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Company Name: PPG Industries Inc Company Ticker: PPG Sector: Basic Materials Industry: Chemicals Event Description: Q3 2015 Earnings Call Market Cap as of Event Date: 26.35B Price as of Event Date: 101.0 © 2014 TheStreet, Inc. All Rights Reserved Page 1 of 22 PPG Industries Inc (PPG) Earnings Report: Q3 2015 Conference Call Transcript The following PPG Industries Inc conference call took place on October 15, 2015, 02:00 PM ET. This is a transcript of that earnings call: Company Participants Vince Morales; PPG Industries Inc.; VP IR & Treasurer Michael McGarry; PPG Industries Inc.; President & CEO Frank Sklarsky; PPG Industries Inc. ; EVP & CFO Other Participants David Begleiter; Deutsche Bank; Analyst Chris Evans; Goldman Sachs; Analyst Duffy Fischer; Barclays Capital; Analyst John Roberts; UBS; Analyst P.J. Juvekar; Citigroup; Analyst Jeff Zekauskas; JPMorgan; Analyst Frank Mitsch; Wells Fargo Securities; Analyst Arun Viswanathan; RBC Capital Markets; Analyst Nils Wallin; CLSA; Analyst Ghansham Panjabi; Robert W. Baird; Analyst Matt Gingrich; Morgan Stanley; Analyst Don Carson; Susquehanna Financial Group; Analyst Jim Sheehan; SunTrust Robinson Humphrey; Analyst Kevin Hocevar; Northcoast Research; Analyst Dmitry Silversteyn; Longbow Research; Analyst MANAGEMENT DISCUSSION SECTION Operator : Welcome to the third quarter PPG Industries earnings conference call. (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. Please proceed. Vince Morales (VP IR & Treasurer): Thank you. Welcome, everybody. This is Vince Morales, PPG's Vice President of Investor Relations and Treasurer. We appreciate your continued interest in PPG and welcome you to this teleconference to review our third quarter 2015 financial results. Joining me on the call today from PPG is Michael McGarry, President and Chief Executive Officer, and Frank Sklarsky, Executive Vice President and Chief Financial Officer.

PPG Industries Inc (PPG) Earnings Report: Q3 2015 ... · PPG Industries Inc (PPG) Earnings Report: Q3 2015 Conference Call Transcript The following PPG Industries Inc conference call

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  • CompanyName:PPGIndustriesIncCompanyTicker:PPGSector:BasicMaterialsIndustry:Chemicals

    EventDescription:Q32015EarningsCallMarketCapasofEventDate:26.35BPriceasofEventDate:101.0

    ©2014TheStreet,Inc.Al l R ightsReserved Page1of22

    PPGIndustriesInc(PPG)EarningsReport:Q32015ConferenceCallTranscriptThefollowingPPGIndustriesIncconferencecalltookplaceonOctober15,2015,02:00PMET.Thisisatranscriptofthatearningscall:

    CompanyPart icipants

    VinceMorales;PPGIndustriesInc.;VPIR&TreasurerMichaelMcGarry;PPGIndustriesInc.;President&CEOFrankSklarsky;PPGIndustriesInc.;EVP&CFO

    OtherPart icipants

    DavidBegleiter;DeutscheBank;AnalystChrisEvans;GoldmanSachs;AnalystDuffyFischer;BarclaysCapital;AnalystJohnRoberts;UBS;AnalystP.J.Juvekar;Citigroup;AnalystJeffZekauskas;JPMorgan;AnalystFrankMitsch;WellsFargoSecurities;AnalystArunViswanathan;RBCCapitalMarkets;AnalystNilsWallin;CLSA;AnalystGhanshamPanjabi;RobertW.Baird;AnalystMattGingrich;MorganStanley;AnalystDonCarson;SusquehannaFinancialGroup;AnalystJimSheehan;SunTrustRobinsonHumphrey;AnalystKevinHocevar;NorthcoastResearch;AnalystDmitrySilversteyn;LongbowResearch;Analyst

    MANAGEMENTDISCUSSIONSECTION

    Operator :

    WelcometothethirdquarterPPGIndustriesearningsconferencecall.

    (OperatorInstructions)

    Asareminder,thisconferenceisbeingrecordedforreplaypurposes.IwouldnowliketoturntheconferenceovertoyourhostfortodayMr.VinceMorales.Pleaseproceed.

    VinceMorales (VPIR&Treasurer):

    Thankyou.Welcome,everybody.

    ThisisVinceMorales,PPG'sVicePresidentofInvestorRelationsandTreasurer.WeappreciateyourcontinuedinterestinPPGandwelcomeyoutothisteleconferencetoreviewourthirdquarter2015financialresults.

    JoiningmeonthecalltodayfromPPGisMichaelMcGarry,PresidentandChiefExecutiveOfficer,andFrankSklarsky,ExecutiveVicePresidentandChiefFinancialOfficer.

  • CompanyName:PPGIndustriesIncCompanyTicker:PPGSector:BasicMaterialsIndustry:Chemicals

    EventDescription:Q32015EarningsCallMarketCapasofEventDate:26.35BPriceasofEventDate:101.0

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    OurcommentsrelatetothefinancialinformationreleasedonThursday,October15,2015.Iwillremindeverybodythatweposteddetailedcommentaryandaccompanyingpresentationslidesonourinvestorcenteratppg.com.TheslidesarealsoavailableonthewebcastsiteforthiscallandtheyprovideadditionalsupporttotheopeningcommentsMichaelwillmakemomentarily.

    FollowingMichael'sperspectiveontheCompany'sresultsforthequarterwewillmovetoaQ&Asession.

    BoththepreparedcommentaryandthediscussionontheQ&Amaycontainforward-lookingstatementsreflectingtheCompany'scurrentviewoffutureeventsandtheirpotentialeffectonPPG'soperatingandfinancialperformance.Thesestatementsmayinvolveuncertaintiesandriskswhichmaycauseactualresultstodiffer.TheCompanyisundernoobligationtoprovidesubsequentupdatestotheseforward-lookingstatements.

    Thispresentationalsocontainscertainnon-GAAPfinancialmeasures.TheCompanyhasprovidedintheappendixofthepresentationmaterialswhichagainareavailableonourwebsitereconciliationsofthesenon-GAAPfinancialmeasurestothemostdirectlycomparableGAAPfinancialmeasures.ForanyadditionalinformationpleaserefertoPPG'sfilingswiththeSEC.

    AndnowletmeintroducePPG'sPresidentandChiefExecutiveOfficerMichaelMcGarry.

    MichaelMcGarry(President&CEO):

    Thankyou,Vince,andgoodafternooneveryone.IwanttothankyouforyourcontinuedinterestinPPG.

    Todaywereportedourthirdquarter2015financialresults.Ourresultsincludedthirdquarternetsalesof$3.8billionandthirdquarterrecordadjustedearningsperdilutedsharefromcontinuingoperationsof$1.61.

    Ouradjustedearningspershareinthethirdquarterwereup$0.20,or14%versusthepriorrecordquarter.Ourcontinuedstrongperformancewasachieveddespiteunfavorableforeigncurrencytranslationimpactswhichwerelargerthanoriginallyanticipatedduetofurtherweakeningofemergingregioncurrenciesduringthequarter.

    WemorethanoffsetthecurrencyheadwindwithcontinuedbenefitsfromouracquisitionsincludingconsistentlystrongperformanceofComex,ongoingandaggressiveactionstofurtherreduceouroverallcostandcontinuedcashdeployment.Overallweperformedwellthisquarteragainstamoredynamicanduneveneconomicbackdrop.WehavecontinuedtodeliversolidcompoundedadjustedEPSgrowthasaCompanyincludingover20%inthelastthreeyears.

    Thisconsistentperformanceisatangiblemeasurementofourglobalcoatingsbusinessplatform,ourabilitytoinnovateandcommercializecustomerdrivenproductsandtechnologiesandourcontinuedaggressivecostmanagement.Additionallywecontinuetobenefitfromdisciplinedearningsaccretivecashdeployment.

    Ourthirdquartersalesvolumedeclinedbylessthan1%yearoveryeardownslightlyversusoursecondquarterperformance.Thelowerresultsreflectoverallmoderationofglobaleconomicgrowthduringthequarterandtransitorycustomerinventorymanagement.

    OurIndustrialCoatingssegmentgrewvolumesupportedbycontinuedautomotiveOEMvolumegrowthinallmajorregions.WedeliveredhighervolumesinAsiadespitelowerindustryproductioninChina.AlsogrowthcontinuedinEuropeandNorthAmericasupportedbygrowingdemandintheseregions.

    Additionallywecontinuetobenefitfrominitialindustryadoptionofournewcancoatingtechnologies

  • CompanyName:PPGIndustriesIncCompanyTicker:PPGSector:BasicMaterialsIndustry:Chemicals

    EventDescription:Q32015EarningsCallMarketCapasofEventDate:26.35BPriceasofEventDate:101.0

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    andourpackagingcoatingsbusiness.Weareinearlystagesofanindustry-widetechnologyconversionandwehavedemonstratedexcellentprogressinsecuringaninitialleadershippositionduringthisonceinamulti-decadeindustryconversion.

    WithintheIndustrialsegmentgrowthwaspartiallyoffsetbyslightvolumedeclinesinourIndustrialCoatingsandspecialtycoatingandmaterialsbusiness,aresultsimilartopriorsequentialquarterasoverallgeneralindustrialdemandremainstepidinallmajorregions.PerformanceCoatingssalesdeclined,volumesdeclinedduetolowerarchitecturalcoatingsdemandstemmingfromaweakerCanadianeconomycoupledwithinventorymanagementbymostofourUSandCanadiannationalretailcustomersapproachingthetailendofamodestpaintingseason.Overallarchitecturalcoatingsindustrydemandwasmodestinthethirdquarterfollowingaweakerthananticipatedsecondquarterduetopoorpaintingweatherconditions.

    Essentiallywedidnotexperiencealarge-scalesnapbackinthequarter.Thisleftmostofourlargenationalretailcustomersandindependentdistributorswithhighinventoriesaswebegantowinddownthepaintseason.Sotheirlatethirdquarterorderpatternswerereducedcommensurately.

    VolumesinourotherPerformanceCoatingsbusinesseswereupslightly.RegionallyfortheCompany,highervolumeswereachievedinEuropewithgrowthtrendslightlyaheadofthepreviousquarteraswecontinuetoseebroaderbutstillmodestlyincrementalimprovementintheregion.

    Year-over-yearvolumesgrewINAsiaaswell.Chinavolumesweresoftearlyinthequarter,includingcustomerinventorymanagementbutstabilizedwithdemandimprovementlaterinthequarter.VolumesintheUSandCanadianmarketswereloweryearoveryearprimarilyduetoarchitecturalcoatingscustomerinventorymanagement.

    Mexicanvolumesexcludingacquisition-relatedbenefitsremainedverysolidwhileSouthAmericandemandweakenedincomparisontoprevioussequentialquarterandyearoveryear.

    AsImentionedweincurrednotableunfavorablecurrencytranslationimpactstosalesandearningsstemmingfromweakenedforeigncurrencies.Thesecurrencies,primarilytheeuro,unfavorablyimpactedoursalesbyabout$310millionorabout8%andreducedourpretaxearningsbyabout$45millionor$0.12pershare.Absenttheforeigncurrencyimpactsouradjustedearningspersharewouldhavebeenupover20%yearoveryear.

    Basedoncurrentforeigncurrencyexchangeratesweexpecttheunfavorableforeigncurrencytranslationimpactstomoderatesomewhatinthefourthquarterasforeigncurrenciesbegantoweakeninthesecondhalfof2014andduetotheseasonalityofourbusinesses.Giventhesefactorswenowexpectcurrencytranslationtoreduceourfull-yearsalesbyabout$1.1billionandpretaxearningsbyabout$120millionto$130million.Thisrangeisslightlyunfavorabletotheforecastthatweprovidedduringoursecondquarterearningsconferencecallwithmostofthechangealreadyrecognizedinourthirdquarterresults.

    AsyouwouldexpectfromPPGwehavemaintainedouraggressiveoperationalandcostfocusasweachievedlowermanufacturingandSG&Acostsincomparisontolastyear.Ouryear-over-yearSG&Acostsasapercentageofsalesweredownabout100basispointsduringthethirdquarter.

    Wecontinuedtoexecuteonourpreviouslyannouncedrestructuringplanandanticipatefull-yearsavingsfromthisprogramof$100millionto$105millionwhenfullyimplementedin2017with$15millionto$20millionofthesesavingsexpectedin2015.Castemploymentwasalsoasignificantfactorofsegmentincomegrowthinthethirdquarter.ThisincludedsalesandearningsfromourrecentacquisitionsincludingComexandseveralsmallercompanies.

  • CompanyName:PPGIndustriesIncCompanyTicker:PPGSector:BasicMaterialsIndustry:Chemicals

    EventDescription:Q32015EarningsCallMarketCapasofEventDate:26.35BPriceasofEventDate:101.0

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    SincetheendofthesecondquarterweclosedonCumingMicrowave,ChemfilCanada,IVCIndustrialCoatingsandLeJointFrancaisorabbreviatedLJF.Wewillbenefitfromthesetransactionsinthefourthquarter.

    Inadditiontoacquisitionspendingwedeployed$150millioncashinthequarterforthepurchaseof1.5millionsharesofPPGstockandourrepurchasepaceyeartodateisaheadoflastyear.Weremaincommittedtoaccretive,earningsaccretivecashdeploymentandyeartodatewehavespent$900millioninthisregard,includingsixbusinessacquisitionswithanaggregatepurchasepriceofover$400millioncoupledwith$500millionofstockrepurchases.

    Wehadpreviouslyannouncedacashdeploymenttargetof$1.5billionto$2.5billionfocusedonacquisitionsandsharerepurchasesforthecombinedcalendaryearsof2015and2016.Wehavenownarrowedtherangeandaretargetingatleast$2billionto$2.5billionoverthattimeperiod.

    LookingaheadweanticipatearesumptionofPPGvolumegrowthinthefourthquartersupportedbyglobaleconomicgrowth,theabsenceofcustomerinventorymanagementandthebenefitofincludingComexinourorganicfiguresfollowingtheacquisition'sanniversaryinNovember.

    LastlywecontinuetohaveavarietyofPPG'sspecificearningsdriversthatarenotdirectlytiedtothepaceoftheeconomy,mostofwhichI'vealreadyspokenabout.Insummary,theseincludethebenefitsofcompletingourrestructuringactions,attainmentofremainingsynergiesfromtheongoingintegrationofouracquisitions,theongoingeffectsofcontinuedcashdeploymentandourproactivecostmanagement.

    BeforeweconcludeourpreparedremarksIwanttoprovidesomecontextaroundafewofthekeyinitiativesIwillbeworkingoninmynewroleasCEO.TheseinitiativesaresummarizedontheslidetitledPPGpathforwardinthepresentationmaterialssupportingtoday'steleconference.

    Firstandforemostwearecommittedtomaintaininganunwaveringfocusonourcustomers.Todosowewillcontinuetoinvestincustomer-driveninnovationandtechnology.TechnologydevelopmenthasbeenthebackboneofPPGformany,manyyearsandwe'vebeenabletogainvaluableshareofourcustomers'walletastechnologyinourindustryhascontinuedtoshiftandsupportedchangingcustomerandenvironmentaldemands.

    RecentexamplesincludeourcompactprocessandautomotiveOEM,anewarrayofcoatingsandsealanttechnologieswedevelopedtoservetoday'scompositeaerospacemarket,ourindustry-leadingwater-basedrefinishcoatingsandnewcoatingsfortheinsideoffoodandbeveragecansjusttonameafew.Weaimtousethesetechnologyshiftstoexpandourinnovationleadershipinmarketsinwhichweparticipate.AlsoweintendtomaximizethetransferofthesetechnologiesacrossallofPPG'sbusinessesfaster.

    Additionallyweneedtoincreaseourcustomerintimacyandservicecapabilitiessothatweareabletodeliverhigherorganicgrowth.ThisrequiresustomakeiteasierforcustomerstodobusinesswithPPG.Thisincludesfromthetimetheyorwedevelopapotentialconceptinvolvingeithercoatingstechnologyorapplicationallthewaythroughthepurchaseordertoourfinalproductshipmentandprovidingtechnicalsupporttoserviceourcustomersandlaunchthenewtechnologyandtheirfacilitiesflawlessly.

    Thisisanend-to-endcustomerapproachthatisfocusedonbuildinglong-lastingmutualbeneficialrelationshipsandisaimedatdrivingahigherorganicgrowthrate.

    PPGhasbeenverygoodoperationally.Asa34-yearveteranoftheCompanythisisoneofthedisciplinesthatwasinstilledinmeandcontinuestobeimpartedwithallassociatesfromdayoneonthejobanditremainswithustoday.Nostonegoesunturnedinlookingforwaystoreducecostandwe'llmaintainthisaggressivecostmanagementapproach.

  • CompanyName:PPGIndustriesIncCompanyTicker:PPGSector:BasicMaterialsIndustry:Chemicals

    EventDescription:Q32015EarningsCallMarketCapasofEventDate:26.35BPriceasofEventDate:101.0

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    Inadditionwe'llmakeitevenmoredynamicsothatwewillcontinuetorapidlyadjustourcoststructuretoconstantlymatchregionalandend-usemarketdemandbyfurthervariablizingourcoststructure.Thiswillincludemoresharedservicecostcentersofexcellencethatwillcentralizecostsallowingustotakeadvantageofefficienciesintechnologiesandispossibleduetoourglobalscale.Thiswillimproveourcoststructureinthevariousregionsandfieldlocationsaroundtheworld.

    Strategicallywehavemadesignificantstridesintransformingourportfoliointhepastseveralyears.Wearenowinapositiontooptimizeandextractthefullscaleadvantagesofourglobalcoatingsplatform.Thisincludesimprovementsinnearlyeveryfacetofourbusinessincludingfurtherdistributionandsupplychainadvantagesduetoourbreadthanddepthofproductsandserviceswebuy,makeandsell.

    Naturallygivenalltheeffortwe'veputintotransformingourbusinessportfoliowewillmaintainourrigoronourbusinessportfoliotoensurecontinuedshareholdervaluecreation.Alsowewillremainfiscallyprudentandshareholderfriendly,twoothertraitsthathavelongbeenembeddedinPPG'sDNA.

    Fromabalancesheetperspectivewewanttoremaininvestment-gradeandmaintainadequatefinancialflexibilitywhichhasservedussowellovertheyears.Wewillcertainlyinvestorganicallytokeepourexistingbusinesseshealthyandkeepourdisciplinewithrespecttoacquisitionvaluation.

    AdditionallyweintendtorewardourshareholdersandwillrecommendsustainabledividendincreasestoourBoardofDirectors.Weintendtobeefficientwithallourassetsincludingcashandwe'llreturnexcesscashtoourshareholders.Lastly,I'mhonoredandexcitedtobeCEOandIlookforwardtothecomingweeksandmonthsofspendingmoretimewithourshareholdersandcontinuingthisdialogueonthepathforward.

    ThankyouforyourtimeandonceagainweappreciateyourinterestinPPG.NowJasminewouldyoupleaseopenthelineforquestions.

    QUESTIONS&ANSWERS

    Operator :

    (OperatorInstructions)DavidBegleiter,DeutscheBank.

    DavidBegleiter (Analyst-DeutscheBank):

    Thankyou.Michael,youhighlightinthereleasemoderatingglobaleconomicgrowth.Canyoutalktowhatregionsandwhatendmarketsyou'reseeingthatmoderatinggrowth?

    MichaelMcGarry(President&CEO):

    Sure.Wecanstartwithautomotiveasyouknow,yousawthatinChina.ThegoodnewsisinSeptemberyousawalittlebitofanimprovementthereandtheorderbookforAugustcontinuestolookmodestlybetter.

    Youwouldalsoseesomeheavydutyequipmentbeinganotherareathatcontinuestobealittlebitweak.FromaregionalsperspectiveweseealittlebitofuptickinEuropeandobviouslyLatinAmericaparticularlyBrazilseemstobegettingweakerinsteadofbetter.SooverallIthinkthosewouldbesomeofmyinitialcomments,David.

    DavidBegleiter (Analyst-DeutscheBank):

    Verygood.Michael,justonrawsinyourgrossmargin,niceexpansioninQ3.WheredowestandontherealizationofsomeofthelowerrawmaterialcoststhroughyourCOGS?

  • CompanyName:PPGIndustriesIncCompanyTicker:PPGSector:BasicMaterialsIndustry:Chemicals

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    MichaelMcGarry(President&CEO):

    David,we'vebeenveryconsistent.Wetoldyouthroughouttheyearthataboutathirdofourrawmaterialsaretiedtooil.Wegetsavingsquickeronitemsclosertotheoilwelllikesolvents.

    Wegetthosein30to60days.Transportationtypically60to90days.Wetypicallyworkwithoursupplierstopullthroughthepropyleneandethylenederivativesavings,andthoselagalittlebitmoresixtoninemonths.

    We'veseenmorerawmaterialdeflationin3Qthanin2Q.Andwewillcontinuetoworkwithoursupplierstogetfurthersavingsin4Qandgoingforward.

    DavidBegleiter (Analyst-DeutscheBank):

    Thankyouverymuch.

    Operator :

    BobKoort,GoldmanSachs.

    ChrisEvans (Analyst-GoldmanSachs):

    Goodafternoon,gentlementhisisChrisEvansonforBob.IwashopingyoucouldprovidesomeadditionalgranularityontheNorthAmericanarchitecturalvolumedecline.Areyouguysseeinganytrendsoutsideofthedestockingthere?

    MichaelMcGarry(President&CEO):

    Chris,whatIwouldtellyouisthatwehadawetJuneandpeoplewereanticipatingastrongerpaintseason.We'vebeenveryconsistentinsayingthatweexpectedthepaintseasontobeinthatlowsingle-digitrange.Ithinkourassessmenthasbeenrelativelyontarget.

    SowesawthemajorretailfolksbothintheUSandCanadastarttodestocklateinthethirdquarter.ThegoodnewsisIwilltellyouwethinkit'stransitorybecauseasIlookatoursalesforthefirst14daysofOctober,thesalesareveryconsistentwithwhatwesawinthefourthquarteroflastyear.Sothatleadsmetobelievethatthisisatransitoryeffect.

    Operator :

    DuffyFischer,Barclays.

    Duf f yFischer (Analyst-BarclaysCapital):

    Yes,goodafternoonfolks.Questionjustifyoutakeastepbackonyourvolumes,thechartthatyouprovideopticallyobviouslydoesn'tlookgood,thewholeindustryisstrugglingalittlebit.Butwhenyoulookacrossyourbusinesses,wouldyousayyou'remygainingorlosingmarketshare,sothequestionisareyourvolumesworsethanthemarketorinlinewiththemarket,wouldyouguess?

    MichaelMcGarry(President&CEO):

    WellIguess,Duffy,Iwouldfirstsaythatit'sadifficultquestiontoanswergiventhatthere'snotalotofindustrydatathatyoucanrelyon.SoIwouldsayit'sconceivablethatintheUSstoresbusinesswemighthavetickeddownafractionbutcertainlyIdon'tfeelthatwayinCanadaandwe'regainingshareinotherplaceslikeMexico.We'regainingshareinEurope,we'regainingshare,soIwouldtellyouthatsincewerunaglobalarchitecturalbusinessoverallnet-netwe'redoingprettywell.

  • CompanyName:PPGIndustriesIncCompanyTicker:PPGSector:BasicMaterialsIndustry:Chemicals

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    FrankSklarsky(EVP&CFO):

    AndDuffyifyougotosomeothermarketsoutsideofarchitecturalyou'llseeautoisupversustheindustry.Packagingwebelieveisupversustheindustryandwethinkourprotectivebusinessisupversustheindustryalthoughtheothersideofthatpointismarine.Andmarinefortheindustryisdownandwe'rematchingthedeclineswiththeindustry.

    Duf f yFischer (Analyst-BarclaysCapital):

    Okay.Andthenoneareathatlookslikeyouhaveaexcitingnewproduct,youcallitcompact,Ithinktheindustrywillcallitwetonwet,butitseemslikeyou'vegottentwobigwinsinthatspacerecently.One,howbigdoesthatmarketbecomeoverthenexttwoorthreeyearsandthenisitconceivablethatthiscouldbelikeE-Coatwhereyouwouldgetastrongermajorityofthewinsgoingforward?

    MichaelMcGarry(President&CEO):

    Duffy,Iwouldtellyouthatthishasn'tbeenarecenttrend.We'vebeenoutperformingtheindustryforquitesomeperiodoftimenow.Sotheindustrywasup1%inQ3,wewereup5%inQ3.

    Soagainwehavesignificantlyoutpaced.Wehavetoldpeoplethatit'snotprobablethatwewouldoutpacetheindustryforanextendedperiodoftime.Atsomepointyouhavetoreverttothemeanbutourtechnologywethinkisthebest.

    Ourtechnicalservicehascertainlybeenoutstanding.Andwe'vebeenwinningmorethanourfairshareofnewplants,sothat'sgood.

    Andthenultimatelywhentheystarttorefurbishsomeoftheseolderfacilitiesandtheywanttosavemoneyandreducethefootprintsizethiscompactprocesswillalsobeanotherwinner.Sowethinkthisisalong-termsustainablewinforusgoingforwardthankstotheoutstandingworkofourR&Dteam.

    Duf f yFischer (Analyst-BarclaysCapital):

    Great.Thanks,fellas.

    Operator :

    JohnRoberts,UBS.

    JohnRoberts (Analyst-UBS):

    Goodafternoon.WasComexuphighsingledigitsinthequarter?Iknowitwasuphighsinglethroughthefirsthalf,soI'mjustwonderingwhetheritsloweddownandstillmaintainedhighsinglefortheninemonthsbutwasdeceleratinginthequartermaybe?

    FrankSklarsky(EVP&CFO):

    No,John,Comexhasperformedverywellallyear,veryconsistentatmarketsales.WhatwedoseewithComexisthepesodevalued20%-plusandsothat'sbeentakingawaysomeofthetopline.We'vemadeupforthatwithgrowthinbothatmarketaswellasnewconcessionairestoreopenings.

    JohnRoberts (Analyst-UBS):

    Okay.CouldyoucommentalittlebitabouttheM&Apipelineandwhethervaluationexpectationshavecomedownwithmultiplesonthepubliclytradedpaintcompanies?

    MichaelMcGarry(President&CEO):

  • CompanyName:PPGIndustriesIncCompanyTicker:PPGSector:BasicMaterialsIndustry:Chemicals

    EventDescription:Q32015EarningsCallMarketCapasofEventDate:26.35BPriceasofEventDate:101.0

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    Yes,John,thewayIwouldanswerthatisit'stooearlyforthemultipleshavecomedownbecausethelast30,60dayswesawthestockmarketcomedown.Ourpipelineitstillcontinuestolookverygood.We'reactivelookingatanumberofpropertiesandIseenodifferenceinthatregardversuswhatwe'vehadinthepast.

    JohnRoberts (Analyst-UBS):

    Thankyou.

    Operator :

    P.J.Juvekar,Citi.

    P.J.Juvekar (Analyst-Citigroup):

    Yes,hiMichael.Ihaveaquestiononthisinventorymanagementbyretailers.Yousawthatinthirdquarter.

    What'syourconfidencelevelthatyouthinkit'sbehindus?Yousaidthefirstcoupleofweeksitlooksgood.

    Andthensecondlyonthatwasitaparticularretailerorwasitacrosstheboardforeveryonethatdestockingtookplace?Wasthereanyimpactonpricingbecauseofthat?

    FrankSklarsky(EVP&CFO):

    P.J.,wehadalittlehardtimehearingyou.Letmetrytorepeatthequestion.YouaskedIthinkwhat'sourconfidenceaboutQ4,nocarryoverintoQ4thedestock,andhowbroadwasthedestocking,isthatcorrect,P.J.?

    P.J.Juvekar (Analyst-Citigroup):

    Yes,that'scorrect.Wasthereanyimpactonpricingofpaintbecauseofthedestocking?

    FrankSklarsky(EVP&CFO):

    Thethirdpartwouldbeokay.

    MichaelMcGarry(President&CEO):

    Right.Sowe'lltakethepricingonefirst.Asyouknowwe'vebeentellingyouconsistentlythatpricing,ourmodelshowspricingflatfortheyear.

    Westillseethathappeningandifyouarethinkingaboutnextyearweseepricingflattoprettymuchintonextyearaswell.Asfaraswhywethinkit'satransitoryeffectoninventorynotonlyhavewelookedatourowninventoriesbutwehavealsoobviouslytalkedtoourcustomersandtheyarealsoofthatsameopinion.SoIthinkthat'sawaytothinkaboutitbesidesjustthebackthatwe'relookingatourorderbook.

    Anditwasbroad.Iwon'tsayallbutIwillsayitwasverybroad.

    FrankSklarsky(EVP&CFO):

    AndP.J.youmayhavemissedearlierbutMichaelmentionedthatthefirsttwoweeksofOctoberourorderpatternsareconsistentwiththatsametimeperiodlastyear.

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    P.J.Juvekar (Analyst-Citigroup):

    Okay,thankyou.ThenjustonCanadayoumentionedthatvolumesweredown.CanyoujustgivesomeorderofmagnitudehowmuchwerevolumesdowninCanada?Thankyou.

    FrankSklarsky(EVP&CFO):

    Soforusjusttoframethisforeverybodywepurchased,whenwepurchasedtheAkzoNobelNorthAmericanbusinessin2013weacquiredthenumberonepositioninthecountryofCanada.Atthattimewesaidthebusinesswasroughly$500millionandveryconcentratedpaintseasonjustfromaweatherperspectiveandthatbusinesswasdownsimilartowhatyou'reseeingthetotalsegmentortotalarchitecturalbusinessbedownsohighsingle-,lowdouble-digitrange.

    Andthat'smorestructural,P.J.WedoseeweakeningintheCanadianeconomy.

    MichaelMcGarry(President&CEO):

    We'vehadtwoquartersinarowofGDPdowninCanada.

    P.J.Juvekar (Analyst-Citigroup):

    Thankyou.

    Operator :

    JeffZekauskas,JPMorgan.

    Jef f Zekauskas (Analyst-JPMorgan):

    Thanksverymuch.Inyourcommentaryyousaidthatyourcost-cuttingprogramisloweringcostsannuallybyabout$20million.Solet'scallit$5millionaquarter.

    ButyourSG&AandR&Dcostsinthequarterweredown$52million.SoIassumethat,Idon'tknow,$47millionofthatiscurrencybutyouroverall--thatisyouhada$47millioncurrencybenefitinSG&A,butyousaidthatyourcurrencynethitwas$40million.Sodoesthatmeanthatthegrossmarginwaspenalizedbyabout$87millionor$90millioninthequarterduetocurrencies?

    FrankSklarsky(EVP&CFO):

    Firstofalllet'stakeavariouscategories.Andifyoulookatcorporatecostit'scorrecttosaycorporatecostswentdownbyabout$20million.

    Andthemajorityofthatwasstock-basedcompensationobviouslyreflectingtheequitymarketsandthatwillincludeboththeQ3effectandacatch-upfromthefirsthalf.Thatwon'treallyrepeatinthefourthquarterandIwouldsuspectthatthatcorporatecostlinewouldbebackupinthe$50millionto$55millionrangeversusthelowof$35millionthatyousawinthequarter.

    Whatyouarecorrectinsayingthatthereisacurrencybenefittoourconstructsareintotal.ThatappliestobothCOGSandSG&Aaroundtheworld.

    Sowhatwesaidwascurrencyimpactedthetoplineby$310millioninthequarterandimpactedthebottomlinebyabout,theoperatingincomelikebyabout$45millioninthequarter,weexpectthatoverallcurrencyimpactinthefourthquarterwillbelessthanthatbutattoday'sratesabout$250millioninthetoplineandabout10%ofthatontheoperatingincomelike.Butintermsofwecan'treallygiveyoudetailrightnowonthespecificcurrencyimpactoneveryportionoftheincomestatementbutthat'showIwouldframeitforQ3andwhatweexpectforQ4aswellasthecorporatedetails.

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    Jef f Zekauskas (Analyst-JPMorgan):

    Andthensecondly,manycompanieswhentheyreportearningsprovideafullbalancesheetandafullfundsplusstatement.Aretherereasonswhyyouinthegatheringofyourinformationthatisdifficultforyoutoputthattogetherandwhatwasoperatingcashflowforthequarter?

    FrankSklarsky(EVP&CFO):

    So,Jeff,asyouknowweareaveryearlyreporter.Wedothinkthatprovidesveryquicktransparencytoourshareholders.

    WedofileourQwithinaweekorsowherewehaveallthosedetails.SoIthinkthereasonwhyiswe'dliketogetalltheEBITinformation,salesandEBITinformationoutasquickaspossible.

    MichaelMcGarry(President&CEO):

    AndallIwouldaddtothatisthefactthatifyoulookatwherewestartedthequarterandwhereweendedthequarterwehaveobviouslypickedupacouplehundredmilliondollars,over$200millionincashbalance.Andthat'sacombinationoftheearningsandthentakeoffofthatobviouslyCapEx,ouracquisitionspendingbutalsoagoodperformanceonworkingcapitalaswecontinuetoworkoncollectingpast-duereceivablesaswellassomeinitiativeswehavearoundbringinginventoriesdown.SostillverydiligentoverthemanagingthecashflowandasaresultwehadaprettydecentQ3inthatrespect.

    Jef f Zekauskas (Analyst-JPMorgan):

    Sowhatwastheoperatingcashflownumberinthequarter?

    MichaelMcGarry(President&CEO):

    Well,you'llseethatwhenwefileourQveryshortlyyou'llseeallthedetailsaroundthat.We'dratherwaituntilyougetthewholestatementbeforewedissectthat.

    Jef f Zekauskas (Analyst-JPMorgan):

    Okay,great.Thankyouverymuch.

    Operator :

    FrankMitsch,WellsFargo.

    FrankMitsch (Analyst-WellsFargoSecurities):

    Hey,goodafternoongentlemenandcongratsonarecordquarter.IwasthinkingmaybeIshouldwaituntilIseetheQtogetsuperexcitedbutI'lltakeyourwordforit.

    Michael,IthinkyoumentionedthatNorthAmericanorderpatternsormaybeVinceforthefirstcoupleofweeksofOctoberweresimilartowhatyouwereseeinglastyear,sothatgivesyouconfidencethatwe'renotseeingadestock.AndobviouslyAsiawasabigconcernforfolksandyousaidthatitstartedoutsoftinQ3butthengotbetter.CanyoutalkaboutthepaceofbusinesssofarinOctoberinthatpartoftheworld?

    MichaelMcGarry(President&CEO):

    SoFrank,letmegiveyouacoupleofthingstothinkabouthere.AndI'llstartwiththeautomotiveside

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    becausethereseemstobealotofconcernabouttheautomotivepieces.

    Youknowthey'vereducedthetaxonsmallenginesinChinaandtheyannouncedthattaxlateinSeptemberandthattookeffectOctober1.Andsoitwouldnotbeinconceivablethatpeopledeferredpurchasesofsmallcarsbecauseyouknowthatthetaxratewasgoingtodropfrom10%to5%onOctober1.

    SowesawSeptembersalesinChinawereactuallyupaboutIthink3%ifIrememberrightandinOctoberwehaveaprettygoodviewofwhat'shappeningwithourcustomers.Ourorderbookwe'reprettymuchjustintimedeliveryandwe'reseeingmoderatelyimproveddeliveriestoourcustomers.

    Ofcoursewe'reperformingbetterthantheindustrysowearestillexpectingautomotivesalesinChinatobeupmodestlyinthat1%to3%range.IfyoulookatourotherbusinessestherewassomeinitialdestockingaftertheTianjinexplosionportexplosion.

    Mostofthathasworkeditswaythroughthesystemnowbecauseofwhathappenedpeoplewereconcernedaboutholdinginventoryforthingslikemarinecoatings,someofourrefinishcoatings.Allthathasbeenmoderatedandweseethoseorderbookscontinuingtogetbetter.

    SoIwouldtellyouthatstartingmid-Septemberwestartedtoseethatimprovement.AndithascontinuedintheearlypartofOctober.

    FrankMitsch (Analyst-WellsFargoSecurities):

    Allright.That'sveryhelpful.AndIdoappreciatetheraisingoftheamountthatyouaregoingtospendoneitherM&Aorsharebuyback.

    YouraisedthelowerendthereandIthinkinresponsetoMr.Roberts'questionyousaidthatyou'renotreallyseeingthemultiplescomedownontheM&Afront.Sowouldthatsuggestthatwemightpreferentiallygotowardsthesharebuybackroute?Andhavingsaidthatandinaskingthequestionobviouslythestockismateriallybelowthe52-weekhighoreventhelastyearlyaverage,howareyourthoughtsaboutsplittingbetweenthosetwousesofcash?

    MichaelMcGarry(President&CEO):

    Well,Frank,letmeclarify.Isaidyetthedaytheacquisitionshadn'tyetreflectedthat.Solet'sbeclearonthat.

    Secondlywe'vealwayssaidthatacquisitionsarealwayspreferred.Theyaremoreaccretivethanbuyingbackourstocksothat'salwaysourfirstpreference.

    Butwe'regoingtoprotecttheshareholders'valueandifwedon'tseetheacquisitionscomingthroughthenwewilltakethatmoneyandbuybackthestock.Sowewanttocontinuetodobothandourfirstpreferenceisalwaysacquisitions.

    FrankSklarsky(EVP&CFO):

    AndFrankIthinkit'sitsafetoassumethataswegothroughthefourthquarteryoucanexpectthatwewillcontinuetodeploycashinthequartertoeitheroneorbothofthoseinitiativesaswedid900throughthethirdquarter.Sowe'realreadyonpacetoexceedhalfthemidpointbytheendofthisyear.Soallthemorereasontoraisethatrangebutwewillcontinuetodeploycashinthequarter.

    FrankMitsch (Analyst-WellsFargoSecurities):

    Thankyouverymuch.

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    Operator :

    ArunViswanathan,RBCCapitalMarkets.

    ArunViswanathan (Analyst-RBCCapitalMarkets):

    Thanksguys.SoIguessIjustwantedtoaskyouyourconfidencelevelonacoupleofthings.

    SogoingforwardQ4and2016youhavealotoforganicgrowthinitiatives.DoyouexpectthatthatwouldpotentiallydriveapositivevolumegrowthpictureingeneralindustrialorautoOEMorarethosekindofmoredependentonmarketdevelopment?

    MichaelMcGarry(President&CEO):

    Iwouldtellyouthatwe'reexpectingcontinuedorganicgrowth.Letmegiveyousomereasonswhywebelievethat.

    Firstofallasyouknowwesoldouroneglassfacilityandthatwasintheendofthethirdquarterlastyear,soyou'llstarttoseethatasapositive.Comexwillthenflipfromanacquisitiontoorganicgrowthinthefourthquarter.

    WecloseonthatinNovember.Wecontinuetoseepositivegrowthinourautomotivebusiness.Packagingcontinuestodowell.

    Ourrefinishbusinesswiththewater-basedtechnologycontinuestogrow.That'saslowergrowthgiventhefactthatit'savolumechallengedmarketwiththenewtechnologyoutthere.

    Butwe'recontinuingtogrowinthatregard.AndtheoneareathatIwouldsayisstillaquestionmarkiswhereweareinthecycleisheavy-dutyequipment.It'sbeendown.

    Iwouldexpectthattoatsomepointreachabottom.Andthenthatwillstarttoturn.Andwetalkedaboutpackagingbeverygoodaswell.

    SoIthinkoverallyou'regoingtoseeareturntomoreorganicgrowth.

    FrankSklarsky(EVP&CFO):

    Andtheotherthinggoinginourfavorquitehonestlyisthefactthatinventoriesinthesystemareatveryreasonablelevels,whetherit'stheUSautomotivebusinesswellunder60daysatcurrentsalesrates,packagingasMichaelsaidwecontinuetopickupnewbusinessfromourtechnology-basedofferingsthere.AndtheninChinabecausetherecentproductionrateshavebeenbelowrecentsalesratesthoseinventoriesarecomingbackinlineinthefieldtoo.Sowedon'treallyhavetogothroughanymorerationalizationofinventoriesifthingsstayreasonablyhealthyintheendmarketsandthatincludesUSarchitectural.

    ArunViswanathan (Analyst-RBCCapitalMarkets):

    Okaygreat.Andyes,justlookingattheslidesitlookslikeobviouslyNorthAmericawaschallengedinQ4,alotofdestockingtherebutyousoundedslightlymorepositiveonEurope.Canyoujusthopeusunderstandalittlebitmoredetailonwhatyou'reseeinginEurope?

    MichaelMcGarry(President&CEO):

    Yes,sowe'llstartfirstofallwiththeautomotivebusiness.Asyouknowsaleshavebeenbetterthanbuildsandthat'sobviouslyagoodthinggoingforward.We'realsoseeingapickupinanumberofthecountries.

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    SouthernEuropeisobviouslycomingoffaverylowbasebutit'sgettingbetteraswell.AndthenwesawapickupinourarchitecturalbusinessintheBenelux.Andofcoursewe'vealwaysseengoodgrowthinGermanyaswellastheUKandalthoughtheEasternEuropeanregionhasbeenalittlechoppymostlyup,that'sbeengood.

    Theonlyonethat'sreallydownofcourseisRussia.Russiacontinuestobedownnearly30%inanumberofsegments,sothateconomyisclearlychallengedandthenwehavebeengainingshareintheprotectedmarketinEuropeaswell.Sothat'sbeenapositiveforceallalong.

    AndthenthelastthingIwouldsayisthatwe'rebuildinganewsilicaplantinEurope.Andthatfacilitywillbestartingupandwehaveaverygooddemandforthenewproductsindustryleadingnewtechnologycomingoutofthatfacility.

    FrankSklarsky(EVP&CFO):

    Andtheoneareawehaven'ttalkedaboutpreviouslyonthecallisSouthAmerica.Forusit'sabout3%ofoursales.

    WedoseechallengesinSouthAmericaasMichaelalludedtoinhispreparedremarks.Wedon'tseethatreturningtogrowthcertainlyinthenearterm.

    ArunViswanathan (Analyst-RBCCapitalMarkets):

    Okay.Andjusttoclarifyyousaidinthepastrecentlythataround10%orsoofyourbusinessesaretheonesthatareinthatchallengedarea.Isthatstillafaircharacterizationoristhereanykindofsensitivityaroundthat?

    VinceMorales (VPIR&Treasurer):

    AgainI'dsaySouthAmericaabout3%ofoursales.We'veframedarchitecturalCanadaforyouatabout$500million.

    Thosewouldbethetwoverysensitive.IfyoucombinedRussia,Ukraine,Africayoumaybegetanother2%or3%max.

    FrankSklarsky(EVP&CFO):

    AndofcoursetheComexbusinessisdoingextremelywellandthatwillalltranslateintoorganicgrowthfor2016.Theycontinuetoopenstoresataveryhealthypace,sothatwillalsohelpusoutintheorganicgrowthrate.

    MichaelMcGarry(President&CEO):

    AndIguess,ArunthisisMichael,theonethingI'daddattheendisFrance.Franceisstillachallengedmarketforus.Butatsomepointwedofeelconfidentthat'sgoingtohavetoturnaroundandsoIwouldtellyouthat'sprobablywhywe'remoreoptimisticwhenyouputallthesethingstogether.

    ArunViswanathan (Analyst-RBCCapitalMarkets):

    Okay,thanks.

    Operator :

    NilsWallin,CLSA.

    NilsWallin (Analyst-CLSA):

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    Goodafternoonandthanksfortakingmyquestion.BackonNorthAmericanarchitecturalyoudidn'tmentionperformanceatthestoressowhatdidvolumedoinyourcompany-ownedstores?

    MichaelMcGarry(President&CEO):

    Yes,same-storesalesweremodestlynegative.We'vecomeoffofIdon'tknowsevenoreightpositivecompsinarowincludingQ1andQ2ofthisyear.MostofthatwasCanada.

    Wetalkedaboutthemodestpaintseason.AndthenIwouldremindyouthatourPMC,mostofourPMCinNorthAmericarunsthroughourstores.Asyouknowtheoilbusinesshasbeencertainlyunderalotofpressureandsothat'sthewayIwouldcharacterizethat.

    VinceMorales (VPIR&Treasurer):

    AndPMC,justforeverybody,isprotectivememoryandcoatings.

    NilsWallin (Analyst-CLSA):

    SoifweremovethestorenumbersfromtheotherchannelsinNorthAmericaandarchitecturaldoesthatmeanthatthoseotherchannelswereactuallydownmorethanhighsingledigits?

    VinceMorales (VPIR&Treasurer):

    Slightlymorebecausethestoreswerejustslightlynegative.

    NilsWallin (Analyst-CLSA):

    Okay.Thanks.AndthenonCanadaImeanobviouslyweunderstandGDPissuestherebuthousingstillcontinuestobestrong,sowhatisitsomeotherchannelthat'saffectingthedemandforarchitecturalpaint?

    VinceMorales (VPIR&Treasurer):

    No,we'vesaidformany,manyyearsthatarchitecturaltypicallytracksclosertoGDPthananythingandthereisahousebuildmarketandahouserepaintmarket.Therepaintmarketistypicallyfivetosixtimeslargerthanthehousebuildmarkets,sotherepaintmarketisnottrackedIguessinnewhomesalesandthat'stheonethatdrivesthevolumeattheendoftheday.

    MichaelMcGarry(President&CEO):

    WewouldsaythepaintinCanadais80%repaint.

    NilsWallin (Analyst-CLSA):

    Understood.That'shelpful.Andthenjustfinally,Michael,youdidspeakaboutleveragingyourassetbase.

    Obviouslyyou'vegotsomeprettysignificantsizeinyourassetsacrosstheglobeanddoingthatthroughdistributionandsupplychain.Whatwouldthattranslateintermsofmarginaccretionoverathree-tofive-yearperiod?

    MichaelMcGarry(President&CEO):

    Ithinkit'salittleearlytoanswerthatquestion.IthinkthewaytothinkaboutitiswehavemajorsharedservicefacilityinEuropeandAsia,nowwiththeComexonewewillbeabletoaddadditionaloneinLatinAmerica.

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    Wearestartingupwe'veputinanewpresentfacilityinBrazil.WehaveanewfacilitythatweexpandedactuallyinChina.

    Sothatwilldrivethelowercostinourautomotiveandindustrialbusinessesthere.AndthenwearealsomovingmoreofourproductioninEuropefromwesttoeast,sothatwilladdadditionalbenefits.SoIthinkthat'sthewayIwouldgetyoutoframeyourquestion.

    NilsWallin (Analyst-CLSA):

    Thanksverymuch.

    Operator :

    GhanshamPanjabi,Baird.

    GhanshamPanjabi(Analyst-RobertW.Baird):

    Heyguys,goodafternoon.MichaelIknowit'searlybutlookingoutto2016canyoujustgiveussomeofthevariousputsandtakesrelatedtosomeofthebiggerbusinessesinyourportfoliojustfromafundamentalstandpoint,maybestartingwithNorthAmericanarchitecturalandthenalsoautoOEM?

    MichaelMcGarry(President&CEO):

    Okay.NorthAmericanarchitecturalIwouldsaythatwe'reprobablygoingtohavethesameopinionwehadthisyearwhichislowsingle-digitsgrowthforthatbusiness.Sowe'regoingtocontinuetostaythere.

    Automotive,itcontinuestobeaverystrongmarketforus.That'sbeenagoodone.OurrefinishbusinessinNorthAmericawe'regainingsharewithourwater-basedtechnology.

    That'sapositive.Aerospacehasbeenmoderatinggrowthbutcontinues--wecontinuetogetnewcontentontheplanesandwiththeacquisitionsthatwe'veadded,thatCumingsMicrowavewouldbeone.Thatwouldbeanotherpositive.

    WhenyoumovetoEuropeIwouldtellyouthatagainIwouldsaythatit'sprobablygoingtobemodestinthatlowsingle-digitsrange.Wecontinuetodowellinourautomotivespacethere.Ourpackagingspacecontinuestopickupbusiness,sothat'sgoodforus.

    Whenyoulookatsomeoftheotherbusinessesprobablythebrightspotisourprotectivebusiness.Wehaveanewindustry-leadingtechnologyonfireprotectionthathasreallydoneverywell.

    OnthenegativesideobviouslyyouarestillgoingtohavethechallengesinRussia.Wedon'tseethatgoingawaymovingtoSouthAmerica.

    AsVincementionedearlier,weseethatprobablybottomingout.Sowe'renotrealexcitedaboutwhatweseedowninBrazilbutweareaggressivelytakingcostoutinBrazil,soit'snotgoingtobeanegativefromthatkindofstandpoint.

    AndthenmovingovertoAsia,SoutheastAsiahasperformedokay.Indiahasbeenreallysolid.Iwouldsaytheyareinthat6%,soifyouaskwhathasthehighestgrowthinAsiarightnowit'sIndia.

    AndwestillremainbecauseourbusinessinChinaispredominantlyforconsumer-orientedstuffwhatwemakeinChinastaysinChina.It'snotfortheexportmarket.Sowe'reoptimisticthatChinawillcontinuetoresumeitsgrowth.

    WeknowtheChinesegovernmentisveryinterestedintheeconomygrowing.Theyaretakingalotofrightmovestohavetheeconomygrow.Andwehavebenefited,thathasbeenoneofourbestmarkets

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    andweexpectthattocontinuetodowellgoingforward.

    GhanshamPanjabi(Analyst-RobertW.Baird):

    That'shelpful.Thenspecifictopackaging,canyoujustparseoutthestronggrowththatyou'reseeingtheregeographically?Itseemslikeyou'veseenafairamountofsuccesswithBPAnon-intent.Isthatspreadinggloballyanddidthatstarttomaterializeand3Q?

    MichaelMcGarry(President&CEO):

    Well,theBPAnon-intentwinstartedinEurope.They'vecontinuedintotheUS.AsyouknoworyoumayknowCaliforniahasthisProposition65outthere.

    They'venottakenafirmpositionyet.ButourguessisthatourfolksintheUSwillbemuchmoreinterestedintheBPAnon-intentcoatingsgoingforwardsothattrendwillaccelerate.

    Andasyouknowweonlyhad3%marketshareinsidethecan.Andsosincethisisaonceinagenerationormulti-generationforsomeofthesethingsopportunitywe'regoingtobeatahigherpresenceinsidethecanthanwe'veeverbeeninthepast.Sothatwillbeapositiveforusoverall.

    GhanshamPanjabi(Analyst-RobertW.Baird):

    Okay,thenjustonefinaloneforFrankifIcould.Justonworkingcapital,Frankfor2015justgivenhowdynamictherawmaterialimpairmenthasbeenhowshouldwethinkaboutthatfor2015?Thankssomuch.

    FrankSklarsky(EVP&CFO):

    Ourgoalonworkingcapitalobviouslyistobringthatdownby100basispointsayear.We'veseenalittlebitofslowpayrecentlybutwe'llgetthatbackdownbytheendoftheyearandwedohavesomerelativelyaggressiveinventorygoalsfortheteams.

    We'remakinggreatprogressonthat.Butthatwouldbeouroverallgoalistokeepbringingthatdownbyabout100basispointsandprobablythelargestopportunityininventoryfollowedbypeopleworkingonthereceivables.Payablesareinprettydecentshape.

    IwasjustgoingtoaddonemorethingtowhatMichaelwassayingonthegrowthprospectsfor2016.Rememberalotoftheacquisitionsthatwehavedonethisyear,that$400millionworthofcashdeployedacquisitions,therevenueassociatedwiththatisonlyasmallportionofwhatthefull-yearimpactisorwillbefor2016.Sobetween$400millionand$500millionofrevenueassociatedwithacquisitionsexcludingthebaseComexbusiness.

    That'soverandabovethebaseComexbusinesswillhitinfullstridenextyear.Andyoucanmakeanyestimatesyou'dlikeintermsoftheprofitabilityofthosebusinessesbutthat'salsogoingtobeaccretivetoourtoplinealongwiththeEBITDAthatgoeswiththat.

    GhanshamPanjabi(Analyst-RobertW.Baird):

    Okay,terrific.Thankssomuch.

    Operator :

    VincentAndrews,MorganStanley.

    MattGingrich (Analyst-MorganStanley):

    HeyguysthisisMattGingrichonforVincent.Iwaswonderingifyoucouldspeaktothephasingofsell

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    throughinUSarchitecturalthroughthequarteronamonth-by-monthbasis?

    MichaelMcGarry(President&CEO):

    Onamonth-by-monthbasisIwouldtellyouthatwestartedtoseethedestockingstartinAugustandbythemiddletotheendofSeptemberitwasover.Sothat'sthewayIwouldthinkaboutthat.

    MattGingrich (Analyst-MorganStanley):

    Okay,great.Andthenintermsofhowsalestrendedinyourdedicatedpaintstores,whatdidyouseethere?

    MichaelMcGarry(President&CEO):

    ActuallyinthededicatedpaintstoresitwasprettyIwouldsayconsistentthroughthequarter,althoughneartheendofSeptemberourcompsweremarginallybetterthanwhattheywereearlyinthequarter.AndthentheyhavestartedtobeinOctoberasImentionedvirtuallyidenticaltowhatwehadin4Qoflastyear.

    MattGingrich (Analyst-MorganStanley):

    Wouldthatbemidsingledigits?

    MichaelMcGarry(President&CEO):

    No,it'slowsingledigitspositive.

    MattGingrich (Analyst-MorganStanley):

    Okay,thanksguys.

    Operator :

    DonCarson,Susquehanna.

    DonCarson (Analyst-SusquehannaFinancialGroup):

    Yes,aquestiongoingintonextyear,whatkindofgrossmarginmomentumdoyouthinkyouhavefromraws?Becauseobviouslyinthefirsthalfoftheyearyou'regoingtohavesomerelativelyeasycomps.Areyoustillexpectingsomegoodgrossmarginexpansioninthefirsthalfoftheyear?

    MichaelMcGarry(President&CEO):

    Don,Iwouldtellyouthatwe'regoingtocontinuetoworkwithoursuppliersandpullthroughthesavingsandsoIwouldsayit'sgoingtobemodest.Ourgoalhereistocontinuetopullthosethrough.

    WestillseeweaknessintheTiO2market.Westillthinkit'soversupplied.

    Andthenclearlywehaven'ttalkedaboutHenanBillionsyet.Surprisinglywe'vemadeit55minutesinthecallandnotonequestionaboutit.SoI'llgoaheadsinceeverybody'sinterestedandtellyouthatthefirstsetofsampleswegotfromthemtheparticlesizewastoolarge.

    Thesecondsetofsampleswegotfromthemweretoosmall,sonowtheyaredialingitin.WeexpecttobebuyingthecommercialquantitiesofTiO2fromHenanBillionssometimelateinthefourthquarter.

    SooverallIwouldtellyouwe'restillfeelinglikethere'smoresavingstocome.PlusasyouknowwewillhaveincrementalrestructuringsavingsinpredominantlyEuropebutalsoBrazilandAustraliafromour

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    restructuringprogram.Thatincrementallythroughouttheyearwilladduptoabout$60millionto$75million.

    Obviouslyitacceleratesasitgoesthroughouttheyearof2016.Butthatwillbeanotherpositive.

    Operator :

    JimSheehan,SunTrust.

    JimSheehan (Analyst-SunTrustRobinsonHumphrey):

    Thankyou.Couldyoutalkaboutyourexposuretocommercialconstructionandwhatyou'reseeinginbothyourcoatingsandyourglassbusinessesinthatmarket?

    MichaelMcGarry(President&CEO):

    Yescommercialconstructionisobviouslymoreimportanttoourglassbusinessthanitistoourcoatingsbusiness.CommercialconstructionhasbeensteadyandgettingslightlybetterbutthechallengethereisactuallythefabricatorswhomakethefabricatedglasswindowunitsareIwouldcallthemfull.

    Theirbacklogonfabricatedunitscontinuestobesix,eight,10weekssothat'sbeenachallengeforthemarket.Iwouldtellyouthatourglassbusinessasyoucanseehasdoneprettywell.

    We'vegottenprice.We'vealreadyhadtwopriceincreasesinthatbusinessthisyear,sothat'sbeenapositive.Andwecontinuetoexpectimprovementagainnextyear.

    JimSheehan (Analyst-SunTrustRobinsonHumphrey):

    Thankyou.AndinEMEAyouhadsomepositivevolumesthere.

    IthinkautoOEMwasparticularlystrong.CouldyoujustcommentonwhatyourvolumegrowthwasinarchitecturalcoatingsinEurope?

    MichaelMcGarry(President&CEO):

    ArchitecturalcoatingswereflatinEuropeandofcoursethatvaried,soupintheUK,upintheBenelux,downinFrance.MostlyupinEasternEuropebutnoteveryEasternEuropeancountrywasup.Sonet-netflatbecauseFranceisourlargestarchitecturalcoatingsmarket.

    JimSheehan (Analyst-SunTrustRobinsonHumphrey):

    Thankyou.

    Operator :

    KevinHocevar,NorthcoastResearch.

    KevinHocevar (Analyst-NorthcoastResearch):

    Hey,goodafternooneverybody.Thequestionongoingbacktothecashdeploymentbumpedupthelowendoftherangeand$2billionto$2.5billionandyousayatleast$2billionto$2.5billionsoimplyingitcouldgoaboutthat.

    Iguesswhatwouldittakeforyoutogoabovethatrange?WoulditnecessitateM&Aorifthestockpricewasattractiveenoughwouldyouconsiderrepurchasingabovethatlevel?

    FrankSklarsky(EVP&CFO):

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    AsMichaelsaidthepaceofsharerepurchaseobviouslydependsuponnotonlythepipelineofM&Abutalsothetimingatwhichyoudeployandclosethedeals.Iguesswhatwe'resayingisthatwe'reconfidentenoughinthecash-generatingcapabilityofthebusinessthatwe'reverycomfortableuppingthemidpointofthatrangesothatwe'renowat$2billionto$2.5billion,andthefactthatwe'vealreadyexceededthepaceofthepriorrangebytheendofthethirdquarterandexpecttocontinuetodeploycashinthefourthquarter.

    Butaswelookoutin2016we'vegotagoodpipelineofM&A,sochancesarewe'llbedoingmoredealsnextyearandbesupplementingitwithsharerepurchasesbecausewe'restartingouttheyearwhereweendedthethirdquarterwith$1.4billionofcash.Q4isgenerallyagoodquarterforcashgeneration,sowehavetheconfidencethatwe'llcontinuetodeployandearnvaluefortheshareholdersandwe'lljustcontinuethatintonextyearandseewhereitgoes.

    Butwecoulddomoresharerepurchase.OurpreferenceistodoM&A,thatwillbethefirstpriority.Butyou'llseebothofthataswegothroughthefourthquarterandmoreprimarilyM&Ainthe2016timeframe.

    KevinHocevar (Analyst-NorthcoastResearch):

    Okaygreat.AndjustalsoyoumentionedanexpectationtoresumeorganicgrowthinthefourthquarterandFXimpactstomitigatealittlebitandalsoyouclosedLJFaftertheendofthesecondquarter.Sodoyouthinkthatthetop-linedeclinethatwesawinthethirdquarterisitwillstopthereandwillresumetop-linegrowthinthefourthquarter?

    MichaelMcGarry(President&CEO):

    Kevin,Idobelievethat'sgoingtohappen.WeclosedLJFonOctober1.

    Wehavefouracquisitionsthatbasicallyclosedinthethirdquarter,pluswe'llhaveComexthatflipsintotheorganicside.SoIthinkthat'sallpositive.

    KevinHocevar (Analyst-NorthcoastResearch):

    Okaygood.Thanks,guys.

    Operator :

    DmitrySilversteyn,LongbowResearch.

    DmitrySilversteyn (Analyst-LongbowResearch):

    Goodafternoon.Thanksforfittingmeinhere.Coupleofquestions,alotofthemhavealreadybeenaddressed,butjustwanttounderstandontheChinaimpactfromtheautomotive,howlongdoyoutypicallyleadthesalesnumberinChina?Inotherwordswe'veseensalesdeclineinChineseauto,I'massumingproductionisdecliningthisquartertoadjustforthat.

    Soisthefactthatyoudidn'tseemuchofadeclineinthethirdquarter,isthatjustadelayandyou'llseesomeofitinthefourth?Orareyoumorereal-timewiththesalesnumberattheretaillevel?

    MichaelMcGarry(President&CEO):

    WellthesalestothecustomerdeclinedinJune,July,AugustandthenturnedbackpositiveinSeptember.Theywere3%.

    Buildsinventorieswerecomingdowninthatsameperiod.Rightnowinventoryisbasicallyatthesame

  • CompanyName:PPGIndustriesIncCompanyTicker:PPGSector:BasicMaterialsIndustry:Chemicals

    EventDescription:Q32015EarningsCallMarketCapasofEventDate:26.35BPriceasofEventDate:101.0

    ©2014TheStreet,Inc.Al l R ightsReserved Page20of22

    levelitwaslastyear,sothey'reinverygoodshapefromthatstandpoint.Wethinkthey'realittlebitover40dayswhichistypicalforthem.

    AndthenrightnowasImentionedearlieronthecalltheOctobersalesaretrendingup.Webasicallysupplyinrealtime.Wegetorderslet'scallthem28daysinadvanceofwhatI'dcallapre-lookandthentheyarefirmedup14daysinadvance.

    SorightnowwehaveaprettygoodfeelforhowOctoberisgoingtoturnout.AndIthinkoverallwewouldtellyouthatitshouldbemarginallyup.

    DmitrySilversteyn (Analyst-LongbowResearch):

    Gotit.Sowhatyou'vedescribeintermsofyoursalescadenceinJune,July,AugustandSeptemberwasprettymuchwhatwesawattheretaillevelinChina.Soisthatjustacoincidenceorareyouorthereisnolagbetweendemandforyourcoatingproductsforautomotiveandthesaleofautomotivetoaretailer?

    VinceMorales (VPIR&Treasurer):

    No,Dmitry,we'reverycloselyalignedbecausetheydidtakeinventorydown.HadtheynottakeninventorydownIthinkyouwouldseethatlageffectbuttheindustrytookinventorydowncommensuratewiththesalesdeclineinrealtime.

    DmitrySilversteyn (Analyst-LongbowResearch):

    Gotyou.Okay,sothat'sgoodtoknow.SecondquestionontherawmaterialbenefityoutalkedabouttakingsixtoninemonthstogetsomeofthesepropyleneethylenederivativeswhichI'massumingyou'remainlytalkingaboutresinsheredowninprice.

    It'sbeenaboutthatlongsinceoilreallystartedtoselloffandsincepropyleneandethylenepricingstartedtotumble.Soareyoustartingtoseelowerpricesinresinsonayear-over-yearbasisthat'sgoingtohelpyouwiththedeclinesinTiO2toreallydriveyourmargincertainlyintothefirsthalfofnextyear?

    VinceMorales (VPIR&Treasurer):

    Wellaswesaidweexpectedmodestbenefitwiththebenefittogrowthroughouttheyear.Weareseeingthatinournumbers.

    Aswesaidinthepastthebenefitismutedinnon-USregionsimplybecauseoilistradedindollarsaroundtheworld.SowhenyougotoEuropeoryougotosomeoftheseemergingmarketsthecurrencydeltashaveeatenintomostoftherawmaterialimpacts.Soagainwe'repullingthisthroughourvaluechain.

    Wefeelwe'redoingagoodjobatit.Wedohaveanotherquarterheretogoandwe'recertainlytalkingtooursuppliersonadailybasis.

    FrankSklarsky(EVP&CFO):

    SoasVinceissayinghereasyouseetherawmaterialbenefitscomethroughthepaceofthatmaynotchangesignificantlygoingfromQ3toQ4toQ1butitwillbemoreevidenttothebottomlinebecausetherewillnotbesomuchoffsetfromthecurrencyheadwindasthatmitigatesstartinginQ4versuswhatwe'veseenatveryhighlevelsrecently.

    DmitrySilversteyn (Analyst-LongbowResearch):

    Soyou'renotsomuchlookingataccelerationofbenefitsasdiminishmentoftheheadwindsthatwill

  • CompanyName:PPGIndustriesIncCompanyTicker:PPGSector:BasicMaterialsIndustry:Chemicals

    EventDescription:Q32015EarningsCallMarketCapasofEventDate:26.35BPriceasofEventDate:101.0

    ©2014TheStreet,Inc.Al l R ightsReserved Page21of22

    makethosebenefitsmoreapparent?

    FrankSklarsky(EVP&CFO):

    TheotherthingthatwewouldmentionthoughisthatwhereyouseeabitofaheadwindonrawmaterialsbecauseoftheexchangerateinplaceslikeBrazilorreallyasmallpercentageofourrevenueinCanadabecausetheexchangedoescausesomeofthoseUSdollar-basedinputstobealittlebithigher.

    DmitrySilversteyn (Analyst-LongbowResearch):

    Okayandthenonefinalquestiononpricing.ArchitecturalmarketinNorthAmericayoutalkedaboutpricingbeingessentiallyflatandsimilarexpectationsfor2016whichmakessense.

    IntermsofthecoatingsideofthebusinessasopposedtothearchitecturalsideofthebusinessbothinNorthAmericaandgloballywhichtendstobedealingwithcustomersthatarelookingforsomepassthroughofrawmaterialprices,what'sthepricingenvironmentlikeinsomeofthegeneralindustrialcoatingsandperhapssomeoftheautomotiveaftermarketandsomeoftheseareaslet'ssayoutsideofhighvaluepropositionlikeautomotiveOEMcoatings?Areyoustartingtoseeeitherlowerpricesormorecustomerinsistenceonpricepassthroughoraretheystillhappywithgettingtheproductfromyouatthepricetheygotitlastyear?

    MichaelMcGarry(President&CEO):

    DmitryIreallydon'twanttogetintoparsingeachofthedifferentbusinessesbecausewerolloutnewproductsandwehaveolderproducts.Whatwe'vebeenconsistentinsayingisthatthepricingenvironmentisflatandweexpectthattocontinue.

    DmitrySilversteyn (Analyst-LongbowResearch):

    Notjustinpaintsbutencodingsaswell?

    MichaelMcGarry(President&CEO):

    Correct.

    DmitrySilversteyn (Analyst-LongbowResearch):

    Thankyouverymuch.

    Operator :

    Thatconcludesquestions.IwouldnowliketoturnthecallovertoMr.VinceMoralesforclosingremarks.

    VinceMorales (VPIR&Treasurer):

    IwanttojustonceagainthankeverybodyfortheirtimeandinterestinPPG.BothScottMinderandmyselfwillbeavailabletotakequestionsafterthecall.Thankyou.

    Operator :

    Ladiesandgentlemen,thatconcludestoday'sconference.

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    EventDescription:Q32015EarningsCallMarketCapasofEventDate:26.35BPriceasofEventDate:101.0

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