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Reportable Business Segment Information
 12 Months Ended
Dec. 31, 2018
Segment Reporting [Abstract]  
Reportable Business Segment Information
Segment Organization and Products
PPG is a multinational manufacturer with 9 operating segments (which the Company refers to as “strategic business units”) that are organized based on the Company’s major products lines. 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 automotive refinish coatings, aerospace coatings, 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, 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.
Production facilities and sales for Performance Coatings and Industrial Coatings are global. PPG’s reportable segments continue to pursue opportunities to further develop their global reach, 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 sales tend to minimize the impact on PPG’s Net sales and Income before income taxes in the consolidated statement of income of changes in demand in a particular industry 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.
($ in millions)
2018

 
2017

 
2016

Net sales to external customers(1)
 
 
 
 
 
Performance Coatings

$9,087

 

$8,730

 

$8,580

Industrial Coatings
6,287

 
6,018

 
5,690

Total Net sales

$15,374

 

$14,748

 

$14,270

Segment income
 
 
 
 
 
Performance Coatings

$1,300

 

$1,313

 

$1,322

Industrial Coatings
818

 
979

 
1,060

Total Segment income

$2,118

 

$2,292

 

$2,382

Corporate / Non-Segment Items(1)
 
 
 
 
 
Legacy items(2)

$5

 

($2
)
 

($17
)
Environmental remediation charges and other costs
(77
)
 
—

 
(82
)
Business restructuring, net
(66
)
 
—

 
(191
)
Accelerated depreciation related to restructuring actions
(9
)
 
—

 
—

Impairment of a non-manufacturing asset
(9
)
 
—

 
—

Accounting investigation costs
(14
)
 
—

 
—

Legacy legal settlements
(10
)
 
—

 
—

Costs related to customer assortment change
(18
)
 
—

 
—

Transaction-related costs(3)
(6
)
 
(9
)
 
(8
)
Gain from sale of a non-operating asset
26

 
13

 
—

Brand rationalization charge
(6
)
 
—

 
—

Gain from a legal settlement
—

 
18

 
—

Asset write-downs
—

 
(7
)
 
(23
)
Pension settlement charges
—

 
(60
)
 
(968
)
Gains on disposals of ownership interests in business affiliates
—

 
25

 
46

Interest expense, net of interest income
(95
)
 
(85
)
 
(99
)
Corporate unallocated(1)
(146
)
 
(180
)
 
(261
)
Total Income before income taxes

$1,693

 

$2,005

 

$779

($ in millions)
2018

 
2017

 
2016

Depreciation and amortization
 
 
 
 
 
Performance Coatings

$274

 

$272

 

$272

Industrial Coatings
181

 
164

 
143

Corporate / Non-Segment Items(1)
42

 
24

 
25

Total

$497

 

$460

 

$440

Share of net earnings of equity affiliates
 
 
 
 
 
Performance Coatings

$1

 

$2

 

$5

Industrial Coatings
—

 
—

 
1

Corporate / Non-Segment Items(1)
15

 
10

 
2

Total

$16

 

$12

 

$8

Segment assets(4)
 
 
 
 
 
Performance Coatings

$9,846

 

$9,763

 

$9,168

Industrial Coatings
4,441

 
4,563

 
3,972

Corporate / Non-Segment Items(1)
1,728

 
2,212

 
2,631

Total

$16,015

 

$16,538

 

$15,771

Investment in equity affiliates
 
 
 
 
 
Performance Coatings

$33

 

$32

 

$30

Industrial Coatings
13

 
13

 
13

Corporate / Non-Segment Items(1)
86

 
89

 
3

Total

$132

 

$134

 

$46

Expenditures for property (including business acquisitions)
 
 
 
 
 
Performance Coatings

$545

 

$224

 

$187

Industrial Coatings
157

 
328

 
510

Corporate / Non-Segment Items(1)
87

 
133

 
32

Total

$789

 

$685

 

$729


($ in millions)
2018

 
2017

 
2016

Geographic Information
 
 
 
 
 
Net sales(5)
 
 
 
 
 
United States and Canada

$6,485

 

$6,307

 

$6,254

Europe, Middle East and Africa (“EMEA”)
4,678

 
4,389

 
4,164

Asia Pacific
2,618

 
2,523

 
2,431

Latin America
1,593

 
1,529

 
1,421

Total

$15,374

 

$14,748

 

$14,270

Segment income
 
 
 
 
 
United States and Canada

$1,022

 

$1,135

 

$1,176

EMEA
549

 
560

 
235

Asia Pacific
306

 
361

 
589

Latin America
241

 
236

 
382

Total

$2,118

 

$2,292

 

$2,382

Property—net
 
 
 
 
 
United States and Canada

$1,254

 

$1,224

 

$1,184

EMEA
777

 
826

 
726

Asia Pacific
482

 
493

 
447

Latin America
292

 
281

 
251

Total

$2,805

 

$2,824

 

$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 pension and other postretirement benefit costs, legal costs and certain charges which are considered to be non-recurring. Legacy items also include equity earnings from PPG’s investment in TCI. Refer to Note 3, “Acquisitions and Divestitures”.
(3)
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.
(4)
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 and deferred tax assets. 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”.
(5)
Net sales to external customers are attributed to geographic regions based upon the location of the operating unit shipping the product.