ppg investor overview · 2020. 11. 25. · ppg’s 2019 form 10-k is considered representative, no...

PPG Investor OverviewNovember 2020

2

Notes

3

This presentation contains forward-looking

statements that reflect the Company’s current

views with respect to future events and

financial performance. You can identify forward-

looking statements by the fact that they do not

relate strictly to current or historic facts.

Forward-looking statements are identified by

the use of the words “aim,” “believe,” “expect,”

“anticipate,” “intend,” “estimate,” “project,”

“outlook,” “forecast” and other expressions that

indicate future events and trends.

Any forward-looking statement speaks only as

of the date on which such statement is made,

and the Company undertakes no obligation to

update any forward-looking statement, whether

as a result of new information, future events or

otherwise. You are advised, however, to

consult any further disclosures we make on

related subjects in our reports to the Securities

and Exchange Commission. Also, note the

following cautionary statements:

Many factors could cause actual results to

differ materially from the Company’s forward-

looking statements.

Such factors include global economic

conditions, increasing price and product

competition by foreign and domestic

competitors, fluctuations in cost and availability

of raw materials, the ability to achieve selling

price increases, the ability to recover margins,

customer inventory levels, our ability to

maintain favorable supplier relationships and

arrangements, the timing of and the realization

of anticipated cost savings from restructuring

initiatives, the ability to identify additional cost

savings opportunities, difficulties in integrating

acquired businesses and achieving expected

synergies therefrom, economic and political

conditions in the markets we serve, the ability

to penetrate existing, developing and emerging

foreign and domestic markets, foreign

exchange rates and fluctuations in such rates,

fluctuations in tax rates, the impact of future

legislation, the impact of environmental

regulations, unexpected business disruptions,

disruption to our business resulting from the

COVID-19 virus, the results of governmental

investigations and the unpredictability of

existing and possible future litigation.

However, it is not possible to predict or identify

all such factors. Consequently, while the list of

factors presented here and under Item 1A of

PPG’s 2019 Form 10-K is considered

representative, no such list should be

considered to be a complete statement of all

potential risks and uncertainties. Unlisted

factors may present significant additional

obstacles to the realization of forward-looking

statements. Consequences of material

differences in the results compared with those

anticipated in the forward-looking statements

could include, among other things, lower sales

or income, business disruption, operational

problems, financial loss, legal liability to third

parties, other factors set forth in Item 1A of

PPG’s 2019 Form 10-K and similar risks, any

of which could have a material adverse effect

on the Company’s consolidated financial

condition, results of operations or liquidity.

Forward-looking statements

4

PPG is a global maker of paints, coatings and specialty materials

Founded in 1883 Headquarters in Pittsburgh, PA

Operations in 70+ countries

Ranked 209 on the Fortune 500 in 2020

Images and videos were captured prior to the COVID-19 pandemic

5

Strategic portfolio actions

• Acquisitions with annual revenue of about $500 million

• Expanded technological capabilities and global footprint

2019 key achievements

Strong financial and operational performance

• Grew adjusted EPS* by ~8%(excluding foreign currency translation impact)

• Delivered approximately $85 millionin cost savings from restructuring actions

Cash and cash deployment

• Record ~$2.1 billion of cash generated from operations

• Quarterly per share dividend increase –48th consecutive year (6% annual increase)

• Returned approximately $0.8 billion of cash to shareholders

• $0.5 billion for dividends

• $0.3 billion for share repurchases

* See appendix for reconciliation of PPG reported to adjusted EPS

6

Well positioned to deliver

growth

Specialtyproducts and

solutions with key functional value

Highly

Diversifiedglobal coatings

company

Growingportfolio of

Sustainableproducts

High percentof sales to

Aftermarketend-use markets

Strong pipeline of

Innovativeproducts

Successful acquirerof coatings assets:

Consolidatingindustry

Opportunities for profitable growth:

7

PPG provides attractive investment fundamentals

Attractive positioning (specialty chemicals)1

Global footprintand capabilities2 Innovative3

• High functional value products

• Stable earnings/cash flow

• Vast growth potential

• Customer reach across every major region

• Opportunities to expand in Asia and growth markets

• Diverse participation in all key coatings end-use markets

• Shared service centers support lower cost

• Commitment to investment; R&D spend ~3% of sales

• New product sales nearing 23% of total sales

• On the frontier with products for electric vehicles

Epoxy electrocoat with low-temp cure Auto refinish automated painting systemSolar heat management coatings

Innovation Levers

8

Innovation levers at PPG

Overspray-free application for

automotive painting

Powercron® 160 Anodic Epoxy Electrocoat

OLYMPIC®

SMARTGUARDMulti-surface Waterproofer

Driving innovation across all aspects of coatings technology

EnvironmentalFormulation Application Functionality

2020Winner

2018Winner

2019Winner

LIQUID NAILS®

Fuze*It® Adhesive

Functionality

2017Winner

PPG CLEAN SURFACE

TECHNOLOGY™

2020Winner

9

ESG commitment drives value

Products and Processes

OurPeople

ResourceEfficiency

OurFootprint

Environmental Safety

33%

GoalZero

Injuries

2019 sales from sustainably-advantaged products and

processes

7%

Less GHG emissions in

2019 vs. 2017 baseline

AMSCI ESG

(scale AAA

to CCC)

In 2019:

Zero process waste to landfill for 33% of manufacturing and

R&D locations

29% less waste disposed vs. 2017

baseline

Reduction in spill and release rate in 2019 vs. 2017

baseline

32%

10

Acquisitions contribute to sales growth

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

+3% average sales growth

from acquisitions

Acquisitions supplement organic growth

Acquisition SalesGrowth Over Prior Year

(USD MM) 2013:

North America

Partial years

2014/5:

Notable Acquisitions:

Other

Global paint andcoatings industry (~$140B)

11

Strong fundamentals

• Stable earnings/cash

• Growth potential

• Low capital intensity

• Technology and service

• Consolidating industryCompetitiveLandscape

Source: IPPIC, Company Annual Reports, PPG estimates

PPG has completed 23 strategic acquisitions since the beginning of 2015

U.S and Canada (USCA)

Latin America(LA)

Europe, Middle Eastand Africa (EMEA)

Asia-Pacific(AP)

PPG geographic business regions

PPG opportunities to expandin Asia and globally

Source: IPPIC13

Coatings

geographic mix

Coatings Industry Geographic Sales Mix

PPG Coatings Geographic Net Sales Mix

18%

30%45%

7%

43%

30%

17%

10%

PPG data is for full year 2019

PPG is in line with the global coatings

industry end-use mix

19%

34%

30%

17%

PPG Coatings End-Use

Net Sales Mix

29%

41%

14%

16%

Source: IPPIC, Company Annual Reports, PPG estimates14

Coatings end-uses

Industry End Use Demand(~$140B Sales

Value)

Architectural GeneralIndustrial

AutomotiveOEM

Refinish / Collision

Protective& Marine

Packaging Aerospace

PPG data is for full year 2019

Meaningful presence No Current Meaningful Presence

Source: IPPIC; company annual reports, PPG estimates15

PPG global end-use positionsPositionby CoatingsVertical

PPG growth opportunity: To be #1 or #2 in every country/vertical

Global Position

Architectural GeneralIndustrial

Protective& Marine

AutomotiveOEM

Refinish / Collision

Packaging Aerospace

PPG #2 #2 #3 ~#3 #1 #2 #2 #1

Sherwin-Williams #1

AkzoNobel #3

Nippon #4

RPM #5

Axalta #6

BASF #7

16

PPG reporting segments drive our business

~60%

~40%

Performance Coatings

Industrial Coatings

Aerospace Coatings

Architectural Coatings*

Automotive Refinish Coatings

Protective & Marine Coatings

Automotive OEM Coatings

Industrial Coatings

Packaging Coatings

Specialty Coatings & Materials

* Includes Architectural Coatings (Americas and Asia Pacific) and Architectural Coatings (Europe, Middle East and Africa)

* Includes Architectural Coatings (Americas and Asia Pacific) and Architectural Coatings (Europe, Middle East and Africa)

** Includes acquisitions and excludes currency impact17

Performance Coatings segment

$8.4 $8.5$8.6

$8.9$9.0

14.8%

15.4% 15.2%

14.4%

15.7%

'15 '16 '17 '18 '19

45% 32% 12% 11%

Net Sales with ROS** ($ Billions) 2019 Net Sales by Geography

5-Year CAGR* +2%

Segment traits

• Distribution focus

• After-market and maintenance component

• Consistent cash generation

• Stable industries

EMEA AP LAUSCA

Aerospace ArchitecturalCoatings*

Automotive Refinish Coatings

Protective and Marine Coatings

'17 '18 '19

'15 '16 '17 '18 '19

Net Sales* 2019 Net Sales by Geography

18

Automotive Refinish

Key Industry Trends

• Color complexity

• Emerging region growth

• Technology shift to waterborne

• Value added programs and training

• Growth of advanced driver-assistance systems

PPG Global Waterborne Paint Shops3-Year

CAGR ~ 7%

* Includes acquisitions and excludes currency impact

USCA EMEA AP LA

5-Year CAGR* ~2%

* Includes acquisitions and excludes currency impact19

Aerospace

Key Industry Trends

• Single aisle aircraft driving growth

• Industry consolidation and OEM vertical integration intensify

• Stable to moderate fuel prices/strong passenger load factor

• Shift to robotic applications and automation

Net Sales Mix

50%50%

30%

70%

Aftermarket

OEM Military

Commercial

'15 '16 '17 '18 '19

Net Sales* 2019 Net Sales by Geography

USCA EMEA AP

5-Year CAGR* ~7%

15 16 17 18 19

USCA EMEA AP LA

* Includes acquisitions and excludes currency impact20

Key Industry End Uses

• Infrastructure ($4.4B)

• Energy ($3.8B)

• Marine Aftermarket ($2.3B)

• Industrial Maintenance ($1.9B)

• Marine OEM ($1.3B)

PPG Net Sales Mix

Protective Coatings

Protective Coatings

Marine Aftermarket

Marine Aftermarket

Marine New Build

Marine New Build

0%

20%

40%

60%

80%

100%

2009 2019

2019 Net Sales by GeographyNet Sales*

Protective & Marine Coatings (PMC)

5-Year CAGR* ~4%

'15 '16 '17 '18 '19

21

Strong Local Architectural BrandsPPG Net Sales Mix

Region Stores

USCA ~900

LA ~5,000***

AP ~50

EMEA ~700

Region Company Stores Ind. Dealers National Retailers

USCA 50% 15% 35%

LA 2% 89% 9%

AP 15% 44% 41%

EMEA 48% 30% 22%

Worldwide 40% 35% 25%

Original slide. Will be reformatted.

* Architectural Americas & Asia-Pacific and Architectural EMEA strategic business units

** Includes acquisitions and excludes currency impact

*** Latin America “stores” are mostly concessionaire locations in Mexico and Central America

Net Sales**

2019 Net Sales by Geography


Architectural Coatings*

5-Year CAGR* ~2%

USCA EMEA AP LA

22

Architectural Coatings is diversified globally and well positioned

Region Strength / Focus Brands

U.S. and Canada

• Services / Delivery • Digitalization• Higher variable cost structure

EMEA• Strong local brands • One of the leading positions

in most countries

LatinAmerica

• Strong brand recognition • Concessionaire model• Expansion into Central America• New factory in Panama

Asia-Pacific• Strong brand in ANZ• Regional participation in China

PPG’s local brands provide opportunities for growth

23

Industrial Coatings segment


AutomotiveOEM

IndustrialCoatings

PackagingCoatings


Segment traits

• Technology-advantaged products

• Mix of global and local customers

• High quality product performance

• Global customer footprint

40% 28% 24% 9%

Net Sales with ROS* ($ Billions) 2019 Net Sales by Geography

EMEA AP LAUSCA

$5.2$5.6

$5.8$6.1 $6.1

18.2% 18.7%16.4%

13.1% 14.1%

'15 '16 '17 '18 '19

5-Year CAGR* +3%

'15 '16 '17 '18 '19

USCA EMEA AP LA

'15 '16 '17 '18 '19


24

Customer MixKey Industry TrendsGlobal Auto OEM Production

All Remaining Customers

U.S. Based

Non-U.S.

Based

Top 7 PPG Automotive Customers

5-Year CAGR* ~ 0%


Net Sales*5-Year CAGR* ~ 1%

Automotive OEM


'15 '16 '17 '18 19

'15 '16 '17 '18 19


25

Industrial Coatings

Asia Net Sales*Key Industry End Uses

5-Year CAGR* ~ 4%



USCA EMEA AP LA

• Heavy-duty Equipment

• Appliances

• Electronic Materials

• Coil

• Automotive

Accessories

• Transportation

• Office Furniture

'15 '16 '17 '18 '19

Net Sales*5-Year CAGR* ~2%

26

Packaging Coatings

Metal Packaging Industry Segments

Key Industry Trends

• Metal packaging industry growth driven by sustainability, performance and safety

• Conversion to BPA-NI technology continues globally

• Can makers drive toward complexity reduction in coatings portfolio



USCA EMEA AP LA

Beverage

FoodPersonal

Care

Other

'15 '16 '17 '18 '19


27


Beverage

Silica

Teslin

Optical Monomers and Dyes

OLED materials

Key Industry Trends

• Mobile device conversions and TV transitioning to OLED technology

• Growth in large diameter tires and tires containing premium silica products

• Growth in durable labels in safety critical applications

Net

Sales Mix



USCA EMEA AP

Resins and Latex

Titanium Dioxide

Solvents and Pigments

Additives

ManufacturingPackaging

Distribution - Final

Source: PPG and industry estimates – figures vary greatly by end-use and application28

Coatings cost comparisonRaw material basket and manufacturing/distribution costs are different

Average Architectural Coatings

Average Industrial Coatings

Resins and Latex

Titanium Dioxide

Solvents and Pigments

Additives

Manufacturing

Packaging

Distribution -

Intermediate

Distribution - Final

Sold in 1-gallon paint cans and

5-gallon buckets

Sold in 2,000-liter

totes

17% 17%

15%13%

21%

+

29

Coatings Peers EBITDA %

+ Incremental impact due to the adoption of IFRS 16 “Leases” in 2019.

Adjusted EBITDA from continuing operations as percent of sales as reported in company reports (excluding unusual items); See Appendix for reconciliations.

2019 Full Year EBITDA as % of Net Sales

PPG remains a margin leader across coatings sector

30

Coatings Peers EBITDA %

17%

16%

15%

14%

19%

18%

17%

13%14%

21%

17%

16%

12%

13%

19%

16% 16%

11%

13%

19%

17% 17%

13%

21%

15%

+

Consistent coatings industry margins across varying economic conditions

2015 2019 2015 2019 2015 2019 2015 2019 2015 2019

+ Incremental impact due to the adoption of IFRS 16 “Leases” in 2019.

Adjusted EBITDA from continuing operations as percent of sales as reported in company reports (excluding unusual items); See Appendix for reconciliations.

2015-2019 Full Year EBITDA as % of Net Sales

2%

3%

2%

1% 1%

3%

2%

2%

PPG Average:

~1%

31

Corporate cost as

a percentage of sales*

2015 2019 2015 2019 2015 2019 2015 2019

*Axalta corporate cost results are not reported in company filings

Source: Annual company filings

15.1% 14.7%

11.1%

8.6%

6.4%

32

Industry leading 2019 return on capital*Measurable proof of PPG’s successful, disciplined and value-creating M&A

* Adjusted ROC excluding certain items (see reconciliation at end of presentation)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

2017 2018 2019

Capital

Return on Capital

ROC trend demonstrates successful acquisition integration

33

PPG return on capital (adjusted)*

15.1%

* Adjusted to exclude certain charges, see appendix for reconciliation. All years as originally reported, not adjusted for business divestitures.

Measurable proof of PPG’s successful, disciplined and value-creating M&A

2%

6%

10%

14%

0

200

400

600

2009 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19

Earnings

EBIT %

PPG Net SalesMix (€MM) Earnings (€MM)

Sales growth continues with improved margins in 2019

34

Total PPG Europe, Middle East & Africa

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2009 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19

Architectural Coatings EMEA Other PPG Businesses

2,457 2,516 2,433 2,431 2,523 2,618 2,542

'13 '14 '15 '16 '17 '18 '19

297 318 359 382 361

306 342

'13 '14 '15 '16 '17 '18 '19

Recent years impacted by significant cost inflation, depreciation of Asian currencies and weak automotive demand

PPG Asia-Pacific financials

$MM - USD

Consolidated Net Sales

Segment Income

$MM - USD

35

Nippon 8%Akzo 7%

PPG 5%

Asian Paints 5%Kansai 3%

KCC 2%

S-W 2%

Jotun 2%

Berger 2%

Axalta 2%

BASF 1%

Noroo 1%TOA 1%SKShu 1%

Hempel 1%Chugoku 1%

Carpoly 1%

Others 55%

#~14,000 players

* PPG estimates

** PPG ‘14-’19 CAGR excludes currency impact36

Strong and growing Asia-Pacific presence (excl. Japan)

Performance

Industrial

Broad, full range coatings business portfolio

PPG MarketPosition

PPG ’14 - ’19CAGR**

Automotive OEM #2 0%

General Industrial #2 5%

Packaging #1 2%

Auto Refinish #1 3%

Aerospace #1 9%

Protective/Marine #4 3%

Architectural #7 3%

Total Coatings #3 3%

60%14%

13%

9%4%

Industry Coatings Demand for Asia* PPG Asia Net Sales Mix (2019)

Coatings Industry in Asia remains fragmented* Many leading Asia markets (excl. Japan)*

ChinaIndia

SE Asia

KoreaANZ

$1.8 $1.8 $1.8 $1.8

$1.2

$1.6$1.5

$2.1

'12 '13 '14 '15 '16 '17 '18 '19

Adjusted +

Robust cash generation over time while transforming the business portfolio

$2.4

$1.7

$1.2

$1.5

$1.9

$1.5

$1.0

$1.3

'12 '13 '14 '15 '16 '17 '18 '19

$ Billions USD

* As originally reported, not adjusted for business divestitures

+ Adjusted Cash from Operations; excluding cash paid to fund the Pittsburgh Corning asbestos trust 37

PPG cash trends

Cash From Operations* Approximate Cash and Short-Term Investments

$ Billions USD

$415

$680

$470

$325

Cash Use Summary:

Grow Business ~45%

Return to Shareholders ~55%

20%

26%

18%

36%

Past 10Years (~$22B)(2010 – 2019)

Approximate2019

Cash Uses

Legacy of consistent and prudent cash deployment

*Acquisitions includes the 2019 cash paid to acquire the remaining minority interest in a coatings business.

$ in millions – As reported, not adjusted for business divestitures38

Balanced cash deployment

Capital Spending

Acquisitions*

Dividends

Share Repurchases

$0.00

$0.40

$0.80

$1.20

$1.60

$2.00

$2.40

'79 '84 '89 '94 '99 '04 '09 '14 '19

$0

$400

$800

$1,200

$1,600

'10 '11 '12 '13 '14 '15 '16 '17 '18 '19

Long-Term Debt Maturity Schedule$ in millions

13%

7%

3%4%

3%2% 3%

3% 3% 2% 3%

1980 || 1990 || '03 '05 '07 '09 '11 '13 '15 '17 '19

Last 5 years

Average = ~3.0%

PPG Share Repurchases$ in millions

Average ~$800MM

Average ~$975MM

39

PPG financial hallmarks

Last 3 years = 8%

Capital Spending as % of Sales

(As originally reported, not adjusted for business divestitures)

48 Years of Increased DividendsDividends per share – Adjusted for stock splits

0

200

400

600

800

'20 '21 '22 '23 '24 '25 '27 '28 '29 '38 '40 '44

EUR Notes

USD Notes

Additional materials and appendix

2019 EBITDA Reconciliation

PPG Sherwin-Williams Akzo Nobel RPMAxalta Coatings

Systems

Currency USD USD Euro USD USD

Sales 15,146 17,901 9,276 5,565 4,482

Income before taxes 1,661 1,982 785 340 330

Unusual or Infrequent Charges 312 *151 **150 ***126 ****95

Interest, net 100 349 **76 102 163

Depreciation & Amortization 511 575 **360 142 353

EBITDA, adjusted 2,584 3,057 1,371 710 941

% of Sales 17% 17% 15% 13% 21%

EBITDA as % of Sales (excluding specials):

42

- Amounts in millions, except percentages, reflects most recent year-end from continuing operations. Compiled from publicly available segment disclosures.

- For all years presented, PPG results from continuing operations, as disclosed in the most recent 10-K and Annual Report.

* Trademark impairment, integration costs and a pension plan settlement expense, which were partially offset by a Brazil indirect tax credit and a reduction in the California litigation provision.

** As disclosed on page 76 of the Akzo Nobel 2019 Annual Report. Akzo Nobel adjusted EBITDA as a % of sales of 14%, excluding the impact of adoption of IFRS 16.

*** Adjustments as disclosed on slide 8 of the RPM 4th Quarter 2019 Reconciliation of Non-GAAP and Supplemental Information Presentation.

**** Termination benefits, divestiture and impairment charges, strategic review and retention costs, offering and transaction costs, accelerated depreciation and debt extinguishment and refinancing related costs.



Systems


Sales 15,374 17,534 9,256 5,322 4,696


Unusual or Infrequent Charges 189 *499 **193 ***62 ****102

Interest, net 95 367 52 84 160

Depreciation & Amortization 497 596 239 128 369

EBITDA, adjusted 2,474 2,822 1,057 691 899

% of Sales 16% 16% 11% 13% 19%


43

- Amounts in millions, except percentages, reflects most recent year-end. Compiled from publicly available segment disclosures.


- Akzo Nobel results from continuing operations as disclosed in the Q4 2018 earnings release.

- Axalta results presented as disclosed in the 2019 10-K.

* Integration costs, environmental expenses, California litigation expense, and pension plan settlement expense

** Identified items as disclosed on page 23 of the Akzo Nobel 2018 Annual Report

*** Adjustments as disclosed on slide 8 of the RPM Fourth Quarter Results for Fiscal Year 2018 presentation

**** Termination benefits, debt extinguishment and refinancing related costs, accelerated depreciation and offering and transaction costs.



Systems


Sales 14,748 14,984 9,612 4,958 4,377


Unusual or Infrequent Charges 20 *186 -- **216 ***155

Interest, net 85 263 78 83 147


EBITDA, adjusted 2,570 2,410 1,118 660 840

% of Sales 17% 16% 12% 13% 19%


44

- Amounts in millions, except percentages, reflects most recent year-end. Compiled from publically available segment disclosures.



- Sherwin-Williams results for 2017 have been adjusted for adoption of ASU 2017-01 as well as an inventory accounting change made in 2018.

- Axalta results presented as disclosed in the 2019 10-K.

* Transaction and integration related SG&A expense related to the acquisition of Valspar, in addition to inventory accounting change adjustment

** Goodwill impairment charge, charge to exit Flowcrete Middle East, and severance expense.

*** Termination benefits, transition-related costs, Venezuelan foreign exchange losses and effects of deconsolidation impacts and impairments.

2016 EBITDA ReconciliationEBITDA as % of Sales (excluding specials):

45


Systems


Sales 14,270 11,856 9,434 4,814 4,069

Income before taxes 779 1,595 850 483 83

Unusual or Infrequent Charges 1,234 *58 5 **(15) ***257

Interest, net 99 154 91 81 178


EBITDA, adjusted 2,552 2,005 1,228 660 840

% of Sales 18% 17% 13% 14% 21%




- Axalta results have been updated for correction of immaterial errors as noted in the 2017 10-K report.

* Transaction and integration related SG&A expense related to the acquisition of Valspar.

** Reversal of Kirker earnout.

*** Termination benefits, debt extinguishment and refinancing related costs, offering and transaction costs, Venezuelan foreign exchange losses and effects of deconsolidation impacts and impairments.

2015 EBITDA ReconciliationEBITDA as % of Sales (excluding specials):

46


Systems


Sales 14,241 11,339 9,892 4,595 4,084


Unusual or Infrequent Charges 198 -- 80 -- 116*

Interest, net 86 62 91 69 197


EBITDA, adjusted 2,475 1,809 1,469 621 779

% of Sales 17% 16% 15% 14% 19%



- Akzo Nobel results from continuing operations (Paints & Coatings) with certain estimates based on 2016 recast data.

- Axalta results have been updated for correction of immaterial errors as noted in the 2017 10-K report.

* Termination benefits, transition-related costs, debt extinguishment and refinancing related costs, offering and transaction costs, Venezuelan foreign exchange losses and effects of deconsolidation impacts and impairments.

2019 Adjusted Return on Capital Reconciliation

(in millions, except percentages)PPG**

Sherwin-Williams

Akzo Nobel RPMAxalta Coatings

Systems


Net Earnings as Reported 1,243 1,541 555 267 249

Total Net Adjustments, after-tax (see details below)* 237 115 143 96 72

Adjusted Net Earnings 1,480 1,656 698 363 321

Net Interest Expense, after-tax* 100 265 45 78 124

Adjusted Net Earnings + Net Interest Expense 1,580 1,921 743 441 445

Capital (Average Debt & Average Equity) as Reported 9,991 12,941 11,397 3,868 5,129

Net Adjustments (see above) 237 115 143 96 72

Adjusted Average Capital 10,460 13,056 11,540 3,964 5,201

Adjusted Return on Capital 15.1% 14.7% 6.4% 11.1% 8.6%

47

Sources for Summary of Net Adjustments:

PPG: Net income impact of certain items as disclosed in the 2019 Form 10-K, page 22.

Sherwin-Williams: Net income impact of certain items of trademark impairment, integration costs and a pension plan settlement expense, which were partially offset by a Brazil indirect tax credit and a reduction in the California litigation provision as noted in the Fourth Quarter and Full Year 2019 Operating Segments presentation slide 2. This calculation does not include the adjustment for acquisition-related amortization.

Akzo Nobel: Net income impact of identified items as disclosed on page 3 of the Akzo Nobel Q4 and full-year 2019 report.

RPM: Net income impact of certain items as disclosed on slide 8 of the RPM 4th Quarter 2019 Reconciliation of Non-GAAP and Supplemental Information presentation.

Axalta Coatings Systems: Net income impact of certain items of termination benefits, divestiture and impairment charges, strategic review and retention costs, offering and transaction costs, accelerated depreciation and debt extinguishment and refinancing related costs as noted in the Fourth Quarter and Full Year 2019 Results press release, page 11.

* Tax impact calculated using a 24% tax rate, except for Akzo Nobel net adjustments.

** Does not foot due to the rounding effect of net adjustments.

48

2019 Quarterly Financial Results by Reportable Segment

Q1

2019

Q2

2019

Q3

2019

Q4

2019

Full Year

2019

Net sales

Performance Coatings $ 2,108 $ 2,430 $ 2,313 $ 2,183 $ 9,034

Industrial Coatings 1,516 1,594 1,513 1,489 6,112

TOTAL $ 3,624 $ 4,024 $ 3,826 $ 3,672 $ 15,146

Segment income

Performance Coatings $ 297 $ 425 $ 380 $ 307 $ 1,409

Industrial Coatings 218 235 206 203 862

TOTAL 515 660 586 510 2,271

Items not allocated to segments

Corporate (45) (45) (43) (64) (197)

Interest expense, net of interest income (25) (28) (23) (24) (100)

Legacy items (2) 1 - - (1)

Environmental remediation charges, net (10) (30) (21) - (61)

Business restructuring-related costs, net (3) (182) (18) (19) (222)

Acquisition-related costs (7) (10) - - (17)

Litigation matters, net (4) (3) - (5) (12)

Income before income taxes $ 419 $ 363 $ 481 $ 398 $ 1,661

PPG Industries and Consolidated Subsidiaries (Continuing Operations)Business Segment Information (Unaudited)

$ in millions

49

PPG Reported and Adjusted EPS

(1) Earnings per diluted share is calculated based on unrounded numbers. Figures in the table may not recalculate due to rounding.

(2) Included in business restructuring-related costs, net are business restructuring charges, accelerated depreciation of certain assets and other related costs, offset by releases to previously approved programs.

(3) After-tax impact of foreign currency translation was $37 million, or $0.16 per diluted share for the year ended December 31, 2019.

$ in millions, except EPS

Full Year

2019

Full Year

2018

Net Income EPS(1) Net Income EPS(1)

Reported net income from continuing operations $ 1,243 $ 5.22 $ 1,323 $ 5.40

Business restructuring-related costs, net(2) 168 0.71 53 0.21

Environmental remediation charges, net 47 0.20 58 0.24

Acquisition-related costs 13 0.05 4 0.02

Litigation matters, net 9 0.04 19 0.08

Gain from the sale of a non-operating asset — — (20) (0.08)

Net tax benefit for Tax Cuts and Jobs Act legislation — — (13) (0.05)

Costs related to customer assortment changes — — 14 0.05

Impairment of a non-manufacturing asset — — 7 0.03

Brand rationalization charge — — 4 0.02

Adjusted net income from continuing operations, excluding certain items(3) $ 1,480 $ 6.22 $ 1,449 $ 5.92

ppg investor overview · 2020. 11. 25. · ppg’s 2019 form 10-k is considered representative, no...

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