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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 or 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended June 30, 2003

Commission File Number 1-1687

PPG INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

(412) 434-3131

(Registrant’s telephone number, including area code)

As of June 30, 2003, 169,731,960 shares of the Registrant’s common stock, par value $1.66-2/3 per share, were outstanding.

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 whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes  x    No  ¨

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PPG INDUSTRIES, INC. AND SUBSIDIARIES

INDEX

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PART I. FINANCIAL INFORMATION

PPG INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Statement of Income (Loss) (Unaudited)

(Millions, except per share amounts)

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

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PPG INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Balance Sheet (Unaudited)

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

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PPG INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Statement of Cash Flows (Unaudited)

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

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PPG INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Condensed Financial Statements (Unaudited)

1. Financial Statements

The condensed financial statements included herein are unaudited. In the opinion of management, these statements include all adjustments, consisting only of normal, recurring adjustments necessary for a fair presentation of the financial position of PPG Industries, Inc. and subsidiaries (the Company or PPG) at June 30, 2003, and the results of their operations for the three and six month periods ended June 30, 2003 and 2002 and their cash flows for the six month periods then ended. These condensed financial statements should be read in conjunction with the financial statements and notes included in PPG’s Annual Report on Form 10-K for the year ended December 31, 2002.

The results of operations for the six months ended June 30, 2003 are not necessarily indicative of the results to be expected for the full year.

Certain prior period amounts have been reclassified to be consistent with the current period presentation.

2. Newly Adopted Accounting Standards

Effective January 1, 2003, PPG adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 143, “Accounting for 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. This standard requires the Company to recognize asset retirement obligations in the period in which they are incurred, if a reasonable estimate of fair value can be made. 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.

Adoption of this new standard on January 1, 2003 resulted in an increase in noncurrent assets, current liabilities and noncurrent liabilities of $4 million, $1 million and $9 million, respectively, and a cumulative effect adjustment reducing net income by $6 million, or $0.03 a share – assuming dilution. The provisions of this standard did not have a material impact on the results of operations for the six months ended June 30, 2003 and will not have a material effect on the Company’s future results of operations or financial condition.

Effective January 1, 2002, PPG adopted the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets.” This standard changes the accounting for goodwill and certain other intangible assets from an amortization method to an impairment only approach. Adoption of this new standard on January 1, 2002 resulted in a cumulative effect of an accounting change reducing net income by $9 million aftertax, or $0.05 a share – assuming dilution, to reflect an impairment in the carrying value of certain trademarks within the coatings segment.

3. Other New Accounting Standards

In November 2002, the Financial Accounting Standards Board (FASB) issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” Interpretation No. 45 requires the recognition of

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liabilities for guarantees that were issued or modified subsequent to December 31, 2002. The liabilities should reflect the fair value, at inception, of the guarantors’ obligations to stand ready to perform, in the event that the specified triggering events or conditions occur. The provisions of this interpretation will not have a material effect on PPG’s future results of operations or financial condition.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities.” Interpretation No. 46 requires unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse the risks and rewards of ownership among their owners and other parties involved. The provisions of Interpretation No. 46 were applicable immediately to all variable interest entities created after January 31, 2003 and variable interest entities in which an enterprise obtains an interest after that date, and for variable interest entities created before this date, the provisions are effective July 1, 2003. We continue to evaluate the provisions of this interpretation; however, we do not believe they will have a material effect on PPG’s future results of operations or financial condition.

4. Earnings (Loss) Per Common Share

The following table presents the earnings (loss) per common share calculations for the three and six months ended June 30, 2003 and 2002.

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5. Business Restructuring

In conjunction with our continued cost reduction focus, the Company recorded a charge of $6 million for restructuring actions initiated in 2003, related to our coatings and glass segments. This charge is for severance benefits for 93 employees. As of June 30, 2003, $2 million of this reserve has been paid. The remaining reserve of $4 million is to be spent during the next year.

In the first quarter of 2002, the Company recorded a charge of $81 million for restructuring and other related activities comprised of $66 million for severance and other costs and $15 million for asset dispositions. During the second quarter of 2003, $2 million of the initial $81 million charge, primarily related to the coatings segment, was reversed to income. The workforce reductions covered by this charge are substantially complete; however, as to a group of approximately 75 employees in Europe, their terminations have been concluded under a different social plan than was assumed when the reserve was recorded. Under the terms of this plan, severance payments of approximately $9 million will be paid to these individuals over a period of approximately 5 years from June 30, 2003. It is expected that the remaining reserve will be paid by December 2003.

6. Inventories

Inventories at June 30, 2003 and December 31, 2002 are detailed below.

Most domestic and certain foreign inventories are valued using the last-in, first-out method. If the first-in, first-out method had been used, inventories would have been $164 million and $158 million higher at June 30, 2003 and December 31, 2002, respectively.

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7. Goodwill and Other Identifiable Intangible Assets

The change in the carrying amount of goodwill attributable to each business segment for the six months ended June 30, 2003 was as follows:

The carrying amount of acquired trademarks with indefinite lives as of June 30, 2003 and December 31, 2002 totaled $144 million.

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

Aggregate amortization expense for the three and six months ended June 30, 2003 related to these identifiable intangible assets, was $8 million and $15 million, respectively, and $9 million and $17 million, respectively, for the three and six months ended June 30, 2002. At June 30, 2003, estimated future amortization expense of identifiable intangible assets is as follows: $16 million for the remaining two quarters of 2003 and $30 million, $29 million, $28 million, $27 million and $26 million in 2004, 2005, 2006, 2007 and 2008, respectively.

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8. Business Segment Information

Business segment net sales and operating income (loss) for the three and six months ended June 30, 2003 and 2002 were as follows:

Includes for the six months ended June 30, 2002, a pretax charge of $81 million for restructuring and other related activities, including severance and other costs of $66 million and asset dispositions of $15 million. See Note 5, “Business Restructuring,” for amounts by business segment. The three months and six months ended June 30, 2002 also include a reversal of $4 million of coatings restructuring reserve originally recorded in 2001.

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9. Comprehensive Income (Loss)

Total comprehensive income (loss) for the three and six months ended June 30, 2003 and 2002 was as follows:

PPG uses derivative instruments to manage its exposure to fluctuating natural gas prices through the use of natural gas swap and option contracts. PPG also uses forward currency contracts as hedges against its exposure to variability in exchange rates on short-term intercompany borrowings denominated in foreign currencies and to translation risk and interest rate swaps to hedge its exposure to changing interest rates. The Company recognizes all derivative instruments as either assets or liabilities at fair value. The unrealized change in the fair value of certain of these instruments is deferred in accumulated other comprehensive income (loss) and subsequently recognized, when realized, by reclassification of the gain or loss into cost of sales, as natural gas is purchased, and into other earnings or charges, as foreign exchange gains and losses are recognized on the related intercompany borrowings.

During the first six months of 2003, other comprehensive income included a net loss due to derivatives of $3 million, net of tax. This loss was comprised of realized gains of $19 million and unrealized gains of $16 million. The realized gains related to the settlement during the period of natural gas and forward currency contracts. The unrealized gains during the period related primarily to the changes in fair value of the natural gas contracts outstanding as of June 30, 2003.

During the first six months of 2002, other comprehensive income included a net gain due to derivatives of $19 million, net of tax. This gain was comprised of realized losses of $8 million and unrealized gains of $11 million. The realized losses related to the settlement during the period of natural gas and forward currency contracts. The unrealized gains during the period related primarily to the changes in fair value of the natural gas contracts outstanding as of June 30, 2002.

In November 2002, PPG entered into a one-year 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 13, “Commitments and Contingent Liabilities.” In accordance with the terms of this instrument, the bank purchased 504,900 shares of PPG stock on the open market at a cost of $24 million through December 31, 2002 and during the first quarter of 2003 the bank purchased an additional 400,000 shares at a cost of $19 million. For the three and six months ended June 30, 2003, PPG recorded income of $5 million and $1 million, respectively, for the change in fair value of this instrument,

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which is reflected in “Asbestos settlement – net” in the condensed statement of income. The fair value of this instrument as of June 30, 2003 was a current asset of $2 million.

11. Cash Flow Information

Cash payments for interest were $58 million and $68 million for the six months ended June 30, 2003 and 2002, respectively. Net cash payments for income taxes for the six months ended June 30, 2003 and 2002 were $88 million and $78 million, respectively.

12. Stock-Based Compensation

A portion of the amounts paid under the Company’s total shareholder return plans and its incentive compensation and management award plans may be paid in PPG common stock. Total compensation cost recognized as expense related to these plans was $14 million and $28 million for the three and six months ended June 30, 2003, respectively, and $16 million and $27 million for the three and six months ended June 30, 2002, respectively.

PPG has two stock option plans, the PPG Stock Option Plan and the Challenge 2000 Stock Option Plan. In accordance with Accounting Principles Board Opinion (APB) No. 25, “Accounting for Stock Issued to Employees,” no compensation cost for PPG’s stock option plans has been recognized in the accompanying condensed financial statements. Had compensation cost for PPG’s stock option plans been determined based upon the estimated fair value at the grant date consistent with the methodology prescribed in SFAS No. 123, “Accounting for Stock-Based Compensation,” net income (loss), earnings (loss) per common share and earnings (loss) per common share – assuming dilution would have been as follows:

13. Commitments and Contingent Liabilities

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 product liability, contract, patent, environmental, 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

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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, 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 in a number of antitrust lawsuits, including suits alleging that PPG acted with competitors to fix prices and allocate markets in the automotive refinish industry and a class action relating to certain glass products. The automotive refinish claims have been consolidated, but the proceedings are still at an early stage. All of the initial defendants in the glass class action antitrust case other than PPG, have settled. On May 29, 2003, the federal district 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 have appealed that order to the federal circuit court of appeals. PPG believes it has meritorious defenses to these antitrust claims.

The Company has been a defendant since April 1994 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 February 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 has appealed that judgment and believes it has meritorious defenses to the plaintiff’s claims and has reasonable prospects of prevailing on appeal.

For over thirty years, PPG has been a defendant in lawsuits involving claims alleging personal injury from exposure to asbestos. At June 30, 2003, PPG was one of many defendants in numerous asbestos-related lawsuits involving approximately 116,000 claims. 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 April 16, 2000, PC filed for Chapter 11 Bankruptcy in the Federal Bankruptcy Court in Pittsburgh, Pennsylvania. Accordingly, in the first quarter of 2000, PPG recorded an aftertax 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

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PC bankruptcy (ACC), 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 April 30, 2003. Other parties with an interest in the bankruptcy proceeding may file objections to the disclosure statement or the plan of reorganization. After considering any objections at a hearing, the Bankruptcy Court, if it approves the disclosure statement, would permit the plan of reorganization and the disclosure statement to be sent to PC’s creditors for voting. 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. Assuming that the plan receives the requisite votes, the judge would conduct another 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 (Trust) to be established as part of the plan. At that hearing, other parties in interest could raise objections to the plan. Following that hearing, the Bankruptcy Court would enter a confirmation order if all requirements to confirm a plan of reorganization under the Bankruptcy Code, including the requirements described above, have been satisfied; this order may be appealed to the District Court. (The District Court may join the Bankruptcy Court in the confirmation order, in which case an appeal to the District Court would not be necessary.) Assuming that the District Court approves the confirmation order, interested parties could appeal the order to the U.S. Circuit Court and subsequently to the U.S. Supreme Court. The PPG Settlement Arrangement would not become effective until 30 days after the plan of reorganization was finally approved by an appropriate court order that was no longer subject to appeal (the “Effective Date”).

If the PC plan of reorganization incorporating the terms of the PPG Settlement Arrangement were approved by the Bankruptcy Court and all legal requirements under the Bankruptcy Code or otherwise were satisfied, 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 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 or its subsidiaries for contribution, indemnification or other recovery. All such claims would have to 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. Approximately 9,000 of the 116,000 claims pending against PPG and its subsidiaries are premises claims. Many of PPG’s premises claims have been resolved without payment from PPG. To date, PPG has paid about $7 million to settle approximately 1,100 premises claims, virtually all of which has been covered by PPG’s

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insurers. There are no property damage claims pending against PPG or its subsidiaries. PPG believes that it has adequate insurance for the asbestos claims not covered by the 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.

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. Under the payment schedule, the amounts due June 30, 2003 and 2004 are $75 million and $98 million, respectively. 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.

In the second quarter of 2002, PPG recorded a pretax charge of $772 million, or $495 million aftertax, reflecting the estimated cost of the PPG Settlement Arrangement. That amount included the net present value, 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 scheduled to be made to the Trust on June 30, 2003, were reflected in the current liability for PPG’s asbestos settlement in the accompanying balance sheet. The net present value of the remaining payments of $566 million was recorded in the noncurrent liability for asbestos settlement. During the third and fourth quarters of 2002, income was recognized and the current liability for PPG’s asbestos settlement was reduced by $16 million, reflecting the decline in the fair value from June 30, 2002 to December 31, 2002 of the shares of PPG common stock which are to be transferred to the asbestos settlement trust. In addition, a change in the fair value of the related equity forward instrument (see Note 10, “Derivative Financial Instruments”) reduced PPG’s asbestos settlement charge by $1 million.

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For the three and six months ended June 30, 2003, PPG recorded a pretax charge of $11 million and $16 million, respectively, related to the change in the current value of its asbestos settlement obligation. This includes an increase in the net present value of the payments to be made to the Trust, which increased the noncurrent asbestos settlement liability by $8 million and $16 million, for the three and six months ended June 30, 2003, respectively. A similar increase will occur each quarter in 2003 and 2004. It also includes the change in fair value of the PPG stock which increased the PPG’s current asbestos settlement liability by $8 million and $1 million for the three and six months ended June 30, 2003, respectively, and the change in fair value of the related equity forward instrument which was income of $5 million and $1 million for the three and the six months ended June 30, 2003, respectively (see Note 10, “Derivative Financial Instruments”). Additionally, the payment due June 30, 2004 of $98 million has been reclassified to the current portion of the asbestos settlement liability in the second quarter of 2003.

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 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 January 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 June 30, 2003 and December 31, 2002, PPG had reserves for environmental contingencies totaling $81 million and $87 million, respectively. Pretax charges against income for environmental remediation costs for the three and six months ended June 30, 2003 totaled $0 million and $2 million, respectively, and $5 million and $8 million, respectively, for the three and six months ended June 30, 2002, and are included in “Other – net” in the accompanying condensed statement of income. Cash outlays related to such environmental remediation for the six months ended June 30, 2003 and 2002 aggregated $8 million and $11 million, respectively.

Management anticipates that the resolution of the Company’s environmental contingencies will occur over an extended period of time. Over the past 10 years the pretax charges against income have ranged between $10 million and $49 million per year. We anticipate that charges against income in 2003 will be within that range. It is possible, however, that technological, regulatory and enforcement developments, the results of environmental studies and other factors could alter this expectation. In management’s opinion, the Company operates in an environmentally sound manner and the outcome of the Company’s environmental contingencies will not have a material effect on PPG’s financial position or liquidity.

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In addition to the amounts currently reserved, the Company may be subject to loss contingencies related to environmental matters estimated to be as much as $200 million to $400 million, which range is unchanged from the prior year end. Such unreserved losses are reasonably possible but are not currently considered to be probable of occurrence. The Company’s environmental contingencies are expected to be resolved over an extended period of time.

Although the unreserved exposure to future loss relates to all sites, a significant portion of such exposure involves three operating plant sites in our chemicals segment. Initial remedial actions are occurring at these sites. Studies to determine the nature of the contamination are reaching completion and the need for additional remedial actions, if any, is presently being evaluated. The loss contingencies related to the remaining portion of such unreserved exposure include significant unresolved issues such as the nature and extent of contamination, if any, at these other sites and the methods that may have to be employed should remediation be required. The most significant of these sites is the Calcasieu River estuary, near our Lake Charles, La. chemicals plant. The U.S. Environmental Protection Agency (USEPA) has been investigating contamination levels in the Calcasieu River estuary. During 2002, the USEPA issued draft Human Health and Ecological Risk Assessments indicating that elevated levels of risk exist in the estuary. A draft Remedial Investigation report was issued May 2, 2003. It is expected that USEPA could issue final risk assessments and a final Remedial Investigation report later in 2003. PPG will hold discussions with the Louisiana Department of Environmental Quality and other parties concerning what role PPG would have in funding a Feasibility Study.

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 voluntary remediation programs, also adds to the present uncertainties with regard to the ultimate resolution of this unreserved exposure to future loss. The Company’s assessment of the 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.

In June 2003, our partner in a fiber glass joint venture in South America 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 is currently evaluating its options with respect to this venture, which include its sale or liquidation of the venture. Should liquidation occur, PPG’s exposure to loss would be limited to $12 million, which includes a combination of the Company’s investment, outstanding receivables and a loan guarantee related to this venture.

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Performance in Second Quarter of 2003 Compared to Second Quarter of 2002

Performance Overview

Sales increased 8% for the second quarter of 2003 to $2.30 billion, compared to $2.13 billion for the second quarter of 2002. The increase in sales was due to a 1% increase in volumes in our glass and chemicals segments, a 2% improvement in selling prices in our chemicals segment and a 5% increase due to the positive effects of foreign currency translation, primarily from our European operations.

The gross profit percentage decreased to 37.3% for the second quarter of 2003 compared to 37.9% for the second quarter of 2002. Increased energy costs in our glass and chemicals segments, inflationary cost increases, higher pension and postretirement medical costs across all of our business segments along with an unfavorable sales mix in our glass segment were offset by higher selling prices in our chemicals segment and the benefits realized from improved manufacturing efficiencies in our coatings and glass segments.

Net income and earnings per share – assuming dilution for the second quarter of 2003 were $152 million and $0.89, respectively, compared to a net loss of $345 million, or a loss per share – assuming dilution of $2.03 for the same quarter in 2002. Net income for the second quarter of 2003 included aftertax charges of $7 million, or 4 cents a share, to reflect the net change in the current value of the Company’s obligation under the asbestos settlement agreement, as discussed in Note 13, “Commitments and Contingent Liabilities,” to the accompanying condensed financial statements, and $2 million, or 1 cent a share, for restructuring costs, as discussed in Note 5, “Business Restructuring,” to the accompanying condensed financial statements. The net loss for the second quarter of 2002 included an aftertax charge of $495 million, or $2.92 a share, for the asbestos settlement, as discussed in Note 13, and income of $3 million, or 2 cents a share, related to a reversal of a portion of the coatings restructuring reserve recorded in 2001.

The increase in net income for the second quarter of 2003 compared to the same quarter in 2002 is primarily attributable to the lack of an initial asbestos settlement charge. Additionally, higher selling prices in our chemicals segment, improved manufacturing efficiencies and lower overhead costs in our coatings and glass segments and the favorable effects of foreign currency translation, primarily from our European operations, contributed to the increase in net income for the second quarter of 2003 compared to the same quarter in 2002. Higher energy costs in our glass and chemicals segments, higher restructuring costs primarily in our coatings and glass segments, inflationary cost increases and an increase in pension and postretirement medical costs across all of our business segments reduced these increases.

Performance of Business Segments

Coatings sales increased 5% to $1.25 billion compared to $1.19 billion for the second quarter of 2002. The sales increase resulted from a 6% increase due to the positive effects of foreign currency translation, principally from our European operations, offset by a combined 1% decrease in lower selling prices and sales volumes. Operating income was $202 million for the second quarter of 2003 compared to $211 million for the same quarter in 2002. The decrease in operating income is attributable to lower selling prices and sales volumes described above, higher restructuring costs, inflationary cost increases and higher pension and postretirement medical costs. These decreases were offset by improved manufacturing efficiencies, lower

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overhead and environmental remediation costs and the favorable effects of foreign currency translation.

Glass sales increased 4% to $574 million compared to $554 million for the second quarter of 2002. The increase reflects the combination of a 4% increase in sales volumes, principally from our automotive original equipment and automotive replacement glass businesses, and a 2% increase due to the positive effects of foreign currency translation, primarily from our European fiber glass operations. These sales increases were offset by a 2% decline in selling prices from our automotive replacement glass and fiber glass businesses. Operating income was $28 million for the second quarter of 2003 compared to $49 million for the same quarter in 2002. The decrease in operating income is attributable to lower selling prices, a shift in sales mix to lower margin products, higher energy costs and higher pension and postretirement medical costs. Factors that caused 2003 earnings to increase were improved manufacturing efficiencies, lower overhead costs and the favorable effects of foreign currency translation.

Chemicals sales increased 22% to $481 million compared to $393 million for the second quarter of 2002. The increase reflects a 17% increase in selling prices for our commodity products, a 1% increase in sales due to higher volumes for our optical and fine chemical products and a 4% increase due to the positive effects of foreign currency translation. Operating income was $70 million for the second quarter of 2003 compared to $22 million for the same quarter in 2002. The increase in operating income is attributable to the combination of higher selling prices and sales volumes described above and the negative impact of higher energy costs, higher pension and postretirement medical costs and inflationary cost increases.

Performance in the First Six Months of 2003 Compared to the First Six Months of 2002

Performance Overview

Sales increased 9% for the first six months of 2003 to $4.38 billion compared to $4.01 billion for the first six months of 2002. The increase in sales is attributable to a 2% increase in volumes across all of our business segments, 3% due to improvements in selling prices in our chemicals segment, net of lower selling prices in our glass segment, and a 4% increase due to the positive effects of foreign currency translation, primarily from our European operations.

The gross profit decreased to 36.3% for the first six months of 2003 compared to 37.3% for the first six months of 2002. The gross profit percentage was reduced by higher energy costs in our glass and chemicals segments, other inflationary cost increases, higher pension and postretirement medical costs across all of our businesses and an unfavorable sales mix in our glass segment. Factors increasing the gross margin percentage were higher selling prices in our chemicals segment and the benefits realized from improved manufacturing efficiencies in our coatings and glass segments.

Net income and earnings per share – assuming dilution, for the first six months of 2003 were $230 million and $1.35, respectively, compared to a net loss of $311 million or a loss per share – assuming dilution of $1.83 for the first six months of 2002. Net income for the first six months of 2003 included aftertax charges of $10 million, or 6 cents a share, to reflect the net change in the current value of the Company’s obligation under the asbestos settlement agreement, as discussed in Note 13, $6 million, or 3 cents a share, for the cumulative effect of an accounting change and $2 million, or 1 cent a share, for restructuring, as discussed in Note 5. The net loss for the first six months of 2002 included aftertax charges of $495 million, or $2.92 a share, for the asbestos settlement, as discussed in Note 13, $52 million, or $0.31 a share, for restructuring and other related activities, as discussed in Note 5, and $9 million, or 5 cents a share, for the cumulative effect of an accounting change.

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The increase in net income for the first six months of 2003 compared to the first six months of 2002 is primarily attributable to the lack of an initial asbestos charge. Additionally, higher selling prices and sales volumes in our chemicals segment, lower restructuring costs in 2003, lower overhead costs and improved manufacturing efficiencies in our coatings and glass segments, lower interest expense due to lower debt levels in 2003 and the favorable effects of foreign currency translation, primarily from our European operations, contributed to the increase in net income for the first six months of 2003 compared to the first six months of 2002. Factors that lowered year over year net earnings were higher energy costs in our glass and chemicals segments, inflationary cost increases and an increase in pension and postretirement medical costs across all of our business segments.

Performance of Business Segments

Coatings sales increased 6% to $2.37 billion compared to $2.24 billion for the first six months of 2002. The sales increase resulted from the combination of a 5% increase due to the positive effects of foreign currency translation, principally from our European operations, and a 1% increase from improved volumes in our architectural, aerospace and industrial businesses. Operating income was $341 million for the first six months of 2003 compared to $282 million for the same period in 2002. The increase in operating income is attributable to lower restructuring costs in 2003, improved manufacturing efficiencies, lower overhead costs and environmental remediation expenses and the favorable effects of foreign currency translation, however, inflationary cost increases and higher pension and postretirement medical costs lowered the increase.

Glass sales increased 5% to $1.09 billion compared to $1.04 billion for the first six months of 2002. The increase reflects a 4% increase in sales volumes, principally from our automotive original equipment and automotive replacement glass businesses, and a 2% increase due to the positive effects of foreign currency translation from our European fiber glass operations. These sales increases were offset by a 1% decline in sales due to lower selling prices, primarily in our automotive replacement glass and fiber glass businesses. Operating income was $34 million for the first six months of 2003 compared to $69 million for the same period in 2002. The decrease in operating income is attributable to lower selling prices described above, a shift in sales mix to lower margin products, higher energy costs and higher pension and postretirement medical costs. Improved manufacturing efficiencies, lower overhead costs and the favorable effects of foreign currency translation were factors that increased earnings in 2003.

Chemicals sales increased 25% to $912 million compared to $728 million for the first six months of 2002. The sales increase reflects a 17% increase due to higher selling prices for our commodity products, a 5% improvement in sales volumes for our optical, silica and fine chemical products and a 3% increase due to the positive effects of foreign currency translation. Operating income was $116 million for the first six months of 2003 compared to $49 million for the same period in 2002. The factors increasing operating income are higher selling prices and sales volumes described above and the favorable effects of foreign currency translation. Other factors that lowered earnings were higher energy costs, higher pension and postretirement medical costs, inflationary cost increases and higher selling and advertising costs in our optical business.

Other Factors

The Company’s pretax earnings for the first six months of 2003 included net periodic pension expense of $86 million compared to $21 million for the same period in 2002. These amounts are included in “Cost of sales,” “Selling, general and administrative” and “Research and development” in the accompanying condensed statement of income. This trend will continue for the remainder of 2003. The increase in pension costs is due primarily to a decrease in the market value of pension plan assets through the end of 2002, a reduction in the expected return

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on plan assets assumption for 2003 and the amortization of accumulated actuarial losses. In addition, the cost of other postretirement benefits during the first six months of 2003 is $10 million higher compared to similar amounts for the first six months of 2002 due to higher medical costs.

At December 31, 2002, the fair market value of our pension plan assets was less than the accumulated benefit obligation (ABO) resulting in a minimum pension liability that reduced shareholders’ equity by $775 million. Based on our current forecast of the ABO at the end of 2003, assuming a discount rate of 6.0%, and assuming the fair market value of our pension plan assets at year end will be equal to their value as of June 30, 2003, we anticipate that equity will be further reduced by approximately $100 million due to an increase in the additional minimum pension liability. Additionally, based on our current forecast, we expect pension and postretirement medical expense for 2004 to be approximately $35 million higher than in 2003.

The tax rate on earnings, excluding charges for restructuring and the asbestos settlement, in the first six months of 2003 and 2002 was 36%. However, the tax benefit of the restructuring charges and the asbestos settlement, resulted in an overall effective tax rate of 35.7% and 35.2% for the first six months of 2003 and 2002, respectively.

Amounts presented as “Selling, general and administrative” in the accompanying condensed 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 between our gross profit and that of other companies.

The decrease in short-term debt during the first six months of 2003 is due primarily to the repayment of various non-U.S. debt obligations.

New Accounting Standards

Note 2, “Newly Adopted Accounting Standards,” to the accompanying condensed financial statements describes and quantifies the impact of the Company’s adoption of the provisions of the Financial Accounting Standards Board’s (FASB) new standards on the accounting for asset retirement obligations, effective January 1, 2003, and the accounting for goodwill and other intangible assets, effective January 1, 2002. See Note 3, “Other New Accounting Standards,” to the accompanying condensed financial statements for a description of the FASB’s Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” and Interpretation No. 46, “Consolidation of Variable Interest Entities.”

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 Note 13, “Commitments and Contingent Liabilities,” to the accompanying condensed financial statements for an expanded description of certain of these lawsuits, including the proposed PPG Settlement Arrangement for asbestos claims announced on May 14, 2002. As discussed in Note 13, 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 13 does not become effective, will not have a material effect on

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PPG’s consolidated financial position or liquidity; however, such outcome may be material to the results of operations of any particular period in which the 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 June 30, 2003 and December 31, 2002, PPG had reserves for environmental contingencies totaling $81 million and $87 million, respectively. Pretax charges against income for environmental remediation costs for the three and six months ended June 30, 2003 totaled $0 million and $2 million, respectively, and $5 million and $8 million, respectively, for the three and six months ended June 30, 2002, and are included in “Other – net” in the accompanying condensed statement of income. Cash outlays related to such environmental remediation for the six months ended June 30, 2003 and 2002 aggregated $8 million and $11 million, respectively.

Management anticipates that the resolution of the Company’s environmental contingencies will occur over an extended period of time. Over the past 10 years the pretax charges against income have ranged between $10 million and $49 million per year. We anticipate that charges against income in 2003 will be within that range. It is possible, however, that technological, regulatory and enforcement developments, the results of environmental studies and other factors could alter this expectation. In management’s opinion, the Company operates in an environmentally sound manner and the outcome of the Company’s environmental contingencies will not have a material effect on PPG’s financial position or liquidity.

In addition to the amounts currently reserved, the Company may be subject to loss contingencies related to environmental matters estimated to be as much as $200 million to $400 million, which range is unchanged from the prior year end. Such unreserved losses are reasonably possible but are not currently considered to be probable of occurrence. The Company’s environmental contingencies are expected to be resolved over an extended period of time.

Although the unreserved exposure to future loss relates to all sites, a significant portion of such exposure involves three operating plant sites in our chemicals segment. Initial remedial actions are occurring at these sites. Studies to determine the nature of the contamination are reaching completion and the need for additional remedial actions, if any, is presently being evaluated. The loss contingencies related to the remaining portion of such unreserved exposure include significant unresolved issues such as the nature and extent of contamination, if any, at these other sites and the methods that may have to be employed should remediation be required. The most significant of these sites is the Calcasieu River estuary, near our Lake Charles, La. chemicals plant. The U.S. Environmental Protection Agency (USEPA) has been investigating contamination levels in the Calcasieu River estuary. During 2002, the USEPA issued draft Human Health and Ecological Risk Assessments indicating that elevated levels of risk exist in the estuary. A draft Remedial Investigation report was issued May 2, 2003. It is expected that USEPA could issue final risk assessments and a final Remedial Investigation report later in 2003. PPG will hold discussions with the Louisiana Department of Environmental Quality and other parties concerning what role PPG would have in funding a Feasibility Study.

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.

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The impact of evolving programs, such as natural resource damage claims, industrial site reuse initiatives and state voluntary remediation programs, also adds to the present uncertainties with regard to the ultimate resolution of this unreserved exposure to future loss. The Company’s assessment of the 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.

In June 2003, our partner in a fiber glass joint venture in South America 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 is currently evaluating its options with respect to this venture, which include its sale or liquidation of the venture. Should liquidation occur, PPG’s exposure to loss would be limited to $12 million, which includes a combination of the Company’s investment, outstanding receivables and a loan guarantee related to this venture.

Financial Resources

Cash from operating activities for the six months ended June 30, 2003 was $412 million compared with $361 million for the comparable period of 2002. Cash from operations and the Company’s debt capacity have been and are expected to continue to be sufficient to fund capital spending, dividend payments, contributions to pension plans, amounts due under the asbestos settlement and operating requirements.

As a result of negative returns on our pension fund assets over the past 3 years, the funded status of our defined benefit pension plans declined to a shortfall of $689 million on a projected benefit obligation basis at December 31, 2002; nevertheless, our current estimate under existing U.S. pension funding regulations is that with available funding credits there will be no mandatory pension funding requirement until 2006 at the earliest. The Company, however, may choose to make a voluntary contribution.

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 Form 10-Q 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. Among these factors are increasing price and product competition by foreign and domestic competitors, fluctuations in the 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 those rates, and the unpredictability of possible future litigation, including litigation that could result if PPG’s Settlement Agreement for asbestos claims does not become effective. Further, 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.

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Unlisted factors may present significant additional obstacles to the realization of forward-looking statements.

The consequences of material differences in the results as compared to 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, operations or liquidity.

PPG had non-US dollar denominated debt of $200 million as of June 30, 2003 and $317 million as of December 31, 2002. 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 $30 million as of June 30, 2003.

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PART II. OTHER INFORMATION