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Reportable Business Segment Information
 12 Months Ended
Dec. 31, 2017
Segment Reporting [Abstract]  
Reportable Business Segment Information
Reportable Business Segment Information (As Restated)
Segment Organization and Products
PPG is a multinational manufacturer with 10 operating segments (which the Company refers to as “strategic business units”) 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 (see Note 1, “Summary of Significant Accounting Policies”).
The Company’s reportable business segments include the following two segments: Performance Coatings and Industrial Coatings. The operating segments have been aggregated based on economic similarities, the nature of their products, production processes, end-use markets and methods of distribution.
The Performance Coatings reportable segment is comprised of the refinish, aerospace, architectural coatings – Americas and Asia-Pacific, architectural coatings - EMEA, 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”) coatings, industrial coatings, packaging coatings, coatings services and the specialty coatings and materials operating segments. This reportable segment primarily supplies a variety of protective and decorative coatings and finishes along with adhesives, sealants, metal pretreatment products, optical monomers and coatings, precipitated silicas and other specialty materials.
Effective January 1, 2018, the coating services operating segment has been merged into the industrial coatings operating segment and the Company will have 9 operating segments. Management teams and operations will be realigned to better deliver our total value proposition and provide optimal solutions to our customers, as well as to achieve operational efficiencies.
Production facilities and markets for Performance Coatings and Industrial Coatings are global. PPG’s reportable segments continue to pursue opportunities to further develop their global markets, including efforts in Asia, Eastern Europe and Latin America. Each of the reportable segments in which PPG is engaged is highly competitive. The diversification of our product lines and the worldwide markets served tend to minimize the impact on PPG’s total sales and income from continuing operations of changes in demand in a particular market or in a particular geographic area.
The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies (See Note 1, “Summary of Significant Accounting Policies”). The Company allocates resources to operating segments and evaluates the performance of operating segments based upon segment income, which is income before interest expense – net, income taxes, and noncontrolling interests and excludes certain charges which are considered to be unusual or non-recurring. The Company also evaluates performance of operating segments based on working capital reduction, margin growth, and sales volume growth. Legacy items include current costs related to former operations of the Company, including certain environmental remediation, pension and other postretirement benefit costs, and certain charges for legal and other matters which are considered to be unusual or non-recurring. These legacy costs are excluded from the segment income that is used to evaluate the performance of the operating segments.
Corporate unallocated costs include the costs of corporate staff functions not directly associated with the operating segments, the cost of corporate legal cases, net of related insurance recoveries and the cost of certain insurance and stock-based compensation programs. Net periodic pension expense is allocated to the operating segments and the portion of net periodic pension expense related to the corporate staff functions is included in the Corporate unallocated costs.
Product movement between Performance Coatings and Industrial Coatings is limited, is accounted for as an inventory transfer, and is recorded at cost plus a mark-up, the impact of which is not significant to the segment income of the reportable segments.
As Restated
 
 
 
 
 
 
 
($ in millions)
Reportable Business Segments
Performance Coatings

 
Industrial Coatings

 
Corporate / Eliminations /
Non-Segment Items(1)

 
Consolidated Totals

2017
 
 
 
 
 
 
 
Net sales to external customers

$8,730

 

$6,018

 
$
—

 

$14,748

Intersegment net sales
—

 
—

 
—

 
—

Total net sales

$8,730

 

$6,018

 
$
—

 

$14,748

Segment income

$1,321

 

$972

 
$
—

 

$2,293

Legacy items(2)
 
 
 
 
 
 
(2
)
Pension settlement charge
 
 
 
 
 
 
(60
)
Transaction-related costs(5) 
 
 
 
 
 
 
(9
)
Asset write-downs
 
 
 
 
 
 
(7
)
Gain from sale of the Plaka business
 
 
 
 
 
 
25

Gain from a legal settlement
 
 
 
 
 
 
18

Gain from sale of a non-operating asset
 
 
 
 
 
 
13

Interest expense, net of interest income
 
 
 
 
 
 
(85
)
Corporate unallocated(1)
 
 
 
 
 
 
(181
)
Income before income taxes
 
 
 
 
 
 

$2,005

Depreciation and amortization

$272

 

$164

 

$24

 

$460

Share of net earnings (loss) of equity affiliates

$2

 

$—

 

$10

 

$12

Segment assets(3)

$9,763

 

$4,563

 

$2,212

 

$16,538

Investment in equity affiliates

$32

 

$13

 

$89

 

$134

Expenditures for property (including business acquisitions)

$224

 

$328

 

$133

 

$685

As Restated
 
 
 
 
 
 
 
($ in millions)
Reportable Business Segments
Performance Coatings

 
Industrial Coatings

 
Corporate / Eliminations /
Non-Segment Items(1)

 
Consolidated Totals

2016
 
 
 
 
 
 
 
Net sales to external customers

$8,580

 

$5,690

 

$—

 

$14,270

Intersegment net sales
—

 
1

 
(1
)
 
—

Total net sales

$8,580

 

$5,691

 

($1
)
 

$14,270

Segment income

$1,314

 

$1,042

 

$—

 

$2,356

Legacy items(2)
 
 
 
 
 
 
(114
)
Business restructuring charge
 
 
 
 
 
 
(191
)
Transaction-related costs(5)
 
 
 
 
 
 
(8
)
Pension settlement charges
 
 
 
 
 
 
(968
)
Asset write-downs
 
 
 
 
 
 
(23
)
Gains on disposals of ownership interests in business affiliates
 
 
 
 
 
 
46

Interest expense, net of interest income
 
 
 
 
 
 
(99
)
Corporate unallocated(1)
 
 
 
 
 
 
(220
)
Income before income taxes
 
 
 
 
 
 

$779

Depreciation and amortization

$272

 

$143

 

$25

 

$440

Share of net earnings/(loss) of equity affiliates

$5

 

$1

 

$2

 

$8

Segment assets(3)

$9,168

 

$3,972

 

$2,631

 

$15,771

Investment in equity affiliates

$30

 

$13

 

$3

 

$46

Expenditures for property (including business acquisitions)

$187

 

$510

 

$32

 

$729

($ in millions)
Reportable Business Segments
Performance Coatings

 
Industrial Coatings

 
Corporate / Eliminations /
Non-Segment Items(1)

 
Consolidated Totals

2015
 

 
 

 
 

 


Net sales to external customers

$8,765

 

$5,476

 

$—

 

$14,241

Intersegment net sales
—

 
1

 
(1
)
 
—

Total net sales

$8,765

 

$5,477

 

($1
)
 

$14,241

Segment income

$1,302

 

$985

 

$—

 

$2,287

Legacy items(2)
 

 
 

 
 

 
(51
)
Business restructuring charge
 
 
 
 
 
 
(136
)
Transaction-related costs(5)
 
 
 
 
 
 
(44
)
Interest expense, net of interest income
 

 
 

 
 

 
(86
)
Corporate unallocated(1)
 

 
 

 
 

 
(225
)
Income before income taxes
 

 
 

 
 

 

$1,745

Depreciation and amortization

$296

 

$124

 

$26

 

$446

Share of net earnings of equity affiliates

$7

 

$—

 

($3
)
 

$4

Segment assets(3)

$9,917

 

$3,643

 

$3,516

 

$17,076

Investment in equity affiliates

$45

 

$13

 

$36

 

$94

Expenditures for property (including business acquisitions)

$298

 

$414

 

$38

 

$750


($ in millions)
 
 
 
 
 
Geographic Information
2017

 
2016

 
2015

Net sales(4)
As Restated
 
 
 
 
United States and Canada

$6,307

 

$6,254

 

$6,232

Europe, Middle East and Africa (“EMEA”)
4,389

 
4,164

 
4,103

Asia Pacific
2,523

 
2,431

 
2,433

Latin America
1,529

 
1,421

 
1,473

Total

$14,748

 

$14,270

 

$14,241

Segment income
 
 
 
 
 
United States and Canada

$1,129

 

$1,152

 

$1,176

EMEA
569

 
590

 
539

Asia Pacific
361

 
382

 
359

Latin America
234

 
232

 
213

Total

$2,293

 

$2,356

 

$2,287

Property—net
 
 
 
 
 
United States and Canada

$1,224

 

$1,184

 

$1,101

EMEA
826

 
726

 
805

Asia Pacific
493

 
447

 
431

Latin America
281

 
251

 
271

Total

$2,824

 

$2,608

 

$2,608

(1)
Corporate intersegment net sales represent intersegment net sales eliminations. Corporate unallocated costs include the costs of corporate staff functions not directly associated with the operating segments, certain legal and insurance costs and stock-based compensation expense.
(2)
Legacy items include current costs related to former operations of the Company, including certain environmental remediation, pension and other postretirement benefit costs, legal costs and certain charges which are considered to be non-recurring. Until April 2016, legacy items also include equity earnings from PPG’s minority investment in Pittsburgh Glass Works, LLC. The Legacy items for 2016 include an environmental remediation pre-tax charge of $82 million. These charges relate to continued environmental remediation activities at legacy chemicals sites, primarily at PPG’s former Jersey City, N.J. chromium manufacturing plant and associated sites (Refer to Note 14, “Commitments and Contingent Liabilities”).
(3)
Segment assets are the total assets used in the operation of each segment. Corporate assets are principally cash and cash equivalents, cash held in escrow, short term investments, deferred tax assets and, until April 2016, PPG’s equity investment in it’s former automotive glass and services business. Non-segment items also includes the assets of businesses which have been reclassified as discontinued operations in the Consolidated Statement of Income. (Refer to Note 3, “Acquisitions and Divestitures”).
(4)
Net sales to external customers are attributed to geographic regions based upon the location of the operating unit shipping the product.
(5)
Transaction-related costs include advisory, legal, accounting, valuation, and other professional or consulting fees incurred to effect significant acquisitions, as well as similar fees and other costs to effect divestitures not classified as discontinued operations. These costs also include the flow-through cost of sales for the step up to fair value of inventory acquired in acquisitions.