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Q1 2013 Earnings Call
April 30, 2013 8:00 am ET
Maria Duey - Vice President - Investor Relations
Timothy Wadhams - Chief Executive Officer, President and Director
John G. Sznewajs - Chief Financial Officer, Vice President and Treasurer
Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division
Robert C. Wetenhall - RBC Capital Markets, LLC, Research Division
Dennis McGill - Zelman & Associates, LLC
Kenneth R. Zener - KeyBanc Capital Markets Inc., Research Division
Daniel Oppenheim - Crédit Suisse AG, Research Division
Sam Darkatsh - Raymond James & Associates, Inc., Research Division
Adam Rudiger - Wells Fargo Securities, LLC, Research Division
Rob Hansen - Deutsche Bank AG, Research Division
Susan Maklari - UBS Investment Bank, Research Division
Michael Jason Rehaut - JP Morgan Chase & Co, Research Division
David S. MacGregor - Longbow Research LLC
George L. Staphos - BofA Merrill Lynch, Research Division
Mike Wood - Macquarie Research
Previous Statements by MAS
» Masco Management Discusses Q4 2012 Results - Earnings Call Transcript
» Masco Management Discusses Q3 2012 Results - Earnings Call Transcript
» Masco Management Discusses Q2 2012 Results - Earnings Call Transcript
I will now turn the call over to Vice President of Investor Relations, Maria Duey. Maria, you may begin your conference.
Thank you, Tiffany, and good morning to everyone. Welcome to Masco Corporation's First Quarter 2013 Earnings Conference Call. Joining me on our call today are Tim Wadhams, President and CEO of Masco; and John Sznewajs, Masco's Vice President, Treasurer and Chief Financial Officer.
Our first quarter earnings release and the presentation slides that we will refer to during the call are available on the Investor Relations portion on our website. Following our prepared remarks, the call will be open for analyst questions. [Operator Instructions] If we are unable to take your question during the call, please feel free to call me directly at (313) 792-5500.
I'd like to remind you that statements in today's presentation will include our views about Masco's future performance, which constitute forward-looking statements. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements. We have described these risks and uncertainties in our Risk Factors and other disclosures in our Form 10-K and our Form 10-Q that we filed with the Securities and Exchange Commission.
Today's presentation also includes non-GAAP financial measures. We've provided reconciliation of these adjusted measurements to GAAP on our website at www.masco.com.
With that, I'll now turn the call over to our President and Chief Executive Officer, Tim Wadhams. Tim?
Thank you, Maria, and thank all of you for joining us today for Masco's First Quarter 2013 Earnings Call. And if you would please move to Slide #4. We're pleased with our first quarter results, and that gets pretty tough comparison given the first quarter of 2012. And we certainly feel like we're off to a good start in 2013.
Our Q1 performance reflects the strength of Masco's brands, our leadership position within the building products markets and our leverage to a continuing housing recovery. Our sales growth was driven by our execution against an increase in North American new home construction activity, which particularly benefited our Cabinet, Installation and window-related businesses. Our top line also benefited from the new products that we've introduced at retail that continue to outperform our expectations and reinforce our strength in the repair and remodel channel.
We also reached a major milestone by achieving profitability in our North American Cabinet business and a breakeven level of profitability at the segment level for cabinets. And obviously, we're very pleased with that outcome. The improvement in Cabinets, together with our focus on cost containment and our operating leverage, helped us continue our margin expansion. Our segments with European market exposure, which include Cabinets, Other Specialty Products and plumbing, were impacted by the continued weakness in the eurozone, which, coupled with unusually harsh weather in Europe, caused a drag on our stronger North American results.
And if you would please move to Slide #5. As we communicated in the past, our strategy is focused on 4 key elements to drive performance. We expanded our market leadership by continuing our legacy of introducing new products and programs which matter to our customers and consumers. In North America, our faucet and toilet businesses benefited -- benefiting from recent product introductions, delivered high-teens growth. And our Decorative Architectural business, which includes our paint and builders' hardware, continue to win new opportunities. Installation services is responding to new home construction growth by strategically adding greenfield locations in markets where activity is strong and the recovery is well underway.
We also had another good quarter from a cost reduction standpoint. We continue to benefit from restructuring actions, our focus on lean and our efforts in the supply chain. And John will talk a little bit more about the outcome later on, but certainly pleased with our continued progress there.
We're coming off a solid 2012 in terms of our Cabinet and Installation segments in their improvement and had a lot of momentum coming into the first quarter, and I'm really pleased with our first quarter results as it relates to Cabinets and Installation. On a combined basis, in aggregate again, those 2 segments improved by $24 million in terms of operating profit compared to the first quarter of 2012, and that's despite the first quarter generally being a little bit slower from a seasonality standpoint.
While there's still a lot of work to do, the potential of Installation and Cabinetry is promising when considering their operating leverage and exposure to recovering markets. Our commitment to strengthen our balance sheet is evident in our working capital improvement and our ability to successfully negotiate a new 5-year revolving credit facility. These execution highlights represent what we feel is a very good start to 2013, and we're certainly pleased with our performance coming out of the gate.