Stock Information: MAS (NYSE): 36.82 +0.29 +0.78%
Volume 1,026,065
Market Cap
August 22, 2017
NAVIGATION

Masco Corporation Reports Second Quarter 2017 Results

July 27, 2017

Key Highlights

  • Sales for the second quarter increased 3 percent to $2.1 billion; in local currencies, sales increased 4 percent
  • Operating profit for the quarter grew 7 percent to $357 million; adjusted operating profit grew 4 percent to $357 million
  • Earnings per share for the quarter grew 9 percent to $0.49 per common share; adjusted earnings per share grew 30 percent to $0.60 per common share
  • Updating our 2017 earnings per share target range to $1.93 to $2.00 from $1.90 to $2.00 per common share
  • Board announces intent to increase annual dividend by $0.02 per share to $0.42 per share, beginning in the fourth quarter

LIVONIA, Mich.--(BUSINESS WIRE)-- Masco Corporation (NYSE: MAS), one of the world’s leading manufacturers of branded home improvement and building products, reported solid net sales and operating profit growth in the second quarter of 2017.

“We continued to execute on our strategic plan in the second quarter,” said Masco President and CEO, Keith Allman. “Our Plumbing Products and Decorative Architectural Products segments once again delivered strong results, and I am extremely pleased with the progress we have made in our Windows business. In our Cabinetry Products segment, we exited certain lower margin builder business and are now pivoting towards growth. Additionally, we continued our disciplined capital allocation by returning approximately $74 million to shareholders through dividends and share repurchases in the quarter.”

2017 Second Quarter Commentary

  • On a reported basis, compared to second quarter 2016:
    • Net sales increased 3 percent to $2.1 billion
    • In local currency, North American sales and international sales increased 4 percent
    • Gross margins improved 80 basis points to 35.8 percent from 35.0 percent
    • Operating margins improved 70 basis points to 17.4 percent from 16.7 percent
    • Net income was $0.49 per common share compared to $0.45 per common share
  • Compared to second quarter 2016, results for key financial measures, as adjusted for certain items (see Exhibit A) and with a normalized tax rate of 34 percent (36 percent in 2016), were as follows:
    • Gross margins improved to 35.8 percent compared to 35.2 percent
    • Operating margins improved to 17.4 percent compared to 17.1 percent
    • Net income was $0.60 per common share, compared to $0.46 per common share (which included $40 million, or approximately $0.08 per share, in debt extinguishment costs in 2016)
  • Liquidity at the end of the second quarter was approximately $1.1 billion
  • 1.2 million shares were repurchased in the second quarter

2017 Second Quarter Operating Segment Highlights

  • Plumbing Products’ net sales increased 3 percent (5 percent excluding the impact of foreign currency translation), driven by North America and international growth
  • Decorative Architectural Products’ net sales increased 5 percent with growth from builders’ hardware and Behr’s pro initiative
  • Cabinetry Products’ net sales decreased 4 percent (3 percent excluding the impact of foreign currency translation) due to the previously announced exit of lower margin business in the builder channel and lower sales in our United Kingdom cabinet operation
  • Windows and Other Specialty Products’ net sales increased 4 percent. Excluding the impact of foreign currency translation, net sales increased 7 percent, driven by strong sales of windows in North America

Outlook

“As we presented during our Investor Day in May, the demand drivers underlying our business are strong and very supportive of continued, long-term growth,” said Allman. “We are confident in our plans to leverage our strong brands, industry leading positions, and our Masco Operating System to capitalize on these robust, long-term demand drivers. We are pleased with our performance this year, and accordingly, we are updating our 2017 earnings per share target to the range of $1.93 to $2.00. Looking forward, we are committed to achieving our 2019 earnings per share target of $2.50 that we introduced at our Investor Day. Reflecting confidence in our plans and Masco’s outlook, our Board of Directors intends to increase our annual dividend by $0.02 per share to $0.42 per share, beginning with the quarterly dividend to be paid in the fourth quarter of 2017.”

About Masco

Headquartered in Livonia, Michigan, Masco Corporation is a global leader in the design, manufacture and distribution of branded home improvement and building products. Our portfolio of industry-leading brands includes Behr® paint; Delta® and Hansgrohe® faucets, bath and shower fixtures; KraftMaid® and Merillat® cabinets; Milgard® windows and doors; and Hot Spring® spas. We leverage our powerful brands across product categories, sales channels and geographies to create value for our customers and shareholders. For more information about Masco Corporation, visit www.masco.com.

The 2017 second quarter supplemental material, including a presentation in PDF format, is available on Masco’s website at www.masco.com.

Conference Call Details

A conference call regarding items contained in this release is scheduled for Thursday, July 27, 2017 at 8:00 a.m. ET. Participants in the call are asked to register five to ten minutes prior to the scheduled start time by dialing (855) 226-2726 (855-22MASCO) and from outside the U.S. at (706) 679-3614. Please use the conference identification number 36385520. The conference call will be webcast simultaneously and in its entirety through Masco’s website. Shareholders, media representatives and others interested in Masco may participate in the webcast by registering through the Investor Relations section on Masco’s website.

A replay of the call will be available on Masco’s website or by phone by dialing (855) 859-2056 and from outside the U.S. at (404) 537-3406. Please use the conference identification number 36385520. The telephone replay will be available approximately two hours after the end of the call and continue through August 27, 2017.

Safe Harbor Statement

This press release contains statements that reflect our views about our future performance and constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “believe,” “anticipate,” “appear,” “may,” “will,” “should,” “intend,” “plan,” “estimate,” “expect,” “assume,” “seek,” “forecast,” and similar references to future periods. Our views about future performance involve risks and uncertainties that are difficult to predict and, accordingly, our actual results may differ materially from the results discussed in our forward-looking statements. We caution you against relying on any of these forward-looking statements.

Our future performance may be affected by the levels of home improvement activity and new home construction, our ability to maintain our strong brands and to develop and introduce new and improved products, our ability to maintain our competitive position in our industries, our reliance on key customers, our ability to achieve the anticipated benefits of our strategic initiatives, our ability to improve our under-performing U.S. window business, the cost and availability of raw materials, our dependence on third party suppliers, and risks associated with international operations and global strategies. These and other factors are discussed in detail in Item 1A, “Risk Factors” in our most recent Annual Report on Form 10-K, as well as in our Quarterly Reports on Form 10-Q and in other filings we make with the Securities and Exchange Commission. The forward-looking statements in this press release speak only as of the date of this press release. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. Unless required by law, we undertake no obligation to update publicly any forward-looking statements as a result of new information, future events or otherwise.

 
 
MASCO CORPORATION
Condensed Consolidated Statements of Operations - Unaudited
For the Three Months and Six Months Ended June 30, 2017 and 2016
 
(in millions, except per common share data)
     
Three Months Ended June 30, Six Months Ended June 30,
2017   2016 2017   2016
Net sales $ 2,057 $ 2,001 $ 3,834 $ 3,721
Cost of sales 1,320   1,301   2,489   2,452  
Gross profit 737 700 1,345 1,269
 
Selling, general and administrative expenses 380   365   735   700  
Operating profit 357 335 610 569
 
Other income (expense), net:
Interest expense (153 ) (87 ) (196 ) (143 )
Other, net 51   5   54   4  
(102 ) (82 ) (142 ) (139 )
Income before income taxes 255 253 468 430
 
Income tax expense 84   90   147   148  
Net income 171 163 321 282
Less: Net income attributable to noncontrolling interest 13   13   23   23  
Net income attributable to Masco Corporation $ 158   $ 150   $ 298   $ 259  
 
Income per common share attributable to Masco Corporation (diluted):
Net income $ 0.49   $ 0.45   $ 0.92   $ 0.77  
 
Average diluted common shares outstanding 319   331   320   333  
 

Historical information is available on our website.

 
 
MASCO CORPORATION
Exhibit A: Reconciliations - Unaudited
For the Three Months and Six Months Ended June 30, 2017 and 2016
 
(in millions, except per common share data)
     
Three Months Ended June 30, Six Months Ended June 30,
2017   2016 2017   2016

Gross Profit, Selling, General and Administrative Expenses, and Operating Profit Reconciliations

 
Net sales $ 2,057   $ 2,001   $ 3,834   $ 3,721  
 
Gross profit, as reported $ 737 $ 700 $ 1,345 $ 1,269
Rationalization charges   5   2   6  
Gross profit, as adjusted $ 737   $ 705   $ 1,347   $ 1,275  
 
Gross margin, as reported 35.8 % 35.0 % 35.1 % 34.1 %
Gross margin, as adjusted 35.8 % 35.2 % 35.1 % 34.3 %
 
Selling, general and administrative expenses, as reported $ 380 $ 365 $ 735 $ 700
Rationalization charges   2     4  
Selling, general and administrative expenses, as adjusted $ 380   $ 363   $ 735   $ 696  
 
Selling, general and administrative expenses as percent of net sales, as reported 18.5 % 18.2 % 19.2 % 18.8 %
Selling, general and administrative expenses as percent of net sales, as adjusted 18.5 % 18.1 % 19.2 % 18.7 %
 
Operating profit, as reported $ 357 $ 335 $ 610 $ 569
Rationalization charges   7   2   10  
Operating profit, as adjusted $ 357   $ 342   $ 612   $ 579  
 
Operating margin, as reported 17.4 % 16.7 % 15.9 % 15.3 %
Operating margin, as adjusted 17.4 % 17.1 % 16.0 % 15.6 %
 

Earnings Per Common Share Reconciliations

 
Income before income taxes, as reported $ 255 $ 253 $ 468 $ 430
Rationalization charges 7 2 10
(Gain) from auction rate securities (1 ) (1 )
(Gains) from private equity funds, net (1 ) (1 ) (2 ) (1 )
(Earnings) from equity investments, net (1 ) (1 ) (1 )
Loss on extinguishment of debt 107 107
(Gain) on sale of business (49 )   (49 )  
Income before income taxes, as adjusted 311 258 525 437
Tax at 34% rate (36% for 2016) (106 ) (93 ) (179 ) (157 )
Less: Net income attributable to noncontrolling interest 13   13   23   23  
Net income, as adjusted $ 192   $ 152   $ 323   $ 257  
 
Net income per common share, as adjusted $ 0.60   $ 0.46   $ 1.01   $ 0.77  
 
Average diluted common shares outstanding 319   331   320   333  
 

Historical information is available on our website.

 
 

MASCO CORPORATION

Exhibit A: Reconciliations - Unaudited

Outlook for the Twelve Months Ended December 31, 2017

         
Twelve Months Ended

December 31, 2017

Low End   High End

Outlook

 
Net income per common share $ 1.81 $ 1.88
Loss on extinguishment of debt 0.22 0.22
(Gain) on sale of business (0.10 ) (0.10 )
Net income per common share, as adjusted $ 1.93   $ 2.00  
 

Historical information is available on our website.

 
 

MASCO CORPORATION

Condensed Consolidated Balance Sheets and Other Financial Data - Unaudited

June 30, 2017 and December 31, 2016

 

         

(dollars in millions)

 
June 30, 2017 December 31, 2016
Balance Sheet
Assets
Current Assets:
Cash and cash investments $ 992 $ 990
Short-term bank deposits 144 201
Receivables 1,231 917
Inventories 850 712
Prepaid expenses and other 89   114  
Total Current Assets 3,306 2,934
 
Property and equipment, net 1,080 1,060
Goodwill 797 832
Other intangible assets, net 156 154
Other assets 150   157  
Total Assets $ 5,489   $ 5,137  
 
Liabilities
Current Liabilities:
Accounts payable $ 960 $ 800
Notes payable 117 2
Accrued liabilities 615   658  
Total Current Liabilities 1,692 1,460
 
Long-term debt 2,967 2,995
Other liabilities 760   785  
Total Liabilities 5,419 5,240
 
Equity 70   (103 )
Total Liabilities and Equity $ 5,489   $ 5,137  
 
As of June 30,
2017 2016
Other Financial Data
Working Capital Days
Receivable days 52 50
Inventory days 63 57
Payable days 72 71
Working capital $ 1,121 $ 965
Working capital as a % of sales (LTM) 15.0 % 13.3 %
 

Historical information is available on our website.

 
 
MASCO CORPORATION
Condensed Consolidated Statements of Cash Flows and Other Financial Data - Unaudited
For the Six Months Ended June 30, 2017 and 2016
 
(dollars in millions)
       
Six Months Ended June 30,
2017   2016
Cash Flows From (For) Operating Activities:
Cash provided by operating activities $ 536 $ 433
Working capital changes (381 ) (243 )
Net cash from operating activities 155   190  
 
Cash Flows From (For) Financing Activities:
Retirement of notes (535 ) (1,300 )
Purchase of Company common stock (134 ) (168 )
Cash dividends paid (64 ) (63 )
Dividend paid to noncontrolling interest (35 ) (31 )
Issuance of notes, net of issuance costs 593 889
Debt extinguishment costs (104 ) (40 )
Issuance of Company common stock 1
Employee withholding taxes paid on stock-based compensation (27 ) (24 )
Increase (decrease) in debt, net 1   (2 )
Net cash for financing activities (305 ) (738 )
 
Cash Flows From (For) Investing Activities:
Capital expenditures (77 ) (79 )
Proceeds from disposition of business 126
Other, net 75   124  
Net cash from investing activities 124   45  
 
Effect of exchange rate changes on cash and cash investments 28 (9 )
 
Cash and Cash Investments:
Increase (decrease) for the period 2 (512 )
At January 1 990   1,468  
At June 30 $ 992   $ 956  
 
As of June 30,
2017 2016
Liquidity
Cash and cash investments $ 992 $ 956
Short-term bank deposits 144   135  
Total Liquidity $ 1,136   $ 1,091  
 

Historical information is available on our website.

 
 
MASCO CORPORATION
Segment Data - Unaudited
For the Three Months and Six Months Ended June 30, 2017 and 2016
 
(dollars in millions)
           
Three Months Ended June 30, Six Months Ended June 30,
2017   2016 Change 2017   2016 Change
Plumbing Products
Net sales $ 949   $ 923   3 % $ 1,812   $ 1,736   4 %
 
Operating profit, as reported $ 198 $ 188 $ 354 $ 317
Operating margin, as reported 20.9 % 20.4 % 19.5 % 18.3 %
 
Rationalization charges   4     6  
Operating profit, as adjusted 198 192

 

 

354 323
Operating margin, as adjusted 20.9 % 20.8 % 19.5 % 18.6 %
 
Depreciation and amortization 15   14   29   28  
 
EBITDA, as adjusted $ 213   $ 206   $ 383   $ 351  
 
Decorative Architectural Products
Net sales $ 653   $ 620   5 % $ 1,158   $ 1,113   4 %
 
Operating profit, as reported $ 141 $ 139 $ 242 $ 244
Operating margin, as reported 21.6 % 22.4 % 20.9 % 21.9 %
 
Depreciation and amortization 4   4   8   8  
 
EBITDA $ 145   $ 143   $ 250   $ 252  
 
Cabinetry Products
Net sales $ 251   $ 261   (4 )% $ 482   $ 497   (3 )%
 
Operating profit, as reported $ 30 $ 34 $ 46 $ 58
Operating margin, as reported 12.0 % 13.0 % 9.5 % 11.7 %
 
Rationalization charges   3   2   4  
Operating profit, as adjusted 30 37 48 62
Operating margin, as adjusted 12.0 % 14.2 % 10.0 % 12.5 %
 
Depreciation and amortization 4   5   8   10  
 
EBITDA, as adjusted $ 34   $ 42   $ 56   $ 72  
 

Historical information is available on our website.

 
 
MASCO CORPORATION
Segment Data - Unaudited
For the Three Months and Six Months Ended June 30, 2017 and 2016
 
(dollars in millions)
           
Three Months Ended June 30, Six Months Ended June 30,
2017   2016 Change 2017   2016 Change
Windows and Other Specialty Products
Net sales $ 204   $ 197   4 % $ 382   $ 375   2 %
 
Operating profit (loss), as reported $ 18 $ (2 ) $ 24 $ 1
Operating margin, as reported 8.8 % (1.0 )% 6.3 % 0.3 %
 
Depreciation and amortization 6   5   11   10  
 
EBITDA $ 24   $ 3   $ 35   $ 11  
 
Total
Net sales $ 2,057   $ 2,001   3 % $ 3,834   $ 3,721   3 %
 
Operating profit, as reported - segment $ 387 $ 359 $ 666 $ 620
General corporate expense, net (GCE) (30 ) (24 ) (56 ) (51 )
Operating profit, as reported 357 335 610 569
Operating margin, as reported 17.4 % 16.7 % 15.9 % 15.3 %
 
Rationalization charges - segment   7   2   10  
Operating profit, as adjusted 357 342

 

612 579

 

Operating margin, as adjusted 17.4 % 17.1 % 16.0 % 15.6 %
 
Depreciation and amortization - segment 29 28 56 56
Depreciation and amortization - non-operating 4   6   8   10  
 
EBITDA, as adjusted $ 390   $ 376   $ 676   $ 645  
 

Historical information is available on our website.

 
 
MASCO CORPORATION
North American and International Data - Unaudited
For the Three Months and Six Months Ended June 30, 2017 and 2016
 
(dollars in millions)
           
Three Months Ended June 30, Six Months Ended June 30,
2017   2016 Change 2017   2016 Change
North American
Net sales $ 1,660   $ 1,598   4 % $ 3,071   $ 2,948   4 %
 
Operating profit, as reported $ 330 $ 299 $ 569 $ 514
Operating margin, as reported 19.9 % 18.7 % 18.5 % 17.4 %
 
Rationalization charges   5   2   7  
Operating profit, as adjusted 330 304 571 521
Operating margin, as adjusted 19.9 % 19.0 % 18.6 % 17.7 %
 
Depreciation and amortization 20   19   38   38  
 
EBITDA, as adjusted $ 350   $ 323   $ 609   $ 559  
 
International
Net sales $ 397   $ 403   (1 )% $ 763   $ 773   (1 )%
 
Operating profit, as reported $ 57 $ 60 $ 97 $ 106
Operating margin, as reported 14.4 % 14.9 % 12.7 % 13.7 %
 
Rationalization charges   2     3  
Operating profit, as adjusted 57 62 97 109
Operating margin, as adjusted 14.4 % 15.4 % 12.7 % 14.1 %
 
Depreciation and amortization 9   9   18   18  
 
EBITDA, as adjusted $ 66   $ 71   $ 115   $ 127  
 
Total
Net sales $ 2,057   $ 2,001   3 % $ 3,834   $ 3,721   3 %
 
Operating profit, as reported - segment $ 387 $ 359 $ 666 $ 620
General corporate expense, net (GCE) (30 ) (24 ) (56 ) (51 )
Operating profit, as reported 357 335 610 569
Operating margin, as reported 17.4 % 16.7 % 15.9 % 15.3 %
 
Rationalization charges - segment   7   2   10  
Operating profit, as adjusted 357 342 612 579
Operating margin, as adjusted 17.4 % 17.1 % 16.0 % 15.6 %
 
Depreciation and amortization - segment 29 28 56 56
Depreciation and amortization - non-operating 4   6   8   10  
 
EBITDA, as adjusted $ 390   $ 376   $ 676   $ 645  
 

Historical information is available on our website.

Source: Masco Corporation

Masco Corporation

Investor Contact

David Chaika

Vice President, Treasurer and Investor Relations

313.792.5500

david_chaika@mascohq.com