PPG
#<UNK>, this is <UNK>.
Let's start with the assumption ---+ we all year, we've been saying that it would be within the 2% to 4% range.
So, I think our assessment has been relatively accurate.
And, this past quarter, overall, we were up low-single digits, and that was over, obviously, a quarter prior-year, that was a little bit weaker than we expected.
We did have some bright spots.
Certainly, the Home Centers did very well, from that standpoint.
We had ---+ all of our retail partners, had a good quarter, from that standpoint, as far as paint sales were.
Our trade business was up, also.
Our company-owned stores continue to perform better.
We think we're closing the gap in that regard.
We're seeing a modest improvement in Canada, as well.
So, I would tell you that the industry has been about where we expected, in that 2% to 4% range.
And we expect to see, next year, in a similar type fashion.
No.
For refinish in Europe, the only thing that we really notice, was that the insurance companies in the UK have been getting tighter and tighter on claim management.
Other than that, I would say there was nothing significant.
Certainly, our waterborne products continue to take share over there.
And we did have a nice win, that we'll be talking about in the first quarter call, when it starts to add to the bottom line.
<UNK>, I'll take the cash flow question, and <UNK> will address the other two.
We're going to put out our 10-Q in the next few days.
The cash flow is a little bit murky simply because we have a significant amount of pension-related specials.
We have some asbestos payments that are reflected as liability reductions.
So, the numbers, you'll need to see the pieces, which will be very well articulated in the Q.
We're up about, on an apples-to-apples basis, excluding some of the specials, we're up just below 10%, year over year on a cash flow basis.
But you'll need to see the specials to fully understand that.
<UNK>, I think you.
Yes.
On the environmental spending, <UNK>, we are planning to spend about half this year of what we spent in total environmental cash, versus last year.
Last year, we spent about $100 million and it will be about half that this year.
Obviously, the environmental spending has some level of unpredictability based upon how the parcels are remediated, and any additional work that we find.
This is an ongoing journey that's been going on for a few decades.
But generally, we think that the run rate of cash spending in environmental this year is more representative to what we would see going forward, and hopefully over time it will continue to modestly diminish.
In terms of pension spending, we did say that we would have about $175 million of top-up of some of the plans, that resulted from the annuitizations that we did on both the US and Canadian side.
We put about $50 million of that into the plans in Q3.
We've got another $125 million to do between Q4 and 2017.
So that will occur over to that period of time.
Aside from that, there is some modest, I'll say, high-single, low-double digit millions of dollars, that we put toward the international plans on an annual basis.
This <UNK>, again.
I would say that, working capital has been a real bright spot, particularly in Q3, where all three elements of working capital: receivables, payables, and inventory have improved in days.
And in fact we took mid-single digits days out of inventory in Q3.
We need to continue to make progress because we still think there is a gap to our peers, in that respect.
That will come from a combination of a more rigorous S&LP process, but also complexity reduction.
And we do continue to think that there will be additional, we'll call it, 100 basis points or so on an annual basis of improvement, in working capital.
But pleased with the progress so far, more work to do.
<UNK>, this is <UNK>.
There's been no change.
We're very experienced in the acquisition ---+ we've done more than 50 acquisitions in the past 10 years.
We have a very dynamic play book that we consistently apply, and we expect fully to ---+ anybody that's below our system average, to get them up to our system average in a relatively simple period of time.
We get the raw materials quickly.
We move on to the best practices next, then we do the back office, and then we bring in our new PPG products.
We expect to be there.
We're not at all concerned.
We just did MetoKote.
We've already picked $1 million of those synergies in the first 90 days.
We're going to be okay in that area.
I think it's a fair question, and I would tell you that everybody starts with their own idea about what a fair price is.
I would tell you that we are not paying 15 times.
We're going to remain disciplined.
But, I don't expect that the current elevation of a couple of specific, unique transactions, drive the entire market.
So, we didn't pay anywhere near that for MetoKote.
And we have others that we're working on right now that aren't in that stratosphere.
Certainly, we are going to have to react to the marketplace.
I don't know whether some of our competitors are thinking that the zero-rate interest environment is going to be here forever.
But, we certainly recognize that there are different expectations when you do an acquisition.
And just following up very quickly on <UNK>'s comment around discipline.
That's a very important point.
At the end of the day, we benchmark against the return that we get by returning cash to shareholders, and what they can, given that.
On a risk-adjusted basis, if we can have an accretive acquisition that returns, in excess of our weighted average cost to capital, that's really the benchmark.
Not necessarily comparing it to any other recent deal.
And that includes any synergies that we can get, either on the revenue or cost side.
Hey, <UNK>.
<UNK>.
We'll take them one at a time.
When you look at the performance coatings business, again, we did have additional growth-related spending that crimped our margins this quarter, in that particular segment.
Certainly the margin growth was contracting, as you noted, due to the diminishing benefit of raw materials.
$15 million of additional growth-related spending was impactful in that particular segment.
If you flip to the industrial segment, as <UNK> alluded to earlier, we did see ---+ we are working with our customers in that segment on our selling prices to them.
And that's the one factor I would point to in that particular segment.
In both these segments, there's always puts and takes outside of those particular items but those would be the two key items.
Actually, <UNK>, especially coatings materials was actually the weakest of the four that were in there.
Automotive had a very good quarter, as we talked about.
And our industrial team had a very good quarter.
When you look at it, our automotive parts and accessories was up high-single digits.
Our coil business was up high-single digits.
Wood was up, transportation coatings were up.
Heavy duty equipment was up for the first time in a long time.
I'd have to guess, but at least two years.
Our packaging business continued their year-over-year growth.
We're in the beginning of a secular growth rate for this.
So, they were up high-single digits.
The move to BPA-NI.
Really, when you look at it, the specialty coatings materials, they were the weakest of the four.
It was everybody contributing though.
Yes, it was definitely share growth in the industry.
We have worked hard to increase our share in that area.
The customers are very comfortable with our ability to deliver more productivity in their shops; that's what they're looking for.
And we've been able to deliver that productivity through value-added products.
And that's what's driving us.
The industry itself, as you know, you can read the papers, continue to be quite weak, but we're very pleased with our team's performance.
Yes, this is <UNK>.
The Comex cost synergy targets, we completed that, fully, by the end of last year, actually.
We do have some sales synergy targets for Comex, that are primarily related to PPG products going into Mexico, as well as Central America.
Those are on track or slightly above track.
The other restructuring program that we announced last year, again, diminishing benefits, as we approach the fourth quarter.
So very modest benefits in the fourth quarter and we will be fully captured at that point.
No.
<UNK>, the way I would think about it is, there are several properties that are out there that are coming to the market because they see the prices that are out there.
And so that makes more people think about whether or not this is the time to get out of some of their investments.
I would also tell you that we have historically worked with a number of these family owned companies for many, many years.
And it takes a long time, sometimes, to build that relationship, to get them to the point where they feel comfortable, ready to pull the trigger.
Whether it's a generational change, whether it's been a dynamic where they're looking at reduce their focus on the coatings business, or whatever the dynamic might be.
So, we're going to continue to work with our potential acquisitions, whether it is a family owned company, or some of these private-equity owned ones.
I think the pipeline looks solid.
In general, <UNK>, what you said is correct.
No growth, it doesn't matter what your margins are if you're not growing.
But, we do have some business mix differences in Europe.
We could have pluses or minuses just around business mix, but generally what you said is accurate.
This is <UNK>.
Just to follow up quickly, you have decremental margins at the profit contribution line, but that's another reason why we're looking at our total cost structure.
So we can minimize any downside, if the [vime] becomes muted in the near future.
And the team over there has done a very good job, thus far.
But there are some additional opportunities that we're going to be looking at, in conjunction with this next set of initiatives we are talking about.
I would say that's a very, very small factor.
Heavy duty equipment has reduced its size and scope overall of our industrial coatings, because of their decline.
So it has no real material impact.
This is <UNK>.
Most of the costs are peso denominated.
There is a little bit of transaction exposure from buying some materials from outside of Mexico, but we do have the ability to hedge a portion of that.
We don't get into detail as to how much we do, but the limited transactional exposure there is, we do have the ability to mitigate that.
Plus there is also pricing opportunity when you see these kinds of movements on currency.
So that's another mitigating factor, which is the reason that business continues to perform very, very well on both top line and bottom line.
<UNK>, let me add to that.
From the Comex perspective, they continue to outpace our original target, which is 2 times GDP.
We've opened up 67 new stores in the quarter.
We're at 168 new stores through the first three months.
So we're going to exceed our target.
We're getting close to 4,200 stores in Mexico.
We're going to have probably 190 stores.
We also opened up new stores, which we're not counting, in Lowe's, so we have a store-in-store concept down there as well.
Overall, even with the challenges to the peso, the PPG Comex team has been doing a phenomenal job.
We don't want to go into specifics right now on the exact amount, because we're assessing all the potential actions we're looking at.
What we can say is, it's going to be broad based and significant, and will address all elements of the cost structure.
And when we have the things nailed down as part of our planning process, we'll update the market at appropriate time.
<UNK>, as we've said in the past, generally you take a couple of quarters to phase it in, and then you start to get more benefits at the back half.
I think we are in inning three.
So, BPA non-intent coatings really started in France.
They have factored their way over to the US, and some of the food applications.
Now California, in fact, their regs, and the way they are going to force to people talk about it, kicked in actually, October 18.
So, that will be more pressure in the marketplace to shift to the BPA-NI coatings.
And, of course, once that starts to happen, I always use tuna fish as an example ---+ you pack cans in Thailand.
Those cans show up in Europe, they show up in the US.
And they're not going to run two and three different formulations for some of those tuna fish runs.
So you're going to have certain markets following later, just because of where they export to.
We're in the early innings, and we're really pleased with the acceptance of our new technology.
If I could add, this is one of the businesses, again, where we're stacking year-on-year growth rates of very high levels.
So we were up mid-single digits this quarter.
That's on a very good comp last year, so that stacking effect is very helpful for us.
Well, we only have one that's falling, and seven are flat.
I talked about Ti02 being up.
Right now, it's a relatively benign environment going into the fourth quarter.
We'll obviously have to wait to see how it looks with the first quarter.
But that's how we stack them up.
We do think, <UNK>, we do have a benign global economy here.
So, the push for raw material inflation shouldn't ---+ there's not a demand-supported push for that.
<UNK>, we put out an 8-K in mid-September that provided, by quarter, the last several years of our EPS from continuing, excluding flat glass in mid-September.
I think for the fourth quarter, that was $1.16.
That European fiberglass business will remain in continuing, it wasn't a sale of an entire business, so based on GAAP guidance, it remains in continuing.
