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: ~~September 30, 2021~~March 31, 2022

☐ 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 ~~September 30, 2021, 237,400,853~~March 31, 2022, 236,194,347 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 September 30		Nine Months Ended September 30			Three Months Ended March 31
		2021	2020	2021	2020
($ in millions, except per share amounts)						($ in millions, except per share amounts)	2022	2021
Net sales	Net sales	$4,372	$3,685	$12,612	$10,077	Net sales	$4,308	$3,881
Cost of sales, exclusive of depreciation and amortization	Cost of sales, exclusive of depreciation and amortization	2,733	2,026	7,594	5,637	Cost of sales, exclusive of depreciation and amortization	2,698	2,232
Selling, general and administrative	Selling, general and administrative	950	836	2,796	2,507	Selling, general and administrative	974	891
Depreciation	Depreciation	100	96	286	280	Depreciation	102	90
Amortization	Amortization	46	36	126	104	Amortization	43	39
Research and development, net	Research and development, net	114	92	323	279	Research and development, net	115	102
Interest expense	Interest expense	30	34	91	107	Interest expense	30	30
Interest income	Interest income	(7)	(4)	(19)	(18)	Interest income	(9)	(6)
Impairment charge		21	—	21	—
Business restructuring, net		—	—	(21)	172
Impairment and other related charges						Impairment and other related charges	290	—

Other charges	Other charges	—	21	28	45	Other charges	13	17
Other income	Other income	(56)	(24)	(146)	(53)	Other income	(26)	(13)
Income before income taxes	Income before income taxes	$441	$572	$1,533	$1,017	Income before income taxes	$78	$499
Income tax expense	Income tax expense	96	124	370	224	Income tax expense	55	114
Income from continuing operations		$345	$448	$1,163	$793
Income from discontinued operations, net of tax		—	—	—	3

Net income attributable to controlling and noncontrolling interests	Net income attributable to controlling and noncontrolling interests	$345	$448	$1,163	$796	Net income attributable to controlling and noncontrolling interests	$23	$385
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	(1)	(6)	(10)	(9)	Net income attributable to noncontrolling interests	(5)	(7)
Net income (attributable to PPG)	Net income (attributable to PPG)	$344	$442	$1,153	$787	Net income (attributable to PPG)	$18	$378
Amounts attributable to PPG:
Income from continuing operations, net of tax		$344	$442	$1,153	$784
Income from discontinued operations, net of tax		—	—	—	3
Net income (attributable to PPG)		$344	$442	$1,153	$787

Earnings per common share:
Income from continuing operations, net of tax		$1.45	$1.87	$4.85	$3.32
Income from discontinued operations, net of tax		—	—	—	0.01

Earnings per common share (attributable to PPG)	Earnings per common share (attributable to PPG)	$1.45	$1.87	$4.85	$3.33	Earnings per common share (attributable to PPG)	$0.08	$1.59

Earnings per common share – assuming dilution:
Income from continuing operations, net of tax		$1.43	$1.86	$4.81	$3.30
Income from discontinued operations, net of tax		—	—	—	0.01

Earnings per common share (attributable to PPG) - assuming dilution	Earnings per common share (attributable to PPG) - assuming dilution	$1.43	$1.86	$4.81	$3.31	Earnings per common share (attributable to PPG) - assuming dilution	$0.08	$1.58

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 (Unaudited)

~~($ in millions)~~


		Three Months Ended September 30		Nine Months Ended September 30			Three Months Ended March 31
		2021	2020	2021	2020
Net income attributable to the controlling and noncontrolling interests		$345	$448	$1,163	$796
Other comprehensive (loss)/income, net of tax:
($ in millions)						($ in millions)	2022	2021
Net income attributable to controlling and noncontrolling interests						Net income attributable to controlling and noncontrolling interests	$23	$385
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	6	3	(1)	9	Defined benefit pension and other postretirement benefits	(4)	(5)
Unrealized foreign currency translation adjustments	Unrealized foreign currency translation adjustments	(215)	136	(276)	(453)	Unrealized foreign currency translation adjustments	37	(128)

Other comprehensive (loss)/income, net of tax		($209)	$139	($277)	($444)
Other comprehensive income/(loss), net of tax						Other comprehensive income/(loss), net of tax	$33	($133)
Total comprehensive income	Total comprehensive income	$136	$587	$886	$352	Total comprehensive income	$56	$252
Less: amounts attributable to noncontrolling interests:	Less: amounts attributable to noncontrolling interests:					Less: amounts attributable to noncontrolling interests:
Net income	Net income	(1)	(6)	(10)	(9)	Net income	(5)	(7)
Unrealized foreign currency translation adjustments	Unrealized foreign currency translation adjustments	2	(2)	5	6	Unrealized foreign currency translation adjustments	3	2
Comprehensive income attributable to PPG	Comprehensive income attributable to PPG	$137	$579	$881	$349	Comprehensive income attributable to PPG	$54	$247

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)~~


		September 30, 2021	December 31, 2020
($ in millions)				($ in millions)	March 31, 2022	December 31, 2021
Assets	Assets			Assets
Current assets:	Current assets:			Current assets:
Cash and cash equivalents	Cash and cash equivalents	$1,216	$1,826	Cash and cash equivalents	$960	$1,005
Short-term investments	Short-term investments	88	96	Short-term investments	73	67
Receivables, net	Receivables, net	3,382	2,726	Receivables, net	3,659	3,152
Inventories	Inventories	2,249	1,735	Inventories	2,439	2,171
Other current assets	Other current assets	365	415	Other current assets	496	379
Total current assets	Total current assets	$7,300	$6,798	Total current assets	$7,627	$6,774
Property, plant and equipment (net of accumulated depreciation of $4,517 and $4,349)		3,350	3,127
Property, plant and equipment (net of accumulated depreciation of $4,564 and $4,532)				Property, plant and equipment (net of accumulated depreciation of $4,564 and $4,532)	3,322	3,442
Goodwill	Goodwill	6,206	5,102	Goodwill	6,232	6,248
Identifiable intangible assets, net	Identifiable intangible assets, net	2,842	2,351	Identifiable intangible assets, net	2,590	2,783
Deferred income taxes	Deferred income taxes	311	379	Deferred income taxes	237	197
Investments	Investments	272	267	Investments	267	274
Operating lease right-of-use assets	Operating lease right-of-use assets	906	847	Operating lease right-of-use assets	879	891
Other assets	Other assets	696	685	Other assets	734	742
Total	Total	$21,883	$19,556	Total	$21,888	$21,351
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	$4,378	$3,792	Accounts payable and accrued liabilities	$4,492	$4,392
Restructuring reserves	Restructuring reserves	187	281	Restructuring reserves	171	173
Short-term debt and current portion of long-term debt	Short-term debt and current portion of long-term debt	704	578	Short-term debt and current portion of long-term debt	319	9
Current portion of operating lease liabilities	Current portion of operating lease liabilities	194	180	Current portion of operating lease liabilities	190	192
Total current liabilities	Total current liabilities	$5,463	$4,831	Total current liabilities	$5,172	$4,766
Long-term debt	Long-term debt	6,092	5,171	Long-term debt	6,834	6,572
Operating lease liabilities	Operating lease liabilities	709	677	Operating lease liabilities	684	693
Accrued pensions	Accrued pensions	933	945	Accrued pensions	821	834
Other postretirement benefits	Other postretirement benefits	718	733	Other postretirement benefits	668	672
Deferred income taxes	Deferred income taxes	642	435	Deferred income taxes	667	646
Other liabilities	Other liabilities	916	949	Other liabilities	709	757
Total liabilities	Total liabilities	$15,473	$13,741	Total liabilities	$15,555	$14,940
Commitments and contingent liabilities (Note 14)	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	1,065	1,008	Additional paid-in capital	1,093	1,081
Retained earnings	Retained earnings	20,226	19,469	Retained earnings	20,251	20,372
Treasury stock, at cost	Treasury stock, at cost	(13,136)	(13,158)	Treasury stock, at cost	(13,381)	(13,386)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(2,871)	(2,599)	Accumulated other comprehensive loss	(2,714)	(2,750)
Total PPG shareholders’ equity	Total PPG shareholders’ equity	$6,253	$5,689	Total PPG shareholders’ equity	$6,218	$6,286
Noncontrolling interests	Noncontrolling interests	157	126	Noncontrolling interests	115	125
Total shareholders’ equity	Total shareholders’ equity	$6,410	$5,815	Total shareholders’ equity	$6,333	$6,411
Total	Total	$21,883	$19,556	Total	$21,888	$21,351

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)~~


($ in millions)	Common Stock	Additional Paid-In Capital	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive (Loss)/Income	Total PPG	Non-controlling Interests	Total
January 1, 2022	$969	$1,081	$20,372	($13,386)	($2,750)	$6,286	$125	$6,411
Net income attributable to controlling and noncontrolling interests	—	—	18	—	—	18	5	23
Other comprehensive income/(loss), net of tax	—	—	—	—	36	36	(3)	33
Cash dividends	—	—	(139)	—	—	(139)	—	(139)

Issuance of treasury stock	—	24	—	5	—	29	—	29
Stock-based compensation activity	—	(12)	—	—	—	(12)	—	(12)
Dividends paid on subsidiary common stock to noncontrolling interests	—	—	—	—	—	—	(1)	(1)
Reductions in noncontrolling interests	—	—	—	—	—	—	(11)	(11)
March 31, 2022	$969	$1,093	$20,251	($13,381)	($2,714)	$6,218	$115	$6,333

Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive (Loss)/Income Total PPG Non-controlling Interests Total
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 — — 378 — — $378 7 $385
Other comprehensive loss, net of tax — — — — (131) ($131) (2) ($133)
Cash dividends — — (128) — — ($128) — ($128)
Issuance of treasury stock — 25 — 10 — $35 — $35
Stock-based compensation activity — (4) — — — ($4) — ($4)
Reductions in noncontrolling interests — — — — — — (1) (1)
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 — — 431 — — $431 2 $433
Other comprehensive income/(loss), net of tax — — — — 66 $66 (1) $65
Cash dividends — — (128) — — ($128) — ($128)
Issuance of treasury stock — 17 — 10 — $27 — $27
Stock-based compensation activity — 7 — — — $7 — $7
Dividends paid on subsidiary common stock to noncontrolling interests — — — — — — (4) ($4)
Acquisition of noncontrolling interests (Note 3) — — — — — — 53 $53
Reductions in noncontrolling interests — — — — — — (11) ($11)
June 30, 2021 $969 $1,053 $20,022 ($13,138) ($2,664) $6,242 $169 $6,411
Net income attributable to the controlling and noncontrolling interests — — 344 — — $344 1 $345
Other comprehensive loss, net of tax — — — — (207) ($207) (2) ($209)
Cash dividends — — (140) — — ($140) — ($140)
Issuance of treasury stock — 3 — 2 — $5 — $5
Stock-based compensation activity — 9 — — — $9 — $9
Dividends paid on subsidiary common stock to noncontrolling interests — — — — — — (1) ($1)
Reductions in noncontrolling interests — — — — — — (10) ($10)
September 30, 2021 $969 $1,065 $20,226 ($13,136) ($2,871) $6,253 $157 $6,410

~~Table of Contents~~


		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
Net income attributable to the controlling and noncontrolling interests		—	—	243	—	—	$243	5	$248
($ in millions)										($ in millions)	Common Stock	Additional Paid-In Capital	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive Loss	Total PPG	Non-controlling Interests	Total
January 1, 2021										January 1, 2021	$969	$1,008	$19,469	($13,158)	($2,599)	$5,689	$126	$5,815
Net income attributable to controlling and noncontrolling interests										Net income attributable to 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
Net income attributable to the controlling and noncontrolling interests		—	—	102	—	—	$102	(2)	$100
Other comprehensive income, net of tax		—	—	—	—	117	$117	2	$119
Cash dividends		—	—	(121)	—	—	($121)	—	($121)

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

June 30, 2020		$969	$962	$19,010	($13,184)	($2,925)	$4,832	$106	$4,938
Net income attributable to the controlling and noncontrolling interests		—	—	442	—	—	$442	6	$448
Other comprehensive income, net of tax		—	—	—	—	137	$137	2	$139
Cash dividends		—	—	(127)	—	—	($127)	—	($127)

Issuance of treasury stock		—	10	—	8	—	$18	—	$18
Stock-based compensation activity		—	8	—	—	—	$8	—	$8
Dividends paid on subsidiary common stock to noncontrolling interests		—	—	—	—	—	—	(1)	(1)
Reductions in noncontrolling interests		—	—	—	—	—	—	1	1

September 30, 2020		$969	$980	$19,325	($13,176)	($2,788)	$5,310	$114	$5,424

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)


		Nine Months Ended September 30			Three Months Ended March 31
($ in millions)	($ in millions)	2021	2020	($ in millions)	2022	2021
Operating activities:	Operating activities:			Operating activities:
Net income attributable to controlling and noncontrolling interests	Net income attributable to controlling and noncontrolling interests	$1,163	$796	Net income attributable to controlling and noncontrolling interests	$23	$385
Less: Income from discontinued operations		—	(3)
Income from continuing operations		1,163	793

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	412	384	Depreciation and amortization	145	129
Pension (income) expense		(27)	29
Pension income				Pension income	(7)	(9)

Debt extinguishment charge		—	7

Environmental remediation charges	Environmental remediation charges	26	12	Environmental remediation charges	—	16
Business restructuring, net		(21)	172
Impairment charge		21	—

Impairment and other related charges				Impairment and other related charges	290	—
Stock-based compensation expense	Stock-based compensation expense	39	29	Stock-based compensation expense	6	17
Gain from sale of production facility		(34)	—
Equity affiliate income, net of dividends		(6)	2

Deferred income taxes	Deferred income taxes	58	4	Deferred income taxes	(36)	(7)
Cash contributions to pension plans		(3)	(7)

Cash used for restructuring actions	Cash used for restructuring actions	(60)	(98)	Cash used for restructuring actions	(32)	(26)
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	(376)	(63)	Receivables	(530)	(354)
Inventories	Inventories	(334)	36	Inventories	(325)	(189)
Other current assets	Other current assets	24	26	Other current assets	(88)	(37)
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	423	(23)	Accounts payable and accrued liabilities	326	110
Taxes and interest payable	Taxes and interest payable	(52)	(72)	Taxes and interest payable	(54)	22
Noncurrent assets and liabilities, net	Noncurrent assets and liabilities, net	(74)	19	Noncurrent assets and liabilities, net	(30)	(32)
Other	Other	(73)	(87)	Other	8	(48)
Cash from operating activities - continuing operations		$1,106	$1,163
Cash from operating activities - discontinued operations		—	1
Cash from for operating activities		$1,106	$1,164

Cash used for operating activities				Cash used for operating activities	($304)	($23)
Investing activities:	Investing activities:			Investing activities:
Capital expenditures	Capital expenditures	(220)	(170)	Capital expenditures	($194)	($80)
Business acquisitions, net of cash balances acquired	Business acquisitions, net of cash balances acquired	(2,137)	(45)	Business acquisitions, net of cash balances acquired	(9)	(356)

Proceeds from sale of production facility		47	—

Payments for the settlement of cross currency swap contracts		(4)	(5)
Proceeds from the settlement of cross currency swap contracts		15	21

Other	Other	23	8	Other	20	12

Cash used for investing activities	Cash used for investing activities	($2,276)	($191)	Cash used for investing activities	($183)	($424)
Financing activities:	Financing activities:			Financing activities:
Net change in borrowing with maturities of three months or less		—	(7)
Proceeds from Term Loan Credit Agreement, net of fees		699	—
Proceeds on commercial paper and short-term debt, net of payments		375	1,397

Proceeds from commercial paper and short-term debt, net of payments				Proceeds from commercial paper and short-term debt, net of payments	$586	$300
Repayment of term loan	Repayment of term loan	(400)	(1,000)	Repayment of term loan	—	(400)
Proceeds from revolving credit facility		—	800
Repayment of revolving credit facility		—	(800)

Proceeds from the issuance of debt, net of discounts and fees	Proceeds from the issuance of debt, net of discounts and fees	692	415	Proceeds from the issuance of debt, net of discounts and fees	55	692
Repayment of long-term debt		(173)	(503)
Repayment of acquired debt		(207)	(12)

Purchase of treasury stock				Purchase of treasury stock	(40)	—
Issuance of treasury stock	Issuance of treasury stock	46	23	Issuance of treasury stock	6	20
Dividends paid on PPG common stock	Dividends paid on PPG common stock	(396)	(368)	Dividends paid on PPG common stock	(139)	(128)

Payments related to tax withholding on stock-based compensation awards	Payments related to tax withholding on stock-based compensation awards	(18)	(11)	Payments related to tax withholding on stock-based compensation awards	(12)	(11)
Other	Other	(12)	(39)	Other	(13)	(4)

Cash from financing activities	Cash from financing activities	$606	($105)	Cash from financing activities	$443	$469
Effect of currency exchange rate changes on cash and cash equivalents	Effect of currency exchange rate changes on cash and cash equivalents	(46)	(76)	Effect of currency exchange rate changes on cash and cash equivalents	(1)	(40)
Net (decrease)/increase in cash and cash equivalents		($610)	$792
Net decrease in cash and cash equivalents				Net decrease in cash and cash equivalents	($45)	($18)
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	1,826	1,216	Cash and cash equivalents, beginning of period	1,005	1,826
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$1,216	$2,008	Cash and cash equivalents, end of period	$960	$1,808

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	$110	$121	Interest paid, net of amount capitalized	$52	$52
Taxes paid, net of refunds	Taxes paid, net of refunds	$376	$293	Taxes paid, net of refunds	$114	$97

Supplemental disclosure of noncash investing activities:				Supplemental disclosure of noncash investing activities:
Capital expenditures accrued within Accounts payable and accrued liabilities at period-end				Capital expenditures accrued within Accounts payable and accrued liabilities at period-end	$31	$31

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

Table of Contents

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.Basis of Presentation

The condensed consolidated financial statements included herein are unaudited and have been prepared following the requirements of the Securities and Exchange Commission (the "SEC") and accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim reporting. Under these rules, certain footnotes and other financial information that are normally required for annual financial statements can be condensed or omitted. These statements include all adjustments, consisting only of normal, recurring adjustments, necessary for a fair presentation of the financial position and shareholders' equity of PPG as of ~~September 30, 2021~~March 31, 2022 and the results of its operations and cash flows for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021. 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 ~~2020~~2021 Annual Report on Form 10-K (the ~~"2020~~"2021 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 nine~~ months ended ~~September 30, 2021~~March 31, 2022 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 ~~2021~~2022

Effective January 1, ~~2021,~~2022, PPG adopted Accounting Standards Update ("ASU") No. ~~2019-12, "Income Taxes~~2020-06, "Debt - ~~Simplifying the Accounting for Income Taxes.~~Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40)." This ASU ~~is intended to simplify various aspects of~~simplifies the accounting for ~~income taxes by eliminating~~ certain ~~exceptions within Accounting Standards Codification Topic 740, "Income Taxes"~~financial instruments with characteristics of liabilities and ~~to clarify certain aspects of the current accounting guidance.~~equity, including convertible instruments and contracts in an entity's own equity. Adoption of this standard did not materially impact PPG's consolidated financial position, results of operations or cash flows.

Recently Issued Accounting Standards ~~to be Adopted in Future Years~~

In 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~~expedients and exceptions to U.S. GAAP 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. As of March 31, 2022, PPG ~~is currently assessing~~has not applied any of the ~~potential impacts~~optional expedients or exceptions allowed under this ASU. PPG does not believe that this ASU ~~may~~will have a material impact on its consolidated financial position, results of operations ~~and~~or cash flows.

3.~~Acquisitions and Divestitures~~

~~Acquisitions~~

~~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 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, including an industrial paint business that produces paints and coatings for the wood and metal industries, among others.

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As of September 30, 2021, PPG had purchased approximately 97.9% of Tikkurila's issued and outstanding shares. All remaining outstanding shares will be acquired through a squeeze out process. As of March 31, 2021, PPG owned 9.32% of the outstanding shares. As of September 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 purchase price was allocated based on information available at the acquisition date and is subject to customary post-closing adjustments. The estimated fair value of assets acquired and liabilities assumed as reflected in the preliminary purchase price allocation included goodwill and identifiable intangible assets of $1.1 billion and $601 million, respectively. The acquired identifiable intangible assets consist of indefinite-lived trademarks of $405 million and other intangible assets with finite lives of $196 million, which consist primarily of customer relationships, trade names, and acquired technology, subject to amortization over a weighted average period of 15 years. 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. 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 and the industrial coatings business. The architectural coatings – EMEA business is included within the Performance Coatings reportable business segment and the industrial coatings business is included within the Industrial Coatings reportable business segment.

~~Other Acquisitions~~

On May 14, 2021, PPG completed the acquisition of Wörwag, a global manufacturer of coatings for industrial and automotive applications. The company specializes in developing sustainable liquid, powder and film coatings. The results of this business since the date of acquisition have been reported within the automotive original equipment manufacturer ("OEM") coatings business within the Industrial Coatings reportable business segment.

On April 19, 2021, PPG announced that it had acquired Cetelon Lackfabrik GmbH, a manufacturer of coatings for automotive and 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 February 22, 2021, PPG completed the acquisition of VersaFlex, a manufacturer specializing in polyurea, epoxy and polyurethane coatings for water and waste water infrastructure, flooring, transportation infrastructure, and industrial applications. The results of this business since the date of acquisition have been reported within the protective and marine coatings business within the 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. In the third quarter 2021, an incremental impairment charge of $21 million was recorded in the condensed consolidated statement of income, representing the excess net book value of the net assets over the anticipated sales proceeds less costs to sell these entities. 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 condensed consolidated balance sheet as of September 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) September 30, 2021 December 31, 2020
Cash and cash equivalents $14 $20
Receivables — 5
Inventories — 5
Assets held for sale $14 $30
Accounts payable and accrued liabilities $14 $14
Operating lease liabilities 6 6
Deferred income taxes 3 3
Other liabilities 1 1
Liabilities held for sale $24 $24

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4.Inventories


($ in millions)	($ in millions)	September 30, 2021	December 31, 2020	($ in millions)	March 31, 2022	December 31, 2021
Finished products	Finished products	$1,241	$1,021	Finished products	$1,369	$1,175
Work in process	Work in process	254	187	Work in process	257	234
Raw materials	Raw materials	714	490	Raw materials	774	723
Supplies	Supplies	40	37	Supplies	39	39
Total Inventories	Total Inventories	$2,249	$1,735	Total Inventories	$2,439	$2,171

Most U.S. inventories are valued using the last-in, first-out method. These inventories represented approximately ~~28% and 33%~~29% of total inventories at ~~September 30, 2021~~both March 31, 2022 and December 31, ~~2020, respectively.~~2021. If the first-in, first-out method of inventory valuation had been used, inventories would have been ~~$153~~$206 million and ~~$110~~$174 million higher as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

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5.4.Goodwill and Other Identifiable Intangible Assets

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

~~Although it was determined~~The Company identified indicators that ~~a triggering event had~~the carrying value of an indefinite-lived intangible asset and certain definite-lived intangible assets may not ~~occurred~~be recoverable as of ~~September 30, 2021,~~March 31, 2022, and the carrying value of those assets was assessed for impairment. As a result of this assessment, the Company ~~will continue~~recorded impairment charges of $124 million related to ~~monitor~~ the ~~impacts~~indefinite-lived intangible asset and $23 million related to definite-lived intangible assets in the condensed consolidated statement of income during the ~~COVID-19 pandemic on the Company~~three months ended March 31, 2022. Refer to Note 7, "Impairment and ~~significant changes in key assumptions that could result in future period impairment charges.~~ Other Related Charges" for additional information.

The Company did not identify an indication of goodwill impairment for ~~each~~any of its reporting units ~~and indefinite-lived intangible assets~~ as of ~~September 30, 2021.~~March 31, 2022.

The change in the carrying amount of goodwill attributable to each reportable segment for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was as follows:


($ in millions)	($ in millions)	Performance Coatings	Industrial Coatings	Total	($ in millions)	Performance Coatings	Industrial Coatings	Total
January 1, 2021		$4,023	$1,079	$5,102
January 1, 2022					January 1, 2022	$5,034	$1,214	$6,248
Acquisitions, including purchase accounting adjustments	Acquisitions, including purchase accounting adjustments	1,156	135	1,291	Acquisitions, including purchase accounting adjustments	39	(10)	29

Foreign currency impact	Foreign currency impact	(156)	(31)	(187)	Foreign currency impact	(44)	(1)	(45)
September 30, 2021		$5,023	$1,183	$6,206
March 31, 2022					March 31, 2022	$5,029	$1,203	$6,232

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


		September 30, 2021			December 31, 2020				March 31, 2022			December 31, 2021
($ 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	$1,454	N/A	$1,454	$1,101	N/A	$1,101	Trademarks	$1,333	N/A	$1,333	$1,449	N/A	$1,449
Definite-Lived Identifiable Intangible Assets	Definite-Lived Identifiable Intangible Assets							Definite-Lived Identifiable Intangible Assets
Acquired technology	Acquired technology	$865	($607)	$258	$813	($585)	$228	Acquired technology	$856	($624)	$232	$862	($616)	$246
Customer-related	Customer-related	1,968	(1,043)	925	1,849	(994)	855	Customer-related	1,927	(1,081)	846	1,956	(1,064)	892
Trade names	Trade names	340	(140)	200	277	(129)	148	Trade names	326	(150)	176	336	(144)	192
Other	Other	51	(46)	5	64	(45)	19	Other	50	(47)	3	51	(47)	4
Total Definite Lived Intangible Assets		$3,224	($1,836)	$1,388	$3,003	($1,753)	$1,250
Total Definite-Lived Intangible Assets								Total Definite-Lived Intangible Assets	$3,159	($1,902)	$1,257	$3,205	($1,871)	$1,334
Total Identifiable Intangible Assets	Total Identifiable Intangible Assets	$4,678	($1,836)	$2,842	$4,104	($1,753)	$2,351	Total Identifiable Intangible Assets	$4,492	($1,902)	$2,590	$4,654	($1,871)	$2,783

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

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As of ~~September 30, 2021,~~March 31, 2022, estimated future amortization expense of identifiable intangible assets is as follows:


($ in millions)	($ in millions)	Future Amortization Expense	($ in millions)	Future Amortization Expense
Remaining three months of 2021		$45
2022		$180
Remaining nine months of 2022			Remaining nine months of 2022	$140
2023	2023	$170	2023	$165
2024	2024	$155	2024	$150
2025	2025	$145	2025	$135
2026	2026	$130	2026	$115
2027			2027	$100
Thereafter	Thereafter	$563	Thereafter	$452

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5. 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~~incurs 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,~~16, "Reportable Business Segment Information" for additional information.

~~2020 Restructuring Program~~In the fourth quarter 2021, the Company approved business restructuring actions related to recent acquisitions targeting further consolidation of its manufacturing footprint and headcount reductions. The majority of these restructuring actions are expected to be completed by the end of 2023.

In ~~June~~the second quarter 2020, the Company approved a business restructuring plan which included actions to reduce its global cost structure. The program ~~addresses~~addressed weakened global economic conditions stemming from ~~the~~ COVID-19 ~~pandemic~~ and related pace of recovery in a few end-use markets along with further opportunities to optimize supply chain and functional costs. ~~The plan included a voluntary separation program that was offered in~~In the ~~U.S. and Canada. The majority of these restructuring actions are expected to be completed by the end of 2021 with the remainder of the actions expected to be completed in the first half of 2022.~~

~~2019 and 2018 Restructuring Programs~~

~~In June~~second quarter 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~~remaining actions 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;2020 and ~~certain redundancy actions related to recent acquisitions. The majority of these~~2019 restructuring ~~actions~~programs are expected to be completed ~~by the end of 2021 with the remainder of the actions expected to be completed~~ in ~~the first half of~~ 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 complete with the remainder of the actions expected to be completed by the end of 2021.

The following table summarizes ~~the~~restructuring reserve activity for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Total Reserve			Total Reserve
($ in millions)	($ in millions)	2021	2020	($ in millions)	2022	2021
January 1	January 1	$293	$224	January 1	$231	$293
Approved restructuring actions		2	198
Release of prior reserves and other adjustments (a)		(23)	(26)

Cash payments	Cash payments	(60)	(98)	Cash payments	(32)	(26)
Foreign currency impact	Foreign currency impact	(14)	10	Foreign currency impact	(5)	(11)
September 30		$198	$308
March 31				March 31	$194	$256

~~(a)Releases of $23 million and $26 million were recorded in the nine months ended September 30, 2021 and 2020, respectively, to reflect the current estimate of the costs to complete these actions.~~

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7.6.Borrowings

In ~~June 2021,~~March 2022, PPG ~~borrowed $700~~privately placed a 15-year €50 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 Company1.95% fixed interest note. This note contains covenants materially consistent 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 capital1.200% notes discussed below. This debt arrangement is denominated in euros 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 anniversaryhas been designated as a net investment hedge 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~~Company's European operations. Refer to Note 12 "Financial Instruments, Hedging Activities and ~~non-U.S. debt of €30 million. The Company paid $170 million to settle these obligations using cash on hand.~~Fair Value Measurements" for additional information.

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 "2021 Indenture"). The 2021 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 2021 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 2021 Indenture. The aggregate cash proceeds from the notes, net of discounts and fees, was $692 million.

In ~~August 2020,~~February 2021, PPG ~~completed~~entered into a ~~public offering~~$2.0 billion Term Loan Credit Agreement (the "Term Loan Credit Agreement") to finance the Company’s acquisition of ~~$100 million~~Tikkurila, and to pay fees, costs and expenses related thereto. The Term Loan Credit Agreement provided the Company with the ability to borrow up to an aggregate principal amount of ~~3.75% notes due March 2028. These notes were issued as additional notes pursuant to PPG’s existing shelf registration statement and pursuant~~$2.0 billion on an unsecured basis. In addition to the ~~Indenture between~~amounts borrowed to finance the acquisition of Tikkurila, the Term Loan Credit Agreement allowed the Company to make up to eleven additional borrowings prior to December 31, 2021, to be used for working capital and The Bank of New York Mellon Trust Company, N.A., as trustee, as supplemented (the "2018 Indenture"), which is is the same Indenture pursuant to which we previously issued $700 million in aggregate principle amount of our 3.75% notes due March 2028 on February 27, 2018. The new notes will be treated as a single series of notes with the existing notes under indenture, have the same CUSIP number as the existing notes, and be fungible with the existing notes for US federal income taxgeneral corporate purposes. The ~~2018 Indenture governing these notes~~Term Loan Credit Agreement contains covenants that ~~limit~~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 ~~among~~create liens or other ~~things, incur certain liens securing indebtedness, engage in certain sale-leaseback~~encumbrances, to enter into sale and leaseback transactions and to enter into ~~certain~~ consolidations, mergers ~~conveyances,~~or transfers ~~or leases~~ 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. In June 2021, PPG borrowed $700 million under the Term Loan Credit Agreement to finance the Company’s ~~assets. The terms~~acquisition of ~~these notes also require the Company~~Tikkurila, and to ~~make an offer to repurchase the notes upon a Change of Control Triggering Event (as defined in the 2018 Indenture) at a price equal to 101% of their principal amount plus accrued~~pay fees, costs and unpaid interest. The Company may issue additional debt from time to time pursuant to the 2018 Indenture. The aggregate cash proceeds from the notes, including the premium received at issuance, net of fees, was $119 million.

expenses related thereto. 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 "2020 Indenture"). The 2020 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 2020 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 2020 Indenture. The aggregate cash proceeds from the notes, net of discounts and fees, was $296 million.December 2021,

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PPG borrowed an additional $700 million under the Term Loan Credit Agreement. Borrowings of $1.4 billion were outstanding under the Term Loan Credit Agreement as of March 31, 2022 and December 31, 2021.

In April 2020, PPG entered into a $1.5 billion 364-Day Term Loan Credit Agreement (the “Term Loan”). The Term Loan ~~contains~~contained covenants that are consistent with those in the Credit Agreement discussed below and that are usual and customary restrictive covenants for facilities of its type, which include, with specified exceptions, limitations on the Company’s ability to create liens or other encumbrances, to enter into sale and leaseback transactions and to enter into consolidations, mergers or transfers of all or substantially all of its assets. In 2020, PPG repaid $1.1 billion of the Term Loan using cash on hand. In the first quarter 2021, PPG repaid the remaining $400 million of the Term Loan using cash on hand. The Term Loan terminated on April 13, 2021.

In August 2019, PPG amended and restated its five-year credit agreement (the “Credit Agreement”) with several banks and financial institutions. The Credit Agreement provides for a $2.2 billion unsecured revolving credit facility. The Company has the ability to increase the size of the Credit Agreement by up to an additional $750 million, subject to the receipt of lender commitments and other conditions precedent. The Credit Agreement will terminate on August 30, 2024. The Company has the right, subject to certain conditions set forth in the Credit Agreement, to designate certain subsidiaries of the Company as borrowers under the Credit Agreement. In connection with any such designation, the Company is required to guarantee the obligations of any such subsidiaries under the Credit Agreement. ~~In March 2020, PPG borrowed $800 million under the Credit Agreement and repaid that amount in full in April 2020.~~ There were no amounts outstanding under the credit agreement as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

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 ~~September 30, 2021,~~March 31, 2022, Total Indebtedness to Total Capitalization as defined under the Credit Agreement and Term Loan Credit Agreement was ~~49%~~51%.

The Credit Agreement also supports the Company’s commercial paper borrowings which are classified as long-term based on PPG’s intent and ability to refinance these borrowings on a long-term basis. Commercial paper borrowings of ~~$625 million~~$1.0 billion and ~~$250~~$440 million were outstanding as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

Letters of Credit and Surety Bonds

The Company had outstanding letters of credit and surety bonds of $160 million as of March 31, 2022.

8.7.Impairment and Other ~~Income~~Related Charges

Three Months Ended
September 30 Nine Months Ended
September 30
($ in millions) 2021 2020 2021 2020
Gain on sale of assets(a)
$34 $1 $38 $4
Royalty income 2 2 6 5
Share of net earnings of equity affiliates 4 2 9 8
Income from legal settlements — — 22 —
Other 16 19 71 36
Total Other income $56 $24 $146 $53
In the first quarter 2022, Russian military forces invaded Ukraine. This military action had significant and immediate adverse economic impacts on businesses operating in Russia and Ukraine. Based on deteriorating business conditions and regulatory restrictions, including the impact of economic sanctions imposed on Russia by the United States, the European Union and other governments, PPG immediately ceased sales to Russian state-owned entities, announced that the Company would cease all new investments in Russia and commenced actions to wind down most of the Company’s operations in Russia.

~~(a)~~InBased on this change in facts and circumstances, the ~~third quarter 2021, PPG recognized a $34 million gain on~~long-term cash flow forecast for the ~~sale~~Company’s operations in Russia was significantly reduced. This reduction in the long-term cash flow forecast indicated that the carrying amounts of ~~a production facility in connection~~long-lived assets and certain indefinite-lived intangible assets associated with the Company’s ~~manufacturing footprint consolidation plans~~operations in Russia may not be recoverable, and ~~associated restructuring programs.~~the carrying value of these assets was tested for impairment. Additionally, the Company evaluated trade receivables for estimated future credit losses, inventories for declines in net realizable value and other current assets for impairment in light of the deteriorating economic conditions in Russia and Ukraine. As a result, during the three months ended March 31, 2022, the Company recognized $290 million of Impairment and other related charges in the condensed consolidated statement of income, comprised of $201 million of long-lived asset impairment charges and $89 million of other related charges.

The $201 million of long-lived asset impairment charges is comprised of $124 million related to indefinite-lived intangible assets, $54 million related to Property, plant and equipment, net and $23 million related to definite-lived intangible assets. The $89 million of other related charges represent reserves established for Receivables, Inventories, and Other current assets impacted by the adverse economic consequences of the Russian invasion of Ukraine.

During both the three months ended March 31, 2022 and the twelve months ended December 31, 2021, net sales in Russia represented approximately 1% of PPG net sales.

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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 nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were as follows:


		Three Months Ended September 30		Nine Months Ended September 30			Three Months Ended March 31
(number of shares in millions)	(number of shares in millions)	2021	2020	2021	2020	(number of shares in millions)	2022	2021
Weighted average common shares outstanding	Weighted average common shares outstanding	237.9	236.8	237.7	236.6	Weighted average common shares outstanding	236.6	237.4
Effect of dilutive securities:	Effect of dilutive securities:					Effect of dilutive securities:
Stock options	Stock options	1.1	0.5	1.0	0.4	Stock options	0.9	0.9
Other stock compensation plans	Other stock compensation plans	0.8	0.6	0.8	0.7	Other stock compensation plans	0.7	0.7
Potentially dilutive common shares	Potentially dilutive common shares	1.9	1.1	1.8	1.1	Potentially dilutive common shares	1.6	1.6
Adjusted weighted average common shares outstanding	Adjusted weighted average common shares outstanding	239.8	237.9	239.5	237.7	Adjusted weighted average common shares outstanding	238.2	239.0

Dividends per common share	Dividends per common share	$0.59	$0.54	$1.67	$1.56	Dividends per common share	$0.59	$0.54

Excluded from the computation of earnings per diluted share due to their antidilutive effect were ~~1.5~~0.5 million and ~~2.0 million of~~0 outstanding stock options for the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2022 and 2021, respectively. ~~No shares have been excluded due to an antidilutive effect for the three and nine months ended September 30, 2021.~~

~~10.~~9.Income Taxes

Nine Months Ended
September 30
2021 2020
Effective tax rate on pretax income 24.1 % 22.0 %


	Three Months Ended March 31
	2022		2021
Effective tax rate on pretax income	70.5	%	22.8	%

~~In the second~~The first quarter ~~2021, PPG recorded a net~~effective tax ~~charge~~rate 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 for the nine months ended September 30, 2020~~70.5% reflects a tax benefit ~~$38~~of $27 million ~~of discrete items~~on the $290 million Impairment and other related charges associated with ~~PPG's U.S. and foreign jurisdictions.~~PPG’s operations in Russia.

Income tax expense for the ~~nine~~three months ~~of September 30,~~ended March 31, 2022 and 2021 ~~and 2020,~~ is based on an estimated annual effective rate, which requires management to make itits best estimate of annual pretax income or loss. During the year, PPG management regularly updates forecasted annual pretax results for the various countries in which PPG operates based on changes in factors such as prices, shipments, product mix, raw material inflation and manufacturing operations. To the extent that actual ~~2021~~2022 pretax results for U.S. and foreign income or loss vary from estimates, the actual Income tax expense recognized in ~~2021~~2022 could be different from the forecasted amount used to estimate the Income tax expense for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022.

~~11.~~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.

Net periodic pension and other postretirement benefit (income)/cost for the three months ended March 31, 2022 and 2021 was as follows:


	Pension		Other Postretirement Benefits
	Three Months Ended March 31		Three Months Ended March 31
($ in millions)	2022	2021	2022	2021
Service cost	$2	$3	$3	$3
Interest cost	19	16	4	3
Expected return on plan assets	(36)	(38)	—	—
Amortization of actuarial losses	8	10	4	6

Amortization of prior service credit	—	—	(3)	(14)
Net periodic benefit (income)/cost	($7)	($9)	$8	($2)

Net periodic other postretirement expense was higher for the three months ended March 31, 2022 compared to

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2021 due to a decrease in the benefit associated with a 2017 other postretirement benefit plan design change. The 2017 plan design change resulted in a significant reduction in the Company’s postretirement benefit obligation, the impact of which was amortized as a reduction of net periodic benefit cost through 2021.

PPG expects 2022 full year net periodic pension ~~and other postretirement benefit costs for the three and nine months ended September 30, 2021 and 2020 were as follows:~~

Pension
Three Months Ended
September 30 Nine Months Ended
September 30
($ in millions) 2021 2020 2021 2020
Service cost $3 $6 $8 $18
Interest cost 17 22 49 65
Expected return on plan assets (38) (36) (114) (108)
Amortization of actuarial losses 10 17 30 53
Curtailments — — — 1
Net periodic benefit cost ($8) $9 ($27) $29

Other Postretirement Benefits
Three Months Ended
September 30 Nine Months Ended
September 30
($ in millions) 2021 2020 2021 2020
Service cost $3 $2 $9 $7
Interest cost 3 5 10 15
Amortization of actuarial losses 5 4 15 12
Amortization of prior service credit (14) (14) (41) (44)
Net periodic benefit cost ($3) ($3) ($7) ($10)

~~PPG expects 2021 net periodic pension and other postretirement benefit cost to be~~ income of approximately ~~$45~~$25 million ~~with pension~~ and net periodic other postretirement ~~benefits representing income~~expense of approximately $35 million and $10 million, respectively. In 2020, PPG's U.S. and Canadian defined benefit plans were frozen for all participants. As of 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.$30 million.

Contributions to Defined Benefit Pension Plans


		Three Months Ended September 30		Nine Months Ended September 30			Three Months Ended March 31
($ in millions)	($ in millions)	2021	2020	2021	2020	($ in millions)	2022	2021

Non-U.S. defined benefit pension mandatory contributions	Non-U.S. defined benefit pension mandatory contributions	$1	$2	$3	$7	Non-U.S. defined benefit pension mandatory contributions	$1	$1

PPG expects to make contributions to its defined benefit pension plans in the range of $5$10 million to ~~$10~~$15 million during the remaining ~~three~~nine months of ~~2021.~~2022. PPG may make voluntary contributions to its defined benefit pension plans in ~~2021~~2022 and beyond.

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~~12.~~11.Accumulated Other Comprehensive Loss (AOCL)

($ 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 ($1,663) ($937) $1 ($2,599)
Current year deferrals to AOCI (a)
(402) (5) — (407)
Current year deferrals to AOCI, net of tax (b)
131 — — 131
Reclassifications from AOCI to net income — 4 — 4
Period change ($271) ($1) $— ($272)
September 30, 2021 ($1,934) ($938) $1 ($2,871)
January 1, 2020 ($1,627) ($724) $1 ($2,350)
Current year deferrals to AOCI (a)
(357) — — (357)
Current year deferrals to AOCI, net of tax (b)
(90) (7) — (97)
Reclassifications from AOCI to net income — 16 — 16
Period change ($447) $9 $— ($438)
September 30, 2020 ($2,074) ($715) $1 ($2,788)


($ in millions)	Foreign Currency Translation Adjustments (1)	Pension and Other Postretirement Benefit Adjustments, net of tax (2)	Unrealized Gain on Derivatives, net of tax	Accumulated Other Comprehensive Loss
January 1, 2021	($1,663)	($937)	$1	($2,599)
Current year deferrals to AOCL	(126)	(7)	—	(133)
Reclassifications from AOCL to net income	—	2	—	2
March 31, 2021	($1,789)	($942)	$1	($2,730)

January 1, 2022	($1,988)	($763)	$1	($2,750)
Current year deferrals to AOCL	30	(11)	—	19
Reclassifications from AOCL to net income	10	7	—	17
March 31, 2022	($1,948)	($767)	$1	($2,714)

~~(a)Except for income taxes of~~ ~~$1 million~~ as of September 30, 2021 and $7 million as of September 30, 2020 related to foreign currency impacts of certain unasserted earnings, unrealized foreign currency translation adjustments related to translation of foreign denominated balance sheets are not presented net of tax given that no deferred U.S. income taxes have been provided on undistributed earnings of non-U.S. subsidiaries because they are deemed to be reinvested for an indefinite period of time.

~~(b)~~(1)The tax cost ~~(benefit)~~ related to unrealized foreign currency translation adjustments on tax inter-branch transactions and net investment hedges as of ~~September 30,~~March 31, 2022 and 2021 was $11 million and ~~2020 was~~ ~~$40 million~~ ~~and $(27)~~$30 million, respectively.

~~(c)~~(2)The tax cost related to the adjustment for pension and other postretirement benefits as of ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ was ~~$1 million~~$2 million and $5$1 million, respectively. Reclassifications from ~~AOCI~~AOCL are included in the computation of net periodic benefit costs (See Note ~~11,~~10, "Pensions and Other Postretirement Benefits").

~~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 ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, 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 months ended March 31, 2022 and ~~nine month periods ended September 30, 2021 and 2020.~~2021.

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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 months ended March 31, 2022 and ~~nine month periods ended September 30,~~ 2021, ~~and 2020,~~ and there were no gains or losses deferred in Accumulated other comprehensive loss on the condensed consolidated balance sheet that were reclassified to

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Income before income taxes in the condensed consolidated statement of income in the ~~nine month periods~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 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 ~~$44~~an asset of $10 million and ~~$67~~$36 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, 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 ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

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 ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, PPG had U.S. dollar to euro cross currency swap contracts with total notional amounts of $775 million ~~and $875 million, respectively,~~ 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 ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the fair value of the U.S. dollar to euro cross currency swap contracts ~~was a~~were net ~~asset~~assets of ~~$38~~$55 million and ~~a net liability of $8~~$50 million, respectively.

As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, PPG had designated ~~€2.0~~€1.5 billion and €1.4 billion, respectively, 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 was $1.6 billion as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020 was $2.3 billion and $2.4 billion, respectively.~~2021.

Other Financial Instruments

PPG uses foreign currency forward contracts to manage certain net transaction exposures that either have not been elected, or 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 ~~$1.8~~$1.8 billion and ~~$1.4~~$1.9 billion at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the fair value of these contracts ~~was a~~were net ~~liability~~assets of $34 million and ~~a net asset of~~ ~~$31~~$24 million, an~~d $2 million,~~ respectively.

Gains/Losses Deferred in Accumulated Other Comprehensive Loss

As of ~~September 30,~~March 31, 2022 and December 31, 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 ~~$144 million.~~ ~~As of December 31, 2020, the Company had accumulated pretax unrealized translation losses of $22 million.~~ $252 million and $204 million, respectively.

The following table summarizes the location within the condensed consolidated financial statements and amount of gains related to derivative and debt financial instruments for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021. All ~~dollar~~ amounts are shown on a pretax basis.

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		September 30, 2021		September 30, 2020		Caption In Condensed Consolidated Statement of Income		March 31, 2022		March 31, 2021		Caption In Condensed Consolidated Statement of Income
($ in millions)	($ in millions)	Gain Deferred in OCI	Gain Recognized	Gain Deferred in OCI	Gain Recognized		($ in millions)	Gain Deferred in OCI	Gain Recognized	Gain Deferred in OCI	(Loss)/Gain Recognized
Economic	Economic						Economic
Foreign currency forward contracts	Foreign currency forward contracts	$—	$14	$—	$27	Other charges	Foreign currency forward contracts	$—	$12	$—	($3)	Other charges
Fair Value	Fair Value						Fair Value
Interest rate swaps	Interest rate swaps	—	11	—	8	Interest expense	Interest rate swaps	—	3	—	4	Interest expense

Total forward contracts and interest rate swaps	Total forward contracts and interest rate swaps	$—	$25	$—	$35		Total forward contracts and interest rate swaps	$—	$15	$—	$1
Net Investment	Net Investment						Net Investment

Cross currency swaps	Cross currency swaps	$41	$10	$14	$13	Interest expense	Cross currency swaps	$5	$3	$28	$4	Interest expense
Foreign denominated debt	Foreign denominated debt	125	—	101	—		Foreign denominated debt	43	—	97	—
Total Net Investment	Total Net Investment	$166	$10	$115	$13		Total Net Investment	$48	$3	$125	$4

Fair Value Measurements

The Company follows a fair value measurement hierarchy to measure its assets and liabilities. As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, 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 ~~14,~~13, "Employee Benefit Plans" under Item 8 in the ~~2020~~2021 Form 10-K for further details). The Company's financial assets and liabilities are measured using inputs from the following three levels:

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

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

Level 3 inputs are unobservable inputs employed for measuring the fair value of assets or liabilities. The Company ~~does~~did not have any recurring financial assets or liabilities that ~~are~~were recorded in its condensed consolidated balance sheets as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 that ~~are~~were classified as Level 3 inputs.

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


		September 30, 2021			December 31, 2020				March 31, 2022			December 31, 2021
($ 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	$6	$—	$—	$6	$—	$—	Marketable equity securities	$9	$—	$—	$6	$—	$—
Foreign currency forward contracts (a)	Foreign currency forward contracts (a)	—	2	—	—	8	—	Foreign currency forward contracts (a)	—	38	—	—	28	—

Cross currency swaps (b)								Cross currency swaps (b)	—	30	—	—	—	—
Interest rate swaps (c)								Interest rate swaps (c)	—	1	—	—	—	—
Investments:	Investments:							Investments:
Marketable equity securities	Marketable equity securities	$95	$—	$—	$97	$—	$—	Marketable equity securities	$84	$—	$—	$98	$—	$—
Other assets:	Other assets:							Other assets:
Cross currency swaps (b)	Cross currency swaps (b)	$—	$41	$—	$—	$13	$—	Cross currency swaps (b)	$—	$25	$—	$—	$50	$—
Interest rate swaps (c)	Interest rate swaps (c)	—	44	—	—	67	—	Interest rate swaps (c)	—	9	—	—	36	—
Liabilities:	Liabilities:							Liabilities:
Accounts payable and accrued liabilities:	Accounts payable and accrued liabilities:							Accounts payable and accrued liabilities:
Foreign currency forward contracts (a)	Foreign currency forward contracts (a)	$—	$33	$—	$—	$6	$—	Foreign currency forward contracts (a)	$—	$4	$—	$—	$4	$—
Cross currency swaps (b)		—	—	—	—	8	—

Other liabilities:
Cross currency swap (b)		$—	$3	$—	$—	$13	$—

(a)Derivatives not designated as hedging instruments

(b)Net investment hedges

(c)Fair value hedges

Long-Term Debt

($ in millions)

September 30, 2021 (a)

December 31, 2020 (b)

($ in millions)

March 31, 2022 (a)

December 31, 2021 (b)

Long-term debt - carrying value

$6,780

$5,334

Long-term debt - carrying value

$7,129

$6,565

Long-term debt - fair value

$7,018

$5,913

Long-term debt - fair value

$7,202

$6,958

(a)Excluding finance lease obligations of ~~$10~~ $9 million and short-term borrowings of $6$15 million as of ~~September 30, 2021.~~March 31, 2022.

(b)Excluding finance lease obligations of ~~$12~~$10 million and short-term borrowings of ~~$403~~$6 million as of December 31, ~~2020.~~2021.

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~~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~~There were 4.7 million shares available for future grants under the PPG Amended Omnibus Plan ~~were 5.1 million~~ as of ~~September 30, 2021.~~March 31, 2022.

Stock-based compensation expense and the associated income tax benefit recognized during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were as follows:


		Three Months Ended September 30		Nine Months Ended September 30			Three Months Ended March 31
($ in millions)	($ in millions)	2021	2020	2021	2020	($ in millions)	2022	2021
Stock-based compensation		$4	$14	$39	$29
Stock-based compensation expense						Stock-based compensation expense	$6	$17
Income tax benefit recognized	Income tax benefit recognized	$1	$3	$9	$7	Income tax benefit recognized	$1	$4

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Grants of stock-based compensation during the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were as follows:


		Nine Months Ended September 30					Three Months Ended March 31
		2021		2020			2022		2021
Grant Details	Grant Details	Shares	Fair Value	Shares	Fair Value	Grant Details	Shares	Fair Value	Shares	Fair Value
Stock options	Stock options	527,464	$29.27	663,485	$21.93	Stock options	487,277	$36.52	527,464	$29.27
Restricted stock units	Restricted stock units	201,068	$134.54	203,574	$109.99	Restricted stock units	189,411	$143.92	162,601	$129.64
Contingent shares (a)	Contingent shares (a)	55,540	$136.60	55,319	$119.52	Contingent shares (a)	57,134	$151.87	55,540	$136.60

(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 ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was calculated with the following weighted average assumptions:


Weighted average exercise price	$~~136.60~~151.87
Risk free interest rate	~~1.0~~2.0	%
Expected life of option in years	6.5
Expected dividend yield	1.6	%
Expected volatility	~~25.3~~25.7	%

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~~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,~~Performance against the ~~amount paid upon vesting~~earnings per share growth and the cash flow return on capital target is calculated annually, and the annual payout for each goal is weighted equally over the three-year period.

The Company also provides grants of ~~performance-based RSUs~~contingent shares to selected key executives that may ~~range from 0% to 180%~~be earned based on PPG total shareholder return (“TSR”) over the three-year period following the date 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~~the Company’s stock 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 Index for the three-year period following the date of grant. This comparison group represents the entire S&P 500 Index as it existed at the beginning of the ~~three-year~~ performance period, excluding any companies that ~~have been~~were removed from the index because they ceased to be publicly ~~traded during the performance period. For awards granted in 2021 and 2020, the~~traded. The payment of awards following the three-year award period ~~will be~~is 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~~Contingent share awards ~~granted in 2019,~~earn dividend equivalents for the ~~amount paid following the three-year~~ award period, ~~may range from 0%~~which are paid to ~~220%~~participants or credited to the participants’ deferred compensation plan accounts with the award payout at the end of the ~~initial grant.~~period based on the actual number of contingent shares that are earned. 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.~~both. 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.

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

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contract, patent, environmental, product liability, ~~asbestos exposure,~~ antitrust, employment ~~securities~~ and other matters arising out of the conduct of PPG’s current and past business activities. To the extent that these lawsuits and claims involve personal injury, 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.

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)~~including 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 relief under Chapter 11 of the Bankruptcy Code 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~~the Bankruptcy Court ~~subsequently entered a series of orders preliminarily enjoining~~enjoined the prosecution of asbestos litigation against ~~PPG until after~~ the ~~effective date of a confirmed PC plan of reorganization. During~~Company during the pendency of ~~this preliminary injunction staying asbestos litigation against PPG, PPG and certain of its historical liability insurers negotiated~~the bankruptcy proceeding.

Following a settlement with ~~representatives~~certain of ~~present and future asbestos claimants. That settlement~~the Company’s insurers that 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,for PC, 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,~~among others, the Company arising 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 other asbestos-related claims against ~~PPG~~the Company 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~~out 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.prior relationships with PC. The foregoing ~~PC related~~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~~the Company and certain of its ~~participating~~ insurers ~~for the benefit of current and future PC asbestos claimants~~ (the “Trust”)~~. The~~, and this Trust is the sole recourse for holders of PC Relationship Claims. ~~PPG and its affiliates have no further 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~~ the Company alleging:

•exposure to asbestos or asbestos-containing products ~~historically~~ manufactured, sold ~~and/~~or distributed by ~~PPG~~the Company or its subsidiaries ~~or for which they are alleged to be liable~~ that are not PC Relationship Claims (“Products 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~~the Company (“Premises Claims”).

In 2009, the Company established a $162 million reserve for Products Claims that it has monitored and reviewed on a periodic basis, and until 2021, the Company had not had sufficient current claims ~~are referred~~information or settlement history on which to ~~as "non-PC Relationship Claims".~~

~~Non-PC relationship~~base a better estimate of this liability in light of the Bankruptcy Court’s injunction staying most asbestos 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 courtswhich was 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.effect from April 2000 through May 2016.

Current open and active claims ~~post-Pittsburgh Corning bankruptcy~~

~~As of September 30, 2021, the~~The Company ~~was~~is aware of ~~approximately 700 open and active~~certain asbestos-related claims pending against the Company and certain of its ~~subsidiaries. These claims consist~~subsidiaries, consisting of ~~non-PC Relationship~~Products Claims, ~~against PPG~~Premises Claims and claims against a ~~PPG~~ subsidiary the Company acquired ~~on April 1, 2013.~~in 2013 (“Subsidiary Claims”). The Company is defending these ~~open and active~~ claims vigorously.

~~PPG has established reserves totaling approximately $190 million~~In 2019, as certain claims data became available and as a supplement to its periodic monitoring and review, the Company began performing an annual valuation analysis, based in part on discussions with counsel and reports from valuation consultants, of its claims history and the amount of the Company’s potential liability for asbestos-related ~~claims that would not be channeled~~claims. As a result of the Company’s 2019 review of its asbestos-related liabilities, a charge of $12 million was recorded in the consolidated statement of income to increase the reserve to reflect the Company’s estimates of potential liability for Premises Claims and Subsidiary Claims.

In 2020, based on the results of the Company’s annual valuation analysis, no adjustments to the ~~Trust which,~~Company’s estimate of its asbestos-related liabilities were required.

In the fourth quarter of 2021, as additional claims data became available following the expiration of the Bankruptcy Court’s injunction in May 2016, the Company adjusted its estimate of potential liability for Products Claims. The

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2021 valuation analysis with respect to Products Claims was based, in part, upon a review of claims data; annual filings by disease and year; pending, paid and dismissed claims; indemnity cash flows; and estimates of future claim, indemnity and acceptance rates. The Company also further adjusted its estimates of potential liability for Premises Claims and Subsidiary Claims in the fourth quarter of 2021.

As a result of the Company’s fourth quarter 2021 review of its asbestos-related liabilities, income of $133 million was recorded in the consolidated statement of income to reduce the reserve to reflect the Company’s current estimate of potential liability for asbestos-related bodily injury claims through December 31, 2057. As of December 31, 2021, the Company’s asbestos-related reserves totaled $54 million.

As of March 31, 2022, the Company's total asbestos-related reserves were $52 million. The Company believes that, based on presently available information, ~~we believe~~the total reserves of $52 million for asbestos-related claims will be sufficient to encompass all of ~~PPG’s~~the Company’s current and estimable potential future asbestos liabilities. These reserves, which are included within Other liabilities on the accompanying condensed consolidated balance sheets, involve significant management judgment and represent ~~PPG’s~~the Company’s current 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 theThe Company ~~was in effect from April 2000 through May 2016.~~

~~PPG~~ monitors and reviews 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) whether closed, dismissed or dormant claims are reinstituted, reinstated or revived; (iii) the amounts required to resolve both currently known and future unknown claims; ~~(iii)~~(iv) the amount of insurance, if any, available to cover such claims; ~~(iv)~~(v) the unpredictable aspects of the ~~litigation process,~~tort system, including a changing trial docket and the jurisdictions in which trials are scheduled; ~~(v)~~(vi) the outcome of any trials, including potential judgments or jury verdicts; ~~(vi)~~(vii) the lack of specific information in many cases concerning exposure for which ~~PPG~~the Company is allegedly responsible, and the claimants’ alleged diseases resulting from such exposure; and ~~(vii)~~(viii) 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~~the Company’s asbestos litigation cannot be predicted with certainty, ~~PPG~~the Company believes that any financial exposure resulting from its asbestos-related claims will not have a material adverse effect on ~~PPG’s~~the Company’s consolidated financial position, liquidity or results of operations.

Environmental Matters

It is PPG’s policy to accrue expenses for environmental contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Reserves for environmental contingencies are exclusive of claims against third parties and are generally not discounted. In management’s opinion, the Company operates in an environmentally sound manner and the outcome of the Company’s environmental contingencies will not have a material effect on PPG’s financial position or liquidity; however, any such outcome may be material to the results of operations of any particular period in which costs, if any, are recognized. Management anticipates that the resolution of the Company’s environmental contingencies will occur over an extended period of time. ~~See Note 15, "Commitments and Contingent Liabilities," under Item 8 of the 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~~adjust the reserves for these sites. ~~Remediation activities at our legacy sites are not related to the ongoing operations of PPG.~~ In ~~2021~~2022 and ~~2020,~~2021, certain charges have been recorded based on updated estimates to increase existing reserves for these sites. C~~ertain~~Certain other charges related to environmental remediation actions are also expensed as incurred.

As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, 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)	September 30, 2021	December 31, 2020	($ in millions)	March 31, 2022	December 31, 2021
New Jersey Chrome	New Jersey Chrome	$94	$102	New Jersey Chrome	$71	$89
Glass and chemical	Glass and chemical	111	106	Glass and chemical	81	83
Other	Other	96	92	Other	110	110
Total	Total	$301	$300	Total	$262	$282
Current portion	Current portion	$96	$99	Current portion	$85	$97

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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 nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were as follows:

Three Months Ended
September 30 Nine Months Ended
September 30
($ in millions) 2021 2020 2021 2020
Environmental remediation pretax charges $5 $6 $36 $21
Cash outlays for environmental remediation activities $17 $15 $34 $52

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.


	Three Months Ended March 31
($ in millions)	2022	2021
Environmental remediation pretax charges	$6	$19
Cash outlays for environmental remediation activities	$23	$9

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~~Over the years, sites have been added as well as removed from the JCO ~~process during 2014 and will be remediated separately at~~process. Of the original sites in the JCO, a ~~future date. A~~ total of 6 soil sites and 11 groundwater sites remain subject to the JCO process.

The most significant assumptions underlying the estimate of remediation costs for ~~all~~the 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 substantially completed pursuant to approved remedial action work plans. Remediation of chromium contaminated soils at certain other smaller sites is ~~ongoing and~~dependent on redevelopment activity by others, the timing of which is ~~expected to continue through 2022.~~unknown. 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.~~information. Based on these assessments, the reserve is adjusted accordingly. Principal factors affecting costs include refinements in the estimate of the mix of hazardous to non-hazardous soils to be excavated, an overall increase in soil volumes to be excavated, enhanced water management requirements, decreased daily soil excavation rates due to site conditions, initial estimates for remedial actions related to groundwater, and oversight and management costs.

Groundwater remediation at the former Garfield Avenue chromium manufacturing site and ~~five~~ adjacent sites is expected to occur over several years. A final groundwater remedial action work plan was submitted to NJDEP in the fourth quarter of 2021. The NJDEP approved the groundwater remediation action work plan in the first quarter of ~~2021.~~2022.

PPG’s financial reserve for remediation of all New Jersey Chrome sites was ~~$94~~$71 million at ~~September 30, 2021.~~March 31, 2022. The major cost components of this liability ~~continue to be~~are related to excavation ~~transportation and disposal~~ of impacted

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soil as well as ~~construction services.~~groundwater remediation. These components each account for approximately ~~14%, 6%~~50% and ~~34%~~15% 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.

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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 $174 million and guarantees of $4 million as of September 30, 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 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~~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 nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ service revenue constituted ~~approximately~~less than 5% of total revenue.

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Net sales by segment and region for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were as follows:


		Three Months Ended September 30		Nine Months Ended September 30			Three Months Ended March 31
($ in millions)	($ in millions)	2021	2020	2021	2020	($ in millions)	2022	2021
Performance Coatings	Performance Coatings					Performance Coatings
United States and Canada	United States and Canada	$1,177	$958	$3,374	$2,825	United States and Canada	$1,063	$998
Europe, Middle East and Africa ("EMEA")	Europe, Middle East and Africa ("EMEA")	965	789	2,746	2,140	Europe, Middle East and Africa ("EMEA")	949	811
Asia Pacific	Asia Pacific	325	274	913	728	Asia Pacific	274	276
Latin America	Latin America	291	230	793	635	Latin America	284	234
Total	Total	$2,758	$2,251	$7,826	$6,328	Total	$2,570	$2,319
Industrial Coatings	Industrial Coatings					Industrial Coatings
United States and Canada	United States and Canada	$579	$526	$1,714	$1,444	United States and Canada	$652	$571
EMEA	EMEA	453	382	1,380	1,018	EMEA	504	445
Asia Pacific	Asia Pacific	433	398	1,257	969	Asia Pacific	423	406
Latin America	Latin America	149	128	435	318	Latin America	159	140
Total	Total	$1,614	$1,434	$4,786	$3,749	Total	$1,738	$1,562
Total Net Sales	Total Net Sales					Total Net Sales
United States and Canada	United States and Canada	$1,756	$1,484	$5,088	$4,269	United States and Canada	$1,715	$1,569
EMEA	EMEA	1,418	1,171	4,126	3,158	EMEA	1,453	1,256
Asia Pacific	Asia Pacific	758	672	2,170	1,697	Asia Pacific	697	682
Latin America	Latin America	440	358	1,228	953	Latin America	443	374
Total PPG	Total PPG	$4,372	$3,685	$12,612	$10,077	Total PPG	$4,308	$3,881

Allowance for ~~Credit Losses~~Doubtful Accounts

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

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

The following table summarizes the activity for the allowance for ~~credit losses~~doubtful accounts for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Trade Receivables Allowance for Credit Losses			Trade Receivables Allowance for Doubtful Accounts
($ in millions)	($ in millions)	2021	2020	($ in millions)	2022	2021
January 1	January 1	$44	$22	January 1	$31	$44
Current-period provision for credit losses		4	41
Bad debt expense				Bad debt expense	43	—
Trade receivables written off as uncollectible, net of recoveries	Trade receivables written off as uncollectible, net of recoveries	(12)	(15)	Trade receivables written off as uncollectible, net of recoveries	(6)	(3)
Foreign currency impact		—	(1)
September 30		$36	$47

March 31				March 31	$68	$41

In the first quarter 2022, PPG recorded a bad debt reserve of $43 million associated with the adverse economic impacts of the Russian invasion of Ukraine. Refer to Note 7, "Impairment and Other Related Charges" for additional information.

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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 10 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, 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.

Reportable business segment net sales and segment income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were as follows:


		Three Months Ended September 30		Nine Months Ended September 30			Three Months Ended March 31
($ in millions)	($ in millions)	2021	2020	2021	2020	($ in millions)	2022	2021
Net sales:	Net sales:					Net sales:
Performance Coatings	Performance Coatings	$2,758	$2,251	$7,826	$6,328	Performance Coatings	$2,570	$2,319
Industrial Coatings	Industrial Coatings	1,614	1,434	4,786	3,749	Industrial Coatings	1,738	1,562
Total	Total	$4,372	$3,685	$12,612	$10,077	Total	$4,308	$3,881
Segment income:	Segment income:					Segment income:
Performance Coatings	Performance Coatings	$408	$426	$1,248	$1,060	Performance Coatings	$319	$386
Industrial Coatings	Industrial Coatings	140	253	575	468	Industrial Coatings	140	245
Total	Total	$548	$679	$1,823	$1,528	Total	$459	$631
Corporate	Corporate	(45)	(55)	(149)	(165)	Corporate	(52)	(52)
Interest expense, net of interest income	Interest expense, net of interest income	(23)	(30)	(72)	(89)	Interest expense, net of interest income	(21)	(24)
Acquisition-related costs, net (a)		(43)	—	(81)	—
Impairment and other related charges (a)						Impairment and other related charges (a)	(290)	—
Business restructuring-related costs, net (b)						Business restructuring-related costs, net (b)	(14)	(4)
Acquisition-related costs (c)						Acquisition-related costs (c)	(4)	(24)
Environmental remediation charges	Environmental remediation charges	—	—	(26)	(12)	Environmental remediation charges	—	(16)
Impairment charge (b)		(21)	—	(21)	—
Expenses incurred due to natural disasters (c)		—	(8)	(17)	(8)
Change in allowance for doubtful accounts related to COVID-19		—	—	14	(30)
Income from legal settlements		—	—	22	—
Business restructuring-related costs, net (d)		25	(14)	40	(200)
Debt extinguishment charge		—	—	—	(7)
Expenses incurred due to natural disasters (d)						Expenses incurred due to natural disasters (d)	—	(12)

Income before income taxes	Income before income taxes	$441	$572	$1,533	$1,017	Income before income taxes	$78	$499

(a)In the first quarter 2022, the Company recorded impairment and other related charges associated with the wind down of the Company’s operations in Russia.

(b)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.

(c)Acquisition-related costs include advisory, legal, accounting, valuation, 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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~~(b)An incremental impairment charge was recorded in the third quarter 2021 related to the previously planned sale of certain smaller entities in non-strategic regions.~~

~~(c)~~(d)In ~~2020, two hurricanes~~early 2021, a winter storm damaged a southern U.S. factory supporting the Company's specialty coatings and materials ~~business. In early 2021, a winter storm further damaged that factory~~business as well as other Company factories in the southern U.S. Incremental expenses incurred due to ~~these storms~~this storm included costs related to maintenance and repairs of damaged property, freight and utility premiums and other incremental expenses directly related to the impacted areas.

~~(d)Included in business restructuring-related costs, net are business restructuring charges, accelerated depreciation~~Table of certain assets and other related costs, offset by releases related to previously approved programs and a $34 million gain on the sale of certain assets in connection with the Company’s manufacturing footprint consolidation plans and associated restructuring programs.Contents

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 ~~2020~~2021 Form 10-K.

~~Executive Overview~~Highlights

~~Below are our key financial results~~Net sales were approximately $4.3 billion for the three months ended ~~September 30, 2021:~~

•~~Net sales were approximately $4.4 billion, up 18.6%~~March 31, 2022, an increase of 11.0% compared to the prior ~~year.~~

•~~Cost of~~year, driven by higher selling prices and acquisition-related sales. While underlying demand in most end-use markets remained strong in the first quarter, sales ~~exclusive of depreciation and amortization ("Cost of sales") was $2.7 billion, up 34.9% versus~~volumes were down compared to the prior year ~~primarily~~ due to ~~cost~~the impact of ~~sales attributable to acquired businesses and raw material inflation. As a percentage of sales, Cost of sales increased 7.5%.~~continued supply constraints.

•Selling, general and administrative ("SG&A") expense was $950 million, up 13.6% year-over-year primarily due to wage and other cost inflation and SG&A expense attributable to acquired businesses. As a percentage of sales, SG&A expense decreased 1.0%.

•Income before income taxes was ~~$441 million.~~

•~~The effective tax rate was 21.8%.~~

•~~Net income attributable to PPG was $344 million.~~

•~~Earnings per diluted share attributable to PPG was $1.43.~~

~~For~~$78 million for the ~~nine~~three months ended ~~September 30, 2021:~~

•~~Cash flows from operating activities from continuing operations was $1,106 million,~~March 31, 2022, a decrease of ~~$57~~$421 million ~~year-over-year.~~

•~~Capital expenditures, including business acquisitions (net~~compared to the prior year. This decrease was largely due to Impairment and other related charges of ~~cash acquired), was $2,357 million.~~

•~~The Company paid $396~~$290 million ~~in dividends.~~and lower sales volumes during the quarter.

Performance in the ~~third~~first quarter of ~~2021~~2022 compared to the ~~third~~first quarter of ~~2020~~2021

~~Performance Overview~~Results of Operations


	Three Months Ended March 31		Percent Change
($ in millions, except percentages)	2022	2021	2022 vs. 2021
Net sales	$4,308	$3,881	11.0	%
Cost of sales, exclusive of depreciation and amortization	2,698	2,232	20.9	%
Selling, general and administrative	974	891	9.3	%
Depreciation	102	90	13.3	%
Amortization	43	39	10.3	%
Research and development, net	115	102	12.7	%
Interest expense	30	30	—	%
Interest income	(9)	(6)	50.0	%
Impairment and other related charges	290	—	100.0	%
Other charges	13	17	(23.5)	%
Other income	(26)	(13)	100.0	%

Net Sales by Region


		Three Months Ended September 30		Percent Change			Three Months Ended March 31		Percent Change
($ in millions, except percentages)	($ in millions, except percentages)	2021	2020	2021 vs. 2020		($ in millions, except percentages)	2022	2021	2022 vs. 2021
United States and Canada	United States and Canada	$1,756	$1,484	18.3	%	United States and Canada	$1,715	$1,569	9.3	%
Europe, Middle East and Africa ("EMEA")	Europe, Middle East and Africa ("EMEA")	1,418	1,171	21.1	%	Europe, Middle East and Africa ("EMEA")	1,453	1,256	15.7	%
Asia Pacific	Asia Pacific	758	672	12.8	%	Asia Pacific	697	682	2.2	%
Latin America	Latin America	440	358	22.9	%	Latin America	443	374	18.4	%
Total	Total	$4,372	$3,685	18.6	%	Total	$4,308	$3,881	11.0	%

Net sales increased ~~$687~~$427 million due to the following:

● ~~Acquisition-related sales (+13%)~~

● Higher selling prices (+6%10%)

~~Table of Contents~~

● ~~Favorable foreign currency translation~~Acquisition-related sales (+2%7%)

Partially offset by:

● Lower sales volumes ~~(-2%~~(-3%)

● Unfavorable foreign currency translation (-3%)

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

~~Cost~~

Table of ~~Sales, exclusive of depreciation and amortization~~Contents

Three Months Ended
September 30 Percent Change
($ in millions, except percentages) 2021 2020 2021 vs. 2020
Cost of sales, exclusive of depreciation and amortization $2,733 $2,026 34.9 %
Cost of sales as a percentage of net sales 62.5 % 55.0 % 7.5 %

Cost of sales, exclusive of depreciation and amortization, increased ~~$707~~$466 million primarily due to ~~the following:~~

~~● Raw~~raw material cost inflation

~~● Cost~~ and cost of sales attributable to acquired businesses,

~~● Unfavorable~~ partially offset by favorable foreign currency ~~translation~~translation.

Selling, general and administrative ~~expenses~~

Three Months Ended
September 30 Percent Change
($ in millions, except percentages) 2021 2020 2021 vs. 2020
Selling, general and administrative expenses (SG&A) $950 $836 13.6 %
Selling, general and administrative expenses as a percentage of net sales 21.7 % 22.7 % (1.0) %

("SG&A&A") expense increased ~~$114~~$83 million primarily due to ~~the following:~~

~~● Selling, general and administrative~~ expenses from acquired businesses

~~● Wage~~ and wage and other cost inflation,

~~● Unfavorable~~ partially offset by favorable foreign currency translation and restructuring cost savings.

~~Partially offset by:~~

~~● Restructuring cost savings~~

~~Other costs~~Impairment and other ~~income~~

Three Months Ended
September 30 Percent Change
($ in millions, except percentages) 2021 2020 2021 vs. 2020
Interest expense, net of Interest income $23 $30 (23.3) %
Impairment charge 21 — 100.0 %
Other charges — $21 (100.0) %
Other income ($56) ($24) 133.3 %

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

~~Interest expense, net of Interest income was lower in~~$290 million were recorded during the three months ended ~~September 30, 2021 compared to 2020 due to more favorable interest rates on outstanding debt.~~

~~Impairment charge~~

InMarch 31, 2022 associated with the ~~third quarter 2021, an incremental impairment charge was recorded for~~wind down of the ~~write-down of certain assets related to the planned sale of certain entities~~Company's operations in ~~smaller, non-strategic countries.~~Russia. Refer to Note ~~3, "Acquisitions~~7, "Impairment and ~~Divestitures" to the accompanying condensed consolidated financial statements~~Other Related Charges" in Part I, Item 1 of this Form 10-Q for ~~further details.~~

~~Table of Contents~~

~~Other charges~~

~~Other charges were lower in the three months ended September 30, 2021 than in the prior year primarily due to lower non-service components of net periodic pension cost.~~

~~Other income~~additional information.

Other income was higher in the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~the prior year~~2021 primarily due to ~~a $34 million gain on the sale of a production facility in connection with the Company’s manufacturing footprint consolidation plans and associated restructuring programs.~~higher earnings from equity affiliates.

Effective tax rate and earnings per diluted share


		Three Months Ended September 30				Percent Change			Three Months Ended March 31				Percent Change
($ in millions, except percentages and amounts per share)	($ in millions, except percentages and amounts per share)	2021		2020		2021 vs. 2020		($ in millions, except percentages and amounts per share)	2022		2021		2022 vs. 2021
Income tax expense	Income tax expense	$96		$124		(22.6)	%	Income tax expense	$55		$114		(51.8)	%
Effective tax rate	Effective tax rate	21.8	%	21.7	%	0.1	%	Effective tax rate	70.5	%	22.8	%	47.7	%
Adjusted effective tax rate, continuing operations*	Adjusted effective tax rate, continuing operations*	22.1	%	22.2	%	(0.1)	%	Adjusted effective tax rate, continuing operations*	22.6	%	23.1	%	(0.5)	%

Earnings per diluted share, continuing operations	Earnings per diluted share, continuing operations	$1.43		$1.86		(23.1)	%	Earnings per diluted share, continuing operations	$0.08		$1.58		(94.9)	%
Adjusted earnings per diluted share*	Adjusted earnings per diluted share*	$1.69		$2.03		(16.7)	%	Adjusted earnings per diluted share*	$1.37		$1.88		(27.1)	%
*See Regulation G Reconciliation below	*See Regulation G Reconciliation below							*See Regulation G Reconciliation below

The effective tax rate for the three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ reflects the impact of certain discrete tax items for the quarter. The Company expects that its ~~fourth~~second quarter ~~2021~~2022 effective tax rate will be ~~about 20%~~between 23% and 24%.

Adjusted earnings per diluted share for the three months ended ~~September 30, 2021~~March 31, 2022 decreased year-over-year primarily due to ~~lower sales volumes stemming from worsening commodity raw material availability and semiconductor chip shortages reducing automotive original equipment manufacturer ("OEM") production, as well as~~ commodity supply disruptions, which caused raw material cost inflation, as well as lower sales volumes stemming from commodity raw material availability and semiconductor chip shortages, that was not fully offset by realized price increases.

Regulation G Reconciliations - Results from Operations

PPG believes ~~investors'~~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, ~~PPG's~~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, 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"~~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, the adjusted effective tax rate and segment income may not be comparable to similarly titled measures as reported by other companies.

~~Table of Contents~~

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 September 30, 2021
($ in millions, except percentages and per share amounts) Income Before Income Taxes Tax Expense Effective Tax Rate Net income (attributable to PPG)
Earnings per diluted share(a)
As reported, continuing operations $441 $96 21.8 % $344 $1.43
Adjusted for:
Acquisition-related amortization expense 46 11 24.6 % 35 0.15
Acquisition-related costs(b)
43 10 24.9 % 33 0.14
Impairment charge(c)
21 6 29.2 % 12 0.05
Business restructuring-related costs, net (d)
(25) (7) 29.9 % (18) (0.08)
Adjusted, continuing operations, excluding certain items $526 $116 22.1 % $406 $1.69

Three Months Ended September 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 $572 $124 21.7 % $442 $1.86
Adjusted for:
Acquisition-related amortization expense 32 9 26.1 % 23 0.10
Business restructuring-related costs, net (d)
14 4 26.2 % 10 0.04
Expenses incurred due to a natural disaster (e)
8 2 24.3 % 6 0.03
Adjusted, continuing operations, excluding certain items $626 $139 22.2 % $481 $2.03

~~(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 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. Acquisition-related costs also include advisory, legal, accounting, valuation, 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.

~~(c)~~An incremental impairment charge was recorded in the third quarter 2021 related to the previously planned sale of certain smaller entities in non-strategic regions. Net loss of $12 million is attributable to PPG and net loss of $3 million is attributable to noncontrolling interests.

~~(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 and a $34 million gain on the sale of certain assets in connection with the Company’s manufacturing footprint consolidation plans and associated restructuring programs. This gain is included in Other income in the condensed consolidated statement of income.

~~(e)In the third quarter 2020, Hurricane Laura caused damages to a southern U.S. factory that supports the Company's specialty coatings and materials business.~~

~~Table of Contents~~

~~Performance of Reportable Business Segments~~

~~Performance Coatings~~

Three Months Ended
September 30 $ Change % Change
($ in millions, except percentages) 2021 2020 2021 vs. 2020 2021 vs. 2020
Net sales $2,758 $2,251 $507 22.5 %
Segment income $408 $426 ($18) (4.2) %
Amortization expense $33 $22 $11 50.0 %
Segment income, excluding amortization expense $441 $448 ($7) (1.6) %

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

~~● Acquisition-related sales (17%)~~

~~● Higher selling prices (5%)~~

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

~~Partially offset by:~~

~~● Lower sales volumes (-1%)~~

~~In the third quarter 2021, the acquisitions of Tikkurila, Ennis-Flint and VersaFlex increased net sales in the Performance Coatings segment by nearly $375 million versus prior year.~~

Architectural coatings - Americas and Asia Pacific net sales, excluding the impact of currency and acquisitions ("organic sales") decreased by a low-single-digit percentage. Sales were unfavorably impacted by raw material shortages and softening do-it-yourself ("DIY") paint demand. In Mexico, PPG Comex architectural coatings business organic sales increased by a low-teen percentage compared to the prior year as concessionaire network demand continued to be strong throughout the quarter and further selling price increases were implemented.

Architectural coatings – EMEA organic sales decreased by a mid-single-digit percentage. Sales were unfavorably impacted by raw material shortages and softening DIY paint demand. Demand in the trade (do-it-for-me) channel continued to recover in most countries.

Automotive refinish coatings organic sales increased by a high-single digit-percentage, primarily due to continued demand improvement in the U.S. and Latin America, but remain below pre-pandemic levels. In Europe, demand remained subdued as congestion during peak driving hours remained lower than pre-pandemic levels. In the U.S., body shop activity improved during the third quarter, due to higher miles driven and increased collision claims.

Aerospace coatings sales volumes increased by about 20% compared to the prior year, as commercial aftermarket demand improved during the quarter, but still remains below pre-pandemic levels. Net sales benefited from continued strong military demand.

Sales volumes in the protective and marine coatings business were higher by a low-teen percentage primarily due to strong demand in the Asia Pacific region and improving demand in the oil and gas industry in the U.S.

Segment income decreased $18 million year-over-year primarily due to raw material cost inflation and lower sales volumes, partially offset by higher selling prices, acquisition-related earnings and savings from previously approved restructuring actions.

~~Looking Ahead~~

Looking ahead for the Performance Coatings segment, raw material cost inflation is expected to be slightly higher in the fourth quarter compared to the third quarter. Coatings raw material supply disruptions, which are mostly impacting the U.S. architectural coatings and traffic solutions businesses, are anticipated to continue through the fourth quarter at comparable levels. Further selling price increases have been secured or will be initiated during the quarter. Fourth quarter sales are expected to follow historical seasonality patterns experienced before the pandemic. Tikkurila and Ennis-Flint have more of a seasonal impact than PPG’s legacy coatings businesses. The company will continue to execute against various cost-savings initiatives. Aggregate net sales volumes are anticipated to be down a low-single-digit percentage compared to the fourth quarter 2020.

~~Table of Contents~~

~~Industrial Coatings~~

Three Months Ended
September 30 $ Change % Change
($ in millions, except percentages) 2021 2020 2021 vs. 2020 2021 vs. 2020
Net sales $1,614 $1,434 $180 12.6 %
Segment income $140 $253 ($113) (44.7) %
Amortization expense $13 $10 $3 30.0 %
Segment income, excluding amortization expense $153 $263 ($110) (41.8) %

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

~~● Acquisition-related sales (8%)~~

~~● Higher selling prices (7%)~~

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

~~Partially offset by:~~

~~● Lower sales volumes (-4%)~~

Automotive OEM coatings sales volumes decreased by a high-teen-percentage year-over-year, but outpaced global industry production rates. During the quarter, production disruptions worsened at many automotive OEM customers due to semiconductor chip shortages. In the U.S., automotive OEM dealer inventories remained at historically low levels as consumer demand remained very robust while production levels were constrained.

For the industrial coatings business, organic sales increased by a high-single-digit percentage year-over-year as global industrial production continued to improve in most regions. The growth was led by the EMEA and Latin America regions with the larger contributions coming from the appliance and heavy-duty equipment sub-segments.

Packaging coatings organic sales increased by about 20% year-over-year due to sales volume growth in most regions, with strong growth across the canned beverage segment partially offset by softening demand for the canned food segment compared to elevated levels in the prior year.

Segment income decreased $113 million year-over-year due to raw material cost inflation and lower automotive OEM coatings sales volumes, partially offset by higher selling prices and savings from previously approved restructuring actions.

~~Looking ahead~~

Looking ahead for the segment in aggregate, sales volumes are expected to be down a mid-teen-percentage compared to the prior-year fourth quarter, including ongoing impacts from customer supply disruptions and coatings raw material shortages. These factors are also expected to further elevate coatings raw material cost inflation in the fourth quarter sequentially compared to the third quarter. The company continues to prioritize working with customers to secure further selling price increases in all businesses.

~~Performance in the first nine months of 2021 compared to the first nine months of 2020~~

~~Performance Overview~~

~~Net Sales by Region~~

Nine Months Ended
September 30 Percent Change
($ in millions, except percentages) 2021 2020 2021 vs. 2020
United States and Canada $5,088 $4,269 19.2 %
EMEA 4,126 3,158 30.7 %
Asia Pacific 2,170 1,697 27.9 %
Latin America 1,228 953 28.9 %
Total $12,612 $10,077 25.2 %

~~Net sales increased $2,535 million due to the following:~~

~~● Acquisition-related sales (+9%)~~

~~● Higher sales volumes (+9%)~~

~~● Higher selling prices (+4%)~~

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

~~Table of Contents~~

~~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~~

Nine Months Ended
September 30 Percent Change
($ in millions, except percentages) 2021 2020 2021 vs. 2020
Cost of sales, exclusive of depreciation and amortization $7,594 $5,637 34.7 %
Cost of sales as a percentage of net sales 60.2 % 55.9 % 4.3 %

~~Cost of sales, exclusive of depreciation and amortization, increased $1,957 million primarily due to the following:~~

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

~~● Higher sales volumes~~

~~● Raw material inflation~~

~~● Foreign currency translation~~

~~Selling, general and administrative expenses~~

Nine Months Ended
September 30 Percent Change
($ in millions, except percentages) 2021 2020 2021 vs. 2020
Selling, general and administrative expenses (SG&A) $2,796 $2,507 11.5 %
Selling, general and administrative expenses as a percentage of net sales 22.2 % 24.9 % (2.7) %

~~SG&A increased $289 million primarily due to the following:~~

~~● SG&A attributable to acquired businesses~~

~~● Unfavorable foreign currency translation~~

~~Partially offset by:~~

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

~~Other costs and income~~

Nine Months Ended
September 30 Percent Change
($ in millions, except percentages) 2021 2020 2021 vs. 2020
Interest expense, net of Interest income $72 $89 (19.1) %
Impairment charge $21 $— 100.0 %
Other charges $28 $45 (37.8) %
Other income ($146) ($53) 175.5 %

~~Interest expense, net of Interest income~~

Interest expense, net of Interest income was lower in the nine months ended September 30, 2021 compared to prior year due to more favorable interest rates on outstanding debt and a premium paid in the prior year for the early redemption of debt.

~~Impairment charge~~

In the third quarter 2021, an incremental impairment charge was recorded for the write-down of certain assets related to the planned sale of certain entities in smaller, non-strategic countries. Refer to Note 3, "Acquisitions and Divestitures" to the accompanying condensed consolidated financial statements for further details.

~~Other charges~~

Other charges were lower in the nine months ended September 30, 2021 compared to the prior year primarily due to lower non-service components of net periodic pension cost. This reduction in costs was partially offset by higher environmental remediation charges in 2021.

~~Table of Contents~~

~~Other income~~

Other income was higher in the nine months ended September 30, 2021 compared to the prior year due to a $34 million gain on the sale of a production facility in the third quarter 2021 in connection with the Company’s manufacturing footprint consolidation plans and associated restructuring programs and favorable legal settlements in the second quarter 2021.

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

Nine Months Ended
September 30 Percent Change
($ in millions, except percentages and per share amounts) 2021 2020 2021 vs. 2020
Income tax expense $370 $224 65.2 %
Effective tax rate 24.1 % 22.0 % 2.1 %
Adjusted effective tax rate, continuing operations* 22.8 % 22.9 % (0.1) %
Earnings per diluted share, continuing operations $4.81 $3.30 45.8 %
Adjusted earnings per diluted share* $5.51 $4.43 24.4 %
*See Regulation G Reconciliation below

~~The effective tax rate for the nine months ended September 30, 2021 reflects the impact of certain discrete tax items.~~

Adjusted earnings per diluted share for the nine months ended September 30, 2021 increased year-over-year as sales volumes in 2020 were more significantly impacted by the global pandemic. The impact of the higher sales volumes was partially offset by the effect of commodity supply disruptions, which caused raw material inflation in excess of our realized price increases.

~~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.

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:~~below.

3424

Table of Contents

Nine Months Ended September 30, 2021
($ 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 $1,533 $370 24.1 % $1,153 $4.81
Adjusted for:
Acquisition-related amortization expense 126 31 24.6 % 95 0.40
Acquisition-related costs, net (b)
81 16 19.8 % 65 0.27
Net tax charge related to UK statutory rate change — (22) N/A 22 0.09
Environmental remediation charges 26 7 24.3 % 19 0.08
Expenses incurred due to natural disasters(c)
17 4 24.3 % 13 0.06
Impairment charge(d)
21 6 29.2 % 12 0.05
Decrease in allowance for doubtful accounts related to COVID-19 (14) (3) 24.7 % (11) (0.05)
Income from legal settlements (22) (5) 24.3 % (17) (0.07)
Business restructuring-related costs, net (e)
(40) (10) 25.0 % (30) (0.13)
Adjusted, continuing operations, excluding certain items $1,728 $394 22.8 % $1,321 $5.51


	Three Months Ended March 31, 2022
($ in millions, except percentages and per share amounts)	Income Before Income Taxes	Income Tax Expense	Effective Tax Rate		Net Income (attributable to PPG)	Earnings Per Diluted Share(a)
As reported, continuing operations	$78	$55	70.5	%	$18	$0.08
Adjusted for:
Impairment and other related charges(b)	290	27	9.3	%	263	1.10
Acquisition-related amortization expense	43	10	24.8	%	33	0.14
Business restructuring-related costs, net (c)	14	4	25.8	%	10	0.04
Acquisition-related costs(d)	4	1	24.0	%	3	0.01
Adjusted, continuing operations, excluding certain items	$429	$97	22.6	%	$327	$1.37


		Nine Months Ended September 30, 2020							Three Months Ended March 31, 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	Income Tax Expense	Effective Tax Rate		Net Income (attributable to PPG)	Earnings Per Diluted Share(a)
As reported, continuing operations	As reported, continuing operations	$1,017	$224	22.0	%	$784	$3.30	As reported, continuing operations	$499	$114	22.8	%	$378	$1.58
Adjusted for:	Adjusted for:							Adjusted for:
Business restructuring-related costs, net (e)		200	52	26.0	%	148	0.62
Acquisition-related amortization expense	Acquisition-related amortization expense	99	25	25.3	%	74	0.32	Acquisition-related amortization expense	39	10	25.2	%	29	0.12
Increase in allowance for doubtful accounts related to COVID-19		30	7	23.2	%	23	0.10
Acquisition-related costs(d)								Acquisition-related costs(d)	24	5	23.5	%	19	0.08
Environmental remediation charges	Environmental remediation charges	12	3	24.3	%	9	0.04	Environmental remediation charges	16	4	24.3	%	12	0.05
Expenses incurred due to natural disasters(c)		8	2	24.3	%	6	0.03
Debt extinguishment charge		7	2	24.3	%	5	0.02
Expenses incurred due to a natural disaster (e)								Expenses incurred due to a natural disaster (e)	12	3	24.3	%	9	0.04
Business restructuring-related costs, net (c)								Business restructuring-related costs, net (c)	4	1	25.0	%	3	0.01
Adjusted, continuing operations, excluding certain items	Adjusted, continuing operations, excluding certain items	$1,373	$315	22.9	%	$1,049	$4.43	Adjusted, continuing operations, excluding certain items	$594	$137	23.1	%	$450	$1.88

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

(b)In the first quarter 2022, the Company recorded impairment and other related charges due to the wind down of the company’s operations in Russia.

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

(d)Acquisition-related costs 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. Acquisition-related costs also include advisory, legal, accounting, valuation, 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.

~~(c)~~(e)In ~~2020, two hurricanes~~early 2021, a winter storm damaged a southern U.S. factory supporting the Company's specialty coatings and materials ~~business. In early 2021, a winter storm further damaged that factory~~business as well as other Company factories in the southern U.S. Incremental expenses incurred due to ~~these storms~~this storm included costs related to maintenance and repairs of damaged property, freight and utility premiums and other incremental expenses directly related to the impacted areas.

~~(d)~~An incremental impairment charge was recorded in the third quarter 2021 related to the previously planned sale of certain smaller entities in non-strategic regions. Net loss of $12 million is attributable to PPG and net loss of $3 million is attributable to noncontrolling interests.

~~(e)~~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 and a $34 million gain on the sale of certain assets in the third quarter 2021 in connection with the Company’s manufacturing footprint consolidation plans and associated restructuring programs. This gain is included in Other income in the condensed consolidated statement of income.

~~Table of Contents~~

Performance of Reportable Business Segments

Performance Coatings


		Nine Months Ended September 30		$ Change	% Change			Three Months Ended March 31		$ Change	% Change
($ in millions, except percentages)	($ in millions, except percentages)	2021	2020	2021 vs. 2020	2021 vs. 2020		($ in millions, except percentages)	2022	2021	2022 vs. 2021	2022 vs. 2021
Net sales	Net sales	$7,826	$6,328	$1,498	23.7	%	Net sales	$2,570	$2,319	$251	10.8	%
Segment income	Segment income	$1,248	$1,060	$188	17.7	%	Segment income	$319	$386	($67)	(17.4)	%
Amortization expense	Amortization expense	$92	$69	$23	33.3	%	Amortization expense	$32	$29	$3	10.3	%
Segment income, excluding amortization expense	Segment income, excluding amortization expense	$1,340	$1,129	$211	18.7	%	Segment income, excluding amortization expense	$351	$415	($64)	(15.4)	%

Performance Coatings net sales increased due to the following:

● Higher selling prices (+8%)

● Acquisition-related sales (+~~12%~~7%)

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Partially offset by:

● ~~Favorable~~Unfavorable foreign currency translation ~~(+4%~~(-2%)

● ~~Higher~~Lower sales volumes ~~(+4%)~~

~~● Higher selling prices (+4%~~(-2%)

In the first ~~nine months of 2021,~~quarter 2022, the acquisitions of Tikkurila ~~Ennis-Flint~~ and VersaFlex increased net sales in the Performance Coatings segment by ~~approximately $760~~about $160 million versus prior year.

Architectural coatings - Americas and Asia Pacific net sales, ~~increased a mid-single-digit percentage during~~excluding the ~~first nine months~~impact of ~~the year with differences by channel~~currency and region. Despite a strong first quarter, the second and third quarters were negatively impacted by raw material shortages. Favorable foreign currency benefited net sales due to the strengthening of the Mexican peso and certain currencies in the Asia Pacific region. In Mexico, PPG Comex architectural coatings business acquisitions ("organic ~~sales~~sales") increased by a ~~low-teen percentage~~low-single-digit percentage. Sales in the U.S. and Canada were unfavorably impacted by ongoing raw material availability and softening do-it-yourself ("DIY") paint demand. In Mexico, PPG-Comex architectural coatings organic sales increased compared to the prior year as ~~the~~ concessionaire network ~~sell-out of PPG products~~demand continued to be ~~strong.~~strong throughout the quarter and further selling price increases were implemented.

Architectural coatings – EMEA ~~net~~organic sales were flat year-over-year as selling price increases were offset by lower sales volumes due to softening DIY paint demand and some modest demand weakness due to geopolitical uncertainty in Europe.

Automotive refinish coatings organic sales increased ~~nearly 30% versus prior year driven~~ by strong volumes in the first half of the year and favorable foreign currency translation due to the strengthening of the euro. Sales volumes in the third quarter were negatively impacted by raw material shortages. Acquisition-related salesa high-single-digit-percentage, reflecting improved body shop activity stemming from ~~Tikkurila also benefited the business.~~

~~Net sales for automotive refinish coatings increased nearly 30%, with significant growth in each region versus prior year driven by an increase in global~~higher miles driven and ~~traffic density in most of the world versus 2020.~~increased collision claims. In Europe, demand improved year-over-year.

Aerospace coatings ~~net~~ sales ~~decreased~~volumes increased by a ~~low-single-digit percentage during~~low-teen-percentage compared to the ~~first nine months of the~~prior year, ~~primarily due to a decline in sales of~~as commercial ~~OEM and general aviation products.~~aftermarket demand strengthened year-over-year, but still remains below pre-pandemic levels. Net sales benefited from ~~consistent demand for the company’s~~continued strong military ~~applications.~~demand.

~~Net sales in the protective~~Protective and marine coatings ~~business increased over 30% versus prior year~~organic sales were higher by a mid-teen-percentage primarily due to strong ~~demand~~selling price increases. Demand in the ~~Asia Pacific region~~oil and ~~acquisition-related~~gas industry improved in the U.S.

Traffic solutions organic sales ~~from VersaFlex.~~increased by more than 20% year-over-year, including the benefit of higher selling prices.

Segment income ~~increased $188~~decreased $67 million year-over-year primarily due to raw material cost inflation and lower sales volumes, partially offset by higher selling prices, ~~higher sales volumes,~~ acquisition-related earnings and savings from previously approved restructuring ~~actions, partially offset~~actions.

Looking Ahead

Looking ahead for the Performance Coatings segment, although disruptions in the supply chain and manufacturing environment are expected to persist, conditions are anticipated to continue to gradually improve as the quarter progresses. The supply of several key inputs remains tight, which will continue to constrain sales. Further selling price increases have been secured or are being initiated during the quarter for all businesses. The Company will continue to execute against various cost-savings initiatives, including acquisition synergy targets. Aggregate sales volumes are expected to be down by ~~raw material~~a mid-single-digit percentage compared to the second quarter 2021, including unfavorable impacts in Europe from the war in Ukraine and ~~logistics cost inflation.~~in China due to COVID-19 production curtailments. Second quarter acquisition-related sales are expected to be about $140 million, principally from Tikkurila. Historically, Tikkurila sales improve sequentially in the second quarter due to a weather-related stronger painting season.

Industrial Coatings


		Nine Months Ended September 30		$ Change	% Change			Three Months Ended March 31		$ Change	% Change
($ in millions, except percentages)	($ in millions, except percentages)	2021	2020	2021 vs. 2020	2021 vs. 2020		($ in millions, except percentages)	2022	2021	2022 vs. 2021	2022 vs. 2021
Net sales	Net sales	$4,786	$3,749	$1,037	27.7	%	Net sales	$1,738	$1,562	$176	11.3	%
Segment income	Segment income	$575	$468	$107	22.9	%	Segment income	$140	$245	($105)	(42.9)	%
Amortization expense	Amortization expense	$34	$30	$4	13.3	%	Amortization expense	$11	$10	$1	10.0	%
Segment income, excluding amortization expense	Segment income, excluding amortization expense	$609	$498	$111	22.3	%	Segment income, excluding amortization expense	$151	$255	($104)	(40.8)	%

Industrial Coatings segment net sales increased due to the following:

● Higher selling prices (+12%)

● Acquisition-related sales ~~volumes~~ (+~~17%~~7%)

Partially offset by:

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● ~~Acquisition-related~~Lower sales ~~(+4%~~volumes (-5%)

● ~~Higher selling prices (+4%)~~

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

Automotive OEM coatings ~~net~~organic sales increased by ~~about 25%~~a low-single-digit percentage year-over-year ~~driven~~led by ~~strong growth in all regions. Sales~~higher selling prices, partially offset by lower sales volumes ~~were negatively impacted by~~due to the ongoing shortage of semiconductor ~~chip shortages that constrained production levels in the second~~chips and ~~third quarters. Sales volumes in the nine months ended September 30, 2020 were negatively impacted by the significant curtailment in global~~lower automotive industry production ~~rates beginning in the second quarter. Net sales also benefited from acquisition-related sales from Wörwag and Cetelon and favorable foreign currency translation~~due to geopolitical uncertainty in Europe and ~~Asia. In the U.S., automotive retail dealer inventories decreased to historically low levels as consumer demand remained robust while production levels were constrained.~~increasing COVID-19 restrictions in China.

For the industrial coatings business, ~~net~~organic sales increased by ~~nearly 30%~~a high-single-digit percentage year-over-year as ~~global industrial production continued to improve from the global pandemic~~strong selling price increases were partially offset by lower economic activity in ~~the prior year, most notably in electronic materials, heavy duty equipment, appliance~~China and ~~cookware segments.~~Europe.

Packaging coatings ~~net~~organic sales increased ~~nearly 20%~~by more than 10% year-over-year due to ~~sales volume growth~~selling price increases in all regions, with strong growth across the canned beverage ~~segment. Net sales also benefited from higher selling prices.~~and personal care segments.

Segment income ~~increased $107~~decreased $105 million year-over-year ~~driven by the earnings impact of higher~~due to raw material cost inflation and lower sales volumes, partially offset by higher selling prices and savings from previously approved restructuring actions.

Looking ahead

Looking ahead for the ~~execution~~Industrial Coatings segment, aggregate sales volumes are expected to be down a low-single-digit percentage compared to the prior-year second quarter, including ongoing impacts from customer supply disruptions and coatings raw material shortages, along with continuing COVID-19-related restrictions and unfavorable impacts in Europe from the war in Ukraine. Many of ~~cost-mitigation actions~~these factors are also expected to lead to additional coatings raw material inflation in the second quarter sequentially versus the first quarter. The company continues to prioritize working with customers to secure further selling price increases in all businesses. Segment margins are expected to continue to improve on a sequential basis in the second quarter 2022. The Company will also continue to aggressively manage costs, which includes executing against various cost-savings and restructuring ~~savings, partially offset by raw material~~initiatives. The acquisitions of Wörwag and ~~logistics cost inflation.~~Cetelon are together expected to deliver sales of about $60 million in the second quarter with margins below the segment’s average.

Liquidity and Capital Resources

PPG had cash and short-term investments totaling ~~$1.3~~$1.0 billion and ~~$1.9~~$1.1 billion at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

~~Cash~~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, ~~from continuing operations~~capital spending, acquisitions, dividend payments, debt service, share repurchases, contributions to pension plans and PPG's contractual obligations.

Cash used for operating activities

Cash used for operating activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ was ~~$1,106~~$304 million and ~~$1,163~~$23 million, respectively. Operating cash flow decreased primarily due to unfavorable changes in working capital in the first ~~nine~~three months of ~~2021~~2022 compared to the prior ~~year,~~year.

Operating working capital

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)	March 31, 2022		December 31, 2021		March 31, 2021
Trade receivables, net	$3,090		$2,687		$2,706
Inventories, FIFO	2,645		2,345		2,027
Trade creditors’ liabilities	2,978		2,734		2,441
Operating working capital	$2,757		$2,298		$2,292
Operating working capital as a % of Sales	16.0	%	13.7	%	14.8	%
Days sales outstanding	59		53		57

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Environmental


	Three Months Ended March 31
($ in millions)	2022	2021
Cash outlays for environmental remediation activities	$23	$9


($ in millions)	Remainder of 2022	Annually 2023 - 2026
Projected future cash outlays for environmental remediation activities	$60 - $80	$20 - $75

Cash used for investing activities

Cash used for investing activities for the three months ended March 31, 2022 and 2021 was $183 million and $424 million, respectively. The $241 million decrease in cash used for investing activities was primarily due to lower spending on business acquisitions, partially offset by higher ~~net income.~~capital expenditures.

~~Other uses~~Total capital spending is expected to be in the range of ~~cash during~~$500 million to $525 million in 2022 in support of future organic growth opportunities and reflecting lower capital spending in the ~~nine~~past two years due to COVID-19 constraints.

Cash from financing activities

Cash from financing activities for the three months ended ~~September 30,~~March 31, 2022 and 2021 ~~included:~~was $443 million and $469 million, respectively. The $26 million decrease in cash from financing activities was primarily due to higher purchases of treasury stock and higher dividends paid year-over-year.

Debt issued and repaid

•In March 2022, PPG privately placed a 15-year €50 million 1.95% fixed interest note.~~Capital expenditures, excluding acquisitions,~~Refer to Note 6, “Borrowings” in Part I, Item 1 of ~~$220 million.~~this Form 10-Q for additional information.

•~~Business acquisition cash spending (net of cash acquired) of $2,137 million.~~

•~~Cash dividends paid of $396 million.~~Credit Agreements

In ~~June~~February 2021, PPG ~~borrowed $700 million under the~~entered into a $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~~provided the Company with the ability to borrow up to an aggregate principal amount of $2.0 billion on an unsecured basis. ~~Prior~~In addition to ~~December 31, 2021,~~the amounts borrowed to finance the acquisition of Tikkurila, the Term Loan Credit Agreement allowed the Company ~~may~~to make up to eleven additional borrowings ~~of term loans under the Term Loan Credit Agreement, which may~~prior to December 31, 2021, to 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.

In ~~March~~June 2021, PPG ~~completed a public offering of~~borrowed $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~~under the Indenture between the Company and the Bank of New York Mellon Trust Company, N.A., as trustee, as supplemented (the "2021 Indenture"). The 2021 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 2021 Indenture) at a price equal to 101% of their principal amount plus accrued and unpaid interest. The Company may issue additional debt from

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~~time to time pursuant to the 2021 Indenture. The aggregate cash proceeds from the notes, net of discounts and fees, was $692 million.~~

In August 2020, PPG completed a public offering of $100 million aggregate principal amount of 3.75% notes due March 2028. These notes were issued as additional notes 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 "2018 Indenture"), which is is the same Indenture pursuant to which we previously issued $700 million in aggregate principle amount of our 3.75% notes due March 2028 on February 27, 2018. The new notes will be treated as a single series of notes with the existing notes under indenture, have the same CUSIP number as the existing notes, and be fungible with the existing notes for US federal income tax purposes. The 2018 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 2018 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 2018 Indenture. The aggregate cash proceeds from the notes, including the premium received at issuance, net of fees, was $119 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 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 onto finance the Company’s ~~ability to create liens or other encumbrances, to enter into sale and leaseback transactions~~acquisition of Tikkurila, and to ~~enter into consolidations, mergers or transfers of all or substantially all of its assets.~~pay fees, costs and expenses related thereto. In ~~2020,~~December 2021, PPG ~~repaid $1.1 billion of~~borrowed an additional $700 million under the Term Loan ~~using cash on hand. In the first quarter 2021, PPG repaid the remaining $400 million~~Credit Agreement. Borrowings of $1.4 billion were outstanding under the Term Loan ~~using cash on hand.~~Credit Agreement as of March 31, 2022 and December 31, 2021.

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Capitalization may not exceed 65% at any time. As of ~~September 30, 2021,~~March 31, 2022, Total Indebtedness to Total Capitalization as defined under the Credit Agreement and Term Loan Credit Agreement was ~~49%~~51%.

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borrowings of ~~$625 million~~$1.0 billion and ~~$250~~$440 million were outstanding as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

Total capital spending in 2021 is expected to be about $400 million in support of future organic growth opportunities. PPG expects to make mandatory contributions to its non-U.S. pension plans in the range of $5 million to $10 million during the remaining three months of 2021. PPG may make voluntary contributions to its defined benefit pension plans in 2021 and beyond.

A primary focus for the Company in 2021 will continue to be cash deployment focused on shareholder value creation, with a preference for business acquisitions. In the fourth quarter, the Company expects to execute stock repurchases and to continue to evaluate further debt reduction.

($ in millions, except percentages) September 30, 2021 December 31, 2020 September 30, 2020
Trade receivables, net $2,995 $2,412 $2,495
Inventories, FIFO 2,402 1,845 1,784
Trade creditors’ liabilities 2,726 2,259 2,055
Operating working capital $2,671 $1,998 $2,224
Operating working capital as a % of Sales 15.3 % 13.3 % 15.1 %
Days sales outstanding 57 54 56

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
September 30 Nine Months Ended
September 30
($ in millions) 2021 2020 2021 2020
Cash outlays for environmental remediation activities $17 $15 $34 $52


~~($ in millions)~~	Remainder of 2021	Annually 2022 - 2025
~~Projected future cash outlays for environmental remediation activities~~	~~$20 - $30~~	~~$20 - $75~~

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 once fully implemented in 2022.

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 $60 million of savings from this program in 2020. We expect to achieve annualized cost savings from the 2019 program of $125 million once fully implemented in 2022.

In April 2018, PPG initiated an $83 million global restructuring program. The program is largely centered around the change in customer assortment related to the U.S. architectural coatings DIY business. PPG recognized $10 million of savings from this program in 2020. We expect to achieve annualized cost savings from the 2018 program of $85 million once fully implemented in 2021.

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Aggregate restructuring savings, ~~related to~~including the ~~2020, 2019 and 2018 programs was~~impact of acquisition synergies, were approximately ~~$110~~$15 million ~~for~~in the ~~nine months ended 2021.~~first quarter of 2022. Total restructuring savings are expected to be at least ~~$135~~$70 million in 2021. Releases of $23 million and $26 million were recorded in the nine months ended September 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.2022. In addition, the Company continues to review its cost structure to identify additional cost savings opportunities. ~~See~~Refer to Note 6,5, “Business ~~Restructuring,” to the accompanying condensed consolidated financial statements~~Restructuring” in Part I, Item 1 of this Form 10-Q for further details on the Company's business restructuring programs. We expect cash outlays related to these actions of approximately $170 million in 2022.

Currency

Comparing spot exchange rates at December 31, ~~2020~~2021 and at ~~September 30, 2021,~~March 31, 2022, the U.S. dollar ~~strengthened~~weakened against the currencies of many countries within the regions PPG operates. As a result, consolidated net assets at ~~September 30, 2021 decreased~~March 31, 2022 increased by ~~$271~~$30 million compared to December 31, ~~2020~~2021 primarily driven by the ~~euro and the~~ Mexican peso.

Comparing average exchange rates during the first ~~nine~~three months of ~~2021~~2022 to those of the first ~~nine months~~three months of ~~2020,~~2021, the U.S. dollar ~~weakened~~strengthened against the currencies of most countries within the EMEA and Asia Pacific regions where PPG operates. This had ~~a favorable~~an unfavorable impact on Income before income taxes for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 of ~~$63~~$13 million from the translation of these foreign earnings into U.S. dollars.

New Accounting Standards

~~See~~Refer to Note 2, “New Accounting ~~Standards,” to the accompanying condensed consolidated financial statements~~Standards” in Part I, Item 1 of this Form 10-Q 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~~in Part I, Item 1 of this Form 10-Q 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~~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~~Refer to the Environmental Matters section of Note 1514 for details of these reserves. ~~A significant portion~~It is PPG’s policy to accrue expenses for contingencies when it is probable that a liability has been incurred and the amount of ~~our reserves~~loss can be reasonably estimated. Reserves for environmental contingencies ~~relate to ongoing remediation at PPG's former chromium manufacturing plant~~are exclusive of claims against third parties and are generally not discounted. In management’s opinion, the Company operates in ~~Jersey City, N.J.~~an environmentally sound manner and associated sites ("New Jersey Chrome"). 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 estimatesoutcome of the Company’s environmental ~~remediation remedies change, the existing reserve for this environmental remediation matter~~contingencies will ~~continue~~not have a material effect on PPG’s financial position or liquidity; however, any such outcome may be material to ~~be adjusted.~~

~~It is possible that technological, regulatory and enforcement developments,~~ 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 ~~studies~~contingencies will occur over an extended period of time.

Critical Accounting Estimates

Management has evaluated the accounting policies used in the preparation of the financial statements and related notes presented in this Form 10-Q and believes those policies to be reasonable and appropriate. We believe that the most critical accounting estimates made in the preparation of our financial statements are those related to accounting for contingencies, under which we accrue a loss when it is probable that a liability has been incurred and the amount can be reasonably estimated, and to accounting for pensions, other postretirement benefits, business combinations, goodwill and other ~~factors could alter~~identifiable intangible assets with indefinite lives because of the importance of management judgment in making the estimates necessary to apply these policies.

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For a comprehensive discussion of the Company’s ~~expectations with respect to future charges against income~~critical accounting estimates, see Item 7, "Management’s Discussion and ~~future cash outlays. Specifically,~~Analysis of Financial Condition and Results of Operations” of our 2021 Form 10-K. There were no material changes in the ~~level of expected future remediation costs and cash outlays is highly dependent upon activity related to New Jersey Chrome.~~Company’s critical accounting estimates from the 2021 Form 10-K.

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 COVID-19, global economic conditions, geopolitical uncertainty in Europe, increasing price and product competition by our competitors, fluctuations in cost and availability of raw materials, energy, labor and logistics, the ability to achieve selling price increases, the ability to recover margins, customer inventory levels, our ability to maintain favorable supplier relationships and arrangements, the timing of and the realization of anticipated cost savings from restructuring initiatives, the ability to identify additional cost savings opportunities, the timing and expected benefits of our acquisitions, difficulties in integrating acquired businesses and achieving expected synergies therefrom, economic and political conditions in the markets we serve, the ability to penetrate existing, developing and emerging foreign and domestic markets, foreign exchange rates and fluctuations in such rates, fluctuations in tax rates, the impact of future legislation, the impact of environmental regulations, unexpected business disruptions, the effectiveness of our internal control over financial reporting, the results of governmental investigations, and the unpredictability of existing and possible future litigation. However, it is not possible to predict or identify all such factors.

Consequently, while the list of factors presented here, in the ~~2020~~2021 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 ~~2020~~2021 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 September 30, 2021~~We conduct operations in many countries around the world. Our results of operations are subject to both currency transaction and ~~December 31, 2020, PPG had non-U.S. dollar denominated borrowings outstanding of $2.3 billion and~~ ~~$2.4 billion, respectively.~~ ~~A weakening of the U.S. dollar by 10% against European currencies and by 20% against Asian and South American currencies would have resulted in unrealized~~currency translation ~~losses on these borrowings of~~ ~~$258 million~~ ~~at September 30, 2021 and $273 million at December 31, 2020, respectively.~~

~~The fair values of~~risk. Certain foreign currency forward contracts outstanding ~~at September 30,~~during 2022 and 2021 served as a hedge of a portion of PPG’s exposure to foreign currency transaction risk. The fair value of these contracts was a net asset of $34 million and $24 million as of March 31, 2022 and December 31, ~~2020 were a net liability~~ ~~$31 million~~ ~~and~~ ~~net asset of~~ ~~$2 million,~~2021, 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 was $249 million for the three months ended ~~September 30, 2021 was~~ ~~$306 million~~ March 31, 2022 and ~~$226~~$306 million for the year ended December 31, ~~2020.~~2021.

As of both March 31, 2022 and December 31, 2021, PPG ~~has~~had U.S. dollar to euro cross currency swap contracts with a total notional amount of $775 million. The fair value of these contracts were net assets of $55 million and ~~$875~~$50 million ~~outstanding at September 30, 2021~~as of March 31, 2022 and December 31, ~~2020, respectively, resulting in a net asset of $38 million and a net liability of $8 million at September 30,~~ 2021, ~~and December 31, 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 ~~$78~~$74 million and ~~$95~~$77 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

As of March 31, 2022 and December 31, 2021, PPG had non-U.S. dollar denominated borrowings outstanding of $1.6 billion. A weakening of the U.S. dollar by 10% against European currencies and by 20% against Asian and South American currencies would have resulted in unrealized translation losses on these borrowings of $180 million at March 31, 2022 and $178 million at December 31, 2021.

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Interest Rate Risk

The Company manages its interest rate risk ofby balancing its exposure to 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 values of these contracts ~~were assets~~was an asset of ~~$44~~$10 million and ~~$67~~$36 million as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. An increase in variable interest rates of 10% would lower the fair values of these swaps and increase interest expense by ~~less~~$2 million and $1 million for the periods ended ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021, respectively. 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 ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. Further a 10% reduction in interest rates would have increased the fair value of the Company's fixed rate debt by approximately ~~$70~~$80 million and ~~$48~~$56 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively; however, such changes would not have had an effect on PPG's ~~income~~Income before income taxes or cash flows.

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There were no other material changes in the Company’s exposure to market risk from December 31, ~~2020~~2021 to ~~September 30, 2021. See~~March 31, 2022. Refer to Note ~~13,~~12, “Financial Instruments, Hedging Activities and Fair Value Measurements” in Part I, Item 1 of this Form 10-Q for a description of our instruments subject to market risk.

Item 4. Controls and Procedures

a. Evaluation of disclosure controls and procedures. Based on their evaluation as of the end of the period covered by this Form 10-Q, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

b. Changes in internal control over financial reporting. There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

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’

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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 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

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Contingent Liabilities” ~~to the accompanying condensed consolidated financial statements under~~in 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 Pennsylvania state court lawsuits filed by Montgomery County and Lehigh County in the respective counties on October 4, 2018 and October 12, 2018. Both suits seek declaratory relief arising out of alleged public nuisances in the counties associated with the presence of lead paint on various buildings constructed prior to 1980. The Company believes these actions are without merit and intends to defend itself vigorously.

Item 1A. Risk Factors

There were no material changes in the Company’s risk factors from the risks disclosed in the ~~2020~~2021 Form 10-K.

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 ~~September 30, 2021~~March 31, 2022 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 ~~10,561,194~~9,615,098 shares as of ~~September 30, 2021.~~March 31, 2022. This repurchase program has no expiration date.

Item 6. Exhibits

See the Index to Exhibits on page ~~44.~~33.

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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 ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ (ii) the Condensed Consolidated Balance Sheet at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, (iii) the Condensed Consolidated Statement of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ and (iv) Notes to Condensed Consolidated Financial Statements for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022.

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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:

~~October 21, 2021~~April 22, 2022

By:

/s/ Vincent J. Morales

Vincent J. Morales

Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Duly Authorized Officer)

By:

/s/ Brian R. Williams

Brian R. Williams

~~Acting~~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	3
	Condensed Consolidated Balance Sheet	4
	Condensed Consolidated Statement of Shareholders' Equity	5
	Condensed Consolidated Statement of Cash Flows	76
	Notes to Condensed Consolidated Financial Statements	87
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2723
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4130
Item 4.	Controls and Procedures	4231
Part II. Other Information
Item 1.	Legal Proceedings	4231
Item 1A.	Risk Factors	4332
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4332

Item 6.	Exhibits	4332
Signatures		4534


	Three Months Ended September 30, 2021
($ in millions, except percentages and per share amounts)	Income Before Income Taxes	Tax Expense	Effective Tax Rate		Net income (attributable to PPG)	Earnings per diluted share(a)
As reported, continuing operations	$441	$96	21.8	%	$344	$1.43
Adjusted for:
Acquisition-related amortization expense	46	11	24.6	%	35	0.15
Acquisition-related costs(b)	43	10	24.9	%	33	0.14
Impairment charge(c)	21	6	29.2	%	12	0.05
Business restructuring-related costs, net (d)	(25)	(7)	29.9	%	(18)	(0.08)
Adjusted, continuing operations, excluding certain items	$526	$116	22.1	%	$406	$1.69


	Three Months Ended September 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	$572	$124	21.7	%	$442	$1.86
Adjusted for:
Acquisition-related amortization expense	32	9	26.1	%	23	0.10
Business restructuring-related costs, net (d)	14	4	26.2	%	10	0.04
Expenses incurred due to a natural disaster (e)	8	2	24.3	%	6	0.03
Adjusted, continuing operations, excluding certain items	$626	$139	22.2	%	$481	$2.03


	Nine Months Ended September 30, 2021
($ 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	$1,533	$370	24.1	%	$1,153	$4.81
Adjusted for:
Acquisition-related amortization expense	126	31	24.6	%	95	0.40
Acquisition-related costs, net (b)	81	16	19.8	%	65	0.27
Net tax charge related to UK statutory rate change	—	(22)	N/A		22	0.09
Environmental remediation charges	26	7	24.3	%	19	0.08
Expenses incurred due to natural disasters(c)	17	4	24.3	%	13	0.06
Impairment charge(d)	21	6	29.2	%	12	0.05
Decrease in allowance for doubtful accounts related to COVID-19	(14)	(3)	24.7	%	(11)	(0.05)
Income from legal settlements	(22)	(5)	24.3	%	(17)	(0.07)
Business restructuring-related costs, net (e)	(40)	(10)	25.0	%	(30)	(0.13)
Adjusted, continuing operations, excluding certain items	$1,728	$394	22.8	%	$1,321	$5.51