William Seymour - Gary E. Hendrickson - Chairman, Chief Executive Officer and Chairman of Executive Committee James L. Muehlbauer - Chief Financial & Administrative Officer and Executive Vice President

Robert A. Koort - Goldman Sachs Group Inc., Research Division Ivan M. Marcuse - KeyBanc Capital Markets Inc., Research Division Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division Mehul M. Dalia - Robert W. Baird & Co. Incorporated, Research Division P. J. Juvekar - Citigroup Inc, Research Division David L. Begleiter - Deutsche Bank AG, Research Division Dmitry Silversteyn - Longbow Research LLC Donald Carson - Susquehanna Financial Group, LLLP, Research Division Kevin Hocevar - Northcoast Research Vincent Andrews - Morgan Stanley, Research Division Rosemarie J. Morbelli - G. Research, Inc. Nils-Bertil Wallin - CLSA Limited, Research Division Steven Schwartz - First Analysis Securities Corporation, Research Division Neal P. Sangani - Goldman Sachs Group Inc., Research Division

Ladies and gentlemen, thank you for standing by, and welcome to the Valspar Fiscal 2014 Third Quarter Results. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn the conference over to our host, Mr. Bill Seymour. Please go ahead, sir.

Good morning, and welcome to our fiscal 2014 third quarter earnings call. We have 2 speakers today who will provide insights on our business and the third quarter results we announced this morning: Gary Hendrickson, our Chairman and Chief Executive Officer; and Jim Muehlbauer, our Executive Vice President, Chief Financial and Administrative Officer. As always, after our prepared remarks, we have plenty of time to take your questions. Let me also remind you that comments made by me or by others representing Valspar may contain forward-looking statements, which are subject to risks and uncertainties. Our SEC filings contain additional information about factors that could cause actual results to differ from management's expectations. These filings can be found in the Investor Relations section of our corporate website at valsparglobal.com. And finally, please note that our reported results this morning include non-GAAP financial measures. These results should not be confused with the GAAP numbers in today's earnings release or with the GAAP numbers we will report in our Form 10-Q. For GAAP and non-GAAP reconciliations of our reported to adjusted results and guidance, please refer to the supplemental schedules in this morning's news release. With that, I'll turn the call over to Gary Hendrickson. Gary E. Hendrickson: Thank you, Bill, and good morning, everyone. We had a very good quarter. Every major product line in our company grew in our Q3 and our diverse business portfolio continues to deliver strong results. Net sales increased 10% and adjusted EPS increased 13% in the quarter. These results were driven by a number of factors, including the successful integration of acquisitions, strong performance from China and Europe, improved sales and profitability in our Coatings segment, benefits of new growth initiatives, investments in innovative products and the positive impact of productivity initiatives. I'll now cover some of the highlights of the quarter. Coatings segment sales grew 6%, excluding Inver. Including Inver, sales grew 16%. All major product lines within the Coatings segment grew in volume and sales over last year. Within the segment, Packaging had its eighth consecutive quarter of growth with sales increasing mid-single-digits as we continue to increase our global market share. Packaging volumes increased in all major geographic regions and included strong growth in non-BPA Coatings. Sales in the General Industrial product line were up mid-single-digits over last year, excluding Inver. This is the third consecutive quarter of improvement in sales trends, driven by market share gains and modestly improving end markets in some geographies. And in Europe, the integration of Inver continues to progress extremely well. Sales in Coil coatings grew mid-single-digits, driven by new business wins and improving customer demand. And our Wood product line grew sales mid-single-digits and has been a strong performer, benefiting from new business wins in China and the improving U.S. housing market. Moving now to our Paints segment. We performed well in all regions and sales increased 4%. Our Paints segment benefited from strong growth in international markets. In China, sales grew double-digits. In Australia, sales grew high single-digits in local currency. This is our best sales growth in Australia since we acquired this business in 2010. Our rollout with B&Q in the U.K. continued to progress well in the third quarter. We're now selling Valspar Paint in 250 B&Q stores and are reformatting the rest of the stores for deployment later this year. Now before I talk to you about the U.S., let me answer the question you may have, which is if sales increased 4% and international markets performed well, why did EBIT decline? The answer is that we experienced low single-digit sales growth in the U.S. in Q3 because of large shipments made in the second quarter in advance of the Valspar Reserve launch at Lowe's and Valspar Paints at Ace. The EBIT decline was driven in large part by the planned investments in advertising and marketing to support these initiatives. So let me provide a couple of comments that will give some context in our U.S. paint sales over the last 6 months. First, if you combine Q2 and Q3 this year and compare it to the same quarters last year, our U.S. paint sales were up double-digits and volume increased mid-single-digits. Second, importantly, sales at retail of Valspar Paint in Q3 were strong. So we're pleased with our performance over the last 6 months. The paint season in the U.S. has been solid and sales of Valspar-branded paint have been strong. In summary, I'm pleased with the progress we've made and the market share gains of our major businesses. The improved results in our Coatings segment coupled with the growth investments we are making in the Paints segment really shows the benefits of our diverse product mix, strong competitive positions and broad global exposure. We have executed well in many key initiatives so far this year, including the integration of Inver, big launches of new initiatives in retail paints, growing our Coatings segment volumes, restructuring our manufacturing costs and continuing to drive improved productivity. Based on our year-to-date performance and our current outlook for the fourth quarter, we are updating our annual fiscal 2014 sales guidance to approximately 9% growth, which is the high end of our previous range. And we are also updating our adjusted earnings per share guidance to $4.05 to $4.15 per share. With that, I'll turn it over to Jim, who'll provide some additional detail and context for the quarter. James L. Muehlbauer: Thanks, Gary. This morning, I will review the key drivers behind our performance in the third quarter and discuss our expectations for the balance of the fiscal year. Starting first with our performance in Q3. Sales growth of 10% was led by volume gains in both our Coatings and Paints segments. These gains were driven by volume growth from new business wins in many of our product lines and from the Inver acquisition. Looking at the Coatings segment. Sales increased 16%, driven primarily by the Inver acquisition and included growth in all major product lines. Excluding acquisitions, Coatings sales increased 6%, which was an improvement over the last 2 quarters when sales were up 2% and down 1% respectively. Gary has already covered the key drivers behind the performance in the Coatings product lines in the quarter. I will focus my comments on providing you with a few more details on the sales and volume performance. Packaging sales were up mid-single-digits and volume increased low single-digits. All of our major geographic regions grew Packaging volumes during the third quarter. Sales in the General Industrial product line improved in the quarter. Total sales increased mid-single-digits in local currency, excluding Inver. This performance reflects continued improvement over the declines experienced last year and in the first half of fiscal 2014. Coil product line sales and volumes were up mid-single-digits in the third quarter. Volume growth benefited from the improved demand after difficult weather conditions in the U.S. during the first half of the year. Wood product line sales increased mid-single-digits and volume was up double-digits, driven by strong growth in China. Moving on to the Paints segment. Total sales increased 4% and volumes were up high single-digits. Volume growth was driven by double-digit increases in both China and Australia. As Gary discussed earlier, Q3 volume in the U.S. was impacted by shipments made to customers during Q2 to support the introduction of Valspar Reserve and the branded paint rollout at Ace. As you may recall, volume in the U.S. was up more than 10% in Q2. With that overview of sales complete, let's discuss the drivers behind gross margin. We finished the quarter with total gross margin of 34.9%, an increase of 80 basis points over last year. The increase was driven by improved sales mix in both the Coatings and Paints segments, leverage benefits from higher volumes and continued productivity initiatives. Gross margins expanded in both the Coatings and Paints segments. Shifting to expenses. OpEx in the third quarter increased 160 basis points to 21.1% of sales. We increased spending to support the key growth initiatives we discussed earlier. These initiatives are focused on providing profitable growth for the company but require investments today that we can leverage more fully as these initiatives grow. The increase in OpEx in the quarter versus last year was driven by 3 main factors, which explain most of the $42 million increase in operating expenses. First, we increased investments in support of new retail initiatives and brand-building activities in the Paints segment. These include higher advertising, marketing and overhead expenses for these businesses, which explains approximately half of the incremental year-over-year spend. Second, our expenses include the addition of Inver, which represents approximately 1/4 of the OpEx increase. And finally, we had higher variable incentive compensation expense in the quarter, which represents approximately $8 million of incremental year-over-year spend in Q3. As I discussed on the Q2 call, the increased incentive expense reflects the normal level of bonus for the year compared to the lower-than-normal bonus amounts from last year. Bringing it all together, consolidated adjusted EBIT increased 4% and adjusted EBIT margins finished at 13.7% in the third quarter. In the Coatings segment, adjusted third quarter EBIT of $122 million increased 21% over the previous year and was 18.3% of sales. The increase in EBIT was a result of Inver, the benefits from leveraging higher sales volumes, improved sales mix and productivity initiatives. In the Paints segment, the EBIT decline was primarily driven by incremental expenses to support new retail initiatives. These investments during the quarter offset improvements in volume and sales mix in the Paints segment. In total, Paints EBIT of $44 million was down 16% from the prior year and was 9.2% of sales. Looking at the balance of the P&L. Our tax rate improved, and we have an opportunity for a lower effective annual tax rate than we estimated at the start of the year. The Q3 adjusted tax rate of approximately 30% was lower than last year, driven by strong performance in our China and Europe businesses and benefits from tax credits related to specific capital projects in fiscal 2014. We now expect our annual tax rate to be between 31% and 32% for fiscal 2014. This compares to our previous expectation of 32% to 33%. We continue to make good progress on our restructuring activities, which will improve our ability to effectively serve customers. Through the first 3 quarters of the fiscal year, pretax restructuring charges totaled $28 million. Moving on to the balance sheet and cash flow. Inventory at the end of the third quarter was $526 million, an increase of 26% versus the prior year. This increase was the result of the addition of Inver and investment in inventory to support new growth initiatives, like Valspar Reserve, Ace and B&Q and other new business wins in the portfolio. Year-to-date adjusted cash flow from operations, which excludes restructuring expenses, was approximately $183 million, a decline of 16%, which reflected the timing of inventory and other working capital investments related to our growth initiatives. We expect cash flow from operations to return to more historical trends as we annualize the impact of these initiatives. Wrapping up the highlights from the quarter. We repurchased approximately 1.1 million shares of the company's stock for a total investment of $81 million. Now looking to the balance of the fiscal year, we are updating our annual fiscal 2014 sales guidance to approximately 9% growth and have updated our adjusted annual earnings per share guidance to $4.05 to $4.15. Before we open the call for your questions, I hope you noted in our release this morning that we are hosting an Analyst Day in New York on December 3 this year. We're excited to take people through our business in more detail, discuss our opportunities going forward and to have you meet our senior leadership team. More details will be coming soon for this event and we hope you can make it. With that, we'd like to open up the call for your questions.

[Operator Instructions] And our first question will come from Bob Koort with Goldman Sachs. Robert A. Koort - Goldman Sachs Group Inc., Research Division: The Coatings side seems to be hitting stride here and the Paints side seems to be in investment to get some growth on the horizon. Can you help us -- I know you're not going to call out the specific level of promotional spending. But can you give us some sense of how we should expect maybe the SG&A of the sales line progress as you go through the next year and you get deeper into the ramp of these new retail initiatives? Gary E. Hendrickson: Yes, Bob. Thanks for your question, I'll let Jim answer that, and I'll be available here to follow up if you have one. James L. Muehlbauer: Sure. So first, Bob, maybe if we can just take a step back for a minute before we look at kind of the individual quarters and the segments. The new business wins that Valspar has been successful in delivering this year has led to performance in Q1, Q2 and Q3 that takes a little bit more explaining, given how it's rolled into the business. So what I thought I could do is maybe to step up for a minute and just remind folks that when we started the year, our plans in total for the company called for sales growth in the high single-digits and double-digit EPS growth. Those plans included the significant investments that we were expected to make this year to grow our Paints business, both in the U.S. and in Europe, with the new business initiatives. The good news is year-to-date, that's essentially what's played out in our total financial results. A little bit more difficult to see if you look individual quarter. But if you look at all the quarters together, as you can see from our top line and bottom line, that's what happened. Looking to your question specifically, Bob, in the Paints segment, our year-to-date EBIT growth has essentially been flat. And that growth has really been limited by the investments that we've made in our biggest market in the U.S. to grow the business, launch new products and expand distribution. Much of the increased investment that we made in the year obviously has been focused during the key paint-selling season, which was Q2 and Q3. So when we look at the third quarter, we continued to increase investments to a similar level that we had saw in the second quarter. But the big thing in the Paints segment in the third quarter, Bob, is that we just didn't have the same level of volume growth that landed in the third quarter, given the pre-shipments that we made in advance of the selling season in Q2. That's the real reason why the EBIT decline was a little bit deeper in Q3 than Q2 for the Paints segment. Probably most importantly for us and for investors, is the investments that we had made this year are really our opportunity to launch those businesses in the portfolio, expand distribution and they're investments that we can continue to leverage as we grow those initiatives further. And as I mentioned on the Q2 call, we expected that our expenses in the Paints segment, the year-over-year growth would decline in the fourth quarter. So we expect to see a little less pressure from expenses overall. So expenses in the Paints segment are still expected to be up in the fourth quarter but not near to the extent that we saw in the last 2 quarters. Robert A. Koort - Goldman Sachs Group Inc., Research Division: And can you talk a little bit about the history at Ace? I know they've said good things about their paint business this year. But what the mix historically has been between private label and branded? And if you would anticipate any change in that, given the greater promotional effort to feature the paint section at Ace? Gary E. Hendrickson: I think, Bob, I think it's been rough. So this is my best estimate to try to give you an answer to the question. I think it's been 30-70 or so, private label to branded. And absolutely, we expect that mix to change over time. That's the whole thesis of our investment in branding this year. And I think our retail partner's committed to that as well.

And our next question is going to come from Ivan Marcuse with KeyBanc Capital. Ivan M. Marcuse - KeyBanc Capital Markets Inc., Research Division: Just as a quick follow-up to the expenses that you've talked about. So when we get into next year, does this level of expenses on a quarter-over-quarter basis sort of stay the same? Are the initiatives unchanged? Or does that lessen because there's more of an upfront expense, and so expenses, I guess, all else equal should decline? Gary E. Hendrickson: Yes. Ivan, it's Gary. So we just want to be careful about not talking about next year until our fourth quarter conference call as is always the case. But let me just say this. Next year, we expect to sell more paint than we did this year. We expect our business to grow both through growth with an improving economy and the things that we're doing in terms of investment. And we expect the investment that we need to generate that growth to decline from this year. Ivan M. Marcuse - KeyBanc Capital Markets Inc., Research Division: Okay, great. And then my follow-up question, your Packaging business seems to be outperforming, I guess, your competitors fairly significantly. Would you describe that as all -- you did point out that sort of un-BPA-related volume is also doing real well. What regions and what product lines are you gaining the most market share? Or is it all in non-BPA? Gary E. Hendrickson: Well, non-BPA, Ivan, is still a relatively small portion of the overall mix that we sell in our Packaging coatings business. But it is growing at a much faster rate than the overall business. We think the investments that we've made over the last 6 or 7 years in developing new technology for that business are paying off. As the market continues to convert through desires of consumers for non-BPA Coatings, we're positioned to win in that space. As we said in the opening comments, we grew our volume and sales in every geographic region this quarter. The take-up of non-BPA Coatings has been most pronounced in Europe with North America being second, very little in Asia and Latin America. So as we think about our total business, we're pleased that we were able to grow in every region, non-BPA was part of it. But I think just excellent execution of our business plan is the main reason. Ivan M. Marcuse - KeyBanc Capital Markets Inc., Research Division: Great. And Packaging is one of your more profitable businesses, correct? Gary E. Hendrickson: Our entire Coatings segment is profitable.

And our next question will come from Jeff Zekauskas with JPMorgan. Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division: Your paint sales grew 4%, but your volume grew 8%. What's the connection between those numbers? How do we get from 8% to 4%? James L. Muehlbauer: Yes. Jeff, a lot of the volume growth in the quarter was driven by markets outside of the U.S. Specifically, China had a very good quarter. And as we've talked before, the growth in China has been in the segment of the market that's lower-priced paints. So the translation from volume to sales dollar growth is a little lower in China. We have the opposite of that going on in the U.S. market with the introduction of branded paints in the hardware channel and the Valspar Reserve at Lowe's. The mix of our business allows us to grow top line sales a little bit more than volume. But the short answer is significant growth in the China market. Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division: So in other words, you had a mix issue in the quarter, it wasn't simply marketing expense? James L. Muehlbauer: Yes, 2 different things, Jeff. I wouldn't call it a mix issue. We're talking about the volume growth in the China business going up commensurate with the strategy that we have in place for that market. Separate and aside, from an expense standpoint, our expense growth has been focused on the investments we're making to support volume growth in both the U.S. and Europe. So I don't look at those as a mix issue, I look at those as investments in growing both of those regional markets. Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division: So your receivables were $871 million versus $716 million in the year ago. Why are the receivables so high? And why is your working capital becoming so heavy? James L. Muehlbauer: Yes. Our working capital is up primarily due to the investments that we've made to increase inventory associated in the new launches around Ace. But also recall that a portion of that inventory build, probably the biggest part of the inventory build year-over-year, is the Inver business, so really not a build, just not in the comparable numbers from last year yet. If you go back to last quarter, we finished Q2 with inventories up roughly 15%. Or as I mentioned in my prepared remarks, inventories now are up a little over 26%. Biggest increase between Q2 and Q3 has really been inventory we've been building to support the growth we've seen in the Packaging business and some of the improved performance we're seeing in the General Industrial markets. Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division: But what about the receivables? James L. Muehlbauer: Receivables primarily relates to the timing of sales in our Packaging business and the agreements that we have with vendors and the sales in the U.S. market around paints. I think the best way to look at this, Jeff, is when we anniversary and we get into the fourth quarter and we look at the kind of a full year-end balances, we expect more normalized behavior. We've just got a bunch of new product launches that have happened in Q2 and Q3 that are changing our timing a little bit within the year. Nothing fundamentally has changed with our payment terms to individuals or our receipt terms from our customer bases by segment.

And the next question comes from Ghansham Panjabi with Robert W. Baird & Co. Mehul M. Dalia - Robert W. Baird & Co. Incorporated, Research Division: It's actually Mehul Dalia sitting in for Ghansham. How much did product load-in related to your initiative contribute in the U.S. business during the quarter? And why was there such a big disconnect in performance between Valspar and the peer group business that sell-in to the big-box retailers? James L. Muehlbauer: Yes, 2 things. First off, I would not say that we experienced a load-in, in the third quarter at all. Basically, our sales volume was highest in the U.S. business during the second quarter in advance of the paint season. So the additional inventory -- or sorry, the additional shipments we talked about in our prepared remarks were really in Q2. And then to answer the second part of your question, I would not say that our sales of paint in the U.S. market were lower than our competitors. I think what you're compared potentially is information that's presented based on end sales to customers with our competitors. Recall, our business is sold through retailers. So there, we pool [ph] our sales numbers are shipments into retailers versus some of our competitors who are reporting direct sales results to customers. But we absolutely see that our results in the U.S. have been very good during paint season. Gary E. Hendrickson: Yes. I think back to -- this is Gary. I'd go back to the comments I made in my script. If you put Q2 and Q3 together, our sales were up double-digits and our volume was up mid-single-digits. And as I said, I'm not going to call out the exact sell-through of Valspar Paints at retail. But I would say that we're satisfied with the sell-through as well. Mehul M. Dalia - Robert W. Baird & Co. Incorporated, Research Division: Great. Just a related question, apart from new products, are you guys maintaining share at your largest customer? Gary E. Hendrickson: Yes, absolutely.

And our next question will come from P.J. Juvekar with Citi. P. J. Juvekar - Citigroup Inc, Research Division: A couple of questions. First, on raw materials, some prices in epoxies and other resins seemed to be going up. So can you comment on that? And then the question on TiO2, do you see any chance of a price increase in this calendar year? Gary E. Hendrickson: It's Gary, P.J. So our raw material basket in the quarter was relatively flat, I will say that we have seen in our China business some early signs of modest inflation. But with respect to answering questions about specific commodities, we got out of that business a long time ago when we got tired of answering the TiO2 questions. So I can't help you. The bottom line is I can't help you on individual commodities. P. J. Juvekar - Citigroup Inc, Research Division: Okay. And let me ask you on pricing. In the U.S., how much were prices are up in Paints year-over-year? And as you sell more volumes through Ace, how will it impact your price mix in the U.S.? Gary E. Hendrickson: Okay. Well, in terms of pricing, I think pricing in the channels that we serve has been pretty steady. I think there had been price increases in the stores channel, which we all participate in. But so that's the answer to your first question. The answer to your second question is as we continue to be successful with Reserve and the branded paint initiatives at Lowe's, we expect our mix will shift in a positive direction. And we actually see that in our results. P. J. Juvekar - Citigroup Inc, Research Division: I mean, my question was is Ace pricing point lower than Lowe's pricing point? Gary E. Hendrickson: No, they're always going to be higher.

And our next question will come from David Begleiter with Deutsche Bank. David L. Begleiter - Deutsche Bank AG, Research Division: Gary, could you just discuss China Coatings, how those markets are progressing, off-road, Wood, et cetera? Gary E. Hendrickson: Yes, David, we've had a very good year in China. Our overall business is up in the mid-teens. It was in the quarter and it has been for the full year. And all of our businesses in China have contributed more or less at the same level. So just as a reminder of the businesses that are significant to us in China, it's our consumer business, it's the Wood coatings business, it's our Packaging coatings business and the 2 industrial businesses that we call out in terms of product lines, are Coil and General Industrial. All of the businesses in China this year have had a positive year. So one, just 1 thing to think about, last year was a relatively weak year for us in China. It's was one of the contributors to the results that we had last year, which didn't meet our expectations. Our businesses have come back this year. The markets have recovered, I would say, modestly. But we've done a very good job in executing and taking share. We're a small player in every market that we participate in, in China. And we've done a nice job of taking share. David L. Begleiter - Deutsche Bank AG, Research Division: Very good. And just in the U.S., Gary, how would you characterize this U.S. paint season: normal, above normal, below normal? What would you say? Gary E. Hendrickson: I'd say it's near normal. With the internal research that we -- just in terms of our sell-through, as I've said, we've been pleased with the sell-through of Valspar Paints at retail. That's 1 indicator. And then our research, our internal research says that people, consumers in the U.S. are thinking about painting projects in more or less the way they have historically in terms of when they're going to do it and why they do it, et cetera, so normal is what I -- is the short answer.

Your next question will come from Dmitry Silversteyn with Longbow Research. Dmitry Silversteyn - Longbow Research LLC: The question I have is regarding the Ace business. When you acquired the business, it was sort of a breakeven-type of an operation. And then just thinking was that by the end of this year, it's going to get to the high single-digits as you close a couple of plants. Sort of where you versus your expectations? Gary E. Hendrickson: We're more or less in line with what we expected. You're talking about the private-label piece, Dmitry? Dmitry Silversteyn - Longbow Research LLC: Correct, the private label. Gary E. Hendrickson: There are 2 parts. There's a branded piece, which is incremental business for us. And then there's a private-label piece, which we acquired and we lost money on for last year and in the first part of this year. But that's a business that we have a contract on a cost-plus basis and we had to close a couple of factories in North America to get to the terminal cost structure that we committed to. We closed those factories, and now we're operating it as it should. Dmitry Silversteyn - Longbow Research LLC: Okay. So I know you don't like to talk about 2015 expectations yet. But as we play with our models and as you look into 2015, that roughly $100 million business is going bring in margin this time around. Gary E. Hendrickson: Yes, but not a ton, right, cost plus. Dmitry Silversteyn - Longbow Research LLC: Second question is your debt continues to climb. And I know typically, as with your inventories, you build them during the winter months, and then you sort of liquidate them into the summer months, this year being different because of the new programs you're rolling out. Can you talk a little bit about what your debt strategy is and sort of where you're comfortable with the debt level? Are there plans to take the debt down materially? Or should we think about it basically staying at these levels, and then you utilizing your free cash for share repurchase and acquisitions? James L. Muehlbauer: Yes, Dmitry, it's Jim. Our priority is obviously from a cash flow standpoint is to take the cash that we're generating from operations that we continue to expect to increase as we grow the initiatives both in the Paints and Coatings segments and deploy that first against good capital ideas against our portfolio, whether it's adding new production or improving productivity. Certainly, from that standpoint, as we've done the last couple years, using cash flow to make acquisitions that make strategic sense for the company. We're not in the business to hoard cash for our shareholders. We've got a nice balanced portfolio of enhancing returns through share repurchases as well. So really I look at the leverage we have on the businesses as appropriate and modest. We've got capacity to do more from a leverage standpoint if an M&A opportunity comes along that makes sense to us. We also have the opportunity to issue a little bit more debt to continue to fund the business and continue to fund share repurchases going forward. So we're really looking at it from a debt strategy standpoint. We've got plenty of capacity to do the things that we need to do to grow the business organically. And we're in position if we need to increase leverage a little bit for an M&A opportunity overall. Dmitry Silversteyn - Longbow Research LLC: Okay. And then just final question, I want to make sure I have my math right in sort of putting together some of the things you've talked about. The incremental SG&A expense of $40 million quarter-over-quarter, you talked about half of that or maybe about $20 million being the advertising and marketing expense, mostly tied to the Paints business, I would assume. Without that incremental expense, would it be fair to say that your Paints operating profits would have been up about $10 million? James L. Muehlbauer: Yes. I mean, we could have driven higher operating income if we weren't making those investments for the business. What I want to call out specifically, Dmitry, is that you can't look at -- well, our intent isn't to say that 100% of those incremental expenses are one-time in nature and are not going to recur next year. A portion of those expenses that I called out in my prepared remarks are ongoing support costs for the business. And we'll absolutely have opportunities to continue to support the growth in those businesses next year. But to the point that Gary made, we expect to grow volumes in the Paints segment next year and we expect to get better operating margins by leveraging those investments as we have a full year behind us in those initiatives and as we continue to see growth in both the big box and in the hardware channel in the U.S.

And our next question will come from Don Carson with Susquehanna Financial. Donald Carson - Susquehanna Financial Group, LLLP, Research Division: Yes. Just a follow-up on the SG&A, so as we look at the balance of this year, again you're up $40 million year-over-year. Does the variable IC -- of $8 million kind of -- does that become flat year-over-year? And with the promotional expense of around $20 million, would that kind of fall in half on a year-over-year basis in the fiscal fourth quarter? James L. Muehlbauer: Yes. So I'm not going to talk about specific components of what's going to drive SG&A. But from a macro standpoint, similar to what I've been saying earlier, our expense growth in Q4 is expected to be less than what we've experienced during the last 2 quarters. We are going to have a little less pressure on variable bonuses, given the activity and turnback we had to do last year based on the performance of the business. But that will be contingent upon where we finish the year. Certainly, our incentive bonuses will be set based on our final year-end performance, and we'll do any true-ups we need to do in the fourth quarter. Coming out of the key element of paint season, just our year-over-year increases in spending in that segment are expected to come down in the fourth quarter from what we experienced in Q3 and Q2. Donald Carson - Susquehanna Financial Group, LLLP, Research Division: Okay. And then you mentioned that you thought your sales or volumes were up mid-single-digits, which you thought was in line with the market. What's your overall expectation of the market this year versus last, given the slowdown that we're seeing in some key housing metrics, like home turnover and new residential construction? James L. Muehlbauer: Yes. I mean, we have a pretty, I think, balanced view of the full year from a housing standpoint when we started. We certainly saw that there'd be continued tailwinds around the recovery of the market. But we did not set an overly optimistic view of where housing was going to go. Quite candidly, our focus this year has been on launching new products and executing in the home improvement channel, which we believe has been very successful, and expanding some very significant and important new distribution in the hardware channel. So while the underlying housing trends may have softened a little bit, our view for the year started off, I think, as kind of down in the middle of the fairway. And secondly, we've been executing really hard on some new growth initiatives. So our results are probably more akin to that this year versus the market than any specific changes in the market.

And our next question comes from Kevin Hocevar with Northcoast Research. Kevin Hocevar - Northcoast Research: I was wondering, it sounds like in Australia, your volumes, I think you called out about high single or double-digit-type volume growth in Australia. So wondering, how does that compare to the market over there? Do you continue to gain share? And also how is your margin profile going over there? I know there's been a lot of restructuring over the past couple years. So are you starting to see now that you're getting that volume, a nice pickup in margin as well? Gary E. Hendrickson: Yes. Kevin, it's Gary. So yes, it was a great quarter for that business. And it did translate into improved earnings. That's a leverage, to some extent, a leverage play now. We've done our restructuring. We've got the cost structure that we want. And incremental volume is very profitable volume for us. So that's the second question that you asked. The first question is we took share again this quarter in both trade and at retail. And that is fundamentally the reason that we got the nice growth that we did. Kevin Hocevar - Northcoast Research: And you called out at least all the major product lines within the General Industrial were improving. I was wondering if shipping container, if -- I know that's been beaten down for a while, if you're starting to see that turn as well. And if this agreement that you had with Maersk, I know you announced a couple quarters ago, if you're starting to see some new business opportunities as a result of that as well. Gary E. Hendrickson: So we saw what I would call a very modest increase in shipping container construction in the quarter for our legacy business. It didn't move the dial in terms of our overall results, but it was positive. And then the Maersk partnership has been very good. We're selling our product to Maersk. We're making containers and that's a significant change in the industry. Obviously, it's new sales for us, but it's also -- they're also a reference customer for that industry. And for Maersk to convert from a solid-based coating to a water-based coating bodes well for the sustainability of that industry and it bodes well for us as a first mover. So no great improvement in the market yet, but our business is doing just fine.

And the next question comes from Vincent Andrews with Morgan Stanley. Vincent Andrews - Morgan Stanley, Research Division: We're seeing some channel checks about your efforts at being cute that suggested you might actually be gaining more shelf space in some of the stores than you had initially targeted. Can you comment on that at all? Gary E. Hendrickson: I don't know, Vincent. I'm not trying to be evasive. I'm not exactly sure what you're talking about. Our program, as it's set, has been pretty consistent with the planograms that we established right in the beginning of the program. So I'm not sure exactly what you're talking about. I will say this, sell-through of Valspar has been really good. We're very pleased with it. And I think our retail partner is very pleased with it. The best is yet to come with B&Q. We've got 250 stores, roughly 250 stores set with about 100 left to go. The 100 remaining are the ones that really drive the volume in the business. They're the large format stores, B&Q has 3 formats. So we're just now in the process of setting the large format stores. And that'll take place over the next few months. So yes, it's gone a little bit slower than we expected just in terms of the overall program, where there's more complexity in the big format stores than we anticipated. But sell-through of Valspar and consumer acceptance and desire to buy Valspar Paint has been very strong. James L. Muehlbauer: Yes. And we're looking forward to the day when we can turn advertising on effectively in the marketplace. And to your point, Vincent, our presence in the stores is strong and noticeable for customers. It's not a value proposition that's tucked away in the department. It is something that stands out as new and big in the portfolio, so we're quite excited to see how it develops. Vincent Andrews - Morgan Stanley, Research Division: Just to be clear, maybe I wasn't clear. The feedback we were getting was that it was going very well and was doing better than expected, and the retailer was quite pleased with it obviously. The rest of my questions have been answered, so I'll pass along.

And the next question comes from Rosemarie Morbelli with Gabelli & Company. Rosemarie J. Morbelli - G. Research, Inc.: Most of my questions have been answered. But I was wondering if you could give us a feel for the success of Valspar Reserve. We are now at the end of the season. Did you sell or did Lowe's sell as much as you anticipated? Gary E. Hendrickson: It exceeded our expectations. I won't comment on Lowe's. But it definitely exceeded Valspar's expectations. The penetration into our overall mix has been higher than we planned. Consumer acceptance has been phenomenal. The basic thing that we set out to do was to provide consumers with an exceptional paint, better than the product that we had at the top end, more features and attributes. We thought we could convince the Lowe's associates in store that consumers would pay up for that price point. And all of that has proven to be true. So we couldn't be more pleased with both the execution of the launch and consumer acceptance of the product. Rosemarie J. Morbelli - G. Research, Inc.: Well, that is great. And, Gary, looking at Europe, other companies have said that while certain areas were growing, like automotive, construction was still in the doldrums and, in some cases, still declining. Could you give us a better feel as to where you are doing so much better in Europe besides Packaging? Gary E. Hendrickson: All of our businesses' product lines in the quarter and the year, Rosemarie, have performed better than last year. So Packaging has performed particularly well. But our General Industrial business is doing well. I mean, big news there this year was Inver and the integration of our legacy business into Inver. That's been substantially completed and has been a success for us. Our Coil business has improved pretty substantially in the year. And we've improved distribution in other parts of our Europe, Middle East and Africa region, particularly the Middle East, where our business in the Middle East has been stronger this year. So it's been a very positive year for our team in Europe. Rosemarie J. Morbelli - G. Research, Inc.: Gary, any particular end markets that are doing better than others? I mean, so the Coil, for example, where is it going? Gary E. Hendrickson: Let's just call it pan-Europe. Rosemarie J. Morbelli - G. Research, Inc.: All right. Well, I meant end product, refrigerators versus something else that I cannot think of. Gary E. Hendrickson: No. I mean, I can't give you that. I'd hate to speculate on that, Rosemarie. Our Coil business is mainly building products. So that would be the end market. But for us it's been about taking market share as much as it is about the overall market. In General Industrial, we're still a small player even after the Inver integration. We're certainly not 10% of the overall market. We're probably closer to 5% in industrial coatings. So we've got lots of opportunities to grow even if the market is not growing. That's the way we look at our business in Europe. We look at our business that way in Latin America. And we look at our business that way in Asia.

And our next question will come from Nils Wallin with CLSA. Nils-Bertil Wallin - CLSA Limited, Research Division: Strong results in Australia notwithstanding one of your partners there, Masters, seems to be having some difficulty with its store growth and revenue growth. Would you help us understand how the split is between your strong growth, I guess, in Wattyl as well as Masters versus what we're seeing in terms of on the Masters' side not really growing at all? Gary E. Hendrickson: Yes. I'm not going to comment on Masters. That would be a question that you'd have to ask them. They have 50 stores. They expect to build 10 to 15 stores over the next few years. All of those stores will require paint. I think the paint department within Masters is performing pretty well. And Masters is still a relatively small portion of our overall portfolio in our Australia business. If you recall, Nils, about 2/3 of our businesses is trade business, about 1/3 is retail. And we have distribution that is not Masters distribution. So 50 stores, 10 to 15 a year, that gets them close to 100 stores in a few years. And that's nice business. Nils-Bertil Wallin - CLSA Limited, Research Division: No, that's helpful. I know you said that your non-BPA offering was pretty small. But as it gets bigger and there's more interest in it in Europe, in the U.S. and perhaps at some point in Asia, is there going to be a meaningful mix uplift from that offering just on pricing or margin? Gary E. Hendrickson: We're not going to commit to that. Our job is to grow our business and we're going to -- we have a very significant opportunity to grow our business in Europe, in Latin America and in Asia, where our share, percentage of market, is much lower than it is in North America. And so we're focused on growth, and it is a profitable segment for us. So if we get market-average margins and we're growing, then our investors will be satisfied with that outcome. Nils-Bertil Wallin - CLSA Limited, Research Division: Got it, understood. And then just finally, I know you said that in Coatings, pretty much all lines had saw growth, didn't call out anything on the off-road or machinery, which had been an issue in the past. Has that corrected itself fully? And are we going to start seeing positive comps anytime soon? Gary E. Hendrickson: Yes, I think we're just trying to get away from, to the extent that we can, talking about the subsegments within GI. So the way our Coatings segment is organized, it's Packaging coatings, Coil coatings, General Industrial coatings and Wood coatings. And when we disappointed ourselves last year, we were pretty specific as to the product lines within our portfolio that hurt us. We like to try not to continue referencing back to those product lines all the time and would rather talk about the main product line within the segment, which would be General Industrial. So I'll say this, within the General Industrial product line in our Coatings segment, every one of those end markets improved at least modestly in the quarter. So I'll answer your specific question, and hopefully this will be the last time I answer it on a call. We took a lot of market share in China. And that's been part of the improvement. And I would say that the overall growth of that segment, you'd be better served reading the earnings transcripts from Caterpillar and Deere, who are the market leaders in that segment. They would be able to tell you with more precision than we can how the overall market is performing.

And our next question comes from Steve Schwartz with First Analysis. Steven Schwartz - First Analysis Securities Corporation, Research Division: Gary, in your prepared remarks, when you talked about the EBIT margin for Paint and you compared second quarter and third quarter, you noted that you shipped more of the Reserve in the second quarter. And you'd expect that, that would help overhead absorption. But I'm not quite sure how that reduces or negatively impacts margin in the third quarter unless there's some cannibalization. Am I reading that wrong or hearing it wrong? James L. Muehlbauer: Yes, 2 things in that, Steve. First off, I think in Gary's remarks, he was referring to volume and sales and not EBIT between the quarters. But to maybe just rewind a little bit, the volume growth we had in the U.S. in the second quarter was comprised of certainly kind of our base recurring businesses but also supporting the launch of Valspar Reserve and the Ace branded sets for Valspar Paints. So as we moved into Q3, we increased spending along both initiative lines. But part of the volume that was actually sold in Q3 by our retail customers, we had actually sold into the channel during Q2 before the start of the season. So what we were trying to provide transparency in explaining is you really need to put the 2 quarters together to look at the performance of the Paints segment. The traction that we're seeing with Valspar Reserve per Gary's comments and what we're seeing in overall offtake is in line with what we expected for the total season so far. Our EBIT, being flat in Paints year-to-date, is a product of the top line growth we're driving to those new business initiatives plus expenses we need to do to support the business in the near term that we know we can leverage more fully going forward.

And our last question will come from Bob Koort with Goldman Sachs. Neal P. Sangani - Goldman Sachs Group Inc., Research Division: This is actually Neal Sangani with the follow-up. It sounds like the B&Q rollout is going very well. Have you figured out or how are you looking at your long-term supply plan for the region? Gary E. Hendrickson: We're going to supply from Europe, Neal. It's just a question of getting the right structure in place. And we're talking with multiple parties that are interested in partnering with us, and we've -- our team knows that next year, we expect -- I expect that we're going to be supplying B&Q from Europe. And our team will make that happen.

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