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2016 PPG ANNUAL REPORT AND FORM 10-K 15
effective income tax rate could be affected by changes in the mix
of earnings in countries with differing statutory tax rates,
changes in the valuation of deferred tax assets or changes in tax
laws or their interpretation. Recent developments, including
potential U.S. tax reform discussions, the European
Commission’s investigations on illegal state aid as well as the
Organisation for Economic Co-operation and Development
project on Base Erosion and Profit Shifting may result in
changes to long-standing tax principles, which could adversely
affect our effective tax rate or result in higher cash tax liabilities.
If our effective income tax rate was to increase, our cash from
operating activities, financial condition and results of operations
would be adversely affected.
Although we believe that our tax filing positions are
appropriate, the final determination of tax audits or tax disputes
may be different from what is reflected in our historical income
tax provisions and accruals. If future audits find that additional
taxes are due, we may be subject to incremental tax liabilities,
possibly including interest and penalties, which could have a
material adverse effect on our cash from operating activities,
financial condition and results of operations.
Business disruptions could have a negative impact on our
results of operations and financial condition.
Unexpected events, including supply disruptions, temporary
plant and/or power outages, work stoppages, natural disasters
and severe weather events, 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.
Failure to successfully integrate acquired businesses into our
existing operations could adversely affect our financial results.
Part of the Company’s strategy is growth through
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:
• difficulties in assimilating acquired companies and
products into our existing business;
• delays in realizing the benefits from the acquired
companies or products;
• diversion of our management’s time and attention from
other business concerns;
• difficulties due to lack of or limited prior experience in
any new markets we may enter;
• unforeseen claims and liabilities, including unexpected
environmental exposures or product liability;
• unexpected losses of customers or suppliers of the
acquired or existing business;
• difficulty in conforming the acquired business’ standards,
processes, procedures and controls to those of our
operations; and
• difficulties in retaining key employees of the acquired
businesses.
Our failure to address these risks or other problems
encountered in connection with our past or future acquisitions
and joint ventures could cause us to fail to realize the anticipated
benefits of such acquisitions or joint ventures and could
adversely affect our results of operations, cash from operating
activities or financial condition.
Our ability to understand our customers’ specific preferences
and requirements, and to innovate, develop, produce and
market products that meet customer demand is critical to our
business results.
Our business relies on continued global demand for our
brands and products. To achieve 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 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.
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.
The industries in which we operate are highly competitive.
With each of our businesses, an increase in competition may
cause us to lose market share, lose a large regional or global
customer, or compel us to reduce prices to remain competitive,
which could result in reduced margins for our products.
Competitive pressures may not only reduce our margins but may
also impact our revenues and our growth which could adversely
affect our results of operations.
The security of our information technology systems could be
compromised, which could adversely affect our ability to
operate.
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 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.