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

Angel Castillo Malpica - Goldman Sachs Group Inc., Research Division Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division Duffy Fischer - Barclays Capital, Research Division David L. Begleiter - Deutsche Bank AG, Research Division Robert Walker - Jefferies LLC, Research Division Daniel Jester - Citigroup Inc, Research Division Frank J. Mitsch - Wells Fargo Securities, LLC, Research Division Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division Donald Carson - Susquehanna Financial Group, LLLP, Research Division Nils-Bertil Wallin - CLSA Limited, Research Division Kevin W. McCarthy - BofA Merrill Lynch, Research Division Ivan M. Marcuse - KeyBanc Capital Markets Inc., Research Division Charles A. Dan - Morgan Stanley, Research Division John Roberts - UBS Investment Bank, Research Division Kevin Hocevar - Northcoast Research James Sheehan - SunTrust Robinson Humphrey, Inc., Research Division

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2013 PPG Industries Earnings Conference Call. My name is Philip, and I'll 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.

Thank you, Philip. Good afternoon, everyone. Again, Vince Morales, Vice President of Investor Relations. Welcome to PPG's fourth quarter 2013 financial teleconference. Joining me from PPG on the call today is our Chairman and CEO, Chuck Bunch; and our Executive Vice President and CFO, Frank Sklarsky. Our comments today relate to the financial information we released Thursday, January 26 -- or January 16, excuse me, 2014. I will remind everybody that approximately 1 hour ago, we posted detailed commentary and accompanying presentation slides on our Investor Center at our website at www.ppg.com. The slides are also available on the webcast site for this call and provide additional support to the opening comments Chuck will make momentarily. Following Chuck's perspective on the company's results for the quarter and the year, we will move to a Q&A session. Both the prepared commentary and discussion during the call may contain forward-looking statements reflecting the company's current views 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 materials accompanying the presentation and again 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. Now let me introduce PPG's Chairman and CEO, Chuck Bunch.

Thank you, Vince, and welcome, everyone. We appreciate your continued interest in PPG Industries. Today, I'm pleased to report record 2013 fourth quarter and full year financial results. This record financial performance caps off one of the most successful years in the company's history, both financially and strategically. Quickly reviewing our strategic initiatives, we announced or completed several considerable actions during 2013. In January, we completed the separation of our Commodity Chemicals business. We closed the North American architectural coatings acquisition in April and announced an agreement to sell PPG's ownership interest in the Transitions Optical joint venture in July. These actions were focused on creating additional value for PPG's shareholders as we shift to a more consistent and higher growth business portfolio. Financially, we once again delivered record results. Our sales for the fourth quarter increased to $3.7 billion, up 14%. Fourth quarter adjusted earnings per share from continuing operations were a record $1.81, exceeding the prior year record by 45%. This marks 14 consecutive quarters of record adjusted earnings, illustrating the benefits of the company's strong coatings portfolio, broad global footprint, prudent cash deployment and measurable results from the strategic initiatives. Supplementing acquisition-related sales gains, our year-over-year volumes grew 2% in the fourth quarter. Volume trends in North America and emerging regions were similar with previous quarters. As we indicated last quarter, Europe continues to stabilize, and our fourth quarter year-over-year coatings volumes in Europe were flat following nonconsecutive quarters of decline. Aggressive cost management, including additional restructuring-related cost improvements, remained a contributor to our earnings growth. Our 2012 restructuring program is substantially complete, and I am pleased to report we have achieved the targeted annual cost savings run rate of about $140 million. Our acquisition integration continued for the acquired North American architectural coatings business, and our…

[Operator Instructions] And your first question comes from the line of Robert Koort from Goldman Sachs.

This is actually Angel Castillo on for Bob. I was just hoping to understand a little bit better. You mentioned the $3 billion to $4 billion in capital deployment. If I'm doing the math correctly, it seems that you really aren't assuming much or any incremental leverage. I was wondering if you could talk about that and just how should we think about that and just your acquisitions versus repurchase strategy, especially since you exceeded your repurchase guidance in 2013.

Yes, in terms of the -- this is Frank. In terms of the leverage, yes, we're looking at the $3 billion to $4 billion being able to be deployed when considering the existing cash balance at the end of this year, $1.75 billion, plus the $1.5 billion Chuck referred to as the after-tax proceeds from TRANSITIONS, along with the ongoing cash flow from operations that we'll continue to generate in both 2014 and 2015. That will be definitely adequate and ample in order to be able to deploy that $3 billion to $4 billion. The question around leverage, we do not need to take on additional leverage in order to deploy that $3 billion to $4 billion, although there's certainly capability on the balance sheet to do so, if we were to desire to do that. But it's not required for the $3 billion to $4 billion to be deployed.

Great. And just a follow-up question. With all the moving pieces in performance for this quarter, can you help us understand some of the larger impacts, namely just the seasonality that you saw from the Akzo business?

Well, as we've been highlighting in our second and third quarter reports, the architectural coatings business historically is a seasonal business, with the strongest quarters in the second and third quarters of the year. Fourth quarter, traditionally weaker. That seasonality is present in the Akzo businesses that we acquired. In fact, maybe slightly stronger because of the strong Canadian business that's part of that acquisition. So there was -- we felt that -- we felt good with the performance of the Akzo business. However, as we tried to note in the earlier comments, it is a seasonally weaker quarter with less earnings generation than what we experienced in the second and third quarters.

Your next question comes from the line of Ghansham Panjabi from Robert W. Baird. Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division: On the North American architectural price increases, how should we think about the price realization impact, Frank, on a quarterly basis? And also, you mentioned that the increase was implemented through your stores. What about the other channels?

Right now, the price increase that we announced and we're implementing, you'll see that -- the effects of that in the store channel in -- beginning in the first quarter of the year. The other channels are -- these are still discussions that we're having with our customers, and we have no announced price increases at this point outside of the one that we've noted in the stores channel. Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division: Okay. And what about in Europe when you're -- in the network there?

The pricing is relatively flat going into 2014. We have the -- some initiatives around certain products or markets. But by and large, we're going into 2014 in Europe with stable price. Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then just one more on Europe. Chuck, you were a bit more positive on the region during the third quarter as well. Did anything change during the fourth quarter, either positive or negative, that sticks out, either by region or product line?

Actually, we feel good about what's going on in Europe. If you look at one of our largest markets, automotive, on the sales side, things were picking up. And it looks like now, if you look at all the forecasts for 2014 in automotive production, they are now forecasting an increase in production for automotive, a modest one, 2% to 4%. But that is, we think, an indication of a positive trend. In architectural, even though the fourth quarter European volumes were still down, this was our best performance during 2013. And as we noted in the fourth quarter, overall, for all our businesses, volumes were flat, and that was our best performance. So I think we had discussed what we thought was a stable to improving trend in Europe. We see that. And right now, we feel good about these modest improvements that we're seeing. And although we note that much of the earnings improvement for PPG during 2013, where we did have record pretax, pre-interest earnings was a result of our productivity and cost initiatives, we do feel now that the volume is stabilizing and looking now to be positive, albeit modest. So actually, we still feel pretty good about our commentary around what's going on in Europe.

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

A couple of quick questions. One, just the $3 billion to $4 billion in cash back to shareholders, is that inclusive of dividends?

No. In fact, the $3 billion to $4 billion is a combination of cash that could be both returned to shareholders, as well as incremental growth, inorganic growth initiatives, so could potentially be M&A activity to the extent we identify things over the next 18 to 24 months. But it excludes the cash that is already slated to go toward dividends.

Fair enough. And then on the Slide 6, where you're walking through the volume trends, I mean, it's kind of interesting. If you just eyeball down, everything was getting double derivative better throughout the year except the U.S. and Canada looked like it turned or negative in the fourth quarter, again, kind of on a double derivative in that the gain was smaller than the quarter before. Is that an inflection point? Is that -- should we read into that? Or was that an anomaly relative to everything else, do you think?

No, Duffy. If you look last year, that's on a -- we had very good growth in Q4 of '12. So that's just on a more difficult comparable period than the third quarter, as an example, was. So we started to see the inflection actually in '12 of an uptick of activity.

Okay. That's helpful. And then just the last one. The sales growth faster than the market in auto OE is a little bit of a lagging indicator in that it's the wins that you got in the preceding year. When you look back at '13, how was your win rate on new business for auto OE globally?

We felt good about our performance on, let's say, new business in auto OEM. And as you know, there's a lot of new construction of manufacturing facilities around the world, both here in North America and in China, 2 of the biggest markets. But we're also seeing it in not only in Mexico, part of the North American growth, but also in South America. So we feel very good about the new technologies that we've introduced over the last couple of years. The compact process for the total coating system in automotive OEM, plus our new electrocoat generation is doing very well. So we're confident that the sales growth that we've seen and getting our share of new business from these new facilities or additional awards are in place.

Your next question comes from the line of David Begleiter from Deutsche Bank.

Chuck, just on Performance Coatings, you know that earnings were hurt by some growth-related spending in aerospace and refinish. How much was that? And is that continuing into 2014?

Hey, Dave, this is Vince. The additional spending on higher sales level combined is single mid -- single-digit millions of dollars. So fairly de minimis.

Very good. And Chuck, just how is the M&A pipeline today?

Well, it's very active. From a discussion standpoint, we hope to realize some acquisitions here throughout 2014, having what we feel are good productive discussions. But obviously, we're maintaining our traditional discipline around valuations. But we're confident that we'll be able to announce here in the coming quarters new acquisitions for PPG.

And just lastly, on the 10% auto OEM growth, Chuck, I think there was some benefit from a competitor who was recently acquired. Do you expect that -- those benefits to taper off in 2014 as that competitor gets its feet under it?

I think that the trends that we've seen, the competitors that we have out there are all -- seem to be performing in the marketplace. And so we feel that the momentum that we have that we think is continuing is again based on service and technology, and it's always been a competitive environment out there. But we feel confident that we're going to be able to continue to grow the business nicely here in 2014.

And your next question comes from the line of Laurence Alexander from Jefferies.

This is Rob Walker on for Laurence. I guess, can you be a little bit more specific about the growth projects you have planned for '14?

Is there specific business, Rob, you want to talk about or just in general?

The increase. I mean, is it mostly in North America? Any particular region or line?

Well, we do have some incremental CapEx in the year. We're not talking about hundreds of millions of dollars, tens of millions, let's call it, and that's to expansion capacity in automotive OEM and industrial in each one of the regions. And to that extent, that spending's going to be very accretive from a value-creation standpoint. So from an organic standpoint, that's what we have going on from an inorganic, as Chuck referred to, on the M&A side of things.

But we have a number of businesses outside of just the industrial or automotive space, and I think Frank highlighted some of the projects that we have in Russia, Brazil, Mexico, China, where we feel that 2014 is going to be a very good year for the automotive OEM and the industrial businesses. But on the Performance Coatings side, aerospace looks to have another solid year in front of it, a lot of momentum on the commercial aviation sector. We're well positioned with our products, including the growth from the new acquisition at Deft. The refinish business continues to grow, especially in emerging regions. And we look for continued improvement that we saw at the end of the year in Europe. And on the construction markets overall, for both our architectural coatings and our flat glass businesses, we think they're going to benefit from this continued growth here in North America. And as we've said, the European business on architectural should be stronger, along with the rest of the region. So we're quite excited about the prospects that we're seeing, and we think we have a lot of initiatives in place to drive profitable growth for the company.

And I guess, just on Performance Coatings, what -- how much were volumes, either up or down, excluding marine? And I guess, your expectations kind of for the next quarter? Can those be -- start to turn positive?

Rob, Vince again. If you look at the segment, the volume decline of 3% that we included in our prepared materials was exactly the decline related to marine. So if you took the marine negative out, it would have been flat.

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

It's Dan Jester sitting in for P.J. So on your favorable view of the North American architectural market, is that still predominantly residential recovery? Or are you starting to see some improvement in the commercial market?

We started to see -- 2013 was primarily about the recovery in the residential markets, and we see that continuing. We saw some signs later in the year and in the fourth quarter that the commercial market may be beginning its long-awaited recovery. The business that we have that's most directly exposed to commercial construction activity is the flat glass business, and they had a better fourth quarter when you look at the architects' indexes and the like. And so we're more comfortable that the commercial market, starting with maintenance markets but also expanding out there, we're going to see some growth here in commercial construction in 2014.

Okay. And then on titanium dioxide, I think that you said previously that your goal in 2013 was to reduce your usage by 2% or 3%. I guess, did you hit those goals? And do you have any goals for 2014?

We did hit our productivity targets for TiO2 within that range, the lower end of that range, but we did achieve them. And we are continuing the programs that we've discussed. And again, I would expect further productivity improvements for us in 2014. But probably again, probably at that lower end of the range as we've, I think, capitalized on the best or quickest opportunities that we had. So I think there's still more to go. But we've certainly hit our targets over these last 2 years. We're still working, but I don't think that we're going to see the kinds of reductions that we saw in 2012 and '13.

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

This is Frank Mitsch sitting in for Frank Mitsch. Chuck, I wanted to get a clarification on the volumes in Europe. You had mentioned that you expect them to be positive in 2014. Is that an overall comment or are you speaking specifically to architectural EMEA?

Well, that's an overall comment for all of our businesses. So that if you look at the fourth quarter, we were flat on volumes. But I would expect that as we go through the year in architectural, that we're going to see a return to positive trends as we go through the year here in architectural.

A return to positive trends. Okay, great. And obviously, that business was a big beneficiary of the cost-cut programs. Your margins went up over 200 bps. What -- is there any incremental savings left in 2014 that will supplement the sort of improvements you're going to have from volumes moving in the right direction?

Yes. We're going to see a small, what I would call, a small increment in the cost savings for architectural in Europe. And you're going to -- if you look at it, an anniversary of those benefits, so we're going to still see in the first half of the year, the completion of the rest of the cost savings and productivity initiatives. So we still have what I would call modest improvements to look forward to here in the first half.

All right, great. And then lastly, we talked a little bit about price increases in the company-owned stores. What's your overall take for the raw material environment in 2014 on the coatings side relative to 2013?

We are still looking forward to relatively stable raw material prices inflation projections, low-single digits. Now we've seen some of the commodities moving around a little bit. We have a little bit of energy cost inflation. If you look at what's happening to natural gas and some of the transportation costs, propylene has moved up a little bit. It usually does at this time of year. Nothing that's an overall concern. But our forecast right now overall for the inflation basket, including raw materials, low-single digits.

And your next question comes from the line of Jeff Zekauskas from JPMorgan. Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division: I guess, I still have a couple of questions on Performance Coatings. I think your operating profits were up $2 million year-over-year, and your sales were up $290 million. And I realize that it's seasonally weak. But why weren't operating profits higher?

Well, in the fourth quarter, if you look at what we've indicated, we had weaker activity in marine, which had been a very profitable segment or market for our protective and marine segment. And also in architectural coatings, there is an amount. You have seasonally weaker volumes in the business. We've talked about the seasonality of the Akzo business, which is a little higher because of the presence there, Canadian presence. But you do have higher fixed costs in architectural coatings, especially with the store networks. So that as you're putting less volume through, the cost structure, both manufacturing, distribution and stores network, that will affect your profitability for the business in these seasonally low quarters.

And the other thing I would add is that even in some places where we had some volume uptick in Asia, for instance, there was a little bit of currency headwind there. So you have to take that into account, too. Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division: I think earlier in the call, you commented that if you excluded the marine business, the volumes would have been flat in the fourth quarter and Performance Coatings. What were the other things that shrank? Why weren't Performance Coatings even a little bit stronger, excluding the contraction in marine?

Well, I think as we indicated in the supplemental material from this afternoon, Jeff, that we are, in the fourth quarter, still experiencing the volume declines in our legacy architectural business from the loss of the price points, the low-end price points at Lowe's. So that was the other volume indicator in the fourth quarter for Performance Coatings.

We had growth, Jeff, in aerospace and refinish that offset that. Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division: Okay. And then lastly, why have you increased prices in company-owned stores? There's not really a lot of raw material inflation. Are your prices lower than some of your competitors? Or what's the justification you've got?

No. There is still inflationary cost in the store network. Both -- from a distribution standpoint, we have higher transportation, higher labor and benefit costs. So these costs are still impacting our businesses, and so this was what we felt was the right opportunity to announce these price increases early in the year, the beginning of the season, that we would be in a position to offset these increases as we move through the year.

And your next question comes from the line of Don Carson with Susquehanna Financial.

Chuck, you seem cautiously optimistic on the organic growth outlook. Can you talk a bit about what's kind of your macro call on global industrial production? And then what -- given all the cost cutting and productivity moves you've made over the last years, what kind of incremental operating and gross profits do you see in businesses like EMEA or industrial?

Well, at this point, our macro forecast on global industrial production is up 2% to 2.5%, something in that neighborhood, a little stronger here. Obviously, stronger in China today, not as much in a couple of the other emerging regions. And Europe, just kind of breaking into kind of a positive low-single digit. So overall, we think that the improvement is going to be noticeable even if it isn't considered robust.

And can you comment on incremental -- what kind of operating leverage you would get from even a modest rebound in volumes in some of your key businesses?

Hey, Don, this is Vince. It depends, obviously, on the market and the region. As Chuck alluded to in his opening remarks, for us, Europe provides the most upside as we've got -- as we've taken out a tremendous amount of cost and we've got good leverage there. And we'd see margins between 25% and 40% incrementally depending on the business, the time of year. And elsewhere in the world, it would be toward the lower end of that range.

Okay. And then finally, on the $1.5 billion from proceeds from the TRANSITIONS sale, is the plan to do a significant share repurchase to offset the loss of the TRANSITION earnings as they go out the door? Or are you still focused on using that for acquisitions?

Well, again, that would also be wrapped up in that $3 billion to $4 billion that we could potentially deploy -- or that we will deploy over the next 18 to 24 months. And we will continue to have share repurchase and M&A, both as integral parts of the capital allocation strategy. And in some quarters, it might be more of one -- more of the other depending on the timing of the acquisition activity. I can think -- you can see that we have actually absolutely been committed to returning cash to shareholders, as evidenced by hitting $1 billion in 2013 with the significant amount we did also of $680 million in the fourth quarter. So again, that $1.5 billion is in that $3 billion to $4 billion that we intend to deploy.

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

On Slide 8, shows very helpful volume trends index to 2008 and it's, I think, interesting to show how much Europe is down, as well as U.S. and Canada. Is there anything structural that would imply these volumes can't get back to the 2008 levels? And if so, what would it -- if there isn't anything structural, what would it take to get there? And how long?

If you comment on the situation, I'll take the example of the North American automotive industry. When the volumes really declined by almost 50% here from 2007 through 2009, there was a view that we'll never get back to those peak years in automotive in North America of 2005, '06 or '07. And here we are 3, 4 years into the recovery at production volumes for North America in automotive at near records, and we're going to see that, we think, continue in 2014. So there is a lot of pessimism sometimes at the depth of these recessionary environments, and I think it will take a while for Europe to get back to what we saw prior to the Great Recession, but I think we're going to see that begin to turn. There were a lot of structural and banking issues in Europe. But I'm confident that they're going to start to see a modest recovery, and it may take them quite a while because I think we addressed a number of those issues here in North America, probably a little more painfully in the early parts of the recession, but it did position us for a recovery. And so I am confident that over time, you will see the growth in Europe return, may take a few more years. If you look at that chart, it's taken us 4 years, and we're still not quite back overall in the economy to that level. But you were seeing it in automotive now. I think we're going to see it in the construction markets. And I think we're going to start to see that line turn a little bit, but it's going to be slow in Europe. And we're certainly not expecting a robust recovery, but we think we'll start to see those early signs of a positive economic growth even at a very low level.

And in automotive, to Chuck's example there, in Germany, in France, Italy, U.K., Spain, even in commercial vehicles, December registrations versus prior year were all up, and that's a turn for some of those countries versus several months of being down year-over-year. So that started to turn. Architectural, as I said before, should be going from negative to modestly positive during the year 2014. Refinish has already turned positive. Aerospace has been positive. So all those are positive indicators to start chipping away at that 20% you see on Slide 8. And in fact, in Germany, when you look at industrial production or GDP, those were all solidly positive with industrial production ahead of GDP because they've got some exports going in their favor as other parts of the world pick up growth. But -- so U.K., the strongest, followed by Germany. Benelux has been fairly strong; Poland, returning to growth; and Spain, turning positive. So all positive indicators.

Got it. That was helpful. Just on -- just turning to your protective coatings, the synergies you got from selling protective coatings in the stores, was that in the original synergy guidance? And if not, what's the opportunity there?

Well, we were aware that there would be an opportunity to sell additional protective coatings in North America with the acquisition of Akzo North America business. We also made a small acquisition in Canada during this time where we picked up -- or we returned the license to PPG for one of our Canadian distributors. So we think that the combination of these opportunities, not all just related to the Akzo acquisition, are going to produce some positive synergies. We think we're going to be able to see that capture throughout 2014 in a way that we were just getting started in some of these markets during 2013. So we think it's an additional synergy opportunity. We were aware that there'd be some of that, but we think the opportunity is there, if we can capitalize on it.

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

A question on Performance Coatings. If we were to strip out the acquisitions, would your fourth quarter margins have been flat, up or down? Trying to get a sense for how the legacy PPG businesses would have been trending, recognizing the size of the deals and the pronounced seasonality there.

Yes, Kevin, this is Vince again. As you read the commentary we put out at 1:00, we had roughly $300 million of architectural acquisition-related sales in the segment, and that was roughly at a breakeven for the quarter, which is customary. Last year, that business was not owned by us. It was in the red, solidly in the red. So we've made -- our synergies have made it a breakeven business in a seasonally low quarter. And if you do the math on that, you can see that our margins on the legacy Performance Coatings segment would be up year-over-year.

Okay. And if we adjusted for Deft in a similar fashion, would that still be true, Vince?

Yes. That was a small contributor. It's a smaller business, much smaller business.

Yes. Okay. Secondarily, Chuck, you've been very active on portfolio management, to say the least. You've commented on M&A a bit. I'm wondering about your view on the divestiture side and whether we should anticipate anything in terms of flat glass or fiber glass, say, looking over the next year or 2.

Certainly, looking over the next year, we don't have any active discussions going on for those businesses. As we've said in the past, for these or any of our other less core activities, that we would certainly consider a -- any transaction that created significant value for our shareholders. But at this point, over the next year or so, we don't have any active discussions. And we see these businesses as now benefiting from some of the recovery here in North America and some of our key markets. So we view them as stronger contributors over the next year as some of these markets recover.

And finally, if I may, just on a housekeeping issue. Would you intend to leave Optical in your financials or move it to discontinued operation for the first quarter?

Well, as we've said, we intend for the business to -- transaction to close in the first half of the year. And once the conditions for a closing have been met, at that point in time, we would move it to discontinued operations. So all we can say right now is it'll be sometime in the first half. And of course, once it moves to disc ops, it will recast for all periods presented.

But that would be a recast for the TRANSITIONS business.

Right, right.

Obviously, we have an ongoing Optical and Specialty Materials business that's also performing well. Now if you look at our quarterly performance in silicas, in our OLED business and the remaining pieces of Optical outside of TRANSITIONS, we have what we feel is a strong business portfolio outside of TRANSITIONS, which, as Frank described, would move into discontinued ops with the -- with all the conditions to closing that.

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

Most of my questions have been asked. Just have a couple of quick ones. In the fourth quarter, what was your -- for coatings, the raw material basket, was that up or down or flat year-over-year?

I would say flat.

Yes. Ivan, if you dissect that a little more detailed, we are seeing, as Chuck alluded to earlier, higher propylene derivative costs year-over-year offset by some other items that are slower in terms of pricing.

Great. And then in the packaging business, you mentioned that was up in all regions except for Europe. Was Europe just more of a market demand thing or was there some sort of share -- market share shift?

That was -- I think the market conditions in Europe were slower. But there has been an increased competitive activity in the packaging coatings business, especially in the European region. But obviously, we are holding on our own and growing in the markets that have growth like Asia.

And then my last question, you may have touched on this in a previous answer, I just missed it. But you mentioned that the U.K. was up, and historically, I believe that U.K. has been -- is a bit of a leading indicator for PPG for that region. Historically, how long has -- does the other countries follow, if that's true, U.K. after you see it sort of turn? If you understand my question.

We do, and I think, historically, what we've seen is the U.K. markets have -- if the U.S. starts to turn, we see the U.K. improvement earlier than Continental Europe. And then probably if you look at the tendencies or the trends that we're seeing, that's going to be followed by Eastern Europe. So what we saw in 2013 was a clear improvement across a number of markets in the U.K. They're not the leading automotive producer. But certainly, in automotive sales and in production, the U.K. was growing. The architectural market turned around in the U.K. We would look then for the Western Europe to follow, usually with a couple of quarters lag. And then from there, you'd usually see then Eastern Europe follow. So I would say that's one of the reasons why we feel that there will be a positive turn in Europe, albeit, I think, we use the word fragile. I would say it's going to be weak. But the markets that have been weaker and shown less signs of a turnaround have been in Eastern Europe. And we're looking here in the first half to see some improvement in Western Europe now. And hopefully, by the latter half of the year, to see some of the economies in Eastern Europe also begin to stabilize and turn around.

Yes. Ivan, I mean, in the U.K. where a lot of our business is architectural, that's one of the reasons we're seeing that business turn positive in 2014. That economy's followed by Germany, where we have more of a business in automotive, and so we've seen -- already seen that turn positive, and that trend should continue. What'll really help us from an operating leverage standpoint is when France turns. And right now, of course, it's been a little bit flattish. But when that turns, substantial part of that business is architectural and that'll really help us accelerate the growth there and in a very accretive way. We just are -- it's just an uncertainty as to when that will turn as the U.K. has. So far it hasn't had happened, but we're hopeful for sometime in 2014 for that to turn also.

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

Most of my questions have been answered, and I apologize if it did miss this earlier. Can you just clarify, of the forward guidance you gave on restructuring-related benefits, how much of that is related to the acquired AkzoNobel assets?

Yes, glad you asked the question, Charlie. If you look, we laid out in the press release and the prepared remarks $75 million to $90 million of incremental year-over-year cost savings. Those are programs that we've announced previously. If you recall, we closed on the acquisition in April. We put out a synergy target and also indicated we'd have some restructuring, which we announced in the third quarter. And so this $75 million to $90 million are programs that we've already announced. The lion's share of that will occur in our Performance Coatings segment with the synergy capture of Akzo. We also have some targeted synergy -- targeted cost savings, excuse me, in restructuring and in a few other businesses. And again, we laid this out in our third quarter. That included much smaller amounts in businesses like architectural, EMEA, marine and fiber glass. So of the $75 million to $90 million, the lion's share of that would be specific to that acquisition and a much smaller portion allocated to those 3 other buckets.

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

It sounds like we'll have the TRANSITIONS business in the earnings here in the first quarter. Should we expect another really strong quarter? I mean, the $1.5 billion doesn't change, and you get to keep half of anything you can generate over the next couple of quarters. So I assume you're running that business relatively hard right now.

Yes. John, again, we can't tell when we're going to get the final regulatory approvals, which is what we're waiting on. But until we do that, we'll continue to classify the business as continuing. We didn't talk a lot about it, but the business had a very successful Q4. Substantial event occurred with the new release of a Gen VII product in North America about a week or so ago. There was a nice pipeline fill in Q4. And we're certainly still waiting to see how that is going to translate in Q1 at market sales, but we're certainly excited. We did see good progress last year in Europe under similar circumstances. So yes, we feel good about the business. The fourth quarter was strong, and we expect that to continue here, early part of the year.

If you had another 14% sales growth in that segment, would you have another 25% earnings growth? Is that incremental math still in play in the first quarter?

Yes, all that sales growth, as Chuck alluded to, was not all TRANSITIONS. We did have good silica. We did have good optical products outside of TRANSITIONS. Typically, these businesses, coatings and specialty materials, do have a lot of leverage on the upside to a degree.

And then secondly, are the same-store sales in the PPG stores benefiting at all from closure of Glidden stores? That is, are you capturing some of that closure sales volume in that same-store sales number or in your continuing stores?

Yes, we think there is some of that, a small piece. As we've tried to analyze it over the last few quarters, we obviously have closed stores in the combined network now. So we're looking to maintain as many of those sales in the remaining stores. So again, a very -- what we feel is a very solid number for same-store sales growth for PPG, but we think there is a little bit of benefit in there from the closed Glidden stores in the network.

Your next question comes from the line of Kevin Hocevar from Northcoast Research.

I was wondering what your visibility is like in the marine market, and as the year progresses, if you see that flattening out. Or do you expect kind of these negative volume comps to continue throughout all of 2014?

Well, when you look at our sales over the course of 2012 and 2013 and the new business that we're capturing for future sales, we experienced probably one of the larger decreases in our marine sales between the fourth quarter of 2012 and the first quarter of 2013. So one of the things that we're suffering in the fourth quarter is the comparison with what was still a stronger period of sales level in marine from business that had been previously booked and was being finished up. So I think in the first quarter of 2014 and throughout the year, we will have, let's call them, easier sales comparables with the prior year. And we are seeing new bookings growth, but I would not expect the sales level to move up significantly until the latter part of 2014. But certainly, we're seeing a stable level of sales now going into 2014. So the comparables will be better.

Okay, great. And in terms of the auto OEM business, could you -- you mentioned you expect to outperform the industry again in 2014, and I believe you've outperformed the industry 700 or 800 basis points, something like that, in 2013. Is that type of outperformance what we should expect in 2014 as well? Or is that a little bit optimistic?

I would say that I don't know that we look for that type of outperformance in every year. We think that we've benefited, again as we mentioned, on the technology side and being well positioned in the fastest-growing markets in places like North America or in China. So I think on a longer-term basis, you wouldn't expect that, but we still feel that we have positive momentum going into 2014.

And one of the other factors, too, is that as the Japanese OEMs and even some of the European OEMs localize production in other markets to add incremental capacity, we do tend to benefit from that by virtue of our technology, service levels, contact process, whatever. So new facilities, we tend to get a very good portion of that market in addition to the layers as a result of some of the technologies in existing facilities. So that also helps to contribute to having some level of over performance versus the market going forward.

All right, ladies and gentlemen, we have time for one final question, and that question is coming from the line of James Sheehan from SunTrust.

Chuck, just wondering on the price increases in the company-owned stores, for the Akzo stores in particular, are the price increases equivalent to those in the legacy PPG stores? Or are they a little bit higher or lower?

Well, right now, we're consolidating store operating systems. We're consolidating management and practices. So you should expect similar strategies and policies, including pricing, regardless of whether these were a legacy Akzo or PPG's store.

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

I just want to thank everybody again for their attention and interest in PPG. If you have any further questions, please contact our Investor Relations function. Thank you.

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