MAS - Earnings call transcript Q3 2017

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Operator

Good morning, ladies and gentlemen. Welcome to Masco Corporation’s Third Quarter Conference Call. My name is Amy, and I will be your operator for today’s call.

As a reminder, today’s conference call is being recorded for replay purposes. [Operator Instructions] I will now turn the call over to David Chaika, Vice President, Treasurer, and Investor Relations.

begin. may You

David Chaika

Masco’s and third Amy, Keith Welcome Masco John to President Officer. Chief Thank conference good call. XXXX Sznewajs, and Masco; quarter CEO are President With Corporation’s and and Financial you, of morning. Vice me Allman, today

today earnings Relations. to available third will quarter slides we website and release Our on presentation our the that refer are Investor under

can’t yourself follow open remarks, call for XXX-XXX-XXXX. we limit we up. Please one with will at the your please to our now, question Following questions. one directly question call take If analysts’ me

Our performance, to our that and results statements and Form today Securities the will in could are our Form Disclosures our include These and uncertainties Risk Factors filed forward-looking our described actual views our Exchange differ about uncertainties statements. materially We with XX-K which our forward-looking subject future cause Other and from constitute that these XX-Q we risks to risks the Commission. statements in statements. and

will also Our include measures. statements non-GAAP financial

references to under to noted. I’ll adjusted on which website profit these available will With share Relations. call earnings reconciled We unless and per measurements as are earnings adjusted, Executive now President Officer, in and be turn Chief presentation otherwise our our release to slides, Our that, the over Investor GAAP and operating our Keith Allman.

Keith Allman

for today. us joining Dave. you, you everyone, good And thank Thank and morning,

growth. here head we day. in X. degrees excuse Slide to OUR XX to Please third cold Midwestern have my have driving You’ll business, where the while quarter to classic been suffering voice, In turn am the profitable our XX invest a temperatures I on depending and continue between from

growth driven Plumbing the of currency, in Decorative segments. X%, favorable Our Architectural top by increased excluding our line and impact solid

in Excluding the our or Fastener, Arrow line currency. X% top divestiture X% local grew of

once share, Our to in share cost to per per growth growth through disciplined North even sales and per common grew leverage, by increased convert to allocation. turnaround XX% share basis Masco's XX $X.XX quick ability operating business. again our XX.X% solid capital Window operating demonstrating points into driven the earnings largely American Earnings improvements better margin

natural the Rico. you North the throughout Florida know, that disasters and state areas quarter, were As during of in particularly there Houston, Puerto all America significant impacted

As negatively quarter alike on not new and and focused impacted a or were homes. and result, consumer’s, storms cleaning homes we customers the preparing after as existing in re-modeling on these builders their up for building

Our for be we also areas. XXth challenges thoughts some go particularly our to there positive thank ongoing these expect will our impacted in a and net business XXXX. in should suppliers, efforts out rebuilding all be to I'd those that But like to sales those our business for us quarter our achieved efforts their Despite us in coatings our these growth. serve events. and challenges, who turn keep we customers operating profit during which all enabled difficult these support supplied, of to consecutive

partners. WaterSense strong Faucet Delta eCommerce a proud in was omni growth our well. of and well say the and Central to Company business our bath to market Architectural saw give conserve performance. partner gain markets insights the high strong, to China. as additional WaterSense Congratulations our of continues me highest our segment, rest Hansgrohe and solutions Germany, continued paint into behind Plumbing. efficiency. drove and help innovative business be strength the both retailers for significant across in growth the awarded for without in Excellence some drivers sacrificing kitchen row share third channel I'm of a you as America on its U.S. North to end showroom Beginning Let water Delta with sales the entire outstanding trade to year advance we the our performance. efforts help focus In online developing for Decorative program In Award, primary the water with in EPA's recognition products its saw pure-play and that perform also continued and Internationally, each segments Europe as our focused its to Sustained team

sales we the are Depot. believe outstanding partner, a service Paint product at to double-digit Home strong with our pace its grew market powerful and Pro DIY quality brand, and Our ratings we outperform the BEHR and our positioned channel

KraftMaid continued sales our our from Additionally, Hardware focus program eCommerce its growth Cabinetry from business. with segment, we business double-digit achieved initiatives. Liberty across In growth our dealer channels, growth its on and strong shower recognition and retail door our strong our in brand innovative drove our and our brand

segment, with turnaround that cabinet softness XXXX. I of of with margins million, builder as a Profits delayed which Windows Fastener. schedules. divestiture was to sales hurricanes, the remain by substantial our due confident on brand, products growth adjustment, of shared as In functionality strong operating digit was momentum. of Our new I'm UK you operation and power other some we our rapid the as of strong consisting last and warranty impact improvements. launch customers product year for in installation and innovative operational mid single full pleased previously, our of in the Arrow very the improvement and year's grew $XX baths kitchens the this this X% and will the pricing weakness Offsetting will driven consumer’s trend absence finishes deliveries Milgard KraftMaid increased I US achieve excluding that this well over which with and the enhance continue segment

our and in our share continued buying dividends returning quarter X and We to also million in repurchase share the $XXX shares million by activity shareholders. back buybacks approximately

Lastly, the now to to business $X.XX. seeing we're for we the through in earnings impact to our on our Based range of range be on $X. and hurricanes earnings half October, XXXX the updated the our call a the on of to prior target and in XX $X. quarter results our the be XXXX good year, share $X.XX the we per per the third earnings in of our in second of expect start share in

Now, John? call I'd the to will in and go over over to operational John, who our turn more financial performance like detail.

John Sznewajs

everyone. morning, Thank and you, good Keith

focus mentioned items. my on of will the rationalization excluding impact of comments most other performance, As Dave one-time and adjusted

Turning in the both performance bottom in and line. growth X, top our our Slide solid resulted

third of operating consecutive increase for year-over-year our sales quarter XXth a accounting The in XXXX or sales growth. quarter currency. or X% basis local in and of divestiture, X% X% On profit and X% was increased when reported the local Arrow sales currency

across favorably or translation and X% third repair remodeling increase the euro due impacted by revenues Delta X% x-Arrow million, as channels American our and as for approximately against we quarter our of continued Foreign better higher sales all showroom the product. demand price currency product Milgard distribution and our dollar. consumer best continuum, demand experience to KraftMaid, to and North a particularly strengthened across and $XX the offerings, on US strong products for the

as mentioned, hurricanes in Plumbing, be adversely evenly Cabinetry third full segment. quarter XX.X%, quarter fourth we Plumbing the to for to to continue a North our international largely impact basis approximately Rico. XX drive devastating by were approximately $XX the $XX currency, of Texas, and estimate million these We last Keith the points QX businesses Architectural each Cabinetry growth. results Decorative million largely in expanded year storms impacted Florida improvement Gross As American $X nearly between approximately the split in sales compared International of in that Windows local in of Puerto quarter third will to the will million, our segments the of the year and margins due X% increased expect business. our revenue impact the the

line XX.X% at quarter as as million XX.X%. X% the XX leverage to a And prior improvement compared margins bottom operating our basis EPS to to we SG&A the growth. Our percent XX% with delivered to sales operating year our We while in strategic as to $XXX drive solid the making matched of XXXX. volume, of profitable expanding investments of performance, quarter, increased income $X.XX third an points continue

in results. Turning Plumbing the our to currency our growth strong X% excluding spa continues X%. driven sales by shower and faucet, performance to This increased of solid impact Slide increased businesses. Segment was and X, deliver segment

currency Foreign sales $XX this quarter. by in segment transition approximately the impacted favorably million

grew industry driven large X% consumer customers. North in third the strong as from dealer experienced sales brands, and retail wholesale, we Our with demand leading American quarter,

benefit strong the through drop expenses. focus of in on decreased their in sales local in growth Hansgrohe X% increased $XX strong Plumbing with volume brand, increased both was the yielding offset currency. by China. markets in in growth on to investments Operating the Germany quarter, approximately profit incremental other design along variable key international from more continues and growing as in than X% is investments double-digit million Our for These they strategic investments, innovation. experience and and results segment

orders Liberty strong interior continues shower of as - our channel. double-digit benefit the to to this segment from grew product quarter Turning the the paint growth We to in was PRO also in the primers expansion BEHR areas. to its by our the it Hardware believe affected we door initiative. strong quickest from This X, it eCommerce Architectural as and of another for be will topline of driven in performance, Decorative contributed hurricanes are Slide experiencing X%. the performance innovative program and growth recover and segment

now set This relationship will relationship discussed we $X win planned quarter. call, awarded believe impact as last continues this program costs in income was third million, quarter As approximately quarter. this operating the It reset program. decreased third the an in on fourth mentioned We to cost expanded to program. hardware second input quarter be quarter. segment In increased expect set in third programs. greatest originally we price-to-commodity in the experienced an quarter quarter quarter fourth anticipate in improve as We retail the go million new $X driven the our we to we and and of by spending the in into Liberty cabinet that fourth the unfavorable the was

in to segment the In loss the additional is United X%. due business X. Slide UK. to both and sales This in builder principally States declined Cabinetry the Turning

and new to had mitigated tariffs double-digit have plywood through million. profitability in $X increased driven of duties at $X anticipate volume. supply home KraftMaid growth the the quarter. to million, repair reduced call, mentioned Segment remodel and not approximately the imported performance through anti-dumping impact them on product business impact channels, countervailing Our initiatives, we And quarter to perform Chinese quarter and in incremental delivering cost these well by solid the launches, the other the of second declined in a and KraftMaid duties continues material chain third the have forward. do center volume we going dealer our and related by

Turning XX. to Slide

favorable which business and pricing, quarter was mix X%. volume savings This Milgard, XXXX, the due and over XX% of growth grew million the the year’s premium ARROW quarter by sales strong sales window leading our in last and of initiatives. segment Western pricing lapping driven door favorable to U.S. performance the Our products. $XX prior warranty Window increased excluding in Windows the strong Fasteners by was year, matched grew third profitability of growth favorable a divestiture shift expense, toward the cost driven increased in Segment Milgard's quarter. our

We result an improved has are XXXX. extremely with progress the Milgard's pleased made that team and rapid delivered on in the turnaround

that to in of Arrow. the As we receive a to Working growth quarter's our year approximately prior and and the balance we full due approximately margins be operating segment turning percent ended to Keith growth work value earnings call, call X will at as with profit by the And back approximately the billion I'll shares of mid-single capital digit approximately our results, And basis our am focus progress quarter, last year to that, in reminder, end have creation and of level program points pleased down liquidity. and now $X.X third on to mentioned sales to normalized quarter $X versus during valued more repurchasing driving we a sale on our Arrow inventory million topline of sheet believe new Keith. we with the Allman a wins. support we initiatives the over and of million sale higher sales as $XX fourth XX.X% made shareholder and year. XXX we May. third I outlined the respectively, impacted Thank expect in by $XXX will to – increased this the with quarter you, to with John. the Slide We despite million quarter due our inventory And the principally growth turn have XX, turn continued million. Fastener

a Architectural and a Hardware paint as gain US global invest of We PRO XX to housing - leadership we for Cabinet in in business. confidence million past market, units. In to in both of formation over XX business must the and the position for investing home. our and our with up million a to been business XX driving our household our maintain stock driver leveraging committed to product our at ensure their remain our business come. with over our our continue homes drive business than appreciating, we progress our Housing while are pace in for year-over-year, increasingly finally, units group DIY fundamentals drive and business X.X of And with Decorative And products We Architectural and Home growth a will of is of introductions consumer’s we namely dealer turnover, new growth. our residential continue growth, initiatives has brands developing US now KraftMaid of pleased is an in Liberty to repair XX% the with should business, our leading more old, result. aging, healthy spending our behind profitable enjoy the extend exceptional. turnaround years our share which prices customers. are housing years. and Plumbing key increase are are invest innovative In years boosting Windows X% strong the to indicator strong, annualized millennial remodel large favorable demographics, have The

the between our with balancing and earns Focusing the on share buybacks strategic continued operational acquisitions system finally right allocation of operating capital and through our dividends. and fit deployment excellence Masco

a coupled three share the in years execution, drive strong outperform to per the us to with $X.XX we proud and provides team operational sheet liquidity doubling position will industry. this fact our target. I'm from XXXX. our ago, Our multiple to in to levers value balance and earnings continue committed XXXX we with and that Nearly exceed of $X.XX shareholder

I'll our target we forward, to set in share that, that we XXXX are up call achieving the open of Looking Investor Q&A. our committed per Day $X.XX for With earnings at May.

Operator

first Maklari Your open. Susan is your the from comes with Suisse. Instructions] [Operator Susan, of line question Credit line

Chris Counihan

cost just mix? color of Susan. Paint How was versus hoping price you're Hi. additional that on was This Counihan Chris margin could for of some in is and that pressure seeing I much you on provide the segment. some input driven Plumbing's

John Sznewajs

Yes.

I'm - quarter call. commodity and we Chris share we So also inflation, our second were That in Stephen we there did some know, growth inflation should see We see [ph] segments some both that some to quarter initiatives. inflation you expenses Plumbing strategic did segment, said, some comedy some say, I see do commodity incremental should those sorry. in our the incurred that on we in

thought caused think little inefficiency. of had a seeing were are accelerate our some going we - the that, lived distribution that same given quarter. strength things clip our of been strategic plumbing that were in as pull little our for investments some that States that the are some and that know, expect was of and that you some it in we advertising shop right in - we spend. forward what one, At in had incurred, has of the center incremental to I that probably the time We we we some short do that One resetting the We unit across would much should us we customers decided a United and things now. do now the a go modest through that headwind and a be of display we live fairly we - nationally in you Hansgrohe dealer expense, the we displays unit of included a pretty cost new bit know, of the Germany in bit of

$X the I'd quarter third spend some you’ll as display see set that incremental the to that XX displays see set that fourth third to and in quarter in you'll fourth quarter maybe of - the those say of in So quarter. well. in of X probably hit being also the some hit related million

So as of we accelerate spend. that some

material think remarks, the On we the side relationship price you bit forward indicated in the see raw impacted and did as and that by into quarter fourth and do some inflation prepared should know, going we the in were that commodity we I third paint most my ease little a quarter going beyond.

Chris Counihan

over provide on know And not you said segment. into spill and I Got that then be it. color Thanks. I the be would it some you to cabinets, it over you why wondering experiencing that XQ, is know you cabinet spill segment is was additional question would isolated second if - was on the there know, my rest?

John Sznewajs

Yeah.

the you set they segment its the are became gets work, is, last is is hurricane projects way from is reason been know, rebuilt. the home get the So if experiencing when cabinets damaged over it impact about really the the of think you Cabinets - to things and �� spill the one

to plumbing, paint cabinets. So before drywall their they have flooring, go all other that through people set electrical and

and to that our as so go a bit product some But of we there headwind we in going all tailwinds And efforts broadly be into of categories, a see the little in across as is QX. going rebuilding should of Florida. result into we expect do XXXX in cabinetry Texas

Chris Counihan

Thank you. It’s helpful. very

Operator

your The open. from next is Wood Nomura comes line the question Michael Instinet. from line Michael, of

Michael Wood

morning. Hi, good

relatively DIY softness that of think that that ongoing be you there given there traditionally piece. in growth. tends you're know, would that or seeing discipline change change First, just any growth in be very demand just provide if helpful? you the in And the the gallon you could could also to industry maintenance price paint end know, Do on disciplined less any because be the there's market, cost although paint you cyclical

John Sznewajs

so Good we gallon was double-digits. terms Mike. It’s what morning, up down as saw indicated John. Pro we our on it to just DIY was business Yeah, of go in modestly,

terms within know, You expect we in dynamic the any don't of question going in that pricing change your discipline around industry you first know, forward.

I with quality supporting serving really best service the for focused know at our the how can't we're strategy the everyone the speak look just best You as best - Pro. – major consumer well everyone industry, our serving I in - on but and paint experience, as our the very customer both DIY of and given share with of else, their the growing we

in no see change dynamic that we So whatsoever.

Michael Wood

Great. for spend. Thank you. you also in thanks And strategic hardware what up on give the quarter? the fourth on Okay. decorative the the color that plumbing third some Can quarter us from set details delayed

John Sznewajs

Yes.

going to program largely couple the there. significant of set and and expect country, just impacting know, in the start we're elected with that were we you So with big delay nothing storms they large one that so know, expect September of you retailers to that the as to of weeks, part a a

Michael Wood

Thank you.

Operator

next Mike open. question from comes line with The Barclays. the is Mike, Dahl of line your

Mike Dahl

cost my is the otherwise And been kind would follow have expect on that originally then the million in thinking over particular I ‘XX that time a for this display just should what was or just on spend Could plumbing forward in taking into detail ’XX? in $XX a incremental you set questions. or out XXXX pulling period? guess of to up into so continue we resets. the detail John little play more Thanks how around to give on us

Keith Allman

expense, post it will some think Mike, we a multi-quarter be I did impact.

some those will of so know, and out QX. well. you we But So ‘XX going QX continue both into have ’XX for and as of to some resets into we expense are XXXX early pulling

the more it expect modest half can we in impact XXXX be a So of do back XXXX. bit was the than in little

John Sznewajs

best out program for to Mike out and two those this accelerating seeing had is and our because its as I us, but showrooms, chance lay displaying showering I the see some investments. to a working customers market We're the feet we're these good don't reason and you've displays return The that dealers it's these fundamentally them think know if - our gained three are out We've investment of we the in our more are linear on more are our in there. showrooms to strongly. additional, displays get

why because reason sets on so So so the bullish performing that's investment are this the well. we're initial

Mike Dahl

question give and the just pressures, side should Okay, know going the helpful. my related months? are the given to the these of you is great. second XQ given of you'll of you on us That's around strategy we recoup confidence Can some guess paint margin the be your next you specifically kind you're to of seeing back I really raws of giving there. pricing the some cost the the peak in And areas or inflation through commentary that that several the detail how reduction more headwinds as get what

Keith Allman

Mike, this is Keith.

We the As in with customer those glove in We hurricanes. really you help us into out don't of during we same know, specifics hand on go terms given price. work work that concentration suppliers, avoidance. one suppliers cost our with the

them We great we and help us win. them. win They with relationships help have

together team. a So it's good

So constantly in a and by have as at they and in can the can trying looking performance competitive demonstrated to line consumer giving walked keeping need. the while quality we be we're can, nice what the value as the and really there we're

flush over time flow price we price There's know, and tend rather you and commodity, with price that commensurate of flow. and get some the lag, ebb prices get terms always In get commodities, to really to regards time particularly remain be of with commodities tend and commodity There'll But quickly. when that's we more forward. expect what over going to lag. accelerate price we a pronounced

Mike Dahl

Keith. Thanks, right. Good in XQ. luck All

Keith Allman

you. Thank

Operator

is SunTrust. next line line Keith Hughes open. your Keith, comes with the Your question from of

Keith Hughes

Thank you.

promotional spend, fourth question the First will to Architectural pretty in is about that products, fourth the is ’XX reoccur of quarter back quarter million, Decorative ’XX? the $XX heavily a in there

Keith Allman

activity, be probably quarter point, of in as fourth the bit as not Keith it but will was little this intense At a of XXXX. we're promotional expecting

Keith Hughes

segment with price/cost Given about that will – that as that the in talk rise allow pressures? contemplated to with margins you

Keith Allman

Yeah.

a right. are and mind think of to quarter that into slow we the there in fourth you is keep seasonally Keith obviously couple know… One there, down you So I know, things

Keith Hughes

Given the…

Keith Allman

sorry… am I

Keith Hughes

am I to… referring

Keith Allman

Got you.

it as all we of I headwind because you reset. out that about $X spend the you only little million the So for know, bit we Liberty know, called think have a

in I trying you think, be make where into just you that think in So XXXX, up point. your you other terms quarter But that the factor margins to I'm of know calculation. I margins from we slightly of that, sure the than fourth of will know, think were

Keith Hughes

Thank you.

John Sznewajs

outlook where year really Keith, if paint, it in digit talked quarter mid-single helps we haven't from last changed we growth our margin about full erosion. for the modest and

Keith Hughes

saw the to Okay. one just want quick still builder of in out be? other you business one the not process or within is business, some the of you fire And really related that just is getting weakness are where cabinet or we builder in US that hurricane

Keith Allman

the clearly and where Denver, you look Well, them, Florida. at Texas we When in in a them it. big direct was have concentration hurricane our we of builder piece branches that have

footprint our well pretty devastated. of thirds two was So

will significant we've the couple continuing actions piece for of was it hit next drive when win those fundamentally it, builder back want a we a into and have consolidation but we of this pricing price was a and quarters. to build we'll bit the channel. that of But that of of was combination forward that. some We're We segment the we create that that we for the consolidation and us for taken created price all So builder a little of headwind We don't to hurricane. had and headwind it. always profitable of a little do go that us from little going little of bit re-bids have wasn't when and a with it bit this bit builder there

Keith Hughes

you. Thank

Operator

the comes from line is your Lovallo next line of John Bank John, America. of Your question with open.

John Lovallo

Hi, Thanks for taking my guys. questions.

going that I just The Pro initiated you on Can you largest first that - your supporting you competitors update an has guess that give campaigns us and thoughts know, question on an see product. partner advertising coatings how maybe forward? your is

Keith Allman

really our lost John you, haven't with space any we products. I'll tell shelf Behr

quality way to great and the the third with have brand commercialize Depot Our stories with have proverbial it. there. the where we're have. very best how great the both compelling initiatives that the are we terms best these best relationship is and Pro on the most share of position of hip joined folks, DIY verified we a strong in when that market party It's shelf and terms in out And at in we service verified the is by all same proposition we be

So we've to and brands our as in continue offers across want they had choice Depot expect and to we – offering process many we're product to the obviously product confident have consumers categories win.

John Sznewajs

say also I'd in John well equally the as know, our not advertising solely. are product that you you they it’s know marketplace, just

side as great with there's a Depot that So the advertising on on Home partnership front well.

John Lovallo

expected any cabinet why the underperforming of Okay. your overall little bit it's a seems sort Thanks, there Is guys. reason softer view business? has for And we least. data than then at it like industry some the been R&R of in

Keith Allman

soft. John, a choppy the to, is that we on can point that data think I there a couple bit a bit little things has been right little Yeah. and of you're front,

there what but category, least One, in You custom the softness seeing participate we high of or we're I that of in end are definitely part at of was very two the are that things. not part the are we the the high think the suggests end, seeing softness know, market. the very data market seeing, we this

think So component one of I it. that's

your hearing labor demand we the delayed country seeing where second and because think product are get our the pockets to the for where good products. we're customers retail instillation of - of enough that component while demand the can’t be installation install in you across just strong dealer may our it know, channel is is the I you simply labor KraftMaid products

John Lovallo

Okay. Thanks, guys.

Operator

line comes open. your the question Sood is next Nishu from Nishu, Deutsche Bank. Your line with

Nishu Sood

you. Thank

know are Going impact. investors and from which lot of kind the back know mentioned. you positive kind seems might immediate to you be a current know, pretty get looking of past to you of the well rebuilding Houston the you the recovering from hurricane impact, tailwind along weakness rebounding, anticipating, you

On indications how you for up that is any showing there Are early the you're folks. that seeing. ground,

kind of you the You know, tailwind rebuilding what efforts see there? impact know, might the you from

Keith Allman

widespread effect. We're you're see the Florida this both same of due think wind the at localized in damage right. the Florida. kind versus to that’s markets of principally We Houston flooding Yeah, was the and the nature do We little rain bit state point. seeing recovering weather of where faster it a than in

in right, people expect primer paint the we what home, it So disasters early which we've other particular storm repaint see that to primers. look to is Kilz we products, so orders our our starting need they to are prime and following indications seeing, their what are natural after and we strong as with seen for would

know, hurricane you first is know - just expected we've this going the So you experienced so as following as and activity. other that's a sign that's

Following to we that felt should the be should last think be really orders will impacted. as don't be for faucets earlier that And I cabinets mentioned and XXXX. be until

Nishu Sood

Got it. Got it.

the guess XQ as Yeah, in Okay. for well. laid out reflected breakdown sales you I how that's expected

to the wanted go I in question, price to commodity back Second paint.

is know the XQ. not disruption price kind the input in inflection you max you're impact specifically to but responses, with cost input probably commodity, know, chem to You price know the in Paint going petro Pro the sector talking for you obviously of the thinking costs, be about

sounds have So But spite do to in commodities. how that inflection would that? in I reconcile you're related be mean, hurricane you're in would expected that you the know, in like cost increase inflection of potential I How about the should have any see XQ. going it able to input saying we delayed even price still that? I think

Keith Allman

there like mean, impact we flow will with very and do very, think you I things minor think to some the hurricane Yeah. are very that and simply that that we disruption quickly. transportation quite and I know impact

Nishu Sood

Got you. it. Thank

Operator

Your next from line McGill the question comes Zelman Dennis Associates. your open. line & is with Dennis, as

Dennis McGill

think so, to would year the quarter, guess a start on quarter, the organic Thanks, about to that's trend see good been reaccelerate. growth the think that I where you out it thoughts guess with just impact, into I next big kind the morning. the start, range And that side, a or been Hi, Keith, in is to good guys. early have part the talked into X% of from aside and on revenue growth was what in hurricane I last any picture the get the year? half punch X% as off you especially to that ability of X% how October about can fourth you you X%,

Keith Allman

at to see little by looking We're full I that. mid-single segments and full In a down the commodities still described of be cab's for which was hit as growth and than line year to you our maybe it We're Dennis - by talked still bit to sense hurricanes, the top paint the about the continue go kind by know, paying rather digit expecting quarter. fourth to think get - cabinets terms hit we in we've full we're the year. line for maybe of the line flat line our will probably for top of slightly there harder as in year. in in makes to

the plumbing, year. again growth of strong We're for having terms growth. mid-single In digit full

capacity Our anticipating and seasonal typically [Technical down for that. we're quarter Difficulty] fourth us slow is

digit So is that. mid-single our expectation growth for and confident we'd see Windows in we're

‘XX. XXXX, In extension an I'd as you of this seeing know, we’re terms of really -

still very we in products, We're We We're our haven't cash in said POS sales for fundamentals. for in good cabinets and productive plumbing the good us. the semi-custom register and I - at believe and resets as seeing the paint. showrooms dealer in particularly our seeing is

we XXXX on a So good we've our growth be Day to expect for XXXX that would and continuation Investor we're right seen. the of plan

John Sznewajs

of the look way of out and hurricanes line ARROW, closer at the we're clarification, maybe growth. it the we you quarter, point in And probably as top to just X% third the impact if specifically Dennis, take one

Keith Allman

Yeah.

John Sznewajs

the just So way see know, we just you it.

Dennis McGill

Okay…

John Sznewajs

Not a huge inflection.

Dennis McGill

versus what and And the understand. John quarter, then maybe would of end you end the or relatively get earnings just can I fourth items? wide to guidance lower the but higher range, guidance, range the that the hopefully puts just the in are sensitive the on that implied more takes detail you

John Sznewajs

principally key Yeah, and the simply so is quarter of put control I I that's mean, just Dennis, up that fourth out there. think expenses we would I see, volume expenses do driver, how than the the two one our there's we to mean, really we into XXXX. forward to decide things other choose how if shapes or some it quarter be is, that fourth

Dennis McGill

Thank you, Good guys. luck.

Operator

your comes o Evercore question ISI. next Kim Your Stephen, line open. the Stephen from is with line

Trey Morrish

for for actually It’s Thanks on guys. Steve. Hey, Trey taking our questions.

could you Depot? to First, in that at that in Behr mirror product eventually bit to little at of expect how the talk about terms of you DIY you a you Home Depot have your what terms Home expect Pro. share market Do -

Keith Allman

a our and are The those with resi Pro way the of is really Home those the painters sorts initiative States that folks already that's about of go apartment the United are we half market. about The Depot in in maintenance value our is which think ring. here things. after maintenance proposition market to Pro significant involved where that really repaint repair, with It's

of double-digit kind the to with that continue we attack seen and segment. we've growth that So specific

Trey Morrish

walked to abandonment could Is then builder back you business that there you promotional going was happened And cabinet? Also excluding you. XQ any activity just happened? that cabinets. that Got additional turn away on there incremental consolidation from from any

Keith Allman

quarters. activity promotional seen The it's much last we cabman's a the been was pretty really couple change where and consistent from of of haven't in

builder In terms hurricanes. course consolidation. builders of from concentration were the the into on couple little A then of the a we and those that was that with a the put there bit of increases affected business market price

Trey Morrish

Appreciate Thanks. All right. it guys.

Operator

Michael, comes line your next Michael line from with Your is JPMorgan. Rehaut of question the open.

Neal BasuMullick

turnaround guess you of I ahead for How you know see you of much BasuMullick recently? bottlenecks are you there gains I share up? for in the is the as efforts know where you're your Milgard you turnaround Neal guess know, any sort performance kind coming you that to given seeing Hey, do ask labor Windows. in are bit and the and otherwise of Mike. are ERP this solid someone the pointed a or rollout schedule on out

Keith Allman

that tell we that we this delivery expected that to lead dealers planned would is it's you down customers large had those industry value our the and clear I lead had demand done times on sheet call for And a prior levels the the our and it on the or into line us with rates. a basis, get that. clear oftentimes and a time delivery you and of sheet sight I is of and mention this to bid expect, that a is quickly. delivery in it bid business because By did they I get reason a key And by improvements a leading doing we've really is to to and and quick. lose fill win as and the terms job then our regards turnaround to proposition bounced relatively be and times, meaning they back quite that might they driver

having I a expected to would it we So be tell than that, quick I said faster relatively turnaround, you it's but expected. been

So with was your follow up I'm that. question? pleased Neal what

Neal BasuMullick

On…

Keith Allman

in We've I in long lead in made have labor quarter of the apologize terms we've something XX record talked door I On operational really growth. Milgard and in work like talked those but It capacity. getting then times to the we're the and to and on this we being XX% improvements northwest made capacity, capacity, rates go at will know, be - that have to where the and close less days. just always tell of a fill we've that. that But period and I we've as about helped market Milgard in tight. in however you in tight. helping with in way have we significant always the during also both folks California than continues then permits you that growth the was out about the and it in what to regard. turnover it's

Neal BasuMullick

from Keith. all me. That’s Great, Okay.

Operator

your the question MKM from Megan comes with McGrath Megan, open. line Partners. of next is Your line

Megan McGrath

Maybe morning. questions. picture Good higher level Thanks. questions couple more bigger of a or

around In terms it down sales looks you cabinets, of know hurricanes X like the X%.

profitability. of You you focused seventh quarter know, that sales year-over-year. declining it's price And very know, and your being I on understand

out You like base would know we that seeing given regarding quarter what at in the and forward? go as flattening start least this you you segment expect the to when revenue some saw your in negotiations

John Sznewajs

be KraftMaid the that to to on our start XX% X% XXXX. margin. we're growth on in the then on remodeling direction and both view You new our the well. long-term We're to and segment in in particularly performing repair XX% know, about Merillat are improvements builder cabinets to that and margin and focused move Certainly we've in get introductions and in product range talked X% going to the

continue called X% march to that Investor we to So our margin towards growth to X% on to and XX% we XX% Day. that out expect

Megan McGrath

paint, is you little the know, your which and and bit seeing in the estimate about of you then at down beginning prices repairing model like gave sort things And of in terms positives quarter growth in talked Okay. we're you and you know, a house gallon know you the that. for

in you you think time terms What that positives fundamentals? quite the we're generally we've some lackluster is for know, kind speaking do know the Just industry seeing now. growth for you given gallon seen of of driving the macro

Keith Allman

to versus that you one think if start and our belief families The things requires be you piece in that will the Well, know, about look I of scales forming see way where to to have that's our me painting get have these it of from millennials been you plays lot has as of to the lot of weekend, a rather of do that's millennials. that of for a talked a gallons we you're formations has a to years more this. primer it know, is house There piece yourself. I do lot as terms there's are renters more people I it of then getting a less up a a code make in who back the and owners a cost few household on products a is when as a and to versus that start better you than number to at yourself and demographics discretionary colors paint there tend the fewer difference think think more coverage, significant millennials tend percent if going going a to renters big paint go tell into it. I I paint your someone formations which you money think

back. numbers So to going market for the that to fundamentally peg paint, think come when it's we we the look DIY to we look at start at

John Sznewajs

you up know basis. single look a tell were at you sales gallon low digits a our count and as we the DIY on quarter you basis Pro. and on I’ll in Megan, combined

overall So feel performing. we’re pretty about good how

Megan McGrath

Great. Thank you.

Operator

line question next Rygiel from the of Alex, Markets. is Capital Your open. with Alex your line comes FBR

Alex Rygiel

Thank good you and morning.

Keith Allman

Alex. Morning,

Alex Rygiel

of those killed guidance As the lines, some $XX relates the for guys to the I to behind do million then to put over Investor time, opportunity million. as Where million some they've think generally Liberty business That it Pro any - at relates looking you're to and it $XXX Day. some targets of stand out and on other the million you tracking $XXX revenue $XX ahead, tracking comments?

John Sznewajs

a Alex, kind know, guidance of half acknowledging only and that a year into on quarter You X we're a those.

that to there. Pro achieve then the we growth that And somewhere you that the not big exceed help do know, - get pleased forecasted. track – we're – on that Pro You range program camera clearly kills we on one the track with and us Pro every side now. will of we're things we're that I we're to very and setting on on we're achieve helping think hardware know, continue the think outperforming if end to know, piece That's definitely you the was component of a higher to definitely the expanded the I right

Alex Rygiel

And secondly Windows actions on the turnaround, left there any take? are to

Keith Allman

a know, or so Well couple it. know - we're you quarter you a only into

behind the you continuing out performed ERP on-time improvements very continuing us put prepared We've So we that system we're in to roll last complete improved in we've our have to our We've work. of for gotten the an plants that. that fill rates. we're productivity and a got and know, that in couple certainly we're well lot

the particularly in more to work drive to keep - continuous always improvement So working. there's

Alex Rygiel

Thank you.

Operator

your the Your next open. Ng is question with from Jefferies. Phillip, comes of line Phillip line

Phillip Ng

Hey, guys.

You’ve provided and have I price some in quarter cost about plumbing should the Can you with quarter in we paint some it. XXXX? color how fourth price/cost John am color think better in missed into fourth give on price going and

Keith Allman

over it Phil, as should at again, that slowly improve that we look we time. Yeah, relationship expect

as that the in price little of call in that's so why margins about expanded putting QX. into and ahead you we commodity XXXX, have saw and more in cost a Q we quarter You QX into got further know, feeling have to a as into QX a we - may will at little price the the of second we go marketplace. we're bit But into talked look

Phillip Ng

quarters for highest to a Thanks. good this margins Is your Windows building you XQ a Okay. guided was see XXXX XQ margin for out think year? And one historically XQ way you've That's that that for in XQ. margin helpful. profile about your which nice see target and was up your know and that should digit in step from impressive. mid-single business that some and pretty I in decline

John Sznewajs

good a that's way to look think Phil. I at Yeah, it

You're right on that.

expect business nailed as would course development that in of the kind continue - And as how the volumes seasonality out that and continue develops orders know the that the seeing over the XXXX. given perfectly. year. you to long strong we're the of we’re to You seeing That's strength the we exactly hold

Phillip Ng

Okay, thanks.

Operator

of comes with line is the Macquarie. line Adam Your question next from Baumgarten Adam, open. your

Adam Baumgarten

up what's kind my input clarify you lag go see we've and Hi, copper guys. them zinc your on costs just of the terms seen Thanks plumbing terms the results? for when then in Can taking when question. those dramatically, in you up the in metals and of of

John Sznewajs

Yeah, it’s John.

generally our lines. speaking right, lag of it’s because length that a the You're supply there Asian we generally of in roughly quarters about two our P&L. see is

And but a pretty and not so close. copper zinc direct you its it for track if one, one

play over of see how can time. course that You will out the

Adam Baumgarten

anything Okay, it, in any targeting you're lastly of acquisitions update sort close? great. And on kind of just that's there's then where if pipeline the

Keith Allman

a good really both gave and know the update of good be from to the in change out when on for terms status there work. can't across. continuing and I we various But I specifics, we've got you to hasn't of focus quarter in it get value been last We're that do Obviously into we volume. a let pipeline spread a our of in deal. last is we're believe that pipeline moving got what the attractive reasons in targets terms We've we'll

look North globally we're looking companies distribution, looking of type here in and you at looking the the If we're America. at, we're

continuing to So it. the act and We good we're work stay we fit right the with continuing to patient. activity we're them But before focused. and at find and to same time returns targets need the out

Adam Baumgarten

Great. Thanks.

Operator

your with next of Bob Bob, comes RBC open. Wetenhall Your Markets. is question line line the Capital from

Bob Wetenhall

the Windows the I good crushing. Nice is turnaround out to can underway? margins profitable be Hey, never quarter, hurricane. still morning. years could this? given to that on wanted where a you, three I such drive Two business. a ask to business you given knew your ceiling What's

Keith Allman

we as to on XX% know, margins Investor the XX% Bob know talked You Day. you about

a keep market. the to fundamentally underlying rates imply that fill there. in at would but you going top good delivery, leadership So know, strong you driving great XX%, great know and We've we're brand. out team got Good a a place,

XX% probably the limit. is that not So

Bob Wetenhall

dividend that raise activity capital allocation to scale M&A you standpoint? cash, just sounds when or being sheet. got And a It cash - it. any Got disciplined the balance on expect you we consumes wanted you've your from M&A around buybacks barring more large approach think $X I billion the like opportunities. you're very know, more Is a about, if of to just and

John Sznewajs

Bob, John. its

first in in of watching our we back versus about activity we four foremost into to over M&A the aggressively third then were continue activity while been in and have it late And course times and and at as four activity our us you raised you're about pretty I and too cannot repurchase type the the going of dividend the we know after years that we'll it know, the of company X commit think continue to that as last the of XXXX. the look that and that's you we runs the you've you right know of then the the the allocation you marketplace sales. buying invest know, way share existing to think growth quarter shares CapEx right, rebalancing businesses way out X.X% business talked is prioritize always capital pretty million keeps

Bob Wetenhall

margin business. Got question to in out you you and that get you to What's the should do I do your we dollar just some compression come know, Thanks and spend some investing spend the XQ to it. XQ XXXX? the was When when obviously that in finish up trying understand does in commentary and expect you around in strategic where of initiatives. know, and growth dollar you good investing luck. And to back in your into a put it kind go the of clean plumbing just in

John Sznewajs

Thanks, will quarter. Bob. we and do XXXX. all expect plans in and to better in the spend somewhere range our our do I $XX million to know be that yes $X million set similar fourth on will. activity expect QX do that We in the there - on be call you when in have for in plumbing there the segment, we XXXX We’ll give a clarity guidance February to

for spend So you kind - displaced. in those for XXXX of those

Bob Wetenhall

luck. Good Cool.

John Sznewajs

Thanks.

Operator

Your Truman Truman, of question the last comes open. is your line line from Wells with Fargo. Patterson

Truman Patterson

you of And hit quarter how fourth do know from little declining your and of segment maybe utilization the the know, mix Could guys. just about of and some bit as the you've us that margins previously think give X.X still deeper you guys on levels about - see know, I your and between capacity you there. you operating update stated dig in level you starts. wanted a XXXX, million looking the you to cab know, cabinet you an can utilization just trade-off know, Hey, you that? really you into decremental kind the into some revenues we're capacity

Keith Allman

our a capacity great place. in think We is

look cost headroom of whole start a regards say when and - a commence cost not with up capacity issue anything you operating the at more three We that's than of commensurate shifts, capacity two have as type We at plenty extra and that get of on to shifts to of X.X growth. us. for our million really that level lot have instead look to we

present. talking across capacity current really So the deal asset we're extending that It's for in need you about a decremental will hours demands. that of operation our meet an if of big would not we our demand margin excess existing us terms to because for

for about our in we right getting is getting product it brands humming a back at quality to look and fundamentally it is this want pivoting to where and performance shape. and forward as we're Investor capacity KraftMaid, about we Our up the getting and us excited levels. our good business talked to good we those working That's Day Merillat new and growth and introductions

Truman Patterson

Okay.

also you to even you so know XX% forward going you're safe looking are XXXX that were you we to Okay, know XX% guys that know you or are also is to little bit. know, you know, headwinds you be Is move anniversaries those operating you are move repeat into you assume will promotional maybe fairly it to that environment to further those? margin. the from see those we steady as towards going And know, to looking or know going launch decline going as then tiny product you enter a ‘XX costs

Keith Allman

if the of set by and promotional others, support don't some set alone customers our we schedule. again, it know, you go will. they That's You we those

been terms consistent. I it believe forward. have my promotional no expect would of In of lot won't reason the I that change to going a in say that that be of of environment terms fairly it's ilk I something whole expectations, wouldn't

Do I a a step. on to Truman? think pretty going question you it's have follow be

Truman Patterson

No. that was it. Thanks.

Keith Allman

call. interest to this for everyone thank I’d Corporation. And in today's Masco concludes their like

Operator

today’s concludes call. This conference

You may disconnect. now

Masco (MAS) 24 Oct 172017 Q3 Earnings call transcript