Acquisitions and Dispositions

9 Months Ended

Sep. 30, 2016

Acquisitions

On July 1, 2016, PPG completed the acquisition of MetoKote Corporation ("MetoKote"). MetoKote is a U.S.-based coatings services business with 2015 global sales of approximately $200 million. MetoKote applies coatings to customers' manufactured parts and assembled products. It operates on-site coatings services within several customer manufacturing locations, as well as at regional service centers, located throughout the U.S., Canada, Mexico, the United Kingdom, Germany, Hungary and the Czech Republic. Customers ship parts to MetoKote service centers where they are treated to enhance paint adhesion and painted with electrocoat, powder or liquid coatings technologies. Coated parts are then shipped to the customer’s next stage of assembly. MetoKote coats an average of more than 1.5 million parts per day.

PPG is in the process of obtaining third-party valuations of assets acquired and liabilities assumed in the MetoKote acquisition. As such, the allocation of the purchase price is subject to change. The following table summarizes the estimated fair value of assets acquired and liabilities assumed as reflected in the purchase price allocation for MetoKote.



($ in millions)	September 30, 2016
Receivables	$	30
Inventory	4
Property, plant, and equipment	96
Identifiable intangible assets	83
Goodwill	129
Total Assets	$	342
Accounts payable and accrued liabilities	10
Other current liabilities	10
Other long-term liabilities	16
Total Liabilities	$	36
Total purchase price, net of cash acquired	$	306

The pro-forma impact on PPG's sales and results of operations, including the pro forma effect of events that are directly attributable to the acquisition, was not significant. While calculating this impact, no cost savings or operating synergies that may result from the acquisition were included.

In conjunction with the 2013 separation of its commodity chemicals business, PPG conveyed to Axiall Corporation ("Axiall") its 60% ownership interest in Taiwan Chlorine Industries (“TCI”), a joint venture with China Petrochemical Development Corporation (“CPDC”) located in Taiwan. Under PPG’s agreement with CPDC, if certain post-closing conditions were not met following the 3 year anniversary of the separation, CPDC had the option to sell its 40% ownership interest in TCI to Axiall for $100 million. In turn, Axiall had a right to designate PPG as its designee to purchase the 40% ownership interest of CPDC. On April 22, 2016, Axiall announced that CPDC had decided to sell its ownership interest in TCI to Axiall. On June 19, 2016, Axiall formally designated PPG to purchase the 40% ownership interest in TCI. On August 31, 2016, Westlake Chemical Corporation acquired Axiall, which became a wholly-owned subsidiary of Westlake. PPG is currently negotiating the terms of its purchase of CPDC’s 40% ownership interest.

Dispositions

Flat Glass Business

On October 1, 2016, PPG completed the sale of its flat glass manufacturing and glass coatings operations to Vitro S.A.B. de C.V. PPG received approximately $740 million in cash proceeds and expects to record a gain on the sale during the fourth quarter 2016. PPG reported the assets and liabilities of the flat glass business as "Assets held for sale" and "Liabilities held for sale" in the accompanying condensed consolidated balance sheets and the results of operations of the flat glass business as discontinued operations on the condensed consolidated statements of income and cash flows for all periods presented.

Under the terms of the agreement, PPG divested its entire flat glass manufacturing and glass coatings operations, including production sites located in Fresno, California; Salem, Oregon; Carlisle, Pennsylvania; and Wichita Falls, Texas; four distribution/fabrication facilities located across Canada; and a research-and-development center located in Harmar, Pennsylvania, near Pittsburgh. PPG’s flat glass business included approximately 1,200 employees. The business manufactures glass that is fabricated into products used primarily in commercial and residential construction.

The net sales and income from discontinued operations related to the flat glass business for the three and nine months ended September 30, 2016 and 2015 were as follows:



	Three Months Ended September 30				Nine Months Ended September 30
($ in millions)	2016		2015		2016		2015
Net sales	$	156	$	147	$	427	$	421

Income from operations	26		27		70		70
Income tax expense	9		9		24		23
Income from discontinued operations, net of tax	$	17	$	18	$	46	$	47

The major classes of assets and liabilities of the flat glass business included in the PPG condensed consolidated balance sheet at September 30, 2016 and December 31, 2015 were as follows:



($ in millions)	September 30, 2016			December 31, 2015
Receivables	$	83		$	79
Inventory	66			47
Property, plant, and equipment	190			196
Deferred income taxes (a)	(37		)	(37		)
Assets held for sale	$	302		$	285
Short-term debt and current portion of long-term debt	1			1
Accounts payable and accrued liabilities	67			72
Long-term debt	15			16
Accrued pensions	21			16
Other postretirement benefits	4			6
Other long-term liabilities	3			1
Liabilities held for sale	$	111		$	112

(a) The net deferred income tax liability is included in assets held for sale due to the Company's tax jurisdictional netting.

European Fiber Glass Business

On October 1, 2016, PPG completed the sale of its European fiber glass operations to glass manufacturer Nippon Electric Glass Co. Ltd. ("NEG") and received cash proceeds of approximately $120 million. Manufacturing facilities in Hoogezand, Netherlands, and Wigan, England, and a research-and-development facility in Hoogezand were included in the transaction. The European fiber glass operations manufacture reinforcement materials for thermoset and thermoplastic composite applications. They serve the transportation, energy, infrastructure and consumer markets. This transaction meets the criteria to be classified as assets held for sale and accordingly all assets and liabilities of the European fiber glass business have been reclassified to "Assets held for sale" and "Liabilities held for sale" as of September 30, 2016 in the accompanying condensed consolidated balance sheet. The results of the European fiber glass business have not been reclassified as discontinued operations, as the divestiture of the European fiber glass business did not have a major impact on PPG's ongoing results of operations.

The major classes of assets and liabilities of the European fiber glass operation included in the PPG condensed, consolidated balance sheet at September 30, 2016 were as follows:



($ in millions)	September 30, 2016
Receivables	$	24
Inventory	18
Property, plant, and equipment	55
Goodwill	44
Assets held for sale	$	141
Accounts payable and accrued liabilities	34
Accrued pensions	67
Deferred income taxes (a)	(13		)
Other long-term liabilities	—
Liabilities held for sale	$	88

(a) The net deferred income tax asset is included in liabilities held for sale due to the Company's tax jurisdictional netting.

PFG Fiber Glass Joint Ventures

On September 22, 2016, PPG reached an agreement to divest its 50 percent ownership interests in its two PFG fiber glass joint ventures (PFG) to Nan Ya Plastics Corporation (Nan Ya), which currently controls the other 50 percent ownership interest in the joint ventures. Nan Ya is affiliated with Taiwan-based Formosa Plastics Group. The transaction is expected to close by the end of 2016 and PPG expects to receive cash proceeds of approximately $170 million.

PFG was formed as an equally-held joint venture between PPG and Nan Ya in 1987, with a single production facility in Chia Yi, Taiwan. To meet growing demand, a second joint venture was formed to add a production facility in Kunshan, China in 2001.

PFG supplies electronic yarn fibers used in integrated electronic circuit boards and fiber glass reinforcement products for automotive applications.

Pittsburgh Glass Works LLC

In April 2016, PPG sold its minority ownership interest in Pittsburgh Glass Works LLC ("PGW") to LKQ Corporation concurrent with the majority partner’s sale of its ownership interest. At March 31, 2016, the carrying value of PPG's investment in PGW was $21 million. In conjunction with the sale, PPG received $41 million in cash proceeds and recorded a pre-tax gain of $20 million in the second quarter 2016. PPG accounted for its interest in PGW under the equity method of accounting. PPG’s share of net earnings from PGW are reported in Other income in the Condensed, Consolidated Statement of Income for all periods presented and have not been reclassified as discontinued operations, as the divestiture of PGW does not represent a strategic shift in PPG’s operations and PGW did not have a major impact on PPG's ongoing results of operations.