Masco Corporation

Good morning, ladies and gentlemen. Welcome to NASCO Corporation first quarter 2020 conference call. My name is Michelle, and I will be your operator for today's call. As a reminder, today's conference is being recorded for replay purposes. To ask a question, please press star, then the number one on your telephone keypad. To withdraw your question, please press the pound key. I will now turn the call over to David Chayka, Vice President, Treasurer of Investor Relations. You may begin.

Thank you, Michelle, and good morning. Welcome to Masco Corporation's 2021 First Quarter Conference Call. With me today are Keith Allman, President and CEO of Masco, and John Snevice, Masco's Vice President and Chief Financial Officer. Our First Quarter earnings release and the presentation slides we will refer to today are available on our website under Investor Relations. Following our remarks, we will open the call for analyst questions. Please limit yourself to one question with one follow-up. If you can't take your question now, please call me directly at 313-792-5500. Our statements today will include our views about our future performance, which constitute forward-looking statements. These statements are subject to risk and uncertainties that could cause our actual results to differ materially from the forward-looking statements. We've described these risk and uncertainties in our risk factors, disclosures in our Form 10-K and our Form 10-Q that we filed with the Securities and Exchange Commission. Our statements will also include non-GAAP financial metrics. Our references to operating profit and earnings per share will be as adjusted, unless otherwise noted. We reconcile these adjusted metrics to GAAP in our earnings release and presentation slides, which are available on our website under Investor Relations. With that, I now turn the call over to Keith.

Thank you, Dave. Good morning, everyone, and thank you for joining us today. I hope everyone is staying safe and healthy. While we are well over a year into this pandemic, the effects are still being felt. We are encouraged by the rollout of vaccines, but many areas around the globe continue to experience a surge in cases. The safety of our employees remains our number one priority, and I would like to thank all our employees for keeping each other safe and for serving our customers. Through the efforts of our employees and the robust demand we continue to experience for our products, we delivered another outstanding quarter. Please turn to slide five. We had a strong start to 2021, and our ability to effectively navigate this highly dynamic environment resulted in exceptional top and bottom line growth. For the quarter, sales increased 25%. Excluding acquisitions and currency, sales increased 19%. Operating profit increased 61% to $366 million, principally due to strong volume leverage and reduced spending in the form of lower travel, entertainment, and marketing expenses across our segments. Earnings per share increased an outstanding 89%. Turning to our plumbing segment, sales grew 27%, excluding currency, driven by strong volume growth at Hansgrohe, Delta, and Watkins. Our two recent plumbing acquisitions performed well in the quarter and contributed 5% to plumbing's growth. North American plumbing grew 28%, led by our wellness business, which continued to experience strong demand and begin to comp their March shutdown of 2020. Delta Faucet delivered another quarter of double-digit growth, with strength across all channels, particularly e-commerce, which showed exceptional strength as consumers continued to shift their buying patterns to online. International plumbing grew 37% in the quarter as many of our markets returned to strong growth with particular strength in Central Europe and China. In our decorative architectural segment, sales grew 15% against a healthy 9% comp from Q1 of 2020. Acquisitions contributed 2% to our decorative growth. Our lighting, bath and cabinet hardware, and paint businesses each posted double-digit growth during the quarter. DIY Paint grew high teens in the quarter, which is impressive, considering it was facing a strong double-digit comp in Q1 of 2020. While ProPaint was down low single digits for the quarter as it faced a tough comp in Q1 of 2020, we did see a return to positive growth in the back half of the quarter, and we're encouraged by the momentum we are now seeing in this business as we move into Q2. Lastly, we actively continued our share repurchases, during the quarter by repurchasing 5.5 million shares for $303 million. We anticipate deploying approximately $800 million towards share repurchases or acquisitions for the full year, as we guided on our fourth quarter call. In addition, we anticipate receiving approximately $160 million for our preferred stock in Cabinet Works, resulting from their recently announced transaction. assuming it closes as expected. We intend to deploy these funds towards share repurchases or acquisitions, which would be in addition to the $800 million that I just mentioned. Now let me discuss two issues that are top of mind right now, inflation and supply chain tightness. We have seen significant inflation in raw materials, namely copper, zinc, and resin, used in both our paint and plumbing businesses, as well as increases in freight costs. All in, we expect our raw material and freight costs to be up in the mid-single-digit range for the full year for both our plumbing and decorative segments, with inflation likely reaching high single-digit levels in both segments in the third and fourth quarters. To mitigate these impacts, we have secured price increases across both segments to begin offsetting these costs. We have further actions planned, including additional price increases and productivity improvements, while continuing to work with our customers and suppliers to offset these rising costs. Time and again, we have demonstrated that our strong brands, innovation pipelines, and channel relationships gives us the ability to offset rising costs we expect to continue this track record and achieve price cost neutrality by year end and we are maintaining our full year margin expectations in both segments that we provided on our fourth quarter call with respect to supply chain tightness in addition to the strain caused by robust demand We have been impacted by significant disruption in the supply of resins and products in both our plumbing and paint businesses due to the severe weather that Texas experienced in February. Additionally, ocean container availability and timeliness continues to be constrained. This has temporarily reduced output of certain spa products during the month of April and limited our ability to build certain to build inventory of certain architectural coatings and other products. However, the availability of resins is improving, and our teams have done an outstanding job utilizing MASCO's size, scale, and agility to countermeasure these issues by working with our key suppliers to increase availability of certain materials, by leveraging our purchasing power to increase container availability for our products, and by working around the clock to adjust production to meet the needs of our customers. This once again shows the competitive advantage that comes from being part of Masco's portfolio. With our strong performance, the actions we have taken and will take to offset persistent inflation, the interest savings from our recent bond transaction, and the continued strong demand for our products and innovative products, and products and brands, we are increasing our full-year expectations of earnings per share to be in the range of $3.50 to $3.70 per share. This is up from our previous expectations of $3.25 to $3.45. With that, I'll now turn it over to John for additional detail on our first quarter results. John?