1. business and industrial
2. company
3. merger and acquisition

Corrected Transcript
28-Apr-2015
Masco Corp.
(MAS)
Q1 2015 Earnings Call
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Masco Corp.
Corrected Transcript
(MAS)
Q1 2015 Earnings Call
28-Apr-2015
CORPORATE PARTICIPANTS
Irene Tasi
John G. Sznewajs
Director-Investor Relations
Chief Financial Officer, Treasurer & VP
Keith J. Allman
President, Chief Executive Officer & Director
................................................................................................................................................................................................................................
OTHER PARTICIPANTS
Stephen F. East
Dennis P. McGill
Tim R. Wojs
Michael Jason Rehaut
Michael G. Dahl
George L. Staphos
Matt A. Bouley
Susan Marie Maklari
Eric Bosshard
Nishu Sood
Mike Wood
Will Randow
Macquarie Capital (USA), Inc.
Citigroup Global Markets, Inc. (Broker)
Philip Ng
Keith Hughes
Jefferies LLC
SunTrust Robinson Humphrey
Evercore ISI
Zelman & Associates
Robert W. Baird & Co., Inc. (Broker)
Credit Suisse Securities (USA) LLC (Broker)
RBC Capital Markets LLC
Cleveland Research Co. LLC
JPMorgan Securities LLC
Bank of America Merrill Lynch
UBS Securities LLC
Deutsche Bank Securities, Inc.
Alex J. Rygiel
FBR Capital Markets & Co.
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(MAS)
Q1 2015 Earnings Call
28-Apr-2015
MANAGEMENT DISCUSSION SECTION
Operator: Good morning, ladies and gentlemen. Welcome to Masco Corporation's F irst Quarter 2015 Results
Conference Call. My name is [ph] Laurel, and I will be y our operator for today's call. As a reminder, today's
conference call is being recorded for replay purposes. [Operator Instructions]
I'll now turn the call ov er to the Director of Investor Relations, Irene Tasi. Irene, you may begin.
................................................................................................................................................................................................................................
Irene Tasi
Director-Investor Relations
Thank y ou, Laurel, and good morning to everyone. Welcome to Masco Corporation's first quarter 2015 earnings
conference call. Joining me today are Keith Allman, President and CEO of Masco; and John Sznewajs, Masco's
V ice President, Treasurer and Chief Financial Officer.
Our first quarter release and the presentation slides that we will refer to during the call are av ailable on the
Inv estor Relations portion of our website. Following our prepared remarks, the call will be open for analysts'
questions. As a reminder, we would appreciate it if y ou could limit y ourself to one question with one follow -up. If
we are unable to take y our question during the call, please feel free to contact me directly at 313 -792-5500.
I'd like to remind y ou that statements in today's presentation will include our v iews about Masco's future
performance, which constitute forward-looking statements. These statements are subject to r isks and
uncertainties that could cause our actual results to differ materially from the forward-looking statements. We'v e
described these risks and uncertainties in our Risk Factors and other disclosures in our Form 10 -K and our Form
1 0-Q that we file with the Securities and Ex change Commission.
Today 's presentation also includes non-GAAP financial measures. Any references to operating profit, earnings per
share, or cash flow on today's call will be as adjusted unless otherwise noted with a reconciliation of these adjusted
measurements to GAAP in our quarterly press release and presentation slides. These can be found in the Inv estor
Relations section of our website, www.masco.com.
With that, I will now turn the call ov er to our President and Chief Ex ecutive Officer, Keith Allman.
................................................................................................................................................................................................................................
Keith J. Allman
President, Chief Executive Officer & Director
Thank y ou, Irene. Good morning, everyone, and thank y ou for joining us today. Turning to slide four. We had a
great start to 2015, with Q1 representing our 14th consecutive quarter of y ear-over-year sales and profit growth.
All of our segments contributed to top line growth in local currency, resulting in our North American sales
increasing 5%, and our international sales increasing 1 0% in local currency. We deliv ered this growth while
ex panding our operating margin to 9%, our strongest first quarter operating margin since 2007. Our focus on
ex ecution and cost containment continues to pay off as we improved our operating profit by $24 million, while
decreasing SG&A by $6 million or 90 basis points.
As a global company, foreign exchange cost us $0.02 of EPS in the quarter. Despite this headwind, our adjusted
EPS grew 43% to $0.20 per common share. This strong performance was augmented by several value -creating
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Corrected Transcript
28-Apr-2015
initiativ es we accomplished in the quarter. We returned approximately $135 million to shareholders through our
increased dividends and the repurchase of approximately 4 million shares of stock.
We announced an acquisition of Endless Pools by Watkins, a pr emiere spa business. This acquisition allows
Watkins to ex pand its offering into the aquatic fitness category, opening new channels of distribution and access
to a new customer base. The acquisition is reflective of a ty pe of bolt -on opportunities we will continue to pursue.
Additionally, the spin-off of our Installation Services business, TopBuild, remains on track for the middle of the
y ear.
Before turning the call ov er to John, I'd like to highlight how our strategies and execution are driving results. In
our Plumbing segment, our longstanding commitment to innovation and design continues to propel our market leading brands to new lev els. Delta and Hansgrohe once again broke records in the quarter and both experienced
the highest sales quarters in their history. Behr's longstanding reputation as an industry leader in paint was
reaffirmed. J.D. Power and Associates ranked Behr number one in customer satisfaction for interior paints.
Y ou may recall that earlier this y ear, Behr was also rated number one in quality by a leading independent testing
organization for its interior and ex terior paints, as well as stains. These awards established Behr as the number
one ranked paint based on quality and customer satisfaction and only add to Behr's brand awareness an d brand
equity . Milgard windows' history of innovation continues to drive sales with Essence windows and new multi panel glass doors improving our business mix. Our Installation Services business continues to benefit from a
strategic expansion into commercial construction, as well as targeted growth with custom builders.
Finally , Joe Gross was named President of our Cabinetry Business in mid -February. He and his team are already
deliv ering on their turnaround plan with improved top and bottom line results.
With that, I'll turn the call ov er to John, who will go ov er our operational and financial performance in detail.
................................................................................................................................................................................................................................
John G. Sznewajs
Chief Financial Officer, Treasurer & VP
Thanks, Keith. And good morning, everyone. Please turn to slide six. As Irene me ntioned, most of my comments
will focus on adjusted performance ex cluding the impact of rationalization and other one -time charges. We started
201 5 with positive momentum from last y ear. As Keith mentioned, the first quarter was our 1 4th consecutive
quarter of y ear-over-year sales and profit growth. Ex cluding the impact of foreign currency, sales increased 7 %
and we ex perienced sales growth in all fiv e segments.
On a reported basis, sales grew 3%. Foreign currency translation negatively impacted our sales in the first quarter
by $7 7 million, principally due to a weaker euro compared to the U.S. dollar. Sales in North America were up 5%
for the quarter. As the U.S. economy improves we are ex periencing growing demand for our new home
construction and repair/remodeling products including big ticket repair/remodeling products. As a reminder,
repair/remodel activity accounts for approximately [ph] 7 5% (7 :20) of our total sales.
International sales increased 1 0% in local currency in the quarter, driven by the con tinued strength of our
International Plumbing business. Gross margins expanded approximately 20 basis points compared to Q1 of last
y ear to 28.2%. Our focus on cost control continues to pay off. As Keith mentioned, SG&A spend declined by $6
million in the quarter, despite a $53 million increase in rev enue. As a result, SG&A as a percent of sales decreased
90 basis points to 1 9.2%. Our cost control enhanced our operating leverage as we generated a 45% incremental
margin in the quarter.
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We deliv ered strong bottom line performance as operating income increased 1 5% in the quarter to $181 million,
with operating margins expanding 100 basis points to 9%; our highest first quarter margin since 2007. And our
EPS was $0.20, an improvement of $0.06 or 43% compared to the first quarter of last y ear. Foreign currency
negativ ely impacted operating profit in the quarter by $10 million or approximately $0.02 per share.
Turning to slide sev en, our Plumbing segment sales decreased 1% due to the unfav orable impact of foreign
currency. The strength of the U.S. dollar masked the terrific performance in Q1 across our Plumbing segment.
Ex cluding the $7 1 million impact of foreign currency translation, sales increased 8%, driv en by growth in faucets,
spas, and new program wins with trade and retail partners. As Keith mentioned earlier, both Delta and Hansgrohe
enjoy ed their best quarter for any period in their history. We ex perienced strong growth in the trade channel in
the quarter, as Delta and Brizo brands driv e consumer demand for our innovative new products, and we continue
to take share in this category.
Our European businesses continue to outperform, delivering 1 0% sales growth in local currency despite a strong
mid-single digit comp from the first quarter of last y ear. Hansg rohe's record quarter in local currency was driven
by emerging market growth, as well as the strength of Hansgrohe's brand, design and innovation, all of which
were on display at the recent ISH trade show in Frankfurt. Operating profit decreased 7 %, driven primarily by
unfav orable currency of $1 0 million and negative mix of $5 million as we further penetrate the emerging
markets.As we mentioned on our Q4 earnings call, sales marketing and trade show expenses due primarily
through our participation in the biennial trade show in Frankfurt impacted results by approximately $8 million.
This was partially offset by fav orable price commodity relationships, nearly all of which was incurred in our
European businesses and increased v olumes. We look at these costs in Q1 as inv estments for future growth and we
believ e this y ear Plumbing segment margins will approximate the 15% to 1 6% that we ex perienced in 2014.
Turning to slide eight, in the Decorative Architectural segment, first quarter sales increased 2%, driv en by the
performance of our new BEHR MARQUEE Interior product and growth in our BEHRPro business. As Keith
mentioned, we are pleased that Behr was ranked number one in the J.D. Power's 201 5 Paint Satisfaction Study in
the interior paint category. This recognition, together with being ranked number one in interior paint, exterior
paint, and ex terior stains by a leading independent consumer testing organization establishes Behr as a quality
leader in the architectural coatings industry.
Liberty Hardware contributed to the top and bottom line growth through the continued share gains from
successful new product introductions and program wins in the retail channel. Operating profit increased 9% in the
first quarter due to increased v olumes, effective cost management, and the deferral of approximately $2 million in
adv ertising and promotional expenses related to the coatings business from the first quarter to later this y ear. All
of this was partially offset by some incremental expense at Liberty.
As we mentioned in our Q4 call, we ex pect to incur approximately $20 million of incremental investments in
201 5, related to program wins at Liberty Hardware, and the inv estment in Behr's new Color Solution Centers in
The Home Depot. These New Color Solution Centers should be in all stores by Memorial Day , in time for the
kickoff of the painting season.
Segment sales were impacted by $3 million of these expenses in Q1 , slightly lower than the $5 million we initially
ex pected as a result of timing of some of these initiatives. We still ex pect to incur approximately $20 million of
incremental inv estment related to these programs and initiatives in 2015 with Q2 impacted by approximately $8
million, Q3 by $6 million, and Q4 by $3 million in addition to the $3 million we ex perienced in Q1 .
Turning to slide nine, our Cabinet segment sales increased 5% in the quarter due to improved performance of the
KraftMaid brand in the home centers and with dealers. The bottom line improved $7 million over the prior y ear
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Q1 2015 Earnings Call
28-Apr-2015
driv en primarily by improved mix as our higher price point KraftMaid ex perienced strong growth, the reduction of
prior y ear's incremental spend and the benefits associated with other cost savings initiatives.
Turning to Installation on slide 1 0, our sales increased 7 % in the qua rter as a result of improved end-market
activ ity with the strongest growth coming from residential new home construction and commercial channels. The
growth in the residential new home construction was driven by strong single -family performance with both
production and custom builders.
In addition, TopBuild was recently awarded ENERGY STAR Partner of the Y ear by the EPA for the 1 1 th time for
its home energy rating service. This reflects TopBuild's commitment to improve the energy efficiency of homes in
the U.S., and a recognition of TopBuild ex pertise in building science.
Our efforts to driv e productivity and increase v olume helped offset raw material price increases and wage inflation
as operating profit increased $12 million and delivered 2.2% operating margins. We are pleased that Q1 is this
segment's first profitable first quarter since 2007. And as Keith mentioned, we are happy to report that we're on
track to ex ecute the spin-off in the middle of the y ear.
Turning to slide 1 1 , our Other Specialty Product segment sales increased 7 %, driven by a low double-digit sales
growth in our North American window business. This growth was driven by v olume increases and the continued
benefit of a fav orable mix shift toward our premium window and door product lines. Ex cluding the impact of a
negativ e impact of a stronger U.S. dollar, our European window sales increased 5%. The segment's operating
profit growth in the quarter can be attributed to increased v olumes and a fav orable price/commodity relationship,
which was partially offset by approximately $2 million of cost related to ERP inv estment in Milgard and the
timing of adv ertising and display expense.
And turning to slide 1 2, we ended the quarter with about $1.8 billion of liquidity. As a reminder, this number
reflects the $500 million 1 0-year bond we issued in March to pre -fund our upcoming June 1 5 $500 million
maturity. The issuance carrying cost is approximately $5 million, nearly all of which will impact the second
quarter. And we continue to have strong per formance in working capital. Working capital as a percent of sales
came in at 1 2.7 %, a 60 -basis point improvement from the first quarter of last y ear.
And finally , turning to slide 1 3, we continue to take initiatives to unlock shareholder v alue. One of these initiatives
was to increase our share repurchase activity. As Keith mentioned earlier, during the first quarter, we repurchased
more than 4 million shares or approximately 1 .2% of our common stock. It is our expectation and we will allocate
in total between $400 million and $500 million to share repurchases in 2015. and we are well -positioned to retire
between $300 million and $500 million of debt in 2016.
That concludes my remarks, so with that, I'll turn the call back over to Keith.
................................................................................................................................................................................................................................
Keith J. Allman
President, Chief Executive Officer & Director
Thank y ou, John. We're really pleased with our strong start to the y ear and our continued ability to ex ecute
against a backdrop of strengthening demand for our industry -leading products and services. We started the y ear
well, we hav e good momentum as we mov e further into 2015, and we remain confident in our outlook for the y ear.
We look forward to sharing more of the Masco story and our growth plans with you next week at our Investor Day.
So with that, I'd like to turn the call back ov er to Laurel for Q&A.
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Corrected Transcript
(MAS)
Q1 2015 Earnings Call
28-Apr-2015
QUESTION AND ANSWER SECTION
Operator: Thank y ou. Ladies and gentlemen, in order to ensure that everyone has a chance to participate, we
would like to request that y ou limit yourself to asking one question and one follow-up question during the Q&A
session. [Operator Instructions]
Y our first question comes from the line of Stephen East with Ev ercore ISI. Your line is open.
................................................................................................................................................................................................................................
Stephen F. East
Q
Evercore ISI
Thank y ou, thank y ou. Good morning, guys. Thanks for the detail on Plumbing in Europe. I guess if y ou could talk
a little bit more about what you all are doing with the emerging markets in Europe, just trying to understand
where y ou're going with the business and what percentage of Europe is Plumbi ng for y ou all?
................................................................................................................................................................................................................................
Keith J. Allman
A
President, Chief Executive Officer & Director
We hav e a, as y ou know, Stephen, a v ery strong global brand in Hansgrohe, and our plan for that brand is to
continue to invest in it. And we hav e a substantial amount of ups ide as we look across the emerging markets both
in Europe and outside of Europe. So, in general, our ex pectation is to continue to invest behind that. We see good
returns on that. The business has good margins, and we feel really good about emerging market s.
Y ou mentioned Europe, in particular. Of course, we continue to have challenges like everyone does in the Ukraine
and in Russia, but we're committed to the European market and we like the results that we're seeing. And we'll
hav e more detailed information at the Inv estor Day as we outline more specific growth plans and milestones.
................................................................................................................................................................................................................................
John G. Sznewajs
A
Chief Financial Officer, Treasurer & VP
Stephen, may be just to giv e y ou a little bit of color. International sales represent approximately 40% of the
segment sales.
................................................................................................................................................................................................................................
Stephen F. East
Q
Evercore ISI
Okay . Okay . And within – embedded within that, I know y ou gave us the top line FX impact. The op margin
impact would y ou mind giv ing? And then my second question revolved around Behr. It was a fairly ea sy comp. So,
I'm wondering did the Lowe's paint rollout sort of disrupt the market, what do y ou think is going on there? And
then are y ou starting to see any raw material tailwind from oil costs coming down and the derivative products off
that?
................................................................................................................................................................................................................................
John G. Sznewajs
Chief Financial Officer, Treasurer & VP
A
So, Stephen just to answer y our first question, the operating profit impact of foreign currency was approximately
$1 0 million in the Plumbing segment in the quarter.
................................................................................................................................................................................................................................
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Corrected Transcript
(MAS)
Q1 2015 Earnings Call
28-Apr-2015
Stephen F. East
Q
Evercore ISI
Okay .
................................................................................................................................................................................................................................
John G. Sznewajs
A
Chief Financial Officer, Treasurer & VP
Coincidentally that happens also to be the impact for the company in total.
................................................................................................................................................................................................................................
Stephen F. East
Q
Evercore ISI
Okay . Thanks.
................................................................................................................................................................................................................................
John G. Sznewajs
A
Chief Financial Officer, Treasurer & VP
As it relates to Paint, Keith do y ou want...
................................................................................................................................................................................................................................
Keith J. Allman
A
President, Chief Executive Officer & Director
Y eah, on the Paint side, as we mentioned in our remarks, we have good strong momentum rolling with a lot of our
awards rolling our way. And we're inve sting behind that. We hav e a new Color Center that we're launching and
that will be rolled out in the end of March. We really feel good about that. We hav e an adv ertising campaign that's
coming in consistent with that.
And we'v e also got new products that we're rolling out where we'v e rebranded KILZ PRO-X to BEHRPro and I
think that's going to be v ery productive for us. We're rolling out Tex tured DECKOV ER. When y ou put that all
together we feel confident in where Paint's going.
................................................................................................................................................................................................................................
Operator: Y our next question comes from the line of Tim Wojs with Baird. Y our line is open.
................................................................................................................................................................................................................................
Tim R. Wojs
Robert W. Baird & Co., Inc. (Broker)
Q
Hey , good morning everybody. Nice job.
................................................................................................................................................................................................................................
Keith J. Allman
President, Chief Executive Officer & Director
A
Thanks, Tim.<Q – [06QHTD-E]Tim Wojs – Robert W. Baird & Co., Inc. (Broker)>: I guess I just had a couple of
questions on the EBIT. I was wondering if y ou could – I think in the past, y ou've given us an EBIT bridge y earov er-year. I'm just wondering if may be I missed that, but if y ou could kind of go through what the price
commodity was productivity, those types of things?
................................................................................................................................................................................................................................
John G. Sznewajs
Chief Financial Officer, Treasurer & VP
A
Y eah, Tim, we're not giv ing out that information any longer. So – but suffice to say , if y ou think about the v olumes
– we had pretty good v olume growth in the quarter, obviously offset by a fair amount of currency headwinds and a
little bit of pricing in there as well. So, I think I'v e got – I thought some of the segment detail that I provided was
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probably more useful than giving it in the company overall. So, take a look at the transcript and then if y ou have
more questions we can perhaps circle back after the call.
................................................................................................................................................................................................................................
Tim R. Wojs
Robert W. Baird & Co., Inc. (Broker)
Q
Okay . No, I just wanted to make sure I didn't miss it. And then I guess, just as y ou guy s stand right now, I know
it's early , but any change to how y ou're thinking about the full y ear with on e quarter under your belt? And then
just a housekeeping question. How should we think of the FX headwind to revenue for the full y ear?
................................................................................................................................................................................................................................
Keith J. Allman
A
President, Chief Executive Officer & Director
No change in our outlook for the y ear. We're ex cited about it and we continue to be positive about how we see
201 5 shaping up. When y ou look at the fundamentals and the indicators from a macroeconomic standpoint,
they 're shaping up well. Consumer confidence is good. Household formation seemed to hav e spiked. Ex isting
home sales are well-positioned and credit's easing up.
So, from a macro perspective, we continue to be v ery positive. When y ou look specifically at the demand drivers,
in terms of new construction, we talked last call about how we felt that Blue Chip was may be a little aggressive at
$1 .150 million they've since come down. We think they 're still a little bit high. We're looking at about $1.1 million
is how we're thinking out at it in terms of starts, so that's a good healthy 10% growth for us. And we're seeing
indications of that growth importantly in the markets. Carolina's v ery robust. Florida is robust. Dallas is doing
well. So this is fairly ty pical of what we see where pockets start to have that kind of heat, so on the new
construction side, we feel good about it.
On the R&R demand driv ers, when y ou look at, in addition to the macroeconomic indicators, y ou look at how our
businesses that are more skewed to R&R are performing, y ou see good signs. Plumbing is a strong R&R business
for us and that's doing v ery well. Milgard windows is principally an R&R play and that's doing ex tremely well. And
in Cabinets, we're seeing KraftMaid, which is in the high end, more or less, in that space doing well and starting to
grow which is indicative of a mov e towards that bigger ticket.
Our channel partners as they announced a month or so ago had v ery strong comps. So from a macroeconomic
standpoint, a new construction demand driver, an R&R demand driv er, we feel v ery good about the y ear and
continue to be positive. And I think importantly, we hav e the supply chain in our company set up to handle it
without a significant capital ex pense and the inefficiencies that can sometimes come with that. So, we're positive
for the y ear.
................................................................................................................................................................................................................................
John G. Sznewajs
Chief Financial Officer, Treasurer & VP
A
Tim as it relates to y our housekeeping question on FX. FX will continue to be a headwind, particularly for the
second and third quarters because of the way that currency developed last y ear. If y ou think about in the fourth
quarter, we had about a $32 million headwind in currency in the fourth quarter of last y ear, so the comp will ease
as we get into the back-half of the y ear, particularly the fourth quarter. So if y ou take a look at where currency
rates are today v ersus where they were over the last y ear, order of magnitude of $300 million, so headwind facing
us from currency this y ear.
................................................................................................................................................................................................................................
Tim R. Wojs
Robert W. Baird & Co., Inc. (Broker)
Q
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Q1 2015 Earnings Call
Corrected Transcript
28-Apr-2015
Great. Appreciate the color, thank y ou.
................................................................................................................................................................................................................................
Operator: Y our next question comes from the line of Mike Dahl with Credit Suisse. Please go ahead.
................................................................................................................................................................................................................................
Michael G. Dahl
Credit Suisse Securities (USA) LLC (Broker)
Q
Hi, thank y ou. I wanted to go back to the Plumbing discussion and actually focus on the margins. I think y ou had
said y ou ex pect full y ear margins in the 1 5% to 1 6% range, clearly a lot of the headwinds in the first quarter. But
also seems to imply that any benefits that y ou're getting on the commodity side are likely to be offset by maybe
currency and some of the spend in the near term. Just won dering how y ou'd think about that and going forward is
this – I think y ou'v e talked about margins that could be a little bit higher in a normal env ironment than this, so is
there any change there or is this just more of a temporary issue?
................................................................................................................................................................................................................................
Keith J. Allman
A
President, Chief Executive Officer & Director
Mike, there is no change to our mid- to long term expectations for margin in the segment, mid -teens. And
specifically in the quarter, we incurred about $8 million of ex pense related to advertising, marketin g and trade
show ex pense which happens every other y ear at ISH. We believ e this is really good spend for us to make, this is a
productive segment for us. We hav e strong brands with good growth potential. So, this is a good place to put our
inv estment.
And for those of y ou that were at the ISH show in Frankfurt, y ou were able to see the power of the Hansgrohe
brand. I don't think it's say ing too much to say that we were most definitely the best position in the entire fair. And
that's a fair that happens European-wide every other y ear. So, we feel really good about the investment in it and
we really don't see a change to our margin expectations in this space.
................................................................................................................................................................................................................................
Michael G. Dahl
Credit Suisse Securities (USA) LLC (Broker)
Q
Okay , great. And then shifting gears to the Cabinet side, just with the leadership change or the new leadership
coming in, can y ou talk about just what some of the specific initiatives that [ph] Bill's (26:02) been tasked with are
– as far as kind of day one, first few months and then longer term, what's he y ou really coming in to do differently
than y ou guy s had been doing?
................................................................................................................................................................................................................................
Keith J. Allman
A
President, Chief Executive Officer & Director
Joe Gross is the right leader for this business at this time. We brought him in because of his ex perien ce. And he is
steeped in turnarounds. He's spent a good portion of his career in priv ate equity working for Cerberus and he's
run and turned around and helped us in significant businesses here in our portfolio.
In terms of the specific initiatives and his plan of attack and what we're doing with this business, we'v e talked
about our objective is to driv e this business to profitability in 2015 and we're going to do that. And in terms of
specifics, we'll talk about that next week and y ou'll get a chance to m eet Joe.
................................................................................................................................................................................................................................
Michael G. Dahl
Credit Suisse Securities (USA) LLC (Broker)
Q
Okay . Thank y ou.
................................................................................................................................................................................................................................
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Q1 2015 Earnings Call
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Operator: Y our next question comes from the line of Robert Wetenhall with RBC Capital Markets. Y our line is
open.
................................................................................................................................................................................................................................
Matt A. Bouley
Q
RBC Capital Markets LLC
Hi. This is actually Matt Bouley on for Bob. Thank y ou for taking my questions. So, just in Paint, on the raw
materials side, I'm wondering if y ou can update us on what y ou're seeing now in terms of the Paint feedstocks and
what y ou're ex pecting in 201 5.
................................................................................................................................................................................................................................
Keith J. Allman
President, Chief Executive Officer & Director
A
We really have seen modest deflation in Paint so far. We ex pect to see a little bit of fav orability on the Paint side
coming in in the nex t quarter. How long that's going to last remains to be seen. If y ou look at ex panding it to our
entire commodity basket, there really is a mix ed bag. We're seeing copper in our Plumbing segment come off its
lows, again how long and how high copper pricing will go remains to be seen.
We're seeing some slight inflation in hardwoods in our Cabinets side. And of course, a month or so ago, there was
an announcement of a 1 0% price increase in our Installation. We are seeing a little bit of fav orability out in
logistics – in terms of logistics costs as the price of diesel starts to come down. As we talked earlier, we really see
no significant change in our margin ex pectations particularly in our big segments around Paint and Plumbing.
................................................................................................................................................................................................................................
Matt A. Bouley
Q
RBC Capital Markets LLC
Got it. Thanks. And then back to Cabinets, just giv en the recent consolidation in the space. So, I'm wondering if
y ou could touch on maybe the competitive dynamics y ou're seeing and particularly in the dealer channel.
................................................................................................................................................................................................................................
Keith J. Allman
President, Chief Executive Officer & Director
A
We really don't see a big change in terms of the competitive environment. We'v e competed against Norcraft for
y ears, and we're going to continue to do that. We hav e strong competitors out in the space. We respect them for
sure and we're focused on our business. And Joe and the team driving the turnaround and getting our Cabinet
business back to profitability. But don't see any real fundamental changes in the competitive environment.
................................................................................................................................................................................................................................
Matt A. Bouley
Q
RBC Capital Markets LLC
Great. Thank y ou.
................................................................................................................................................................................................................................
Operator: Y our next question comes from the line of Eric Bosshard with Clev eland Research. Please go ahead.<Q
– [05QY C6-E]Eric Bosshard – Clev eland Research Co. LLC>: Thank y ou. Two questions. First of all in the Paint
segment the margin performance obviously quite good. But from a rev enue perspective it sounds like the
Hardware and the Paint both showed growth. I'm curious in how y ou think that growth compares to the market in
the first quarter and how we should ex pect that growth to behave as we mov e through the y ear?
................................................................................................................................................................................................................................
John G. Sznewajs
Chief Financial Officer, Treasurer & VP
A
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Y eah, Eric, it's John. Y eah, we, if y ou look at some of the others that have reported we're consistent with some.
The one company's a little bit higher than us but they had a load -in going in in the stores. So we think if any thing
we are holding if not picking up just a little bit of share in the marketplace today.
................................................................................................................................................................................................................................
Eric Bosshard
Q
Cleveland Research Co. LLC
Okay . And then a similar question on the Cabinets side. You know the Cabinet growth is I think a little bit better
than prior trend. As you look forward in that business and y ou can get a little bit of a forward look with
measurements in traffic in that segment, but curious what y ou're seeing and ex pecting in terms of the rev enue
growth opportunity there. And also the market share opportunity there, how that experience is playing out.
................................................................................................................................................................................................................................
Keith J. Allman
A
President, Chief Executive Officer & Director
We're seeing some good traction, particularly in our KraftMaid brand at both retail and the dea ler segment.
Market share is v ery difficult in this fragmented market to report, particularly when y ou're talking about a
quarter-over-quarter of v ariance. But we like our demand trend and we think we're winning with KraftMaid both
in retail and in dealer.
We remain challenged in the dealer segment for Merillat, as we recover from some of our ex ecution issues that we
had last y ear, frankly. We hav e our deliveries and lead times back and we're starting to win back that, the trust of
that segment. We hav e the leading brands in KraftMaid and Merillat in the R&R and the builder segment
respectively. So we're going to continue to drive that demand.
................................................................................................................................................................................................................................
Eric Bosshard
Q
Cleveland Research Co. LLC
Just within that, again the underly ing demand, I appreciate the progress on market share. The underlying Cabinet
demand, especially on the R&R side, how is that behav ing relative to your expectations and how do y ou think
about that specific category this y ear, R&R Cabinets?
................................................................................................................................................................................................................................
Keith J. Allman
A
President, Chief Executive Officer & Director
I think it's robust. I mean, when y ou look at the pent -up demand that we've seen over, lack of spend in prior y ears,
when we look at the indicators in terms of new home v alues, we look at store traffic, the fact that KraftMaid for us
has momentum and it's on a higher end of the price continuum, I think that bodes well for the overall R&R
dy namics.
................................................................................................................................................................................................................................
Eric Bosshard
Q
Cleveland Research Co. LLC
Great. Thank y ou.
................................................................................................................................................................................................................................
Operator: Y our next question comes from the line of Mike Wood with Macqua rie Capital. Your line is open.
................................................................................................................................................................................................................................
Mike Wood
Macquarie Capital (USA), Inc.
Q
Hi. Good morning and thanks for taking my question. First question in Cabinets, I'm curious if y ou can giv es us
how much ERP inefficiencies where in the Cabinet segment in the first quarter? And some of y our competitors
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28-Apr-2015
hav e gone through the portfolio and ex ited recently some unprofitable markets in Cabinets, regional builder share,
hav e y ou gone through that y our portfolio made that decision yet as to whether or not you can exit certain
underperforming businesses?
................................................................................................................................................................................................................................
John G. Sznewajs
A
Chief Financial Officer, Treasurer & VP
Y es. Hi, Mike. As it relates to the ERP inefficiencies we experienced, it was about $3 million in the first quarter.
................................................................................................................................................................................................................................
Keith J. Allman
A
President, Chief Executive Officer & Director
In terms of the strategy of the team that's in place and the leadership of Joe, we are definitely applying
segmentation to customers, markets, geographies and channels and we're looking at that as a factor without
question. And again, at the Inv estor Day nex t week, we're going to go into more detail on that .
................................................................................................................................................................................................................................
Mike Wood
Q
Macquarie Capital (USA), Inc.
Great. And was the – in Paint, was the deferral of that spending just more of an ex ecution timing? And if y ou
could also just comment on the Pro initiatives, it was mentioned in the release, just wondering how large that
business is?
................................................................................................................................................................................................................................
Keith J. Allman
A
President, Chief Executive Officer & Director
Y eah. So, Mike, the deferral – it was more due to the fact that we had some inclement weather, [indiscernible]
(33:1 6) the advertisement people are painting, so we just deferred it into second and third quarters. As it relates to
the Pro business, they continue to have nice growth and we'll talk more – Jeff Filley , the Head of Behr will talk
more about our Pro initiatives next week at the Investor Day .
................................................................................................................................................................................................................................
Mike Wood
Q
Macquarie Capital (USA), Inc.
Thank y ou.
................................................................................................................................................................................................................................
Operator: Y our next question comes from the line of Philip Ng with Jefferies. Y our line is open.
................................................................................................................................................................................................................................
Philip Ng
Q
Jefferies LLC
Good morning, top line in y our Cabinets were pretty strong, have y ou been able to regain some of that lost y ear in
home center, the home center channel. And the high -single digit growth in KraftMaid is better than we would
hav e ex pected. How does that stack up to y our expectation and did y ou have to cede some price to regain market
share?
................................................................................................................................................................................................................................
Keith J. Allman
President, Chief Executive Officer & Director
A
It met our ex pectation. We planned on as we talked last call of recalibrating our pricing and promotional
strategies. We're lev eraging the brand and the designer advocacy that we hav e in KraftMaid. So Philip I'd say it
was on plan and we do think that the growth that we showed was a share gain for us.
................................................................................................................................................................................................................................
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Philip Ng
Q
Jefferies LLC
Okay , that's helpful. And can y ou giv e us a little color on how – it sounds like y ou're generally upbeat about the
outlook but can you give us some color on how the start of the spring selling season is progressing and any sales
trends y ou'v e seen in April?
................................................................................................................................................................................................................................
Keith J. Allman
A
President, Chief Executive Officer & Director
Y eah. We like what we're seeing, the demand is rolling along as ex pected. As I talked in some of the earlier
remarks, the macroeconomics and what we're seeing in specific markets, the foot traffic we're seeing in retail, the
mov ement with KraftMaid indicating that the buyer is moving up in terms of the price continuum, that all
supports a nice spring selling season.
................................................................................................................................................................................................................................
Philip Ng
Q
Jefferies LLC
Okay , all right. Thanks, guy s. Good luck in the quarter.
................................................................................................................................................................................................................................
Operator: Y our next question comes from the line of Alex Ry giel with FBR. Y our line is open.
................................................................................................................................................................................................................................
Alex J. Rygiel
Q
FBR Capital Markets & Co.
Thank y ou, good morning, gentlemen. Looking at the Plumbing margins that expectation of 1 5% to 1 6% this y ear,
is there any way you could sort of quantify the negative headwinds this y ear from emerging markets, tr ade show
ex pense and foreign currency?
................................................................................................................................................................................................................................
John G. Sznewajs
Chief Financial Officer, Treasurer & VP
A
Sure, Alex . Well, that impact comes over a period of time, we'v e introduced a lot of new products at those trade
shows and particularly the one in Frankfur t. And so, we will see the benefit of those sales really from in 2015 and
201 6 because a lot those won't hit the market until later this year. But when they do because they're new products
and they – we'v e priced them approximately because of the innovation that's in these new products, you will see
that the margin benefit at that time.
................................................................................................................................................................................................................................
Alex J. Rygiel
Q
FBR Capital Markets & Co.
And then secondly, can you go a little bit deeper on the double-digit growth in windows in the quarter? Was that
market share growth, price or market share gains?
................................................................................................................................................................................................................................
John G. Sznewajs
Chief Financial Officer, Treasurer & VP
A
It was probably a little bit of share gain along with some improved mix in the quarter. We'v e seen a lot of nice
upward pricing – or price point driven demand from the consumers in the Western U.S. So, think of our Essence
windows as we talked about or Keith mentioned it a couple of minutes ago, some of our paint and v inyl products
are doing particularly well. The sliding glass door/glass wall product that we came out with last y ear are all
resonating v ery well with the consumers in the Western U.S.
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Alex J. Rygiel
Q
FBR Capital Markets & Co.
Great. Thank y ou.
................................................................................................................................................................................................................................
Operator: Y our next question comes from the line of Dennis McGill with Zelman & Associates. Please go ahead.
................................................................................................................................................................................................................................
Dennis P. McGill
Q
Zelman & Associates
Hi. Good morning. Thank y ou guys. Just wanted to go back to Decorative Architectural segment. John, are y ou
seeing or did y ou guys see any difference between point of sale and y our revenue recognition during the quarter?
................................................................................................................................................................................................................................
John G. Sznewajs
A
Chief Financial Officer, Treasurer & VP
We did – y eah, POS was higher than our revenue recognition.
................................................................................................................................................................................................................................
Dennis P. McGill
Q
Zelman & Associates
And what was driv ing that?
................................................................................................................................................................................................................................
John G. Sznewajs
A
Chief Financial Officer, Treasurer & VP
I think there may have been just a small amount of inv entory balancing there, Dennis.
................................................................................................................................................................................................................................
Dennis P. McGill
Q
Zelman & Associates
And is that across the Hardware and Paint segment or more Paint?
................................................................................................................................................................................................................................
John G. Sznewajs
Chief Financial Officer, Treasurer & VP
A
I'd say it's solely in the Paint segment.
................................................................................................................................................................................................................................
Dennis P. McGill
Q
Zelman & Associates
Okay . And then just going back to Cabinets. Y ou touched on this a little bit I think around the Merillat
performance, but can y ou speak to may be a little bit more specifically the trends you're seeing in the home center
v ersus Merillat in the dealer channel? How much of a drag is that for y ou, guy s, right now that y ou're looking to
rev erse?
................................................................................................................................................................................................................................
Keith J. Allman
President, Chief Executive Officer & Director
A
We're performing well in the home center dealer channel with KraftMaid. The challenge that we're facing to give
y ou a little bit of color on that from the Merillat side, as y ou know, last y ear we had delivery and lead time issues
associated with some execution problems we had with our ERP sy stem. We'v e put that in the rearview mirror. We
hav e our delivery and our lead times back. But there has been some hangover with regards to our ability to serve
in businesses that those dealers go after. We're building t hat confidence back.
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We hav en't lost leaderships but we did lose some confidence in them. And we're working that back and step -bystep, we'll continue to do that. So, directly to y our question, Dennis, we're seeing some good strong retail and
dealer business in KraftMaid. We continue to be challenged with regards to the demand side at Merillat, but we're
getting better.
................................................................................................................................................................................................................................
Dennis P. McGill
Q
Zelman & Associates
And I'm sure y ou'll touch on this nex t week, but as far as communicating that message to the Merillat dealers,
what's the primary focus that you're communicating to them right now as far as why they should stick with y ou?
................................................................................................................................................................................................................................
Keith J. Allman
President, Chief Executive Officer & Director
A
Well, really , it's not so much, the communication isn't orie nted on why to stick with us, it's why y ou should grow
with us and why we're going to be dependable. And fundamentally, we do that with our numbers and our
performance.
................................................................................................................................................................................................................................
Dennis P. McGill
Q
Zelman & Associates
Okay . I look forward to next week. Thanks, guys.
................................................................................................................................................................................................................................
John G. Sznewajs
Chief Financial Officer, Treasurer & VP
A
Thanks, Dennis.
................................................................................................................................................................................................................................
Operator: Y our next question comes from the line of Michael Rehaut with JPMorgan. Your line is open.<Q –
[05P8K5-E]Mike Rehaut – JPMorgan Securities LLC>: Thanks. Good morning, everyone. First question I had
was on – just going back to Plumbing for a moment. The 1 4% margin in the quarter y ou mentioned, obviously,
impacted by the trade show and some of the spend. And I believe you said last quarter the trade show itself w as $3
million, so I just wanted to make sure that was the case. But getting to the 1 5% to 1 6% margin for the full y ear,
from the 1 4% y ou're seeing in the first quarter, is that a function of most of that $8 million dissipating or is there
sort of incremental profitability that y ou expect as well from v olume growth or price mix ? If y ou could go into a
little more detail in terms of going from the 1 4% to the 1 5% to 1 6% for the y ear.
................................................................................................................................................................................................................................
John G. Sznewajs
Chief Financial Officer, Treasurer & VP
A
Sure, Mike. It's John. So the trade show actually costs us $4 million, so a little bit more than we ex pected than the
$3 million. But in the $8 million there's some embedded incremental advertising and marketing expenses that we
referred to. So, that's how y ou bridge the $4 million to the $8 million.
In terms of the growth – the profit growth going forward from Q2 to Q4, clearly a big part of it is just the ex pense
that we incurred in Q1 we don't ex pect to repeat itself in the following quarters. At the same time, we do ex pect to
grow this business, so the balance of that relates to the v olume drop that we expect to hav e in the remaining three
quarters in 2015.
In terms of mix , we do probably see a little bit of improved mix over the quarter, but we did hav e kind of some
crosswinds in there in the first quarter, just with the strong growth in the emerging markets that we experienced.
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Michael Jason Rehaut
Q
JPMorgan Securities LLC
Great. No, thank y ou. And just a second question on Cabinets, y ou had a $7 million profit im provement off of $1 2
million in better v olume or I'm sorry, better revenue. So, it would seem that a portion of the profit improvement
was just from incremental margins. And I was hoping y ou could explain the other portion if that was may be
lapping some ERP or costs that y ou're not incurring this y ear, if y ou could kind of walk through the drivers of the
profit improvement.
And in terms of the new management, I was hoping just to get a sense for – y ou kind of referred to the fact that
the new leader, and I apologize for not catching the name, I believe, [ph] Bill Gross (41 :49), not – coming from
priv ate equity place but if there's also – if could just go through his background in a little more detail, as well as if
there were any other major changes to the leadership team I think we'v e discussed in the past.
................................................................................................................................................................................................................................
Keith J. Allman
A
President, Chief Executive Officer & Director
Y eah. We'v e – the improv ement is a combination of some fav orable mix that we've seen and KraftMaid growing.
We certainly are performing better on the operational side and getting over some of the inefficiencies of ERP.
We'v e also taken some costs out. So it's a combination of the usual suspects with regards to the improvements.
With regard to Joe Gross, he's not a bond guy ; he's Joe and n ot Bill. He's been with Masco for quite a number of
y ears. He came from our Tool business and then was moved into a President of our Rough Plumbing business and
all along the way he's done a tremendous job. He does hav e significant turnaround ex perience as I mentioned, he's
worked in priv ate equity for a good portion of his career. So he brings a v ery good perspective in this business, and
as I said, y ou'll get a chance to meet him, to talk to him, to hav e Q&A et cetera at the Inv estor Conference.
................................................................................................................................................................................................................................
Michael Jason Rehaut
Q
JPMorgan Securities LLC
Great. Thank y ou.
................................................................................................................................................................................................................................
Operator: Y our next question comes from the line of George Staphos with Bank of America. Your line is open.
................................................................................................................................................................................................................................
George L. Staphos
Q
Bank of America Merrill Lynch
Hi ev eryone, good morning, most o f my questions have been asked but I'll giv e it a shot with these two. First of all,
can y ou comment at all or affirm what y our v iews on the incremental margin and incremental profit uplift should
be for Cabinets this y ear. I seem to recall there was a $25 million or so built-in benefit giv en last y ear's
inefficiencies. And then, Keith, I remember still a goal of 25% incremental margin. Can y ou confirm that that's the
outlook for 2015?
And then question for y ou, John, just on FX, can y ou comment at all on sort of how y our debt is allocated
regionally? I don't recall on whether there's an opportunity at all to use that as a natural hedge for FX going
forward.
................................................................................................................................................................................................................................
John G. Sznewajs
Chief Financial Officer, Treasurer & VP
A
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28-Apr-2015
So, George, with respect to y our incremental margin question on Cabinetry, y eah, we do expect that there should
be a $25 million tailwind from just the lack of the incremental expenses that we incurred in 2014 that will benefit
201 5. So, above and beyond that, in terms of just the v olume benefit, we should expect about a 30% dropdown on
a contribution margin on incremental v olume in the segment. So, that's how to kind of think about profit growth
in 201 5 and beyond in our Cabinet business.
As it relates to FX, right now all of our debt is U.S.-based. But to y our point, giv en the attractive rate environment
that we're seeing ov er in Europe, as we hav e upcoming maturities and we hav e that significant maturity that's
coming up in 201 6, if the rate env ironment stays similar to what it is now, we would definitely consider taking a
look at perhaps doing some euro -based financing for that refinancing activity later next y ear.
................................................................................................................................................................................................................................
George L. Staphos
Q
Bank of America Merrill Lynch
Okay . Keith, just one quickie, and not trying to be too short-term, in answering a prior question y ou were certainly
espousing y our optimism, your confidence in the way the quarter is dev eloping. Is there a way to put a number or
a range on the sales comp y ou're seeing thus far in the quarter? Thanks, and good luck in the qu arter.
................................................................................................................................................................................................................................
Keith J. Allman
A
President, Chief Executive Officer & Director
Y eah. I think we're – I'm going to stay away from giving a number. We're – our outlook has not changed. We feel
the same way about these businesses now as we did coming into the quarter and continue to feel good about the
outlook for 2015.
................................................................................................................................................................................................................................
George L. Staphos
Q
Bank of America Merrill Lynch
Thank y ou.
................................................................................................................................................................................................................................
Operator: Y our next question comes from the line of Susan Maklari with UBS. Y our line is open.
................................................................................................................................................................................................................................
Susan Marie Maklari
UBS Securities LLC
Q
Good morning.
................................................................................................................................................................................................................................
Keith J. Allman
President, Chief Executive Officer & Director
A
Good morning, Susan.
................................................................................................................................................................................................................................
Susan Marie Maklari
UBS Securities LLC
Q
In terms of the pricing env ironment and promotions, I know that y ou made a big effort towards the end of last
y ear to sort of reset a lot of that. Can y ou talk about with the improvement that y ou saw during the quarter, any
changes there and maybe any abilities to sort of get more pricing as we go through the y ear?
................................................................................................................................................................................................................................
Keith J. Allman
President, Chief Executive Officer & Director
A
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As we talked about – as I talked about last quarter, our intention was to adjust our promotional strategy and
pricing in Cabinets. We got more aggressive than I think the market would bear, as we'v e talked about in the past,
and we made some adjustments to that. We're competitive in terms of where we are in our strategy right now, and
we saw good results from it. We're committed to driving this business to profitability and we're seeing some nice
signs as Joe and the new team start to get traction.
................................................................................................................................................................................................................................
Susan Marie Maklari
Q
UBS Securities LLC
Okay . And then in terms of y our working capital, the improvement was really impressive there as y ou saw things
take off in the quarter. Can y ou talk a little bit about how we can expect to trend during the y ear, and is there may
be any thing significant that y ou can do there?
................................................................................................................................................................................................................................
John G. Sznewajs
A
Chief Financial Officer, Treasurer & VP
We continue to work on working capital, Susan. And as y ou highlighted, just great outcome that the team fro m an
operations, finance, and supply chain execute upon. We do incentivize all of our employees across the enterprise
on working capital performance, so there is incentive to continue to improve that.
So there's a v ariety of things that we're working on, principally around inventories. We think there's an
opportunity to continue to improve. That said, I think giv en that we're kind of at record low levels of working
capital, the improvement from here will be slightly incremental. Don't ex pect major step -change improvement
from working capital going forward.
................................................................................................................................................................................................................................
Susan Marie Maklari
Q
UBS Securities LLC
Okay . That's great. Thank y ou.
................................................................................................................................................................................................................................
Operator: Y our next question comes from the line of Nishu Sood with Deutsche Bank. Please go ahead.
................................................................................................................................................................................................................................
Nishu Sood
Deutsche Bank Securities, Inc.
Q
Thanks. So, Keith when y our tenure started and y ou talked about portfolio restructuring, most of the inv estor
focus was on what might be div ested. But y ou folks are fairly consistent in talking about potential bolt -on
acquisitions happening as well; so the Endless Pools' acquisition. First, if y ou could give us some sense of the size
of that, sales, may be EBITDA? And also if y ou could giv e us some sense of how it fits in to the acquisition v ision
and what it might tell us about what sor ts of future acquisitions y ou're considering and might make as time goes
on?<A – [06V RJK-E]Keith Allman – Masco Corp.>: Endless Pools was a small acquisition for us. It was about
$25 million. In terms of how it fits into the ov erall strategy, we're focused on bolt-ons, rather than per se another
leg, another platform for us. We v iew Plumbing and Paint, North American and Global, and that space is where
our target is. We're targeting in the range of $200 million to $300 million as the kind of acquisitions th at we're
looking on.
So Endless Pools is small, but it's consistent in that it's in Plumbing, it's where we see the potential to leverage
either our technologies or our access to markets. And that's what we'v e brought onboard a new V P of Strategy and
Business Dev elopment, and his role is to help manage our pipeline and we're working with our teams to do that.
So it's – while it's small, it's quite consistent with what we're looking at in terms of our ongoing acquisitions.
................................................................................................................................................................................................................................
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Q1 2015 Earnings Call
28-Apr-2015
Nishu Sood
Q
Deutsche Bank Securities, Inc.
Got it. And y ou mean up to $200 million to $300 million in the acquisition v alue?
................................................................................................................................................................................................................................
Keith J. Allman
A
President, Chief Executive Officer & Director
Correct.
................................................................................................................................................................................................................................
Nishu Sood
Q
Deutsche Bank Securities, Inc.
Got it. Okay . And a second question, the Investor Day obviously, we're looking – ev eryone is looking forward to
that. Y ou've mentioned we'll be hearing from a few of the div isions, Cabinets, [ph] ProBuilt (49:49), Paint. Are we
going to be hearing from all of the different div isions? Is it going to be a pretty sy stematic review of what's going
on across Masco? What – may be – are there going to be some themes y ou're going to be looking at? Obv iously,
we'll – I'm sure we'll get all the details, but may be if y ou could give us a mov ie trailer v ersion.
................................................................................................................................................................................................................................
Keith J. Allman
A
President, Chief Executive Officer & Director
Y ou're not going to hear from every one of our general managers, but clearly y ou're going to have people talking to
y ou about every segment. We're going to go through and put the business leaders in front to talk about their
growth strategies. We're going to talk about specific actions as well as performance milestones, and we're going to
talk about ex pectations.
................................................................................................................................................................................................................................
Nishu Sood
Q
Deutsche Bank Securities, Inc.
Got it. Okay . Great. We'll see y ou nex t week. Thanks.
................................................................................................................................................................................................................................
Keith J. Allman
A
President, Chief Executive Officer & Director
Thank y ou.
................................................................................................................................................................................................................................
Operator: Y our next question comes from the line of Will Randow with Citi. Y our line is open.
................................................................................................................................................................................................................................
Will Randow
Citigroup Global Markets, Inc. (Broker)
Q
Hey , good morning, and thanks for taking my questions. I was curious on the Cabinet side. It looks like y ou guys
introduced the Merillat Ex press, fiv e days ship business along with recently purchased the Cardell trademark, and
hav e been making some waves in Cabinets. Where's the strategic v ision behind some of those initiatives?
................................................................................................................................................................................................................................
Keith J. Allman
President, Chief Executive Officer & Director
A
Well, Cardell was purchased some time ago. And, really, what we're focused on is try ing to give our cu stomers
what they need to drive foot traffic and to be profitable for them and for us to be profitable. So, our strategy is a
combination of market penetration with the strongest brands that we hav e, as well as getting our house in order
with regards to performance and cost.
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Will Randow
Q
Citigroup Global Markets, Inc. (Broker)
Thanks for that. And just one follow-up in terms of the pace of the repurchase program with about 4 million
shares in the first quarter. Is there any room to accelerate that? And are y ou looking at this consistently on a free
cash flow less share purchases neutral basis? Thank y ou.
................................................................................................................................................................................................................................
John G. Sznewajs
A
Chief Financial Officer, Treasurer & VP
Y eah, Will, there is alway s opportunity to accelerate or decelerate this share repurchase activity based on where
we see the share price go. As I mentioned in my remarks, we are – we did reaffirm the fact that we would purchase
between $400 million and $500 million worth of shares this y ear. And so we'll continue to evaluate opportunities
to accelerate repurchases based on where the share price is at.
................................................................................................................................................................................................................................
Will Randow
Q
Citigroup Global Markets, Inc. (Broker)
Thanks again.
................................................................................................................................................................................................................................
Operator: Y our next question comes from the line of Keith Hughes with SunTrust. Y our line is open.
................................................................................................................................................................................................................................
Keith Hughes
Q
SunTrust Robinson Humphrey
Thank y ou. My question's on Cabinets. Y ou had discussed mix being a positive in the quarter. Could y ou giv e us a
v iew of where v olume was in the first quarter?
................................................................................................................................................................................................................................
John G. Sznewajs
A
Chief Financial Officer, Treasurer & VP
Y eah. So, v olume was up just a little bit, Keith. Pretty good v olume in that we saw as a result of the mix though. So
KraftMaid really led the v olume charge in Q1 as Keith mentioned earlier, both at retail as well as our dealers. So,
that initiativ e has gone very well so we're v ery pleased with the v olume growth at KraftMaid.
................................................................................................................................................................................................................................
Keith Hughes
Q
SunTrust Robinson Humphrey
Does that mean that Merillat v olume was down year-over-year?
................................................................................................................................................................................................................................
John G. Sznewajs
A
Chief Financial Officer, Treasurer & VP
Y eah. It was down slightly year-over-year.
................................................................................................................................................................................................................................
Keith Hughes
Q
SunTrust Robinson Humphrey
Okay . Thank y ou.
................................................................................................................................................................................................................................
Operator: Ladies and gentlemen, that's all the time we hav e for today. Thank y ou for participating in today's
conference call. You may now disconnect.
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Masco Corp.
(MAS)
Q1 2015 Earnings Call
Corrected Transcript
28-Apr-2015
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