PPG Industries Annual Report 2020 Form 10-K (NYSE:PPG) Published: February 20th, 2020 PDF generated by stocklight.com 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 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: Name of each exchange on Title of each class Trading Symbol(s) 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. 2 As of January 31, 2020, 235,755,928 shares of the Registrant’s common stock, with a par value of $1.66 /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 Incorporated By Document Reference In Part No. Portions of PPG Industries, Inc. Proxy Statement for its 2020 Annual Meeting of Shareholders III 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. Business 7 Item 1A. Risk Factors 12 Item 1B. Unresolved Staff Comments 16 Item 2. Properties 16 Item 3. Legal Proceedings 16 Item 4. Mine Safety Disclosures 18 Part II Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 19 Item 6. Selected Financial Data 19 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 32 Item 8. Financial Statements and Supplementary Data 34 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 80 Item 9A. Controls and Procedures 80 Item 9B. Other Information 80 Part III Item 10. Directors, Executive Officers and Corporate Governance 80 Item 11. Executive Compensation 80 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 80 Item 13. Certain Relationships and Related Transactions, and Director Independence 81 Item 14. Principal Accounting Fees and Services 81 Part IV Item 15. Exhibits, Financial Statement Schedules 81 Item 16. Form 10-K Summary 84 Signatures 85 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. 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. PERFORMANCE COATINGS Strategic Business Main Distribution Unit Products Primary End-uses Methods Primary Brands Automotive and commercial transport/fleet Coatings, solvents, Automotive Refinish repair and refurbishing, Independent distributors adhesives, sealants, PPG®, SEM® Coatings light industrial coatings and direct to customers sundries, software and specialty coatings for signs Coatings, sealants, transparencies, transparent armor, adhesives, Commercial, military, Direct to customers and Aerospace Coatings engineered materials, regional jet and general company-owned PPG® packaging and chemical aviation aircraft distribution network management services for the aerospace industry Direct to customers, Metal fabricators, heavy company-owned Coatings and finishes for the duty maintenance Protective and architectural coatings protection of metals and contractors and PPG® Marine Coatings stores, independent structures manufacturers of ships, distributors and bridges and rail cars concessionaires PPG®, GLIDDEN®, COMEX®, OLYMPIC®, DULUX® (in Canada), SIKKENS®, PPG Architectural PITTSBURGH PAINTS®, MULCO®, Company-owned stores, Coatings Americas Painting and maintenance FLOOD®, LIQUID NAILS®, SICO®, home centers and other and Asia Pacific contractors and RENNER®, TAUBMANS®, WHITE regional or national Paints, wood stains, consumers for decoration KNIGHT®, BRISTOL®, HOMAX® among consumer retail outlets, adhesives and purchased and maintenance of others paint dealers, sundries residential and SIGMA®, HISTOR®, SEIGNEURIE®, concessionaires, Architectural commercial building GUITTET®, PEINTURES GAUTHIER®, independent distributors Coatings Europe, structures RIPOLIN®, JOHNSTONE’S®, LEYLAND®, and direct to consumers Middle East and PRIMALEX®, DEKORAL®, TRILAK®, Africa (EMEA) PROMINENT PAINTS®, GORI®, BONDEX®, and DANKE!® among others This reportable business segment primarily supplies a variety of protective and decorative coatings, sealants and finishes Segment Overview along with paint strippers, stains and related chemicals, as well as transparencies and transparent armor. Product performance, technology, quality, technical and customer service, price, customer productivity,