Company Quick10K Filing
PPG Industries
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 238 $27,531
10-K 2020-02-20 Annual: 2019-12-31
10-Q 2019-07-19 Quarter: 2019-06-30
10-Q 2019-04-19 Quarter: 2019-03-31
10-K 2019-02-21 Annual: 2018-12-31
10-Q 2018-10-19 Quarter: 2018-09-30
10-Q 2018-07-20 Quarter: 2018-06-30
10-Q 2018-06-28 Quarter: 2018-03-31
10-K 2018-02-15 Annual: 2017-12-31
10-Q 2017-10-20 Quarter: 2017-09-30
10-Q 2017-07-21 Quarter: 2017-06-30
10-Q 2017-04-24 Quarter: 2017-03-31
10-K 2017-02-16 Annual: 2016-12-31
10-Q 2016-10-21 Quarter: 2016-09-30
10-Q 2016-07-22 Quarter: 2016-06-30
10-Q 2016-04-21 Quarter: 2016-03-31
10-K 2016-02-18 Annual: 2015-12-31
10-Q 2015-10-26 Quarter: 2015-09-30
10-Q 2015-07-27 Quarter: 2015-06-30
10-Q 2015-04-27 Quarter: 2015-03-31
10-K 2015-02-19 Annual: 2014-12-31
10-Q 2014-10-24 Quarter: 2014-09-30
10-Q 2014-07-23 Quarter: 2014-06-30
10-Q 2014-04-24 Quarter: 2014-03-31
10-K 2014-02-20 Annual: 2013-12-31
10-Q 2013-10-28 Quarter: 2013-09-30
10-Q 2013-07-29 Quarter: 2013-06-30
10-Q 2013-04-29 Quarter: 2013-03-31
10-K 2013-02-21 Annual: 2012-12-31
10-Q 2012-10-29 Quarter: 2012-09-30
10-Q 2012-07-30 Quarter: 2012-06-30
10-Q 2012-04-30 Quarter: 2012-03-31
10-K 2012-02-16 Annual: 2011-12-31
10-Q 2011-10-31 Quarter: 2011-09-30
10-Q 2011-08-01 Quarter: 2011-06-30
10-Q 2011-05-02 Quarter: 2011-03-31
10-K 2011-02-17 Annual: 2010-12-31
10-Q 2010-07-26 Quarter: 2010-06-30
10-Q 2010-04-26 Quarter: 2010-03-31
10-K 2010-02-18 Annual: 2009-12-31
8-K 2020-03-20 Amend Bylaw, Exhibits
8-K 2020-01-16 Earnings, Exhibits
8-K 2019-11-19 Officers
8-K 2019-08-30 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-08-15 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-08-06 Enter Agreement, Exhibits
8-K 2019-07-18 Earnings, Exhibits
8-K 2019-06-05 Exit Costs
8-K 2019-04-18 Earnings, Exhibits
8-K 2019-04-18 Officers, Shareholder Vote, Exhibits
8-K 2019-03-28 Officers
8-K 2019-01-17 Earnings, Regulation FD, Exhibits
8-K 2019-01-07 Officers
8-K 2018-10-18 Earnings, Exhibits
8-K 2018-10-08 Earnings, Exhibits
8-K 2018-07-19 Officers, Exhibits
8-K 2018-07-19 Earnings, Exhibits
8-K 2018-06-27 Earnings, Amendment, Exhibits
8-K 2018-05-16 Exhibits
8-K 2018-05-10 Amendment, Officers, Other Events, Exhibits
8-K 2018-04-23 Exit Costs
8-K 2018-04-19 Earnings, Exhibits
8-K 2018-04-19 Shareholder Vote
8-K 2018-02-28 Regulation FD, Exhibits
8-K 2018-02-27 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-01-18 Earnings, Exhibits
8-K 2018-01-04 Officers
PPG 2019-12-31
Part I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Part II
Item 5. Market for The Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Note 1, "Summary of Significant Accounting Policies" Under Item 8 of This Form 10-K Describes The Company's Recently Adopted Accounting Pronouncements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Part IV
Item 15. Exhibits, Financial Statement Schedules
Item 16. Form 10-K Summary
EX-4.9 ppg201910kex49-descrip.htm
EX-13.1 ppg201910kex131-market.htm
EX-13.2 ppg201910kex132-select.htm
EX-21 ppg201910kex21-subsidi.htm
EX-23 ppg201910kex23-consent.htm
EX-24 ppg201910kex24-powerof.htm
EX-31.1 ppg201910kex311-office.htm
EX-31.2 ppg201910kex312-office.htm
EX-32.1 ppg201910kex321-906cer.htm
EX-32.2 ppg201910kex322-906cer.htm

PPG Industries Earnings 2019-12-31

PPG 10K Annual Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
LYB 29,573 30,114 22,226 35,424 5,439 3,477 5,221 38,693 15% 7.4 12%
SCCO 26,664 16,494 9,624 7,126 3,472 1,574 2,885 32,960 49% 11.4 10%
GLW 25,627 27,329 14,195 11,721 4,383 1,243 2,679 30,881 37% 11.5 5%
NEM 31,565 40,763 18,279 8,821 541 2,300 4,350 35,534 6% 8.2 6%
PPG 27,721 18,064 12,709 15,119 4,932 1,227 2,014 32,171 33% 16.0 7%
TS 25,228 14,251 2,376 0 0 0 0 25,228 0%
RPM 7,990 5,596 4,250 5,577 2,243 304 524 9,796 40% 18.7 5%
AXTA 7,126 6,690 5,350 4,550 1,565 287 727 10,214 34% 14.0 4%
FOE 976 1,783 1,396 1,543 416 50 88 1,752 27% 19.9 3%

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 1-1687
ppga01.gif 
PPG INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania
  
25-0730780
(State or other jurisdiction of incorporation or organization)
  
(I.R.S. Employer Identification No.)
 
 
One PPG Place
Pittsburgh
Pennsylvania
  
15272
(Address of principal executive offices)
  
(Zip code)
 
 
Registrant’s telephone number, including area code:
  
412
434-3131
 Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on
which registered
Common Stock – Par Value $1.66 2/3
 
PPG
 
New York Stock Exchange
0.875% Notes due 2022
 
PPG 22
 
New York Stock Exchange
0.875% Notes due 2025
 
PPG 25
 
New York Stock Exchange
1.400% Notes due 2027
 
PPG 27
 
New York Stock Exchange
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      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  
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      No  
Indicate by checkmark whether the registrant has submitted electronically every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
 ☒
Accelerated filer
Non-accelerated filer
 ☐
Smaller reporting company
(Do not check if a smaller reporting company)
 
Emerging growth company
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Act).  Yes      No  
The aggregate market value of common stock held by non-affiliates as of June 30, 2019, was $27,547 million.
As of January 31, 2020, 235,755,928 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 $28,220 million.
 DOCUMENTS INCORPORATED BY REFERENCE
Document
  
Incorporated By
Reference In Part No.
Portions of PPG Industries, Inc. Proxy Statement for its 2020 Annual Meeting of Shareholders
  
III

2019 PPG ANNUAL REPORT AND FORM 10-K 5


PPG INDUSTRIES, INC.
AND CONSOLIDATED SUBSIDIARIES

As used in this report, the terms “PPG,” “Company,” “Registrant,” “we,” “us” and “our” refer to PPG Industries, Inc., and its subsidiaries, taken as a whole, unless the context indicates otherwise.

TABLE OF CONTENTS
 
 
 
Page
Part I
 
 
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 
 
 
Part II
 
 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
 
 
 
Part III
 
 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 
 
 
Part IV
 
 
Item 15.
Item 16.
 
 
 
Note on Incorporation by Reference
Throughout this report, various information and data are incorporated by reference from the Company’s 2019 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.

6 2019 PPG ANNUAL REPORT AND 10-K


Part I
Item 1. Business
PPG Industries, Inc. manufactures and distributes a broad range of paints, coatings and specialty materials. PPG was incorporated in Pennsylvania in 1883. PPG’s vision is to be the world’s leading coatings company by consistently delivering high-quality, innovative and sustainable solutions that customers trust to protect and beautify their products and surroundings. 
PPG has a proud heritage and demonstrated commitment to innovation, sustainability, community engagement and developing leading-edge paint, coatings and specialty materials technologies. Through dedication and industry-leading expertise, we solve our customers’ biggest challenges, collaborating closely to find the right path forward. PPG is a global leader, serving customers in construction, consumer products, industrial and transportation markets and aftermarkets with manufacturing facilities and equity affiliates in more than 70 countries.
Performance Coatings and Industrial Coatings
PPG’s business is comprised of two reportable business segments: Performance Coatings and Industrial Coatings. The Performance Coatings and Industrial Coatings reportable business segments supply coatings and specialty materials to customers in a wide array of end-uses, including industrial equipment and components; packaging material; aircraft and marine equipment; automotive original equipment; automotive refinish; as well as for other industrial and consumer products. PPG also serves commercial and residential new build and maintenance customers by supplying coatings to painting and maintenance contractors and directly to consumers for decoration and maintenance. The coatings industry is highly competitive and consists of several large firms with global presence and many firms supplying 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 regional coatings companies.

2019 PPG ANNUAL REPORT AND FORM 10-K 7


PERFORMANCE COATINGS
Strategic Business Unit
Products
Primary End-uses
Main Distribution Methods
 Primary Brands
Automotive Refinish Coatings
Coatings, solvents, adhesives, sealants, sundries, software
Automotive and commercial transport/fleet repair and refurbishing, light industrial coatings and specialty coatings for signs
Independent distributors and direct to customers
PPG®, SEM®
Aerospace Coatings
Coatings, sealants, transparencies, transparent armor, adhesives, engineered materials, packaging and chemical management services for the aerospace industry
Commercial, military, regional jet and general aviation aircraft
Direct to customers and company-owned distribution network
PPG®
Protective and Marine Coatings
Coatings and finishes for the protection of metals and structures
Metal fabricators, heavy duty maintenance contractors and manufacturers of ships, bridges and rail cars
Direct to customers, company-owned architectural coatings stores, independent distributors and concessionaires
PPG®
Architectural Coatings Americas and Asia Pacific
Paints, wood stains, adhesives and purchased sundries
Painting and maintenance contractors and consumers for decoration and maintenance of residential and commercial building structures
Company-owned stores, home centers and other regional or national consumer retail outlets, paint dealers, concessionaires, independent distributors and direct to consumers
PPG®, GLIDDEN®, COMEX®, OLYMPIC®, DULUX® (in Canada), SIKKENS®, PPG PITTSBURGH PAINTS®, MULCO®, FLOOD®, LIQUID NAILS®, SICO®, RENNER®, TAUBMANS®, WHITE KNIGHT®, BRISTOL®, HOMAX® among others
Architectural Coatings Europe, Middle East and Africa (EMEA)
SIGMA®, HISTOR®, SEIGNEURIE®, GUITTET®, PEINTURES GAUTHIER®, RIPOLIN®, JOHNSTONE’S®, LEYLAND®, PRIMALEX®, DEKORAL®, TRILAK®, PROMINENT PAINTS®, GORI®, BONDEX®, and DANKE!® among others
Segment Overview
This reportable business segment primarily supplies a variety of protective and decorative coatings, sealants and finishes along with paint strippers, stains and related chemicals, as well as transparencies and transparent armor.
Major Competitive Factors
Product performance, technology, quality, technical and customer service, price, customer productivity, distribution and brand recognition
Global Competitors
Akzo Nobel N.V., Axalta Coating Systems Ltd., BASF Corporation, Benjamin Moore, Cromology, Hempel A/S, Kansai Paints, the Jotun Group, Masco Corporation, Nippon Paint; RPM International Inc, the Sherwin-Williams Company, Tikkurila Oyj and 3M Company
2019 Strategic Acquisitions
Texstars, LLC, Dexmet Corporation and Industria Chimica Reggiana (“ICR”; closed on January 31, 2020). Refer to Note 3, “Acquisitions and Divestitures” under Item 8 of this Form 10-K for more information.
Average Number of Employees in 2019
27,700
Principal Manufacturing and Distribution Facilities
Amsterdam, Netherlands; Birstall, United Kingdom; Busan, South Korea; Carrollton, Texas; Clayton, Australia; Delaware, Ohio; Deurne, Belgium; Gonfreville, France; Huntsville, Alabama; Huron, Ohio; Kunshan, China; Little Rock, Arkansas; Mexico City, Mexico; Milan, Italy; Mojave, California; Oakwood, Georgia; Ontario, Canada; Ostrow Wielkopolski, Poland; Ruitz, France; Shildon, United Kingdom; Sylmar, California; Stowmarket, United Kingdom; Tepexpan, Mexico; and Wroclaw, Poland.

8 2019 PPG ANNUAL REPORT AND 10-K


INDUSTRIAL COATINGS
Strategic Business Unit
Products
Primary End-uses
Main Distribution Methods
Primary Brands
Automotive OEM(a) Coatings
Specifically formulated coatings, adhesives and sealants and metal pretreaments
Automotive original equipment
Direct to manufacturing companies and various coatings applicators
PPG®
Industrial Coatings
Specifically formulated coatings, adhesives and sealants and metal pretreaments; Services and coatings application
Appliances, agricultural and construction equipment, consumer electronics, automotive parts and accessories, building products (including residential and commercial construction), transportation vehicles and numerous other finished products; On-site coatings services within several customer manufacturing locations as well as at regional service centers.
PPG®
Packaging Coatings
Specifically formulated coatings
Metal cans, closures, plastic tubes, industrial packaging, and promotional and specialty packaging
PPG®
Specialty Coatings and Materials
Amorphous precipitated silicas, TESLIN® substrate, Organic Light Emitting Diode (OLED) materials, optical lens materials and photochromic dyes
SILICA - Tire, battery separator and other end-uses
TESLIN - Labels, e-passports, drivers’ licenses, breathable membranes, loyalty cards and identification cards
OLED - displays and lighting
LENS MATERIALS - optical lenses and color-change products
PPG®
TESLIN®
(a) Original equipment manufacturer (OEM)
Segment Overview
This reportable business segment primarily supplies a variety of protective and decorative coatings and finishes along with adhesives, sealants, metal pretreatment products, optical monomers and coatings, precipitated silicas and other specialty materials.
Alliances
PPG has established alliances with Kansai Paints to serve Japanese-based automotive OEM customers in North America and Europe and Asian Paints Ltd. to serve certain aftermarket customers and automotive OEM customers in India.
Major Competitive Factors
Product performance, technology, quality, technical and customer service, price, customer productivity and distribution.
Global Competitors
Akzo Nobel N.V., Axalta Coating Systems Ltd., BASF Corporation, Kansai Paints, Nippon Paint and the Sherwin-Williams Company
2019 Strategic Acquisitions
Hemmelrath and Whitford Worldwide Company. Refer to Note 3, “Acquisitions and Divestitures” under Item 8 of this Form 10-K for more information.
Average Number of Employees in 2019
15,300
Principal Manufacturing and Distribution Facilities
Barberton, Ohio; Busan, South Korea; Cieszyn, Poland; Cleveland, Ohio; Delfzijl, Netherlands; Lake Charles, Louisiana; Oak Creek, Wisconsin; Quattordio, Italy; San Juan del Rio, Mexico; Springdale, Pennsylvania; Sumaré, Brazil; Suzhou, Tianjin and Zhangjiagang, China.

2019 PPG ANNUAL REPORT AND FORM 10-K 9


Research and Development
($ in millions)
2019

 
2018

 
2017

Research and development costs, including depreciation of research facilities

$456

 

$464

 

$472

% of annual net sales
3.0
%
 
3.0
%
 
3.2
%
Technology innovation has been a hallmark of PPG’s success throughout its history. The Company seeks to optimize its investment in research and development to create new products to drive profitable growth. We align our product development with the macro trends in the markets we serve and leverage core technology platforms to develop products for unmet market needs. Additionally, we operate laboratories in close geographic proximity to our customers, and we customize our products for our customers' end-use applications. Our history of successful technology introductions is based on a commitment to an efficient and effective innovation process and disciplined portfolio management. We have obtained government funding for a small portion of the Company’s research efforts, and we will continue to pursue government funding where appropriate.
We own and operate several facilities to conduct research and development for new and improved products and processes. In addition to the Company’s centralized principal research and development centers (See Item 2. “Properties” of this Form 10-K), operating segments manage their development through centers of excellence. As part of our ongoing efforts to manage our formulations and raw material costs effectively, we operate global competitive sourcing laboratories. Because of our broad array of products and customers, we are not materially dependent upon any single technology platform.
Raw Materials, Energy and Logistics
The effective management of raw materials, energy and logistics is important to PPG’s continued success as PPG uses a wide variety of complex raw materials that serve as the building blocks of our manufactured products. The Company’s most significant raw materials are epoxy and other resins, titanium dioxide and other pigments, and solvents in the coatings businesses and sand and soda ash in the specialty coatings and materials business. Raw materials include both organic, primarily petroleum-derived, materials and inorganic materials, including titanium dioxide. These raw materials represent PPG’s single largest production cost component.
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 our planned operating requirements for the future. Supply of critical raw materials and energy is managed by establishing contracts with multiple sources and identifying alternative materials or technology whenever possible. Our raw materials include bio-based materials as part of a product renewal strategy. While prices for certain raw materials typically fluctuate with energy prices and global supply and demand changes, such fluctuations are impacted by the fact that the manufacture of our raw materials is several steps downstream from crude oil and natural gas inputs.
We are continuing our aggressive sourcing initiatives to broaden our supply of high quality raw materials. These initiatives include qualifying multiple sources of supply, both local and international, including suppliers from Asia and other lower cost regions of the world, adding on-site resin production at certain manufacturing locations and reducing the amount of titanium dioxide used in our product formulations.
We are subject to existing and evolving standards relating to the registration of chemicals which 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. Changes to chemical registration regulations have been proposed or implemented in the European Union and many other countries, including China, Canada, the United States (“U.S.”), Brazil, Mexico and South Korea. Because implementation of many of these programs has not been finalized, the financial impact cannot be estimated at this time. We anticipate that the number of chemical registration regulations will continue to increase globally, and we have implemented programs to track and comply with these regulations.
PPG has joined a global initiative to eliminate child labor from the mica industry, and the Company is continuing to take steps, including audits of our suppliers, to ensure compliance with PPG’s policy against the use of child labor in our supply chains.
We typically experience fluctuating prices for energy and raw materials driven by various factors, including changes in supplier feedstock costs and inventories, global industry activity levels, foreign currency exchange rates, government regulation, and global supply and demand factors. For 2019 versus 2018, we experienced a deflationary movement in costs, particularly in the second half of 2019, driven by a general slowdown in industrial demand affecting the global supply and demand balance in several of our key purchasing categories. This was in addition to pricing decreases in most of our key feedstocks throughout 2019. In contrast, average raw material costs rose by a mid-single-digit percentage in 2018 versus 2017 due to the rise in feedstock prices, acute shortages in key raw materials and the impact of Chinese environmental regulations.
Given the continuing volatility in certain energy-based input costs, particularly the volatility in oil and oil-based derivatives, and foreign currencies, we are not able to predict with certainty the 2020 full-year impact of changes in raw material pricing

10 2019 PPG ANNUAL REPORT AND 10-K


versus 2019. Further, given the distribution nature of many of our businesses, logistics and distribution costs are sizable, as are wage and benefit changes. For 2019 versus 2018, we experienced a slight decrease in our logistics costs as a percentage of sales driven by operational efficiency improvements and through sourcing efforts to take advantage of the reduction in industry surface transportation shipping rates due to an improvement in the availability of transportation assets. We expect these costs to remain steady or be slightly lower through 2020 given the continuing efforts by PPG to improve our global operational efficiencies.
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.
Global Operations
PPG has a significant investment in non-U.S. operations. This broad geographic footprint serves to lessen the significance of economic impacts occurring in any one region on our total Net sales and Income before income taxes in the consolidated statement of income. As a result of our expansion outside the U.S., we are subject to certain inherent risks, including economic and political conditions in international markets, trade protection measures and fluctuations in foreign currency exchange rates. During 2019, unfavorable foreign currency translation decreased Net sales by approximately $400 million and Income before income taxes by approximately $50 million.
Our net sales in the developed and emerging regions of the world for the years ended December 31st are summarized below:
($ in millions)
2019

 
2018

 
2017

Net sales
 
 
 
 
 
United States, Canada, Western Europe

$10,191

 

$10,299

 

$9,911

Latin America, Central and Eastern Europe, Middle East, Africa, Asia Pacific
4,955

 
5,075

 
4,837

Total

$15,146

 

$15,374

 

$14,748

Refer to Note 21, “Reportable Business Segment Information” under Item 8 of this Form 10-K for geographic information related to PPG’s property, plant and equipment, and for additional geographic information pertaining to sales.
Seasonality
PPG’s Income before income taxes has typically been greater in the second and third quarters and Cash from operating activities has been greatest in the fourth quarter due to end-use market seasonality, primarily in our architectural coatings businesses. Demand for our architectural coatings products is typically the strongest in the second and third quarters due to higher home improvement, maintenance and construction activity during the spring and summer months in the U.S., Canada and Europe. The Latin America paint season is the strongest in the fourth quarter. These cyclical activity levels result in the collection of outstanding receivables and lower inventory on hand in the fourth quarter generating higher Cash from operating activities.
Employee Relations
The average number of people employed worldwide by PPG during 2019 was approximately 47,600. The Company has numerous collective bargaining agreements throughout the world. We observe local customs, laws and practices in labor relations when negotiating collective bargaining agreements. There were no significant work stoppages in 2019. 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 that we will be able to negotiate all labor agreements on satisfactory terms. To date, these work stoppages have not had a significant impact on our results of operations. Overall, we believe we have good relationships with our employees.
Environmental Matters
PPG is committed to operating in a sustainable manner and to helping our customers meet their sustainability goals. Our sustainability efforts are led by the Technology and Environment Committee of our Board of Directors and our Sustainability Committee, which is comprised of members of PPG’s senior management team. The Sustainability Committee establishes policies, programs, procedures and goals to address sustainability in our business practices, including resource management, climate change, innovation, communications, purchasing, manufacturing and employee wellness.
Our dedication to innovation is intertwined with sustainability. Once again, we increased the percent of our sales from sustainable products to 33% in 2019 from 32% in 2018. We are marketing an ever-growing variety of products and services that provide environmental, safety and other benefits to our customers. Our products contribute to lighter, more fuel-efficient vehicles, airplanes and ships, and they help our customers reduce their energy consumption, conserve water and reduce waste. These products include a compact automotive paint process that saves energy and reduces water usage; sustainable,

2019 PPG ANNUAL REPORT AND FORM 10-K 11


waterborne coatings formulations; lightweight sealants and coatings for aircraft; coatings that cool surfaces; coatings for recyclable metal packaging; and solutions for autonomous and battery-powered vehicles.
The Company’s commitment to sustainability continues to yield tangible results. In 2019, we again made significant progress reducing our energy intensity, greenhouse gas emissions intensity and waste intensity. More information about PPG’s sustainability values, efforts, goals and data and our community and employee engagement programs can be found in our Sustainability Report and on our sustainability website at http://sustainability.ppg.com and on the CDP’s website at www.cdp.net.
We are subject to existing and evolving standards relating to the protection of the environment. In management’s opinion, the Company operates in an environmentally sound manner and is well positioned, relative to environmental matters, within the industries in which it operates. PPG is negotiating with various government agencies concerning current and former manufacturing sites and offsite waste disposal locations, including certain sites on the National Priority List. 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 onsite and offsite remediation of those sites where it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.
Our experience to date regarding environmental matters leads us 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.
In addition to the $304 million currently reserved for environmental remediation efforts, we may be subject to loss contingencies related to environmental matters estimated to be approximately $100 million to $200 million. These reasonably possible unreserved losses relate to environmental matters at a number of sites, none of which are individually significant. The loss contingencies related to these sites include significant unresolved issues such as the nature and extent of contamination at these sites and the methods that may have to be employed to remediate them.
($ in millions)
2019

 
2018

 
2017

Capital expenditures for environmental control projects

$15

 

$20

 

$7

It is expected that capital expenditures for such projects in 2020 will be in the range of $20 million to $30 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.
Management believes that 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 and our accrued liability for estimated environmental remediation costs.
Available Information
The Company’s website address is www.ppg.com. The Company posts, and shareholders may access without charge, the Company’s recent filings and any amendments thereto of its annual reports on Form 10-K, quarterly reports on Form 10-Q and its proxy statements as soon as reasonably practicable after such reports are filed with the Securities and Exchange Commission (“SEC”). The Company also posts all financial press releases, including earnings releases, to its website. All other reports filed or furnished to the SEC, including reports on Form 8-K, are available via direct link on PPG’s website to the SEC’s website, www.sec.gov. Reference to the Company’s, the SEC’s or other websites herein does not incorporate by reference any information contained on those websites and such information should not be considered part of this Form 10-K.
Item 1A. Risk Factors
As a global manufacturer of paints, coatings and specialty materials, we operate in a business environment that includes risks. These risks are not unlike the risks we have faced in the recent past nor are they unlike risks faced by our competitors. Each of the risks described in this section could adversely affect our results of operations, 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 businesses and our results of operations, financial position and liquidity.

12 2019 PPG ANNUAL REPORT AND 10-K


Increases in prices and declines in the availability of raw materials could negatively impact our financial results.
Our financial results are significantly affected by the cost of raw materials. Raw materials include both organic, primarily petroleum-derived, materials and inorganic materials, including titanium dioxide. These raw materials represent PPG’s single largest production cost component.
While not our customary practice, we also import raw materials and intermediates, particularly for use at our manufacturing facilities in the emerging regions of the world. In most cases, those imports are priced in the currency of the supplier and, therefore, if that currency strengthens against the currency of our manufacturing facility, our margins may be lower.
Most of our raw materials 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. Adequate supply of critical raw materials is managed by establishing contracts, procuring from multiple sources, and identifying alternative materials or technology whenever possible. The Company is continuing its aggressive sourcing initiatives to effectively broaden our supply of high quality raw materials. These initiatives include qualifying multiple and local sources of supply, including suppliers from Asia and other lower cost regions of the world, adding on-site resin production at certain manufacturing locations, and a reduction in the amount of titanium dioxide and other raw materials used in our product formulations. Our raw materials include bio-based materials as part of a product renewal strategy.
An inability to obtain critical raw materials would adversely impact our ability to produce products. Increases in the cost of raw materials may have an adverse effect on our Income from continuing operations or Cash from operating activities in the event we are unable to offset these higher costs in a timely manner.
The pace of economic growth and level of uncertainty could have a negative impact on our results of operations and cash flows.
Demand for our products and services depends, in part, on the general economic conditions affecting the countries and markets in which we do business. Weak economic conditions in certain geographies and changing supply and demand balances in the markets we serve have negatively impacted demand for our products and services in the past and may do so in the future. Recently, global economic uncertainty has increased due to a number of factors, including slowing global growth, consumer sentiment and commodity market volatility, disruption in existing trade agreements, the imposition of tariffs and the threat of additional tariffs, the United Kingdom’s exit from the European Union and weaker demand in China. PPG provides products and services to a variety of end-use markets in many geographies. This broad end-use market exposure and expanded geographic presence lessens the significance of any individual decrease in activity levels; nonetheless, lower demand levels may result in lower sales, which would result in reduced Income from continuing operations and Cash from operating activities.
We are subject to existing and evolving standards relating to the protection of the environment.
Environmental laws and regulations control, among other things, the discharge of pollutants into the air and water, the handling, use, treatment, storage and clean-up of hazardous and non-hazardous waste, and the investigation and remediation of soil and groundwater affected by hazardous substances. In addition, various laws regulate health and safety matters. The environmental laws and regulations we are subject to impose liability for the costs of, and damages resulting from, cleaning up current sites, past spills, disposals and other releases of hazardous substances. Violations of these laws and regulations can also result in fines and penalties. Future environmental laws and regulations may require substantial capital expenditures or may require or cause us to modify or curtail our operations, which may have a material adverse impact on our business, financial condition and results of operations.
We are involved in a number of lawsuits and claims, and we may be involved in future lawsuits and claims, in which substantial monetary damages are sought.
PPG is involved in a number of lawsuits and claims, both actual and potential, in which substantial monetary damages are sought. Those lawsuits and claims relate to contract, patent, environmental, product liability, asbestos exposure, antitrust, employment, securities and other matters arising out of the conduct of PPG’s current and past business activities. Any such claims, whether with or without merit, could be time consuming, expensive to defend and could divert management’s attention and resources. We maintain insurance against some, but not all, of these potential claims, and the levels of insurance we do maintain may not be adequate to fully cover any and all losses. We believe that, in the aggregate, the outcome of all current lawsuits and claims involving PPG, including those described in Note 14, “Commitments and Contingent Liabilities” under Item 8 of this Form 10-K, 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. Nonetheless, the results of any future litigation or claims are inherently unpredictable, and such outcomes could have a material adverse effect on our results of operations, Cash from operating activities or financial condition.

2019 PPG ANNUAL REPORT AND FORM 10-K 13


Fluctuations in foreign currency exchange rates could affect our financial results.
We earn revenues, pay expenses, own assets and incur liabilities in countries using currencies other than the U.S. dollar. Because our consolidated financial statements are presented in U.S. dollars, we must translate revenues and expenses into U.S. dollars at the average exchange rate during each reporting period, as well as assets and liabilities into U.S. dollars at exchange rates in effect at the end of each reporting period. Therefore, increases or decreases in the value of the U.S. dollar against other currencies will affect our Net sales, Net income and the value of balance sheet items denominated in foreign currencies. We may use derivative financial instruments to reduce our net exposure to currency exchange rate fluctuations related to foreign currency transactions. However, fluctuations in foreign currency exchange rates, particularly the strengthening or weakening of the U.S. dollar against major currencies, could adversely or positively affect our financial condition and results of operations expressed in U.S. dollars.
We are subject to a variety of complex U.S. and non-U.S. laws and regulations, which could increase our compliance costs and could adversely affect our results of operations.
We are subject to a wide variety of complex U.S. and non-U.S. laws and regulations, and legal compliance risks, including securities laws, tax laws, environmental laws, employment and pension-related laws, competition laws, U.S. and foreign export and trading laws, and laws governing improper business practices, including bribery. We are affected by new laws and regulations and changes to existing laws and regulations, as well as interpretations by courts and regulators. These laws and regulations effectively expand our compliance obligations and costs.
For example, regulations concerning the composition, use and transport of chemical products continue to evolve. Developments concerning these regulations could potentially impact the availability or viability of some of the raw materials we use in our product formulations and/or our ability to supply certain products to some customers or markets. Import/export regulations also continue to evolve and could result in increased compliance costs, slower product movements or additional complexity in our supply chains.
Further, although we believe that we have appropriate risk management and compliance programs in place, we cannot guarantee that our internal controls and compliance systems will always protect us from improper acts committed by employees, agents, business partners or businesses that we acquire. Any non-compliance or such improper actions or allegations could damage our reputation and subject us to civil or criminal investigations and shareholder lawsuits, could lead to substantial civil and criminal, monetary and non-monetary penalties, and could cause us to incur significant legal and investigatory fees.
Our international operations expose us to additional risks and uncertainties that could affect our financial results.
PPG has a significant investment in global operations. This broad geographic footprint serves to lessen the significance of economic impacts occurring in any one region. Notwithstanding the benefits of geographic diversification, our ability to achieve and maintain profitable growth in international markets is subject to risks related to the differing legal, political, social and regulatory requirements and economic conditions of many countries. As a result of our operations outside the U.S., we are subject to certain inherent risks, including political and economic uncertainty, inflation rates, exchange rates, trade protection measures, local labor conditions and laws, restrictions on foreign investments and repatriation of earnings, and weak intellectual property protection. Our percentage of sales generated in 2019 by products sold outside the U.S. was approximately 61%.
Changes in the tax regimes and related government policies and regulations in the countries in which we operate could adversely affect our results and our effective tax rate.
As a multinational corporation, we are subject to various taxes in both the U.S. and non-U.S. jurisdictions. Due to economic and political conditions, tax rates in these various jurisdictions may be subject to significant changes. Our future effective income tax rate could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets or changes in tax laws or their interpretation. Further, PPG may continue to refine its estimates to incorporate new or better information as it becomes available. Recent developments, including the European Commission’s investigations on illegal state aid as well as the Organisation for Economic Co-operation and Development project on Base Erosion and Profit Shifting may result in changes to long-standing tax principles, which could adversely affect our effective tax rate or result in higher cash tax liabilities. If our effective income tax rate was to increase, our Cash from operating activities, financial condition and results of operations would be adversely affected.
Although we believe that our tax filing positions are appropriate, the final determination of tax audits or tax disputes may be different from what is reflected in our historical income tax provisions and accruals. If future audits find that additional taxes are due, we may be subject to incremental tax liabilities, possibly including interest and penalties, which could have a material adverse effect on our Cash from operating activities, financial condition and results of operations.

14 2019 PPG ANNUAL REPORT AND 10-K


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, work stoppages, natural disasters and severe weather events, significant public health issues, computer system disruptions, fires, 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 us to predict the occurrence or consequence of any such events. However, such events could reduce our ability to supply products, reduce demand for our products or make it difficult or impossible for us to receive raw materials from suppliers or to deliver products to customers.
Integrating acquired businesses into our existing operations.
Part of the Company’s strategy is growth through acquisitions. Over the last decade, we have successfully completed more than 50 acquisitions, and we will likely acquire additional businesses and enter into additional joint ventures in the future. Growth through acquisitions and the formation of joint ventures involve risks, including:
difficulties in assimilating acquired companies and products into our existing business;
delays in realizing the benefits from the acquired companies or products;
diversion of our management’s time and attention from other business concerns;
difficulties due to lack of or limited prior experience in any new markets we may enter;
unforeseen claims and liabilities, including unexpected environmental exposures, product liability, or existing cyber vulnerability;
unexpected losses of customers or suppliers of the acquired or existing business;
difficulty in conforming the acquired business’ standards, processes, procedures and controls to those of our operations; and
difficulties in retaining key employees of the acquired businesses.
These risks or other problems encountered in connection with our past or future acquisitions and joint ventures could cause delays in realizing the anticipated benefits of such acquisitions or joint ventures and could adversely affect our results of operations, Cash from operating activities or financial condition.
Our ability to understand our customers’ specific preferences and requirements, and to innovate, develop, produce and market products that meet customer demand is critical to our business results.
Our business relies on continued global demand for our brands and products. To achieve business goals, we must develop and sell products that appeal to customers. This is dependent on a number of factors, including our ability to produce products that meet the quality, performance and price expectations of our customers and our ability to develop effective sales, advertising and marketing programs. 
We believe the automotive industry will experience significant and continued change in the coming years. Vehicle manufacturers continue to develop new safety features such as collision avoidance technology and self-driving vehicles that may reduce vehicle collisions in the future, potentially lowering demand for our refinish coatings. In addition, through the introduction of new technologies, new business models or new methods of travel, such as ridesharing, the number of automotive OEM new-builds may decline, potentially reducing demand for our automotive OEM coatings and related automotive parts.
Our future growth will depend on our ability to continue to innovate our existing products and to develop and introduce new products. If we fail to keep pace with product innovation on a competitive basis or to predict market demands for our products, our businesses, financial condition and results of operations could be adversely affected.
The industries in which we operate are highly competitive.
With each of our businesses, an increase in competition may cause us to lose market share, lose a large regional or global customer, or compel us to reduce prices to remain competitive, which could result in reduced margins for our products. Additionally, our ability to achieve price increases may impact the overall economics for the products we offer. Competitive pressures may not only reduce our margins but may also impact our revenues and our growth which could adversely affect our results of operations.
The security of our information technology systems could be compromised, which could adversely affect our ability to operate. 
Increased global information technology security requirements, threats and sophisticated and targeted computer crime pose a risk to the security of our systems, networks and the confidentiality, availability and integrity of our data. Despite our efforts

2019 PPG ANNUAL REPORT AND FORM 10-K 15


to protect sensitive information and confidential and personal data, our facilities and systems may be vulnerable to security breaches. This could lead to negative publicity, theft, modification or destruction of proprietary information or key information, manufacture of defective products, production downtimes and operational disruptions, which could adversely affect our reputation, competitiveness and results of operations.
In 2018, we concluded that previously issued financial statements as detailed below should not be relied upon and restated those previously issued financial statements, which led to, among other things, shareholder litigation, investigations by the SEC and the U.S. Attorney’s office, a settlement by the Company with the SEC and unanticipated costs for accounting and legal fees, and which may result in certain other risks.
As discussed in the Explanatory Note, Note 2, “Restatement of Previously Reported Consolidated Annual Financial Statements” and in Note 19, “Quarterly Financial Information (unaudited)” under Item 8 of the 2017 Form 10-K/A, in 2018 we concluded that our previously issued financial statements as of December 31, 2017 and 2016, and for each of the quarterly and year-to-date periods in 2017, and the final quarterly and year-to-date period in 2016, should no longer be relied upon. The determination that the applicable financial statements should no longer be relied upon and that these financial statements would be restated was made following the identification of misstatements. Although the Company restated these financial statements, remediated the material weakness in the Company’s internal control over financial reporting, reached a settlement with the SEC and is no longer the subject of an investigation by the U.S. Attorney’s Office, we continue to be subject to risks and uncertainties relating to these events, including shareholder derivative litigation, advancement of legal expenses and potential indemnification obligations to certain current and former employees who are responding to investigations by the SEC and U.S. Attorney’s Office for alleged violations of the securities laws relating to the restatement described above, potential loss of investor confidence, potential reputational harm and a potential negative impact on our stock price.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
PPG’s corporate headquarters is located in the United States in Pittsburgh, Pa. The Company’s manufacturing facilities, sales offices, research and development centers and distribution centers are located throughout the world. See Item 1. “Business” of this Form 10-K for the principal manufacturing and distribution facilities by reportable business segment.
The Company’s principal research and development centers are located in Allison Park, Pa.; Tianjin, China; Milan, Italy; Monroeville, Pa.; Springdale, Pa.; Amsterdam, Netherlands; Burbank, Calif.; Tepexpan, Mexico; Marly, France and Wroclaw, Poland.
Our headquarters, certain distribution centers and substantially all company-owned paint stores are located in facilities that are leased while our other facilities are generally owned. Our facilities are considered to be 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 may relate to contract, patent, environmental, product liability, asbestos exposure, antitrust, employment, securities and other matters arising out of the conduct of PPG’s current and past business activities. To the extent these lawsuits and claims involve personal injury, property damage and certain other claims, 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 may contest coverage. 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.
As previously disclosed, the SEC is conducting a non-public investigation of accounting matters described in the Explanatory Note and in Note 2, “Restatement of Previously Reported Consolidated Annual Financial Statements" under Item 8 of the Company’s 2017 Form 10-K/A. On September 26, 2019, PPG announced a final settlement with the SEC as to the Company. Without admitting or denying the findings in the SEC’s administrative cease-and-desist order, the Company consented to the entry of the order, which imposed no financial penalty. The Company continues to cooperate fully with the SEC’s ongoing investigation relating to these accounting matters. The Company is also cooperating fully with an investigation into the same accounting matters commenced by the U.S. Attorney’s Office for the Western District of Pennsylvania (“USAO”). As previously disclosed, the USAO has informed PPG that it will not pursue any action as to the Company.
On January 16, 2020, the Company, as a nominal defendant, and certain of its current or former officers and directors were named as defendants in a shareholder derivative action captioned L. Courtland Lee, derivatively on behalf of PPG Industries, Inc. v. Michael H. McGarry, et al. The plaintiff alleges breach of fiduciary duty and unjust enrichment arising out of various alleged acts, and alleged failures to act, by the individually named defendants following financial restatements by the Company. 

16 2019 PPG ANNUAL REPORT AND 10-K


The Company anticipates that the Court will order a stay of any discovery in the lawsuit and postpone the Company’s obligation to respond to the Complaint until an investigation into this matter is completed.
On May 20, 2018, a putative securities class action lawsuit was filed in the U.S. District Court for the Central District of California against the Company and three of its current and former officers. On September 21, 2018, an Amended Class Action Complaint was filed in the lawsuit. The Amended Complaint, captioned Trevor Mild v. PPG Industries, Inc., Michael H. McGarry, Vincent J. Morales, and Mark C. Kelly, asserted securities fraud claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 on behalf of a putative class of persons who purchased or otherwise acquired stock of the Company between January 19, 2017 and May 10, 2018. The allegations related to, among other things, allegedly false and misleading statements and/or failures to disclose information about the Company’s business, operations and prospects. The parties reached a settlement in principal on May 1, 2019.  On June 2, 2019, the plaintiff filed with the Court a Petition for Preliminary Approval of the proposed settlement, including the proposed settlement amount of $25 million. On November 22, 2019, the Court entered final judgment approving the settlement. PPG’s insurance carriers confirmed to the Company insurance coverage for the full amount of the settlement. The settlement payment is expected to occur in 2020.
From the late 1880’s until the early 1970’s, PPG owned property located in Cadogan and North Buffalo Townships, Pennsylvania which was used for the disposal of solid waste from PPG’s former glass manufacturing facility in Ford City, Pennsylvania. In October 2018, the Pennsylvania Department of Environmental Protection (the “DEP”) approved PPG’s cleanup plan for the Cadogan Property. In April 2019, PPG and the DEP entered into a consent order and agreement (“CO&A”) which incorporated PPG’s approved cleanup plan and a draft final permit for the collection and discharge of seeps emanating from the former disposal area. The CO&A includes a civil penalty of $1.2 million for alleged past unauthorized discharges. PPG’s former disposal area is also the subject of a citizens’ suit filed by the Sierra Club and PennEnvironment seeking remedial measures beyond the measures specified in PPG’s approved cleanup plan, a civil penalty in addition to the penalty included in the CO&A and plaintiffs’ attorneys fees. PPG believes that the citizen’s suit is without merit and intends to defend itself vigorously.
For many 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, see Note 14, “Commitments and Contingent Liabilities” to the accompanying consolidated financial statements under Part I, Item 8 of this Form 10-K.
In the past, 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. After having not been named in a new lead-related lawsuit for 15 years, PPG was named as a defendant in two new Pennsylvania state court lawsuits filed by Montgomery County and Lehigh County in the respective counties on October 4, 2018 and October 12, 2018. Both suits seek declaratory relief arising out of alleged public nuisances in the counties associated with the presence of lead paint on various buildings constructed prior to 1980. The Company believes these actions are without merit and intends to defend itself vigorously.

2019 PPG ANNUAL REPORT AND FORM 10-K 17


Information About Our Executive Officers
Set forth below is information related to the Company’s executive officers as of February 20, 2020
Name
Age
Title
Michael H. McGarry (a)
61
Chairman and Chief Executive Officer since September 2016
Anne M. Foulkes (b)
57
Senior Vice President and General Counsel since September 2018
Timothy M. Knavish (c)
54
Executive Vice President since October 2019
Rebecca B. Liebert (d)
52
Executive Vice President since October 2019
Vincent J. Morales (e)
54
Senior Vice President and Chief Financial Officer since March 2017
Amy R. Ericson (f)
54
Senior Vice President, Packaging Coatings since July 2018
Ramaparasad Vadlamannati (g)
57
Senior Vice President, Protective and Marine Coatings and President PPG EMEA since October 2019
(a)
Mr. McGarry served as President and Chief Executive Officer from September 2015 through August 2016, President and Chief Operating Officer from March 2015 through August 2015; Chief Operating Officer from August 2014 through February 2015; Executive Vice President from September 2012 through July 2014; and Senior Vice President, Commodity Chemicals from July 2008 through August 2012.
(b)
Ms. Foulkes served as Senior Vice President, General Counsel and Secretary from August 2018 to September 2018, Vice President and Associate General Counsel and Secretary from March 2016 through July 2018 and Assistant General Counsel and Secretary from April 2011 through February 2016.
(c)
Mr. Knavish served as Senior Vice President, Architectural Coatings and President, PPG EMEA from January 2019 through September 2019, Senior Vice President, Industrial Coatings from October 2017 through December 2018, Senior Vice President, Automotive Coatings from March 2016 through September 2017, Vice President, Protective and Marine Coatings from August 2012 through February 2016 and Vice President, Automotive Coatings, Americas from March 2010 through July 2012.
(d)
Ms. Liebert served as Senior Vice President, Automotive Coatings from June 2018 to September 2019. She previously served as President and Chief Executive Officer of Honeywell UOP from 2016 to 2018, Senior Vice President and General Manager, Catalyst Adsorbents and Specialties of Honeywell UOP from 2015 to 2016 and Senior Vice President and General Manager, Gas Processing and Hydrogen of Honeywell UOP from 2012 to 2015.
(e)
Mr. Morales served as Vice President, Finance from June 2016 through February 2017. From June 2015 through June 2016, he served as Vice President, Investor Relations and Treasurer and from October 2007 through May 2015 he served as Vice President, Investor Relations.
(f)
Ms. Ericson was appointed Senior Vice President, Packaging Coatings in July 2018 when she joined PPG from SUEZ SA. She previously served as President of SUEZ Chemical Monitoring and Solutions from 2017 until 2018, President of General Electric Water Services Company from 2015 to 2017 and President and Chief Executive Officer of Alstom SA’s U.S. business from 2013 to 2015.
(g)
Mr. Vadlamannati served as Senior Vice President, Protective and Marine Coatings from March 2016 through September 2019, Vice President, Architectural Coatings, EMEA and Asia/Pacific from August 2014 through February 2016, Vice President, Architectural Coatings, EMEA from February 2012 through July 2014, Vice President, Architectural Coatings, EMEA for Region Western Europe from March 2011 through January 2012 and Vice President, Automotive Refinish, EMEA from September 2010 through February 2011.
Item 4. Mine Safety Disclosures
Not Applicable.

18 2019 PPG ANNUAL REPORT AND 10-K


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 PPG’s stock exchange listing and quarterly stock market prices, dividends and holders of common stock is included in Exhibit 13.1 filed with this Form 10-K and is incorporated herein by reference. Annual information is also included in the 2019 Financial Overview and Shareholder Information on page 3 of the Annual Report to shareholders.
Issuer Purchases of Equity Securities - Fourth Quarter 2019
Month
Total Number of Shares Purchased

Avg. Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Programs 

Max. Number of Shares That May Yet Be Purchased Under the Programs(1)

October 2019
 
 
 
 
Repurchase program


$—


13,270,110

November 2019


 
 
 
Repurchase program
100,338


$128.54

100,338

12,786,858

December 2019


 
 
 
Repurchase program
1,033,842


$132.61

1,033,842

11,314,379

Total quarter ended December 31, 2019


 
 
 
Repurchase program
1,134,180


$132.25

1,134,180

11,314,379

(1)
In December 2017, PPG's board of directors approved a $2.5 billion share repurchase program. The remaining shares yet to be purchased under the program has been calculated using PPG’s closing stock price on the last business day of the respective month. This repurchase program has no expiration date.
No shares were withheld in satisfaction of the exercise price and/or tax withholding obligation by holders of employee stock options who exercised options granted under the Company’s equity compensation plans in the fourth quarter of 2019.
Item 6. Selected Financial Data
The information required by Item 6 regarding the selected financial data for the five years ended December 31, 2019 is included in Exhibit 13.2 filed with this Form 10-K and is incorporated herein by reference. This information is also reported in the Five-Year Digest on page 90 of the Annual Report to shareholders.

2019 PPG ANNUAL REPORT AND FORM 10-K 19


Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion includes a comparison of our results of operations and liquidity and capital resources for the years ended December 31, 2019 and 2018. A discussion of changes in our results of operations for the year ended December 31, 2018 as compared to the year ended December 31, 2017 has been omitted from this Form 10-K, but may be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2018 Form 10-K, filed with the Securities and Exchange Commission on February 21, 2019.
Performance Overview
Net Sales by Region
 
 
% Change
($ in millions, except percentages)
2019

2018

2019 vs. 2018
United States and Canada

$6,475


$6,485

(0.2)%
Europe, Middle East and Africa (EMEA)
4,549

4,678

(2.8)%
Asia Pacific
2,542

2,618

(2.9)%
Latin America
1,580

1,593

(0.8)%
Total

$15,146


$15,374

(1.5)%
Net sales decreased $228 million due to the following:
Lower sales volumes (-3%)
Unfavorable foreign currency translation (-2%)
Partially offset by:
Higher selling prices (+2%)
Acquisition-related sales (+2%)
We achieved higher selling prices across nearly all businesses, reflecting the value of our products and services. These increases helped to offset general cost inflation, including employee wages and benefits.
U.S. and Canada net sales were relatively flat compared to the prior year. Higher selling prices and net sales from acquired businesses were almost entirely offset by lower sales volumes. The unfavorable impact from customer assortment changes in the U.S. architectural DIY channel negatively impacted sales volumes.
Europe, Middle East and Africa (EMEA) net sales decreased nearly 3% versus the prior year, driven by unfavorable foreign currency translation and lower sales volumes, partially offset by higher selling prices in all businesses and net sales from acquired businesses.
Asia Pacific net sales decreased nearly 3% versus the prior year, driven by unfavorable foreign currency translation and lower sales volumes, partially offset by net sales from acquired businesses and higher selling prices.
Latin America net sales decreased slightly versus the prior year, driven by lower sales volumes and unfavorable foreign currency translation, partially offset by higher selling prices.
For specific business results see the Segment Results section within Item 7 of this Form 10-K.
Cost of sales, exclusive of depreciation and amortization
 
 
% Change
($ in millions, except percentages)
2019

2018

2019 vs. 2018
Cost of sales, exclusive of depreciation and amortization

$8,653


$9,001

(3.9)%
Cost of sales as a % of net sales
57.1
%
58.5
%
(1.4)%
Cost of sales, exclusive of depreciation and amortization, decreased $348 million due to the following:
● Lower sales volumes
● Foreign currency translation
● Restructuring cost savings
Partially offset by:
● Cost of sales attributable to acquired businesses
● General cost inflation

20 2019 PPG ANNUAL REPORT AND 10-K


Selling, general and administrative expenses
 
 
% Change
($ in millions, except percentages)
2019

2018

2019 vs. 2018
Selling, general and administrative expenses

$3,604


$3,573

0.9%
Selling, general and administrative expenses as a % of net sales
23.8
%
23.2
%
0.6%
Selling, general and administrative expenses increased $31 million primarily due to:
● Wage and other cost inflation
● Selling, general and administrative expenses from acquired businesses
Partially offset by:
● Foreign currency translation
● Cost management including restructuring cost savings
Other charges and other income
 
 
% Change
($ in millions, except percentages)
2019

2018

2019 vs. 2018
Interest expense, net of Interest income

$100


$95

5.3%
Business restructuring, net

$176


$66

166.7%
Other charges

$98


$122

(19.7)%
Other income

($89
)

($114
)
(21.9)%
Interest expense, net of Interest income
Interest expense, net of Interest income increased $5 million in 2019 versus 2018 primarily due to higher levels of debt in the current year.
Business restructuring, net
Pretax restructuring charges of $194 million were recorded in 2019, offset by certain changes in estimates to complete previously recorded programs of $18 million. A pretax restructuring charge of $83 million was recorded in the second quarter of 2018, offset by certain changes in estimates to complete previously recorded programs of $17 million. Refer to Note 8, "Business Restructuring" in Item 8 of this Form 10-K for additional information.
Other charges
Other charges consist primarily of environmental remediation charges. These charges were principally for environmental remediation at a former chromium manufacturing plant and associated sites in New Jersey. Refer to Note 14, "Commitments and Contingent Liabilities" in Item 8 of this Form 10-K for additional information.
Other income
Other income was lower in 2019 than prior year primarily due to a gain in 2018 on the sale of land near a facility of the Company’s former commodity chemicals business.
Effective tax rate and earnings per diluted share, continuing operations
 
 
% Change
($ in millions, except percentages)
2019

2018

2019 vs. 2018
Income tax expense

$392


$353

11.0%
Effective tax rate
23.6
%
20.9
%
2.7%
Adjusted effective tax rate, continuing operations*
23.7
%
22.1
%
1.6%
 
 
 
 
Earnings per diluted share, continuing operations

$5.22


$5.40

(3.3)%
Adjusted earnings per diluted share, continuing operations*

$6.22


$5.92

5.1%
*See the Regulation G reconciliations - results of operations
The effective tax rate for the year-ended December 31, 2019 was 23.6%, an increase of 2.7% from the prior year. In 2018, the tax rate benefited from certain favorable adjustments, including finalization of the provisional toll charge recorded in 2017 for unremitted foreign earnings under the U.S. Tax Cuts and Jobs Act.

2019 PPG ANNUAL REPORT AND FORM 10-K 21


As reported, earnings per diluted share from continuing operations for the year ended December 31, 2019 decreased year-over-year. Refer to the Regulation G Reconciliations - Results from Operations for additional information. The Company’s earnings per diluted share and adjusted earnings per diluted share benefited from the 2.7 million and 15.9 million shares of stock repurchased in 2019 and 2018, respectively, in conjunction with the Company’s cash deployment objectives.
Regulation G Reconciliations - Results from Operations
PPG believes investor’s understanding of the Company’s performance is enhanced by the disclosure of net income from continuing operations, earnings per diluted share from continuing operations and PPG’s effective tax rate from continuing operations adjusted for certain items. PPG’s management considers this information useful in providing insight into the Company’s ongoing performance because it excludes the impact of items that cannot reasonably be expected to recur on a quarterly basis or that are not attributable to our primary operations. Net income from continuing operations, earnings per diluted share from continuing operations and the effective tax rate from continuing operations adjusted for these items are not recognized financial measures determined in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and should not be considered a substitute for net income, earnings per diluted share, the effective tax rate or other financial measures as computed in accordance with U.S. GAAP. In addition, adjusted net income, adjusted earnings per diluted share from continuing operations and the adjusted effective tax rate from continuing operations may not be comparable to similarly titled measures as reported by other companies.
Income before income taxes from continuing operations is reconciled to adjusted income before income taxes from continuing operations, the effective tax rate from continuing operations is reconciled to the adjusted effective tax rate from continuing operations and net income from continuing operations (attributable to PPG) and earnings per share – assuming dilution (attributable to PPG) are reconciled to adjusted net income from continuing operations (attributable to PPG) and adjusted earnings per share – assuming dilution below:
($ in millions, except percentages and per share amounts)
Income Before Income Taxes

 
Tax Expense

 
Effective Tax Rate

 
Net income from continuing operations (attributable to PPG)

 
Earnings per diluted share(2)

Year-ended December 31, 2019
 
 
 
 
 
 
 
 
 
As reported, continuing operations

$1,661

 

$392

 
23.6
%
 

$1,243

 

$5.22

Includes:
 
 
 
 
 
 
 
 
 
Net charges related to business restructuring-related costs(1)
222

 
54

 
24.4
%
 
168

 
0.71

Net charges related to environmental remediation
61

 
14

 
23.0
%
 
47

 
0.20

Charges related to acquisition-related costs(3)
17

 
4

 
23.5
%
 
13

 
0.05

Net charges related to litigation matters
12

 
3

 
24.1
%
 
9

 
0.04

Adjusted, continuing operations, excluding certain items

$1,973

 

$467

 
23.7
%
 

$1,480

 

$6.22

($ in millions, except percentages and per share amounts)
Income Before Income Taxes

 
Tax Expense

 
Effective Tax Rate

 
Net income from continuing operations (attributable to PPG)

 
Earnings per diluted share(2)

Year-ended December 31, 2018
 
 
 
 
 
 
 
 
 
As reported, continuing operations

$1,693

 

$353

 
20.9
%
 

$1,323

 

$5.40

Includes:
 
 
 
 
 
 
 
 
 
Net tax benefit related to U.S. Tax Cuts and Jobs Act

 
13

 
N/A

 
(13
)
 
(0.05
)
Charges related to customer assortment changes
18

 
4

 
24.3
%
 
14

 
0.05

Charges related to environmental remediation and other costs
77

 
19

 
24.3
%
 
58

 
0.24

Net charges related to business restructuring-related costs(1)
75

 
22

 
29.3
%
 
53

 
0.21

Charges related to litigation matters
24

 
5

 
24.3
%
 
19

 
0.08

Charges related to acquisition-related costs(3)
6

 
2

 
25.5
%
 
4

 
0.02

Charge related to brand rationalization
6

 
2

 
26.8
%
 
4

 
0.02

Gain from the sale of a non-operating asset
(26
)
 
(6
)
 
24.3
%
 
(20
)
 
(0.08
)
Charge related to impairment of a non-manufacturing asset
9

 
2

 
24.3
%
 
7

 
0.03

Adjusted, continuing operations, excluding certain items

$1,882

 

$416

 
22.1
%
 

$1,449

 

$5.92

(1)
Included in net charges related to business restructuring-related costs, are business restructuring charges, accelerated depreciation of certain assets and other related costs, offset by releases related to previously approved programs.
(2)
Earnings per diluted share is calculated based on unrounded numbers. Figures in the table may not recalculate due to rounding.
(3)
Acquisition-related costs include advisory, legal, accounting, valuation, and other professional or consulting fees incurred to effect acquisitions. These costs are included in Selling, general and administrative expense in the consolidated statement of income. Acquisition-related costs also include the impact for the step up to fair value of inventory acquired in certain acquisitions which are included in Cost of sales, exclusive of depreciation and amortization in the consolidated statement of income.

22 2019 PPG ANNUAL REPORT AND 10-K


Performance of Reportable Business Segments
Performance Coatings
 
 
 
$ Change
 
% Change
($ in millions, except percentages)
2019

2018

 
2019 vs. 2018
 
2019 vs. 2018
Net sales

$9,034


$9,087

 
($53)
 
(0.6)%
Segment income

$1,409


$1,300

 
$109
 
8.4%
Performance Coatings net sales decreased slightly due to the following:
Unfavorable foreign currency translation (-3%)
Lower sales volumes (-1%)
Partially offset by:
Higher selling prices (+2%)
Acquisition-related sales (+1%)
For the full year 2019, PPG achieved higher selling prices across all businesses, reflecting the value of our products and services, offset by unfavorable foreign currency translation in all businesses.
Architectural coatings - Americas and Asia Pacific net sales decreased by a mid-single-digit percentage versus the prior year. The unfavorable impact from customer assortment changes in the U.S. architectural DIY channel negatively impacted sales volumes. The U.S. and Canada company-owned stores network net sales decreased slightly compared to the prior year. The PPG-Comex architectural coatings businesses had slightly higher net sales, excluding the impact of foreign currency translation and acquisitions (organic sales), and continued to benefit from the opening of a net of approximately 160 new concessionaire locations. Net sales in Asia Pacific were negatively impacted by unfavorable foreign currency translation.
Architectural coatings - EMEA net sales decreased by a mid-single-digit percentage due to unfavorable foreign currency translation; however, organic sales increased by a low-single-digit percentage year-over-year driven by higher selling prices. Despite volume growth in certain key countries, sales volumes were lower year-over-year.
Automotive refinish coatings net sales were relatively flat versus the prior year including the increase in net sales from the SEM acquisition. Sales volumes were impacted by softer U.S. industry demand evidenced by lower collision claims during the year. Organic sales increased in all other major geographic regions as customers continued to adopt PPG’s industry-leading technologies.
Aerospace coatings net sales increased by over 10% versus the prior year, driven by higher sales volumes. This increase was supported by market outperformance in all major platforms stemming from technology-advantaged products and robust industry demand.
Protective and marine coatings increased net sales by a mid-single-digit percentage versus the prior year, driven by strong sales volumes in China and Europe and price gains in each region. Net sales in the U.S. were negatively impacted by reduced activity in the oil and gas sector.
Segment income increased $109 million year-over-year due to higher selling prices and the continued benefits from the Company’s ongoing restructuring programs. These benefits were partially offset by the earnings impact of lower sales volumes, which were mostly attributable to the previously announced customer assortment changes, and other cost inflation. Additionally, unfavorable foreign currency translation decreased segment income by approximately $25 million, primarily related to the weakening of key currencies, including the Mexican peso and euro.
Looking Ahead
Looking ahead, industry demand levels in the first quarter of 2020 are expected to be similar to those experienced in the fourth quarter of 2019. Acquisitions are forecasted to add about $25 million of net sales primarily from Dexmet, Texstars, and ICR. In addition, net sales will be impacted due to lower production rates by an aerospace customer. Based on current exchange rates, foreign currency translation is not expected to have a material impact on segment sales or earnings.

2019 PPG ANNUAL REPORT AND FORM 10-K 23


Industrial Coatings
 
 
 
$ Change
 
% Change
($ in millions, except percentages)
2019

2018

 
2019 vs. 2018
 
2019 vs. 2018
Net sales

$6,112


$6,287

 
($175)
 
(2.8)%
Segment income

$862


$818

 
$44
 
5.4%
Industrial Coatings segment net sales decreased due to the following:
Lower sales volumes (-6%)
Unfavorable foreign currency translation (-3%)
Partially offset by:
Acquisition-related sales (+4%)
Higher selling prices (+2%)
For the full year 2019, PPG achieved higher selling prices in all major regions for nearly all businesses, reflecting the value of our products and services, offset by unfavorable foreign currency translation in all businesses.
In the automotive OEM coatings business, net sales decreased by a mid-single-digit percentage driven by lower sales volumes versus the prior year, consistent with the overall global industry automotive build rate. Partially offsetting the lower sales volumes were acquisition-related sales from the Hemmelrath acquisition and higher selling prices in all major regions.
Industrial coatings net sales increased slightly versus the prior year, despite lower sales volumes due to weakening global manufacturing demand for certain end-use products. Lower sales volumes were more than offset by acquisition-related sales from the Whitford acquisition.
Packaging coatings net sales decreased by a mid-single-digit percentage due to lower sales volumes versus the prior year. Year-over-year volumes were impacted by lower demand in packaged foods. However, sales volumes increased in Latin America due to customer conversions in the region during the year.
Specialty coatings and materials net sales were lower by a low-single-digit percentage versus the prior year, despite sales volume growth in the U.S. and EMEA.
Segment income increased $44 million year-over-year. Segment income benefited from improving selling prices, continued benefits from the Company’s ongoing restructuring programs and acquisition-related income, which were partially offset by the earnings impact of lower sales volumes and other cost inflation. Unfavorable foreign currency translation decreased segment income by approximately $20 million, primarily related to the Chinese yuan, Mexican peso and the euro.
Looking ahead
Looking ahead, global industrial demand trends are expected to remain subdued through the first quarter of 2020, with inconsistencies by region. Significant public health issues could have an unfavorable impact in certain industries and regions. The company will continue to prioritize operating margin recovery, focusing on executing its cost savings program and implementing contingency actions where necessary. Acquisition-related sales are forecast to add about $60 million stemming from Whitford and Hemmelrath. Based on current exchange rates, foreign currency translation is not expected to have a material impact on segment sales or earnings.
Review and Outlook
During 2019, economic conditions were generally positive in all of our major geographic regions despite soft global manufacturing activity that weakened during the year and remained mixed by end-uses. PPG’s net sales excluding foreign currency translation impact grew approximately 1% versus the prior year. Acquisition-related sales from acquisitions completed in 2018 and 2019 contributed 2% to net sales growth year-over-year, net of dispositions. Foreign currency translation was unfavorable throughout the year and impacted net sales by about 3%. Raw material costs moderated during the year, but remain elevated after a multi-year inflationary period. Some other key costs continued to increase in 2019 such as employee wage and benefit costs.
U.S. and Canada
During 2019, the pace of economic growth moderated in the U.S. and Canada versus the prior year, led by weaker U.S. GDP growth. Automotive OEM industry builds were relatively flat compared to 2018. Demand in the residential and commercial construction markets was modestly higher in 2019 compared to 2018. New home starts advanced approximately 2% in 2019 versus approximately 4% in 2018. Residential remodeling was down 2% in 2019 versus 2018, while commercial construction was down approximately 4% compared to flat in 2018. Market demand for architectural paint continued to shift more to professional trade painters as continued lower U.S. unemployment resulted in consumers choosing professional painters

24 2019 PPG ANNUAL REPORT AND 10-K


rather than completing projects themselves; although, demand in U.S. do-it-yourself (DIY) paint stores was stable after several years of weaker trends. PPG’s architectural coatings sales volumes in the U.S. and Canada was impacted by DIY customer assortment changes that reduced net sales by more than $100 million. The aerospace coatings business had above-market sales volume growth of nearly a double-digit percentage year-over-year. The automotive refinish coatings business was impacted by lower collision rates, changes to inventory management by our customers and a continuing trend of a higher number of automobiles in accidents being scrapped rather than being repaired and repainted offsetting modest growth in miles driven. PPG’s packaging coatings business was impacted by lower packaged food demand which offset growth in the packaged beverage segment. PPG’s automotive OEM coatings business performance was slightly below industry demand levels due to customer mix. Higher selling prices and acquisition-related sales nearly offset lower sales volumes in the automotive OEM coatings business. For the industrial coatings business, acquisition-related sales and higher selling prices were partially offset by lower sales volumes. The U.S. and Canada remained PPG’s largest region, representing approximately 43% of 2019 net sales.
Europe, Middle East and Africa
European economic activity was weak in 2019. Industrial production and manufacturing rates in the region were lower than 2018 and worsened as the year progressed. The region was impacted by continuing uncertainty over the United Kingdom’s exit from the European Union and overall contracting demand in most of the end-use markets that PPG supplies. Regional demand continued to be mixed by country and end-uses. Demand for PPG’s products was impacted by a decline in automotive industry builds and soft manufacturing activity in most of the general industrial coatings sub-segments. PPG’s architectural coatings - EMEA business organic sales were higher by a low-single-digit percentage as higher selling prices offset lower sales volumes.
EMEA represented approximately 30% of PPG’s 2019 net sales, similar to prior year levels. Regional coatings volumes remain approximately 20% below 2008 pre-recession levels. Net sales, excluding the impact of foreign translation, increased in 2019 compared to 2018 as higher selling prices and acquisition-related sales more than offset lower sales volumes. The euro and British pound both depreciated against the U.S. dollar during 2019.
Asia Pacific and Latin America
The emerging regions of Asia Pacific and Latin America represented 27% of PPG’s 2019 net sales in aggregate, similar to the prior year.
Asia Pacific remained the largest emerging region, with net sales of approximately $2.5 billion, led by China, which remained PPG’s second largest country by revenue. The Performance Coatings segment grew sales volumes in Asia Pacific, led by strong sales volume growth in the protective and marine coatings and aerospace coatings businesses. Sales volumes in the Industrial Coatings segment were lower by a high-single-digit percentage year-over-year, mostly due to a decline in the automotive OEM coatings business, particularly in China and India where new automobile sales were lower, and a decline in the industrial coatings business driven by weakening global manufacturing demand.
Overall, demand in Latin America declined year-over-year driven by lower automotive industry builds and overall softer economic conditions in most countries, including a weak trading environment in Mexico. In Mexico, the PPG-Comex business added a net of approximately 160 new concessionaire locations. The overall region’s performance was supported by strong growth in the packaging coatings business. Weaker sales volumes were offset by higher selling prices. Foreign currency translation was volatile and finished 2% unfavorable compared to 2018, principally driven by weaker currencies, including the Mexican peso and Brazilian real.
Outlook
Looking ahead to 2020, we expect modest global market growth that will likely be uneven by region and end-use. We expect most regional growth rates to be similar to 2019, with the softest conditions expected in the EMEA region.
We anticipate PPG’s U.S. and Canada regional growth will be led by aerospace coatings, albeit at lower levels than 2019 due to expected production curtailments at one customer, especially in the first half of the year. Automotive OEM builds are expected to be relatively flat compared to 2019. We expect modestly positive growth in housing and commercial construction.
We expect similar industry demand trends in 2020 in Europe as those experienced in 2019 with continuing improvement in profitability due to margin improvement. Regional growth is expected to remain mixed by sub-region and country. Favorable end-use trends are expected to continue in aerospace coatings, with the potential for heightened volatility in automotive OEM builds due to new regional emission standards. Industrial coatings demand is expected to remain soft as industry growth rates are anticipated to be flat to modestly lower. Demand is expected to contract but be mixed by country in the architectural coatings business. We continue to monitor the economic environment in the U.K., as its exit from the European Union progresses and impacts consumer sentiment and coatings demand.

2019 PPG ANNUAL REPORT AND FORM 10-K 25


In Asia Pacific, we expect improved industrial production growth in China, Southeast Asia and India as the year progresses. In China, we foresee continued above global average growth with heightened risk as the Chinese economy continues to shift and rely more on domestic consumption. The sharp decline in automotive OEM activity realized in the past 18 months is expected to moderate and improve as 2020 progresses, with year-over-year demand patterns expected to become more favorable in the second half of 2020. The recovery in marine coatings new-build demand is expected to remain subdued.
In Latin America, we anticipate slightly better economic conditions in Mexico, most of Central America and South America compared to 2019.
Significant other factors
In June 2019, PPG initiated a $184 million global restructuring program. The program is the result of a comprehensive internal operational assessment to identify further opportunities to improve profitability of the overall business portfolio. PPG recognized approximately $15 million of savings from this program in 2019. The majority of restructuring actions are expected to be completed by the end of the fourth quarter 2020 with the remainder of the actions expected to be completed in 2022.
We made significant progress on the global restructuring programs that were announced in December 2016 and May 2018. The Company achieved approximately $70 million of savings in 2019 relating to these programs. These restructuring actions are expected to be completed by the end of the second quarter of 2020. Aggregate restructuring savings related to the 2019, 2018 and 2016 programs was approximately $85 million in 2019.
We will continue to aggressively manage the Company’s cost structure to ensure alignment with the overall demand environment and will make adjustments as required to remain cost competitive in the marketplace. Aggregate restructuring savings are expected to be at least $75 million in 2020.
Raw materials are a significant input cost to the process of manufacturing coatings. PPG experiences fluctuating energy and raw material costs driven by various factors, including changes in supplier feedstock costs and inventories, global industry activity levels, foreign currency exchange rates, and global supply and demand factors. In aggregate, average raw material costs were modestly lower in 2019 versus 2018 due to variety of reasons, including softer industry demand and lower crude oil prices. PPG currently expects overall raw material prices to be impacted by weak industrial supply and demand conditions in 2020. Cost inflation is expected in several other areas including wage, benefit, and logistics costs in 2020.
In 2019, we achieved broad selling price improvement, reflecting the Company’s efforts to offset inflationary pressures. Further benefits from selling price actions are necessary in 2020 to recover operating margins, reflecting the value of our products. The Company will carefully monitor all costs during 2020 and assess the need for additional selling price increases.
In 2019, we experienced unfavorable foreign currency translation throughout the year. Based on mid-January 2020 exchange rates, the Company does not expect year-over-year foreign currency translation to significantly impact 2020 net sales or income before income taxes. The foreign currency environment continues to be volatile, and the impact on 2020 net sales and income before income taxes could differ from this expectation. The Company generally purchases raw materials, incurs manufacturing costs and sells finished goods in the same currency, so we typically incur only modest foreign currency transaction related impacts.
We are monitoring the potential impact of the recent outbreak of the coronavirus in China, which could negatively impact our global business and results of operations in 2020.
The 2020 effective tax rate from continuing operations is expected to be in the range of 22% to 24%. This range represents the Company’s best estimate, including recent updates to the 2017 the U.S. Tax Cuts and Jobs Act.
Over the past five years, the Company used over $4.5 billion of cash to repurchase approximately 45 million shares of PPG stock, including $325 million in 2019. The Company ended the year with approximately $1.5 billion remaining under its current share repurchase authorization. During 2019, the Company deployed nearly $700 million for acquisitions, including the purchase of a remaining minority interest, and approximately $470 million for dividends. PPG increased its per-share dividend in September 2019, marking the 48th annual per share dividend increase and the 120th consecutive year of annual dividend payments.
PPG ended 2019 with approximately $1.3 billion in cash and short-term investments. The Company expects continued strong cash generation in 2020.
Accounting Standards Adopted in 2019
Note 1, “Summary of Significant Accounting Policies” under Item 8 of this Form 10-K describes the Company’s recently adopted accounting pronouncements.

26 2019 PPG ANNUAL REPORT AND 10-K


Accounting Standards to be Adopted in Future Years
Note 1, “Summary of Significant Accounting Policies” under Item 8 of this Form 10-K describes accounting pronouncements that have been promulgated prior to December 31, 2019 but are not effective until a future date.
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” and Note 14, “Commitments and Contingent Liabilities” under Item 8 of this Form 10-K for a description of certain of these lawsuits.
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, 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 contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Reserves for environmental contingencies are exclusive of claims against third parties and are generally not discounted. In management’s opinion, the Company operates in an environmentally sound manner and the outcome of the Company’s environmental contingencies will not have a material effect on PPG’s financial position or liquidity; however, any such outcome may be material to the results of operations of any particular period in which costs, if any, are recognized. Management anticipates that the resolution of the Company’s environmental contingencies will occur over an extended period of time.
As also discussed in Note 14, PPG has significant reserves for environmental contingencies. Please refer to the Environmental Matters section of Note 14 for details of these reserves. A significant portion of our reserves for environmental contingencies relate to ongoing remediation at PPG's former chromium manufacturing plant in Jersey City, N.J. and associated sites ("New Jersey Chrome"). There are multiple, future events yet to occur, including further remedy selection and design, remedy implementation and execution and applicable governmental agency or community organization approvals. Considerable uncertainty exists regarding the timing of these future events for the New Jersey Chrome sites. Further resolution of these events is expected to occur over the next several years. As these events occur and to the extent that the cost estimates of the environmental remediation remedies change, the existing reserve for this environmental remediation matter will continue to be adjusted.
Liquidity and Capital Resources
During the past two years, PPG had sufficient financial resources to meet its operating requirements, to fund our capital spending, including acquisitions, share repurchases and pension plans and to pay increasing dividends to shareholders.
Cash and cash equivalents and short-term investments
($ in millions)
2019

 
2018

Cash and cash equivalents

$1,216

 

$902

Short-term investments
57

 
61

Total

$1,273

 

$963

Cash from operating activities - continuing operations
($ in millions, except percentages)
 
% Change
 
2019

2018

2019 vs. 2018
Cash from operating activities

$2,084


$1,487

40.1%
2019 vs. 2018
The $597 million increase in Cash from operating activities - continuing operations was primarily due to favorable changes in working capital, excluding the impact of business acquisitions, and lower cash contributions to its defined benefit pension plans year-over-year.
Operating working capital
Operating working capital is a subset of total working capital and represents (1) receivables from customers, net of allowance for doubtful accounts, (2) inventories, and (3) trade liabilities. See Note 4, “Working Capital Detail” under Item 8 of this Form 10-K for further information related to the components of the Company’s operating working capital. We believe operating working capital represents the key components of working capital under the operating control of our businesses.

2019 PPG ANNUAL REPORT AND FORM 10-K 27


A key metric we use to measure our working capital management is operating working capital as a percentage of sales (fourth quarter sales annualized). 
($ in millions, except percentages)
2019

 
2018

Trade receivables, net

$2,479

 

$2,505

Inventories, FIFO
1,834

 
1,896

Trade creditors’ liabilities
2,098

 
2,177

Operating working capital

$2,215

 

$2,224

Operating working capital as a % of fourth quarter sales, annualized
15.1
%
 
15.3
%
 
 
 
 
Trade receivables, net as a % of fourth quarter sales, annualized
16.9
%
 
17.2
%
Days sales outstanding
56

 
56

Inventories, FIFO as a % of fourth quarter sales, annualized
12.5
%
 
13.0
%
Inventory turnover
4.6

 
4.8

Environmental expenditures
($ in millions)
2019

2018

Cash outlays related to environmental remediation activities

$77


$64

We expect cash outlays for environmental remediation activities in 2020 to be between $80 million and $100 million.
Defined benefit pension plan contributions
($ in millions)
2019

2018

U.S. defined benefit pension plans

$—


$75

Non-U.S. defined benefit pension plans

$13


$24

Contributions to PPG’s non-U.S. defined benefit pension plans in 2019 were required by local funding requirements. PPG expects to make mandatory contributions to its non-U.S. defined benefit pension plans in the range of $15 million to $20 million in 2020. PPG may make voluntary contributions to its defined benefit pension plans in 2020 and beyond.
Cash used for investing activities
($ in millions, except percentages)
 
% Change
 
2019

2018

2019 vs. 2018
Cash used for investing activities

($1,009
)

($764
)
32.1%
2019 vs. 2018
The $245 million increase in cash used for investing activities - continuing operations, was primarily due to higher spending on business acquisitions.
Capital expenditures, including business acquisitions
($ in millions, except percentages)
 
% Change
 
2019

2018

2019 vs. 2018
Capital expenditures (1)

$413


$411

0.5%
Business acquisitions, net of cash balances acquired

$643


$378

70.1%
Total capital expenditures, including acquisitions

$1,056


$789

33.8%
Capital expenditures, excluding acquisitions, as a % of sales
2.7
%
2.7
%
—%
(1) Includes modernization and productivity improvements, expansion of existing businesses and environmental control projects.
Capital expenditures related to modernization and productivity improvements, expansion of existing businesses and environmental control projects is expected to be in the range of 2.5% to 3.0% of sales during 2020.
A primary focus for the Company in 2020 will continue to be cash deployment focused on shareholder value creation, with a preference for business acquisitions.

28 2019 PPG ANNUAL REPORT AND 10-K


Cash used for financing activities
 
 
% Change
($ in millions, except percentages)
2019

2018

2019 vs. 2018
Cash used for financing activities

($758
)

($1,205
)
(37.1)%
2019 vs. 2018
The $447 million decrease in cash used for financing activities - continuing operations, was primarily due to lower net purchases of treasury stock year-over-year, partially offset by the repayment of long term debt.
Share repurchase activity
($ in millions, except number of shares)
2019

2018

Number of shares repurchased (millions)
2.7

15.9

Cost of shares repurchased

$325


$1,721

The Company has approximately $1.5 billion remaining under the current authorization from the Board of Directors, which was approved in December 2017. The current authorized repurchase program has no expiration date.
Dividends paid to shareholders
($ in millions)
2019

2018

Dividends paid to shareholders

$468


$453

PPG has paid uninterrupted annual dividends since 1899, and 2019 marked the 48th consecutive year of increased annual per-share dividend payments to shareholders. The Company raised its per-share quarterly dividend by 6% to $0.51 per share paid in September 2019.
Debt issued and repaid
Debt Issued (net of discount and issuance costs)
Year
$ in millions

$300 million 2.4% Note due 2024 and $300 million 2.8% Notes due 2029
2019

$595

$300 million 3.2% Note due 2023 and $700 million 3.75% Notes due 2028
2018

$992

Debt Repaid
Year
$ in millions

0.00% Note (€300)
2019

$334

2.3% Notes
2019

$300

The ratio of total debt, including finance leases (previously referred to as capital leases), to total debt and equity was 49% at December 31, 2019, down from 52% in 2018.
Credit agreements and lines of credit
In August 2019, PPG amended and restated the Credit Agreement with several banks and financial institutions as further discussed in Note 9, "Borrowings and Lines of Credit" under Item 8 of this Form 10-K. The Credit Agreement amends and restates the Company's existing five year credit agreement dated as of December 18, 2015. The Credit Agreement provides for a