Acquisitions and Dispositions

9 Months Ended

Sep. 30, 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 $1.95 billion, net of cash acquired of $69 million. PPG also repaid $280 million of third-party debt assumed in the acquisition. Comex manufactures coatings and related products in Mexico and sells them in Mexico and Central America principally through approximately 3,900 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. As of the acquisition date, Comex had 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 principally included in the results of the architectural coatings - Americas and Asia Pacific business, within the Performance Coatings reportable segment. Comex's net sales were approximately $200 million and $630 million for the three and nine month periods ended September 30, 2015, respectively. Comex's income from continuing operations for both the three and nine months ended September 30, 2015 was a mid-teen percentage return on sales.

The purchase price related to the Comex acquisition was allocated based on information available at the acquisition date and is subject to customary post-closing adjustments. During the nine-months ended 2015, PPG obtained a valuation of property, plant and equipment acquired in the Comex acquisition which resulted in adjustments to property, plant and equipment, non-current deferred tax liabilities and goodwill. Over the nine month period ended September 30, 2015, PPG recorded remeasurement period adjustments, which have reduced goodwill by a net, aggregate amount of $13 million. These preliminary remeasurement period adjustments are not considered material individually or in the aggregate, therefore, prior periods have not been revised. Certain other preliminary purchase price allocation estimates will be finalized in the fourth quarter of 2015. 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	$	366
Property, plant, and equipment	230
Trademarks with indefinite lives	1,022
Identifiable intangible assets with finite lives	281
Goodwill	1,073
Other non-current assets	30
Total assets	$	3,002
Current liabilities	(321		)
Non-current deferred tax liabilities	(407		)
Long-term debt	(280		)
Accrued pensions	(20		)
Other long-term liabilities	(24		)
Total liabilities	$	(1,052	)
Total purchase price, net of cash acquired	$	1,950

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 24 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 September 30, 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 September 30		Nine Months Ended September 30
($ in millions)	2014		2014
Net sales	$	4,138	$	12,227

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 or nine months ended September 30, 2014. While calculating this impact, no cost savings or operating synergies that may result from the acquisition were included.

Other Acquisitions

Acquisition spending during the nine months ended September 30, 2015 totaled $274 million, net of $130 million of cash acquired and other post-closing adjustments.

On October 1, 2015, PPG acquired a majority interest in the automotive and aerospace sealants and adhesives business of Le Joint Français SNC (“LJF”), a France-based specialty sealants and adhesives manufacturer serving the aerospace, automotive and insulating glass industries. This acquisition brings new approvals and technology variants to PPG that will support geographic expansion and aid growth in existing PPG markets. LJF has been a long-time licensee of PPG Aerospace sealant technology. PPG will report the sales and income from operations for LJF as part of the aerospace coatings business in the Performance Coatings segment.

On September 1, 2015, PPG completed the acquisition of I.V.C. Industrial Coatings, Inc. ("IVC"), a U.S.-based specialty powder and liquid coatings company. IVC's industry-leading coatings are used on a wide variety of products such as metal office furniture, material handling and storage products, automotive parts, motorcycles, industrial containers, small appliances and electronics such as printers, servers and audio-visual equipment. The addition of IVC's high-quality products and industry expertise will further enhance PPG's ability to deliver a robust portfolio of industry-leading industrial coatings solutions. PPG reports the sales and income from operations for IVC as part of the industrial coatings business in the Industrial Coatings segment.

On July 1, 2015, PPG acquired Cuming Microwave Corporation based in Avon, Massachusetts, and its wholly-owned subsidiary Cuming-Lehman Chambers, Inc., based in Chambersburg, Pennsylvania. The acquisition enhances PPG’s portfolio of aerospace coatings with specialty coatings and materials that absorb microwaves and radio waves such as radar. The products are used for military aircraft and also have applications in electronics, telecommunications, medical and automotive end-uses. PPG reports the sales and income from operations for Cuming Microwave Corporation as part of the aerospace business in the Performance Coatings segment.

On June 2, 2015, PPG acquired Consorcio Latinoamericano, which operates a network of 57 paint stores in Central America. With this acquisition, PPG will operate 87 company-owned stores across Belize, El Salvador, Guatemala, Honduras, Costa Rica, Nicaragua and Panama. PPG has branded stores in Panama with the Glidden brand, which is well recognized in the region, and plans to offer products from its protective and marine coatings business in stores throughout Central America. Consorcio Latinoamericano operated as a concessionaire network for PPG-Comex, the Company’s architectural paint and coatings business in Mexico and Central America. PPG reports the sales and income from operations for Consorcio Latinamericano as part of the architectural coatings - Americas and Asia Pacific business in the Performance Coatings segment.

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. PPG reports the sales and income from operations for Revocoat as part of the automotive OEM business in the Industrial Coatings segment.

Dispositions

In September 2014, PPG completed the sale of substantially all of the assets of its former Mt. Zion, Illinois, flat glass manufacturing facility to automotive glass manufacturer Fuyao Glass America Incorporated. As a result of this transaction, the Company recognized a pre-tax gain of $22 million which is reported in the caption "Other income" on the Condensed Consolidated Statement of Income. The sale did not include specific production assets which are unique and specialized to PPG.

In July 2014, Pittsburgh Glass Works LLC ("PGW"), an equity affiliate in which PPG has an approximate 40% ownership interest, sold its insurance and services business and recognized a pre-tax gain on the sale. PPG accounts for its interest in PGW under the equity method of accounting and in the third quarter of 2014 recognized $94 million as its share of the gain on this transaction. This gain is reported in the caption "Other income" on the Condensed Consolidated Statement of Income. In addition, PPG received a cash distribution of approximately $38 million from PGW to offset PPG’s expected income tax liability associated with this sale. The pre-tax gain and the cash distribution are both reported within the "Equity affiliate earnings, net of distributions received" caption on the Condensed Consolidated Statement of Cash Flows.

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 pretax (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 pretax 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 was 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 pretax 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 pretax 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 nine months ending September 30, 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. The revenues for these contracts are included in the results from continuing operations.

Net sales and earnings from discontinued operations related to the Transitions Optical and sunlens transaction are presented in the table below for the three and nine months ended September 30, 2015 and 2014:



	Three Months Ended September 30					Nine Months Ended September 30
($ in millions)	2015		2014			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 expense	—		(6		)	1		(567		)
(Loss)/Income from discontinued operations, net of tax	—		(6		)	1		1,005
Less: Net income attributable to non-controlling interests, discontinued operations	—		—			—		(33		)
Net (loss) income from discontinued operations (attributable to PPG)	$	—	$	(6	)	$	1	$	972