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 September 30, 2001 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 September 30, 2001, 168,373,621 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
----- _____
PPG INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
PAGE(S)
Part I. Financial Information
Item 1. Financial Statements (Unaudited):
Condensed Statement of Income............................................ 2
Condensed Balance Sheet.................................................. 3
Condensed Statement of Cash Flows........................................ 4
Notes to Condensed Financial Statements.................................. 5-13
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................ 14-19
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................................... 21-22
Signature..................................................................... 23
-1-
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
-----------------------------
PPG INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Statement of Income (Unaudited)
-----------------------------------------
(Millions, except per share amounts)
Three Months Nine Months
Ended Sept. 30 Ended Sept. 30
-------------- --------------
2001 2000 2001 2000
------ ------ ------ ------
Net sales........................................ $1,999 $2,144 $6,262 $6,571
Cost of sales.................................... 1,261 1,337 3,927 4,048
------ ------ ------ ------
Gross profit................................... 738 807 2,335 2,523
------ ------ ------ ------
Other expenses (earnings):
Selling, general and administrative............ 348 329 1,041 999
Depreciation................................... 93 94 281 281
Research and development....................... 66 72 200 212
Interest....................................... 43 43 137 130
Amortization................................... 18 18 54 55
Business realignments (Note 3)................. 2 6 103 6
Other, net..................................... 15 (4) (9) (8)
------ ------ ------ ------
Total other expenses - net................... 585 558 1,807 1,675
------ ------ ------ ------
Income before income taxes and minority
interest....................................... 153 249 528 848
Income taxes..................................... 55 92 197 333
Minority interest................................ 5 7 27 21
------ ------ ------ ------
Net income....................................... $ 93 $ 150 $ 304 $ 494
====== ====== ====== ======
Earnings per common share (Note 2)............... $ 0.56 $ 0.87 $ 1.81 $ 2.85
====== ====== ====== ======
Earnings per common share - assuming
dilution (Note 2).............................. $ 0.55 $ 0.86 $ 1.80 $ 2.82
====== ====== ====== ======
Dividends per common share....................... $ 0.42 $ 0.40 $ 1.26 $ 1.20
====== ====== ====== ======
The accompanying notes to the condensed financial statements are an integral
part of this statement.
-2-
PPG INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Balance Sheet (Unaudited)
-----------------------------------
Sept. 30 Dec. 31
2001 2000
------- --------
Assets (Millions)
------
Current assets:
Cash and cash equivalents..................................... $ 159 $ 111
Receivables-net............................................... 1,534 1,563
Inventories (Note 4).......................................... 1,006 1,121
Other......................................................... 285 298
------- --------
Total current assets...................................... 2,984 3,093
Property (less accumulated depreciation of $4,352 million
and $4,148 million)........................................... 2,791 2,941
Investments...................................................... 302 320
Goodwill (less accumulated amortization of $151 million and
$128 million)................................................. 992 1,032
Identifiable intangible assets (less accumulated
amortization of $130 million and $102 million)................ 582 616
Prepaid pension asset............................................ 972 919
Other assets..................................................... 205 204
------- --------
Total..................................................... $ 8,828 $ 9,125
======= ========
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Short-term debt and current portion of long-term debt......... $ 944 $ 1,161
Accounts payable and accrued liabilities...................... 1,368 1,382
------- --------
Total current liabilities................................. 2,312 2,543
Long-term debt................................................... 1,720 1,810
Deferred income taxes............................................ 555 543
Accumulated provisions........................................... 488 475
Other postretirement benefits.................................... 523 529
------- --------
Total liabilities......................................... 5,598 5,900
------- --------
Commitments and contingent liabilities (Note 9)
Minority interest................................................ 127 128
------- --------
Shareholders' equity:
Common stock.................................................. 484 484
Additional paid-in capital.................................... 109 102
Retained earnings............................................. 6,538 6,444
Treasury stock................................................ (3,498) (3,508)
Unearned compensation......................................... (118) (114)
Accumulated other comprehensive loss (Note 5)................. (412) (311)
------- --------
Total shareholders' equity................................ 3,103 3,097
------- --------
Total..................................................... $ 8,828 $ 9,125
======= ========
The accompanying notes to the condensed financial statements are an integral
part of this statement.
-3-
PPG INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Statement of Cash Flows (Unaudited)
---------------------------------------------
Nine Months Ended
-----------------
Sept. 30
--------
2001 2000
----- ----
(Millions)
Cash from operating activities........................... $ 766 $ 612
----- ------
Investing activities:
Capital spending
Additions to property and investments............. (223) (333)
Business acquisitions, net of cash balances
acquired...................................... (8) (114)
Reduction of property and investments................. 23 16
Other................................................. - 1
----- ------
Cash used for investing activities................ (208) (430)
----- ------
Financing activities:
Net change in borrowings with
maturities of three months or less................ (260) 126
Proceeds from other short-term debt................... 142 212
Repayment of other short-term debt.................... (174) (212)
Proceeds from long-term debt.......................... 26 26
Repayment of long-term debt........................... (35) (35)
Loans to employee stock ownership plan................ (32) (24)
Repayment of loans by employee stock
ownership plan.................................... 29 31
Issuance (purchase) of treasury stock, net............ 7 (118)
Dividends paid........................................ (212) (208)
----- ------
Cash used for financing activities................ (509) (202)
----- ------
Effect of currency exchange rate changes
on cash and cash equivalents.......................... (1) (3)
----- ------
Net increase (decrease) in cash and cash equivalents..... 48 (23)
Cash and cash equivalents, beginning of period........... 111 158
----- ------
Cash and cash equivalents, end of period................. $ 159 $ 135
===== ======
The accompanying notes to the condensed financial statements are an integral
part of this statement.
-4-
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 September 30, 2001, and the results of their operations
for the three and nine month periods ended September 30, 2001 and 2000 and
their cash flows for the nine month periods then ended. 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, 2000.
The results of operations for the nine months ended September 30, 2001 are
not necessarily indicative of the results to be expected for the full year.
In the fourth quarter of 2000 the Company changed its policy for
classifying freight costs from a deduction in arriving at net sales to an
expense in cost of sales as required by Emerging Issues Task Force 00-10,
"Accounting for Shipping and Handling Fees and Costs." As a result, sales
and cost of sales have been restated by an equal amount for each 2000
period presented.
Change in Method of Accounting
Effective January 1, 2001, PPG adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities" as amended by SFAS No. 138, "Accounting
for Certain Derivative Instruments and Certain Hedging Activities." These
standards require the Company to recognize all derivatives as either assets
or liabilities at fair value in its balance sheet. The accounting for
changes in the fair value of a derivative depends on the use of the
derivative. To the extent that a derivative is effective as a hedge of a
future exposure to changes in value, the fair value of the derivative is
deferred in other comprehensive income or as an adjustment to the carrying
amount of the hedged item. Any portion considered to be ineffective is
reported in earnings immediately.
Adoption of these new standards on January 1, 2001 resulted in an increase
in current assets, current liabilities and other comprehensive income of
$70 million, $26 million and $43 million, respectively, with a cumulative
after-tax increase in net income of less than $1 million.
-5-
2. Earnings Per Common Share
-------------------------
The following table reflects the earnings per common share calculations for
the three and nine months ended September 30, 2001 and 2000.
Three Months Nine Months
Ended Sept. 30 Ended Sept. 30
-------------------- --------------------
2001 2000 2001 2000
------ ------ ------ ------
(Millions, except per share amounts)
Earnings per common share
Net income.......................................... $ 93 $ 150 $ 304 $ 494
------ ------ ------ ------
Weighted average common shares outstanding.......... 168.3 172.8 168.3 173.5
------ ------ ------ ------
Earnings per common share........................... $ 0.56 $ 0.87 $ 1.81 $ 2.85
====== ====== ====== ======
Earnings per common share - assuming dilution
Net income.......................................... $ 93 $ 150 $ 304 $ 494
------ ------ ------ ------
Weighted average common shares outstanding.......... 168.3 172.8 168.3 173.5
Effect of dilutive securities:
Stock options...................................... 0.2 0.1 0.2 0.1
Other stock compensation plans..................... 0.8 1.3 0.7 1.3
------ ------ ------ ------
Potentially dilutive common shares.................. 1.0 1.4 0.9 1.4
------ ------ ------ ------
Adjusted weighted average common shares
outstanding........................................ 169.3 174.2 169.2 174.9
------ ------ ------ ------
Earnings per common share - assuming dilution....... $ 0.55 $ 0.86 $ 1.80 $ 2.82
====== ====== ====== ======
3. Business Realignments
---------------------
During the first quarter of 2001, the Company finalized plans to reduce costs,
increase efficiencies and accelerate performance improvement and took a charge
of $101 million for restructuring and other related activities, including
severance and other costs of $67 million and asset dispositions of $34 million.
It is expected that substantially all of these amounts will be spent by June
2002.
Severance and Asset Total Employees
Other Costs Dispositions Charge Covered
----------- ------------ ------ -------
(Millions, except employee amounts)
Coatings................. $ 60 $ 23 $ 83 1,072
Glass.................... 4 6 10 254
Chemicals................ 2 5 7 23
Corporate................ 1 - 1 18
---- ---- ---- -----
Total PPG............... $ 67 $ 34 $101 1,367
Activity................ (24) (25) (49) (785)
---- ---- ---- -----
Balance, end of period.. $ 43 $ 9 $ 52 582
==== ==== ==== =====
-6-
An additional $2 million of restructuring costs were incurred in the third
quarter of 2001.
During 2000, the Company finalized restructuring plans for certain locations
related to the integration of the automotive and industrial coatings businesses
of Imperial Chemical Industries PLC (the ICI business) and PRC-DeSoto
International, Inc. (PRC-DeSoto). These restructuring plans were originally
developed at the acquisition date (principally July 1999). The plans cover
severance benefits for 618 employees, as well as other costs, and resulted in an
increase to goodwill of $24 million and a charge of $1 million in 2000. As of
September 30, 2001, $20 million has been paid to 618 employees. The balance of
the reserve, $5 million, will cover lease costs, which run through the
termination of a lease, and other exit costs.
During 2000, PPG Auto Glass L.L.C. (PPG Auto Glass) accrued severance and other
restructuring related costs of $10 million, resulting in an increase to goodwill
of $6 million and a pretax charge of $4 million. In addition, PPG Auto Glass
incurred one-time integration costs of $2 million. The restructuring plans
include severance benefits for 133 employees and other exit costs. As of
September 30, 2001, $8 million has been paid, including $2 million to 133
employees. The remaining reserve of $2 million will cover lease costs, which
run through the termination of the leases, and other exit costs.
In the fourth quarter of 2000, the Company took charges of $3 million related to
work force reductions in the coatings business for 65 people. These actions were
completed in 2001.
During 1999, the Company approved restructuring plans associated with the
integration of the packaging coatings acquisition and cost reduction activities
across all of the businesses that resulted in charges of $47 million. The
components of the plans included severance benefits for 519 employees and
estimated losses of $17 million on the disposition of a redundant European
facility and the disposition of the assets of a U.S. coatings facility.
Additionally in 2000, severance reserves for 121 people totaling $5 million were
reversed due to changes in estimates. As of September 30, 2001, the asset
dispositions are complete and $23 million has been paid under the plans to 385
employees and to cover other exit costs. The remaining balance of $2 million
will be substantially utilized in 2001.
4. Inventories
-----------
Inventories at September 30, 2001 and December 31, 2000 are detailed below.
Sept. 30 Dec. 31
2001 2000
-------- -------
(Millions)
Finished products and work in process........... $ 706 $ 807
Raw materials................................... 181 198
Supplies........................................ 119 116
-------- -------
Total....................................... $ 1,006 $ 1,121
======== =======
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 $171 million and $183 million higher at
September 30, 2001 and December 31, 2000, respectively.
-7-
5. Comprehensive Income
--------------------
Total comprehensive income for the three and nine months ended September
30, 2001 and 2000 was as follows:
Three Months Nine Months
Ended Sept. 30 Ended Sept. 30
----------------- -----------------
2001 2000 2001 2000
------ ------ ------ ------
(Millions)
Net income......................................... $ 93 $ 150 $ 304 $ 494
Other comprehensive income (loss), net of tax:
Currency translation adjustment.................. 15 (56) (86) (145)
Minimum pension liability adjustment............. - - (6) 2
Unrealized (losses) gains on marketable
securities...................................... (1) 1 7 (4)
Transition adjustment on
derivatives (Note 1)............................ - - 43 -
Net change - derivatives (Note 8)................. (2) - (59) -
------ ------ ------ ------
12 (55) (101) (147)
------ ------ ------ ------
Total comprehensive income...................... $ 105 $ 95 $ 203 $ 347
====== ====== ====== ======
As of September 30, 2001 and December 31, 2000, accumulated other
comprehensive loss net of tax, as reflected on the condensed balance sheet,
was comprised of the following:
Sept. 30 Dec. 31
2001 2000
----- -----
(Millions)
Accumulated derivative loss (Note 8)............ $ (16) $ -
Currency translation adjustment................. (368) (282)
Minimum pension liability adjustment............ (35) (29)
Unrealized gains on marketable securities....... 7 -
----- -----
Accumulated other comprehensive loss.......... $(412) $(311)
===== =====
6. Cash Flow Information
---------------------
Cash payments for interest totaled $153 million for each of the nine months
ended September 30, 2001 and 2000. Net cash payments for income taxes for
the nine months ended September 30, 2001 and 2000 were $134 million and
$251 million, respectively.
-8-
7. Business Segment Information
----------------------------
Business segment net sales and operating income for the three and nine
months ended September 30, 2001 and 2000 were as follows:
Three Months Nine Months
Ended Sept. 30 Ended Sept. 30
---------------------- ----------------------
2001 2000 2001 2000
------ ------ ------ ------
(Millions)
Net sales:
Coatings (a)............................... $1,068 $1,133 $3,340 $3,549
Glass (b).................................. 554 604 1,745 1,777
Chemicals (c).............................. 378 409 1,185 1,255
Intersegment net sales..................... (1) (2) (8) (10)
------ ------ ------ ------
Total................................... $1,999 $2,144 $6,262 $6,571
====== ====== ====== ======
Operating income:
Coatings................................... $ 123 $ 164 $ 359 $ 536
Glass (d).................................. 49 94 233 304
Chemicals.................................. 25 37 74 161
------ ------ ------ ------
Total................................... 197 295 666 1,001
Interest expense - net....................... (37) (41) (124) (122)
Other unallocated corporate
expense - net (e).......................... (7) (5) (14) (31)
------ ------ ------ ------
Income before income taxes and
minority interest (f)...................... $ 153 $ 249 $ 528 $ 848
====== ====== ====== ======
(a) Includes intersegment net sales of $2 million for each of the nine
months ended September 30, 2001 and 2000.
(b) Includes intersegment net sales of $1 million for the nine months
ended September 30, 2000.
(c) Includes intersegment net sales of $1 million and $2 million for the
three months ended September 30, 2001 and 2000, respectively, and $6
million and $7 million for the nine months ended September 30, 2001 and
2000, respectively.
(d) Includes in each 2000 period presented, pretax charges of $7 million
for restructuring and one-time integration costs related to PPG Auto Glass.
(e) Includes for the nine months ended September 30, 2000, a pretax charge
of $39 million representing the write-off of an equity investment in
Pittsburgh Corning Corporation, which filed for reorganization under the
federal bankruptcy code. Also included is a $9 million pretax gain from
the sale of corporate assets and net insurance recoveries of $4 million.
(f) Includes for the nine months ended September 30, 2001, a pretax
charge of $101 million for restructuring and other related activities,
including severance and other costs of
-9-
$67 million and asset dispositions of $34 million. See Note 3, "Business
Realignments," for amounts by business segment.
8. Derivative Financial Instruments
--------------------------------
PPG is exposed to certain market risks arising from transactions that are
entered into in the normal course of business. The Company may enter into
derivative financial instrument transactions in order to manage or reduce
this market risk. PPG's policies do not permit active trading of, or
speculation in, derivative financial instruments.
PPG manages its foreign currency transaction risk to minimize the
volatility of cash flows caused by currency fluctuations by forecasting
foreign currency-denominated cash flows of each subsidiary for a 12-month
period and aggregating these cash inflows and outflows in each currency to
determine the overall net transaction exposures. Decisions on whether to
use derivative financial instruments to hedge the net transaction exposures
are made based on the amount of those exposures, by currency, and an
assessment of the near-term outlook for each currency. The Company's
policy permits the use of foreign currency forward and option contracts to
hedge up to 70% of its anticipated net foreign currency cash flows over the
next 12-month period. These contracts do not qualify for hedge accounting.
Therefore, the change in the fair value of these instruments is recorded in
earnings in the period of change in "Other, net" in the condensed statement
of income. Such amount was not material for the periods ended September 30,
2001.
The sales, costs, assets and liabilities of our non-U.S. operations must be
reported in U.S. dollars in order to prepare consolidated financial
statements which gives rise to translation risk. The Company monitors its
exposure to translation risk and enters into derivative foreign currency
contracts to hedge its exposure, as deemed appropriate. This risk
management strategy does not qualify for hedge accounting under the
provisions of SFAS No. 133; therefore, the change in the fair value of
these instruments is recorded in earnings in the period of change in
"Other, net" in the condensed statement of income. Such amount was not
material for the periods ended September 30, 2001.
PPG designates forward currency contracts as hedges against the Company's
exposure to variability in exchange rates on intercompany borrowings
denominated in foreign currencies. To the extent effective, changes in the
fair value of these instruments are deferred in other comprehensive income
and subsequently reclassified to "Other, net" in the condensed statement of
income as foreign exchange gains and losses are recognized on the
intercompany borrowings. The portion of the change in fair value
considered to be ineffective is reported in "Other, net" in the condensed
statement of income. Such amount was not material for the periods ended
September 30, 2001.
The Company manages its interest rate risk in order to balance its exposure
to fixed and variable rates while attempting to minimize its interest
costs. Generally, the Company maintains variable interest rate debt at a
level of 25% to 50% of total borrowings. PPG principally manages its fixed
and variable interest rate risk by retiring and issuing debt from time to
time. To a limited extent, PPG manages its interest rate risk through the
use of interest rate swaps. Currently, these swaps convert fixed rate
exposure to variable rate and are designated as fair value hedges. As such,
the swaps are carried at fair value. As of January 1, 2001 and September
30, 2001, the fair value of interest rate swaps was not material.
-10-
Currently, the Company's principal use of derivative financial instruments
is to manage its exposure to fluctuating natural gas prices through the use
of natural gas swap and option contracts. To the extent that these
instruments are effective in hedging PPG's exposure to price changes,
changes in the hedge contracts' fair values are deferred in other
comprehensive income and reclassified to cost of sales as the natural gas
is purchased. As of January 1, and September 30, 2001, the fair value of
these contracts was an asset of $62 million and a liability of $21 million,
respectively. Changes in the time value of option contracts are excluded
from the Company's assessment of hedge effectiveness and reported in
earnings immediately. The amount of ineffectiveness, which is reported in
"Other, net" in the condensed statement of income for the periods ended
September 30, 2001, was not material.
No derivative instrument initially designated as a hedge instrument was
undesignated or discontinued as a hedging instrument for the quarter ended
September 30, 2001. As of September 30, 2001, the derivative instruments
that hedge PPG's exposure to changes in natural gas prices and exchange
rates mature within the next twelve months. During the three and nine
months ended September 30, 2001, $(13) million and $13 million,
respectively, of accumulated (loss) gain on derivatives, net of tax, was
realized and reclassified from accumulated other comprehensive income to
earnings, and other comprehensive income decreased by $15 million and $46
million, respectively, from a decline in the fair value of derivatives
held, net of tax.
9. 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 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.
For over thirty years, the Company has been a defendant in lawsuits
involving claims alleging personal injury from exposure to asbestos.
Aggregate settlements by PPG to date have been immaterial. Over the past
few years, the number of asbestos-related claims against the Company, as
well as numerous other defendants, has increased. At September 30, 2001,
the Company was one of many defendants in numerous asbestos-related
lawsuits involving approximately 116,000 claims. In many of the cases, the
plaintiffs allege that the Company should be liable for injuries from
products manufactured and distributed by Pittsburgh Corning Corporation
("PC"). The Company and Corning Incorporated are each 50% shareholders of
PC. The Company believes it is not responsible for any injuries caused by
PC products and intends to defend against such claims. Prior to 2000, PPG
had never been found liable for any such claims, and in numerous cases PPG
had been dismissed on motions prior to trial. In January 2000, in a trial
in a state court in Texas involving six plaintiffs, the jury found PPG not
liable. However, a week later in a separate trial also in a state court in
Texas, another jury found PPG, for the first time, partly responsible for
injuries to five plaintiffs alleged to be caused by PC products. The
Company intends to appeal that verdict.
On April 16, 2000, PC filed for Chapter 11 bankruptcy in the Federal
Bankruptcy Court in Pittsburgh, Pennsylvania. Accordingly, in the first
quarter of 2000, the Company recorded an after-tax charge of $35 million
for the write-off of all of its equity investment
-11-
in PC. As a consequence of the bankruptcy filing and the various motions
and orders in that proceeding, the asbestos litigation against PC and PPG
has been stayed, and the filing of additional asbestos suits against them
has been enjoined, until November 30, 2001. During the pendency of the
stay, interested parties, including PC and PPG, among others, have been
engaged in discussions to determine whether a settlement of all current and
potential asbestos claims can be agreed on within the context of the PC
bankruptcy proceeding. These settlement discussions involve numerous,
complex issues. Accordingly, it is impossible to predict whether or on what
terms a voluntary settlement, if any, on the part of PPG might be reached.
Although PPG believes it has adequate insurance for the lawsuits and claims
against PPG described above, certain of PPG's insurers are contesting
coverage with respect to some of these claims. 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, asbestos
and other matters. Except with respect to any PPG contribution arising out
of a possible voluntary settlement of asbestos claims as discussed above,
the amount of which cannot be predicted, 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 generally not discounted.
As of September 30, 2001 and December 31, 2000, PPG had reserves for
environmental contingencies totaling $98 million and $84 million,
respectively. Pretax charges against income for environmental remediation
costs for the three and nine months ended September 30, 2001 totaled $20
million and $27 million, respectively, and $4 million and $10 million,
respectively, for the three and nine months ended September 30, 2000. Cash
outlays related to such environmental remediation for the nine months ended
September 30, 2001 and 2000 aggregated $13 million.
Management anticipates that the resolution of the Company's environmental
contingencies will occur over an extended period of time. The pretax
charge for environmental remediation costs for 2001 is expected to be in
the range of $30 million to $35 million. 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, 2000. 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
-12-
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.
A major customer of one of the Company's Asian coatings joint ventures is
experiencing financial difficulties. Should this customer be unable to pay
the amounts owed to our investee or cease operations, our loss would be
limited to the carrying value of the Company's investment in the joint
venture which was approximately $20 million as of September 30, 2001.
-13-
Item 2. Management's Discussion and Analysis of Financial Condition and
-------------------------------------------------------------------------
Results of Operations
---------------------
Performance for Third Quarter of 2001 Compared to Third Quarter of 2000
Performance Overview
Sales decreased 7% for the third quarter of 2001 to $2.00 billion compared to
$2.14 billion for the third quarter of 2000. The combination of a 7% volume
decline across all of our business segments and a 1% decline from the negative
effects of foreign currency translation primarily in our coatings segment
contributed to the sales decline. These negative factors were partially offset
by a 1% increase due to higher selling prices primarily in our glass segment.
The gross profit percentage decreased to 36.9% for the third quarter of 2001
compared to 37.6% for the third quarter of 2000. The decrease in the gross
profit percentage was due to unfavorable sales mix changes primarily in our
coatings and glass businesses.
Net income and earnings per share, diluted, for the third quarter of 2001 were
$93 million and $0.55, respectively, compared to $150 million and $0.86,
respectively, for the same quarter in 2000. Net income for the third quarter of
2000 included after-tax restructuring and one-time integration costs of $3
million related to PPG Auto Glass L.L.C. (PPG Auto Glass). Excluding these
charges, net income and earnings per share, diluted, for the third quarter of
2000 were $153 million and $0.88, respectively. The decrease in net income was
due to lower sales volumes across all of our businesses and higher environmental
expenses offset, in part, by an increase in selling prices and by a lower
effective tax rate.
Performance of Business Segments
Coatings sales decreased 6% to $1.07 billion compared to $1.13 billion for the
third quarter of 2000. The combination of a decrease in sales volume of 4%,
primarily in our North American automotive original, refinish and industrial
coatings businesses, and a 2% decline from the negative effects of foreign
currency translation contributed to the sales decline. Operating income for the
third quarter of 2001 was $123 million compared to $164 million for the same
quarter of 2000. The decrease in operating income is attributable primarily to
lower sales volumes and higher environmental expenses.
Glass sales decreased 8% to $554 million compared to $604 million for the third
quarter of 2000. A decrease in sales volume of 10% across all of our glass
businesses was offset, in part, by a 2% increase resulting from higher selling
prices. Operating income for the third quarter of 2001 was $49 million compared
to $94 million for the same quarter of 2000. Operating income for the third
quarter of 2000 included pretax charges of $7 million for restructuring charges
and one-time integration costs related to PPG Auto Glass. Excluding these
charges, operating income for the third quarter of 2000 was $101 million. The
decrease in operating income is attributable primarily to lower sales volume.
Chemicals sales decreased 7% to $377 million compared to $407 million for the
third quarter of 2000. The combination of a decrease in sales volume of 6%
primarily in our chlor-alkali and optical products and a 1% decline from the
negative effects of foreign currency translation contributed to the sales
decline. Operating income for the third quarter of 2001 was $25 million
compared to $37 million for the same quarter of 2000. The decrease in operating
income is attributable to lower sales volume and higher environmental expenses.
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Performance in the First Nine Months of 2001 Compared to the First Nine Months
of 2000
Performance Overview
Sales decreased 5% for the first nine months of 2001 to $6.26 billion compared
to $6.57 billion for the first nine months of 2000. The combination of a 4%
volume decline across all of our business segments and a 2% decline from the
negative effects of foreign currency translation in our coatings segment
contributed to the sales decline. These negative factors were partially offset
by a 1% increase due to higher selling prices primarily in our glass segment.
The gross profit percentage decreased to 37.3% for the first nine months of 2001
compared to 38.4% for the first nine months of 2000. The decrease in the gross
profit percentage was due to higher energy costs in our glass and chemicals
segments.
Net income and earnings per share, diluted, for the first nine months of 2001
were $304 million and $1.80, respectively, compared to $494 million and $2.82,
respectively, for the first nine months of 2000. Net income for the first nine
months of 2001 included an after-tax charge of $71 million for restructuring and
other related activities and net income for the first nine months of 2000
included an after-tax charge of $35 million for the write-off of an equity
investment and $3 million of restructuring and one-time integration costs
associated with PPG Auto Glass. Excluding these charges, net income and earnings
per share, diluted, for the first nine months of 2001 were $375 million and
$2.22, respectively, compared to $532 million and $3.04, respectively, for the
first nine months of 2000. The decrease is attributable to higher energy and
environmental costs and lower sales volumes, partially offset by slightly higher
selling prices and a lower effective tax rate.
Performance of Business Segments
Coatings sales decreased 6% to $3.34 billion compared to $3.55 billion for the
first nine months of 2000. The combination of a decrease in sales volume of 3%,
primarily in our North American automotive original, refinish and industrial
businesses, and a 3% decline from the negative effects of foreign currency
translation produced the sales decline. Operating income was $359 million for
the first nine months of 2001 compared to $536 million for the first nine months
of 2000. Operating income for the first nine months of 2001 included pretax
restructuring and other related costs of $83 million, as previously discussed.
Excluding these charges, operating income for the first nine months of 2001 was
$442 million. The decrease in operating income is attributable to lower sales
volumes and higher selling and environmental costs offset, in part, by improved
manufacturing efficiencies.
Glass sales decreased 2% to $1.75 billion compared to $1.78 billion for the
first nine months of 2000. Sales volumes declined 4% primarily in our
automotive original and fiber glass businesses. This decrease was offset by a
2% increase in selling prices primarily in our flat glass and fiber glass
businesses. Operating income was $233 million for the first nine months of 2001
compared to $304 million for the first nine months of 2000. Operating income
for the first nine months of 2001 included pretax restructuring and other
related costs of $10 million, as previously discussed, and operating income for
the first nine months of 2000 included pretax charges of $7 million for
restructuring charges and one-time integration costs related to PPG Auto Glass.
Excluding these charges, operating income for the first nine months of 2001 was
$243 million as compared to $311 for the first nine months of 2000. The
decrease in operating income is attributable to lower sales volumes primarily in
our automotive original and fiber glass businesses and the effects of higher
natural gas costs, partially offset by improved manufacturing efficiencies and
higher selling prices.
Chemicals sales decreased 6% to $1.18 billion compared to $1.25 billion for the
first nine months of 2000. The combination of a decrease in sales volume of 6%,
primarily of our chlor-
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alkali products, and a 1% decline from the negative effects of foreign currency
translation contributed to the sales decline. These sales decreases were offset
slightly by a 1% increase from higher selling prices for our chlorine and other
chlor-alkali products. Operating income was $74 million for the first nine
months of 2001 compared to $161 million for the first nine months of 2000.
Operating income for the first nine months of 2001 included pretax restructuring
and other related costs of $7 million, as previously discussed. Excluding these
charges, operating income for the first nine months of 2001 was $81 million. The
decrease in operating income is attributable to lower sales volumes, higher
natural gas and environmental costs and decreased manufacturing efficiencies
offset, in part, by higher selling prices.
Other Factors
Other unallocated corporate expense - net for the nine months ended September
30, 2000 includes a pretax charge of $39 million representing the write-off of
an equity investment and a gain from the sale of corporate assets.
The Company's pretax earnings for the first nine months of 2001 and 2000
included net periodic pension income of $44 million and $63 million,
respectively, related to its U.S. defined benefit pension plans. It is possible
that the Company would record pension expense in 2002 unless there is a
significant recovery in the U.S. equity markets between now and the end of the
year.
The tax rate on on-going operations for 2001 is 36.0% and reflects an
improvement in the regional mix of non-U.S. taxable earnings and a lower
effective state tax rate when compared with the prior year. Restructuring
charges in 2001, which reflected a tax benefit at a rate of 30.0%, raised the
overall effective tax rate for the first nine months of 2001 to 37.3%. The
overall effective tax rate of 39.3% for the first nine months of 2000 reflects a
38.5% tax rate on on-going operations and the adverse effects of the write-off
of an equity investment, which was not deductible for tax purposes.
During the second quarter of 2001 the Company renegotiated $1.2 billion in
credit lines which support the commercial paper programs in the United States,
Europe and Canada. The new facility is comprised of a $600 million portion
having a 5-year term and a $600 million portion having a 364-day term. The
facility fee paid on the committed amount is 7 1/2 basis points on the 5-year
portion and six basis points on the 364-day portion. At September 30, 2001,
there were no outstanding borrowings on these lines of credit.
The decrease in short-term and long-term debt is due principally to the
repayment of various U.S. and non-U.S. debt obligations.
Accounting Standards
Effective January 1, 2001, PPG adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities" as amended by SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities." These standards require
the Company to recognize all derivatives as either assets or liabilities at fair
value in its balance sheet. The accounting for changes in the fair value of a
derivative depends on the use of the derivative. To the extent that a
derivative is effective as a hedge of a future exposure to changes in value, the
fair value of the derivative is deferred in other comprehensive income or an
adjustment to the carrying amount of the hedged item. Any portion considered to
be ineffective is reported in earnings immediately.
Adoption of these new standards on January 1, 2001 resulted in an increase in
current assets, current liabilities and other comprehensive income of $70
million, $26 million and $43 million, respectively, with a cumulative after-tax
increase in net income of less than $1 million. Since
-16-
the issuance of SFAS No. 133 and SFAS No. 138, the Financial Accounting
Standards Board (FASB), through its Derivative Implementation Group, continues
to issue additional requirements. On an ongoing basis, the Company evaluates the
potential impact of the pronouncements on PPG's consolidated results of
operations, financial position and cash flows.
In June 2001, the FASB issued SFAS No. 141, "Business Combinations," and SFAS
No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001. The Company does not believe that the prospective adoption
of this standard will have a material impact on its consolidated results of
operations, financial position or cash flows for 2001. SFAS No. 142 changes the
accounting for goodwill and certain other intangible assets from an amortization
method to an impairment only approach. We will adopt the provisions of SFAS No.
142 on January 1, 2002 and are currently in the process of evaluating the effect
the adoption of SFAS No. 142 will have on PPG's consolidated results of
operations, financial position and cash flows. Amortization of goodwill recorded
in 2001 will be approximately $30 million.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations" and in October 2001, issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." These standards are effective on
January 1, 2003 and January 1, 2002, respectively. We are currently in the
process of evaluating the effect the adoption of these standards will have on
PPG's consolidated results of operations, financial position and cash flows.
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. Greece has joined the original eleven countries and will adopt the
euro in 2002. The legacy currencies will remain legal tender through February
28, 2002. Beginning January 1, 2002, euro-denominated currency will be issued.
No later than February 28, 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 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.
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.
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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.
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 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.
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
monetary 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. See Note 9, "Commitments and Contingent
Liabilities," to the condensed financial statements in this Form 10-Q for an
expanded description of certain of these lawsuits. 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 and other
matters. As discussed in Note 9, except with respect to any PPG contribution
arising out of a possible voluntary settlement of asbestos claims, the amount of
which cannot be predicted, 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 generally not discounted. As of September
30, 2001 and December 31, 2000, PPG had reserves for environmental contingencies
totaling $98 million and $84 million, respectively. Pretax charges against
income for environmental remediation costs for the three and nine months ended
September 30, 2001 totaled $20 million and $27 million, respectively, and $4
million and $10 million, respectively, for the three and nine months ended
September 30, 2000. Cash outlays related to such environmental remediation for
the nine months ended September 30, 2001 and 2000 aggregated $13 million.
Management anticipates that the resolution of the Company's environmental
contingencies will occur over an extended period of time. The pretax charge for
environmental remediation costs
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for 2001 is expected to be in the range of $30 million to $35 million. 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, 2000.
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 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.
A major customer of one of the Company's Asian coatings joint ventures is
experiencing financial difficulties. Should this customer be unable to pay the
amounts owed to our investee or cease operations, our loss would be limited to
the carrying value of the Company's investment in the joint venture which was
approximately $20 million as of September 30, 2001.
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, 2000. The Company enters into natural gas swap and option contracts
to reduce its exposure to fluctuations in the prices paid for natural gas. As of
January 1, and September 30, 2001, the fair value of these contracts was an
asset of $62 million and a liability of $21 million, respectively. See Note 8,
"Derivative Financial Instruments," to the condensed financial statements in the
Form 10-Q for an expanded description of these market risks.
-19-
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
--------------------------
In the Company's Form 10-K for the year ended December 31, 2000, it was reported
that the Company has been a defendant in lawsuits involving claims alleging
personal injury from exposure to asbestos. In many of the cases, the plaintiffs
allege that the Company should be liable for injuries involving asbestos-
containing thermal insulation products manufactured and distributed by
Pittsburgh Corning Corporation (PC). The Company and Corning Incorporated are
each 50% shareholders of PC. On April 16, 2000, PC filed for Chapter 11
bankruptcy in the Federal Bankruptcy Court in Pittsburgh, Pennsylvania.
Accordingly in the first quarter of 2000, the Company recorded an after-tax
charge of $35 million for the write-off of all of its equity investment in PC.
As a consequence of the bankruptcy filing and the various motions and orders in
that proceeding, the asbestos litigation against PC and PPG has been stayed, and
the filing of additional asbestos suits against them has been enjoined, until
November 30, 2001. During the pendency of the stay, interested parties,
including PC and PPG, among others, have been engaged in discussions to
determine whether a settlement of all current and potential asbestos claims can
be agreed on within the context of the PC bankruptcy proceeding. These
settlement discussions involve numerous, complex issues. Accordingly, it is
impossible to predict whether or on what terms a voluntary settlement, if any,
on the part of PPG might be reached.
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 third quarter of 2001, the
Directors, as a group, were credited with 929 Common Stock Equivalents under
this Plan. The values of the Common Stock Equivalents, when credited, ranged
from $45.10 to $54.95.
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,
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 third quarter of 2001, the Directors, as a group, received
330 Common Stock Equivalents under this Plan. The value of each Common Stock
Equivalent, when credited, was $45.10.
-20-
Item 6. Exhibits and Reports on Form 8-K
------------------------------------------
(a) Exhibits
(3) The Restated Articles of Incorporation, as amended, were filed as
Exhibit 3 to the Registrant's Form 10-Q for the quarter ended March
31, 1995, which exhibit is incorporated herein by reference.
(3.1) Statement with Respect to Shares, amending the Restated Articles of
Incorporation effective April 21, 1998 was filed as Exhibit 3.1 to
the Registrant's Form 10-K for the year ended December 31, 1998,
which exhibit is incorporated herein by reference.
(3.2) The Bylaws, as amended, were filed as Exhibit 3 to the Registrant's
Form 10-Q for the quarter ended March 31, 2000, which exhibit is
incorporated herein by reference.
(4) The Shareholders' Rights Plan was filed as Exhibit 4 on the
Registrant's Form 8-K, dated February 19, 1998, which exhibit is
incorporated herein by reference.
(4.1) Indenture, dated as of August 1, 1982, was filed as Exhibit 4.1 to
PPG's Registration Statement on Form S-3 (No. 333-44397) dated
January 16, 1998 (the "1998 Form S-3"), which exhibit is
incorporated herein by reference.
(4.2) First Supplemental Indenture, dated as of April 1, 1986, was filed
as Exhibit 4.2 to the 1998 Form S-3, which exhibit is incorporated
herein by reference.
(4.3) Second Supplemental Indenture, dated as of October 1, 1989, was
filed as Exhibit 4.3 to the 1998 Form S-3, which exhibit is
incorporated herein by reference.
(4.4) Third Supplemental Indenture, dated as of November 1, 1995, was
filed as Exhibit 4.4 to the 1998 Form S-3, which exhibit is
incorporated herein by reference.
*(10) PPG Industries, Inc. Nonqualified Retirement Plan dated as of
January 1, 1989, as amended January 1, 1996 was filed as Exhibit 10
to the Registrant's Form 10-Q for the quarter ended March 31, 1996,
which exhibit is incorporated herein by reference. The Supplemental
Executive Retirement Plan II as amended, and the Change in Control
Employment Agreement were filed as Exhibits 10.2 and 10.5,
respectively, to the Registrant's Form 10-Q for the quarter ended
September 30, 1995, which exhibit is incorporated herein by
reference. The PPG Industries, Inc. Stock Plan was filed as Exhibit
10 to the Registrant's Form 10-Q for the quarter ended March 31,
1997, which exhibit is incorporated herein by reference. PPG
Industries, Inc. Incentive Compensation and Deferred Income Plan for
Key Employees, as amended, was filed as Exhibit 10.1 to the
Registrant's Form 10-Q
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for the quarter ended March 31, 2000, which exhibit is
incorporated herein by reference. PPG Industries, Inc. Deferred
Compensation Plan for Directors, was filed as Exhibit 10.3 to the
Registrant's Form 10-K for the year ended December 31, 1997, which
exhibit is incorporated herein by reference. PPG Industries, Inc.
Total Shareholder Plan for Key Employees was filed as Exhibit 10.4
to the Registrant's Form 10-K for the year ended December 31,
1998, which exhibit is incorporated herein by reference.
*(10.1) The Directors' Common Stock Plan, as amended April 19, 2000, was
filed as Exhibit 10.1 to the Registrant's Form 10-K for the year
ended December 31, 2000, which exhibit is incorporated herein by
reference.
*(10.2) PPG Industries, Inc. Deferred Compensation Plan, as amended
effective October 1, 2000, was filed as Exhibit 10.2 to the
Registrant's Form 10-K for the year ended December 31, 2000, which
exhibit is incorporated herein by reference.
*(10.3) PPG Industries, Inc. Executive Officers Annual Incentive
Compensation Plan was filed as Exhibit 10.3 to the Registrant's
Form 10-K for the year ended December 31, 2000, which exhibit is
incorporated herein by reference.
*(10.4) PPG Industries, Inc. Executive Officers Total Shareholder Return
Plan was filed as Exhibit 10.4 to the Registrant's Form 10-K for
the year ended December 31, 2000, which exhibit is incorporated
herein by reference.
(12) Computation of Ratio of Earnings to Fixed Charges.
* Items referred to in Exhibit 10, 10.1, 10.2, 10.3 and 10.4 and
incorporated by reference are either management contracts, compensatory
plans or arrangements required to be filed as an exhibit hereto pursuant
to Item 601 of Regulation S-K.
(b) Reports on Form 8-K
(1) The Company did not file any reports on Form 8-K during the three
months ended September 30, 2001.
-22-
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: October 26, 2001 By /s/ W. H. Hernandez
-----------------------------------
W. H. Hernandez
Senior Vice President, Finance
(Principal Financial and
Accounting Officer and
Duly Authorized Officer)
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PPG INDUSTRIES, INC. AND SUBSIDIARIES
-------------------------------------
INDEX TO EXHIBITS
Exhibit
Number Description
------ -----------
(12) Computation of Ratio of Earnings to Fixed Charges.