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(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.

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.and other key feedstocks.

Through effective management of raw materials, energy and logistics, the Company maintains a competitive cost position and ensures ongoing security of supply. Security of a sufficient supply of high-quality raw materials is important to PPG’s continued success as it allows the Company to increase production as necessary to keep pace with customer demand. In 2021, we experienced shortages of certain raw materials, which negatively impacted our ability to fully meet customer demand. We are continuing our aggressive sourcing initiatives to improve our competitive cost position and broaden our supply of high qualityhigh-quality raw materials. These initiatives include qualifying multiple sources of supply, both local and international, including suppliers fromwithin Asia and other lower cost regions of the world, addingcontinuing to diversify our resin supply, including actions to expand our on-site resin production at certain manufacturing locationscapabilities, and reducing the amount of titanium dioxide used in our product formulations.

We are subject to existing and evolving standards relating to the regulation and 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.”), the United Kingdom (“U.K.”), 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.

At PPG, has joined a global initiativeour commitment to eliminate child labor from the mica industry, and the Company is continuingsustainability extends to take steps, including auditsour suppliers as an extension of our suppliers, to ensure compliance with PPG’s policy againstinternal focus on sustainability. Our Global Supplier Code of Conduct clarifies our global expectations in the useareas of childbusiness integrity, labor inpractices, associate health and safety, and environmental management. Our Supplier Sustainability Policy builds upon our Global Supplier Code of Conduct by establishing expectations for sustainability within our supply chains.chain. This policy reinforces our expectations that our suppliers, as well as their subcontractors, will comply fully with applicable laws and adhere to internationally recognized environmental, social and corporate-governance standards.

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 20192021 versus 2018,2020, we experienced a deflationary movementincreases in our operating costs particularlyof more than $1.0 billion led by raw material cost inflation. The increases 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 rosewere primarily driven by a mid-single-digit percentageongoing supply constraints, including various force majeure declarations, higher energy prices, maintenance outages at many of our suppliers, energy surcharges in 2018 versus 2017 due to the riseEurope, labor availability challenges, transportation shortages and higher ocean freight costs. Also in feedstock prices, acute2021, we experienced increases in other logistics costs, driven by supply chain disruptions, logistical challenges, labor shortages in key raw materials and the impactmanufacturing interruptions at both our factories and those of Chinese environmental regulations.

Given the uncertainty presented 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.

PPG has a significant investment in non-U.S. operations. This broad geographic footprint serves to lessen the significance to us of economic impacts occurring in any one region on our total Net sales and Income before income taxes inof the consolidated statement of income.world. As a result of our expansion outside the U.S.,global footprint, 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, unfavorable2021, favorable foreign currency translation decreasedincreased Net sales by approximately $400$345 million and Income before income taxes by approximately $50$60 million.

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 and traffic solutions businesses. Demand for our architectural coatings and traffic solutions 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.

The average number of people employed worldwide by PPG during 20192021 was approximately 47,600.49,300, of which approximately 14,800 were in the United States and approximately 34,500 were elsewhere in the world. 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 2019.2021. 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.

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 Sustainability and Innovation Committee (formerly known as the Technology and Environment CommitteeCommittee) of our Board of DirectorsDirectors. At the management level, day-to-day implementation of our environmental, social and governance (“ESG”) initiatives is led by our Vice President, Global Sustainability, a new position created in 2021 to coordinate PPG’s ESG and sustainability programs and to communicate our ESG progress with our customers, shareholders and other stakeholders. The Vice President, Global Sustainability works with PPG’s Sustainability Committee, which is compriseda committee of membersmanagement consisting of PPG’s senior management team. The Sustainability Committee establishescorporate executives, to establish and monitor our sustainability goals, policies, programs and procedures and goals to addressthat incorporate sustainability ininto our business practices, including resource management, climate change impacts, innovation, community engagement, communications, purchasing,procurement, 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%38% in 20192021 from 32%35% in 2018.2020. We are marketing an ever-growing variety of products and services that protect the environment and 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,

The Company’s commitment to sustainability continues to yield tangible results. In 2019,2021, 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.sustainability.ppg.com.

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 itwe 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$282 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.

It is expected that capital expenditures for such projects in 20202022 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 anticipatedis likely that environmental control standards will become increasingly stringent and the cost of compliance will increase.

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.

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 fromwithin Asia and other lower cost regions of the world, diversification of our resin supply including 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. Despite our actions undertaken to maintain supply arrangements adequate to meet planned operating requirements, raw material supply chain disruptions, including logistical and transportation challenges in many regions, have adversely impacted, and may continue to adversely impact, our financial results.

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.

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,COVID-19, consumer sentiment and commodity market volatility, disruption in existingsupply chains globally, potential changes to international trade agreements, the imposition of tariffs and the threat of additional tariffs, and labor shortages in certain regions of the United Kingdom’s exit from the European Union and weaker demand in China.world. 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.

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 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.costs.

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 20192021 by products sold outside the U.S. was approximately 61%65%.

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.

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:

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, andor such anticipated benefits may never be realized, which could adversely affect our results of operations, Cash from operating activities or financial condition.

Our business relies on continued global demand for our brands and products. To achieve our 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 automotive 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.

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

As discussed in the Explanatory Note, Note 2, “Restatement of Previously Reported Consolidated Annual Financial Statements” and in Note 19, “Quarterly Financial Information (unaudited)” underin 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.

None.

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. SeeRefer to Item 1. “Business” of this Form 10-K for the principal manufacturing and distribution facilities by reportable business segment.

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.

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" underin 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.

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 and the plaintiffs settled plaintiffs’ claims for injunctive relief and PPG agreed to enhancements to the DEP approved cleanup plan and a $250,000 donation to a Pennsylvania nonprofit organization. This settlement has been memorialized by an amendment to the CO&A which was appended to a Consent Agreement between PPG and the plaintiffs which has been entered by the federal Court. The remaining claims in the case for attorneys’ fees and a civil penalty are not affected by this settlement. PPG believes that the citizen’s suit isremaining claims are without merit and intends to defend itself against these claims vigorously.

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.

Foreign currency translation increased net sales from acquired businesses were almost entirely offset by lower sales volumes. The unfavorable impact from customer assortment changes inapproximately 2% as the U.S. architectural DIY channel negatively impacted sales volumes.

For specific business results, see the Segment ResultsPerformance of Reportable Business Segments section within Item 7 of this Form 10-K.

Selling, general and administrative expenses increased $31$391 million primarily due to:

Interest expense, net of Interest income increased $5decreased $20 million in 20192021 versus 20182020 primarily due to higher levelsmore favorable interest rates on outstanding debt.

In 2021 and 2020, impairment charges were recorded for the write-down of debtcertain assets related to the previously planned sale of certain smaller entities in non-strategic regions. Also, in 2020, an impairment charge was recorded to reduce the carrying value of an indefinite-lived trademark. Refer to Note 2, ”Acquisitions and Divestitures” and Note 6, “Goodwill and Other Identifiable Intangible Assets” in Item 8 of this Form 10-K for additional information.

In 2021, the reserve for asbestos-related claims was reduced to reflect the Company’s current year.estimate of potential liability for these claims. Refer to Note 14 “Commitments and Contingent Liabilities” in Item 8 of this Form 10-K for additional information.

The effective tax rate for the year-ended December 31, 20192021 was 23.6%20.6%, an increasea decrease of 2.7%0.8% from the prior year. In 2018, theyear primarily driven by a benefit from releases of reserves for uncertain 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 Cutspositions.

Earnings per diluted share and Jobs Act.

PPG believes investor’sinvestors’ 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 operationsand segment income 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 operationsand segment income 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 from continuing operations, earnings per diluted share from continuing operations, the effective tax rate, segment income 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.

Architectural coatings -– Americas and Asia Pacific net sales decreased byincreased a mid-single-digit percentage versusduring the prior year. The unfavorable impact from customer assortment changesyear with differences by channel and region. Despite a strong first quarter, the remaining nine months of the year were negatively impacted by raw material shortages. Favorable foreign currency benefited net sales due to the strengthening of the Mexican peso and certain currencies 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-ComexAsia Pacific region. In Mexico, PPG Comex architectural coatings businesses had slightly higherbusiness net sales, excluding the impact of foreign currency translation and acquisitions (organic sales), and increased by about 10% compared to the prior year as the concessionaire network sell-out of PPG products continued to benefitbe strong.

Architectural coatings – EMEA net sales increased about 25% versus prior year largely driven by acquisition-related sales from Tikkurila and higher selling prices. Favorable foreign currency translation benefited net sales compared to the openingprior year. Sales volumes were strong in the first half of a net of approximately 160 new concessionaire locations. Net sales in Asia Pacificthe year but were negatively impacted by unfavorable foreign currency translation.raw material shortages in the second half.

ArchitecturalNet sales for automotive refinish 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-yearover 20%, with significant growth in each region versus prior year driven by an increase in global miles driven and traffic density in most of the world coupled with higher selling prices. Despite volume growth in certain key countries, sales volumes were lower year-over-year.

Aerospace coatings net sales increased a low-single-digit percentage during the year primarily due to favorable foreign currency translation. Sales volumes were flat compared to prior year as a modest increase in demand for the Company’s military applications was offset by a decline in commercial OEM.

Net sales in the protective and marine coatings business increased over 10%35% versus prior year due to higher selling prices, strong demand in the Asia Pacific region and acquisition-related sales from VersaFlex.

Specialty coatings and materials net sales increased by about 35% versus the prior year driven by higher sales volumes. This increase was supportedvolumes in the U.S. and Europe.

Segment income decreased $70 million year-over-year due to raw material cost inflation, partially offset by market outperformance in all major platforms stemminghigher selling prices, higher sales volumes and savings from technology-advantaged products and robust industry demand.previously approved restructuring actions.

Aggregate sales volumes for the Industrial Coatings reportable business segment for the first quarter 2022 are expected to be lower by a mid-single-digit percentage versuscompared to 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.

During 2021, supply disruptions, severe cost inflation, and continuing impacts from COVID-19 significantly impacted net sales and earnings and the Company’s ability to meet robust aggregate customer demand. There was partial recovery in end-use markets that were significantly impacted by mobility restrictions in 2020, such as automotive refinish coatings and aerospace coatings, but both remained below 2019 economic conditions were generally positiveglobal demand levels. Demand for architectural products was mixed as DIY gradually moderated to pre-pandemic levels. This was partially offset by strong recovery in alldo-it-for-me (“DIFM”) activity as professional paint contractor project work improved from lower levels in 2020, supported by a strong U.S. housing market. A significant shortage of our major geographic regions despite soft global manufacturing activity that weakened duringsemiconductor chips developed as the year progressed which constrained automotive OEM manufacturers’ production, despite strong underlying demand in many regions. Raw material cost inflation trended higher throughout the year, finishing the fourth quarter about 30% above the prior year fourth quarter. Some other key costs continued to increase in 2021, such as logistics, employee wage and remained mixed by end-uses.benefit costs. The Company took swift action to collaborate with its customers and increase selling prices to help mitigate the elevated input costs which drove a 5% increase in selling prices compared to 2020. PPG’s net sales, excluding foreign currency translation impact, grewincreased approximately 1%19% versus the prior year. Acquisition-relatedyear and were a record $16.8 billion. Organic sales from acquisitions completed in 2018were up by about 10% and 2019acquisition-related sales contributed 2%9% to net sales growth year-over-year, net of dispositions.compared to prior year. The Company

benefited from five strategic acquisitions that were completed between December 2020 and June 2021. Foreign currency translation was unfavorable throughoutfavorable for the year and impacted net sales by about 3%2%. 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.

During 2019,In 2021, economic activity rebounded sharply from depressed levels experienced due to pandemic related restrictions in 2020. For the pace of economic growth moderated in the U.S. and Canada versus the priorfull year, led by weaker U.S. GDP growth. Automotive OEM industry builds were relatively flat compared to 2018.and industrial production both increased by nearly 6%. Demand in the residential and commercial construction markets was modestly higher in 2019 compared to 2018.also significantly improved during 2021. New home starts advanced approximately 2%by a low-teen percentage in 20192021 versus approximately 4%8% in 2018.2020. Residential remodeling was down 2%up by about 9% in 20192021 versus 2018, while commercial2020 supported by strong housing fundamentals. Commercial construction was down approximately 4%10% compared to flat in 2018.2020. Market demand for architectural paint continuedshifted significantly back to shift more to professional trade paintersDIFM from the DIY channel during the year as continued lower U.S. unemployment and increased mobility resulted in consumers choosing to hire professional painters

European economic activity improved in 2021, but was weak in 2019.constrained by supply disruptions. Industrial production and manufacturing rates in the region were lowerhigher than 2018 and worsened as the year progressed. The2020. Activity in this region was negatively impacted by continuing uncertainty overmobility restrictions associated with COVID-19 and by the United Kingdom’sU.K.’s exit from the European Union which further disrupted logistics, especially to and overall contracting demand in most offrom the end-use markets that PPG supplies. Regional demand continued to be mixed by country and end-uses. Demand for PPG’s products wasU.K. Semiconductor chip shortages negatively impacted by a decline in automotive industry builds and soft manufacturing activity in most of the general industrialOEM sales volumes versus prior year, despite strong demand. Architectural coatings sub-segments. PPG’s architectural coatings -– EMEA business organicnet sales were higher driven by a low-single-digit percentage as higher selling pricesstrong demand by professional paint contractors and the June 2021 acquisition of Tikkurila, partially offset by lower demand for architectural DIY products from elevated levels in 2020. Net sales volumes.were aided by partial recovery in the aerospace and automotive refinish coatings businesses. Demand for packaging coatings and general industrial products was solid.

EMEA represented approximately 30%32% of PPG’s 20192021 net sales, similar to prior year levels. Regional coatings volumes remain approximately 20% below 2008 pre-recession levels.modestly higher than 2020. Net sales, excluding the impact of foreign currency translation, increased in 2019 compared to 2018 asover 20%, led by higher selling prices and acquisition-related sales. Regional sales more than offset lower sales volumes. The euro and British pound both depreciated against the U.S. dollar duringvolumes were up a mid-single-digit percentage compared to 2020, but remain 8% below 2019.

The emerging regions of Asia Pacific and Latin America represented 27%28% of PPG’s 20192021 net sales in aggregate, similar to the prior year.

Asia Pacific remained the largest emerging region, with net sales of approximately $2.5nearly $3 billion, led by China, which remained PPG’s second largest country by revenue. Net sales in 2021 were more than 20% higher than 2020 driven by strong organic growth that was up a mid-teen-percentage compared to 2020. The Performance Coatings segment grew sales volumes in Asia Pacific,volume growth was led by strong sales volume growthrecovering demand for coatings products from softer economic activity in 2020 and demand for the Company’s technologically advantaged products. Sales volumes were the strongest in the protective and marine, coatingsindustrial, and aerospacepackaging coatings businesses. Sales volumes in the Industrial Coatings segmentautomotive OEM end-use market were lowerpositive and above industry build rates, but were constrained by a high-single-digit percentage year-over-year, mostly due to a declinesemiconductor chip shortages. Sales volumes in the automotive OEM coatings business, particularly in China and India where new automobile salesregion were lower, and a decline in the industrial coatings business driven by weakening global manufacturing demand.slightly higher compared to 2019.

Overall, demand in Latin America declinedsharply increased year-over-year driven by lower automotive industry builds and overall softerimproved economic conditionsactivity in most countries, includingend-use markets. Organic sales were higher by a weak trading environment in Mexico. In Mexico,high-teen-percentage as compared to 2020. Strong contributions were made by the PPG-ComexPPG Comex business, which continued to outpace the industry and added a net of approximately 160over 150 new concessionaire locations. The overall region’s performance was supported by strong growthlocations during 2021. Additionally, all the businesses in the packagingindustrial coatings business. Weakerreportable segment delivered strong year over year sales volumes were offset by higher selling prices.growth. Foreign currency translation was volatile and finished 2% unfavorableabout 3% favorable compared to 2018,2020, principally driven by a weaker

U.S. dollar compared to currencies, including the Mexican peso and Brazilian real. Sales volumes in the region were up a low-single-digit percentage compared to 2019.

Looking ahead to 2020, weWe expect modestsolid global market growth in 2022 that will likely be uneven by region and end-use. WeAs 2022 progresses, we expect most regional growth ratesdemand for coatings products to be similar to 2019, with the softest conditionsbenefit from more economic re-opening, an easing of supply chain problems, general inventory rebuilding across many end-use markets, and healthy consumer spending. Continued recovery is expected in the EMEA region.automotive refinish, automotive OEM and aerospace coatings businesses, which collectively accounted for about 40% of the Company’s pre-pandemic sales, and where the Company has broad global businesses supported by advantaged technologies.

We anticipate that PPG’s U.S. and Canada regional growth will be led by aerospace and automotive OEM coatings albeit at lower levels than 2019 dueas both end-use markets continue their recovery to expected production curtailments at one customer, especiallypre-pandemic demand levels. Automotive OEM industry builds in the first half of the year. Automotive OEM buildsregion are expected to be relatively flathigher by a mid-teen-percentage compared to 2021. Architectural DIY demand is expected to remain at more moderate levels during 2022 and similar to 2019. We expect modestly positive growthTraffic solutions demand should be aided later in housing and commercial construction.2022 as infrastructure activity gains momentum.

We expect similar industry demand trends in 20202022 in Europe asto gradually improve from those experienced in 2019 with continuing improvement2021, particularly in profitability due to margin improvement.the automotive OEM and refinish coatings businesses. The integration of Tikkurila will continue, and synergies from recent acquisitions should aid earnings growth. 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 coatingspackaging, protective and marine, and general industrial coatings. Overall demand is expected to remain soft as industry growth rates are anticipated to be flat to modestly lower. Demand is expected to contractsimilar but be mixed by country in the architectural coatings business. Raw material availability is expected to gradually improve as the year progresses. We continue to monitor the economic environment in the U.K., as its exit from the European Union progresses and impacts consumer sentiment, logistics, labor availability and coatings demand.

In Asia Pacific, we expect improved industrial production growtheconomic activity to be soft in China during the first quarter as more severe operating restrictions have recently been imposed due to COVID and the Winter Olympics. The region is expected to receive stimulus support that should help aid economic activity as the year progresses. Economic output in Southeast Asia and India as the year progresses.is still below 2019 levels, but is expected to improve in 2022. In China, we foreseeexpect continued growth above the global average growth withdespite challenges in the real estate market and heightened riskrisks 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.gain momentum as order books for large vessels and container ships is at multi-year highs.

In Latin America, we anticipate slightly better economic conditions in Mexico, most of Central America and South America compared to 2019.2021. We expect continued strong demand in the PPG Comex architectural coatings business.

We made significant progress on the global restructuring programs that were announced in December 2016April 2018, June 2019 and May 2018.June 2020. The April 2018 program has been substantially completed. In the fourth quarter 2021, the Company achieved approximately $70 million of savings in 2019 relatingapproved business restructuring plans related to these programs. These restructuring actions are expected to be completed by the end of the second quarter of 2020.recent acquisitions. Aggregate restructuring savings related to the 2020, 2019 2018 and 20162018 programs was approximately $85$135 million in 2019.

Raw materials are aour most significant input cost to the process of manufacturing coatings.cost. 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 lowersignificantly higher in 20192021 versus 2018 due to variety2020. The increases in raw material costs were primarily driven by ongoing supply constraints, including various force majeure declarations, higher energy prices, maintenance outages at many of reasons, including softer industry demandour suppliers, energy surcharges in Europe, labor availability challenges, transportation shortages and lower crude oil prices.higher ocean freight costs. PPG currently expects overall raw material pricescosts to be impacted by weak industrial supplybetween 25% and demand conditions30% higher on a year-over-year basis in 2020.the first quarter 2022. Cost inflation is expected in several other areas, including wage, benefit and logistics costs in 2020.2022.

In 2019, weWe achieved broad selling price improvement across all businesses in 2021, reflecting the Company’s efforts to offset various 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 forcontinue to prioritize additional selling price increases.increases in the first quarter 2022 and will seek additional increases throughout the year as necessary.

In 2019,2021, we experienced unfavorablefavorable foreign currency translation throughout the year. Based on mid-January 2020 exchange rates, the Company does notWe expect unfavorable year-over-year foreign currency translation to significantly impact 2020 net sales or income before income taxes.in 2022. The foreign currency environment continues to be volatile, and the impact on 20202022 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 relatedtransaction-related impacts.

Over the past five years, the Company used over $4.5$3 billion of cash to repurchase approximately 4527 million shares of PPG stock, including $325$210 million in 2019.2021. The Company ended the year with approximately $1.5$1.3 billion remaining under its current share repurchase authorization. During 2019,2021, the Company deployed nearly $700$2.1 billion for acquisitions, $371 million for acquisitions, including the purchase of a remaining minority interest,capital expenditures and approximately $470$536 million for dividends. In 2021, PPG increased its per-share dividend in September 2019, markingmarked the 48th50th annual per share dividend increase and the 120th consecutive122nd successive year of annual dividend payments.

PPG ended 20192021 with approximately $1.3$1.1 billion in cash and short-term investments. The Company expects continued strong cash generation in 2020.2022.

As also discussed in Note 14, PPG has significant reserves for environmental contingencies. Refer to the Environmental Matters section of Note 14 for details of these reserves. 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.

Note 14, PPG has significant reserves for environmental contingencies. Please refer to1, “Summary of Significant Accounting Policies” in Item 8 of this Form 10-K describes 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 continueCompany’s recently adopted accounting pronouncements.

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.

The $597$567 million increasedecrease in Cash from operating activities - continuing operations was primarily due to favorable changesincreases in working capital, excluding the impact of business acquisitions, and lower cash contributions to its defined benefit pension plans year-over-year.acquisitions.

A key metric we use to measure our working capital management is operating working capital as a percentage of sales (fourth quarter sales annualized). 

We expect cash outlays for environmental remediation activities in 20202022 to be between $80 million and $100 million.

The $245$957 million increase in cash used for investing activities, - continuing operations, was primarily due to higher spending on business acquisitions.acquisitions and capital expenditures, partially offset by proceeds from the sale of a production facility in connection with the Company’s manufacturing footprint consolidation plans and associated restructuring programs.

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%$475 million to 3.0%$525 million in 2022 in support of sales during 2020.future organic growth opportunities and reflecting lower capital spending in the past two years due to COVID-19 constraints.

A primary focus forIn 2022, the Company in 2020 will continue to be cash deployment focused on shareholder value creation, with a preference for business acquisitions.

The $447$152 million decreaseincrease in cash used forfrom financing activities, - continuing operations, was primarily due to lower netthe issuance of long-term debt in 2021, partially offset by higher repayments of long-term debt, purchases of treasury stock year-over-year, partially offset by the repayment of long term debt.and dividends paid year-over-year.

The Company has approximately $1.5$1.3 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.

PPG has paid uninterrupted annual dividends since 1899, and 20192021 marked the 48th consecutive50th successive year of increased annual per-share dividend payments to shareholders. The Company raised its per-share quarterly dividend by 6%more than 9% to $0.51$0.59 per share paid in September 2019.December 2021.

In August 2019, PPG amended and restated the Credit Agreementits five-year credit agreement (the “Credit Agreement”) with several banks and financial institutions as further discussed in Note 9,, "Borrowings "Borrowings and Lines of Credit" underCredit" in 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 $2.2 billion unsecured revolving credit facility. The Credit Agreement will terminate on August 30, 2024. DuringIn March 2020, PPG borrowed $800 million under the years ended December 31, 2019Credit Agreement and 2018, thererepaid that amount in full in April 2020. There were no borrowings amounts outstanding under the existing or the prior credit agreement.agreement as of December 31, 2021 and December 31, 2020.

The Credit Agreement also supports the Company’s commercial paper borrowings.borrowings which are classified as long-term based on PPG’s intent and ability to refinance these borrowings on a long-term basis. As of December 31, 2019,2021 and 2020, there were $100$440 million and $250 million of commercial paper borrowings outstanding. There were no commercial paper borrowings outstanding, respectively.

The Term Loan Credit Agreement and Credit Agreement require the Company to maintain a ratio of Total Indebtedness to Total Capitalization, as defined in the Term Loan Credit Agreement and Credit Agreement, of 60% or less; provided, that for any fiscal quarter in which the Company has made an acquisition for consideration in excess of $1 billion and for the next five fiscal quarters thereafter, the ratio of Total Indebtedness to Total Capitalization may not exceed 65% at any time. As of December 31, 20182021, Total Indebtedness to Total Capitalization as defined under the prior credit agreement.Credit Agreement and the Term Loan was 48%.

In addition to the amounts available under lines of credit, the Company maintains access to the capital markets and may issue debt or equity securities from time to time, which may provide an additional source of liquidity. 

We continue to believe that our cash on hand and short term investments, cash from operations and the Company’s access to capital markets will continue to be sufficient to fund our operating activities, capital spending, acquisitions, dividend payments, debt service, share repurchases, contributions to pension plans, and PPG’s significant contractual obligations. Thesecash requirements. The Company’s significant cash requirements include the following contractual obligations and commitments.

The Company’s off-balance sheet arrangements include unconditional purchase commitments disclosed in the following table.“Liquidity and Capital Resources” section in the cash requirements table as well as letters of credit as discussed in Note 9, “Borrowings and Lines of Credit” in Item 8 of this Form 10-K.