2007 2008 2009

Sales 12,220 15,849 12,239

Cost of sales 7,828 10,155 7,539
Gross profit 4,392 5,694 4,700
Selling general adminstrative (SGA) 2,310 3,432 2,936
Research & development (RD) 348 451 388
Depreciation and amortization (D&A) 403 563 480
Adjustment for operating leases (OLs) 31 40 43
Adjustment for retirement-related liabilities (RRLs) 122 114 179
EBIT 1,484 1,402 1,118
Taxes on EBIT 451 455 364
Change in deferred taxes -21 -134 28
NOPLAT 1,012 813 782
Depreciation and amortization 403 563 480
Stock-based compensation expense 46 33 34
Gross cash flow from operations 1,461 1,409 1,296
Investment in operating working capital (OWC) 1269 268 -348
Capital expenditures 616 648 310
Free cash flow before investment in GW -424 493 1,334
Investment in goodwill 170 1,134 143
Free cash flow -594 -641 1,191

Line items expressed as % of sales or EBIT:

Cost of sales/sales 0.64059 0.64073 0.61598

Gross profit/sales 0.35941 0.35927 0.38402
SGA/sales 0.18903 0.21654 0.23989
RD/sales 0.028 0.028 0.032
D&A/sales 0.03298 0.03552 0.03922
Adjustment for OLs/sales 0.00254 0.00252 0.00351
Adjustment for RRLs/sales 0.00998 0.00719 0.01463
EBIT/sales 0.12144 0.08846 0.09135
Taxes on EBIT/EBIT 0.30391 0.32454 0.32558
Stock-based compensation expense/sales 0.00376 0.00208 0.00278
Investment in operating working capital/sales 0.10385 0.01691 -0.0284
Capital expenditures/sales 0.05041 0.04089 0.02533
Historical Data

2010 2011 2012 2013 2014 2015 2016

13,423 13,153 12,686 14,265 15,360 15,330 15,091

8,214 7,865 7,599 8,314 8,791 8,591 8270
5,209 5,288 5,087 5,951 6,569 6,739 6,821
2,979 3,122 2,987 3,486 3,758 3,679
394 428 430 463 492 486
470 425 399 452 476 495
36 28 21 23 25 24
90 79 63 56 56 51
1,492 1,420 1,355 1,629 1,924 2,154
532 364 296 394 437 551
134 118 -119 202 452 -2
1,094 1,174 940 1,437 1,939 1,601
470 425 399 452 476 495
52 34 71 81 73 56
1,616 1,633 1,410 1,970 2,488 2,152
-678 106 -6 -154 -68 -116
278 326 330 494 587 476
2,016 1,201 1,086 1,630 1,969 1,792
-65 -59 101 247 793 -132
2,081 1,260 985 1,383 1,176 1,924

0.61193 0.598 0.599007 0.58283 0.5723 0.5604

0.38807 0.402 0.400993 0.41717 0.4277 0.4396
0.22193 0.2374 0.235456 0.24437 0.2447 0.24
0.029 0.033 0.034 0.032 0.032 0.032
0.03501 0.0323 0.031452 0.03169 0.031 0.0323
0.00268 0.0021 0.001655 0.00161 0.0016 0.0016
0.0067 0.006 0.004966 0.00393 0.0036 0.0033
0.11115 0.108 0.106811 0.1142 0.1253 0.1405
0.35657 0.2563 0.21845 0.24187 0.2271 0.2558
0.00387 0.0026 0.005597 0.00568 0.0048 0.0037
-0.0505 0.0081 -0.00047 -0.0108 -0.004 -0.008
0.02071 0.0248 0.026013 0.03463 0.0382 0.0311
 Forecast Period

2017 2018 2019 2020 2021

Sales 15082 15483 16101 16642 17749

Cost of sales 8295 8578 8775 9037 9087
Gross profit 6787 6905 7326 7605 8662
SGA 3695 3793 3945 4077 4349
RD 483 495 515 533 568
D&A 476 476 476 476 476
Adj. for Ols 30 31 32 33 35
Adj. for RRLs 60 62 64 67 71
EBIT 2,224 2,234 2,487 2,619 3,376
Taxes on EBIT 556 558 622 655 844
Change in deferred taxes 41 41 41 41 41
NOPLAT 1,709 1,717 1,906 2,006 2,573
D&A 476 476 476 476 476
Stock-based compensation expen 75 77 81 83 89
Gross cash flow from operations 2,260 2,270 2,463 2,565 3,138
Investment in OWC 151 155 161 166 177
Capital expenditures 458 458 458 458 458
Free cash flow 1,652 1,657 1,844 1,941 2,502

Assumptions for DCF valuation

Sales growth rate 0.026622 0.0399147 0.0336004 0.0665184

Cost of sales/sales 0.55 0.554 0.545 0.543 0.512
Gross profit/sales 0.45 0.446 0.455 0.457 0.488
SGA/sales 0.245 0.245 0.245 0.245 0.245
RD/sales 0.032 0.032 0.032 0.032 0.032
D&A/sales
OL Adj./sales 0.002 0.002 0.002 0.002 0.002
RRL Adj./sales 0.004 0.004 0.004 0.004 0.004

Taxes on EBIT 0.25 0.25 0.25 0.25 0.25

Stock-based compensation/sales 0.005 0.005 0.005 0.005 0.005
Inv. In OWC/sales 0.01 0.01 0.01 0.01 0.01
Capital expenditures to sales

DCF valuation

WACC 0.072 0.072 0.072 0.072 0.072

(1+WACC)t 1.072 1.149184 1.2319252 1.3206239 1.4157088
Discount factor 0.9328358 0.8701827 0.8117376 0.7572179 0.70636

PV(FCF) 1540.7499 1442.0047 1496.7085 1469.5698 1767.5279

Sum of PV(FCF) 7716.5608
Terminal value (TV) 48271.593
PV(TV) 34097.121
V(Operations) 41813.681
NOA 1595
PPG enterprise value 43408.681
PPG Debt 8130
V(PPG equity) 35278.681
Non controlling interest 90
ESOs 168
RSUs 130
V(PPG common stock) 34890.681
No. shares outstanding 263.99524
Estimated stock price 132.16405

"Correcting" for terminal value

TV = NOPLAT/WACC 35865.038
PV Stock-based comp, 2021 1740.7673
New TV 37605.805
PV(New TV) 26563.235
New enterprise value 35874.796

PV(Old TV) - PV(New TV) 7533.8854

No. shares outstanding 263.9952
Effect on stock price 28.537964
New stock price 103.62609
 Terminal

2022 2017

18104 Sales 15082

9269 Cost of sales 8295
8835 Gross profit 6787
4435 SGA 3695
579 RD 483
486 D&A 476
36 Adj. for Ols 30
72 Adj. for RRLs 60
3,443 EBIT 2,224
861 Taxes on EBIT 556
0 Change in deferred taxes 41
2,582 NOPLAT 1,709
486 D&A 476
91 Stock-based compensation expense 75
3,158 Gross cash flow from operations 2,260
181 Investment in OWC 151
467 Capital expenditures 458
2,510 Free cash flow 1,652

Assumptions for DCF valuation

0.02 Sales growth rate

0.512 Cost of sales/sales 0.55
0.488 Gross profit/sales 0.45
0.245 SGA/sales 0.245
0.032 RD/sales 0.032
D&A/sales
0.002 OL Adj./sales 0.002
0 0.004 RRL Adj./sales 0.004

0.25 Taxes on EBIT 0.25

0.005 Stock-based compensation/sales 0.005
0 0.01 Inv. In OWC/sales 0.01
Capital expenditures to sales

DCF valuation

WACC 0.082
(1+WACC)t 1.082
Discount factor 0.9242144

PV(FCF) 1526.5101
Sum of PV(FCF) 7333.65
Terminal value (TV) 38307.479
PV(TV) 25831.36
V(Operations) 33165.01
NOA 1595
PPG enterprise value 34760.01
PPG Debt 8130
V(PPG equity) 26630.01
Non controlling interest 90
ESOs 168
RSUs 130
V(PPG common stock) 26242.01
No. shares outstanding 263.99524
Estimated stock price 99.403344

"Correcting" for terminal value

TV = NOPLAT/WACC 29791.986
PV Stock-based comp, 2021 1390.9533
New TV 31182.939
PV(New TV) 21027.166
New enterprise value 29955.816

PV(Old TV) - PV(New TV) 4804.1942

No. shares outstanding 263.9952
Effect on stock price 18.198036
New stock price 81.205308
 Forecast Period Terminal

2018 2019 2020 2021 2022

15332 15791 16164 17077 17248

8494 8606 8777 8743 8831
6838 7185 7387 8334 8417
3756 3869 3960 4184 4226
491 505 517 546 552
476 476 476 476 486
31 32 32 34 34
61 63 65 68 69
2,207 2,430 2,530 3,230 3,257
552 607 633 807 814
41 41 41 41 0
1,697 1,864 1,939 2,464 2,443
476 476 476 476 486
77 79 81 85 86
2,249 2,418 2,496 3,025 3,015
153 158 162 171 172
458 458 458 458 467
1,638 1,803 1,876 2,396 2,375

0.016622 0.0299147 0.0236004 0.0565184 0.02

0.554 0.545 0.543 0.512 0 0.512
0.446 0.455 0.457 0.488 0.488
0.245 0.245 0.245 0.245 0.245
0.032 0.032 0.032 0.032 0.032

0.002 0.002 0.002 0.002 0.002

0.004 0.004 0.004 0.004 0.004

0.25 0.25 0.25 0.25 0.25

0.005 0.005 0.005 0.005 0.005
0.01 0.01 0.01 0.01 0.01

0.082 0.082 0.082 0.082

 1.170724 1.2667234 1.3705947 1.4829834
0.8541723 0.7894383 0.7296103 0.6743164

1399.2097 1423.0275 1369.0354 1615.8674

Investment in OWC
2006 2007 2008 2009 2010 2011 2012
Current assets
Operating cash 110 122 158 122 134 131.5 126.9
Accounts receivables 2,168 2,522 2,804 2,628 2,778 2,830 2,813
Inventories 1,390 1,532 1,702 1,548 1,573 1,607 1,687
Operating current assets 3,668 4,176 4,664 4,298 4,485 4,569 4,627

Trade creditors 1,943 1,182 1,402 1,384 1,626 1,612 1,620

Accrued payroll 405 414 459
Customer rebates 218 201 212
Operating current liabilities 1,943 1,182 1,402 1,384 2,249 2,227 2,291

Operating working capital 1,725 2,994 3,262 2,914 2,236 2,342 2,336

Investment in OWC 1,269 268 -348 -678 106 -6

2013 2014 2015

143 153.6 153.3

2,736 2,815 2,788
1,824 1,825 1,705
4,703 4,794 4,646

1,790 1,919 1,940

506 497 474
225 264 234
2,521 2,680 2,648

2,182 2,114 1,998

-154 -68 -116

 2015 2016 2017 2018 2019 2020 2021 2022
Operating lease expense 266 177 146 120 86 60 55 45
1.02495 1.051 1.077 1.104 1.131 1.1594 1.188 1.218
0.9756573 0.952 0.929 0.906 0.884 0.8625 0.842 0.821
259.52485 168 136 108.7 76.03 51.753 46.29 36.95
Total 959.57967
Implicit interest 23.941513

PPG cost of debt beg 2015 0.0256

PPG cost of debt end 2015 0.0243
Average cost of debt 2015 0.02495

PPG cost of debt beg 2015 Weight

Amt Market times
Bond Price Out Value WeightYield Yield

3.875s15 101.80 300 305.4 0.078 0.90 0.0699

1.9s16 100.88 250 252.2 0.064 1.13 0.0725
7.375s16 109.18 146 159 0.041 1.33 0.0539
6.875s17 112.86 74 83.52 0.021 2.35 0.0499
6.65s18 115.18 700 806 0.205 1.92 0.3939
2.3s19 100.02 300 300 0.076 2.30 0.1756
7.4s19 121.11 199 241 0.061 2.64 0.1619
3.6s20 104.08 500 520.4 0.132 2.85 0.3774
9s21 132.91 150 199 0.051 3.30 0.1674
2.7s22 97.78 400 391 0.10 3.02 0.3006
7.7s38 150.60 250 376.5 0.10 4.26 0.4081
5.5s40 117.95 250 295 0.075 4.34 0.3256

Total 3930 Sum 2.5568

 2023 2024 2025 2026
35 25 20 18
1.248 1.279 1.311 1.344
0.801 0.782 0.763 0.744
28 19.54 15.25 13.39
Retirement related liabilities
2007 2008 2009 2010 2011 2012

Accrued pensions 396 1250 944 819 968 1057

Other postretirement benefits 997 1072 1010 1151 1307 1287
Short-term post retirement 90 102 103 109 108 103
Total 1483 2424 2057 2079 2383 2447
Avg. 1953.5 3,314 2068 2231 2415
Cost of debt beg year 0.0552 0.055 0.0613 0.0464 0.041 0.0296
Avg. cost of debt 0.0551 0.05815 0.0539 0.0436 0.035 0.0263
Implicit interest 113.596 178.46 90.165 78.53 63.394
 2013 2014 2015 2016

728 995 712

1007 1132 1021
93 94 130
1828 2221 1863
2137.5 2024.5 2042
0.0229 0.02969 0.0256 0.0243
0.02629 0.02764 0.02495
56.2002 55.9622 50.9479
 2008 2009 2010 2011 2012

Income tax expense 284 191 415 260 148

Tax shield on interest expense 88.9 67.55 66.15 73.5 73.5
Tax shield on implicit interest expense OL 14 15.05 12.6 9.8 7.35
Tax shield on implicit interest expense RRL 63.35 62.3 47.6 34.3 25.55
Tax shield on restructuring charges 39.9 62.65 31.5 27.65 22.05
Tax shield on asbestos settlement 1.4 4.55 4.2 4.2 4.2
Tax shield on debt refinancing charge 0 0 0 0 0
Tax shield on other charges 21.35 22.75 29.4 22.05 78.05
Tax on other income 57.75 52.5 63 53.2 48.3
Tax on interest income 9.8 11.9 14.7 14

Taxes on EBIT 455.15 363.55 531.6 363.6 296.4

 2013 2014 2015

253 259 456

68.6 65.45 44.1
8.05 8.75 8.4
19.6 19.6 17.85
34.3 0 49
3.85 4.2 4.2
0 110.95 0
66.15 77.35 36.4
44.45 91 50.75
15.05 17.5 14

394.05 436.8 551.2

ROIC 2007 2008 2009 2010 2011 2012 2013

Operating WC 2994 3262 2914 2236 2342 2336 2182

Net PPE 2426 2798 2754 2686 2721 2888 2876
Operating leases 418 736 704 768 779 839 1070
Operating invested capital 5838 6796 6372 5690 5842 6063 6128
Avg. operating invested capital 6317 6584 5404 5766 5952.5 6095.5

Goodwill 1507 2641 2784 2719 2660 2761 3008

Invested capital, including GW 7345 9437 9156 8409 8502 8824 9136
Avg. invested capital, incl GW 8391 9297 8155 8455.5 8663 8843

Excess cash 414 887 942 1844 1350 2266 1602

Non-operating investments 979 509 499 550 387 422 393
Intangibles 612 1472 1416 1268 1125 1085 1339
Total investor funds 9350 12305 12013 ### 11364 12597 12470
Avg. total investor funds 10828 12159 ### 11718 11981 12534

NOPLAT 813 782 1094 1174 940 1437

ROIC 1 0.129 0.119 0.202 0.2036 0.1579 0.2357
ROIC 2 0.097 0.084 0.134 0.1388 0.1085 0.1625

NOPLAT + Nonoperating earnings 920 898 1233 1300.1 1029.7 1520

ROIC 3 0.085 0.074 0.108 0.111 0.0859 0.1212
 2014 2015

2114 1998
3092 3017
901 960
6107 5975
6117.5 6041

3801 3669
9908 9644
9522 9776

1029 1302
443 367
2411 2178
13791 13491
13131 13641

1939 1601
0.317 0.265
0.2036 0.1638

2140.5 1721
0.163 0.1262
PPG's debt to value and equity to value, Jan. 2, 2017

Short-term debt 652

Long-term debt 3752
Retirement related liabilities 1942
Other liabilities 824
Present value of operating leases 960
Total debt 8130

Noncontrolling interests 90
Common stock 25016

Total value 33236

Debt/Value 0.2446142737
Equity/Value 0.7553857263

market cap 01/02/17 25016189321

Bond Ask Price Bid Price Mid Price Amt. Out. Mkt. Val. Weight

2.3s19 100.324 100.126 100.225 297 298 0.1414

3.6s20 103.778 103.509 103.6435 496 515 0.2443
9s21 123.75 123.008 123.379 133 165 0.0783
1.4s27 100.729 100.009 100.369 600 604 0.2865
7.7s38 140.35 138.464 139.407 174 244 0.1157
5.5s40 114.47 113.029 113.7495 246 282 0.1338

Total 1946 2108 1

Mid Yield
Times
Ask Yield Bid Yield Mid Yield Weight
2.3s19 0.0218 0.0225 0.02215 0.003131
3.6s20 0.0257 0.0264 0.02605 0.006364
9s21 0.0308 0.0325 0.03165 0.002477
1.4s27 0.0132 0.014 0.0136 0.003897
7.7s38 0.0468 0.0479 0.04735 0.005481
5.5s40 0.045 0.046 0.0455 0.006087

Total 0.027437
Cost of equity

Risk-free rate 0.0245

Beta 1.18
ERP 0.055
Cost of equity 0.0894
Debt/Value 0.245
Equity/Value 0.755
Pre-tax cost of debt 0.0274
After-tax cost of debt 0.01781
Cost of equity 0.0894
WACC 0.0718605
Value of nonoperating assets 9/30/2016

Cash 929
Short-term investments 46
Total cash 975
Operating cash 151

Excess cash 824

Assets held for sale 443
Investments 328

1,595
Employee Stock Options

Strike price 67.68

Stock price 94.76
Time 6.5
Volatility 29.20%
Risk-free rate 2.45

Black Scholes call price $45.06

No. ESOs 3,729,728

Value of ESOs 168061544

Intrinsic Value RSUs 130489641

Value of ESOs and RSUs 298551185

Continuing value diagnostics
2022

Investment in operating WC 181

Capital expenditures 467
Depreciation and amortization 486
Net investment 162
NOPLAT 2582
investment rate 0.0627421

g 0.02

implied return on net investment 0.3187654

implied g if r=c 0.0045174

implied ir if r=c 0.2777778

FCF in 2022 2510

less stock based compensation expens 91
FCF* in 2022 2419
original TV 48272
w/g=0.004423 35846.292
w/ir=0.277778
Net investment 717.22222
FCF 1864.7778
TV 35861.111

TV = NOPLAT/c 35861.111