Key Highlights
- Sales for the second quarter increased
4 percent to $2.0 billion
- Operating profit grew 20 percent to
$335 million; adjusted operating profit grew 22 percent to $342
million
- Operating profit margin for the quarter
increased to 16.7 percent, a 220 basis point expansion; adjusted
operating profit margin for the quarter increased to 17.1 percent,
a 260 basis point expansion
- Earnings per share for the quarter grew
45 percent to $0.45 per common share; adjusted earnings per share
for the quarter grew 21 percent to $0.46 per common share
- Board announces intent to increase
annual dividend by $0.02 per share to $0.40 per share, beginning in
the fourth quarter
Masco Corporation (NYSE: MAS), one of the world’s leading
manufacturers of branded home improvement and building products,
reported strong net sales and operating profit growth in the second
quarter of 2016, recording its highest second quarter operating
margin since 2002.
“We continued our great start to 2016 with solid execution in
the second quarter,” said Masco’s President and CEO, Keith Allman.
“Our Plumbing segment in particular had an exceptional second
quarter, with strong top- and bottom-line performance both in North
America and internationally, and our Cabinetry segment continued to
exceed expectations as it executed against its strategic plan to
optimize sales mix and increase profitability. Additionally, we
continued our disciplined capital allocation by reducing debt by
$400 million, as planned, and returning nearly $120 million to
shareholders through dividends and share repurchases during the
quarter.”
2016 Second Quarter
Commentary
- On a reported basis, compared to second
quarter 2015:
- Net sales from continuing operations
increased 4 percent to $2.0 billion
- In local currency, North American sales
increased 3 percent and international sales increased 9
percent
- Gross margins improved to 35.0 percent
from 33.0 percent
- Operating margins improved to 16.7
percent from 14.5 percent
- Income from continuing operations was
$0.45 per common share, which included the $40 million debt
extinguishment cost incurred during the quarter, compared to $0.31
per common share
- Compared to second 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 35.2 percent
compared to 33.0 percent
- Operating margins improved to 17.1
percent compared to 14.5 percent
- Income from continuing operations was
$0.46 per common share compared to $0.38 per common share
- Liquidity at the end of the second
quarter was approximately $1.1 billion
- 2.8 million shares were repurchased in
the second quarter
2016 Second Quarter Operating Segment
Highlights
- Plumbing Products’ net sales increased
9 percent (10 percent excluding the impact of foreign currency
translation), driven by growth in the retail and wholesale
channels
- Decorative Architectural Products’ net
sales matched last year, with growth from paints and other coating
products and builders’ hardware offset by the timing and amount of
promotions
- Cabinetry Products’ net sales decreased
3 percent due to the exit of lower margin business in the builder
channel, which was partially offset by growth and improved mix in
the retail channel
- Windows and Other Specialty Products’
net sales increased 3 percent (4 percent excluding the impact of
foreign currency translation), led by our North American windows
business
Outlook
“The fundamental demand drivers of our end markets remain
robust,” said Allman. “Combined with these underlying fundamentals,
our strong performance this quarter is evidence that we continue to
successfully execute against our long-term growth strategies by
leveraging our brand portfolio, our industry-leading positions and
our Masco Operating System. Reflecting confidence in Masco’s future
outlook, our Board of Directors intends to increase our annual
dividend by $0.02 per share to $0.40 per share, beginning with the
quarterly dividend to be paid in the fourth quarter of 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. For more information about Masco Corporation, visit
www.masco.com.
The 2016 second quarter supplemental material, including a
presentation in PDF format, is available on the Company’s website
at www.masco.com.
Conference Call Details
A conference call regarding items contained in this release is
scheduled for Tuesday, July 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 34096856. 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 34096856.
The telephone replay will be available approximately two hours
after the end of the call and continue through August 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 and Six Months
Ended June 30, 2016 and 2015
(in millions, except per common share
data)
Three Months Ended June 30,
Six Months Ended June 30, 2016 2015
2016 2015 Net sales $ 2,001 $ 1,929 $ 3,721 $
3,588 Cost of sales 1,301 1,292 2,452 2,456
Gross profit 700 637 1,269 1,132 Selling, general and
administrative expenses 365 358 700 688
Operating profit 335 279 569 444 Other income (expense),
net: Interest expense (87 ) (61 ) (143 ) (117 ) Other, net 5
3 4 4 (82 ) (58 ) (139 ) (113 ) Income from
continuing operations before income taxes 253 221 430 331
Income tax expense (90 ) (102 ) (148 ) (142 ) Income from
continuing operations 163 119 282 189 Loss from discontinued
operations, net — (4 ) — (1 ) Net income 163 115 282
188 Less: Net income attributable to noncontrolling interest
13 10 23 19 Net income attributable to
Masco Corporation $ 150 $ 105 $ 259 $ 169
Income per common share attributable to Masco
Corporation (diluted): Income from continuing operations $ 0.45 $
0.31 $ 0.77 $ 0.48 Loss from discontinued operations, net —
(0.01 ) — — Net income $ 0.45 $ 0.30 $
0.77 $ 0.48 Average diluted common shares
outstanding 331 344 333 346
Amounts attributable to Masco Corporation: Income from continuing
operations $ 150 $ 109 $ 259 $ 170 Loss from discontinued
operations, net — (4 ) — (1 ) Net income attributable
to Masco Corporation $ 150 $ 105 $ 259 $ 169
Historical information is available on our
website.
MASCO CORPORATION
Exhibit A: Reconciliations -
Unaudited
For the Three Months and Six Months
Ended June 30, 2016 and 2015
(in millions, except per common share
data)
Three Months Ended June 30,
Six Months Ended June 30, 2016 2015
2016 2015
Gross Profit,
Selling, General and Administrative Expenses, and Operating Profit
Reconciliations
Net sales $ 2,001 $
1,929 $ 3,721 $
3,588 Gross profit, as reported
$ 700 $ 637 $ 1,269
$ 1,132 Rationalization charges 5 — 6
1
Gross profit, as adjusted $
705 $ 637 $ 1,275
$ 1,133 Gross margin, as
reported 35.0 % 33.0 % 34.1 % 31.5 % Gross margin, as adjusted 35.2
% 33.0 % 34.3 % 31.6 %
Selling, general and
administrative expenses, as reported $ 365
$ 358 $ 700 $ 688
Rationalization charges 2 1 4 6
Selling, general and administrative expenses, as adjusted
$ 363 $ 357 $
696 $ 682 Selling,
general and administrative expenses as percent of net sales, as
reported 18.2 % 18.6 % 18.8 % 19.2 % Selling, general and
administrative expenses as percent of net sales, as adjusted 18.1 %
18.5 % 18.7 % 19.0 %
Operating profit, as reported
$ 335 $ 279 $ 569
$ 444 Rationalization charges 7 1 10
7
Operating profit, as adjusted $
342 $ 280 $ 579
$ 451 Operating margin, as
reported 16.7 % 14.5 % 15.3 % 12.4 % Operating margin, as adjusted
17.1 % 14.5 % 15.6 % 12.6 %
Earnings Per
Common Share Reconciliation
Income from continuing operations before income taxes, as
reported $ 253 $ 221 $
430 $ 331 Rationalization charges 7 1 10 7
Gain from auction rate securities (1 ) — (1 ) — Gains from private
equity funds, net (1 ) (2 ) (1 ) (4 ) Earnings from equity
investments, net — (2 ) (1 ) (2 )
Income from continuing
operations before income taxes, as adjusted 258
218 437 332 Tax at 36% rate (93 ) (78 ) (157 )
(120 ) Less: Net income attributable to noncontrolling interest 13
10 23 19
Income from continuing
operations, as adjusted $ 152 $
130 $ 257 $ 193
Income per common share, as adjusted $
0.46 $ 0.38 $ 0.77
$ 0.56 Average diluted common
shares outstanding 331 344 333 346
Historical information is available on our
website.
MASCO CORPORATION
Condensed Consolidated Balance Sheets
and
Other Financial Data -
Unaudited
(dollars in millions)
June 30, 2016
December 31, 2015
Balance Sheet Assets Current Assets: Cash and cash
investments $ 956 $ 1,468 Short-term bank deposits 135 248
Receivables 1,113 853 Inventories 765 687 Prepaid expenses and
other 88 72 Total Current Assets 3,057 3,328 Property
and equipment, net 1,039 1,027 Goodwill 840 839 Other intangible
assets, net 156 160 Other assets 232 310 Total Assets $
5,324 $ 5,664
Liabilities Current Liabilities:
Accounts payable $ 913 $ 749 Notes payable 3 1,004 Accrued
liabilities 716 752 Total Current Liabilities 1,632 2,505
Long-term debt 2,993 2,403 Other liabilities 629 698
Total Liabilities 5,254 5,606
Equity 70 58
Total Liabilities and Equity $ 5,324 $ 5,664
As of June 30, 2016 June 30, 2015 Other
Financial Data Working Capital Days Receivable days 50
51 Inventory days 57 58 Payable days 71 68 Working capital $ 965 $
995 Working capital as a % of sales (LTM) 13.3 % 14.0 %
Historical information is available on our
website.
MASCO CORPORATION
Condensed Consolidated Statements of
Cash Flows
and Other Financial Data -
Unaudited
(dollars in millions)
Six Months EndedJune 30,
2016 2015 Cash Flows From (For) Operating
Activities: Cash provided by operating activities $ 357 $ 355
Working capital changes (243 ) (216 ) Net cash from operating
activities 114 139
Cash Flows From (For)
Financing Activities: Retirement of notes (1,300 ) (500 )
Purchase of Company common stock (168 ) (207 ) Cash dividends paid
(63 ) (62 ) Dividend paid to noncontrolling interest (31 ) (36 )
Cash distributed to TopBuild Corp. — (63 ) Issuance of TopBuild
Corp. debt — 200 Issuance of notes, net of issuance costs 889 497
Issuance of Company common stock 1 — Excess tax benefit from
stock-based compensation 12 15 Credit Agreement and other financing
costs — (3 ) Decrease in debt, net (2 ) — Net cash for
financing activities (662 ) (159 )
Cash Flows From (For)
Investing Activities: Capital expenditures (79 ) (70 ) Other,
net 124 10 Net cash from (for) investing activities
45 (60 ) Effect of exchange rate changes on cash and
cash investments (9 ) (6 )
Cash and Cash Investments:
Decrease for the period (512 ) (86 ) At January 1 1,468
1,383 At June 30 $ 956 $ 1,297
As of June 30, 2016 2015 Liquidity Cash
and cash investments $ 956 $ 1,297 Short-term bank deposits 135
210
Total Liquidity $ 1,091 $ 1,507
Historical information is available on our
website.
MASCO CORPORATION
Segment Data - Unaudited
For the Three Months and Six Months
Ended June 30, 2016 and 2015
(dollars in millions)
Three Months EndedJune 30, Six Months
EndedJune 30, 2016 2015
Change 2016 2015 Change
Plumbing Products Net sales $ 923 $ 846 9 % $
1,736 $ 1,642 6 % Operating profit, as
reported $ 188 $ 138 $ 317 $ 249 Operating margin, as reported 20.4
% 16.3 % 18.3 % 15.2 % Rationalization charges 4 —
6 1 Operating profit, as adjusted 192 138 323
250 Operating margin, as adjusted 20.8 % 16.3 % 18.6 % 15.2 %
Depreciation and amortization 14 14 28
28 EBITDA, as adjusted $ 206 $ 152 $
351 $ 278
Decorative Architectural
Products Net sales $ 620 $ 622 — % $ 1,113
$ 1,073 4 % Operating profit, as reported $ 139 $ 133
$ 244 $ 216 Operating margin, as reported 22.4 % 21.4 % 21.9 % 20.1
% Depreciation and amortization 4 4 8 8
EBITDA $ 143 $ 137 $ 252 $ 224
Cabinetry Products Net sales $ 261 $
269 (3 )% $ 497 $ 518 (4 )% Operating
profit, as reported $ 34 $ 15 $ 58 $ 11 Operating margin, as
reported 13.0 % 5.6 % 11.7 % 2.1 % Rationalization charges 3
— 4 2 Operating profit, as adjusted 37
15 62 13 Operating margin, as adjusted 14.2 % 5.6 % 12.5 % 2.5 %
Depreciation and amortization 5 6 10 13
EBITDA, as adjusted $ 42 $ 21 $ 72
$ 26
Historical information is available on our
website.
MASCO CORPORATION
Segment Data - Unaudited
For the Three Months and Six Months
Ended June 30, 2016 and 2015
(dollars in millions)
Three Months EndedJune 30, Six Months Ended
June 30, 2016 2015 Change
2016 2015 Change Windows and Other
Specialty Products Net sales $ 197 $ 192 3 % $
375 $ 355 6 % Operating (loss) profit, as
reported $ (2 ) $ 21 $ 1 $ 27 Operating margin, as reported (1.0 )%
10.9 % 0.3 % 7.6 % Depreciation and amortization 5 4
10 8 EBITDA $ 3 $ 25 $ 11
$ 35
Total Net sales $ 2,001 $
1,929 4 % $ 3,721 $ 3,588 4 % Operating
profit, as reported - segment $ 359 $ 307 $ 620 $ 503 General
corporate expense, net (GCE) (24 ) (28 ) (51 ) (59 ) Operating
profit, as reported 335 279 569 444 Operating margin, as reported
16.7 % 14.5 % 15.3 % 12.4 % Rationalization charges -
segment 7 — 10 3 Rationalization charges - GCE — 1 —
4 Operating profit, as adjusted 342 280 579 451
Operating margin, as adjusted 17.1 % 14.5 % 15.6 % 12.6 %
Depreciation and amortization - segment 28 28 56 57 Depreciation
and amortization - non-operating 6 3 10 5
EBITDA, as adjusted $ 376 $ 311 $ 645
$ 513
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, 2016 and 2015
(dollars in millions)
Three Months Ended June 30, Six Months Ended June
30, 2016 2015 Change 2016
2015 Change North American Net sales $
1,598 $ 1,554 3 % $ 2,948 $ 2,836 4 %
Operating profit, as reported $ 299 $ 260 $ 514 $ 411
Operating margin, as reported 18.7 % 16.7 % 17.4 % 14.5 %
Rationalization charges 5 — 7 2
Operating profit, as adjusted 304 260 521 413 Operating margin, as
adjusted 19.0 % 16.7 % 17.7 % 14.6 % Depreciation and
amortization 19 19 38 39 EBITDA,
as adjusted $ 323 $ 279 $ 559 $ 452
International Net sales $ 403 $ 375 7 %
$ 773 $ 752 3 % Operating profit, as reported
$ 60 $ 47 $ 106 $ 92 Operating margin, as reported 14.9 % 12.5 %
13.7 % 12.2 % Rationalization charges 2 — 3
1 Operating profit, as adjusted 62 47 109 93
Operating margin, as adjusted 15.4 % 12.5 % 14.1 % 12.4 %
Depreciation and amortization 9 9 18 18
EBITDA, as adjusted $ 71 $ 56 $ 127 $
111
Total Net sales $ 2,001 $ 1,929
4 % $ 3,721 $ 3,588 4 % Operating
profit, as reported - segment $ 359 $ 307 $ 620 $ 503 General
corporate expense, net (GCE) (24 ) (28 ) (51 ) (59 ) Operating
profit, as reported 335 279 569 444 Operating margin, as reported
16.7 % 14.5 % 15.3 % 12.4 % Rationalization charges -
segment 7 — 10 3 Rationalization charges - GCE — 1 —
4 Operating profit, as adjusted 342 280 579 451
Operating margin, as adjusted 17.1 % 14.5 % 15.6 % 12.6 %
Depreciation and amortization - segment 28 28 56 57 Depreciation
and amortization - non-operating 6 3 10 5
EBITDA, as adjusted $ 376 $ 311 $ 645
$ 513
Historical information is available on our
website.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160726005313/en/
Masco CorporationInvestor
ContactDavid ChaikaVice President, Treasurer and
Investor Relations313.792.5500david_chaika@mascohq.com
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