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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 1998 Commission File Number 1-1687
PPG INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0730780
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One PPG Place, Pittsburgh, Pennsylvania 15272
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 412-434-3131
Securities Registered Pursuant to Section 12(b) of the Act:
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Name of each exchange on
Title of each class which registered
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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
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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
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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 29, 1999, 174,199,797 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 $9,338
million.
DOCUMENTS INCORPORATED BY REFERENCE
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Incorporated By
Document Reference In Part No.
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Portions of PPG Industries, Inc. Annual Report to
Shareholders for the year ended December 31, 1998....... I, II and IV
Portions of PPG Industries, Inc. Proxy Statement for its
1999 Annual Meeting of Shareholders..................... III
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PPG INDUSTRIES, INC.
AND CONSOLIDATED SUBSIDIARIES
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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.
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TABLE OF CONTENTS
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Page
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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.......... 4
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 7a. Quantitative and Qualitative Disclosures About Market Risk... 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
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Note on Incorporation by Reference
Throughout this report, various information and data are incorporated by
reference to the Company's 1998 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.
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Part I
Item 1. Business
PPG Industries, Inc., incorporated in Pennsylvania in 1883, is comprised of
three basic business segments: coatings, glass and chemicals. Within these
business segments, PPG has followed a program of directing its resources of
people, capital and technology in selected areas for positions of leadership.
Areas in which resources have been focused are automotive original, refinish,
industrial, packaging 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 30 through 32 of the Annual Report to
Shareholders, which is incorporated herein by reference, for financial
information relating to business segments.
Coatings
PPG is a major supplier of protective and decorative coatings. The coatings
industry is highly competitive and consists of a few large firms with global
presence and many smaller firms serving local or regional markets. PPG
competes in its primary markets with the world's largest coatings companies,
most of which have operations in North America and Europe, and many smaller
regional coatings companies. Product development, innovation, quality and
customer service have been stressed by PPG and have been significant factors
in developing an important supplier position.
The coatings business involves the supply of protective and decorative
finishes for automotive original equipment, appliances, industrial equipment
and packaging; factory-finished aluminum extrusions and coils for
architectural uses; and other industrial and consumer products. In addition to
supplying finishes to the automotive original equipment market, PPG supplies
automotive refinishes to the aftermarket, which are primarily sold through
distributors. In addition to specific products, PPG supplies technical
expertise, engineering and purchasing services to the automotive original and
industrial portions of the business. In the automotive original and industrial
portions of the coatings business, PPG sells directly to a variety of
manufacturing companies. The packaging portion of the coatings business
supplies finishes for aerosol, food and beverage consumer products. 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
supplies 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, home centers, PPG-operated outlets and directly
to some customers. Price, quality and distribution are key competitive factors
in the architectural finishes market.
PPG grew the coatings business through several acquisitions completed during
1998. In February 1998, PPG acquired the German automotive coatings business
of Helios-Lacke Bollig & Kemper GmbH & Co. KG; in September 1998, PPG acquired
the technical coatings business in Australia and New Zealand of Orica Ltd.,
which included the automotive refinish, automotive original equipment, coil,
packaging and industrial coatings businesses; in November 1998, PPG acquired
the U.S. architectural coatings business of Courtaulds plc (Courtaulds) held
by Akzo Nobel N.V. (Akzo); and in December 1998, PPG acquired a portion of the
global packaging coatings business of Courtaulds from Akzo, with substantially
all of the remainder acquired by PPG in early 1999. In August 1998, PPG
divested the European decorative coatings business of Max Meyer Duco S.p.A.
The principal production facilities of the coatings business are concentrated
in North America and Europe. North American production facilities consist of
18 plants in the United States, two in Canada and one 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 industrial coatings; and the Delaware, Ohio, plant,
which primarily produces automotive refinishes and certain industrial
coatings. Outside North America, PPG operates four plants each in Italy and
Germany, three plants in Spain, two plants in the People's Republic of China,
and one plant each in Brazil, England, France, Netherlands, Australia, Turkey
and Portugal. PPG owns equity interests in operations in India, South Korea
and Taiwan. Additionally, the coatings business operates 10 service centers in
the United States, two each in Canada and Mexico, and one each in Poland and
Argentina to provide just-in-time delivery and service to selected automotive
assembly plants. Nineteen training centers in the United States, 15 in Europe,
10 in Asia, two in South America and one each in Mexico and 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
1
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of persons employed by the coatings segment during 1998 was 12,000.
In 1998, PPG approved a restructuring plan associated with cost reduction
initiatives which resulted in a pre-tax charge of $9 million in our coatings
operations.
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. 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 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.
In January 1998, PPG acquired the assets of an automotive glass plant in
Evart, Mich. PPG divested its European flat and automotive glass operations in
July 1998, resulting in a pre-tax gain of $85 million.
PPG's principal glass production facilities are concentrated in North America
and Europe. Fifteen plants operate in the United States, of which six produce
automotive glass products, five produce flat 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. One
plant operates in Italy producing aircraft transparencies. One plant each in
England and the Netherlands produce fiber glass. PPG owns equity interests in
operations in Denmark, 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, there are four satellite operations
that provide limited manufacturing and just-in-time service to selected
automotive customer locations, and one coating facility for flat glass products.
The average number of persons employed by the glass segment during 1998 was
14,700.
During 1998, PPG approved a restructuring program, which included cost
reduction initiatives in our glass operations, and recorded a pre-tax charge
of $9 million. PPG also recorded additional pre-tax charges in 1998 related to
a 1997 restructuring program, including a $15 million pre-tax charge related
to the disposition of the Company's equity interests in two Asian float glass
plants and two Asian downstream fabrication facilities and the reversal of a
$3 million reserve related to the closure of the Perry, Ga., flat glass plant.
Chemicals
PPG is a major producer and marketer of chlor-alkali chemicals and a supplier
of specialty chemicals. The primary chlor-alkali products are chlorine,
caustic soda, vinyl chloride monomer, chlorinated solvents, chlorinated
benzenes and calcium hypochlorite. Most of these products are sold directly to
manufacturing companies in the chemical processing, rubber and plastics,
paper, minerals and metals, and water treatment industries. The primary
products of PPG's specialty chemicals businesses are Transitions(Registered
Trademark) lenses; optical monomers; precipitated silicas for tire, shoe, and
battery separator businesses and phosgene derivatives and other intermediates
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 five plants in the United States and one each in Canada and
Mexico. The two largest facilities, located in Lake Charles, La., and Natrium,
W. Va., primarily produce chlor-alkali products. Outside North America, PPG
operates two plants each in 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 1998 was 4,800.
Raw Materials
The effective management of raw materials is important to PPG's continued
success. The Company's most significant raw materials are titanium dioxide and
epoxy and other resins in the coatings segment; sand, soda ash, energy and
polyvinyl butyral in the glass segment, and energy and ethylene in the
chemicals segment. Most of the raw materials used in production are purchased
from outside sources, and the Company has made, and will continue to make,
supply arrangements to meet the planned operating requirements for the future.
For PPG's significant raw material requirements, there is more than one source
of supply or alternative raw materials.
Research and Development
Research and development costs, including depreciation of research facilities,
during 1998, 1997 and 1996 were $287 million, $266 million and $255 million,
respectively.
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PPG owns and operates ten research and development facilities in the United
States, Europe and Japan to conduct research and development involving new and
improved products and processes. Additional process and product research and
development work is also undertaken at many of the Company's manufacturing
plants.
Patents
PPG considers patent protection to be important. The Company's business
segments are not materially dependent upon any single patent or group of
related patents. PPG received $18 million in 1998 and $25 million in each of
the years 1997 and 1996 from royalties and the sale of technical know-how.
Backlog
In general, PPG does not manufacture its products against a backlog of orders.
Production and inventory levels are geared primarily to projections of future
demand and the level of incoming orders.
Non-U.S. Operations
Although PPG has a significant investment in non-U.S. operations, based upon
the magnitude and location of investments, management believes that the risk
associated with its international operations is not significantly greater than
that of domestic operations.
Employees
The average number of persons employed worldwide by PPG during 1998 was
32,500.
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 $19 million, $32 million and $18 million
in 1998, 1997 and 1996, respectively. It is expected that expenditures for
such projects in 1999 will approximate $35 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 54 cleanup
sites, including 32 sites on the National Priority List (NPL). While PPG is
not generally a major contributor of wastes to these sites, each potentially
responsible party or contributor may face governmental agency assertions of
joint and several liability as to each cleanup site. Generally, however, a
final allocation of costs is made based on relative contributions of wastes to
the site. There is a wide range of cost estimates for cleanup of these sites,
due largely to uncertainties as to the nature and extent of their condition
and the methods that may have to be employed for their remediation.
Additionally, remediation projects have been or may be undertaken at certain
of the Company's current and former plant sites. The Company has established
reserves for those sites where it is probable a liability exists and the
amount can be reasonably estimated. As of December 31, 1998 and 1997, PPG had
reserves for environmental contingencies totaling $94 million and $100
million, respectively. Pre-tax charges against income for environmental
remediation costs totaled $10 million in 1998, $34 million in 1997 and $27
million in 1996.
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 addition, a portion of such environmental expenditures may be
recovered from insurers and other third parties. In management's opinion, the
Company operates in an environmentally sound manner, is well positioned,
relative to environmental matters, within the industries in which it operates,
and the outcome of these environmental matters will not have a material
adverse effect on PPG's financial position or liquidity. See Commitments and
Contingent 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
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. These lawsuits and claims relate to product
liability, contract, patent, environmental, antitrust and other matters
arising out of the conduct of PPG's business. PPG's lawsuits and claims
against others include claims against insurers and other third
3
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parties with respect to actual and contingent losses related to environmental
matters. Included among PPG's legal proceedings are the following:
The Company has been named as a defendant in a number of antitrust lawsuits
filed in federal and state courts by various plaintiffs. These suits allege
PPG was involved with competitors in fixing prices and allocating markets for
certain glass products. Twenty-eight cases were filed in federal courts, all
of which have been consolidated in a single federal district court (W.D. Pa.)
for pretrial proceedings under the multidistrict litigation rules. Ten cases
were filed in state courts in California, Wisconsin and Tennessee; the
Wisconsin case was removed to federal court and then consolidated under
multidistrict litigation. Among the defendants in these actions are Pilkington
plc; Libbey-Owens Ford Co., Inc.; AFG Industries; Asahi Glass Co., Ltd.;
Guardian Industries Corp., and Ford Motor Company. These lawsuits purport to
be class action suits. The plaintiffs in these cases are seeking economic and
treble damages and injunctive relief.
Securities Exchange Commission rules require the Company to report any
environmental proceeding involving a potential fine exceeding $100,000. For
that reason, PPG's Form 10-Q for the quarter ended September 30, 1998 reported
that the Company received a Notification of Potential Enforcement Action from
the United States Environmental Protection Agency (EPA) which alleged that the
Company's Torrance facility failed to timely submit a certain report for 1995.
On January 12, 1999, that matter was settled and a Consent Agreement and
Consent Order was entered by the EPA under which PPG agreed to pay a civil
penalty of $21,148 and perform a supplemental environmental project to improve
solvent recovery at the Torrance facility.
Management believes that, in the aggregate, the outcome of all lawsuits and
claims involving PPG will not have a material effect on PPG's consolidated
financial position, results of operations, or liquidity.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Executive Officers of the Registrant
The executive officers of the Company are elected annually in April by the
Board of Directors and the business experience during the past five years of
each Executive Officer is set forth below.
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Raymond W. LeBoeuf (a) 52 Chairman of the Board and Chief Executive Officer since November 1997
Frank A. Archinaco (b) 55 Executive Vice President since April 1997
Charles E. Bunch (c) 49 Senior Vice President, Strategic Planning and Corporate Services since April 1997
Russell L. Crane (d) 58 Senior Vice President, Human Resources and Administration since April 1994
James C. Diggs (e) 50 Senior Vice President and General Counsel since July 1997
William H. Hernandez (f) 50 Senior Vice President, Finance since January 1995
E. Kears Pollock (g) 58 Executive Vice President since April 1997
</TABLE>
(a) Mr. LeBoeuf was Chairman Elect and Chief Executive Officer, President and
Chief Operating Officer, Executive Vice President, Group Vice President,
Coatings and Resins, and Vice President, Finance, prior to his present
position.
(b) Mr. Archinaco was Senior Vice President, Glass; Vice President, Glass, and
Vice President, Automotive and Aircraft Products, prior to his present
position.
(c) Mr. Bunch was Vice President, Fiber Glass; Vice President, Architectural
Finishes, and General Manager, Architectural Finishes, prior to his
present position.
(d) Mr. Crane was Vice President, Human Resources, prior to his present
position.
(e) Mr. Diggs was Senior Vice President and General Counsel Elect and was TRW
Inc.'s Vice President and Assistant General Counsel prior to joining PPG
in March 1997.
(f) Mr. Hernandez was Vice President, Finance; Vice President and Controller,
and Controller prior to his present position.
(g) Mr. Pollock was Senior Vice President, Coatings and Resins; Vice
President, Coatings and Resins, and Vice President, Automotive Products,
prior to his present position.
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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.
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Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
Stock Exchange Listings............................................... 45
Quarterly Stock Information........................................... 45
Directors who are not also Officers of the Company receive Common
Stock Equivalents pursuant to the Deferred Compensation Plan for
Directors and the Directors' Common Stock Plan. Common Stock
Equivalents are hypothetical shares of Common Stock having a value on
any given date equal to the value of a share of Common Stock. Common
Stock Equivalents earn dividend equivalents which are converted into
additional Common Stock Equivalents but carry no voting rights or
other rights of a holder of Common Stock. The Common Stock Equivalents
credited to Directors under both plans are exempt from registration
under Section 4(2) of the Securities Act of 1933 as private offerings
made only to Directors of the Company in accordance with the
provisions of the plans. The plans are incorporated by reference into
this Form 10-K as Exhibits 10 and 10.3.
Under the Company's Deferred Compensation Plan for Directors, each
Director must defer receipt of such compensation as the Board
mandates. Currently, the Board mandates deferral of one-third of each
payment of the basic annual retainer of each Director. Each Director
may also elect to defer the receipt of (i) an additional one-third of
each payment of the basic annual retainer, (ii) all of the basic
annual retainer, or (iii) all compensation. All deferred payments are
held in the form of Common Stock Equivalents. Payments out of the
deferred accounts are made in the form of Common Stock of the Company
(and cash as to any fractional Common Stock Equivalent). In 1998, the
Directors, as a group, were credited with 6,674 Common Stock
Equivalents under this plan. The values of the Common Stock
Equivalents, when credited, ranged from $51.00 to $72.88.
Under the Directors' Common Stock Plan, each Director who neither is
nor was an employee of the Company is credited annually with Common
Stock Equivalents worth one-half of the Director's basic annual
retainer. No more than 10 years of credits may be made for the account
of any Director. Upon termination of service, the Common Stock
Equivalents held in a Director's account are converted to and paid in
Common Stock of the Company (and cash as to any fractional Common
Stock Equivalent). In 1998, the Directors, as a group, received 2,582
Common Stock Equivalents under this plan. The values of those Common
Stock Equivalents, when credited, ranged from $52.50 to $70.94.
Item 6. Selected Financial Data
The information required by Item 6 is reported in the Eleven-Year
Digest under the captions net sales, income before accounting changes,
cumulative effect of accounting changes, net income, earnings per
common share before accounting changes, cumulative effect of
accounting changes on earnings per common share, earnings per common
share, earnings per common share-assuming dilution, dividends per
share, total assets and long-term debt for the years 1994 through
1998.................................................................. 44
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Management's Discussion and Analysis.................................. 22-29
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
Management's Discussion and Analysis.................................. 28-29
Item 8. Financial Statements and Supplementary Data
Independent Auditors' Report.......................................... 17
Financial Statements:
Statement of Income for the years ended December 31, 1998, 1997 and
1996................................................................ 18
Balance Sheet, December 31, 1998 and 1997............................ 19
Statement of Shareholders' Equity for the years ended December 31,
1998, 1997 and 1996................................................. 20
Statement of Comprehensive Income for the years ended December 31,
1998, 1997 and 1996................................................. 20
Statement of Cash Flows for the years ended December 31, 1998, 1997
and 1996............................................................ 21
Notes to the Financial Statements.................................... 33-42
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
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5
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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 1999 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.
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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, 1998, 1997 and
1996:
The following should be read in conjunction with the previously
referenced financial statements.
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Independent Auditors' Report........................................... 9
Schedule II--Valuation and Qualifying Accounts......................... 10
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All other schedules are omitted because they are not applicable.
(b) No reports were filed on Form 8-K during the last quarter of the period
covered by this report.
(c)Exhibits:
3 The Restated Articles of Incorporation, as amended, were filed as
Exhibit 3 to the Registrant's Form 10-Q for the quarter ended March
31, 1995, which exhibit is incorporated herein by reference.
3.1 Statement with Respect to Shares, amending the Restated Articles of
Incorporation effective April 21, 1998.
3.2 The Bylaws, as amended, were filed as Exhibit 3 to the Registrant's
Form 10-Q for the quarter ended March 31, 1998, which exhibit is
incorporated herein by reference.
4 The Shareholders' Rights Plan was filed as Exhibit 4 on the
Registrant's Form 8-K, dated February 19, 1998, which exhibit is
incorporated herein by reference.
*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 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 PPG Industries, Inc. Stock
Plan was filed as Exhibit 10 to the Registrant's Form 10-Q for the
quarter ended March 31, 1997. The Directors' Common Stock Plan as
amended, was filed as Exhibit 10.2 to the Registrant's Form 10-K for
the year ended December 31, 1996. All such exhibits are incorporated
by reference.
10.1 PPG Industries, Inc. Incentive Compensation and Deferred Income Plan
for Key Employees.
10.2 PPG Industries, Inc. Deferred Compensation Plan.
10.3 PPG Industries, Inc. Deferred Compensation Plan for Directors, was
filed as Exhibit 10.3 to the Registrant's Form 10-K for the year
ended December 31, 1997, which exhibit is incorporated by reference.
10.4 PPG Industries, Inc. Total Shareholder Return Plan for Key
Employees.
12 Computation of Ratio of Earnings to Fixed Charges for the Five Years
Ended December 31, 1998.
13 Company's 1998 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, 10.3 and 10.4 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 19, 1999.
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 19, 1999.
<TABLE>
<S> <C>
Signature Capacity
--------- --------
/s/ R. W. LeBoeuf Director, Chairman of the Board and
..................... Chief Executive Officer
R. W. LeBoeuf
/s/ W. H. Hernandez Senior Vice President, Finance (Principal
..................... Financial and Accounting Officer)
W. H. Hernandez
E. B. Davis, Jr. Director ||
||
M. J. Hooper Director ||
||
A. J. Krowe Director ||
||
N. C. Lautenbach Director ||
||
R. Mehrabian Director ||
|| By /s/ W. H. Hernandez
V. A. Sarni Director || ..............................
|| W. H. Hernandez, Attorney-in-Fact
T. J. Usher Director ||
||
D. G. Vice Director ||
||
D. R. Whitwam Director ||
</TABLE>
8
<PAGE>
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, 1998 and
1997, and the related statements of income,
comprehensive income, shareholders' equity and cash
flows for each of the three years in the period ended
December 31, 1998, and have issued our report thereon
dated January 21, 1999; such financial statements and
report are included in your 1998 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, 1998, 1997 and 1996.
The financial statement schedule is the
responsibility of the Company's management. Our
responsibility is to express an opinion based on our
audits. In our opinion, such financial statement
schedule, when considered in relation to the basic
financial statements taken as a whole, presents
fairly in all material respects the information set
forth therein.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
January 21, 1999
9
<PAGE>
PPG Industries, Inc. and Subsidiaries
Schedule II--Valuation and Qualifying Accounts
For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Balance at Charged to
Beginning Costs and Balance at
Description of Year Expenses Deductions(/1/) End of Year
----------- ---------- ---------- --------------- -----------
<S> <C> <C> <C> <C>
(Millions)
1998
Deducted from assets to
which they apply:
Allowance for doubtful
accounts ____________ $20.5 $11.4 $11.3 $20.6
===== ===== ===== =====
1997
Deducted from assets to
which they apply:
Allowance for doubtful
accounts ____________ $25.6 $10.2 $15.3 $20.5
===== ===== ===== =====
1996
Deducted from assets to
which they apply:
Allowance for doubtful
accounts ____________ $28.2 $12.9 $15.5 $25.6
===== ===== ===== =====
</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.
AND CONSOLIDATED SUBSIDIARIES
-----------------------------
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Incorporated by Reference
- ------- -------------------------
<S> <C> <C> <C>
3 Restated Articles Exhibit 3 - Form 10-Q for the quarter
of Incorporation. ended March 31, 1995.
3.2 Bylaws. Exhibit 3 - Form 10-Q for the quarter
ended March 31, 1998.
4 Shareholders' Rights Exhibit 4 - Form 8-K, dated February
Plan. 19, 1998.
10 Nonqualified Retirement Exhibit 10 - Form 10-Q for the quarter
Plan. ended March 31, 1996.
10 Supplemental Executive Exhibit 10.2 - Form 10-Q for the quarter
Retirement Plan II. ended September 30, 1995.
10 Change in Control Exhibit 10.5 - Form 10-Q for the quarter
Employment Agreement. ended September 30, 1995.
10 PPG Industries, Inc. Exhibit 10 - Form 10-Q for the quarter
Stock Plan. ended March 31, 1997.
10 Directors' Common Exhibit 10.2 - Form 10-K for the year
Stock Plan. ended December 31, 1996.
10.3 PPG Industries, Inc. Exhibit 10.3 - Form 10-K for the year
Deferred Compensation ended December 31, 1997.
Plan for Directors.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
3.1 Statement with Respect to Shares, amending the Restated Articles of
Incorporation.
10.1 PPG Industries, Inc. Incentive Compensation and Deferred Income
Plan for Key Employees.
10.2 PPG Industries, Inc. Deferred Compensation Plan.
10.4 PPG Industries, Inc. Total Shareholder Return Plan for Key Employees.
12 Computation of Ratio of Earnings to Fixed Charges for the Five
Years Ended December 31, 1998.
13 Company's 1998 Annual Report to Shareholders.
21 Subsidiaries of the Registrant.
23 Consent of Independent Auditors.
24 Powers of Attorney.
27 Financial Data Schedule.
</TABLE>
<PAGE>
Exhibit 3.1
STATEMENT WITH RESPECT TO SHARES-DOMESTIC BUSINESS CORPORATION
DSCB:15-1522 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. (SS) 1522(b) (relating to
statement with respect to shares), the undersigned corporation, desiring to
state the designation and voting rights, preferences, limitations, and special
rights, if any, of a class or series of its shares, hereby states that:
1. The name of the corporation is: PPG Industries, Inc.
----------------------------------------------
- --------------------------------------------------------------------------------
2. (Check and complete one of the following):
The resolution amending the Articles under 15 Pa.C.S. (SS) 1522(b)
---
(relating to divisions and determinations by the board), set forth in
full, is as follows:
-------------------------------------------------------------------------
-------------------------------------------------------------------------
X The resolution amending the Articles under 15 Pa.C.S. (SS) 1522(b) is set
---
forth in full in Exhibit A attached hereto and made a part hereof.
3. The aggregate number of shares of such class or series established and
designated by (a) such resolution, (b) all prior statements, if any, filed
under 15 Pa.C.S. (SS) 1522 or corresponding provisions of prior law with
respect thereto, and (c) any other provision of the Articles is 2,000,000
---------
shares.
4. The resolution was adopted by the Board of Directors or an authorized
committee thereof on: February 19, 1998
-----------------
5. (Check, and if appropriate complete, one of the following):
The resolution shall be effective upon the filing of this statement with
---
respect to shares in the Department of State.
X The resolution shall be effective on: April 21, 1998 at 12:00 a.m.
--- -------------------- ------------
Date Hour
IN TESTIMONY WHEREOF, the undersigned corporation has caused this statement
to be signed by a duly authorized officer thereof this 2nd day of March, 1998.
--- ------ --
PPG Industries, Inc.
------------------------------------
(Name of Corporation)
BY: /s/ H. Kennedy Linge
-------------------------------------
(Signature)
TITLE: Vice President, Associate General
-----------------------------------
Counsel and Secretary
<PAGE>
Exhibit A
RESOLVED FURTHER, that, effective at 12:00 a.m. prevailing time in
Pittsburgh, Pennsylvania on April 21, 1998, the existing Series A Junior
Participating Preferred Stock of the Company, established on April 21, 1988, of
which no shares have been issued, shall be eliminated and withdrawn and the
shares thereof previously reserved shall be returned to the status of
undesignated, authorized and unissued shares of Preferred Stock of the Company;
RESOLVED FURTHER, that pursuant to the authority granted to and vested in
the Board of Directors of the Company in accordance with the provisions of its
Restated Articles of Incorporation as Amended, immediately following the
elimination and withdrawal of the Series A Junior Participating Preferred Stock
of the Company, established on April 21, 1988, a series of Preferred Stock,
without par value, of the Company shall be created and the Board of Directors
hereby states the designation and amount thereof and the preferences, voting
rights, qualifications, privileges, limitations, options, restrictions and other
special or relative rights of the shares of such series as are set forth in the
statement with respect to Series A Junior Participating Preferred Stock, which
is attached hereto as Exhibit I and incorporated herein by reference, and the
resolution set forth in Exhibit I is hereby adopted;
RESOLVED FURTHER, that Two Million Preferred Shares be, and they hereby
are, initially reserved for issuance upon exercise of the Rights, such number
to be subject to adjustment from time to time in accordance with the Rights
Agreement;
<PAGE>
Exhibit I
---------
Statement with respect to Series A Junior Participating Preferred Stock,
being the first series of Preferred Stock, without par value, of PPG Industries,
Inc.
RESOLVED, that this Board of Directors, pursuant to authority expressly
vested on it by the provisions of the Articles of Incorporation of PPG
Industries, Inc. (hereinafter called the "Corporation") hereby authorizes the
issue of the first series of Preferred Stock, without par value, of the
Corporation and hereby fixes the designation and relative rights and preferences
thereof in addition to those set forth in said Articles of Incorporation, as
follows:
Section 1. Designation and Amount. The shares of such series shall be
----------------------
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be 2,000,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
--------
the number of shares of Series A Peferred Stock to a number less than the number
of shares then outstanding plus the number of shares reseved for issuance upon
the exercise of outstanding options, rights or warrants or upon the conversion
of any outstanding securities issued by the Corporation convertible into Series
A Preferred Stock.
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the rights of the holders of any shares of any
series of Preferred Stock (or any similar stock) ranking prior and superior to
the Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock, in preference to the holders of Common Stock, par
value $1.66-2/3 per shares (the "Common Stock"), of the Corporation, and of any
other junior stock, shall be entitled to receive, when, as and if declared by
the Board of Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the first day of March, June, September and
December in each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Series A
Preferred Stock, in an amount per share (rounded to the nearest cent)
<PAGE>
equal to the greater of (a) $1 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions, other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. In the event the Corporation
shall at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior to
such event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series
A Preferred Stock as provided in paragraph (A) of this Section immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1 per share on the Series A
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a
-2-
<PAGE>
date after the record date for the determination of holders of shares of Series
A Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series A Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be allocated
pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be not more
than 50 days prior to the date fixed for the payment thereof.
(D) The annual dividends on the Series A Preferred Stock shall be equal to
the sum of the quarterly dividends in each year.
Section 3. Voting Rights. The holders of shares of Series A Preferred Stock
--------------
shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to 100 votes
on all matters submitted to a vote of the stockholders of the Corporation. In
the event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per shares to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in any other Statement creating a
series of Preferred Stock or any similar stock, or by law, the holders of shares
of Series A Preferred Stock and the holders of shares of Common Stock and any
other capital stock of the Corporation
-3-
<PAGE>
having general voting rights shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation.
(c) Except as set forth herein, or as otherwise provided by law, holders of
Series A Preferred Stock shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote with
holders of Common Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on any
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other distributions, or any
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, except dividends
paid ratably on the Series A Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of
any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock, provided that the
Corporation may at any time redeem, purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution, liquidation or winding up)
to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration any shares
of Series A Preferred Stock, or any shares of stock ranking on a parity with the
Series A Preferred Stock, except in accordance with a
-4-
<PAGE>
purchase offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
------------------
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Restated Articles of Incorporation, as amended, of the Corporation, or in any
other Statement creating a series of Preferred Stock or any similar stock or as
otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
---------------------------------------
dissolution or winding up of the Corporation, no distribution shall be made (1)
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A Preferred Stock shall have
received $100 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series A Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of shares of Common Stock, or (2) to the
holders of shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except distributions made ratably on the Series A Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up. In the
event the Corporation shall
-5-
<PAGE>
at any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior to
such event under the provison in clause (1) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
--------------------------
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Preferred Stock shall
-------------
not be redeemable.
Section 9. Fractional Shares. The Corporation may issue fractions and
------------------
certificates representing fractions of a share of Series A
-6-
<PAGE>
Preferred Stock in integral multiples of 1/100th of a share of Series A
Preferred Stock, or in lieu thereof, at the election of the Board of Directors
of the Corporation at the time of the first issue of any shares of Series A
Preferred Stock, evidence such fractions by depositary receipts, pursuant to an
appropriate agreement between the Corporation and a depositary selected by it,
provided that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they
would be entitled as beneficial owners of shares of Series A Preferred Stock. In
the event that fractional shares of Series A Preferred Stock are issued, the
holders thereof shall have all the rights provided herein for holders of full
shares of Series A Preferred Stock in the proportion which such fraction bears
to a full share.
Section 10. Amendment. The Restated Articles of Incorporation, as
----------
amended, of the Corporation shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series A Preferred Stock so as to affect them adversely without the affirmative
vote of the holders of at least two-thirds of the outstanding shares of Series A
Preferred Stock, voting together as a single class.
-7-
<PAGE>
Exhibit 10.1
PPG INDUSTRIES, INC.
INCENTIVE COMPENSATION
AND
DEFERRED INCOME PLAN
FOR
KEY EMPLOYEES
<PAGE>
Table of Contents
-----------------
Section I Definitions
Section II Awards
Section III Capital Enhancement
Account
Section IV Withdrawal Provisions
Section V Specific Provisions Related
to Benefits
Section VI Administration & Claims
Section VII Amendment & Termination
Section VIII Miscellaneous
Section IX Change in Control
<PAGE>
SECTION I - DEFINITIONS
-----------------------
1.01 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.
1.02 Award means a grant of incentive compensation.
1.03 Beneficiary means the person or persons designated by a Participant to
receive benefits hereunder following the Participant's death, in
accordance with section 5.02; provided, however, in the event a
Participant fails to designate a Beneficiary in accordance with Section
5.02, his/her Beneficiary shall be the Beneficiary designated under the
Deferred Compensation Plan. For purposes of this Section 1.05, "person or
persons" is limited to an individual, a Trustee or a Participant's estate.
1.04 Board means the Board of Directors of PPG Industries, Inc.
1.05 Capital Enhancement Account or 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 all or any part of
an Award in the form of cash or Salary, as provided in Section 3.01.
1.06 CEA-1 means all funds contributed to the Capital Enhancement Account
during the period August 1, 1985 thru July 31, 1986, and earnings thereon.
1.07 CEA-2 means all funds contributed to the Capital Enhancement Account
during the period November 1, 1987 thru December 31, 1988, and earnings
thereon.
1.08 CEBC means the Compensation and Employee Benefits Committee of the
Company.
1.09 Code means the Internal Revenue Code of 1986, as amended.
1.10 Committee means the Officers-Directors Compensation Committee, as further
defined in Section 6.01, (or any successor) of the Board.
1.11 Company or PPG means PPG Industries, Inc.
1.12 Conversion Formula means dividing an amount by the average of the closing
sale prices for PPG Stock reported on the New York Stock Exchange-
Composite Tape for all days in the month of January during which the New
York Stock Exchange is open during the year following the Plan Year to
which the Award relates.
- Page 1.1 -
<PAGE>
1.13 Corporation means PPG and any Subsidiary Corporation designated by the
Committee as eligible to participate in the Plan, and which, by proper
authorization of the Board of Directors or other governing body of such
Subsidiary Corporation, elects to participate in the Plan.
1.14 Deferred Compensation Plan means the PPG Industries, Inc. Deferred
Compensation Plan.
1.15 Disability means any long-term disability. The Administrator, in his
complete and sole discretion, shall determine a 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.
1.16 Employee means any full-time, or permanent part-time employee (including
any officer) of the Corporation.
1.17 ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
1.18 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.
1.19 Former Participant means a Participant who becomes ineligible to receive
an Award but who continues to have an Account hereunder.
1.20 Insider means a Participant or a Former 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 Minimum Rate - means the average of the daily closing yields during
November of 10-year Treasury Notes.
1.22 Participant means an Employee who is approved by the CEBC, or the
Committee, as appropriate, to participate. Participants shall be limited
to key Employees of the Corporation who contribute the most to the growth
and profitability of the Company.
- Page 1.2 -
<PAGE>
1.23 Plan Year means the calendar year.
1.24 Pre-tax Earnings means the consolidated earnings of the Company and its
consolidated Subsidiaries and equity affiliates before the deduction of
income taxes, minority interest and the amount to be set aside in the
Reserve as provided in Section 2.01. The Reserve shall not be adjusted for
any restatements of prior years' earnings.
1.25 PPG Stock means Common Stock of the Company.
1.26 Reserve means the aggregate of the amounts available for the making of
Awards as provided in Section 2.01.
1.27 Retired Participant means a Participant who elects to maintain an Account
in the Plan after his/her Retirement Date.
1.28 Salary means the regular base salary to be paid to a Participant by the
Corporation.
1.29 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.
1.30 Terminated Participant means a Participant who maintains an Account in the
Plan following his/her termination of employment from the Corporation.
- Page 1.3 -
<PAGE>
SECTION II - AWARDS
-------------------
2.01 The Reserve
-----------
(a) For purposes of establishing a Reserve, an amount shall be set aside
each year to be calculated as follows:
(1) Multiply consolidated shareholders' equity as of the beginning of
the year by 12%;
(2) Subtract the result of (1) above from Pre-tax Earnings for the
year;
(3) Multiply the result of (2) above by 5%.
(b) In no event, may the amount set aside exceed 20% of the cash dividends
paid on PPG Stock during the year.
(c) For purposes of subparagraph (a)(1) above, "shareholders' equity"
shall be exclusive of the aggregate par or stated value of preferred
stock outstanding, if any, and of any unpaid cumulative dividends
thereon.
(d) The Reserve shall be reduced by the amount of all Awards, including
any deferred amounts, first from the amount, if any, set aside for the
year to which the Awards relate, and then from the amounts which have
been in the Reserve for the longest period of time.
(e) Unawarded amounts set aside prior to the fourth preceding year shall
be automatically released from the Reserve and returned to income.
(f) The Reserve shall not be reduced by interest or dividend equivalents
on deferred amounts, dividends paid on restricted shares, negative
amounts resulting from the calculation of the amount to be set aside
each year, or the expenses of administering the Plan.
(g) Not later than the last day of the year to which the Awards relate,
the Committee may make an allocation (on the basis of estimates of the
amount to be set aside in the Reserve for such year and unawarded
amounts in the Reserve) to a group of Employees without determining
the amounts to be allocated to individuals in such group and such
allocation shall create a legal obligation upon the Company to pay
such amount to the individuals comprising such group.
- Page 2.1 -
<PAGE>
2.02 Awards
------
(a) The Committee shall determine or approve:
(1) The Participants;
(2) The maximum amount of all Awards to all Participants; and
(3) The amount and the form of the Award to each Participant.
(b) The Committee may delegate to another person(s) the authority to
determine:
(1) The Participants, other than Insiders; and
(2) The amount of Awards to such Participants.
(c) Awards may be made only from the Reserve; provided, however, that the
Committee is under no obligation to make Awards; or, if Awards are
made, to award the total amount set aside in the Reserve each year.
(d) Awards may be made in the form of cash, shares of PPG Stock, or a
combination of both.
2.03 Payment of Awards
-----------------
(a) Awards to Participants will be made in the form of cash ("cash
component"), shares of PPG Stock ("stock component"), or a combination
of both, as the Committee may determine.
(b) If all or any part of an Award is made in the form of shares of PPG
Stock, the number of such shares shall be determined by applying the
Conversion Formula. Fractional shares shall be paid in cash.
If the number of such shares is specified, the Reserve shall be
reduced on account of such shares by an amount determined by applying
the Conversion Formula in reverse.
As to shares of PPG Stock which constitute all or any part of an
Award, the Committee may impose such restrictions concerning their
transferability and/or their forfeitability as are provided for in
Section 5.05.
- Page 2.2 -
<PAGE>
(c) Payment of Awards shall be made to Participants not later than March
15 of the year following the end of the year to which the Awards
relate.
2.04 Deferral of Awards
------------------
(a) Prior to the beginning of each Plan Year, a Participant may elect to
defer a percentage, in whole percentages only, of his/her Award, as
follows:
Minimum Deferral Maximum Deferral
---------------- ----------------
Cash component 10% 100%
Stock component 100% 100%
(b) Except as otherwise provided in paragraph (c) below, all elections
pursuant to this Section 2.04 must be filed with the Administrator no
later than the last day of the Plan Year prior to the Plan Year to
which an Award relates; and such election shall become irrevocable as
of the first day of the Plan Year to which it relates.
(c) Employees who are approved to participate during a Plan Year, may make
an election in accordance with this Section 2.04 within the 30-day
period following notice to the Participant that he/she has been
approved.
(d) Amounts deferred in accordance with this section 2.04 shall be
credited to the Participant's account in the Deferred Compensation
Plan and shall be subject to the provisions of the Deferred
Compensation Plan.
(e) Amounts deferred in accordance with this Plan prior to January 1,
1996, which have not been withdrawn by January 1, 1996, shall be
transferred to the Deferred Compensation Plan, in accordance with the
provisions of such Plan.
2.04.01 Investment Elections
--------------------
(a) At the time an election is made to defer all or a portion of
the cash component of a Award, the Participant must also
designate whether such amount is to be credited to the
Interest Account, the PPG Stock Account, or a combination of
both in the Deferred Compensation Plan.
(b) At the time an election is made to defer the stock component
of an Award, such deferral shall be credited to the PPG Stock
Account in the Deferred Compensation Plan.
- Page 2.3 -
<PAGE>
(c) Amounts credited to the PPG Stock Account in the Deferred
Compensation Plan shall be credited in the form of whole and
fractional Stock Account Shares determined according to the
Conversion Formula.
2.04.02 In-Service Withdrawal Elections
-------------------------------
(a) Subject to the provisions of this Section 2.04.02, at the
time an election is made to defer all or a portion of the
cash component of an Award, a Participant may designate all
or a portion of the cash component of such deferred amount,
not including any earnings thereon, to be paid during a
specified quarter/year.
(b) Withdrawal elections made pursuant to this Section may not
specify a year which is any sooner than the fourth Plan Year
after the Plan Year in which the deferred amount is credited
to the Participant's Account.
(c) Any amount subject to withdrawal pursuant to this Section,
must be invested in the Interest Account in the Deferred
Compensation Plan.
(d) Any election made in accordance with this subjection 2.04.02
shall be irrevocable.
- Page 2.4 -
<PAGE>
SECTION III - CAPITAL ENHANCEMENT ACCOUNT
-----------------------------------------
3.01 Deferrals of Salary to Capital Enhancement Account
--------------------------------------------------
(a) Subject to any minimum/maximum limits established by the Committee,
each prospective Participant, or such prospective Participant as the
Committee deems appropriate, may be given an opportunity to make an
election to defer payment of all or any part of his/her Salary and/or
Award, to be credited to the Capital Enhancement Account.
(b) (1) Subject to subparagraph (2) below, interest equivalents shall be
credited on amounts deferred to the Capital Enhancement Account
as follows:
CEA-1 CEA-2
----- -----
Minimum Rate 0% - 1987
plus 5% 10% - 1988
13% - 1989
15% - 1990
17% - 1991 and thereafter
(2) Except as otherwise provided in subparagraph (3) below, when a
Participant's employment terminates, including retirement, prior
to age 62, interest equivalents shall be recalculated at the
Minimum Rate for both CEA-1 and CEA-2, for the total period such
amounts were invested in the Capital Enhancement Account, unless:
(i) with respect to any Participant who is an Insider, the
Committee, in its sole discretion, specifically determines
such Participant is entitled to the interest rate described
in subparagraph (1) above; or
(ii) with respect to any Participant who is not an Insider, the
Compensation and Employee Benefits Committee, in its sole
discretion, specifically determines such Participant is
entitled to the interest rate described in subparagraph (1)
above.
(3) In the case of a Participant whose termination of employment
prior to age 62 is the result of a divestiture, such Participant
shall be entitled to the interest rate described in subparagraph
(1) above.
- Page 3.1 -
<PAGE>
(c) Designations to credit a deferred amount to the Capital Enhancement
Account shall be made in such terms on such bases as the Administrator
may prescribe.
3.02 Payment of Deferrals from the Capital Enhancement Account
---------------------------------------------------------
Payments from the Capital Enhancement Account shall be made in cash.
3.03 Pre-Retirement Death Benefit
----------------------------
If a Participant dies prior to retirement, the Company shall pay a pre-
retirement death benefit to such Participant's Beneficiary equal to:
(a) For a Participant who had a balance in his/her CEA-2 account at the
time of death, the balance in the CEA-2 account; and
(b) For Participants who had a balance in his/her CEA-1 account at the
time of death, and who provided evidence of insurability at the time
of enrollment in CEA-1, the pre-retirement death benefit shall be
equal the greater of:
(1) The CEA-1 account balance; or
(2) The original amount deferred into the CEA-1 account (not
including interest equivalents credited thereon) times the
applicable factor in the following TABLE:
TABLE
-----
Attained Age on
August 1, 1985 Factor
------------------- ------
44 and under 15
45 to 54 9
55 and older 8
3.04 Termination of Capital Enhancement Account - 2 ("CEA-2")
--------------------------------------------------------
(a) Notwithstanding any other provision of Section III or Section IV
herein, CEA-2 shall be terminated effective December 31, 1998.
(b) Participants whose Account contains amounts credited under CEA-2 as of
January 1, 1998, shall be required to make an election regarding the
payout of all amounts credited under CEA-2 to be effective on January
1, 1999.
- Page 3.2 -
<PAGE>
(1) An active Participant may elect:
(A) To receive the full amount of his/her CEA-2 Account paid in
a lump sum in January, 1999; or
(B) To have such amount credited to his/her Account in the PPG
Industries, Inc. Deferred Compensation Plan.
(2) A terminated or retired Participant may elect:
(A) To receive the full amount of his/her CEA-2 Account balance
paid in a lump sum in January, 1999; or
(B) To have his/her Account balance credited to his/her Account
in the PPG Industries, Inc. Deferred Compensation Plan. A
Participant who makes an election in accordance with this
subparagraph must further elect to receive his/her CEA-2
Account balance paid in accordance with the election filed
at the time of his/her termination or retirement for
payments from:
His/her Deferred Compensation Plan Account; or
His/her CEA-2 Account.
(3) Elections filed in accordance with this paragraph (b) must be
received by the Administrator no later than June 20, 1998.
In the event an active Participant fails to make an election in
accordance with section (b)(1) above, his/her CEA-2 amount shall
be credited to his/her Account in the PPG Industries, Inc.
Deferred Compensation Plan.
In the event a retired or terminated Participant fails to make an
election in accordance with section (b)(2) above, his/her CEA-2
amount shall be credited to an account in the PPG Industries,
Inc. Deferred Compensation Plan and the Participant shall be
deemed to have elected to receive his/her CEA-2 Account balance
paid in accordance with the election filed at the time of his/her
termination or retirement for payments from his/her CEA-2
Account.
(c) Elections made in accordance with subparagraph (b) above shall
supersede any other elections on file with the Administrator which
were made in accordance with Section IV.
- Page 3.3 -
<PAGE>
(d) Section 4.02 shall apply to any Participant whose employment is
terminated notwithstanding any election filed in accordance with this
Section 3.04.
- Page 3.4 -
<PAGE>
SECTION IV - WITHDRAWAL PROVISIONS
----------------------------------
4.01 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 up to a maximum of ten years.
(c) A Participant may delay the first payment; provided, however, that, in
all cases, payments must be completed no later than the month
preceding the month in which the Participant's 75th birthday occurs.
(d) The payment schedule elected by the Participant shall apply to his/her
entire Account.
Annual installments shall be each year on the first of the month
selected by the Participant as the month for such payments to
commence.
Semiannual installments shall be paid twice each year with the first
yearly payment paid the first of the month selected by the Participant
as the month for such payments to commence, and the second yearly
payment paid the first of the month which is six month later.
Quarterly installments shall be paid four times each year with the
first yearly payment paid the first of the month selected by the
Participant as the month for such payments to commence, and the
second, third and fourth payments following with three month between
each such payment.
- Page 4.1 -
<PAGE>
Each installment payment shall be calculated by dividing the
Participant's account balance, increased by the projected rate of
interest to be earned during the period of the payment schedule, by
the remaining number of installments -(e.g.: Ten annual installments
----
shall be paid: 1st installment = 1/10 of Account as adjusted; 2nd
installment = 1/9; 3rd installment = 1/8, etc.).
(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 month in
such year which is at least six months/ten days following such
Retirement Date.
4.02 Withdrawals following Termination
---------------------------------
Participants shall receive their entire Account balance, paid in a lump
sum as soon as possible following their termination of employment.
4.03 Withdrawals in the event of Disability
--------------------------------------
(a) In the event a Participant becomes disabled, he/she shall receive
payments in accordance with the election filed with the Administrator
at the time the deferral election was filed.
(b) As provided in such election, the Participant shall receive:
(1) One lump-sum payment; or
(2) Quarterly, semiannual or annual installments - to be made over a
period of up to a maximum of ten years.
(c) The payment schedule elected by the Participant shall apply to his/her
entire Account.
Annual installments shall be each year on the first of the month
selected by the Participant as the month for such payments to
commence.
Semiannual installments shall be paid twice each year with the first
yearly payment paid the first of the month selected by the Participant
as the month for such payments to commence, and the second yearly
payment paid the first of the month which is six month later.
- Page 4.2 -
<PAGE>
Quarterly installments shall be paid four times each year with the
first yearly payment paid the first of the month selected by the
Participant as the month for such payments to commence, and the
second, third and fourth payments following with three months between
each such payment.
Each installment payment shall be calculated by dividing the
Participant's account balance, increased by the projected rate of
interest to be earned during the period of the payment schedule, by
the remaining number of installments -(e.g.: Ten annual installments
----
shall be paid: 1st installment = 1/10 of Account as adjusted; 2nd
installment = 1/9; 3rd installment = 1/8, etc.).
4.04 Withdrawals following a Participant's death
-------------------------------------------
(a) Death prior to the Participant's Payment Election
-------------------------------------------------
In the event of a Participant's death prior to the time he/she files
an irrevocable payment election in accordance with section 4.01 or
4.03, the Participant's entire Account shall be paid to the
Participant's Beneficiary as soon as possible following the
Participant's death.
(b) Death on or after a Participant's Payment Election
--------------------------------------------------
In the event of a Participant's death on or after the time he/she
files an irrevocable payment election in accordance with section 4.01
or 4.03, the Participant's Beneficiary shall receive the remaining
balance of the Participant's Account in accordance with the payment
schedule filed by the Participant.
4.05 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) The Participant shall be required to exhaust all our sources of funds,
other than the PPG Savings Plan, before the Administrator will
consider an accelerated withdrawal in accordance with this section
4.05.
- Page 4.3 -
<PAGE>
4.06 Small Account Provision
-----------------------
(a) Each scheduled withdrawal must equal a minimum of $5,000, or 100
shares of PPG Stock.
(b) If the remaining balance in a Participant's Account is less than
$5,000, or 100 shares of PPG Stock, the Administrator may, at his
discretion, distribute the remainder of the Account.
- Page 4.4 -
<PAGE>
SECTION V SPECIFIC PROVISIONS
-----------------------------
RELATED TO BENEFITS
-------------------
5.01 Nonassignability
----------------
(a) Except as provided in paragraph (b) below and in section 5.02, no
person shall have any power to encumber, sell, alienate, or otherwise
dispose of his/her interest under the Plan prior to actual payment to
and receipt thereof by such person; nor shall the Administrator
recognize any assignment in derogation of the foregoing. No interest
hereunder of any person shall be subject to attachment, execution,
garnishment or any other legal, equitable, or other process.
(b) Paragraph (a) above shall not apply to the extent that a 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 5.1 -
<PAGE>
5.02 Beneficiary Designation
-----------------------
(a) The Participant shall have the right, at any time, to designate any
person(s) as Beneficiary. The designation of a Beneficiary shall be
effective on the date it is received by the Administrator, provided
the 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 Capital Enhancement Account shall be paid as soon
as possible to the Participant's estate.
5.03 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.
5.04 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.
5.05 Restricted Shares of PPG Stock
------------------------------
(a) The Committee may, on such terms as it deems appropriate, restrict the
transferability of all or any number of such shares as constitute all
or any part of an Award to installments over periods not exceeding
five years and/or provide for the forfeitability of all or any number
of such shares over a period not exceeding five years. During the
period of restriction as to transferability and/or provision as to
forfeitability, Participants shall receive dividends and have voting
and other shareholders' rights as to such shares.
- Page 5.2 -
<PAGE>
(b) No restriction on the transferability and/or provisions as to the
forfeitability of any shares of PPG Stock may be imposed so as to
obtain beyond the normal retirement date of the Participant awarded
such shares. Further, all restrictions on the transferability and/or
provisions as to the forfeitability of any shares of PPG Stock shall
be such as to terminate in the event of death, total and permanent
disability or early retirement, upon the occurrence of a Change in
Control, or upon the occurrence of the commencement of a tender offer
or an exchange offer.
(c) Any restrictions on the transferability and/or provisions as to the
forfeitability of any shares of PPG Stock shall be reflected in a
legend imprinted on the certificate(s) representing such shares.
5.06 The shares of PPG Stock delivered under the Plan may be either authorized
but unissued shares or issued shares acquired by the Company and held in
its Treasury.
5.07 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.
5.08 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 accruing interest at the Minimum Rate for the total period such
amounts were credited in the Account;
(c) Apply both (a) and (b) above; or
- Page 5.3 -
<PAGE>
(d) Apply any other diminution or forfeiture of benefits. which is
specifically approved by the Administrative Subcommittee.
For purposes of this Section 5.08, 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 5.4 -
<PAGE>
SECTION VI ADMINISTRATION & CLAIMS
----------------------------------
6.01 Administration
--------------
(a) The Committee shall be comprised of at least three members of the
Board, none of whom shall, at the time of exercising discretion in
administering the Plan, be eligible, or have been eligible at any time
within one year, for selection as a person, to whom stock may be
allocated or to whom stock options or stock appreciation rights may be
granted pursuant to the Plan or any other plan of the Company or any
of its affiliates entitling Participants therein to acquire stock,
stock options or stock appreciation rights of the Company or any of
its affiliates.
The Committee, for purposes of administering the Plan, shall meet and
act as necessary to determine or approve the maximum amount of Awards
to all Participants, the form of Awards to Participants and the amount
of Awards to Insiders and such other Participants as the Committee
deems appropriate.
(b) 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.
(c) 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.
(d) 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.
(e) The Administrator shall not receive any compensation from the Plan for
his services.
- Page 6.1 -
<PAGE>
(f) 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.
6.02 Claims
------
(a) Every person receiving or claiming benefits under the Plan shall be
conclusively presumed to be mentally and physically competent and of
age. If the Administrator determines that such person is mentally or
physically incompetent or is a minor, payment shall be made to the
legally appointed guardian, conservator, or other person who has been
appointed by a court of competent jurisdiction to care for the estate
of such person, provided that proper proof of such appointment is
furnished in a form and manner suitable to the Administrator. Any
payment made under the provisions of the paragraph (a) shall be a
complete discharge of any liability therefor under the Plan. The
Administrator shall not be required to see to the proper application
of any such payment.
(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.
- Page 6.2 -
<PAGE>
(c) Review Procedure
----------------
Within sixty (60) days of the date the Administrator denies a claim,
in whole or in part, the claimant, or his/her authorized
representative, may request that the decision be reviewed. Such
request shall be in writing, shall be filed with the Administrator,
and shall contain the following information:
(1) The date on which the denial was received by the claimant;
(2) The date on which the claimant's request for review was filed
with the Administrator;
(3) The specific portions of the denial which the claimant requests
the Administrator to review;
(4) A statement setting forth the basis on which the claimant
believes that a review of the decision is required;
(5) Any written material which the claimant desires the Administrator
to take into consideration in reviewing the claim.
The Administrator shall afford the claimant, or his/her authorized
representative, an opportunity to review documents pertinent to the
claim, and shall conduct a full and fair review of the claim and its
denial. The Administrator's decision on such review shall be
furnished to the claimant in writing, and shall be written in a manner
calculated to be understandable to the claimant. Such decision shall
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 6.3 -
<PAGE>
SECTION VII AMENDMENT AND TERMINATION
-------------------------------------
7.01 Amendment of the Plan
---------------------
(a) Except as provided in paragraph (b) below, the Board or the Committee
may amend the Plan, in whole or in part, at any time.
(b) The Plan shall not be amended, without shareholder approval, so as to
increase the percentage of Pre-tax Earnings to be set aside in the
Reserve each year or extend the period of time after which unawarded
amounts are automatically released from the Reserve and returned to
income.
7.02 Termination of the Plan
-----------------------
The Board or the Committee may terminate the Plan at any time. Upon a
termination pursuant to this Section 7.02, the Committee has the sole
discretion to determine distribution schedules for any or all Accounts,
notwithstanding a Participant's previous distribution schedule.
7.03 Company Action.
---------------
The Company's power to amend or terminate the Plan shall be exercisable by
the Board or by the Committee, or by any individual authorized by the
Board to exercise such powers.
7.04 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 7.04 shall be
binding and conclusive.
- Page 7.1 -
<PAGE>
SECTION VIII MISCELLANEOUS
--------------------------
8.01 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.
8.02 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.
8.03 Trust
-----
The Company shall be responsible for the payment of all benefits under the
Plan. At its discretion, the Company may establish one or more grantor
trusts for the purpose of providing for payment of benefits under the
Plan. Such trust(s) may be irrevocable, but the assets thereof shall be
subject to the claims of the Company's creditors. Benefits paid to the
Participant from any such trust shall be considered paid by the Company
for purposes of meeting the obligations of the Company under the Plan.
8.04 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.
8.05 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.
8.06 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 8.1 -
<PAGE>
8.07 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.
8.08 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.
8.09 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.
8.10 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 8.2 -
<PAGE>
SECTION IX CHANGE IN CONTROL
----------------------------
9.01 Change in Control
-----------------
(a) Upon, or in reasonable anticipation of, a Change in Control (as
defined in section 9.02):
(1) Awards in the form of cash shall be made for the year during
which the Change in Control occurs, and then paid immediately 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, or their successors, shall deem
appropriate (including such terms as are appropriate to cause
such payment, if possible, not to be a taxable event to
Participants) in order to cause the Awards so paid to be paid
either not later than the end of the first calendar quarter
following the end of the year to which the Awards relate or on a
deferred basis in accordance with the elections of Participants
then in effect as to the timing of the receipt of Awards for such
year.
(2) Participants who are eligible to receive an Award for the Plan
Year in which a Change in Control occurs shall be eligible to
receive an Award for the Plan Year following the Change in
Control.
(3) The amount of the Award payable to each Participant shall be:
one-half of the regular Award if the Change in Control occurs
during the first six months of the year; or
the full regular Award, if the Change in Control occurs during
the second six months of the year
either calculated at a rating of 12 for all performance
categories.
(4) All deferred amounts credited to the Capital Enhancement Account
shall be paid immediately 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, or their
successors shall deem appropriate (including such terms as are
appropriate to cause such payment, if possible, not to be a
taxable event to Participants) in order to give effect to the
elections of Participants with respect to the timing of the
receipt of such deferred amounts.
- Page 9.1 -
<PAGE>
(b) By way of example of the operation of paragraph (a) above:
If the Change in Control occurred on August 1 of a Plan Year, a
Participant in a position with 1000 total points and an incentive
award value of $1.75 per point would receive an Award of no less than
$21,000 calculated as follows: 1000 x 1.75 x 12 = $21,000.
If the Change in Control occurred on April 1 of a Plan Year, such
Participant would receive $10,500.
If the Plan were to be continued to the end of the year, and
performance exceeded the 12 rating, a higher Award would be paid.
(c) Notwithstanding any other provision of this section, if an Award
ultimately made for such Plan Year is greater than the Award made
pursuant to this section, the Participant shall be entitled to the
difference between such Awards.
If the Participant has elected his/her Award to be deferred, payment
of such difference shall be made to a trustee in accordance with the
provisions set forth in subparagraph (a)(4) above.
(d) For purposes of this section, the fair market value of a share of PPG
Stock on any date shall be the closing sale price as reported for such
date (or, if no price is reported for such date, for the next
preceding date for which a price is reported) on the New York Stock
Exchange-Composite Tape.
9.02 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").
- Page 9.2 -
<PAGE>
For purposes of this subsection (a) the following acquisitions shall
not constitute a Change in Control:
Any acquisition directly from the Company;
Any acquisition by the Company;
Any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled
by the Company; or
Any acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of paragraph (c) of this
section 9.02.
(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
- Page 9.3 -
<PAGE>
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be;
(ii) No Person (excluding any employee benefit plan (or related
trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly,
20% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination; and
(iii) At least a majority of the members of the board of directors of
the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing
for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company; or
(e) A majority of the Board otherwise determines that a Change in Control
shall have occurred.
- Page 9.4 -
<PAGE>
Exhibit 10.2
PPG INDUSTRIES, INC.
DEFERRED COMPENSATION PLAN
<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
i
<PAGE>
SECTION I - DEFINITIONS
-----------------------
1.01 Account means all deferred Award amounts, all deferred Salary amounts, all
deferred TSR Plan Payments and all Restoration Contributions and any amount
transferred from a Participant's CEA-2 account effective on January 1,
1999, and earnings on each in a Participant's account at any particular
time. For purposes of this Plan, "CEA-2 account" means the balance in the
CEA-2 Account in the IC Plan or the CEA Account in the MAP Plan, whichever
is applicable, as of December 31, 1998.
1.02 Administrator means an officer or officers of the Company appointed by the
Committee, and any person(s) designated by such Administrator to assist in
the administration of the Plan.
1.03 Affiliate means any business entity, other than a Subsidiary Corporation,
in which PPG has an equity interest.
1.04 Award means a grant to a Participant under either the IC Plan or MAP
which such person may elect to defer. Awards to Participants may be made
in the form of cash ("cash component"), shares of PPG stock ("stock
component"), or a combination of both.
1.05 Beneficiary means the person or persons designated by a Participant to
receive benefits hereunder following the Participant's death, in accordance
with Section 6.02. For purposes of this Section 1.05, "person or persons"
is limited to an individual, a Trustee or a Participant's estate.
1.06 Board means the Board of Directors of PPG Industries, Inc.
1.07 Code means the Internal Revenue Code of 1986, and amendments thereto.
1.08 Committee means the Officers-Directors Compensation Committee (or any
successor) of the Board.
1.09 Company or PPG means PPG Industries, Inc.
1.10 Conversion Formula means dividing an amount by the average of the closing
sale prices for PPG Stock reported on the New York Stock Exchange-Composite
Tape for all days in the month of January during which the New York Stock
Exchange is open during the year following the Plan Year to which the Award
relates.
- Page 1.1 -
<PAGE>
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.
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.
- Page 1.2 -
<PAGE>
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.
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.
- Page 1.3 -
<PAGE>
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.
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.
- Page 1.4 -
<PAGE>
1.34 Salary means a Participant's monthly base salary from the Corporation
(excluding bonuses, commissions and other non-regular forms of
compensation) and including payments from the PPG Industries Salary
Continuance Plan, before reductions for deferrals under the Plan or under
any other Plan sponsored by the Corporation. In the case of Salary
Continuance, Salary deferral elections shall be applied to the actual
amount of Salary Continuance being paid.
1.35 Savings Plan means the PPG Industries Employee Savings Plan.
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 Transferred Interest Account means a separate Interest Account for any
amount transferred from a Participant's CEA-2 account, which the
Participant elects not to add to his/her Account, and earnings thereon.
- Page 1.5 -
<PAGE>
1.45 TSR Plan means the PPG Industries, Inc. Total Shareholder Return Plan for
Key Employees. The following words shall have the meaning set forth in the
TSR Plan:
Dividend Equivalent
Payment
TSR Shares
1.46 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, which-
ever 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.
2.03 Deferral of Payment under the TSR Plan
--------------------------------------
(a) In accordance with the provisions of the TSR Plan, the portion of a
Payment which a Participant has elected to defer shall be credited to
the PPG Stock Account in the Participant's Account on the day such
Payment would otherwise have been paid to the Participant.
(b) All crediting elections pursuant to this Section 2.03 are subject to
the transfer provisions of Section 3.04.
(c) The number of TSR Shares deferred by the Participant under the TSR
Plan shall be credited in the form of Stock Account Shares.
2.03.01 Dividend Equivalents under TSR Plan
-----------------------------------
(a) Dividend Equivalents payable in accordance with the TSR Plan
shall be paid into the PPG Stock Account in the Participant's
Account.
(b) The number of Stock Account Shares credited to the PPG Stock
Account shall be determined in accordance with Section 3.02(b).
- 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>
(c) Any amount transferred at the election of a Participant from his/her
CEA-2 account:
(1) To his/her Account, will be transferred, effective January 1,
1999 to the Interest Account; or
(2) To his/her Transferred Interest Account, will be transferred,
effective January 1, 1999. Notwithstanding Section 3.04, amounts
held in the Transferred Interest Account may not be transferred
to the PPG Stock Account.
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.
(d) The payment schedule elected by the Participant shall apply to his/her
entire Account. Participants may designate the first day of the
quarter for the commencement of the payment schedule on an annual,
semiannual or quarterly basis.
- Page 5.1 -
<PAGE>
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:
(1) A Participant whose Termination of Employment occurs prior to March 1,
1998, may elect, in accordance with subparagraph (b)(1) below, when to
receive a lump-sum payment of his/her Account balance following
his/her termination date; or
(2) A Participant whose Termination of Employment occurs on or after March
1, 1998 may elect one lump-sum payment, in accordance with
subparagraph (1) above, or may elect to receive up to five annual
installments, in accordance with subparagraph (b)(2) below.
(3) Any election made pursuant to this paragraph (a) must be filed with
the Administrator no later than 30 days after the Participant's
Termination of Employment.
(b) (1) Participants who elect to receive a lump-sum, must specify the
quarter/year that the lump-sum payment is to be made; provided,
however, that the Participant must elect to receive the payment no
later than the last quarter of the year in which the fifth anniversary
of his/her termination date occurs. Payment must occur no earlier
than the Plan Year after the Plan Year of the Participant's
termination and as of the first day of the first quarter which is at
least six (6) months and 10 days following the Participant's
termination.
- Page 5.2 -
<PAGE>
(2) Participants who elect to receive installments, must specify the
quarter/year that such installments will begin; provided, however,
that the Participant must elect to begin installments no later than
the last quarter of the year in which the fifth anniversary of his/her
termination date occurs. Installments must begin no earlier than the
Plan Year after the Plan Year of the Participant's termination and as
of the first day of the first quarter which is at least six (6) months
and 10 days following the Participant's termination. The payment
schedule elected by the Participant shall apply to his/her entire
Account. Each installment shall be calculated by dividing the
Participant's account balance by the remaining number of installments
- (e.g.: Five annual installments shall be paid: 1st installment =
1/5 of Account; 2nd installment = 1/4 of Account, etc.). If the
installment payment is to be in the form of PPG Stock, any stock
increment shall be rounded down to the nearest whole stock share. Any
remaining stock increments shall remain in the Account until subject
to further payment.
(c) In the event a Participant fails to file a payment election with the
Administrator within the time provided in paragraph (a) above, his/her
Account shall be paid in one lump sum in the year following 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," or is otherwise potentially adverse
to the Company's interest, as for example, a Participant's termination
in order to accept a position with a major competitor, the Participant
shall have no election with respect to payment of his/her Account.
Such Participant shall receive his/her entire Account balance as of
the first day of the first quarter immediately following his/her
termination date.
(f) Payment schedules pursuant to this Section 5.03 shall supersede any
prior payment election(s) filed with the Administrator.
(g) In accordance with authority delegated to the Administrator by the
Committee at its meeting on September 20, 1995, the Administrator
granted the option of five installments, as provided in paragraphs (a)
and (b) of this Section to those employees whose employment with the
Company was terminated as a result of the sale of the Chemicals
Surfactants business to BASF Corp. on December 1, 1997.
- Page 5.3 -
<PAGE>
5.04 Withdrawals in the event of Disability
--------------------------------------
(a) In the event a Participant becomes disabled, he/she may elect a
payment schedule applicable to his/her Account provided such election
is filed with the Administrator within 30 days of the Administrator's
determination that such Participant has a Disability.
(b) Participants may elect:
(1) One lump-sum payment; or
(2) Quarterly, semiannual or annual installments - to be made over a
period of years, up to a maximum period of 15 years; or
(3) A combination of (1) and (2).
(c) A Participant may delay the first payment for a period of up to ten
years following the determination that he/she has a Disability;
provided, however, that, in all cases, payments must begin no later
than the year in which the Participant's 75th birthday occurs.
Payments must commence no earlier than the Plan Year following the
Plan Year in which the Participant 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.
- Page 5.4 -
<PAGE>
(f) Payment schedules pursuant to this Section 5.04 shall supersede any
prior payment election(s) filed with the Administrator; and shall
become irrevocable when filed in accordance with paragraph (a).
5.05 Withdrawals following a Participant's death
-------------------------------------------
(a) Death prior to a Participant's Election Date
--------------------------------------------
In the event of a Participant's death prior to his/her Election Date,
the Participant's entire Account shall be paid to the Participant's
Beneficiary as soon as possible following the Participant's death.
(b) Death on or after a Participant's Election Date
-----------------------------------------------
In the event of a Participant's death on or after his/her Election
Date, the Participant's Beneficiary may elect to receive the remaining
balance of the Participant's Account paid as a lump sum, or in
accordance with the payment schedule filed by the Participant.
Such election must be filed by the Beneficiary within 60-days
following the Participant's death. If no such election is made, the
balance in the Participant's Account shall be paid in a lump sum. Any
lump sum payment made in accordance with this paragraph shall be paid
in the Plan Year 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.
- Page 5.5 -
<PAGE>
(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.
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.
- Page 5.6 -
<PAGE>
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.
(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.
5.11 Withdrawals of amounts from the Transferred Interest Account
------------------------------------------------------------
(a) Withdrawals from the Transferred Interest Account shall be governed by
the election made by the Participant for his/her CEA-2 account.
(b) In the event of a Participant's death prior to receiving the entire
balance in his/her Transferred Interest Account, the Participant's
Beneficiary may elect to receive the remaining balance of the
Participant's Transferred Interest Account paid as a lump sum, or in
accordance with the payment schedule filed by the Participant.
- Page 5.7 -
<PAGE>
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.
- Page 5.8 -
<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
--------------------
(a) In the event the Company becomes aware that a Participant is engaged
or employed as a business owner, employee, or consultant in any
activity which is in competition with any line of business of the
Corporation, or has engaged in any activity otherwise determined to be
detrimental to the Company, the Administrative Subcommittee may:
(1) Terminate such Participant's participation in the Plan, and
distribute the entire amount in the Participant's Account in a
lump sum;
(2) Recalculate all earnings in the Account as though all investments
had been invested in the Interest Account and accruing interest
at the Minimum Rate;
(3) Both (1) and (2) above; or
(4) 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.
(b) TSR Plan
--------
A Participant may forfeit any or all amounts held in his/her Account
if the Committee determines that such forfeiture shall occur in
accordance with Section 4.04 of the TSR Plan.
- Page 6.3 -
<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 10.4
PPG INDUSTRIES, INC.
TOTAL SHAREHOLDER RETURN PLAN
FOR
KEY EMPLOYEES
<PAGE>
Table of Contents
-----------------
Statement of Purpose
Section I Definitions
Section II Awards
Section III Termination/Disability
Death
Section IV Specific Provisions Related
to Benefits
Section V Administration & Claims
Section VI Amendment & Termination
Section VII Miscellaneous
Section VIII Change in Control
i
<PAGE>
STATEMENT OF PURPOSE
--------------------
The PPG Industries Total Shareholder Return Plan is intended to further the
long-term growth of the Corporation by providing incentive, in addition to
current compensation, to those key executives of the Corporation who will have a
substantial opportunity to influence such long-term growth. Specifically the
Plan:
. Associates the personal interests of key executives with the shareholders of
the Corporation by relating capital accumulation to increases in the returns
to shareholders;
. Provides a compensation program to key executives which is competitive with
compensation opportunities in competing industries;
. Encourages key executives to continue as employees of the Corporation.
<PAGE>
SECTION I - DEFINITIONS
-----------------------
1.01 Administrator means the senior Human Resources officer of the Company, and
any person(s) designated by such Administrator to assist in the
administration of the Plan.
1.02 Affiliate means any business entity, other than a Subsidiary Corporation,
in which PPG has an equity interest.
1.03 Award means the TSR Shares granted to a Participant in accordance with
Section 2.02.
1.04 Award Agreement means the agreement executed by the Corporation and a
Participant, in such form as the Administrator determines, which sets
forth the number of TSR Shares awarded and such terms and conditions
applicable to the Award.
1.05 Award Goals means the goals set by the Committee which determine the
amount of a Payment, as defined in Section 2.04(a), if any, which will be
paid at the end of an Award Period.
1.06 Award Period means, as to the Corporation as a whole, the three-year
period commencing with January 1 of the year in which an Award is made,,
or, as to a Subsidiary or a particular unit of the Corporation, such
period as the Committee determines.
1.07 Beneficiary means the person or persons designated by a Participant to
receive benefits hereunder following the Participant's death, in
accordance with section 3.03; provided, however, in the event a
Participant fails to designate a Beneficiary in accordance with Section
4.02, his/her Beneficiary shall be the Beneficiary designated under the
Deferred Compensation Plan. For purposes of this Section 1.05, "person or
persons" is limited to an individual, a Trustee or a Participant's estate.
1.08 Board means the Board of Directors of PPG Industries, Inc.
1.09 Committee means the Officers-Directors Compensation Committee (or any
successor) of the Board.
1.10 Common Stock means the common stock of PPG Industries, Inc.
1.11 Company or PPG means PPG Industries, Inc.
- Page 1.1 -
<PAGE>
1.12 Corporation means PPG and any Subsidiary Corporation designated by the
Committee as eligible to participate in the Plan, and which, by proper
authorization of the Board of Directors or other governing body of such
Subsidiary Corporation, elects to participate in the Plan.
1.13 Deferred Compensation Plan means the PPG Industries, Inc. Deferred
Compensation Plan.
1.14 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.
1.15 Dividend Equivalent means a hypothetical dividend on each TSR Share,
granted on the same date as dividends are paid on the Company's Common
Stock and having a value on the date granted equal to the value of actual
dividends paid on a share of the Company's Common Stock on the same date.
1.16 Employee means any key executive of the Corporation.
1.17 ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
1.18 Fair Market Value of the Common Stock means the average of the closing
sale prices reported on the New York Stock Exchange-Composite Tape for the
Common Stock for all days in the month of December during which the New
York Stock Exchange is open in the last year of the Award Period to which
the Award being paid wholly or partly in shares of Common Stock relates.
1.19 Original Plan means the 1984 Earnings Growth Plan, as amended, which is
being amended and restated as this Total Shareholder Return Plan.
1.20 Participant means an Employee who is selected by the Committee to receive
an Award.
1.21 Plan or TSR means the PPG Industries, Inc. Total Shareholder Return Plan
for Key Executives, as set forth herein and as amended from time to time.
- Page 1.2 -
<PAGE>
1.22 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.
1.23 TSR Account means an account maintained for a Participant to which TSR
Shares are credited.
1.24 TSR Share means a unit which is equivalent to one share of Common Stock.
- Page 1.3 -
<PAGE>
SECTION II - PARTICIPATION & AWARDS
-----------------------------------
2.01 Participation
The Committee shall select the Participants for each Award Period. Such
selection shall be at the total discretion of the Committee based on the
Committee's estimation of those Employees who will have a substantial
opportunity to influence the long-term growth of the Corporation, or a
particular unit of the Corporation.
2.02 Awards
(a) For each Award Period, the Committee shall determine or approve:
(1) The Award Goals;
(2) The Award Period;
(3) The Participants;
(4) The number of TSR Shares to be awarded to each Participant;
(5) Any terms and conditions applicable to the Awards, including, but
not limited to, the imposition of restrictions on the right to
transfer shares of Common Stock delivered to Participants. Such
terms and conditions may differ for each Award Period.
(b) The Committee may grant Awards at any time during an Award Period;
and, when made, such grant shall be effective for the entire Award
Period.
(c) Awards under the Plan shall be granted to Participants in the form of
TSR Shares which shall be reflected in a TSR Account, maintained by
the Company for each Participant.
(d) Each Award shall be made in writing in an Award Agreement which shall
set forth the terms and conditions established by the Committee for
the Award.
- Page 2.1 -
<PAGE>
(e) The Committee shall have the authority to adjust the Award Goal for
any Award Period as it deems equitable in recognition of unusual or
unforeseen circumstances experienced by the Corporation or a
particular unit of the Corporation or changes in accounting principles
or practices instituted during an Award Period.
2.03 Dividend Equivalents
(a) Subject to paragraph (c) below, each Participant shall be entitled to
receive a Dividend Equivalent on each TSR Share in his/her TSR Account
during the Award Period.
(b) Dividend Equivalents shall be paid quarterly into the PPG Stock
Account in the Deferred Compensation Plan.
(c) Dividend Equivalent payments shall not be made on any TSR Shares
following the date a Participant's employment is terminated or the
date the Participant is determined to have a Disability.
(d) A Participant shall be entitled to payment of Dividend Equivalents in
accordance with the provisions of the Deferred Compensation Plan
without regard to the actual payment or non-payment of the Award to
which the Dividend Equivalents relate.
2.04 Payment of Awards
(a) In accordance with the provisions of this Plan and the conditions set
forth in the Award Agreement, a Participant shall be entitled to a
payment on account of an Award at the end of the Award Period
("Payment").
(b) Payments to Participants will be made in the form of Common Stock, or
cash or a combination of both, as the Committee may determine.
(c) The amount of any cash to be paid in lieu of Common Stock shall be
determined on the basis of the Fair Market Value of the Common Stock.
As to shares of Common Stock which constitute all or any part of
a Payment, the Committee may impose such restrictions concerning their
transferability and/or their forfeitability as provided in the Award
Agreement.
- Page 2.2 -
<PAGE>
(d) Payments shall be made to Participants as soon as practicable after
the Committee has determined that the terms and conditions with
respect to the Award have been satisfied - i.e.: generally, within
-----
two and one-half months after the end of the Award Period.
(e) If any dividends are declared on the Common Stock portion of a Payment
on a date subsequent to the close of a Award Period but prior to the
delivery of Common Stock shares to a Participant, an amount equivalent
to such dividends shall be paid in cash to the Participant.
2.05 Deferral of Payments
(a) A Participant may elect to defer receipt of a Payment in accordance
with this Section 2.05.
(b) A Participant may elect to defer either 25%, 50%, 75% or 100% of
his/her Payment. Any balance which is not deferred in accordance with
this paragraph shall be paid to the Participant in Common Stock and
cash, as determined in accordance with Section 2.04(b).
(c) Except as otherwise provided in paragraph (c) below, all elections
pursuant to this Section 2.05 must be filed with the Administrator no
later than the last day of the first year of the Award Period; and
such election shall become irrevocable as of the first day of the
second year of the Award Period.
(d) Employees who are granted an Award after the last day of the first
year of any Award Period, may make an election in accordance with this
Section 2.04 within the 30-day period following notice to the
Participant that he/she has been granted such Award.
(e) The value of any amount deferred in accordance with this Section 2.05,
as determined in TSR Shares, shall be credited to the PPG Stock
Account in the Deferred Compensation Plan at the time the Payment
would otherwise be made following the Award Period and shall be
subject to the provisions of the Deferred Compensation Plan.
- Page 2.3 -
<PAGE>
SECTION III - TERMINATION/DISABILITY/DEATH
------------------------------------------
3.01 Retirement
If a Participant's employment with the Corporation terminates during an
Award Period because of retirement, and after the Employee has been a
Participant for at least 12 months of the Award Period, the Participant
shall be entitled to a prorated Award which shall be determined at the end
of the Award Period. Such prorated Award shall be determined by
multiplying the Award to which the Participant would otherwise have been
entitled by a fraction - the numerator of which is the number of months
the Participant was employed during the Award Period and the denominator
of which is the total number of calendar months in the Award Period.
3.02 Disability
If a Participant's employment with the Corporation terminates during an
Award Period because of Disability, and after the Employee has been a
Participant for at least 12 months of the Award Period, the Participant
shall be entitled to a prorated Award which shall be determined at the end
of the Award Period. Such prorated Award shall be determined by
multiplying the Award to which the Participant would otherwise have been
entitled by a fraction - the numerator of which is the number of months
the Participant was employed during the Award Period and the denominator
of which is the total number of calendar months in the Award Period.
3.03 Death
If a Participant's employment with the Corporation terminates during an
Award Period because of the Participant's death, and after the Employee
has been a Participant for at least 12 months of the Award Period, the
Participant's Beneficiary shall be entitled to a prorated Award which
shall be determined at the end of the Award Period. Such prorated Award
shall be determined by multiplying the Award to which the Participant
would otherwise have been entitled by a fraction - the numerator of which
is the number of months the Participant was employed during the Award
Period and the denominator of which is the total number of calendar months
in the Award Period.
- Page 3.1 -
<PAGE>
3.04 Termination
If a Participant's employment with the Corporation terminates during an
Award Period for any reason other than retirement, Disability or Death,
the Award shall be forfeited on the date of such termination; provided,
however, that the Committee, in its sole discretion, may determine that
the Participant will be entitled to a prorated Award.
- Page 3.2 -
<PAGE>
SECTION IV SPECIFIC PROVISIONS
------------------------------
RELATED TO BENEFITS
-------------------
4.01 Nonassignability
----------------
(a) Except as provided in paragraph (b) below and in section 5.02, no
person shall have any power to encumber, sell, alienate, or otherwise
dispose of his/her interest under the Plan prior to actual payment to
and receipt thereof by such person; nor shall the Administrator
recognize any assignment in derogation of the foregoing. No interest
hereunder of any person shall be subject to attachment, execution,
garnishment or any other legal, equitable, or other process.
(b) Paragraph (a) above shall not apply to the extent that a 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) TSR Shares shall not be payable to an Alternate Payee until such
shares would otherwise be payable to a Participant.
4.02 Beneficiary Designation
-----------------------
(a) The Participant shall have the right, at any time, to designate any
person(s) as Beneficiary. The designation of a Beneficiary shall be
effective on the date it is received by the Administrator, provided
the 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.
- Page 4.1 -
<PAGE>
(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, any Payment to
which the Participant would have been entitled shall be paid to the
Participant's estate at the end of the Award Period.
4.03 Limited Right to Assets of the Corporation
(a) No Employee or other person shall have any claim or right to be
granted an Award under the Plan.
(b) The Benefits paid under the Plan shall be paid from the general funds
of the Company and from shares authorized and available for issuance
under the Original Plan, 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.
4.04 Forfeiture Provision
Notwithstanding any other provisions herein:
(a) If at any time within the Award Period or within one year after the
Award Period, the Participant engages in any activity in competition
with any activity of the Corporation, or contrary or harmful to the
interests of the Corporation, including, but not limited to:
(1) Conduct related to the Participant's employment for which either
criminal or civil penalties against the Participant may be
sought; or
(2) Violation of the Corporation's Business Conduct Policies; or
(3) Accepting employment with or serving as a consultant, advisor or
in any other capacity to an employer that is in competition with
or acting against the interests of the Corporation, including
employing or recruiting any present, former or future employee of
the Corporation; or
(4) Disclosing or misusing any confidential information or material
concerning the Corporation; or
(5) Participating in a hostile take over attempt;
- Page 4.2 -
<PAGE>
then the Award shall terminate effective on the date on which the
Committee determines that Participant has engaged in such activity.
Any "Award Gain" realized by the Participant shall be paid by the
Participant to the Company. For purposes of this Section 4.04, "Award
Gain" shall mean the cash and the closing market price of the Common
Stock delivered to the Participant pursuant to an Award. Any portion
of a Payment which was deferred shall be forfeited from the
Participant's account in the Deferred Compensation Plan in accordance
with this Section 4.04.
(b) By executing the Award Agreement, the Participant shall agree to a
deduction from any amounts the Corporation owes the Participant from
time to time (including amounts owed to the Participant as wages or
other compensation, fringe benefits or vacation pay, as well as any
other amounts owed to the Participant), to the extent of amounts owed
to the Corporation in accordance with paragraph (a) above. Whether or
not the Corporation elects to make any set-off in whole or in part, if
the Corporation does not recover by means of set-off the full amount
the Participant owes in accordance with paragraph (a), the Participant
agrees to pay the unpaid balance to the Corporation immediately upon
notification by the Administrator.
(c) The Participant may be released from the Participant's obligations
under paragraphs (a) and (b) above only if the Committee determines,
in its sole discretion, that such action is in the best interest of
the Corporation.
4.05 Taxes
The Corporation shall have the right to deduct, or to require the
Participant or other person receiving a payment under the Plan to pay to
the Corporation any Federal or state taxes required by law to be withheld
or paid.
- Page 4.3 -
<PAGE>
SECTION V ADMINISTRATION & CLAIMS
---------------------------------
5.01 Administration
--------------
(a) The Administrator shall administer the Plan and interpret, construe
and apply its provisions in accordance with its terms. Subject to the
terms of the Plan the Administrator shall have the complete authority
to:
(1) Construe the terms of the Plan; and
(2) Control and manage the operation of the Plan.
(b) The Administrator shall have the authority to establish rules for the
administration and interpretation of the Plan and the transaction of
its business. The determination of the Administrator as to any
disputed question shall be conclusive. All actions, decisions and
interpretations of the Administrator shall be performed in a uniform
and nondiscriminatory manner.
(c) The Administrator may employ counsel and other agents and may procure
such clerical, accounting and other services as the Administrator may
require in carrying out the provisions of the Plan.
(d) The Administrator shall not receive any compensation from the Plan for
his services.
(e) The Corporation shall indemnify and save harmless the Administrator
against all expenses and liabilities arising out of the
Administrator's service as such, excepting only expenses and
liabilities arising from the Administrator's own gross negligence or
willful misconduct, as determined by the Committee.
- Page 5.1 -
<PAGE>
5.02 Claims
(a) Every person receiving or claiming benefits under the Plan shall be
conclusively presumed to be mentally and physically competent and of
age. If the Administrator determines that such person is mentally or
physically incompetent or is a minor, payment shall be made to the
legally appointed guardian, conservator, or other person who has been
appointed by a court of competent jurisdiction to care for the estate
of such person, provided that proper proof of such appointment is
furnished in a form and manner suitable to the Administrator. Any
payment made under the provisions of the paragraph (a) shall be a
complete discharge of any liability therefor under the Plan. The
Administrator shall not be required to see to the proper application
of any such payment.
(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:
- Page 5.2 -
<PAGE>
(1) The date on which the denial was received by the claimant;
(2) The date on which the claimant's request for review was filed
with the Administrator;
(3) The specific portions of the denial which the claimant requests
the Administrator to review;
(4) A statement setting forth the basis on which the claimant
believes that a review of the decision is required;
(5) Any written material which the claimant desires the Administrator
to take into consideration in reviewing the claim.
The Administrator shall afford the claimant, or his/her authorized
representative, an opportunity to review documents pertinent to the
claim, and shall conduct a full and fair review of the claim and its
denial. The Administrator's decision on such review shall be
furnished to the claimant in writing, and shall be written in a manner
calculated to be understandable to the claimant. Such decision shall
include a statement of the specific reason(s) for the decision,
including references to the specific provision(s) of the Plan relied
upon.
The written notice from the Administrator shall be furnished to the
claimant within sixty (60) days following the date on which the
request for review was received by the Administrator, except that if
special circumstances require an extension of time, the Administrator
shall notify the claimant of this need within such 60-day period.
Such notice shall inform the claimant the nature of the circumstances
necessitating the need for additional time and the date by which the
claimant will be furnished with the decision regarding the claim.
Such extension may provide for up to an additional 60 days.
5.03 Plan Expenses
The cost of administering the Plan shall be paid by the Corporation.
- Page 5.3 -
<PAGE>
SECTION VI AMENDMENT AND TERMINATION
------------------------------------
6.01 Amendment of the Plan
(a) Except as provided in paragraph (b) below, the Board or the Committee
may amend the Plan, in whole or in part, at any time.
(b) No amendment may, without shareholder approval, increase the number of
shares of Common Stock which may be delivered under the Plan.
6.02 Termination of the Plan
The Plan shall terminate when all TSR Shares subject to Award under the
Plan or all Common Stock available for delivery under the Plan have been
paid out or delivered or on such earlier date as may be determined by the
Board or the Committee.
6.03 Company Action
The Company's power to amend or terminate the Plan shall be exercisable by
the Board or by the Committee, or by any individual authorized by the
Board to exercise such powers.
- Page 6.1 -
<PAGE>
SECTION VII MISCELLANEOUS
-------------------------
7.01 Share and Award Authorization
(a) Awards of TSR Shares shall entitle Participants to Dividend
Equivalents but not to actual dividends, voting or other rights of
shareholders. TSR Shares covered by Awards which are not earned or
are forfeited for any reason shall, unless the Plan has been
terminated, again be available for other Awards under the Plan. The
maximum number to TSR Shares which may be awarded under the Plan on
and after the date hereof shall not exceed the number of shares
authorized and available for award on this date under the Original
Plan, subject to adjustment as provided in paragraph (c) below.
(b) The maximum number of shares of Common Stock which shall be available
for issuance and delivery to Participants under this Plan on and after
this date shall not exceed the number of shares authorized and
available for issuance on this date under the Original Plan, subject
to adjustment as provided in paragraph (c) below.
(c) In the event of any change in the number of outstanding shares of
Common Stock by reason of any stock dividend, stock split,
reorganization, merger, consolidation, exchange of shares or similar
change, a corresponding change shall be made in:
(i) The number of TSR Shares available for grant pursuant to Section
2.02;
(ii) The number of shares of Common Stock available for issuance and
delivery pursuant to paragraph (b) above;
(iii) The number of TSR Shares contingently held by any Participant
unless the Committee makes a contrary determination, which it
may do in its sole discretion and which, if done, shall be final
and binding.
7.02 Successors of the Company
The rights and obligations of the Company under the Plan shall inure to
the benefit of, and shall be binding upon, the successors and assigns of
the Company.
- Page 7.1 -
<PAGE>
7.03 ERISA Plan
The Plan is intended to be an unfunded plan maintained primarily to
provide deferred compensation benefits for "a select group of management
or highly compensated employees" within the meaning of Sections 201, 301
and 401 of ERISA and therefore to be exempt from Parts 2, 3 and 4 of Title
I of ERISA.
7.04 Trust
The Company shall be responsible for the payment of all benefits under the
Plan. At its discretion, the Company may establish one or more grantor
trusts for the purpose of providing for payment of benefits under the
Plan. Such trust(s) may be irrevocable, but the assets thereof shall be
subject to the claims of the Company's creditors. Benefits paid to the
Participant from any such trust shall be considered paid by the Company
for purposes of meeting the obligations of the Company under the Plan.
7.05 Employment Not Guaranteed
Nothing contained in the Plan nor any action taken hereunder shall be
construed as a contract of employment or as giving any Participant any
right to continued employment with the Corporation.
7.06 Gender, Singular and Plural
All pronouns and variations thereof shall be deemed to refer to the
masculine, feminine, or neuter, as the identity of the person(s) requires.
As the context may require, the singular may be read as the plural and the
plural as the singular.
7.07 Headings
The headings of the Sections, subsections and paragraphs of the Plan are
for convenience only and shall not control or affect the meaning or
construction of any of its provisions.
7.08 Validity
If any provision of the Plan is held invalid, void or unenforceable, the
same shall not affect, in any respect, the validity of any other
provision(s) of the Plan.
- Page 7.2 -
<PAGE>
7.09 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.
7.10 Applicable Law
The Plan is intended to conform and be governed by ERISA. In any case
where ERISA does not apply, the Plan shall be governed and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
7.11 Notice
Any notice required or permitted to be given to the Administrator under
the Plan shall be sufficient if in writing and either hand-delivered, or
sent by first class mail to the principal office of the Company at One PPG
Place, Pittsburgh, PA 15272, directed to the attention of the
Administrator. Such notice shall be deemed given as of the date of
delivery.
- Page 7.3 -
<PAGE>
SECTION VIII CHANGE IN CONTROL
------------------------------
8.01 Payments to a Trustee
Upon, or in reasonable anticipation of a Change in Control, as defined in
Section 8.02, all contingent Awards outstanding shall be deemed to have
been earned on such basis as the Committee shall prescribe and then paid
to a trustee or otherwise on such terms as the Committee may prescribe or
permit and any deferred amounts shall be paid to a trustee or otherwise in
such form and on such terms as the Committee may prescribe or permit.
8.02 Definition: Change in Control
A "Change in Control" shall mean:
(a) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding shares
of common stock of the Company (the "Outstanding Company Common
Stock") or (ii) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities").
For purposes of this subsection (a) the following acquisitions shall
not constitute a Change in Control:
Any acquisition directly from the Company;
Any acquisition by the Company;
Any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled
by the Company; or
Any acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of paragraph (c) of this
section 8.02.
(b) Individuals who, as of January 1, 1999, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming
a director subsequent to such date whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at
least a majority of
- Page 8.1 -
<PAGE>
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 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
- Page 8.2 -
<PAGE>
(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 8.3 -
<PAGE>
Exhibit 12
PPG INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
Computation of Ratio Of Earnings to Fixed Charges
(Dollars in Millions)
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings:
Earnings before income taxes $ 840 $ 1,247 $ 1,215 $ 1,149 $ 1,267
Plus:
Fixed charges exclusive of capitalized interest 108 113 124 136 139
Amortization of capitalized interest 11 12 13 13 12
Adjustments for equity affiliates and minority interest (2) (4) (3) 0 (2)
--------------------------------------------------------------
Total $ 957 $ 1,368 $ 1,349 $ 1,298 $ 1,416
==============================================================
Fixed Charges:
Interest expense including amortization of debt
discount/premium and debt expense $ 88 $ 91 $ 102 $ 113 $ 114
Rentals - portion representative of interest 20 22 22 23 25
--------------------------------------------------------------
Fixed charges exclusive of capitalized interest 108 113 124 136 139
Capitalized interest 5 9 12 10 9
--------------------------------------------------------------
Total $ 113 $ 122 $ 136 $ 146 $ 148
==============================================================
Ratio of earnings to fixed charges 8.4 11.3 9.9 8.9 9.6
==============================================================
</TABLE>
<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
subsidiaries as of December 31, 1998 and 1997, and the related statements of
income, comprehensive income, shareholders' equity and cash flows for each of
the three years in the period ended December 31, 1998. These financial state-
ments 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, 1998 and 1997, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
January 21, 1999
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 the best estimates and judgments of management.
We believe, further, that the other financial information contained in this
Annual Report is consistent with the financial statements.
/s/ Raymond W. LeBoeuf
Raymond W. LeBoeuf
Chairman of the Board
and Chief Executive Officer
/s/ William H. Hernandez
William H. Hernandez
Senior Vice President, Finance
17
<PAGE>
Statement of Income
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year
- -------------------------------------------------------------------------------
(Millions, except per share amounts) 1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $7,510 $7,379 $7,218
- -------------------------------------------------------------------------------
Cost of sales 4,476 4,397 4,340
- -------------------------------------------------------------------------------
Gross profit 3,034 2,982 2,878
- -------------------------------------------------------------------------------
Other expenses (earnings)
Selling, general and administrative 1,133 1,068 1,004
-----------------------------------------------------------------------------
Depreciation 354 348 340
-----------------------------------------------------------------------------
Research and development--net (See Note 17) 271 250 239
-----------------------------------------------------------------------------
Interest 110 105 96
-----------------------------------------------------------------------------
Business divestitures and realignments (See Note 2) 31 102 --
-----------------------------------------------------------------------------
Other charges 77 96 82
-----------------------------------------------------------------------------
Other earnings (See Notes 2 and 14) (236) (162) (123)
- -------------------------------------------------------------------------------
Total other expenses--net 1,740 1,807 1,638
- -------------------------------------------------------------------------------
Income before income taxes and minority interest 1,294 1,175 1,240
- -------------------------------------------------------------------------------
Income taxes (See Note 8) 466 435 471
- -------------------------------------------------------------------------------
Minority interest 27 26 25
- -------------------------------------------------------------------------------
Net income $ 801 $ 714 $ 744
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Earnings per common share (See Note 7) $ 4.52 $ 3.97 $ 3.96
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Earnings per common share--assuming dilution
(See Note 7) $ 4.48 $ 3.94 $ 3.93
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes to the financial statements are an integral part of this
statement.
18
<PAGE>
Balance Sheet
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31
- ---------------------------------------------------------------------------
(Millions) 1998 1997
- ---------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 128 $ 129
-------------------------------------------------------------------------
Receivables (See Note 3) 1,366 1,353
-------------------------------------------------------------------------
Inventories (See Note 3) 917 863
-------------------------------------------------------------------------
Deferred income taxes (See Note 8) 146 118
-------------------------------------------------------------------------
Other 103 121
- ---------------------------------------------------------------------------
Total current assets 2,660 2,584
- ---------------------------------------------------------------------------
Property (See Note 4) 6,739 6,758
- ---------------------------------------------------------------------------
Less accumulated depreciation 3,834 3,903
- ---------------------------------------------------------------------------
Property--net 2,905 2,855
- ---------------------------------------------------------------------------
Investments 263 219
- ---------------------------------------------------------------------------
Goodwill 660 392
- ---------------------------------------------------------------------------
Less accumulated amortization 84 70
- ---------------------------------------------------------------------------
Goodwill--net 576 322
- ---------------------------------------------------------------------------
Other assets (See Note 9) 983 888
- ---------------------------------------------------------------------------
Total $ 7,387 $ 6,868
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities
Short-term debt and current portion of long-term debt
(See Note 5) $ 637 $ 444
-------------------------------------------------------------------------
Accounts payable and accrued liabilities (See Note 3) 1,264 1,210
-------------------------------------------------------------------------
Income taxes (See Note 8) 11 8
- ---------------------------------------------------------------------------
Total current liabilities 1,912 1,662
- ---------------------------------------------------------------------------
Long-term debt (See Note 5) 1,081 1,257
- ---------------------------------------------------------------------------
Deferred income taxes (See Note 8) 440 406
- ---------------------------------------------------------------------------
Accrued pensions (See Note 9) 130 130
- ---------------------------------------------------------------------------
Other postretirement benefits (See Note 9) 543 531
- ---------------------------------------------------------------------------
Other liabilities 314 291
- ---------------------------------------------------------------------------
Total liabilities 4,420 4,277
- ---------------------------------------------------------------------------
Commitments and contingent liabilities (See Note 10)
- ---------------------------------------------------------------------------
Minority interest 87 82
- ---------------------------------------------------------------------------
Shareholders' equity (See Notes 11 and 12)
Common stock 484 484
-------------------------------------------------------------------------
Additional paid-in capital 105 99
-------------------------------------------------------------------------
Retained earnings 5,791 5,239
-------------------------------------------------------------------------
Treasury stock, at cost (3,198) (2,990)
-------------------------------------------------------------------------
Unearned compensation (149) (162)
-------------------------------------------------------------------------
Accumulated other comprehensive loss (153) (161)
- ---------------------------------------------------------------------------
Total shareholders' equity 2,880 2,509
- ---------------------------------------------------------------------------
Total $ 7,387 $ 6,868
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
Shares outstanding were 174,989,596 and 177,826,463 at Dec. 31, 1998 and 1997,
respectively.
The accompanying notes to the financial statements are an integral part of this
statement.
19
<PAGE>
Statement of Shareholders' Equity
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
Other
Additional Unearned Comprehensive
Common Paid-In Retained Treasury Compensation Income (Loss)
(Millions) Total Stock Capital Earnings Stock (See Note 13) (See Note 12)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, Jan. 1, 1996 $2,570 $484 $ 82 $4,249 $(2,060) $(179) $ (6)
- ------------------------------------------------------------------------------------------------
Net income 744 -- -- 744 -- -- --
- ------------------------------------------------------------------------------------------------
Other comprehensive
loss, net of tax (14) -- -- -- -- -- (14)
- ------------------------------------------------------------------------------------------------
Cash dividends (237) -- -- (237) -- -- --
- ------------------------------------------------------------------------------------------------
Purchase of treasury
stock (635) -- -- -- (635) -- --
- ------------------------------------------------------------------------------------------------
Issuance of treasury
stock 43 -- 15 -- 28 -- --
- ------------------------------------------------------------------------------------------------
Loans to ESOP (26) -- -- -- -- (26) --
- ------------------------------------------------------------------------------------------------
Repayment of loans by
ESOP 34 -- -- -- -- 34 --
- ------------------------------------------------------------------------------------------------
Other 4 -- -- 4 -- -- --
- ------------------------------------------------------------------------------------------------
Balance, Dec. 31, 1996 2,483 484 97 4,760 (2,667) (171) (20)
- ------------------------------------------------------------------------------------------------
Net income 714 -- -- 714 -- -- --
- ------------------------------------------------------------------------------------------------
Other comprehensive
loss, net of tax (141) -- -- -- -- -- (141)
- ------------------------------------------------------------------------------------------------
Cash dividends (239) -- -- (239) -- -- --
- ------------------------------------------------------------------------------------------------
Purchase of treasury
stock (343) -- -- -- (343) -- --
- ------------------------------------------------------------------------------------------------
Issuance of treasury
stock 22 -- 2 -- 20 -- --
- ------------------------------------------------------------------------------------------------
Loans to ESOP (27) -- -- -- -- (27) --
- ------------------------------------------------------------------------------------------------
Repayment of loans by
ESOP 36 -- -- -- -- 36 --
- ------------------------------------------------------------------------------------------------
Other 4 -- -- 4 -- -- --
- ------------------------------------------------------------------------------------------------
Balance, Dec. 31, 1997 2,509 484 99 5,239 (2,990) (162) (161)
- ------------------------------------------------------------------------------------------------
Net income 801 -- -- 801 -- -- --
- ------------------------------------------------------------------------------------------------
Other comprehensive
income, net of tax 8 -- -- -- -- -- 8
- ------------------------------------------------------------------------------------------------
Cash dividends (252) -- -- (252) -- -- --
- ------------------------------------------------------------------------------------------------
Purchase of treasury
stock (231) -- -- -- (231) -- --
- ------------------------------------------------------------------------------------------------
Issuance of treasury
stock 29 -- 6 -- 23 -- --
- ------------------------------------------------------------------------------------------------
Loans to ESOP (26) -- -- -- -- (26) --
- ------------------------------------------------------------------------------------------------
Repayment of loans by
ESOP 39 -- -- -- -- 39 --
- ------------------------------------------------------------------------------------------------
Other 3 -- -- 3 -- -- --
- ------------------------------------------------------------------------------------------------
Balance, Dec. 31, 1998 $2,880 $484 $105 $5,791 $(3,198) $(149) $(153)
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>
Statement of Comprehensive Income
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year
- ------------------------------------------------------------------
(Millions) 1998 1997 1996
- ------------------------------------------------------------------
<S> <C> <C> <C>
Net income $801 $ 714 $ 744
- ------------------------------------------------------------------
Other comprehensive income (loss), net of tax
Currency translation adjustment 14 (126) (14)
----------------------------------------------------------------
Minimum pension liability adjustment (6) (15) --
- ------------------------------------------------------------------
Other comprehensive income (loss) 8 (141) (14)
- ------------------------------------------------------------------
Comprehensive income $809 $ 573 $ 730
- ------------------------------------------------------------------
- ------------------------------------------------------------------
</TABLE>
The accompanying notes to the financial statements are an integral part of
these statements.
20
<PAGE>
Statement of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year
- --------------------------------------------------------------------------------
(Millions) 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 801 $ 714 $ 744
- --------------------------------------------------------------------------------
Adjustments to reconcile to cash from operations
Depreciation and amortization 383 373 363
------------------------------------------------------------------------------
Business divestitures and realignments 31 102 --
------------------------------------------------------------------------------
Gain on sale of business (85) (59) --
------------------------------------------------------------------------------
Increase in receivables (85) (124) (2)
------------------------------------------------------------------------------
Increase in inventories (73) (60) (56)
------------------------------------------------------------------------------
Increase in accounts payable and accrued liabilities 46 40 3
------------------------------------------------------------------------------
Increase (decrease) in income taxes payable 9 (3) (25)
------------------------------------------------------------------------------
Change in other noncurrent assets and liabilities and
other--net (85) 24 (19)
- --------------------------------------------------------------------------------
Cash from operating activities 942 1,007 1,008
- --------------------------------------------------------------------------------
Investing activities
Capital spending
Additions to property and investments (487) (466) (476)
------------------------------------------------------------------------------
Business acquisitions, net of cash balances acquired (390) (363) (13)
- --------------------------------------------------------------------------------
Proceeds from business divestitures 278 171 --
- --------------------------------------------------------------------------------
Reductions of property and investments 18 75 20
- --------------------------------------------------------------------------------
Cash used for investing activities (581) (583) (469)
- --------------------------------------------------------------------------------
Financing activities
Net change in borrowings with maturities of three
months or less 109 (223) 248
- --------------------------------------------------------------------------------
Proceeds from other short-term debt 170 89 59
- --------------------------------------------------------------------------------
Repayment of other short-term debt (154) (78) (50)
- --------------------------------------------------------------------------------
Proceeds from long-term debt 12 472 158
- --------------------------------------------------------------------------------
Repayment of long-term debt (64) (63) (153)
- --------------------------------------------------------------------------------
Loans to employee stock ownership plan (26) (27) (26)
- --------------------------------------------------------------------------------
Repayment of loans by employee stock ownership plan 39 38 34
- --------------------------------------------------------------------------------
Purchase of treasury stock (217) (343) (635)
- --------------------------------------------------------------------------------
Issuance of treasury stock 22 14 27
- --------------------------------------------------------------------------------
Dividends paid (252) (239) (237)
- --------------------------------------------------------------------------------
Cash used for financing activities (361) (360) (575)
- --------------------------------------------------------------------------------
Effect of currency exchange rate changes on cash and
cash equivalents (1) (5) --
- --------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (1) 59 (36)
- --------------------------------------------------------------------------------
Cash and cash equivalents, beginning of year 129 70 106
- --------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 128 $ 129 $ 70
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes to the financial statements are an integral part of this
statement.
21
<PAGE>
Management's Discussion and Analysis
- --------------------------------------------------------------------------------
Performance in 1998 Compared with 1997
Overall Performance
Our sales in 1998 increased 2% to $7.5 billion from $7.4 billion in 1997. The
sales increase resulted from an 8% increase in volumes, including sales related
to several acquisitions made in late 1997 and in 1998, primarily within our
coatings segment. These sales increases were offset in part by a 4% decline due
to the absence of sales related to the divestitures of our European flat and
automotive glass businesses in July 1998 and our surfactants business in Novem-
ber 1997, a 1% decline in sales associated with lower prices for chlorine prod-
ucts in our chemicals segment and a 1% decline from foreign currency transla-
tion due to the strengthening of the U.S. dollar.
The gross profit percentage remained relatively constant at 40.4% in 1998 and
1997. The combination of improved manufacturing efficiencies across all of our
business segments and lower raw materials costs in our chemicals segment was
substantially offset by lower sales prices for chlorine products and certain
glass products and the negative effects of inflation in our coatings and glass
segments.
Net income and earnings per common share, diluted, for 1998 increased to $801
million and $4.48, respectively, compared to net income and earnings per common
share, diluted, of $714 million and $3.94, respectively, for 1997. The increase
in 1998 net income resulted from an $82 million after-tax gain from the sale of
our European flat and automotive glass businesses, a significant reduction in
business divestiture and realignment charges, insurance recoveries of certain
past environmental costs and the same factors that contributed to the increased
sales described above. These improvements were partially offset by the absence
of the gain from the 1997 sale of our surfactants business, higher expenses as-
sociated with worldwide growth initiatives in our coatings segment, the nega-
tive effects of inflation, higher income tax expense due to increased pre-tax
earnings, the effects of the 1998 General Motors strike and the impact of ad-
verse economic conditions in Asia.
Results of Business Segments
Coatings sales increased 13% to $3.5 billion in 1998 from $3.1 billion in 1997.
A 14% increase in sales volume included sales from recent acquisitions and vol-
ume increases for our worldwide automotive refinish, industrial and architec-
tural coatings products and for our automotive original coatings products in
Europe and North America. These sales increases were slightly offset by a 1%
decline from foreign currency translation. Sales generated from worldwide ac-
quisitions in 1998 and late 1997 contributed substantially to the segment's
sales growth in 1998. The unfavorable effects of the General Motors strike par-
tially offset the sales volume improvements in our North American automotive
original and industrial coatings businesses. Operating income decreased to $546
million in 1998 compared to $561 million in 1997. The decrease in operating in-
come is attributable to higher expenses associated with worldwide growth
initiatives in our automotive refinish and industrial businesses, the negative
effects of inflation, particularly on our European businesses, restructuring
charges related to cost reduction initiatives, the impact of the General Motors
strike and reduced royalty income. These reductions were partially offset by
the previously discussed volume improvements and the favorable effect of earn-
ings from recently acquired businesses.
Glass sales decreased 5% to $2.5 billion in 1998 from $2.7 billion in 1997.
Sales declined 7% as a result of the divestiture of our European flat and
automotive glass businesses effective July 31, 1998, 1% due to the unfavorable
effects of foreign currency translation and 1% from lower fiber glass product
volumes. These negative factors were partially offset by a 4% sales volume
increase, principally for North American automotive replacement glass products
and an acquisition of an automotive original glass products facility in early
1998. Additionally, worldwide sales price improvements for fiber glass products
were more than offset by lower sales prices for North American automotive
original glass and flat glass products. The increase in operating income to
$478 million in 1998 compared to $286 million in 1997 is attributable to an $85
million pre-tax gain from the sale of our European flat and automotive glass
businesses, a reduction in business divestiture and realignment charges to $21
million from $102 million in 1997, improved manufacturing efficiencies,
particularly in our North American automotive original glass business and
increased equity affiliate earnings. These favorable factors were partially
offset by the negative effects of inflation, the sales price reductions
mentioned above and the impact of the General Motors strike.
Chemicals sales decreased 7% to $1.5 billion in 1998 from $1.6 billion in
1997. A 7% reduction in sales volumes associated with the divestiture of the
surfactants business in late 1997 and a 5% decline related to lower sales
prices were partially offset by a 5% increase in sales volumes for specialty
chemicals. Significantly lower sales prices were experienced for chlor-alkali
and derivative products. Specialty chemical volumes increased due primarily to
demand for Transitions(Registered Trademark) optical lenses and the acquisition
in late 1997 of a pharmaceutical intermediates company. Operating income in 1998
decreased to $354 million from $428 million in 1997. The decrease in operating
income is attributable to a decline in chlor-alkali and derivative product
prices and the absence of a $59 million pre-tax gain from the sale of and
earnings associated with our surfactants business. These unfavorable factors
were partially offset by lower raw material
22
<PAGE>
Management's Discussion and Analysis
- --------------------------------------------------------------------------------
costs within our chlor-alkali and derivatives business, lower environmental
costs, an insurance recovery of certain past environmental costs and the sales
volume increases discussed above.
Other Significant Factors
The reduction in the overall effective tax rate in 1998 was primarily attribut-
able to the realization of the benefits of capital loss carryforwards on the
gain from the sale of our European flat and automotive glass businesses.
Goodwill increased due to acquisition activity in 1998. The increase in other
long-term assets was attributable principally to an increase in our prepaid
pension asset and to an increase in other intangible assets resulting from 1998
acquisition activity.
Outlook
Although the rate of economic growth is expected to moderate in 1999 in North
America and Europe, PPG should experience an increase in volume, principally as
a result of our commercialization of new products, the expansion of our market
presence and the inclusion of a full year's results associated with businesses
acquired in 1998. We also expect to continue our acquisition activity in 1999,
which should further contribute to volume increases.
During 1998, we were adversely affected by the economic weakness in Asia. Our
businesses within the region were directly affected by the economic conditions.
Furthermore, our chlor-alkali and fiber glass businesses experienced an indi-
rect effect as exports to Asia declined and imports from Asia into North Amer-
ica and Europe resulted in increased competition and lower selling prices for
our chlor-alkali products. We expect the economic weakness in Asia to continue
in 1999, which may result in continued pressure on selling prices for our
chlor-alkali products, some fiber glass products and our automotive replacement
glass products. In addition, the economic weakness and currency devaluation in
Brazil during 1999 are expected to adversely affect our automotive coatings and
refinish operations in that country. However, to the extent we are adversely
affected by the economic weakness in Asia, we anticipate a benefit due to lower
raw materials costs in the chemicals and coatings businesses.
If the current economic weakness in Brazil spreads to other countries in South
America or to Mexico, it may result in a weaker North American economy which
could adversely affect certain operations within our coatings, glass and chemi-
cals segments.
Accounting Standards
In March 1998, the Accounting Standards Executive Committee of the American In-
stitute of Certified Public Accountants issued Statement of Position 98-1, "Ac-
counting for the Costs of Computer Software Developed or Obtained for Internal
Use," which is effective for fiscal years beginning after Dec. 15, 1998. The
adoption of this new standard in 1999 will not have a material effect on the
Company's financial position or results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement of Fi-
nancial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which is effective for fiscal years beginning after
June 15, 1999. The Company is currently evaluating the prospective impact of
this standard on its financial position and results of operations.
Performance in 1997 Compared with 1996
Overall Performance
Our sales increased 2% in 1997 to $7.4 billion from $7.2 billion in 1996. Over-
all, the sales increase was due to a 6% increase in sales volumes, including
sales from recent business acquisitions in our coatings segment, offset in part
by a 2% decrease in sales prices and a 2% decline from foreign currency trans-
lation due to the strong U.S. dollar. Slightly higher sales prices for certain
products in our chemicals and coatings segments were substantially offset by
lower sales prices for caustic soda in our chemicals segment and overall lower
sales prices across the majority of our glass product lines.
The gross profit percentage increased to 40.4% in 1997 from 39.9% in 1996. The
benefits realized from improved manufacturing efficiencies, particularly in our
glass and chemicals segments, favorable sales mix changes within our chemicals
and coatings segments, and slightly higher sales prices and lower raw materials
costs within our coatings segment contributed to the increase. These improve-
ments were partially offset by lower overall sales prices in our glass segment
and for caustic soda in our chemicals segment, as well as the negative effects
of inflation on our glass and chemicals segments.
Net income and earnings per common share, diluted, for 1997 were $714 million
and $3.94, respectively, compared with $744 million and $3.93, respectively,
for 1996. Net income in 1997 was affected by the same factors as gross profit.
In addition, these earnings were adversely affected by pre-tax business divest-
iture and realignment charges of $102 million associated with our glass opera-
tions; higher overhead costs associated with growth initiatives in our coatings
segment; increased advertising, selling and environmental expenses in our chem-
icals segment; the negative effects of inflation and foreign currency transla-
tion, and a slight increase in interest costs associated with higher outstand-
ing borrowings. These negative factors were offset in part by a pre-tax $59
million gain from the sale of our surfactants business and lower income tax ex-
pense.
23
<PAGE>
Management's Discussion and Analysis
- --------------------------------------------------------------------------------
Reduced average shares outstanding, as a result of repurchases of common stock
by the Company, also favorably affected earnings per common share for 1997.
Results of Business Segments
Coatings sales increased 5% to $3.1 billion for 1997 from $2.9 billion for
1996. A 7% sales volume increase, including sales from recent business acquisi-
tions, and a 1% increase in overall sales prices were partially offset by a 3%
decline from foreign currency translation. Volume increases for automo-
tive original and industrial coatings and improved sales prices for automotive
refinish products in North America and Europe and for North American industrial
coatings were partially offset by lower sales prices for our automotive origi-
nal coatings products in North America and Europe. Operating income increased
to $561 million in 1997, compared with $519 million in 1996. The earnings im-
provement was attributable to the same volume and price factors that contrib-
uted to the sales increase, combined with lower raw material costs and slightly
improved manufacturing efficiencies. These improvements were offset in part by
higher overhead costs associated with growth initiatives, particularly in South
America and Asia, the negative effects of inflation and foreign currency
translation, and higher legal expenses.
Glass sales remained relatively constant at $2.7 billion in 1997 and 1996. A
5% increase in sales volumes was offset by declines of 3% each related to sales
prices and foreign currency translation. Although volumes increased for fiber
glass products, worldwide automotive original glass products, flat glass in
North America and Europe, and aircraft products, these increases were offset by
lower sales prices for fiber glass, flat glass and automotive original glass
products in North America and Europe. Operating income decreased to $286 mil-
lion in 1997 compared with $429 million in the prior year. The decrease was at-
tributable to 1997 pre-tax charges totaling $102 million for restructuring ac-
tions related principally to the closing of our Perry, Ga., float glass plant
and the planned disposition of our equity interests in two Asian float glass
plants, the sales price reductions mentioned above, the negative effects of in-
flation and foreign currency translation, and slightly higher legal expenses.
Improved worldwide manufacturing efficiencies and increased overall volumes
partially offset these unfavorable factors.
Chemicals sales totaled $1.6 billion for 1997, up 2% from 1996. A 6% increase
in sales volumes was substantially offset by a 3% decline in overall sales
prices and a 1% decline from foreign currency translation. Volume increases for
chlorine and caustic soda products, and for certain specialty chemical prod-
ucts, particularly Transitions(Registered Trademark) optical lenses, and higher
selling prices for chlorine, vinyl chloride monomer and other chlorine
derivative products were offset by significantly lower selling prices for
caustic soda, reduced volumes for vinyl chloride monomer and the absence of
sales from our surfactants business, which was divested late in 1997. Operating
income increased to $428 million in 1997 from $374 million in 1996, and
included a $59 million pre-tax gain from the sale of our surfactants business.
Excluding this gain, operating earnings declined $5 million. The favorable
effects of volume increases for specialty chemicals and chlor-alkali products,
price improvements for chlorine, vinyl chloride monomer and other chlorine
derivative products, and improved manufacturing efficiencies associated with
chlor-alkali products were more than offset by the decline in sales prices for
caustic soda, increased advertising and selling expenses, principally for
Transitions(Registered Trademark) optical lenses, the negative effects of
inflation on raw material costs, and higher environmental and legal expenses.
Business Divestitures and Realignments
During 1998, we approved a restructuring plan principally associated with cost
reduction initiatives in our glass and coatings operations. We recorded a pre-
tax charge of $19 million in connection with this plan. The components of the
plan include severance benefits for 283 employees. As of Dec. 31, 1998, $2 mil-
lion had been paid under the plan and it is anticipated that the remainder will
be paid in 1999. We also recorded in 1998 an additional pre-tax charge of $15
million related to the disposition of our equity interests in two Asian float
glass plants and two Asian downstream fabrication facilities. The $15 million
pre-tax charge related to a reassessment of the proceeds expected to be real-
ized on the dispositions of $14 million and asset write-offs of $1 million. Ad-
ditionally, in 1998 we recorded a $3 million reversal of a reserve, originally
recorded in 1997, related to the closure of our Perry, Ga., flat glass plant.
In 1997 we recorded a pre-tax restructuring charge of $102 million related to
certain glass businesses that were not meeting strategic and performance objec-
tives. The principal components of the 1997 restructuring program included the
closure of our Perry, Ga., flat glass plant and the disposition of our equity
interests in two Asian float glass plants. The pre-tax restructuring charge in
1997 included $61 million of asset write-offs and $41 million associated with
cash outlays primarily for severance costs (317 employees), a proportionate
share of equity investee indebtedness, and demolition and environmental costs,
net of estimated proceeds from sale. During 1998, cash outlays associated with
both the 1997 restructuring program and the additional restructuring charge re-
corded in 1998 related to this program totaled $11 million. We also reversed $3
million of the 1997 restructuring charge in 1998. It is anticipated that the
remaining reserves related to the 1997 restructuring program of $41 million at
Dec. 31, 1998, will be paid in 1999.
24
<PAGE>
Management's Discussion and Analysis
- --------------------------------------------------------------------------------
Commitments and Contingent Liabilities, including Environmental Matters
PPG is involved in a number of lawsuits and claims, both actual and potential,
including some that it has asserted against others, in which substantial money
damages are sought. These lawsuits and claims relate to product liability, con-
tract, patent, environmental, antitrust and other matters arising out of the
conduct of PPG's business. The Company has been named in a number of antitrust
lawsuits alleging that PPG acted with competitors to fix prices and allocate
markets for certain glass products. These antitrust proceedings are in an early
stage. 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, in the aggregate, the outcome
of all lawsuits and claims involving PPG will not have a material effect on
PPG's consolidated financial position, results of operations or liquidity.
It is PPG's policy to accrue expenses for environmental contingencies when it
is probable that a liability has been incurred and the amount of loss can be
reasonably estimated. Reserves for environmental contingencies are exclusive of
claims against third parties and are not discounted. As of Dec. 31, 1998 and
1997, PPG had reserves for environmental contingencies totaling $94 million and
$100 million, respectively. Pre-tax charges against income for environmental
remediation costs in 1998, 1997 and 1996 totaled $10 million, $34 million and
$27 million, respectively, and are included in "Other charges" in the statement
of income. Cash outlays related to such charges aggregated $16 million, $25
million and $36 million in 1998, 1997 and 1996, 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. Although insurers and other third parties may
cover a portion of these costs, to the extent they are incurred, any potential
recovery is not included in this unreserved exposure to future loss. The
Company's environmental contingencies are expected to be resolved over an ex-
tended period of time.
Although the unreserved exposure to future loss relates to all sites, a
significant portion of such exposure involves three operating plant sites.
Initial remedial actions are occurring at these sites. Studies to determine the
nature of the contamination are reaching completion and the need for additional
remedial actions, if any, is presently being evaluated. The loss contingencies
related to the remaining portion of such unreserved exposure include
significant unresolved issues such as the nature and extent of contamination,
if any, at sites and the methods that may have to be employed should
remediation be required.
With respect to certain waste sites, the financial condition of any other po-
tentially 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, in-
dustrial site reuse initiatives and state voluntary remediation programs, also
adds to the present uncertainties with regard to the ultimate resolution of
this unreserved exposure to future loss. The Company's assessment of the poten-
tial impact of these environmental contingencies is subject to considerable un-
certainty due to the complex, ongoing and evolving process of investigation and
remediation, if necessary, of such environmental contingencies.
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 1998 the overall decline in sales prices was partially offset by improved
manufacturing efficiencies and the overall positive impacts of inflation on our
production costs. In 1997 and 1996, the increase in production costs due to the
negative effects of inflation was not fully recovered through price increases
and manufacturing efficiencies. While inflationary pressure on costs is ex-
pected to be experienced in 1999, we anticipate that ongoing improvements in
manufacturing efficiencies, as well as raw material
25
<PAGE>
Management's Discussion and Analysis
- --------------------------------------------------------------------------------
substitution and increases in selling prices for certain products, will miti-
gate to a significant extent the negative impact of inflation on 1999 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 $942 million in 1998, $1,007 mil-
lion in 1997 and $1,008 million in 1996. Dividends paid to shareholders totaled
$252 million in 1998, $239 million in 1997 and $237 million in 1996. Contribu-
tions to U.S. pension plans totaled $109 million in 1996.
During 1998, 1997 and 1996, the Company repurchased approximately 2.1 million,
5.3 million and 11.9 million shares of common stock at a cost of $122 million,
$302 million and $606 million, respectively, under various share repurchase
programs. The most recent program authorized the repurchase of 10 million
shares of common stock, and was initiated in November 1998. As of Dec. 31,
1998, 2.0 million shares of common stock had been repurchased under the most
recent program at a cost of $114 million. The repurchase of common stock was
financed principally by cash from operations and proceeds from long-term debt.
In 1997 long-term debt was increased principally by the issuance of $450 mil-
lion of notes at rates ranging from 6 1/4% to 6 7/8%, partially offset by
scheduled debt repayments. In 1996 long-term debt was increased principally by
the issuance of $150 million of callable 7 3/8% notes partially offset by
scheduled debt repayments. The proceeds from the issuance of the notes were
used for general corporate purposes, including the repayment of commercial pa-
per borrowings.
Capital spending in 1998 totaled $877 million, compared with $829 million in
1997 and $489 million in 1996. This spending related to modernization and pro-
ductivity improvements, expansion of existing businesses, environmental control
projects and, in 1998, 1997 and 1996, business acquisitions totaling $390 mil-
lion, $363 million and $13 million, respectively. Capital spending of a similar
nature, excluding acquisitions, is expected to total about $600 million during
1999.
In 1999 the Company will continue to implement its acquisition strategy fo-
cused on areas of recognized strength. It is anticipated that any acquisitions
completed will be funded through a combination of cash generated from opera-
tions and external funding sources.
The ratio of total debt, including capital leases, to total debt and equity
was 37% and 40% at Dec. 31, 1998 and 1997, 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 5, Debt and Bank Credit Agreements and Leases, for details regarding
the use and availability of committed and uncommitted lines of credit.
In addition to the lines of credit, the Company may issue up to $500 million
aggregate principal amount of debt securities under a shelf registration state-
ment filed with the Securities and Exchange Commission (SEC) in January 1998.
Conversion to the Euro
On Jan. 1, 1999, eleven of the member countries of the European Monetary Union
converted from their sovereign currencies to a common currency, the euro. At
that time, fixed conversion rates between the legacy currencies and the euro
were set. The legacy currencies will remain legal tender from Jan. 1, 1999,
through July 1, 2002. Beginning Jan. 1, 2002, euro-denominated currency will be
issued. No later than July 1, 2002, the participating countries will withdraw
all bills and coins so that their legacy currencies will no longer be consid-
ered legal tender.
PPG has identified the significant issues that may result from the euro con-
version and is addressing them. These issues include increased competitive
pressures from greater price transparency, changes to information systems to
accommodate various aspects of the new currency and exposure to market risk
with respect to financial instruments. PPG does not expect the impact on its
operating results or financial condition from the conversion to be material.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements made by or on behalf of the Company. Management's
Discussion and Analysis and other sections of this Annual Report contain for-
ward-looking statements that reflect the Company's current views with respect
to future events and financial performance.
Forward-looking statements are identified by the use of the words "aim," "be-
lieve," "expect," "anticipate," "intend," "estimate" and other expressions that
indicate future events and trends. Any forward-looking statement speaks only as
of the date on which such statement is made and the Company undertakes no obli-
gation to update any forward-looking statement, whether as a result of new in-
formation, future events or otherwise. You are advised, however, to consult any
further disclosures we make on related subjects in our Form 10-Q, 8-K and 10-K
reports to the SEC. Also, note the following cautionary statements.
Many factors could cause actual results to differ materially from the
Company's forward-looking statements. Among these factors are increasing price
and product competition
26
<PAGE>
Management's Discussion and Analysis
- --------------------------------------------------------------------------------
by foreign and domestic competitors, fluctuations in the cost and availability
of raw materials, the ability to maintain favorable supplier relationships and
arrangements, economic and political conditions in international markets, the
ability to penetrate existing, developing and emerging foreign and domestic
markets, which also depends on economic and political conditions, foreign ex-
change rates and fluctuations in those rates, and the uncertainties regarding
the Year 2000 problem discussed below. Further, one should understand that it
is not possible to predict or identify all such factors. Consequently, while
the list of factors presented here is considered representative, no such list,
including the one here, should be considered to be a complete statement of all
potential risks and uncertainties. Indeed, unlisted factors may present signif-
icant additional obstacles to the realization of forward-looking statements.
The following discussion regarding Year 2000 issues, including the discussion
of the timing and effectiveness of implementation and the estimated cost of the
Company's Year 2000 efforts, contains forward-looking statements derived using
various assumptions of future events. These forward-looking statements involve
inherent risks and uncertainties, and the actual results could differ materi-
ally from those contemplated by such statements.
Factors that could cause material differences in results -- many of which are
outside the control of the Company -- include, but are not limited to:
. PPG's ability to locate and correct all relevant computer software.
. The accuracy of representations by manufacturers of the Company's computer
systems and software that their products are Year 2000 compliant.
. The ability of our suppliers, customers and other counterparties to identify
and resolve their own Year 2000 obligations so as to allow them to continue
normal business operations or furnish products, services or data to PPG
without disruption.
. Our ability to respond to unforeseen Year 2000 complications.
The consequences of material differences in the results as compared to those
anticipated in the forward-looking statements could include, among other
things, business disruption, operational problems, financial loss, legal lia-
bility to third parties and similar risks, any of which could have a material
adverse effect on our consolidated financial condition, operations or
liquidity.
Year 2000 Readiness Disclosure
Background
Many existing information technology (IT) products and systems, and non-IT
products and systems containing embedded microchip processors, were originally
programmed to represent any calendar dates by using six digits (for example,
12/31/99), as opposed to eight digits (for example, 12/31/1999). Accordingly,
such products and systems may experience miscalculations, malfunctions or dis-
ruptions when attempting to process information containing dates that fall af-
ter Dec. 31, 1999, or other dates that could cause computer malfunctions. These
potential problems are collectively referred to as the "Year 2000" problem.
State of Readiness
Recognizing the importance of Year 2000 issues, we have established a corpo-
rate-wide Year 2000 Steering Committee made up of certain senior executives of
the Company. The Committee is responsible for overseeing our efforts to assess
and address the Year 2000 problem as it may affect the Company. The scope of
our efforts includes (1) an assessment, and where needed a remediation, of both
IT and non-IT elements of our business information, computing, telecommunica-
tions, and process control systems; (2) an assessment, and remediation, as nec-
essary, of equipment with embedded computer chips, and (3) an evaluation of the
Company's relationships with material third parties as they may be impacted by
the Year 2000 problem.
The phases of the Company's Year 2000 compliance plan are: (1) Internal As-
sessment -- a detailed evaluation of the potential Year 2000 effects on the
Company's IT and non-IT systems and on its equipment with embedded computer
chips; (2) Remediation -- corrective action including code enhancements,
hardware and software upgrades, system replacements, vendor certification,
equipment repair or replacement, and other associated changes to achieve Year
2000 compliance; (3) Testing -- the verification that remediation actions are
effective; (4) Third-Party Evaluation -- an evaluation of the Year 2000
readiness of key suppliers of goods and services and of key customers, and (5)
Contingency Planning -- the development of detailed procedures to be put in
place should the Company or key suppliers or customers experience a significant
Year 2000 problem. These phases sometimes overlap.
The assessment phase is complete with the exception of certain recently ac-
quired businesses where the assessment phase is in progress and is expected to
be completed by March 31, 1999. The remediation effort is well under way on all
critical IT and non-IT systems, and we presently anticipate that we will sub-
stantially complete remediation of such critical systems by June 30, 1999, and
that remediation and testing of all remaining systems will be completed by Dec.
31, 1999. Once systems undergo remediation, they are tested for Year 2000 com-
pliance. For major systems, the testing process usually involves subjecting the
remediated system to a simulated change of date from the year 1999 to the year
2000 using, in many cases, computer resources
27
<PAGE>
Management's Discussion and Analysis
- --------------------------------------------------------------------------------
dedicated to that purpose so that normal computing activity is not interrupted
or adversely affected by the testing. We are currently in the process of test-
ing a number of the most critical IT and non-IT systems and expect to complete,
in all material respects, testing of all internal systems prior to the year
2000. The Year 2000 Steering Committee will continue to review Year 2000 com-
pliance efforts on an ongoing basis.
In the third-party evaluation phase, we have identified and contacted
materially significant suppliers of goods or services in an effort to determine
the state of readiness of these important third parties. Materially significant
suppliers for this purpose are considered to be those from whom we purchase a
significant dollar amount of goods or services, those who supply goods or serv-
ices that are critical to uninterrupted production by PPG of its products, in-
cluding those who are sole-source suppliers of important goods or services.
Written assurances that these materially significant suppliers are progressing
toward timely Year 2000 compliance have been received from approximately 66% of
our materially significant suppliers. We are also in the process of identifying
and investigating the Year 2000 readiness of our materially significant custom-
ers. Materially significant customers for this purpose are considered to be
those to which we sell a significant dollar amount of goods.
If materially significant suppliers or customers or a number of less substan-
tial suppliers or customers do not convert their systems in a timely manner, or
are themselves adversely affected by a lack of Year 2000 readiness on the part
of their suppliers or customers, it could have a material adverse effect on our
operations, liquidity or consolidated financial condition. We believe that our
continuing efforts to gain assurances of Year 2000 compliance from materially
significant suppliers and our investigative efforts with respect to the readi-
ness of materially significant customers will minimize these risks. Nonethe-
less, the actual readiness of these third parties is beyond our control.
Costs
The Company is using both internal and external resources to execute its Year
2000 compliance plan. We currently estimate the incremental cost of resolving
the Year 2000 issue at approximately $20 million to $25 million. The incremen-
tal cost of resolving the Year 2000 issue was $7 million in 1998 and was not
material in 1997 or 1996. Approximately 40% to 50% of the total Year 2000 costs
are expected to be expended on equipment or software replacement and the re-
mainder on remediation and testing of existing systems.
All Year 2000 costs are expected to be funded from the Company's operating
cash flow. We are expensing as incurred all costs related to the assessment,
remediation and testing of the Year 2000 issue, unless new systems or equipment
are purchased. In those instances, such costs will be capitalized and charged
to expense over the useful lives of those assets in accordance with our exist-
ing policy. These cost estimates are based on currently available information,
and may be subject to change.
Risks
If needed modifications and conversions of computer systems are not made on a
timely basis by PPG or its materially significant suppliers or customers, the
Company could be affected by business disruption, operational problems, finan-
cial loss, legal liability to third parties and similar risks, any of which
could have a material adverse effect on our consolidated financial condition,
operations or liquidity. Although not anticipated, the most reasonably likely
worst-case scenario of failure by the Company or its key suppliers or custom-
ers to resolve the Year 2000 issue would be a short-term slowdown or cessation
of manufacturing operations at one or more of our facilities and a short-term
inability on the part of the Company to process orders and billings in a timely
manner, and to deliver product to customers.
Contingency Planning
While we continue to focus on solutions for Year 2000 issues, and expect to be
Year 2000 compliant in a timely manner, we are in the process of developing a
contingency plan. Such a plan will set forth our responses should PPG or mate-
rially significant third parties with which we have relationships not achieve
Year 2000 compliance in a timely manner. We expect to finalize the contingency
plan by June 30, 1999.
Market Risk
PPG is exposed to certain market risks arising from transactions that are
entered into in the normal course of business. The Company may enter into
derivative financial instrument transactions in order to manage or reduce this
market risk. PPG's policies do not permit active trading of, or speculation in,
derivative financial instruments. A discussion of the Company's primary market
risk exposures and the management of those exposures is presented below.
PPG generates revenues and costs that are subject to fluctuations due to
changes in foreign currency exchange rates when transactions are denominated in
currencies other than the functional currency. Since the Company manufactures
its products in a number of locations around the world, principally North Amer-
ica and Europe, it has a cost base that is diversified over a number of differ-
ent currencies as well as the U.S. dollar, which serves to counterbalance par-
tially its foreign currency transaction risk.
28
<PAGE>
Management's Discussion and Analysis
- --------------------------------------------------------------------------------
PPG manages its foreign currency transaction risk to minimize the volatility
of cash flows caused by currency fluctuations by forecasting foreign currency
denominated cash flows of each subsidiary for a 12-month period and aggregating
these cash inflows and outflows in each currency to determine the overall net
transaction exposures. Decisions on whether to use derivative financial instru-
ments to hedge the net transaction exposures are made based on the amount of
those exposures, by currency, and an assessment of the near-term outlook for
each currency. The Company's policy permits the use of foreign currency forward
and option contracts to hedge approximately 30% to 70% of its anticipated net
foreign currency cash flows over the next 12-month period. PPG does not hedge
its exposure to translation gains and losses; however, by borrowing in local
currencies, it reduces such exposure. The Company does not hedge its foreign
currency exposures in a manner that eliminates the effect of changes in foreign
currency rates on consolidated net income. The fair value of the foreign cur-
rency contracts outstanding as of Dec. 31, 1998 and 1997, was not material. The
market value of such contracts has a high correlation to the price changes in
the currencies of the related hedged transactions. The potential reduction in
PPG's future earnings resulting from adverse changes in the exchange rates of
its outstanding foreign currency hedge contracts of 10% for European currencies
and 20% for Asian and South American currencies would have totaled approxi-
mately $12 million and $5 million as of Dec. 31, 1998 and 1997, respectively.
In addition, PPG had foreign currency denominated debt of $332 million and $405
million as of Dec. 31, 1998 and 1997, respectively. A weakening of the U.S.
dollar relative to this foreign currency denominated debt of 10% for debt de-
nominated in European currencies and 20% for debt denominated in Asian and
South American currencies would have resulted in unrealized translation losses
of approximately $43 million and $52 million as of Dec. 31, 1998 and 1997,
respectively.
The Company manages its interest rate risk in order to balance its exposure
between fixed and variable rates while attempting to minimize its interest
costs. Generally, the Company maintains variable interest rate debt at a level
of 25% to 50% of total borrowings. PPG principally manages its interest rate
risk by retiring and issuing debt from time to time. To a limited extent, PPG
manages its interest rate risk through the use of interest rate swaps. As of
Dec. 31, 1998 and 1997, the fair value of interest rate swaps was not material.
A 10% increase in interest rates in the United States and a 20% increase in
Asia and South America would have affected PPG's variable rate debt obligations
by increasing interest expense by approximately $3 million as of both Dec. 31,
1998 and 1997. Further, a 10% reduction in interest rates would have increased
the present value of the Company's fixed rate debt by approximately $54 million
and $58 million as of Dec. 31, 1998 and 1997, respectively. Such changes would
not have had a near-term impact on PPG's future earnings or cash flows.
The Company enters into commodity swap and option contracts to reduce its
exposure to fluctuations in prices for natural gas. The fair values of these
contracts as of Dec. 31, 1998 and 1997, were not material. As a result of a 10%
reduction in the price of natural gas, the Company would have experienced
potential losses in the fair value of the underlying commodity swap and option
contracts as of Dec. 31, 1998 and 1997, of approximately $3 million and $8
million, respectively.
29
<PAGE>
Business Segment Information
- -------------------------------------------------------------------------------
Segment Organization and Products
Effective in 1998, PPG adopted Statement of Financial Accounting Standards
(SFAS) No. 131, "Disclosures About Segments of an Enterprise and Related In-
formation." SFAS No. 131 establishes standards for reporting information about
operating segments, products and services, geographic areas and major custom-
ers. The presentation of segment information reflects the manner in which man-
agement organizes segments for making operating decisions and assessing per-
formance. Prior year amounts have been restated to conform with the current
presentation format.
PPG is a multinational manufacturer with three reportable segments: coatings,
glass and chemicals. The Company's segments are organized based on differences
in products. The glass and fiber glass operations have been aggregated into a
single reportable segment. The coatings segment supplies a variety of protec-
tive and decorative coatings and finishes along with adhesives, sealants and
metal pretreatment products for automotive original equipment and aftermarket
refinish, industrial, packaging and architectural applications. In addition to
specific products, the coatings segment supplies technical expertise, engi-
neering and purchasing services to the automotive original and industrial por-
tions of the business. The glass segment supplies flat glass and continuous-
strand fiber glass for residential and commercial construction, automotive
original and replacement markets and other transportation and industrial ap-
plications. The chemicals segment supplies chlor-alkali and specialty
chemicals products. The primary chlor-alkali products are chlorine, caustic
soda, vinyl chloride monomer, chlorinated solvents and chlorinated benzenes.
The primary specialty chemicals products are Transitions(Registered Trademark)
lenses, optical monomers, silicas and fine chemicals. Production facilities and
markets for the coatings and glass segments are predominantly in North America
and Europe, while the chemicals segment operates primarily in North America.
Each of the businesses in which PPG is engaged is highly competitive. However,
the diversification of product lines and worldwide markets served tends to
minimize the impact on total sales and earnings of changes in demand for a
particular product line or in a particular geographic area.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company allocates re-
sources to segments and evaluates the performance of segments based upon re-
ported segment income before interest expense and income, income taxes and mi-
nority interest. Substantially all corporate expenses are allocated to the
segments. Net periodic pension income and expense is allocated to the seg-
ments; however, prepaid pension assets for defined benefit plans that cover
certain U.S. employees are not allocated to the segments and are included in
corporate assets. Intersegment sales and transfers are recorded at selling
prices that approximate market prices.
<TABLE>
- ------------------------------------------------------------------------------------------
<CAPTION>
(Millions) Consolidated
Segments Coatings(/1/) Glass(/2/) Chemicals Corporate(/4/) Totals
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998
Net sales to external
customers $3,459 $2,527 $1,524 $ -- $7,510
- ------------------------------------------------------------------------------------------
Intersegment net sales 2 -- 9 (11) --
- ------------------------------------------------------------------------------------------
Total net sales $3,461 $2,527 $1,533 $ (11) $7,510
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Operating income $ 546 $ 478 $ 354 $ 14 $1,392
- ------------------------------------------------------------------------------------------
Interest--net (98)
- ------------------------------------------------------------------------------------------
Income before income
taxes and minority
interest $1,294
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Depreciation and
amortization $ 108 $ 161 $ 88 $ 26 $ 383
- ------------------------------------------------------------------------------------------
Share of net earnings in
equity affiliates $ 1 $ 14 $ 2 $ 13 $ 30
- ------------------------------------------------------------------------------------------
Segment assets(/5/) $2,976 $1,791 $1,187 $1,433 $7,387
- ------------------------------------------------------------------------------------------
Investments in equity
affiliates $ 16 $ 74 $ 31 $ 55 $ 176
- ------------------------------------------------------------------------------------------
Expenditures for long-
lived assets $ 580 $ 167 $ 97 $ 22 $ 866
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
</TABLE>
(continued on next page)
30
<PAGE>
Business Segment Information
- --------------------------------------------------------------------------------
(continued)
<TABLE>
<CAPTION>
(Millions) Consolidated
Segments Coatings Glass(/2/) Chemicals(/3/) Corporate(/4/) Totals
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997
Net sales to external
customers $3,059 $2,673 $1,647 $ -- $7,379
- ------------------------------------------------------------------------------------------
Intersegment net sales -- -- 37 (37) --
- ------------------------------------------------------------------------------------------
Total net sales $3,059 $2,673 $1,684 $ (37) $7,379
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Operating income (loss) $ 561 $ 286 $ 428 $ (3) $1,272
- ------------------------------------------------------------------------------------------
Interest--net (97)
- ------------------------------------------------------------------------------------------
Income before income
taxes and minority
interest $1,175
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Depreciation and
amortization $ 91 $ 169 $ 87 $ 26 $ 373
- ------------------------------------------------------------------------------------------
Share of net earnings in
equity affiliates $ -- $ -- $ 1 $ 9 $ 10
- ------------------------------------------------------------------------------------------
Segment assets(/5/) $2,239 $2,115 $1,183 $1,331 $6,868
- ------------------------------------------------------------------------------------------
Investments in equity
affilates $ 10 $ 79 $ 31 $ 51 $ 171
- ------------------------------------------------------------------------------------------
Expenditures for long-
lived assets $ 370 $ 168 $ 147 $ 22 $ 707
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
1996
Net sales to external
customers $2,902 $2,704 $1,612 $ -- $7,218
- ------------------------------------------------------------------------------------------
Intersegment net sales 1 -- 35 (36) --
- ------------------------------------------------------------------------------------------
Total net sales $2,903 $2,704 $1,647 $ (36) $7,218
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Operating income $ 519 $ 429 $ 374 $ 3 $1,325
- ------------------------------------------------------------------------------------------
Interest--net (85)
- ------------------------------------------------------------------------------------------
Income before income
taxes and minority
interest $1,240
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Depreciation and
amortization $ 86 $ 167 $ 85 $ 25 $ 363
- ------------------------------------------------------------------------------------------
Share of net earnings in
equity affiliates $ -- $ 7 $ 2 $ 10 $ 19
- ------------------------------------------------------------------------------------------
Segment assets(/5/) $1,764 $2,233 $1,191 $1,253 $6,441
- ------------------------------------------------------------------------------------------
Investments in equity
affiliates $ 20 $ 86 $ 33 $ 52 $ 191
- ------------------------------------------------------------------------------------------
Expenditures for long-
lived assets $ 119 $ 188 $ 129 $ 19 $ 455
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
</TABLE>
(continued on next page)
31
<PAGE>
Business Segment Information
- --------------------------------------------------------------------------------
(continued)
<TABLE>
<CAPTION>
Geographic Information
- ---------------------------------------------------------------------------
(Millions) 1998 1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales(/6/)
United States $5,023 $4,960 $4,844
-------------------------------------------------------------------------
Europe 1,606 1,560 1,633
-------------------------------------------------------------------------
Canada 476 477 465
-------------------------------------------------------------------------
Other 405 382 276
- ---------------------------------------------------------------------------
Total $7,510 $7,379 $7,218
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Operating income
United States(/7/) $1,063 $1,037 $1,037
-------------------------------------------------------------------------
Europe(/8/) 244 156 148
-------------------------------------------------------------------------
Canada(/9/) 83 82 99
-------------------------------------------------------------------------
Other (12) -- 38
- ---------------------------------------------------------------------------
Total 1,378 1,275 1,322
- ---------------------------------------------------------------------------
Interest--net (98) (97) (85)
- ---------------------------------------------------------------------------
Other unallocated corporate income (expenses)--net 14 (3) 3
- ---------------------------------------------------------------------------
Income before income taxes and minority interest $1,294 $1,175 $1,240
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Long-lived assets
United States $3,064 $2,799 $2,740
-------------------------------------------------------------------------
Europe 825 836 780
-------------------------------------------------------------------------
Canada 191 220 206
-------------------------------------------------------------------------
Other 367 197 153
- ---------------------------------------------------------------------------
Total $4,447 $4,052 $3,879
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Identifiable assets
United States(/10/) $4,889 $4,442 $4,230
-------------------------------------------------------------------------
Europe 1,505 1,641 1,536
-------------------------------------------------------------------------
Canada 323 346 326
-------------------------------------------------------------------------
Other 670 439 349
- ---------------------------------------------------------------------------
Total $7,387 $6,868 $6,441
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
(1) Coatings segment income in 1998 includes a pre-tax restructuring charge of
$9 million related to cost reduction initiatives.
(2) Glass segment income in 1998 includes a pre-tax gain of $85 million related
to the sale of the European flat and automotive glass businesses and pre-
tax restructuring charges (credit) of $15 million, $9 million, and $(3)
million, respectively, related to the disposition of equity interests in
two Asian float glass plants and two Asian downstream fabrication
facilities, cost reduction initiatives and the reversal of a reserve
related to the Perry, Ga., plant. Glass segment income in 1997 includes a
pre-tax restructuring charge of $102 million of which $65 million
principally related to the closure of the Perry, Ga., plant and $37 million
related to the disposition of equity interests in two Asian float glass
plants.
(3) Chemicals segment income in 1997 includes a pre-tax gain of $59 million
related to the sale of the surfactants business.
(4) Corporate intersegment net sales represents intersegment net sales
eliminations. Corporate income (loss) represents unallocated corporate
income and expenses.
(5) Segment assets are the total assets used in the operation of each segment.
Corporate assets are principally cash and cash equivalents, income tax
assets, the Company's headquarters building and prepaid pensions. See
Note 9.
(6) Net sales to external customers are attributed to individual countries
based upon the location of the operating unit shipping the product.
(7) Operating income in 1998 includes pre-tax restructuring charges (credit) of
$15 million, $14 million, and $(3) million, respectively, related to the
disposition of equity interests in two Asian float glass plants and two
Asian downstream fabrication facilities, cost reduction initiatives and the
reversal of a reserve related to the Perry, Ga., plant. Operating income in
1997 includes a pre-tax gain of $59 million related to the sale of the
surfactants business and pre-tax restructuring charges of $58 million and
$37 million principally related to the divestiture of the Perry, Ga., plant
and the disposition of equity interests in two Asian float glass plants,
respectively.
(8) Operating income in 1998 includes a pre-tax gain of $85 million related to
the sale of the European flat and automotive glass businesses and a pre-tax
restructuring charge of $4 million related to cost reduction initiatives.
Operating income in 1997 includes pre-tax restructuring charges of $7
million related to cost reduction initiatives.
(9) Operating income in 1998 includes a pre-tax restructuring charge of $1
million related to cost reduction initiatives.
(10) Includes corporate assets which are principally cash and cash equivalents,
income tax assets, the Company's headquarters building and prepaid
pensions.
32
<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, both U.S. and non-
U.S., of which we own more than 50% of the voting stock. Investments in compa-
nies 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
eliminated in consolidation.
Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements,
as well as the reported amounts of income and expenses during the reporting 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 in accumulated other comprehensive income, 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.
Identified intangible assets and goodwill
Identified intangible assets acquired in business combinations accounted for by
the purchase method are recorded based upon fair market value at the date of
acquisition and amortized on a straight-line basis over the estimated useful
lives of the assets (two to 10 years).
Goodwill, representing the excess of the cost over the net tangible and iden-
tified intangible assets of acquired businesses, is stated at cost and amor-
tized on a straight-line basis over the estimated future periods to be benefit-
ed, principally 20 to 40 years.
Identified intangible assets and goodwill are reviewed for impairment at each
balance sheet date or whenever events or circumstances indicate that the carry-
ing amounts may not be recoverable.
Employee Stock Ownership Plan
We account for our employee stock ownership plan (ESOP) in accordance with
Statement of Position (SOP) No. 93-6 for PPG common stock purchased after Dec.
31, 1992 (new ESOP shares). As permitted by SOP No. 93-6, shares purchased
prior to Dec. 31, 1992, (old ESOP shares) continue to be accounted for in 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.
For new ESOP shares, compensation expense is equal to the Company's matching
contribution (see Note 13). Dividends on released new ESOP shares are deducted
from retained earnings, and dividends on unreleased shares are reported as a
reduction of debt or accrued interest. Only new ESOP shares that have been
released are considered outstanding in computing earnings per share.
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 a portion of the Company's
foreign currency and interest rate exposures. Income and expense are recorded
in the same
33
<PAGE>
Notes
- --------------------------------------------------------------------------------
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 and option contracts to reduce its expo-
sure to fluctuations in prices for natural gas. Gains and losses on these con-
tracts are deferred and recognized in income in the same period as the hedged
transactions as an adjustment to cost of sales.
The fair value of derivative instruments held as of Dec. 31, 1998 and 1997,
was not material. The Company does not enter into derivative transactions for
speculative purposes and therefore holds no derivative instruments for trading
purposes.
2. Acquisitions, Business Divestitures and Realignments
During 1998 and 1997, we acquired several businesses, all of which were re-
corded using the purchase method of accounting and, accordingly, the results of
operations of the acquired companies have been included in our consolidated re-
sults from their respective acquisition dates.
In November and December 1998, respectively, we completed the purchase of the
U.S. architectural coatings business and a portion of the global packaging
coatings business formerly owned by Courtaulds plc (Courtaulds) from Akzo Nobel
N.V. The acquisition of the remaining portion of the Courtaulds global packag-
ing coatings business was substantially completed in early 1999. In September
1998, we acquired the technical coatings business of Orica Ltd. of Melbourne,
Australia. The purchase included Orica's automotive refinish, automotive origi-
nal equipment, coil, packaging and industrial coatings businesses. The purchase
of certain Orica assets that are currently leased is expected to be completed
in 1999. In February 1998, we acquired the automotive coatings business of He-
lios-Lacke Bollig & Kemper GmbH & Co. KG of Cologne, Germany. In January 1998,
we acquired the assets of an automotive glass plant in Evart, Mich., from
Chrysler Corporation. The preliminary purchase price allocations for the acqui-
sitions occurring in the second half of 1998 and used in preparing the Dec. 31,
1998, balance sheet are subject to adjustment in 1999 when finalized.
From September to December 1997, we acquired the U.S. industrial pretreatment
business of Man-Gill Chemical Company; Max Meyer Duco S.p.A. (Max Meyer), a Eu-
ropean supplier of automotive refinish, fleet finish and decorative coatings;
Phillips Paint Products, a Canadian industrial coatings manufacturer; the
worldwide packaging coatings businesses of BASF Lacke + Farben AG; Keeler &
Long, a U.S. manufacturer of high-performance coatings and coil coatings, and
Sipsy Chimie Fine S.C.A., a French manufacturer of pharmaceutical intermediates
formerly owned by Warner Lambert Company. We also increased our ownership in-
terest in 1997 in two related automotive original coatings companies located in
Brazil and Argentina from 45% to 100%.
The cost of the 1998 and 1997 acquisitions was $390 million and $363 million,
respectively, plus the assumption of indebtedness of $11 million and $42 mil-
lion, respectively.
On a pro forma basis, if the 1998 acquisitions had occurred effective Jan. 1,
1997, and the 1997 acquisitions had occurred effective Jan. 1, 1996, they would
have contributed net sales of approximately $280 million in 1998, $635 million
in 1997, and $300 million in 1996. The pro forma impact of these acquisitions
on net income and earnings per common share in 1998, 1997 and 1996 is accretive
but is not material. The pro forma financial information is not necessarily in-
dicative of the operating results that would have occurred had the acquisitions
been consummated as of the dates indicated, nor are they necessarily indicative
of future operating results.
In July 1998, we completed the sale of our European flat and automotive glass
businesses to Glaverbel S.A. of Brussels, Belgium, for $266 million in cash
plus the assumption of certain indebtedness, which resulted in a pre-tax gain
of approximately $85 million. We also completed certain business divestitures
in 1997, primarily the sale of the surfactants business, which resulted in a
net pre-tax gain of $58 million. The net sales of these divested businesses to-
taled $271 million in 1998, $550 million in 1997 and $593 million in 1996. Ad-
ditionally, in August 1998, we sold the European decorative coatings business
acquired in the 1997 Max Meyer acquisition. The selling price approximated the
carrying value of the net assets sold.
During 1998, we approved a restructuring plan principally associated with cost
reduction initiatives in our glass and coatings operations. We recorded a pre-
tax charge of $19 million in connection with this plan. The components of the
plan include severance benefits for 283 employees. As of Dec. 31, 1998, $2 mil-
lion had been paid under the plan and it is anticipated that the remainder will
be paid in 1999. We also recorded in 1998 an additional pre-tax charge of $15
million related to the disposition of our equity interests in two Asian float
glass plants and two Asian downstream fabrication facilities. The $15 million
pre-tax charge related to a reassessment of the proceeds expected to be real-
ized on the dispositions of $14 million and asset write-offs of $1 million. Ad-
ditionally, in 1998 we recorded a $3 million reversal
34
<PAGE>
Notes
- --------------------------------------------------------------------------------
of a reserve, originally recorded in 1997, related to the closure of our Perry,
Ga., flat glass plant.
In 1997 we recorded a pre-tax restructuring charge of $102 million related to
certain glass businesses that were not meeting strategic and performance objec-
tives. The principal components of the 1997 restructuring program included the
closure of our Perry, Ga., flat glass plant and the disposition of our equity
interests in two Asian float glass plants. The pre-tax restructuring charge in
1997 included $61 million of asset write-offs and $41 million associated with
cash outlays primarily for severance costs (317 employees), a proportionate
share of equity investee indebtedness, and demolition and environmental costs,
net of estimated proceeds from sale. During 1998, cash outlays associated with
both the 1997 restructuring program and the additional restructuring charge re-
corded in 1998 related to this program totaled $11 million. We also reversed $3
million of the 1997 restructuring charge in 1998. It is anticipated that the
remaining reserves related to the 1997 restructuring program of $41 million at
Dec. 31, 1998, will be paid in 1999.
3. Working Capital Detail
<TABLE>
<CAPTION>
December 31
- -----------------------------------------------------------
(Millions) 1998 1997
- -----------------------------------------------------------
<S> <C> <C>
Receivables
Customers $1,246 $1,236
---------------------------------------------------------
Other 141 138
---------------------------------------------------------
Allowance for doubtful accounts (21) (21)
- -----------------------------------------------------------
Total $1,366 $1,353
- -----------------------------------------------------------
- -----------------------------------------------------------
Inventories(/1/)
Finished products and work in process $ 638 $ 608
---------------------------------------------------------
Raw materials 174 141
---------------------------------------------------------
Supplies 105 114
- -----------------------------------------------------------
Total $ 917 $ 863
- -----------------------------------------------------------
- -----------------------------------------------------------
Accounts payable and accrued liabilities
Trade creditors $ 630 $ 646
---------------------------------------------------------
Accrued payroll 213 237
---------------------------------------------------------
Other postretirement and pension benefits 57 56
---------------------------------------------------------
Other 364 271
- -----------------------------------------------------------
Total $1,264 $1,210
- -----------------------------------------------------------
- -----------------------------------------------------------
</TABLE>
(1) Inventories valued using the LIFO method comprised 68% and 71% of total
gross inventory values at Dec. 31, 1998 and 1997, respectively. If the
first-in, first-out method of inventory valuation had been used,
inventories would have been $183 million and $191 million higher at Dec.
31, 1998 and 1997, respectively.
4. Property Detail
<TABLE>
<CAPTION>
December 31
- ------------------------------------------
(Millions) 1998 1997
- ------------------------------------------
<S> <C> <C>
Property(/1/)
Land and land improvements $ 317 $ 304
----------------------------------------
Buildings 1,194 1,188
----------------------------------------
Machinery and equipment 4,697 4,802
----------------------------------------
Other 323 291
----------------------------------------
Construction in progress 208 173
- ------------------------------------------
Total $6,739 $6,758
- ------------------------------------------
- ------------------------------------------
</TABLE>
(1) Interest capitalized in 1998, 1997 and 1996 was $9 million, $10 million and
$12 million, respectively.
5. Debt and Bank Credit Agreements and Leases
<TABLE>
<CAPTION>
December 31
- ---------------------------------------------------------------------------
(Millions) 1998 1997
- ---------------------------------------------------------------------------
<S> <C> <C>
9.3% notes, due 1999 $ 123 $ 123
- ---------------------------------------------------------------------------
6 1/4% non-callable notes, due 2002 100 100
- ---------------------------------------------------------------------------
6 7/8% non-callable debentures, due 2005 100 100
- ---------------------------------------------------------------------------
6 1/2% notes, due 2007 150 150
- ---------------------------------------------------------------------------
6 7/8% notes, due 2012 100 100
- ---------------------------------------------------------------------------
7 3/8% notes, due 2016 149 149
- ---------------------------------------------------------------------------
6 7/8% notes, due 2017 99 99
- ---------------------------------------------------------------------------
9% non-callable debentures, due 2021 148 148
- ---------------------------------------------------------------------------
ESOP notes(/1/)
Weighted average 8.5% fixed-rate notes 56 61
-------------------------------------------------------------------------
Variable-rate notes, weighted average 4.6% at Dec. 31, 1998 83 90
- ---------------------------------------------------------------------------
Various other debt, weighted average 5.0% at Dec. 31, 1998 38 45
- ---------------------------------------------------------------------------
Non-U.S. subsidiary borrowings
12.7% notes, maturing in 1999 13 35
-------------------------------------------------------------------------
Weighted average 8.5% fixed-rate notes -- 3
-------------------------------------------------------------------------
Various other debt, weighted average 5.4% at Dec. 31, 1998 53 69
- ---------------------------------------------------------------------------
Capital lease obligations 34 41
- ---------------------------------------------------------------------------
Total 1,246 1,313
- ---------------------------------------------------------------------------
Less payments due within one year 165 56
- ---------------------------------------------------------------------------
Long-term debt $1,081 $1,257
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
(1) See Note 13 for discussion of ESOP borrowings. The fixed- and variable-rate
notes mature in 2009 and require annual principal payments from 1999 to
2008.
35
<PAGE>
Notes
- --------------------------------------------------------------------------------
Aggregate maturities during the next five years are (in millions) $165 in
1999, $41 in 2000, $28 in 2001, $137 in 2002 and $28 in 2003.
The Company has revolving credit agreements with credit lines totaling $825
million. Of these credit lines, $800 million will expire in December 2001 and
requires payment of annual fees equal to seven basis points on the unused por-
tion of the lines. These lines support our commercial paper programs in the
United States and Canada. The remaining $25 million, relating to a subsidiary,
will expire in September 1999 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,
1998, we had used $21 million of these lines of credit.
Our non-U.S. operations have other committed and uncommitted lines of credit
totaling $43 million and $449 million, respectively, of which $26 million and
$140 million, respectively, were used at Dec. 31, 1998. The committed lines of
credit, which expire between 1999 and 2001, do not require significant commit-
ment fees. The uncommitted lines of credit are subject to cancellation at any
time and are not subject to any commitment fees.
PPG is in compliance with the restrictive covenants under its various credit
agreements, loan agreements and indentures.
The Dec. 31, 1998 and 1997, balances for "Short-term debt and current portion
of long-term debt" include, respectively, $147 million and $34 million of com-
mercial paper and $325 million and $354 million of short-term notes. The
weighted-average interest rates of short-term borrowings as of Dec. 31, 1998
and 1997, were 5.1% and 6.0%, respectively.
Interest payments in 1998, 1997 and 1996 totaled $121 million, $106 million
and $109 million, respectively.
Rental expense for operating leases was $75 million, $70 million and $68 mil-
lion in 1998, 1997 and 1996, respectively. Minimum lease commitments for oper-
ating leases that have initial or remaining lease terms in excess of one year
at Dec. 31, 1998, are (in millions) $38 in 1999, $25 in 2000, $14 in 2001, $8
in 2002, $5 in 2003 and $21 thereafter.
6. 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
$1,212 million and $1,317 million, respectively, at Dec. 31, 1998. The corre-
sponding amounts at Dec. 31, 1997, were $1,272 million and $1,362 million, re-
spectively. The fair values of the other instruments approximated their carry-
ing values, in the aggregate.
The fair values of the debt instruments were based upon quoted market prices
of the same or similar instruments or on the rates available to the Company for
instruments of the same remaining maturities.
7. Earnings Per Common Share
The earnings per common share calculations for the three years ended Dec. 31,
1998 are as follows:
<TABLE>
- -------------------------------------------------------------------
<CAPTION>
(Millions, except per share amounts) 1998 1997 1996
- -------------------------------------------------------------------
<S> <C> <C> <C>
Earnings per common share
- -------------------------------------------------------------------
Net income $ 801 $ 714 $ 744
-----------------------------------------------------------------
Weighted average common shares outstanding 177.0 179.8 187.8
-----------------------------------------------------------------
Earnings per common share $ 4.52 $ 3.97 $ 3.96
- -------------------------------------------------------------------
- -------------------------------------------------------------------
Earnings per common share--assuming dilution
- -------------------------------------------------------------------
Net income $ 801 $ 714 $ 744
-----------------------------------------------------------------
Weighted average common shares outstanding 177.0 179.8 187.8
-----------------------------------------------------------------
Effect of dilutive securities
Stock options 0.6 0.7 0.8
----------------------------------------------------------------
Other stock compensation plans 1.1 1.0 0.9
-----------------------------------------------------------------
Potentially dilutive common shares 1.7 1.7 1.7
-----------------------------------------------------------------
Adjusted common shares outstanding 178.7 181.5 189.5
-----------------------------------------------------------------
Earnings per common share--assuming dilution $ 4.48 $ 3.94 $ 3.93
- -------------------------------------------------------------------
- -------------------------------------------------------------------
</TABLE>
8. 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
- ---------------------------------------------------------------------
1998 1997 1996
- ---------------------------------------------------------------------
<S> <C> <C> <C>
U.S. federal income tax rate 35.0% 35.0% 35.0%
- ---------------------------------------------------------------------
Changes in tax rate resulting from
State and local taxes--U.S. 3.2 3.2 3.7
-------------------------------------------------------------------
Taxes on non-U.S. earnings and related
tax credits .9 .1 .8
-------------------------------------------------------------------
Other (3.1) (1.3) (1.5)
- ---------------------------------------------------------------------
Effective income tax rate 36.0% 37.0% 38.0%
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
</TABLE>
36
<PAGE>
Notes
- -------------------------------------------------------------------------------
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) 1998 1997 1996
- ----------------------------------------
<S> <C> <C> <C>
Current income taxes
U.S. federal $308 $284 $255
--------------------------------------
Non-U.S. 97 93 79
--------------------------------------
State and local--U.S. 60 58 66
- ----------------------------------------
Total current 465 435 400
- ----------------------------------------
Deferred income taxes
U.S. federal 6 2 36
--------------------------------------
Non-U.S. (6) (1) 30
--------------------------------------
State and local--U.S. 1 (1) 5
- ----------------------------------------
Total deferred 1 -- 71
- ----------------------------------------
Total $466 $435 $471
- ----------------------------------------
- ----------------------------------------
</TABLE>
Net deferred income tax assets and liabilities as of Dec. 31, 1998 and 1997,
are as follows:
<TABLE>
- --------------------------------------------------------
<CAPTION>
(Millions) 1998 1997
- --------------------------------------------------------
<S> <C> <C>
Deferred income tax assets related to
Employee benefits $337 $310
------------------------------------------------------
Environmental 36 38
------------------------------------------------------
Operating loss and other carryforwards 46 63
------------------------------------------------------
Inventories 32 31
------------------------------------------------------
Property 17 40
------------------------------------------------------
Restructuring 24 --
------------------------------------------------------
Other 28 18
------------------------------------------------------
Valuation allowance (24) (45)
- --------------------------------------------------------
Total 496 455
- --------------------------------------------------------
Deferred income tax liabilities related to
Property 461 454
------------------------------------------------------
Employee benefits 263 238
------------------------------------------------------
Intangibles 32 19
------------------------------------------------------
Other 29 35
- --------------------------------------------------------
Total 785 746
- --------------------------------------------------------
Deferred income tax liabilities--net $289 $291
- --------------------------------------------------------
- --------------------------------------------------------
</TABLE>
Dispositions of certain non-U.S. subsidiaries in 1997 generated U.S. capital
losses of approximately $180 million. A portion of these losses was realized
by offsetting it against capital gains from previous years and a 1997 capital
gain from the sale of certain U.S. businesses. The remaining $88 million capi-
tal loss carryforward was offset with a valuation allowance at Dec. 31, 1997,
because PPG's ability to realize the amount carried forward was uncertain. In
July 1998, PPG recognized a gain from the sale of its European flat and auto-
motive glass businesses, of which a considerable portion was capital, the tax
on which was offset by the capital loss carryforward. As a result of the real-
ization of the tax benefit from the capital loss carryforward, the valuation
allowance that was recorded in the prior year was reversed in 1998. This bene-
fit from the realization of the capital loss in both 1997 and 1998 reduced the
effective tax rate in each year.
At Dec. 31, 1998, subsidiaries of the Company had available net operating
loss (NOL) carryforwards of approximately $129 million for income tax purpos-
es, of which $104 million has an indefinite expiration. The remaining $25 mil-
lion expires between the years 1999 and 2003.
The majority of the NOL carryforwards relate to operations of subsidiaries in
countries permitting indefinite carryforward of losses. Generally, a valuation
allowance has been established for these carryforwards because the ability to
utilize them is uncertain.
Income before income taxes of our non-U.S. operations for 1998, 1997 and 1996
was $273 million, $232 million and $266 million, respectively.
No deferred U.S. income taxes have been provided on certain undistributed
earnings of non-U.S. subsidiaries, which amounted to $681 million at Dec. 31,
1998, and $495 million at Dec. 31, 1997. These earnings are considered to be
reinvested for an indefinite period of time or will be repatriated when it is
tax effective to do so. It is not practicable to determine the deferred tax
liability on these earnings.
The Internal Revenue Service has examined our U.S. federal income tax returns
through 1993, and we have paid all tax claims.
Income tax payments in 1998, 1997 and 1996 totaled $385 million, $452 million
and $402 million, respectively.
9. Pensions and Other Postretirement Benefits
We have noncontributory defined benefit pension plans that cover certain em-
ployees worldwide. PPG also sponsors defined benefit plans that provide medi-
cal and life insurance benefits for certain active and retired U.S. and Cana-
dian employees and dependents. Salaried and certain wage employees hired after
Jan. 31, 1993, will not be entitled to postretirement medical benefits. At
Dec. 31, 1998 and 1997, the U.S. plans had provisions that capped the cost of
postretirement medical benefits at 2003 levels for certain current and future
retirees covered by bargaining plans and non-bargaining plans.
37
<PAGE>
Notes
- --------------------------------------------------------------------------------
The following table sets forth the changes in benefit obligations, plan as-
sets, the funded status and the amounts recognized in our balance sheet for our
defined benefit pension and other postretirement benefit plans.
<TABLE>
<CAPTION>
Other
Postretirement
Pensions Benefits
- ---------------------------------------------------------------------------
(Millions)
1998 1997 1998 1997
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Benefit obligation, Jan. 1 $2,023 $1,859 $ 704 $ 676
- ---------------------------------------------------------------------------
Service cost 41 36 8 7
- ---------------------------------------------------------------------------
Interest cost 137 134 48 48
- ---------------------------------------------------------------------------
Plan amendments 10 8 (2) (14)
- ---------------------------------------------------------------------------
Actuarial losses 116 130 22 38
- ---------------------------------------------------------------------------
Benefits paid (130) (125) (50) (50)
- ---------------------------------------------------------------------------
Businesses acquired 7 -- 1 --
- ---------------------------------------------------------------------------
Businesses disposed (6) -- -- --
- ---------------------------------------------------------------------------
Foreign currency translation adjustments -- (21) (2) (1)
- ---------------------------------------------------------------------------
Special termination benefits and other 3 2 -- --
- ---------------------------------------------------------------------------
Benefit obligation, Dec. 31 $2,201 $2,023 $ 729 $ 704
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Fair value of plan assets, Jan. 1 $2,308 $2,006
- ---------------------------------------------------------
Actual return on plan assets 349 434
- ---------------------------------------------------------
Contributions 6 8
- ---------------------------------------------------------
Benefits paid (121) (119)
- ---------------------------------------------------------
Businesses acquired 2 --
- ---------------------------------------------------------
Plan expenses and other--net (4) (3)
- ---------------------------------------------------------
Foreign currency translation adjustments (4) (18)
- ---------------------------------------------------------
Fair value of plan assets, Dec. 31 $2,536 $2,308
- ---------------------------------------------------------
- ---------------------------------------------------------
Funded status $ 335 $ 285 $ (729) $ (704)
- ---------------------------------------------------------------------------
Unrecognized actuarial losses 246 233 116 98
- ---------------------------------------------------------------------------
Unrecognized prior service cost 71 71 18 23
- ---------------------------------------------------------------------------
Unrecognized transition asset (19) (21) -- --
- ---------------------------------------------------------------------------
Minimum pension liability (56) (48) -- --
- ---------------------------------------------------------------------------
Net prepaid (accrued) benefit cost $ 577 $ 520 $ (595) $ (583)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
The following summarizes the amounts recognized in the balance sheet:
<TABLE>
<CAPTION>
Other
Postretirement
Pensions Benefits
- --------------------------------------------------------------------
(Millions) 1998 1997 1998 1997
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prepaid benefit cost $ 707 $ 650 $ -- $ --
- --------------------------------------------------------------------
Accrued benefit costs (130) (130) (595) (583)
- --------------------------------------------------------------------
Net prepaid (accrued) benefit cost $ 577 $ 520 $ (595) $ (583)
- --------------------------------------------------------------------
- --------------------------------------------------------------------
</TABLE>
The minimum pension liability impacted the following balance sheet captions:
<TABLE>
- -----------------------------------------------
<CAPTION>
(Millions) 1998 1997
- -----------------------------------------------
<S> <C> <C>
Other assets $ 7 $ 8
- -----------------------------------------------
Accumulated other comprehensive loss $31 $25
- -----------------------------------------------
Deferred income taxes $18 $15
- -----------------------------------------------
</TABLE>
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for the pension plans with benefit obligations in excess
of plan assets were $200 million, $178 million and $53 million, respectively,
at Dec. 31, 1998, and were $191 million, $173 million and $49 million,
respectively, at Dec. 31, 1997.
The accrued pension benefit cost reflected in the balance sheet includes $5
million and $4 million, at Dec. 31, 1998 and 1997, respectively, for defined
contribution plans.
Net periodic benefit cost (income) includes the following:
<TABLE>
<CAPTION>
Other
Postretirement
Pension Benefits Benefits
- -----------------------------------------------------------------------
(Millions) 1998 1997 1996 1998 1997 1996
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 41 $ 36 $ 36 $ 8 $ 7 $ 7
- -----------------------------------------------------------------------
Interest cost 137 134 124 48 48 43
- -----------------------------------------------------------------------
Expected return on plan assets (245) (212) (189) -- -- --
- -----------------------------------------------------------------------
Amortization of transition assets (5) (5) (6) -- -- --
- -----------------------------------------------------------------------
Amortization of prior service cost 11 10 9 2 4 2
- -----------------------------------------------------------------------
Amortization of actuarial losses 4 12 27 4 2 2
- -----------------------------------------------------------------------
Net periodic benefit (income)
cost $ (57) $ (25) $ 1 $62 $61 $54
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
</TABLE>
In determining net periodic benefit cost (income), unrecognized prior service
costs are amortized over periods ranging from six to 13 years.
38
<PAGE>
Notes
- --------------------------------------------------------------------------------
The following weighted average assumptions were used to determine the benefit
obligations and net periodic benefit cost (income) for our defined benefit pen-
sion and other postretirement benefit plans:
<TABLE>
- -------------------------------------------------
<CAPTION>
1998 1997 1996
- -------------------------------------------------
<S> <C> <C> <C>
Discount rate(/1/) 6.4% 7.0% 7.5%
- -------------------------------------------------
Expected return on assets(/2/) 10.9% 10.9% 10.9%
- -------------------------------------------------
Rate of compensation increase 4.1% 4.6% 4.6%
- -------------------------------------------------
</TABLE>
(1) Net periodic benefit (income) cost is determined using the previous year's
discount rate.
(2) Applies only to defined benefit pension plans.
The weighted-average healthcare cost trend rate used was 7% for 1998 and 6.7%
for 1999, declining ratably to 3.5% in the year 2007. If these trend rates were
increased or decreased by one percentage point per year, such increases or de-
creases would have the following effects:
<TABLE>
- ----------------------------------------------------------------------------
<CAPTION>
One- One-
Percentage- Percentage-
(Millions) Point Point
Increase Decrease
- ----------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in the aggregate of service and
interest cost components $ 2 $ (3)
- ----------------------------------------------------------------------------
Increase (decrease) in the benefit obligation $25 $(37)
- ----------------------------------------------------------------------------
</TABLE>
The Company also incurred costs for multi-employer pension plans of $1 million
in each of the years 1998, 1997 and 1996. Multi-employer healthcare costs to-
taled $1 million in each of the years 1998, 1997 and 1996.
10. Commitments and Contingent Liabilities
PPG is involved in a number of lawsuits and claims, both actual and potential,
including some that it has asserted against others, in which substantial money
damages are sought. These lawsuits and claims relate to product liability, con-
tract, patent, environmental, antitrust and other matters arising out of the
conduct of PPG's business. The Company has been named in a number of antitrust
lawsuits alleging that PPG acted with competitors to fix prices and allocate
markets for certain glass products. These antitrust proceedings are in an early
stage. 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, in the aggregate, the outcome
of all lawsuits and claims involving PPG will not have a material effect on
PPG's consolidated financial position, results of operations or liquidity.
It is PPG's policy to accrue expenses for environmental contingencies when it
is probable that a liability has been incurred and the amount of loss can be
reasonably estimated. Reserves for environmental contingencies are exclusive of
claims against third parties and are not discounted. As of Dec. 31, 1998 and
1997, PPG had reserves for environmental contingencies totaling $94 million and
$100 million, respectively. Pre-tax charges against income for environmental
remediation costs in 1998, 1997 and 1996 totaled $10 million, $34 million and
$27 million, respectively, and are included in "Other charges" in the statement
of income. Cash outlays related to such charges aggregated $16 million, $25
million and $36 million in 1998, 1997 and 1996, 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. Although insurers and other third parties may
cover a portion of these costs, to the extent they are incurred, any potential
recovery is not included in this unreserved exposure to future loss. The
Company's environmental contingencies are expected to be resolved over an ex-
tended period of time.
Although the unreserved exposure to future loss relates to all sites, a
significant portion of such exposure involves three operating plant sites.
Initial remedial actions are occurring at these sites. Studies to determine the
nature of the contamination are reaching completion and the need for additional
remedial actions, if any, is presently being evaluated. The loss contingencies
related to the remaining portion of such unreserved exposure include
significant unresolved issues such as the nature and extent of contamination,
if any, at sites and the methods that may have to be employed should
remediation be required.
With respect to certain waste sites, the financial condition of any other po-
tentially responsible parties also contributes to the uncertainty of estimating
PPG's final costs. Although contributors of waste to sites involving other po-
tentially responsible parties may face governmental agency assertions of joint
and several liability, in general, final allocations of costs are made based on
the relative
39
<PAGE>
Notes
- --------------------------------------------------------------------------------
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, in-
dustrial site reuse initiatives and state voluntary remediation programs, also
adds to the present uncertainties with regard to the ultimate resolution of
this unreserved exposure to future loss. The Company's assessment of the poten-
tial impact of these environmental contingencies is subject to considerable un-
certainty due to the complex, ongoing and evolving process of investigation and
remediation, if necessary, of such environmental contingencies.
11. Shareholders' Equity
A class of 10 million shares of preferred stock, without par value, is autho-
rized but unissued. Common stock has a par value of $1.66 2/3 per share; 600
million shares are authorized and 290,573,068 were issued at Dec. 31, 1998,
1997 and 1996. Shares outstanding at Dec. 31, 1998 and 1997, exclude unreleased
new ESOP shares (see Note 13).
PPG has a Shareholders' Rights Plan, under which each share of the Company's
outstanding common stock has an associated preferred share purchase right. The
rights are exercisable only under certain circumstances and allow holders of
such rights to purchase common stock of PPG or an acquiring company at a dis-
counted price, which would generally be 50% of the respective stocks' current
fair market value.
Treasury shares held at Dec. 31, 1998 and 1997, were 115,448,529 shares and
112,518,245 shares, respectively. Purchases of treasury stock totaled
3,793,300, 5,964,792 and 12,452,817 in 1998, 1997 and 1996, respectively. Issu-
ances of treasury stock totaled 863,016, 804,507 and 1,217,958 in 1998, 1997
and 1996, respectively.
Per share cash dividends paid were $1.42 in 1998, $1.33 in 1997 and $1.26 in
1996.
12. Accumulated Other Comprehensive Income (Loss)
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Minimum Accumulated
Currency Pension Other
Translation Liability Comprehensive
(Millions) Adjustment Adjustment Income (Loss)
- ------------------------------------------------------------
<S> <C> <C> <C>
Balance, Jan. 1, 1996 $ 4 $(10) $ (6)
- ------------------------------------------------------------
Net change (14) -- (14)
- ------------------------------------------------------------
Balance, Dec. 31, 1996 (10) (10) (20)
- ------------------------------------------------------------
Net change (126) (15) (141)
- ------------------------------------------------------------
Balance, Dec. 31, 1997 (136) (25) (161)
- ------------------------------------------------------------
Net change 14 (6) 8
- ------------------------------------------------------------
Balance, Dec. 31, 1998 $(122) $(31) $(153)
- ------------------------------------------------------------
- ------------------------------------------------------------
</TABLE>
Foreign currency translation adjustments exclude income tax expense (benefit)
given that the earnings of non-U.S. subsidiaries are deemed to be reinvested
for an indefinite period of time. The tax benefit associated with the minimum
pension liability adjustment was $3 million in 1998 and $8 million in 1997.
13. 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-
pants' savings, subject to certain limitations, the matching percentage being
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
347,287, 471,526 and 506,761 shares of PPG common stock (new ESOP shares) on
the open market in 1998, 1997 and 1996, 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 5).
Compensation expense related to the ESOP for 1998, 1997 and 1996 totaled $9
million, $11 million and $15 million, respectively. Interest expense totaled
$10 million, $11 million and $11 million for 1998, 1997 and 1996, respectively.
Dividends on PPG shares held by the ESOP, to service ESOP debt, totaled $39
million, $39 million and $37 million for 1998, 1997 and 1996, respectively. The
fair value of unreleased new ESOP shares was $8 million and $13 million at Dec.
31, 1998 and 1997, respectively. Shares held by the ESOP as of Dec. 31, 1998
and 1997, are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
1998 1997
- ---------------------------------------------------------------------------
Old Shares New Shares Old Shares New Shares
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allocated shares 8,085,473 2,382,576 7,498,208 1,919,623
- ---------------------------------------------------------------------------
Shares released for allocation -- -- 10,575 22,249
- ---------------------------------------------------------------------------
Unreleased shares 5,314,861 134,943 5,891,551 228,360
- ---------------------------------------------------------------------------
Total 13,400,334 2,517,519 13,400,334 2,170,232
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
40
<PAGE>
Notes
- --------------------------------------------------------------------------------
14. Other Earnings
<TABLE>
- ----------------------------------------------------------
(Millions) 1998 1997 1996
- ----------------------------------------------------------
<S> <C> <C> <C>
Interest income $ 12 $ 8 $ 11
- ----------------------------------------------------------
Royalty income 18 25 25
- ----------------------------------------------------------
Share of net earnings in equity affiliates 30 10 19
- ----------------------------------------------------------
Gain on sale of businesses 85 59 --
- ----------------------------------------------------------
Other 91 60 68
- ----------------------------------------------------------
Total $236 $162 $123
- ----------------------------------------------------------
- ----------------------------------------------------------
</TABLE>
PPG's share of undistributed earnings of equity affiliates was $106 million
and $85 million at Dec. 31, 1998 and 1997, respectively. Dividends received
from equity affiliates were $16 million, $14 million and $15 million in 1998,
1997 and 1996, respectively.
15. Stock Option Plans
Under PPG's stock option plan, certain employees of the Company have been
granted options to purchase shares of common stock at prices equal to the fair
market value of the shares on the date the option was granted. Options are ex-
ercisable beginning from six to 12 months after granting and have a maximum
term of 10 years. Shares available for future grants were 8,808,178 and
10,029,300 at Dec. 31, 1998 and 1997, respectively.
On July 1, 1998, the Company granted to substantially all active employees of
the Company and its majority owned subsidiaries, subject to statutory and regu-
latory requirements, including but not limited to approvals required by securi-
ties and labor laws, the option to purchase 100 shares of common stock at its
then fair market value of $70 per share. Options are exercisable beginning July
1, 2003 and expire on June 30, 2008. If the Company's earnings per common share
for the year ended Dec. 31, 2000 is $7.00 or more, the options become exercis-
able beginning Jan. 31, 2001.
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 1998, 1997 and 1996 consistent with the methodology pre-
scribed in SFAS No. 123, "Accounting for Stock-Based Compensation," net income
and earnings per common share, assuming dilution, would have been reduced by
$24 million and $0.13 in 1998, $20 million and $0.11 in 1997 and $16 million
and $.09 in 1996. The fair value of stock options is estimated at the grant
date using the Black-Scholes option pricing model with the following weighted
average assumptions.
<TABLE>
- ---------------------------------------------------
1998 1997 1996
- ---------------------------------------------------
<S> <C> <C> <C>
Risk-free interest rate 5.4% 6.0% 5.5%
- ---------------------------------------------------
Expected life of option in years 4.8 3.4 3.5
- ---------------------------------------------------
Expected dividend yield 2.7% 2.8% 3.0%
- ---------------------------------------------------
Expected volatility 21.0% 21.0% 22.1%
- ---------------------------------------------------
- ---------------------------------------------------
</TABLE>
The following table summarizes stock option activity under all plans for the
three years ended Dec. 31, 1998.
<TABLE>
<CAPTION>
Weighted
Number of average
shares subject to exercise
Stock option activity options price per share
- -------------------------------------------------------------
<S> <C> <C>
Outstanding, Jan. 1, 1996 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
- -------------------------------------------------------------
Granted 3,177,322 56.91
-----------------------------------------------------------
Exercised (2,474,445) 40.41
-----------------------------------------------------------
Terminated (45,500) 51.90
- -------------------------------------------------------------
Outstanding, Dec. 31, 1997 7,382,342 48.82
- -------------------------------------------------------------
Granted 6,255,259 66.47
-----------------------------------------------------------
Exercised (2,607,468) 47.29
-----------------------------------------------------------
Terminated (269,103) 61.72
- -------------------------------------------------------------
Outstanding, Dec. 31, 1998 10,761,030 59.13
- -------------------------------------------------------------
- -------------------------------------------------------------
</TABLE>
The following table summarizes information about stock options outstanding and
exercisable at Dec. 31, 1998.
<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>
$19.75 - $33.00 452,214 3.15 $29.58 452,214 $29.58
- --------------------------------------------------------------------------------
$34.69 - $48.88 1,719,560 5.84 43.06 1,719,560 43.06
- --------------------------------------------------------------------------------
$50.25 - $76.31 8,589,256 7.54 63.90 3,578,210 60.46
- --------------------------------------------------------------------------------
10,761,030 5,749,984
========== =========
</TABLE>
At Dec. 31, 1997, options were exercisable for 5.1 million shares at a
weighted average exercise price of $45.06 per common share. The corresponding
amounts at Dec. 31, 1996, were 4.6 million and $38.14 per common share, respec-
tively.
41
<PAGE>
Notes
- --------------------------------------------------------------------------------
16. Advertising Costs
Advertising costs are expensed as incurred and totaled $93 million, $88 million
and $72 million in 1998, 1997 and 1996, respectively.
17. Research and Development
<TABLE>
- -----------------------------------------------
<S> <C> <C> <C>
(Millions) 1998 1997 1996
- -----------------------------------------------
Research and development--total $287 $266 $255
- -----------------------------------------------
Less depreciation 16 16 16
- -----------------------------------------------
Research and development--net $271 $250 $239
- -----------------------------------------------
- -----------------------------------------------
</TABLE>
18. Quarterly Financial Information (unaudited)
- --------------------------------------
<TABLE>
<CAPTION>
Earnings
Per
Earnings Common
Net Gross Net Per Share--
Sales Profit Income Common Assuming
(Millions) (Millions) (Millions) Share Dilution
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 quarter ended
March 31 $1,913 $ 768 $192 $1.08 $1.07
- ---------------------------------------------------------------------
June 30(/1/) 2,004 818 199 1.13 1.11
- ---------------------------------------------------------------------
September 30(/2/) 1,804 722 248 1.40 1.39
- ---------------------------------------------------------------------
December 31(/3/) 1,789 726 162 .91 .91
- ---------------------------------------------------------------------
Total $7,510 $3,034 $801 $4.52 $4.48
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
1997 quarter ended
March 31 $1,777 $ 690 $166 $ .91 $ .90
- ---------------------------------------------------------------------
June 30 1,944 798 218 1.21 1.20
- ---------------------------------------------------------------------
September 30 1,812 733 171 .96 .95
- ---------------------------------------------------------------------
December 31(/4/) 1,846 761 159 .89 .89
- ---------------------------------------------------------------------
Total $7,379 $2,982 $714 $3.97 $3.94
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
</TABLE>
(1) Second-quarter 1998 earnings were reduced by a pre-tax charge of $15
million related to the divestiture of equity interests in two Asian float
glass plants and two Asian downstream fabrication facilities.
(2) Third-quarter 1998 earnings were increased by a pre-tax gain of $85 million
related to the sale of the European flat and automotive glass businesses
and reduced by a pre-tax charge of $3 million related to cost reduction
initiatives in our glass operations.
(3) Fourth-quarter 1998 earnings were reduced by a pre-tax charge of $16
million related to cost reduction initiatives principally in our glass and
coatings operations and increased by a reversal of $3 million related to a
1997 restructuring reserve in our glass operations.
(4) Fourth-quarter 1997 earnings were reduced by a pre-tax charge for business
divestitures and realignments of $102 million and increased by a pre-tax
gain of $59 million associated with the sale of the surfactants business.
19. Business Segment Information and Nature of Operations
Refer to pages 30 through 32 for information on our business segments for 1998,
1997 and 1996.
Officer Changes
- -------------------------------------------------------------------------------
Gerald W. Gruber was named vice president, science and technology, replacing
Gary W. Weber, who left the Company. He had been vice president, research,
development and technology services, coatings. Also, Michael C. Hanzel was
elected corporate counsel and secretary.
During the year, James W. Craig retired as vice president, European
development, following nearly 23 years' service with PPG.
Donald W. Bogus was elected vice president of the newly created packaging
coatings strategic business unit. Re- placing him as vice president of
industrial coatings was Michael A. Ludlow. Margaret H. McGrath succeeded Mr.
Ludlow as vice president of purchasing and distribution. She had been president
of PPG Canada and vice president, coatings, Canada. Also, Roderick I. A.
Watters, who had been vice president, European coatings, left the Company.
42
<PAGE>
Corporate Directory
- -------------------------------------------------------------------------------
Directors
*(Plus Sign)Erroll B. Davis, Jr.
President and Chief Executive Officer, Alliant Energy
*++Michele J. Hooper
Former President and Chief Executive Officer, Stadtlander Drug Co., Inc.
++(Plus Sign)Allen J. Krowe
Retired Director and Vice Chairman, Texaco Inc.
++(Plus Sign)Ned C. Lautenbach
Partner, Clayton, Dubilier & Rice, Inc.
Raymond W. LeBoeuf
Chairman of the Board and Chief Executive Officer, PPG Industries, Inc.
*+Steven C. Mason
Retired Chairman of the Board and Chief Executive Officer, Mead Corporation
*+Robert Mehrabian
Executive Vice President, Allegheny Teledyne Incorporated
Vincent A. Sarni
Retired Chairman of the Board and Chief Executive Officer, PPG Industries,
Inc.
+(Plus Sign)Thomas J. Usher
Chairman of the Board and Chief Executive Officer, USX Corporation
++(Plus Sign)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
(Plus Sign)Investment Committee
Office of the Chief Executive
Raymond W. LeBoeuf
Chairman of the Board and Chief Executive Officer
Frank A. Archinaco
Executive Vice President
E. Kears Pollock
Executive Vice President
Executive Committee
Raymond W. LeBoeuf, Chairman
Chairman of the Board and Chief Executive Officer
Frank A. Archinaco
Executive Vice President
Charles E. Bunch
Senior Vice President, Strategic Planning and Corporate Services
Russell L. Crane
Senior Vice President, Human Resources and Administration
James C. Diggs
Senior Vice President and General Counsel
William H. Hernandez
Senior Vice President, Finance
E. Kears Pollock
Executive Vice President
Operating Committee
Frank A. Archinaco,
Co-Chairman
Executive Vice President
E. Kears Pollock,
Co-Chairman
Executive Vice President
Donald W. Bogus
Vice President, Packaging Coatings
Rae R. Burton
Vice President, Chlor-Alkali and Derivatives
Garry A. Goudy
Vice President, Automotive Replacement Glass
Gerald W. Gruber
Vice President, Science and Technology
Ernest A. Hahn
Vice President, Automotive Glass
Douglas C. Hepper
General Manager, Automotive Refinish
Richard B. Leggett
Vice President, Flat Glass
Michael A. Ludlow
Vice President,
Industrial Coatings
Barry J. McGee
Vice President, Glass Technology and Manufacturing Services
David B. Navikas
Controller
Maurice V. Peconi
Vice President, Architectural Coatings
Kevin F. Sullivan
Vice President, Fiber Glass
Thomas M. Von Lehman
Vice President, Specialty Chemicals
Richard Zahren
Vice President, Automotive Coatings
Other Officers
L. Blaine Boswell
Vice President, Public Affairs
David C. Cannon Jr.
Vice President, Environment, Health and Safety
Stanley C. DeGreve
President, PPG Europe;
Vice President, Fiber Glass, Europe
Michael C. Hanzel
Corporate Counsel and Secretary
Dan W. Kiener
Treasurer
H. Kennedy Linge
Vice President and
Associate General
Counsel
Margaret H. McGrath
Vice President, Purchasing and Distribution
David W. Smith
Vice President, Information Technology
Arend W. D. Vos
President, PPG Asia/Pacific; Vice President, Coatings, Asia/Pacific
David R. Wallis
Vice President,
Corporate Development
43
<PAGE>
Eleven-Year Digest
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Income
Net sales 7,510 7,379 7,218 7,058 6,331 5,754 5,814 5,673 6,021 5,734 5,617
- -----------------------------------------------------------------------------------------------------------
Gross profit (%) 40.4 40.4 39.9 40.3 38.9 36.9 36.4 35.2 37.8 37.1 39.2
- -----------------------------------------------------------------------------------------------------------
Income before income
taxes 1,267 1,149 1,215 1,248 840 531 538 348 767 749 779
- -----------------------------------------------------------------------------------------------------------
Income taxes 466 435 471 480 325 236 218 147 292 284 311
- -----------------------------------------------------------------------------------------------------------
Income before accounting
changes 801 714 744 768 515 295 319 201 475 465 468
- -----------------------------------------------------------------------------------------------------------
Cumulative effect of
accounting changes(/1/) -- -- -- -- -- (273) -- 75 -- -- --
- -----------------------------------------------------------------------------------------------------------
Net income 801 714 744 768 515 22 319 276 475 465 468
- -----------------------------------------------------------------------------------------------------------
Return on average
capital (%)(/2/)(/3/) 19.6 19.1 20.3 21.6 15.3 2.2/8.9 9.7 8.7/7.0 14.0 14.8 15.5
- -----------------------------------------------------------------------------------------------------------
Return on average equity
(%)(/2/) 29.4 28.8 29.5 28.8 20.1 .9/10.7 11.8 10.7/8.0 19.7 21.0 22.1
- -----------------------------------------------------------------------------------------------------------
Earnings per common
share before accounting
changes 4.52 3.97 3.96 3.80 2.43 1.39 1.51 .95 2.22 2.09 2.13
- -----------------------------------------------------------------------------------------------------------
Cumulative effect of
accounting changes
on earnings per
common share -- -- -- -- -- (1.29) -- .35 -- -- --
- -----------------------------------------------------------------------------------------------------------
Earnings per common
share 4.52 3.97 3.96 3.80 2.43 .10 1.51 1.30 2.22 2.09 2.13
- -----------------------------------------------------------------------------------------------------------
Average number of shares 177.0 179.8 187.8 202.0 211.9 212.6 212.2 212.4 214.4 222.6 219.6
- -----------------------------------------------------------------------------------------------------------
Earnings per common
share--assuming dilution 4.48 3.94 3.93 3.78 2.42 .10 1.50 1.29 2.21 2.08 2.12
- -----------------------------------------------------------------------------------------------------------
Dividends 252 239 237 239 238 221 200 183 176 165 141
- -----------------------------------------------------------------------------------------------------------
Per share 1.42 1.33 1.26 1.18 1.12 1.04 .94 .86 .82 .74 .64
===========================================================================================================
Balance Sheet
Current assets 2,660 2,584 2,296 2,275 2,168 2,026 1,951 2,173 2,217 2,056 1,899
- -----------------------------------------------------------------------------------------------------------
Current liabilities 1,912 1,662 1,769 1,629 1,425 1,281 1,253 1,341 1,471 1,338 1,264
- -----------------------------------------------------------------------------------------------------------
Working capital 748 922 527 646 743 745 698 832 746 718 635
- -----------------------------------------------------------------------------------------------------------
Property (net) 2,905 2,855 2,913 2,835 2,742 2,787 2,972 3,183 3,255 3,007 2,758
- -----------------------------------------------------------------------------------------------------------
Total assets 7,387 6,868 6,441 6,194 5,894 5,652 5,662 6,056 6,108 5,645 5,154
- -----------------------------------------------------------------------------------------------------------
Long-term debt 1,081 1,257 834 736 773 774 905 1,190 1,210 1,198 892
- -----------------------------------------------------------------------------------------------------------
Shareholders' equity 2,880 2,509 2,483 2,569 2,557 2,473 2,699 2,655 2,547 2,282 2,243
- -----------------------------------------------------------------------------------------------------------
Per share 16.46 14.11 13.57 13.23 12.35 11.57 12.71 12.50 12.01 10.49 10.24
===========================================================================================================
Other Data
Capital spending(/4/) 877 829 489 454 356 293 283 335 567 671 410
- -----------------------------------------------------------------------------------------------------------
Depreciation expense 354 348 340 332 318 331 352 351 324 292 274
- -----------------------------------------------------------------------------------------------------------
Quoted market price
High 76 5/8 67 1/2 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
---------------------------------------------------------------------------------------------------------
Low 49 1/8 48 5/8 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
---------------------------------------------------------------------------------------------------------
Year-end 58 3/16 57 1/8 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
---------------------------------------------------------------------------------------------------------
Price/earnings
ratio(/5/)
High 17 17 16 13 17 27 23 31 12 11 11
---------------------------------------------------------------------------------------------------------
Low 11 12 11 9 14 21 17 22 8 9 7
---------------------------------------------------------------------------------------------------------
Average number of
employees 32,500 31,900 31,300 31,200 30,800 31,400 32,300 33,700 35,100 35,500 36,300
===========================================================================================================
</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 split
payable on June 10, 1994.
(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) Return on average capital and return on average equity for 1993 and 1991
were calculated and presented inclusive and exclusive of the cumulative
effect of the accounting changes.
(3) Return on average capital is calculated using pre-interest, after-tax
earnings and average debt and equity during the year.
(4) Includes the cost of businesses acquired.
(5) Price/earnings ratios were calculated based on high and low market prices
during the year and the respective year's earnings per common share. The
1993 and 1991 ratios were calculated and presented exclusive of the
cumulative effect of the accounting changes.
44
<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 15, 1999, 11:00 a.m.
The Westin William Penn Hotel
530 William Penn Place
Pittsburgh, PA 15219
Transfer Agent & Registrar
ChaseMellon Shareholder Services, LLC
Overpeck Centre
85 Challenger Road
Ridgefield Park, NJ 07660
PPG-dedicated phone 1-800-648-8160
Internet inquiries: www.chasemellon.com
Shareholders with specific questions regarding dividend checks, transfer or
replacement of stock certificates or dividend tax information should contact
ChaseMellon 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, 40E, PPG Industries,
One PPG Place, Pittsburgh, PA 15272.
Toll-Free Quarterly Financial Results
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. By dialing this
number, shareholders also may request copies of financial news releases via
fax, electronic mail or conventional mail.
Publications Available to Shareholders
Copies of the following publications will be furnished without charge upon
written request to Corporate Communications, 7W, PPG Industries, One PPG Place,
Pittsburgh, PA 15272.
Form 10-K -- the Company's Annual Report filed with the Securities and Exchange
Commission.
PPG Industries Blueprint -- a booklet summarizing PPG's mission, values,
strategy and goals.
PPG Global Code of Ethics -- an employee guide to corporate conduct policies,
including those concerning personal conduct, relationships with customers,
suppliers and competitors, protection of corporate assets, responsibilities to
the public, and PPG as a global organization.
PPG's Environment, Health and Safety Policy -- a brochure describing the
Company's commitment, worldwide, to manufacturing, selling and distributing
products in a manner that is safe and healthful for its employees, neighbors
and customers, and that protects the environment.
PPG's Environment, Health and Safety Progress Report -- a report of progress
during the year with respect to the Company's environment, health and safety
commitment.
PPG's Responsible Care Commitment -- a brochure outlining the Company's
voluntary activities under the Responsible Care initiative of the Chemical
Manufacturers Association for safe and ethical management of chemicals.
Dividend Information
PPG has paid uninterrupted dividends since 1899. The latest quarterly dividend
of 38 cents per share, voted by the board of directors on Jan. 21, 1999,
results in an annual dividend rate of $1.52 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" or by calling 1-800-648-8160.
Investor Relations
General information about PPG common stock may be obtained from Douglas B.
Atkinson, Director of Investor Relations. Phone (412) 434-3312, or write
Director of Investor Relations, 40E, PPG Industries, One PPG Place, Pittsburgh,
PA 15272.
Quarterly Stock Market Price
<TABLE>
<CAPTION>
1998 1997
- -------------------------------------------------------------------
Quarter Ended High Low Close High Low Close
- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
March 31 $68 9/16 $52 3/4 $67 15/16 $57 3/8 $52 1/4 $54
- -------------------------------------------------------------------
June 30 76 5/8 63 5/8 69 9/16 60 1/4 48 5/8 58 1/8
- -------------------------------------------------------------------
Sept. 30 70 5/8 49 1/8 54 9/16 67 1/2 58 62 11/16
- -------------------------------------------------------------------
Dec. 31 63 3/8 51 3/4 58 3/16 65 1/8 53 1/4 57 1/8
- -------------------------------------------------------------------
</TABLE>
The number of holders of record of PPG common stock as of Jan. 29, 1999, was
32,680, as shown on the records of the Company's transfer agent.
Dividends
<TABLE>
<CAPTION>
1998 1997
- --------------------------------------------
Month of Amount Per Amount Per
Payment (Millions) Share (Millions) Share
- --------------------------------------------
<S> <C> <C> <C> <C>
March $ 60 $ .34 $ 60 $ .33
- --------------------------------------------
June 64 .36 59 .33
- --------------------------------------------
September 64 .36 59 .33
- --------------------------------------------
December 64 .36 61 .34
- --------------------------------------------
Total $252 $1.42 $239 $1.33
- --------------------------------------------
- --------------------------------------------
</TABLE>
45
<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 1998 consolidated financial statements of the Company are:
Percentage of
Domestic: Voting Power
------------
Market View, Inc. - 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:
Hoba Lacke Und Farben GmbH - Germany.................... 85.00
Max Meyer Duco S.p.A. - Italy........................... 100.00
PPG Holdings (U.K.) Limited - United Kingdom............ 100.00
PPG Holdings B.V. - The Netherlands..................... 100.00
PPG Iberica, S.A. - Spain............................... 60.00
PPG Industries Fiber Glass B.V. - The Netherlands....... 100.00
PPG Industries France - France.......................... 100.00
PPG Industries Lacke GmbH - Germany..................... 100.00
PPG Industries Lackfabrik GmbH - Germany................ 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
PPG Ireland Int'l Finance Company Limited - Ireland..... 100.00
Transitions Optical Limited - Ireland .................. 51.00
PPG Coatings BV - The Netherlands....................... 100.00
Sipsy Chimie Fine S.C.A. - France....................... 100.00
Subsidiaries in other areas:
A.C.N. 084 065 350 Proprietary Limited - Australia ..... 100.00
PPG C.I. Co. Ltd. - Japan............................... 51.00
PPG Coatings (Hong Kong) Co. Ltd. - Hong Kong........... 60.00
PPG - Feng Tai, Ltd. - Hong Kong........................ 55.00
PPG Industrial do Brasil Limitada - Brazil.............. 100.00
PPG Industries Japan Ltd.- Japan........................ 100.00
PPG Industries Argentina S.A. - Argentina............... 100.00
PPG Industries Australia PTY Limited - Australia........ 100.00
PPG Industries de Mexico, S.A. de C.V. - Mexico......... 100.00
PPG Industries New Zealand Ltd.- New Zealand............ 100.00
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.
333-44397 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 21, 1999, appearing
in and incorporated by reference in this Annual Report on Form 10-K of PPG
Industries, Inc. for the year ended December 31, 1998.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
February 19, 1999
<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 R. W. LeBoeuf, W. H.
Hernandez and M. C. Hanzel, or any of them, my true and lawful attorneys or
attorneys-in-fact, with full power of substitution and revocation, to sign, in
my name and on my behalf as a Director of the Corporation, the Corporation's
Form 10-K for the fiscal year ended December 31, 1998, to be filed with the
Securities and Exchange Commission, Washington, DC.
WITNESS my hand this 18th day of February 1999.
/s/ Thomas J. Usher
-------------------
<PAGE>
PPG INDUSTRIES, INC.
POWER OF ATTORNEY
-----------------
(10-K)
I, Allen J. Krowe, a Director of PPG Industries, Inc. (the "Corporation"),
a Pennsylvania corporation, hereby constitute and appoint R. W. LeBoeuf, W. H.
Hernandez and M. C. Hanzel, or any of them, my true and lawful attorneys or
attorneys-in-fact, with full power of substitution and revocation, to sign, in
my name and on my behalf as a Director of the Corporation, the Corporation's
Form 10-K for the fiscal year ended December 31, 1998, to be filed with the
Securities and Exchange Commission, Washington, DC.
WITNESS my hand this 18th day of February 1999.
/s/ Allen J. Krowe
------------------
<PAGE>
PPG INDUSTRIES, INC.
POWER OF ATTORNEY
-----------------
(10-K)
I, Robert Mehrabian, a Director of PPG Industries, Inc. (the
"Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W.
LeBoeuf, W. H. Hernandez and M. C. Hanzel, or any of them, my true and lawful
attorneys or attorneys-in-fact, with full power of substitution and revocation,
to sign, in my name and on my behalf as a Director of the Corporation, the
Corporation's Form 10-K for the fiscal year ended December 31, 1998, to be filed
with the Securities and Exchange Commission, Washington, DC.
WITNESS my hand this 18th day of February 1999.
/s/ Robert Mehrabian
--------------------
<PAGE>
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 R. W.
LeBoeuf, W. H. Hernandez and M. C. Hanzel, or any of them, my true and lawful
attorneys or attorneys-in-fact, with full power of substitution and revocation,
to sign, in my name and on my behalf as a Director of the Corporation, the
Corporation's Form 10-K for the fiscal year ended December 31, 1998, to be filed
with the Securities and Exchange Commission, Washington, DC.
WITNESS my hand this 18th day of February 1999.
/s/ Vincent A. Sarni
--------------------
<PAGE>
PPG INDUSTRIES, INC.
POWER OF ATTORNEY
-----------------
(10-K)
I, David G. Vice, a Director of PPG Industries, Inc. (the "Corporation"), a
Pennsylvania corporation, hereby constitute and appoint R. W. LeBoeuf, W. H.
Hernandez and M. C. Hanzel, or any of them, my true and lawful attorneys or
attorneys-in-fact, with full power of substitution and revocation, to sign, in
my name and on my behalf as a Director of the Corporation, the Corporation's
Form 10-K for the fiscal year ended December 31, 1998, to be filed with the
Securities and Exchange Commission, Washington, DC.
WITNESS my hand this 18th day of February 1999.
/s/ David G. Vice
-----------------
<PAGE>
PPG INDUSTRIES, INC.
POWER OF ATTORNEY
-----------------
(10-K)
I, David R. Whitwam, a Director of PPG Industries, Inc. (the
"Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W.
LeBoeuf, W. H. Hernandez and M. C. Hanzel, or any of them, my true and lawful
attorneys or attorneys-in-fact, with full power of substitution and revocation,
to sign, in my name and on my behalf as a Director of the Corporation, the
Corporation's Form 10-K for the fiscal year ended December 31, 1998, to be filed
with the Securities and Exchange Commission, Washington, DC.
WITNESS my hand this 18th day of February 1999.
/s/ David R. Whitwam
--------------------
<PAGE>
PPG INDUSTRIES, INC.
POWER OF ATTORNEY
-----------------
(10-K)
I, Erroll B. Davis, Jr., a Director of PPG Industries, Inc. (the
"Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W.
LeBoeuf, W. H. Hernandez and M. C. Hanzel, or any of them, my true and lawful
attorneys or attorneys-in-fact, with full power of substitution and revocation,
to sign, in my name and on my behalf as a Director of the Corporation, the
Corporation's Form 10-K for the fiscal year ended December 31, 1998, to be filed
with the Securities and Exchange Commission, Washington, DC.
WITNESS my hand this 18th day of February 1999.
/s/ Erroll B. Davis, Jr.
------------------------
<PAGE>
PPG INDUSTRIES, INC.
POWER OF ATTORNEY
-----------------
(10-K)
I, Ned C. Lautenbach, a Director of PPG Industries, Inc. (the
"Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W.
LeBoeuf, W. H. Hernandez and M. C. Hanzel, or any of them, my true and lawful
attorneys or attorneys-in-fact, with full power of substitution and revocation,
to sign, in my name and on my behalf as a Director of the Corporation, the
Corporation's Form 10-K for the fiscal year ended December 31, 1998, to be filed
with the Securities and Exchange Commission, Washington, DC.
WITNESS my hand this 18th day of February 1999.
/s/ Ned C. Lautenbach
---------------------
<PAGE>
PPG INDUSTRIES, INC.
POWER OF ATTORNEY
-----------------
(10-K)
I, Michele J. Hooper, a Director of PPG Industries, Inc. (the
"Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W.
LeBoeuf, W. H. Hernandez and M. C. Hanzel, or any of them, my true and lawful
attorneys or attorneys-in-fact, with full power of substitution and revocation,
to sign, in my name and on my behalf as a Director of the Corporation, the
Corporation's Form 10-K for the fiscal year ended December 31, 1998, to be filed
with the Securities and Exchange Commission, Washington, DC.
WITNESS my hand this 18th day of February 1999.
/s/ Michele J. Hooper
---------------------
<PAGE>
PPG INDUSTRIES, INC.
POWER OF ATTORNEY
-----------------
(10-K)
I, Raymond W. LeBoeuf, a Director of PPG Industries, Inc. (the
"Corporation"), a Pennsylvania corporation, hereby constitute and appoint W. H.
Hernandez and M.C. Hanzel, or either of them, my true and lawful attorneys or
attorneys-in-fact, with full power of substitution and revocation, to sign, in
my name and on my behalf as a Director of the Corporation, the Corporation's
Form 10-K for the fiscal year ended December 31, 1998, to be filed with the
Securities and Exchange Commission, Washington, DC.
WITNESS my hand this 18th day of February 1999.
/s/ Raymond W. LeBoeuf
----------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PPG
INDUSTRIES, INC., DECEMBER 31, 1998 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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 128
<SECURITIES> 0
<RECEIVABLES> 1,246
<ALLOWANCES> 21
<INVENTORY> 917
<CURRENT-ASSETS> 2,660
<PP&E> 6,739
<DEPRECIATION> 3,834
<TOTAL-ASSETS> 7,387
<CURRENT-LIABILITIES> 1,912
<BONDS> 1,081
0
0
<COMMON> 484
<OTHER-SE> 2,396
<TOTAL-LIABILITY-AND-EQUITY> 7,387
<SALES> 7,510
<TOTAL-REVENUES> 7,510
<CGS> 4,476
<TOTAL-COSTS> 4,476
<OTHER-EXPENSES> 733
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 110
<INCOME-PRETAX> 1,294
<INCOME-TAX> 466
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 801
<EPS-PRIMARY> 4.52
<EPS-DILUTED> 4.48
</TABLE>
