Welcome to the Masco Corporation 2008 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 Investor 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. These are cautionary reminders about the 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 analyst questions. If we are unable to get to your question during this call, please call the Masco Corporation Investor Relations’ office at 313-792-5500. I would now like to turn the call over to Mr. Timothy Wadhams, President and Chief Executive Officer of Masco.

Thank you for joining us today for Masco’s third quarter earnings call. I’m joined today by Donnie DeMarie, our Executive Vice President and Chief Operating Officer, and Richard Manoogian, our Executive Chairman. We’re going to go through the slide presentation so if you would please move to slide number 3 please. Obviously in the operating environment we’re in the third quarter was another challenging quarter for Masco. Our sales from continuing operations were down 16% in the quarter. Earnings per share were $0.10 versus $0.56 in the third quarter of 2007. Gross margins declined in the quarter 270 basis points. SG&A as a percent of sales was up 200 basis points to 17.9%. On the plus side if you will, we continue to do a good job of balance sheet management, working capital as a percent of sales for the third consecutive quarter, mirror the prior year. We did announce in the quarter as we indicated previously that the Board increased our dividend for the 50th consecutive year. That was announced in September. We also completed the divestiture program that we communicated early this year generating $28 million of proceeds in the third quarter, $174 million for the entire plan. Importantly we end the quarter with $1 billion of cash on hand and significant unused bank lines. If you would flip to slide number 4 please. As I mentioned, sales were down 16%. We continued to see significant softening related to new home construction. Housing starts were off in excess of 33%. But more importantly in the quarter we saw a significant slowdown in European markets and a continued decline in North America for consumer spending. Sales to our key retail customers were down 11% in the quarter and that’s the third straight quarter we’ve had double-digit declines in terms…

(Operator Instructions) Our first question comes from analyst for Budd Bugatch - Raymond James.

You talked Tim about sales falling off at the end of September and continuing to be difficult in October, which unfortunately is a sentiment we’ve heard echo from a lot of our other consumer oriented companies. Specifically in regard to key retailers, could you put some numbers behind that for us? What were the trends like in September versus the quarter and did it actually worsen in October or how should we think about that?

I don’t really have any specific numbers around that for you but I would say that what we saw in the second half of September pretty much across the board from a repair/remodel standpoint has continued into October. The one exception there might be paint. Paint was a little bit stronger in October than it would have been in late third quarter. But otherwise pretty much the same kind of scenario. Again as we said before, October pretty well tracks with the 20% decline that we estimate for the fourth quarter at this point.

I think you said earlier bad debt expense was $6 million in the quarter. I believe on the last call you had said you had internally planned for around $20 million for the year. Is that still the case and could you maybe comment on the financial health of your customers?

Before Donnie talks a little bit about what we do to monitor bad debt, bad debt was up about $6 million in the quarter. Originally this year we anticipated that our bad debt expense would be pretty comparable to 2007. We originally estimated on the builders’ side of the business that we’d be around $22 million and on a company-wide basis, I’m not sure we gave that number out, but I think we estimated at that point that we would probably be around $26 million to $27 million. Those are pretty comparable with where we ended up last year. At this point in time it looks as though on the builders’ side of the business we’ll be around $24 million or $25 million in total and that from a company-wide standpoint we’ll be around $34 million or $35 million. That would be about a $2 million increase on the builders’ side of the business and about a $7 million increase all of which took place pretty much in the third quarter. I’ll let Donnie talk a little bit about what he and our CFO John Sznewajs do on an ongoing basis to monitor our receivables with our builder customers.

I just wanted to say that John Sznewajs, the CFO, and I review monthly the top 100 builders’ accounts receivable portfolio and are very much engaged to look at their credit worthiness. Our business units are focused on it as well as our group president. It’s a difficult environment. We have seen an increase in some bad debt exposure but we think we’ve managed it well and think we have it under control.

I would say too that we deal with builders of all size and deal with a very large number of builders so we don’t have any real substantial concentration in any one particular builder from a receivables standpoint. So that’s pretty well dispersed in terms of any kind of risk management there.

Our next question comes from Michael Rehaut - J.P. Morgan.

The first question is just on the restructuring actions. You kind of summarized what you’ve done more cycle to date and said that you’re going to take about $70 million now for the full year in terms of expense. There are kind of two parts to this if I could as my first question. One. What did you do in the third quarter itself in terms of actually closing down plants and branches? If you look at the $70 million that you’re spending this year, what do you expect that to result in terms of cost savings and when would you expect to see that hit?

In the third quarter we did announce the mothballing of the Ocala plant in our cabinet group as well as the closure of the Adrian plant in our builder cabinet group. Again that will be phased in I think late first or early second quarter of next year. We did recognize some costs associated with that. In the window business we had one plant closure there and the redirection of another plant to a distribution center. So we’ve got that activity going on. Then in Europe we had as I mentioned particularly in the plumbing segment several actions to address headcount as well as manufacturing and distribution footprint. All those took place in the third quarter. There’s typically a lag effect in terms of when we see the benefit. We have not at this point done anything to necessarily quantify when we would expect to see that going forward but rest assured when we look at these activities we do look at them from a savings standpoint. The best example we can give you is when you look at our plumbing business. I think investors have been pleased as we have with the performance of plumbing over the last three or four quarters from a return on sales standpoint. As you know we got much more aggressive in plumbing much earlier than some of our other businesses because even when business was pretty good a couple years ago we weren’t performing at a level that we anticipated or really expected in the plumbing segment. We’ve talked a little bit about some of those changes. So you’re starting to see that flow through the system at this point in time. But we would expect to update investors probably sometime next year in terms of some of the changes that we’ve made. Donnie has talked in the past and may want to talk a little bit about some of the modifications we’re doing in our cabinet manufacturing as well as some of the activity that’s going on in the installation business.

MCS and particularly our installation segment continue to re-evaluate its footprint as well as its product portfolio and those activities are ongoing, and they will continue to be ongoing. As the market continues to find new loans especially on the housing side, it really forces different decisions and we’re being very careful to make decisions that make sense today but don’t impact our ability to create some incremental leverage on the way back up. They’re getting difficult but we’re trying not to leave markets and really leave intact an organization that we think we’re going to be able to capitalize on our way up. On really the supply chain, when I look at our manufacturing footprint as we’ve talked about before, we really see this as being able to build what we’re calling flexible but scalable supply chains. Instead of picking a housing start number and building our capacity to that number, we’re really looking at a range. As we’ve communicated previously, we see that sweet spot for us between $1.2 million and $1.8 million and be able to optimize our performance in that range. So we’ve challenged our group to look at and think about capacity differently. Some of the activities going on, we talked about the builder cabinet group where we’ve adopted a common architecture and are moving toward being able to build both our quality and Merillat brand in any plant within the group which has allowed us to take some of the actions that we recently have taken. We also are working to finish the orders so we have less dependency on moving components around. It makes a lot of good sense. We’re doing some very similar at Milguard where we’ve announced a couple of closures in the North American window facility and starting to look at that production capacity a little bit differently. So we’re excited about the activities that have taken place already and we see that we still have more work to do and more opportunity.

To that point we will continue to assess our business and are continuing to assess our business given the dramatic declines we’re seeing in volume. I wouldn’t want you to think that there won’t be some additional actions that we will certainly be looking at going forward. The other thing is that as we said before and as Donnie alluded to, it’s tough. We’ve got to address the current market conditions but we’ve got to make sure that we’re in a position from a long-term perspective that we don’t lose opportunities when the markets return. We don’t want to do something today that saves us a dollar that might cost us $2 or $3 when the markets come back at some point down the road.

Along the line of that thought process in terms of step-by-step but not to use the political phrase a scalpel but not a hatchet, can we still expect this moderate improvement in installation services? You had a slight loss in the first quarter, scrapped back into marginal profitability in the second, and it’s a little bit more in the third. Just seeing that continuing to modestly improve and not necessary a step function back into a high single-digit or low double-digit?

I think what’s happened at installation services is that we had the right forecast in the housing market for really the first seven or eight months was really stable at a lower rate. They’ve been able to catch up. What you saw in installation services is they’ve been able to adjust their footprint and their product portfolio to meet their demand. The problem we have going forward is we have a significant headwind going forward and that’s that we see another leg down in housing. How far down, we’re still really going through our process of determining what the start level looks like or at least our projection looks like in ’09. I would anticipate that as we go from our current projection of 900,000 to 1 million for ’09 and come out with some new guidance related to where we think housing’s going to be in 2009 that those will create new challenges for installation services because we’ll be once again having to assess that footprint and product portfolio to really adjust to a much lower housing start number. If housing starts continue to go lower at least as we see them directionally going today for next year, I would expect that to create some challenges for the installation services group to then adjust our footprint once again.

On the covenants you mentioned that the net worth covenant test was 70% of equity, am I to understand, and if I just did that calculation and you come up with about $2.6 billion, is that only a $600 million cushion? I thought you said a $900 million cushion. Am I looking at that right?

Ys. What that basically is, and again I don’t have the covenant analysis right in front of me, but essentially what happens is that at the end of the year we reset that target at 70% of ending net worth. That would have been set at the beginning of this year. The reason we had that provision in is because of the share repurchase program to kind of take that into account. But again based on what I saw just recently we had about $900 million of cushion at the end of 9/30.

Isn’t 70% of $3.7 billion more like $2.6 billion?

Yes, if that’s the way the calculation works but I don’t have the actual account right in front of me.

Maybe we could go over that offline.

I guess it goes back to 2006. What we could do is we could tighten that up a little bit for you on a subsequent call. But $900 million is the right number at this point.

Our next question comes from Ivy Zelman - Zelman & Associates. Ivy Zelman - Zelman & Associates: Two easy quickies and then a bigger one. Hansgrohe in the quarter, roughly what percent of the profits? Was it more than 2/3 of plumbing? Secondly cash. The $1 billion of cash that you have on hand, how much of that is tied up in Europe that you wouldn’t be able to access? And three, your impairment on goodwill analysis related to the $4 billion. How much of that is related to MCS and what in terms of the analysis would you do to test if the goodwill needs to be charged off?

First of all, we wouldn’t be giving a percentage relative to Hansgrohe but it is a major contributor to the segment as is Delta faucet. We do have some businesses in that segment that aren’t contributing a lot and again we mentioned some of the restructuring charges related to those in terms of the plumbing segment. Second relative to cash, basically in the $1 billion we estimate that we need about $350 million of cash to both operate the business and recognize some of the cash that is somewhat constricted in terms of European cash. We would have access on that basis to about $650 million but again we do have unused bank lines if there is a temporary issue relative to cash as we go into ’09 for example where working capital might ramp up in the early part of the year. I’m not really overly concerned about that. In terms of the impairment test question that you asked, we have about $1.8 billion of goodwill associated with the installation business. Total goodwill on our balance sheet is about $4 billion and we have $1.8 billion as I said related to installation. Really the key driver in terms of analyzing that will be the five-year forecast that we put together and we run that through a discounted cash flow model. So in terms of how we look at that, as we kind of project out it’s obviously going to be important but my sense is that as we look out to 2012 or 2013 our feeling would be; and again I don’t have those assumptions in front of me right now; but we ought to be looking at a much more normalized situation in terms of new home starts. I would guess at that point we’d be somewhere in the 1.3 million to 1.5 million range and obviously hopefully a much more robust situation relative to the consumer.

Our next question comes from Analyst for Peter Lisnic - Robert W. Baird & Co., Inc. Analyst for Peter Lisnic - Robert W. Baird & Co., Inc.: Can you guys just talk about what’s in plumbing? Is there a currency benefit there on the margin? And just with the dollar appreciating as much as it has in the last 60 days, how much of that is what’s happening to your fourth quarter outlook or for next year?

Margins are not impacted by currency. Typically the P&L is translated at an average currency rate for the quarter. It’s weighted by month. But typically your sales and your profit tend to come across at the same translation when you translate into foreign currency. In terms of the fourth quarter, we do have based on where the Euro is today and we also have the English Croner and Pound related businesses but those are relatively stable. But the Euro is down about 11% today versus the average rate for last year’s fourth quarter. So that would contribute probably somewhere around $50 million of decremental sales in the fourth quarter if that stays where it is.

Is there an operating profit impact to that falling off?

Yes. That would be at the normal margin for our European businesses and those margins have tended to be, even though they were down in the third quarter, around 10%. If we lose about $50 million of sales related to currency translation, we would drop about $5 million of operating profit on that basis. Analyst for Peter Lisnic - Robert W. Baird & Co., Inc.: On the comment about pricing pressure and your comment about commodity costs continuing to go up in the third quarter, with commodity costs coming off a bit has your outlook either for the fourth quarter or for ’09 changed a little bit?

When we think about last year, we still are experiencing higher commodity related costs and that’s particularly true in terms of petroleum based inputs for paints and stains as well as resins for vinyl windows. So that continues to be somewhat of a challenge even though oil is down. Typically there’s a couple of quarter lag for us to see the benefit if you will of lower commodity related costs. We currently continue to pursue pricing related to cost increases and I think sometimes we get a little hung up on just raw materials but obviously there are other aspects of the business, everything from insurance to freight and transportation and other expenditures that certainly work into that equation as well. It would be a couple quarters before we’d see any relief if commodities stay where they are today.

Our next question comes from Nishu Sood - Deutsche Bank Securities.

Just a follow up on the commodity cost issue. I was just wondering if we could get an update. You’ve given us some good quantification on that over time. I think it’s about $650 million or $700 million in cumulative commodity cost impact that you’ve described and pricing actions I think you’ve said have recovered about $500 million of that. I was just wondering if you could give us an update on those figures.

What you’re referring and for those of you listening what Nishu is referring to is that when we go back to the first wave of commodity cost increases in late ’04 and early ’05, as we said in the past our reaction time was relatively slow and we didn’t really get on top of that as quickly as we should have from a pricing/productivity/work with vendors standpoint. We have indicated that even though we were much more aggressive and much more timely in late 2005/early 2006 and believe t hat we have implemented probably on a gross basis $550 million to $600 million of price increases, we still had a negative carry of $150 million +/-. I would guess today we aren’t necessarily tracking that number like we did in the past but as we’ve said to you folks we’ve done we think a pretty good job of staying current. Now we’re still in the process as I said a second or two of continuing to pursue price increases in certain areas where we do have significant cost increases and will continue to do that but generally speaking there’s a little bit of lag but we are pretty much on top of it. I would say that there still is probably historically a negative carry for us. I’d be a little hesitant to want to quantify it now because some of that would have related to insulation costs. Some insulation costs have come down over time; our pricing’s come down. So there’s some balancing there. But there’s no question in my mind that we still have a bit of a negative carry and it’s probably $100 million to $150 million would be my guess.

On your business rationalization, the environment that has been the background for your business rationalization to date has been principally the housing downturn. More recently obviously you’ve seen an intensification of weakness in the US remodeling business and your European businesses. What implication does that have for your restructuring activities? In other words, does it imply additional cuts? Does it imply cuts or consolidations in perhaps different areas, less of focus on contractor services, more of a focus on other areas? How does that change your thinking on business rationalization?

As mentioned earlier, Europe is another area where we’ve seen some decline and we did talk a little bit about having about $9 million of restructuring related costs related to activities in Europe. I would also tell you that we’ve seen some fairly significant declines in our cabinet business at retail that have really extended over a couple of year period. We started to talk about consumers backing away from high ticket large repair remodel activities probably a couple of years ago so in our rationalization there has been a fair amount of work done on the retail cabinet group. We’ve also talked about plumbing in the past. I would say that I wouldn’t want to characterize or necessarily agree that most of what we have done has been driven by the change in new home constructions, it’s really been driven by a lot of factors including dissatisfaction with the performance of our plumbing related business. As you might recall, even when times were really robust from a top line standpoint our performance wasn’t where we needed to get. We have stepped up wherever it seems as though it makes sense and we’ll continue to look at our businesses across the board for process improvement activities, opportunities to improve process implementations, those types of things. So, I wouldn’t necessarily want to say it’s been isolated to the new homes side. Analyst One quick housekeeping questions, is that tax issue going to carry in to 2009 or will it end in 4Q?

No, it will not carry in to 2009 but I would want to mention to investors that with some of the new account rules there’s a lot of volatility in tax rates from quarter-to-quarter in terms of having to recognize what are called discreet items and so it gets a little bit tougher to actually forecast tax rates because you have to recognize certain things where in the past you could make some different judgments and kind of smooth those out. But they do affect quarter-to-quarter now. We would not anticipate being in the position, this is driven really more by the repatronization of earnings. Before the next question operator I would like to go back to a Mike Rehaut’s question earlier in terms of our calculation and Mike and for the rest of the group the way that calculation works is we take 70% of our net worth at the end of 12/31/07. That was $4.25, 70% of that is about $2.8 and we currently have $3.7 plus of net worth. That’s how we get to the $9 million. You might have been using a quarterly number when you were calculating the 70% would be my guess. Anyway, I just wanted to throw that out there.

Your next question from David Goldberg – UBS. David Goldberg – UBS: Tim, I was wondering if you could give us some more details, I know you were saying and I don’t mean to dwell on the commodity cost issue but you’re saying you were still pursuing increases in commodity costs and some price increases based on higher commodity costs. I’m just wondering if you can give us some more details and some more color? Can you get a little bit more specific on that? Then maybe with that talk about how successful you’ve been and how that’s changed over the past let’s say three or four weeks with what’s going on in the broader economy?

Well, we have been successful and as I mentioned earlier David going back in to early ’06 we’ve been very successful so for the last two and a half years I think we’ve done a good job there and I wouldn’t differentiate anything that’s taken place in the last couple of quarters. I’m not aware of anything that would suggest that we’ll be less successful going forward. We don’t like to talk about specific customers generally in terms of pricing but I think you can glean from some of the commentary we’re still at a situation where brass is at higher levels than it was last year at this point in time notwithstanding the fact that copper has backed off pretty dramatically. We also talked a little bit about petroleum based resins that go in to paints and stains as well as vinyl for windows. We’ve seen some steal price increases that affect our fastening tools. Again, there’s some things in Europe that would impacted commodities relative to glass. So, we continue to pursue those where we think they make sense and we’ll continue to do that. David Goldberg – UBS: I appreciate the color and then I guess the follow up to that is based on what you’ve seen historically, when we get a couple of quarters our and you start to see some of the benefit of declining raw material costs I think you commented on before it’s a couple of quarter lag. How much of that do you think historically you guy kept versus having to pass on?

That’s always an interesting conversation obviously with our customers and there’s a lot of facets to the relationship. We tend to focus on price quite a bit but there are other aspects when we look at advertising programs, promotional programs, those types of things. I think the other thing I mentioned earlier, we sort of started behind the eight ball if you will relative to having a negative carry relative to commodity costs so I think when we look at our cost structure today I think we’ve got a better opportunity or hopefully a very good opportunity to kind of hang on to the pricing that we currently have in place.

Our next question comes from Stephen East – Pali Research. Stephen East – Pali Research: If we looked at your cap ex for 2009 what would be the minimum required that you all would need to spend?

We’re going to finish Steve this year probably around $200 million give or take in 2008. I would guess the minimum that we would have to spend would probably be $140 million to $150 million just in terms of maintenance. There is some in there for ERP systems, a little bit of capital for that but I would say probably $140 million to $150 million is probably sort of a maintenance type level. Again, as we’ve said in the past, over the course of the last several years and I guess it’s kind of obvious given current market conditions but we have added new facilities in cabinets, paint, plumbing, windows and obviously we’re not running at a very efficient rate currently relative to that but we would continue to be in really good shape relative to bricks and mortar. Depreciation and amortization are about $240 million on an annual basis. Stephen East – Pali Research: What scenarios would you look at would you say have to occur for you all to seriously consider cutting the dividend and I realize that’s not a forecast. Just, what would have to unfold in your mind?

I think probably the biggest element to that Steve would be our perception of business prospects in 2010. We’re reasonably certain that 2009 is going to be pretty tough, especially the first half. If there is a stimulus package put in place at the federal level, a lot of us seem to think that’s a high probability, we think that would bode well obviously for the latter part possibly of 2009 but certainly in to 2010. But I think the key for us as we work our way through next year and again, as I mentioned earlier we expect to end with a healthy cash balance. Even though conditions are going to be tough next year I’d be really surprised if we don’t have positive cash flow before the dividend. Again, we’ll talk more about that in February but I think the real gating issue would probably be our perception of what 2010 looks like.

Your last question comes from Keith Hughes – Suntrust Robinson Humphrey. Keith Hughes – Suntrust Robinson Humphrey: To follow up on the last question, internally at Masco do you work on a three or five year planning process and does that occur at the end of each calendar year? How does the work.

We work Keith on a five year planning process and that really starts for us typically in the spring. We’ll start to work on that and again, we’ve really changed that process over the course of the last year or so putting a lot more emphasis on strategic planning as opposed to in the past we spent an awful lot of time working on the budget so we’ve kind of flipped that upside down, the budget for the coming year with a lot more emphasis on strategic opportunities, trying to identify out of the box thinking for breakthrough opportunities and that type of thing. So, that process really starts in the spring and kind of cumulates in the fall with the delivery of that plan and review of that plan typically in November. Keith Hughes – Suntrust Robinson Humphrey: To follow up on the last question, as you develop these plans do they come with a view point that you’re going to under earn the dividend in 2010 based on market factors? Even though you could pay it you could still in a potential scenario under earn it. Would that be enough for the board to reconsider the dividend level?

Well, if we are in a cash position that allows us to continue to pay it, we’ll pull out basically all stops to try and make that happen. That’s something that we recognize that is very important to investors and I think from a cash management standpoint we would try to do what we can do. Again, given that investing in the business is our first priority to do everything we could to keep that going. Keith Hughes – Suntrust Robinson Humphrey: Because over the last five or six years you’ve done an excellent job returning cash to shareholders in a fairly balanced format. It appears as though cash is still going to be coming back to shareholders but it’s going to be all dividend for the next several years?

I wouldn’t exclude future share repurchases. I think that certainly at this point on a near term basis we think the dividend is more important than share repurchase but I would think as things get back in to a more normalized operating environment that we would certainly consider the application of our excess cash and keep in mind it’s always been about excess cash in terms of potential future share repurchases. I’d like to make just a couple of closing comments. Again, I’d like to thank everybody for joining us today. As we mentioned, we continue to aggressively manage our cost structure and have worked hard over the past several quarters to offset the impacts of the current economic environment on our business. While these actions have been difficult we expected additional actions to address current market conditions will be even more challenging as we balance what we can do to mitigate the impact of current market conditions on our near term results and the implications these actions may have on our long term performance. Although we expect market conditions over the next several quarters to be very challenging we continue to be confident that the long term fundamentals for the new home construction and home improvement markets are positive. We believe that our strong financial position including cash of over $1 billion at 9/30/2008, modest debt maturities until 2012, unused bank lines and our ability to generate strong cash flow together with our current strategy of investing in leadership brands, innovative growth, flexible and scalable supply chains along with a strong focus on cash flow to fund our dividends will allow us to drive long term growth and incremental leverage for our shareholders. In these challenging times we are extremely proud of the Masco team worldwide as they focus on driving solutions for our customers and value for our shareholders. As I mentioned earlier there’s a lot of excitement at Masco and we want to share that with you at the 2009 International Builders Show in Las Vegas. Our booth will showcase our brands supported by new products and innovative customer solutions. On Wednesday, January 21st we will host an investor vent. We have partnered with Professional Builder Magazine to design and build a green show house which will be built to the highest level of our environments for living program certified green. This home will feature many of Masco’s brands and sustainable products in a smart systems based approach to make consumers aware of what is possible today through a Masco branded solution. Think of this as a green coming out party. We’ll give more information out to you over the next few weeks and we hope that many of you can join us. Thanks again for being on the call.

That does conclude our conference for today. Thank you for attending and have a wonderful day.