PPG Industries 10-Q 2024-03-31

Filed 2024-04-19. 8 sections, 162K characters. Original on sec.gov · Markdown · JSON

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-Q

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

For the quarterly period ended: March 31, 2024

☐ 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 2025	PPG 25	New York Stock Exchange
1.875% Notes due 2025	PPG 25A	New York Stock Exchange
1.400% Notes due 2027	PPG 27	New York Stock Exchange
2.750% Notes due 2029	PPG 29A	New York Stock Exchange

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

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

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


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

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

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

As of March 31, 2024, 234.5 million shares of the Registrant’s common stock, par value $1.66 2/3 per share, were outstanding.

PPG INDUSTRIES, INC. AND SUBSIDIARIES

INDEX


		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	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	31
Part II. Other Information
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 5.	Other Information	32
Item 6.	Exhibits	32
Signatures		34

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Income (Unaudited)


	Three Months Ended March 31
($ in millions, except per share amounts)	2024	2023
Net sales	$4,311	$4,380
Cost of sales, exclusive of depreciation and amortization	2,445	2,596
Selling, general and administrative	1,064	992
Depreciation	103	92
Amortization	38	41
Research and development, net	109	104
Interest expense	55	59
Interest income	(42)	(25)
Pension settlement charge	—	190

Other charges/(income), net	1	(22)
Income before income taxes	$538	$353
Income tax expense	129	80


Net income attributable to controlling and noncontrolling interests	$409	$273
Net income attributable to noncontrolling interests	(9)	(9)




Net income (attributable to PPG)	$400	$264




Earnings per common share (attributable to PPG)	$1.70	$1.12




Earnings per common share (attributable to PPG) - assuming dilution	$1.69	$1.11

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

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PPG INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Comprehensive Income (Unaudited)


	Three Months Ended March 31
($ in millions)	2024	2023
Net income attributable to controlling and noncontrolling interests	$409	$273
Other comprehensive (loss)/income, net of tax:
Defined benefit pension and other postretirement benefits	—	139
Unrealized foreign currency translation adjustments	(14)	264

Other comprehensive (loss)/income, net of tax	($14)	$403
Total comprehensive income	$395	$676
Less: amounts attributable to noncontrolling interests:
Net income	(9)	(9)
Unrealized foreign currency translation adjustments	2	(1)
Comprehensive income attributable to PPG	$388	$666

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

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PPG INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheet (Unaudited)


($ in millions)	March 31, 2024	December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$1,181	$1,514
Short-term investments	54	75
Receivables, net	3,581	3,279
Inventories	2,331	2,127
Other current assets	524	436
Total current assets	$7,671	$7,431
Property, plant and equipment (net of accumulated depreciation of $4,995 and $4,963)	3,633	3,644
Goodwill	6,140	6,200
Identifiable intangible assets, net	2,399	2,424
Deferred income taxes	340	273
Investments	275	259
Operating lease right-of-use assets	808	832
Other assets	601	584
Total	$21,867	$21,647
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$4,351	$4,467
Restructuring reserves	89	87
Short-term debt and current portion of long-term debt	311	306
Current portion of operating lease liabilities	192	194
Total current liabilities	$4,943	$5,054
Long-term debt	5,940	5,748
Operating lease liabilities	600	622
Accrued pensions	608	588

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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 2023 Form 10-K.

Highlights

Net sales were approximately $4.3 billion for the three months ended March 31, 2024, a decrease of 1.6% compared to the prior year, driven by lower sales volumes.

Income before income taxes was $538 million for the three months ended March 31, 2024, an increase of $185 million compared to the prior year. This increase was primarily due to the absence of a $190 million Pension settlement charge recorded in the first quarter 2023.

Results of Operations


	Three Months Ended March 31		Percent Change
($ in millions, except percentages)	2024	2023	2024 vs. 2023
Net sales	$4,311	$4,380	(1.6)	%
Cost of sales, exclusive of depreciation and amortization	$2,445	$2,596	(5.8)	%
Selling, general and administrative	$1,064	$992	7.3	%
Depreciation	$103	$92	12.0	%
Amortization	$38	$41	(7.3)	%
Research and development, net	$109	$104	4.8	%
Interest expense	$55	$59	(6.8)	%
Interest income	($42)	($25)	68.0	%
Pension settlement charge	$—	$190	(100.0)	%

Other charges/(income), net	$1	($22)	(104.5)	%

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Net Sales by Region


	Three Months Ended March 31		Percent Change
($ in millions, except percentages)	2024	2023	2024 vs. 2023
United States and Canada	$1,742	$1,776	(1.9)	%
EMEA	1,359	1,428	(4.8)	%
Asia Pacific	656	647	1.4	%
Latin America	554	529	4.7	%
Total	$4,311	$4,380	(1.6)	%

Three Months Ended March 31, 2024

Net sales decreased $69 million due to the following:

● 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 $151 million primarily due to lower sales volumes and moderating input costs.

Selling, general and administrative expense increased $72 million primarily due to wage inflation and growth-related investments.

Depreciation expense increased $11 million primarily due to higher accelerated depreciation related to previously approved restructuring actions.

Other charges/(income), net increased by $23 million primarily due to the absence of a first quarter 2023 insurance recovery related to hurricane damage at a southern U.S. factory.

Interest expense decreased $4 million primarily due to lower debt balances. Interest income increased $17 million primarily due to higher levels of cash and cash equivalents and higher interest rates.

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 9, "Pensions and Other Postretirement Benefits" in Part I, Item 1 of this Form 10-Q for additional information.

Effective Tax Rate and Earnings Per Diluted Share


	Three Months Ended March 31				Percent Change
($ in millions, except percentages and amounts per share)	2024		2023		2024 vs. 2023
Income tax expense	$129		$80		61.3	%
Effective tax rate	24.0	%	22.7	%	1.3	%
Adjusted effective tax rate, continuing operations*	24.1	%	23.3	%	0.8	%

Earnings per diluted share, continuing operations	$1.69		$1.11		52.3	%
Adjusted earnings per diluted share*	$1.86		$1.82		2.2	%
*See Regulation G Reconciliation below

Adjusted earnings per diluted share for the three months ended March 31, 2024 increased year-over-year primarily due to 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

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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 March 31, 2024
($ 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	$538	$129	24.0	%	$400	$1.69
Adjusted for:
Acquisition-related amortization expense	38	9	24.6	%	29	0.12
Business restructuring-related costs, net(b)	11	3	27.4	%	8	0.03
Portfolio optimization(c)	6	2	24.2	%	4	0.02
Adjusted, continuing operations, excluding certain items	$593	$143	24.1	%	$441	$1.86


	Three Months Ended March 31, 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	$353	$80	22.7	%	$264	$1.11
Adjusted for:
Acquisition-related amortization expense	41	10	24.5	%	31	0.13
Pension settlement charge(d)	190	46	24.3	%	144	0.61
Insurance recovery(e)	(9)	(2)	24.3	%	(7)	(0.03)
Adjusted, continuing operations, excluding certain items	$575	$134	23.3	%	$432	$1.82

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

(b)Business restructuring-related costs, net include business restructuring charges, offset by releases related to previously approved programs, which are included in Other charges/(income), net on the condensed consolidated statement of income, accelerated depreciation of certain assets, which is included in Depreciation on the condensed consolidated statement of income and other restructuring-related costs, which are included in Cost of sales, exclusive of depreciation and amortization and Selling, general and administrative on the condensed consolidated statement of income.

(c)Portfolio optimization includes advisory, legal, accounting, valuation, other professional or consulting fees, and certain internal costs directly incurred to effect acquisitions, as well as similar fees and other costs to effect divestitures and other portfolio optimization exit actions. These costs are included in Selling, general and administrative expense on the condensed consolidated statement of income.

(d)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.

(e)In the first quarter 2023, the Company received reimbursement under its insurance policies for damages incurred at a southern U.S. factory from a winter storm in 2020.

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Performance of Reportable Business Segments

Performance Coatings


	Three Months Ended March 31		$ Change	% Change
($ in millions, except percentages)	2024	2023	2024 vs. 2023	2024 vs. 2023
Net sales	$2,614	$2,628	($14)	(0.5)	%
Segment income	$402	$395	$7	1.8	%
Amortization expense	$27	$30	($3)	(10.0)	%
Segment income, excluding amortization expense	$429	$425	$4	0.9	%

Three Months Ended March 31, 2024

Performance Coatings net sales decreased due to the following:

● Lower sales volumes (-3%)

Partially offset by:

● Higher selling prices (+1%)

● Favorable foreign currency translation (+1%)

Architectural coatings – EMEA net sales, excluding the impact of currency, acquisitions and divestitures ("organic sales") decreased by a mid-single-digit percentage year over year driven by lower sales volumes. Consumer confidence remained weak during the quarter, and the timing of the Easter holiday negatively impacted results by deferring sales into the second quarter 2024. Regional demand remained uneven by country, with challenging sales volumes in western Europe partially offset by positive sales trends in central and eastern Europe.

Architectural coatings - Americas and Asia Pacific organic sales decreased by a mid-single-digit percentage compared to the prior year driven by the timing of the Easter holiday and lower sales volume compared to an elevated first quarter 2023, which included a $40 million customer load-in. In Mexico, the business continued to benefit from our strong concessionaire network.

Automotive refinish coatings organic sales were relatively flat versus prior year as higher prices were offset by lower sales volumes. In the U.S., sales volumes declined reflecting a strong prior year comparable period and as body shop activity moderated. In Europe, weaker market demand drove a small decline in sales volumes. In China, demand for refinish products is recovering and expected to continue to improve in the coming quarters.

Aerospace coatings organic sales increased by a mid-single-digit percentage, led by higher prices and sales volumes as demand was strong in all regions. Global air travel remains below pre-pandemic levels for both domestic and international flights.

Protective and marine coatings organic sales increased by a low single-digit percentage year over year primarily due to higher sales volumes, which were driven by global energy and marine demand for our sustainably advantaged products.

Traffic solutions organic sales decreased by a mid-single-digit percentage year over year due to lower sales volumes and prices. The U.S. delivered mid-single-digit percentage volume growth which was offset by a challenging environment in Argentina.

Segment income was $402 million, an increase of 2% versus the prior year, primarily due to higher selling prices and moderating raw material costs partially offset by lower sales volume, higher selling, general and administrative costs and wage inflation.

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Looking Ahead

In the second quarter, demand in Mexico is expected to remain robust, and we expect to experience continued strength in the aerospace and protective and marine coatings businesses. In the second quarter, automotive refinish coatings is expected to decline compared to record results last year due the timing of orders, and we expect to see the benefit of summer seasonal sales in traffic solutions. In architectural coatings, comparisons to the second quarter 2023 will be positively impacted by the timing of Easter. We expect to realize continued benefits from moderating input costs, and several businesses have implemented targeted, incremental price increases. Aggregate organic sales are anticipated to increase by a low single-digit percentage compared to the second quarter 2023.

Industrial Coatings


	Three Months Ended March 31		$ Change	% Change
($ in millions, except percentages)	2024	2023	2024 vs. 2023	2024 vs. 2023
Net sales	$1,697	$1,752	($55)	(3.1)	%
Segment income	$249	$240	$9	3.8	%
Amortization expense	$9	$11	($2)	(18.2)	%
Segment income, excluding amortization expense	$258	$251	$7	2.8	%

Three Months Ended March 31, 2024

Industrial Coatings segment net sales decreased due to the following:

● Lower selling prices (-2%)

● Lower sales volumes (-1%)

Automotive OEM coatings organic sales decreased by a low single-digit percentage year over year as uneven regional industry volumes and lower index-based pricing were partly offset by PPG share gains in China. PPG sales volumes increased in the Asia Pacific and Latin America regions offset by declines in the U.S. and Europe. In Western Europe, automotive industry build rates were lower than prior year in the first quarter. In China, automotive retail sales activity continued to be solid, along with exports.

In the industrial coatings business, organic sales decreased by a mid-single-digit percentage year over year due to lower sales volumes and prices. Overall, global industrial production remained sluggish resulting in lower sales volumes in all regions except Asia Pacific, where volumes increased a high single-digit percentage.

Packaging coatings organic sales were flat year over year with solidly higher volumes stemming from PPG share gains offset by lower index-based pricing.

Specialty coatings and materials organic sales increased by a mid-single-digit percentage due to strong sales volumes partially offset by the absence of European energy-related surcharge pricing in the prior year period.

Segment income increased $9 million year over year primarily due to moderating input costs and other wage deflation, which more than offset lower selling prices and lower sales volumes.

Looking Ahead

In the second quarter, global industrial production is expected to remain at a low level with improvement in the Asia Pacific region offset by sluggishness in Europe. Aggregate organic sales are anticipated to be similar to the second quarter 2023. Automotive industry build rates are expected to increase modestly in the second quarter with growth in China and Latin America offsetting anticipated declining builds in Europe. Additionally, packaging coatings is expected to have positive sales volume growth in all regions compared to the prior-year second quarter. For the segment, lower prices are anticipated in 2024 due to index pricing and the absence of European energy-related surcharge pricing.

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Liquidity and Capital Resources

PPG had cash and short-term investments totaling $1.2 billion and $1.6 billion at March 31, 2024 and December 31, 2023, 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 contractual obligations.

Cash (used for)/from operating activities

Cash used for operating activities for the three months ended March 31, 2024 was $60 million and cash from operating activities for the three months ended March 31, 2023 was $85 million. The $145 million increase in cash used for operating activities was primarily due to unfavorable changes in working capital in the first quarter 2024 compared to the prior 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, 2024		December 31, 2023		March 31, 2023
Trade receivables, net	$3,156		$2,881		$3,142
Inventories, FIFO	2,583		2,376		2,880
Trade creditors’ liabilities	2,672		2,612		2,805
Operating working capital	$3,067		$2,645		$3,217
Operating working capital as a % of sales	17.8	%	15.2	%	18.4	%
Days sales outstanding	60		55		58

Environmental


	Three Months Ended March 31
($ in millions)	2024	2023
Cash outlays for environmental remediation activities	$8	$9


($ in millions)			Remainder of 2024						Annually 2025 - 2028
Projected future cash outlays for environmental remediation activities			$30 - $50						$20 - $75

Cash used for investing activities

Cash used for investing activities for the three months ended March 31, 2024 and 2023 was $239 million and $64 million, respectively. The $175 million increase in cash used for investing activities was primarily due to higher capital expenditures compared to the prior year.

Total capital spending is expected to be approximately $600 million in 2024 in support of future organic growth opportunities.

Cash (used for)/from financing activities

Cash used for financing activities for the three months ended March 31, 2024 and 2023 was $35 million and cash from financing activities for the three months ended March 31, 2023 was $277 million. The $312 million increase in cash used for financing activities was primarily due to share repurchases and the absence of net proceeds from commercial paper and short-term debt.

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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 December 2023, PPG obtained lender commitments sufficient to increase the size of the Term Loan by €250 million. In January 2024, PPG borrowed the additional €250 million.

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 above 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 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 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 and 2023, PPG repaid $300 million and $1.1 billion, respectively, of the Term Loan Credit Agreement using cash on hand. The Term Loan Credit Agreement was fully repaid as of December 31, 2023.

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 remained unchanged. In July 2023, PPG amended and restated the Credit Agreement, extending the term through July 27, 2028. The amended and restated Credit Agreement provides for a $2.3 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 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 March 31, 2024 and December 31, 2023.

The Term Loan and the Credit Agreement require the Company to maintain a ratio of Total Indebtedness to Total Capitalization, as defined in the Term Loan and the 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 March 31, 2024, Total Indebtedness to Total Capitalization as defined under the Credit Agreement was 43%.

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 no commercial paper borrowings outstanding as of March 31, 2024 and December 31, 2023.

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.

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Other Liquidity Information

Restructuring

Aggregate restructuring savings were approximately $8 million in the first quarter 2024. Total restructuring savings are expected to be at least $35 million in 2024. 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 $80 million in 2024.

Strategic Reviews

During the first quarter 2024, PPG announced that it would review strategic alternatives for its architectural coatings U.S. and Canada business and its global silicas products business. Through these strategic reviews, PPG will assess whether some or all of these businesses are better suited to grow faster with a partner or different owner, or may be better suited to operate as a core business within another company, as a standalone entity, or in a joint venture. PPG is executing on the strategic reviews and will communicate the path forward once determined.

Currency

Comparing spot exchange rates at March 31, 2024 and at December 31, 2023, the U.S. dollar strengthened against the currencies of many countries within Europe and Asia where PPG operates, partially offset by weakening against the Mexican peso. As a result, consolidated net assets at March 31, 2024 decreased by $12 million compared to December 31, 2023.

Comparing average exchange rates during the first three months of 2024 to those of the first three months of 2023, the U.S. dollar weakened against the currencies of many countries where PPG operates, including the Mexican Peso, partially offset by strengthening against the Chinese Yuan. This had a favorable impact on Income before income taxes for the three months ended March 31, 2024 of $10 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 13, “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 13, 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 13, PPG has significant reserves for environmental contingencies. Refer to the Environmental Matters section of Note 13 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

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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 2023 Form 10-K. There were no material changes in the Company’s critical accounting estimates from the 2023 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 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 2023 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 2023 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Risk

We conduct operations in many countries around the world. Our results of operations are subject to both currency transaction risk and currency translation risk. Certain foreign currency forward contracts outstanding during 2024 and 2023 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 $53 million and $23 million as of March 31, 2024 and December 31, 2023, 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 $409 million for the three months ended March 31, 2024 and $402 million for the year ended December 31, 2023.

PPG had U.S. dollar to euro cross currency swap contracts with a total notional amount of $475 million as of both March 31, 2024 and December 31, 2023. The fair value of these contracts were net assets of $41 million and $33 million as of March 31, 2024 and December 31, 2023, 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 $44 million and $46 million at March 31, 2024 and December 31, 2023, respectively.

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As of March 31, 2024 and December 31, 2023, PPG had non-U.S. dollar denominated borrowings outstanding of $3.5 billion and $3.3 billion, respectively. A weakening of the U.S. dollar by 10% against European currencies and by 20% against Asian and South American currencies would have resulted in unrealized translation losses on these borrowings of $385 million at March 31, 2024 and $363 million at December 31, 2023.

Interest Rate Risk

The Company manages its interest rate risk by balancing its exposure to fixed and variable rates while attempting to minimize its interest costs. PPG has interest rate swaps which converted $375 million of fixed rate debt to variable rate debt as of both March 31, 2024 and December 31, 2023. The fair values of these contracts was a liability of $20 million and $14 million as of March 31, 2024 and December 31, 2023, respectively. An increase in variable interest rates of 10% would have lowered the fair values of these swaps and increased annual interest expense by $6 million and $5 million for the periods ended March 31, 2024 and December 31, 2023, respectively. Considering the debt balance outstanding at March 31, 2024 and December 31, 2023, 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 increased annual interest expense associated with PPG's variable rate debt obligations by $3 million and by $2 million, respectively. Further a 10% reduction in interest rates would have increased the fair value of the Company's fixed rate debt by approximately $94 million and $96 million at March 31, 2024 and December 31, 2023, respectively; however, such changes would not have had an effect on PPG's Income before income taxes or cash flows.

There were no other material changes in the Company’s exposure to market risk from December 31, 2023 to March 31, 2024. Refer to Note 11, “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 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 certain insurers may contest coverage with respect to claims in the future. 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.

From the late 1880’s until the early 1970’s, PPG owned property located in Cadogan and North Buffalo Townships, Pennsylvania which was used for the disposal of solid waste from PPG’s former glass manufacturing facility in Ford City, Pennsylvania. In October 2018, the Pennsylvania Department of Environmental Protection (the “DEP”) approved PPG’s cleanup plan for the Cadogan Property. In April 2019, PPG and the DEP entered into a consent order and agreement (“CO&A”) which incorporated PPG’s approved cleanup plan and a draft final permit for the collection and discharge of seeps emanating from the former disposal area. The CO&A includes a civil penalty of $1.2 million for alleged past unauthorized discharges. PPG’s former disposal area is also the subject of a citizens’ suit filed by the Sierra Club and PennEnvironment seeking remedial measures beyond the measures specified in PPG’s approved cleanup plan, a civil penalty in addition to the penalty included in the CO&A and plaintiffs’ attorneys

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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. A trial on the issue of a civil penalty under the Clean Water Act has been scheduled for June 3, 2024. 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 13, “Commitments and Contingent Liabilities” in Part I, Item 1 of this Form 10-Q.

Item 1A. Risk Factors

There were no material changes in the Company’s risk factors from the risks disclosed in the 2023 Form 10-K.

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

Issuer Purchases of Equity Securities

The following table summarizes the Company's stock repurchase activity for the three months ended March 31, 2024:


Month	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Programs	Maximum Number of Shares That May Yet Be Purchased Under the Programs (1)
January 2024
Repurchase program	—	$—	—	7,162,444
February 2024
Repurchase program	—	$—	—	7,134,117
March 2024
Repurchase program	1,061,901	$141.29	1,061,901	5,936,211
Total quarter ended March 31, 2024
Repurchase program	1,061,901	$141.29	1,061,901	5,936,211

(1)In December 2017, PPG's board of directors approved a $2.5 billion share repurchase program. The remaining shares yet to be purchased under the program have been calculated using PPG’s closing stock price on the last business day of the respective month. This repurchase program has no expiration date.

In addition to the Company’s share repurchase program authorized in December 2017, PPG’s Board of Directors authorized the repurchase of an additional $2.5 billion of outstanding common stock on April 18, 2024.

Item 5. Other Information

Rule 10b5-1 Trading Plans

During the three months ended March 31, 2024, none of the Company's directors or officers, as defined in Section 16 of the Securities Exchange Act of 1934, adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K of the Securities Exchange Act of 1934.

Item 6. Exhibits

See the Index to Exhibits on page 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 three months ended March 31, 2024 and 2023, (ii) the Condensed Consolidated Balance Sheet at March 31, 2024 and December 31, 2023, (iii) the Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2024 and 2023, and (iv) Notes to Condensed Consolidated Financial Statements for the three months ended March 31, 2024.

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SIGNATURES

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


			PPG INDUSTRIES, INC.
			(Registrant)

Date:	April 19, 2024	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
			Vice President and Controller (Principal Accounting Officer and Duly Authorized Officer)