OREANDA-NEWS. 

  • Sales for the first quarter increased 4 percent to $1.7 billion; sales increased 5 percent excluding the impact of foreign currency translation
  • Adjusted operating profit grew 39 percent to $237 million
  • Adjusted operating profit margin for the quarter increased to 13.8 percent, a 350 basis point expansion
  • Adjusted EPS for the quarter grew 78 percent to $.32 per common share

Masco Corporation (NYSE: MAS), one of the world’s leading manufacturers of branded home improvement and building products, reported net sales and adjusted operating profit growth in the first quarter of 2016. Adjusted operating profit margin rose to 13.8 percent, representing a 350 basis point increase over the prior year.

“The year is off to a great start with strong performances from all of our businesses,” said Masco President and CEO Keith Allman. “Our industry-leading plumbing businesses maintained their positive momentum by delivering another quarter of top- and bottom-line growth both domestically and internationally. Our Decorative Architectural Products segment benefitted from increased demand for Behr’s core DIY, Behr Pro® and Liberty Hardware branded products. Our cabinetry business continued to make progress against its strategic plan to optimize sales mix and increase profitability. Finally, our windows businesses capitalized on repair and remodel and new home construction growth in the U.S. and U.K.”

2016 First Quarter Commentary

  • Compared to first quarter 2015, net sales from continuing operations increased 4 percent to $1.7 billion. In local currency, North American sales increased 6 percent and international sales increased 2 percent
  • Compared to first quarter 2015, results for key financial measures, as adjusted for certain items (see Exhibit A) and with a normalized tax rate of 36 percent, were as follows:
    • Gross margins improved to 33.1 percent compared to 29.9 percent
    • Operating margins improved to 13.8 percent compared to 10.3 percent
    • Income from continuing operations was $.32 per common share compared to $.18 per common share
  • Income from continuing operations, as reported, was $.32 per common share
  • Liquidity at the end of the first quarter was approximately $2.4 billion (includes $900 million of cash from the issuance of notes in March 2016). Subsequently, $1.3 billion of cash was paid for the retirement of debt in April
  • 3.2 million shares were repurchased in the first quarter

2016 First Quarter Operating Segment Highlights

  • Plumbing Products’ net sales increased 2 percent (4 percent excluding the impact of foreign currency translation) driven by growth in the wholesale/trade channel
  • Decorative Architectural Products’ net sales increased 9 percent, fueled by strong growth in Behr’s core DIY products and Behr Pro® products
  • Cabinetry Products’ net sales decreased 5 percent, due to the exit of lower margin business in the builder channel, which was partially offset by continued growth in the dealer channel
  • Windows and Other Specialty Products’ net sales increased 9 percent (11 percent excluding the impact of foreign currency translation) led by the strong performance of our North American windows business

Outlook

“The fundamentals driving our business are progressing in line with our expectations, and our performance this quarter demonstrates that we are fully focused on achieving our financial and operational objectives,” continued Mr. Allman. “We remain confident in our ability to successfully execute against our long-term growth strategies by leveraging our brand portfolio, industry-leading positions and our Masco Operating System. We expect that these growth strategies, coupled with our disciplined capital allocation approach and strengthening balance sheet, will continue to create shareholder value in 2016.”

About Masco

Headquartered in Taylor, 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.

Conference Call Details

A conference call regarding items contained in this release is scheduled for Tuesday, April 26, 2016 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 75969468. The conference call will be webcast simultaneously and in its entirety through the Company’s website. Shareholders, media representatives and others interested in Masco may participate in the webcast by registering through the Investor Relations section on the Company’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 75969468. The telephone replay will be available approximately two hours after the end of the call and continue through May 26, 2016.

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 sustain the performance of our cabinetry businesses, 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 Ended March 31, 2016 and 2015
 
(in millions, except per common share data)
     
    Three Months Ended March 31,
    2016   2015
Net sales   $ 1,720     $ 1,659  
Cost of sales   1,151     1,164  
Gross profit   569     495  
         
Selling, general and administrative expenses   335     330  
Operating profit   234     165  
         
Other income (expense), net:        
Interest expense   (56 )   (56 )
Other, net   (1 )   1  
    (57 )   (55 )
Income from continuing operations before income taxes   177     110  
         
Income tax expense   (58 )   (40 )
Income from continuing operations   119     70  
         
Income from discontinued operations, net   —     3  
Net income   119     73  
         
Less: Net income attributable to noncontrolling interest   10     9  
Net income attributable to Masco Corporation   $ 109     $ 64  
         
Income per common share attributable to Masco Corporation (diluted):        
Income from continuing operations   $ 0.32     $ 0.17  
Income from discontinued operations, net   —     0.01  
Net income   $ 0.32     $ 0.18  
         
Average diluted common shares outstanding   333     347  
         
Amounts attributable to Masco Corporation:        
Income from continuing operations   $ 109     $ 61  
Income from discontinued operations, net   —     3  
Net income attributable to Masco Corporation   $ 109     $ 64  
                 

Historical information is available on our website.
     
MASCO CORPORATION
Exhibit A: Reconciliations - Unaudited
For the Three Months Ended March 31, 2016 and 2015
 
(in millions, except per common share data)
     
    Three Months Ended March 31,
    2016   2015

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

        
         
Net sales   $ 1,720     $ 1,659  
         
Gross profit, as reported   $ 569     $ 495  
Rationalization charges   1     1  
Gross profit, as adjusted   $ 570     $ 496  
         
Gross margin, as reported   33.1 %   29.8 %
Gross margin, as adjusted   33.1 %   29.9 %
         
Selling, general and administrative expenses, as reported   $ 335     $ 330  
Rationalization charges   2     5  
Selling, general and administrative expenses, as adjusted   $ 333     $ 325  
         
Selling, general and administrative expenses as percent of net sales, as reported   19.5 %   19.9 %
Selling, general and administrative expenses as percent of net sales, as adjusted   19.4 %   19.6 %
         
Operating profit, as reported   $ 234     $ 165  
Rationalization charges   3     6  
Operating profit, as adjusted   $ 237     $ 171  
         
Operating margin, as reported   13.6 %   9.9 %
Operating margin, as adjusted   13.8 %   10.3 %
         

Earnings Per Common Share Reconciliation

        
         
Income from continuing operations before income taxes, as reported   $ 177     $ 110  
Rationalization charges   3     6  
Gains from private equity funds, net   —     (2 )
Earnings from equity investments, net   (1 )   —  
Income from continuing operations before income taxes, as adjusted   179     114  
Tax at 36% rate   (64 )   (41 )
Less: Net income attributable to noncontrolling interest   10     9  
Income from continuing operations, as adjusted   $ 105     $ 64  
         
Income per common share, as adjusted   $ 0.32     $ 0.18  
         
Average diluted common shares outstanding   333     347  
             

Historical information is available on our website.
         
MASCO CORPORATION
Condensed Consolidated Balance Sheets and
Other Financial Data - Unaudited
 
(dollars in millions)
         
        December 31,
    March 31, 2016   2015
Balance Sheet        
Assets        
Current Assets:        
Cash and cash investments   $ 2,175     $ 1,468  
Short-term bank deposits   195     248  
Receivables   1,036     853  
Inventories   755     687  
Prepaid expenses and other   87     72  
Total Current Assets   4,248     3,328  
         
Property and equipment, net   1,040     1,027  
Goodwill   844     839  
Other intangible assets, net   158     160  
Other assets   264     310  
Total Assets   $ 6,554     $ 5,664  
         
Liabilities        
Current Liabilities:        
Accounts payable   $ 834     $ 749  
Notes payable   1,303     1,004  
Accrued liabilities   652     752  
Total Current Liabilities   2,789     2,505  
         
Long-term debt   2,993     2,403  
Other liabilities   688     698  
Total Liabilities   6,470     5,606  
         
Equity   84     58  
Total Liabilities and Equity   $ 6,554     $ 5,664  
     
    As of
    March 31, 2016   March 31, 2015
Other Financial Data        
Working Capital Days        
Receivable days   50     51  
Inventory days   56     56  
Payable days   70     68  
Working capital   $ 957     $ 968  
Working capital as a % of sales (LTM)   13.3 %   13.8 %
             
Historical information is available on our website.
     
MASCO CORPORATION
Condensed Consolidated Statements of Cash Flows*
and Other Financial Data - Unaudited
 
(dollars in millions)
     
    Three Months Ended March 31,
    2016   2015
Cash Flows From (For) Operating Activities:        
Cash provided by operating activities   $ 189     $ 144  
Working capital changes   (289 )   (296 )
Net cash for operating activities   (100 )   (152 )
         
Cash Flows From (For) Financing Activities:        
Purchase of Company common stock   (86 )   (103 )
Cash dividends paid   (32 )   (32 )
Issuance of notes, net of issuance costs   889     497  
Issuance of Company common stock   1     —  
Excess tax benefit from stock-based compensation   11     —  
Decrease in debt, net   (2 )   —  
Net cash from financing activities   781     362  
         
Cash Flows From (For) Investing Activities:        
Capital expenditures   (37 )   (32 )
Other, net   57     43  
Net cash from investing activities   20     11  
         
Effect of exchange rate changes on cash and cash investments   6     (26 )
         
Cash and Cash Investments:        
Increase for the period   707     195  
At January 1   1,468     1,383  
At March 31   $ 2,175     $ 1,578  
     
    As of March 31,
    2016   2015
Liquidity*        
Cash and cash investments   $ 2,175     $ 1,578  
Short-term bank deposits   195     197  
Total Liquidity   $ 2,370     $ 1,775  

 

                
* Prior period amounts not restated for spin off of TopBuild Corp.
 
Historical information is available on our website.
         
MASCO CORPORATION
Segment Data - Unaudited
For the Three Months Ended March 31, 2016 and 2015
 
(dollars in millions)
         
    Three Months Ended    
    March 31,    
    2016   2015   Change
Plumbing Products            
Net sales   $ 813     $ 796     2 %
             
Operating profit, as reported   $ 129     $ 111      
Operating margin, as reported   15.9 %   13.9 %    
             
Rationalization charges   2     1      
Operating profit, as adjusted   131     112      
Operating margin, as adjusted   16.1 %   14.1 %    
             
Depreciation and amortization   14     14      
             
EBITDA, as adjusted   $ 145     $ 126      
             
Decorative Architectural Products            
Net sales   $ 493     $ 451     9 %
             
Operating profit, as reported   $ 105     $ 83      
Operating margin, as reported   21.3 %   18.4 %    
             
Depreciation and amortization   4     4      
             
EBITDA   $ 109     $ 87      
             
Cabinetry Products            
Net sales   $ 236     $ 249     (5 )%
             
Operating profit (loss), as reported   $ 24     $ (4 )    
Operating margin, as reported   10.2 %   (1.6 )%    
             
Rationalization charges   1     2      
Operating profit (loss), as adjusted   25     (2 )    
Operating margin, as adjusted   10.6 %   (0.8 )%    
             
Depreciation and amortization   5     7      
             
EBITDA, as adjusted   $ 30     $ 5      
                     

Historical information is available on our website.
 
MASCO CORPORATION
Segment Data - Unaudited
For the Three Months Ended March 31, 2016 and 2015

(dollars in millions)
         
    Three Months Ended    
    March 31,    
    2016   2015   Change
Windows and Other Specialty Products            
Net sales   $ 178     $ 163     9 %
             
Operating profit, as reported   $ 3     $ 6      
Operating margin, as reported   1.7 %   3.7 %    
             
Depreciation and amortization   5     4      
             
EBITDA   $ 8     $ 10      
             
Total            
Net sales   $ 1,720     $ 1,659     4 %
             
Operating profit, as reported - segment   $ 261     $ 196      
General corporate expense, net (GCE)   (27 )   (31 )    
Operating profit, as reported   234     165      
Operating margin, as reported   13.6 %   9.9 %    
             
Rationalization charges - segment   3     3      
Rationalization charges - GCE   —     3      
Operating profit, as adjusted   237     171      
Operating margin, as adjusted   13.8 %   10.3 %    
             
Depreciation and amortization - segment   28     29      
Depreciation and amortization - non-operating   4     2      
             
EBITDA, as adjusted   $ 269     $ 202      
                     

Historical information is available on our website.
         

MASCO CORPORATION

North American and International Data - Unaudited

For the Three Months Ended March 31, 2016 and 2015
         

(dollars in millions)
         
    Three Months Ended March 31,    
      2016       2015     Change
North American            
Net sales   $ 1,350     $ 1,282     5 %
             
Operating profit, as reported   $ 215     $ 151      
Operating margin, as reported    

15.9

%

 

  

11.8

%

    
             
Rationalization charges     2       2      
Operating profit, as adjusted     217       153      

Operating margin, as adjusted

    

16.1

%

    

11.9

%

    
             
Depreciation and amortization     19       20      
             
EBITDA, as adjusted   $ 236     $ 173      
             
International            
Net sales   $ 370     $ 377     (2 )%
             
Operating profit, as reported   $ 46     $ 45      
Operating margin, as reported    

12.4

%

 

  

11.9

%

    
             
Rationalization charges     1       1      
Operating profit, as adjusted     47       46      
Operating margin, as adjusted     12.7 %

 

  

12.2

%

    
             
Depreciation and amortization     9       9      
             
EBITDA, as adjusted   $ 56     $ 55      
             
Total            
Net sales   $ 1,720     $ 1,659     4 %
             
Operating profit, as reported - segment   $ 261     $ 196      
General corporate expense, net (GCE)     (27 )     (31 )    
Operating profit, as reported     234       165      
Operating margin, as reported     13.6

%

 

  

9.9

%

    
             
Rationalization charges - segment     3       3      
Rationalization charges - GCE     —      

3

      
Operating profit, as adjusted     237       171      
Operating margin, as adjusted    

13.8

%

 

  

10.3

%

    
             
Depreciation and amortization - segment     28       29      
Depreciation and amortization - non-operating     4       2      
             
EBITDA, as adjusted   $ 269     $ 202