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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
  –––––––––––––––––––––––––––––––––––––––––––––––––
FORM 10-Q
  –––––––––––––––––––––––––––––––––––––––––––––––––
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2021
or
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 1-1687
ppg-20210331_g1.gif
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
PPG INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
25-0730780
(I.R.S. Employer Identification No.)
Pennsylvania
(State or Other Jurisdiction of Incorporation or Organization)
One PPG Place, Pittsburgh, Pennsylvania
(Address of Principal Executive Offices)
15272
(Zip Code)
(412) 434-3131
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $1.66 2/3
PPGNew York Stock Exchange
0.875% Notes due 2022PPG 22New York Stock Exchange
0.875% Notes due 2025PPG 25New York Stock Exchange
1.400% Notes due 2027PPG 27New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes      No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes     No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.    
Large Accelerated FilerAccelerated Filer
Non-accelerated Filer
 
Smaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes     No 
As of March 31, 2021, 237,091,179 shares of the Registrant’s common stock, par value $1.66 2/3 per share, were outstanding.



PPG INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
 
  PAGE
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.
1

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PPG INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Income (Unaudited)
($ in millions, except per share amounts)
 Three Months Ended
March 31
 20212020
Net sales$3,881 $3,377 
Cost of sales, exclusive of depreciation and amortization2,232 1,908 
Selling, general and administrative891 905 
Depreciation90 93 
Amortization39 36 
Research and development, net102 101 
Interest expense30 32 
Interest income(6)(9)
Other charges17 10 
Other income(13)(18)
Income before income taxes$499 $319 
Income tax expense114 71 
Net income attributable to controlling and noncontrolling interests$385 $248 
Net income attributable to noncontrolling interests(7)(5)
Net income (attributable to PPG)$378 $243 
Earnings per common share (attributable to PPG)$1.59 $1.03 
Earnings per common share (attributable to PPG) - assuming dilution$1.58 $1.02 
The accompanying notes to the condensed consolidated financial statements are an integral part of this condensed consolidated statement.
Condensed Consolidated Statement of Comprehensive Income/(Loss) (Unaudited)
($ in millions)
 Three Months Ended
March 31
 20212020
Net income attributable to the controlling and noncontrolling interests$385 $248 
Other comprehensive(loss)/income, net of tax:
Defined benefit pension and other postretirement benefits(5)1 
Unrealized foreign currency translation adjustments(128)(706)
Derivative financial instruments 3 
Other comprehensive loss, net of tax($133)($702)
Total comprehensive income/(loss)$252 ($454)
Less: amounts attributable to noncontrolling interests:
Net income(7)(5)
Unrealized foreign currency translation adjustments2 10 
Comprehensive income/(loss) attributable to PPG$247 ($449)
The accompanying notes to the condensed consolidated financial statements are an integral part of this condensed consolidated statement.
2

Table of Contents
PPG INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet (Unaudited)
($ in millions)
March 31, 2021December 31, 2020
Assets
Current assets:
Cash and cash equivalents$1,808 $1,826 
Short-term investments120 96 
Receivables, net3,034 2,726 
Inventories1,914 1,735 
Other current assets463 415 
Total current assets$7,339 $6,798 
Property, plant and equipment (net of accumulated depreciation of $4,367 and $4,349)3,052 3,127 
Goodwill5,153 5,102 
Identifiable intangible assets, net2,301 2,351 
Deferred income taxes334 379 
Investments429 267 
Operating lease right-of-use assets851 847 
Other assets680 685 
Total$20,139 $19,556 
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities$3,815 $3,792 
Restructuring reserves244 281 
Short-term debt and current portion of long-term debt881 578 
Current portion of operating lease liabilities180 180 
Total current liabilities$5,120 $4,831 
Long-term debt5,336 5,171 
Operating lease liabilities676 677 
Accrued pensions927 945 
Other postretirement benefits728 733 
Deferred income taxes422 435 
Other liabilities961 949 
Total liabilities$14,170 $13,741 
Commitments and contingent liabilities (Note 14)
Shareholders’ equity:
Common stock$969 $969 
Additional paid-in capital1,029 1,008 
Retained earnings19,719 19,469 
Treasury stock, at cost(13,148)(13,158)
Accumulated other comprehensive loss(2,730)(2,599)
Total PPG shareholders’ equity$5,839 $5,689 
Noncontrolling interests130 126 
Total shareholders’ equity$5,969 $5,815 
Total$20,139 $19,556 
The accompanying notes to the condensed consolidated financial statements are an integral part of this condensed consolidated statement.
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PPG INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Shareholders' Equity (Unaudited)
($ in millions)
Common StockAdditional Paid-In CapitalRetained EarningsTreasury StockAccumulated Other Comprehensive LossTotal PPGNon-controlling InterestsTotal
January 1, 2021$969 $1,008 $19,469 ($13,158)($2,599)$5,689 $126 $5,815 
Net income attributable to the controlling and noncontrolling interests— — 378 — — $378 7 $385 
Other comprehensive loss, net of tax— — — — (131)($131)(2)($133)
Cash dividends— — (128)— — ($128)— ($128)
Issuance of treasury stock— 25 — 10 — $35 — $35 
Stock-based compensation activity— (4)— — — ($4)— ($4)
Reductions in noncontrolling interests— — — — — — (1)(1)
March 31, 2021$969 $1,029 $19,719 ($13,148)($2,730)$5,839 $130 $5,969 
Common StockAdditional Paid-In CapitalRetained EarningsTreasury StockAccumulated Other Comprehensive LossTotal PPGNon-controlling InterestsTotal
January 1, 2020$969 $950 $18,906 ($13,191)($2,350)$5,284 $119 $5,403 
Net income attributable to the controlling and noncontrolling interests— — 243 — — $243 5 $248 
Other comprehensive loss, net of tax— — — — (692)($692)(10)($702)
Cash dividends— — (120)— — ($120)— ($120)
Issuance of treasury stock— 12 — 4 — $16 — $16 
Stock-based compensation activity— (8)— — — ($8)— ($8)
March 31, 2020$969 $954 $19,029 ($13,187)($3,042)$4,723 $114 $4,837 
The accompanying notes to the condensed consolidated financial statements are an integral part of this condensed consolidated statement.
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PPG INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows (Unaudited)
Three Months Ended
March 31
($ in millions)20212020
Operating activities:
Net income attributable to controlling and noncontrolling interests$385 $248 
Adjustments to reconcile net income to cash from operations:
Depreciation and amortization129 129 
Pension expense(9)10 
Environmental remediation charges16 8 
Business restructuring, net 7 
Stock-based compensation expense17 7 
Equity affiliate income, net of dividends(1)(4)
Deferred income taxes(7)(4)
Cash contributions to pension plans(1)(2)
Cash used for restructuring actions(26)(18)
Change in certain asset and liability accounts (net of acquisitions):
Receivables(354)(58)
Inventories(189)(206)
Other current assets(37)(28)
Accounts payable and accrued liabilities110 (87)
Taxes and interest payable22 (28)
Noncurrent assets and liabilities, net(32)(27)
Other(46)(106)
Cash used for operating activities($23)($159)
Investing activities:
Capital expenditures(80)(37)
Business acquisitions, net of cash balances acquired(356)(44)
Payments for the settlement of cross currency swap contracts(3)(2)
Proceeds from the settlement of cross currency swap contracts9 10 
Other6 14 
Cash used for investing activities($424)($59)
Financing activities:
Proceeds on commercial paper and short-term debt, net of payments300 371 
Repayment of term loan(400) 
Proceeds from revolving credit facility 800 
Proceeds from the issuance of debt, net of discounts and fees692  
Repayment of long-term debt(1)(5)
Repayment of acquired debt(3)(8)
Issuance of treasury stock20 5 
Dividends paid on PPG common stock(128)(120)
Payments related to tax withholding on stock-based compensation awards(11)(7)
Other (24)
Cash from financing activities$469 $1,012 
Effect of currency exchange rate changes on cash and cash equivalents(40)(124)
Net (decrease)/increase in cash and cash equivalents($18)$670 
Cash and cash equivalents, beginning of period1,826 1,216 
Cash and cash equivalents, end of period$1,808 $1,886 
Supplemental disclosures of cash flow information:
Interest paid, net of amount capitalized$52 $48 
Taxes paid, net of refunds$97 $90 
The accompanying notes to the condensed consolidated financial statements are an integral part of this condensed consolidated statement.
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PPG INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
 
1.Basis of Presentation
The condensed consolidated financial statements included herein are unaudited and have been prepared following the requirements of the Securities and Exchange Commission (the "SEC") and accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim reporting. Under these rules, certain footnotes and other financial information that are normally required for annual financial statements can be condensed or omitted. These statements include all adjustments, consisting only of normal, recurring adjustments, necessary for a fair presentation of the financial position and shareholders' equity of PPG as of March 31, 2021 and the results of its operations and cash flows for the three months ended March 31, 2021 and 2020. All intercompany balances and transactions have been eliminated. Material subsequent events are evaluated through the report issuance date and disclosed where applicable. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in PPG's 2020 Annual Report on Form 10-K (the "2020 Form 10-K").
Net sales, expenses, assets and liabilities can vary during each quarter of the year. Accordingly, the results of operations for the three months ended March 31, 2021 and the trends in these unaudited condensed consolidated financial statements may not necessarily be indicative of the results to be expected for the full year.
2.New Accounting Standards
Accounting Standards Adopted in 2021
Effective January 1, 2021, PPG adopted Accounting Standards Update ("ASU") No. 2019-12, "Income Taxes - Simplifying the Accounting for Income Taxes." This ASU is intended to simplify various aspects of accounting for income taxes by eliminating certain exceptions within Accounting Standards Codification Topic 740, "Income Taxes" and to clarify certain aspects of the current accounting guidance. Adoption of this standard did not materially impact PPG's consolidated financial position, results of operations or cash flows.
Accounting Standards to be Adopted in Future Years
In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40).” This ASU simplifies the accounting for convertible debt instruments by removing certain accounting separation models as well as the accounting for debt instruments with embedded conversion features that are not required to be accounted for as derivative instruments. The ASU also updates and improves the consistency of earnings per share calculations for convertible instruments. The amendments in this ASU are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. PPG is currently assessing the potential impacts this ASU may have on its consolidated financial position, results of operations and cash flows.
In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform." This ASU provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as the London Interbank Offered Rate ("LIBOR"). The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued. The amendments in this ASU are effective through December 31, 2022. PPG is currently assessing the potential impacts this ASU may have on its consolidated financial position, results of operations and cash flows.
3.Acquisitions and Divestitures
Acquisitions
On December 18, 2020, PPG announced that it entered into a definitive agreement to acquire Tikkurila in an all-cash transaction. On February 4, 2021, PPG and Tikkurila entered into an amendment to the previously announced definitive combination agreement. Tikkurila is a leading Nordic producer and distributor of decorative paint and coatings. Under the terms of the amended agreement, PPG has commenced a tender offer to acquire all of the issued and outstanding stock of Tikkurila. As of March 31, 2021, PPG owned 9.32% of the outstanding shares of Tikkurila. The transaction is expected to close in the second quarter, subject to customary closing conditions.
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On February 22, 2021, PPG completed the acquisition of VersaFlex, a manufacturer specializing in polyurea, epoxy and polyurethane coatings for water and waste water infrastructure, flooring, transportation infrastructure, and industrial applications. 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. The results of this business since the date of acquisition have been reported within the protective and marine coatings business within the Performance Coatings reportable business segment.
On January 11, 2021, PPG announced that it had reached a definitive agreement to acquire Wörwag, a global manufacturer of coatings for industrial and automotive applications. The company specializes in developing sustainable liquid, powder and film coatings. The transaction is expected to close in the second quarter of 2021, subject to customary closing conditions.
Divestitures
In December 2020, PPG committed to a plan to sell certain entities in smaller, non-strategic countries. The planned sale is expected to occur in 2021. The assets and liabilities of these entities are reported as held for sale in Other current assets and Accounts payable and accrued liabilities, respectively, on the accompanying consolidated balance sheet as of March 31, 2021 and December 31, 2020. The results of these entities are reported within the Performance Coatings reportable business segment.
The major classes of assets and liabilities of these entities included in the PPG consolidated balance sheet are as as follows:
($ in millions)March 31, 2021December 31, 2020
Cash and cash equivalents$22 $20 
Receivables5 5 
Inventories5 5 
Assets held for sale$32 $30 
Accounts payable and accrued liabilities$13 $14 
Operating lease liabilities6 6 
Deferred income taxes3 3 
Other liabilities1 1 
Liabilities held for sale$23 $24 
4.Inventories
($ in millions)March 31, 2021December 31, 2020
Finished products$1,100 $1,021 
Work in process210 187 
Raw materials566 490 
Supplies38 37 
Total Inventories$1,914 $1,735 
Most U.S. inventories are valued using the last-in, first-out method. These inventories represented approximately 31% and 33% of total inventories at March 31, 2021 and December 31, 2020, respectively. If the first-in, first-out method of inventory valuation had been used, inventories would have been $113 million and $110 million higher as of March 31, 2021 and December 31, 2020, respectively.
5.Goodwill and Other Identifiable Intangible Assets
The Company tests indefinite-lived intangible assets and goodwill for impairment by either performing a qualitative evaluation or a quantitative test at least annually, or more frequently if an indication of impairment arises. The qualitative evaluation is an assessment of factors to determine whether it is more likely than not that the fair value of a reporting unit or asset is less than its carrying amount.
Although it was determined that a triggering event had not occurred as of March 31, 2021, the Company will continue to monitor the impacts of the COVID-19 pandemic on the Company and significant changes in key assumptions that could result in future period impairment charges. The Company did not identify an indication of impairment for each of its reporting units and indefinite-lived intangible assets as of March 31, 2021.
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The change in the carrying amount of goodwill attributable to each reportable segment for the three months ended March 31, 2021 was as follows:
($ in millions)Performance
Coatings
Industrial
Coatings
Total
January 1, 2021$4,023 $1,079 $5,102 
Acquisitions, including purchase accounting adjustments143 (2)141 
Foreign currency impact(70)(20)(90)
March 31, 2021$4,096 $1,057 $5,153 
A summary of the carrying value of the Company's identifiable intangible assets is as follows:
 March 31, 2021December 31, 2020
($ in millions)Gross
Carrying
Amount
Accumulated
Amortization
NetGross
Carrying
Amount
Accumulated
Amortization
Net
Indefinite-Lived Identifiable Intangible Assets
Trademarks$1,079 N/A$1,079 $1,101 N/A$1,101 
Definite-Lived Identifiable Intangible Assets
Acquired technology$798 ($589)$209 $813 ($585)$228 
Customer-related1,865 (997)868 1,849 (994)855 
Trade names269 (130)139 277 (129)148 
Other51 (45)6 64 (45)19 
Total Definite Lived Intangible Assets$2,983 ($1,761)$1,222 $3,003 ($1,753)$1,250 
Total Identifiable Intangible Assets$4,062 ($1,761)$2,301 $4,104 ($1,753)$2,351 
The Company’s identifiable intangible assets with definite lives are being amortized over their estimated useful lives.
As of March 31, 2021, estimated future amortization expense of identifiable intangible assets is as follows:
($ in millions)Future Amortization Expense
Remaining nine months of 2021$140 
2022$175 
2023$165 
2024$150 
2025$140 
2026$135 
Thereafter$317 
6. Business Restructuring
The Company records restructuring liabilities that represent charges incurred in connection with consolidations of certain operations, including operations from acquisitions, as well as headcount reduction programs. These charges consist primarily of severance costs and certain other cash costs. As a result of these programs, the Company will also incur incremental non-cash accelerated depreciation expense for certain assets due to their reduced expected asset life. These charges are not allocated to the Company’s reportable business segments. Refer to Note 16 Reportable Business Segment Information for additional information.
2020 Restructuring Program
In June 2020, the Company approved a business restructuring plan which included actions to reduce its global cost structure. The program addresses weakened global economic conditions stemming from the COVID-19 pandemic and related pace of recovery in a few end-use markets along with further opportunities to optimize supply chain and functional costs. The plan included a voluntary separation program that was offered in the U.S. and Canada. The majority of these restructuring actions are expected to be completed by the end of 2021.
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2019 and 2018 Restructuring Programs
As a result of the COVID-19 pandemic, the Company expects delays in the timing of certain previously recorded restructuring actions. Program completion dates may differ from the originally targeted timeline, as noted below.
In June 2019, the Company approved a business restructuring plan which included actions to reduce its global cost structure. The program is the result of a comprehensive internal operational assessment to identify further opportunities to improve the profitability of the overall business portfolio. This program includes further manufacturing optimization; targeted pruning of low-profit business in certain regions; exiting certain smaller product lines that are not meeting profitability objectives; reorganization of certain business unit cost structures based on the current economic climate; and certain redundancy actions related to recent acquisitions. The majority of restructuring actions are expected to be completed by the end of the second quarter 2021 with the remainder of the actions expected to be completed in 2022.
In April 2018, the Company approved a business restructuring plan which included actions to reduce its global cost structure. The program was in response to the impacts of customer assortment changes in our U.S. architectural coatings business during the first quarter 2018 and sustained, elevated raw material inflation. The program aims to further right-size employee headcount and production capacity in certain businesses based on product demand, as well as reductions in various global functional and administrative costs. The majority of restructuring actions are expected to be completed by the end of the second quarter of 2021.
The following table summarizes the reserve activity for the three months ended March 31, 2021 and 2020:
Total Reserve
($ in millions)20212020
January 1$293 $224 
Approved restructuring actions 22 
Release of prior reserves and other adjustments (15)
Cash payments(26)(18)
Foreign currency impact(11)(3)
March 31$256 $210 
7.Borrowings
In March 2021, PPG completed a public offering of $700 million aggregate principal amount of 1.200% notes due 2026. These notes were issued pursuant to PPG’s existing shelf registration statement and pursuant to the Indenture between the Company and the Bank of New York Mellon Trust Company, N.A., as trustee, as supplemented (the "Indenture"). The Indenture governing these notes contains covenants that limit the Company’s ability to, among other things, incur certain liens securing indebtedness, engage in certain sale-leaseback transactions, and enter into certain consolidations, mergers, conveyances, transfers or leases of all or substantially all the Company’s assets. The terms of these notes also require the Company to make an offer to repurchase the notes upon a Change of Control Triggering Event (as defined in the Indenture) at a price equal to 101% of their principal amount plus accrued and unpaid interest. The Company may issue additional debt from time to time pursuant to the Indenture. The aggregate cash proceeds from the notes, net of discounts and fees, was $692 million.
In February 2021, PPG entered into a $2.0 billion Term Loan Credit Agreement (the "Term Loan Credit Agreement"). The Term Loan Credit Agreement provides the Company with the ability to borrow up to an aggregate principal amount of $2.0 billion on an unsecured basis. The Company may borrow term loans under the Term Loan Credit Agreement to finance cash consideration for the Company’s pending acquisition of up to all of the equity interests of Tikkurila, and to pay fees, costs and expenses related thereto. Following the Closing Date and from time to time prior to December 31, 2021, the Company may make up to eleven additional borrowings of term loans under the Term Loan Credit Agreement, which may be used for working capital and general corporate purposes. The Term Loan Credit Agreement contains covenants that are usual and customary restrictive covenants for facilities of its type, which include, with specified exceptions, limitations on the Company’s ability to create liens or other encumbrances, to enter into sale and leaseback transactions and to enter into consolidations, mergers or transfers of all or substantially all of its assets. The Term Loan Credit Agreement matures and all outstanding borrowings are due and payable on the third anniversary of the date of the initial borrowing under the Agreement. There were no amounts outstanding under the Term Loan Credit Agreement as of March 31, 2021.
In April 2020, PPG entered into a $1.5 billion 364-Day Term Loan Credit Agreement (the “Term Loan”). The Term Loan contains covenants that are consistent with those in the Credit Agreement discussed below and that are usual
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and customary restrictive covenants for facilities of its type, which include, with specified exceptions, limitations on the Company’s ability to create liens or other encumbrances, to enter into sale and leaseback transactions and to enter into consolidations, mergers or transfers of all or substantially all of its assets. In 2020, PPG repaid $1.1 billion of the Term Loan using cash on hand. In the first quarter 2021, PPG repaid the remaining $400 million of the Term Loan using cash on hand.
In August 2019, PPG amended and restated its five-year credit agreement (the “Credit Agreement”) with several banks and financial institutions. The Credit Agreement provides for a $2.2 billion unsecured revolving credit facility. The Company has the ability to increase the size of the Credit Agreement by up to an additional $750 million, subject to the receipt of lender commitments and other conditions precedent. The Credit Agreement will terminate on August 30, 2024. The Company has the right, subject to certain conditions set forth in the Credit Agreement, to designate certain subsidiaries of the Company as borrowers under the Credit Agreement. In connection with any such designation, the Company is required to guarantee the obligations of any such subsidiaries under the Credit Agreement. In March 2020, PPG borrowed $800 million under the Credit Agreement and repaid that amount in full in April 2020. There were no amounts outstanding under the credit agreement as of March 31, 2021 and December 31, 2020.
The Term Loan Credit Agreement and Credit Agreement require the Company to maintain a ratio of Total Indebtedness to Total Capitalization, as defined in the Term Loan Credit Agreement and Credit Agreement, of 60% or less; provided, that for any fiscal quarter in which the Company has made an acquisition for consideration in excess of $1 billion and for the next five fiscal quarters thereafter, the ratio of Total Indebtedness to Total Capitalization may not exceed 65% at any time. As of March 31, 2021, Total Indebtedness to Total Capitalization as defined under the Credit Agreement and Term Loan Credit Agreement was 48%.
The Credit Agreement also supports the Company’s commercial paper borrowings which are classified as long-term based on PPG’s intent and ability to refinance these borrowings on a long-term basis. Commercial paper borrowings of $550 million and $250 million were outstanding as of March 31, 2021 and December 31, 2020, respectively.
8.Earnings Per Common Share
The effect of dilutive securities on the weighted average common shares outstanding included in the calculation of earnings per diluted common share for the three months ended March 31, 2021 and 2020 were as follows:
 Three Months Ended
March 31
(number of shares in millions)20212020
Weighted average common shares outstanding237.4 236.5 
Effect of dilutive securities:
Stock options0.9 0.5 
Other stock compensation plans0.7 0.7 
Potentially dilutive common shares1.6 1.2 
Adjusted weighted average common shares outstanding239.0 237.7 
Dividends per common share$0.54 $0.51 
Excluded from the computation of earnings per diluted share due to their antidilutive effect were zero and 1.5 million outstanding stock options for the three months ended March 31, 2021 and 2020, respectively.
9.Income Taxes
Three Months Ended
March 31
20212020
Effective tax rate on pretax income22.8 %22.3 %
The effective tax rate of 22.8% for the three months ended March 31, 2021 reflects a benefit of $5 million of discrete items associated with PPG's U.S. and foreign jurisdictions. Income tax expense for the first three months of 2021 is based on an estimated annual effective rate, which requires management to make its best estimate of annual pretax income or loss. Income tax expense for the three months ended March 31, 2020 reflects $11 million of discrete items associated with PPG's U.S. and foreign locations and implementation of updated regulations associated with the 2017 Tax Cuts and Jobs Act for Global Intangible Low Taxed Income.
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During the year, PPG management regularly updates forecasted annual pretax results for the various countries in which PPG operates based on changes in factors such as prices, shipments, product mix, raw material inflation and manufacturing operations. To the extent that actual 2021 pretax results for U.S. and foreign income or loss vary from estimates, the actual Income tax expense recognized in 2021 could be different from the forecasted amount used to estimate the Income tax expense for the three months ended March 31, 2021.
10.Pensions and Other Postretirement Benefits
Service cost for net periodic pension and other postretirement benefit costs is included in Cost of sales, exclusive of depreciation and amortization, Selling, general and administrative, and Research and development, net in the accompanying condensed consolidated statements of income. All other components of net periodic benefit cost are recorded in Other charges in the accompanying condensed consolidated statements of income.
The net periodic pension and other postretirement benefit costs for the three months ended March 31, 2021 and 2020 were as follows:
 PensionOther Postretirement Benefits
 Three Months Ended
March 31
Three Months Ended
March 31
($ in millions)2021202020212020
Service cost$3 $6 $3 $2 
Interest cost16 22 3 5 
Expected return on plan assets(38)(36)— — 
Amortization of actuarial losses10 18 6 4 
Amortization of prior service credit— — (14)(15)
Net periodic benefit cost($9)$10 ($2)($4)
PPG expects 2021 net periodic pension and other postretirement benefit cost to be income of approximately $45 million, with pension and other postretirement benefits representing income of approximately $40 million and $5 million, respectively. In 2020, PPG's U.S. and Canadian defined benefit plans were frozen for all participants. As of January 1, 2021, these plans are mostly inactive and as such, the accumulated net actuarial losses amortization period is now the average remaining life expectancy of the plan participants. This change in amortization period reduces future pension expense for PPG.
Contributions to Defined Benefit Pension Plans
Three Months Ended
March 31
($ in millions)20212020
Non-U.S. defined benefit pension mandatory contributions$1 $2 
PPG expects to make contributions to its defined benefit pension plans in the range of $10 million to $15 million during the remaining nine months of 2021. PPG may make voluntary contributions to its defined benefit pension plans in 2021 and beyond.
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11.Accumulated Other Comprehensive Loss
($ in millions)Unrealized Foreign Currency Translation Adjustments
Pension and Other Postretirement Benefit Adjustments, net of tax (c)
Unrealized Gain on Derivatives, net of taxAccumulated Other Comprehensive Loss
January 1, 2021($1,663)($937)$1 ($2,599)
Current year deferrals to AOCI (a)
83   83 
Current year deferrals to AOCI, net of tax (b)
(209)(7) (216)
Reclassifications from AOCI to net income 2  2 
Period change($126)($5)$ ($131)
March 31, 2021($1,789)($942)$1 ($2,730)
January 1, 2020($1,627)($724)$1 ($2,350)
Current year deferrals to AOCI (a)
(758)  (758)
Current year deferrals to AOCI, net of tax (b)
62 (4)3 61 
Reclassifications from AOCI to net income 5  5 
Period change($696)$1 $3 ($692)
March 31, 2020($2,323)($723)$4 ($3,042)
(a)Except for income taxes, which were less than $1 million as of March 31, 2021 and $7 million as of March 31, 2020, related to foreign currency impacts of certain unasserted earnings, unrealized foreign currency translation adjustments related to translation of foreign denominated balance sheets are not presented net of tax given that no deferred U.S. income taxes have been provided on undistributed earnings of non-U.S. subsidiaries because they are deemed to be reinvested for an indefinite period of time.
(b)The tax cost related to unrealized foreign currency translation adjustments on tax inter-branch transactions and net investment hedges as of March 31, 2021 and 2020 was $30 million and $19 million, respectively.
(c)The tax cost related to the adjustment for pension and other postretirement benefits as of March 31, 2021 and 2020 was $1 million and $2 million, respectively. Reclassifications from AOCI are included in the computation of net periodic benefit costs (See Note 10, "Pensions and Other Postretirement Benefits").
12.Financial Instruments, Hedging Activities and Fair Value Measurements
Financial instruments include cash and cash equivalents, short-term investments, cash held in escrow, marketable equity securities, accounts receivable, company-owned life insurance, accounts payable, short-term and long-term debt instruments, and derivatives. The fair values of these financial instruments approximated their carrying values at March 31, 2021 and December 31, 2020, in the aggregate, except for long-term debt instruments.
Hedging Activities
The Company has exposure to market risk from changes in foreign currency exchange rates and interest rates. As a result, financial instruments, including derivatives, have been used to hedge a portion of these underlying economic exposures. Certain of these instruments may qualify as fair value, cash flow, and net investment hedges upon meeting the requisite criteria, including effectiveness of offsetting hedged or underlying exposures. Changes in the fair value of derivatives that do not qualify for hedge accounting are recognized in Income before income taxes in the period incurred.
PPG’s policies do not permit speculative use of derivative financial instruments. PPG enters into derivative financial instruments with high credit quality counterparties and diversifies its positions among such counterparties in order to reduce its exposure to credit losses. The Company did not realize a credit loss on derivatives during the three month periods ended March 31, 2021 and 2020.
All of PPG's outstanding derivative instruments are subject to accelerated settlement in the event of PPG’s failure to meet its debt or payment obligations under the terms of the instruments’ contractual provisions. In addition, if the Company would be acquired and its payment obligations under its derivative instruments’ contractual arrangements are not assumed by the acquirer, or if PPG would enter into bankruptcy, receivership or reorganization proceedings, its outstanding derivative instruments would also be subject to accelerated settlement.
There were no derivative instruments de-designated or discontinued as hedging instruments during the three month periods ended March 31, 2021 and 2020 and there were no gains or losses deferred in Accumulated other comprehensive loss on the condensed consolidated balance sheet that were reclassified to Income before income
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taxes in the condensed consolidated statement of income in the three month periods ended March 31, 2021 and 2020 related to hedges of anticipated transactions that were no longer expected to occur.
Fair Value Hedges
The Company uses interest rate swaps from time to time to manage its exposure to changing interest rates. When outstanding, the interest rate swaps are typically designated as fair value hedges of certain outstanding debt obligations of the Company and are recorded at fair value.
PPG has interest rate swaps which converted $525 million of fixed rate debt to variable rate debt. These swaps are designated as fair value hedges and are carried at fair value. Changes in the fair value of these swaps and changes in the fair value of the related debt are recorded in interest expense in the accompanying condensed consolidated statement of income. The fair value of these interest rate swaps was $44 million and $67 million at March 31, 2021 and December 31, 2020, respectively.
Cash Flow Hedges
PPG designates certain foreign currency forward contracts as cash flow hedges of the Company’s exposure to variability in exchange rates on third party transactions denominated in foreign currencies. There were no outstanding cash flow hedges at March 31, 2021 and December 31, 2020.
Net Investment Hedges
PPG uses cross currency swaps and foreign currency euro-denominated debt to hedge a significant portion of its net investment in its European operations, as follows:
As of March 31, 2021 and December 31, 2020, PPG had U.S. dollar to euro cross currency swap contracts with a total notional amount of $875 million and designated these contracts as hedges of the Company's net investment in its European operations. During the term of these contracts, PPG will receive payment in U.S. dollars and make payments in euros to the counterparties. As of March 31, 2021 and December 31, 2020, the fair value of the U.S. dollar to euro cross currency swap contracts was a net asset of $19 million and a net liability of $8 million, respectively.
As of March 31, 2021 and December 31, 2020, PPG had designated €2.0 billion of euro-denominated borrowings as hedges of a portion of its net investment in the Company's European operations. The carrying value of these instruments as of March 31, 2021 and December 31, 2020 was $2.3 billion and $2.4 billion, respectively.
Other Financial Instruments
PPG uses foreign currency forward contracts to manage net transaction exposures that do not qualify for hedge accounting; therefore, the change in the fair value of these instruments is recorded in Other charges in the condensed consolidated statement of income in the period of change. Underlying notional amounts related to these foreign currency forward contracts were $1.7 billion and $1.4 billion at March 31, 2021 and December 31, 2020, respectively. As of March 31, 2021 and December 31, 2020, the fair value of these contracts was a net asset and a net liability of $9 million and $2 million, respectively.
Gains/Losses Deferred in Accumulated Other Comprehensive Loss
As of March 31, 2021, the Company had accumulated pretax unrealized translation gains in Accumulated other comprehensive loss on the condensed consolidated balance sheet related to euro-denominated borrowings, and cross currency swaps of $103 million. As of December 31, 2020, the Company had accumulated pretax unrealized translation losses of $22 million.
The following table summarizes the location within the condensed consolidated financial statements and amount of gains/(losses) related to derivative and debt financial instruments for the three months ended March 31, 2021 and 2020. All dollar amounts are shown on a pretax basis.
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March 31, 2021March 31, 2020Caption In Condensed Consolidated Statement of Income
($ in millions)Gain Deferred in OCIGain/(Loss) RecognizedGain Deferred in OCIGain Recognized
Economic
   Foreign currency forward contracts
$— ($3)$— $16 Other charges
Fair Value
   Interest rate swaps
— 4 — 2 Interest expense
Cash Flow
Foreign currency forward contracts  4  Other charges and Cost of sales
Total Cash Flow$ $1 $4 $18 
Net Investment
Cross currency swaps$28 $4 $42 $5 Interest expense
Foreign denominated debt97 — 36 — 
Total Net Investment$125 $4 $78 $5 
Fair Value Measurements
The Company follows a fair value measurement hierarchy to measure its assets and liabilities. As of March 31, 2021 and December 31, 2020, the assets and liabilities measured at fair value on a recurring basis were cash equivalents, equity securities and derivatives. In addition, the Company measures its pension plan assets at fair value (see Note 14, "Employee Benefit Plans" under Item 8 in the 2020 Form 10-K for further details). The Company's financial assets and liabilities are measured using inputs from the following three levels:
Level 1 inputs are quoted prices in active markets for identical assets and liabilities that the Company has the ability to access at the measurement date. Level 1 inputs are considered to be the most reliable evidence of fair value as they are based on unadjusted quoted market prices from various financial information service providers and securities exchanges.
Level 2 inputs are directly or indirectly observable prices that are not quoted on active exchanges, which include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means. The fair values of the derivative instruments reflect the instruments' contractual terms, including the period to maturity, and uses observable market-based inputs, including forward curves.
Level 3 inputs are unobservable inputs employed for measuring the fair value of assets or liabilities. The Company does not have any recurring financial assets or liabilities that are recorded in its condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020 that are classified as Level 3 inputs.
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Assets and liabilities reported at fair value on a recurring basis:
March 31, 2021December 31, 2020
($ in millions)Level 1Level 2Level 3Level 1Level 2Level 3
Assets:
Other current assets:
Marketable equity securities$6 $ $ $6 $ $ 
Foreign currency forward contracts (a)
 25   8  
Investments:
Marketable equity securities$259 $ $ $97 $ $ 
Other assets:
Cross currency swaps (b)
$ $32 $ $ $13 $ 
Interest rate swaps (c)
 44   67  
Liabilities:
Accounts payable and accrued liabilities:
Foreign currency forward contracts (a)
$ $16 $ $ $6 $ 
        Cross currency swaps (b)
 4   8  
Other liabilities:
Cross currency swap (b)
$ $9 $ $ $13 $ 
(a) Derivatives not designated as hedging instruments
(c) Fair value hedges
(b) Net investment hedges
Long-Term Debt
($ in millions)
March 31, 2021 (a)
December 31, 2020 (b)
Long-term debt - carrying value$6,201 $5,296 
Long-term debt - fair value$6,616 $5,875 
(a) Excluding finance lease obligations of $11 million and short-term borrowings of $5 million as of March 31, 2021.
(b) Excluding finance lease obligations of $12 million and short-term borrowings of $403 million as of December 31, 2020.
The fair values of the debt instruments were based on discounted cash flows and interest rates then currently available to the Company for instruments of the same remaining maturities and were measured using level 2 inputs.
13.Stock-Based Compensation
The Company’s stock-based compensation includes stock options, restricted stock units (“RSUs”) and grants of contingent shares that are earned based on achieving targeted levels of total shareholder return. All current grants of stock options, RSUs and contingent shares are made under the PPG Industries, Inc. Amended and Restated Omnibus Incentive Plan (“PPG Amended Omnibus Plan”), which was amended and restated effective April 21, 2016. Shares available for future grants under the PPG Amended Omnibus Plan were 6.5 million as of March 31, 2021.
Stock-based compensation and the income tax benefit recognized during the three months ended March 31, 2021 and 2020 were as follows:
Three Months Ended
March 31
($ in millions)20212020
Stock-based compensation$17 $7 
Income tax benefit recognized$4 $2 
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Grants of stock-based compensation during the three months ended March 31, 2021 and 2020 were as follows:
Three Months Ended
March 31
20212020
Grant DetailsSharesFair ValueSharesFair Value
Stock options527,464 $29.27 659,835 $21.93 
Restricted stock units162,601 $129.64 182,276 $112.99 
Contingent shares (a)
55,540 $136.60 54,648 $119.52 
(a) The number of contingent shares represents the target value of the award.
Stock options are generally exercisable 36 months after being granted and have a maximum term of 10 years. Compensation expense for stock options is recorded over the vesting period based on the fair value on the date of grant. The fair value of the stock option grants issued during the three months ended March 31, 2021 was calculated with the following weighted average assumptions:
Weighted average exercise price$136.60
Risk free interest rate1.0 %
Expected life of option in years6.5
Expected dividend yield1.6 %
Expected volatility25.3 %
The risk-free interest rate is determined by using the U.S. Treasury yield curve at the date of the grant and using a maturity equal to the expected life of the option. The expected life of options is calculated using the average of the vesting term and the maximum term, as prescribed by accounting guidance on the use of the simplified method for determining the expected term of an employee share option. The expected dividend yield and volatility are based on historical stock prices and dividend amounts over past time periods equal in length to the expected life of the options.
Time-based RSUs generally vest over the three-year period following the date of grant, unless forfeited, and will be paid out in the form of stock, cash or a combination of both at the Company’s discretion at the end of the vesting period. Performance-based RSUs vest based on achieving specific annual performance targets for earnings per share growth and cash flow return on capital over the three calendar year-end periods following the date of grant. Unless forfeited, the performance-based RSUs will be paid out in the form of stock, cash or a combination of both at the Company’s discretion at the end of the three-year performance period if PPG meets the performance targets.
For awards granted in 2021 and 2020, the amount paid upon vesting of performance-based RSUs may range from 0% to 200% of the original grant, based upon the level of earnings per share growth achieved and frequency with which the annual cash flow return on capital performance target is met over the three calendar year periods comprising the vesting period. For awards granted in 2019, the amount paid upon vesting of performance-based RSUs may range from 0% to 180% of the original grant.
Contingent share grants (referred to as “TSR awards”) are made annually and are paid out at the end of each three-year period following the date of grant based on PPG's performance. Performance is measured by determining the percentile rank of the total shareholder return of PPG common stock in relation to the total shareholder return of the S&P 500 as it existed at the beginning of the three-year performance period excluding any companies that have been removed from the index because they ceased to be publicly traded during the performance period. For awards granted in 2021 and 2020, the payment of awards following the three-year award period will be based on performance achieved in accordance with the scale set forth in the plan agreement and may range from 0% to 200% of the initial grant. For awards granted in 2019, the amount paid following the three-year award period may range from 0% to 220% of the initial grant. Any payments made at the end of the award period may be in the form of stock, cash or a combination of both at the Company's discretion. The TSR awards qualify as liability awards, and compensation expense is recognized over the three-year award period based on the fair value of the awards (giving consideration to the Company’s percentile rank of total shareholder return) remeasured in each reporting period until settlement of the awards.
14.Commitments and Contingent Liabilities
PPG is involved in a number of lawsuits and claims, both actual and potential, including some that it has asserted against others, in which substantial monetary damages are sought. These lawsuits and claims may relate to contract, patent, environmental, product liability, asbestos exposure, antitrust, employment, securities and other
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matters arising out of the conduct of PPG’s current and past business activities. To the extent that these lawsuits and claims involve personal injury, property damage, and certain other claims, PPG believes it has adequate insurance; however, certain of PPG’s insurers are contesting coverage with respect to some of these claims, and other insurers, as they had prior to the asbestos settlement described below, may contest coverage with respect to some of the asbestos claims. PPG’s lawsuits and claims against others include claims against insurers and other third parties with respect to actual and contingent losses related to environmental, asbestos and other matters.
The results of any current or future litigation and claims are inherently unpredictable. However, management believes that, in the aggregate, the outcome of all lawsuits and claims involving PPG will not have a material effect on PPG’s consolidated financial position or liquidity; however, such outcome may be material to the results of operations of any particular period in which costs, if any, are recognized.
Shareholder Class Action
On May 20, 2018, a putative securities class action lawsuit was filed in the U.S. District Court for the Central District of California against the Company and three of its current and former officers.  On September 21, 2018, an Amended Class Action Complaint was filed in the lawsuit. The Amended Complaint, captioned Trevor Mild v. PPG Industries, Inc., Michael H. McGarry, Vincent J. Morales, and Mark C. Kelly, asserted securities fraud claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 on behalf of a putative class of persons who purchased or otherwise acquired stock of the Company between January 19, 2017 and May 10, 2018. The allegations related to, among other things, allegedly false and misleading statements and/or failures to disclose information about the Company’s business, operations and prospects. The parties reached a settlement in principal on May 1, 2019.  On June 2, 2019, the plaintiff filed with the Court a Petition for Preliminary Approval of the proposed settlement, including the proposed settlement amount of $25 million. On November 22, 2019, the Court entered final judgment approving the settlement. PPG’s insurance carriers fully funded the settlement escrow account and the court-approved settlement payments to class members were fully distributed by the claims administrator as of March 31, 2021.
Asbestos Matters
Prior to 2000, the Company had been named as a defendant in numerous claims alleging bodily injury from (i) exposure to asbestos-containing products allegedly manufactured, sold or distributed by the Company, its subsidiaries, or for which they are otherwise alleged to be liable; (ii) exposure to asbestos allegedly present at a facility owned or leased by the Company; or (iii) exposure to asbestos-containing products of Pittsburgh Corning Corporation (“PC”) for which the Company was alleged to be liable under a variety of legal theories (the Company and Corning Incorporated were each 50% shareholders in PC prior to April 27, 2016).
Pittsburgh Corning Corporation asbestos bankruptcy
In 2000, PC filed for Chapter 11 in the U.S. Bankruptcy Court for the Western District of Pennsylvania in an effort to permanently and comprehensively resolve all of its pending and future asbestos-related liability claims. The Bankruptcy Court subsequently entered a series of orders preliminarily enjoining the prosecution of asbestos litigation against PPG until after the effective date of a confirmed PC plan of reorganization. During the pendency of this preliminary injunction staying asbestos litigation against PPG, PPG and certain of its historical liability insurers negotiated a settlement with representatives of present and future asbestos claimants. That settlement was incorporated into a PC plan of reorganization that was confirmed by the Bankruptcy Court on May 24, 2013 and ultimately became effective on April 27, 2016. With the effectiveness of the plan, the preliminary injunction staying the prosecution of asbestos litigation against PPG expired by its own terms on May 27, 2016. In accordance with the settlement, the Bankruptcy Court issued a permanent channeling injunction under Section 524(g) of the Bankruptcy Code that prohibits present and future claimants from asserting claims against PPG that arise, in whole or in part, out of exposure to asbestos or asbestos-containing products manufactured, sold and/or distributed by PC or asbestos on or emanating from any PC premises. The channeling injunction, by its terms, also prohibits codefendants in cases that are subject to the channeling injunction from asserting claims against PPG for contribution, indemnification or other recovery. The channeling injunction also precludes the prosecution of claims against PPG arising from alleged exposure to asbestos or asbestos-containing products to the extent that a claimant is alleging or seeking to impose liability, directly or indirectly, for the conduct of, claims against, or demands on PC by reason of PPG’s prior: (i) ownership of a financial interest in PC; (ii) involvement in the management of PC, or service as an officer, director or employee of PC or a related party; (iii) provision of insurance to PC or a related party; or (iv) involvement in a financial transaction affecting the financial condition of PC or a related party. The foregoing PC related claims are referred to as “PC Relationship Claims.”
The Bankruptcy Court's channeling injunction channels the Company’s liability for PC Relationship Claims to a trust funded in part by PPG and its participating insurers for the benefit of current and future PC asbestos claimants (the
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“Trust”). The Trust is the sole recourse for holders of PC Relationship Claims. PPG and its affiliates have no further liability or responsibility for, and are permanently protected from, pending and future PC Relationship Claims. The channeling injunction does not extend to present and future claims against PPG that arise out of alleged exposure to asbestos or asbestos-containing products historically manufactured, sold and/or distributed by PPG or its subsidiaries or for which they are alleged to be liable that are not PC Relationship Claims, and does not extend to claims against PPG alleging personal injury allegedly caused by asbestos on premises presently or formerly owned, leased or occupied by PPG. These claims are referred to as "non-PC Relationship Claims".
Non-PC relationship claims
With respect to the asbestos-related claims pending against the Company at the time PC filed for bankruptcy, the Company considers such claims to fall within one or more of the following categories: (1) claims that have been closed or dismissed as a result of processes undertaken during the bankruptcy; (2) claims that may have been previously filed on the dockets of state and federal courts in various jurisdictions, but are inactive as to the Company; and (3) claims that are subject, in whole or in part, to the channeling injunction and thus will be resolved, in whole or in part, in accordance with the Trust procedures established under the PC bankruptcy reorganization plan. As a result of the foregoing, the Company does not consider these three categories of claims to be open or active litigation against it, although the Company cannot now determine whether, or the extent to which, any of these claims may in the future be reinstituted, reinstated, or revived such that they may become open and active non-PC Relationship Claims against it.
Current open and active claims post-Pittsburgh Corning bankruptcy
As of March 31, 2021, the Company was aware of approximately 1,190 open and active asbestos-related claims pending against the Company and certain of its subsidiaries. These claims consist of non-PC Relationship Claims against PPG and claims against a PPG subsidiary the Company acquired on April 1, 2013. The Company is defending these open and active claims vigorously.
PPG has established reserves totaling approximately $190 million for asbestos-related claims that would not be channeled to the Trust which, based on presently available information, we believe will be sufficient to encompass all of PPG’s current and estimable potential future asbestos liabilities. These reserves, which are included within Other liabilities on the accompanying condensed consolidated balance sheets, represent PPG’s best estimate of its liability for these claims.
These reserves include a $162 million reserve established in 2009 in connection with an amendment to the PC plan of reorganization for non-PC Relationship Claims other than claims arising from premises-related exposures. PPG does not have sufficient current claim information or settlement history on which to base a better estimate of this liability in light of the fact that the Bankruptcy Court’s injunction staying most asbestos claims against the Company was in effect from April 2000 through May 2016.
PPG monitors the activity associated with its asbestos claims and evaluates, on a periodic basis, its estimated liability for such claims, its insurance assets then available, and all underlying assumptions to determine whether any adjustment to the reserves for these claims is required.
The amount reserved for asbestos-related claims by its nature is subject to many uncertainties that may change over time, including (i) the ultimate number of claims filed; (ii) the amounts required to resolve both currently known and future unknown claims; (iii) the amount of insurance, if any, available to cover such claims; (iv) the unpredictable aspects of the litigation process, including a changing trial docket and the jurisdictions in which trials are scheduled; (v) the outcome of any trials, including potential judgments or jury verdicts; (vi) the lack of specific information in many cases concerning exposure for which PPG is allegedly responsible, and the claimants’ alleged diseases resulting from such exposure; and (vii) potential changes in applicable federal and/or state tort liability law. All of these factors may have a material effect upon future asbestos-related liability estimates. As a potential offset to any future asbestos financial exposure, under the PC plan of reorganization PPG retained, for its own account, the right to pursue insurance coverage from certain of its historical insurers that did not participate in the PC plan of reorganization. While the ultimate outcome of PPG’s asbestos litigation cannot be predicted with certainty, PPG believes that any financial exposure resulting from its asbestos-related claims will not have a material adverse effect on PPG’s consolidated financial position, liquidity or results of operations.
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Environmental Matters
It is PPG’s policy to accrue expenses for environmental contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Reserves for environmental contingencies are exclusive of claims against third parties and are generally not discounted. In management’s opinion, the Company operates in an environmentally sound manner and the outcome of the Company’s environmental contingencies will not have a material effect on PPG’s financial position or liquidity; however, any such outcome may be material to the results of operations of any particular period in which costs, if any, are recognized. Management anticipates that the resolution of the Company’s environmental contingencies will occur over an extended period of time. See Note 15, "Commitments and Contingent Liabilities," under Item 8 of the 2020 Form 10-K for additional descriptions of the following environmental matters.
As remediation at certain legacy environmental sites progresses, PPG continues to refine its assumptions underlying the estimates of the expected future costs of its remediation programs. PPG’s ongoing evaluation may result in additional charges against income to increase the reserves for these sites. Remediation activities at our legacy sites are not related to the ongoing operations of PPG. In 2021 and 2020, certain charges have been recorded based on updated estimates to increase existing reserves for these sites. Certain other charges related to environmental remediation actions are also expensed as incurred.
As of March 31, 2021 and December 31, 2020, PPG had reserves for environmental contingencies associated with PPG’s former chromium manufacturing plant in Jersey City, New Jersey (“New Jersey Chrome”), glass and chemical manufacturing sites, and for other environmental contingencies, including current manufacturing locations and National Priority List sites. These reserves are reported as Accounts payable and accrued liabilities and Other liabilities in the accompanying condensed consolidated balance sheet.
Environmental Reserves
($ in millions)March 31, 2021December 31, 2020
New Jersey Chrome$114 $102 
Glass and chemical105 106 
Other91