Good afternoon, and welcome to the PPG Industries’ Fourth Quarter and Full Year 2015 Earnings Conference Call. My name is Andrew and I will be your conference specialist today. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Scott Minder, Director, Investor Relations. Please go ahead.

Good afternoon. This is Scott Minder, Director of Investor Relations. We appreciate your interest in PPG Industries and welcome you to this teleconference to review PPG’s fourth quarter and full year 2015 financial results. Joining me on the call from PPG are Michael McGarry, President and Chief Executive Officer, Frank Sklarsky, Executive Vice President and Chief Financial Officer and Vince Morales, Vice President, Investor Relations and Treasurer. Our comments relates to the financial information released on Thursday, January 21, 2015. I will remind everybody that we posted detailed commentary and accompanying presentation slides on the investor center of our Web site ppg.com. The slides are also available on the webcast site for this call and provide additional support to the opening comments Michael will make momentarily. Following Michael’s perspective on the Company’s results for the quarter and for the full year, a brief financial update from Frank we will move to a Q&A session. Both the prepared commentary and discussions during this call may contain forward-looking statements, reflecting the Company’s current view of future events and their potential effect on PPG’s operating and financial performance. These statements involve uncertainties and risks, which may cause actual results to differ. The Company is under no obligation to provide subsequent updates to these forward-looking statements. This presentation also contains certain non-GAAP financial measures. The Company has provided in the appendix of the presentation materials, which are available in our Web site, reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures. For additional information, please refer to PPG’s filings with the SEC. Now, let me introduce PPG’s President and CEO, Michael McGarry.

Thank you, Scott and good afternoon everyone. Today we reported fourth quarter and full year 2015 financial results. For the fourth quarter, our net sales were 3.7 billion and our adjusted earnings per diluted share from continuing operations were $1.23. While our net sales were flat with prior year, our sales in local currencies increased about 7% with higher sales volumes year-over-year and continued benefit from acquisition-related sales. These sales increases were offset by persistent unfavorable foreign currency translation impacts. For the quarter, the unfavorable currency translation impact totaled about $250 million of sales and approximately $25 million on pretax income. Our sales volume growth in the quarter of nearly 2% represented our highest growth rate of the year. This solid volume growth stemmed from our ability to gain larger share of our customers’ wallets through their adoption of new or leading PPG technologies. In addition, we benefited from broadening improvement in European demand as our volumes in this region steadily improved in each quarter of 2015. We grew coatings volume to 1% a year from the first quarter and steadily improved to 3% in the fourth quarter. We also return to solid mid single-digit percentage growth rate in Asia, as demand in that region improved remarkably in comparison with a weaker third quarter. Volume trends in the Americas were mixed with countries, but consistent with the prior levels. We achieved organic growth in the U.S. and Mexico that was offset with lower year-over-year sales volumes in Canada and several South American countries. Our sales volume growth was broad-based across our business portfolio led by Industrial Coating segment, which grew by mid single-digit percentage. We delivered sales volume gains in all our business units within the segments, including in our general industrial business where we reversed the negative sales volume…

Thank you, Michael and good afternoon everyone. I am going to cover several items that will assist in modeling PPG’s 2016 sales and earnings. We have included in today’s presentation materials a summary of these financial assumptions on Slide Number 12. First is the carryover impact from the six acquisitions we completed throughout 2015. As we’ve discussed in the past, these acquisitions are expected to achieve full year sales of about $400 million in 2016. We realized about $150 million of sales in 2015 for these acquisitions and expect an incremental 250 million in 2016. This incremental revenue will be classified in the acquisition category until each acquired entity reaches its respective acquisition anniversary day. After which time the energy’s performance will be include in normal operating organic results. These acquisitions will typically achieve at or below the segment average margins and may be comfortably integrated into PPG. Next, we will continue to experience the impact of foreign currency translation headwinds that is measures against the U.S. dollar. As a result, the Company expects that year-over-year currency translation will unfavorably impact sales by $550 million to $600 million and approximately two-thirds of this impact will be in the first half of the year. Pretax earnings will be impacted by about $70 million to $80 million with similar phasing for the year. These figures represent our current assumptions based on current exchange rates as of this week. Again these impacts are currency translation related given the nature of our business we typically do not incur significant transaction-related currency impacts. The next item relates to the Company’s pension and other post-retirement benefits or OPEB expenses. Following an increase in 2015, we are expecting these expenses to decrease by about $20 million to $25 million in 2016. This decrease stems from our adoption of a spilt discount rate methodology for measurement of pension cost components. Probably offset by slightly lower expecting return on assets. We expect slightly higher interest cost in 2016, including impact of our placement of long-term debt at the end of the first quarter of 2015, along with the changes in the cash balances. As a result, we expect a total of about $20 million of higher net interest expense year-over-year and we provided our quarterly net interest estimates on the presentation slide. Next, we anticipate that the Company’s 2016 tax rate on ongoing earnings from continuing operations would be in the range of 24.5% to 25.5%, the comparable rate for 2015 was 24.5%. This increase relates primarily to our regional earnings mix. Finally, as Michael mentioned the Company still anticipates cash deployment of 2 billion to 2.5 billion for the year’s 2015 and 2016 combined for acquisitions and share repurchases. Once again, a summary of these financial assumptions is contained in the presentation materials provided for today’s call. This now concludes our prepared remarks. Once again, we appreciate your interest in PPG. And now operator would you please open the line for questions.

We will now begin the question-and-answer session. [Operator instruction] The first question comes from John Roberts of UBS. Please go ahead.

Mike, normally M&A multiples decline when high yield debt market rates rise that private buyers kind of get back out of the market, are you seeing anything yet in your -- because you indicated you are still engaged with a number of potential acquisition targets, are you seeing any drop in evaluation multiples finally?

John I think the way I would answer that is we don’t see as much competition from the private equity side. But we haven’t seen any reduction in interest level from the strategics. So at this point in time, I think it’s a little early. Now we’d be happy if it moves that direction as you know, but right now we’d just wait and see.

And then just very little commentary here on raw materials, given the massive drop that we have had in the base petroleum raw materials for your suppliers?

Yes John, consistent what we have said previously. We saw modest benefits in 3Q and 4Q. We’ve not lapped those benefits yet. We have always said it takes six to nine months for us to pull through any savings. And yes before you ask, we expect our selling prices be flat for 2016 similar to 2015. So we work with our suppliers on a regular basis, we expect to be priced fairly and we have a whole purchasing team down there that knows that’s top of my mind.

The next question comes from Bob Koort of Goldman Sachs. Please go ahead.

Michael you have mentioned some rebranding though the DIY channels, is that going to be at both your major partners and what are you going to do exactly there and is there -- you mentioned that you had already rebranded the store base, is there some savings that offsets that 15 million in incremental spend?

Well, Bob as you know we started the rebranding of our stores in 2015 that was very successful. That work has been completed so there is no carryover cost if you will from, for that. We do have agreement with our retail partners to begin some newer brandings. I don’t want to get in the specifics because you have to wait until you see it on the shelves, but we also have some new wins for 2016 that will require replacing some products on the shelves. So all those costs are front loaded into Q1 prior to the paint season and so it makes sense, it’s a onetime cost we wanted to make sure you were aware of.

And if I follow-up I know you’ve talked about reinvigorating organic growth of the Company following a lot of M&A work. Can you give us any updates on what you’re doing or some specifics, maybe some anecdotes of successes and what’s on the horizon?

Well I think you started to see some of this, this is work that’s been underway for quite some period of time. We have a lot of leading technologies that we were focused on, but maybe there are some additional regional opportunities for us in emerging regions, that’s one. You’ve seen the significant adoption pickup rates in our Packaging business. That’s been a good one, you have seen in our Refinish business, more water-based sales there and of course in our Automotive business you’ve seen the most recent acquisitions that we’ve done in REVOCOAT where those products are applied in the paint shop they had limited customers, a limited geographic scope and we’re going to take that out globally and get some shares there as well, so we’ve worked hard on trying to commercialize all this faster and I think that’s where the focus has been. We also had some new wins that we’ll be rolling out later in 2016 in commercial transport, so that’s all good as well. So altogether I would say probably the most recent one that you probably haven’t seen in the past that are popping up would be our Protected segment, in protected we had significant wins in dry-docking, significant wins in the LNG sector, significant wins in what we call our advantage products, tank lines and things like that. So those are ones that we’re rolling out globally as well. So I say all positive.

The next question comes from David Begleiter of Deutsche Bank. Please go ahead.

Mike your Performance Coatings volumes fell 1% in 2015, I know you’re expecting growth this year, but what would you expect volume growth to be in Performance Coatings in 2016?

In Performance Coatings, I would say that we should break that down into the various segments, right, so the Aerospace we would say that would be low single-digits, so that is a reasonable number. If you look into PNC given our last quarter, I would say that it should continue to be low single-digits, so obviously the marine side is a problem. The order book for the big guys in Korea were 50% of what their expectations were, so marine new builds will continue to be the challenge, but the protective side should be really solid. If you look at our refinished business miles driven, continue to go up, gas prices are down, distracted driving is up, insurance claims are up so refinish has done quite well, so I would just call that historically that would be a zero business, but I’d say that’s going to be a low single-digit kind of year. And that leaves architectural and I think again that’s going to vary considerably by the region. We were pleased with the UK, Ireland, Benelux, Scandinavia all had good three plus kind of numbers that was good for us. France actually stabilized and so we saw a couple of months in the fourth quarter that were marginally up. It’s a little too early to tell yet what we expect there, but I would say France I am more optimistic now than I’ve been the last say nine to 15 months. So that’s all good. The Eastern European countries are -- they have had a lot of promotional challenges, but I would say overall it should come back around when you look at the U.S., we’ve obviously had some good growth in the U.S. except for the dealer market, the dealer market continues to be challenged. Canada I think is probably going to stabilize, so I don’t expect a lot in there. Mexico we’ve had tremendous growth there we’re going to continue to expect to grow two times GDP, the one negative in Mexico is the fact that government spending has started to slowdown with the price of oil dropping. I think Brazil’s going to be a challenge, I think China’s going to be a challenge, Australia should be good at least mid, I would low to mid single-digits in Australia. So that’s a good market for us, so all-in-all I would say we should be at or above GDP for the Performance Coatings segment.

Very good Mike, same off the Performance Coatings, would you expect margins to be up in 2016 versus ‘15 given where it was and if so would 6 basis points be a low bar somewhere?

David I think it’s a little early to answer that question. In my opening commentary you saw that we said pricing would be flat. We expect this to continue to see modest raw material deflation, so I think putting a number on it is way too early.

This is Vince. The one thing we do have is restructuring benefit, we -- it is not the restructuring plan for everybody’s recollection in April 2015, we saw very modest benefits, but targeted for all of ‘15 and we expect incremental benefits in 2016.

Yes, that would be partially offset by changes in the corporate cost, which should effect the historical levels, but overall our goal would be to gradually accrete with return on sales percentage overall for the Company.

The next question comes from Duffy Fischer from Barclays. Please go ahead.

First question just there has been a lot kind of about and written with the MROs in the refinish side of things and how they’re rolling that up. As you look back at ‘15, how’s that played out for you guys and what would you look at going forward whether it would be a lot more on that consolidation and does that favor you, would this favor you, how would you talk about that?

Duffy, this is Michael. I think you’re referring to the MSOs Multi Shop Operators, that trend line is for the big guys that continue to buy the little guys it is obviously a positive for us. Some of these smaller shops lack the same productivity that the bigger shops too, that’s where we bring tremendous amount of value to our multi-shop operators, we are there to improve their business instead of getting nine cars out of the shop, they can get 10 cars out in a day. So, that’s been a positive for us. So, I’d tell you that our share in the U.S. continues to increase. I don’t know how much more the MSOs will aggregate this year because when I think about it from a dead market, I’m not sure how aggressive they’re going to be in trying to raise more debt given this environment, but regardless we are totally supportive and it’s been a good trend for PPG.

And then, it is a little bit nitpicky but it might be $20 million or so, last year currency hedged you 250 million on revenue, 25 million on income which was about a 10% margin, this year at the midpoint you have kind of moved that up to a 13% or 14% margin, what’s the difference in how the currency is impacting earnings relative to sales this year versus last year?

Duffy, this is Frank here. It really has to do with some of the mix of where the currency translation impacts ours so for instance, so we have much larger component of Comex this year and given the margin structures and given that relative portion of that business to the total PPG that’s really where the difference is and so the last year the largest impact for instance was the euro, it is a little bit more balanced in terms of the currency impacts this year with maybe, with a higher proportion of Latin America so that would really be the difference.

The next question comes from Rory Blake of Wells Fargo. Please go ahead.

This is Frank Mitsch, setting in for Rory. Michael, in early September we met with you and you were talking about how you were concerned about 10% or just under 10% of the PPG portfolio mentioning Brazil, Russia heavy-duty equipment, et cetera. As we sit here today late mid to late January, what percent of the portfolio would you say you’d put in that concerning category?

Well, I think Frank it probably hasn’t changed too much. Russia, we still see that as a challenging market, Brazil is probably more challenged today than it used to be, heavy-duty equipment though is I’d say stabilized at a lower level, but it is a down, but the negativeness of those numbers have significantly reduced. Besides that I’d tell you that the rest of our businesses are pretty good. So, I don’t know that I would -- change what you got as a concerned level.

That’s very interesting, obviously you see the broader market melting down expecting that the global economy is going to tank here, but based on the guidance that you have put forth it doesn’t appear that that was the case and I’ll take your response so you reiterate that that’s terrific, if I could follow-up and some granularity to the productivity progress , I think you had talked about or could you talk about realizing about $70 million of benefits in 2016 and exiting the year at a run rate of $100 million, is that still a target or is it higher lower? How can you help us there?

Now Frank that’s still above right, I know we said that was on the program, we would get a between $15 million and $20 million if you remember by the end of 2015 and that was accurate and the incremental 50 to 70 for 2016, bringing us a total of just under 100 million by the end of 2016 and then a little bit of trailing into ‘17 and those assumptions are still good and nevertheless we continue based on macro environment. We’re always looking for additional rationalization opportunities and that will be a very strong focus for us.

Frank you mentioned though that corporate expenses are expected to tick higher in ‘16, is that correct?

I’d say that because of the fact that Q4 number was a little bit lower based on stock-based compensation based on stock-based compensation, it will probably revert back to something closer to what we’ve seen historically in prior years as you get back into Q1 and for the remainder of the year.

So, it’s based on stock-based compensation, that’s the delta?

That was one of the primary drivers really going down form the Q4 the prior year, yes.

The next question comes from Jeff Zekauskas of JP Morgan. Please go ahead.

I think your pension funding this year was about $300 million. What you expect your pension funding for the next year?

Yes, the numbers will come down substantially. The number for this year really includes that large $250 million that we put in the first quarter to really shore up the funding of the U.S. plans. Those numbers will come down into the I would say the low double-digits in terms of cash funding for 2016. We have very little in terms of mandatory funding for the year. And that was really related to some of the international plans. So that cash funding will not be what I would call material way. We may have some wind ups that we do in various parts of the world and we’ll be very transparent about those when those happen, but on a trend basis that 250 was probably an anomaly.

In thinking about your overall volume growth for 2015, the geographic area that you had your difficulties in was North America, that is Europe and Asia grew 2% or 3% and the U.S. and Canada was down 1%. Can you diagnose what went wrong in the U.S. and Canada in 2015? And how you expect it to be different than 2016?

Let’s start with Canada first. I mean, clearly, the oil business has the first material impact on that and that was a challenge for us. I would say that the slowing Canadian economy was also a challenge for us. When you shipped into the U.S., clearly we told you that the biggest challenge we had in the third quarter was the destocking that we saw due to the weather challenges we had in May and June. We have a very large stain [ph] business, if you will, in our architectural business. So that was one. Then, you had heavy duty equipment and industrial was the challenge. So those were all the negatives. We also had the slowing in the industrial production. So, when you factor that in and look at what we’re looking at for 2016, I am not nearly as pessimistic, I think industrial production will be more steady. You certainly see the housing market continuing to progress. I would say that our rebranding initiatives in our architectural business is a positive, the line reviews that we had with the major retail DIY chains were also positive. So, I am coming in the year feeling better about the U.S. So that would be my explanation.

The next question comes from P.J. Juvekar of Citi. Please go ahead.

Mike, I want to go back to some of your broader comments that you made. You talked about broadening out of the recovery in Europe, which is not something we have heard a lot about. You talked about auto sales growing from the mid $17 million -- or mid-17 million unit level. Do you think that’s sustainable given some cautious commentary from auto companies and auto parts companies so far?

Well, one of the leading indicators we look at of course is registrations and the various countries. And if you look at registrations, they have been ahead of builds and sales in the fourth quarter were substantially ahead of builds. So, inventory wise, even though Europe historically doesn’t keep much inventory, we still think that’s a positive. If you look in the southern countries, in Europe, they all had very high growth rates, albeit coming off an extremely low base. But that was our positive. So, I’d say unlike in the U.S. where we’re in the late innings in the U.S. for automotive, I’d say in Europe we’re more like the middle innings there. So, I think that’s just our viewpoint. Obviously, we could be wrong P.J., but I think that’s our take on it.

And my second question is on TiO2. Can you just give us an update on where does the Henan Billions plan stand on chloride TiO2? And would you be willing to license that technology to other companies in China?

So P.J., you probably saw our press release. We qualified the material, let’s call it in October. We had shipments on the water. We started commercially using the material in early December. More product is on the water going to other locations outside the U.S. So, it’s going to get qualified in Mexico; it’s getting qualified in Europe. The bottom line is they are making good products, their consistency is getting better. And we are pleased with what we are seeing. We have most favored nations with them, so that’s the positive for us as well. As far as licensing, no one else has approached us. But clearly, as we have demonstrated and people I think were a little bit concerned about but we have demonstrated that we are able to support them with our technology, and it’s running well. And the biggest thing we are working with them on now is consistency and so far so good. And we are open. So, if you know somebody we should be talking to let us know, but right now Henan Billions is our partner.

The next question comes from Arun Viswanathan of RBC. Please go ahead.

I just had a question on the volume trends. It looks like Q4 you’ve got 2% growth and most of the ‘15 was about 1%. And just look at the slide commentary, looks like most of the commentary is for continued improvement in Q1 outside of seasonality. So, I mean would you characterize what you are seeing right is any kind of positive inflection point? Then maybe you can talk about by end market, especially automotive OEM and architectural.

Well, so far in Q1 our order book looks very similar to what we saw fairly in Q4. As we told people in Q4, everybody thought that world was falling down in China, we tried to reassure people that we did not see that. I think people saw that car builds in China were up substantially in 4Q. We have good visibility all the way through Chinese New Year, so we see the Chinese auto builds continue to be up low single digits. Overall we see the U.S. car market being up low single digits as well. But as we described in the earlier comment, we see that in a later innings of ball game. So, those are our commentary as far as the other markets, industrial has been an up and down market for us. We talked about heavy duty equipment; the automotive parts business is being good; we had positive trends in coil in the fourth quarter, general finishes was up. Our electronic materials business was also up. That is not really due to electronic materials growth as much as the new product reductions we have. And electronic materials were pretty significant and our customers are adopting this new technology. So, it’s more like a win in the marketplace. And I think I have covered architectural quite substantially but there is a market I missed, I’d be happy to cover it Arun.

It’s fair enough.

Arun, just to add to what Michael said, referring to his comments before too, we’ve seen some good wins on the protective side, that should continue specialty coatings materials and packaging; that also applies to the packaging and industrial businesses in Europe where we continue to see recovery and then see some nice wins there. So that’s also going to add to the organic growth as we go forward.

Great. And just as a follow-up, I mean have you seen any change in behavior amongst your customers? As you said, a lot of us -- lot of investors and maybe observers are just kind of skittish on what’s going on in first half -- couple of weeks of the year. But is there have been any changes amongst yours customers and is that to be expected or your business is much longer cycle and we shouldn’t expect that?

Well, we haven’t got anybody calling us up all nervous. I would tell you the one packaging comment I’d throw out [ph] that Frank didn’t mention was that in California with Proposition 65 concerns, we see more of our customers actually converting to the newer technologies faster and sooner than we originally expected. So that’s the positive for us. I think we read more about the nervousness than we see about the nervousness. But maybe people would turn off the TVs that might be a little better.

The next question comes from Don Carson of Susquehanna Financial. Please go ahead.

Michael, I want to go back to architectural, just both U.S. and Canada and that North American outlook, last year in the U.S. obviously growth was below trend due to weather. Do you see that snapping back this year or do you see that being offset by weakness in some of the energy related states? And more importantly, what was your growth in U.S. architectural last year versus the market, and how would you expect it compared to the market this year? Then just any general comments on Canada and Mexico market growth outlook?

So Don, let me start with the U.S. We saw the market at between 2% and 3%; that’s been consistent. You’ve seen that with retailers as well. I would say that we were a tick below that. So from that standpoint, we were disappointed with our performance but I would tell you that given what we have seen moving forward that the will be a better year this. We opened 25, essentially 25 new stores between U.S. and Canada, we opened a 190 new store locations in Mexico, we’ve opened new locations in France as well. So, I would say overall, our global store network will be bigger and better in 2016 than 2015. So that’s kind of my summation of that.

We said earlier -- I don’t if you caught it, this is Vince that we expected the Canadian market to remain soft in the first part of the year, but then we’d lap that softness in the back half of the year so that -- I think you had question on Canada as well.

On the protective side, I guess you also made a commentary about that. Protective, [audio gap] we’re winning share both in the U.S. and Canada, so we had built into our plans continued growth in 2016.

And then just to follow up on raws, not so much coatings raws, but just hydrocarbons, just Vince, you can run how much gas you’re consuming in your glass business? And I would imagine just things like diesel fuel coming down given how substantial your truck fleet hours [ph] have to be a benefit as well. So, what kind of hydrocarbon benefit do you see going into ‘16 versus ‘15?

Hey Don, as you know once you divested the commodity chemical business, our gas consumption dropped materially. A dollar change in natural gas for us is $15 million to $20 million a year. On the cost side, we do have some customer price indexing that mutes that whether it be up or down. So, really gas price changes are not material impact for us in any individual quarter. We don’t buy a lot of hydrocarbon materials for coatings production. We do have logistics cost, so diesel cost is important to us in our distribution businesses. We do see some benefit there as oil moves down. It takes a lot of pass-through. We are seeing some inflation in trucker salaries. So right now those probably are moving equal and opposite directions.

The next question comes from Mike Harrison of Seaport Global Securities. Please go ahead.

Michael, I was wondering if you could talk about competitive dynamics you’re seeing in the auto refinish business. As you look to expand share, what does that mean in terms of what’s going on with pricing?

The refinish business is a beautiful model from the standpoint that we have thousands and thousands and thousands of little customers. And what that means is that all -- we always have a price up opportunity, this year -- in 2015, we had a price increase in August. We would expect to have another price increase sometime in the third quarter of 2016. This has been an industry trend for quite some period of time. I don’t know that I can ever remember the time that refinished business hasn’t had a price increase. So that’s a positive but it’s not just PPG; I mean that’s an industry event as well.

And you’ve got to number too that pricing is just only one element in terms of winning a new business. PPG is known obviously for the color matching and the service capabilities, the things that we do really well. And it’s the technologies change and go more to waterborne and so on, that plays to PPG’s advantages.

And then looking over to the packaging coating side, you noted last quarter that you were going to be lapping the introduction of interior can coatings in that business. But it sounds like you saw straight despite what sounded like was going to be a challenging comp in that business. Can you talk about the uptick that you are seeing in the non-intent BPA coatings? How much additional runway does that have and are you capturing any additional exterior coating business as a result of the interior product?

Hey Mike, this is Vince. We did see difficult comparable in Europe in the fourth quarter this year, as they were prepping last year in the fourth quarter for the legislative change in France. So that was actually our lowest growth region this year, due to the tough comp, it still grew year over year. But we had mid single digit or higher in the other regions as customers continue to roll this out around the world. And we still see very good runway; we’re still in the infancy of this product introduction and this has no impact on the outside of the can. So that’s still being competed based on the similar metrics it was in the past, similar customer metrics it was in the past.

The next question comes from Vincent Andrews of Morgan Stanley. Please go ahead.

Just a question on pricing, you said for ‘15 you expected to be flat, it looks like you’re up 25 basis points. But if I’m remembering the trend, through the year it seemed to decelerate a bit in the second, third and fourth quarter and you’re anticipating being flat again next year. So, if you could give us a sense of maybe on an end market basis or if you’re having to pass through some costs, just sort of what the dynamics are that sort of caused the deceleration through the year and then how we should be thinking about the cadence in ‘16 as well?

Vincent, if you look at -- you described the situation accurately. We did have call it, less than 1% in Q1 and we ended the year just very modestly over zero. We do re-price with new product introductions. We do have some customers where we talk about price annually. And again our situation as we look at it today is base case of flat price all in for the year. There are certain markets where we do get price as Michael mentioned. There are other markets that are more competitive. So, we’re expecting flat price. We won’t go into individual customers, individual businesses. That’s been our customary pattern not to talk about this.

And then just a quick one on -- there was a comment on challenges in the independent dealer channel in the U.S. Could you just speak to those a little bit more? And what’s you’re doing to change that?

Sure Vincent, this is Michael again. Independent dealers channel has been a declining channel for quite some period of time. These are small -- a lot of them are small business owners; as they retire, they would rather sell out to the large paint companies. Plus, as you know, large retail partners continue to win share from that segment. So, it has been under pressure for a long time. We do not expect that trend to change. And so, I think you can expect to be that going forward.

So, there was nothing incrementally different about what you saw in the quarter versus the test? Okay. Thanks very much.

Very similar and the contraction rate remains minor but continues.

The next question comes from Ghansham Panjabi of Baird. Please go ahead.

First off on Comex. Michael, you gave us a nice update on the integration. What about market conditions in Mexico and Central America as a whole? Has there been any deviation in the trend line there?

Let’s start with Mexico, the one slowing trend has been the government spending. The spending from the consumer has been very solid. We saw good gains all across our network, whether it’s in the north or the south. We added 190 stores. It was a very good year for the Comex team, up high single digits for the year. So that was really job well done by them. In Central America, we’re in seven small countries there. Those seven, all seven had positive year-over-year growth. And two of them, we had particularly high growth rates, but that was the introduction of our new Glidden product down there and that was specifically Panama and Costa Rica. We would expect to grow faster in those two particular countries than we would the others. The others should be at a GDP kind of run rate. But overall, I would say, both Mexico and Central America continue to be good markets for us overall.

And then on U.S. architectural and I am sorry if I missed this. But can you give us a sense as to how that business performed in the big box channel and also retail stores? Also any benefit from the warmer weather in the country during the fourth quarter? And also how would you characterize the pricing environment by channel at current? Thanks so much.

I think we covered a lot of this originally, but the combined U.S.-Canada stores network was slightly flat. It was obviously held back by Canada. So, that was our challenge there. We’ve had positive growth with our DIY partners in the quarter. There was probably some material improvement due to weather but not as much as you would think because obviously they’re destocking at that period of time, so they probably took that opportunity to continue to move down. But all in all, we do think weather was a positive in the fourth quarter. And then, we talked about the dealers just recently. So, I think overall, we’ve been performing slightly under the markets; if you say the market was 2% to 3%, we were 1 tick below that.

The next question comes from Nils Wallin of CLSA. Please go ahead.

First, would you remind us where you are in achieving all those various Comex cost revenue and Central America synergies?

The cost synergies we laid out were $45 million to $50 million, and we are on our pace to beat that number, so that’s good. On the sales synergies in the Mexican market, we said that number was going to be $40 million to $50 million; those are PPG products, through the Comex concessionaire network. We are solidly on pace to achieve those numbers. And then the Central America number was $60 million to $70 and basis the most recent quarter, I am very comfortable with that number that we put out there. It’s obviously early; we just closed on that acquisition in July, but the fourth quarter is a busy season down there and we had a very good fourth quarter in the Central American market.

And then just in terms of the cash deployment guidance, obviously last quarter you’ve moved it up at the bottom end and then reiterated it this quarter. I am curious as to how you’re thinking about next in ‘16; what would be the factors that would allow it or cause it to be below what you’ve done in ‘15, or above what you’ve done in ‘15? And then what you think the mix will be; is it likely to be more repurchases or more repurchases than M&A or is the likely to change?

So, if you look at what we did in ‘15 and we basically came in at half of what the midpoint of the range we reiterated, so 1.15 as compared with 2 to 2.5 for the three year period. And as always, the mix between the share repurchases and the acquisitions will depend on what we have in the pipeline and the timing of any -- closing of any particular acquisition. We’ve continually said, we have a really nice robust pipeline of things that we continue to look at around the various regions and the various businesses from an acquisition standpoint, and that would be our preference do accretive acquisitions. But as always, at any given quarter that mix will change. And I think it’s safe to assume that while we like to focus on the acquisitions that share repurchases will continue to be an integral part of our capital deployment strategy and no reason believe that will not continue including this quarter.

And just also what would -- would it just be the acquisition timing that would cause it to be above or below that midpoint or is there something else?

We look at the whole landscape between what we have available and acquisition pipeline and also in the deployment. And really it starts with what our cash from operations that we generate is going to be. And what we said as we came up with that range because we know how much cash we’ll have to deploy and we fully intend to be midpoint in that range and the only thing would change the mix is the timing of acquisitions. But the absolute dollars we intend to bring in within that $2 billion and $2.5 billion range.

The next question comes from Laurence Alexander of Jefferies. Please go ahead.

Hi. This is Dan Rizzo on for Laurence. Just one question, so some of your competitors have talked about going from sole sourcing to dual sourcing as a means to reduce raw materials cost. Is that something you guys are looking into or would it be suitable for you; I mean how much of your raw materials are currently sole sourced?

Well I wouldn’t want to get into the percentage that’s either one of those, but I’d tell you that we’re consistently working with our suppliers to have maximum flexibility on how we formulate and how we work with our suppliers. So, I’d tell you we’re very comfortable with where we are.

And then one more quick one. I think you just indicated that you opened 190 new stores in Mexico through Comex in 2015. Is that going to be the pace going forward, is that going to moderated at all or are those accelerating, some color?

We’re expecting to open up 150 to 170 stores in 2016. So, we’d originally thought we’d do 170 this year, we actually did a 190. So, we might have pulled forward one or two but I’d still think we’re going to be in the similar type of a range.

And the next question comes from Dmitry Silversteyn of Longbow Research. Please go ahead.

A lot of my questions have been answered but I’d like to follow-up on a couple of points. First of all, in fourth quarter, aerospace weakness that you mentioned, was that related to new builds or was that on the rebate part of the business? I know they are usually 50-50 for you. But I was just wondering where the weakness in the quarter came from.

The weakness was really one part of it. I divided it into two parts. One part of it was because in the fourth quarter 2014 we had a government annuity double order whether they tried to use up all their budget or not, we’re not that -- we’re not able to predict but we do know they double ordered. And then the other half of the slowdown was due to our sealants business. We have a customer that had a large new plane that they were working on and they’ve gotten more consistent in ordering and their work practices have gotten slightly better. So, their waste has declined marginally. So, now that that’s more stable, we see that returning back to a year-over-year growth. The only thing about aerospace is the general aviation market is very strong for the big planes and slightly weak for the little planes.

So, it sounds like it was more a new builds rather than sort of maintenance. So, it would imply that the overall industry is still in pretty good shape.

Yes, Boeing is expected -- I think you probably listen their commentary, both guys are trying to increase the production rate. So, they both had eight-year backlogs. So, it’s not like they don’t have a business.

Yes, we do expect aerospace return to growth, as Michael mentioned earlier. And again just to give you the Q4 ‘14 comp, we were up high single digits in aerospace last year; that’s a comp Michael is comparing against.

On the Comex store openings, are these being opened by existing concessionaries, are you signing new concessionaries or are these company-owned stores I guess for lack of better word, and just trying to understand where the source of growth is and how it’s being supported by corporate versus concessionaries?

There are no company-owned stores in Mexico. We have a dedicated concessionaire network. We do not ever plan to be in the company store business in Mexico. It is a combination of both, some of our long term concessionaire partners as well as some new ones. So, we have a lot of people that would like to have a store. And so we are very, very selective of our about finding those entrepreneurs that are going to live, eat, sleep selling Comex paint. And that’s our desire and we make sure we find the right people and it is the combination of both existing and new.

So, it sounds like sort of the hopper is being filled by people on the ground in Mexico and then it’s sort of up to you to figure out who gets it and who doesn’t; is that how the business model works?

This is definitely owned by Marcos Achar and his leadership team. All I do is bless it.

Okay.

They are way better at this than anybody else.

And then speaking of packaging and the shares that you picked up there inside of a can, I’m assuming you talked about sort of gaining shares in Europe last year and I guess in 2015 it was more the turn of the U.S., if I understand your commentary correctly. So, I know that back a couple of years ago when you had your special day on packaging, you talked about zero percentage inside the can market share in the U.S. What is your market share in the U.S. currently with this 9 and 10 BPA transition taking place?

Well, what we told you was that we had a 3% global market share. I don’t know that I want to get into what our market share is now. But I would call 3%, not the material; and what we have now is defiantly material but it is a substantial double digit kind of increase. And our customers are excited about what we bring to the table from a technology standpoint. More importantly, they are excited about our ability to launch flawlessly these new products. And that gives them a lot of comfort in giving us the business.

On the performance coatings and fourth quarter margins, they were a little bit lighter than I would have expected, and the year-over-year improvement wasn’t what you saw in the previous three quarters. Was that just a matter of mix and the aerospace business being not as strong in performance coatings or was there something else going on with margins there?

Dmitry, the sole factor there was the fact that we lapped Comex. So, for the other three quarters this Comex, which comes in at above segment margin was a true adder. We only have one month of that benefit in Q4 because we closed the Comex acquisition in November last year’s.

Okay, so that was entirely Comex related, fine. And on the glass side of the business, I’m assuming it’s the lower energy costs that are driving these mid teens margins that you haven’t seen as far as my model goes to 2001?

No, the energy -- most of the energy in glass is on an index. And so, this is coming from true pricing in the marketplace. As you know supply and demand is relatively tight. One of our competitors closed the furnace in California. We sold our facility in the Midwest. And so with the reduction in industry capacity, pricing has been attractive in that segment.

And then finally, as a sort of a longer-term as I think about your cash flow, your working capital as a percentage of sales really has come down meaningfully over the last five years; I think it’s almost half of what it used to be as a percentage of sales, at just over 6% here in 2015. Do you have a longer term goal or is this the level that you are happy with or is there an expectation that maybe given all the growth you have that working capital will go up as a percentage of sales in future years?

Well, our goal is still to bring working capital down as a percent of sales. And you are correct, over last two years we brought it down by about $300 million; about half of it was payables including supplier financing programs and about half was inventory where we took out about five days of operational inventories this year and we’ve also improved the quality of the receivables by working down the percentage of past-dues. So, we are pleased with that and we still have a several days to go, we can get out of inventories and keep working on past-due receivables. So, the goal would be continue to bring down working capital by kind of on average of 100 basis points a year for the next couple of years. And then we think we will be kind in line with the peer group.

And what would your CapEx guidance be for 2016? One final question.

We couldn’t hear you, Dmitry. Could you repeat?

What would the CapEx guidance be for 2016, what you expect to spend on capital expenditures?

As we put in our presentation 3% to 3.5% of sales would be our…

3% to 3.5%, okay. Okay, fair enough. Thank you guys.

As we are out of time, I would like to turn the conference back over to Mr. Scott Minder for any closing remarks.

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