-----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, HBLoHbABzDNQHOKlHoY486WzgMkngQ8CuCLqDr3hVE58pFK8D/Mw/AavVES7iS1V kWv4HARz/xhiwarYKMOIiA== 0000950132-98-000141.txt : 19980225 0000950132-98-000141.hdr.sgml : 19980225 ACCESSION NUMBER: 0000950132-98-000141 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980224 SROS: NYSE 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-K SEC ACT: SEC FILE NUMBER: 001-01687 FILM NUMBER: 98548292 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-K 1 FORM 10-K [Conformed] =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 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 (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) One PPG Place, Pittsburgh, Pennsylvania 15272 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) Registrant's telephone number, including 412-434-3131 area code: SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED ------------------- ------------------------ Common Stock--Par Value $1.66 2/3 New York Stock Exchange Pacific Stock Exchange Philadelphia Stock Exchange Preferred Share Purchase Rights New York Stock Exchange Pacific Stock Exchange Philadelphia Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES X NO ---- ---- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of January 30, 1998, 177,800,420 shares of the Registrant's common stock, with a par value of $1.66 2/3 per share, were outstanding. As of that date, the aggregate market value of common stock held by non-affiliates was $10,177 million. DOCUMENTS INCORPORATED BY REFERENCE
INCORPORATED BY DOCUMENT REFERENCE IN PART NO. -------- --------------------- Portions of PPG Industries, Inc. Annual Report to Shareholders for the year ended December 31, 1997...... I, II and IV Portions of PPG Industries, Inc. Proxy Statement for its 1998 Annual Meeting of Shareholders.................... III
=============================================================================== PPG INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES --------------- As used in this report, the terms "PPG," "Company," and "Registrant" mean PPG Industries, Inc. and its subsidiaries, taken as a whole, unless the context indicates otherwise. --------------- TABLE OF CONTENTS
PAGE ---- PART I Item 1. Business..................................................... 1 Item 2. Properties................................................... 3 Item 3. Legal Proceedings............................................ 3 Item 4. Submission of Matters to a Vote of Security Holders.......... 4 Executive Officers of the Registrant......................... 5 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters.......................................... 6 Item 6. Selected Financial Data...................................... 6 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................... 6 Item 7a. Quantitative and Qualitative Disclosures About Market Risk... 6 Item 8. Financial Statements and Supplementary Data.................. 6 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......................... 6 PART III Item 10. Directors and Executive Officers of the Registrant........... 7 Item 11. Executive Compensation....................................... 7 Item 12. Security Ownership of Certain Beneficial Owners and Management................................................... 7 Item 13. Certain Relationships and Related Transactions............... 7 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K..................................................... 8 Signatures ............................................................. 9
NOTE ON INCORPORATION BY REFERENCE Throughout this report, various information and data are incorporated by reference to the Company's 1997 Annual Report to Shareholders (hereinafter referred to as "the Annual Report to Shareholders"). Any reference in this report to disclosures in the Annual Report to Shareholders shall constitute incorporation by reference only of that specific information and data into this Form 10-K. PART I ITEM 1. BUSINESS PPG Industries, Inc., incorporated in Pennsylvania in 1883, is comprised of three basic business segments: coatings, glass and chemicals. Within these business segments, PPG has followed a program of directing its resources of people, capital and technology in selected areas for positions of leadership. Areas in which resources have been focused are automotive original, refinish, industrial and architectural coatings; flat glass, automotive original and replacement glass, aircraft transparencies, continuous-strand fiber glass; and chlor-alkali and specialty chemicals. Each of the business segments in which PPG is engaged is highly competitive. However, the diversification of product lines and worldwide markets served tend to minimize the impact on total sales and earnings of changes in demand for a particular product line or in a particular geographic area. Reference is made to "Business Segment Information" on pages 27 and 28 of the Annual Report to Shareholders, which is incorporated herein by reference, for financial information relating to business segments. COATINGS PPG is a major supplier of protective and decorative coatings. The coatings industry is highly competitive and consists of a few large firms with global presence and many smaller firms serving local or regional markets. PPG competes in its primary markets with the world's largest coatings companies, most of which have operations in North America and Europe, and many smaller regional coatings companies. Product development, innovation, quality and customer service have been stressed by PPG and have been significant factors in developing an important supplier position. The coatings business involves the supply of protective and decorative finishes for automotive original equipment, appliances, industrial equipment and packaging; factory-finished aluminum extrusions and coils for architectural uses; and other industrial and consumer products. In addition to supplying finishes to the automotive original equipment market, PPG supplies automotive refinishes to the aftermarket, which are primarily sold through distributors. In the automotive original and industrial portions of the coatings business, PPG sells directly to a variety of manufacturing companies. Product performance, technology, quality and customer service are major competitive factors. The automotive original and industrial coatings are formulated specifically for the customer's needs and application methods. PPG also supplies adhesives and sealants for the automotive industry and metal pretreatments for automotive and industrial applications. The architectural finishes business consists primarily of coatings used by painting and maintenance contractors and by consumers for decoration and maintenance. PPG's products are sold through independent distributors, paint dealers, mass merchandisers, home centers and directly to some customers. Price, quality and distribution are key competitive factors in the architectural finishes market. PPG grew the coatings business through several acquisitions completed during 1997. In September 1997, PPG acquired the U.S. industrial pretreatment business of Man-Gill Chemical Company; in November 1997, PPG acquired Max Meyer Duco S.p.A. (Max Meyer), a European supplier of automotive refinish, fleet finish and decorative coatings, and Phillips Paint Products, a Canadian industrial coatings manufacturer; and in December 1997, PPG acquired the worldwide packaging coatings businesses of BASF Lacke + Farben AG, a German company, and Keeler & Long, a U.S. manufacturer of high performance coatings and coil coatings. During 1997, PPG also increased its ownership interest from 45% to 100% in two related automotive original coatings companies located in Brazil and Argentina. PPG plans to sell the European decorative coatings business of Max Meyer in 1998. The principal production facilities of Coatings are concentrated in North America and Europe. North American production facilities consist of 17 plants in the United States, and two each in Canada and Mexico. The three largest facilities are the Cleveland, Ohio, plant, which primarily produces automotive original coatings; the Oak Creek, Wis., plant, which produces automotive original and industrial coatings; and the Delaware, Ohio, plant, which primarily produces automotive refinishes and certain industrial coatings. Outside North America, PPG operates three plants each in Spain and Italy, two plants in Germany, and one plant each in The People's Republic of China, England, France and Portugal. These plants produce a variety of automotive original, automotive refinish and industrial coatings. PPG owns equity interests in operations in Hong Kong, India, South Korea, Taiwan and Thailand. Additionally, coatings operates 10 service centers in the United States, two each in Canada and Mexico, and one in Argentina to provide just-in-time delivery and service to selected automotive assembly plants. Twenty training centers in the United States, eleven in Europe, five in Asia and one in Canada are in operation. These centers provide training for automotive aftermarket refinish customers. Also, four automotive original coatings application centers that provide testing facilities for customer paint processes and new products are in operation. The average number of persons employed by the coatings segment during 1997 was 10,500. 1 GLASS PPG is one of the major producers of flat glass, fabricated glass and continuous-strand fiber glass in the world. PPG's major markets are automotive original equipment, automotive replacement, residential and commercial construction, aircraft transparencies, the furniture, marine and electronics industries, and other markets. Most glass products are sold directly to manufacturing and construction companies, although in some instances products are sold directly to independent distributors and through PPG distribution outlets. PPG manufactures flat glass by the float process and fiber glass by the continuous-filament process. The bases for competition are price, quality, technology, cost and customer service. The Company competes with six other major producers of flat glass, six other major producers of fabricated glass and two other major producers of fiber glass throughout the world. PPG's principal glass production facilities are con- centrated in North Amer- ica and Europe. Fifteen plants operate in the United States, of which six pro- duce flat glass, five produce automotive glass products, three produce fiber glass products and one produces aircraft transparencies. There are three plants in Canada, two of which produce automotive glass and one produces flat glass. Four plants operate in Italy; one manufactures automotive and flat glass, one produces automotive glass products, one produces flat glass and one produces aircraft transparencies. Three plants are located in France; one plant manufactures automotive and flat glass and two plants produce automotive glass products. One plant in England and one plant in the Netherlands produce fiber glass. PPG owns equity interests in operations in France, Mexico, the Netherlands, the People's Republic of China, Taiwan, the United States and Venezuela and a majority interest in a glass distribution company in Japan. Additionally, there are four satellite operations that provide limited manu- facturing and just-in-time service to selected automotive customer locations, and one coating facility for flat glass products. The average number of per- sons employed by the glass segment during 1997 was 15,800. PPG approved a program in late 1997 to restructure certain glass businesses that were not meeting strategic and performance objectives. The principal components of this program include the closure of the Perry, Ga., flat glass plant, and the sale of the Company's equity interests in two Asian float glass plants, which are expected to be completed in 1998. PPG recorded a pre-tax charge of $102 million in 1997 to reflect the estimated cost of this program. CHEMICALS PPG is a major producer and marketer of chlor-alkali chemicals and a supplier of specialty chemicals. The primary chlor-alkali products are chlorine, caustic soda, vinyl chloride monomer, chlorinated solvents, chlorinated benzenes and calcium hypochlorite. Most of these products are sold directly to manufacturing companies in the chemical processing, rubber and plastics, paper, minerals and metals, and water treatment industries. The primary products of PPG's specialty chemicals businesses are Transitions(R) lenses; optical monomers; precipitated silicas for tire, shoe, and battery separator businesses; and phosgene and other derivatives and intermediates for the pharmaceutical, agricultural and fuel additives businesses. In late December 1997, PPG acquired Sipsy Chimie Fine S.C.A., a French manufacturer of pharmaceutical intermediates. PPG's surfactants business was sold in 1997, resulting in a pre-tax gain of $59 million. PPG competes with six other major producers of chlor-alkali products. Price, product availability, product quality and customer service are the key competitive factors. In the specialty chemicals area, PPG's market share varies greatly by business; product quality and performance and technical service are the most critical competitive factors. Chemicals' principal production facilities are concentrated in North America with five plants in the United States and one plant in Canada. The two largest facilities, located in Lake Charles, La., and Natrium, W. Va., primarily produce chlor-alkali products. An additional North American plant began producing silica-based compounds in Mexico in the first half of 1997. Outside North America, PPG operates two plants each in Taiwan and the People's Republic of China, and one each in Australia, France, Ireland and the Netherlands. PPG owns equity interests in operations in Japan, Thailand and the United States. The average number of persons employed by the chemicals segment during 1997 was 4,700. RAW MATERIALS The effective management of raw materials is important to PPG's continued success. The Company's most significant raw materials are titanium dioxide and epoxy resins in the coatings segment; sand, soda ash, energy, polyvinyl butyral and boron-containing minerals in the glass segment; and energy and ethylene in the chemicals segment. Most of the raw materials used in production are purchased from outside sources, and the Company has made, and will continue to make, supply arrangements to meet the planned operating requirements for the future. For the significant raw material requirements identified above, and other raw materials, there is more than one source of supply. RESEARCH AND DEVELOPMENT Research and development costs, including depreciation of research facilities, during 1997, 1996 and 1995 were 2 $266 million, $255 million and $252 million, respectively. PPG owns and operates ten research and development facilities in the United States, Europe and Japan to conduct research and development involving new and improved products and processes. Additional process and product research and development work is also undertaken at many of the Company's manufacturing plants. PATENTS PPG considers patent protection to be important. The Company's business segments are not materially dependent upon any single patent or group of related patents. PPG received $25 million, $25 million and $27 million from royalties and the sale of technical know-how during 1997, 1996 and 1995, respectively. BACKLOG In general, PPG does not manufacture its products against a backlog of orders. Production and inventory levels are geared primarily to projections of future demand and the level of incoming orders. NON-U.S. OPERATIONS Although PPG has a significant investment in non-U.S. operations, based upon the magnitude and location of investments, management believes that the risk associated with its international operations is not significantly greater than domestic operations. EMPLOYEES The average number of persons employed worldwide by PPG during 1997 was 31,900. ENVIRONMENTAL MATTERS Like other companies, PPG is subject to the existing and evolving standards relating to the protection of the environment. Capital expenditures for environmental control projects were $32 million, $18 million and $25 million in 1997, 1996 and 1995, respectively. It is expected that expenditures for such projects in 1998 will approximate $30 million with similar amounts of annual expenditures expected in the near future. Although future capital expenditures are difficult to estimate accurately because of constantly changing regulatory standards and policies, it can be anticipated that environmental control standards will become increasingly stringent and costly. PPG is negotiating with various government agencies concerning 65 cleanup sites, including 31 sites on the National Priority List ("NPL"). While PPG is not generally a major contributor of wastes to these sites, each potentially responsible party or contributor may face governmental agency assertions of joint and several liability as to each cleanup site. Generally, however, a final allocation of costs is made based on relative contributions of wastes to the site. There is a wide range of cost estimates for cleanup of these sites, due largely to uncertainties as to the nature and extent of their condition and the methods that may have to be employed for their remediation. Additionally, remediation projects have been or may be undertaken at certain of the Company's current and former plant sites. The Company has established reserves for those sites where it is probable a liability exists and the amount can be reasonably estimated. As of Dec. 31, 1997 and 1996, PPG had reserves for environmental contingencies totaling $100 million and $91 million, respectively. Pre-tax charges against income for environmental remediation costs totaled $34 million in 1997, $27 million in 1996 and $49 million in 1995. The Company's experience to date regarding environmental matters leads PPG to believe that it will have continuing expenditures for compliance with provisions regulating the protection of the environment and for present and future remediation efforts at waste and plant sites. However, management anticipates that such expenditures, which will occur over an extended period of time, will not result in future annual charges against income that are significantly greater than those recorded in recent years. It is possible, however, that technological, regulatory and enforcement developments, the results of environmental studies and other factors could alter this expectation. In addition, a portion of such environmental expenditures may be recovered from insurers and other third parties. In management's opinion, the Company operates in an environmentally sound manner, is well positioned, relative to environmental matters, within the industries in which it operates, and the outcome of these environmental matters will not have a material adverse effect on PPG's financial position or liquidity. See Commitments and Contingent Liabilities, including Environmental Matters, in Management's Discussion and Analysis for additional information related to environmental matters. ITEM 2. PROPERTIES See "Item 1. Business" for information on PPG's production and fabrication facilities. Generally, the Company's plants are suitable and adequate for the purposes for which they are intended, and overall have sufficient capacity to conduct business in the upcoming year. ITEM 3. LEGAL PROCEEDINGS PPG is involved in a number of lawsuits and claims, both actual and potential, including some which it has asserted against others, in which substantial money 3 damages are sought. These lawsuits and claims relate to product liability, contract, patent, antitrust, environmental and other matters arising out of the conduct of PPG's business. PPG's lawsuits and claims against others include claims against insurers and other third 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. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 4 EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the Company are elected annually in April by the Board of Directors and the business experience during the past five years of each Executive Officer is set forth below.
NAME AGE TITLE ---- --- ----- Raymond W. LeBoeuf (a) 51 Chairman of the Board and Chief Executive Officer since November 1997 Frank A. Archinaco (b) 54 Executive Vice President since April 1997 Charles E. Bunch (c) 48 Senior Vice President, Strategic Planning and Corporate Services since April 1997 Russell L. Crane (d) 57 Senior Vice President, Human Resources and Administration since April 1994 James C. Diggs (e) 49 Senior Vice President and General Counsel since July 1997 William H. Hernandez (f) 49 Senior Vice President, Finance since January 1995 E. Kears Pollock (g) 57 Executive Vice President since April 1997 Gary W. Weber (h) 54 Senior Vice President, Science and Technology since April 1997
(a) Mr. LeBoeuf was Chairman Elect and Chief Executive Officer, President and Chief Operating Officer, Executive Vice President, Group Vice President, Coatings and Resins and Vice President, Finance prior to his present position. (b) Mr. Archinaco was Senior Vice President, Glass, Vice President, Glass and Vice President, Automotive and Aircraft Products prior to his present position. (c) Mr. Bunch was Vice President, Fiber Glass, Vice President, Architectural Finishes and General Manager, Architectural Finishes prior to his present position. (d) Mr. Crane was Vice President, Human Resources prior to his present position. (e) Mr. Diggs was Senior Vice President and General Counsel Elect and was TRW Inc.'s Vice President and Assistant General Counsel prior to joining PPG in March 1997. (f) Mr. Hernandez was Vice President, Finance, Vice President and Controller and Controller prior to his present position. (g) Mr. Pollock was Senior Vice President, Coatings and Resins, Vice President, Coatings and Resins and Vice President, Automotive Products prior to his present position. (h) Dr. Weber was Vice President, Science and Technology and Vice President, Technology, Glass prior to his present position. 5 PART II Information with respect to the following Items can be found on the indicated pages of the Annual Report to Shareholders and is incorporated herein by reference.
PAGE(S) ------- ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Stock Exchange Listings............................................... 41 Quarterly Stock Information........................................... 41 Directors who are not also Officers of the Company receive Common Stock Equivalents pursuant to The Deferred Compensation Plan for Directors and The Directors' Common Stock Plan. Common Stock Equivalents are hypothetical shares of Common Stock having a value on any given date equal to the value of a share of Common Stock. Common Stock Equivalents earn dividend equivalents which are converted into additional Common Stock Equivalents but carry no voting rights or other rights of a holder of Common Stock. The Common Stock Equivalents credited to Directors under both plans are exempt from registration under Section 4(2) of the Securities Act of 1933 as private offerings made only to Directors of the Company in accordance with the provisions of the plans. The plans are incorporated by reference into this Form 10-K as Exhibit 10 and 10.3. Under the Company's Deferred Compensation Plan for Directors, each Director must defer receipt of such compensation as the Board mandates. Currently, the Board mandates deferral of one-third of each payment of the basic annual retainer of each Director. Each Director may also elect to defer the receipt of (i) an additional one-third of each payment of the basic annual retainer, (ii) all of the basic annual retainer, or (iii) all compensation. All deferred payments are held in the form of Common Stock Equivalents. Payments out of the deferred accounts are made in the form of Common Stock of the Company (and cash as to any fractional Common Stock Equivalent). In 1997, the Directors, as a group, were credited with 6,934 Common Stock Equivalents under this Plan. The values of the Common Stock Equivalents, when credited, ranged from $53.50 to $64. Under the Directors' Common Stock Plan, each Director who neither is nor was an employee of the Company is credited annually with Common Stock Equivalents worth one-half of the Director's basic annual retainer. No more than 10 years of credits may be made for the account of any director. Upon termination of service, the Common Stock Equivalents held in a Director's account are converted to and paid in Common Stock of the Company (and cash as to any fractional Common Stock Equivalent). In 1997, the Directors, as a group, received 3,162 Common Stock Equivalents under this Plan. The values of those Common Stock Equivalents, when credited, ranged from $50.375 to $63.313. ITEM 6. SELECTED FINANCIAL DATA The information required by Item 6 is reported in the Eleven-Year Digest under the captions net sales, income before accounting changes, cumulative effect of accounting changes, net income, earnings per common share before accounting changes, cumulative effect of accounting changes on earnings per common share, earnings per common share, earnings per common share-assuming dilution, dividends per share, total assets and long-term debt for the years 1993 through 1997.................................................................. 40 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis.................................. 21-26 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Management's Discussion and Analysis.................................. 25-26 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Independent Auditors' Report.......................................... 17 Financial Statements: Statement of Income for the years ended December 31, 1997, 1996 and 1995................................................................ 18 Balance Sheet, December 31, 1997 and 1996............................ 19 Statement of Cash Flows for the years ended December 31, 1997, 1996 and 1995............................................................ 20 Notes to the Financial Statements.................................... 29-38 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
6 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by Item 10 regarding Directors is contained under the caption "Election of Directors" in the Registrant's definitive Proxy Statement for its 1998 Annual Meeting of Shareholders (the "Proxy Statement") which will be filed with the Securities and Exchange Commission, pursuant to Regulation 14A, not later than 120 days after the end of the fiscal year, which information under such caption is incorporated herein by reference. The information required by Item 10 regarding Executive Officers is set forth in Part I of this report under the caption "Executive Officers of the Registrant." The information required by Item 405 of Regulation S-K is included under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement which information under such caption is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information required by Item 11 is contained under the captions "Compensation of Executive Officers" and "Election of Directors--Compensation of Directors" in the Proxy Statement which information under such captions is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by Item 12 is contained under the caption "Voting Securities" in the Proxy Statement which information under such caption is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by Item 13 is contained under the caption "Election of Directors--Other Transactions" in the Proxy Statement which information under such caption is incorporated herein by reference. 7 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Financial Statements and Independent Auditors' Report (see Part II, Item 8 of this report (page 6) regarding incorporation by reference from the Annual Report to Shareholders). Financial Statement Schedules for years ended December 31, 1997, 1996 and 1995: The following should be read in conjunction with the previously referenced financial statements.
PAGE ---- Independent Auditors' Report........................................... 10 Schedule II--Valuation and Qualifying Accounts......................... 11
All other schedules are omitted because they are not applicable. (b) A Form 8-K was filed on October 29, 1997 which provided the Senior Vice President and General Counsel's consent to being named in the Prospectus Supplement dated October 29, 1997, which was part of the Registration Statement No. 33-64081, as counsel in passing on the validity of the Notes referred to in the Prospectus Supplement. (c)Exhibits: 3 The Restated Articles of Incorporation, as amended, were filed as Exhibit 3 to the Registrant's Form 10-Q for the quarter ended March 31, 1995, which exhibit is incorporated herein by reference. 3.1 The Bylaws. 4 The Shareholders' Rights Plan was filed as Exhibit 4 on the Registrant's Form 8-K, dated May 12, 1988, which exhibit is incorporated herein by reference. *10 The Nonqualified Retirement Plan as amended, was filed as Exhibit 10 to the Registrant's Form 10-Q for the quarter ended March 31, 1996. The Supplemental Executive Retirement Plan II as amended, and the Change in Control Employment Agreement were filed as Exhibits 10.2 and 10.5, respectively, to the Registrant's Form 10-Q for the quarter ended September 30, 1995. The PPG Industries, Inc. Stock Plan was filed as Exhibit 10 to the Registrant's Form 10-Q for the quarter ended March 31, 1997. The Directors' Common Stock Plan as amended, was filed as Exhibit 10.2 to the Registrant's Form 10-K for the year ended December 31, 1996. All such exhibits are incorporated by reference. 10.1 PPG Industries, Inc. Incentive Compensation and Deferred Income Plan for Key Employees. 10.2 PPG Industries, Inc. Deferred Compensation Plan. 10.3 PPG Industries, Inc. Deferred Compensation Plan for Directors. 11 Computation of Earnings Per Share for the Five Years Ended December 31, 1997. 12 Computation of Ratio of Earnings to Fixed Charges for the Five Years Ended December 31, 1997. 13 Company's 1997 Annual Report to Shareholders. (Except for the pages and information therein expressly incorporated by reference in this Form 10-K, the Annual Report to Shareholders is provided solely for the information of the Commission and is not to be deemed "filed" as part of the Form 10-K.) 21 Subsidiaries of the Registrant. 23 Consent of Independent Auditors. 24 Powers of Attorney. 27 Financial Data Schedule. * Items referred to in Exhibit 10 and incorporated by reference and Exhibits 10.1, 10.2 and 10.3 are either management contracts, compensatory plans or arrangements required to be filed as an exhibit hereto pursuant to Item 14(c) of Form 10-K. 8 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on February 24, 1998. PPG INDUSTRIES, INC. (Registrant) By /s/ W. H. Hernandez ............................................... W. H. Hernandez, Senior Vice President, Finance Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities indicated, on February 24, 1998. SIGNATURE CAPACITY /s/ R. W. LeBoeuf Director, Chairman of the Board and Chief ..................... Executive Officer R. W. LeBoeuf /s/ W. H. Hernandez Senior Vice President, Finance (Principal ..................... Financial and Accounting Officer) W. H. Hernandez E. B. Davis, Jr. Director M. J. Hooper Director A. J. Krowe Director N. C. Lautenbach Director By /s/ W. H. Hernandez S. C. Mason Director ................................... W. H. Hernandez, Attorney-in-Fact H. A. McInnes Director R. Mehrabian Director V. A. Sarni Director T. J. Usher Director D. G. Vice Director D. R. Whitwam Director 9 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of PPG Industries, Inc.: We have audited the balance sheet of PPG Industries, Inc. and subsidiaries as of December 31, 1997 and 1996, and the related statements of income and cash flows for each of the three years in the period ended December 31, 1997, and have issued our report thereon dated January 15, 1998; such financial statements and report are included in your 1997 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included financial statement schedule II, Valuation and Qualifying Accounts, of PPG Industries, Inc. and subsidiaries for the years ended December 31, 1997, 1996 and 1995. The financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Pittsburgh, Pennsylvania January 15, 1998 10 PPG INDUSTRIES, INC. AND SUBSIDIARIES SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
BALANCE AT CHARGED TO BEGINNING COSTS AND BALANCE AT DESCRIPTION OF YEAR EXPENSES DEDUCTIONS(/1/) END OF YEAR ----------- ------- -------- --------------- ----------- (MILLIONS) 1997 Deducted from assets to which they apply: Allowance for doubtful accounts ____________ $25.6 $10.2 $15.3 $20.5 ===== ===== ===== ===== 1996 Deducted from assets to which they apply: Allowance for doubtful accounts ____________ $28.2 $12.9 $15.5 $25.6 ===== ===== ===== ===== 1995 Deducted from assets to which they apply: Allowance for doubtful accounts ____________ $26.5 $ 8.1 $ 6.4 $28.2 ===== ===== ===== =====
--------------------- (1) Notes and accounts receivable written off as uncollectible, net of recoveries, changes attributable to foreign currency translation, and activity related to businesses sold. 11 PPG INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES ----------------------------- INDEX TO EXHIBITS
Exhibit Incorporated by Reference - ------- ------------------------- 3 The Restated Articles Exhibit 3 - Form 10-Q for the quarter of Incorporation. ended March 31, 1995. 4 The Shareholders' Rights Exhibit 4 - Form 8-K, dated May 12, 1988. Plan. 10 The Nonqualified Retire- Exhibit 10 - Form 10-Q for the quarter ment Plan. ended March 31, 1996. 10 The Supplemental Exhibit 10.2 - Form 10-Q for the quarter Executive Retirement ended September 30, 1995. Plan II. 10 Change in Control Exhibit 10.5 - Form 10-Q for the quarter Employment Agreement. ended September 30, 1995. 10 PPG Industries Stock Exhibit 10 - Form 10-Q for the quarter Plan. ended March 31, 1997. 10 The Directors' Common Exhibit 10.2 - Form 10-K for the year ended Stock Plan December 31, 1996.
Exhibit Description - ------- ----------- 3.1 The bylaws. 10.1 PPG Industries, Inc. Incentive Compensation and Deferred Income Plan for Key Employees. 10.2 PPG Industries, Inc. Deferred Compensation Plan. 10.3 PPG Industries, Inc. Deferred Compensation Plan for Directors. 11 Computation of Earnings Per Share for the Five Years Ended December 31, 1997. 12 Computation of Ratio of Earnings to Fixed Charges for the Five Years Ended December 31, 1997. 13 Company's 1997 Annual Report to Shareholders. 21 Subsidiaries of the Registrant. 23 Consent of Independent Auditors. 24 Powers of Attorney. 27 Financial Data Schedule.
EX-3.1 2 RESTATED ARTICLES OF INCORPORATION Exhibit 3.1 BYLAWS OF PPG INDUSTRIES, INC. (Incorporated under the Laws of the Commonwealth of Pennsylvania) ______________________________________ April 17, 1997 TABLE OF CONTENTS ----------------- PAGE ARTICLE I -- MEETINGS OF SHAREHOLDERS Section 1.1. Annual Meetings 1 Section 1.2. Business at Annual Meetings 1 Section 1.3. Nominations of Director Candidates 1 Section 1.4. Other Matters Brought by Shareholders 2 Section 1.5. Special Meetings 3 Section 1.6. Business at Special Meetings 3 Section 1.7. Notice 3 Section 1.8. Quorum 3 Section 1.9. Voting 4 Section 1.10. Proxies; Appointment and Revocation 5 Section 1.11. Meeting Procedure 5 ARTICLE II -- BOARD OF DIRECTORS Section 2.1. Number, Classification and Removal; Vacancies 5 Section 2.2. Qualifications and Powers 7 Section 2.3. Organizational Meeting 7 Section 2.4. Regular Meetings; Notice 7 Section 2.5. Special Meetings; Notice 7 Section 2.6. Quorum; Action 8 Section 2.7. Fees and Expenses 8 Section 2.8. Charitable Contributions 8 Section 2.9. Catastrophe 8 Section 2.10. Limitation of Liability 9 ARTICLE III -- COMMITTEES Section 3.1. Standing Committees 9 (a) Audit Committee 10 (b) Nominating and Governance Committee 10 (c) Officers-Directors Compensation Committee 10 i Section 3.2. Other Committees 10 Section 3.3. Organization of and Action by Committees 11 ARTICLE IV -- OFFICERS Section 4.1. Election 11 Section 4.2. Chairman 11 Section 4.3. Chief Executive Officer 12 Section 4.4. Vice Chairman 12 Section 4.5. President 12 Section 4.6. Vice Presidents and Other Officers 12 Section 4.7. Secretary 12 Section 4.8. Treasurer 13 Section 4.9. Controller 13 Section 4.10. Vacancies 14 Section 4.11. Delegation of Duties 14 ARTICLE V -- MISCELLANEOUS CORPORATE TRANSACTIONS AND DOCUMENTS Section 5.1. Borrowing 14 Section 5.2. Execution of Instruments 14 Section 5.3. Voting and Acting with Respect to Stock and Other Securities Owned by the Corporation 15 VI -- INDEMNIFICATION Section 6.1. Entitlement to Indemnification 15 Section 6.2. Advancement of Expenses 16 Section 6.3. Indemnification Procedure 16 Section 6.4. Partial Indemnification 17 Section 6.5. Insurance 17 Section 6.6. Agreements 17 Section 6.7. Miscellaneous 18 Section 6.8. Construction 18 Section 6.9. Effectiveness 18 Section 6.10. Amendment 18 ii ARTICLE VII -- CAPITAL STOCK Section 7.1. Share Certificates 19 Section 7.2. Transfer of Shares 19 Section 7.3. Holders of Record 19 Section 7.4. Replacement 20 ARTICLE VIII -- MISCELLANEOUS Section 8.1. Description of Seal 20 Section 8.2. Fiscal Year 20 Section 8.3. Gender 21 Section 8.4. Adoption, Amendment or Repeal of Bylaws 21 iii BYLAWS ------ OF -- PPG INDUSTRIES, INC. -------------------- (Incorporated under the Laws of the Commonwealth of Pennsylvania) ARTICLE I MEETINGS OF SHAREHOLDERS ------------------------ Section 1.1. Annual Meetings. An annual meeting of the shareholders shall ------------ ---------------- be held each year on such day as the Board of Directors of the Corporation (the "Board of Directors") may designate, or, if not so designated, on the third Thursday in April if not a legal holiday, and if a legal holiday, then on the next business day following. Annual meetings shall be held at the registered office of the Corporation, or at such other places, within or without the Commonwealth of Pennsylvania, as may be designated by the Board of Directors. Section 1.2. Business at Annual Meetings. The business at each annual ------------ ---------------------------- meeting of the shareholders shall include: (a) a review of the business of the preceding year; (b) the election of directors; and (c) such other business as may properly be brought before the meeting. No business may be transacted at any annual meeting other than (i) matters referred to in the notice of the meeting or any supplement thereto, (ii) matters otherwise properly brought before the meeting by or at the direction of the Board of Directors, (iii) matters properly brought before the meeting by one or more shareholders, but only in accordance and upon compliance with the provisions of the proxy rules of the Securities and Exchange commission and the notice provisions of Sections 1.3 and 1.4 of these bylaws and (iv) matters which are incidental or germane to any of the foregoing. Section 1.3. Nominations of Director Candidates. Nominations for the ------------ ----------------------------------- election of directors at a meeting of shareholders may be made only (a) by the Board of Directors or a committee appointed by the Board of Directors or (b) by a holder of record of stock entitled to vote in the election of the directors to be elected; but a nomination (other than a nomination to fill a vacancy resulting from removal from office by a vote of the shareholders under Article Sixth of the Restated Articles of Incorporation) may be made 1 by a shareholder only if written notice of such nomination is given, either by personal delivery or by United States mail, postage prepaid, to the Secretary and has been received by the Secretary at the principal executive offices of the Corporation not later than (i) with respect to an election to be held at an annual meeting of shareholders held on the third Thursday in April, 90 days prior to such annual meeting and (ii) with respect to an election to be held at an annual meeting of shareholders held on a date other than the third Thursday in April or an election to be held at a special meeting of the shareholders, the close of business on the tenth day following the date of the first public disclosure of the date of such meeting. For purposes of this Section 1.3, the first public disclosure of the date of any special meeting of shareholders or any annual meeting of shareholders held on a date other than the third Thursday in April shall be when disclosure of such meeting date is first made in a filing made by the Corporation with the Securities and Exchange Commission, in any notice given to the New York Stock Exchange, or in a news release reported by the Dow Jones News Service, Reuters, Bloomberg, Associated Press or comparable national news service. Each notice of nomination from a shareholder shall set forth: (a) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the shareholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to be present at the meeting in person or by proxy to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; (d) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated by the Board of Directors; and (e) the written consent of each nominee, signed by such nominee, to serve as a director of the Corporation if so elected. The presiding officer of the meeting may refuse to acknowledge the nomination of any person by a shareholder not made in compliance with the foregoing procedure. Section 1.4. Other Matters Brought by Shareholders. For business other ------------ -------------------------------------- than nominations of director candidates properly brought before an annual meeting by a shareholder pursuant to clause (c) of Section 1.2 of these bylaws, the shareholder must give timely notice thereof in writing to the Secretary and such business must otherwise be a proper matter for shareholder action. To be timely, a shareholder's notice shall be given, either by personal delivery or by United States mail, postage prepaid, to the Secretary and received by the Secretary at the principal executive officers of the Corporation not later than 90 days prior to such annual meeting, provided that, if such 2 annual meeting is held on a date other than the third Thursday in April, such written notice must be given within ten days after the first public disclosure of the date of such meeting. For purposes of this Section 1.4, the first public disclosure of the date of any annual meeting of shareholders held on a date other than the third Thursday in April shall be when disclosure of such meeting date is first made in a filing by the Corporation with Securities and Exchange Commission, in any notice given to the New York Stock Exchange, or in a news release reported by the Dow Jones News Service, Reuters, Bloomberg, Associated Press or comparable national news service. Such shareholder's notice shall set forth (a) as to each matter a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder; (b) the beneficial owner, if any, on whose behalf the notice is given and a specific representation that the shareholder intends to be present at the meeting in person or by proxy to present and speak as to such business; and (c) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the notice is given (i) the name and address of such shareholder, as they appear on the Corporation's books, and of such beneficial owner and (ii) the class and number of shares of the Corporation which are owned beneficially and of record by such shareholder and such beneficial owner. The presiding officer of the meeting may refuse to permit any business to be brought before an annual meeting by a shareholder without compliance with the procedure set forth in this Section 1.4. Section 1.5. Special Meetings. Special meetings of the shareholders may be ------------ ----------------- called at any time, for the purpose or purposes set forth in the call, by the Board of Directors or by the Chairman of the Board of Directors. Special meetings shall be held at the registered office of the Corporation, or at such other places, within or without the Commonwealth of Pennsylvania, as may be designated by the Board of Directors or the Chairman of the Board of Directors. Section 1.6. Business at Special Meetings. No business may be transacted ------------ ----------------------------- at any special meeting of the shareholders other than matters referred to in the notice of the meeting or any supplement thereto and matters which are incidental or germane thereto. Section 1.7. Notice. Written notice specifying the place, date and time ------------ ------- and the general nature of business to be transacted at each meeting of the shareholders shall be given by the Secretary to each shareholder of record entitled to vote at such meeting. Section 1.8. Quorum. A shareholders' meeting shall not be organized for ------------ ------- the transaction of business unless a quorum is present. At any meeting, the presence in 3 person or by proxy of shareholders entitled to cast the minimum number of votes required by law to constitute a quorum on a particular matter in the absence of a bylaw to the contrary, or if no such number is required by law, at least a majority of the votes which all shareholders are entitled to cast on such matter, shall be necessary and sufficient to organize a meeting for the purpose of considering such matter. Notwithstanding the withdrawal of enough shareholders to leave less than the number of votes required by the preceding sentence, the shareholders who continue to be present at a duly organized meeting shall constitute a quorum in order to continue to do business until adjournment. If a meeting cannot be organized because a quorum has not attended, those present in person or by proxy may by majority vote adjourn the meeting to such time and place as they may determine, and it shall not be necessary to give notice of such adjourned meeting or the business to be transacted at such meeting to any shareholder other than by announcement at the meeting at which such adjournment is taken, unless the Board of Directors fixes a new record date for the adjourned meeting. Section 1.9. Voting. The voting at all meetings of the shareholders may be ------------ ------- by voice; but any qualified voter may demand a stock vote, whereupon (i) with respect to any matter specifically set forth in the notice of meeting, such stock vote shall be taken by ballot, and (ii) in the case of any other vote, such stock vote may be taken by ballot, by show of hands, or any other manner selected by the presiding officer. If the vote is taken by ballot, each ballot shall state the name of the shareholder voting and the number of shares voted by him, and if such ballot be cast by proxy, it shall state the name of the proxy voting and the number of shares voted by him as proxy. Each shareholder shall be entitled to one vote for each share having voting power registered in his name on the books of the Corporation as of the record date for the determination of the shareholders entitled to vote at the meeting, and it may be voted by the shareholder or his duly authorized proxy. When a stock vote is demanded, all questions shall be decided by a vote of shareholders present, in person or by proxy, entitled to cast at least a majority of the votes which all shareholders present and voting (excluding abstentions) are entitled to cast on the particular matter, unless otherwise especially provided in these bylaws, in the Restated Articles of Incorporation, as amended from time to time (the "Restated Articles of Incorporation"), or by law, and except that in the case of privileged, subsidiary or incidental motions or questions involving the convenience of the shareholders present, the presiding officer may call for a per capita vote, either by voice or by show of hands. Where a proxy or proxies represent the holders of shares entitled to cast in aggregate a sufficient number of votes to adopt a particular resolution, the vote of such proxy or proxies may, in the discretion of the presiding officer, constitute action by the shareholders. 4 A complete list of the shareholders entitled to vote at any meeting of shareholders, arranged in alphabetical order with the address of and the number of shares held by each, shall be prepared by the Secretary and shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. In lieu of the making of a list, the Corporation may make the information therein available at the meeting by any other means. Section 1.10. Proxies; Appointment and Revocation. Every shareholder ------------- ------------------------------------ entitled to vote at a meeting of the shareholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons, but not more than three, to act for him by proxy. Every proxy shall be executed in writing (including telegram, cable or radiogram, telex, TWX, facsimile transmission or similar transmission), by the shareholder or by his duly authorized attorney-in-fact, and filed with the Secretary. Section 1.11. Meeting Procedure. At all meetings of shareholders, the ------------- ------------------ Chairman of the Board of Directors shall preside, but in his absence, the presiding officer shall be designated by the Board of Directors, or if not so designated, selected by the shareholders present. The Secretary shall take the minutes of the meeting, but in the absence of the Secretary or an Assistant Secretary, the presiding officer shall designate any person to take the minutes of the meeting. The presiding officer of any meeting shall determine the order of business and the procedure at the meeting, including such regulation of the conduct of discussion as seems to him in order. The conduct of meetings shall be governed by accepted corporate practice (not Roberts' Rules), the fundamental --- rule being that all who are entitled to take part shall be treated with fairness and good faith. ARTICLE II BOARD OF DIRECTORS ------------------ Section 2.1. Number, Classification and Removal; Vacancies. ------------ ---------------------------------------------- Article Sixth of the Restated Articles of Incorporation reads as follows: "SIXTH. 6.1 The business and affairs of the corporation shall be managed ----- by a Board of Directors comprised as follows: 5 (a) The Board of Directors shall consist of not less than 9 nor more than 17 persons, the exact number to be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority vote of the directors then in office; (b) Directors shall, from and after the annual meeting of shareholders held in 1987, continue to be classified with respect to the time for which they shall severally hold office by dividing them into 3 classes, as nearly equal in number as possible. At such meeting and at each succeeding annual meeting of shareholders, the class of directors then being elected shall be elected to hold office for a term of 3 years. Each director shall hold office for the term for which elected and until his or her successor shall have been elected and qualified; (c) Subject to the rights of the holders of any series of preferred stock then outstanding, any director, any class of directors, or the entire Board of Directors, may be removed from office by shareholder vote at any time, with or without assigning any cause, but only if shareholders entitled to cast at least 80% of the votes which all shareholders would be entitled to cast at an annual election of directors or of such class of directors shall vote in favor of such removal; provided, however, that no individual director shall be removed (unless the entire Board of Directors or any class of directors be removed) in case the votes cast against such removal would be sufficient, if voted cumulatively for such director, to elect him or her to the class of directors of which he or she is a member; and (d) Subject to the rights of the holders of any series of preferred stock then outstanding, vacancies in the Board of Directors, including vacancies resulting from an increase in the number of directors, shall be filled only by a majority vote of the remaining directors then in office, though less than a quorum, except that vacancies resulting from removal from office by a vote of the shareholders may be filled by the shareholders at the same meeting at which such removal occurs. All directors elected to fill vacancies shall hold office for a term expiring at the annual meeting of shareholders at which the term of the class to which they have been elected expires. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. 6 6.2 Notwithstanding any other provisions of law, the Restated Articles or the bylaws of the corporation, the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of capital stock of the corporation entitled to vote in an annual election of directors, voting together as a single class, shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article Sixth." Section 2.2. Qualifications and Powers. No person shall be elected a ------------ -------------------------- director unless such person owns at least 100 shares of Common Stock of the Corporation. In addition to the powers and authority expressly conferred upon it by these bylaws and the Restated Articles of Incorporation, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things in the management of the Corporation as are not, by these bylaws, by the Restated Articles of Incorporation, or by law directed or required to be exercised or done by the shareholders. Section 2.3. Organizational Meeting. The first regular meeting of each ------------ ----------------------- newly-elected Board of Directors shall be held immediately following the annual meeting of the shareholders, and no notice of such meeting shall be necessary in order legally to constitute the meeting, provided that a quorum of the Board of Directors shall be present. At such meeting the Board of Directors shall organize itself, and may elect officers, appoint members of standing committees and transact any other business. Section 2.4. Regular Meetings; Notice. Regular meetings of the Board of ------------ ------------------------- Directors shall be held at such time and place as shall be designated by the Board of Directors from time to time. Notice of such regular meetings of the Board of Directors shall not be required to be given, except as otherwise expressly required in these bylaws or by law. However, whenever the time or place of regular meetings shall be initially fixed or changed, notice of such action shall be given to each director not participating in such action. Any business may be transacted at any regular meeting. Section 2.5. Special Meetings; Notice. Special meetings of the Board of ------------ ------------------------- Directors may be called at any time by the Chairman of the Board of Directors or, in his absence or during his inability to act, by the Chief Executive Officer or, in the absence or during the inability of either to act, by the Vice Chairman of the Board of Directors or, in the absence or during the inability of any of them to act, by the President, or by any four directors of the Corporation, by giving notice to the Secretary. Notice of every special meeting of the Board of Directors stating the place, day and hour thereof shall be given by the Secretary to each director by being mailed by first class at least five days, or 7 express mail or sent by courier service at least three days, or sent by telex, TWX, telegram, facsimile transmission or similar transmission or given personally or by telephone at least 24 hours, before the time at which the meeting is to be held. Any business may be transacted at any special meeting. Section 2.6. Quorum; Action. A meeting of the Board of Directors shall not ------------ --------------- be organized for the transaction of business unless a quorum is present. At any meeting, a majority of the directors then in office shall be necessary and sufficient to organize the meeting. A meeting at which a quorum is not present may be adjourned from time to time by a majority vote of those present to such time and place as they may determine, and it shall not be necessary to give notice of such adjourned meeting or the business to be transacted thereat other than by announcement at the meeting at which such adjournment is taken. Notwithstanding the withdrawal of enough directors to leave less than a majority, the directors who continue to be present at a duly organized meeting shall constitute a quorum in order to continue to do business. Unless otherwise provided in these bylaws, in the Restated Articles of Incorporation or by law, the acts of a majority of the directors present and voting (excluding abstentions) at a duly organized meeting shall be the acts of the Board of Directors. The yeas and nays shall be taken and recorded in the minutes at the request of any director present at a meeting. Section 2.7. Fees and Expenses. The Board of Directors shall fix the ------------ ------------------ compensation of each director (except for those directors who are officers of the Corporation, whose compensation is to be fixed by the Officers-Directors Compensation Committee) including, without limitation: (a) a fixed annual fee; and (b) a fixed sum for attendance at any meeting of the Board of Directors or any committee. Directors shall be reimbursed for the expenses of attendance at any meeting of the Board of Directors or any committee. Section 2.8. Charitable Contributions. The Board of Directors may ------------ ------------------------- authorize contributions out of the income of the Corporation for the public welfare or for religious, charitable, scientific, or educational purposes. Section 2.9. Catastrophe. Notwithstanding any other provisions of law, the ------------ ------------ Restated Articles of Incorporation or these bylaws, during any emergency period caused by a national catastrophe or local disaster, a majority of the surviving members (or the sole survivor) of the Board of Directors who have not been rendered incapable of acting because of incapacity or the difficulty of communication or transportation to the place of meeting, shall constitute a quorum for the sole purpose of electing directors to fill such emergency vacancies or to reduce the size of the full Board of Directors or both; and a 8 majority of the directors (or the sole survivor) present at such a meeting may take such action. Directors so elected shall serve until such absent directors are able to attend meetings or until the shareholders act to elect directors for such purpose. During such an emergency period, if the Board of Directors and the Policy and Planning Committee are unable to or fail to meet, any action appropriate to the circumstances may be taken by such officers of the Corporation as may be present and able. Questions as to the existence of a national catastrophe or local disaster and the number of surviving members capable of acting shall be conclusively determined at the time by the directors or the officers so acting. Section 2.10. Limitation of Liability. To the fullest extent that the laws ------------- ------------------------ of the Commonwealth of Pennsylvania, as in effect on January 27, 1987, or as thereafter amended, permit the elimination or limitation of the liability of directors, no director of the Corporation shall be personally liable for monetary damages as such for any action taken, or any failure to take any action, as a director. This Section 2.10 shall not apply to any actions filed prior to January 27, 1987, nor to any breach of performance of duty or any failure of performance of duty by any director occurring prior to January 27, 1987. The provisions of this Section 2.10 shall be deemed to be a contract with each director of the Corporation who serves as such at any time while such provisions are in effect, and each such director shall be deemed to be serving as such in reliance on such provisions. Any amendment to or repeal of this Section 2.10, or adoption of any other Article or bylaw of the Corporation, which has the effect of increasing director liability shall require the affirmative vote of at least 80% of the voting power of the then outstanding shares of capital stock of the Corporation entitled to vote in an annual election of directors, voting together as a single class. Any such amendment or repeal, other Article or bylaw, shall operate prospectively only and shall not have effect with respect to any action taken, or any failure to act, by a director prior thereto. ARTICLE III COMMITTEES ---------- Section 3.1. Standing Committees. The Board of Directors, upon the ------------ -------------------- recommendation of the Nominating and Governance Committee, shall appoint the members of the following standing committees: 9 (a) Audit Committee, comprised of independent, non-employee members of the Board of Directors, which shall recommend to the Board of Directors the independent public accountants to be appointed or elected annually; review with the independent public accountants and the internal auditors the scope and plan of their respective future audit programs and their respective reports and recommendations concerning audit findings; meet with the officers of the Corporation and separately with the independent public accountants and with the internal auditors to review audits, annual financial statements prior to their release, accounting and financial controls and compliance with appropriate codes of conduct; report on its meetings to the Board of Directors together with its comments and recommendations; and have such other powers and perform such other duties as the Board of Directors may specify. (b) Nominating and Governance Committee, comprised of non-employee members of the Board of Directors, which shall recommend to the Board of Directors (i) the persons to be nominated by the Board of Directors to stand for election as directors at the annual meeting of the shareholders, (ii) the person or persons to be elected by the Board of Directors to fill any vacancy or vacancies in the Board of Directors, (iii) the persons to be elected by the Board of Directors to the offices of the Chairman of the Board of Directors, Chief Executive Officer, Vice Chairman of the Board of Directors, President and any office which would cause such person to be an executive officer (as defined under the Securities Exchange Act of 1934) of the Corporation, (iv) the persons to be appointed by the Board of Directors as members of the Office of the Chief Executive and the Executive Committee, (v) actions to be taken regarding the structure, organization and functioning of the Board of Directors and (vi) the directors to be appointed to serve as members, and as chairmen, of the standing and other committees established by the Board of Directors; and have such other powers and perform such other duties as the Board of Directors may specify. (c) Officers-Directors Compensation Committee, comprised of non-employee members of the Board of Directors, which shall approve, adopt, administer, interpret, amend, suspend or terminate the compensation plans of the Corporation applicable to, and fix the compensation and benefits of, (i) all officers of the Corporation serving as directors of the Corporation and (ii) all executive officers (as defined under the Securities Exchange Act of 1934) of the Corporation; and have such other powers and perform such other duties as the Board of Directors may specify. Section 3.2. Other Committees. The Board of Directors shall establish the ------------ ----------------- Office of the Chief Executive and the Executive Committee and may establish such other 10 committees as it may deem appropriate, all of which committees shall have such powers and perform such duties as the Board of Directors may specify and have such membership, which may or may not include directors, as the Board of Directors may appoint. Section 3.3. Organization of and Action by Committees. All committee ------------ ----------------------------- ----------- members appointed by the Board of Directors shall serve at the pleasure of the Board of Directors. All committees shall determine their own organization, procedures and times and places of meeting, unless otherwise directed by the Board of Directors. Any action taken by any committee shall be subject to alteration or revocation by the Board of Directors; provided, however, that third parties shall not be prejudiced by such alteration or revocation. ARTICLE IV OFFICERS -------- Section 4.1. Election. The Board of Directors shall elect a Chairman of ------------ --------- the Board of Directors, a Secretary and a Treasurer. In addition, the Board of Directors may elect a Chief Executive Officer, Vice Chairman of the Board of Directors, President and Controller, or any one or more of them, and may elect one or more Vice Presidents or other officers. Each officer elected by the Board of Directors shall serve until the next organizational meeting of the Board of Directors and until his successor, if any, shall have been elected, unless his resignation or removal shall expressly be effective earlier. Each officer appointed by the Office of the Chief Executive or the Executive Committee shall serve until his successor, if any, shall have been appointed, unless his resignation or removal shall expressly be effective earlier. Any officer of the Corporation may be removed by the Board of Directors with or without cause. Section 4.2. Chairman. The Chairman of the Board of Directors shall have ------------ --------- general control and direction of the business of the Corporation. He shall preside at all meetings of shareholders and directors and shall have such other powers and perform such other duties as the Board of Directors may specify. The Chairman of the Board of Directors shall be an ex officio member, without the right to vote, of the Audit, Nominating and Governance and Officers-Directors Compensation Committees. No person shall hold the position of Chairman of the Board of Directors for a period in excess of ten years. 11 Section 4.3. Chief Executive Officer. Subject to the control of the ------------ ----------------------- Chairman of the Board of Directors, the Chief Executive Officer shall have general control and direction of the business of the Corporation. If no person is elected to the office of the Chief Executive Officer, the Chairman of the Board of Directors shall be the Chief Executive Officer. Section 4.4. Vice Chairman. The Vice Chairman of the Board of Directors ------------ -------------- shall have such powers and perform such duties as the Board of Directors or the Chairman of the Board of Directors may specify. Section 4.5. President. The President shall have such powers and perform ------------ ---------- such duties as the Board of Directors or the Chairman of the Board of Directors may specify. If the office of President is vacant, the Chairman of the Board of Directors shall have all of the powers and perform all acts incident to the office of the President. Section 4.6. Vice Presidents and Other Officers. The Vice Presidents and ------------ ----------------------------------- other officers elected by the Board of Directors shall have such powers and perform such duties as the Board of Directors, the Chairman of the Board of Directors, the Chief Executive Officer, the Vice Chairman of the Board of Directors or the President may specify. In the absence of the Chairman of the Board of Directors, the Chief Executive Officer, the Vice Chairman of the Board of Directors and the President, or during their inability to act, such Vice Presidents and other officers may exercise, subject to the control of the Board of Directors, the powers and duties of the Chairman of the Board of Directors, the Chief Executive Officer, the Vice Chairman of the Board of Directors and the President. The Vice Presidents and other officers appointed by the Office of the Chief Executive or the Executive Committee shall have such powers and perform such duties as the entity that appointed them or any officers to whom they report, directly or indirectly, may specify. Section 4.7. Secretary. The Secretary shall attend all meetings of the ------------ ---------- shareholders and of the Board of Directors and shall keep careful records of all such meetings, the proceedings of which shall be transcribed into the minute book of the Corporation over his signature. He shall have custody of the corporate seal and of all books, documents, and papers of the Corporation committed to his charge. He shall cause all notices to be given to shareholders and to directors of the Corporation as may be required by law or these bylaws. He shall make such reports, have such other powers and perform such other duties as are authorized or required by law or the Board of Directors may specify. The Secretary may delegate to one or more Assistant Secretaries any of his powers and 12 duties. In the absence of the Secretary or during his inability to act, his powers and duties shall be performed by one or more Assistant Secretaries. Section 4.8. Treasurer. The Treasurer shall have the custody and care of, ------------ ---------- and shall manage and invest, all the money, securities, and funds of the Corporation. To the extent not invested in stocks, bonds or other securities, the Treasurer shall deposit the money and funds of the Corporation in such bank or banks or depositories as the Board of Directors may designate, provided that the Board of Directors may delegate to the Treasurer, subject to such limitations as it may from time to time prescribe, the power to designate such bank or banks or depositories. Under the direction of the Board of Directors, the Treasurer shall pay out and dispose of all drafts, notes, checks, warrants, and orders for the payment of money; render such statements to the Board of Directors as it shall require; and have such other powers and perform such other duties as the Board of Directors may specify or which are authorized or required of the Treasurer by law. The Treasurer may delegate any of his powers and duties to one or more Assistant Treasurers and, if authorized by the Board of Directors, any officer or agent of the Corporation. If required by the Board of Directors, the Treasurer and any Assistant Treasurer shall give bond for the faithful discharge of his duties in such amount as may be fixed by the Board of Directors and with such surety as may be approved by the Board of Directors. In the absence of the Treasurer or during his inability to act, his powers and duties shall be performed by one or more Assistant Treasurers. Section 4.9. Controller. The Controller shall keep or cause to be kept all ------------ ----------- books of account and accounting records of the Corporation. He shall periodically render to the Board of Directors financial statements and reports covering the results of the operations of the Corporation. Subject to the control of the Board of Directors, he shall determine all accounting policies and procedures, including, without limiting the generality of the foregoing, matters relating to depreciation, depletion, valuation of inventories, the method of creating reserves and accruals, and the establishment of the value of land, buildings, equipment, securities and other assets and shall perform all other acts authorized or required of the Controller by law and shall have such other powers and perform such other duties as the Board of Directors may specify. The Controller may delegate to one or more Assistant Controllers any of his powers and duties. In the absence of the Controller or during his inability to act, his powers and duties shall be performed by one or more Assistant Controllers. If the office of Controller is vacant, his duties shall be performed by the officer designated by the Board of Directors. 13 Section 4.10. Vacancies. Vacancy in any office or position by reason of ------------- ---------- death, resignation, removal, disqualification or any other cause, shall be filled in the manner provided in this ARTICLE IV for regular election or appointment to such office. Section 4.11. Delegation of Duties. In case of the absence of any officer ------------- --------------------- of the Corporation, or for any other reason that the Board of Directors may deem sufficient, the Board of Directors may delegate for the time being the powers and duties, or any of them, of such officer to any other officer or director or other person whom it may select. ARTICLE V MISCELLANEOUS CORPORATE TRANSACTIONS AND DOCUMENTS -------------------------------------------------- Section 5.1. Borrowing. No officer, agent or employee of the Corporation ------------ ---------- shall have any power or authority to borrow money on its behalf, to guarantee or pledge its credit, or to mortgage or pledge any of its real or personal property, except within the scope and to the extent of such authority as may be delegated by the Board of Directors. Authority may be granted by the Board of Directors for any of the above purposes and may be general or limited to specific instances. Section 5.2. Execution of Instruments. All properly authorized notes, ------------ ------------------------- bonds, drafts, acceptances, checks, endorsements (other than for deposit), guarantees, and all evidences of indebtedness of the Corporation whatsoever, and all deeds, mortgages, contracts and other instruments requiring execution by the Corporation may be signed by the Chairman of the Board of Directors, the Chief Executive Officer, the Vice Chairman of the Board of Directors, the President, any Vice President or the Treasurer; and authority to sign any such instruments, which may be general or confined to specific instances, may be conferred by the Board of Directors upon any other person or persons, subject to such requirements as to countersignature or other conditions, as the Board of Directors may from time to time determine. Facsimile signatures may be used on checks, notes, bonds or other instruments. Any person having authority to sign on behalf of the Corporation may delegate, from time to time, by instrument in writing, all or any part of such authority to any person or persons if authorized so to do by the Board of Directors. Unless otherwise delegated, the Board of Directors retains the authority to approve any and all transactions entered into on behalf of the Corporation. 14 Section 5.3. Voting and Acting with Respect to Stock and Other Securities ------------ ------------------------------------------------------------ Owned by the Corporation. The Chairman of the Board of Directors, the Chief - ------------------------- Executive Officer, the Vice Chairman of the Board of Directors, the President, any Vice President or the Treasurer of the Corporation shall have the power and authority to vote and act with respect to all stock and other securities in any other corporation owned by this Corporation, unless the Board of Directors confers such authority, which may be general or confined to specific instances, upon some other officer or person. Any person so authorized shall have the power to appoint an attorney or attorneys, with general power of substitution, as proxies for the Corporation, with full power to vote and act on behalf of the Corporation with respect to such stock and other securities. ARTICLE VI INDEMNIFICATION --------------- Section 6.1. Entitlement to Indemnification. The Corporation shall, to the ------------ ------------------------------- extent that a determination of entitlement is made pursuant to, or to the extent that entitlement to indemnification is otherwise accorded by, this Article, indemnify every person who was or is a director, officer or employee of the Corporation (hereinafter referred to as the "Indemnitee") who was or is involved in any manner (including, without limitation, as a party or a witness), or is threatened to be made so involved, in any threatened, pending or completed investigation, claim, action, suit or proceeding, whether civil, criminal, administrative or investigative (including without limitation, any investigation, claim, action, suit or proceeding by or in the right of the Corporation) by reason of the fact that the Indemnitee is or was a director, officer or employee of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, fiduciary or other representative of another corporation, partnership, joint venture, trust, employee benefit plan or other entity (such investigation, claim, action, suit or proceeding hereinafter being referred to as a "Proceeding"), against any expenses and any liability actually and in good faith paid or incurred by such person in connection with such Proceeding; provided, that indemnification may be made with respect to a Proceeding brought by an Indemnitee against the Corporation only as provided in the last sentence of this Section 6.1. As used in this Article, the term "expenses" shall include fees and expenses of counsel and all other expenses (except any liability) and the term "liability" shall include amounts of judgments, fines or penalties and amounts paid in settlement. Indemnification may be made under this Article for expenses incurred in connection with 15 any Proceeding brought by an Indemnitee against the Corporation only if (1) the Proceeding is a claim for indemnification under this Article or otherwise, (2) the Indemnitee is successful in whole or in part in the Proceeding for which expenses are claimed, or (3) the indemnification for expenses is included in a settlement of, or is awarded by a court in, a Proceeding to which the Corporation is a party. Section 6.2. Advancement of Expenses. All expenses incurred in good faith ------------ ------------------------ by or on behalf of the Indemnitee with respect to any Proceeding shall, upon written request submitted to the Secretary of the Corporation, be advanced to the Indemnitee by the Corporation prior to final disposition of such Proceeding, subject to any obligation which may be imposed by law or by provision in the Articles, bylaws, an agreement or otherwise to repay the Corporation in certain events. Section 6.3. Indemnification Procedure. ------------ -------------------------- (a) To obtain indemnification under this Article, an Indemnitee shall submit to the Secretary of the Corporation a written request, including such supporting documentation as is reasonably available to the Indemnitee and reasonably necessary to the making of a determination of whether and to what extent the Indemnitee is entitled to indemnification. The Secretary of the Corporation shall promptly thereupon advise the General Counsel in writing of such request. (b) The Indemnitee's entitlement to indemnification shall be determined by a Referee (selected as hereinafter provided) in a written opinion. The Referee shall find the Indemnitee entitled to indemnification unless the Referee finds that the Indemnitee's conduct was such that, if so found by a court, indemnification would be prohibited by Pennsylvania law. (c) "Referee" means an attorney with substantial expertise in corporate law who neither presently is, nor in the past five years has been, retained to represent: (i) the Corporation or the Indemnitee, or an affiliate of either of them, in any matter material to either such party, except to act as a Referee in similar proceedings, or (ii) any other party to the Proceeding giving rise to a claim for indemnification under this Article. The Corporation's General Counsel, if Disinterested (as hereinafter defined), or if not, the Corporation's senior officer who is Disinterested, shall propose a Referee. The Secretary of the Corporation shall notify the Indemnitee of the name of the Referee proposed, whose appointment shall become final unless the Indemnitee, within 10 days of such notice, reasonably objects to such Referee as not being qualified, independent or 16 unbiased. If the Corporation and the Indemnitee cannot agree on the selection of a Referee, or if the Corporation fails to propose a Referee, within 45 days of the submission of a written request for indemnification, the Referee shall be selected by the American Arbitration Association. The General Counsel or a senior officer shall be deemed Disinterested if not a party to the Proceeding and not alleged in the pleadings as to the Proceeding to have participated in the action, or participated in the failure to act, which is the basis for the relief sought in the Proceeding. (d) Notwithstanding any other provision of this Article, to the extent that there has been a determination by a court as to the conduct of an Indemnitee such that indemnification would not be prohibited by Pennsylvania law, or if an Indemnitee would be entitled by Pennsylvania law to indemnification, the Indemnitee shall be entitled to indemnification hereunder. (e) A determination under this Section 6.3 shall be conclusive and binding on the Company but not on the Indemnitee. Section 6.4. Partial Indemnification. If an Indemnitee is entitled under ------------ ------------------------ any provision of this Article to indemnification by the Corporation of a portion, but not all, of the expenses or liability resulting from a Proceeding, the Corporation shall nevertheless indemnify the Indemnitee for the portion thereof to which the Indemnitee is entitled. Section 6.5. Insurance. The Corporation may purchase and maintain ------------ ---------- insurance to protect itself and any Indemnitee against expenses and liability asserted or incurred by any Indemnitee in connection with any Proceeding, whether or not the Corporation would have the power to indemnify such person against such expense or liability by law, under an agreement or under this Article. The Corporation may create a trust fund, grant a security interest or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification. Section 6.6. Agreements. The Corporation may enter into agreements with ------------ ----------- any director, officer or employee of the Corporation, which agreements may grant rights to the Indemnitee or create obligations of the Corporation in furtherance of, different from, or in addition to, but not in limitation of, those provided in this Article, without shareholder approval of any such agreement. Without limitation of the foregoing, the Corporation may obligate itself (1) to maintain insurance on behalf of the Indemnitee against certain expenses and liabilities and (2) to contribute to expenses and liabilities 17 incurred by the Indemnitee in accordance with the application of relevant equitable considerations to the relative benefits to, and the relative fault of, the Corporation. Section 6.7. Miscellaneous. The entitlement to indemnification and ------------ -------------- advancement of expenses provided for in this Article (1) shall be a contract right, (2) shall not be exclusive of any other rights to which an Indemnitee may otherwise be entitled under any Article, bylaw, agreement, vote of shareholders or directors or otherwise, (3) shall continue as to a person who has ceased to be a director, officer or employee and (4) shall inure to the benefit of the heirs and legal representatives of any person entitled to indemnification or advancement of expenses under this Article. Section 6.8. Construction. If any provision of this Article shall be held ------------ ------------- to be invalid, illegal or unenforceable for any reason (1) such provision shall be invalid, illegal or unenforceable only to the extent of such prohibition and the validity, legality and enforceability of the remaining provisions of this Article shall not in any way be affected or impaired thereby, and (2) to the fullest extent possible, the remaining provisions of this Article shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. Section 6.9. Effectiveness. This Article shall apply to every Proceeding ------------ -------------- other than a Proceeding filed prior to January 27, 1987, except that it shall not apply to the extent that Pennsylvania law does not permit its application to any breach of performance of duty or any failure of performance of duty by an Indemnitee occurring prior to January 27, 1987. Section 6.10. Amendment. This Article may be amended or repealed at any ------------- ---------- time in the future by vote of the directors without shareholder approval; provided, that any amendment or repeal, or adoption of any Article of the Restated Articles or any other bylaw of the Corporation, which has the effect of limiting the rights granted to directors under this Article, shall require the affirmative vote of at least 80% of the voting power of the then outstanding shares of capital stock of the Corporation entitled to vote in an annual election of directors, voting together as a single class. Any amendment or repeal, or such Article or other bylaw, limiting the rights granted under this Article shall operate prospectively only, and shall not limit in any way the indemnification provided for herein with respect to any action taken, or failure to act, by an Indemnitee prior thereto. 18 ARTICLE VII CAPITAL STOCK ------------- Section 7.1. Share Certificates. Every holder of fully-paid stock of the ------------ ------------------- Corporation shall be entitled to a certificate or certificates, to be in such form as the Board of Directors may from time to time prescribe, and signed (in facsimile or otherwise, as permitted by law) by the Chairman of the Board of Directors, the Chief Executive Officer, the Vice Chairman of the Board of Directors, the President or any Vice President and also by the Secretary or the Treasurer or an Assistant Secretary or an Assistant Treasurer, which certificate or certificates shall represent and certify the number of shares of stock owned by such holder. In case any officer, transfer agent or registrar who has signed (in facsimile or otherwise, as permitted by law) any share certificate shall cease to be such officer, transfer agent or registrar before the certificate is issued, it may be issued by the Corporation with the same effect as if the officer, transfer agent or registrar had not ceased to be such at the date of its issue. The Board of Directors may authorize the issuance of certificates for fractional shares or, in lieu thereof, scrip or other evidence of ownership, which may (or may not) as determined by the Board of Directors entitle the holder thereof to voting, dividends or other rights of shareholders. Section 7.2. Transfer of Shares. Transfers of shares of stock of the ------------ ------------------- Corporation shall be made on the books of the Corporation only upon surrender to the Corporation of the certificate or certificates for such shares properly endorsed by the shareholder or by his assignee, agent or legal representative, who shall furnish proper evidence of assignment, authority or legal succession, or by the agent of one of the foregoing thereunto duly authorized by an instrument duly executed and filed with the Corporation in accordance with regular commercial practice. Section 7.3. Holders of Record. The Corporation shall be entitled to treat ------------ ------------------ the holder of record of any share or shares of stock of the Corporation as the holder and owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in any share on the part of any person other than the registered holder thereof, whether or not it shall have express or other notice thereof, except as expressly provided by law. The Board of Directors may fix a record date, within any applicable limits imposed by law or the Restated Articles of Incorporation, for the determination of shareholders for any purpose, including meetings, payment of dividends, allotment of rights and reclassification, conversion or exchange of shares. The Board of 19 Directors may adopt a procedure whereby a shareholder of the Corporation may certify in writing to the Corporation that all or a portion of the shares registered in the name of the shareholder are held for the account of a specified person or persons. The resolution of the Board of Directors adopting such a procedure may set forth: (1) the classification of shareholder who may certify; (2) the purpose or purposes for which the certification may be made; (3) the form of certification and information to be contained therein; (4) if the certification is with respect to a record date, the time after the record date within which the certification must be received by the Corporation; and (5) such other provisions with respect to the procedure as are deemed necessary or desirable. Upon receipt by the Corporation of a certification complying with the procedure, the persons specified in the certification shall be deemed, for the purposes set forth in the certification, to be the holders of record of the number of shares specified in place of the shareholder making the certification. Section 7.4. Replacement. Each duly appointed transfer agent and registrar ------------ ------------ of the Corporation may issue and register, respectively, from time to time, without further action or approval by or on behalf of the Corporation, new certificates of stock of the Corporation to replace certificates claimed to have been lost, stolen, or destroyed, upon receipt by the transfer agent of an Affidavit of Loss and Bond of Indemnity in such amount and upon such terms as may be required by the transfer agent to protect the Corporation, the transfer agent and registrar against all loss, cost or damage arising from the issuance of such new certificates, provided that a Bond of Indemnity shall not be required where not more than five shares of stock are involved. ARTICLE VIII MISCELLANEOUS Section 8.1. Description of Seal. The corporate seal of the Corporation ------------ -------------------- shall be inscribed with the name of the Corporation, and the words "Corporate Seal," and may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. Section 8.2. Fiscal Year. The fiscal year of the Corporation shall be the ------------ ------------ calendar year. 20 Section 8.3. Gender. In these bylaws, words used in the masculine gender ------------ ------- shall include the feminine. Section 8.4. Adoption, Amendment or Repeal of Bylaws. Except as otherwise ----------- -------------------------------- ------- provided by law, in the Restated Articles of Incorporation or in these bylaws, new or additional bylaws may be adopted and these bylaws may be amended or repealed by action of the Board of Directors at any regular or special meeting, subject to the power of the shareholders to change such action. 21 EX-10.1 3 INCENTIVE COMP & DEFERRED INCOME FOR KEY EMPLOYEES Exhibit 10.1 PPG INDUSTRIES, INC. INCENTIVE COMPENSATION AND DEFERRED INCOME PLAN FOR KEY EMPLOYEES Effective: February 15, 1995 As Amended Thru: April 17, 1996 As Further Amended February 18, 1998 Table of Contents ----------------- Section I Definitions Section II Awards Section III Capital Enhancement Account Section IV Withdrawal Provisions Section V Specific Provisions Related to Benefits Section VI Administration & Claims Section VII Amendment & Termination Section VIII Miscellaneous Section IX Change in Control - Page 1.1 - SECTION I - DEFINITIONS ----------------------- 1.01 Administrator means an officer or officers of the Company appointed by the Committee, and any person(s) designated by such Administrator to assist in the administration of the Plan. 1.02 Award means a grant of incentive compensation. 1.03 Beneficiary means the person or persons designated by a Participant to receive benefits hereunder following the Participant's death, in accordance with section 5.02; provided, however, in the event a Participant fails to designate a Beneficiary in accordance with Section 5.02, his/her Beneficiary shall be the Beneficiary designated under the Deferred Compensation Plan. For purposes of this Section 1.05, "person or persons" is limited to an individual, a Trustee or a Participant's estate. 1.04 Board means the Board of Directors of PPG Industries, Inc. 1.05 Capital Enhancement Account or Account means a bookkeeping account or accounts maintained for a Participant who, for such period or periods as the Committee may establish or permit, elects to defer all or any part of an Award in the form of cash or Salary, as provided in Section 3.01. 1.06 CEA-1 means all funds contributed to the Capital Enhancement Account during the period August 1, 1985 thru July 31, 1986, and earnings thereon. 1.07 CEA-2 means all funds contributed to the Capital Enhancement Account during the period November 1, 1987 thru December 31, 1988, and earnings thereon. 1.08 CEBC means the Compensation and Employee Benefits Committee of the Company. 1.09 Code means the Internal Revenue Code of 1986, as amended. 1.10 Committee means the Officers-Directors Compensation Committee, as further defined in Section 6.01, (or any successor) of the Board. 1.09 Company or PPG means PPG Industries, Inc. 1.10 Conversion Formula means dividing an amount by the average of the closing sale prices for PPG Stock reported on the New York Stock Exchange- Composite Tape for the first five days during which the New York Stock Exchange is open during the Plan Year immediately following the last day of the Plan Year to which the Award relates. - Page 1.2 - 1.11 Corporation means PPG and any Subsidiary Corporation designated by the Committee as eligible to participate in the Plan, and which, by proper authorization of the Board of Directors or other governing body of such Subsidiary Corporation, elects to participate in the Plan. 1.12 Deferred Compensation Plan means the PPG Industries, Inc. Deferred Compensation Plan. 1.13 Disability means any long-term disability. The Administrator, in his complete and sole discretion, shall determine a Participant's Disability; provided, however, that a Participant who is approved to receive Long-Term Disability benefits pursuant to the PPG Industries, Inc. Long-Term Disability Plan shall be considered to have a Disability. The Administrator may require that a Participant submit to an examination from time to time, but no more often than annually, at the expense of the Company, by a competent physician or medical clinic, selected by the Administrator, to confirm Disability. On the basis of such medical evidence, the determination of the Administrator as to whether or not a condition of Disability exists or continues shall be conclusive. 1.14 Employee means any full-time, or permanent part-time employee (including any officer) of the Corporation. 1.15 ERISA means the Employee Retirement Income Security Act of 1974, as amended. 1.16 Financial Hardship means an unexpected need for cash arising from an illness, casualty loss, sudden financial reversal, or other such unforeseeable occurrence, as determined by the Administrator, in his complete and sole discretion. 1.17 Former Participant means a Participant who becomes ineligible to receive an Award but who continues to have an Account hereunder. 1.18 Insider means a Participant or a Former Participant who at any time within the prior six (6) months was a person subject to Section 16 of the Securities Act of 1934. 1.19 Minimum Rate - means the average of the daily closing yields during November of 10-year Treasury Notes. 1.20 Participant means an Employee who is approved by the CEBC, or the Committee, as appropriate, to participate. Participants shall be limited to key Employees of the Corporation who contribute the most to the growth and profitability of the Company. - Page 1.3 - 1.21 Plan Year means the calendar year. 1.22 Pre-tax Earnings means the consolidated earnings of the Company and its consolidated Subsidiaries and equity affiliates before the deduction of income taxes, minority interest and the amount to be set aside in the Reserve as provided in Section 2.01. The Reserve shall not be adjusted for any restatements of prior years' earnings. 1.23 PPG Stock means Common Stock of the Company. 1.24 Reserve means the aggregate of the amounts available for the making of Awards as provided in Section 2.01. 1.25 Retired Participant means a Participant who elects to maintain an Account in the Plan after his/her Retirement Date. 1.26 Salary means the regular base salary to be paid to a Participant by the Corporation. 1.27 Subsidiary means any corporation of which fifty percent (50%) or more of the outstanding voting stock or voting power is owned, directly or indirectly, by the Company and any partnership or other entity in which the Company has a fifty percent (50%) or more ownership interest. 1.28 Terminated Participant means a Participant who maintains an Account in the Plan following his/her termination of employment from the Corporation. - Page 1.4 - SECTION II - AWARDS ------------------- 2.01 The Reserve ----------- (a) For purposes of establishing a Reserve, an amount shall be set aside each year to be calculated as follows: (1) Multiply consolidated shareholders' equity as of the beginning of the year by 12%; (2) Subtract the result of (1) above from Pre-tax Earnings for the year; (3) Multiply the result of (2) above by 5%. (b) In no event, may the amount set aside exceed 20% of the cash dividends paid on PPG Stock during the year. (c) For purposes of subparagraph (a)(1) above, "shareholders' equity" shall be exclusive of the aggregate par or stated value of preferred stock outstanding, if any, and of any unpaid cumulative dividends thereon. (d) The Reserve shall be reduced by the amount of all Awards, including any deferred amounts, first from the amount, if any, set aside for the year to which the Awards relate, and then from the amounts which have been in the Reserve for the longest period of time. (e) Unawarded amounts set aside prior to the fourth preceding year shall be automatically released from the Reserve and returned to income. (f) The Reserve shall not be reduced by interest or dividend equivalents on deferred amounts, dividends paid on restricted shares, negative amounts resulting from the calculation of the amount to be set aside each year, or the expenses of administering the Plan. (g) Not later than the last day of the year to which the Awards relate, the Committee may make an allocation (on the basis of estimates of the amount to be set aside in the Reserve for such year and unawarded amounts in the Reserve) to a group of Employees without determining the amounts to be allocated to individuals in such group and such allocation shall create a legal obligation upon the Company to pay such amount to the individuals comprising such group. - Page 2.1 - 2.02 Awards ------ (a) The Committee shall determine or approve: (1) The Participants; (2) The maximum amount of all Awards to all Participants; and (3) The amount and the form of the Award to each Participant. (b) The Committee may delegate to another person(s) the authority to determine: (1) The Participants, other than Insiders; and (2) The amount of Awards to such Participants. (c) Awards may be made only from the Reserve; provided, however, that the Committee is under no obligation to make Awards; or, if Awards are made, to award the total amount set aside in the Reserve each year. (d) Awards may be made in the form of cash, shares of PPG Stock, or a combination of both. 2.03 Payment of Awards ----------------- (a) Awards to Participants will be made in the form of cash ("cash component"), shares of PPG Stock ("stock component"), or a combination of both, as the Committee may determine. (b) If all or any part of an Award is made in the form of shares of PPG Stock, the number of such shares shall be determined by applying the Conversion Formula. Fractional shares shall be paid in cash. If the number of such shares is specified, the Reserve shall be reduced on account of such shares by an amount determined by applying the Conversion Formula in reverse. As to shares of PPG Stock which constitute all or any part of an Award, the Committee may impose such restrictions concerning their transferability and/or their forfeitability as are provided for in Section 5.05. (c) Payment of Awards shall be made to Participants not later than March 15 of the year following the end of the year to which the Awards relate. - Page 2.2 - 2.04 Deferral of Awards ------------------ (a) Prior to the beginning of each Plan Year, a Participant may elect to defer a percentage, in whole percentages only, of his/her Award, as follows: Minimum Deferral Maximum Deferral ---------------- ---------------- Cash component 10% 100% Stock component 100% 100% (b) Except as otherwise provided in paragraph (c) below, all elections pursuant to this Section 2.04 must be filed with the Administrator no later than the last day of the Plan Year prior to the Plan Year to which an Award relates; and such election shall become irrevocable as of the first day of the Plan Year to which it relates. (c) Employees who are approved to participate during a Plan Year, may make an election in accordance with this Section 2.04 within the 30-day period following notice to the Participant that he/she has been approved. (d) Amounts deferred in accordance with this section 2.04 shall be credited to the Participant's account in the Deferred Compensation Plan and shall be subject to the provisions of the Deferred Compensation Plan. (e) Amounts deferred in accordance with this Plan prior to January 1, 1996, which have not been withdrawn by January 1, 1996, shall be transferred to the Deferred Compensation Plan, in accordance with the provisions of such Plan. 2.04.01 Investment Elections -------------------- (a) At the time an election is made to defer all or a portion of the cash component of a Award, the Participant must also designate whether such amount is to be credited to the Interest Account, the PPG Stock Account, or a combination of both in the Deferred Compensation Plan. (b) At the time an election is made to defer the stock component of an Award, such deferral shall be credited to the PPG Stock Account in the Deferred Compensation Plan. (c) Amounts credited to the PPG Stock Account in the Deferred Compensation Plan shall be credited in the form of whole and - Page 2.3 - fractional Stock Account Shares determined according to the Conversion Formula. 2.04.02 In-Service Withdrawal Elections ------------------------------- (a) Subject to the provisions of this Section 2.04.02, at the time an election is made to defer all or a portion of the cash component of an Award, a Participant may designate all or a portion of the cash component of such deferred amount, not including any earnings thereon, to be paid during a specified quarter/year. (b) Withdrawal elections made pursuant to this Section may not specify a year which is any sooner than the fourth Plan Year after the Plan Year in which the deferred amount is credited to the Participant's Account. (c) Any amount subject to withdrawal pursuant to this Section, must be invested in the Interest Account in the Deferred Compensation Plan. (d) Any election made in accordance with this subjection 2.04.02 shall be irrevocable. - Page 2.4 - SECTION III - CAPITAL ENHANCEMENT ACCOUNT ----------------------------------------- 3.01 Deferrals of Salary to Capital Enhancement Account -------------------------------------------------- (a) Subject to any minimum/maximum limits established by the Committee, each prospective Participant, or such prospective Participant as the Committee deems appropriate, may be given an opportunity to make an election to defer payment of all or any part of his/her Salary and/or Award, to be credited to the Capital Enhancement Account. (b) (1) Subject to subparagraph (2) below, interest equivalents shall be credited on amounts deferred to the Capital Enhancement Account as follows: CEA-1 CEA-2 ----- ----- Minimum Rate 0% - 1987 plus 5% 10% - 1988 13% - 1989 15% - 1990 17% - 1991 and thereafter (2) Except as otherwise provided in subparagraph (3) below, when a Participant's employment terminates, including retirement, prior to age 62, interest equivalents shall be recalculated at the Minimum Rate for both CEA-1 and CEA-2, for the total period such amounts were invested in the Capital Enhancement Account, unless: (i) with respect to any Participant who is an Insider, the Committee, in its sole discretion, specifically determines such Participant is entitled to the interest rate described in subparagraph (1) above; or (ii) with respect to any Participant who is not an Insider, the Compensation and Employee Benefits Committee, in its sole discretion, specifically determines such Participant is entitled to the interest rate described in subparagraph (1) above. (3) In the case of a Participant whose termination of employment prior to age 62 is the result of a divestiture, such Participant shall be entitled to the interest rate described in subparagraph (1) above. - Page 3.1 - (c) Designations to credit a deferred amount to the Capital Enhancement Account shall be made in such terms on such bases as the Administrator may prescribe. 3.02 Payment of Deferrals from the Capital Enhancement Account --------------------------------------------------------- Payments from the Capital Enhancement Account shall be made in cash. 3.03 Pre-Retirement Death Benefit ---------------------------- If a Participant dies prior to retirement, the Company shall pay a pre- retirement death benefit to such Participant's Beneficiary equal to: (a) For a Participant who had a balance in his/her CEA-2 account at the time of death, the balance in the CEA-2 account; and (b) For Participants who had a balance in his/her CEA-1 account at the time of death, and who provided evidence of insurability at the time of enrollment in CEA-1, the pre-retirement death benefit shall be equal the greater of: (1) The CEA-1 account balance; or (2) The original amount deferred into the CEA-1 account (not including interest equivalents credited thereon) times the applicable factor in the following TABLE: TABLE ----- Attained Age on August 1, 1985 Factor --------------- ------ 44 and under 15 45 to 54 9 55 and older 8 3.04 Termination of Capital Enhancement Account - 2 ("CEA-2") -------------------------------------------------------- (a) Notwithstanding any other provision of Section III or Section IV herein, CEA-2 shall be terminated effective December 31, 1998. (b) Participants whose Account contains amounts credited under CEA-2 as of January 1, 1998, shall be required to make an election regarding the payout of all amounts credited under CEA-2 to be effective on January 1, 1999. (1) An active Participant may elect: - Page 3.2 - (A) To receive the full amount of his/her CEA-2 Account paid in a lump sum in January, 1999; or (B) To have such amount credited to his/her Account in the PPG Industries, Inc. Deferred Compensation Plan. (2) A terminated or retired Participant may elect: (A) To receive the full amount of his/her CEA-2 Account balance paid in a lump sum in January, 1999; or (B) To have his/her Account balance credited to his/her Account in the PPG Industries, Inc. Deferred Compensation Plan. A Participant who makes an election in accordance with this subparagraph must further elect to receive his/her CEA-2 Account balance paid in accordance with the election filed at the time of his/her termination or retirement for payments from: His/her Deferred Compensation Plan Account; or His/her CEA-2 Account. (3) Elections filed in accordance with this paragraph (b) must be received by the Administrator no later than June 20, 1998. In the event an active Participant fails to make an election in accordance with section (b)(1) above, his/her CEA-2 amount shall be credited to his/her Account in the PPG Industries, Inc. Deferred Compensation Plan. In the event a retired or terminated Participant fails to make an election in accordance with section (b)(2) above, his/her CEA-2 amount shall be credited to an account in the PPG Industries, Inc. Deferred Compensation Plan and the Participant shall be deemed to have elected to receive his/her CEA-2 Account balance paid in accordance with the election filed at the time of his/her termination or retirement for payments from his/her CEA-2 Account. (c) Elections made in accordance with subparagraph (b) above shall supersede any other elections on file with the Administrator which were made in accordance with Section IV. - Page 3.3 - (d) Section 4.02 shall apply to any Participant whose employment is terminated notwithstanding any election filed in accordance with this Section 3.04. - Page 3.4 - SECTION IV - WITHDRAWAL PROVISIONS ---------------------------------- 4.01 Withdrawals at/after a Participant's Retirement Date ---------------------------------------------------- (a) A Participant may elect a payment schedule applicable to his/her Account provided such election is filed with the Administrator: (1) Prior to the Participant's Retirement Date; and (2) In the year prior to the year the first payment is to be made and, in all cases, at least six months/ten days prior to the time the first payment is to be made. (b) Participants may elect: (1) One lump-sum payment; or (2) Quarterly, semiannual or annual installments - to be made over a period of up to a maximum of ten years. (c) A Participant may delay the first payment; provided, however, that, in all cases, payments must be completed no later than the month preceding the month in which the Participant's 75th birthday occurs. (d) The payment schedule elected by the Participant shall apply to his/her entire Account. Annual installments shall be each year on the first of the month selected by the Participant as the month for such payments to commence. Semiannual installments shall be paid twice each year with the first yearly payment paid the first of the month selected by the Participant as the month for such payments to commence, and the second yearly payment paid the first of the month which is six month later. Quarterly installments shall be paid four times each year with the first yearly payment paid the first of the month selected by the Participant as the month for such payments to commence, and the second, third and fourth payments following with three month between each such payment. - Page 4.1 - Each installment payment shall be calculated by dividing the Participant's account balance, increased by the projected rate of interest to be earned during the period of the payment schedule, by the remaining number of installments - (e.g.: Ten annual installments ---- shall be paid: 1st installment = 1/10 of Account as adjusted; 2nd installment = 1/9; 3rd installment = 1/8, etc.). (e) In the event a Participant fails to file a payment schedule election with the Administrator prior to his/her Retirement Date, his/her Account shall be paid in one lump sum in the year following the year of such Retirement Date and shall be paid during the first month in such year which is at least six months/ten days following such Retirement Date. 4.02 Withdrawals following Termination --------------------------------- Participants shall receive their entire Account balance, paid in a lump sum as soon as possible following their termination of employment. 4.03 Withdrawals in the event of Disability -------------------------------------- (a) In the event a Participant becomes disabled, he/she shall receive payments in accordance with the election filed with the Administrator at the time the deferral election was filed. (b) As provided in such election, the Participant shall receive: (1) One lump-sum payment; or (2) Quarterly, semiannual or annual installments - to be made over a period of up to a maximum of ten years. (c) The payment schedule elected by the Participant shall apply to his/her entire Account. Annual installments shall be each year on the first of the month selected by the Participant as the month for such payments to commence. Semiannual installments shall be paid twice each year with the first yearly payment paid the first of the month selected by the Participant as the month for such payments to commence, and the second yearly payment paid the first of the month which is six month later. - Page 4.2 - Quarterly installments shall be paid four times each year with the first yearly payment paid the first of the month selected by the Participant as the month for such payments to commence, and the second, third and fourth payments following with three months between each such payment. Each installment payment shall be calculated by dividing the Participant's account balance, increased by the projected rate of interest to be earned during the period of the payment schedule, by the remaining number of installments - (e.g.: Ten annual installments ---- shall be paid: 1st installment = 1/10 of Account as adjusted; 2nd installment = 1/9; 3rd installment = 1/8, etc.). 4.04 Withdrawals following a Participant's death ------------------------------------------- (a) Death prior to the Participant's Payment Election ------------------------------------------------- In the event of a Participant's death prior to the time he/she files an irrevocable payment election in accordance with section 4.01 or 4.03, the Participant's entire Account shall be paid to the Participant's Beneficiary as soon as possible following the Participant's death. (b) Death on or after a Participant's Payment Election -------------------------------------------------- In the event of a Participant's death on or after the time he/she files an irrevocable payment election in accordance with section 4.01 or 4.03, the Participant's Beneficiary shall receive the remaining balance of the Participant's Account in accordance with the payment schedule filed by the Participant. 4.05 Withdrawals upon finding of Financial Hardship ----------------------------------------------- (a) Upon a finding that the Participant, or Beneficiary if the Participant is deceased, has suffered a Financial Hardship, the Administrator may, in his sole discretion, permit the acceleration of a withdrawal under the Plan in an amount reasonably necessary to alleviate such Financial Hardship. (b) The Participant shall be required to exhaust all our sources of funds, other than the PPG Savings Plan, before the Administrator will consider an accelerated withdrawal in accordance with this section 4.05. - Page 4.3 - 4.06 Small Account Provision ----------------------- (a) Each scheduled withdrawal must equal a minimum of $5,000, or 100 shares of PPG Stock. (b) If the remaining balance in a Participant's Account is less than $5,000, or 100 shares of PPG Stock, the Administrator may, at his discretion, distribute the remainder of the Account. - Page 4.4 - SECTION V SPECIFIC PROVISIONS ----------------------------- RELATED TO BENEFITS ------------------- 5.01 Nonassignability ---------------- (a) Except as provided in paragraph (b) below and in section 5.02, no person shall have any power to encumber, sell, alienate, or otherwise dispose of his/her interest under the Plan prior to actual payment to and receipt thereof by such person; nor shall the Administrator recognize any assignment in derogation of the foregoing. No interest hereunder of any person shall be subject to attachment, execution, garnishment or any other legal, equitable, or other process. (b) Paragraph (a) above shall not apply to the extent that a Participant's interest under the Plan is alienated pursuant to a "Qualified Domestic Relations Order" ("QDRO") as defined in (S)414(p) of the Code. (1) The administrator is authorized to adopt such procedural and substantive rules and to take such procedural and substantive actions as the Administrator may deem necessary or advisable to provide for the payment of amounts from the Plan to an Alternate Payee as provided in a QDRO. Such rules and actions shall be consistent with the principal purposes of the Plan. (2) Under no circumstances may the Administrator accept an order as a QDRO following a Participant's death. (3) An Alternate Payee may not establish an account in the Plan. All amounts taken from a Participant's Account, as provided in a QDRO, must be distributed as soon as possible following the acceptance of an order as a QDRO. (4) In the sole discretion of the Administrator, a Participant's scheduled withdrawal or otherwise requested withdrawal may be delayed for a period, not to exceed six months, if the Administrator has notice that part or all of the Participant's Account may be subject to alienation pursuant to a QDRO. - Page 5.1 - 5.02 Beneficiary Designation ----------------------- (a) The Participant shall have the right, at any time, to designate any person(s) as Beneficiary. The designation of a Beneficiary shall be effective on the date it is received by the Administrator, provided the Participant is alive on such date. (b) Each time a Participant submits a new Beneficiary designation form to the Administrator, such designation shall cancel all prior designations. (c) In the case of a Participant who does not have a valid Beneficiary designation on file at the time of his/her death, or in the case the designated Beneficiary predeceases the Participant, the entire balance in the Participant's Capital Enhancement Account shall be paid as soon as possible to the Participant's estate. 5.03 Limited Right to Assets of the Corporation ------------------------------------------ The Benefits paid under the Plan shall be paid from the general funds of the Company, and the Participants and any Beneficiary shall be no more than unsecured general creditors of the Company with no special or prior right to any assets of the Company for payment of any obligations hereunder. 5.04 Protective Provisions --------------------- The Participant or Beneficiary shall cooperate with the Administrator by furnishing any and all information requested by the Administrator in order to facilitate the payment of benefits hereunder. If a Participant refuses to cooperate, he/she may be deemed ineligible to receive a distribution and/or ineligible to continue to actively participate in the Plan. 5.05 Restricted Shares of PPG Stock ------------------------------ (a) The Committee may, on such terms as it deems appropriate, restrict the transferability of all or any number of such shares as constitute all or any part of an Award to installments over periods not exceeding five years and/or provide for the forfeitability of all or any number of such shares over a period not exceeding five years. During the period of restriction as to transferability and/or provision as to forfeitability, Participants shall receive dividends and have voting and other shareholders' rights as to such shares. - Page 5.2 - (b) No restriction on the transferability and/or provisions as to the forfeitability of any shares of PPG Stock may be imposed so as to obtain beyond the normal retirement date of the Participant awarded such shares. Further, all restrictions on the transferability and/or provisions as to the forfeitability of any shares of PPG Stock shall be such as to terminate in the event of death, total and permanent disability or early retirement, upon the occurrence of a Change in Control, or upon the occurrence of the commencement of a tender offer or an exchange offer. (c) Any restrictions on the transferability and/or provisions as to the forfeitability of any shares of PPG Stock shall be reflected in a legend imprinted on the certificate(s) representing such shares. 5.06 The shares of PPG Stock delivered under the Plan may be either authorized but unissued shares or issued shares acquired by the Company and held in its Treasury. 5.07 Withholding ----------- The Participant or Beneficiary shall make appropriate arrangements with the Administrator for satisfaction of any federal, state or local income tax withholding requirements and Social Security or other employee tax requirements applicable to the payment of benefits under the Plan. If no other arrangements are made, the Administrator may provide for such withholding and tax payments by any means he deems appropriate, in his sole discretion. 5.08 Forfeiture Provision -------------------- In the event the Company becomes aware that a Participant is engaged or employed as a business owner, employee, or consultant in any activity which is in competition with any line of business of the Corporation, or has engaged in any activity otherwise determined to be detrimental to the Company, the Administrative Subcommittee may: (a) Terminate such Participant's participation in the Plan, and distribute the entire amount in the Participant's Account in a lump sum; (b) Recalculate all earnings in the Account as though all investments had been accruing interest at the Minimum Rate for the total period such amounts were credited in the Account; (c) Apply both (a) and (b) above; or - Page 5.3 - (d) Apply any other diminution or forfeiture of benefits. which is specifically approved by the Administrative Subcommittee. For purposes of this Section 5.08, the Administrative Subcommittee shall consist of the Senior Vice President, Human Resources and Administration, the Director, Compensation and Benefits, and a representative of the Law Department, as appointed by the General Counsel of PPG. The Administrative Subcommittee shall report all of its activities to the Committee. - Page 5.4 - SECTION VI ADMINISTRATION & CLAIMS ---------------------------------- 6.01 Administration -------------- (a) The Committee shall be comprised of at least three members of the Board, none of whom shall, at the time of exercising discretion in administering the Plan, be eligible, or have been eligible at any time within one year, for selection as a person, to whom stock may be allocated or to whom stock options or stock appreciation rights may be granted pursuant to the Plan or any other plan of the Company or any of its affiliates entitling Participants therein to acquire stock, stock options or stock appreciation rights of the Company or any of its affiliates. The Committee, for purposes of administering the Plan, shall meet and act as necessary to determine or approve the maximum amount of Awards to all Participants, the form of Awards to Participants and the amount of Awards to Insiders and such other Participants as the Committee deems appropriate. (b) The Administrator shall administer the Plan and interpret, construe and apply its provisions in accordance with its terms. The Administrator shall have the complete authority to: (1) Determine eligibility for benefits; (2) Construe the terms of the Plan; and (3) Control and manage the operation of the Plan. (c) The Administrator shall have the authority to establish rules for the administration and interpretation of the Plan and the transaction of its business. The determination of the Administrator as to any disputed question shall be conclusive. All actions, decisions and interpretations of the Administrator shall be performed in a uniform and nondiscriminatory manner. (d) The Administrator may employ counsel and other agents and may procure such clerical, accounting and other services as the Administrator may require in carrying out the provisions of the Plan. (e) The Administrator shall not receive any compensation from the Plan for his services. (f) The Corporation shall indemnify and save harmless the Administrator against all expenses and liabilities arising out of the Administrator's - Page 6.1 - service as such, excepting only expenses and liabilities arising from the Administrator's own gross negligence or willful misconduct, as determined by the Committee. 6.02 Claims ------ (a) Every person receiving or claiming benefits under the Plan shall be conclusively presumed to be mentally and physically competent and of age. If the Administrator determines that such person is mentally or physically incompetent or is a minor, payment shall be made to the legally appointed guardian, conservator, or other person who has been appointed by a court of competent jurisdiction to care for the estate of such person, provided that proper proof of such appointment is furnished in a form and manner suitable to the Administrator. Any payment made under the provisions of the paragraph (a) shall be a complete discharge of any liability therefor under the Plan. The Administrator shall not be required to see to the proper application of any such payment. (b) Claims Procedure ---------------- Claims for benefits by a Participant or Beneficiary shall be filed, in writing, with the Administrator. If the Administrator denies the claim, in whole or in part, the Administrator shall furnish a written notice to the claimant setting forth a statement of the specific reasons for the denial of the claim, references to the specific provisions of the Plan on which the denial is based, a description of any additional material or information necessary to perfect the claim and an explanation of why such material or information is necessary, and an explanation of the review procedure. Such notice shall be written in a way calculated to be understandable by the claimant. The written notice from the Administrator shall be furnished to the claimant within ninety (90) days following the date on which the claim was filed, except that if special circumstances require an extension of time, the Administrator shall notify the claimant of this need within such 90-day period. Such notice shall inform the claimant the nature of the circumstances necessitating the need for additional time and the date by which the claimant will be furnished with the decision regarding the claim. Such extension may provide for up to an additional 90 days. - Page 6.2 - (c) Review Procedure ---------------- Within sixty (60) days of the date the Administrator denies a claim, in whole or in part, the claimant, or his/her authorized representative, may request that the decision be reviewed. Such request shall be in writing, shall be filed with the Administrator, and shall contain the following information: (1) The date on which the denial was received by the claimant; (2) The date on which the claimant's request for review was filed with the Administrator; (3) The specific portions of the denial which the claimant requests the Administrator to review; (4) A statement setting forth the basis on which the claimant believes that a review of the decision is required; (5) Any written material which the claimant desires the Administrator to take into consideration in reviewing the claim. The Administrator shall afford the claimant, or his/her authorized representative, an opportunity to review documents pertinent to the claim, and shall conduct a full and fair review of the claim and its denial. The Administrator's decision on such review shall be furnished to the claimant in writing, and shall be written in a manner calculated to be understandable to the claimant. Such decision shall include a statement of the specific reason(s) for the decision, including references to the specific provision(s) of the Plan relied upon. The written notice from the Administrator shall be furnished to the claimant within sixty (60) days following the date on which the request for review was received by the Administrator, except that if special circumstances require an extension of time, the Administrator shall notify the claimant of this need within such 60-day period. Such notice shall inform the claimant the nature of the circumstances necessitating the need for additional time and the date by which the claimant will be furnished with the decision regarding the claim. Such extension may provide for up to an additional 60 days. - Page 6.3 - SECTION VII AMENDMENT AND TERMINATION ------------------------------------- 7.01 Amendment of the Plan --------------------- (a) Except as provided in paragraph (b) below, the Board or the Committee may amend the Plan, in whole or in part, at any time. (b) The Plan shall not be amended, without shareholder approval, so as to increase the percentage of Pre-tax Earnings to be set aside in the Reserve each year or extend the period of time after which unawarded amounts are automatically released from the Reserve and returned to income. 7.02 Termination of the Plan ----------------------- The Board or the Committee may terminate the Plan at any time. Upon a termination pursuant to this Section 7.02, the Committee has the sole discretion to determine distribution schedules for any or all Accounts, notwithstanding a Participant's previous distribution schedule. 7.03 Company Action. --------------- The Company's power to amend or terminate the Plan shall be exercisable by the Board or by the Committee, or by any individual authorized by the Board to exercise such powers. 7.04 Constructive Receipt -------------------- In the event the Administrator determines that amounts deferred under the Plan have been constructively received by Participants and must be recognized as income for federal income tax purposes, distributions shall be made to Participants, as determined by the Administrator. The determination of the Administrator under this section 7.04 shall be binding and conclusive. - Page 7.1 - SECTION VIII MISCELLANEOUS -------------------------- 8.01 Successors of the Company ------------------------- The rights and obligations of the Company under the Plan shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company. 8.02 ERISA Plan ---------- The Plan is intended to be an unfunded plan maintained primarily to provide deferred compensation benefits for "a select group of management or highly compensated employees" within the meaning of Sections 201, 301 and 401 of ERISA and therefore to be exempt from Parts 2, 3 and 4 of Title I of ERISA. 8.03 Trust ----- The Company shall be responsible for the payment of all benefits under the Plan. At its discretion, the Company may establish one or more grantor trusts for the purpose of providing for payment of benefits under the Plan. Such trust(s) may be irrevocable, but the assets thereof shall be subject to the claims of the Company's creditors. Benefits paid to the Participant from any such trust shall be considered paid by the Company for purposes of meeting the obligations of the Company under the Plan. 8.04 Employment Not Guaranteed ------------------------- Nothing contained in the Plan nor any action taken hereunder shall be construed as a contract of employment or as giving any Participant any right to continued employment with the Corporation. 8.05 Gender, Singular and Plural --------------------------- All pronouns and variations thereof shall be deemed to refer to the masculine, feminine, or neuter, as the identity of the person(s) requires. As the context may require, the singular may be read as the plural and the plural as the singular. 8.06 Headings -------- The headings of the Sections, subsections and paragraphs of the Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. - Page 8.1 - 8.07 Validity -------- If any provision of the Plan is held invalid, void or unenforceable, the same shall not affect, in any respect, the validity of any other provision(s) of the Plan. 8.08 Waiver of Breach ---------------- The waiver by the Company of any breach of any provision of the Plan by a Participant or Beneficiary shall not operate or be construed as a waiver of any subsequent breach. 8.09 Applicable Law -------------- The Plan is intended to conform and be governed by ERISA. In any case where ERISA does not apply, the Plan shall be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania. 8.10 Notice ------ Any notice required or permitted to be given to the Administrator under the Plan shall be sufficient if in writing and either hand-delivered, or sent by first class mail to the principal office of the Company at One PPG Place, Pittsburgh, PA 15272, directed to the attention of the Administrator. Such notice shall be deemed given as of the date of delivery. - Page 8.2 - SECTION IX CHANGE IN CONTROL ---------------------------- 9.01 Change in Control ----------------- (a) Upon, or in reasonable anticipation of, a Change in Control (as defined in section 9.02): (1) Awards in the form of cash shall be made for the year during which the Change in Control occurs, and then paid immediately to a trustee on such terms as the Senior Vice President, Human Resources and Administration and the Senior Vice President, Finance, or either of them, or their successors, shall deem appropriate (including such terms as are appropriate to cause such payment, if possible, not to be a taxable event to Participants) in order to cause the Awards so paid to be paid either not later than the end of the first calendar quarter following the end of the year to which the Awards relate or on a deferred basis in accordance with the elections of Participants then in effect as to the timing of the receipt of Awards for such year. (2) Participants who are eligible to receive an Award for the Plan Year in which a Change in Control occurs shall be eligible to receive an Award for the Plan Year following the Change in Control. (3) The amount of the Award payable to each Participant shall be: one-half of the regular Award if the Change in Control occurs during the first six months of the year; or the full regular Award, if the Change in Control occurs during the second six months of the year either calculated at a rating of 12 for all performance categories. (4) All deferred amounts credited to the Capital Enhancement Account shall be paid immediately to a trustee on such terms as the Senior Vice President, Human Resources and Administration and the Senior Vice President, Finance, or either of them, or their successors shall deem appropriate (including such terms as are appropriate to cause such payment, if possible, not to be a taxable event to Participants) in order to give effect to the elections of Participants with respect to the timing of the receipt of such deferred amounts. (b) By way of example of the operation of paragraph (a) above: - Page 9.1 - If the Change in Control occurred on August 1 of a Plan Year, a Participant in a position with 1000 total points and an incentive award value of $1.75 per point would receive an Award of no less than $21,000 calculated as follows: 1000 x 1.75 x 12 = $21,000. If the Change in Control occurred on April 1 of a Plan Year, such Participant would receive $10,500. If the Plan were to be continued to the end of the year, and performance exceeded the 12 rating, a higher Award would be paid. (c) Notwithstanding any other provision of this section, if an Award ultimately made for such Plan Year is greater than the Award made pursuant to this section, the Participant shall be entitled to the difference between such Awards. If the Participant has elected his/her Award to be deferred, payment of such difference shall be made to a trustee in accordance with the provisions set forth in subparagraph (a)(4) above. (d) For purposes of this section, the fair market value of a share of PPG Stock on any date shall be the closing sale price as reported for such date (or, if no price is reported for such date, for the next preceding date for which a price is reported) on the New York Stock Exchange-Composite Tape. 9.02 Definition: Change in Control ------------------------------ A "Change in Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"). - Page 9.2 - For purposes of this subsection (a) the following acquisitions shall not constitute a Change in Control: Any acquisition directly from the Company; Any acquisition by the Company; Any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; or Any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of paragraph (c) of this section 9.02. (b) Individuals who, as of September 20, 1995, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to such date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Approval by the shareholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination: (i) All or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more - Page 9.3 - subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; (ii) No Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination; and (iii) At least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company; or (e) A majority of the Board otherwise determines that a Change in Control shall have occurred. - Page 9.4 - EX-10.2 4 DEFERRED COMPENSATION PLAN Exhibit 10.2 PPG INDUSTRIES, INC. DEFERRED COMPENSATION PLAN Initially Effective: January 1, 1996 Amended November 1, 1996 Further Amended January 18, 1998 Table of Contents ----------------- Section I .................................... Definitions Section II .................................... Deferrals Section III .................................... Investment Options Section IV .................................... Savings Plan Restoration Contributions Section V .................................... Withdrawal Provisions Section VI .................................... Specific Provisions Related to Benefits Section VII .................................... Administration and Claims Section VIII .................................... Amendment and Termination Section IX .................................... Miscellaneous Section X .................................... Change in Control i HISTORY OF AMENDMENTS --------------------- At its meeting on April 17, 1996, the Officers-Directors Compensation Committee adopted an Amendment to add the definition of "Insider" and to delegate certain authority to the Compensation and Employee Benefits Committee. [PAT: PLEASE CHECK TO SEE IF ABOVE IS CORRECT. ALSO, THE PLAN INDICATES AN AMENDMENT NOVEMBER 1, 1996 - WHAT WAS THAT? At it meeting on February 18, 1998 the Officers-Directors Compensation Committee adopted amendments to: Effect the decision to terminate the CEA-2 in the IC Plan and the CEA in the MAP Plan; Provide the option to elect five installment payments to Participants who terminate employment and provide that the Administrator shall have the sole discretion to determine those terminations which are for cause or which are in any other way adverse to the Company and to deny any payout election to such Participant. ii SECTION I - DEFINITIONS ----------------------- 1.01 Account means all deferred Award amounts, all deferred Salary amounts and all Restoration Contributions and any amount transferred from a Participant's CEA-2 account effective on January 1, 1999, and earnings on each in a Participant's account at any particular time. For purposes of this Plan, "CEA-2 account" means the balance in the CEA-2 Account in the IC Plan or the CEA Account in the MAP Plan, whichever is applicable, as of December 31, 1998. 1.02 Administrator means an officer or officers of the Company appointed by the Committee, and any person(s) designated by such Administrator to assist in the administration of the Plan. 1.03 Affiliate means any business entity, other than a Subsidiary Corporation, in which PPG has an equity interest. 1.04 Award means a grant to a Participant under either the IC Plan or MAP which such person may elect to defer. Awards to Participants may be made in the form of cash ("cash component"), shares of PPG stock ("stock component"), or a combination of both. 1.05 Beneficiary means the person or persons designated by a Participant to receive benefits hereunder following the Participant's death, in accordance with Section 6.02. For purposes of this Section 1.05, "person or persons" is limited to an individual, a Trustee or a Participant's estate. 1.06 Board means the Board of Directors of PPG Industries, Inc. 1.07 Code means the Internal Revenue Code of 1986, and amendments thereto. 1.08 Committee means the Officers-Directors Compensation Committee (or any successor) of the Board. 1.09 Company or PPG means PPG Industries, Inc. 1.10 Conversion Formula means dividing an amount by the average of the closing sale prices for PPG Stock reported on the New York Stock Exchange-Composite Tape for the first five days during which the New York Stock Exchange is open during the Plan Year immediately following the last day of the Plan Year to which the Award relates. - Page 1.1 - 1.11 Corporation means PPG and any Subsidiary Corporation and any Affiliate designated by the Administrator as eligible to participate in the Plan, and which, by proper authorization of the Board of Directors or other governing body of such Subsidiary Corporation or Affiliate, elects to participate in the Plan. 1.12 Disability means any long-term disability. The Administrator, in his complete and sole discretion, shall determine a Participant's Disability; provided, however, that a Participant who is approved to receive Long-Term Disability benefits pursuant to the PPG Industries, Inc. Long-Term Disability Plan shall be considered to have a Disability. The Administrator may require that a Participant submit to an examination from time to time, but no more often than annually, at the expense of the Company, by a competent physician or medical clinic, selected by the Administrator, to confirm Disability. On the basis of such medical evidence, the determination of the Administrator as to whether or not a condition of Disability exists or continues shall be conclusive. 1.13 Discretionary Transaction means a transaction pursuant to any employee benefit plan of the Company that: (a) Is at the volition of the plan participant; (b) Is not made in connection with the participant's death, disability, retirement or termination of employment; (c) Is not required to be made available to a plan participant pursuant to a provision of the Code; and (d) Results in either an intra-plan transfer involving a PPG Stock Fund or a cash distribution funded by a volitional disposition of PPG Common Stock by the plan participant. 1.14 Earnings Growth Plan means the PPG Industries, Inc. 1984 Earnings Growth Plan. 1.15 Employee means any full-time or permanent part-time salaried employee (including any officer) of the Corporation. 1.16 ERISA means the Employee Retirement Income Security Act of 1974, as amended. 1.17 Financial Hardship means an unexpected need for cash arising from an illness, casualty loss, sudden financial reversal, or other such unforeseeable occurrence, as determined by the Administrator, in his complete and sole discretion. - Page 1.2 - 1.18 Former Participant means a Participant who becomes ineligible to receive an Award but who continues to have an Account hereunder. 1.19 IC Plan means the PPG Industries, Inc. Incentive Compensation and Deferred Income Plan for Key Employees. 1.20 Insider means a Participant who at any time within the prior six (6) months was a person subject to Section 16 of the Securities Act of 1934. 1.21 Interest Account means a record-keeping account maintained for a Participant who elects to defer all or part of an Award/Salary and/or maintain all or part of a deferred Award/Salary in the form of cash. 1.22 Interest Rate means the rate of interest to be credited during a Plan Year, as established prior to the beginning of the Plan Year. Such rate shall be either the Declared Rate or the Minimum Rate, as provided in the Plan. Declared Rate - means the greatest of: (a) the 90-day Treasury Bill yield plus 2.0 percentage points (Established: for Plan Year 1996 - as of September 15, 1995 and for Plan Years after 1996 - as of October 15 of the Plan Year prior to the Plan Year in which the rate is to be effective); or (b) the average of the month's end 10-year Treasury Note yield over the previous 36 month period (as of the last business day of September of the Plan Year prior to the Plan Year in which the average rate is to be effective); or (c) The Minimum Rate. Minimum Rate - means the average of the daily closing yields during October for the 10-year Treasury Note. The Declared Rate and the Minimum Rate will be announced to Participants prior to the beginning of the Plan Year to which such rates apply. 1.23 MAP means the PPG Industries, Inc. Management Award and Deferred Income Plan. 1.24 Participant means an Employee approved to participate in either the IC Plan or MAP. As used herein, "Participants" may be used collectively to include Retired Participants, Terminated Participants and Former Participants. 1.25 Plan or DCP means the PPG Industries, Inc. Deferred Compensation Plan. - Page 1.3 - 1.26 Plan Year means the calendar year. 1.27 PPG Stock means Common Stock of the Company. Shares of PPG Stock issued under the Plan may be either authorized but unissued shares or issued shares acquired by the Company and held in its treasury. 1.28 PPG Stock Account means a record-keeping account maintained for a Participant who elects to defer all or part of an Award/Salary and/or to maintain all or part of a deferred Award/Salary in the form of Stock Account Shares. 1.29 PPG Stock Fund means the PPG Stock Account, the Savings Plan PPG Stock Account or any other fund or account of any other benefit plan of the Company or a Subsidiary which account or fund is invested in, or valued based upon, PPG Common Stock and which fund or account is an alternative to other funds or accounts made available to plan participants which funds or accounts are not invested in, or valued based upon, PPG Common Stock. 1.30 Prohibited Discretionary Transaction means a Discretionary Transaction to be effected pursuant to an election made less than six months following the date of the most recent previous election to make a Discretionary Transaction with respect to any employee benefit plan of the Company which most recent previous election effected: (a) An increase in a PPG Stock Fund if the current transaction would entail a disposition of PPG Stock or a decrease in a PPG Stock Fund; or (b) A disposition of PPG Stock or a decrease in a PPG Stock Fund if the current transaction would entail an increase in a PPG Stock Fund. 1.31 Restoration Contributions means contributions to a Participant's Savings Plan Restoration Account in accordance with Section IV. 1.32 Retired Participant means a Participant who elects to maintain an Account in the Plan after his/her Retirement Date. 1.33 Retirement Date means the first day of the month following a Participant's termination of employment, provided such Participant is eligible to receive a benefit from a retirement plan sponsored by the Corporation on such date. - Page 1.4 - 1.34 Salary means a Participant's monthly base salary from the Corporation (excluding bonuses, commissions and other non-regular forms of compensation) and including payments from the PPG Industries Salary Continuance Plan, before reductions for deferrals under the Plan or under any other Plan sponsored by the Corporation. In the case of Salary Continuance, Salary deferral elections shall be applied to the actual amount of Salary Continuance being paid. 1.35 Savings Plan means the PPG Industries Employee Savings Plan. 1.36 Savings Plan Election means the sum of the percentage the Participant is contributing to the Savings Plan as Savings and as Elective Deferrals not to exceed the percentage eligible for the Company match in the Savings Plan. 1.37 Savings Plan Interest Account means a record-keeping account maintained for a Participant who is eligible to receive Restoration Contributions. The Interest Rate credited in the Savings Plan Interest Account shall be the same as that credited to the Interest Account. 1.38 Savings Plan Matching Percentage means the percentage of the Company's Matching Contributions for a Plan Year in the Savings Plan. 1.39 Savings Plan PPG Stock Account means a record-keeping account maintained for a Participant who is eligible to receive Savings Plan Restoration Contributions in accordance with Section IV, in the form of Stock Account Shares. 1.40 Savings Plan Restoration Account means all Restoration Contributions and earnings thereon in a Participant's Account at any particular time. 1.41 Stock Account Share means a record-keeping unit which is equivalent to one share of PPG Stock. 1.42 Subsidiary means any corporation of which fifty percent (50%) or more of the outstanding voting stock or voting power is owned, directly or indirectly, by the Company and any partnership or other entity in which the Company has a fifty percent (50%) or more ownership interest. 1.43 Terminated Participant means a Participant who maintains an Account in the Plan following his/her termination of employment from the Corporation. 1.44 Transferred Interest Account means a separate Interest Account for any amount transferred from a Participant's CEA-2 account, which the Participant elects not to add to his/her Account, and earnings thereon. - Page 1.5 - 1.45 Unscheduled Withdrawal means a distribution of all or a portion of a Participant's Interest Account and/or PPG Stock Account requested by a Participant, or a Beneficiary, if the Participant is deceased, in accordance with Section 5.07. - Page 1.6 - SECTION II - DEFERRALS ---------------------- 2.01 Deferral of Award ----------------- (a) In accordance with the provisions of either the IC Plan or MAP, which- ever is applicable, the value of that portion of the cash component of a deferred Award which the Participant has designated to the Interest Account shall be credited to the Interest Account on the day such deferral would otherwise have been paid to the Participant. (b) In accordance with the provisions of either the IC Plan or MAP, whichever is applicable, the value of: (1) that portion of the cash component of a deferred Award which the Participant has designated to the PPG Stock Account; and/or (2) the value of the stock component of a deferred Award shall be credited to the PPG Stock Account in the Participant's Account on the day such deferral would otherwise have been paid to the Participant. (c) Subject to paragraph (e) below, all crediting elections pursuant to this Section 2.01 are subject to the transfer provisions of Section 3.04 (d) Amounts credited to the PPG Stock Account shall be credited in the form of whole and fractional Stock Account Shares determined according to the Conversion Formula. (e) Any amount designated by the Participant for in-service withdrawal in accordance with either the IC Plan or MAP must be credited to the Interest Account and is not subject to the transfer provisions of Section 3.04. - Page 2.1 - 2.02 Deferral of Salary ------------------ (a) Prior to the beginning of each quarter, a Participant may elect to defer a percentage, in whole percentages only, of his/her Salary as follows: Minimum Deferral Maximum Deferral ---------------- ---------------- 1% 50% (b) Elections made pursuant to this Section 2.02 shall remain in effect until the earlier of: (1) The first day of the quarter following the quarter the Participant rescinds or modifies the election; or (2) The first day of the Plan Year following the Plan Year in which the Participant becomes a Former Participant. (c) Any election filed by a Participant pursuant to this Section 2.02 must be received by the Administrator on or before the last business day of the quarter prior to the quarter in which such election is to become effective. Deferred Salary shall be credited to the Participant's Account on the first day of the month following the month in which the deferral is made. (d) A Participant is ineligible to defer or continue to have deferred any Salary percentage during a quarter in which the Participant's salary is subject to a garnishment, tax lien, child support or any similar attachment to Salary. (e) A Participant who becomes ineligible for Salary deferral, in accordance with Paragraph (d) above, may thereafter resume Salary deferral upon the discontinuance of the attachment to the Salary and in accordance with the Salary election provisions of this Section 2.02. 2.02.01 Salary Deferral Crediting Elections ----------------------------------- (a) At the time an election is made to defer Salary, the Participant must also designate in whole percentages whether such amount is to be credited to the Interest Account, the PPG Stock Account, or a combination of both. - Page 2.2 - (b) A Salary deferral crediting election shall remain in effect through an entire quarter. A Salary deferral crediting election may be changed by a Participant for a subsequent quarter by notification to the Administrator on or before the last business day of the quarter, to be effective on the first day of the next quarter. (c) All crediting elections pursuant to this Section 2.02.01 are subject to the transfer provisions of Section 3.04. (d) The number of Stock Account Shares credited to the PPG Stock Account shall be determined by the closing price for PPG Stock on the last business day of the month in which the deferral is made. - Page 2.3 - SECTION III - DEFERRAL ACCOUNT OPTIONS -------------------------------------- 3.01 Interest Account ---------------- Except as otherwise provided in Sections 5.03 and 6.06, amounts deferred to the Interest Account shall accrue interest equivalents at the Declared Rate. 3.02 PPG Stock Account ----------------- (a) Amounts credited to the PPG Stock Account shall be credited in the form of Stock Account Shares. (b) Participants shall not receive cash dividends or have voting or other shareholders' rights as to Stock Account Shares; however, Stock Account Shares shall accrue whole and fractional dividend equivalents, in the form of additional Stock Account Shares, on the basis of the closing sale price for PPG Stock, reported on the Composite Tape for the day on which a dividend is paid, based on the number of whole Stock Account Shares in the PPG Stock Account on the record date. 3.03 Transfers from IC Plan, MAP and/or the Earnings Growth Plan ----------------------------------------------------------- (a) Any amount previously deferred under either the IC Plan or MAP, which has not been withdrawn prior to January 1, 1996, shall be transferred to the Participant's Account in this Plan effective January 1, 1996. Amounts credited to the interest account under the prior plan(s) shall be transferred to the Interest Account and amounts credited to the PPG stock account under the prior plan(s) shall be transferred to the PPG Stock Account. (b) (1) Subject to subparagraph (2) below, any amount which a Participant currently has in his/her account in the Earnings Growth Plan shall be transferred to the Participant's Account in this Plan effective January 1, 1996. Amounts credited to the interest account in the Earnings Growth Plan shall be transferred to the Interest Account, and amounts credited as earnings growth shares in the Earnings Growth Plan shall be transferred to the PPG Stock Account. (2) Subparagraph (1) above shall not apply in the case of a Participant who has filed a withdrawal election with respect to his/her earnings growth account under the Earnings Growth Plan. Such account shall remain in the Earnings Growth Plan and subject to the provisions thereof. (c) Any amount transferred at the election of a Participant from his/her CEA-2 account: - Page 3.1 - (1) To his/her Account, will be transferred, effective January 1, 1999 to the Interest Account; or (2) To his/her Transferred Interest Account, will be transferred, effective January 1, 1999. Notwithstanding Section 3.04, amounts held in the Transferred Interest Account may not be transferred to the PPG Stock Account. 3.04 Transfers --------- (a) Subject to paragraph (b) below, a Participant who has a balance in his/her Account, may elect to transfer some or all of his/her Account balance between the PPG Stock Account and the Interest Account. Transfers shall be subject to the following provisions: (1) Participants must file a transfer request with the Administrator on or before the last business day of a quarter, to be effective on the first day of the next quarter. (2) The number and value of Stock Account Shares shall be determined by the closing price for PPG Stock on the last business day of the quarter in which the election is received by the Administrator. (b) Insiders may not without the prior approval of the Senior Vice President, Human Resources and Administration, or his or her successor, transfer any amount out of the PPG Stock Account which was credited to their Account balance within the prior six months. Insiders are also prohibited from making any transfer which would constitute a Prohibited Discretionary Transaction. - Page 3.2 - SECTION IV - SAVINGS PLAN RESTORATION CONTRIBUTIONS --------------------------------------------------- 4.01 Restoration Contributions ------------------------- Participants who are currently contributing to the Savings Plan may be eligible to receive Restoration Contributions as follows: (a) For Participants whose Salary exceeds the amount specified in (S)401(a)(17) of the Code, Restoration Contributions shall equal the sum of (1) and (2) below: (1) Lesser of: Excess Salary times Savings Plan Election times Savings Plan Matching Percentage; or Amount of monthly deferred Salary. (2) If the difference between the Participant's Salary deferral and Excess Salary ("Difference") is greater than zero: Difference times Savings Plan Election times Savings Plan Matching Percentage. (b) For a Participant whose Salary equals or is less than the amount specified in (S)401(a)(17) of the Code and such Participant elects to defer Salary in accordance with Section 2.02, Restoration Contributions shall equal the amount of the deferred Salary times the Participant's Savings Plan Election times the Savings Plan Matching Percentage. (c) For purposes of this Section 4.01 Excess Salary means Salary minus the amount specified in (S)401(a)(17) of the Code divided by 12. 4.02 Savings Plan Restoration Account -------------------------------- (a) Restoration Contributions shall be credited monthly and shall be maintained in the Savings Plan Restoration Account. The Savings Plan Restoration Account shall consist of a Savings Plan Interest Account, and a Savings Plan PPG Stock Account. - Page 4.1 - (b) Restoration Contributions shall be credited to the Savings Plan PPG Stock Account and shall be credited in the form of Stock Account Shares, the number of which shall be determined by using the closing price for PPG Stock on the last business day of the month in which such Restoration Contributions are made, and credited to the Participant's Savings Plan Restoration Account on the first day of the month following the month in which the Restoration Contributions are made. (c) Participants shall not receive cash dividends or have voting or other shareholders' rights as to Stock Account Shares; however, Stock Account Shares shall accrue whole and fractional dividend equivalents, in the form of additional Stock Account Shares, on the basis of the closing sale price for PPG Stock, reported on the Composite Tape for the day on which a dividend is paid, based on the number of whole Stock Account Shares in the Savings Plan PPG Stock Account on the record date. 4.03 Vesting ------- Restoration Contributions shall be 100% vested at the time such Restoration Contributions are credited to a Participant's Account. 4.04 Transfers --------- Restoration Contributions may be transferred to the Savings Plan Interest Account, in accordance with Section 3.04, beginning the Plan Year in which a Participant reaches his/her 55th birthday. 4.05 Withdrawal Provisions --------------------- (a) The Savings Plan Restoration Account is not subject to provisions of Sections 5.01, 5.06 or 5.07. (b) At the time of a Participant's termination of employment, including termination due to Retirement, Death and/or Disability, any amount in the Savings Plan PPG Stock Account shall be transferred to the PPG Stock Account and any amount in the Savings Plan Interest Account shall be transferred to the Interest Account and shall be subject to any election filed by the Participant or the Beneficiary, in accordance with the provisions of Section 5.02, 5.03, 5.04 or 5.05. - Page 4.2 - SECTION V - WITHDRAWAL PROVISIONS --------------------------------- 5.01 Scheduled In-Service Withdrawals -------------------------------- Except as otherwise provided in this Section V, payment of any amount designated by a Participant for in-service withdrawal, in accordance with provisions of either the IC Plan or MAP, whichever is applicable, shall be made to the Participant in a lump sum as of the first day of the quarter/year specified by the Participant. 5.02 Withdrawals at/after a Participant's Retirement Date ---------------------------------------------------- (a) A Participant may elect a payment schedule applicable to his/her Account provided such election is filed with the Administrator: (1) Prior to the Participant's Retirement Date; and (2) In the year prior to the year the first payment is to be made and, in all cases, at least six months/ten days prior to the time the first payment is to be made. (b) Participants may elect: (1) One lump-sum payment; or (2) Quarterly, semiannual or annual installments - to be made over a period of years, up to a maximum period of 15 years; or (3) A combination of (1) and (2). (c) A Participant may delay the first payment for a period up to ten years following his/her Retirement Date; provided, however, that, in all cases, payments must begin no later than the year in which the Participant's 75th birthday occurs. (d) The payment schedule elected by the Participant shall apply to his/her entire Account. Participants may designate the first day of the quarter for the commencement of the payment schedule on an annual, semiannual or quarterly basis. - Page 5.1 - Each installment payment shall be calculated by dividing the Participant's account balance by the remaining number of installments - (e.g.: Ten annual installments shall be paid: 1st installment = 1/10 of Account; 2nd installment = 1/9 of Account; 3rd installment = 1/8 of Account, etc.). If the installment payment is to be in the form of PPG Stock, any stock increment shall be rounded down to the nearest whole stock share. Any remaining stock increments shall remain in the Account until subject to further payment. (e) In the event a Participant fails to file a payment schedule election with the Administrator prior to his/her Retirement Date, his/her Account shall be paid in one lump sum in the year following the year of such Retirement Date and shall be paid during the first quarter of such year which is at least six months/ten days following such Retirement Date. (f) Payment schedules pursuant to this Section 5.02 shall supersede any prior payment election(s) filed with the Administrator; and shall become irrevocable on the Participant's Retirement Date. 5.03 Withdrawals Following Termination --------------------------------- (a) Except as provided in paragraph (e) below: (1) A Participant whose Termination of Employment occurs prior to March 1, 1998, may elect, in accordance with subparagraph (b)(1) below, when to receive a lump-sum payment of his/her Account balance following his/her termination date; or (2) A Participant whose Termination of Employment occurs on or after March 1, 1998 may elect one lump-sum payment, in accordance with subparagraph (1) above, or may elect to receive up to five annual installments, in accordance with subparagraph (b)(2) below. (3) Any election made pursuant to this paragraph (a) must be filed with the Administrator no later than 30 days after the Participant's Termination of Employment. (b) (1) Participants who elect to receive a lump-sum, must specify the quarter/year that the lump-sum payment is to be made; provided, however, that the Participant must elect to receive the payment no later than the last quarter of the year in which the fifth anniversary of his/her termination date occurs. Payment must occur no earlier than the Plan Year after the Plan Year in which the Participant files his election with the Administrator and as of the first day of the first quarter which is at least six (6) months and 10 days following the date the Participant files his election with the Administrator. - Page 5.2 - (2) Participants who elect to receive installments must specify the quarter/year that such installments will begin; provided, however, that the Participant must elect to begin installments no later than the last quarter of the year in which the fifth anniversary of his/her termination date occurs. Installments must begin no earlier than the Plan Year after the Plan Year in which the Participant files his election with the Administrator and as of the first day of the first quarter which is at least six (6) months and 10 days following the date the Participant files his election with the Administrator. The payment schedule elected by the Participant shall apply to his/her entire Account. Each installment shall be calculated by dividing the Participant's account balance by the remaining number of installments - (e.g.: Five annual installments shall be paid: 1st installment = 1/5 of Account; 2nd installment = 1/4 of Account, etc.). If the installment payment is to be in the form of PPG Stock, any stock increment shall be rounded down to the nearest whole stock share. Any remaining stock increments shall remain in the Account until subject to further payment. (c) In the event a Participant fails to file a payment election with the Administrator within the time provided in paragraph (a) above, his/her Account shall be paid in one lump sum in the Plan Year after the Plan Year in which the last date on which such election could have been filed occurs, and shall be paid during the first quarter in such year which is at least six months/ten days following such date. (d) The rate of interest credited in the Interest Account following a Participant's termination date shall be at the Minimum Rate; provided, however, that the Committee shall have the authority to approve continuation of the Declared Rate, on a case-by-case basis. (e) In the event the Administrator determines, in his sole discretion, that a termination is "for cause," or is otherwise potentially adverse to the Company's interest, as for example, a Participant's termination in order to accept a position with a major competitor, the Participant shall have no election with respect to payment of his/her Account. Such Participant shall receive his/her entire Account balance as of the first day of the first quarter immediately following his/her termination date. (f) Payment schedules pursuant to this Section 5.03 shall supersede any prior payment election(s) filed with the Administrator. - Page 5.3 - (g) In accordance with authority delegated to the Administrator by the Committee at its meeting on September 20, 1995, the Administrator granted the option of five installments, as provided in paragraphs (a) and (b) of this Section to those employees whose employment with the Company was terminated as a result of the sale of the Chemicals Surfactants business to BASF Corp. on December 1, 1997. 5.04 Withdrawals in the event of Disability -------------------------------------- (a) In the event a Participant becomes disabled, he/she may elect a payment schedule applicable to his/her Account provided such election is filed with the Administrator within 30 days of the Administrator's determination that such Participant has a Disability. (b) Participants may elect: (1) One lump-sum payment; or (2) Quarterly, semiannual or annual installments - to be made over a period of years, up to a maximum period of 15 years; or (3) A combination of (1) and (2). (c) A Participant may delay the first payment for a period of up to ten years following the determination that he/she has a Disability; provided, however, that, in all cases, payments must begin no later than the year in which the Participant's 75th birthday occurs. Payments must commence no earlier than the Plan Year following the Plan Year in which the Participant files his election with the Administrator and as of the first day of the first quarter which is at least six (6) months and 10 days following the date the Participant files his election with the Administrator. (d) The payment schedule elected by the Participant shall apply to his/her entire Account. Participants may designate the first day of a quarter for the commencement of the payment schedule on an annual, semiannual or quarterly basis. Each installment payment shall be the applicable fraction of the Participant's Account balance -(e.g.: Ten annual installments shall ---- be paid: 1st installment = 1/10 of Account; 2nd installment = 1/9 of Account; 3rd installment = 1/8 of Account, etc.). If the installment payment is to be in the form of PPG Stock, any stock increment shall be rounded down to the nearest whole stock share. Any remaining stock increments shall remain in the Account until subject to further payment. - Page 5.4 - (e) In the event a Participant fails to file a payment schedule election with the Administrator within the period specified in paragraph (a) above, his/her Account shall be paid in one lump sum in the Plan Year after the Plan Year in which the last date on which such election could have been filed occurs, and shall be paid during the first quarter in such year which is at least six months/ten days following such date. (f) Payment schedules pursuant to this Section 5.04 shall supersede any prior payment election(s) filed with the Administrator; and shall become irrevocable when filed in accordance with paragraph (a). 5.05 Withdrawals following a Participant's death ------------------------------------------- (a) Death prior to a Participant's Election Date -------------------------------------------- In the event of a Participant's death prior to his/her Election Date, the Participant's entire Account shall be paid to the Participant's Beneficiary as soon as possible following the Participant's death. (b) Death on or after a Participant's Election Date ----------------------------------------------- In the event of a Participant's death on or after his/her Election Date, the Participant's Beneficiary may elect to receive the remaining balance of the Participant's Account paid as a lump sum, or in accordance with the payment schedule filed by the Participant. Such election must be filed by the Beneficiary within 60 days following the Participant's death. If no such election is made, the balance in the Participant's Account shall be paid in a lump sum. (c) Any lump sum payment made in accordance with paragraph (b) shall be paid in the Plan Year after the Plan Year which is the later of: (i) The Plan Year in which the Beneficiary files an election with the Administrator; or (ii) In the case of a Beneficiary who does not file an election, the Plan Year in which the last date on which such election could have been filed occurs; and as of the first day of the first quarter which is at least six (6) months and ten days following the date in (i) or (ii) above, whichever is applicable. - Page 5.5 - (d) For purposes of this Section 5.05 "Election Date" means the date on which the Participant's election schedule becomes irrevocable in accordance with paragraph (f) of Section 5.02 or paragraph (f) of Section 5.04. 5.06 Withdrawals upon finding of Financial Hardship ----------------------------------------------- (a) Upon a finding that the Participant, or Beneficiary if the Participant is deceased, has suffered a Financial Hardship, the Administrator may, in his sole discretion, permit the acceleration of a withdrawal under the Plan in an amount reasonably necessary to alleviate such Financial Hardship. (b) If the Administrator permits a withdrawal due to Financial Hardship, the Participant shall cease Salary deferrals, if any, and may not make any deferrals under the Plan, in the form of an Award or Salary, until one entire Plan Year has elapsed following the Plan Year in which such withdrawal is made. (c) The Participant shall be required to exhaust all other sources of funds, other than the Savings Plan, before the Administrator will consider an accelerated withdrawal in accordance with this Section 5.06. (d) A withdrawal pursuant to this Section 5.06 shall nullify any in- service withdrawal election filed in accordance with Section 5.01. (e) Notwithstanding any other provision of this Section 5.06, funds in the Savings Plan Restoration Account are not subject to withdrawal due to Financial Hardship. 5.07 Unscheduled Withdrawals ----------------------- (a) A Participant, or Beneficiary if the Participant is deceased, may request an Unscheduled Withdrawal of all or a portion of the Participant's Interest Account and/or PPG Stock Account. All such payments shall be made in a single sum and shall be paid in cash. An Insider of PPG may not request an Unscheduled Withdrawal from the PPG Stock Account at any time that such withdrawal would constitute a Prohibited Discretionary Transaction. A Participant, or Beneficiary, may request not more than one (1) Unscheduled Withdrawal in a Plan Year. (b) An Unscheduled Withdrawal must be a minimum of 25% of the Participant's Interest and PPG Stock Accounts. - Page 5.6 - (c) An election to withdraw 75% or more of the Participant's Interest and Stock Accounts shall be deemed a request to withdraw the entire Account balance in these two accounts. (d) Prior to payment of any Unscheduled Withdrawal, a penalty of 10% of the Unscheduled Withdrawal amount shall be withheld and forfeited (or 5% if such Unscheduled Withdrawal is made during the Plan Year in which a Change in Control occurs, or the Plan Year immediately following such Change in Control) and the Participant shall cease Salary deferrals, if any, effective on the date the withdrawal is paid and may not make any deferrals under the Plan, in the form of an Award or Salary, until one entire Plan Year has elapsed following the Plan Year in which such Unscheduled Withdrawal is made. (e) A withdrawal pursuant to this Section 5.07 shall nullify any scheduled in-service withdrawal election filed in accordance with Section 5.01. 5.08 Methods of Payment ------------------ (a) PPG Stock Account ----------------- Except as provided in paragraph (a) of Section 5.07 any payment from the PPG Stock Account shall be paid in the form of PPG Stock. At the time of the final scheduled payment, if payments were disbursed from the PPG Stock Account in shares of PPG Stock, any remaining fractional shares of PPG Stock shall be converted to and paid in cash. (b) Interest Account ---------------- Payments from the Interest Account shall be made in cash. (c) All payments to Participants, or their Beneficiaries, shall be made on the first business day of a calendar quarter. 5.09 Small Account Provision ----------------------- (a) Each scheduled withdrawal must equal a minimum of $2,000. (b) If the remaining balance in a Participant's Account is less than $2,000, the Administrator may, at his discretion, distribute the remainder of the Account. - Page 5.7 - 5.10 Special Rules for Withdrawals by Insiders ----------------------------------------- Anything to the contrary in this Section 5 notwithstanding, Insiders may not, without prior approval of the Senior Vice President, Human Resources and Administration, or his or her successor, withdraw any amount from the PPG Stock Account which was credited to their Account balance within the prior six months. 5.11 Withdrawals of amounts from the Transferred Interest Account ------------------------------------------------------------ (a) Withdrawals from the Transferred Interest Account shall be governed by the election made by the Participant for his/her CEA-2 account. (b) In the event of a Participant's death prior to receiving the entire balance in his/her Transferred Interest Account, the Participant's Beneficiary may elect to receive the remaining balance of the Participant's Transferred Interest Account paid as a lump sum, or in accordance with the payment schedule filed by the Participant. Such election must be filed by the Beneficiary within 60-days following the Participant's death. If no such election is made, the balance in the Participant's account shall be paid in a lump sum. Any lump sum payment made in accordance with this paragraph shall be paid in the Plan Year after the Plan Year of the Participant's death and as of the first day of the first quarter which is at least six (6) months and 10 days following the Participant's death. - Page 5.8 - SECTION VI - SPECIFIC PROVISIONS -------------------------------- RELATED TO BENEFITS ------------------- 6.01 Nonassignability ---------------- (a) Except as provided in paragraph (b) below and in Section 6.02, no person shall have any power to encumber, sell, alienate, or otherwise dispose of his/her interest under the Plan prior to actual payment to and receipt thereof by such person; nor shall the Administrator recognize any assignment in derogation of the foregoing. No interest hereunder of any person shall be subject to attachment, execution, garnishment or any other legal, equitable, or other process. (b) Paragraph (a) above shall not apply to the extent that a Participant's interest under the Plan is alienated pursuant to a "Qualified Domestic Relations Order" ("QDRO") as defined in (S)414(p) of the Code. (1) The Administrator is authorized to adopt such procedural and substantive rules and to take such procedural and substantive actions as the Administrator may deem necessary or advisable to provide for the payment of amounts from the Plan to an Alternate Payee as provided in a QDRO. Such rules and actions shall be consistent with the principal purposes of the Plan. (2) Under no circumstances may the Administrator accept an order as a QDRO following a Participant's death. (3) An Alternate Payee may not establish an account in the Plan. All amounts taken from a Participant's Account, as provided in a QDRO, must be distributed as soon as possible following the acceptance of an order as a QDRO. (4) In the sole discretion of the Administrator, a Participant's scheduled withdrawal or otherwise requested withdrawal may be delayed for a period, not to exceed six months, if the Administrator has notice that part or all of the Participant's Account may be subject to alienation pursuant to a QDRO. - Page 6.1 - 6.02 Beneficiary Designation ----------------------- (a) The Participant shall have the right, at any time and from time to time, to designate any person(s) as Beneficiary. The designation of a Beneficiary shall be effective on the date it is received by the Administrator, provided the Participant is alive on such date. (b) Each time a Participant submits a new Beneficiary designation form to the Administrator, such designation shall cancel all prior designations. (c) In the case of a Participant who does not have a valid Beneficiary designation on file at the time of his/her death, or in the case the designated Beneficiary predeceases the Participant, the entire balance in the Participant's Account shall be paid as soon as possible to the Participant's estate. (d) Any Beneficiary designated by the Participant under the IC Plan or MAP filed before January 1, 1996, shall remain in effect for this Plan, until a new Beneficiary designation form is filed in accordance with this Section 6.02, on or after January 1, 1996. 6.03 Limited Right to Assets of the Corporation ------------------------------------------ The Benefits paid under the Plan shall be paid from the general funds of the Company, and the Participants and any Beneficiary shall be no more than unsecured general creditors of the Company with no special or prior right to any assets of the Company for payment of any obligations hereunder. 6.04 Protective Provisions --------------------- The Participant or Beneficiary shall cooperate with the Administrator by furnishing any and all information requested by the Administrator in order to facilitate the payment of benefits hereunder. If a Participant refuses to cooperate, he/she may be deemed ineligible to receive a distribution and/or ineligible to continue to actively participate in the Plan. 6.05 Withholding ----------- The Participant or Beneficiary shall make appropriate arrangements with the Administrator for satisfaction of any federal, state or local income tax withholding requirements and Social Security or other employee tax requirements applicable to the payment of benefits under the Plan. If no other arrangements are made, the Administrator may provide for such withholding and tax payments by any means he deems appropriate, in his sole discretion. - Page 6.2 - 6.06 Forfeiture Provision -------------------- In the event the Company becomes aware that a Participant is engaged or employed as a business owner, employee, or consultant in any activity which is in competition with any line of business of the Corporation, or has engaged in any activity otherwise determined to be detrimental to the Company, the Administrative Subcommittee may: (a) Terminate such Participant's participation in the Plan, and distribute the entire amount in the Participant's Account in a lump sum; (b) Recalculate all earnings in the Account as though all investments had been invested in the Interest Account and accruing interest at the Minimum Rate; (c) Both (a) and (b) above; or (d) Apply any other diminution or forfeiture of benefits, which is specifically approved by the Administrative Subcommittee. For purposes of this Section 6.06, the Administrative Subcommittee shall consist of the Senior Vice President, Human Resources and Administration, the Director, Compensation and Benefits, and a representative of the Law Department, as appointed by the General Counsel of PPG. The Administrative Subcommittee shall report all of its activities to the Committee. - Page 6.3 - SECTION VII - ADMINISTRATION & CLAIMS ------------------------------------- 7.01 Administration -------------- (a) The Administrator shall administer the Plan and interpret, construe and apply its provisions in accordance with its terms. The Administrator shall have the complete authority to: (1) Determine eligibility for benefits; (2) Construe the terms of the Plan; and (3) Control and manage the operation of the Plan. (b) The Administrator shall have the authority to establish rules for the administration and interpretation of the Plan and the transaction of its business. The determination of the Administrator as to any disputed question shall be conclusive. All actions, decisions and interpretations of the Administrator shall be performed in a uniform and nondiscriminatory manner. (c) The Administrator may employ counsel and other agents and may procure such clerical, accounting and other services as the Administrator may require in carrying out the provisions of the Plan. (d) The Administrator shall not receive any compensation from the Plan for his services. (e) The Corporation shall indemnify and save harmless the Administrator against all expenses and liabilities arising out of the Administrator's service as such, excepting only expenses and liabilities arising from the Administrator's own gross negligence or willful misconduct, as determined by the Committee. 7.02 Claims ------ (a) Every person receiving or claiming benefits under the Plan shall be conclusively presumed to be mentally and physically competent and of age. If the Administrator determines that such person is mentally or physically incompetent or is a minor, payment shall be made to the legally appointed guardian, conservator, or other person who has been appointed by a court of competent jurisdiction to care for the estate of such person, provided that proper proof of such appointment is furnished in a form and manner suitable to the Administrator. Any payment made under the - Page 7.1 - provisions of the paragraph (a) shall be a complete discharge of any liability therefor under the Plan. The Administrator shall not be required to see to the proper application of any such payment. (b) Claims Procedure ---------------- Claims for benefits by a Participant or Beneficiary shall be filed, in writing, with the Administrator. If the Administrator denies the claim, in whole or in part, the Administrator shall furnish a written notice to the claimant setting forth a statement of the specific reasons for the denial of the claim, references to the specific provisions of the Plan on which the denial is based, a description of any additional material or information necessary to perfect the claim and an explanation of why such material or information is necessary, and an explanation of the review procedure. Such notice shall be written in a way calculated to be understandable by the claimant. The written notice from the Administrator shall be furnished to the claimant within ninety (90) days following the date on which the claim was filed, except that if special circumstances require an extension of time, the Administrator shall notify the claimant of this need within such 90-day period. Such notice shall inform the claimant the nature of the circumstances necessitating the need for additional time and the date by which the claimant will be furnished with the decision regarding the claim. Such extension may provide for up to an additional 90 days. (c) Review Procedure ---------------- Within sixty (60) days of the date the Administrator denies a claim, in whole or in part, the claimant, or his/her authorized representative, may request that the decision be reviewed. Such request shall be in writing, shall be filed with the Administrator, and shall contain the following information: (1) The date on which the denial was received by the claimant; (2) The date on which the claimant's request for review was filed with the Administrator; (3) The specific portions of the denial which the claimant requests the Administrator to review; (4) A statement setting forth the basis on which the claimant believes that a review of the decision is required; - Page 7.2 - (5) Any written material which the claimant desires the Administrator to take into consideration in reviewing the claim. The Administrator shall afford the claimant, or his/her authorized representative, an opportunity to review documents pertinent to the claim, and shall conduct a full and fair review of the claim and its denial. The Administrator's decision on such review shall be furnished to the claimant in writing, and shall be written in a manner calculated to be understandable to the claimant. Such decision shall include a statement of the specific reason(s) for the decision, including references to the specific provision(s) of the Plan relied upon. The written notice from the Administrator shall be furnished to the claimant within sixty (60) days following the date on which the request for review was received by the Administrator, except that if special circumstances require an extension of time, the Administrator shall notify the claimant of this need within such 60-day period. Such notice shall inform the claimant the nature of the circumstances necessitating the need for additional time and the date by which the claimant will be furnished with the decision regarding the claim. Such extension may provide for up to an additional 60 days. - Page 7.3 - SECTION VIII - AMENDMENT AND TERMINATION ---------------------------------------- 8.01 Amendment of the Plan --------------------- Except as provided in Section X, the Committee may amend the Plan, in whole or in part, at any time; however, except as provided in Section X, no such amendment may decrease the amount of benefit currently accrued in Participants' Accounts. Except as provided in Section X, the Administrator shall have the authority to adopt amendments to the Plan, in whole or in part, at any time, necessary for the implementation and/or administration of the Plan, which will not result in a material change to the Plan. Moreover, except as provided in Section X, no such amendment by the Administrator may decrease the amount of benefit currently accrued in Participants' Accounts. 8.02 Termination of the Plan ----------------------- Except as provided in Section X, the Committee may terminate the Plan at any time. Upon a termination pursuant to this Section 8.02, the Committee has the sole discretion to determine distribution schedules for any or all Accounts, notwithstanding a Participant's previous distribution schedule. 8.03 Constructive Receipt -------------------- In the event the Administrator determines that amounts deferred under the Plan have been constructively received by Participants and must be recognized as income for federal income tax purposes, distributions shall be made to Participants, as determined by the Administrator. The determination of the Administrator under this Section 8.03 shall be binding and conclusive. - Page 8.1 - SECTION IX - MISCELLANEOUS -------------------------- 9.01 Successors of the Company ------------------------- The rights and obligations of the Company under the Plan shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company. 9.02 ERISA Plan ---------- The Plan is intended to be an unfunded plan maintained primarily to provide deferred compensation benefits for "a select group of management or highly compensated employees" within the meaning of Sections 201, 301 and 401 of ERISA and therefore to be exempt from Parts 2, 3 and 4 of Title I of ERISA. 9.03 Trust ----- The Company shall be responsible for the payment of all benefits under the Plan. Except as otherwise required by Section X, the Company, at its discretion, may establish one or more grantor trusts for the purpose of providing for payment of benefits under the Plan. Such trust(s) may be irrevocable, but the assets thereof shall be subject to the claims of the Company's creditors. Benefits paid to the Participant from any such trust shall be considered paid by the Company for purposes of meeting the obligations of the Company under the Plan. 9.04 Employment Not Guaranteed ------------------------- Nothing contained in the Plan nor any action taken hereunder shall be construed as a contract of employment or as giving any Participant any right to continued employment with the Corporation. 9.05 Gender, Singular and Plural --------------------------- All pronouns and variations thereof shall be deemed to refer to the masculine, feminine, or neuter, as the identity of the person(s) requires. As the context may require, the singular may be read as the plural and the plural as the singular. 9.06 Headings -------- The headings of the Sections, subsections and paragraphs of the Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. - Page 9.1 - 9.07 Validity -------- If any provision of the Plan is held invalid, void or unenforceable, the same shall not affect, in any respect, the validity of any other provision(s) of the Plan. 9.08 Waiver of Breach ---------------- The waiver by the Company of any breach of any provision of the Plan by a Participant or Beneficiary shall not operate or be construed as a waiver of any subsequent breach. 9.09 Applicable Law -------------- The Plan is intended to conform and be governed by ERISA. In any case where ERISA does not apply, the Plan shall be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania. 9.10 Notice ------ Any notice required or permitted to be given to the Administrator under the Plan shall be sufficient if in writing and either hand-delivered, or sent by first class mail to the principal office of the Company at One PPG Place, Pittsburgh, PA 15272, directed to the attention of the Administrator. Such notice shall be deemed given as of the date of delivery. - Page 9.2 - SECTION X - CHANGE IN CONTROL ----------------------------- 10.01 Payments to a Trustee --------------------- Upon, or in reasonable anticipation of, a Change in Control, as defined in Section 10.02 below, the Senior Vice President, Human Resources and Administration and the Senior Vice President, Finance, or either of them or their successor, shall cause an amount, as they deem appropriate, to be paid to a trustee on such terms as they shall deem appropriate (including such terms as are appropriate to cause such payment not to be a taxable event to Participants, if possible, and to cause such Awards to be distributable to Participants in accordance with elections filed with the Administrator). Such amount shall be paid in cash and shall be sufficient, at a minimum, to equal to all deferred amounts credited to the Interest Account, the Savings Plan Interest Account, the PPG Stock Account and the Savings Plan PPG Stock Account. Amounts in the PPG Stock Account and the Savings Plan PPG Stock Account, shall be converted to cash on the basis of the fair market value of PPG Stock on the date of the occurrence of the Change in Control, or, if higher, within 30 days of such date. 10.02 Definition: Change in Control ------------------------------ A "Change in Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"). For purposes of this subsection (a) the following acquisitions shall not constitute a Change in Control: Any acquisition directly from the Company; Any acquisition by the Company; Any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; or - Page 10.1 - Any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of paragraph (c) of this Section 10.02. (b) Individuals who, as of September 20, 1995, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to such date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Approval by the shareholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination: (i) All or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; (ii) No Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or - Page 10.2 - the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination; and (iii) At least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company; or (e) A majority of the Board otherwise determines that a Change in Control shall have occurred. EX-10.3 5 DEFERRED COMPENSATION PLAN FOR DIRECTORS Exhibit 10.3 PPG INDUSTRIES, INC. -------------------- DEFERRED COMPENSATION PLAN FOR DIRECTORS ---------------------------------------- 1. Purpose ------- The purpose of the PPG Industries, Inc. Deferred Compensation Plan for Directors (the "Plan") is to offer each non-employee member of the Board of Directors of PPG Industries, Inc. (the "Corporation") the opportunity to defer receipt of the compensation to be earned for services as a director of the Corporation until after termination of service as a director. 2. Definitions ----------- (a) "Beneficiary" means the person or entity designated by the Participant or the Participant's legal representative as provided under Section 7(b). (b) "Committee" means the Officers-Directors Compensation Committee (or any successor) of the Board of Directors of the Company. (c) "Common Stock" means the common stock, par value $1.66 2/3 per share, of the Corporation. (d) "Common Stock Unit" means a hypothetical share of Common Stock. (e) "Compensation" means a Participant's retainer and meeting fees earned for services as a director and as chairman or a member of a committee of the Board of Directors. (f) "Discontinued Account" means any account which had been maintained for one or more Participants and which has been discontinued by action of the Committee or the Board of Directors to the effect that such account has ceased to be available for amounts previously deferred to it by Participants. (g) "Dividend Equivalents" means an additional number of Common Stock Units the Corporation shall credit to each Stock Account as of each dividend payment date declared with respect to the Corporation's Common Stock. The additional number of Common Stock Units to be credited to each Stock Account shall be equal to: -1- (1) the product of (i) the dividend per share of the Common Stock which is payable as of the dividend payment date, multiplied by (ii) the number of whole Common Stock Units credited to the Stock Account as of the applicable dividend record date; DIVIDED BY ---------- (2) the closing price of a share of the Common Stock on the dividend payment date (or if such stock was not traded on that date, on the next preceding date on which it was traded), as reported in the New York Stock Exchange Composite Transactions. (i) "Participant" means an eligible director who participates in the Plan. (j) "Stock Account" means a bookkeeping account maintained for a Participant who elects to defer to it all or any part of his or her Compensation and to which Common Stock Units and Dividend Equivalents are credited. 3. Eligibility ----------- All directors of the Corporation who are not at the time also serving as salaried employees of the Corporation are eligible to participate in the Plan. 4. Deferral of Compensation ------------------------ (a) Each Participant shall have such Compensation as the Board of Directors mandates deferred under the Plan and credited to the Stock Account. In addition, each Participant may elect to have additional Compensation deferred under the Plan and credited to the Stock Account. (b) Subject to any rules, regulations, procedures or resolutions adopted by the Committee, an election to defer shall be made in writing prior to the start of the calendar year for which it is to become effective and shall be effective upon filing with the Secretary of the Corporation, provided however that in the first calendar year in which an individual becomes a director, an election to defer may be made as to the remainder of such year, provided that the election is filed with the Secretary within thirty (30) days of the individual's appointment to the Board. Once deferral has been elected and filed with the Secretary of the Corporation, it shall become irrevocable for the next succeeding calendar year and, unless revoked in writing or superseded by a new election effective for calendar years after the year in which such revocation or new election is executed, shall continue in effect for each calendar year thereafter. -2- (c) Deferred amounts shall be credited on the books of the Corporation to an account in the name of the Participant on the same date that it would otherwise be payable and shall thereafter be paid from the general funds of the Corporation. No assets of the Corporation shall be segregated or earmarked in respect to any amounts credited to the Stock Accounts of Participants and all such amounts shall constitute unsecured contractual obligations of the Corporation. (d) The number of Common Stock Units to be credited to the Stock Account of a Participant shall be equal to the quotient obtained by dividing the unpaid deferred amount to be credited to the Stock Account by the closing price of a share of the Common Stock on the date on which such deferred amount is credited on the books of the Corporation (or if such stock was not traded on that date, on the next preceding date on which it was traded), as reported on the New York Stock Exchange Composite Transactions. Dividend Equivalents shall be credited to each Stock Account as of each dividend payment date declared with respect to the Corporation's Common Stock. 5. Payment of Deferred Amounts --------------------------- (a) Payments from the Stock Account will be made in the form of Common Stock, provided that payment with respect to any partial Common Stock Unit shall be made in the form of cash. However, payments from the Stock Account of any Participant who ceased to be a director of the Corporation before August 15, 1996 shall continue to be paid in the manner provided by the Plan as effective on August 15, 1996. (b) Subject to Section 5(d), Section 5(e) and Section 5(g), a Participant may elect to have the amount deferred paid in from one to 15 annual installments after he or she shall cease to be a director of the Corporation. Such installment(s) shall commence upon or following (i) a specified date; (ii) an event certain; (iii) the earlier of a specified date or an event certain. Installments shall continue to be payable as soon as practicable after the first day of January of each year thereafter. -3- Subject to Sections 5(d), 5(e) and 5(f), payment of deferred amounts shall commence no later than January of the first calendar year which is the later of: (i) the year following attainment of age seventy (or such other age as may supersede the age referred to in Section 403(f)(3) of Title 42 United States Code); or (ii) the year following such Participant's retirement. Where installments are payable from a Participant's Stock Account, the number of shares of Common Stock paid in each installment shall be equal to the whole number obtained by dividing the number of Common Stock Equivalents then credited to the Participant's Stock Account by the number of unpaid installments. Common Stock Equivalents with respect to which payment has not yet occurred shall continue to be credited with Dividend Equivalents until paid. However, no installment paid from the Stock Account may be in an amount less than 20 shares of Common Stock, and, to the extent necessary, installments shall be accelerated to provide for such minimum installments. As of the date on which the last payment of benefits is made to a Participant from the Stock Account, the Company shall pay the Participant, in cash, an amount equal to the value of any remaining fractional Stock Unit based on the closing price of the Common Stock on the New York Stock Exchange Composite Transactions on the last date such price is available prior to the payment date. (c) Death or Disability ------------------- (i) Subject to Section 5(g), in the event of the death or disability of a Participant either while serving as a director of the Corporation or prior to the commencement of any payments hereunder, any amount due under the Plan shall be paid in a lump sum to the Participant's beneficiary, or in the case of disability, to the Participant, as soon as practicable after the death or disability. (ii) Subject to Section 5(g), in the event of the death or disability of a Participant on or after the commencement of installment payments, in accordance with Section 5(b), payments shall continue to paid to the Participant's beneficiary, or in the case of disability, to the Participant, in accordance with the election made by the Participant in accordance with Section 5(b); provided, however, that the Secretary of the Committee shall have the power to accelerate the -4- payment of any installment(s) because of hardship or other circumstances deemed by him, in his discretion, to warrant such acceleration. (d) Discontinued Accounts --------------------- (i) At such time as any account becomes a Discontinued Account, deferred amounts credited to such account for any Participant shall be rolled into the Stock Account of such Participant. (ii) Any prior election as to installment payments of deferred amounts in any Discontinued Account shall be null and void with respect to such amounts as of the date such account is terminated and the payment elections of the Participant as to amounts then in the Participant's Stock Account shall also apply to any amounts from the Discontinued Account which are rolled into the Stock Account. (e) Payment Elections ----------------- Any prior election as to the number of installments made by a Participant who is serving as a director of the Corporation on February 19, 1992 shall be null and void. Subject to Section 5(d) and Section 5(g), a Participant may elect the number and the date or event for the commencement of installment payments in accordance with the following: (i) Such elections must be made at least six months and ten days prior to the first payment date; and (ii) In all cases, the elections must be made in the calendar year preceding the first payment date. (f) Notwithstanding any other provision of this Plan, the first installment to a Participant out of the Stock Account shall not be paid until six months and ten days after the Participant shall cease to be a director of the Corporation. (g) Notwithstanding any other provision of this Plan, any Participant who, pursuant to any income tax laws to which he or she is subject, would be immediately taxed on any Compensation that the Board of Directors mandates shall be deferred may not elect the number and the date or --- event for the commencement of payments under the Plan. Instead, the payment of -5- all benefits to such Participant (including any Dividend Equivalents from the Plan) resulting from the mandatory deferrals shall occur as a lump sum payment on the first business day which is 6 months and 10 days after the Participant's last day as a member of the Board. In the event of such Participant's death prior to receipt of the benefits, the Participant's Beneficiary shall be paid the benefits on the first business day which is 6 months and 10 days after the Participant's last day as a member of the Board. 6. Change in Control ----------------- (a) Upon, or in reasonable anticipation of, a Change in Control (as defined below), the Corporation shall immediately make a payment in cash to a trustee on such terms as the Senior Vice President, Human Resources and Administration, and the Senior Vice President, Finance, or either of them, shall deem appropriate (including such terms as are appropriate to cause such payment, if possible, not to be a taxable event to Participants) of a sufficient amount to insure that Participants receive the payment of all amounts as contemplated under the Plan. (b) Except as regards Section 6(c)(v), the Committee shall have the duty and the authority to make the determination as to whether a Change in Control has occurred, or is reasonably to be anticipated, and, concomitantly, to direct the making of the payment contemplated herein. (c) A "Change in Control" shall mean: (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (x) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (y) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change in Control: (a) any acquisition directly from the Company, (b) any acquisition by the Company, (c) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (d) any acquisition by any corporation -6- pursuant to a transaction which complies with clauses (a), (b) and (c) of subsection (iii) of this Section 6(c); or (ii) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (iii) Approval by the shareholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (a) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (b) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to -7- the extent that such ownership existed prior to the Business Combination and (c) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company; or (v) A majority of the Board otherwise determines that a Change in Control shall have occurred. 7. General Provisions ------------------ (a) Either the Board of Directors of the Corporation or the Committee may modify or amend the Plan, in whole or in part, from time to time, or terminate the Plan at any time, without the consent of any Participant or Beneficiary of any Participant; provided, however, that any modification, amendment or termination shall be of general application to all Participants and Beneficiaries and shall not, without the consent of the Participant or, in the event of his death, the Participant's Beneficiary or estate adversely affect (i) any amount theretofore deferred or credited to the Participant's Account(s) or (ii) the right of the Participant to receive all amounts theretofore credited to the Participant's account(s), as of the date of such modification, amendment or termination; and provided further that any modification, amendment or termination that would materially increase or accelerate the payment of any amount under the Plan shall be approved by the Board of Directors. The Plan shall remain in effect until terminated pursuant to this paragraph. (b) No rights under the Plan may be transferred or assigned except that a Participant may designate, in writing filed with the Secretary of the Corporation, his spouse or children, a trustee or his or her executor or executrix as Beneficiary to receive any unpaid amounts under the Plan after the death of the Participant. In the absence of any such designation or in the event that the designated person or entity shall not be in existence at the time a payment under the Plan comes due, the Beneficiary of the Participant shall be the Participant's legal representative. (c) The Committee shall have full power to administer and interpret the Plan and to adopt such rules, regulations, procedures and resolutions consistent -8- with the terms of the Plan as the Committee deems necessary or advisable to carry out the terms of the Plan. (d) The place of administration of the Plan shall be conclusively deemed to be within the Commonwealth of Pennsylvania, and the validity, construction, interpretation and administration of the Plan, and of any determinations or decisions made thereunder, and the rights of any and all persons having or claiming to have any interest therein or thereunder, shall be governed by, and determined exclusively and solely in accordance with, the internal laws of the Commonwealth of Pennsylvania. As Amended--February 18, 1998 -9- EX-11 6 COMPUTATION OF EARNINGS PER SHARE Exhibit 11 PPG INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES ----------------------------- COMPUTATION OF EARNINGS PER SHARE FOR THE FIVE YEARS ENDED DECEMBER 31, 1997 (Millions, except for per share amounts)
1997 1996 1995 1994 1993 --------- --------- --------- --------- --------- Income before cumulative effect of changes in methods of accounting.................... $714 $744 $768 $515 $295 Cumulative effect on prior years of changes in methods of accounting: Other postretirement benefits................... -- -- -- -- (357) Postemployment benefits...... -- -- -- -- (6) Income taxes................. -- -- -- -- 90 --------- --------- --------- --------- --------- Net income....................... $714 $744 $768 $515 $22 ========= ========= ========= ========= ========= Weighted average number of shares of common stock outstanding.................... 179.8 187.8 202.0 211.9 212.6 ========= ========= ========= ========= ========= Weighted average number of shares of common stock outstanding and potentially dilutive common shares......... 181.5 189.5 203.3 213.0 213.6 ========= ========= ========= ========= ========= Earnings per common share: Income before cumulative effect of changes in methods of accounting........ $3.97 $3.96 $3.80 $2.43 $1.39 Cumulative effect on prior years of changes in methods of accounting: Other postretirement benefits................. -- -- -- -- (1.68) Postemployment benefits. -- -- -- -- (0.03) Income taxes............... -- -- -- -- 0.42 --------- --------- --------- --------- --------- Earnings per common share........ $3.97 $3.96 $3.80 $2.43 $0.10 ========= ========= ========= ========= =========
Exhibit 11 PPG INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES ----------------------------- COMPUTATION OF EARNINGS PER SHARE FOR THE FIVE YEARS ENDED DECEMBER 31, 1997 (Millions, except for per share amounts)
1997 1996 1995 1994 1993 --------- --------- --------- --------- --------- Earnings per common share - assuming dilution: Income before cumulative effect of changes in methods of accounting.......... $3.94 $3.93 $3.78 $2.42 $1.38 Cumulative effect on prior years of changes in methods of accounting: Other postretirement benefits................. -- -- -- -- (1.67) Postemployment benefits.... -- -- -- -- (0.03) Income taxes............... -- -- -- -- 0.42 --------- --------- --------- --------- --------- Earnings per common share - assuming dilution............... $3.94 $3.93 $3.78 $2.42 $0.10 ========= ========= ========= ========= =========
NOTES: Potentially dilutive common shares consist of the shares reserved for issuance under PPG's stock option plan and deferred under PPG's deferred compensation, earnings growth, deferred compensation plan for directors and directors common stock plans. EX-12 7 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES Exhibit 12 PPG INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES Computation of Ratio Of Earnings to Fixed Charges (Dollars in Millions)
Year Ended December 31 --------------------------------------------- 1993 1994 1995 1996 1997 ---- ---- ---- ---- ---- Earnings: Earnings before income taxes $ 531 $ 840 $ 1,247 $ 1,215 $ 1,149 Plus: Fixed charges exclusive of capitalized interest $ 128 $ 108 $ 113 $ 125 $ 136 Amortization of capitalized interest $ 11 $ 11 $ 12 $ 13 $ 13 Adjustments for equity affiliates $ (1) $ (2) $ (4) $ (3) $ -- -------------------------------------------- Total $ 669 $ 957 $ 1,368 $ 1,350 $ 1,298 ============================================ Fixed Charges: Interest expense including amortization of debt discount/premium and debt expense $ 108 $ 88 $ 91 $ 102 $ 113 Rentals - portion representative of interest $ 20 $ 20 $ 22 $ 22 $ 23 --------------------------------------------- Fixed charges exclusive of capitalized interest $ 128 $ 108 $ 113 $ 124 $ 136 Capitalized interest $ 6 $ 5 $ 9 $ 12 $ 10 --------------------------------------------- Total $ 134 $ 113 $ 122 $ 136 $ 146 ============================================= Ratio of earnings to fixed charges 5.0 8.4 11.3 9.9 8.9 =============================================
EX-13 8 1997 ANNUAL REPORT FINANCIAL AND OPERATING REVIEW - -------------------------------------------------------------------------------- INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of PPG Industries, Inc.: We have audited the accompanying balance sheet of PPG Industries, Inc. and sub- sidiaries as of December 31, 1997 and 1996, and the related statements of in- come and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing stan- dards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of mate- rial misstatement. An audit includes examining, on a test basis, evidence sup- porting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement pre- sentation. We believe that our audits provide a reasonable basis for our opin- ion. In our opinion, such financial statements present fairly, in all material re- spects, the financial position of PPG Industries, Inc. and subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997 in con- formity with generally accepted accounting principles. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Pittsburgh, Pennsylvania January 15, 1998 MANAGEMENT STATEMENT Responsibility for Preparation of the Financial Statements The management of PPG Industries, Inc. is responsible for the preparation of the financial statements included in this Annual Report. To ensure the reliability of financial data, PPG has established, and main- tains, an internal control system. We believe the internal controls in use give reasonable assurance that financial reports do not contain any material misstatement. We believe that the financial statements and related notes in this report are accurate in all material respects, and that they were prepared according to generally accepted accounting principles. The financial statements include amounts that are based on the best estimates and judgments of management. We believe, further, that the other financial information contained in this Annual Report is consistent with the financial statements. /s/ Raymond W. LeBoeuf RAYMOND W. LEBOEUF Chairman of the Board and Chief Executive Officer /s/ William H. Hernandez WILLIAM H. HERNANDEZ Senior Vice President, Finance 17 STATEMENT OF INCOME - --------------------------------------------------------------------------------
For the Year - ------------------------------------------------------------------------------- (Millions, except per share amounts) 1997 1996 1995 - ------------------------------------------------------------------------------- Net sales $7,379 $7,218 $7,058 - ------------------------------------------------------------------------------- Cost of sales 4,397 4,340 4,212 - ------------------------------------------------------------------------------- Gross profit 2,982 2,878 2,846 - ------------------------------------------------------------------------------- Other expenses (earnings) Selling, general and administrative 1,068 1,004 977 ----------------------------------------------------------------------------- Depreciation 348 340 332 ----------------------------------------------------------------------------- Research and development--net (See Note 12) 250 239 236 ----------------------------------------------------------------------------- Interest 105 96 85 ----------------------------------------------------------------------------- Business divestitures and realignments (See Note 2) 102 -- -- ----------------------------------------------------------------------------- Other charges 96 82 143 ----------------------------------------------------------------------------- Other earnings (See Note 7) (162) (123) (189) - ------------------------------------------------------------------------------- Total other expenses--net 1,807 1,638 1,584 - ------------------------------------------------------------------------------- Income before income taxes and minority interest 1,175 1,240 1,262 - ------------------------------------------------------------------------------- Income taxes (See Note 9) 435 471 480 - ------------------------------------------------------------------------------- Minority interest 26 25 14 - ------------------------------------------------------------------------------- Net income $ 714 $ 744 $ 768 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Earnings per common share (See Note 10) $ 3.97 $ 3.96 $ 3.80 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Earnings per common share--assuming dilution (See Note 10) $ 3.94 $ 3.93 $ 3.78 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
The accompanying notes to the financial statements are an integral part of this statement. 18 BALANCE SHEET - --------------------------------------------------------------------------------
December 31 - --------------------------------------------------------------------------- (Millions) 1997 1996 - --------------------------------------------------------------------------- Assets Current assets Cash and cash equivalents $ 129 $ 70 ------------------------------------------------------------------------- Receivables (See Note 4) 1,353 1,226 ------------------------------------------------------------------------- Inventories (See Note 4) 863 797 ------------------------------------------------------------------------- Deferred income taxes (See Note 9) 118 116 ------------------------------------------------------------------------- Other 121 87 - --------------------------------------------------------------------------- Total current assets 2,584 2,296 - --------------------------------------------------------------------------- Property (See Note 5) 6,758 6,688 - --------------------------------------------------------------------------- Less accumulated depreciation 3,903 3,775 - --------------------------------------------------------------------------- Property--net 2,855 2,913 - --------------------------------------------------------------------------- Investments 219 254 - --------------------------------------------------------------------------- Other assets (See Note 14) 1,210 978 - --------------------------------------------------------------------------- Total $ 6,868 $ 6,441 - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- Liabilities and Shareholders' Equity Current liabilities Short-term debt and current portion of long-term debt (See Note 6) $ 444 $ 648 ------------------------------------------------------------------------- Accounts payable and accrued liabilities (See Note 4) 1,210 1,106 ------------------------------------------------------------------------- Income taxes (See Note 9) 8 15 - --------------------------------------------------------------------------- Total current liabilities 1,662 1,769 - --------------------------------------------------------------------------- Long-term debt (See Note 6) 1,257 834 - --------------------------------------------------------------------------- Deferred income taxes (See Note 9) 406 419 - --------------------------------------------------------------------------- Accrued pensions (See Note 14) 130 101 - --------------------------------------------------------------------------- Other postretirement benefits (See Note 14) 531 521 - --------------------------------------------------------------------------- Other liabilities 291 238 - --------------------------------------------------------------------------- Total liabilities 4,277 3,882 - --------------------------------------------------------------------------- Commitments and contingent liabilities (See Note 15) - --------------------------------------------------------------------------- Minority interest 82 76 - --------------------------------------------------------------------------- Shareholders' equity (See Note 3) Common stock 484 484 ------------------------------------------------------------------------- Additional paid-in capital 99 97 ------------------------------------------------------------------------- Retained earnings 5,239 4,760 ------------------------------------------------------------------------- Treasury stock, at cost (2,990) (2,667) ------------------------------------------------------------------------- Unearned compensation (162) (171) ------------------------------------------------------------------------- Minimum pension liability adjustment (25) (10) ------------------------------------------------------------------------- Currency translation adjustment (136) (10) - --------------------------------------------------------------------------- Total shareholders' equity 2,509 2,483 - --------------------------------------------------------------------------- Total $ 6,868 $ 6,441 - --------------------------------------------------------------------------- - ---------------------------------------------------------------------------
Shares outstanding were 177,826,463 and 183,002,461 at Dec. 31, 1997 and 1996, respectively. The accompanying notes to the financial statements are an integral part of this statement. 19 STATEMENT OF CASH FLOWS - --------------------------------------------------------------------------------
For the Year - -------------------------------------------------------------------------------- (Millions) 1997 1996 1995 - -------------------------------------------------------------------------------- Operating activities Net income $ 714 $ 744 $ 768 - -------------------------------------------------------------------------------- Adjustments to reconcile to cash from operations Depreciation and amortization 373 363 352 ------------------------------------------------------------------------------ Business divestitures and realignments 102 -- -- ------------------------------------------------------------------------------ Gain on sale of business (59) -- -- ------------------------------------------------------------------------------ Increase in receivables (124) (2) (29) ------------------------------------------------------------------------------ Increase in inventories (60) (56) (47) ------------------------------------------------------------------------------ Increase in accounts payable and accrued liabilities 40 3 55 ------------------------------------------------------------------------------ (Decrease) increase in income taxes payable (3) (25) 20 ------------------------------------------------------------------------------ Change in other noncurrent assets and liabilities and other--net 24 (19) (47) - -------------------------------------------------------------------------------- Cash from operating activities 1,007 1,008 1,072 - -------------------------------------------------------------------------------- Investing activities Capital spending Additions to property and investments (466) (476) (448) ------------------------------------------------------------------------------ Business acquisitions, net of cash balances acquired (363) (13) (6) - -------------------------------------------------------------------------------- Proceeds from business divestitures 171 -- 60 - -------------------------------------------------------------------------------- Reductions of property and investments 75 20 119 - -------------------------------------------------------------------------------- Cash used for investing activities (583) (469) (275) - -------------------------------------------------------------------------------- Financing activities Net change in borrowings with maturities of three months or less (223) 248 13 - -------------------------------------------------------------------------------- Proceeds from other short-term debt 89 59 48 - -------------------------------------------------------------------------------- Repayment of other short-term debt (78) (50) (66) - -------------------------------------------------------------------------------- Proceeds from long-term debt 472 158 118 - -------------------------------------------------------------------------------- Repayment of long-term debt (63) (153) (51) - -------------------------------------------------------------------------------- Loans to employee stock ownership plan (27) (26) (25) - -------------------------------------------------------------------------------- Repayment of loans by employee stock ownership plan 38 34 29 - -------------------------------------------------------------------------------- Purchase of treasury stock (343) (635) (588) - -------------------------------------------------------------------------------- Issuance of treasury stock 14 27 8 - -------------------------------------------------------------------------------- Dividends paid (239) (237) (239) - -------------------------------------------------------------------------------- Cash used for financing activities (360) (575) (753) - -------------------------------------------------------------------------------- Effect of currency exchange rate changes on cash and cash equivalents (5) -- -- - -------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 59 (36) 44 - -------------------------------------------------------------------------------- Cash and cash equivalents, beginning of year 70 106 62 - -------------------------------------------------------------------------------- Cash and cash equivalents, end of year $ 129 $ 70 $ 106 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
The accompanying notes to the financial statements are an integral part of this statement. 20 MANAGEMENT'S DISCUSSION AND ANALYSIS - -------------------------------------------------------------------------------- PERFORMANCE IN 1997 COMPARED WITH 1996 Overall Performance Our sales increased 2% in 1997 to $7.4 billion from $7.2 billion in 1996. Over- all, the sales increase was due to a 6% increase in sales volumes, including sales from recent business acquisitions in our coatings segment, offset in part by a 2% decrease in sales prices and a 2% decline from foreign currency trans- lation due to the strong U.S. dollar. Slightly higher sales prices for certain products in our chemicals and coatings segments were substantially offset by lower sales prices for caustic soda in our chemicals segment and overall lower sales prices across the majority of our glass product lines. The gross profit percentage increased to 40.4% from 39.9% in the prior year. The benefits realized from improved manufacturing efficiencies, particularly in our glass and chemicals segments, favorable sales mix changes within our chemi- cals and coatings segments, and slightly higher sales prices and lower raw ma- terials costs within our coatings segment contributed to the increase. These improvements were partially offset by lower overall sales prices in our glass segment and for caustic soda in our chemicals segment, and the negative effects of inflation on our glass and chemicals segments. Net income and earnings per common share for 1997 were $714 million and $3.97, respectively, compared with $744 million and $3.96, respectively, for 1996. Net income in 1997 was affected by the same factors as gross profit. In addition, these earnings were adversely affected by pre-tax business divestiture and re- alignment charges of $102 million associated with our glass operations; higher overhead costs associated with growth initiatives in our coatings segment; in- creased advertising, selling and environmental expenses in our chemicals seg- ment; the negative effects of inflation and foreign currency translation, and a slight increase in interest costs associated with higher outstanding borrowings. These negative factors were offset in part by a pre-tax $59 million gain from the sale of our surfactants business and lower income tax expense. Reduced average shares outstanding, as a result of repurchases of common stock by the Company, also favorably affected earnings per common share for 1997. Results of Business Segments Coatings sales increased 5% to $3.1 billion for 1997 from $2.9 billion for 1996. A 7% sales volume increase, including sales from recent business acquisi- tions, and a 1% increase in overall sales prices were partially offset by a 3% decline from foreign currency translation. Volume increases for automotive original and industrial coatings and improved sales prices for automotive refinish products in North America and Europe and for North American industrial coatings were partially offset by lower sales prices for our automotive origi- nal coatings products in North America and Europe. Operating income increased to $568 million in 1997, compared with $529 million in the prior year. The earnings improvement was attributable to the same volume and price factors that contributed to the sales increase, combined with lower raw material costs and slightly improved manufacturing efficiencies. These improvements were offset in part by higher overhead costs associated with growth initiatives, particularly in South America and Asia, the negative effects of inflation and foreign cur- rency translation, and higher legal expenses. Glass sales remained relatively constant at $2.7 billion in 1997 and 1996. A 5% increase in sales volumes was offset by declines of 3% each related to sales prices and foreign currency translation. Although volumes increased for fiber glass products, worldwide automotive original glass products, flat glass in North America and Europe, and aircraft products, these increases were offset by lower sales prices for fiber glass, flat glass and automotive original glass products in North America and Europe. Operating income decreased to $330 mil- lion in 1997 compared with $431 million in the prior year. The decrease was at- tributable to fourth-quarter pre-tax charges totaling $65 million for restruc- turing actions related principally to the closing of our Perry, Ga., float glass plant, the sales price reductions mentioned above, the negative effects of inflation and foreign currency translation, and slightly higher legal ex- penses. Improved worldwide manufacturing efficiencies and increased overall volumes partially offset these unfavorable factors. Chemicals sales totaled $1.6 billion for 1997, up 2% from 1996. A 6% increase in sales volumes was substantially offset by a 3% decline in overall sales prices and a 1% decline from foreign currency translation. Volume increases for chlorine and caustic soda products, and for certain specialty chemical prod- ucts, particularly Transitions(R) optical lenses, and higher selling prices for chlorine, vinyl chloride monomer and other chlorine derivative products were offset by significantly lower selling prices for caustic soda, reduced volumes for vinyl chloride monomer and the absence of sales from our surfactants busi- ness divested late in 1997. Operating income increased to $430 million in 1997 from $376 million in 1996, and included a $59 million pre-tax gain from the sale of our surfactants business. Excluding this gain, operating earnings de- clined $5 million. The favorable effects of volume increases for specialty chemicals and chlor-alkali products, price improvements for chlorine, vinyl chloride monomer and other chlorine derivative products, and improved manufac- turing efficiencies associated with chlor-alkali products were more than offset by the decline in sales prices for caustic soda, increased advertising and selling expenses, principally for Transitions(R) optical lenses, 21 MANAGEMENT'S DISCUSSION AND ANALYSIS - -------------------------------------------------------------------------------- the negative effects of inflation on raw material costs, and higher environmen- tal and legal expenses. Other Significant Factors The increase in other unallocated corporate expenses-net from $11 million in 1996 to $56 million in 1997 was primarily attributable to a fourth-quarter pre- tax charge of $37 million related to the planned disposition of our equity in- terests in two Asian float glass plants and lower earnings from our equity af- filiates. The reduction in income tax expense and the overall effective tax rate in 1997 were principally attributable to realization of capital losses associated with the disposition of certain non-U.S. affiliates, which offset certain capital gains, a portion of which had been taxed in a previous year. The increase in accounts receivable and inventories principally related to the fourth-quarter 1997 acquisitions by our coatings and chemicals segments. Higher sales volume in 1997 also contributed to the increase in accounts receivable, while anticipated volume increases in 1998 contributed to the increase in in- ventories. Partially offsetting these increases was the negative effect of translating foreign subsidiary accounts receivable and inventory balances into U.S. dollars. The increase in other current assets is due to the inclusion of the net assets of the European decorative coatings business of Max Meyer Duco, S.p.A., which we expect to sell in 1998. Other long-term assets increased because of goodwill and other intangible as- sets resulting from 1997 acquisition activity and an increase in our prepaid pension asset. Increases in accounts payable and accrued liabilities resulted from business acquisitions and the accrual of a restructuring reserve. However, these in- creases were partially offset by the effect of translating foreign subsidiary liability balances into U.S. dollars. The decrease in the 1997 year-end discount rate from the prior year end in- creased the additional minimum pension liability accrual and produced an ad- justment in the shareholders' equity section of the balance sheet. Outlook PPG's strategy to focus on new product development and positioning as a low- cost producer will likely result in increased volume in many of our businesses, despite the expected slowing in the economic growth rate of the United States and a slight improvement in growth in Europe in 1998. In addition, volume will benefit from the impact of a full year's results from businesses acquired in 1997. The current economic weakness in Asia could have an impact on all of our businesses and may cause certain chemicals prices to weaken in 1998. However, to the extent this occurs, PPG may also benefit as certain raw material costs in the chemicals and coatings industries may decrease and inflationary pres- sures, particularly in North America, may be reduced and further extend the economic expansion. PPG's diversification of product lines and worldwide mar- kets served tend to reduce the overall impact on results of operations or changes in demand for a particular product line or in a particular geographic area. Accounting Standards During the first quarter of 1997, the Company adopted the provisions of State- ment 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 finan- cial position or results of operations in 1997 and did not affect the Company's cash flow. In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information," which is effective for fiscal years beginning after Dec. 15, 1997. The Company is currently evaluating the impact of this new standard on its current reporting of operating segment information in its annual financial statements. Business Divestitures and Realignments We approved a program in late 1997 to restructure certain glass businesses that were not meeting strategic and performance objectives. The principal components of this program include the closure of our Perry, Ga., flat glass plant and the sale of our equity interests in two Asian float glass plants, which are ex- pected to be completed in 1998. We recorded a pre-tax charge of $102 million in 1997 to reflect the estimated cost of this program. Asset write-offs comprise $61 million of the total charge. The remaining $41 million will require cash outlays primarily for severance (317 employees), a proportionate share of eq- uity investee indebtedness, and demolition and environmental costs, net of es- timated proceeds from sale. No significant amounts had been paid as of Dec. 31, 1997, and substantially all of these cash payments will be made in 1998. The loss on the disposition of our equity interests in two Asian float glass plants is based upon management's best estimate of the amounts expected to be realized on the sale of these facilities. Due in part to the current Asian eco- nomic instability, the proceeds the Company will ultimately realize on these sales could, in the near term, differ from the amounts assumed in arriving at the $37 million pre-tax charge on the disposition of these investments. PPG's European flat and automotive glass businesses are not performing at lev- els that meet the Company's strategic and performance objectives. As a result, management is in 22 MANAGEMENT'S DISCUSSION AND ANALYSIS - -------------------------------------------------------------------------------- the process of evaluating available options to restructure these businesses. This evaluation process is expected to be completed in the next several months. PERFORMANCE IN 1996 COMPARED WITH 1995 Overall Performance Our sales in 1996 increased 2% to $7.2 billion from $7.1 billion in 1995. Contributing to the overall sales increase was a 3% increase in sales volumes, which was partially offset by a 1% decrease in overall sales prices and the unfavorable effects of foreign currency translation. Higher volumes from each of our business segments, including sales from several small acquisitions, and higher sales prices in our coatings segment contributed to the increase. Partially offsetting these improvements were the absence of sales from our divested European architectural coatings business and sodium chlorate business and lower sales prices for our chemicals and glass segments. The gross profit percentage decreased to 39.9% in 1996 from 40.3% in 1995. Contributing to the decline were lower overall sales prices and the negative overall effect of inflation as the unfavorable impacts in our glass and chemi- cals segments were partially offset by lower raw material costs in our coatings segment. The positive effects of improved manufacturing efficiencies in each of our business segments only partially offset these unfavorable factors. Net income for 1996 was $744 million compared with $768 million for 1995. Earnings per share rose to $3.96 from $3.80 in 1995. Included in 1995's net in- come was an after-tax gain of $24 million ($0.12 per share) from a legal set- tlement of a glass technology dispute with Pilkington plc of England. Our 1996 earnings were affected unfavorably by lower other earnings, the decline in our gross profit percentage, increased interest expense and higher minority inter- est attributable in part to increased earnings from our majority-owned subsidi- ary Transitions Optical, Inc. Our other earnings in 1996 declined due to gains from legal settlements in 1995, the most significant of which was the settle- ment with Pilkington, and lower earnings from equity affiliates in 1996 than in 1995. Interest expense in 1996 increased as a result of higher overall borrowings, partially offset by lower average interest rates in 1996 compared with 1995. These negative factors were partially offset by higher overall sales volumes in each of our business segments and lower other charges. The majority of the decline in other charges in 1996 was attributable to lower environmental ex- pense and the settlement of a legal dispute in 1995. Additionally, the benefits of ongoing overhead cost reduction actions were more than offset by the nega- tive effects of inflation. While the effective tax rate for both 1996 and 1995 was 38%, income tax ex- pense decreased slightly because of lower pretax earnings. Reduced average shares outstanding, due to repurchases of PPG common stock by the Company, fa- vorably affected earnings per share during 1996. Results of Business Segments Coatings sales increased 3% to $2.9 billion for 1996 from $2.8 billion for 1995, while operating income increased to $529 million from $469 million. A 2% increase in sales volumes and a 1% increase in overall sales prices contributed to the overall sales increase. Improved volumes in North America, higher sales prices in most of the segment's major businesses, and sales from several small acquisitions were partially offset by the absence of sales from our European architectural coatings business divested late in 1995. The increase in operat- ing income in 1996 was the result of the factors that contributed to the sales increase, lower raw material costs, reduced overhead costs and improved manu- facturing efficiencies. These positive factors were partially offset by the negative effects of inflation on overhead costs in 1996 and gains from two le- gal settlements included in 1995 operating income. Glass sales for 1996 were $2.7 billion compared with $2.65 billion for 1995. A 4% increase in sales volumes was partially offset by decreases of 1% each re- lated to overall sales prices and foreign currency translation. Operating in- come was $431 million compared with $479 million in 1995. The benefits of im- proved volumes in North America and higher sales prices for fiber glass and North American automotive replacement glass products were partially offset by lower worldwide flat glass prices, particularly in Europe, and lower European volumes. Operating income in 1995 included the gain from the legal settlement with Pilkington. Also contributing to the decline in operating income in 1996 were lower sales prices for our flat glass and automotive original glass prod- ucts and the negative effects of inflation. Higher fiber glass sales prices, improved manufacturing efficiencies, increased overall volumes and lower over- head costs only partially offset these negative factors. Chemicals sales were $1.61 billion for 1996 compared with $1.6 billion for 1995, while operating income for the same periods was $376 million and $383 million, respectively. Sales volumes increased 4% overall and were substan- tially offset by a 3% decrease in overall sales prices and the unfavorable ef- fects of foreign currency translation. We experienced volume improvements in most of the segment's major businesses, particularly Transitions(R) lenses and silica products, and higher prices for our specialty chemical products. Sub- stantially offsetting these benefits were lower prices for chlor-alkali prod- ucts and the absence of sales 23 MANAGEMENT'S DISCUSSION AND ANALYSIS - -------------------------------------------------------------------------------- from our sodium chlorate business, which was divested in late 1995. The de- crease in operating income in 1996 is attributable to lower chlor-alkali sales prices, the negative effects of inflation and increased overhead costs in sup- port of the growth in the Transitions/R/ lens business. These negative factors were only partially offset by the benefits of volume improvements, lower envi- ronmental expense, the absence of a charge for a legal dispute and improved manufacturing efficiencies. Other Significant Factors The increase in other unallocated corporate expenses--net in 1996 was primarily attributable to lower earnings from our equity affiliates. 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. These lawsuits and claims relate to product liability, con- tract, patent, antitrust, environmental and other matters arising out of the conduct of PPG's business. PPG's lawsuits and claims against others include claims against insurers and other third parties with respect to actual and con- tingent 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 op- erations or liquidity. It is PPG's policy to accrue expenses for environmental contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Reserves for environmental contingencies are exclusive of claims against third parties and are not discounted. As of Dec. 31, 1997 and 1996, PPG had reserves for environmental contingencies totaling $100 million and $91 million, respectively. Pre-tax charges against income for environmental remediation costs in 1997, 1996 and 1995 totaled $34 million, $27 million and $49 million, respectively, and are included in "Other charges" in the statement of income. Cash outlays related to such charges aggregated $25 million, $36 million and $39 million in 1997, 1996 and 1995, respectively. Management anticipates that the resolution of the Company's environmental con- tingencies, which will occur over an extended period of time, will not result in future annual charges against income that are significantly greater than those recorded in recent years. It is possible, however, that technological, regulatory and enforcement developments, the results of environmental studies and other factors could alter this expectation. In management's opinion, the Company operates in an environmentally sound manner and the outcome of the Company's environmental contingencies will not have a material effect on PPG's financial position or liquidity. In addition to the amounts currently reserved, the Company may be subject to loss contingencies related to environmental matters estimated to be as much as $200 million to $400 million, which range is unchanged from the prior year end. Such unreserved losses are reasonably possible but are not currently considered to be probable of occurrence. Although insurers and other third parties may cover a portion of these costs, to the extent they are incurred, any potential recovery is not included in this unreserved exposure to future loss. The Company's environmental contingencies are expected to be resolved over an ex- tended period of time. Although the unreserved exposure to future loss relates to all sites, a sig- nificant portion of such exposure involves three operating plant sites and one closed plant site. Initial remedial actions are occurring at these sites. Stud- ies 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 ex- posure include significant unresolved issues such as the nature and extent of contamination, if any, at sites and the methods that may have to be employed should remediation be required. With respect to certain waste sites, the financial condition of any other po- tentially responsible parties also contributes to the uncertainty of estimating PPG's final costs. Although contributors of waste to sites involving other po- tentially responsible parties may face governmental agency assertions of joint and several liability, in general, final allocations of costs are made based on the relative contributions of wastes to such sites. PPG is generally not a ma- jor contributor to such sites. The impact of evolving programs, such as natural resource damage claims, in- dustrial site reuse initiatives and state voluntary remediation programs, also adds to the present uncertainties with regard to the ultimate resolution of this unreserved exposure to future loss. The Company's assessment of the poten- tial impact of these environmental contingencies is subject to considerable un- certainty due to the complex, ongoing and evolving process of investigation and remediation, if necessary, of such environmental contingencies. Impact of Inflation PPG's financial statements are prepared on a historical cost basis, which does not completely account for the effects of inflation. Since the cost of most of the Company's inventories is determined using the last-in, first-out (LIFO) method, 24 MANAGEMENT'S DISCUSSION AND ANALYSIS - -------------------------------------------------------------------------------- the cost of sales reported in the financial statements approximates current costs. In 1997 and 1996, our operating results were negatively affected as increased production costs, resulting from inflation, were not fully recovered through price increases and manufacturing efficiencies. In 1995 the negative effects of inflation on our costs were more than offset, for the Company as a whole, by a combination of price increases and improved manufacturing efficiencies. While inflationary pressure on costs is expected to continue, we anticipate that on- going improvements in operating efficiencies, as well as raw material substitu- tion and increases in selling prices for certain products, will mitigate to a significant extent the negative impact of inflation on 1998 operating income. FINANCIAL RESOURCES, CAPITAL SPENDING Over the past three years, we continued to have sufficient financial resources to meet operating requirements, to fund our capital spending, share repurchase programs and pension contributions, and to pay increased dividends to share- holders. Cash from operating activities was $1,007 million in 1997, $1,008 mil- lion in 1996 and $1,072 million in 1995. Dividends paid to shareholders totaled $239 million in 1997, $237 million in 1996 and $239 million in 1995. Contribu- tions to U.S. pension plans totaled $109 million and $146 million in 1996 and 1995, respectively. During 1997, 1996 and 1995, the Company repurchased approximately 5.3 million, 11.9 million and 13.5 million shares of common stock at a cost of $302 million, $606 million and $585 million, respectively, under various share repurchase programs, the most recent of which authorized the repurchase of 10 million shares of common stock, and was initiated in July 1996. As of Dec. 31, 1997, 9.9 million shares of common stock had been repurchased under the most recent program at a cost of $553 million. The repurchase of common stock was financed principally by cash from operations and proceeds from long-term debt. In 1997 long-term debt was increased principally by the issuance of $450 mil- lion of notes at rates ranging from 6 1/4% to 6 7/8% partially offset by sched- uled debt repayments. In 1996 long-term debt was increased principally by the issuance of $150 million of callable 7 3/8% notes partially offset by scheduled debt repayments. In 1995 long-term debt was increased principally by the issu- ance of $100 million of non-callable 6 7/8% notes partially offset by scheduled debt repayments. The proceeds from the issuance of the notes were used for gen- eral corporate purposes, including the repayment of commercial paper borrowings. Capital spending in 1997 totaled $829 million, compared with $489 million in 1996 and $454 million in 1995. This spending related to modernization and pro- ductivity improvements, expansion of existing businesses, environmental control projects and, in 1997, 1996 and 1995, business acquisitions totaling $363 mil- lion, $13 million and $6 million, respectively. Additionally, a 1995 acquisi- tion was financed through issuance of treasury stock with a market value ap- proximating $15 million. Capital spending of a similar nature, excluding acquisitions, is expected to total about $600 million during 1998. In 1998 the Company will continue to implement its acquisition strategy fo- cused on areas of recognized strength. It is anticipated that any acquisitions completed will be funded through a combination of cash generated from opera- tions and external funding sources. The ratio of total debt, including capital leases, to total debt and equity was 40% and 37% at Dec. 31, 1997 and 1996, respectively. Cash from operations and the Company's debt capacity are expected to continue to be sufficient to fund capital spending, dividend payments, share repurchases and operating re- quirements. See Note 6, Debt and Bank Credit Agreements and Leases, for details regarding the use and availability of committed and uncommitted lines of credit. In addition to the lines of credit, the Company may issue up to $500 million aggregate principal amount under a shelf registration statement filed with the Securities and Exchange Commission in January 1998. MARKET RISK PPG is exposed to certain market risks arising from transactions that are entered into in the normal course of business. The Company may enter into derivative financial instrument transactions in order to manage or reduce this market risk. PPG's policies do not permit active trading of, or speculation in, derivative financial instruments. A discussion of the Company's primary market risk exposures and the management of those exposures is presented below. PPG generates revenues and costs that are subject to fluctuations due to changes in foreign currency exchange rates when transactions are denominated in currencies other than the functional currency. Since the Company manufactures its products in a number of locations around the world, principally North Amer- ica and Europe, it has a cost base that is diversified over a number of differ- ent currencies as well as the U.S. dollar, which serves to counterbalance par- tially its foreign currency transaction risk. PPG manages its foreign currency transaction risk to minimize the volatility of cash flows caused by currency fluctuations by forecasting foreign currency denominated cash flows of each subsidiary for a 12-month period and aggregating these cash inflows and outflows in each currency to determine the overall net transaction exposures. Decisions on whether to use derivative financial instru- ments to hedge 25 MANAGEMENT'S DISCUSSION AND ANALYSIS - -------------------------------------------------------------------------------- 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 forward and option contracts (foreign cur- rency contracts) to hedge approximately 30% to 70% of its anticipated net for- eign currency cash flows over the next 12-month period. PPG does not hedge its exposure to translation gains and losses; however, by borrowing in local cur- rencies, it reduces such exposure. The Company does not hedge its foreign cur- rency exposures in a manner that eliminates the effect of changes in foreign currency rates on consolidated net income. The fair value of the foreign cur- rency contracts outstanding as of Dec. 31, 1997 and 1996, was not material. The market value of such contracts has a high correlation to the price changes in the currencies of the related hedged transactions. The potential reduction in PPG's future earnings resulting from an adverse change in the hedged currencies of its outstanding foreign currency contracts in the amount of 10% for European currencies and 20% for Asian and Latin American currencies would total approxi- mately $5 million. In addition, PPG has foreign currency denominated debt of $405 million. A weakening of the U.S. dollar relative to this foreign currency denominated debt of 10% for debt denominated in European currencies and 20% for debt denominated in Asian and Latin American currencies would result in an unrealized translation loss of approximately $52 million. The Company manages its interest rate risk in order to balance its exposure between fixed and variable rates while attempting to minimize its interest costs. Generally, the Company maintains variable interest rate debt at a level of 25% to 50% of total borrowings. PPG principally manages its interest rate risk by retiring and issuing debt from time to time. To a limited extent, PPG manages its interest rate risk through the use of interest rate swaps. As of Dec. 31, 1997 and 1996, the fair value of interest rate swaps was not material. A 10% increase in interest rates would affect PPG's variable rate debt obligations and reduce future earnings by approximately $3 million. Further, a 10% reduction in interest rates would increase the present value of the Company's fixed rate debt by approximately $58 million, which would not have a near-term impact on PPG's future earnings or cash flows. The Company enters into commodity swap and option contracts to reduce its exposure to fluctuations in prices for natural gas. The fair value of these contracts as of Dec. 31, 1997 and 1996, was not material. As a result of a 10% reduction in the price of natural gas, the Company would experience a potential loss in the fair value of the underlying commodity swap and option contracts as of Dec. 31, 1997, of approximately $8 million. YEAR 2000 The Company has initiated a program to prepare its computer systems and applications for the year 2000. As part of this program, a review has been performed of key financial, business and operational systems, and plans have been developed to implement the required system modifications, and remediation efforts are under way. The Company expects to utilize both internal staff and outside consulting firms to complete the necessary system modifications, and anticipates that the associated costs to address this issue will not be material. It is anticipated that these costs will be largely funded from systems maintenance budgets. The Company is also contacting suppliers to obtain their assurance of year 2000 compliance. 26 BUSINESS SEGMENT INFORMATION - -------------------------------------------------------------------------------- Nature of Operations PPG is a multinational manufacturer engaged in three lines of business: coatings, glass and chemicals. The coatings business supplies a variety of protective and decorative coatings and finishes along with adhesives, sealants and metal pretreatment products for automotive original equipment and aftermarket refinish, industrial and architectural applications. The glass business supplies flat and continuous-strand fiber glass for residential and commercial construction, automotive original and replacement, other transportation and industrial applications. The chemicals business supplies chlor-alkali and specialty chemical products. The primary chlor-alkali products are chlorine, caustic soda, vinyl chloride monomer, chlorinated solvents and chlorinated benzenes. The primary specialty chemical products are Transitions(R) lenses, optical monomers, silicas, surfactants (until December 1997) and fine chemicals. Production facilities and markets for the coatings and glass businesses are predominantly in North America and Europe, while the chemicals business operates primarily in North America. Most coatings and glass products are sold directly to manufacturing and construction companies, although in some instances products are sold directly to independent distributors and mass merchants, and through PPG distribution outlets. Most chlor-alkali and specialty chemical products are sold directly to manufacturing companies in the chemical processing, rubber and plastics, paper, minerals and metals, water treatment, pharmaceutical and optical industries. Each of the businesses in which PPG is engaged is highly competitive. However, the diversification of product lines and worldwide markets served tends to minimize the impact on total sales and earnings of changes in demand for a particular product line or in a particular geographic area.
- ----------------------------------------------------------------------------------------------------------------------------------- (Millions) 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ INDUSTRY SEGMENTS Net sales Coatings $3,059 $2,902 $2,812 ------------------------------------------------------------------------------------------------------------------------------- Glass 2,673 2,704 2,651 ------------------------------------------------------------------------------------------------------------------------------- Chemicals 1,647 1,612 1,595 - ------------------------------------------------------------------------------------------------------------------------------------ Total $7,379 $7,218 $7,058 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Operating income Coatings $ 568 $ 529 $ 469 ------------------------------------------------------------------------------------------------------------------------------- Glass(/1/) 330 431 479 ------------------------------------------------------------------------------------------------------------------------------- Chemicals(/2/) 430 376 383 - ------------------------------------------------------------------------------------------------------------------------------------ Total 1,328 1,336 1,331 - ------------------------------------------------------------------------------------------------------------------------------------ Interest--net (97) (85) (74) - ------------------------------------------------------------------------------------------------------------------------------------ Other unallocated corporate (expenses) income--net(/3/) (56) (11) 5 - ------------------------------------------------------------------------------------------------------------------------------------ Income before income taxes and minority interest $1,175 $1,240 $1,262 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
(continued on next page) 27 BUSINESS SEGMENT INFORMATION - ------------------------------------------------------------------------------- (continued)
(Millions) INDUSTRY SEGMENTS Coatings Glass Chemicals Corporate Total - ------------------------------------------------------------------------- 1997 Segment assets(/4/) $2,244 $2,066 $1,166 $1,392 $6,868 - ------------------------------------------------------------------------- Depreciation and amortization $ 92 $ 176 $ 90 $ 15 $ 373 - ------------------------------------------------------------------------- Capital spending $ 431 $ 170 $ 157 $ 71 $ 829 - ------------------------------------------------------------------------- 1996 Segment assets(/4/) $1,756 $2,183 $1,179 $1,323 $6,441 - ------------------------------------------------------------------------- Depreciation and amortization $ 88 $ 173 $ 88 $ 14 $ 363 - ------------------------------------------------------------------------- Capital spending $ 117 $ 194 $ 134 $ 44 $ 489 - ------------------------------------------------------------------------- 1995 Segment assets(/4/) $1,723 $2,128 $1,129 $1,214 $6,194 - ------------------------------------------------------------------------- Depreciation and amortization $ 84 $ 167 $ 86 $ 15 $ 352 - ------------------------------------------------------------------------- Capital spending $ 125 $ 222 $ 83 $ 24 $ 454 - ------------------------------------------------------------------------- - -------------------------------------------------------------------------
- -------------------------------------------------------------------------
(Millions) 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------------------------------- GEOGRAPHIC SEGMENTS Net sales United States $4,960 $4,844 $4,702 ------------------------------------------------------------------------------------------------------------------------------- Europe 1,560 1,633 1,712 ------------------------------------------------------------------------------------------------------------------------------- Canada 477 465 431 ------------------------------------------------------------------------------------------------------------------------------- Other 382 276 213 - ----------------------------------------------------------------------------------------------------------------------------------- Total $7,379 $7,218 $7,058 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Operating income United States(/5/) $1,092 $1,060 $1,058 ------------------------------------------------------------------------------------------------------------------------------- Europe 154 145 153 ------------------------------------------------------------------------------------------------------------------------------- Canada 81 98 96 ------------------------------------------------------------------------------------------------------------------------------- Other 1 33 24 - ----------------------------------------------------------------------------------------------------------------------------------- Total 1,328 1,336 1,331 - ----------------------------------------------------------------------------------------------------------------------------------- Interest--net (97) (85) (74) - ----------------------------------------------------------------------------------------------------------------------------------- Other unallocated corporate (expenses) income--net(/3/) (56) (11) 5 - ----------------------------------------------------------------------------------------------------------------------------------- Income before income taxes and minority interest $1,175 $1,240 $1,262 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Segment assets(/4/) United States $3,207 $3,096 $2,994 ------------------------------------------------------------------------------------------------------------------------------- Europe 1,623 1,498 1,519 ------------------------------------------------------------------------------------------------------------------------------- Canada 282 267 274 ------------------------------------------------------------------------------------------------------------------------------- Other 364 257 193 ------------------------------------------------------------------------------------------------------------------------------- Corporate 1,392 1,323 1,214 - ----------------------------------------------------------------------------------------------------------------------------------- Total $6,868 $6,441 $6,194 - ----------------------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------------------
(1) Operating income in 1997 includes a pre-tax restructuring charge of $65 million principally related to the closure of the Perry, Ga., plant. (2) Operating income in 1997 includes a pre-tax gain of $59 million related to the sale of the surfactants business. (3) Other unallocated corporate expenses--net in 1997 includes a pre-tax charge of $37 million related to the disposition of equity interests in two Asian float glass plants. (4) Segment assets are the total assets used in the operation of each business segment. Corporate assets are principally cash and cash equivalents, investments, income tax assets, the Company's headquarters building and prepaid pensions. (5) Operating income in 1997 includes a pre-tax charge of $58 million principally related to the divestiture of the Perry, Ga., plant and a pre- tax gain of $59 million related to the sale of the surfactants business. 28 NOTES - -------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation The consolidated financial statements include the accounts of PPG Industries, Inc. (PPG or the Company) and all significant subsidiaries, U.S. and non-U.S., of which we own more than 50% of the voting stock. Investments in companies of which we own 20% to 50% of the voting stock are carried at equity, and our share of the earnings or losses of such equity affiliates is included in the statement of income. Transactions between PPG and its subsidiaries are elimi- nated in consolidation. Use of estimates in the preparation of financial statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of income and expenses during the reporting pe- riod. Actual results could differ from those estimates. Foreign currency translation For all significant non-U.S. operations, the functional currency is the local currency. Assets and liabilities of those operations are translated into U.S. dollars using year-end exchange rates; income and expenses are translated using the average exchange rates for the reporting period. Translation adjustments are deferred as a separate component of shareholders' equity. Inventories Most U.S. and certain non-U.S. inventories are stated at cost, using the last- in, first-out (LIFO) method, which does not exceed market. Other inventories are stated at the lower of cost or market. We determine cost using either aver- age or standard factory costs, which approximate actual costs, excluding cer- tain fixed costs such as depreciation and property taxes. Property Property is recorded at cost. We compute depreciation by the straight-line method based on the estimated useful lives of depreciable assets. Additional expense is recorded when facilities or equipment are subject to abnormal eco- nomic conditions or obsolescence. Significant improvements that add to produc- tive capacity or extend the lives of properties are capitalized. Costs for re- pairs and maintenance are charged to expense as incurred. When property is retired or otherwise disposed of, the cost and related depreciation are removed from the accounts and any related gains or losses are included in income. Amor- tization of the cost of capitalized leased assets is included in depreciation expense. Goodwill Goodwill, representing the excess of the cost over the net tangible and identi- fiable intangible assets of acquired businesses, is stated at cost and is amor- tized on a straight-line basis over the estimated future periods to be bene- fited (15 to 40 years). The Company evaluates the recoverability of goodwill at each balance sheet date and would record an impairment if necessary. Employee Stock Ownership Plan We account for our employee stock ownership plan (ESOP) in accordance with Statement of Position (SOP) No. 93-6 for PPG common stock purchased after Dec. 31, 1992 (new ESOP shares). As permitted by SOP No. 93-6, shares purchased prior to Dec. 31, 1992 (old ESOP shares), continue to be accounted for in ac- cordance with SOP No. 76-3. ESOP shares are released and allocated to partici- pants based upon debt service paid during the year on loans used by the ESOP to purchase the shares. Unearned compensation, reflected as a reduction of share- holders' equity, principally represents the unpaid balance of such ESOP loans. Dividends received by the ESOP are used to pay debt service. For old ESOP shares, compensation expense is equal to amounts contributed, or committed to be contributed, to the ESOP by the Company less the ESOP interest expense element of such contributions. Dividends on old ESOP shares are de- ducted from retained earnings. Old ESOP shares are considered to be outstanding in computing earnings per share. For new ESOP shares, compensation expense is equal to the Company's matching contribution (see Note 8). Dividends on released new ESOP shares are deducted from retained earnings, and dividends on unreleased shares are reported as a reduction of debt or accrued interest. Only new ESOP shares that have been released are considered outstanding in computing earnings per share. Cash equivalents Cash equivalents are highly liquid investments (valued at cost, which approxi- mates fair value) acquired with an original maturity of three months or less. Derivative instruments Derivative financial instruments are used to hedge a portion of the Company's foreign currency and interest rate exposures. Income and expense are recorded in the same caption as that arising from the related asset or liability being hedged. Premiums paid on option contracts are amortized over the lives of the contracts. Gains and losses related to hedges of firm commitments are deferred and recog- nized over the expected remaining lives of the related assets and liabilities. Unrealized gains 29 NOTES - -------------------------------------------------------------------------------- and losses from option contracts that hedge anticipated transactions are also deferred and recognized in income in the same period as the hedged transac- tions. Unrealized gains and losses from forward contracts that hedge antici- pated transactions are not deferred. The Company also uses commodity swap and option contracts to reduce its expo- sure to fluctuations in prices for natural gas. Gains and losses on these con- tracts are deferred and recognized in income in the same period as the hedged transactions as an adjustment to cost of sales. The fair value of derivative instruments held as of Dec. 31, 1997 and 1996, was not material. The Company does not enter into derivative transactions for speculative purposes and therefore holds no derivative instruments for trading purposes. 2. ACQUISITIONS, BUSINESS DIVESTITURES AND REALIGNMENTS During 1997, we acquired several businesses, all of which were recorded using the purchase method of accounting and, accordingly, the results of operations of the acquired companies have been included in our consolidated results from their respective acquisition dates. In September 1997, we acquired the U.S. in- dustrial pretreatment business of Man-Gill Chemical Company; in November 1997, we acquired Max Meyer Duco S.p.A. (Max Meyer), a European supplier of automo- tive refinish, fleet finish and decorative coatings, and Phillips Paint Prod- ucts, a Canadian industrial coatings manufacturer; and in December 1997, we ac- quired the worldwide packaging coatings businesses of BASF Lacke + Farben AG, a German company, Keeler & Long, a U.S. manufacturer of high-performance coatings and coil coatings, and Sipsy Chimie Fine S.C.A., a French manufacturer of phar- maceutical intermediates and formerly a wholly owned subsidiary of Warner Lam- bert Company. During 1997, we also increased our ownership interest from 45% to 100% in two related automotive original coatings companies located in Brazil and Argentina. The cost of these 1997 acquisitions was $363 million plus the assumption of $42 million in indebtedness. We expect to sell the European decorative coatings business of Max Meyer in 1998. Therefore, the net assets of that business are reflected as "Other cur- rent assets" in the balance sheet at Dec. 31, 1997. The preliminary purchase price allocations for these acquisitions used in preparing the Dec. 31, 1997, balance sheet are subject to adjustment in 1998 when finalized. On a pro forma basis, if these acquisitions had occurred effective as of Jan. 1, 1996, they would have contributed approximately $300 million to net sales in both 1997 and 1996. The pro forma effect of these acquisitions on net income and earnings per share in 1997 and 1996 would not be material. The pro forma financial information is not necessarily indicative of the operating results that would have occurred had the acquisitions been consummated as of Jan. 1, 1996, nor are they necessarily indicative of future operating results. Business divestitures completed in 1997, primarily the sale of the surfactants business, resulted in a net pre-tax gain of $58 million. Net sales associated with these businesses totaled $111 million in 1997, $122 million in 1996 and $119 million in 1995. We also approved a program in late 1997 to restructure certain glass businesses that were not meeting strategic and performance objectives. The principal components of this program include the closure of our Perry, Ga., flat glass plant and the sale of our equity interests in two Asian float glass plants, which are expected to be completed in 1998. We recorded a pre-tax charge of $102 million in 1997 to reflect the estimated cost of this program. Asset write-offs comprise $61 million of the total charge. The remaining $41 million will require cash outlays primarily for severance (317 employees), a proportionate share of equity investee indebtedness, and demolition and environmental costs, net of estimated proceeds from sale. No significant amounts had been paid as of Dec. 31, 1997, and substantially all of these cash payments will be made in 1998. The loss on the disposition of our equity interests in two Asian float glass plants is based upon management's best estimate of the amounts expected to be realized on the sale of these facilities. Due in part to the current Asian eco- nomic instability, the proceeds the Company will ultimately realize on these sales could, in the near term, differ from the amounts assumed in arriving at the $37 million pre-tax charge on the disposition of these investments. 3. SHAREHOLDERS' EQUITY A class of 10 million shares of preferred stock, without par value, is autho- rized but unissued. Common stock has a par value of $1.66 2/3 per share and 600 million shares are authorized. Shares outstanding at Dec. 31, 1997 and 1996, exclude unreleased new ESOP shares (see Note 8). PPG has a Shareholders' Rights Plan, under which each share of the Company's outstanding common stock has an associated preferred share purchase right. The rights are exercisable only under certain circumstances and allow holders of such rights to purchase common stock of PPG or an acquiring company at a dis- counted price, which generally would be 50% of the respective stocks' current fair market value. Per share cash dividends paid were $1.33 in 1997, $1.26 in 1996 and $1.18 in 1995. 30 NOTES - --------------------------------------------------------------------------------
Minimum Common Stock Additional Treasury Stock Unearned Pension Currency Shares Par Paid-In Retained Compensation Liability Translation (Dollars in Millions) Issued Value Capital Earnings Shares Cost (See Note 8) Adjustment Adjustment - ---------------------------------------------------------------------------------------------------------------------------- BALANCE, JAN. 1, 1995 290,573,068 $484 $68 $3,717 (83,434,423) $(1,489) $(183) $ (2) $ (39) - ---------------------------------------------------------------------------------------------------------------------------- Net income -- -- -- 768 -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------- Cash dividends -- -- -- (239) -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------- Purchase of treasury stock -- -- -- -- (13,582,300) (588) -- -- -- - ---------------------------------------------------------------------------------------------------------------------------- Issuance of treasury stock -- -- 14 -- 893,622 17 -- -- -- - ---------------------------------------------------------------------------------------------------------------------------- Loans to ESOP -- -- -- -- -- -- (25) -- -- - ---------------------------------------------------------------------------------------------------------------------------- Repayment of loans by ESOP -- -- -- -- -- -- 29 -- -- - ---------------------------------------------------------------------------------------------------------------------------- Translation adjustments -- -- -- -- -- -- -- -- 43 - ---------------------------------------------------------------------------------------------------------------------------- Other -- -- -- 3 -- -- -- (8) -- - ---------------------------------------------------------------------------------------------------------------------------- BALANCE, DEC. 31, 1995 290,573,068 484 82 4,249 (96,123,101) (2,060) (179) (10) 4 - ---------------------------------------------------------------------------------------------------------------------------- Net income -- -- -- 744 -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------- Cash dividends -- -- -- (237) -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------- Purchase of treasury stock -- -- -- -- (12,452,817) (635) -- -- -- - ---------------------------------------------------------------------------------------------------------------------------- Issuance of treasury stock -- -- 15 -- 1,217,958 28 -- -- -- - ---------------------------------------------------------------------------------------------------------------------------- Loans to ESOP -- -- -- -- -- -- (26) -- -- - ---------------------------------------------------------------------------------------------------------------------------- Repayment of loans by ESOP -- -- -- -- -- -- 34 -- -- - ---------------------------------------------------------------------------------------------------------------------------- Translation adjustments -- -- -- -- -- -- -- -- (14) - ---------------------------------------------------------------------------------------------------------------------------- Other -- -- -- 4 -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------- BALANCE, DEC. 31, 1996 290,573,068 484 97 4,760 (107,357,960) (2,667) (171) (10) (10) - ---------------------------------------------------------------------------------------------------------------------------- Net income -- -- -- 714 -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------- Cash dividends -- -- -- (239) -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------- Purchase of treasury stock -- -- -- -- (5,964,792) (343) -- -- -- - ---------------------------------------------------------------------------------------------------------------------------- Issuance of treasury stock -- -- 2 -- 804,507 20 -- -- -- - ---------------------------------------------------------------------------------------------------------------------------- Loans to ESOP -- -- -- -- -- -- (27) -- -- - ---------------------------------------------------------------------------------------------------------------------------- Repayment of loans by ESOP -- -- -- -- -- -- 36 -- -- - ---------------------------------------------------------------------------------------------------------------------------- Translation adjustments -- -- -- -- -- -- -- -- (126) - ---------------------------------------------------------------------------------------------------------------------------- Other -- -- -- 4 -- -- -- (15) -- - ---------------------------------------------------------------------------------------------------------------------------- BALANCE, DEC. 31, 1997 290,573,068 $484 $99 $5,239 (112,518,245) $(2,990) $(162) $(25) $(136) - ---------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------
4. WORKING CAPITAL DETAIL
December 31 - ------------------------------------------------------- (Millions) 1997 1996 - ------------------------------------------------------- Receivables Customers $1,236 $1,166 ----------------------------------------------------- Other 138 85 ----------------------------------------------------- Allowance for doubtful accounts (21) (25) - ------------------------------------------------------- Total $1,353 $1,226 - ------------------------------------------------------- - ------------------------------------------------------- Inventories(/1/) Finished products and work in process $ 608 $ 548 ----------------------------------------------------- Raw materials 141 134 ----------------------------------------------------- Supplies 114 115 - ------------------------------------------------------- Total $ 863 $ 797 - ------------------------------------------------------- - -------------------------------------------------------
December 31 - ------------------------------------------------------- (Millions) 1997 1996 - ------------------------------------------------------- Accounts payable and accrued liabilities Trade creditors $ 646 $ 602 ----------------------------------------------------- Accrued payroll 237 237 ----------------------------------------------------- Other postretirement and pension benefits 56 56 ----------------------------------------------------- Other 271 211 - ------------------------------------------------------- Total $1,210 $1,106 - ------------------------------------------------------- - -------------------------------------------------------
(1) Inventories valued using the LIFO method comprised 71% and 73% of total gross inventory values at Dec. 31, 1997 and 1996, respectively. If the first-in, first-out method of inventory valuation had been used, inventories would have been $191 million and $204 million higher at Dec. 31, 1997 and 1996, respectively. 31 NOTES - -------------------------------------------------------------------------------- 5. PROPERTY DETAIL
December 31 - ------------------------------------------ (Millions) 1997 1996 - ------------------------------------------ Property(/1/) Land and land improvements $ 304 $ 296 ---------------------------------------- Buildings 1,188 1,185 ---------------------------------------- Machinery and equipment 4,802 4,748 ---------------------------------------- Other 291 247 ---------------------------------------- Construction in progress 173 212 - ------------------------------------------ Total $6,758 $6,688 - ------------------------------------------ - ------------------------------------------
(1) Interest capitalized in 1997, 1996 and 1995 was $10 million, $12 million and $9 million, respectively. 6. DEBT AND BANK CREDIT AGREEMENTS AND LEASES
December 31 - ------------------------------------------------------------------------- (Millions) 1997 1996 - ------------------------------------------------------------------------- 9.3% notes, due 1999 $ 123 $123 - ------------------------------------------------------------------------- 6 1/4% non-callable notes, due 2002 100 -- - ------------------------------------------------------------------------- 6 7/8% non-callable debentures, due 2005 100 100 - ------------------------------------------------------------------------- 6 1/2% notes, due 2007 150 -- - ------------------------------------------------------------------------- 6 7/8% notes, due 2012 100 -- - ------------------------------------------------------------------------- 7 3/8% notes, due 2016 149 149 - ------------------------------------------------------------------------- 6 7/8% notes, due 2017 99 -- - ------------------------------------------------------------------------- 9% non-callable debentures, due 2021 148 148 - ------------------------------------------------------------------------- ESOP notes(/1/) Weighted average 8.5% fixed-rate notes 61 66 ----------------------------------------------------------------------- Variable-rate notes, weighted average 4.9% at Dec. 31, 1997 90 96 - ------------------------------------------------------------------------- Various other debt, weighted average 5.1% 45 46 - ------------------------------------------------------------------------- Non-U.S. subsidiary borrowings 12.7% notes, maturing in 1998 and 1999 35 58 ----------------------------------------------------------------------- Fixed-rate notes, weighted average 8.5% at Dec. 31, 1997, maturing in 1998 3 9 ----------------------------------------------------------------------- Various other debt, weighted average 5.8% at Dec. 31, 1997 69 63 - ------------------------------------------------------------------------- Capital lease obligations 41 28 - ------------------------------------------------------------------------- Total 1,313 886 - ------------------------------------------------------------------------- Less payments due within one year 56 52 - ------------------------------------------------------------------------- Long-term debt $1,257 $834 - ------------------------------------------------------------------------- - -------------------------------------------------------------------------
(1) See Note 8 for discussion of ESOP borrowings. The fixed- and variable-rate notes mature in 2009 and require annual principal payments from 1998 to 2008. Aggregate maturities during the next five years are (in millions) $56 in 1998, $171 in 1999, $32 in 2000, $32 in 2001 and $137 in 2002. The Company has revolving credit agreements with credit lines totaling $820 million. Of these credit lines, $800 million will expire in December 2001 and require payment of annual fees equal to seven basis points on the unused por- tion of the lines. These lines support our commercial paper programs in the United States, Canada and the Netherlands. The remaining $20 million, relating to a subsidiary, will expire in September 1998 and requires payment of annual fees equal to 10 basis points on the unused portion of the line. PPG may cancel all or part of these credit agreements at any time without penalty or premium. At Dec. 31, 1997, we had used $10 million of these lines of credit. Our non-U.S. operations have other committed and uncommitted lines of credit totaling $21 million and $554 million, respectively, of which $14 million and $264 million, respectively, were used at Dec. 31, 1997. The committed lines of credit, which expire during the years 1998 and 1999, do not require significant commitment fees. The uncommitted lines of credit are subject to cancellation at any time and are not subject to any commitment fees. PPG is in compliance with the restrictive covenants under its various credit agreements, loan agreements and indentures. The Dec. 31, 1997 and 1996, balances for "Short-term debt and current portion of long-term debt" include, respectively, $34 million and $423 million of com- mercial paper and $354 million and $173 million of short-term notes. The weighted-average interest rates of short-term borrowings as of Dec. 31, 1997 and 1996, were 6.0% and 5.5%, respectively. Interest payments in 1997, 1996 and 1995 totaled $106 million, $109 million and $91 million, respectively. Rental expense for operating leases was $70 million, $68 million and $67 mil- lion in 1997, 1996 and 1995, respectively. Minimum lease commitments for oper- ating leases that have initial or remaining lease terms in excess of one year at Dec. 31, 1997, are (in millions) $30 in 1998, $21 in 1999, $12 in 2000, $6 in 2001, $4 in 2002 and $17 thereafter. 7. OTHER EARNINGS
- ---------------------------------------------------------- (Millions) 1997 1996 1995 - ---------------------------------------------------------- Interest income $ 8 $ 11 $ 11 - ---------------------------------------------------------- Royalty income 25 25 27 - ---------------------------------------------------------- Share of net earnings in equity affiliates 10 19 31 - ---------------------------------------------------------- Gain on sale of business 59 -- 7 - ---------------------------------------------------------- Other 60 68 113 - ---------------------------------------------------------- Total $162 $123 $189 - ---------------------------------------------------------- - ----------------------------------------------------------
32 NOTES - -------------------------------------------------------------------------------- In 1995 "Other" includes gains on legal settlements, the most significant of which related to a glass technology dispute with Pilkington plc of England. PPG's share of undistributed earnings of equity affiliates was $85 million and $94 million at Dec. 31, 1997 and 1996, respectively. Dividends received from equity affiliates were $14 million, $15 million and $14 million in 1997, 1996 and 1995, respectively. 8. EMPLOYEE STOCK OWNERSHIP PLAN Our employee stock ownership plan (ESOP) covers substantially all U. S. employ- ees. The Company makes matching contributions to the ESOP based upon partici- pant's savings, subject to certain limitations, the matching percentage being based upon our return on average equity for the previous year. In 1989 and 1990, the ESOP purchased 13,400,334 shares of PPG common stock (old ESOP shares) from the Company and on the open market. The ESOP purchased 471,526, 506,761 and 631,748 shares of PPG common stock (new ESOP shares) on the open market in 1997, 1996 and 1995, respectively. The ESOP financed these purchases through a combination of borrowings guaranteed by PPG and borrowings directly from PPG. Borrowings from third-parties to finance these purchases are included in debt in our balance sheet (see Note 6). Compensation expense related to the ESOP for 1997, 1996 and 1995 totaled $11 million, $15 million and $18 million, respectively. Interest expense totaled $11 million, $11 million and $12 million for 1997, 1996 and 1995, respectively. Dividends on PPG shares held by the ESOP, to service ESOP debt, totaled $39 million, $37 million and $34 million for 1997, 1996 and 1995, respectively. The fair value of unreleased new ESOP shares was $13 million and $12 million at Dec. 31, 1997 and 1996, respectively. Shares held by the ESOP as of Dec. 31, 1997 and 1996, are as follows:
- --------------------------------------------------------------------------- 1997 1996 - --------------------------------------------------------------------------- Old Shares New Shares Old Shares New Shares - --------------------------------------------------------------------------- Allocated shares 7,498,208 1,919,623 6,899,912 1,290,001 - --------------------------------------------------------------------------- Shares released for allocation 10,575 22,249 10,432 196,058 - --------------------------------------------------------------------------- Unreleased shares 5,891,551 228,360 6,489,990 212,647 - --------------------------------------------------------------------------- Total 13,400,334 2,170,232 13,400,334 1,698,706 - --------------------------------------------------------------------------- - ---------------------------------------------------------------------------
9. INCOME TAXES The following is a reconciliation of the statutory U.S. corporate federal in- come tax rate to the effective income tax rate.
Percent of Pre-tax Income - --------------------------------------------------------------------- 1997 1996 1995 - --------------------------------------------------------------------- U.S. federal income tax rate 35.0% 35.0% 35.0% - --------------------------------------------------------------------- Changes in tax rate resulting from Taxes on non-U.S. earnings and related tax credits .1 .8 .3 ------------------------------------------------------------------- State and local taxes--U.S. 3.2 3.7 3.3 ------------------------------------------------------------------- Other (1.3) (1.5) (.6) - --------------------------------------------------------------------- Effective income tax rate 37.0% 38.0% 38.0% - --------------------------------------------------------------------- - ---------------------------------------------------------------------
The following table gives details of income tax expense in the statement of income. A portion of these taxes will be payable within one year and is there- fore shown below as "Current income taxes," while the balance is shown as "De- ferred income taxes."
- --------------------------------------- (Millions) 1997 1996 1995 - --------------------------------------- Current income taxes U.S. federal $284 $255 $275 ------------------------------------- Non-U.S. 93 79 66 ------------------------------------- State and local--U.S. 58 66 65 - --------------------------------------- Total current 435 400 406 - --------------------------------------- Deferred income taxes U.S. federal 2 36 38 ------------------------------------- Non-U.S. (1) 30 33 ------------------------------------- State and local--U.S. (1) 5 3 - --------------------------------------- Total deferred -- 71 74 - --------------------------------------- Total $435 $471 $480 - --------------------------------------- - ---------------------------------------
33 NOTES - -------------------------------------------------------------------------------- Net deferred income tax assets and liabilities as of Dec. 31, 1997 and 1996, are as follows: - -------------------------------------------------------
(Millions) 1997 1996 - ------------------------------------------------------- Deferred income tax assets related to Employee benefits $310 $ 311 ----------------------------------------------------- Environmental 38 34 ----------------------------------------------------- Operating loss and other carryforwards 63 128 ----------------------------------------------------- Inventories 31 26 ----------------------------------------------------- Property 40 33 ----------------------------------------------------- Other 18 32 ----------------------------------------------------- Valuation allowance (45) (104) - ------------------------------------------------------- Total 455 460 - ------------------------------------------------------- Deferred income tax liabilities related to Property 454 492 ----------------------------------------------------- Employee benefits 238 223 ----------------------------------------------------- Other 54 50 - ------------------------------------------------------- Total 746 765 - ------------------------------------------------------- Deferred income tax liabilities--net $291 $ 305 - ------------------------------------------------------- - -------------------------------------------------------
At Dec. 31, 1997, subsidiaries of the Company had available net operating loss (NOL) carryforwards of approximately $75 million for income tax purposes, of which $56 million have an indefinite expiration. The remaining $19 million ex- pire between the years 2001 and 2003. The majority of the NOL carryforwards relate to operations of subsidiaries in countries permitting indefinite carryforward of losses. Generally, the valua- tion allowance has been established for these carryforwards because the ability to utilize them is uncertain. The significant decreases in the operating loss and other carryforwards and the related valuation allowance are attributable to the dispositions of certain non-U.S. subsidiaries. These dispositions also generated U.S. capital losses of approximately $183 million, of which $85 million was utilized in 1997 and $98 million was carried forward. A valuation allowance has been established for these carryforwards because the ability to utilize them is uncertain. These carryforwards expire Jan. 1, 2003. Income before income taxes of our non-U.S. operations for 1997, 1996 and 1995 was $232 million, $266 million and $257 million, respectively. No deferred U.S. income taxes have been provided on certain undistributed earnings of non-U.S. subsidiaries, which amounted to $495 million at Dec. 31, 1997, and $511 million at Dec. 31, 1996. These earnings are considered to be reinvested for an indefinite period of time or will be repatriated when it is tax effective to do so. It is not practicable to determine the deferred tax li- ability on these earnings. The Internal Revenue Service has examined our U.S. federal income tax returns through 1990, and we have paid all tax claims. Income tax payments in 1997, 1996 and 1995 totaled $452 million, $402 million and $358 million, respectively. 10. EARNINGS PER SHARE In 1997 the Company adopted the provisions of SFAS No. 128, "Earnings Per Share." The following table reflects the earnings per share calculations for the three years ended Dec. 31, 1997.
- ------------------------------------------------------------------- (Millions, except per share amounts) 1997 1996 1995 - ------------------------------------------------------------------- Earnings per common share - ------------------------------------------------------------------- Net income $ 714 $ 744 $ 768 ----------------------------------------------------------------- Weighted average common shares outstanding 179.8 187.8 202.0 ----------------------------------------------------------------- Earnings per common share $ 3.97 $ 3.96 $ 3.80 - ------------------------------------------------------------------- - ------------------------------------------------------------------- Earnings per common share-- assuming dilution - ------------------------------------------------------------------- Net income $ 714 $ 744 $ 768 ----------------------------------------------------------------- Weighted average common shares outstanding 179.8 187.8 202.0 ----------------------------------------------------------------- Effect of dilutive securities Stock options 0.7 0.8 0.6 ---------------------------------------------------------------- Other stock compensation plans 1.0 0.9 0.7 ----------------------------------------------------------------- Potentially dilutive common shares 1.7 1.7 1.3 ----------------------------------------------------------------- Adjusted common shares outstanding 181.5 189.5 203.3 ----------------------------------------------------------------- Earnings per common share--assuming dilution $ 3.94 $ 3.93 $ 3.78 - ------------------------------------------------------------------- - -------------------------------------------------------------------
11. STOCK OPTION PLAN Under PPG's stock option plan, certain employees of the Company have been granted options to purchase shares of common stock at prices equal to the fair market value of the shares on the date the option was granted. Options are ex- ercisable beginning from six to 12 months after granting and have a maximum term of 10 years. Shares available for future grants were 10,029,300 and 1,429,883 at Dec. 31, 1997 and 1996, respectively. PPG applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its stock- based compensation. Accordingly, no compensation cost for PPG's stock option plan has been recognized in the accompanying financial statements. Had compen- sation cost been determined based upon the fair value at the grant date for 34 NOTES - -------------------------------------------------------------------------------- awards granted in 1997, 1996 and 1995 consistent with the methodology pre- scribed in SFAS No. 123, "Accounting for Stock-Based Compensation," net income and earnings per common share would have been reduced by $20 million and $0.11 per common share in 1997, $16 million and $.09 per common share in 1996 and $10 million and $.05 per common share in 1995. The fair value of stock options is estimated at the grant date using the Black-Scholes option pricing model with the following weighted average assumptions.
- --------------------------------------------------- 1997 1996 1995 - --------------------------------------------------- Risk-free interest rate 6.0% 5.5% 6.9% - --------------------------------------------------- Expected life of option in years 3.4 3.5 3.6 - --------------------------------------------------- Expected dividend yield 2.8% 3.0% 3.2% - --------------------------------------------------- Expected volatility 21.0% 22.1% 24.4% - --------------------------------------------------- - ---------------------------------------------------
The following table summarizes stock option activity for the three years ended Dec. 31, 1997.
Weighted Number of average shares subject to exercise Stock option activity options price per share - ------------------------------------------------------------- Outstanding, Jan. 1, 1995 5,437,911 $33.01 - ------------------------------------------------------------- Granted 2,323,990 39.53 ----------------------------------------------------------- Exercised (1,316,206) 31.04 ----------------------------------------------------------- Terminated (38,612) 37.76 - ------------------------------------------------------------- Outstanding, Dec. 31, 1995 6,407,083 35.75 - ------------------------------------------------------------- Granted 2,717,073 49.72 ----------------------------------------------------------- Exercised (2,365,091) 34.14 ----------------------------------------------------------- Terminated (34,100) 44.76 - ------------------------------------------------------------- Outstanding, Dec. 31, 1996 6,724,965 41.92 - ------------------------------------------------------------- Granted 3,177,322 56.91 ----------------------------------------------------------- Exercised (2,474,445) 40.41 ----------------------------------------------------------- Terminated (45,500) 51.90 - ------------------------------------------------------------- Outstanding, Dec. 31, 1997 7,382,342 48.82 - ------------------------------------------------------------- - -------------------------------------------------------------
The following table summarizes information about stock options outstanding and exercisable at Dec. 31, 1997.
Options outstanding Options exercisable ------------------------------------- ---------------------- Weighted Weighted Weighted Range of average average average exercise remaining exercise exercise price Number contractual price Number price per share of shares life (years) per share of shares per share - ------------------------------------------------------------------------------- $18.50 - $27.25 179,851 2.48 yrs. $24.20 179,851 $24.20 - ------------------------------------------------------------------------------- $29.38 - $41.63 1,817,724 5.84 yrs. 36.40 1,817,724 36.40 - ------------------------------------------------------------------------------- $41.88 - $65.94 5,384,767 6.47 yrs. 53.84 3,092,963 51.40 - ------------------------------------------------------------------------------- 7,382,342 5,090,538 ========= =========
At Dec. 31, 1996, options were exercisable for 4.6 million shares at a weighted average exercise price of $38.14 per share. The corresponding amounts at Dec. 31, 1995, were 4.6 million and $34.20 per share, respectively. 12. RESEARCH AND DEVELOPMENT
- ----------------------------------------------- (Millions) 1997 1996 1995 - ----------------------------------------------- Research and development--total $266 $255 $252 - ----------------------------------------------- Less depreciation 16 16 16 - ----------------------------------------------- Research and development--net $250 $239 $236 - ----------------------------------------------- - -----------------------------------------------
13. ADVERTISING COSTS Advertising costs are expensed as incurred and totaled $88 million, $72 million and $79 million in 1997, 1996 and 1995, respectively. 14. PENSIONS AND OTHER POSTRETIREMENT BENEFITS Pension benefits We have noncontributory defined benefit pension plans that cover certain em- ployees worldwide. Benefits under these plans are based on years of service and salaries or on stated amounts for each year of service. Our funding policy for all plans is consistent with applicable governmental requirements. We provide for obligations for all plans by depositing funds with trustees, by purchasing insurance policies or by recording financial statement accruals. Pension plan assets held in trust consist of equity securities and fixed-income investments. Net periodic pension (income) cost includes the following components:
- ------------------------------------------------------------------- (Millions) 1997 1996 1995 - ------------------------------------------------------------------- Service cost--benefits earned during the year $ 36 $ 36 $ 23 - ------------------------------------------------------------------- Interest cost on projected benefit obligation 134 124 122 - ------------------------------------------------------------------- Return on assets Actual gain (434) (266) (327) ----------------------------------------------------------------- Deferred gain 222 77 174 - ------------------------------------------------------------------- Net amortization 17 30 13 - ------------------------------------------------------------------- Net periodic pension (income) cost $ (25) $ 1 $ 5 - ------------------------------------------------------------------- - -------------------------------------------------------------------
In the determination of net periodic pension (income) cost, the assumed weighted-average long-term rate of return on plan assets was 10.9% for 1997, 1996 and 1995. Unrecognized prior service costs are amortized over periods ranging from six to 14 years. 35 NOTES - -------------------------------------------------------------------------------- The following table sets forth the combined funded status and amounts recog- nized in our balance sheet for our defined benefit pension plans.
December 31 - -------------------------------------------------------------------------- (Millions) 1997 1996 - -------------------------------------------------------------------------- Plan ABO Plan ABO Assets Exceeds Assets Exceeds Exceed Plan Exceed Plan ABO Assets ABO Assets - -------------------------------------------------------------------------- Actuarial present value of the estimated pension benefits to be paid in the future Vested benefit obligation $1,608 $146 $1,530 $ 75 - -------------------------------------------------------------------------- Nonvested benefit obligation 76 27 78 21 - -------------------------------------------------------------------------- Accumulated benefit obligation (ABO) 1,684 173 1,608 96 - -------------------------------------------------------------------------- Effect of projected future salary increases 148 18 137 18 - -------------------------------------------------------------------------- Projected benefit obligation (PBO) 1,832 191 1,745 114 - -------------------------------------------------------------------------- Plan assets at fair value 2,259 49 2,003 3 - -------------------------------------------------------------------------- PBO (less than) in excess of plan assets (427) 142 (258) 111 - -------------------------------------------------------------------------- Unamortized net asset (liability) at date of adoption 29 (8) 35 (10) - -------------------------------------------------------------------------- Unrecognized net loss (188) (45) (319) (18) - -------------------------------------------------------------------------- Unrecognized prior service cost (64) (7) (69) (4) - -------------------------------------------------------------------------- Minimum liability -- 48 -- 23 - -------------------------------------------------------------------------- (Prepaid) accrued pensions--net(/1/) $ (650) $130 $ (611) $102 - -------------------------------------------------------------------------- - --------------------------------------------------------------------------
(1) As of Dec. 31, 1997 and 1996, the prepaid pension amounts are included in Other assets in the balance sheet. We determined the projected benefit obligation using weighted-average discount rates of 7.0% at Dec. 31, 1997, and 7.5% at Dec. 31, 1996. For those plans that provide benefits based on salaries in the final years of employment, the assumed long-term rate of increase in salaries was 4.6% at Dec. 31, 1997 and 1996. The accrued pension liability, reflected in the balance sheet, included $4 million at Dec. 31, 1997 and 1996, for defined contribution plans. Total pension (income) cost, which includes costs for defined contribution plans, multi-employer defined benefit pension plans and the net periodic pen- sion (income) cost shown above, was $(22) million, $4 million and $8 million in 1997, 1996 and 1995, respectively. Other postretirement benefits PPG sponsors defined benefit plans that provide medical and life insurance ben- efits to nearly all of its retired employees in the United States and certain retired employees in Canada. These plans also cover the employees' spouse and dependents. Salaried and certain wage employees hired after Jan. 31, 1993, will not be entitled to postretirement medical benefits. At Dec. 31, 1997, the U.S. plans had provisions that capped the cost of postretirement medical benefits at 2003 levels for most current and future retirees covered by bargaining plans, as well as current and future retirees covered by nonbargaining plans. Many of our plans include cost-sharing provisions, such as co-insurance and deduct- ibles, and require participant contributions based upon elected coverage. The plans also coordinate benefits with Medicare for those employees who are 65 and older or transfer the health care risk to Medicare health maintenance organiza- tions. Life insurance benefits for retirees covered by nonbargaining plans are calculated at a percentage of the retirees' final base pay. For most bargaining units, the benefits are based upon negotiated flat dollar amounts. Our Canadian plans provide postretirement medical and life insurance benefits that supple- ment benefits provided and paid for under the Canadian health care system. The Company's postretirement medical and life insurance plans are unfunded. Net periodic postretirement benefit cost includes the following components:
- ------------------------------------------------------------- (Millions) 1997 1996 1995 - ------------------------------------------------------------- Service cost--benefits earned during the year $ 7 $ 7 $ 5 - ------------------------------------------------------------- Interest cost on accumulated postretirement benefit obligation 48 43 46 - ------------------------------------------------------------- Net amortization 6 4 5 - ------------------------------------------------------------- Net periodic postretirement benefit cost $61 $54 $56 - ------------------------------------------------------------- - -------------------------------------------------------------
In determining net periodic postretirement benefit cost, unrecognized prior service costs are amortized over periods ranging from six to 13 years. In addition to the net periodic postretirement benefit cost shown above, $1 million of multi-employer costs was incurred in each of the years 1997, 1996 and 1995. The accumulated postretirement benefit obligation of our plans and the liabil- ity recognized in the balance sheet as of Dec. 31, 1997 and 1996, are as fol- lows: - ----------------------------------------------------------------- (Millions) 1997 1996 - ----------------------------------------------------------------- Accumulated postretirement benefit obligation (APBO) Retirees $487 $472 - ----------------------------------------------------------------- Fully eligible active plan participants 95 87 - ----------------------------------------------------------------- Other active plan participants 122 117 - ----------------------------------------------------------------- APBO 704 676 - ----------------------------------------------------------------- Unrecognized prior service cost (23) (40) - ----------------------------------------------------------------- Unrecognized net loss (98) (63) - ----------------------------------------------------------------- Other postretirement benefit liability $583 $573 - ----------------------------------------------------------------- - -----------------------------------------------------------------
36 NOTES - -------------------------------------------------------------------------------- The weighted-average discount rate used in determining the APBO was 7.0% at Dec. 31, 1997, and 7.5% at Dec. 31, 1996. The weighted-average assumed health care cost trend rate was 7.3% for 1997 and 7.0% for 1998, declining ratably to 4.0% by the year 2007. If these trend rates were increased by one percentage point per year, the APBO and the aggregate of the service and interest cost components of the net periodic postretirement benefit cost would increase by approximately 4.7% and 4.2%, re- spectively. 15. 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. These lawsuits and claims relate to product liability, con- tract, patent, antitrust, environmental and other matters arising out of the conduct of PPG's business. PPG's lawsuits and claims against others include claims against insurers and other third 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 Dec. 31, 1997 and 1996, PPG had reserves for environmental contingencies totaling $100 million and $91 million, respectively. Pre-tax charges against income for environmental remediation costs in 1997, 1996 and 1995 totaled $34 million, $27 million and $49 million, respectively, and are included in "Other charges" in the statement of income. Cash outlays related to such charges aggregated $25 million, $36 million and $39 million in 1997, 1996 and 1995, respectively. Management anticipates that the resolution of the Company's environmental con- tingencies, which will occur over an extended period of time, will not result in future annual charges against income that are significantly greater than those recorded in recent years. It is possible, however, that technological, regulatory and enforcement developments, the results of environmental studies and other factors could alter this expectation. In management's opinion, the Company operates in an environmentally sound manner and the outcome of the Company's environmental contingencies will not have a material effect on PPG's financial position or liquidity. In addition to the amounts currently reserved, the Company may be subject to loss contingencies related to environmental matters estimated to be as much as $200 million to $400 million, which range is unchanged from the prior year end. Such unreserved losses are reasonably possible but are not currently considered to be probable of occurrence. Although insurers and other third parties may cover a portion of these costs, to the extent they are incurred, any potential recovery is not included in this unreserved exposure to future loss. The Company's environmental contingencies are expected to be resolved over an ex- tended period of time. Although the unreserved exposure to future loss relates to all sites, a sig- nificant portion of such exposure involves three operating plant sites and one closed plant site. Initial remedial actions are occurring at these sites. Stud- ies 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 ex- posure include significant unresolved issues such as the nature and extent of contamination, if any, at sites and the methods that may have to be employed should remediation be required. With respect to certain waste sites, the financial condition of any other po- tentially responsible parties also contributes to the uncertainty of estimating PPG's final costs. Although contributors of waste to sites involving other po- tentially responsible parties may face governmental agency assertions of joint and several liability, in general, final allocations of costs are made based on the relative contributions of wastes to such sites. PPG is generally not a ma- jor contributor to such sites. The impact of evolving programs, such as natural resource damage claims, in- dustrial site reuse initiatives and state voluntary remediation programs, also adds to the present uncertainties with regard to the ultimate resolution of this unreserved exposure to future loss. The Company's assessment of the poten- tial impact of these environmental contingencies is subject to considerable un- certainty due to the complex, ongoing and evolving process of investigation and remediation, if necessary, of such environmental contingencies. 16. FINANCIAL INSTRUMENTS Included in PPG's financial instrument portfolio are cash and cash equivalents, Company-owned life insurance, derivative financial instruments and short- and long-term debt instruments. The most significant instrument, long-term debt (excluding capital lease obligations), had carrying and fair values totaling $1,272 million and $1,362 million, respectively, at Dec. 31, 1997. The corre- sponding amounts at Dec. 31, 1996, were $858 million and $903 million, respec- tively. The fair values of the other instruments approximated their carrying values, in the aggregate. The fair values of the debt instruments were based upon quoted market prices of the same or similar instruments or on the rates available to the Company for instruments of the same remaining maturities. 37 NOTES - -------------------------------------------------------------------------------- 17. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) - -----------------------------------------------
Earnings Per Earnings Common Net Gross Net Per Share-- Sales Profit Income Common Assuming (Millions) (Millions) (Millions) Share Dilution - -------------------------------------------------------------------- 1997 quarter ended March 31 $1,777 $ 690 $166 $ .91 $ .90 - -------------------------------------------------------------------- June 30 1,944 798 218 1.21 1.20 - -------------------------------------------------------------------- September 30 1,812 733 171 .96 .95 - -------------------------------------------------------------------- December 31(/1/) 1,846 761 159 .89 .89 - -------------------------------------------------------------------- Total $7,379 $2,982 $714 $3.97 $3.94 - -------------------------------------------------------------------- - -------------------------------------------------------------------- 1996 quarter ended March 31 $1,749 $ 682 $172 $ .90 $ .89 - -------------------------------------------------------------------- June 30 1,913 785 229 1.20 1.20 - -------------------------------------------------------------------- September 30 1,802 729 191 1.03 1.02 - -------------------------------------------------------------------- December 31 1,754 682 152 .83 .82 - -------------------------------------------------------------------- Total $7,218 $2,878 $744 $3.96 $3.93 - -------------------------------------------------------------------- - --------------------------------------------------------------------
(1) Fourth-quarter 1997 earnings were reduced by a pre-tax charge for business divestitures and realignments of $102 million and increased by a pre-tax gain of $59 million associated with the sale of the surfactants business. The net effect of these transactions reduced fourth-quarter net income by $15 million and earnings per common share by $0.09. 18. BUSINESS SEGMENT INFORMATION AND NATURE OF OPERATIONS Refer to pages 27 and 28 for information on our business segments for 1997, 1996 and 1995. OFFICER CHANGES - -------------------------------------------------------------------------------- On Nov. 1, 1997, Raymond W. LeBoeuf succeeded Jerry E. Dempsey as chairman of the board. Mr. LeBoeuf had been president and chief executive officer and, prior to that, president and chief operating officer. Also during the year, Frank A. Archinaco and E. Kears Pollock were elected ex- ecutive vice presidents. They had been senior vice presidents of glass and coatings, respectively. In addition, Charles E. Bunch was elected senior vice president, strategic planning and corporate services. Kevin F. Sullivan suc- ceeded him as vice president, fiber glass. James C. Diggs, who joined the Com- pany in 1997, became senior vice president and general counsel, succeeding Guy A. Zoghby, who retired. Gary W. Weber was named senior vice president, science and technology. He had been vice president of that function. James W. Craig became vice president, European development. He was succeeded as president, PPG Europe, by Stanley C. DeGreve, who also was named vice presi- dent, fiber glass, Europe. John Maaghul retired as president, PPG South America. He had served PPG for 29 years. In coatings operations, Thomas A. Craig, vice president of automotive refin- ish, retired after 41 years of Company service. Douglas C. Hepper was appointed general manager of automotive refinish. Also during the year, Maurice V. Peconi was named vice president, architectural coatings, and Roderick I. A. Watters, who had been vice president, automotive products, Europe, became vice presi- dent, European coatings. Additionally, Gerald W. Gruber was elected vice presi- dent, coatings research, development and technology services. In glass operations, named as new officers were Garry A. Goudy, vice presi- dent, automotive replacement glass; Richard B. Leggett, vice president, flat glass, and Barry J. McGee, vice president, technology and manufacturing servic- es. 38 CORPORATE DIRECTORY - ------------------------------------------------------------------------------- DIRECTORS *+ERROLL B. DAVIS, JR. President and Chief Executive Officer, Wisconsin Power and Light Company and WPL Holdings, Inc. *++MICHELE J. HOOPER President, International Business Group, Caremark International, Inc. *++ALLEN J. KROWE Retired Director and Vice Chairman, Texaco Inc. NED C. LAUTENBACH Senior Vice President and Group Executive, Worldwide Sales and Distribution, IBM Corporation RAYMOND W. LEBOEUF Chairman of the Board and Chief Executive Officer, PPG Industries, Inc. *+STEVEN C. MASON Retired Chairman of the Board and Chief Executive Officer, Mead Corporation +++HAROLD A. MCINNES Retired Chairman of the Board and Chief Executive Officer, AMP Incorporated *++ROBERT MEHRABIAN Senior Vice President and Segment Executive, Allegheny Teledyne Incorporated VINCENT A. SARNI Retired Chairman of the Board and Chief Executive Officer, PPG Industries, Inc. +++THOMAS J. USHER Chairman of the Board and Chief Executive Officer, USX Corporation *+DAVID G. VICE Retired Vice-Chairman, Products and Technology, Northern Telecom Limited +++DAVID R. WHITWAM Chairman of the Board and Chief Executive Officer, Whirlpool Corporation OFFICE OF THE CHIEF EXECUTIVE RAYMOND W. LEBOEUF Chairman of the Board and Chief Executive Officer FRANK A. ARCHINACO Executive Vice President E. KEARS POLLOCK Executive Vice President EXECUTIVE COMMITTEE RAYMOND W. LEBOEUF, CHAIRMAN Chairman of the Board and Chief Executive Officer FRANK A. ARCHINACO Executive Vice President CHARLES E. BUNCH Senior Vice President, Strategic Planning and Corporate Services RUSSELL L. CRANE Senior Vice President, Human Resources and Administration JAMES C. DIGGS Senior Vice President and General Counsel WILLIAM H. HERNANDEZ Senior Vice President, Finance E. KEARS POLLOCK Executive Vice President GARY W. WEBER Senior Vice President, Science and Technology *Audit Committee +Officers-Directors Compensation Committee ++Nominating and Governance Committee OPERATING COMMITTEE FRANK A. ARCHINACO, CO-CHAIRMAN Executive Vice President E. KEARS POLLOCK, CO-CHAIRMAN Executive Vice President DONALD W. BOGUS Vice President, Industrial Coatings RAE R. BURTON Vice President, Chlor-Alkali and Derivatives GARRY A. GOUDY Vice President, Automotive Replacement Glass GERALD W. GRUBER Vice President, Coatings Research, Development and Technology Services ERNEST A. HAHN Vice President, Automotive Glass DOUGLAS C. HEPPER General Manager, Automotive Refinish RICHARD B. LEGGETT Vice President, Flat Glass GUY MAUGIS General Manager, Glass, Europe BARRY J. MCGEE Vice President, Glass Technology and Manufacturing Services DAVID B. NAVIKAS Controller MAURICE V. PECONI Vice President, Architectural Coatings KEVIN F. SULLIVAN Vice President, Fiber Glass THOMAS M. VON LEHMAN Vice President, Specialty Chemicals RICHARD ZAHREN Vice President, Automotive Coatings OTHER OFFICERS L. BLAINE BOSWELL Vice President, Public Affairs DAVID C. CANNON JR. Vice President, Environment, Health and Safety JAMES W. CRAIG Vice President, European Development STANLEY C. DEGREVE President, PPG Europe; Vice President, Fiber Glass, Europe DAN W. KIENER Treasurer H. KENNEDY LINGE Vice President, Associate General Counsel and Secretary MICHAEL A. LUDLOW Vice President, Purchasing and Distribution MARGARET H. MCGRATH President, PPG Canada; Vice President, Coatings, Canada DAVID W. SMITH Vice President, Information Technology AREND W. D. VOS President, PPG Asia/Pacific; Vice President, Coatings, Asia/Pacific DAVID R. WALLIS Vice President, Corporate Development RODERICK I. A. WATTERS Vice President, European Coatings 39 ELEVEN-YEAR DIGEST
- --------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------- 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ---------------------------------------------------------------------------------------------------------- STATEMENT OF INCOME Net sales 7,379 7,218 7,058 6,331 5,754 5,814 5,673 6,021 5,734 5,617 5,183 - ---------------------------------------------------------------------------------------------------------- Gross profit (%) 40.4 39.9 40.3 38.9 36.9 36.4 35.2 37.8 37.1 39.2 37.8 - ---------------------------------------------------------------------------------------------------------- Income before income taxes 1,149 1,215 1,248 840 531 538 348 767 749 779 637 - ---------------------------------------------------------------------------------------------------------- Income taxes 435 471 480 325 236 218 147 292 284 311 260 - ---------------------------------------------------------------------------------------------------------- Income before accounting changes 714 744 768 515 295 319 201 475 465 468 377 - ---------------------------------------------------------------------------------------------------------- Cumulative effect of accounting changes(/1/) -- -- -- -- (273) -- 75 -- -- -- -- - ---------------------------------------------------------------------------------------------------------- Net income 714 744 768 515 22 319 276 475 465 468 377 - ---------------------------------------------------------------------------------------------------------- Return on average capital (%)(/2/)(/3/) 19.1 20.3 21.6 15.3 2.2/8.9 9.7 8.7/7.0 14.0 14.8 15.5 13.1 - ---------------------------------------------------------------------------------------------------------- Return on average equity (%)(/2/) 28.8 29.5 28.8 20.1 .9/10.7 11.8 10.7/8.0 19.7 21.0 22.1 18.1 - ---------------------------------------------------------------------------------------------------------- Earnings per common share before accounting changes 3.97 3.96 3.80 2.43 1.39 1.51 .95 2.22 2.09 2.13 1.60 - ---------------------------------------------------------------------------------------------------------- Cumulative effect of accounting changes on earnings per common share -- -- -- -- (1.29) -- .35 -- -- -- -- - ---------------------------------------------------------------------------------------------------------- Earnings per common share 3.97 3.96 3.80 2.43 .10 1.51 1.30 2.22 2.09 2.13 1.60 - ---------------------------------------------------------------------------------------------------------- Average number of shares 179.8 187.8 202.0 211.9 212.6 212.2 212.4 214.4 222.6 219.6 236.4 - ---------------------------------------------------------------------------------------------------------- Earnings per common share-- assuming dilution 3.94 3.93 3.78 2.42 .10 1.50 1.29 2.21 2.08 2.12 1.58 - ---------------------------------------------------------------------------------------------------------- Dividends 239 237 239 238 221 200 183 176 165 141 132 - ---------------------------------------------------------------------------------------------------------- Per share 1.33 1.26 1.18 1.12 1.04 .94 .86 .82 .74 .64 .56 - ---------------------------------------------------------------------------------------------------------- BALANCE SHEET Current assets 2,584 2,296 2,275 2,168 2,026 1,951 2,173 2,217 2,056 1,899 1,844 - ---------------------------------------------------------------------------------------------------------- Current liabilities 1,662 1,769 1,629 1,425 1,281 1,253 1,341 1,471 1,338 1,264 1,295 - ---------------------------------------------------------------------------------------------------------- Working capital 922 527 646 743 745 698 832 746 718 635 549 - ---------------------------------------------------------------------------------------------------------- Property (net) 2,855 2,913 2,835 2,742 2,787 2,972 3,183 3,255 3,007 2,758 2,685 - ---------------------------------------------------------------------------------------------------------- Total assets 6,868 6,441 6,194 5,894 5,652 5,662 6,056 6,108 5,645 5,154 5,008 - ---------------------------------------------------------------------------------------------------------- Long-term debt 1,257 834 736 773 774 905 1,190 1,210 1,198 892 917 - ---------------------------------------------------------------------------------------------------------- Shareholders' equity 2,509 2,483 2,569 2,557 2,473 2,699 2,655 2,547 2,282 2,243 2,044 - ---------------------------------------------------------------------------------------------------------- Per share 14.11 13.57 13.23 12.35 11.57 12.71 12.50 12.01 10.49 10.24 9.22 - ---------------------------------------------------------------------------------------------------------- OTHER DATA Capital spending(/4/) 829 489 454 356 293 283 335 567 671 410 479 - ---------------------------------------------------------------------------------------------------------- Depreciation expense 348 340 332 318 331 352 351 324 292 274 266 - ---------------------------------------------------------------------------------------------------------- Quoted market price High 67 1/2 62 1/4 47 7/8 42 1/8 38 1/8 34 1/8 29 5/8 27 5/8 23 23 3/8 26 3/4 -------------------------------------------------------------------------------------------------------- Low 48 5/8 42 7/8 34 7/8 33 3/4 29 5/8 25 20 3/4 17 1/4 18 1/2 15 5/8 13 3/4 -------------------------------------------------------------------------------------------------------- Year-end 57 1/8 56 1/8 45 3/4 37 1/8 37 7/8 32 7/8 25 1/4 23 1/2 19 7/8 20 1/8 16 1/2 -------------------------------------------------------------------------------------------------------- Price/earnings ratio(/5/) High 17 16 13 17 27 23 31 12 11 11 17 -------------------------------------------------------------------------------------------------------- Low 12 11 9 14 21 17 22 8 9 7 9 -------------------------------------------------------------------------------------------------------- Average number of employees 31,900 31,300 31,200 30,800 31,400 32,300 33,700 35,100 35,500 36,300 36,800 - 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All amounts are in millions of dollars except per share data and number of employees. Data was adjusted, as appropriate, to reflect the two-for-one stock splits payable on June 10, 1994, and on March 12, 1987. (1) The 1993 changes in methods of accounting relate to the adoption of SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions"; SFAS No. 109, "Accounting for Income Taxes," and SFAS No. 112, "Employers' Accounting for Postemployment Benefits." The 1991 change in the method of accounting relates to the cost of rebuilding glass and fiber glass melting facilities. The effect of all the changes on net income in the years of change, exclusive of the cumulative effect to Jan. 1 of the year of change and the pro forma effect on individual prior years' net income, was not material. (2) Return on average capital and return on average equity for 1993 and 1991 were calculated and presented inclusive and exclusive of the cumulative effect of the accounting changes. (3) Return on average capital is calculated using pre-interest, after-tax earnings and average debt and equity during the year. (4) Includes the cost of businesses acquired. (5) Price/earnings ratios were calculated based on high and low market prices during the year and the respective year's earnings per common share. The 1993 and 1991 ratios were calculated and presented exclusive of the cumulative effect of the accounting changes. 40 PPG SHAREHOLDER INFORMATION - -------------------------------------------------------------------------------- WORLD HEADQUARTERS One PPG Place Pittsburgh, PA 15272, U.S.A. Phone (412) 434-3131 Internet: www.ppg.com ANNUAL MEETING Thursday, April 16, 1998, 11:00 a.m. The Westin William Penn Hotel 530 William Penn Place Pittsburgh, PA 15219 TRANSFER AGENT & REGISTRAR ChaseMellon Shareholder Services, LLC Overpeck Centre 85 Challenger Road Ridgefield Park, NJ 07660 PPG-dedicated phone 1-800-648-8160 Internet inquiries: www.chasemellon.com Shareholders with specific questions regarding dividend checks, transfer or replacement of stock certificates or dividend tax information should contact ChaseMellon Shareholder Services--the dividend paying agent, dividend reinvestment agent, transfer agent and registrar for PPG at the above address. Or, shareholders may contact PPG Shareholder Relations, 40E, PPG Industries, One PPG Place, Pittsburgh, PA 15272. TOLL-FREE QUARTERLY FINANCIAL RESULTS Shareholders may dial the toll-free number 1-888-NEWS-PPG (1-888-6397-774) at any time, 24 hours a day, to hear quarterly financial results. By dialing this number, shareholders also may request copies of financial news releases via fax, electronic mail or conventional mail. PUBLICATIONS AVAILABLE TO SHAREHOLDERS Copies of the following publications will be furnished without charge upon written request to Corporate Communications, 7W, PPG Industries, One PPG Place, Pittsburgh, PA 15272. FORM 10-K--the Company's Annual Report filed with the Securities and Exchange Commission. PPG INDUSTRIES BLUEPRINT--a booklet summarizing PPG's mission, values, strategy and goals. PPG WORLDWIDE CODE OF ETHICS--an employee guide to corporate conduct policies, including those concerning personal conduct, relationships with customers, suppliers and competitors, protection of corporate assets, responsibilities to the public, and PPG as a global organization. PPG'S ENVIRONMENT, HEALTH AND SAFETY POLICY--a brochure describing the Company's commitment, worldwide, to manufacturing, selling and distributing products in a manner that is safe and healthful for its employees, neighbors and customers, and that protects the environment. PPG'S ENVIRONMENT, HEALTH AND SAFETY PROGRESS REPORT--a report of progress during the year with respect to the Company's environment, health and safety commitment. PPG'S RESPONSIBLE CARE COMMITMENT--a brochure outlining the Company's voluntary activities under the Responsible Care initiative of the Chemical Manufacturers Association for safe and ethical management of chemicals. DIVIDEND INFORMATION PPG has paid uninterrupted dividends since 1899. The latest quarterly dividend of 34 cents per share, voted by the board of directors on Jan. 15, 1998, results in an annual dividend rate of $1.36 per share. STOCK EXCHANGE LISTINGS PPG common stock is traded on the New York, Pacific and Philadelphia stock exchanges (symbol: PPG). DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN PPG's Dividend Reinvestment and Stock Purchase Plan is offered as a service and convenience to shareholders. The Plan provides for the automatic reinvestment of dividends in shares of PPG stock. Shareholders also may purchase additional stock through cash contributions to the Plan. A prospectus fully describing the Plan and authorization forms for participation are available from the Company at the address shown under "Investor Relations" or by calling 1-800-648-8160. INVESTOR RELATIONS General information about PPG common stock may be obtained from Douglas B. Atkinson, Director of Investor Relations. Phone (412) 434-3312, or write Director of Investor Relations, 40E, PPG Industries, One PPG Place, Pittsburgh, PA 15272. QUARTERLY STOCK MARKET PRICE
1997 1996 - ---------------------------------------------------------------- Quarter Ended High Low Close High Low Close - ---------------------------------------------------------------- March 31 $57 3/8 $52 1/4 $ 54 $50 1/8 $42 7/8 $48 7/8 - ---------------------------------------------------------------- June 30 60 1/4 48 5/8 58 1/8 53 1/2 48 1/2 48 3/4 - ---------------------------------------------------------------- Sept. 30 67 1/2 58 62 11/16 54 1/2 44 5/8 54 3/8 - ---------------------------------------------------------------- Dec. 31 65 1/8 53 1/4 57 1/8 62 1/4 53 1/4 56 1/8 - ----------------------------------------------------------------
The number of holders of record of PPG common stock as of Jan. 31, 1998, was 33,186, as shown on the records of the Company's transfer agent. DIVIDENDS
1997 1996 - -------------------------------------------- Month of Amount Per Amount Per Payment (Millions) Share (Millions) Share - -------------------------------------------- March $ 60 $ .33 $ 58 $ .30 - -------------------------------------------- June 59 .33 60 .32 - -------------------------------------------- September 59 .33 60 .32 - -------------------------------------------- December 61 .34 59 .32 - -------------------------------------------- Total $239 $1.33 $237 $1.26 - -------------------------------------------- - --------------------------------------------
41 EX-21 9 SUBSIDIARIES OF THE REGISTRANT Exhibit 21 PPG INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES ----------------------------- SUBSIDIARIES OF THE REGISTRANT The Registrant is PPG Industries, Inc. There are no subsidiaries for which separate financial statements are filed or included in group financial statements filed for unconsolidated subsidiaries. Material subsidiaries included in the 1997 consolidated financial statements of the Company are:
Percentage of Voting Power ------------ Domestic: Market View, Inc. - Delaware ........................... 100.00% PPG Architectural Finishes, Inc. - Delaware............. 100.00 PPG Industries International, Inc.- Delaware............ 100.00 PPG Industries Securities, Inc. - Delaware.............. 100.00 Transitions Optical, Inc. - Delaware.................... 51.00 Canadian: PPG Canada Inc. - Canada................................ 100.00 European: Max Meyer Duco S.P.A. - Italy........................... 100.00 PPG Holdings (U.K.) Limited - United Kingdom............ 100.00 PPG Holdings B.V. - The Netherlands..................... 100.00 PPG Iberica, S.A. - Spain............................... 60.00 PPG Industries Fiber Glass B.V. - The Netherlands....... 100.00 PPG Industries France - France.......................... 100.00 PPG Industries Glass S.A. - France...................... 100.00 PPG Industries Lacke GmbH - Germany..................... 100.00 PPG Industries Lackfabrik GmbH - Germany................ 100.00 PPG Industries Italia S.r.l. - Italy.................... 100.00 PPG Industries (U. K.) Limited - England................ 100.00 PPG Industries Chemicals B.V. - The Netherlands......... 100.00 Transitions Optical Limited - Ireland .................. 51.00 PPG Packaging Coatings - The Netherlands................ 100.00 PPG - Sipsy S.C.A. - France............................. 100.00 Subsidiaries in other areas: PPG Automotive Products S.A. - Argentina................ 100.00 PPG Autotintas S.A. - Argentina......................... 100.00 PPG C.I. Co. Ltd. - Japan............................... 51.00 PPG Coatings (Hong Kong) Co. Ltd. - Hong Kong........... 60.00 PPG - Feng Tai, Ltd. - Hong Kong........................ 55.00 PPG Industrial do Brasil - Brazil....................... 100.00 PPG Industries Asia/Pacific Ltd.- Japan................. 100.00 PPG Industries Argentina S.A. - Argentina............... 100.00 PPG Industries de Mexico, S.A. de C.V. - Mexico......... 100.00 PPG Industries Taiwan Ltd. - Taiwan..................... 55.00 Taiwan Chlorine Industries Ltd. - Taiwan................ 60.00 Partnerships: Glass Plaza Associates - Pennsylvania................... 100.00
EX-23 10 CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in Post- effective Amendment No. 1 to Registration Statement No. 2-62328 on Form S-3, in Registration Statement No. 333-44397 on Form S-3 and in Registration Statement Nos. 33-23350, 33-50400, 33-13605 and 33- 64077 on Form S-8 of our reports dated January 15, 1998, appearing in and incorporated by reference in this Annual Report on Form 10-K of PPG Industries, Inc. for the year ended December 31, 1997. DELOITTE & TOUCHE LLP Pittsburgh, Pennsylvania February 24, 1998 EX-24 11 POWER OF ATTORNEY Exhibit 24 PPG INDUSTRIES, INC. POWER OF ATTORNEY ----------------- (10-K) I, Thomas J. Usher, a Director of PPG Industries, Inc. (the "Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W. LeBoeuf, W. H. Hernandez and H. K. Linge, or any of them, my true and lawful attorneys or attorneys-in-fact, with full power of substitution and revocation, to sign, in my name and on my behalf as a Director of the Corporation, the Corporation's Form 10-K for the fiscal year ended December 31, 1997, to be filed with the Securities and Exchange Commission, Washington, DC. WITNESS my hand this 19th day of February 1998. /s/ Thomas J. Usher ------------------- PPG INDUSTRIES, INC. POWER OF ATTORNEY ----------------- (10-K) I, Allen J. Krowe, a Director of PPG Industries, Inc. (the "Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W. LeBoeuf, W. H. Hernandez and H. K. Linge, or any of them, my true and lawful attorneys or attorneys-in-fact, with full power of substitution and revocation, to sign, in my name and on my behalf as a Director of the Corporation, the Corporation's Form 10-K for the fiscal year ended December 31, 1997, to be filed with the Securities and Exchange Commission, Washington, DC. WITNESS my hand this 19th day of February 1998. /s/ Allen J. Krowe ------------------ PPG INDUSTRIES, INC. POWER OF ATTORNEY ----------------- (10-K) I, Steven C. Mason, a Director of PPG Industries, Inc. (the "Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W. LeBoeuf, W. H. Hernandez and H. K. Linge, or any of them, my true and lawful attorneys or attorneys-in-fact, with full power of substitution and revocation, to sign, in my name and on my behalf as a Director of the Corporation, the Corporation's Form 10-K for the fiscal year ended December 31, 1997, to be filed with the Securities and Exchange Commission, Washington, DC. WITNESS my hand this 19th day of February 1998. /s/ Steven C. Mason ------------------- PPG INDUSTRIES, INC. POWER OF ATTORNEY ----------------- (10-K) I, Harold A. McInnes, a Director of PPG Industries, Inc. (the "Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W. LeBoeuf, W. H. Hernandez and H. K. Linge, or any of them, my true and lawful attorneys or attorneys-in-fact, with full power of substitution and revocation, to sign, in my name and on my behalf as a Director of the Corporation, the Corporation's Form 10-K for the fiscal year ended December 31, 1997, to be filed with the Securities and Exchange Commission, Washington, DC. WITNESS my hand this 19th day of February 1998. /s/ Harold A. McInnes --------------------- PPG INDUSTRIES, INC. POWER OF ATTORNEY ----------------- (10-K) I, Robert Mehrabian, a Director of PPG Industries, Inc. (the "Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W. LeBoeuf, W. H. Hernandez and H. K. Linge, or any of them, my true and lawful attorneys or attorneys-in-fact, with full power of substitution and revocation, to sign, in my name and on my behalf as a Director of the Corporation, the Corporation's Form 10-K for the fiscal year ended December 31, 1997, to be filed with the Securities and Exchange Commission, Washington, DC. WITNESS my hand this 19th day of February 1998. /s/ Robert Mehrabian -------------------- PPG INDUSTRIES, INC. POWER OF ATTORNEY ----------------- (10-K) I, Vincent A. Sarni, a Director of PPG Industries, Inc. (the "Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W. LeBoeuf, W. H. Hernandez and H. K. Linge, or any of them, my true and lawful attorneys or attorneys-in-fact, with full power of substitution and revocation, to sign, in my name and on my behalf as a Director of the Corporation, the Corporation's Form 10-K for the fiscal year ended December 31, 1997, to be filed with the Securities and Exchange Commission, Washington, DC. WITNESS my hand this 19th day of February 1998. /s/ Vincent A. Sarni -------------------- PPG INDUSTRIES, INC. POWER OF ATTORNEY ----------------- (10-K) I, David G. Vice, a Director of PPG Industries, Inc. (the "Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W. LeBoeuf, W. H. Hernandez and H. K. Linge, or any of them, my true and lawful attorneys or attorneys-in-fact, with full power of substitution and revocation, to sign, in my name and on my behalf as a Director of the Corporation, the Corporation's Form 10-K for the fiscal year ended December 31, 1997, to be filed with the Securities and Exchange Commission, Washington, DC. WITNESS my hand this 19th day of February 1998. /s/ David G. Vice ----------------- PPG INDUSTRIES, INC. POWER OF ATTORNEY ----------------- (10-K) I, David R. Whitwam, a Director of PPG Industries, Inc. (the "Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W. LeBoeuf, W. H. Hernandez and H. K. Linge, or any of them, my true and lawful attorneys or attorneys-in-fact, with full power of substitution and revocation, to sign, in my name and on my behalf as a Director of the Corporation, the Corporation's Form 10-K for the fiscal year ended December 31, 1997, to be filed with the Securities and Exchange Commission, Washington, DC. WITNESS my hand this 19th day of February 1998. /s/ David R. Whitwam -------------------- PPG INDUSTRIES, INC. POWER OF ATTORNEY ----------------- (10-K) I, Erroll B. Davis, Jr., a Director of PPG Industries, Inc. (the "Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W. LeBoeuf, W. H. Hernandez and H. K. Linge, or any of them, my true and lawful attorneys or attorneys-in-fact, with full power of substitution and revocation, to sign, in my name and on my behalf as a Director of the Corporation, the Corporation's Form 10-K for the fiscal year ended December 31, 1997, to be filed with the Securities and Exchange Commission, Washington, DC. WITNESS my hand this 19th day of February 1998. /s/ Erroll B. Davis, Jr. ------------------------ PPG INDUSTRIES, INC. POWER OF ATTORNEY ----------------- (10-K) I, Ned C. Lautenbach, a Director of PPG Industries, Inc. (the "Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W. LeBoeuf, W. H. Hernandez and H. K. Linge, or any of them, my true and lawful attorneys or attorneys-in-fact, with full power of substitution and revocation, to sign, in my name and on my behalf as a Director of the Corporation, the Corporation's Form 10-K for the fiscal year ended December 31, 1997, to be filed with the Securities and Exchange Commission, Washington, DC. WITNESS my hand this 19th day of February 1998. /s/ Ned C. Lautenbach --------------------- PPG INDUSTRIES, INC. POWER OF ATTORNEY ----------------- (10-K) I, Michele J. Hooper, a Director of PPG Industries, Inc. (the "Corporation"), a Pennsylvania corporation, hereby constitute and appoint R. W. LeBoeuf, W. H. Hernandez and H. K. Linge, or any of them, my true and lawful attorneys or attorneys-in-fact, with full power of substitution and revocation, to sign, in my name and on my behalf as a Director of the Corporation, the Corporation's Form 10-K for the fiscal year ended December 31, 1997, to be filed with the Securities and Exchange Commission, Washington, DC. WITNESS my hand this 19th day of February 1998. /s/ Michele J. Hooper --------------------- PPG INDUSTRIES, INC. POWER OF ATTORNEY ----------------- (10-K) I, Raymond W. LeBoeuf, a Director of PPG Industries, Inc. (the "Corporation"), a Pennsylvania corporation, hereby constitute and appoint W. H. Hernandez and H. K. Linge, or either of them, my true and lawful attorneys or attorneys-in-fact, with full power of substitution and revocation, to sign, in my name and on my behalf as a Director of the Corporation, the Corporation's Form 10-K for the fiscal year ended December 31, 1997, to be filed with the Securities and Exchange Commission, Washington, DC. WITNESS my hand this 19th day of February 1998. /s/ Raymond W. LeBoeuf ---------------------- EX-27 12 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PPG INDUSTRIES, INC. DECEMBER 31, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 129 0 1,236 21 863 2,584 6,758 3,903 6,868 1,662 1,257 0 0 484 2,025 6,868 7,379 7,379 4,397 4,397 796 0 105 1,175 435 0 0 0 0 714 3.97 3.94
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