PPG Industries (PPG) 10-Q 26 Apr 10 2010 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information
	3 Months Ended Mar. 31, 2010	Mar. 31, 2010
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2010-03-31
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1
Trading Symbol	PPG
Entity Registrant Name	PPG INDUSTRIES INC
Entity Central Index Key	0000079879
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		166,327,067

Condensed Consolidated Statemen

Condensed Consolidated Statement of Income (USD $)
In Millions, except Per Share data	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Net sales	$3,126	$2,783
Cost of sales, exclusive of depreciation and amortization	1,944	1,718
Selling, general and administrative	727	716
Depreciation	89	88
Amortization (Note 8)	32	30
Research and development	96	94
Interest expense	45	48
Asbestos settlement - net (Note 20)	3	4
Business restructuring (Note 6)		186
Other charges	20	17
Other earnings	(36)	(7)
Income (loss) before income taxes	206	(111)
Income tax expense (benefit) (Note 12)	147	(20)
Net income (loss) attributable to the controlling and noncontrolling interests	59	(91)
Less: net income attributable to noncontrolling interests	(29)	(20)
Net income (loss) (attributable to PPG)	$30	($111)
Earnings (loss) per common share (Note 11)	0.18	-0.68
Earnings (loss) per common share - assuming dilution (Note 11)	0.18	-0.68
Dividends per common share	0.54	0.53

Condensed Consolidated Balance

Condensed Consolidated Balance Sheet (USD $)
In Millions	3 Months Ended Mar. 31, 2010	12 Months Ended Dec. 31, 2009
Current assets:
Cash and cash equivalents	$689	$1,057
Receivables (less allowance for doubtful accounts of $115 million and $122 million)	2,809	2,628
Inventories (Note 7)	1,599	1,548
Other	825	748
Total current assets	5,922	5,981
Property (less accumulated depreciation of $5,549 million and $5,559 million)	2,660	2,754
Investments	503	499
Goodwill (Note 8)	2,687	2,784
Identifiable intangible assets (Note 8)	1,343	1,416
Other assets	641	806
Total	13,756	14,240
Current liabilities:
Short-term debt and current portion of long-term debt (Note 10)	112	272
Asbestos settlement (Note 20)	544	534
Accounts payable and accrued liabilities	2,685	2,648
Business restructuring (Note 6)	77	123
Total current liabilities	3,418	3,577
Long-term debt (Note 10)	3,051	3,074
Asbestos settlement (Note 20)	241	238
Deferred income taxes	319	328
Accrued pensions	914	944
Accrued other postretirement benefits	1,016	1,010
Other liabilities	1,008	1,147
Total liabilities	9,967	10,318
Commitments and contingent liabilities (Note 20)
Shareholders' equity (Note 15):
Common stock	484	484
Additional paid-in capital	580	609
Retained earnings	8,080	8,139
Treasury stock	(4,199)	(4,218)
Accumulated other comprehensive loss	(1,353)	(1,261)
Total PPG shareholders' equity	3,592	3,753
Noncontrolling interests	197	169
Total shareholders' equity	3,789	3,922
Total	$13,756	$14,240

1_Condensed Consolidated Balanc

Condensed Consolidated Balance Sheet (Parenthetical) (USD $)
In Millions	Mar. 31, 2010	Dec. 31, 2009
Receivables, allowance for doubtful accounts	$115	$122
Property, accumulated depreciation	$5,549	$5,559

2_Condensed Consolidated Statem

Condensed Consolidated Statement of Cash Flows (USD $)
In Millions	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Cash (used for) operating activities	($54)	($291)
Capital spending
Additions to property and long-term investments	(45)	(51)
Business acquisitions, net of cash balances acquired (2010 - $3) (Note 4)	(16)	(11)
Reductions of other property and investments	8	1
Release of cash held in escrow		17
Proceeds from termination of cross currency swap contracts	5
Payments on cross currency swap contracts	(45)	(44)
Cash used for investing activities	(93)	(88)
Debt:
Net change in borrowings with maturities of three months or less	(49)	(14)
Repayments of other short-term debt	(106)	(5)
Proceeds from issuance of long-term debt	2	27
Repayment of long-term debt	(2)	(1)
Other financing activities:
Issuance of treasury stock	20
Dividends paid	(90)	(87)
Cash used for financing activities	(225)	(80)
Effect of currency exchange rate changes on cash and cash equivalents	4	(31)
Net decrease in cash and cash equivalents	(368)	(490)
Cash and cash equivalents, beginning of period	1,057	1,021
Cash and cash equivalents, end of period	$689	$531

3_Condensed Consolidated Statem

Condensed Consolidated Statement of Cash Flows (Parenthetical) (USD $)
In Millions	3 Months Ended Mar. 31, 2010
Business acquisitions, cash balances acquired	$3

Basis of Presentation

Basis of Presentation
	3 Months Ended Mar. 31, 2010
Basis of Presentation	1. Basis of Presentation The condensed consolidated 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) as of March31, 2010, and the results of their operations and their cash flows for the three months ended March31, 2010 and 2009. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in PPGs Annual Report on Form 10-K for the year ended December31, 2009. The results of operations for the three months ended March31, 2010 are not necessarily indicative of the results to be expected for the full year.

Newly Adopted Accounting Standa

Newly Adopted Accounting Standards
	3 Months Ended Mar. 31, 2010
Newly Adopted Accounting Standards	2. Newly Adopted Accounting Standards In June 2009, the Financial Accounting Standards Board (FASB) issued revisions to the accounting guidance on consolidation of variable interest entities. On January1, 2010, PPG adopted the provisions of the new guidance, which did not have an impact on its consolidated results of operations, cash flows or financial position. Refer to Note 9, Variable Interest Entities for information related to PPGs sole variable interest entity, RS Cogen, L.L.C.

Fair Value Measurement

Fair Value Measurement
	3 Months Ended Mar. 31, 2010
Fair Value Measurement	3. Fair Value Measurement The accounting guidance on fair value measurement establishes a hierarchy with three levels of inputs used to determine fair value. Level 1 inputs are quoted prices in active markets for identical assets and liabilities, are considered to be the most reliable evidence of fair value, and should be used whenever available. Level 2 inputs are observable prices that are not quoted on active exchanges. Level 3 inputs are unobservable inputs used for measuring the fair value of assets or liabilities. Assets and liabilities reported at fair value on a recurring basis: ($ in Millions) At March31, 2010 Level1 Level2 Level3 Total Other current assets: Foreign currency contracts(1) $ $ 13 $ $ 13 Equity forward arrangement(2) 29 29 Marketable equity securities 4 4 Investments: Marketable equity securities 61 1 62 Other assets: Interest rate swaps(2) 11 11 Forward starting swaps(2) 1 1 Accounts payable and accrued liabilities: Foreign currency contracts(1) 7 7 Natural gas swap contracts(2) 40 40 Other liabilities: Cross currency swaps(2) 171 171 Natural gas swap contracts (2) 23 23 Forward starting swaps(2) 1 1 At December31, 2009 Other current assets: Foreign currency contracts(1) 3 3 Equity forward arrangement(2) 18 18 Marketable equity securities 4 4 Investments: Marketable equity securities 60 1 61 Other assets: Interest rate swaps(2) 10 10 Forward starting swaps(2) 3 3 Accounts payable and accrued liabilities: Foreign currency contracts(2) 8 8 Natural gas swap contracts(2) 37 37 Other liabilities: Natural gas swap contracts(2) 13 13 Cross currency swaps(2) 308 308 (1) The majority of this balance is designated as a hedging instrument under GAAP. (2) This entire balance is designated as a hedging instrument under GAAP. Assets and liabilities reported at fair value on a nonrecurring basis: As a result of finalizing a restructuring plan, as discussed in Note 6, Business Restructuring, long-lived assets with a carrying amount of $36 million were written-down to their fair value of $4 million, resulting in a charge of $32 million, which was included within the business restructuring charge in March 2009. These long-lived assets were valued using Level 3 inputs.

Acquisitions

Acquisitions
	3 Months Ended Mar. 31, 2010
Acquisitions	4. Acquisitions During the first quarter of 2010, PPG spent $16 million on acquisitions (net of cash acquired of $3 million) and during the first quarter of 2009, PPG spent $11 million, related to earn-out and holdback payments on acquisitions that were completed prior to December31, 2008.

Divestiture of Automotive Glass

Divestiture of Automotive Glass and Services Business
	3 Months Ended Mar. 31, 2010
Divestiture of Automotive Glass and Services Business	5. Divestiture of Automotive Glass and Services Business During the third quarter of 2007, the Company entered into an agreement to sell its automotive glass and services business to Platinum Equity (Platinum) for approximately $500 million. In the fourth quarter of 2007, PPG was notified that affiliates of Platinum had filed suit in the Supreme Court of the State of New York, County of New York, alleging that Platinum was not obligated to consummate the agreement. Platinum also terminated the agreement. PPG has sued Platinum and certain of its affiliates for damages, including the $25 million breakup fee stipulated by the terms of the agreement, based on various alleged actions of the Platinum parties. In July 2008, PPG entered into an agreement with affiliates of Kohlberg Company, LLC, under which PPG would divest the automotive glass and services business to a new company formed by affiliates of Kohlberg. The transaction with affiliates of Kohlberg was completed on September30, 2008, with PPG receiving total proceeds of $315 million, including $225 million in cash and two 6-year notes totaling approximately $90 million ($60 million at 8.5% interest and $30 million at 10% interest). Both notes, which may be prepaid at any time without penalty, are senior to the equity of the new company. In addition, PPG received a noncontrolling interest of approximately 40 percent in the new company, Pittsburgh Glass Works LLC. PPG accounts for its interest in Pittsburgh Glass Works LLC under the equity method of accounting from October1, 2008 onward. PPG has retained certain liabilities for pension and post-employment benefits earned for service up to September30, 2008, totaling $850 million at December31, 2009, for employees who were active as of the divestiture date and for individuals who were retirees of the business as of the divestiture date. PPG recognized expense of approximately $8 million and $11 million related to these obligations in the three months ended March31, 2010 and 2009, respectively. In addition, PPG is providing certain transition services, including information technology and accounting services, to Pittsburgh Glass Works LLC for a period of up to two years after the transaction date. In 2009, Pittsburgh Glass Works LLC ceased production at its Oshawa, Canada plant and also has announced that it will close its Hawkesbury, Canada plant in 2010. Under Canadian pension regulations, these plant closures will result in partial wind-ups of the pension plans for former employees in Canada that were retained by PPG. This will result in settlement charges against PPG earnings and required cash contributions to the plans in amounts that will be determined following the required review of the partial wind-ups by the Canadian pension authorities. The amount of each pretax charge and the cash contribution is currently estimated to be in the range of $20-$30 million and $10-$15 million, respectively. The deficits can be funded over the five year period following the effective date of the partial wind-ups. The settlement charges will be recorded following the approval of the partial wind-ups by the Canadian pension authorities and when

Business Restructuring

Business Restructuring
	3 Months Ended Mar. 31, 2010
Business Restructuring	6. Business Restructuring During the third quarter of 2008, the Company finalized a restructuring plan as part of implementing PPGs global transformation strategy and the integration of its 2008 acquisition of SigmaKalon. As part of that restructuring, PPG closed its coatings manufacturing facilities in Clarkson, Ont., Canada, and Geldermalsen, the Netherlands. Other staffing reductions in PPGs coatings businesses in North America and Europe occurred in 2009. PPG also closed its Owen Sound, Ont., Canada, glass manufacturing facility, and idled one float glass production line at its Mt. Zion, Ill., facility in the fourth quarter of 2008. Other actions included writing off idle production assets in PPGs fiber glass and chemicals businesses. In the third quarter of 2008, the Company recorded a charge of $163 million for business restructuring, including severance and other costs of $73 million, pension curtailments of $21 million and asset write-offs of $69 million. Severance and other restructuring costs related to the SigmaKalon acquisition totaling $33 million were recorded as part of the purchase price allocation, effectively increasing goodwill. The restructuring reserve recorded in 2008 totaled $196 million. The company incurred additional costs of approximately $6 million directly associated with the restructuring actions for demolition, dismantling, relocation and training, which were charged to expense as incurred. During the first quarter of 2009, the Company finalized a restructuring plan focused on further reducing its global cost structure, driven by global economic conditions, low end-market demand and acceleration of cost-savings from the integration of the 2008 acquisition of SigmaKalon. As part of the restructuring, PPG closed the paint manufacturing portion of its facility in Saultain, France at the end of 2009, as well as several smaller production, laboratory, warehouse and distribution facilities across PPGs businesses and regions, and reduced staffing across the company globally. In the first quarter of 2009, the Company recorded a charge of $186 million for business restructuring, including severance and other costs of $154 million and asset write-offs of $32 million. The Company also incurred approximately $11 million of additional costs directly associated with the restructuring actions for demolition, dismantling, relocation and training, which were charged to expense as incurred in the second half of 2009. In the fourth quarter of 2009, adjustments of approximately $10 million were recorded to reduce the remaining restructuring reserves established in 2008 and 2009 to reflect the current estimate of the costs to complete these actions. Also in the fourth quarter of 2009, some additional restructuring actions were approved and charges of approximately $10 million were recorded. At March31, 2010, about half of the remaining reserves for the 2008 and 2009 restructuring plans relate to severance that will be paid to certain of the former employees over the remainder of 2010. Substantially all of the remaining restructuring actions are expected to be completed in the second quarter of 2010. The following tabl

Inventories

Inventories
	3 Months Ended Mar. 31, 2010
Inventories	7. Inventories Inventories as of March31, 2010 and December31, 2009 are detailed below. March31, 2010 Dec. 31, 2009 (Millions) Finished products $ 937 $ 918 Work in process 138 125 Raw materials 408 390 Supplies 116 115 Total $ 1,599 $ 1,548 Most U.S. inventories are valued using the last-in, first-out method. These inventories represented approximately 34% and 35% of total inventories at March31, 2010 and December31, 2009, respectively. If the first-in, first-out method of inventory valuation had been used, inventories would have been $203 million and $224 million higher as of March31, 2010 and December31, 2009, respectively.

Goodwill and Other Identifiable

Goodwill and Other Identifiable Intangible Assets
	3 Months Ended Mar. 31, 2010
Goodwill and Other Identifiable Intangible Assets	8. Goodwill and Other Identifiable Intangible Assets The change in the carrying amount of goodwill attributable to each reportable segment for the three months ended March31, 2010 was as follows: Performance Coatings Industrial Coatings Architectural Coatings - EMEA Optical and Specialty Materials Commodity Chemicals Glass Total (Millions) Balance, Dec. 31, 2009 $ 1,143 $ 509 $ 1,021 $ 51 $ 3 $ 57 $ 2,784 Acquisitions 7 1 8 Currency (18 ) (20 ) (61 ) (2 ) (4 ) (105 ) Balance, March 31, 2010 $ 1,125 $ 489 $ 967 $ 49 $ 4 $ 53 $ 2,687 The carrying amount of acquired trademarks with indefinite lives as of March31, 2010 and December31, 2009 totaled $324 million and $334 million, respectively. The Companys identifiable intangible assets with finite lives are being amortized over their estimated useful lives and are detailed below. March31, 2010 December31, 2009 Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net (Millions) Acquired technology $ 513 $ (243 ) $ 270 $ 519 $ (234 ) $ 285 Customer-related intangibles 958 (295 ) 663 990 (286 ) 704 Trade names 117 (36 ) 81 122 (35 ) 87 Other 27 (22 ) 5 28 (22 ) 6 Balance $ 1,615 $ (596 ) $ 1,019 $ 1,659 $ (577 ) $ 1,082 Aggregate amortization expense related to these identifiable intangible assets for the three months ended March31, 2010 and 2009 was $32 million and $30 million, respectively. As of March31, 2010, estimated future amortization expense of identifiable intangible assets is as follows: $95million for the remaining quarters of 2010 and $130 million in each of the next five years.

Variable Interest Entities

Variable Interest Entities
	3 Months Ended Mar. 31, 2010
Variable Interest Entities	9. Variable Interest Entities PPG has a 50% ownership interest in RS Cogen, L.L.C., which toll produces electricity and steam, primarily for PPG and its joint venture partner. The joint venture was formed with a wholly-owned subsidiary of Entergy Corporation in 2000 for the construction and operation of a $300 million process steam, natural gas-fired cogeneration facility in Lake Charles, LA., the majority of which was financed by a syndicate of lenders. PPGs future commitment to purchase electricity and steam from the joint venture approximates $23 million per year subject to contractually defined inflation adjustments for the next 13 years. RS Cogen is a variable interest entity under U.S. accounting guidance. The joint ventures critical operations are overseen by a management committee, which has equal representation by PPG and Entergy. With the power to direct the activities of RS Cogen equally shared between RS Cogens two owners, PPG does not consider itself to be the joint ventures primary beneficiary. Accordingly, PPG accounts for its investment in RS Cogen as an equity method investment. The following table summarizes the Companys maximum exposure to loss associated with RS Cogen. (Millions) Investment in and advances to RS Cogen $ 7 Take-or-pay obligation under power tolling arrangement 300 Maximum exposure to loss as of March31, 2010 $ 307

Debt

Debt
	3 Months Ended Mar. 31, 2010
Debt	10. Debt During the first quarter of 2010, the Company repaid $106 million related to its 650million revolving credit facility. The Company currently has no amounts outstanding under this facility. This facility will expire in December of 2010. In October of 2009, the Company entered into an agreement with a counterparty to repurchase 1.2million shares of the Companys stock. Under the terms of the agreement, the counterparty purchased 1.1million shares in the open market and is now holding the shares until such time as the Company pays the agreed upon average price of $57.87 per share and takes possession of these shares. There will be no additional shares purchased under this agreement. These shares are not considered outstanding for the basic and diluted earnings per share calculations, and total shareholders equity at March31, 2010 has been reduced by $65 million representing the amount that will be paid by PPG to the counterparty upon settlement.

Earnings Per Common Share

Earnings Per Common Share
	3 Months Ended Mar. 31, 2010
Earnings Per Common Share	11. Earnings Per Common Share The following table presents the earnings (loss) per common share calculations for the three months ended March31, 2010 and 2009. Three Months Ended March31 (Millions, except per share amounts) 2010 2009 Earnings (loss) per common share (attributable to PPG) Net income (loss) (attributable to PPG) $ 30 $ (111 ) Weighted average common shares outstanding 165.9 164.0 Earnings (loss) per common share (attributable to PPG) $ 0.18 $ (0.68 ) Earnings (loss) per common share - assuming dilution (attributable to PPG) Net income (loss) (attributable to PPG) $ 30 $ (111 ) Weighted average common shares outstanding 165.9 164.0 Effect of dilutive securities: Stock options 0.6 0.0 Other stock compensation plans 0.5 0.4 Potentially dilutive common shares 1.1 0.4 Adjusted weighted average common shares outstanding 167.0 164.4 Earnings (loss) per common share - assuming dilution (attributable to PPG) $ 0.18 $ (0.68 ) Excluded from the computation of diluted earnings per share due to their antidilutive effect were 3.7million and 7.1million outstanding stock options for the three months ended March31, 2010 and 2009, respectively.

Income Taxes

Income Taxes
	3 Months Ended Mar. 31, 2010
Income Taxes	12. Income Taxes PPG recorded a one-time aftertax charge in the first quarter 2010 of $85 million, or 51 cents per share, as a result of a change in U.S. tax law included in the U.S. Patient Protection and Affordable Care Act enacted in March 2010. Under the prior tax law, the total amount paid for prescription drug costs for retirees over the age of 65 was tax deductible. Beginning in 2013, however, these costs will only be deductible to the extent they exceed the amount of the annual subsidy PPG receives from the U.S. government under Medicare Part D. As a result of this change, the companys deferred tax asset, which reflects the future tax deductibility of these post retirement costs, had to be reduced. This resulted in a charge against earnings in the period that the change in the tax law was enacted, as required by the accounting guidance for income taxes. While this charge will not have a cash impact in 2010, the $85 million represents the loss of future tax benefits beginning in 2013. The company estimates a negative cash impact of approximately $4 million in 2013, with the remainder realized over the many future years that these retiree prescription drug costs are expected to be paid. The Company files federal, state and local income tax returns in numerous domestic and foreign jurisdictions. In most tax jurisdictions, returns are subject to examination by the relevant tax authorities for a number of years after the returns have been filed. The Company is no longer subject to examinations by tax authorities in any major tax jurisdiction for years before 2002. Additionally, the Internal Revenue Service (IRS) has completed its examination of the Companys U.S. federal income tax returns filed for years through 2007. The IRS is currently conducting its examination of the Companys U.S. federal income tax return for 2008. This examination is expected to be completed in the first quarter of 2011 and is not expected to result in a significant adjustment to the Companys income tax expense.

Pensions and Other Postretireme

Pensions and Other Postretirement Benefits
	3 Months Ended Mar. 31, 2010
Pensions and Other Postretirement Benefits	13. Pensions and Other Postretirement Benefits The net periodic benefit costs for the three months ended March31, 2010 and 2009 were as follows: Pensions Other PostretirementBenefits Three Months EndedMarch31 Three Months Ended March31 2010 2009 2010 2009 (Millions) Service cost $ 17 $ 17 $ 5 $ 6 Interest cost 64 61 15 17 Expected return on plan assets (69 ) (56 ) Amortization of prior service cost 1 1 (1 ) (3 ) Amortization of actuarial losses 31 32 5 8 Net periodic pension cost $ 44 $ 55 $ 24 $ 28 PPG does not have a mandatory contribution to make to its U.S. defined benefit pension plans in 2010; however, PPG expects to make voluntary contributions of approximately $150 million to these plans in 2010. PPG expects to make mandatory contributions to its non-U.S. plans in 2010 of approximately $90 million, of which approximately $20 million was made as of March31, 2010.

Comprehensive Loss

Comprehensive Loss
	3 Months Ended Mar. 31, 2010
Comprehensive Loss	14. Comprehensive Loss Total comprehensive loss for the three months ended March31, 2010 and 2009 was as follows: Three Months EndedMarch31 2010 2009 (Millions) Net income (loss) attributable to the controlling and noncontrolling interests $ 59 $ (91 ) Other comprehensive loss, net of tax: Pension and other postretirement benefits 27 (20 ) Unrealized currency translation adjustment (112 ) (210 ) Net change derivatives (Note 17) (9 ) (22 ) Other comprehensive loss, net of tax (94 ) (252 ) Total comprehensive loss (35 ) (343 ) Less: amounts attributable to noncontrolling interests: Net income (29 ) (20 ) Unrealized currency translation adjustment 2 3 Comprehensive loss attributable to PPG $ (62 ) $ (360 )

Shareholders' Equity

Shareholders' Equity
	3 Months Ended Mar. 31, 2010
Shareholders' Equity	15. Shareholders Equity The following table presents the change in total shareholders equity for the three months ended March31, 2010 and 2009, respectively. (Millions) Total PPG Shareholders Equity Non-controlling Interests Total Balance, January1, 2010 $ 3,753 $ 169 $ 3,922 Net income 30 29 59 Other comprehensive loss, net of tax (92 ) (2 ) (94 ) Cash dividends (90 ) (90 ) Issuance of treasury stock 39 39 Stock-based compensation activity (10 ) (10 ) Equity forward agreement (Note 10) (38 ) (38 ) Other 1 1 Balance, March31, 2010 $ 3,592 $ 197 $ 3,789 Balance, January1, 2009 $ 3,333 $ 156 $ 3,489 Net (loss) income (111 ) 20 (91 ) Other comprehensive loss, net of tax (249 ) (3 ) (252 ) Cash dividends (87 ) (87 ) Issuance of treasury stock 17 17 Stock-based compensation activity (14 ) (14 ) Equity forward agreement(1) (59 ) (59 ) Balance, March31, 2009 $ 2,830 $ 173 $ 3,003 (1) In December of 2008, the Company entered into an agreement with a counterparty to repurchase 1.5million shares of the Companys stock. Under the terms of the agreement, the counterparty purchased the shares in the open market in January of 2009. These shares were not considered outstanding for basic and diluted earnings per share calculation, and total shareholders equity at March31, 2009 was reduced by $59 million, representing the amount that was paid by PPG to the counterparty upon settlement in December of 2009.

Financial Instruments, Excludin

Financial Instruments, Excluding Derivative Financial Instruments
	3 Months Ended Mar. 31, 2010
Financial Instruments, Excluding Derivative Financial Instruments	16. Financial Instruments, Excluding Derivative Financial Instruments Included in PPGs financial instrument portfolio are cash and cash equivalents, cash held in escrow, marketable equity securities, company-owned life insurance and short- and long-term debt instruments. The fair values of these financial instruments approximated their carrying values at March31, 2010 and December31, 2009, in the aggregate, except for long-term debt. Long-term debt (excluding capital lease obligations) had carrying and fair values totaling $3,023 million and $3,315 million, respectively, as of March31, 2010. Long-term debt (excluding capital lease obligations) had carrying and fair values totaling $3,046 million and $3,313 million, respectively, as of December31, 2009. The fair values of the debt instruments were based on discounted cash flows and interest rates then currently available to the Company for instruments of the same remaining maturities.

Derivative Financial Instrument

Derivative Financial Instruments and Hedge Activities
	3 Months Ended Mar. 31, 2010
Derivative Financial Instruments and Hedge Activities	17. Derivative Financial Instruments and Hedge Activities The Company recognizes all derivative financial instruments as either assets or liabilities at fair value on the balance sheet. The accounting for changes in the fair value of a derivative depends on the use of the instrument. To the extent that a derivative is effective as a cash flow hedge of an exposure to future changes in value, the change in fair value of the instrument is deferred in accumulated other comprehensive (loss) income (AOCI). Any portion considered to be ineffective is reported in earnings immediately, including changes in value related to credit risk. To the extent that a derivative is effective as a hedge of an exposure to future changes in fair value, the change in the derivatives fair value is offset in the condensed consolidated statement of income by the change in fair value of the item being hedged. To the extent that a derivative or a financial instrument is effective as a hedge of a net investment in a foreign operation, the change in the derivatives fair value is deferred as an unrealized currency translation adjustment in AOCI. PPGs policies do not permit speculative use of derivative financial instruments. PPG uses derivative instruments to manage its exposure to fluctuating natural gas prices through the use of natural gas swap contracts. PPG also uses forward currency and option contracts as hedges against its exposure to variability in exchange rates on short-term intercompany borrowings, unrecognized firm sales commitments and cash flows denominated in foreign currencies. PPG uses foreign denominated debt and cross currency swap contracts to hedge net investments in foreign operations. Interest rate swaps are used to manage the Companys exposure to changing interest rates as such rate changes affect the fair value of fixed rate borrowings. Forward starting swaps are used to lock-in a fixed interest rate, to which will be added a corporate spread, related to future long-term debt refinancings. PPG also uses an equity forward arrangement to hedge the Companys exposure to changes in the fair value of PPG stock that is to be contributed to the asbestos settlement trust as discussed in Note 20, Commitments and Contingent Liabilities. PPG enters into derivative financial instruments with high credit quality counterparties and diversifies its positions among such counterparties in order to reduce its exposure to credit losses. The Company did not realize a credit loss on derivatives during the three-month periods ended March31, 2010 or 2009. PPG centrally manages its foreign currency transaction risk to minimize the volatility in cash flows caused by currency fluctuations. Decisions on whether to use derivative financial instruments to hedge the net transaction exposures related to all regions of the world are made based on the amount of those exposures by currency and, in certain situations, an assessment of the near-term outlook for certain currencies. This net hedging strategy does not qualify for hedge accounting; therefore, the change in the fair value of these instruments is recorded in Other charges in the accompanying condensed consolidated

Cash Flow Information

Cash Flow Information
	3 Months Ended Mar. 31, 2010
Cash Flow Information	18. Cash Flow Information Cash used for operating activities for the three months ended March31, 2010 was $54 million versus $291 million for the comparable period of 2009. Cash used for operating activities in 2009 included the negative impact of cash contributions to our pension plans of approximately $176 million, while there were only $20 million of cash contributions to our pension plans in the first quarter of 2010. Additionally, higher earnings and a smaller increase in working capital in the first quarter of 2010 also contributed to the reduction in the amount of cash used for operations in the first quarter of 2010. Cash payments for interest were $67 million and $70 million for the three months ended March31, 2010 and 2009, respectively. Cash payments for income taxes for the three months ended March31, 2010 and 2009 were $30 million.

Stock-Based Compensation

Stock-Based Compensation
	3 Months Ended Mar. 31, 2010
Stock-Based Compensation	19. Stock-Based Compensation The Companys stock-based compensation includes stock options, restricted stock units (RSUs) and grants of contingent shares that are earned based on achieving targeted levels of total shareholder return. All current grants of stock options, RSUs and contingent shares are made under the PPG Industries, Inc. Omnibus Incentive Plan (PPG Omnibus Plan). Shares available for future grants under the PPG Omnibus Plan were 4.1million as of March31, 2010. Total stock-based compensation cost was $14 million and $7 million for the three months ended March31, 2010 and 2009, respectively. The total income tax benefit recognized in the accompanying condensed consolidated statement of income related to the stock-based compensation was $5 million and $2 million for the three months ended March31, 2010 and 2009, respectively. Stock Options PPG has outstanding stock option awards that have been granted under two stock option plans: the PPG Industries, Inc. Stock Plan (PPG Stock Plan) and the PPG Omnibus Plan. Under the PPG Omnibus Plan and the PPG Stock 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 options were granted. The options are generally exercisable beginning from six to 48 months after being granted and have a maximum term of 10 years. Upon exercise of a stock option, shares of Company stock are issued from treasury stock. The PPG Stock Plan includes a restored option provision for options originally granted prior to January1, 2003 that allows an optionee to exercise options and satisfy the option price by certifying ownership of mature shares of PPG common stock with equivalent market value. In the first quarter of 2010, PPG granted 900,170 stock options under the PPG Omnibus Plan at a weighted average exercise price of $61.81 per share. The weighted average fair value of options granted was $13.36 per share. In the first quarter of 2009, PPG granted 926,380 stock options from the PPG Omnibus Plan, at a weighted average exercise price of $34.19 per share. The weighted average fair value of options granted was $6.79 per share. The fair value of stock options issued to employees is measured on the date of grant and is recognized as expense over the requisite service period. PPG estimates the fair value of stock options using the Black-Scholes option pricing model. The risk-free interest rate is determined by using the U.S. Treasury yield curve at the date of the grant and using a maturity equal to the expected life of the option. The expected life of options is calculated using the average of the vesting term and the maximum term, as prescribed by accounting guidance on the use of the simplified method for determining the expected term of an employee share option. This method is used as the vesting terms of stock options were changed in 2004 to a three year vesting term, and as a result, the historical exercise data does not provide a reasonable basis upon which to estimate the expected life of options. The expected dividend yield and volatility are based on historical stock prices and di

Commitments and Contingent Liab

Commitments and Contingent Liabilities
	3 Months Ended Mar. 31, 2010
Commitments and Contingent Liabilities	20. 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 monetary damages are sought. These lawsuits and claims, the most significant of which are described below, relate to contract, patent, environmental, product liability, antitrust and other matters arising out of the conduct of PPGs current and past business activities. To the extent that these lawsuits and claims involve personal injury and property damage, PPG believes it has adequate insurance; however, certain of PPGs insurers are contesting coverage with respect to some of these claims, and other insurers, as they had prior to the asbestos settlement described below, may contest coverage with respect to some of the asbestos claims if the settlement is not implemented. PPGs lawsuits and claims against others include claims against insurers and other third parties with respect to actual and contingent losses related to environmental, asbestos and other matters. The result of any future litigation of such lawsuits and claims is inherently unpredictable. However, management believes that, in the aggregate, the outcome of all lawsuits and claims involving PPG, including asbestos-related claims in the event the settlement described below does not become effective, will not have a material effect on PPGs condensed consolidated financial position or liquidity; however, such outcome may be material to the results of operations of any particular period in which costs, if any, are recognized. Antitrust Matters Several complaints were filed in late 2007 and early 2008 in different federal courts naming PPG and other flat glass producers as defendants in purported antitrust class actions. The complaints allege that the defendants conspired to fix, raise, maintain and stabilize the price and the terms and conditions of sale of flat glass in the United States in violation of federal antitrust laws. In June 2008, these cases were consolidated into one federal court class action in Pittsburgh, Pa. Many allegations in the complaints are similar to those raised in ongoing proceedings by the European Commission in which fines were levied against other flat glass producers arising out of alleged antitrust violations. PPG is not involved in any of the proceedings in Europe. PPG divested its European flat glass business in 1998. A complaint containing allegations substantially similar to the U.S. litigation was filed in the Superior Court in Windsor, Ontario, Canada in August 2008 regarding the sale of flat glass in Canada. PPG is aware of no wrongdoing or conduct on its part in the operation of its flat glass business that violated any antitrust laws, and it intends to vigorously defend its position. Asbestos Matters For over 30 years, PPG has been a defendant in lawsuits involving claims alleging personal injury from exposure to asbestos. Most of PPGs potential exposure relates to allegations by plaintiffs that PPG should be liable for injuries involving asbestos-containing thermal insulation products, known as Unibestos, manufactured and distributed by

Reportable Segment Information

Reportable Segment Information
	3 Months Ended Mar. 31, 2010
Reportable Segment Information	21. Reportable Segment Information PPG is a multinational manufacturer with 13 operating segments that are organized based on the Companys major products lines. These operating segments are also the Companys reporting units for purposes of testing goodwill for impairment. The operating segments have been aggregated based on economic similarities, the nature of their products, production processes, end-use markets and methods of distribution into six reportable business segments. The Performance Coatings reportable segment is comprised of the refinish, aerospace, architectural coatings Americas and Asia Pacific and protective and marine coatings operating segments. This reportable segment primarily supplies a variety of protective and decorative coatings, sealants and finishes along with paint strippers, stains and related chemicals, as well as transparencies and transparent armor. The Industrial Coatings reportable segment is comprised of the automotive, industrial and packaging coatings operating segments. This reportable segment primarily supplies a variety of protective and decorative coatings and finishes along with adhesives, sealants, inks and metal pretreatment products. The Architectural Coatings EMEA reportable segment is comprised of the architectural coatings EMEA operating segment. This reportable segment primarily supplies a variety of coatings under a number of brands and purchased sundries to painting contractors and consumers in Europe, the Middle East and Africa. The Optical and Specialty Materials reportable segment is comprised of the optical products and silicas operating segments. The primary Optical and Specialty Materials products are Transitions lenses, sunlenses, optical lens materials, amorphous precipitated silica products and Teslin synthetic printing sheet. Transitions lenses are processed and distributed by PPGs 51%-owned joint venture with Essilor International. The Commodity Chemicals reportable segment is comprised of the chlor-alkali and derivatives operating segment. The primary chlor-alkali and derivative products are chlorine, caustic soda, vinyl chloride monomer, chlorinated solvents, calcium hypochlorite, ethylene dichloride, hydrochloric acid and phosgene derivatives. The Glass reportable segment is comprised of the performance glazings and fiber glass operating segments. This reportable segment primarily supplies flat glass and continuous-strand fiber glass products. Reportable segment net sales and segment income (loss) for the three months ended March31, 2010 and 2009 were as follows: ThreeMonthsEnded March31 2010 2009 (Millions) Net sales: Performance Coatings $ 965 $ 928 Industrial Coatings 893 644 Architectural Coatings - EMEA 436 409 Optical and Specialty Materials 284 245 Commodity Chemicals 328 361 Glass 220 196 Total (a) $ 3,126 $ 2,783 Segment income (loss): Performance Coatings $ 127 $ 89 Industrial Coatings 101 (16 ) Architectural Coati