30-Jul-2020 Masco Corp. · 7/30/2020 · Keith Hughes Analyst, SunTrust Robinson Humphrey, Inc....

Corrected Transcript

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30-Jul-2020

Masco Corp. (MAS)

Q2 2020 Earnings Call

Masco Corp. (MAS) Q2 2020 Earnings Call

Corrected Transcript 30-Jul-2020


2 Copyright © 2001-2020 FactSet CallStreet, LLC

CORPORATE PARTICIPANTS

David A. Chaika Vice President, Treasurer & Investor Relations, Masco Corp.

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp.

John G. Sznewajs Chief Financial Officer & Vice President, Masco Corp.

.....................................................................................................................................................................................................................................................................

OTHER PARTICIPANTS

Matthew Bouley Analyst, Barclays Capital, Inc.

Stephen Kim Analyst, Evercore ISI

John Lovallo II Analyst, Bank of America Merrill Lynch

Michael Rehaut Analyst, JPMorgan Securities LLC

Kenneth Zener Analyst, KeyBanc Capital Markets, Inc.

Mike Dahl Analyst, RBC Capital Markets LLC

Susan Maklari Analyst, Goldman Sachs & Co. LLC

Seldon Clarke Analyst, Deutsche Bank

Adam Baumgarten Analyst, Credit Suisse

Garik Shmois Analyst, Loop Capital Markets LLC

Truman Patterson Analyst, Wells Fargo Securities

Philip Ng Analyst, Jefferies LLC

Keith Hughes Analyst, SunTrust Robinson Humphrey, Inc.

Steven Ramsey Analyst, Thompson Research Group LLC

Justin Andrew Speer Analyst, Zelman & Associates





MANAGEMENT DISCUSSION SECTION

Operator: Good morning, ladies and gentlemen, and welcome to the Masco Second Quarter 2020 Earnings

Call. My name is Beverlin and I'll 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 David Chaika, Vice President, Treasurer and Investor Relations. You may begin. .....................................................................................................................................................................................................................................................................

David A. Chaika Vice President, Treasurer & Investor Relations, Masco Corp.

Thank you, Beverlin, and good morning. Welcome to Masco Corporation's 2020 Second Quarter Conference Call.

With me today are Keith Allman, President and CEO of Masco; and John Sznewajs, Masco's Vice President and

Chief Financial Officer.

Our second quarter earnings release and the presentation slides that 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 we 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 describe these risk 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. 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'll now turn the call over to Keith. .....................................................................................................................................................................................................................................................................


Thank you, Dave. Good morning, everyone, and thank you for joining us today. I hope you and your families and

loved ones are healthy and safe. This is certainly a difficult time for all of us. Despite the numerous challenges

created by the COVID-19 pandemic, I am proud that the Masco team has demonstrated support for one another,

support for our customers, and support for the thousands of communities we serve. Our team has risen to the

challenge, and I'm grateful for their dedication.

Similar to the responsiveness that Masco has shown throughout the pandemic, we are not standing on the

sidelines in the fight against racial injustice and inequality. We are concerned about systemic racism, passionate

about creating lasting change, and committed to doing our part.

Over the last five years, our enterprise-wide diversity and inclusion strategy has included actions within our

company, and our communities. We fully recognize that we have more work to do, but we've laid a solid

foundation that will enable us to accelerate progress in the future. At Masco, we are committed to creating an





environment where all employees are included, all employees are treated with dignity and respect, and all

employees have an opportunity, an equal opportunity to thrive.

Now, turning to our quarterly results, please refer to slide 4. We executed extremely well in the second quarter,

and demand for our products improved as restrictions on production eased and our distribution channels

reopened. This strong demand resulted in a record sales quarter for our paint business, along with our focus on

cost control, resulted in better-than-expected decremental margins in our Plumbing segment and strong

incremental margins in our Decorative segment.

Combined, sales for the quarter decreased 3%, excluding the impact of currency, significantly outperforming our

expectations. Operating [ph] profit (00:04:04) decreased just $5 million, while operating margins expanded 50

basis points to 19.5%. Net income from continuing operations increased 3% and earnings per share grew 14% to

$0.84 per share, highlighting the strength of our capital allocation and portfolio moves.

Turning our segments, excluding currency, Plumbing sales declined 13%. Sales varied widely across our

businesses in plumbing, mainly driven by the extent of production facility and distribution closures. Our spa

business experienced the largest sales decline in the segment, due to facility closures. However, production

resumed quicker than expected during the quarter, and we were able to achieve a sales decline of less than half

of what we originally forecasted in this business. We continue to see record levels of demand and backlog for our

spas, which speaks to our industry-leading brands and to the desire of consumers to enhance their at-home living

experience.

Our international plumbing business saw significant improvement throughout the quarter. Germany, our largest

market, saw a positive sales growth in June, while other European countries, such as the UK and Italy, have been

slower to reopen. Our North American Plumbing business also saw a significant improvement throughout the

quarter, with Delta achieving a record sales month in June, with strong strength in its trade, retail and e-

commerce channels of distribution. Our stronger-than-anticipated sales performance in plumbing, together with

our disciplined cost control, resulted in decremental margins of 28%, significantly better than expected.

In our Decorative Architectural segment, extremely strong paint volume drove both top and bottom line

performance. DIY sales were up high teens for the quarter and even stronger in May and June. Our PRO paint

sales declined low double digits for the quarter, but we did see notable improvement in June. With our leading

Behr brand, we are well positioned to continue to capitalize on the strength of the DIY market. And we remain

committed to invest, along with our partner The Home Depot, in the large PRO opportunity.

As we discussed last quarter, we are in dynamic and uncertain times and accurately predicting the depth and

duration of the impact of this pandemic is difficult, at best. While have withdrawn our full-year guidance, here's

how we are currently thinking about our expected third quarter performance.

We anticipate third quarter [indiscernible] (00:07:04) excluding currency, to be in the range of flat to up 10% with

Plumbing sales in the range of down 5% to up 5% and Decorative Architectural sales growth to be in the range of

7% to 17%. Third quarter operating margins for both the company and each of our segments are expected to be

similar to last year. Importantly, this outlook assumes no further shutdowns of facilities or points of distribution,

which is obviously a concern as COVID cases spike in many parts of the country.

While the third quarter appears to be robust based on the demand we are seeing and the backlog for our

products, we have concerns that demand could lessen in the fourth quarter, if government stimulus reduces and if

the economic impact of the pandemic worsens. Additionally, while we were focused on short-term cost control





during this pandemic, we remain committed to driving long-term growth and we will continue to invest in brand,

innovation and service to ensure we win in the recovery.

Lastly, I'd like to update you on our current thoughts on capital allocation. We have suspended our share

repurchase activity indefinitely due to the uncertainty of the current environment. I'll remind you that we

repurchased approximately $600 million of our shares prior to suspending our activity at an average price of

$39.30 per share. There is no change to our thoughts on M&A. We remain active in the M&A market and have the

balance sheet and liquidity to execute transactions during these uncertain times.

Lastly, expressing confidence in our future prospects and the strength of our balance sheet, our board announced

its intention to raise our annual dividend by 4% to $0.56 per share beginning in the fourth quarter. This marks our

seventh consecutive year of an annual dividend increase.

With that, I will now turn it over to John for additional detail on our second quarter results. John? .....................................................................................................................................................................................................................................................................

John G. Sznewajs Chief Financial Officer & Vice President, Masco Corp.

Thank you, Keith and good morning, everyone. As Dave mentioned, most of my comments will focus on adjusted

performance, excluding the impact of rationalization and other one-time items.

Turning the slide 6, sales decreased 4% and 3% excluding currency. Foreign currency translation unfavorably

impacted our second quarter revenue by approximately $13 million. In local currency, North American sales in the

second quarter matched prior year. This performance was mainly due to lower volumes in our plumbing business,

which were offset by strong volume growth in our DIY paint business.

In local currency, international sales decreased 17% in the quarter driven by lower volumes. Gross margins was

35.8%, down 90 basis points. Our SG&A, as a percent of sales, decreased 140 basis points to 16.3% as a result

of our focused cost containment in the quarter. We do, however, expect a portion of these costs to come back

and impact the remainder of the year as demand improves.

These costs are related to investments in advertising to further strengthen our brands, [ph] displays, (00:10:44)

support new program wins and additional funding to advance our e-commerce initiatives in the continued rapid

growth of this channel. Operating income was $344 million in the quarter, down $5 million from last year, with

operating margins expanding 50 basis points to 19.5% despite lower volumes. Our EPS was $0.84 in a quarter,

an increase of 14% compared to the second quarter of 2019.

While we do not normally provide monthly sales trends, in this environment, we thought it would be helpful for you

to understand the improvement we saw throughout the quarter. April was the low point, with sales down 22% due

to numerous restrictions, improving to down only 3% in May and turning to growth of 14% in June, as restrictions

were eased and some of the pent-up demand was fulfilled.

We anticipate continued solid demand in the third quarter, with sales expectations, excluding currency, of

approximately flat to 10% growth as this pent-up demand continues to get fulfilled with operating margins similar

to Q3 of 2019.

Many uncertainties remain that can impact these results such as the effect of government stimulus programs and

the impact of virus on the overall health of the economy and consumer. Additionally, it is important to note that our





expectations for Q3 assumes no further closures of our manufacturing plants or points of distribution related to

COVID-19.

Turning to slide 7. Plumbing decreased 13%, excluding the impact of currency, but improved sequentially during

the quarter with June sales up high single digits, resulting in better-than-expected segment performance. Foreign

currency translation unfavorably impacted the segment sales by approximately $10 million in the quarter.

North American sales decreased 11% in local currency and a solid growth in our retail and e-commerce channels

was more than offset by declines in our wholesale in specialty dealer channels. The trade channel was more

impacted by the closure of wholesale locations and plumbing showrooms. However, we saw a significant

improvement and positive sales growth in the trade channel in the month of June. While Delta sales in the quarter

were down low single digit, we recovered exceptionally well from a significant decline in April to a record sales

month in June.

North American sales in the quarter were also unfavorably impacted by approximately 7% as a result of facility

closures in our spa business in California and Mexico due to government orders. Spa manufacturing did ramp up

in May and June as restrictions were eased. However, Watkins continues to operate at less than 100% capacity

due to ongoing employee limitations and labor constraints in our facilities, which we expect to continue throughout

out the third quarter.

International plumbing sales decreased 17% in local currency. Hansgrohe experienced a low single-digit decline

in the quarter in its home market of Germany. However, sales improved in June with mid-single-digit growth.

Hansgrohe saw larger declines in the quarter in other European markets, including the UK, France, Spain and

Italy, due to a slower easing of restrictions in those countries.

Sales in China also declined low single digits for the quarter, a significant improvement from the approximately

20% decline experienced in the first quarter. Operating profit in the quarter was $159 million and margins were

18.3%. Our decremental margin of 28% was better than expected due to improved volumes and solid execution

on cost containment. In terms of monthly sales trends, plumbing sales were down in April, 33%, improved to down

17% in May and rebounded to 8% growth in June.

Turning to the third quarter. We expect sales, excluding currency, to be in the range of down 5% to up 5% as we

currently see good demand for our products in North America, while international demand remains slower to

recover. We anticipate margins will be similar to prior-year margins of 18.7%.

Turning to slide 8, Decorative Architectural grew 8% for the quarter. This strong performance was driven by low

double-digit growth for our paint business, with high-teens growth in DIY paint partially offset by low double-digit

decline in PRO paint, resulting in a record sales quarter for Behr.

Our outstanding DIY paint results benefited from the continued research into DYI painting. While it is still too early

call this a trend, we remain well-positioned with Behr's compelling quality and value proposition to capitalize on

shifts in consumer behavior. While PRO paint demand declined in the second quarter, we saw sequential

improvement within the quarter, with June sales down only low-single digits. Our builders' hardware business also

experienced growth in the quarter driven by a solid performance in the retail and e-commerce channels. Growth

was partially offset by lower sales in our lighting business.

As we mentioned on our first quarter earnings call, lighting sales were impacted by the loss of a portion of a

private label program and inventory rebalancing into customer. But results were better than anticipated.





Sales were also and negatively impacted by the closure of lighting showrooms due to state shelter-in-place

orders. Lighting sales improved sequentially in the quarter with year-over-year sales growth in June.

Operating profit increased in the quarter by 17% driven by incremental volume and focused cost containment

such as reduced marketing and advertising spending. In terms of monthly sales, decorative sales were down

approximately 9% in April, but we're up 13% in May and up and outstanding 23% in June.

Turning to the third quarter, we expect the strong demand for paint to continue and anticipate segment sales

growth to be in the range of 7% to 17% and margins to approximate prior-year margins of 18.9%. We also

anticipate higher investment in the third quarter in advertising and marketing in the segment, and additional

display expense in our builders' hardware business related to a program win at a retail customer.

And turning to slide 9, our balance sheet remains very strong with net debt to EBITDA at 1.3 times as we ended

the quarter with approximately $2.1 billion of balance sheet liquidity, which includes full availability of our $1 billion

revolver. Note that our quarter end cash balance includes a $200 million benefit due to the deferral of taxes owed

on the sale of our Cabinetry business. This tax was paid on July 15.

Working capital, as a percent of sales, improved 50 basis points versus prior year to 18.1% due to lower inventory

levels and an improvement in accounts payable.

Lastly, during the second quarter, we received 2.3 million shares at no additional cost to complete our $350

million accelerated share repurchase agreement at an average share price of $36.63. As Keith mentioned, our

share buyback activity remains suspended, therefore, we continue to estimate our 2020 average diluted share

count will be approximately 266 million shares.

And with that, I'll turn the call back over to Keith. .....................................................................................................................................................................................................................................................................


Thank you, John. The COVID-19 pandemic may have lasting structural effects on the economy, consumer

behavior and homeownership, all of which we will continue to assess. There could be increased interest in single-

family housing with more space in the house and more distance from neighbors. Increased remote working could

lead to higher remodeling spending. Homeowners may take on more do-it-yourself projects, especially easy-to-do

projects, such as painting as opposed to having other people in their homes. And record-low mortgage rates and

lack of supply could lead to home price appreciation, which historically has a strong correlation with our sales.

All of these factors bode well for our lower-ticket repair and remodel products. The changes we have made to

Masco over the past few years, our culture of execution and our commitment to continue to invest in brand,

innovation and service to support our customers, positions us well to drive long-term growth and value creation.

With that, I'll now open up the call for questions. Operator?





QUESTION AND ANSWER SECTION

Operator: [Operator Instructions] Your first question comes from the line of Matthew Bouley of Barclays Capital. .....................................................................................................................................................................................................................................................................

Matthew Bouley Analyst, Barclays Capital, Inc. Q Hey, good morning. Thanks for taking the questions. Hope everyone's doing well. I guess I wanted to start

perhaps on the sales guidance for Q3. It's a relatively wide range. And thanks for all the details around the

monthly cadence, but I'd be curious if you could give some color on sort of the starting point for the quarter and

how July trended in both segments? And kind of what's keeping you a little more conservative on providing such a

large range there? Thank you. .....................................................................................................................................................................................................................................................................

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A Matthew, July was strong for us, and we are starting off the quarter confidently. However, when we think about

the large range, I think it's clear that there is volatility and variability as we look forward in terms of what can

happen with the consumer. And that's fundamentally what's driven our thinking as it relates to the range on

possible top line. .....................................................................................................................................................................................................................................................................

Matthew Bouley Analyst, Barclays Capital, Inc. Q Okay, understood. And secondly, just on DIY Paint specifically. Obviously, very strong result, and it seems like it's

going to continue strong through the summer months, at least. And I hear you on making some investments there

into Q3. What are you doing or what's kind of the intent around share through this? Is there an ability to kind of

maintain or even really grow your market share while this underlying demand is the strong or does it make more

sense to kind of limit the promotional investment and sort of ride the underlying wave there? Thank you. .....................................................................................................................................................................................................................................................................

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A No question, there's an opportunity to gain share, and we're doing just that. A significant change as we look at the

performance from a demand perspective, DIY related to PRO, and when you overlay that with our strong position

with the leading DIY brand, we, most definitely, are gaining share here. And that's our intent to continue to do that.

As we've talked about consistently, Matthew, our focus has been on three things. Number one is the safety of our

employees, full stop. That's our focus. Number two, is to make sure we're ensuring business continuity and

keeping a close eye on our liquidity, and we have very strong liquidity as a result of the strong cash flow of our

portfolio, so that's strong. And number three, consistently, we've talked about winning in the recovery. And part of

that winning in the recovery is making sure that we're investing appropriately in brand and innovation. John talked

a little bit about some new displays, particularly in this Decorative Architectural segment that we'll also be

spending in. So it's a judgment call, and it's a feel, if you will. But we are committed to ensuring that we spend

appropriately to win in the recovery. And that's how we're thinking about it. .....................................................................................................................................................................................................................................................................

Matthew Bouley Analyst, Barclays Capital, Inc. Q Thanks, Keith. Congrats on the results.





Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A Thank you. .....................................................................................................................................................................................................................................................................

Operator: Your next question comes from the line of Stephen Kim of Evercore. .....................................................................................................................................................................................................................................................................

Stephen Kim Analyst, Evercore ISI Q Yeah. Thanks very much, guys. Good quarter. I wanted to ask you a little bit about what you're seeing in the US

with respect to inventory levels and the restocking. Wondering if it's happening yet, how long could it last? And I'm

imagining that would probably be more impactful in maybe your wholesale, specialty dealer channel. Just want to

confirm, was that like down as much as high-teens in second quarter? .....................................................................................................................................................................................................................................................................

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A I'm sorry, Steve. But I didn't hear that last portion of your question. .....................................................................................................................................................................................................................................................................

Stephen Kim Analyst, Evercore ISI Q I'm sorry, the wholesale and specialty dealer channel within plumbing, was that down as much as high teens in

2Q? .....................................................................................................................................................................................................................................................................

John G. Sznewajs Chief Financial Officer & Vice President, Masco Corp. A Yeah, Stephen, it's John. No. I would say, no, actually – a couple of points I'd like to make. Sell-through has been

very good. It is probably better than sell-in across our channels. And we've seen – once we saw the trade channel

start to reopen, we saw a very good sales trends there. And so no, our sales were not down, the teens that you

described, it was less than that. .....................................................................................................................................................................................................................................................................

Stephen Kim Analyst, Evercore ISI Q That's great. .....................................................................................................................................................................................................................................................................

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A In terms of inventory, Stephen, it really varies a lot business to business. As you know, we had some shutdowns

in Q1, driven by government orders that certainly put a dent in our inventory levels as consumers continued to

buy our products and paint, for example, we're seeing an unprecedented amount of demand, particularly demand

for the 1-gallon DIY-friendly containers. So, there were some inventory fluctuations, both from a business-to-

business perspective as well as within our businesses. But our facilities are ramping production back up. We're

catching up on that backlog, and we believe we're in a good position to serve our customers as we go in here

through the summer months. .....................................................................................................................................................................................................................................................................

Stephen Kim Analyst, Evercore ISI Q





Okay. Great. Thanks for that. Just to clarify, so are you saying that you feel like in 3Q, you can pretty much catch

up on whatever destocking occurred? Or do you think that this is something that we're going to be talking about

through 4Q or even further? .....................................................................................................................................................................................................................................................................

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A No, I think we're going to catch up. .....................................................................................................................................................................................................................................................................

Stephen Kim Analyst, Evercore ISI Q Okay. Thanks very much. .....................................................................................................................................................................................................................................................................

Operator: Your next question comes from the line of John Lovallo of Bank of America. .....................................................................................................................................................................................................................................................................

John Lovallo II Analyst, Bank of America Merrill Lynch Q Hey, guys. Thank you for taking my question. First one, maybe I'll just try Matt's question one more time. The

June sales trend's obviously very strong, plus 14%. I mean, would you say July was comparable to that, at least,

on a year-over-year basis? .....................................................................................................................................................................................................................................................................

John G. Sznewajs Chief Financial Officer & Vice President, Masco Corp. A Yes, John, I think it was – yeah, I think very similar. Yeah. .....................................................................................................................................................................................................................................................................

John Lovallo II Analyst, Bank of America Merrill Lynch Q Okay. That's helpful. And then maybe just turning to SG&A, the $39 million or so pulled out on a year-over-year

basis is very significant. And I know you guys talked about some investment in displays and e-commerce and so

forth. How should we think about absolute dollars of SG&A on a year-over-year basis in 3Q and 4Q? I mean, will

they actually be down on a year-over-year basis or would you think those trend upwards again? .....................................................................................................................................................................................................................................................................

John G. Sznewajs Chief Financial Officer & Vice President, Masco Corp. A I don't think, they'll be down year-over-year – I'm sorry, they'll be – I'm sorry, I think, they'll – I think, SG&A, year-

over-year, John, we have some additional investment that we're going to make in the things that we described,

like advertising, some head count coming back in. As you might expect, we really pulled back on head count. We

had a hiring freeze, we have wage freezes across the enterprise, as we came in the second quarter. And as

demand has come back, we're starting to look at putting some of those things back into the system.

One of the things that goes through SG&A, as Keith mentioned, and I mentioned in my prepared remarks, are

some of the displays that will be going into to support Liberty in the program win that they had at retail. So I think

we'll have some additional investments, some advertising that we pulled back on pretty significantly, will come

back in the third quarter. So, I think, overall, I think we'll be in good shape. I can tell you, we are monitoring this

very, very closely. And to the extent that we see any changes, we'll be very quick to react on our SG&A spend. .....................................................................................................................................................................................................................................................................





John Lovallo II Analyst, Bank of America Merrill Lynch Q Okay. Thank you, guys. .....................................................................................................................................................................................................................................................................

Operator: Our next question comes from the line of Michael Rehaut of JPMorgan. .....................................................................................................................................................................................................................................................................

Michael Rehaut Analyst, JPMorgan Securities LLC Q Thanks. Good morning everyone and congrats on all the hard work. .....................................................................................................................................................................................................................................................................

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A Thanks. .....................................................................................................................................................................................................................................................................

Michael Rehaut Analyst, JPMorgan Securities LLC Q Wanted to just, again, kind of zero in on 3Q a little bit. And number one, I appreciate the additional color around

July. If you're talking about the high-end of the 3Q range being a few points below June and maybe July, are you

seeing anything in your order book or anything from – in terms of like a forward look into the last two months that

puts you maybe 10 points at a midpoint below what you're seeing in July?

And then, I guess, also on the operating margin side, when you look at operating margins being similar to a year

ago, but down a bit sequentially, how much of that is maybe coming back, of some of those temporary cost

measures, holding back on some advertising and other types of spend. How much of that is a function of some of

those costs coming back, rather than perhaps just seasonality? .....................................................................................................................................................................................................................................................................

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A Well, certainly, seasonality is a part of that. If you look, Mike, at paint, Q2 is our heftiest quarter. And then, it backs

off a little bit in Q3. So there's an element of seasonality when you look at volume, particularly in paint. The

biggest driver would be costs that we are planning to put back into this business when we look at Q3.

And I think we had a keen focus on business continuity, as I mentioned, in liquidity, and we did not know what this

pandemic was going to [ph] deal us (00:30:52) in terms of overall demand. So we were cautious and we – I think

it's favorable that we were able to demonstrate that we do have the levers to be able to control our spend

because this is an unpredictable environment.

So we're balancing that spend control, with investment to win in the recovery. And we feel where we sit today, that

it's appropriate for us to start to layer that investment back in. We've talked about program wins and the displays,

the costs that we need to put in to support that program. That's a good thing.

We're going to continue to drive advertising, promotions, those sorts of things in terms of continuing to build our

brand and continuing to take share in this recovery. We also admittedly have some increased costs as we look

into the third quarter as it relates to hiring costs over time, there will be a little bit of premium freight as we're

continuing to smooth out our supply chain. So, when you roll all those in and you look at that variability, that's why

we're making the call for Q3 margins to be similar to last year.





Michael Rehaut Analyst, JPMorgan Securities LLC Q And then just on the sales question, again, I appreciate it. .....................................................................................................................................................................................................................................................................

John G. Sznewajs Chief Financial Officer & Vice President, Masco Corp. A On the order book, what are we seeing... .....................................................................................................................................................................................................................................................................

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A Oh, yeah. We have a real solid order book and we have, as John mentioned, the sell-through has been very

strong, stronger than the sell-in. So we have some ability for us to continue to put some inventory back into the

channel and our order book is strong. .....................................................................................................................................................................................................................................................................

Michael Rehaut Analyst, JPMorgan Securities LLC Q Thank you. .....................................................................................................................................................................................................................................................................

Operator: Your next question comes from the line of Ken Zener of KeyBanc. .....................................................................................................................................................................................................................................................................

Kenneth Zener Analyst, KeyBanc Capital Markets, Inc. Q Hello, everyone. .....................................................................................................................................................................................................................................................................

John G. Sznewajs Chief Financial Officer & Vice President, Masco Corp. A Good morning, Ken. .....................................................................................................................................................................................................................................................................

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A Good morning. .....................................................................................................................................................................................................................................................................

Kenneth Zener Analyst, KeyBanc Capital Markets, Inc. Q What a quarter? Focused on plumbing, I have two parts. First, what is the plumbing SKU mix you're seeing? So

kind of rough versus fittings, focused on the US and then kind of the thoughts about if retail is picking up a lot of

traffic from the trade. So, I mean [indiscernible] (00:33:08) talked about record retail. So as – are we just seeing

people going to retail and it wasn't so bad in the trade? And then also just between the rough trends in the US and

fittings, first question. .....................................................................................................................................................................................................................................................................

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A I think, generally speaking, the rough tends to have a little bit more new construction component to it than finish.

As you can certainly do a remodel or a repair and remodel job with a faucet, et cetera, versus going under the

deck and working with stops or working with rough plumbing. So there was a little bit of a tougher impact on rough





as it relates to the temporary shift we saw earlier in the quarter away from new construction. Now, obviously,

we're starting to see that build in the last month of June in the quarter as it relates to rough. But to answer your

question, I would say that finish fared a little bit better than rough for that demand mix.

In terms of retail versus wholesale, I think, a pretty consistent story to what us and others have been saying.

When you have points of sale and points of distribution closed, i.e., plumbing showrooms, that volume goes

down. So there was a shift to retail, a shift to e-commerce that we've we saw in the first, call it, two months of the

quarter. And then in June, we're seeing that start to come back, and we're seeing actually some very nice traction

in showrooms as people are starting to interface with that channel more as they're reopened. .....................................................................................................................................................................................................................................................................

Kenneth Zener Analyst, KeyBanc Capital Markets, Inc. Q And is there a big difference in the consumer behavior in plumbing specifically in the US versus Europe? If you

could kind of contrast that if it might offer some insight? Thank you. .....................................................................................................................................................................................................................................................................

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A I don't know that I'd say so much that it is consumer behavior so much. We really haven't seen that. And the best

way to tell that really is to look at channels of and traffic and channels and look at mix. Really, what we're seeing, I

would say, broadly speaking is that Europe has been slower to recover than our recovery here in the United

States. And that may say something about our infection rates here in the United States versus Europe, frankly.

But it's been a little slower in Europe. You look at the UK, just thinking here, Spain, Italy, I would say those

countries' approach to reopening has been significantly less aggressive than the United States. And that's where I

would say there's a difference more so than, say, consumer behavior. .....................................................................................................................................................................................................................................................................

Kenneth Zener Analyst, KeyBanc Capital Markets, Inc. Q Thank you. .....................................................................................................................................................................................................................................................................

Operator: Your next question comes from the line of Mike Dahl of RBC Capital Markets. .....................................................................................................................................................................................................................................................................

Mike Dahl Analyst, RBC Capital Markets LLC Q Good morning. Thanks for taking my questions and that's quite a quarter against such a fluid backdrop. First

question, I had just on dec arc and paint specifically. You kind of commented that PRO paint got back to down

low-single-digits in June. If we think about that business being, I think, roughly 20% of the total coating segment, it

sounds like that was maybe like a 2-point drag in the quarter based on the overall trends. So when you're looking

at the guide for 3Q, up 7% to 17%, any thoughts on just like how to frame what PRO paint expectations are and

how much that could either contribute or continue to drag on the segment results? .....................................................................................................................................................................................................................................................................

John G. Sznewajs Chief Financial Officer & Vice President, Masco Corp. A Yeah. Mike. So first of all, the PRO business is about 25% of our paint sales. And as we look forward to Q3, we

expect it to be just modest growth from here on. I mean, we don't expect a significant – slight improvement from

where we're at today, but not a significant improvement is what we're counting on in the third quarter. .....................................................................................................................................................................................................................................................................





Mike Dahl Analyst, RBC Capital Markets LLC Q Okay. Got it. And then the second question, just back on margins. I appreciate the – certainly, the investment and

some of the cost returning at the same time, it's at a midpoint or back in a growth environment, and you normally

lever on that. And at least in plumbing, not sure about on dec arc, but in plumbing, you may also have some cost

tailwinds from raw mats potentially, is the reason for flat margins then overall? Just is it timing of when these

investments come through on a year-on-year basis? Or is it – I guess, trying to think about how to frame whether

the investments are significantly larger in general or whether it's truly just kind of catch-up from deferred 2Q into

3Q, so a little more stacked year-on-year than you'd normally be? .....................................................................................................................................................................................................................................................................

John G. Sznewajs Chief Financial Officer & Vice President, Masco Corp. A Yeah. Mike, I'd say it's more of the latter part. It's more just kind of a catch-up from some of the Q2 spend that we

did not incur. And across both segments, it's pretty much the same story that we're putting the [indiscernible]

(00:38:34) other displays for the builders' hardware business and a lot of the investment that we're putting back

into the business, as Keith mentioned a couple of minutes ago, is similar, right?

We're reinvesting in some of the head count, because we're slowly loosening the head count freeze that we had,

the hiring freeze that we had on. We are starting to reinvest in the brands appropriately. We're not trying to get too

far out there, but we think appropriate investment in the brand makes sense at this point to continue to support

our brands and the brands with our retail partners.

In terms of price cost, I'd say – as you think about the commodity basket that we're seeing, Mike, now – break that

apart, I guess, into the two segments. Zinc has been relatively flat, maybe up a touch. Copper has risen in the last

month or so. And so today, it's above where it was a year ago. So that could be potentially a little bit of a

headwind in the future. Recall that it takes about two quarters for raw material [ph] inflation to (00:39:41) flow

through and hit our P&L. So maybe a little bit of the tailwind that we'll enjoy on the commodity side will help offset

some of the tariff impact and will continue to feel as we go into the second half of the year on the plumbing side of

the business.

Then if you turn into the – and look at the raw material basket on the Decorative Architectural side, our TiO2 has

been relatively stable through the year, and we expect it to continue to be stable through really the balance of the

year. The one area that we have seen a little bit of easing is on resins. And we do – we are seeing a little bit of

potential for that to maybe Q2 to be the bottom of that and to see a little bit of inflation as we go into the last half

of the year. So there's the potential for some price cost headwinds in the second half of the year on the

Decorative Architectural side. .....................................................................................................................................................................................................................................................................

Mike Dahl Analyst, RBC Capital Markets LLC Q Okay. Thanks. That's really helpful. .....................................................................................................................................................................................................................................................................

John G. Sznewajs Chief Financial Officer & Vice President, Masco Corp. A Yeah. .....................................................................................................................................................................................................................................................................

Operator: Your next question comes from the line of Susan Maklari of Goldman Sachs.





Susan Maklari Analyst, Goldman Sachs & Co. LLC Q Thank you. Good morning. My first question is a bit higher level. It feels like from your commentary that what

we've been seeing over the last couple of months is that some of the mix shift that we historically see in

recessionary periods really has not come together to the same extent. Do you think that that's accurate? And I

guess, how are you thinking about mix shift going forward and the sustainability of some of the trends that we've

seen? .....................................................................................................................................................................................................................................................................

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A I think, Susan, that that is an accurate statement in terms of the mix shift that maybe you would say is typical of,

let's say, a recession that we haven't seen. And there's several different theories on why that is, perhaps it's more

affluent. The customers that would buy the higher-level mix haven't really been affected in terms of unemployment

or haven't been affected by the pandemic so far. So that's an aspect of it. But we are seeing a good high-quality

mix at that high level, and we're seeing it across our segments.

We talked about record backlog in our spa business, and that's a high-dollar discretionary purchase. And we have

a very solid demand. So I think that's a fair statement. In terms of where we think mix will go as we look through

the rest of the year, we really don't think it's going to be much of a factor. We had a little, call it, channel mix early

on in the quarter as retail was stronger than trade. And we have a little bit of a mix headwind in Europe as that

economy has yet to really pull back through, but we anticipate that when we look at the full-year impact, that really

isn't going to be that material as it relates to mix. .....................................................................................................................................................................................................................................................................

Susan Maklari Analyst, Goldman Sachs & Co. LLC Q Okay. That's helpful. And, Keith, in your comments, you talked about capital allocation. And it sounds like the

M&A pipeline is perhaps ticked up a little bit for you. Can you just give us a little more color on what you're seeing

there? And how you're thinking about perhaps M&A relative to shareholder returns and that kind of breakdown? .....................................................................................................................................................................................................................................................................

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A The pipeline has really been about the same. We continue to work and to drive it, we have interesting targets. I

think probably in this type of an environment, there's less of a willingness to sell, clearly. But we're still talking to

people. So, I wouldn't expect much activity or much difference. In terms of how we think about M&A and

shareholder return, and how that fits into our capital allocation, as I talked about, really no change. Our capital

allocation strategy is to fund the good idea of our businesses and to support our core business, first and foremost.

And we're going to maintain a respectable and healthy dividend and continue to grow that dividend.

And then as it relates to share buybacks and M&A or acquisitions, we're going to be patient. And I think we've

demonstrated that. And we will take advantage of episodic times to buy our stock a little bit more heavily, as we

have in the past. And we'll also be patient and make sure that our M&A targets are shareholder value-creating

and that they're – by and large, we're looking at bolt-on to our existing segments. And that hasn't changed. .....................................................................................................................................................................................................................................................................

Susan Maklari Analyst, Goldman Sachs & Co. LLC Q Okay. Great, thank you, good luck. .....................................................................................................................................................................................................................................................................






Operator: Thank you. Your next question comes from the line of Seldon Clarke of Deutsche Bank. .....................................................................................................................................................................................................................................................................

Seldon Clarke Analyst, Deutsche Bank Q Hey, good morning. Thanks for the question. What's the right way to think about either incrementals or

decrementals in either plumbing or decorative if sales come in at the either book end of your guidance? Are there

– I know you talked about some temporary costs. But would those scale with revenue growth if you come in, in

decorative, for example, at the higher end of the 7% to 17% range? Or should the fixed cost base stay fairly

consistent? .....................................................................................................................................................................................................................................................................

John G. Sznewajs Chief Financial Officer & Vice President, Masco Corp. A Yeah. Seldon, I would tell you that our incrementals really haven't changed much overall from a company

perspective, we're in that 30% to 35% range. The Plumbing segment, should be in approximately at same range

of 30% to 35%, the Decorative Architectural segment will be a little bit less than that, closer to the 25% to 30%

range. So – while – so that should reflect some good leverage of our fixed cost but really no significant change

from what we've experienced historically. .....................................................................................................................................................................................................................................................................

Seldon Clarke Analyst, Deutsche Bank Q Okay. That's helpful. And then, just a couple of quick ones on the spa business. First is just, how much

seasonality is there in that business? And you talked about seeing a significant amount of pent-up demand. But

did you lose any market share in the second quarter? Or are all the major manufacturers constrained from a

production standpoint? .....................................................................................................................................................................................................................................................................

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A When you look at the industry, everybody is constrained at this point. So you're right on that assertion for sure,

there's no question about it. In terms of seasonality, typically, this is a very seasonal business. However, with our

strong order book and our backlog, we anticipate that seasonality through the summer fall and into the winter,

frankly, to not be there this year. We've got a tremendous backlog and we're looking forward to filling it. .....................................................................................................................................................................................................................................................................

John G. Sznewajs Chief Financial Officer & Vice President, Masco Corp. A Yeah, and quite honestly so. And this is clearly not a demand issue. This is a supply issue. I mean, this was – we

were not permitted to manufacturing. And so to Keith's point, yeah, we're seeing really good strength in this

business. .....................................................................................................................................................................................................................................................................

Seldon Clarke Analyst, Deutsche Bank Q Okay. I appreciate the time. Thanks guys.






Operator: Your next question comes from the line of Adam Baumgartener (sic) [Adam Baumgarten] (00:47:02)

of Credit Suisse. .....................................................................................................................................................................................................................................................................

Adam Baumgarten Analyst, Credit Suisse Q Hi, thanks for taking my question. Just in paint, curious if you saw any meaningful difference in sales growth

between exterior and interior and maybe how that trended throughout the quarter? .....................................................................................................................................................................................................................................................................

John G. Sznewajs Chief Financial Officer & Vice President, Masco Corp. A Sure. Yeah. Because – given the nature of the season, generally in the second quarter, we saw stronger sales in

exterior paints than we did in the interior paint during the second quarter, Adam. And probably a little bit stronger

than we would normally see versus historical second quarters, but I take it, that's the nature of the current

environment in the pandemic. .....................................................................................................................................................................................................................................................................

Adam Baumgarten Analyst, Credit Suisse Q Got it. And then just to confirm on the decorative guidance for 3Q on sales. Are you assuming positive sales

growth for the PRO paint business? And also, will Kichler and Liberty be up in that guidance that you gave? .....................................................................................................................................................................................................................................................................

John G. Sznewajs Chief Financial Officer & Vice President, Masco Corp. A So Kichler and Liberty will continue their growth. So, it will be modest overall in the segment because they're the

relatively small pieces of the segment. And then we are expecting modest growth for the PRO business in the

third quarter. .....................................................................................................................................................................................................................................................................

Adam Baumgarten Analyst, Credit Suisse Q Got it. Thanks. Appreciate it. .....................................................................................................................................................................................................................................................................

Operator: Your next question comes from the line of Garik Shmois of Loop Capital. .....................................................................................................................................................................................................................................................................

Garik Shmois Analyst, Loop Capital Markets LLC Q Hi, thanks. Just want to follow up on the PRO question. Do you think we're at a point, just given the trends that

you're seeing in July and expected in Q3, there were more [indiscernible] (00:48:29) levels for PRO demand? And

I guess, conversely, if not, do you think that over the next several quarters and years, potentially that you're going

to see a secular shift to that category due to the resurgence in DIY interest? .....................................................................................................................................................................................................................................................................

John G. Sznewajs Chief Financial Officer & Vice President, Masco Corp. A





Garik, I'm going to ask you to repeat the question. There's a little bit of interference on the call when you were

asking your question. .....................................................................................................................................................................................................................................................................

Garik Shmois Analyst, Loop Capital Markets LLC Q Sorry. No, just wondering if you're starting to see PRO Paint sales normalize into July and in the third quarter. And

then conversely, if not, do you worry that there could be a secular shift away from this category due to the

resurgence in DIY interest? .....................................................................................................................................................................................................................................................................

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A The – we are seeing throughout the quarter, we are seeing PRO pick up a little bit. It was strong in exterior, as I

think people obviously are more comfortable having people on the outside of their home than inside. And we saw,

as we mentioned in our prepared remarks, a lift-up in the quarter.

In terms of – if we're concerned about the resurgence of or a lack of resurgence of the PRO, no, we're not. We

have a solid plan and track record for share gain in the PRO, and we're going to continue to do that. But

fundamentally, we have the leading DIY brand, and DIY is our sweet spot, for lack of a better word and we're

excited about this. Particularly when we look at some of our research, where we think a full, call it, 30% of the

painters that have painted in the pandemic, were first-time painters. And if you peel that back, about half of those

first timers we're millennials.

Now this is a thesis that we have been talking about for some time as it relates to the millennials coming into the

market, forming households and that big cohort being able to be a tailwind for our DIY business. And we do think

that this will be a structural shift and we are poised and ready to take advantage of that. So our – having both an

incredibly strong brand in DIY and a growing and solid business in PRO, I think, is a good spot to be. .....................................................................................................................................................................................................................................................................

Garik Shmois Analyst, Loop Capital Markets LLC Q Okay. Thanks for that. A follow-up question is, are there any incremental costs associated with transitioning to 1-

gallon paint production in a way maybe from 5-gallon? And how quickly – or is there any sensitivity if you have to

toggle between the two quickly in production? .....................................................................................................................................................................................................................................................................

John G. Sznewajs Chief Financial Officer & Vice President, Masco Corp. A Yeah. There's a little bit of inefficiency, obviously, because you're not running your plant smoothly with 1-gallon fill

rates as you are with over 5-gallon. And one of the things we will be doing is we will be investing in additional 1-

gallon capacity [ph] hue (00:51:22) in the coming months in support of this trend. And so, we feel confident that

we can improve our efficiency and get back on track there. .....................................................................................................................................................................................................................................................................

Garik Shmois Analyst, Loop Capital Markets LLC Q Thank you. .....................................................................................................................................................................................................................................................................

Operator: Your next question comes from the line of Truman Patterson of Wells Fargo. .....................................................................................................................................................................................................................................................................





Truman Patterson Analyst, Wells Fargo Securities Q Hi. Good morning, guys. Nice results and thanks for taking my questions. First on Kichler, there are some moving

parts there. Previously, you had to push price pretty meaningfully to cover the increased tariff costs. It seems like

demand is rebounding in that category in June. But can you just discuss, has that continued into July? And are

your margins starting to normalize in that business? Are you actually able to recapture the tariff costs in this

environment? .....................................................................................................................................................................................................................................................................

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A Yeah. We are seeing continued improvement in the demand throughout the quarter and then into July here. So,

that's a good sign. We continue, as we've talked about, to work to strengthen this business and we've worked on

restructuring. We talked last quarter about closing a DC and some workforce rationalization. So that's advancing

well. And we're largely on track for our turnaround plan with this business, and then we're continuing to drive it. So

we feel good about the team down there and the progress that they've made. We continue to advance our

strategies, cost strategies, brand-building strategies, 80-20 and assortment simplification so that we can invest in

growth more and it's on plan. .....................................................................................................................................................................................................................................................................

Truman Patterson Analyst, Wells Fargo Securities Q Okay. Thanks for that. And then, just following up on a few other questions. DIY has just been very robust past

few months, double-digit growth rates plus. I don't think anybody expects that to really continue forever. But more

recently, in July, have you seen any sort of deceleration or consumer fatigue or anything in the DIY category? .....................................................................................................................................................................................................................................................................

John G. Sznewajs Chief Financial Officer & Vice President, Masco Corp. A No, Truman. Not at this point. And July continued to be very strong. .....................................................................................................................................................................................................................................................................

Truman Patterson Analyst, Wells Fargo Securities Q Okay. Thank you. .....................................................................................................................................................................................................................................................................

Operator: Your next question comes from the line of Phil Ng of Jefferies. .....................................................................................................................................................................................................................................................................

Philip Ng Analyst, Jefferies LLC Q Hey. Good morning, everyone. Appreciating how the pandemic is impacting US and your international business,

it's having an impact on demand for plumbing this year. But if we zoom out to 2021, how are you thinking about

the growth profile of your US versus international plumbing business? Any big delta out there? .....................................................................................................................................................................................................................................................................

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A I think we're equally positioned and well positioned on both sides of the Atlantic here. We've got the strong

franchise of Bayer. We've got both ores in the water, if you will, as it relates to DIY and PRO in an effective way,

where we've worked to have significantly improved our margins in PRO. So we're very much in tune to growing





both sides of that business. Leading brand in Delta in the United States that continues to grow well and as we

said, had a record quarter in June. So that momentum continues to be strong.

And then when we look over in Europe, we've got an outstanding brand with Hansgrohe. And because of the

nature of that brand, we're able to operate really around the world quite profitably and still have a significant

amount of white space and share gain potential and opportunities. So, I think we feel equally strong and feel good

about our share gain and our growth opportunities, both here in North America as well as abroad. .....................................................................................................................................................................................................................................................................

Philip Ng Analyst, Jefferies LLC Q Okay. That's really helpful. And then just given the strength you're seeing in plumbing and things kind of firming

up with Kichler in recent months, any concerns that we should be mindful of in terms of logistics importing

components from China due to the pandemic and does that pose a risk on just kind of meeting that demand,

whether it's on the plumbing and lighting side? .....................................................................................................................................................................................................................................................................

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A I'd tell you, I really have to hand it to our supply chain. And when I say supply chain, I mean the folks that work in

our factories, the folks that plan our inventory and our suppliers. We have really leaned on that group. And

manufacturing is not typically set up to go from [ph] 60% to 30% (00:55:49) in a matter of a couple of weeks and

then jump from [ph] 30% to 90% (00:55:53) in the following month. And our supply base and our factory and the

professionals that work there have done a phenomenal job. And particularly from a supply chain standpoint and a

supply base and our big suppliers, they have been there to support us. And we're not going to forget that. We're

very thankful for the supply chain that we have. And we do not – things can change. Clearly, this is a dynamic

environment, but we do not anticipate any significant or material issues as it relates to our supply chain. .....................................................................................................................................................................................................................................................................

Philip Ng Analyst, Jefferies LLC Q Okay. Thanks a lot. Appreciate the color. .....................................................................................................................................................................................................................................................................

Operator: Your next question comes from the line of Keith Hughes of SunTrust. .....................................................................................................................................................................................................................................................................

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A Are you mute, Keith? .....................................................................................................................................................................................................................................................................

Operator: Mr. Hughes, your line is open. .....................................................................................................................................................................................................................................................................

Keith Hughes Analyst, SunTrust Robinson Humphrey, Inc. Q Hello? Can you hear me now? .....................................................................................................................................................................................................................................................................

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A Yeah. We got you. .....................................................................................................................................................................................................................................................................





John G. Sznewajs Chief Financial Officer & Vice President, Masco Corp. A Yeah. .....................................................................................................................................................................................................................................................................

Keith Hughes Analyst, SunTrust Robinson Humphrey, Inc. Q Sorry, I had a connection issue. Let me start again. On the Watkins business, I know it played a role and the

decline in the second quarter. Can you give us any sort of feel for how much that will be affecting the plumbing

business in the third quarter? .....................................................................................................................................................................................................................................................................

John G. Sznewajs Chief Financial Officer & Vice President, Masco Corp. A Yeah, Keith, I'd say, it would be a modest headwind in the third quarter because it's still not up to 100% capacity,

even though they've got very strong demand and the team there has done a terrific job at responding to that

demand. Because of some of the capacity restrictions that are still in place, they – there will still be a bit of a

headwind, but not significant. .....................................................................................................................................................................................................................................................................

Keith Hughes Analyst, SunTrust Robinson Humphrey, Inc. Q Okay. Thank you. .....................................................................................................................................................................................................................................................................

Operator: Your next question comes from the line of Steven Ramsey of Thompson Research Group. .....................................................................................................................................................................................................................................................................

Steven Ramsey Analyst, Thompson Research Group LLC Q Good morning. Just a quick question, high level, I guess, [ph] quantification. (00:57:40) I mean given that Q2 has

come back strongly and that Q3 results are expected to be pretty solid. And you talked about the factors shaping

up for single-family R&R being very positive. There's still a lot of macro uncertainty, but it's still – I would just like

to get your thoughts on bridging 2020 into your original – but now taking off 2021 guidance given at the Investor

Day, it seems achievable, but just curious if the factors are setting up now for 2021 to be a strong year? .....................................................................................................................................................................................................................................................................

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A Yeah. I think so. We look at – we're reviewing that original Investor Day targets, and we think it's very possible

that we could be in there. As I recall, plumbing at the 18% to 18.5%, deco in that 17.5% to 18%, Masco overall at

16.5% in terms of margin. Yeah, I think that is doable. We have, without a doubt, seeing the benefit of our

portfolio reconfiguration. Certainly, the pandemic played into that, but when you look at our resilience, the fact that

low-ticket items in the DIY orientation are right in the sweet spot of where the consumer wants to be at this point

where they want to spend their money.

I think that bodes well for what 2021 could be for us. I will also say, Steven, that we're in a dynamic environment,

and that we're not – we are not giving guidance for the full year here in 2020 and we're certainly not going to give

specific guidance for 2021. But as we look at small-ticket DIY, the overall health of the consumer and how we're

positioned against that, it feels pretty good. .....................................................................................................................................................................................................................................................................





Steven Ramsey Analyst, Thompson Research Group LLC Q Great. Thanks. .....................................................................................................................................................................................................................................................................

Operator: Our next question comes from the line of Justin Speer of Zelman & Associates. .....................................................................................................................................................................................................................................................................

Justin Andrew Speer Analyst, Zelman & Associates Q Good morning. Thank you, guys. Just a quick question on the spa disruption. Could you reiterate what that was to

the growth in the plumbing business? And then, does that fall under North American or international or both? Just

curious if you could back out the small disruption for your North American and international markets, just to see

the distinction between the two. .....................................................................................................................................................................................................................................................................

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A Yeah. .....................................................................................................................................................................................................................................................................

John G. Sznewajs Chief Financial Officer & Vice President, Masco Corp. A Go ahead. .....................................................................................................................................................................................................................................................................

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A The interruption of the headwind for spa was really driven by a California state order and by a Mexican national

order, and that's where we have the majority of our manufacturing. So we were down, couldn't produce for quite a

period of time. In terms of the accounting, international? .....................................................................................................................................................................................................................................................................

John G. Sznewajs Chief Financial Officer & Vice President, Masco Corp. A Yeah. So, Justin, that's all in our North American Plumbing results. .....................................................................................................................................................................................................................................................................

Justin Andrew Speer Analyst, Zelman & Associates Q Okay. Okay. And so I'll get that from the transcript. But as you look at the two geographies, the North American

geography, trending a little bit better, obviously, than the international geography. Is there any major distinctions

in terms of behavior as folks shelter in place in North America versus international markets as you see it? Or is

there anything else that explains some of the disconnect in terms of the differences in growth? .....................................................................................................................................................................................................................................................................

Keith J. Allman President, Chief Executive Officer & Director, Masco Corp. A I think it's – as I mentioned a little bit on a prior answer, I think it's more country and nationally oriented as it

relates to closure and associated reopening cadence, US versus international, than it is so much consumer

behavior. Our demand for spas, which interestingly enough for spa business is one of the most global we have in

Masco as it relates to percent of volume from outside North America, and we have strong demand in Europe as

well.





Justin Andrew Speer Analyst, Zelman & Associates Q Okay. Okay, and then... .....................................................................................................................................................................................................................................................................

John G. Sznewajs Chief Financial Officer & Vice President, Masco Corp. A And, Justin, just to save you some time, just to save you some time, the North American impact on the spa

business was 7%. .....................................................................................................................................................................................................................................................................

Justin Andrew Speer Analyst, Zelman & Associates Q Okay. That's perfect. And then the last question for me is just on the – switching gears to the paint business,

point-of-sale or the sell-through versus the sell-in, was it – is it fair to say that the sell-through was stronger? It

sounds like it was, but stronger than what you reported in your results? .....................................................................................................................................................................................................................................................................

John G. Sznewajs Chief Financial Officer & Vice President, Masco Corp. A Yes, that's correct. .....................................................................................................................................................................................................................................................................

Justin Andrew Speer Analyst, Zelman & Associates Q And it that – I guess, from that standpoint, how does that work from a channel inventory standpoint? Is this going

to throw off typical seasonality of a typical buy-in or sell-in trends for you, as you think about the third and fourth

quarter? .....................................................................................................................................................................................................................................................................

John G. Sznewajs Chief Financial Officer & Vice President, Masco Corp. A Not significantly, Justin, no. .....................................................................................................................................................................................................................................................................

Justin Andrew Speer Analyst, Zelman & Associates Q Okay. Thank you very much. .....................................................................................................................................................................................................................................................................

Operator: Ladies and gentlemen, we have reached our allotted time for questions. Thank you for participating in

today's conference call. This concludes the call. You may now disconnect.





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