PPG Industries : 2021 Annual Report and Form 10-K (pdf)

Peace	Positively Purple
PPG10-28	PPG13-08

Olive Sprig

PPG1125-4

Big Sky	Harmonious
PPG1142-2	PPG1120-5

Freedom Found

PPG1040-6

Aloha

PPG1229-5

Acceleration

PPG10-21

Annual

Report

2021

Be Daring

PPG1211-7

2021annualreport.ppg.com

A Message From Our Chairman

Our Valued Shareholders,

Certainly, 2021 was a very challenging year given the ever-evolving pandemic. In addition, we've learned to adapt and manage through a myriad of obstacles, including global supply chain disruptions, raw material scarcity, labor shortages and overall cost inflation.

That's why I am very proud and appreciative of our approximately 50,000 employees who helped to navigate through this past year. As a result of their dedication to living our values - The PPG Way - we were able to continue to support our customers, deliver strong results for our shareholders, and maintain the support of our communities around the world. Every day, our employees' commitment to our company's purpose - to protect and beautify the world - is the reason why we remain well positioned today and for the future.

Our Performance

We achieved all-time record sales of $16.8 billion in 2021, up 21% compared to the prior year. This was led by strong organic growth of 10% and several strategic acquisitions. In addition, we delivered record adjusted earnings per share (EPS) with year-over-year growth of more than 10%, despite unprecedented levels of inflation.

Strategically, we made continued progress in strengthening our company. In addition to integrating Ennis-Flint, which we acquired in December 2020 and formed PPG's traffic solutions strategic business unit, we welcomed and began integrating the companies acquired in 2021, including VersaFlex, Cetelon, Wörwag and Tikkurila. These five acquisitions added $1.7 billion of annualized revenue, expanded our sustainable product offerings and moved us into new markets.

We generated $1.6 billion of cash flow from operations, and deployed cash of about $2.3 billion on acquisitions and share repurchases. We also further optimized our cost structure in 2021, achieving about $135 million in cost savings.

We continue to have excellent financial flexibility with cash and short-term investments of about $1.1 billion at year-end.

The success of our team's work throughout the year has enabled us to continue to reward our shareholders by extending our consecutive annual dividend payments to over 120 years, including raising our annual dividend payout for the 50th successive year. We're among a very small number of companies that have achieved these milestones. #PPGProud.

Together, as One PPG, we remained steadfast in our commitment to launch innovative products and sustainable solutions in 2021. One example is our battery fire protection coating that protects electric automobiles from fire, improving passenger safety. This product, along with others from PPG, was recognized for its innovation with a 2021 R&D® 100 Award. Another example, PPG ERGOLUX™ Eco Powder Coatings contains up to 14% recycled polyethylene terephthalate (rPET). These innovative products, among many others, are helping to drive our customers' success by providing new solutions in the market.

Throughout 2021, we took actions to bolster our Environment, Social and Governance (ESG) commitments. We appointed our first Vice President of Global Sustainability; established a framework of Board governance of our ESG efforts; integrated the Task Force on Climate-Related Financial Disclosures (TCFD) Framework into our strategic planning process; and established groundwork to set Science- Based Targets aligned with the Paris Agreement.

We were pleased that Michael Nally, CEO, Generate Biomedicines, Inc. and CEO-Partner, Flagship Pioneering, and Guillermo Novo, chairman and CEO, Ashland Global Holdings Inc., were elected to join the PPG Board of Directors. On behalf of the entire board of directors, I would also like to recognize John Faraci, who joined the PPG Board in 2012 and will be stepping down at the April 2022 Annual Meeting of Shareholders. I want to thank John personally for his dedication to PPG and his continuous insight on how we can continue to evolve and grow. We wish him well in all of his future endeavors.

Our Culture and Communities

"It starts with me" is an important statement that I've been sharing with the PPG leadership team. I believe every employee owns and shapes the culture of our company. We use The PPG Way, a set of behaviors, to guide us. It includes goals such as "we do better today, than yesterday - every day," and "we make it happen." These are more than just words. They define who we are and what we want to be. We remain focused on creating an engaged workplace for everyone, where employees bring their unique ideas, backgrounds, and true selves to work every day. We believe that diverse teams perform better….period. We released our inaugural Diversity,

Equity & Inclusion (DE&I) Report in March, sharing our progress and our focus moving forward. This is another important step in our journey.

In addition, I want to recognize the many PPG people who supported the communities in which we live and operate. Last year, PPG and the PPG Foundation outlined a commitment to invest $20 million by

2025 to advance racial equity in the U.S. by funding educational pathways for Black communities and people of color. Employees around the world also continued our signature COLORFUL COMMUNITIES® program, conducting more than 50 projects in

2021 that brought color and brightness to schools, community centers and other important places where we live and work. Since 2015, we have completed more than 385 projects in 42 countries.

2021 Financial Performance

Our Focus on the Future

As we look ahead, I remain very optimistic about the future growth and earnings capability of our company, and see many catalysts to return to prior peak operating margins with opportunities to exceed them over time. This includes:

• Continued recovery in the automotive refinish coatings, automotive OEM (original equipment manufacturer) coatings and aerospace coatings businesses, which collectively account for about 40% of our pre-pandemic sales.
• Normalization of raw material costs.
• Higher operating leverage on sales volumes supported by our lower cost structure.
• Year-over-yearearnings growth in 2022 and 2023, due to further synergy capture from our recent acquisitions.
• Above-marketorganic growth driven by our advantaged and leading brands, technology and services. The recent announcement on our expanded relationship with The Home Depot® and HD Supply® is one example. Together with The Home Depot, we are positioned to outgrow the Pro market in the U.S.
• Further growth of our product innovation pipeline and digitization of our business models.

I want to thank you for your continued interest and investment in PPG. In 2022, we look forward to continuing to drive and fulfill our purpose - to protect and beautify the world.

Michael H. McGarry

Chairman and Chief Executive Officer

PPG Annual Report 2021

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, 2021

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:

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 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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

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, 2021, was $40,246 million.

As of January 31, 2022, 235,998,952 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 $36,817 million.

DOCUMENTS INCORPORATED BY REFERENCE

Document	Incorporated By
Reference In Part No.
Portions of PPG Industries, Inc. Proxy Statement for its 2022 Annual Meeting of Shareholders..............................................	III

2021 PPG ANNUAL REPORT AND FORM 10-K 1

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

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.

Item 9C.

Part III

Item 10.

Item 11.

Item 12.

Item 13.

Item 14.

Part IV

Item 15.

Item 16.

	Page
Business	3
Risk Factors	9
Unresolved Staff Comments	13
Properties	13
Legal Proceedings	13
Mine Safety Disclosures	15
Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases	16
of Equity Securities
[Reserved]	16
Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Quantitative and Qualitative Disclosures About Market Risk	29
Financial Statements and Supplementary Data	30
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	72
Controls and Procedures	72
Other Information	72
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	72
Directors, Executive Officers and Corporate Governance	72
Executive Compensation	72
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder	72
Matters
Certain Relationships and Related Transactions, and Director Independence	73
Principal Accounting Fees and Services	73
Exhibits, Financial Statement Schedules	73
Form 10-K Summary	76

Signatures

77

Note on Incorporation by Reference

Throughout this report, various information and data are incorporated by reference from the Company's 2021 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.

2021 PPG ANNUAL REPORT AND FORM 10-K 2

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, supplying customers in construction, consumer products, industrial and transportation markets and aftermarkets with manufacturing facilities and equity affiliates in more than 75 countries.

PPG supplies 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; pavement marking products; as well as coatings 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.

PPG's business is comprised of two reportable business segments: Performance Coatings and Industrial Coatings as described below:

2021 PPG ANNUAL REPORT AND FORM 10-K 3