PPG INDUSTRIES INC

Previous 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.

Current wording

Net sales were approximately $4.6 billion for the three months ended September 30, 2024, a decrease of 1.5% 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 $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.

Current wording

Income before income taxes was $611 million for the three months ended September 30, 2024, an increase of $54 million compared to the prior year. This increase was primarily due to improved manufacturing productivity, certain reductions in overhead, and lower depreciation, amortization and net interest costs, partially offset by wage and benefits inflation.

Previous wording

Selling, general and administrative expense increased $80 million primarily due to wage inflation and growth-related investments.

Current wording

Selling, general and administrative expense increased $15 million primarily due to wage and benefits inflation partially offset by certain overhead reductions.

Previous wording

Interest expense decreased $9 million primarily due to lower debt balances. Interest income increased $30 million primarily due to higher interest rates.

Current wording

Interest expense increased $3 million primarily due to higher interest rates. Interest income increased $9 million primarily due to higher interest rates.

Previous wording

Other charges/(income), net increased by $15 million primarily due to higher environmental remediation charges and a non-cash loss on the sale of the traffic solutions business in Argentina, partially offset by an increase in realized foreign currency gains.

Current wording

Other (income)/charges, net increased by $27 million of income primarily due to the absence of a loss on the third quarter 2023 sale of the Company's legacy Russian industrial operations and an increase in realized foreign currency gains.

Previous wording

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

Current wording

Selling, general and administrative expense increased $95 million primarily due to wage and benefits inflation and growth-related investments.

Previous wording

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

Current wording

Interest expense decreased $6 million primarily due to lower debt balances. Interest income increased $39 million primarily due to higher interest rates and higher intra-quarter cash and cash equivalents balances during the period.

Previous 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.

Current wording

Other (income)/charges, net increased by $11 million of charges primarily due to a non-cash loss on the second quarter 2024 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 U.S. factory, partially offset by the absence of a loss on the third quarter 2023 sale of the Company's legacy Russian industrial operations and an increase in realized foreign currency gains.

Previous 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.

Current wording

Adjusted earnings per diluted share for the nine months ended September 30, 2024 increased year-over-year primarily due to moderating raw material costs during the first six months of 2024, partially offset by wage and benefits inflation.

Previous 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.

Current wording

(b)Portfolio optimization includes losses on the sale of non-core assets, including the loss recognized in the second quarter 2024 on the sale of the Company's traffic solutions business in Argentina and the loss recognized in the third quarter 2023 on the sale of the Company's legacy industrial Russian operations, which are included in Other (income)/charges, 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

(b)Business restructuring-related costs, net include business restructuring charges, offset by releases related to previously approved programs, which are included in Other charges/(income), net on the condensed consolidated statement of income, accelerated depreciation of certain assets, which is included in Depreciation on the condensed consolidated statement of income, and other restructuring-related costs, which are included in Cost of sales, exclusive of depreciation and amortization and Selling, general and administrative on the condensed consolidated statement of income.

Current wording

(c)Business restructuring-related costs, net include business restructuring charges, offset by releases related to previously approved programs, which are included in Other (income)/charges, net on the condensed consolidated statement of income, accelerated depreciation of certain assets, which is included in Depreciation on the condensed consolidated statement of income, and other restructuring-related costs, which are included in Cost of sales, exclusive of depreciation and amortization and Selling, general and administrative on the condensed consolidated statement of income.

Previous wording

(d)Legacy environmental remediation charges represent environmental remediation costs at certain non-operating PPG manufacturing sites. These charges are included in Other charges/(income), net in the condensed consolidated statement of income.

Current wording

(d)Legacy environmental remediation charges represent environmental remediation costs at certain non-operating PPG manufacturing sites. These charges are included in Other (income)/charges, net in the condensed consolidated statement of income.

Previous wording

Performance Coatings net sales were flat due to the following:

Current wording

Performance Coatings net sales increased due to the following:

Previous 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.

Current wording

Architectural coatings - Americas and Asia Pacific net sales, excluding the impact of currency, acquisitions and divestitures ("organic sales") increased a low single-digit percentage compared to the prior-year third quarter driven by increased sales volumes in the U.S. and Canada coupled with higher prices. In the U.S. and Canada, growth initiatives through our partnership with The Home Depot® drove higher professional contractor sales volumes. In Mexico, the business benefited from our strong concessionaire network.

Previous 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.

Current wording

Architectural coatings – EMEA organic sales were flat year over year, as higher prices were offset by lower sales volumes. Consumer confidence remained weak during the quarter, and regional demand was uneven by country. Sales volumes were strong in central and eastern Europe offset by lower sales volumes in western Europe.

Previous wording

Aerospace coatings organic sales increased by a double-digit percentage compared to the second quarter 2023, driven by higher price and sales volumes. Demand remained strong as customer order backlogs increased.

Current wording

Aerospace coatings organic sales increased by a double-digit percentage compared to the third quarter 2023, led by higher selling prices and sales volume. Demand remained strong as customer order backlogs are at similar levels to the prior quarter. Global air travel has improved year over year but remains about 3% below pre-pandemic levels for both domestic and international flights. The company remains focused on debottlenecking and expanding manufacturing capabilities to drive volume and earnings growth.

Previous wording

Traffic solutions organic sales increased by a low-single-digit percentage compared with the prior-year second quarter due to increased sales volumes stemming from share gains. Seasonally, second quarter and third quarter sales in the traffic solutions business are typically more than 50% higher than the first quarter and fourth quarter due to the difficulty of applying traffic markings in colder temperatures.

Current wording

Traffic solutions organic sales increased by a low single-digit percentage compared with the prior-year third quarter primarily due to increased sales volumes offset by lower prices. Seasonally, second and third quarter sales in the traffic solutions business are typically more than twice the sales in the first and fourth quarter due to the difficulty of applying traffic markings in colder temperatures.

Previous 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.

Current wording

Segment income was $513 million, an increase of 13% versus the prior year, primarily due to higher sales volumes and selling prices, partially offset by wage inflation.

Previous wording

Architectural coatings – EMEA organic sales decreased by a low single-digit percentage year over year driven by lower sales volumes. 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.

Current wording

Architectural coatings – EMEA organic sales decreased by a low single-digit percentage year over year driven by lower sales volumes. Regional demand was uneven by country, with strong sales volumes in central and eastern Europe offset by lower sales volumes in western Europe.

Previous wording

Aerospace coatings sales volumes increased by a high single-digit percentage as demand was strong in most regions. Sales also increased due to the benefit of higher selling prices.

Current wording

Aerospace coatings sales volumes increased by a high single-digit percentage as demand was strong in all regions. Sales also increased due to the benefit of higher selling prices.

Previous 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.

Current wording

Segment income increased $101 million year over year primarily due to higher selling prices, lower manufacturing costs and moderating raw material costs during the first six months of 2024, which more than offset wage and benefits inflation and higher growth-related spending.

Previous 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.

Current wording

Automotive OEM coatings organic sales decreased by a double-digit percentage compared to the third quarter 2023 driven by lower sales volumes and lower indexed-based selling prices for certain customer contracts. Overall global demand weakened in the third quarter. Sales volume declines in the U.S. and Europe were partially offset by sales volume increases in Latin America. In Western Europe and the U.S., automotive industry build rates were significantly lower than the third quarter 2023 with reduced demand and extended OEM downtime.

Previous 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.

Current wording

In the industrial coatings business, organic sales decreased by a mid-single-digit percentage compared to the prior year due to lower sales volumes and lower indexed-based prices. Overall, global industrial production remained sluggish, especially in Europe and the U.S. Sales volume declines in those regions more than offset strong growth in the Asia Pacific and Latin America regions.

Previous wording

Packaging coatings organic sales increased a mid-single-digit percentage compared to the prior year with higher sales volumes partially offset by lower, index-driven prices.

Current wording

Packaging coatings organic sales increased by a low single-digit percentage compared to the prior year with higher sales volumes partially offset by lower, index-driven prices. Global beverage demand remains strong, and PPG is well positioned to support the growth.

Previous 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.

Current wording

Specialty coatings and materials organic sales increased by a low single-digit percentage due to higher sales volumes partially offset by lower selling prices.

Previous wording

Automotive OEM coatings organic sales decreased by a mid-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.

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 Europe and the U.S.

Previous wording

In the industrial coatings business, organic sales decreased by a mid-single-digit percentage year over year driven by lower sales volumes and indexed-based prices. Softening global industrial demand resulted in lower sales volumes in all regions except Asia Pacific where sales volumes increased by a high single-digit percentage.

Current wording

In the industrial coatings business, organic sales decreased by a mid-single-digit percentage year over year driven by lower sales volumes and indexed-based prices. Softening global industrial demand resulted in lower sales volumes in all regions except Asia Pacific where sales volumes increased by a mid single-digit percentage.

Previous wording

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

Previous wording

Segment income increased $18 million year over year primarily due to moderating input costs which more than offset certain index-based selling price declines.

Current wording

Segment income decreased $29 million year over year primarily due to index-based selling price declines, partially offset by moderating raw material costs during the first six months of 2024.

Previous wording

PPG had cash and short-term investments totaling $1.2 billion and $1.6 billion at June 30, 2024 and December 31, 2023, respectively.

Current wording

PPG had cash and short-term investments totaling $1.3 billion and $1.6 billion at September 30, 2024 and December 31, 2023, respectively.

Previous 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.

Current wording

Cash from operating activities for the nine months ended September 30, 2024 and 2023 was $1,074 million and $1,513 million, respectively. The $439 million decrease in cash from operating activities was primarily due to unfavorable changes in working capital compared to the prior year.

Previous 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.

Current wording

Cash used for investing activities for the nine months ended September 30, 2024 and 2023 was $511 million and $399 million, respectively. The $112 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 to $650 million in 2024 in support of future organic growth opportunities.

Current wording

Total capital spending is expected to be approximately $650 million to $700 million in 2024 in support of future organic growth opportunities.

Previous wording

Cash used for financing activities for the six months ended June 30, 2024 and 2023 was $185 million and $266 million, respectively. The $81 million decrease in cash used for financing activities was primarily due to higher net debt proceeds, partially offset by higher share repurchases compared to the prior year.

Current wording

Cash used for financing activities for the nine months ended September 30, 2024 and 2023 was $617 million and $1,005 million, respectively. The $388 million decrease in cash used for financing activities was primarily due to higher net debt proceeds, partially offset by higher share repurchases compared to the prior year.

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 $171 million commercial paper borrowings outstanding as of June 30, 2024 and no commercial paper borrowings outstanding as of 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 $408 million commercial paper borrowings outstanding as of September 30, 2024 and no commercial paper borrowings outstanding as of December 31, 2023.

Previous 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.

Current wording

Aggregate restructuring savings were approximately $10 million in the third 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 6, “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 in the range of $50 million to $60 million in 2024.

Previous 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.

Current wording

Comparing spot exchange rates at September 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 September 30, 2024 decreased by $558 million compared to December 31, 2023.

Previous 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.

Current wording

Comparing average exchange rates during the first nine months of 2024 to those of the first nine months of 2023, the U.S. dollar was relatively flat compared to the currencies of most countries where PPG operates. Changes in foreign exchange rates had an unfavorable impact on Income before income taxes for the nine months ended September 30, 2024 of $1 million from the translation of these foreign earnings into U.S. dollars.

Previous wording

Many factors could cause actual results to differ materially from the Company’s forward-looking statements. Such factors include statements related to the expected effects on our business of COVID-19, global economic conditions, geopolitical issues in Europe, increasing price and product competition by our competitors, fluctuations in cost and availability of raw materials, energy, labor and logistics, the ability to achieve selling price increases, the ability to recover margins, customer inventory levels, PPG inventory levels, our ability to maintain favorable supplier relationships and arrangements, the timing of and the realization of anticipated cost savings from restructuring initiatives, the ability to identify additional cost savings opportunities, the timing and expected benefits of our acquisitions, difficulties in integrating acquired businesses and achieving expected synergies therefrom, the amount of future share repurchases, economic and political conditions in the markets we serve, the ability to penetrate existing, developing and emerging foreign and domestic markets, foreign exchange rates and fluctuations in such rates, fluctuations in tax rates, the impact of future legislation, the impact of environmental regulations, unexpected business disruptions, the unpredictability of existing and possible future litigation, including asbestos litigation, and government investigations. However, it is not possible to predict or identify all such factors.

Current wording

Many factors could cause actual results to differ materially from the Company’s forward-looking statements. Such factors include statements related to the global economic conditions, geopolitical issues in Europe, effects on our business of COVID-19, increasing price and product competition by our competitors, fluctuations in cost and availability of raw materials, energy, labor and logistics, the ability to achieve selling price increases, the ability to recover margins, customer inventory levels, PPG inventory levels, our ability to maintain favorable supplier relationships and arrangements, the cost reduction program, including the timing and amounts of the expected future restructuring charges, accelerated depreciation, and cash costs and the timing and realization of anticipated cost savings from restructuring actions, the ability to identify additional cost savings opportunities, the timing and expected benefits of our acquisitions, difficulties in integrating acquired businesses and achieving expected synergies therefrom, the amount of future share repurchases, economic and political conditions in the markets we serve, the ability to penetrate existing, developing and emerging foreign and domestic markets, foreign exchange rates and fluctuations in such rates, fluctuations in tax rates, the impact of future legislation, the impact of environmental regulations, unexpected business disruptions, the unpredictability of existing and possible future litigation, including asbestos litigation, and government investigations. However, it is not possible to predict or identify all such factors.