Financial Data and Key Metrics Changes - For the second quarter, net sales decreased by 2%, but were in line with the prior year when excluding the Kichler divestiture and currency impacts [11][19] - Gross margins increased by 10 basis points to 37.7% [11][20] - Operating profit grew by $14 million to $413 million, with an operating profit margin increase of 100 basis points to 20.1% [11][20] - Earnings per share grew by 8% to $1.3 per share [11][20] Business Line Data and Key Metrics Changes - Plumbing sales increased by 4% in local currency, with North American Plumbing sales up by 5% driven by favorable pricing and volume [12][22] - International plumbing sales increased by 1% in local currency, with operating profit for the segment at $276 million and an operating margin of 21% [12][22] - Decorative Architectural segment sales decreased by 12%, or 4% excluding the Kichler divestiture, with overall paint sales down mid-single digits [13][24] - Pro paint sales increased mid-single digits, while DIY paint sales decreased high single digits [14][24] Market Data and Key Metrics Changes - The global repair and remodel market is anticipated to decline by low single digits in 2025 [16][30] - The company expects its sales in 2025 to decrease by low single digits, impacted by the Kichler divestiture, with currency having a favorable impact of approximately 1% [30] Company Strategy and Development Direction - The new CEO plans to engage with stakeholders to strengthen the brand portfolio and drive profitable growth [6][18] - The company aims to leverage digital strategies, including e-commerce and digital marketing, to accelerate top-line growth while maintaining strong margins [80] - The focus remains on achieving additional growth and benefiting from the structural factors of the housing market, such as aging housing stock and high home equity levels [17][18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the dynamic geopolitical and macroeconomic environment, which has impacted sales and margins [10][15] - The company anticipates continued pressure on DIY paint sales due to low existing home turnover and macroeconomic conditions [14][24] - Despite near-term uncertainties, the long-term outlook for repair and remodel activity remains strong [17][18] Other Important Information - The company has a strong balance sheet with gross debt to EBITDA at two times and $1.3 billion in liquidity [25] - The company returned $167 million to shareholders in the second quarter through dividends and share repurchases [26] - The company plans to invest approximately $175 million in capital expenditures and anticipates deploying at least $450 million towards share repurchases or acquisitions in 2025 [27] Q&A Session Summary Question: Allocation of $450 million to repurchases and acquisitions - Management indicated that acquisitions would be bolt-on in nature, focusing on core areas, with the majority of the $450 million likely allocated to share repurchases [34][36][38] Question: Sustainability of propane growth - The propane business has grown significantly, and management believes there is still room for growth, particularly through partnerships with The Home Depot [39][40] Question: Pre-buy activity in plumbing - Some pre-buy activity was noted in plumbing due to anticipated price increases, but overall channel inventories remain healthy [44][46] Question: DIY paint consumption trends - Management highlighted that existing home sales, which are at a three-decade low, are a major driver of softness in DIY paint sales [51][52] Question: Brand performance in plumbing - Upper premium and luxury brands are performing well, while mid-tier brands are experiencing some trade-down [58][60] Question: Mitigation actions against tariffs - Management is implementing cost reductions, pricing actions, and sourcing changes to mitigate tariff impacts, with a focus on reducing exposure to China [71][100] Question: Future tariff impacts - Management stated it is premature to estimate the impact of potential future tariffs, but they are focused on providing guidance based on currently enacted tariffs [84][86] Question: Working capital dynamics - The increase in working capital is largely driven by tariffs and material cost inflation, with a focus on lean inventory management [112][114]