First Quarter 2008
- Net sales from continuing operations declined 13 percent to $2.4 billion.
- Income from continuing operations was $24 million or $.07 per common share.
- The Company returned $184 million to shareholders through share repurchases and dividends.
- The Company had over $600 million of cash at March 31, 2008.
Taylor, Mich., (April 29, 2008) - Masco Corporation
(NYSE: MAS) today reported that net sales from continuing operations for
the quarter ended March 31, 2008 declined 13 percent to $2.4 billion
compared with $2.8 billion for the first quarter of 2007. North
American sales declined 16 percent and International sales increased one
percent. In local currencies, International sales declined eight
percent compared with the first quarter of 2007.
Income from continuing operations was $24 million or $.07 per common
share and $137 million or $.35 per common share in the first quarters of
2008 and 2007, respectively.
The first quarter of 2008 results were adversely affected by
significantly lower sales volume to the new home construction market and
a continued decline in consumer spending for home improvement products.
The first quarter of 2008 results included non-cash impairment charges
for financial investments of $26 million pre-tax ($.05 per common share,
after tax), currency losses of $10 million pre-tax ($.02 per common
share, after tax) and the negative impact of a higher tax rate of $.03
per common share. In aggregate, these items reduced the first quarter
of 2008 earnings by $.10 per common share.
The first quarter of 2007 results benefited from net gains related to
financial investments of $22 million pre-tax ($.04 per common share,
after tax).
As previously disclosed, in the first quarter of 2008, the Company
determined that several European business units are not core to the
Company's long-term growth strategy and accordingly, embarked on a plan
of disposition. The dispositions are expected to be completed within the
next twelve months.
The Company has been focused on the rationalization of its businesses,
including sourcing programs, business consolidations, plant closures,
headcount reductions and other initiatives. During the first quarters
of 2008 and 2007, the Company incurred costs and charges of $9 million
pre-tax ($.02 per common share, after tax) and $25 million pre-tax ($.04
per common share, after tax), respectively, related to these
initiatives. Since late 2006, the Company has aggressively reduced its
cost structure including closing 11 manufacturing facilities, reducing
headcount by 15,000 (which exceeds 25 percent of North American
headcount) and reducing installation branches by over 20 percent.
Business conditions remain difficult in a number of the Company's
markets. The Company continues to estimate that 2008 housing starts
will decline an additional 25 to 33 percent, to a range of 900,000 to
one million units, compared to 1.3 million units in 2007. (In the first
quarter of 2008, housing starts declined 30 percent). While the
Company's view on housing starts for 2008 has not changed since it
developed its earnings guidance earlier this year, the Company currently
believes that consumer spending for home improvement products and
demand for certain of the Company's International products will be
weaker than originally anticipated. As a result, the Company currently
estimates that its 2008 percentage sales decline will be low-double
digits to mid-teens compared to 2007. The Company's previous guidance
estimated that its 2008 percentage sales decline would be high-single to
low-double digits.
While forecasting future business conditions in the current uncertain
economic environment remains challenging, the Company currently believes
that 2008 earnings will be in a range of $.50 to $.65 per common share.
This compares to the Company's previous guidance of $.85 to $1.15 per
common share. The Company estimates that free cash flow (cash from
operations, after capital expenditures and before dividends) will
continue to be strong and approximate $640 million, compared to its
previous estimate of $700 million.
The Company's revised guidance also reflects increasingly competitive
market conditions for its services and products and increasing costs for
freight and logistics and for certain commodities, including metals and
commodities impacted by energy costs.
The Company's revised guidance includes the Company's estimate that its
full-year tax rate will approximate 48 to 49 percent (due to the U.S.
tax on the anticipated repatriation of low-taxed foreign earnings to
utilize favorable provisions of the U.S. tax law) which, compared to the
Company's normalized tax rate of approximately 36 percent, will reduce
earnings by approximately $.17 per common share. The Company's original
guidance estimated that the 2008 full-year tax rate would approximate
42 to 43 percent and reduce earnings by $.11 per common share compared
to the Company's normalized tax rate. The increase in the estimated
2008 tax rate reflects a decrease in the Company's projected 2008
pre-tax income from continuing operations. The Company estimates that
its tax rate on income from continuing operations for 2009 will
approximate 35 to 36 percent.
The Company's revised guidance includes: the first quarter of 2008
impairment charges for financial investments and currency losses; the
impact of discontinued operations; and the benefit of the first quarter
2008 share repurchases. These items, together with the expected
increase in the tax rate, decrease full-year estimated earnings by
approximately $.27 per common share, net. (Relative to these items, the
Company's original guidance reflected that earnings would be reduced by
$.11 per common share, based on the expectation that the full-year tax
rate would increase to 42 to 43 percent).
Although the Company expects market conditions in its industry, over the
next several quarters, to be very challenging, the Company is confident
that the long-term fundamentals for the new home construction and home
improvement products markets are positive. The Company believes that
its current strategy of dividend increases and share repurchases,
concentrating on organic growth, improving returns and generating
superior cash flow, together with the leveraging of the combined market
strength of its retail service, distribution and installation
capabilities, brands and scale, will allow Masco to continue to drive
long-term growth and value for its shareholders.
Headquartered in Taylor, Michigan, Masco Corporation is one of the
world's leading manufacturers of home improvement and building products,
as well as a leading provider of services that include the installation
of insulation and other building products.
A conference call regarding items contained in this release is scheduled
for Tuesday, April 29, 2008 at 11:00 a.m. ET. Participants in the call
are asked to register five to ten minutes prior to the scheduled start
time by dialing (913) 312-1226 (confirmation #4316668). The conference
call will be webcast simultaneously on the Company's website at www.masco.com
and supplemental material, including the financial data referred to on
the call and a reconciliation of non-GAAP information provided on the
call, will also be available on the website. A replay of the call will
be available on Masco's website or by phone by dialing (719) 457-0820
(replay access code #4316668) approximately two hours after the end of
the call and will continue through May 6, 2008.
Masco Corporation's press releases and other information are available
through the Company's toll free number, 1-888-MAS-NEWS, or under the
Investor Relations section of Masco's website at www.masco.com.
# # #
Statements contained herein that reflect the Company's views about
its future performance constitute "forward-looking statements" under the
Private Securities Litigation Reform Act of 1995. These views involve
risks and uncertainties that are difficult to predict and, accordingly,
the Company's results may differ materially from the results discussed
in such forward-looking statements. For an explanation of various
factors that may affect our performance, refer to our most recent Annual
Report on Form 10-K (particularly the "Risk Factors" section) and to
any subsequent Quarterly Reports on Form 10-Q, all of which are on file
with the Securities and Exchange Commission. The Company undertakes no
obligation to update any forward-looking statements, whether as a result
of new information, future events or otherwise. The Company believes
that certain non-GAAP performance measures and ratios that may be
contained herein, used in managing the business, may provide users of
this financial information with additional meaningful comparisons
between current results and results in prior periods. Non-GAAP
performance measures and ratios should be viewed in addition to, and not
as an alternative for, the Company's reported results under accounting
principles generally accepted in the United States. Additional
information about the Company is contained in the Company's filings with
the Securities and Exchange Commission and is available on Masco's
website at www.masco.com.
Media Contact
Sharon Rothwell
Vice President - Corporate Affairs
313.792.6028
sharon_rothwell@mascohq.com
Investor Contact
Maria Duey
Vice President - Investor Relations
313.792.5500
maria_duey@mascohq.com
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