-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SMc2tdH/vDxzZAkm0z10fEAKN5sl3ar5v8YpqzsvCN1Nz0xL8yuCTgRsu4FHbscs WIXuwJ8+4T5PaJP+5s5exw== 0000950132-97-000363.txt : 19970507 0000950132-97-000363.hdr.sgml : 19970507 ACCESSION NUMBER: 0000950132-97-000363 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970506 SROS: NYSE SROS: PHLX SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PPG INDUSTRIES INC CENTRAL INDEX KEY: 0000079879 STANDARD INDUSTRIAL CLASSIFICATION: PAINTS, VARNISHES, LACQUERS, ENAMELS & ALLIED PRODUCTS [2851] IRS NUMBER: 250730780 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-01687 FILM NUMBER: 97596188 BUSINESS ADDRESS: STREET 1: ONE PPG PL 40 EAST CITY: PITTSBURGH STATE: PA ZIP: 15272 BUSINESS PHONE: 4124343131 MAIL ADDRESS: STREET 1: ONE PPG PL 40 EAST CITY: PITTSBURGH STATE: PA ZIP: 15272 FORMER COMPANY: FORMER CONFORMED NAME: PITTSBURGH PLATE GLASS CO DATE OF NAME CHANGE: 19681219 10-Q 1 FORM 10-Q 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 March 31, 1997 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 April 30, 1997, 180,271,393 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: Condensed Statement of Income...................................... 2 Condensed Balance Sheet............................................ 3 Condensed Statement of Cash Flows.................................. 4 Notes to Condensed Financial Statements............................ 5-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................... 8-11 Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders......... 12 Item 6. Exhibits and Reports on Form 8-K............................ 13 Signature............................................................... 14
-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 Ended March 31 --------------------------- 1997 1996 ------------- ------------ Net sales............................... $1,776.6 $1,748.8 Cost of sales........................... 1,086.8 1,067.2 -------- -------- Gross profit.................... 689.8 681.6 -------- -------- Other expenses: Selling, general and 247.7 238.9 administrative................. Depreciation.................... 84.7 83.2 Research and development........ 58.0 58.6 Interest........................ 25.0 22.0 Other charges................... 20.5 16.8 -------- -------- Total other expenses.......... 435.9 419.5 -------- -------- Other earnings.......................... 24.7 25.6 -------- -------- Income before income taxes and minority interest...................... 278.6 287.7 Income taxes............................ 105.9 109.3 Minority interest....................... 6.7 6.1 -------- -------- Net income.............................. $ 166.0 $ 172.3 ======== ======== Earnings per share...................... $ 0.91 $ 0.90 ======== ======== Dividends per share..................... $ 0.33 $ 0.30 ======== ======== Average shares outstanding.............. 182.3 192.4 ======== ========
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) -----------------------------------
March 31 Dec. 31 1997 1996 ----------- ----------- (Millions) Assets - ------ Current Assets: Cash and cash equivalents..................... $ 109.5 $ 69.6 Receivables-net............................... 1,344.8 1,225.6 Inventories (Note 2).......................... 819.6 796.5 Other......................................... 193.4 204.7 ---------- ---------- Total current assets........................ 2,467.3 2,296.4 Property (less accumulated depreciation of $3,772.8 million and $3,774.7 million)..... 2,871.4 2,913.5 Investments................................... 229.8 254.4 Other assets.................................. 984.7 977.1 ---------- ---------- Total....................................... $ 6,553.2 $ 6,441.4 ========== ========== Liabilities and Shareholders' Equity - ---------------------------------------- Current liabilities: Short-term borrowings and current portion of long-term debt................. $ 590.2 $ 648.3 Accounts payable and accrued liabilities..... 1,055.4 1,105.5 Income taxes................................. 81.2 15.1 ---------- ---------- Total current liabilities.................. 1,726.8 1,768.9 Long-term debt (Note 6)......................... 1,008.3 833.9 Deferred income taxes........................... 411.4 419.1 Accumulated provisions.......................... 352.7 339.5 Other postretirement benefits................... 523.9 521.2 ---------- ---------- Total liabilities..................... 4,023.1 3,882.6 ---------- ---------- Commitments and contingent liabilities (Note 5). Minority interest............................... 77.3 76.2 ---------- ---------- Shareholders' equity: Common stock................................. 484.3 484.3 Additional paid-in capital................... 97.6 96.6 Retained earnings............................ 4,866.4 4,759.8 Treasury stock............................... (2,758.1) (2,667.2) Unearned compensation........................ (159.5) (171.3) Minimum pension liability adjustment......... (10.2) (9.9) Currency translation adjustment.............. (67.7) (9.7) ---------- ---------- Total shareholders' equity................. 2,452.8 2,482.6 ---------- ---------- Total...................................... $ 6,553.2 $ 6,441.4 ========== ==========
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) ---------------------------------------------
Three Months Ended March 31 ----------------------------- 1997 1996 ----------- ---------- (Millions) Cash from operating activities................................... $ 163.3 $ 139.7 -------- -------- Investing activities: Capital spending.............................................. (103.2) (116.6) Reduction of investments...................................... 2.7 10.4 Other......................................................... 1.7 .3 -------- -------- Cash used for investing activities.......................... (98.8) (105.9) -------- -------- Financing activities: Net change in borrowings with maturities of three months or less.......................... (62.5) 283.2 Proceeds from other short-term debt........................... 26.3 17.1 Repayment of other short-term debt............................ (22.6) (14.1) Proceeds from long-term debt.................................. 202.6 2.7 Repayment of long-term debt................................... (24.3) (95.2) Repayment of loans by employee stock ownership plan.............................................. 11.8 5.6 Purchase of treasury stock, net............................... (93.8) (191.4) Dividends paid................................................ (60.2) (57.8) -------- -------- Cash used for financing activities.......................... (22.7) (49.9) -------- -------- Effect of currency exchange rate changes on cash and cash equivalents................................... (1.9) (.5) -------- -------- Net increase (decrease) in cash and cash equivalents............ 39.9 (16.6) Cash and cash equivalents, beginning of period................... 69.6 105.6 -------- -------- Cash and cash equivalents, end of period......................... $ 109.5 $ 89.0 ======== ========
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 March 31, 1997, and the results of their operations and their cash flows for the three months ended March 31, 1997 and 1996. 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, 1996. The results of operations for the three months ended March 31, 1997 are not necessarily indicative of the results to be expected for the full year. 2. Inventories ----------- Inventories at March 31, 1997 and December 31, 1996 are detailed below.
March 31 Dec. 31 1997 1996 -------- ------- (Millions) Finished products and work in process.......... $563.8 $547.3 Raw materials.................................. 135.8 133.9 Supplies....................................... 120.0 115.3 ------ ------ Total....................................... $819.6 $796.5 ====== ======
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 $198.2 million and $203.7 million higher at March 31, 1997 and December 31, 1996, respectively. 3. Cash Flow Information --------------------- Cash payments for interest were $18.5 million and $20.6 million for the three months ended March 31, 1997 and 1996, respectively. Net cash payments for income taxes for the three months ended March 31, 1997 and 1996 were $46.3 million and $43.8 million, respectively. -5- 4. Business Segment Information ----------------------------
Three Months Ended March 31 ----------------------------- 1997 1996 -------------- ------------- (Millions) Net sales: Coatings and Resins....................................... $ 713 $ 692 Glass..................................................... 659 666 Chemicals................................................. 405 391 ------ ------ Total................................................... $1,777 $1,749 ====== ======= Operating income: Coatings and Resins....................................... $ 124 $ 115 Glass..................................................... 89 103 Chemicals................................................. 89 91 ------ ------ Total operating income.................................. 302 309 Interest expense - net...................................... (23) (20) Other unallocated corporate expense - net................... -- (1) ------ ------ Income before income taxes and minority interest............ $ 279 $ 288 ======= ======
5. Commitments and Contingent Liabilities -------------------------------------- PPG is involved in a number of lawsuits and claims, both actual and potential, including some which it has asserted against others, in which substantial money damages are sought. PPG's lawsuits and claims against others include claims against insurers and other third parties with respect to actual and contingent losses related to environmental matters. Management believes that the outcome of all lawsuits and claims involving PPG, in the aggregate, will not have a material effect on PPG's consolidated financial position, results of operations or liquidity. It is PPG's policy to accrue expenses for environmental contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Reserves for environmental contingencies are exclusive of claims against third parties and are not discounted. As of March 31, 1997 and December 31, 1996, PPG had reserves for environmental contingencies totaling $91 million. Pre-tax charges against income for environmental remediation costs for the three months ended March 31, 1997 and 1996 were $7 million in each period. Cash outlays related to such charges aggregated $7 million and $9 million for the three months ended March 31, 1997 and 1996, respectively. Management anticipates that the resolution of the Company's environmental contingencies, which will occur over an extended period of time, will not result in future annual charges against income that are significantly greater than those recorded in recent years. It is possible, however, that technological, regulatory and -6- 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, 1996. Such unreserved losses are reasonably possible but are not currently considered to be probable of occurrence. 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 and one closed plant site. Initial remedial actions are occurring at these sites. Studies to determine the nature of the contamination are reaching completion and the need for additional 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. Although insurers and other third parties may cover a portion of these costs, to the extent they are incurred, any potential recovery is not included in this unreserved exposure to future loss. The Company's assessment of the potential impact of these environmental contingencies is subject to considerable uncertainty due to the complex, ongoing and evolving process of investigation and remediation, if necessary, of such environmental contingencies. 6. Long-term Debt -------------- On February 21, 1997, the Company issued $100 million of non-redeemable 6- 1/4% notes due February 15, 2002 and $100 million of redeemable 6-7/8% notes due February 15, 2012. -7- Item 2. Management's Discussion and Analysis of Financial Condition and Results - ------- ----------------------------------------------------------------------- of Operations ------------- Performance Overview During the first quarter of 1997, sales increased to $1.78 billion compared to $1.75 billion in the first quarter of 1996. Sales increased as a result of improved volumes in each of our business segments combined with the effect of several minor acquisitions in our coatings and resins segment. These improvements were partially offset by lower sales prices in our glass segment, particularly in Europe, lower sales prices for caustic soda products in our chemicals segment, and the unfavorable effects of foreign currency translation in both the coatings and resins and glass segments. The gross profit percentage decreased slightly to 38.8% compared to 39.0% in the prior year's quarter. The benefits realized from improved manufacturing efficiencies within the glass and chemicals segments, slightly higher sales prices and lower raw material costs in our coatings and resins segment, and favorable sales mix changes in our three segments were more than offset by the negative effects of lower sales prices and inflation within the glass and chemicals segments. Net income and earnings per share for the first quarter of 1997 were $166.0 million and $0.91, respectively, compared to net income and earnings per share of $172.3 million and $0.90, respectively, for the first quarter of 1996. The decrease in net income in the current quarter is attributable to the same factors that contributed to the gross profit percentage decrease described above, higher selling, general and administrative expenses as a result of our growth initiatives and increased advertising costs, increased interest costs due to higher outstanding indebtedness, and higher other charges. Partially offsetting these negative factors were higher overall sales volumes and lower income tax expense. Reduced average shares outstanding, due to repurchases of PPG's common stock by the Company, favorably impacted earnings per share in the current quarter. Performance of Business Segments Coatings and resins sales increased to $713 million in the first quarter of 1997 compared to $692 million in the same quarter of 1996. Sales increased due to the impact of volume gains for industrial coatings and automotive refinish products in both North America and Europe, improved volumes for automotive original coatings products in North America, improved sales prices for automotive refinish and industrial products in North America, and sales from several minor acquisitions. These improvements were partially mitigated by the unfavorable effects of foreign currency translation and lower volumes experienced in the North American architectural coatings business. Operating income increased to $124 million from $115 million when comparing the first quarter of 1997 and 1996. The improvement in operating income was due to the same factors that contributed to the sales increase and lower raw material costs, principally in Europe. Partially offsetting these positive factors were higher overhead costs due principally to growth initiatives in South America and Asia and the negative effects of inflation. Glass sales decreased to $659 million in the first quarter of 1997 compared to $666 million in the first quarter of 1996. Volume increases for our North American automotive original glass and fiber glass products, worldwide flat glass products, and aircraft products were more than offset by lower selling prices for our European and North American fiber glass and flat glass products, the unfavorable effects of foreign currency translation, and lower North American automotive replacement glass volumes. Operating income decreased to -8- $89 million in the first quarter of 1997 compared to $103 million in the prior year's quarter. The decline in operating income was due to the same factors that contributed to the lower sales levels, unfavorable sales mix changes in our automotive original glass and fiber glass businesses, and the negative effects of inflation. Improved manufacturing efficiencies and slightly reduced overhead costs only partially offset these unfavorable factors. Chemicals sales increased to $405 million in the first quarter of 1997 compared to $391 million in the first quarter of 1996 principally due to volume increases in the specialty chemicals business, particularly for Transitions optical lenses and silica products, volume gains for chlorine, caustic soda, and solvents, and higher selling prices for chlorine and vinyl chloride monomer. Lower selling prices for caustic soda partially offset these favorable factors. Operating income decreased slightly to $89 million in the current quarter versus $91 million in the comparable quarter of the prior year. The favorable effects of increased volumes in the specialty chemicals and chlor-alkali businesses and improved manufacturing efficiencies were more than offset by the decline in sales prices for caustic soda, the negative effects of inflation, particularly on ethylene and energy costs, and slightly higher environmental expenses. Increased advertising and selling expenses for Transitions optical lenses in the current quarter also impacted operating income. Other Factors The reduction in income tax expense in the current quarter is the result of lower pre-tax earnings as the effective income tax rate remained at 38% in each of the periods. Income taxes payable experienced an increase due to the timing of estimated tax payments. The increase in long-term debt in the current quarter results from the issuance of $100 million of non-redeemable 6-1/4% notes due February 15, 2002 and $100 million of redeemable 6-7/8% notes due February 15, 2012. The proceeds from the issuance of the notes were used for general corporate purposes, including the repayment of commercial paper. Accounting Standards During the first quarter of 1997, the Company adopted the provisions of Statement of Position (SOP) No. 96-1, "Environmental Remediation Liabilities." The adoption of SOP No. 96-1 did not have a material impact on the Company's financial position or results of operations in the quarter. Further, the adoption of SOP No. 96-1 did not affect the Company's cash flow. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share." The impact on the Company's reported earnings per share of adopting this new standard will not be material. Commitments and Contingent Liabilities, including Environmental Matters PPG is involved in a number of lawsuits and claims, both actual and potential, including some which it has asserted against others, in which substantial money damages are sought. PPG's lawsuits and claims against others include claims against insurers and other third parties with respect to actual and contingent losses related to environmental matters. Management believes that the outcome of all lawsuits and claims involving PPG, in the aggregate, will not have a material effect on PPG's consolidated financial position, results of operations or liquidity. -9- It is PPG's policy to accrue expenses for environmental contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Reserves for environmental contingencies are exclusive of claims against third parties and are not discounted. As of March 31, 1997 and December 31, 1996, PPG had reserves for environmental contingencies totaling $91 million. Pre-tax charges against income for environmental remediation costs for the three months ended March 31, 1997 and 1996 were $7 million in each period. Cash outlays related to such charges aggregated $7 million and $9 million for the three months ended March 31, 1997 and 1996, respectively. Management anticipates that the resolution of the Company's environmental contingencies, which will occur over an extended period of time, will not result in future annual charges against income that are significantly greater than those recorded in recent years. It is possible, however, that technological, regulatory and enforcement developments, the results of environmental studies and other factors could alter this expectation. In management's opinion, the Company operates in an environmentally sound manner and the outcome of the Company's environmental contingencies will not have a material effect on PPG's financial position or liquidity. In addition to the amounts currently reserved, the Company may be subject to loss contingencies related to environmental matters estimated to be as much as $200 million to $400 million, which range is unchanged from December 31, 1996. Such unreserved losses are reasonably possible but are not currently considered to be probable of occurrence. 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 and one closed plant site. Initial remedial actions are occurring at these sites. Studies to determine the nature of the contamination are reaching completion and the need for additional 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. Although insurers and other third parties may cover a portion of these costs, to the extent they are incurred, any potential recovery is not included in this unreserved exposure to future loss. The Company's assessment of the potential impact of these environmental contingencies is subject to considerable uncertainty due to the complex, ongoing and evolving process of investigation and remediation, if necessary, of such environmental contingencies. Foreign Currency, Interest Rate and Commodity Price Risk As a multinational company, PPG manages its transaction exposure to foreign currency risk to minimize the volatility of cash flows caused by currency fluctuations. The Company manages it foreign currency transaction exposures principally through the purchase of -10- forward and option contracts. It does not hedge its exposure to translation gains and losses; however, by borrowing in local currencies it reduces such exposure. The fair value of the forward and option contracts purchased and outstanding as of March 31, 1997 and December 31, 1996, was not material. The Company manages its interest rate risk in order to balance its exposure between fixed and variable rates while attempting to minimize its interest costs. PPG principally manages its interest rate risk by retiring and issuing debt from time to time. To a limited extent, PPG manages its interest rate risk through the purchase of interest rate swaps. As of March 31, 1997 and December 31, 1996, the notional principal amount and fair value of interest rate swaps held were not material. The Company also uses commodity swap contracts to reduce its exposure to fluctuations in prices for natural gas. The fair value of such swap contracts purchased and outstanding as of March 31, 1997 and December 31, 1996, was not material. PPG's policies do not permit active trading of, or speculation in, derivative instruments. -11- PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------- At the Company's Annual Meeting of Shareholders held on April 17, 1997 (the "Annual Meeting"), the shareholders voted on the following matters with the results shown below. 1. On the matter of the election of four directors to serve for the terms indicated in the proxy statement relating to the Annual Meeting, the vote was as follows:
Nominees Votes For Votes Withheld ----------------- ----------- -------------- Jerry E. Dempsey 142,110,351 2,172,566 Steven C. Mason 142,152,236 2,130,681 Thomas J. Usher 140,955,918 3,326,999 David R. Whitwam 142,151,811 2,131,106
There were no broker nonvotes with respect to this matter. Each of the nominees was therefore elected a director to serve for the terms indicated in the proxy statement relating to the Annual Meeting. 2. On the matter of the election of Deloitte & Touche LLP as auditors for the Company for the year 1997, the vote was as follows: For: 142,809,765 Against: 730,708 Abstain: 734,225 Therefore, Deloitte & Touche LLP were elected auditors for the Company for 1997. 3. On the proposal to approve amendments to, and the restatement of, the PPG Industries, Inc. 1984 Stock Option Plan, the vote was as follows: For: 115,324,868 Against: 12,322,153 Abstain: 2,596,649 There were 14,039,247 broker nonvotes with respect to this matter. Therefore, the amended and restated plan was approved. -12- Item 6. Exhibits and Reports on Form 8-K - ------------------------------------------ (a) Exhibits (4.1) Indenture, dated as of August 1, 1982 (filed as Exhibit 4.1 to the Company's Form S-3, Number 2-78575, dated July 27, 1982, and incorporated herein by reference). (4.2) First Supplemental Indenture, dated as of April 1, 1986 (filed as Exhibit 4.2 to the Company's Form S-3, Number 33-03938, dated March 12, 1986, and incorporated herein by reference). (4.3) Second Supplemental Indenture, dated as of October 1, 1989 (filed as Exhibit 4.4 to the Company's Form 8-K dated November 8, 1995, and incorporated herein by reference). (4.4) Third Supplemental Indenture, dated as of November 1, 1995 (filed as Exhibit 4.5 to the Company's Form 8-K dated November 8, 1995, and incorporated herein by reference). (4.5) Forms of Debt Securities (included in Exhibit 4.1). (10) PPG Industries, Inc. Stock Plan. (11) Computation of Earnings Per Share. (27) Financial Data Schedule. (b) Reports on Form 8-K (1) The Company filed a Form 8-K on February 18, 1997, dated January 16, 1997, whereby the Company's press release reporting fourth quarter 1996 earnings and a computation of the ratio of earnings to fixed charges were filed as exhibits. -13- 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: May 6, 1997 By /s/ W. H. Hernandez --------------------------------- W. H. Hernandez Senior Vice President, Finance (Principal Financial and Accounting Officer and Duly Authorized Officer) -14- PPG INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------- INDEX TO EXHIBITS Exhibit No. Description ------- --------------------------------- (10) PPG Industries, Inc. Stock Plan (11) Computation of Earnings Per Share (27) Financial Data Schedule EX-10 2 PPG INDUSTRIES, INC. STOCK PLAN Exhibit 10 PPG INDUSTRIES, INC. STOCK PLAN 1. Purpose The purpose of the Plan is to promote the growth and profitability of the Company and its Subsidiaries by giving Directors and selected Employees an opportunity to own and to benefit from the growth of the value of the Common Stock of the Company, thereby (1) providing them with additional incentive to cause the Company and its Subsidiaries to grow and profit, (2) making their compensation competitive with opportunities available in competing industries, and (3) encouraging them to continue in the employ or service of the Company or a Subsidiary. 2. Definitions (a) "Award" means any Option, Stock Appreciation Right or Restricted Stock granted under the Plan. (b) "Award Agreement" means the written agreement evidencing an Award, which shall be executed by the Company and the Participant. (c) "Award Date" means the date as of which an Award is granted, unless another date is specified by the Board, the Committee or other person granting such Award. (d) "Award Grantor" means the Board, the Committee or the person or persons to whom the Board or the Committee has delegated authority to grant Awards under the Plan. (e) "Board" means the Board of Directors of the Company. (f) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated thereunder. (g) "Committee" means the Officers-Directors Compensation Committee (or any successor) of the Board. (h) "Common Stock" means the Common Stock of the Company. (i) "Company" means PPG Industries, Inc. (j) "Director" means any director of the Company or any of its Subsidiaries. (k) "Eligible Person" means any Director or any Employee. (l) "Employee" means any person (including any officer) employed by the Company or any of its Subsidiaries. (m) "Fair Market Value" of a share of Common Stock means the closing sale price reported for any applicable date on the New York Stock Exchange-Composite Tape or, if there is no sale on such date, for the nearest preceding date upon which such a sale took place. (n) "Incentive Option" means an Option which qualifies as an "incentive stock option" as defined in Section 422 of the Code. (o) "Nonqualified Option" means an Option which does not qualify as an Incentive Option. (p) "Option" means an option granted hereunder to purchase a specified number of shares of Common Stock. (q) "Optionee" means a Participant who is granted an Option and the Participant's Successor. (r) "Option Price" means the price per share to be paid upon exercise of an Option for the purchase of shares subject to the Option. (s) "Option Expiration Date" means the date set forth in the Award Agreement on which the right to exercise an Option will expire due to lapse of time. (t) "Option Term" means the period during which an Option may be exercised. (u) "Restricted Stock" means Common Stock granted pursuant to Section 7 of the Plan, but any shares of Common Stock shall cease to be Restricted Stock when the conditions specified in the Award of such Restricted Stock have been satisfied. (v) "Participant" means any Eligible Person who has received an Award under the Plan. -2- (w) "Plan" means the PPG Industries, Inc. Stock Plan, as set forth herein and as amended from time to time. (x) "Stock Appreciation Right" means the right to receive cash or shares of Common Stock in lieu of exercising an Option, as more fully described in Section 6. (y) "Subsidiary" means any corporation fifty percent (50%) or more of the outstanding voting stock or voting power of which is owned, directly or indirectly, by the Company and any partnership or other entity in which the Company has a fifty percent (50%) or more ownership interest. (z) "Successor" means the executor or administrator of a Participant's estate, or that person or persons to whom is transferred, by will or the laws of descent and distribution, or as otherwise permitted by the Board or Committee within the terms of the Plan, the right to exercise an Option or Stock Appreciation Right or the ownership of Restricted Stock. 3. Administration The Board and the Committee shall both have full power and authority pursuant and subject to the provisions of the Plan: (1) to determine from time to time the number and type of Awards; (2) to determine from time to time which Eligible Persons shall be granted Awards; (3) to determine, with respect to Options, the number of shares of Common Stock subject to each Option, the Option Price, the form of payment of the Option Price, the Option Term, whether an Option shall be an Incentive Option or a Nonqualified Option, whether an Option shall be accompanied by Stock Appreciation Rights, whether an Option may be transferred and under what conditions, the form in which Stock Appreciation Rights may be paid and the terms and conditions upon which Options or Stock Appreciation Rights may be exercised; (4) to prescribe the provisions to be contained in Award Agreements (which need not be identical); (5) to construe and interpret the Plan, to establish, amend and revoke rules and regulations relating to the Plan, and to determine all questions or controversies arising in the administration or operation of the Plan; and (6) generally, to exercise such powers and take such actions as the Board or the Committee may deem necessary or advisable to administer or implement the Plan. Any determination or decision made or action taken by the Board or the Committee in connection with the Plan shall be final, conclusive and binding on all persons, including the Company, its shareholders and Participants. The Board or the Committee may delegate to another person or persons the right to grant Awards, including the right to determine whether an Option shall be an Incentive Option or a Nonqualified Option, to Eligible Persons who are not Directors of the Company or officers of the Company subject to Section 16 of the Securities Exchange Act of 1934. -3- 4. Awards Awards under the Plan may be made in any of the following forms (or any combination thereof): (a) Restricted Stock; (b) Incentive Options; (c) Nonqualified Options; and (d) Stock Appreciation Rights. 5. Options (a) Options to purchase a specified number of shares of Common Stock at a specified price may be granted from time to time to those Eligible Persons who have the ability to make a contribution to the growth and profitability of the Company or any of its Subsidiaries. Options granted hereunder may be Incentive Options or Nonqualified Options. (b) The aggregate Fair Market Value (determined as of the time an Incentive Option is granted) of the Common Stock for which an Eligible Person may be granted Incentive Options in the calendar year of such grant (under all plans of the Company or its parent or subsidiary corporations, or a predecessor corporation of any such corporation, all within the meaning of Section 422 of the Code) shall not exceed $100,000 plus any unused limit carryover to such year or such other maximum as may be specified in the Code. No Incentive Option will be transferable except by will or by the operation of the laws of descent and distribution. (c) The grant of an Option shall be evidenced by a written Award Agreement executed by the Company and the Optionee, specifying the number of shares of Common Stock subject to the Option, the Option Price and the Option Expiration Date and may contain other provisions, not inconsistent herewith. (d) The Option Price of each Option shall be as determined by the Board or the Committee but in no event shall be less than the Fair Market Value of a share of Common Stock on the Date of Grant. The Option Price may be paid in full in the form of cash, shares of Common Stock or a combination of both, as the Board or the Committee may specify. (e) Options may be exercised at such times and in such manner as shall be prescribed by the Board or the Committee, except that no Option shall be exercisable under any circumstances more than ten (10) years from the Date of Grant. (f) The Board or the Committee may specify, at the time of grant or, with respect to Nonqualified Options, at or after the time of grant, that an Optionee shall be granted a Nonqualified Option (a "Restored Option") in the event that (i) such Optionee exercises -4- all or part of an Option (an "Original Option") by surrendering (or certifying ownership of) already owned shares of Common Stock in full or partial payment of the Option Price under such Original Option and/or (ii) such Optionee surrenders shares of Common Stock or causes shares of Common Stock to be withheld to pay withholding taxes in connection with the exercise of such Original Option. All Restored Options are subject to the availability of shares of Common Stock under the Plan at the time of such exercise. A Restored Option shall cover a number of shares of Common Stock not greater than the number of shares of Common Stock surrendered (or to which ownership has been certified) in payment of the Option Price under such Original Option and/or used to pay withholding taxes in connection with the exercise of such Original Option. Each Restored Option shall have an Option Price equal to the Fair Market Value of the Common Stock on the Date of Grant of the Restored Option and shall expire on the Option Expiration Date of the Original Option or such earlier specific date as the Original Option will expire provided such earlier date has been established on the Date of Grant of the Restored Option. The Date of Grant of a Restored Option shall be the date of exercise of the Original Option. A Restored Option shall be exercisable at any time and from time to time from or after the Date of Grant of the Restored Option (or, as the Board or the Committee in its sole discretion shall specify in the Award Agreement for the Restored Option). An Award Agreement for a Restored Option shall contain such other terms and conditions, which may include a restriction on the transferability of the Common Stock received upon the exercise of the Original Option, as the Board or the Committee in its sole discretion shall deem desirable and which may be set forth in rules or regulations adopted by the Board or the Committee or in the Award Agreement evidencing the Restored Option. Successive Restored Options may be granted to the extent and upon such terms and conditions consistent with this Section 5(f) as the Board or the Committee in its sole discretion shall specify. 6. Stock Appreciation Rights (a) The Board or the Committee may grant Stock Appreciation Rights with respect to all or any of the shares of Common Stock subject to an Option. Stock Appreciation Rights with respect to an Incentive Option may be granted only on the Date of Grant of the related Option. Stock Appreciation Rights with respect to a Nonqualified Option may be granted either on the Date of Grant of the related Option or at any time thereafter during the Option Term. (b) Stock Appreciation Rights shall entitle the Optionee, upon exercise, to receive a payment equal to the amount by which the value of a share of Common Stock exceeds the Option Price, multiplied by the number of shares with respect to which Stock Appreciation Rights are exercised. Such value shall be the Fair Market Value of a share of Common Stock on the date of exercise or, in the discretion of the Board or the -5- Committee, the average of the Fair Market Values of a share of Common Stock over such period as the Board or the Committee may specify. Such payment may be made in the form of cash, shares of Common Stock or a combination of both, as the Board or the Committee may specify. (c) Stock Appreciation Rights may be exercised in such manner and at such times as may be prescribed by the Board or the Committee, but only to the extent the related Option is exercisable. To the extent Stock Appreciation Rights are exercised, the related Option shall be deemed to have been exercised. 7. Restricted Stock Restricted Stock may be awarded to any Eligible Person. An Award of Restricted Stock may set forth such terms and conditions, including, but not limited to, forfeiture and vesting provisions and restrictions against sale, assignment, transfer or other disposition as the Board or the Committee may determine. Restricted Stock shall be duly issued and transferred by the Company on such dates as the Award Grantor may determine, and a certificate for such Restricted Stock shall be issued to each Participant to whom an award is made. The Participant shall thereupon become a stockholder of the Company with respect to such Restricted Stock, and shall be entitled to vote and to receive the dividends on such stock; provided, however, that: (1) stock certificates for Restricted Stock shall be imprinted with a legend to the effect that the stock represented thereby may not be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of except in accordance with the terms of the Plan, and each transfer agent for the Common Stock shall be instructed to such effect; and (2) upon the date specified in the grant as the "Award Maturity Date", unless cancelled earlier by the Board or the Committee, the restrictions imposed upon the Restricted Stock shall lapse, and the Participant shall be fully vested in the award. 8. Number of Shares Available for Issuance and Subject to Awards (a) From and after April 17, 1997, the maximum number of shares of Common Stock which may be issued under the Plan shall be 18 Million and the maximum number of shares of Common Stock as to which Awards may be granted shall be 10 Million. Any shares of Common Stock subject to Awards that are forfeited or unexercised, to the extent Options remain unexercised at the expiration or termination thereof or Restricted Stock is forfeited prior to the Award Maturity Date, may be subject to the grant of further Awards under the Plan. In addition, shares of Common Stock that are surrendered (or to which ownership has been certified) by Participants as full or partial payment to the Company of the purchase price of shares being acquired through the exercise of an option granted under this Plan and any shares surrendered by the Participant or withheld by the Company -6- to pay withholding taxes in connection with the exercise of an Option shall also be available for issuance and for the grant of Awards under the Plan. The number of shares which may be issued under the Plan and as to which Options may be granted shall be further subject to adjustment in accordance with Section 12. (b) In no event, except as subject to adjustment as provided in Section 12, shall more than two hundred fifty thousand (250,000) shares of Common Stock be cumulatively available for issuance as Restricted Stock under the Plan. (c) The Common Stock to be issued under the Plan may be either authorized but unissued shares or issued shares acquired by the Company and held in its treasury. 9. Government and Other Regulations The obligation of the Company to issue or transfer and deliver shares for Options exercised under the Plan shall be subject to (1) the effectiveness of a registration statement under the Securities Act of 1933, as amended, with respect to such issue or transfer, if deemed necessary or appropriate by counsel for the Company; (2) the condition that the shares of Common Stock authorized to be issued hereunder shall have been listed (or authorized for listing upon official notice of issuance) upon each stock exchange on which outstanding shares of Common Stock may then be listed; and (3) all other applicable laws, regulations, rules and orders which shall then be in effect. 10. Limit on Awards More than one Award may be granted to a Participant, but except as subject to adjustment as provided in Section 12 the aggregate number of shares of Common Stock subject to Awards granted to any Participant after April 17, 1997 may not exceed two million (2,000,000) shares. 11. No Right to Employment Neither the existence of the Plan nor the grant of any Award pursuant to the Plan shall create in any Participant or Eligible Person the right to continue to be employed by or to continue as a Director of the Company or a Subsidiary. 12. Adjustments Upon Changes in Capitalization In the event of any change in the number of outstanding shares of Common Stock by reason of any stock dividend, stock split or similar change, a corresponding change shall be made in the numbers, and Option Prices, of shares subject to outstanding Awards, -7- and in the maximum number of shares which then remain available for issuance, and in the number of shares of Restricted Stock which then remain available for issuance under the Plan and the limits as to Awards to individual Eligible Persons. In the event of any change in the outstanding shares of Common Stock, or in the number thereof, by reason of any merger, consolidation, combination, sale of assets, exchange of shares, recapitalization, reorganization, spin-off or similar change, the Board or the Committee may make such changes in the shares, and in the numbers or Option Prices of shares, subject to outstanding Awards, and in the maximum number of shares which may be issued under the Plan, and in the number of shares of Restricted Stock which may have been issued, as the Board or the Committee may deem to be equitable. No such change, without the consent of a Participant may adversely affect the rights of such Participant with respect to an Award previously granted, and any such change shall be final, conclusive and binding on all persons, including the Company, its shareholders and Participants. 13. Amendment and Termination The Board may amend, suspend or terminate the Plan, in whole or in part, at any time, but no amendment may, without shareholder approval, (1) increase the maximum number of shares which may be issued and for which Awards may be granted under the Plan, either in the aggregate or to any individual Participant; (2) change the manner of determining the minimum Option Price, other than to change the manner of determining the Fair Market Value of the Common Stock to conform to any then-applicable provision of the Code; (3) extend the date upon which the Plan shall terminate; or (4) increase the maximum period during which Options may be exercised hereunder. The Plan shall terminate on, and no Award may be granted after, December 31, 2002, or on such earlier date as may be determined by the Board. No amendment, suspension or termination of the Plan may affect adversely, without the consent of the Participant, the rights of such Participant with respect to an Award previously granted. 14. Effective Date Subject to its approval by the shareholders of the Company, the Plan shall be effective as of April 17, 1997. -8- EX-11 3 COMPUTATION OF PER SHARE EARNINGS Exhibit 11 PPG INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------- Computation of Earnings Per Share
Three Months Ended March 31 --------------------------- 1997 1996 ------------- ------------ Net income......................... $166.0 $172.3 ====== ====== Weighted average number of shares of common stock outstanding...... 182.3 192.4 ====== ====== Weighted average number of shares of common stock outstanding and common stock equivalents......... 184.2 194.8 ====== ====== Primary earnings per share......... $ 0.91 $ 0.90 ====== ====== Fully diluted earnings per share... $ 0.90 $ 0.88 ====== ======
NOTES: The common stock equivalents consist of the shares reserved for issuance under PPG's stock option plan and deferred under PPG's incentive compensation, management award, and earnings growth plans. The fully diluted earnings per share calculations are submitted in accordance with Regulation S-K, Item 601(b)(11) although not required by footnote 2 to paragraph 14 of APB Opinion 15 because they result in dilution of less than three percent. All amounts are in millions except per share data. EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PPG INDUSTRIES, INC'S MARCH 31, 1997 UNAUDITED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH UNAUDITED FINANCIAL STATEMENTS. 1,000,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 110 0 1,345 0 820 2,467 6,644 3,773 6,553 1,727 1,008 0 0 484 1,969 6,553 1,777 1,777 1,087 1,087 163 0 25 279 106 0 0 0 0 166 0.91 0.91
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