Masco Corporation (MAS)

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Masco (MAS)

Q2 2013 Earnings Call

July 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


Michael Dahl - Crédit Suisse AG, Research Division

Robert C. Wetenhall - RBC Capital Markets, LLC, Research Division

Dennis McGill - Zelman & Associates, LLC

Keith B. Hughes - SunTrust Robinson Humphrey, Inc., Research Division

Nishu Sood - Deutsche Bank AG, Research Division

George L. Staphos - BofA Merrill Lynch, Research Division

Mike Wood - Macquarie Research

Kenneth R. Zener - KeyBanc Capital Markets Inc., Research Division

Sam Darkatsh - Raymond James & Associates, Inc., Research Division

Nicholas A. Coppola - Thompson Research Group, LLC

Adam Rudiger - Wells Fargo Securities, LLC, Research Division

Michael Jason Rehaut - JP Morgan Chase & Co, Research Division

Stephen F. East - ISI Group Inc., Research Division

Susan Maklari - UBS Investment Bank, Research Division

David S. MacGregor - Longbow Research LLC



Good morning, ladies and gentlemen. Welcome to Masco Corporation's Second Quarter 2013 Conference Call. My name is Regina, 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 the Vice President of Investor Relations, Maria Duey. Maria, you may begin.

Maria Duey

Thank you, Regina, and good morning to everyone. Welcome to Masco Corporation's Second 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 second 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 have provided a reconciliation of these adjusted measurements to GAAP on our website at

With that, I'll now turn the call over to our President and Chief Executive Officer, Tim Wadhams. Tim?

Timothy Wadhams

Thank you, Maria, and thank all of you for joining us today for Masco's second quarter 2013 earnings call. If you please move to Slide #4. We're very pleased with our second quarter 2013 results, certainly one of our strongest quarters since the downturn and a continuation of the momentum, which started for us in the fourth quarter of 2012. We continued our trend of delivering growth in the second quarter, with all 5 of our operating segments increasing top line sales and expanding operating margins. Our leadership position in the building products industry and our focused execution against rising new home construction activity particularly benefited our Cabinet, Installation and window-related businesses.

Notably, our Installation and Cabinetry segments were both profitable in the quarter, reflecting our strong leverage to a housing recovery and our continued commitment to cost containment. As we previously indicated, returning these segments to profitability has been one of our prime -- our top priorities.

Demonstrating the strength of our brands was a strong sales contribution from new product introductions, particularly in our paint and Plumbing businesses. And despite challenging macroeconomic environments in the Eurozone, our international sales increased in the quarter, reflecting strong performance by our international Plumbing and window businesses.

And if you would please turn to Slide #5. As we've 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 both our customers and the end consumer. Our Decorative Architectural businesses introduced new products at retail, which have exceeded expectation. And we continue to reap the benefits from previously-introduced products and programs with our North American faucet and toilet businesses, which delivered mid-teens growth in the quarter.

Our emphasis on cost control is evident in our continued SG&A improvement. As I mentioned, we continue to see improvement in our Installation and Cabinet segments. Our Installation segment is capitalizing on improved market dynamics and drove increased sales in all channels of their business. By remaining focused on profitability, they continued their trend of improving operating profit. The new management team that's been in place in our North American Cabinet business for the past year has had a positive impact on that business. The segment reached profitability in the quarter and continues to execute on their plan of stabilizing the business and positioning it for future profitable growth.

Combining these 2 segments, our Cabinet and Installation business improved by $26 million of operating profit versus the second quarter of 2012, and we're obviously very pleased with that performance. In addition, we remain committed to strengthening our balance sheet and continue to improve our working capital during the quarter. These execution highlights produced a very strong second quarter, and we're very pleased with the trajectory of our performance.

If you please move to Slide #6. At this time, I'd like to turn the presentation over to John Sznewajs, our Chief Financial Officer. And John will walk us through our segment operating performance.

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