Table	of	Contents

# UNITED	STATES

# SECURITIES	AND	EXCHANGE	COMMISSION

# ANNUAL	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF

# THE	SECURITIES	EXCHANGE	ACT	OF	1934

For	the	fiscal	year	ended	December	31,	2006

Commission	File	Number	1-1687

# PPG	INDUSTRIES,	INC.

(Exact	name	of	registrant	as	specified	in	its	charter)

Pennsylvania

(State	or	other	jurisdiction	of incorporation	or	organization)

One	PPG	Place,	Pittsburgh,	Pennsylvania (Address	of	principal	executive	offices)

(I.R.S.	Employer Identification	No.)

# Securities	Registered	Pursuant	to	Section	12(b)	of	the	Act:

# Securities	Registered	Pursuant	to	Section	12(g)	of	the	Act:	None

Indicate	by	check	mark	if	the	Registrant	is	a	well-known	seasoned	issuer	as	defined	in	Rule	405	of	the	Securities	Act.		YES		x				NO		¨

Indicate	by	check	mark	if	the	Registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	Section	15(d)	of	the	Act.		YES		¨				NO		x

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.				¨

Indicate	by	check	mark	whether	the	registrant	is	a	large	accelerated	filer,	an	accelerated	filer,	or	a	non-accelerated	filer.	See	definition	of	"accelerated	filer	and	large accelerated	filer"	in	Rule	12b-2	of	the	Exchange	Act.	(Check	one):

Large	accelerated	filer		x

Accelerated	filer		¨ Non-accelerated	filer		¨

Indicate	by	check	mark	whether	the	Registrant	is	a	shell	company	(as	defined	by	Rule	12b-2	of	the	Act).		YES		¨				NO		x

The	aggregate	market	value	of	common	stock	held	by	non-affiliates	as	of	June	30,	2006,	was	$10,885	million.

As	of	January	31,	2007,	163,976,892	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	$10,854	million.

# DOCUMENTS	INCORPORATED	BY	REFERENCE

Portions	of	PPG	Industries,	Inc.	Proxy	Statement	for	its	2007

# 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 | TABLE	OF	CONTENTS | Page |
| :--- | :--- | :--- |
| Part\tI |  |  |
| Item\t1. | Business | 11 |
| Item\t1a. | Risk\tFactors | 15 |
| Item\t1b. | Unresolved\tStaff\tComments | 16 |
| Item\t2. | Properties | 16 |
| Item\t3. | Legal\tProceedings | 16 |
| Item\t4. | Submission\tof\tMatters\tto\ta\tVote\tof\tSecurity\tHolders | 17 |
| Part\tII |  |  |
| Item\t5. | Market\tfor\tthe\tRegistrant's\tCommon\tEquity,\tRelated\tStockholder\tMatters\tand |  |
|  | Issuer\tPurchases\tof\tEquity\tSecurities | 18 |
| Item\t6. | Selected\tFinancial\tData | 19 |
| Item\t7. | Management's\tDiscussion\tand\tAnalysis\tof\tFinancial\tCondition\tand\tResults\tof\tOperations | 19 |
| Item\t7a. | Quantitative\tand\tQualitative\tDisclosures\tAbout\tMarket\tRisk | 30 |
| Item\t8. | Financial\tStatements\tand\tSupplementary\tData | 32 |
| Item\t9. | Changes\tin\tand\tDisagreements\tWith\tAccountants\ton\tAccounting\tand |  |
|  | Financial\tDisclosure | 65 |
| Item\t9a. | Controls\tand\tProcedures | 65 |
| Item\t9b. | Other\tInformation | 65 |
| Part\tIII |  |  |
| Item\t10. | Directors\tand\tExecutive\tOfficers\tof\tthe\tRegistrant | 65 |
| Item\t11. | Executive\tCompensation | 65 |
| Item\t12. | Security\tOwnership\tof\tCertain\tBeneficial\tOwners\tand\tManagement\tand |  |
|  | Related\tStockholder\tMatters | 66 |
| Item\t13. | Certain\tRelationships\tand\tRelated\tTransactions | 66 |
| Item\t14. | Principal\tAccounting\tFees\tand\tServices | 66 |
| Part\tIV |  |  |
| Item\t15. | Exhibits\tand\tFinancial\tStatement\tSchedules | 66 |
| Signatures |  | 68 |

# Note	on	Incorporation	by	Reference

Throughout	this	report,	various	information	and	data	are	incorporated	by	reference	to	the	Company's	2006	Annual	Report	(hereinafter	referred	to	as	"the	Annual Report").	Any	reference	in	this	report	to	disclosures	in	the	Annual	Report	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	five	reportable	business	segments:	Industrial	Coatings,	Performance	and	Applied	Coatings, Optical	and	Specialty	Materials,	Commodity	Chemicals	and	Glass.	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	PPG's	total	sales	and	earnings	of	changes	in	demand	for	a	particular product	line	or	in	a	particular	geographic	area.	Refer	to	Note	23,	"Reportable	Business	Segment	Information"	under	Item	8	of	this	Form	10-K	for	financial	information relating	to	our	reportable	business	segments	and	Note	2,	"Acquisitions"	under	Item	8	for	information	regarding	acquisition	activity.

# Industrial	Coatings	and	Performance	and	Applied	Coatings

PPG	is	a	major	global	supplier	of	protective	and	decorative	coatings.	The	Industrial	Coatings	and	Performance	and	Applied	Coatings	reportable	business	segments supply	protective	and	decorative	finishes	for	customers	in	a	wide	array	of	end	use	markets	including	industrial	equipment,	appliances	and	packaging;	factory-finished aluminum	extrusions	and	steel	and	aluminum	coils;	marine	and	aircraft	equipment;	automotive	original	equipment;	and	other	industrial	and	consumer	products.	In addition	to	supplying	finishes	to	the	automotive	original	equipment	market,	PPG	supplies	automotive	refinishes	to	the	aftermarket.	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	global	operations,	and	many	smaller	regional	coatings	companies.	Product	development,	innovation,	quality and	technical	and	customer	service	have	been	stressed	by	PPG	and	have	been	significant	factors	in	developing	an	important	supplier	position	by	PPG's	coatings businesses	comprising	the	Industrial	Coatings	and	Performance	and	Applied	Coatings	reportable	business	segments.

The	Industrial	Coatings	reportable	business	segment	is	comprised	of	the	automotive,	industrial	and	packaging	coatings	operating	segments.	The	industrial	and automotive	coatings	operating	segments	sell	directly	to	a	variety	of	manufacturing	companies.	Industrial,	automotive	and	packaging	coatings	are	formulated	specifically for	the	customers'	needs	and	application	methods.	PPG	also	supplies	adhesives	and	sealants	for	the	automotive	industry	and	metal	pretreatments	and	related	chemicals for	industrial	and	automotive	applications.	The	packaging	coatings	business	supplies	coatings	and	inks	for	aerosol,	food	and	beverage	containers	for	consumer	products to	the	manufacturers	of	those	containers.	Product	performance,	technology,	quality,	and	technical	and	customer	service	are	major	competitive	factors	in	these	coatings businesses.

The	Performance	and	Applied	Coatings	reportable	business	segment	is	comprised	of	the	refinish,	aerospace	and	architectural	coatings	operating	segments.	The refinish	coatings	business	produces	coatings	products	for	automotive/fleet	repair	and	refurbishing,	light	industrial	coatings	for	a	wide	array	of	markets	and	specialty coatings	for	signs.	These	products	are	sold	primarily	through	distributors.	The	aerospace	coatings	business	supplies	sealants,	coatings,	paint	strippers,	technical	cleaners, transparent	armor	and	transparencies	for	commercial,	military,	regional	jet	and	general	aviation	aircraft.	We	supply	products	to	aircraft	manufacturers,	maintenance	and aftermarket	customers	around	the	world	both	on	a	direct	basis	and	through	a	company	owned	distribution	network.	Product	performance,	technology,	quality, distribution	and	technical	and	customer	service	are	major	competitive	factors	in	these	coatings	businesses.	The	architectural	coatings	business	primarily	produces coatings	used	by	painting	and	maintenance	contractors	and	by	consumers	for	decoration	and	maintenance.	We	also	supply	coatings	and	finishes	for	the	protection	of metals	and	structures	to	metal	fabricators,	heavy	duty	maintenance	contractors	and	manufacturers	of	ships,	bridges,	rail	cars	and	shipping	containers.	These	products	are sold	through	a	combination	of	company-owned	stores,	home	centers,	mass	merchandisers,	paint	dealers,	independent	distributors,	and	directly	to	customers.	Price, product	performance,	quality,	distribution	and	brand	recognition	are	key	competitive	factors	for	the	architectural	coatings	operating	segment.	The	architectural	coatings business	operates	approximately	450	company-owned	stores.

The	Industrial	Coatings	and	Performance	and	Applied	Coatings	businesses	operate	production	facilities	around	the	world.	These	facilities	are	usually	shared	and produce	products	sold	by	several	operating	segments	of	the	Industrial	Coatings	and	Performance	and	Applied	Coatings	reportable	business	segments.	North	American production	facilities	consist	of	27	plants	in	the	United	States,	two	in	Canada	and	one	in	Mexico.	The	three	largest	facilities	in	the	United	States	are	the	Delaware,	Ohio, plant,	which	primarily	produces	automotive	refinishes;	the	Oak	Creek,	Wis.,	plant,	which	primarily	produces	industrial	coatings;	and	the	Cleveland,	Ohio,	plant,	which primarily	produces	automotive	original	coatings.	Outside	North	America,	PPG	operates	five	plants	in	Italy,	three	plants	each	in	Brazil,	China,	Germany	and	Spain,	two plants	each	in	Australia,	England,	France,	South	Korea	and	the	Netherlands,	and	one	plant	each	in	Argentina,	Chile,	Malaysia,	New	Zealand,	Singapore,	Thailand, Turkey	and	Uruguay.	We	also	have	an	alliance	with	Kansai	Paint.	The	venture,	known	as	PPG	Kansai	Automotive	Finishes,	is	owned	60%	by	PPG	and	40%	by	Kansai Paint.	The	focus	of	the	venture	is	Japanese-based

automotive	original	equipment	manufacturers	in	North	America	and	Europe.	In	addition,	PPG	and	Kansai	Paint	are	developing	technology	jointly,	potentially	benefiting customers	worldwide.	PPG	owns	equity	interests	in	coatings	operations	in	Canada,	India	and	Japan.	Additionally,	the	automotive	coatings	business	operates	five	service centers	in	the	United	States,	two	in	Poland,	and	one	each	in	Canada,	Italy,	Mexico,	and	Portugal	to	provide	just-in-time	delivery	and	service	to	selected	automotive assembly	plants.	Fourteen	training	centers	in	the	United	States,	15	in	Europe,	11	in	Asia,	three	in	South	America,	two	in	Canada,	and	one	in	Mexico	are	in	operation. These	centers	provide	training	for	automotive	aftermarket	refinish	customers.	The	aerospace	business	operates	a	global	network	of	application	support	centers strategically	located	close	to	our	customers	around	the	world	that	provide	technical	support	and	just-in-time	delivery	of	customized	solutions	to	improve	customer efficiency	and	productivity.	Also,	several	automotive	original	coatings	application	centers	are	in	operation	throughout	the	world	that	provide	testing	facilities	for customer	paint	processes	and	new	products.	The	average	number	of	persons	employed	by	the	Industrial	Coatings	reportable	business	segment	during	2006	was	7,900. The	average	number	of	persons	employed	by	the	Performance	and	Applied	Coatings	reportable	business	segment	during	2006	was	8,800.

# Optical	and	Specialty	Materials	and	Commodity	Chemicals

PPG	is	a	major	producer	and	supplier	of	chemicals.	PPG's	chemicals	operations	are	comprised	of	two	reportable	business	segments:	Optical	and	Specialty	Materials	and Commodity	Chemicals.	PPG's	Optical	and	Specialty	Materials	reportable	business	segment	is	comprised	of	the	optical	products,	silica	and	fine	chemicals	operating segments.	The	primary	Optical	and	Specialty	Materials	products	are	Transitions®	lenses,	sunlenses,	optical	materials	and	polarized	film;	amorphous	precipitated	silicas for	tire,	battery	separator,	and	other	end-use	markets;	Teslin®	synthetic	printing	sheet	used	in	such	applications	as	waterproof	labels,	e-passports	and	identification	cards; and	advanced	intermediates	and	bulk	active	ingredients	for	the	pharmaceutical	industry.	Transitions®	lenses	are	processed	and	distributed	by	PPG's	51%-owned	joint venture	with	Essilor	International.	In	the	Optical	and	Specialty	Materials	businesses,	product	quality	and	performance	and	technical	service	are	the	most	critical competitive	factors.	The	Optical	and	Specialty	Materials	businesses	operate	four	plants	in	the	United	States	and	one	in	Mexico.	Outside	North	America,	these	businesses operate	three	plants	in	Thailand	and	one	plant	each	in	Australia,	Brazil,	France,	Ireland,	Italy,	the	Netherlands	and	the	Philippines.	The	average	number	of	persons employed	by	the	Optical	and	Specialty	Materials	reportable	business	segment	during	2006	was	3,000.

The	Commodity	Chemicals	reportable	business	segment	produces	chlor-alkali	and	derivative	products	including	chlorine,	caustic	soda,	vinyl	chloride	monomer, chlorinated	solvents,	chlorinated	benzenes,	calcium	hypochlorite,	ethylene	dichloride	and	phosgene	derivatives.	Most	of	these	products	are	sold	directly	to manufacturing	companies	in	the	chemical	processing,	rubber	and	plastics,	paper,	minerals,	metals,	and	water	treatment	industries.	PPG	competes	with	six	other	major producers	of	chlor-alkali	products.	Price,	product	availability,	product	quality	and	customer	service	are	the	key	competitive	factors.	The	chlor-alkali	business	operates three	production	facilities	in	the	United	States	and	one	each	in	Canada	and	Taiwan.	The	two	largest	facilities	are	located	in	Lake	Charles,	La.,	and	Natrium,	W.	Va.	PPG also	owns	equity	interests	in	operations	in	the	United	States.	The	average	number	of	persons	employed	by	the	Commodity	Chemicals	reportable	business	segment during	2006	was	1,900.

# Glass

PPG	is	a	major	producer	of	flat	and	fabricated	glass	in	North	America	and	a	major	global	producer	of	continuous-strand	fiber	glass.	The	Glass	reportable	business segment	is	comprised	of	the	automotive	OEM	glass,	automotive	replacement	glass	and	services,	performance	glazings	and	fiber	glass	operating	segments.	PPG's	major markets	are	commercial	and	residential	construction,	the	furniture	and	electronics	industries,	automotive	original	equipment	and	automotive	aftermarket.	Most	glass products	are	sold	directly	to	manufacturing	companies.	However,	in	the	automotive	replacement	glass	business	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-strand	process.	PPG	also	provides	third	party	claims management	services	to	insurance	and	vehicle	fleet	companies.

The	bases	for	competition	in	the	Glass	businesses	are	price,	quality,	technology	and	customer	service.	The	Company	competes	with	six	major	producers	of	flat glass,	six	major	producers	of	fabricated	glass	and	three	major	producers	of	fiber	glass	throughout	the	world.	In	certain	glass	and	fiber	glass	markets,	there	is	increasing competition	from	other	producers	operating	in	low	labor	cost	countries.

PPG's	principal	Glass	production	facilities	are	in	North	America	and	Europe.	Fourteen	plants	operate	in	the	United	States,	of	which	six	produce	automotive	original and	replacement	glass	products,	five	produce	flat	glass,	and	three	produce	fiber	glass	products.	There	are	three	plants	in	Canada,	two	of	which	produce	automotive original	and	replacement	glass	products	and	one	which	produces	flat	glass.	One	plant	each	in	England	and	the	Netherlands	produces	fiber	glass.	PPG	owns	equity interests	in	operations	in	China,	Mexico,	Taiwan,	the	United	States	and	Venezuela	and	a	majority	interest	in	a	glass	distribution	company	in	Japan.	Additionally,	there	are four	satellite	operations	in	the	United	States,	two	in

Canada	and	one	in	Mexico	that	provide	limited	fabricating	or	assembly	and	just-in-time	product	delivery	to	selected	automotive	customer	locations,	one	satellite	glass coating	facility	in	the	United	States	for	flat	glass	products	and	two	satellite	tempering	and	fabrication	facilities	in	the	United	States	for	flat	glass	products.	There	are	also three	claims	management	centers.	The	average	number	of	persons	employed	by	the	Glass	reportable	business	segment	during	2006	was	8,900.

# Raw	Materials	and	Energy

The	effective	management	of	raw	materials	and	energy	is	important	to	PPG's	continued	success.	Our	primary	energy	cost	is	natural	gas	used	in	our	Glass	and Commodity	Chemicals	businesses.	In	2006,	natural	gas	costs	declined	slightly	in	the	U.S.	compared	to	record	2005	levels.	This	decline	was	due	in	large	part	to	relatively low	hurricane	activity	in	the	U.S.	Gulf	Coast	and	record	high	natural	gas	inventory	levels	in	the	fourth	quarter	of	2006.	In	the	fourth	quarter	of	2005,	prices	were	elevated due	in	large	part	to	the	adverse	impact	on	supply	of	the	high	level	of	hurricane	activity	in	the	Gulf	Coast.	In	2006	our	coatings	raw	material	costs	increased	by approximately	three	percent,	following	an	approximate	ten	percent	rise	in	2005.	In	addition,	the	growth	of	global	industrial	production,	particularly	in	China	and	the United	States,	and	a	slowing	in	the	rate	at	which	our	suppliers	have	added	production	capacity	in	North	America	have	resulted	not	only	in	upward	pressure	on	price,	but also	increased	the	importance	of	managing	our	supply	chain.

The	Company's	most	significant	raw	materials	are	titanium	dioxide	and	epoxy	and	other	resins	in	the	coatings	businesses;	and	sand,	soda	ash	and	polyvinyl	butyral in	the	Glass	businesses.	Energy	is	a	significant	production	cost	in	the	Commodity	Chemicals	and	Glass	businesses.	Most	of	the	raw	materials	and	energy	used	in production	are	purchased	from	outside	sources,	and	the	Company	has	made,	and	plans	to	continue	to	make,	supply	arrangements	to	meet	the	planned	operating requirements	for	the	future.	Supply	of	critical	raw	materials	and	energy	is	managed	by	establishing	contracts,	multiple	sources,	and	identifying	alternative	materials	or technology,	whenever	possible.	We	have	aggressive	sourcing	initiatives	underway	to	support	our	continuous	efforts	to	find	the	lowest	total	material	costs.	These initiatives	include	reformulation	of	certain	of	our	products	as	part	of	a	product	renewal	strategy	and	qualifying	multiple	sources	of	supply,	including	supplies	from	Asia and	other	lower	cost	regions	of	the	world.

We	are	subject	to	existing	and	evolving	standards	relating	to	the	registration	of	chemicals	that	impact	or	could	potentially	impact	the	availability	and	viability	of some	of	the	raw	materials	we	use	in	our	production	processes.	Our	ongoing,	global	product	stewardship	efforts	are	directed	at	maintaining	our	compliance	with	these standards.	In	December	2006,	European	Union	member	states	gave	their	final	approval	to	comprehensive	chemical	management	legislation	known	as	"REACH",	the Registration,	Evaluation	and	Authorization	of	Chemicals.	REACH	applies	to	all	existing	and	new	chemical	substances	manufactured	in	or	imported	into	the	European Union	in	quantities	greater	than	one	metric	ton	per	year.	The	legislation	requires	that	all	such	substances	be	pre-registered	by	Dec.	31,	2008.	Subsequently,	REACH	will require	the	registration,	testing	and	authorization	of	these	pre-registered	chemicals	over	an	11-year	period.	We	are	currently	reviewing	our	product	portfolio	to	identify substances	that	may	require	pre-registration.	Additionally,	we	are	working	with	our	suppliers	to	understand	the	future	availability	and	viability	of	the	raw	materials	we use	in	our	production	processes.	We	anticipate	that	REACH	will	result	in	incremental	costs	to	PPG	and	our	suppliers	and	may	result	in	some	of	the	chemicals	we	use being	regulated	or	restricted;	however,	at	this	time	it	is	not	possible	to	quantify	the	financial	impact	on	PPG's	businesses.

# Research	and	Development

Research	and	development	costs,	including	depreciation	of	research	facilities,	during	2006,	2005	and	2004	were	$334	million,	$325	million	and	$321	million, respectively.	PPG	owns	and	operates	several	facilities	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.	As	part	of	our	ongoing	efforts	to	manage	our	costs effectively,	we	have	a	laboratory	in	China	and	an	outsourcing	arrangement	with	a	laboratory	in	the	Ukraine	and	have	been	actively	pursuing	government	funding	of	a small,	but	growing	portion	of	our	research	efforts.

# Patents

PPG	considers	patent	protection	to	be	important.	The	Company's	reportable	business	segments	are	not	materially	dependent	upon	any	single	patent	or	group	of	related patents.	PPG	received	$44	million	in	2006,	$38	million	in	2005	and	$40	million	in	2004	from	royalties	and	the	sale	of	technical	know-how.

# 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

PPG	has	a	significant	investment	in	non-U.S.	operations,	and	as	a	result	we	are	subject	to	certain	inherent	risks,	including	economic	and	political	conditions	in international	markets	and	fluctuations	in	foreign	currency	exchange	rates.	While	approximately	85%	of	sales	and	operating	income	is	generated	by	products	sold	in	the

United	States,	Canada	and	Western	Europe,	our	remaining	sales	and	operating	income	are	generated	in	developing	regions,	such	as	Asia,	Eastern	Europe	and	Latin America.

# Employee	Relations

The	average	number	of	persons	employed	worldwide	by	PPG	during	2006	was	32,200.	The	Company	has	numerous	collective	bargaining	agreements	throughout	the world.	While	we	have	experienced	occasional	work	stoppages	as	a	result	of	the	collective	bargaining	process	and	may	experience	some	work	stoppages	in	the	future,	we believe	we	will	be	able	to	negotiate	all	labor	agreements	on	satisfactory	terms.	To	date,	these	work	stoppages	have	not	had	a	significant	impact	on	the	PPG's	operating results.	Overall,	the	Company	believes	it	has	good	relationships	with	its	employees.

# Environmental	Matters

PPG	is	subject	to	existing	and	evolving	standards	relating	to	protection	of	the	environment.	Capital	expenditures	for	environmental	control	projects	were	$14	million, $18	million	and	$11	million	in	2006,	2005	and	2004,	respectively.	It	is	expected	that	expenditures	for	such	projects	in	2007	will	approximate	$24	million.	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	the	cost	of	compliance	will	increase.

Additionally,	about	20%	of	our	chlor-alkali	production	capacity	currently	utilizes	mercury	cell	technology.	We	strive	to	operate	these	cells	in	accordance	with applicable	laws	and	regulations,	and	these	cells	are	reviewed	at	least	annually	by	state	authorities.	The	U.S.	Environmental	Protection	Agency	("USEPA")	has	issued new	regulations	imposing	significantly	more	stringent	requirements	on	mercury	emissions.	These	new	rules	took	effect	in	December	2006.	In	order	to	meet	the USEPA's	new	air	quality	standards,	in	July	2005,	a	decision	was	made	to	replace	the	existing	mercury	cell	production	unit	at	our	Lake	Charles,	LA	chlor-alkali	plant with	newer	membrane	cell	technology.	The	Louisiana	Department	of	Environmental	Quality	has	granted	a	one	year	extension	to	meet	the	new	requirements	on	mercury emissions.	This	capital	project	began	in	2005	and	will	continue	through	mid-2007.	We	do	not	expect	the	project	to	materially	increase	PPG's	total	capital	spending	in 2007.

PPG	is	negotiating	with	various	government	agencies	concerning	95	current	and	former	manufacturing	sites	and	offsite	waste	disposal	locations,	including	22	sites on	the	National	Priority	List.	The	number	of	sites	is	comparable	with	the	prior	year.	While	PPG	is	not	generally	a	major	contributor	of	wastes	to	these	offsite	waste disposal	locations,	each	potentially	responsible	party	may	face	governmental	agency	assertions	of	joint	and	several	liability.	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.	The	Company	has	established	reserves	for	those	sites	where	it is	probable	that	a	liability	has	been	incurred	and	the	amount	can	be	reasonably	estimated.	As	of	Dec.	31,	2006	and	2005,	PPG	had	reserves	for	environmental contingencies	totaling	$282	million	and	$94	million,	respectively,	of	which	$65	million	and	$29	million,	respectively,	were	classified	as	current	liabilities.	Pretax charges	against	income	for	environmental	remediation	costs	in	2006,	2005	and	2004	totaled	$207	million,	$27	million	and	$15	million,	respectively.	Cash	outlays related	to	such	environmental	remediation	aggregated	$22	million,	$14	million	and	$26	million	in	2006,	2005	and	2004,	respectively.	Environmental	remediation	of	a former	chromium	manufacturing	plant	site	and	associated	sites	in	Jersey	City,	NJ	represents	the	major	part	of	our	2006	environmental	charges	and	reserves.	Included	in the	amounts	mentioned	above	were	$185	million	of	2006	charges	against	income	and	$198	million	in	reserves	at	Dec.	31,	2006	associated	with	all	New	Jersey chromium	sites.

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.	Management	anticipates	that	such	expenditures	will occur	over	an	extended	period	of	time.	Over	the	15	years	prior	to	2006,	the	pretax	charges	against	income	ranged	between	$10	million	and	$49	million	per	year. Charges	for	estimated	environmental	remediation	costs	in	2006	were	significantly	higher	than	our	historical	range	as	a	result	of	our	continuing	efforts	to	analyze	and assess	the	environmental	issues	associated	with	a	former	chromium	manufacturing	plant	site	located	in	Jersey	City,	NJ	and	at	the	Calcasieu	River	Estuary	located	near our	Lake	Charles,	LA	chlor-alkali	plant,	which	efforts	resulted	in	a	pre-tax	charge	of	$173	million	in	the	third	quarter	of	2006	for	the	estimated	costs	of	remediating	these sites.	We	anticipate	that	charges	against	income	in	2007	for	environmental	remediation	costs	will	be	within	the	prior	historical	range.	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	contingencies	will	not	have	a	material	adverse	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.	See	Note	14,	"Commitments	and	Contingent	Liabilities,"	under	Item	8	of	this	Form 10-K	for	additional	information	related	to	environmental	matters.

# Internet	Access

The	Web	site	address	for	the	Company	is	www.ppg.com.	The	Company's	recent	filings	on	Forms	10-K,	10-Q	and	8-K	and	any	amendments	to	those	documents	can	be accessed	without	charge	on	that	website	under	Investor	Center,	SEC	Filings.

# Item	1a.	Risk	Factors

As	a	global	manufacturer	of	coatings,	glass	and	chemicals	products,	we	operate	in	a	business	environment	that	includes	risks.	These	risks	are	not	unlike	the	risks	we have	faced	in	the	recent	past.	Each	of	the	risks	described	in	this	section	could	adversely	affect	our	operating	results,	financial	position,	and	liquidity.	While	the	factors listed	here	are	considered	to	be	the	more	significant	factors,	no	such	list	should	be	considered	to	be	a	complete	statement	of	all	potential	risks	and	uncertainties.	Unlisted factors	may	present	significant	additional	obstacles	which	may	adversely	affect	our	business.

# Increases	in	prices	and	declines	in	the	availability	of	raw	materials	could	negatively	impact	our	financial	results

Our	operating	results	are	significantly	affected	by	the	cost	of	raw	materials	and	energy,	including	natural	gas.	Changes	in	natural	gas	prices	have	a	significant	impact	on the	operating	performance	of	our	Commodity	Chemicals	and	Glass	businesses.	Each	one-dollar	change	in	the	unit	price	of	natural	gas	per	million	British	Thermal	Units ("mmbtu")	has	a	direct	impact	of	approximately	$60	million	to	$70	million	on	our	annual	operating	costs.	All	time	record	high	natural	gas	costs	in	North	America	were reached	in	2005	following	the	severe	hurricanes	that	impacted	the	U.S.	Gulf	Coast	in	the	third	quarter.	In	2006,	natural	gas	costs	in	North	America	remained	high	by historical	standards,	but	did	decline	slightly	versus	the	2005	levels.	Year-over-year	coatings	raw	material	costs	rose	by	$75	million	in	2006	following	a	rise	of	$245 million	in	2005.	Additionally,	certain	raw	materials	are	critical	to	our	production	processes.	These	include	titanium	dioxide	and	epoxy	and	other	resins	in	the	Industrial Coatings	and	Performance	and	Applied	Coatings	businesses	and	sand,	soda	ash	and	polyvinyl	butyral	in	the	Glass	businesses.	The	Company	has	made,	and	plans	to continue	to	make,	supply	arrangements	to	meet	the	planned	operating	requirements	for	the	future.	However,	an	inability	to	obtain	these	critical	raw	materials	would adversely	impact	our	ability	to	produce	products.

# We	experience	substantial	competition	from	certain	low-cost	regions

Growing	competition	from	companies	in	certain	regions	of	the	world,	including	Asia,	Eastern	Europe	and	Latin	America,	where	energy	and	labor	costs	are	lower	than those	in	the	U.S.,	could	result	in	lower	selling	prices	or	reduce	demand	for	some	of	our	glass	and	fiber	glass	products.

# Our	facilities	are	subject	to	various	environmental	laws	and	regulations

Pretax	charges	against	income	for	environmental	remediation	ranged	between	$10	million	and	$49	million	per	year	over	the	15	years	prior	to	2006.	In	2006	those charges	totaled	$207	million.	We	have	accrued	$282	million	for	estimated	remediation	costs	that	are	probable	at	Dec.	31,	2006.	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	$300	million.	Such	unreserved losses	are	reasonably	possible	but	are	not	currently	considered	to	be	probable	of	occurrence.

# We	are	involved	in	a	number	of	lawsuits	and	claims,	both	actual	and	potential,	in	which	substantial	monetary	damages	are	sought

The	results	of	any	future	litigation	or	settlement	of	such	lawsuits	and	claims	are	inherently	unpredictable,	but	such	outcomes	could	be	adverse	and	material	in	amount.

# For	over	thirty	years,	we	have	been	a	defendant	in	lawsuits	involving	claims	alleging	personal	injury	from	exposure	to	asbestos

Most	of	our	potential	exposure	relates	to	allegations	by	plaintiffs	that	PPG	should	be	liable	for	injuries	involving	asbestos	containing	thermal	insulation	products manufactured	by	a	50%	owned	joint	venture,	Pittsburgh	Corning	Corporation.	Although	we	have	entered	into	a	settlement	arrangement	with	several	parties	concerning these	asbestos	claims	as	discussed	in	Note	14,	"Commitments	and	Contingent	Liabilities,"	under	Item	8	of	this	Form	10-K,	the	arrangement	remains	subject	to	court proceedings	and,	if	not	approved,	the	outcome	could	be	material	to	the	results	of	operations	of	any	particular	period.

# We	sell	products	to	U.S.-based	automotive	original	equipment	manufacturers	and	their	suppliers

The	North	American	automotive	industry	continues	to	experience	structural	change,	including	the	loss	of	U.S.	market	share	by	General	Motors,	Ford	and	Daimler- Chrysler.	Further	deterioration	of	market	conditions	could	cause	certain	of	our	customers	and	suppliers	to	have	liquidity	problems,	potentially	resulting	in	the	write-off of	amounts	due	from	these	customers	and	cost	impacts	of	changing	suppliers.

# Our	international	operations	expose	us	to	additional	risks	and	uncertainties	that	could	affect	our	financial	results

Because	we	are	a	global	company,	our	results	are	subject	to	certain	inherent	risks,	including	economic	and	political	conditions	in	international	markets	and	fluctuations in	foreign	currency	exchange	rates.	While	approximately	85%	of	sales	and	operating	income	is	generated	by	products	sold	in	the	United	States,	Canada	and	Western Europe,	our	remaining	sales	and	operating	income	are	generated	in	developing	regions,	such	as	Asia,	Eastern	Europe	and	Latin	America.

# As	a	producer	of	chemicals	and	coatings,	we	manufacture	and	transport	certain	materials	that	are	inherently	hazardous	due	to	their	toxic	or	volatile	nature

We	have	significant	experience	in	handling	these	materials	and	take	precautions	to	handle	and	transport	them	in	a	safe	manner.	However,	these	materials,	if	mishandled or	released	into	the	environment,	could	cause	substantial	property	damage	or	personal	injuries	resulting	in	significant	legal	claims	against	us.	In	addition,	evolving regulations	concerning	the	security	of	chemical	production	facilities	and	the	transportation	of	hazardous	chemicals	could	result	in	increased	future	capital	or	operating costs.

# Business	disruptions	could	have	a	negative	impact	on	our	results	of	operations	and	financial	condition

Unexpected	events,	including	supply	disruptions,	temporary	plant	and/or	power	outages,	natural	disasters	and	severe	weather	events,	fires,	or	war	or	terrorist	activities, could	increase	the	cost	of	doing	business	or	otherwise	harm	the	operations	of	PPG,	our	customers	and	our	suppliers.	It	is	not	possible	for	PPG	to	predict	the	occurrence or	consequence	of	any	such	events.	However,	such	events	could	make	it	difficult	or	impossible	for	PPG	to	receive	raw	materials	from	suppliers	and	deliver	products	to customers	or	reduce	demand	for	PPG's	products.

# Item	1b.	Unresolved	Staff	Comments

None.

# 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	that	it	has	asserted	against	others,	in	which	substantial	monetary	damages are	sought.	These	lawsuits	and	claims,	the	most	significant	of	which	are	described	below,	relate	to	contract,	patent,	environmental,	product	liability,	antitrust	and	other matters	arising	out	of	the	conduct	of	PPG's	business.	To	the	extent	that	these	lawsuits	and	claims	involve	personal	injury	and	property	damage,	PPG	believes	it	has adequate	insurance;	however,	certain	of	PPG's	insurers	are	contesting	coverage	with	respect	to	some	of	these	claims,	and	other	insurers,	as	they	had	prior	to	the	asbestos settlement	described	below,	may	contest	coverage	with	respect	to	some	of	the	asbestos	claims	if	the	settlement	is	not	implemented.	PPG's	lawsuits	and	claims	against others	include	claims	against	insurers	and	other	third	parties	with	respect	to	actual	and	contingent	losses	related	to	environmental,	asbestos	and	other	matters.

The	result	of	any	future	litigation	of	such	lawsuits	and	claims	is	inherently	unpredictable.	However,	management	believes	that,	in	the	aggregate,	the	outcome	of	all lawsuits	and	claims	involving	PPG,	including	asbestos-related	claims	in	the	event	the	settlement	described	below	does	not	become	effective,	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.

For	over	thirty	years,	PPG	has	been	a	defendant	in	lawsuits	involving	claims	alleging	personal	injury	from	exposure	to	asbestos.	For	a	description	of	asbestos litigation	affecting	the	Company	and	the	terms	and	status	of	the	proposed	PPG	Settlement	Arrangement	announced	May	14,	2002,	see	Note	14,	"Commitments	and Contingent	Liabilities,"	under	Item	8	of	this	Form	10-K.

Over	the	past	several	years,	the	Company	and	others	have	been	named	as	defendants	in	several	cases	in	various	jurisdictions	claiming	damages	related	to	exposure to	lead	and	remediation	of	lead-based	coatings	applications.	PPG	has	been	dismissed	as	a	defendant	from	most	of	these	lawsuits	and	has	never	been	found	liable	in	any of	these	cases.

In	2005,	we	received	a	Notice	of	Violation	("NOV")	and	notice	of	intent	to	issue	a	further	NOV	from	the	State	of	North	Carolina	Department	of	Environment	and Natural	Resources	related	to	our	Shelby,	North	Carolina	fiber	glass	plant.	Specifically,	the	NOVs	related	to	non-compliant	stack	air	emissions	tests	in	2005	conducted under	the	requirements	of	the	Clean	Air	Act	Title	V	Regulations.	In	2006,	PPG	resolved	these	NOVs	by	entering	into	a	Special	Order	By	Consent	("SOC")	with	the North	Carolina	Environmental	Management	Commission	(the	"EMC")	pursuant	to	which	PPG	paid	a	civil	penalty	of	$52,000.

In	an	unrelated	matter,	PPG	and	the	EMC	entered	into	an	SOC	in	June,	2004	pursuant	to	which	PPG	agreed	to	achieve	certain	specified	emission	limits	for particulate	matter	from	a	furnace	at	the	Lexington	facility	by	Dec.	31,	2007.	In	March	2006,	PPG	requested	an	extension	of	the	Dec.	31,	2007	deadline	for	achieving	the emission	limits	for	particulate	matter	until	Dec.	31,	2009.	The	EMC	has	agreed	in	principal	to	this	extension	and	has	proposed	that	PPG	and	EMC	enter	into	a	new	SOC which	would	include,	among	other	things,	a	stipulated	civil	penalty	of	$125,000	and	a	commitment	by	PPG	to	pay	an	additional	$1,102,500	penalty	in	the	event	PPG were	to	shut	down	the	furnace	without	installing	an	emission	control	system	for	particulate	matter	by	Dec.	31,	2011.	In	PPG's	experience,	matters	such	as	these	often	can be	resolved	with	civil	penalty	amounts	below	$100,000.	However,	PPG	cannot	predict	the	amount,	if	any,	of	the	civil	penalty	that	may	be	assessed	for	this	matter.

# Item	4.	Submission	of	Matters	to	a	Vote	of	Security	Holders

# Executive	Officers	of	the	Company

Set	forth	below	is	information	related	to	the	Company's	executive	officers	as	of	Feb.	21,	2007.

(a) Prior	to	his	present	position,	Mr.	Bunch	held	the	positions	of	President	and	Chief	Operating	Officer	and	Executive	Vice	President,	Coatings.

(b) Prior	to	his	present	position,	Mr.	Alexander	held	the	positions	of	Vice	President,	Industrial	Coatings	and	Global	General	Manager,	General	Industrial	Coatings.

(c) Prior	to	her	present	position,	Ms.	Holt	held	the	position	of	Vice	President,	Fiber	Glass.	Prior	to	joining	PPG,	she	held	executive	positions	at	Solutia	Inc.

(d) Prior	to	his	present	position,	Mr.	Sullivan	held	the	positions	of	Vice	President,	Chemicals	and	Vice	President,	Fiber	Glass.

(e) Prior	to	his	present	position,	Mr.	Wulfsohn	held	the	position	of	Senior	Vice	President,	Coatings	and	Managing	Director,	PPG	Europe;	and	Vice	President,	Coatings,	Europe,	and	Managing	Director,	PPG	Europe. Prior	to	joining	PPG,	he	held	executive	positions	at	Honeywell	International	Inc.

# Part	II

# Item	5.	Market	for	the	Registrant's	Common	Equity,	Related	Stockholder	Matters	and	Issuer	Purchases	of	Equity	Securities

The	information	required	by	Item	5	regarding	market	information,	including	stock	exchange	listings	and	quarterly	stock	market	prices,	dividends	and	holders	of common	stock	is	included	in	Exhibit	99.1	filed	with	this	Form	10-K	and	is	incorporated	herein	by	reference.	This	information	is	also	included	in	the	PPG	Shareholder Information	on	page	73	of	this	Annual	Report.

Directors	who	are	not	also	Officers	of	the	Company	receive	Common	Stock	Equivalents	pursuant	to	the	PPG	Industries,	Inc.	Deferred	Compensation	Plan	for Directors	("PPG	Deferred	Compensation	Plan	for	Directors")	and,	through	2002,	the	PPG	Industries,	Inc.	Directors'	Common	Stock	Plan	("PPG	Directors'	Common Stock	Plan").	Common	Stock	Equivalents	are	hypothetical	shares	of	Common	Stock	having	a	value	on	any	given	date	equal	to	the	value	of	a	share	of	Common	Stock. Common	Stock	Equivalents	earn	dividend	equivalents	that	are	converted	into	additional	Common	Stock	Equivalents	but	carry	no	voting	rights	or	other	rights	afforded	to a	holder	of	Common	Stock.	The	Common	Stock	Equivalents	credited	to	Directors	under	both	plans	are	exempt	from	registration	under	Section	4(2)	of	the	Securities	Act of	1933	as	private	offerings	made	only	to	Directors	of	the	Company	in	accordance	with	the	provisions	of	the	plans.

Under	the	PPG	Deferred	Compensation	Plan	for	Directors,	each	Director	may	elect	to	defer	the	receipt	of	all	or	any	portion	of	the	compensation	paid	to	such Director	for	serving	as	a	PPG	Director.	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).	The	Directors,	as	a	group,	were	credited	with	2,886;	10,954;	and 12,877	Common	Stock	Equivalents	in	2006,	2005,	and	2004	respectively,	under	this	plan.	The	values	of	the	Common	Stock	Equivalents,	when	credited,	ranged	from $61.32	to	$65.84	in	2006,	$57.85	to	$72.95	in	2005	and	$57.69	to	$65.09	in	2004.

Under	the	PPG	Directors'	Common	Stock	Plan,	each	Director	who	neither	is,	nor	was,	an	employee	of	the	Company	was	credited	with	Common	Stock	Equivalents worth	one-half	of	the	Director's	basic	annual	retainer.	Effective	Jan.	1,	2003,	active	Directors	no	longer	participate	in	the	PPG	Directors'	Common	Stock	Plan.	On	that date,	the	Common	Stock	Equivalents	held	in	each	of	the	then	active	Directors'	accounts	in	the	PPG	Directors'	Common	Stock	Plan	were	transferred	to	their	accounts	in the	PPG	Deferred	Compensation	Plan	for	Directors.	On	Dec.	31,	2006,	there	were	only	two	retired	Directors	with	accounts	remaining	in	the	PPG	Directors'	Common Stock	Plan.	For	one	retired	Director,	the	Common	Stock	Equivalents	will	be	converted	to	cash	at	the	fair	market	value	of	the	common	stock	and	paid	in	cash	upon distribution.	For	the	other	retired	Director,	the	Common	Stock	Equivalents	will	be	converted	into	and	paid	in	Common	Stock	of	the	Company	(and	cash	as	to	any fractional	Common	Stock	Equivalent)	upon	distribution.	These	Directors,	as	a	group,	received	26,	58	and	93	Common	Stock	Equivalents	in	2006,	2005	and	2004, respectively,	under	this	plan.	The	values	of	those	Common	Stock	Equivalents,	when	credited,	ranged	from	$61.32	to	$65.84	in	2006,	$57.85	to	$72.95	in	2005	and $57.69	to	$65.09	in	2004.

# Issuer	Purchases	of	Equity	Securities

The	following	table	summarizes	the	Company's	stock	repurchase	activity	for	the	three	months	ended	Dec.	31,	2006:

|  |  |  | Total | Maximum |
| :--- | :--- | :--- | :--- | :--- |
|  |  |  | Number | Number\tof |
|  |  |  | of\tShares | Shares |
|  |  |  | Purchased | that\tMay |
|  | Total |  | as\tPart\tof | Yet\tBe |
|  | Number\tof | Average | Publicly | Purchased |
|  | Shares | Price\tPaid | Announced | Under\tthe |
|  |  |  |  | (1) |
| Month | Purchased | per\tShare | Program | Program |
| October\t2006 |  |  |  |  |
| Repurchase\tprogram | 236,300 | $68.45 | 236,300 | 8,980,000 |
| (2) |  |  |  |  |
| Other\ttransactions | 103,099 | 69.03 | — | — |
| November\t2006 |  |  |  |  |
| Repurchase\tprogram | 861,900 | 65.45 | 861,900 | 8,118,100 |
| (2) |  |  |  |  |
| Other\ttransactions | 13,116 | 67.41 | — | — |
| December\t2006 |  |  |  |  |
| Repurchase\tprogram | 456,700 | 65.10 | 456,700 | 7,661,400 |
| (2) |  |  |  |  |
| Other\ttransactions | 68,553 | 66.09 | — | — |
| Total\tquarter\tended |  |  |  |  |
| Dec.\t31,\t2006 |  |  |  |  |
| Repurchase\tprogram | 1,554,900 | $65.80 | 1,554,900 | 7,661,400 |
| (2) |  |  |  |  |
| Other\ttransactions | 184,768 | $67.82 | — | — |
| (1) |  |  |  |  |

(1) These	shares	were	repurchased	under	a	10	million	share	repurchase	program	approved	by	PPG's	Board	of	Directors	in	October	2005.

(2) Includes	shares	withheld	or	certified	to	in	satisfaction	of	the	exercise	price	and/or	tax	withholding	obligation	by	holders	of	employee	stock	options	who	exercised	options	granted	under	the	PPG	Industries,	Inc. Stock	Plan.

# Equity	Compensation	Plan	Information

The	plan	documents	for	the	plans	described	in	the	footnotes	below	are	included	as	Exhibits	to	this	Form	10-K,	and	are	incorporated	herein	by	reference	in	their	entirety. The	following	table	provides	information	as	of	Dec.	31,	2006	regarding	the	number	of	shares	of	PPG	Common	Stock	that	may	be	issued	under	PPG's	equity compensation	plans.

|  |  |  |  | available	for |
| :--- | :--- | :--- | :--- | :--- |
|  |  | Number\tof |  | future |
|  |  | securities | Weighted- | issuance |
|  |  | to\tbe\tissued | average | under\tequity |
|  |  | upon | exercise | compensation |
|  |  | exercise\tof | price\tof | plans |
|  |  | outstanding | outstanding | (excluding |
|  |  | options, | options, | securities |
|  |  | warrants | warrants | reflected\tin |
|  |  | and\trights | and\trights | column\t(a)) |
| Plan\tcategory |  | (a) | (b) | (c) |
| Equity\tcompensation |  |  |  |  |
| plans\tapproved\tby\tsecurity |  |  |  |  |
| holders^(1) |  | 9,413,216 | $58.35 | 10,265,556 |
| Equity\tcompensation |  |  |  |  |
| plans\tnot\tapproved\tby |  |  |  |  |
| security\tholders^(2),\t(3) |  | 2,089,300 | $70.00 | — |
|  | Total | 11,502,516 | $60.57 | 10,265,556 |
| (1) |  |  |  |  |

(1) Equity	compensation	plans	approved	by	security	holders	include	the	PPG	Industries,	Inc.	Stock	Plan,	the	PPG	Omnibus	Plan,	the	PPG	Industries,	Inc.	Executive	Officers'	Long	Term	Incentive	Plan,	and	the	PPG Industries	Inc.	Long	Term	Incentive	Plan.

(2) Equity	compensation	plans	not	approved	by	security	holders	include	the	PPG	Industries,	Inc.	Challenge	2000	Stock	Plan.	This	plan	is	a	broad-based	stock	option	plan	under	which	the	Company	granted	to substantially	all	active	employees	of	the	Company	and	its	majority	owned	subsidiaries	on	July	1,	1998,	the	option	to	purchase	100	shares	of	the	Company's	common	stock	at	its	then	fair	market	value	of	$70.00	per share.	Options	became	exercisable	on	July	1,	2003,	and	expire	on	June	30,	2008.	There	were	2,089,300	shares	issuable	upon	exercise	of	options	outstanding	under	this	plan	as	of	Dec.	31,	2006.

(3) Excluded	from	the	information	presented	here	are	common	stock	equivalents	held	under	the	PPG	Industries,	Inc.	Deferred	Compensation	Plan,	the	PPG	Industries,	Inc.	Deferred	Compensation	Plan	for	Directors and	the	PPG	Industries,	Inc.	Directors'	Common	Stock	Plan,	none	of	which	are	equity	compensation	plans.	As	supplemental	information,	there	were	491,168	common	stock	equivalents	held	under	such	plans	as	of Dec.	31,	2006.

# Item	6.	Selected	Financial	Data

The	information	required	by	Item	6	regarding	the	selected	financial	data	for	the	five	years	ended	Dec.	31,	2006	is	included	in	Exhibit	99.2	filed	with	this	Form	10-K	and is	incorporated	herein	by	reference.	This	information	is	also	reported	in	the	Eleven-Year	Digest	on	page	72	of	the	Annual	Report	under	the	captions	net	sales,	income (loss)	before	accounting	changes,	cumulative	effect	of	accounting	changes,	net	income	(loss),	earnings	(loss)	per	common	share	before	accounting	changes,	cumulative effect	of	accounting	changes	on	earnings	(loss)	per	common	share,	earnings	(loss)	per	common	share,	earnings	(loss)	per	common	share	–	assuming	dilution,	dividends per	share,	total	assets	and	long-term	debt	for	the	years	2002	through	2006.

# Item	7.	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations

# Performance	in	2006	compared	with	2005

# Performance	Overview

Our	sales	increased	8%	to	$11.0	billion	in	2006	compared	to	$10.2	billion	in	2005.	Sales	increased	4%	due	to	the	impact	of	acquisitions,	2%	due	to	increased	volumes, and	2%	due	to	increased	selling	prices.

Cost	of	sales	as	a	percentage	of	sales	increased	slightly	to	63.7%	compared	to	63.5%	in	2005.	Selling,	general	and	administrative	expense	increased	slightly	as	a percentage	of	sales	to	17.9%	compared	to	17.4%	in	2005.	These	costs	increased	primarily	due	to	higher	expenses	related	to	store	expansions	in	our	architectural	coatings operating	segment	and	increased	advertising	to	promote	growth	in	our	optical	products	operating	segment.

Other	charges	decreased	$81	million	in	2006.	Other	charges	in	2006	included	pretax	charges	of	$185	million	for	estimated	environmental	remediation	costs	at	sites in	New	Jersey	and	$42	million	for	legal	settlements	offset	in	part	by	pretax	earnings	of	$44	million	for	insurance	recoveries	related	to	the	Marvin	legal	settlement	and	to Hurricane	Rita.	Other	charges	in	2005	included	pretax	charges	of	$132	million	related	to	the	Marvin	legal	settlement	net	of	related	insurance	recoveries	of	$18	million, $61	million	for	the	federal	glass	class	action	antitrust	legal	settlement,	$34	million	of	direct	costs	related	to	the	impact	of	hurricanes	Rita	and	Katrina,	$27	million	for	an asset	impairment	charge	in	our	fine	chemicals	operating	segment	and	$19	million	for	debt	refinancing	costs.

Other	earnings	increased	$30	million	in	2006	due	to	higher	equity	earnings,	primarily	from	our	Asian	fiber	glass	joint	ventures,	and	higher	royalty	income.

Net	income	and	earnings	per	share	–	assuming	dilution	for	2006	were	$711	million	and	$4.27,	respectively,	compared	to	$596	million	and	$3.49,	respectively,	for 2005.	Net	income	in	2006	included	aftertax	charges	of	$106	million,	or	64	cents	a	share,	for	estimated	environmental	remediation	costs	at	sites	in	New	Jersey	and Louisiana	in	the	third	quarter;	$26	million,	or	15	cents	a	share,	for	legal	settlements;	$23	million,	or	14	cents	a	share	for	business	restructuring;	$17	million,	or	10	cents	a share,	to	reflect	the	net	increase	in	the	current	value	of	the	Company's	obligation	relating	to	asbestos	claims	under	the	PPG	Settlement	Arrangement;	and	aftertax earnings	of	$24	million,	or	14	cents	a	share	for	insurance	recoveries.	Net	income	in	2005	included	aftertax	charges	of	$117	million,	or	68	cents	a	share	for	legal settlements	net	of	insurance;	$21	million,	or	12	cents	a	share	for	direct	costs	related	to	the	impact	of	hurricanes	Katrina	and	Rita;	$17	million,	or	10	cents	a	share,	related to	an	asset	impairment	charge	related	to	our	fine	chemicals	operating	segment;	$12	million,	or	7	cents	a	share,	for	debt	refinancing	cost;	and	$13	million,	or	8	cents	a share,	to	reflect	the	net	increase	in	the	current

# Management's	Discussion	and	Analysis

value	of	the	Company's	obligation	relating	to	asbestos	claims	under	the	PPG	Settlement	Arrangement.	The	legal	settlements	net	of	insurance	included	aftertax	charges of	$80	million	for	the	Marvin	legal	settlement,	net	of	insurance	recoveries	of	$11	million,	and	$37	million	for	the	impact	of	the	federal	glass	class	action	antitrust	legal settlement.

# Results	of	Reportable	Business	Segments

| (Millions) | 2006 | 2005 | 2006 | 2005 |
| :--- | :--- | :--- | :--- | :--- |
| Industrial\tCoatings | $3,236 | $2,921 | $349 | $284 |
| Performance\tand\tApplied\tCoatings | 3,088 | 2,668 | 514 | 464 |
| Optical\tand\tSpecialty\tMaterials | 1,001 | 867 | 223 | 158 |
| Commodity\tChemicals | 1,483 | 1,531 | 285 | 313 |
| Glass | 2,229 | 2,214 | 148 | 123 |

Industrial	Coatings	sales	increased	$315	million	or	11%	in	2006.	Sales	increased	4%	due	to	acquisitions,	4%	due	to	increased	volumes	in	the	automotive,	industrial	and packaging	coatings	operating	segments,	2%	due	to	higher	selling	prices,	particularly	in	the	industrial	and	packaging	coatings	businesses	and	1%	due	to	the	positive effects	of	foreign	currency	translation.	Segment	income	increased	$65	million	in	2006.	The	increase	in	segment	income	was	primarily	due	to	the	impact	of	increased sales	volume,	lower	overhead	and	manufacturing	costs,	and	the	impact	of	acquisitions.	Segment	income	was	reduced	by	the	adverse	impact	of	inflation,	which	was substantially	offset	by	higher	selling	prices.

Performance	and	Applied	Coatings	sales	increased	$420	million	or	16%	in	2006.	Sales	increased	8%	due	to	acquisitions,	4%	due	to	higher	selling	prices	in	the refinish,	aerospace	and	architectural	coatings	operating	segments,	3%	due	to	increased	volumes	in	our	aerospace	and	architectural	coatings	businesses	and	1%	due	to	the positive	effects	of	foreign	currency	translation.	Segment	income	increased	$50	million	in	2006.	The	increase	in	segment	income	was	primarily	due	to	the	impact	of increased	sales	volume	and	higher	selling	prices,	which	more	than	offset	the	impact	of	inflation.	Segment	income	was	reduced	by	increased	overhead	costs	to	support growth	in	our	architectural	coatings	business.

Optical	and	Specialty	Materials	sales	increased	$134	million	or	15%	in	2006.	Sales	increased	10%	due	to	higher	volumes,	particularly	in	optical	products	and	fine chemicals	and	5%	due	to	acquisitions	in	our	optical	products	business.	Segment	income	increased	$65	million	in	2006.	The	absence	of	the	2005	charge	for	an	asset impairment	in	our	fine	chemicals	business	increased	segment	income	by	$27	million.	The	remaining	$38	million	increase	in	segment	income	was	primarily	due	to increased	volumes,	lower	manufacturing	costs,	and	the	absence	of	the	2005	hurricane	costs	of	$3	million,	net	of	2006	insurance	recoveries,	which	were	only	partially offset	by	increased	overhead	costs	in	our	optical	products	business	to	support	growth	and	the	negative	impact	of	inflation.

Commodity	Chemicals	sales	decreased	$48	million	or	3%	in	2006.	Sales	decreased	4%	due	to	lower	chlor-alkali	volumes	and	increased	1%	due	to	higher	selling prices.	Segment	income	decreased	$28	million	in	2006.	The	year-over-year	decline	in	segment	income	was	due	primarily	to	lower	sales	volumes	and	higher manufacturing	costs	associated	with	reduced	production	levels.	The	absence	of	the	2005	charges	for	direct	costs	related	to	hurricanes	increased	segment	income	by	$29 million.	The	impact	of	higher	selling	prices;	lower	inflation,	primarily	natural	gas	costs,	and	an	insurance	recovery	of	$10	million	related	to	the	2005	hurricane	losses also	increased	segment	income	in	2006.

Our	fourth-quarter	chlor-alkali	sales	volumes	and	earnings	were	negatively	impacted	by	production	outages	at	several	customers	over	the	last	two	months	of	2006. It	is	uncertain	when	some	of	these	customers	will	return	to	a	normal	level	of	production	which	may	impact	the	sales	and	earnings	of	our	chlor-alkali	business	in	early 2007.

Glass	sales	increased	$15	million	or	1%	in	2006.	Sales	increased	1%	due	to	improved	volumes	resulting	from	a	combination	of	organic	growth	and	an	acquisition. A	slight	positive	impact	on	sales	due	to	foreign	currency	translation	offset	a	slight	decline	in	pricing.	Volumes	increased	in	the	performance	glazings,	automotive replacement	glass	and	services	and	fiber	glass	businesses.	Automotive	OEM	glass	volume	declined	during	2006.	Pricing	was	also	up	in	performance	glazings,	but declined	in	the	other	glass	businesses.	Segment	income	increased	$25	million	in	2006.	This	increase	in	segment	income	was	primarily	the	result	of	higher	equity earnings	from	our	Asian	fiber	glass	joint	ventures,	higher	royalty	income	and	lower	manufacturing	and	natural	gas	costs,	which	more	than	offset	the	negative	impacts	of higher	inflation,	lower	margin	mix	of	sales	and	reduced	selling	prices.

Our	fiber	glass	operating	segment	made	progress	during	2006	in	achieving	our	multi-year	plan	to	improve	profitability	and	cash	flow.	A	transformation	of	our supply	chain,	which	includes	production	of	a	more	focused	product	mix	at	each	manufacturing	plant,	manufacturing	cost	reduction	initiatives	and	improved	equity earnings	from	our	Asian	joint	ventures	are	the	primary	focus	and	represent	the	critical	success	factors	in	this	plan.	During	2006,	our	new	joint	venture	in	China	started producing	high	labor	content	fiber	glass	reinforcement	products,	which	will	allow	us	to	refocus	our	U.S.	production	capacity	on	higher	margin,	direct	process	products. The	2006	earnings	improvement	by	our	fiber	glass	operating	segment	accounted	for	the	bulk	of	the	2006	improvement	in	the	Glass	reportable	business	segment	income.

The	2006	earnings	of	our	automotive	OEM	glass	operating	segment	declined	year	over	year	by	$9	million,	following	a	decline	of	$30	million	in	2005.	Significant structural	changes	continue	to	occur	in	the	North	American	automotive	industry,	including	the	loss	of	U.S.	market	share	by	General	Motors,	Ford	and	Daimler-Chrysler. This	has	created	a	challenging	and	competitive	environment	for	all	suppliers	to	the	domestic	OEMs,	including	our	operating	segment.	In	2007,	the	automotive	OEM glass	business	will	continue	to	focus	on	cost	reduction,	developing	new,	value	added	products	and	increasing	sales	volume.

We	have	an	ongoing	process	that	includes	a	review	of	our	array	of	operating	segments	in	relation	to	our	overall	strategic	and	performance	objectives.	In	2007,	this process	will	include	considering	alternatives	for	maximizing	shareholder	value.	These	alternatives	may	include	acquisitions,	restructure,	forming	strategic	alliances	and divestiture.	As	part	of	this	process,	we	are	initially	focused	on	the	automotive	OEM	glass,	automotive	replacement	glass	and	services	and	fine	chemicals	operating segments.	To	that	end,	we	have	engaged	outside	advisors	to	assist	us	in	considering	our	alternatives,	including	the	potential	sale	of	one	or	more	of	these	operating segments.

See	Note	23,	"Reportable	Business	Segment	Information,"	under	Item	8	of	this	Form	10-K	for	further	information	related	to	our	operating	segments	and	reportable business	segments.

# Other	Significant	Factors

The	effective	tax	rate	for	2006	was	26.2%	compared	to	29.8%	for	2005.	The	2006	rate	includes	the	benefit	of	a	tax	refund	from	Canada	resulting	from	the	favorable resolution	of	a	tax	dispute	dating	back	to	1997	and	a	tax	benefit	related	to	the	settlement	with	the	Internal	Revenue	Service	("IRS")	of	our	tax	returns	for	the	years	2001- 2003.	In	the	aggregate,	these	benefits	reduced	2006	income	tax	expense	by	$39	million.	The	2006	effective	tax	rate	includes	a	tax	benefit	of	36%	on	the	charge	for business	restructuring	and	a	tax	benefit	of	39%	on	the	third	quarter	environmental	remediation	charge	for	sites	in	New	Jersey	and	Louisiana,	on	the	charges	for	legal settlements,	and	on	the	adjustment	to	increase	the	current	value	of	the	Company's	obligation	relating	to	asbestos	claims	under	the	PPG	Settlement	Arrangement,	as discussed	in	Note	14,	"Commitments	and	Contingent	Liabilities"	under	Item	8	of	this	Form	10-K.	Income	tax	expense	of	39%	was	recognized	on	certain	insurance recoveries,	and	income	tax	expense	of	31.5%	was	recognized	on	the	remaining	pretax	earnings.	The	2005	effective	tax	rate	included	a	tax	benefit	of	39%	on	the	charge for	the	Marvin	legal	settlement	net	of	insurance	recoveries,	the	settlement	of	the	federal	glass	class	action	antitrust	case,	the	asset	impairment	charge	related	to	our	fine chemicals	operating	segment,	the	charge	for	debt	refinancing	costs	and	the	adjustment	to	increase	the	current	value	of	the	Company's	obligation	relating	to	asbestos claims	under	the	PPG	Settlement	Arrangement.	The	2005	effective	tax	rate	also	included	tax	expense	of	$9	million	related	to	dividends	repatriated	under	the	American Jobs	Creation	Act	of	2004	("AJCA	2004")	and	tax	expense	of	31.0%	on	the	remaining	pretax	earnings.	Our	current	estimate	of	the	effective	tax	rate	for	2007	is	31.5%.

# Outlook

In	2006,	growth	slowed	in	the	U.S.	and	overall	North	American	economy	during	the	year.	This	growth	rate	decelerated	more	in	the	second	half	of	the	year	due,	in	part,	to both	slower	U.S.	residential	construction	and	automobile	production.	Overall	industrial	production	increased	3%	for	the	year	despite	a	3%	decrease	in	automotive production.	Industrial	production	remains	the	economic	metric	that	most	positively	correlates	with	our	organic	volume	growth	because	it	reflects	activity	in	PPG's	broad end-use	markets.	The	U.S.	commercial	construction	sector	continued	to	grow	throughout	the	year	recording	growth	of	more	than	15%,	a	rate	well	above	recent	historical trends	and	overall	U.S.	GDP	growth.	The	European	economy	grew	at	a	fairly	consistent	rate	throughout	the	year	and	overall	industrial	activity	in	most	emerging	regions of	the	world	remained	robust.

Overall	inflation	rates	remained	fairly	modest	as	labor	rates	were	fairly	flat	through	most	of	the	world.	Energy	prices	and	other	basic	raw	material	costs	remained high	from	an	historical	perspective,	with	some	costs	increasing	slightly	while	others	declined	during	the	year.	Natural	gas	costs	in	the	U.S.	declined	from	all-time	record highs	experienced	at	the	end	of	2005	which	were	due,	in	part,	to	supply	disruptions	resulting	from	the	U.S.	hurricanes,	while	oil	costs	remained	at	high	levels	through year-end.

The	European	economy	grew	at	a	rate	of	about	3%	in	2006.	The	economic	growth	was	fueled	primarily	by	higher	industrial	production	and	lower	unemployment rates,	the	latter	of	which	aided	consumer	spending.	European	automotive	production	rose	by	about	3%,	as	increases	in	Eastern	Europe	offset	a	slight	decline	in	Western Europe.	Overall	industrial	production	expanded	by	about	1%.

The	Asian	economy	continued	to	post	very	high	growth	relative	to	historical	global	trends.	Industrial	production,	which	includes	vehicle	production	among	other sub-categories,	grew	at	more	than	15%	in	China.

Entering	2007,	many	economists	are	predicting	slower	North	American	growth	in	the	first	half	of	the	year	compared	with	2006.	Inflation	will	likely	remain	fairly

modest,	as	globalization	and	productivity	are	expected	to	minimize	labor	cost	inflation.	Additionally,	a	slower	U.S.	economy	would	reduce	demand	for	both	energy	and other	commodity	materials,	which	could	in	turn	impact	costs	favorably.	We	currently	expect	interest	rates	in	the	U.S.	to	decline	at	some	point	in	2007,	but	they	may increase	further	in	the	European	community.

Overall	global	economic	growth	is	expected	to	continue	despite	the	moderation	in	the	North	American	economy.	The	global	growth	will	continue	to	be	stimulated by	growth	in	the	emerging	regions	of	the	world	including	China,	India	and	Eastern	Europe.	Western	Europe	is	expected	to	continue	to	expand,	but	it	may	be	at	lower levels	than	2006	due,	in	part,	to	a	stronger	Euro	and	higher	interest	rates.

The	strong	growth	in	the	emerging	regions	continues	a	trend	that	has	been	prevalent	for	several	years.	Economic	growth	in	China	will	be	sustained	by	both continued	infrastructure	expansion	and	unrelenting	growth	in	its	industrial	base.	The	infrastructure	expansion	will	likely	be	helped	by	preparations	for	the	2008	Olympics which	will	be	held	in	China.

Global	companies	such	as	PPG	will	continue	to	benefit	by	this	overall	global	expansion,	as	evidenced	in	2006	where	PPG's	non-U.S.	and	non-Canadian	operations grew	organically	by	almost	10%.	As	this	globalization	increases,	customers	seek	both	global	solutions	and	global	servicing.

In	2007,	we	expect	continued	cost	pressures	including	certain	raw	materials,	transportation	and	healthcare	costs.	We	remain	focused	on	offsetting	these	cost pressures	through	aggressive	sourcing	initiatives	combined	with	manufacturing	cost	improvements,	productivity	and	selling	price	increases.

Our	pension	and	post	retirement	benefit	costs	totaled	$271	million	in	2006	reflecting	an	increase	of	$37	million	from	2005.	These	costs	remain	well	above	their 2000	level	as	a	result	of	subpar	investment	returns	over	this	time	period,	particularly	the	negative	investment	returns	in	the	equity	market	in	2001	and	2002,	a	reduction in	our	expected	future	rate	of	return	on	pension	plan	assets,	a	lower	discount	rate	environment	and	rising	retiree	medical	costs,	particularly	for	prescription	drugs. However,	based	on	our	current	estimates,	we	expect	our	pension	and	other	postretirement	benefits	costs	to	decline	by	approximately	$40	million	in	2007.	This	decline	is due	primarily	to	improved	actual	investment	returns	and	an	increase	in	the	discount	rate	environment	in	2006	as	well	as	the	impact	of	the	$100	million	contribution	we made	to	our	U.S.	pension	plans	in	2006.

In	the	area	of	energy,	natural	gas	costs	in	2006	remained	high	by	historical	standards,	but	did	decline	slightly	versus	the	2005	levels.	In	2005,	natural	gas	supply was	disrupted	by	the	two	severe	hurricanes,	Katrina	and	Rita,	which	impacted	the	U.S.	Gulf	Coast	in	the	third	and	fourth	quarters.	Changes	in	natural	gas	prices	have	a significant	impact	on	the	operating	performance	of	our	Commodity	Chemicals	and	Glass	businesses.	Each	one-dollar	change	in	the	price	of	natural	gas	per	million British	thermal	units	("mmbtu")	has	a	direct	impact	of	approximately	$60	million	to	$70	million	on	our	annual	operating	costs.

Our	2006	natural	gas	costs	averaged	about	$8.00	per	mmbtu	for	the	year,	while	our	2005	costs	averaged	about	$8.50.	While	it	remains	difficult	to	predict	future natural	gas	prices,	in	order	to	reduce	the	risks	associated	with	volatile	prices,	we	use	a	variety	of	techniques,	which	include	reducing	consumption	through	improved manufacturing	processes,	switching	to	alternative	fuels	and	hedging.	We	currently	estimate	our	cost	for	natural	gas	in	the	first	quarter	of	2007	will	be	lower	than	the	first quarter	of	2006.	We	currently	have	about	35%	of	our	first	quarter	2007	natural	gas	purchases	hedged	at	a	price	of	about	$8.30,	and	roughly	30%	of	our	2007	annual requirements	hedged	at	about	$8.00.

For	the	past	several	years	we	have	also	experienced	increases	in	the	prices	we	pay	for	raw	materials	used	in	many	of	our	businesses,	particularly	in	our	coatings businesses.	These	increases	have	resulted	from	the	industrial	expansion,	supply/demand	imbalance	and	increases	in	supplier	costs	for	oil	and	other	inputs.	Year-over- year	coatings	raw	material	costs	rose	by	$245	million	in	2005	and	costs	advanced	another	$75	million	in	2006.	We	have	and	plan	to	continue	to	combat	the	impact	of these	rising	costs	by	seeking	alternate	and	global	supply	sources	for	our	raw	materials,	reformulating	our	products,	improving	our	production	processes	and	raising	our selling	prices.

The	same	economic	factors,	along	with	high	capacity	utilization	and	industry	related	hurricane	outages,	resulted	in	tight	supplies	of	chlor-alkali	products	in	2005 and	a	large	portion	of	2006.	This	led	to	record	ECU	pricing	during	all	of	2005,	followed	by	another	record	year	in	2006.	First	quarter	2006	ECU	prices	reached	all-time levels	for	PPG,	and	prices	gradually	descended	each	subsequent	quarter.

Separately,	during	2006	several	chlor-alkali	competitors	in	the	industry	announced	permanent	facility	shutdowns	which	equate	to	approximately	4%	of	the	North American	production	capacity.	The	largest	portion	of	these,	approximately	3%,	was	completed	in	the	fourth	quarter	of	2006,	with	the	remainder	scheduled	for	late	2007.

In	the	fourth	quarter	of	2006,	PPG's	chlor-alkali	volumes	were	curtailed	due	to	facility	shutdowns	by	several	large	customers.	These	facility	shutdowns	were	due,	in part,	to	inventory	management	initiatives	by	customers,	reflecting	slowing	in	several	of	their	U.S.	end-markets.

We	see	a	continued,	dynamic	chlor-alkali	environment	in	2007.	It	is	uncertain	when	some	of	these	customers	will	return	to	a	normal	level	of	production	which	may impact	the	sales	and	earnings	of	our	chlor-alkali	business	in	early	2007.

PPG	also	supplies	a	variety	of	product	into	the	U.S.	residential	and	commercial	construction	markets.	In	2006,	the	demand	in	the	U.S.	residential	market	dropped notably,	as	U.S.	housing	starts	declined	13%.	Conversely,	investment	in	commercial	construction	increased	by	more	than	15%.

Also,	the	North	American	automotive	industry	continues	to	experience	structural	change,	including	the	loss	of	U.S.	market	share	by	General	Motors,	Ford,	and Daimler-Chrysler.	This	has	resulted	in	continuation	of	a	very	challenging	and	competitive	environment	for	all	suppliers	to	this	industry.	These	OEMs	are	also	faced	with, among	other	things,	funding	substantial	pension	and	post-retirement	medical	liabilities	that	place	stress	on	their	financial	condition.	Our	2006	sales	in	the	U.S.	and Canada	to	General	Motors,	Ford	and	the	automotive	tiered	suppliers	whose	Standard	&	Poor's	credit	rating	was	BB	or	lower	at	Dec.	31,	2006	totaled	approximately	4% of	our	total	global	sales.	These	sales	were	made	under	normal	credit	terms,	and	we	expect	to	collect	substantially	all	of	the	amounts	due	from	these	customers	at	Dec.	31, 2006	during	the	first	quarter	of	2007;	however,	we	continue	to	focus	on	the	management	of	this	credit	risk.

In	2006	we	continued	work	on	a	major	business	process	redesign	project	in	our	European	coatings	businesses	that	has	the	objectives	of	improving	our competitiveness,	supporting	our	initiatives	to	grow	the	business	and	increasing	our	margins.	The	project	will	standardize	our	business	processes	throughout	the	region	on a	common	IT	application	platform	in	a	newly	defined	business	model	that	includes	a	new	European	headquarters	established	in	Switzerland.	We	reached	the	first	key milestone	in	this	project	in	2006	as	we	moved	our	European	refinish	business	to	the	new	business	model	over	the	first	half	of	2006.	The	net	cost	savings	in	2006	were	not significant	but	will	increase	as	project	activities	continue	through	2008	as	we	move	our	other	European	coatings	businesses	to	this	new	model	in	2007	and	2008.

We	completed	a	series	of	acquisitions	in	2006	that	are	intended	to	strengthen	our	coatings	and	optical	products	businesses	by	broadening	their	product	offerings	and geographic	breadth.	Sales	increased	in	2006	by	$379	million	due	to	acquisitions,	and	the	acquired	businesses	were	slightly	accretive	to	earnings	in	2006.	We	expect	sales in	2007	from	these	acquisitions	to	be	$700	million	to	$800	million	with	meaningful	earnings	growth.

While	we	anticipate	some	ongoing	challenges	entering	2007	due	to	continued	softness	in	a	few	U.S.	customer	markets,	we	anticipate	that	solid	global	economic conditions	will	remain.	We	expect	to	continue	capitalizing	on	this	environment	with	organic	growth,	especially	in	emerging	regions,	and	remain	committed	to	continuing our	consistent	track	record	of	cash	generation	for	the	ongoing	benefit	of	our	shareholders.

# Accounting	Standards	Adopted	in	2006

Note	1,	"Summary	of	Significant	Accounting	Policies,"	under	Item	8	of	this	Form	10-K	details	the	impact	of	the	Company's	adoption	of	the	provisions	of	Statement	of Financial	Accounting	Standards	(SFAS)	No.	123(R),	"Share-Based	Payment;"	SFAS	No.	151,	"Inventory	Costs,	an	Amendment	of	ARB	No.	43,	Chapter	4;"	and	SFAS No.	158,	"Employers'	Accounting	for	Defined	Benefit	Pension	and	Other	Postretirement	Plans,	an	amendment	of	FASB	Statements	No.	87,	88,	106,	and	132(R)."

# Accounting	Standards	to	be	Adopted	in	Future	Years

In	June	2006,	the	FASB	issued	FASB	Interpretation	("FIN")	No.	48,	"Accounting	for	Uncertainty	in	Income	Taxes,	an	interpretation	of	FASB	Statement	No.	109".	FIN No.	48	clarifies	the	accounting	for	uncertainty	in	income	taxes	recognized	in	an	enterprise's	financial	statements	and	prescribes	a	recognition	threshold	and	measurement attribute	for	the	financial	statement	recognition	and	measurement	of	a	tax	position	taken	or	expected	to	be	taken	in	a	tax	return.	FIN	No.	48	is	effective	for	fiscal	years beginning	after	Dec.	15,	2006.	We	are	in	the	process	of	evaluating	the	effect	that	the	adoption	of	this	interpretation	will	have	on	PPG.	We	currently	expect	that	we	will reduce	our	tax	contingency	reserve	by	an	amount	that	will	not	have	a	material	effect	on	PPG's	financial	position.

In	September	2006,	the	FASB	issued	SFAS	No.	157,	"Fair	Value	Measurements,"	which	defines	fair	value,	establishes	a	framework	for	measuring	fair	value	in GAAP,	and	expands	disclosures	about	fair	value	measurements.	This	standard	only	applies	when	other	standards	require	or	permit	the	fair	value	measurement	of	assets and	liabilities.	It	does	not	increase	the	use	of	fair	value	measurement.	SFAS	No.	157	is	effective	for	fiscal	years	beginning	after	Nov.	15,	2007.	The	Company	is currently	evaluating	the	impact	of	adopting	this	Statement;	however,	we	do	not	expect	it	to	have	an	effect	on	PPG's	consolidated	results	of	operations	or	financial position.

Our	sales	increased	7%	to	$10.2	billion	in	2005	compared	to	$9.5	billion	in	2004.	Sales	increased	6%	due	to	higher	selling	prices,	primarily	in	our	Commodity Chemicals,	Industrial	Coatings	and	Performance	and	Applied	Coatings	reportable	business	segments,	and	1%	due	to	the	positive	effects	of	foreign	currency	translation. The	impact

of	increased	volumes	in	our	Performance	and	Applied	Coatings,	Optical	and	Specialty	Materials	and	Glass	reportable	business	segments	was	offset	by	volume	declines in	the	Commodity	Chemicals	reportable	business	segment.	The	volume	decline	in	the	Commodity	Chemicals	reportable	business	segment	was	due	in	part	to	lost	sales resulting	from	the	impact	of	Hurricane	Rita,	as	discussed	below.

Cost	of	sales	as	a	percentage	of	sales	increased	to	63.5%	as	compared	to	63.1%	in	2004.	Inflation,	including	higher	coatings	raw	material	costs	and	higher	energy costs	in	our	Commodity	Chemicals	and	Glass	reportable	business	segments	increased	our	cost	of	sales.

Selling,	general	and	administrative	expense	declined	slightly	as	a	percentage	of	sales	to	17.4%	despite	increasing	by	$56	million	in	2005.	These	costs	increased primarily	due	to	increased	advertising	in	our	optical	products	operating	segment	and	higher	expenses	due	to	store	expansions	in	our	architectural	coatings	operating segment.	Interest	expense	declined	$9	million	in	2005,	reflecting	the	year	over	year	reduction	in	the	outstanding	debt	balance	of	$80	million.

Other	charges	increased	$284	million	in	2005	primarily	due	to	pretax	charges	of	$132	million	related	to	the	Marvin	legal	settlement,	net	of	$18	million	in	insurance recoveries,	$61	million	for	the	federal	glass	class	action	antitrust	legal	settlement,	$34	million	of	direct	costs	related	to	the	impact	of	hurricanes	Rita	and	Katrina,	$27 million	for	an	asset	impairment	charge	in	our	fine	chemicals	operating	segment,	$19	million	for	debt	refinancing	costs	and	an	increase	of	$12	million	for	environmental remediation	costs.

Net	income	and	earnings	per	share	–	assuming	dilution	for	2005	were	$596	million	and	$3.49	respectively,	compared	to	$683	million	and	$3.95,	respectively,	for 2004.	Net	income	in	2005	included	aftertax	charges	of	$117	million,	or	68	cents	a	share,	for	legal	settlements	net	of	insurance;	$21	million,	or	12	cents	a	share	for	direct costs	related	to	the	impact	of	hurricanes	Katrina	and	Rita;	$17	million,	or	10	cents	a	share	related	to	an	asset	impairment	charge	related	to	our	fine	chemicals	business; and	$12	million,	or	7	cents	a	share,	for	debt	refinancing	costs.	The	legal	settlements	net	of	insurance	include	aftertax	charges	of	$80	million	for	the	Marvin	legal settlement,	net	of	insurance	recoveries,	and	$37	million	for	the	impact	of	the	federal	glass	class	action	antitrust	legal	settlement.	Net	income	for	2005	and	2004	included an	aftertax	charge	of	$13	million,	or	8	cents	a	share,	and	$19	million,	or	11	cents	a	share,	respectively,	to	reflect	the	net	increase	in	the	current	value	of	the	Company's obligation	relating	to	asbestos	claims	under	the	PPG	Settlement	Arrangement.

| (Millions) | 2005 | 2004 | 2005 | 2004 |
| :--- | :--- | :--- | :--- | :--- |
| Industrial\tCoatings | $2,921 | $2,818 | $284 | $338 |
| Performance\tand\tApplied\tCoatings | 2,668 | 2,478 | 464 | 451 |
| Optical\tand\tSpecialty\tMaterials | 867 | 805 | 158 | 186 |
| Commodity\tChemicals | 1,531 | 1,229 | 313 | 113 |
| Glass | 2,214 | 2,183 | 123 | 166 |

Sales	of	Industrial	Coatings	increased	$103	million	or	4%	in	2005.	Sales	increased	2%	due	to	higher	selling	prices	in	our	industrial	and	packaging	coatings businesses	and	2%	due	to	the	positive	effects	of	foreign	currency	translation.	Volume	was	flat	year	over	year	as	increased	volume	in	automotive	coatings	was	offset	by lower	volume	in	industrial	and	packaging	coatings.	Segment	income	decreased	$54	million	in	2005.	The	decrease	in	segment	income	was	due	to	the	adverse	impact	of inflation,	including	raw	materials	costs	increases	of	about	$170	million,	which	more	than	offset	the	benefits	of	higher	selling	prices,	improved	sales	margin	mix,	formula cost	reductions,	lower	manufacturing	costs	and	higher	other	income.

Performance	and	Applied	Coatings	sales	increased	$190	million	or	8%	in	2005.	Sales	increased	4%	due	to	higher	selling	prices	in	all	three	operating	segments,	3% due	to	increased	volumes	as	increases	in	our	aerospace	and	architectural	coatings	businesses	exceeded	volume	declines	in	automotive	refinish,	and	1%	due	to	the positive	effects	of	foreign	currency	translation.	Performance	and	Applied	Coatings	segment	income	increased	$13	million	in	2005.	Segment	income	increased	due	to	the impact	of	increased	sales	volumes	described	above	and	higher	other	income,	which	combined	to	offset	the	negative	impacts	of	higher	overhead	costs	to	support	the growth	in	these	businesses,	particularly	in	the	architectural	coatings	business,	and	higher	manufacturing	costs.	The	impact	of	higher	selling	prices	fully	offset	the	adverse impact	of	inflation,	including	raw	materials	cost	increases	of	about	$75	million.

Optical	and	Specialty	Materials	sales	increased	$62	million	or	8%.	Sales	increased	8%	due	to	higher	sales	volumes	in	our	optical	products	and	silica	businesses, which	offset	lower	sales	volumes	in	our	fine	chemicals	business.	Sales	increased	1%	due	to	an	acquisition	in	our	optical	products	business	and	decreased	1%	due	to lower	pricing.	Segment	income	decreased	$28	million.	The	primary	factor	decreasing	segment	income	was	the	$27	million	impairment	charge	related	to	our	fine chemicals	business.	The	impact	of	higher	sales	volumes	described	above	was	offset	by	higher	inflation,	including	increased	energy	costs;	lower	selling	prices;	increased overhead	costs	in	our	optical	products	business	to	support	growth

and	$4	million	of	direct	costs	related	to	the	impact	of	the	hurricanes.

Market	conditions,	such	as	fewer	new	drug	approvals,	product	withdrawals,	excess	production	capacity	and	increasing	share	of	generic	drugs,	put	pressure	on	the pharmaceutical	industry	and	created	a	challenging	environment	for	our	fine	chemicals	business.	These	conditions	produced	an	operating	performance	in	fine	chemicals in	2005	that	was	disappointing.	As	a	result,	in	the	fourth	quarter,	the	Company	evaluated	our	fine	chemicals	business	for	impairment	in	accordance	with	SFAS	No.	144, "Accounting	for	the	Impairment	of	Long-Lived	Assets",	and	determined	that	indicators	of	impairment	were	present	for	certain	long-lived	assets	at	our	manufacturing plant	in	the	United	States.	In	measuring	the	fair	value	of	these	assets,	the	Company	utilized	an	expected	cash	flow	methodology	to	determine	that	the	carrying	value	of these	assets	exceeded	their	fair	value	by	$24	million.	We	also	wrote	down	the	assets	of	a	small	fine	chemical	facility	in	France	to	their	estimated	net	realizable	value. Due	to	these	developments,	the	Company	recorded	an	asset	impairment	charge	related	to	these	fine	chemicals	assets	of	$27	million	pretax,	which	was	included	in	"Other charges"	in	the	statement	of	income	for	the	year	ended	Dec.	31,	2005.

Commodity	Chemicals	sales	increased	$302	million	or	25%.	Sales	increased	35%	due	to	higher	selling	prices	and	decreased	10%	due	to	lower	sales	volumes,	which were	adversely	impacted	in	the	third	and	fourth	quarters	by	the	impact	of	the	hurricanes.	Segment	income	increased	$200	million	in	2005.	The	primary	factor	increasing segment	income	was	the	record	high	selling	prices	in	2005.	Factors	decreasing	segment	income	were	higher	inflation,	including	$127	million	due	to	increased	energy and	ethylene	costs;	$29	million	of	direct	costs	related	to	the	impact	of	the	hurricanes;	lower	sales	volumes;	higher	manufacturing	costs;	and	increased	environmental remediation	expense.	The	hurricanes	hit	the	Gulf	Coast	in	September	impacting	volumes	and	costs	in	September	through	November	and	contributing	to	the	rise	in	natural gas	prices	which	lowered	fourth	quarter	Commodity	Chemicals	earnings	by	$54	million,	almost	58%	of	the	full	year	impact	of	higher	natural	gas	prices.

The	damage	caused	by	Hurricane	Rita	resulted	in	the	shutdown	of	our	Lake	Charles,	LA	chemicals	plant	for	a	total	of	eight	days	in	September	and	an	additional five	days	in	October.	On	Sept.	26,	2005,	following	Hurricane	Rita,	PPG	declared	force	majeure	for	products	produced	at	the	Lake	Charles	facility.	On	Oct.	6,	2005,	the facility	resumed	production	at	reduced	operating	rates,	and	returned	to	full	production	capability	in	mid-November.	PPG	recorded	a	pretax	charge	in	the	amount	of	$34 million	in	2005	for	direct	costs	primarily	related	to	hurricane	damage	to	the	Lake	Charles	facility.	This	charge	is	included	in	"Other	charges"	in	the	statement	of	income under	Item	8	of	this	Form	10-K	for	the	year	ended	Dec.	31,	2005.	The	Company	also	estimates	that	pretax	earnings	were	reduced	by	approximately	$27	million	in	2005 due	to	lower	sales	volumes	resulting	from	Hurricane	Rita.	The	Company	was	engaged	in	discussions	in	early	2006	with	its	insurance	providers	that	resulted	in	insurance recoveries	in	the	third	quarter	of	2006.

Glass	sales	increased	$31	million	or	1%	in	2005.	Sales	increased	1%	due	to	improved	volumes	as	increases	in	our	automotive	replacement	glass	and	services	and performance	glazings	businesses	offset	volume	declines	in	our	fiber	glass	and	automotive	original	equipment	glass	businesses.	The	positive	effects	of	foreign	currency translation	were	largely	offset	by	lower	selling	prices	primarily	in	our	automotive	replacement	glass	and	services	and	automotive	original	equipment	businesses. Segment	income	decreased	$43	million	in	2005.	The	$49	million	impact	of	rising	natural	gas	costs	and	the	absence	of	the	$19	million	gain	in	2004	from	the sale/leaseback	of	precious	metals	combined	to	account	for	a	reduction	in	segment	income	of	$68	million.	The	remaining	year-over-year	increase	in	Glass	segment income	of	$25	million	resulted	primarily	from	improved	manufacturing	efficiencies	and	lower	overhead	costs	exceeding	the	adverse	impact	of	other	inflation.

Our	continuing	efforts	in	2005	to	position	the	fiber	glass	business	for	future	growth	in	profitability	were	adversely	impacted	by	the	rise	in	fourth	quarter	natural	gas prices,	slightly	lower	year-over-year	sales,	lower	equity	earnings	due	to	weaker	pricing	in	the	Asian	electronics	market,	and	the	absence	of	the	$19	million	gain	which occurred	in	2004	stemming	from	the	sale/	leaseback	of	precious	metals.	Despite	high	energy	costs,	we	expected	fiber	glass	earnings	to	improve	in	2006	because	of	price strengthening	in	the	Asian	electronics	market,	which	began	to	occur	in	the	fourth	quarter	of	2005,	increased	cost	reduction	initiatives	and	the	positive	impact	resulting from	the	start	up	of	our	new	joint	venture	in	China.	This	joint	venture	will	produce	high	labor	content	fiber	glass	reinforcement	products	and	take	advantage	of	lower labor	costs,	allowing	us	to	refocus	our	U.S.	production	capacity	on	higher	margin	direct	process	products.

The	2005	earnings	of	our	North	American	automotive	OEM	glass	operating	segment	declined	by	$30	million	compared	with	2004.	Significant	structural	changes continue	to	occur	in	the	North	American	automotive	industry,	including	the	loss	of	U.S.	market	share	by	General	Motors	and	Ford.	This	has	created	a	challenging	and competitive	environment	for	all	suppliers	to	the	domestic	OEMs,	including	our	operating	segment.	About	half	of	the	decline	in	earnings	resulted	from	the	impact	of rising	natural	gas	costs,	particularly	in	the	fourth	quarter,	combined	with	the	traditional	adverse	impact	of	year-over-year	sales	price	reductions	producing	a	decline	in

earnings	that	exceeded	our	successful	efforts	to	reduce	manufacturing	costs.	The	other	half	of	the	2005	decline	was	due	to	lower	sales	volumes	and	mix	and	higher	new program	launch	costs.

The	Company's	pension	and	other	postretirement	benefit	costs	for	2005	were	$12	million	lower	than	in	2004.	This	decrease	represents	the	impact	of	market	driven growth	in	pension	plan	assets	that	occurred	in	2004	and	an	increased	benefit	provided	by	the	subsidy	offered	pursuant	to	the	Medicare	Prescription	Drug,	Improvement Act	of	2003	(the	"Medicare	Act")	in	2005,	offset	in	part	by	a	decrease	in	the	discount	rate.	The	majority	of	the	Company's	defined	benefit	plans	continued	to	be underfunded	on	an	accumulated	benefit	obligation	("ABO")	basis	at	Dec.	31,	2005.	The	underfunded	amount	increased	in	2005,	resulting	in	an	increase	in	the	minimum pension	liability	and	a	decrease	in	shareholders'	equity	through	a	decrease	in	accumulated	other	comprehensive	income	of	$173	million,	aftertax.	This	increase	in	the underfunded	amount	reflects	a	reduction	of	40	basis	points	in	the	discount	rate	and	the	impact	of	a	change	in	the	mortality	assumption	for	the	U.S.	plans	used	to	calculate the	ABO.	See	Note	13,	"Pensions	and	Other	Postretirement	Benefits,"	under	Item	8	of	this	Form	10-K	for	additional	information.

In	October	2004,	the	American	Jobs	Creation	Act	of	2004	("AJCA	2004")	was	signed	into	law.	Among	its	many	provisions,	the	AJCA	2004	provided	a	limited opportunity	through	2005	to	repatriate	the	undistributed	earnings	of	non-U.S.	subsidiaries	at	a	U.S.	tax	cost	that	could	be	lower	than	the	normal	tax	cost	on	such distributions.	During	2005,	we	repatriated	$114	million	of	dividends	under	the	provisions	of	AJCA	2004	resulting	in	income	tax	expense	of	$9	million.	In	the	absence	of AJCA	2004,	the	Company	estimates	the	tax	cost	to	repatriate	these	dividends	would	have	been	$23	million	higher.

The	effective	tax	rate	for	2005	was	29.8%	compared	to	30.3%	for	2004.	The	2005	effective	tax	rate	included	a	tax	benefit	of	39%	on	the	$132	million	charge	for	the Marvin	legal	settlement	net	of	insurance	recoveries,	the	$61	million	settlement	of	the	federal	glass	class	action	antitrust	case,	the	$27	million	asset	impairment	charge related	to	our	fine	chemicals	operating	segment,	the	$19	million	charge	for	debt	refinancing	costs	and	the	adjustment	to	increase	the	current	value	of	the	Company's obligation	related	to	asbestos	claims	under	the	PPG	Settlement	Arrangement,	as	discussed	in	Note	14,	"Commitments	and	Contingent	Liabilities"	under	Item	8	of	this Form	10-K.	The	effective	tax	rate	also	included	tax	expense	of	$9	million	related	to	dividends	repatriated	under	the	AJCA	2004	and	tax	expense	of	31.0%	on	the remaining	pretax	earnings.	The	2005	effective	tax	rate	also	included	the	benefit	of	the	U.S.	manufacturing	deduction,	which	was	created	by	AJCA	2004.	The	2004 effective	tax	rate	included	a	tax	benefit	of	39%	on	the	adjustment	to	increase	the	current	value	of	the	Company's	obligation	related	to	asbestos	claims	under	the	PPG Settlement	Arrangement	and	tax	expense	of	30.5%	on	the	remaining	pretax	earnings.

# 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.	See	Item	3,	"Legal	Proceedings"	of	this	Form	10-K	and	Note	14,	"Commitments	and	Contingent	Liabilities,"	under	Item	8	of	this	Form	10-K	for	a description	of	certain	of	these	lawsuits,	including	a	description	of	the	proposed	PPG	Settlement	Arrangement	for	asbestos	claims	announced	on	May	14,	2002	and	a description	of	the	antitrust	suits	against	PPG	related	to	the	flat	glass	and	automotive	refinish	industries.	As	discussed	in	Item	3	and	Note	14,	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	in	the	event	the	PPG	Settlement	Arrangement	described	in	Note	14	does	not	become	effective,	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.

It	is	PPG's	policy	to	accrue	expenses	for	environmental	contingencies	when	it	is	probable	that	a	liability	has	been	incurred	and	the	amount	of	loss	can	be	reasonably estimated.	Reserves	for	environmental	contingencies	are	exclusive	of	claims	against	third	parties	and	are	generally	not	discounted.	As	of	Dec.	31,	2006	and	2005,	PPG had	reserves	for	environmental	contingencies	totaling	$282	million	and	$94	million,	respectively,	of	which	$65	million	and	$29	million,	respectively,	were	classified	as current	liabilities.	Pretax	charges	against	income	for	environmental	remediation	costs	in	2006,	2005	and	2004	totaled	$207	million,	$27	million	and	$15	million, respectively,	and	are	included	in	"Other	charges"	in	the	statement	of	income.	Cash	outlays	related	to	such	environmental	remediation	aggregated	$22	million,	$14 million	and	$26	million,	in	2006,	2005	and	2004,	respectively.

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	$300	million,	which	range	has	been	revised	since	Dec.	31,	2005	to	reflect	the	impact	of	the

submission	of	a	feasibility	study	work	plan	for	the	former	chromium	manufacturing	plant	site	located	in	Jersey	City,	NJ	and	of	the	draft	remediation	feasibility	study	for the	Calcasieu	River	Estuary,	which	included	the	pretax	charge	of	$173	million	recorded	in	the	third	quarter	of	2006,	for	the	estimated	costs	of	remediating	these	sites, which	actions	are	more	fully	described	in	Note	14.	Such	unreserved	losses	are	reasonably	possible	but	are	not	currently	considered	to	be	probable	of	occurrence.

Management	anticipates	that	the	resolution	of	the	Company's	environmental	contingencies	will	occur	over	an	extended	period	of	time.	Over	the	15	years	prior	to 2006,	the	pretax	charges	against	income	ranged	between	$10	million	and	$49	million	per	year.	Consistent	with	our	previous	disclosure,	charges	for	estimated environmental	remediation	costs	in	2006	were	significantly	higher	than	our	historical	range	as	a	result	of	our	continuing	efforts	to	analyze	and	assess	the	environmental issues	associated	with	a	former	chromium	manufacturing	plant	site	located	in	Jersey	City,	NJ	and	at	the	Calcasieu	River	Estuary	located	near	our	Lake	Charles,	LA chlor-alkali	plant.	We	anticipate	that	charges	against	income	in	2007	will	be	within	the	prior	historical	range.	We	expect	cash	outlays	for	environmental	remediation costs	to	be	approximately	$65	million	in	2007	and	to	range	from	$50	million	to	$70	million	annually	through	2011.	It	is	possible,	however,	that	technological, regulatory	and	enforcement	developments,	the	results	of	environmental	studies	and	other	factors	could	alter	these	expectations.	See	Note	14	for	an	expanded	description of	certain	of	these	environmental	contingencies.	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.

# Impact	of	Inflation

In	2006,	the	increase	in	our	costs	due	to	the	negative	effects	of	inflation,	including	the	impact	of	higher	raw	material	costs	in	our	coatings	businesses,	was	offset	by higher	selling	prices	in	our	Industrial	Coatings,	Performance	and	Applied	Coatings	and	Commodity	Chemicals	reportable	segments	and	by	reduced	manufacturing	costs in	our	Glass	and	Optical	and	Specialty	Materials	reportable	segments.

In	2005,	the	increase	in	our	costs	due	to	the	negative	effects	of	inflation,	including	the	impact	of	higher	coatings	raw	material	costs	and	higher	energy	costs	in	our Glass	and	Commodity	Chemicals	businesses	were	offset	by	higher	selling	prices	in	our	Commodity	Chemicals	and	Performance	and	Applied	Coatings	reportable segments	but	were	not	offset	by	the	combination	of	higher	selling	prices	and	lower	manufacturing	costs	in	our	Industrial	Coatings,	Optical	and	Specialty	Materials	and Glass	reportable	segments.

In	2004,	the	combined	impact	of	lower	overall	selling	prices	and	higher	production	costs,	due	to	the	negative	effects	of	inflation,	including	the	impact	of	higher	raw material	and	labor	costs	across	all	our	reportable	segments	and	higher	energy	costs	in	our	Glass	and	Commodity	Chemicals	businesses,	was	only	partially	offset	by lower	manufacturing	costs.

We	expect	that	the	gradual	decline	in	ECU	pricing	in	our	Commodity	Chemicals	reportable	segment	that	began	in	the	second	quarter	of	2006	will	continue	into 2007.	We	also	expect	pricing	pressure	to	continue	in	Glass	in	2007.	The	combination	of	the	negative	impact	of	inflation	and	lower	pricing	is	expected	to	exceed	the productivity	improvements	and	lower	manufacturing	costs	for	2007	in	the	Commodity	Chemicals	and	Glass	reportable	segments.	In	the	remaining	reportable	segments, the	combination	of	higher	selling	prices	and	lower	manufacturing	costs	is	expected	to	offset	the	negative	impact	of	inflation.

# Liquidity	and	Capital	Resources

During	the	past	three	years,	we	had	sufficient	financial	resources	to	meet	our	operating	requirements,	to	fund	our	capital	spending,	share	repurchases	and	pension	plans and	to	pay	increasing	dividends	to	our	shareholders.

Cash	from	operating	activities	was	$1,130	million,	$1,065	million	and	$1,018	million	in	2006,	2005	and	2004,	respectively.	Capital	spending	was	$774	million, $379	million	and	$311	million	in	2006,	2005	and	2004,	respectively.	This	spending	related	to	modernization	and	productivity	improvements,	expansion	of	existing businesses,	environmental	control	projects	and	business	acquisitions,	which	amounted	to	$402	million,	$91	million	and	$67	million	in	2006,	2005	and	2004,

respectively.	We	also	assumed	$80	million	in	debt	in	connection	with	acquisitions	in	2006.	Capital	spending,	excluding	acquisitions,	is	expected	to	be	$350	to	$400 million	during	2007.

During	2007,	we	anticipate	making	acquisitions	as	part	of	our	strategy	for	accelerating	growth.	Any	acquisitions	would	be	funded	through	a	combination	of	cash	on hand,	cash	generated	from	operations	or	from	the	sale	of	other	businesses	and,	if	necessary,	external	funding	sources	or	the	issuance	of	stock.	In	Jan.	2007,	the	Company acquired	the	architectural	and	industrial	coatings	business	of	Renner	Sayerlack,	S.A.,	Gravatai,	Brazil.

Dividends	paid	to	shareholders	totaled	$316	million,	$316	million	and	$307	million	in	2006,	2005	and	2004,	respectively.	PPG	has	paid	uninterrupted	dividends since

1899,	and	2006	marked	the	35th	consecutive	year	of	increased	dividend	payments	to	shareholders.	In	Jan.	2007,	our	board	of	directors	raised	the	quarterly	dividend	on our	common	stock	to	50	cents	from	48	cents	a	share.	Over	time,	our	goal	is	to	sustain	our	dividends	at	approximately	one-third	of	our	earnings	per	share.

During	2006,	the	Company	repurchased	2.3	million	shares	of	PPG	common	stock	at	a	cost	of	$153	million	under	a	previously	authorized	share	repurchase program.	During	2005,	the	Company	repurchased	9.4	million	shares	of	PPG	common	stock	at	a	cost	of	$607	million	and	during	2004,	the	Company	repurchased	1.5 million	shares	of	PPG	common	stock	at	a	cost	of	$100	million.

Cash	contributions	to	our	employee	stock	ownership	plan	("ESOP")	and	related	expense	were	reduced	by	$18	million	in	2006	by	the	appreciation	on	PPG	shares purchased	prior	to	Dec.	31,	1992	allocated	to	participant	accounts	during	2006.	We	expect	cash	contributions	to	the	ESOP	and	related	expense	to	be	reduced	by	$10 million	in	2007	by	the	appreciation	on	such	shares.

During	June	2005,	the	Company	completed	a	debt	refinancing	consisting	of	tender	offers	in	the	United	States	to	retire	outstanding	debt	combined	with	the	issuance of	bonds	in	Europe.	As	part	of	this	refinancing,	the	Company	issued	€300	million	of	3.875%	Senior	Notes	due	2015	(the	"Euro	Notes").	The	proceeds	from	the	Euro Notes	were	used	to	repay	short-term	commercial	paper	obligations	incurred	in	June	2005	in	connection	with	the	purchase	of	$100	million	of	6.5%	notes	due	2007, $159	million	of	7.05%	notes	due	2009	and	$16	million	of	6.875%	notes	due	2012,	as	well	as	for	general	corporate	purposes.	The	Company	recorded	a	second	quarter 2005	pre-tax	charge	of	approximately	$19	million,	($12	million	after-tax	or	7	cents	per	share),	for	debt	refinancing	costs.

On	Aug.	17,	2006,	the	Pension	Protection	Act	of	2006	(the	"PPA")	was	signed	into	law,	changing	the	funding	requirements	for	our	U.S.	defined	benefit	pension plans	beginning	in	2008.	Under	current	funding	requirements,	PPG	did	not	have	to	make	a	mandatory	contribution	to	our	U.S.	plans	in	2006,	and	we	do	not	expect	to have	a	mandatory	contribution	to	these	plans	in	2007.	We	are	currently	evaluating	the	impact	that	PPA	will	have	on	our	funding	requirements	for	2008	and	beyond.	In 2006,	2005	and	2004	we	made	voluntary	contributions	to	our	U.S.	defined	benefit	pension	plans	of	$100	million,	$4	million	and	$100	million,	respectively,	and contributions	to	our	non-U.S.	defined	benefit	pension	plans	of	$24	million,	$26	million	and	$40	million,	respectively,	some	of	which	were	required	by	local	funding requirements.	We	expect	to	make	mandatory	contributions	to	our	non-U.S.	plans	in	2007	of	approximately	$37	million.	We	expect	to	make	a	$100	million	voluntary contribution	to	our	U.S.	plans	in	the	first	quarter	of	2007,	and	we	may	make	additional	voluntary	contributions	in	2007.

Cash	from	operations	and	the	Company's	debt	capacity	are	expected	to	continue	to	be	sufficient	to	fund	capital	spending,	including	acquisitions,	share	repurchases, dividend	payments,	contributions	to	pension	plans,	amounts	due	under	the	proposed	PPG	Settlement	Arrangement	and	operating	requirements,	including	PPG's significant	contractual	obligations,	which	are	presented	in	the	following	table	along	with	amounts	due	under	the	proposed	PPG	Settlement	Arrangement:

|  |  |  |  | 2008- | 2010- |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (Millions) |  | Total | 2007 | 2009 | 2011 | Thereafter |
| Contractual\tObligations |  |  |  |  |  |  |
|  | Long-term\tdebt | $1,218 | $64 | $120 | $— | $1,034 |
|  | Capital\tlease\tobligations | 2 | 1 | 1 | — | — |
|  | Operating\tleases | 300 | 90 | 121 | 57 | 32 |
|  | Unconditional |  |  |  |  |  |
|  | purchase\tobligations | 784 | 204 | 170 | 88 | 322 |
|  | Total | $2,304 | $359 | $412 | $145 | $1,388 |
| Asbestos\tSettlement | (1) |  |  |  |  |  |
|  | Aggregate\tcash\tpayments | $998 | $422 | $66 | $36 | $474 |
|  | PPG\tstock\tand\tother | 135 | 135 | — | — | — |
|  | Total | $1,133 | $557 | $66 | $36 | $474 |

(1) We	have	recorded	an	obligation	equal	to	the	net	present	value	of	the	aggregate	cash	payments,	along	with	the	PPG	stock	and	other	assets	to	be	contributed	to	the	Asbestos	Settlement	Trust.	However,	PPG	has	no obligation	to	pay	any	amounts	under	this	settlement	until	the	Effective	Date,	as	more	fully	discussed	in	Note	14,	"Commitments	and	Contingent	Liabilities"	under	Item	8	of	this	Form	10-K.

The	unconditional	purchase	commitments	are	principally	take-or-pay	obligations	related	to	the	purchase	of	certain	materials,	including	industrial	gases,	natural	gas,	coal and	electricity,	consistent	with	customary	industry	practice.

These	also	include	PPG's	commitment	to	purchase	electricity	and	steam	from	the	RS	Cogen	joint	venture	discussed	in	Note	5,	"Investments,"	under	Item	8	of	this	Form 10-K.

See	Note	8,	"Debt	and	Bank	Credit	Agreements	and	Leases,"	under	Item	8	of	this	Form	10-K	for	details	regarding	the	use	and	availability	of	committed	and uncommitted	lines	of	credit,	letters	of	credit,	guarantees,	and	debt	covenants.

In	addition	to	the	amounts	available	under	the	lines	of	credit,	the	Company	may	issue	up	to	$500	million	aggregate	principal	amount	of	debt	securities	under	a	shelf registration	statement	filed	with	the	Securities	and	Exchange	Commission	in	July	1999.

# Off-Balance	Sheet	Arrangements

The	Company's	off-balance	sheet	arrangements	include	the	operating	leases	and	unconditional	purchase	obligations	disclosed	in	the	"Liquidity	and	Capital	Resources" section	in	the	contractual	obligations	table	as

well	as	letters	of	credit	and	guarantees	as	discussed	in	Note	8,	"Debt	and	Bank	Credit	Arrangements	and	Leases,"	under	Item	8	of	this	Form	10-K.

# Critical	Accounting	Estimates

Management	has	evaluated	the	accounting	policies	used	in	the	preparation	of	the	financial	statements	and	related	notes	presented	under	Item	8	of	this	Form	10-K	and believes	those	policies	to	be	reasonable	and	appropriate.	We	believe	that	the	most	critical	accounting	estimates	used	in	the	preparation	of	our	financial	statements	relate 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,	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,	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	the	collectibility of	accounts	receivable,	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	3,	"Working	Capital	Detail,"	Note	12,	"Income	Taxes"	and	Note	14,	"Commitments	and	Contingent Liabilities"	under	Item	8	of	this	Form	10-K.

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,	extensive	use	is	made	of	assumptions	about	inflation,	investment	returns,	mortality,	turnover,	medical	costs and	discount	rates.	These	assumptions	are	reviewed	annually.	See	Note	13,	"Pensions	and	Other	Postretirement	Benefits,"	under	Item	8	of	this	Form	10-K	for information	on	these	plans	and	the	assumptions	used.

The	discount	rate	used	in	accounting	for	pensions	and	other	postretirement	benefits	is	determined	in	conjunction	with	our	actuary	by	reference	to	a	current	yield curve	and	by	considering	the	timing	and	amount	of	projected	future	benefit	payments.	The	discount	rate	assumption	for	2007	is	5.90%	for	our	U.S.	defined	benefit pension	and	other	postretirement	benefit	plans.	A	reduction	in	the	discount	rate	of	50	basis	points,	with	all	other	assumptions	held	constant,	would	increase	2007	net periodic	benefit	expense	for	our	defined	benefit	pension	and	other	postretirement	benefit	plans	by	approximately	$11	million	and	$5	million,	respectively.

The	expected	return	on	plan	assets	assumption	used	in	accounting	for	our	pension	plans	is	determined	by	evaluating	the	mix	of	investments	that	comprise	plan assets	and	external	forecasts	of	future	long-term	investment	returns.	For	2006,	the	return	on	plan	assets	assumption	for	our	U.S.	defined	benefit	pension	plans	was	8.5%. We	will	use	the	same	assumption	for	2007.	A	reduction	in	the	rate	of	return	of	50	basis	points,	with	other	assumptions	held	constant,	would	increase	2007	net	periodic pension	expense	by	approximately	$12	million.

Net	periodic	benefit	cost	for	our	U.S.	defined	benefit	pension	and	other	postretirement	benefit	plans	for	each	of	the	years	ended	Dec.	31,	2005	and	2004	was calculated	using	the	GAM	83	mortality	table,	a	commonly	used	mortality	table.	In	2006,	we	began	to	use	RP	2000,	a	newer	and	more	relevant	mortality	table	to calculate	net	periodic	benefit	costs	for	these	plans.	This	change	in	the	mortality	assumption	in	2006	increased	net	periodic	benefit	costs	by	approximately	$13	million	and $4	million	for	our	defined	benefit	pension	and	other	postretirement	benefit	plans,	respectively.

As	discussed	in	Note	1,	"Summary	of	Significant	Accounting	Policies,"	under	Item	8	of	this	Form	10-K,	the	Company	tests	goodwill	and	identifiable	intangible assets	with	indefinite	lives	for	impairment	at	least	annually	by	comparing	the	fair	value	of	the	reporting	units	to	their	carrying	values.	Fair	values	are	estimated	using discounted	cash	flow	methodologies	that	are	based	on	projections	of	the	amounts	and	timing	of	future	revenues	and	cash	flows.	Based	on	this	testing,	none	of	our goodwill	was	impaired	as	of	Dec.	31,	2006.	The	excess	of	fair	value	over	the	carrying	value	of	our	fiber	glass	reporting	unit	grew	during	2006	as	a	result	of	progress made	during	2006	in	achieving	our	multi-year	plan	to	improve	profitability	and	cash	flow.

As	part	of	our	ongoing	financial	reporting	process,	a	collaborative	effort	is	undertaken	involving	PPG	managers	with	functional	responsibility	for	financial,	credit, environmental,	legal,	tax	and	benefit	matters	and	outside	advisors	such	as	consultants,	engineers,	lawyers	and	actuaries.	The	results	of	this	effort	provide	management with	the	necessary	information	on	which	to	base	their	judgments	on	these	contingencies	and	to	develop	the	estimates	and	assumptions	used	to	prepare	the	financial statements.

We	believe	that	the	amounts	recorded	in	the	financial	statements	under	Item	8	of	this	Form	10-K	related	to	these	contingencies,	pensions,	other	postretirement benefits,	goodwill	and	other	identifiable	intangible	assets	with	indefinite	lives	are	based	on	the	best	estimates	and	judgments	of	the	appropriate	PPG	management, although	actual	outcomes	could	differ	from	our	estimates.

# Currency

During	2006,	the	U.S.	dollar	weakened	against	the	currencies	of	most	of	the	countries	in	which	PPG	operates,	most	notably	against	the	euro,	the	British	pound	sterling and	the	Australian	dollar.	The	effects	of	translating	the	net	assets	of	our	operations	denominated	in	non-U.S.	currencies	to	the	U.S.	dollar	increased	consolidated	net assets	by	$179	million	for	the	year	ended	Dec.	31,	2006.	In	addition,	the	weaker	U.S.	dollar	had	a	favorable	impact	on	2006	pretax	earnings	of	$9	million.

The	U.S.	dollar	was	weaker	than	the	euro	and	the	British	pound	sterling	for	most	of	the	first	eight	months	of	2005	when	compared	with	currency	rates	of	2004.	The U.S.	dollar	strengthened	against	these	currencies	during	the	last	four	months	of	2005.	The	effects	of	translating	the	net	assets	of	our	operations	denominated	in	non-U.S. currencies	to	the	U.S.	dollar	decreased	consolidated	net	assets	by	$215	million	for	the	year	ended	Dec.	31,	2005.	The	effect	of	currency	rate	changes	over	the	course	of the	year	resulted	in	a	net	favorable	impact	on	2005	pretax	earnings	as	compared	with	2004	of	$8	million.

During	2004,	the	U.S.	dollar	weakened	against	the	currencies	of	most	of	the	countries	in	which	PPG	operated,	most	notably	against	the	euro,	the	British	pound sterling	and	the	Canadian	dollar.	The	effects	of	translating	the	net	assets	of	our	operations	denominated	in	non-U.S.	currencies	to	the	U.S.	dollar	increased	consolidated net	assets	by	$180	million	for	the	year	ended	Dec.	31,	2004.	In	addition,	the	weaker	U.S.	dollar	had	a	favorable	impact	on	2004	pretax	earnings	of	$35	million.

Technological	innovation	has	been	a	hallmark	of	our	Company's	success	throughout	its	history.	Research	and	development	costs	totaled	over	3%	of	sales	in	each	of	the past	three	years,	representing	a	level	of	expenditure	that	we	expect	to	continue	in	2007.	These	costs	include	technology-driven	improvements	to	our	manufacturing processes	and	customer	technical	service,	as	well	as	the	costs	of	developing	new	products	and	processes.	Because	of	our	broad	array	of	products	and	customers,	we	are not	materially	dependent	upon	any	single	technology	platform.

# 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.

Forward-looking	statements	are	identified	by	the	use	of	the	words	"aim,"	"believe,"	"expect,"	"anticipate,"	"intend,"	"estimate"	and	other	expressions	that	indicate future	events	and	trends.	Any	forward-looking	statement	speaks	only	as	of	the	date	on	which	such	statement	is	made	and	the	Company	undertakes	no	obligation	to update	any	forward-looking	statement,	whether	as	a	result	of	new	information,	future	events	or	otherwise.	You	are	advised,	however,	to	consult	any	further	disclosures we	make	on	related	subjects	in	our	reports	to	the	Securities	and	Exchange	Commission.	Also,	note	the	following	cautionary	statements.

Many	factors	could	cause	actual	results	to	differ	materially	from	the	Company's	forward-looking	statements.	Such	factors	include	increasing	price	and	product competition	by	foreign	and	domestic	competitors,	fluctuations	in	cost	and	availability	of	raw	materials,	the	ability	to	maintain	favorable	supplier	relationships	and arrangements,	economic	and	political	conditions	in	international	markets,	the	ability	to	penetrate	existing,	developing	and	emerging	foreign	and	domestic	markets,	which also	depends	on	economic	and	political	conditions,	foreign	exchange	rates	and	fluctuations	in	such	rates,	and	the	unpredictability	of	existing	and	possible	future litigation,	including	litigation	that	could	result	if	PPG's	Settlement	Agreement	for	asbestos	claims	does	not	become	effective.	However,	it	is	not	possible	to	predict	or identify	all	such	factors.	Consequently,	while	the	list	of	factors	presented	here	is	considered	representative,	no	such	list	should	be	considered	to	be	a	complete	statement of	all	potential	risks	and	uncertainties.	Unlisted	factors	may	present	significant	additional	obstacles	to	the	realization	of	forward-looking	statements.

Consequences	of	material	differences	in	the	results	compared	with	those	anticipated	in	the	forward-looking	statements	could	include,	among	other	things,	business disruption,	operational	problems,	financial	loss,	legal	liability	to	third	parties	and	similar	risks,	any	of	which	could	have	a	material	adverse	effect	on	the	Company's consolidated	financial	condition,	results	of	operations	or	liquidity.

# Item	7a.	Quantitative	and	Qualitative	Disclosures	About	Market	Risk

PPG	is	exposed	to	market	risks	related	to	changes	in	foreign	currency	exchange	rates,	interest	rates,	and	natural	gas	prices	and	to	changes	in	PPG's	stock	price.	The Company	may	enter	into	derivative	financial	instrument	transactions	in	order	to	manage	or	reduce	these	market	risks.	A	detailed	description	of	these	exposures	and	the Company's	risk	management	policies	are	provided	in	Note	10,	"Derivative	Financial	Instruments	and	Hedge	Activities,"	under	Item	8	of	this	Form	10-K.

The	following	disclosures	summarize	PPG's	exposure	to	market	risks	and	information	regarding	the	use	of	and	fair	value	of	derivatives	employed	to	manage	our exposure	to	such	risks.	Quantitative	sensitivity	analyses	have	been	provided	to	reflect	how	reasonably	possible,	unfavorable	changes	in	market	rates	can	impact	PPG's consolidated	results	of	operations,	cash	flows	and	financial	position.

Foreign	currency	forward	and	option	contracts	outstanding	during	2006	and	2005	were	used	to	hedge	PPG's	exposure	to	foreign	currency	transaction	risk.	The	fair value	of	these	contracts	as	of	Dec.	31,	2006	and	2005	were	assets	of	$2	million	and	$1	million,	respectively.	The	potential	reduction	in	PPG's	earnings	resulting	from	the impact	of	adverse	changes	in	exchange	rates	on	the	fair	value	of	its	outstanding	foreign	currency	hedge	contracts	of	10%	for	European	currencies	and	20%	for	Asian	and South	American	currencies	for	the	years	ended	Dec.	31,	2006	and	2005	would	have	been	$2	million	and	$1	million,	respectively.

PPG	had	non-U.S.	dollar	denominated	debt	of	$472	million	as	of	Dec.	31,	2006	and	$433	million	as	of	Dec.	31,	2005.	A	weakening	of	the	U.S.	dollar	by	10% against	European	currencies	and	by	20%	against	Asian	and	South	American	currencies	would	have	resulted	in	unrealized	translation	losses	of	approximately	$63	million and	$50	million	as	of	Dec.	31,	2006	and	2005,	respectively.

Interest	rate	swaps	are	used	to	manage	a	portion	of	PPG's	interest	rate	risk.	The	fair	value	of	the	interest	rate	swaps	was	a	liability	of	$7	million	as	of	Dec.	31,	2006 and	2005.	The	fair	value	of	these	swaps	would	have	decreased	by	$2	million	and	$3	million	as	of	Dec.	31,	2006	and	2005,	respectively,	if	variable	interest	rates increased	by	10%.	A	10%	increase	in	interest	rates	in	the	U.S.,	Canada,	Mexico	and	Europe	and	a	20%	increase	in	interest	rates	in	Asia	and	South	America	would	have affected	PPG's	variable	rate	debt	obligations	by	increasing	interest	expense	by	approximately	$2	million	as	of	Dec.	31,	2006	and	2005.	Further,	a	10%	reduction	in interest	rates	would	have	increased	the	present	value	of	the	Company's	fixed	rate	debt	by	approximately	$51	million	and	$53	million	as	of	Dec.	31,	2006	and	2005, respectively;	however,	such	changes	would	not	have	had	an	effect	on	PPG's	annual	earnings	or	cash	flows.

The	fair	value	of	natural	gas	contracts	in	place	as	of	Dec.	31,	2006	was	a	liability	of	$25	million.	The	fair	value	of	natural	gas	swap	contracts	in	place	as	of	Dec.	31, 2005	was	an	asset	of	$0.3	million.	These	contracts	were	entered	into	to	reduce	PPG's	exposure	to	higher	prices	of	natural	gas.	A	10%	reduction	in	the	price	of	natural	gas would	result	in	a	loss	in	the	fair	value	of	the	underlying	natural	gas	swap	contracts	outstanding	as	of	Dec.	31,	2006	and	2005	of	approximately	$23	million	and	$3 million,	respectively.

An	equity	forward	arrangement	was	entered	into	to	hedge	the	Company's	exposure	to	changes	in	fair	value	of	its	future	obligation	to	contribute	PPG	stock	into	an asbestos	settlement	trust	(see	Note	10	and	Note	14,	"Commitments	and	Contingent	Liabilities,"	under	Item	8	of	this	Form	10-K).	The	fair	value	of	this	instrument	as	of Dec.	31,	2006	and	2005	was	an	asset	of	$14	million	and	$10	million,	respectively.	A	10%	decrease	in	PPG's	stock	price	would	have	reduced	the	value	of	this	instrument by	$6	million	and	$5	million,	respectively,	as	of	Dec.	31,	2006	and	2005.

# Item	8.	Financial	Statements	and	Supplementary	Data

# Internal	Controls	–	Report	of	Independent	Registered	Public	Accounting	Firm

# To	the	Board	of	Directors	and	Shareholders	of	PPG	Industries,	Inc.:

We	have	audited	management's	assessment,	included	in	the	accompanying	Management	Report,	that	PPG	Industries,	Inc.	and	subsidiaries	(the	"Company")	maintained effective	internal	control	over	financial	reporting	as	of	December	31,	2006,	based	on	criteria	established	in	Internal	Control	–	Integrated	Framework	issued	by	the Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission.	The	Company's	management	is	responsible	for	maintaining	effective	internal	control	over financial	reporting	and	for	its	assessment	of	the	effectiveness	of	internal	control	over	financial	reporting.	Our	responsibility	is	to	express	an	opinion	on	management's assessment	and	an	opinion	on	the	effectiveness	of	the	Company's	internal	control	over	financial	reporting	based	on	our	audit.

We	conducted	our	audit	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those	standards	require	that	we	plan and	perform	the	audit	to	obtain	reasonable	assurance	about	whether	effective	internal	control	over	financial	reporting	was	maintained	in	all	material	respects.	Our	audit included	obtaining	an	understanding	of	internal	control	over	financial	reporting,	evaluating	management's	assessment,	testing	and	evaluating	the	design	and	operating effectiveness	of	internal	control,	and	performing	such	other	procedures	as	we	considered	necessary	in	the	circumstances.	We	believe	that	our	audit	provides	a	reasonable basis	for	our	opinions.

A	company's	internal	control	over	financial	reporting	is	a	process	designed	by,	or	under	the	supervision	of,	the	company's	principal	executive	and	principal financial	officers,	or	persons	performing	similar	functions,	and	effected	by	the	company's	board	of	directors,	management,	and	other	personnel	to	provide	reasonable assurance	regarding	the	reliability	of	financial	reporting	and	the	preparation	of	financial	statements	for	external	purposes	in	accordance	with	accounting	principles generally	accepted	in	the	United	States	of	America.	A	company's	internal	control	over	financial	reporting	includes	those	policies	and	procedures	that	(1)	pertain	to	the maintenance	of	records	that,	in	reasonable	detail,	accurately	and	fairly	reflect	the	transactions	and	dispositions	of	the	assets	of	the	company;	(2)	provide	reasonable assurance	that	transactions	are	recorded	as	necessary	to	permit	preparation	of	financial	statements	in	accordance	with	accounting	principles	generally	accepted	in	the United	States	of	America,	and	that	receipts	and	expenditures	of	the	company	are	being	made	only	in	accordance	with	authorizations	of	management	and	directors	of	the company;	and	(3)	provide	reasonable	assurance	regarding	prevention	or	timely	detection	of	unauthorized	acquisition,	use,	or	disposition	of	the	company's	assets	that could	have	a	material	effect	on	the	financial	statements.

Because	of	the	inherent	limitations	of	internal	control	over	financial	reporting,	including	the	possibility	of	collusion	or	improper	management	override	of	controls, material	misstatements	due	to	error	or	fraud	may	not	be	prevented	or	detected	on	a	timely	basis.	Also,	projections	of	any	evaluation	of	the	effectiveness	of	the	internal control	over	financial	reporting	to	future	periods	are	subject	to	the	risk	that	the	controls	may	become	inadequate	because	of	changes	in	conditions,	or	that	the	degree	of compliance	with	policies	or	procedures	may	deteriorate.

In	our	opinion,	management's	assessment	that	the	Company	maintained	effective	internal	control	over	financial	reporting	as	of	December	31,	2006,	is	fairly	stated, in	all	material	respects,	based	on	the	criteria	established	in	Internal	Control	–	Integrated	Framework	issued	by	the	Committee	of	Sponsoring	Organizations	of	the Treadway	Commission.	Also	in	our	opinion,	the	Company	maintained,	in	all	material	respects,	effective	internal	control	over	financial	reporting	as	of	December	31, 2006,	based	on	the	criteria	established	in	Internal	Control	–	Integrated	Framework	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission. We	have	also	audited,	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States),	the	consolidated	financial	statements and	financial	statement	schedule	as	of	and	for	the	year	ended	December	31,	2006	of	the	Company	and	our	report	dated	February	21,	2007	expressed	an	unqualified opinion	on	those	financial	statements	and	financial	statement	schedule	and	included	an	explanatory	paragraph	regarding	the	Company's	adoption	of	a	new	accounting standard.

/s/	Deloitte	&	Touche	LLP

# Deloitte	&	Touche	LLP

Pittsburgh,	Pennsylvania

# Management	Report

Responsibility	for	Preparation	of	the	Financial	Statements	and	Establishing	and	Maintaining	Adequate	Internal	Control	Over	Financial	Reporting

We	are	responsible	for	the	preparation	of	the	financial	statements	included	in	this	Annual	Report.	The	financial	statements	were	prepared	in	accordance	with	accounting principles	generally	accepted	in	the	United	States	of	America	and	include	amounts	that	are	based	on	the	best	estimates	and	judgments	of	management.	The	other financial	information	contained	in	this	Annual	Report	is	consistent	with	the	financial	statements.

We	are	also	responsible	for	establishing	and	maintaining	adequate	internal	control	over	financial	reporting.	Our	internal	control	system	is	designed	to	provide reasonable	assurance	concerning	the	reliability	of	the	financial	data	used	in	the	preparation	of	PPG's	financial	statements,	as	well	as	to	safeguard	the	Company's	assets from	unauthorized	use	or	disposition.

All	internal	control	systems,	no	matter	how	well	designed,	have	inherent	limitations.	Therefore,	a	system	of	internal	control	over	financial	reporting	can	provide only	reasonable	assurance	and	may	not	prevent	or	detect	misstatements.	In	addition,	because	of	changing	conditions,	there	is	risk	in	projecting	any	evaluation	of	internal controls	to	future	periods.

We	conducted	an	evaluation	of	the	effectiveness	of	the	Company's	internal	control	over	financial	reporting	as	of	December	31,	2006.	In	making	this	evaluation,	we used	the	criteria	set	forth	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission	(COSO)	in	Internal	Control	-	Integrated	Framework.	Our evaluation	included	reviewing	the	documentation	of	our	controls,	evaluating	the	design	effectiveness	of	our	controls	and	testing	their	operating	effectiveness.	Based	on this	evaluation	we	believe	that,	as	of	December	31,	2006,	the	Company's	internal	controls	over	financial	reporting	were	effective	and	provide	reasonable	assurance	that the	accompanying	financial	statements	do	not	contain	any	material	misstatement.

Deloitte	&	Touche	LLP,	an	independent	registered	public	accounting	firm,	has	issued	their	report	on	our	evaluation	of	PPG's	internal	control	over	financial reporting.	Their	report	appears	on	page	32	of	this	Annual	Report.

# Charles	E.	Bunch

Chairman	of	the	Board

# William	H.	Hernandez

Senior	Vice	President,	Finance

and	Chief	Executive	Officer

# Financial	Statements	–	Report	of	Independent	Registered	Public	Accounting	Firm

We	have	audited	the	accompanying	consolidated	balance	sheets	of	PPG	Industries,	Inc.	and	subsidiaries	(the	"Company")	as	of	December	31,	2006	and	2005,	and	the related	consolidated	statements	of	income,	shareholders'	equity,	comprehensive	income	and	cash	flows	for	each	of	the	three	years	in	the	period	ended	December	31, 2006.	Our	audits	also	included	the	financial	statement	schedule	listed	in	Item	15(b).	These	financial	statements	and	the	financial	statement	schedule	are	the	responsibility of	the	Company's	management.	Our	responsibility	is	to	express	an	opinion	on	the	financial	statements	and	the	financial	statement	schedule	based	on	our	audits.

We	conducted	our	audits	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those	standards	require	that	we plan	and	perform	the	audit	to	obtain	reasonable	assurance	about	whether	the	financial	statements	are	free	of	material	misstatement.	An	audit	includes	examining,	on	a test	basis,	evidence	supporting	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	presentation.	We	believe	that	our	audits	provide	a	reasonable	basis	for	our	opinion. In	our	opinion,	such	consolidated	financial	statements	present	fairly,	in	all	material	respects,	the	financial	position	of	PPG	Industries,	Inc.	and	subsidiaries	as	of December	31,	2006	and	2005,	and	the	results	of	their	operations	and	their	cash	flows	for	each	of	the	three	years	in	the	period	ended	December	31,	2006	in	conformity with	accounting	principles	generally	accepted	in	the	United	States	of	America.	Also,	in	our	opinion,	such	financial	statement	schedule,	when	considered	in	relation	to	the basic	consolidated	financial	statements	taken	as	a	whole,	presents	fairly,	in	all	material	respects,	the	information	set	forth	therein.

We	have	also	audited,	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States),	the	effectiveness	of	the	Company's internal	control	over	financial	reporting	as	of	December	31,	2006,	based	on	the	criteria	established	in	Internal	Control	–	Integrated	Framework	issued	by	the	Committee of	Sponsoring	Organizations	of	the	Treadway	Commission	and	our	report	dated	February	21,	2007	expressed	an	unqualified	opinion	on	management's	assessment	of	the effectiveness	of	the	Company's	internal	control	over	financial	reporting	and	an	unqualified	opinion	on	the	effectiveness	of	the	Company's	internal	control	over	financial reporting.

As	discussed	in	Note	1	to	the	consolidated	financial	statements,	on	December	31,	2006,	the	Company	changed	its	method	of	accounting	for	pensions	and	other postretirement	benefits	by	adopting	Statement	of	Financial	Accounting	Standards	No.	158,	"Employers'	Accounting	for	Defined	Benefit	Pension	and	Other Postretirement	Plans,	an	amendment	of	FASB	Statements	No.	87,	88,	106,	and	132(R)."

# Statement	of	Income

|  |  | For	the	Year |  |
| :--- | :--- | :--- | :--- |
| (Millions,\texcept\tper\tshare\tamounts) | 2006 | 2005 | 2004 |
| Net\tsales | $11,037 | $10,201 | $9,513 |
| Cost\tof\tsales,\texclusive\tof\tdepreciation\tand\tamortization | 7,036 | 6,473 | \t 5,999 |
| Selling,\tgeneral\tand\tadministrative | 1,980 | 1,771 | \t 1,715 |
| Depreciation | 337 | 340 | 357 |
| Research\tand\tdevelopment\t-\tnet\t(See\tNote\t21) | 318 | 309 | 303 |
| Interest | 83 | 81 | 90 |
| Amortization\t(See\tNote\t6) | 43 | 32 | 31 |
| Asbestos\tsettlement\t-\tnet\t(See\tNotes\t10\tand\t14) | 28 | 22 | 32 |
| Business\trestructuring\t(See\tNote\t7) | 37 | — | — |
| Other\tcharges\t(See\tNotes\t7,\t8\tand\t14) | 257 | 338 | 54 |
| Other\tearnings\t(See\tNote\t18) | (142) | (112) | (131) |
| Income\tbefore\tincome\ttaxes\tand\tminority\tinterest | 1,060 | 947 | \t 1,063 |
| Income\ttax\texpense\t(See\tNote\t12) | 278 | 282 | 322 |
| Minority\tinterest | 71 | 69 | 58 |
| Net\tincome | $711 | $596 | $683 |
| Earnings\tper\tcommon\tshare\t(See\tNote\t11) | $4.29 | $3.51 | $3.98 |
| Earnings\tper\tcommon\tshare\t-\tassuming\tdilution\t(See\tNote\t11) | $4.27 | $3.49 | $3.95 |

The	accompanying	notes	to	the	financial	statements	are	an	integral	part	of	this	consolidated	statement.

# Balance	Sheet

| (Millions) | 2006 | 2005 |
| :--- | :--- | :--- |
| Assets |  |  |
| Current\tassets |  |  |
| Cash\tand\tcash\tequivalents | $455 | $466 |
| Receivables\t(See\tNote\t3) | 2,168 | 1,871 |
| Inventories\t(See\tNote\t3) | 1,390 | 1,119 |
| Deferred\tincome\ttaxes\t(See\tNote\t12) | 394 | 345 |
| Other | 185 | 218 |
| Total\tcurrent\tassets | 4,592 | 4,019 |
| Property\t(See\tNote\t4) | 8,344 | 7,802 |
| Less\taccumulated\tdepreciation | 5,848 | 5,498 |
| Property\t–\tnet | 2,496 | 2,304 |
| Investments\t(See\tNote\t5) | 352 | 311 |
| Goodwill\t(See\tNote\t6) | 1,396 | 1,166 |
| Identifiable\tintangible\tassets\t–\tnet\t(See\tNote\t6) | 586 | 488 |
| Other\tassets\t(See\tNotes\t12\tand\t13) | 599 | 393 |
| Total | $10,021 | $8,681 |
| Liabilities\tand\tShareholders'\tEquity |  |  |
| Current\tliabilities |  |  |
| Short-term\tdebt\tand\tcurrent\tportion\tof\tlong-term\tdebt\t(See\tNote\t8) | $140 | $101 |
| Asbestos\tsettlement\t(See\tNote\t14) | 557 | 472 |
| Accounts\tpayable\tand\taccrued\tliabilities\t(See\tNote\t3) | 2,090 | 1,776 |
| Total\tcurrent\tliabilities | 2,787 | 2,349 |
| Long-term\tdebt\t(See\tNote\t8) | 1,155 | 1,169 |
| Asbestos\tsettlement\t(See\tNote\t14) | 332 | 385 |
| Deferred\tincome\ttaxes\t(See\tNote\t12) | 136 | 90 |
| Accrued\tpensions\t(See\tNotes\t1\tand\t13) | 629 | 561 |
| Other\tpostretirement\tbenefits\t(See\tNotes\t1\tand\t13) | 1,028 | 587 |
| Other\tliabilities\t(See\tNote\t13) | 572 | 379 |
| Total\tliabilities | 6,639 | 5,520 |
| Commitments\tand\tcontingent\tliabilities\t(See\tNote\t14) |  |  |
| Minority\tinterest | 148 | 108 |
| Shareholders'\tequity\t(See\tNote\t15)\nCommon\tstock | 484 | 484 |
| Additional\tpaid-in\tcapital | 408 | 352 |
| Retained\tearnings | 7,453 | 7,057 |
| Treasury\tstock,\tat\tcost | (4,101) | (3,984) |
| Unearned\tcompensation\t(See\tNote\t1) | (25) | (37) |
| Accumulated\tother\tcomprehensive\tloss\t(See\tNote\t16) | (985) | (819) |
| Total\tshareholders'\tequity | 3,234 | 3,053 |
| Total | $10,021 | $8,681 |

# Statement	of	Shareholders'	Equity

| (Millions) | Common<br>Stock | Additional<br>Paid-In<br>Capital | Retained<br>Earnings | Treasury<br>Stock | Unearned<br>Compensation<br>(See	Note	1) | Comprehensive<br>(Loss)	Income<br>(See	Note	16) | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Balance,\tJan.\t1,\t2004 | $484 | $158 | $6,399 | $(3,428) | $(60) | $(642) | $2,911 |
| Net\tincome | — | — | 683 | — | — | — | 683 |
| Other\tcomprehensive\tincome,\tnet\tof\ttax | — | — | — | — | — | 207 | 207 |
| Cash\tdividends | — | — | (307) | — | — | — | (307) |
| Purchase\tof\ttreasury\tstock | — | — | — | (100) | — | — | (100) |
| Issuance\tof\ttreasury\tstock | — | 63 | — | 73 | — | — | 136 |
| Stock\toption\tactivity | — | 28 | — | — | — | — | 28 |
| Repayment\tof\tloans\tby\tESOP | — | — | — | — | 13 | — | 13 |
| Other | — | — | 1 | — | — | — | 1 |
| Balance,\tDec.\t31,\t2004 | $484 | $249 | $6,776 | $(3,455) | $(47) | $(435) | $3,572 |
| Net\tincome | — | — | 596 | — | — | — | 596 |
| Other\tcomprehensive\tloss,\tnet\tof\ttax | — | — | — | — | — | (384) | (384) |
| Cash\tdividends | — | — | (316) | — | — | — | (316) |
| Purchase\tof\ttreasury\tstock | — | — | — | (607) | — | — | (607) |
| Issuance\tof\ttreasury\tstock | — | 75 | — | 78 | — | — | 153 |
| Stock\toption\tactivity | — | 28 | — | — | — | — | 28 |
| Repayment\tof\tloans\tby\tESOP | — | — | — | — | 10 | — | 10 |
| Other | — | — | 1 | — | — | — | 1 |
| Balance,\tDec.\t31,\t2005 | $484 | $352 | $7,057 | $(3,984) | $(37) | $(819) | $3,053 |
| Net\tincome | — | — | 711 | — | — | — | 711 |
| Other\tcomprehensive\tloss,\tnet\tof\ttax | — | — | — | — | — | (166) | (166) |
| Cash\tdividends | — | — | (316) | — | — | — | (316) |
| Purchase\tof\ttreasury\tstock | — | — | — | (153) | — | — | (153) |
| Issuance\tof\ttreasury\tstock | — | 25 | — | 36 | — | — | 61 |
| Stock\toption\tactivity | — | 31 | — | — | — | — | 31 |
| Repayment\tof\tloans\tby\tESOP | — | — | — | — | 12 | — | 12 |
| Other | — | — | 1 | — | — | — | 1 |
| Balance,\tDec.\t31,\t2006 | $484 | $408 | $7,453 | $(4,101) | $(25) | $(985) | $3,234 |

| Other	comprehensive	(loss)	income,	net	of	tax | (166) | (384) | 207 |
| :--- | :--- | :--- | :--- |
| Comprehensive\tincome | $545 | $212 | $890 |

The	accompanying	notes	to	the	financial	statements	are	an	integral	part	of	these	consolidated	statements.

# Statement	of	Cash	Flows

| (Millions) | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Operating\tactivities |  |  |  |
| Net\tincome | $711 | $596 | $683 |
| Adjustments\tto\treconcile\tto\tcash\tfrom\toperations\nDepreciation\tand\tamortization | 380 | 372 | 388 |
| Asbestos\tsettlement,\tnet\tof\ttax | 17 | 13 | 19 |
| Asset\timpairment\t(See\tNote\t7) | — | 27 | — |
| Business\trestructuring | 37 | — | — |
| Restructuring\tcash\tspending | (33) | (4) | (3) |
| Bad\tdebt\texpense | 15 | 24 | 9 |
| Equity\taffiliate\t(earnings)\tloss\tnet\tof\tdividends | (18) | 6 | (14) |
| Increase\t(decrease)\tin\tnet\taccrued\tpension\tbenefit\tcosts | 21 | 72 | (10) |
| Increase\tin\treceivables | (87) | (144) | (134) |
| Increase\tin\tinventories | (78) | (59) | (45) |
| Increase\tin\tother\tcurrent\tassets | (9) | (14) | (25) |
| Increase\tin\taccounts\tpayable\tand\taccrued\tliabilities | 65 | 191 | 111 |
| Increase\tin\tnoncurrent\tassets | (98) | (81) | (2) |
| Increase\tin\tnoncurrent\tliabilities | 167 | 7 | 50 |
| Other | 40 | 59 | (9) |
| Cash\tfrom\toperating\tactivities | \t 1,130 | 1,065 | 1,018 |
| Investing\tactivities |  |  |  |
| Purchases\tof\tshort-term\tinvestments\t(See\tNote\t1) | (963) | (1,990) | (4,718) |
| Proceeds\tfrom\tsales\tof\tshort-term\tinvestments\t(See\tNote\t1) | 963 | 2,040 | 4,668 |
| Capital\tspending |  |  |  |
| Additions\tto\tproperty\tand\tinvestments | (372) | (288) | (244) |
| Business\tacquisitions,\tnet\tof\tcash\tbalances\tacquired | (402) | (91) | (67) |
| Reductions\tof\tother\tproperty\tand\tinvestments | 48 | 31 | 51 |
| Deposits\theld\tin\tescrow | (3) | (67) | — |
| Release\tof\tdeposits\theld\tin\tescrow | 67 | — | — |
| Cash\tused\tfor\tinvesting\tactivities | (662) | (365) | (310) |
| Financing\tactivities |  |  |  |
| Net\tchange\tin\tborrowings\twith\tmaturities\tof\tthree\tmonths\tor\tless | (4) | 9 | 11 |
| Proceeds\tfrom\tother\tshort-term\tdebt | 143 | 91 | 27 |
| Repayment\tof\tother\tshort-term\tdebt | (212) | (56) | (18) |
| Proceeds\tfrom\tlong-term\tdebt | — | 360 | 7 |
| Repayment\tof\tlong-term\tdebt | (26) | (486) | (339) |
| Repayment\tof\tloans\tby\temployee\tstock\townership\tplan | 12 | 10 | 13 |
| Purchase\tof\ttreasury\tstock | (153) | (607) | (100) |
| Issuance\tof\ttreasury\tstock | 55 | 138 | 121 |
| Dividends\tpaid | (316) | (316) | (307) |

| Cash	used	for	financing	activities | (501) | (857) | (585) |
| :--- | :--- | :--- | :--- |
| Effect\tof\tcurrency\texchange\trate\tchanges\ton\tcash\tand\tcash\tequivalents | 22 | (36) | 37 |
| Net\t(decrease)\tincrease\tin\tcash\tand\tcash\tequivalents | (11) | (193) | 160 |
| Cash\tand\tcash\tequivalents,\tbeginning\tof\tyear | 466 | 659 | 499 |
| Cash\tand\tcash\tequivalents,\tend\tof\tyear | $455 | $466 | $659 |
|  | 2006\tPPG\tANNUAL\tREPORT\tAND\tFORM\t10-K | 2006\tPPG\tANNUAL\tREPORT\tAND\tFORM\t10-K | 37 |

# Notes	to	the	Financial	Statements

# 1.	Summary	of	Significant	Accounting	Policies

# Principles	of	consolidation

The	accompanying	consolidated	financial	statements	include	the	accounts	of	PPG	Industries,	Inc.	("PPG"	or	the	"Company"),	and	all	subsidiaries,	both	U.S.	and	non- U.S.,	that	we	control.	We	own	more	than	50%	of	the	voting	stock	of	the	subsidiaries	that	we	control.	Investments	in	companies	in	which	we	own	20%	to	50%	of	the voting	stock	and	have	the	ability	to	exercise	significant	influence	over	operating	and	financial	policies	of	the	investee	are	accounted	for	using	the	equity	method	of accounting.	As	a	result,	our	share	of	the	earnings	or	losses	of	such	equity	affiliates	is	included	in	the	accompanying	statement	of	income	and	our	share	of	these companies'	shareholders'	equity	is	included	in	the	accompanying	balance	sheet.	Transactions	between	PPG	and	its	subsidiaries	are	eliminated	in	consolidation.

# Use	of	estimates	in	the	preparation	of	financial	statements

The	preparation	of	financial	statements	in	conformity	with	U.S.	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	period.	Actual	outcomes	could	differ	from	those	estimates.

# Revenue	recognition

Revenue	from	sales	is	recognized	by	all	operating	segments	when	goods	are	shipped	and	title	to	inventory	and	risk	of	loss	passes	to	the	customer	or	when	services	have been	rendered.

# Shipping	and	handling	costs

Amounts	billed	to	customers	for	shipping	and	handling	are	recorded	in	"Net	sales"	in	the	accompanying	statement	of	income.	Shipping	and	handling	costs	incurred	by the	Company	for	the	delivery	of	goods	to	customers	are	included	in	"Cost	of	sales,	exclusive	of	depreciation	and	amortization"	in	the	accompanying	statement	of income.

# Selling,	general	and	administrative	costs

Amounts	presented	as	"Selling,	general	and	administrative"	in	the	accompanying	statement	of	income	are	comprised	of	selling,	customer	service,	distribution	and advertising	costs,	as	well	as	the	costs	of	providing	corporate-wide	functional	support	in	such	areas	as	finance,	law,	human	resources,	and	planning.	Distribution	costs pertain	to	the	movement	and	storage	of	finished	goods	inventory	at	company-owned	and	leased	warehouses,	terminals	and	other	distribution	facilities.	Certain	of	these costs	may	be	included	in	cost	of	sales	by	other	companies,	resulting	in	a	lack	of	comparability	with	other	companies.

# Legal	costs

Legal	costs	are	expensed	as	incurred.

# Foreign	currency	translation

For	all	significant	non-U.S.	operations,	the	functional	currency	is	their	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.	Unrealized	currency	translation	adjustments	are deferred	in	accumulated	other	comprehensive	(loss)	income,	a	separate	component	of	shareholders'	equity.

# Cash	equivalents

Cash	equivalents	are	highly	liquid	investments	(valued	at	cost,	which	approximates	fair	value)	acquired	with	an	original	maturity	of	three	months	or	less.

# Short-term	investments

Short-term	investments	are	highly	liquid	investments	that	have	stated	maturities	of	three	months	to	one	year.	The	purchases	and	sales	of	these	investments	are	classified as	investing	activities	in	our	statement	of	cash	flows.	Short-term	investments	include	auction	rate	securities.

# Inventories

Most	U.S.	inventories	are	stated	at	cost,	using	the	last-in,	first-out	("LIFO")	method,	which	does	not	exceed	market.	All	other	inventories	are	stated	at	cost,	using	the first-in,	first-out	("FIFO")	method,	which	does	not	exceed	market.	We	determine	cost	using	either	average	or	standard	factory	costs,	which	approximate	actual	costs, excluding	certain	fixed	costs	such	as	depreciation	and	property	taxes.

In	November	2004,	the	Financial	Accounting	Standards	Board	("FASB")	issued	Statement	of	Financial	Accounting	Standards	("SFAS")	No.	151,	"Inventory	Costs, an	Amendment	of	ARB	No.	43,	Chapter	4."	SFAS	No.	151	requires	the	exclusion	of	certain	costs	from	inventories	and	the	allocation	of	fixed	production	overheads	to inventories	to	be	based	on	the	normal	capacity	of	the	production	facilities.	Effective	Jan.	1,	2006,	PPG	adopted	the	provisions	of	SFAS	No.	151.	Our	adoption	of	this standard	did	not	have	a	material	effect	on	PPG's	consolidated	results	of	operations,	financial	position	or	liquidity.

# Marketable	equity	securities

The	Company's	investment	in	marketable	equity	securities	is	recorded	at	fair	market	value	in	"Investments"	in	the	accompanying	balance	sheet	with	changes	in	fair market	value	recorded	in	income	for	those	securities	designated	as	trading	securities	and	in	other	comprehensive	(loss)	income,	net	of	tax,	for	those	designated	as available	for	sale	securities.

# 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	economic	conditions	or	obsolescence.	Significant	improvements	that	add	to	productive	capacity	or	extend the	lives	of	properties	are	capitalized.	Costs	for	repairs	and	maintenance	are	charged	to	expense	as	incurred.	When	property	is	retired	or	otherwise	disposed	of,	the original	cost	and	related	accumulated	depreciation	balance	are	removed	from	the	accounts	and	any	related	gain	or	loss	is	included	in	income.	Amortization	of	the	cost	of capitalized	leased	assets	is	included	in	depreciation	expense.	Property	and	other	long-lived	assets	are	reviewed	for	impairment	whenever	events	or	circumstances indicate	that	their	carrying	amounts	may	not	be	recoverable.

# Goodwill	and	identifiable	intangible	assets

Goodwill	represents	the	excess	of	the	cost	over	the	fair	value	of	acquired	identifiable	tangible	and	intangible	assets	and	liabilities	assumed	from	acquired	businesses. Identifiable	intangible	assets	acquired	in	business	combinations	are	recorded	based	upon	their	fair	value	at	the	date	of	acquisition.

The	Company	tests	goodwill	of	each	reporting	unit	for	impairment	at	least	annually	in	connection	with	our	strategic	planning	process	in	the	third	quarter.	The goodwill	impairment	test	is	performed	by	comparing	the	fair	value	of	the	associated	reporting	unit	to	its	carrying	value.	The	Company's	reporting	units	are	its	operating segments.	(See	Note	23,	"Reportable	Business	Segment	Information"	for	further	information	concerning	our	operating	segments.)	Fair	value	is	estimated	using discounted	cash	flow	methodologies	and	market	comparable	information.

The	Company	has	determined	that	certain	acquired	trademarks	have	indefinite	useful	lives.	The	Company	tests	the	carrying	value	of	these	trademarks	for impairment	at	least	annually	in	the	third	quarter	by	comparing	the	fair	value	of	each	trademark	to	its	carrying	value.	Fair	value	is	estimated	by	using	the	relief	from royalty	method	(a	discounted	cash	flow	methodology).

Identifiable	intangible	assets	with	finite	lives	are	amortized	on	a	straight-line	basis	over	their	estimated	useful	lives	(2	to	25	years)	and	are	reviewed	for	impairment whenever	events	or	circumstances	indicate	that	their	carrying	amount	may	not	be	recoverable.

# Stock-based	compensation

In	December	2004,	the	FASB	issued	a	revision	to	SFAS	No.	123,	"Share-Based	Payment,"	("SFAS	No.	123R")	which	became	effective	January	1,	2006,	and	now requires	that	all	stock-based	compensation	awards	be	expensed	based	on	their	fair	value.	PPG	began	expensing	stock	options	effective	Jan.	1,	2004,	and	effective	Jan.	1, 2006,	we	adopted	SFAS	No.	123R	using	the	modified	prospective	application	transition	method.	Because	the	fair	value	recognition	provisions	of	SFAS	No.	123, "Accounting	for	Stock-Based	Compensation",	and	SFAS	No.	123R	are	essentially	the	same	as	they	relate	to	our	equity	plans,	the	adoption	of	SFAS	No.	123R	did	not have	a	material	impact	on	PPG's	consolidated	results	of	operations,	financial	position	or	liquidity.	Prior	to	our	adoption	of	SFAS	No.	123R,	the	benefits	of	tax deductions	in	excess	of	recognized	compensation	costs	were	reported	as	an	operating	cash	flow.	SFAS	No.	123R	requires	such	excess	tax	benefits	to	be	reported	as	a financing	cash	inflow.	The	adoption	of	SFAS	No.	123R	did	not	have	a	material	impact	on	PPG's	operating	or	financing	cash	flows	for	the	year	ended	Dec.	31,	2006.	See Note	19,	"Stock-Based	Compensation"	for	additional	information.

# 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	accordance with	SOP	No.	76-3.	ESOP	shares	are	released	for	future	allocation	to	participants	based	on	the	ratio	of	debt	service	paid	during	the	year	on	loans	used	by	the	ESOP	to purchase	the	shares	to	the	remaining	debt	service	on	these	loans.	These	loans	are	a	combination	of	borrowings	guaranteed	by	PPG	and	borrowings	by	the	ESOP	directly from	PPG.	The	ESOP's	borrowings	from	third	parties	are	included	in	debt	in	our	balance	sheet	(see	Note	8).	Unearned	compensation,	reflected	as	a	reduction	of shareholders'	equity,	principally	represents	the	unpaid	balance	of	all	of	the	ESOP's	loans.	Dividends	received	by	the	ESOP	are	primarily	used	to	pay	debt	service.

For	old	ESOP	shares,	compensation	expense	is	equal	to	cash	contributed	to	the	ESOP	by	the	Company	less	the	appreciation	on	the	allocated	old	ESOP	shares.	Cash contributions	to	the	ESOP	were	reduced	by	$18	million	for	each	year	in	the	three	year	period	ended	Dec.	31,	2006,	for	the	appreciation	on	the	old	shares	allocated	to participants'	accounts	in	each	of	those	years.	By	Dec.	31,	2008,	all	old	shares	are	expected	to	be	allocated,	after	which	all	unallocated	shares	will	be	accounted	for	under the	provisions	of	SOP	No.	93-6.	Dividends	paid	on	old	ESOP	shares	are	deducted	from	retained	earnings.	Old	ESOP	shares	are	considered	to	be	outstanding	in computing	earnings	per	common	share.	For	new	ESOP	shares,	compensation	expense	is	equal	to	the	Company's	matching	contribution	(see	Note	17).	Dividends	paid	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.	New	ESOP	shares	that	have	been	released	are	considered	outstanding	in	computing	earnings	per	common	share.	Unreleased new	ESOP	shares	are	not	considered	to	be	outstanding.

# Pensions	and	Other	Postretirement	Benefits

In	September	2006,	the	FASB	issued	SFAS	No.	158,	"Employers'	Accounting	for	Defined	Benefit	Pension	and	Other	Postretirement	Plans,	an	amendment	of	FASB Statements	No.	87,	88,	106,	and	132(R)."	Under	this	new	standard,	a	company	must	recognize	a	net	liability	or	asset	to	report	the	funded	status	of	its	defined	benefit pension	and	other	postretirement	benefit	plans	on	its	balance	sheets	as	well	as	recognize	changes	in	that	funded	status,	in	the	year	in	which	the	changes	occur,	through charges	or	credits	to	comprehensive	income.	SFAS	No.	158	does	not	change	how	pensions	and	other	postretirement	benefits	are	accounted	for	and	reported	in	the income	statement.	PPG	adopted	the	recognition	and	disclosure	provisions	of	SFAS	No.	158	as	of	Dec.	31,	2006.	The	following	table	presents	the	impact	of	applying SFAS	No.	158	on	individual	line	items	in	the	balance	sheet	as	of	Dec.	31,	2006:

| (Millions)<br>Balance	Sheet	Caption: | Before<br>Application	of<br>SFAS	No.	158^(1) | Adjustments | After<br>Application<br>of<br>SFAS	No.	158 |
| :--- | :--- | :--- | :--- |
| Other\tassets | $494 | $105 | $599 |
| Deferred\tincome\ttax\tliability | (193) | 57 | (136) |
| Accrued\tpensions | (371) | (258) | (629) |
| Other\tpostretirement\tbenefits | (619) | (409) | (1,028) |
| Accumulated\tother\tcomprehensive\tloss | 480 | 505 | 985 |
| (1) |  |  |  |

(1) Represents	balances	that	would	have	been	recorded	under	accounting	standards	prior	to	the	adoption	of	SFAS	No.	158.

See	Note	13,	"Pensions	and	Other	Postretirement	Benefits,"	for	additional	information.

# Derivative	financial	instruments	and	hedge	activities

The	Company	recognizes	all	derivative	instruments	as	either	assets	or	liabilities	at	fair	value	on	the	balance	sheet.	The	accounting	for	changes	in	the	fair	value	of	a derivative	depends	on	the	use	of	the	derivative.	To	the	extent	that	a	derivative	is	effective	as	a	cash	flow	hedge	of	an	exposure	to	future	changes	in	value,	the	change	in fair	value	of	the	derivative	is	deferred	in	accumulated	other	comprehensive	(loss)	income.	Any	portion	considered	to	be	ineffective	is	reported	in	earnings	immediately. To	the	extent	that	a	derivative	is	effective	as	a	hedge	of	an	exposure	to	future	changes	in	fair	value,	the	change	in	the	derivative's	fair	value	is	offset	in	the	statement	of income	by	the	change	in	fair	value	of	the	item	being	hedged.	To	the	extent	that	a	derivative	or	a	financial	instrument	is	effective	as	a	hedge	of	a	net	investment	in	a foreign	operation,	the	change	in	the	derivative's	fair	value	is	deferred	as	an	unrealized	currency	translation	adjustment	in	accumulated	other	comprehensive	(loss) income.

# Product	warranties

The	Company	accrues	for	product	warranties	at	the	time	the	associated	products	are	sold	based	on	historical	claims	experience.	As	of	Dec.	31,	2006	and	2005,	the reserve	for	product	warranties	was	$10	million	and	$4	million,	respectively.	Pretax	charges	against	income	for	product	warranties	in	2006,	2005	and	2004	totaled	$4 million,	$5	million	and	$4	million,	respectively.	Cash	outlays	related	to	product	warranties	were	$5	million,	$4	million	and	$4	million	in	2006,	2005	and	2004, respectively.	In	addition,	$7	million	of	warranty	obligations	were	assumed	as	part	of	the	Company's	2006	business	acquisitions.

# Asset	Retirement	Obligations

An	asset	retirement	obligation	represents	a	legal	obligation	associated	with	the	retirement	of	a	tangible	long-lived	asset	that	is	incurred	upon	the	acquisition, construction,	development	or	normal	operation	of	that	long-lived	asset.	We	recognize	asset	retirement	obligations	in	the	period	in	which	they	are	incurred,	if	a	reasonable estimate	of	fair	value	can	be	made.	The	asset	retirement	obligation	is	subsequently	adjusted	for	changes	in	fair	value.	The	associated	estimated	asset	retirement	costs	are capitalized	as	part	of	the	carrying	amount	of	the	long-lived	asset	and	depreciated	over	its	useful	life.	PPG's	asset	retirement	obligations	are	primarily	associated	with closure	of	certain	assets	used	in	the	chemicals	manufacturing	process.

In	March	2005,	the	FASB	issued	FASB	Interpretation	("FIN")	No.	47,	"Accounting	for	Conditional	Asset	Retirement	Obligations,	an	interpretation	of	FASB Statement	No.	143".	FIN	No.	47	clarifies	the	term	conditional	asset	retirement	obligation	as	used	in	SFAS	No.	143,	"Accounting	for	Asset	Retirement	Obligations",	and provides	further	guidance	as	to	when	an	entity	would	have	sufficient	information	to	reasonably	estimate	the	fair	value	of	an	asset	retirement	obligation.

Effective	Dec.	31,	2005,	PPG	adopted	the	provisions	of	FIN	No.	47.	Our	only	conditional	asset	retirement	obligation	relates	to	the	possible	future	abatement	of asbestos	contained	in	certain	PPG	production	facilities.	The	asbestos	in	our	production	facilities	arises	from	the	application	of	normal	and	customary	building	practices in	the	past	when	the	facilities	were	constructed.	This	asbestos	is	encapsulated	in	place	and,	as	a	result,	there	is	no	current	legal	requirement	to	abate	it.	Inasmuch	as	there is	no	requirement	to	abate,	we	do	not	have	any	current	plans	or	an	intention	to	abate	and	therefore	the	timing,	method	and	cost	of	future	abatement,	if	any,	are	not

known.	In	accordance	with	the	provisions	of	FIN	No.	47,	the	Company	has	not	recorded	an	asset	retirement	obligation	associated	with	asbestos	abatement,	given	the uncertainty	concerning	the	timing	of	future	abatement,	if	any.

The	adoption	of	FIN	No.	47	on	Dec.	31,	2005	has	not	resulted	in	any	impact	to	our	results	of	operations	or	financial	position,	and	we	do	not	expect	the	adoption	to have	a	material	impact	on	the	Company's	future	results	of	operations,	financial	position	or	liquidity.

# Other	new	accounting	standards

In	June	2006,	the	FASB	issued	FIN	No.	48,	"Accounting	for	Uncertainty	in	Income	Taxes,	an	interpretation	of	FASB	Statement	No.	109".	FIN	No.	48	clarifies	the accounting	for	uncertainty	in	income	taxes	recognized	in	an	enterprise's	financial	statements	and	prescribes	a	recognition	threshold	and	measurement	attribute	for	the financial	statement	recognition	and	measurement	of	a	tax	position	taken	or	expected	to	be	taken	in	a	tax	return.	FIN	No.	48	is	effective	for	fiscal	years	beginning	after Dec.	15,	2006.	We	are	in	the	process	of	evaluating	the	effect	that	the	adoption	of	this	interpretation	will	have	on	PPG.	We	currently	expect	that	we	will	reduce	our	tax contingency	reserve	by	an	amount	that	will	not	have	a	material	effect	on	PPG's	financial	position.

In	September	2006,	the	FASB	issued	SFAS	No.	157,	"Fair	Value	Measurements,"	which	defines	fair	value,	establishes	a	framework	for	measuring	fair	value	in generally	accepted	accounting	principles,	and	expands	disclosures	about	fair	value	measurements.	This	standard	only	applies	when	other	standards	require	or	permit	the fair	value	measurement	of	assets	and	liabilities.	It	does	not	increase	the	use	of	fair	value	measurement.	SFAS	No.	157	is	effective	for	fiscal	years	beginning	after	Nov. 15,	2007.	The	Company	is	currently	evaluating	the	impact	of	adopting	this	Statement;	however,	we	do	not	expect	it	to	have	an	effect	on	PPG's	consolidated	results	of operations	or	financial	position.

# Reclassifications

Certain	amounts	in	the	2005	and	2004	financial	statements	have	been	reclassified	to	be	consistent	with	the	2006	presentation,	including	the	information	presented	for	our reportable	business	segments	as	more	fully	described	in	Note	23,	"Reportable	Business	Segment	Information".	These	reclassifications	had	no	impact	on	our	previously reported	net	income,	total	assets,	cash	flows	or	shareholders'	equity.

# 2.	Acquisitions

During	2006,	the	Company	made	a	number	of	business	acquisitions	with	a	cash	cost	of	$402	million	and	the	assumption	of	$80	million	of	debt.	In	addition,	certain	of these	acquisitions	also	provide	for	contingent	payments,	holdbacks	and	potential	purchase	price	adjustments.	At	Dec.	31,	2006,	approximately	$62	million	had	been accrued	as	part	of	the	purchase	price	allocations	for	such	payments.	The	2006	results	of	the	acquired	businesses	have	been	included	in	our	consolidated	results	of operations	for	the	period	since	the	acquisitions	were	completed.	Sales	increased	in	2006	by	$379	million	due	to	acquisitions,	and	the	acquired	businesses	were	slightly accretive	to	earnings	in	2006.	The	more	significant	transactions	completed	during	2006	are	described	below.

During	the	third	quarter	of	2006,	the	Company	acquired	the	performance	coatings	and	finishes	business	of	Ameron	International	Corporation,	expanding	PPG's protective	coatings	business	in	the	U.S.,	Europe	and	Asia	and	enabling	the	Company	to	participate	in	the	marine	coatings	market.	The	Company	also	acquired	privately- held	Sierracin	Corporation,	a	U.S.	supplier	of	advanced	composite	transparencies	to	the	aerospace	industry,	and	Spectra-Tone	Paint	Corporation,	a	U.S.	architectural coatings	manufacturer.	In	addition,	the	Company	acquired	Australian-based	Protec	Pty.	Ltd.	and	the	assets	of	Fortec	Paints	Ltd.,	Protec's	New	Zealand	business.	These businesses	manufacture	and	distribute	automotive	refinish	coatings	and	light	industrial	and	high	performance	coatings.

During	the	second	quarter	of	2006,	the	Company	acquired	Intercast	Europe,	S.p.A.,	a	manufacturer	of	nonprescription	sunlenses	with	manufacturing	and distribution	operations	in	Italy,	Thailand	and	Hong	Kong.	PPG	also	acquired	certain	assets	of	Shanghai	Sunpool	Building	Material	Co.,	Ltd.	and	its	associated companies,	including	Shanghai	IDI	International	Co.,	Ltd.,	and	a	group	of	Shanghai-based	businesses	that	manufacture	and	distribute	architectural	coatings.	In	addition, the	Company	acquired	certain	assets	of	Eldorado	Chemical	Co.,	Inc.,	a	U.S.	manufacturer	of	paint	strippers	and	technical	cleaners	for	the	aerospace	industry.	Also,	the Company	acquired	the	remaining	50%	share	of	Dongju	Industrial	Co.,	Ltd.,	a	South	Korean	coatings	manufacturer.	The	Company	had	owned	50%	of	Dongju	since	1985 and	had	accounted	for	this	investment	under	the	equity	method	of	accounting.

During	the	first	quarter	of	2006,	the	Company	purchased	certain	assets	of	Independent	Glass	Distributors,	a	wholesale	distributor	of	automotive	replacement	glass and	related	products	based	in	Cedar	Rapids,	Iowa.

The	preliminary	purchase	price	allocations	related	to	the	acquisitions	made	in	2006	resulted	in	an	excess	of	purchase	price	over	the	fair	value	of	the	tangible	and identifiable	intangible	assets	acquired	and	liabilities	assumed	totaling	$158	million,	which	has	been	recorded

as	an	addition	to	goodwill.	The	preliminary	purchase	price	allocations	were	recorded	upon	acquisition	of	each	business	and	adjustments	were	made	to	the	allocations	in subsequent	quarters	as	the	Company	refined	the	estimates	of	the	fair	value	of	the	assets	acquired	and	liabilities	assumed.	In	the	fourth	quarter	of	the	year,	independent valuations	were	completed	for	certain	acquired	intangible	assets,	properties	and	fixed	assets.	The	results	of	these	valuations	were	reflected	in	the	adjustments	to	the purchase	price	allocations	for	the	quarter.	Further	adjustments	to	the	purchase	price	allocations	are	expected	as	we	finalize	estimates	related	to	acquired	assets	and liabilities,	which	adjustments	are	expected	to	be	completed	within	twelve	months	of	the	dates	of	acquisition.

The	following	table	summarizes	the	estimated	fair	value	of	assets	acquired	and	liabilities	assumed	as	a	result	of	the	acquisitions	completed	in	2006	and	reflected	in the	preliminary	purchase	price	allocations	and	adjustments	recorded	as	of	Dec.	31,	2006.

| the	preliminary	purchase	price	allocations	and	adjustments	recorded	as	of	Dec.	31,	2006. |  |
| :--- | :--- |
| (Millions) |  |
| Current\tassets | $ 296 |
| Property,\tplant,\tand\tequipment | 150 |
| Goodwill | 158 |
| Other\tnon-current\tassets | 102 |
| Total\tassets | 706 |
| Short-term\tdebt | (69) |
| Current\tliabilities | (153) |
| Long-term\tdebt | (11) |
| Long-term\tliabilities | (71) |
| Net\tassets | $ 402 |

During	2005,	the	Company	made	acquisitions	at	a	cost	totaling	$91	million,	which	relate	primarily	to	four	acquisitions.	In	the	second	quarter,	the	Company acquired	the	business	of	International	Polarizer	Holdings	Trust,	a	privately	held	polarized	film	manufacturer	for	sun	lens	applications	based	in	Marlborough,

Massachusetts.	In	the	third	quarter,	the	Company	acquired	the	business	of	Crown	Coatings	Industries,	a	privately	held	manufacturer	of	specialty	wood	coatings	based	in Singapore.	In	the	fourth	quarter,	the	Company	acquired	a	network	of	42	architectural	coatings	service	centers	from	Iowa	Paint	Manufacturing.	Also	in	the	fourth	quarter, the	Company	purchased	the	30%	minority	interest	in	PPG	Coatings	(Hong	Kong),	which	has	a	wholly-owned	Chinese	subsidiary	engaged	in	the	manufacture	of automotive	and	industrial	coatings.	The	purchase	price	allocations	resulted	in	an	excess	of	purchase	price	over	the	fair	value	of	the	net	assets	acquired,	which	has	been recorded	as	an	addition	to	goodwill.

During	2004,	the	Company	made	acquisitions	at	a	cost	totaling	$67	million.	The	amount	relates	primarily	to	the	acquisition	in	the	first	quarter	of	the	remaining	one- third	interest	in	PPG	Iberica,	S.A.,	a	Spanish	automotive	and	industrial	coatings	producer,	for	$61	million.	The	purchase	price	allocation	resulted	in	an	excess	of purchase	price	over	the	fair	value	of	net	assets	acquired,	which	has	been	recorded	as	an	addition	to	goodwill.

In	Jan.	2007,	the	Company	acquired	the	architectural	and	industrial	coatings	businesses	of	Renner	Sayerlack,	S.A.,	Gravatai,	Brazil,	to	expand	our	coatings business	in	Latin	America.	The	acquired	business	operates	manufacturing	plants	in	Brazil,	Chile	and	Uruguay	and	each	plant	also	serves	as	a	distribution	center.

# 3.	Working	Capital	Detail

| (Millions) |  |  | 2006 | 2005 |
| :--- | :--- | :--- | :--- | :--- |
| Receivables |  |  |  |  |
|  |  | Customers | $2,025 | $1,728 |
|  |  | Equity\taffiliates | 31 | 54 |
|  |  | Other | 161 | 128 |
|  |  | Allowance\tfor\tdoubtful\taccounts | (49) | (39) |
|  |  | Total | $2,168 | $1,871 |
| Inventories | (1) |  |  |  |
|  |  | Finished\tproducts | $850 | $667 |
|  |  | Work\tin\tprocess | 129 | 111 |
|  |  | Raw\tmaterials | 273 | 213 |
|  |  | Supplies | 138 | 128 |
|  |  | Total | $1,390 | $1,119 |
| Accounts\tpayable\tand\taccrued\tliabilities |  |  |  |  |
|  |  | Trade\tcreditors | $1,081 | $927 |
|  |  | Accrued\tpayroll | 323 | 273 |
|  |  | Other\tpostretirement\tand\tpension\tbenefits | 93 | 91 |
|  |  | Income\ttaxes | 54 | 36 |
|  |  | Other | 539 | 449 |
|  |  | Total | $2,090 | $1,776 |

(1) Inventories	valued	using	the	LIFO	method	of	inventory	valuation	comprised	 56%	and	57%	of	total	gross	inventory	values	as	of	Dec.	31,	2006	and	2005,	respectively.	If	the	FIFO	method	of	inventory	valuation	had been	used,	inventories	would	have	been	$249	million	and	$203	million	higher	as	of	Dec.	31,	2006	and	2005,	respectively.	During	the	year	ended	Dec.	31,	2005,	certain	inventories	accounted	for	on	the	LIFO method	of	accounting	were	reduced,	which	resulted	in	the	liquidation	of	certain	quantities	carried	at	costs	prevailing	in	prior	years.	The	net	effect	on	earnings	of	the	liquidation	was	not	material.

|  | Useful |  |  |
| :--- | :--- | :--- | :--- |
|  | Lives |  |  |
|  | (years) | 2006 | 2005 |
| Land\tand\tland\timprovements | 5-30 | $385 | $333 |
| Buildings | 20-40 | 1,322 | 1,201 |
| Machinery\tand\tequipment | 5-25 | 5,941 | 5,674 |
| Other | 3-20 | 483 | 452 |
| Construction\tin\tprogress |  | 213 | 142 |
| Total^(1) |  | $8,344 | $7,802 |

# 5.	Investments

| (Millions) | 2006 | 2005 |
| :--- | :--- | :--- |
| Investments\tin\tequity\taffiliates | $191 | $177 |
| Marketable\tequity\tsecurities |  |  |
| Trading\t(See\tNote\t13) | 77 | 78 |
| Available\tfor\tsale | 13 | 9 |
| Other | 71 | 47 |
| Total | $352 | $311 |

The	Company's	investments	in	equity	affiliates	are	comprised	principally	of	fifty-percent	ownership	interests	in	a	number	of	joint	ventures	that	manufacture	and	sell coatings,	glass	and	chemicals	products,	the	most	significant	of	which	produce	fiber	glass	products	and	are	located	in	Asia.

During	the	second	quarter	of	2006,	the	Company	purchased	its	joint	venture	partner's	50%	interest	in	Dongju	Industrial	Co.,	Ltd.,	a	South	Korean	coatings manufacturer.	In	the	third	quarter	of	2006,	we	started	up	a	new	50%	owned	joint	venture	in	China	to	produce	high	labor	content	fiber	glass	reinforcement	products	as part	of	the	supply	chain	transformation	by	the	fiber	glass	operating	segment	to	take	advantage	of	lower	labor	costs.	Expansion	of	the	manufacturing	capacity	of	another fiber	glass	joint	venture	in	China	that	serves	the	electronics	market	was	completed	in	the	second	quarter	of	2006.

In	addition,	we	have	a	fifty-percent	ownership	interest	in	RS	Cogen,	L.L.C.,	which	toll	produces	electricity	and	steam	primarily	for	PPG	and	its	joint	venture partner.	The	joint	venture	was	formed	with	a	wholly-owned	subsidiary	of	Entergy	Corporation	in	2000	for	the	construction	and	operation	of	a	$300	million	process steam,	natural	gas-fired	cogeneration	facility	in	Lake	Charles,	La.,	the	majority	of	which	was	financed	by	a	syndicate	of	banks.	PPG's	future	commitment	to	purchase electricity	and	steam	from	the	joint	venture	approximates	$23	million	per	year	subject	to	contractually	defined	inflation	adjustments	for	the	next	sixteen	years.	The purchases	for	the	years	ended	Dec.	31,	2006,	2005	and	2004	were	$24	million,	$25	million	and	$25	million,	respectively.

Summarized	financial	information	of	our	equity	affiliates	on	a	100	percent	basis	is	as	follows:

PPG's	share	of	undistributed	net	earnings	of	equity	affiliates	was	$63	million	and	$71	million	as	of	Dec.	31,	2006	and	2005,	respectively.	Dividends	received	from equity	affiliates	were	$16	million,	$20	million	and	$6	million	in	2006,	2005	and	2004,	respectively.

As	of	Dec.	31,	2006,	there	were	unrealized	pretax	gains	of	$3	million	and	as	of	Dec.	31,	2005	and	2004,	there	were	unrealized	pretax	losses	of	$1	million	and $2	million,	respectively,	recorded	in	"Accumulated	other	comprehensive	loss"	in	the	accompanying	balance	sheet	related	to	marketable	equity	securities	available	for sale.	During	2006,	PPG	sold	certain	of	these	investments	resulting	in	recognition	of	pretax	gains	of	$1	million	and	proceeds	of	$3	million.	During	2005,	PPG	sold certain	of	these	investments	resulting	in	recognition	of	pretax	gains	of	$1	million	and	proceeds	of	$4	million.	During	2004,	PPG	sold	certain	of	these	investments resulting	in	recognition	of	pretax	gains	of	$0.3	million	and	proceeds	of	$2	million.

# 6.	Goodwill	and	Other	Identifiable	Intangible	Assets

The	change	in	the	carrying	amount	of	goodwill	attributable	to	each	reportable	business	segment	for	the	years	ended	Dec.	31,	2006	and	2005	was	as	follows:

|  |  |  | Optical |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | Performance | and |  |  |
|  | Industrial | and\tApplied | Specialty |  |  |
| (Millions) | Coatings | Coatings | Materials | Glass | Total |
| Balance, |  |  |  |  |  |
| Jan.\t1,\t2005 | $255 | $842 | $30 | $89 | $1,216 |
| Goodwill\tfrom |  |  |  |  |  |
| acquisitions | 4 | 10 | 5 | 2 | 21 |
| Currency |  |  |  |  |  |
| translation | (16) | (44) | (4) | (7) | (71) |
| Balance, |  |  |  |  |  |
| Dec.\t31,\t2005 | 243 | 808 | 31 | 84 | \t 1,166 |
| Goodwill\tfrom |  |  |  |  |  |
| acquisitions | 25 | 84 | 48 | 1 | 158 |
| Currency |  |  |  |  |  |
| translation | 17 | 45 | 5 | 5 | 72 |
| Balance, |  |  |  |  |  |
| Dec.\t31,\t2006 | $285 | $937 | $84 | $90 | $1,396 |

The	carrying	amount	of	acquired	trademarks	with	indefinite	lives	as	of	Dec.	31,	2006	and	2005	totaled	$144	million.

The	Company's	identifiable	intangible	assets	with	finite	lives	are	being	amortized	over	their	estimated	useful	lives	and	are	detailed	below.

|  |  | Dec.	31,	2006 |  |  | Dec.	31,	2005 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Gross |  |  | Gross |  |  |
|  | Carrying | Accumulated |  | Carrying | Accumulated |  |
| (Millions) | Amount | Amortization | Net | Amount | Amortization | Net |
| Acquired\ttechnology | $400 | $(164) | $ 236 | $362 | $(142) | $220 |
| Other | 335 | (129) | 206 | 225 | (101) | 124 |
| Balance | $735 | $(293) | $ 442 | $587 | $(243) | $344 |
|  |  |  |  | 2006\tPPG\tANNUAL\tREPORT\tAND\tFORM\t10-K | 2006\tPPG\tANNUAL\tREPORT\tAND\tFORM\t10-K | 43 |

# 7.	Business	Restructuring	and	Asset	Impairment

During	the	first	quarter	of	2006,	the	Company	finalized	plans	for	certain	actions	to	reduce	its	workforce	and	consolidate	facilities.	In	the	first	quarter,	the	Company recorded	a	charge	of	$35	million	for	restructuring	and	other	related	activities,	including	severance	costs	of	$33	million	and	loss	on	asset	impairment	of	$2	million.	In	the second	quarter	of	2006,	the	remaining	approvals	were	received	related	to	additional	severance	actions	and	a	cost	of	$4	million	was	accrued.	It	is	expected	that	these restructuring	actions	will	be	substantially	completed	by	the	end	of	the	first	quarter	of	2007.	In	addition,	$5	million	of	the	cost	accrued	in	the	first	quarter	was	reversed later	in	2006	as	a	result	of	actions	not	being	taken	or	completed	at	a	cost	that	was	less	than	the	estimated	amount	accrued.	In	the	fourth	quarter	of	2006,	the	Company undertook	further	restructuring	actions,	which	resulted	in	an	additional	charge	of	$3	million	for	severance	costs.	It	is	expected	that	these	restructuring	actions	will	be substantially	completed	by	the	end	of	the	second	quarter	of	2007.

The	following	table	summarizes	the	activity	through	Dec.	31,	2006.

| (Millions,	except |  | Asset | Total | Employees |
| :--- | :--- | :--- | :--- | :--- |
| no.\tof\temployees) | Severance | Impairment | Charge | Covered |
|  | Costs |  |  |  |
| Industrial\tCoatings | $28 | $1 | $29 | 353 |
| Performance\tand\tApplied\tCoatings | 7 | 1 | 8 | 193 |
| Optical\tand\tSpecialty\tMaterials | 1 | — | 1 | 33 |
| Glass | 4 | — | 4 | 189 |
| Reversal | (5) | — | (5) | (80) |
| Total | 35 | 2 | 37 | 688 |
| Activity | (26) | (2) | (28) | (531) |
| Balance\tat\tDec.\t31,\t2006 | $9 | $\t\t— | $9 | 157 |

In	2002,	the	Company	recorded	a	charge	of	$81	million	for	restructuring	and	other	related	activities.	The	workforce	reductions	covered	by	this	charge	have	been completed;	however,	as	of	Dec.	31,	2006,	$4	million	of	this	reserve	remained	to	be	spent.	This	reserve	relates	to	a	group	of	approximately	75	employees	in	Europe, whose	terminations	were	concluded	under	a	different	social	plan	than	was	assumed	when	the	reserve	was	recorded.	Under	the	terms	of	this	social	plan,	severance payments	will	be	paid	to	these	75	individuals	through	2008.

Market	conditions,	such	as	fewer	new	drug	approvals,	product	withdrawals,	excess	production	capacity	and	an	increasing	share	of	generic	drugs	put	pressure	on	the pharmaceutical	industry	and	created	a	challenging	environment	for	our	fine	chemicals	operating	segment	in	2005.	In	the	fourth	quarter	of	2005,	the	Company	evaluated our	fine	chemicals	operating	segment	for	impairment	in	accordance	with	SFAS	No.	144,	"Accounting	for	the	Impairment	of	Long-Lived	Assets",	and	determined	that indicators	of	impairment	were	present	for	certain	long-lived	assets	at	our	manufacturing	plant	in	the	United	States.	In	measuring	the	fair	value	of	these	assets,	the Company	utilized	an	expected	cash	flow	methodology	to	determine	that	the	carrying	value	of	these	assets	exceeded	their	fair	value.	We	also	wrote	down	the	assets	of	a small	fine	chemical	facility	in	France	to	their	estimated	net	realizable	value.	The	Company	recorded	an	asset	impairment	charge	related	to	these	fine	chemicals	assets	of $27	million	pretax	in	2005,	which	was	included	in	"Other	charges"	in	the	accompanying	statement	of	income.

# 8.	Debt	and	Bank	Credit	Agreements	and	Leases

| (Millions) | (Millions) | (Millions) |  |  | 2006 | 2005 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| 6 | \t1 | /2%\tnotes,\tdue\t2007 | (1) |  | $50 | $50 |
| 7.05%\tnotes,\tdue\t2009 | 7.05%\tnotes,\tdue\t2009 | 7.05%\tnotes,\tdue\t2009 | (1) |  | 116 | 116 |
| 6 | \t7 | /8%\tnotes,\tdue\t2012 | (1) |  | 71 | 71 |
| 3 | \t7 | /8%\tnotes,\tdue\t2015\t(€300) | /8%\tnotes,\tdue\t2015\t(€300) |  | 394 | 353 |
| 7^\t3 | 7^\t3 | /8%\tnotes,\tdue\t2016 |  |  | 146 | 146 |
| 6^\t7 | 6^\t7 | /8%\tnotes,\tdue\t2017 |  |  | 74 | 74 |
| 7.4%\tnotes,\tdue\t2019 | 7.4%\tnotes,\tdue\t2019 | 7.4%\tnotes,\tdue\t2019 | 7.4%\tnotes,\tdue\t2019 | 7.4%\tnotes,\tdue\t2019 | 198 | 198 |
| 9%\tnon-callable\tdebentures,\tdue\t2021 | 9%\tnon-callable\tdebentures,\tdue\t2021 | 9%\tnon-callable\tdebentures,\tdue\t2021 | 9%\tnon-callable\tdebentures,\tdue\t2021 | 9%\tnon-callable\tdebentures,\tdue\t2021 | 148 | 148 |
| Impact\tof\tderivatives\ton\tdebt^(1) | Impact\tof\tderivatives\ton\tdebt^(1) | Impact\tof\tderivatives\ton\tdebt^(1) | Impact\tof\tderivatives\ton\tdebt^(1) | Impact\tof\tderivatives\ton\tdebt^(1) | (1) | (1) |
| ESOP\tnotes^(2) |  |  |  |  |  |  |
|  |  |  |  | Fixed-rate\tnotes,\tweighted\taverage\t8.5% | 9 | 16 |
|  |  |  |  | Variable-rate\tnotes,\tweighted\taverage\t 4.7% |  |  |
|  |  |  |  | as\tof\tDec.\t31,\t2006 | 9 | 14 |
| Various\tother\tU.S.\tdebt,\tweighted\taverage\nas\tof\tDec.\t31,\t2006 | Various\tother\tU.S.\tdebt,\tweighted\taverage\nas\tof\tDec.\t31,\t2006 | Various\tother\tU.S.\tdebt,\tweighted\taverage\nas\tof\tDec.\t31,\t2006 | Various\tother\tU.S.\tdebt,\tweighted\taverage\nas\tof\tDec.\t31,\t2006 | 5.0% | 1 | 2 |
| Various\tother\tnon-U.S.\tdebt,\tweighted\taverage\nas\tof\tDec.\t31,\t2006 | Various\tother\tnon-U.S.\tdebt,\tweighted\taverage\nas\tof\tDec.\t31,\t2006 | Various\tother\tnon-U.S.\tdebt,\tweighted\taverage\nas\tof\tDec.\t31,\t2006 | Various\tother\tnon-U.S.\tdebt,\tweighted\taverage\nas\tof\tDec.\t31,\t2006 | 2.4% | 3 | 4 |
| Capital\tlease\tobligations | Capital\tlease\tobligations | Capital\tlease\tobligations | Capital\tlease\tobligations | Capital\tlease\tobligations | 2 | 2 |
|  |  |  |  | Total | 1,220 | 1,193 |
| Less\tpayments\tdue\twithin\tone\tyear | Less\tpayments\tdue\twithin\tone\tyear | Less\tpayments\tdue\twithin\tone\tyear | Less\tpayments\tdue\twithin\tone\tyear |  | 65 | 24 |

# Long-term	debt

(1) PPG	entered	into	several	interest	rate	swaps	which	have	the	effect	of	converting	$ 175	million	as	of	Dec.	31,	2006	and	2005	of	these	fixed	rate	notes	to	variable	rates,	based	on	either	the	three-month	or	the	six- month	London	Interbank	Offered	Rate	(LIBOR).	The	weighted	average	effective	interest	rate	for	these	borrowings,	including	the	effects	of	the	outstanding	swaps	was	7.8%	and	5.9%	for	the	years	ended	Dec.	31, 2006	and	2005,	respectively.	Refer	to	Notes	1	and	10	for	additional	information.

(2) See	Note	1	for	discussion	of	ESOP	borrowings.	The	fixed-	and	variable-rate	notes	mature	in	2008	and	require	annual	principal	payments	in	2007	and	2008.

The	Company	has	a	$1	billion	revolving	credit	facility	that	expires	in	2011.	The	annual	facility	fee	payable	on	the	committed	amount	is	6	basis	points.	This	facility is	available	for	general	corporate	purposes	and	also	to	support	PPG's	commercial	paper	programs	in	the	U.S.	and	Europe.	As	of	Dec.	31,	2006,	no	amounts	were outstanding	under	this	facility.

In	June	2005,	the	Company	issued	€300	million	of	3.875%	Senior	Notes	due	2015	(the	"Euro	Notes").	The	proceeds	from	the	Euro	Notes	were	used	to	repay	short- term	commercial	paper	obligations	incurred	in	June	2005	in	connection	with	the	purchase	of	$100	million	of	6.5%	notes	due	2007,	$159	million	of	7.05%	notes	due 2009	and	$16	million	of	6.875%	notes	due	2012,	as	well	as	for	general	corporate	purposes.	The	Company	recorded	a	second	quarter	2005	pre-tax	charge	of approximately	$19	million,	($12	million	aftertax	or	7	cents	per	share),	for	debt	refinancing	costs,	which	is	included	in	"Other	charges"	in	the	accompanying	statement	of income	for	the	year	ended	Dec.	31,	2005.

The	fixed	rate	notes	that	were	retired	had	been	converted	to	variable	rate	notes	using	interest	rate	swaps.	As	a	result,	the	debt	was	reflected	in	the	balance	sheet	at fair	value	through	the	inclusion	of	the	impact	of	these	derivatives	on	the	debt.	As	a	result	of	the	early	retirement	of	these	debt	instruments,	$8	million	of	these	fair	value adjustments	were	recognized	and	included	as	a	net	reduction	in	the	debt	refinancing	costs	described	above.

Our	non-U.S.	operations	have	other	uncommitted	lines	of	credit	totaling	$332	million	of	which	$75	million	was	used	as	of	Dec.	31,	2006.	These	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	Company's	revolving	credit agreements,	under	which	there	are	currently	no	borrowings,	and	a	portion	of	PPG's	ESOP	Notes,	include	financial	ratio	covenants.	The	most	restrictive	of	these covenants	requires	that	the	amount	of	long-term	senior	debt	outstanding	not	exceed	55%	of	the	Company's	tangible	net	assets.	As	of	Dec.	31,	2006,	long-term	senior debt	was	22%	of	the	Company's	tangible	net	assets.	In	the	event	of	a	breach	of	this	covenant,	each	holder	of	the	ESOP	notes	would	have	the	right	to	refinance	the	notes. Additionally,	substantially	all	of	our	debt	agreements	contain	customary	cross-default	provisions.	Those	provisions	generally	provide	that	a	default	on	a	debt	service payment	of	$10	million	or	more	for	longer	than	the	grace	period	provided	(usually	10	days)	under	one	agreement	may	result	in	an	event	of	default	under	other agreements.	None	of	our	primary	debt	obligations	are	secured	or	guaranteed	by	our	affiliates.

As	of	Dec.	31,	2006	and	2005,	the	caption	"Short-term	debt	and	current	portion	of	long-term	debt"	includes	$75	million	and	$77	million,	respectively,	of	other short-term	borrowings.	The	weighted-average	interest	rates	of	short-term	borrowings	as	of	Dec.	31,	2006	and	2005,	were	5.2%	and	5.1%,	respectively.

The	Company	had	outstanding	letters	of	credit	of	$71	million	as	of	Dec.	31,	2006.	The	letters	of	credit	secure	the	Company's	performance	to	third	parties	under certain	self-insurance	programs	and	other	commitments	made	in	the	ordinary	course	of	business.	As	of	Dec.	31,	2006	and	2005	guarantees	outstanding	were	$62	million and	$53	million,	respectively.	The	guarantees	relate	primarily	to	debt	of	certain	entities	in	which	PPG	has	an	ownership	interest	and	selected	customers	of	certain	of	our operating	segments	of	which	a	portion	is	secured	by	the	assets	of	the	related	entities.	The	carrying	values	of	these	guarantees	were	$9	million	and	$3	million	as	of	Dec. 31,	2006	and	2005,	respectively,	and	the	fair	values	were	$9	million	and	$11	million,	as	of	Dec.	31,	2006	and	2005,	respectively.	The	Company	does	not	believe	any	loss related	to	these	letters	of	credit	or	guarantees	is	likely.

# 9.	Financial	Instruments,	Excluding	Derivative	Financial	Instruments

Included	in	PPG's	financial	instrument	portfolio	are	cash	and	cash	equivalents,	short-term	investments,	marketable	equity	securities,	company-owned	life	insurance	and short-	and	long-term	debt	instruments.	The	most	significant	instrument,	long-term	debt	(excluding	capital	lease	obligations),	had	carrying	and	fair	values	totaling	$1,218 million	and	$1,303	million,	respectively,	as	of	Dec.	31,	2006.	The	corresponding	amounts	as	of	Dec.	31,	2005,	were	$1,191	million	and	$1,309	million,	respectively. The	fair	values	of	the	other	financial	instruments	approximated	their	carrying	values,	in	the	aggregate.

The	fair	values	of	the	debt	instruments	were	based	on	discounted	cash	flows	and	interest	rates	available	to	the	Company	for	instruments	of	the	same	remaining maturities.

# 10.	Derivative	Financial	Instruments	and	Hedge	Activities

PPG's	policies	do	not	permit	speculative	use	of	derivative	financial	instruments.	PPG	uses	derivative	instruments	to	manage	its	exposure	to	fluctuating	natural	gas	prices through	the	use	of	natural	gas	swap	contracts.	PPG	also	uses	forward	currency	and	option	contracts	as	hedges	against	its	exposure	to	variability	in	exchange	rates	on short-term	intercompany	borrowings	and	cash	flows	denominated	in	foreign	currencies	and	to	translation	risk.	PPG	uses	foreign	denominated	debt	to	hedge	investments in	foreign	operations.	Interest	rate	swaps	are	used	to	manage	the	Company's	exposure	to	changing	interest	rates.	We	also	use	an	equity	forward	arrangement	to	hedge	a portion	of	our	exposure	to	changes	in	the	fair	value	of	PPG	stock	that	is	to	be	contributed	to	the	asbestos	settlement	trust	as	discussed	in	Note	14.

PPG	enters	into	derivative	financial	instruments	with	high	credit	quality	counterparties	and	diversifies	its	positions	among	such	counterparties	in	order	to	reduce	its exposure	to	credit	losses.	The	Company	has	not	experienced	any	credit	losses	on	derivatives	during	the	three-year	period	ended	Dec.	31,	2006.

PPG	manages	its	foreign	currency	transaction	risk	to	minimize	the	volatility	of	cash	flows	caused	by	currency	fluctuations	by	forecasting	foreign	currency- denominated	cash	flows	of	each	subsidiary	for	a	12-month	period	and	aggregating	these	cash	inflows	and	outflows	in	each	currency	to	determine	the	overall	net transaction	exposures.	Decisions	on	whether	to	use	derivative	financial	instruments	to	hedge	the	net	transaction	exposures	are	made	based	on	the	amount	of	those exposures,	by	currency,	and	an	assessment	of	the	near-term	outlook	for	each	currency.	The	Company's	policy	permits	the	use	of	foreign	currency	forward	and	option contracts	to	hedge	up	to	70%	of	its	anticipated	net	foreign	currency	cash	flows	over	the	next	12-month	period.	These	contracts	do	not	qualify	for	hedge	accounting	under the	provisions	of	SFAS	No.	133;	therefore,	the	change	in	the	fair	value	of	these	instruments	is	recorded	in	"Other	charges"	in	the	accompanying	statement	of	income	in the	period	of	change.	The	amounts	recorded	in	earnings	for	the	years	ended	Dec.	31,	2006,	2005	and	2004	were	a	loss	of	$1	million,	income	of	$4	million	and	a	loss	of $1	million,	respectively.	The	fair	value	of	these	contracts	as	of	Dec.	31,	2006	and	2005	were	assets	of	$2	million	and	$1	million,	respectively.

The	sales,	costs,	assets	and	liabilities	of	our	non-U.S.	operations	must	be	reported	in	U.S.	dollars	in	order	to	prepare	consolidated	financial	statements	which	gives rise	to	translation	risk.	The	Company	monitors	its	exposure	to	translation	risk	and	enters	into	derivative	foreign	currency	contracts	to	hedge	its	exposure,	as	deemed appropriate.	This	risk	management	strategy	does	not	qualify	for	hedge	accounting	under	the	provisions	of	SFAS	No.	133;	therefore,	changes	in	the	fair	value	of	these instruments	would	be	recorded	in	"Other	charges"	in	the	accompanying	statement	of	income	in	the	period	of	change.	No	derivative	instruments	were	acquired	to	hedge translation	risk	during	2006,	2005	or	2004.

In	June	2005,	the	Company	issued	Euro	Notes,	as	discussed	in	Note	8,	and	has	designated	these	notes	as	a	hedge	of	a	portion	of	our	net	investment	in	our	European operations.	As	a	result,	the	change	in	book	value	from	adjusting	these	foreign	denominated	notes	to	current	spot	rates	at	each	balance	sheet	date	is	deferred	in accumulated	other	comprehensive	(loss)	income.	As	of	Dec.	31,	2006	and	2005,	the	amount	recorded	in	accumulated	other	comprehensive	(loss)	income	from	this hedge	of	our	net	investment	was	an	unrealized	loss	of	$34	million	and	an	unrealized	gain	of	$7	million,	respectively.

PPG	designates	forward	currency	contracts	as	hedges	against	the	Company's	exposure	to	variability	in	exchange	rates	on	short-term	intercompany	borrowings denominated	in	foreign	currencies.	To	the	extent	effective,	changes	in	the	fair	value	of	these	instruments	are	deferred	in	accumulated	other	comprehensive	(loss)	income and	subsequently	reclassified	to	"Other	charges"	in	the	accompanying	statement	of	income	as	foreign	exchange	gains	and	losses	are	recognized	on	the	related intercompany	borrowings.	The	portion	of	the	change	in	fair	value	considered	to	be	ineffective	is	recognized	in	"Other	charges"	in	the	accompanying	statement	of income.	The	amounts	recorded	in	earnings	for	the	years	ended	Dec.	31,	2006,	2005	and	2004,	were	losses	of	$5	million,	$6	million	and	$5	million,	respectively.	The	fair value	of	these	contracts	was	a	liability	of	$1	million	and	$5	million	as	of	Dec.	31,	2006	and	2005,	respectively.

The	Company	manages	its	interest	rate	risk	by	balancing	its	exposure	to	fixed	and	variable	rates	while	attempting	to	minimize	its	interest	costs.	Generally,	the Company	maintains	variable	interest	rate	debt	at	a	level	of	approximately	25%	to	50%	of	total	borrowings.	PPG	principally	manages	its	fixed	and	variable	interest	rate risk	by	retiring	and	issuing	debt	from	time	to	time	and	through	the	use	of	interest	rate	swaps.	As	of	Dec.	31,	2006	and	2005,	these	swaps	converted	$175	million	of	fixed rate	debt	to	variable	rate	debt.	These	swaps	are	designated	as	fair	value	hedges.	As	such,	the	swaps	are	carried	at	fair	value.	Changes	in	the	fair	value	of	these	swaps	and that	of	the	related	debt	are	recorded	in	"Interest	expense"	in	the	accompanying	statement	of	income,	the	net	of	which	is	zero.	The	fair	value	of	these	contracts	was	a liability	of	$7	million	as	of	Dec.	31,	2006	and	2005.	In	January	2007,	PPG	converted	an	additional	$150	million	of	fixed	rate	debt	to	variable	rates.

The	Company	uses	derivative	instruments	to	manage	its	exposure	to	fluctuating	natural	gas	prices	through	the

use	of	natural	gas	swap	contracts.	These	instruments	mature	over	the	next	37	months.	To	the	extent	that	these	instruments	are	effective	in	hedging	PPG's	exposure	to price	changes,	changes	in	the	fair	values	of	the	hedge	contracts	are	deferred	in	accumulated	other	comprehensive	(loss)	income	and	reclassified	to	cost	of	sales	as	the natural	gas	is	purchased.	The	amount	of	ineffectiveness,	which	is	reported	in	"Cost	of	sales,	exclusive	of	depreciation	and	amortization"	in	the	accompanying	statement of	income	for	the	years	ended	Dec.	31,	2006,	2005,	and	2004,	was	$0.2	million	of	income	and	$0.2	million	and	$1	million	of	expense,	respectively.	The	fair	value	of these	contracts	was	a	liability	of	$25	million	and	an	asset	of	$0.3	million	as	of	Dec.	31,	2006	and	2005,	respectively.	As	of	Dec.	31,	2006	an	after-tax	loss	of	$2	million was	deferred	in	accumulated	other	comprehensive	(loss)	income,	which	related	to	natural	gas	hedge	contracts	that	mature	in	excess	of	twelve	months.

In	November	2002,	PPG	entered	into	a	one-year	renewable	equity	forward	arrangement	with	a	bank	in	order	to	partially	mitigate	the	impact	of	changes	in	the	fair value	of	PPG	stock	that	is	to	be	contributed	to	the	asbestos	settlement	trust	as	discussed	in	Note	14.	This	instrument,	which	has	been	renewed,	is	recorded	at	fair	value	as an	asset	or	liability	and	changes	in	the	fair	value	of	this	instrument	are	reflected	in	"Asbestos	settlement	–	net"	in	the	accompanying	statement	of	income.	As	of	Dec.	31, 2006	and	2005,	PPG	had	recorded	a	current	asset	of	$14	million	and	$10	million,	respectively,	and	recognized	income	of	$4	million	for	the	year	ended	Dec.	31,	2006, expense	of	$9	million	for	the	year	ended	Dec.	31,	2005	and	income	of	$4	million	for	the	year	ended	Dec.	31,	2004.

In	accordance	with	the	terms	of	this	instrument	the	bank	had	purchased	504,900	shares	of	PPG	stock	on	the	open	market	at	a	cost	of	$24	million	through	Dec.	31, 2002,	and	during	the	first	quarter	of	2003	the	bank	purchased	an	additional	400,000	shares	at	a	cost	of	$19	million,	for	a	total	principal	amount	of	$43	million.	PPG	will pay	to	the	bank	interest	based	on	the	principal	amount	and	the	bank	will	pay	to	PPG	an	amount	equal	to	the	dividends	paid	on	these	shares	during	the	period	this instrument	is	outstanding.	The	difference	between	the	principal	amount,	and	any	amounts	related	to	unpaid	interest	or	dividends,	and	the	current	market	price	for	these shares	will	represent	the	fair	value	of	the	instrument	as	well	as	the	amount	that	PPG	would	pay	or	receive	if	the	bank	chose	to	net	settle	the	instrument.	Alternatively,	the bank	may,	at	its	option,	require	PPG	to	purchase	the	shares	covered	by	the	arrangement	at	the	market	price	on	the	date	of	settlement.

No	derivative	instrument	initially	designated	as	a	hedge	instrument	was	undesignated	or	discontinued	as	a hedging	instrument	during	2006	or	2005.	For	the	year	ended	Dec.	31,	2006,	other	comprehensive	(loss)	income	included	a	net	loss	due	to	derivatives	of	$13	million,	net of	tax.	This	loss	was	comprised	of	realized	losses	of	$22	million	and	unrealized	losses	of	$35	million.	The	realized	losses	related	to	the	settlement	of	natural	gas	contracts and	interest	rate	swaps	owned	by	one	of	the	Company's	investees	accounted	for	under	the	equity	method	of	accounting.	These	losses	were	offset	in	part	by	realized	gains related	to	the	settlement	of	foreign	currency	contracts.	The	unrealized	losses	related	primarily	to	the	change	in	fair	value	of	the	natural	gas	contracts.	These	unrealized losses	were	partially	offset	by	unrealized	gains	on	foreign	currency	contracts	and	on	interest	rate	swaps	owned	by	one	of	the	Company's	investees	accounted	for	under the	equity	method	of	accounting.

For	the	year	ended	Dec.	31,	2005,	other	comprehensive	(loss)	income	included	a	net	gain	due	to	derivatives	of	$3	million,	net	of	tax.	This	gain	was	comprised	of realized	gains	of	$1	million	and	unrealized	gains	of	$4	million.	The	realized	gains	related	to	the	settlement	during	the	period	of	natural	gas	contracts	offset	in	part	by	the settlement	of	interest	rate	swaps	owned	by	one	of	the	Company's	investees	accounted	for	under	the	equity	method	of	accounting	and	the	settlement	of	foreign	currency contracts.	The	unrealized	gains	relate	to	these	same	instruments.

The	fair	values	of	outstanding	derivative	instruments,	excluding	interest	rate	swaps,	were	determined	using	quoted	market	prices.	The	fair	value	of	interest	rate swaps	was	determined	using	discounted	cash	flows	and	current	interest	rates.

# 11.	Earnings	Per	Common	Share

The	earnings	per	common	share	calculations	for	the	three	years	ended	Dec.	31,	2006	are	as	follows:

| (Millions,	except	per	share	amounts) | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Earnings\tper\tcommon\tshare |  |  |  |
| Net\tincome | $711 | $596 | $683 |
| Weighted\taverage\tcommon\nshares\toutstanding | 165.7 | 169.6 | 171.7 |
| Earnings\tper\tcommon\tshare | $4.29 | $3.51 | $3.98 |
| Earnings\tper\tcommon\tshare\t–\tassuming\ndilution |  |  |  |
| Net\tincome | $711 | $596 | $683 |
| Weighted\taverage\tcommon\nshares\toutstanding | 165.7 | 169.6 | 171.7 |
| Effect\tof\tdilutive\tsecurities |  |  |  |
| Stock\toptions | 0.6 | 0.6 | 0.7 |
| Other\tstock\tcompensation\tplans | 0.2 | 0.7 | 0.6 |
| Potentially\tdilutive\tcommon\tshares | 0.8 | 1.3 | 1.3 |
| Adjusted\tweighted\taverage\ncommon\tshares\toutstanding | 166.5 | 170.9 | 173.0 |
| Earnings\tper\tcommon\nshare\t–\tassuming\tdilution | $4.27 | $3.49 | $3.95 |
|  | 2006\tPPG\tANNUAL\tREPORT\tAND\tFORM\t10-K | 2006\tPPG\tANNUAL\tREPORT\tAND\tFORM\t10-K | 47 |

There	were	4.0	million,	3.9	million	and	4.7	million	outstanding	stock	options	excluded	in	2006,	2005	and	2004,	respectively,	from	the	computation	of	diluted	earnings per	common	share	due	to	their	anti-dilutive	effect.

# 12.	Income	Taxes

The	following	table	presents	a	reconciliation	of	the	statutory	U.S.	corporate	federal	income	tax	rate	to	our	effective	income	tax	rate:

| (Percent	of	Pretax	Income) |  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- | :--- |
| U.S.\tfederal\tincome\ttax\trate |  | 35.00% | 35.00% | 35.00% |
| Changes\tin\trate\tdue\tto: |  |  |  |  |
|  | State\tand\tlocal\ttaxes\t–\tU.S. | 0.75 | 0.87 | 1.23 |
|  | Taxes\ton\tnon-U.S.\tearnings | (2.80) | (3.37) | (3.56) |
|  | ESOP\tdividends | (1.03) | (1.18) | (1.08) |
|  | Other | (5.69) | (1.54) | (1.30) |
|  | Effective\tincome\ttax\trate | 26.23% | 29.78% | 30.29% |

The	2006	effective	income	tax	rate	includes	the	tax	benefit	related	to	the	settlement	with	the	IRS	of	our	tax	returns	for	the	years	2001-2003.	Additionally,	the	2006 effective	income	tax	rate	is	reduced	by	the	absence	of	the	one-time	U.S.	tax	cost	that	was	incurred	in	2005	related	to	dividends	that	were	repatriated	under	the	provisions of	the	American	Jobs	Creation	Act	of	2004	("AJCA	2004").	The	impact	of	these	items	is	presented	as	"Other"	in	the	above	rate	reconciliation.

The	following	table	gives	details	of	income	tax	expense	reported	in	the	accompanying	statement	of	income.

| (Millions) |  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- | :--- |
| Current\tincome\ttaxes |  |  |  |  |
|  | U.S.\tfederal | $236 | $255 | $193 |
|  | Non-U.S. | 105 | 111 | 114 |
|  | State\tand\tlocal\t–\tU.S. | 29 | 31 | 34 |
|  | Total\tcurrent | 370 | 397 | 341 |
| Deferred\tincome\ttaxes |  |  |  |  |
|  | U.S.\tfederal | (82) | (85) | (16) |
|  | Non-U.S. | — | (21) | 2 |
|  | State\tand\tlocal\t–\tU.S. | (10) | (9) | (5) |
|  | Total\tdeferred | (92) | (115) | (19) |
|  | Total | $278 | $282 | $322 |

Net	deferred	income	tax	assets	and	liabilities	as	of	Dec.	31,	2006	and	2005,	are	as	follows:

| (Millions) | 2006 | 2005 |
| :--- | :--- | :--- |
| Deferred\tincome\ttax\tassets\trelated\tto |  |  |
| Employee\tbenefits | $753 | $584 |
| Contingent\tand\taccrued\tliabilities | 490 | 409 |
| Operating\tloss\tand\tother\tcarryforwards | 102 | 96 |
| Inventories | 22 | 11 |
| Property | 5 | 5 |
| Other | 54 | 50 |
| Valuation\tallowance | (65) | (58) |
| Total | \t 1,361 | \t 1,097 |
| Deferred\tincome\ttax\tliabilities\trelated\tto |  |  |
| Property | 382 | 393 |
| Intangibles | 242 | 193 |
| Employee\tbenefits | 40 | 40 |
| Other | 23 | 34 |
| Total | 687 | 660 |
| Deferred\tincome\ttax\tassets\t–\tnet | $674 | $437 |

As	of	Dec.	31,	2006,	subsidiaries	of	the	Company	had	available	net	operating	loss	carryforwards	of	approximately	$286	million	for	income	tax	purposes,	of	which approximately	$244	million	has	an	indefinite	expiration.	The	remaining	$42	million	expires	between	the	years	2007	and	2021.	A	valuation	allowance	has	been established	for	carry-forwards	where	the	ability	to	utilize	them	is	not	likely.

No	deferred	U.S.	income	taxes	have	been	provided	on	certain	undistributed	earnings	of	non-U.S.	subsidiaries,	which	amounted	to	$2,116	million	as	of	Dec.	31, 2006	and	$1,791	million	as	of	Dec.	31,	2005.	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	liability	on	these	undistributed	earnings.	In	October	2004,	the	AJCA	2004	was	signed	into	law.	Among	its many	provisions,	the	AJCA	2004	provided	a	limited	opportunity	through	2005	to	repatriate	the	undistributed	earnings	of	non-U.S.	subsidiaries	at	a	U.S.	tax	cost	that could	be	lower	than	the	normal	tax	cost	on	such	distributions.	During	2005,	we	repatriated	$114	million	of	dividends	under	the	provisions	of	AJCA	2004	resulting	in income	tax	expense	of	$9	million.	In	the	absence	of	AJCA	2004,	the	Company	estimates	the	tax	cost	to	repatriate	these	dividends	would	have	been	$23	million	higher.

The	determination	of	annual	income	tax	expense	takes	into	consideration	amounts	which	may	be	needed	to	cover	exposures	for	open	tax	years.	In	2006,	the 46

The	determination	of	annual	income	tax	expense	takes	into	consideration	amounts	which	may	be	needed	to	cover	exposures	for	open	tax	years.	In	2006,	the Company	resolved	all	matters	with	the	IRS	related	to	its	federal	income	tax	returns	for	the	years	2001	to	2003.	The	Company's	federal	income	tax	returns	for	the	years 2004	and	2005	are	currently	under	IRS	audit.	The	Company

does	not	expect	any	material	adverse	impact	on	earnings	to	result	from	the	resolution	of	matters	related	to	open	tax	years,	however,	actual	settlements	may	differ	from amounts	accrued.	As	of	Dec.	31,	2006	and	2005,	the	reserve	related	to	exposures	for	open	tax	years	was	$87	million	and	$88	million,	respectively.

# Defined	Benefit	Plans

We	have	defined	benefit	pension	plans	that	cover	certain	employees	worldwide.	PPG	also	sponsors	welfare	benefit	plans	that	provide	postretirement	medical	and	life insurance	benefits	for	certain	U.S.	and	Canadian	employees	and	their	dependents.	These	programs	require	retiree	contributions	based	on	retiree-selected	coverage	levels for	certain	retirees	and	their	dependents	and	provide	for	sharing	of	future	benefit	cost	increases	between	PPG	and	participants	based	on	management	discretion.	The Company	has	the	right	to	modify	or	terminate	certain	of	these	benefit	plans	in	the	future.	Salaried	and	certain	hourly	employees	hired	on	or	after	Oct.	1,	2004,	are	not eligible	for	postretirement	medical	benefits.	Salaried	employees	hired,	rehired,	or	transferred	to	salaried	status	on	or	after	Jan.	1,	2006,	and	certain	hourly	employees hired	in	2006	or	thereafter	are	eligible	to	participate	in	a	defined	contribution	retirement	plan.	These	employees	are	not	eligible	for	defined	benefit	pension	plan	benefits.

The	Medicare	Act	of	2003	introduced	a	prescription	drug	benefit	under	Medicare	("Medicare	Part	D")	that	provides	several	options	for	Medicare	eligible participants	and	employers,	including	a	federal	subsidy	payable	to	companies	that	elect	to	provide	a	retiree	prescription	drug	benefit	which	is	at	least	actuarially equivalent	to	Medicare	Part	D.	During	the	third	quarter	of	2004,	PPG	concluded	its	evaluation	of	the	provisions	of	the	Medicare	Act	and	decided	to	maintain	its	retiree prescription	drug	program	and	to	take	the	subsidy	available	under	the	Medicare	Act.	The	impact	of	the	Medicare	Act	was	accounted	for	in	accordance	with	FASB	Staff Position	No.	106-2,	"Accounting	and	Disclosure	Requirements	Related	to	the	Medicare	Prescription	Drug,	Improvement	and	Modernization	Act	of	2003"	effective	Jan. 1,	2004.	In	addition,	the	plan	was	amended	Sept.	1,	2004,	to	provide	that	PPG	management	will	determine	the	extent	to	which	future	increases	in	the	cost	of	its	retiree medical	and	prescription	drug	programs	will	be	shared	by	certain	retirees.	The	federal	subsidy	related	to	providing	a	retiree	prescription	drug	benefit	is	not	subject	to U.S.	federal	income	tax	and	is	recorded	as	a	reduction	in	our	annual	net	periodic	benefit	cost	of	other	postretirement	benefits.

The	following	table	sets	forth	the	changes	in	projected	benefit	obligations	("PBO")	(as	calculated	by	our	actuaries	as	of	Dec.	31),	plan	assets,	the	funded	status	and the	amounts	recognized	in	our	balance	sheet	for	our	defined	benefit	pension	and	other	postretirement	benefit	plans:

| (Millions) | 2006 | 2005 | 2006 | 2005 |
| :--- | :--- | :--- | :--- | :--- |
| Projected\tbenefit\nobligation,\tJan.\t1 | $3,636 | $3,318 | $1,119 | $1,073 |
| Service\tcost | 74 | 64 | 27 | 24 |
| Interest\tcost | 197 | 189 | 62 | 63 |
| Plan\tamendments | 3 | (13) | (10) | — |
| Actuarial\tlosses\t(gains) | 10 | 330 | (7) | 41 |
| Benefits\tpaid | (203) | (196) | (84) | (83) |
| Foreign\tcurrency\ttranslation\tadjustments | 75 | (59) | — | 1 |
| Other | (1) | 3 | — | — |
| Projected\tbenefit\nobligation,\tDec.\t31 | $3,791 | $3,636 | $1,107 | $1,119 |
| Market\tvalue\tof\tplan |  |  |  |  |
| assets,\tJan.\t1 | $2,812 | $2,782 |  |  |
| Actual\treturn\ton\tplan\tassets | 363 | 211 |  |  |
| Company\tcontributions | 124 | 30 |  |  |
| Participant\tcontributions | 3 | 3 |  |  |
| Benefits\tpaid | (187) | (174) |  |  |
| Plan\texpenses\tand\tother-net | (6) | (2) |  |  |
| Foreign\tcurrency\ttranslation\tadjustments | 52 | (38) |  |  |
| Market\tvalue\tof\tplan\nassets,\tDec.\t31 | $3,161 | $2,812 |  |  |
| Funded\tStatus | $(630) | $(824) | $(1,107) | $(1,119) |
| Accumulated\tunrecognized: |  |  |  |  |
| Accumulated\tactuarial\tlosses | 1,313 | 1,512 | 460 | 505 |
| Accumulated\tprior\tservice\tcost | 37 | 50 | (51) | (56) |
| Net\tamount\trecognized\tbefore\tadjustment | $720 | $738 | $(698) | $(670) |
| Adjustment\trecognized\tby\tcharge\tto\taccumulated\tother\tcomprehensive\tloss\tpre-tax | (1,350) | (1,227) | (409) | — |
| Amount\trecognized | $(630) | $(489) | $(1,107) | $(670) |
| Amounts\trecognized\tin\tthe\tBalance\tSheet: |  |  |  |  |
| Other\tassets\t(long-term) | 6 | 75 | — | — |
| Accounts\tpayable\tand\taccrued\tliabilities | (13) | (8) | (79) | (83) |
| Accrued\tpensions | (623) | (556) | — | — |
| Other\tpostretirement\tbenefits | — | — | (1,028) | (587) |
| Amount\trecognized | $(630) | $(489) | $(1,107) | $(670) |
| See\tNote\t1\tfor\ta\tsummary\tof\tthe\tamounts\trecorded. |  |  |  |  |
|  |  | 2006\tPPG\tANNUAL\tREPORT\tAND\tFORM\t10-K | 2006\tPPG\tANNUAL\tREPORT\tAND\tFORM\t10-K | 49 |

Due	to	the	adoption	of	SFAS	No.	158	as	of	Dec.	31,	2006,	the	funded	status	of	the	plans	is	equal	to	the	net	liability	recognized	in	the	Dec.	31,	2006	balance	sheet. See	Note	1	for	a	summary	of	the	amounts	recorded.

The	PBO	is	the	actuarial	present	value	of	benefits	attributable	to	employee	service	rendered	to	date,	including	the	effects	of	estimated	future	pay	increases.

The	accumulated	benefit	obligation	("ABO")	also	reflects	the	actuarial	present	value	of	benefits	attributable	to	employee	service	rendered	to	date,	but	does	not	include the	effects	of	estimated	future	pay	increases.	In	order	to	measure	the	funded	status	for	financial	accounting	purposes	prior	to	the	adoption	of	SFAS	No.	158,	the	ABO was	compared	to	the	market	value	of	plan	assets	and	amounts	accrued	for	such	benefits	in	the	balance	sheet.	The	ABO	as	of	Dec.	31,	2006	and	2005	was	$3,512	million and	$3,361	million,	respectively.	The	following	summarizes	the	funded	status	of	those	pension	plans	that	were	under-funded	on	an	ABO	basis	as	of	Dec.	31,	2006	and 2005:

Amounts	recognized	in	accumulated	other	comprehensive	loss	as	of	Dec.	31,	2006	consist	of:

|  |  | Postretirement |
| :--- | :--- | :--- |
|  | Pensions | Benefits |
| Accumulated\tnet\tactuarial\tlosses | $1,313 | $460 |
| Accumulated\tprior\tservice\tcost\t(credit) | 37 | (51) |
| Total | $1,350 | $409 |

The	accumulated	net	actuarial	losses	for	pensions	relate	primarily	to	the	actual	return	on	plan	assets	being	less	than	the	expected	return	on	plan	assets	in	2000,	2001 and	2002	and	a	decline	in	the	discount	rate	since	1999.	The	accumulated	net	actuarial	losses	for	other	postretirement	benefits	relate	primarily	to	actual	healthcare	costs increasing	at	a	higher	rate	than	assumed	during	the	2001-2003	period	and	the	decline	in	the	discount	rate.	The	increases	in	the	accumulated	net	actuarial	losses	for	both pension	and	other	postretirement	benefits	have	occurred	primarily	since	2001.	Since	the	accumulated	net	actuarial	losses	exceed	10%	of	the	higher	of	the	market	value	of plan	assets	or	the	PBO	at	the	beginning	of	the	year,	amortization	of	such	excess	over	the	average	remaining	service	period	of	active	employees	expected	to	receive benefits	has	been	included	in	net	periodic	benefit	costs	for	pension	and	other	postretirement	benefits	in	each	of	the	last	three	years.	Accumulated	prior	service	cost (credit)	is	amortized	over	the	future	service	periods	of	those	employees	who	are	active	at	the	dates	of	the	plan	amendments	and	who	are	expected	to	receive	benefits.

The	increase	(decrease)	in	accumulated	other	comprehensive	loss	in	2006	relating	to	pension	and	other	postretirement	benefits	consists	of:

| (Millions) | Pensions | Postretirement<br>Benefits | Total |
| :--- | :--- | :--- | :--- |
| Minimum\tpension\tliability | (170) | — | (170) |
| SFAS\tNo.\t158\tadjustment | 254 | 251 | 505 |
| Net\tChange | 84 | 251 | 335 |

The	estimated	net	actuarial	loss	and	prior	service	cost	for	the	defined	benefit	pension	plans	that	will	be	amortized	from	accumulated	other	comprehensive	(loss) income	into	net	periodic	benefit	cost	in	2007	are	$80	and	$14,	respectively.	The	estimated	net	actuarial	loss	and	prior	service	credit	for	the	other	postretirement	benefits that	will	be	amortized	from	accumulated	other	comprehensive	(loss)	income	into	net	periodic	benefit	cost	in	2007	are	$33	and	$10,	respectively.

Net	periodic	benefit	cost	for	the	three	years	ended	Dec.	31,	2006,	includes	the	following:

|  |  |  |  |  | Postretirement |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | Pensions |  |  | Benefits |  |
| (Millions) | 2006 | 2005 | 2004 | 2006 | 2005 | 2004 |
| Service\tcost | $74 | $64 | $65 | $27 | $24 | $22 |
| Interest\tcost | 197 | 189 | 182 | 62 | 63 | 62 |
| Expected\treturn |  |  |  |  |  |  |
| on\tplan\tassets | (232) | (223) | (208) | — | — | — |
| Amortization\tof |  |  |  |  |  |  |
| prior\tservice |  |  |  |  |  |  |
| cost\t(credit) | 15 | 19 | 20 | (15) | (15) | (6) |
| Amortization\tof\tactuarial\tlosses | 105 | 78 | 81 | 38 | 35 | 28 |
| Net\tperiodic |  |  |  |  |  |  |
| benefit\tcost | $159 | $127 | $140 | $112 | $107 | $106 |

Net	periodic	benefit	cost	is	included	in	"Cost	of	sales,	exclusive	of	depreciation	and	amortization,"	"Selling,	general	and	administrative"	and	"Research	and development"	in	the	accompanying	statement	of	income.

# Assumptions

The	following	weighted	average	assumptions	were	used	to	determine	the	benefit	obligation	for	our	defined	benefit	pension	and	other	postretirement	plans	as	of	Dec. 31,	2006	and	2005:

The	following	weighted	average	assumptions	were	used	to	determine	the	net	periodic	benefit	cost	for	our	defined	benefit	pension	and	other	postretirement	benefit plans	for	the	three	years	ended	Dec.	31,	2006:

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Discount\trate | 5.5% | 5.9% | 6.1% |
| Expected\treturn\ton\tassets | 8.4% | 8.4% | 8.4% |
| Rate\tof\tcompensation\tincrease | 4.1% | 4.0% | 4.0% |

These	assumptions	are	reviewed	on	an	annual	basis.	In	determining	the	expected	return	on	plan	asset	assumption,	the	Company	evaluates	the	mix	of	investments that	comprise	plan	assets	and	external	forecasts	of	future	long-term	investment	returns.	The	expected	return	on	plan	assets	assumption	to	be	used	in	determining	2007	net periodic	pension	expense	will	be	8.5%	for	the	U.S.	plans.

As	of	Dec.	31	2005,	the	Company	began	use	of	a	newer	and	more	relevant	mortality	table	know	as	RP	2000,	in	order	to	calculate	its	U.S.	defined	benefit	pension and	other	postretirement	liabilities.	Previously,	the	Company	had	used	the	GAM	83	mortality	table	to	calculate	these	liabilities.	This	change	in	the	mortality	assumption increased	net	periodic	benefit	costs	in	2006	by	approximately	$13	million	and	$4	million	for	our	defined	benefit	pension	and	other	postretirement	benefit	plans, respectively.

The	weighted-average	healthcare	cost	trend	rate	used	was	9.0%	for	2006	declining	to	5.0%	in	the	year	2010.	For	2007,	the	weighted-average	healthcare	cost	trend rate	used	will	be	8.0%	declining	to	5.0%	in	the	year	2011.	These	assumptions	are	reviewed	on	an	annual	basis.	In	selecting	rates	for	current	and	long-term	health	care assumptions,	the	Company	takes	into	consideration	a	number	of	factors	including	the	Company's	actual	health	care	cost	increases,	the	design	of	the	Company's	benefit programs,	the	demographics	of	the	Company's	active	and	retiree	populations	and	expectations	of	future	medical	cost	inflation	rates.	If	these	2007	trend	rates	were increased	or	decreased	by	one	percentage	point	per	year,	such	increases	or	decreases	would	have	the	following	effects:

One-Percentage	Point

# Contributions

On	Aug.	17,	2006,	the	Pension	Protection	Act	of	2006	("PPA")	was	signed	into	law,	changing	the	funding	requirements	for	our	U.S.	defined	benefit	pension	plans beginning	in	2008.	Under	current	funding	requirements,	PPG	did	not	have	to	make	a	mandatory	contribution	to	our	U.S.	plans	in	2006,	and	we	do	not	expect	to	have	a mandatory	contribution	to	these	plans	in	2007.	We	are	currently	evaluating	the	impact	that	PPA	will	have	on	our	funding	requirements	for	2008	and	beyond.

In	2006	and	2005,	we	made	voluntary	contributions	to	our	U.S.	defined	benefit	pension	plans	of	$100	million	and	$4	million,	respectively,	and	contributions	to	our non-U.S.	defined	benefit	pension	plans	of	$24	million	and	$26	million,	respectively,	some	of	which	were	required	by	local	funding	requirements.	We	expect	to	make mandatory	contributions	to	our	non-U.S.	plans	in	2007	of	approximately	$37	million.	We	expect	to	make	a	$100	million	voluntary	contribution	to	our	U.S.	plans	in	the first	quarter	of	2007,	and	we	may	make	additional	voluntary	contributions	in	2007.

# Benefit	Payments

# Plan	Assets

The	following	summarizes	the	target	pension	plan	asset	allocation	as	of	Dec.	31,	2006,	and	the	actual	pension	plan	asset	allocations	as	of	Dec.	31,	2006	and	2005:

| Asset	Category | Dec.	31,	2006 | 2006 | 2005 |
| :--- | :--- | :--- | :--- |
| Equity\tsecurities | 50-75% | 70% | 69% |
| Debt\tsecurities | 25-50% | 26% | 27% |
| Real\testate | 0-10% | 4% | 4% |
| Other | 0-10% | 0% | 0% |

The	pension	plan	assets	are	invested	to	generate	investment	earnings	over	an	extended	time	horizon	to	help	fund	the	cost	of	benefits	promised	under	the	plans	while controlling	investment	risk.

# Other	Plans

The	Company	incurred	costs	for	multi-employer	pension	plans	of	$1	million	in	each	of	the	years	2006,	2005	and	2004.	The	Company's	termination	liability	with respect	to	these	plans	is	estimated	to	be	$6	million	as	of	Dec.	31,	2006.	Multi-employer	healthcare	costs	totaled	$1	million	in	each	of	the	years	2006,	2005	and	2004.

As	of	Dec.	31,	2006	and	2005,	the	liability	related	to	defined	contribution	pension	plans	was	$7	million	and	$5	million,	respectively.

The	Company	has	a	deferred	compensation	plan	for	certain	key	managers	which	allows	them	to	defer	a	portion	of	their	compensation	in	a	phantom	PPG	stock account	or	other	phantom	investment	accounts.	The	amount	deferred	earns	a	return	based	on	the	investment	options	selected	by	the	participant.	The	amount	owed	to participants	is	an	unfunded	and	unsecured	general	obligation	of	the	Company.	Upon	retirement,	death,	disability	or	termination	of	employment,	the	compensation deferred	and	related	accumulated	earnings	are	distributed	in	accordance	with	the	participant's	election	in	cash	or	in	PPG	stock,	based	on	the	accounts	selected	by	the participant.

The	plan	provides	participants	with	investment	alternatives	and	the	ability	to	transfer	amounts	between	the	phantom	non-PPG	stock	investment	accounts.	To mitigate	the	impact	on	compensation	expense	of	changes	in	the	market	value	of	the	liability,	the	Company	has	purchased	a	portfolio	of	marketable	securities	that	mirror the	phantom	non-PPG	stock	investment	accounts	selected	by	the	participants	except	the	money	market	accounts.	The	changes	in	market	value	of	these	securities	are	also included	in	earnings.	Trading	will	occur	in	this	portfolio	to	align	the	securities	held	with	the	participant's	phantom	non-PPG	stock	investment	accounts	except	the	money market	accounts.

The	cost	of	the	deferred	compensation	plan,	comprised	of	dividend	equivalents	accrued	on	the	phantom	PPG	stock	account,	investment	income	and	the	change	in market	value	of	the	liability,	was	expense	in	2006,	2005	and	2004	of	$9	million,	$7	million	and	$8	million,	respectively.	These	amounts	are	included	in	"Selling,	general and	administrative"	in	the	accompanying	statement	of	income.	The	change	in	market	value	of	the	investment	portfolio	in	2006,	2005	and	2004	was	income	of	$8	million, $6	million	and	$8	million,	respectively,	of	which	$4	million,	$1	million	and	$1	million	was	realized,	respectively,	and	is	also	included	in	"Selling,	general	and administrative."

The	Company's	obligations	under	this	plan,	which	are	included	in	"Accounts	payable	and	accrued	liabilities"	and	"Other	liabilities"	in	the	accompanying	balance sheet,	were	$113	million	and	$110	million	as	of	Dec.	31,	2006	and	2005,	respectively,	and	the	investments	in	marketable	securities,	which	are	included	in	"Investments" in	the	accompanying	balance	sheet,	were	$77	million	and	$78	million	as	of	Dec.	31,	2006	and	2005,	respectively.

# 14.	Commitments	and	Contingent	Liabilities

The	result	of	any	future	litigation	of	such	lawsuits	and	claims	is	inherently	unpredictable.	However,	management	believes	that,	in	the	aggregate,	the	outcome	of	all lawsuits	and	claims	involving	PPG,	including	asbestos-related	claims	in	the	event	the	settlement	described	below	does	not	become	effective,	will	not	have	a	material effect	on	PPG's	consolidated	financial	position	or	liquidity;	however,	such	outcome	may	be	material	to	the	results	of	operations	of	any	particular	period	in	which	costs,	if any,	are	recognized.

The	Company	has	been	named	as	a	defendant,	along	with	various	other	co-defendants,	in	a	number	of	antitrust	lawsuits	filed	in	federal	and	state	courts.	These	suits allege	that	PPG	acted	with	competitors	to	fix	prices	and	allocate	markets	in	the	flat	glass	and	automotive	refinish	industries.	The	plaintiffs	in	these	cases	are	seeking economic	and,	in	certain	cases,	treble	damages	and	injunctive	relief.	As	described	below,	we	have	either	settled	or	agreed	to	settle	the	most	significant	of	these	cases.

Twenty-nine	glass	antitrust	cases	were	filed	in	federal	courts,	all	of	which	have	been	consolidated	as	a	class	action	in	the	U.S.	District	Court	for	the	Western	District of	Pennsylvania	located	in	Pittsburgh,	Pa.	All	of	the	other	defendants	in	the	glass	class	action	antitrust	case	previously	settled	with	the	plaintiffs	and	were	dismissed	from the	case.	On	May	29,	2003,	the	Court	granted	PPG's	motion	for	summary	judgment	dismissing	the	claims	against	PPG	in	the	glass	class	action	antitrust	case.	The plaintiffs	in	that	case	appealed	that	order	to	the	U.S.	Third	Circuit	Court	of	Appeals.	On	Sept.	30,	2004,	the	U.S.	Third	Circuit	Court	of	Appeals	affirmed	in	part	and reversed	in	part	the	dismissal	of	PPG	and	remanded	the	case	for	further	proceedings.	PPG	petitioned	the	U.S.	Supreme	Court	for	permission	to	appeal	the	decision	of	the U.S.	Third	Circuit	Court	of	Appeals,	however,	the	U.S.	Supreme	Court	rejected	PPG's	petition	for	review.

On	Oct.	19,	2005,	PPG	entered	into	a	settlement	agreement	to	settle	the	federal	glass	class	action	antitrust	case	in	order	to	avoid	the	ongoing	expense	of	this protracted	case,	as	well	as	the	risks	and	uncertainties	associated	with	complex	litigation	involving	jury	trials.	Pursuant	to	the	settlement	agreement,	PPG	agreed	to	pay $60	million	and	to	bear	up	to	$500,000	in	settlement	administration	costs.	PPG	recorded	a	charge	for	$61	million	which	is	included	in	"Other	charges"	in	the accompanying	statement	of	income	for	the	year	ended	Dec.	31,	2005.	The	U.S.	District	Court	entered	an	order	on	Feb.	7,	2006,	approving	the	settlement.	This	order	is no	longer	appealable.	As	a	result	of	the	settlement,	PPG	also	paid	$900,000	pursuant	to	a	pre-existing	contractual	obligation	to	a	plaintiff	that	did	not	participate	in	the federal	glass	class	action	antitrust	case.	Separately,	on	Nov.	8,	2006,	PPG	entered	into	a	class-wide	settlement	agreement	to	resolve	all	claims	of	indirect	purchasers	of flat	glass	in	California.	PPG	agreed	to	make	a	payment	of	$2.5	million,	inclusive	of	attorneys'	fees	and	costs.	On	Jan.	30,	2007,	the	Court	granted	preliminary	approval of	the	settlement.	The	Court	has	also	approved	the	form	of

notice	to	the	settlement	class	and	has	scheduled	a	hearing	on	final	approval	of	the	settlement	for	May	30,	2007.	Independent	state	court	cases	remain	pending	in Tennessee	involving	claims	that	are	not	included	in	the	settlement	of	the	federal	and	California	glass	class	action	antitrust	cases.	Notwithstanding	that	PPG	has	agreed	to settle	the	federal	and	California	glass	class	action	antitrust	cases,	and	is	considering	settlement	of	the	Tennessee	cases,	PPG	continues	to	believe	that	there	was	no wrongdoing	on	the	part	of	the	Company	and	also	believes	that	PPG	has	meritorious	defenses	to	the	independent	state	court	cases.

Approximately	60	cases	alleging	antitrust	violations	in	the	automotive	refinish	industry	have	been	filed	in	various	state	and	federal	jurisdictions.	The	approximately 55	federal	cases	have	been	consolidated	as	a	class	action	in	the	U.S.	District	Court	for	the	Eastern	District	of	Pennsylvania	located	in	Philadelphia,	Pa.	Certain	of	the defendants	in	the	federal	automotive	refinish	case	have	settled.	The	automotive	refinish	cases	in	state	courts	have	either	been	stayed	pending	resolution	of	the	federal proceedings	or	have	been	dismissed.	Neither	PPG's	investigation	conducted	through	its	counsel	of	the	allegations	in	these	cases	nor	the	discovery	conducted	in	the	case has	identified	a	basis	for	the	plaintiffs'	allegations	that	PPG	participated	in	a	price-fixing	conspiracy	in	the	U.S.	automotive	refinish	industry.	PPG's	management continues	to	believe	that	there	was	no	wrongdoing	on	the	part	of	the	Company	and	that	it	has	meritorious	defenses	in	the	federal	automotive	refinish	case.	Nonetheless,	it remained	uncertain	whether	the	federal	court	ultimately	would	dismiss	PPG,	or	whether	the	case	would	go	to	trial.	On	Sept.	14,	2006,	PPG	agreed	to	settle	the	federal class	action	for	$23	million	to	avoid	the	ongoing	expense	of	this	protracted	case,	as	well	as	the	risks	and	uncertainties	associated	with	complex	litigation	involving	jury trials.	This	amount	is	included	in	"Other	charges"	in	the	accompanying	statement	of	income.	Although	a	formal	settlement	agreement	has	been	executed	and	the	$23 million	was	paid	into	escrow	on	Jan.	3,	2007,	necessary	court	proceedings	will	follow	before	the	settlement	is	final	and	non-appealable.

There	are	class	action	lawsuits	in	six	states	that	mimic	the	federal	class	action	but	were	filed	pursuant	to	state	statutes	on	behalf	of	indirect	purchasers	of	automotive refinish	products.	The	plaintiffs	in	these	cases	have	not	yet	specified	an	amount	of	alleged	damages.	The	cases	are	in	state	courts	in	California,	Maine,	Massachusetts, Tennessee	and	Vermont,	and	a	federal	court	in	New	York	City.	PPG	believes	that	there	was	no	wrongdoing	on	its	part,	and	believes	it	has	meritorious	defenses	to	the independent	state	court	cases.	Notwithstanding	the	foregoing,	PPG	is	considering	potential	settlement	of	these	cases.

Beginning	in	April	1994,	the	Company	was	a	defendant	in	a	suit	filed	by	Marvin	Windows	and	Doors	("Marvin")	alleging	numerous	claims,	including	breach	of warranty.	All	of	the	plaintiff's	claims,	other	than	breach	of	warranty,	were	dismissed.	However,	on	Feb.	14,	2002,	a	federal	jury	awarded	Marvin	$136	million	on	the remaining	claim.	Subsequently,	the	court	added	$20	million	for	interest	bringing	the	total	judgment	to	$156	million.	PPG	appealed	that	judgment	and	the	appeals	court heard	the	parties'	arguments	on	June	9,	2003.	On	March	23,	2005,	the	appeals	court	ruled	against	PPG.	Subsequent	to	the	ruling	by	the	court,	PPG	and	Marvin	agreed	to settle	this	matter	for	$150	million	and	PPG	recorded	a	charge	for	that	amount	in	the	first	quarter	of	2005,	which	is	included	in	"Other	charges"	in	the	accompanying statement	of	income	for	the	year	ended	Dec.	31,	2005.	PPG	paid	the	settlement	on	Apr.	28,	2005.	PPG	subsequently	received	$51	million	in	insurance	recoveries	related to	this	settlement;	of	which	$33	million	is	included	in	"Other	charges"	for	the	year	ended	Dec.	31,	2006,	and	the	remainder	was	received	in	the	third	quarter	of	2005.

For	over	thirty	years,	PPG	has	been	a	defendant	in	lawsuits	involving	claims	alleging	personal	injury	from	exposure	to	asbestos.	As	of	Dec.	31,	2006,	PPG	was	one of	many	defendants	in	numerous	asbestos-related	lawsuits	involving	approximately	114,000	open	claims	served	on	PPG.	Most	of	PPG's	potential	exposure	relates	to allegations	by	plaintiffs	that	PPG	should	be	liable	for	injuries	involving	asbestos-containing	thermal	insulation	products	manufactured	and	distributed	by	Pittsburgh Corning	Corporation	("PC").	PPG	and	Corning	Incorporated	are	each	50%	shareholders	of	PC.	PPG	has	denied	responsibility	for,	and	has	defended,	all	claims	for	any injuries	caused	by	PC	products.

On	Apr.	16,	2000,	PC	filed	for	Chapter	11	Bankruptcy	in	the	U.S.	Bankruptcy	Court	for	the	Western	District	of	Pennsylvania	located	in	Pittsburgh,	Pa. Accordingly,	in	the	first	quarter	of	2000,	PPG	recorded	an	after-tax	charge	of	$35	million	for	the	write-off	of	all	of	its	investment	in	PC.	As	a	consequence	of	the bankruptcy	filing	and	various	motions	and	orders	in	that	proceeding,	the	asbestos	litigation	against	PPG	(as	well	as	against	PC)	has	been	stayed	and	the	filing	of additional	asbestos	suits	against	them	has	been	enjoined,	until	thirty	days	after	the	effective	date	of	a	confirmed	plan	of	reorganization	for	PC	substantially	in	accordance with	the	settlement	arrangement	among	PPG	and	several	other	parties	discussed	below.	The	stay	may	be	terminated	if	the	Bankruptcy	Court	determines	that	such	a	plan will	not	be	confirmed,	or	the	settlement	arrangement	set	forth	below	is	not	likely	to	be	consummated.

On	May	14,	2002,	PPG	announced	that	it	had	agreed	with	several	other	parties,	including	certain	of	its	insurance	carriers,	the	official	committee	representing asbestos	claimants	in	the	PC	bankruptcy,	and	the	legal	representatives	of	future	asbestos	claimants	appointed	in	the	PC	bankruptcy,	on	the	terms	of	a	settlement arrangement	relating	to	asbestos	claims	against	PPG	and	PC	(the	"PPG	Settlement	Arrangement").

On	March	28,	2003,	Corning	Incorporated	announced	that	it	had	separately	reached	its	own	arrangement	with	the	representatives	of	asbestos	claimants	for	the settlement	of	certain	asbestos	claims	that	might	arise	from	PC	products	or	operations	(the	"Corning	Settlement	Arrangement").

The	terms	of	the	PPG	Settlement	Arrangement	and	the	Corning	Settlement	Arrangement	have	been	incorporated	into	a	bankruptcy	reorganization	plan	for	PC	along with	a	disclosure	statement	describing	the	plan,	which	PC	filed	with	the	Bankruptcy	Court	on	Apr.	30,	2003.	Amendments	to	the	plan	and	disclosure	statement	were filed	on	Aug.	18	and	Nov.	20,	2003.	Creditors	and	other	parties	with	an	interest	in	the	bankruptcy	proceeding	were	entitled	to	file	objections	to	the	disclosure	statement and	the	plan	of	reorganization,	and	a	few	parties	filed	objections.	On	Nov.	26,	2003,	after	considering	objections	to	the	second	amended	disclosure	statement	and	plan	of reorganization,	the	Bankruptcy	Court	entered	an	order	approving	such	disclosure	statement	and	directing	that	it	be	sent	to	creditors,	including	asbestos	claimants,	for voting.	The	Bankruptcy	Court	established	March	2,	2004	as	the	deadline	for	receipt	of	votes.	In	order	to	approve	the	plan,	at	least	two-thirds	in	amount	and	more	than one-half	in	number	of	the	allowed	creditors	in	a	given	class	must	vote	in	favor	of	the	plan,	and	for	a	plan	to	contain	a	channeling	injunction	for	present	and	future asbestos	claims	under	§524(g)	of	the	Bankruptcy	Code,	as	described	below,	seventy-five	percent	of	the	asbestos	claimants	voting	must	vote	in	favor	of	the	plan.	On March	16,	2004,	notice	was	received	that	the	plan	of	reorganization	received	the	required	votes	to	approve	the	plan	with	a	channeling	injunction.	From	May	3-7,	2004, the	Bankruptcy	Court	judge	conducted	a	hearing	regarding	the	fairness	of	the	settlement,	including	whether	the	plan	would	be	fair	with	respect	to	present	and	future claimants,	whether	such	claimants	would	be	treated	in	substantially	the	same	manner,	and	whether	the	protection	provided	to	PPG	and	its	participating	insurers	would	be fair	in	view	of	the	assets	they	would	convey	to	the	asbestos	settlement	trust	(the	"Trust")	to	be	established	as	part	of	the	plan.	At	that	hearing,	creditors	and	other	parties in	interest	raised	objections	to	the	PC	plan	of	reorganization.	Following	that	hearing,	the	Bankruptcy	Court	set	deadlines	for	the	parties	to	develop	agreed-upon	and contested	Findings	of	Fact	and	Conclusions	of	Law	and	scheduled	oral	argument	for	contested	items	on	Nov.	9,	2004.	Subsequently,	the	Bankruptcy	Court	rescheduled such	oral	argument	for	Nov.	17,	2004.

The	Bankruptcy	Court	heard	oral	arguments	on	the	contested	items	on	Nov.	17-18,	2004.	At	the	conclusion	of	the	hearing,	the	Bankruptcy	Court	agreed	to	consider certain	post-hearing	written	submissions.	In	a	further	development,	on	Feb.	2,	2005,	the	Bankruptcy	Court	established	a	briefing	schedule	to	address	whether	certain aspects	of	a	decision	of	the	U.S.	Third	Circuit	Court	of	Appeals	in	an	unrelated	case	have	any	applicability	to	the	PC	plan	of	reorganization.	The	Bankruptcy	Court	set oral	arguments	on	the	briefs	for	March	16,	2005.	During	an	omnibus	hearing	on	Feb.	28,	2006,	the	Bankruptcy	Judge	stated	that	she	was	prepared	to	rule	on	the	PC	plan of	reorganization	in	the	near	future,	provided	certain	amendments	were	made	to	the	plan.	Those	amendments	were	filed,	as	directed,	on	March	17,	2006.	After	further conferences	and	supplemental	briefings,	the	Court	held	final	oral	arguments	on	July	21,	2006	during	an	omnibus	hearing.	On	Dec.	21,	2006,	the	Bankruptcy	Court issued	a	ruling	denying	confirmation	of	the	second	amended	PC	plan	of	reorganization.	Several	parties	in	interest,	including	PPG,	filed	motions	for	reconsideration and/or	to	alter	or	amend	the	Dec.	21,	2006	ruling.	Final	written	submissions	were	due	on	Jan.	26,	2007.	Oral	argument	on	the	motions	is	scheduled	for	March	5,	2007. Upon	reconsideration,	the	Bankruptcy	Court	may	adhere	to	its	Dec.	21,	2006	decision,	may	alter	that	decision	and	confirm	the	plan	or	may	amend	the	decision	in	a manner	that	may	provide	further	guidance	on	how	the	plan	could	be	modified	and	become	confirmable	in	the	Bankruptcy	Court's	view.

If	the	Bankruptcy	Court	reconsiders	its	decision	and	determines	that	the	second	amended	plan	is	confirmable,	or	if	the	Bankruptcy	Court's	ruling	is	reversed	on appeal	and	the	case	remanded,	the	Bankruptcy	Court	may	enter	a	confirmation	order.	That	order	may	be	appealed	to	or	otherwise	reviewed	by	the	U.S.	District	Court	for the	Western	District	of	Pennsylvania,	located	in	Pittsburgh,	Pa.	Assuming	that	the	District	Court	approves	a	confirmation	order	following	any	such	appeal,	interested parties	could	further	appeal	the	District	Court's	order	to	the	U.S.	Third	Circuit	Court	of	Appeals	and	subsequently	seek	review	of	any	decision	of	the	Third	Circuit	Court of	Appeals	by	the	U.	S.	Supreme	Court.	The	PPG	Settlement	Arrangement	will	not	become	effective	until	30	days	after	the	PC	plan	of	reorganization	is	finally	approved by	an	appropriate	court	order	that	is	no	longer	subject	to	appellate	review	(the	"Effective	Date").

If	the	PC	plan	of	reorganization	incorporating	the	terms	of	the	PPG	Settlement	Arrangement	and	the	Corning	Settlement	Arrangement	is	approved	by	the Bankruptcy	Court,	the	Court	would	enter	a	channeling	injunction	under	§524(g)	and	other	provisions	of	the	Bankruptcy	Code,	prohibiting	present	and	future	claimants from	asserting	bodily	injury	claims	after	the	Effective	Date	against	PPG	or	its	subsidiaries	or	PC	relating	to	the	manufacture,	distribution	or	sale	of	asbestos-containing products	by	PC	or	PPG	or	its	subsidiaries.	The	injunction	would	also	prohibit	co-defendants	in	those	cases	from	asserting	claims	against	PPG	for	contribution, indemnification	or	other	recovery.	All	such	claims	would	be	filed	with	the	Trust	and	only	paid	from	the	assets	of	the	Trust.

The	channeling	injunction	would	not	extend	to	claims	against	PPG	alleging	injury	caused	by	asbestos	on	premises	owned,	leased	or	occupied	by	PPG	(so	called "premises	claims"),	or	claims	alleging	property	damage	resulting	from	asbestos.	There	are	no	property	damage	claims	pending	against	PPG	or	its	subsidiaries. Historically,	a	small	proportion	of	the	claims	against	PPG	and	its	subsidiaries	have	been	premises	claims.	As	a	result	of	the	settlements	described	below,	and	based	upon recent	review	and	analysis,	PPG	believes	that	the	number	of	premises	claims	currently	comprise	less	than	2%	of	the	total	asbestos-related	claims	against	PPG.	PPG believes	that	it	has	adequate	insurance	for	the	asbestos	claims	that	would	not	be	covered	by	any	channeling	injunction	and	that	any	financial	exposure	resulting	from such	claims	will	not	have	a	material	effect	on	PPG's	consolidated	financial	position,	liquidity	or	results	of	operations.	Certain	claimants	that	have	alleged	premises claims	against	PPG	moved	the	Bankruptcy	Court	for	an	order	lifting	the	stay	as	to	their	claims.	Initially,	the	Bankruptcy	Court	did	not	grant	these	claimants'	motions, but,	at	a	hearing	in	the	second	quarter	of	2006,	did	direct	PPG	and	the	claimants	to	engage	in	good	faith	negotiations	toward	the	potential	settlement	of	the	premises claims	at	issue.	As	a	result	of	those	negotiations	PPG	and	its	primary	insurers	have	agreed	to	settle	approximately	425	premises	claims.	PPG's	insurers	have	agreed	to provide	insurance	coverage	for	a	major	portion	of	the	payments	made	in	connection	with	these	settlements.	PPG	has	accrued	the	portion	of	the	settlement	amounts	not covered	by	insurance	in	2006.

In	addition,	and	in	response	to	additional	motions	to	lift	the	stay	filed	on	behalf	of	other	premises	claimants,	the	Bankruptcy	Court	issued	a	series	of	orders	in	late December	2006	lifting	the	stay,	effective	Jan.	31,	2007,	with	respect	to	an	additional	496	premises	claims.	PPG	is	in	the	process	of	gathering	preliminary	information about	these	claims.	Other	premises	claims	that	have	not	been	resolved	remain	subject	to	the	stay.

PPG	has	no	obligation	to	pay	any	amounts	under	the	PPG	Settlement	Arrangement	until	the	Effective	Date.	PPG	and	certain	of	its	insurers	(along	with	PC)	would then	make	payments	to	the	Trust,	which	would	provide	the	sole	source	of	payment	for	all	present	and	future	asbestos	bodily	injury	claims	against	PPG,	its	subsidiaries	or PC	alleged	to	be	caused	by	the	manufacture,	distribution	or	sale	of	asbestos	products	by	these	companies.	PPG	would	convey	the	following	assets	to	the	Trust.	First, PPG	would	convey	the	stock	it	owns	in	PC	and	Pittsburgh	Corning	Europe.	Second,	PPG	would	transfer	1,388,889	shares	of	PPG's	common	stock.	Third,	PPG	would make	aggregate	cash	payments	to	the	Trust	of	approximately	$998	million,	payable	according	to	a	fixed	payment	schedule	over	21	years,	beginning	on	June	30,	2003,	or, if	later,	the	Effective	Date.	PPG	would	have	the	right,	in	its	sole	discretion,	to	prepay	these	cash	payments	to	the	Trust	at	any	time	at	a	discount	rate	of	5.5%	per	annum as	of	the	prepayment	date.	Under	the	payment	schedule,	the	amount	due	June	30,	2003	was	$75	million.	In	addition	to	the	conveyance	of	these	assets,	PPG	would	pay $30	million	in	legal	fees	and	expenses	on	behalf	of	the	Trust	to	recover	proceeds	from	certain	historical	insurance	assets,	including	policies	issued	by	certain	insurance carriers	that	are	not	participating	in	the	settlement,	the	rights	to	which	would	be	assigned	to	the	Trust	by	PPG.

PPG's	participating	historical	insurance	carriers	would	make	cash	payments	to	the	Trust	of	approximately	$1.7	billion	between	the	Effective	Date	and	2023.	These payments	could	also	be	prepaid	to	the	Trust	at	any	time	at	a	discount	rate	of	5.5%	per	annum	as	of	the	prepayment	date.	In	addition,	as	referenced	above,	PPG	would assign	to	the	Trust	its	rights,	insofar	as	they	relate	to	the	asbestos	claims	to	be	resolved	by	the	Trust,	to	the	proceeds	of	policies	issued	by	certain	insurance	carriers	that are	not	participating	in	the	PPG	Settlement	Arrangement	and	from	the	estates	of	insolvent	insurers	and	state	insurance	guaranty	funds.

PPG	would	grant	asbestos	releases	to	all	participating	insurers,	subject	to	a	coverage-in-place	agreement	with	certain	insurers	for	the	continuing	coverage	of premises	claims	(discussed	above).	PPG	would	grant	certain	participating	insurers	full	policy	releases	on	primary	policies	and	full	product	liability	releases	on	excess coverage	policies.	PPG	would	also	grant	certain	other	participating	excess	insurers	credit	against	their	product	liability	coverage	limits.

The	following	table	summarizes	the	impact	on	our	financial	statements	resulting	from	the	initial	charge	in	the	second	quarter	of	2002	for	the	estimated	cost	of	the PPG	Settlement	Arrangement	which	included	the	net	present	value	as	of	Dec.	31,	2002,	using	a	discount	rate	of	5.5%,	of	the	aggregate	cash	payments	of	approximately $998	million	to	be	made	by	PPG	to	the	Trust.	That	amount	also	included	the	carrying	value	of	PPG's	stock	in	Pittsburgh	Corning	Europe,	the	fair	value	as	of	June	30, 2002	of	1,388,889	shares	of	PPG	common	stock	and	$30	million	in	legal	fees	of	the	Trust	to	be	paid	by	PPG,	which	together	with	the	first	payment	originally	scheduled to	be	made	to	the	Trust	on	June	30,	2003,	were	reflected	in	the	current	liability	for	PPG's	asbestos	settlement	in	the	balance	sheet	as	of	June	30,	2002.	The	net	present value	of	the	remaining	payments	of	$566	million	was	recorded	in	the	noncurrent	liability	for	asbestos	settlement.	The	table	also	presents	the	impact	of	the	subsequent changes	in	the	estimated	cost	of	the	settlement	due	to	the	change	in	fair	value	of	the	stock	to	be	transferred	to	the	asbestos	settlement	trust	and	the	equity	forward instrument	(see	Note	10)	and	the	increase	in	the	net	present	value	of	the	future	payments	to	be	made	to	the	Trust.

|  | Asbestos	Settlement	Liability | Asbestos	Settlement	Liability | Equity |  |
| :--- | :--- | :--- | :--- | :--- |
|  |  |  | Forward | Pretax |
| (Millions) | Current | Long-term | (Asset) | Charge |
| Initial\tasbestos |  |  |  |  |
| settlement\tcharge | $206 | $566 | $— | $772 |
| Change\tin\tfair\tvalue:\nPPG\tstock | (16) | — | — | (16) |
| Equity\tforward\tinstrument | — | — | (1) | (1) |
| Balance\tas\tof\tand\tActivity\tfor\tthe\tyear\tended\nDec.\t31,\t2002 | 190 | 566 | (1) | $755 |
| Change\tin\tfair\tvalue:\nPPG\tstock | 20 | — | — | 20 |
| Equity\tforward\tinstrument | — | — | (14) | (14) |
| Accretion\tof\nasbestos\tliability | — | 32 | — | 32 |
| Reclassification | 98 | (98) | — | — |
| Balance\tas\tof\tand\tActivity\tfor\tthe\tyear\tended\nDec.\t31,\t2003 | 308 | 500 | (15) | $38 |
| Change\tin\tfair\tvalue:\nPPG\tstock | 6 | — | — | 6 |
| Equity\tforward\tinstrument | — | — | (4) | (4) |
| Accretion\tof\nasbestos\tliability | — | 30 | — | 30 |
| Reclassification | 90 | (90) | — | — |
| Balance\tas\tof\tand\tActivity\tfor\tthe\tyear\tended\nDec.\t31,\t2004 | 404 | 440 | (19) | $32 |
| Change\tin\tfair\tvalue:\nPPG\tstock | (14) | — | — | (14) |
| Equity\tforward\tinstrument | — | — | 9 | 9 |
| Accretion\tof\nasbestos\tliability | — | 27 | — | 27 |
| Reclassification | 82 | (82) | — | — |
| Balance\tas\tof\tand\tActivity\tfor\tthe\tyear\tended\nDec.\t31,\t2005 | $472 | $385 | $(10) | $22 |
| Change\tin\tfair\tvalue:\nPPG\tstock | 9 | — | — | 9 |
| Equity\tforward\tinstrument | — | — | (4) | (4) |
| Accretion\tof\nasbestos\tliability | — | 23 | — | 23 |
| Reclassification | 76 | (76) | — | — |
| Balance\tas\tof\tand\tActivity\tfor\tthe\tyear\tended\nDec.\t31,\t2006 | $557 | $332 | $(14) | $28 |

The	fair	value	of	the	equity	forward	instrument	is	included	as	an	other	current	asset	as	of	Dec.	31,	2006	and	2005	in	the	accompanying	balance	sheet.	Payments under	the	fixed	payment	schedule	require	annual	payments	that	are	due	each	June.	The	current	portion	of	the	asbestos	settlement	liability	included	in	the	accompanying balance	sheet	as	of	Dec.	31,	2006,	consists	of	all	such	payments	required	through	June	2007,	the	fair	value	of	PPG's	common	stock	and	legal	fees	and	expenses.	The amount	due	June	30,	2008,	of	$28	million	and	the	net	present	value	of	the	remaining	payments	is	included	in	the	long-	term	asbestos	settlement	liability	in	the accompanying	balance	sheet.	For	2007	accretion	expense	associated	with	the	asbestos	liability	will	be	approximately	$5	million	per	quarter.

Because	the	filing	of	asbestos	claims	against	the	Company	has	been	enjoined	since	April	2000,	a	significant	number	of	additional	claims	may	be	filed	against	the Company	if	the	Bankruptcy	Court	stay	were	to	expire.	If	the	PPG	Settlement	Arrangement	(or	any	potential	modification	of	that	arrangement)	is	not	implemented,	for any	reason,	and	the	Bankruptcy	Court	stay	expires,	the	Company	intends	to	vigorously	defend	the	pending	and	any	future	asbestos	claims	against	it	and	its	subsidiaries. The	Company	believes	that	it	is	not	responsible	for	any	injuries	caused	by	PC	products,	which	represent	the	preponderance	of	the	pending	bodily	injury	claims	against	it. Prior	to	2000,	PPG	had	never	been	found	liable	for	any	such	claims,	in	numerous	cases	PPG	had	been	dismissed	on	motions	prior	to	trial,	and	aggregate	settlements	by PPG	to	date	have	been	immaterial.	In	Jan.	2000,	in	a	trial	in	a	state	court	in	Texas	involving	six	plaintiffs,	the	jury	found	PPG	not	liable.	However,	a	week	later	in	a separate	trial	also	in	a	state	court	in	Texas,	another	jury	found	PPG,	for	the	first	time,	partly	responsible	for	injuries	to	five	plaintiffs	alleged	to	be	caused	by	PC	products. PPG	intends	to	appeal	the	adverse	verdict	in	the	event	the	settlement	does	not	become	effective.	Although	PPG	has	successfully	defended	asbestos	claims	brought against	it	in	the	past,	in	view	of	the	number	of	claims,	and	the	questionable	verdicts	and	awards	that	other	companies	have	experienced	in	asbestos	litigation,	the	result	of any	future	litigation	of	such	claims	is	inherently	unpredictable.

It	is	PPG's	policy	to	accrue	expenses	for	environmental	contingencies	when	it	is	probable	that	a	liability	has	been	incurred	and	the	amount	of	loss	can	be	reasonably

estimated.	Reserves	for	environmental	contingencies	are	exclusive	of	claims	against	third	parties	and	are	generally	not	discounted.	As	of	Dec.	31,	2006	and	2005,	PPG had	reserves	for	environmental	contingencies	totaling	$282	million	and	$94	million,	respectively,	of	which	$65	million	and	$29	million,	respectively,	were	classified	as current	liabilities.	Pretax	charges	against	income	for	environmental	remediation	costs	in	2006,	2005	and	2004	totaled	$207	million,	$27	million	and	$15	million, respectively,	and	are	included	in	"Other	charges"	in	the	accompanying	statement	of	income.	Cash	outlays	related	to	such	environmental	remediation	aggregated	$22 million,	$14	million	and	$26	million	in	2006,	2005	and	2004,	respectively.

Management	anticipates	that	the	resolution	of	the	Company's	environmental	contingencies	will	occur	over	an	extended	period	of	time.	Over	the	15	years	prior	to 2006,	the	pretax	charges	against	income	ranged	between	$10	million	and	$49	million	per	year.	Consistent	with	our	previous	disclosure,	charges	for	estimated environmental

remediation	costs	in	2006	were	significantly	higher	than	our	historical	range	as	a	result	of	our	continuing	efforts	to	analyze	and	assess	the	environmental	issues associated	with	a	former	chromium	manufacturing	plant	site	located	in	Jersey	City,	NJ	and	at	the	Calcasieu	River	Estuary	located	near	our	Lake	Charles,	LA	chlor-alkali plant,	which	efforts	resulted	in	a	pre-tax	charge	of	$173	million	in	the	third	quarter	of	2006	for	the	estimated	costs	of	remediating	these	sites,	which	is	included	in	"Other charges"	in	the	accompanying	statement	of	income.	We	anticipate	that	charges	against	income	in	2007	for	environmental	remediation	costs	will	be	within	the	prior historical	range.	We	expect	cash	outlays	for	environmental	remediation	costs	to	be	approximately	$65	million	in	2007	and	to	range	from	$50	million	to	$70	million annually	through	2011.	It	is	possible,	however,	that	technological,	regulatory	and	enforcement	developments,	the	results	of	environmental	studies	and	other	factors could	alter	these	expectations.	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	operation	of	any particular	period	in	which	costs,	if	any,	are	recognized.

In	New	Jersey,	PPG	continues	to	perform	its	obligations	under	an	Administrative	Consent	Order	("ACO")	with	the	New	Jersey	Department	of	Environmental Protection	("NJDEP").	Since	1990,	PPG	has	remediated	47	of	61	residential	and	nonresidential	sites	under	the	ACO.	The	most	significant	of	the	remaining	sites	is	the former	chromium	manufacturing	location	in	Jersey	City.	The	Company	submitted	a	feasibility	study	work	plan	to	the	NJDEP	in	October	2006	that	includes	certain interim	remedial	measures	for	the	former	chromium	manufacturing	location	and	the	available	remediation	technology	alternatives	for	the	site.	Under	the	feasibility	study work	plan,	remedial	alternatives	which	will	be	assessed	include,	but	are	not	limited	to,	soil	excavation	and	offsite	disposal	in	a	licensed	disposal	facility,	insitu	chemical stabilization	of	soil	and	groundwater,	and	insitu	solidification	of	soils.	A	feasibility	study	is	expected	to	be	completed	in	late	2007	or	2008.	PPG	has	recently	proposed excavation	and	offsite	disposal	of	impacted	soils	as	the	preferred	remedial	alternative	for	one	other	of	the	remaining	sites	under	the	ACO.	This	proposal	has	been submitted	to	the	NJDEP	for	approval.	In	addition,	investigation	activities	are	ongoing	for	an	additional	six	sites	covered	by	the	ACO	with	completion	expected	in	2007. Investigation	activities	have	not	yet	begun	for	the	remaining	six	sites	covered	by	the	ACO,	but	we	believe	the	results	of	the	study	at	the	former	chromium	manufacturing location	will	also	provide	us	with	relevant	information	concerning	remediation	alternatives	at	these	12	sites.	The	principal	contaminant	of	concern	is	hexavalent chromium.	Based	on	current	estimates,	at	least	500,000	tons	of	soil	may	be	potentially	impacted	for	all	remaining	sites.

As	a	result	of	the	extensive	analysis	undertaken	in	connection	with	the	preparation	and	submission	of	the	feasibility	study	work	plan	for	the	former	chromium manufacturing	location,	the	Company	recorded	a	pretax	charge	of	$165	million	in	the	third	quarter	2006,	which	is	included	in	"Other	charges"	in	the	accompanying statement	of	income.	This	charge	included	estimated	costs	for	remediation	at	all	remaining	ACO	sites,	including	the	former	manufacturing	site,	and	for	the	resolution	of litigation	filed	by	NJDEP	as	discussed	below.	In	May	2005,	the	NJDEP	filed	a	complaint	against	PPG	and	two	other	former	chromium	producers	seeking	to	hold	the parties	responsible	for	a	further	53	sites	where	the	source	of	chromium	contamination	is	not	known	and	to	recover	costs	incurred	by	the	agency	in	connection	with	its response	activities	at	certain	of	those	sites.	This	case	is	in	discovery	with	ongoing	mediation	to	resolve	the	allocation	of	these	additional	sites	among	the	three companies.	As	of	Dec.	31,	2006	and	2005,	PPG	had	reserves	of	$198	million	and	$18	million,	respectively,	for	environmental	contingencies	associated	with	all	New Jersey	sites.

Multiple	future	events,	such	as	feasibility	studies,	remedy	selection,	remedy	design	and	remedy	implementation	involving	agency	action	or	approvals	will	be required,	and	considerable	uncertainty	exists	regarding	the	timing	of	these	future	events	for	the	remaining	14	sites	covered	by	the	ACO.	Final	resolution	of	these	events is	expected	to	occur	over	an	extended	period	of	time.	However,	based	on	current	information	it	is	expected	that	feasibility	study	approval	and	remedy	selection	could occur	during	2007	to	2008	for	the	former	chromium	plant	and	six	adjacent	sites,	while	remedy	design	and	approval	could	occur	during	2008	to	2009,	and	remedy implementation	could	occur	during	2009	to	2013,	with	some	period	of	long-term	monitoring	for	remedy	effectiveness	to	follow.	One	other	site	is	expected	to	be remediated	during	2007	to	2008.	Activities	at	six	other	sites	have	not	yet	begun	and	the	timing	of	future	events	related	to	these	sites	cannot	be	predicted	at	this	time. Based	on	current	information,	we	expect	cash	outlays	related	to	remediation	efforts	in	New	Jersey	to	range	from	$30	million	to	$55	million	annually	from	2007	through 2011.

In	Lake	Charles,	the	U.S.	Environmental	Protection	Agency	has	completed	investigation	of	contamination	levels	in	the	Calcasieu	River	estuary	and	issued	a	Final Remedial	Investigation	Report	in	September	2003,	which	incorporates	the	Human	Health	and	Ecological	Risk	Assessments,	indicating	that	elevated	levels	of	risk	exist in	the	estuary.	PPG	and	other	potentially	responsible	parties	are	performing	a	feasibility	study	under	the	authority	of	the	Louisiana	Department	of	Environmental	Quality

("LDEQ").	A	report	describing	the	process	by	which	preliminary	remedial	action	goals	will	be	determined	was	submitted	on	March	1,	2005	and	approved	by	LDEQ	on Aug.	10,	2005.	PPG's	exposure	with	respect	to	the	Calcasieu	Estuary	is	focused	on	the	lower	few	miles	of	Bayou	d'Inde,	a	small	tributary	to	the	Calcasieu	Estuary	near PPG's	Lake	Charles	facility,	and	about	150	to	200	acres	of	adjacent	marshes.	The	Company	and	three	other	potentially	responsible	parties	submitted	a	draft	remediation feasibility	study	report	to	the	LDEQ	in	October	2006	following	completion	of	the	feasibility	study	and	an	evaluation	of	its	findings.	The	proposed	remedial	alternatives include	sediment	dredging,	sediment	capping,	and	biomonitoring	of	fish	and	shellfish.	Principal	contaminants	of	concern	which	may	require	remediation	include	various metals,	dioxins	and	furans,	and	polychlorinated	biphenyls.	As	a	result	of	the	analysis	undertaken	in	connection	with	the	preparation	and	submission	of	the	draft feasibility	study,	PPG	recorded	a	pretax	charge	of	$8	million	in	the	third	quarter	of	2006	for	its	estimated	share	of	the	remediation	costs	at	this	site,	which	is	included	in "Other	charges"	in	the	accompanying	statement	of	income.

Multiple	future	events,	such	as	feasibility	studies,	remedy	selection,	remedy	design	and	remedy	implementation	involving	agency	action	or	approvals	will	be required	and	considerable	uncertainty	exists	regarding	the	timing	of	these	future	events.	Final	resolution	of	these	events	is	expected	to	occur	over	an	extended	period	of time.	However,	based	on	currently	available	information	it	is	expected	that	feasibility	study	approval	and	remedy	selection	could	occur	in	2007	or	2008,	remedy	design and	approval	could	occur	during	2008,	and	remedy	implementation	could	occur	during	2008	to	2011	with	some	period	of	long-term	monitoring	for	remedy	effectiveness to	follow.

The	principal	elements	of	the	charges	for	remediating	the	New	Jersey	and	Calcasieu	Estuary	sites	are	based	on	competitively	derived	or	readily	available remediation	industry	cost	data	for	representative	remedial	options	(e.g.	excavation,	insitu	stabilization/solidification,	etc.)	to	be	evaluated	for	the	New	Jersey	sites	and the	remedial	alternatives	proposed	to	LDEQ	for	the	Calcasieu	Estuary.	Major	cost	components	include	transportation	and	disposal	of	excavated	soil	and/or	soil	treatment costs	for	the	New	Jersey	sites	and	sediment	capping	and	dredging	costs	for	the	Calcasieu	Estuary	site.	The	charges	we	recorded	are	exclusive	of	any	third	party indemnification,	as	we	believe	the	likelihood	of	receiving	any	such	amounts	to	be	remote.

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	$300	million,	which	range	has	been	revised	since	Dec.	31,	2005	to	reflect	the	impact	of	the	submission	of	a	feasibility	study	work	plan	for	the	former chromium	manufacturing	plant	site	located	in	Jersey	City,	NJ	and	of	the	draft	remediation	feasibility	study	for	the	Calcasieu	River	Estuary,	which	included	the	pretax charge	of	$173	million	recorded	in	the	third	quarter	of	2006	for	the	estimated	costs	of	remediating	these	sites	as	more	fully	described	above.	Such	unreserved	losses	are reasonably	possible	but	are	not	currently	considered	to	be	probable	of	occurrence.	This	range	of	reasonably	possible	unreserved	loss	relates	to	environmental	matters	at	a number	of	sites;	however,	about	40%	of	this	range	relates	to	the	former	chromium	manufacturing	plant	site	in	Jersey	City,	NJ,	and	about	30%	relates	to	three	operating PPG	plant	sites	in	our	chemicals	businesses.	The	loss	contingencies	related	to	these	sites	include	significant	unresolved	issues	such	as	the	nature	and	extent	of contamination	at	these	sites	and	the	methods	that	may	have	to	be	employed	to	remediate	them.

Initial	remedial	actions	are	occurring	at	the	three	operating	plant	sites	in	our	chemicals	businesses.	Studies	to	determine	the	nature	of	the	contamination	are	reaching completion	and	the	need	for	additional	remedial	actions,	if	any,	is	presently	being	evaluated.

With	respect	to	certain	waste	sites,	the	financial	condition	of	any	other	potentially	responsible	parties	also	contributes	to	the	uncertainty	of	estimating	PPG's	final costs.	Although	contributors	of	waste	to	sites	involving	other	potentially	responsible	parties	may	face	governmental	agency	assertions	of	joint	and	several	liability,	in general,	final	allocations	of	costs	are	made	based	on	the	relative	contributions	of	wastes	to	such	sites.	PPG	is	generally	not	a	major	contributor	to	such	sites.

The	impact	of	evolving	programs,	such	as	natural	resource	damage	claims,	industrial	site	reuse	initiatives	and	state	remediation	programs,	also	adds	to	the	present uncertainties	with	regard	to	the	ultimate	resolution	of	this	unreserved	exposure	to	future	loss.	The	Company's	assessment	of	the	potential	impact	of	these	environmental contingencies	is	subject	to	considerable	uncertainty	due	to	the	complex,	ongoing	and	evolving	process	of	investigation	and	remediation,	if	necessary,	of	such environmental	contingencies,	and	the	potential	for	technological	and	regulatory	developments.

In	June	2003,	our	partner	in	a	fiber	glass	joint	venture	in	Venezuela	filed	for	bankruptcy.	Upon	resolution	of	the	bankruptcy	proceedings,	the	partner's	ownership interest	may	transfer	to	one	of	its	senior	secured	creditors	or	be	sold.	While	PPG	expects	operations	at	the	joint	venture	to	continue,	the	Company	continues	to	evaluate its	options	with	respect	to	this	venture,	which	may	include	the	sale	or	liquidation	of	the	venture.	PPG's	exposure	to	loss	would	be	limited	to	$10	million,	which	includes a	combination	of	the	Company's	investment,	and	outstanding	receivables	related	to	this	venture.

# 15.	Shareholders'	Equity

A	class	of	10	million	shares	of	preferred	stock,	without	par	value,	is	authorized	but	unissued.	Common	stock	has	a	par	value	of	$1.66	2/3	per	share;	600	million	shares are	authorized.

The	following	table	summarizes	the	shares	outstanding	for	the	three	years	ended	Dec.	31,	2006:

|  | Common<br>Stock | Treasury<br>Stock | ESOP<br>Shares | Shares<br>Outstanding |
| :--- | :--- | :--- | :--- | :--- |
| Balance, |  |  |  |  |
| Jan.\t1,\t2004 | 290,573,068 | (119,508,553) | (137,876) | 170,926,639 |
| Purchases | — | (1,507,400) | — | (1,507,400) |
| Issuances/releases | — | 2,577,392 | 5,164 | 2,582,556 |
| Balance, |  |  |  |  |
| Dec.\t31,\t2004 | 290,573,068 | (118,438,561) | (132,712) | 172,001,795 |
| Purchases | — | (9,401,300) | — | (9,401,300) |
| Issuances/releases | — | 2,669,955 | 6,840 | 2,676,795 |
| Balance, |  |  |  |  |
| Dec.\t31,\t2005 | 290,573,068 | (125,169,906) | (125,872) | 165,277,290 |
| Purchases | — | (2,343,215) | — | (2,343,215) |
| Issuances/releases | — | 1,139,214 | 8,464 | 1,147,678 |
| Balance, |  |  |  |  |
| Dec.\t31,\t2006 | 290,573,068 | (126,373,907) | (117,408) | 164,081,753 |

ESOP	shares	represent	the	unreleased	new	shares	held	by	the	ESOP	that	are	not	considered	outstanding	under	SOP	93-6	(see	Notes	1	and	17).	The	number	of	ESOP shares	changes	as	a	result	of	the	purchases	of	new	shares	and	releases	of	shares	to	participant	accounts	by	the	ESOP.

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	discounted price,	which	would	generally	be	50%	of	the	respective	stocks'	then	current	fair	market	value.

# 16.	Accumulated	Other	Comprehensive	Loss

|  |  | Pension	and | Unrealized |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | Unrealized | Other | Gain\t(Loss) | Unrealized | Accumulated |
|  | Currency | Postretirement | on | (Loss) | Other |
|  | Translation | Benefit | Marketable | Gain\ton | Comprehensive |
| (Millions) | Adjustment | Adjustments | Securities | Derivatives | (Loss)\tIncome |
| Balance,\nJan.\t1,\t2004 | $(12) | $(628) | $2 | $(4) | $(642) |
| Net\tchange | 180 | 33 | (3) | (3) | 207 |
| Balance, |  |  |  |  |  |
| Dec.\t31,\t2004 | 168 | (595) | (1) | (7) | (435) |
| Net\tchange | (215) | (173) | 1 | 3 | (384) |
| Balance,\nDec.\t31,\t2005 | (47) | (768) | \t\t— | (4) | (819) |
| Net\tchange | 179 | (335) | 3 | (13) | (166) |
| Balance, |  |  |  |  |  |
| Dec.\t31,\t2006 | $132 | $(1,103) | $3 | $(17) | $(985) |

Unrealized	currency	translation	adjustments	exclude	income	tax	expense	(benefit)	given	that	the	earnings	of	non-U.S.	subsidiaries	are	deemed	to	be	reinvested	for	an indefinite	period	of	time.	The	tax	benefit	(cost)	related	to	the	adjustment	for	pension	and	other	postretirement	benefits	for	the	years	ended	Dec.	31,	2006,	2005	and	2004 was	$197	million,	$107	million	and	$(21)	million,	respectively.	The	cumulative	tax	benefit	related	to	the	adjustment	for	pension	and	other	postretirement	benefits	at	Dec. 31,	2006	and	2005	was	$656	million	and	$459	million,	respectively.	The	tax	(cost)	benefit	related	to	the	change	in	the	unrealized	gain	(loss)	on	marketable	securities	for the	years	ended	Dec.	31,	2006,	2005	and	2004	was	$(2)	million,	$(0.4)	million	and	$2	million,	respectively.	The	tax	benefit	(cost)	related	to	change	in	the	unrealized (loss)	gain	on	derivatives	for	the	years	ended	Dec.	31,	2006,	2005	and	2004	was	$9	million,	$(2)	million	and	$2	million,	respectively.

Our	ESOP	covers	substantially	all	U.S.	employees.	The	Company	makes	matching	contributions	to	the	ESOP	based	upon	participants'	savings,	subject	to	certain limitations.	The	matching	percentages	for	2006,	2005	and	2004	were	based	upon	our	return	on	average	capital	for	the	previous	year.

|  | Old<br>Shares | New<br>Shares | Old<br>Shares | New<br>Shares |
| :--- | :--- | :--- | :--- | :--- |
| Allocated\tshares | 12,823,689 | 3,857,038 | 12,407,060 | 3,848,574 |
| Unreleased\tshares | 576,645 | 117,408 | 993,274 | 125,872 |
| Total | 13,400,334 | 3,974,446 | 13,400,334 | 3,974,446 |

The	fair	value	of	unreleased	new	ESOP	shares	was	$8	million	as	of	Dec.	31,	2006,	and	$7	million	as	of	Dec.	31,	2005.	The	average	cost	of	the	unreleased	old	ESOP shares	was	$21	per	share.

# 18.	Other	Earnings

| (Millions) | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Interest\tincome | $14 | $13 | $12 |
| Royalty\tincome | 44 | 38 | 40 |
| Share\tof\tnet\tearnings\tof\tequity\taffiliates\t(See\tNote\t5) | 34 | 14 | 21 |
| Other | 50 | 47 | 58 |
| Total | $142 | $112 | $131 |

The	Company's	stock-based	compensation	includes	stock	options,	restricted	stock	units	("RSUs")	and	annual	grants	of	contingent	shares	that	are	earned	based	on achieving	targeted	levels	of	total	shareholder	return.	On	April	20,	2006,	the	PPG	Industries,	Inc.	Omnibus	Incentive	Plan	("PPG	Omnibus	Plan")	was	approved	by shareholders	of	the	Company.	The	PPG	Omnibus	Plan	consolidated	into	one	plan	several	of	the	Company's	previously	existing	compensatory	plans	providing	for	equity- based	and	cash	incentive	awards	to	certain	of	the	Company's	employees	and	directors.	Effective	Apr.	20,	2006,	all	grants	of	stock	options,	RSUs	and	contingent	shares are	made	under	the	PPG	Omnibus	Plan.	The	provisions	of	the	PPG	Omnibus	Plan	do	not	modify	the	terms	of	awards	that	were	granted	under	the	Company's	previously existing	compensatory	plans.	Shares	available	for	future	grants	under	the	PPG	Omnibus	Plan	were	9,997,162	as	of	Dec.	31,	2006.

Total	stock-based	compensation	cost	was	$34	million,	$75	million,	and	$89	million	in	2006,	2005	and	2004,	respectively.	Stock-based	compensation	cost	for	2005 and	2004	includes	$50	million	and	$68	million,	respectively,	for	amounts	paid	under	the	Company's	incentive	compensation	and	management	award	plans,	which allowed	for	payment	partially	in	PPG	common	stock	in	2005	and	2004.	These	plans	no	longer	allow	for	payment	in	PPG	common	stock,	and	therefore	are	not	included in	the	amount	of	total	stock-based	compensation	cost	in	2006.	The	total	income	tax	benefit	recognized	in	the	income	statement	related	to	the	stock-based	compensation was	$12	million,	$29	million	and	$34	million	in	2006,	2005	and	2004,	respectively.

# Stock	Options

PPG	has	outstanding	stock	option	awards	that	have	been	granted	under	two	stock	option	plans,	the	PPG	Industries,	Inc.	Stock	Plan	("PPG	Stock	Plan")	and	the	PPG Industries,	Inc.	Challenge	2000	Stock	Plan	("PPG	Challenge	2000	Stock	Plan").	Under	the	PPG	Stock	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	options	were	granted.	The	options	are	generally exercisable	beginning	from	six	to	48	months	after	being	granted	and	have	a	maximum	term	of	10	years.	Upon	exercise	of	a	stock	option,	shares	of	Company	stock	are issued	from	treasury	stock.	The	PPG	Stock	Plan	includes	a	restored	option	provision	for	options	granted	prior	to	Jan.	1,	2003	that	allows	an	optionee	to	exercise	options and	satisfy	the	option	price	by	certifying	ownership	of	mature	shares	of	PPG	common	stock	with	equivalent	market	value.

On	July	1,	1998,	under	the	PPG	Challenge	2000	Stock	Plan,	the	Company	granted	to	substantially	all	active	employees	of	the	Company	and	its	majority	owned subsidiaries	the	option	to	purchase	100	shares	of	common	stock	at	its	then	fair	market	value	of	$70	per	share.	The	options	became	exercisable	on	July	1,	2003	and	expire on	June	30,	2008.

The	fair	value	of	stock	options	issued	to	employees	is	measured	on	the	date	of	grant	and	is	recognized	as	expense	over	the	requisite	service	period.	However,	the awards	provide	that	an	individual	who	retires	from	PPG	automatically	vests	in	any	award	that	has	been	outstanding	for	more	than	12	months.	As	such,	compensation cost	related	to	grants	to	participants	who	are	eligible	to	retire	as	of	the	date	of	the	grant	is	recognized	over	a	period	of	12	months,	as	this	represents	the	effective	vesting period.	PPG	estimates	the	fair	value	of	stock	options	using	the	Black-Scholes	option	pricing	model.	The	risk-free	interest	rate	is	determined	by	using	the	U.S.	Treasury yield	curve	at	the	date	of	the	grant	and	using	a	maturity	equal	to	the	expected	life	of	the	option.	The	expected	life	of	options	is	calculated	using	the	average	of	the	vesting term	and	the	maximum	term,	as	prescribed	by	SEC	Staff	Accounting	Bulletin	No.	107,	"Share-Based	Payment".	The	expected	dividend	yield	and	volatility	are	based	on historical	stock	prices	and	dividend	amounts	over	past	time	periods	equal	in	length	to	the	expected	life	of	the	options.	The	fair	value	of	each	grant	was	calculated	with	the following	weighted	average	assumptions:

|  | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Risk\tfree\tinterest\trate | 4.7% | 3.8% | 3.2% |
| Expected\tlife\tof\toption\tin\tyears | 5.3 | 4.3 | 4.6 |
| Expected\tdividend\tyield | 3.1% | 3.1% | 3.2% |
| Expected\tvolatility | 24.1% | 26.3% | 30.5% |

A	summary	of	stock	options	outstanding	and	exercisable	and	activity	for	the	year	ended	Dec.	31,	2006	is	presented	below:

|  | Number	of<br>Shares | Weighted<br>Average<br>Exercise<br>Price | Weighted<br>Average<br>Remaining<br>Contractual<br>Life<br>(in	years) | Intrinsic<br>Value<br>(in	millions) |
| :--- | :--- | :--- | :--- | :--- |
| Outstanding,\tJan.\t1,\t2006 | 11,738,018 | 59.91 | 4.8 | $31 |
| Granted | 1,229,482 | 62.52 |  |  |
| Exercised | (1,568,589) | 55.73 |  |  |
| Forfeited/Expired | (437,662) | 65.82 |  |  |
| Outstanding,\tDec.\t31,\t2006 | 10,961,249 | 60.57 | 4.4 | $62 |
| Exercisable,\tDec.\t31,\t2006 | 7,650,656 | 59.86 | 3.0 | $49 |

At	Dec.	31,	2006,	there	was	$12	million	of	total	unrecognized	compensation	cost	related	to	outstanding	stock	options	that	have	not	yet	vested.	This	cost	is

expected	to	be	recognized	as	expense	over	a	weighted	average	period	of	1.4	years.

The	following	table	presents	stock	option	activity	for	the	years	ended	Dec.	31,	2006,	2005	and	2004:

| (Millions) | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Total\tintrinsic\tvalue\tof\tstock\toptions\texercised | $16 | $42 | $29 |
| Cash\treceived\tfrom\tstock\toption\texercises | 55 | \t 138 | \t 121 |
| Income\ttax\tbenefit\tfrom\tthe\texercise\tof\tstock\toptions | 6 | 16 | 10 |
| Total\tfair\tvalue\tof\tstock\toptions\tvested | 4 | 11 | 7 |

# Restricted	Stock	Units

Beginning	in	2005,	comparable	long-term	incentive	value	has	been	delivered	to	selected	key	management	employees	by	reducing	reliance	on	stock	options	and incorporating	RSUs,	which	have	either	time	or	performance-based	vesting	features.	The	fair	value	of	an	RSU	is	equal	to	the	market	value	of	a	share	of	stock	on	the	date of	grant.	Time-based	RSUs	vest	over	the	three-year	period	following	the	date	of	grant,	unless	forfeited,	and	will	be	paid	out	in	the	form	of	stock,	cash	or	a	combination of	both	at	the	end	of	the	three-year	vesting	period.	Performance-based	RSUs	vest	based	on	achieving	specific	annual	performance	targets	for	earnings	per	share	growth and	cash	flow	return	on	capital	over	the	three-year	period	following	the	date	of	grant.	Unless	forfeited,	the	performance-based	RSUs	will	be	paid	out	in	the	form	of stock,	cash	or	a	combination	of	both	at	the	end	of	the	three-year	vesting	period	if	PPG	meets	the	performance	targets.	The	actual	award	for	performance-based	vesting may	range	from	0%	to	150%	of	the	original	grant,	as	50%	of	the	grant	vests	in	each	year	that	targets	are	met	during	the	three-year	period.	If	the	designated	performance targets	are	not	met	in	any	of	the	three	years	in	an	award	period,	no	payout	will	be	made	on	the	performance-based	RSUs.	Compensation	cost	is	generally	recognized over	the	vesting	period	of	the	award.	However,	the	awards	provide	that	an	individual	who	retires	from	PPG	automatically	vests	in	any	award	that	has	been	outstanding for	more	than	12	months.	As	such,	compensation	cost	related	to	grants	to	participants	who	are	eligible	to	retire	as	of	the	date	of	the	grant	is	recognized	over	a	period	of 12	months,	as	this	represents	the	effective	vesting	period.	For	the	purposes	of	expense	recognition,	we	have	assumed	that	the	performance-based	RSUs	granted	in	2005 and	2006	will	vest	at	the	100%	level.	The	performance	targets	for	2005	and	2006	were	achieved.

The	following	table	summarizes	RSU	activity	under	the	long-term	incentive	plan	for	the	year	ended	Dec.	31,	2006:

|  |  | Weighted | Intrinsic |
| :--- | :--- | :--- | :--- |
|  | Number\tof | Average | Value |
|  | Shares | Fair\tValue | (in\tmillions) |
| Outstanding,\tJan.\t1,\t2006 | 236,100 | $65.91 | $14 |
| Granted | 250,623 | $54.23 |  |
| Forfeited | (11,335) | $57.76 |  |
| Outstanding,\tDec.\t31,\t2006 | 475,388 | $59.95 | $31 |

There	was	$12	million	of	total	unrecognized	compensation	cost	related	to	nonvested	RSUs	outstanding	as	of	Dec.	31,	2006.	This	cost	is	expected	to	be	recognized as	expense	over	a	weighted	average	period	of	1.6	years.

# Contingent	Share	Grants

The	Company	also	provides	grants	of	contingent	shares	that	will	be	earned	based	on	PPG	total	shareholder	return	over	the	three-year	period	following	the	date	of	grant. Contingent	share	grants	("TSR")	are	made	annually	and	are	paid	out	at	the	end	of	each	three-year	period	if	the	company	achieves	target	performance.	Performance	is measured	by	determining	the	percentile	rank	of	the	total	shareholder	return	of	PPG	Common	Stock	(stock	price	plus	accumulated	dividends)	in	relation	to	the	total shareholder	return	of	the	S&P	500	and	of	the	Basic	Materials	sector	of	the	S&P	500.	Compensation	expense	is	recognized	over	the	three-year	award	period	based	on	fair value,	giving	consideration	to	the	Company's	percentile	rank	of	total	shareholder	return	in	relation	to	the	S&P	500	and	Basic	Materials	sector.	The	payment	of	awards following	the	three-year	award	period	will	be	based	on	performance	achieved	in	accordance	with	the	scale	set	forth	in	the	plan	agreement	and	may	range	from	0%	to 220%	of	the	initial	grant.	A	payout	of	100%	is	earned	if	the	target	performance	is	achieved.	Contingent	share	awards	earn	dividend	equivalents	during	the	three-year award	period,	which	are	credited	to	participants	in	the	form	of	Common	Stock	Equivalents.	Any	payments	made	at	the	end	of	the	award	period	may	be	in	the	form	of stock,	cash	or	a	combination	of	both.	The	TSR	awards	qualify	as	liability	awards,	and	expense	will	be	recognized	over	the	award	period	based	on	the	fair	value	of	the awards	as	remeasured	in	each	reporting	period	until	settlement	of	the	awards.

As	of	Dec.	31,	2006,	there	was	$3	million	of	total	unrecognized	compensation	cost	related	to	outstanding	TSR	awards	based	on	the	current	estimate	of	fair	value. This	cost	is	expected	to	be	recognized	as	expense	over	a	weighted	average	period	of	1.8	years.

# 20.	Advertising	Costs

Advertising	costs	are	expensed	as	incurred	and	totaled	$121	million,	$105	million	and	$91	million	in	2006,	2005	and	2004,	respectively.

| (Millions) | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Research\tand\tdevelopment\t–\ttotal | $334 | $325 | $321 |
| Less\tdepreciation\ton\tresearch\tfacilities | 16 | 16 | 18 |
| Research\tand\tdevelopment\t–\tnet | $318 | $309 | $303 |
|  |  | 2006\tPPG\tANNUAL\tREPORT\tAND\tFORM\t10-K | 61 |

# 22.	Quarterly	Financial	Information	(unaudited)

| 2006	quarter	ended | Net	Sales<br>(Millions) | Cost	of<br>Sales^(1)<br>(Millions) | Net<br>Income<br>(Millions) | Earnings<br>Per<br>Common<br>Share | Common<br>Share	–<br>Assuming<br>Dilution |
| :--- | :--- | :--- | :--- | :--- | :--- |
| March\t31 | $2,638 | $1,691 | $184 | $1.11 | $1.11 |
| June\t30 | 2,824 | 1,747 | 280 | 1.69 | 1.68 |
| September\t30 | 2,802 | 1,791 | 90 | .54 | .54 |
| December\t31 | 2,773 | 1,807 | 157 | .95 | .94 |
| Total | $11,037 | $7,036 | $711 | $4.29 | $4.27 |
| 2005\tquarter\tended |  |  |  |  |  |
| March\t31 | $2,493 | $1,558 | $95 | $.55 | $.55 |
| June\t30 | 2,656 | 1,650 | 231 | 1.35 | 1.34 |
| September\t30 | 2,547 | 1,614 | 157 | .93 | .92 |
| December\t31 | 2,505 | 1,651 | 113 | .68 | .68 |
| Total | $10,201 | $6,473 | $596 | $3.51 | $3.49 |

# (1) Exclusive	of	depreciation	and	amortization.

# 23.	Reportable	Business	Segment	Information

# Segment	Organization	and	Products

PPG	is	a	multinational	manufacturer	with	fourteen	operating	segments	that	are	organized	based	on	our	major	products	lines.	These	operating	segments	are	also	our reporting	units	for	purposes	of	testing	goodwill	for	impairment	(see	Note	1).	The	operating	segments	have	been	aggregated	based	on	the	nature	of	their	products, production	processes,	end-use	markets	and	methods	of	distribution	into	five	reportable	business	segments.	In	2006,	we	have	changed	the	composition	of	our	reportable business	segment	information	to	reflect	management's	current	view	of	our	organization	and	to	provide	further	clarity	in	our	reporting	of	business	performance.	The reportable	business	segment	information	presented	for	2005	and	2004	has	been	restated	to	conform	to	the	2006	presentation.

The	Industrial	Coatings	reportable	business	segment	is	comprised	of	the	automotive,	industrial	and	packaging	coatings	operating	segments.	This	reportable	business segment	primarily	supplies	a	variety	of	protective	and	decorative	coatings	and	finishes	along	with	adhesives,	sealants,	inks	and	metal	pretreatment	products.

The	Performance	and	Applied	Coatings	reportable	business	segment	is	comprised	of	the	refinish,	aerospace	and	architectural	coatings	operating	segments.	This reportable	business	segment	primarily	supplies	a	variety	of	protective	and	decorative	coatings,	sealants	and	finishes	along	with	paint	strippers,	transparent	armor, transparencies,	stains	and	related	chemicals	that	are	used	by	customers	in	addition	to	our	coatings,	sealants	and	finishes.

The	Optical	and	Specialty	Materials	reportable	business	segment	is	comprised	of	the	optical	products,	silica	and	fine	chemicals	operating	segments.	The	primary Optical	and	Specialty	Materials	products	are	Transitions®	lenses,	sunlenses,	optical	materials,	polarized	film,	amorphous	precipitated	silica	products,	advanced pharmaceutical	intermediates	and	bulk	active	ingredients.	Transitions®	lenses	are	processed	and	distributed	by	PPG's	51%-owned	joint	venture	with	Essilor	International. The	Commodity	Chemicals	reportable	business	segment	is	comprised	of	the	chlor-alkali	and	derivatives	operating	segment.	The	primary	chlor-alkali	and	derivative products	are	chlorine,	caustic	soda,	vinyl	chloride	monomer,	chlorinated	solvents,	chlorinated	benzenes,	calcium	hypochlorite,	ethylene	dichloride	and	phosgene derivatives.

The	Glass	reportable	business	segment	is	comprised	of	the	automotive	OEM	glass,	automotive	replacement	glass	and	services,	performance	glazings	and	fiber	glass operating	segments.	This	reportable	business	segment	primarily	supplies	flat	glass,	fabricated	glass	and	continuous-strand	fiber	glass	products.

Production	facilities	and	markets	for	Industrial	Coatings,	Performance	and	Applied	Coatings,	Optical	and	Specialty	Materials,	Commodity	Chemicals	and	Glass	are predominantly	in	North	America	and	Europe.	Our	reportable	business	segments	continue	to	pursue	opportunities	to	further	develop	markets	in	Asia,	Eastern	Europe	and Latin	America.	Each	of	the	reportable	business	segments	in	which	PPG	is	engaged	is	highly	competitive.	However,	the	diversification	of	product	lines	and	worldwide markets	served	tends	to	minimize	the	impact	on	PPG's	total	sales	and	earnings	from	changes	in	demand	in	a	particular	market	or	in	a	particular	geographic	area. The	accounting	policies	of	the	operating	segments	are	the	same	as	those	described	in	the	summary	of	significant	accounting	policies.	The	Company	allocates resources	to	operating	segments	and	evaluates	the	performance	of	operating	segments	based	upon	segment	income,	which	is	earnings	before	interest	expense—net, income	taxes	and	minority	interest	and	which	may	exclude	certain	charges	which	are	considered	to	be	unusual	or	non-recurring.	Legacy	costs	include	current	costs related	to	former	operations	of	the	Company,	including	certain	environmental	remediation,	pension	and	other	postretirement	benefit	costs,	and	certain	charges	for	legal and	other	matters	which	are	considered	to	be	unusual	or	non-recurring.	These	legacy	costs	are	excluded	from	the	segment	income	that	is	used	to	evaluate	the performance	of	the	operating	segments.	A	substantial	portion	of	corporate	administrative	expenses	is	allocated	to	the	operating	segments.	The	portion	not	allocated	to	the operating	segments	primarily	represents	the	cost	of	corporate	legal	cases,	net	of	related	insurance	recoveries,	a	business	process	redesign	project	in	Europe	and	certain insurance	and	employee	benefit	programs	and	is	included	in	the	amount	presented	as	Corporate	loss.	Net	periodic	pension	expense	is	allocated	to	the	operating	segments. For	Optical	and	Specialty	Materials,	Commodity	Chemicals	and	Glass,	intersegment	sales	and	transfers	are	recorded	at	selling	prices	that	approximate	market prices.	Product	movement	between	Industrial	Coatings	and	Performance	and	Applied	Coatings	is	very	limited,	is	accounted	for	as	an	inventory	transfer	and	is	recorded at	cost	plus	a	mark-up,	the	impact	of	which	is	not	significant	to	the	segment	income	of	the	two	coatings	reportable	business	segments.

| (Millions)<br>Reportable	Business	Segments | (Millions)<br>Reportable	Business	Segments | Industrial<br>Coatings | Performance<br>and<br>Applied<br>Coatings | Optical<br>and<br>Specialty<br>Materials^(1) | Commodity<br>Chemicals^(2) | Glass | Corporate	/<br>Eliminations^(3) | Consolidated<br>Totals |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| 2006 |  |  |  |  |  |  |  |  |
| Net\tsales\tto\texternal\tcustomers | Net\tsales\tto\texternal\tcustomers | $3,236 | $3,088 | $1,001 | $1,483 | $2,229 | $\t\t— | $11,037 |
| Intersegment\tnet\tsales | Intersegment\tnet\tsales | \t\t— | 3 | 4 | 8 | 1 | (16) | \t\t— |
| Total\tnet\tsales | Total\tnet\tsales | $3,236 | $3,091 | $1,005 | $1,491 | $2,230 | $(16) | $11,037 |
| Segment\tincome\t(loss) | Segment\tincome\t(loss) | $349 | $514 | $223 | $285 | $148 | $(92) | $1,427 |
| Restructuring\t(see\tNote\t7) | Restructuring\t(see\tNote\t7) |  |  |  |  |  |  | (37) |
| Legacy\tcosts^(4) | Legacy\tcosts^(4) |  |  |  |  |  |  | (199) |
| Asbestos\tsettlement\t–\tnet\t(see\tNote\t14) | Asbestos\tsettlement\t–\tnet\t(see\tNote\t14) |  |  |  |  |  |  | (28) |
| Interest\t–\tNet | Interest\t–\tNet |  |  |  |  |  |  | (69) |
| Unallocated\tstock\tbased\tcompensation\t(See\tNote\t19)^(5) | Unallocated\tstock\tbased\tcompensation\t(See\tNote\t19)^(5) |  |  |  |  |  |  | (34) |
| Income\tbefore\tincome\ttaxes\tand\tminority\tinterest | Income\tbefore\tincome\ttaxes\tand\tminority\tinterest |  |  |  |  |  |  | $1,060 |
| Depreciation\tand\tamortization\t(see\tNote\t1) | Depreciation\tand\tamortization\t(see\tNote\t1) | $87 | $84 | $40 | $43 | $105 | $21 | $380 |
| Share\tof\tnet\tearnings\tof\tequity\taffiliates | Share\tof\tnet\tearnings\tof\tequity\taffiliates | 9 | \t\t— | \t\t— | \t\t— | 25 | \t\t— | 34 |
| Segment\tassets^(6) | Segment\tassets^(6) | 2,216 | 3,297 | 661 | 609 | \t 1,577 | 1,661 | 10,021 |
| Investment\tin\tequity\taffiliates | Investment\tin\tequity\taffiliates | 16 | \t\t— | — | 5 | 155 | 15 | 191 |
| Expenditures\tfor\tproperty | Expenditures\tfor\tproperty | 116 | 128 | 63 | 63 | 67 | 29 | 466 |
| 2005 |  |  |  |  |  |  |  |  |
| Net\tsales\tto\texternal\tcustomers | Net\tsales\tto\texternal\tcustomers | $2,921 | $2,668 | $867 | $1,531 | $2,214 | $\t\t— | $10,201 |
| Intersegment\tnet\tsales | Intersegment\tnet\tsales | — | 3 | 3 | 6 | 2 | (14) | — |
| Total\tnet\tsales | Total\tnet\tsales | $2,921 | $2,671 | $870 | $1,537 | $2,216 | $(14) | $10,201 |
| Segment\tincome\t(loss) | Segment\tincome\t(loss) | $284 | $464 | $158 | $313 | $123 | $(54) | $1,288 |
| Legacy\tcosts | (4) |  |  |  |  |  |  | (226) |
| Asbestos\tsettlement\t–\tnet\t(see\tNote\t14) | Asbestos\tsettlement\t–\tnet\t(see\tNote\t14) |  |  |  |  |  |  | (22) |
| Interest\t–\tNet |  |  |  |  |  |  |  | (68) |
| Unallocated\tstock\tbased\tcompensation\t(See\tNote\t19) | (5) |  |  |  |  |  |  | (25) |
| Income\tbefore\tincome\ttaxes\tand\tminority\tinterest | Income\tbefore\tincome\ttaxes\tand\tminority\tinterest |  |  |  |  |  |  | $947 |
| Depreciation\tand\tamortization\t(see\tNote\t1) | Depreciation\tand\tamortization\t(see\tNote\t1) | $82 | $76 | $38 | $44 | $109 | $23 | $372 |
| Share\tof\tnet\tearnings\t(loss)\tof\tequity\taffiliates | Share\tof\tnet\tearnings\t(loss)\tof\tequity\taffiliates | 9 | \t\t— | \t\t— | (8) | 13 | \t\t— | 14 |
| Segment\tassets | (6) | 1,906 | 2,649 | 501 | 580 | \t 1,546 | 1,499 | 8,681 |
| Investment\tin\tequity\taffiliates | Investment\tin\tequity\taffiliates | 38 | 1 | \t\t— | 6 | 117 | 15 | 177 |
| Expenditures\tfor\tproperty | Expenditures\tfor\tproperty | 52 | 51 | 32 | 32 | 94 | 19 | 280 |
| 2004 |  |  |  |  |  |  |  |  |
| Net\tsales\tto\texternal\tcustomers | Net\tsales\tto\texternal\tcustomers | $2,818 | $2,478 | $805 | $1,229 | $2,183 | $\t\t— | $9,513 |
| Intersegment\tnet\tsales | Intersegment\tnet\tsales | — | 1 | 2 | 14 | 3 | (20) | — |
| Total\tnet\tsales | Total\tnet\tsales | $2,818 | $2,479 | $807 | $1,243 | $2,186 | $(20) | $9,513 |
| Segment\tincome\t(loss) | Segment\tincome\t(loss) | $338 | $451 | $186 | $113 | $166 | $(43) | $1,211 |
| Legacy\tcosts | (4) |  |  |  |  |  |  | (17) |
| Asbestos\tsettlement\t–\tnet\t(see\tNote\t14) | Asbestos\tsettlement\t–\tnet\t(see\tNote\t14) |  |  |  |  |  |  | (32) |
| Interest\t–\tNet |  |  |  |  |  |  |  | (78) |
| Unallocated\tstock\tbased\tcompensation\t(See\tNote\t19) | (5) |  |  |  |  |  |  | (21) |
| Income\tbefore\tincome\ttaxes\tand\tminority\tinterest | Income\tbefore\tincome\ttaxes\tand\tminority\tinterest |  |  |  |  |  |  | $1,063 |
| Depreciation\tand\tamortization\t(see\tNote\t1) | Depreciation\tand\tamortization\t(see\tNote\t1) | $80 | $79 | $37 | $47 | $120 | $25 | $388 |
| Share\tof\tnet\tearnings\t(loss)\tof\tequity\taffiliates | Share\tof\tnet\tearnings\t(loss)\tof\tequity\taffiliates | 5 | \t\t— | \t\t— | (6) | 22 | \t\t— | 21 |
| Segment\tassets | (6) | 1,920 | 2,687 | 517 | 611 | \t 1,554 | 1,643 | 8,932 |
| Investment\tin\tequity\taffiliates | Investment\tin\tequity\taffiliates | 26 | 4 | \t\t— | 2 | 124 | 15 | 171 |
| Expenditures\tfor\tproperty | Expenditures\tfor\tproperty | 47 | 47 | 28 | 36 | 56 | 17 | 231 |
| (continued\ton\tnext\tpage) |  |  |  |  |  |  |  |  |
|  |  |  |  |  | 2006\tPPG\tANNUAL\tREPORT\tAND\tFORM\t10-K | 2006\tPPG\tANNUAL\tREPORT\tAND\tFORM\t10-K | 2006\tPPG\tANNUAL\tREPORT\tAND\tFORM\t10-K | 63 |

| Geographic	Information | 2006 | 2005 | 2004 |
| :--- | :--- | :--- | :--- |
| Net\tsales(7) |  |  |  |
| The\tAmericas |  |  |  |
| United\tStates | \t\t $6,878 | $6,562 | $6,029 |
| Other\tAmericas | 983 | 949 | 907 |
| Europe | 2,347 | 2,090 | \t 2,050 |
| \t Asia | 829 | 600 | 527 |
| Total | \t\t $11,037 | $10,201 | $9,513 |
| Segment\tincome |  |  |  |
| The\tAmericas |  |  |  |
| United\tStates(8) | \t\t $1,077 | $994 | $858 |
| Other\tAmericas | 72 | 38 | 69 |
| Europe(9) | 225 | 195 | 216 |
| \t Asia | 145 | 115 | 111 |
| Total | \t\t $1,519 | $1,342 | $1,254 |
| Property—net |  |  |  |
| The\tAmericas |  |  |  |
| United\tStates | \t\t $1,461 | $1,449 | $1,518 |
| Other\tAmericas | 185 | 197 | 209 |
| Europe | 577 | 507 | 613 |
| \t Asia | 273 | 151 | 131 |
| Total | \t\t $2,496 | $2,304 | $2,471 |

(1) Optical	and	Specialty	Materials	2005	segment	income	includes	a	pretax	charge	of	$27	million	related	to	the	impairment	of	certain	assets	in	the	fine	chemicals	operating	segment.

(2) Commodity	Chemicals	segment	income	includes	pretax	earnings	of	$10	million	from	an	insurance	recovery	in	2006	and	pretax	charges	of	$29	million	due	to	direct	costs	of	hurricanes	in	2005.

(3) Corporate	intersegment	net	sales	represent	intersegment	net	sales	eliminations.	Corporate	income	(loss)	represents	unallocated	corporate	income	and	expenses.	Corporate	loss	for	2006	increased	as	compared	to 2005	in	part	due	to	higher	compensation,	medical,	pension	and	legal	costs	and	a	reduction	in	the	amount	of	insurance	recoveries.

(4) Legacy	costs	include	current	costs	related	to	former	operations	of	the	Company,	including	certain	environmental	remediation,	pension	and	other	postretirement	benefit	costs	and	certain	charges	which	are considered	to	be	unusual	or	non-recurring.	In	2006,	these	costs	include	environmental	remediation	costs	at	sites	related	to	our	former	chromium	manufacturing	facility	and	related	sites	in	Jersey	City,	NJ	of	$185 million,	a	charge	for	the	settlement	of	the	federal	refinish	antitrust	case	of	$23	million,	and	insurance	recoveries	related	to	the	Marvin	litigation	settlement	of	$33	million.	In	2005,	these	costs	included	charges	of $132	million	for	the	Marvin	litigation	settlement,	net	of	insurance	recoveries,	and	$61	million	for	the	settlement	of	the	federal	glass	class	action	antitrust	case.

(5) Unallocated	stock	based	compensation	includes	the	cost	of	stock	options,	restricted	stock	units	and	contingent	share	grants	which	are	not	allocated	to	the	operating	segments.

(6) Segment	assets	are	the	total	assets	used	in	the	operation	of	each	segment.	Corporate	assets	are	principally	cash	and	cash	equivalents	and	deferred	tax	assets.

(7) Net	sales	to	external	customers	are	attributed	to	individual	countries	based	upon	the	location	of	the	operating	unit	shipping	the	product.

(8) Includes	pretax	earnings	of	$11	million	for	insurance	recoveries	in	2006	and	pretax	charges	of	$34	million	due	to	direct	costs	of	hurricanes	and	$24	million	related	to	the	impairment	of	certain	assets	in	the	fine chemicals	operating	segment	in	2005.

(9) Includes	pretax	charges	of	$3	million	related	to	the	impairment	of	certain	assets	in	the	fine	chemicals	operating	segment	in	2005.

# Item	9.	Changes	in	and	Disagreements	With	Accountants	on	Accounting	and	Financial	Disclosure

# Item	9a.	Controls	and	Procedures

(a) Evaluation	of	disclosure	controls	and	procedures.

Based	on	their	evaluation	as	of	the	end	of	the	period	covered	by	this	Form	10-K,	the	Company's	principal	executive	officer	and	principal	financial	officer	have concluded	that	the	Company's	disclosure	controls	and	procedures	(as	defined	in	Rules	13a-15(e)	and	15d-15(e)	under	the	Securities	Exchange	Act	of	1934	(the "Exchange	Act"))	are	effective	to	ensure	that	information	required	to	be	disclosed	by	the	Company	in	reports	that	it	files	or	submits	under	the	Exchange	Act	is	recorded, processed,	summarized	and	reported	within	the	time	periods	specified	in	Securities	and	Exchange	Commission	rules	and	forms	and	to	ensure	that	information	required	to be	disclosed	by	the	Company	in	the	reports	that	it	files	or	submits	under	the	Exchange	Act	is	accumulated	and	communicated	to	the	Company's	management,	including its	principal	executive	and	principal	financial	officers,	as	appropriate,	to	allow	timely	decisions	regarding	required	disclosure.

# (b)	 Changes	in	internal	control.

There	were	no	changes	in	the	Company's	internal	control	over	financial	reporting	that	occurred	during	the	Company's	most	recent	fiscal	quarter	that	have	materially affected,	or	are	reasonably	likely	to	materially	affect,	the	Company's	internal	control	over	financial	reporting.

See	Management	Report	on	page	33	for	management's	annual	report	on	internal	control	over	financial	reporting.	See	Report	of	Independent	Registered	Public Accounting	Firm	on	page	32	for	Deloitte	&	Touche	LLP's	attestation	report	on	management's	assessment	of	internal	control	over	financial	reporting.

# Item	9b.	Other	Information

On	Dec.	13,	2006,	the	Officers-Directors	Compensation	Committee	of	the	Company's	Board	of	Directors	approved	and	adopted	certain	administrative	and	other technical	amendments	to	the	PPG	Industries,	Inc.	Deferred	Compensation	Plan	and	the	PPG	Industries,	Inc.	Nonqualified	Retirement	Plan,	the	primary	purpose	of	which was	to	conform	these	plans	to	the	requirements	of	Section	409A	of	the	Internal	Revenue	Code.	Each	of	the	foregoing	plans	are	filed	as	Exhibits	to	this	Form	10-K	and are	incorporated	herein	by	reference	in	their	entirety.

# Part	III

# Item	10.	Directors	and	Executive	Officers	of	the	Registrant

The	information	required	by	Item	10	and	not	otherwise	set	forth	below	is	contained	under	the	caption	"Proposal	1:	To	Elect	Three	Directors"	in	our	definitive	Proxy Statement	for	our	2007	Annual	Meeting	of	Shareholders	(the	"Proxy	Statement")	which	we	anticipate	filing	with	the	Securities	and	Exchange	Commission,	pursuant	to Regulation	14A,	not	later	than	120	days	after	the	end	of	the	Company's	fiscal	year,	and	is	incorporated	herein	by	reference.

The	executive	officers	of	the	Company	are	elected	by	the	Board	of	Directors.	The	information	required	by	this	item	concerning	our	executive	officers	is incorporated	by	reference	herein	from	Part	I	of	this	report	under	the	caption	"Executive	Officers	of	the	Company."

The	information	required	by	Item	405	of	Regulation	S-K	is	included	in	the	Proxy	Statement	under	the	caption	"Other	Information	–	Section	16(a)	Beneficial Ownership	Reporting	Compliance"	and	is	incorporated	herein	by	reference.

The	Board	of	Directors	has	determined	that	three	members	of	the	Audit	Committee,	including	the	Chair	of	the	Audit	Committee,	Michele	J.	Hooper,	are	"audit committee	financial	experts"	within	the	meaning	of	Item	407(d)(5)	of	Regulation	S-K.

Since	1988,	the	Company	has	maintained	a	Global	Code	of	Ethics	applicable	to	all	our	employees.	The	Company	has	also	adopted	a	Code	of	Ethics	for	Senior Financial	Officers	that	is	applicable	to	our	principal	executive	officer,	principal	financial	officer,	principal	accounting	officer	or	controller,	or	persons	performing	similar functions.	A	copy	of	our	Global	Code	of	Ethics	and	our	Code	of	Ethics	for	Senior	Financial	Officers,	as	well	as	the	Company's	Corporate	Governance	Guidelines	and the	committee	charters	for	each	of	the	committees	of	the	Board	of	Directors,	can	be	obtained	from	our	Internet	Web	site	at	www.ppg.com	and	will	be	made	available	to any	shareholder	upon	request.	The	Company	intends	to	disclose	any	waivers	from,	or	amendments	to,	the	Code	of	Ethics	for	Senior	Financial	Officers	by	posting	a description	of	such	waiver	or	amendment	on	our	Internet	Web	site.	However,	the	Company	has	never	granted	a	waiver	from	either	the	Global	Code	of	Ethics	or	the Code	of	Ethics	for	Senior	Financial	Officers.

# Item	11.	Executive	Compensation

The	information	required	by	Item	11	is	contained	in	the	Proxy	Statement	under	the	captions	"Compensation	Discussion	and	Analysis,"	"Compensation	of	Executive Officers,"	"Corporate	Governance	–	Compensation	Committee	Interlocks	and	Insider	Participation,"	and	"Corporate	Governance	–	Officers	–	Directors	Compensation Committee	Report	to	Shareholders"	and	is	incorporated	herein	by	reference.

# Item	12.	Security	Ownership	of	Certain	Beneficial	Owners	and	Management	and	Related	Stockholder	Matters

The	information	required	by	Item	12	is	contained	in	the	Proxy	Statement	under	the	captions	"Other	Information	–	Beneficial	Ownership	Table"	and	in	Part	II,	Item	5	of this	report	under	the	caption	"Equity	Plan	Compensation	Information"	and	is	incorporated	herein	by	reference.

# Item	13.	Certain	Relationships	and	Related	Transactions

The	information	required	by	Item	13	is	contained	in	the	Proxy	Statement	under	the	captions	"Corporate	Governance	–	Director	Independence"	and	"Corporate Governance	–	Certain	Relationships	and	Related	Transactions"	and	is	incorporated	herein	by	reference.

# Item	14.	Principal	Accounting	Fees	and	Services

The	information	required	by	Item	14	is	contained	in	the	Proxy	Statement	under	the	caption	"Proposal	2:	To	Endorse	Deloitte	&	Touche	LLP	as	our	Independent Registered	Public	Accounting	Firm	for	2007"	and	is	incorporated	herein	by	reference.

# Part	IV

# Item	15.	Exhibits	and	Financial	Statement	Schedules

(a) Financial	Statements	and	Reports	of	Independent	Registered	Public	Accounting	Firm	(see	Part	II,	Item	8	of	this	Form	10-K).

The	following	information	is	filed	as	part	of	this	Form	10-K:

The	following	should	be	read	in	conjunction	with	the	previously	referenced	financial	statements:

# Schedule	II	–	Valuation	and	Qualifying	Accounts

|  | Balance	at | Charged	to |  |  | Balance	at |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | Beginning | Costs\tand | Other |  | End\tof |
| (Millions) | of\tYear | Expenses | Additions(1) | Deductions(2) | Year |
| Allowance\tfor\tdoubtful\taccounts: |  |  |  |  |  |
| 2006 | $39 | $15 | $7 | $(13) | $48 |
| 2005 | $39 | $24 | $— | $(24) | $39 |
| 2004 | $45 | $9 | $— | $(15) | $39 |

(1) Allowance	for	notes	and	accounts	receivable	relating	to	acquisitions.

(2) Notes	and	accounts	receivable	written	off	as	uncollectible,	net	of	recoveries,	and	changes	attributable	to	foreign	currency	translation.

All	other	schedules	are	omitted	because	they	are	not	applicable.

†	Filed	herewith.

*	 Management	contracts,	compensatory	plans	or	arrangements	required	to	be	filed	as	an	exhibit	hereto	pursuant	to	Item	601	of	Regulation	S-K.

# 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	21,	2007.

(Registrant)

	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	21,	2007.

# PPG	Industries	Inc.	and	Consolidated	Subsidiaries

# Index	to	Exhibits

†32.1 Certification	of	Chief	Executive	Officer	Pursuant	to	18	U.S.C	Section	1350,	as	Adopted	Pursuant	to	Section	906	of	the	Sarbanes-Oxley	Act	of	2002.

†32.2 Certification	of	Chief	Financial	Officer	Pursuant	to	18	U.S.C.	Section	1350,	as	Adopted	Pursuant	to	Section	906	of	the	Sarbanes-Oxley	Act	of	2002.

†99.1 Market	Information,	Dividends	and	Holders	of	Common	Stock.

†99.2 Selected	Financial	Data	for	the	Five	Years	Ended	December	31,	2006.



Question: what would the cash expense for product warranties be in 2007 if the amounts increased the same percentage as in 2006 ( in millions ) ?
Calculation:   a = 5 / 4
 b = a * 5 
 answer = b
Answer: 6.25