PPG Annual Report 2016

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2016 PPG ANNUAL REPORT AND FORM 10-K 13
GHG emissions are generated by locations in the U.S., where
considerable legislative and regulatory activity has been taking
place. PPG has, and will continue to, annually report our global
GHG emissions to the voluntary Carbon Disclosure project.
Since PPG’s GHG emissions arise principally from
combustion of fossil fuels and the purchase of electricity, PPG
has for some time recognized the desirability of reducing energy
consumption and GHG generation. For the three year period
ended December 31, 2016, including the flat glass facilities
divested October 1, 2016, energy consumption intensity was
reduced by 30% and GHG emission generation intensity was
reduced by 22%.
PPG participates in both the U.S. Department of Energy,
BETTER BUILDINGS®, BETTER PLANTS® program,
formerly the SAVE ENERGY NOW® Leadership program, and
the Environmental Protection Agency ENERGY STAR®
Industrial Partnership program, both reinforcing the company’s
voluntary efforts to significantly reduce its industrial energy
intensity. These programs include developing and implementing
energy management processes and setting energy savings targets
while providing a suite of educational, training, and technical
resources to help meet those targets. Recognizing the continuing
importance of this matter, PPG has a senior management group
with a mandate to guide the Company’s progress in this area.
PPG’s public disclosure on energy security and climate
change can be viewed in our Sustainability Report at
sustainability.ppg.com or at the Carbon Disclosure Project
Available Information
The Company’s website address is . The
Company posts, and shareholders may access without charge,
the Company’s recent filings and any amendments thereto of its
annual reports on Form 10-K, quarterly reports on Form 10-Q
and its proxy statements as soon as reasonably practicable after
such reports are filed with the Securities and Exchange
Commission (“SEC”). The Company also posts all financial
press releases, including earnings releases, to its website. All
other reports filed or furnished to the SEC, including reports on
Form 8-K, are available via direct link on PPG’s website to the
SEC’s website, . Reference to the Company’s and
the SEC’s websites herein does not incorporate by reference any
information contained on those websites and such information
should not be considered part of this Form 10-K.
Item 1A. Risk Factors
As a global manufacturer of coatings, specialty materials
and fiber glass products, 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.
Increases in prices and declines in the availability of raw
materials could negatively impact our financial results.
Our financial results are significantly affected by the cost of
raw materials. Coatings raw materials, which include both
organic, primarily petroleum based, materials and inorganic
materials, including titanium dioxide, comprise between 70%
and 80% of the Company’s cost of sales, exclusive of
depreciation and amortization, sold in most coatings
formulations and 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 from Asia and other lower cost regions of the world,
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
products use both petroleum-derived and bio-based materials as
part of a product renewal strategy.
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.
The pace of economic growth and level of uncertainty could
have a negative impact on our results of operations and cash
flows.
During 2016, overall economic conditions remained mixed
among the major global economies. 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.
Refer to Item 7. “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” of this Form 10-
K for discussion of the economic conditions in 2016 and our
outlook on certain economic conditions in 2017.
We are subject to existing and evolving standards relating to
the protection of the environment.
Environmental laws and regulations control, among other
things, the discharge of pollutants into the air and water, the