Q3 2012 Earnings Call
October 30, 2012 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
Keith B. Hughes - SunTrust Robinson Humphrey, Inc., Research Division
Robert C. Wetenhall - RBC Capital Markets, LLC, Research Division
Stephen F. East - ISI Group Inc., Research Division
David S. MacGregor - Longbow Research LLC
Sam Darkatsh - Raymond James & Associates, Inc., Research Division
Adam Rudiger - Wells Fargo Securities, LLC, Research Division
Kenneth R. Zener - KeyBanc Capital Markets Inc., Research Division
Previous Statements by MAS
» Masco Management Discusses Q2 2012 Results - Earnings Call Transcript
» Masco's CEO Discusses Q1 2012 Results - Earnings Call Transcript
» Masco's CEO Discusses Q4 2011 Results - Earnings Call Transcript
As a reminder, today's conference 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.
Thank you, Christie, and good morning to everyone. Welcome to Masco Corporation's Third Quarter 2012 Earnings Conference Call. Joining me on our call today are Tim Wadhams, President and CEO of Masco; and John Sznewajs, who is the Vice President, Treasurer and Chief Financial Officer.
Our third 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.
If you would refer to Slide 2, I'd like to remind you that today's presentation includes 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 statement. We've described these risks and uncertainties in our risk factors in our Form 10-K that we've filed with the Securities and Exchange Commission.
Today's presentation also includes non-GAAP financial measures. We have provided a reconciliation of these measurements 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. Hey, and thank you for joining us. And for those of you who are dealing with some of the implications from the storm on the East Coast, we certainly wish you well, your families well. And obviously, that's a difficult situation.
If you would please flip to Slide #4. From a top line perspective, third quarter sales were flat with the third quarter of 2011. And although economic growth in North America continues to be slow, our sales in North America were up 4%. We benefited from new home construction activity, the introduction of new products as well as pricing actions. Also from a repair/remodel standpoint, we saw some modest improvement as our sales to key retail customers were up low-single digits. Big ticket remodel continues to be relatively slow.
The 4% sales increase in North America was offset by challenging economic conditions in Europe. And for the first time in several quarters, in fact it's hard to remember, we were down in local currencies in terms of our international operations. We also had a negative impact from foreign currency translation.
Even with flat sales, we did see some improvement in operating profit. On an adjusted basis, our operating profit was up 11%. We also saw some nice margin expansion. And we benefited in the quarter from improved price/commodity relationships, as well as profit improvements. John will talk to you about those items in some detail as we get into the presentation, including a nice lift in adjusted earnings per share.
If you flip to Slide #5, please. Earlier this year, we communicated to you the strategic initiatives that we're focused on to drive performance. Those include expanding our market leadership positions, continuing to focus on supply chain and lean from a cost standpoint, improving our Cabinet and Installation segments and reducing -- and continuing to improve our balance sheet. As you flip to Slide #6, we'll take a look at how we are doing against some of those strategic initiatives.
As it relates to expanding our market leadership position. Over the last few quarters, as you know, we've had some expenditures for growth initiatives. That includes international expansion and it include some program costs, and we've seen in the third quarter some positive implications related to those expenses.
Delta has launched a new Delta-branded toilet at The Home Depot, which we're very excited about, along with The Home Depot. We also have a nice program win in terms of Behr paint. Behr will be placed in all of The Home Depot Mexico stores by the second quarter of 2013. And we've won, at big box, several programs for builders' hardware-related businesses. So we're really pleased about those opportunities going forward.
In terms of our cost structure, John will talk about the progress we're making from a profit improvement standpoint. We feel pleased. We're ahead of targets that we set initially this year. Also in the third quarter, we announced some additional headcount reduction and plant closures. And if we look at our headcount quarter-to-quarter, third quarter to third quarter this year, we're down about 1,000 employees. And so we feel we're making -- continuing to make progress, continuing to take actions to address cost structure.