PPG Annual Report and 10K 2019

16 2019 PPG ANNUAL REPORT AND 10-K to protect sensitive information and confidential and personal data, our facilities and systems may be vulnerable to security breaches. This could lead to negative publicity, theft, modification or destruction of proprietary information or key information, manufacture of defective products, production downtimes and operational disruptions, which could adversely affect our reputation, competitiveness and results of operations. In 2018, we concluded that previously issued financial statements as detailed below should not be relied upon and restated those previously issued financial statements, which led to, among other things, shareholder litigation, investigations by the SEC and the U.S. Attorney’s office, a settlement by the Companywith the SEC and unanticipated costs for accounting and legal fees, and which may result in certain other risks. As discussed in the Explanatory Note, Note 2, “Restatement of Previously Reported Consolidated Annual Financial Statements” and in Note 19, “Quarterly Financial Information (unaudited)” under 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 thematerial weakness in theCompany’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. Item 1B. Unresolved Staff Comments None. Item 2. Properties 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. See Item 1. “Business” of this Form 10-K for the principal manufacturing and distribution facilities by reportable business segment. The Company’s principal research and development centers are located in Allison Park, Pa.; Tianjin, China; Milan, Italy; Monroeville, Pa.; Springdale, Pa.; Amsterdam, Netherlands; Burbank, Calif.; Tepexpan, Mexico; Marly, France and Wroclaw, Poland. 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. Item 3. Legal Proceedings 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" under 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 accountingmatters commenced by the U.S. Attorney’s Office for theWestern District of Pennsylvania (“USAO”). As previously disclosed, the USAO has informed PPG that it will not pursue any action as to the Company. On January 16, 2020, the Company, as a nominal defendant, and certain of its current or former officers and directors were named as defendants in a shareholder derivative action captioned L. Courtland Lee, derivatively on behalf of PPG Industries, Inc. v. Michael H. McGarry, et al. The plaintiff alleges breach of fiduciary duty and unjust enrichment arising out of various alleged acts, and alleged failures to act, by the individually named defendants following financial restatements by theCompany.