-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VGqoSVNV+IxFr+zIHFT7P1RlC/StJ3v7/MW+1DrKGKnBklCiHyN99uzv9w98iOG/ nX2WwwcieKHsx92GzMuc5g== 0000950132-01-000119.txt : 20010224 0000950132-01-000119.hdr.sgml : 20010224 ACCESSION NUMBER: 0000950132-01-000119 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PPG INDUSTRIES INC CENTRAL INDEX KEY: 0000079879 STANDARD INDUSTRIAL CLASSIFICATION: PAINTS, VARNISHES, LACQUERS, ENAMELS & ALLIED PRODUCTS [2851] IRS NUMBER: 250730780 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-01687 FILM NUMBER: 1549201 BUSINESS ADDRESS: STREET 1: ONE PPG PL 40 EAST CITY: PITTSBURGH STATE: PA ZIP: 15272 BUSINESS PHONE: 4124343131 MAIL ADDRESS: STREET 1: ONE PPG PL 40 EAST CITY: PITTSBURGH STATE: PA ZIP: 15272 FORMER COMPANY: FORMER CONFORMED NAME: PITTSBURGH PLATE GLASS CO DATE OF NAME CHANGE: 19681219 10-K405 1 0001.txt FORM 10-K405 =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 Commission File Number 1-1687 PPG INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Pennsylvania 25-0730780 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One PPG Place, Pittsburgh, Pennsylvania 15272 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: 412-434-3131 Securities Registered Pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered ------------------- ------------------------ Common Stock--Par Value $1.66 2/3 New York Stock Exchange Pacific Stock Exchange Philadelphia Stock Exchange Preferred Share Purchase Rights New York Stock Exchange Pacific Stock Exchange Philadelphia Stock Exchange Securities Registered Pursuant to Section 12(g) of the Act: None 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, and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of January 31, 2001, 168,199,771 shares of the Registrant's common stock, with a par value of $1.66 2/3 per share, were outstanding. As of that date, the aggregate market value of common stock held by non-affiliates was $7,754 million. DOCUMENTS INCORPORATED BY REFERENCE Incorporated By Document Reference In Part No. -------- --------------------- Portions of PPG Industries, Inc. Annual Report to Shareholders for the year ended December 31, 2000....... I, II and IV Portions of PPG Industries, Inc. Proxy Statement for its 2001 Annual Meeting of Shareholders..................... III =============================================================================== PPG INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES --------------- As used in this report, the terms "PPG," "Company," and "Registrant" mean PPG Industries, Inc. and its subsidiaries, taken as a whole, unless the context indicates otherwise. --------------- TABLE OF CONTENTS
Page ---- Part I Item 1. Business..................................................... 1 Item 2. Properties................................................... 3 Item 3. Legal Proceedings............................................ 4 Item 4. Submission of Matters to a Vote of Security Holders.......... 4 Executive Officers of the Registrant......................... 5 Part II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters.......................................... 6 Item 6. Selected Financial Data...................................... 6 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................... 6 Item 7a. Quantitative and Qualitative Disclosures About Market Risk... 6 Item 8. Financial Statements and Supplementary Data.................. 7 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......................... 7 Part III Item 10. Directors and Executive Officers of the Registrant........... 8 Item 11. Executive Compensation....................................... 8 Item 12. Security Ownership of Certain Beneficial Owners and Management................................................... 8 Item 13. Certain Relationships and Related Transactions............... 8 Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K..................................................... 9 Signatures ............................................................. 11
Note on Incorporation by Reference Throughout this report, various information and data are incorporated by reference to the Company's 2000 Annual Report to Shareholders (hereinafter referred to as "the Annual Report to Shareholders"). Any reference in this report to disclosures in the Annual Report to Shareholders shall constitute incorporation by reference only of that specific information and data into this Form 10-K. Part I Item 1. Business PPG Industries, Inc., incorporated in Pennsylvania in 1883, is comprised of three basic business segments: coatings, glass and chemicals. Within these business segments, PPG has followed a program of directing its resources of people, capital and technology into selected areas to build upon positions of leadership. Areas in which resources have been focused are automotive original, refinish, industrial, aerospace, packaging, and architectural coatings; flat glass, automotive original and replacement glass, continuous- strand fiber glass; and chlor-alkali and specialty chemicals. Each of the businesses in which PPG is engaged is highly competitive. However, the diversification of product lines and worldwide markets served tend to minimize the impact on total sales and earnings of changes in demand for a particular product line or in a particular geographic area. Reference is made to "Business Segment Information" on pages 29 through 31 of the Annual Report to Shareholders, which is incorporated herein by reference, for financial information relating to business segments. Coatings PPG is a major supplier of protective and decorative coatings. The coatings industry is highly competitive and consists of a few large firms with global presence and many smaller firms serving local or regional markets. PPG competes in its primary markets with the world's largest coatings companies, most of which have operations in North America and Europe, and many smaller regional coatings companies. Product development, innovation, quality and customer service have been stressed by PPG and have been significant factors in developing an important supplier position. The coatings business involves the supply of protective and decorative finishes for automotive original equipment, appliances, industrial equipment and packaging; factory-finished aluminum extrusions and coils for architectural uses; aircraft; and other industrial and consumer products. In addition to supplying finishes to the automotive original equipment market, PPG supplies automotive refinishes to the aftermarket, which are primarily sold through distributors. In addition to specific products, PPG supplies technical expertise, engineering and purchasing services to the automotive original and industrial portions of the business. In the automotive original and industrial portions of the coatings business, PPG sells directly to a variety of manufacturing companies. Automotive original and industrial coatings are formulated specifically for the customer's needs and application methods. PPG also supplies adhesives and sealants for the automotive industry and metal pretreatments and related chemicals for automotive and industrial applications. The packaging portion of the coatings business supplies finishes for aerosol, food and beverage containers for consumer products. Product performance, technology, quality and customer service are major competitive factors. The architectural finishes business consists primarily of coatings used by painting and maintenance contractors and by consumers for decoration and maintenance. PPG's products are sold through independent distributors, paint dealers, mass merchandisers, home centers, PPG-operated outlets and directly to some customers. Price, quality and distribution are key competitive factors in the architectural finishes market. The aerospace business primarily supplies coatings, sealants and transparencies for aircraft serving the commercial, military and general aviation industries as well as sealants for architectural insulating glass units. The aerospace business distributes products directly to aircraft maintenance and aftermarket customers around the world. In July 2000 PPG's aircraft transparency business, previously included in the glass segment, was combined with the aerospace coatings and sealants business. PPG continued to grow the coatings business with the acquisition of the Monarch Paint Company based in Houston, Texas in February 2000 and the acquisition of several smaller architectural finishes businesses during the year. The principal production facilities of the coatings business are in North America and Europe. North American production facilities consist of 27 plants in the United States, two in Canada and one in Mexico. The three largest facilities in the United States are the Cleveland, Ohio, plant, which primarily produces automotive original coatings; the Oak Creek, Wis., plant, which primarily produces industrial coatings and certain automotive original coatings; and the Delaware, Ohio, plant, which primarily produces automotive refinishes and certain automotive original and industrial coatings. Outside North America, PPG operates six plants in Italy, four plants in Germany, three plants each in England and Spain, two plants each in Brazil, China and France, and one plant each in Argentina, Australia, Malaysia, the Netherlands, Thailand and Turkey. PPG owns equity interests in operations in Canada, India, South Korea and Taiwan. Additionally, the coatings business operates 10 service centers in the United States, two each in Canada, Mexico and Poland, and one each in Argentina, Brazil, Portugal and Slovenia to provide just-in- time delivery and service to selected automotive assembly plants. Twenty-nine training centers in Europe, 20 in the United States, 18 in Asia, seven in South America, four in the Middle East, three in Canada and two in Mexico are in operation. These centers provide training for automotive aftermarket refinish customers. The aerospace business operates a global network of 13 1 application support centers that provide customer technical support, on-time delivery of products, and improvements to customer efficiency and productivity. Also, five automotive original coatings application centers throughout the world that provide testing facilities for customer paint processes and new products are in operation. The average number of persons employed by the coatings segment during 2000 was 17,400. Glass PPG is one of the major producers of flat glass, fabricated glass and continuous-strand fiber glass in the world. PPG's major markets are automotive original equipment, automotive replacement, residential and commercial construction, the furniture and electronics industries, insurance services, and other markets. Most glass products are sold directly to manufacturing and construction companies, although in some instances products are sold directly to independent distributors and through PPG distribution outlets. PPG manufactures flat glass by the float process and fiber glass by the continuous-filament process. PPG also provides services to insurance companies and glass installers through its auto glass claims processor, LYNX Services(R). The bases for competition are price, quality, technology, cost and customer service. The Company competes with six other major producers of flat glass, six other major producers of fabricated glass and two other major producers of fiber glass throughout the world. PPG's principal glass production facilities are concentrated in North America and Europe. Fourteen plants operate in the United States, of which six produce automotive original and replacement glass products, five produce flat glass, and three produce fiber glass products. There are three plants in Canada, two of which produce automotive original and replacement glass products and one produces flat glass. One plant each in England and the Netherlands produce fiber glass. PPG owns equity interests in operations in Mexico, the Netherlands, Taiwan, the United States and Venezuela and a majority interest in a glass distribution company in Japan. Additionally, there are three satellite operations in the United States, two satellite operations in Canada and one in Mexico that provide limited manufacturing and just-in-time service to selected automotive customer locations, one satellite coating facility in the United States for flat glass products and one satellite tempering and fabrication facility in the United States for flat glass products. There are also two insurance claim management centers that serve the LYNX Services(R) business. The average number of persons employed by the glass segment during 2000 was 12,200. In July 2000, PPG and Apogee Enterprises, Inc. (Apogee) combined their U.S. automotive replacement glass distribution businesses, creating a new entity, PPG Auto Glass L.L.C. (PPG Auto Glass). PPG has a 66 percent ownership interest in PPG Auto Glass. Chemicals PPG is a major producer and marketer of chlor-alkali chemicals and a supplier of specialty chemicals. The primary chlor-alkali products are chlorine, caustic soda, vinyl chloride monomer, chlorinated solvents, chlorinated benzenes and calcium hypochlorite. Most of these products are sold directly to manufacturing companies in the chemical processing, rubber and plastics, paper, minerals, metals, and water treatment industries. The primary products of PPG's specialty chemicals businesses are Transitions(R) lenses; optical monomers; precipitated silicas for tire, shoe, and battery separator businesses and phosgene derivatives and other intermediates for the pharmaceutical and agricultural businesses. PPG competes with six other major producers of chlor-alkali products. Price, product availability, product quality and customer service are the key competitive factors. In the specialty chemicals area, PPG's market share varies greatly by business; product quality and performance and technical service are the most critical competitive factors. Chemicals' principal production facilities are concentrated in North America, with five plants in the United States and one each in Canada and Mexico. The two largest facilities, located in Lake Charles, La., and Natrium, W. Va., primarily produce chlor-alkali products. Outside North America, PPG operates two plants each in China, France and Taiwan, and one each in Australia, Bra- zil, Ireland, the Netherlands and the Philippines. PPG owns equity interests in operations in China, Japan, Thailand and the United States. The average number of persons employed by the chemicals segment during 2000 was 4,900. Raw Materials The effective management of raw materials is important to PPG's continued success. The Company's most significant raw materials are titanium dioxide and epoxy and other resins in the coatings segment; sand, soda ash, energy and polyvinyl butyral in the glass segment, and energy and ethylene in the chemicals segment. Most of the raw materials used in production are purchased from outside sources, and the Company has made, and will continue to make, supply arrangements to meet the planned operating requirements for the future. Supply of critical raw materials is managed by establishing contracts, multiple sources, and identifying alternative materials or technology, whenever possible. Research and Development Research and development costs, including depreciation of research facilities, during 2000, 1999 and 1998 were 2 $301 million, $301 million and $287 million, respectively. PPG owns and operates several research and development facilities to conduct research and development involving new and improved products and processes. Additional process and product research and development work is also undertaken at many of the Company's manufacturing plants. Patents PPG considers patent protection to be important. The Company's business segments are not materially dependent upon any single patent or group of related patents. PPG received $27 million in 2000, $26 million in 1999 and $18 million in 1998 from royalties and the sale of technical know-how. Backlog In general, PPG does not manufacture its products against a backlog of orders. Production and inventory levels are geared primarily to projections of future demand and the level of incoming orders. Non-U.S. Operations Although PPG has a significant investment in non-U.S. operations, based upon the magnitude and location of investments, management believes that the risk associated with its international operations is not significantly greater than that of domestic operations. Employee Relations The average number of persons employed worldwide by PPG during 2000 was 35,600. As disclosed in the Outlook section of Management's Discussion and Analysis (see Item 7 of this report), the Company expects to reduce its workforce during 2001. The Company has numerous collective bargaining agreements throughout the world and believes it will be able to renegotiate any such agreements on satisfactory terms. The Company believes it has good relationships with its employees. Environmental Matters Like other companies, PPG is subject to the existing and evolving standards relating to the protection of the environment. Capital expenditures for environmental control projects were $22 million, $19 million and $19 million in 2000, 1999 and 1998, respectively. It is expected that expenditures for such projects in 2001 will approximate $20 million, with similar amounts of annual expenditures expected in the near future. Although future capital expenditures are difficult to estimate accurately because of constantly changing regulatory standards and policies, it can be anticipated that environmental control standards will become increasingly stringent and costly. PPG is negotiating with various government agencies concerning 69 cleanup sites, including 28 sites on the National Priority List (NPL). While PPG is not generally a major contributor of wastes to these sites, each potentially responsible party or contributor may face governmental agency assertions of joint and several liability as to each cleanup site. Generally, however, a final allocation of costs is made based on relative contributions of wastes to the site. There is a wide range of cost estimates for cleanup of these sites, due largely to uncertainties as to the nature and extent of their condition and the methods that may have to be employed for their remediation. Additionally, remediation projects have been or may be undertaken at certain of the Company's current and former plant sites. The Company has established reserves for those sites where it is probable that a liability has been incurred and the amount can be reasonably estimated. As of December 31, 2000 and 1999, PPG had reserves for environmental contingencies totaling $84 million and $82 million, respectively. Pre-tax charges against income for environmental remediation costs totaled $18 million in 2000, and $10 million in 1999 and 1998. The Company's experience to date regarding environmental matters leads PPG to believe that it will have continuing expenditures for compliance with provisions regulating the protection of the environment and for present and future remediation efforts at waste and plant sites. However, management anticipates that such expenditures, which will occur over an extended period of time, will not result in future annual charges against income that are significantly greater than those recorded in 2000. It is possible, however, that technological, regulatory and enforcement developments, the results of environmental studies and other factors could alter this expectation. In addi- tion, a portion of such environmental expenditures may be recovered from in- surers and other third parties. In management's opinion, the Company operates in an environmentally sound manner, is well positioned, relative to environmental matters, within the industries in which it operates, and the outcome of these environmental matters will not have a material adverse effect on PPG's financial position or liquidity. See Commitments and Contingent Lia- bilities, including Environmental Matters, in Management's Discussion and Analysis for additional information related to environmental matters. Item 2. Properties See "Item 1. Business" for information on PPG's production and fabrication facilities. Generally, the Company's plants are suitable and adequate for the purposes for which they are intended, and overall have sufficient capacity to conduct business in the upcoming year. 3 Item 3. Legal Proceedings 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 relate to product liability, contract, patent, environmental, antitrust and other matters arising out of the conduct of PPG's business. Included among PPG's legal proceedings are the following: The Company has been named as a defendant in a number of antitrust lawsuits filed in federal and state courts by various plaintiffs. These suits allege PPG was involved with competitors in fixing prices and allocating markets for certain glass products. Twenty-nine cases were filed in federal courts, all of which have been consolidated in a single federal district court (W.D. Pa.) for pretrial proceedings under the multidistrict litigation rules. The court has ruled that the case may proceed as a class action. The other initial defendants in these actions are Pilkington plc; Libbey-Owens Ford Co., Inc.; AFG Industries; Asahi Glass Co., Ltd.; Guardian Industries Corp.; and Ford Motor Company. The other defendants named above, except for the Ford Motor Company, have entered into settlement agreements with the plaintiffs, which are pending court approval. The remaining defendants, PPG and Ford, are participants in discovery with plaintiffs on the merits of the case. The plaintiffs in these cases are seeking economic and treble damages and injunctive relief. The Company believes it has meritorious defenses in these lawsuits. For over thirty years, PPG has been a defendant in lawsuits involving claims alleging personal injury from exposure to asbestos. Aggregate settlements by PPG to date have been immaterial. At December 31, 2000, PPG was one of many defendants in numerous asbestos-related lawsuits involving about 116,000 claims. In many of the cases, the plaintiffs allege that PPG should be liable for injuries involving asbestos-containing thermal insulation products manufactured and distributed by Pittsburgh Corning Corporation ("PC"). PPG and Corning Incorporated are each 50% shareholders in PC. PPG believes that it is not responsible for any injuries caused by PC products and intends to defend against such claims. Prior to 2000, PPG had never been found liable for any such claims, and in numerous cases PPG had been dismissed on motions prior to trial. In January 2000, in a trial in a state court in Texas involving six plaintiffs, the jury found PPG not liable. However, a week later in a separate trial also in state court in Texas, another jury found PPG, for the first time, partly responsible for injuries to five plaintiffs alleged to be caused by PC products. PPG intends to appeal the adverse verdict. On April 16, 2000, PC filed for Chapter 11 Bankruptcy in the Federal Bankruptcy Court in Pittsburgh, Pennsylvania. Accordingly, in the first quarter of 2000, PPG recorded an after-tax charge of $35 million for the write-off of all of its investment in PC. As a consequence of the bankruptcy filing and the various motions and orders in that proceeding, the asbestos litigation against PC and PPG has been stayed, and the filing of additional asbestos suits against them has been enjoined, until May 21, 2001. During the pendency of the stay, interested parties, including PC and PPG, among others, have been engaged in discussions to determine whether a settlement of all current and potential asbestos claims can be agreed on within the context of the PC bankruptcy proceeding. These settlement discussions involve numerous, complex issues. Accordingly, it is impossible to predict whether or on what terms a voluntary settlement, if any, on the part of PPG might be reached. The Company and others are defendants in two cases filed in State Court in Maryland claiming damages related to exposure to lead. The first is a purported class action by homeowners for remediation of single-family residences in Maryland constructed before 1978 which contain lead paint. The second case was filed on behalf of six children who allegedly suffer from lead poisoning. That case alleges the injuries arose from exposure to lead pigments in paints and exposure to tetraethyl lead gasoline additives. In a third case, decided on June 12, 2000 in a Maryland State Court, the jury returned a verdict in favor of PPG, finding that lead exposure did not cause the plaintiff's alleged injuries. Over the past ten years, PPG has been a defendant in several other lawsuits alleging injury due to lead paint. PPG has been dismissed as a defendant from all those other lawsuits. Although PPG believes it has adequate insurance for the personal injury and property damage claims against PPG described above, certain of PPG's insurers are contesting coverage with respect to some of these 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. Except with respect to any PPG contribution arising out of a possible voluntary settlement of asbestos claims as discussed above, the amount of which cannot be predicted, 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, results of operations or liquidity. Item 4. Submission of Matters to a Vote of Security Holders None. 4 Executive Officers of the Registrant The executive officers of the Company are elected annually in April by the Board of Directors. The business experience during the past five years of each Executive Officer is set forth below.
Name Age Title ---- --- ----- Raymond W. LeBoeuf (a) 54 Chairman of the Board and Chief Executive Officer since November 1997 Frank A. Archinaco (b) 57 Executive Vice President since April 1997 Charles E. Bunch (c) 51 Executive Vice President since March 2000 James C. Diggs (d) 52 Senior Vice President and General Counsel since July 1997 William H. Hernandez 52 Senior Vice President, Finance since January 1995
(a) Mr. LeBoeuf was Chairman Elect and Chief Executive Officer and President and Chief Operating Officer, prior to his present position. (b) Mr. Archinaco was Senior Vice President, Glass and Vice President, Glass, prior to his present position. (c) Mr. Bunch was Senior Vice President, Strategic Planning and Corporate Services and Vice President, Fiber Glass, prior to his present position. (d) Mr. Diggs was Senior Vice President and General Counsel Elect and was TRW Inc.'s Vice President and Assistant General Counsel prior to joining PPG in March 1997. 5 Part II Information with respect to the following Items can be found on the indicated pages of the Annual Report to Shareholders and is incorporated herein by reference.
Page(s) ------- Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters Stock Exchange Listings............................................... 45 Quarterly Stock Information........................................... 45 Directors who are not also Officers of the Company receive Common Stock Equivalents pursuant to the Deferred Compensation Plan for Directors and the Directors' Common Stock Plan. Common Stock Equivalents are hypothetical shares of Common Stock having a value on any given date equal to the value of a share of Common Stock. Common Stock Equivalents earn dividend equivalents that are converted into additional Common Stock Equivalents but carry no voting rights or other rights of a holder of Common Stock. The Common Stock Equivalents credited to Directors under both plans are exempt from registration under Section 4(2) of the Securities Act of 1933 as private offerings made only to Directors of the Company in accordance with the provisions of the plans. The plans are incorporated by reference into this Form 10-K as Exhibits 10 and 10.1. Under the Company's Deferred Compensation Plan for Directors, each Director must defer receipt of such compensation as the Board mandates. Currently, the Board mandates deferral of one-third of each payment of the basic annual retainer of each Director. Each Director may also elect to defer the receipt of (i) an additional one-third of each payment of the basic annual retainer, (ii) all of the basic annual retainer, or (iii) all compensation. All deferred payments are held in the form of Common Stock Equivalents. Payments out of the deferred accounts are made in the form of Common Stock of the Company (and cash as to any fractional Common Stock Equivalent). The Directors, as a group, were credited with 7,584, 10,811 and 6,674 Common Stock Equivalents in 2000, 1999 and 1998, respectively, under this plan. The values of the Common Stock Equivalents, when credited, ranged from $39.69 to $55.06 in 2000, $51.25 to $64.94 in 1999 and $51.00 to $72.88 in 1998. Under the Directors' Common Stock Plan, each Director who neither is nor was an employee of the Company is credited annually with Common Stock Equivalents worth one-half of the Director's basic annual retainer. Upon termination of service and attaining 70 years of age, the Common Stock Equivalents held in a Director's account are converted to and paid in Common Stock of the Company (and cash as to any fractional Common Stock Equivalent). The Directors, as a group, received 3,603, 3,746 and 2,582 Common Stock Equivalents in 2000, 1999 and 1998, respectively, under this plan. The values of those Common Stock Equivalents, when credited, ranged from $40.00 to $52.25 in 2000, $52.21 to $64.13 in 1999 and $52.50 to $70.94 in 1998. Item 6. Selected Financial Data The information required by Item 6 is reported in the Eleven-Year Digest under the captions net sales, income before accounting changes, cumulative effect of accounting changes, net income, earnings per common share before accounting changes, cumulative effect of accounting changes on earnings per common share, earnings per common share, earnings per common share - assuming dilution, dividends per share, total assets and long-term debt for the years 1996 through 2000.................................................................. 44 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's Discussion and Analysis.................................. 22-28 Item 7a. Quantitative and Qualitative Disclosures About Market Risk Management's Discussion and Analysis.................................. 27-28
6
Page(s) ------- Item 8. Financial Statements and Supplementary Data Independent Auditors' Report.......................................... 17 Financial Statements: Statement of Income for the years ended December 31, 2000, 1999 and 1998................................................................ 18 Balance Sheet, December 31, 2000 and 1999............................ 19 Statement of Shareholders' Equity for the years ended December 31, 2000, 1999 and 1998................................................. 20 Statement of Comprehensive Income for the years ended December 31, 2000, 1999 and 1998................................................. 20 Statement of Cash Flows for the years ended December 31, 2000, 1999 and 1998............................................................ 21 Notes to the Financial Statements.................................... 32-43 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.
7 Part III Item 10. Directors and Executive Officers of the Registrant The information required by Item 10 regarding Directors is contained under the caption "Election of Directors" in the Registrant's definitive Proxy Statement for its 2001 Annual Meeting of Shareholders (the Proxy Statement) which will be filed with the Securities and Exchange Commission, pursuant to Regulation 14A, not later than 120 days after the end of the fiscal year, which information under such caption is incorporated herein by reference. The information required by Item 10 regarding Executive Officers is set forth in Part I of this report under the caption "Executive Officers of the Registrant." The information required by Item 405 of Regulation S-K is included under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement which information under such caption is incorporated herein by reference. Item 11. Executive Compensation The information required by Item 11 is contained under the captions "Compensation of Executive Officers" and "Election of Directors--Compensation of Directors" in the Proxy Statement which information under such captions is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management The information required by Item 12 is contained under the caption "Voting Securities" in the Proxy Statement which information under such caption is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions The information required by Item 13 is contained under the caption "Election of Directors--Other Transactions" in the Proxy Statement which information under such caption is incorporated herein by reference. 8 Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) Financial Statements and Independent Auditors' Report (see Part II, Item 8 of this report (page 7) regarding incorporation by reference from the Annual Report to Shareholders). Financial Statement Schedules for years ended December 31, 2000, 1999 and 1998: The following should be read in conjunction with the previously referenced financial statements.
Page ---- Independent Auditors' Report........................................... 12 Schedule II--Valuation and Qualifying Accounts......................... 13
All other schedules are omitted because they are not applicable. (b) No reports were filed on Form 8-K during the last quarter of the period covered by this report. (c) Exhibits: 3 The Restated Articles of Incorporation, as amended, were filed as Exhibit 3 to the Registrant's Form 10-Q for the quarter ended March 31, 1995, which exhibit is incorporated herein by reference. 3.1 Statement with Respect to Shares, amending the Restated Articles of Incorporation effective April 21, 1998 was filed as Exhibit 3.1 to the Registrant's Form 10-K for the year ended December 31, 1998, which exhibit is incorporated herein by reference. 3.2 The Bylaws, as amended, were filed as Exhibit 3 to the Registrant's Form 10-Q for the quarter ended March 31, 2000, which exhibit is incorporated herein by reference. 4 The Shareholders' Rights Plan was filed as Exhibit 4 on the Registrant's Form 8-K, dated February 19, 1998, which exhibit is incorporated herein by reference. 4.1 Indenture, dated as of August 1, 1982, was filed as Exhibit 4.1 to PPG's Registration Statement on Form S-3 (No. 333-44397) dated January 16, 1998 (the "1998 Form S-3"), which exhibit is incorporated herein by reference. 4.2 First Supplemental Indenture, dated as of April 1, 1986, was filed as Exhibit 4.2 to the 1998 Form S-3, which exhibit is incorporated herein by reference. 4.3 Second Supplemental Indenture, dated as of October 1, 1989, was filed as Exhibit 4.3 to the 1998 Form S-3, which exhibit is incorporated herein by reference. 4.4 Third Supplemental Indenture, dated as of November 1, 1995, was filed as Exhibit 4.4 to the 1998 Form S-3, which exhibit is incorporated herein by reference. *10 PPG Industries, Inc. Nonqualified Retirement Plan dated as of January 1, 1989, as amended January 1, 1996 was filed as Exhibit 10 to the Registrant's Form 10-Q for the quarter ended March 31, 1996, which exhibit is incorporated by reference. The Supplemental Executive Retirement Plan II as amended, and the Change in Control Employment Agreement were filed as Exhibits 10.2 and 10.5, respectively, to the Registrant's Form 10-Q for the quarter ended September 30, 1995, which exhibit is incorporated by reference. The PPG Industries, Inc. Stock Plan was filed as Exhibit 10 to the Registrant's Form 10-Q for the quarter ended March 31, 1997, which exhibit is incorporated by reference. PPG Industries, Inc. Incentive Compensation and Deferred Income Plan for Key Employees, as amended, was filed as Exhibit 10.1 to the Registrant's Form 10-Q for the quarter ended March 31, 2000, which exhibit is incorporated herein by reference. PPG Industries, Inc. Deferred Compensation Plan for Directors, was filed as Exhibit 10.3 to the Registrant's Form 10-K for the year ended December 31, 1997, which exhibit is incorporated herein by reference. PPG Industries, Inc. Total Shareholder Return Plan for Key Employees was filed as Exhibit 10.4 to the Registrant's Form 10-K for the year ended December 31, 1998, which exhibit is incorporated herein by reference. *10.1 The Directors' Common Stock Plan, as amended April 19, 2000. *10.2 PPG Industries, Inc. Deferred Compensation Plan, as amended effective October 1, 2000. 9 *10.3 PPG Industries, Inc. Executive Officers Annual Incentive Compensation Plan. *10.4 PPG Industries, Inc. Executive Officers Total Shareholder Return Plan. 12 Computation of Ratio of Earnings to Fixed Charges for the Five Years Ended December 31, 2000. 13 Company's 2000 Annual Report to Shareholders. (Except for the pages and information therein expressly incorporated by reference in this Form 10-K, the Annual Report to Shareholders is provided solely for the information of the Commission and is not to be deemed "filed" as part of the Form 10-K.) 21 Subsidiaries of the Registrant. 23 Consent of Independent Auditors. 24 Powers of Attorney. 27 Financial Data Schedule. * Items referred to in Exhibit 10, 10.1, 10.2, 10.3 and 10.4 and incorporated by reference are either management contracts, compensatory plans or arrangements required to be filed as an exhibit hereto pursuant to Item 14(c) of Form 10-K. 10 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on February 15, 2001. PPG INDUSTRIES, INC. (Registrant) By /s/ W. H. Hernandez ............................................... W. H. Hernandez, Senior Vice President, Finance Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities indicated, on February 15, 2001. Signature Capacity --------- -------- /s/ R. W. LeBoeuf Director, Chairman of the Board and ..................... Chief Executive Officer R. W. LeBoeuf /s/ W. H. Hernandez Senior Vice President, Finance (Principal ..................... Financial and Accounting Officer) W. H. Hernandez J. G. Berges Director E. B. Davis, Jr. Director M. J. Hooper Director A. J. Krowe Director By /s/ W. H. Hernandez S. C. Mason Director ................................... W. H. Hernandez, Attorney-in-Fact R. Mehrabian Director T. J. Usher Director D. G. Vice Director D. R. Whitwam Director 11 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of PPG Industries, Inc.: We have audited the balance sheet of PPG Industries, Inc. and subsidiaries as of December 31, 2000 and 1999, and the related statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2000, and have issued our report thereon dated January 18, 2001; such financial statements and report are included in your 2000 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included financial statement schedule II, Valuation and Qualifying Accounts, of PPG Industries, Inc. and subsidiaries for the years ended December 31, 2000, 1999 and 1998. The financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ DELOITTE & TOUCHE LLP Pittsburgh, Pennsylvania January 18, 2001 12 PPG Industries, Inc. and Subsidiaries Schedule II--Valuation and Qualifying Accounts For the Years Ended December 31, 2000, 1999 and 1998
Balance at Charged to Beginning Costs and Balance at Description of Year Expenses Deductions(/1/) End of Year ----------- ---------- ---------- --------------- ----------- (Millions) 2000 Deducted from assets to which they apply: Allowance for doubtful accounts _____________ $25.7 $26.7 $15.0 $37.4 ===== ===== ===== ===== 1999 Deducted from assets to which they apply: Allowance for doubtful accounts _____________ $20.6 $20.5 $15.4 $25.7 ===== ===== ===== ===== 1998 Deducted from assets to which they apply: Allowance for doubtful accounts _____________ $20.5 $11.4 $11.3 $20.6 ===== ===== ===== =====
--------------------- (/1/)Notes and accounts receivable written off as uncollectible, net of recoveries, changes attributable to foreign currency translation and activity related to businesses sold. 13 PPG INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES ----------------------------- INDEX TO EXHIBITS
Exhibit Incorporated by Reference - ------- ------------------------- 3 Restated Articles Exhibit 3 - Form 10-Q for the quarter of Incorporation. ended March 31, 1995. 3.1 Statement with Respect to Exhibit 3.1 - Form 10-K for the year Shares, amending the ended December 31, 1998. Restated Articles of Incorporation. 3.2 Bylaws. Exhibit 3 - Form 10-Q for the quarter ended March 31, 2000. 4 Shareholders' Rights Exhibit 4 - Form 8-K, dated February Plan. 19, 1998. 4.1 Indenture, dated as of Exhibit 4.1 - Registration Statement on August 1, 1982. Form S-3 (No. 333-44397), dated January 16, 1998. 4.2 First Supplemental Exhibit 4.2 - Registration Statement on Indenture, dated as of Form S-3 (No. 333-44397), April 1, 1986. dated January 16, 1998. 4.3 Second Supplemental Exhibit 4.3 - Registration Statement on Indenture, dated as of Form S-3 (No. 333-44397), October 1, 1989. dated January 16, 1998. 4.4 Third Supplemental Exhibit 4.4 - Registration Statement on Indenture, dated as of Form S-3 (No. 333-44397), November 1, 1995. dated January 16, 1998. 10 PPG Industries, Inc. Exhibit 10 - Form 10-Q for the quarter Nonqualified Retirement ended March 31, 1996. Plan, dated as of January 1, 1989, as Amended January 1, 1996. 10 Supplemental Executive Exhibit 10.2 - Form 10-Q for the quarter Retirement Plan II. ended September 30, 1995. 10 Change in Control Exhibit 10.5 - Form 10-Q for the quarter Employment Agreement. ended September 30, 1995. 10 PPG Industries, Inc. Exhibit 10 - Form 10-Q for the quarter Stock Plan. ended March 31, 1997.
Exhibit Incorporated by Reference - ------- ------------------------- 10 PPG Industries, Inc. Exhibit 10.1 - Form 10-Q for the quarter Incentive Compensation ended March 31, 2000. and Deferred Income Plan for Key Employees. 10 PPG Industries, Inc. Exhibit 10.3 - Form 10-K for the year Deferred Compensation ended December 31, 1997. Plan for Directors. 10 PPG Industries, Inc. Exhibit 10.4 - Form 10-K for the year Total Shareholder ended December 31, 1998. Return Plan for Key Employees.
Exhibit Description - ------- ----------- 10.1 The Directors' Common Stock Plan, as amended April 19, 2000. 10.2 PPG Industries, Inc. Deferred Compensation Plan, as amended effective October 1, 2000. 10.3 PPG Industries, Inc. Executive Officers Annual Incentive Compensation Plan. 10.4 PPG Industries, Inc. Executive Officers Total Shareholder Return Plan. 12 Computation of Ratio of Earnings to Fixed Charges for the Five Years Ended December 31, 2000. 13 Company's 2000 Annual Report to Shareholders. 21 Subsidiaries of the Registrant. 23 Consent of Independent Auditors. 24 Powers of Attorney. 27 Financial Data Schedule.
EX-10.1 2 0002.txt PPG DIRECTOR'S COMMON STOCK PLAN EXHIBIT 10.1 PPG INDUSTRIES, INC. DIRECTORS' COMMON STOCK PLAN ---------------------------- 1. PURPOSE. The purpose of this Plan is to align the financial interests of ------- the Company's shareholders with those of its Non-Employee Directors by providing such Directors with compensation in the form of Company Common Stock. 2. DEFINITIONS. ----------- "Account" means the account maintained for each Non-Employee Director to which Common Stock Equivalents and Dividend Equivalents are credited. "Annual Contribution" means the Common Stock Equivalents credited to an Account each year under Section 4.1. "Beneficiary" means the person or entity designated by the Participant or the Participant's legal representative as provided under Section 9. "Board" means the Board of Directors of the Company. "Change in Control" has the same meaning as given to that term in the PPG Industries, Inc. Deferred Compensation Plan for Directors, as such plan may be amended from time to time. "Committee" means the Officers-Directors Compensation Committee of the Board. "Common Stock" means the common stock, par value $1.66 2/3 per share, of the Company. "Common Stock Equivalent" means a hypothetical share of Common Stock. "Company" means PPG Industries, Inc. 1 "Dividend Equivalent" means an additional number of Common Stock Equivalents the Company shall credit to each Account as of each dividend payment date declared with respect to the Company's Common Stock. The additional number of Common Stock Equivalents to be credited to each Account shall be equal to: (a) the product of (i) the dividend per share of the Common Stock which is payable as of the dividend payment date, multiplied by (ii) the number of whole Common Stock Equivalents credited to the Account as of the applicable dividend record date; DIVIDED BY ---------- (b) the closing price of a share of the Common Stock on the dividend payment date (or if such stock was not traded on that date, on the next preceding date on which it was traded), as reported in the New York Stock Exchange Composite Transactions. "Non-Employee Director" means a director of the Company who is not a present or former employee of the Company or any of its subsidiaries. "Participant" means a Non-Employee Director who has become eligible to receive benefits under this Plan. A Non-Employee Director becomes a Participant when he or she (1) resigns from the Board and (2) attains 70 years of age; provided however, that the Committee may waive the requirement that the Participant attain 70 years of age. "Plan" means the PPG Industries, Inc. Directors' Common Stock Plan. "Retainer" means the base annual retainer fee paid to each Non-Employee Director by the Company. It does not include committee retainer fees, meeting attendance fees, committee chairperson's retainer fees or any other compensation other than the base annual retainer fee. 2 "Service" means the period of time a Non-Employee Director serves on the Board. 3. EFFECTIVE DATE. This Plan shall be effective on and after January 1, 1988. -------------- 4. CREDITING ACCOUNTS. ------------------ 4.1 Each year on the day following the Annual Meeting of Shareholders of the Company, the Company shall credit the Account of each Non-Employee Director who serves on the Board on that day with the number of Common Stock Equivalents determined by dividing one-half of such Director's Retainer by the average closing price of the Common Stock in the New York Stock Exchange Composite Transactions during the 5 days for which such price is available immediately preceding such day of crediting. The Account of any person who ceases to be a Director prior to April 16, 1999, shall be credited with no more than 10 such Annual Contributions and the total number of such Annual Contributions made to his or her Account under this Section 4.1 plus the number which is multiplied by $10,000 to determine the amount credited to the Account under Section 4.2 will not exceed 10. Any Non-Employee Director who is a Director of the Company on or after April 16, 1999 and whose total number of Annual Contributions was limited to 10 under the Plan in effect prior to April 16, 1999, shall have credited to his or her Account such additional Annual Contributions and Dividend Equivalents as are necessary so that such Account is credited with the number of Common Stock Equivalents it would have had credited if such limitation had never existed. 4.2 On the day following the 1988 Annual Meeting of Shareholders of the Company, the Company shall credit the Account of each Non-Employee Director who is age 61 or older on that date with the number of Common Stock Equivalents determined by (1) multiplying $10,000 times his or her number of full fiscal years of Service, but such number of full fiscal years of Service shall not exceed the number determined by subtracting 60 from the Non-Employee Director's age on the day immediately following the 1988 Annual Meeting of Shareholders and (2) then dividing that amount by the average closing price of the Common Stock in the 3 New York Stock Exchange Composite Transactions during the 5 days for which such price is available immediately preceding such day. 4 5. PAYMENTS OF BENEFITS. -------------------- 5.1 Payments from the Account will be made in the form of Common Stock, provided that payment with respect to any partial shares of Common Stock shall be made in the form of cash. However, payments from the Account of any Participant who ceased to be a director of the Company before August 15, 1996 shall continue to be paid in the manner provided by the Plan as effective on August 15, 1996. 5.2 Subject to Section 5.4 and Section 5.5, a Participant may elect to have the amount deferred paid in from one to 15 annual installments after he or she shall cease to be a director of the Company. Such installment(s) shall commence upon or following (i) a specified date; (ii) an event certain; (iii) the earlier of a specified date or an event certain. Installments shall continue to be payable as soon as practicable after the first day of January of each year thereafter. Subject to Sections 5.4 and 5.5, payment of deferred amounts shall commence no later than January of the first calendar year which is the later of: (i) the year following attainment of age seventy (or such other age as may supersede the age referred to in Section 403(f)(3) of Title 42 United States Code); or (ii) the year following such Participant's retirement. The number of shares of Common Stock paid in each installment shall be equal to the whole number obtained by dividing the number of Common Stock Equivalents then credited to the Participant's Account by the number of unpaid 5 installments. Common Stock Equivalents with respect to which payment has not yet occurred shall continue to be credited with Dividend Equivalents until paid. However, no installment paid from the Account may be in an amount less than 20 shares of Common Stock, and, to the extent necessary, installments shall be accelerated to provide for such minimum installments. As of the date on which the last payment of benefits is made to a Participant from the Account, the Company shall pay the Participant, in cash, an amount equal to the value of any remaining fractional Common Stock Equivalent based on the closing price of the Common Stock on the New York Stock Exchange Composite Transactions on the last date such price is available prior to the payment date. 5.3 Death or Disability ------------------- (i) Subject to Section 7, in the event of the death or disability of a Participant either while serving as a director of the Company or prior to the commencement of any payments hereunder, any amount due under the Plan shall be paid in a lump sum to the Participant's beneficiary, or in the case of disability, to the Participant, as soon as practicable after the death or disability. (ii) Subject to Section 7, in the event of the death or disability of a Participant on or after the commencement of installment payments, in accordance with Section 5.2, payments shall continue to paid to the Participant's beneficiary, or in the case of disability, to the Participant, in accordance with the election made by the Participant in accordance with Section 5.2; provided, however, that the Secretary of the Committee shall have the power to accelerate the payment of any installment(s) because of hardship or other circumstances deemed by him, in his discretion, to warrant such acceleration. 6 5.4 Payment Elections ----------------- Subject to Section 5.6, a Participant may elect the number and the date or event for the commencement of installment payments in accordance with the following: (i) Such elections must be made at least six months and ten days prior to the first payment date; and (ii) In all cases, the elections must be made in the calendar year preceding the first payment date. 5.5 Notwithstanding any other provision of this Plan, the first installment to a Participant out of the Account shall not be paid until six months and ten days after the Participant shall cease to be a director of the Company. 5.6 Notwithstanding any other provision of this Plan, any Participant who, pursuant to any income tax laws to which he or she is subject, would be immediately taxed on any amounts credited under the Plan may not elect the number and the date or event for the commencement of payments under the Plan. Instead, the payment of all benefits to such Participant (including any Dividend Equivalents from the Plan) shall occur as a lump sum payment on the first business day which is 6 months and 10 days after the Participant's last day as a member of the Board. In the event of such Participant's death prior to receipt of the benefits, the Participant's Beneficiary shall be paid the benefits on the first business day which is 6 months and 10 days after the Participant's last day as a member of the Board. 6. CHANGES IN STOCK. In the event of any change in the outstanding shares of ---------------- the Common Stock, or in the number thereof, by reason of any stock dividend or split, recapitalization, merger, consolidation, exchange of shares or other similar change, a corresponding change will be made in the number of Common Stock Equivalents and Dividend Equivalents, if any, credited to each Account, unless the Committee determines otherwise. 7 7. ACCELERATION. The Committee, in its sole discretion, may accelerate the ------------ payment of benefits hereunder to any Participant or his or her Beneficiary for reasons of changes in tax laws or in the event of a Change in Control of the Company; provided that no payment of benefits may be accelerated hereunder to any Participant or his or her Beneficiary if such Participant was a director of the Company on or after November 1, 1990. An exception is provided for any Non-Employee Director if any income tax laws to which he or she is subject would cause him/her to be immediately taxed on amounts credited under the Plan. Under this exception, the requirement that age 70 be attained before a Non-Employee Director becomes a Participant is automatically waived by the Committee. Additionally, under this exception, the payment of all benefits under the Plan shall occur on the first business day which is 6 months and 10 days after the earlier of a Participant's resignation from the Board or death. In the event of such Non-Employee Director's death, either while still an active member of the Board or after resignation from the Board but before receipt of payment from the Plan, payment shall be made to the Participant's Beneficiary on the above referenced date. 8. CHANGE IN CONTROL. Upon, or in reasonable anticipation of, a Change in ----------------- Control (as defined above), the Company shall immediately make a payment in cash to a trustee on such terms as the Senior Vice President, Human Resources, and Administration and the Senior Vice President, Finance, or either of them, shall deem appropriate (including such terms as are appropriate to cause such payment, if possible, not to be a taxable event to Participants) of a sufficient amount to insure that Participants receive the payment of all amounts as contemplated under the Plan. 9. GENERAL PROVISIONS. The entire cost of benefits and administrative ------------------ expenses for this Plan shall be paid by the Company. This Plan is purely voluntary on the part of the Company. The Company, by action of the Board or, except as limited by the Company's bylaws, the Committee, may amend, suspend or terminate this Plan in whole or part at any time, but no such amendment, suspension or termination shall adversely affect the rights of any Non-Employee Director or Beneficiary of a deceased 8 Non-Employee Director with respect to Common Stock Equivalents and Dividend Equivalents credited prior to such amendment, suspension or termination or Dividend Equivalents which would otherwise have been credited in the future with respect to Common Stock Equivalents credited prior to such amendment, suspension or termination. No rights under the Plan may be transferred or assigned except that a Participant may designate, in writing filed with the Secretary of the Company, his spouse or children, a trustee or his or her executor or executrix as Beneficiary to receive any unpaid amounts under the Plan after the death of the Participant. In the absence of any such designation or in the event that the designated person or entity shall not be in existence at the time a payment under the Plan comes due, the Beneficiary of the Participant shall be the Participant's legal representative. As Amended April 19, 2000 9 EX-10.2 3 0003.txt PPG DEFERRED COMPENSATION PLAN EXHIBIT 10.2 PPG INDUSTRIES, INC. DEFERRED COMPENSATION PLAN As amended and restated Effective October 1, 2000 Effective October 1, 2000 Preamble In accordance with the Resolution adopted by the Officers-Directors Compensation Committee of the Board of Directors of PPG Industries, Inc. on July 19, 2000, the PPG Industries Inc. Deferred Compensation Plan is hereby amended and restated to be effective October 1, 2000. The Plan is adopted primarily for the purpose of providing deferred compensation to a select group of management and highly compensated employees. i Table of Contents ----------------- Section I ...................... Definitions Section II ...................... Deferrals Section III ...................... Investment Options Section IV ...................... Savings Plan Restoration Contributions Section V ...................... Withdrawal Provisions Section VI ...................... Specific Provisions Related to Benefits Section VII ...................... Administration and Claims Section VIII ...................... Amendment and Termination Section IX ...................... Miscellaneous Section X ...................... Change in Control i SECTION I - DEFINITIONS ----------------------- 1.01 Account means all amounts transferred from the Prior Plan, deferred Award amounts, all deferred Salary amounts, all deferred TSR Plan Payments and all Restoration Contributions and earnings on each in a Participant's account at any particular time. 1.02 Administrator means an officer or officers of the Company appointed by the Committee, and any person(s) designated by such Administrator to assist in the administration of the Plan. 1.03 Affiliate means any business entity, other than a Subsidiary Corporation, in which PPG has an equity interest. 1.04 Award means a grant to a Participant under either the IC Plan or MAP which such person may elect to defer. Awards to Participants may be made in the form of cash ("cash component"), shares of PPG stock ("stock component"), or a combination of both. 1.05 Beneficiary means the person or persons designated by a Participant to receive benefits hereunder following the Participant's death, in accordance with Section 6.02. For purposes of this Section 1.05, "person or persons" is limited to an individual, a Trustee or a Participant's estate. 1.06 Board means the Board of Directors of PPG Industries, Inc. 1.07 Code means the Internal Revenue Code of 1986, and amendments thereto. 1.08 Committee means the Officers-Directors Compensation Committee (or any successor) of the Board. 1.09 Company or PPG means PPG Industries, Inc. 1.10 Conversion Formula means dividing an amount by the average of the closing sale prices for PPG Stock reported on the New York Stock Exchange-Composite Tape for all days in the month of January during which the New York Stock Exchange is open during the year following the Plan Year to which the Award relates. 1.11 Corporation means PPG and any Subsidiary Corporation and any Affiliate designated by the Administrator as eligible to participate in the Plan, and which, by proper authorization of the Board of Directors or other governing body of such Subsidiary Corporation or Affiliate, elects to participate in the Plan. -Page 1.1- 1.12 Disability means any long-term disability. The Administrator, in his complete and sole discretion, shall determine a Participant's Disability; provided, however, that a Participant who is approved to receive Long-Term Disability benefits pursuant to the PPG Industries, Inc. Long-Term Disability Plan shall be considered to have a Disability. The Administrator may require that a Participant submit to an examination from time to time, but no more often than annually, at the expense of the Company, by a competent physician or medical clinic, selected by the Administrator, to confirm Disability. On the basis of such medical evidence, the determination of the Administrator as to whether or not a condition of Disability exists or continues shall be conclusive. 1.13 Discretionary Transaction means a transaction pursuant to any employee benefit plan of the Company that: (a) Is at the volition of the plan participant; (b) Is not made in connection with the participant's death, disability, retirement or termination of employment; (c) Is not required to be made available to a plan participant pursuant to a provision of the Code; and (d) Results in either an intra-plan transfer involving a PPG Stock Fund or a cash distribution funded by a volitional disposition of PPG Common Stock by the plan participant. 1.14 Employee means any full-time or permanent part-time salaried employee (including any officer) of the Corporation. 1.15 ERISA means the Employee Retirement Income Security Act of 1974, as amended. 1.16 Financial Hardship means an unexpected need for cash arising from an illness, casualty loss, sudden financial reversal, or other such unforeseeable occurrence, as determined by the Administrator, in his complete and sole discretion. 1.17 Former Participant means a Participant who becomes ineligible to receive an Award but who continues to have an Account hereunder. 1.18 IC Plan means the PPG Industries, Inc. Incentive Compensation and Deferred Income Plan for Key Employees. 1.19 Insider means a Participant who at any time within the prior six (6) months was a person subject to Section 16 of the Securities Act of 1934. -Page 1.2- 1.20 Investment Account means any one of the following: Fidelity Growth Company Fund Account: A recordkeeping account, the value ------------------------------------ of which is based on the Fidelity Growth Company Fund. Fidelity Contrafund Account: A recordkeeping account, the value of which --------------------------- is based on the Fidelity Contrafund. Fidelity Spartan U.S. Equity Index Fund Account: A recordkeeping account, ----------------------------------------------- the value of which is based on the Fidelity Spartan U.S. Equity Index Fund. Fidelity Growth and Income Portfolio Account: A recordkeeping account, the -------------------------------------------- value of which is based on the Fidelity Growth and Income Portfolio. Fidelity Intermediate Bond Fund Account: A recordkeeping account, the --------------------------------------- value of which is based on the Fidelity Intermediate Bond Fund. Fidelity Institutional MM Portfolio - Class 1 Account: A recordkeeping ----------------------------------------------------- account, the value of which is based on the Fidelity Institutional MM Portfolio Class 1. 1.21 Investment Account Share means a recordkeeping unit for the appropriate Investment Account, in each case, equivalent to one share of the mutual fund on which the value of the particular Investment Account is based. 1.22 MAP means the PPG Industries, Inc. Management Award and Deferred Income Plan. 1.23 Participant means an Employee approved to participate in either the IC Plan or MAP. As used herein, "Participants" may be used collectively to include Retired Participants, Terminated Participants and Former Participants. 1.24 Plan means the PPG Industries, Inc. Deferred Compensation Plan as amended and restated, effective October 1, 2000. 1.25 Plan Year means the calendar year. 1.26 PPG Stock means Common Stock of the Company. Shares of PPG Stock issued under the Plan may be either authorized but unissued shares or issued shares acquired by the Company and held in its treasury. 1.27 PPG Stock Account means a record-keeping account maintained for a Participant who elects to defer all or part of an Award/Salary and/or to maintain all or part of a deferred Award/Salary in the form of Stock Account Shares. -Page 1.3- 1.28 PPG Stock Fund means the PPG Stock Account or any other fund or account of any other benefit plan of the Company or a Subsidiary which account or fund is invested in, or valued based upon, PPG Common Stock and which fund or account is an alternative to other funds or accounts made available to plan participants which funds or accounts are not invested in, or valued based upon PPG Common Stock. 1.29 Prior Plan means the PPG Industries, Inc. Deferred Compensation Plan, as in effect through September 30, 2000. 1.30 Prohibited Discretionary Transaction means a Discretionary Transaction to be effected pursuant to an election made less than six months following the date of the most recent previous election to make a Discretionary Transaction with respect to any employee benefit plan of the Company which most recent previous election effected: (a) An increase in a PPG Stock Fund if the current transaction would entail a disposition of PPG Stock or a decrease in a PPG Stock Fund; or (b) A disposition of PPG Stock or a decrease in a PPG Stock Fund if the current transaction would entail an increase in a PPG Stock Fund . 1.31 Restoration Contributions means contributions to a Participant's Account in accordance with Section IV. 1.32 Retired Participant means a Participant who elects to maintain an Account in the Plan after his/her Retirement Date. 1.33 Retirement Date means the first day of the month following a Participant's termination of employment, provided such Participant is eligible to receive a benefit from a retirement plan sponsored by the Corporation on such date. 1.34 Salary means a Participant's monthly base salary from the Corporation (excluding bonuses, commissions and other non-regular forms of compensation) and including payments from the PPG Industries Salary Continuance Plan, before reductions for deferrals under the Plan or under any other Plan sponsored by the Corporation. In the case of Salary Continuance, Salary deferral elections shall be applied to the actual amount of Salary Continuance being paid. 1.35 Savings Plan means the PPG Industries Employee Savings Plan, as amended from time to time. 1.36 Savings Plan Election means the sum of the percentage the Participant is contributing to the Savings Plan as Savings and as Elective Deferrals not to exceed the percentage eligible for the Company match in the Savings Plan. -Page 1.4- 1.37 Savings Plan Matching Percentage means the percentage of the Company's Matching Contributions for a Plan Year in the Savings Plan. 1.38 Stock Account Share means a record-keeping unit which is equivalent to one share of PPG Stock. 1.39 Subsidiary means any corporation of which fifty percent (50%) or more of the outstanding voting stock or voting power is owned, directly or indirectly, by the Company and any partnership or other entity in which the Company has a fifty percent (50%) or more ownership interest. 1.40 Terminated Participant means a Participant who maintains an Account in the Plan following his/her termination of employment from the Corporation. 1.41 Transferred Interest Account means a separate Interest Account, transferred from the Prior Plan, for any amount which the Participant had transferred from his/her CEA-2 account. 1.41 TSR Plan means the PPG Industries, Inc. Total Shareholder Return Plan for Key Employees. The following words shall have the meaning set forth in the TSR Plan: Dividend Equivalent Payment TSR Shares 1.42 Unscheduled Withdrawal means a distribution of all or a portion of a Participant's Investment Accounts and/or PPG Stock Account requested by a Participant, or a Beneficiary, if the Participant is deceased, in accordance with Section 5.07. -Page 1.5- SECTION II - DEFERRALS ---------------------- 2.01 Deferral of Award ----------------- (a) In accordance with the provisions of either the IC Plan or MAP, which- ever is applicable, the value of that portion of the cash component of a deferred Award which the Participant has designated to one or more of the Investment Accounts in accordance with Section 3.01 shall be credited to such Investment Account(s) on the day such deferral would otherwise have been paid to the Participant. (b) In accordance with the provisions of either the IC Plan or MAP, whichever is applicable, the value of: (1) that portion of the cash component of a deferred Award which the Participant has designated in accordance with Section 3.01 to the PPG Stock Account; and/or (2) the value of the stock component of a deferred Award shall be credited to the PPG Stock Account in the Participant's Account on the day such deferral would otherwise have been paid to the Participant. (c) (1) Share Awards credited to the PPG Stock Account shall be credited in the form of Stock Account Shares and cash Awards credited to the PPG Stock Account shall be credited in the form of whole and fractional Stock Account Shares, the number of which will be determined according to the Conversion Formula. (2) Cash Awards credited to the Investment Account(s) shall be credited in the form of Investment Account Shares, the number of which will be determined according to the most recent closing market value of the appropriate Investment Account Shares. (d) Any amount designated by the Participant for in-service withdrawal in accordance with either the IC Plan or MAP may not be credited to the PPG Stock Fund. -Page 2.1- 2.02 Deferral of Salary ------------------ (a) Prior to the beginning of each quarter, a Participant may elect to defer a percentage, in whole percentages only, of his/her Salary as follows: Minimum Deferral Maximum Deferral ---------------- ---------------- 1% 50% (b) Elections made pursuant to this Section 2.02 shall remain in effect until the earlier of: (1) The first day of the quarter following the quarter the Participant rescinds or modifies the election; or (2) The first day of the Plan Year following the Plan Year in which the Participant becomes a Former Participant. (c) Any election filed by a Participant pursuant to this Section 2.02 must be received by the Administrator on or before the last business day of the quarter prior to the quarter in which such election is to become effective. Deferred Salary shall be credited to the Participant's Account on the first day of the month following the month in which the deferral is made. (d) A Participant is ineligible to defer or continue to have deferred any Salary percentage during a quarter in which the Participant's salary is subject to a garnishment, tax lien, child support or any similar attachment to Salary. (e) A Participant who becomes ineligible for Salary deferral, in accordance with Paragraph (d) above, may thereafter resume Salary deferral upon the discontinuance of the attachment to the Salary and in accordance with the Salary election provisions of this Section 2.02. (f) The number of Stock Account Shares credited to the PPG Stock Account shall be determined by the closing price for PPG Stock on the last business day of the month in which the deferral is made. (g) The number of Investment Account Shares credited to the appropriate Investment Account shall be determined by the closing market price for shares of the mutual fund on which the value of the Investment Account is based on the last business day of the month in which the deferral is made. -Page 2.2- 2.03 Deferral of Payment under the TSR Plan -------------------------------------- (a) In accordance with the provisions of the TSR Plan, the portion of a Payment which a Participant has elected to defer shall be credited to the PPG Stock Account in the Participant's Account on the day such Payment would otherwise have been paid to the Participant. (b) The portion of a Payment deferred by the Participant under the TSR Plan, as determined in TSR Shares, shall be credited to the PPG Stock Account in the form of Stock Account Shares. (c) Dividend Equivalents under TSR Plan ----------------------------------- (1) Dividend Equivalents payable in accordance with the TSR Plan shall be paid into the PPG Stock Account. (2) The number of Stock Account Shares credited to the PPG Stock Account due to Dividend Equivalents paid from the TSR Plan shall be determined on the basis of the closing sale price of PPG Stock reported on the Composite Tape for the day on which a dividend is paid on PPG Stock. -Page 2.3- SECTION III - INVESTMENT OPTIONS -------------------------------- 3.01 Investment Election ------------------- (a) Participants must file an election with the Administrator designating the investment election for any cash amounts being deferred into the Plan. (b) Any election filed by a Participant shall remain in effect for all cash amounts deferred to the Plan unless and until the Participant files a new election with the Administrator. (c) Elections filed in accordance with this Section 3.01 must be filed in accordance with the procedure established by the Administrator. 3.02 Investment Accounts ------------------- Amounts credited to the Investment Accounts shall be credited in the form of whole and fractional Investment Account Shares. 3.03 PPG Stock Account ----------------- (a) Amounts credited to the PPG Stock Account shall be credited in the form of whole and fractional Stock Account Shares. (b) Participants shall not receive cash dividends or have voting or other shareholders' rights as to Stock Account Shares; however, Stock Account Shares shall accrue whole and fractional dividend equivalents, in the form of additional Stock Account Shares, on the basis of the closing sale price for PPG Stock, reported on the Composite Tape for the day on which a dividend is paid, based on the number of whole Stock Account Shares in the PPG Stock Account on the record date. 3.04 Transfers from the Prior Plan ----------------------------- (a) Any amounts in a Participant's account on September 30, 2000, shall be transferred to his/her Account effective October 1, 2000, in accordance with the election filed by the Participant in accordance with Section 3.01. (b) In the event a Participant has not filed a valid election in accordance with Section 3.01, amounts credited to the Participant's PPG Stock account in the Prior Plan shall be transferred to the PPG Stock Account; and amounts credited to the Participant's interest account in the Prior Plan shall be transferred to the Fidelity Institutional MM Portfolio - Class 1 Account. -Page 3.1- (c) Any amounts in the Participant's PPG Stock Account in the Prior Plan which the participant has designated for withdrawal in accordance with the provisions of Section XI of the Prior Plan, including any amounts representing dividend equivalents, accrued in accordance with Section 3.03(b), shall be distributed to the Participant on April 1, 2001. (d) Any amount credited to a Participant's transferred interest account in the Prior Plan, shall be transferred to the Transferred Interest Account notwithstanding any election filed by the Participant. 3.05 Transfers --------- (a) Subject to paragraph (b) below, a Participant who has a balance in the Investment Accounts may elect to transfer any amounts between/among the Investment Accounts or into the PPG Stock Account. Such transfers shall be subject to the following: (1) Participants must file a transfer request with the Administrator in accordance with the procedure established by the Administrator. (2) (A) For transfers into the PPG Stock Account, the number and value of whole and fractional Stock Account Shares shall be determined by the closing price of PPG Stock on the last business day of the month in which the election is received by the Administrator. (B) For transfers into and out of any of the Investment Accounts, the number and value of whole and fractional Investment Account Shares shall be determined by the closing price of the appropriate Investment Account Share on the last business day of the month in which the election is received by the Administrator. (3) No transfers may be made out of the PPG Stock Account at any time. (4) No transfers may be made out of the Transferred Interest Account at any time. (b) Insiders are prohibited from making any transfer which would constitute a Prohibited Discretionary Transaction. -Page 3.2- SECTION IV - SAVINGS PLAN RESTORATION CONTRIBUTIONS --------------------------------------------------- 4.01 Restoration Contributions ------------------------- Participants who are currently contributing to the Savings Plan may be eligible to receive Restoration Contributions as follows: (a) For Participants whose Salary exceeds the amount specified in (S)401(a)(17) of the Code, Restoration Contributions shall equal the sum of (1) and (2) below: (1) Lesser of: Excess Salary times Savings Plan Election times Savings Plan Matching Percentage; or Amount of monthly deferred Salary. (2) If the difference between the Participant's Salary deferral and Excess Salary ("Difference") is greater than zero: Difference times Savings Plan Election times Savings Plan Matching Percentage. (b) For a Participant whose Salary equals or is less than the amount specified in (S)401(a)(17) of the Code and such Participant elects to defer Salary in accordance with Section 2.02, Restoration Contributions shall equal the amount of the deferred Salary times the Participant's Savings Plan Election times the Savings Plan Matching Percentage. (c) For purposes of this Section 4.01 Excess Salary means Salary minus the amount specified in (S)401(a)(17) of the Code divided by 12. 4.02 Savings Plan Restoration Account -------------------------------- Restoration Contributions shall be credited monthly to the Participant's PPG Stock Account in the form of Stock Account Shares. The number of whole and fractional Stock Account Shares shall be determined by using the closing price for PPG Stock on the last business day of the month in which such Restoration Contributions are made, and shall be credited to the Participant's Account on such day. -Page 4.1- 4.03 Vesting ------- Restoration Contributions shall be 100% vested at the time such Restoration Contributions are credited to a Participant's Account. 4.04 Transfers --------- Restoration Contributions may not be transferred from the PPG Stock Account. -Page 4.2- SECTION V - WITHDRAWAL PROVISIONS --------------------------------- 5.0 Scheduled In-Service Withdrawals -------------------------------- Except as otherwise provided in this Section V, payment of any amount designated by a Participant for in-service withdrawal, in accordance with provisions of either the IC Plan or MAP, whichever is applicable, shall be made to the Participant in a lump sum as of the first day of the quarter/year specified by the Participant. 5.02 Withdrawals at/after a Participant's Retirement Date ---------------------------------------------------- (a) A Participant may elect a payment schedule applicable to his/her Account provided such election is filed with the Administrator: (1) Prior to the Participant's Retirement Date; and (2) In the year prior to the year the first payment is to be made and, in all cases, at least six months/ten days prior to the time the first payment is to be made. (b) Participants may elect: (1) One lump-sum payment; or (2) Quarterly, semiannual or annual installments - to be made over a period of years, up to a maximum period of 15 years; or (3) A combination of (1) and (2). (c) A Participant may delay the first payment for a period up to ten years following his/her Retirement Date; provided, however, that, in all cases, payments must begin no later than the year in which the Participant's 75th birthday occurs. (d) The payment schedule elected by the Participant shall apply to his/her entire Account. Participants may designate the first day of the quarter for the commencement of the payment schedule on an annual, semiannual or quarterly basis. -Page 5.1- Each installment payment shall be calculated by dividing the Participant's account balance by the remaining number of installments (e.g.: Ten annual installments shall be paid: 1st installment = 1/10 of Account; 2nd installment = 1/9 of Account; 3rd installment = 1/8 of Account, etc.). If the installment payment is to be in the form of PPG Stock, any stock increment shall be rounded down to the nearest whole stock share. Any remaining stock increments shall remain in the Account until subject to further payment. (e) In the event a Participant fails to file a payment schedule election with the Administrator prior to his/her Retirement Date, his/her Account shall be paid in one lump sum in the year following the year of such Retirement Date and shall be paid during the first quarter of such year which is at least six months/ten days following such Retirement Date. (f) Payment schedules pursuant to this Section 5.02 shall supersede any prior payment election(s) filed with the Administrator; and shall become irrevocable on the Participant's Retirement Date. 5.03 Withdrawals Following Termination --------------------------------- (a) Except as provided in paragraph (d) below: (1) A Participant may elect one lump-sum payment, in accordance with subparagraph (b)(1) below, or may elect to receive up to five annual installments, in accordance with subparagraph (b)(2) below. (2) Any election made pursuant to this paragraph (a) must be filed with the Administrator no later than 30 days after the Participant's Termination of Employment. (b) (1) Participants who elect to receive a lump-sum, must specify the quarter/year that the lump-sum payment is to be made; provided, however, that the Participant must elect to receive the payment no later than the last quarter of the year in which the fifth anniversary of his/her termination date occurs. Payment must occur no earlier than the Plan Year after the Plan Year of the Participant's election and as of the first day of the first quarter which is at least six (6) months and 10 days following the Participant's election. (2) Participants who elect to receive installments, must specify the quarter/year that such installments will begin; provided, however, that the Participant must elect to begin installments no later than the last quarter of the year in which the fifth anniversary of his/her termination date occurs. Installments must begin no earlier than the Plan Year after the Plan Year of the Participant's election and as of the -Page 5.2- first day of the first quarter which is at least six (6) months and 10 days following the Participant's election. The payment schedule elected by the Participant shall apply to his/her entire Account. Each installment shall be calculated by dividing the Participant's account balance by the remaining number of installments (e.g.: Five annual installments shall be paid: 1st installment = 1/5 of Account; 2nd installment = 1/4 of Account, etc.). If the installment payment is to be in the form of PPG Stock, any stock increment shall be rounded down to the nearest whole stock share. Any remaining stock increments shall remain in the Account until subject to further payment. (c) In the event a Participant fails to file a payment election with the Administrator within the time provided in paragraph (a) above, his/her Account shall be paid in one lump sum in the year following: (i) the year in which the Participants's termination occurs; or, if later (ii) the year in which the 30th day following the Participant's termination occurs; and shall be paid during the first quarter of the applicable year specified in (i) or (ii) above. (d) In the event the Administrator determines, in his sole discretion, that a termination is "for cause," or is otherwise potentially adverse to the Company's interest, as for example, a Participant's termination in order to accept a position with a major competitor, the Participant shall have no election with respect to payment of his/her Account. Such Participant shall receive his/her entire Account balance as of the first day of the first quarter immediately following his/her termination date. (e) Payment schedules pursuant to this Section 5.03 shall supersede any prior payment election(s) filed with the Administrator. (f) In accordance with authority delegated to the Administrator by the Committee at its meeting on September 20, 1995, the Administrator granted the option of five installments, as provided in paragraphs (a) and (b) of this Section to those employees whose employment with the Company was terminated as a result of the sale of the Chemicals Surfactants business to BASF Corp. on December 1, 1997. -Page 5.3- (g) In accordance with authority delegated to the Administrator by the Committee at its meeting on September 20, 1995, the Administrator has adopted the following with respect to Participants who become employees of PPG Auto Glass, LLC: Such Participants shall not incur a "termination" as contemplated by this Section 5 unless or until the Participant is no longer employed by either PPG Industries, Inc. or PPG Auto Glass, LLC. 5.04 Withdrawals in the event of Disability -------------------------------------- (a) In the event a Participant becomes disabled, he/she may elect a payment schedule applicable to his/her Account provided such election is filed with the Administrator within 30 days of the Administrator's determination that such Participant has a Disability. (b) Participants may elect: (1) One lump-sum payment; or (2) Quarterly, semiannual or annual installments - to be made over a period of years, up to a maximum period of 15 years; or (3) A combination of (1) and (2). (c) A Participant may delay the first payment for a period of up to ten years following the determination that he/she has a Disability; provided, however, that, in all cases, payments must begin no later than the year in which the Participant's 75th birthday occurs. Payments must commence no earlier than the Plan Year following the Plan Year in which the Participant files an election in accordance with paragraph (a) of this Section 5.04, and as of the first day of the first quarter which is at least six (6) months and 10 days following such election. (d) The payment schedule elected by the Participant shall apply to his/her entire Account. Participants may designate the first day of a quarter for the commencement of the payment schedule on an annual, semiannual or quarterly basis. -Page 5.4- Each installment payment shall be the applicable fraction of the Participant's Account balance (e.g.: Ten annual installments shall be paid: 1st installment = 1/10 of Account; 2nd installment = 1/9 of Account; 3rd installment = 1/8 of Account, etc.). If the installment payment is to be in the form of PPG Stock, any stock increment shall be rounded down to the nearest whole stock share. Any remaining stock increments shall remain in the Account until subject to further payment. (e) In the event a Participant fails to file a payment schedule election with the Administrator within the period specified in paragraph (a) above, his/her Account shall be paid in one lump sum in the year following the year in which the latest date for filing an election occurs, and shall be paid during the first quarter in such year. (f) Payment schedules pursuant to this Section 5.04 shall supersede any prior payment election(s) filed with the Administrator; and shall become irrevocable when filed in accordance with paragraph (a). 5.05 Withdrawals following a Participant's death ------------------------------------------- (a) Death prior to a Participant's Election Date -------------------------------------------- In the event of a Participant's death prior to his/her Election Date, the Participant's entire Account shall be paid to the Participant's Beneficiary as soon as possible following the Participant's death. (b) Death on or after a Participant's Election Date ----------------------------------------------- In the event of a Participant's death on or after his/her Election Date, the Participant's Beneficiary may elect to receive the remaining balance of the Participant's Account paid as a lump sum, or in accordance with the payment schedule filed by the Participant. Such election must be filed by the Beneficiary within 60-days following the Participant's death. If no such election is made, the balance in the Participant's Account shall be paid in a lump sum. Any lump sum payment made in accordance with this paragraph shall be paid in the Plan Year following: (i) the year in which the Participants's death occurs; or, if later (ii) the year in which the 60th day following the Participant's death occurs; and -Page 5.5- shall be paid during the first quarter of the applicable year specified in (i) or (ii) above. (c) For purposes of this Section 5.05 "Election Date" means the date on which the Participant's election schedule becomes irrevocable in accordance with paragraph (f) of Section 5.02 or paragraph (f) of Section 5.04. 5.06 Withdrawals upon finding of Financial Hardship ----------------------------------------------- (a) Upon a finding that the Participant, or Beneficiary if the Participant is deceased, has suffered a Financial Hardship, the Administrator may, in his sole discretion, permit the acceleration of a withdrawal under the Plan in an amount reasonably necessary to alleviate such Financial Hardship. (b) If the Administrator permits a withdrawal due to Financial Hardship, the Participant shall cease Salary deferrals, if any, and may not make any deferrals under the Plan, in the form of an Award or Salary, until one entire Plan Year has elapsed following the Plan Year in which such withdrawal is made. (c) The Participant shall be required to exhaust all other sources of funds, other than the Savings Plan, before the Administrator will consider an accelerated withdrawal in accordance with this Section 5.06. (d) A withdrawal pursuant to this Section 5.06 shall nullify any in- service withdrawal election filed in accordance with Section 5.01. 5.07 Unscheduled Withdrawals ----------------------- (a) A Participant, or Beneficiary if the Participant is deceased, may request an Unscheduled Withdrawal of all or a portion of the Participant's Investment Accounts and/or PPG Stock Account. Payments from the PPG Stock Fund shall be made in the form of PPG Shares, and payment from the Investment Accounts shall be paid in cash. An Insider of PPG may not request an Unscheduled Withdrawal from the PPG Stock Account at any time that such withdrawal would constitute a Prohibited Discretionary Transaction. A Participant, or Beneficiary, may request not more than one (1) Unscheduled Withdrawal in a Plan Year. (b) An Unscheduled Withdrawal must be a minimum of 25% of the Participant's Investment and PPG Stock Accounts. -Page 5.6- (c) An election to withdraw 75% or more of the Participant's Investment and Stock Accounts shall be deemed a request to withdraw the entire Account balance. (d) Prior to payment of any Unscheduled Withdrawal, a penalty of 10% of the Unscheduled Withdrawal amount shall be withheld and forfeited (or 5% if such Unscheduled Withdrawal is made during the Plan Year in which a Change in Control occurs, or the Plan Year immediately following such Change in Control) and the Participant shall cease Salary deferrals, if any, effective on the date the withdrawal is paid and may not make any deferrals under the Plan, in the form of an Award or Salary, until one entire Plan Year has elapsed following the Plan Year in which such Unscheduled Withdrawal is made. (e) A withdrawal pursuant to this Section 5.07 shall nullify any scheduled in-service withdrawal election filed in accordance with Section 5.01. 5.08 Methods of Payment ------------------ (a) PPG Stock Account ----------------- Any payment from the PPG Stock Account shall be paid in the form of PPG Stock. At the time of the final scheduled payment, if payments were disbursed from the PPG Stock Account in shares of PPG Stock, any remaining fractional shares of PPG Stock shall be converted to and paid in cash. (b) Investment Accounts ------------------- Payments from the Investment Accounts shall be made in cash. The value shall be determined using the value of the closing price of the appropriate Investment Account Shares on the last business day of the month preceding the month in which the distribution is made. (c) All payments to Participants, or their Beneficiaries, shall be made on the first business day of a calendar quarter. 5.09 Small Account Provision ----------------------- (a) Each scheduled withdrawal must equal a minimum of $2,000. (b) If the remaining balance in a Participant's Account is less than $2,000, the Administrator may, at his discretion, distribute the remainder of the Account. -Page 5.7- 5.10 Special Rules for Withdrawals by Insiders ----------------------------------------- Anything to the contrary in this Section 5 notwithstanding, Insiders may not, without prior approval of the Senior Vice President, Human Resources and Administration, or his or her successor, withdraw any amount from the PPG Stock Account which was credited to their Account balance within the prior six months. 5.11 Withdrawals of amounts from the Transferred Interest Account ------------------------------------------------------------ (a) Withdrawals from the Transferred Interest Account shall be governed by the election made by the Participant for his/her CEA-2 account. (b) In the event of a Participant's death prior to receiving the entire balance in his/her Transferred Interest Account, the Participant's Beneficiary may elect to receive the remaining balance of the Participant's Transferred Interest Account paid as a lump sum, or in accordance with the payment schedule filed by the Participant. Such election must be filed by the Beneficiary within 60-days following the Participant's death. If no such election is made, the balance in the Participant's account shall be paid in a lump sum. Any lump sum payment made in accordance with this paragraph shall be paid in the Plan Year following: (i) the year in which the Participants's death occurs; or, if later (ii) the year in which the 60th day following the Participant's death occurs; and shall be paid during the first quarter of the applicable year specified in (i) or (ii) above. -Page 5.8- SECTION VI - SPECIFIC PROVISIONS -------------------------------- RELATED TO BENEFITS ------------------- 6.01 Nonassignability ---------------- (a) Except as provided in paragraph (b) below and in Section 6.02, no person shall have any power to encumber, sell, alienate, or otherwise dispose of his/her interest under the Plan prior to actual payment to and receipt thereof by such person; nor shall the Administrator recognize any assignment in derogation of the foregoing. No interest hereunder of any person shall be subject to attachment, execution, garnishment or any other legal, equitable, or other process. (b) Paragraph (a) above shall not apply to the extent that a Participant's interest under the Plan is alienated pursuant to a "Qualified Domestic Relations Order" ("QDRO") as defined in (S)414(p) of the Code. (1) The Administrator is authorized to adopt such procedural and substantive rules and to take such procedural and substantive actions as the Administrator may deem necessary or advisable to provide for the payment of amounts from the Plan to an Alternate Payee as provided in a QDRO. Such rules and actions shall be consistent with the principal purposes of the Plan. (2) Under no circumstances may the Administrator accept an order as a QDRO following a Participant's death. (3) An Alternate Payee may not establish an account in the Plan. All amounts taken from a Participant's Account, as provided in a QDRO, must be distributed as soon as possible following the acceptance of an order as a QDRO. (4) In the sole discretion of the Administrator, a Participant's scheduled withdrawal or otherwise requested withdrawal may be delayed for a period, not to exceed six months, if the Administrator has notice that part or all of the Participant's Account may be subject to alienation pursuant to a QDRO. -Page 6.1- 6.02 Beneficiary Designation ----------------------- (a) The Participant shall have the right, at any time and from time to time, to designate any person(s) as Beneficiary. The designation of a Beneficiary shall be effective on the date it is received by the Administrator, provided the Participant is alive on such date. (b) Each time a Participant submits a new Beneficiary designation form to the Administrator, such designation shall cancel all prior designations. (c) In the case of a Participant who does not have a valid Beneficiary designation on file at the time of his/her death, or in the case the designated Beneficiary predeceases the Participant, the entire balance in the Participant's Account shall be paid as soon as possible to the Participant's estate. (d) Any Beneficiary designated by the Participant under the IC Plan or MAP filed before January 1, 1996, shall remain in effect for this Plan, until a new Beneficiary designation form is filed in accordance with this Section 6.02, on or after January 1, 1996. 6.03 Limited Right to Assets of the Corporation ------------------------------------------ The Benefits paid under the Plan shall be paid from the general funds of the Company, and the Participants and any Beneficiary shall be no more than unsecured general creditors of the Company with no special or prior right to any assets of the Company for payment of any obligations hereunder. 6.04 Protective Provisions --------------------- The Participant or Beneficiary shall cooperate with the Administrator by furnishing any and all information requested by the Administrator in order to facilitate the payment of benefits hereunder. If a Participant refuses to cooperate, he/she may be deemed ineligible to receive a distribution and/or ineligible to continue to actively participate in the Plan. 6.05 Withholding ----------- The Participant or Beneficiary shall make appropriate arrangements with the Administrator for satisfaction of any federal, state or local income tax withholding requirements and Social Security or other employee tax requirements applicable to the payment of benefits under the Plan. If no other arrangements are made, the Administrator may provide for such withholding and tax payments by any means he deems appropriate, in his sole discretion. -Page 6.2- 6.06 Forfeiture Provision -------------------- (a) In the event the Company becomes aware that a Participant is engaged or employed as a business owner, employee, or consultant in any activity which is in competition with any line of business of the Corporation, or has engaged in any activity otherwise determined to be detrimental to the Company, the Administrative Subcommittee may: (1) Terminate such Participant's participation in the Plan, and distribute the entire amount in the Participant's Account in a lump sum; (2) Apply any other diminution or forfeiture of benefits, which is specifically approved by the Administrative Subcommittee. For purposes of this Section 6.06, the Administrative Subcommittee shall consist of the Senior Human Resources Officer of the Company, the Director, Payroll and Benefits, and a representative of the Law Department, as appointed by the General Counsel of PPG. The Administrative Subcommittee shall report all of its activities to the Committee. (b) TSR Plan -------- A Participant may forfeit any or all deferrals from the TSR Plan held in his/her Account if the Committee determines that such forfeiture shall occur in accordance with Section 4.04 of the TSR Plan. -Page 6.3- SECTION VII - ADMINISTRATION & CLAIMS ------------------------------------- 7.01 Administration -------------- (a) The Administrator shall administer the Plan and interpret, construe and apply its provisions in accordance with its terms. The Administrator shall have the complete authority to: (1) Determine eligibility for benefits; (2) Construe the terms of the Plan; and (3) Control and manage the operation of the Plan. (b) The Administrator shall have the authority to establish rules for the administration and interpretation of the Plan and the transaction of its business. The determination of the Administrator as to any disputed question shall be conclusive. All actions, decisions and interpretations of the Administrator shall be performed in a uniform and nondiscriminatory manner. (c) The Administrator may employ counsel and other agents and may procure such clerical, accounting and other services as the Administrator may require in carrying out the provisions of the Plan. (d) The Administrator shall not receive any compensation from the Plan for his services. (e) The Corporation shall indemnify and save harmless the Administrator against all expenses and liabilities arising out of the Administrator's service as such, excepting only expenses and liabilities arising from the Administrator's own gross negligence or willful misconduct, as determined by the Committee. 7.02 Claims ------ (a) Every person receiving or claiming benefits under the Plan shall be conclusively presumed to be mentally and physically competent and of age. If the Administrator determines that such person is mentally or physically incompetent or is a minor, payment shall be made to the legally appointed guardian, conservator, or other person who has been appointed by a court of competent jurisdiction to care for the estate of such person, provided that proper proof of such appointment is furnished in a form and manner suitable to the Administrator. Any payment made under the provisions of the paragraph (a) shall be a complete discharge of any liability therefor -Page 7.1- under the Plan. The Administrator shall not be required to see to the proper application of any such payment. (b) Claims Procedure ---------------- Claims for benefits by a Participant or Beneficiary shall be filed, in writing, with the Administrator. If the Administrator denies the claim, in whole or in part, the Administrator shall furnish a written notice to the claimant setting forth a statement of the specific reasons for the denial of the claim, references to the specific provisions of the Plan on which the denial is based, a description of any additional material or information necessary to perfect the claim and an explanation of why such material or information is necessary, and an explanation of the review procedure. Such notice shall be written in a way calculated to be understandable by the claimant. The written notice from the Administrator shall be furnished to the claimant within ninety (90) days following the date on which the claim was filed, except that if special circumstances require an extension of time, the Administrator shall notify the claimant of this need within such 90-day period. Such notice shall inform the claimant the nature of the circumstances necessitating the need for additional time and the date by which the claimant will be furnished with the decision regarding the claim. Such extension may provide for up to an additional 90 days. (c) Review Procedure ---------------- Within sixty (60) days of the date the Administrator denies a claim, in whole or in part, the claimant, or his/her authorized representative, may request that the decision be reviewed. Such request shall be in writing, shall be filed with the Administrator, and shall contain the following information: (1) The date on which the denial was received by the claimant; (2) The date on which the claimant's request for review was filed with the Administrator; (3) The specific portions of the denial which the claimant requests the Administrator to review; (4) A statement setting forth the basis on which the claimant believes that a review of the decision is required; (5) Any written material which the claimant desires the Administrator to take into consideration in reviewing the claim. -Page 7.2- The Administrator shall afford the claimant, or his/her authorized representative, an opportunity to review documents pertinent to the claim, and shall conduct a full and fair review of the claim and its denial. The Administrator's decision on such review shall be furnished to the claimant in writing, and shall be written in a manner calculated to be understandable to the claimant. Such decision shall include a statement of the specific reason(s) for the decision, including references to the specific provision(s) of the Plan relied upon. The written notice from the Administrator shall be furnished to the claimant within sixty (60) days following the date on which the request for review was received by the Administrator, except that if special circumstances require an extension of time, the Administrator shall notify the claimant of this need within such 60-day period. Such notice shall inform the claimant the nature of the circumstances necessitating the need for additional time and the date by which the claimant will be furnished with the decision regarding the claim. Such extension may provide for up to an additional 60 days. -Page 7.3- SECTION VIII - AMENDMENT AND TERMINATION ---------------------------------------- 8.01 Amendment of the Plan --------------------- Except as provided in Section X, the Committee may amend the Plan, in whole or in part, at any time; however, no such amendment may decrease the amount of benefit currently accrued in Participants' Accounts. Except as provided in Section X, the Administrator shall have the authority to adopt amendments to the Plan, in whole or in part, at any time, necessary for the implementation and/or administration of the Plan, which will not result in a material change to the Plan. Moreover, no such amendment by the Administrator may decrease the amount of benefit currently accrued in Participants' Accounts. 8.02 Termination of the Plan ----------------------- Except as provided in Section X, the Committee may terminate the Plan at any time. Upon a termination pursuant to this Section 8.02, the Committee has the sole discretion to determine distribution schedules for any or all Accounts, notwithstanding a Participant's previous distribution schedule. 8.03 Constructive Receipt -------------------- In the event the Administrator determines that amounts deferred under the Plan have been constructively received by Participants and must be recognized as income for federal income tax purposes, distributions shall be made to Participants, as determined by the Administrator. The determination of the Administrator under this Section 8.03 shall be binding and conclusive. -Page 8.1- SECTION IX - MISCELLANEOUS -------------------------- 9.01 Successors of the Company ------------------------- The rights and obligations of the Company under the Plan shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company. 9.02 ERISA Plan ---------- The Plan is intended to be an unfunded plan maintained primarily to provide deferred compensation benefits for "a select group of management or highly compensated employees" within the meaning of Sections 201, 301 and 401 of ERISA and therefore to be exempt from Parts 2, 3 and 4 of Title I of ERISA. 9.03 Trust ----- The Company shall be responsible for the payment of all benefits under the Plan. Except as otherwise required by Section X, the Company, at its discretion, may establish one or more grantor trusts for the purpose of providing for payment of benefits under the Plan. Such trust(s) may be irrevocable, but the assets thereof shall be subject to the claims of the Company's creditors. Benefits paid to the Participant from any such trust shall be considered paid by the Company for purposes of meeting the obligations of the Company under the Plan. 9.04 Employment Not Guaranteed ------------------------- Nothing contained in the Plan nor any action taken hereunder shall be construed as a contract of employment or as giving any Participant any right to continued employment with the Corporation. 9.05 Gender, Singular and Plural --------------------------- All pronouns and variations thereof shall be deemed to refer to the masculine, feminine, or neuter, as the identity of the person(s) requires. As the context may require, the singular may be read as the plural and the plural as the singular. 9.06 Headings -------- The headings of the Sections, subsections and paragraphs of the Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. -Page 9.1- 9.07 Validity -------- If any provision of the Plan is held invalid, void or unenforceable, the same shall not affect, in any respect, the validity of any other provision(s) of the Plan. 9.08 Waiver of Breach ---------------- The waiver by the Company of any breach of any provision of the Plan by a Participant or Beneficiary shall not operate or be construed as a waiver of any subsequent breach. 9.09 Applicable Law -------------- The Plan is intended to conform and be governed by ERISA. In any case where ERISA does not apply, the Plan shall be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania. 9.10 Notice ------ Any notice required or permitted to be given to the Administrator under the Plan shall be sufficient if in writing and either hand-delivered, or sent by first class mail to the principal office of the Company at One PPG Place, Pittsburgh, PA 15272, directed to the attention of the Administrator. Such notice shall be deemed given as of the date of delivery. -Page 9.2- SECTION X - CHANGE IN CONTROL ----------------------------- 10.01 Payments to a Trustee --------------------- Upon, or in reasonable anticipation of, a Change in Control, as defined in Section 10.02 below, the Senior Vice President, Human Resources and Administration and the Senior Vice President, Finance, or either of them or their successor, shall cause an amount, as they deem appropriate, to be paid to a trustee on such terms as they shall deem appropriate (including such terms as are appropriate to cause such payment not to be a taxable event to Participants, if possible, and to cause such Awards to be distributable to Participants in accordance with elections filed with the Administrator). Such amount shall be paid in cash and shall be sufficient, at a minimum, to equal to all deferred amounts credited to the Investment Accounts, the Transferred Interest Account, and the PPG Stock Account. Amounts in the PPG Stock Account shall be converted to cash on the basis of the fair market value of PPG Stock on the date of the occurrence of the Change in Control, or, if higher, within 30 days of such date. Amounts in the Investment Accounts shall be converted to cash on the basis of the fair market value of the appropriate Investment Account on the date of the occurrence of the Change in Control, or, if higher, within 30 days of such date. 10.02 Definition: Change in Control ------------------------------ A "Change in Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"). For purposes of this subsection (a) the following acquisitions shall not constitute a Change in Control: Any acquisition directly from the Company; Any acquisition by the Company; Any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; or -Page 10.1- Any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of paragraph (c) of this Section 10.02. (b) Individuals who, as of September 20, 1995, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to such date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Approval by the shareholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination: (i) All or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; (ii) No Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of -Page 10.2- the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination; and (iii) At least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company; or (e) A majority of the Board otherwise determines that a Change in Control shall have occurred. 10.03 Plan Provisions Following a Change in Control, the Plan may not be amended and may not be terminated. Upon a Change in Control, in accordance with Section 10.01, the Plan Document then in existence ("Controlling Plan") shall be provided to the Trustee. The Controlling Plan shall govern all amounts transferred and remain in effect until the Trustee has paid all such amounts to Participants and/or Beneficiaries. -Page 10.3- EX-10.3 4 0004.txt PPG EXECUTIVE OFFICER ANNUAL INCENTIVE COMP. PLAN EXHIBIT 10.3 PPG Industries, Inc. Executive Officer Annual Incentive Compensation Plan I. Purpose ------- The purpose of the PPG Industries, Inc. Executive Officer Annual Incentive Compensation Plan (the "Annual Plan") is to attract and retain highly qualified employees, to obtain from each the best possible performance, to establish a performance goal based on Consolidated Earnings for Incentive Compensation Awards for covered executive officers and to underscore the importance to employees of increasing consolidated earnings for PPG Industries, Inc. II. Definitions ----------- For the purposes of the Annual Plan, the following terms shall have the following meanings: A. Annual Pool. The Incentive Compensation Pool established pursuant to Section IV of the Annual Plan. B. Award Period. An award period under the Annual Plan shall be the fiscal year of the Company with respect to Incentive Compensation Awards. C. Board of Directors. The Board of Directors of PPG Industries, Inc. D. Change of Control. This term shall have the meaning in Section IX.D of the Incentive Compensation Plan. E. Committee. The Officers and Directors Compensation Committee of the Board of Directors or any successor thereto. F. Company. PPG Industries, Inc. and its subsidiaries. G. Consolidated Earnings. Income from continuing operations of the Company and its consolidated subsidiaries before deduction of income taxes and minority interest, as shown in the Company's audited annual statement of income, reduced by the pre-tax amount of non-recurring gains and increased by the pre-tax amount of non-recurring charges. As such, income from continuing operations will exclude the effect of extraordinary items, gain or loss on the disposal of a business segment, and the cumulative effects of changes in accounting principles, net of related tax effects, as determined in accordance with generally accepted accounting principles. H. Covered Employee. An employee who may be deemed to be a "covered employee" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, as such section may be amended. I. Deferred Compensation Plan. The PPG Industries, Inc. Deferred Compensation Plan. J. Incentive Compensation Award. Any annual award paid to a Covered Employee from the Annual Pool. K. Incentive Compensation Plan. The PPG Industries, Inc. Incentive Compensation and Deferred Income Plan for Key Employees. L. PPG Stock. The common stock, par value $1.66 2/3 per share, of PPG Industries, Inc. III. Effective Date -------------- The Annual Plan has been adopted as of January 1, 2001 and shall become effective upon approval by the Company's shareholders at the Company's 2001 Annual Meeting of Shareholders. IV. Amounts Available for Incentive Compensation Awards --------------------------------------------------- A. An Annual Pool shall be established to which will be credited for each fiscal year an amount equal to 1.0% of Consolidated Earnings for such year. B. The maximum amount available for Incentive Compensation Awards to Covered Employees for a fiscal year shall be limited by the total then in the Annual Pool, and such Incentive Compensation Awards shall be chargeable against the Annual Pool but need not exhaust such total. Any balance remaining after the making of Incentive Compensation Awards to Covered Employees will not be available for future Incentive Compensation Awards to Covered Employees. V. Eligibility ----------- Only Covered Employees are eligible to receive Incentive Compensation Awards under the Annual Plan. VI. Determination of Amounts of Incentive Compensation Awards --------------------------------------------------------- The maximum Incentive Compensation Award payable with respect to any fiscal year to a Covered Employee who is the Chief Executive Officer shall be equal to 30% of the Annual Pool for such year. The maximum Incentive Compensation Award payable with respect to the next two most highly compensated of the other Covered Employees for any fiscal year shall be equal to 20% of the Annual Pool for such year. The maximum Incentive Compensation Award payable -2- with respect to any fiscal year to each of the other Covered Employees shall be equal to 15% of the Annual Pool for such year. Incentive Compensation Awards may be made either at or following the end of the fiscal year to which they relate; provided, however, that no Incentive -------- Compensation Awards shall be made to Covered Employees prior to the certification by the Committee that the performance criteria have been met for the relevant Award Period. The final amounts of Incentive Compensation Awards to Covered Employees will be determined by the Committee. The Committee may exercise negative discretion to reduce the amount of, or to eliminate, an Incentive Compensation Award that would otherwise be payable. Such determinations, except in the case of the Incentive Compensation Award for the Chief Executive Officer, shall be made after considering the recommendations of the Chief Executive Officer and such other matters as the Committee shall deem relevant. VII. Form of Incentive Compensation Awards ------------------------------------- Incentive Compensation Awards under the Annual Plan shall be made in cash or in PPG Stock. VIII. Payment of Incentive Compensation Awards ---------------------------------------- A. Incentive Compensation Awards under the Annual Plan shall be paid currently, unless the payment is deferred by the Covered Employee or unless the Committee shall determine that any Incentive Compensation Award shall be deferred ("Deferred Awards"). Any Deferred Awards shall be credited to the Covered Employee's account in the Deferred Compensation Plan and shall be subject to the provisions of the Deferred Compensation Plan. B. When an Incentive Compensation Award is made, the Company shall cause the cash to be paid or the PPG Stock to be delivered to the individual to whom the Incentive Compensation Award is made at the time or times specified by the Committee, or, if no time or times are specified, as soon as practicable after the Incentive Compensation Award is made, but in no event later than two and one-half months after year end. C. At the time any Incentive Compensation Award is made to Covered Employees, the Annual Pool shall be reduced by the amount of such Incentive Compensation Award, regardless of whether such Incentive Compensation Award is in a lump sum or in installments, current or deferred. IX. Change in Control ----------------- A. Upon, or in reasonable anticipation of, a Change in Control: 1. Incentive Compensation Awards in the form of cash shall be made for the year during which the Change in Control occurs, and then paid immediately -3- to a trustee on such terms as the senior Human Resources officer and the senior Finance officer, or either of them, or their successors, shall deem appropriate (including such terms as are appropriate to cause such payment, if possible, not to be a taxable event to Covered Employees) in order to cause the Incentive Compensation Awards so paid to be paid either not later than the end of the first calendar quarter following the end of the year to which the Incentive Compensation Awards relate or on a deferred basis in accordance with the elections of Covered Employees then in effect as to the timing of the receipt of Incentive Compensation Awards for such year. 2. Covered Employees who are eligible to receive an Incentive Compensation Award for the Annual Plan year in which a Change in Control occurs shall be eligible to receive an Incentive Compensation Award for the Annual Plan year following the Change in Control. 3. The amount of the Incentive Compensation Award payable to each Covered Employee shall be: one-half of the maximum Incentive Compensation Award payable (reduced by the application of the Committee's negative discretion, if applicable) to such person if the Change in Control occurs during the first six months of the year; or the full maximum Incentive Compensation Award payable (reduced by the application of the Committee's negative discretion, if applicable) to such person if the Change in Control occurs during the second six months of the year. 4. All Deferred Amounts shall be paid immediately to a trustee on such terms as the senior Human Resources officer and the senior Finance officer, or either of them, or their successors shall deem appropriate (including such terms as are appropriate to cause such payment, if possible, not to be a taxable event to Covered Employees) in order to give effect to the elections of Covered Employees with respect to the timing of the receipt of such Deferred Amounts. B. Notwithstanding any other provision of this section, and subject to Section VI hereof, if an Incentive Compensation Award ultimately made for such Annual Plan year is greater than the Incentive Compensation Award made pursuant to this section, the Covered Employee shall be entitled to the difference between such Incentive Compensation Awards. If the Covered Employee has elected his/her Incentive Compensation Award to be deferred, payment of such difference shall be made to a trustee in accordance with the provisions set forth in subparagraph A.4 above. -4- X. Special Awards and Other Plans ------------------------------ Nothing contained in the Annual Plan shall prohibit the Company or any of its subsidiaries from granting special performance or recognition awards, not chargeable against the Annual Pool, under such conditions and in such form and manner as it sees fit, to employees (including Covered Employees) for meritorious service of any nature. In addition, nothing contained in the Annual Plan shall prohibit the Company or any of its subsidiaries from establishing other incentive compensation plans providing for the payment of incentive compensation to employees (including Covered Employees), not chargeable against the Annual Pool. XI. Amendment and Interpretation of the Annual Plan ----------------------------------------------- A. The Board of Directors or the Committee shall have the right to amend the Annual Plan from time to time or to repeal it entirely or to direct the discontinuance of Incentive Compensation Awards either temporarily or permanently; provided, however, that (i) no amendment of the Annual Plan shall -------- operate to annul, without the consent of the Covered Employee, an Incentive Compensation Award already made hereunder, and (ii) with respect to Incentive Compensation Awards for Covered Employees, no amendment of the Annual Plan to change the calculation of the Annual Pool or to change the percent of Consolidated Earnings Credited to the Annual Pool, to change the maximum Incentive Compensation Award of a Covered Employee, to change the definition of Covered Employee or to change the definition of Consolidated Earnings, shall be effective without approval by the shareholders of the Company. B. The decision of the Committee with respect to any questions arising in connection with the administration or interpretation of the Annual Plan shall be final, conclusive and binding. XII. Miscellaneous ------------- A. All expenses and costs in connection with the operation of the Annual Plan shall be borne by the Company and no part thereof shall be charged against the Annual Pool, other than the amounts of Incentive Compensation Awards to Covered Employees under the Annual Plan. B. All Incentive Compensation Awards under the Annual Plan are subject to withholding, where applicable, for federal, state and local taxes. -5- EX-10.4 5 0005.txt PPG EXECUTIVE OFFICERS SHAREHOLDER RETURN PLAN EXHIBIT 10.4 PPG INDUSTRIES, INC. EXECUTIVE OFFICERS' TOTAL SHAREHOLDER RETURN PLAN Table of Contents ----------------- Statement of Purpose Section I Definitions Section II Awards Section III Termination/Disability/Death Section IV Specific Provisions Related to Benefits Section V Administration & Claims Section VI Amendment & Termination Section VII Miscellaneous Section VIII Change in Control STATEMENT OF PURPOSE -------------------- The PPG Industries Executive Officers' Total Shareholder Return Plan is intended to further the long-term growth of the Corporation by providing incentive, in addition to current compensation, to certain executive officers of the Corporation who will have a substantial opportunity to influence such long- term growth. Specifically the Plan: . Associates the personal interests of executive officers with the shareholders of the Corporation by relating capital accumulation to objective business or financial criteria, such as the returns to shareholders, return on capital, cash return on capital, return on equity, earnings (pre-tax or after-tax) and earnings growth; . Provides a compensation program to executive officers which is competitive with compensation opportunities in competing industries; . Encourages executive officers to continue as employees of the Corporation. -1- SECTION I - DEFINITIONS ----------------------- 1.01 Administrator means the senior Human Resources officer of the Company, and any person(s) designated by such Administrator to assist in the administration of the Plan. 1.02 Affiliate means any business entity, other than a Subsidiary Corporation, in which PPG has an equity interest. 1.03 Award means the TSR Shares granted to a Covered Employee in accordance with Section 2.02. 1.04 Award Agreement means the agreement executed by the Corporation and a Covered Employee, in such form as the Administrator determines, which sets forth the number of TSR Shares awarded and such terms and conditions applicable to the Award. 1.05 Award Goals means the specific performance-based goals set by the Committee no later than 90 days after the commencement of an Award Period which determine the amount of a Payment, as defined in Section 2.04(a), if any, which would be paid upon the achievement of such goals at the end of an Award Period. 1.06 Award Period means the three-year period commencing with January 1 of the year in which an Award is made. 1.07 Beneficiary means the person or persons designated by a Covered Employee to receive benefits hereunder following the Covered Employee's death, in accordance with section 3.03; provided, however, in the event a Covered -------- Employee fails to designate a Beneficiary in accordance with Section 4.02, his/her Beneficiary shall be the Beneficiary designated under the Deferred Compensation Plan. For purposes of this Section 1.05, "person or persons" is limited to an individual, a Trustee or a Covered Employee's estate. 1.08 Board means the Board of Directors of PPG Industries, Inc. 1.09 Committee means the Officers-Directors Compensation Committee (or any successor) of the Board. 1.10 Common Stock means the common stock of PPG Industries, Inc. 1.11 Company or PPG means PPG Industries, Inc. 1.12 Corporation means PPG and any Subsidiary Corporation designated by the Committee as eligible to participate in the Plan, and which, by proper authorization of the Board of Directors or other governing body of such Subsidiary Corporation, elects to participate in the Plan. 1.13 Covered Employee means any Executive Officer who may be deemed to be a "covered employee" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended. -2- 1.14 Deferred Compensation Plan means the PPG Industries, Inc. Deferred Compensation Plan. 1.15 Disability means any long-term disability. The Administrator, in his complete and sole discretion, shall determine a Covered Employee's Disability; provided, however, that a Covered Employee who is approved to -------- receive Long-Term Disability benefits pursuant to the PPG Industries, Inc. Long-Term Disability Plan shall be considered to have a Disability. The Administrator may require that a Covered Employee submit to an examination from time to time, but no more often than annually, at the expense of the Company, by a competent physician or medical clinic, selected by the Administrator, to confirm Disability. On the basis of such medical evidence, the determination of the Administrator as to whether or not a condition of Disability exists or continues shall be conclusive. 1.16 Dividend Equivalent means a hypothetical dividend on each TSR Share, granted on the same date as dividends are paid on the Company's Common Stock and having a value on the date granted equal to the value of actual dividends paid on a share of the Company's Common Stock on the same date. 1.17 ERISA means the Employee Retirement Income Security Act of 1974, as amended. 1.18 Fair Market Value of the Common Stock means the average of the closing sale prices reported on the New York Stock Exchange-Composite Tape for the Common Stock for all days in the month of December during which the New York Stock Exchange is open in the last year of the Award Period to which the Award being paid wholly or partly in shares of Common Stock relates. 1.19 Long-Term Plan or TSR means the PPG Industries, Inc. Executive Officers' Total Shareholder Return Plan, as set forth herein and as amended from time to time. 1.20 Prior TSR Plan means the PPG Industries, Inc. Total Shareholder Return Plan for Key Employees. 1.21 TSR Account means an account maintained for a Covered Employee to which TSR Shares are credited. 1.22 TSR Share means a unit which is equivalent to one share of Common Stock, or the cash equivalent thereof, as determined by the closing sale price reported on the New York Stock Exchange-Composite Tape for the Common Stock for the date on which an Award is made. -3- SECTION II - PARTICIPATION & AWARDS ----------------------------------- 2.01 Participation All Covered Employees shall be eligible to receive an Award for each Award Period. Such determination shall be at the total discretion of the Committee based on the Committee's estimation of those Covered Employees who will have a substantial opportunity to influence the long-term growth of the Corporation. 2.02 Awards (a) The Committee may only grant one Award to any Covered Employee in a given year. No later than 90 days after the commencement of the relevant Award Period, the Committee shall determine or approve: (1) The Award Goals based on one or more of the following business or financial criteria: (i) A comparison of where the total shareholder return of PPG Common Stock (stock price plus accumulated dividends) ranks among the total shareholder return for companies in a relevant stock index; (ii) Return on Capital; (iii) Cash Return on Capital; (iv) Return on Equity; (v) Earnings (pre-tax or after-tax); and (vi) Earnings Growth. (2) The Award Period; (3) The maximum number of TSR Shares to be awarded to each Covered Employee, subject to clauses (c) and (f) below, upon the achievement of the Award Goals; (4) Any terms and conditions applicable to the Awards, including, but not limited to, the imposition of restrictions on the right to transfer shares of Common Stock delivered to Covered Employees. Such terms and conditions may differ for each Award Period. (b) The Committee may grant Awards at any time during an Award Period; and, when made, such grant shall be effective for the entire Award Period; provided, that such Awards granted after the 90-day period -------- described in paragraph (a) above (which may not be entirely tax deductible) shall not affect the tax deductibility of any Awards granted pursuant to paragraph (a). (c) Awards under the Plan shall be granted to Covered Employees in the form of TSR Shares which shall be reflected in a TSR Account, maintained by the Company for each Covered Employee. (d) Each Award shall be made in writing in an Award Agreement which shall set forth the terms and conditions established by the Committee for the Award. (e) The Committee shall have the negative discretion to reduce or eliminate the Award Goal for any Award Period as it deems equitable. -4- (f) The maximum amount that may be granted to an individual who is Chief Executive Officer would be limited to 250,000 shares of Common Stock for any Award Period. The maximum amount that may be granted to either of the next two most highly compensated Covered Employees would be limited to 150,000 shares of Common Stock for any Award Period. The maximum amount that may be granted to any other Covered Employee would be limited to 100,000 shares of Common Stock for each year of any Award Period. 2.03 Dividend Equivalents (a) Subject to paragraph (c) below, each Covered Employee shall be entitled to receive a Dividend Equivalent on each TSR Share in his/her TSR Account during the Award Period. (b) Dividend Equivalents shall be paid quarterly into the PPG Stock Account in the Deferred Compensation Plan. (c) Dividend Equivalent payments shall not be made on any TSR Shares following the date a Covered Employee's employment is terminated or the date the Covered Employee is determined to have a Disability. (d) A Covered Employee shall be entitled to payment of Dividend Equivalents in accordance with the provisions of the Deferred Compensation Plan without regard to the actual payment or non-payment of the Award to which the Dividend Equivalents relate. 2.04 Payment of Awards (a) In accordance with the provisions of this Plan and the conditions set forth in the Award Agreement, a Covered Employee shall be entitled to a payment on account of an Award at the end of the Award Period ("Payment"). (b) Payments to Covered Employees will be made in the form of Common Stock, or cash or a combination of both, as the Committee may determine. (c) The amount of any cash to be paid in lieu of Common Stock shall be determined on the basis of the Fair Market Value of the Common Stock. As to shares of Common Stock which constitute all or any part of a Payment, the Committee may impose such restrictions concerning their transferability and/or their forfeitability as provided in the Award Agreement. (d) Payments shall be made to Covered Employees as soon as practicable after the Committee has determined that the terms and conditions with respect to the Award have been satisfied - i.e.: generally, within ----- two and one-half months after the end of the Award Period. -5- (e) If any dividends are declared on the Common Stock portion of a Payment on a date subsequent to the close of an Award Period but prior to the delivery of Common Stock shares to a Covered Employee, an amount equivalent to such dividends shall be paid in cash to the Covered Employee. (f) Any Award granted to a Covered Employee under the Prior TSR Plan may be adopted by the Committee and paid out under this Plan if the Committee determines that (1) objective Award Goals were established under the Prior TSR Plan no later than 90 days after the commencement of the relevant Award Period, (2) the Awards granted under the Prior TSR Plan do not exceed the maximums set forth in Section 2.02(f), (3) the Award Goals have been met, and (4) the material terms of the Awards granted under the Prior TSR Plan do not differ from this Plan, as approved by the Company's shareholders. (g) Prior to the payment of any Award under this Plan, the Committee shall certify that the Award Goals for such Award have been met. 2.05 Deferral of Payments (a) A Covered Employee may elect to defer receipt of a Payment in accordance with this Section 2.05. (b) A Covered Employee may elect to defer either 25%, 50%, 75% or 100% of his/her Payment. Any balance which is not deferred in accordance with this paragraph shall be paid to the Covered Employee in Common Stock and cash, as determined in accordance with Section 2.04(b). (c) Except as otherwise provided in paragraph (c) below, all elections pursuant to this Section 2.05 must be filed with the Administrator no later than the last day of the first year of the Award Period; and such election shall become irrevocable as of the first day of the second year of the Award Period. (d) Covered Employees who are granted an Award after the last day of the first year of any Award Period, may make an election in accordance with this Section 2.04 within the 30-day period following notice to the Covered Employee that he/she has been granted such Award. (e) The value of any amount deferred in accordance with this Section 2.05, as determined in TSR Shares, shall be credited to the PPG Stock Account in the Deferred Compensation Plan at the time the Payment would otherwise be made following the Award Period and shall be subject to the provisions of the Deferred Compensation Plan. -6- SECTION III - TERMINATION/DISABILITY/DEATH ------------------------------------------ 3.01 Retirement If a Covered Employee's employment with the Corporation terminates during an Award Period because of retirement, and after the Covered Employee has been an eligible participant for at least 12 months of the Award Period, the Covered Employee shall be entitled to a prorated Award which shall be determined at the end of the Award Period. Such prorated Award shall be determined by multiplying the Award to which the Covered Employee would otherwise have been entitled by a fraction - the numerator of which is the number of months the Covered Employee was employed during the Award Period and the denominator of which is the total number of calendar months in the Award Period. 3.02 Disability If a Covered Employee's employment with the Corporation terminates during an Award Period because of Disability, and after the Covered Employee has been an eligible participant for at least 12 months of the Award Period, the Covered Employee shall be entitled to a prorated Award which shall be determined at the end of the Award Period. Such prorated Award shall be determined by multiplying the Award to which the Covered Employee would otherwise have been entitled by a fraction - the numerator of which is the number of months the Covered Employee was employed during the Award Period and the denominator of which is the total number of calendar months in the Award Period. 3.03 Death If a Covered Employee's employment with the Corporation terminates during an Award Period because of the Covered Employee's death, and after the Covered Employee has been an eligible participant for at least 12 months of the Award Period, the Covered Employee's Beneficiary shall be entitled to a prorated Award which shall be determined at the end of the Award Period. Such prorated Award shall be determined by multiplying the Award to which the Covered Employee would otherwise have been entitled by a fraction - the numerator of which is the number of months the Covered Employee was employed during the Award Period and the denominator of which is the total number of calendar months in the Award Period. 3.04 Termination If a Covered Employee's employment with the Corporation terminates during an Award Period for any reason other than retirement, Disability or Death, the Award shall be forfeited on the date of such termination; provided, -------- however, that the Committee, in its sole discretion, may determine that the Covered Employee will be entitled to a prorated Award. -7- SECTION IV - SPECIFIC PROVISIONS RELATED TO BENEFITS ---------------------------------------------------- 4.01 Nonassignability ---------------- (a) Except as provided in paragraph (b) below and in section 5.02, no person shall have any power to encumber, sell, alienate, or otherwise dispose of his/her interest under the Plan prior to actual payment to and receipt thereof by such person; nor shall the Administrator recognize any assignment in derogation of the foregoing. No interest hereunder of any person shall be subject to attachment, execution, garnishment or any other legal, equitable, or other process. (b) Paragraph (a) above shall not apply to the extent that a Covered Employee's interest under the Plan is alienated pursuant to a "Qualified Domestic Relations Order" ("QDRO") as defined in (S)414(p) of the Code. (1) The administrator is authorized to adopt such procedural and substantive rules and to take such procedural and substantive actions as the Administrator may deem necessary or advisable to provide for the payment of amounts from the Plan to an Alternate Payee as provided in a QDRO. Such rules and actions shall be consistent with the principal purposes of the Plan. (2) Under no circumstances may the Administrator accept an order as a QDRO following a Covered Employee's death. (3) TSR Shares shall not be payable to an Alternate Payee until such shares would otherwise be payable to a Covered Employee. 4.02 Beneficiary Designation ----------------------- (a) The Covered Employee shall have the right, at any time, to designate any person(s) as Beneficiary. The designation of a Beneficiary shall be effective on the date it is received by the Administrator, provided -------- the Covered Employee is alive on such date. (b) Each time a Covered Employee submits a new Beneficiary designation form to the Administrator, such designation shall cancel all prior designations. (c) In the case of a Covered Employee who does not have a valid Beneficiary designation on file at the time of his/her death, or in the case the designated Beneficiary predeceases the Covered Employee, any Payment to which the Covered Employee would have been entitled shall be paid to the Covered Employee's estate at the end of the Award Period. -8- 4.03 Limited Right to Assets of the Corporation (a) No Covered Employee or other person shall have any claim or right to be granted an Award under the Plan. (b) The Benefits paid under the Plan shall be paid from the general funds of the Company, and the Covered Employees and any Beneficiary shall be no more than unsecured general creditors of the Company with no special or prior right to any assets of the Company for payment of any obligations hereunder. 4.04 Forfeiture Provision Notwithstanding any other provisions herein: (a) If at any time within the Award Period or within one year after the Award Period, the Covered Employee engages in any activity in competition with any activity of the Corporation, or contrary or harmful to the interests of the Corporation, including, but not limited to: (1) Conduct related to the Covered Employee's employment for which either criminal or civil penalties against the Covered Employee may be sought; or (2) Violation of the Corporation's Business Conduct Policies; or (3) Accepting employment with or serving as a consultant, advisor or in any other capacity to an employer that is in competition with or acting against the interests of the Corporation, including employing or recruiting any present, former or future employee of the Corporation; or (4) Disclosing or misusing any confidential information or material concerning the Corporation; or (5) Participating in a hostile take over attempt; then the Award shall terminate effective on the date on which the Committee determines that Covered Employee has engaged in such activity. Any "Award Gain" realized by the Covered Employee shall be paid by the Covered Employee to the Company. For purposes of this Section 4.04, "Award Gain" shall mean the cash and the closing market price of the Common Stock delivered to the Covered Employee pursuant to an Award. Any portion of a Payment which was deferred shall be forfeited from the Covered Employee's account in the Deferred Compensation Plan in accordance with this Section 4.04. (b) By executing the Award Agreement, the Covered Employee shall agree to a deduction from any amounts the Corporation owes the Covered Employee from time to time (including amounts owed to the Covered Employee as wages or other compensation, fringe benefits or vacation pay, as well as any other amounts owed to the Covered Employee), to the extent of amounts owed -9- to the Corporation in accordance with paragraph (a) above. Whether or not the Corporation elects to make any set-off in whole or in part, if the Corporation does not recover by means of set-off the full amount the Covered Employee owes in accordance with paragraph (a), the Covered Employee agrees to pay the unpaid balance to the Corporation immediately upon notification by the Administrator. (c) The Covered Employee may be released from the Covered Employee's obligations under paragraphs (a) and (b) above only if the Committee determines, in its sole discretion, that such action is in the best interest of the Corporation. 4.05 Taxes The Corporation shall have the right to deduct, or to require the Covered Employee or other person receiving a payment under the Plan to pay to the Corporation any Federal or state taxes required by law to be withheld or paid. -10- SECTION V - ADMINISTRATION & CLAIMS ----------------------------------- 5.01 Administration (a) The Committee shall designate the Administrator to administer the Plan and interpret, construe and apply its provisions in accordance with its terms. Subject to the terms of the Plan the Administrator shall have the complete authority to: (1) Construe the terms of the Plan; and (2) Control and manage the operation of the Plan. (b) The Administrator shall have the authority to establish rules for the administration and interpretation of the Plan and the transaction of its business. The determination of the Administrator as to any disputed question shall be conclusive. All actions, decisions and interpretations of the Administrator shall be performed in a uniform and nondiscriminatory manner. (c) The Administrator may employ counsel and other agents and may procure such clerical, accounting and other services as the Administrator may require in carrying out the provisions of the Plan. (d) The Administrator shall not receive any compensation from the Plan for his services. (e) The Corporation shall indemnify and save harmless the Administrator against all expenses and liabilities arising out of the Administrator's service as such, excepting only expenses and liabilities arising from the Administrator's own gross negligence or willful misconduct, as determined by the Committee. 5.02 Claims (a) Every person receiving or claiming benefits under the Plan shall be conclusively presumed to be mentally and physically competent and of age. If the Administrator determines that such person is mentally or physically incompetent or is a minor, payment shall be made to the legally appointed guardian, conservator, or other person who has been appointed by a court of competent jurisdiction to care for the estate of such person, provided that proper proof of such appointment is -------- furnished in a form and manner suitable to the Administrator. Any payment made under the provisions of the paragraph (a) shall be a complete discharge of any liability therefor under the Plan. The Administrator shall not be required to see to the proper application of any such payment. -11- (b) Claims Procedure Claims for benefits by a Covered Employee or Beneficiary shall be filed, in writing, with the Administrator. If the Administrator denies the claim, in whole or in part, the Administrator shall furnish a written notice to the claimant setting forth a statement of the specific reasons for the denial of the claim, references to the specific provisions of the Plan on which the denial is based, a description of any additional material or information necessary to perfect the claim and an explanation of why such material or information is necessary, and an explanation of the review procedure. Such notice shall be written in a way calculated to be understandable by the claimant. The written notice from the Administrator shall be furnished to the claimant within ninety (90) days following the date on which the claim was filed, except that if special circumstances require an extension of time, the Administrator shall notify the claimant of this need within such 90-day period. Such notice shall inform the claimant the nature of the circumstances necessitating the need for additional time and the date by which the claimant will be furnished with the decision regarding the claim. Such extension may provide for up to an additional 90 days. (c) Review Procedure Within sixty (60) days of the date the Administrator denies a claim, in whole or in part, the claimant, or his/her authorized representative, may request that the decision be reviewed. Such request shall be in writing, shall be filed with the Administrator, and shall contain the following information: (1) The date on which the denial was received by the claimant; (2) The date on which the claimant's request for review was filed with the Administrator; (3) The specific portions of the denial which the claimant requests the Administrator to review; (4) A statement setting forth the basis on which the claimant believes that a review of the decision is required; (5) Any written material which the claimant desires the Administrator to take into consideration in reviewing the claim. The Administrator shall afford the claimant, or his/her authorized representative, an opportunity to review documents pertinent to the claim, and shall conduct a full and fair review of the claim and its denial. The Administrator's decision on such review shall be furnished to the claimant in writing, and shall be written in a manner calculated to be understandable to the claimant. Such decision shall -12- include a statement of the specific reason(s) for the decision, including references to the specific provision(s) of the Plan relied upon. The written notice from the Administrator shall be furnished to the claimant within sixty (60) days following the date on which the request for review was received by the Administrator, except that if special circumstances require an extension of time, the Administrator shall notify the claimant of this need within such 60-day period. Such notice shall inform the claimant the nature of the circumstances necessitating the need for additional time and the date by which the claimant will be furnished with the decision regarding the claim. Such extension may provide for up to an additional 60 days. 5.03 Plan Expenses The cost of administering the Plan shall be paid by the Corporation. -13- SECTION VI - AMENDMENT AND TERMINATION -------------------------------------- 6.01 Amendment of the Plan (a) Except as provided in paragraph (b) below, the Board or the Committee may amend the Plan, in whole or in part, at any time. (b) No amendment may, without shareholder approval, (1) expand the class of eligible employees, (2) increase either the maximum award to an individual Covered Employee or the maximum aggregate number of shares payable, or (3) change the list of business or financial criteria to be used to establish Award Goals. 6.02 Termination of the Plan The Plan shall terminate when all TSR Shares subject to Award under the Plan or all Common Stock available for delivery under the Plan have been paid out or delivered or on such earlier date as may be determined by the Board or the Committee 6.03 Company Action The Company's power to amend or terminate the Plan shall be exercisable by the Board or by the Committee, or by any individual authorized by the Board to exercise such powers. -14- SECTION VII - MISCELLANEOUS --------------------------- 7.01 Share and Award Authorization (a) Awards of TSR Shares shall entitle Covered Employees to Dividend Equivalents but not to actual dividends, voting or other rights of shareholders. TSR Shares covered by Awards which are not earned or are forfeited for any reason shall, unless the Plan has been terminated, again be available for other Awards under the Plan. The maximum number to TSR Shares which may be awarded under the Plan on and after the date hereof shall not exceed the number of shares authorized and available for award as approved by shareholders as set forth in paragraph (d) below, subject to adjustment as provided in paragraph (c) below. (b) The maximum number of shares of Common Stock which shall be available for issuance and delivery to Covered Employees under this Plan on and after this date shall not exceed the number of shares authorized and available for issuance as approved by shareholders, as set forth in paragraph (d) below, subject to adjustment as provided in paragraph (c) below. (c) In the event of any change in the number of outstanding shares of Common Stock by reason of any stock dividend, stock split, reorganization, merger, consolidation, exchange of shares or similar change, a corresponding change shall be made in: (i) The number of TSR Shares available for grant pursuant to Section 2.02; (ii) The number of shares of Common Stock available for issuance and delivery pursuant to paragraph (b) above; (iii) The number of TSR Shares contingently held by any Covered Employee unless the Committee makes a contrary determination, which it may do in its sole discretion and which, if done, shall be final and binding. (d) The maximum aggregate number of shares of Common Stock that may be paid out for all Covered Employees under this Plan shall not exceed 1,000,000 shares without shareholder approval. 7.02 Successors of the Company The rights and obligations of the Company under the Plan shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company. 7.03 ERISA Plan The Plan is intended to be an unfunded plan maintained primarily to provide deferred compensation benefits for "a select group of management or highly compensated employees" within the meaning of Sections 201, 301 and 401 of ERISA and therefore to be exempt from Parts 2, 3 and 4 of Title I of ERISA. -15- 7.04 Trust The Company shall be responsible for the payment of all benefits under the Plan. At its discretion, the Company may establish one or more grantor trusts for the purpose of providing for payment of benefits under the Plan. Such trust(s) may be irrevocable, but the assets thereof shall be subject to the claims of the Company's creditors. Benefits paid to the Covered Employee from any such trust shall be considered paid by the Company for purposes of meeting the obligations of the Company under the Plan. 7.05 Employment Not Guaranteed Nothing contained in the Plan nor any action taken hereunder shall be construed as a contract of employment or as giving any Covered Employee any right to continued employment with the Corporation. 7.06 Gender, Singular and Plural All pronouns and variations thereof shall be deemed to refer to the masculine, feminine, or neuter, as the identity of the person(s) requires. As the context may require, the singular may be read as the plural and the plural as the singular. 7.07 Headings The headings of the Sections, subsections and paragraphs of the Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 7.08 Validity If any provision of the Plan is held invalid, void or unenforceable, the same shall not affect, in any respect, the validity of any other provision(s) of the Plan. 7.09 Waiver of Breach The waiver by the Company of any breach of any provision of the Plan by a Covered Employee or Beneficiary shall not operate or be construed as a waiver of any subsequent breach. 7.10 Applicable Law The Plan is intended to conform and be governed by ERISA. In any case where ERISA does not apply, the Plan shall be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania. -16- 7.11 Notice Any notice required or permitted to be given to the Administrator under the Plan shall be sufficient if in writing and either hand-delivered, or sent by first class mail to the principal office of the Company at One PPG Place, Pittsburgh, PA 15272, directed to the attention of the Administrator. Such notice shall be deemed given as of the date of delivery. -17- SECTION VIII - CHANGE IN CONTROL -------------------------------- 8.01 Payments to a Trustee Upon, or in reasonable anticipation of a Change in Control, as defined in Section 8.02, all contingent Awards outstanding shall be deemed to have been earned on such basis as the Committee shall prescribe and then paid to a trustee or otherwise on such terms as the Committee may prescribe or permit and any deferred amounts shall be paid to a trustee or otherwise in such form and on such terms as the Committee may prescribe or permit. 8.02 Definition: Change in Control A "Change in Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"). For purposes of this subsection (a) the following acquisitions shall not constitute a Change in Control: Any acquisition directly from the Company; Any acquisition by the Company; Any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; or Any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of paragraph (c) of this section 8.02. (b) Individuals who, as of January 1, 1999, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming -------- a director subsequent to such date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or -18- (c) Approval by the shareholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination: (i) All or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of Common Stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; (ii) No Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of Common Stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination; and (iii) At least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company; or (e) A majority of the Board otherwise determines that a Change in Control shall have occurred. -19- EX-12 6 0006.txt RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12 PPG INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES Computation of Ratio Of Earnings to Fixed Charges (Dollars in Millions)
Year Ended December 31, ------------------------------------------------------------- 1996 1997 1998 1999 2000 ----------- ---------- ---------- ---------- ---------- Earnings: Earnings before income taxes and net earnings in equity affiliates $ 1,221 $ 1,165 $ 1,264 $ 945 $ 978 Plus: Fixed charges exclusive of capitalized interest 118 128 135 164 217 Amortization of capitalized interest 13 13 12 10 10 Adjustments for equity affiliates 15 14 16 16 20 -------------------------------------------------------------- Total $ 1,367 $ 1,320 $ 1,427 $ 1,135 $ 1,225 ============================================================== Fixed Charges: Interest expense including amortization of debt discount/premium and debt expense $ 96 $ 105 $ 110 $ 133 $ 177 Rentals - portion representative of interest 22 23 25 31 40 -------------------------------------------------------------- Fixed charges exclusive of capitalized interest 118 128 135 164 217 Capitalized interest 12 10 9 11 16 -------------------------------------------------------------- Total $ 130 $ 138 $ 144 $ 175 $ 233 ============================================================== Ratio of earnings to fixed charges 10.5 9.6 9.9 6.5 5.3 ==============================================================
EX-13 7 0007.txt ANNUAL REPORT EXHIBIT 13 Financial and Operating Review Independent Auditors' Report To the Board of Directors and Shareholders of PPG Industries, Inc.: We have audited the accompanying balance sheet of PPG Industries, Inc. and subsidiaries as of December 31, 2000 and 1999, and the related statements of income, shareholders' equity, comprehensive income and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of PPG Industries, Inc. and subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP Deloitte & Touche LLP Pittsburgh, Pennsylvania January 18, 2001 Management Statement Responsibility for Preparation of the Financial Statements The management of PPG Industries, Inc. is responsible for the preparation of the financial statements included in this Annual Report. To ensure the reliability of financial data, PPG has established, and maintains, an internal control system. We believe the internal controls in use give reasonable assurance that financial reports do not contain any material misstatement. We believe that the financial statements and related notes in this report are accurate in all material respects, and that they were prepared according to generally accepted accounting principles. The financial statements include amounts that are based on the best estimates and judgments of management. We believe, further, that the other financial information contained in this Annual Report is consistent with the financial statements. /s/ Raymond W. LeBoeuf Raymond W. LeBoeuf Chairman of the Board and Chief Executive Officer /s/ William H. Hernandez William H. Hernandez Senior Vice President, Finance 17 Statement of Income
For the Year - ------------------------------------------------------------------------------------------------------------------ (Millions, except per share amounts) 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------ Net sales $ 8,629 $ 7,995 $ 7,751 - ------------------------------------------------------------------------------------------------------------------ Cost of sales 5,334 4,957 4,717 - ------------------------------------------------------------------------------------------------------------------ Gross profit 3,295 3,038 3,034 - ------------------------------------------------------------------------------------------------------------------ Other expenses (earnings) Selling, general and administrative 1,364 1,230 1,133 ---------------------------------------------------------------------------------------------------------------- Depreciation 374 366 354 ---------------------------------------------------------------------------------------------------------------- Research and development -- net (See Note 17) 282 284 271 ---------------------------------------------------------------------------------------------------------------- Interest 177 133 110 ---------------------------------------------------------------------------------------------------------------- Amortization 73 49 27 ---------------------------------------------------------------------------------------------------------------- Business divestitures and realignments (See Note 2) 5 42 31 ---------------------------------------------------------------------------------------------------------------- Purchased in-process research and development (See Note 2) -- 40 -- ---------------------------------------------------------------------------------------------------------------- Other charges 141 45 50 ---------------------------------------------------------------------------------------------------------------- Other earnings (See Notes 2 and 14) (138) (124) (236) - ------------------------------------------------------------------------------------------------------------------ Total other expenses -- net 2,278 2,065 1,740 - ------------------------------------------------------------------------------------------------------------------ Income before income taxes and minority interest 1,017 973 1,294 - ------------------------------------------------------------------------------------------------------------------ Income taxes (See Note 8) 369 377 466 - ------------------------------------------------------------------------------------------------------------------ Minority interest 28 28 27 ================================================================================================================== Net income $ 620 $ 568 $ 801 ================================================================================================================== Earnings per common share (See Note 7) $ 3.60 $ 3.27 $ 4.52 ================================================================================================================== Earnings per common share -- assuming dilution (See Note 7) $ 3.57 $ 3.23 $ 4.48 ==================================================================================================================
The accompanying notes to the financial statements are an integral part of this statement. 18 Balance Sheet
December 31 - -------------------------------------------------------------------------------------------------------------------------------- (Millions) 2000 1999 - -------------------------------------------------------------------------------------------------------------------------------- Assets Current assets Cash and cash equivalents $ 111 $ 158 ------------------------------------------------------------------------------------------------------------------------------ Receivables (See Note 3) 1,563 1,594 ------------------------------------------------------------------------------------------------------------------------------ Inventories (See Note 3) 1,121 1,016 ------------------------------------------------------------------------------------------------------------------------------ Deferred income taxes (See Note 8) 155 165 ------------------------------------------------------------------------------------------------------------------------------ Other 143 129 - -------------------------------------------------------------------------------------------------------------------------------- Total current assets 3,093 3,062 - -------------------------------------------------------------------------------------------------------------------------------- Property (See Note 4) 7,089 6,859 - -------------------------------------------------------------------------------------------------------------------------------- Less accumulated depreciation 4,148 3,926 - -------------------------------------------------------------------------------------------------------------------------------- Property -- net 2,941 2,933 - -------------------------------------------------------------------------------------------------------------------------------- Investments (See Note 9) 320 261 - -------------------------------------------------------------------------------------------------------------------------------- Goodwill 1,160 1,102 - -------------------------------------------------------------------------------------------------------------------------------- Less accumulated amortization 128 100 - -------------------------------------------------------------------------------------------------------------------------------- Goodwill -- net 1,032 1,002 - -------------------------------------------------------------------------------------------------------------------------------- Identifiable intangible assets 718 723 - -------------------------------------------------------------------------------------------------------------------------------- Less accumulated amortization 102 63 - -------------------------------------------------------------------------------------------------------------------------------- Identifiable intangible assets -- net 616 660 - -------------------------------------------------------------------------------------------------------------------------------- Other assets (See Note 9) 1,123 996 - -------------------------------------------------------------------------------------------------------------------------------- Total $ 9,125 $ 8,914 ================================================================================================================================ Liabilities and Shareholders' Equity Current liabilities Short-term debt and current portion of long-term debt (See Note 5) $ 1,161 $ 954 ------------------------------------------------------------------------------------------------------------------------------ Accounts payable and accrued liabilities (See Note 3) 1,382 1,430 - -------------------------------------------------------------------------------------------------------------------------------- Total current liabilities 2,543 2,384 - -------------------------------------------------------------------------------------------------------------------------------- Long-term debt (See Note 5) 1,810 1,836 - -------------------------------------------------------------------------------------------------------------------------------- Deferred income taxes (See Note 8) 543 520 - -------------------------------------------------------------------------------------------------------------------------------- Accrued pensions (See Note 9) 131 123 - -------------------------------------------------------------------------------------------------------------------------------- Other postretirement benefits (See Note 9) 529 548 - -------------------------------------------------------------------------------------------------------------------------------- Other liabilities (See Note 9) 344 299 - -------------------------------------------------------------------------------------------------------------------------------- Total liabilities 5,900 5,710 - -------------------------------------------------------------------------------------------------------------------------------- Commitments and contingent liabilities (See Note 10) - -------------------------------------------------------------------------------------------------------------------------------- Minority interest 128 98 - -------------------------------------------------------------------------------------------------------------------------------- Shareholders' equity (See Notes 11 and 12) Common stock 484 484 ------------------------------------------------------------------------------------------------------------------------------ Additional paid-in capital 102 104 ------------------------------------------------------------------------------------------------------------------------------ Retained earnings 6,444 6,098 ------------------------------------------------------------------------------------------------------------------------------ Treasury stock, at cost (3,508) (3,268) ------------------------------------------------------------------------------------------------------------------------------ Unearned compensation (See Note 13) (114) (134) ------------------------------------------------------------------------------------------------------------------------------ Accumulated other comprehensive loss (311) (178) - -------------------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 3,097 3,106 - -------------------------------------------------------------------------------------------------------------------------------- Total $ 9,125 $ 8,914 ================================================================================================================================
Shares outstanding were 168,222,073 and 173,988,266 at Dec. 31, 2000 and 1999, respectively. The accompanying notes to the financial statements are an integral part of this statement. 19 Statement of Shareholders' Equity
Accumulated Other Additional Unearned Comprehensive Common Paid-In Retained Treasury Compensation Loss (Millions) Total Stock Capital Earnings Stock (See Note 13) (See Note 12) - ---------------------------------------------------------------------------------------------------------------------------------- Balance, Jan. 1, 1998 $2,509 $484 $ 99 $5,239 $(2,990) $(162) $(161) - ---------------------------------------------------------------------------------------------------------------------------------- Net income 801 -- -- 801 -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Other comprehensive income, net of tax 8 -- -- -- -- -- 8 - ---------------------------------------------------------------------------------------------------------------------------------- Cash dividends (252) -- -- (252) -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Purchase of treasury stock (231) -- -- -- (231) -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Issuance of treasury stock 29 -- 6 -- 23 -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Loans to ESOP (26) -- -- -- -- (26) -- - ---------------------------------------------------------------------------------------------------------------------------------- Repayment of loans by ESOP 39 -- -- -- -- 39 -- - ---------------------------------------------------------------------------------------------------------------------------------- Other 3 -- -- 3 -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Balance, Dec. 31, 1998 2,880 484 105 5,791 (3,198) (149) (153) - ---------------------------------------------------------------------------------------------------------------------------------- Net income 568 -- -- 568 -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Other comprehensive loss, net of tax (25) -- -- -- -- -- (25) - ---------------------------------------------------------------------------------------------------------------------------------- Cash dividends (264) -- -- (264) -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Purchase of treasury stock (82) -- -- -- (82) -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Issuance of treasury stock 11 -- (1) -- 12 -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Loans to ESOP (24) -- -- -- -- (24) -- - ---------------------------------------------------------------------------------------------------------------------------------- Repayment of loans by ESOP 39 -- -- -- -- 39 -- - ---------------------------------------------------------------------------------------------------------------------------------- Other 3 -- -- 3 -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Balance, Dec. 31, 1999 3,106 484 104 6,098 (3,268) (134) (178) - ---------------------------------------------------------------------------------------------------------------------------------- Net income 620 -- -- 620 -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Other comprehensive loss, net of tax (133) -- -- -- -- -- (133) - ---------------------------------------------------------------------------------------------------------------------------------- Cash dividends (276) -- -- (276) -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Purchase of treasury stock (247) -- -- -- (247) -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Issuance of treasury stock 5 -- (2) -- 7 -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Loans to ESOP (24) -- -- -- -- (24) -- - ---------------------------------------------------------------------------------------------------------------------------------- Repayment of loans by ESOP 44 -- -- -- -- 44 -- - ---------------------------------------------------------------------------------------------------------------------------------- Other 2 -- -- 2 -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Balance, Dec. 31, 2000 $3,097 $484 $102 $6,444 $(3,508) $(114) $(311) ==================================================================================================================================
Statement of Comprehensive Income
For the Year - ---------------------------------------------------------------------------------------------------------- (Millions) 2000 1999 1998 - ---------------------------------------------------------------------------------------------------------- Net income $ 620 $ 568 $ 801 - ---------------------------------------------------------------------------------------------------------- Other comprehensive (loss) income, net of tax (See Note 12) Currency translation adjustment (120) (40) 14 -------------------------------------------------------------------------------------------------------- Minimum pension liability adjustment (16) 18 (6) -------------------------------------------------------------------------------------------------------- Unrealized losses on marketable equity securities (6) (3) -- -------------------------------------------------------------------------------------------------------- Reclassification adjustment--marketable equity securities 9 -- -- - ---------------------------------------------------------------------------------------------------------- Other comprehensive (loss) income (133) (25) 8 - ---------------------------------------------------------------------------------------------------------- Comprehensive income $ 487 $ 543 $ 809 ==========================================================================================================
The accompanying notes to the financial statements are an integral part of these statements. 20 Statement of Cash Flows
For the Year - ----------------------------------------------------------------------------------------------------------------------------- (Millions) 2000 1999 1998 - ----------------------------------------------------------------------------------------------------------------------------- Operating activities Net income $ 620 $ 568 $ 801 - ----------------------------------------------------------------------------------------------------------------------------- Adjustments to reconcile to cash from operations Depreciation and amortization 447 419 383 --------------------------------------------------------------------------------------------------------------------------- Business divestitures and realignments 5 42 31 --------------------------------------------------------------------------------------------------------------------------- Purchased in-process research and development -- 40 -- --------------------------------------------------------------------------------------------------------------------------- Loss on write-off of equity investment 39 -- -- --------------------------------------------------------------------------------------------------------------------------- Reclassification adjustment -- marketable equity securities 9 -- -- --------------------------------------------------------------------------------------------------------------------------- Gain on sale of business -- -- (85) --------------------------------------------------------------------------------------------------------------------------- Increase in receivables (44) (128) (85) --------------------------------------------------------------------------------------------------------------------------- Increase in inventories (92) (7) (73) --------------------------------------------------------------------------------------------------------------------------- Increase in pension asset (102) (110) (57) --------------------------------------------------------------------------------------------------------------------------- (Decrease) increase in accounts payable and accrued liabilities (11) 77 55 --------------------------------------------------------------------------------------------------------------------------- Change in other noncurrent assets and liabilities and other -- net (1) 1 (28) - ----------------------------------------------------------------------------------------------------------------------------- Cash from operating activities 870 902 942 - ----------------------------------------------------------------------------------------------------------------------------- Investing activities Capital spending Additions to property and investments (561) (490) (487) --------------------------------------------------------------------------------------------------------------------------- Business acquisitions, net of cash balances acquired (115) (1,343) (390) - ----------------------------------------------------------------------------------------------------------------------------- Proceeds from business divestitures -- -- 278 - ----------------------------------------------------------------------------------------------------------------------------- Proceeds from the sale of the Company's headquarters complex -- 152 -- - ----------------------------------------------------------------------------------------------------------------------------- Reductions of other property and investments 40 37 18 - ----------------------------------------------------------------------------------------------------------------------------- Cash used for investing activities (636) (1,644) (581) - ----------------------------------------------------------------------------------------------------------------------------- Financing activities Net change in borrowings with maturities of three months or less 220 492 109 - ----------------------------------------------------------------------------------------------------------------------------- Proceeds from other short-term debt 268 252 170 - ----------------------------------------------------------------------------------------------------------------------------- Repayment of other short-term debt (244) (267) (154) - ----------------------------------------------------------------------------------------------------------------------------- Proceeds from long-term debt 32 821 12 - ----------------------------------------------------------------------------------------------------------------------------- Repayment of long-term debt (55) (203) (64) - ----------------------------------------------------------------------------------------------------------------------------- Loans to employee stock ownership plan (24) (24) (26) - ----------------------------------------------------------------------------------------------------------------------------- Repayment of loans by employee stock ownership plan 44 39 39 - ----------------------------------------------------------------------------------------------------------------------------- Purchase of treasury stock (247) (82) (217) - ----------------------------------------------------------------------------------------------------------------------------- Issuance of treasury stock 4 9 22 - ----------------------------------------------------------------------------------------------------------------------------- Dividends paid (276) (264) (252) - ----------------------------------------------------------------------------------------------------------------------------- Cash (used for) from financing activities (278) 773 (361) - ----------------------------------------------------------------------------------------------------------------------------- Effect of currency exchange rate changes on cash and cash equivalents (3) (1) (1) - ----------------------------------------------------------------------------------------------------------------------------- Net (decrease) increase in cash and cash equivalents (47) 30 (1) - ----------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents, beginning of year 158 128 129 - ----------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents, end of year $ 111 $ 158 $ 128 =============================================================================================================================
The accompanying notes to the financial statements are an integral part of this statement. 21 Management's Discussion and Analysis Performance in 2000 Compared with 1999 Overall Performance Our sales increased 8% in 2000 to $8.6 billion from $8.0 billion in 1999. The majority of this sales increase, 7%, is attributable to several acquisitions made in 1999 and 2000, primarily within our coatings segment. Other improvements in volume in our coatings and glass segments totaled 2%. Sales for 2000 also increased by 2% due to higher selling prices primarily within our chemicals segment. These sales increases were partially offset by a 3% decline from foreign currency translation in all of our business segments due to the strengthening of the U.S. dollar against other currencies, especially the euro and the British pound sterling. The gross profit percentage increased slightly to 38.2% in 2000 from 38.0% in 1999. Improvements in manufacturing efficiencies across all of our business segments and higher selling prices, primarily in our chemicals segment, were substantially offset by increases in raw material costs, particularly for natural gas. Net income and earnings per share, diluted, in 2000 were $620 million and $3.57, respectively, compared to $568 million and $3.23, respectively, in 1999. Net income in 2000 included after-tax charges of $35 million for the write-off of an equity investment and $3 million of restructuring and one-time integration costs associated with PPG Auto Glass L.L.C. (PPG Auto Glass), an automotive replacement glass distribution venture formed during 2000. Net income in 1999 included after-tax charges of $33 million for purchased in-process research and development, $31 million related to the integration of packaging coatings acquisitions and ongoing cost reduction efforts and $15 million for the fair- market-value adjustment of acquired inventories sold. Excluding these charges, net income and earnings per share, diluted, for 2000 were $658 million and $3.79, respectively, and $647 million and $3.68, respectively, in 1999. Results of Business Segments Coatings sales increased 9% to $4.7 billion in 2000 from $4.3 billion in 1999. Sales increased 11% from acquisitions and 2% due to volume improvements primarily in our European automotive original equipment business and our European industrial business. Sales declined 3% from the negative effects of foreign currency translation and 1% from lower selling prices. Operating income was $685 million in 2000 compared to $545 million in 1999. Operating income in 1999 included pre-tax charges of $40 million for purchased in-process research and development; $41 million of restructuring charges related to the integration of packaging coatings acquisitions and ongoing cost reduction efforts throughout our coatings businesses and $23 million representing the fair-market-value adjustment of acquired inventories that had been sold. Excluding these pre-tax restructuring charges, operating income in 1999 was $649 million. The increase in operating income is attributable to acquisitions, increased sales volumes and manufacturing efficiencies. These factors were partially offset by higher raw material costs, the effect of inflation and currency. Glass sales increased 5% to $2.4 billion in 2000 from $2.2 billion in 1999. Sales increased 3% from increased volumes across all glass businesses, 2% from acquisitions and 1% from higher selling prices primarily for our fiber glass products. These increases were partially offset by a 1% decline due to foreign currency translation. Operating income was $377 million in 2000 compared to $363 million in 1999. Operating income in 2000 also included pre-tax charges of $6 million for restructuring and one-time integration costs related to PPG Auto Glass. Excluding these charges, operating income in 2000 was $383 million. The increase in operating income is attributable to increased selling prices, increased equity affiliate earnings and manufacturing efficiencies, partially offset by higher natural gas costs. Chemicals sales increased 8% to $1.6 billion in 2000 from $1.5 billion in 1999. Sales increased 11% as a result of higher selling prices for our chlorine and caustic soda products. This increase was offset slightly by a 2% decline in sales volume of our chlor-alkali derivative, optical and fine chemicals products and a 1% decline from the negative effect of foreign currency translation. Operating income decreased to $174 million in 2000 from $177 million in 1999. The decrease in operating income is attributable to lower sales volumes and higher natural gas costs. These negative factors were partially offset by higher selling prices mentioned previously and improved manufacturing efficiencies. Other Significant Factors Earnings in 2000 and 1999 included net periodic pension income of $86 million and $71 million, respectively, due primarily to returns on U.S. defined benefit pension plan assets. See Note 9, "Pensions and Other Postretirement Benefits," for information concerning the pension plan assets and the components of the net periodic pension income. Interest expense increased due to the issuance of $800 million aggregate principal amount of debt securities in August 1999 to finance the 1999 acquisitions. Other unallocated corporate expense--net, was expense of $54 million in 2000 as compared to income of $12 million in 1999. Included in 2000 are pre-tax charges of $39 million representing the write-off of an equity investment in Pittsburgh Corning Corporation, which has filed for reorganization under the federal bankruptcy code, and $14 million representing an other than temporary decline in the market value of an investment in marketable equity securities, previously recorded, net of tax, as an unrealized loss in other comprehensive loss. The effective tax rate for 2000 was 36.25% compared to 38.80% for 1999. The reduction in the effective tax rate for 2000 was due to an improvement in the regional mix of 22 Management's Discussion and Analysis non-U.S. taxable earnings and a lower effective state tax rate. The 1999 rate reflects the impact of the non-deductibility of certain purchased in-process research and development charges recorded in 1999. The effective tax rate for 2001 is expected to approximate the 2000 effective tax rate. Outlook The economic and market conditions that adversely impacted our operating performance in the second half of 2000 are expected to continue to impact our results in 2001, at least through the early part of the year. Most importantly, these conditions include a weakening of demand in our North American markets related to automotive original equipment and other transportation products, other consumer durable goods, such as appliances, and construction. The competitive pressures resulting from the ongoing consolidation of companies within our customer, supplier and competitor groups is also expected to continue in 2001. In particular, there is a risk that further chemical industry consolidation combined with a more disciplined approach to incremental capacity additions could make prices or physical availability of certain raw materials more volatile and could contribute to increases in raw material costs in excess of inflation; however, that impact may be dampened by weaker, recession-driven demand. Other factors that may adversely impact our operating performance in 2001 include continued inventory corrections and production cutbacks in commodity chemical markets, as well as other end markets, and the impact of fluctuations in the value of the U.S. dollar against the euro and other currencies. Finally, higher natural gas costs have had and will continue to have a significant impact on our operating results, particularly within our glass and chemicals segments. Each one dollar change in the price of natural gas per mmbtu (million British thermal units) could have a direct impact of approximately $60 million on annual operating costs. The trading range for natural gas shifted significantly in 2000. The average monthly market price for 2000 was $3.91 per mmbtu which was more than 75% above the average monthly price during the preceding five years. The market price for natural gas for the month of January 2001 was nearly $10 per mmbtu. Natural gas prices are expected to be substantially more volatile over the next few years making it difficult to predict the future cost of natural gas. However, it is not expected to return to historical average price levels in 2001. In order to reduce the risks associated with volatile prices, we use a number of techniques including hedging, conserving through improved manufacturing technologies and switching to alternative fuels. In Europe, the general economic outlook for 2001 is more positive than in North America; however, the issue of continuing over-capacity confronting the automotive original equipment industry is global in scope and is expected to adversely impact our businesses serving the European, as well as other, global markets. The economic outlook for Brazil in 2001 is positive in terms of growth in industrial production and lower inflation. On the other hand, Argentina is in the midst of a recession. The outlook for Asia is also mixed given the region's wide diversity, with certain markets in Taiwan and China showing signs of growth while others, such as those in Japan, look to remain more stable. The challenging economic environment we see for 2001 means, in part, that we must accelerate the implementation of our strategies to lower our costs to serve customers. In that regard, we are in the process of finalizing plans begun last September to address this objective. In December 2000, we announced that actions would be taken beginning in early 2001, to reduce costs, increase efficiency and accelerate performance improvement. We expect to incur pre-tax charges against first quarter 2001 earnings in the range of $50 million to $100 million as a result of these actions, which will include facility and job consolidations. The annual, on-going savings from these actions are estimated to equal the one-time charges. Accounting Standards Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," is effective for the Company as of Jan. 1, 2001. SFAS No. 133 will require the Company to recognize all derivatives as either assets or liabilities at fair value, most of which are currently not recorded on the balance sheet. The accounting for changes in the fair value of a derivative will depend on the use of the derivative. To the extent that a derivative is effective as a hedge of a future exposure to changes in value, the fair value of the derivative will be deferred in other comprehensive income. Any portion considered to be ineffective will be reported in earnings immediately. As of Jan. 1, 2001, adoption of these new accounting standards will result in an increase in current assets, current liabilities and other comprehensive income of $70 million, $26 million and $43 million, respectively, with a cumulative after-tax increase in net earnings of less than $1 million. Performance in 1999 Compared with 1998 Overall Performance Our sales increased 3% in 1999 to $8.0 billion from $7.8 billion in 1998. The combination of acquisitions in our coatings segment and volume increases across all of our business segments contributed 8% and 3%, respectively, to the increased sales levels in 1999. These sales increases were partially offset by a 4% decrease due to lower selling prices in all of our business segments and a 4% decrease due to the absence of sales from our European flat and automotive glass businesses, which were divested in July 1998. 23 Management's Discussion and Analysis The gross profit percentage decreased to 38.0% in 1999 from 39.1% in 1998. The effects of lower selling prices across all of our business segments, particularly in our chemicals business for certain chlor-alkali products, increased raw material costs in our chemicals business and a charge representing the fair-market-value adjustment of acquired inventories that have been sold contributed to the lower gross margins. These negative factors were offset in part by the benefits realized from improved manufacturing efficiencies across all of our segments and the margins from recent acquisitions. Net income and earnings per share, diluted, for 1999 were $568 million and $3.23, respectively, compared to $801 million and $4.48, respectively, in 1998. Net income in 1999 was affected by the same factors that contributed to the change in sales and gross profit, including $15 million for the fair-market- value adjustment on an after-tax basis of acquired inventories sold, the absence of an $82 million after-tax gain from the sale of our European flat and automotive glass businesses, after-tax acquisition related charges of $33 million for purchased in-process research and development and higher interest expense as a result of acquisition activity. Net income in 1999 was also affected by after-tax restructuring charges of $31 million, related to the integration of packaging coatings acquisitions and ongoing cost reduction efforts, which exceeded after-tax restructuring charges in 1998. These factors were partially offset by lower income tax expense as a result of a reduction in pre-tax earnings. Excluding the after-tax acquisition related and restructuring charges and the after-tax gain from the sale of our European flat and automotive glass businesses, net income and earnings per share, diluted, for 1999 were $647 million and $3.68, respectively, compared to $738 million or $4.13, respectively, in 1998. Results of Business Segments Coatings sales increased 17% to $4.3 billion in 1999 from $3.6 billion in 1998. Sales increased 17% from acquisitions that affected all of our coatings businesses and 3% due to volume increases in our North American and European automotive original businesses and our North American industrial business. Sales in 1998 were impacted by the adverse effects of the General Motors strike. Sales declines of 2% from the negative effects of foreign currency translation and 1% from lower selling prices, principally within our North American and European automotive original businesses, partially offset the sales increases. Operating income decreased to $545 million in 1999 from $565 million in 1998. Operating income in 1999 was reduced by the lower selling prices discussed above and pre-tax restructuring charges of $41 million related to the integration of packaging acquisitions and on-going cost reduction efforts throughout our coatings businesses. Coatings operating income in 1999 was also negatively impacted by pre-tax acquisition related charges of $40 million for purchased in-process research and development charges associated with the acquisitions of coatings and sealant maker PRC DeSoto International, Inc. (PRC-DeSoto) and the majority of the global automotive refinish, automotive and industrial coatings businesses of Imperial Chemical Industries PLC (the ICI business), and $23 million for the fair-market-value adjustment of acquired inventories that have been sold. A combination of increased sales volumes as previously discussed, earnings from acquisitions and improved manufacturing efficiencies, primarily within our North American and European industrial businesses, partially offset these reductions. Excluding the pre-tax acquisition related and restructuring charges, operating income in 1999 increased to $649 million as compared to $574 million in 1998. Glass sales decreased 11% to $2.2 billion in 1999 from $2.5 billion in 1998. Sales declined by 11% as a result of the divestiture of our European flat and automotive glass businesses in July 1998 and 3% due to lower selling prices for our fiber glass, automotive original and automotive replacement glass products. These negative factors were offset in part by a 3% increase in sales volumes primarily from our North American automotive original glass business, our fiber glass reinforcement products and, to a lesser extent, our automotive replacement and flat glass businesses. Sales levels in 1998 were adversely affected by the General Motors strike. Operating income decreased to $363 million in 1999 from $459 million in 1998. The absence of an $85 million pre-tax gain from the sale of our European flat and automotive glass businesses and the lower selling prices mentioned previously were partially offset by manufacturing efficiencies in our North American automotive original glass and fiber glass reinforcements businesses. Operating income in 1998 also included pre-tax restructuring charges of $21 million, related to the divesture of our equity interests in Asian glass operations, cost reduction initiatives and the reversal of a reserve related to the Perry, Ga., plant. Excluding the pre-tax restructuring charges and the pre- tax gain from the sale of our European flat and automotive glass businesses, operating income in 1999 was $363 million as compared to $395 million in 1998. Chemicals sales decreased 6% to $1.5 billion in 1999 from $1.6 billion in 1998. Sales declined 10% as a result of significantly lower selling prices for our chlorine and caustic soda products and 1% due to the negative effects of foreign currency translation. These negative factors were offset in part by a 5% improvement in volumes primarily for certain chlor-alkali derivative products and, to a lesser extent, certain specialty chemicals products. The volume increase for specialty chemicals related to optical products, including Transitions(R) optical lenses. Operating income decreased to $177 million in 1999 compared to $354 million in 1998. The significant reduction in selling prices for chlorine and caustic soda products and higher raw material costs were only slightly offset by the previously discussed sales volume improvements and manufacturing efficiencies in our chlor-alkali and derivatives business. 24 Management's Discussion and Analysis Other Significant Factors Earnings in 1999 and 1998 included net periodic pension income of $71 million and $57 million, respectively, due primarily to returns on U.S. defined benefit pension plan assets. Interest expense and long-term debt increased due to the issuance of $800 million aggregate principal amount of debt securities in August 1999 to repay a substantial portion of the short-term debt issued to finance the acquisitions of the ICI business and PRC-DeSoto. The increase in the overall effective tax rate is principally due to the non- deductibility of certain 1999 purchased in-process research and development charges and the 1998 pre-tax gain from the sale of our European flat and automotive glass businesses being almost entirely offset by the utilization of capital loss carryforwards. Goodwill and identifiable intangible assets increased principally due to the acquisitions of the ICI business and PRC-DeSoto in 1999. The increase in other long-term assets was attributable to an increase in our prepaid pension asset. Business Divestitures and Realignments During 2000, we finalized restructuring plans for certain locations related to the integration of the ICI business and PRC-DeSoto. These restructuring plans were originally developed at the acquisition date (principally July 1999). The plans cover severance benefits for 618 employees, as well as other costs, and resulted in an increase to goodwill of $24 million and a pre-tax charge of $1 million. As of Dec. 31, 2000, $15 million has been paid to 411 employees, and the remaining reserve of $10 million, which covers 207 employees and other exit costs, is expected to be utilized in 2001. During 2000, PPG Auto Glass accrued severance and other restructuring related costs of $10 million, resulting in an increase to goodwill of $6 million and a pre-tax charge of $4 million. In addition, PPG Auto Glass incurred one-time integration costs of $2 million. The restructuring plans include severance benefits for 133 employees and other exit costs. As of Dec. 31, 2000, $4 million has been paid, including $2 million to 100 employees. The remaining reserve of $6 million, which includes severance for 33 employees and other restructuring costs, is expected to be paid by mid-2001. In the fourth quarter of 2000, we took charges of $3 million related to work force reductions in our coatings business for 65 people. As of Dec. 31, 2000, $1 million has been paid to 24 people. The remaining reserve will be paid by mid- 2001. During 1999, we approved restructuring plans associated with the integration of the packaging coatings acquisitions and cost reduction activities across all of our businesses that resulted in pre-tax charges of $47 million. The components of the plans included severance benefits for 519 employees and estimated losses of $17 million on the disposal of a redundant European facility and the disposition of the assets of a U.S. coatings facility. As of Dec. 31, 2000, the asset dispositions are complete and $21 million has been paid under the plans to 372 employees and to cover other exit costs. Additionally, in 2000, severance reserves for 121 people totaling $5 million were reversed due to changes in estimates. At Dec. 31, 2000, the remaining reserves established in 1999 totaled $4 million for 26 employees and will be paid in early 2001. In 1999, we also recorded a $3 million reversal of a reserve originally recorded in 1997. During 1998, we recorded a pre-tax charge of $19 million in connection with a restructuring plan to reduce costs in our glass and coatings businesses. The components of the plan included severance benefits for 283 employees. During the years 2000, 1999 and 1998, $16 million was paid out under the restructuring plan and $3 million was reversed in 1999 and 1998 for amounts that will not be paid under the plan. In 1998, we also recorded an additional pre-tax charge of $15 million related to the disposition of our equity interests in two Asian float glass plants and two Asian downstream fabrication facilities. The additional charge for the disposition of these facilities resulted from a reassessment of the proceeds expected to be realized on the dispositions of $14 million and additional asset write-offs of $1 million. We also recorded a $3 million reversal of a reserve in 1998, originally recorded in 1997, related to the closure of our Perry, Ga., flat glass plant. At Dec. 31, 1999, $40 million of reserves related to the Asian glass restructuring program remained. These amounts were paid out in 2000 upon the completion of the disposition of our Asian glass interests. Commitments and Contingent Liabilities, including Environmental Matters 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 money damages are sought. See Note 10, "Commitments and Contingent Liabilities," for an expanded description of certain of these lawsuits. As discussed in Note 10, except with respect to any PPG contribution arising out of a possible voluntary settlement of asbestos claims, the amount of which cannot be predicted, 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, results of operations or liquidity. 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 not discounted. As of Dec. 31, 2000 and 1999, PPG had reserves for environmental contingencies totaling $84 million and $82 million, respectively. Pre-tax charges against income for environmental remediation costs in 2000, 1999 and 1998 totaled $18 million, $10 million and $10 million, respectively, and are 25 Management's Discussion and Analysis included in "Other charges" in the statement of income. Cash outlays related to such environmental remediation aggregated $16 million, $22 million and $16 million in 2000, 1999 and 1998, respectively. Management anticipates that the resolution of the Company's environmental contingencies, which will occur over an extended period of time, will not result in future annual charges against income that are significantly greater than those recorded in 2000. It is possible, however, that technological, regulatory and enforcement developments, the results of environmental studies and other factors could alter this expectation. 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. In addition to the amounts currently reserved, the Company may be subject to loss contingencies related to environmental matters estimated to be as much as $200 million to $400 million, which range is unchanged from the prior year end. Such unreserved losses are reasonably possible but are not currently considered to be probable of occurrence. Although insurers and other third parties may cover a portion of these costs, to the extent they are incurred, any potential recovery is not included in this unreserved exposure to future loss. The Company's environmental contingencies are expected to be resolved over an extended period of time. Although the unreserved exposure to future loss relates to all sites, a significant portion of such exposure involves three operating plant sites. Initial remedial actions are occurring at these sites. Studies to determine the nature of the contamination are reaching completion and the need for additional remedial actions, if any, is presently being evaluated. The loss contingencies related to the remaining portion of such unreserved exposure include significant unresolved issues such as the nature and extent of contamination, if any, at sites and the methods that may have to be employed should remediation be required. With respect to certain waste sites, the financial condition of any other potentially responsible parties also contributes to the uncertainty of estimating PPG's final costs. Although contributors of waste to sites involving other potentially responsible parties may face governmental agency assertions of joint and several liability, in general, final allocations of costs are made based on the relative contributions of wastes to such sites. PPG is generally not a major contributor to such sites. The impact of evolving programs, such as natural resource damage claims, industrial site reuse initiatives and state voluntary remediation programs, also adds to the present uncertainties with regard to the ultimate resolution of this unreserved exposure to future loss. The Company's assessment of the potential impact of these environmental contingencies is subject to considerable uncertainty due to the complex, ongoing and evolving process of investigation and remediation, if necessary, of such environmental contingencies. A major customer of one of the Company's Asian coatings joint ventures is experiencing financial difficulties. Should this customer be unable to pay the amounts owed to our investee or cease operations, our loss would be limited to the value of the Company's investment in the joint venture which was approximately $20 million at Dec. 31, 2000. Impact of Inflation PPG's financial statements are prepared on the historical cost basis, which does not completely account for the effects of inflation. In 2000, the negative effects of inflation, including the impact of higher natural gas costs, were substantially offset in the aggregate by the impact of higher selling prices in our glass and chemicals businesses and manufacturing efficiencies in all of our businesses. In 1999, the decline in selling prices and negative effects of inflation on our production costs were partially offset by improved manufacturing efficiencies. In 1998, the overall decline in selling prices was partially offset by improved manufacturing efficiencies and the overall positive impacts of lower raw material and other production costs. While inflationary and market pressures on costs are expected to be experienced in 2001, we anticipate that ongoing improvements in manufacturing efficiencies and increases in selling prices for certain products will mitigate the negative effect of inflation on 2001 operating income to a significant extent. Financial Resources, Capital Spending During the past three years, we continued to have sufficient financial resources to meet operating requirements, to fund our capital spending, share repurchase programs and pension contributions, and to pay increased dividends to shareholders. Cash from operating activities was $870 million in 2000, $902 million in 1999 and $942 million in 1998. Dividends paid to shareholders totaled $276 million in 2000, $264 million in 1999 and $252 million in 1998. During 2000, 1999 and 1998, the Company repurchased approximately 5.8 million, 1.2 million and 2.1 million shares of common stock at a cost of $234 million, $68 million and $122 million, respectively, under various share repurchase programs. The program initiated in November 1998 authorized the repurchase of 10 million shares of common stock. As of Dec. 31, 2000, 9.0 million shares of common stock had been repurchased under this program at a cost of $416 million. In October 2000, we authorized a program to repurchase an additional 10 million shares of common stock which is to commence once the 1998 repurchase program is complete. The repurchase of common stock was financed principally by cash from operations and proceeds from long-term debt. Additional shares were repurchased from the PPG Employee Savings Plan. 26 Management's Discussion and Analysis In 1999, long-term debt was increased principally by the issuance of $800 million of notes and debentures at rates ranging from 6.75% to 7.40%. The proceeds from the issuance of the notes were used to fund acquisitions and for general corporate purposes, including the repayment of U.S. commercial paper borrowings. Capital spending in 2000 totaled $676 million, compared with $1,833 million in 1999 and $877 million in 1998. This spending related to business acquisitions totaling $115 million, $1,343 million and $390 million, in 2000, 1999 and 1998, respectively, modernization and productivity improvements, expansion of existing businesses, and environmental control projects. Capital spending in 2000 also included $83 million for marketable securities relating to the deferred compensation plan. Capital spending, excluding acquisitions and marketable securities, is expected to total about $400 million during 2001. We periodically review our array of businesses in comparison to our overall strategic or performance objectives. As part of this review, we routinely acquire or divest of certain businesses. During 2001, we anticipate that any acquisitions completed will be funded through a combination of cash generated from operations or from the sale of other businesses and, to a lesser extent, external funding sources. The ratio of total debt, including capital leases, to total debt and equity was 49% and 47% at Dec. 31, 2000 and 1999, respectively. Cash from operations and the Company's debt capacity are expected to continue to be sufficient to fund capital spending, dividend payments, share repurchases and operating requirements. See Note 5, "Debt and Bank Credit Agreements and Leases," for details regarding the use and availability of committed and uncommitted lines of credit. In addition to the lines of credit, the Company may issue up to $500 million aggregate principal amount of debt securities under a shelf registration statement filed with the Securities and Exchange Commission (SEC) in July 1999. Conversion to the Euro On Jan. 1, 1999, eleven of the member countries of the European Monetary Union converted from their sovereign currencies to a common currency, the euro. At that time, fixed conversion rates between the legacy currencies and the euro were set. The legacy currencies will remain legal tender through July 1, 2002. Beginning Jan. 1, 2002, euro-denominated currency will be issued. No later than July 1, 2002, the participating countries will withdraw all bills and coins so that their legacy currencies will no longer be considered legal tender. PPG has identified and substantially addressed the significant issues that may have resulted from the euro conversion. These issues include increased competitive pressures from greater price transparency, changes to information systems to accommodate various aspects of the new currency and exposure to market risk with respect to financial instruments. The impact on PPG's operating results and financial condition from the conversion to the euro has not been, and is not expected to be, material. Forward-Looking Statements The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of the Company. Management's Discussion and Analysis and other sections of this Annual Report contain forward-looking statements that reflect the Company's current views with respect to future events and financial performance. Forward-looking statements are identified by the use of the words "aim," "believe," "expect," "anticipate," "intend," "estimate" and other expressions that indicate future events and trends. Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our reports to the SEC. Also, note the following cautionary statements. Many factors could cause actual results to differ materially from the Company's forward-looking statements. Among these factors are increasing price and product competition by foreign and domestic competitors, fluctuations in the cost and availability of raw materials, the ability to maintain favorable supplier relationships and arrangements, economic and political conditions in international markets, the ability to penetrate existing, developing and emerging foreign and domestic markets, which also depends on economic and political conditions, foreign exchange rates and fluctuations in those rates. Further, it is not possible to predict or identify all such factors. Consequently, while the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. The consequences of material differences in the results as compared to those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on the Company's consolidated financial condition, operations or liquidity. Market Risk PPG is exposed to certain market risks arising from transactions that are entered into in the normal course of business. The Company may enter into derivative financial 27 Management's Discussion and Analysis instrument transactions in order to manage or reduce this market risk. PPG's policies do not permit active trading of, or speculation in, derivative financial instruments. PPG generates revenues and costs that are subject to fluctuations due to changes in foreign currency exchange rates when transactions are denominated in currencies other than the functional currency. Since the Company manufactures and sells its products in a number of locations around the world, it has a revenue and cost base that is diversified over a number of different currencies, which serves to counterbalance partially its foreign currency transaction risk. PPG manages its foreign currency transaction risk to minimize the volatility of cash flows caused by currency fluctuations by forecasting foreign currency- denominated cash flows of each subsidiary for a 12-month period and aggregating these cash inflows and outflows in each currency to determine the overall net transaction exposures. The expanding use of the euro has reduced our transaction risk because cash flows between our businesses in the eleven Euroland countries are now occurring, effectively, in one currency. Decisions on whether to use derivative financial instruments to hedge the net transaction exposures are made based on the amount of those exposures, by currency, and an assessment of the near-term outlook for each currency. The Company's policy permits the use of foreign currency forward and option contracts to hedge up to 70% of its anticipated net foreign currency cash flows over the next 12-month period. By borrowing in local currencies PPG also reduces its exposures to currency fluctuations. The sales, costs, assets and liabilities of our non-U.S. operations must be reported in U.S. dollars in order to prepare consolidated financial statements which gives rise to translation risk. The Company monitors its exposure to translation risk and purchases option contracts to hedge its exposure, as deemed appropriate. The fair value of foreign currency contracts outstanding as of Dec. 31, 2000 and 1999 was not material. The market value of such contracts has a high correlation to the price changes in the currencies of the related hedged transactions. The potential reduction in PPG's future earnings resulting from adverse changes in the exchange rates of its outstanding foreign currency hedge contracts of 10% for European currencies and 20% for Asian and South American currencies would have totaled approximately $2 million, $9 million and $12 million as of Dec. 31, 2000, 1999 and 1998, respectively. In addition, PPG had foreign currency-denominated debt of $554 million and $598 million as of Dec. 31, 2000 and 1999, respectively. A weakening of the U.S. dollar relative to this foreign currency-denominated debt of 10% for debt denominated in European currencies and 20% for debt denominated in Asian and South American currencies would have resulted in unrealized translation losses of approximately $76 million, $75 million and $43 million as of Dec. 31, 2000, 1999 and 1998, respectively. The Company manages its interest rate risk in order to balance its exposure between fixed and variable rates while attempting to minimize its interest costs. Generally, the Company maintains variable interest rate debt at a level of 25% to 50% of total borrowings. PPG principally manages its interest rate risk by retiring and issuing debt from time to time. To a limited extent, PPG manages its interest rate risk through the use of interest rate swaps. As of Dec. 31, 2000 and 1999, the fair value of interest rate swaps was not material. A 10% increase in interest rates in North America and Europe and a 20% increase in interest rates in Asia and South America would have affected PPG's variable rate debt obligations by increasing interest expense by approximately $9 million, $6 million and $3 million as of Dec. 31, 2000, 1999 and 1998, respectively. Further, a 10% reduction in interest rates would have increased the present value of the Company's fixed rate debt by approximately $84 million and $93 million as of Dec. 31, 2000 and 1999, respectively. Such changes would not have had a material effect on PPG's earnings or cash flows. The Company enters into commodity swap and option contracts to reduce its exposure to fluctuations in prices for natural gas. The fair value of these contracts as of Dec. 31, 2000 was $62 million. The fair value of the open contracts as of Dec. 31, 1999 was immaterial. As a result of a 10% reduction in the price of natural gas, the Company would have experienced potential losses in the fair value of the underlying commodity swap and option contracts as of Dec. 31, 2000, 1999 and 1998 of approximately $12 million, $0.1 million and $3 million, respectively. 28 Business Segment Information Segment Organization and Products PPG is a multinational manufacturer with three reportable segments: coatings, glass and chemicals. The Company's segments are organized based on differences in products. The glass and fiber glass operations have been aggregated into a single reportable segment. The coatings segment supplies a variety of protective and decorative coatings and finishes along with adhesives, sealants and metal pretreatment products for automotive original equipment and aftermarket refinish, aerospace, industrial, packaging and architectural applications. In addition to specific products, the coatings segment supplies technical expertise, engineering and purchasing services to the automotive original, industrial and aerospace portions of the business. The glass segment supplies flat glass and continuous-strand fiber glass for residential and commercial construction, automotive original and replacement markets and industrial applications. The chemicals segment supplies chlor-alkali and specialty chemicals products. The primary chlor-alkali products are chlorine, caustic soda, vinyl chloride monomer, chlorinated solvents and chlorinated benzenes. The primary specialty chemicals products are Transitions(R) lenses, optical monomers, silicas and fine chemicals. Production facilities and markets for the coatings and glass segments are predominantly in North America and Europe, while the chemicals segment operates primarily in North America. Our businesses are also pursuing opportunities to develop markets in Asia and South America. Each of the businesses in which PPG is engaged is highly competitive. However, the diversification of product lines and worldwide markets served tends to minimize the impact on total sales and earnings of changes in demand for a particular product line or in a particular geographic area. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company allocates resources to segments and evaluates the performance of segments based upon reported segment income before interest expense--net, income taxes and minority interest. Substantially all corporate administrative expenses are allocated to the segments. Net periodic pension income and expense is allocated to the segments; however, prepaid pension assets for defined benefit plans that cover certain U.S. employees are not allocated to the segments and are included in corporate assets. Intersegment sales and transfers are recorded at selling prices that approximate market prices.
- ----------------------------------------------------------------------------------------------------------------------------------- (Millions) Consolidated Segments Coatings(1) Glass(2) Chemicals Corporate(3) Totals - ----------------------------------------------------------------------------------------------------------------------------------- 2000 Net sales to external customers $4,658 $2,350 $1,621 $ -- $8,629 - ----------------------------------------------------------------------------------------------------------------------------------- Intersegment net sales 3 1 11 (15) -- - ----------------------------------------------------------------------------------------------------------------------------------- Total net sales $4,661 $2,351 $1,632 $ (15) $8,629 =================================================================================================================================== Operating income (loss) $ 685 $ 377 $ 174 $ (54) $1,182 - ----------------------------------------------------------------------------------------------------------------------------------- Interest--net (165) - ----------------------------------------------------------------------------------------------------------------------------------- Income before income taxes and minority interest $1,017 =================================================================================================================================== Depreciation and amortization $ 193 $ 140 $ 95 $ 19 $ 447 - ----------------------------------------------------------------------------------------------------------------------------------- Share of net earnings in equity affiliates $ 5 $ 25 $ 3 $ 6 $ 39 - ----------------------------------------------------------------------------------------------------------------------------------- Segment assets(4) $4,592 $1,791 $1,221 $1,521 $9,125 - ----------------------------------------------------------------------------------------------------------------------------------- Investments in equity affiliates $ 24 $ 106 $ 29 $ 13 $ 172 - ----------------------------------------------------------------------------------------------------------------------------------- Expenditures for long-lived assets $ 240 $ 140 $ 79 $ 37 $ 496 ================================================================================================================================== 1999 Net sales to external customers $4,266 $2,228 $1,501 $ -- $7,995 - ----------------------------------------------------------------------------------------------------------------------------------- Intersegment net sales 3 1 8 (12) -- - ----------------------------------------------------------------------------------------------------------------------------------- Total net sales $4,269 $2,229 $1,509 $ (12) $7,995 ================================================================================================================================== Operating income $ 545 $ 363 $ 177 $ 12 $1,097 - ----------------------------------------------------------------------------------------------------------------------------------- Interest--net (124) - ----------------------------------------------------------------------------------------------------------------------------------- Income before income taxes and minority interest $ 973 ================================================================================================================================== Depreciation and amortization $ 157 $ 149 $ 91 $ 22 $ 419 - ----------------------------------------------------------------------------------------------------------------------------------- Share of net earnings in equity affiliates $ 3 $ 14 $ 3 $ 8 $ 28 - ----------------------------------------------------------------------------------------------------------------------------------- Segment assets(4) $4,451 $1,728 $1,252 $1,483 $8,914 - ----------------------------------------------------------------------------------------------------------------------------------- Investments in equity affiliates $ 21 $ 87 $ 33 $ 54 $ 195 - ----------------------------------------------------------------------------------------------------------------------------------- Expenditures for long-lived assets $1,415 $ 144 $ 125 $ 54 $1,738 ==================================================================================================================================
(continued on next page) 29 Business Segment Information
(continued) - ----------------------------------------------------------------------------------------------------------------------------------- (Millions) Consolidated Segments Coatings(1) Glass(2) Chemicals Corporate(3) Totals - ----------------------------------------------------------------------------------------------------------------------------------- 1998 - ----------------------------------------------------------------------------------------------------------------------------------- Net sales to external customers $3,640 $2,516 $1,595 $ -- $7,751 - ----------------------------------------------------------------------------------------------------------------------------------- Intersegment net sales 2 -- 9 (11) -- - ----------------------------------------------------------------------------------------------------------------------------------- Total net sales $3,642 $2,516 $1,604 $ (11) $7,751 ================================================================================================================================== Operating income $ 565 $ 459 $ 354 $ 14 $1,392 - ----------------------------------------------------------------------------------------------------------------------------------- Interest--net (98) - ----------------------------------------------------------------------------------------------------------------------------------- Income before income taxes and minority interest $1,294 ================================================================================================================================= Depreciation and amortization $ 111 $ 158 $ 88 $ 26 $ 383 - ----------------------------------------------------------------------------------------------------------------------------------- Share of net earnings in equity affiliates $ 1 $ 14 $ 2 $ 13 $ 30 - ----------------------------------------------------------------------------------------------------------------------------------- Segment assets(4) $3,047 $1,720 $1,187 $1,433 $7,387 - ----------------------------------------------------------------------------------------------------------------------------------- Investments in equity affiliates $ 16 $ 74 $ 31 $ 55 $ 176 - ----------------------------------------------------------------------------------------------------------------------------------- Expenditures for long-lived assets $ 580 $ 167 $ 97 $ 22 $ 866 =================================================================================================================================
- ------------------------------------------------------------------------------------------------------- (Millions) Geographic Information 2000 1999 1998 - ------------------------------------------------------------------------------------------------------- Net sales(5) United States $ 5,754 $ 5,358 $ 5,193 ----------------------------------------------------------------------------------------------------- Europe 1,599 1,569 1,656 ----------------------------------------------------------------------------------------------------- Canada 595 542 486 ----------------------------------------------------------------------------------------------------- Other 681 526 416 - ------------------------------------------------------------------------------------------------------- Total $ 8,629 $ 7,995 $ 7,751 - ------------------------------------------------------------------------------------------------------- Operating income United States(6) $ 934 $ 888 $ 1,063 ----------------------------------------------------------------------------------------------------- Europe(7) 185 121 244 ----------------------------------------------------------------------------------------------------- Canada 74 63 83 ----------------------------------------------------------------------------------------------------- Other 43 13 (12) - ------------------------------------------------------------------------------------------------------- Total $ 1,236 $ 1,085 $ 1,378 - ------------------------------------------------------------------------------------------------------- Interest -- net (165) (124) (98) - ------------------------------------------------------------------------------------------------------- Other unallocated corporate (expense) income -- net (54) 12 14 - ------------------------------------------------------------------------------------------------------- Income before income taxes and minority interest $ 1,017 $ 973 $ 1,294 =======================================================================================================
(continued on next page) 30 Business Segment Information
(continued) - ------------------------------------------------------------------------------------------------------- (Millions) Geographic Information 2000 1999 1998 - ------------------------------------------------------------------------------------------------------- Long-lived assets(8) United States $ 3,862 $ 3,676 $ 3,064 ----------------------------------------------------------------------------------------------------- Europe 1,031 1,082 825 ----------------------------------------------------------------------------------------------------- Canada 211 235 191 ----------------------------------------------------------------------------------------------------- Other 553 545 367 - ------------------------------------------------------------------------------------------------------- Total $ 5,657 $ 5,538 $ 4,447 ======================================================================================================= Identifiable assets United States(9) $ 5,977 $ 5,625 $ 4,889 ----------------------------------------------------------------------------------------------------- Europe 1,752 1,943 1,505 ----------------------------------------------------------------------------------------------------- Canada 366 390 323 ----------------------------------------------------------------------------------------------------- Other 1,030 956 670 - ------------------------------------------------------------------------------------------------------- Total $ 9,125 $ 8,914 $ 7,387 =======================================================================================================
Net sales were adjusted in the fourth quarter of 2000 to reclassify outgoing freight costs from a deduction in arriving at net sales to an expense in cost of sales as required by Emerging Issues Task Force 00-10, "Accounting for Shipping and Handling Fees and Costs." Also, as previously announced in 2000, the aircraft transparency business of the glass segment was combined with the aerospace coatings and sealants business as part of the coatings segment. Net sales and operating income have been restated to reflect these changes. (1) Coatings segment income in 1999 includes a pre-tax restructuring charge of $41 million related to the integration of the packaging coatings acquisition and on-going cost reduction efforts throughout our coatings businesses. Also included in 1999 coatings segment income is a $40 million pre-tax charge for purchased in-process research and development and a $23 million pre-tax charge for the fair-market-value adjustment of acquired inventories that have been sold. Coatings segment income in 1998 includes a pre-tax restructuring charge of $9 million related to cost reduction initiatives. (2) Glass segment income in 2000 includes pre-tax restructuring and one-time integration costs of $6 million related to PPG Auto Glass. Glass segment income in 1998 includes a pre-tax gain of $85 million related to the sale of the European flat and automotive glass businesses and pre-tax restructuring charges (credit) of $15 million, $9 million, and $(3) million, respectively, related to the disposition of equity interests in two Asian float glass plants and two Asian downstream fabrication facilities, cost reduction initiatives and the reversal of a reserve related to the closure of the Perry, Ga., plant. (3) Corporate intersegment net sales represent intersegment net sales eliminations. Corporate income (loss) represents unallocated corporate income and expenses. The corporate loss in 2000 includes a pre-tax charge of $39 million representing the write-off of an equity investment in Pittsburgh Corning Corporation, which has filed for reorganization under the federal bankruptcy code. Also included in 2000 is a pre-tax charge of $14 million due to an other than temporary decline in the market value of an investment in marketable equity securities, previously recorded net of tax as an unrealized loss in other comprehensive loss. (4) Segment assets are the total assets used in the operation of each segment. Corporate assets are principally cash and cash equivalents, income tax assets and prepaid pensions. See Note 9. In 1998, corporate assets also included the Company's headquarters complex, which was sold in July 1999. (5) Net sales to external customers are attributed to individual countries based upon the location of the operating unit shipping the product. (6) Operating income in 2000 includes pre-tax charges of $39 million, $14 million and $6 million, respectively, related to the write-off of an equity investment in Pittsburgh Corning Corporation which has filed for reorganization under the federal bankruptcy code, an other than temporary decline in the market value of an investment in marketable equity securities, and restructuring and one-time integration costs related to PPG Auto Glass. Operating income in 1999 includes pre-tax charges (credit) of $40 million, $18 million, $6 million and $(5) million, respectively, related to purchased in-process research and development, cost reduction initiatives, the fair-market-value adjustment of acquired inventories that have been sold and the reversal of previously established restructuring reserves. Operating income in 1998 includes pre-tax restructuring charges (credit) of $15 million, $14 million, and $(3) million, respectively, related to the disposition of equity interests in two Asian float glass plants and two Asian downstream fabrication facilities, cost reduction initiatives and the reversal of a reserve related to the Perry, Ga., plant. (7) Operating income in 1999 includes pre-tax charges of $29 million and $13 million, respectively, related to cost reduction initiatives and the fair- market-value adjustment of acquired inventories that have been sold. Operating income in 1998 includes a pre-tax gain of $85 million related to the sale of the European flat and automotive glass businesses and a pre-tax restructuring charge of $4 million related to cost reduction initiatives. (8) Long-lived assets include property, goodwill and identifiable intangible assets, net of accumulated depreciation and amortization, and other assets except for non-current trade and notes receivable. (9) Includes corporate assets which are principally cash and cash equivalents, income tax assets and prepaid pensions. In 1998, corporate assets also included the Company's headquarters complex, which was sold in July 1999. 31 Notes 1. Summary of Significant Accounting Policies Principles of consolidation The consolidated financial statements include the accounts of PPG Industries, Inc. (PPG or the Company), and all significant subsidiaries, both U.S. and non- U.S., of which we own more than 50% of the voting stock. Investments in companies of which we own 20% to 50% of the voting stock and/or have the ability to exercise significant influence over operating and financial policies of the investee are carried at equity and our share of the earnings or losses of such equity affiliates is included in the statement of income. Transactions between PPG and its subsidiaries are eliminated in consolidation. Use of estimates in the preparation of financial statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of income and expenses during the reporting period. Actual outcomes could differ from those estimates. Revenue recognition Revenue from sales is recognized when title to inventory passes to the customer. Foreign currency translation For all significant non-U.S. operations, the functional currency is the local currency. Assets and liabilities of those operations are translated into U.S. dollars using year-end exchange rates; income and expenses are translated using the average exchange rates for the reporting period. Translation adjustments are deferred in accumulated other comprehensive income (loss), a separate component of shareholders' equity. Inventories Most U.S. and certain non-U.S. inventories are stated at cost, using the last- in, first-out (LIFO) method, which does not exceed market. Other inventories are stated at the lower of cost or market. We determine cost using either average or standard factory costs, which approximate actual costs, excluding certain fixed costs such as depreciation and property taxes. Property Property is recorded at cost. We compute depreciation by the straight-line method based on the estimated useful lives of depreciable assets. Additional expense is recorded when facilities or equipment are subject to abnormal economic conditions or obsolescence. Significant improvements that add to productive capacity or extend the lives of properties are capitalized. Costs for repairs and maintenance are charged to expense as incurred. When property is retired or otherwise disposed of, the cost and related depreciation are removed from the accounts and any related gains or losses are included in income. Amortization of the cost of capitalized leased assets is included in depreciation expense. Identifiable intangible assets and goodwill Identifiable intangible assets acquired in business combinations accounted for by the purchase method are recorded based upon fair market value at the date of acquisition. Identifiable intangible assets are amortized on a straight-line basis over their estimated useful lives (3 to 40 years) and primarily consist of core developed technology, trademarks and tradenames and customer lists. Goodwill, representing the excess of the cost over the net tangible and identified intangible assets of acquired businesses, is stated at cost and amortized on a straight-line basis over the estimated future periods to be benefited, principally 40 years. Identified intangible assets and goodwill are reviewed for impairment whenever events or circumstances indicate that the carrying amounts may not be recoverable. Employee Stock Ownership Plan We account for our employee stock ownership plan (ESOP) in accordance with Statement of Position (SOP) No. 93-6 for PPG common stock purchased after Dec. 31, 1992 (new ESOP shares). As permitted by SOP No. 93-6, shares purchased prior to Dec. 31, 1992 (old ESOP shares), continue to be accounted for in accordance with SOP No. 76-3. ESOP shares are released and allocated to participants based upon debt service paid during the year on loans used by the ESOP to purchase the shares. These loans are a combination of borrowings guaranteed by PPG and borrowings directly from PPG. Borrowings from third parties are included in debt in our balance sheet (see Note 5). Unearned compensation, reflected as a reduction of shareholders' equity, principally represents the unpaid balance of such ESOP loans. Dividends received by the ESOP are used to pay debt service. For old ESOP shares, compensation expense is equal to amounts contributed, or committed to be contributed, to the ESOP by the Company less the ESOP interest expense element of such contributions. Dividends on old ESOP shares are deducted from retained earnings. Old ESOP shares are considered to be outstanding in computing earnings per share. For new ESOP shares, compensation expense is equal to the Company's matching contribution (see Note 13). Dividends on released new ESOP shares are deducted from retained earnings, and dividends on unreleased shares are reported as a reduction of debt or accrued interest. Only new ESOP shares that have been released are considered outstanding in computing earnings per share. 32 Notes Cash equivalents Cash equivalents are highly liquid investments (valued at cost, which approximates fair value) acquired with an original maturity of three months or less. Derivative financial instruments Derivative financial instruments are used to hedge a portion of the Company's foreign currency and interest rate exposures. Income and expense are recorded in the same caption as that arising from the related asset or liability being hedged. Premiums paid on option contracts have been amortized over the lives of the contracts. Gains and losses related to hedges of firm commitments are deferred and recognized over the expected remaining lives of the related assets and liabilities. Unrealized gains and losses from option contracts that hedge anticipated transactions are also deferred and recognized in income in the same period as the hedged transactions. Unrealized gains and losses from forward contracts that hedge anticipated transactions are not deferred. The Company also uses commodity swap and option contracts to reduce its exposure to fluctuations in prices for natural gas. Gains and losses on these contracts are deferred and recognized in income in the same period as the hedged transactions as an adjustment to cost of sales. The fair value of foreign currency derivatives instruments outstanding as of Dec. 31, 2000 was not material and the fair value of commodity contracts outstanding as of Dec. 31, 2000 was $62 million. The fair values of foreign currency and commodity contracts outstanding as of Dec. 31, 1999 were not material. The Company does not enter into derivative transactions for speculative purposes and therefore holds no derivative instruments for trading purposes. Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," is effective for the Company as of Jan. 1, 2001. SFAS No. 133 will require the Company to recognize all derivatives as either assets or liabilities at fair value, most of which are currently not recorded on the balance sheet. The accounting for changes in the fair value of a derivative will depend on the use of the derivative. To the extent that a derivative is effective as a hedge of a future exposure to changes in value, the fair value of the derivative will be deferred in other comprehensive income. Any portion considered to be ineffective will be reported in earnings immediately. As of Jan. 1, 2001, adoption of these new accounting standards will result in an increase in current assets, current liabilities and other comprehensive income of $70 million, $26 million and $43 million, respectively, with a cumulative after-tax increase in net earnings of less than $1 million. Reclassifications Certain amounts in the 1999 and 1998 financial statements have been reclassified to be consistent with the 2000 presentation. In the fourth quarter of 2000 we changed our policy for classifying outgoing freight costs from a deduction in arriving at net sales to an expense in cost of sales as required by Emerging Issues Task Force 00-10, "Accounting for Shipping and Handling Fees and Costs." As a result, we have restated sales and cost of sales by an equal amount for each prior period presented. 2. Acquisitions, Business Divestitures and Realignments During the past three years, we have acquired a number of businesses, all of which were recorded using the purchase method of accounting. Accordingly, the results of operations of the acquired companies have been included in our consolidated results from their respective acquisition dates. In July 2000, PPG and Apogee Enterprises, Inc. (Apogee) combined their U.S. automotive replacement glass distribution businesses, creating a new entity, PPG Auto Glass L.L.C. (PPG Auto Glass). PPG contributed net assets with a basis of $39 million and has a 66 percent ownership interest in PPG Auto Glass. Apogee contributed net assets with a fair value of $31 million in exchange for its 34 percent ownership interest. In February 2000, we acquired Monarch Paint Co., an architectural coatings producer. Additionally, throughout 2000, we acquired several smaller businesses. The preliminary purchase price allocations for the 2000 acquisitions are subject to adjustment in 2001 when finalized. In each of the 2000 acquisitions, the preliminary allocation resulted in an excess of purchase price over the fair value of net assets acquired being allocated to goodwill, which is being amortized on a straight-line basis over 40 years. In October 1999, we acquired a majority interest in privately held powder coatings maker Bellaria S.p.A. In July 1999, we acquired the global automotive refinish, automotive and industrial coatings businesses of Imperial Chemical Industries PLC (the ICI business), except for the businesses in the Indian subcontinent, for approximately $677 million and aerospace coatings and sealant maker PRC-DeSoto International, Inc. (PRC-DeSoto) from Akzo Nobel N.V. (Akzo) for approximately $524 million. Although included as part of the original purchase price, the majority of the ICI business in Asia was not acquired until the fourth quarter of 1999 and the PRC-DeSoto and ICI businesses in France were not acquired until November 1999. We also acquired the U.S. architectural coatings business of Australian based Wattyl, Ltd. and we completed the acquisition of the German-based specialty coatings business of Imperial Chemical Industries PLC in July 1999. In February 1999, we acquired the commercial transport refinish coatings business of Sigma Coatings B.V., a subsidiary of Belgian refiner PetroFina S.A. Finally, in January 1999, we completed the acquisition of the remaining portion of the global packaging coatings business formerly owned by Courtaulds plc (Courtaulds) from Akzo and the purchase of certain leased 33 Notes assets associated with our 1998 acquisition of the technical coatings business of Orica Ltd. (Orica). In connection with the acquisitions of PRC-DeSoto and the ICI business, a portion of the purchase price for each acquisition was allocated to purchased in-process research and development (IPR&D) which totaled $21 million and $19 million, respectively. The amounts attributed to IPR&D were expensed at the dates of acquisition as the IPR&D projects had not reached technological feasibility nor had any alternative future use. The IPR&D projects, which totaled more than 40, primarily related to developing improved environmentally compliant product offerings, such as high solids (low solvents) or waterborne products, were valued through the application of the income approach by independent valuation specialists. The income approach includes an analysis of the markets, projected net cash flows, and technical and commercial risks associated with achieving such cash flows. With respect to the IPR&D projects of PRC-DeSoto and the ICI business, the estimated cash flows were projected over periods ranging from ten to twenty years after the date of the acquisitions, and were discounted at rates ranging from 15% to 30% (the average discount rate utilized was approximately 20%). The discount rates were selected on a project-by-project basis and were based on the Company's weighted average cost of capital adjusted for the risks associated with the estimated growth, profitability, and technical and commercial risks of the acquired IPR&D projects. The nature of the efforts to develop the acquired IPR&D into commercially viable products consists principally of planning, designing and testing activities necessary to determine that the products can meet market expectations, including functionality, technical and performance requirements and specifications. The financial assumptions utilized in the valuation of the IPR&D are consistent with the acquired businesses' historical results, PPG's specific experience and expectations, and general industry levels. Anticipated cost savings and other synergies were not included in the valuation analysis of the IPR&D. The Company expects that the products incorporating the acquired technology will generally be completed and begin to generate cash flows over the three to twenty-four month period after the acquisitions. However, development of these technologies remains a significant risk due to the remaining effort to achieve technical viability, evolving customer markets, uncertain standards and performance specifications for new products, and significant competitive threats from numerous companies. The valuation of the acquired IPR&D also gave consideration to the stage of completion of the projects at the time of the acquisition and the degree to which the projects relied on prior, existing technology. With respect to the stage of completion, the PRC-DeSoto and the ICI business IPR&D projects were, on average, approximately 46% and 56% complete, respectively, at the dates of acquisition. Similarly, the IPR&D projects' degree of leverage from the applicable developed technologies was approximately 33% for PRC-DeSoto and 36% for the ICI business. During 2000 work continued on these projects. At Dec. 31, 2000, about half of the acquired projects had achieved technological feasibility and are being incorporated into products marketed to customers. Reprioritization of resources during the year has slowed the progress on a few of the acquired projects, while the remainder are progressing as expected. From September to December 1998, we completed the purchase of the Australian automotive refinish, automotive original equipment, coil, packaging and industrial coatings businesses of Orica and the U.S. architectural coatings business and a portion of the global packaging coatings business formerly owned by Courtaulds from Akzo. In January and February 1998, we acquired the assets of a U.S. automotive glass plant from Chrysler Corporation and the automotive coatings business of Helios-Lacke Bollig & Kemper GmbH & Co. KG of Germany. The cost of the acquisitions was $115 million in 2000, $1,343 million in 1999 and $390 million in 1998 plus the assumption of indebtedness of $1 million, $5 million and $11 million, respectively. Pro forma information reflecting the 2000 acquisitions is not presented as the impact would not be material. The following table reflects the results of our operations on a pro forma basis as if the 1999 and 1998 acquisitions had been completed on Jan. 1, 1998. The pro forma results of operations do not include 1999 after-tax charges of $33 million for IPR&D and $15 million for the fair- market-value adjustment of acquired inventories sold, both of which are associated with the 1999 acquisitions of the ICI business and PRC-DeSoto. The following unaudited pro forma information also excludes the effects of synergies and cost reduction initiatives directly related to all acquisitions.
(Millions, except per share amounts) 1999 1998 - -------------------------------------------------------------------------------- Net sales $8,416 $8,867 - -------------------------------------------------------------------------------- Earnings before interest, income taxes and minority interest $1,191 $1,469 - -------------------------------------------------------------------------------- Net income $ 597 $ 788 - -------------------------------------------------------------------------------- Earnings per common share $ 3.44 $ 4.45 - -------------------------------------------------------------------------------- Earnings per common share -- assuming dilution $ 3.40 $ 4.41 - --------------------------------------------------------------------------------
The pro forma financial information is not necessarily indicative of the operating results that would have occurred had the acquisitions been consummated as of the dates indicated, nor are they necessarily indicative of future operating results. In July 1999, we completed the sale of our Pittsburgh headquarters complex for $186 million and concurrently entered into a long-term operating lease for the portion of the complex occupied by the Company. The pre-tax gain of $7 million on the sale was deferred and will be amortized over the term of the long-term operating lease. In July 1998, we completed the sale of our European flat and automotive glass businesses, that had sales of $271 million in 1998, to Glaverbel S.A. of Brussels, Belgium, for $266 million in cash 34 Notes plus the assumption of certain indebtedness, which resulted in a pre-tax gain of approximately $85 million. In August 1998, we sold the European decorative coatings business acquired in the 1997 Max Meyer acquisition. The selling price approximated the carrying value of the net assets sold. During 2000, we finalized restructuring plans for certain locations related to the integration of the ICI business and PRC-DeSoto. These restructuring plans were originally developed at the acquisition date (principally July 1999). The plans cover severance benefits for 618 employees, as well as other costs, and resulted in an increase to goodwill of $24 million and a pre-tax charge of $1 million. As of Dec. 31, 2000, $15 million has been paid to 411 employees, and the remaining reserve of $10 million, which covers 207 employees and other exit costs, is expected to be utilized in 2001. During 2000, PPG Auto Glass accrued severance and other restructuring related costs of $10 million, resulting in an increase to goodwill of $6 million and a pre-tax charge of $4 million. In addition, PPG Auto Glass incurred one-time integration costs of $2 million. The restructuring plans include severance benefits for 133 employees and other exit costs. As of Dec. 31, 2000, $4 million has been paid, including $2 million to 100 employees. The remaining reserve of $6 million, which includes severance for 33 employees and other restructuring costs, is expected to be paid by mid-2001. In the fourth quarter of 2000, we took charges of $3 million related to work force reductions in our coatings business for 65 people. As of Dec. 31, 2000, $1 million has been paid to 24 people. The remaining reserve will be paid by mid- 2001. During 1999, we approved restructuring plans associated with the integration of the packaging coatings acquisitions and cost reduction activities across all of our businesses that resulted in pre-tax charges of $47 million. The components of the plans included severance benefits for 519 employees and estimated losses of $17 million on the disposal of a redundant European facility and the disposition of the assets of a U.S. coatings facility. As of Dec. 31, 2000, the asset dispositions are complete and $21 million has been paid under the plans to 372 employees and to cover other exit costs. Additionally, in 2000, severance reserves for 121 people totaling $5 million were reversed due to changes in estimates. At Dec. 31, 2000, the remaining reserves established in 1999 totaled $4 million for 26 employees and will be paid in early 2001. In 1999, we also recorded a $3 million reversal of a reserve originally recorded in 1997. During 1998, we recorded a pre-tax charge of $19 million in connection with a restructuring plan to reduce costs in our glass and coatings businesses. The components of the plan included severance benefits for 283 employees. During the years 2000, 1999 and 1998, $16 million was paid out under the restructuring plan and $3 million was reversed in 1999 and 1998 for amounts that will not be paid under the plan. In 1998, we also recorded an additional pre-tax charge of $15 million related to the disposition of our equity interests in two Asian float glass plants and two Asian downstream fabrication facilities. The additional charge for the disposition of these facilities resulted from a reassessment of the proceeds expected to be realized on the dispositions of $14 million and additional asset write-offs of $1 million. We also recorded a $3 million reversal of a reserve in 1998, originally recorded in 1997, related to the closure of our Perry, Ga., flat glass plant. At Dec. 31, 1999, $40 million of reserves related to the Asian glass restructuring program remained. These amounts were paid out in 2000 upon the completion of the disposition of our Asian glass interests. 3. Working Capital Detail
December 31 - ----------------------------------------------------------------------------- (Millions) 2000 1999 - ----------------------------------------------------------------------------- Receivables Customers $1,478 $1,489 --------------------------------------------------------------------------- Other 122 131 --------------------------------------------------------------------------- Allowance for doubtful accounts (37) (26) - ----------------------------------------------------------------------------- Total $1,563 $1,594 ============================================================================= Inventories(1) Finished products and work in process $ 807 $ 716 --------------------------------------------------------------------------- Raw materials 198 189 --------------------------------------------------------------------------- Supplies 116 111 - ----------------------------------------------------------------------------- Total $1,121 $1,016 ============================================================================= Accounts payable and accrued liabilities Trade creditors $ 764 $ 755 --------------------------------------------------------------------------- Accrued payroll 235 219 --------------------------------------------------------------------------- Other postretirement and pension benefits 72 64 --------------------------------------------------------------------------- Income taxes 12 26 --------------------------------------------------------------------------- Other 299 366 - ----------------------------------------------------------------------------- Total $1,382 $1,430 =============================================================================
(1) Inventories valued using the LIFO method comprised 65% and 63% of total gross inventory values at Dec. 31, 2000 and 1999, respectively. If the first-in, first-out method of inventory valuation had been used, inventories would have been $183 million and $164 million higher at Dec. 31, 2000 and 1999, respectively. 4. Property Detail
December 31 - ----------------------------------------------------------------------------- (Millions) 2000 1999 - ----------------------------------------------------------------------------- Property(1) Land and land improvements $ 303 $ 308 --------------------------------------------------------------------------- Buildings 1,076 1,058 --------------------------------------------------------------------------- Machinery and equipment 5,020 4,864 --------------------------------------------------------------------------- Other 371 348 --------------------------------------------------------------------------- Construction in progress 319 281 - ----------------------------------------------------------------------------- Total $7,089 $6,859 =============================================================================
(1) Interest capitalized in 2000, 1999 and 1998 was $16 million, $11 million and $9 million, respectively. 35 Notes 5. Debt and Bank Credit Agreements and Leases
December 31 - ----------------------------------------------------------------- (Millions) 2000 1999 - ----------------------------------------------------------------- 6-1/4% non-callable notes, due 2002 $ 100 $ 100 - ----------------------------------------------------------------- 6-3/4% non-callable notes, due 2004 299 299 - ----------------------------------------------------------------- 6-7/8% non-callable debentures, due 2005 100 100 - ----------------------------------------------------------------- 6-1/2% notes, due 2007 150 150 - ----------------------------------------------------------------- 7.05% notes, due 2009 298 298 - ----------------------------------------------------------------- 6-7/8% notes, due 2012 100 100 - ----------------------------------------------------------------- 7-3/8% notes, due 2016 149 149 - ----------------------------------------------------------------- 6-7/8% notes, due 2017 74 99 - ----------------------------------------------------------------- 7.4% notes, due 2019 199 199 - ----------------------------------------------------------------- 9% non-callable debentures, due 2021 148 148 - ----------------------------------------------------------------- ESOP notes(1) Fixed-rate notes, weighted average 8.5% 46 51 --------------------------------------------------------------- Variable-rate notes, weighted average 5.5% at Dec. 31, 2000 68 77 - ----------------------------------------------------------------- Various other debt, weighted average 5.5% at Dec. 31, 2000 54 54 - ----------------------------------------------------------------- Non-U.S. various other debt, weighted average 4.5% at Dec. 31, 2000 44 34 - ----------------------------------------------------------------- Capital lease obligations 10 10 - ----------------------------------------------------------------- Total 1,839 1,868 - ----------------------------------------------------------------- Less payments due within one year 29 32 - ----------------------------------------------------------------- Long-term debt $1,810 $1,836 =================================================================
(1) See Note 13 for discussion of ESOP borrowings. The fixed- and variable- rate notes mature in 2009 and require annual principal payments from 2001 to 2008. Aggregate maturities during the next five years are (in millions) $29 in 2001, $131 in 2002, $47 in 2003, $315 in 2004 and $118 in 2005. The Company has revolving credit agreements with credit lines totaling $1.2 billion. Of these credit lines, $800 million will expire in December 2001 and requires payment of annual fees equal to seven basis points on the unused portion of the lines. An additional $377 million of the Company's credit lines will expire in October 2001 and requires payment of annual fees equal to 7 1/2 basis points on the unused portion of the lines. These lines support our commercial paper programs in the United States, Europe and Canada. The remaining $23 million of credit lines, relating to a subsidiary, will expire in October 2001 and require payment of annual fees equal to 10 basis points on the unused portion of the line. PPG may cancel all or part of these credit agreements at any time without penalty or premium. At Dec. 31, 2000, we had used $22 million of these lines of credit. Our non-U.S. operations have other committed and uncommitted lines of credit totaling $40 million and $252 million, respectively, of which $13 million and $92 million, respectively, were used at Dec. 31, 2000. The committed lines of credit, which expire between 2001 and 2003, do not require significant commitment fees. The uncommitted lines of credit are subject to cancellation at any time and are not subject to any commitment fees. PPG is in compliance with the restrictive covenants under its various credit agreements, loan agreements and indentures. The Dec. 31, 2000 and 1999, balances for "Short-term debt and current portion of long-term debt" include, respectively, $947 million and $757 million of commercial paper and $185 million and $165 million of short-term notes. Of the $947 million in commercial paper, $382 million relates to our euro-denominated commercial paper program. The weighted-average interest rates of short-term borrowings as of Dec. 31, 2000 and 1999, were 6.4% and 5.0%, respectively. Interest payments in 2000, 1999 and 1998 totaled $195 million, $123 million and $121 million, respectively. Rental expense for operating leases was $120 million, $92 million and $75 million in 2000, 1999 and 1998, respectively. Minimum lease commitments for operating leases that have initial or remaining lease terms in excess of one year at Dec. 31, 2000, are (in millions) $48 in 2001, $38 in 2002, $28 in 2003, $22 in 2004, $19 in 2005 and $88 thereafter. 6. Financial Instruments Included in PPG's financial instrument portfolio are cash and cash equivalents, equity securities, Company-owned life insurance, derivative financial instruments and short- and long-term debt instruments. The most significant instrument, long-term debt (excluding capital lease obligations), had carrying and fair values totaling $1,829 million and $1,819 million, respectively, at Dec. 31, 2000. The corresponding amounts at Dec. 31, 1999, were $1,858 million and $1,794 million, respectively. The fair values of the other instruments approximated their carrying values, in the aggregate. The fair values of the debt instruments were based upon quoted market prices of the same or similar instruments or on discounted cash flows based on interest rates available to the Company for instruments of the same remaining maturities. 36 Notes 7. Earnings Per Common Share The earnings per common share calculations for the three years ended Dec. 31, 2000 are as follows:
- ------------------------------------------------------------------------------- (Millions, except per share amounts) 2000 1999 1998 - ------------------------------------------------------------------------------- Earnings per common share - ------------------------------------------------------------------------------- Net income $ 620 $ 568 $ 801 ----------------------------------------------------------------------------- Weighted average common shares outstanding 172.3 173.8 177.0 - ------------------------------------------------------------------------------- Earnings per common share $ 3.60 $ 3.27 $ 4.52 - ------------------------------------------------------------------------------- Earnings per common share -- assuming dilution Net income $ 620 $ 568 $ 801 ----------------------------------------------------------------------------- Weighted average common shares outstanding 172.3 173.8 177.0 ----------------------------------------------------------------------------- Effect of dilutive securities Stock options 0.1 0.5 0.6 --------------------------------------------------------------------------- Other stock compensation plans 1.2 1.2 1.1 ----------------------------------------------------------------------------- Potentially dilutive common shares 1.3 1.7 1.7 ----------------------------------------------------------------------------- Adjusted common shares outstanding 173.6 175.5 178.7 - ------------------------------------------------------------------------------- Earnings per common share -- assuming dilution $ 3.57 $ 3.23 $ 4.48 ===============================================================================
8. Income Taxes The following is a reconciliation of the statutory U.S. corporate federal income tax rate to the effective income tax rate.
- ------------------------------------------------------------------------------- (Percent of Pre-Tax Income) 2000 1999 1998 - ------------------------------------------------------------------------------- U.S. federal income tax rate 35.00% 35.00% 35.00% - ------------------------------------------------------------------------------- Changes in rate due to: State and local taxes -- U.S. 1.08 1.85 3.18 ----------------------------------------------------------------------------- Taxes on non-U.S. earnings net of related tax credits 2.41 3.52 0.95 ----------------------------------------------------------------------------- Other (2.24) (1.57) (3.13) - ------------------------------------------------------------------------------- Effective income tax rate 36.25% 38.80% 36.00% ===============================================================================
The following table gives details of income tax expense in the statement of income.
- ------------------------------------------------------------------------------- (Millions) 2000 1999 1998 - ------------------------------------------------------------------------------- Current income taxes U.S. federal $ 210 $ 310 $ 308 ----------------------------------------------------------------------------- Non-U.S. 85 87 97 ----------------------------------------------------------------------------- State and local -- U.S. 20 28 60 - ------------------------------------------------------------------------------- Total current 315 425 465 - ------------------------------------------------------------------------------- Deferred income taxes U.S. federal 39 (43) 6 ----------------------------------------------------------------------------- Non-U.S. 23 (2) (6) ----------------------------------------------------------------------------- State and local -- U.S. (8) (3) 1 - ------------------------------------------------------------------------------- Total deferred 54 (48) 1 - ------------------------------------------------------------------------------- Total $ 369 $ 377 $ 466 ===============================================================================
Net deferred income tax assets and liabilities as of Dec. 31, 2000 and 1999, are as follows:
- ----------------------------------------------------------------------------- (Millions) 2000 1999 - ----------------------------------------------------------------------------- Deferred income tax assets related to Employee benefits $321 $333 --------------------------------------------------------------------------- Environmental 28 32 --------------------------------------------------------------------------- Operating loss and other carryforwards 60 80 --------------------------------------------------------------------------- Inventories 35 35 --------------------------------------------------------------------------- Property 23 27 --------------------------------------------------------------------------- Restructuring 8 26 --------------------------------------------------------------------------- Intangibles 14 12 --------------------------------------------------------------------------- Other 47 42 --------------------------------------------------------------------------- Valuation allowance (42) (46) - ----------------------------------------------------------------------------- Total 494 541 - ----------------------------------------------------------------------------- Deferred income tax liabilities related to Property 406 406 --------------------------------------------------------------------------- Employee benefits 315 296 --------------------------------------------------------------------------- Intangibles 138 147 --------------------------------------------------------------------------- Other 25 38 - ----------------------------------------------------------------------------- Total 884 887 - ----------------------------------------------------------------------------- Deferred income tax liabilities -- net $390 $346 =============================================================================
In 2000, the overall effective tax rate was favorably impacted by an improvement in the regional mix of non-U.S. taxable earnings and a lower effective state tax rate. In addition, the rate impact of the write-off of an equity investment, a significant portion of which was not deductible for tax purposes, was offset by the recognition of a U.S. income tax benefit associated with the losses of exiting our Asian glass operations. 37 Notes The 1999 effective tax rate was higher due to the non-deductibility of certain purchased in-process research and development charges recorded in 1999. In July 1998, PPG recognized a gain from the sale of its European flat and automotive glass businesses, of which a considerable portion was capital, the tax on which was offset by a capital loss carryforward. This benefit from the realization of the capital loss in 1998 reduced the effective tax rate. At Dec. 31, 2000, subsidiaries of the Company had available net operating loss (NOL) carryforwards of approximately $196 million for income tax purposes, of which approximately $153 million has an indefinite expiration. The remaining $43 million expires between the years 2002 and 2010. A valuation allowance has been established for carryforwards where the ability to utilize them is uncertain. Income before income taxes of our non-U.S. operations for 2000, 1999 and 1998 was $280 million, $190 million and $273 million, respectively. No deferred U.S. income taxes have been provided on certain undistributed earnings of non-U.S. subsidiaries, which amounted to $875 million at Dec. 31, 2000 and $750 million at Dec. 31, 1999. These earnings are considered to be reinvested for an indefinite period of time or will be repatriated when it is tax effective to do so. It is not practicable to determine the deferred tax liability on these earnings. The Internal Revenue Service (IRS) has examined our U.S. federal income tax returns through 1993, and we have paid all tax claims. In addition the IRS has examined our U.S. federal income tax returns for the years 1994 through 1996. The final resolution of these returns is currently under appeal. The Company does not expect a significant loss from the resolution of the matters under appeal. Income tax payments in 2000, 1999 and 1998 totaled $319 million, $394 million and $385 million, respectively. 9. Pensions and Other Postretirement Benefits We have noncontributory defined benefit pension plans that cover certain employees worldwide. PPG also sponsors defined benefit plans that provide medical and life insurance benefits for certain active and retired U.S. and Canadian employees and dependents. The Company has the right to modify or terminate certain of these defined benefit plans in the future. Salaried and certain wage employees hired after Jan. 31, 1993, were not, as of Dec. 31, 2000, entitled to postretirement medical benefits. At Dec. 31, 2000 and 1999, the U.S. plans had provisions that capped the cost of postretirement medical benefits at 2003 levels for certain current and future retirees covered by bargaining plans and non-bargaining plans. The following table sets forth the changes in benefit obligations, plan assets, the funded status and the amounts recognized in our balance sheet for our defined benefit pension and other postretirement benefit plans.
Other Postretirement Pensions Benefits - ------------------------------------------------------------------------------- (Millions) 2000 1999 2000 1999 - ------------------------------------------------------------------------------- Benefit obligation, Jan. 1 $2,012 $2,201 $ 637 $ 729 - ------------------------------------------------------------------------------- Service cost 43 48 5 8 - ------------------------------------------------------------------------------- Interest cost 154 140 45 45 - ------------------------------------------------------------------------------- Plan amendments 35 26 (2) 2 - ------------------------------------------------------------------------------- Actuarial losses (gains) 113 (285) (15) (95) - ------------------------------------------------------------------------------- Benefits paid (145) (134) (68) (58) - ------------------------------------------------------------------------------- Businesses acquired 50 20 -- 4 - ------------------------------------------------------------------------------- Businesses disposed (1) -- -- -- - ------------------------------------------------------------------------------- Foreign currency translation adjustments (19) (10) (1) 2 - ------------------------------------------------------------------------------- Other 5 6 -- -- - ------------------------------------------------------------------------------- Benefit obligation, Dec. 31 $2,247 $2,012 $ 601 $ 637 =============================================================================== Fair value of plan assets, Jan. 1 $2,730 $2,536 - ------------------------------------------------------------- Actual return on plan assets (21) 307 - ------------------------------------------------------------- Contributions 15 7 - ------------------------------------------------------------- Benefits paid (133) (127) - ------------------------------------------------------------- Businesses acquired 66 17 - ------------------------------------------------------------- Plan expenses and other -- net -- (4) - ------------------------------------------------------------- Foreign currency translation adjustments (20) (6) - ------------------------------------------------------------- Fair value of plan assets, Dec. 31 $2,637 $2,730 ============================================================= Funded status $ 390 $ 718 $(601) $(637) - ------------------------------------------------------------------------------- Unrecognized actuarial losses (gains) 355 (72) 6 19 - ------------------------------------------------------------------------------- Unrecognized prior service cost 103 84 -- 13 - ------------------------------------------------------------------------------- Unrecognized transition asset (8) (13) -- -- - ------------------------------------------------------------------------------- Minimum pension liability (52) (23) -- -- - ------------------------------------------------------------------------------- Net prepaid (accrued) benefit cost $ 788 $ 694 $(595) $(605) ===============================================================================
Effective July 1, 2001, the cap of postretirement medical benefits at 2003 levels will be eliminated and generally be replaced with new medical and prescription drug programs. These programs will require retiree contributions based on selected coverage levels and will provide for the equal sharing of future cost increases between PPG and retirees. Other plan modifications will also be implemented. Additionally, as of that date, salaried and certain wage employees hired after Jan. 31, 1993 will be entitled to postretirement medical benefits after ten years of service. We have estimated the impact of these changes on the accumulated postretirement benefit obligation as of Jan. 1, 2001 and net periodic postretirement benefit costs in 2001 to be an increase of approximately $30 million and $9 million, respectively. 38 Notes The following summarizes the amounts recognized in the balance sheet:
Other Postretirement Pensions Benefits - ------------------------------------------------------------------------------- (Millions) 2000 1999 2000 1999 - ------------------------------------------------------------------------------- Prepaid benefit cost $ 919 $ 817 $ -- $ -- - ------------------------------------------------------------------------------- Accrued benefit cost (131) (123) (595) (605) - ------------------------------------------------------------------------------- Net prepaid (accrued) benefit cost $ 788 $ 694 $(595) $(605) ===============================================================================
The minimum pension liability impacted the following balance sheet captions:
- ------------------------------------------------------------------------------- (Millions) 2000 1999 - ------------------------------------------------------------------------------- Other assets $ 6 $ 4 - ------------------------------------------------------------------------------- Accumulated other comprehensive loss $29 $13 - ------------------------------------------------------------------------------- Deferred income taxes $17 $ 6 - -------------------------------------------------------------------------------
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pension plans with benefit obligations in excess of plan assets were $249 million, $218 million and $92 million, respectively, at Dec. 31, 2000, and were $137 million, $116 million and $4 million, respectively, at Dec. 31, 1999. The accrued pension benefit cost reflected in the balance sheet includes $6 million and $5 million, at Dec. 31, 2000 and 1999, for defined contribution plans. Net periodic benefit (income) cost includes the following:
Other Postretirement Pensions Benefits - ---------------------------------------------------------------------------- (Millions) 2000 1999 1998 2000 1999 1998 - ---------------------------------------------------------------------------- Service cost $ 43 $ 48 $ 41 $ 5 $ 8 $ 8 - ---------------------------------------------------------------------------- Interest cost 154 140 137 45 45 48 - ---------------------------------------------------------------------------- Expected return on plan assets (296) (271) (245) -- -- -- - ---------------------------------------------------------------------------- Amortization of transition assets (5) (5) (5) -- -- -- - ---------------------------------------------------------------------------- Amortization of prior service cost 16 12 11 12 5 2 - ---------------------------------------------------------------------------- Amortization of actuarial losses (gains) 2 5 4 (2) 5 4 - ---------------------------------------------------------------------------- Net periodic benefit (income) cost $ (86) $ (71) $ (57) $60 $63 $62 ============================================================================
In determining net periodic benefit (income) cost, unrecognized prior service costs are amortized over periods ranging from 6 to 14 years. The following weighted average assumptions were used to determine the benefit obligations and net periodic benefit (income) cost for our defined benefit pension and other postretirement benefit plans:
- -------------------------------------------------------------------- 2000 1999 1998 - -------------------------------------------------------------------- Discount rate(1) 7.3% 7.8% 6.4% - -------------------------------------------------------------------- Expected return on assets(2) 10.9% 10.9% 10.9% - -------------------------------------------------------------------- Rate of compensation increase 4.1% 4.1% 4.1% - --------------------------------------------------------------------
(1) Net periodic benefit (income) cost is determined using the previous year's discount rate. (2) Applies only to defined benefit pension plans. The weighted-average medical healthcare cost trend rate used was 5.7% for 2000 and 5.3% for 2001, declining ratably to 3.5% in the year 2007. If these trend rates were increased or decreased by one percentage point per year, such increases or decreases would have the following effects:
One-Percentage Point (Millions) Increase Decrease - ------------------------------------------------------------------------------- Increase (decrease) in the aggregate of service components and interest cost $ 1 $ (1) - ------------------------------------------------------------------------------- Increase (decrease) in the benefit obligation $18 $(17) - -------------------------------------------------------------------------------
The Company also incurred costs for multi-employer pension plans of $1 million in each of the years 2000, 1999 and 1998. Multi-employer healthcare costs totaled $1 million in each of the years 2000, 1999 and 1998. The Company has a deferred compensation plan for certain key managers which allows them to defer a portion of their annual compensation in a phantom PPG stock account or other phantom investment accounts. The amount deferred earns a return based on the investment options selected by the participant. The amount owed to participants is an unfunded and unsecured general obligation of the Company. Upon retirement, death, disability or termination of employment, the compensation deferred and related accumulated earnings are distributed in cash or in PPG stock, based on the accounts selected by the participant. Effective Oct. 1, 2000, the plan was amended to provide participants with expanded investment alternatives and the ability to transfer amounts between the phantom non-PPG stock investment accounts. Concurrent with the plan amendment and to mitigate the impact on compensation expense of changes in the market value of the liability, the Company purchased a portfolio of marketable securities that mirror the phantom non-PPG stock investment accounts selected by the participants. The changes in market value of these securities will also be included in earnings. Trading will occur in this portfolio to align the securities held with the participant's phantom non-PPG stock investment accounts. The cost of the deferred compensation plan, including dividend equivalents accrued on the phantom PPG stock account, investment income and, in 2000, the change in 39 Notes market value of the liability was income of $1 million in 2000 and expense of $5 million in both 1999 and 1998. These amounts are reflected in selling, general and administrative expenses in the accompanying income statement. The change in market value of the investment portfolio in 2000 was a loss of $5 million and is also reflected in selling, general and administrative expenses. The Company's obligations under this plan were $94 million and $90 million at Dec. 31, 2000 and Dec. 31, 1999, respectively, and the investments in marketable securities, which are included in investments in the accompanying balance sheet, were $79 million at Dec. 31, 2000. 10. 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 relate to product liability, contract, patent, environmental, antitrust and other matters arising out of the conduct of PPG's business. The Company has been named in a number of antitrust lawsuits alleging that PPG acted with competitors to fix prices and allocate markets for certain glass products. These antitrust proceedings are in an early stage. For over thirty years, PPG has been a defendant in lawsuits involving claims alleging personal injury from exposure to asbestos. Aggregate settlements by PPG to date have been immaterial. At Dec. 31, 2000, PPG was one of many defendants in numerous asbestos-related lawsuits involving about 116,000 claims. In many of the cases, the plaintiffs allege that PPG should be liable for injuries involving asbestos-containing thermal insulation products manufactured and distributed by Pittsburgh Corning Corporation ("PC"). PPG and Corning Incorporated are each 50% shareholders in PC. PPG believes that it is not responsible for any injuries caused by PC products and intends to defend against such claims. Prior to 2000, PPG had never been found liable for any such claims, and in numerous cases PPG had been dismissed on motions prior to trial. In January 2000, in a trial in a state court in Texas involving six plaintiffs, the jury found PPG not liable. However, a week later in a separate trial also in state court in Texas, another jury found PPG, for the first time, partly responsible for injuries to five plaintiffs alleged to be caused by PC products. PPG intends to appeal the adverse verdict. On April 16, 2000, PC filed for Chapter 11 Bankruptcy in the Federal Bankruptcy Court in Pittsburgh, Pennsylvania. Accordingly, in the first quarter of 2000, PPG recorded an after-tax charge of $35 million for the write-off of all of its investment in PC. As a consequence of the bankruptcy filing and the various motions and orders in that proceeding, the asbestos litigation against PC and PPG has been stayed, and the filing of additional asbestos suits against them has been enjoined, until May 21, 2001. During the pendency of the stay, interested parties, including PC and PPG, among others, have been engaged in discussions to determine whether a settlement of all current and potential asbestos claims can be agreed on within the context of the PC bankruptcy proceeding. These settlement discussions involve numerous, complex issues. Accordingly, it is impossible to predict whether or on what terms a voluntary settlement, if any, on the part of PPG might be reached. Although PPG believes it has adequate insurance for the lawsuits and claims against PPG described above, certain of PPG's insurers are contesting coverage with respect to some of these 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. Except with respect to any PPG contribution arising out of a possible voluntary settlement of asbestos claims as discussed above, the amount of which cannot be predicted, 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, results of operations or liquidity. 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 not discounted. As of Dec. 31, 2000 and 1999, PPG had reserves for environmental contingencies totaling $84 million and $82 million, respectively. Pre-tax charges against income for environmental remediation costs in 2000, 1999 and 1998 totaled $18 million, $10 million and $10 million, respectively, and are included in "Other charges" in the statement of income. Cash outlays related to such environmental remediation aggregated $16 million, $22 million and $16 million in 2000, 1999 and 1998, respectively. Management anticipates that the resolution of the Company's environmental contingencies, which will occur over an extended period of time, will not result in future annual charges against income that are significantly greater than those recorded in 2000. It is possible, however, that technological, regulatory and enforcement developments, the results of environmental studies and other factors could alter this expectation. 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. In addition to the amounts currently reserved, the Company may be subject to loss contingencies related to environmental matters estimated to be as much as $200 million to $400 million, which range is unchanged from the prior year end. Such unreserved losses are reasonably 40 Notes possible but are not currently considered to be probable of occurrence. Although insurers and other third parties may cover a portion of these costs, to the extent they are incurred, any potential recovery is not included in this unreserved exposure to future loss. The Company's environmental contingencies are expected to be resolved over an extended period of time. Although the unreserved exposure to future loss relates to all sites, a significant portion of such exposure involves three operating plant sites. Initial remedial actions are occurring at these sites. Studies to determine the nature of the contamination are reaching completion and the need for additional remedial actions, if any, is presently being evaluated. The loss contingencies related to the remaining portion of such unreserved exposure include significant unresolved issues such as the nature and extent of contamination, if any, at sites and the methods that may have to be employed should remediation be required. With respect to certain waste sites, the financial condition of any other potentially responsible parties also contributes to the uncertainty of estimating PPG's final costs. Although contributors of waste to sites involving other potentially responsible parties may face governmental agency assertions of joint and several liability, in general, final allocations of costs are made based on the relative contributions of wastes to such sites. PPG is generally not a major contributor to such sites. The impact of evolving programs, such as natural resource damage claims, industrial site reuse initiatives and state voluntary remediation programs, also adds to the present uncertainties with regard to the ultimate resolution of this unreserved exposure to future loss. The Company's assessment of the potential impact of these environmental contingencies is subject to considerable uncertainty due to the complex, ongoing and evolving process of investigation and remediation, if necessary, of such environmental contingencies. A major customer of one of the Company's Asian coatings joint ventures is experiencing financial difficulties. Should this customer be unable to pay the amounts owed to our investee or cease operations, our loss would be limited to the value of the Company's investment in the joint venture which was approximately $20 million at Dec. 31, 2000. 11. Shareholders' Equity A class of 10 million shares of preferred stock, without par value, is authorized but unissued. Common stock has a par value of $1.66 2/3 per share; 600 million shares are authorized and 290,573,068 were issued at Dec. 31, 2000, 1999 and 1998. Shares outstanding at Dec. 31, 2000 and 1999, exclude unreleased new ESOP shares (see Note 13). PPG has a Shareholders' Rights Plan, under which each share of the Company's outstanding common stock has an associated preferred share purchase right. The rights are exercisable only under certain circumstances and allow holders of such rights to purchase common stock of PPG or an acquiring company at a discounted price, which would generally be 50% of the respective stocks' current fair market value. Treasury shares held at Dec. 31, 2000 and 1999, were 122,350,519 shares and 116,472,619 shares, respectively. Purchases of treasury stock totaled 6,126,000, 1,452,600 and 3,793,300 shares in 2000, 1999 and 1998, respectively. Issuances of treasury stock totaled 248,100, 428,510 and 863,016 shares in 2000, 1999 and 1998, respectively. Per share cash dividends paid were $1.60 in 2000, $1.52 in 1999 and $1.42 in 1998. 12. Accumulated Other Comprehensive Loss
- ------------------------------------------------------------------------------ Minimum Unrealized Accumulated Currency Pension Losses on Other Translation Liability Marketable Comprehensive (Millions) Adjustment Adjustment Securities Loss - ------------------------------------------------------------------------------ Balance, Jan. 1, 1999 $ (122) $(31) $-- $(153) - ------------------------------------------------------------------------------ Net change (40) 18 (3) (25) - ------------------------------------------------------------------------------ Balance, Dec. 31, 1999 (162) (13) (3) (178) - ------------------------------------------------------------------------------ Net change (120) (16) 3 (133) - ------------------------------------------------------------------------------ Balance, Dec. 31, 2000 $ (282) $(29) $-- $(311) ==============================================================================
Foreign currency translation adjustments exclude income tax expense (benefit) given that the earnings of non-U.S. subsidiaries are deemed to be reinvested for an indefinite period of time. The income tax (benefit) expense associated with the minimum pension liability adjustment was $(11) million in 2000 and $12 million in 1999. The 2000 net change in unrealized losses on marketable securities includes the reclassification to "Other charges" in the statement of income for unrealized losses of $14 million, $9 million net of tax, due to an other than temporary decline in the market value of an investment in marketable equity securities. 13. Employee Stock Ownership Plan Our employee stock ownership plan (ESOP) covers substantially all U. S. employees. The Company makes matching contributions to the ESOP based upon participants' savings, subject to certain limitations, the matching percentage being based upon our return on average capital for the previous year. Prior to 1999, the matching percentage was based on the previous year's return on equity. 41 Notes Compensation expense related to the ESOP for 2000, 1999 and 1998 totaled $11 million, $18 million and $9 million, respectively. Interest expense totaled $9 million, $9 million and $10 million for 2000, 1999 and 1998, respectively. Dividends on PPG shares held by the ESOP, to service ESOP debt, totaled $42 million, $40 million and $39 million for 2000, 1999 and 1998, respectively. The fair value of unreleased new ESOP shares was $22,000 and $7 million at Dec. 31, 2000 and 1999, respectively. Shares held by the ESOP as of Dec. 31, 2000 and 1999, are as follows:
- ------------------------------------------------------------------------------ 2000 1999 - ------------------------------------------------------------------------------ Old New Old New Shares Shares Shares Shares - ------------------------------------------------------------------------------ Allocated shares 9,255,641 3,390,372 8,640,224 2,833,480 - ------------------------------------------------------------------------------ Unreleased shares 4,144,693 476 4,760,110 112,183 - ------------------------------------------------------------------------------ Total 13,400,334 3,390,848 13,400,334 2,945,663 ==============================================================================
14. Other Earnings
- ---------------------------------------------------------------------- (Millions) 2000 1999 1998 - ---------------------------------------------------------------------- Interest income $ 12 $ 8 $ 12 - ---------------------------------------------------------------------- Royalty income 27 26 18 - ---------------------------------------------------------------------- Shares of net earnings in equity affiliates 39 28 30 - ---------------------------------------------------------------------- Gain on sale of businesses -- -- 85 - ---------------------------------------------------------------------- Other 60 62 91 - ---------------------------------------------------------------------- Total $138 $124 $236 ======================================================================
PPG's share of undistributed earnings of equity affiliates was $103 million and $122 million at Dec. 31, 2000 and 1999, respectively. Dividends received from equity affiliates were $20 million, $16 million and $16 million in 2000, 1999 and 1998, respectively. 15. Stock Option Plans Under PPG's stock option plan, certain employees of the Company have been granted options to purchase shares of common stock at prices equal to the fair market value of the shares on the date the option was granted. Options are exercisable beginning from six to 12 months after granting and have a maximum term of 10 years. Shares available for future grants were 5,562,305 and 7,234,550 at Dec. 31, 2000 and 1999, respectively. On July 1, 1998, the Company granted to substantially all active employees of the Company and its majority owned subsidiaries the option to purchase 100 shares of common stock at its then fair market value of $70 per share. Options are exercisable beginning July 1, 2003 and expire on June 30, 2008. PPG applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its stock- based compensation. Accordingly, no compensation cost for PPG's stock option plan has been recognized in the accompanying financial statements. Had compensation cost been determined based upon the fair value at the grant date for awards granted in 2000, 1999 and 1998 consistent with the methodology prescribed in SFAS No. 123, "Accounting for Stock-Based Compensation," net income and earnings per common share, assuming dilution, would have been reduced by $23 million and $0.13 in 2000, $26 million and $0.14 in 1999 and $24 million and $0.13 in 1998. The weighted average fair value of options granted was $13.08 per share in 2000, $10.20 per share in 1999 and $13.51 per share in 1998. The fair value of stock options is estimated at the grant date using the Black- Scholes option pricing model with the following weighted average assumptions.
- ------------------------------------------------------------------------ 2000 1999 1998 - ------------------------------------------------------------------------ Risk-free interest rate 6.1% 5.4% 5.4% - ------------------------------------------------------------------------ Expected life of option in years 5.7 5.2 4.8 - ------------------------------------------------------------------------ Expected dividend yield 2.6% 2.6% 2.7% - ------------------------------------------------------------------------ Expected volatility 24.5% 22.2% 21.0% ========================================================================
The following table summarizes stock option activity under all plans for the three years ended Dec. 31, 2000.
Weighted Number of average shares exercise subject to price Stock option activity options per share - ------------------------------------------------------------------------------- Outstanding, Jan. 1, 1998 7,382,342 $48.82 - ------------------------------------------------------------------------------- Granted 6,255,259 66.47 ---------------------------------------------------------------------------- Exercised (2,607,468) 47.29 ---------------------------------------------------------------------------- Terminated (269,103) 61.72 - ------------------------------------------------------------------------------- Outstanding, Dec. 31, 1998 10,761,030 59.13 - ------------------------------------------------------------------------------- Granted 3,117,845 57.40 ---------------------------------------------------------------------------- Exercised (1,711,732) 51.21 ---------------------------------------------------------------------------- Terminated (374,022) 66.58 - ------------------------------------------------------------------------------- Outstanding, Dec. 31, 1999 11,793,121 59.58 - ------------------------------------------------------------------------------- Granted 2,048,445 52.99 ---------------------------------------------------------------------------- Exercised (301,432) 43.00 ---------------------------------------------------------------------------- Terminated (353,405) 64.30 - ------------------------------------------------------------------------------- Outstanding, Dec. 31, 2000 13,186,729 $58.81 ===============================================================================
42 Notes The following table summarizes information about stock options outstanding and exercisable at Dec. 31, 2000.
Options outstanding Options exercisable -------------------------------------------------------------- Weighted Weighted Weighted Range of average average average exercise remaining exercise exercise price Number contractual price Number price per share of shares life (years) per share of shares per share - ------------------------------------------------------------------------------- $27.25-$39.75 724,916 2.69 $34.91 724,916 $34.91 - ------------------------------------------------------------------------------- $40.00-$60.00 6,018,011 6.88 53.20 4,216,622 53.37 - ------------------------------------------------------------------------------- $60.06-$76.31 6,443,802 5.74 66.74 3,886,702 64.60 - ------------------------------------------------------------------------------- 13,186,729 8,828,240 ========== =========
At Dec. 31, 1999, options were exercisable for 7.0 million shares at a weighted average exercise price of $57.17 per common share. The corresponding amounts at Dec. 31, 1998, were 5.7 million and $52.83 per common share, respectively. 16. Advertising Costs Advertising costs are expensed as incurred and totaled $75 million, $101 million and $93 million in 2000, 1999 and 1998, respectively. 17. Research and Development
- ------------------------------------------------------------------------------ (Millions) 2000 1999 1998 - ------------------------------------------------------------------------------ Research and development -- total $ 301 $ 301 $ 287 - ------------------------------------------------------------------------------ Less depreciation 19 17 16 - ------------------------------------------------------------------------------ Research and development -- net $ 282 $ 284 $ 271 ==============================================================================
18. Quarterly Financial Information (unaudited)
Earnings Per Earnings Common Net Gross Net Per Share-- Sales Profit Income Common Assuming (Millions) (Millions) (Millions) Share Dilution - ------------------------------------------------------------------------------------------------------------- 2000 quarter ended - ------------------------------------------------------------------------------------------------------------- March 31(1) $2,152 $ 833 $139 $ .80 $ .79 - ------------------------------------------------------------------------------------------------------------- June 30 2,275 883 205 1.18 1.17 - ------------------------------------------------------------------------------------------------------------- September 30(2) 2,144 807 150 .87 .86 - ------------------------------------------------------------------------------------------------------------- December 31(3) 2,058 772 126 .75 .75 - ------------------------------------------------------------------------------------------------------------- Total $8,629 $3,295 $620 $3.60 $3.57 ============================================================================================================= 1999 quarter ended - ------------------------------------------------------------------------------------------------------------- March 31(4) $1,858 $ 700 $123 $ .71 $ .70 - ------------------------------------------------------------------------------------------------------------- June 30 2,007 782 184 1.06 1.05 - ------------------------------------------------------------------------------------------------------------- September 30(5) 2,016 748 99 .57 .56 - ------------------------------------------------------------------------------------------------------------- December 31 2,114 808 162 .93 .92 - ------------------------------------------------------------------------------------------------------------- Total $7,995 $3,038 $568 $3.27 $3.23 =============================================================================================================
Net sales were adjusted in the fourth quarter of 2000 to reclassify outgoing freight costs from a deduction in arriving at net sales to an expense in cost of sales as required by Emerging Issues Task Force 00-10, "Accounting for Shipping and Handling Fees and Costs." (1) First-quarter 2000 earnings were reduced by pre-tax charges of $39 million for the write-off of an equity investment in Pittsburgh Corning Corporation which has filed for reorganization under the federal bankruptcy code. (2) Third-quarter 2000 earnings were reduced by a pre-tax charge of $7 million for restructuring and one-time integration costs related to PPG Auto Glass. (3) Fourth-quarter 2000 earnings were reduced by a pre-tax charge of $14 million due to an other than temporary decline in the market value of an investment in marketable equity securities, previously recorded net of tax as an unrealized loss in other comprehensive loss. (4) First-quarter 1999 earnings were reduced by a pre-tax charge of $24 million for the disposal of a redundant European packaging coatings facility and work force reductions. (5) Third-quarter 1999 earnings were reduced by pre-tax charges of $40 million for purchased in-process research and development, $19 million representing the fair-market-value adjustment of acquired ICI and PRC-DeSoto inventories that have been sold and $19 million of restructuring charges related to cost reduction initiatives and the closure of a coatings facility. 19. Business Segment Information Refer to pages 29 through 31 for information on our business segments for 2000, 1999 and 1998. 43 Eleven-Year Digest
2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 - ----------------------------------------------------------------------------------------------------------------------------------- Statement of Income Net sales(1) 8,629 7,995 7,751 7,631 7,466 7,311 6,570 5,980 6,042 5,889 6,241 - ----------------------------------------------------------------------------------------------------------------------------------- Gross profit (%)(1) 38.2 38.0 39.1 39.1 38.5 38.9 37.5 35.5 35.1 33.9 36.5 - ----------------------------------------------------------------------------------------------------------------------------------- Income before income taxes 989 945 1,267 1,149 1,215 1,248 840 531 538 348 767 - ----------------------------------------------------------------------------------------------------------------------------------- Income taxes 369 377 466 435 471 480 325 236 218 147 292 - ----------------------------------------------------------------------------------------------------------------------------------- Income before accounting changes 620 568 801 714 744 768 515 295 319 201 475 - ----------------------------------------------------------------------------------------------------------------------------------- Cumulative effect of accounting changes(2) -- -- -- -- -- -- -- (273) -- 75 -- - ----------------------------------------------------------------------------------------------------------------------------------- Net income 620 568 801 714 744 768 515 22 319 276 475 - ----------------------------------------------------------------------------------------------------------------------------------- Return on average capital (%)(3)(4) 12.1 12.7 19.6 19.1 20.3 21.6 15.3 2.2/8.9 9.7 8.7/7.0 14.0 - ----------------------------------------------------------------------------------------------------------------------------------- Return on average equity (%)(3) 19.7 19.3 29.4 28.8 29.5 28.8 20.1 .9/10.7 11.8 10.7/8.0 19.7 - ----------------------------------------------------------------------------------------------------------------------------------- Earnings per common share before accounting changes 3.60 3.27 4.52 3.97 3.96 3.80 2.43 1.39 1.51 .95 2.22 - ----------------------------------------------------------------------------------------------------------------------------------- Cumulative effect of accounting changes on earnings per common share -- -- -- -- -- -- -- (1.29) -- .35 -- - ----------------------------------------------------------------------------------------------------------------------------------- Earnings per common share 3.60 3.27 4.52 3.97 3.96 3.80 2.43 .10 1.51 1.30 2.22 - ----------------------------------------------------------------------------------------------------------------------------------- Average number of common shares 172.3 173.8 177.0 179.8 187.8 202.0 211.9 212.6 212.2 212.4 214.4 - ----------------------------------------------------------------------------------------------------------------------------------- Earnings per common share -- assuming dilution 3.57 3.23 4.48 3.94 3.93 3.78 2.42 .10 1.50 1.29 2.21 - ----------------------------------------------------------------------------------------------------------------------------------- Dividends 276 264 252 239 237 239 238 221 200 183 176 - ----------------------------------------------------------------------------------------------------------------------------------- Per share 1.60 1.52 1.42 1.33 1.26 1.18 1.12 1.04 .94 .86 .82 - ----------------------------------------------------------------------------------------------------------------------------------- Balance Sheet Current assets 3,093 3,062 2,660 2,584 2,296 2,275 2,168 2,026 1,951 2,173 2,217 - ----------------------------------------------------------------------------------------------------------------------------------- Current liabilities 2,543 2,384 1,912 1,662 1,769 1,629 1,425 1,281 1,253 1,341 1,471 - ----------------------------------------------------------------------------------------------------------------------------------- Working capital 550 678 748 922 527 646 743 745 698 832 746 - ----------------------------------------------------------------------------------------------------------------------------------- Property (net) 2,941 2,933 2,905 2,855 2,913 2,835 2,742 2,787 2,972 3,183 3,255 - ----------------------------------------------------------------------------------------------------------------------------------- Total assets 9,125 8,914 7,387 6,868 6,441 6,194 5,894 5,652 5,662 6,056 6,108 - ----------------------------------------------------------------------------------------------------------------------------------- Long-term debt 1,810 1,836 1,081 1,257 834 736 773 774 905 1,190 1,210 - ----------------------------------------------------------------------------------------------------------------------------------- Shareholders' equity 3,097 3,106 2,880 2,509 2,483 2,569 2,557 2,473 2,699 2,655 2,547 - ----------------------------------------------------------------------------------------------------------------------------------- Per share 18.41 17.86 16.46 14.11 13.57 13.23 12.35 11.57 12.71 12.50 12.01 - ----------------------------------------------------------------------------------------------------------------------------------- Other Data Capital spending(5) 676 1,833 877 829 489 454 356 293 283 335 567 - ----------------------------------------------------------------------------------------------------------------------------------- Depreciation expense 374 366 354 348 340 332 318 331 352 351 324 - ----------------------------------------------------------------------------------------------------------------------------------- Quoted market price High 65.06 70.75 76.63 67.50 62.25 47.88 42.13 38.13 34.13 29.63 27.63 ------------------------------------------------------------------------------------------------------------------------------ Low 36.00 47.94 49.13 48.63 42.88 34.88 33.75 29.63 25.00 20.75 17.25 ------------------------------------------------------------------------------------------------------------------------------ Year-end 46.31 62.56 58.19 57.13 56.13 45.75 37.13 37.88 32.88 25.25 23.50 ------------------------------------------------------------------------------------------------------------------------------ Price/earnings ratio(6) High 18 22 17 17 16 13 17 27 23 31 12 ------------------------------------------------------------------------------------------------------------------------------ Low 10 15 11 12 11 9 14 21 17 22 8 ------------------------------------------------------------------------------------------------------------------------------ Average number of employees 35,600 33,800 32,500 31,900 31,300 31,200 30,800 31,400 32,300 33,700 35,100 - -----------------------------------------------------------------------------------------------------------------------------------
All amounts are in millions of dollars except per share data and number of employees. Data was adjusted, as appropriate, to reflect the two-for-one stock split payable on June 10, 1994. (1) Net sales and gross profit percentages were adjusted in the fourth quarter of 2000 to reclassify outgoing freight costs from a deduction in arriving at net sales to an expense in cost of sales as required by Emerging Issues Task Force 00-10, "Accounting for Shipping and Handling Fees and Costs." (2) The 1993 changes in methods of accounting relate to the adoption of SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions"; SFAS No. 109, "Accounting for Income Taxes," and SFAS No. 112, "Employers' Accounting for Postemployment Benefits." The 1991 change in the method of accounting relates to the cost of rebuilding glass and fiber glass melting facilities. The effect of all the changes on net income in the years of change, exclusive of the cumulative effect to Jan. 1 of the year of change and the pro forma effect on individual prior years' net income, was not material. (3) Return on average capital and return on average equity for 1993 and 1991 were calculated and presented inclusive and exclusive of the cumulative effect of the accounting changes. (4) Return on average capital is calculated using pre-interest, after-tax earnings and average debt and equity during the year. (5) Includes the cost of businesses acquired. (6) Price/earnings ratios were calculated based on high and low market prices during the year and the respective year's earnings per common share. The 1993 and 1991 ratios were calculated and presented exclusive of the cumulative effect of the accounting changes. 44 PPG Shareholder Information World Headquarters One PPG Place Pittsburgh, PA 15272, U.S.A. Phone (412) 434-3131 Internet: www.ppg.com Annual Meeting Thursday, April 19, 2001, 11:00 A.M. Pittsburgh Marriott Hotel, City Center 112 Washington Place Pittsburgh, PA 15219 Transfer Agent & Registrar Mellon Investor Services LLC Overpeck Centre 85 Challenger Road Ridgefield Park, NJ 07660 PPG-dedicated phone 1-800-648-8160 Internet inquiries: www.mellon-investor.com ----------------------- As a convenience to shareholders, account information, address changes, requests for replacement checks, and Form 1099's can be accessed by way of the Internet. Log on to Investor ServiceDirect(TM) at www.mellon-investor.com. ----------------------- Shareholders with specific questions regarding dividend checks, transfer or replacement of stock certificates or dividend tax information should contact Mellon Investor Services. Toll-Free Quarterly Financial Results Shareholders may dial the toll-free number 1-888-NEWS-PPG (1-888-639-7774) at any time, 24 hours a day, to hear quarterly financial results. By dialing this number, shareholders also may request copies of financial news releases via fax, electronic mail or conventional mail. Publications Available to Shareholders Copies of the following publications will be furnished without charge upon written request to Corporate Communications, 7W, PPG Industries, One PPG Place, Pittsburgh, PA 15272. Form 10-K -- the Company's Annual Report filed with the Securities and Exchange Commission. PPG Industries Blueprint -- a booklet summarizing PPG's mission, values, strategy and goals. PPG's Global Code of Ethics -- an employee guide to corporate conduct policies, including those concerning personal conduct, relationships with customers, suppliers and competitors, protection of corporate assets, responsibilities to the public, and PPG as a global organization. PPG's Environment, Health and Safety Policy -- a brochure describing the Company's commitment, worldwide, to manufacturing, selling and distributing products in a manner that is safe and healthful for its employees, neighbors and customers, and that protects the environment. PPG's Environment, Health and Safety Progress Report -- a report of progress during the year with respect to the Company's environment, health and safety commitment. PPG's Responsible Care Commitment -- a brochure outlining the Company's voluntary activities under the Responsible Care initiative of the Chemical Manufacturers Association for safe and ethical management of chemicals. Dividend Information PPG has paid uninterrupted dividends since 1899. The latest quarterly dividend of 42 cents per share, voted by the board of directors on Jan. 18, 2001, results in an annual dividend rate of $1.68 per share. Stock Exchange Listings PPG common stock is traded on the New York, Pacific and Philadelphia stock exchanges (symbol: PPG). Direct Purchase Plan with Dividend Reinvestment Option This plan is offered as a service and convenience to shareholders. It allows purchase of shares of PPG stock directly through the plan, as well as dividend reinvestment, direct deposit of dividends, and safekeeping of PPG stock certificates. For more information, call Mellon Investor Services at 1-800-648-8160. Investor Relations General information about PPG common stock may be obtained from Douglas B. Atkinson, Director of Investor Relations. Phone (412) 434-3312, or write Director of Investor Relations, 40E, PPG Industries, One PPG Place, Pittsburgh, PA 15272. Quarterly Stock Market Price
- ---------------------------------------------------------------------------- 2000 1999 - ---------------------------------------------------------------------------- Quarter Ended High Low Close High Low Close - ---------------------------------------------------------------------------- March 31 $65.06 $44.38 $52.31 $64.75 $49.38 $51.25 - ---------------------------------------------------------------------------- June 30 58.13 41.56 44.31 70.75 47.94 59.06 - ---------------------------------------------------------------------------- Sept. 30 46.50 36.00 39.69 67.00 57.00 60.00 - ---------------------------------------------------------------------------- Dec. 31 47.44 37.19 46.31 63.00 55.50 62.56 - ----------------------------------------------------------------------------
The number of holders of record of PPG common stock as of Jan. 31, 2001, was 30,035, as shown on the records of the Company's transfer agent. Dividends
- -------------------------------------------------------------------- 2000 1999 - -------------------------------------------------------------------- Amount Per Amount Per Month of Payment (Millions) Share (Millions) Share - -------------------------------------------------------------------- March $ 70 $ .40 $ 66 $ .38 - -------------------------------------------------------------------- June 70 .40 66 .38 - -------------------------------------------------------------------- September 69 .40 66 .38 - -------------------------------------------------------------------- December 67 .40 66 .38 - -------------------------------------------------------------------- Total $276 $1.60 $264 $1.52 ====================================================================
45 EX-21 8 0008.txt SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 PPG INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES ----------------------------- SUBSIDIARIES OF THE REGISTRANT The Registrant is PPG Industries, Inc. There are no subsidiaries for which separate financial statements are filed or included in group financial statements filed for unconsolidated subsidiaries. Material subsidiaries included in the 2000 consolidated financial statements of the Company are: Percentage of United States: Voting Power ------------ PPG Architectural Finishes, Inc. - Delaware............. 100.00% PPG Industries Fiber Glass Products, Inc - Delaware..... 100.00 PPG Industries International, Inc.- Delaware............ 100.00 PPG Industries Ohio, Inc. - Delaware.................... 100.00 PPG Industries Securities, Inc. - Delaware.............. 100.00 PRC-DeSoto International, Inc. - California............. 100.00 Transitions Optical, Inc. - Delaware.................... 51.00 PPG Auto Glass, LLC - Delaware.......................... 66.00 Canadian: PPG Canada Inc. - Canada................................ 100.00 European: Hoba Lacke und Farben GmbH - Germany.................... 85.00 PPG Coatings BV - The Netherlands....................... 100.00 PPG Coatings S.A. - France.............................. 100.00 PPG Holdings (U.K.) Limited - United Kingdom............ 100.00 PPG Holdings B.V. - The Netherlands..................... 100.00 PPG Holdings SARL - France.............................. 100.00 PPG Iberica S.A. - Spain................................ 60.00 PPG Industries Belgium SANV - Belgium................... 100.00 PPG Industries Chemicals B.V. - The Netherlands......... 100.00 PPG Industries Fiber Glass B.V. - The Netherlands....... 100.00 PPG Industries France - France.......................... 100.00 PPG Industries Italia S.r.l. - Italy.................... 100.00 PPG Industries Kimya Sanayi ve Ticoret Anonim Sirketi-Turkey 100.00 PPG Industries Lacke GmbH - Germany..................... 100.00 PPG Industries Lackfabrik GmbH - Germany................ 100.00 PPG Industries (U.K.) Limited - England................ 100.00 PPG Refinish France - France............................ 100.00 PPG Sipsy S.C.A. - France............................... 100.00 Transitions Optical Holdings B.V. - The Netherlands..... 51.00 Transitions Optical Limited - Ireland .................. 51.00 Subsidiaries in other areas: American Finishes Limitada(Brazil) - Brazil............. 100.00 PPG Coatings(Hong Kong) Co. Ltd. - Hong Kong............ 60.00 PPG Coatings(Malaysia)Sdn.Bhd. - Malaysia............... 100.00 PPG-Feng Tai Company, Limited - Hong Kong............... 55.00 PPG Industrial Do Brasil Limitada - Brazil.............. 100.00 PPG Japan Ltd.- Japan................................... 100.00 PPG Industries Argentina S.A. - Argentina............... 100.00 PPG Industries Australia PTY Limited - Australia........ 100.00 PPG Industries de Mexico, S.A. de C.V. - Mexico......... 100.00 PPG Industries New Zealand Limited - New Zealand........ 100.00 PPG Packaging Coatings (Suzhou) Co. Ltd - China......... 90.40 Taiwan Chlorine Industries Ltd. - Taiwan................ 60.00 Transitions Optical Philippines, Inc. - Philippines..... 51.00 PPG Singapore, Ltd - Singapore ........................ 100.00 Partnerships: Glass Plaza Associates - Pennsylvania................... 100.00 EX-23 9 0009.txt CONSENT OF DELOITTE & TOUCHE LLP EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in Post-effective Amendment No. 1 to Registration Statement No. 2-62328 on Form S-3, in Registration Statement Nos. 333-44397 and 333-83019 on Form S-3 and in Registration Statement Nos. 33-23350, 33-50400, 33-13605 and 33-64077 on Form S-8 of our reports dated January 18, 2001, appearing in and incorporated by reference in this Annual Report on Form 10-K of PPG Industries, Inc. for the year ended December 31, 2000. /s/ Deloitte & Touche LLP Pittsburgh, Pennsylvania February 16, 2001 EX-24 10 0010.txt POWER OF ATTORNEY EXHIBIT 24 PPG INDUSTRIES, INC. POWER OF ATTORNEY ----------------- (10-K) I, Thomas J. Usher, a Director of PPG Industries, Inc. (the "Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W. LeBoeuf, W. H. Hernandez and M. C. Hanzel, or any of them, my true and lawful attorneys or attorneys-in-fact, with full power of substitution and revocation, to sign, in my name and on my behalf as a Director of the Corporation, the Corporation's Form 10-K for the fiscal year ended December 31, 2000, to be filed with the Securities and Exchange Commission, Washington, DC. WITNESS my hand this 15th day of February 2001. /s/ Thomas J. Usher ------------------- PPG INDUSTRIES, INC. POWER OF ATTORNEY ----------------- (10-K) I, Allen J. Krowe, a Director of PPG Industries, Inc. (the "Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W. LeBoeuf, W. H. Hernandez and M. C. Hanzel, or any of them, my true and lawful attorneys or attorneys-in-fact, with full power of substitution and revocation, to sign, in my name and on my behalf as a Director of the Corporation, the Corporation's Form 10-K for the fiscal year ended December 31, 2000, to be filed with the Securities and Exchange Commission, Washington, DC. WITNESS my hand this 15th day of February 2001. /s/ Allen J. Krowe ------------------ PPG INDUSTRIES, INC. POWER OF ATTORNEY ----------------- (10-K) I, Steven C. Mason, a Director of PPG Industries, Inc. (the "Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W. LeBoeuf, W. H. Hernandez and M. C. Hanzel, or any of them, my true and lawful attorneys or attorneys-in-fact, with full power of substitution and revocation, to sign, in my name and on my behalf as a Director of the Corporation, the Corporation's Form 10-K for the fiscal year ended December 31, 2000, to be filed with the Securities and Exchange Commission, Washington, DC. WITNESS my hand this 15th day of February 2001. /s/ Steven C. Mason ------------------- PPG INDUSTRIES, INC. POWER OF ATTORNEY ----------------- (10-K) I, Robert Mehrabian, a Director of PPG Industries, Inc. (the "Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W. LeBoeuf, W. H. Hernandez and M. C. Hanzel, or any of them, my true and lawful attorneys or attorneys-in-fact, with full power of substitution and revocation, to sign, in my name and on my behalf as a Director of the Corporation, the Corporation's Form 10-K for the fiscal year ended December 31, 2000, to be filed with the Securities and Exchange Commission, Washington, DC. WITNESS my hand this 15th day of February 2001. /s/ Robert Mehrabian -------------------- PPG INDUSTRIES, INC. POWER OF ATTORNEY ----------------- (10-K) I, David G. Vice, a Director of PPG Industries, Inc. (the "Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W. LeBoeuf, W. H. Hernandez and M. C. Hanzel, or any of them, my true and lawful attorneys or attorneys-in-fact, with full power of substitution and revocation, to sign, in my name and on my behalf as a Director of the Corporation, the Corporation's Form 10-K for the fiscal year ended December 31, 2000, to be filed with the Securities and Exchange Commission, Washington, DC. WITNESS my hand this 15th day of February 2001. /s/ David G. Vice ----------------- PPG INDUSTRIES, INC. POWER OF ATTORNEY ----------------- (10-K) I, David R. Whitwam, a Director of PPG Industries, Inc. (the "Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W. LeBoeuf, W. H. Hernandez and M. C. Hanzel, or any of them, my true and lawful attorneys or attorneys-in-fact, with full power of substitution and revocation, to sign, in my name and on my behalf as a Director of the Corporation, the Corporation's Form 10-K for the fiscal year ended December 31, 2000, to be filed with the Securities and Exchange Commission, Washington, DC. WITNESS my hand this 15th day of February 2001. /s/ David R. Whitwam -------------------- PPG INDUSTRIES, INC. POWER OF ATTORNEY ----------------- (10-K) I, Erroll B. Davis, Jr., a Director of PPG Industries, Inc. (the "Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W. LeBoeuf, W. H. Hernandez and M. C. Hanzel, or any of them, my true and lawful attorneys or attorneys-in-fact, with full power of substitution and revocation, to sign, in my name and on my behalf as a Director of the Corporation, the Corporation's Form 10-K for the fiscal year ended December 31, 2000, to be filed with the Securities and Exchange Commission, Washington, DC. WITNESS my hand this 15th day of February 2001. /s/ Erroll B. Davis, Jr. ------------------------ PPG INDUSTRIES, INC. POWER OF ATTORNEY ----------------- (10-K) I, Michele J. Hooper, a Director of PPG Industries, Inc. (the "Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W. LeBoeuf, W. H. Hernandez and M. C. Hanzel, or any of them, my true and lawful attorneys or attorneys-in-fact, with full power of substitution and revocation, to sign, in my name and on my behalf as a Director of the Corporation, the Corporation's Form 10-K for the fiscal year ended December 31, 2000, to be filed with the Securities and Exchange Commission, Washington, DC. WITNESS my hand this 15th day of February 2001. /s/ Michele J. Hooper --------------------- PPG INDUSTRIES, INC. POWER OF ATTORNEY ----------------- (10-K) I, Raymond W. LeBoeuf, a Director of PPG Industries, Inc. (the "Corporation"), a Pennsylvania corporation, hereby constitute and appoint W. H. Hernandez and M. C. Hanzel, or either of them, my true and lawful attorneys or attorneys-in-fact, with full power of substitution and revocation, to sign, in my name and on my behalf as a Director of the Corporation, the Corporation's Form 10-K for the fiscal year ended December 31, 2000, to be filed with the Securities and Exchange Commission, Washington, DC. WITNESS my hand this 15th day of February 2001. /s/ Raymond W. LeBoeuf ---------------------- PPG INDUSTRIES, INC. POWER OF ATTORNEY ----------------- (10-K) I, James G. Berges, a Director of PPG Industries, Inc. (the "Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W. LeBoeuf, W. H. Hernandez and M. C. Hanzel, or any of them, my true and lawful attorneys or attorneys-in-fact, with full power of substitution and revocation, to sign, in my name and on my behalf as a Director of the Corporation, the Corporation's Form 10-K for the fiscal year ended December 31, 2000, to be filed with the Securities and Exchange Commission, Washington, DC. WITNESS my hand this 15th day of February 2001. /s/ James G. Berges ------------------- EX-27 11 0011.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PPG INDUSTRIES, INC. DECEMBER 31, 2000 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 YEAR DEC-31-2000 JAN-01-2000 DEC-31-2000 111 0 1,478 (37) 1,121 3,093 7,089 4,148 9,125 2,543 0 0 0 484 2,613 9,125 8,629 8,629 5,334 5,334 875 0 177 1,017 369 620 0 0 0 620 3.60 3.57
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