Q4 2021 Masco Corp Earnings Call
Speaker 1: Good morning ladies and gentlemen.
Good morning, ladies and gentlemen.
Speaker 1: Welcome to Masco Corporation's 4th Quarter and Full Year 2021 Earnings Call. My name is Rens and I'll be your operator for today's call.
Welcome to Masco Corporation's fourth quarter and full year 2021 earnings call.
My name is rents and I'll be your operator for today's call.
Speaker 1: As a reminder, today's conference call is being recorded for replay purposes.
As a reminder, today's conference call is being recorded for replay purposes.
Speaker 1: To ask a question, please press star, then the number one on your telephone keypad. To withdraw your question, press star, then the number one on your telephone keypad.
To ask a question. Please press Star then the number one on your telephone keypad.
Do we draw your question. Please press the pound key.
Speaker 1: I will now turn the call over to Mr. David Chayka, Vice President, Treasurer, and Investor Relations.
I will now turn the call over to Mr. David Chaika.
Vice President Treasurer, and Investor Relations you may begin.
Speaker 2: Thank you, Rens, and good morning. Welcome to Masco Corporation's 2021 fourth quarter and full year conference call.
Thank you Ron and good morning, welcome to Masco Corporation's 2021 fourth quarter and full year conference call.
Speaker 2: With me today are Keith Allman, President and CEO of Masco, and Jon Snovice, Masco's Vice President and Chief Financial Officer of Masco, and Jon Snovice, Masco, and Keith
With me today are Keith Allman, President and CEO of Masco, and John Snow Bike Smith, Vice President and Chief Financial Officer of <unk>.
Speaker 2: Our fourth quarter earnings released in the presentation slides are available on our website under investor relations. Following our remarks, we open.
Fourth quarter earnings release, and the presentation slides are available on our website under Investor Relations.
Following our remarks, we will open the call for analyst questions. Please.
Speaker 2: 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.
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.
Speaker 2: Our statements today will include our views about our future performance, which constitute forward-looking statements.
Our statements today will include our views about our future performance, which constitute forward looking statements.
Speaker 2: These statements are subject to risk and uncertainties that could cause our actual results to differ materially from the foreign-looking statement.
These statements are subject to risks and uncertainties that could cause our actual results to differ materially from the forward looking statements.
Speaker 2: We describe these risks and uncertainties in our risk factors and other disclosures in our Form 10-K and our Form 10-Q that we filed with the Securities and Exchange Commission. Our statements will also include...
Describe these risks and uncertainties in our risk factors and other disclosures in our Form 10-K , and our Form 10-Q that we filed with the Securities and Exchange Commission.
Our statements will also include non-GAAP financial metrics.
Speaker 2: Our reference is the operating profit and earnings per share will be as adjusted unless otherwise noted.
Our references to operating profit and earnings per share will be as adjusted unless otherwise noted.
Speaker 2: We reconcile these adjusted metrics to GAAP and our earnings release in presentation slides, which are available on our website under investor relations. With that, I'll now turn the call over to...
We reconciled 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.
Speaker 3: Thank you, Dave. Good morning, everyone, and thank you for joining us today.
Thank you Dave.
Good morning, everyone and thank you for joining us today.
2021 was another challenging year, but once again, we demonstrated the strength and resilience of masco and our 20000 employees across the globe.
Speaker 3: 2021 was another challenging year, but once again, we demonstrated the strength and resilience of Masco and our 20,000 employees across the globe. I'll start this morning.
I'll start this morning, with some brief comments on our fourth quarter.
Speaker 3: Then I'll turn to our full year results and our view on 2022.
Now I'll turn to our full year results and our view on 2022.
Turning to slide five our topline increased 9% in the fourth quarter.
Speaker 3: Turning to slide five, our top line increased 9% in the fourth quarter. This strong growth with
This strong growth was led by our paint business, which delivered exceptional results and continued to gain share in both the pro and DIY markets.
Speaker 3: which delivered exceptional results and continue to gain share in both the pro and DIY market.
Speaker 3: Our operating profit declined in the quarter due to higher commodity and freight costs. As inflation reached low double ditch.
Our operating profit declined in the quarter due to higher commodity and freight costs as inflation reached the low double digits.
As a reminder, we discussed on our third quarter call that inflation would have the greatest impact on our P&L in terms of price cost lag in the fourth quarter of 2021.
Speaker 3: As a reminder, we discussed on our third quarter call that inflation would have the greatest impact on our P&L in terms of price cost lag in the fourth quarter of 2020.
Partially offsetting this inflation in the fourth quarter was good expense control as SG&A in dollars was approximately flat, although as a percentage of sales improved 140 basis points.
Speaker 3: Partially offsetting this inflation in the fourth quarter was good expense control. If S, G, N, A, and dollars was approximately flat, all as a percentage of sales improved on 140 basis points. All right up for frontage.
Our earnings per share for the quarter was 67.
Turning to our segments plumbing.
Speaker 3: Plumbing grew 5% local currency with 6% growth in North American plumbing and 3% growth in international plumbing.
Plumbing grew 5% in local currency with 6% growth in North American plumbing, and 3% growth in international plumbing.
Speaker 3: North American plumbing performed well in the quarter as we continued to see good demand for our faucets and shower products, particularly through the e-commerce channel.
North American plumbing performed well in the quarter as we continued to see good demand for our faucet and shower products, particularly through the ecommerce channel.
Speaker 3: Our spy business also continued to see strong demand.
Our spa business also continued to see strong demand.
Speaker 3: for its outdoor wellness-oriented products that have a tremendous appeal to today's homeowners.
Outdoor wellness oriented products that have tremendous appeal to today's homeowners.
And international plumbing.
Speaker 3: on growing growth in many key markets, including China and the UK.
How's it growing drove growth in many key markets, including China and the U K.
And our decorative architectural segment Behr continued its tremendous performance with mid single digit growth in DIY paint and over 50% growth in propane.
Speaker 3: In our Decorative Architectural segment, bear continued its tremendous performance with mid-single-digit growth in DIY paint and over 50% growth in propane.
Speaker 3: We continue to see good demand for both DIY and propane, and our operational excellence has enabled us to gain share in this supply challenge.
We continue to see good demand for both DIY and pro paint and our operational excellence has enabled us to gain share in this supply challenged market.
Speaker 3: Our lighting and bath hardware businesses also contributed to growth and margin expansion in the quarter. Now let's review our full year plan.
Our lighting and Bath hardware businesses also contributed to growth and margin expansion in the quarter.
Now, let's review our full year performance, please turn to slide six.
For the full year.
Speaker 3: For the full year, total company sales grew 17% and operating profit increased 11% with an operating margin of 17.4%.
Total company sales grew 17% and operating profit increased 11% with an operating margin of 17, 4%.
Speaker 3: strong volume growth and pricing realization was partially offset by high single digit inflation and a return to more normalized investments in marketing and personnel to support our growth.
Strong volume growth and pricing realization was partially offset by high single digit inflation and a return to more normalized investments in marketing and personnel to support our growth.
Our plumbing segment grew an outstanding 22% excluding currency.
Speaker 3: Our plumbing segment grew an outstanding 22%, excluding current.
Speaker 3: led by strong growth at Delta, Hans Groey, and Watt.
Led by strong growth at Delta <unk> and Watkins.
Our plumbing business is well positioned to continue to outperform the market with its leading brands new product introductions and operational excellence and enters 2020 with healthy backlogs.
Speaker 3: Our plumbing business is well positioned to continue to outperform the market with its leading brands, new product introductions, and operational excellence, and enters 2020 with healthy backlogs.
In our decorative architectural segment.
Full year growth was 6% against a 12% comp.
As our business grew mid single digits with DIY down mid single digits and pro up over 30%.
Propane now accounts for approximately 30% of our paint business.
Bear enters 2022 with a lot of momentum.
Speaker 3: Bear enters 2022 with a lot of more.
Speaker 3: Our relationship with our channel partners is extremely strong and we are committed to mutual growth.
Our relationship with our channel partners are extremely strong and we are committed to mutual growth.
Our Bayer brand was recently named the most trusted paint brands and independent third party market research firm.
Speaker 3: Our bear brand was recently named the most trusted pink brand. I'm independent, third party market research firm.
Our propane business continues to gain share in the market and outperformed the competition.
Speaker 3: Our propane business continues to gain share in the market and outperform the competition.
Speaker 3: And our recently launched Dynasty Behind the Paint is performing exceptionally well.
And our recently launched dynasty behind the paint is performing exceptionally well.
And as we exit 2020 , one we have one shelf space and a number of adjacent paint categories, such as aerosols interior stains and Cox and sealants.
Speaker 3: And as we exit 2021, we have one shelf space and a number of adjacent paint categories such as aerosols, interior stains, and cox and sealant.
Speaker 3: all of which will help to drive growth in 2022 and further demonstrate the strength of our brand and partnership with our customers.
All of which will help to drive growth in 2022, and further demonstrates the strength of our brand and partnership with our customers.
Turning to capital allocation.
Speaker 3: Our strong cash position and cash generation allowed us to deploy nearly $1.3 billion in capital.
Our strong cash position and cash generation allowed us to deploy nearly one $3 billion in capital during the year.
Speaker 3: We were repurchased a billion dollars of our stock at an average price of $58.31 per share.
We weren't repurchased $1 billion of our stock at an average price of $58 31 per share.
Speaker 3: This represents approximately 7% of our outstanding.
This represents approximately 7% of our outstanding shares.
We increased our annual dividend, 68% and paid approximately $211 million in dividends to shareholders.
Speaker 3: We increased our annual dividends 68% and paid approximately $211 million in dividends to Cheryl.
Speaker 3: We completed the acquisition of SteamMist for approximately $56 million, and we finished the year with over $925 million in cash and net leverage of 1.3 times, providing us ample financial flexibility and fire.
We completed the acquisition of steam mess for approximately $56 million.
And we finished the year with over $925 million in cash and net leverage of one three times, providing us ample financial flexibility and firepower.
Our strong operating profit growth combined with our significant capital deployment.
Speaker 3: Our strong operating profit growth, combined with our significant capital deployment, resulted in exception...
Resulted in exceptional financial results.
Speaker 3: We increased earnings per share by 19% to $3.70 per share.
We increased earnings per share by 19% to $3 70 per share.
Speaker 3: We delivered adjusted free cash flow approximately $900 million.
We delivered adjusted free cash flow of approximately $900 million with a conversion rate of 90%. Despite an increase in working capital due to inflation and supply chain tightness.
Speaker 3: with a conversion rate of 90%. Despite an increase in working capital due to inflation and supply chain type.
Speaker 3: And we achieved a return on invested capital of approximately 47%.
And we achieved a return on invested capital of approximately 47%.
Speaker 3: I want to thank all our 20,000 employees across the globe for their outstanding efforts throughout 2021 to deliver these exceptional results.
I want to thank all our 20000 employees across the globe for their outstanding efforts throughout 2021 to deliver these exceptional results.
Speaker 3: No summary of 2021 would be complete without mentioning this significant. I'm going supply chain and inflation channel.
No summary of 2021 would be complete.
Without mentioning the significant ongoing supply chain and inflation challenges.
Speaker 3: Once again, I'd like to thank our tremendous suppliers who worked with us through these unprecedented challenges of 2021.
Once again I'd like to thank our tremendous suppliers, who worked with us through these unprecedented challenges of 2021.
Speaker 3: As we exited 2021, supply chain challenges have marginally improved.
As we exited 2021 supply chain challenges have marginally improved.
Speaker 3: However, shipping delays and labor constraints remain a chance.
However.
Shipping delays and labor constraints remain a challenge.
Speaker 3: We experienced high single-digit inflation overall in 2021.
We experienced high single digit inflation overall in 2021.
Speaker 3: and expect insulation to remain persistent and to increase in 2022 as higher raw material, freight and labor costs glow through our P&L.
And then expect inflation to remain persistent and to increase in 2022 is higher raw material freight and labor costs flow through our P&L.
Importantly, however.
Speaker 3: We exited the year on a price-cost neutral basis, except for additional increases in freight logistics that occurred during the...
We exited the year on a price cost neutral basis, except for additional increases in freight and logistics that occurred during the fourth quarter.
Speaker 3: We have initiated actions to cover these additional logistics price costs with price.
We have initiated actions to cover these additional logistics price cost with price.
Speaker 3: The price cost impact in Q1 will be significantly improved as compared to the 4th quarter of 2021.
The price cost impact in Q1 will be significantly improved as compared to the fourth quarter of 2021.
Speaker 3: Now turning to 2022, I'd like to share with you our view of the markets where we can
Now turning to 2022 I'd like to share with you our view of the markets, where we compete.
For the North American repair and remodel market, we expect market growth to be in the mid single digit range.
Speaker 3: For the North American repair and remodel market, we expect the market growth to be in the mid single digit range.
For the paint market.
Speaker 3: For the paint market, we expect the DIY paint market to grow mid single digits and the pro paint market to grow low double digits.
We expect the DIY paint market to grow mid single digits in the propane market to grow low double digits.
Speaker 3: And for our international markets, principally Europe , we expect a low single digit growth in buyer.
And for our international markets, principally Europe , we expect a low single digit growth environment.
These expectations across all markets include significant price.
Speaker 3: These expectations across all markets include significant price.
Speaker 3: Three-parent remodel market remains strong and leading home improvement indicators are robust. Home price appreciation was...
The repair and remodel market remains strong and leading home improvement indicators are robust.
Home price appreciation was 18% in December and.
Speaker 3: and existing home sales increased over 8% compared to prior years.
In existing home sales increased over 8% compared to prior year.
Speaker 3: Each of these metrics has a strong correlation with our sales. I like.
Each of these metrics has a strong correlation with our sales.
A lagged basis.
Speaker 3: based on these assumptions. In our expectation that we will continue to gain share and I'll perform the mark.
Based on these assumptions and our expectation that we will continue to gain share and outperform the market.
Speaker 3: We anticipate Masco's growth to be in the range of approximately 4-8%, excluding currency for 2022.
We anticipate <unk> growth to be in the range of approximately 4% to 8% excluding currency for 2022.
Speaker 3: We expect margins to expand modestly to approximately 17.5%, despite a significant margin headwind from pricing to recover cost, and normalization of investments in the business as we continue to grow.
We expect margins to expand modestly to approximately 17, 5%. Despite a significant margin headwind from pricing to recover cost and normalization of investments in the business as we continue to grow.
Turning to capital allocation.
Our strategy remains unchanged.
Speaker 3: First and foremost, we will invest in our business to meet the current future demand for our product.
First and foremost we will invest in our business to meet the current and future demand for our products.
Speaker 3: As we announce last quarter, we are expanding our production capability in Europe with a new faucet and shower plant for hunt.
As we announced last quarter, we are expanding our production capability in Europe , with a new faucet and shower plant for hot is growing.
Additionally, we are adding manufacturing and distribution capacity to our spa and paint businesses to support our strong growth.
Speaker 3: Additionally, we are adding manufacturing and distribution capacity to our spot and paint businesses.
These investments will likely increase our capital expenditures to just above our normal level of approximately two to two 5% of sales on average keeping in mind that capex was only about one 5% in 2021.
Speaker 3: These investments will likely increase our capital expenditures to just above our normal level of approximately 2 to 2.5% of sales. On it.
Speaker 3: Keeping in mind that CAPEX was only about 1.5% in 2021.
In terms of returning cash to shareholders.
Speaker 3: based on the strength of our business model and cash generation capability.
Based on the strength of our business model and cash generation capabilities are.
Speaker 3: Our board declared a quarterly dividend of 28 cents per share, a 19% in
Our board declared a quarterly dividend of 28 cents per share a 19% increase which would bring our annual dividend to $1 12 per share in 2000 2012 2022.
Speaker 3: which will bring our annual dividend to $1.12 per share in 2020-12. 2020-
We will deploy our free cash flow after dividends to share repurchases or acquisitions.
Speaker 3: We'll deploy our free cash flow after dividends to share repurchases or acquisitions.
Speaker 3: Based on our strong liquidity position and our projected free cash flow, we expect to deploy at least $600 million to share repurchases or acquisitions.
Based on our strong liquidity position and our projected free cash flow, we expect to deploy at least $600 million to share repurchases or acquisitions in 2022.
Lastly, there is no change to our M&A strategy, we continue to review and selectively pursue opportunities that have the right strategic fit and the right return for masco.
Speaker 3: Lastly, there is no change for M&A strategy. We continue to review and selectively pursue opportunities that have the right strategic fit and the right return from ASCO. With our expected operating profit growth.
With our expected operating profit growth.
Strong pricing to recover costs and continued capital deployment.
Speaker 3: We anticipate earnings per share to be in the range of $4.10 to $4.30 per share representing a 14% growth.
We anticipate earnings per share to be in the range of $4 10 to.
Two $4 30 per share.
Representing a 14% growth at the midpoint.
Speaker 3: Now, I'll turn the call over to John to go over the fourth quarter, full year and 22 outlook in more detail.
Now I'll turn the call over to John to go over the fourth quarter full year and 'twenty two outlook in more detail John .
Thank you Keith and good morning, everyone as Dave mentioned in my comments today will focus on adjusted performance.
Speaker 2: Thank you, Keith, and good morning, everyone. As Dave mentioned, my comments today will focus on adjusted performance, excluding the impact of rationalization and other ones, I might have.
Excluding the impact of rationalization and other onetime items.
Speaker 2: Turning with slide eight, the man for our industry leading brands remained robust. And we delivered a strong finish to the year of sales increasing 9% in the quarter against the healthy 13% cap in the fourth quarter of last year.
Turning to slide eight demand for our industry, leading brands remained robust and we delivered a strong finish to the year with sales increasing 9% in the quarter against a healthy 13% comp in the fourth quarter of last year.
Speaker 4: Net acquisitions and divestitures contributed 2% to growth, and currency had a minimal impact.
Net acquisitions, and divestitures contributed 2% to growth and currency had a minimal impact.
In local currency North American sales increased 11%.
Speaker 4: In local currency, North American sales increased 11%, from 7%.
7% excluding acquisitions.
Speaker 4: Our team's outstanding execution for a strong growth in both DIY and propane as well as faucets, showers and spots.
Our team's outstanding execution drove strong growth in both DIY and pro paint.
Well as faucets showers spas.
In local currency international sales increased 3%.
Speaker 4: In local currency, international sales increased 3% or 5% excluding acquisitions and divestations.
Or 5%, excluding acquisitions and divestitures.
Speaker 4: The gross margin of 30.7% is impacted by a higher commodity and logistics cost in the quarter.
Gross margin of 37% was impacted by higher commodity and logistics costs in the quarter.
As we discussed on our third quarter call price cost in 2021 had peak impact on our P&L in the fourth quarter.
Speaker 4: As we discussed on our third quarter call, price cost in 2021 had a peak impact on our P&L in the fourth quarter.
Our SG&A as a percentage of sales improved 140 basis points to 17, 6% as we continued to drive cost containment activities across our business.
Speaker 4: Our SG&A as a percentage of sales improved 140 basis points to 17.6% as we continue to drive cost containment activities across our business.
Speaker 4: operating profit in the fourth quarter was $265 million. Then operating margin of 13.1%, and an EPS was $67.7.
Operating profit in the fourth quarter was $265 million with an operating margin of 13, 1%.
<unk> was <unk> 67 cents.
Turning to the full year 2021 sales increased 17% over prior year.
Speaker 4: Turn to the 4 year 2021. Fill the tree 17% over prior year.
Speaker 4: Net acquisitions and the vestitures contributed 3% to growth, currency contributed another 1%.
Net acquisitions and divestitures contributed 3% to growth and currency contributed another 1%.
Speaker 4: Local currency, North American sales increased 14% in international sales increased.
In local currency North American sales increased 14%.
International sales increased 21%.
Speaker 4: RSGNA is a percent of sale decreased 100 basis points to 16.9%.
Our SG&A as a percentage of sales decreased 100 basis points to 16, 9%.
Operating profit increased to $148 million were 11% and operating margin of 17, 4%.
Speaker 4: Operating profit increased $148 million or 11%, an operating margin of 17.4%.
Speaker 4: Lastly, our EPS increased 19% to $3.70.
Lastly, our EPS increased 19% to $3 70.
I want to thank our employees across the globe for their hard work dedication and <unk>.
Speaker 4: I want to thank our employees across the globe for their hard work, dedication, and commitment to safety that enabled us to achieve these outstanding results in another challenging year.
It's a safety that enabled us to achieve these outstanding results and another challenging year.
Okay.
Turning to slide nine.
Speaker 4: Home and Ghost is 5% against a strong 14% comp in the fourth quarter of last year.
Plumbing growth was 5% against a strong 14% comp in the fourth quarter of last year.
Net acquisitions and divestitures contributed 3% to this growth.
Speaker 4: 9 acquisitions in the vestitures contributed 3% to this growth. In currency had a minimal impact.
Currency had a minimal impact.
Speaker 4: North American sales increased 6% local currency, or 1% excluding acquisition.
North American sales increased 6% local currency or 1% excluding acquisitions.
Speaker 4: This performance was aided by Delta's continued strength in their growing e-commerce channel and increased selling.
This performance was aided by Delta's continued strengthening their growing ecommerce channel.
Selling prices.
Watkins wellness was also a significant contributor to growth as it continued to experience strong demand for their industry leading sponsor.
Speaker 4: Joaquin's wellness was also a significant contributor to growth, as they continued to experience strong demand for their industry-leading spots.
Yeah.
Speaker 4: International plumbing sales increased 3% in local currency, or 5%, excluding net acquisitions and divestitures.
International plumbing sales increased 3% in local currency.
Or 5%, excluding net acquisitions and divestitures.
Speaker 4: Funds grow at root sales in many of their key markets, including China and the UK.
Tons grow grew sales in many of their key markets, including China and the U K.
Speaker 4: Second and operating profit in the fourth quarter is $156 million. And operating margins were 12.7%.
Segment operating profit in the fourth quarter was $156 million and operating margins were 12, 7%.
Speaker 4: As we discussed on our third quarter call, operating profit was impacted by an unfavorable price cost relationship, along with credit or marketing and personnel expenses. As we continue to invest to grow our plumbing business.
As we discussed on our third quarter call operating profit was impacted by an unfavorable price cost relationship along with created a marketing and personnel expenses as we continue to invest to grow our plumbing businesses.
Turning to the full year 2021, plumbing sales increased an outstanding 24%.
Speaker 4: Turning to the four-year 2021, plumbing sales increased in outstanding 24%.
Speaker 4: Net acquisitions in the vet to choose contributors 4% to this growth. The currency contributed another 2%.
Net acquisitions and divestitures contributed 4% to this growth.
Currency contributed another 2%.
Local currency.
Speaker 4: Local currency, North American plumbing sales to 22%.
North American plumbing sales grew 22%.
Speaker 4: 17% excluding acquisitions. The international plumbing sales increased 21% or 22% excluding net acquisitions in the vest.
17% excluding acquisitions.
International plumbing sales increased 21%.
22%, excluding net acquisitions and divestitures.
Speaker 4: Pull your operating profit with $931 million, up $110 million or 15% in operating margin of 18.1%.
Full year operating profit was $931 million up $181 million or 15%.
Operating margin of 18, 1%.
Speaker 4: Furniture slide 10, Decorative architectural sales increased 15% to the fourth quarter, or 14% excluding acquisition.
Turning to slide 10.
Architectural sales increased 15% for the fourth quarter or 14% excluding acquisitions.
Our DIY paint business grew mid single digits in the quarter against a high teens comp in the fourth quarter of last year.
Speaker 4: Our DIY paint business through mid-single digit center quarter against the high teams comp in the fourth quarter of last year.
Our protein business grew more than 50% in the quarter driven by strong professional paint demand and operational execution, resulting in share gains.
Speaker 4: Our pro-payment business grew more than 50% in the quarter. Given by strong professional payment demand, and operational execution, resulting in share gain.
We expect pro paint demand to remain strong as contractors continue to see growing demand for their services.
Speaker 4: We expect pro-paint demand to remain strong, as contractors continue to see growing demand for their service.
Speaker 4: We also anticipate increasing our penetration with the pro by continuing to invest along with our
We also anticipate increasing our penetration with the pro by continuing to invest.
Along with our partner the home depot.
Speaker 4: In new services and programs to retain and grow the pro-customer.
New services and programs to retain and grow the pro customer.
Speaker 4: I build this hardware and lighting businesses also contributed to the segments overall growth in the quarter.
Our builders' hardware and lighting businesses also contributed to the segment's overall growth in the quarter.
Operating profit was $132 million in the quarter.
Speaker 4: Operating profit was $132 million in the quarter, up $23 million or 21% with margins expanding 80 basis points to 16.6%. This performance was retrieved by a higher net selling.
$23 million or 21% with margins expanding 80 basis points to 16, 6%.
This performance was driven by higher net selling prices.
<unk> results in our lending business.
Speaker 4: incremental volume and cost productivity initiatives, partially offset by higher commodity costs.
Incremental volume and cost productivity initiatives.
We offset by higher commodity costs.
Turning to the full year 2021 sales increased 6% driven by exceptional performance of our DIY and pro paint businesses. So it teams did an outstanding job in effectively managing through numerous supply chain constraints throughout the year.
Speaker 4: Turning to the full year 2021, sales increased 6% driven by exceptional performance of our DIY and propane businesses. So our team has done an outstanding job at effectively managing through numerous supply chain constraints throughout the year.
Speaker 4: You'll live for our customers, gain share in the paint marks.
Ever for our customers and gained share in the paint market.
Full year operating income increased $41 million or 7% with margins expanding 20 basis points to 19, 4%.
Speaker 4: Full year operating income increased $41 million or 7% with margins expanding 20 basis points to 19.4%.
Turning to slide 11.
Speaker 4: Our urine balance sheet is strong. The net debt to EBITDA at 1.3 times.
<unk> balance sheet is strong.
Net debt to EBITDA at one three times.
We ended the quarter with approximately $1 $9 billion of balance sheet liquidity, which includes full availability of our $1 billion revolver.
Speaker 4: The end of the quarter with approximately $1.9 billion of balance sheet and clarity, which includes full availability of our $1 billion revolver. Working capital-
Working capital as a percent of sales was 16%.
With our strong operating performance and lower than normal Capex adjusted.
Speaker 4: They're strong operating performance and lower the normal cap-back.
Speaker 4: The adjusted free cash flow was nearly $900 million for presenting 90% of adjusted net income.
Adjusted free cash flow was nearly $900 million, representing 90% of adjusted net income.
This is a strong result, when considering the significant impact of inflation and supply chain disruptions on our working capital investment throughout the year.
Speaker 4: which is a strong result in considering the significant impact of inflation and supply chain disruptions on our working capital investment throughout the year.
Speaker 4: Finally, during 2021, we repurchased more than 17.6 million shares for over $1 billion. We increased our annual dividend at 68%.
Finally during 2021, we repurchased more than $17 6 million shares over $1 billion, we increased our annual dividend at.
A 68%.
Now, let's turn to slide 12, and review our outlook for 2022.
Speaker 4: Now, let's turn to 512 and review our outlet for 2022.
Speaker 4: From ASCO overall, we expect sales growth in the range of 48% excluding foreign currency, with operating margins of 17.5%.
For Masco overall, we expect sales growth in the range of 4% to 8%, excluding foreign currency with operating margins of 17, 5%.
Operating profit will be unfavorably impacted in the first half of the year as we experienced the impact of a more normalized level of growth investments as compared to the first half of 2021.
Speaker 4: Operating profit will be unfavorably impacted in the first half of the year. It's the experience the impact of a more normalized level of growth investments compared to the first half of 2021.
For our plumbing segment.
Speaker 4: We expect 2022 sales growth to be in the range of 3 to 7 percent, excluding foreign currency.
We expect 2022 sales growth to be in the range of 3% to 7% excluding foreign currency.
Given current exchange rates.
Speaker 4: Four returns you've expected an unfavorably impact plumbing revenue by approximately 2% or $90 million.
Foreign currency is expected to unfavorably impact plumbing revenue by approximately 2% or.
$90 million.
Speaker 4: Recissipate for your plumbing margins will expand to approximately 19%.
We anticipate full year plumbing margins will expand to approximately 19%.
Speaker 4: margins in the first half of 2022, particularly in the first quarter, will be impacted by higher year-over-year marketing and personnel expenses. If we count against our strong margins in the first half of 2021.
Margins in the first half of 2022, particularly in the first quarter will be impacted by higher year over year marketing and personnel expenses as we comp against our strong margins in the first half of 2021.
So our decorative architectural segment.
Speaker 4: We expect 2022 sales to grow on the range of 6th to 10%.
Expect 2022 sales to grow in the range of 6% to 10%.
Speaker 4: looking specifically at Pinkrose 2022.
Looking specifically at peak growth for 2022.
Speaker 4: We currently anticipate our DIY business to increase high single digits and our pro business to increase mid teams.
We currently anticipate our DIY business to increase high single digits.
<unk> business to increased mid teens.
We anticipate full year decorative architectural margins to be approximately 18%.
Speaker 4: We anticipate full-year decorative architectural margins to be approximately 18%.
Speaker 4: As we have previously discussed in this segment, pricing actions typically only recover the dollar amount of the inflation. As a result, as a result, as a result,
As we have previously discussed in this segment pricing actions typically only recover the dollar amount of the inflation.
As a result, all else equal.
Speaker 4: Operating profit dollars remain neutral from cost recovery pricing actions for results.
Operating profit dollars remained neutral from cost recovery pricing actions for results.
And margin compression.
During 2022, we also anticipate increased investment in this segment for marketing and new products that will drive future growth.
Speaker 4: During 2022, they also anticipate each recent investment in this segment for marketing in new products that will drive future growth.
Finally.
Speaker 4: Keith mentioned earlier, our 2022 EPS estimate of $4.10 to $4.30 represents 14% EPS growth at the midpoint of the rain.
As Keith mentioned earlier, our 2022 EPS estimate of $4 10 to $4 30.
Represents 14% EPS growth at the midpoint of the range.
Speaker 4: This assumes the 240 million average diluted shear count for the year.
This assumes a 240 million average diluted share count.
<unk>.
Speaker 4: Additional modeling assumptions for 2022 can be found on slide 15 in our earnings deck. But then I'll now turn the callback over to Keith. Thank you, John .
Additional modeling assumptions for 2022 can be found on slide 15 in our earnings deck.
With that I'll now turn the call back over to Keith.
Thank you John .
'twenty one was another dynamic year.
Speaker 3: We navigated it well and delivered exceptional results.
We navigated it well and delivered exceptional results.
Speaker 3: As we enter 2022, we are poised to continue this trend of proven execution.
As we enter 2022, we are poised to continue this trend of proven execution.
Speaker 3: Masco's focus business model of low-check it repair and remodel product.
Masco has focused business model of low ticket repair and remodel products with market, leading brands and product and geographic diversification.
Speaker 3: marketing brands and product and geographic diversification provides growth and stability through cycles. We leverage our
<unk> growth and stability through cycles.
We leverage our consumer insights broad channel relationships scale diversification and our masco operating system to drive innovation and make our businesses better.
Speaker 3: Gail, diversification, and our Mass Go operating system to drive innovation and make our businesses better. The repair and remodel industry is an attractive industry.
The repair and remodel industry is an attractive industry with favorable long term fundamentals.
Growth on average is approximately GDP plus 1% to 2%.
Speaker 3: Thickical factors such as home price appreciation and existing home turnover have a high correlation with repair and remodel activity.
Cyclical factors such as home price appreciation in existing home turnover have a high correlation.
With repair and remodel activity.
Structural factors such as demographics, the age of the housing stock and how consumers view their homes can also drive increased repair and remodel activity.
Speaker 3: such as demographics, the age of the housing stock, and how consumers view their homes, can also drive increased repair and repair and repair and repair and repair and repair and repair.
Speaker 3: We are on the leading edge of the large 75 million millennial covert warming households and entering the housing market.
We are on the leading edge of the large 75 million millennial cohort forming households in entering the housing market.
$2 7 million more homes will reach the prime remodeling ages of $20 to 39 years old over the next three years.
Speaker 3: 2.7 million more homes will reach the 5-meet remodeling ages of 20 to 39 years old over the next three years.
And the COVID-19 pandemic has clearly increased the desire for more enjoyable living spaces, which has led to increased demand and remodeling expenditures.
Speaker 3: And a COVID-19 pandemic has clearly increased the desire for more enjoyable living spaces, which has led to increase home demand and remodeling expenditures. All of these structural forces.
All of these structural forces provide tailwind for our business.
Speaker 3: As we previously outlined, our long-term outlook is comprised.
As we previously outlined our long term outlook is comprised of above market organic growth in the range of 3% to 5% annually.
Speaker 3: above-market organic growth in the range of 3 to 5% annually.
Growth from acquisitions in the range of 1% to 3%.
Margin expansion, each year through cost productivity and volume leverage.
Speaker 3: Margin expansion each year through prosper activity and volume.
Speaker 3: and continued capital deployment in the form of share. Bybacks should contribute approximately 2% to 4% to EPS growth.
And continued capital deployment in the form of share buybacks, which should contribute approximately 2% to 4% to EPS growth.
Together, we expect this to result in EPS growth of at least 10% per year through cycles, plus dividend returns of approximately 1% to 2%.
Speaker 3: Together, we expect this to result in EPS growth of at least 10% per year through cycles, plus dividend returns of approximately 1 to 2%. With favorable fundamentals.
With favorable fundamentals.
Our continued focus on executing our growth strategy.
Together with our strong free cash flow and capital deployment, we are positioned to continue to drive shareholder value creation.
Speaker 3: Together with our strong free cash flow and capital deployment, we are positioned to continue to drive shareholder value creation for the long term. With that, we'll now open up the call.
A long term.
With that we'll now open up the call for questions and answers.
Thank you.
In order to ensure that everyone has a chance to participate we would like to request that you limit yourself to asking one question and one follow up question during the Q&A session.
Speaker 1: In order to ensure that everyone has trans-supertisipit, we would like to request that you limit yourself to asking one question and one follow-up question during the Q&A.
Speaker 1: To ask a question, please press star then the number one on your telephone keypad. To withdraw your question...
To ask a question. Please press Star then the number one on your telephone keypad.
Do we draw a question please press the pound key.
Our first question comes from the line of Kenneth Zhonya Your line's now open.
Speaker 1: Our first question comes from the line of scan it, Zuner, your line is open.
Good morning, everybody.
Good morning, Ken.
Speaker 3: You guys obviously talk to cost pressure, but if we can really just narrow in on our sexual paint, where you have PPI off in the low teens, obviously there's some percentage of cost.
You guys, obviously constant cost pressure.
If we can really just narrow in on architectural paint where you have PPI up in the low teens obviously.
Yes, there is some percentage of Cogs, there, but can you <unk>.
Speaker 3: expand a little bit given the inflationary environment we're in. You know, talk to the dynamics between units and price to the extent you feel comfortable, but given inflation, I think it's warranted. But can you also...
Expand a little bit given the inflationary environment we're in.
Talk to the dynamic between units and price to the extent you feel comfortable.
Given inflation, it's I think it's warranted, but can you also.
Speaker 3: to help us understand, right, with so much price there. It seems like volume might not be high and you're actually getting...
Help us understand right with so much price there.
It seems like volume might not be high and you're actually getting pretty good.
Speaker 5: pretty good margins because there's other manufacturer, paint manufacturers have faced a lot of pressure because of the absence of volume. It doesn't seem like
<unk> because there's other manufactured paint manufacturers have faced a lot of pressure because of the absence of volume it doesn't seem like that's such an issue with you, but if you could discuss that dynamic in that business a little more I think we all would appreciate it.
Speaker 5: that's such an issue with you, but if you could discuss that dynamic in that business a little more, I think we all would have.
Speaker 3: Yeah, can let me take a crack at the place of volume part of the question that maybe John can contribute as I go through this. Without a doubt, price was a healthy contributor to the growth in the quarter. As we and many others implemented price to offset, as you mentioned, the significant raw material inflation that we've experienced and frankly continue to feel. After a volume decline, let's say in Q3 for the segment, volume has increased in Q4.
Yeah, Ken Let me, let me take a crack at the price volume part of the question that may be Jonathan.
Contributed as I go through this without a doubt price was a healthy contributor to the growth growth in the quarter.
As we and many others implemented price to offset as you mentioned the significant raw material inflation that we've experienced and frankly continue to feel.
After a volume decline, let's say in Q3 for the segment volume has increased in Q4.
Speaker 3: And we expect that trend to continue into 22 despite, as you know, tough comps that we've had from 2021.
And we expect that trend to continue into 'twenty two dispute.
Despite as you know tough comps that we've had from 2021.
Speaker 3: So I will point out, however, and we've mentioned this consistently, that when we get priced typically, we get priced to cover the cost increase of the baskets in terms of dollar impact. So that does represent some margin ahead with it for us this year, and we will continue to experience that. So we put price into the market.
So I will point out however.
We've mentioned this consistently that when we get price typically.
We get price to cover the cost increase of the baskets in terms of dollar.
Impact so that does represent.
Some margin headwind for us this year, and we will and we will continue to experience that.
So we put price into the market.
<unk>.
Speaker 3: and have covered our costs. We expect some from margin headwind, so that's consistent with what we've talked about. However, we are seeing some volume improvement and we expect that to continue to occur.
And have covered our costs, we expect some some margin headwinds. So that's consistent with what we've talked about however, we are seeing some volume improvement and we are.
Expect that to continue to occur.
Speaker 4: Yeah, Ken. The only thing I would add to Keith's good comments are kind of two with respect to the performance and specifically in the fourth quarter. One specifically to the fourth quarter and then one into 22. So if you look at the margin expansion that we experienced in the fourth quarter.
Yeah, Kevin the only thing I would add to Keith's comments are kind of two.
Two with respect to the performance and specifically in the fourth quarter ones, specifically to the fourth quarter and then wander into 'twenty. Two so if you look at the margin expansion that we experienced in the fourth quarter.
Speaker 4: You know, a good chunk of that is attributable to the improved performance in kitchen during the quarter. They improved significantly compared to the results in the fourth quarter last year. And maybe just one of the comments I emphasize with Keith said about 2022 for paint.
A good chunk of that is attributable to the improved performance in kitchen during the quarter.
They improved significantly compared to the results in the fourth quarter of last year.
Just wanted to kind of a 10 precise with you.
Keith said about 2022 for for Pete.
Speaker 4: We continue to experience inflation and we think we're going to experience further inflation here in 2022 as paint walls continue to inflate.
We continue to experience inflation, and we think we'll get an experienced further inflation here in 'twenty. Two is paint raws continue to insight and so we'll have to continue to work through those challenges as we go through 2022, but we feel confident in our position.
Speaker 4: And so, lots of continued work through those challenges as we go through 2022, the refill competent in our position.
Speaker 5: Right. Appreciate that. And I guess sticking with paint.
Right.
Appreciate that and I guess sticking with pain.
Speaker 5: It doesn't sound like you had as much material constraints, perhaps, as the industry. And if that's the case, obviously, you have great relationships with your supplier. But the flip side of that is, can you really expand? You had such success in the pro category. Can you just give us a better sense of why it's not just?
It doesn't sound like you've had as much material constraints, perhaps as the industry and if that's the case, obviously you have great relationships with your supplier.
But the flip side to that is can you really expand you had such success in the pro category can you just give us a better sense of why it's not just supply access that's giving you the share gains expand on your confidence.
Speaker 3: why access that's giving you the share game expand on your confidence.
Speaker 5: In your success date, if you would arm that propane, you obviously cracked a nut there, I believe. Thank you.
In your success to date, if you would on that propane obviously crack that.
They're not there I believe thank you.
Speaker 3: It's been talked about and it's, you know, there's no one single thing I would point to. There's really several. There's, as I've talked in the past, I think we have an outstanding research and development department in our coding business that has been able to.
It's been tough without a doubt and it's a.
There's no one single thing I would point to us.
Several others as I've talked in the past I think we have an outstanding research and development Department in our coatings business that has been able to.
Speaker 3: work through challenges as it relates to changes in inbound supply and being able to take on different suppliers.
<unk> worked through challenges as it relates to changes in inbound supply and being able to take on different suppliers, we have a tremendous supply base and those companies that we have the long term and I'm talking 20, plus years relationship with have done phenomenal things for us and continue to do phenomenal thing so I can't thank our Ah <unk>.
Speaker 3: We have a tremendous supply base and those companies that we have the long-term and I'm talking 20 plus years relationship with have done phenomenal things for us and continue to do phenomenal things. So I can't thank our supply chain enough. And then of course the...
Why change it up and then of course the.
Speaker 3: The folks at our, in our company, at Bear and throughout our businesses that have really worked.
The folks at our at our company at bear in throughout our businesses that have really worked.
Incredibly hard and.
Speaker 3: incredibly hard and and and really put good thinking to how to manage through this crisis and it hasn't been without it challenged
It really put good thinking to how to manage through this crisis and it hasn't been without its challenges I mean, it's we're far from perfect, but we've done pretty well and I think we've at the end of the day, we demonstrated our operational excellence and what the Masco operating system can do these past couple of quarters and it's it's afforded us the opportunity.
Speaker 3: We're far from perfect, but we've done pretty well. And I think we've, at the end of the day, we've demonstrated.
Speaker 3: operational excellence and what the Massgo operating system can do these past couple quarters and it's it's afforded us the opportunity To get more of our paint into more professional hands and when that happens, it's good for us
To get more of our paint into more professionals hands and when.
When that happens its good for us as I said, we've recently been awarded again.
Speaker 3: As I said, we've recently been awarded again, some nice accolades around service. You're well aware of the awards that we've received in terms of our quality and our net promoter scores and our experience, et cetera. So we have a very good product and it's been beneficial for us to be able to leverage our supply chain excellence and our supply base and our people to get more people to try it. And as I said, when we would post try it, they tend to like it.
Some nice accolades around service, you're well aware of the awards that we've received in terms of our quality.
And our net promoter scores and our experience et cetera. So we have a very good product and it's been beneficial for us to be able to leverage our supply chain excellence and our supply base and our people.
To get more people to try it and as I said one.
Try it they they tend to like it and it's we're up against tough competition. There's no question about it but I'm very confident.
Speaker 3: And it's, it's, we're up against tough competition. There's no question about it, but I'm very confident in our outlook of mid-Jim's growth in pro-Pain for 2022.
Our outlook of mid teens growth in propane for 2022.
Thank you.
Thank you. Our next question is from the line of Michael Rehaut with J P. Morgan. Please go ahead.
Speaker 6: Thank you. Our next question is from the line of Michael. We haught with JP Morgan. Please go ahead. Thank you. Thanks. Good morning, everyone.
Thanks, Good morning, everyone and congrats on the results.
Speaker 2: But I wanted to, for the first question, just get a sense of, and I'm sorry if you, if you covered this earlier.
Wanted to.
First question, just get a sense of and I'm sorry, if you covered this earlier.
The cadence.
Speaker 6: The cadence, any type of sense for the cadence throughout the year, from a margin in growth, sales growth perspective, and specifically, I'm thinking about.
Any type of sense for the cadence.
Throughout the year.
From a margin and growth sales growth perspective, and specifically I'm thinking about.
You know the plumbing segment margins.
Speaker 6: the plumbing segment margins. You've had a couple of quarters now of year of year margin declines. I'm not sure if we should be thinking that that might continue at least in the first quarter and any comments around.
You've had a couple of quarters now.
Year over year margin declines.
I'm not sure if we should be thinking that that might.
Continue at least in the first quarter.
And.
Any comments around.
Speaker 7: you know, pop line cadence given the tougher comps in the first
Top line cadence given the tougher comps in the first half.
Yeah, Mike It's John let me I'll take a crack at this and keep feel free to jump in so as you think about.
Speaker 4: Yeah, Mike, it's John . I mean, I'll take a crack at this and feel free to jump in. So as you think about margins for 2022, Mike, compared to 2021, just given the strong comps that we faced in the first half of the year and the fact the way the inflation rolled out through 2021 with it not really impacting the P&L too much in the first half of the year and being much more significant impact to our P&L in the back half of the year.
Margins for 2022, my compared to 221, just given the strong comps that we face in the first half of the year and in fact, what is the inflation rolled out through 2020 , one with it not really impacting the P&L too much in the first half year and be much more significant impact to our P&L in the back half of the year.
Speaker 4: What that leads us to believe is that as we go into 2022, you'll kind of see a mirror image of 2021, meaning we'll have a little bit more margin, you know, pressure in the first half of the year as we recover costs to offset the inflation, but then as we lap the inflation and go into the back half of the year, we should see margins expand in the back half of the year.
Well that leads us to believe is that as we go into 'twenty. Two you kind of see a mirror image of 2021, meaning we have a little bit more margin pressure in the first half year as we recover costs to offset the inflation, but then as we lap the inflation and then you go into the back half of the year, we should see margins expand in the bag.
Back half of the year.
Speaker 4: in terms of top line cadence. You know, I say it's fairly balanced through the year, you know, not a significant, you know,
In terms of top line cadence.
It's fairly balanced through the year.
Significant.
So difference between first half second half of the year, Mike It feels pretty pretty straightforward at this point, so we like where we're positioned as Keith mentioned in his prepared remarks, we're seeing good growth both domestically and internationally.
Speaker 4: Difference between first half second half of the year. Mike, it feels pretty pretty straightforward at this point. So, you know, we like where we're positioned to keep mentioned in his prepared remarks. You know, we're seeing good growth, both domestically and internationally. So we feel good about where plumbing is positioned and we do expect some margin expansion in 2022.
So we feel good about where plumbing is positioned and we do expect some margin expansion in 2022.
Speaker 3: Mike, I think in terms of overall market growth and what we're expecting for North America, as I talked, we're looking at mid-single digits and that's including price. And then in our international markets, probably in that low single digit type of growth environment and our expectation is to outperform.
Mike I think you know in terms of overall market growth.
What we're expecting for North America as I talked we're looking at mid single digits, and that's including price and then in our international markets probably in that low single digit type of growth environment and our expectation is to outperform those.
Speaker 4: And just one last piece, you know, we do think that our margins bottomed out in Q4 and that we should see sequential improvement in plumbing margins as we go into Q1.
And Mike maybe one just one last piece you know, we do think that our margins.
Bottomed out in Q4, and then we should see sequential improvement in plumbing margins as we go into Q1.
Okay. No. Thanks, that's very helpful guys I appreciate it.
Speaker 7: Okay, thanks. That's very helpful guys appreciate it. Maybe secondly.
Maybe secondly.
Speaker 7: a question on propane. Obviously, the last two quarters have been extremely impressive and you're now forecasting for double digit growth in 2022. Obviously, you had an announcement by a competitor adding propane to Home Depot in addition to yours.
A question on propane obviously, the last two quarters have been extremely impressive and.
You're now forecasting for double digit growth in in 2022.
You know obviously you had an announcement by our competitor.
Adding propane to home depot in addition to yours.
Speaker 7: You know, I was hoping maybe just to talk, I know you probably don't like to talk about competitors directly, but to the extent that you could kind of frame how that announcement impacts
Was hoping maybe just to talk I know you probably don't like to talk about competitors directly but.
To the extent that you could kind of frame.
How that.
Announcement.
Impacts.
You know your own.
Speaker 7: dynamics either at home depot or just more broadly. And why you're still expecting this stronger rate of growth if it has to do more with again kind of the market share and product availability that you've been able to that's been favorable for you for the last couple quarters if that's going to continue for the next couple quarters. And any kind of broader competitive dynamics on the propane side.
You know the dynamics either at home depot, or just more broadly and why youre still expecting the stronger rate of growth. If it has to do more with again kind of the that the market share and product availability that you've been able to do.
Been favorable for you for the last couple of quarters, if that's going to continue for the next couple of quarters.
And any kind of broader <unk>.
Competitive dynamics on the propane side. Thank you.
Speaker 3: Yeah, Mike, the recent announcement doesn't change our strategy or outlook in any way.
Yeah, Mike I'll start.
The recent announcement doesn't change our strategy or outlook in any way.
Speaker 3: Our relationship with our channel partners is extremely strong, really hasn't ever been better. We're committed to mutual growth. We have significant discussions around our strategy and how we're going to continue to drive that together. So the relationship is really strong. We're not losing any shells.
Our relationship with our channel partners are extremely strong.
Really it hasn't ever been better we're committed to mutual growth, we have significant discussions around our strategy and how we're going to continue to drive that together. So the relationship is really strong we're not losing any shelf space.
Speaker 3: The recent news is mainly switching out of some other products in the aisle, not replacing ours. So it's not a shelf space issue, though we're confident in our paint business for the reasons that we talked about. When you have the best quality and the best brand and the best service.
The recent news is mainly switching out of some other products.
In the aisle not replacing ours. So it's not a shelf space issue. So we're confident in our paint business for the reasons that we talked about when you have.
The best quality and the best brand and the best service.
Speaker 3: and the ability through your supply chain to get it into more hands, and that's a good sales pitch for us. And we have outstanding sales force that are out there. So that, plus the fundamentals of the market, both cyclical and structural, give us plenty of reason to feel very good about our paint business. And then, additionally...
And the ability through your supply chain to get it into more hands.
That's a good sales pitch for us and we have outstanding sales force out there so that plus the fundamentals of the market.
Both cyclical and structural give us.
Plenty of reason to feel very good about our paint business and then additionally.
Speaker 3: We want some self-shault space in adjacent categories as well, which further demonstrates the strength of our quality and our brand and what the consumer thinks about it, things like, as I mentioned, aerosols into your stains, cost and feelings, and stuff like that. So there's plenty of reasons to feel good about our paint business, and we do.
We want them self shelf space and adjacent categories as well, which further demonstrates the strength of our quality and our brand and what the consumer thinks about it things like as I mentioned aerosols interior stains Cox and sealants stuff like that so there is there's plenty of reasons to feel good about our.
Our paint business and we do.
Great. Thank you.
Speaker 1: Thank you. Our next question is from the line of Adam. Please go ahead.
Thank you. Our next question is from the line of Adam. Please go ahead.
Speaker 8: Thanks for taking my question, everyone. Just on the inflation piece, you know, you mentioned it was upload double digits in the fourth quarter.
Hey, Thanks for taking my question everyone.
On the inflation piece I know you mentioned it was up low double digits in the fourth quarter. What are you assuming in your 2022 guidance and maybe by segment would be helpful.
Speaker 4: Sure, let me, let me take a crack at that, Adam.
Sure Let me, let me take a crack at that Adam.
Speaker 4: Um, you know, overall, like we said, you know, um.
Overall like we said you know.
Inflation for 2021 was kind of high single digits as we look into.
Speaker 4: Inflation for 2021, what's kind of high single digits as we look?
Speaker 4: into 2022, we do expect the impact to be up modestly from 2021, and it could be low double digits in the first half of the year. That said, if we specifically look at paint, we do think it's going to be up over 20% for the first part of 2022, so the first half of 2022. So we are expecting, I should say, this inflation to continue at least in the first part of the year.
Into the <unk>.
Into 2022 would you expect the impact to be up modestly from 2021.
It could be low double digits in the first half of the year.
Yes, if we specifically look at <unk>.
Do you think it's going to be up over 20% for the first part of 2022. So the first half of 2022 so.
We are expanding experience expecting you should soon.
This inflation to continue at least through the first part of the year.
Got it thanks, and then just when you talked about kits are driving the margin expansion decorative overall, if we just isolate where those margins down year over year in the fourth quarter.
Speaker 8: Got it. Thanks. And then just, you know, you talked about Kitscher driving the margin expansion decorative overall. If we just isolate paint, were those margins down year over year in the fourth quarter?
No we don't paint margins were down year over year.
Got it thank you.
Speaker 1: Thank you. Our next question is from the line of Mike, BALL with our BC capital markets. Your line is open.
Thank you over next question is from the line of Mike Dahl with RBC capital markets. Your line is open.
Thanks for taking my questions.
Speaker 9: I wanted to stick with paint. Keith, in the opening remarks, you made a comment about, you know, having some winds and getting some shelf space in aerosols, stains, caulks. I'm wondering if you could give us any sort of sense of magnitude of what the impacts from those will be within your guidance from a top-line standpoint. And then, you know, when we think about margin impacts, I know you've
I wanted to stick with paint Keith in the opening remarks, you made a comment about.
Having some wins and gaining some shelf space in aerosols stains Cox wondering if you could give us any sort of sense of magnitude of what the impacts from those will be within your guidance from a top line standpoint.
When we think about margin impacts I know you've.
Speaker 9: said a couple of times now on paint, you know, keeping in mind that it's dollar cost, not margin neutral on inflation, but wondering whether these adjacencies are comparable margins or should we think about the margin profile a little bit differently and if that's having any impact?
Set a couple of times now on paint you know keeping in mind that it's.
Dollar costs not margin.
Neutral on an inflation, but wondering whether these adjacencies are comparable margins or should we think about the margin profile, a little bit differently and if that's having any impact.
Speaker 3: What I'm most excited about with these additional spaces that we're getting into is it really highlights the strength of the Bayer brand, and it really serves as more of a billboard for us in the aisle and builds momentum with regards to the overall brand. Honestly, in terms of the overall size of these wins, at least for now, compared to our overall paint business, it's not that big of a win, and I'm not going to get into the specific margin breakdowns of it. In terms of...
What I'm most excited about what these additional spaces that we're getting into is it really highlights the strength of the bear brand and it really serves as more of a Billboard for us in the island and builds momentum with regards to the overall brand.
Honestly in terms of the overall size of this these wins at least for now compared to our overall paint business, it's not that big of a fan.
And I'm not going to get into the specific margin breakdowns of it.
In terms of the.
Speaker 3: The price-cost relationship as it relates to price recovery for costs only and not getting margin on that, just to kind of give you a little bit of the back of the envelope math, a 5% increase in costs where we recover only the cost but not the margin equates to about 100 basis points of margin erosion. So that gives you a flavor for the kind of challenges we're looking at and the dynamics that we have.
The price cost relationship as it relates to price recovery for cross selling at not getting margin on that just to kind of give you a little bit of a back of the envelope math, a 5% increase in costs, where we recover only the cost but not the margin equates to about 100 basis points of margin erosion. So that gives you a flavor for the kind of challenges we're looking at and.
The dynamics that we have the new wins.
Speaker 3: The new winds, you know, they're not that large compared to the overall market, our overall segment now, but I think very positive for us for the reasons I mentioned.
You know, they're there they're not that large compared to the overall market. Our overall segment now, but I think very positive for us for the reasons I mentioned.
Speaker 9: Okay, great. Yeah, that makes sense. Thanks. My second question is on the investment side. It sounds like there's a step up in both plumbing and DECARC when we think about investments, whether it's personnel or other investments around marketing. Can you help us, again, kind of quantify from a year-on-year standpoint how those investments look by segment?
Okay, great Yeah that makes sense. Thanks. My second question is on the investment side it sounds like.
There is a step up in both plumbing and Deca, when we think about investments whether it's.
Personnel or other investments around marketing can can you help us kind of quantify from from a year on year standpoint, how those investments look by segment.
Yeah, Mike Yeah on that one.
Speaker 4: Yeah, Mike, yeah, on that one, you know, it's just the continuation of, you know, putting some of the investment back into the business that we pulled back on during 2020.
It's just the continuation of putting some of the investment back into the business. If we pulled back on during 2020.
Speaker 4: And so, you know, from a, you know, in terms of actual dollars of investment.
So from a.
Actual dollars of investments.
Speaker 4: You know, it's modest, you know, in terms of the ongoing investment we've put, you know, as we talked about for 2021, we're looking to put about $40 million back into the business. Most of that isn't going to be in the plumbing segment. And I'd say we've made progress along those lines. I'd say the dollar amount, we still have some room to go in terms of investment as we go into 22, but I wouldn't say it's, you know, significant from here. Yep.
Yeah.
It's modest in terms of the ongoing investment we put you know as we talk.
For 2021, we're looking to put about $40 million back into the business most of that wasn't going to be in the plumbing segment and I'd say, we've made progress along those lines I'd say the dollar amount we still have some room to go in terms of investment as we go into 'twenty two.
I wouldn't say it's.
Significant from here.
We're.
Speaker 3: We're keeping a close eye, Mike, on these investments as we feather them back in to make sure we're getting the return for them. So it's not like we're keen on just simply jumping up our SG&A back to historical levels. I would think about in 2022, while we're increasing in the spend area, our SG&A as a percent of sales should still hover around that 17 percent.
We're keeping a close eye Mike on these investments as we feather them back end to make sure we're getting the return for them. So it's not like we're keen.
Tina just simply jumping up our SG&A back to historical levels I would think about in 2022, while we're increasing and in the spend area. Our SG&A as a percentage of sales should still hover around that 17%.
In terms of capacity.
Speaker 3: In terms of capacity, you talked about, I think you asked a little bit about where that investment is going. Our CAPEX typically averages between 2 and 2 and a half percent of revenue. We've been on the lower end of that for a number of years. For the next couple of years, we'll probably be on the high side of that.
You talked about I think you asked a little bit about where that investment is going.
Our capex typically averages between two and two 5% of revenue we've been on the lower end of that for a number of years for the next couple of years, we'll probably be on the high side of that.
Range.
Speaker 3: The large projects that we announced as they come online will have capacity for us probably in that 2023 time period. But we've always said that our number one capital allocation priority is to reinvest in our business. That's the best return we get, it's the least risky, and it's the one we have the most confidence in. So these capital investments will be spaced over the next coming years and, as I said, should put us towards the higher end of the range for a couple of years.
The large projects that we announced as they come online will have capacity for us probably in that 2023.
Time period.
But we've always said that our number one capital allocation priority is to reinvest in our business. That's the best return we get it's the least risky and if so why do we have the most confidence and so it's.
These will be these capital investments will be spaced over the next coming years and as I said should put us towards the higher end of the range for a couple of years.
Got it alright, thanks, Keith Thanks, Sean.
Speaker 1: Thank you. The next one we have the line of John Lavallo with UBS.
Thank you. The next one we have the line of John Lovallo with UBS. Please go ahead.
Speaker 10: Good morning guys and thank you for taking my questions. The first one just to dub tell off of mics, when would you anticipate reaching that sort of normalized SGNA run rate and the investments that you're speaking of just to be clear, are they contemplated in that 40 million or is there incremental on top of that?
Good morning, guys and thank you for taking my questions.
First one just to dovetail off of Mike's when would you anticipate reaching that sort of normalized SG&A run rate and the investments that you're speaking of just to be clear are they contemplated in that $40 million or is there.
You know incremental on top of that.
Hey, John No, there's nothing incremental on top of it and I'd say, we'd probably be in it.
Speaker 4: Hey, John , no, there's not incremental on top of that. And I'd say we'd probably be in that, you know, on that run rate, probably in the back half of the year. I mean, there's going to still be we're going to meter that investment in as we see how demand shapes up for 2022.
On that run rate probably in the back half of the year I mean, it's going to still be a meter that investment in as we see how demand shapes up for 2022.
Speaker 10: Okay, got it, that's helpful. And then, you know, with the Watkins backlog coming in, which is, you know, very strong at the end of the year, how should we sort of think of the potential benefit to the plumbing margin with that backlog flowing through?
Okay got it that's helpful and then.
With with the Watkins bad backlog coming in which is very strong at the end of the year, how should we sort of think of the potential benefit to the plumbing margin with that backlog flowing through.
I think I'd point, you to our overall guide for.
Speaker 3: I think I'd point you to our overall guide for the plumbing, right?
For the full the plumbing right right around that 18%.
Speaker 4: Yeah, you know, John , as you as you as you look at that business.
Yes, Jonathan.
You look at that business.
Speaker 4: You know, I would say that, you know, the plumbing that, you know, to maybe to correct it, plumbing is closer to 19% than 18%. And I would expect, you know, that volume, if you look at that business, just given the strength of it, you know, will flow through pretty consistently through the year. So you know, it is going to be a contributor to us achieving that 19% margin. But it's not, I'd say there's no out, it's not going to drive us, you know, well north of that, just given that strength of those backlogs.
I would say that.
Pardon me, Tim maybe to see correctly plenty is closer to 19% and 18%.
And I would expect that.
You did you look at that business, just given the strength of it.
Flow through pretty consistently through the year.
So it's gonna be contributor to us achieving that 19% margin, but it's.
I'd say theres no.
That kind of drive us well north of that just given that given the strength of those backlogs.
Got it thank you.
Speaker 1: Thank you. The next one we have the line of Susan McBarry with Goldman Sachs Eliza
Thank you. The next one we have the line of Susan Mcclary with Goldman Sachs. Your line is now open.
Thank you good morning, everyone.
Speaker 11: My first question is, can you just give us some color across the business of where inventories sit as you come into this year, and recognizing that you don't.
My first question is can you just give us some color across the business of where inventories sit as you come into this year and recognizing that you don't oftentimes have extended backlogs in most of these operations, but any commentary on the backlog and your thoughts on the ability to sort of catch up this year as their supply chains continue to improve.
Speaker 11: extended backlogs in most of these operations. But any commentary on the backlog and your thoughts on the ability to sort of catch up this year as a
We've made a little bit of improvement, but I'd say, Susan it's it's a mixed bag if you look across.
Speaker 3: We've made a little bit of improvement, but I'd say, Susan, it's a mixed bag. If you look across the different products, the channels, the geographies, I would say, generally speaking, that we're still a little bit light. So that might represent a little bit of tailwind for us. But really, we're getting back fairly close to where we want to be. But there's a little bit of upside, I would say.
The different products and channels and geographies I would say generally speaking that we're still a little bit light.
So that that might represent a little bit of a.
A tailwind for us, but really where we're getting back fairly fairly close to where we want to be but theres, a little bit of upside I would say.
Speaker 11: Okay, all right, that's helpful. And then, you know, as we think about the longer term trajectory of the businesses, especially in terms of the market.
Okay, Alright, that's helpful. And then as we think about the longer term trajectory of that business is especially in terms of the margins can you talk a little bit about where you think that business can continue to go over time. It feels like we are sitting with a certainly a stronger housing backdrop.
Speaker 11: It feels like we are sitting with certainly a stronger housing backdrop over the longer term as we go through. You're obviously doing a lot of initiatives around new products, those kinds of company specific efforts.
Over the longer term as we go through you're obviously doing a lot of initiatives around new products those kinds of company specific efforts.
Do we think about what that will mean for you over time and where things can go.
Speaker 3: At first point in the last couple of years and said, these have been some strange times, obviously with fairly significant inflation. This year with the COVID initial austerity program where we really cut back at the beginning of the pandemic to keep us sharp eye on the liquidity to a very much a spikened demand, if you will, or where people over time, throughout the pandemic had a different view of where
I'd I'd first point to the last couple of years and said. These these have been some strange times, obviously with fairly significant inflation this year with the the Covid.
Initial.
Austerity program, where we really cut back at the beginning of the pandemic to keep a sharp eye on liquidity to a very much a.
The spike in demand, if you will or where people over time throughout the pandemic had a different view of where.
Speaker 3: what their home meant to them and what they were willing to invest in their home and how they wanted that to look and feel. So it has been a strange past couple of years for sure, to say it in the obvious.
What what their home meant to them and what they're willing to invest in their home, but how they wanted that to look and feel so.
It has been a strange past couple of years for sure stating the obvious as we look forward in the business our margins are pretty good.
Speaker 3: As we look forward in the business, our margins are pretty good, but our mantra is to continue to improve them.
But our mantra is to continue to improve them and that improvement will not will not come at hundreds of basis points chunk. So it'll come in rather modest improvements over time, but fundamentally we have a dropdown in that 25% to 30% on the base volume and then then we're going to continue to invest for.
Speaker 3: And that improvement will not come in hundreds of basis points, chunks of it will come in rather modest improvements over time, but fundamentally.
Speaker 3: We have a drop down in that 25% to 30% on the base volume. And then we're going to continue to invest for growth. And in some cases, those investments, like we've talked about in the past, come ahead of.
Growth and in some cases those investments like we've talked about in the past come ahead of the growth.
Speaker 3: And we earn our way into that. So as we think about the competitive forces, we think about the value of our drop down, we think about the need to improve or invest incrementally in future growth. We're committed to slight margin expansion as we move through the years.
And we earn our way into that so as we think about the competitive forces. We think about the value of our dropdown, we think about the need to improve or invest incrementally in future growth.
We're committed to slight margin expansion as we move through the years.
Okay. That's helpful. Thank you and good luck.
Thank you thanks.
Thank you the next one.
Speaker 1: Thank you, the next one, we have the line of fill, now with Jafris. Here you go.
The line of Phil <unk> with Jefferies. Please go ahead.
Speaker 12: Hey guys, John , you were really kind to give us some color on how to think about the margin progression on plumbing. Any hand holding on to the DAP segment, you know, I'm appreciating, you're probably seeing a lot more inflation to start the year. And when we look out to 2023, assuming inflation kind of stays steady and not pull back, is there an opportunity to kind of get that back to that 19% range over time?
Hey, guys. John you were really kind of give us some color on how to think about the margin progression plumbing any handholding on the da P segment, appreciating you've probably seen a lot more inflation to start the year and when we look out to 2023, assuming inflation kind of stays steady and not pull back is there an opportunity.
<unk> kind of get that back to that 19% range over time.
You know Phil.
Speaker 4: You know, Phil, as we look at the decorative architectural segment.
As we look at.
Yeah, Jack could have architectural segment for the year.
Speaker 4: for the year. I'll tell you a couple of things. One, obviously, as you look at the cadence of our progression in 2021, obviously we faced some pretty significant headwind in the second quarter just given the
And I'll tell you a couple of things one obviously, if you look at the cadence of our progression in 'twenty 'twenty. One obviously, we faced some pretty significant headwind.
Second quarter just given.
Yeah.
Speaker 4: challenges from the Texas freeze in Q1 of last year, and so that impacted our Q2.
The challenges from the Texas freeze in Q1 of last year, and so that impacted our Q.
Speaker 4: two, but as you think about, you know, are both our top line and our bottom line for.
Two.
But as you think about.
Both our topline and our bottom line for us.
Speaker 4: 2022 as compared to 2021, you know I think you're going to see
2022 as compared to 2021.
No I think you're going to see.
Speaker 4: Better growth in the first half of the year than in the back half of the year. A largely that's due to some of the pricing that we put in during 2021 as well as the relatively soft comp that we had in the second quarter of 2022.
Better growth in the first half of the year than in the back half of the year largely due to some of the pricing that we've put in during 2021 as well as the relatively soft comp that we had in the second quarter of 2022.
Speaker 4: is you think about the margin progression for 2022. Again, we call it some of the comments that both Keith and I made about as we cover the dollar cost of the inflation, it's going to impact margin. And so, you know, with that segment, I would expect to see, you know, we talked very openly about the margin compression, and we really don't see
As you think about the margin progression for 2022.
Again recall that some of the comments that both Keith and I made about.
As we cover the <unk>.
Dollar cost of the inflation, that's going to impact margin and so.
With that segment I would expect to see you know we talked very openly about some margin compression and we really don't see.
That really getting much better as we go through the year I mean, I think it'd probably be more of a first half weighted will probably be more impacted than the back half mall, depending on where inflation goes.
So that's how we're seeing it now with you know.
We're very confident though in the 18% margin.
Speaker 3: And, you know, as we think about the fourth quarter, we probably did see a little bit of margin compression on the paint side, just given that price-cost recovery action that we talked about earlier. You know, Phil, I just... Yep, sorry, go ahead, Keith.
And.
Think about the fourth quarter, we probably did see a little bit of margin compression on.
The paint side.
Just given that price cost recovery accident, Debbie we talked about earlier.
Phil This is Kip sorry go ahead.
I would tell you that.
Speaker 3: This is not a static environment. I think we certainly have a view of what of the overall inflation is going to be and we base our plans on that and we have a commitment to price cross neutrality and we've demonstrated the ability to get that on all those things, but it's not static. I mean, as John , he alluded to on the fourth quarter.
This is not a static environment I think we are we certainly have a view of what are the overall inflation is going to be and we base. Our plans on that and we have a commitment to price cost neutrality and we've demonstrated the ability to get that on all of those things, but it's it's not static I mean as John alluded.
Alluded to on the fourth quarter.
Speaker 3: We had high teens, raw material inflation, and paint the fourth quarter, and we think that's going to be in the mid-20 percent, still to come here in the first quarter of 2022, so there's some moving parts here, and we need to continue to work through them.
We had high teens.
Raw material inflation in paint in the fourth quarter, and where do you think that's going to be in the mid 20% still to come here in the first quarter of 2022. So there are some moving parts here and we need to continue to work through that.
Speaker 12: Yeah, that's fair. I mean, a lot of inflation, so you're managing through that. When we think about rate hikes, I've certainly seen a lot of volatility in the equity markets. Keith, I think your business should be a little more insulated. Curious how you think about that impacting your business and any way to kind of parse out your sales guidance for the full year. How much is price versus volume?
Yeah, that's fair I mean, a lot of inflation, so you're managing through that.
When we think about rate hike certainly seen a lot of volatility.
And the equity markets, Keith I think your business should be a little more insulated I'm curious how you think about that impacting your business in any way to kind of parse out your sales guidance for the full year, how much is price versus volume.
Yeah.
Speaker 3: Yeah, you hit the nail on the head. So we have made significant changes.
You hit the nail on the head. So we have made significant changes and by design and reduce the cyclicality of masco less cyclical more resilient.
Speaker 3: And by design have reduced the cyclicality of masculine, less cyclical, more resilient, less distance peak to trough, less time peak to peak. So that is really what we...
Less distance peak to trough less time peak to peak so that that is really what we've <unk>.
Speaker 3: changed and built a portfolio for. We believe, and it's demonstrated, that the R&R market is more correlated with home price appreciation, existing home turnover, consumative confidence, and the like, versus interest rates.
<unk> and built our portfolio for so.
We believe and it's demonstrated that the R&R market is more correlated with home price appreciation extend existing home turnover of consumer confidence and alike.
Versus interest rates, particularly.
Speaker 3: with many repair and remodel projects not financed with mortgage debt. So we believe that that dynamic alone provides some pretty good insulation from concerns about rates. But then there's the structural factors, and you think about the demographics and the number of homes. You know, you think back to that.
With many repair and remodel projects.
Financial with mortgage debt so we.
We believe that that dynamic alone.
<unk> provides some pretty good insulation from concerns about rates, but then there's the structural factors and you'd think about the demographics.
And the number of homes, you think back to that.
Speaker 3: 2002 to 2006 time period when we were building, you know, 1.9, 2.0 million kind of homes, those are now starting to age to that juicy age of, you know, 16 to 20 years where significant remodeling.
2002 to 2006 time period, when we were building 1.9 2.1 million.
Homes those are now starting to age to that juiced. The age of 16 to 20 years, where significant remodeling occur so that that structural aspect and the COVID-19 impact in terms of how people are viewing viewing their house plus the millennial cohort coming in as I talked about so.
Speaker 3: occurs, so that structural aspect and the COVID impact in terms of how people are viewing their house, plus the millennial cohort coming in, as I talked about.
Speaker 3: You know, we feel that through our designed work on the portfolio and what that portfolio now depends on in terms of the consumer rather than interest rates that worth pretty good shape.
We feel that through our design work on the portfolio and what that portfolio that'll depend bad in terms of the consumer rather than interest rates that were pretty good shape.
Speaker 12: Any color on the parsing out price versus volumes?
Any color on the parsing out price residual volumes.
Speaker 10: Yeah, Phil, you know, I'd say, you know, both will contribute to growth. I'd say in this inflationary environment, price will be more impactful than volume in 2022. But we still are looking at volume across both segments. But yeah, as John said, price will be the majority of it. OK, thank you. Really appreciate the color, guys.
Yeah, Phil I'd say, both will contribute to your growth I'd say in this inflationary environment price will be more impactful than volume.
In 2022.
We still are looking at volume growth across both segments, but yes, as John said price the price will be the majority of it. Okay. Thank you really appreciate the color guys.
Yeah.
Speaker 1: Thank you, the next one we have the line of a Stephen Kim with Evercore ISI. Your line's off.
Thank you. The next one we have the line of Stephen Kim with Evercore ISI. Your line is now open.
Speaker 13: yeah thanks much uh... appreciated uh... just want to clean up a couple of things here one thing in paint i'd believe you mentioned uh... i think you alluded to the fact you expect some additional inflation within pain and and the decker segment generally sequentially like from here i just want to make sure that i was understanding that uh... if what's included in your guidance there and then also there was a forty five million dollar impairment to goodwill and i was just wondering what that was related
Yeah. Thanks, so much I.
I appreciate it.
To clean up a couple of things here one thing in paint I believe you mentioned I think you alluded to the fact that you expect some additional inflation within pain in the Dec arc segment generally.
Sequentially like from here I, just wanted to make sure that I was understanding that if what's included in your guidance. There and then also if there was a $45 million impairment to goodwill in that I was just wondering what that was related to.
Sure you know.
Speaker 4: Sure. You know, uh, Stephen, in terms of inflation, you're right. Yeah. We do expect additional inflation from here is, you know, we are continuing to see inputs, both titanium dioxide and residents continue to inflate as we enter 2022. So we do expect that to be, um, you know, continue to increase in 2022. Um, as it, as it relates to the, uh, goodwill impairment, that charge that we took that was related to, um,
Stephen in terms of.
And you're right Yeah, we do expect additional placements from here is it.
To see inputs, both titanium dioxide and resins continued to inflate as we enter 2022. So do you expect that to be.
Continuing to increase in 2022.
As it relates to the.
The goodwill impairment the charge that we took out was related to.
Kissler. Meanwhile, kitchen lives enjoying improved performance in 2021 and returned to growth and actually had some nice.
Speaker 4: Kishler. While Kishler has enjoyed, you know, improved performance in 2021 and returned the growth and actually had some nice both, you know, productivity and profit improvement in the year. But, you know, as a result of the inflation that impacted the business.
Both productivity and profit improvement in the year.
As a result of the inflation that impacted the business.
Speaker 4: You know, both initially starting in 2019 with the tariffs, as well as then in 2021 with what took place, you know, with the inflation and how it overall impacted the business. We made the determination that it was appropriate to lower the carrying value of the business and took the cash charge in the fourth quarter. This said,
Both initially starting in 2019 with the tariffs.
Well then in 2021 with.
What took place with the inflation.
Yeah.
The impact of the business made the determination that it was appropriate to lower the carrying value of the business and took a non cash charge in the fourth quarter. This said.
Speaker 4: You know, we like how the team is performed. We like where the business is standing today. And so we feel much better about how this business is positioned.
We like how the team has performed really towards the business is standing today.
And so we feel much better about how this business is positioned.
Okay is there any goodwill remaining in kitzmiller at this point.
Speaker 4: There's a small amount of goodwill that's remaining, Stephen.
Theres, a small amount of goodwill that's remaining.
Steven.
Speaker 13: Okay, great. And then you walked through the cadence, I think, in sales in DECARC, and I was just wondering, related to the top line, particularly in plumbing, when we kind of look at your
Okay, Great and then.
You were you walk through the cadence I think in sales in <unk>.
<unk> and I was just wondering related to the topline, particularly in plumbing.
When we kind of look at your growth trying to cut through the pandemic you know year over year gyrations.
Speaker 13: trying to cut through the pandemic, you know, Euro be your gyrations.
Speaker 13: it looks like your fourth quarter could on a you know multiple your stack basis could have a pretty nice year-over-year uh... increase uh... but there's also some normal seasonality in that business too so just kind of curious if you if you can kind of made the the case that in dakar there would be a little bit of chunkiness i think in terms of the sales growth looks like particularly in 2Q is there anything like that in plumbing and should we think that uh... or should we think that the sales growth organic will be you know pretty pretty stable throughout the
It looks like your fourth quarter could on a multiple year stacked basis could have a pretty nice year over year increase but there's also some normal seasonality in that business too. So just kind of curious if you could kind of make the case that in Dec arc there'd be a little bit of chunk in this I think in terms of the sales growth.
It looks like particularly in <unk> is there anything like that in plumbing and should we think that or should we think that the sales growth organic will be pretty pretty stable throughout the year.
Speaker 4: It should be pretty stable throughout the year with maybe a little bit, you know, better in the back half of the year, Steven. But, you know, I don't see there's anything, there's not a meaningful driver to make a huge distinction between the first and second day.
It should be pretty stable throughout the year with maybe a little bit better.
Better in the back half of the year Stephen Byrd.
I don't think there's anything there's not a meaningful driver can make a huge distinction.
Between first half second half.
Okay. That's helpful. Okay. Thanks very much.
Thank you. The next one we have the line of Garik <unk> with loop capital. Please go ahead.
Speaker 1: Thank you, the next one we have the line of Garek Shmois with Loop Capital. Please go ahead.
Hi, Thanks for taking my question apologize for the short term focused question here first but just wondering if you're seeing any pronounced absenteeism related to COVID-19 and if theres any production inefficiencies that impacted <unk> what could impact <unk>.
Speaker 14: Thanks for taking my question. Apologies for the short term focused question here at 1st, but just wondering if you're seeing any pronounced absenteeism related to cobit. And if there's any production and efficiencies that impacted 4 Q, or could impact 1 Q.
Speaker 3: Yeah, we're still struggling with that. And I would say towards the back after the year with Omicron variant that it increased in a fairly typical of what the rest of the country is seeing. But we are seeing the elevated absenteeism and our factories and it's happening in our supply base as well. So that remains an ongoing challenge. I've just looked at some recent data and it...
Yes, we're still struggling with that and I would say.
Towards towards the back half of the year with a Oh my God there has that increased.
Fairly typical of what the rest of the country are saying, but we are seeing an elevated absenteeism in our factories and it's happening in our supply base as well so that remains an ongoing challenge.
Just looked at some recent data and it appears that it's it's it's starting to wane, but we'll.
Speaker 3: It's starting to wane, but we'll see. I think...
We'll see it I think.
Speaker 3: Our approach, I know that our approach is that this, expect this type of absenteeism to continue and we've got to figure out ways.
Our approach I know that our approach is that this.
Expect this type of absenteeism to continue and we've got to figure out ways.
Speaker 4: uh... the best manage it but yeah it's uh... it's uh... it's an ongoing challenge for some questions in here that was more for a cute one comment in the q4
The best manage it but yeah. It's it's a it's an ongoing challenge there's no question.
And it was much more of a Q1 comment into Q4 comment.
Speaker 14: Okay, great. No, thanks for the clarification. The follow-up question is on pricing and you talk about putting through pricing to all systems and recent transportation costs.
Okay, great broker thanks for the clarification.
Follow up question is on pricing and you talked about putting through pricing to offset some recent transportation costs. You also talked about.
Speaker 14: You also talked about increasing inflation, particularly in paint. I'm just wondering if your guidance assumes the need for additional pricing from here, or does it assume all the pricing actions that you already put through could be enough to drive the margins down?
Increasing inflation, particularly in paint.
Wondering if your guidance assumes the need for additional pricing from here or does it.
All the pricing actions that you're already Peru, which could be enough to drive the margins in your outlook.
Yeah I mean.
Speaker 4: Yeah, I mean, Derek, what we're seeing particularly with some of the inflation that continues, you know, it looks like we'll need to, you know, we've put in a lot of price to date, but you know, we likely to foresee the need for further pricing actions as we go into 2022. Thank you.
What we're seeing particularly with some of the inflation.
There continues it looks like we'll need to you know.
We put in a lot of price to date.
But you know, we usually we likely foresee the need for further pricing actions as we go into 2022.
I see thank you very much.
Yeah.
Speaker 1: Thank you, we have time for one last question and it would be from Eric Bosshard with Cleveland Research. Realize that.
Thank you we have time for one last question and it would be from Eric Bosshardt B Cleveland Research. Your line is open.
Speaker 3: Thank you. I'm curious, in the plumbing segment, the North American growth was slower in 4Q than I think we had seen in what was a strong year. Just curious, in that business, in 4Q and into 1Q, what you're seeing go on in terms of consumer demand or channel fill or product mix specifically in that?
Thank you.
Curious in the plumbing segment.
North American growth was slower in <unk> than I think we had seen in what was a strong year.
Just curious in that business in <unk> and into <unk>, what Youre seeing go on in terms of consumer demand or channel fill or product mix specifically in that business.
Speaker 3: It continues to remain strong, you know, our incoming order rate, our backlogs are solid. And importantly, we have not seen, if you will, a trade down in the mix as it relates to a reaction to the significant price that us and others have put into the market. So, where we sit right now, it's pretty stable.
Yeah. It continues to remain strong.
Our incoming order rate or backlogs are solid.
And importantly, we.
We have not seen if.
If you will the trade down in the mix as it relates to our reaction to the significant price that us and others are put into the market. So.
Where we sit right now it's pretty stable.
Okay.
Great. Thank you that's all I have.
Yeah.
Speaker 2: I'd like to thank you for your continued interest in MASCO and joining us on the call this morning. That concludes today's call.
Like to thank you for your continued interest in masco and joining us on the call. This morning that concludes today's call.
Okay.
This concludes today's conference call. Thank you for participating you may now disconnect have a great day.
Speaker 1: This concludes today's conference call. Thank you for participating. You may now disconnect.
Okay.
Speaker 15: this
Yes.
Uh huh.
Yeah.
Okay.
[music].
Yes.
Okay.
Yeah.
[music].
Okay.
No.
Yes.
Okay.
Yeah.
Yes.
Yeah.