MAS Masco Corp

Key Highlights

• Sales for the first quarter increased 3 percent to $1.8 billion; in local currencies, sales increased 5 percent
• Operating profit for the quarter grew 8 percent to $253 million; adjusted operating profit grew 8 percent to $255 million
• Operating profit margin for the quarter increased to 14.2 percent, a 60 basis point expansion; adjusted operating profit margin increased to 14.4 percent, a 60 basis point expansion
• Earnings per share for the quarter grew 34 percent to $0.43 per common share; adjusted earnings per share grew 28 percent to $0.41 per common share, which includes a $0.01 benefit due to a lower normalized tax rate
• Earnings per share target of $1.80 for 2017 updated to the range of $1.90 to $2.00 per common share, which includes an estimated $0.06 benefit from a reduction in our expected tax rate

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 first quarter of 2017.

“Our strong operating performance continued in the first quarter of 2017 as our leading brands coupled with our innovative products and programs drove demand with consumers and pros alike, resulting in profitable growth across our portfolio,” said Masco President and CEO, Keith Allman. “Additionally, we returned over $120 million to shareholders through dividends and share repurchases in the quarter.”

2017 First Quarter Commentary

• On a reported basis, compared to first quarter 2016:
  • Net sales increased 3 percent to $1.8 billion
  • In local currency, North American sales increased 4 percent and international sales increased 5 percent
  • Gross margins improved 110 basis points to 34.2 percent from 33.1 percent
  • Operating margins improved 60 basis points to 14.2 percent from 13.6 percent
  • Net income was $0.43 per common share compared to $0.32 per common share

• Compared to first 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 34.3 percent compared to 33.1 percent
  • Operating margins improved to 14.4 percent compared to 13.8 percent
  • Net income was $0.41 per common share, which includes a $0.01 benefit due to a lower normalized tax rate, compared to $0.32 per common share

• Liquidity at the end of the first quarter was $883 million
• 2.8 million shares were repurchased in the first quarter

2017 First Quarter Operating Segment Highlights

• Plumbing Products’ net sales increased 6 percent (8 percent excluding the impact of foreign currency translation), driven by growth in North America and internationally
• Decorative Architectural Products’ net sales increased 2 percent with growth from builders’ hardware and Behr’s pro initiative
• Cabinetry Products’ net sales decreased 2 percent due to the previously announced exit of lower margin business in the builder channel
• Windows and Other Specialty Products’ net sales were flat. Excluding the impact of foreign currency translation, net sales increased 3 percent, driven by sales of windows in North America and internationally

Outlook

“The building products industry fundamentals remain favorable and are expected to support long-term growth. Our outlook for demand in both repair and remodel and new home construction continues to be positive,” said Allman. “We will leverage these favorable industry fundamentals along with our strong brand portfolio, our industry-leading positions and our Masco Operating System to achieve our long-term growth expectations. As such, we are now updating our 2017 earnings per share target to the range of $1.90 to $2.00 per common share, exceeding our $1.80 target that we communicated at our last Investor Day in 2015. This updated target includes an estimated $0.06 benefit from a reduction in our expected tax rate. We look forward to updating you on our long-term goals at our upcoming Investor Day on May 16 in New York City.”

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 2017 first 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, April 25, 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 90696233. 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 90696233. The telephone replay will be available approximately two hours after the end of the call and continue through May 25, 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 Ended March 31, 2017 and 2016  

(in millions, except per common share data)

  Three Months Ended March 31, 2017   2016 Net sales $ 1,777 $ 1,720 Cost of sales 1,169   1,151   Gross profit 608 569   Selling, general and administrative expenses 355   335   Operating profit 253 234   Other income (expense), net: Interest expense (43 ) (56 ) Other, net 3   (1 ) (40 ) (57 ) Income before income taxes 213 177   Income tax expense 63   58   Net income 150 119 Less: Net income attributable to noncontrolling interest 10   10   Net income attributable to Masco Corporation $ 140   $ 109     Income per common share attributable to Masco Corporation (diluted): Net income $ 0.43   $ 0.32     Average diluted common shares outstanding 321   333  

Historical information is available on our website.

  MASCO CORPORATION Exhibit A: Reconciliations - Unaudited   (in millions, except per common share data)   Three Months Ended March 31, 2017   2016

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

  Net sales $ 1,777   $ 1,720     Gross profit, as reported $ 608 $ 569 Rationalization charges 2   1   Gross profit, as adjusted $ 610   $ 570     Gross margin, as reported 34.2 % 33.1 % Gross margin, as adjusted 34.3 % 33.1 %   Selling, general and administrative expenses, as reported $ 355 $ 335 Rationalization charges —   2   Selling, general and administrative expenses, as adjusted $ 355   $ 333     Selling, general and administrative expenses as percent of net sales, as reported 20.0 % 19.5 % Selling, general and administrative expenses as percent of net sales, as adjusted 20.0 % 19.4 %   Operating profit, as reported $ 253 $ 234 Rationalization charges 2   3   Operating profit, as adjusted $ 255   $ 237     Operating margin, as reported 14.2 % 13.6 % Operating margin, as adjusted 14.4 % 13.8 %  

Earnings Per Common Share Reconciliations

  Income before income taxes, as reported $ 213 $ 177 Rationalization charges 2 3 (Gains) from private equity funds, net (1 ) — (Earnings) from equity investments, net —   (1 ) Income before income taxes, as adjusted 214 179 Tax at 34% rate (36% for 2016) (73 ) (64 ) Less: Net income attributable to noncontrolling interest 10   10   Net income, as adjusted $ 131   $ 105     Net income per common share, as adjusted $ 0.41   $ 0.32     Average diluted common shares outstanding 321   333  

Historical information is available on our website.

    MASCO CORPORATION Condensed Consolidated Balance Sheets and Other Financial Data - Unaudited   (dollars in millions)   March 31, 2017 December 31, 2016 Balance Sheet Assets Current Assets: Cash and cash investments $ 689 $ 990 Short-term bank deposits 194 201 Receivables 1,144 917 Inventories 826 712 Prepaid expenses and other 105   114   Total Current Assets 2,958 2,934   Property and equipment, net 1,074 1,060 Goodwill 835 832 Other intangible assets, net 154 154 Other assets 118   157   Total Assets $ 5,139   $ 5,137     Liabilities Current Liabilities: Accounts payable $ 903 $ 800 Notes payable 3 2 Accrued liabilities 518   658   Total Current Liabilities 1,424 1,460   Long-term debt 2,996 2,995 Other liabilities 778   785   Total Liabilities 5,198 5,240   Equity (59 ) (103 ) Total Liabilities and Equity $ 5,139   $ 5,137     As of March 31, 2017   2016 Other Financial Data Working Capital Days Receivable days 53 50 Inventory days 61 56 Payable days 71 70 Working capital $ 1,067 $ 957 Working capital as a % of sales (LTM) 14.4 % 13.3 %

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, 2017   2016 Cash Flows From (For) Operating Activities: Cash provided by operating activities $ 253 $ 219 Working capital changes (402 ) (289 ) Net cash for operating activities (149 ) (70 )   Cash Flows From (For) Financing Activities: Purchase of Company common stock (87 ) (86 ) Cash dividends paid (32 ) (32 ) Issuance of notes, net of issuance costs — 889 Issuance of Company common stock — 1 Employee withholding taxes paid on stock-based compensation (14 ) (19 ) Decrease in debt, net —   (2 ) Net cash (for) from financing activities (133 ) 751     Cash Flows From (For) Investing Activities: Capital expenditures (37 ) (37 ) Other, net 11   57   Net cash (for) from investing activities (26 ) 20     Effect of exchange rate changes on cash and cash investments 7 6   Cash and Cash Investments: (Decrease) increase for the period (301 ) 707 At January 1 990   1,468   At March 31 $ 689   $ 2,175     As of March 31, 2017   2016 Liquidity Cash and cash investments $ 689 $ 2,175 Short-term bank deposits 194   195 Total Liquidity $ 883   $ 2,370

Historical information is available on our website.

    MASCO CORPORATION Segment Data - Unaudited For the Three Months Ended March 31, 2017 and 2016   (dollars in millions)   Three Months Ended March 31, 2017   2016 Change Plumbing Products Net sales $ 863   $ 813   6 %   Operating profit, as reported $ 156 $ 129 Operating margin, as reported 18.1 % 15.9 %   Rationalization charges —   2   Operating profit, as adjusted 156 131

 

Operating margin, as adjusted 18.1 % 16.1 %

 

  Depreciation and amortization 14   14     EBITDA, as adjusted $ 170   $ 145     Decorative Architectural Products Net sales $ 505   $ 493   2 %   Operating profit, as reported $ 101 $ 105

 

 

Operating margin, as reported 20.0 % 21.3 %

 

  Depreciation and amortization 4   4     EBITDA $ 105   $ 109     Cabinetry Products Net sales $ 231   $ 236   (2 )%   Operating profit, as reported $ 16 $ 24 Operating margin, as reported 6.9 % 10.2 %   Rationalization charges 2   1   Operating profit, as adjusted 18 25

 

 

Operating margin, as adjusted 7.8 % 10.6 %

 

  Depreciation and amortization 4   5     EBITDA, as adjusted $ 22   $ 30  

Historical information is available on our website.

    MASCO CORPORATION Segment Data - Unaudited For the Three Months Ended March 31, 2017 and 2016   (dollars in millions)   Three Months Ended March 31, 2017   2016 Change Windows and Other Specialty Products Net sales $ 178   $ 178   — %   Operating profit, as reported $ 6 $ 3 Operating margin, as reported 3.4 % 1.7 %   Depreciation and amortization 5   5     EBITDA $ 11   $ 8     Total Net sales $ 1,777   $ 1,720   3 %   Operating profit, as reported - segment $ 279 $ 261 General corporate expense, net (GCE) (26 ) (27 ) Operating profit, as reported 253 234 Operating margin, as reported 14.2 % 13.6 %   Rationalization charges - segment 2   3   Operating profit, as adjusted 255 237

 

Operating margin, as adjusted 14.4 % 13.8 %

 

  Depreciation and amortization - segment 27 28 Depreciation and amortization - non-operating 4   4     EBITDA, as adjusted $ 286   $ 269  

Historical information is available on our website.

    MASCO CORPORATION North American and International Data - Unaudited For the Three Months Ended March 31, 2017 and 2016   (dollars in millions)   Three Months Ended March 31, 2017   2016 Change North American Net sales $ 1,411   $ 1,350   5 %   Operating profit, as reported $ 239 $ 215 Operating margin, as reported 16.9 % 15.9 %   Rationalization charges 2   2   Operating profit, as adjusted 241 217 Operating margin, as adjusted 17.1 % 16.1 %   Depreciation and amortization 18   19     EBITDA, as adjusted $ 259   $ 236     International Net sales $ 366   $ 370   (1 )%   Operating profit, as reported $ 40 $ 46 Operating margin, as reported 10.9 % 12.4 %   Rationalization charges —   1   Operating profit, as adjusted 40 47 Operating margin, as adjusted 10.9 % 12.7 %   Depreciation and amortization 9   9     EBITDA, as adjusted $ 49   $ 56     Total Net sales $ 1,777   $ 1,720   3 %   Operating profit, as reported - segment $ 279 $ 261 General corporate expense, net (GCE) (26 ) (27 ) Operating profit, as reported 253 234 Operating margin, as reported 14.2 % 13.6 %   Rationalization charges - segment 2   3   Operating profit, as adjusted 255 237 Operating margin, as adjusted 14.4 % 13.8 %   Depreciation and amortization - segment 27 28 Depreciation and amortization - non-operating 4   4     EBITDA, as adjusted $ 286   $ 269  

Historical information is available on our website.

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Masco CorporationInvestor ContactDavid ChaikaVice President, Treasurer and Investor Relations313.792.5500david_chaika@mascohq.com