Ladies and gentlemen, thank you for standing by, and welcome to the Axalta Coating Systems Third Quarter 2017 Earnings Conference Call. All participants will be in a listen-only mode. A question-and-answer session will follow the management presentation. Today's call is being recorded, and replays will be available through November 10. Those listening after today's call should please take note that the information provided in the recording will not be updated and therefore may no longer be current. I would like to turn the call over to Chris Mecray for a few introductory remarks. Please go ahead sir.

Thank you, and good morning. This is Chris Mecray, Axalta's VP of Investor Relations. We appreciate your continued interest in Axalta and welcome you to our third quarter 2017 financial results conference call. Joining us today are Charlie Shaver, Chairman and CEO; and Robert Bryant, EVP and CFO. This morning, we released our quarterly financial results and posted a slide presentation to the Investor Relations section of our website at axaltacs.com, which we will be referencing during this call. Both the prepared remarks and discussion today may contain forward-looking statements reflecting the company's current view of future events and their potential effect on Axalta's operating and financial performance. These statements involve uncertainties and risks, and actual results may differ materially from these forward-looking statements. Please note that the company is under no obligation to provide updates to these forward-looking statements. This presentation also contains various non-GAAP financial measures. In the appendix, we have included reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures. For additional information regarding forward-looking statements and non-GAAP financial measures, please refer to our filings with the SEC. I will now turn the call over to Charlie.

Good morning, and thanks for joining our call today. We look forward to providing color on our most recent performance as well as offering a few thoughts on how we see the balance of 2017 shaping up. I hope you had a chance to review our press release and also noted from our release on October 9th when we preview today’s results and some and key drivers for our quarter. While the third quarter 2017 included significant business impacts and operating adjustments, we believe the business remains on solid footing and some of the transitory elements that took and will continue to impact 2017 results may actually translates to better out comes as we look forward to 2018, which I will review. Our markets remains fundamentally stable and supported and we believe we are on the right course for the coming year to deliver improved underlying results. If you were to turn to Slide 3 of our presentations, I will review some of our third quarter highlights. Taking a look at our financial results, we grew net sales year-over-year by 7% which included a 9.7% contribution from these recent acquisitions. We commented on our October 9th press release on the drivers of lower organic volume in the third quarter, which included distribution working capital adjustments in North America performance coatings, the ongoing effect of raw material cost price headwinds and the impact of the hurricanes and the earthquake in North America. These elements collectively had a significant impact on our net sales, masking otherwise healthy and stable demand trends in the end-markets that we serve. We believe most of these drivers are transitory in nature and we see our core markets as largely unchanged in the period. Stripping out the impact of the refinish adjustments in North America and the…

Thank you and good morning, everyone. Turning to Slide 4. Constant currency net sales in the quarter increased 5.1% year-over-year, including 10.4% growth in performance Coatings offset by 2.8% decline in transportation coatings. Overall growth in the third quarter was driven by 9.7% acquisition contribution, offset by lower organic volume and slightly lower average pricing in the period. Foreign currency translation benefited net sales by 1.9% in the quarter, the first positive effect in several years and a change from the 1.5% negative effect seen in that second quarter. We certainly welcome this inflection point. The largest contributor to the shift was the Euro, dollar appreciation versus the same period last year. Axalta's lower organic volume in the third quarter was driven to a largely by lower refinish volumes in North America and Latin America. Partially offset by solid growth in industrial and commercial vehicle end-markets. Consolidated price mix reutilization was at decrement of 0.7% in the quarter, primarily from the transportation segment, while refinish pricing was positive in all regions. Adjusted EBITDA in the third quarter of $210 million decreasing 9.1% from last year 230 million. The adjusted EBITDA margin for the quarter of 19.2% compared with 22.6% in the year ago quarter, this decrease was driven primarily by the impact of lower volumes, increased variable cost pressure and ongoing reduced average pricing. These drivers were offset impart by higher acquisition contribution particularly from wood coatings transaction completed in June as well as Spencer coding. Turning to Slide 5, Performance Coatings net sales in the third quarter increase 12.5% year-over-year including an FX benefit of 2.1% driven by 16.1% growth from acquisition contribution and 0.9% higher average selling prices, again offset by 6.6% pull back in organic volumes. Third quarter refinish net sales decreased 8.4%, including a currency tailwind…

Thank you. At this time, we will be conduction a question-and-answer session. [Operator Instructions]. Our first question is from Arun Viswanathan with RBC Capital Markets. Please state your question.

Great good morning thank you. Just wanted to ask a couple of questions on the guidance, for Q4 it looks like the implied range is about a $30 million sequential improvement. What do you think is going to drive that? Is that the accelerated cost reductions you know some price cost recovery FX maybe you can just help us size some of those buckets? Thanks.

Arun, good morning. To answer your question, there are really three variables in that. The first one is volume, we will have volume recuperation in the fourth quarter compared to the one-time third quarter events that we have highlighted. The second aspect is acquisition contribution we will have a full three months of all of the acquisitions contributing and then we also have the impact of cost reductions which as we have talked about on previous calls is not linear through the year. It picks up and accelerates a little bit more in the back half of the year given the timing of when some of those decisions were implemented in the fourth quarter and last year in and the first quarter of this year.

Okay, that’s helpful. And then on 2018 you also have a comment in your release expecting double-digit growth and I understand that’s probably due to the lower base, but maybe you can give us a similar kind of outlook as far as what you think is going to drive that double-digit growth. I imagine that it’s the acquisition, some volume as you said and do you expect any moderation in either the distributor working capital adjustments or the OEM price give backs? Thanks.

So we will provide more information on our guidance call that we will have in early December where we will preview our outlook for 2018. But if you look at you know stating that we will be double-digit growth in EBITDA. Again, that’s not a heroic effort actually when you pull out the one-time effects that we have seen here in the third quarter related to the hurricane, the earthquake and then also the distributor working capital adjustments that we have seen in our North America performance coating segment. We would not expect that those circumstances to repeat themselves in 2018.

And lastly, is there a range for the Venezuela deconsolidation impact that you gave as far as a 2018 uplift? Thanks.

So in the fourth quarter as we highlighted in our prepared remarks the year-over-year headwind will totally dissipate and the actual amount of EBITDA contribution from Venezuela in 2017 was immaterial or essentially close to zero. Sorry in 2017 it was close to zero. Therefore year-over-year versus 2018 that it will not be an impact in Q4, nor I would it be impact in 2018.

Thanks.

Our next question is from Bob Koort with Goldman Sachs. Please take you question.

This is Chris Evans on for Bob. I was wondering in light vehicle, you mentioned there is targeted light vehicle customers that you are saying lower selling pressures, that seems in the second quarter you focused really single customer that was pushing back on price. So is there any change or additional OEMs that are coming in significant pricing concessions or it is just a change in communication.

Yes this is Charlie. There is no change, in fact in this point in time, it largely a lot of price downs curve over the past year, we don’t see anything new there. Cleary there is always business up for renewal over the coming periods, but there is nothing new there.

Chris, there was a lot of focus last quarter on one customer in particular, but we commented several times that the effect of price in the second and indeed in the first quarter and the fourth quarter of last year and was accumulative and inclusive of the broader trend among the OEM's.

Thanks for that and then may be speak just broadly on your variable cost pressures, could you quantify how much raws may have impacted the third quarter, which raw was pacifically might been most impactful and then may be your expectation in to the fourth.

Chris in the second quarter, just to give you some sequential prospective and actually going back to the first quarter of this year, raws actually slight, slightly neutral for us, we did see low single digit pressure in the second quarter that increased now to mid-single-digit pressure on our raw material basket. And as we look into the fourth quarter, we expect to see raw materials in the high single-digits as a headwind year-over-year and its turns that the outlook for 2018, we expect that to continue into at least for first quarter of 2018, based on purchases that we have already made of raw materials. That been said obviously we have two key areas of focus, one is on cost reduction and then the other is on where appropriate passing along price increases to our customers. The specific areas, where we are seeing raw material inflation really are in several categories, we are seeing inflation in [indiscernible] and monomers, in resins both polyester and epoxy, isocyanates and then although we have seen a slight decrease in some of the high pigments. We continue to see significant raw material price increase in [indiscernible].

Okay.

Our next question would be David Begleiter with Deutsche Bank. Please take your question.

Thank you, god morning. Charlie and Robert, first on the Q4 guide, it’s still a pretty wide range of $30 million, so through the quarter. Any further insights, is the upper half more likely at this point in time and any further help would be appreciated there.

David I think as we think about the third quarter it obviously there are variables that could move around in the fourth quarter in terms of light vehicle production, in terms of price increase execution as well as other macro factors. I think we have done a pretty good job of trying to understand the impact of the natural disasters, but that has impacted both on the cost side as well as the revenue side. So given the variability in some of those elements we felt that a range of that nature was appropriate.

And Rob you mentioned on the 2018 guide that double-digits was not heroic, which I agree with. Is mid-teens plus a more realistic guidance I know it’s early before your December earnings guidance call, but any help there also will be appreciated on what double-digits plus means.

David on that, we are in the middle of going through our annual budgeting process and as I said that process is still ongoing. We need to get through that process with each one of our businesses and each one of our regions should really be able to answer that question. And as I said we will be able to provide a little bit more insight into that in our preview at the beginning of December or middle of December.

And David I think the point we are making in that release was that clearly we don’t view 2017 as a new baseline if you will. We didn’t want to try to communicate that we would be comfortable or satisfied with a normal rate of growth off of 2017 given the severity of the onetime effects that we highlighted. So we wanted to make that point and note that 2018 observationally today should be a more normal year and therefore substantially better than the 2017 outlook.

Very clear. Thank you guys.

Okay, our next question is from Christopher Parkinson from Credit Suisse. Please state your question.

Can you guys hear me?

Coming through loud and clear Chris.

Alright perfect. So probably clearly over the raw material question that when you guys take a step back and you look at it for various price initiative and surcharges throughout the year, what do you believe to be done differently or would you do anything differently in 2018 and 2019. And then also in the year, do you have a view in terms of percent of magnitude of the spike in raws that were resulting from a various force measures in some of your suppliers in Europe and Asia. Just any views on that would be helpful. Thank you.

Yes, Chris I’ll take the first one and I’ll let Roberts take the second one. As far as we have gone through the year, no I think our general view when we looked at oil prices, hydrocarbon how the oil prices moving through the year, I don’t think we could have done anything different on pricing. I think in some cases you have to wait till that raw material goes up, before you can go sit down with the customer and talk about a price increase. When you look at the segments as Robert mentioned with To2, as To2 started our fleet started having discussions as many people know we even went to a surcharge recognizing that when all the China production went offline, that was kind of unprecedented and we had to deal with it. And the last piece for that is just roughly a third of a raw material increases this year had come from tight supply demand conditions that either were results of one-time issues. We had subsequent force matures earlier in the year. So you just kind of have to wait till when those things happens and you have to go deal with them. So I think now as we go through the year, I think we have taken the actions when we saw the increases coming and [indiscernible] our customers. Now, I think as we look into 2018, 2019 I would just say my general view is and again I think it’s appropriate not to be trying to get to exactly what the numbers will be. I think what you have to look for now is a couple of questions. One, will there be an abatement in To2, as we go into 2018 will some of that capacity come on and I think we will wait to see how that gets answered. I think we are covered, because the way we have addressed the surcharges. But I think in general, if we believe oil will - oil today is $52 a barrel, WTI $58 with that [indiscernible]. We have a general view, we think there will continue to be a slight upward bias on oil. So as we go into 2018 as we think about pricing, we think raw materials clearly could go up another 3%, 4%, 5% mid-single-digits on average. Again, we haven't laid all that out yet with everyone, but certainly recovering that price will try to be in front of that as much as we can as the oil complex continues to recover. Now should it pull then I think we will take a different view, but right now I think with the positive bias on oil, my general view is the coatings industry and certainly Axalta will be dealing with these increases for some period of time to come and try to stay out in front of them as best as we can.

Great and just, could you just give us a little more color on your doubling down comment on costs and just in terms of the potential magnitude and cadence of any new initiatives in particular. Then also Robert if you could just comment on your long-term working capital initiatives and how you expect that cash flow to evolve in that 20and 2019, just any preliminary thoughts there would be helpful. Thank you.

On the cost initiatives, we have undertaken a new initiatives related to cost, we will provide more detail about that in terms of magnitude as well as one-time cost on our call in December. Again, I think it’s important though to keep that cost program in the appropriate content, in other words, the results were negatively impacted in Q3 and somewhat in Q2 by really a lot of one-time items. So if we look at our volumes, excluding one-time items in the third quarter, our volumes would have been up 1%. So the important thing here is not to over react to several of these things that we see as one-time. And further with regard to refinish, excluding the one-time events in refinish our revenue would have been up mid-single-digits. So we are adding number on a volume side consistent with what our peers are seeing in our refinish end-market, I would say outperforming the overall market globally. So I think as we think about an appropriate the actions to some of margin pressure, the margin pressure from raw material is something that is driving the desire to have an additional cost program, it’s not by these temporary factors and we just thought that that was something that was very important to highlight. In terms of working capital, we have made a lot of acquisition, as you know those acquisition bring with them obviously increased accounts, receivable, but we also have the impact of the decrease in sales offsetting some of that as well a lot of collection effort. So you will see our AR performance in Q3 was notably better than it was in Q2 and that was a focus effort. On the inventory side, we have seen an increase in inventory due to the acquisitions as well as due to the lower sales levels that we experienced in Q3, but we expect to bring those down in Q4. And regarding our working capital, I think we feel confident that we will end up at the end of the year what our expectations were that we said out at the beginning of the year and as you could see we saw very good cash flow progress even adjusting for the debt extinguishment charge that we took in third quarter of last year, very strong cash flow and we still see opportunities in inventory in AR and as we go into 2018.

Great. Thank you very much.

Our next question is from Duffy Fischer with Barclays. Please state your question.

Good morning fellows. First quarter is just around the margin effect from the volume issues around the inventory. What was the detrimental margin on kind of that loss volume and then should that come back roughly to the same magnitude as we normalize the volumes going forward?

Duffy with regards to the margin in performance coatings and the decrement that we saw in Q3 from that, the detrimental margin in Q3 from the decrease in volume was very high and it was high due to two reasons. Number one, particular product mix that was not purchased in Q3 was a very rich product mix so the drop through on the volume is quite high. The secondary and much, much smaller effect is Venezuela which is a market where we did enjoy very good margins. So as we experience zero sales in third quarter of this year compared to about 20 million in sales last year and the associated EBITDA contribution from that, that was also another region with a very rich mix. Moving forward, we would not expect to see a detrimental margins to the extent that volumes were lower anywhere near that magnitude and I think our expectation now is that volumes will continue to move back to normal levels as we go into Q3 and Q1 of next year.

Okay. And then can you quantify on an EBITDA level, FX turned positive for the first time in a long time. How much of a benefit was that going from Q2 to Q3 and then if you just flat line FX for the rest of this quarter, what does that do Q3 to Q4 to the business?

Duffy, I have to get back to on the exact number of the Q2 to Q3 obviously FX was a big help on the top-line in Q3 about $19 million or 1.9%. What it does do is change our FX assumptions for the full-year. As you remember at the beginning of the year, when we provided guidance, it was expected to be a slight headwind as we came into Q2 and then now Q3. For the quarter it’s been a slight tailwind and depending upon what the euro does, which is obviously the most important variable for us. It could end up being a slight tailwind for us on a full-year basis.

Yes, the euro assumed at around $1.18 in the fourth quarter and should translate somewhat over 3% tailwind for FX in the fourth quarter leading to a full-year FX effect that’s relatively neutral slightly positive given the decrement of the FX in the first half of the year.

Great, thanks Charles.

Our next question is from P.J. Juvekar with Citigroup. Please state your question.

Yes good morning thank you. Just a quick question on light vehicles, you know there is lower pricing, you mentioned that it was just one or two site where you had to give this pricing concession. How long does it take to get pricing back in auto, is it typical two to three quarters or could it be faster because it was just a couple of sites.

P.J. on that question, it depends on frankly on the cycle of new business and how much new business is up for bid. I mean I think the important thing that we have highlighted before is that some of those price concessions that were giving in earlier quarters this quarter and end of last year, were reflective of price sharing that occurred or you could say should have occurred in the quarters prior to those quarters. It’s just that it’s kind of come all at once. Now we will lap, some of these price down as we go into the middle quarter of next year, but we have a number of elements that will allow us to continue to increase price in the transportation segment. First and foremost the course is introducing new colors, introducing new products any type of an engineering change, give us an opportunity to reset everything to current raw material, to current raw material pricing that’s one element. Another element is reformulation and that’s another area where we spend time in terms of the actual formulation of the paint are there tweaks that we can do to lower the cost basis of that so that the impact of the higher raw materials is not such a degree. We also have index pricing implemented at some customer and then of course it goes without saying the first tool in the tool box against that is overall cost management and cost reduction at the company.

Okay thank you and second question is on use of cash, stock buyback versus M&A, you purchased $50 million worth of share, should we expect more buybacks in the future, on an ongoing basis or M&A is still the top priority.

Yes P.J. its Charlie. I think that you will continue see to us to do strategic M&A as we go through, and if you look at our strategic plan over the next couple of years, things we have lined up, things we like, at the same time, when we look at the total free cash flow of the company, we certainly have the opportunity to do that and from time-to-time going to the market. So I think you will see us from time-to-time continue to go into the market and buy share at points where we believe that’s value creating. Obviously we like with the price where it was in the third quarter and that was an opportunity to use some of that free cash flow. So I think you will continue to see M&A and priority, but from time-to-time we will exercise on our stock repurchase plan.

Thank you.

Our next question is from Laurence Alexander with Jefferies. Please take your question.

Good morning. Just two quick ones. First, on the OEM side, can you characterize what you are seeing in terms of year end shutdowns if your customers are giving you any indications yet. And secondly, there is quickly allusion to how being closer to the body shops would have associated benefits and that’s probably something negligible with just one of these. Would you mind clarifying if that’s anything that we should be - that would be relevant.

This is Charlie. On the first question around the light vehicle production in fourth quarter, if you look at what we saw in third quarter, which was actually get this thing with our plant was in North America you saw a pretty good pull back in production, in August some of the producers took shutdowns and managed through keeping their inventories constant in August and September. Although sales picked up pretty significant in September. And my guess is that we will see some hurricane effect here in fourth quarter on vehicle sales that might be a little stronger than normal. Right now we haven’t seen any of our customers, or any of our production plans in fourth quarter for light vehicle change from previously communicated plans either in North America, Europe or China. So I think we see continued demand being up a little bit versus first half of the year, but pretty much consistent with the plan and probably the numbers that a lot you get from IHS and others it think it is what we see. Again, we might see a little stronger production out of a couple of OEMs here in North America as they replacement volumes of the million or so cars that were affected in the hurricane, but again those are very specific models. Yes, in some cases were on and in some cases were not.

Lawrence its Chris. On the second part of your question on associated benefits from being closer to body sops demand. What we are really referring to there is the expectations that volumes and sales from the refinish channel should more closely align to end-market demand going forward. The benefit that we have from that is simply the ability to smooth the operating flow in our business and theoretically to have a more consistent and stable operating profile, which has benefit to our cost structure.

Got it. Thanks.

Our next question is from Kevin McCarthy with Vertical Research Partners. Please state your question.

Yes, good morning thank you. Wanted to come back to pricing and transportation coatings, do you have meaningful price increases on the table today? And then as I look at the sequence of price contributions over the last three or four quarters. It looks like your price comparisons get easier in the fourth quarter of 2017 and so in that context would you expect price to neutralize or turn positive over the next few quarters?

Kevin so in terms of providing specific commentary about pricing that we might or might now have on the table right now with our light vehicle customers. That’s something that we have to be a little bit careful about discussing. I would say just in the normal course of operating the business I commented on my earlier comments, there are ways that we attempt to continue to go out and get price. And as new business comes up for bid, there has not been a lot of business that’s come up for bid say over the last quarter or two. There will be some coming up here in the backend of the year in first quarter of next year when we will have a little bit more insight in terms of how price is behaving in the market. But at this point, I think it’s a little bit too early to say.

Very good, understood. Second question if I may on performance, Robert I think you made a comment here on the call that excluding one-time events, the refinish business would have been up mid single digits. Perhaps you could provide a little bit more color on what were those one-time events or perhaps the magnitude associated with the various events that you are including in there so that we can kind of bridge to that positive mid-single level.

Sure, so there are three events. One would be the distributor reduction in their working capital levels in performance coatings in North America, that would be one element. The other element is the year-over-year comparison in Venezuela and then the third element is the impact of the two hurricanes and the earthquake on our refinish and our industrial business in the third quarter. So those are three events that we see largely as one-time and would expect demand and volume levels to come back to normal levels beginning in the fourth and moving into the first quarter.

Excellent. Thank you.

Our next question is from John Roberts with UBS. Please take your question.

Operator, let's move on and we can try and pick up John on the way back.

Steve Byrne from Bank of America Merrill Lynch. Please take your question.

Charlie you mentioned 250 new products, you're expecting this year, can you just describe the nature of these new products is there any new technology in there that could help price into our market share or anything on horizon you can comment on in terms of new technology that could give you an edge.

Yes, I mean, I think a couple of examples there, as we look across all of our segments, for example in the refinish business, this past year we have launched what we call our Syrox brand this is a main stream refinish product that’s at very competitive price point in the market for folks who aren’t looking for premium type of product, but are looking for nice good color match at a good value price. We have launched that globally and right now it’s actually ahead of our expectations, we are now measuring acceptance in thousands of body shops not 100. So I'm very pleased with that, I think an example, in industrial business across the board, we are introducing products that in most cases are give higher protective value, give that at a nominal price but also extent the product range, I listed a couple in my comments. Our power coatings like Tufcote, Nap-Gard product families, but I think overall we are really focused in these segments, but we can either to a low VOC, I would say the theme in many cases is lower VOC, waterborne products in the powder coatings business more protective products and more differentiation of color. In OEM segment across the board we are working on productivity with the OEM where we can either go to lower flash temperatures, where they can use lower temperatures, faster drying and also waterborne products that meet some of the specs they are looking for on corrosion protection. So I think across the board when you look at the fact that we spend almost $200 million this year, R&D well in excess of 4% of our sales that’s pretty equal across three of our major segments. The two segments in performance and then in transportation in both light vehicle and commercial vehicle. So I think you will see continue these products that puts us increase protective properties, a good value proposition from a cost price standpoint and then once that move lower VOC and more into waterborne around the world. As we see waterborne becoming more and more accepted product not just in premium markets but in more mainstream market. Clearly in places like China, you have seen more and more government regulation around that but also not just on environmental but also productivity, where people are looking for those waterborne products to even be more productive than they have been in the past.

Thank you for that and another technology question for you. As autos increasingly employee more censors in their body panels to detect other vehicles and so forth. Is the repair of those body panels more challenging from a refinish coating perspective or is this trend more of a headwind for you?

Yes, it’s actually an interesting question and one that as you know those trends are evolving both electric vehicles, but then also more active driving technology ultimately autonomous vehicles that are out there. So we kind of think about it in two ways, one is we already currently work with the OEMs and a lot of the Tier-1 plastic parts suppliers are not only coating those averse time, but also ultimately how you teach the refinish shops, how to repair lot of those parts. I think more just as important we are actually starting to work with some other external plating companies on long-term where you get into some of these other compounds on cars and on trucks. How do you not only cook and write the first time with increasing tighter specs on corrosion and scratch resistant smart coatings, but also how your repair those. So it is an increasing effort for us. I would say all that is just a trend, there is not any one single technology or one single person that has - or one single company that has the monopoly on that. You are really having to work across a range of manufacturers not only in the OEM side but also on the refinish side. It’s absolutely as a industry leader, we view its important and we are leading a lot of those efforts, but we are also finding you got a more closer look at other companies, other plating companies, other coatings companies not necessarily direct competitors, but other coating companies on technologies that are going to help not only the OEMs but the refinish markets. So I think we feel pretty good about it, those are all macro trends that you guys stay in front of absolutely.

Thank you.

Our next question comes from [Technical Difficulty].

Thank you and sorry about that before. Did you say how the wood coatings business performed versus your expectations and what was it up versus a year ago and should we expect any seasonality here as we go through the next few quarters?

[John] (Ph) this is Robert. On that point I would say that we haven’t provided granular detail of that lower business level but what I would say is that you know we had an investment case which we made the decision to purchase that business and associated projections that our budget for this year and the business is spot on budget. So its performing quite well and we have been very happy with the performance of the business. And of course there is seasonal effect in that you would expect to see in Q4 and Q1 given the weather patterns.

And then could you remind us again how concentrated or fragmented the North American refinish distribution channel is and maybe compare and contrast that with international distribution for the refinish business?

North America refinish we have approximately 400 distributors in total. We have a few distributors that make up a pretty sizeable amount of the total volume in North America. As you look at distribution in Europe, it’s much more of a local country based model and its highly, highly fragmented. The same thing in Asia from a distribution perspective as well as Latin America.

Okay. Thank you.

Our next question is from Jeff DuKakis with JP Morgan. Please state your question.

Thanks very much. In the domestic refinish market where some customer slowing their inventories, was it one or two customers, is that were all of volume weakness comes from exclusive of the hurricane.

Jeff, in terms of the in terms of the volume impact that we saw a little bit in the second quarter and then strongly in the third quarter, just to make sure from a nomenclature prospective that we are being clear. We did not see any decrease in customer demand, the dynamics with the end customer in other words the body shop, those remain quite healthy, miles driven are up about 2% accident rates, the rate itself is holding relatively steady and hard park is up about 1.6%, where we saw the decrease in volume was at the distributor level that sits in between the manufacturer and the end customer and that is what we expect to be much more for one-time nature.

Right, but at distributor level, is this a couple of larger customers and that you are competitors don’t describe the business similarly to the way you describe it.

Yes. So in that case, correct. Our distribution model is a little bit more heavily weighted towards large national distributors compared to some of our competitors that have distribution system that’s a little bit more distributed and not quite as concentrated.

And in light vehicle pricing, if you exclude the effects of the one customer that you had issues with, can you talk about light vehicle pricing in general in the quarter. And why wasn’t there more progress in pricing in industrial coatings, you have been trying to raise prices there for a long time, were there pockets of weakness and pockets of strength in industrial.

Jeff, I think when you think about light vehicle pricing, it is not just one customers, I think it not fair to try to pin it on any one customer. I think over the last year, the 2016 round of negotiations with OEM involve a broad based ask on their part to share some of the savings that we had experienced in lower raw material over a multi year time frame. So it would be a miss representation to think that you could strip out one customer and that pricing is therefore probably the light vehicle. The fact is its been somewhat of a sharing during that 2016 round and I think as you look forward, obviously there is an opportunity given structural increases in costs over recent quarters to shift the tone of the discussion, but that’s the process.

In regarding industrial Jeff, we have been pushing to increase price, obviously there particularly in power coatings, the impact of To2 is quite substantial. So similar to other players in the industry in particular in industrial we have see a pretty dramatic raw material impact in Asia Pacific that started early. In previous calls when we talked about trying to increase price in the industrial business to offset that raw material inflation. It has been in Asia Pacific in particular. Our efforts to increase price and also with the To2 surcharge that we have implemented, we have had some success with those two efforts. Obviously there is a lot more to do just given how much raw materials have gone up, but I think it is important to highlight that industrial is up as an end-market year-over-year in all regions. So from a top-line perspective its actually is performing quite well. The challenge is really at the cost level from a raw material perspective.

Okay. Thank you so much.

Ladies and gentlemen we have reached the end of the question-and-answer session. I would like to turn the call back over to management for closing remarks.

Yes, thanks operator and I appreciate everyone’s questions this morning. I think as we noted in our press release in our call, pretty challenging quarter. I think when you would lay out two hurricanes, an earthquake and some supply chain adjustments had at all that happened in one quarter, certainly disappointing for us. However, again the transitory nature I think that Robert talks to, we feel good, our markets remain fundamentally sound in some cases better than we would have guessed, and in low organic growth period I think that we like most of our industry at this point in time feel pretty good about the markets being fundamentally sound. In fact, I’m probably more optimistic on the industrial markets than I would have thought I would be at this point. So as we go into 2018, we feel pretty good about the overall underlying demand. I think the challenge for all of us will continue to be looking at these raw materials, looking at the increases which ones are transitory in nature, which ones are more fundamental i.e. around oil prices around the world. I think we have a good insight into that and are really just focused on recovering that price, recovering our margins and moving forward as we go into 2018. So I appreciate the questions this morning and we look forward to a good solid fourth quarter and look forward to visiting with you in December when we do our 2018 outlook. So thanks everyone and have a good day.

This concludes today’s conference. You may disconnect your lines at this time and thank you for your participation.