Ladies and gentlemen, thank you for standing by, and welcome to the Axalta Coating Systems Fourth Quarter 2017 Earnings Conference Call. All participants will be in a listen-only mode. A question-and-answer session will follow the management presentation. Today's call is being recorded, and replays will be available through February 13, 2018. Those listening after today's call should please take note that the information provided in the recording will not be updated and therefore may no longer be current. I would now like to turn the call over to Chris Mecray for a few introductory remarks. Please go ahead sir.

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

Good morning, and thank you all for joining us to review our fourth quarter and full year 2017 performance. And add some color to our 2018 outlook based on our read of current market conditions which we view as fundamentally stable across all of our end markets. Fourth quarter results metric sees our expectations that we laid out on the October and December outlook calls. It was a fairly strong fourth quarter result, including 10% topline growth excluding currency, positive organic growth and favorable inflection and average pricing and strong cash flow. Routed and broadly supportive market demand, we believe 2018 should produce fairly solid financial results going forward. I would face ongoing challenges from input price inflation which is common to the whole coatings market. We have plans in place to address this and objectives to neutralize the impact for the full year. Turning to page 3 in our posted slide deck, I'd like to review some of the highlights from the period. We grew the fourth quarter net sales by 13.4% year-over-year, which included 8.6% acquisition contribution. Our strong relative to the coatings group, our organic result was impacted by residual distributor working capital adjustments in North America refinish largely in October. Beyond this anticipate FX the business was in line with expected outcomes in the period and showed strong underlying trends in nearly all of our business lines. Net price also turned positive in the fourth quarter following several quarters in tougher comps and this comes as a result of a myriad of pricing related initiatives needed to address rising input cost across our business. Finally, we also saw a 3.5% FX tailwind in the fourth quarter and little overall impact for the full year as FX has turned from an aggressive and insidious headwind for the…

Thank you. [Operator Instruction] Our first question is from Ghansham Panjabi from Robert W. Baird, please take your question.

Hi, good morning. This is actually Matt setting in for Ghansham, how are you doing today?

Hey good morning Matt.

So my first question is given the substantial raw material inflation that you have seen across your cost basket and understanding that turning that price positive during 4Q ‘17 is a big step in the right direction. When do you expect to achieve price cost neutrality across your business? Is this sometime during 2018 or even pushed out a little further?

Matt, this is Robert. It depends on the trajectory of raw material inflation. I think currently we are expecting to see raw material inflation at about $68 per barrel oil cost in Q1 and Q2 and our projection is I think maximum of the market’s projection are that we would start to see some relief in Q3 and Q4 and that actually is the case between the cost saving initiatives that we have in place inside the company as well as the plan price increases we think we could almost entirely offset the amount of incremental raw material inflation. However, if we see that raw materials remain at a higher price and let's say oil is at $68 continually for the remainder of the year and/or moves up, then we would have the typical lag effect and would probably take us longer than the calendar year to fully catch up.

Okay. That's very helpful. And then can you parse out your organic sales expectations by subsegment or business during 2018 and if you could do that by volumes versus pricing that would be particularly helpful.

Matt, we will do as best as we can here with the time we have but that could be a pretty long question but overall for 2018 I think as we highlighted on our December 14th call we do expect overall result to have mid singled digit organic growth of course that will be supplemented with acquisitions and we believe that organic growth is strongly supported by the stability that we see in the refinish market as well as business that we have in hand in the industrial business and commercial vehicle and then assuming a global light vehicle market interim from a build perspective of approximately 2%. In global refinish, we see relatively stable market conditions globally and we expect mid single-digits growth and that will be a combination of volume and price. In industrial, we see pretty supportive market conditions with good industrial growth in almost all regions and we expect mid single-digit growth. Similar to Q4, we expect that will be more driven by volume than it will be by price but we did start to get price in the industrial end market in the fourth quarter. In light vehicle, we're expecting low single-digit growth, again, we're expecting the global market to grow at about 1% to 2% with good growth in AMEA, in South America, also decent growth in China. And then we are projecting similar to IHS and LMC lower production rates in North America. But again, there a lot of our customer specific opportunities in our technology, are giving us some unique opportunities in 2018 that we'll take advantage of. And then lastly, in commercial vehicle for 2018, we expect mid single-digit growth. There we see we are supportive market conditions in the truck and non-truck markets supported by good heavy-duty truck build rates. There we expect North America, Latin America and AMEA to be up. The China market maybe a little bit flatter but we do expect some growth opportunities there given that we're growing from a relatively smaller base and we also have a good opportunity set in that market.

That's helpful. Thank you, very much.

Our next question is from Christopher Parkinson with Credit Suisse. Please state your question.

Thank you. So, first of all the Philadelphian, I'd like to thank you for coming up with the solution with the Eagles goal posts earlier in the season. So, you had to repay multi times a year. And I'm a little upset to see the city goal mad max [ph] but hopefully you're also poised win some volumes from rebuild the process incidentally. So, on that refinish'l aims, you mentioned you had some lingering inventory issues in the beginning of the quarter. How confident are you that these are finally over and what is your general review of the market as we head into '18 regarding collision trends, insurance and MSO consolidation. Thank you.

It's over all in terms of the market conditions in refinish. We believe in North America, that inventories in the supply chain are largely normal and aligned with end customer demand. We don’t really foresee any further impact from any of the inventory adjustments. And again, that was in the distribution channel, not with the actual end customer. So, we did see some of that in as we know Q3 and a little bit in October, Chris, in the first month of the quarter, orders are strong, indicating that stability has returned to that market place. So, I think we feel pretty good about where we are. In North America refinish from the perspective of MSO consolidation, we are continuing to see that trend and we have seen that trend and expect to see it in 2018. But it's not only with some of the larger well known MSOs, we are seeing mid-sized MSOs also not only acquire new shops but also do some ground fields with or buy an existing shop, tear it down or mix some significant investment as an opportunity to grow points of sale. Axalta continues to be a beneficiary of that. We actually grew our points of sale over the last 12 months by 2.5%, so again although we did have some hiccups in 2017 in the distribution channel.

That's helpful. And just on the order OEM side, I think the vast majority of investors understand some modest headwinds in North America. But can you comment on how to assess your own prospects in your update, how you believe you should perform versus the market in '18 versus in years passed. And then, also maybe just touch on the merger markets such as Brazil and Russia on the peripheral. Thank you.

We look at overall light vehicle demand, as we talked about earlier. We're looking at 1% to 2% overall, globally. If we look at the NAFTA market, so here we'll be talking about North America as well as Mexico and Canada, the markets projecting to be up actually about 1.7%. Most of that is from Mexico. We do expect to see some pressures due to lower builds here in North America. We think that we're pretty well positioned given our customer base in North America to perform relatively in line with the market. In Europe, as we highlighted in previous quarters, we've had some opportunities there. There's been a great deal of focus by our global transportation team in AMEA and we saw a nice result here in Q4 reflecting the efforts of that team as well as Europe being up about 6% from a build perspective. 2018 we're projecting them to be up close to 2%. So, I think we feel pretty good about our position in Europe. China, as everybody knows are the market was down from a build perspective about 0.8% in the fourth quarter. It's projecting to be up about 0.7%, 2018. So, relatively flatter conditions in China. But again, given our market share there in that market as well as some of our opportunities with the domestics. I think we're pretty excited about some of the opportunities that we have before us there in China. And then lastly, in South America, we always comment that if we go back a couple of years that the market Brazil in particular was quite challenged. But that we were looking forward to the day when the market rebounded because we had lowered our cost structure in that market so much and that day has come. We don’t see a parabolic recovery, we see a more steady linear recovery in Brazil in particular but overall South America Q4 was up 15%. And I think in 2018 the market forecast were about 14%. So again, it's a smaller base. Then in China, in North America, or Europe, but it's good growth and we'll take it.

That's very helpful. Thanks again.

Our next question is from David Begleiter with Deutsche Bank. Please state your question.

Hi, this is David Huang here for David. I guess, can you maybe give us your thoughts on your Q1 EBITDA price segments. Do you expect any margin revision and if any, where do you see the headwinds coming from?

Overall for Q1, as we highlighted from a phasing, we're projecting about 23% of our full year EBITDA to -- I'm sorry 21% of our full year EBITDA to come in the first quarter compared to 23% in the prior year. That 2% difference is really reflective of the timing of our price increases as well as the timing of when some of the raw material inflation flows in. So, we think that Q1 and then depending upon trajectory Q2 will be the quarters where we see most of that inflation flow through especially on a year-over-year comparison basis. And then between the two segments in performance given the traction that we're getting with price increases not only in refinish but also in industrial, I think we feel good about our ability to offset a large portion of that inflation together with cost reductions. On the transportation side of the business, it's more challenging because the price increases take more time to negotiate and are more complicated to negotiate. However, we would say that in our business we are seeing slightly less negative price mix in Q4. And just in terms of some of the market quotes and bids that we're seeing in the last couple of months at least, we are starting to see a sense that prices are starting to firm overall in the market.

Thanks. And M&A, can you preferably talk about your M&A pipeline, what products, areas or regions do you see as the most attractive to your M&A if there are any opportunities.

This is Charley. I think, as you witnessed by last year, I think as completing over rate acquisitions, I think overall we feel like the pipeline has been good and we'll continue to be good for us. Overall, we would target to add between a $100 million and $150 million in topline growth on an annualized basis to both on M&As. Clearly, we're always looking at things that'll be opportunistic out there but I would say overall pipeline is full. As far as the focus that pipeline, we will really look at both segments both performance and transportation. However, many more opportunities on the performance side and as we said our stated strategy has been to continue to on a pro rata basis grow out preferencely our industrial portfolio within performance. So, I think you would see the majority of our acquisitions, both on acquisitions continue to be over in our performance segment.

Thanks.

Our next question is from Aleksey Yefremov from Nomura Instinet. Please state your question.

Good morning. This is Matt Stronski on for Aleksey. Just to start off, some pigment players had talked about long-term pricing contracts. Have you looked into this as sort of a solution to raw material volatility not just on pigments but on other raw materials that you use?

Our procurement, this is Robert. Our procurement team in terms of negotiating this contract, we look at every situation on a unique basis and where it is in the cycle and if entering into an index contract would be something that would make sense or not make sense. In terms of pigments specifically, we haven’t seen much activity in terms of indexed index contracts at the moment, continues to be very much of a seller's market with a lot of sold source or do source situations for most of the players or all the players really in the coatings industry. So, we haven’t really seen those conditions. And then, in terms of the other categories, the other commodities within raw materials, it didn’t really varies by category. So, we have to kind of go into each one.

Thank you. And then, can you talk about the cadence of productivity and cost initiatives. It sounds that it's going to be front half weighted. Is that correct?

This year, we would expect our productivity program to be fairly similar I would say to what we had to what we had last year in terms of you would expect to see a little bit more back half loaded especially in the fourth quarter as some of the actions that we've taken and that we discussed in our press release in our prepared remarks take effect during the course of the year given the delay in terms of some of those initiatives.

Thank you.

Our next question is from Arun Viswanathan with RBC Capital Markets. Please state your question.

Hey guys, it's actually Tom for Arun. First, congrats on getting the distributor issue and the -- percent of what's going to happen at stock market today. But I guess on that distributor issue, just trying to understanding that better, is it something that's typical in the industry for refinish players, your peers, what are the chance that something like this could happen again. How about other geographies, think that question will be getting a lot.

Yes, I know. This is Charley. I think overall, this was unique to the fact that we had a couple of distributors who had been on fairly large acquisitions free over a couple of years and consolidated and as they looked to reduce their inventories and we looked at what was optimal to be able to price appropriately and get enough returns in our market place. We felt like it was going to do is as many of you know. But I don’t think that we don’t believe there's another big set up coming there. There is always distributor consolidation going on around the world. We see going on in Europe right now in several countries. In many cases, we're anticipating that and managing through that but I think we'll always see distributor consolidations happen. If any of the following chemical industry, this has been 30 years where distribution channels have continued to consolidate moving through commodities specialties in coatings. So, I think we'll continue to see it. When we look at our particular distributors we have right now, we think a lot of that is in the rear view mirror. We don’t, we think that there'll still be consolidation but not to the extent that we saw over the prior 30 months period, with these and especially with these two particular distributors that we deal with.

I understood. And I know you guys -- you kind of a formal new Axalta Way program or anything like that. But in the past, I think you've mentioned that it's typically cost saves in the area like $50 million a year post the initial $200 million programs. Is that kind of what something we could expect 2018 as well, something like a $50 million cost saved number or is it kind of different?

That's a good estimate. And I think that the other assumption would be to the extent that we launch other initiatives which we have in addition to kind of our standard Axalta Way program above and beyond offsetting fixed cost inflation. Anything additional in that would be to basically a hedge against incremental raw material inflation that we might see during the course of the year. But $50 million is a good estimate from a modeling perspective.

Great. And in my final one, is just a quick housekeeping thing. Is that correct, does the free cash flow guidance from the Analyst Day was changed a little bit, I think you said was it a timing of CapEx and M&A expense. What was behind that?

Yes, it was a $10 million adjustment and entirely timing related.

Okay. Alright, that's all from me. Thanks.

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

Good morning. It's Silky Cook for Jeff.

Good morning, Silky.

Good morning. Can you tell me what your cash tax rate was in 2017 and whether it will go up or down in 2018 and to what extent?

And so, from a, we don’t talk about the exact cash tax rate per se. what I would say is our adjusted book tax rate which is what we use in our guidance construct. Basically that adjusted rate was lower than we had originally projected. I think our in our last guidance was 21% to 23%, we came at 16.2%. And that was lowered due to the impact of excess tax benefits related to share based compensation which was approximately 4% points. And then finally or additionally we also had a different mix of regional earnings than we have projected as of the last time we updated our tax forecast. And that's why you see that difference. So, that was not factored into our guidance rate of 21% to 23%, since we can't estimate when or at what price employees will exercise our stock option. So, in our guidance for 2018, is 19% to 21%. But that rate does not consider any potential excess tax benefits related to share based compensation. And from a cash tax perspective, given the net operating loss and in tax carry forwards that we still have, our cash tax rate will continue to run lower than our adjusted book tax rate for 2018.

Okay, that's helpful. And secondly, do you expect to reassess where your stand was, your restructuring effort and your cost start throughout the year. And do you think there are would be additional restructuring charges that you may take this year?

That's something that we continue to evaluate. I think we have a fairly aggressive plan this year from an optimization perspective. I think you hear our competitors talk. That's its part of the DNA of I think anybody in the coating space as part of our DNA as well. We're taking additional measures this year just given this step-up in raw material inflation and to cover the risk that we can't recuperate all of that through price or the timing difference. So, you will see a step-up some of our cost activities this year. And if we do need to take any additional charges in the future for that, we'll communicate it once become they become known and estimatable.

And lastly, if you look at your acquisition that you've made in '17 and the benefit to 2018. Can you quantify what EBITDA and sales benefit you may expect from the acquisition that you've already, that yourselves have completed to-date and in '17.

So, if you look at 2017, our acquisition sales contribution was 7.4%. 2018, we're projecting 3%. You can do the math on the sales and then from the perspective of what the drop through is from an EBITDA perspective. We have bought some good businesses highlighting the Valspar wood business which is an attractive business for us. So, we would expect it to drop through accordingly.

Okay. And thanks very much.

Our next question is from P.J. Juvekar with Citigroup.

Hi, good morning guys. It's Jan Jester on for P. J.

Hi Jan, good morning.

Good morning. I want to revisit a question earlier about index pricing. But turning flipping around a little bit, have you talked to your like vehicle customers and their willingness to maybe do index pricing with you to rather in the future during raw material periods and enforcing don’t have such a long catch up period to get back to square.

Yes, this is Charley. I mean, what I would tell you is that in certain cases with OEMs, we already have index pricing. As a rule of the industry, the cuttings industry is kind of an interesting, has stayed away from that. I think a lot of us who've been in OEM for a long time, know another market that is more prevalent. So, I do think that you'll see not only with us but I would imagine with our competitors as well over the next couple of years. I request by the OEM or by us to put more index factoring into these contracts. So, I think overall in general we'll do more that, I think the OEMs will more of that, more of that will actually become the dominant way, the paint is sold into the most state of what the ends we have I think over the next couple of years. That's probably a little bit of a stretch. But I think in general, people will look to manage risk both ways. I don’t think the OEMs like it when price really drops and then they have to go back and try to play back. And certainly, we don’t like it on the other side. So, I think we will push to do more of that but we actually do some of that today. And I think both sides if we could buy the right matrix and the right indexes, we'll continue to push for more that as well they. Again, as a rule like cuttings companies, in the past anyway you try to stay away from that because your price capture was always better if you were handling that rather than just being an automatic formula. But I think, again I think just given a relative volatility in what investors demand, you will see the industry continue to move more and more towards that. But I don’t think in the next couple of years that will be the dominant way that I don’t think you'll see a majority of the contracts in those markets have indexing after some time to come though.

Okay. That's great color, thank you. And then, can you just give us an insight about the conversation when differences between the pricing conversations that likely occur and your commercial vehicle customers?

From a market perspective, they are somewhat similar. Commercial vehicle customers are obviously equally is sophisticated on the heavy-duty truck side as on the light vehicle side. It's very similar. I think where you see a difference is when you get into the non-HDT areas of commercial vehicle. Remember, in Axalta's business of the -- in our commercial vehicle business, only 25% of that is heavy-duty truck, 25% is about medium-duty truck, and the other 50% is bus, rail, recreational vehicle, trailers, and other applications. And so, there the dynamics in terms of what they're looking for in product efficiency, in technology, in customization, et cetera are different. So, the pricing discussion can also have a different dynamic.

Okay, thanks. And then, if I could speak in one more, the $35 million increase in CapEx year-over-year, is there one or two statistical metrics that are driving that. Thanks.

No, not really. The main reason is that our CapEx was pulled back from our original estimate of a 150 for 2017 back to a 125 where we came in at the end of the year. Some of that is timing and then some of that was also just projects in terms of when we'd expected the cash to go out for this projects moving out into 2018. So, there are no additional projects, it's really catch up from projects and payments that we expected to make in 2017 that actually are going to go out in 2018.

Thank you very much, guys.

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

Hi guys, this is Dennis Wan for Laurence. Are you going to multi-sourcing for your raw materials and try to mitigate some of the uptick in cost. Is that something that's possible over the next couple of years?

That's been an area of focus at Axalta really since the separation from DuPont. But in particular, in the last three years, really in earnest, we now have a separate team within our procurement organization that's fully dedicated to supplier development. And we have made some progress there and integrated additional suppliers in situations where we are single source. But we are very careful to do that in terms of any potential impact on quality as well as meeting our customers' expectations. So, we are making progress. I think the kind of corollary to your with your question is how do you deal with a raw material environment. That's so inflationary and part of it of course is adding suppliers and creating more of a competitive dynamic. But there are other elements and a lot of that have to do with reformation and having common platforms across products. And that really goes to Axalta's complexity initiative, which is really the heart of what that initiative is all about. So, we have made good progress there but there still are ways to go.

Okay. And then, raw materials are as we you know that we discussed and obvious headwind. But how can it effect this and our position having an overall margin in 2017 and 2018?

The acquisitions we've made, we haven’t purchased many fix or wrappers. The business is that we've acquired have been good businesses. But they all of course don’t have exactly the same margin and there may be a little bit of incremental cost at the beginning of an acquisition when you put together the integration team and you're charging certain costs to that business. But then, as you integrate that business, move it on to your ERP system as well as other company systems, you start to see some synergies in the fixed costs on the operational side and on the SG&A side as well. So, I think an initial year of an acquisition, you may see a little bit more of a cost bump compared to an operated as a standalone entity. But then you see that come down over the next, we try and do it as quickly as we can but certainly within the next 12 to 18 months to see those cost come back down most of the company average.

Alright, thank you very much.

Our next question is from Don Carson with Susquehanna. Please state your question.

Good morning. This is Emely Wagner on for Don. Do you still expect the order OEM pricing comps to ease in the second half of 2018. And is the negative pricing concentrated in the region or a specific customer or is it more in uniform?

On a year-over-year compare basis, we really started to see the higher the inflection of some of these pricing pressures. And it's not just price, there's also a mix element to it as well, that started early last year and really kind of peaked in second and third quarter of last year. So, as we move through the first and second quarter of this year, we'll turn this comps as we go into the back half of the year. So, from a pure, things within Axalta's control, I would say that's how we would see those numbers shaking out. And then, in terms of pricing, there's a component that we control and then there's a component of course that's the market. And a lot of what happens with price will depend on how the overall market conditions and what business comes up from for bid. And then lastly, in terms of the concentration or the dispersion of that price pressure, it's been concentrated in a couple of accounts that's not it's not a broad based phenomena across our brands.

Okay. And then, in 2017 you imposed a TiO2 surcharge and now with inflation spreading to other raw, notably epoxies and oil and gas. Are you in that same price increases to a broader basket of raw materials, I know you're still expecting high single-digit inflation for the full-year.

On the raw material side, we did implement a TiO2 surcharge, in particular really for the benefit of some of our industrial products that have a very high component of TiO2. But you could think about that is our overall price increase plan is based on a weighted index of all of the raw materials that we purchased. So, that's all altogether within our general price increase and the TiO2 surcharges is supplemental for certain types of products and really certain types of customers. And as far as the expectation for 2018, we currently at $68 oil and then assuming that we start to see some relief in Q3 and Q4, we would estimate raw material inflation to be roughly 10% in 2018.

Okay, thank you.

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

Thank you. Robert, the Valspar termination impact on your interest expense would have been known when you gave your guidance. Was the $15 million all currency, in 2018, the increase?

So, there's two elements. The first one you hit on is currency and then the other is the actual uptick in LIBOR. Now, that does have a much reduced effect than perhaps at other companies because we do have our variable interest rate risk hedged. So, if you look at it, our overall structure were about 62% variable, 38% fixed, free hedging and then post hedging which were industry caps were about 40% variable, 60% fixed. And of our U.S. dollar denominated variable interest rate debt, 60% of that is hedged within industry caps. So, we don’t have it all hedged but we have 60% of it hedged which helps offset the increase in LIBOR but not all of the increased because there's still 40% of it that comes through.

Okay. And then, Charley, I don’t know if there's anything you can tell us about what the impediments were to you executing the deals. You had discussions on last quarter whether it was governance or evaluation or, is there anything any color you can provide to us and why we couldn’t get anything executed?

Well, I think the two different transactions had different issues. Certainly the one what we've said and I think what the other party said as far as on the Akzo transaction, as it was looked at as a potential merger, clearly they were governance and valuation issues that we just reached a point where we just couldn’t quite get there at that point in time. And on the other transaction, as we highlight and I think the other side did too. Their value and their ability to get there large shareholder on board, you now think subsequent actions by him. Clearly there were other issues going on in that company at that time. And we had noted at that point we got the offer, we felt like there were some, they were constrained, they were probably going to keep that one from happening. Again, there wasn’t -- the transaction we announced, it was actually late, by someone else. So, neither one of them were actually at the finish line like maybe some people had proposed. So, I think in both cases, clearly the Akzo transaction had great synergies. We felt like there's a great industrial logic for it but again just in things I think especially given there all the activities they have gone on in their company. I think they were just too many loose ends there to work with them in earnest. I think both parties worked hard and earnest to try to get there but just too many loose ends and bearables on one side of the equation. You had to close it down.

John, this is Robert. One correct to what I told you. 60% of our debt structure is now fixed, giving our hedging program but specifically on our U.S. variable rate loan, that particular instrument 43% of that is hedged with an interest rate cap. I previously told you 60 and the correct number is 43.

Okay. Thank you.

And John, just to finish if I may. I think, I would just say we continue to be supportive of consolidation in the industry. And I continue to believe, over the next year or two or three, you will see a couple of steps happen in the industry as people drive for additional productivity and those customers look for more global solutions to think.

Great, thank you.

Okay. And our last question for today is Kevin McCarthy with Vertical Research Partners. Please state your question.

Hi, this is Matt Oven for Kevin. Just wanted to piggy back a bit on a prior question. So, margins and performance coatings were just about flat year-over-year. Can you discuss how legacy Axalta margins are performing I guess year-over-year versus perhaps the mix impact from Valspar wood coatings business?

Yes. I think, if you look at margins in performance coatings, there are a number of moving parts in there. Certainly the industrial margins have tended to improve at the core, excluding the acquisitions that we've done. Some of those acquisitions have been accretive to the overall margin that we performed at the industrial. But not all, necessarily. So, there's a mixture of deals that go in there. And then of course within performance, you have refinish, which was effected last year primarily by the lower volumes in North America that we highlighted.

Okay. And I guess, all the refinish sales were up, I think 0.6%, can you kind of break that down a little bit more in between price and volume. And can you expect volume to trend positively in that business in 1Q because I know you have some pretty rough comps.

Yes. You had a really nicely positive price performance in refinish in the fourth quarter in the low single-digit. We highlighted that volumes were impacted by the ongoing working capital adjustments that took place through October primarily. So, you did see some pull back versus the normal trend in volume in the fourth quarter in refinish again from North America. The rest of the world, they're growing nicely.

Okay.

And this is Robert. I would just add to what Chris said. It's only one month of the quarter, but as we look at our sales results here in the month of January for the refinish end market. We've had god performance thus far in the month of January. So, I think that's also an encouraging sign.

Alright, thank you.

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

Yes, thank. I will be brief here. Again, overall I'm really pleased where we came on 2017, I think when we look at 2018 which is more important at this juncture. Again, good sound markets. Settings has the stock market for the last week. Our overall demand starts off the year in good shape. I think the biggest challenge we all in the coatings industry we'll see this year is just core inflation and pricing through that. Again, I think we have good plans already in place. Many of those actions already taking place as we highlighted on the call. So, I think when we look at our operating plan, we're going to navigate through an environment that's going to have some inflation of raw materials. And potentially later on the year, in other markets such as or in some of our transportation and logistics system, it's higher fuel prices work their way to the economy. Again, I think we have good plans to address that. But overall, we start the year, I think we're very encouraged with the core strength of our markets. The new businesses we acquired last year and look forward to being able to deliver on the matrix that we've laid out in our 2018 guidance. So, thanks everyone. And we look forward to any additional questions or details that you have over the coming days.

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