Form 10-Q

-----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, VGuMmlFBQVPVIfquT5i/XBk+IRCJV9tIxpnXgalkFZfmQRsu199ZHHZ2ml7o1fog OaTBtFYiMye5rt9e4oV2sA== 0000950168-03-001605.txt : 20030505 0000950168-03-001605.hdr.sgml : 20030505 20030505170247 ACCESSION NUMBER: 0000950168-03-001605 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030505 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-01687 FILM NUMBER: 03682554 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-Q 1 d10q.htm FORM 10-Q Form 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 or 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended March 31, 2003

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 incorporation or organization)		(I.R.S. Employer Identification No.)

One PPG Place, Pittsburgh, Pennsylvania		15272
(Address of principal executive offices)		(Zip Code)

(412) 434-3131

(Registrant’s telephone number, including area code)

As of April 30, 2003, 169,719,753 shares of the Registrant’s common stock, par value $1.66-2/3 per share, were outstanding.

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 whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

PPG INDUSTRIES, INC. AND SUBSIDIARIES

INDEX

		PAGE(S)
Part I. Financial Information

Item 1.	Financial Statements (Unaudited):

Condensed Statement of Income		2

Condensed Balance Sheet		3

Condensed Statement of Cash Flows		4

Notes to Condensed Financial Statements		5-15

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16-20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20

Item 4.	Controls and Procedures	20

Part II. Other Information

Item 1.	Legal Proceedings	21

Item 2.	Change in Securities and Use of Proceeds	21-22

Item 4.	Submission of Matters to a Vote of Security Holders	22

Item 5.	Other Information	23

Item 6.	Exhibits and Reports on Form 8-K	23-24

Signature		25

Certifications		26-29

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Statement of Income (Unaudited)

(Millions, except per share amounts)

	Three Months Ended March 31
	2003			2002
Net sales	$	2,071		$	1,875
Cost of sales		1,343			1,189

Gross profit		728			686

Other expenses (earnings):
Selling, general and administrative		377			342
Depreciation		90			91
Research and development		72			66
Interest		28			33
Amortization		7			8
Asbestos settlement—net (Note 13)		5			—
Business restructuring (Note 5)		—			81
Other—net		(2	)		(19	)

Total other expenses—net		577			602

Income before income taxes, minority interest and cumulative effect of accounting change		151			84
Income tax expense		55			33
Minority interest		12			8

Income before cumulative effect of accounting change		84			43
Cumulative effect of accounting change, net of tax (Note 2)		(6	)		(9	)

Net income	$	78		$	34

Earnings per common share (Note 4):
Income before cumulative effect of accounting change	$	0.49		$	0.25
Cumulative effect of accounting change, net of tax		(0.03	)		(0.05	)

Earnings per common share	$	0.46		$	0.20

Earnings per common share—assuming dilution (Note 4):
Income before cumulative effect of accounting change	$	0.49		$	0.25
Cumulative effect of accounting change, net of tax		(0.03	)		(0.05	)

Earnings per common share—assuming dilution	$	0.46		$	0.20

Dividends per common share	$	0.43		$	0.42

The accompanying notes to the condensed financial statements are an integral part of this consolidated statement.

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Balance Sheet (Unaudited)

	March 31 2003			Dec. 31 2002
	(Millions)
Assets
Current assets:
Cash and cash equivalents	$	77		$	117
Receivables-net		1,649			1,486
Inventories (Note 6)		1,004			942
Other		365			400

Total current assets		3,095			2,945

Property (less accumulated depreciation of $4,741 million and $4,638 million)		2,611			2,632
Investments		278			262
Goodwill (Note 7)		1,066			1,047
Identifiable intangible assets (Note 7)		508			514
Other assets		493			463

Total	$	8,051		$	7,863

Liabilities and Shareholders’ Equity
Current liabilities:
Short-term debt and current portion of long-term debt	$	332		$	352
Asbestos settlement (Note 13)		183			190
Accounts payable and accrued liabilities		1,429			1,378

Total current liabilities		1,944			1,920

Long-term debt		1,699			1,699
Asbestos settlement (Note 13)		574			566
Deferred income taxes		66			64
Accumulated provisions		865			817
Other postretirement benefits		522			516

Total liabilities		5,670			5,582


Commitments and contingent liabilities (Note 13)
Minority interest		145			131

Shareholders’ equity:
Common stock		484			484
Additional paid-in capital		130			126
Retained earnings		6,203			6,197
Treasury stock		(3,464	)		(3,471	)
Unearned compensation		(78	)		(85	)
Accumulated other comprehensive loss (Note 9)		(1,039	)		(1,101	)

Total shareholders’ equity		2,236			2,150

Total	$	8,051		$	7,863

The accompanying notes to the condensed financial statements are an integral part of this consolidated statement.

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Statement of Cash Flows (Unaudited)

	Three Months Ended March 31
	2003			2002
	(Millions)
Cash from operating activities	$	113		$	48

Investing activities:
Capital spending
Additions to property and investments		(61	)		(47	)
Business acquisitions, net of cash balances acquired		—			(9	)
Other		1			1

Cash used for investing activities		(60	)		(55	)

Financing activities:
Net change in borrowings with maturities of three months or less		12			136
Proceeds from other short-term debt		1			20
Repayment of other short-term debt		(21	)		(14	)
Proceeds from long-term debt		—			1
Repayment of long-term debt		(24	)		(113	)
Repayment of loans by employee stock ownership plan		8			8
Issuance of treasury stock, net		3			5
Dividends paid		(73	)		(71	)

Cash used for financing activities		(94	)		(28	)

Effect of currency exchange rate changes on cash and cash equivalents		1			(1	)

Net decrease in cash and cash equivalents		(40	)		(36	)
Cash and cash equivalents, beginning of period		117			108

Cash and cash equivalents, end of period	$	77		$	72

The accompanying notes to the condensed financial statements are an integral part of this consolidated statement.

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Condensed Financial Statements (Unaudited)

1. Financial Statements

The condensed financial statements included herein are unaudited. In the opinion of management, these statements include all adjustments, consisting only of normal, recurring adjustments, necessary for a fair presentation of the financial position of PPG Industries, Inc. and subsidiaries (the Company or PPG) at March 31, 2003 and the results of their operations and their cash flows for the three months ended March 31, 2003 and 2002. These condensed financial statements should be read in conjunction with the financial statements and notes included in PPG’s Annual Report on Form 10-K for the year ended December 31, 2002.

The results of operations for the three months ended March 31, 2003 are not necessarily indicative of the results to be expected for the full year.

2. Newly Adopted Accounting Standards

Effective January 1, 2003, PPG adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 143, “Accounting for Asset Retirement Obligations.” An asset retirement obligation represents a legal obligation associated with the retirement of a tangible long-lived asset that is incurred upon the acquisition, construction, development or normal operation of that long-lived asset. This standard requires the Company to recognize asset retirement obligations in the period in which they are incurred, if a reasonable estimate of fair value can be made. The associated estimated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset and depreciated over its useful life.

Adoption of this new standard on January 1, 2003 resulted in an increase in noncurrent assets, current liabilities and noncurrent liabilities of $4 million, $1 million and $9 million, respectively, and a cumulative effect adjustment reducing net income by $6 million, or $0.03 a share—assuming dilution. The provisions of this standard did not have a material impact on the results of operations for the three months ended March 31, 2003 and will not have a material effect on the Company’s future results of operations or financial condition.

Effective January 1, 2002, PPG adopted the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets.” This standard changes the accounting for goodwill and certain other intangible assets from an amortization method to an impairment only approach. Adoption of this new standard on January 1, 2002 resulted in a cumulative effect of an accounting change of $9 million after tax, or $0.05 a share—assuming dilution, to reflect an impairment in the carrying value of certain trademarks within the coatings segment.

3. Other New Accounting Standards

In November 2002, the Financial Accounting Standards Board (FASB) issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” Interpretation No. 45 requires the recognition of liabilities for guarantees that were issued or modified subsequent to December 31, 2002. The liabilities should reflect the fair value, at inception, of the guarantors’ obligations to stand ready to perform, in the event that the specified triggering events or conditions occur. The provisions of this interpretation will not have a material effect on PPG’s future results of operations or financial condition.

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Condensed Financial Statements—(Continued)

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities.” Interpretation No. 46 requires unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse the risks and rewards of ownership among their owners and other parties involved. The provisions of Interpretation No. 46 were applicable immediately to all variable interest entities created after January 31, 2003 and variable interest entities in which an enterprise obtains an interest after that date, and for variable interest entities created before this date, the provisions are effective July 1, 2003. We are currently evaluating the provisions of this interpretation; however, we do not believe they will have a material impact on our accounting for existing investments.

4. Earnings Per Common Share

The following table reflects the earnings per common share calculations for the three months ended March 31, 2003 and 2002.

	Three Months Ended March 31
	2003		2002
	(Millions, except per share amounts)
Earnings per common share
Net income	$	78	$	34
Weighted average common shares outstanding		169.6		168.6

Earnings per common share	$	0.46	$	0.20

Earnings per common share—assuming dilution
Net income	$	78	$	34
Weighted average common shares outstanding		169.6		168.6
Effect of dilutive securities:
Stock options		—		0.2
Other stock compensation plans		0.7		0.7

Potentially dilutive common shares		0.7		0.9

Adjusted common shares outstanding		170.3		169.5

Earnings per common share—assuming dilution	$	0.46	$	0.20

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Condensed Financial Statements—(Continued)

5. Business Restructuring

In the first quarter of 2002, the Company recorded a charge of $81 million for restructuring and other related activities comprised of $66 million for severance and other costs and $15 million for asset dispositions. Workforce reductions continued during the first quarter of 2003. The remaining workforce reductions will be substantially completed in the second quarter; however, as to a group of approximately 75 employees in Europe, their terminations have been concluded under a different social plan than was assumed when the reserve was recorded. Under the terms of this plan, severance payments of approximately $9 million will be paid to these individuals over a period of approximately 5 years after June 30, 2003. However, the actual cost of these restructuring actions will not be materially different than the total amount originally recorded. Severance payments of $13 million are expected to be paid in the second quarter of 2003 with the majority of the remaining severance cost to be incurred in the third quarter of 2003.

	Severance and Other Costs			Asset Dispositions			Total Charge			Employees Covered
	(Millions, except no. of employees)
Coatings	$	62		$	15		$	77		1,004
Glass		1			—			1		22
Chemicals		1			—			1		20
Corporate		2			—			2		20

Total	$	66		$	15		$	81		1,066
Activity		(40	)		(15	)		(55	)	(840	)

Balance, end of period	$	26		$	—		$	26		226

6. Inventories

Inventories at March 31, 2003 and December 31, 2002 are detailed below.

	March 31 2003		Dec. 31 2002
	(Millions)
Finished products	$	601	$	548
Work in process		120		113
Raw materials		159		157
Supplies		124		124

Total	$	1,004	$	942

Most domestic and certain foreign inventories are valued using the last-in, first-out method. If the first-in, first-out method had been used, inventories would have been $162 million and $158 million higher at March 31, 2003 and December 31, 2002, respectively.

7. Goodwill and Other Identifiable Intangible Assets

The change in the carrying amount of goodwill attributable to each business segment for the three months ended March 31, 2003 was as follows:

	Coatings		Glass		Chemicals		Total
	(Millions)
Balance, December 31, 2002	$	939	$	84	$	24	$	1,047
Currency translation		17		2		—		19

Balance, March 31, 2003	$	956	$	86	$	24	$	1,066

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Condensed Financial Statements—(Continued)

The carrying amount of acquired trademarks with indefinite lives as of March 31, 2003 and December 31, 2002 totaled $144 million.

The Company’s identifiable intangible assets with finite lives are being amortized over their estimated useful lives and are detailed below.

	March 31, 2003							December 31, 2002
	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
	(Millions)
Acquired technology	$	350	$	(88	)	$	262	$	348	$	(82	)	$	266
Other		168		(66	)		102		167		(63	)		104

Balance	$	518	$	(154	)	$	364	$	515	$	(145	)	$	370

Aggregate amortization expense for the three months ended March 31, 2003 and 2002 related to these identifiable intangible assets, was $7 million and $8 million, respectively. At March 31, 2003, estimated future amortization expense of identifiable intangible assets is as follows: $24 million for the remaining three quarters of 2003 and $30 million, $29 million, $28 million, $27 million and $26 million in 2004, 2005, 2006, 2007 and 2008, respectively.

8. Business Segment Information

Business segment net sales and operating income for the three months ended March 31, 2003 and 2002 were as follows:

	Three Months Ended March 31
	2003			2002
	(Millions)
Net sales:
Coatings	$	1,125		$	1,053
Glass		516			488
Chemicals		433			336
Intersegment net sales		(3	)		(2	)

Total	$	2,071		$	1,875

Operating income:
Coatings	$	139		$	71
Glass		6			20
Chemicals		46			27

Total		191			118
Asbestos settlement—net		(5	)		—
Interest expense—net		(25	)		(31	)
Other unallocated corporate expense—net		(10	)		(3	)

Income before income taxes, minority interest and cumulative effect of accounting change(a)	$	151		$	84

(a)

Includes for the three months ended March 31, 2002, a pretax charge of $81 million for restructuring and other related activities, including severance and other costs of $66

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Condensed Financial Statements—(Continued)

million and asset dispositions of $15 million. See Note 5, “Business Restructuring,” for amounts by business segment.

9. Comprehensive Income

Total comprehensive income for the three months ended March 31, 2003 and 2002 was as follows:

	Three Months Ended March 31
	2003		2002
	(Millions)
Net income	$	78	$	34

Other comprehensive income, net of tax:
Currency translation adjustment		59		(42	)
Unrealized losses on marketable securities		—		(2	)
Net change—derivatives (Note 10)		3		19

		62		(25	)

Total comprehensive income	$	140	$	9

10. Derivative Financial Instruments

PPG uses derivative instruments to manage its exposure to fluctuating natural gas prices through the use of natural gas swap and option contracts. PPG also uses forward currency contracts as hedges against its exposure to variability in exchange rates on short-term intercompany borrowings denominated in foreign currencies and to translation risk and interest rate swaps to hedge its exposure to changing interest rates. The Company recognizes all derivative instruments as either assets or liabilities at fair value. The unrealized change in the fair value of certain of these instruments is deferred in accumulated other comprehensive income (loss) and subsequently recognized, when realized, by reclassification of the gain or loss into cost of sales, as natural gas is purchased, and into other earnings or charges, as foreign exchange gains and losses are recognized on the related intercompany borrowings.

During the first quarter of 2003, other comprehensive income included a net gain due to derivatives of $3 million, net of tax. This gain was comprised of realized gains of $9 million and unrealized gains of $12 million. The realized gains related principally to the settlement during the period of natural gas contracts. The unrealized gains during the period related primarily to the changes in fair value of the natural gas contracts outstanding as of March 31, 2003.

During the first quarter of 2002, other comprehensive income included a net gain due to derivatives of $19 million, net of tax. This gain was comprised of realized losses of $9 million and unrealized gains of $10 million. The realized losses related to the settlement during the period of natural gas and forward currency contracts. The unrealized gains during the period related primarily to the changes in fair value of the natural gas contracts outstanding as of March 31, 2002.

In November 2002, PPG entered into a one-year equity forward arrangement with a bank in order to partially mitigate the impact of changes in the fair value of PPG stock that is to be contributed to the asbestos settlement trust as discussed in Note 13, “Commitments and Contingent Liabilities.” In accordance with the terms of this instrument the bank purchased 504,900 shares of PPG stock on the open market at a cost of $24 million through December 31, 2002 and during the first quarter of 2003 the bank purchased an additional 400,000 shares at a cost of $19 million. For the three months ended March 31, 2003, PPG recorded expense of $4 million for the change in fair value of this instrument, which is reflected in “Asbestos settlement—net” in the

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Condensed Financial Statements—(Continued)

condensed statement of income. The fair value of this instrument as of March 31, 2003 was a current liability of $3 million.

11. Cash Flow Information

Cash payments for interest were $38 million and $40 million for the three months ended March 31, 2003 and 2002, respectively. Net cash payments for income taxes for the three months ended March 31, 2003 and 2002 were $20 million and $33 million, respectively.

12. Stock-Based Compensation

A portion of the amounts paid under the Company’s total shareholder return plans and its incentive compensation and management award plans may be paid in PPG common stock. Total compensation cost recognized as expense related to these plans was $14 million and $11 million for the three months ended March 31, 2003 and 2002, respectively.

PPG has two stock option plans, the PPG Stock Option Plan and the Challenge 2000 Stock Option Plan. In accordance with Accounting Principles Board Opinion (APB) No. 25, “Accounting for Stock Issued to Employees,” no compensation cost for PPG’s stock option plans has been recognized in the accompanying condensed financial statements. Had compensation cost for PPG’s stock option plans been determined based upon the estimated fair value at the grant date consistent with the methodology prescribed in SFAS No. 123, “Accounting for Stock-Based Compensation,” net income, earnings per common share and earnings per common share—assuming dilution would have been as follows:

	Three Months Ended March 31
	2003			2002
	(Millions, except per share amounts)
Net income
Reported net income	$	78		$	34
Impact of SFAS No. 123		(6	)		(6	)

Pro forma net income	$	72		$	28

Earnings per common share
Reported earnings	$	0.46		$	0.20
Impact of SFAS No. 123		(0.04	)		(0.04	)

Pro forma earnings	$	0.42		$	0.16

Earnings per common share—assuming dilution
Reported earnings	$	0.46		$	0.20
Impact of SFAS No. 123		(0.04	)		(0.04	)

Pro forma earnings	$	0.42		$	0.16

13. 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, the most significant of which are described below, relate to product liability, contract, patent, environmental, antitrust and other matters arising out of the conduct of PPG’s business. To the extent that these lawsuits and claims involve personal injury and property damage, PPG believes it has adequate insurance; however, certain of PPG’s insurers are contesting coverage with respect to some of these claims, and other insurers, as they had prior to the asbestos settlement described below, may contest coverage with respect to some of the asbestos claims if the settlement is not implemented. PPG’s lawsuits and claims against others

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Condensed Financial Statements—(Continued)

include claims against insurers and other third parties with respect to actual and contingent losses related to environmental, asbestos and other matters.

The result of any future litigation of such lawsuits and claims is inherently unpredictable. However, management believes that, in the aggregate, the outcome of all lawsuits and claims involving PPG, including asbestos-related claims in the event the settlement described below does not become effective, will not have a material effect on PPG’s consolidated financial position or liquidity; however, such outcome may be material to the results of operations of any particular period in which costs, if any, are recognized.

The Company has been named in a number of antitrust lawsuits, including suits alleging that PPG acted with competitors to fix prices and allocate markets in the automotive refinish industry and a class action relating to certain glass products. The automotive refinish claims have been consolidated, but the proceedings are still at an early stage. All of the initial defendants in the glass class action antitrust case other than PPG, have settled. PPG believes it has meritorious defenses to these claims.

The Company has been a defendant since April 1994 in a suit filed by Marvin Windows and Doors (Marvin) alleging numerous claims, including breach of warranty. All of the plaintiff’s claims, other than breach of warranty, were dismissed. However, on February 14, 2002, a federal jury awarded Marvin $136 million on the remaining claim. Subsequently, the court added $20 million for interest bringing the total judgment to $156 million. PPG filed an appeal on July 8, 2002. PPG believes it has meritorious defenses to the plaintiff’s claims and has reasonable prospects of prevailing on appeal.

For over thirty years, PPG has been a defendant in lawsuits involving claims alleging personal injury from exposure to asbestos. At March 31, 2003, PPG was one of many defendants in numerous asbestos-related lawsuits involving approximately 116,000 claims. Most of PPG’s potential exposure relates to allegations by plaintiffs 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 of PC. PPG has denied responsibility for, and has defended, all claims for any injuries caused by PC products.

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 various motions and orders in that proceeding, the asbestos litigation against PPG (as well as against PC) has been stayed and the filing of additional asbestos suits against them has been enjoined, until thirty days after the effective date of a confirmed plan of reorganization for PC substantially in accordance with the settlement arrangement among PPG and several other parties discussed below. The stay may be terminated if the Bankruptcy Court determines that such a plan will not be confirmed, or the settlement arrangement set forth below is not likely to be consummated.

On May 14, 2002, PPG announced that it had agreed with several other parties, including certain of its insurance carriers, the official committee representing asbestos claimants in the PC bankruptcy (ACC), and the legal representatives of future asbestos claimants appointed in the PC bankruptcy, on the terms of a settlement arrangement relating to asbestos claims against PPG and PC (the “PPG Settlement Arrangement”).

On March 28, 2003, Corning Incorporated announced that it had separately reached its own arrangement with the representatives of asbestos claimants for the settlement of certain

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Condensed Financial Statements—(Continued)

asbestos claims that might arise from PC products or operations (the “Corning Settlement Arrangement”).

The terms of the PPG Settlement Arrangement and the Corning Settlement Arrangement have been incorporated into a bankruptcy reorganization plan for PC along with a disclosure statement describing the plan, which PC filed with the Bankruptcy Court on April 30, 2003. Other parties with an interest in the bankruptcy proceeding may file objections to the disclosure statement or the plan of reorganization. After considering any objections at a hearing, the Bankruptcy Court, if it approves the disclosure statement, would permit the plan of reorganization and the disclosure statement to be sent to PC’s creditors for voting. In order to approve the plan, at least two-thirds in amount and more than one-half in number of the allowed creditors in a given class must vote in favor of the plan, and for a plan to contain a channeling injunction for present and future asbestos claims under §524(g) of the Bankruptcy Code, as described below, seventy-five percent of the asbestos claimants voting must vote in favor of the plan. Assuming that the plan receives the requisite votes, the judge would conduct another hearing regarding the fairness of the settlement, including whether the plan would be fair with respect to present and future claimants, whether such claimants would be treated in substantially the same manner, and whether the protection provided to PPG and its participating insurers would be fair in view of the assets they would convey to the asbestos settlement trust (Trust) to be established as part of the plan. At that hearing, other parties in interest could raise objections to the plan. Following that hearing, the Bankruptcy Court would enter a confirmation order if all requirements to confirm a plan of reorganization under the Bankruptcy Code, including the requirements described above, have been satisfied; this order may be appealed to the District Court. (The District Court may join the Bankruptcy Court in the confirmation order, in which case an appeal to the District Court would not be necessary.) Assuming that the District Court approves the confirmation order, interested parties could appeal the order to the U.S. Circuit Court and subsequently to the U.S. Supreme Court. The PPG Settlement Arrangement would not become effective until 30 days after the plan of reorganization was finally approved by an appropriate court order that was no longer subject to appeal (the “Effective Date”).

If the PC plan of reorganization incorporating the terms of the PPG Settlement Arrangement were approved by the Bankruptcy Court and all legal requirements under the Bankruptcy Code or otherwise were satisfied, the Court would enter a channeling injunction under §524(g) and other provisions of the Bankruptcy Code, prohibiting present and future claimants from asserting bodily injury claims against PPG or its subsidiaries or PC relating to the manufacture, distribution or sale of asbestos-containing products by PC or PPG or its subsidiaries. The injunction would also prohibit co-defendants in those cases from asserting claims against PPG or its subsidiaries for contribution, indemnification or other recovery. All such claims would have to be filed with the Trust and only paid from the assets of the Trust.

The channeling injunction would not extend to claims against PPG alleging injury caused by asbestos on premises owned, leased or occupied by PPG (so called “premises claims”), or claims alleging property damage resulting from asbestos. Approximately 9,000 of the 116,000 claims pending against PPG and its subsidiaries are premises claims. Many of PPG’s premises claims have been resolved without payment from PPG. To date, PPG has paid about $7 million to settle approximately 1,100 premises claims, virtually all of which has been covered by PPG’s insurers. There are no property damage claims pending against PPG or its subsidiaries. PPG believes that it has adequate insurance for the asbestos claims not covered by the channeling injunction and that any financial exposure resulting from such claims will not have a material effect on PPG’s consolidated financial position, liquidity or results of operations.

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Condensed Financial Statements—(Continued)

PPG has no obligation to pay any amounts under the PPG Settlement Arrangement until the Effective Date. PPG and certain of its insurers (along with PC) would then make payments to the Trust, which would provide the sole source of payment for all present and future asbestos bodily injury claims against PPG, its subsidiaries or PC alleged to be caused by the manufacture, distribution or sale of asbestos products by these companies. PPG would convey the following assets to the Trust. First, PPG would convey the stock it owns in PC and Pittsburgh Corning Europe. Second, PPG would transfer 1,388,889 shares of PPG’s common stock. Third, PPG would make aggregate cash payments to the Trust of approximately $998 million, payable according to a fixed payment schedule over 21 years, beginning on June 30, 2003, or, if later, the Effective Date. PPG would have the right, in its sole discretion, to prepay these cash payments to the Trust at any time at a discount rate of 5.5% per annum. Under the payment schedule, the amounts due June 30, 2003 and 2004 are $75 million and $98 million, respectively. In addition to the conveyance of these assets, PPG would pay $30 million in legal fees and expenses on behalf of the Trust to recover proceeds from certain historical insurance assets, including policies issued by certain insurance carriers that are not participating in the settlement, the rights to which would be assigned to the Trust by PPG.

PPG’s participating historical insurance carriers would make cash payments to the Trust of approximately $1.7 billion between the Effective Date and 2023. These payments could also be prepaid to the Trust at any time at a discount rate of 5.5% per annum as of the prepayment date. In addition, as referenced above, PPG would assign to the Trust its rights, insofar as they relate to the asbestos claims to be resolved by the Trust, to the proceeds of policies issued by certain insurance carriers that are not participating in the PPG Settlement Arrangement and from the estates of insolvent insurers and state insurance guaranty funds.

PPG would grant asbestos releases to all participating insurers, subject to a coverage-in-place agreement with certain insurers for the continuing coverage of premises claims (discussed above). PPG would grant certain participating insurers full policy releases on primary policies and full product liability releases on excess coverage policies. PPG would also grant certain other participating excess insurers credit against their product liability coverage limits.

In the second quarter of 2002, PPG recorded a pretax charge of $772 million, or $495 million after tax, reflecting the estimated cost of the PPG Settlement Arrangement. That amount included the net present value, using a discount rate of 5.5%, of the aggregate cash payments of approximately $998 million to be made by PPG to the Trust. That amount also included the carrying value of PPG’s stock in Pittsburgh Corning Europe, the fair value as of June 30, 2002 of 1,388,889 shares of PPG common stock and $30 million in legal fees of the Trust to be paid by PPG, which together with the first payment scheduled to be made to the Trust on June 30, 2003, were reflected in the current liability for PPG’s asbestos settlement in the accompanying balance sheet. The net present value of the remaining payments of $566 million was recorded in the noncurrent liability for asbestos settlement in the accompanying balance sheet. During the third and fourth quarters of 2002, income was recognized and the current liability for PPG’s asbestos settlement was reduced by $16 million, reflecting the decline in the fair value from June 30, 2002 to December 31, 2002 of the shares of PPG common stock which are to be transferred to the asbestos settlement trust. In addition, a change in the fair value of the related equity forward instrument (see Note 10, “Derivative Financial Instruments”) reduced PPG’s asbestos settlement charge by $1 million.

During the first quarter of 2003, PPG recorded a pretax charge of $5 million related to the change in the current value of its asbestos settlement obligation. This includes an increase in the net present value of the payments to be made to the Trust, which increased the noncurrent asbestos settlement liability by $8 million. A similar increase will occur each quarter in 2003 and 2004. It also includes the change in fair value during the quarter of the PPG stock, which

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Condensed Financial Statements—(Continued)

decreased PPG’s current asbestos settlement liability by $7 million and the change in fair value of the related equity forward instrument of $4 million (see Note 10, “Derivative Financial Instruments”).

Because the filing of asbestos claims against the Company has been enjoined since April 2000, a significant number of additional claims may be filed against the Company if the Bankruptcy Court stay were to expire. If the PPG Settlement Arrangement is not implemented, for any reason, and the Bankruptcy Court stay expires, the Company intends to vigorously defend the pending and any future asbestos claims against it and its subsidiaries. The Company believes that it is not responsible for any injuries caused by PC products, which represent the preponderance of the pending bodily injury claims against it. Prior to 2000, PPG had never been found liable for any such claims, in numerous cases PPG had been dismissed on motions prior to trial, and aggregate settlements by PPG to date have been immaterial. 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 a 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 in the event the settlement does not become effective. Although PPG has successfully defended asbestos claims brought against it in the past, in view of the number of claims, and the questionable verdicts and awards that other companies have experienced in asbestos litigation, the result of any future litigation of such claims is inherently unpredictable.

It is PPG’s policy to accrue expenses for environmental contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Reserves for environmental contingencies are exclusive of claims against third parties and are generally not discounted. As of March 31, 2003 and December 31, 2002, PPG had reserves for environmental contingencies totaling $86 million and $87 million, respectively. Pretax charges against income for environmental remediation costs totaled $2 million and $3 million for the three months ended March 31, 2003 and 2002, respectively, and are included in “Other—net” in the accompanying condensed statement of income. Cash outlays related to such environmental remediation aggregated $3 million and $5 million for the three months ended March 31, 2003 and 2002, respectively.

Management anticipates that the resolution of the Company’s environmental contingencies will occur over an extended period of time. Over the past 10 years the pretax charges against income have ranged between $10 million and $49 million per year. We anticipate that charges against income in 2003 will be within that range. 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. 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 in our chemicals segment. 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.

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Condensed Financial Statements—(Continued)

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 these other sites and the methods that may have to be employed should remediation be required. The most significant of these sites is the Calcasieu River estuary, near our Lake Charles, La. chemicals plant. The U.S. Environmental Protection Agency (USEPA) has been investigating contamination levels in the Calcasieu River estuary. During 2002, the USEPA issued draft Human Health and Ecological Risk Assessments indicating that elevated levels of risk exist in the estuary. A draft Remedial Investigation report was issued May 2, 2003. It is expected that USEPA could issue final risk assessments and a final Remedial Investigation report later in 2003. PPG will hold discussions with the USEPA and other parties to determine what, if any, role PPG would have in addressing estuary issues.

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.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Performance in First Quarter of 2003 Compared to First Quarter of 2002

Performance Overview

Sales increased 10% for the first quarter 2003 to $2.07 billion, compared to $1.88 billion for the first quarter of 2002. The increase in sales was due to a 4% increase in volume across all of our business segments, a 4% increase due to the positive effects of foreign currency translation, primarily from our European operations, and a 2% increase in selling prices in our chemicals segment.

The gross profit percentage decreased to 35.2% for the first quarter of 2003, compared to 36.6% for the first quarter of 2002. The decrease in gross profit percentage was due to higher energy costs in our glass and chemicals segments and higher pension and postretirement medical costs across all of our business segments offset, in part, by higher selling prices in our chemicals segment.

Net income and earnings per share—assuming dilution, for the first quarter of 2003 were $78 million and $0.46, respectively, compared to $34 million and $0.20, respectively, for the same quarter in 2002. Net income for the first quarter of 2003 included after tax charges of $6 million, or 3 cents a share, for the cumulative effect of an accounting change and $3 million, or 2 cents a share, to reflect the net change in the current value of the Company’s obligation under the asbestos settlement agreement, as discussed in Note 13, “Commitments and Contingent Liabilities,” to the accompanying condensed financial statements. Net income for the first quarter of 2002 included after tax charges of $55 million, or $0.33 a share, for restructuring and other related activities, as discussed in Note 5, “Business Restructuring,” to the accompanying condensed financial statements, and $9 million, or $0.05 a share, for the cumulative effect of an accounting change.

In the first quarter of 2003, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 143, “Accounting for Asset Retirement Obligations,” resulting in the cumulative effect of an accounting change of $6 million after tax. This standard requires the Company to recognize asset retirement obligations in the period in which they are incurred, if a reasonable estimate of fair value can be made. In the first quarter of 2002, the Company adopted the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets,” resulting in a cumulative effect of an accounting change of $9 million after tax to reflect an impairment in the carrying value of certain trademarks within the coatings segment.

The increase in net income in 2003 is attributable to higher selling prices in our chemicals segment, improved volumes in our coatings and chemicals segments, the benefit of no restructuring costs in 2003 and the favorable effects of foreign currency translation. These increases were partially offset by higher energy costs in our glass and chemical segments, inflationary cost increases and an increase in pension and postretirement medical costs across all of our business segments.

Performance of Business Segments

Coatings sales increased 7% to $1.13 billion compared to $1.05 billion for the first quarter of 2002. The sales increase resulted from the combination of a 5% increase due to the positive effects of foreign currency translation, principally from our European operations, and a 2% increase from improved volumes in our architectural, aerospace, automotive original equipment and industrial businesses. Volume growth from our North American and Asian operations was partially offset by volume declines from our European operations. Operating income was $139

million for the first quarter of 2003 compared to $71 million for the same quarter in 2002. The increase in operating income is attributable primarily to lower restructuring costs of $77 million, higher sales volumes described above, increased manufacturing efficiencies and the favorable effects of foreign currency translation. These were partly offset by inflationary costs increases and higher pension and postretirement medical costs.

Glass sales increased 6% to $516 million compared to $488 million for the first quarter of 2002. The increase reflects the combination of a 4% increase in sales volumes, principally from our automotive original equipment business, and a 2% increase due to the positive effects of foreign currency translation from our European fiber glass business. Operating income was $6 million for the first quarter of 2003 compared to $20 million for the same quarter in 2002. The decrease in operating income is attributable to higher energy costs and higher pension and postretirement medical costs. These were offset, in part, by higher sales volumes, lower overhead and restructuring costs, improved manufacturing efficiencies and the favorable effects of foreign currency translation.

Chemicals sales increased 29% to $433 million compared to $336 million for the first quarter of 2002. The increase reflects a 16% increase in selling prices for our commodity products, a 10% improvement in sales volumes for optical, commodity, silica and fine chemical products and a 3% increase due to the positive effects of foreign currency translation. Operating income was $46 million for the first quarter of 2003 compared to $27 million for the same quarter in 2002. The increase in operating income is attributable to higher selling prices and sales volumes described above. Operating income also increased due to lower restructuring costs and the favorable effects of foreign currency translation. These improvements were offset, in part, by higher energy costs, higher pension and postretirement medical costs, inflationary cost increases, additional selling and advertising costs in our optical business and lower equity earnings.

Other Factors

The Company’s pretax earnings for the first three months of 2003 included net periodic pension expense of $43 million compared to $11 million for the same quarter in 2002. These amounts are included in “Cost of sales,” “Selling, general and administrative” and “Research and development” in the accompanying condensed statement of income. This trend will continue for the remainder of 2003. The increase in pension costs is due primarily to a decrease in the market value of pension plan assets through the end of 2002, a reduction in the expected return on plan assets assumption for 2003 and the amortization of accumulated actuarial losses. In addition, the cost of other postretirement benefits during the first quarter of 2003 is $5 million higher compared to similar amounts for the first quarter of 2002 due to higher medical costs.

The tax rate on earnings, excluding charges for restructuring taken in the first quarter of 2002, was 36% for the first quarter of 2003 and 2002. However, restructuring charges reflected a lower tax benefit, which raised the overall effective rate to 39.3% for the first quarter of 2002.

Amounts presented as “Selling, general and administrative” in the accompanying condensed statement of income are comprised of selling, customer service, distribution and advertising costs, as well as the costs of providing corporate-wide functional support in such areas as finance, law, human resources, and planning. Distribution costs pertain to the movement and storage of finished goods inventory at company-owned and leased warehouses, terminals and other distribution facilities. Certain of these costs may be included in cost of sales by other companies, resulting in a lack of comparability between our gross profit and that of other companies.

New Accounting Standards

Note 2, “Newly Adopted Accounting Standards,” to the accompanying condensed financial statements describes and quantifies the impact of the Company’s adoption of the provisions of the Financial Accounting Standards Board’s (FASB) new standards on the accounting for asset retirement obligations, effective January 1, 2003, and the accounting for goodwill and other intangible assets, effective January 1, 2002. See Note 3, “Other New Accounting Standards,” to the accompanying condensed financial statements for a description of the FASB’s Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” and Interpretation No. 46, “Consolidation of Variable Interest Entities.”

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 monetary damages are sought. See Note 13, “Commitments and Contingent Liabilities,” to the accompanying condensed financial statements for an expanded description of certain of these lawsuits, including the proposed PPG Settlement Arrangement for asbestos claims announced on May 14, 2002. As discussed in Note 13, although the result of any future litigation of such lawsuits and claims is inherently unpredictable, management believes that, in the aggregate, the outcome of all lawsuits and claims involving PPG, including asbestos-related claims in the event the PPG Settlement Arrangement described in Note 13 does not become effective, will not have a material effect on PPG’s consolidated financial position or liquidity; however, such outcome may be material to the results of operations of any particular period in which the costs, if any, are recognized.

Although the unreserved exposure to future loss relates to all sites, a significant portion of such exposure involves three operating plant sites in our chemicals segment. 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 these other sites and the methods that may have to be employed should remediation be required. The most significant of these sites is the Calcasieu River estuary, near our Lake Charles, La. chemicals plant. The U.S. Environmental Protection Agency (USEPA) has been investigating contamination levels in the Calcasieu River estuary. During 2002, the USEPA issued draft Human Health and Ecological Risk Assessments indicating that elevated levels of risk exist in the estuary. A draft Remedial Investigation report was issued May 2, 2003. It is expected that USEPA could issue final risk assessments and a final Remedial Investigation report later in 2003. PPG will hold discussions with the USEPA and other parties to determine what, if any, role PPG would have in addressing estuary issues.

Financial Resources

Cash from operating activities for the three months ended March 31, 2003 was $113 million compared with $48 million for the comparable period of 2002. Cash from operations and the Company’s debt capacity have been and are expected to continue to be sufficient to fund capital spending, dividend payments, contributions to pension plans, amounts due under the asbestos settlement and operating requirements.

As a result of negative returns on our pension fund assets over the past 3 years, the funded status of our defined benefit pension plans declined to a shortfall of $689 million on a projected benefit obligation basis at December 31, 2002; nevertheless, our current estimate under existing U.S. pension funding regulations is that with available funding credits there will be no mandatory pension funding requirement until 2006 at the earliest.

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 Form 10-Q 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 Securities and Exchange Commission. 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, and the unpredictability of possible future litigation, including litigation that could result if PPG’s Settlement Arrangement for asbestos claims does not become effective. 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There were no material changes in the Company’s exposure to market risk from December 31, 2002.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures. Based on their evaluation as of a date within 90 days of the filing date of this Form 10-Q, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the “Exchange Act”)) are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in internal control. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation described above. There were no significant deficiencies or material weaknesses, and therefore there were no corrective actions taken.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

In the Company’s Form 10-K for the year ended December 31, 2002, it was reported that the Company has been a defendant in lawsuits involving claims alleging personal injury from exposure to asbestos. Most of PPG’s potential exposure relates to allegations by plaintiffs that the Company should be liable for injuries involving asbestos-containing thermal insulation products manufactured and distributed by Pittsburgh Corning Corporation (PC). The Company and Corning Incorporated are each 50% shareholders of PC. On April 16, 2000, PC filed for Chapter 11 Bankruptcy in the Federal Bankruptcy Court in Pittsburgh, Pennsylvania. On May 14, 2002, PPG announced that it had agreed with several other parties, including certain of its insurance carriers, the official committee representing asbestos claimants in the PC bankruptcy (ACC), and the legal representatives of future asbestos claimants appointed in the PC bankruptcy, on the terms of a settlement arrangement relating to asbestos claims against PPG and PC (the “PPG Settlement Arrangement”). The proposed terms of the PPG Settlement Arrangement, and the process and legal requirements for incorporating that settlement into a plan of reorganization in PC’s bankruptcy, are discussed in more detail under Note 13, “Commitments and Contingent Liabilities,” to the accompanying condensed financial statements in this Form 10-Q. As a consequence of the bankruptcy filing and the various motions and orders in that proceeding, the asbestos litigation against PPG (as well as against PC) has been stayed and the filing of additional asbestos suits against them has been enjoined, until thirty days after the effective date of a confirmed plan of reorganization for PC substantially in accordance with the PPG Settlement Arrangement discussed in Note 13. In the event such a plan is not confirmed, or PPG or the ACC concludes that the PPG Settlement Arrangement set forth in Note 13 is not likely to be consummated, then either PPG or the ACC may move for an order terminating the stay. The stay will remain in effect, however, until the Bankruptcy Court resolves the motion if the motion is opposed by the non-moving party. On March 28, 2003, Corning Incorporated announced that it had separately reached its own arrangement with the representatives of asbestos claimants for the settlement of certain asbestos claims that might arise from PC products or operations (the “Corning Settlement Arrangement”). On April 30, 2003, PC filed its plan of reorganization and disclosure statement describing the plan with the Bankruptcy Court, incorporating the terms of the PPG Settlement Arrangement and the Corning Settlement Arrangement. Note 13 to the condensed financial statements in this Form 10-Q describes the process and requirements to be met before the Bankruptcy Court confirms PC’s plan of reorganization. As more fully described in Note 13, PPG’s Settlement Arrangement will not become effective until 30 days after a PC plan of reorganization incorporating PPG’s Settlement Arrangement is finally approved by an appropriate court order no longer subject to appeal.

In March 2003, the United States Environmental Protection Agency, Region 6 (USEPA) informed PPG that the USEPA will seek penalties from PPG relating to a comprehensive inspection of PPG’s Lake Charles, Louisiana facility conducted in May and June of 1999. PPG is engaged in negotiations with the USEPA. Currently, the total proposed penalties relating to the inspection are $1,407,000. The USEPA has not yet filed a legal complaint. PPG will continue negotiating with the USEPA regarding the allegations and proposed penalties.

Item 2. Change in Securities and Use of Proceeds

Directors who are not also Officers of the Company receive Common Stock Equivalents pursuant to the Deferred Compensation Plan for Directors. Retired Directors receive dividend equivalents in the form of Common Stock Equivalents pursuant to 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 afforded to 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.

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). In the first quarter of 2003, the Directors, as a group, were credited with 1,379 Common Stock Equivalents under this plan. The values of the Common Stock Equivalents, when credited, ranged from $43.47 to $48.83.

The Directors’ Common Stock Plan is only applicable to two retired Directors. For those Directors, the Common Stock Equivalents held in their account will be converted to and paid in Common Stock of the Company (and cash as to any fractional Common Stock Equivalent). In the first quarter of 2003, those two retired Directors received dividend equivalents in the form of 49 Common Stock Equivalents under this plan. The value of each Common Stock Equivalents, when credited, was $43.47.

Item 4. Submission of Matters to a Vote of Security Holders

At the Company’s Annual Meeting of Shareholders held on April 17, 2003 (the Annual Meeting), the shareholders voted on the following matters:

On the matter of the election of four directors to serve for the terms indicated in the proxy statement relating to the Annual Meeting, the vote was as follows:

Nominees	Votes For	Votes Withheld
Charles E. Bunch	135,720,981	2,856,161
Robert Ripp	135,752,232	2,824,910
Thomas J. User	135,561,523	3,015,619
David R. Whitwam	135,807,242	2,769,900

There were no broker non-votes with respect to this matter. Each of the nominees was elected to serve as a director for the terms indicated in the proxy statement relating to the Annual Meeting.

On the matter of the shareholder proposal requesting that PPG’s Board of Directors establish a policy of expensing in the Company’s annual income statement the costs of all future stock options issued by the Company, the vote was as follows:

Votes For		Votes Against		Votes Abstain
58,123,773		52,857,465		7,248,840

There were 20,347,064 broker non-votes with respect to this matter.

Item 5. Other Information

The Company’s chief executive officer and chief financial officer have provided the certification with respect to this Form 10-Q that is required by Section 906 of the Sarbanes-Oxley Act of 2002. These certifications have been filed as Exhibits 99.1 and 99.2.

Item 6. Exhibits and Reports on Form 8-K

Exhibits. The following exhibits are filed as a part of, or incorporated herein by reference into, this Form 10-Q.


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.

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.

3.2		The Bylaws, as amended, were filed as Exhibit 3.2 to the Registrant’s Form 10-Q for the quarter ended March 31, 2002.

4		The Shareholders’ Rights Plan was filed as Exhibit 4 on the Registrant’s Form 8-K, dated February 19, 1998.

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”).

4.2		First Supplemental Indenture, dated as of April 1, 1986, was filed as Exhibit 4.2 to the 1998 Form S-3.

4.3		Second Supplemental Indenture, dated as of October 1, 1989, was filed as Exhibit 4.3 to the 1998 Form S-3.

4.4		Third Supplemental Indenture, dated as of November 1, 1995, was filed as Exhibit 4.4 to the 1998 Form S-3.

*10		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. 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. 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. PPG Industries, Inc. Executive Officers Annual Incentive Compensation Plan, dated as of April 19, 2001, was filed as Exhibit 10.3 to the Registrant’s Form 10-K for the year ended December 31, 2000. PPG Industries, Inc. Nonqualified Retirement Plan dated as of January 1, 1989, as amended February 21, 2002, was filed as Exhibit 10.1 to the Registrant’s Form 10-K for the year ended December 31, 2001. PPG Industries, Inc. Deferred Compensation Plan, as amended effective February 21, 2002, was filed as Exhibit 10.2 to the Registrant’s Form 10-K for the year ended December 31, 2001. PPG Industries, Inc. Stock Plan, dated as of April 17, 1997, as amended April 18, 2002,


		was filed as Exhibit 10.3 to the Registrant’s Form 10-K for the year ended December 31, 2001. PPG Industries, Inc. Total Shareholder Return Plan for Key Employees, as amended effective April 18, 2002, was filed as Exhibit 10.4 to the Registrant’s Form 10-K for the year ended December 31, 2001. PPG Industries, Inc. Executive Officers’ Total Shareholder Return Plan, as amended effective April 18, 2002, was filed as Exhibit 10.5 to the Registrant’s Form 10-K for the year ended December 31, 2001. PPG Industries, Inc. Management Award and Deferred Income Plan was filed as Exhibit 10.1 to the Registrant’s Form 10-K for the year ended December 31, 2002.

*10.1		PPG Industries, Inc. Directors’ Common Stock Plan, as amended February 20, 2002, was filed as Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended March 31, 2003.

*10.2		PPG Industries, Inc. Challenge 2000 Stock Plan was filed as Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended March 31, 2003.

12		Computation of Ratio of Earnings to Fixed Charges for the Three Months Ended March 31, 2003 and for the Five Years Ended December 31, 2002.

99.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Items referred to in Exhibit 10, 10.1 and 10.2 and incorporated by reference are either management contracts, compensatory plans or arrangements required to be filed as an exhibit hereto pursuant to Item 601 of Regulation S-K.

Reports on Form 8-K

The Company filed a Form 8-K relating to a press release dated February 24, 2003. The release announced that the Directors of the Company have elected Robert Ripp a member of the Company’s Board, effective March 1, 2003.

The Company filed a Form 8-K relating to a press release dated April 17, 2003. The release announced the Company’s first quarter 2003 financial results.

SIGNATURE

Pursuant to the requirements 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.


		PPG INDUSTRIES, INC.
		(Registrant)

Date: May 5, 2003	By	/s/ W. H. HERNANDEZ
		W. H. Hernandez Senior Vice President, Finance (Principal Financial and Accounting Officer and Duly Authorized Officer)

PRINCIPAL EXECUTIVE OFFICER CERTIFICATION

I, Raymond W. LeBoeuf, certify that:

I have reviewed this quarterly report on Form 10-Q of PPG Industries, Inc. (“PPG”);

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of PPG as of, and for, the periods presented in this quarterly report;

PPG’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for PPG and we have:

designed such disclosure controls and procedures to ensure that material information relating to PPG, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

evaluated the effectiveness of PPG’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

PPG’s other certifying officer and I have disclosed, based on our most recent evaluation, to PPG’s auditors and the audit committee of PPG’s Board of Directors:

all significant deficiencies in the design or operation of internal controls which could adversely affect PPG’s ability to record, process, summarize and report financial data and have identified for PPG’s auditors any material weaknesses in internal controls; and

any fraud, whether or not material, that involves management or other employees who have a significant role in PPG’s internal controls; and

PPG’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Date: May 5, 2003								/s/ RAYMOND W. LEBOEUF
								Raymond W. LeBoeuf
								Chairman of the Board and
								Chief Executive Officer

PRINCIPAL FINANCIAL OFFICER CERTIFICATION

I, William H. Hernandez, certify that:

I have reviewed this quarterly report on Form 10-Q of PPG Industries, Inc. (“PPG”);

PPG’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for PPG and we have:

evaluated the effectiveness of PPG’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

PPG’s other certifying officer and I have disclosed, based on our most recent evaluation, to PPG’s auditors and the audit committee of PPG’s Board of Directors:

any fraud, whether or not material, that involves management or other employees who have a significant role in PPG’s internal controls; and


Date: May 5, 2003								/s/ WILLIAM H. HERNANDEZ
								William H. Hernandez
								Senior Vice President, Finance

PPG INDUSTRIES, INC. AND SUBSIDIARIES

INDEX TO EXHIBITS

Exhibit Number		Description

10.1		PPG Industries, Inc. Directors’ Common Stock Plan, as amended February 20, 2002.

10.2		PPG Industries, Inc. Challenge 2000 Stock Plan

12		Computation of Ratio of Earnings to Fixed Charges for the Three Months Ended March 31, 2003 and for the Five Years Ended December 31, 2002.

99.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-10.1 3 dex101.htm DIRECTOR'S COMMON STOCK PLAN Director's Common Stock Plan

Exhibit 10.1

PPG INDUSTRIES, INC.

DIRECTORS’ COMMON STOCK PLAN

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.

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.

“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 the Plan and who has resigned or retired or is otherwise no longer an active Director of the Company as of January 1, 2003.

“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.

“Service” means the period of time a Non-Employee Director serves on the Board.

EFFECTIVE DATE. This Plan shall be effective on and after January 1, 1988.

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 New York Stock Exchange Composite Transactions during the 5 days for which such price is available immediately preceding such day.

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 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.

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.

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.

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.

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.

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 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 February 20, 2002

EX-10.2 4 dex102.htm CHALLENGE 2000 STOCK PLAN Challenge 2000 Stock Plan

Exhibit 10.2

PPG INDUSTRIES, INC.

CHALLENGE 2000 STOCK PLAN

Purpose

The purpose of the Plan is to promote the attainment of the Company’s Challenge 2000 goals by awarding Options and Stock Appreciation Rights to Employees by which Employees may benefit from the increase in the value of the Common Stock of the Company which is expected to result from attaining such goals.

Definitions

(a) “Award” means any Option or Stock Appreciation Right granted under the Plan.

(b) “Award Term” means the period during which an Option or a Stock Appreciation Right may be exercised.

(d) “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated thereunder.

(e) “Committee” means the Compensation and Employment Benefits Committee of the Company or any successor thereto.

(f) “Common Stock” means the Common Stock of the Company.

(g) “Company” means PPG Industries, Inc.

(h) “Director” means any director of the Company.

(i) “Eligible Person” means any Employee who is not an Insider.

(j) “Employee” means any person (including any officer) employed by the Company or any of its Subsidiaries.

(k) “Exercise Price” means the Fair Market Value of a share of Common Stock on the Grant Date.

(l) “Fair Market Value” of a share of Common Stock means the closing sale price reported for any applicable date on the New York Stock Exchange-Composite Tape or, if there is no sale on such date, for the nearest preceding date upon which such a sale took place.

(m) “Grant Date” means the date as of which an Option or a Stock Appreciation Right is granted, unless another date is specified by the Board or the Committee.

(n) “Insider” means an officer of the Company or a Director subject to Section 16 of the Securities Exchange Act of 1934.

(o) “Nonqualified Option” means an Option which does not qualify as an “incentive stock option” as defined in Section 422 of the Code.

(p) “Option” means an option granted hereunder to purchase a specified number of shares of Common Stock.

(q) “Participant” means any Eligible Person who has received an Award.

(r) “Plan” means the PPG Industries, Inc. Challenge 2000 Stock Plan, as set forth herein and as amended from time to time.

(s) Stock Appreciation Right” means an Award to benefit from the appreciation of Common Stock granted pursuant to the provisions of Section 5 of the Plan.

(t) “Subsidiary” means any corporation fifty percent (50%) or more of the outstanding voting stock or voting power of which 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.

Administration

The Board and the Committee shall both have full power and authority pursuant and subject to the provisions of the Plan: (1) to determine from time to time which Eligible Persons shall be granted Awards; (2) to determine the number of shares of Common Stock subject to each Award, the Award Term, and the terms and conditions upon

which Awards may be exercised and in the case of an Option Award, the form of payment of the Exercise Price,; (3) to construe and interpret the Plan, to establish, amend and revoke rules and regulations relating to the Plan, and to determine all questions or controversies arising in the administration or operation of the Plan; and (4) generally, to exercise such powers and take such actions as the Board or the Committee may deem necessary or advisable to administer or implement the Plan. Any determination or decision made or action taken by the Board or the Committee in connection with the Plan shall be final, conclusive and binding on all persons, including the Company, its shareholders and Participants.

Awards

Awards under the Plan may be Options or Stock Appreciation Rights (or any combination thereof).

Options

(a) Options to purchase a specified number of shares of Common Stock at a specified price may be granted from time to time to Eligible Persons. Options granted hereunder may be Nonqualified Options only.

(b) The Exercise Price of each Option shall the Fair Market Value of a share of Common Stock on the Grant Date. The Exercise Price may be paid in such form as the Board or the Committee may specify.

(c) Options may be exercised at such times and in such manner as shall be prescribed by the Board or the Committee, except that no Option shall be exercisable under any circumstances more than ten (10) years from the Grant Date.

Stock Appreciation Rights

(a) A Stock Appreciation Right is an Award entitling a Participant to receive an amount equal to the excess of the Fair Market Value of a share of Common Stock on the date of exercise over the Exercise Price, multiplied by the number of shares of Common Stock with respect to which the Stock Appreciation Right shall have been exercised.

(b) A Stock Appreciation Right may be exercised by a Participant at such times and in such manner as shall be prescribed by the Board or

the Committee, except that no Stock Appreciation Right shall be exercisable under any circumstances more than ten(10) years from the Grant Date.

(c) Payment to a Participant upon exercise of a Stock Appreciation Right may be made in cash or in shares of Common Stock, as the Board or the Committee shall determine.

Number of Shares Available for Issuance and Subject to Awards

(a) The maximum number of shares of Common Stock which may be issued under the Plan and as to which Awards may be granted shall be 4.0 Million. Any shares of Common Stock subject to Awards that are forfeited or unexercised, to the extent Awards remain unexercised at the expiration or termination thereof may be subject to the grant of further Awards under the Plan. The number of shares which may be issued and as to which Awards may be granted under the Plan shall be further subject to adjustment in accordance with Section 9.

(b) The Common Stock to be issued under the Plan may be either authorized but unissued shares or issued shares acquired by the Company and held in its treasury.

Government and Other Regulations

The obligation of the Company to issue or transfer and deliver shares for Awards exercised under the Plan shall be subject to (1) the effectiveness of a registration statement under the Securities Act of 1933, as amended, with respect to such issue or transfer, if deemed necessary or appropriate by counsel for the Company; (2) the condition that the shares of Common Stock authorized to be issued hereunder shall have been listed (or authorized for listing upon official notice of issuance) upon each stock exchange on which outstanding shares of Common Stock may then be listed; and (3) all other applicable laws, regulations, rules and orders which shall then be in effect and which may apply to the Participant, the Company and its Subsidiaries.

No Right to Employment

Neither the existence of the Plan nor the grant of any Award pursuant to the Plan shall create in any Participant or Eligible Person the right to continue to be employed by the Company or a Subsidiary.

10.

Adjustments Upon Changes in Capitalization

In the event of any change in the number of outstanding shares of Common Stock by reason of any stock dividend, stock split or similar change, a corresponding change shall be made in the numbers of shares subject to outstanding Awards, in the Exercise Price of outstanding Awards and in the maximum number of shares which then remain available for issuance. In the event of any change in the outstanding shares of Common Stock, or in the number thereof, by reason of any merger, consolidation, combination, sale of assets, exchange of shares, recapitalization, reorganization, spin-off or similar change, the Board may make such changes in the shares, and in the numbers or Exercise Prices of shares, subject to outstanding Awards, and in the maximum number of shares which may be issued under the Plan, as the Board may deem to be equitable. No such change, without the consent of a Participant may adversely affect the rights of such Participant with respect to an Award previously granted, and any such change shall be final, conclusive and binding on all persons, including the Company, its shareholders and Participants.

11.

Amendment and Termination

The Board or the Committee may amend or suspend the Plan, in whole or in part, at any time, but no amendment may, without Board approval, (1) increase the maximum number of shares which may be issued and for which Awards may be granted under the Plan; (2) change the manner of determining the Exercise Price, other than to change the manner of determining the Fair Market Value of the Common Stock to conform to any then-applicable provision of the Code; (3) extend the date upon which the Plan shall terminate; or (4) increase the maximum period during which Awards may be exercised hereunder. The Plan shall terminate on, and no Award may be granted after, December 31, 2008, or on such earlier date as may be determined by the Board. No amendment, suspension or termination of the Plan may affect adversely, without the consent of the Participant, the rights of such Participant with respect to an Award previously granted.

EX-12 5 dex12.htm COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES Computation of 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											Three Months Ended March 31, 2003
	1998		1999		2000		2001		2002			Three Months Ended March 31, 2003
Earnings:
Earnings (loss) before income taxes and net earnings in equity affiliates	$	1,264	$	945	$	978	$	651	$	(27	)	$	151
Plus:
Fixed charges exclusive of capitalized interest		135		164		217		208		168			39
Amortization of capitalized interest		12		10		10		10		11			2
Adjustments for equity affiliates		16		16		20		26		6			2

Total	$	1,427	$	1,135	$	1,225	$	895	$	158		$	194

Fixed Charges:
Interest expense including amortization of debt discount/premium and debt expense	$	110	$	133	$	177	$	169	$	128		$	28
Rentals—portion representative of interest		25		31		40		39		40			11

Fixed charges exclusive of capitalized interest		135		164		217		208		168			39
Capitalized interest		9		11		16		13		5			1

Total	$	144	$	175	$	233	$	221	$	173		$	40

Ratio of earnings to fixed charges		9.9		6.5		5.3		4.0		—			4.9

Deficiency of earnings to fixed charges	$	—	$	—	$	—	$	—	$	(15	)	$	—

EX-99.1 6 dex991.htm CERTIFICATION PURSUANT TO THE SARBANES-OXLEY ACT (CEO) Certification Pursuant to the Sarbanes-Oxley Act (CEO)

Exhibit 99.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of PPG Industries, Inc. on Form 10-Q for the period ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Raymond W. LeBoeuf, Chief Executive Officer of PPG Industries, Inc., certify to the best of my knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of PPG Industries, Inc.

/s/ RAYMOND W. LEBOEUF

Raymond W. LeBoeuf
Chief Executive Officer
May 5, 2003

A signed original of this written statement required by Section 906 has been provided to PPG Industries, Inc. and will be retained by PPG Industries, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99.2 7 dex992.htm CERTIFICATION PURSUANT TO THE SARBANES-OXLEY ACT (CFO) Certification Pursuant to the Sarbanes-Oxley Act (CFO)

Exhibit 99.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of PPG Industries, Inc. on Form 10-Q for the period ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William H. Hernandez, Chief Financial Officer of PPG Industries, Inc., certify to the best of my knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of PPG Industries, Inc.

/s/ WILLIAM H. HERNANDEZ

William H. Hernandez
Chief Financial Officer
May 5, 2003

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