Reportable Segment Information

9 Months Ended

Sep. 30, 2012

Reportable Segment Information

Reportable Segment Information

PPG is a multinational manufacturer with 13 operating segments that are organized based on the Company’s major products lines. These operating segments are also the Company’s reporting units for purposes of testing goodwill for impairment. The operating segments have been aggregated based on economic similarities, the nature of their products, production processes, end-use markets and methods of distribution into six reportable business segments.

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

The Industrial Coatings reportable segment is comprised of the automotive original equipment manufacturer (“OEM”), industrial and packaging coatings operating segments. This reportable segment primarily supplies a variety of protective and decorative coatings and finishes along with adhesives, sealants, inks and metal pretreatment products.

The Architectural Coatings – EMEA (Europe, Middle East, and Africa) reportable segment is comprised of the architectural coatings – EMEA operating segment. This reportable segment primarily supplies a variety of coatings under a number of brands and purchased sundries to painting contractors and consumers in Europe, the Middle East and Africa.

The Optical and Specialty Materials reportable segment is comprised of the optical products and silicas businesses. The primary Optical and Specialty Materials products are Transitions^® lenses, optical lens materials and high performance sunlenses; amorphous precipitated silicas for tire, battery separator and other end-use markets; and Teslin^® substrate used in such applications as radio frequency identification (RFID) tags and labels, e-passports, drivers’ licenses and identification cards. Transitions^® lenses are processed and distributed by PPG’s 51 percent-owned joint venture with Essilor International.

The Commodity Chemicals reportable segment is comprised of the chlor-alkali and derivatives operating segment. The primary chlor-alkali and derivative products are chlorine, caustic soda, vinyl chloride monomer, chlorinated solvents, calcium hypochlorite, ethylene dichloride, hydrochloric acid and phosgene derivatives.

The Glass reportable segment is comprised of the flat glass and fiber glass operating segments. This reportable segment primarily supplies flat glass and continuous-strand fiber glass products.

Reportable segment net sales and segment income for the three and nine months ended September 30, 2012 and 2011 were as follows:

	Three Months Ended September 30						Nine Months Ended September 30
	2012			2011			2012			2011
	(Millions)
Net sales:
Performance Coatings	$	1,210		$	1,208		$	3,601		$	3,490
Industrial Coatings	1,090			1,039			3,265			3,139
Architectural Coatings - EMEA	564			573			1,682			1,655
Optical and Specialty Materials	282			311			930			945
Commodity Chemicals	437			445			1,283			1,334
Glass	262			273			791			805
Total (a)	$	3,845		$	3,849		$	11,552		$	11,368
Segment income:
Performance Coatings	$	203		$	190		$	567		$	533
Industrial Coatings	153			101			446			332
Architectural Coatings - EMEA	56			53			136			115
Optical and Specialty Materials	76			93			280			273
Commodity Chemicals	94			104			300			307
Glass	24			23			55			78
Total	606			564			1,784			1,638
Legacy items (b)	(14		)	(15		)	(204		)	(52		)
Business restructuring (c)	—			—			(208		)	—
Acquisition-related (costs) gain, net (d)	—			—			(6		)	9
Costs related to the separation and merger transaction (e)	(9		)	—			(13		)	—
Interest expense, net of interest income	(44		)	(40		)	(126		)	(127		)
Other unallocated corporate expense – net	(53		)	(47		)	(163		)	(155		)
Income before income taxes	$	486		$	462		$	1,064		$	1,313

(a) Intersegment net sales for the three and nine months ended September 30, 2012 and 2011 were not material.

(b) Legacy items include current costs related to former operations of the Company, including pension and other postretirement benefit costs, certain charges for legal matters and environmental remediation costs, and certain charges which are considered to be unusual or non-recurring including the earnings impact of the proposed asbestos settlement. Legacy items also include equity earnings from PPG’s approximate 40 percent investment in the former automotive glass and services business. The expense for the nine months ended September 30, 2012 includes a nonrecurring environmental remediation pretax charge of $159 million. The charge relates to continued environmental remediation activities at legacy chemicals sites, primarily at PPG’s former Jersey City, N.J. chromium manufacturing plant and associated sites.

(c) The charge for business restructuring costs in the nine months ended September 30, 2012, includes charges of $65 million related to the Performance Coatings segment, $46 million related to the Industrial Coatings segment, $63 million related to the Architectural Coatings - EMEA segment, $32 million related to the Optical and Specialty Materials segment $1 million related to the Commodity Chemicals segment and $1 million related to Corporate. These costs are considered to be unusual and non-recurring and do not reduce the segment earnings used to evaluate the performance of the operating segments.

(d) For the nine months ended September 30, 2012, the expense represents the flow-through cost of sales of the step up to fair value of inventory acquired from Dyrup and Colpisa. These costs are considered to be unusual and non-recurring and do not reduce the segment earnings used to evaluate the performance of the operating segments. For the three and nine months ended September 30, 2011, represents a net benefit stemming primarily from a bargain purchase gain reflecting the excess of the fair value of the net assets acquired over the price paid for the business, net of the flow-through cost of sales of the step up to fair value of acquired inventory.

(e) Represents costs incurred in connection with the announced separation and merger of the commodity chemicals business.