MAS - Earnings call transcript Q2 2018

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Operator

Good morning, ladies and gentlemen, and welcome to Masco Corporation Second Quarter 2018 Conference Call. My name is Angela and I will be your operator for today's call.

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

You may begin.

David Chaika

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

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

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

about that views Form describe statements. to other our filed future our with include performance XX-Q subject the We forward-looking will today these forward-looking Commission. and from and the Securities statements risk results constitute our disclosures and uncertainties These to which Our statements. actual materially differ Form risk could in are Exchange statements and our factors uncertainties our that our in we risk cause and XX-K

non-GAAP will measures. also statements include Our financial

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

Keith J. Allman

thank and Please for Thank Good morning, slide X. you, Dave. everyone, joining today. to us you turn

the We continued in our sales second quarter. momentum

Decorative Our and Cabinetry the XX% by impact Plumbing, excluding in top the Architectural, increased strong segments. line of currency, growth driven

and divestitures. Our sales grew the X% excluding acquisitions currency, of impact

operating profit acquisition $X into segments implement against in all our increase business, price executed well we operating Kichler a quarter to and million in strategic Our as and an of resulting XX.X% the the teams margin. continued make integrate our plans investments across

to increased $X.XX per share. XX% EPS Our

I potential you. topic this me is of as individual for address I inflation latest mind the top of rounds and of segments' our Before tariffs, many address impact of know let the performance, of

price the to continue experienced inflation of second we effect As in across commodity we work segments in and and relationship segments the four half and the cost price/cost pricing with approximately need believe we across inflation other we to neutral first our anticipated, to pricing disciplined of offset We will pricing all quarter actions half have XXXX. mitigate control to the increases implemented other be the this commodity seen, and XXXX. our expect If actions. actions, in inflation will. We further second and take we we that these

materially and As we have discussed been been last tariffs steel aluminum we quarter, impacted the enacted. that not have by

While are needed. as China supply this many of proposed latest our our by potential tariffs, we mitigate ability if of this the enacted, products with cost would from and components chain and increase, flexible be source round impacted we that confident in to price

considering in we our competition categories Cabinetry. capabilities feel we equal and or to our product Additionally, significant better manufacturing across Plumbing domestic compared are footing on our

Now, Plumbing. give of insight some additional into moving the with quarter's beginning each this back to behind segment's you performance performance, our let drivers me

Delta on X% had grew Watkins very American in strong and its retail introductions pleased quarter Plumbing North and Delta, tremendous a in product thank continued channels home and operation. channel market China. top currency. due strong a our local In driven ERP and growth continued performance local was in geographies. strength by achieved sales for another dealer local currency, launch in I'd showroom, International channel. growth ERP to Our May by e-commerce capitalizing Architectural growth grew continued and currency. American the record in X% that or largest Germany X% launch a new its retail Hansgrohe's Watkins, their Delta system I'm quarter in strong with growing X% this demand Decorative commend Delta performance North new success. XX%. this momentum our like achieved successful its segment at grew channels. line segment, its sales make consistent while team Hansgrohe and in this on efforts to system well, also X the Plumbing by plumbing The launching went drove to Plumbing in across and of

integration acquisition our of Lighting, our together partner, our mid-single-digit Home grew continued sales X% DIY on in XXX-plus both Excluding hub Depot, with days. The of is our and we to our growth coatings execute by progressing channel force. sales growth sales and pro. drive In pro pro concept plan its Kichler expanding Kichler to plan first paint store Lighting in business, with The

a and commercial Kichler fans $X and across and shared of breadth on Masco into professional quality our We the product both our capabilities integrate purchase of channels design, of offering, billion we further distribution has many residential fully LED systems our lighting profitably products ceiling customers. Decorative coordinate where leading expertise market. customer a as as and experience decision design developer As with decorative Kichler light position residential lighting lighting similar leverage our grow is based and operational and strengthen is base expect to a into of our to building many reliability reminder, service. lighting products, consumer and

our of led Moores. to Moving business and growth our across Menards sales business up our by remodel drove growth rate channels, channel. during the repair all Cabinetry annual on in an plan the The of on well ramp achieve as million have fourth well, growth extremely to the segment the our Menards program We strong rollout and quarter. initial delivered Cabinetry, run and excluding XX% $XX in as we of gone are dealer months divestiture

effect and an to year. workforce inefficiencies last segment A the due portion cost increased these experienced the in the inflation. foreign excluding We Arrow costs the will Turning primarily likely warranty continue to costs of reserve to matched divestiture our of our third due quarter. sales and adjustment UK of currency, largely to Windows, into rightsizing the and

X bringing repurchase position, deploy share $XXX year-to-date we toward half XXXX. intend our of total and flows $XXX strength of in share repurchases our continued repurchasing $XXX allocation, capital activity million for by quarter repurchase to on we second or in the to million. our share the our liquidity million million, cash strong acquisitions the to shares approximately forecasted Based Moving

of by annual in or prospects. long-term Directors is dividend. fifth $X.XX per its also Board we the the our year Our our confidence increase beginning dividend quarter, share to their announced increased in XX% have intention our fourth reflecting This consecutive

by further we retiring in balance the that addition, million April. In due $XXX our in quarter came debt in strengthened sheet

and cost segment the discussed. that our adjustment the This our Demand to product $X.XX I robust. our earnings Lastly, per believe for half are performance with segments XXXX. range on anticipating very I'm remains well the the robust of expansion is of updating in our geographies across this half in XXXX to demand Windows of just first capitalize margin be drive due second $X.XX. to the we pleased to strong in and increased in positioned growth to we're share and largely year

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

John G. Sznewajs

Keith, and morning, you, Thank good everyone.

one-time earnings reference step-up provided adjusted rationalization reminder, the of for adjusted comparisons in we Kichler call of accounting refer As Please performance have reflect Dave excluding impact to prior most my a will presentation standards. and the for focus of any to been adoption the items. related purchase to other accounting inventory revenue new page the acquisition comments charges, on as Also, the last the recognition XX pension details to period quarter. and mentioned,

reported On growth to a in per the earnings slide X, we share top solid in second double-digit Turning XX%, increased delivered basis, currency. quarter. or XX% line and sales local

or X%, in acquisitions, and local divestitures increased sales currency. X% Excluding

Foreign X% divestitures. by million. impacted excluding sales acquisitions the and favorably approximately currency our currency, quarter or second American translation revenue North In quarter, in XX% increased $XX local

continue price industry-leading of and repair strong our consumer all demand experience We remodeling across products points. and all to distribution across for channels

local approximately XX% matched reminder, international our sales As of of quarter currency, In a represents repair/remodel total second XXXX. the sales. activity

Excluding margins the XX.X%. once driven sales Moores, were X%, of by divestiture Gross international Hansgrohe. again increased

and solid half we the the as we look the the ahead to diminish. improves investments strategic margin of expansion year, As price/cost year-over-year second expect relationship gross

a drive million generated operating as XX.X%. operating and of growth. $XXX of we to percent leverage as while our sales SG&A points improved basis profitable continue to profit of margins making We to investments SG&A Our XXX XX.X% strategic

impacted a lag and on discussed operating second quarter's we last costs, growth price/cost. call, were the quarter in due margins As in ERP to investments, strategic

We the in incremental These Windows cost segment. quarter. our million also experienced approximately in items $XX aggregated

segment the we are EPS Our range that is share. $X.XX. quarter of the $X.XX annual incremental This affects improvement XXXX. The EPS to Windows as $X.XX item the narrowing was change XX% that our $X.XX, mentioned, to of Keith cost by our EPS our principal Keith estimate compared of And described. range in per midpoint an this to lowers second

strong growth X, X%. experienced Turning another sales as segment to quarter solid slide our of and increased Plumbing demand

Excluding currency solid and faucet, shower, was driven the and impact businesses. of growth performance This sales X%. acquisitions, by in increased spa our

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

North e-commerce growth for as wholesale, demand our channels industry-leading in experienced all consumer-driven sales Our in brands American and X% local strong dealer, grew we currency with across customers. retail,

into As a QX the reminder, the due of QX sales implementation Delta's $XX to were pulled of from that system. million ERP segment forward experienced approximately

Wellness business new to dealer industry-leading brands outperform products, spa the network, strong our continued and its innovative growth. Watkins drive Additionally, as competition, leveraged to

in markets local focus yield in continued X% key with Hansgrohe's results growth China. increased sales both Germany plumbing and international Our currency as strong to on

Turning displays. faucet impacted margins investments, and impacted were our largely at aggregate to include profitability, by price Mix win point a $XX retail. to strategic Peerless also in These price/cost growth items lower which due segment million. operating lag approximately margins

expansion year-over-year. will of the that we million containment are As anticipated despite actions our spend of in third and half strategic margin as we our growth we pricing at the consider realized confident ERP experience are the investments to quarter, comp favorably cost second year, begin $X and the Delta

$XX display of in a had the second spending million we As XXXX. and half reminder, other of

be full operating margins to year, compared for XXXX. the we this segment down expect For slightly to

XX%. X, slide Decorative Architectural to segment Products Turning grew the

Kichler sales performance mid-single grew to line as relationship. in Operating Excluding its the businesses quarter continues offset e-commerce by channels. by X%. achieve retail depreciation both contributed pro price/cost income was digits. top amortization Hardware the and and and increased Kichler Liberty from expense strong an and to acquisition partially driven unfavorable volume, This Behr's the it by acquisition also the the of second growth DIY XX%, increased in each and acquisition growing Kichler, higher driven

and of the upper we our raw continued be anticipate this for XX.X% the XXXX, in paint the we year, expect as to materials for on But full cost mitigate we second will As pressure range. of segment end look XX.X% needed. to we inflation will work half to margins in this

and $X continues driven million, due favorable was Segment schedule ramp-up price/cost, Cabinetry increased as and are by our in with the The XX% related at very the roll volume the increased home sales construction Menards segment, our quarter profitability X, low-single-digit in to by our the and increased divestiture. the outstanding by costs slide of increased out growth Cardell in and excluding to partially growth this in in impact double-digit to the through mix repair price. we program program's performance performance. volume business brands offset Moores experienced industry-leading remodel favorable and and win. Turning initial pleased we This new quarter principally to on Menards business

Moores X% to XXXX X% year, the excluding operating approximately sales divestiture full margins the at of we expect growth levels. For with

currency. matched divestiture XX, prior Windows and Turning the of our Fastener, to Arrow local X% excluding sales segment year in slide grew

currency was Foreign a positive due performance our growth market to and favorably premium offset approximately at impacted UK. pricing, the volume, increased was in sales Milgard shift favorable This This $X this by window a translation driven mix toward by single-digit door products. segment's by and softness million.

increased third incremental our the the quarter the anticipate of in we the quarter and as the reminder, new profitability reserve by the this As costs a launch million, decreased UK $X took Segment warranty to inefficiencies in grew as further and right-size comp at inefficiencies a third approximately X% third of tough driven million workforce products. quarter address $XX in segment We sales actions an Milgard. segment we XXXX. faces in quarter in in

increased XXX full with XXX to segment excluding X% this on million revolving $XXX currency of year, ended the as the percent facility. to down impact versus availability points to credit largely be For approximately we sales compared growth XX, prior XXXX. we Working and expect quarter divestitures, due as our And full sheet well to with approximately basis a to of $XXX X% sales points balance margins slide turning the the operating to XX.X%, as capital Kichler million of acquisition. liquidity basis year

full the percent expect be of capital approximately we year, For sales working to XX%. as a

our of $XXX sheet by took in retiring strengthen million We balance debt April. to also further action

approximately bringing shareholder by continued total repurchasing focus strong we year-to-date more valued second of approximately cash than to quarter, flow, buybacks share second or shares to deployed at million. X value half on top we million our During $XXX expect free With million the acquisitions our on deploy XXXX the our million, of $XXX million either $XXX in year-to-date. creation the $XXX in

confidence raise board our its expressing future, QX per XX% our starting to in our addition, to share, XXXX In annual announced dividend with a intention dividend. $X.XX increase our

that, million I'll the confident strong. Europe, in Keith. call in cash ability our growth solid free remains and XXXX. than business the generate seeing to Lastly, we the in remain North We're in back outlook and over turn America, flow more to with $XXX for And China

Keith J. Allman

I'm in address market quickly pricing and of shifting environment effective first Thank with pleased performance the XXXX. We cost actions. our the moved half John. you, with to

drive programs products Decorative and with segments Plumbing Our channel continued and growth expansions. to new and

confidence a Our Cabinetry fundamentals our efforts ERP Delta. now to over focused the units. newer long-term as launch XX-year homes have the at level than housing old Demographics business remains our drive remodel continues growth has Age repair repair remains which stock stock on X.X household more from a of start housing in high, large we Existing economy. XX% XX older years remodel households. as and to have executed of at and turnover increase has overall appreciation, and to and performance, healthy at successfully margin spending, to strong. price years healthy consumer remains investments a as of is per benefit consumers significant And year-over-year. strong spending a strong million growth nearly and home the and led Home remain and U.S. importantly, of formation Furthermore, strong has X% should homes. housing with for correlation a home industry forming millennial come begun generation at

we generate are growth we actions the on expansion second the investments the in well $XXX have industry With made, free cash to XXXX, drive in half have favorable as fundamentals the strong capitalize and year. of the and we flow to taken for over positioned margin to we million expect

and I'll value the and dividends now We the fit balanced will continue to to acquisitions a that, share with With deploy and approach with that open shareholders. return, cash disciplined our repurchases Q&A. call right up create for flow to for

Operator

with Your from first ISI. question is the line of Kim Evercore Stephen

Stephen Kim

both margins we we and you're in of those that could got to guess XQ clearly. perhaps make start Thanks just year-over-year time sure I in looking very I of half. I we the Plumbing in to in within components broke could what price/cost your expect And there, much, just quarters guys. you the in XQ, the terms if back for be $XX specifically million I just addition and with want think here. out also Appreciate business, up ERP if think to

John G. Sznewajs

John. morning. Good It's Stephen. Hey,

the of yeah, $XX I the call quarter total – terms as out, indeed $X that last million of the did components about on balance ERP is our we the call, called out so roughly million lag. breaks price/cost spend our In

quarter In of we terms investment fourth in a and can you for recall, last amount have fair and the what third QX, if QX of of display expect you year.

half $XX second of million this at we in year, about last had the in So total segment. aggregate

that to fourth that quarter would anticipate would and segment. So, question, both quarter in margin I yes, in the expansion second your say we third

Stephen Kim

– what related pipeline then the us the That's you comment I promising to second areas focused and certain is like M&A curious that your the as repurchases. if are there which describe pipeline? to in to particularly if geographically you. the of Could terms or acquisition you markets end and/or And look give kind you're verticals, now given on about could looking Was question was good. Great. any color most of had

Keith J. Allman

Stephen, it's our diverse. healthy and pipeline is

that function if would some segment and that you to range that larger we looking from We at the some existing both within smallish new have have opportunities well in as segments, segments. looking as size bolt-on, at ones we're and will,

both So we the broad we to to do obviously and that size. internationally, in creating on and be terms we're acquisitions looking have but patient acquisitions, long to for fit we the balance sheet of and going domestically make approach find sure the and reiterate and value our shareholder a in that the we're fit have We're I'd our culture that capital also these return right that have and both term. like strategy focused with

approach, disciplined on and with particular appropriate our generate and to to in are eye shareholders. to balanced can continue remain a we we're we invested value return our where acquisitions going on return the So going for capital

Stephen Kim

that a Would well that talking it right say $XXX to you'd say both bolt-ons when a of we million little along you're that million go should kind ones fair larger came opportunity maybe or as as that you be as think if the that about are of above to that would ceiling? be willing $XXX bit

Keith J. Allman

go wouldn't have you quality the think and it know, on right eye as came. patience, of as out be have, $XXX a opportunity. be right million But would again, balance if the of the sheet based opportunity we I the opportunity. our ceiling to No, over a given And to our it that able right to level

Stephen Kim

Thanks much, Appreciate it. guys. very it. Got

Operator

just segment. a (USA) Suisse. about Good - is Securities with paint LLC morning. bit Your next Credit Maklari the question Credit I talk wanted Susan little from Susan Suisse Maklari to

how of give there, You that, you of get continuing that stores? in related coming ability to some us together, expenditures the unfavorable business. be lag some to Can mentioned of factors are kind hub the to the of part price price/cost expansion of maybe within sense a those and your that's just some the

John G. Sznewajs

Yeah, good morning, Susan.

In terms (XX:XX). paint, input the of yes cost of

continuing our TiOX As price/cost of resins that affecting peers and both other I public some in think disclosed, go there are paint. terms the engineered into have headwinds of

this we as my And I mitigate efficiencies our those own and as to so, best mitigate pricing try working mentioned to on internally to both as as well actively our we're prepared working remarks, in through suppliers with can. working

little the channel making less of little that point, a say Suisse pro earlier we amount Susan Securities to and we're (USA) point. line Credit investment nice at certainly terms some investment have said, indicated momentum to just of absolutely guess decided dealer LLC on Okay. as on in investment you've then And at you That not our about this as ongoing our business, this really you're the there. that you of our in It things we performance our terms had and In disclosing this us some expanding further just margin in year. partner area cabinets, doing. Maklari - a and with the we're other in been that? more that like top seems color investments the give can getting some I

Keith J. Allman

call supply ago our work to started, XX and chain really to This the reconfigure Susan. when XX market. to went to Sure, we it, dynamic address the months months our factories in

on for price – purchase our So of factories, incoming Quality Quality, and points. focused them meaning the example, the for them we opening the materials Quality brand, took focused assembly and

architecture. Quality the So lower the part Merillat the reduced market. took we price then factory the and its focused we a brand have common-ized and of and point brand, on complexity that's We the

to we and that higher KraftMaid focuses that cost and call the and reduction it, on then efficient supply to more effective simplification chain middle point semi-custom. middle that of brand the after, very driving again, go So have and market,

complexity continuing to win Okay, stock think an growth, drive semi-custom, so I shows execution. off was you the taken so while potential. Menards able strategy to we So, are that amplification cost nice to of right cabinetry, we of force the the upbeat chain be this, dropdowns cost different going when drive this – a opening level market, that value about competitive look (USA) that across supply us of able for were Susan it's really price Suisse low and if to to look with combination when some to our you on across point, then regards how and you semi-custom execute And at to it's the continue sales have and segment, obviously LLC and we of that land, good and time Securities bandwidths the reconfiguring Maklari great. Thank Credit pay will, its - we're and we to you. were starting incremental with our

Operator

question Michael is JPMorgan. next from Rehaut Your with

Michael Jason Rehaut

everyone. Thanks, good morning,

Keith J. Allman

morning. Good

Michael Jason Rehaut

The I more up and pro, DIY the on moment. actually a a or that XX% in DIY I've of growth the a I mid-single-digit consistently had was thinking category you that segments a Susan obviously asked, maybe first in different to been both just digit, on rate. about pro was very little with of a kind question light, mid-single pro low-double-digit and more couple solid First, paint, but as for or growth pointed of bit growth, of type a better interested

one this growth because if of of point this rather the years. potential over we've or also the be view a as of contribution few quarter, more kind perhaps, as size type mid-single-digit curious than achieved that should I you where kind pause of was two is it's good quarter that a thinking digit years, last this more the inflection the given area with or of the we still beginning mid-single-digit thought three over type about expansion about a just an next low-double So of

Keith J. Allman

generating that committed for next We're growth our others, segment, we're our but with Home I as am The hub we're the to more be course, sure the traffic investments doing can is Depot, in we sales in going and our an it's quality and expanding this buyers the pleased of $XXX pro than chunk of We're works. remain so pro We're force million, this that some over drive the with there's in and brand that scheme, think a and the shoppers our DIY keeping I well. itself. course concept converting to with we've outstanding in growth, double-digit driving quarters job for our happy years it aisle. in sizeable double-digit to are with to terms to of speaks this of growth advertising mind, double-digit but growth of seen to accelerated Together good pro in committed couple the growth.

So, we across think coatings overall, and competition, when the we doing we're look good. ourselves against pretty both

Michael Jason Rehaut

Okay. That's great. Understandable.

any rollout there's allowed outside dealer a But on to segment, top the there a the of but if but sell-in. advance over was more Menards if the to with the I and of cabinets there in I if Secondly, double-digit I recognize turnaround that to be continued that continues growth are that, strong impressive growth top talk great great turnaround, curious you annualized if know an inventory rollout the XQ don't strong was sell-in $XX what key is mean contributor or quarter. in story business, growth you is contributed rate, the very to an that the know and repair/remodel don't million obviously line – results. cabinets not last said that that, Menards expect drivers this I couple this just of of even years. I channel of to run if you terms about line. any the could the there know

Keith J. Allman

done year assortment the in I as course, half year, good showcase being to in we was remodeling and that we well, us mentioned, and is of so when growth and Menards expansion, and a we've work you work, past of a big construction. the had Yeah, terms the win, able new our definitely cost contributor. for over growth sales But a competitiveness, demand and and, had win then as look strong channel across you in that repair as drivers, mentioned, it strong both dealer

assortment it's beginning one driven a We've cost-outs. you of executed this obviously ago and KraftMaid to together action reconfiguring continuum. and launches and reduction took. chain XX of both included did, actions we the over along then the significant turnaround We've it's, imagine, Merillat, as might series that focused supply built this that at to come points various that enhancements So the the call cost regards months in terms and around price it, we of no with

those business. together excited all So in about we're potential and the have things come the

Michael Jason Rehaut

in terms should over could of like Any quarters, mid-single-digit that? a further at add granularity maybe Menards obviously be to we next potentially core growth of the expecting least couple and

Keith J. Allman

the full year looking to X% X% in range. that We're for growth

Michael Jason Rehaut

you. Great, thank Okay.

Operator

comes next Sood Bank. question Your with from Nishu Deutsche

Nishu Sood

Thank you.

So, Keith, appreciate the and beginning. the input commentary tariffs about at costs the the

Looking margin you perhaps like the highlighted the guidance takes Plumbing, at I where high In that called there. sounds guidance of of reduction, a the of $X.XX into Decorative with It at it out sounds Decorative end the the your as opposite. other takes perhaps going and puts previously? imagine that you midpoint, expected kind than expectations some like price/cost about Architectural going incremental lot your and well relative range to were Architectural, in talk the trends are a of the you just or puts the better little can

for other reconsidering this and the kind quarter. takes guidance kind So maybe some major of that the of went into of puts

Keith J. Allman

Yeah, exchange year thought that beginning unfold here, we at Nishu, the experienced. we there's two what primary we Windows versus about and compare One headwinds drivers. of the the what seeing when two is we're is foreign

a impact QX business we some States, business warranty about was in the and there in and United be of the Milgard that here In in expense the million our $X of QX. think of in will accrued and in those Windows we significant was that impact UK our in that we a areas in terms workforce did about $XX million combination headwinds, reduction that in

FX, And $X.XX. operating revenue that, that to about comes experiencing we favorability $XX we're terms million affects we when in So that aggregate you thought then in and would, originally of than less profit. about

$X.XX. that to So, about accrues

that's we year there, way year thought at what unfold. terms the beginning the and the right $X.XX in of of the there's So but difference principal the we're seeing

Nishu Sood

Got you tell gone that of us it. price/cost anticipated earlier does kind expected as year? price/cost, has then it on And as that this

John G. Sznewajs

expected. would kind as beginning out, of we this playing and about the year a a always it's that's for I'd And Yeah, said it's back it say story very be half on that Nishu. how price/cost, from

remarks and So I in of prepared our be the half think I to we year. mentioned neutral expect in both Keith the price/cost second

Nishu Sood

And the Decorative DIY there. tells a better there. Architectural, good a that it. obviously of seeing you're growth, the in positive be performance growth us growth still seem would category Got It than on mid-single-digits volume then so to kind

of What ahead? outperform continue You've kind for time. DIY drivers that? in category of the had long you trend some are to the underlying that place now How can looking

Keith J. Allman

Well, it that customers. and Home growth the The store to in we're mid-single-digit mentioned, a to the very is we're with partnership expecting pleased traffic with I the as year certainly certainly through And getting. Depot, convert traction we're

terms with what's distribution just call points that, great X,XXX of driving let's we it, and levels of of got well service. that's The Depot. very managed outstanding In have, Home We've

have focused and Depot to where concept a on on are their in week this Home distribution we truck here of is The customers. We completely steroids going every for center XX/XX Home and Depot a the focus

generator DIY focus, that efficiency traffic in and of and course – sales. service it level brand of leading So, is of quality be levels, in that and and a brand significant that in the foot the

what So it's distribution, service, understanding product, taking outstanding quality, them. of of and of and make consumer care wants to and an conversion brand, combination a how the that

and The with So expect we Depot continued growth. it's definitely Home a Behr, and partnership

Operator

asking question one follow-up reminder, during session. and one the limit yourself a to question please Q&A As

question Capital Mike with Dahl RBC Markets. from is Your next

Michael Dahl

Thanks questions. morning. taking my for Good

Keith J. Allman

morning. Good

Michael Dahl

Morning.

range components thinking gone flat if Kichler XX.X% Kichler, to the margin the way right toward of the price/cost, First something on or to given roughly the the Am on quarter little has me to quarter the Decorative, it suggest question a it just the that around would about year and than the would – probably on breaking great. those even color looks in as business. and that legacy up about thinking Just both the some more two there the just is margins there between was upper better full flat that those guide then legacy in potentially margin just in difference and business for expected? ex I comments be actually end of that the performance down the guide XX.X%

John G. Sznewajs

the when good than low-double-digit from range teens say Mike, a some One, experiencing been high said, think as (XX:XX) lower anticipated, we've bit in disclosed materially Kichler but different. been had than we Kichler's you That little annual that bought that the margins experiencing margin better segment. have and company in – is probably that I Yeah, a originally had I we obviously there. we doing a we not would insights are perspective

margin the And for a materials some in that raw we've don't experienced just helps particularly that inflation works we've inflation We with segment it So, on paint. in price with forget that the and recover that touch. the the the commodity way the paint us we with recover that taken, paint actions is of paint. cost

So actually, what contract that a bit. margins little tends to does is

that piece of a has So, it.

for So we margin expect do year. kind modest full of the contraction

Michael Dahl

Plumbing, far ERP. cost, top you're around line Could helpful. as second just as an question That's It didn't change decent. seems guidance you give items it. My in the Okay. looked the midst of update? like just really the us Got

and So seem the update any it be just around us there takes ERP puts been have there disruptive. conversion But kind of that. an and to doesn't that on whether give

Keith J. Allman

as it it. of I live the a Yeah, along little in as further midst Mike, you than being We May. said would in went characterize bit

We have been of a couple closes. obviously through

was launch. of We have order-to-cash manufacturing This a turned system significant on. type

hundreds that system. ERP we of implemented a was existing only change ERP as was of that system. version the It new we a wasn't So it a and new that et it cetera, not people training, a an initiatives of system, but implemented multitude system and significant of management organization very involved

very and think, we was We it to significant I the also our But a to you're it, the plus. very need endeavor drive that been significant significant an well. this a a and – quarter some Hansgrohe went was you upgrade costly have intelligence it good that and success we're some a it So a that well executed we real efficiencies and as with it's when business in Mike, that. was was pointing big executed turn happy and investment, have SAP to have look of yet well system we the at while it certainly And magnitude continue to upgrade tools on. had of and at that we to we point,

and put job is a this at, doing a we something particularly and better on our performance, So focus pleased with I am Delta. at

Michael Dahl

Great. Thanks, Keith.

Operator

Your Bank with America. next Lovallo John question from is of

John Lovallo

me you guys. getting in for Hey, here. Thank

price that's understand second there sure well question mats that fourth in the catch-up half? for being half. in the second with First it about the is being raw as off case flush more make leveling in quarter Is – I want quarter the of or this, just third just the is, the comment kind I to

John G. Sznewajs

quarter roughly similar quarter. it's to John,

QX. difference So and not QX lot of a between

John Lovallo

that's use last in runs. increased any logistics mentioned you you helpful. the of in I had had quarter standard then see cost distribution that given that Did not And your freight Okay, and that really uptick second think quarter? much

John G. Sznewajs

as customers. little particularly actually bit of like with to our or we an our may where as Windows runs, say, Behr have more going that common paints we don't our Yeah, Delta customized standard let's products we Cabinetry have some have for with John, a of seen well as uptick of products faucets as products in

efficiencies. we're some little yeah, a have work either or So, but a in think of we price to own our indeed, bit of position of some seen to offset that inflation, internal we through

John Lovallo

Okay. Thanks, guys.

Operator

Jefferies. with next Ng Phil question is from Your

Philip Ng

that's get distribution. the to of ramping Hey, Kichler your up of on integration some leverage guys. how as Curious and your commercial thoughts you

Keith J. Allman

It's going on very over days. well. plan. been We're XXX It's

of number fronts of integration have legal. executed risk terms treasury, in We management, a along

with our quickly do implement in Kichler areas with working existing and to efficiencies freight yet. as We're the China Masco in going grabbing can, team as to got at we infrastructure the Operating of consolidation are and we've particularly in We logistics and System. China work

add We customers think common to leveraged we be able going to value. that further be to are have

sure. very cultures meshing The our planning say are with plan investment thesis. I'd are for summary, we wins. wins term for longer more on and on plan We're in that So, we're well. We're early getting

Philip Ng

guess of kind type envision of in you what then chain interested and particularly it, of and prepared you how Keith, newer respectively, in of supply the in Got China. tariffs lot going the tariffs do a it you're kind your things upon components since manage I buy and Curious touched your of side it potential business Kichler – on impact from remarks it's to a on and Asia. you Thanks.

Keith J. Allman

here obvious, shakes all, the all it our to as the segments. at expect degree it's but remains be state moving it if to but where and across how parts and everything it and out, what lot I'll and of seen timing varies a might there's and enacted else, you

with is bit a then in Windows impact large impact. have that would which and So, for imported really have little and Cabinetry impact to imported in largest has some our have hardware, would Plumbing us, decorative lighting impact. segment of no plywood a the paint, with and some hardware regards

are product across terms Cabinetry, then supply relates at of competitive we to when In in costs. procuring footing a terms And some from by that, the domestic categories we on in mitigate manufacturing one, how we quickly our we effectively what at as or and look couple equal position. our it with look industry-wide to believe we these competition two, is handle of you can that considering we and do really to and chain And number of at large, lighting, a better do chain in we China. Plumbing then our that and value Number look what regards things.

initiate we our So and of needed. something you strength to if feel in this regard, whole I stay as would cost-outs look to obviously of it moving our channel to price. price But it position both would we and reiterate brands, where at a there's service parts is and all our when competitive see and that ability watch comfortable our in the that we're relates and going shakes out. lot But

Operator

Your with Keith Hughes SunTrust. next question is from

Keith Hughes

– Questions specifically you. back Thank Plumbing, a in Plumbing. U.S. or quick question

like generally kind of were channels out had good You it sounds called in this all period. the

in little win kind you, more, of the continue in quarter the know sector as past, think a I diving the details Just growth? has for trend the whole. that wholesale I with of big a been leader a being second that bit Did the

Keith J. Allman

did. wholesale been Yes, in for it's Very strong it strong a quite and while.

John G. Sznewajs

Yeah...

Keith Hughes

that – has been so ahead. go Why

John G. Sznewajs

pretty of that so say that that the we just don't I'd though reminding even into was QX, impacted pulled good by $XX million QX that numbers, well. out was you – ERP, posted that forget as

Keith Hughes

that does is kind Where or numbers retail? fall? wholesale the a affect that of that does And

John G. Sznewajs

customers. all based our across I think broad fairly was of that

Keith Hughes

you Okay, discussed, Why and this. been so these over wholesale periods final on good has Keith? question

Keith J. Allman

we it did on I work lot a of assortment. think the to the speaks

launches. aspect went with point So a significant We've worked in and we wholesale. showroom work amount targeted of opening of price in some on the done the

our the and showroom Delta customer have outreach, the our to that customers and continuum offerings And investment to done to So a the more goes recall with not in we that that the by we up where terms on juiced product center, significant business build work spent that bring we incremental work and you back you only we where call programs sale capital customer of showroom extension and Brizo on and product that marketing we've we feet. influencer or effectively, that so had counter then end, on some the also then also of advocacy. back outreach or where we've creates experience we overlay and some made the year have work a to lighting may nice design, our more really create across an lot the and we've three the front a in show assisted done on in and have and gained showcasing what we the LED end displays the them displays

things So for excellence growth good us. of it's the combination of is that what area driving commercial around a would that those all I call

Keith Hughes

Okay. Thank you.

Operator

Wells with Your next is Fargo. East question Stephen from

Stephen East

of that? all have half and businesses. might various not in flush of still look quarter Is you think good your about that in year, early to you the it about the offset in by a some pretty half, tough the feel you in time things? could second sounds you like Keith, the than as that for talk the we're seeing. other be back typically flowing flush actually from through and lag May, the cost better you on to the the And sort raw right second flush – a of is you you One, guys. that with your major being Congratulations about end few with the get you materials income morning, it Thank raw of statement? talked that way price/cost when paint, a and in way. being Could environment then finally, your materials, when you announcement assumptions that through

Keith J. Allman

way down, in break your to of the different segments. is question our terms some of Stephen, think to best Probably

from driver So XX% there is look to and XXXX you you've copper point $X.XX seen about if June about look if big at of you say, a June view Plumbing, zinc. June increase And to up $X as at, from a for XXXX, copper.

over the significant a a And gone to while year, bit cost down dipped late, that's from Now, driver. zinc, little has been of about has that more $X.XX again $X.XX. then last

healthy that's increases. bit again So, are in and the a those but seen last month, we've X% about dip little that a increase, still

look segment. go you XXXX. look you and at at in of it's the seen Plumbing and we've June seen now. to And go our about up resins, $X.XX XXXX of TiOX, almost driver the business, copper, of really about in up kind it TiOX we've June coatings same if that's it the resin pound When So, to XX%, then from as a

probably So, to we that's in little seeing we're is a half. bit significant resins as increase. be back look to And the pressure what a going more

primary driver right And use plywood, obviously that about and range. the again gone – hardwood lumber hardwood XX% then coincidentally that's So, that's coatings. up and in we in

with experienced mentioned, we it we've both getting So, that cost attacked price four as segments. price, commodities we've way broad-based that's and pressure all across and pretty the

Stephen East

any far allocation, from other it lag that get at how is your Got you. you indications time, and flows I'm when wondering thoughts to you bump that then XXXX All long billion. And further? I that that or $X.X whether with through? right. into it the And bumped question announcement through had then as just it are capital how your you up any you've you already look

Keith J. Allman

and the inventory. the I'll price take let of segment, capital it it a and – by terms lead allocation In on the lot of varies – on the time question John, depends really you

in we price P&L, relates some with sure, price where imagine, away. it's books cyclical more China we that we you cases, more be ship longer then direct I'm FOB supply into and port would chain could the the actually that time get a So in and our come as could have a the we right at it may when could off books out. price And business to get that's sheet, before

it It varies. on variable depending a to it's two So touch quarters and capital? the want could you on that be supply – the do to commodity talking one John, chain we're about.

John G. Sznewajs

allocation, terms in you're capital Stephen, sure. Yeah, right. of

updated Day we of had after cash lower that reform. more of pretty last over we is healthy As the the And sheet. we've a billion I we gotten on comfortable with last the tax course levels perhaps couple of that operating one $X.X of things Investor with at balance our the outlined quarters think year,

May share the well to much indicated terms And than Yeah, see be price I have window? that plays through emerge. year where mean for in what of that more? as of exist. It's in say. tough do more I does both out How we'll the to us there there's candidates acquisition that as that where we so, $X.X go last does deployed three-year capital billion could think a possibility

the so, that's still little And future something a out bit. in

Operator

Justin from Zelman Speer question with last Associates. our And comes

Justin Andrew Speer

you, morning. Thank guys. Good

Keith J. Allman

Justin. morning, Good

Justin Andrew Speer

on ask quick I'd question business. the Windows a like to

those the you intermediate to what Just you one-time, size for that some maybe what's the mentioned. What's on margin look XXXX ongoing, this or particularly pieces right color term the as business? is of and

Keith J. Allman

work quarter. talked through in of over this $XX those about next inefficiencies We $X will we UK quarter in be million particular. We a we about had the million headwind some in about think it as

X% X% term, in top for looking long line. year, to we're growth at terms the of In the

Justin Andrew Speer

pieces mentioned, restructuring what then was what in piece mentioned – the and the year mentioned I thinking for UK more with to you how we that these what right Well, workforce. you – repeats doesn't, structure right particular, pieces like next that just those you on think business. those I'm is curious a warranty margin moves, and the piece, what of as

John G. Sznewajs

sure. Yeah,

like of UK as Justin, not you piece work recurring. through the expect, activities is should and we restructuring so some nature in kind one-time that the might of be

accounts in XX% May it is whether do our of long term whatever, for and to range not Day time the next in. low-teens, guess warranty this In question, was we that of that warranty term, the and I that whether your time so from it. nature, really terms this of have last first experiencing accounts we that to costs to warranty quarter's or Longer that margins quarter our view reason this whether those the or the long we some digit that's adjustments we you that quarter of to quarter year. doesn't things or to into to it's of judgment-based heart to the term of where at low-double of next coming time called receivable adjustment out at all it's from with The one are piece, inventory, term it's to make terms time, your some expect in drove respect principal but should that change Investor be margins were of warranty the inflation to evaluate XX% that long again point, our in year, be, the

Justin Andrew Speer

then the benefit the in back Menards question follow-up much you guidance? Plumbing just half from How did quarter business provide a for for lastly your and organic me cabinets. on And a then figure in growth

John G. Sznewajs

provided back No, half. a think don't we I

a all X% I is think Moores. of of we excluding full divestiture to X% the said for year

Justin Andrew Speer

on the there in Menards know that contribution thinking the context we obviously any cabinets the Okay. you don't have but for about And how Do much. quarter, piece, then just helped, us?

John G. Sznewajs

Yeah, at don't intend that this to this We point. time. haven't we to disclosed disclose it

Justin Andrew Speer

Really guys. you, Thank appreciate it.

Operator

does this conference. And today's conclude

may You now disconnect.

David Chaika	Masco Corp.
Keith J. Allman	Masco Corp.
John G. Sznewajs	Masco Corp.
Stephen Kim	Evercore ISI
Susan Maklari	Credit Suisse Securities (NYSE:USA) LLC
Michael Jason Rehaut	JPMorgan Securities LLC
Nishu Sood	Deutsche Bank Securities, Inc.
Michael Dahl	RBC Capital Markets LLC
John Lovallo	Bank of America
Philip Ng	Jefferies LLC
Keith Hughes	SunTrust Robinson Humphrey, Inc.
Stephen East	Wells Fargo Securities LLC
Justin Andrew Speer	Zelman Partners LLC

Masco (MAS) 31 Jul 182018 Q2 Earnings call transcript