Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion includes a comparison of our results of operations and liquidity and capital resources for the years ended December 31, 2025 and 2024. A discussion of changes in our results of operations for the year ended December 31, 2024 as compared to the year ended December 31, 2023 has been omitted from this Form 10-K, but may be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2024 Form 10-K, filed with the Securities and Exchange Commission on February 20, 2025.
Highlights
Net sales of approximately $15.9 billion in 2025 were flat compared to 2024, with higher selling prices, sales volume growth and favorable foreign currency translation offset by the impact of divestitures.
Income before income taxes was $2,045 million in 2025, an increase of $193 million compared to the prior year. This increase was primarily due to lower business restructuring charges and impairment and other related charges, higher selling prices, improved manufacturing productivity and restructuring savings, partially offset by the impact of unfavorable sales mix and overhead and other cost inflation.
Performance Overview
Net Sales by Region
% Change
($ in millions, except percentages)
United States and Canada
Europe, Middle East and Africa (EMEA)
Asia Pacific
Latin America
Total
Net sales increased $30 million due to the following:
● Higher selling prices (+1%)
● Higher sales volumes (+1%)
● Favorable foreign currency translation (+1%)
2025 PPG ANNUAL REPORT AND FORM 10-K 19
Partially offset by:
● Divestitures (-3%)
For specific business results, see the Performance of Reportable Business Segments section within Item 7 of this Form 10-K.
Cost of sales, exclusive of depreciation and amortization
% Change
($ in millions, except percentages)
Cost of sales, exclusive of depreciation and amortization
Cost of sales as a % of net sales
Cost of sales, exclusive of depreciation and amortization, increased $64 million due to the following:
● Wage and other cost inflation
● Higher sales volumes
● Unfavorable foreign currency translation
Partially offset by:
● Increased manufacturing productivity
● Divestitures
Selling, general and administrative expenses
% Change
($ in millions, except percentages)
Selling, general and administrative expenses
Selling, general and administrative expenses as a % of net sales
Selling, general and administrative expenses increased $48 million primarily due to:
● Wage and other cost inflation
● Unfavorable foreign currency translation
Partially offset by:
● Restructuring savings
● Divestitures
Depreciation
% Change
($ in millions, except percentages)
Depreciation
Depreciation as a % of net sales
Depreciation increased $43 million primarily due to:
● Accelerated depreciation expense
● Unfavorable foreign currency translation
Partially offset by:
● Divestitures
Other charges and other income
% Change
($ in millions, except percentages)
Interest expense
Interest income
Business restructuring, net
Impairment and other related charges, net
Other charges/(income), net
2025 PPG ANNUAL REPORT AND FORM 10-K 20
Business restructuring, net
In October 2024, the Company approved a comprehensive cost reduction program focused on reducing structural costs primarily in Europe and in certain other global businesses, along with other corporate costs following the divestitures of PPG’s silicas products business and the architectural coatings business in the U.S. and Canada. In connection with approval of this restructuring program, the Company recorded a pretax restructuring charge of $239 million, representing employee severance and other cash costs. Refer to Note 8, “Business Restructuring” in Item 8 of this Form 10-K for additional information.
Impairment and other related charges, net
In 2025, the Company recognized pretax net impairment and other related charges of $24 million related to a consolidated joint venture in the Performance Coatings segment. The charges primarily represented the impairment of definite-lived identified intangible assets.
In 2024, the Company received written approval from Russian regulatory authorities of a definitive agreement to sell the Company’s remaining Russian business. As a result, the Company classified the business as held for sale as of December 31, 2024 and recognized an impairment charge of $146 million, primarily related to accumulated foreign currency translation losses.
Refer to Note 7 ”Impairment and Other Related Charges, Net” in Item 8 of this Form 10-K for additional information.
Other charges/(income), net
Other charges/(income), net was higher in 2025 compared to 2024 primarily due to a net charge related to the anticipated resolution of an outstanding tax matter that includes both income taxes and non-income taxes and the absence of a gain recognized in 2024 on the divestiture of the silicas products business. Refer to Note 18, “Other Charges/(Income), Net” in Item 8 of this Form 10-K for additional information.
Effective tax rate and earnings per diluted share, continuing operations
% Change
($ in millions, except percentages)
Income tax expense
Effective tax rate
Adjusted effective tax rate, continuing operations*
Earnings per diluted share, continuing operations
Adjusted earnings per diluted share, continuing operations*
*See the Regulation G reconciliations - results of operations
The effective tax rate on continuing operations for the year ended December 31, 2025 was 22.4%, a decrease of 3.2% compared to the prior year, primarily due to the absence of the 2024 impairment charge, which had no associated income tax benefit, and a reduction in the provision for uncertain tax positions. The adjusted effective tax rate was 23.5%, which was slightly higher than the prior year adjusted effective tax rate.
Earnings per diluted share from continuing operations for the year ended December 31, 2025 increased year over year primarily due to lower business restructuring and impairment and other related charges, higher selling prices, improved manufacturing productivity, restructuring savings and the lower effective tax rate, partially offset by the unfavorable impact of sales mix and overhead and other cost inflation.
Adjusted earnings per diluted share from continuing operations for the year ended December 31, 2025 decreased year over year due to the unfavorable impact of sales mix and overhead and other cost inflation, partially offset by higher selling prices, increased manufacturing productivity and restructuring savings.
Refer to the Regulation G Reconciliations - Results from Operations for additional information.
Review and Outlook
During 2025, PPG demonstrated resilience in a challenging macroeconomic environment by growing both selling prices and sales volumes and generating $1.9 billion in operating cash flow. Net sales were $15.9 billion, similar to the prior year. Results were supported by the breadth and diversity of the business portfolio, as the Company benefited from higher prices and sales volumes in several businesses and favorable foreign currency translation, which was offset by the impact of divestitures completed in 2024. Net sales, excluding the impact of currency, acquisitions and divestitures ("organic sales") increased 2% during the year with continued strong growth in our aerospace coatings business and share gains in both the packaging coatings business and the protective and marine business, which were partially offset by declines in the automotive refinish coatings, industrial coatings and architectural coatings EMEA businesses. Earnings per diluted
2025 PPG ANNUAL REPORT AND FORM 10-K 21
share from continuing operations was $6.92, compared to $5.72 in the prior year. Adjusted earnings per diluted share was $7.58, a decrease of 4% compared to $7.87 in 2024. Total segment income decreased by 3%. Aggregate segment margins were 60 basis points lower than the prior year, driven by a decline in industry project-related spending on architectural coatings in Mexico in the first half of 2025 and a decline in automotive refinish coatings sales volumes in the second half of the year.
Demand for PPG products was mixed by end-use market and geographic region during 2025. Demand for aerospace coatings and protective and marine coatings was strong with double-digit percentage organic sales growth year over year. Automotive refinish coatings demand was impacted by lower collision claims in the U.S. which drove volume declines in the second half of 2025. Global automotive OEM manufacturers’ production increased by about 4% versus 2024 with higher demand in the Asia-Pacific and Latin America regions more than offsetting lower demand in the United States and Europe. PPG outperformed the market in the third and fourth quarters of 2025 driven by share gains.
On a regional basis, sales volume increases in the United States and Canada, Asia-Pacific and Latin America regions were partially offset by decreases in Europe. In the U.S. and Canada, demand was strong for aerospace coatings, protective and marine coatings, packaging coatings and traffic solutions but declined for most other businesses. In Asia, demand was strong with sales volume growth in protective and marine coatings, automotive OEM coatings, and packaging coatings. In Latin America, demand was negatively impacted in the first half of the year as project-related spending was paused due to tariff uncertainties. However, demand for architectural retail sales was strong within the region, and the Company delivered growth in automotive OEM products and packaging coatings. Demand was soft in Europe with the largest impact on the automotive OEM coatings business and the architectural coatings business.
In 2026, we anticipate demand in Europe and in global industrial end-use markets to remain challenged. Despite the macroeconomic environment, we expect growth will be driven by aerospace coatings and architectural coatings in Mexico as well as share gains in our Industrial Coatings segment, resulting in organic sales growth in the range of flat to a positive low single-digit percentage. This reflects the strength of our focused organization and our sharpened portfolio of technology-advantaged products and services.
Significant other factors
During the year, PPG made significant progress to reduce costs and improve the profitability of the overall business portfolio through the global restructuring programs. In October 2024, the Company approved a comprehensive cost reduction program with anticipated annualized pre-tax savings of approximately $175 million once fully implemented. Total restructuring savings were approximately $75 million in 2025 and the Company expects approximately $50 million in incremental savings in 2026. The multi-year program is focused on reducing structural costs primarily in Europe and in certain other global businesses, along with other corporate costs following the divestitures of PPG’s silicas products business and the architectural coatings business in the U.S. and Canada. The Company will continue to monitor and manage its cost structure to ensure alignment with the overall demand environment.
Raw materials are the Company’s most significant input cost. PPG experiences fluctuating energy and raw material costs driven by various factors, including changes in supplier feedstock costs and inventories, global industry activity levels, foreign currency exchange rates, tariffs and global supply and demand factors.
In 2025, the Company incurred wage inflation, which adversely impacted operating costs compared to 2024. There was an ample supply of commodity-related raw materials in all regions, and raw material inflation had a negligible impact on our operating costs for 2025 versus 2024. PPG did not experience a significant decrease in customer demand, significant increase in raw material costs, or other significant adverse impacts related to tariffs during 2025. The Company continues to monitor overall economic demand and customer order patterns and is prepared to take actions intended to mitigate adverse impacts, as necessary, through supply chain contingency plans, pricing actions, and/or cost reduction actions. In 2026, we anticipate that raw material costs will remain relatively flat compared to 2025. Additionally, we expect manufacturing efficiencies to improve as the year progresses.
We achieved selling price improvement across several businesses in 2025 stemming from our technology-advantaged products and solutions, partially offset by lower selling prices in the Industrial Coatings segment from certain index-based customer contracts. The Company will carefully monitor all costs during 2026 and assess the need for additional selling price increases.
In 2025, the U.S. dollar strengthened against certain currencies in the countries where PPG operates during the first half of 2025, but weakened in the second half of the year, resulting in a net unfavorable impact to net income from continuing operations in the first half of the year partially offset by a net favorable impact in the second half of the year. Based on recent exchange rates, we expect that foreign currency exchange rates will have a slightly favorable impact on net income
2025 PPG ANNUAL REPORT AND FORM 10-K 22
from continuing operations in 2026; however, the Company generally purchases raw materials, incurs manufacturing costs and sells finished goods in the same currency, which reduces foreign currency transaction-related impacts to net income.
The 2026 effective tax rate from continuing operations is expected to be in the range of 24% to 25%, varying by quarter. This range is the Company’s best estimate and represents an increase compared to the 2025 adjusted effective tax rate driven by higher rates in certain countries, including the impact of global minimum tax standards, and the geographic mix of earnings.
Over the past three years, the Company used nearly $1.6 billion of cash to repurchase approximately 12 million shares of PPG stock, including using $790 million to repurchase shares of PPG stock during 2025. The Company ended the year with approximately $2.0 billion remaining under its current share repurchase authorization. During 2025, the Company deployed $778 million for capital expenditures and $628 million for dividends. In 2025, PPG marked the 54th annual per share dividend increase and the 126th successive year of annual dividend payments.
PPG ended 2025 with approximately $2.2 billion in cash and short-term investments. The Company expects strong cash generation in 2026.
Regulation G Reconciliations - Results from Operations
PPG believes investors’ understanding of the Company’s performance is enhanced by the disclosure of net income from continuing operations, earnings per diluted share from continuing operations, and PPG’s effective tax rate adjusted for certain items, and segment income before interest, taxes, depreciation and amortization. PPG’s management considers this information useful in providing insight into the Company’s ongoing performance because it excludes the impact of items that cannot reasonably be expected to recur on a quarterly basis or that are not attributable to our primary operations. Net income from continuing operations, earnings per diluted share from continuing operations, the effective tax rate and segment income adjusted for these items are not recognized financial measures determined in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and should not be considered a substitute for net income from continuing operations, earnings per diluted share from continuing operations, the effective tax rate, segment income or other financial measures as computed in accordance with U.S. GAAP. In addition, adjusted net income, adjusted earnings per diluted share and the adjusted effective tax rate may not be comparable to similarly titled measures as reported by other companies.
Income before income taxes from continuing operations is reconciled to adjusted income before income taxes from continuing operations, the effective tax rate from continuing operations is reconciled to the adjusted effective tax rate from continuing operations and net income from continuing operations (attributable to PPG) and earnings per share – assuming dilution (attributable to PPG) are reconciled to adjusted net income from continuing operations (attributable to PPG) and adjusted earnings per share – assuming dilution below.
($ in millions, except percentages and per share amounts)
Income Before Income Taxes
Income Tax Expense
Effective Tax Rate
Net Income
(attributable to PPG)
Earnings per Diluted Share (1)
Year-ended December 31, 2025
As reported, continuing operations
Includes:
Acquisition-related amortization expense
Business restructuring-related costs, net (2)
Portfolio optimization (3)
Income from legal settlement (4)
Resolution of tax matter (5)
Legacy environmental remediation charges (6)
Insurance recoveries (7)
Impairment and other related charges, net (8)
Adjusted, continuing operations, excluding certain items
2025 PPG ANNUAL REPORT AND FORM 10-K 23
($ in millions, except percentages and per share amounts)
Income Before Income Taxes
Income Tax Expense
Effective Tax Rate
Net Income
(attributable to PPG)
Earnings per Diluted Share (1)
Year-ended December 31, 2024
As reported, continuing operations
Includes:
Acquisition-related amortization expense
Business restructuring-related costs, net (2)
Portfolio optimization (3)
Legacy environmental remediation charges (6)
Insurance recoveries (7)
Adjusted, continuing operations, excluding certain items
(1) Earnings per diluted share is calculated based on unrounded numbers. Figures in the table may not recalculate due to rounding.
(2) Business restructuring-related costs, net include business restructuring charges, offset by releases related to previously approved programs, which are included in Business restructuring, net on the consolidated statement of income, accelerated depreciation of certain assets, which is included in Depreciation on the consolidated statement of income, and other restructuring-related costs, which are included in Cost of sales, exclusive of depreciation and amortization, Selling, general and administrative and Other charges/(income), net on the consolidated statement of income. Business restructuring-related costs, net also includes the fourth quarter 2024 recognition of accumulated foreign currency translation losses of $110 million related to the company's exit of its Argentina operations in connection with a restructuring program, which are included in Other (income)/charges, net on the consolidated statement of income. No tax benefit was recorded on the fourth quarter 2024 recognition of the accumulated foreign currency translation losses.
(3) Portfolio optimization includes gains and losses related to the sale of certain assets, which are included in Other charges/(income), net on the consolidated statement of income, including the gain of $129 million on the sale of the company's silicas products business in the fourth quarter 2024, and the loss on the sale of the company's traffic solutions business in Argentina in the second quarter 2024. Portfolio optimization includes advisory, legal, accounting, valuation, other professional or consulting fees and certain internal costs directly incurred to effect acquisitions, as well as similar fees and other costs to effect divestitures and other portfolio optimization exit actions. These costs are included in Selling, general and administrative expense on the consolidated statement of income. Portfolio optimization also includes an impairment charge of $146 million recognized during the fourth quarter 2024 when the company's remaining operations in Russia were classified as held for sale, which is included in Impairment and other related charges, net on the consolidated statement of income. No tax benefit was recorded on the fourth quarter 2024 charge.
(4) In the fourth quarter 2025, the Company settled a legal matter related to a legacy business that it no longer operates. The related gain is included in Other charges/(income), net on the consolidated statement of income.
(5) In the fourth quarter 2025, the Company recorded a net charge related to the anticipated resolution of an outstanding tax matter. The Company expects to pay incremental income taxes and non-income taxes in the impacted taxing jurisdiction related to the matter. The portion of the charge related to non-income taxes is included in Other charges/(income), net on the consolidated statement of income. In connection with this matter, the Company reduced its provision for uncertain tax positions, the impact of which is included in income tax expense on the consolidated statement of income.
(6) Legacy environmental remediation charges represent environmental remediation costs at certain non-operating PPG manufacturing sites. These charges are included in Other charges/(income), net on the consolidated statement of income.
(7) In the first quarter 2025, the Company received reimbursement under its insurance policies for damages incurred at a southern U.S. factory from a winter storm in 2021. In the fourth quarter 2024, the company received reimbursement for previously approved insurance claims under policies covering legacy asbestos-related matters. These insurance recoveries are included in Other charges/(income), net on the consolidated statement of income.
(8) In the third quarter 2025, the Company recorded net impairment and other related charges related to a consolidated joint venture in the Performance Coatings segment, which are included in Impairment and other related charges, net on the consolidated statement of income.
Performance of Reportable Business Segments
Global Architectural Coatings
$ Change
% Change
($ in millions, except percentages)
Net sales
Segment income
Depreciation and amortization expense
Segment income before interest, taxes, depreciation and amortization (EBITDA)
Global Architectural Coatings net sales decreased due to the following:
● Divestitures (-3%)
● Lower sales volumes (-2%)
Partially offset by:
● Higher selling prices (+2%)
● Favorable foreign currency translation (+1%)
2025 PPG ANNUAL REPORT AND FORM 10-K 24
Architectural coatings EMEA organic sales decreased by a low single-digit percentage year over year due to lower sales volumes partially offset by higher selling prices. Overall demand for architectural coatings in Europe was lower and mixed by country.
Architectural coatings Latin America and Asia Pacific organic sales increased by a low single-digit percentage during the year primarily due to higher selling prices partially offset by lower sales volumes. In Mexico, retail demand for architectural coatings was solid and project-related spending continued to improve throughout the year.
Segment income decreased $79 million year over year primarily due to wage and other cost inflation and lower sales volumes, partially offset by higher selling prices and cost reductions, including restructuring savings.
Looking Ahead
In the first quarter 2026, demand in Mexico is expected to be strong and consumer sentiment in Europe is expected to be tepid. First quarter 2026 organic sales for the Global Architectural Coatings segment are anticipated to increase in the range of by a low single-digit percentage to a mid-single-digit percentage compared to the first quarter 2025.
Performance Coatings
$ Change
% Change
($ in millions, except percentages)
Net sales
Segment income
Depreciation and amortization expense
Segment EBITDA
Performance Coatings net sales increased due to the following:
● Higher selling prices (+3%)
● Higher sales volumes (+2%)
Automotive refinish coatings organic sales decreased by a mid-single-digit percentage with lower sales volumes partially offset by higher selling prices. Organic sales in the United States were lower as demand was suppressed by lower collision claims and as distributors managed their order patterns for PPG products toward the first half of 2025. The Company continues to grow the number of PPG LINQ™ subscriptions and PPG Moonwalk™ installations, further supporting customer productivity and related share gains.
Aerospace coatings organic sales increased by a double-digit percentage driven by increases in both price and sales volume in all regions. Demand remained strong, and customer order backlogs increased to approximately $315 million, even with improved production and other productivity gains. Global international and domestic air travel improved year over year, and passenger air traffic is forecasted to grow 5% in 2026. As demand for PPG’s technology-advantaged products grows, the Company remains focused on debottlenecking and further expanding manufacturing capabilities to drive additional sales volume and earnings growth.
Protective and marine coatings organic sales increased by a double-digit percentage compared to the prior year driven by higher sales volumes. Increased sales volumes were driven by share gains in both protective and marine, reflecting demand for PPG's sustainably-advantaged products.
Traffic solutions organic sales increased by a mid single-digit percentage year over year due to higher sales volumes, which benefited from market share gains across North America, partially offset by lower selling prices.
Segment income increased $6 million year over year with higher selling prices and manufacturing efficiencies, offset by the impact of unfavorable sales mix and raw material, wage and other cost inflation.
Looking Ahead
In the first quarter 2026, continued strength in aerospace coatings is anticipated. Protective and marine coatings will begin to lap prior year share gains resulting in growth similar to the industry. In automotive refinish coatings, we anticipate lower organic sales due to customer order patterns and low industry demand. Traffic solutions is expected to follow typical seasonal trends. First quarter 2026 organic sales for the segment are anticipated to be within the range of down by a low single-digit percentage to flat compared to the first quarter 2025.
2025 PPG ANNUAL REPORT AND FORM 10-K 25
Industrial Coatings
$ Change
% Change
($ in millions, except percentages)
Net sales
Segment income
Depreciation and amortization expense
Segment EBITDA
Industrial Coatings segment net sales decreased due to the following:
● Divestitures (-4%)
● Lower selling prices (-1%)
Partially offset by:
● Higher sales volumes (+2%)
● Favorable foreign currency translation (+1%)
Automotive OEM coatings organic sales were flat year over year with higher sales volumes offset by lower index-based selling prices for certain customer contracts. Sales volume increases in the Latin America and Asia-Pacific regions were partially offset by declines in the United States and Europe, which decreased primarily due to lower new vehicle production.
For the industrial coatings business, organic sales decreased by a low single-digit percentage due to lower selling prices, including the impact of lower index-based prices under certain customer contracts. Sales volume increases in Europe and the Asia-Pacific region were offset by decreases in the United States.
Packaging coatings organic sales increased by a high single-digit percentage year over year due to higher sales volumes in all regions, including share gains in Europe aided by expanding regional regulations. Sales volume increases were partially offset by lower index-based selling prices in all regions.
Specialty products organic sales increased by a mid-single-digit percentage due to higher sales volumes and higher selling prices.
Segment income decreased $18 million year over year primarily due lower index-based selling prices and wage and other cost inflation, partially offset by increased manufacturing productivity, higher sales volumes, and restructuring and other cost savings.
Looking Ahead
In the first quarter 2026, global industrial production is expected to remain at a relatively low level with the potential for slight improvement in the United States, Europe and the Asia-Pacific region and lower demand in Latin America. First quarter 2026 organic sales for the segment are anticipated to be within the range of down by a low single-digit percentage to flat compared to the first quarter 2025.
Commitments and Contingent Liabilities, including Environmental Matters
PPG is involved in a number of lawsuits and claims, both actual and potential, including some that it has asserted against others, in which substantial monetary damages are sought. Refer to Item 3. “Legal Proceedings” and Note 15, “Commitments and Contingent Liabilities” in Item 8 of this Form 10-K for a description of certain of these lawsuits.
As discussed in Item 3 and Note 15, although the result of any future litigation of such lawsuits and claims is inherently unpredictable, management believes that, in the aggregate, the outcome of all lawsuits and claims involving PPG, including asbestos-related claims, will not have a material effect on PPG’s consolidated financial position or liquidity; however, any such outcome may be material to the results of operations of any particular period in which costs, if any, are recognized.
As also discussed in Note 15, PPG has significant reserves for environmental contingencies. Refer to the Environmental Matters section of Note 15 for details of these reserves. It is PPG’s policy to accrue expenses for contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Reserves for environmental contingencies are exclusive of claims against third parties and are generally not discounted. 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; however, any such outcome may be material to the results of operations of any particular period in which costs, if any, are recognized. Management anticipates that the resolution of the Company’s environmental contingencies will occur over an extended period of time.
2025 PPG ANNUAL REPORT AND FORM 10-K 26
Accounting Standards Adopted in 2025
Note 1, “Summary of Significant Accounting Policies” in Item 8 of this Form 10-K describes the Company’s recently adopted accounting pronouncements.
Accounting Standards to be Adopted in Future Years
Note 1, “Summary of Significant Accounting Policies” in Item 8 of this Form 10-K describes accounting pronouncements that have been promulgated prior to December 31, 2025 but are not effective until a future date.
Liquidity and Capital Resources
During the past two years, PPG had sufficient financial resources to meet its operating requirements, to fund capital spending, including acquisitions, share repurchases and pension plans, and to pay increasing dividends to shareholders.
Cash and cash equivalents and short-term investments
($ in millions)
Cash and cash equivalents
Short-term investments
Total
Cash from operating activities - continuing operations
($ in millions, except percentages)
% Change
Cash from operating activities - continuing operations
The $545 million increase in Cash from operating activities - continuing operations was primarily due to higher net income and higher accounts payable and accrued liabilities, including the impact of lower incentive-based compensation payouts in 2025 versus 2024.
Operating working capital
Operating working capital is a subset of total working capital and represents (1) receivables from customers, net of allowance for doubtful accounts, (2) inventories, and (3) trade liabilities. Refer to Note 3, “Working Capital Detail” in Item 8 of this Form 10-K for further information related to the components of the Company’s operating working capital. We believe operating working capital represents the key components of working capital under the operating control of our businesses.
A key metric we use to measure our working capital management is operating working capital as a percentage of sales (fourth quarter sales annualized).
($ in millions, except percentages)
Trade receivables, net
Inventories, FIFO
Less: trade creditors’ liabilities
Operating working capital
Operating working capital as a % of fourth quarter sales, annualized
Trade receivables, net as a % of fourth quarter sales, annualized
Days sales outstanding
Inventories, FIFO as a % of fourth quarter sales, annualized
Inventory turnover
Environmental expenditures
($ in millions)
Cash outlays related to environmental remediation activities
We expect cash outlays for environmental remediation activities to be between $20 million and $60 million annually from 2026 through 2030.
2025 PPG ANNUAL REPORT AND FORM 10-K 27
Cash used for investing activities - continuing operations
% Change
($ in millions, except percentages)
Cash used for investing activities - continuing operations
The $301 million increase in cash used for investing activities - continuing operations was primarily due to higher capital expenditures and the absence of proceeds from the divestiture of our silicas products business that occurred in 2024.
Capital expenditures, including business acquisitions
% Change
($ in millions, except percentages)
Capital expenditures (1)
Business acquisitions, net of cash balances acquired
Total capital expenditures, including acquisitions
Capital expenditures, excluding acquisitions, as a % of sales
(1) Includes modernization and productivity improvements, expansion of existing businesses and environmental control projects.
During 2026, capital expenditures, which are expected to be approximately $650 million to $700 million, will support future organic growth opportunities. The Company will continue to deploy cash focused on shareholder value creation.
Cash used for financing activities
% Change
($ in millions, except percentages)
Cash used for financing activities
The $880 million decrease in cash used for financing activities was primarily due to increased proceeds from long-term debt, partially offset by higher repayments of long-term debt.
Share repurchase activity
($ in millions, except number of shares)
Number of shares repurchased (millions)
Cash paid for shares repurchased
The Board of Directors authorized a $2.5 billion share repurchase plan in April 2024. The Company has approximately $2.0 billion remaining under the current authorization. The repurchase program does not have an expiration date.
Dividends paid to shareholders
($ in millions)
Dividends paid to shareholders
PPG has paid uninterrupted annual dividends since 1899, and 2025 marked the 54th successive year of increased annual per-share dividend payments to shareholders. The Company raised its per-share quarterly dividend by approximately 5% to $0.71 per share in July 2025.
2025 PPG ANNUAL REPORT AND FORM 10-K 28
Debt issued and repaid
Debt Issued (net of premium/discount and issuance costs)
Year
$ in millions
4.375% notes ($700), due 2031
3.250% notes (€900), due 2032
Term Loan, due 2028 (1)
Term Loan, due 2028 (1)
Term Loan, due 2028 (1)
Debt Repaid
Year
$ in millions
0.875% notes (€600)
1.875% notes (€300)
2.4% notes ($300)
3.2% notes ($300)
Term Loan Credit Agreement, due 2024
(1) As of December 31, 2025, the Term Loan was due in 2028. In January 2026, the Term Loan was amended to extend its maturity to January 2029.
The Company’s commercial paper borrowings are classified as long-term debt based on PPG’s intent and ability to refinance these borrowings on a long-term basis. Net payments on commercial paper were zero for both the years ended December 31, 2025 and December 31, 2024.
Credit agreements and lines of credit
In April 2023, PPG entered into a €500 million term loan credit agreement (the "Term Loan"). The Term Loan contains covenants that are consistent with those in the Credit Agreement discussed below and that are usual and customary restrictive covenants for facilities of its type, which include, with specified exceptions, limitations on the Company’s ability to create liens or other encumbrances, to enter into sale and leaseback transactions and to enter into consolidations, mergers or transfers of all or substantially all of its assets. In April 2023, PPG borrowed €500 million under the Term Loan. In December 2023, PPG obtained lender commitments sufficient to increase the size of the Term Loan by €250 million. In January 2024, PPG borrowed the additional €250 million. In December 2024, PPG obtained lender commitments sufficient to increase the size of the Term Loan by €300 million. In January 2025, PPG borrowed the additional €300 million. In January 2026, the Term Loan was amended to extend its maturity. Based on this amendment, the Term Loan terminates and all amounts outstanding are payable in January 2029.
In July 2023, PPG amended and restated its P5Y -year credit agreement (the "Credit Agreement") dated as of August 30, 2019, extending the term through July 27, 2028. In October 2025, PPG amended the Credit Agreement to extend its maturity as to certain commitments. The amended Credit Agreement provides for a $2.3 billion unsecured revolving credit facility, of which $2,148 million of the total commitment has a term through July 2029 and $152 million of the total commitment has a term through July 2028. The Company has the ability to increase the size of the Credit Agreement by up to an additional $750 million, subject to the receipt of lender commitments and other conditions precedent. The Company has the right, subject to certain conditions set forth in the Credit Agreement, to designate certain subsidiaries of the Company as borrowers under the Credit Agreement. In connection with any such designation, the Company is required to guarantee the obligations of any such subsidiaries under the Credit Agreement. There were no amounts outstanding under the Credit Agreement as of December 31, 2025 and December 31, 2024.
The Term Loan and the Credit Agreement require the Company to maintain a ratio of Total Indebtedness to Total Capitalization, as defined in the Credit Agreement, of 60% or less; provided, that for any fiscal quarter in which the Company has made an acquisition for consideration in excess of $1 billion and for the next five fiscal quarters thereafter, the ratio of Total Indebtedness to Total Capitalization may not exceed 65% at any time. As of December 31, 2025, Total Indebtedness to Total Capitalization as defined under the Credit Agreement was 47%.
In addition to the amounts available under lines of credit, the Company maintains access to the capital markets and may issue debt or equity securities from time to time, which may provide an additional source of liquidity.
Refer to Note 10, “Borrowings and Lines of Credit” in Item 8 of this Form 10-K for information regarding notes entered into and repaid as well as details regarding the use and availability of committed and uncommitted lines of credit, letters of credit and debt covenants.
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Cash requirements
We continue to believe that our cash on hand and short-term investments, cash from operations and the Company’s access to capital markets will continue to be sufficient to fund our operating activities, capital spending, acquisitions, dividend payments, debt service, share repurchases, contributions to pension plans, and PPG’s significant cash requirements. The Company’s significant cash requirements include the following contractual obligations and commitments.
Obligations Due In:
($ in millions)
Total
Thereafter
Long-term debt (1)
Interest payments (2)
Operating leases (3)
Unconditional purchase commitments (4)
(1) As of December 31, 2025, the Term Loan with an outstanding balance of $1,233 million was due in 2028. The Term Loan is shown as due in 2028 within this table. In January 2026, the Term Loan was amended to extend its maturity to January 2029.
(2) Interest on all outstanding debt.
(3) Includes interest payments.
(3) The unconditional purchase commitments are principally take-or-pay obligations related to the purchase of certain materials, utilities and services consistent with customary industry practice.
The Company’s off-balance sheet arrangements include unconditional purchase commitments disclosed in the “Liquidity and Capital Resources” section in the cash requirements table as well as letters of credit as discussed in Note 10, “Borrowings and Lines of Credit” in Item 8 of this Form 10-K.
Other liquidity matters
At December 31, 2025, the total amount of unrecognized tax benefits for uncertain tax positions, including an accrual of related interest and penalties along with positions only impacting the timing of ta x benefits, was $122 million. The timing of payments will depend on the progress of examinations by tax authorities. PPG does not expect a significant tax p ayment related to these obligations within the next year. The Company is unable to make a reasonably reliable estimate as to if, or when, any significant cash settlements with tax authorities may occur.
Critical Accounting Estimates
Management has evaluated the accounting policies used in the preparation of the financial statements and related notes presented in Item 8 of this Form 10-K and believes those policies to be reasonable and appropriate. We believe that the most critical accounting estimates made in the preparation of our financial statements are those related to accounting for contingencies, under which we accrue a loss when it is probable that a liability has been incurred and the amount can be reasonably estimated, and to accounting for pensions, other postretirement benefits, business combinations, goodwill and other identifiable intangible assets with indefinite lives because of the importance of management judgment in making the estimates necessary to apply these policies.
Contingencies
Contingencies, by their nature, relate to uncertainties that require management to exercise judgment both in assessing the likelihood that a liability has been incurred as well as in estimating the amount of potential loss. The most important contingencies impacting our financial statements are those related to environmental remediation, to pending, impending or overtly threatened litigation against the Company and to the resolution of matters related to open tax years. For more information on these matters, see Note 15, “Commitments and Contingent Liabilities” and Note 13, “Income Taxes” in Item 8 of this Form 10-K.
Defined Benefit Pension and Other Postretirement Benefit Plans
Accounting for pensions and other postretirement benefits involves estimating the cost of benefits to be provided well into the future and attributing that cost over the time period each employee works. To accomplish this, we make extensive use of assumptions about inflation, investment returns, mortality, turnover, medical costs and discount rates. The Company has established a process by which management reviews and selects these assumptions annually. Refer to Note 14, “Employee Benefit Plans” in Item 8 of this Form 10-K for information on these plans and the assumptions used.
Business Combinations
The Company uses the acquisition method of accounting to allocate costs of acquired businesses to the assets acquired and liabilities assumed based on their estimated fair values at the dates of acquisition. The excess costs of acquired businesses over the fair values of the assets acquired and liabilities assumed is recognized as goodwill. The valuations of the acquired assets and liabilities impacts the determination of future operating results. In addition to using management
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estimates and negotiated amounts, the Company uses a variety of information sources to determine the estimated fair values of acquired assets and liabilities including: third-party appraisals for the estimated value and lives of identifiable intangible assets and property, plant and equipment; third-party actuaries for the estimated obligations of defined benefit pension plans and similar benefit obligations; and legal counsel or other experts to assess the obligations associated with legal, environmental and other contingent liabilities.
The business and technical judgment of management is used in determining wh ich acquired intangible assets have indefinite lives and in determining the useful lives of acquired finite-lived intangible assets in accordance with the accounting guidance for goodwill and other intangible assets.
Goodwill and Intangible Assets
The Company tests indefinite-lived intangible assets and goodwill for impairment by either performing a qualitative evaluation or a quantitative test at least annually, or more frequently if an indication of impairment arises. The qualitative evaluation is an assessment of factors to determine whether it is more likely than not that the fair value of a reporting unit or asset is less than its carrying amount. In the quantitative test, fair values are estimated using a discounted cash flow model. Key assumptions and estimates used in the discounted cash flow model include projected future revenues, discount rates, operating cash flows, capital expenditures and tax rates. For more information on these matters, see Note 1, “Summary of Significant Accounting Policies” in Item 8 of this Form 10-K.
We believe that the amounts recorded in the financial statements in Item 8 of this Form 10-K related to these contingencies, pensions, other postretirement benefits, business combinations, goodwill and other identifiable intangible assets with indefinite lives are based on the best estimates and judgments of the appropriate members of PPG’s management, although actual outcomes could differ from our estimates.
Currency
Comparing spot exchange rates at December 31, 2025 and at December 31, 2024, the U.S. dollar weakened against the currencies of many countries within the regions PPG operates, most notably the Mexican peso and the euro. As a result, consolidated net assets at December 31, 2025 increased by $949 million from December 31, 2024.
Comparing average exchange rates during 2025 to those of 2024, the U.S. dollar strengthened against the currencies of certain countries where PPG operates, including the Mexican peso and the euro, during the first half of 2025, but the U.S. dollar weakened in the second half of the year, resulting in a net unfavorable impact to Income before taxes in the first half of the year partially offset by a net favorable impact in the second half of 2025. This resulted in an unfavorable impact of $8 million on full year 2025 Income before income taxes from the translation of foreign income into U.S. dollars.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of the Company. Management’s Discussion and Analysis and other sections of this Annual Report contain forward-looking statements that reflect the Company’s current views with respect to future events and financial performance. You can identify forward-looking statements by the fact that they do not relate strictly to current or historic facts. Forward-looking statements are identified by the use of the words “aim,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “outlook,” “forecast” and other expressions that indicate future events and trends. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our reports to the SEC. Also, note the following cautionary statements.
Many factors could cause actual results to differ materially from the Company’s forward-looking statements. Such factors include statements related to global economic conditions, geopolitical issues, increasing price and product competition by our competitors, fluctuations in cost and availability of raw materials, energy, labor and logistics, the ability to achieve selling price increases, the ability to recover margins, customer inventory levels, PPG inventory levels, our ability to maintain favorable supplier relationships and arrangements, the timing of and the realization of anticipated cost savings from restructuring initiatives, the ability to identify additional cost savings opportunities, the timing and expected benefits of our acquisitions, difficulties in integrating acquired businesses and achieving expected synergies therefrom, the amount of future share repurchases, economic and political conditions in the markets we serve, the imposition of tariffs, the ability to penetrate existing, developing and emerging foreign and domestic markets, foreign exchange rates and fluctuations in such rates, fluctuations in tax rates, the impact of future legislation, the impact of environmental regulations, unexpected business disruptions, cybersecurity events, global human health issues, the of existing and possible future , including asbestos , and government . However, it is not possible to predict or identify all such factors.
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Consequently, while the list of factors presented here and in Item 1A is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements.
Consequences of material differences in the results compared with those anticipated in the forward-looking statements could include, among other things, lower sales or income, business disruption, operational problems, financial loss, legal liability to third parties, other factors set forth in Item 1A of this Form 10-K and similar risks, any of which could have a material adverse effect on the Company’s consolidated financial condition, results of operations or liquidity. PPG undertakes no obligation to update any forward-looking statement, except as otherwise required by applicable law.
