<PAGE>
[Conformed]
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996 Commission File Number 1-1687
PPG INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Pennsylvania 25-0730780
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
One PPG Place, Pittsburgh, 15272
Pennsylvania (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
Registrant's telephone number, 412-434-3131
including area code:
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
<S> <C>
Common Stock--Par Value $1.66 2/3 New York Stock Exchange
Pacific Stock Exchange
Philadelphia Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Pacific Stock Exchange
Philadelphia Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
As of January 31, 1997, 182,268,407 shares of the Registrant's common stock,
with a par value of $1.66 2/3 per share, were outstanding. As of that date,
the aggregate market value of common stock held by non-affiliates was $9,697
million.
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
INCORPORATED BY
DOCUMENT REFERENCE IN PART NO.
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<S> <C>
Portions of PPG Industries, Inc. Annual Report to
Shareholders
for the year ended December 31, 1996................... I, II and IV
Portions of PPG Industries, Inc. Proxy Statement for its
1997
Annual Meeting of Shareholders......................... III
</TABLE>
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<PAGE>
PPG INDUSTRIES, INC.
AND CONSOLIDATED SUBSIDIARIES
---------------
As used in this report, the terms "PPG," "Company," and "Registrant" mean PPG
Industries, Inc. and its subsidiaries, taken as a whole, unless the context
indicates otherwise.
---------------
TABLE OF CONTENTS
<TABLE>
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PAGE
----
<C> <S> <C>
PART I
Item 1. Business..................................................... 1
Item 2. Properties................................................... 3
Item 3. Legal Proceedings............................................ 3
Item 4. Submission of Matters to a Vote of Security Holders.......... 3
Executive Officers of the Registrant......................... 4
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.......................................... 5
Item 6. Selected Financial Data...................................... 5
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 5
Item 8. Financial Statements and Supplementary Data.................. 5
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.......................... 5
PART III
Item 10. Directors and Executive Officers of the Registrant........... 6
Item 11. Executive Compensation....................................... 6
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................... 6
Item 13. Certain Relationships and Related Transactions............... 6
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K.......................................................... 7
Signatures ............................................................. 8
</TABLE>
NOTE ON INCORPORATION BY REFERENCE
Throughout this report, various information and data are incorporated by
reference to the Company's 1996 Annual Report to Shareholders (hereinafter
referred to as "the Annual Report to Shareholders"). Any reference in this
report to disclosures in the Annual Report to Shareholders shall constitute
incorporation by reference only of that specific information and data into
this Form 10-K.
<PAGE>
PART I
ITEM 1. BUSINESS
PPG Industries, Inc., incorporated in Pennsylvania in 1883, is comprised of
three basic business segments: coatings and resins, glass and chemicals.
Within these business segments, PPG has followed a program of directing its
resources of people, capital and technology in selected areas where it enjoys
positions of leadership. Areas in which resources have been focused are
automotive original, refinish, industrial and architectural coatings; flat
glass, automotive original and replacement glass, aircraft transparencies,
continuous-strand fiber glass; and chlor-alkali and specialty chemicals. Each
of the business segments in which PPG is engaged is highly competitive.
However, the diversification of product lines and worldwide markets served
tend to minimize the impact on total sales and earnings of changes in demand
for a particular product line or in a particular geographic area. Reference is
made to "Business Segment Information" on pages 26 and 27 of the Annual Report
to Shareholders, which is incorporated herein by reference, for financial
information relating to business segments.
COATINGS AND RESINS
PPG is a major manufacturer of protective and decorative coatings. The
coatings industry is highly competitive and consists of a few large firms with
global presence and many smaller firms serving local or regional markets. PPG
competes in its primary markets with the world's largest coatings companies,
most of which have operations in North America and Europe. Product
development, innovation, quality and customer service have been stressed by
PPG and have been significant factors in developing an important supplier
position.
The coatings business involves the supply of protective and decorative
finishes for automotive original equipment, appliances, industrial equipment
and packaging; factory-finished aluminum extrusions and coils for
architectural uses; and other industrial and consumer products. In addition to
supplying finishes to the automotive original-equipment market, PPG supplies
automotive refinishes to the aftermarket, which are primarily sold through
distributors. In the automotive original and industrial portions of the
coatings business, PPG sells directly to a variety of manufacturing companies.
Product performance, technology, quality and customer service are major
competitive factors. The automotive original and industrial coatings are
formulated specifically for the customer's needs and application methods. PPG
also manufactures adhesives and sealants for the automotive industry and metal
pretreatments for automotive and industrial applications.
The architectural finishes business consists primarily of coatings used by
painting and maintenance contractors and by consumers for decoration and
maintenance. PPG's products are sold through independent distributors, paint
dealers, mass merchandisers and home centers. Price, quality and service are
key competitive factors in the architectural finishes market.
Coatings and resins' principal production facilities are concentrated in North
America and Europe. North American production facilities consist of 15 plants
in the United States, one in Canada and two in Mexico. The three largest
facilities are the Cleveland, Ohio, plant, which primarily produces automotive
original coatings; the Oak Creek, Wis., plant, which produces automotive
original and other industrial coatings, and the Delaware, Ohio, plant, which
primarily produces automotive refinishes and certain industrial coatings.
Outside North America, PPG operates three plants in Spain, two plants in
Germany and Italy, and one plant each in China, England, France and Portugal.
These plants produce a variety of automotive and industrial coatings. PPG owns
equity interests in operations in Argentina, Brazil, Hong Kong, South Korea
and Taiwan. Additionally, coatings and resins operates 10 service centers in
the United States, two each in Canada and Mexico, and one in Argentina to
provide just-in-time delivery and service to selected automotive assembly
plants. Nineteen training centers in the United States, six in Europe, five in
Asia and one in Canada are in operation. These centers provide training for
automotive aftermarket refinish customers. Also, four automotive original
coatings application centers that provide testing facilities for customer
paint processes and new products are in operation. The average number of
persons employed by the coatings and resins segment during 1996 was 9,900.
GLASS
PPG is one of the major producers of flat glass, fabricated glass and
continuous-strand fiber glass in the world. PPG's major markets are automotive
original equipment, automotive replacement, residential and commercial
construction, aircraft transparencies, the furniture, marine and electronics
industries, and other markets. Most glass products are sold directly to
manufacturing and construction companies, although in some instances products
are sold directly to independent distributors and through PPG distribution
outlets. Fiber glass products are sold directly to manufacturing companies and
independent distributors. PPG manufactures flat glass by the float process and
fiber glass by the continuous-filament process.
The bases for competition are price, quality, technology, cost and customer
service. The Company competes with
1
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six other major producers of flat glass, six other major producers of
fabricated glass and two other major producers of fiber glass throughout the
world.
PPG's principal glass production facilities are concentrated in North America
and Europe. Fifteen plants operate in the United States, of which six produce
flat glass, five produce automotive glass, three produce fiber glass products
and one produces aircraft transparencies. There are three plants in Canada,
two of which produce automotive glass and one produces flat glass. Four plants
operate in Italy; one manufactures automotive and flat glass, one produces
automotive glass, one produces flat glass and another produces aircraft
transparencies. Three plants are located in France; one plant manufactures
automotive and flat glass and two plants produce automotive glass. One plant
in England and one plant in the Netherlands produce fiber glass. PPG owns
equity interests in operations in Canada, France, Mexico, the Netherlands, the
People's Republic of China, Taiwan, the United States and Venezuela and a
majority interest in a glass distribution company in Japan. Additionally,
three satellite operations provide limited manufacturing and just-in-time
service to selected automotive customer locations. The average number of
persons employed by the glass segment during 1996 was 15,900.
CHEMICALS
PPG is a major producer of chlor-alkali and specialty chemicals. The primary
chlor-alkali products are chlorine, caustic soda, vinyl chloride monomer,
chlorinated solvents and chlorinated benzenes. Most of these products are sold
directly to manufacturing companies in the chemical processing, rubber and
plastics, paper, minerals and metals, and water treatment industries. The
primary specialty chemical products are Transitions(registered trademark)
lenses; optical monomers; precipitated silicas for the tire, shoe and battery
separator businesses; surfactants for food emulsification, sugar processing and
personal care products; and phosgene derivatives for the pharmaceutical,
agricultural and fuel additives businesses.
PPG competes with six other major producers of chlor-alkali products. Price,
product availability, product quality and customer service are the key
competitive factors. In the specialty chemicals area, PPG's market share
varies greatly by business; product quality and performance and technical
service are the most critical competitive factors.
Chemicals' principal production facilities are concentrated in North America
with nine plants in the United States and one plant in Canada. The two largest
facilities, located in Lake Charles, La., and Natrium, W. Va., primarily
produce chlor-alkali products. An additional North American plant is expected
to begin producing silica-based compounds in Mexico in March 1997. Outside
North America, PPG operates two plants each in Taiwan and the People's
Republic of China, and one each in Australia, France, Ireland and the
Netherlands. PPG owns equity interests in operations in Japan, Thailand and
the United States. The average number of persons employed by the chemicals
segment during 1996 was 4,600.
RAW MATERIALS
The effective management of raw materials is important to PPG's continued
success. The Company's most significant raw materials are sand, soda ash,
energy, polyvinyl butyral and boron-containing minerals in the glass segment;
titanium dioxide and epoxy resins in the coatings and resins segment; and
energy and ethylene in the chemicals segment. Most of the raw materials used
in production are purchased from outside sources, and the Company has made,
and will continue to make, supply arrangements to meet the planned operating
requirements for the future. For the significant raw material requirements
identified above, and other material, there is more than one source of supply.
RESEARCH AND DEVELOPMENT
Research and development costs, including depreciation of research facilities,
during 1996, 1995 and 1994 were $255 million, $252 million and $233 million,
respectively. Research and development facilities are maintained for each
business segment and each of the facilities conducts research and development
involving new and improved products and processes. PPG owns and operates nine
research and development facilities in the United States, Europe and Japan.
Additional process and product research and development work is also
undertaken at many of the Company's manufacturing plants.
PATENTS
PPG considers patent protection to be important from an overall standpoint.
The Company's business segments are not materially dependent upon any single
patent or group of related patents. PPG received $25 million, $27 million and
$25 million from royalties and the sale of technical know-how during the years
1996, 1995 and 1994, respectively.
BACKLOG
In general, PPG does not manufacture its products against a backlog of orders.
Production and inventory levels are geared primarily to projections of future
demand and the level of incoming orders.
NON-U.S. OPERATIONS
Although PPG has a significant investment in non-U.S. operations, based upon
the extent and location of
2
<PAGE>
investments, management believes that the risk associated with its
international operations is not significantly greater than domestic
operations.
EMPLOYEES
The average number of persons employed worldwide by PPG during 1996 was
31,300.
ENVIRONMENTAL MATTERS
Like other companies, PPG is subject to the existing and evolving standards
relating to the protection of the environment. Capital expenditures for
environmental control projects were $18 million, $25 million and $19 million
in 1996, 1995 and 1994, respectively. It is expected that expenditures for
such projects in 1997 will approximate $40 million with similar amounts of
annual expenditures expected in the near future. Although future capital
expenditures are difficult to estimate accurately because of constantly
changing regulatory standards and policies, it can be anticipated that
environmental control standards will become increasingly stringent and costly.
PPG is negotiating with various government agencies concerning 74 National
Priority List ("NPL") and various other cleanup sites. While PPG is not
generally a major contributor of wastes to these sites, each potentially
responsible party or contributor may face governmental agency assertions of
joint and several liability. Generally, however, a final allocation of costs
is made based on relative contributions of wastes to the site. There is a wide
range of cost estimates for cleanup of these sites, due largely to
uncertainties as to the nature and extent of their condition and the methods
that may have to be employed for their remediation. Additionally, remediation
projects have been or may be undertaken at certain of the Company's current
and former plant sites. The Company has established reserves for those sites
where it is probable a liability exists and the amount can be reasonably
estimated. As of Dec. 31, 1996 and 1995, PPG had reserves for environmental
contingencies totaling $91 million and $100 million, respectively. Pretax
charges against income for environmental remediation costs totaled $27 million
in 1996, $49 million in 1995 and $36 million in 1994.
The Company's experience to date regarding environmental matters leads PPG to
believe that it will have continuing expenditures for compliance with
provisions regulating the protection of the environment and for present and
future remediation efforts at waste and plant sites. However, management
anticipates that such expenditures, which will occur over an extended period
of time, will not result in future annual charges against income that are
significantly greater than those recorded in recent years. 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, is well positioned, relative to environmental
matters, within the industries in which it operates, and the outcome of these
environmental matters will not have a material adverse effect on PPG's
financial position or liquidity. See Commitments and Contingent Liabilities,
including Environmental Matters in Management's Discussion and Analysis for
additional information related to environmental matters.
ITEM 2. PROPERTIES
See "Item 1. Business" for information on PPG's production and fabrication
facilities.
Generally, the Company's plants are suitable and adequate for the purposes for
which they are intended, and overall have sufficient capacity to conduct
business in the upcoming year.
ITEM 3. LEGAL PROCEEDINGS
Securities and Exchange Commission regulations require the disclosure of any
environmental legal proceeding in which a governmental authority is a party
and which may reasonably be expected to involve monetary sanctions in excess
of $100,000. In this regard, the Company voluntarily entered into an agreement
with the U.S. Environmental Protection Agency ("EPA") to participate in the
EPA's Toxic Substances Control Act Section 8(e) Compliance Audit Program (the
"Program"). Under the Program, the Company conducted a self-audit. On Oct. 28,
1992, the Company submitted the first of two final reports pursuant to the
first of two phases of the Program as it then existed. In May 1996, the EPA
eliminated the second phase of the Program. A Consent Agreement and Consent
Order settling the first phase was signed by the Company in September 1996. In
December 1996, the Company paid the EPA $522,000 in final settlement of this
matter.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
3
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EXECUTIVE OFFICERS OF THE REGISTRANT
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<CAPTION>
NAME AGE TITLE
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<S> <C> <C>
Jerry E. Dempsey (a) 64 Chairman of the Board and Chief Executive Officer since September 1993
Raymond W. LeBoeuf (b) 50 President and Chief Operating Officer since December 1995
Frank A. Archinaco (c) 53 Senior Vice President, Glass since December 1995
Russell L. Crane (d) 56 Senior Vice President, Human Resources and Administration since April 1994
William H. Hernandez (e) 48 Senior Vice President, Finance since January 1995
E. Kears Pollock (f) 56 Senior Vice President, Coatings and Resins since December 1995
Guy A. Zoghby (g) 62 Senior Vice President and General Counsel since April 1994
</TABLE>
(a) Mr. Dempsey was Senior Vice President of WMX Technologies, Inc., and
Chairman of Chemical Waste Management, Inc., prior to his present
position.
(b) Mr. LeBoeuf was Executive Vice President, Group Vice President, Coatings
and Resins and Vice President, Finance prior to his present position.
(c) Mr. Archinaco was Vice President, Glass and Vice President, Automotive and
Aircraft Products prior to his present position.
(d) Mr. Crane was Vice President, Human Resources prior to his present
position.
(e) Mr. Hernandez was Vice President, Finance, Vice President and Controller
and Controller prior to his present position.
(f) Mr. Pollock was Vice President, Coatings and Resins and Vice President,
Automotive Products prior to his present position.
(g) Mr. Zoghby was Vice President and General Counsel prior to his present
position.
The executive officers of the Company are elected annually in April by the
Board of Directors.
4
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PART II
Information with respect to the following Items can be found on the indicated
pages of the Annual Report to Shareholders and is incorporated herein by
reference.
<TABLE>
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PAGE(S)
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Stock Exchange Listings................................................ 40
Quarterly Stock Information............................................ 40
ITEM 6. SELECTED FINANCIAL DATA
The information required by Item 6 is reported in the Eleven-Year
Digest under the captions net sales, income before accounting changes,
cumulative effect of accounting changes, net income, earnings per share
before accounting changes, cumulative effect of accounting changes on
earnings per share, earnings per share, dividends per share, total
assets and long-term debt for the years 1992 through 1996.............. 39
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis................................... 21-25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Independent Auditors' Report........................................... 17
Financial Statements:
Statement of Income for the years ended
December 31, 1996, 1995 and 1994..................................... 18
Balance Sheet, December 31, 1996 and 1995............................. 19
Statement of Cash Flows for the years ended
December 31, 1996, 1995 and 1994..................................... 20
Notes to the Financial Statements..................................... 28-37
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
5
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 regarding Directors is contained under the
caption "Election of Directors" in the Registrant's definitive Proxy Statement
for its 1997 Annual Meeting of Shareholders (the "Proxy Statement") which will
be filed with the Securities and Exchange Commission, pursuant to Regulation
14A, not later than 120 days after the end of the fiscal year, which
information under such caption is incorporated herein by reference.
The information required by Item 10 regarding Executive Officers is set forth
in Part I of this report under the caption "Executive Officers of the
Registrant."
The information required by Item 405 of Regulation S-K is included under the
caption "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy
Statement which information under such caption is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is contained under the captions
"Compensation of Executive Officers" and "Election of Directors--Compensation
of Directors" in the Proxy Statement which information under such captions is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is contained under the caption "Voting
Securities" in the Proxy Statement which information under such caption is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is contained under the caption "Election
of Directors--Other Transactions" in the Proxy Statement which information
under such caption is incorporated herein by reference.
6
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements and Independent Auditors' Report (see Part II, Item 8
of this report (page 5) regarding incorporation by reference from the
Annual Report to Shareholders).
Financial Statement Schedules for years ended December 31, 1996, 1995 and
1994:
The following should be read in conjunction with the previously
referenced financial statements.
<TABLE>
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PAGE
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Independent Auditors' Report........................................... 9
Schedule II--Valuation and Qualifying Accounts......................... 10
</TABLE>
All other schedules are omitted because they are not applicable.
(b) No reports were filed on Form 8-K during the last quarter of the period
covered by this report.
(c)Exhibits:
3 The Restated Articles of Incorporation as amended, were filed as
Exhibit 3 to the Registrant's Form 10-Q for the quarter ended March
31, 1995, which exhibit is incorporated herein by reference. The
bylaws as amended, were filed as Exhibit 3(ii) to the Registrant's
Form 10-Q for the quarter ended September 30, 1996, which exhibit is
incorporated herein by reference.
4 The Shareholders' Rights Plan was filed as Exhibit 4 on the
Registrant's Form 8-K, dated May 12, 1988, which exhibit is
incorporated herein by reference.
10 The Nonqualified Retirement Plan as amended, was filed as Exhibit 10
to the Registrant's Form 10-Q for the quarter ended March 31, 1996.
The Incentive Compensation and Deferred Income Plan for Key
Employees as amended, was filed as Exhibit 10.4 to the Registrant's
Form 10-K for the year ended December 31, 1995. 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. The 1984 Stock Option Plan was filed as Exhibit
10 to the Registrant's Form 10-Q for the quarter ended March 31,
1992. All such exhibits are incorporated by reference.
*10.1 Deferred Compensation Plan for Directors as amended through November
1, 1996.
*10.2 Directors' Common Stock Plan as amended through November 1, 1996.
*10.3 Deferred Compensation Plan as amended through November 1, 1996.
11 Computation of Earnings Per Share for the Five Years Ended December
31, 1996.
13 Company's 1996 Annual Report to Shareholders. (Except for the pages
and information therein expressly incorporated by reference in this
Form 10-K, the Annual Report to Shareholders is provided solely for
the information of the Commission and is not to be deemed "filed" as
part of the Form 10-K.)
21 Subsidiaries of the Registrant.
23 Consent of Independent Auditors.
24 Powers of Attorney.
27 Financial Data Schedule.
* Items referred to in Exhibit 10 and incorporated by reference and Exhibits
10.1, 10.2 and 10.3 are either management contracts, compensatory plans or
arrangements required to be filed as an exhibit hereto pursuant to Item
14(c) of Form 10-K.
7
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized, on February 20, 1997.
PPG INDUSTRIES, INC.
(Registrant)
By /s/ W. H. Hernandez
...............................................
W. H. Hernandez, Senior Vice President,
Finance
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant
and in the capacities indicated, on February 20, 1997.
SIGNATURE CAPACITY
/s/ J. E. Dempsey Director, Chairman of the Board and Chief
..................... Executive Officer
J. E. Dempsey
/s/ W. H. Hernandez Senior Vice President, Finance (Principal
..................... Financial and Accounting Officer)
W. H. Hernandez
E. B. Davis, Jr.
Director
M. J. Hooper
Director
A. J. Krowe
Director
R. W. LeBoeuf
Director
By /s/ W. H. Hernandez
S. C. Mason ...................................
Director W. H. Hernandez, Attorney-in-Fact
H. A. McInnes
Director
R. Mehrabian
Director
V. A. Sarni
Director
T. J. Usher
Director
D. G. Vice
Director
D. R. Whitwam
Director
8
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of PPG
Industries, Inc.:
We have audited the balance sheet of PPG Industries,
Inc. and subsidiaries as of December 31, 1996 and
1995, and the related statements of income and cash
flows for each of the three years in the period ended
December 31, 1996, and have issued our report thereon
dated January 16, 1997; such financial statements and
report are included in your 1996 Annual Report to
Shareholders and are incorporated herein by
reference. Our audits also included financial
statement schedule II, Valuation and Qualifying
Accounts, of PPG Industries, Inc. and subsidiaries
for the years ended December 31, 1996, 1995 and 1994.
The financial statement schedule is the
responsibility of the Company's management. Our
responsibility is to express an opinion based on our
audits. In our opinion, such financial statement
schedule, when considered in relation to the basic
financial statements taken as a whole, presents
fairly in all material respects the information set
forth therein.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
January 16, 1997
9
<PAGE>
PPG INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING COSTS AND BALANCE AT
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS(/1/) END OF YEAR
---------- ---------- --------------- -----------
(MILLIONS)
<S> <C> <C> <C> <C>
1996
Deducted from assets to
which they apply:
Allowance for doubtful
accounts ____________ $28.2 $12.9 $15.5 $25.6
===== ===== ===== =====
1995
Deducted from assets to
which they apply:
Allowance for doubtful
accounts ____________ $26.5 $ 8.1 $ 6.4 $28.2
===== ===== ===== =====
1994
Deducted from assets to
which they apply:
Allowance for doubtful
accounts ____________ $25.6 $12.6 $11.7 $26.5
===== ===== ===== =====
</TABLE>
---------------------
(/1/) Notes and accounts receivable written off as uncollectible, net of
recoveries, changes attributable to foreign currency translation, and
activity related to businesses sold.
10
<PAGE>
PPG INDUSTRIES, INC.PPG INDUSTRIES, INC.
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
INDEX TO EXHIBITS
Exhibit Incorporated by Reference
- ------- -------------------------
3 The Restated Articles Exhibit 3 - Form 10-Q for the quarter
of Incorporation. ended March 31, 1995.
3 The Bylaws, as amended. Exhibit 3(ii) - Form 10-Q for the quarter
ended September 30, 1996.
4 The Shareholders' Rights Exhibit 4 - Form 8-K, dated May 12, 1988.
Plan.
10 The Nonqualified Retire- Exhibit 10 - Form 10-Q for the quarter
ment Plan. ended March 31, 1996.
10 The Incentive Compen- Exhibit 10.4 - Form 10-K for the year ended
sation and Deferred December 31, 1995.
Income Plan For Key
Employees, as amended.
10 The Supplemental Exhibit 10.2 - Form 10-Q for the quarter
Executive Retirement ended September 30, 1995.
Plan II.
10 Change in Control Exhibit 10.5 - Form 10-Q for the quarter
Employment Agreement. ended September 30, 1995.
10 1984 Stock Option Plan. Exhibit 10 - Form 10-Q for the quarter
ended March 31, 1992.
<PAGE>
Exhibit Description
- ------- -----------
10.1 Deferred Compensation Plan for Directors as amended through
November 1, 1996.
10.2 Directors' Common Stock Plan as amended through November 1, 1996.
10.3 Deferred Compensation Plan as amended through November 1, 1996.
11 Computation of Earnings Per Share for the Five Years Ended
December 31, 1996.
13 Company's 1996 Annual Report to Shareholders.
21 Subsidiaries of the Registrant.
23 Consent of Independent Auditors.
24 Powers of Attorney.
27 Financial Data Schedule.
<PAGE>
Exhibit 10.1
PPG INDUSTRIES, INC.
--------------------
DEFERRED COMPENSATION PLAN FOR DIRECTORS
----------------------------------------
1. Purpose
-------
The purpose of the PPG Industries, Inc. Deferred Compensation Plan for
Directors (the "Plan") is to offer each non-employee member of the Board of
Directors of PPG Industries, Inc. (the "Corporation") the opportunity to
defer receipt of the compensation to be earned for services as a director of
the Corporation until after termination of service as a director.
2. Definitions
-----------
(a) "Account" or "Accounts" means one or more of the Stock Account or the
Capital Enhancement Account maintained for a Participant.
(b) "Beneficiary" means the person or entity designated by the Participant
or the Participant's legal representative as provided under Section
7(b).
(c) "Capital Enhancement Account" means a bookkeeping account or accounts
maintained for a Participant who, for such period or periods as the
Committee may establish or permit, elects to defer to it all or any
part of his or her Compensation.
(d) "Committee" means the Officers-Directors Compensation Committee (or
any successor) of the Board of Directors of the Company.
(e) "Common Stock" means the common stock, par value $1.66 2/3 per share,
of the Corporation.
(f) "Common Stock Unit" means a hypothetical share of Common Stock.
(g) "Compensation" means a Participant's retainer and meeting fees earned
for services as a director and as chairman or a member of a committee
of the Board of Directors.
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<PAGE>
(h) "Dividend Equivalents" means an additional number of Common Stock
Units the Corporation shall credit to each Stock Account as of each
dividend payment date declared with respect to the Corporation's
Common Stock. The additional number of Common Stock Units to be
credited to each Stock Account shall be equal to:
(1) 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 Units credited to the Stock
Account as of the applicable dividend record date;
DIVIDED BY
----------
(2) 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.
(i) "Participant" means an eligible director who participates in the Plan.
(j) "Stock Account" means a bookkeeping account maintained for a
Participant who elects to defer to it all or any part of his or her
Compensation and to which Common Stock Units and Dividend Equivalents
are credited.
3. Eligibility
-----------
All directors of the Corporation who are not at the time also serving as
salaried employees of the Corporation are eligible to participate in the
Plan.
4. Deferral of Compensation
------------------------
(a) Each Participant shall have such Compensation as the Board of
Directors mandates deferred under the Plan and credited to the Stock
Account. In addition, each Participant may elect to have additional
Compensation deferred under the Plan and
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<PAGE>
credited to the Stock Account and/or, as permitted by the Committee,
the Capital Enhancement Account.
(b) Subject to any rules, regulations, procedures or resolutions adopted
by the Committee, an election to defer shall be made in writing prior
to the start of the calendar year for which it is to become effective
and shall be effective upon filing with the Secretary of the
Corporation, provided however that in the first calendar year in which
an individual becomes a director, an election to defer may be made as
to the remainder of such year, provided that the election is filed
with the Secretary within thirty (30) days of the individual's
appointment to the Board. Once deferral has been elected and filed
with the Secretary of the Corporation, it shall become irrevocable for
the next succeeding calendar year and, unless revoked in writing or
superseded by a new election effective for calendar years after the
year in which such revocation or new election is executed, shall
continue in effect for each calendar year thereafter.
(c) Deferred amounts shall be credited on the books of the Corporation to
an account in the name of the Participant on the same date that it
would otherwise be payable and shall thereafter be paid from the
general funds of the Corporation. No assets of the Corporation shall
be segregated or earmarked in respect to any amounts credited to the
Accounts of Participants and all such amounts shall constitute
unsecured contractual obligations of the Corporation.
(d) The number of Common Stock Units to be credited to the Stock Account
of a Participant shall be equal to the quotient obtained by dividing
the unpaid deferred amount to be credited to the Stock Account by the
closing price of a share of the Common Stock on the date on which such
deferred amount is credited on the books of the Corporation (or if
such stock was not traded on that date, on the next preceding date on
which it was traded), as reported on the New York Stock Exchange
Composite Transactions. Dividend Equivalents shall be credited to
each Stock Account as of each dividend payment date declared with
respect to the Corporation's Common Stock.
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<PAGE>
(e) Interest equivalents in respect to unpaid deferred amounts credited to
the Capital Enhancement Account shall be credited at the same interest
rate, and in the same manner, as interest equivalents are credited to
the Capital Enhancement Account under the PPG Industries, Inc.
Incentive Compensation and Deferred Income Plan for Key Employees;
provided, however, that (i) pre-retirement death benefits as a
multiple of amounts deferred thereunder and (ii) reduction of the rate
of interest equivalents in case of termination of service prior to age
62, shall not apply to amounts deferred hereunder.
(f) The sum of each Participant's deferrals of Compensation under Section
4(a), to his Capital Enhancement Account shall be not less than such
minimum, and not more than such maximum, as the Committee shall
specify.
5. Payment of Deferred Amounts
---------------------------
(a) Payments from the Stock Account will be made in the form of Common
Stock, provided that payment with respect to any partial Common Stock
Unit shall be made in the form of cash. However, payments from the
Stock Account of any Participant who ceased to be a director of the
Corporation before August 15, 1996 shall continue to be paid in the
manner provided by the Plan as effective on August 15, 1996. Payments
from the Capital Enhancement Account shall be made in the form of
cash.
(b) Subject to Section 5(d) and Section 5(f), 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 Corporation.
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.
-4-
<PAGE>
Subject to Sections 5(d), 5(e) and 5(f), 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.
Where installments are payable from a Participant's Capital
Enhancement Account, the amount of each installment will be calculated
such as to provide approximately equal distributions over the period
designated. However, no installment paid from the Capital Enhancement
Account may be in an amount less than $1,000, and, to the extent
necessary, installments shall be accelerated so as to provide for such
minimum installments.
Where installments are payable form a Participant's Stock Account, 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 Stock 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 Stock 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 Stock Account, the Company shall pay the
Participant, in cash, an amount equal to the value of any remaining
fractional Stock Unit 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.
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<PAGE>
(c) Death or Disability
-------------------
(i) Subject to Section 5(f), in the event of the death or disability
of a Participant either while serving as a director of the
Corporation 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 5(f), in the event of the death or disability
of a Participant on or after the commencement of installment
payments, in accordance with Section 5(b), 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(b); 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.
(d) Payment Elections
-----------------
Any prior election as to the number of installments made by a
Participant who is serving as a director of the Corporation on
February 19, 1992 shall be null and void.
Subject to Section 5(f), 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.
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<PAGE>
(e) Notwithstanding any other provision of this Plan, the first
installment to a Participant shall not be paid until six months and
ten days after the Participant shall cease to be a director of the
Corporation.
(f) 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 Compensation that the Board of Directors
mandates shall be deferred 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) resulting from the mandatory deferrals
shall occur as a lump sum payment on the first business day which is 6
months and 10 days after the Participant's last day as a member of the
Board. In the event of such Participant's death prior to receipt of
the benefits, the Participant's Beneficiary shall be paid the benefits
on the first business day which is 6 months and 10 days after the
Participant's last day as a member of the Board.
6. Change in Control
-----------------
(a) Upon, or in reasonable anticipation of, a Change in Control (as
defined below), the Corporation 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.
(b) Except as regards Section 6(c)(v), the Committee shall have the duty
and the authority to make the determination as to whether a Change in
Control has occurred, or is reasonably to be anticipated, and,
concomitantly, to direct the making of the payment contemplated
herein.
-7-
<PAGE>
(c) A "Change in Control" shall mean:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (x) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (y) the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (i), the
following acquisitions shall not constitute a Change in Control:
(a) any acquisition directly from the Company, (b) any
acquisition by the Company, (c) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (d) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (a), (b) and (c) of subsection (iii) of
this Section 6(c); or
(ii) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
-8-
<PAGE>
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless,
following such Business Combination, (a) all or substantially
all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (b) no Person (excluding any
employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities
of such corporation except to the extent that such ownership
existed prior to the Business Combination and (c) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing
for such Business Combination; or
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company; or
-9-
<PAGE>
(v) A majority of the Board otherwise determines that a Change in
Control shall have occurred.
7. General Provisions
------------------
(a) Either the Board of Directors of the Corporation or the Committee may
modify or amend the Plan, in whole or in part, from time to time, or
terminate the Plan at any time, without the consent of any Participant
or Beneficiary of any Participant; provided, however, that any
modification, amendment or termination shall be of general application
to all Participants and Beneficiaries and shall not, without the
consent of the Participant or, in the event of his death, the
Participant's Beneficiary or estate adversely affect (i) any amount
theretofore deferred or credited to the Participant's Account(s) or
(ii) the right of the Participant to receive all amounts theretofore
credited to the Participant's Account(s), as of the date of such
modification, amendment or termination; and provided further that any
modification, amendment or termination that would materially increase
or accelerate the payment of any amount under the Plan shall be
approved by the Board of Directors. The Plan shall remain in effect
until terminated pursuant to this paragraph.
(b) No rights under the Plan may be transferred or assigned except that a
Participant may designate, in writing filed with the Secretary of the
Corporation, 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.
(c) The Committee shall have full power to administer and interpret the
Plan and to adopt such rules, regulations, procedures and resolutions
consistent with the terms of the Plan as the Committee deems necessary
or advisable to carry out the terms of the Plan.
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<PAGE>
(d) The place of administration of the Plan shall be conclusively deemed
to be within the Commonwealth of Pennsylvania, and the validity,
construction, interpretation and administration of the Plan, and of
any determinations or decisions made thereunder, and the rights of any
and all persons having or claiming to have any interest therein or
thereunder, shall be governed by, and determined exclusively and
solely in accordance with, the internal laws of the Commonwealth of
Pennsylvania.
As Amended -- November 1, 1996
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<PAGE>
Exhibit 10.2
PPG INDUSTRIES, INC.
DIRECTORS' COMMON STOCK PLAN
----------------------------
1. PURPOSE. The purpose of this Plan is to align the financial interests of
-------
the Company's shareholders with those of its Non-Employee Directors by
providing such Directors with compensation in the form of Company Common
Stock.
2. DEFINITIONS.
-----------
"Account" means the account maintained for each Non-Employee Director to
which Common Stock Equivalents and Dividend Equivalents are credited.
"Annual Contribution" means the Common Stock Equivalents credited to an
Account each year under Section 4.1.
"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:
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<PAGE>
(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.
"Eligible Spouse" means the spouse who is legally married to a Participant
at the time of his or her death.
"Non-Employee Director" means a director of the Company who is not a
present or former employee of the Company or any of its subsidiaries.
"Participant" means a Non-Employee Director who has become eligible to
receive benefits under this Plan. A Non-Employee Director becomes a
Participant when he or she (1) resigns from the Board and (2) attains 70
years of age; provided however, that the Committee may waive the
requirement that the Participant attain 70 years of age.
"Plan" means the PPG Industries, Inc. Directors' Common Stock Plan.
"Retainer" means the base annual retainer fee paid to each Non-Employee
Director by the Company. It does not include committee retainer fees,
meeting attendance fees, committee chairperson's retainer fees or any other
compensation other than the base annual retainer fee.
"Service" means the period of time a Non-Employee Director serves on the
Board.
3. EFFECTIVE DATE. This Plan shall be effective on and after January 1, 1988.
--------------
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<PAGE>
4. CREDITING ACCOUNTS.
------------------
4.1 Commencing in the year 1988, 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. No more than 10 such Annual Contributions shall be made to each
Account and the total number of such Annual Contributions to an 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.
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.
5. PAYMENTS OF BENEFITS.
--------------------
5.1 Only Participants or Eligible Spouses will receive benefits under this
Plan. Except as set forth in Section 5.4, the Account of a Non-Employee
Director will be forfeited if he or she does not become a Participant.
5.2 Benefits will be paid in the form of Common Stock (and cash for any
remaining partial shares of Common Stock as described below) in annual
installments each year on May 1 (or on the next business day if May 1 is
not a business day) commencing the first May 1 the
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<PAGE>
Participant is eligible to receive benefits; provided, however, that the
first payment to a Participant shall not be made until 6 months and 10 days
after the Participant ceases to be a Non-Employee Director. The number of
annual installments paid to each Participant shall be equal to his or her
number of full fiscal years of Service, but shall not exceed 10 annual
installments. The number of shares of Common Stock attributable to 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. As of the date on which the last payment of
benefits is made to any Participant, the Company shall pay the Participant,
in cash, the value of any remaining fractional Common Stock Equivalent
based on the closing sale price of the Common Stock on the New York Stock
Exchange Composite Transactions on the last date for which such price is
available prior to the payment date. Notwithstanding the foregoing,
payments from the account of any Participant who ceased to be 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.
5.3 If a Non-Employee Director dies prior to resigning, or after resigning from
the Board but before becoming eligible to receive benefits hereunder, he or
she shall be deemed to have become a Participant eligible to receive
benefits hereunder immediately prior to his or her death, and such benefits
shall be paid to the Participant's Eligible Spouse. If a Participant dies
after becoming eligible to receive benefits hereunder, but prior to
receiving all the benefits due him or her hereunder, such remaining
benefits shall be paid to the Participant's Eligible Spouse. Unpaid
benefits under this Plan will be forfeited in the event the Participant's
death and Participant's Eligible Spouse's death occur prior to the total
amount of benefits due hereunder having been paid.
6. CHANGES IN STOCK. In the event of any change in the outstanding shares of
----------------
the Common Stock, or in the number thereof, by reason of any stock dividend
or split, recapitalization, merger, consolidation, exchange of shares or
other similar change, a corresponding change will be made in the number of
Common
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<PAGE>
Stock Equivalents and Dividend Equivalents, if any, credited to each
Account, unless the Committee determines otherwise.
7. ACCELERATION. The Committee, in its sole discretion, may accelerate the
------------
payment of benefits hereunder to any Participant or his or her Eligible
Spouse 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 Eligible Spouse 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
Eligible Spouse on the above referenced date.
8. CHANGE IN CONTROL. Upon, or in reasonable anticipation of, a Change in
-----------------
Control (as defined above), the Company shall immediately make a payment in
cash to a trustee on such terms as the Senior Vice President, Human
Resources, and Administration and the Senior Vice President, Finance, or
either of them, shall deem appropriate (including such terms as are
appropriate to cause such payment, if possible, not to be a taxable event
to Participants) of a sufficient amount to insure that Participants receive
the payment of all amounts as contemplated under the Plan.
9. GENERAL PROVISIONS. The entire cost of benefits and administrative
------------------
expenses for this Plan shall be paid by the Company. This Plan is purely
voluntary on the part of the Company. The Company, by action of the Board
or, except as limited by the Company's bylaws, the Committee, may amend,
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<PAGE>
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 Eligible Spouse 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.
As Amended November 1, 1996
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<PAGE>
Exhibit 10.3
PPG INDUSTRIES, INC.
DEFERRED COMPENSATION PLAN
Initially Effective January 1, 1996
Amended November 1, 1996
<PAGE>
Table of Contents
-----------------
Section I ............................ Definitions
Section II ............................ Deferrals
Section III ............................ Investment Options
Section IV ............................ Savings Plan Restoration
Contributions
Section V ............................ Withdrawal Provisions
Section VI ............................ Specific Provisions
Related to Benefits
Section VII ............................ Administration and Claims
Section VIII ............................ Amendment and Termination
Section IX ............................ Miscellaneous
Section X ............................ Change in Control
- Page 1.1 -
<PAGE>
SECTION I - DEFINITIONS
-----------------------
1.01 Account means all deferred Award amounts, all deferred Salary amounts and
all Restoration Contributions and earnings on each in a Participant's
account at any particular time.
1.02 Administrator means an officer or officers of the Company appointed by the
Committee, and any person(s) designated by such Administrator to assist
in the administration of the Plan.
1.03 Affiliate means any business entity, other than a Subsidiary Corporation,
in which PPG has an equity interest.
1.04 Award means a grant to a Participant under either the IC Plan or MAP
which such person may elect to defer. Awards to Participants may
be made in the form of cash ("cash component"), shares of PPG stock
("stock component"), or a combination of both.
1.05 Beneficiary means the person or persons designated by a Participant to
receive benefits hereunder following the Participant's death, in
accordance with Section 6.02. For purposes of this Section 1.05,
"person or persons" is limited to an individual, a Trustee or a
Participant's estate.
1.06 Board means the Board of Directors of PPG Industries, Inc.
1.07 Code means the Internal Revenue Code of 1986, and amendments thereto.
1.08 Committee means the Officers-Directors Compensation Committee
(or any successor) of the Board.
1.09 Company or PPG means PPG Industries, Inc.
1.10 Conversion Formula means dividing an amount by the average of the closing
sale prices for PPG Stock reported on the New York Stock Exchange-
Composite Tape for the first five days during which the New York
Stock Exchange is open during the Plan Year immediately following
the last day of the Plan Year to which the Award relates.
1.11 Corporation means PPG and any Subsidiary Corporation and any Affiliate
designated by the Administrator as eligible to participate in the
Plan, and which, by proper authorization of the Board of Directors or
other governing body of such Subsidiary Corporation or Affiliate, elects
to participate in the Plan.
- Page 1.2 -
<PAGE>
1.12 Disability means any long-term disability. The Administrator, in his
complete and sole discretion, shall determine a Participant's Disability;
provided, however, that a Participant who is approved to receive Long-Term
Disability benefits pursuant to the PPG Industries, Inc. Long-Term
Disability Plan shall be considered to have a Disability. The
Administrator may require that a Participant submit to an examination from
time to time, but no more often than annually, at the expense of the
Company, by a competent physician or medical clinic, selected by the
Administrator, to confirm Disability. On the basis of such medical
evidence, the determination of the Administrator as to whether or not a
condition of Disability exists or continues shall be conclusive.
1.13 Discretionary Transaction means a transaction pursuant to any employee
benefit plan of the Company that:
(a) Is at the volition of the plan participant;
(b) Is not made in connection with the participant's death, disability,
retirement or termination of employment;
(c) Is not required to be made available to a plan participant
pursuant to a provision of the Code; and
(d) Results in either an intra-plan transfer involving a PPG Stock
Fund or a cash distribution funded by a volitional disposition of
PPG Common Stock by the plan participant.
1.14 Earnings Growth Plan means the PPG Industries, Inc. 1984 Earnings Growth
Plan.
1.15 Employee means any full-time or permanent part-time salaried employee
(including any officer) of the Corporation.
1.16 ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
1.17 Financial Hardship means an unexpected need for cash arising from an
illness, casualty loss, sudden financial reversal, or other such
unforeseeable occurrence, as determined by the Administrator, in his
complete and sole discretion.
1.18 Former Participant means a Participant who becomes ineligible to receive
an Award but who continues to have an Account hereunder.
1.19 IC Plan means the PPG Industries, Inc. Incentive Compensation and
Deferred Income Plan for Key Employees.
- Page 1.3 -
<PAGE>
1.20 Insider means a Participant who at any time within the prior six (6)
months was a person subject to Section 16 of the Securities Act of 1934.
1.21 Interest Account means a record-keeping account maintained for a
Participant who elects to defer all or part of an Award/Salary and/or
maintain all or part of a deferred Award/Salary in the form of cash.
1.22 Interest Rate means the rate of interest to be credited during a Plan
Year, as established prior to the beginning of the Plan Year. Such
rate shall be either the Declared Rate or the Minimum Rate, as provided
in the Plan.
Declared Rate - means the greatest of:
(a) the 90-day Treasury Bill yield plus 2.0 percentage points
(Established: for Plan Year 1996 - as of September 15, 1995 and for
Plan Years after 1996 - as of October 15 of the Plan Year prior to
the Plan Year in which the rate is to be effective); or
(b) the average of the month's end 10-year Treasury Note yield over the
previous 36 month period (as of the last business day of September
of the Plan Year prior to the Plan Year in which the average rate
is to be effective); or
(c) The Minimum Rate.
Minimum Rate - means the average of the daily closing yields during
October for the 10-year Treasury Note.
The Declared Rate and the Minimum Rate will be announced to Participants
prior to the beginning of the Plan Year to which such rates apply.
1.23 MAP means the PPG Industries, Inc. Management Award and Deferred Income
Plan.
1.24 Participant means an Employee approved to participate in either the IC
Plan or MAP. As used herein, "Participants" may be used collectively to
include Retired Participants, Terminated Participants and Former
Participants.
1.25 Plan or DCP means the PPG Industries, Inc. Deferred Compensation Plan.
1.26 Plan Year means the calendar year.
1.27 PPG Stock means Common Stock of the Company. Shares of PPG Stock issued
under the Plan may be either authorized but unissued shares or issued
shares acquired by the Company and held in its treasury.
- Page 1.4 -
<PAGE>
1.28 PPG Stock Account means a record-keeping account maintained for a
Participant who elects to defer all or part of an Award/Salary and/or to
maintain all or part of a deferred Award/Salary in the form of Stock
Account Shares.
1.29 PPG Stock Fund means the PPG Stock Account, the Savings Plan PPG Stock
Account or any other fund or account of any other benefit plan of the
Company or a Subsidiary which account or fund is invested in, or valued
based upon, PPG Common Stock and which fund or account is an alternative
to other funds or accounts made available to plan participants which funds
or accounts are not invested in, or valued based upon ,PPG Common Stock.
1.30 Prohibited Discretionary Transaction means a Discretionary Transaction
to be effected pursuant to an election made less than six months following
the date of the most recent previous election to make a Discretionary
Transaction with respect to any employee benefit plan of the Company which
most recent previous election effected:
(a) An increase in a PPG Stock Fund if the current transaction would
entail a disposition of PPG Stock or a decrease in a PPG Stock
Fund; or
(b) A disposition of PPG Stock or a decrease in a PPG Stock Fund if the
current transaction would entail an increase in a PPG Stock Fund.
1.31 Restoration Contributions means contributions to a Participant's Savings
Plan Restoration Account in accordance with Section IV.
1.32 Retired Participant means a Participant who elects to maintain an Account
in the Plan after his/her Retirement Date.
1.33 Retirement Date means the first day of the month following a Participant's
termination of employment, provided such Participant is eligible to
receive a benefit from a retirement plan sponsored by the Corporation on
such date.
1.34 Salary means a Participant's monthly base salary from the Corporation
(excluding bonuses, commissions and other non-regular forms of
compensation) and including payments from the PPG Industries Salary
Continuance Plan, before reductions for deferrals under the Plann or
under any other Plan sponsored by the Corporation. In the case of Salary
Continuance, Salary deferral elections shall be applied to the actual
amount of Salary Continuance being paid.
1.35 Savings Plan means the PPG Industries Employee Savings Plan.
- Page 1.5 -
<PAGE>
1.36 Savings Plan Election means the sum of the percentage the Participant is
contributing to the Savings Plan as Savings and as Elective Deferrals
not to exceed the percentage eligible for the Company match in the
Savings Plan.
1.37 Savings Plan Interest Account means a record-keeping account maintained
for a Participant who is eligible to receive Restoration Contributions.
The Interest Rate credited in the Savings Plan Interest Account shall be
the same as that credited to the Interest Account.
1.38 Savings Plan Matching Percentage means the percentage of the Company's
Matching Contributions for a Plan Year in the Savings Plan.
1.39 Savings Plan PPG Stock Account means a record-keeping account maintained
for a Participant who is eligible to receive Savings Plan Restoration
Contributions in accordance with Section IV, in the form of Stock
Account Shares.
1.40 Savings Plan Restoration Account means all Restoration Contributions and
earnings thereon in a Participant's Account at any particular time.
1.41 Stock Account Share means a record-keeping unit which is equivalent to
one share of PPG Stock.
1.42 Subsidiary means any corporation of which fifty percent (50%) or more of
the outstanding voting stock or voting power is owned, directly or
indirectly, by the Company and any partnership or other entity in
which the Company has a fifty percent (50%) or more ownership interest.
1.43 Terminated Participant means a Participant who maintains an Account in
the Plan following his/her termination of employment from the Corporation.
1.44 Unscheduled Withdrawal means a distribution of all or a portion of a
Participant's Interest Account and/or PPG Stock Account requested by a
Participant, or a Beneficiary, if the Participant is deceased, in
accordance with Section 5.07.
- Page 1.6 -
<PAGE>
SECTION II - DEFERRALS
----------------------
2.01 Deferral of Award
-----------------
(a) In accordance with the provisions of either the IC Plan or MAP,
whichever is applicable, the value of that portion of the cash
component of a deferred Award which the Participant has designated
to the Interest Account shall be credited to the Interest Account on
the day such deferral would otherwise have been paid to the
Participant.
(b) In accordance with the provisions of either the IC Plan or MAP,
whichever is applicable, the value of:
(1) that portion of the cash component of a deferred Award which
the Participant has designated to the PPG Stock Account;
and/or
(2) the value of the stock component of a deferred Award
shall be credited to the PPG Stock Account in the
Participant's Account on the day such deferral would otherwise
have been paid to the Participant.
(c) Subject to paragraph (e) below, all crediting elections pursuant to
this Section 2.01 are subject to the transfer provisions of Section
3.04
(d) Amounts credited to the PPG Stock Account shall be credited in the
form of whole and fractional Stock Account Shares determined
according to the Conversion Formula.
(e) Any amount designated by the Participant for in-service withdrawal
in accordance with either the IC Plan or MAP must be credited to the
Interest Account and is not subject to the transfer provisions of
Section 3.04.
- Page 2.1 -
<PAGE>
2.02 Deferral of Salary
------------------
(a) Prior to the beginning of each quarter, a Participant may elect to
defer a percentage, in whole percentages only, of his/her Salary as
follows:
Minimum Deferral Maximum Deferral
---------------- ----------------
1% 50%
(b) Elections made pursuant to this Section 2.02 shall remain in effect
until the earlier of:
(1) The first day of the quarter following the quarter the
Participant rescinds or modifies the election; or
(2) The first day of the Plan Year following the Plan Year in
which the Participant becomes a Former Participant.
(c) Any election filed by a Participant pursuant to this Section 2.02
must be received by the Administrator on or before the last business
day of the quarter prior to the quarter in which such election is to
become effective. Deferred Salary shall be credited to the
Participant's Account on the first day of the month following the
month in which the deferral is made.
(d) A Participant is ineligible to defer or continue to have deferred
any Salary percentage during a quarter in which the Participant's
salary is subject to a garnishment, tax lien, child support or any
similar attachment to Salary.
(e) A Participant who becomes ineligible for Salary deferral, in
accordance with Paragraph (d) above, may thereafter resume Salary
deferral upon the discontinuance of the attachment to the Salary and
in accordance with the Salary election provisions of this Section
2.02.
2.02.01 Salary Deferral Crediting Elections
-----------------------------------
(a) At the time an election is made to defer Salary, the Participant
must also designate in whole percentages whether such amount is to
be credited to the Interest Account, the PPG Stock Account, or a
combination of both.
- Page 2.2 -
<PAGE>
(b) A Salary deferral crediting election shall remain in effect through
an entire quarter. A Salary deferral crediting election may be
changed by a Participant for a subsequent quarter by notification to
the Administrator on or before the last business day of the quarter,
to be effective on the first day of the next quarter.
(c) All crediting elections pursuant to this Section 2.02.01 are subject
to the transfer provisions of Section 3.04.
(d) The number of Stock Account Shares credited to the PPG Stock Account
shall be determined by the closing price for PPG Stock on the last
business day of the month in which the deferral is made.
- Page 2.3 -
<PAGE>
SECTION III - DEFERRAL ACCOUNT OPTIONS
--------------------------------------
3.01 Interest Account
----------------
Except as otherwise provided in Sections 5.03 and 6.06, amounts deferred to
the Interest Account shall accrue interest equivalents at the Declared
Rate.
3.02 PPG Stock Account
-----------------
(a) Amounts credited to the PPG Stock Account shall be credited in the
form of Stock Account Shares.
(b) Participants shall not receive cash dividends or have voting or other
shareholders' rights as to Stock Account Shares; however, Stock
Account Shares shall accrue whole and fractional dividend
equivalents, in the form of additional Stock Account Shares, on the
basis of the closing sale price for PPG Stock, reported on the
Composite Tape for the day on which a dividend is paid, based on the
number of whole Stock Account Shares in the PPG Stock Account on the
record date.
3.03 Transfers from IC Plan, MAP and/or the Earnings Growth Plan
-----------------------------------------------------------
(a) Any amount previously deferred under either the IC Plan or MAP, which
has not been withdrawn prior to January 1, 1996, shall be transferred
to the Participant's Account in this Plan effective January 1, 1996.
Amounts credited to the interest account under the prior plan(s)
shall be transferred to the Interest Account and amounts credited to
the PPG stock account under the prior plan(s) shall be transferred to
the PPG Stock Account.
(b) (1) Subject to subparagraph (2) below, any amount which a
Participant currently has in his/her account in the Earnings
Growth Plan shall be transferred to the Participant's Account in
this Plan effective January 1, 1996. Amounts credited to the
interest account in the Earnings Growth Plan shall be
transferred to the Interest Account, and amounts credited as
earnings growth shares in the Earnings Growth Plan shall be
transferred to the PPG Stock Account.
(2) Subparagraph (1) above shall not apply in the case of a
Participant who has filed a withdrawal election with respect to
his/her earnings growth account under the Earnings Growth Plan.
Such account shall remain in the Earnings Growth Plan and
subject to the provisions thereof.
- Page 3.1 -
<PAGE>
3.04 Transfers
---------
(a) Subject to paragraph (b) below, a Participant who has a balance in
his/her Account, may elect to transfer some or all of his/her Account
balance between the PPG Stock Account and the Interest Account.
Transfers shall be subject to the following provisions:
(1) Participants must file a transfer request with the Administrator
on or before the last business day of a quarter, to be effective
on the first day of the next quarter.
(2) The number and value of Stock Account Shares shall be determined
by the closing price for PPG Stock on the last business day of
the quarter in which the election is received by the
Administrator.
(b) Insiders may not without the prior approval of the Senior Vice
President, Human Resources and Administration, or his or her
successor, transfer any amount out of the PPG Stock Account
which was credited to their Account balance within the prior six
months. Insiders are also prohibited from making any transfer
which would constitute a Prohibited Discretionary Transaction.
- Page 3.2 -
<PAGE>
SECTION IV - SAVINGS PLAN RESTORATION CONTRIBUTIONS
---------------------------------------------------
4.01 Restoration Contributions
-------------------------
Participants who are currently contributing to the Savings Plan may be
eligible to receive Restoration Contributions as follows:
(a) For Participants whose Salary exceeds the amount specified in
(S)401(a)(17) of the Code, Restoration Contributions shall equal the
sum of (1) and (2) below:
(1) Lesser of:
Excess Salary times Savings Plan Election times Savings Plan
Matching Percentage; or
Amount of monthly deferred Salary.
(2) If the difference between the Participant's Salary deferral and
Excess Salary ("Difference") is greater than zero:
Difference times Savings Plan Election times Savings Plan
Matching Percentage.
(b) For a Participant whose Salary equals or is less than the amount
specified in (S)401(a)(17) of the Code and such Participant elects to
defer Salary in accordance with Section 2.02, Restoration
Contributions shall equal the amount of the deferred Salary times the
Participant's Savings Plan Election times the Savings Plan Matching
Percentage.
(c) For purposes of this Section 4.01 Excess Salary means Salary minus
the amount specified in (S)401(a)(17) of the Code divided by 12.
4.02 Savings Plan Restoration Account
--------------------------------
(a) Restoration Contributions shall be credited monthly and shall be
maintained in the Savings Plan Restoration Account. The Savings Plan
Restoration Account shall consist of a Savings Plan Interest
Account, and a Savings Plan PPG Stock Account.
- Page 4.1 -
<PAGE>
(b) Restoration Contributions shall be credited to the Savings Plan PPG
Stock Account and shall be credited in the form of Stock Account
Shares, the number of which shall be determined by using the closing
price for PPG Stock on the last business day of the month in which
such Restoration Contributions are made, and credited to the
Participant's Savings Plan Restoration Account on the first day of
the month following the month in which the Restoration Contributions
are made.
(c) Participants shall not receive cash dividends or have voting or
other shareholders' rights as to Stock Account Shares; however,
Stock Account Shares shall accrue whole and fractional dividend
equivalents, in the form of additional Stock Account Shares, on the
basis of the closing sale price for PPG Stock, reported on the
Composite Tape for the day on which a dividend is paid, based on the
number of whole Stock Account Shares in the Savings Plan PPG Stock
Account on the record date.
4.03 Vesting
-------
Restoration Contributions shall be 100% vested at the time such
Restoration Contributions are credited to a Participant's Account.
4.04 Transfers
---------
Restoration Contributions may be transferred to the Savings Plan Interest
Account, in accordance with Section 3.04, beginning the Plan Year in which
a Participant reaches his/her 55th birthday.
4.05 Withdrawal Provisions
---------------------
(a) The Savings Plan Restoration Account is not subject to provisions of
Sections 5.01, 5.06 or 5.07.
(b) At the time of a Participant's termination of employment, including
termination due to Retirement, Death and/or Disability, any amount
in the Savings Plan PPG Stock Account shall be transferred to the
PPG Stock Account and any amount in the Savings Plan Interest
Account shall be transferred to the Interest Account and shall be
subject to any election filed by the Participant or the Beneficiary,
in accordance with the provisions of Section 5.02, 5.03, 5.04 or
5.05.
- Page 4.2 -
<PAGE>
SECTION V - WITHDRAWAL PROVISIONS
---------------------------------
5.01 Scheduled In-Service Withdrawals
--------------------------------
Except as otherwise provided in this Section V, payment of any amount
designated by a Participant for in-service withdrawal, in accordance with
provisions of either the IC Plan or MAP, whichever is applicable, shall be
made to the Participant in a lump sum as of the first day of the
quarter/year specified by the Participant.
5.02 Withdrawals at/after a Participant's Retirement Date
----------------------------------------------------
(a) A Participant may elect a payment schedule applicable to his/her
Account provided such election is filed with the Administrator:
(1) Prior to the Participant's Retirement Date; and
(2) In the year prior to the year the first payment is to be made
and, in all cases, at least six months/ten days prior to the
time the first payment is to be made.
(b) Participants may elect:
(1) One lump-sum payment; or
(2) Quarterly, semiannual or annual installments- to be made over a
period of years, up to a maximum period of 15 years; or
(3) A combination of (1) and (2).
(c) A Participant may delay the first payment for a period up to ten
years following his/her Retirement Date; provided, however, that, in
all cases, payments must begin no later than the year in which the
Participant's 75th birthday occurs.
- Page 5.1 -
<PAGE>
(d) The payment schedule elected by the Participant shall apply to
his/her entire Account. Participants may designate the first day of
the quarter for the commencement of the payment schedule on an
annual, semiannual or quarterly basis.
Each installment payment shall be calculated by dividing the
Participant's account balance by the remaining number of
installments - (e.g.: Ten annual installments shall be paid: 1st
---
installment = 1/10 of Account; 2nd installment = 1/9 of Account; 3rd
installment = 1/8 of Account, etc.). If the installment payment is to
be in the form of PPG Stock, any stock increment shall be rounded
down to the nearest whole stock share. Any remaining stock increments
shall remain in the Account until subject to further payment.
(e) In the event a Participant fails to file a payment schedule election
with the Administrator prior to his/her Retirement Date, his/her
Account shall be paid in one lump sum in the year following the year
of such Retirement Date and shall be paid during the first quarter of
such year which is at least six months/ten days following such
Retirement Date.
(f) Payment schedules pursuant to this Section 5.02 shall supersede any
prior payment election(s) filed with the Administrator; and shall
become irrevocable on the Participant's Retirement Date.
5.03 Withdrawals following Termination
---------------------------------
(a) Except as provided in paragraph (e) below, a Participant may elect
when to receive a lump-sum payment of his/her Account balance
following his/her termination date provided such election is filed
with the Administrator no later than 30 days after such termination
date.
(b) Participants must specify the quarter/year that the lump-sum payment
is to be made; provided, however, that the Participant must elect to
receive the payment no later than the last quarter of the year in
which the fifth anniversary of his/her termination date occurs.
Payment must occur no earlier than the Plan Year after the Plan Year
of the Participant's termination and as of the first day of the
first quarter which is as least six (6) months and 10 days following
the Participant's termination.
- Page 5.2 -
<PAGE>
(c) In the event a Participant fails to file a payment election with the
Administrator within the time provided in paragraph (a) above,
his/her Account shall be paid in one lump sum in the year following
the year of such termination date and shall be paid during the first
quarter in such year which is at least six months/ten days following
such termination date.
(d) The rate of interest credited in the Interest Account following a
Participant's termination date shall be at the Minimum Rate;
provided, however, that the Committee shall have the authority to
approve continuation of the Declared Rate, on a case-by-case basis.
(e) In the event the Administrator determines, in his sole discretion,
that a termination is "for cause," the Participant shall have no
election with respect to payment of his/her Account. Such
Participant shall receive his/her entire Account balance as of the
first day of the first quarter immediately following his/her
termination date.
(f) Payment schedules pursuant to this Section 5.03 shall supersede any
prior payment election(s) filed with the Administrator.
5.04 Withdrawals in the event of Disability
--------------------------------------
(a) In the event a Participant becomes disabled, he/she may elect a
payment schedule applicable to his/her Account provided such
election is filed with the Administrator within 30 days of the
Administrator's determination that such Participant has a
Disability.
(b) Participants may elect:
(1) One lump-sum payment; or
(2) Quarterly, semiannual or annual installments- to be made over a
period of years, up to a maximum period of 15 years; or
(3) A combination of (1) and (2).
- Page 5.3 -
<PAGE>
(c) A Participant may delay the first payment for a period of up to ten
years following the determination that he/she has a Disability;
provided, however, that, in all cases, payments must begin no later
than the year in which the Participant's 75th birthday occurs.
Payments must commence no earlier than the Plan Year following the
Plan Year in which the Participant is determined to have a
Disability and as of the first day of the first quarter which is at
least six (6) months and 10 days following the Administrator's
determination that such Participant has a Disability.
(d) The payment schedule elected by the Participant shall apply to
his/her entire Account. Participants may designate the first day of
a quarter for the commencement of the payment schedule on an annual,
semiannual or quarterly basis.
Each installment payment shall be the applicable fraction of the
Participant's Account balance -(e.g.: Ten annual installments shall
be paid: 1st installment = 1/10 of Account; 2nd installment = 1/9 of
Account; 3rd installment = 1/8 of Account, etc.). .). If the
installment payment is to be in the form of PPG Stock, any stock
increment shall be rounded down to the nearest whole stock share.
Any remaining stock increments shall remain in the Account until
subject to further payment.
(e) In the event a Participant fails to file a payment schedule election
with the Administrator within the period specified in paragraph (a)
above, his/her Account shall be paid in one lump sum in the year
following the year he/she incurs a Disability, and shall be paid
during the first quarter in such year which is at least six
months/ten days following such Disability date.
(f) Payment schedules pursuant to this Section 5.04 shall supersede any
prior payment election(s) filed with the Administrator; and shall
become irrevocable when filed in accordance with paragraph (a).
5.05 Withdrawals following a Participant's death
-------------------------------------------
(a) Death prior to a Participant's Election Date
--------------------------------------------
In the event of a Participant's death prior to his/her Election
Date, the Participant's entire Account shall be paid to the
Participant's Beneficiary as soon as possible following the
Participant's death.
- Page 5.4 -
<PAGE>
(b) Death on or after a Participant's Election Date
-----------------------------------------------
In the event of a Participant's death on or after his/her Election
Date, the Participant's Beneficiary may elect to receive the
remaining balance of the Participant's Account paid as a lump sum,
or in accordance with the payment schedule filed by the Participant.
Such election must be filed by the Beneficiary within 60-days
following the Participant's death. If no such election is made, the
balance in the Participant's Account shall be paid in a lump sum.
Any lump sum payment made in accordance with this paragraph shall be
paid in the Plan Year after the Plan Year of the Participant's death
and as of the first day of the first quarter which is at least six
(6) months and 10 days following the Participant's death.
(c) For purposes of this Section 5.05 "Election Date" means the date on
which the Participant's election schedule becomes irrevocable in
accordance with paragraph (f) of Section 5.02 or paragraph (f) of
Section 5.04.
5.06 Withdrawals upon finding of Financial Hardship
----------------------------------------------
(a) Upon a finding that the Participant, or Beneficiary if the
Participant is deceased, has suffered a Financial Hardship, the
Administrator may, in his sole discretion, permit the acceleration
of a withdrawal under the Plan in an amount reasonably necessary to
alleviate such Financial Hardship.
(b) If the Administrator permits a withdrawal due to Financial Hardship,
the Participant shall cease Salary deferrals, if any, and may not
make any deferrals under the Plan, in the form of an Award or
Salary, until one entire Plan Year has elapsed following the Plan
Year in which such withdrawal is made.
(c) The Participant shall be required to exhaust all other sources of
funds, other than the Savings Plan, before the Administrator will
consider an accelerated withdrawal in accordance with this Section
5.06.
(d) A withdrawal pursuant to this Section 5.06 shall nullify any in-
service withdrawal election filed in accordance with Section 5.01.
(e) Notwithstanding any other provision of this Section 5.06, funds in
the Savings Plan Restoration Account are not subject to withdrawal
due to Financial Hardship.
- Page 5.5 -
<PAGE>
5.07 Unscheduled Withdrawals
-----------------------
(a) A Participant, or Beneficiary if the Participant is deceased, may
request an Unscheduled Withdrawal of all or a portion of the
Participant's Interest Account and/or PPG Stock Account. All such
payments shall be made in a single sum and shall be paid in cash.
An Insider of PPG may not request an Unscheduled Withdrawal from the
PPG Stock Account at any time that such withdrawal would constitute
a Prohibited Discretionary Transaction. A Participant, or
Beneficiary, may request not more than one (1) Unscheduled
Withdrawal in a Plan Year.
(b) An Unscheduled Withdrawal must be a minimum of 25% of the
Participant's Interest and PPG Stock Accounts.
(c) An election to withdraw 75% or more of the Participant's Interest
and Stock Accounts shall be deemed a request to withdraw the entire
Account balance in these two accounts.
(d) Prior to payment of any Unscheduled Withdrawal, a penalty of 10% of
the Unscheduled Withdrawal amount shall be withheld and forfeited
(or 5% if such Unscheduled Withdrawal is made during the Plan Year
in which a Change in Control occurs, or the Plan Year immediately
following such Change in Control) and the Participant shall cease
Salary deferrals, if any, effective on the date the withdrawal is
paid and may not make any deferrals under the Plan, in the form of
an Award or Salary, until one entire Plan Year has elapsed following
the Plan Year in which such Unscheduled Withdrawal is made.
(e) A withdrawal pursuant to this Section 5.07 shall nullify any
scheduled in-service withdrawal election filed in accordance with
Section 5.01.
5.08 Methods of Payment
------------------
(a) PPG Stock Account
-----------------
Except as provided in paragraph (a) of Section 5.07 any payment from
the PPG Stock Account shall be paid in the form of PPG Stock.
At the time of the final scheduled payment, if payments were
disbursed from the PPG Stock Account in shares of PPG Stock, any
remaining fractional shares of PPG Stock shall be converted to and
paid in cash.
- Page 5.6 -
<PAGE>
(b) Interest Account
----------------
Payments from the Interest Account shall be made in cash.
(c) All payments to Participants, or their Beneficiaries, shall be made
on the first business day of a calendar quarter.
5.09 Small Account Provision
-----------------------
(a) Each scheduled withdrawal must equal a minimum of $2,000.
(b) If the remaining balance in a Participant's Account is less than
$2,000, the Administrator may, at his discretion, distribute the
remainder of the Account.
5.10 Special Rules for Withdrawals by Insiders
-----------------------------------------
Anything to the contrary in this Section 5 notwithstanding, Insiders may
not, without prior approval of the Senior Vice President, Human Resources
and Administration, or his or her successor, withdraw any amount from the
PPG Stock Account which was credited to their Account balance within the
prior six months.
- Page 5.7 -
<PAGE>
SECTION VI - SPECIFIC PROVISIONS
--------------------------------
RELATED TO BENEFITS
-------------------
6.01 Nonassignability
----------------
(a) Except as provided in paragraph (b) below and in Section 6.02, no
person shall have any power to encumber, sell, alienate, or
otherwise dispose of his/her interest under the Plan prior to actual
payment to and receipt thereof by such person; nor shall the
Administrator recognize any assignment in derogation of the
foregoing. No interest hereunder of any person shall be subject to
attachment, execution, garnishment or any other legal, equitable, or
other process.
(b) Paragraph (a) above shall not apply to the extent that a
Participant's interest under the Plan is alienated pursuant to a
"Qualified Domestic Relations Order" ("QDRO") as defined in
(S)414(p) of the Code.
(1) The Administrator is authorized to adopt such procedural and
substantive rules and to take such procedural and substantive
actions as the Administrator may deem necessary or advisable
to provide for the payment of amounts from the Plan to an
Alternate Payee as provided in a QDRO. Such rules and actions
shall be consistent with the principal purposes of the Plan.
(2) Under no circumstances may the Administrator accept an order
as a QDRO following a Participant's death.
(3) An Alternate Payee may not establish an account in the Plan.
All amounts taken from a Participant's Account, as provided in
a QDRO, must be distributed as soon as possible following the
acceptance of an order as a QDRO.
(4) In the sole discretion of the Administrator, a Participant's
scheduled withdrawal or otherwise requested withdrawal may be
delayed for a period, not to exceed six months, if the
Administrator has notice that part or all of the Participant's
Account may be subject to alienation pursuant to a QDRO.
- Page 6.1 -
<PAGE>
6.02 Beneficiary Designation
-----------------------
(a) The Participant shall have the right, at any time and from time to
time, to designate any person(s) as Beneficiary. The designation of
a Beneficiary shall be effective on the date it is received by the
Administrator, provided the Participant is alive on such date.
(b) Each time a Participant submits a new Beneficiary designation form
to the Administrator, such designation shall cancel all prior
designations.
(c) In the case of a Participant who does not have a valid Beneficiary
designation on file at the time of his/her death, or in the case the
designated Beneficiary predeceases the Participant, the entire
balance in the Participant's Account shall be paid as soon as
possible to the Participant's estate.
(d) Any Beneficiary designated by the Participant under the IC Plan or
MAP filed before January 1, 1996, shall remain in effect for this
Plan, until a new Beneficiary designation form is filed in
accordance with this Section 6.02, on or after January 1, 1996.
6.03 Limited Right to Assets of the Corporation
------------------------------------------
The Benefits paid under the Plan shall be paid from the general funds of
the Company, and the Participants and any Beneficiary shall be no more
than unsecured general creditors of the Company with no special or prior
right to any assets of the Company for payment of any obligations
hereunder.
6.04 Protective Provisions
---------------------
The Participant or Beneficiary shall cooperate with the Administrator by
furnishing any and all information requested by the Administrator in order
to facilitate the payment of benefits hereunder. If a Participant refuses
to cooperate, he/she may be deemed ineligible to receive a distribution
and/or ineligible to continue to actively participate in the Plan.
6.05 Withholding
-----------
The Participant or Beneficiary shall make appropriate arrangements with
the Administrator for satisfaction of any federal, state or local income
tax withholding requirements and Social Security or other employee tax
requirements applicable to the payment of benefits under the Plan. If no
other arrangements are made, the Administrator may provide for such
withholding and tax payments by any means he deems appropriate, in his
sole discretion.
- Page 6.2 -
<PAGE>
6.06 Forfeiture Provision
--------------------
In the event the Company becomes aware that a Participant is engaged or
employed as a business owner, employee, or consultant in any activity
which is in competition with any line of business of the Corporation, or
has engaged in any activity otherwise determined to be detrimental to the
Company, the Administrative Subcommittee may:
(a) Terminate such Participant's participation in the Plan, and
distribute the entire amount in the Participant's Account in a lump
sum;
(b) Recalculate all earnings in the Account as though all investments
had been invested in the Interest Account and accruing interest at
the Minimum Rate;
(c) Both (a) and (b) above; or
(d) Apply any other diminution or forfeiture of benefits, which is
specifically approved by the Administrative Subcommittee.
For purposes of this Section 6.06, the Administrative Subcommittee
shall consist of the Senior Vice President, Human Resources and
Administration, the Director, Compensation and Benefits, and a
representative of the Law Department, as appointed by the General
Counsel of PPG. The Administrative Subcommittee shall report all of
its activities to the Committee.
- Page 6.3 -
<PAGE>
SECTION VII - ADMINISTRATION & CLAIMS
-------------------------------------
7.01 Administration
--------------
(a) The Administrator shall administer the Plan and interpret, construe
and apply its provisions in accordance with its terms. The
Administrator shall have the complete authority to:
(1) Determine eligibility for benefits;
(2) Construe the terms of the Plan; and
(3) Control and manage the operation of the Plan.
(b) The Administrator shall have the authority to establish rules for
the administration and interpretation of the Plan and the
transaction of its business. The determination of the Administrator
as to any disputed question shall be conclusive. All actions,
decisions and interpretations of the Administrator shall be
performed in a uniform and nondiscriminatory manner.
(c) The Administrator may employ counsel and other agents and may
procure such clerical, accounting and other services as the
Administrator may require in carrying out the provisions of the
Plan.
(d) The Administrator shall not receive any compensation from the Plan
for his services.
(e) The Corporation shall indemnify and save harmless the Administrator
against all expenses and liabilities arising out of the
Administrator's service as such, excepting only expenses and
liabilities arising from the Administrator's own gross negligence or
willful misconduct, as determined by the Committee.
7.02 Claims
------
(a) Every person receiving or claiming benefits under the Plan shall be
conclusively presumed to be mentally and physically competent and of
age. If the Administrator determines that such person is mentally or
physically incompetent or is a minor, payment shall be made to the
legally appointed guardian, conservator, or other person who has
been appointed by a court of competent jurisdiction to care for the
estate of such person, provided that proper proof of such
appointment is furnished in a form and manner suitable to the
Administrator. Any payment made under the
- Page 7.1 -
<PAGE>
provisions of the paragraph (a) shall be a complete discharge of any
liability therefor under the Plan. The Administrator shall not be
required to see to the proper application of any such payment.
(b) Claims Procedure
----------------
Claims for benefits by a Participant or Beneficiary shall be filed,
in writing, with the Administrator. If the Administrator denies the
claim, in whole or in part, the Administrator shall furnish a written
notice to the claimant setting forth a statement of the specific
reasons for the denial of the claim, references to the specific
provisions of the Plan on which the denial is based, a description of
any additional material or information necessary to perfect the claim
and an explanation of why such material or information is necessary,
and an explanation of the review procedure. Such notice shall be
written in a way calculated to be understandable by the claimant.
The written notice from the Administrator shall be furnished to the
claimant within ninety (90) days following the date on which the
claim was filed, except that if special circumstances require an
extension of time, the Administrator shall notify the claimant of
this need within such 90-day period. Such notice shall inform the
claimant the nature of the circumstances necessitating the need for
additional time and the date by which the claimant will be furnished
with the decision regarding the claim. Such extension may provide for
up to an additional 90 days.
(c) Review Procedure
----------------
Within sixty (60) days of the date the Administrator denies a claim,
in whole or in part, the claimant, or his/her authorized
representative, may request that the decision be reviewed. Such
request shall be in writing, shall be filed with the Administrator,
and shall contain the following information:
(1) The date on which the denial was received by the claimant;
(2) The date on which the claimant's request for review was filed
with the Administrator;
(3) The specific portions of the denial which the claimant requests
the Administrator to review;
(4) A statement setting forth the basis on which the claimant
believes that a review of the decision is required;
- Page 7.2 -
<PAGE>
(5) Any written material which the claimant desires the
Administrator to take into consideration in reviewing the
claim.
The Administrator shall afford the claimant, or his/her authorized
representative, an opportunity to review documents pertinent to the
claim, and shall conduct a full and fair review of the claim and its
denial. The Administrator's decision on such review shall be
furnished to the claimant in writing, and shall be written in a
manner calculated to be understandable to the claimant. Such
decision shall include a statement of the specific reason(s) for
the decision, including references to the specific provision(s) of
the Plan relied upon.
The written notice from the Administrator shall be furnished to the
claimant within sixty (60) days following the date on which the
request for review was received by the Administrator, except that if
special circumstances require an extension of time, the
Administrator shall notify the claimant of this need within such
60-day period. Such notice shall inform the claimant the nature of
the circumstances necessitating the need for additional time and the
date by which the claimant will be furnished with the decision
regarding the claim. Such extension may provide for up to an
additional 60 days.
- Page 7.3 -
<PAGE>
SECTION VIII - AMENDMENT AND TERMINATION
----------------------------------------
8.01 Amendment of the Plan
---------------------
Except as provided in Section X, the Committee may amend the Plan, in
whole or in part, at any time; however, except as provided in Section X,
no such amendment may decrease the amount of benefit currently accrued in
Participants' Accounts.
Except as provided in Section X, the Administrator shall have the
authority to adopt amendments to the Plan, in whole or in part, at any
time, necessary for the implementation and/or administration of the Plan,
which will not result in a material change to the Plan. Moreover, except
as provided in Section X, no such amendment by the Administrator may
decrease the amount of benefit currently accrued in Participants'
Accounts.
8.02 Termination of the Plan
-----------------------
Except as provided in Section X, the Committee may terminate the Plan at
any time. Upon a termination pursuant to this Section 8.02, the Committee
has the sole discretion to determine distribution schedules for any or all
Accounts, notwithstanding a Participant's previous distribution schedule.
8.03 Constructive Receipt
--------------------
In the event the Administrator determines that amounts deferred under the
Plan have been constructively received by Participants and must be
recognized as income for federal income tax purposes, distributions shall
be made to Participants, as determined by the Administrator. The
determination of the Administrator under this Section 8.03 shall be
binding and conclusive.
- Page 8.1 -
<PAGE>
SECTION IX - MISCELLANEOUS
--------------------------
9.01 Successors of the Company
-------------------------
The rights and obligations of the Company under the Plan shall inure to
the benefit of, and shall be binding upon, the successors and assigns of
the Company.
9.02 ERISA Plan
----------
The Plan is intended to be an unfunded plan maintained primarily to
provide deferred compensation benefits for "a select group of management
or highly compensated employees" within the meaning of Sections 201, 301
and 401 of ERISA and therefore to be exempt from Parts 2, 3 and 4 of Title
I of ERISA.
9.03 Trust
-----
The Company shall be responsible for the payment of all benefits under the
Plan. Except as otherwise required by Section X, the Company, at its
discretion, may establish one or more grantor trusts for the purpose of
providing for payment of benefits under the Plan. Such trust(s) may be
irrevocable, but the assets thereof shall be subject to the claims of the
Company's creditors. Benefits paid to the Participant from any such trust
shall be considered paid by the Company for purposes of meeting the
obligations of the Company under the Plan.
9.04 Employment Not Guaranteed
-------------------------
Nothing contained in the Plan nor any action taken hereunder shall be
construed as a contract of employment or as giving any Participant any
right to continued employment with the Corporation.
9.05 Gender, Singular and Plural
---------------------------
All pronouns and variations thereof shall be deemed to refer to the
masculine, feminine, or neuter, as the identity of the person(s) requires.
As the context may require, the singular may be read as the plural and the
plural as the singular.
9.06 Headings
--------
The headings of the Sections, subsections and paragraphs of the Plan are
for convenience only and shall not control or affect the meaning or
construction of any of its provisions.
- Page 9.1 -
<PAGE>
9.07 Validity
--------
If any provision of the Plan is held invalid, void or unenforceable, the
same shall not affect, in any respect, the validity of any other
provision(s) of the Plan.
9.08 Waiver of Breach
----------------
The waiver by the Company of any breach of any provision of the Plan by a
Participant or Beneficiary shall not operate or be construed as a waiver
of any subsequent breach.
9.09 Applicable Law
--------------
The Plan is intended to conform and be governed by ERISA. In any case
where ERISA does not apply, the Plan shall be governed and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
9.10 Notice
------
Any notice required or permitted to be given to the Administrator under
the Plan shall be sufficient if in writing and either hand-delivered, or
sent by first class mail to the principal office of the Company at One PPG
Place, Pittsburgh, PA 15272, directed to the attention of the
Administrator. Such notice shall be deemed given as of the date of
delivery.
- Page 9.2 -
<PAGE>
SECTION X - CHANGE IN CONTROL
-----------------------------
10.01 Payments to a Trustee
---------------------
Upon, or in reasonable anticipation of, a Change in Control, as defined in
Section 10.02 below, the Senior Vice President, Human Resources and
Administration and the Senior Vice President, Finance, or either of them
or their successor, shall cause an amount, as they deem appropriate, to be
paid to a trustee on such terms as they shall deem appropriate (including
such terms as are appropriate to cause such payment not to be a taxable
event to Participants, if possible, and to cause such Awards to be
distributable to Participants in accordance with elections filed with the
Administrator). Such amount shall be paid in cash and shall be sufficient,
at a minimum, to equal to all deferred amounts credited to the Interest
Account, the Savings Plan Interest Account, the PPG Stock Account and the
Savings Plan PPG Stock Account. Amounts in the PPG Stock Account and the
Savings Plan PPG Stock Account, shall be converted to cash on the basis of
the fair market value of PPG Stock on the date of the occurrence of the
Change in Control, or, if higher, within 30 days of such date.
10.02 Definition: Change in Control
------------------------------
A "Change in Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (i) the then
outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company
Voting Securities").
For purposes of this subsection (a) the following acquisitions shall
not constitute a Change in Control:
Any acquisition directly from the Company;
Any acquisition by the Company;
Any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled
by the Company; or
- Page 10.1 -
<PAGE>
Any acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of paragraph (c) of this
Section 10.02.
(b) Individuals who, as of September 20, 1995, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual
becoming a director subsequent to such date whose election, or
nomination for election by the Company's shareholders, was approved
by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination:
(i) All or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 60% of, respectively,
the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets
either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be;
(ii) No Person (excluding any employee benefit plan (or related
trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such
Business Combination or
- Page 10.2 -
<PAGE>
the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such
ownership existed prior to the Business Combination; and
(iii) At least a majority of the members of the board of directors
of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company; or
(e) A majority of the Board otherwise determines that a Change in
Control shall have occurred.
- Page 10.3 -
<PAGE>
Exhibit 11
PPG INDUSTRIES, INC.
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
COMPUTATION OF EARNINGS PER SHARE
FOR THE FIVE YEARS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income before cumulative
effect of changes in methods
of accounting............... $744.0 $767.6 $514.6 $295.0 $319.4
Cumulative effect on prior
years of changes in methods
of accounting:
Other postretirement
benefits................ -- -- -- (357.1) --
Postemployment benefits... -- -- -- (6.1) --
Income taxes.............. -- -- -- 90.4 --
------ ------ ------ ------ ------
Net income.................... $744.0 $767.6 $514.6 $ 22.2 $319.4
====== ====== ====== ====== ======
Weighted average number of
shares of common stock
outstanding................. 187.8 202.0 211.9 212.6 212.2
====== ====== ====== ====== ======
Weighted average number of
shares of common stock
outstanding and common
stock equivalents........... 189.8 204.2 213.4 214.4 213.6
====== ====== ====== ====== ======
Primary earnings per share:
Income before cumulative
effect of changes in
methods of accounting.... $ 3.96 $ 3.80 $ 2.43 $ 1.39 $ 1.51
Cumulative effect on
prior years of changes in
methods of accounting:
Other postretirement
benefits................ -- -- -- (1.68) --
Postemployment benefits... -- -- -- (0.03) --
Income taxes.............. -- -- -- 0.42 --
------ ------ ------ ------ ------
Earnings per share............ $ 3.96 $ 3.80 $ 2.43 $ 0.10 $ 1.51
====== ====== ====== ====== ======
</TABLE>
<PAGE>
PPG INDUSTRIES, INC.
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
COMPUTATION OF EARNINGS PER SHARE
FOR THE FIVE YEARS ENDED DECEMBER 31, 1996
(Continued)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Fully diluted earnings
per share:
Income before cumulative
effect of changes in
methods of accounting..... $ 3.92 $ 3.76 $ 2.41 $ 1.38 $ 1.50
Cumulative effect on prior
years of changes in
methods of accounting:
Other postretirement
benefits.............. -- -- -- (1.67) --
Postemployment benefits. -- -- -- (0.03) --
Income taxes............ -- -- -- 0.42 --
------ ------ ------ ------ ------
Earnings per share............ $ 3.92 $ 3.76 $ 2.41 $ 0.10 $ 1.50
====== ====== ====== ====== ======
</TABLE>
NOTES:
The common stock equivalents consist of the shares reserved for issuance under
PPG's stock option plan and deferred under PPG's deferred compensation, earnings
growth, deferred compensation plan for directors and directors common stock
plans.
The fully diluted earnings per share calculations are submitted in accordance
with Regulation S-K item 601(b)(11) although not required by footnote 2 to
paragraph 14 of APB Opinion No. 15 because they result in dilution of less than
three percent.
All amounts are in millions except per share data.
<PAGE>
Exhibit 13
FINANCIAL AND OPERATING REVIEW
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of PPG Industries, Inc.:
We have audited the accompanying balance sheet of PPG Industries, Inc. and sub-
sidiaries as of December 31, 1996 and 1995, and the related statements of in-
come and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of mate-
rial misstatement. An audit includes examining, on a test basis, evidence sup-
porting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement pre-
sentation. We believe that our audits provide a reasonable basis for our opin-
ion.
In our opinion, such financial statements present fairly, in all material re-
spects, the financial position of PPG Industries, Inc. and subsidiaries as of
December 31, 1996 and 1995, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1996 in con-
formity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
January 16, 1997
MANAGEMENT STATEMENT
Responsibility for Preparation of the Financial Statements
The management of PPG Industries, Inc. is responsible for the preparation of
the financial statements included in this Annual Report.
To ensure the reliability of financial data, PPG has established, and main-
tains, an internal control system. We believe the internal controls in use give
reasonable assurance that financial reports do not contain any material
misstatement.
We believe that the financial statements and related notes in this report are
accurate in all material respects, and that they were prepared according to
generally accepted accounting principles. The financial statements include
amounts that are based on best estimates and judgments of management.
We believe, further, that the other financial information contained in this
Annual Report is consistent with the financial statements.
JERRY E. DEMPSEY
Chairman of the Board and Chief Executive Officer
WILLIAM H. HERNANDEZ
Senior Vice President, Finance
17
<PAGE>
STATEMENT OF INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year
- -------------------------------------------------------------------------------
(Millions, except per share amounts) 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $7,218.1 $7,057.7 $6,331.2
- -------------------------------------------------------------------------------
Cost of sales 4,340.3 4,212.1 3,865.5
- -------------------------------------------------------------------------------
Gross profit 2,877.8 2,845.6 2,465.7
- -------------------------------------------------------------------------------
Other expenses
Selling, general and administrative 1,004.3 977.1 919.0
-----------------------------------------------------------------------------
Depreciation 340.2 331.5 317.5
-----------------------------------------------------------------------------
Research and development--net (See Note 12) 239.1 236.4 218.1
-----------------------------------------------------------------------------
Interest 95.6 84.6 86.1
-----------------------------------------------------------------------------
Business divestitures and realignments (See Note
5) -- -- 85.0
-----------------------------------------------------------------------------
Other charges 82.2 142.2 113.8
- -------------------------------------------------------------------------------
Total other expenses 1,761.4 1,771.8 1,739.5
- -------------------------------------------------------------------------------
Other earnings (See Note 11) 123.2 188.5 129.5
- -------------------------------------------------------------------------------
Income before income taxes and minority interest 1,239.6 1,262.3 855.7
- -------------------------------------------------------------------------------
Income taxes (See Note 6) 471.0 479.7 325.2
- -------------------------------------------------------------------------------
Minority interest 24.6 15.0 15.9
- -------------------------------------------------------------------------------
Net income $ 744.0 $ 767.6 $ 514.6
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Earnings per share $ 3.96 $ 3.80 $ 2.43
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Average shares outstanding 187.8 202.0 211.9
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes to the financial statements are an integral part of this
statement.
18
<PAGE>
BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31
- -------------------------------------------------------------------------------
(Millions) 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 69.6 $ 105.6
-----------------------------------------------------------------------------
Receivables (See Note 2) 1,225.6 1,245.1
-----------------------------------------------------------------------------
Inventories (See Note 2) 796.5 737.5
-----------------------------------------------------------------------------
Deferred income taxes (See Note 6) 116.2 119.5
-----------------------------------------------------------------------------
Other 88.5 67.8
- -------------------------------------------------------------------------------
Total current assets 2,296.4 2,275.5
- -------------------------------------------------------------------------------
Property (See Note 2) 6,688.2 6,464.0
- -------------------------------------------------------------------------------
Less accumulated depreciation 3,774.7 3,629.2
- -------------------------------------------------------------------------------
Property--net 2,913.5 2,834.8
- -------------------------------------------------------------------------------
Investments 254.4 223.8
- -------------------------------------------------------------------------------
Other assets (See Note 7) 977.1 860.2
- -------------------------------------------------------------------------------
Total $ 6,441.4 $ 6,194.3
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities
Short-term debt and current portion of long-term debt
(See Note 3) $ 648.3 $ 485.3
-----------------------------------------------------------------------------
Accounts payable and accrued liabilities (See Note 2) 1,105.5 1,103.5
-----------------------------------------------------------------------------
Income taxes (See Note 6) 15.1 40.6
- -------------------------------------------------------------------------------
Total current liabilities 1,768.9 1,629.4
- -------------------------------------------------------------------------------
Long-term debt (See Note 3) 833.9 735.5
- -------------------------------------------------------------------------------
Deferred income taxes (See Note 6) 419.1 354.9
- -------------------------------------------------------------------------------
Accrued pensions (See Note 7) 101.6 91.1
- -------------------------------------------------------------------------------
Other postretirement benefits (See Note 7) 521.2 517.4
- -------------------------------------------------------------------------------
Other liabilities 237.9 228.6
- -------------------------------------------------------------------------------
Total liabilities 3,882.6 3,556.9
- -------------------------------------------------------------------------------
Commitments and contingent liabilities (See Note 10)
- -------------------------------------------------------------------------------
Minority interest 76.2 68.2
- -------------------------------------------------------------------------------
Shareholders' equity (See Note 4)
Common stock 484.3 484.3
-----------------------------------------------------------------------------
Additional paid-in capital 96.6 81.3
-----------------------------------------------------------------------------
Retained earnings 4,759.8 4,249.0
-----------------------------------------------------------------------------
Treasury stock, at cost (2,667.2) (2,059.6)
-----------------------------------------------------------------------------
Unearned compensation (171.3) (179.2)
-----------------------------------------------------------------------------
Minimum pension liability adjustment (9.9) (10.4)
-----------------------------------------------------------------------------
Currency translation adjustment (9.7) 3.8
- -------------------------------------------------------------------------------
Total shareholders' equity 2,482.6 2,569.2
- -------------------------------------------------------------------------------
Total $ 6,441.4 $ 6,194.3
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
Shares outstanding were 183,002,461 and 194,198,546 at Dec. 31, 1996 and 1995,
respectively.
The accompanying notes to the financial statements are an integral part of this
statement.
19
<PAGE>
STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year
- --------------------------------------------------------------------------------
(Millions) 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 744.0 $ 767.6 $ 514.6
- --------------------------------------------------------------------------------
Adjustments to reconcile to cash from operations
Depreciation and amortization 362.6 351.6 335.2
------------------------------------------------------------------------------
Business divestitures and realignments -- -- 85.0
------------------------------------------------------------------------------
Increase in receivables (1.5) (29.0) (263.7)
------------------------------------------------------------------------------
Increase in inventories (56.1) (47.1) (25.6)
------------------------------------------------------------------------------
(Decrease) increase in accounts payable, accrued
liabilities and
income taxes payable (22.2) 75.8 123.0
------------------------------------------------------------------------------
Change in other noncurrent assets and liabilities
and other-net (18.9) (46.9) (77.4)
- --------------------------------------------------------------------------------
Cash from operating activities 1,007.9 1,072.0 691.1
- --------------------------------------------------------------------------------
Investing activities
Capital spending
Additions to property and investments (475.9) (447.8) (321.8)
------------------------------------------------------------------------------
Business acquisitions, net of cash balances ac-
quired (12.6) (6.6) (33.9)
- --------------------------------------------------------------------------------
Proceeds from business divestitures -- 59.9 28.5
- --------------------------------------------------------------------------------
Reductions of property and investments 20.1 119.0 81.8
- --------------------------------------------------------------------------------
Cash used for investing activities (468.4) (275.5) (245.4)
- --------------------------------------------------------------------------------
Financing activities
Net change in borrowings with maturities of three
months or less 247.7 13.3 (5.7)
- --------------------------------------------------------------------------------
Proceeds from other short-term debt 59.0 48.3 44.1
- --------------------------------------------------------------------------------
Repayment of other short-term debt (49.4) (66.0) (27.3)
- --------------------------------------------------------------------------------
Proceeds from long-term debt 158.0 118.1 23.2
- --------------------------------------------------------------------------------
Repayment of long-term debt (153.4) (50.9) (33.0)
- --------------------------------------------------------------------------------
Loans to employee stock ownership plan (26.0) (25.0) (22.0)
- --------------------------------------------------------------------------------
Repayment of loans by employee stock ownership plan 33.9 28.8 21.5
- --------------------------------------------------------------------------------
Purchase of treasury stock (635.1) (588.0) (280.0)
- --------------------------------------------------------------------------------
Issuance of treasury stock 26.8 7.4 19.4
- --------------------------------------------------------------------------------
Dividends paid (236.6) (238.9) (237.8)
- --------------------------------------------------------------------------------
Cash used for financing activities (575.1) (752.9) (497.6)
- --------------------------------------------------------------------------------
Effect of currency exchange rate changes on cash
and cash equivalents (.4) (.1) 2.1
- --------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equiva-
lents (36.0) 43.5 (49.8)
- --------------------------------------------------------------------------------
Cash and cash equivalents, beginning of year 105.6 62.1 111.9
- --------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 69.6 $ 105.6 $ 62.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes to the financial statements are an integral part of this
statement.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- -------------------------------------------------------------------------------
PERFORMANCE IN 1996 COMPARED WITH 1995
Overall Performance
Our sales in 1996 increased to $7.2 billion from $7.1 billion in 1995. The in-
crease was attributable to higher volumes from each of our business segments,
including sales from several small acquisitions, and higher sales prices in
our coatings and resins segment. Partially offsetting these improvements were
the absence of sales from our divested European architectural coatings busi-
ness and sodium chlorate business, lower sales prices for our chemicals and
glass segments and the unfavorable effects of foreign currency translation.
The gross profit percentage decreased to 39.9% from 40.3% in the prior year.
Contributing to the decline were lower overall sales prices and the negative
overall effect of inflation as the unfavorable impacts in our glass and chemi-
cals segments were partially offset by lower raw material costs in our coat-
ings and resins segment. The positive effects of improved manufacturing effi-
ciencies in each of our business segments only partially offset these
unfavorable factors.
Net income for 1996 was $744 million compared with $768 million for 1995.
Earnings per share rose to $3.96 from $3.80 in 1995. Included in 1995's net
income was an after-tax gain of $24 million ($0.12 per share) from a legal
settlement of a glass technology dispute with Pilkington plc of England. Our
1996 earnings were affected unfavorably by lower other earnings, the decline
in our gross profit percentage, increased interest expense and higher minority
interest attributable in part to increased earnings from our majority-owned
subsidiary, Transitions Optical, Inc. Our other earnings declined due to gains
from legal settlements in 1995, the most significant of which was the settle-
ment with Pilkington, and lower earnings from equity affiliates. Interest ex-
pense increased as a result of higher overall borrowings, partially offset by
lower average interest rates in 1996 compared with 1995. These negative fac-
tors were partially offset by higher overall sales volumes in each of our
business segments and lower other charges. The majority of the decline in
other charges was attributable to lower environmental expense and the settle-
ment of a legal dispute in 1995. Additionally, the benefits of ongoing over-
head cost reduction actions were more than offset by the negative effects of
inflation. While the effective tax rate for both years was 38%, income tax ex-
pense decreased slightly because of lower pretax earnings. Reduced average
shares outstanding, due to repurchases of PPG common stock by the Company, fa-
vorably affected earnings per share during 1996.
Results of Business Segments
Coatings and resins sales increased to $2.9 billion for 1996 from $2.8 billion
for 1995, while operating income increased to $529 million from $469 million.
Sales increased as a result of improved volumes in North America, higher sales
prices in most of the segment's major businesses, and sales from several small
acquisitions. The absence of sales from our European architectural coatings
business divested late in 1995 partially offset these improvements. The in-
crease in operating income was the result of the factors that contributed to
the sales increase, lower raw material costs, reduced overhead costs and im-
proved manufacturing effi- ciencies. These positive factors were partially
offset by the negative effects of inflation on overhead costs and gains
from two legal settlements included in 1995 operating income.
Glass sales for 1996 were $2.7 billion compared with $2.65 billion for 1995.
Operating income was $431 million compared with $479 million in 1995. Sales
increased modestly as a result of the benefits of improved volumes in North
America and higher sales prices for fiber glass and North American automotive
replacement glass products. Partially offsetting these improvements were lower
worldwide flat glass prices, particularly in Europe, the unfavorable effects
of foreign currency translation and lower European volumes. Operating income
in 1995 included the gain from the legal settlement with Pilkington. Also con-
tributing to the decline in operating income were lower sales prices for our
flat glass and automotive original glass products and the negative effects of
inflation. Higher fiber glass sales prices, improved manufacturing efficien-
cies, increased overall volumes and lower overhead costs only partially offset
these negative factors.
Chemicals sales were $1.61 billion for 1996 compared with $1.6 billion for
1995, while operating income for the same periods was $376 million and $383
million, respectively. Sales, which increased slightly, benefitted from volume
improvements in most of the segment's major businesses, particularly
Transitions(registered trademark) lenses and silica products, and from higher
prices for our specialty chemical products. Substantially offsetting these
benefits were lower prices for chlor-alkali products, the absence of sales from
our sodium chlorate business, which was divested in late 1995, and the
unfavorable effects of foreign currency translation. The decrease in operating
income is attributable to lower chlor-alkali sales prices, the negative effects
of inflation and increased overhead costs in support of the growth in the
Transitions(registered trademark) lens business. These negative factors were
only partially offset by the benefits of volume improvements, lower
environmental expense, the absence of a charge for a legal dispute and improved
manufacturing efficiencies.
Other Significant Factors
The increase in other unallocated corporate expense-net was primarily
attributable to lower earnings from our equity affiliates.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
Outlook
In 1997 PPG expects to face a challenging economic environment, characterized
by moderate global growth, including the continuation of slow economic expan-
sion in Western Europe. Furthermore, recent economic signs point to a rela-
tively stable North American automotive industry, continued commodity chemical
price weakness and higher energy costs, at least in the near term. PPG's diver-
sification of product lines and worldwide markets served tend to reduce the im-
pact on total sales and earnings of changes in demand for a particular product
line or in a particular geographic area.
Accounting Standard
In October 1996, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position (SOP)
No. 96-1, "Environmental Remediation Liabilities." The impact on PPG's finan-
cial position and results of operations of adopting this SOP will not be mate-
rial. Adoption of SOP No. 96-1 will not affect the Company's cash flow.
PERFORMANCE IN 1995 COMPARED WITH 1994
Overall Performance
Sales in 1995 totaled $7.1 billion, up from 1994's $6.3 billion. The majority
of the sales increase was attributable to higher overall prices, particularly
for our chlor-alkali, fiber glass and flat glass products. Also contributing to
the sales increase were higher volumes from each of our business segments, com-
bined with the favorable effects of foreign currency translation.
PPG's gross profit percentage increased to 40.3% in 1995 from 38.9% in 1994,
primarily as a result of the higher sales prices in all segments. Partially
offsetting the price increases were the negative effects of inflation, particu-
larly on raw material costs.
Net income of $768 million in 1995 increased from $515 million in 1994, while
earnings per share rose to $3.80 from $2.43 in 1994. Included in 1995's net in-
come was an after-tax gain of $24 million ($0.12 per share) from the settlement
with Pilkington previously mentioned. Net income in 1994 included an after-tax
charge of $52 million ($0.24 per share) related to the divestiture of our Bio-
medical Systems Division. Our 1995 earnings were affected favorably by the same
factors that contributed to our sales and gross profit percentage improvements.
Gains from several legal settlements, the most significant of which was the
settlement with Pilkington, higher earnings from equity affiliates and the ab-
sence of significant business divestiture charges also contributed to the in-
crease. Partially offsetting these improvements were higher selling, general
and administrative, and research and development expenses as well as increased
other charges and income tax expense. The increase in selling, general and ad-
ministrative expenses was primarily attributable to the unfavorable impacts of
inflation, foreign currency translation and increased advertising costs. Howev-
er, selling, general and administrative expenses as a percentage of sales de-
clined to 13.8% in 1995 from 14.5% in 1994, reflecting, in part, the effects of
continued cost management. The increase in other charges was principally at-
tributable to settlement of a legal dispute and higher environmental expenses.
While the effective tax rate for both 1995 and 1994 was 38%, income tax expense
increased as a result of higher pretax earnings.
The increase in earnings per share was attributable to the factors that re-
sulted in the increase in net income, combined with the impact on average
shares outstanding of repurchasing approximately 13.6 million shares of our
common stock during 1995.
Results of Business Segments
Coatings and resins sales increased to $2.8 billion from $2.6 billion in 1994.
Operating income for 1995 was $469 million compared with $497 million for 1994.
Contributing to the sales increase were higher volumes in most European product
lines, particularly automotive original products, stronger prices in all prod-
uct lines and the favorable effect of translating European currencies. The ef-
fect of lower North American automotive refinish volume partially offset these
improvements. Operating income declined because of the negative effects of in-
flation, particularly on raw material costs, unfavorable sales mix changes, a
charge to improve productivity in our European operations and a loss on the
sale of our European architectural coatings business. These negative factors
were only partially offset by higher sales prices, increased volumes, gains
from legal settlements and improved manufacturing efficiencies.
Glass sales increased to $2.65 billion from $2.4 billion in 1994, while oper-
ating income increased to $479 million from $315 million. Contributing to the
sales increase were higher prices, principally for worldwide fiber glass and
flat glass products and North American automotive replacement glass products,
higher volumes in most of the segment's major businesses, principally fiber
glass and automotive original glass products, and the favorable effects of
translating European currencies. The effect of lower volume in North American
automotive replacement glass products partially offset these improvements. The
significant improvement in operating income resulted from the factors that con-
tributed to the sales increase and the gain from the legal settlement with
Pilkington. The negative effects of inflation on our costs partially offset
these improvements.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
Chemicals sales increased to $1.6 billion from $1.3 billion in 1994, and oper-
ating income increased to $383 million from $227 million. The increase in sales
was primarily attributable to substantial price gains for chlor-alkali products
and volume improvements for specialty products, particularly
Transitions(registered trademark) lenses. The substantial increase in operating
income was a result of the factors that contributed to the sales increases.
Partially offsetting these improvements were increased environmental expenses
and a charge for a legal settlement. The negative effects of inflation,
particularly on ethylene costs, and higher selling, general and administrative
expenses due, in part, to additional investments in Transitions(registered
trademark) advertising also partially offset these improvements. In addition,
1994 operating income included a gain from disposition of our investment in a
foreign chemical business.
The other segment's operating loss in 1994 represents the charge to divest the
Biomedical Systems Division (see Business Divestitures and Realignments on page
24).
Other Significant Factors
The increase in other unallocated corporate income-net in 1995 was principally
attributable to higher earnings from our equity affiliates combined with a de-
crease in foreign currency transaction losses.
COMMITMENTS AND CONTINGENT LIABILITIES, INCLUDING ENVIRONMENTAL MATTERS
PPG is involved in a number of lawsuits and claims, both actual and potential,
including some which it has asserted against others, in which substantial money
damages are sought. PPG's lawsuits and claims against others include claims
against insurers and other third parties with respect to actual and contingent
losses related to environmental matters. Management believes that the outcome
of all lawsuits and claims involving PPG, in the aggregate, will not have a ma-
terial effect on PPG's consolidated financial position, results of operations
or liquidity.
It is PPG's policy to accrue expenses for environmental contingencies when it
is probable that a liability has been incurred and the amount of loss can be
reasonably estimated. Reserves for environmental contingencies are exclusive of
claims against third parties and are not discounted. As of Dec. 31, 1996 and
1995, PPG had reserves for environmental contingencies totaling $91 million and
$100 million, respectively. Pre-tax charges against income for environmental
remediation costs in 1996, 1995 and 1994 totaled $27 million, $49 million and
$36 million, respectively. Cash outlays related to such charges aggregated $36
million, $39 million and $36 million in 1996, 1995 and 1994, respectively.
Management anticipates that the resolution of the Company's environmental con-
tingencies, which will occur over an extended period of time, will not result
in future annual charges against income that are significantly greater than
those recorded in recent years. 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 ex-
pected 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 ex-
posure involves three operating plant sites and one closed plant site. Initial
remedial actions are occurring at these sites. Studies to determine the nature
of the contamination are reaching completion and the need for additional reme-
dial actions, if any, is presently being evaluated. The loss contingencies re-
lated to the remaining portion of such unreserved exposure include significant
unresolved issues such as the nature and extent of contamination, if any, at
sites and the methods that may have to be employed should remediation be re-
quired. 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 re-
gard to the ultimate resolution of this unreserved exposure to future loss. Al-
though insurers and other third parties may cover a portion of these costs, to
the extent they are incurred, any potential recovery is not included in this
unreserved exposure to future loss.
The Company's assessment of the potential impact of these environmental con-
tingencies is subject to considerable uncertainty due to the complex, ongoing
and evolving process of investigation and remediation, if necessary, of such
environmental contingencies.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
BUSINESS DIVESTITURES AND REALIGNMENTS
PPG's results in 1994 included a pre-tax charge of $85 million pertaining to
the divestiture of the Biomedical Systems Division as this business was not
meeting strategic or financial performance objectives. Approximately $60 mil-
lion of the charge related to a reduction of the proceeds expected to be re-
ceived upon divestiture of the division's sensors business, reflecting the gen-
eral decline in health-care and related markets. A $13 million charge also was
taken for additional operating losses anticipated because of extension of the
expected disposal date as well as actual operating losses exceeding those orig-
inally estimated. With the sale of the sensors business in January 1995, the
divestiture of the Biomedical Systems Division was completed.
The charge recorded in 1994 is being recovered in the post-divestiture period
through the absence of the historical operating losses of the Biomedical Sys-
tems Division. Since 1994, there have not been significant changes in the
Company's plans for implementing business divestiture and realignment programs
undertaken in prior years.
IMPACT OF INFLATION
PPG's financial statements are prepared on a historical cost basis, which does
not completely account for the effects of inflation. Since the cost of most of
the Company's inventories is determined using the last-in, first-out (LIFO)
method, the cost of sales reported in the financial statements approximates
current costs.
In 1996 and 1994, our operating results were negatively affected as increased
production costs, resulting from inflation, were not fully recovered through
price increases. In 1995 the negative effects of inflation on our costs were
more than offset, for the Company as a whole, by price increases and improved
operating efficiencies. While inflationary pressure on costs is expected to
continue, we anticipate that ongoing actions to improve operating efficiencies,
as well as increases in selling prices for certain products, will mitigate to a
significant extent the negative impact of inflation on 1997 operating income.
FINANCIAL RESOURCES, CAPITAL SPENDING
Over the past three years, we continued to have sufficient financial resources
to meet operating requirements, to fund our capital spending, share repurchase
programs and pension contributions, and to pay increased dividends to share-
holders. Cash from operating activities was $1,008 million in 1996, $1,072 mil-
lion in 1995 and $691 million in 1994. Dividends paid to shareholders totaled
$237 million in 1996, $239 million in 1995 and $238 million in 1994. Contribu-
tions to U.S. pension plans totaled $109 million, $146 million and $139 million
in 1996, 1995 and 1994, respectively.
During 1996, 1995 and 1994, the Company repurchased approximately 11.9 mil-
lion, 13.5 million and 7.2 million shares of common stock at a cost of $606
million, $585 million and $270 million, respectively. These repurchases were
made under several repurchase programs. The most recent share repurchase pro-
gram, authorizing the repurchase of 10 million shares of common stock, was ini-
tiated in July 1996. As of Dec. 31, 1996, 4.6 million shares of common stock
had been repurchased thereunder at a cost of $251 million. The repurchase of
common stock was financed principally by cash from operations and short-term
borrowings.
In 1996 long-term debt was increased principally by the issuance of $150 mil-
lion of callable 7 3/8% notes partially offset by scheduled debt repayments. In
1995 long-term debt was increased principally by the issuance of $100 million
of non-callable 6 7/8% notes partially offset by scheduled debt repayments.
Capital spending in 1996 totaled $489 million, compared with $454 million in
1995 and $356 million in 1994. This spending related to modernization and pro-
ductivity improvements, expansion of existing businesses, environmental control
projects and, in 1996, 1995 and 1994, business acquisitions totaling $13 mil-
lion, $7 million and $34 million, respectively. Additionally, a 1995 acquisi-
tion was financed through issuance of treasury stock with a market value ap-
proximating $15 million. Capital spending of a similar nature, excluding any
for major acquisitions, is expected to total about $500 million during 1997.
The ratio of total debt, including capital leases, to total debt and equity
was 37% and 32% at Dec. 31, 1996 and 1995, respectively. Cash from operations
and the Company's debt capacity are expected to continue to be sufficient to
fund capital spending, dividend payments, share repurchases and operating re-
quirements.
See Note 3, Debt and Bank Credit Agreements and Leases, for details regarding
the use and availability of committed and uncommitted lines of credit. In addi-
tion to the lines of credit, the Company may issue up to $450 million aggregate
principal amount of debt securities under a shelf registration statement filed
with the Securities and Exchange Commission.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
FOREIGN CURRENCY, INTEREST RATE AND COMMODITY PRICE RISK
As a multinational company, PPG manages its transaction exposure to foreign
currency risk to minimize the volatility of cash flows caused by currency fluc-
tuations. The Company manages its foreign currency transaction exposures prin-
cipally through the purchase of forward and option contracts. It does not hedge
its exposure to translation gains and losses; however, by borrowing in local
currencies it reduces such exposure. The fair value of the forward and option
contracts purchased and outstanding as of Dec. 31, 1996 and 1995, was not mate-
rial.
The Company manages its interest rate risk in order to balance its exposure
between fixed and variable rates while attempting to minimize its interest
costs. PPG principally manages its interest rate risk by retiring and issuing
debt from time to time. To a limited extent, PPG manages its interest rate risk
through the purchase of interest rate swaps. As of Dec. 31, 1996 and 1995, the
notional principal amount and fair value of interest rate swaps held were not
material.
The Company also uses commodity swap contracts to reduce its exposure to fluc-
tuations in prices for natural gas. The fair value of such swap contracts pur-
chased and outstanding as of Dec. 31, 1996 and 1995, was not material.
PPG's policies do not permit active trading of, or speculation in, derivative
instruments.
25
<PAGE>
BUSINESS SEGMENT INFORMATION
- --------------------------------------------------------------------------------
Nature of Operations
PPG is a multinational manufacturer engaged in three lines of business:
coatings and resins, glass and chemicals. The coatings and resins business
manufactures a variety of protective and decorative coatings and finishes along
with adhesives, sealants and metal pretreatment products for automotive original
equipment and aftermarket refinish, industrial and architectural applications.
The glass business produces flat glass, automotive original and replacement
fabricated glass, aircraft transparencies and continuous-strand fiber glass. The
chemicals business manufactures chlor-alkali and specialty chemical products.
The primary chlor-alkali products are chlorine, caustic soda, vinyl chloride
monomer, chlorinated solvents and chlorinated benzenes. Specialty chemicals
manufactured consist of Transitions(registered trademark) lenses, optical
monomers, silicas, surfactants and fine chemicals. Production facilities and
markets for the coatings and resins and glass businesses are predominantly in
North America and Europe, while the chemicals business operates primarily in
North America. Most coatings and resins and glass products are sold directly to
manufacturing and construction companies, although in some instances products
are sold directly to independent distributors and through PPG distribution
outlets. Most chlor-alkali and specialty chemical products are sold directly to
manufacturing companies in the chemical processing, rubber and plastics, paper,
minerals and metals, water treatment, pharmaceutical and optical industries.
Each of the businesses in which PPG is engaged is highly competitive. However,
the diversification of product lines and worldwide markets served tend to
minimize the impact on total sales and earnings of changes in demand for a
particular product line or in a particular geographic area.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(Millions) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INDUSTRY SEGMENTS
Net sales
Coatings and Resins $2,902 $2,812 $2,647
-------------------------------------------------------------------------------------------------------------------------------
Glass 2,704 2,651 2,388
-------------------------------------------------------------------------------------------------------------------------------
Chemicals 1,612 1,595 1,296
- ------------------------------------------------------------------------------------------------------------------------------------
Total $7,218 $7,058 $6,331
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Operating income (loss)
Coatings and Resins $ 529 $ 469 $ 497
-------------------------------------------------------------------------------------------------------------------------------
Glass 431 479 315
-------------------------------------------------------------------------------------------------------------------------------
Chemicals 376 383 227
-------------------------------------------------------------------------------------------------------------------------------
Other(/1/) -- -- (85)
- ------------------------------------------------------------------------------------------------------------------------------------
Total 1,336 1,331 954
- ------------------------------------------------------------------------------------------------------------------------------------
Interest--net (85) (74) (77)
-------------------------------------------------------------------------------------------------------------------------------
Other unallocated corporate (expenses) income--net (11) 5 (21)
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes and minority interest $1,240 $1,262 $ 856
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(continued on next page)
26
<PAGE>
BUSINESS SEGMENT INFORMATION
- -------------------------------------------------------------------------------
(continued)
<TABLE>
<CAPTION>
(Millions)
Coatings
INDUSTRY SEGMENTS and
Resins Glass Chemicals Other (/1/) Corporate Total
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996
Segment assets(/2/) $1,756 $2,183 $1,179 $ -- $1,323 $6,441
- ---------------------------------------------------------------------------
Depreciation and
amortization $ 88 $ 173 $ 88 $ -- $ 14 $ 363
- ---------------------------------------------------------------------------
Capital spending $ 117 $ 194 $ 134 $ -- $ 44 $ 489
- ---------------------------------------------------------------------------
1995
Segment assets(/2/) $1,723 $2,128 $1,129 $ -- $1,214 $6,194
- ---------------------------------------------------------------------------
Depreciation and
amortization $ 84 $ 167 $ 86 $ -- $ 15 $ 352
- ---------------------------------------------------------------------------
Capital spending $ 125 $ 222 $ 83 $ -- $ 24 $ 454
- ---------------------------------------------------------------------------
1994
Segment assets(/2/) $1,662 $2,010 $1,117 $ 5 $1,100 $5,894
- ---------------------------------------------------------------------------
Depreciation and
amortization $ 77 $ 159 $ 84 $ -- $ 15 $ 335
- ---------------------------------------------------------------------------
Capital spending $ 128 $ 119 $ 72 $ 1 $ 36 $ 356
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Millions) 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GEOGRAPHIC SEGMENTS
Net sales
United States $4,844 $4,702 $4,332
-------------------------------------------------------------------------------------------------------------------------------
Europe 1,633 1,712 1,405
-------------------------------------------------------------------------------------------------------------------------------
Canada 465 431 413
-------------------------------------------------------------------------------------------------------------------------------
Other 276 213 181
- -----------------------------------------------------------------------------------------------------------------------------------
Total $7,218 $7,058 $6,331
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Operating income
United States(/3/) $1,060 $1,058 $ 767
-------------------------------------------------------------------------------------------------------------------------------
Europe(/3/) 145 153 88
-------------------------------------------------------------------------------------------------------------------------------
Canada 98 96 72
-------------------------------------------------------------------------------------------------------------------------------
Other 33 24 27
- -----------------------------------------------------------------------------------------------------------------------------------
Total 1,336 1,331 954
- -----------------------------------------------------------------------------------------------------------------------------------
Interest--net (85) (74) (77)
-------------------------------------------------------------------------------------------------------------------------------
Other unallocated corporate (expenses) income--net (11) 5 (21)
- -----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes and minority interest $1,240 $1,262 $ 856
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Segment assets(/2/)
United States $3,096 $2,994 $2,955
-------------------------------------------------------------------------------------------------------------------------------
Europe 1,498 1,519 1,424
-------------------------------------------------------------------------------------------------------------------------------
Canada 267 274 261
-------------------------------------------------------------------------------------------------------------------------------
Other 257 193 154
-------------------------------------------------------------------------------------------------------------------------------
Corporate 1,323 1,214 1,100
- -----------------------------------------------------------------------------------------------------------------------------------
Total $6,441 $6,194 $5,894
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Other represents the Company's Biomedical Systems Division. The 1994
operating loss was the result of a pre-tax charge pertaining to the
divestiture of this Division.
(2) Segment assets are the total assets used in the operation of each business
segment. Corporate assets are principally cash and cash equivalents,
investments, income tax assets, the Company's headquarters building and
prepaid pensions.
(3) Georgraphic operating income in 1994, exclusive of the $85 million pre-tax
charge pertaining to the divestiture of the Company's Biomedical Systems
Division, was $851 million in the United States and $89 million in Europe.
27
<PAGE>
NOTES
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements include the accounts of PPG Industries,
Inc. (PPG or the Company) and all significant subsidiaries, U.S. and non-U.S.,
of which we own more than 50% of the voting stock. Investments in companies of
which we own 20% to 50% of the voting stock are carried at equity, and our
share of the earnings or losses of such equity affiliates is included in the
statement of income. Transactions between PPG and its subsidiaries are elimi-
nated in consolidation.
Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements,
as well as the reported amounts of income and expenses during the reporting pe-
riod. Actual results could differ from those estimates.
Foreign currency translation
For all significant non-U.S. operations, the functional currency is the local
currency. Assets and liabilities of those operations are translated into U.S.
dollars using year-end exchange rates; income and expenses are translated using
the average exchange rates for the reporting period. Translation adjustments
are deferred as a separate component of shareholders' equity.
Inventories
Most U.S. and certain non-U.S. inventories are stated at cost, using the last-
in, first-out (LIFO) method, which does not exceed market. Other inventories
are stated at the lower of cost or market. We determine cost using either aver-
age or standard factory costs, which approximate actual costs, excluding cer-
tain fixed costs such as depreciation and property taxes.
Property
Property is recorded at cost. We compute depreciation by the straight-line
method based on the estimated useful lives of depreciable assets. Additional
expense is recorded when facilities or equipment are subject to abnormal eco-
nomic conditions or obsolescence. Significant improvements that add to produc-
tive capacity or extend the lives of properties are capitalized. Costs for re-
pairs and maintenance are charged to expense as incurred. When property is
retired or otherwise disposed of, the cost and related depreciation are removed
from the accounts and any related gains or losses are included in income. Amor-
tization of the cost of capitalized leased assets is included in depreciation
expense.
Employee Stock Ownership Plan
We account for our employee stock ownership plan (ESOP) in accordance with
Statement of Position (SOP) No. 93-6 for PPG common stock purchased after Dec.
31, 1992 (new ESOP shares). As permitted by SOP No. 93-6, shares purchased
prior to Dec. 31, 1992 (old ESOP shares), continue to be accounted for in ac-
cordance with SOP No. 76-3. ESOP shares are released and allocated to partici-
pants based upon debt service paid during the year on loans used by the ESOP to
purchase the shares. Unearned compensation, reflected as a reduction of share-
holders' equity, principally represents the unpaid balance of such ESOP loans.
Dividends received by the ESOP are used to pay debt service.
For old ESOP shares, compensation expense is equal to amounts contributed, or
committed to be contributed, to the ESOP by the Company less the ESOP interest
expense element of such contributions. Dividends on old ESOP shares are de-
ducted from retained earnings. Old ESOP shares are considered to be outstanding
in computing earnings per share.
28
<PAGE>
NOTES
- --------------------------------------------------------------------------------
For new ESOP shares, compensation expense is equal to the Company's matching
contribution (see Note 8). Dividends on released new ESOP shares are deducted
from retained earnings, and dividends on unreleased shares are reported as a
reduction of debt or accrued interest. Only new ESOP shares that have been re-
leased are considered outstanding in computing earnings per share.
Cash equivalents
Cash equivalents are highly liquid investments (valued at cost, which approxi-
mates fair value) acquired with an original maturity of three months or less.
Derivative instruments
Derivative financial instruments are used to hedge the Company's foreign cur-
rency and interest rate exposures. Income and expense are recorded in the same
caption as that arising from the related asset or liability being hedged. Pre-
miums paid on option contracts are amortized over the lives of the contracts.
Gains and losses related to hedges of firm commitments are deferred and recog-
nized over the expected remaining lives of the related assets and liabilities.
Unrealized gains and losses from option contracts that hedge anticipated trans-
actions are also deferred and recognized in income in the same period as the
hedged transactions. Unrealized gains and losses from forward contracts that
hedge anticipated transactions are not deferred.
The Company also uses commodity swap contracts to reduce its exposure to fluc-
tuations in prices for natural gas. Gains and losses on these contracts are de-
ferred and recognized in income in the same period as the hedged transactions.
The fair value of derivative instruments as of Dec. 31, 1996 and 1995, was not
material. The Company does not enter into derivative transactions for specula-
tive purposes and therefore holds no derivative instruments for trading purpos-
es.
2. BALANCE SHEET DETAIL
<TABLE>
<CAPTION>
December 31
- -------------------------------------------------------------
(Millions) 1996 1995
- -------------------------------------------------------------
<S> <C> <C>
Receivables
Customers $1,166.1 $1,187.6
-----------------------------------------------------------
Other 85.1 85.7
-----------------------------------------------------------
Allowance for doubtful accounts (25.6) (28.2)
- -------------------------------------------------------------
Total $1,225.6 $1,245.1
- -------------------------------------------------------------
- -------------------------------------------------------------
Inventories(/1/)
Finished products and work in process $ 547.3 $ 504.5
-----------------------------------------------------------
Raw materials 133.9 120.5
-----------------------------------------------------------
Supplies 115.3 112.5
- -------------------------------------------------------------
Total $ 796.5 $ 737.5
- -------------------------------------------------------------
- -------------------------------------------------------------
Property(/2/)
Land and land improvements $ 295.9 $ 288.4
-----------------------------------------------------------
Buildings 1,184.8 1,129.8
-----------------------------------------------------------
Machinery and equipment 4,747.9 4,618.0
-----------------------------------------------------------
Other 246.8 233.0
-----------------------------------------------------------
Construction in progress 212.8 194.8
- -------------------------------------------------------------
Total $6,688.2 $6,464.0
- -------------------------------------------------------------
- -------------------------------------------------------------
Accounts payable and accrued liabilities
Trade creditors $ 601.9 $ 583.4
-----------------------------------------------------------
Accrued payroll 236.5 224.9
-----------------------------------------------------------
Other postretirement and pension
benefits 56.2 57.8
-----------------------------------------------------------
Other 210.9 237.4
- -------------------------------------------------------------
Total $1,105.5 $1,103.5
- -------------------------------------------------------------
- -------------------------------------------------------------
</TABLE>
(1) Inventories valued using the LIFO method comprised 73% and 72% of total
gross inventory values at Dec. 31, 1996 and 1995, respectively. If the
first-in, first-out method of inventory valuation had been used,
inventories would have been $204 million and $203 million higher at Dec.
31, 1996 and 1995, respectively.
(2) Interest capitalized in 1996, 1995 and 1994 was $12 million, $9 million and
$5 million, respectively.
29
<PAGE>
NOTES
- --------------------------------------------------------------------------------
3. DEBT AND BANK CREDIT AGREEMENTS AND LEASES
<TABLE>
<CAPTION>
December 31
- ---------------------------------------------------------------------------
(Millions) 1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C>
9.3% notes, due 1999 $122.6 $122.6
- ---------------------------------------------------------------------------
6.9% non-callable debentures, due 2005 100.0 100.0
- ---------------------------------------------------------------------------
7.4% notes, due 2016 149.3 --
- ---------------------------------------------------------------------------
9.0% non-callable debentures, due 2021 148.0 148.0
- ---------------------------------------------------------------------------
ESOP notes(/1/)
Weighted average 8.5% fixed-rate notes 65.9 146.0
-------------------------------------------------------------------------
Variable-rate notes, weighted average 4.6% at Dec. 31, 1996 95.8 120.3
- ---------------------------------------------------------------------------
Various other debt, weighted average 5.1% 45.9 48.9
- ---------------------------------------------------------------------------
Non-U.S. subsidiary borrowings
12.7% notes, maturing 1997 to 1999 57.7 69.2
-------------------------------------------------------------------------
Fixed-rate notes, weighted average
8.5% at Dec. 31, 1996, maturing in 1997 and 1998 9.5 17.1
-------------------------------------------------------------------------
Various other debt, weighted average
6.3% at Dec. 31, 1996 63.5 78.7
- ---------------------------------------------------------------------------
Capital lease obligations 27.8 28.7
- ---------------------------------------------------------------------------
Total 886.0 879.5
- ---------------------------------------------------------------------------
Less payments due within one year 52.1 144.0
- ---------------------------------------------------------------------------
Long-term debt $833.9 $735.5
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
(1) See Note 8 discussing ESOP borrowings. The fixed- and variable-rate notes
mature in 2009 and require annual principal payments from 1997 to 2008.
Aggregate maturities during the next five years are (in millions) $52 in 1997,
$56 in 1998, $170 in 1999, $31 in 2000 and $29 in 2001.
The Company has revolving credit agreements with credit lines totaling $820
million. Of these credit lines, $800 million will expire in December 2001 and
require payment of annual fees equal to seven basis points on the unused portion
of the lines. These lines support our commercial paper programs in the United
States, Canada and the Netherlands. The remaining $20 million, relating to a
subsidiary, will expire in September 1998 and requires payment of annual fees
equal to 10 basis points on the unused portion of the line. PPG may cancel all
or part of these credit agreements at any time without penalty or premium. At
Dec. 31, 1996, we had used $6 million of these lines of credit.
Our non-U.S. operations have committed and uncommitted lines of credit total-
ing $60 million and $500 million, respectively, of which $8 million and $105
million, respectively, were used at Dec. 31, 1996. The committed lines of cred-
it, which expire during the years 1997 through 1999, do not contain significant
commitment fees. The uncommitted lines of credit are subject to cancellation at
any time and are not subject to any commitment fees.
In addition to our lines of credit, the Company may issue up to $450 million
aggregate principal amount of debt securities under a shelf registration state-
ment filed with the Securities and Exchange Commission.
PPG is in compliance with the restrictive covenants under its various credit
agreements, loan agreements and indentures.
The Dec. 31, 1996 and 1995, balances for "Short-term debt and current portion
of long-term debt" include, respectively, $423 million and $96 million of com-
mercial paper and $173 million and $245 million of short-term notes. The
weighted average interest rates of short-term borrowings as of Dec. 31, 1996
and 1995, were 5.5% and 7.1%, respectively.
Interest payments in 1996, 1995 and 1994 totaled $109 million, $91 million and
$93 million, respectively.
Rental expense for operating leases was $68 million, $67 million and $60 mil-
lion in 1996, 1995 and 1994, respectively. Minimum lease commitments for oper-
ating leases that have initial or remaining lease terms in excess of one year
at Dec. 31, 1996, are (in millions) $30 in 1997, $20 in 1998, $12 in 1999, $7
in 2000, $5 in 2001 and $20 thereafter.
30
<PAGE>
NOTES
- --------------------------------------------------------------------------------
4. SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Minimum
Additional Treasury Stock Unearned Pension
Shares Par Paid-In Retained Compensation Liability
(Dollars in Millions) Issued Value Capital Earnings Shares Cost (See Note 8) Adjustment
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JAN. 1,
1994 145,286,534 $242.1 $ 297.5 $3,436.8 (38,445,686) $(1,224.7) $(182.5) $(36.1)
-----------------------------------------------------------------------------------------------------------------------------
Net income -- -- -- 514.6 -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------
Cash dividends -- -- -- (237.8) -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------
Two-for-one
stock split
in the form of a
100%
stock
distribution 145,286,534 242.2 (242.2) -- (39,019,886) -- -- --
-----------------------------------------------------------------------------------------------------------------------------
Purchase of treasury stock(/1/) -- -- -- -- (6,578,700) (280.0) -- --
-----------------------------------------------------------------------------------------------------------------------------
Issuance of
treasury
stock(/1/) -- -- 12.2 -- 609,849 16.1 -- --
-----------------------------------------------------------------------------------------------------------------------------
ESOP loans -- -- -- -- -- -- (22.0) --
-----------------------------------------------------------------------------------------------------------------------------
Repayment of
loans by ESOP -- -- -- -- -- -- 21.5 --
-----------------------------------------------------------------------------------------------------------------------------
Translation
adjustments -- -- -- -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------
Other -- -- -- 3.5 -- -- -- 34.4
-----------------------------------------------------------------------------------------------------------------------------
BALANCE, DEC.
31, 1994 290,573,068 484.3 67.5 3,717.1 (83,434,423) (1,488.6) (183.0) (1.7)
-----------------------------------------------------------------------------------------------------------------------------
Net income -- -- -- 767.6 -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------
Cash dividends -- -- -- (238.9) -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------
Purchase of
treasury
stock -- -- -- -- (13,582,300) (588.0) -- --
-----------------------------------------------------------------------------------------------------------------------------
Issuance of
treasury
stock -- -- 13.8 -- 893,622 17.0 -- --
-----------------------------------------------------------------------------------------------------------------------------
ESOP loans -- -- -- -- -- -- (25.0) --
-----------------------------------------------------------------------------------------------------------------------------
Repayment of
loans by ESOP -- -- -- -- -- -- 28.8 --
-----------------------------------------------------------------------------------------------------------------------------
Translation
adjustments -- -- -- -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------
Other -- -- -- 3.2 -- -- -- (8.7)
-----------------------------------------------------------------------------------------------------------------------------
BALANCE, DEC.
31, 1995 290,573,068 484.3 81.3 4,249.0 (96,123,101) (2,059.6) (179.2) (10.4)
-----------------------------------------------------------------------------------------------------------------------------
Net income -- -- -- 744.0 -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------
Cash dividends -- -- -- (236.6) -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------
Purchase of
treasury
stock -- -- -- -- (12,452,817) (635.1) -- --
-----------------------------------------------------------------------------------------------------------------------------
Issuance of
treasury
stock -- -- 15.3 -- 1,217,958 27.5 -- --
-----------------------------------------------------------------------------------------------------------------------------
ESOP loans -- -- -- -- -- -- (26.0) --
-----------------------------------------------------------------------------------------------------------------------------
Repayment of
loans by ESOP -- -- -- -- -- -- 33.9 --
-----------------------------------------------------------------------------------------------------------------------------
Translation
adjustments -- -- -- -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------
Other -- -- -- 3.4 -- -- -- .5
-----------------------------------------------------------------------------------------------------------------------------
BALANCE, DEC.
31, 1996 290,573,068 $484.3 $ 96.6 $4,759.8 (107,357,960) $(2,667.2) $(171.3) $ (9.9)
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Currency
Translation
Adjustment
-----------------------------------------------------------------------------------------------------------------------------
<S> <C>
BALANCE, JAN. 1,
1994 $(60.0)
-----------------------------------------------------------------------------------------------------------------------------
Net income --
-----------------------------------------------------------------------------------------------------------------------------
Cash dividends --
-----------------------------------------------------------------------------------------------------------------------------
Two-for-one
stock split
in the form of a
100%
stock
distribution --
-----------------------------------------------------------------------------------------------------------------------------
Purchase of treasury stock(/1/) --
-----------------------------------------------------------------------------------------------------------------------------
Issuance of
treasury
stock(/1/) --
-----------------------------------------------------------------------------------------------------------------------------
ESOP loans --
-----------------------------------------------------------------------------------------------------------------------------
Repayment of
loans by ESOP --
-----------------------------------------------------------------------------------------------------------------------------
Translation
adjustments 21.4
-----------------------------------------------------------------------------------------------------------------------------
Other --
-----------------------------------------------------------------------------------------------------------------------------
BALANCE, DEC.
31, 1994 (38.6)
-----------------------------------------------------------------------------------------------------------------------------
Net income --
-----------------------------------------------------------------------------------------------------------------------------
Cash dividends --
-----------------------------------------------------------------------------------------------------------------------------
Purchase of
treasury
stock --
-----------------------------------------------------------------------------------------------------------------------------
Issuance of
treasury
stock --
-----------------------------------------------------------------------------------------------------------------------------
ESOP loans --
-----------------------------------------------------------------------------------------------------------------------------
Repayment of
loans by ESOP --
-----------------------------------------------------------------------------------------------------------------------------
Translation
adjustments 42.4
-----------------------------------------------------------------------------------------------------------------------------
Other --
-----------------------------------------------------------------------------------------------------------------------------
BALANCE, DEC.
31, 1995 3.8
-----------------------------------------------------------------------------------------------------------------------------
Net income --
-----------------------------------------------------------------------------------------------------------------------------
Cash dividends --
-----------------------------------------------------------------------------------------------------------------------------
Purchase of
treasury
stock --
-----------------------------------------------------------------------------------------------------------------------------
Issuance of
treasury
stock --
-----------------------------------------------------------------------------------------------------------------------------
ESOP loans --
-----------------------------------------------------------------------------------------------------------------------------
Repayment of
loans by ESOP --
-----------------------------------------------------------------------------------------------------------------------------
Translation
adjustments (13.5)
-----------------------------------------------------------------------------------------------------------------------------
Other --
-----------------------------------------------------------------------------------------------------------------------------
BALANCE, DEC.
31, 1996 $ (9.7)
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Treasury stock share amounts from Jan. 1, 1994, to the date of the 100%
stock distribution are on a pre-split basis. Shares purchased and issued in
1994 on a post-split basis were 7,457,400 and 914,349, respectively.
A class of 10 million shares of preferred stock, without par value, is
authorized but unissued. Common stock has a par value of $1.66-2/3% per share
and 600 million shares are authorized. Shares outstanding at Dec. 31, 1996 and
1995, exclude unreleased new ESOP shares (see Note 8).
PPG has a Shareholders' Rights Plan, under which each share of the Company's
outstanding common stock has an associated preferred share purchase right. The
rights are exercisable only under certain circumstances and allow holders of
such rights to purchase common stock of PPG or an acquiring company at a
discounted price, which generally would be 50% of the respective stocks' current
fair market value.
Per share cash dividends paid were $1.26 in 1996, $1.18 in 1995 and, after
giving effect to the 1994 two-for-one-stock split in the form of a 100% stock
distribution, $1.12 in 1994.
5. Business Divestitures and Realignments
PPG's results in 1994 included a pre-tax charge of $85 million pertaining to the
divestiture of the Biomedical Systems Division as this business was not meeting
strategic or financial performance objectives. With the sale of the sensors
business in January 1995, the divestiture of the Biomedical Systems Division was
completed. Refer to the Business Divestitures and Realignments section in
Management's Discussion and Analysis for further details regarding this charge.
31
<PAGE>
NOTES
- --------------------------------------------------------------------------------
6. INCOME TAXES
The following is a reconciliation of the statutory U.S. corporate federal in-
come tax rate to the effective income tax rate.
<TABLE>
<CAPTION>
Percent of
Pre-tax Income
- ---------------------------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C> <C>
U.S. federal income tax rate 35.0% 35.0% 35.0%
- ---------------------------------------------------------------------
Changes in tax rate resulting from:
Taxes on non-U.S. earnings and related tax credits .8 .3 (.1)
--------------------------------------------------------------------
State and local taxes--U.S. 3.7 3.3 3.5
--------------------------------------------------------------------
Other (1.5) (.6) (.4)
--------------------------------------------------------------------
Effective income tax rate 38.0% 38.0% 38.0%
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
</TABLE>
The following table gives details of income tax expense in the statement of
income. A portion of these taxes will be payable within one year and is there-
fore shown below as "Current income taxes," while the balance is shown as "De-
ferred income taxes."
<TABLE>
- --------------------------------------------
<CAPTION>
(Millions) 1996 1995 1994
- --------------------------------------------
<S> <C> <C> <C>
Current income taxes
U.S. federal $254.9 $275.4 $206.3
------------------------------------------
Non-U.S. 78.7 65.9 33.3
------------------------------------------
State and local--U.S. 66.7 64.7 45.2
- --------------------------------------------
Total current 400.3 406.0 284.8
- --------------------------------------------
Deferred income taxes
U.S. federal 36.2 37.5 13.9
------------------------------------------
Non-U.S. 29.8 33.5 24.9
------------------------------------------
State and local--U.S. 4.7 2.7 1.6
- --------------------------------------------
Total deferred 70.7 73.7 40.4
- --------------------------------------------
Total $471.0 $479.7 $325.2
- --------------------------------------------
- --------------------------------------------
</TABLE>
Net deferred income tax assets and liabilities as of Dec. 31, 1996 and 1995,
are as follows:
<TABLE>
- -------------------------------------------------------------
<CAPTION>
(Millions) 1996 1995
- -------------------------------------------------------------
<S> <C> <C>
Deferred income tax assets related to
Employee benefits $ 310.8 $ 314.3
-----------------------------------------------------------
Environmental 34.3 38.0
-----------------------------------------------------------
NOL and tax credit carryforwards 128.3 106.9
-----------------------------------------------------------
Inventories 25.5 34.4
-----------------------------------------------------------
Property 33.4 27.4
-----------------------------------------------------------
Other 31.7 39.6
-----------------------------------------------------------
Valuation allowance (103.7) (86.2)
- -------------------------------------------------------------
Total 460.3 474.4
- -------------------------------------------------------------
Deferred income tax liabilities related to
Property 491.6 469.7
-----------------------------------------------------------
Employee benefits 223.4 184.6
-----------------------------------------------------------
Other 50.6 51.0
- -------------------------------------------------------------
Total 765.6 705.3
- -------------------------------------------------------------
Deferred income tax liabilities--net $(305.3) $(230.9)
- -------------------------------------------------------------
- -------------------------------------------------------------
</TABLE>
At Dec. 31, 1996, subsidiaries of the Company had available net operating loss
(NOL) carryforwards of approximately $270 million for income tax purposes, of
which $255 million have an indefinite expiration. The remaining $15 million ex-
pire between the years 2001 and 2005.
The majority of the NOL carryforwards relate to operations of subsidiaries in
countries permitting indefinite carryforward of losses. Generally, the valua-
tion allowance has been established for these carryforwards because the ability
to utilize them is uncertain.
32
<PAGE>
NOTES
- --------------------------------------------------------------------------------
Income before income taxes of our non-U.S. operations for 1996, 1995 and 1994
was $266 million, $257 million and $127 million, respectively.
No deferred U.S. income taxes have been provided on certain undistributed
earnings of non-U.S. subsidiaries, which have been reinvested indefinitely and
which amounted to $511 million and $462 million at Dec. 31, 1996 and 1995, re-
spectively. It is not practicable to determine the deferred tax liability on
these earnings.
The Internal Revenue Service has examined our U.S. federal income tax returns
through 1990, and we have paid all tax claims.
Income tax payments in 1996, 1995 and 1994 totaled $402 million, $358 million
and $254 million, respectively.
7. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
Pension benefits
We have noncontributory defined benefit pension plans that cover certain em-
ployees worldwide. Benefits under these plans are based on years of service and
salaries or on stated amounts for each year of service. Our funding policy for
all plans is consistent with applicable governmental requirements. We provide
for obligations for all plans by depositing funds with trustees, by purchasing
insurance policies or by recording financial statement accruals. Pension plan
assets held in trust consist of fixed-income investments and equity securities.
Net periodic pension cost includes the following components:
<TABLE>
- ----------------------------------------------------------------------
<CAPTION>
(Millions) 1996 1995 1994
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Service cost--benefits earned during the year $ 36.2 $ 23.2 $ 29.1
- ----------------------------------------------------------------------
Interest cost on projected benefit obligation 124.4 121.9 114.0
- ----------------------------------------------------------------------
Return on assets
Actual (gain) loss (266.1) (326.5) 13.0
--------------------------------------------------------------------
Deferred gain (loss) 76.5 173.4 (160.2)
- ----------------------------------------------------------------------
Net amortization 29.6 12.5 13.8
- ----------------------------------------------------------------------
Net periodic pension cost $ .6 $ 4.5 $ 9.7
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
</TABLE>
In the determination of net periodic pension cost, the assumed weighted-aver-
age long-term rate of return on plan assets was 10.9% for 1996, 1995 and 1994.
Unrecognized prior service costs are amortized over periods ranging from six to
14 years.
The following table sets forth the combined funded status and amounts recog-
nized in our balance sheet for our defined benefit pension plans.
<TABLE>
<CAPTION>
December 31
- -------------------------------------------------------------------------------
(Millions) 1996 1995
- -------------------------------------------------------------------------------
Plan ABO Plan ABO
Assets Exceeds Assets Exceeds
Exceed Plan Exceed Plan
ABO Assets ABO Assets
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of the
estimated pension benefits to
be paid in the future
Vested benefit obligation $1,530.4 $ 74.8 $1,526.0 $ 65.0
- -------------------------------------------------------------------------------
Nonvested benefit obligation 77.4 20.9 72.5 18.1
- -------------------------------------------------------------------------------
Accumulated benefit obligation (ABO) 1,607.8 95.7 1,598.5 83.1
- -------------------------------------------------------------------------------
Effect of projected future salary
increases 137.0 17.5 151.8 17.4
- -------------------------------------------------------------------------------
Projected benefit obligation (PBO) 1,744.8 113.2 1,750.3 100.5
- -------------------------------------------------------------------------------
Plan assets at fair value 2,002.8 2.6 1,730.7 1.8
- -------------------------------------------------------------------------------
PBO (less than) in excess of plan assets (258.0) 110.6 19.6 98.7
- -------------------------------------------------------------------------------
Unamortized net asset (liability) at date
of adoption 35.4 (9.7) 43.9 (11.8)
- -------------------------------------------------------------------------------
Unrecognized net loss (319.1) (18.2) (482.6) (16.4)
- -------------------------------------------------------------------------------
Unrecognized prior service cost (68.9) (4.2) (61.1) (2.2)
- -------------------------------------------------------------------------------
Minimum liability -- 23.4 -- 22.8
- -------------------------------------------------------------------------------
(Prepaid) accrued
pensions-- net(/1/) $ (610.6) $101.9 $ (480.2) $91.1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
(1) As of Dec. 31, 1996 and 1995, the prepaid pension amounts are included in
Other assets in the balance sheet.
We determined the projected benefit obligation using weighted average discount
rates of 7.5% at Dec. 31, 1996, and 6.9% at Dec. 31, 1995. For those plans that
provide benefits based on salaries in the final years of employment, the as-
sumed long-term rate of increase in salaries was 4.6% at Dec. 31, 1996, and
4.7% at Dec. 31, 1995. The accrued pension liability, reflected in the balance
sheet, included $4 million and $5 million at Dec. 31, 1996 and 1995, respective-
ly, for defined contribution plans.
Pension cost, which includes costs for defined contribution plans, multi-em-
ployer defined benefit pension plans and the net periodic pension cost shown
above, was $4 million, $8 million and $13 million in 1996, 1995 and 1994, re-
spectively.
Approximately 2% and 8% of plan assets at fair value were held in PPG common
stock at Dec. 31, 1996 and 1995, respectively.
33
<PAGE>
NOTES
- --------------------------------------------------------------------------------
Other postretirement benefits
PPG sponsors defined benefit plans that provide medical and life insurance ben-
efits to nearly all of its retired employees in the United States and certain
retired employees in Canada. These plans also cover the employees' spouse and
dependents. Salaried and certain wage employees hired after Jan. 31, 1993, will
not be entitled to postretirement medical benefits. At Dec. 31, 1996, the U.S.
plans had provisions that capped the cost of postretirement medical benefits at
2003 levels for most current and future retirees covered by bargaining plans,
as well as current and future retirees covered by nonbargaining plans. Many of
our plans include cost-sharing provisions, such as co-insurance and deduct-
ibles, and require participant contributions based upon elected coverage. The
plans also coordinate benefits with Medicare for those employees who are 65 and
older or transfers the health care risk to Medicare health maintenance organi-
zations. Life insurance benefits for retirees covered by nonbargaining plans
are calculated at approximately 50% of the retirees' final base pay or 25% of
retirees' final base pay plus a monthly survivor income benefit. For most bar-
gaining units, the benefits are based upon negotiated flat dollar amounts. Our
Canadian plans provide postretirement medical and life insurance benefits that
supplement benefits provided and paid for under the Canadian health care sys-
tem. The Company's postretirement medical and life insurance plans are unfund-
ed.
Net periodic postretirement benefit cost includes the following components:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
(Millions) 1996 1995 1994
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Service cost--benefits earned during the year $ 7.2 $ 5.0 $ 5.4
- -----------------------------------------------------------------------
Interest cost on accumulated postretirement benefit
obligation 42.9 46.1 40.4
- -----------------------------------------------------------------------
Net amortization 4.0 4.6 (8.0)
- -----------------------------------------------------------------------
Net periodic postretirement benefit cost $54.1 $55.7 $37.8
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
</TABLE>
Net periodic postretirement benefit cost increased approximately $19 million
in 1995 as a result of deferring the cap on benefits from 1996 to 2003. In ad-
dition to the net periodic postretirement benefit cost shown above, $1 million
of multi-employer costs was incurred in each of the years 1996, 1995 and 1994.
The accumulated postretirement benefit obligation of our plans and the liabil-
ity recognized in the balance sheet as of Dec. 31, 1996 and 1995, are as fol-
lows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
(Millions) 1996 1995
- ---------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation (APBO)
Retirees $471.8 $482.4
- ---------------------------------------------------------------------
Fully eligible active plan participants 87.5 89.3
- ---------------------------------------------------------------------
Other active plan participants 116.7 105.0
- ---------------------------------------------------------------------
APBO 676.0 676.7
- ---------------------------------------------------------------------
Unrecognized prior service cost (40.0) (29.1)
- ---------------------------------------------------------------------
Unrecognized net loss (62.6) (79.8)
- ---------------------------------------------------------------------
Other postretirement benefit liability $573.4 $567.8
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
</TABLE>
The weighted average discount rate used in determining the APBO was 7.5% at
Dec. 31, 1996, and 6.8% at Dec. 31, 1995. The assumed health care cost trend
rate was 7.7% for 1996 and 7.3% for 1997, declining ratably to 4.0% by the year
2007. If these trend rates were increased by one percentage point per year, the
APBO and the aggregate of the service and interest cost components of the net
periodic postretirement benefit cost would increase by approximately 5.3% and
4.0%, respectively.
8. EMPLOYEE STOCK OWNERSHIP PLAN
Our employee stock ownership plan (ESOP) covers substantially all U. S. employ-
ees. The Company makes matching contributions to the ESOP based upon partici-
pant's savings, subject to certain limitations, and a matching percentage based
upon our return on average equity for the previous year.
In 1989 and 1990, the ESOP purchased 13,400,334 shares of PPG common stock
(old ESOP shares) from the Company and on the open market. The ESOP purchased
506,761, 631,748 and 560,197 shares of PPG common stock (new ESOP shares) on
the open market in 1996, 1995 and 1994, respectively. The ESOP financed these
purchases through a combination of borrowings guaranteed by PPG and borrowings
directly from PPG. Borrowings from third-parties to finance these purchases are
included in debt in our balance sheet (see Note 3).
<PAGE>
Compensation expense (credit) related to the ESOP for 1996, 1995 and 1994 to-
taled $15 million, $18 million and $(1) million, respectively. Interest expense
totaled $11 million, $12 million and $10 million for 1996, 1995 and 1994, re-
spectively. Dividends on PPG shares held by the ESOP, to service ESOP debt, to-
taled $37 million, $34 million and $31 million for 1996, 1995 and 1994, respec-
tively. The fair value
34
<PAGE>
NOTES
- --------------------------------------------------------------------------------
of unreleased new ESOP shares was $12 million at Dec. 31, 1996 and 1995. Shares
held by the ESOP as of Dec. 31, 1996 and 1995, are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
1996 1995
- ---------------------------------------------------------------------------
Old Shares New Shares Old Shares New Shares
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allocated shares 6,899,912 1,290,001 6,388,020 722,343
- ---------------------------------------------------------------------------
Shares released for allocation 10,432 196,058 10,720 218,181
- ---------------------------------------------------------------------------
Unreleased shares 6,489,990 212,647 7,001,594 251,421
- ---------------------------------------------------------------------------
Total 13,400,334 1,698,706 13,400,334 1,191,945
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
9. STOCK OPTION PLAN
Under PPG's stock option plan, certain employees of the Company have been
granted options to purchase shares of common stock at prices equal to the fair
market value of the shares on the date the option was granted. Options are ex-
ercisable beginning from six to 12 months after granting and have a maximum
term of 10 years. Shares available for future grants were 1,429,883 and
2,168,356 at Dec. 31, 1996 and 1995, respectively.
PPG applies Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations in accounting for its stock-
based compensation. Accordingly, no compensation cost for PPG's stock option
plan has been recognized in the accompanying financial statements. Had compen-
sation cost been determined based upon the fair value at the grant date for
awards granted in 1996 and 1995 consistent with the methodology prescribed in
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," the effect on 1996 and 1995 net income and earnings
per share would have been immaterial.
The following table summarizes stock option activity for the three years ended
Dec. 31, 1996.
<TABLE>
<CAPTION>
Weighted
Number of average
shares subject to exercise
Stock option activity options price per share
- -------------------------------------------------------------
<S> <C> <C>
Outstanding, Jan. 1, 1994 5,044,692 $29.65
- -------------------------------------------------------------
Granted 1,989,592 38.83
-----------------------------------------------------------
Exercised (1,488,173) 28.96
-----------------------------------------------------------
Terminated (108,200) 38.80
- -------------------------------------------------------------
Outstanding, Dec. 31, 1994 5,437,911 33.01
- -------------------------------------------------------------
Granted 2,323,990 39.53
-----------------------------------------------------------
Exercised (1,316,206) 31.04
-----------------------------------------------------------
Terminated (38,612) 37.76
- -------------------------------------------------------------
Outstanding, Dec. 31, 1995 6,407,083 35.75
- -------------------------------------------------------------
Granted 2,717,073 49.72
-----------------------------------------------------------
Exercised (2,365,091) 34.14
-----------------------------------------------------------
Terminated (34,100) 44.76
- -------------------------------------------------------------
Outstanding, Dec. 31, 1996 6,724,965 41.92
- -------------------------------------------------------------
- -------------------------------------------------------------
</TABLE>
<PAGE>
The following table summarizes information about stock options outstanding and
exercisable at Dec. 31, 1996.
<TABLE>
<CAPTION>
Options outstanding Options exercisable
------------------------------------- ----------------------
Weighted Weighted Weighted
Range of average average average
exercise remaining exercise exercise
price Number contractual price Number price
per share of shares life (years) per share of shares per share
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$18.50 - $27.25 317,664 3.32 $24.17 317,664 $24.17
- -------------------------------------------------------------------------------
$29.38 - $41.75 3,195,652 6.59 36.68 3,195,652 36.68
- -------------------------------------------------------------------------------
$41.88 - $61.75 3,211,649 6.77 48.89 1,070,467 46.66
- -------------------------------------------------------------------------------
6,724,965 4,583,783
========= =========
</TABLE>
At Dec. 31, 1995, options were exercisable for 4.6 million shares at a
weighted average exercise price of $34.20 per share. The corresponding amounts
at Dec. 31, 1994, were 3.8 million and $30.69 per share, respectively.
10. COMMITMENTS AND CONTINGENT LIABILITIES
PPG is involved in a number of lawsuits and claims, both actual and potential,
including some which it has asserted against others, in which substantial money
damages are sought. PPG's lawsuits and claims against others include claims
against insurers and other third parties with respect to actual and contingent
losses related to environmental matters. Management believes that the outcome
of all lawsuits and claims involving PPG, in the aggregate, will not
35
<PAGE>
NOTES
- -------------------------------------------------------------------------------
have a material effect on PPG's consolidated financial position, results of
operations or liquidity.
It is PPG's policy to accrue expenses for environmental contingencies when it
is probable that a liability has been incurred and the amount of loss can be
reasonably estimated. Reserves for environmental contingencies are exclusive
of claims against third parties and are not discounted. As of Dec. 31, 1996
and 1995, PPG had reserves for environmental contingencies totaling $91 mil-
lion and $100 million, respectively. Pre-tax charges against income for envi-
ronmental remediation costs in 1996, 1995 and 1994 totaled $27 million, $49
million and $36 million, respectively. Cash outlays related to such charges
aggregated $36 million, $39 million and $36 million in 1996, 1995 and 1994,
respectively.
Management anticipates that the resolution of the Company's environmental
contingencies, which will occur over an extended period of time, will not re-
sult in future annual charges against income that are significantly greater
than those recorded in recent years. It is possible, however, that technologi-
cal, regulatory and enforcement developments, the results of environmental
studies and other factors could alter this expectation. In management's opin-
ion, 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 con-
sidered to be probable of occurrence. The Company's environmental contingen-
cies 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 and one closed plant
site. Initial remedial actions are occurring at these sites. Studies to deter-
mine 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 in-
clude significant unresolved issues such as the nature and extent of contami-
nation, if any, at sites and the methods that may have to be employed should
remediation be required. With respect to certain waste sites, the financial
condition of any other potentially responsible parties also contributes to the
uncertainty of estimating PPG's final costs. Although contributors of waste to
sites involving other potentially responsible parties may face governmental
agency assertions of joint and several liability, in general, final alloca-
tions 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 re-
use initiatives and state voluntary remediation programs, also adds to the
present uncertainties with regard to the ultimate resolution of this unre-
served exposure to future loss. Although insurers and other third parties may
cover a portion of these costs, to the extent they are incurred, any potential
recovery is not included in this unreserved exposure to future loss.
The Company's assessment of the potential impact of these environmental con-
tingencies is subject to considerable uncertainty due to the complex, ongoing
and evolving process of investigation and remediation, if necessary, of such
environmental contingencies.
11. OTHER EARNINGS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
(Millions) 1996 1995 1994
- ----------------------------------------------------------------
<S> <C> <C> <C>
Interest income $ 10.6 $ 10.6 $ 9.3
- ----------------------------------------------------------------
Royalty income 24.7 26.9 25.0
- ----------------------------------------------------------------
Share of net earnings in equity affiliates 19.5 31.0 19.6
- ----------------------------------------------------------------
Gain on sale of businesses -- 7.1 26.8
- ----------------------------------------------------------------
Other 68.4 112.9 48.8
- ----------------------------------------------------------------
Total $123.2 $188.5 $129.5
- ----------------------------------------------------------------
- ----------------------------------------------------------------
</TABLE>
In 1995 Other includes gains on legal settlements, the most significant of
which related to a glass technology dispute with Pilkington plc of England.
PPG's share of undistributed earnings of equity affiliates was $94 million
and $87 million at Dec. 31, 1996 and 1995, respectively. Dividends received
from equity affiliates were $15 million, $14 million and $15 million in 1996,
1995 and 1994, respectively.
<PAGE>
12. RESEARCH AND DEVELOPMENT
<TABLE>
<CAPTION>
- -----------------------------------------------------
(Millions) 1996 1995 1994
- -----------------------------------------------------
<S> <C> <C> <C>
Research and development--total $255.5 $252.1 $233.4
- -----------------------------------------------------
Less depreciation 16.4 15.7 15.3
- -----------------------------------------------------
Research and development--net $239.1 $236.4 $218.1
- -----------------------------------------------------
- -----------------------------------------------------
</TABLE>
13. ADVERTISING COSTS
Advertising costs are expensed as incurred and totaled $72 million, $79 mil-
lion and $63 million in 1996, 1995 and 1994, respectively.
36
<PAGE>
NOTES
- --------------------------------------------------------------------------------
14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
- --------------------------------------
<TABLE>
<CAPTION>
Net Gross Net Earnings
Sales Profit Income Per
(Millions) (Millions) (Millions) Share
- -------------------------------------------------------
<S> <C> <C> <C> <C>
1996 quarter ended
March 31 $1,748.8 $ 681.6 $172.3 $ .90
- -------------------------------------------------------
June 30 1,913.6 785.7 228.5 1.20
- -------------------------------------------------------
September 30 1,801.2 729.1 191.1 1.03
- -------------------------------------------------------
December 31 1,754.5 681.4 152.1 .83
- -------------------------------------------------------
Total $7,218.1 $2,877.8 $744.0 $3.96
- -------------------------------------------------------
- -------------------------------------------------------
1995 quarter ended
March 31 $1,740.8 $ 712.7 $219.2 $1.06
- -------------------------------------------------------
June 30 1,870.4 761.1 216.8 1.06
- -------------------------------------------------------
September 30 1,724.1 694.7 170.4 .85
- -------------------------------------------------------
December 31 1,722.4 677.1 161.2 .83
- -------------------------------------------------------
Total $7,057.7 $2,845.6 $767.6 $3.80
- -------------------------------------------------------
- -------------------------------------------------------
</TABLE>
15. FINANCIAL INSTRUMENTS
Included in PPG's financial instrument portfolio are cash and cash equivalents,
Company-owned life insurance, derivative financial instruments and short- and
long-term debt instruments. The most significant instrument, long-term debt
(excluding capital lease obligations), had carrying and fair values totaling
$858 million and $903 million, respectively, at Dec. 31, 1996. The correspond-
ing amounts at Dec. 31, 1995, were $851 million and $923 million, respectively.
The fair values of the other instruments approximated their carrying values.
The fair values of the debt instruments were based upon quoted market prices
of the same or similar instruments or on the rates available to the Company for
instruments of the same remaining maturities.
16. BUSINESS SEGMENT INFORMATION AND NATURE OF OPERATIONS
Refer to pages 26 and 27 for information on our business segments for 1996,
1995 and 1994.
OFFICER CHANGES
- --------------------------------------------------------------------------------
Robert D. Duncan, executive vice president, retired on May 1, 1996.
John Maaghul was appointed president, PPG South America. Named president, PPG
Asia/Pacific, was Arend W. D. Vos, who also is vice president, coatings and
resins, for the region. Retiring during the year was Ken Kurahashi, who had
been vice president, coatings and resins, PPG Asia/Pacific, as well as
president, PPG Japan.
Four executives received new assignments to broaden their management skills
and experience. Donald W. Bogus was named vice president, industrial coatings.
Thomas M. Von Lehman succeeded Mr. Bogus as vice president, specialty
chemicals. Michael A. Ludlow took Mr. Von Lehman's post as vice president,
purchasing and distribution. Ernest A. Hahn, formerly vice president,
industrial coatings, succeeded Mr. Ludlow as vice president, automotive OEM
(original equipment) products, glass.
Peter R. Heinze, senior vice president, chemicals, left PPG. With his
departure, Rae R. Burton, vice president, chlor-alkali and derivatives, and
Thomas M. Von Lehman, vice president, specialty chemicals, assumed full
accountability for the performance of their respective business units. Mr.
Burton and Mr. Von Lehman report directly to Raymond W. LeBoeuf, president and
chief operating officer.
In January 1997, H. Kennedy Linge was elected vice president, associate gen-
eral counsel and secretary of PPG. He had been associate general counsel and
secretary.
37
<PAGE>
CORPORATE DIRECTORY
- -------------------------------------------------------------------------------
DIRECTORS
*+ERROLL B. DAVIS, JR.
President and Chief Executive Officer, WPL Holdings, Inc.
JERRY E. DEMPSEY
Chairman of the Board and Chief Executive Officer, PPG Industries, Inc.
*MICHELE J. HOOPER
President, International Business Group, Caremark International, Inc.
*++ALLEN J. KROWE
Vice Chairman, Texaco Inc.
RAYMOND W. LEBOEUF
President and ChiefOperating Officer, PPG Industries, Inc.
+++STEVEN C. MASON
Chairman of the Board and Chief Executive Officer,Mead Corporation
+++HAROLD A. MCINNES
Retired Chairman of the Board and Chief Executive Officer, AMP Incorporated
*++ROBERT MEHRABIAN
President,Carnegie Mellon University
VINCENT A. SARNI
Retired Chairman of the Board and Chief Executive Officer, PPG Industries,
Inc.
THOMAS J. USHER
Chairman of the Board and Chief Executive Officer, USX Corporation
*+DAVID G. VICE
Retired Vice Chairman, Products and Technology, Northern Telecom Limited
+++DAVID R. WHITWAM
Chairman of the Board and Chief Executive Officer, Whirlpool Corporation
*Audit Committee
+Officers-Directors Compensation Committee
++Nominating and Governance Committee
POLICY AND PLANNING COMMITTEE
JERRY E. DEMPSEY, CHAIRMAN
Chairman of the Board and Chief Executive Officer
RUSSELL L. CRANE
Senior Vice President, Human Resources and Administration
WILLIAM H. HERNANDEZ
Senior Vice President, Finance
RAYMOND W. LEBOEUF
President and Chief Operating Officer
GUY A. ZOGHBY
Senior Vice President and General Counsel
OPERATING COMMITTEE
RAYMOND W. LEBOEUF, CHAIRMAN
President and Chief Operating Officer
FRANK A. ARCHINACO
Senior Vice President, Glass
CHARLES E. BUNCH
Vice President, Fiber Glass
RAE R. BURTON
Vice President, Chlor-Alkali and Derivatives
DAVID B. NAVIKAS
Controller
E. KEARS POLLOCK
Senior Vice President, Coatings & Resins
THOMAS M. VON LEHMAN
Vice President, Specialty Chemicals
GARY W. WEBER
Vice President, Science and Technology
COATINGS & RESINS
DONALD W. BOGUS
Vice President, Industrial Coatings
THOMAS A. CRAIG
Vice President, Refinish Products
GERALD W. GRUBER
Vice President, Research and Development
RODERICK I. A. WATTERS
Vice President, Automotive Products, Europe
RICHARD ZAHREN
Vice President, Automotive Products
GLASS
STANLEY C. DEGREVE
Vice President, Operations, Fiber Glass
ERNEST A. HAHN
Vice President, Automotive OEM Products
CORPORATE FUNCTIONS
L. BLAINE BOSWELL
Vice President, Public Affairs
DAVID C. CANNON JR.
Vice President, Environment, Health and Safety
JAMES W. CRAIG
President, PPG Europe; Vice President, Coatings & Resins, Europe
DAN W. KIENER
Treasurer
H. KENNEDY LINGE
Vice President, Associate General Counsel and Secretary
MICHAEL A. LUDLOW
Vice President, Purchasing and Distribution
JOHN MAAGHUL
President, PPG South America
MARGARET H. MCGRATH
President, PPG Canada; Vice President, Coatings & Resins, Canada
DAVID W. SMITH
Vice President, Information Technology
AREND W. D. VOS
President, PPG Asia/Pacific; Vice President,Coatings & Resins, Asia/Pacific
DAVID R. WALLIS
Vice President, Corporate Development
38
<PAGE>
ELEVEN-YEAR DIGEST
- --------------------------------------------------------------------------------
<TABLE>
- ------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
Net sales 7,218 7,058 6,331 5,754 5,814 5,673 6,021 5,734 5,617 5,183 4,687
- ------------------------------------------------------------------------------------------------------------
Gross profit (%) 39.9 40.3 38.9 36.9 36.4 35.2 37.8 37.1 39.2 37.8 37.2
- ------------------------------------------------------------------------------------------------------------
Income before income
taxes 1,215 1,247 840 531 538 348 767 749 779 637 553
- ------------------------------------------------------------------------------------------------------------
Income taxes 471 480 325 236 218 147 292 284 311 260 236
- ------------------------------------------------------------------------------------------------------------
Income before accounting
changes 744 768 515 295 319 201 475 465 468 377 316
- ------------------------------------------------------------------------------------------------------------
Cumulative effect of
accounting changes(/1/) -- -- -- (273) -- 75 -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------
Net income 744 768 515 22 319 276 475 465 468 377 316
- ------------------------------------------------------------------------------------------------------------
Average equity(/2/) 2,519 2,666 2,562 2,530/2,749 2,701 2,577 2,407 2,220 2,121 2,089 1,838
- ------------------------------------------------------------------------------------------------------------
Return on average equity
(%)(/2/) 29.5 28.8 20.1 .9/10.7 11.8 10.7 19.7 21.0 22.1 18.1 17.2
- ------------------------------------------------------------------------------------------------------------
Earnings per share
before accounting
changes 3.96 3.80 2.43 1.39 1.51 .95 2.22 2.09 2.13 1.60 1.33
- ------------------------------------------------------------------------------------------------------------
Cumulative effect of
accounting
changes on earnings per
share -- -- -- (1.29) -- .35 -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------
Earnings per share 3.96 3.80 2.43 .10 1.51 1.30 2.22 2.09 2.13 1.60 1.33
- ------------------------------------------------------------------------------------------------------------
Average number of shares 187.8 202.0 211.9 212.6 212.2 212.4 214.4 222.6 219.6 236.4 237.8
- ------------------------------------------------------------------------------------------------------------
Dividends 237 239 238 221 200 183 176 165 141 132 112
- ------------------------------------------------------------------------------------------------------------
Per share 1.26 1.18 1.12 1.04 .94 .86 .82 .74 .64 .56 .47
- ------------------------------------------------------------------------------------------------------------
BALANCE SHEET
Current assets 2,296 2,275 2,168 2,026 1,951 2,173 2,217 2,056 1,899 1,844 1,616
- ------------------------------------------------------------------------------------------------------------
Current liabilities 1,769 1,629 1,425 1,281 1,253 1,341 1,471 1,338 1,264 1,295 976
- ------------------------------------------------------------------------------------------------------------
Working capital 527 646 743 745 698 832 746 718 635 549 640
- ------------------------------------------------------------------------------------------------------------
Property (net) 2,913 2,835 2,742 2,787 2,972 3,183 3,255 3,007 2,758 2,685 2,661
- ------------------------------------------------------------------------------------------------------------
Total assets 6,441 6,194 5,894 5,652 5,662 6,056 6,108 5,645 5,154 5,008 4,641
- ------------------------------------------------------------------------------------------------------------
Long-term debt 834 736 773 774 905 1,190 1,210 1,198 892 917 1,018
- ------------------------------------------------------------------------------------------------------------
Shareholders' equity 2,483 2,569 2,557 2,473 2,699 2,655 2,547 2,282 2,243 2,044 1,978
- ------------------------------------------------------------------------------------------------------------
Per share 13.57 13.23 12.35 11.57 12.71 12.50 12.01 10.49 10.24 9.22 8.28
- ------------------------------------------------------------------------------------------------------------
OTHER DATA
Capital spending 489 454 356 293 283 335 567 671 410 479 497
- ------------------------------------------------------------------------------------------------------------
Depreciation expense 340 332 318 331 352 351 324 292 274 266 242
- ------------------------------------------------------------------------------------------------------------
Quoted market price
High 62 1/4 47 7/8 42 1/8 38 1/8 34 1/8 29 5/8 27 5/8 23 23 3/8 26 3/4 19 3/8
----------------------------------------------------------------------------------------------------------
Low 42 7/8 34 7/8 33 3/4 29 5/8 25 20 3/4 17 1/4 18 1/2 15 5/8 13 3/4 11 1/4
----------------------------------------------------------------------------------------------------------
Year-end 56 1/8 45 3/4 37 1/8 37 7/8 32 7/8 25 1/4 23 1/2 19 7/8 20 1/8 16 1/2 18 1/8
----------------------------------------------------------------------------------------------------------
Price/earnings
ratio(/3/)
High 16 13 17 27 23 31 12 11 11 17 15
----------------------------------------------------------------------------------------------------------
Low 11 9 14 21 17 22 8 9 7 9 8
----------------------------------------------------------------------------------------------------------
Average number of
employees 31,300 31,200 30,800 31,400 32,300 33,700 35,100 35,500 36,300 36,800 36,500
- ------------------------------------------------------------------------------------------------------------
</TABLE>
All amounts are in millions of dollars except per share data and number of
employees.
Data was adjusted, as appropriate, to reflect the two-for-one stock splits
payable on June 10, 1994, and on March 12, 1987.
(1) The 1993 changes in methods of accounting relate to the adoption of SFAS
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions"; SFAS No. 109, "Accounting for Income Taxes," and SFAS No. 112,
"Employers' Accounting for Postemployment Benefits." The 1991 change in the
method of accounting relates to the cost of rebuilding glass and fiber
glass melting facilities. The effect of all the changes on net income in
the years of change, exclusive of the cumulative effect to Jan. 1 of the
year of change and the pro forma effect on individual prior years' net
income, was not material.
(2) Average equity and return on average equity for 1993 were calculated and
presented inclusive and exclusive of the cumulative effect of the
accounting changes.
(3) Price/earnings ratios were calculated based on high and low market prices
during the year and the respective year's earnings per share. The 1993 and
1991 ratios were calculated and presented exclusive of the cumulative
effect of the accounting changes.
39
<PAGE>
PPG SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
WORLD HEADQUARTERS One PPG Place Pittsburgh, PA 15272, U.S.A.
Phone (412) 434-3131 Internet: www.ppg.com
ANNUAL MEETING
Thursday, April 17, 1997, 2:00 p.m. The Westin William Penn Hotel 530 William
Penn Place Pittsburgh, PA 15219
TRANSFER AGENT & REGISTRAR
Chase Mellon Shareholder Services, LLC Overpeck Centre 85 Challenger Road
Ridgefield Park, NJ 07660
PPG-dedicated phone 1-800-648-8160
Shareholders with specific questions regarding dividend checks, transfer or
replacement of stock certificates or dividend tax information should contact
Chase Mellon Shareholder Services--the dividend paying agent, dividend
reinvestment agent, transfer agent and registrar for PPG at the above address.
Or, shareholders may contact PPG Shareholder Relations, 40N, PPG Industries,
One PPG Place, Pittsburgh, PA 15272; phone (412) 434-3312.
TOLL-FREE QUARTERLY FINANCIAL RESULTS
Beginning April 18, 1997, shareholders may dial the toll-free number 1-888-
NEWS-PPG (1-888-6397-774) at any time, 24 hours a day, to hear quarterly
financial results. This service will speed information to our shareholders and
reduce the Company's costs. By dialing this number, shareholders also may
request copies of financial news releases via fax, electronic mail or
conventional mail.
PUBLICATIONS AVAILABLE TO SHAREHOLDERS
Copies of the following publications will be furnished without charge upon
written request to Corporate Communications, 7W, PPG Industries, One PPG Place,
Pittsburgh, PA 15272.
FORM 10-K--the Company's Annual Report filed with the Securities and Exchange
Commission.
BLUEPRINT FOR THE FUTURE--a booklet summarizing PPG's mission, values, strategy
and goals.
PPG WORLDWIDE CODE OF ETHICS--an employee guide to corporate conduct policies,
including those concerning personal conduct, relationships with customers,
suppliers and competitors, protection of corporate assets, responsibilities to
the public, and PPG as a global organization.
PPG'S ENVIRONMENT, HEALTH AND SAFETY POLICY--a brochure describing the
Company's commitment, worldwide, to manufacturing, selling and distributing
products in a manner that is safe and healthful for its employees, neighbors
and customers, and that protects the environment.
PPG'S ENVIRONMENT, HEALTH AND SAFETY PROGRESS REPORT--a report of progress
during the year with respect to the Company's environment, health and safety
commitment.
PPG'S RESPONSIBLE CARE COMMITMENT--a brochure outlining the Company's voluntary
activities under the Responsible Care initiative of the Chemical Manufacturers
Association for safe and ethical management of chemicals.
DIVIDEND INFORMATION
PPG has paid uninterrupted dividends since 1899. The latest quarterly dividend
of 33 cents per share, voted by the board of directors on Jan. 16, 1997,
results in an annual dividend rate of $1.32 per share.
STOCK EXCHANGE LISTINGS
PPG common stock is traded on the New York, Pacific and Philadelphia stock
exchanges (symbol: PPG).
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
PPG's Dividend Reinvestment and Stock Purchase Plan is offered as a service and
convenience to shareholders. The Plan provides for the automatic reinvestment
of dividends in shares of PPG stock. Shareholders also may purchase additional
stock through cash contributions to the Plan.
A prospectus fully describing the Plan and authorization forms for
participation are available from the Company at the address shown under
"Investor Relations."
INVESTOR RELATIONS
General information about PPG common stock, debt and the Dividend Reinvestment
and Stock Purchase Plan may be obtained from Douglas B. Atkinson, Director of
Investor Relations. Phone (412) 434-3312, or write Director of Investor
Relations, 40N, PPG Industries, One PPG Place, Pittsburgh, PA 15272.
<PAGE>
QUARTERLY STOCK MARKET PRICE
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------
Quarter Ended High Low Close High Low Close
- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
March 31 $50 1/8 $42 7/8 $48 7/8 $39 7/8 $34 7/8 $37 3/4
- --------------------------------------------------------------
June 30 53 1/2 48 1/2 48 3/4 43 36 5/8 42 7/8
- --------------------------------------------------------------
Sept. 30 54 1/2 44 5/8 54 3/8 47 42 1/4 46 3/8
- --------------------------------------------------------------
Dec. 31 62 1/4 53 1/4 56 1/8 47 7/8 41 7/8 45 3/4
- --------------------------------------------------------------
</TABLE>
The number of holders of record of PPG common stock as of Jan. 31, 1997, was
33,232, as shown on the records of the Company's transfer agent.
DIVIDENDS
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------
Month of Amount Per Amount Per
Payment (Millions) Share (Millions) Share
- --------------------------------------------
<S> <C> <C> <C> <C>
March $ 57.8 $ .30 $ 59.8 $ .29
- --------------------------------------------
June 60.4 .32 58.0 .29
- --------------------------------------------
September 59.7 .32 62.3 .30
- --------------------------------------------
December 58.7 .32 58.8 .30
- --------------------------------------------
Total $236.6 $1.26 $238.9 $1.18
- --------------------------------------------
- --------------------------------------------
</TABLE>
40
<PAGE>
Exhibit 21
PPG INDUSTRIES, INC.
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
SUBSIDIARIES OF THE REGISTRANT
The Registrant is PPG Industries, Inc. There are no subsidiaries for which
separate financial statements are filed or included in group financial
statements filed for unconsolidated subsidiaries. Material subsidiaries
included in the 1996 consolidated financial statements of the Company are:
Percentage of
Voting Power
Domestic: ------------
LYNX Services from PPG, L.L.C. - Kansas................. 100.00%
Market View, Inc. - Delaware ........................... 100.00
Matthews Paint Company - Delaware....................... 100.00
PPG Architectural Finishes, Inc. - Delaware............. 100.00
PPG Industries International, Inc.- Delaware............ 100.00
PPG Industries Securities, Inc. - Delaware.............. 100.00
Transitions Optical, Inc. - Delaware.................... 51.00
Canadian:
PPG Canada Inc. - Canada................................ 100.00
European:
PPG Iberica, S.A. - Spain............................... 60.00
PPG Industries, (Deutschland) GmbH - Germany............ 100.00
PPG Industries Fiber Glass B.V. - The Netherlands....... 100.00
PPG Industries France - France.......................... 100.00
PPG Industries Glass S.A. - France...................... 100.00
PPG Industries Italia S.r.l. - Italy.................... 100.00
PPG Industries (U. K.) Limited - England................ 100.00
PPG Industries Chemicals B.V. - The Netherlands......... 100.00
Transitions Optical Limited - Ireland .................. 51.00
PPG Holdings (U.K.) Limited - United Kingdom............ 100.00
PPG Holdings B.V. - The Netherlands..................... 100.00
PPG Industries Holdings GmbH - Germany.................. 100.00
Subsidiaries in other areas:
PPG Coatings (Hong Kong) Co. Ltd. - Hong Kong........... 60.00
PPG - Feng Tai, Ltd. - Hong Kong........................ 55.00
PPG Industries Asia/Pacific Ltd.- Japan................. 100.00
PPG Industries Argentina S.A. - Argentina............... 100.00
PPG Industries de Mexico, S.A. de C.V. - Mexico......... 100.00
PPG Industries Export Sales Corporation - U.S. Virgin
Islands............................................... 100.00
PPG C.I. Co. Ltd. - Japan............................... 51.00
PPG Industries Taiwan Ltd. - Taiwan..................... 55.00
Taiwan Chlorine Industries Ltd. - Taiwan................ 60.00
Partnerships:
Glass Plaza Associates - Pennsylvania................... 100.00
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Post-effective Amendment No. 1
to Registration Statement No. 2-62328 on Form S-3, in Registration Statement
No. 33-64081 on Form S-3 and in Registration Statement Nos. 33-23350, 33-50400,
33-13605 and 33-64077 on Form S-8 of our reports dated January 16, 1997,
appearing in and incorporated by reference in this Annual Report on Form 10-K of
PPG Industries, Inc. for the year ended December 31, 1996.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
February 20, 1997
<PAGE>
Exhibit 24
PPG INDUSTRIES, INC.
POWER OF ATTORNEY
-----------------
(10-K)
I, Allen J. Krowe, a Director of PPG Industries, Inc. (the "Corporation"),
a Pennsylvania corporation, hereby constitute and appoint J. E. Dempsey, W. H.
Hernandez and H. K. Linge, or any of them, my true and lawful attorneys or
attorneys-in-fact, with full power of substitution and revocation, to sign, in
my name and on my behalf as a Director of the Corporation, the Corporation's
Form 10-K for the fiscal year ended December 31, 1996, to be filed with the
Securities and Exchange Commission, Washington, DC.
WITNESS my hand this 20th day of February 1997.
/s/Allen J. Krowe
-------------------------------------
<PAGE>
Exhibit 24
PPG INDUSTRIES, INC.
POWER OF ATTORNEY
-----------------
(10-K)
I, Steven C. Mason, a Director of PPG Industries, Inc. (the "Corporation"),
a Pennsylvania corporation, hereby constitute and appoint J. E. Dempsey, W. H.
Hernandez and H. K. Linge, or any of them, my true and lawful attorneys or
attorneys-in-fact, with full power of substitution and revocation, to sign, in
my name and on my behalf as a Director of the Corporation, the Corporation's
Form 10-K for the fiscal year ended December 31, 1996, to be filed with the
Securities and Exchange Commission, Washington, DC.
WITNESS my hand this 20th day of February 1997.
/s/Steven C. Mason
------------------------------------
<PAGE>
Exhibit 24
PPG INDUSTRIES, INC.
POWER OF ATTORNEY
-----------------
(10-K)
I, Harold A. McInnes, a Director of PPG Industries, Inc. (the
"Corporation"), a Pennsylvania corporation, hereby constitute and appoint J. E.
Dempsey, W. H. Hernandez and H. K. Linge, or any of them, my true and lawful
attorneys or attorneys-in-fact, with full power of substitution and revocation,
to sign, in my name and on my behalf as a Director of the Corporation, the
Corporation's Form 10-K for the fiscal year ended December 31, 1996, to be filed
with the Securities and Exchange Commission, Washington, DC.
WITNESS my hand this 20th day of February 1997.
/s/Harold A. McInnes
---------------------------------------
<PAGE>
Exhibit 24
PPG INDUSTRIES, INC.
POWER OF ATTORNEY
-----------------
(10-K)
I, Robert Mehrabian, a Director of PPG Industries, Inc. (the
"Corporation"), a Pennsylvania corporation, hereby constitute and appoint J. E.
Dempsey, W. H. Hernandez and H. K. Linge, or any of them, my true and lawful
attorneys or attorneys-in-fact, with full power of substitution and revocation,
to sign, in my name and on my behalf as a Director of the Corporation, the
Corporation's Form 10-K for the fiscal year ended December 31, 1996, to be filed
with the Securities and Exchange Commission, Washington, DC.
WITNESS my hand this 20th day of February 1997.
/s/Robert Mehrabian
-------------------------------------
<PAGE>
Exhibit 24
PPG INDUSTRIES, INC.
POWER OF ATTORNEY
-----------------
(10-K)
I, Vincent A. Sarni, a Director of PPG Industries, Inc. (the
"Corporation"), a Pennsylvania corporation, hereby constitute and appoint J. E.
Dempsey, W. H. Hernandez and H. K. Linge, or any of them, my true and lawful
attorneys or attorneys-in-fact, with full power of substitution and revocation,
to sign, in my name and on my behalf as a Director of the Corporation, the
Corporation's Form 10-K for the fiscal year ended December 31, 1996, to be filed
with the Securities and Exchange Commission, Washington, DC.
WITNESS my hand this 20th day of February 1997.
/s/Vincent A. Sarni
---------------------------------------
<PAGE>
Exhibit 24
PPG INDUSTRIES, INC.
POWER OF ATTORNEY
-----------------
(10-K)
I, David G. Vice, a Director of PPG Industries, Inc. (the "Corporation"), a
Pennsylvania corporation, hereby constitute and appoint J. E. Dempsey, W. H.
Hernandez and H. K. Linge, or any of them, my true and lawful attorneys or
attorneys-in-fact, with full power of substitution and revocation, to sign, in
my name and on my behalf as a Director of the Corporation, the Corporation's
Form 10-K for the fiscal year ended December 31, 1996, to be filed with the
Securities and Exchange Commission, Washington, DC.
WITNESS my hand this 20th day of February 1997.
/s/ David G. Vice
------------------------------------
<PAGE>
Exhibit 24
PPG INDUSTRIES, INC.
POWER OF ATTORNEY
-----------------
(10-K)
I, David R. Whitwam, a Director of PPG Industries, Inc. (the
"Corporation"), a Pennsylvania corporation, hereby constitute and appoint J. E.
Dempsey, W. H. Hernandez and H. K. Linge, or any of them, my true and lawful
attorneys or attorneys-in-fact, with full power of substitution and revocation,
to sign, in my name and on my behalf as a Director of the Corporation, the
Corporation's Form 10-K for the fiscal year ended December 31, 1996, to be filed
with the Securities and Exchange Commission, Washington, DC.
WITNESS my hand this 20th day of February 1997.
/s/ David R. Whitwam
-----------------------------------
<PAGE>
Exhibit 24
PPG INDUSTRIES, INC.
POWER OF ATTORNEY
-----------------
(10-K)
I, Erroll B. Davis, Jr., a Director of PPG Industries, Inc. (the
"Corporation"), a Pennsylvania corporation, hereby constitute and appoint J. E.
Dempsey, W. H. Hernandez and H. K. Linge, or any of them, my true and lawful
attorneys or attorneys-in-fact, with full power of substitution and revocation,
to sign, in my name and on my behalf as a Director of the Corporation, the
Corporation's Form 10-K for the fiscal year ended December 31, 1996, to be filed
with the Securities and Exchange Commission, Washington, DC.
WITNESS my hand this 20th day of February 1997.
/s/ Erroll B. Davis, Jr.
---------------------------------------
<PAGE>
Exhibit 24
PPG INDUSTRIES, INC.
POWER OF ATTORNEY
-----------------
(10-K)
I, Thomas J. Usher, a Director of PPG Industries, Inc. (the
"Corporation"), a Pennsylvania corporation, hereby constitute and appoint J. E.
Dempsey, W. H. Hernandez and H. K. Linge, or any of them, my true and lawful
attorneys or attorneys-in-fact, with full power of substitution and revocation,
to sign, in my name and on my behalf as a Director of the Corporation, the
Corporation's Form 10-K for the fiscal year ended December 31, 1996, to be filed
with the Securities and Exchange Commission, Washington, DC.
WITNESS my hand this 20th day of February 1997.
/s / Thomas J. Usher
----------------------------------------
<PAGE>
Exhibit 24
PPG INDUSTRIES, INC.
POWER OF ATTORNEY
-----------------
(10-K)
I, Michele J. Hooper, a Director of PPG Industries, Inc. (the
"Corporation"), a Pennsylvania corporation, hereby constitute and appoint J. E.
Dempsey, W. H. Hernandez and H. K. Linge, or any of them, my true and lawful
attorneys or attorneys-in-fact, with full power of substitution and revocation,
to sign, in my name and on my behalf as a Director of the Corporation, the
Corporation's Form 10-K for the fiscal year ended December 31, 1996, to be filed
with the Securities and Exchange Commission, Washington, DC.
WITNESS my hand this 20th day of February 1997.
/s/Michele J. Hooper
------------------------------------
<PAGE>
Exhibit 24
PPG INDUSTRIES, INC.
POWER OF ATTORNEY
-----------------
(10-K)
I, Raymond W. LeBoeuf, a Director of PPG Industries, Inc. (the
"Corporation"), a Pennsylvania corporation, hereby constitute and appoint J. E.
Dempsey, W. H. Hernandez and H. K. Linge, or any of them, my true and lawful
attorneys or attorneys-in-fact, with full power of substitution and revocation,
to sign, in my name and on my behalf as a Director of the Corporation, the
Corporation's Form 10-K for the fiscal year ended December 31, 1996, to be filed
with the Securities and Exchange Commission, Washington, DC.
WITNESS my hand this 20th day of February 1997.
/s/Raymond W. LeBoeuf
-----------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PPG
INDUSTRIES, INC. DECEMBER 31, 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 70
<SECURITIES> 0
<RECEIVABLES> 1,166
<ALLOWANCES> 26
<INVENTORY> 797
<CURRENT-ASSETS> 2,296
<PP&E> 6,688
<DEPRECIATION> 3,775
<TOTAL-ASSETS> 6,441
<CURRENT-LIABILITIES> 1,769
<BONDS> 834
0
0
<COMMON> 484
<OTHER-SE> 1,998
<TOTAL-LIABILITY-AND-EQUITY> 6,441
<SALES> 7,218
<TOTAL-REVENUES> 7,218
<CGS> 4,340
<TOTAL-COSTS> 4,340
<OTHER-EXPENSES> 662
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 96
<INCOME-PRETAX> 1,240
<INCOME-TAX> 471
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<EXTRAORDINARY> 0
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<NET-INCOME> 744
<EPS-PRIMARY> 3.96
<EPS-DILUTED> 3.96
</TABLE>
