<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1999 Commission File Number 1-1687
----------------- --------
PPG INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0730780
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
One PPG Place, Pittsburgh, Pennsylvania 15272
(Address of principal executive offices) (Zip Code)
(412) 434-3131
(Registrant's telephone number, including area code)
As of June 30, 1999, 173,610,793 shares of the Registrant's common stock, par
value $1.66-2/3 per share, were outstanding.
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
--------- ---------
<PAGE>
PPG INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE(S)
<S> <C>
Part I. Financial Information
Item 1. Financial Statements:
Condensed Statement of Income......................................... 2
Condensed Balance Sheet............................................... 3
Condensed Statement of Cash Flows..................................... 4
Notes to Condensed Financial Statements............................... 5-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 11-19
Item 3. Quantitative and Qualitative Disclosures About Market Risk...... 19
Part II. Other Information
Item 1. Legal Proceedings............................................... 20
Item 2. Change in Securities and Use of Proceeds........................ 20
Item 6. Exhibits and Reports on Form 8-K................................ 21
Signature.................................................................. 22
</TABLE>
-1-
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- ------------------------------
PPG INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Statement of Income (Unaudited)
-----------------------------------------
(Millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
--------------------- -----------------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales........................................... $1,947 $2,004 $3,750 $3,917
Cost of sales....................................... 1,165 1,186 2,268 2,331
------ ------ ------ ------
Gross profit...................................... 782 818 1,482 1,586
------ ------ ------ ------
Other expenses (earnings):
Selling, general and administrative............... 307 293 593 556
Depreciation...................................... 87 89 178 178
Research and development.......................... 67 67 134 134
Interest.......................................... 29 28 55 58
Business divestitures and
realignments (Note 3)............................ - 15 24 15
Other charges..................................... 31 16 52 34
Other earnings.................................... (43) (26) (66) (53)
------ ------ ------ ------
Total other expenses - net...................... 478 482 970 922
------ ------ ------ ------
Income before income taxes and minority
interest.......................................... 304 336 512 664
Income taxes........................................ 116 130 195 256
Minority interest................................... 4 7 10 17
------ ------ ------ ------
Net income.......................................... $ 184 $ 199 $ 307 $ 391
====== ====== ====== ======
Earnings per share (Note 2)......................... $ 1.06 $ 1.13 $ 1.77 $ 2.21
====== ====== ====== ======
Earnings per share - assuming dilution
(Note 2).......................................... $ 1.05 $ 1.11 $ 1.75 $ 2.18
====== ====== ====== ======
Dividends per share................................. $ 0.38 $ 0.36 $ 0.76 $ 0.70
====== ====== ====== ======
</TABLE>
The accompanying notes to the condensed financial statements are an integral
part of this statement.
-2-
<PAGE>
PPG INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Balance Sheet (Unaudited)
-----------------------------------
<TABLE>
<CAPTION>
June 30 Dec. 31
1999 1998
-------- --------
Assets (Millions)
- ------
<S> <C> <C>
Current assets:
Cash and cash equivalents...................................... $ 96 $ 128
Receivables-net................................................ 1,500 1,366
Inventories (Note 4)........................................... 915 917
Other.......................................................... 268 249
-------- --------
Total current assets....................................... 2,779 2,660
Property (less accumulated depreciation of
$3,916 million and $3,834 million)............................. 2,876 2,905
Investments....................................................... 262 263
Goodwill (less accumulated amortization of
$89 million and $84 million)................................... 571 576
Prepaid pension cost.............................................. 753 707
Other assets...................................................... 272 276
-------- --------
Total...................................................... $ 7,513 $ 7,387
======== ========
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Short-term borrowings and current
portion of long-term debt.................................. $ 711 $ 637
Accounts payable and accrued liabilities....................... 1,242 1,264
Income taxes................................................... 36 11
-------- --------
Total current liabilities.................................. 1,989 1,912
Long-term debt.................................................... 1,051 1,081
Deferred income taxes............................................. 451 440
Accumulated provisions............................................ 448 444
Other postretirement benefits..................................... 548 543
-------- --------
Total liabilities.......................................... 4,487 4,420
-------- --------
Commitments and contingent liabilities (Note 8)..................
Minority interest................................................. 91 87
-------- --------
Shareholders' equity:
Common stock................................................... 484 484
Additional paid-in capital..................................... 104 105
Retained earnings.............................................. 5,968 5,791
Treasury stock................................................. (3,271) (3,198)
Unearned compensation.......................................... (149) (149)
Accumulated other comprehensive loss (Note 5).................. (201) (153)
-------- --------
Total shareholders' equity................................. 2,935 2,880
-------- --------
Total...................................................... $ 7,513 $ 7,387
======== ========
</TABLE>
The accompanying notes to the condensed financial statements are an integral
part of this statement.
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<PAGE>
PPG INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Statement of Cash Flows (Unaudited)
---------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
----------------
June 30
-------
1999 1998
------ ------
<S> <C> <C>
(Millions)
Cash from operating activities.................................... $ 389 $ 462
------ ------
Investing activities:
Capital spending
Additions to property and investments...................... (206) (216)
Business acquisitions, net of cash balances
acquired............................................... (113) (69)
Reduction of investments....................................... 16 3
Other.......................................................... 19 7
------ ------
Cash used for investing activities......................... (284) (275)
------ ------
Financing activities:
Net change in borrowings with
maturities of three months or less......................... 111 75
Proceeds from other short-term debt............................ 137 62
Repayment of other short-term debt............................. (138) (64)
Proceeds from long-term debt................................... 6 4
Repayment of long-term debt.................................... (43) (43)
Loans to employee stock ownership plan......................... (24) (26)
Repayment of loans by employee stock
ownership plan............................................. 24 20
Purchase of treasury stock, net................................ (76) (67)
Dividends paid................................................. (132) (124)
------ ------
Cash used for financing activities......................... (135) (163)
------ ------
Effect of currency exchange rate changes
on cash and cash equivalents................................... (2) (2)
------ ------
Net (decrease) increase in cash and cash equivalents.............. (32) 22
Cash and cash equivalents, beginning of period.................... 128 129
------ ------
Cash and cash equivalents, end of period.......................... $ 96 $ 151
====== ======
</TABLE>
The accompanying notes to the condensed financial statements are an integral
part of this statement.
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<PAGE>
PPG INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Financial Statements (Unaudited)
---------------------------------------------------
1. Financial Statements
--------------------
The condensed financial statements included herein are unaudited. In the
opinion of management, these statements include all adjustments, consisting
only of normal, recurring adjustments, necessary for a fair presentation of
the financial position of PPG Industries, Inc. and subsidiaries (the
Company or PPG) at June 30, 1999 and the results of their operations and
their cash flows for the three- and six-month periods ended June 30, 1999
and 1998. These condensed financial statements should be read in
conjunction with the financial statements and notes thereto incorporated by
reference in PPG's Annual Report on Form 10-K for the year ended December
31, 1998.
The results of operations for the six months ended June 30, 1999 are not
necessarily indicative of the results to be expected for the full year.
2. Earnings Per Common Share
-------------------------
The following table reflects the earnings per share calculations for the
three and six months ended June 30, 1999 and 1998.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
--------------------- ----------------------
1999 1998 1999 1998
------- ------- ------- --------
<S> <C> <C> <C> <C>
(Millions, except per share amounts)
Earnings per common share
Net income.......................................... $ 184 $ 199 $ 307 $ 391
------ ------ ------ ------
Weighted average common shares
outstanding........................................ 173.5 177.0 173.9 177.3
------ ------ ------ ------
Earnings per common share........................... $ 1.06 $ 1.13 $ 1.77 $ 2.21
====== ====== ====== ======
Earnings per common share -
assuming dilution
Net income.......................................... $ 184 $ 199 $ 307 $ 391
------ ------ ------ ------
Weighted average common shares
outstanding........................................ 173.5 177.0 173.9 177.3
Effect of dilutive securities:
Stock options...................................... 0.5 1.2 0.4 0.9
Other stock compensation plans..................... 1.2 1.0 1.2 1.0
------ ------ ------ ------
Potentially dilutive common shares.................. 1.7 2.2 1.6 1.9
------ ------ ------ ------
Adjusted common shares
outstanding........................................ 175.2 179.2 175.5 179.2
------ ------ ------ ------
Earnings per common share -
assuming dilution.................................. $ 1.05 $ 1.11 $ 1.75 $ 2.18
====== ====== ====== ======
</TABLE>
-5-
<PAGE>
3. Acquisitions, Business Divestitures and Realignments
----------------------------------------------------
In January 1999, the Company completed the acquisition of the remaining
portion of the global packaging coatings business formerly owned by
Courtaulds plc from Akzo Nobel N.V. and completed the purchase of certain
leased assets in connection with its 1998 acquisition of the technical
coatings business of Orica Ltd. In February 1999, the Company acquired the
commercial transport refinish coatings business of Sigma Coatings B.V., a
subsidiary of Belgian refiner PetroFina S.A. The Company has completed
preliminary purchase price allocations for these acquisitions and the
operating activity associated with these acquisitions has been included in
the Company's operations from the acquisition dates. The preliminary
purchase price allocations are subject to adjustment in 1999 when
finalized.
In March 1999, the Company approved a restructuring plan associated with
the integration of recent packaging coatings acquisitions, which resulted
in a pre-tax charge of $24 million. The components of the plan included
severance benefits for 182 employees and an estimated loss of $14 million
on the disposal of a redundant European facility. As of June 30, 1999, $1
million of severance benefits had been paid under the plan. It is
anticipated that the asset disposition and the payment of the remaining
severance benefits will occur by March 31, 2000.
On April 28, 1999, the Company agreed to acquire the global automotive
refinish and industrial coatings businesses of Imperial Chemical Industries
PLC (ICI), with the exception of the businesses in the Indian subcontinent,
for 425 million British pounds sterling or approximately $684 million. The
transaction is subject to regulatory approvals and the Company anticipates
a closing date at the end of July 1999 for the businesses located in Europe
and North and South America, and later in 1999 for the businesses located
in Asia. The 1998 sales of the ICI businesses were approximately $459
million.
On June 2, 1999, the Company agreed to acquire coatings and sealants maker
PRC-DeSoto International, Inc. (PRC-DeSoto) from Akzo Nobel N.V. for
approximately $513 million. Pending regulatory approval, the acquisition
should be completed by the end of July 1999. PRC-DeSoto's 1998 sales were
approximately $225 million.
The Company intends to use the purchase method of accounting to record
these two pending acquisitions and the acquisitions are expected to be
funded through a combination of cash generated from operations and external
funding sources.
The Company has previously reserved for the estimated loss on the
disposition of its equity interests in two Asian float glass plants and two
downstream fabrication facilities. At June 30, 1999, the reserve totaled
approximately $40 million. Negotiations related to these disposals are
ongoing and the Company anticipates completion of the sales of these
facilities by the end of 1999.
-6-
<PAGE>
4. Inventories
-----------
Inventories at June 30, 1999 and December 31, 1998 are detailed below.
<TABLE>
<CAPTION>
June 30 Dec. 31
1999 1998
--------- ---------
(Millions)
<S> <C> <C>
Finished products and work in process........................ $ 636 $ 638
Raw materials................................................ 175 174
Supplies..................................................... 104 105
----- -----
Total.................................................... $ 915 $ 917
===== =====
</TABLE>
Most domestic and certain foreign inventories are valued using the last-in,
first-out method. If the first-in, first-out method had been used,
inventories would have been $166 million and $183 million higher at June
30, 1999 and December 31, 1998, respectively.
5. Comprehensive Income
--------------------
Total comprehensive income for the three and six months ended June 30, 1999
and 1998 was as follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
----------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- --------
(Millions)
<S> <C> <C> <C> <C>
Net income......................................... $ 184 $ 199 $ 307 $ 391
Other comprehensive income (loss), net of tax:
Currency translation adjustment.................. 21 1 (50) (10)
Minimum pension liability adjustment............. - - (1) -
Unrealized gains on marketable
securities...................................... 8 - 3 -
----- ----- ----- -----
29 1 (48) (10)
----- ----- ----- -----
Total comprehensive income...................... $ 213 $ 200 $ 259 $ 381
===== ===== ===== =====
</TABLE>
As of June 30, 1999 and December 31, 1998, accumulated other comprehensive
loss, as reflected on the condensed balance sheet, was comprised of the
following:
<TABLE>
<CAPTION>
June 30 Dec. 31
1999 1998
--------- ---------
(Millions)
<S> <C> <C>
Currency translation adjustment................................... $ (172) $ (122)
Minimum pension liability adjustment.............................. (32) (31)
Unrealized gains on marketable securities......................... 3 -
------ ------
Accumulated other comprehensive loss............................ $ (201) $ (153)
====== ======
</TABLE>
-7-
<PAGE>
6. Cash Flow Information
---------------------
Cash payments for interest were $56 million and $62 million for the six
months ended June 30, 1999 and 1998, respectively. Net cash payments for
income taxes for the six months ended June 30, 1999 and 1998 were $134
million and $193 million, respectively.
7. Business Segment Information
----------------------------
Effective December 31, 1998, PPG adopted Statement of Financial Accounting
Standards No. 131, "Disclosures About Segments of an Enterprise and Related
Information." Segment operating income and other unallocated corporate
(expense) income for the three and six months ended June 30, 1998 have been
restated to conform with the current year presentation format.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
------------------------ -----------------------
1999 1998 1999 1998
-------- -------- -------- --------
(Millions)
<S> <C> <C> <C> <C>
Net sales:
Coatings (a)............................... $1,005 $ 901 $1,917 $1,722
Glass...................................... 586 706 1,143 1,393
Chemicals (b).............................. 359 401 696 808
Intersegment net sales..................... (3) (4) (6) (6)
------ ------ ------ ------
Total................................... $1,947 $2,004 $3,750 $3,917
====== ====== ====== ======
Operating income:
Coatings (c)............................... $ 179 $ 160 $ 280 $ 287
Glass (d).................................. 116 104 213 217
Chemicals.................................. 42 96 78 207
------ ------ ------ ------
Total................................... 337 360 571 711
Interest expense - net....................... (27) (25) (52) (52)
Other unallocated corporate
(expense) income - net..................... (6) 1 (7) 5
------ ------ ------ ------
Income before income taxes and
minority interest.......................... $ 304 $ 336 $ 512 $ 664
====== ====== ====== ======
</TABLE>
(a) Includes intersegment net sales of $1 million for each of the three
months ended June 30, 1999 and 1998, respectively, and $2 million and $1
million for the six months ended June 30, 1999 and 1998, respectively.
(b) Includes intersegment net sales of $2 million and $3 million for the
three months ended June 30, 1999 and 1998, respectively, and $4 million and
$5 million for the six months ended June 30, 1999 and 1998, respectively.
(c) Includes for the six months ended June 30, 1999 a pre-tax
restructuring charge of $24 million associated with the integration of
recent packaging coatings acquisitions, including the disposal of a
redundant European facility and work-force reductions.
-8-
<PAGE>
(d) Includes for each 1998 period 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.
8. 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, contract, 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
June 30, 1999 and December 31, 1998, PPG had reserves for environmental
contingencies totaling $86 million and $94 million, respectively. Pre-tax
charges against income for environmental remediation costs for the six
months ended June 30, 1999 and 1998 totaled $5 million and $4 million,
respectively, and are included in "Other Charges" in the condensed
statement of income. Cash outlays related to such charges for the six
months ended June 30, 1999 and 1998 aggregated $13 million and $9 million,
respectively.
Management anticipates that the resolution of the Company's environmental
contingencies, 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
December 31, 1998. 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 extended period of time.
Although the unreserved exposure to future loss relates to all sites, a
significant portion of such exposure involves three operating plant sites.
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
-9-
<PAGE>
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
potentially responsible parties also contributes to the uncertainty of
estimating PPG's final costs. Although contributors of waste to sites
involving other potentially responsible parties may face governmental
agency assertions of joint and several liability, in general, final
allocations of costs are made based on the relative contributions of wastes
to such sites. PPG is generally not a major contributor to such sites.
The impact of evolving programs, such as natural resource damage claims,
industrial site reuse initiatives and state voluntary remediation programs,
also adds to the present uncertainties with regard to the ultimate
resolution of this unreserved exposure to future loss. The Company's
assessment of the potential impact of these environmental contingencies is
subject to considerable uncertainty due to the complex, ongoing and
evolving process of investigation and remediation, if necessary, of such
environmental contingencies.
-10-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations
---------------------
Performance in the Second Quarter of 1999 Compared to the Second Quarter of 1998
Performance Overview
Sales decreased 3% during the second quarter of 1999 to $1.95 billion compared
to $2.0 billion in the second quarter of 1998. Sales declined 6% due to the
absence of sales from our European flat and automotive glass businesses, which
were divested in July 1998, 4% due to lower selling prices in our chemicals and
glass segments and 1% from the negative effects of foreign currency translation.
These reductions were partially offset by an 8% increase in volumes across all
of our segments, including several acquisitions made within our coatings segment
in late 1998 and early 1999.
The gross profit percentage decreased to 40.2% in the second quarter of 1999
from 40.8% in the second quarter of 1998. Lower selling prices for our
chemicals and fiber glass products more than offset the manufacturing
efficiencies realized across all of our segments.
Net income and earnings per share, diluted, for the second quarter of 1999 were
$184 million and $1.05, respectively, compared to $199 million and $1.11 in the
same quarter of 1998. Net income in the second quarter of 1999 was negatively
impacted by the same factors that contributed to a lower gross profit percentage
and foreign currency transaction losses. However, these negative factors were
partially offset by the absence of a second quarter 1998 $15 million pre-tax
restructuring charge related to the divestiture of our equity interests in Asian
glass operations, lower selling, general and administrative expenses,
principally within our coatings segment, and an insurance recovery of certain
past environmental costs.
Performance of Business Segments
Coatings sales increased 12% to $1.0 billion in the second quarter of 1999 from
$900 million in the same quarter of 1998. A 13% sales volume increase resulted
from several acquisitions made in late 1998 and early 1999 and volume increases
in our North American automotive original and refinish businesses. The second
quarter of 1998 included the effects of the General Motors strike, which
resulted in reduced volumes. These favorable factors in 1999 were partially
offset by a 1% decrease from the negative effects of foreign currency
translation and the announced closing of certain store locations by an
architectural coatings customer. Operating income increased to $179 million in
the second quarter of 1999 from $160 million in the same quarter of 1998. The
increase in operating income is attributable to the sales volume increase
discussed previously, lower selling, general and administrative expenses in our
worldwide automotive original and North American industrial businesses,
increased manufacturing efficiencies in our North American industrial business,
earnings generated from acquisitions and lower legal expenses.
Glass sales decreased 17% to $586 million in the second quarter of 1999 from
$706 million in the same quarter of 1998. A 17% reduction in sales resulted
from the absence of sales from our European flat and automotive glass businesses
divested in July 1998. Additionally, lower selling prices for our fiber glass
products largely as a result of the recessionary Asian economies, as well as for
our automotive replacement and original glass products, contributed to a 4%
reduction in sales. These negative factors were partially offset by a 4%
increase in sales volumes primarily in our North American automotive original
glass business as the comparable quarter of 1998 was adversely affected by the
General Motors strike. Operating income increased to $116 million in the second
quarter of 1999 from $104 million in the same
-11-
<PAGE>
quarter of 1998. The manufacturing efficiencies realized in our North American
automotive original and flat glass businesses and the absence of a second
quarter 1998 $15 million pre-tax restructuring charge related to the divestiture
of our equity interests in Asian glass operations more than offset the negative
effects of the lower sales prices discussed above and the absence of profits
related to our divested European flat and automotive glass businesses.
Chemicals sales decreased 10% to $357 million in the second quarter of 1999 from
$398 million in the same quarter of 1998. Sales decreased 13% from
significantly lower selling prices for our chlorine and caustic soda products,
due in part to the worldwide pricing effects of the recessionary Asian economies
and other competitive pressures, respectively, which was partially offset by a
3% increase in volumes for certain other chlor-alkali products. Operating
income decreased to $42 million in the second quarter of 1999 from $96 million
in the second quarter of 1998. The significant reduction in selling prices for
our chlorine and caustic soda products was only partially offset by increased
manufacturing efficiencies in our chlor-alkali and derivatives business and an
insurance recovery of certain past environmental costs.
Performance in the First Six Months of 1999 Compared to the First Six Months of
1998
Performance Overview
Sales decreased 4% during the first six months of 1999 to $3.75 billion from
$3.92 billion in the first six months of 1998. The combination of the absence
of sales from the European flat and automotive glass businesses divested in July
1998, which reduced sales by 6%, and a 4% decrease principally associated with
significantly lower selling prices for our chlorine and caustic soda products
more than offset a 6% increase in volumes related to several coatings
acquisitions and increased volumes across the majority of our businesses.
The gross profit percentage decreased to 39.5% in the 1999 six-month period
compared to 40.5% in the same prior-year period. The decrease in the gross
profit percentage principally resulted from lower selling prices for our
chlorine, caustic soda and fiber glass products and unfavorable sales mix
changes across all of our segments. These unfavorable deviations were only
partially offset by the continued realization of manufacturing efficiencies in
all of our segments.
Net income and earnings per common share, diluted, for the first six months of
1999 were $307 million and $1.75, respectively, compared to $391 million and
$2.18, respectively, for the first six months of 1998. Net income for the first
six months of 1999 was negatively affected by the same factors that contributed
to a lower gross profit percentage and foreign currency transaction losses.
These negative factors were partially offset by lower income tax expense due to
a reduction in pre-tax earnings, a lower effective income tax rate and an
insurance recovery of certain past environmental costs.
Performance of Business Segments
Coatings sales increased 11% to $1.92 billion in the first six months of 1999
from $1.72 billion in same period of 1998. Sales increased 12% principally from
acquisitions made within all of our coatings businesses and volume increases in
our automotive original and industrial coatings businesses in North America as
second quarter 1998 sales were adversely affected by the General Motors strike.
The favorable factors were slightly offset by a 1% sales decline attributable to
the negative effects of foreign currency translation. Operating income
decreased to $280 million in the first six months of 1999 from $287 million in
the first six months of 1998. The decrease in operating income is attributable
to a $24 million pre-tax restructuring charge for disposal of a redundant
European facility and work-force reductions related to the integration of recent
packaging coatings acquisitions. The combination of lower selling, general and
-12-
<PAGE>
administrative expenses in our worldwide automotive original coatings business
and a modest improvement in manufacturing efficiencies in our industrial
coatings business partially offset these negative factors.
Glass sales decreased 18% to $1.14 billion in the first six months of 1999 from
$1.39 billion in the same period of 1998. Sales declined 16% as a result of the
divestiture of our European flat and automotive glass businesses in July 1998
and 3% principally from lower prices for our fiber glass products due largely to
the worldwide pricing effects of the recessionary Asian economies and lower
selling prices for our North American automotive original and replacement glass
businesses. These negative factors were slightly offset by a 1% increase in
sales volumes primarily related to our North American automotive original and
replacement glass businesses. Operating income decreased to $213 million in the
first six months of 1999 from $217 million in the same six month period of 1998.
The combination of the lower prices for our fiber glass and automotive glass
products discussed above, the absence of profits related to our divested
European flat and automotive glass businesses and unfavorable sales mix changes
in certain businesses were partially offset by manufacturing efficiencies in our
automotive original glass and fiber glass reinforcements businesses. In
addition, operating income for the six months ended June 30, 1998 included a $15
million pre-tax restructuring charge related to the divestiture of our equity
interests in Asian glass operations.
Chemicals sales decreased 14% to $692 million in the first six months of 1999
from $803 million in the same period of 1998. Sales declined 15% as a result of
lower selling prices for chlorine and caustic soda products, due in part to the
worldwide pricing effects of the recessionary Asian economies and other
competitive pressures, respectively, which was offset slightly by a 1% increase
in volumes for certain chlor-alkali products. Operating income decreased to $78
million in the first six months of 1999 compared to $207 million in the same
period of 1998. The significant reduction in selling prices discussed above and
unfavorable sales mix changes were only slightly offset by manufacturing
efficiencies in our chlor-alkali and derivatives business and an insurance
recovery of certain past environmental costs.
Other Factors
The increase in receivables-net principally results from acquisitions and higher
sales volumes in the second quarter of 1999 compared with the fourth quarter of
1998.
The Company may issue up to $500 million aggregate principal amount of debt
securities under a shelf registration statement filed with the Securities and
Exchange Commission (SEC) in January 1998. In July 1999, the Company also filed
a registration statement with the SEC for the issuance of an additional $800
million aggregate principal amount of debt securities.
Acquisitions, Business Divestitures and Realignments
In January 1999, the Company completed the acquisition of the remaining portion
of the global packaging coatings business formerly owned by Courtaulds plc from
Akzo Nobel N.V. and completed the purchase of certain leased assets in
connection with its 1998 acquisition of the technical coatings business of Orica
Ltd. In February 1999, the Company acquired the commercial transport refinish
coatings business of Sigma Coatings B.V., a subsidiary of Belgian refiner
PetroFina S.A. The Company has completed preliminary purchase price allocations
for these acquisitions and the operating activity associated with these
acquisitions has been included in the Company's operations from the acquisition
dates. The preliminary purchase price allocations are subject to adjustment in
1999 when finalized.
-13-
<PAGE>
In March 1999, the Company approved a restructuring plan associated with the
integration of recent packaging coatings acquisitions, which resulted in a pre-
tax charge of $24 million. The components of the plan included severance
benefits for 182 employees and an estimated loss of $14 million on the disposal
of a redundant European facility. As of June 30, 1999, $1 million of severance
benefits had been paid under the plan. It is anticipated that the asset
disposition and the payment of the remaining severance benefits will occur by
March 31, 2000.
On April 28, 1999, the Company agreed to acquire the global automotive refinish
and industrial coatings businesses of ICI with the exception of the businesses
in the Indian subcontinent, for 425 million British pounds sterling or
approximately $684 million. The transaction is subject to regulatory approvals
and the Company anticipates a closing date at the end of July 1999 for the
businesses located in Europe and North and South America, and later in 1999 for
the businesses located in Asia. The 1998 sales of the ICI businesses were
approximately $459 million.
On June 2, 1999, the Company agreed to acquire coatings and sealants maker PRC-
DeSoto from Akzo Nobel N.V. for approximately $513 million. Pending regulatory
approval, the acquisition should be completed by the end of July 1999. PRC-
DeSoto's 1998 sales were approximately $225 million.
The Company intends to use the purchase method of accounting to record these two
pending acquisitions and the acquisitions are expected to be funded through a
combination of cash generated from operations and external funding sources.
The Company has previously reserved for the estimated loss on the disposition of
its equity interests in two Asian float glass plants and two downstream
fabrication facilities. At June 30, 1999, the reserve totaled approximately $40
million. Negotiations related to these disposals are ongoing and the Company
anticipates completion of the sales of these facilities by the end of 1999.
Conversion to the Euro
On January 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 January 1, 1999
through July 1, 2002. Beginning January 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
considered legal tender.
PPG has identified and has substantially addressed the significant issues that
may have resulted from the euro conversion. 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. The impact on PPG's
operating results and financial condition from the conversion to the euro has
not been, and is not expected to be, material.
-14-
<PAGE>
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements made by or on behalf of the Company. Management's
Discussion and Analysis and other sections of this Form 10-Q contain forward-
looking statements that reflect the Company's current views with respect to
future events and financial performance.
Forward-looking statements are identified by the use of the words "aim,"
"believe," "expect," "anticipate," "intend," "estimate" and other expressions
that indicate future events and trends. Any forward-looking statement speaks
only as of the date on which such statement is made and the Company undertakes
no obligation to update any forward-looking statement, whether as a result of
new information, future events or otherwise. You are advised, however, to
consult any further disclosures we make on related subjects in our reports to
the Securities and Exchange Commission. Also, note the following cautionary
statements.
Many factors could cause actual results to differ materially from the Company's
forward-looking statements. Among these factors are increasing price and
product competition by foreign and domestic competitors, fluctuations in the
cost and availability of raw materials, the ability to maintain favorable
supplier relationships and arrangements, economic and political conditions in
international markets, the ability to penetrate existing, developing and
emerging foreign and domestic markets, which also depends on economic and
political conditions, foreign exchange rates and fluctuations in those rates and
the uncertainties regarding the Year 2000 problem discussed below. Further, it
is not possible to predict or identify all such factors. Consequently, while
the list of factors presented here is considered representative, no such list
should be considered to be a complete statement of all potential risks and
uncertainties. Unlisted factors may present significant additional obstacles to
the realization of forward-looking statements.
The 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 materially
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:
. The Company'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 the Company's suppliers, customers and other
counterparties to identify and resolve their own Year 2000 issues so as
to allow them to continue normal business operations or furnish
products, services or data to the Company without disruption.
. The ability of the Company to complete the remediation and testing of
critical information technology and non-information technology systems
of the acquisitions expected to be completed in the last half of 1999.
. The Company's ability to respond to unforeseen Year 2000 complications.
-15-
<PAGE>
The consequences of material differences in the results as compared to those
anticipated in the forward-looking statements could include, among other things,
business disruption, operational problems, financial loss, legal liability to
third parties and similar risks, any of which could have a material adverse
effect on the Company's consolidated financial condition, operations or
liquidity.
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 disruptions when attempting to process information containing
dates that fall after December 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, the Company
has established a corporate-wide Year 2000 Steering Committee made up of certain
senior executives of the Company. The Committee is responsible for overseeing
the Company's efforts to assess and address the Year 2000 problem as it may
affect the Company. The scope of the Company's efforts includes: (1) an
assessment, and where needed a remediation, of both IT and non-IT elements of
its business information, computing, telecommunications and process control
systems; (2) an assessment, and remediation, as necessary, 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
Assessment - 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 testing phase of the Company's Year 2000 compliance plan 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 dedicated to that purpose so
that normal computing activity is not interrupted or adversely affected by the
testing. As of June 30, 1999, the Company has substantially completed the
remediation and testing of all critical IT and non-IT systems. The Company
anticipates that the remediation and testing of all remaining systems will be
completed by December 31, 1999. The Year 2000 Steering Committee will continue
to review Year 2000 compliance efforts on an ongoing basis.
The Company expects to substantially complete the acquisitions of PRC-DeSoto and
certain businesses of ICI in the third quarter of 1999. Although the sellers
have represented that these companies have instituted Year 2000 compliance plans
and will have all critical systems compliant by December 31, 1999, the Company
will assess their state of readiness upon conclusion of the acquisitions.
-16-
<PAGE>
In the third-party evaluation phase, the Company has 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 the Company
purchases a significant dollar amount of goods or services and those who supply
goods or services that are critical to uninterrupted production by the Company
of its products, including 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 more than 95% of the Company's materially significant suppliers. The
Company has identified and is in the process of investigating the Year 2000
readiness of its materially significant customers. Through review of their
publicly issued statements of Year 2000 readiness, no significant concerns have
been identified to date. Materially significant customers for this purpose are
considered to be those to whom the Company sells a significant dollar amount of
goods.
If materially significant suppliers or customers or a number of less substantial
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 the
Company's operations, liquidity or consolidated financial condition. The
Company believes that its continuing efforts to gain assurances of Year 2000
compliance from materially significant suppliers and its investigative efforts
with respect to the readiness of materially significant customers will minimize
these risks. Nonetheless, the actual readiness of these third parties is beyond
the Company's control.
Costs. The Company is using both internal and external resources to execute its
Year 2000 compliance plan. The Company currently estimates the incremental cost
of resolving the Year 2000 issue at approximately $20 million. The Company
spent a total of $14 million during 1998 and the six months ended June 30, 1999,
representing the incremental cost of resolving the Year 2000 issue and
anticipates the expenditure of an additional $4 to $6 million during the second
half of 1999. Approximately 50% of the total Year 2000 costs are expected to be
expended on equipment or software replacement and the remainder on remediation
and testing of existing systems. These cost estimates are based on currently
available information and may be subject to change.
All Year 2000 costs are expected to be funded from the Company's operating cash
flow. The Company is 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 are capitalized and charged to
expense over the useful lives of those assets in accordance with the Company's
existing policy.
Risks. If needed modifications and conversions of computer systems are not made
on a timely basis by the Company or its materially significant suppliers or
customers, the Company could be affected by business disruption, operational
problems, financial loss, legal liability to third parties and similar risks,
any of which could have a material adverse effect on the Company's consolidated
financial condition, results of operations or liquidity. Although not
anticipated, the most reasonably likely worst-case scenario of failure by the
Company or its key suppliers or customers to resolve the Year 2000 issue would
be a short-term slowdown or cessation of manufacturing operations at one or more
of the Company's 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. Although the Company expects to be Year 2000 compliant by
December 31, 1999, contingency plans to address the most reasonably likely worst
case
-17-
<PAGE>
scenario have been completed for substantially all of the Company's
locations as of June 30, 1999. The main focus of the contingency plans is to
outline the procedures and necessary resources for the safe shutdown of
manufacturing and other processes in the event of a business disruption due to a
Year 2000 event. The contingency plans will continue to be reviewed and
modified as required during the remainder of 1999.
Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities". The effective date of this standard has been delayed to
fiscal years beginning after June 15, 2000. The Company is currently evaluating
the prospective impact of this standard on its financial position and results of
operations.
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,
contract, 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 June 30, 1999 and
December 31, 1998, PPG had reserves for environmental contingencies totaling $86
million and $94 million, respectively. Pre-tax charges against income for
environmental remediation costs for the six months ended June 30, 1999 and 1998
totaled $5 million and $4 million, respectively, and are included in "Other
Charges" in the condensed statement of income. Cash outlays related to such
charges for the six months ended June 30, 1999 and 1998 aggregated $13 million
and $9 million, respectively.
Management anticipates that the resolution of the Company's environmental
contingencies, 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 December 31, 1998.
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
extended period of time.
-18-
<PAGE>
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
potentially responsible parties also contributes to the uncertainty of
estimating PPG's final costs. Although contributors of waste to sites involving
other potentially responsible parties may face governmental agency assertions of
joint and several liability, in general, final allocations of costs are made
based on the relative contributions of wastes to such sites. PPG is generally
not a major contributor to such sites.
The impact of evolving programs, such as natural resource damage claims,
industrial site reuse initiatives and state voluntary remediation programs, also
adds to the present uncertainties with regard to the ultimate resolution of this
unreserved exposure to future loss. The Company's assessment of the potential
impact of these environmental contingencies is subject to considerable
uncertainty due to the complex, ongoing and evolving process of investigation
and remediation, if necessary, of such environmental contingencies.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------
There were no material changes in the Company's exposure to market risk from
December 31, 1998.
-19-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
In the Company's Form 10-K for the year ended December 31, 1998, it was reported
that the Company had been named in a number of antitrust lawsuits alleging PPG
was involved with competitors in fixing prices and allocating markets for
certain glass products. Three of the named defendants in those cases,
Pilkington plc, Libbey-Owens Ford Co., Inc. and AFG Industries, Inc. have
entered into preliminary settlement agreements with the plaintiffs. Otherwise,
the status of those cases remains as reported in the Company's Form 10-K.
Item 2. Change in Securities and Use of Proceeds
- -------------------------------------------------
Directors who are not also Officers of the Company receive Common Stock
Equivalents pursuant to the Deferred Compensation Plan for Directors 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 that 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.
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 (1) an
additional one-third of each payment of the basic annual retainer, (2) all of
the basic annual retainer, or (3) all compensation. All deferred payments are
held in the form of Common Stock Equivalents. Payments out of the deferred
accounts are made in the form of Common Stock of the Company (and cash as to any
fractional Common Stock Equivalent). In the second quarter of 1999, the
Directors, as a group, were credited with 4,490 Common Stock Equivalents under
this Plan. The values of the Common Stock Equivalents, when credited, ranged
from $60.69 to $64.94.
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. Upon termination of service
and attaining 70 years of age, 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 the second quarter of 1999, the
Directors, as a group, received 3,028 Common Stock Equivalents under this Plan.
The value of each Common Stock Equivalent, when credited, ranged from $52.21 to
$61.63.
-20-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- ------------------------------------------
(a) Exhibits
(12) Computation of Ratio of Earnings to Fixed Charges.
(27) Financial Data Schedule.
(b) Reports on Form 8-K
(1) The Company filed a Form 8-K on June 17, 1999, dated June 2,
1999, reporting the acquisition by PPG of PRC-DeSoto
International, Inc. from Akzo Nobel N.V., subject to regulatory
approval.
-21-
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PPG INDUSTRIES, INC.
----------------------------------
(Registrant)
Date: July 27, 1999 By /s/ W. H. Hernandez
--------------------------------
W. H. Hernandez
Senior Vice President, Finance
(Principal Financial and
Accounting Officer and
Duly Authorized Officer)
-22-
<PAGE>
PPG INDUSTRIES, INC. AND SUBSIDIARIES
-------------------------------------
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
(12) Computation of Ratio of Earnings to Fixed Charges.
(27) Financial Data Schedule.
<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 Six Months
-------------------------------------------------- Ended
1994 1995 1996 1997 1998 June 30, 1999
------ ------ ------ ------ ------ -------------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Earnings before income taxes $ 840 $1,247 $1,215 $1,149 $1,267 $ 502
Plus:
Fixed charges exclusive of capitalized interest 108 113 124 136 139 70
Amortization of capitalized interest 11 12 13 13 12 5
Adjustments for equity affiliates and
minority interest (2) (4) (3) 0 (2) (1)
-------------------------------------------------------------------
Total $ 957 $1,368 $1,349 $1,298 $1,416 $ 576
===================================================================
Fixed Charges:
Interest expense including amortization of debt
discount/premium and debt expense $ 88 $ 91 $ 102 $ 113 $ 114 $ 57
Rentals - portion representative of interest 20 22 22 23 25 13
-------------------------------------------------------------------
Fixed charges exclusive of capitalized interest 108 113 124 136 139 70
Capitalized interest 5 9 12 10 9 5
-------------------------------------------------------------------
Total $ 113 $ 122 $ 136 $ 146 $ 148 $ 75
===================================================================
Ratio of earnings to fixed charges 8.4 11.3 9.9 8.9 9.6 7.7
===================================================================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PPG
INDUSTRIES, INC. JUNE 30, 1999 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 96
<SECURITIES> 0
<RECEIVABLES> 1,500
<ALLOWANCES> 0
<INVENTORY> 915
<CURRENT-ASSETS> 2,779
<PP&E> 6,792
<DEPRECIATION> 3,916
<TOTAL-ASSETS> 7,513
<CURRENT-LIABILITIES> 1,989
<BONDS> 1,051
0
0
<COMMON> 484
<OTHER-SE> 2,451
<TOTAL-LIABILITY-AND-EQUITY> 7,513
<SALES> 3,750
<TOTAL-REVENUES> 3,750
<CGS> 2,268
<TOTAL-COSTS> 2,268
<OTHER-EXPENSES> 388
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55
<INCOME-PRETAX> 512
<INCOME-TAX> 195
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 307
<EPS-BASIC> 1.77
<EPS-DILUTED> 1.75
</TABLE>
