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 2022 Form 10-K.

Highlights

Net sales were approximately $4.9 billion for the three months ended June 30, 2023, an increase of 3.9% compared to the prior year, driven by higher selling prices. The Company increased net sales despite lower sales volumes, which were unfavorably impacted by lower absolute levels of demand in Europe stemming from geopolitical issues, slower economic recovery in China, lower do-it-yourself ("DIY") paint demand in most regions and softening global manufacturing activity.

Income before income taxes was $646 million for the three months ended June 30, 2023, an increase of $80 million compared to the prior year. This increase was primarily due to selling price increases partially offset by lower sales volumes.

Results of Operations

			Three Months Ended June 30												Percent Change						Six Months Ended June 30												Percent Change
($ in millions, except percentages)			2023						2022						2023 vs. 2022						2023						2022						2023 vs. 2022
Net sales			$4,872						$4,691						3.9		%				$9,252						$8,999						2.8		%
Cost of sales, exclusive of depreciation and amortization			$2,866						$2,954						(3.0)		%				$5,462						$5,652						(3.4)		%
Selling, general and administrative			$1,069						$982						8.9		%				$2,061						$1,956						5.4		%
Depreciation			$93						$99						(6.1)		%				$185						$201						(8.0)		%
Amortization			$40						$42						(4.8)		%				$81						$85						(4.7)		%
Research and development, net			$110						$115						(4.3)		%				$214						$230						(7.0)		%
Interest expense			$67						$38						76.3		%				$126						$68						85.3		%
Interest income			($32)						($11)						190.9		%				($57)						($20)						185.0		%
Impairment and other related (income)/charges, net			$—						($60)						(100.0)		%				—						$230						(100.0)		%
Pension settlement charge			$—						$—						—		%				$190						$—						100.0		%
Other charges/(income), net			$13						($34)						(138.2)		%				($9)						($47)						(80.9)		%

Net Sales by Region

			Three Months Ended June 30												Percent Change						Six Months Ended June 30												Percent Change
($ in millions, except percentages)			2023						2022						2023 vs. 2022						2023						2022						2023 vs. 2022
United States and Canada			$2,059						$2,015						2.2		%				$3,835						$3,730						2.8		%
EMEA			1,520						1,497						1.5		%				2,948						2,950						(0.1)		%
Asia Pacific			736						689						6.8		%				1,383						1,386						(0.2)		%
Latin America			557						490						13.7		%				1,086						933						16.4		%
Total			$4,872						$4,691						3.9		%				$9,252						$8,999						2.8		%

Three Months Ended June 30, 2023

Net sales increased $181 million due to the following:

● Higher selling prices (+6%)

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Partially offset by:

● Lower sales volumes (-2%)

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, decreased $88 million primarily due to lower sales volumes and moderating raw material costs.

Selling, general and administrative expense increased $87 million primarily due to wage and other cost inflation and increased performance-based incentive compensation expense, partially offset by savings from previously approved restructuring actions.

Interest expense increased $29 million primarily due to the unfavorable impact of higher interest rates on PPG’s variable rate debt obligations. Interest income increased $21 million primarily due to higher interest rates.

Impairment and other related charges of $290 million were recorded in the first quarter 2022 associated with the wind down of the Company's operations in Russia. In the second quarter 2022, the Company released a portion of the previously established reserves due to the collection of certain trade receivables and recorded recoveries due to the realization of certain previously written-down inventories, resulting in recognition of income of $60 million. Refer to Note 7, "Impairment and Other Related (Income)/Charges, Net" in Part I, Item 1 of this Form 10-Q for additional information. There were no impairment charges recorded during the second quarter 2023.

Six Months Ended June 30, 2023

Net sales increased $253 million due to the following:

● Higher selling prices (+7%)

● Acquisition-related sales (+1%)

Partially offset by:

● Lower sales volumes (-3%)

● Unfavorable foreign currency translation (-1%)

● Divestiture-related sales and wind down of Russia operations (-1%)

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, decreased $190 million primarily due to lower sales volumes and moderating raw material costs.

Selling, general and administrative expense increased $105 million primarily due to wage and other cost inflation and increased performance-based incentive compensation expense, partially offset by savings from previously approved restructuring actions and favorable foreign currency translation impacts.

Interest expense increased $58 million primarily due to the unfavorable impact of higher interest rates on PPG’s variable rate debt obligations. Interest income increased $37 million primarily due to higher interest rates.

Impairment and other related charges of $290 million were recorded in the first quarter 2022 associated with the wind down of the Company's operations in Russia. In the second quarter 2022, the Company released a portion of the previously established reserves due to the collection of certain trade receivables and recorded recoveries due to the realization of certain previously written-down inventories, resulting in recognition of income of $60 million. Refer to Note 7, "Impairment and Other Related (Income)/Charges, Net" in Part I, Item 1 of this Form 10-Q for additional information. There were no impairment charges recorded during 2023.

A pension settlement charge of $190 million was recorded in the first quarter 2023 associated with the Company's purchase of group annuity contracts that transferred pension benefit obligations for certain of the Company’s retirees in the U.S. to third-party insurance companies. Refer to Note 10, "Pensions and Other Postretirement Benefits" in Part I, Item 1 of this Form 10-Q for additional information.

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Effective Tax Rate and Earnings Per Diluted Share

			Three Months Ended June 30												Percent Change						Six Months Ended June 30												Percent Change
($ in millions, except percentages and amounts per share)			2023						2022						2023 vs. 2022						2023						2022						2023 vs. 2022
Income tax expense			$149						$118						26.3		%				$229						$173						32.4		%
Effective tax rate			23.1		%				20.8		%				2.3		%				22.9		%				26.9		%				(4.0)		%
Adjusted effective tax rate, continuing operations*			23.2		%				22.6		%				0.6		%				23.2		%				22.6		%				0.6		%
Earnings per diluted share, continuing operations			$2.06						$1.86						10.8		%				$3.18						$1.94						63.9		%
Adjusted earnings per diluted share*			$2.25						$1.81						24.3		%				$4.08						$3.18						28.3		%
*See Regulation G Reconciliation below

The effective tax rate of 26.9% for the six months ended June 30, 2022 reflected a tax benefit of $27 million on the $230 million Impairment and other related (income)/charges, net associated with PPG's operations in Russia.

Adjusted earnings per diluted share for the three and six months ended June 30, 2023 increased year-over-year primarily due to increased selling prices and moderating raw material costs, partially offset by lower sales volumes.

Regulation G Reconciliations - Results from Operations

PPG believes investors’ understanding of the Company’s performance is enhanced by the disclosure of net income from continuing operations, earnings per diluted share from continuing operations, 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”) and should not be considered a substitute for net income from continuing operations, earnings per diluted share from continuing operations, the effective tax rate, segment income or other financial measures as computed in accordance with U.S. GAAP. In addition, adjusted net income, adjusted earnings per diluted share and the adjusted effective tax rate may not be comparable to similarly titled measures as reported by other companies.

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

			Three Months Ended June 30, 2023
($ 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			$646						$149						23.1		%				$490						$2.06
Adjusted for:
Acquisition-related amortization expense			40						10						24.6		%				30						0.13
Business restructuring-related costs, net (b)			14						3						24.0		%				11						0.05
Transaction-related costs (c)			7						2						24.3		%				3						0.01
Adjusted, continuing operations, excluding certain items			$707						$164						23.2		%				$534						$2.25

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			Three Months Ended June 30, 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			$566						$118						20.8		%				$443						$1.86
Adjusted for:
Acquisition-related amortization expense			42						10						24.6		%				32						0.13
Business restructuring-related costs, net (b)			8						2						25.7		%				6						0.03
Transaction-related costs (c)			6						(3)						(50.0		%)				9						0.04
Impairment and other related (income)/charges, net (d)			(60)						—						—		%				(60)						(0.25)
Adjusted, continuing operations, excluding certain items			$562						$127						22.6		%				$430						$1.81

			Six Months Ended June 30, 2023
($ 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			$999						$229						22.9		%				$754						$3.18
Adjusted for:
Pension settlement charge (e)			190						46						24.3		%				144						0.61
Acquisition-related amortization expense			81						20						24.6		%				61						0.26
Business restructuring-related costs, net (b)			14						3						24.0		%				11						0.05
Transaction-related costs (c)			7						2						24.3		%				3						0.01
Insurance recovery of expenses incurred due to a natural disaster (f)			(9)						(2)						24.3		%				(7)						(0.03)
Adjusted, continuing operations, excluding certain items			$1,282						$298						23.2		%				$966						$4.08

			Six Months Ended June 30, 2022
($ 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			$644						$173						26.9		%				$461						$1.94
Adjusted for:
Impairment and other related (income)/charges, net (d)			230						27						11.7		%				203						0.85
Acquisition-related amortization expense			85						20						23.5		%				65						0.27
Business restructuring-related costs, net (b)			22						6						27.3		%				16						0.07
Transaction-related costs (c)			10						(2)						(20.0)		%				12						0.05
Adjusted, continuing operations, excluding certain items			$991						$224						22.6		%				$757						$3.18

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

(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)Transaction-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. Transaction-related costs also include losses on the sale of certain assets, which are included in Other charges/(income), net in the condensed consolidated statement of income, and 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. In 2023, net loss of $2 million was attributable to noncontrolling interests.

(d)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. In the second quarter 2022, the Company released a portion of the previously established reserves for Receivables and Inventories due to the collection of certain trade receivables and the realization of certain inventories.

(e)In the first quarter 2023, PPG purchased group annuity contracts that transferred pension benefit obligations for certain of the Company’s retirees in the U.S. to third-party insurance companies, resulting in a non-cash pension settlement charge.

(f)The Company incurred expenses due to damages at a southern U.S. factory resulting from a hurricane in 2020. In the first quarter 2023, the Company received reimbursement under its insurance policies related to the damages incurred at this factory due to this hurricane.

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Performance of Reportable Business Segments

Performance Coatings

			Three Months Ended June 30												$ Change						% Change						Six Months Ended June 30												$ Change						% Change
($ in millions, except percentages)			2023						2022						2023 vs. 2022						2023 vs. 2022						2023						2022						2023 vs. 2022						2023 vs. 2022
Net sales			$3,041						$2,929						$112						3.8		%				$5,669						$5,499						$170						3.1		%
Segment income			$537						$446						$91						20.4		%				$932						$765						$167						21.8		%
Amortization expense			$28						$31						($3)						(9.7)		%				$58						$63						($5)						(7.9)		%
Segment income, excluding amortization expense			$565						$477						$88						18.4		%				$990						$828						$162						19.6		%

Three Months Ended June 30, 2023

Performance Coatings net sales increased due to the following:

● Higher selling prices (+6%)

● Favorable foreign currency translation (+1%)

Partially offset by:

● Lower sales volumes (-3%)

Architectural coatings – EMEA net sales, excluding the impact of currency, acquisitions, divestitures and the wind down of Russia operations ("organic sales") decreased by a low single-digit percentage as selling price increases were more than offset by lower sales volumes. Demand for architectural products in many countries decreased year over year primarily stemming from lower consumer confidence due to continued geopolitical issues in Europe.

Architectural coatings - Americas and Asia Pacific organic sales increased by a low single-digit percentage. Positive organic sales growth in Mexico was partially offset by lower demand in the U.S. and Canada. In Mexico, PPG Comex architectural coatings organic sales increased compared to the prior year as concessionaire network demand continued to be strong and further selling price increases were implemented.

Automotive refinish coatings organic sales were higher by a mid-single-digit percentage as selling price increases were seen across all regions. Demand at U.S. collision body shops remained strong.

Aerospace coatings sales volumes increased by a low teen-percentage as demand was strong in all regions. Sales also increased due to the benefit of higher selling prices.

Protective and marine coatings organic sales increased by a high single-digit percentage primarily due to selling price increases and higher sales volumes in most regions. Sales volumes during the prior year second quarter were negatively impacted by COVID-19 restrictions in China.

Traffic solutions organic sales decreased by a low single-digit percentage primarily due to lower sales volumes. In the U.S., the business prioritized higher margin business, resulting in lower sales volumes.

Segment income increased $91 million year over year primarily due to higher selling prices and moderating raw material costs, which more than offset lower sales volumes.

Six Months Ended June 30, 2023

Performance Coatings net sales increased due to the following:

● Higher selling prices (+8%)

Partially offset by:

● Lower sales volumes (-3%)

● Unfavorable foreign currency translation (-1%)

● Divestiture-related sales and wind down of Russia operations (-1%)

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Architectural coatings – EMEA organic decreased by a low single-digit percentage year over year as selling price increases were more than offset by lower sales volumes. Demand for architectural products in many countries decreased year over year primarily stemming from reduced remodeling activity and lower consumer confidence due to continued geopolitical issues in Europe.

Architectural coatings - Americas and Asia Pacific organic sales increased by a mid-single-digit percentage. Sales volumes in the U.S. were favorably impacted by new business wins in the first quarter but were negatively impacted by lower DIY paint demand throughout the first six months of 2023. In Mexico, PPG Comex architectural coatings organic sales increased compared to the prior year driven by selling price increases and continued strong demand in the concessionaire network.

Automotive refinish coatings organic sales increased by a low single-digit percentage year over year as selling price increases in all regions more than offset by lower sales volumes. Net sales benefited from strong sales volumes in the U.S. in the second quarter despite lower insurance claim activity compared to the second quarter 2022.

Aerospace coatings sales volumes increased by a mid-teen percentage as demand was strong in most regions. Sales also increased due to the benefit of higher selling prices.

Protective and marine coatings organic sales increased by a high single-digit percentage primarily due to selling price increases in all regions and strong demand in the U.S. and Latin America.

Traffic solutions organic sales decreased by a mid-single-digit percentage as higher selling prices in all regions were more than offset by lower sales volumes.

Segment income increased $167 million year over year primarily due to higher selling prices and moderating raw material costs, which more than offset lower sales volumes.

Looking Ahead

In the third quarter, demand conditions in Europe are expected to stabilize at lower levels than before the war in Ukraine. Raw material and transportation availability are expected to normalize near pre-pandemic levels. Aggregate organic sales are anticipated to increase by a low-single-digit percentage compared to the third quarter 2022.

Industrial Coatings

			Three Months Ended June 30												$ Change						% Change						Six Months Ended June 30												$ Change						% Change
($ in millions, except percentages)			2023						2022						2023 vs. 2022						2023 vs. 2022						2023						2022						2023 vs. 2022						2023 vs. 2022
Net sales			$1,831						$1,762						$69						3.9		%				$3,583						$3,500						$83						2.4		%
Segment income			$250						$156						$94						60.3		%				$490						$296						$194						65.5		%
Amortization expense			$12						$11						$1						9.1		%				$23						$22						$1						4.5		%
Segment income, excluding amortization expense			$262						$167						$95						56.9		%				$513						$318						$195						61.3		%

Three Months Ended June 30, 2023

Industrial Coatings segment net sales increased due to the following:

● Higher selling prices (+5%)

● Acquisition-related sales (+1%)

Partially offset by:

● Lower sales volumes (-1%)

● Unfavorable foreign currency translation (-1%)

Automotive OEM coatings organic sales increased by a mid-teen percentage year over year driven by higher selling prices in all regions and strong sales volume growth in Europe and the U.S. While global industry growth rates have improved in the first half of 2023, they remain well below pre-pandemic levels.

In the industrial coatings business, organic sales decreased by a mid-single-digit percentage year over year as higher selling prices were more than offset by lower sales volumes in Europe and China due to softer general industrial production. Sales volumes in the U.S. were negatively impacted by lower demand in the coil, wood and general finishes subsegments.

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Packaging coatings organic sales decreased by a mid-single-digit percentage primarily due to lower sales volumes more than offsetting selling price increases. The decrease in sales volumes was driven by lower demand in all regions driven by broad demand weakness. On a year-over-year basis, global demand in the metal packaged food and beverage segment was lower, while demand for personal-care products was higher.

Specialty coatings and materials organic sales decreased by a high single-digit percentage primarily due to lower sales volumes, partially offset by higher selling prices.

Segment income increased $94 million year over year primarily due to higher selling prices and moderating raw material costs.

Six Months Ended June 30, 2023

Industrial Coatings segment net sales increased due to the following:

● Higher selling prices (+6%)

● Acquisition-related sales (+1%)

Partially offset by:

● Lower sales volumes (-2%)

● Unfavorable foreign currency translation (-2%)

● Divestiture-related sales and wind down of Russia operations (-1%)

Automotive OEM coatings organic sales increased by a low teen percentage year over year driven by higher selling prices and strong sales volume growth in all regions. While global industry growth rates have improved in the first half of 2023, they remain well below pre-pandemic levels.

In the industrial coatings business, organic sales decreased by a mid single-digit percentage year over year as higher selling prices were more than offset by lower sales volumes in most regions due to softening global industrial demand.

Packaging coatings organic sales decreased by a low single-digit percentage year over year as selling price increases were offset by lower sales volumes in all regions driven by broad demand weakness.

Specialty coatings and materials organic sales decreased by a mid-single-digit percentage primarily due to lower sales volumes, partially offset by higher selling prices.

Segment income increased $194 million year over year primarily due to higher selling prices and moderating raw material costs, which more than offset lower sales volumes.

Looking Ahead

In the third quarter, global industrial production is expected to remain at lower levels, with modest sequential improvement in China. Aggregate organic sales are anticipated to decrease by a low single-digit percentage compared to the third quarter 2022. While automotive industry build rates and retail activity is expected to continue to be solid, other industrial production end-use markets are expected to be soft, including the industrial coatings, packaging coatings, and specialty coatings and materials businesses. Positive selling price increases are expected to continue; although, some of the pricing gains realized in 2022 will begin to reach their anniversary in the third quarter.

Liquidity and Capital Resources

PPG had cash and short-term investments totaling $1.3 billion and $1.2 billion at June 30, 2023 and December 31, 2022, respectively.

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 be sufficient to fund our operating activities, capital spending, acquisitions, dividend payments, debt service, share repurchases, contributions to pension plans and PPG's contractual obligations.

Cash from/(used for) operating activities

Cash from operating activities for the six months ended June 30, 2023 was $621 million. Cash used for operating activities for the six months ended June 30, 2022 was $136 million. The $757 million increase was primarily due to higher net income driven by higher selling prices and favorable changes in working capital compared to the prior year.

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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)			June 30, 2023						December 31, 2022						June 30, 2022
Trade receivables, net			$3,426						$2,824						$3,306
Inventories, FIFO			2,776						2,544						2,715
Trade creditors’ liabilities			2,717						2,538						2,940
Operating working capital			$3,485						$2,830						$3,081
Operating working capital as a % of sales			17.9		%				16.9		%				16.4		%
Days sales outstanding			57						56						58

Environmental

			Three Months Ended June 30												Six Months Ended June 30
($ in millions)			2023						2022						2023						2022
Cash outlays for environmental remediation activities			$7						$24						$16						$47

($ in millions)			Remainder of 2023						Annually 2024 - 2027
Projected future cash outlays for environmental remediation activities			$20 - $40						$20 - $75

Cash used for investing activities

Cash used for investing activities for the six months ended June 30, 2023 and 2022 was $290 million and $150 million, respectively. The $140 million increase in cash used for investing activities was primarily due to higher spending on business acquisitions and the absence of proceeds from asset sales recognized during the six months ended June 30, 2022.

Total capital spending is expected to be in the range of $500 million to $550 million in 2023 in support of future organic growth opportunities.

Cash (used for)/from financing activities

Cash used for financing activities for the six months ended June 30, 2023 was $266 million. Cash from financing activities for the six months ended June 30, 2022 was $213 million. The $479 million change was primarily due to repayments of long-term debt, repayment of the Term Loan Credit Agreement and lower proceeds from the issuance of debt, partially offset by higher net proceeds from commercial paper.

Credit Agreements

In April 2023, PPG entered into a €500 million Term Loan Credit Agreement (the "Term Loan"). The Term Loan provides the Company with the ability to increase the size of the loan by an amount not to exceed €250 million. The Term Loan contains covenants that are consistent with those in the Credit Agreement discussed below and that are usual and customary restrictive covenants for facilities of its type, which include, with specified exceptions, limitations on the Company’s ability to create liens or other encumbrances, to enter into sale and leaseback transactions and to enter into consolidations, mergers or transfers of all or substantially all of its assets. The Term Loan terminates and all amounts outstanding are payable in April 2026. In April 2023, PPG borrowed €500 million under the Term Loan.

In February 2021, PPG entered into a $2.0 billion Term Loan Credit Agreement (the "Term Loan Credit Agreement") to finance the Company’s acquisition of 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 $2.0 billion on an unsecured basis. In addition to the 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 general corporate purposes. The Term Loan Credit Agreement contains covenants that are consistent with those in the Credit Agreement discussed below and that are usual and customary

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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. In March 2023, PPG amended the Term Loan Credit Agreement to replace the LIBOR-based reference interest rate option with a reference interest rate option based upon Term Secured Overnight Financing Rate ("SOFR"). The other terms of the Term Loan Credit Agreement remain unchanged. In June 2021, PPG borrowed $700 million under the Term Loan Credit Agreement to finance the Company’s acquisition of Tikkurila, and to pay fees, costs and expenses related thereto. In December 2021, PPG borrowed an additional $700 million under the Term Loan Credit Agreement. In 2022, PPG repaid $300 million of the Term Loan Credit Agreement using cash on hand. In the first quarter 2023, PPG repaid $100 million of the Term Loan Credit Agreement using cash on hand. In the second quarter 2023, PPG repaid $200 million of the Term Loan Credit Agreement using cash on hand. Borrowings of $800 million and $1.1 billion were outstanding under the Term Loan Credit Agreement as of June 30, 2023 and December 31, 2022, respectively.

In March 2023, PPG amended its five-year credit agreement (the “Credit Agreement”) dated as of August 30, 2019. The amendments to the Credit Agreement replace the LIBOR-based reference interest rate option with a reference interest rate option based upon Term SOFR. The other terms of the Credit Agreement remain unchanged. 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. There were no amounts outstanding under the Credit Agreement as of June 30, 2023 and December 31, 2022.

The Term Loan, 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, Term Loan Credit Agreement and Credit Agreement, of 60% or less; provided, that for any fiscal quarter in which the Company has made an acquisition for consideration in excess of $1 billion and for the next five fiscal quarters thereafter, the ratio of Total Indebtedness to Total Capitalization may not exceed 65% at any time. As of June 30, 2023, Total Indebtedness to Total Capitalization as defined under the Term Loan, Term Loan Credit Agreement and Credit Agreement was 46%.

The Credit Agreement also supports the Company’s commercial paper borrowings which are classified as long-term based on PPG’s intent and ability to refinance these borrowings on a long-term basis. There were $100 million commercial paper borrowings outstanding as of June 30, 2023. There no commercial paper borrowings outstanding as of December 31, 2022.

Other Debt Issued and Repaid

In March 2023, PPG's $300 million 3.2% notes matured, and the Company repaid this obligation using cash on hand. Refer to Note 6, “Borrowings” in Part I, Item 1 of this Form 10-Q for additional information.

In May 2022, PPG completed a public offering of €300 million 1.875% Notes due 2025 and €700 million 2.750% Notes due 2029. Refer to Note 6, “Borrowings” in Part I, Item 1 of this Form 10-Q for additional information.

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

Other Liquidity Information

Restructuring

Aggregate restructuring savings, including the impact of acquisition synergies, were approximately $15 million in the second quarter 2023. Total restructuring savings are expected to be at least $60 million in 2023. In addition, the Company continues to review its cost structure to identify additional cost savings opportunities. Refer to Note 5, “Business 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 $100 million in 2023.

Currency

Comparing spot exchange rates at December 31, 2022 and at June 30, 2023, the U.S. dollar weakened against the currencies of many countries within the regions PPG operates, most notably the Mexican peso. The U.S. dollar strengthened against the Chinese yuan. As a result of the net weakening of the U.S. dollar, consolidated net assets at June 30, 2023 increased by $372 million compared to December 31, 2022.

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Comparing average exchange rates during the first six months of 2023 to those of the first six months of 2022, the U.S. dollar weakened against the Mexican peso. The U.S. dollar strengthened against the currencies of many countries where PPG operates, including many of the countries in the EMEA region. The net weakening of the U.S. dollar had a favorable impact on Income before income taxes for the six months ended June 30, 2023 of $1 million from the translation of these foreign earnings into U.S. dollars.

New Accounting Standards

Refer to Note 2, “New Accounting 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 14, “Commitments and Contingent Liabilities” 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 14, although the result of any future litigation of such lawsuits and claims is inherently unpredictable, management believes that, in the aggregate, the outcome of all lawsuits and claims involving PPG, including asbestos-related claims, will not have a material effect on PPG’s consolidated financial position or liquidity; however, any such outcome may be material to the results of operations of any particular period in which costs, if any, are recognized.

As also discussed in Note 14, PPG has significant reserves for environmental contingencies. Refer to the Environmental Matters section of Note 14 for details of these reserves. It is PPG’s policy to accrue expenses for 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.

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 identifiable intangible assets with indefinite lives because of the importance of management judgment in making the estimates necessary to apply these policies.

For a comprehensive discussion of the Company’s critical accounting estimates, see Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2022 Form 10-K. There were no material changes in the Company’s critical accounting estimates from the 2022 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,” "looking ahead" and other expressions that indicate future events and trends. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward looking statement, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our reports to the Securities and Exchange Commission ("SEC"). Also, note the following cautionary statements.

Many factors could cause actual results to differ materially from the Company’s forward-looking statements. Such factors include statements related to the expected effects on our business of COVID-19, global economic conditions, geopolitical issues 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

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ability to recover margins, customer inventory levels, PPG 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, the amount of future share repurchases, 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 unpredictability of existing and possible future litigation, including asbestos litigation, and government investigations. However, it is not possible to predict or identify all such factors.

Consequently, while the list of factors presented here and in the 2022 Form 10-K 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 2022 Form 10-K and similar risks, any of which could have a material adverse effect on the Company’s consolidated financial condition, results of operations or liquidity.