG)	$0.43	$1.15	$1.46	$2.47	Earnings per common share (attributable to PPG)	$1.81	$0.43	$3.40	$1.46

Earnings per common share – assuming dilution:	Earnings per common share – assuming dilution:					Earnings per common share – assuming dilution:
Income from continuing operations, net of tax	Income from continuing operations, net of tax	$0.42	$1.13	$1.44	$2.44	Income from continuing operations, net of tax	$1.80	$0.42	$3.38	$1.44
Income from discontinued operations, net of tax	Income from discontinued operations, net of tax	0.01	0.01	0.01	0.01	Income from discontinued operations, net of tax	0	0.01	0	0.01
Earnings per common share (attributable to PPG) - assuming dilution	Earnings per common share (attributable to PPG) - assuming dilution	$0.43	$1.14	$1.45	$2.45	Earnings per common share (attributable to PPG) - assuming dilution	$1.80	$0.43	$3.38	$1.45

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

Table of Contents

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

($ in millions)


		Three Months Ended June 30			Six Months Ended June 30				Three Months Ended June 30		Six Months Ended June 30
		2020	2019	2020	2019		2021	2020	2021	2020
Net income attributable to the controlling and noncontrolling interests	Net income attributable to the controlling and noncontrolling interests	$100	$279	$348	$596	Net income attributable to the controlling and noncontrolling interests	$433	$100	$818	$348
Other comprehensive income/(loss), net of tax:	Other comprehensive income/(loss), net of tax:					Other comprehensive income/(loss), net of tax:
Defined benefit pension and other postretirement benefits	Defined benefit pension and other postretirement benefits	5	12	6	6	Defined benefit pension and other postretirement benefits	(2)	5	(7)	6
Unrealized foreign currency translation adjustments	Unrealized foreign currency translation adjustments	117	(15)	(589)	66	Unrealized foreign currency translation adjustments	67	117	(61)	(589)
Derivative financial instruments	Derivative financial instruments	(3)	(1)	—	(1)	Derivative financial instruments	0	(3)	0	0
Other comprehensive income/(loss), net of tax	Other comprehensive income/(loss), net of tax	$119	($4)	($583)	$71	Other comprehensive income/(loss), net of tax	$65	$119	($68)	($583)
Total comprehensive income/(loss)	Total comprehensive income/(loss)	$219	$275	($235)	$667	Total comprehensive income/(loss)	$498	$219	$750	($235)
Less: amounts attributable to noncontrolling interests:	Less: amounts attributable to noncontrolling interests:					Less: amounts attributable to noncontrolling interests:
Net loss/(income)		2	(7)	(3)	(12)
Net income						Net income	(2)	2	(9)	(3)
Unrealized foreign currency translation adjustments	Unrealized foreign currency translation adjustments	(2)	(2)	8	(1)	Unrealized foreign currency translation adjustments	1	(2)	3	8
Comprehensive income/(loss) attributable to PPG	Comprehensive income/(loss) attributable to PPG	$219	$266	($230)	$654	Comprehensive income/(loss) attributable to PPG	$497	$219	$744	($230)

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)


		June 30, 2020	December 31, 2019		June 30, 2021	December 31, 2020
Assets	Assets			Assets
Current assets:	Current assets:			Current assets:
Cash and cash equivalents	Cash and cash equivalents	$2,252	$1,216	Cash and cash equivalents	$1,195	$1,826
Short-term investments	Short-term investments	45	57	Short-term investments	110	96
Receivables, net	Receivables, net	2,673	2,756	Receivables, net	3,498	2,726
Inventories	Inventories	1,706	1,710	Inventories	2,226	1,735
Other current assets	Other current assets	401	431	Other current assets	417	415
Total current assets	Total current assets	$7,077	$6,170	Total current assets	$7,446	$6,798
Property, plant and equipment (net of accumulated depreciation of $4,176 and $4,082)		2,865	2,983
Property, plant and equipment (net of accumulated depreciation of $4,484 and $4,349)				Property, plant and equipment (net of accumulated depreciation of $4,484 and $4,349)	3,424	3,127
Goodwill	Goodwill	4,307	4,470	Goodwill	6,233	5,102
Identifiable intangible assets, net	Identifiable intangible assets, net	1,916	2,131	Identifiable intangible assets, net	3,024	2,351
Deferred income taxes	Deferred income taxes	188	220	Deferred income taxes	338	379
Investments	Investments	251	258	Investments	269	267
Operating lease right-of-use assets	Operating lease right-of-use assets	826	782	Operating lease right-of-use assets	934	847
Other assets	Other assets	740	694	Other assets	685	685
Total	Total	$18,170	$17,708	Total	$22,353	$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	$3,055	$3,496	Accounts payable and accrued liabilities	$4,318	$3,792
Restructuring reserves	Restructuring reserves	320	196	Restructuring reserves	206	281
Short-term debt and current portion of long-term debt	Short-term debt and current portion of long-term debt	1,688	513	Short-term debt and current portion of long-term debt	770	578
Current portion of operating lease liabilities	Current portion of operating lease liabilities	171	170	Current portion of operating lease liabilities	194	180
Total current liabilities	Total current liabilities	$5,234	$4,375	Total current liabilities	$5,488	$4,831
Long-term debt	Long-term debt	4,613	4,539	Long-term debt	6,387	5,171
Operating lease liabilities	Operating lease liabilities	669	622	Operating lease liabilities	736	677
Accrued pensions	Accrued pensions	727	745	Accrued pensions	951	945
Other postretirement benefits	Other postretirement benefits	656	661	Other postretirement benefits	720	733
Deferred income taxes	Deferred income taxes	397	452	Deferred income taxes	683	435
Other liabilities	Other liabilities	936	911	Other liabilities	977	949
Total liabilities	Total liabilities	$13,232	$12,305	Total liabilities	$15,942	$13,741
Commitments and contingent liabilities (Note 15)
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	962	950	Additional paid-in capital	1,053	1,008
Retained earnings	Retained earnings	19,010	18,906	Retained earnings	20,022	19,469
Treasury stock, at cost	Treasury stock, at cost	(13,184)	(13,191)	Treasury stock, at cost	(13,138)	(13,158)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(2,925)	(2,350)	Accumulated other comprehensive loss	(2,664)	(2,599)
Total PPG shareholders’ equity	Total PPG shareholders’ equity	$4,832	$5,284	Total PPG shareholders’ equity	$6,242	$5,689
Noncontrolling interests	Noncontrolling interests	106	119	Noncontrolling interests	169	126
Total shareholders’ equity	Total shareholders’ equity	$4,938	$5,403	Total shareholders’ equity	$6,411	$5,815
Total	Total	$18,170	$17,708	Total	$22,353	$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)/Income	Total PPG	Non-controlling Interests	Total		Common Stock	Additional Paid-In Capital	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive (Loss)/Income	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
Net income attributable to the controlling and noncontrolling interests	Net income attributable to the controlling and noncontrolling interests	—	—	102	—	—	$102	(2)	$100	Net income attributable to the controlling and noncontrolling interests	—	—	431	—	—	$431	2	$433
Other comprehensive income, net of tax		—	—	—	—	117	$117	2	$119
Other comprehensive income/(loss), net of tax										Other comprehensive income/(loss), net of tax	—	—	—	—	66	$66	(1)	$65
Cash dividends	Cash dividends	—	—	(121)	—	—	($121)	—	($121)	Cash dividends	—	—	(128)	—	—	($128)	—	($128)

Issuance of treasury stock	Issuance of treasury stock	—	2	—	3	—	$5	—	$5	Issuance of treasury stock	—	17	—	10	—	$27	—	$27
Stock-based compensation activity	Stock-based compensation activity	—	6	—	—	—	$6	—	$6	Stock-based compensation activity	—	7	—	—	—	$7	—	$7
Dividends paid on subsidiary common stock to noncontrolling interests	Dividends paid on subsidiary common stock to noncontrolling interests	—	—	—	—	—	$—	(3)	($3)	Dividends paid on subsidiary common stock to noncontrolling interests	—	—	—	—	—	—	(4)	($4)
Acquisition of noncontrolling interests (Note 3)										Acquisition of noncontrolling interests (Note 3)	—	—	—	—	—	—	50	$50
Reductions in noncontrolling interests	Reductions in noncontrolling interests	—	—	—	—	—	$—	(5)	($5)	Reductions in noncontrolling interests	—	—	—	—	—	—	(8)	($8)
June 30, 2020		$969	$962	$19,010	($13,184)	($2,925)	$4,832	$106	$4,938
June 30, 2021										June 30, 2021	$969	$1,053	$20,022	($13,138)	($2,664)	$6,242	$169	$6,411

Table of Contents


		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
Net income attributable to the controlling and noncontrolling interests	Net income attributable to the controlling and noncontrolling interests	—	—	272	—	—	$272	7	$279	Net income attributable to the controlling and noncontrolling interests	—	—	102	—	—	$102	(2)	$100
Other comprehensive (loss)/income, net of tax		—	—	—	—	(6)	($6)	2	($4)
Other comprehensive income, net of tax										Other comprehensive income, net of tax	—	—	—	—	117	$117	2	$119
Cash dividends	Cash dividends	—	—	(114)	—	—	($114)	—	($114)	Cash dividends	—	—	(121)	—	—	($121)	—	($121)

Issuance of treasury stock	Issuance of treasury stock	—	7	—	9	—	$16	—	$16	Issuance of treasury stock	—	2	—	3	—	$5	—	$5
Stock-based compensation activity	Stock-based compensation activity	—	7	—	—	—	$7	—	$7	Stock-based compensation activity	—	6	—	—	—	$6	—	$6
Dividends paid on subsidiary common stock to noncontrolling interests	Dividends paid on subsidiary common stock to noncontrolling interests	—	—	—	—	—	$—	(5)	($5)	Dividends paid on subsidiary common stock to noncontrolling interests	—	—	—	—	—	—	(3)	($3)
Reductions in noncontrolling interests	Reductions in noncontrolling interests	—	—	—	—	—	$—	(2)	($2)	Reductions in noncontrolling interests	—	—	—	—	—	—	(5)	($5)

June 30, 2020										June 30, 2020	$969	$962	$19,010	($13,184)	($2,925)	$4,832	$106	$4,938

June 30, 2019		$969	$913	$18,488	($13,061)	($2,230)	$5,079	$108	$5,187

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

Table of Contents

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Cash Flows (Unaudited)


		Six Months Ended June 30				Six Months Ended June 30
($ 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	$348	$596	Net income attributable to controlling and noncontrolling interests	$818	$348
Less: Income from discontinued operations	Less: Income from discontinued operations	(3)	(2)	Less: Income from discontinued operations	0	(3)
Income from continuing operations	Income from continuing operations	345	594	Income from continuing operations	818	345
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	252	244	Depreciation and amortization	266	252
Pension expense		20	25
Pension (income) expense				Pension (income) expense	(19)	20

Debt extinguishment charge		7	—

Environmental remediation charges	Environmental remediation charges	12	40	Environmental remediation charges	26	12
Business restructuring, net	Business restructuring, net	172	173	Business restructuring, net	(21)	172

Stock-based compensation expense	Stock-based compensation expense	15	19	Stock-based compensation expense	35	15

Equity affiliate income, net of dividends	Equity affiliate income, net of dividends	4	6	Equity affiliate income, net of dividends	(2)	4
Deferred income taxes	Deferred income taxes	(8)	(7)	Deferred income taxes	61	(8)
Cash contributions to pension plans	Cash contributions to pension plans	(5)	(6)	Cash contributions to pension plans	(2)	(5)
Cash used for restructuring actions	Cash used for restructuring actions	(34)	(23)	Cash used for restructuring actions	(48)	(34)
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	92	(431)	Receivables	(480)	92
Inventories	Inventories	(29)	(97)	Inventories	(280)	(29)
Other current assets	Other current assets	18	(70)	Other current assets	8	18
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	(347)	60	Accounts payable and accrued liabilities	392	(347)
Taxes and interest payable	Taxes and interest payable	(58)	(21)	Taxes and interest payable	(60)	(58)
Noncurrent assets and liabilities, net	Noncurrent assets and liabilities, net	5	(10)	Noncurrent assets and liabilities, net	(53)	5
Other	Other	(140)	(10)	Other	(60)	(133)
Cash from operating activities - continuing operations	Cash from operating activities - continuing operations	$321	$486	Cash from operating activities - continuing operations	$581	$321
Cash from/(used for) operating activities - discontinued operations		1	(4)
Cash from operating activities		$322	$482
Cash from operating activities - discontinued operations				Cash from operating activities - discontinued operations	0	1
Cash from for operating activities				Cash from for operating activities	$581	$322
Investing activities:	Investing activities:			Investing activities:
Capital expenditures	Capital expenditures	(92)	(133)	Capital expenditures	(142)	(92)
Business acquisitions, net of cash balances acquired	Business acquisitions, net of cash balances acquired	(45)	(361)	Business acquisitions, net of cash balances acquired	(2,126)	(45)

Payments for the settlement of cross currency swap contracts	Payments for the settlement of cross currency swap contracts	(3)	(6)	Payments for the settlement of cross currency swap contracts	(3)	(3)
Proceeds from the settlement of cross currency swap contracts	Proceeds from the settlement of cross currency swap contracts	12	19	Proceeds from the settlement of cross currency swap contracts	10	12
Other	Other	17	24	Other	19	17

Cash used for investing activities	Cash used for investing activities	($111)	($457)	Cash used for investing activities	($2,242)	($111)
Financing activities:	Financing activities:			Financing activities:
Net change in borrowing with maturities of three months or less	Net change in borrowing with maturities of three months or less	(7)	6	Net change in borrowing with maturities of three months or less	0	(7)
Proceeds from Term Loan Credit Agreement, net of fees				Proceeds from Term Loan Credit Agreement, net of fees	699	0
Proceeds on commercial paper and short-term debt, net of payments	Proceeds on commercial paper and short-term debt, net of payments	1,434	470	Proceeds on commercial paper and short-term debt, net of payments	561	1,434
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
Repayment of revolving credit facility	Repayment of revolving credit facility	(800)	—	Repayment of 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	296	—	Proceeds from the issuance of debt, net of discounts and fees	692	296
Repayment of long-term debt	Repayment of long-term debt	(506)	(2)	Repayment of long-term debt	(172)	(506)
Repayment of acquired debt	Repayment of acquired debt	(9)	(23)	Repayment of acquired debt	(86)	(9)
Purchase of treasury stock		—	(175)

Issuance of treasury stock	Issuance of treasury stock	6	22	Issuance of treasury stock	44	6
Dividends paid on PPG common stock	Dividends paid on PPG common stock	(241)	(227)	Dividends paid on PPG common stock	(256)	(241)

Payments related to tax withholding on stock-based compensation awards	Payments related to tax withholding on stock-based compensation awards	(8)	(12)	Payments related to tax withholding on stock-based compensation awards	(17)	(8)
Other	Other	(38)	(27)	Other	(11)	(38)

Cash from financing activities	Cash from financing activities	$927	$32	Cash from financing activities	$1,054	$927
Effect of currency exchange rate changes on cash and cash equivalents	Effect of currency exchange rate changes on cash and cash equivalents	(102)	4	Effect of currency exchange rate changes on cash and cash equivalents	(24)	(102)
Net increase in cash and cash equivalents		$1,036	$61
Net (decrease)/increase in cash and cash equivalents				Net (decrease)/increase in cash and cash equivalents	($631)	$1,036
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	$2,252	$963	Cash and cash equivalents, end of period	$1,195	$2,252

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	$82	$68	Interest paid, net of amount capitalized	$69	$82
Taxes paid, net of refunds	Taxes paid, net of refunds	$187	$194	Taxes paid, net of refunds	$276	$187
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.

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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 June 30, ~~2020,~~2021 and the results of its operations and cash flows for the three and six months ended June 30, ~~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 and six months ended June 30, ~~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.

In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes - Simplifying 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 aspects of the current accounting guidance. The amendments 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.

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3.~~Allowance for Credit Losses~~Acquisitions and Divestitures

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.Acquisitions

~~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. PPG will monitor the adequacy of this reserve as new information becomes available.

~~The following table summarizes the activity for the allowance for credit losses for the six months ended June 30, 2020:~~


~~($ in millions)~~			~~Trade Receivables Allowance for Credit Losses~~
~~January 1, 2020~~			~~$22~~
~~Current-period provision for credit losses~~ ^(a)			39
~~Trade receivables written off as uncollectible, net of recoveries~~			~~(8)~~
~~Foreign currency impact~~			~~(1)~~
~~June 30, 2020~~			~~$52~~

~~(a) Includes expense recorded from customer bad debts and a $30 million adjustment recorded in the first quarter 2020 related to COVID-19.~~

4.~~Acquisitions~~

~~On March 2, 2020, PPG completed the acquisition of Alpha Coating Technologies, LLC, a manufacturer of powder coatings for light industrial applications and heat sensitive substrates.~~ 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,~~following acquisitions, was not significant.

Tikkurila

On June 10, 2021, PPG completed its tender offer for all of the outstanding shares of Tikkurila Ojy ("Tikkurila"). Tikkurila is a leading Nordic producer and distributor of decorative paint and coatings. Tikkurila’s industrial paint business produces paints and coatings for the wood and metal industries, among others.

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As of June 30, 2021, PPG had purchased approximately 97.3% of Tikkurila's issued and outstanding shares. As of March 31, 2021, PPG owned 9.32% of the outstanding shares. All remaining outstanding shares will be acquired through a squeeze out process. As of June 30, 2021, the minority interest is classified as Noncontrolling interests on the condensed consolidated balance sheet. The company paid an aggregate purchase price of $1.7 billion, net of cash acquired. The preliminary determination of fair value of acquired assets and liabilities included goodwill and identifiable intangible assets of $1.0 billion and $672 million, respectively. The fair values assigned to assets acquired and liabilities assumed are based on management's best estimates and assumptions as of the reporting date and are considered preliminary pending finalization of the valuation of deferred tax assets, tax liabilities, and payroll tax liabilities. The acquired identifiable intangible assets consist of indefinite-lived trademarks of approximately $455 million and other intangible assets with finite lives of approximately $215 million, which consist primarily of customer relationships, trade names, and acquired technology, subject to amortization over a weighted average period of 15 years. See Note 5 “Goodwill and Other Identifiable Intangible Assets” for additional information.

The results of this business since the date of acquisition have been reported within two operating segments: the architectural coatings – EMEA business within the Performance Coatings reportable business segment and within the industrial coatings business within the Industrial Coatings reportable business segment.

Other Acquisitions

On ~~January 31, 2020,~~May 14, 2021, PPG completed the acquisition of ~~Industria Chimica Reggiana S.p.A ("ICR"), an Italian~~Wörwag, a global manufacturer of coatings for industrial and automotive ~~refinish products.~~applications. The ~~pro-forma impact on PPG's sales~~company specializes in developing sustainable liquid, powder and ~~results of operations, including the pro-forma effect of events that are directly attributable to the acquisition, was not significant.~~film coatings. The results of this business since the date of acquisition have been reported within the automotive ~~refinish~~original equipment manufacturer ("OEM") coatings business within the ~~Performance~~Industrial Coatings reportable business segment.

On April ~~16, 2019,~~19, 2021, PPG ~~completed the acquisition of Hemmelrath,~~announced that it had acquired Cetelon Lackfabrik GmbH, a ~~global~~ manufacturer of coatings for automotive ~~original equipment manufacturers ("OEMs"). The pro-forma impact on PPG's sales~~ and ~~results of operations, including the pro-forma effect of events that are directly attributable to the acquisition, was not significant.~~light truck wheel applications. The results of this business since the date of acquisition have been reported within the automotive OEM coatings business within the Industrial Coatings reportable business segment.

On ~~March 1, 2019,~~February 22, 2021, PPG completed the acquisition of ~~Whitford Worldwide Company ("Whitford"),~~VersaFlex, a ~~global~~ manufacturer ~~that specializes~~specializing in ~~low-friction~~polyurea, epoxy and ~~nonstick~~polyurethane coatings for water and waste water infrastructure, flooring, transportation infrastructure, and 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 that are directly attributable to the acquisition, was not significant.applications. The results of this business since the date of acquisition have been reported within the ~~industrial~~protective and marine coatings business within the ~~Industrial~~Performance Coatings reportable business segment.

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 the accompanying consolidated balance sheet as of June 30, 2021 and December 31, 2020. The results of these entities are reported within the Performance Coatings reportable business segment.

The major classes of assets and liabilities of these entities included in the PPG consolidated balance sheet are as as follows:


($ in millions)	June 30, 2021	December 31, 2020
Cash and cash equivalents	$22	$20
Receivables	8	5
Inventories	5	5
Assets held for sale	$35	$30
Accounts payable and accrued liabilities	$15	$14
Operating lease liabilities	7	6
Deferred income taxes	3	3
Other liabilities	1	1
Liabilities held for sale	$26	$24

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5.4.Inventories


($ in millions)	($ in millions)	June 30, 2020	December 31, 2019	($ in millions)	June 30, 2021	December 31, 2020
Finished products	Finished products	$1,012	$1,047	Finished products	$1,237	$1,021
Work in process	Work in process	192	197	Work in process	254	187
Raw materials	Raw materials	466	431	Raw materials	697	490
Supplies	Supplies	36	35	Supplies	38	37
Total Inventories	Total Inventories	$1,706	$1,710	Total Inventories	$2,226	$1,735

Most U.S. inventories are valued using the last-in, first-out method. These inventories represented approximately ~~35%~~27% and ~~34%~~33% of total inventories at June 30, ~~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 ~~$119~~$124 million and ~~$124~~$110 million higher as of June 30, ~~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.

During the second quarter, the Company evaluated the effects of the COVID-19 pandemic and its negative impact on the global economy on each of the Company’s reporting units and indefinite-lived intangible assets. Management reviewed key assumptions, including revisions of projected future revenues for reporting units and the results of the previous annual impairment testing performed during the fourth quarter of 2019. The Company did not identify an indication of impairment for each of its reporting units and indefinite-lived intangible assets. Although it was determined that a triggering event had not occurred as of June 30, ~~2020, we~~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 June 30, 2021.

The change in the carrying amount of goodwill attributable to each reportable segment for the six months ended June 30, ~~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	1,089	111	1,200

Foreign currency impact	Foreign currency impact	(164)	(19)	(183)	Foreign currency impact	(54)	(15)	(69)
June 30, 2020		$3,282	$1,025	$4,307
June 30, 2021					June 30, 2021	$5,058	$1,175	$6,233

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


		June 30, 2020					December 31, 2019						June 30, 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	$1,034	N/A	$1,034	$1,167	N/A	$1,167	Trademarks	$1,543	N/A	$1,543	$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	$712	($560)	$152	$710	($549)	$161	Acquired technology	$871	($600)	$271	$813	($585)	$228
Customer-related	Customer-related	1,527	(899)	628	1,578	(885)	693	Customer-related	2,025	(1,036)	989	1,849	(994)	855
Trade names	Trade names	208	(114)	94	210	(111)	99	Trade names	349	(136)	213	277	(129)	148
Other	Other	48	(40)	8	51	(40)	11	Other	54	(46)	8	64	(45)	19
Total Definite Lived Intangible Assets	Total Definite Lived Intangible Assets	$2,495	($1,613)	$882	$2,549	($1,585)	$964	Total Definite Lived Intangible Assets	$3,299	($1,818)	$1,481	$3,003	($1,753)	$1,250
Total Identifiable Intangible Assets	Total Identifiable Intangible Assets	$3,529	($1,613)	$1,916	$3,716	($1,585)	$2,131	Total Identifiable Intangible Assets	$4,842	($1,818)	$3,024	$4,104	($1,753)	$2,351

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

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As of June 30, ~~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 six months of 2020		$65
2021		$125
Remaining six months of 2021			Remaining six months of 2021	$90
2022	2022	$125	2022	$180
2023	2023	$110	2023	$170
2024	2024	$90	2024	$155
2025	2025	$85	2025	$145
2026			2026	$130
Thereafter	Thereafter	$282	Thereafter	$611

7.6. 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 ~~17 Reportable~~16, "Reportable Business Segment ~~Information~~Information" for additional information.

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 ~~includes~~included a voluntary separation program that was offered in the U.S. and Canada. ~~A pretax restructuring charge of $176 million was recorded in PPG's second quarter 2020 financial results. This charge represents employee severance and other cash costs.~~ The majority of these restructuring actions are expected to be completed by the end of ~~2020 with the remainder of the actions expected to be completed in~~ 2021.

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 these restructuring actions are ~~now~~ expected to be completed by the end of the ~~fourth~~third quarter ~~2020~~2021 with the remainder of the actions expected to be completed in 2022.

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 these restructuring actions are ~~now~~complete with the remainder of the actions expected to be completed ~~by the end of the third quarter of 2020.~~

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in 2021.

The following table summarizes the reserve activity for the six months ended June 30, ~~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
Approved restructuring actions ^(a)	Approved restructuring actions ^(a)	198	184	Approved restructuring actions ^(a)	2	198
Release of prior reserves		(26)	(11)
Release of prior reserves and other adjustments (a)				Release of prior reserves and other adjustments (a)	(23)	(26)
Cash payments	Cash payments	(34)	(23)	Cash payments	(48)	(34)
Foreign currency impact	Foreign currency impact	(2)	1	Foreign currency impact	(8)	(2)
June 30	June 30	$360	$261	June 30	$216	$360

(a) ~~In the first quarter~~Releases of ~~2020, additional programs were approved by management~~approximately $23 million and ~~charges of $22~~$26 million were recorded in ~~PPG's financial results.~~the six months ended June 30, 2021 and 2020, respectively, to reflect the current estimate of the costs to complete these actions.

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7.Borrowings

In June 2021, PPG borrowed $700 million under the $2.0 billion Term Loan Credit Agreement (the "Term Loan Credit Agreement") entered into in February 2021 to finance the Company’s acquisition of Tikkurila, and to pay fees, costs and expenses related thereto. 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. Prior to December 31, 2021, the Company may make up to 11 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.

Also in the second quarter of 2021, 2 of PPG's long-term debt obligations matured; $134 million 9% non-callable debentures and non-U.S. debt of €30 million. The Company paid $170 million to settle these obligations using cash on hand.

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 June 2020, PPG completed an early redemption of the $500 million 3.6% notes due November 2020 using proceeds from the May 2020 public offering and cash on hand. The Company recorded a charge of $7 million in the second quarter 2020 for the debt redemption which consists of the aggregate make-whole cash premium of $6 million and a balance of unamortized fees and discounts of $1 million related to the debt redeemed.

In May 2020, PPG completed a public offering of $300 million aggregate principal amount of 2.55% notes due 2030. These notes were issued pursuant to PPG’s existing shelf registration statement and pursuant to an indenture between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee, as supplemented (the "Indenture"). 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 $296 million.

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. ~~The~~In 2020, PPG repaid $1.1 billion of the Term Loan ~~terminates and all amounts outstanding are payable~~using cash on ~~April 13, 2021.~~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~~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

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in April 2020. There were no0 amounts outstanding under the credit agreement as of June 30, ~~2020~~2021 and December 31, ~~2019.~~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. As of June 30, ~~2020,~~2021, Total Indebtedness to Total Capitalization as defined under the Credit Agreement and Term Loan Credit Agreement was ~~53%~~50%.

The Credit Agreement also supports the Company’s commercial paper borrowings which are classified as long-term based on PPG’s intent and ability to refinance these borrowings on a long-term basis. ~~There~~Commercial paper borrowings of $800 million and $250 million were ~~0 commercial paper borrowing~~ outstanding as of June 30, ~~2020. Commercial paper borrowings of $100 million were outstanding as of~~2021 and December 31, ~~2019.~~

2020, respectively.

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9.8.Earnings Per Common Share

The effect of dilutive securities on the weighted average common shares outstanding included in the calculation of earnings per diluted common share for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 were as follows:


		Three Months Ended June 30			Six Months Ended June 30				Three Months Ended June 30		Six Months Ended June 30
(number of shares in millions)	(number of shares in millions)	2020	2019	2020	2019	(number of shares in millions)	2021	2020	2021	2020
Weighted average common shares outstanding	Weighted average common shares outstanding	236.6	236.9	236.6	236.8	Weighted average common shares outstanding	237.8	236.6	237.6	236.6
Effect of dilutive securities:	Effect of dilutive securities:					Effect of dilutive securities:
Stock options	Stock options	0.3	0.7	0.4	0.7	Stock options	1.2	0.3	1.0	0.4
Other stock compensation plans	Other stock compensation plans	0.7	0.7	0.6	0.6	Other stock compensation plans	0.8	0.7	0.8	0.6
Potentially dilutive common shares	Potentially dilutive common shares	1.0	1.4	1.0	1.3	Potentially dilutive common shares	2.0	1.0	1.8	1.0
Adjusted weighted average common shares outstanding	Adjusted weighted average common shares outstanding	237.6	238.3	237.6	238.1	Adjusted weighted average common shares outstanding	239.8	237.6	239.4	237.6

Dividends per common share	Dividends per common share	$0.51	$0.48	$1.02	$0.96	Dividends per common share	$0.54	$0.51	$1.08	$1.02

Excluded from the computation of earnings per diluted share due to their antidilutive effect were 0 outstanding stock options for the three and six months ended June 30, 2021, and 2.7 million and 2.1 million of outstanding stock options for the three and six months ended June 30, 2020, ~~respectively and 1.0 million outstanding stock options for both the three and six months ended June 30, 2019.~~respectively.

~~10.~~9.Income Taxes

Six Months Ended
June 30
2020 2019
Effective tax rate on pretax income 22.5 % 24.0 %


	Six Months Ended June 30
	2021		2020
Effective tax rate on pretax income	25.1	%	22.5	%

The effective tax rate of ~~22.5%~~25.1% for the six months ended June 30, ~~2020~~2021 reflects ~~a benefit~~an expense of ~~$14~~$15 million of discrete items associated with PPG's U.S. and foreign jurisdictions. In the second quarter 2021, PPG recorded a net tax charge of $22 million as a result of new legislation enacted in June 2021 that increased the United Kingdom's corporation tax rate. Income tax ~~expense~~expense for the first six 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 six months ended June 30, ~~2019~~2020 reflects $3a benefit $14 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.~~jurisdictions.

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 six months ended June 30, ~~2020.~~2021.

~~11.~~Table of Contents

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 and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 were as follows:


		Pension								Pension
		Three Months Ended June 30			Six Months Ended June 30				Three Months Ended June 30		Six Months Ended June 30
($ in millions)	($ in millions)	2020	2019	2020	2019	($ in millions)	2021	2020	2021	2020
Service cost	Service cost	$6	$5	$12	$11	Service cost	$2	$6	$5	$12
Interest cost	Interest cost	21	27	43	53	Interest cost	16	21	32	43
Expected return on plan assets	Expected return on plan assets	(36)	(35)	(72)	(70)	Expected return on plan assets	(38)	(36)	(76)	(72)
Amortization of actuarial losses	Amortization of actuarial losses	18	16	36	31	Amortization of actuarial losses	10	18	20	36
Curtailments	Curtailments	1	—	1	—	Curtailments	0	1	0	1

Net periodic benefit cost	Net periodic benefit cost	$10	$13	$20	$25	Net periodic benefit cost	($10)	$10	($19)	$20

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		Other Postretirement Benefits								Other Postretirement Benefits
		Three Months Ended June 30			Six Months Ended June 30				Three Months Ended June 30		Six Months Ended June 30
($ in millions)	($ in millions)	2020	2019	2020	2019	($ in millions)	2021	2020	2021	2020
Service cost	Service cost	$3	$2	$5	$4	Service cost	$3	$3	$6	$5
Interest cost	Interest cost	5	7	10	13	Interest cost	4	5	7	10
Amortization of actuarial losses	Amortization of actuarial losses	4	2	8	4	Amortization of actuarial losses	4	4	10	8
Amortization of prior service credit	Amortization of prior service credit	(15)	(15)	(30)	(29)	Amortization of prior service credit	(13)	(15)	(27)	(30)
Net periodic benefit cost	Net periodic benefit cost	($3)	($4)	($7)	($8)	Net periodic benefit cost	($2)	($3)	($4)	($7)

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 amortization period of the accumulated net actuarial losses 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 June 30			Six Months Ended June 30				Three Months Ended June 30		Six Months Ended June 30
($ in millions)	($ in millions)	2020	2019	2020	2019	($ in millions)	2021	2020	2021	2020

Non-U.S. defined benefit pension mandatory contributions	Non-U.S. defined benefit pension mandatory contributions	$3	$3	$5	$6	Non-U.S. defined benefit pension mandatory contributions	$1	$3	$2	$5

PPG expects to make ~~mandatory~~ contributions to its ~~non-U.S.~~defined benefit pension plans in the range of $5$10 million to ~~$10~~$15 million during the remaining six months of ~~2020.~~2021. PPG may make voluntary contributions to its defined benefit pension plans in ~~2020~~2021 and beyond.

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~~12.~~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)	58			0			0		58
Current year deferrals to AOCI, net of tax (b)											Current year deferrals to AOCI, net of tax (b)	(116)			(9)			0		(125)
Reclassifications from AOCI to net income											Reclassifications from AOCI to net income	0			2			0		2
Period change											Period change			($58)			($7)		$0		($65)
June 30, 2021											June 30, 2021			($1,721)			($944)		$1		($2,664)

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)	(600)		—		—			(600)		Current year deferrals to AOCI (a)	(600)			0			0		(600)
Current year deferrals to AOCI, net of tax^(b)	Current year deferrals to AOCI, net of tax^(b)	19		(5)		—			14		Current year deferrals to AOCI, net of tax (b)	19			(5)			0		14
Reclassifications from AOCI to net income	Reclassifications from AOCI to net income	—		11		—			11		Reclassifications from AOCI to net income	0			11			0		11
Period change	Period change		($581)		$6		$—			($575)	Period change			($581)			$6		$0		($575)
June 30, 2020	June 30, 2020		($2,208)		($718)		$1			($2,925)	June 30, 2020			($2,208)			($718)		$1		($2,925)

January 1, 2019			($1,734)		($568)		$2			($2,300)
Current year deferrals to AOCI^(a)		44		—		—			44
Current year deferrals to AOCI, net of tax^(b)		21		(1)		(2)			18
Reclassifications from AOCI to net income		—		7		1			8
Period change			$65		$6		($1)			$70
June 30, 2019			($1,669)		($562)		$1			($2,230)

(a)Except for income taxes, of $81 millionas of June 30, 2021 and $9$8 million as of June 30, 2020, ~~and 2019, respectively,~~ 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 June 30, 2021 and 2020 ~~and 2019~~ was~~$5 million~~ $22 million and $7$5 million, respectively.

(c)The tax cost related to the adjustment for pension and other postretirement benefits as of June 30, 2021 and 2020 ~~and 2019 was~~ wa$3s $1 million and $2$3 million, respectively. Reclassifications from AOCI are included in the computation of net periodic benefit costs (See Note ~~11,~~10, "Pensions and Other Postretirement Benefits").

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~~13.~~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 June 30, ~~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 and six month periods ended June 30, ~~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 and six month periods ended June 30, ~~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 six month periods ended June 30, ~~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 statement of income. The fair value of these interest rate swaps was ~~$78~~$48 million and ~~$35~~$67 million at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

Cash Flow Hedges

At times, PPG designates certain foreign currency forward contracts as cash flow hedges of the Company’s exposure to variability in exchange rates on third party transactions denominated in foreign currencies. There were no outstanding cash flow hedges at June 30, ~~2020. The underlying notional amounts relating to foreign currency forward contracts were $43 million at~~2021 and December 31, ~~2019. As of December 31, 2019, the fair value of all foreign currency forward contracts designated as cash flow hedges was a liability of $1 million.~~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 June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, PPG 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 June 30, ~~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 ~~$73~~$15 million and a net ~~asset~~liability of ~~$48~~$8 million, respectively.

~~Table of Contents~~

As of June 30, ~~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 June 30, ~~2020~~2021 and December 31, ~~2019~~2020 was ~~$2.2~~$2.4 billion for both periods.

Other Financial Instruments

PPG uses foreign currency forward contracts to manage net transaction exposures that do not qualify for hedge accounting; therefore, the change in the fair value of these instruments is recorded in Other charges in the condensed consolidated statement of income in the period of change. Underlying notional amounts related to these foreign currency forward contracts were ~~$1.3~~$1.8 billion and ~~$2.8~~$1.4 billion at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. As of June 30, ~~2020~~2021 and December 31, ~~2019~~2020, the fair value of these contracts ~~was a~~were net ~~asset and a net liability~~assets of $7 $6 million ~~and $6~~and $2 million, respectively.

Gains/Losses Deferred in Accumulated Other Comprehensive Loss

As of June 30, ~~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 $~~256~~71 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 six months ended June 30, ~~2020~~2021 and ~~2019.~~2020. All dollar amounts are shown on a pretax basis.

June 30, 2020 June 30, 2019
($ in millions) (Loss)Gain Deferred in OCI Gain Recognized (Loss)Gain Deferred in OCI Gain/(Loss) Recognized Caption In Condensed Consolidated Statement of Income
Economic
Foreign currency forward contracts
$— $26 $— $32 Other charges
Fair Value
Interest rate swaps
— 5 — 1 Interest expense
Cash Flow
Foreign currency forward contracts — — (3) (4) Other charges and Cost of sales
Total Cash Flow $— $31 ($3) $29
Net Investment
Cross currency swaps ($4) $9 $6 $8 Interest expense
Foreign denominated debt 25 — 22 —
Total Net Investment $21 $9 $28 $8

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	June 30, 2021		June 30, 2020		Caption In Condensed Consolidated Statement of Income
($ in millions)	Gain Deferred in OCI	Gain Recognized	(Loss)/Gain Deferred in OCI	Gain Recognized
Economic
Foreign currency forward contracts	$—	$8	$—	$26	Other charges
Fair Value
Interest rate swaps	—	7	—	5	Interest expense


Total forward contracts and interest rate swaps	$0	$15	$0	$31
Net Investment

Cross currency swaps	$23	$7	($4)	$9	Interest expense
Foreign denominated debt	70	—	25	—
Total Net Investment	$93	$7	$21	$9

Fair Value Measurements

The Company follows a fair value measurement hierarchy to measure its assets and liabilities. As of June 30, ~~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.

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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 June 30, ~~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:


		June 30, 2020					December 31, 2019						June 30, 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)	—	15	—	—	14	—	Foreign currency forward contracts (a)	0	12	0	0	8	0

Investments:	Investments:							Investments:
Marketable equity securities	Marketable equity securities	$83	$—	$—	$80	$—	$—	Marketable equity securities	$97	$0	$0	$97	$0	$0
Other assets:	Other assets:							Other assets:
Cross currency swaps^(b)	Cross currency swaps^(b)	$—	$73	$—	$—	$52	$—	Cross currency swaps (b)	$0	$29	$0	$0	$13	$0
Interest rate swaps ^(c)	Interest rate swaps ^(c)	—	78	—	—	35	—	Interest rate swaps (c)	0	48	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)	—	8	—	—	20	—	Foreign currency forward contracts (a)	$0	$6	$0	$0	$6	$0
Cross currency swaps (b)								Cross currency swaps (b)	0	6	0	0	8	0

Other liabilities:	Other liabilities:							Other liabilities:
Cross currency swap^(b)	Cross currency swap^(b)	$—	$—	$—	$—	$4	$—	Cross currency swap (b)	$0	$8	$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)

June 30, 2020 ^(a)

December 31, 2019 ^(b)

($ in millions)

June 30, 2021 (a)

December 31, 2020 (b)

Long-term debt - carrying value

$4,776

$5,031

Long-term debt - carrying value

$7,091

$5,334

Long-term debt - fair value

$5,221

$5,363

Long-term debt - fair value

$7,567

$5,913

(a) Excluding finance lease obligations of $8$11 million and short-term borrowings of $~~1.5 billion~~55 million as of June 30, ~~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.

~~14.~~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~~5.1 million as of June 30, ~~2020.~~2021.

Stock-based compensation and the income tax benefit recognized during the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 were as follows:


		Three Months Ended June 30			Six Months Ended June 30				Three Months Ended June 30		Six Months Ended June 30
($ in millions)	($ in millions)	2020	2019	2020	2019	($ in millions)	2021	2020	2021	2020
Stock-based compensation	Stock-based compensation	$8	$10	$15	$19	Stock-based compensation	$18	$8	$35	$15
Income tax benefit recognized	Income tax benefit recognized	$2	$2	$4	$4	Income tax benefit recognized	$4	$2	$8	$4

1718

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Grants of stock-based compensation during the six months ended June 30, ~~2020~~2021 and ~~2019~~2020 were as follows:


		Six Months Ended June 30								Six Months Ended June 30
		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	663,485	$21.93	588,870	$22.50	Stock options	527,464	$29.27	663,485	$21.93
Restricted stock units	Restricted stock units	203,239	$110.00	208,602	$104.46	Restricted stock units	185,084	$132.63	203,239	$110.00
Contingent shares^(a)	Contingent shares^(a)	55,319	$119.52	51,850	$109.74	Contingent shares (a)	55,540	$136.60	55,319	$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 six months ended June 30, ~~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 cash flow return on capital performance 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.

~~15.~~14.Commitments and Contingent Liabilities

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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 to the Company insurance coverage for the full amount of the settlement. Settlement payments are expected to occur in 2020.

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”). 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,

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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 June 30, ~~2020,~~2021, the Company was aware of approximately ~~500~~810 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 June 30, ~~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

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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)	June 30, 2020	December 31, 2019	($ in millions)	June 30, 2021	December 31, 2020
New Jersey Chrome	New Jersey Chrome	$108	$134	New Jersey Chrome	$107	$102
Glass and chemical	Glass and chemical	99	96	Glass and chemical	115	106
Other	Other	84	74	Other	92	92
Total	Total	$291	$304	Total	$314	$300
Current portion	Current portion	$85	$62	Current portion	$92	$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 and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 were as follows:


		Three Months Ended June 30			Six Months Ended June 30				Three Months Ended June 30		Six Months Ended June 30
($ in millions)	($ in millions)	2020	2019	2020	2019	($ in millions)	2021	2020	2021	2020
Environmental remediation pretax charges	Environmental remediation pretax charges	$4	$35	$15	$51	Environmental remediation pretax charges	$12	$4	$31	$15
Cash outlays for environmental remediation activities	Cash outlays for environmental remediation activities	$12	$20	$37	$36	Cash outlays for environmental remediation activities	$8	$12	$17	$37

In the first quarter 2021, PPG recognized a $16 million pretax charge to increase the existing reserve for New Jersey Chrome based on updated estimates of the underlying factors as described below largely related to groundwater remediation. In the second quarter 2021, PPG recognized a $10 million pretax charge to increase existing reserves for a legacy Glass and chemicals environmental site based upon updated remediation estimates.

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 11 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 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 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

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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. ~~Ongoing groundwater monitoring will be utilized to develop a final~~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 ~~$108~~$107 million at June 30, ~~2020.~~2021. The major cost components of this liability continue to be related to excavation, transportation and disposal of impacted

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soil, as well as construction services. These components each account for approximately ~~18%~~17%, ~~14%~~11% and ~~34%~~28% of the accrued amount, respectively.

There are multiple, future events yet to occur, including further remedy selection and design, remedy implementation and execution and applicable governmental agency or community organization approvals. Considerable uncertainty exists regarding the timing of these future events for the New Jersey Chrome sites. 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.

Other Matters

The Company had outstanding letters of credit and surety bonds of ~~$134~~$129 million and guarantees of $9$4 million as of June 30, ~~2020.~~2021. The Company does not believe any loss related to such guarantees is likely.

~~16.~~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

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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.

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The Company also provides services by applying coatings to customers' manufactured parts and assembled products and by providing technical support to certain customers. Performance obligations are satisfied over time as critical milestones are met and as services are provided. PPG is entitled to payment as the services are rendered. For the three and six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, service revenue constituted approximately 5% of total revenue.

Net sales by segment and region for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 were as follows:


		Performance Coatings			Industrial Coatings			Total Net Sales
		Three Months Ended June 30			Three Months Ended June 30			Three Months Ended June 30			Three Months Ended June 30			Six Months Ended June 30
($ in millions)	($ in millions)	2020	2019	2020	2019	2020	2019	($ in millions)	2021	2020		2021	2020
Performance Coatings								Performance Coatings
United States and Canada	United States and Canada	$940	$1,110	$336	$623	$1,276	$1,733	United States and Canada	$1,199	$940		$2,197	$1,867
Europe, Middle East and Africa ("EMEA")	Europe, Middle East and Africa ("EMEA")	686	793	240	462	926	1,255	Europe, Middle East and Africa ("EMEA")	970	686		1,781	1,351
Asia Pacific	Asia Pacific	255	283	311	360	566	643	Asia Pacific	312	255		588	454
Latin America	Latin America	188	244	59	149	247	393	Latin America	268	188		502	405
Total	Total	$2,069	$2,430	$946	$1,594	$3,015	$4,024	Total	$2,749	$2,069		$5,068	$4,077
Industrial Coatings								Industrial Coatings
United States and Canada								United States and Canada	$564	$336		$1,135	$918
EMEA								EMEA	482	240		927	636
Asia Pacific								Asia Pacific	418	311		824	571
Latin America								Latin America	146	59		286	190
Total								Total	$1,610	$946		$3,172	$2,315
Total Net Sales								Total Net Sales
United States and Canada								United States and Canada	$1,763	$1,276		$3,332	$2,785
EMEA								EMEA	1,452	926		2,708	1,987
Asia Pacific								Asia Pacific	730	566		1,412	1,025
Latin America								Latin America	414	247		788	595
Total PPG								Total PPG	$4,359	$3,015		$8,240	$6,392

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 six months ended June 30, 2021 and 2020:


	Trade Receivables Allowance for Credit Losses
($ in millions)	2021	2020
January 1	$44	$22
Current-period provision for credit losses	(11)	39
Trade receivables written off as uncollectible, net of recoveries	(8)	(8)
Foreign currency impact	0	(1)
June 30	$25	$52

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Performance Coatings Industrial Coatings Total Net Sales
Six Months Ended
June 30 Six Months Ended
June 30 Six Months Ended
June 30
($ in millions) 2020 2019 2020 2019 2020 2019
United States and Canada $1,867 $2,063 $918 $1,236 $2,785 $3,299
EMEA 1,351 1,481 636 888 1,987 2,369
Asia Pacific 454 526 571 700 1,025 1,226
Latin America 405 468 190 286 595 754
Total $4,077 $4,538 $2,315 $3,110 $6,392 $7,648
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. During the second quarter 2021, PPG released $14 million of the previously established reserve due to improvement in economic conditions in certain countries and a slower pattern of bankruptcies than expected.

~~17.~~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 and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 were as follows:


		Three Months Ended June 30			Six Months Ended June 30				Three Months Ended June 30		Six Months Ended June 30
($ in millions)	($ in millions)	2020	2019	2020	2019	($ in millions)	2021	2020	2021	2020
Net sales:	Net sales:					Net sales:
Performance Coatings	Performance Coatings	$2,069	$2,430	$4,077	$4,538	Performance Coatings	$2,749	$2,069	$5,068	$4,077
Industrial Coatings	Industrial Coatings	946	1,594	2,315	3,110	Industrial Coatings	1,610	946	3,172	2,315
Total	Total	$3,015	$4,024	$6,392	$7,648	Total	$4,359	$3,015	$8,240	$6,392
Segment income:	Segment income:					Segment income:
Performance Coatings	Performance Coatings	$362	$425	$634	$722	Performance Coatings	$454	$362	$840	$634
Industrial Coatings	Industrial Coatings	34	235	215	453	Industrial Coatings	190	34	435	215
Total	Total	$396	$660	$849	$1,175	Total	$644	$396	$1,275	$849
Corporate	Corporate	(50)	(44)	(110)	(91)	Corporate	(52)	(50)	(104)	(110)
Interest expense, net of interest income	Interest expense, net of interest income	(36)	(28)	(59)	(53)	Interest expense, net of interest income	(25)	(36)	(49)	(59)
Business restructuring-related costs, net^(a)		(173)	(182)	(186)	(185)
Acquisition-related costs (a)						Acquisition-related costs (a)	(14)	0	(38)	0
Environmental remediation charges						Environmental remediation charges	(10)	(4)	(26)	(12)
Expenses incurred due to natural disasters(b)						Expenses incurred due to natural disasters(b)	(5)	0	(17)	0
Business restructuring-related costs, net (c)						Business restructuring-related costs, net (c)	19	(173)	15	(186)
Debt extinguishment charge	Debt extinguishment charge	(7)	—	(7)	—	Debt extinguishment charge	0	(7)	0	(7)
Environmental remediation charges		(4)	(30)	(12)	(40)
Increase in allowance for doubtful accounts related to COVID-19		—	—	(30)	—
Costs associated with accounting investigations		—	(3)	—	(7)
Acquisition-related costs ^(b)		—	(10)	—	(17)
Change in allowance for doubtful accounts related to COVID-19						Change in allowance for doubtful accounts related to COVID-19	14	0	14	(30)
Income from legal settlements						Income from legal settlements	22	0	22	0
Income before income taxes	Income before income taxes	$126	$363	$445	$782	Income before income taxes	$593	$126	$1,092	$445

(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.

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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~~

We delivered solid operating results in the second quarter, especially considering the significant declines in economic activity in most of the world due to the COVID-19 pandemic. The strongest performance came from our global architectural coatings businesses, which was driven by increased do-it-yourself ("DIY") demand for PPG paint products in all major regions. During the quarter, several of our businesses in China, including automotive original equipment manufacturer ("OEM") coatings, general industrial coatings, and protective and marine coatings, realized higher sales volumes year-over-year supported by a recovery in Chinese economic activity. Year-over-year demand was lower across most businesses in other major global regions, but our sequential monthly sales volumes improved in each region during the quarter.

The quick and decisive actions we took at the outset of the pandemic helped to mitigate the earnings impact from lower sales volumes. Our aggregate segment margins were about 13%, which is a significant improvement versus the depths of the prior recession in 2008 and 2009, and is primarily a result of the structural cost savings that we have implemented over the past several years. In the quarter, we had about $170 million of incremental cost savings from various interim initiatives and more than $20 million of incremental structural savings from business restructuring programs. In June, we initiated a new restructuring program targeting up to $170 million of annualized structural cost savings. In addition, we generated nearly $500 million of cash from operations, similar to second

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~~quarter 2019 levels driven by our continued focus on working capital management. In July, the Company's Board of Directors approved a 6% increase in our quarterly dividend.~~

As the pandemic continues, our focus remains on the protection of our employees and providing excellent support to our customers with the essential products and services they need to resume and ramp-up their operations. Looking ahead, we expect overall economic activity to continue to recover, although at a varied pace across end-use markets and geographic regions, given the uncertainty around the ongoing effects of the pandemic.

Below are our key financial results for the three months ended June 30, ~~2020:~~2021:

•Net sales were approximately ~~$3.0~~$4.4 billion, ~~down 25.1%~~up 44.6% compared to the prior year.

•Cost of sales, exclusive of depreciation and amortization ("Cost of sales") was ~~$1.7~~$2.6 billion, ~~down 25.6%~~up 54.4% 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 0.4%~~increased 3.8%.

•Selling, general and administrative ("SG&A") expense was ~~$766~~$955 million, ~~down 18.0%~~up 24.7% year-over-year primarily due to wage and other cost ~~mitigation initiatives.~~inflation and SG&A expense attributable to acquired businesses. As a percentage of sales, SG&A expense ~~increased 2.2%~~decreased 3.5%.

•Income before income taxes was ~~$126~~$593 million.

•The reported effective tax rate was ~~23.0%~~27.0%. The adjusted effective tax rate was ~~24.8%~~23.2%.

•Net income ~~from continuing operations~~ attributable to PPG was ~~$99~~$431 million.

•Earnings per diluted share ~~from continuing operations~~ attributable to PPG was ~~$0.42.~~$1.80.

For the six months ended June 30, ~~2020:~~2021:

•Cash flows ~~provided by~~from operating activities ~~from continuing operations~~ was ~~$321~~$581 million, ~~a decrease~~an increase of ~~$165~~$260 million year-over-year.

•Capital expenditures, including business acquisitions (net of cash acquired), was ~~$137~~$2,268 million.

•The Company paid ~~$241~~$256 million in dividends.

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

Performance Overview

Net Sales by Region


		Three Months Ended June 30						Percent Change	Three Months Ended June 30			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	$1,276	$1,733	(26.4)	%	United States and Canada	$1,763		$1,276	38.2	%
Europe, Middle East and Africa ("EMEA")	Europe, Middle East and Africa ("EMEA")	926	1,255	(26.2)	%	Europe, Middle East and Africa ("EMEA")	1,452		926	56.8	%
Asia Pacific	Asia Pacific	566	643	(12.0)	%	Asia Pacific	730		566	29.0	%
Latin America	Latin America	247	393	(37.2)	%	Latin America	414		247	67.6	%
Total	Total	$3,015	$4,024	(25.1)	%	Total	$4,359		$3,015	44.6	%

Net sales ~~decreased $1,009~~increased $1,344 million due to the following:

● ~~Lower~~Higher sales volumes ~~(-24%~~(+24%)

● ~~Unfavorable~~Acquisition-related sales (+11%)

● Favorable foreign currency translation ~~(-3%~~(+6%)

~~Partially offset by:~~

● Higher selling prices ~~(2%~~(+4%)

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. Higher selling prices and acquisition-related sales partially offset this downturn.

Foreign currency translation decreased net sales approximately $135 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.

2526

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Cost of Sales, exclusive of depreciation and amortization


		Three Months Ended June 30								Percent Change		Three Months Ended June 30				Percent Change
($ in millions, except percentages)	($ 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	$1,703		$2,288		(25.6)	%	Cost of sales, exclusive of depreciation and amortization	$2,629			$1,703		54.4	%
Cost of sales as a percentage of net sales	Cost of sales as a percentage of net sales	56.5	%	56.9	%	(0.4)	%	Cost of sales as a percentage of net sales	60.3		%	56.5	%	3.8	%

Cost of sales, exclusive of depreciation and amortization, ~~decreased $585~~increased $926 million primarily due to the following:

● ~~Lower~~Higher sales volumes

~~● Foreign currency translation~~

~~Partially offset by:~~

● Cost of sales attributable to acquired businesses

● Raw material inflation

● Unfavorable foreign currency translation

Selling, general and administrative expenses


		Three Months Ended June 30								Percent Change		Three Months Ended June 30				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)	$766		$934		(18.0)	%	Selling, general and administrative expenses (SG&A)	$955			$766		24.7	%
Selling, general and administrative expenses as a percentage of net sales	Selling, general and administrative expenses as a percentage of net sales	25.4	%	23.2	%	2.2	%	Selling, general and administrative expenses as a percentage of net sales	21.9		%	25.4	%	(3.5)	%

SG&A expense ~~decreased $168~~increased $189 million primarily due to the following:

● ~~Cost savings initiatives, including restructuring actions~~Wage and other cost inflation

● ~~Foreign~~Unfavorable foreign currency translation

● Selling, general and administrative expenses from acquired businesses

● Return of certain expenses suspended during the second quarter 2020 due to short-term cost cutting initiatives related to COVID-19

Other costs and other income


		Three Months Ended June 30						Percent Change	Three Months Ended June 30			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	$36	$28	28.6	%	Interest expense, net of Interest income	$25		$36	(30.6)	%
Other charges	Other charges	$21	$29	(27.6)	%	Other charges	$11		$21	(47.6)	%
Other income	Other income	($11)	($31)	(64.5)	%	Other income	($77)		($11)	600.0	%

Interest expense, net of Interest income

Interest expense, net of Interest income was ~~higher~~lower in the three months ended June 30, 2021 compared to 2020 due to a premium paid in the prior year for the early redemption of ~~the $500 million notes due November 2020 and the $1.5 billion 364-day term loan credit agreement entered into in April 2020.~~debt.

Other charges

Other charges were lower in the three months ended June 30, ~~2020 compared to~~2021 than in the prior year due to ~~lower environmental remediation charges during~~ the ~~quarter, offset by a charge related~~change in fair value of certain marketable equity securities.

Other income

Other income was higher in the three months ended June 30, 2021 compared to the ~~early retirement~~prior year due to favorable legal settlements.

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Effective tax rate and earnings per diluted share

Three Months Ended
June 30 Percent Change
($ in millions, except percentages) 2020 2019 2020 vs. 2019
Income tax expense $29 $86 (66.3) %
Effective tax rate 23.0 % 23.7 % (0.7) %
Adjusted effective tax rate, continuing operations* 24.8 % 23.8 % 1.0 %
Earnings per diluted share, continuing operations $0.42 $1.13 (62.8) %
Adjusted earnings per diluted share* $0.99 $1.85 (46.5) %
*See Regulation G Reconciliation below

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	Three Months Ended June 30				Percent Change
($ in millions, except percentages)	2021		2020		2021 vs. 2020
Income tax expense	$160		$29		451.7	%
Effective tax rate	27.0	%	23.0	%	4.0	%
Adjusted effective tax rate, continuing operations*	23.2	%	24.9	%	(1.7)	%

Earnings per diluted share, continuing operations	$1.80		$0.42		328.6	%
Adjusted earnings per diluted share*	$1.94		$1.09		78.0	%
*See Regulation G Reconciliation below

The effective tax rate for the three months ended June 30, 2021 and 2020 reflects the impact of certain discrete tax items for the quarter. In the second quarter 2021, PPG recorded a net tax charge of $22 million triggered by new legislation that increased the United Kingdom's corporation tax rate. The Company expects that its third quarter ~~2020~~2021 effective tax rate will be between ~~23%~~21% and ~~25%.~~23%, including potential favorable discrete tax items.

Adjusted earnings per diluted share for the three months ended June 30, ~~2020 decreased~~2021 increased year-over-year primarily due to ~~the items described further in the Regulation G reconciliation.~~higher sales volumes.

Regulation G Reconciliations - Results from Operations

PPG believes investors' understanding of the Company’s performance is enhanced by the disclosure of net income from continuing operations, earnings per diluted share from continuing operations, ~~and~~ 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 from continuing operations, ~~and~~ 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.

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 June 30, 2020												Three Months Ended June 30, 2021
($ in millions, except percentages and per share amounts)	($ 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)	($ 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	As reported, continuing operations	$126	$29	23.0	%	$99	$0.42	As reported, continuing operations	$593	$160	27.0	%	$431	$1.80
Adjusted for:	Adjusted for:							Adjusted for:
Business restructuring-related costs, net ^(b)		173	45	26.5	%	128	0.54
Debt extinguishment charge		7	2	24.3	%	5	0.02
Acquisition-related amortization expense								Acquisition-related amortization expense	41	10	25.2	%	31	0.13
Net tax charge related to UK statutory rate change								Net tax charge related to UK statutory rate change	—	(22)	N/A		22	0.09
Acquisition-related costs, net								Acquisition-related costs, net	14	1	9.7	%	13	0.05
Environmental remediation charges	Environmental remediation charges	4	1	24.3	%	3	0.01	Environmental remediation charges	10	3	24.3	%	7	0.03
Expenses incurred due to natural disasters (b)								Expenses incurred due to natural disasters (b)	5	1	24.3	%	4	0.02
Decrease in allowance for doubtful accounts related to COVID-19								Decrease in allowance for doubtful accounts related to COVID-19	(14)	(3)	24.7	%	(11)	(0.05)
Business restructuring-related costs, net (c)								Business restructuring-related costs, net (c)	(19)	(4)	20.9	%	(15)	(0.06)
Income from legal settlements								Income from legal settlements	(22)	(5)	24.3	%	(17)	(0.07)
Adjusted, continuing operations, excluding certain items	Adjusted, continuing operations, excluding certain items	$310	$77	24.8	%	$235	$0.99	Adjusted, continuing operations, excluding certain items	$608	$141	23.2	%	$465	$1.94

Three Months Ended June 30, 2019
($ in millions, except percentages and per share amounts) Income Before Income Taxes Tax Expense Effective Tax Rate Net income (attributable to PPG)
Earnings per diluted share^(a)
As reported, continuing operations $363 $86 23.7 % $270 $1.13
Adjusted for:
Business restructuring-related costs, net^(b)
182 44 24.2 % 138 0.58
Environmental remediation charges, net 30 7 24.3 % 23 0.10
Acquisition-related costs 10 2 23.8 % 8 0.03
Costs associated with accounting investigations 3 1 24.3 % 2 0.01
Adjusted, continuing operations, excluding certain items $588 $140 23.8 % $441 $1.85

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	Three Months Ended June 30, 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	$126	$29	23.0	%	$99	$0.42
Adjusted for:

Business restructuring-related costs, net (c)	173	45	26.5	%	128	0.54
Acquisition-related amortization expense	31	8	26.1	%	23	0.10
Debt extinguishment charge	7	2	24.3	%	5	0.02
Environmental remediation charges	4	1	24.3	%	3	0.01


Adjusted, continuing operations, excluding certain items	$341	$85	24.9	%	$258	$1.09

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

(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 second 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.

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Performance of Reportable Business Segments

Performance Coatings


		Three Months Ended June 30			$ Change				% Change	Three Months Ended June 30		$ 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	$2,069	$2,430	($361)	(14.9)	%	Net sales	$2,749		$2,069	$680	32.9	%
Segment income	Segment income	$362	$425	($63)	(14.8)	%	Segment income	$454		$362	$92	25.4	%
Amortization expense							Amortization expense	$30		$21	$9	42.9	%
Segment income, excluding amortization expense							Segment income, excluding amortization expense	$484		$383	$101	26.4	%

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

● ~~Lower~~Acquisition-related sales (14%)

● Higher sales volumes ~~(-15%~~(9%)

● ~~Unfavorable~~Favorable foreign currency translation ~~(-4%~~(7%)

~~Partially offset by:~~

● Higher selling prices (3%)

~~● Acquisition-related sales (1%~~)

Architectural coatings - Americas and Asia Pacific net sales, excluding the impact of currency and acquisitions ("organic sales") ~~were down slightly~~decreased by a low-single-digit percentage, with differences by channel and region. Sales ~~volumes in~~were unfavorably impacted by raw material availability and softening do-it-yourself ("DIY") paint demand. In Mexico, PPG Comex architectural coatings business organic sales increased by a mid-teen percentage compared to the ~~DIY channel were sharply higher during~~prior year as the ~~quarter in all major regions, while sales volumes in~~concessionaire network sell-out of PPG products continued to be strong throughout the ~~trade and professional channel suffered from the unfavorable impact of retail store shutdowns in the U.S., Canada and Mexico.~~quarter.

Architectural coatings – EMEA organic sales ~~decreased~~increased by a mid-teen percentage, driven by broad sales volume growth year-over-year in most countries. This performance was led by strong demand in the trade (do-it-for-me) channel.

Sales volumes for automotive refinish coatings increased by about 45% compared to prior year, primarily due to continued demand improvement in the Asia Pacific region. In Europe, congestion and miles driven in major cities improved during the second quarter. In the U.S., body shop activity modestly improved during the second quarter, driven by higher miles driven and higher collision claims.

Aerospace coatings sales volumes increased by a low-single-digit percentage as ~~weak~~commercial aftermarket demand ~~trends in~~improved during the ~~first half of the quarter were nearly offset by strong volume growth in June as countries re-opened their economies.~~

~~Net sales for automotive refinish coatings declined nearly 35% versus prior year, despite improving sequentially each month of the~~ quarter. ~~Higher selling prices were more than offset by lower sales volumes in each region reflecting a sharp decline in global miles driven and traffic density in most of the world.~~

~~Aerospace coatings sales volumes decreased about 30% year-over-year due to a sharp decline in commercial OEM, general aviation and after-market products.~~ Net sales benefited from ~~consistent~~continued robust demand of military ~~demand and acquisition-related sales from Dexmet and Texstars.~~applications year-over-year.

Sales volumes in the protective and marine coatings business were ~~down~~higher by a ~~mid-single-digit~~low-teen percentage ~~driven by lower~~primarily due to strong demand in the Asia Pacific region.

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Net sales ~~volumes~~ in ~~all regions, with~~ the ~~exception of China.~~traffic solutions business met expectations despite raw material shortages.

Segment income ~~decreased $63~~increased $92 million year-over-year ~~including unfavorable foreign currency translation impacts~~due to the earnings impact of ~~about $10 million. Segment margins were the same as the prior year second quarter despite~~higher sales volumes, ~~being 15% lower. Segment income was impacted by lower sales volumes related to~~higher selling prices, the ~~pandemic~~execution of cost-mitigation actions and ~~unfavorable foreign currency translation~~restructuring savings, partially offset by ~~execution of cost-mitigation efforts, higher selling prices, and restructuring initiatives.~~raw material cost inflation.

Looking Ahead

Looking ahead for the Performance Coatings segment, ~~net~~raw material and transportation costs are expected to be higher in the third quarter compared to the second quarter. Supply disruptions, mostly impacting the U.S. architectural coatings and traffic solutions businesses, are anticipated to continue through the third quarter. Raw material inflation is expected to be sequentially higher. Further selling price increases have been secured or were initiated during the second quarter. Third quarter sales are expected to ~~be lower year-over-year by 8% to 14%, with sharper declines in~~follow historical seasonality patterns experienced before the aerospace and refinish coatings businesses. All businesses continue to focus on strong cost management and mitigation actions. In addition, targeted selling price actions continue. Lastly, acquisitions are forecast to add about $20 million of net sales primarily from Dexmet, Texstars, and ICR, andpandemic. Finally, foreign currency translation is expected to have ~~an unfavorable~~a favorable impact on segment sales and earnings of about ~~$35~~$60 million and $7approximately $10 million, respectively, based on recent exchange rates.

Industrial Coatings


		Three Months Ended June 30			$ Change				% Change	Three Months Ended June 30		$ 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	$946	$1,594	($648)	(40.7)	%	Net sales	$1,610		$946	$664	70.2	%
Segment income	Segment income	$34	$235	($201)	(85.5)	%	Segment income	$190		$34	$156	458.8	%
Amortization expense							Amortization expense	$11		$10	$1	10.0	%
Segment income, excluding amortization expense							Segment income, excluding amortization expense	$201		$44	$157	356.8	%

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

● ~~Lower~~Higher sales volumes ~~(-38%~~(56%)

● ~~Unfavorable~~Favorable foreign currency translation ~~(-3%~~(5%)

● Acquisition-related sales (5%)

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● Higher selling prices (4%)

Automotive OEM coatings sales volumes ~~decreased~~increased by ~~nearly 50%~~about 75% year-over-year, above global industry production rates, driven by strong growth in all regions after a recovery in automotive production from the ~~significant curtailment in~~ global ~~automotive industry production, especially in the first six weeks of the quarter when production was down about 80% in~~pandemic. In the U.S. ~~and Europe. Global~~, automotive retail dealer inventories decreased to historically low levels as consumer demand remained robust while production improved during the quarter with Chinese production nearly matching the prior year’s quarterly production level, while North American and European quarterly production was down about 50% for the quarter comparedlevels were constrained due to ~~prior year, but improved markedly in the second half~~a shortage of ~~the quarter.~~computer chips.

For the industrial coatings business, ~~net~~ sales ~~decreased~~volumes increased by ~~about 35%~~nearly 50% year-over-year ~~driven by weak demand trends in April~~as global industrial production continued to improve compared to the start of the pandemic. Globally, the recovery was broad-based across all segments with the larger contributions coming from the appliance, heavy-duty equipment, and ~~May, but with strong sequential monthly improvement in June.~~general finishes end uses.

Packaging coatings organic sales increased by a ~~low-single-digit~~high-single-digit percentage year-over-year asdue to sales volume growth in most regions, with strong ~~demand in~~growth across the ~~U.S. was~~canned beverage segment, partially offset by softer demand ~~in Asia, including certain customer facility shutdowns~~for canned personal care items.

Segment income increased $156 million year-over-year due to the ~~pandemic.~~

~~Segment income decreased $201 million year-over-year, including unfavorable foreign currency translation impacts~~earnings impact of ~~$7 million. Segment income was impacted by lower~~higher sales volumes, ~~primarily due to customer shutdowns related to~~higher selling prices, the ~~pandemic,~~execution of cost-mitigation actions and restructuring savings, partially offset by ~~cost-mitigation actions, restructuring~~raw material cost ~~savings, and modestly higher selling prices.~~inflation.

Looking ahead

Looking ahead for the Industrial Coatings segment, ~~while demand is~~sales volumes are expected to be ~~sequentially better~~up a low-single-digit percentage compared to the prior-year third quarter, including continuing impacts from supply disruptions. These disruptions are also expected to further elevate raw material costs in the third quarter compared to the second ~~quarter, demand~~quarter. 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 half of the year will likely have an unfavorable net impact from higher raw material and logistics costs compared to selling price increases. This is ~~expected~~anticipated to ~~remain below prior-year levels. Aggregate net sales for~~improve in the ~~business segment are expected to be lower by about 10% to 15%. Based on current exchange rates,~~first half of 2022. Finally, foreign currency translation is expected to have ~~an unfavorable~~a favorable impact on segment sales and earnings of about ~~$25~~$30 million and $5$4 million, respectively, ~~for the third quarter. All businesses are focusing~~based on ~~strong cost management and cost mitigation actions along with prioritizing cash flow optimization.~~recent exchange rates.

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Performance in the first six months of ~~2020~~2021 compared to the first six months of ~~2019~~2020

Performance Overview

Net Sales by Region


		Six Months Ended June 30						Percent Change	Six Months Ended June 30			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	$2,785	$3,299	(15.6)	%	United States and Canada	$3,332		$2,785	19.6	%
Europe, Middle East and Africa (EMEA)		1,987	2,369	(16.1)	%
Asia-Pacific		1,025	1,226	(16.4)	%
EMEA						EMEA	2,708		1,987	36.3	%
Asia Pacific						Asia Pacific	1,412		1,025	37.8	%
Latin America	Latin America	595	754	(21.1)	%	Latin America	788		595	32.4	%
Total	Total	$6,392	$7,648	(16.4)	%	Total	$8,240		$6,392	28.9	%

Net sales ~~decreased $1,256~~increased $1,848 million due to the following:

● ~~Lower~~Higher sales volumes ~~(-16%)~~

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

~~Partially offset by:~~

~~● Higher selling prices (2%~~(+15%)

● Acquisition-related sales ~~(1%~~(+7%)

~~As a result of COVID-19 and slowing of the global economy, sales volumes and unfavorable~~● Favorable foreign currency translation ~~lowered net sales in each region and in both reportable business segments.~~(+4%)

● Higher selling prices ~~and acquisition-related sales partially offset this downturn.~~

Foreign currency translation decreased net sales approximately $210 million as the U.S. dollar strengthened against several foreign currencies versus the prior year, most notably the Mexican peso and euro.(+3%)

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

Cost of Sales, exclusive of depreciation and amortization


	Six Months Ended June 30				Percent Change
($ in millions, except percentages)	2021		2020		2021 vs. 2020
Cost of sales, exclusive of depreciation and amortization	$4,861		$3,611		34.6	%
Cost of sales as a percentage of net sales	59.0	%	56.5	%	2.5	%

Cost of sales, exclusive of depreciation and amortization, increased $1,250 million primarily due to the following:

● Higher sales volumes

● Cost of sales attributable to acquired businesses

● Raw material inflation

● Foreign currency translation

Selling, general and administrative expenses


	Six Months Ended June 30				Percent Change
($ in millions, except percentages)	2021		2020		2021 vs. 2020
Selling, general and administrative expenses (SG&A)	$1,846		$1,671		10.5	%
Selling, general and administrative expenses as a percentage of net sales	22.4	%	26.1	%	(3.7)	%

SG&A increased $175 million primarily due to the following:

● Unfavorable foreign currency translation

● SG&A attributable to acquired businesses

Partially offset by:

● Cost savings initiatives, including restructuring actions

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

Six Months Ended
June 30 Percent Change
($ in millions, except percentages) 2020 2019 2020 vs. 2019
Cost of sales, exclusive of depreciation and amortization $3,611 $4,361 (17.2) %
Cost of sales as a percentage of net sales 56.5 % 57.0 % (0.5) %

~~Cost of sales, exclusive of depreciation and amortization, decreased $750 million primarily due to the following:~~

~~● Lower sales volumes~~

~~● Foreign currency translation~~

~~Partially offset by:~~

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

~~Selling, general and administrative expenses~~

Six Months Ended
June 30 Percent Change
($ in millions, except percentages) 2020 2019 2020 vs. 2019
Selling, general and administrative expenses (SG&A) $1,671 $1,823 (8.3) %
Selling, general and administrative expenses as a percentage of net sales 26.1 % 23.8 % 2.3 %

~~SG&A expense decreased $152 million primarily due to the following:~~

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

~~● Foreign currency translation~~

~~Partially offset by:~~

~~● Charge for potential uncollectible accounts related to COVID-19 incurred in the first quarter of 2020~~

Other costs and income


		Six Months Ended June 30						Percent Change	Six Months Ended June 30			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	$59	$53	11.3	%	Interest expense, net of Interest income	$49		$59	(16.9)	%
Other charges	Other charges	$24	$43	(44.2)	%	Other charges	$28		$24	16.7	%
Other income	Other income	($29)	($47)	(38.3)	%	Other income	($90)		($29)	210.3	%

~~Other charges~~Interest expense, net of Interest income

~~Other charges were~~Interest expense, net of Interest income was lower in the six months ended June 30, ~~2020~~2021 compared to prior year due to ~~lower~~more favorable interest rates on outstanding debt and a premium paid in the prior year for the early redemption of debt.

Other charges

Other charges were higher in the six months ended June 30, 2021 compared to prior year due to environmental remediation charges ~~offset by a debt extinguishment charge related~~recorded to increase existing reserves based on updated estimates of remediation costs.

Other income

Other income was higher in the six months ended June 30, 2021 compared to the ~~early retirement of debt~~prior year due to favorable legal settlements in the second quarter ~~2020.~~2021.

Effective tax rate and earnings per diluted share


		Six Months Ended June 30								Percent Change		Six Months Ended June 30					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	$100		$188		(46.8)	%	Income tax expense	$274			$100		174.0		%
Effective tax rate	Effective tax rate	22.5	%	24.0	%	(1.5)	%	Effective tax rate	25.1		%	22.5	%	2.6		%
Adjusted effective tax rate, continuing operations*	Adjusted effective tax rate, continuing operations*	23.5	%	24.1	%	(0.6)	%	Adjusted effective tax rate, continuing operations*	23.1		%	23.6	%	(0.5)		%

Earnings per diluted share, continuing operations	Earnings per diluted share, continuing operations	$1.44		$2.44		(41.0)	%	Earnings per diluted share, continuing operations	$3.38			$1.44		134.7		%
Adjusted earnings per diluted share*	Adjusted earnings per diluted share*	$2.18		$3.23		(32.5)	%	Adjusted earnings per diluted share*	$3.82			$2.40		59.2		%
*See Regulation G Reconciliation below	*See Regulation G Reconciliation below														*See Regulation G Reconciliation below

The effective tax rate for the six months ended June 30, ~~2020~~2021 reflects the impact of certain discrete tax items. The Company expects that its full year ~~2020~~2021 effective tax rate will be between 22% and 24%.

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, including potential favorable discrete tax items.

Adjusted earnings per diluted share for the six months ended June 30, ~~2020 decreased~~2021 increased year-over-year due to the ~~items described further~~global pandemic which negatively impacted sales volumes in the ~~Regulation G reconciliation.~~prior year.

Regulation G Reconciliation - Results from Operations

PPG believes investors' understanding of the Company’s performance is enhanced by the disclosure of net income from continuing operations, earnings per diluted share from continuing operations and PPG's effective tax rate 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 from continuing operations and the effective tax rate adjusted for these items are not recognized financial measures determined in accordance with 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 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 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 from continuing operations and net income from continuing operations (attributable to PPG) and earnings per share – assuming dilution (attributable to PPG) are reconciled to adjusted net income from continuing operations (attributable to PPG) and adjusted earnings per share – assuming dilution below:


		Six Months Ended June 30, 2020												Six Months Ended June 30, 2021
($ in millions, except percentages and per share amounts)	($ in millions, except percentages and per share amounts)	Income Before Income Taxes	Tax Expense	Effective Tax Rate		Net income from continuing operations (attributable to PPG)	Earnings per diluted share^(a)	($ in millions, except percentages and per share amounts)	Income Before Income Taxes	Tax Expense	Effective Tax Rate		Net income from continuing operations (attributable to PPG)	Earnings per diluted share(a)
As reported, continuing operations	As reported, continuing operations	$445	$100	22.5	%	$342	$1.44	As reported, continuing operations	$1,092	$274	25.1	%	$809	$3.38
Adjusted for:	Adjusted for:							Adjusted for:
Business restructuring-related costs, net ^(b)		186	48	26.2	%	138	0.58
Increase in allowance for doubtful accounts related to COVID-19		30	7	23.2	%	23	0.10
Acquisition-related amortization expense								Acquisition-related amortization expense	80	20	25.2	%	60	0.25
Acquisition-related costs, net(b)								Acquisition-related costs, net(b)	38	6	15.8	%	32	0.13
Net tax charge related to UK statutory rate change								Net tax charge related to UK statutory rate change	—	(22)	N/A		22	0.09
Environmental remediation charges	Environmental remediation charges	12	3	24.3	%	9	0.04	Environmental remediation charges	26	7	24.3	%	19	0.08
Debt extinguishment charge		7	2	24.3	%	5	0.02
Expenses incurred due to natural disasters(c)								Expenses incurred due to natural disasters(c)	17	4	24.3	%	13	0.06
Decrease in allowance for doubtful accounts related to COVID-19								Decrease in allowance for doubtful accounts related to COVID-19	(14)	(3)	24.7	%	(11)	(0.05)
Business restructuring-related costs, net (d)								Business restructuring-related costs, net (d)	(15)	(3)	17.3	%	(12)	(0.05)
Income from legal settlements								Income from legal settlements	(22)	(5)	24.3	%	(17)	(0.07)
Adjusted, continuing operations, excluding certain items	Adjusted, continuing operations, excluding certain items	$680	$160	23.5	%	$517	$2.18	Adjusted, continuing operations, excluding certain items	$1,202	$278	23.1	%	$915	$3.82


		Six Months Ended June 30, 2019												Six Months Ended June 30, 2020
($ in millions, except percentages and per share amounts)	($ in millions, except percentages and per share amounts)	Income Before Income Taxes	Tax Expense	Effective Tax Rate		Net income from continuing operations (attributable to PPG)	Earnings per diluted share^(a)	($ in millions, except percentages and per share amounts)	Income Before Income Taxes	Tax Expense	Effective Tax Rate		Net income from continuing operations (attributable to PPG)	Earnings per diluted share(a)
As reported, continuing operations	As reported, continuing operations	$782	$188	24.0	%	$582	$2.44	As reported, continuing operations	$445	$100	22.5	%	$342	$1.44
Adjusted for:	Adjusted for:							Adjusted for:

Business restructuring-related costs, net ^(b)		185	45	24.3	%	140	0.59
Environmental remediation charges, net		40	9	24.3	%	31	0.13

Acquisition-related costs		17	4	23.8	%	13	0.05
Costs associated with accounting investigations		7	2	24.3	%	5	0.02

Business restructuring-related costs, net (d)								Business restructuring-related costs, net (d)	186	48	26.2	%	138	0.58
Acquisition-related amortization expense								Acquisition-related amortization expense	67	16	23.9	%	51	0.22
Increase in allowance for doubtful accounts related to COVID-19								Increase in allowance for doubtful accounts related to COVID-19	30	7	23.2	%	23	0.10
Environmental remediation charges								Environmental remediation charges	12	3	24.3	%	9	0.04
Debt extinguishment charge								Debt extinguishment charge	7	2	24.3	%	5	0.02
Adjusted, continuing operations, excluding certain items	Adjusted, continuing operations, excluding certain items	$1,031	$248	24.1	%	$771	$3.23	Adjusted, continuing operations, excluding certain items	$747	$176	23.6	%	$568	$2.40

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

(b) Acquisition-related costs include advisory, legal, accounting, valuation, other professional or consulting fees, and certain internal costs directly incurred to effect acquisitions. Acquisition-related costs also include the impact for the step up to fair value of inventory acquired in certain acquisitions.

(c) 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 half 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.

(d) 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.

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Performance of Reportable Business Segments

Performance Coatings


		Six Months Ended June 30			$ Change				% Change	Six Months Ended June 30		$ 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	$4,077	$4,538	($461)	(10.2)	%	Net sales	$5,068		$4,077	$991	24.3	%
Segment income	Segment income	$634	$722	($88)	(12.2)	%	Segment income	$840		$634	$206	32.5	%
Amortization expense							Amortization expense	$59		$47	$12	25.5	%
Segment income, excluding amortization expense							Segment income, excluding amortization expense	$899		$681	$218	32.0	%

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

● ~~Lower~~Acquisition-related sales (+9%)

● Higher sales volumes ~~(-11%~~(+7%)

● ~~Unfavorable~~Favorable foreign currency translation ~~(-3%~~(+5%)

~~Partially offset by:~~

● Higher selling prices ~~(3%)~~

~~● Acquisition-related sales (1%~~(+3%)

Architectural coatings - Americas and Asia Pacific net sales ~~decreased~~increased a mid-single-digit percentage during the first ~~half~~six months of the year with differences by channel and region. ~~Higher DIY~~Despite a strong first quarter, the second quarter was negatively impacted by raw material shortages. Favorable foreign currency benefited net sales ~~volumes were more than offset by~~due to the ~~unfavorable impact~~strengthening of ~~retail store shutdowns~~the Mexican peso and certain currencies in the ~~U.S., Canada and~~Asia Pacific region. In Mexico, ~~and unfavorable foreign currency translation driven~~PPG Comex architectural coatings business organic sales increased by a low-teen percentage compared to the ~~Mexican peso.~~prior year as the concessionaire network sell-out of PPG products continued to be strong.

Architectural coatings – EMEA ~~organic~~net sales ~~decreased~~increased over 30% versus prior year driven by a ~~low-single-digit percentage driven by lower demand~~strong volumes in ~~Southern Europe where various countries mandated~~ the ~~closures of retail paint stores at the end~~first half of the ~~first quarter.~~year and favorable foreign currency translation due to the strengthening of the euro. Acquisition-related sales from Tikkurila also benefited the business.

Net sales for automotive refinish coatings ~~were down~~increased nearly ~~25%~~40%, with significant growth in each region versus prior year driven by ~~a sharp decline~~an increase in global miles driven and traffic density in most of the ~~world.~~world versus 2020.

Aerospace coatings sales volumes decreased ~~about 15%~~a low-teen percentage year-over-year due to a ~~sharp~~ decline in commercial OEM and general aviation ~~and after-market~~ products.

Net sales ~~benefited from consistent demand for the company’s military applications and acquisition-related sales from Dexmet and Texstars.~~

~~Sales volumes~~ in the protective and marine coatings business ~~were down a mid-single-digit percentage driven by lower demand~~increased over 30% versus prior year due to acquisition-related sales from VersaFlex and higher sales volumes in Asia Pacific.

Net sales in the ~~U.S. oil and gas end-use market.~~traffic solutions business met expectations despite raw material shortages.

Segment income ~~decreased $88~~increased $206 million year-over-year ~~including unfavorable foreign currency translation impacts~~due to the earnings impact of ~~$18 million. Segment income was impacted by lower~~higher sales volumes, ~~related to the pandemic~~higher selling prices, and ~~unfavorable foreign currency translation~~savings from previously approved restructuring actions, partially offset by ~~higher selling prices, execution of cost-mitigation efforts~~raw material and ~~restructuring initiatives.~~logistics cost inflation.

Industrial Coatings


		Six Months Ended June 30			$ Change				% Change	Six Months Ended June 30		$ 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	$2,315	$3,110	($795)	(25.6)	%	Net sales	$3,172		$2,315	$857	37.0	%
Segment income	Segment income	$215	$453	($238)	(52.5)	%	Segment income	$435		$215	$220	102.3	%
Amortization expense							Amortization expense	$21		$20	$1	5.0	%
Segment income, excluding amortization expense							Segment income, excluding amortization expense	$456		$235	$221	94.0	%

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

● ~~Lower~~Higher sales volumes ~~(-25%)~~

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

~~Partially offset by:~~

~~● Acquisition-related sales (2%~~(+29%)

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● Favorable foreign currency translation (+4%)

● Higher selling prices (+2%)

● Acquisition-related sales (+2%)

Automotive OEM coatings net sales ~~volumes decreased by about 35%~~increased over 45% year-over-year driven by strong growth in all regions after a recovery from the ~~significant curtailment~~global pandemic in ~~global~~ automotive ~~industry~~ production ~~rates.~~and favorable foreign currency translation in Europe and Asia. Net sales also benefited from acquisition-related sales from Wörwag and Cetelon. In the U.S., automotive retail dealer inventories decreased to historically low levels as consumer demand remained robust while production levels were constrained due to a shortage of computer chips.

For the industrial coatings business, net sales ~~decreased~~increased by ~~about 20% compared to prior year. Acquisition-related sales from Whitford and Hemmelrath were more than offset by lower~~nearly 35% as global industrial production ~~demand~~continued to improve from the global pandemic in prior year, most ~~regions due to customer shutdowns.~~notably in electronic materials, heavy duty equipment and cookware.

Packaging coatings ~~organic~~net sales ~~were flat~~increased over 15% 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. Net sales also benefited from higher selling prices ~~were offset by lower sales volumes stemming from pandemic-related customer shutdowns.~~and favorable foreign currency translation.

Segment income ~~decreased $238~~increased $220 million year-over-year ~~including unfavorable foreign currency translation impacts~~driven by the earnings impact of ~~about $10 million. Segment income was impacted by lower~~higher sales volumes, ~~driven by customer shutdowns related to~~higher selling prices, and the ~~pandemic,~~execution of cost-mitigation actions and restructuring savings, partially offset by ~~cost-mitigation actions, restructuring~~raw material and logistics cost ~~savings, and modestly higher selling prices.~~inflation.

Liquidity and Capital Resources

PPG had cash and short-term investments totaling ~~$2.3~~$1.3 billion and ~~$1.3~~$1.9 billion at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

Cash ~~provided by~~from operating activities from continuing operations for the six months ended June 30, 2021 and 2020 ~~and 2019~~ was ~~$321~~$581 million and ~~$486~~$321 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 six months of ~~2020~~2021 compared to the prior year.

Other uses of cash during the six months ended June 30, ~~2020~~2021 included:

•Capital expenditures, excluding acquisitions, of ~~$92~~$142 million.

•Business acquisition cash spending (net of ~~$45~~cash acquired) of $2,126 million.

•Cash dividends paid of ~~$241~~$256 million.

In June 2021, PPG borrowed $700 million under the $2.0 billion Term Loan Credit Agreement (the "Term Loan Credit Agreement") entered into in February 2021 to finance the Company’s acquisition of Tikkurila, and to pay fees, costs and expenses related thereto. 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. 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.

Also in the second quarter of 2021, two of PPG's long-term debt obligations matured; $134 million 9% non-callable debentures and non-U.S. debt of €30 million. The Company paid $170 million to settle these obligations using cash on hand.

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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. ~~The~~In 2020, PPG repaid $1.1 billion of the Term Loan ~~terminates~~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 ~~all amounts outstanding are payable~~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 ~~April 13, 2021.~~

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 ~~this~~that amount in full in April 2020. There were no amounts outstanding under the ~~Credit~~credit agreement as of June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

The ~~Company's~~Credit Agreement also supports 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, commercial paper borrowings~~which are classified as long-term ~~debt~~ based

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on ~~PPG's~~PPG’s intent and ability to refinance these borrowings on a long-term basis. AsCommercial paper borrowings of $800 million and $250 million were outstanding as of June 30, ~~2020, no commercial paper borrowings were outstanding. As of~~2021 and December 31, ~~2019, there were $100 million of commercial paper borrowings outstanding.~~2020, respectively.

Total capital spending in ~~2020~~2021 is expected to be approximately $300 million, an increase versus the prior company estimate due to the restart of certain capital projects in China and capital spending associated with the restructuring programs approved in the ~~second quarter 2020. The Company continues~~range of $425 to ~~defer non-essential capital~~$450 million, reflecting a return to pre-pandemic levels of 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 $5$10 million to ~~$10~~$15 million during the remaining six 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 ~~to maintain appropriate balance sheet flexibility, including~~ cash deployment focused on ~~hand, due to the uncertain nature and unpredictable timing~~shareholder value creation, with a preference for business acquisitions.

Table of ~~the COVID-19 pandemic.~~Contents

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)	June 30, 2020		December 31, 2019		June 30, 2019		($ in millions, except percentages)	June 30, 2021		December 31, 2020		June 30, 2020
Trade receivables, net	Trade receivables, net	$2,356		$2,479		$3,028		Trade receivables, net	$3,147		$2,412		$2,356
Inventories, FIFO	Inventories, FIFO	1,825		1,834		2,071		Inventories, FIFO	2,350		1,845		1,825
Trade creditors’ liabilities	Trade creditors’ liabilities	1,798		2,098		2,319		Trade creditors’ liabilities	2,770		2,259		1,798
Operating working capital	Operating working capital	$2,383		$2,215		$2,780		Operating working capital	$2,727		$1,998		$2,383
Operating working capital as a % of Sales	Operating working capital as a % of Sales	19.8	%	15.1	%	17.3	%	Operating working capital as a % of Sales	15.6	%	13.3	%	19.8	%
Days sales outstanding	Days sales outstanding	65		56		62		Days sales outstanding	59		54		65
Days payable outstanding		97		94		96

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.

Environmental


		Three Months Ended June 30			Six Months Ended June 30				Three Months Ended June 30		Six Months Ended June 30
($ in millions)	($ in millions)	2020	2019	2020	2019	($ in millions)	2021	2020	2021	2020
Cash outlays for environmental remediation activities	Cash outlays for environmental remediation activities	$12	$20	$37	$36	Cash outlays for environmental remediation activities	$8	$12	$17	$37


($ in millions)	Remainder of ~~2020~~2021	Annually ~~2021~~2022 - ~~2024~~2025
Projected future cash outlays for environmental remediation activities	$3060 - ~~$40~~$80	$20 - $50

Restructuring

In June 2020, PPG initiated a $176 million restructuring program. 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 includes a voluntary separation program that was offered in the U.S. and Canada. PPG recognized $45 million of savings from this program in 2020. We expect to achieve annualized cost savings from the 2020 program of $160 to $170 million ~~by the expected completion date~~once fully implemented in 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. The 2019 program is expected~~2020. We expect to achieve ~~approximately $125 million of~~ annualized cost savings byfrom the ~~expected completion date~~2019 program of $125 million once fully implemented in 2022.

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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 ~~$55~~$10 million of savings from this program in ~~2019.~~2020. We expect to achieve annualized cost savings from the 2018 program of $85 million once fully implemented in ~~2020.~~2021.

Aggregate restructuring savings related to the 2020, 2019 and 2018 programs was approximately $75 million for the six months ended 2021. Total restructuring savings are expected to be ~~between $100~~at least $135 million in 2021. Releases of approximately $23 million and ~~$110~~$26 million were recorded in ~~2020.~~the six months ended June 30, 2021 and 2020, respectively, to reflect the current estimate of the costs to complete these actions. There are no changes to the previously estimated restructuring program savings as a result of these adjustments. 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.

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Currency

Comparing spot exchange rates at December 31, ~~2019~~2020 and at June 30, ~~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 June 30, ~~2020~~2021 decreased by ~~$581~~$58 million compared to December 31, ~~2019~~2020 primarily driven by the ~~Mexican peso~~.Euro.

Comparing average exchange rates during the first six months of ~~2020~~2021 to those of the first six ~~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~~.operates. This had ~~an unfavorable impact~~a favorable impact on Income before income taxes for the six months ended June 30, ~~2020~~2021 of ~~$29~~$42 million from the translation of these foreign earnings into U.S. dollars.

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 ~~15,~~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 ~~15,~~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 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 ~~15,~~14, PPG has significant reserves for environmental contingencies. Please refer to the Environmental Matters section of Note 1514 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.

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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~~our 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,

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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 ~~2019~~2020 Form 10-K under Item 1A and in this Form 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, 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 June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, PPG had non-U.S. dollar denominated borrowings outstanding of $~~2.3~~2.4 billion. A weakening of the U.S. dollar by 10% against European currencies and by 20% against Asian and South American currencies would have resulted in unrealized translation losses on these borrowings of $~~256~~266 million at June 30, ~~2020~~2021 and ~~$255~~$273 million at December 31, ~~2019,~~2020, respectively.

The fair ~~value~~values of foreign currency forward contracts outstanding at June 30, ~~2020~~2021 and December 31, ~~2019 was a~~2020 were net ~~asset~~assets of $7$6 million and~~and a net liability of $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 June 30, ~~2020~~2021 was $~~196~~284 million and ~~$357~~$226 million for the ~~period~~year ended December 31, ~~2019.~~2020.

PPG has ~~U. S.~~U.S. dollar to euro cross currency swap contracts with a total notional amount of $875 million outstanding, resulting in ana net asset of ~~$73~~$15 million and a net ~~asset~~liability of ~~$48~~$8 million at June 30, ~~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 $91 million and ~~$87~~$95 million at June 30, ~~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 ~~$78~~$48 million and ~~$35~~$67 million atas of June 30, ~~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 less than $1 ~~million and $7~~ million for the periods ended June 30, ~~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 June 30, ~~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 ~~$61~~$53 million and ~~$67~~$48 million at June 30, ~~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 June 30, ~~2020.~~2021. See Note ~~13,~~12, “Financial Instruments, Hedging Activities and Fair Value Measurements” for a description of our instruments subject to market risk.

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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

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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 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 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 three federal court derivative actions have been consolidated. On May 28, 2020, a Motion to Dismiss all three federal court derivative actions was filed. The court has confirmed that the Company and the individual defendants need not respond to the lawsuits while the Motion to Dismiss is pending. The state court derivative action has been stayed pending the outcome of the federal court Motion to Dismiss.

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

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entered final judgment approving the settlement. PPG’s insurance carriers confirmed to the Company insurance coverage for the full amount of the settlement. Settlement payments are expected to occur in 2020.

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 ~~15,~~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~~ 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~~

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

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 June 30, ~~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 ~~14,240,585~~8,896,486 shares as of June 30, ~~2020.~~2021. This repurchase program has no expiration date.

Item 6. Exhibits

See the Index to Exhibits on page ~~41.~~42.

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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.


†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 six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, (ii) the Condensed Consolidated Balance Sheet at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, (iii) the Condensed Consolidated Statement of Cash Flows for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, and (iv) Notes to Condensed Consolidated Financial Statements for the six months ended June 30, ~~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:

July ~~17, 2020~~20, 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)

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		PAGE
Part I. Financial Information
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Statement of Income	2
	Condensed Consolidated Statement of Comprehensive Income/(Loss) Income	3
	Condensed Consolidated Balance Sheet	4
	Condensed Consolidated Statement of Shareholders' Equity	5
	Condensed Consolidated Statement of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2426
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3639
Item 4.	Controls and Procedures	3739
Part II. Other Information
Item 1.	Legal Proceedings	3740
Item 1A.	Risk Factors	3840
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3841

Item 6.	Exhibits	3841
~~Signature~~Signatures		4043


	Three Months Ended June 30, 2019
($ in millions, except percentages and per share amounts)	Income Before Income Taxes	Tax Expense	Effective Tax Rate		Net income (attributable to PPG)	Earnings per diluted share^(a)
As reported, continuing operations	$363	$86	23.7	%	$270	$1.13
Adjusted for:
Business restructuring-related costs, net^(b)	182	44	24.2	%	138	0.58
Environmental remediation charges, net	30	7	24.3	%	23	0.10
Acquisition-related costs	10	2	23.8	%	8	0.03
Costs associated with accounting investigations	3	1	24.3	%	2	0.01
Adjusted, continuing operations, excluding certain items	$588	$140	23.8	%	$441	$1.85