Vincent J. Morales - Vice President of Investor Relations Charles E. Bunch - Chairman, Chief Executive Officer and Member of Operating Committee Frank S. Sklarsky - Chief Financial Officer, Executive Vice President, Member of Executive Committee and Member of Operating Committee

Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division Frank J. Mitsch - Wells Fargo Securities, LLC, Research Division Neal Sangani - Goldman Sachs Group Inc., Research Division Duffy Fischer - Barclays Capital, Research Division Robert Walker - Jefferies LLC, Research Division P. J. Juvekar - Citigroup Inc, Research Division Donald Carson - Susquehanna Financial Group, LLLP, Research Division Nils-Bertil Wallin - CLSA Limited, Research Division David L. Begleiter - Deutsche Bank AG, Research Division Ivan M. Marcuse - KeyBanc Capital Markets Inc., Research Division John P. McNulty - Crédit Suisse AG, Research Division Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division Kevin W. McCarthy - BofA Merrill Lynch, Research Division Dmitry Silversteyn - Longbow Research LLC Charles A. Dan - Morgan Stanley, Research Division John Roberts - UBS Investment Bank, Research Division Rosemarie J. Morbelli - G. Research, Inc.

Good day, ladies and gentlemen, and welcome to the Third Quarter 2013 PPG Industries Earnings Conference Call. My name is Philip, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Vince Morales, Vice President of Investor Relations. Please proceed, sir.

Thank you, Philip, and good afternoon, everyone. Again, this is Vince Morales, Vice President of Investor Relations for PPG Industries. Welcome to our third quarter 2013 financial teleconference. Joining me on the call today from PPG is Chuck Bunch, PPG's Chairman and CEO; and Frank Sklarsky, Executive Vice President of Finance and CFO. Our comments relate to the financial information we released today, Thursday, October 17, 2013. I will also remind everyone that approximately 1 hour ago, we posted commentary and accompanying presentation slides at our Investor Center on our website at www.ppg.com. The slides are also available on the webcast site for this call, and they provide additional support to our opening commentary. Following the opening comments, we will move to a Q&A session. Both prepared commentary and discussion during the call may contain forward-looking statements, reflecting the company's current view about future events and their potential effect on PPG's operating and financial performance. These statements involve uncertainties and risks, which may cause actual results to differ. The company is under no obligation to provide subsequent updates to these forward-looking statements. The presentation also contains certain non-GAAP financial measures. The company has provided in the appendix of the presentation materials, which again are available on our website, reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures. For any additional information, please refer to our filings with the SEC. And now, let me introduce PPG's Chairman and CEO, Chuck Bunch.

Thanks, Vince. As all of you can obviously tell, I have been having issues with my voice these past few days. I've been told I need to limit the amount of my talking to rest my voice so it can return to normal. So I am going to leave the vast majority of the earnings call commentary today to Frank and Vince. I will stay on the line and participate in the call. I want to express my regrets to everyone for this unexpected issue. Now I will turn the call over to Frank to go over our prepared remarks.

Thanks very much, Chuck, and good afternoon, everyone. We do appreciate your continued interest in PPG. Today, we're very pleased to report our third quarter financial results, which included records for both sales and adjusted earnings per share. Our sales in the quarter of $4 billion were up 17% versus last year. Our adjusted earnings per share of $2.44 from continuing operations exceeded our prior year record by 31%. Similar to last quarter, we more than fully replaced the earnings per share reduction stemming from the separation of our former Commodity Chemicals business. Feeding our performance in the quarter were improvements in overall market conditions, and compared with the first half of 2013, our year-over-year sales volume trends improved in each major region during the quarter. Our growth rates in North America improved and were more broad-based and included continuing benefits from aerospace, automotive OEM coatings, and Architectural Coatings, as well as contributions from most other businesses. In Asia, higher demand occurred in most end-use markets we supply. However, marine new-build activity remains sharply negative on a year-over-year basis. Lastly, while volumes remained slightly negative in Europe, the trend has significantly improved versus the earlier quarters this year as we experienced some initial signs of stability in the region. Our volumes were down 2% in the Euro region during the third quarter compared to mid to high single-digit percentage declines experienced in the first half of 2013. Another contributing factor to our performance is the ongoing aggressive management of our cost base. Our cost actions included the continued implementation of the business restructuring actions that were approved and started in early 2012, as well as other ongoing discretionary cost reduction initiatives. As a result of both the improving regional demand trends and our proactive cost management, PPG team delivered record…

[Operator Instructions] And your first question comes from the line of Ghansham Panjabi from Robert W. Baird. Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division: Yes, on your prepared comments, you noted that auto refinishing was a little bit weaker in North America. Just curious as to why this is because previously you talked about weakness in Europe, but was it just a tougher comp in North America or was there something else there?

Yes, I think that's it. It's still doing very well. It's just really the comparison as you mentioned. This is still performing quite nicely with good profitability. So no significant issues there. Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then just sort of on Europe, just given your commentary of Europe stabilizing or less bad, if you will, does that region get more attractive for you? As you start to think about future acquisitions, are you sort of repositioned for the upturn in the various countries there?

Certainly, the acquisition of pipeline that we're looking at is going to include a variety of opportunities in all the regions in a variety of businesses. So we certainly wouldn't shy away from that should a good opportunity present itself. But yes, I mean, when we look at the outlook for 2014, fourth quarter and 2014, things are stabilizing and turning. The decline rates in those businesses that are still showing decline are moderating substantially. Auto business continues to do very nicely, aerospace and some of the others. So yes, we would not shy away from Europe as a region. Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division: Okay, great. Chuck, I hope you feel better soon.

Thank you.

Your next question comes from the line of Frank Mitsch from Wells Fargo Securities.

Yes. Chuck, let me offer my well wishes for a speedy recovery of your voice. Frank, a large part of the transcript and some of the commentary did revolve around Europe, and you're seeing pockets of growth there and you're suggesting signs of stabilization. What gives you the confidence? And where are those pockets of growth? And looking at that Slide 9 where you see how the year-over-year volume trends are moving in the right direction, I mean, are -- is it fair to say that we're going to get close to the breakeven point in the next quarter or 2 and then start seeing positive comps there?

I mean, if you look at it from a macroeconomic standpoint, all the economists are projecting a very modest GDP growth next year. And we're kind of seeing the same kind of outlook when we talk to our businesses. The recent trends have pointed very clearly to dramatically reduced decline rates. We see that in Architectural, we see that in the Industrial segments and the refinished segments, PMC, and so forth. And auto continues to be very positive and strong, and that has not subsided. So the vast majority of our businesses are starting to migrate toward that breakeven lines and a few of them already have crossed that. And so we are cautiously optimistic and see more favorable trends. And certainly, as we get into next year, if the GDP prognostications are correct, I mean we expect things to turn. And again, as we said, we think there's some really nice operating leverage out there in the months and years ahead, given all the work that's taken place on the cost base.

You're already seeing, in some avenues, positive comps already but the expectation is that 2014 will bring a lot -- or more of it if the forecasts are correct. And speaking of 2014, obviously, you guys have a lot of self-help measures in place. The comments about Akzo synergies running a little bit ahead of schedule, at least on a run rate basis. Then you talked about restructuring benefits. How should we be thinking about the year-over-year delta benefit 2014 from those sorts of actions? Can you kind of quantify it and size it for us?

Yes, I mean, if you -- if we start with the synergies from the Akzo acquisition, as we said, we are a little bit more than halfway to the $200 million on a run rate basis. So if you look at the end of this year, call that $100 million-plus out of the $200 million on a run rate basis. And then by the end of 2014, expecting to be upwards -- to the $175 million to $180 million on a run rate basis by the end of the year. And if that occurs evenly throughout the year, which we fully expect, you would book about half that increase actually in the year. So that's that piece of it. On the restructuring programs, of course, when we had the program in 2012 and the benefits from that, we accrued some of that last year. We expect an amount around $80 million in addition this year and then the trailing amount of a modest amount, low double-digits in 2014 to accumulate to the total benefit that we had originally anticipated. And then the new program, we're really not going to see anything significant in terms of benefits in 2013 as we're just getting things underway. But I would say the majority of that new program, the one we announced, the $98 million, the majority of that is associated with achieving the synergies that we've already talked about for Akzo and then a more minority piece, but still significant, is associated with some of the other regions and businesses as we described, and we expect to get most of that remainder occurring through 2014.

Your next question comes from the line of Robert Koort from Goldman Sachs.

This is actually Neal Sangani, on for Rob. Can you maybe, just going back to the synergies, talk a little bit more on the revenue side about what you're seeing and what the outlook is and others, maybe some store closings left to do? And what synergy opportunities are you seeing in brand rejuvenation or anything else on the revenue front?

Neal, this is Vince. With regards to the Akzo business, the acquired business, we've gone through our process to rationalize the store network already. So we've done that, and that process had been completed. As we noted, we still had for the acquired business about $400 million of sales, which is comparable to what Akzo had last year when the business was still owned by them. With respect to any further revenue synergies, we didn't have any revenue synergies in the project. And again, we're maintaining the top line with a smaller, a more consistent store base, let's say.

Okay. And then on the aerospace side, what contribution is the Deft acquisition having on the top line?

What we said is that's about a $50 million a year business on the top line. And it's fairly prorated throughout the year, so each quarter's a little over $10 million.

Your next question comes from the line of Duffy Fischer from Barclays.

You guys have a pretty good history of macro analysis, I guess. So you've just gone through probably your '14 planning reviews with all the business leaders, where do you think your guys are more or less negative than kind of the consensus economic stuff that you're reading?

Yes. We're still finalizing and in the process of our 2014 planning, so not complete there just yet. But I would say that, overall, our folks internally are relatively consistent with what you'd see out there from the economists. We start with the GDP projections and also get projections on things that are industry-specific, automotive OEM, for instance, and then look at how we participate in those markets and what new products or offerings that we can offer and put our planning process together from there. But in general, I would say, to your direct question, we don't see -- we don't have any major differences with the major economic assumptions out there with respect to either GDP or exchange rate or things like that.

And Duffy, I'd say in one instance, which is in Asia, I think we've been a bit more bullish regarding Asia all year. I think our numbers have been -- outside of the Marine business, our numbers have been supportive of our stance. And we have a very good array of businesses there that are really focused on middle-class consumption, automobiles, auto repair, packaging, refinish. And those are what's being propped up, if you will, in China with all the -- their 5-year plan. And so, again, I think we -- our bullish stance there has been warranted.

Right. And I guess, just to add to that, we don't have as significant a presence in the Architectural, which is not -- doesn't particularly bother us right now given maybe some of the modestly -- more modest growth rates in the residential and commercial real estate in the China market right now. So I think things are in fairly good shape.

Okay. And then in the written commentary, a number of points around the seasonality, kind of Q3 going to Q4, which would lead one to believe that numbers need to come down a little bit, is there something different about the seasonality this year versus what we should expect going forward or what's the right template to think about what a Q3 going into a Q4 should look like with the new footprint?

When we think about the trends, Q3 to Q4, that has not really changed. That same dynamic occurs. All we're trying to do is make sure that there's a common understanding around the fact that because the North American Akzo business, we acquired it on April 1, this is the first quarter, this year's fourth quarter is the first fourth quarter where we will have that business in the mix. And given its significance, the fact that it will exhibit a similar seasonality decline rate from Q3 to Q4, that will just make up a larger proportion of the mix. That's a $1.5 billion business on a run rate basis, let's say. So -- but we said about $400 million of revenue in the third quarter, that declines to 25% per the slide we published this morning. As the other Architectural businesses, it's just making sure there's an understanding of that dynamic. It's just a bigger piece of the pie, but the dynamics really haven't changed at all.

Your next question comes from the line of Laurence Alexander from Jefferies.

This is Rob Walker, on for Laurence. I guess on Europe, so this year, your volume is down mid-single-digits, earnings are likely up mid-teens year-over-year. I know a lot of that's restructuring. I guess, is it normalization improvement you're seeing there? If volume is flat next year, how much can profits grow or do you need volume growth to get the incremental margin benefit?

Yes. I would say if you look at where our earnings profile is right now, if there were to be no change in the volume run rate versus where we are in Q3, you would see an incrementally better profitability story, certainly, in the first half of 2014 because we've gotten a lot of cost rationalization as we have come through the year 2013. But any modest improvement in volume, because we do not have to add structural cost either in the area of capacity in most cases or back office, you're looking at a 30% to 40% profit contribution to the bottom line from incremental volume improvements. So you'll get some improvement in the first half of next year because of the cost improvements that were achieved during that time in 2013 and then any uptick will accrete in a slightly larger way because of the -- you're dropping the profit contribution margin without having to add incremental fixed costs in a big way.

Great. And then on raw materials, overall for the basket, how much were -- I guess if you could split it out inorganic and organic, were they up or down year-over-year in Q3? And what's your expectations for Q4?

Yes. Rob, if you look at our raw material basket, again, it's fairly benign as it's been all year. If you look on the 2 sides, as you mentioned, propylene costs on a year-over-year basis are up more than 25%. TiO2 costs, on the other side of the equation, though, have come down from last year's level. So net, again, if you look at our total raw material basket, it's been fairly benign all year with some ups and downs.

Your next question comes from the line of P.J. Juvekar from Citi.

Chuck, I hope you feel better. Frank and Vince, a couple of questions. On automotive OEM, your volume growth at 10% continues to outpace the global OEM industry. So can you tell us which geographies or which areas are you gaining share in?

Well, when we talk about the volume uptick, we gain volume by serving our customers. We have very good relationships with our customers and we bring value-added products and services to them. In some cases, we will pick up business at different facilities with different customers based on our product offering. And so, if we add a facility, you could argue that, that is market share. But we look at it on a manufacturer-by-manufacturer basis, on a plant-by-plant basis, and that's how we pick up business. Now the other dynamic that's taking place that we benefit from is we do not participate with the Japanese OEMs in Japan. As those manufacturers continue to localize their production in the markets that they may have traditionally exported to, in Europe and North America, Latin America, wherever, we have tended to do well in those facilities. And that's another area where we have been able to solidify our market position. So I guess that's the way I would answer it really, that it's the increase over the market. While we may not be able to sustain double-digit increases vis-a-vis market growth forever, where we have been able to pick up business based on our product offerings, our multigenerational product plan and some of the Japanese OEM facilities, that's how we've been able to do that.

And just a quick question on sort of M&A divestitures. In Glass, you've seen your segment at its highest in 3 years. So with that kind of recovery, is this now a candidate for divestiture? And then on M&A front, you had mentioned earlier that you guys were interested more in Asia. And can you just talk about what kind of landscape do you see there, and have the bid and ask spreads on these deals coming in?

Yes, P.J., on Glass, well, the sales have moved up a little bit to our highest level in a couple of years. From an earnings perspective, it's still below the corporate average, and we're just now starting to see -- I think we were a little more bullish on commercial construction coming into the year. That didn't pan out for us in the first half. We did start to see a little bit of a creep-up in volume and commercial construction in 3Q. So some of the end markets that Glass is supplying, we're just starting to see in the early stages of recovery. So we'd like to see that go further, profitability a couple of years ago was in the double-digit range in EBIT and return on sales. So we still think those businesses have some improvement left. I'll let Frank answer the M&A question.

Yes. I guess, we wouldn't want anybody to believe that we're not looking at opportunities in all the major regions because there are opportunities for acquisition, for bolt-ons either in the technology nature or help us solidify a market position or whatever in each of the regions. Certainly, emerging markets are attractive because they can add to our growth profile but so are some opportunities in other regions where we can achieve either revenue or cost synergies or, like I said, solidify market position. In terms of the multiples, multiples are -- we believe are healthy for a couple of reasons. So one is the fact that money is still cheap and valuations adjust based on the fact that cost of capital, at least in the short term, is still very affordable. And then the other piece is that, as some of these markets come out of -- still come out of recession, particularly late cycle types of companies, that's reflected in the present value of their, as you know, future earnings and the multiples will reflect just that. But that doesn't necessarily scare us away from good, solid, high-quality acquisition targets. And like I said before, the pipeline includes a variety of things in all the markets. And all we'll say is that we will continue to focus on our core Coatings businesses as well as close adjacencies to build the portfolio.

Your next question comes from the line of Don Carson from Susquehanna.

A question on capital allocation. I'm just wondering, you bumped your share repurchase to the top end of your $500 million to $750 million range. Should we regard this range as a good number for annual purchases from cash flow? And then when you do one-off transactions, whether it was chlor-alkali earlier this year or the TRANSITIONS sale next year, that, that would lead to significant onetime reductions in shares outstanding?

I guess, we wouldn't, at this point, want to nail down a specific number that we would necessarily do on an annual basis. But we would say this, and we have stated this before, and we want to make sure that everybody understands that we're living up to what we've said in terms of our commitments on our capital allocation model. Our priority is continue to invest in -- on organic growth, keep driving the top line, whether that's in technology or incremental CapEx to build for capacity actions, which are highly accretive, number one. Number two, continue to -- sustainable dividend increases along the lines that we've seen in the recent past and even before that. Number three, acquisition targets we just spoke about. And then, where there is excess cash, continue to have share repurchases be an integral part, an important integral part, of our capital allocation philosophy. And there's no reason to believe that, that won't continue. In terms of specific amounts and specific timings, some of that will depend on the exact timing of what we -- identification and completion of certain acquisition targets. But I think it's reasonable to expect that the share repurchases will continue to be an important part of that capital allocation model. And obviously, we disseminate that, updates to that and news about that into the marketplace as soon as our board makes the decisions along those lines.

One follow-up on U.S. Architectural. You originally targeted, I think, a 10% operating margin for Akzo once you had the synergies behind you. You're already in the upper single-digits. So have you expanded your outlook for the potential margins from that acquisition, and for your overall U.S. Architectural business?

Don, this is Vince again. I just -- if you look at our targets, we were looking at about a 12% return on sales upon achievement of the full synergy range. We're not changing that outlook. We've got good traction to date. We have a lot of work to do. But I think that's still a good target for us, again, 12%, 12.5% for that acquired business.

Your next question comes from the line of Nils Wallin from CLSA.

First off, Frank, you mentioned something about M&A and coatings adjacencies. So I was curious if you would clarify that a little bit, what you mean by adjacencies.

Yes, I mean, when we talk about adjacencies, we're not going to go too far afield. But we could explore things in coatings and sealants and adhesives, things that are closely aligned with core competencies in material science where you have a common customer base, we can take advantage of our supply chain, things we know well, things where we can get revenue and cost synergies. So that's what we're really referring to there.

And Nils, we're in those businesses.

Right.

They're embedded in our current business structure. Like in automotive and aerospace, we already sell sealants into those markets.

Right.

Got it. Okay. Since Akzo had the same number of sales year-over-year, if I heard you correctly, and yet a lower store base, does that mean that you just got rid of stores that had really poor sales or was the growth rate in the -- on the lower base just much higher than your base business?

Well, what I'll remind you, Nils, is the market is growing. And so, while we'd like to think we would keep every dollar from every -- of sales from each store we close, that's not realistic. But we've had very high retention where we've had overlap in stores, and we've got the benefit of market growth. So again, that's how I would characterize how we've been able to maintain that top line.

And in some of the stores, we're in very close proximity to each other geographically. And so, you try to rationalize that in a sensible way. And also there were some that were performing less so and, obviously, that was part of the mix, too.

Great. And just one last, if I may. On the Industrial Coatings businesses, great, great volume growth year-over-year. But pricing growth has been pretty moderate, which is surprising, given how well auto OEM is doing. Is there something I'm missing there? Is there a mix effect? Just curious as why price growth hasn't been as strong as volume growth.

We typically price, Nils, in reflection of raw materials. We do get, certainly, new products, we're able to price a little higher. But our focus on pricing is to cover raw material inflation and transportation inflation. And we -- as I said earlier in the call, raw material inflation's fairly benign. We do have transportation inflation this year, which is what we're trying to do with our pricing this year.

And your next question comes from David Begleiter from Deutsche Bank.

Frank, in Industrial, you're doing quite well on OEM autos, you're doing okay in packaging. Can you add a little more color on the industrial portion of that business, I guess, as the mix trends in Europe versus the rest of the world?

Yes. I think that when you look overall, first, globally, in Industrial business, the areas that are doing well are heavy-duty equipment, some of the automotive parts and accessories kinds of things where we coat certain components there. The part that is probably a little bit softer out there is the consumer electronics, and we've said that before, no secret there. But other than that, we continue to see some pretty good volumes and some pretty good recovery. And as the commercial construction -- when the commercial construction recovers, we expect to see continued strength in that heavy-duty equipment sector.

That's a good segue into China. I know you made some comments about China in Q4. What's your expectations for China demand heading out of Q4 into 2014?

I mean, I think we're pretty pleased with the mix of business we have in China. As Vince said before, automotive OEM, refinish, some of the Industrial categories are still doing well. The experts are saying around 7% growth in China next year, which might be a little bit less than it has been traditionally. But 2 things there: one, the law of large numbers is starting to take over; and number two, some of the downdraft is because of residential and commercial construction where we probably have less of an exposure. So we're still pretty optimistic about China for the businesses where we compete. Clearly, we've said before, Asia, on marine new-build, not expected to come back anytime in the near future. But the other businesses, again, we're still optimistic about those for the rest of the year and for 2014.

And just last, some of the TiO2 guys have put forth some price increases with a Jan 1 implementation. What's your view on potential for TiO2 price increases in 2014?

Dave, we still -- we're not having any problems getting any supply. We're exiting, really, the peak of the paint season now, and our view is that market has sufficient supply. We may come to a situation where we go back to, what I would call, a more seasonal pattern of inflation in some of our raw materials where in parts of the season, they are in more demand; in other parts, they are not. But our view is that market remains sufficiently supplied.

Your next question comes from the line of Ivan Marcuse from KeyBanc Capital Markets.

Real quick. In Europe, you mentioned in your commentary that it's projected that European automotive is expected to grow, which is consistent with some other data, in the fourth quarter. So how meaningful of a business would that be for you in improvement? And then, if you also look at Europe, you're saying you're going to miss 2 days. How much of a drag in terms of volumes would those 2 days be on that region?

Ivan, the 2 days less -- 2 less shipping days in the fourth quarter are really an only architectural-driven event. The auto companies and most industrial companies run 24/7. So they're not affected by that. So it's more retail-oriented. So I would say that that's a small -- that's a typically light season anyway, but it's 1% or 2% in terms of just pure math. With respect to automotive OEM, again, if you look at our mix of business geographically, our auto business is about 1/3 U.S., about 1/3 Europe and about 1/3 Asia. So we've got a good mix. And certainly, one of those portions of those businesses have been a downdraft, which is Europe. And from an industry perspective, we perform well. We're glad to see that start to turn the corner. And we would hope that, as Frank mentioned earlier, that it continues, and that'll give us a lift because of the cost we've taken out of the region.

Right, and the operating leverage because the capacity is in fairly good shape at the European business. So any incremental volume will accrete at something closer to the profit contribution margin versus the just the bottom line PTPI margin.

Great. And then -- and would that contribution margin be in the same sort of degree that you -- on an increase of volume that you described, previously, in that 30% to 40% range?

I think it's a good rule of thumb to use overall.

Okay. And then in North America, you may have mentioned this, was there a significant difference between sales in your stores versus your mass retail?

Yes. I mean, I think the mass retail is doing well. The company-owned stores are doing well, and I think we stated that the one spot that is doing okay, but not as well as the other 2, would be the PPG legacy and the Akzo dealer store channel. But other than that, things are going fine, continue to benefit from the residential recovery.

So would the stores and the mass retail be up about the same in terms of volume?

Stores were up a little higher, Ivan, and the mass retailers were up but not as much as stores.

The next question comes from the line of John McNulty from Credit Suisse. John P. McNulty - Crédit Suisse AG, Research Division: Just a quick question. On the Akzo stores, in the second quarter, I believe the sales rate was about 475, and it dropped to 400 in the third quarter. I know there's a little bit of seasonality, but not quite that much. Is it all just the store closures or is there something else that may be going on, at least temporarily, in that business?

No, John. If you look -- I'll remind you in the first quarter, on our first quarter call, we put out projected seasonality for that business. And we're tracking almost to $0.01 with what our projections were and what they did last year. So that seasonality you saw, it's about a 15% haircut, it's consistent with history for that business, and it's also consistent with our U.S. legacy business, about a 15% downdraft from Q2 to Q3. And I'll remind you, Q3 to Q4, again, for seasonal reasons drops about 25%. John P. McNulty - Crédit Suisse AG, Research Division: Okay, fair enough. And then one last question on the stores. Can you give us your outlook potentially for pricing in 2014, if there's room to push higher? Because I think you probably would have to launch it relatively soon if you're going to do it in time for the contract season next year.

I mean that -- a lot of that would depend on the change in raw materials. But as Vince said, that we expect that to be relatively modest, particularly in those materials that impact that segment. So as long as the raw material environment remains relatively benign, we would expect a relatively stable pricing environment.

Yes, with the -- again, the other thing we're watching, John, is freight. So if that moves up, that's a big -- it's a distribution business.

Right.

That does have a hefty freight component to it. So if freight costs move up, which they have been, that would be another -- it would be a catalyst for some further pricing.

And OEM was, obviously, one of the drivers of that also on a delayed basis.

Your next question comes from the line of Jeff Zekauskas from JPMorgan. Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division: On a per pound basis, did you pay less for TiO2 in the third quarter than you did in the second?

Yes, Jeff, we typically don't talk about our particular raw materials in that level of granularity. What I can say on a more broad sense is we're not seeing any -- outside of some propylene transitory inflation, everything else is fairly benign. Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division: Okay. You indicated that you lifted your share repurchase target to the upper end of $500 million to $750 million range. But given that you have $2 billion in cash on the balance sheet and you have more coming in, in the fourth quarter, it seems that you've made a decision to retain a lot of cash that is -- I think in the old days, you had a target of maybe having $1 billion cash balance. So what's changed in your thinking? Is it that you bought back so many shares last year, you don't want to buy back too many over a shorter period of time? Or why does it seem that you want to hold more cash now?

Yes, and I would say that, that is not necessarily the case at all. Going -- as we said, we've done about $325 million so far this year. And if we go to that upper end of $750 million, by the end of the fourth quarter, that is buying back over $400 million worth of stock in one quarter, which is a pretty healthy clip. And so, I guess, what we would reiterate is that, as we go forward, as we continue to assess the pipeline of acquisition targets, we also will be looking at making sure that the share repurchases continue to be an integral part of that capital allocation model. And of course, all decisions around that, obviously, are reviewed with our Board of Directors, and they make the final call. But I think we would all, here, internally, our Board of Management agree that, that model that we've used will continue. And no, we do not necessarily believe we need to hold a substantial amount of excess cash on the balance sheet. Let's keep in mind, too, that the TRANSITIONS deal is not yet complete. We expect that by mid next year. But you're correct in saying that we have a very healthy cash balance. We will continue to generate cash, and we will make sure we continue to deploy it in a manner that's accretive and value-creating for the shareholders. Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division: Okay. And then lastly, you increased your environmental reserves $56 million. Have we come to the end of that or are we going to see another, I don't know, $100 million or $150 million increase in reserves over the next couple of years?

Some of these projects and sites go for a long period of time. And parts of those projects are more predictable than others. We took this reserve now because we had done more work on one of the key sites, in the Jersey Chrome site has been disclosed and, obviously, have more granularity in terms of information and rigor of analysis as we go through time. So we felt this was the appropriate time to take that reserve, it made all the sense in the world. As we go through time, we'll continue to assess the remaining exposures we have at that site and other ones. And the other thing I would say is that when you look at the amount of the reserves, not just for this site but for all the other sites, it is a number of years over which we typically discharge these liabilities. So the amount of cash expenditure in any given year is not really material to our results or our ability to deploy cash. So it should not be a significant concern.

And Jeff, if you look, we have in our filings some mentioning around what environmental projects we're working on. I think we've been very descriptive in all of our filings about the current and future situations. The cash comment, I just want to elaborate on a little bit from Frank. We spent about $60 million a year in 2010 and '11 on environmental cash deployment. We moved that up about $30 million or $40 million to $100 million, which is the rate we're going to run at for the next couple of years. So Frank's comments that we've not -- we're not spending a lot of cash, this will be discharged over a long period of time, I think are important to understand from a shareholder perspective.

And your next question comes from the line of Kevin McCarthy from Bank of America Merrill Lynch.

I just want to follow up on store count, Vince. I think you'd mentioned you've completed the rationalization of the Akzo store network. A couple of questions. How many stores did you close there? Also, what was the change in count on the legacy PPG side? And then if you look ahead for, let's say, 2014, how many stores would you plan to add? And what does that future trajectory look like?

Yes. Kevin, if you look, we started with roughly 1,000 stores. We -- as Frank mentioned, some of those were in very close proximity to each other, in some cases, right across from each other. And we've rationalized, let's say, 5% to 7% of our store network. And so, that's 80 to 90 stores net and, on a go-forward basis, we'll be targeted in store additions. I don't want to give a rule of thumb number, but it's not going -- it's going to be, in a given year, anywhere from 20 to maybe 30 or 40. It depends on the year and what locations we're looking at geographically. So again, I think we'll be measured -- we've got, as you know, 3 different distribution outlets. We got the stores business. We also have the national accounts or DIY business to have another customer touch point in the dealer network. So we want to grow in all those networks.

Okay. And then just to shift gears, a clarification, if I may, on Optical. I think you've said in the past, you would expect the divestiture to close in the first half of 2014. I guess we've got maybe 2.5 months under the belt now. Any updated thoughts on when you would expect that deal to close? And then also in Optical, I think you're rolling out Gen VII in the U.S. So can you comment as to the 4Q versus 3Q pattern? Is there a loading of the channel to come there?

Yes. And I'll first -- the first question around the timing -- our expectations haven't changed around the timing of the deal, it's still going through the typical normal regulatory approval process in the various regions, and still expect an outlook of first half, by mid-year next year, the closure of that deal. In terms of the Q3, Q4 dynamics, I'm -- recall last year in 2012, Q3, there was some destocking around the circuit, which made the Q3 comparison -- aided the Q3 comparison in terms of a favorable look versus the prior year. In Q4, probably a more typical comparable performance Q4 over Q4. We do have the loading that has been taking place already in anticipation of the January launch in the U.S. of TRANSITIONS VII, that continues. But Q4, last year, was very solid. So probably a more comparable comparison vis-à-vis the very favorable performance this Q3 because of the destocking last year Q3.

And your next question comes from the line of Dmitry Silversteyn from Longbow Research.

Chuck, I hope you'll feel better with your voice. A couple of things that I want to touch base on that haven't been discussed already. Number one, when you talk about the Industrial segment, you've done a good job outlining what's going on in automotive and provided some ideas on general Industrial. Can you talk about packaging coatings of the business in the third quarter and your outlook for the fourth? Crown came out with results that were not that spectacular in terms of volume growth on the can business, particularly in the European food pack and U.S. beverage. So can you talk about what you're seeing in the end markets, how your BPA share gains are progressing, and just give us any commentary you can on the Packaging business?

Yes, Dmitry. We're seeing -- let me give you a little bit of background. As you know, we've got a lot of good activity going on in Asia in terms of just overall market growth. We've got a good position there. And our emerging region growth has really helped us grow on a global basis. We're seeing, like our other European businesses, our business in -- our packaging business in Europe is down modestly. Again, similar to some other businesses in Europe. It hasn't been moving around much. The U.S. business or North American business is solid. It's not a -- it's a GDP-type growth business. With respect to BPA, we're seeing a lot of activity in Europe in terms of going through the testing process. There is some dates out there as you -- as I know you and I have talked about, with respect to what France's legislation is, so there's a lot of -- the can fillers, as well as the can makers are doing a lot of activity. And we're pleased with the progress we've made, but it's still a very small portion of the total packaging business at this point. We do expect it to grow certainly next year and in years coming. But right now, it's still fairly modest in terms of its total size.

Got it. And if I could ask just on sort of the trends that you saw towards the end of September and, perhaps, early in October. Some of the industrial companies pointed out that there was a little bit of a softness, particularly in the U.S., at the very end of September. Whether or not it had to do with what's going on with the government or not is a different story. But have you seen in any of your businesses, any kind of sort of late quarter pullback from customers in terms of their order patterns or maybe you're seeing it in the first couple of weeks of October or has this just not been an issue for you at all?

Just to the contrary, Dmitry, if you look at our progression as we went through the quarter, September was our best year-over-year month of all 3 months. So it's just the opposite of what you're describing.

Okay, all right. So I was just curious because these were comments that were made by some industrial companies but not by others. So I was curious where you came out on that.

And your next question comes from the line of Charles Dan from Morgan Stanley.

Just a couple of clarifying questions. One, can you quantify how much of a drag on the Architectural business was the lost contract at Lowe's or what that sort of mid-single-digit growth rate would have been without that? I guess we can start there.

Yes. Charlie, as we said in the past -- I think I'll just give everybody a backgrounder. About 2 years ago, we picked up a position at Lowe's with our Olympic ONE brand. That for us was about $60 million a year. And in addition, this past year, we lost 2 price points at Lowe's. They were the $12 and $18 lower price points. That was a commensurate $60 million a year event. So about $15 million a quarter. And again, we did have positive comps in our DIY channel, so that market growth and the performance of our DIY channel overcame that. And so, we would have been up, obviously, mid to high single digits without that absence of business.

And just on the Marine business, can you give some sense for when -- we've seen sort of an extreme decline there, when those comps really get easier and could we potentially be lapping those really severe declines by the first quarter of next year?

Yes. I think to your point, we're within a quarter or 2 where the comps will start to look less unfavorable, start to sort of even out on a year-over-year basis. Keep in mind that there was quite a bubble a few years ago. We don't expect -- so we're sort of bouncing along at lower levels here, absolutely good, but I wouldn't expect any significant uptick in the new-build marine business, certainly, during 2014, perhaps sometime mid-late 2015. Keep in mind, these are long cycle projects, and we will typically participate in terms of ringing in the cash register in the latter part of the project when the coatings go on, on the ships. So the first stage is the RFPs go out, we bid. That can be up to a 12-, 18-month process, then the construction commences. And we put our part of the project in place, and then we generate the revenue and the cash, probably still a couple of years off before you see that happen in a meaningful way. But we are starting to see some repair in terms of deferred maintenance, which is the first glimmer of hope that you start to -- you see some of the shippers release the purse strings a little bit on some of the deferred maintenance and on a follow-on to that, obviously, they'll be doing RFPs on the new-builds. So compares will be a little bit easier, but a little bit of time before we see a significant uptick.

If I could, just one quick question. You guys gave a lot of numbers on sort of the run rate improvements you're seeing in the Akzo synergies. Just so that everybody's clear, is it possible for you to give a range of sort of what your view is on the operating income line there for that business next year?

Charlie, where we are now is again upper mid-single-digits. We would expect that to go up next year with, again, the increase in synergies capture. So I'm not -- we're not going to put an exact number on it but, again, it'll be part of the way between where we are today and the 12.5% target.

Your next question comes from the line of John Roberts from UBS.

Get well, Chuck.

Thank you.

For the European recovery that you're seeing, can you talk about how much of that might be export automotive and aerospace? And what I'm getting at is things that might not be local European demand recovering but global recovery just being sourced out of Europe?

Yet, John, if you look, the -- I wouldn't call it a recovery, we're seeing less negativity and some improvement in a few markets, but it is broad. I mean, every one of our businesses in the quarter did better than the quarter or 2 quarters prior and the quarter prior. So it's more broad than just exports. I do agree with you, there's some additional exports, but this is more of a broad issue. Frank, you want to...

Yes. It's like if you look at the local GDPs in Western Europe, for instance, going from modestly negative to forecast to being modestly positive next year. And also, we're seeing some leading indicators showing that there is less of a decline in the leading indicators. So again, it's kind of mirroring the lower decline rates in the actual revenues. We do expect more of the growth to come from domestic consumption than export as -- now we'll certainly see, to the extent they're exporting to Asia and we see growth in Asia, that will continue. But the increase in the growth rate in Europe, we do expect a significant portion of that, going forward, to have to come from the domestic consumption. If that's a 2 percentage points from negative 1% to positive 1% GDP, that's where that's going to come from.

And then secondly, for TRANSITIONS, will we see that as, again, discontinued beginning first quarter 2014 and it'll still be consolidated in the fourth quarter 2013 results?

Yes. We would expect to see it consolidated in the fourth quarter. It would move to continuing operations once regulatory approvals are received. That would be the triggering event to move it over to disc ops.

And your next question comes from the line of Rosemarie Morbelli from Gabelli & Company.

If I -- if we look at TiO2, does it make a difference to you, for your use of the TiO2, whether it is a sulfate-based or chloride-based process?

Rosemarie, we use both. It depends on a variety of factors, including location and geography. It depends on end markets. It depends on whether it's slurry or not. So we use a variety of different -- we use both grades in a variety of different ways. And what I would tell you with respect to TiO2 is we are, and we have been continuing to progress along our efficiency programs. And we announced a target a couple of years ago, and we continue to work on that. And we also continue to use more sulfate around the world than we've had in the past. So those are 2 trends that are continuing. But again, we do use both grades.

Okay. So am I correct in thinking that sulfate, there is plenty of capacity and, therefore, you are less likely to get price increases than the -- from the chloride process?

I would -- there's probably a little more to the algorithm than that. But what I would tell you is that there is certainly excess capacity, in our view, in sulfate, especially in Asia. And again, where we can use sulfate around the world, we're adding to our capabilities there. I would say, in terms of total global dynamics on TiO2 pricing, it's not a simple as what you described.

Okay, that would have been too easy. If I could ask one quick question regarding consumer electronics. You said that demand was weak. This is what everyone else says. Have you seen any sign of a change in trends for consumer electronics?

Not significantly in the recent couple of quarters, no. We really haven't -- not a huge portion of our business, but we haven't seen any major changes in trends.

And ladies and gentlemen, this will conclude the question-and-answer portion of today's conference. I would now like to turn the call back over to Vince Morales for closing remarks.

Thank you, Philip. And again, I just want to thank everybody for their time today. And if there's any further questions regarding the quarter, please contact me and Investor Relations. Thank you.

Thank you.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation, and you may now disconnect. Have a wonderful day.