MAS
#In terms of your first question, <UNK>, on the builder side of our cabinet business, I think it is important to delineate between more of the smaller regional builders, and then the bigger, call it, top 10, top 20 builders.
That top 10, top 20 builder business is leaner for us, and we're being very selective and careful about how we drive that business with an eye on profitability.
When we look at the bigger chunk of the business, which is more the smaller and the regional business, we think that can be attractive business.
The key is having consistent delivery lead times and fill rates.
And that is something that we've worked very hard to get back, and now we are working to get the confidence of that customer base back, and we will go after that.
So it is a mixed bag, but certainly there is business that we want and we're focused on, and we understand the segmentation of it.
And there's business that isn't so much attractive to us.
In terms of the home center demand in paint.
As I've said we think that the DIY or that section of the paint market is relatively flat, right in that flat range anyway.
And with our growth rate, we're happy with how we are performing, with our color center that is in place, and the promotions that we are doing, and the acknowledgment from various third parties about our customer satisfaction and our quality ranking.
We feel pretty good about it.
<UNK>, just maybe just to supplement some of <UNK>'s comments, particularly on the paint side.
You may recall, in the September and October time frame, in the last year, we had some unusual order patterns develop, where we had very low orders in September, but very, very strong orders in October of last year.
And so, we did not see the inventory pull back in the third quarter.
As you might expect, since we're up against a difficult comp here in the first part of the fourth quarter, we are seeing a little bit of a pull back vis-a-vis our ---+ compared to last year.
So but overall, I think as we get through the six month window, I think we should be just in good ---+ fine shape.
Yes.
Next question, please.
On cabinets, as we have talked about in the past, <UNK>, turnarounds are never any one-shot deal to get it done and they are seldom linear.
There's ups and downs to them, and we have seen that.
It is a balance between short and long term initiatives, and a balance between cost-out and revenue up initiatives.
So it really wasn't one particular initiative that we drove that got us to this position.
We certainly have worked on our costs and our efficiency, and our material yields and scrap rates, and have worked very hard to overcome the misstep, frankly, that we had in 2014 with our ERP.
So that was a significant part of it.
We've invested in innovation.
We have, what we believe to be the best finishing system in our KraftMaid line that we recently put in the last year, and we're getting a lot of good response from that.
We've increased on the innovation front, with some creative assortment work, particularly with KraftMaid Vantage.
And we are segmenting our markets, and we're driving hard particularly in the dealer channel which is a very attractive and lucrative channel for us.
So I'd say, a mixed bag across the board for us, and that is why we think that this type of performance is sustainable.
In fact, we're looking to grow as we move into 2016.
Obviously, the seasonality around this business remains.
But fundamentally, I like how this business has moved.
And a year ago, if you would have said, <UNK>, you could have this business in this position at this time, I would take it (multiple speakers).
I think that is fair.
We're going across the different channels, and we're working with both our powerful brands in Merillat and KraftMaid.
And I think thinking about this business in the 30% to 35% incrementals is the right way to think about it.
In paint, in terms of where we anticipate reinvesting, it is really broadly across all of those revenue drivers that <UNK> talked about.
We have got our color center reinvestment behind us, and that is really strong.
We're going to continue to drive with promotions and advertising.
We're going to look for ways to partner with the Home Depot to drive growth, particularly in the Pro segment, in terms of how we train, how we staff stores, the products that we offer, and our supply chain, and how we deliver products.
So it is an exciting and dynamic time for us in paint, and we're happy with how we have outperformed the market.
I would clarify a little bit, <UNK>, in that we haven't exited builders lines, meaning lines of our cabinets or lines of our product assortment.
What we are doing is paying closer attention to a segmentation of the builders we have, particularly in the builder direct part of our business, where we handle the last mile delivery, the installation and the punch out.
And then, what we're seeing in some cases, the taper home is being reduced with the type of mix that has evolved in certain markets with certain builders.
And that is just not an affordable proposition for us to manage all the value add that we do in the backside, with regards to delivery and installation and punch out.
It is not an exit of the builder lines so much, as it is the segmentation of various types of builders in certain regions.
And then, through pricing and through other mechanisms, moving away from that business and directing our energy toward more profitable business.
In terms of an overall strategy and our other segments to move away from builders, that is not really the case.
We have good value propositions and good supply chains to be able to deliver profitably to most of the segmented builders in our other segments.
So that is not a broad strategy from Masco per se.
<UNK>, it's <UNK>.
No, we don't think it is changing our view longer term.
Obviously, while we're pleased that we reported 7.5% margins in the [segments], and we feel we're well on our way to that high single digit margin performance that we're seeking.
Is there is a [potentially some upside there], it's too early to call.
We've had two good quarters so far in this cabinet business in a long period of time, and we don't want to get ahead of ourselves as to where we think this business can go just yet.
So we need to continue to execute our plan and turn it around, and then we'll talk in future periods about maybe if there's upside to we have laid out for you.
We've got ---+ we have had good success in the cost outs, and we're starting to get traction on the growth side.
We are deep into our planning process now.
And we are continuing, as we look at these plans to drive them both cost and revenue, and we will continue to update you as we flesh those plans out more.
I think we're through a big chunk of the hard work, Bob.
I wouldn't quite characterize it that all the low hanging fruit is clipped, and now we are just on a market trajectory.
But clearly, the better you get, the harder it is to get better, and we are getting better.
So it is going to be tougher to make, and we won't make the kind of dramatic improvements that we have made so far.
But having said that, we think we have got a long way to go.
We are not ---+ we don't have this business to its full potential, that there are significant areas of growth that we can continue to drive, both in terms of the retail, as well as the import and dealer business.
So I think you're dead on Bob, and that is the big chunks are behind us in terms of the improvement pace.
But again back to that 30%, 35% drop down margin, and the fact that we have these two powerful brands in KraftMaid and Merillat, I like where we are sitting.
Yes, thanks Bob.
As we've talked about before, we have a very, what we think a balanced approach to our capital allocation.
So first and foremost, our capital ---+ our first priority is to reinvest in the business and grow it.
And I think many of you know, that our CapEx, we're relatively light on the CapEx side, compared to some of our competitors.
CapEx runs about 2% of sales.
So that is our number one priority.
After that, we really do take a balanced approach, and we balance three or four items.
The first is dividends.
We do pay a dividend, and we increase our dividend.
As you may know, for this dividend that we pay here in the fourth quarter of this year, about a 6% or 7% dividend increase.
That's following a [20]% dividend increase last year.
And then, after that, we have talked about our share repurchase program, which we have said would be on average between $400 million to $500 million a year, and we're clearly on pace to do that here in 2015.
We also balance that with acquisitions.
Again, we have been thinking about smaller acquisitions, more bolt-ons, particularly in our paint and plumbing area.
We have hired an executive, Amit Bhargava, to really pursue that and build our M&A pipeline.
And so, we are aggressively pursuing that.
So that is clearly part of our strategy.
And then debt repayment is on our radar screen.
As many of you may know, we have a $1 billion maturity coming due in October of next year, and we've been talking for several years about taking $300 million to $500 million of that debt down, when that maturity comes due.
So clear and balanced approach, and we will keep you updated as things change.
But we think we have got a good sense of how we're going to spend our cash over the coming year.
Good.
How are you.
(Multiple speakers).
Yes, we haven't parsed that out specifically.
But I think if you do the read-through, <UNK>, sales impact was down approximately $10 million from that [line] of business based on dealer sales being up 9% and half our business being ---+ the other half of our business being builder-oriented.
So and that is a rough number.
Are you talking specifically in cabinetry or.
So your commodities generally have been ---+ we talked a little bit about plumbing a little earlier.
Copper and zinc have come down a little bit, and that's reflected itself in our metal hedge impact.
At this point, we are not forecasting any further price deflation in commodities next year.
We've had very little impact in our cabinet business.
We are seeing a little bit of price inflation in the windows side on glass.
And so, we may need to work with our suppliers as well, as I'll look at our pricing on windows next year.
But that said, it's a little bit too early to determine exactly how we will play that, as glass prices change in the marketplace.
Over the long term, we tended to be [flush] with it comes to price commodity, and that is how I'd think about 2016.
When we look at wholesale, there's really two types of wholesalers that we sell to, though broadly speaking, there is wholesalers with distribution centers, and wholesalers that we ship directly to their warehouses.
And in both cases, we are seeing pretty consistent POS matching our shipments into their chains.
So I would say that, on the plumbing side and the wholesale, it is pretty level, pretty level flow through.
And you want me to complement some of <UNK>'s comments.
We got very high service levels in our plumbing businesses.
So doesn't ---+ that means our customers aren't required to hold as much inventory, as maybe they are with some of our other competitors.
And so, we feel really good about the service levels that we provide.
We, obviously have our feelers out, in both the channels and in the markets, and we do consumer research, and have somewhat of a feel for it.
But admittedly, it is tough to tell in terms of the drivers of the relative softness in the space.
In Q2, while we didn't see a significant impact due to the weather, that was certainly noise that was out there in the market.
Without a doubt, it was a wet summer, and that affects the demand.
So I think that could play into it.
But overall, when you look at how people have the opportunity to defer paint, and it is not that big of a purchase item, we feel good about the underlying demand in 2016.
We are.
We talked about that in Texas.
We have a new factory that we're bringing up out there.
In fact, I'm on a plane here in a few hours to go out there and visit Milgard, and talk about how they are doing.
They're doing very well.
We talked about their growth rates.
We are a new player into Texas, but we have been shipping into that from outside of the markets, this is ---+ we're new in terms of our factory being onsite there.
So there is plenty of headroom for us, in terms of share gain and incremental growth for us, starting at the small base that we have.
Texas is a big market, and we're looking forward to a success there.
Yes, <UNK>.
I think that is the way to think about it.
