Masco Corporation (MAS)

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Masco Corporation (MAS)

June 12, 2013 9:40 am ET


John G. Sznewajs - Chief Financial Officer, Vice President and Treasurer


Nishu Sood - Deutsche Bank AG, Research Division


Nishu Sood - Deutsche Bank AG, Research Division

So why don't we get started. First session of the day here. I'm very excited to kick it off with Masco Corporation. I'm Nishu Sood. I'm the building and homebuilding analyst at Deutsche Bank. Just wanted to give a quick advertisement to our conference handbook. This has some profiles of all the companies that are presenting in the homebuilding and building product sector and -- as well as really tough questions that you can ask them in your one-on-one.

And -- so I'm delighted to introduce Masco. Very interesting fact. Last year, Masco, and I think your market cap last year would have been probably what, $6 billion, $7 billion or so?

John G. Sznewajs

Right. Probably [indiscernible]

Nishu Sood - Deutsche Bank AG, Research Division

So Masco market capital was $6 billion or $7 billion last year, was the most requested meeting last year for one-on-ones. So that gives you a sense that obviously, we are in residential recovery. Obviously Masco with a 70%, I'm sorry, 80% exposure to U.S. residential construction. Again, a ton of interest this year, so very excited to hear what they have to say.

This year, John Sznewajs is the CFO and he has worked in various other financial roles in the past as well at Masco Corporation. So delighted to have him speaking. Also up here is Maria Duey, who works in IR; and Renee Benedict is here as well. She's also part of the IR department.

So with that, I'll turn it over to John.

John G. Sznewajs

Thank you, Nishu, and good morning to all of you, and thanks for joining us here this morning. As Nishu said, I'm delighted to be here because we actually are in recovery now in the repair/remodel and new home construction industries in the U.S. And so before we get into our strength, our strategies and our growth that we've seen in front of us, I thought we'd spend just a couple of minutes covering some basics about the company for those of you that may not be as familiar with us.

So we finished our 2012 with about $7.5 billion in revenue. And just to give you a little bit of a sense, about 1/4 of that was related to the residential new home construction market here in the United States. The balance of about 75% was related to the repair/remodel industry that we serve here in the U.S. If you take the same set of businesses that we have today and roll the tape back to 2006, what you would find is that we have about $11.5 billion in revenue, and about 45% of our exposure was related to new home construction and about 55% was related to the repair/remodel industry. So you can see the dramatic impact of the downturn it had on the new home construction side of our business and a composition of our business over the last several years.

There are a couple of things that distinguish us from our competition and one of the biggest things is the fact that we've got some of the best ways [ph] in the industry with market-leading positions. So in the plumbing industry, we've got Delta here domestically, Delta Faucet Company, as well as Hansgrohe. That's our international faucet brand.

In our paint segment, we've got Behr, one of the leading DIY paint manufacturers, as well as Kilz, one of the leading primer brands here in the United States. We also have the #1 and #2 brands in the cabinet industry with KraftMaid and Merillat. And finally, we've got the leading vinyl window business in the Western U.S. under the Milgard brand.

At the same time, we've got some great strength within this business and a great scale. And we believe we are the largest manufacturer of faucets in the world; the largest commodity supplier, non-commodity supplier to the Home Depot; the largest supplier to Lowe's in their kitchen and bath segment; the largest supplier of architectural coatings or paint to the U.S. DIY market; and the largest and only national installer of fiberglass insulation for the new home construction industry. So that gives you a good glimpse of the company.

So with that, let's take a little bit of a look at our strategy. Really there are 4 strategies that we're pursuing to drive shareholder value. So we're looking to expand our market leadership positions, reduce our cost structures, improve our 2 underperforming businesses, that means our cabinet business and our installation business, and then strengthen our balance sheet.

So as we think about expanding our market leadership, and really, we take a look at the brands that we have in their market positions over the course of the last several years. And we clearly see the Delta, Peerless and Brizo, our faucet brands here in the United States have gained share in the last several years. Along with Hansgrohe, our international brands, as they have continued to penetrate more markets and gain shares by participating in international projects.

Our paint business has done a nice job of gaining share as they've introduced new products as well as certain to seek out new channels of distribution by going after the Pro paint contractor.

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