PPG Annual Report and 10K 2019

2019 PPG ANNUAL REPORT AND FORM 10-K 11 versus 2019. Further, given the distribution nature of many of our businesses, logistics and distribution costs are sizable, as are wage and benefit changes. For 2019 versus 2018, we experienced a slight decrease in our logistics costs as a percentage of sales driven by operational efficiency improvements and through sourcing efforts to take advantage of the reduction in industry surface transportation shipping rates due to an improvement in the availability of transportation assets. We expect these costs to remain steady or be slightly lower through 2020 given the continuing efforts by PPG to improve our global operational efficiencies. Backlog In general, PPG does not manufacture its products against a backlog of orders. Production and inventory levels are geared primarily to projections of future demand and the level of incoming orders. Global Operations PPG has a significant investment in non-U.S. operations. This broad geographic footprint serves to lessen the significance of economic impacts occurring in any one region on our total Net sales and Income before income taxes in the consolidated statement of income. As a result of our expansion outside the U.S., we are subject to certain inherent risks, including economic and political conditions in international markets, trade protection measures and fluctuations in foreign currency exchange rates. During 2019, unfavorable foreign currency translation decreased Net sales by approximately $400 million and Income before income taxes by approximately $50 million. Our net sales in the developed and emerging regions of the world for the years ended December 31 st are summarized below: ($ in millions) 2019 2018 2017 Net sales United States, Canada, Western Europe $10,191 $10,299 $9,911 Latin America, Central and Eastern Europe, Middle East, Africa, Asia Pacific 4,955 5,075 4,837 Total $15,146 $15,374 $14,748 Refer to Note 21, “Reportable Business Segment Information” under Item 8 of this Form 10-K for geographic information related to PPG’s property, plant and equipment, and for additional geographic information pertaining to sales. Seasonality PPG’s Income before income taxes has typically been greater in the second and third quarters and Cash from operating activities has been greatest in the fourth quarter due to end-use market seasonality, primarily in our architectural coatings businesses. Demand for our architectural coatings products is typically the strongest in the second and third quarters due to higher home improvement, maintenance and construction activity during the spring and summer months in the U.S., Canada and Europe. The Latin America paint season is the strongest in the fourth quarter. These cyclical activity levels result in the collection of outstanding receivables and lower inventory on hand in the fourth quarter generating higher Cash from operating activities. Employee Relations The average number of people employed worldwide by PPG during 2019 was approximately 47,600. The Company has numerous collective bargaining agreements throughout the world. We observe local customs, laws and practices in labor relations when negotiating collective bargaining agreements. There were no significant work stoppages in 2019. While we have experienced occasional work stoppages as a result of the collective bargaining process and may experience some work stoppages in the future, we believe that we will be able to negotiate all labor agreements on satisfactory terms. To date, these work stoppages have not had a significant impact on our results of operations. Overall, we believe we have good relationships with our employees. Environmental Matters PPG is committed to operating in a sustainable manner and to helping our customers meet their sustainability goals. Our sustainability efforts are led by the Technology and Environment Committee of our Board of Directors and our Sustainability Committee, which is comprised of members of PPG’s senior management team. The Sustainability Committee establishes policies, programs, procedures and goals to address sustainability in our business practices, including resourcemanagement, climate change, innovation, communications, purchasing, manufacturing and employee wellness. Our dedication to innovation is intertwined with sustainability. Once again, we increased the percent of our sales from sustainable products to 33% in 2019 from 32% in 2018. We are marketing an ever-growing variety of products and services that provide environmental, safety and other benefits to our customers. Our products contribute to lighter, more fuel-efficient vehicles, airplanes and ships, and they help our customers reduce their energy consumption, conserve water and reduce waste. These products include a compact automotive paint process that saves energy and reduces water usage; sustainable,

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