Delaware (State or Other Jurisdiction of Incorporation) | 1-5794 (Commission File Number) | 38-1794485 (IRS Employer Identification No.) |
21001 Van Born Road, Taylor, Michigan (Address of Principal Executive Offices) | 48180 (Zip Code) |
MASCO CORPORATION | ||
By: | /s/ John G. Sznewajs | |
Name: | John G. Sznewajs | |
Title: | Vice President and Chief Financial Officer | |
• | 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 |
• | 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 |
• | 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 |
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 |
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 |
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 | % |
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 |
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 | 25 | |||||||
Operating margin, as adjusted | 18.1 | % | 16.1 | % | 200 | |||||
Depreciation and amortization | 14 | 14 | ||||||||
EBITDA, as adjusted | $ | 170 | $ | 145 | ||||||
Decorative Architectural Products | ||||||||||
Net sales | $ | 505 | $ | 493 | 2 | % | ||||
Operating profit, as reported | $ | 101 | $ | 105 | (4 | ) | ||||
Operating margin, as reported | 20.0 | % | 21.3 | % | -130 | |||||
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 | (7 | ) | ||||||
Operating margin, as adjusted | 7.8 | % | 10.6 | % | -280 | |||||
Depreciation and amortization | 4 | 5 | ||||||||
EBITDA, as adjusted | $ | 22 | $ | 30 |
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 | $18,000,000 | |||||||
Operating margin, as adjusted | 14.4 | % | 13.8 | % | 60 | |||||
Depreciation and amortization - segment | 27 | 28 | ||||||||
Depreciation and amortization - non-operating | 4 | 4 | ||||||||
EBITDA, as adjusted | $ | 286 | $ | 269 |
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 |
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