MAS - Earnings call transcript Q1 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, ladies and gentlemen and thank you for standing by and welcome to the Masco First Quarter 2020 Earnings Call. My name is Carmen 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.

You may begin.

David Chaika

good and Carmen you, morning. Thank Corporation’s Welcome quarter call. first 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;

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

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

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

financial include metrics. also will statements non-GAAP Our

earnings Our as and references our will otherwise under which GAAP and to adjusted earnings to unless are We in release be our presentation adjusted, operating reconcile Investor website on metrics slides, these profit per available share Relations. noted.

turn I to over With will the Keith. that, now call

Keith Allman

morning, results with the year I to Dave. conclude this through response our is actions everyone you I you, quarter the remainder us I business will first pandemic. at of in and COVID-XX thank will today. time. taking difficult are Good we we and the Thank healthy are our touch strong beyond. how looking and then joining by comments hope the discussing for there out through everyone and safe, managing begin my

Please turn to X. Slide

task employees cross-functional safety unprecedented and Our March, In to across our this top during response COVID-XX coordinate we organization. time. formed the priority well-being of early the our a force is

followed distancing cleaning to and modifying taking the proper practices and remotely, measures social to the for and Centers including sick from Health have enhancing employees Prevention, ensure shifts, work Disease guidance practices areas home. Control ensure World that Organization best working employed We staggering and stay

focused we supporting on Masco’s been the work We which foundation community have has communities in the and outreach culture. also always been of at live

Several such donating and local by donations. assisted masks frontline sanitizers purchasing equipment making have protective business charities healthcare professionals as and in-kind and by Masco units by and

the In a shields communities to and days, to $X near we the addition, have million RAS the matter organizations Other watching of non-profit and exploring and ventilators and are committed producing certain units. and efforts business of coverings needs in valves and of units that examinations a components in proud delivering going to include on face serve closures our our few our just manufacturer helping urgent They each very meet for employees. of medical in personnel keep These across Germany. I other safe for treating to interim clinic communities. am many efforts patients and the were worked hard our company. have protect of to extremely activities our COVID-XX XXX-bed and

employee been customers second during safety. of the highest meeting consumers to ensure time needs this of while are has we priority and our levels the Our difficult maintaining in

the continue May. products extent April essential shutdown been businesses will Our and certain to to some in shutdown for month provide have to facilities be though continue of

the for QX. in of distribution the big our closures will retail and customers have in impact number limited box stores certain sales but on on limits QX, of products Additionally, categories states in and restrictions of various outlets sale reduce

Please me first Let results. briefly Slide quarter our to X. discuss turn

grew million earnings profit per the per in to increased volume For the to leverage our of North principally $XX impact $X.XX and paint sales Operating increased XX% quarter, in share. currency. and X%, American share due strong excluding plumbing business

across all currency, Delta’s sales drove record by sales quarter strong driven of excluding as segments, they plumbing our X% volume to distribution. Turning grew channels

solution System our showering in a bottom home that an showering our products technology an ISH in invested Investor interconnected quarter, spoke connected system company adaptable of last the for developed year. monitors in flow at acquisition wide drove is Day technology a small debut Hansgrohe performance. Smart that both the of volume has that at we we system and temperature strong with segment, that strategy featured water. This Frankfurt also Show top our range and is a architectural decorative about the And Shower During the of and and controls paint line

were reaffirmed of took at Behr’s As do-it-yourselfers advantage painting the time March, acceleration position as out the a Behr testing sale throughout spots home Recently, two and we in shelter-in-place the three to saw undertake Behr a of more paint paint highest was issued Ultra of top the more projects. rating once brand and orders Behr and achieved in our significant third-party brands. as we organization quality with by leading again Marquee

us leading with to well to demand. DIY the continue Home positions paint of value resurgence this capitalize Our with and quality on Depot paint our along partnership

over on the average We in Cabinetry open share repurchases additional incremental transaction repurchase market we and no $XX delivering when ago. of through receive transformation the that the on on sale a divestiture announced depending us also shares completed share ASR to concludes. total year that over cost many We quarter, $XXX a we price accelerated at just how of portfolio deployed actively million of combined between share business at our just per expected our unit and for the an an proceeds $XX

to strong standpoint, recovery. we liquidity of safety things: ensuring and on a current how our maintaining are positioned in let’s X. we now win two it to and are addition how discuss impacts we environment employees, are turn to focused the Please our approaching our commitment outlook. From So, Slide our in the business to

billion the quarter. Our liquidity the remains strong first at $X.X end at of

activity actively by are a fees, share our expenditures spending, liquidity our costs We and indefinitely. reducing capital wage delaying discretionary conserving suspending hiring implementing cutting and discretionary and buyback

efficient able ensure our scenario the are we to way is most any to in customers goal possible. support Our cost in

on brand, to service are pandemic, this cost to ensure While to in and we committed we short-term win a and focused driving growth during long-term innovation control invest the we recovery. will continue remain in

in We uncertain the it pandemic, duration and difficult this depth the best. and predicting is of impact dynamic times accurately at and are of

However, I about we are second currently quarter, XXXX share how have you and to with understanding thinking like would formal we the for guidance our XXXX. withdrawn that

in that we that May of there and With the reopening orders, United rage shelter-in-place began numerous Europe, the are This shutdown in States our enacted states in no geographies. or further and the closed to be to sales and month second down anticipate assumes of XX% XX%. facilities the throughout additional quarter restrictions

safety the throughout our distribution, XX% will quarter margins nature be year of the decremental plants operating and in shutdowns XX%. full will the decremental improve likely due to With range and a restrictions to margins in are and the to we the year of have a shutdown These and inefficiencies enacted. second reconfigured sudden XX% result of the roughly the rapid decremental precautions of the in

anticipate reopening. we demand upon Additionally, healthy

our on now quarter, main the COVID-XX to supply our was its of chain. the chain, beginning impact supply at Transitioning the Asian about concern

are and world. good we the for in China of and first third-party now or for While a which suppliers all the operating our hope XXX% the of majority shutdown to nearly suppliers at close third-party of is our the sign quarter, our factory were factory rest

assess with DIY ticket, on determining believe leaders our years past work weather near-term Masco impact storm refocus over the through and lower managed during and products across oriented particularly products oriented environment, this remodel the portfolio position Masco through outperform to move to few on in well closely less are and we as to the best strong our to to positions recovery. we repair and working we the our cyclical, recovery. the organization position to ever-changing win how our the As XXXX are we We

are the so With quarter I to over on will and trends detail how first that, far QX. additional now the we turn John for in call seeing John? our

John Sznewajs

Thank you, good and everyone. morning Keith

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

currency. X% had X% first and to Slide we increased Turning X, sales grew solid in a and local quarter

first revenue our lower plumbing driven unfavorable mix quarter. in is performance This translation and sales hardware international by $X American lighting X% impacted local in XX currency, and In strong lower currency our This Gross our pricing volume offset businesses. currency, by points. in In in decreased by local by volumes businesses. driven unfavorably partially actions. basis Foreign volumes the approximately in partially XX.X%, North offset by the quarter up were quarter sales X% paint increased growth million. was margins

we discussed to SG&A as million, solid to XX delivered bottom quarter. basis points sales with increased a XX% XX.X% performance income Our decreased the to basis operating $XXX expanding XX.X%. points XX that increased line costs We tariff despite as margins percent operating last of

quarter EPS to of increase was of the $X.XX in XX% first XXXX. an compared Our quarter, the

for Turning the to guidance Keith year, as of XXXX our the reminder and withdrawn we XXXX. mentioned, have

as earnings be on as tax other items deck to dynamic such our Slide we times, rate, given corporate have However, transparent key along call expense these with of general normalized share our our assumptions on as provided count, and XX possible the website. posted

we walk wrap through More call before color will turn sales more importantly, Keith. over the as provide our and to the in I position to I trends on help on you liquidity additional each of are with status better understand our the detail seeing up business April I segment back

currency. increased X, plumbing Slide the of impact X%, to Turning sales excluding

this impacted quarter. sales, across segment in channels. $X experienced unfavorably as the demand retail and North strong by translation approximately e-commerce we local in sales currency American wholesale currency Foreign X% increased million our

our decline with As of unfavorably a Germany. was the sales in than in China products in Keith growth as in Faucet by showering plumbing including other mid was markets, increased the result mentioned, local COVID-XX. Hansgrohe sales approximately record quarter North at another growth European the the facility International in volumes decreased order. double market impact Spain by growth Delta an due of business of as in single-digit delivered declines This approximately to offset X% closures X% its currency UK, a and France, digit sales in result American low from quarter XX% state California and home Austria their impacted their spa growth more bathing

of the stand the full profit volume driven incremental in Operating quarter X% by lower increased tariffs. offset partially in impact a by

the in Let’s markets. seen recently have trends we plumbing turn our to

be sales that quarter segments sale sales do situation the can approximately XX% quarter million weeks in down are to expectation will While manufacturing by misleading demand a few in principle In quarter our from California spa we we be other helpful. to XX%. spa affecting our be in in Mexico April orders closure seize April. and unprecedented due inter early are orders this plumbing lower not data will us any and prior short-term the points sales this by second a locations being quarter spa businesses second year decline excluding This results anticipate feel fluctuations, aggregate is business, $XXX and segment. in We driven typically segment XX% in currency several approximately will down decline shelter-in-place our between in issued is as that production. as in trends caused only over These March discuss orders late in

Our demand the enough Interestingly expectation both robust. May end production is specialty thereafter. our of by limited and that remains will our channel online through we for and begin customers, through spa dealer ramp up

XX% and be many Additionally, of largest as declines supply our digit France are in we UK rebounding Italy international in our to European the in appears and both approximately year being chain reopen. in the slightly over impacting North China UK, illustrate demand the showrooms Due year. April, begins orders impacted last this, shelter-in-place double orders from wholesalers currently China Canada plumbing our April to many shutdown approximately and In the and first be market. American we and year sales To countries, perspective expect business XX% U.S. to Germany, high our including many sales nicely to seeing in operation. states were up declines is sales. economy to shelter-in-place quarter their plumbing in flat closed but plumbing from down remain the by

e-commerce what be believe pent the we to there economy of based are and demand hearing will this Some reopens. we shifted demand as from customers on channel has the up additional

performance This our to Decorative DIY high-teens mid growth single-digit first driven growth in business percentage Slide in Turning and Architectural strong X% by Pro. in double-digit growth quarter. XX, grew for the paint with was

from resurgence paint painting orders Steve benefited Our outstanding as in results in shelter-in-place DIY issued beginning DIY March.

consumer to call early capitalize compelling value Home behavior. well it is are in too with strong While partner we any and a Behr’s proposition and trend, on quality with shifts this a Depot positioned potential the to

Pro the and our addition, In pleased committed investments are remain with in to performance quarter. we the in the

a three our businesses label private as customer. sales $XX Strong our earning paint and lower segment, of mentioned loss quarter were a rebalancing by Lighting hardware we impacted of call. in our online in were builders fourth million inventory to plumbing portion increase by offset on to sales approximately we in businesses lighting due all strong Similar the sales experienced a in program and this segment. orders at partially

their that by and offset XX% increased to by driven by East consolidating during took shifted habits, the quarter the business builders’ Center volume lighting into and closing facilities. quarter by consumers Distribution purchasing other We As impact partially profit our operating the the lighting steps incremental tariff on hardware. strengthen our activity in Coast

prior segment quarter range be anticipate year we April trends, X% of to will XX%. XX% the in in expect the second sales to down be April over down sales segment will and in Turning approximately

will a $XX label inventory impacted of due portion loss program negatively million lighting approximately in a be by As at to reminder, of quarter a sales customer. the also a rebalancing second private

quarter have Turning approximately our covenants. to availability includes Slide sheet revolver. $X.X plenty EBITDA of main balance balance billion $X which sheet ended and cushion. our on liquidity, the net to with of of is billion full debt our strong revolver at which subject to Borrowing Both with remains X.Xx two we of XX,

and less are covenant the The net first of leverage a the than is X.Xx. we covenant end debt of Xx at quarter, at

no we interest at end At The X.Xx. second coverage covenant are X.Xx. the quarter, of than the an of covenant is less

our portfolio Turning segments. the debt improved million Moody’s following to both April good reaffirming past grade XXXX. our ratings as $XXX maturities, due businesses maturity in investment are Fitch our Windows their with our – is of positive the reaffirmed improved of and not shape divestitures outlook Cabinetry due to Fitch we until next our In of on its month, of and

We $X billion. are for closed that in pleased February the we Cabinetry sale

million $XXX a approximately reminder, million $XXX expenses. we As and in after proceeds, received cash net of cash taxes

liquidation working million. prior stock of We percent XX%. expect capital preference of a of We XX% Working preferred received improved also of points to XX%. basis full sales XXX with percent the of will as versus sales a range year year now buyer the capital at be as in $XXX a

suspending $XXX buyback estimate mentioned Keith million on repurchase Lastly, shares. shareholder value during XXXX our deploying diluted the our million that continue roughly will share by therefore activity share average quarter, XX.X focus we to shares. approximately be indefinitely we million are count approximately XXX

to that, with call I Keith. back And over will turn the

Keith Allman

Thank remote in people projects as space as having you, The themselves, from will have their other increased products in of in lead remodeling increased all which as we and more effects John. particularly There also increase touch to to consumer water. lasting more but ours house housing could may to such And do-it-yourself increased consumers the single-family trusted distance assess. on brands, economy, projects neighbors, to with homeownership, could do and be their interest more on in painting working continue for could turnover, pandemic may lower the COVID-XX home such especially that preference spending. opposed Homeowners take easy behavior homes.

outperform brands know the and create partners well What with more through actions strong a resilient we create the outstanding X is extremely to our competition, portfolio, positions that over to years a our pipeline together Masco innovation do value recovery. cyclical, less and customers the past our shareholder to

XXXX in led products and And e-commerce all particularly distribution, repair downturn channels in to to lower the are recession. XXXX rapidly only we XX% products performed and our Our including trough Many well of in ticket and channel. invested growing are the have paint. in housing DIY-focused, declined well-positioned peak of remodel the

strong in products and have cash in gain new even generate We liquidity us slower programs flow allowing times share times. to significant by good and in bad and investing

such that as our be may allow We tool of us opportunities arise take or to that sheet have positioned attractive balance M&A. a buyback advantage will share to

With call that, up the Carmen? for I open now questions. will

Operator

question [Operator go of the Instructions] first will Please you. come Evercore with Thank line ahead. ISI. The Kim from Stephen

Stephen Kim

that well the second year resumption And in on particularly congratulations us shutdowns. a if margin is result you significant I to are the between sure reopening a that environment. two decremental just in regarding And eventually how yes, to sense think wave want extremely look incremental and guys you suggested are where we a a on divisions result doing XX% margins go margins, you had wanted a you may can the you And much give effects us those right? in May, that well. also question make your guys improve be day the ask no all decrementals XX% full you in you you might of Hope margins, when outlook, tough in comments you to assuming just the very make a then and think in there decremental it be could arise, happy I XQ to sure that when will XX% that the with give clearly? said thinking near-term? heard doing of are suggested as whether Thanks the I sense then that for would your incremental for of about decrementals to

Keith Allman

the which I take sudden we as our on prepared we in thanks safety nature address employees. number the are priority our one shutdown and and is a efficiencies and our bit remarks – talked question. plants social Stephen operating for of my little improve about experiencing of that the some distancing the

there are decrementals. there that are some inefficiencies the affecting So

if plumbing serve to to our the mind through were holding incremental even would to called tariff last headwinds incrementals high We typically losses. will. the the out decorative lower quarter better label of and architecture that business customers lighting at in than we we to due in this some cost low on towards to relates to QX, pandemic, and to in point volume and loss we margins some prior in and QX rebound guiding lower prepared QX Keep the are it headwinds you be able tariff private that be as

higher will improve our we do So expect them the QX decrementals year. be throughout and in to

improvement our expect in the year our anticipate and flow comps XX% in decrementals incrementals, will terms that excuse to there that in we at of When XX%. the – You year full lot roughly in would are strong at QX how right get there, we of range decrementals. how cost strong in in decrementals will looking more me, take-outs look we range. that’s way to see of full of variables to thinking color terms our about we are Admittedly, is the but

In terms talk John, to about? want you incrementals, of

John Sznewajs

Yes.

them of we would be expect think terms XX% years. you mean, I In think incrementals, in see decrementals, back, the would yes, different materially comes traditionally enjoyed have to I volume that we have over from our business them XX% our as would grown I on I volume range which to that as

Operator

from Instinet. will Wood your Your go be next question. Nomura question with Please Mike ahead with

Mike Wood

data morning. you Hi, provided. have Thanks for that all good the

You gave the the information impact of have? of are in that sales to us XQ, you that the will any spot profit business shutdown impact give in on able terms

Keith Allman

good to decrementals, think look I our you at if about think I typical Well, way that’s it. think those, a

John Sznewajs

Yes. extra Keith’s are plants carrying because And point, costs. shutdown, those some to we are

are – income the shutdowns nature. driving the of view quarter decrementals in second the we we because short-term short-term one higher are the that’s probably is it So in reasons do

so we fair have of employees And around. the number

that So online. back, to back come when plants comes produce we those up are able plant

Mike Wood

And of in the… terms

Keith Allman

Go ahead.

Mike Wood

ahead. go sorry, am I

Keith Allman

our point that is definitely testament continued and our this this channel comment our more shutdown that business of a for than because demand an we and order in to of nuance down Mexico of nuance the our will is definitely channel as supply are think a seeing really highlight think facing related is Mexico to the manufacturing in in which country business to a most short-term orders spa of shut issues part ecommerce California left. important I specialty and I in issue is strong that we it demand orders a that this addressing relate in was we these just a our particular capabilities we we our I an this products and an retail going demand patterns strength in its our and case plants what are come of of important fact for in in are and to business that out made that state that’s

Mike Wood

XQ how this could terms the are orders Thank go Understood. may provided you you. the in paint gallon into to facilities you has additional reopen sales. try that of how you I when and shelter affect And incorporate of guidance that no place in in terms that thinking about impact understand

pulling In may projects terms at they home permanent paining this? consumer what continues behavioral just of expecting is terms list you. you some talk you you think trends you honey that to-do about of temporary related they called out because of are forward or consumers those to that in increasingly if be are are and Thank can might

Keith Allman

hard more of that so bit worked impact on buy leveraging think and we plumbing or we remains those how what that about business for much a are that both a know even seeing seeing to may are as that be is the in mix demand definitely good businesses that less we business in to we are to I I I it talked fleeting if comments patterns paint a skewed led that little my sticks stack towards but seen DIY are we change be we through difficult of our question going pro realistically term all pro will we to and that think rough our that while where stick us buying reasons this our and a longer with the QX remains XX% like DIY about that’s to what but is no we we psyche volume do to so a have is a seen we for about resurgence to those hard neutralize think structural of there is anticipate change but move structural the our and the our and DIY we business have we strong brands with strong consumers more prospective positioning also on online DIY to is our respect pro we towards of there that of this indefinitely able so and mixed mixed worked and our to form going it business been partner impact through but and not our see stay pros the of manage really what to sure are be profitability be we and on positioning for the say how to DIY sure trend will and way I a are When will COVID-XX stick quality like seeing definitely a stay QX. is we and change that are

Operator

Your with Barclays. the next Bouley go from Matthew ahead comes Please question of line

Matthew Bouley

you. attributed severe like discrete the guide Hey, it what the sort demand good XQ to wanted out question better of Thank business? revenue it for ask able seeing in consumer the demand business quantify seeing to discrete tracking the Thanks are impact end the relative or everyone sort spa of on the taking morning. across and which your back the relative there the impact you particularly perhaps ballpark shutdowns sounded you is where is well. hope are of the to shutdowns like of feels end of something you to somewhat I doing

Keith Allman

your what bit say better? me little can a in – question you you Matthew, demand, help When do you understand

Matthew Bouley

Certainly.

bit specifically selling demand the then that relative about customers for your demand consumer the little down were to is were of course? speaking the different shut a So than which is plants what and consumer demand really

Keith Allman

inventory to of to say consumer not of for demand we are due our terms due some demand facilities seeing to consumer the as in definitely lets in intermittent shutdowns the change we the are our some from in So safety to employee is our of orders. state channel relates the of some how issues a longer and of this position relates it shutdowns

in I our inventory it’s a and inventory say seen little channel, the little of We to think have channel. bit reduction there bit of safe is in the

POS. This demand, is it don’t as I in we John, particularly see this paint. know… So, good is

John Sznewajs

Yes.

specialty comments is spas I thing the other just, It’s demand spas experiencing right. Matthew, channel is consumer fact very is both ticket to item, homes. and shopping We high The a and Keith on out that looking sign channel dealer their the continue would is demand think healthy. good to online remains we there to higher end that improve for a it are our in the point that

I as Keith good just where both sign think So is a spas is. the indicative pretty paints, of consumer mentioned,

Operator

Ken go Your is question from Zener line of with the Please next KeyBanc. ahead.

Ken Zener

can in than appreciated? feel you. Thank terms can DIY Northern of you is both for seeing lot, explain about on gentlemen. related are morning, you are that talk Dallas, variances out could how guess markets in I plumbing, be you a orders terms being but is seeing am, I other Good comments very state a down its paint? of would that is like of just specifically spa some or Appreciate discuss differences and supply you Thank home obviously different affecting called is that issue, could America. where less responding your places is within If of you But the perhaps a demand. Denver shutdown. the you big the in quarter, very you that, much California, in terms which are give us what but how you to there maybe perhaps demand, so obviously, severe plumbing as

Keith Allman

about as I for maybe a little couple talk will Thanks relates demand a the talk which helpful parameters, channel, to of for geographical to Sure, Ken. you. question. is maybe bit and then

all Germany, Italy, a should our to we Those that the in some or XX% we shelter-in-place and QX. shelter-in-place little and in We what are I maybe about mainly talked in has and that decline – closures a significant and to bit UK, little even Texas be that customer’s we a see different hit seeing has we Europe, Spain down been in bit, really Northeast temporary and distribution our Let’s flat have just to Obviously, to don’t down think lot in states. rebounding appears little England China up impacted harder. about less in we and offer a April, quite been demand of of that have due the and And by in across France. plumbing. nicely. but west in has start Canada, east U.S. range mentioned seeing Florida up the been we we been in QX, outlets XX% bit sale improve, to to beyond for as here a in hit do bit. are New outlets little know we starting The were be many

their their little retailers only been terms and nicely In Sales a positive and modestly since to a and are continuing retail wholesalers of are towards is counter, here bit little very skew their DIY sales have by remained open. their as and large, have many in that’s those but little bit. said have channels, we to showrooms, kept reluctant house. more Paint year-over-year. impacted as large bit stores. up out tends back-end talked wholesale homeowners in I about plumbing have sales Retail helping open someone it closed a the Plumbing with channels, many

well be is a then to e-commerce by the states tends across Pro do that is perspective, from quite in sometimes category Michigan. board. limited and performing some And see a install really we channel being up of construction year-over-year here And more and

and our think and of I the helping really these we both changes. geographies is are channels in channels diversification terms win as positioned to situation out So,

John Sznewajs

closely are boost a to do things. consumers of lot good. we the term that hit how that far And short is sense good term to stimulus the last? over there to why watching out consumers couple reluctant and consumer Ken, does well react question mid-April to are kind get how demand going that’s we of really is are longer a the very over could weeks and how is, yes, get and is strong things. you Keith’s we until demand too aware, what a long we of checks As I think demand this add would temporarily kind But of comments,

as So your want of I the just in keep well. mind to that back

Operator

America. of Your questions. Bank John comes go your line Please the next Lovallo with ahead question with from of

John Lovallo

mentioned or relates question. there is Thank my taking needed? so seems help you maintenance quickly pullback $XX non-essential to guys. your just and outlook, in could sort non-essential it $XX that can you that $XX I if Questions million of Hey, that about CapEx, think what understand is you on spend about million how us million, like on you for

John Sznewajs

Sure, John.

recession is to And I and in in and a we, for products are lot new that plumbing that things As CapEx fixtures area. I delivering tooling non-maintenance through and the of think invest products, Keith we products, continuing for shower mentioned one the innovation. the things the that goes so new of of and things paint to even mentioned, new jigs some

product out locations. maybe So tougher having that’s us to generally think consumer where we shelf to is that and partners even continues the going, draws our showroom though footsteps space their capital drive retail our give because partners, new there, good important times into with it’s continue at partners, to consumer our to

that’s on whether or portfolio. across that’s entire continue important And locations, physical locations their whether we innovation it’s online the drive their think to so to

Keith Allman

are little of delay of and that that in technology little a those things talking and things sorts sometimes terms will cutting are those projects can of delay some sorts we so those there look that That’s bit, to at a we some really bit. we information is related upgrades about. of equipment we John, what can

John Lovallo

guys. Thanks

Operator

from Your ahead Markets. question. line your Capital the with is Please next question with go RBC Mike Dahl of

Mike Dahl

Europe. think year-on-year looks morning. the you business taking good plumbing fairly like one follow-up out that It’s impact so have about alone the plumbing information looks is some like given prior a so to in in commentary. XX% of detail I that it and the of highlighted this spa severe sales I the business, to the on there. you impact helpful far. question, Thanks declines had in much my it some of get and question Good particular, Delta components and and channel for When

ex I something like XX% XX% the would really components question can to down imply or business, expectations for guess because in if plumbing so? seems may – I for core guess they or other then the the U.S. am So those with of assumed your maybe you core it that plumbing the teens I business spa segment is some breakout U.S.

John Sznewajs

Mike, Yes, John. it’s

terms most XX% viewing In that, would the I so that than we American or range would probably as done bit currently plumbing, way little closer we say right. American be down characterize North on are better we but have how to would you of that’s math, down the North plumbing. it, of I look at are higher probably a

Mike Dahl

Thank got Okay, it. you.

Operator

line of is Your go with next with Rehaut Michael JPMorgan. question. ahead from Please your question the

Michael Rehaut

out also wishes. just everyone Good your Thanks. everyone safe is to healthy morning, and extend organization. Hope there across and want my

have First stages circle sense question an much and that could the makes you appreciate question, obviously I would commentary complete to very a decremental. to higher I there than if back and initial decrementals normal the around wanted just earlier in

XX% certainly than fourth thought in XX% was As bit the you point bit within of you then had business get we that plumbing of that by a time, quarter. to to look Initially decorative towards of the the at full little that better normalized a of lower, basis, year would to range. perhaps or a time kind something the little a where higher decrementals was XX% over

in better the it of Just end you decorative position on wanted plumbing? that if that would a be assume year be back the to to circle correct is of those at by assumptions kind XX% than little the and given a year bit so trend and lower or full that certainly

John Sznewajs

between so and line clear quarter normalize through point things obviously progression we then to same. were got the by so Keith what one always margins decrementals the full that look that straight part if was and typical if to work. these think look tend have by so make decrementals to way high we out I difference here approximately quarter how the between at that we or just a to however think if don't they of you material decrementals segment they're a segment trying think incrementals there's revert the that’s I to you are are I at the things want seeing begin how think the and to First, it, sure are range thing how of incremental/decremental I but a that would plumbing through should ourselves or finding you incrementals the is right decorative first nature in the and mention I of because should are to we to circumstances that architecture at year I back through XX% it see they more and year help the both think about for if things XX% we

Michael Rehaut

backdrop shelter-in-place decent U.S. secondly, of was U.S. any and sense home the was have those and a or been retail Okay, in in that. a was decline get paint trends how two been certain there around strong possible paint expecting jump sales forward improvement that segment standpoint also any an a I wanted up out overall sense and particularly I any there on back if guess you of to April for I if March as I a we circle have little appreciate it a March have proceeding the occurred the monthly if then triangulation a has the shelter-in-place. growth are DIY people how I lined around census perhaps you of March put you assuming or around room-by-room of for coverage press to hoping and and quarter have projects XX% perhaps for is type was the in week what strong might before am activity strong the in X% to bit of sense business around obviously a alluded there just projects amount as

Keith Allman

in and win of brand as our to includes that, and and effectively the the having geographies is the a or it, will a appropriate certainly is don’t are thinking we this broad that’s estimation January are range that don’t so terms the at if investment XX% is you capacity to end come the broad I pandemic we we and not monthly we quarter nice, overall with specifically trends. as so saw for there if more head in what that’s consistent about on in so of being the is volume recovery team John that’s That's forecast saw. this the about important We win saw to to trying capacity got of uncertainty inside ready near know call we the we pickup technology and across includes our what move and this while that key R&D position way for what’s quarter, and important as to exactly it hit in on that where that’s right I this full March in in more lot where can think for point Mike a inside single-digit you are precision said and and to that the it. know this is costs it thinking I market us of we was flexibility what channels volume and through communicate same But if really is get in us through us much

Michael Rehaut

Great. Thank you so much.

Operator

ahead question. Please the your of Ng Phil Your next line from with question with comes go Jefferies.

Phil Ng

the your particularly lift margin, much guys. on decremental dramatically? any you more curious Hey that of be paint one down with question am account cost how pick – in business potential I any down any that that does just oil raw deflation And guess the for I road? might mat pursuing initiatives from pretty

Keith Allman

Yes anticipate business we decremental what Phil I our all in are what board. the across inclusive we mean margins and of the see

a let materials me materials, – sense are raw now portfolio. just just looking give think me the raw at I we on across of of you let that, you terms how touched in So

the and in place zinc are copper down most more of So, first that here decline year-over-year took XX% than and quarter.

cost freight cost declined have pretty our relatively as will a out, well recently. that piece help offset help of but we tariff but half of the have particularly think To Clearly, the prices freight aware, impact will your here some we of second in probably that you So, will, feeling, year. overall are oil point, the that is structure. our been I small

increases. been impact the stay industry and prices obviously paints, producers you across for environment, has Though have do those plays basket this how place demand oil in raw TiOX strong paint material commodity announced that the in the of see so could in terms out. the In will And price that basket there paint.

have far. extent, prices movement seen downstream costs other the resin costs to-date, from oil up or prices. it’s so decline of a a our fairly to in we yet well follow but in not oil pretty some resin crude a and result is Specifically, held material Propylene as

and oil particularly are we time, would stays of if the a guess by oil definitely the prices, period half relationship our And so any is resins that in some easing anticipate resin on levels of but at these back for a sustained one-for-one means, year.

Phil Ng

last? long-term this you you. thinking more it’s one me, guys shock Thank Perfect. walk thinking for pretty seen you are any And like how duration out seen few are sense and depth rather you how upbeat you through then of can of about of a the versus just cycle cycles, outlook, and John, it? a It us perhaps it just about are real us the about give coming seems you of the how than more Keith this guys have kind you downturn, have but positioned a the

Keith Allman

Yes.

that at we color are nature they but our and that give it’s both we that of the talking look to I certainly while think understand is the depth us metrics that trailing unknowable. of our working how to best understand are most hard of demand, this little pandemic leading a impact is about to can, of comment I consumers it’s And to bit a and and we customers re-price try indices and prior the feel of and and a duration to that made the unknowable. importantly,

the focus win that’s then and capacity when leading in we to So, in duration recovery to and is exactly those move our in going are in and on the period our through and length recovery And of market being having to our back focus to any able goes any what cost do. shape taking that structure share short-term. we flexibility. and support the investment brands continued into innovation winning And on and managing it brands

Phil Ng

thanks. Okay,

Operator

go Please is from Your of Susan next the with Goldman question ahead. Maklari line Sachs.

Susan Maklari

Good to given the wanted to position pullback but just activity, you and the your what things, on again M&A capital has side there? and your and liquidity on with any caused would in cash pipeline us to morning. the you on Thank of balances you. things the allocation see that recognizing that to updates back that you and any the repurchase need market uncertainty give follow-up along getting start can changes I

John Sznewajs

Yes, sure, Susan.

have As capital the we the we said we near-term. in our situation are balanced prepared our allocation not changed, here in into long-term discussed, we conservative disciplined be going fundamentally, objectives and but right. we it. to how liquidity watching remarks, are And We closely, as approach want on be to our

will activity our and share our we continue and it. resume before suspended liquidity conditions have to evaluate market we repurchase We

M&A, things to produce sense that readjust it in a expectations starting as got sellers have oftentimes, Don’t we near-term. of some better. the are to may opportunities some their some attractive know time market the So to respect to With situation takes little conditions. get

cash selective. be so liquidity view payout to of right current It’s highly generation. will our And we be to but see continue return to the right then might dividend. committed level fit, as evaluate you as not our M&A that reasonable strategic got many, do We our are our in and we considering

to it want continually flow proceed. conservative So we conditions how given in reevaluate and our continue will to the near then market strong evaluate term be but cash

Operator

ahead. next Speer with Your Zelman the go & of Please from Associates. comes question line Justin

Justin Speer

morning Thank but volume volumes or is more an the call. know I of what hosting this is good not incremental for margins business you normal it a Hi, environment? just time questions for few on easy typical a your in type incremental guys.

Keith Allman

XX% Typically or Justin. be XX%

Justin Speer

I associated disruptions with disruption the the like explained chain and for So most supply of sort things there? the of Delta efforts you guess discontinuing

John Sznewajs

here near-term yes yes. in the Correct

Justin Speer

your and mentioned how the have kind this in in your terms of portfolio recognizing been business trends tailwind partial as paint portfolio plumbing your dynamics negative price business in pocket raw price business And basket where general but coatings Okay. to volume? of up of you air favorable including expect you well raw you to some, in some but has the that sort terms material offsets do of then of know hold your kind across I material environment as do across all

Keith Allman

channel the generally I with price just maybe channel and think trade the across put pricing to I may year, price paint have in conversations European with in some from relationship customer with time different pricing here by discuss one varies individual wholesale our the this know put our we to given we or don’t have of bonus nature dynamics portfolio business time is earlier respect customer. put that they in – different

Justin Speer

then Okay. question the is cash the last model. And conversion just for me of

we in of holds – way the can model? of how it your cash of these of or as look the think at think revenues maybe percentage of flow net percentage sensitize as types as about type thinking – free kind a income free a cash of environment Just flows do you you that up

John Sznewajs

Yes.

of it we talking a well, beginning cash time. our really about comes free conversion way that of down think XXX% net net income come CapEx free believe flow reasonably XXX% period given I this can Justin. flow conversion – are working emerged and anything cash to and the our in on capital can the up the income we of we maintain mean at I this holds year we before were

Justin Speer

Excellent. guys. you, Thank

Operator

go Garik Your next the line question with Please comes ahead. Shmois Loop from of Capital.

Garik Shmois

me Thanks thanks/ scooping for Hi, in.

of of to want lag-affected how how how if back did look could be there that sense past on on of demand recessions your wondering the downturn? now in get commentary Just fluent you just the trying given market to performed spa demand the nature more any just right a on encouraging that is and business follow-up up if sustainable the of some just pretty that the hold point target business

John Sznewajs

international the new spas the the on health recession cycle you XX saw right just count is incredible market that of may the you relatively for versus in can I recession the recall feel we we leadership by Yes we in pretty a expect dispersion and of this very product number you amount today the would because this way so XX the is them as positioned what is home and States well strong how volume XX even there an business is maintain in and a I is and is company we expect apples-to-apples fair as of last the the pretty cycles strong of cycle hand will the I we share the geographic that comparison we they better the expect to aspect about space great helps is so have and family fair session fundamental good for real fell aging those went unit of impact health of for do and a the great one we sleep that almost of plus then so the spa last second in can people side worst Garik it housing pretty have be leaders. taken and of when recession about past some positioned year the time. think we leader the that experienced because in is position new given and have and this there their last even significant best a not think the the like a I in that it particularly never broader important United is social the declines economy about a it competition as or bankrupt and XX great is lever or well particularly of think time out developing softening haven’t through most We wellness is is this them company an know demographics I think mean spa to dealers thousand as it would that for piece or international benefits certainly it of this lost money that some Garik

very So, like all-in-all much. this business we

Operator

with go Your is the Seldon line from next ahead. of Bank. Clarke question Please Deutsche

Seldon Clarke

the pricing of on growth relates thanks the of and just question. sales environment strategy current changed and all given for guidance, this your to it at mix just you sense what the but Appreciate assumes trends color whether tariffs second give price as quarter-to-date Hey, quarter? us the impact and a can on the has volume

John Sznewajs

may tariffs in most of related So, remember Seldon, pricing you to our XXXX. that we put the early

last yes, about that And we covered of call. pricing we we off actions this really cover future going the talk The that so feel are year. on dynamics, on pricing are really balance to not and

Operator

Your question will Truman next with Fargo. be Wells go from Patterson Please ahead.

Truman Patterson

Hi, to Glad good thanks taking hear of are guys my guys morning all for you safe. question. and

investments during picture, get channel you gain go cash discuss in thoughts some businesses of forward you your for try this out $X.X big defensively positioned have could flow, liquidity more stores your that in hub So and downturn? of on Behr the maybe little share bit pulling a lot a contractor, the offensive that billion more drive in maybe just

Keith Allman

a improved we the as in growth with segment the getting Pro. years. leverage about It’s to committed are profitability that has in over I are We the the talked

if business for we have a us you and good sales good picture, a it’s So will.

the that’s good We a Pro for Depot. Home at already the shopping proposition Pro value particularly there, have the

So business. we that like

We to it. to in are invest continue going

to stores. in going invest are both people, hub technology We

where is any work at investment and We are best time. to that understand going continue make given to to

to of ability In about general terms value we going and continue reason in we are talk divest going good of to that, a specifics, we that, the think do terms very in win. but have both we sense, a more to to that to and in are not

Truman Patterson

you. thank Okay,

Operator

from Research. Your Thompson next ahead question Ramsey Steven with questions. your Please go will be with

Steven Ramsey

Good morning.

impact to make are maybe the wanted changes term near-term adjustments a you the making you to current in have structure cost minute, impacts that Kichler Just to how discuss unit? discuss and reductions longer you the can for the

Keith Allman

are as would have capacity product optimize to hit what the that as short-term entire that there understanding our across our when capabilities continuing the in etcetera to and for our but work have want taking we – are development a cost recovery. are We crisis, we to I structure are place we we we in call portfolio am is I

are we the learn portfolio So continuing think we we or quarter individually evaluate as And I lot we what are really it. our at and looking two across over happens open are up. means as going that what a to to states next see

our cost units. all business across the at business looking are we of footprint at So our

Keith Allman

Okay.

conclude little much as and fact that call. it relates a can We as delve can I to to you to time. getting how and this to thinking and of families we are the a in in this as giving we we encourage are a business. well make stay going different hope your think tried everyone about you that along to this much transparency crisis. are very for giving Thank with safe healthy I us as situation want much I detail bit call as to to as is as the different be and you your this Bye-bye.

Operator

conference This concludes for you in call. Thank the call. today’s participating

disconnect. now may You

Masco (MAS) 29 Apr 202020 Q1 Earnings call transcript