Acquisitions and Dispositions

3 Months Ended

Mar. 31, 2015

Acquisitions

Comex

In November 2014, PPG finalized the acquisition of Consorcio Comex, S.A. de C.V. (“Comex”), an architectural coatings company with headquarters in Mexico City, Mexico for $1.98 billion, net of cash acquired of $69 million. PPG also repaid $280 million of third-party debt assumed in the acquisition. The purchase price is subject to customary post-closing adjustments. Comex manufactures coatings and related products in Mexico and sells them in Mexico and Central America principally through more than 3,800 stores that are independently owned and operated by more than 700 concessionaires. Comex also sells its products through regional retailers and wholesalers and directly to customers. The company has approximately 3,900 employees, eight manufacturing facilities and six distribution centers. The acquisition further expands PPG's global coatings business and adds a leading architectural coatings business in Mexico and Central America. Since the acquisition, the results of this acquired business have been included in the results of the architectural coatings - Americas and Asia Pacific operating segment, within the Performance Coatings reportable segment. Net sales reported by PPG from this acquired business were approximately $210 million for the quarter ended March 31, 2015. Segment income from continuing operations related to this acquisition was in the low to mid-teen percentage return on these sales.

PPG is in the process of obtaining third-party valuations of property, plant and equipment acquired in the Comex acquisition. As such, the allocation of the purchase price is subject to change. The purchase price was allocated based on information available at the acquisition date. During the quarter ended March 31, 2015, PPG recorded remeasurement period adjustments, which reduced goodwill by $56 million. The amount was not considered material and therefore prior periods have not been revised. The following table summarizes the estimated fair value of assets acquired and liabilities assumed as reflected in the preliminary purchase price allocation for Comex.



($ in millions)
Current assets	$	379
Property, plant, and equipment	312
Trademarks with indefinite lives	1,022
Identifiable intangible assets with finite lives	282
Goodwill	1,030
Other non-current assets	35
Total assets	$	3,060
Current liabilities	(368		)
Non-current deferred tax liabilities	(387		)
Long-term debt	(280		)
Accrued pensions	(20		)
Other long-term liabilities	(29		)
Total liabilities	$	(1,084	)
Total purchase price, net of cash acquired	$	1,976

The identifiable intangible assets with finite lives in the table above, which consist primarily of customer relationships and acquired technology, are subject to amortization over a weighted average period of 23 years. See Note 5, "Goodwill and Other Identifiable Intangible Assets" for further details regarding PPG's intangible assets.

The following information reflects the net sales of PPG for the period ended March 31, 2014 on a pro forma basis as if the transaction for the Comex acquisition had been completed on January 1, 2014.



Condensed Consolidated Pro Forma information (unaudited)
	Three months-ended March 31
($ in millions)	2014
Net sales	$3,810

The pro forma impact on PPG's results of operations, including the pro forma effect of events that are directly attributable to the acquisition, was not significant to the consolidated results for the three months ended March 31, 2014. While calculating this impact, no cost savings or operating synergies that may result from the acquisition were included.

Other Acquisitions

On April 1, 2015, PPG completed the acquisition of Revocoat from the Axson Group. Revocoat, headquartered in France, is a world leader in automotive adhesives and sealants and offers a range of automotive assembly products such as complementary epoxy-based products, polyurethanes and water-based emulsions. Revocoat employs more than 500 people and operates eight manufacturing facilities and one research and development center. Beginning in the second quarter of 2015, PPG will report the sales and income from operations from Revocoat as part of the automotive OEM business unit in the Industrial Coatings segment.

Dispositions

In March 2014, the Company completed the sale of its 51% ownership interest in its Transitions Optical joint venture and 100% of its optical sunlens business to Essilor International (Compagnie Generale D'Optique) SA ("Essilor"). PPG received cash at closing of $1.735 billion pre-tax (approximately $1.5 billion after-tax). The cash consideration was subject to certain post-closing adjustments and transaction costs, all of which have been settled. The sale of these businesses, which were previously reported in the former Optical and Specialty Materials segment, resulted in a first quarter of 2014 pre-tax gain of $1,468 million ($946 million after-tax) reported in discontinued operations. During the first quarter of 2014, the Company recognized $522 million of tax expense on the sale, of which $262 million is deferred U.S. income tax on the foreign earnings of the sale, as PPG does not consider these earnings to be reinvested for an indefinite period of time. The pre-tax gain on this sale reflects the excess of the sum of the cash proceeds received over the net book value of the net assets of PPG's former Transitions Optical and sunlens business. The Company also incurred $55 million of pre-tax expense, primarily for professional services related to the sale, post-closing adjustments, costs and other contingencies under the terms of the agreements. The net gain on the sale includes these related losses and expenses. During 2015 and 2014, revisions to estimated tax liabilities associated with the transaction were recorded to discontinued operations.

The results of operations and cash flows of these businesses and the net gain on the sale, are reported as results from discontinued operations for the three months ending March 31, 2014.

Essilor has also entered into multi-year agreements with PPG for the continued supply of photochromic materials and for research and development services for a period of 5 years, subject to renewal. PPG considered the significance of the revenues associated with the agreements compared to total operating revenues of the disposed businesses and determined that they were not significant.

Net sales and income from discontinued operations related to the Transitions Optical and sunlens transaction are presented in the table below for the three months ended March 31, 2015 and 2014:



	Three Months Ended March 31
($ in millions)	2015		2014
Net sales	$	—	$	247
Income from operations	$	—	$	104
Net gain from divestiture of PPG's interest in the Transitions Optical joint venture and sunlens business	—		1,468
Income tax benefit (expense)	1		(554		)
Income from discontinued operations, net of tax	1		1,018
Less: Net income attributable to non-controlling interests, discontinued operations	—		(33		)
Net income from discontinued operations (attributable to PPG)	$	1	$	985