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Masco Corporation Reports First Quarter 2020 Results

April 29, 2020

Key Results

  • Sales increased 4 percent to $1.6 billion; in local currency, sales increased 5 percent
  • Operating profit for the quarter increased 14 percent to $225 million; adjusted operating profit increased 11 percent to $228 million
  • Earnings per share from continuing operations increased 33 percent to $0.48 per share; adjusted earnings per share from continuing operations increased 24 percent to $0.46 per share
  • Returned $639 million to shareholders through share repurchases and dividends in the quarter
  • Liquidity at the end of the quarter was $1,767 million, including full availability on $1.0 billion revolving credit facility

LIVONIA, Mich.--(BUSINESS WIRE)-- Masco Corporation (NYSE: MAS), one of the world’s leading manufacturers of branded home improvement and building products, reported its first quarter results.

“We delivered strong top and bottom-line growth and expanded margins in the quarter while managing through the initial challenges we faced in addressing the COVID-19 pandemic,” said Masco President and CEO, Keith Allman. “I am extremely proud of how our people have responded and adapted to this rapidly changing environment. The entire organization has united to protect the safety of our employees and support our customers and communities, while still successfully running the business. Our focus remains on the health and safety of our employees, maintaining business operations, and executing on our plans to ensure continued long-term success for Masco.”

2020 First Quarter Commentary

  • On a reported basis, compared to first quarter 2019:
    • Net sales increased 4 percent to $1.6 billion; in local currency, net sales increased 5 percent
    • In local currency, North American sales increased 8 percent and international sales decreased 3 percent
    • Gross margins increased 10 basis points to 34.6 percent from 34.5 percent
    • Operating profit increased 14 percent to $225 million
    • Operating margins increased 120 basis points to 14.2 percent from 13.0 percent
    • Income from continuing operations increased to $0.48 per share, compared to $0.36 per share
  • Compared to first quarter 2019, results for key financial measures, as adjusted for certain items (see Exhibit A) and with a normalized tax rate of 26 percent, were as follows:
    • Gross margins increased 30 basis points to 34.8 percent compared to 34.5 percent
    • Operating profit increased 11 percent to $228 million from $206 million
    • Operating margins increased 80 basis points to 14.4 percent compared to 13.6 percent
    • Income from continuing operations increased to $0.46 per share, compared to $0.37 per share
  • Liquidity at the end of the first quarter was $1,767 million, including full availability on $1.0 billion revolving credit facility
  • Repurchased 14.2 million shares in the quarter
  • Plumbing Products’ net sales increased 2 percent (3 percent excluding the impact of foreign currency) due to strong sales of North American plumbing products
  • Decorative Architectural Products’ net sales increased 9 percent, driven by strong sales of paint and other coatings products

“We are taking actions to reduce our expenses and preserve our strong liquidity by reducing our variable costs, implementing a hiring and wage freeze, delaying non-critical capital expenditures, and temporarily suspending our share repurchase activity,” continued Allman. “While our near-term results will be impacted, with our portfolio of lower ticket, repair and remodel-oriented products, we expect demand for our products will be solid as we recover from the pandemic. We believe our work over the past few years to improve our portfolio and strengthen our balance sheet has positioned Masco very well to weather this storm and create long-term shareholder value.”

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; Kichler® decorative and outdoor lighting; and HotSpring® 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 2020 first 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 Wednesday, April 29, 2020 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 2137448. 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 2137448. The telephone replay will be available approximately two hours after the end of the call and continue through May 29, 2020.

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 “outlook,” “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 residential repair and remodel activity and new home construction, our ability to maintain our strong brands and reputation and to develop innovative products, our ability to maintain our competitive position in our industries, our reliance on key customers, the length and severity of the ongoing COVID-19 pandemic, including its impact on domestic and international economic activity, consumer demand for our products, our production capabilities, our employees and our supply chain; the cost and availability of materials and the imposition of tariffs, our dependence on third-party suppliers, risks associated with our international operations and global strategies, our ability to achieve the anticipated benefits of our strategic initiatives, our ability to successfully execute our acquisition strategy and integrate businesses that we have and may acquire, our ability to attract, develop and retain talented personnel, risks associated with our reliance on information systems and technology, and our ability to achieve the anticipated benefits from our investments in new technology. These and other factors are discussed in detail in Item 1A "Risk Factors" of this Report. Any forward-looking statement made by us speaks only as of the date on which it was made. 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 Ended March 31, 2020 and 2019

(in millions, except per common share data)

 

 

Three Months Ended March 31,

 

2020

 

2019

Net sales

$

1,581

 

 

$

1,513

 

Cost of sales

1,034

 

 

991

 

Gross profit

547

 

 

522

 

 

 

 

 

Selling, general and administrative expenses

322

 

 

316

 

Impairment charge for other intangible assets

 

 

9

 

Operating profit

225

 

 

197

 

 

 

 

 

Other income (expense), net:

 

 

 

Interest expense

(35

)

 

(39

)

Other, net

(16

)

 

(5

)

 

(51

)

 

(44

)

Income from continuing operations before income taxes

174

 

 

153

 

 

 

 

 

Income tax expense

33

 

 

35

 

Income from continuing operations

141

 

 

118

 

 

 

 

 

Income from discontinued operations, net

397

 

 

9

 

Net income

538

 

 

127

 

 

 

 

 

Less: Net income attributable to noncontrolling interest

8

 

 

11

 

Net income attributable to Masco Corporation

$

530

 

 

$

116

 

 

 

 

 

Income per common share attributable to Masco Corporation (diluted):

 

 

 

Income from continuing operations

$

0.48

 

 

$

0.36

 

Income from discontinued operations, net

1.44

 

 

0.03

 

Net income

$

1.92

 

 

$

0.39

 

 

 

 

 

Average diluted common shares outstanding

274

 

 

294

 

 

 

 

 

Amounts attributable to Masco Corporation:

 

 

 

Income from continuing operations

$

133

 

 

$

107

 

Income from discontinued operations, net

397

 

 

9

 

Net income attributable to Masco Corporation

$

530

 

 

$

116

 

Historical information is available on our website.

MASCO CORPORATION

Exhibit A: Reconciliations - Unaudited

For the Three Months Ended March 31, 2020 and 2019

(in millions, except per common share data)

 

 

Three Months Ended March 31,

 

2020

 

2019

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

 

 

 

 

 

 

 

Net sales

$

1,581

 

 

$

1,513

 

 

 

 

 

Gross profit, as reported

$

547

 

 

$

522

 

Rationalization charges

3

 

 

 

Gross profit, as adjusted

$

550

 

 

$

522

 

 

 

 

 

Gross margin, as reported

34.6

%

 

34.5

%

Gross margin, as adjusted

34.8

%

 

34.5

%

 

 

 

 

Selling, general and administrative expenses, as reported

$

322

 

 

$

316

 

 

 

 

 

Selling, general and administrative expenses as percent of net sales, as reported

20.4

%

 

20.9

%

 

 

 

 

Operating profit, as reported

$

225

 

 

$

197

 

Rationalization charges

3

 

 

 

Impairment charge for other intangible assets

 

 

9

 

Operating profit, as adjusted

$

228

 

 

$

206

 

 

 

 

 

Operating margin, as reported

14.2

%

 

13.0

%

Operating margin, as adjusted

14.4

%

 

13.6

%

 

 

 

 

 

Three Months Ended March 31,

 

2020

 

2019

Income Per Common Share Reconciliations

 

 

 

 

 

 

 

Income from continuing operations before income taxes, as reported

$

174

 

 

$

153

 

Rationalization charges

3

 

 

 

Impairment charge for other intangible assets

 

 

9

 

Pension costs associated with expected terminated plans

6

 

 

 

Income from continuing operations before income taxes, as adjusted

183

 

 

162

 

Tax at 26% rate

(48

)

 

(42

)

Less: Net income attributable to noncontrolling interest

8

 

 

11

 

Income from continuing operations, as adjusted

$

127

 

 

$

109

 

 

 

 

 

Income from continuing operations per common share, as adjusted

$

0.46

 

 

$

0.37

 

 

 

 

 

Average diluted common shares outstanding

274

 

 

294

 

Historical information is available on our website.

MASCO CORPORATION

Condensed Consolidated Balance Sheets and Other Financial Data - Unaudited

March 31, 2020 and December 31, 2019

(dollars in millions)

 

 

March 31, 2020

 

December 31, 2019

Balance Sheet

 

 

 

Assets

 

 

 

Current Assets:

 

 

 

Cash and cash investments

$

767

 

 

$

697

 

Receivables

1,142

 

 

997

 

Prepaid expenses and other

80

 

 

90

 

Inventories

756

 

 

754

 

Assets held for sale

 

 

173

 

Total Current Assets

2,745

 

 

2,711

 

 

 

 

 

Property and equipment, net

861

 

 

878

 

Operating lease right-of-use assets

171

 

 

176

 

Goodwill

518

 

 

509

 

Other intangible assets, net

264

 

 

259

 

Other assets

281

 

 

139

 

Assets held for sale

 

 

355

 

Total Assets

$

4,840

 

 

$

5,027

 

 

 

 

 

Liabilities

 

 

 

Current Liabilities:

 

 

 

Accounts payable

$

743

 

 

$

697

 

Notes payable

5

 

 

2

 

Accrued liabilities

756

 

 

700

 

Liabilities held for sale

 

 

149

 

Total Current Liabilities

1,504

 

 

1,548

 

 

 

 

 

Long-term debt

2,771

 

 

2,771

 

Noncurrent operating lease liabilities

157

 

 

162

 

Other liabilities

573

 

 

589

 

Liabilities held for sale

 

 

13

 

Total Liabilities

5,005

 

 

5,083

 

 

 

 

 

Equity

(165

)

 

(56

)

Total Liabilities and Equity

$

4,840

 

 

$

5,027

 

 

As of March 31,

 

2020

 

2019

Other Financial Data

 

 

 

Working Capital Days

 

 

 

Receivable days

58

 

 

60

 

Inventory days

66

 

 

76

 

Payable days

71

 

 

70

 

Working capital

$

1,155

 

 

$

1,219

 

Working capital as a % of sales (LTM)

17.0

%

 

18.3

%

Historical information is available on our website.

MASCO CORPORATION

Condensed Consolidated Statements of Cash Flows and Other Financial Data - Unaudited

For the Three Months Ended March 31, 2020 and 2019

(dollars in millions)

 

 

Three Months Ended March 31,

 

2020

 

2019

Cash Flows From (For) Operating Activities:

 

 

 

Cash provided by operating activities

$

7

 

 

$

183

 

Working capital changes

(99

)

 

(314

)

Net cash for operating activities

(92

)

 

(131

)

 

 

 

 

Cash Flows From (For) Financing Activities:

 

 

 

Purchase of Company common stock

(602

)

 

(116

)

Proceeds from revolving credit borrowings, net

 

 

87

 

Cash dividends paid

(37

)

 

(35

)

Proceeds from the exercise of stock options

20

 

 

9

 

Employee withholding taxes paid on stock-based compensation

(22

)

 

(14

)

Increase (decrease) in debt, net

2

 

 

(1

)

Credit Agreement and other financing costs

 

 

(2

)

Net cash for financing activities

(639

)

 

(72

)

 

 

 

 

Cash Flows From (For) Investing Activities:

 

 

 

Capital expenditures

(24

)

 

(38

)

Acquisition of business, net of cash acquired

(24

)

 

 

Proceeds from disposition of business, net of cash disposed

853

 

 

 

Other, net

2

 

 

 

Net cash from (for) investing activities

807

 

 

(38

)

 

 

 

 

Effect of exchange rate changes on cash and cash investments

(6

)

 

(2

)

 

 

 

 

Cash and Cash Investments:

 

 

 

Increase (decrease) for the period

70

 

 

(243

)

At January 1

697

 

 

559

 

At March 31

$

767

 

 

$

316

 

 

As of March 31,

 

2020

 

2019

Liquidity

 

 

 

Cash and cash investments

$

767

 

 

$

316

 

Revolver availability

1,000

 

 

913

 

Total Liquidity

$

1,767

 

 

$

1,229

 

Historical information is available on our website.

MASCO CORPORATION

Segment Data - Unaudited

For the Three Months Ended March 31, 2020 and 2019

(dollars in millions)

 

 

Three Months Ended March 31,

 

 

 

2020

 

2019

 

Change

Plumbing Products

 

 

 

 

 

Net sales

$

955

 

 

$

940

 

 

2

%

 

 

 

 

 

 

Operating profit, as reported

$

157

 

 

$

153

 

 

 

Operating margin, as reported

16.4

%

 

16.3

%

 

 

 

 

 

 

 

 

Rationalization charges

2

 

 

 

 

 

Operating profit, as adjusted

159

 

 

153

 

 

 

Operating margin, as adjusted

16.6

%

 

16.3

%

 

 

 

 

 

 

 

 

Depreciation and amortization

20

 

 

19

 

 

 

EBITDA, as adjusted

$

179

 

 

$

172

 

 

 

 

 

 

 

 

 

Decorative Architectural Products

 

 

 

 

 

Net sales

$

626

 

 

$

573

 

 

9

%

 

 

 

 

 

 

Operating profit, as reported

$

95

 

 

$

73

 

 

 

Operating margin, as reported

15.2

%

 

12.7

%

 

 

 

 

 

 

 

 

Rationalization charges

1

 

 

 

 

 

Impairment charge for other intangible assets

 

 

9

 

 

 

Operating profit, as adjusted

96

 

 

82

 

 

 

Operating margin, as adjusted

15.3

%

 

14.3

%

 

 

 

 

 

 

 

 

Depreciation and amortization

11

 

 

10

 

 

 

EBITDA, as adjusted

$

107

 

 

$

92

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

Net sales

$

1,581

 

 

$

1,513

 

 

4

%

 

 

 

 

 

 

Operating profit, as reported - segment

$

252

 

 

$

226

 

 

 

General corporate expense, net

(27

)

 

(29

)

 

 

Operating profit, as reported

225

 

 

197

 

 

 

Operating margin, as reported

14.2

%

 

13.0

%

 

 

 

 

 

 

 

 

Rationalization charges - segment

3

 

 

 

 

 

Impairment charge for other intangible assets

 

 

9

 

 

 

Operating profit, as adjusted

228

 

 

206

 

 

 

Operating margin, as adjusted

14.4

%

 

13.6

%

 

 

 

 

 

 

 

 

Depreciation and amortization - segment

31

 

 

29

 

 

 

Depreciation and amortization - non-operating

2

 

 

2

 

 

 

EBITDA, as adjusted

$

261

 

 

$

237

 

 

 

Historical information is available on our website.

MASCO CORPORATION

North American and International Data - Unaudited

For the Three Months Ended March 31, 2020 and 2019

(dollars in millions)

 

 

Three Months Ended March 31,

 

 

 

2020

 

2019

 

Change

North American

 

 

 

 

 

Net sales

$

1,258

 

 

$

1,171

 

 

7

%

 

 

 

 

 

 

Operating profit, as reported

$

210

 

 

$

181

 

 

 

Operating margin, as reported

16.7

%

 

15.5

%

 

 

 

 

 

 

 

 

Rationalization charges

3

 

 

 

 

 

Impairment charge for other intangible assets

 

 

9

 

 

 

Operating profit, as adjusted

213

 

 

190

 

 

 

Operating margin, as adjusted

16.9

%

 

16.2

%

 

 

 

 

 

 

 

 

Depreciation and amortization

20

 

 

20

 

 

 

EBITDA, as adjusted

$

233

 

 

$

210

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

Net sales

$

323

 

 

$

342

 

 

(6

)%

 

 

 

 

 

 

Operating profit, as reported

$

42

 

 

$

45

 

 

 

Operating margin, as reported

13.0

%

 

13.2

%

 

 

 

 

 

 

 

 

Depreciation and amortization

11

 

 

9

 

 

 

EBITDA

$

53

 

 

$

54

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

Net sales

$

1,581

 

 

$

1,513

 

 

4

%

 

 

 

 

 

 

Operating profit, as reported - segment

$

252

 

 

$

226

 

 

 

General corporate expense, net

(27

)

 

(29

)

 

 

Operating profit, as reported

225

 

 

197

 

 

 

Operating margin, as reported

14.2

%

 

13.0

%

 

 

 

 

 

 

 

 

Rationalization charges - segment

3

 

 

 

 

 

Impairment charge for other intangible assets

 

 

9

 

 

 

Operating profit, as adjusted

228

 

 

206

 

 

 

Operating margin, as adjusted

14.4

%

 

13.6

%

 

 

 

 

 

 

 

 

Depreciation and amortization - segment

31

 

 

29

 

 

 

Depreciation and amortization - non-operating

2

 

 

2

 

 

 

EBITDA, as adjusted

$

261

 

 

$

237

 

 

 

Historical information is available on our website.

Investor Contact
David Chaika
Vice President, Treasurer and Investor Relations
313.792.5500
david_chaika@mascohq.com

Source: Masco Corporation

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