GROWTH LEADERSHIP INNOVATION DELIVERING ON COMMITMENTS PPG INDUSTRIES, INC. 2006 ANNUAL REPORT AND FORM 10-K AT A GLANCE PPG Industries is a leader in its markets; is a streamlined, effi cient manufacturer; and operates on the leading edge of new technologies and solutions. It is our vision to become the world’s leading coatings and specialty products and services company, serving customers in construction, consumer products, industrial and transportation markets and aftermarkets. With headquarters in Pittsburgh, PPG has 125 manufacturing facilities and equity affi liates in more than 20 countries around the globe. 2006 SEGMENT NET SALES INDUSTRIAL COATINGS AUTOMOTIVE COATINGS. Global supplier of automotive coatings and services to auto and light truck manufacturers. Products include electrocoats, primer surfacers, base coats, clearcoats, bedliner, pretreatment chemicals, adhesives and sealants. INDUSTRIAL COATINGS. Produces a wide range of value-added coatings for appliances, agricultural and construction equipment, consumer products, electronics, heavy-duty trucks, automotive parts and accessories, residential and commercial construction, wood flooring, kitchen cabinets and other finished products. Industrial Coatings 29% PACKAGING COATINGS. Global supplier of coatings, inks, compounds, Performance and Applied pretreatment chemicals and lubricants for metal, glass and plastic containers Coatings 28% for the beverage, food, general line and specialty packaging industries. Optical and Specialty Materials 9% PERFORMANCE AND AEROSPACE. World’s leading supplier of sealants, coatings, aircraft Commodity Chemicals 14% APPLIED COATINGS maintenance chemicals, transparent armor, transparencies and application Glass 20% systems, serving original equipment manufacturers and maintenance providers for the commercial, military, regional jet and general aviation industries. Services include chemicals management. ARCHITECTURAL COATINGS. Under the Pittsburgh, Olympic, Porter, Monarch, Lucite, Iowa Paint, Spectra-Tone and PPG HPC (High Performance Coatings) brands, this unit produces paints, stains and specialty coatings for commercial, maintenance and residential applications. AUTOMOTIVE REFINISH. Produces and markets a full line of coatings products CONTENTS and related services for automotive and fl eet repair and refurbishing, light industrial coatings and specialty coatings for signs. Also created and 1 Financial Highlights manages Certifi edFirst, PPG’s premier collision-shop alliance. 3 Letter From the Chairman 4 Growth, Leadership OPTICAL AND FINE CHEMICALS. Produces advanced intermediates and bulk active ingredients and Innovation SPECIALTY MATERIALS for the pharmaceutical industry. 8 Corporate Governance and Management OPTICAL PRODUCTS. Produces optical monomers, including CR-39 and Trivex 9 Form 10-K lens materials, photochromic dyes, Transitions photochromic ophthalmic plastic lenses and polarized film. 19 Management’s Discussion and Analysis SILICAS. Produces amorphous precipitated silicas for tire, battery separator 32 Financial and and other end-use applications and Teslin synthetic printing sheet used in Operating Review applications such as waterproof labels, e-passports and identification cards. 72 Eleven-Year Digest 73 PPG Shareholder Information COMMODITY CHEMICALS CHLOR-ALKALI AND DERIVATIVES. A world leader in the production of chlorine, caustic soda and related chemicals for use in chemical manufacturing, pulp and paper production, water treatment, plastics production, agricultural products and many other applications. ON THE COVER GLASS AUTOMOTIVE OEM GLASS. Produces original equipment windshields, rear and TOP: With its acquisition of Ameron’s side windows and related assemblies for auto and truck manufacturers. Performance Coatings and Finishes business, PPG has broadened its AUTOMOTIVE REPLACEMENT GLASS AND SERVICES. Fabricates and distributes portfolio of protective and marine replacement windshields and auto glass. Provides software and services coatings. linking the automotive aftermarket, insurance and fleet industries. Includes MIDDLE: PPG’s performance glazings LYNX Services claims-management solutions and PPG PROSTARS retail auto business is a leader in the commercial glass marketing alliance. construction market. FIBER GLASS. Maker of fiber glass yarn for use in electronics, especially BOTTOM: Five-time World Cup printed circuit boards, and specialty materials, such as insect screening, Champion mountain biker Brian Lopes rides with Oakley’s Thump Pro™ medical casting and filtration fabrics. Also maker of fiber glass chopped eyewear, which combines cutting-edge strands, rovings and mat products used as reinforcing agents in thermoset digital music technology and Oakley® and thermoplastic composite applications. Activated by Transitions™ lenses featuring photochromic technology PERFORMANCE GLAZINGS. Produces glass that is fabricated into products from Transitions Optical, Inc., primarily for commercial construction and residential markets, as well as the a PPG joint venture company. appliance, mirror and transportation industries. FINANCIAL HIGHLIGHTS Average shares outstanding and all dollar amounts except per share data are in millions. 2006For the Year 2006 Change 2005 Net sales $ 11,037 8% $ 10,201 Net income* $ 711 19% $ 596 Earnings per share*‡ $ 4.27 22% $ 3.49 Dividends per share $ 1.91 3% $ 1.86 Return on average capital 16.6% 20% 13.8% Operating cash flow $ 1,130 6% $ 1,065 Capital spending — including acquisitions $ 774 104% $ 379 Research and development $ 334 3% $ 325 Average shares outstanding‡ 166.5 — 3% 170.9 Average number of employees 32,200 5% 30,800 At Year End Working capital $ 1,805 8% $ 1,670 Shareholders’ equity $ 3,234 6% $ 3,053 Shareholders (at Jan. 31, 2007 and 2006) 22,571 — 3% 23,389 * Includes in 2006 aftertax charges totaling $172 million, or $1.03 per share, for estimated environmental remediation costs at sites in New Jersey and Louisiana, legal settlements, business restructuring and the net increase in the value of the company’s obligations under its asbestos settlement agreement, and aftertax earnings of $24 million, or 14 cents per share, for insurance recoveries. Included in 2005 aftertax charges totaling $180 million, or $1.05 per share, for legal settlements, net of insurance recoveries, direct hurricane costs, asset impairment, debt refinancing and the net increase in the value of the company’s obligation under its asbestos settlement agreement. ‡Assumes dilution. NET SALES NET INCOME EARNINGS DIVIDENDS (Millions of Dollars) (Millions of Dollars) PER SHARE‡ (Dollars) PER SHARE (Dollars) 1.91 11,037 1.86 711 1.79 10,201 683 4.27 1.70 1.73 9,513 3.95 8,756 596 3.49 8,067 494 2.89 (69)** (.41)** 02 03 04 05 06 02 03 04 05 06 02 03 04 05 06 02 03 04 05 06 **Includes aftertax charge of $484 million, or $2.85 a share, representing the initial asbestos charge. ‡Assumes dilution. 1 Charles E. Bunch Chairman and Chief Executive Officer But what is, and will remain, critical for PPG is not so much our ability to acquire businesses, but more our ability to integrate them in a manner that furthers “our profi table growth and enhances the value we provide to customers and shareholders. Leveraging our acquisitions to further drive growth is a top priority for PPG in 2007. 2 ” LETTER FROM THE CHAIRMAN y most measures, 2006 was an outstanding year for PPG. We reached many new heights, and worked Bto position the company for even greater achievements in the coming years. Our sales this year grew 8 percent, reaching a level the company has never seen before, topping $11 billion. This is the fourth consecutive year we delivered sales growth between 7 and 9 percent. Earnings in 2006 were $711 million, or $4.27 per share. Our earnings in the previous year were $596 million, or $3.49 per share. In 2006, PPG demonstrated solid execution of its growth strategy. In fact, we realized organic sales growth in many of our businesses and in all regions. In addition, this was one of the most acquisitive years in the company’s history. The acquisitions we made this year represented approximately half of our sales growth. In 2007, we expect these acquisitions to add between $700 and $800 million in sales annually and to return meaningful operating earnings. All of which is well and good. But what is, and will remain, critical for PPG is not so much our ability to acquire businesses, but more our ability to integrate them in a manner that furthers our profi table growth and enhances the value we provide to customers and shareholders. Leveraging our acquisitions to further drive growth is a top priority for PPG in 2007. 2006 presented us with some signifi cant challenges. Energy costs continued to be stubbornly high and volatile, and coatings raw material costs continued to escalate. In addition, we continue to manage legacy issues common to companies of our age and heritage. I’m proud to say, however, that PPG continues to be successful in spite of these obstacles through our strong tradition of operational excellence, combined with decisive steps we have taken in many of our businesses. PPG’s 2006 fi nancial results demonstrate our ability to consistently deliver profi table growth. In addition, our pursuit of growth is laying the foundation for accelerated earnings and, most importantly, increased shareholder value in the future. What’s more, beginning with this report, PPG is providing its results in fi ve business segments, as opposed to our traditional three, in order to provide enhanced clarity about