Good morning, ladies and gentlemen, and welcome to the Masco Corporation 2011 Third Quarter Conference Call. As a reminder, today's conference is being recorded and simultaneously webcast. If you have not received the press release and supplemental information, they are available on Masco's website, along with today's slide presentation under the Investors Relations section at www.masco.com. Before we begin management’s presentation, the company wants to direct your attention to the current slide and the note at the end of the earnings release, which are cautionary reminders about statements that reflect the company’s views about its future performance and about non-GAAP financial measures. After a brief discussion by management, the call will be open for analysts' questions. If we are unable to get to your question during this time, please call the Masco Corporation Investor Relations office at (313)792-5500. I would like to now turn the call over to Mr. Timothy Wadhams, President and Chief Executive Officer of Masco. Please go ahead, sir.

Thank you, Debbie, and thank all of you for joining us today for Masco's third quarter earnings call. I'm joined by Donnie Demarie, our Executive Vice President, Chief Operating Officer; and John Sznewajs, our CFO. And if you would please flip to Slide #3. The operating environment for our businesses continues to be challenging as commodity cost pressures, a very competitive retail environment and depressed consumer confidence continue to impact our performance. In this challenging environment, we continue to strengthen our market positions. We believe that we maintained or gain share in our major product categories. We've introduced new products and programs and gotten some very nice industry recognition, which we'll talk about as we work our way through the presentation. And we've taken some additional actions to strengthen our position in several of our markets. And if you flip to Slide #4, I want to talk about some of the things that have transpired here over the last couple of months. As it relates to Milgard, our window business in the Western United States, in September, we exited our glass business. We also, in October, closed -- announced the closure of 3 of our manufacturing facilities. That's going to cost us, we estimate about $30 million, of which about $5 million will be cash. And we expect to save, on an annual basis, about $7 million, give or take. Those actions, together with some other actions that we've taken in other business units, should result in headcount reductions of about 750 for the period September through the end of the year. Obviously, those continue to be very, very difficult issues, difficult decisions, but certainly necessary in the environment that we're in. We also announced in our press release the divestiture of 4 of our non-core diversified products businesses and…

[Operator Instructions] We'll go first today to Josh Levin with Citi.

So as you look towards 2012, assuming the housing starts environment does not improve much next year, it sounds like you think you might be able to get cabinets and installation at breakeven, if I understood your remarks correctly. And if so, how do you get there, is that more top line or further cost cuts?

Josh, yes, what we really are challenging both of those businesses to do in North America, both our Installation business, as well as our North American Cabinet business, is to assume a relatively flat market next year. And again, we'll talk about that in a second in terms of where blue chip is relative to starts, and really pushing them to do everything they can to get as close to breakeven as possible. It's a little bit too early to declare that we think we can get there. We're in our planning process as we speak. We have not reviewed some of the plans and obviously, a part of that is going to be to the extent that we think we can get there, what are some of the things that we might not be able to do that might have some longer-term implications to us. So I -- we're pushing them very, very aggressively. I think the one wild card in cabinets is probably Europe. The environment over there is very, very difficult. And as we've indicated in the past, we've got 2 new leaders there that have been -- at Moores, and at development in Denmark -- that have been basically in the businesses now for about 9 or 10 months. And so we're pleased with the folks we have. We've got some additional changes in the leadership teams, but the environment there continues to be very, very difficult. So we're pushing the businesses very hard. My sense is if the blue chip consensus is right relative to housing starts and there are a lot of folks that are very good at projecting that are significantly above the 700,000-unit number for next year, if we get close to that number in terms of starts, I think we've got a real good chance to show some substantial improvement in both of those segments. And I guess for this -- at this point in time, I'd rather not get anymore aggressive than that. We'll be able to give you a better update in February when we get together on the fourth quarter call.

Okay. On a separate note, Behr has been a real star for Masco. One of your competitors recently launched a paint and primer product at Lowe's. How are you positioning Behr to deal with that competition?

Josh, this is Donnie. Really, most of our competitors have launched new products either 2-in-1, 3-in-1 products that are following our leadership in creating a whole new category with paint and primer in one. We continue to be the market leader in DIY, and believe we've held that share position in the U.S. by a long shot. We will continue to defend that position. We feel really good about our product, our brand and our performance, both on the top line and bottom line in the quarter. Certainly, we've had some short-term responses related to some of the new offerings and lower price points. And we think that's important to defend where we sit in our share and on the shelf with our key partner.

Yes, I think, Josh, you'll see us continue to invest in innovation. We obviously have been a leader in the do-it-yourself market, as Donnie mentioned, paint and primer in one, the color center, low-VOC paint. So we'll continue to innovate and work on merchandising solutions with our partner there as well.

We'll take our next question from Peter Lisnic with Robert W. Baird. Joshua K. Chan - Robert W. Baird & Co. Incorporated, Research Division: This is Josh Chan, filling in for Pete. So I was just wondering on the Milgard plant take-outs. Taking out 3 plants in a month, could you walk through that decision and whether there was a change in how you thought about the market and/or your positioning in that market?

Yes. The announcement, Josh, was made in October. It will take us a little bit of time to wind those plants down. So that will be an ongoing process that I imagine we'll probably finish in the fourth quarter. But our feeling is with -- as we assess market conditions going forward in the Western United States, that we can serve with our remaining plants. We'll have 6 remaining manufacturing facilities in the Western part of the country and our feeling is that we can maintain lead times, given current market conditions with the manufacturing footprint that remains behind. We've done some good things from a productivity standpoint. We just completed and have -- the launch of the Essence products, which was a new product for us. But as we think about it, we think there's some things we can do more on a regional basis going forward just in terms of cost management and supply chain, and certainly feel pretty comfortable that we can handle the market demand, again, with good lead times for our customers. If things do pick up for a limited amount of capital, we can put another plant in or that type of thing. I mean that's not that challenging to do, but we feel very comfortable that we can handle the demand at this point in time.

Josh, if I could add, we've been talking a lot about the work we're doing in the supply chain and manufacturing. And really, this is -- what you're seeing now is really a result of a lot of those efforts, where we looked at our supply chain and our manufacturing base, and which was primarily served to a local markets, and have regionalized our ability to serve in a way where we think we can maintain lead times and our service levels and take costs out of the business. So we're excited about the changes. Changes are always tough, but we think it's necessary in the current environment and, going forward, we think will serve us well. Joshua K. Chan - Robert W. Baird & Co. Incorporated, Research Division: Right, okay, that makes sense. And then you talked about ongoing competitiveness in the retail market. I mean, I think, in the cabinet side, that's been pretty well-documented. Are you seeing that above-normal level of competition spilling over into some of the other categories as well?

Well, I think, Josh Levin mentioned that in terms of Behr, where there have been some new competitive products, competitive price points, a lot of promotional, obviously, related to cabinets as you articulated. And basically, I think the environment, when you look at plumbing as well, it's pretty much across the board. Obviously, we feel good about how we're positioned in all of those categories. But with the increase in promotional activities, it's just a little bit more intense from ultimately a pricing standpoint as well.

We'll take our next question from Sam Darkatsh with Raymond James. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: Two questions, first off, you mentioned a number of instances of costs for new programs. Could you quantify the impact for that overall? And then how much of these costs are one-time in nature in terms of starting up a new program versus ongoing and then would have to be leveraged going forward? Then I have a follow-up as well.

Yes, we estimated, Sam, that in the quarter, we probably spent about $20 million incrementally on some of the programs that we're launching. And again, that primarily was -- well, it's pretty much across the board. You've got some in cabinets. There's certainly are some costs related to plumbing. I've talked about that, the paint programs, et cetera, et cetera. And I would say that those incremental costs at this point in time, I would guess that will be able to -- you're always going to have new programs. And so typically, when you have those kinds of costs, there's an expectation that you're going to get some additional revenue on the top line. So the paybacks, we think, tend to be pretty good. I wouldn't want to suggest that we won't see -- well, I would say this, I don't think we'll see that level of increase next year. Whether we see some reductions, kind of remains to be seen, but I think it's really going to be driven more by our ability to continue to bring out new products and new programs which quite frankly, we certainly anticipate doing. But I would doubt that level would be much higher than it is this year because we've been running at a fairly high rate. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: My follow-up question has to do with Europe and the trends you're seeing throughout the quarter in the European theater. You mentioned more in Tvilum continuing, that the end markets are soft and you also mentioned Hansgrohe with some nice share gains. But are you seeing any meaningful deterioration in the European demand picture, or is it kind of the same old, same old at this point?

I would say for cabinets, it's probably deteriorated a bit. That tends to a be a little bit higher particularly. We go to the U.K., there's a lot of austerity measures in place. We have tended to serve what is called public housing over there, which is really like new construction here. And in terms of our ready-to-assemble Tvilum operation, demand has been down in virtually all of their markets. So I think there's -- that tends to be a little bit more of a discretionary purchase as well. When it gets to plumbing for Hansgrohe, we continue to do a great job of global expansion. We're seeing a lot more pressure from a mix standpoint, as consumers seem to be trading down a little bit for lower price points. And then as we enter some of the emerging markets, that tends to be at a little lower price point as well. Yes, I wouldn't say necessarily, I mean, it's always been competitive. And I don't know that I would say it's ratcheted up any more so than it has been in the past. But they've continue to do a very good job from that perspective. I mentioned our U.K. window business, we continue to take share there. And as I mentioned, we've got a really neat opportunity coming up that we think we're going to win, and we'll be able to talk a little bit more probably in February. But other than that, that pretty much covers the landscape, I think.

Yes, Sam, I would add to Tim's comments that if you think about our exposure to Southern Europe, where a lot of the trouble seems to be focused, that we don't have a heck a lot of concentration down there. It's probably, overall, less than 2% of our overall sales. So not a big exposure there whatsoever. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: And if I could sneak one little question and last one then, if you're assuming flat housing starts market next year or flattish, does that affect your goodwill impairment test at all?

Well, let me make sure I clarify that, Sam. We have not given formal guidance for next year. What I did mention was that we are challenging our Installation business and our North American cabinet business to plan for an environment that does not show any lift on the macro side. So we're pushing them very, very hard to see what we can do to get to breakeven in an environment like that. As I mentioned, if we get to that 700, that is the blue-chip consensus. And again, we'll talk about our thoughts in February. That would certainly help that process greatly, but we're really pushing our guys to assume the same kind of environment in those 2 businesses that have been the most problematic for us relative to performance.

We'll take our next question from Ivy Zelman with Zelman & Associates. Ivy Lynne Zelman - Zelman & Associates, Research Division: Just curious on your cash flow. I noticed in the presentation, you talked a lot about the working capital, the percent of sales. But can you tell us what your actual cash flow before CapEx was? And then just looking at that cash flow, I noticed you've got -- you're $800 million, just off the 6% notes coming due, and I know you talked about in the past that you'd refinance half of it and pay off the other with cash. Is that still the expectations and timing of that? So the first question relates to actual cash flow from operations for the quarter and then the timing of the refinancing, or is that still the plan, when you're going to pay half off with cash?

Yes, the cash flow will be available, Ivy, when we issue the Q and that should be -- what, John, late this weekend?

Either late Thursday, early Friday, Ivy.

Yes, we'll have that out. And then yes, we still intend on the $800 million that is due next -- what, August?

July.

July, to hopefully refi about $400 million of that, and then use the $400 million in terms of internal cash to pay that down. Ivy Lynne Zelman - Zelman & Associates, Research Division: Okay. And just curious, is there a reason why you don't want to talk about cash flow from operations on the call? I know that you say it's going to be in the Q, but just curious with that...

The Q's not finalized at this point. Ivy Lynne Zelman - Zelman & Associates, Research Division: I see, okay. My other question relates to the 4 divestitures and installation services, and I think the 4 plant closures in windows. I think we've been in this downturn a very long time, and a lot of us have questioned you on whether or not you'd stay in the Installation Services business given the continued losses. And it seems to me that now, at this stage of the downturn to first be deciding to divest out of those non-core Installation Services businesses is a bit surprising because you've stuck with it this long. It seems a little bit of a late decision. So what happens at the board meeting with the directors that you now decide after all this time to do it, when it could have been done years ago? And, really, the same thing within windows, I mean, closing 4 plants this year, the year ago, the same situation, we exited that. And windows were doing better right, I guess, with the tax credit. But it just seems like there's a lot of things that you're doing now that could have been done earlier. So what I'm trying to better understand is there even more stuff that can be done that is not being done like selling more of the installation services? So I'm a little bit surprised about that into some of these late-stage restructurings.

Yes, as to your question as it relates to the Contracting Service business, Ivy, we've got a new management team on the ground that basically has been in place now for a little less than a year. And as you might remember last year, we talked a little bit about rationalizing some of the diversified products that we installed. Basically, at the businesses that we're talking about here, are not really core. We've tried to simplify that business immensely. We've put in a new ERP system and these businesses, given their product mix and what they do kind of fall outside of that area, if you will. So from our standpoint, as we looked at opportunities going forward, didn't really feel like they -- we're going to have a lot. We also had a couple of -- on the commercial drywall side, we had a couple of contracts that we recently completed. And those businesses in 2010, in aggregate, were basically profitable as well. And as we think about the market going forward, the opportunities that we have from an installation side, driven more by the installation install, we really think it makes a whole lot more sense to get out of those at this point in time. And again, with the new management team, that was their feel, and we certainly support that. On the windows side, that really is a result of our perspective of the Western market going forward. We have had several plant closings previously in the window category. But basically, given some of the supply chain work we're doing, some of the work particularly around logistics, distribution and freight, our feeling is that we can service that market with the 6 remaining plants, again, and do that in a way that maintains good lead times as well as service levels. Ivy Lynne Zelman - Zelman & Associates, Research Division: No, no, I understand all that and I think it makes sense. I just know that when you guys were getting into installation services, you wanted to have diversity within the market, you wanted to be installing everything and not just limited to what you made. And so -- and also within the windows business, of course, you want to rationalize cost, but a lot of that seems like it's being decided today. So what changed today versus -- and it sounds like new management in Installation Services, is there a new management in windows?

No, no. We've got the same gentleman who's running that business. He's been there for about 3 years. But, really, in terms of our perception of the Western market on a longer-term basis, we don't see a lot of upside, I guess, just in terms of where we are today versus where we might be a couple of years down the road. And as I mentioned, earlier, if we did decide that we needed another manufacturing location going forward, a couple of years out, it's not that difficult to put one in. But it's really probably driven more by our perception of what we think the demand in that area of the world is going to be over the next couple of years.

We'll go next to Michael Rehaut with JP Morgan. Michael Rehaut - JP Morgan Chase & Co, Research Division: First question on the cabinets, appreciate the comments about planning for flat next year and a lot of initiatives. I was wondering if you could kind of break down -- I mean, so far this year, excluding the structuring charges, you're a little less than $80 million negative. I was hoping to kind of break down at least on a year-to-date basis, what the negative mix and price/commodity relationship, how that impacted, also the positive benefits of the profit improvement programs? And what things can change potentially if you look at that negative $80 million going forward into 2012?

Yes, in terms of profit improvement programs, Mike, related to cabs on a year-to-date basis, we're in about $30 million, roughly. And that would project -- as we said earlier in the year, we expect to be somewhere around $40 million to $45 million in that particular segment. So they continue to do a nice job there. In terms of negative price/commodity, we're probably looking at a little less than $10 million in terms of impact. I think we had about $5 million in the second quarter and we did comment on that. We've had a little bit in the first quarter and a little bit in the third, but not huge numbers. And in terms of the rest of your question, going forward, we have taken a lot of cost out and as you know, we've completed a lot of initiatives this year. We've completed the common architecture program, ERP system implementation, also the exit of the ready-to-assemble business, as well as the integration of the 2 businesses continuing to be on track. We do anticipate some additional profit improvement next year from a cost-reduction standpoint that I would guess, just if we look at -- and again, we haven't gone through the plan yet, but my sense is it would probably be similar to what we've done this year, somewhere in that $40 million to $50 million range, where they've been the last couple 3 years. So I think that covered most of your question. If there's anything that I didn't get to, maybe you can repeat that. Michael Rehaut - JP Morgan Chase & Co, Research Division: No, no, that's very helpful. And I guess the second question just to move to installation, where you are doing some important changes. I was wondering if you could give perhaps an idea on a pro forma basis, what is the non-insulation portion of the business, let's say, what would it be as a percent in terms of top line, following these divestitures? And if the remaining non-installation businesses are negative as well, I think you mentioned one was positive, but are there others or -- that could be identified for further divestiture or some type of restructuring that continue to get that business back to profitability?

Yes. The way I would think about that, Mike, is that the likelihood is that there maybe -- as we continue to work that, there maybe other branch location opportunities that I would say are more likely than to focus on a particular product group. We have rationalized down to 6 core products: installation, fireplaces, gutters, garage doors and then what we call after paint, which includes mirrors, closet organizers, tubs and things of that nature. So we're, I think, in a pretty good spot now relative to diversified products. My sense is that installation, again, without factoring in the businesses that we're exiting, probably represents about 2/3 of what we installed. Donnie, does that sound about right?

That sounds about right.

Yes, about 2/3. We've -- we're getting out of the commercial side. We've got some commercial drywall that was into the framing that was into that $100 million that I talked about. And we've seen some really nice growth, Mike, on the retrofit side. As I mentioned, we folded WellHome into the Contracting Service business branches and we really think that those capabilities and lead generation, et cetera, et cetera, should put us in a position to continue to grow the retrofit side. That's been pretty good business for us. I think that's probably up to maybe 12%, maybe 15% of our top line at this point in time. So we've seen some real nice growth there. Michael Rehaut - JP Morgan Chase & Co, Research Division: I appreciate that. One last question if I could sneak it in. The Other Specialty had a good bounce back in margins after 3 quarters that were pretty disappointing. There's a little bit of lift in sales in 3Q. But even in 4Q '10 with the similar amount of sales, you only had a 2% margin. So what's been going on there? Is it sustainable? Is it -- was this more of a price/commodity lag issue, or are there some identifiable changes that we can look to a mid- to higher-single-digit type of margin level going forward?

Well, the biggest change, Mike, that I would mention to you is that we have launched a couple of new products. Obviously, we talked about some of the cost reductions to the plant closures. But we also have got less rebate hitting us in terms of our product offerings. We had a positive price/commodity relationship in the quarter in that segment of about $3 million. And most of that is driven by a reduction in rebates that have been sort of part of the pricing landscape, if you will. So my sense is that if we can continue to maintain that discipline going forward, that ought to continue to help the bottom line.

We'll go next to Nishu Sood with Deutsche Bank.

First question I wanted to ask was on the Milgard. You've mentioned that your changes to the way that you're perceiving the Western markets as the main rationale for the changes there, the plant closures, what about the glass business? Getting out of that business altogether, were there other options available? And so what was the rationale specifically on that?

Yes, we've been doing a lot of supply-chain work, Nishu, as we mentioned. And our feeling was having our own glass manufacturing capability, tempering capability, if you would, didn't really make a whole lot of sense relative to some of other alternatives. And my sense is we'll end up saving up a little bit of money by moving in that direction.

Got it. What were the sales roughly in the glass business?

They were de minimis. I think less than $5 million, as I recall, $2 million, $3 million.

Got it. And just the second question on the hedging losses. Now this is something new that you're highlighting in terms of creating volatility in your results. So I just wanted to get a sense of -- have the hedging strategies changed, let's say, in the last year or so? Was this more of a one-off event, or should we expect this to become more of a, perhaps, more of a common feature?

Nishu, we've been in the hedging program for over a year now, and just -- maybe that's the levels for everyone, how this works, is because -- in fact, we're hedging our copper and zinc. It's going to our plumbing products in the form of brass, and this is not a brass market. We don't get the hedge accounting treatment on this. So we have to mark-to-market our contract on copper and zinc at the end of every period. So as you think about copper prices for the third quarter of 2011, on average, per pound, they were up 24% versus the third quarter of 2010. Though at the end of the quarter, they fell, they came off their historic -- or near historic highs, and it came down pretty dramatically on the period-end date. So it's a mark-to-market to a relatively low number. That said, copper since that point in time, is up about 10% since the end of September. As -- so we don't want to commit in copper price of -- metal prices will tend to rise more than fall. So if this does occur, we should recognize gains on these contracts in future periods. So overall, if you think about how much we had right now, as I've said, we got into this last year a little bit. And overall, less than 20% of our metals consumption is currently hedged.

We'll take our last question today then from Bob Wetenhall with RBC.

. Just wanted to touch base on your SG&A spending at around $1.6 billion a year. Just assuming your outlook for housing remains kind of flattish into 2012. Are you going to try to grow margin performance by cutting SG&A? Do you think there's room to do that?

Well, yes, I think there's always room to improve and we certainly have -- well, I think we made a little bit -- had a little bit of leverage in the third quarter on SG&A. But there are a couple of aspects there that I think are kind of important to understand. We do have service organizations. We've got -- at Behr, we've got a large sales service force that is in the field, and they tend to be a fixed number, if you will. We also have the same thing in terms of Masco retail sales service support for Lowe's, and we have a sales service support for Home Depot as well. So irrespective -- and generally, those guys are in the stores, working on our sets, our displays, et cetera. And so that's a little bit like kind of a large fixed cost. And the number of stores doesn't change dramatically, and revenue may be down or up a little bit. But that tends to be a cost that's fairly fixed across the enterprise. Having said that, we have leveraged our sales folks. You might remember last year that we talked a little bit in terms of the installation business that we -- we're maybe underrepresented in a couple of locations, where we didn't have the sales representation that we would have liked to have had. We did add some folks there. We've added some people on the Pro paint side. So as we pursue some of the new opportunities, Bob, my sense is there's a bit of an investment that we'll make in that area. You may have heard me comment earlier to a question, I think, from -- might have been from Sam or somebody about incremental spend on programs that were up about $20 million in the quarter versus last year. And my sense is, I think, on a year-to-date basis, that number might be around $50 million, John?

Yes, that's right.

Right around $50 million. So we do incur expense for new opportunities, sometimes those don't hit the top line in the same period. But you can rest assure that when you look at some of the headcount reductions that we've made across the company over the last several years, a lot of that has been in the SG&A category. And I think as things start to pick up a little bit, there should be some really good leveraging opportunities for us.

That's helpful. And just very quickly to touch on plumbing. I think sales were up 12% year-over-year. I know some of that has an FX component, but your operating margin was roughly 300 basis points lower. Could you just give us the breakdown of the margin contraction because I was surprised that you didn't get more benefit from sales leverage out of it?

Well, yes one of the key items there, Bob, you might not have caught this is that, that metals hedge that John just talked about is in that segment totally. And if you factored out the hedge impact from both years, last year, we had $4 million of gains, this year, $10 million of loss. You'd be comparing 14% last year in the third quarter to 13.3% this year. And so we'd only be down 70 basis points in the segment. And that is really driven primarily by mix, which I think I mentioned was about $13 million negative in the quarter versus last year. And also some program costs that, as I recall, represented about $7 million. Okay. Thank you, Bob. And thanks to all of you for joining us today. We appreciate it and take care.

Ladies and gentlemen, thank you for your participation. This does conclude today's conference.