PPG INDUSTRIES INC

Previous wording

Net sales were approximately $4.3 billion for the three months ended March 31, 2024, a decrease of 1.6% compared to the prior year, driven by lower sales volumes.

Current wording

Net sales were approximately $4.8 billion for the three months ended June 30, 2024, a decrease of 1.6% compared to the prior year, primarily due to the unfavorable impact of foreign currency translation and the divestitures of the non-North American portion of the traffic solutions business.

Previous wording

Income before income taxes was $538 million for the three months ended March 31, 2024, an increase of $185 million compared to the prior year. This increase was primarily due to the absence of a $190 million Pension settlement charge recorded in the first quarter 2023.

Current wording

Income before income taxes was $693 million for the three months ended June 30, 2024, an increase of $47 million compared to the prior year. This increase was primarily due to the impact of moderating raw material costs partially offset by wage inflation.

Previous wording

Selling, general and administrative expense increased $72 million primarily due to wage inflation and growth-related investments.

Current wording

Selling, general and administrative expense increased $8 million primarily due to wage inflation and growth-related investments.

Previous wording

Interest expense decreased $4 million primarily due to lower debt balances. Interest income increased $17 million primarily due to higher levels of cash and cash equivalents and higher interest rates.

Current wording

Interest expense decreased $5 million primarily due to lower debt balances. Interest income increased $13 million primarily due to higher interest rates.

Previous wording

Depreciation expense increased $11 million primarily due to higher accelerated depreciation related to previously approved restructuring actions.

Current wording

Depreciation expense increased $16 million primarily due to higher accelerated depreciation related to previously approved restructuring actions.

Previous wording

Other charges/(income), net increased by $23 million primarily due to the absence of a first quarter 2023 insurance recovery related to hurricane damage at a southern U.S. factory.

Current wording

Other charges/(income), net increased by $38 million primarily due to higher environmental remediation charges, a non-cash loss on the sale of the Argentina portion of the traffic solutions business and the absence of a first quarter 2023 insurance recovery related to hurricane damage at a southern US. factory, partially offset by an increase in realized foreign currency gains.

Previous wording

Adjusted earnings per diluted share for the three months ended March 31, 2024 increased year-over-year primarily due to moderating raw material costs, partially offset by lower sales volumes.

Current wording

Adjusted earnings per diluted share for both the three and six months ended June 30, 2024 increased year-over-year primarily due to moderating raw material costs, partially offset by wage inflation.

Previous wording

(c)Portfolio optimization includes advisory, legal, accounting, valuation, other professional or consulting fees, and certain internal costs directly incurred to effect acquisitions, as well as similar fees and other costs to effect divestitures and other portfolio optimization exit actions. These costs are included in Selling, general and administrative expense on the condensed consolidated statement of income.

Current wording

(c)Portfolio optimization includes losses on the sale of non-core assets, including the loss recognized on the sale of the Company's traffic solutions business in Argentina which was completed during the second quarter 2024, which is included in Other charges/(income), net in the condensed consolidated statement of income. Portfolio optimization also includes advisory, legal, accounting, valuation, other professional or consulting fees and certain internal costs directly incurred to effect acquisitions, as well as similar fees and other costs to effect divestitures and other portfolio optimization exit actions. These costs are included in Selling, general and administrative expense on the condensed consolidated statement of income. In 2023, net loss of $2 million was attributable to noncontrolling interests.

Previous wording

(d)In the first quarter 2023, PPG purchased group annuity contracts that transferred pension benefit obligations for certain of the Company’s retirees in the U.S. to third-party insurance companies, resulting in a non-cash pension settlement charge.

Current wording

(e)In the first quarter 2023, PPG purchased group annuity contracts that transferred pension benefit obligations for certain of the Company’s retirees in the U.S. to third-party insurance companies, resulting in a non-cash pension settlement charge.

Previous wording

(e)In the first quarter 2023, the Company received reimbursement under its insurance policies for damages incurred at a southern U.S. factory from a winter storm in 2020.

Current wording

(f)In the first quarter 2023, the Company received reimbursement under its insurance policies for damages incurred at a southern U.S. factory from a winter storm in 2020.

Previous wording

Performance Coatings net sales decreased due to the following:

Current wording

Performance Coatings net sales were flat due to the following:

Previous wording

Architectural coatings - Americas and Asia Pacific organic sales decreased by a mid-single-digit percentage compared to the prior year driven by the timing of the Easter holiday and lower sales volume compared to an elevated first quarter 2023, which included a $40 million customer load-in. In Mexico, the business continued to benefit from our strong concessionaire network.

Current wording

Architectural coatings - Americas and Asia Pacific net sales, excluding the impact of currency, acquisitions and divestitures ("organic sales") increased by a low single-digit percentage compared to the prior-year second quarter driven by increased sales volumes in the U.S. and Latin America and higher prices. In Mexico, the business benefited from sales through our strong concessionaire network.

Previous wording

Architectural coatings – EMEA net sales, excluding the impact of currency, acquisitions and divestitures ("organic sales") decreased by a mid-single-digit percentage year over year driven by lower sales volumes. Consumer confidence remained weak during the quarter, and the timing of the Easter holiday negatively impacted results by deferring sales into the second quarter 2024. Regional demand remained uneven by country, with challenging sales volumes in western Europe partially offset by positive sales trends in central and eastern Europe.

Current wording

Architectural coatings – EMEA organic sales decreased by a low single-digit percentage year over year driven by lower sales volumes. Consumer confidence remained weak during the quarter, and regional demand was uneven by country, with strong sales volumes in central and eastern Europe offset by lower sales volumes in other parts of Europe.

Previous wording

Segment income was $402 million, an increase of 2% versus the prior year, primarily due to higher selling prices and moderating raw material costs partially offset by lower sales volume, higher selling, general and administrative costs and wage inflation.

Current wording

Segment income was $570 million, an increase of 6% versus the prior year, primarily due to higher selling prices and moderating raw material costs, partially offset by higher growth-related spending and wage inflation.

Previous wording

Segment income increased $9 million year over year primarily due to moderating input costs and other wage deflation, which more than offset lower selling prices and lower sales volumes.

Current wording

Segment income increased $40 million year over year primarily due to higher selling prices and moderating raw material costs, which more than offset lower sales volumes and higher growth-related spending.

Previous wording

Automotive OEM coatings organic sales decreased by a low single-digit percentage year over year as uneven regional industry volumes and lower index-based pricing were partly offset by PPG share gains in China. PPG sales volumes increased in the Asia Pacific and Latin America regions offset by declines in the U.S. and Europe. In Western Europe, automotive industry build rates were lower than prior year in the first quarter. In China, automotive retail sales activity continued to be solid, along with exports.

Current wording

Automotive OEM coatings organic sales decreased by a high single-digit percentage year over year driven by lower sales volumes and lower index-based selling prices for certain customer contracts. Sales volume increases in the Asia Pacific and Latin America regions were more than offset by declines in the U.S. and Europe. In Western Europe, automotive industry build rates were lower than prior year in the second quarter. In China, automotive retail sales activity continued to be solid, along with exports, which have grown compared to last year.

Previous wording

In the industrial coatings business, organic sales decreased by a mid-single-digit percentage year over year due to lower sales volumes and prices. Overall, global industrial production remained sluggish resulting in lower sales volumes in all regions except Asia Pacific, where volumes increased a high single-digit percentage.

Current wording

In the industrial coatings business, organic sales decreased by a low single-digit percentage compared to the prior year due to lower sales volumes and lower indexed-based prices. Overall, global industrial production remained sluggish resulting in lower sales volumes in all regions except Asia Pacific, where volumes increased by a mid-single-digit percentage.

Previous wording

Specialty coatings and materials organic sales increased by a mid-single-digit percentage due to strong sales volumes partially offset by the absence of European energy-related surcharge pricing in the prior year period.

Current wording

Specialty coatings and materials organic sales increased by a high single-digit percentage due to higher sales volumes partially offset by the absence of European energy-related surcharge pricing in the prior year period.

Previous wording

In the second quarter, global industrial production is expected to remain at a low level with improvement in the Asia Pacific region offset by sluggishness in Europe. Aggregate organic sales are anticipated to be similar to the second quarter 2023. Automotive industry build rates are expected to increase modestly in the second quarter with growth in China and Latin America offsetting anticipated declining builds in Europe. Additionally, packaging coatings is expected to have positive sales volume growth in all regions compared to the prior-year second quarter. For the segment, lower prices are anticipated in 2024 due to index pricing and the absence of European energy-related surcharge pricing.

Current wording

In the third quarter, global industrial production is expected to remain at a low level with improvement in the Asia Pacific and Latin America regions offset by sluggishness in Europe and the U.S. Automotive industry build rates are expected to decline in the third quarter with growth in Latin America more than offset by declining builds in all other regions. Additionally, packaging coatings is expected to have positive sales volume growth in all regions compared to the prior-year quarter. Aggregate organic sales are anticipated to decline a low single digit percentage compared to the third quarter 2023.

Previous wording

Cash used for operating activities for the three months ended March 31, 2024 was $60 million and cash from operating activities for the three months ended March 31, 2023 was $85 million. The $145 million increase in cash used for operating activities was primarily due to unfavorable changes in working capital in the first quarter 2024 compared to the prior year.

Current wording

Cash from operating activities for the six months ended June 30, 2024 and 2023 was $305 million and $621 million, respectively. The $316 million decrease in cash from operating activities was primarily due to unfavorable changes in working capital in the second quarter 2024 compared to the prior year.

Previous wording

Cash used for investing activities for the three months ended March 31, 2024 and 2023 was $239 million and $64 million, respectively. The $175 million increase in cash used for investing activities was primarily due to higher capital expenditures compared to the prior year.

Current wording

Cash used for investing activities for the six months ended June 30, 2024 and 2023 was $370 million and $290 million, respectively. The $80 million increase in cash used for investing activities was primarily due to higher capital expenditures compared to the prior year.

Previous wording

Total capital spending is expected to be approximately $600 million in 2024 in support of future organic growth opportunities.

Current wording

Total capital spending is expected to be approximately $600 million to $650 million in 2024 in support of future organic growth opportunities.

Previous wording

In February 2021, PPG entered into a $2.0 billion Term Loan Credit Agreement (the "Term Loan Credit Agreement") to finance the Company’s acquisition of Tikkurila, and to pay fees, costs and expenses related thereto. The Term Loan Credit Agreement provided the Company with the ability to borrow up to an aggregate principal amount of $2.0 billion on an unsecured basis. In addition to the amounts borrowed to finance the acquisition of Tikkurila, the Term Loan Credit Agreement allowed the Company to make up to eleven additional borrowings prior to December 31, 2021, to be used for working capital and general corporate purposes. The Term Loan Credit Agreement contains covenants that are consistent with those in the Credit Agreement discussed above and that are usual and customary restrictive covenants for facilities of its type, which include, with specified exceptions, limitations on the Company’s ability to create liens or other encumbrances, to enter into sale and leaseback transactions and to enter into consolidations, mergers or transfers of all or substantially all of its assets. The Term Loan Credit Agreement matures and all outstanding borrowings are due and payable on the third anniversary of the date of the initial borrowing under the Agreement. In June 2021, PPG borrowed $700 million under Term Loan Credit Agreement to finance the Company’s acquisition of Tikkurila, and to pay fees, costs and expenses related thereto. In December 2021, PPG borrowed an additional $700 million under the Term Loan Credit Agreement. In 2022 and 2023, PPG repaid $300 million and $1.1 billion, respectively, of the Term Loan Credit Agreement using cash on hand. The Term Loan Credit Agreement was fully repaid as of December 31, 2023.

Current wording

In February 2021, PPG entered into a $2.0 billion Term Loan Credit Agreement (the "Term Loan Credit Agreement") to finance the Company’s acquisition of Tikkurila, and to pay fees, costs and expenses related thereto. The Term Loan Credit Agreement provided the Company with the ability to borrow up to an aggregate principal amount of $2.0 billion on an unsecured basis. In addition to the amounts borrowed to finance the acquisition of Tikkurila, the Term Loan Credit Agreement allowed the Company to make up to eleven additional borrowings prior to December 31, 2021, to be used for working capital and general corporate purposes. The Term Loan Credit Agreement contains covenants that are consistent with those in the Credit Agreement discussed above and that are usual and customary restrictive covenants for facilities of its type, which include, with specified exceptions, limitations on the

Previous wording

In March 2023, PPG amended its five-year credit agreement (the “Credit Agreement”) dated as of August 30, 2019. The amendments to the Credit Agreement replace the LIBOR-based reference interest rate option with a reference interest rate option based upon Term SOFR. The other terms of the Credit Agreement remained unchanged. In July 2023, PPG amended and restated the Credit Agreement, extending the term through July 27, 2028. The amended and restated Credit Agreement provides for a $2.3 billion unsecured revolving credit facility. The Company has the ability to increase the size of the Credit Agreement by up to an additional $750 million, subject to the receipt of lender commitments and other conditions precedent. The Company has the right, subject to certain conditions set forth in the Credit Agreement, to designate certain subsidiaries of the Company as borrowers under the Credit Agreement. In connection with any such designation, the Company is required to guarantee the obligations of any such subsidiaries under the Credit Agreement. There were no amounts outstanding under the Credit Agreement as of March 31, 2024 and December 31, 2023.

Current wording

In March 2023, PPG amended its five-year credit agreement (the “Credit Agreement”) dated as of August 30, 2019. The amendments to the Credit Agreement replace the LIBOR-based reference interest rate option with a reference interest rate option based upon Term SOFR. The other terms of the Credit Agreement remained unchanged. In July 2023, PPG amended and restated the Credit Agreement, extending the term through July 27, 2028. The amended and restated Credit Agreement provides for a $2.3 billion unsecured revolving credit facility. The Company has the ability to increase the size of the Credit Agreement by up to an additional $750 million, subject to the receipt of lender commitments and other conditions precedent. The Company has the right, subject to certain conditions set forth in the Credit Agreement, to designate certain subsidiaries of the Company as borrowers under the Credit Agreement. In connection with any such designation, the Company is required to guarantee the obligations of any such subsidiaries under the Credit Agreement. There were $171 million commercial paper borrowings outstanding as of June 30, 2024 and no commercial paper borrowings outstanding as of December 31, 2023.

Previous wording

The Term Loan and the Credit Agreement require the Company to maintain a ratio of Total Indebtedness to Total Capitalization, as defined in the Term Loan and the Credit Agreement, of 60% or less; provided, that for any fiscal quarter in which the Company has made an acquisition for consideration in excess of $1 billion and for the next five fiscal quarters thereafter, the ratio of Total Indebtedness to Total Capitalization may not exceed 65% at any time. As of March 31, 2024, Total Indebtedness to Total Capitalization as defined under the Credit Agreement was 43%.

Current wording

The Term Loan and the Credit Agreement require the Company to maintain a ratio of Total Indebtedness to Total Capitalization, as defined in the Term Loan and the Credit Agreement, of 60% or less; provided, that for any fiscal quarter in which the Company has made an acquisition for consideration in excess of $1 billion and for the next five fiscal quarters thereafter, the ratio of Total Indebtedness to Total Capitalization may not exceed 65% at any time. As of June 30, 2024, Total Indebtedness to Total Capitalization as defined under the Credit Agreement was 44%.

Previous wording

Aggregate restructuring savings were approximately $8 million in the first quarter 2024. Total restructuring savings are expected to be at least $35 million in 2024. In addition, the Company continues to review its cost structure to identify additional cost savings opportunities. Refer to Note 5, “Business Restructuring” in Part I, Item 1 of this Form 10-Q for further details on the Company's business restructuring programs. We expect cash outlays related to these actions of approximately $80 million in 2024.

Current wording

Aggregate restructuring savings were approximately $10 million in the second quarter 2024. Total restructuring savings are expected to be at least $35 million in 2024. In addition, the Company continues to review its cost structure to identify additional cost savings opportunities. Refer to Note 5, “Business Restructuring” in Part I, Item 1 of this Form 10-Q for further details on the Company's business restructuring programs. We expect cash outlays related to these actions of approximately $60 million in 2024.

Previous wording

Comparing spot exchange rates at March 31, 2024 and at December 31, 2023, the U.S. dollar strengthened against the currencies of many countries within Europe and Asia where PPG operates, partially offset by weakening against the Mexican peso. As a result, consolidated net assets at March 31, 2024 decreased by $12 million compared to December 31, 2023.

Current wording

Comparing spot exchange rates at June 30, 2024 and at December 31, 2023, the U.S. dollar strengthened against the currencies of many countries within the regions PPG operates, most notably the Mexican peso. As a result, consolidated net assets at June 30, 2024 decreased by $444 million compared to December 31, 2023.

Previous wording

Comparing average exchange rates during the first three months of 2024 to those of the first three months of 2023, the U.S. dollar weakened against the currencies of many countries where PPG operates, including the Mexican Peso, partially offset by strengthening against the Chinese Yuan. This had a favorable impact on Income before income taxes for the three months ended March 31, 2024 of $10 million from the translation of these foreign earnings into U.S. dollars.

Current wording

Comparing average exchange rates during the first six months of 2024 to those of the first six months of 2023, the U.S. dollar weakened against the currencies of certain countries where PPG operates, including the Mexican peso, partially offset by strengthening against the Chinese yuan. This had a favorable impact on Income before income taxes for the six months ended June 30, 2024 of $6 million from the translation of these foreign earnings into U.S. dollars.