Delaware (State or Other Jurisdiction of Incorporation) | 1-5794 (Commission File Number) | 38-1794485 (IRS Employer Identification No.) |
17450 College Parkway, Livonia, Michigan (Address of Principal Executive Offices) | 48152 (Zip Code) |
MASCO CORPORATION | ||
By: | /s/ John G. Sznewajs | |
Name: | John G. Sznewajs | |
Title: | Vice President, Chief Financial Officer | |
• | Sales for the third quarter increased 3 percent to $1.9 billion; in local currency, sales increased 2 percent |
• | Operating profit for the quarter grew 10 percent to $295 million; adjusted operating profit grew 8 percent to $296 million |
• | Earnings per share for the quarter grew 15 percent to $0.46 per common share; adjusted earnings per share grew 22 percent to $0.50 per common share |
• | Updating 2017 earnings per share target to $1.93 to $1.97 from $1.93 to $2.00 per common share which reflects the impact of the severe hurricanes |
• | On a reported basis, compared to third quarter 2016: |
• | Net sales increased 3 percent to $1.9 billion; in local currency net sales increased 2 percent |
• | In local currency, North American sales increased 2 percent and international sales increased 4 percent |
• | Gross margins improved 90 basis points to 33.6 percent from 32.7 percent |
• | Operating margins improved 90 basis points to 15.2 percent from 14.3 percent |
• | Net income was $0.46 per common share compared to $0.40 per common share |
• | Compared to third 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 33.6 percent compared to 32.9 percent |
• | Operating margins improved to 15.3 percent compared to 14.7 percent |
• | Net income was $0.50 per common share, compared to $0.41 per common share |
• | Liquidity at the end of the third quarter was approximately $1.2 billion |
• | 4.0 million shares were repurchased in the third quarter |
• | Plumbing Products’ net sales increased 6 percent (4 percent excluding the impact of foreign currency translation), driven by North American and international growth |
• | Decorative Architectural Products’ net sales increased 3 percent with growth from Behr’s pro initiative and Liberty’s builders’ hardware business |
• | Cabinetry Products’ net sales decreased 4 percent due to decreased sales to U.S. and U.K. builders |
• | Windows and Other Specialty Products’ net sales were flat due to the divestiture of Arrow Fastener. Excluding the impact of this divestiture, net sales increased 9 percent, driven by strong sales of windows in North America |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net sales | $ | 1,936 | $ | 1,877 | $ | 5,770 | $ | 5,598 | |||||||
Cost of sales | 1,286 | 1,263 | 3,775 | 3,715 | |||||||||||
Gross profit | 650 | 614 | 1,995 | 1,883 | |||||||||||
Selling, general and administrative expenses | 355 | 345 | 1,090 | 1,045 | |||||||||||
Operating profit | 295 | 269 | 905 | 838 | |||||||||||
Other income (expense), net: | |||||||||||||||
Interest expense | (43 | ) | (43 | ) | (239 | ) | (186 | ) | |||||||
Other, net | 4 | 1 | 58 | 5 | |||||||||||
(39 | ) | (42 | ) | (181 | ) | (181 | ) | ||||||||
Income before income taxes | 256 | 227 | 724 | 657 | |||||||||||
Income tax expense | 96 | 81 | 243 | 229 | |||||||||||
Net income | 160 | 146 | 481 | 428 | |||||||||||
Less: Net income attributable to noncontrolling interest | 12 | 12 | 35 | 35 | |||||||||||
Net income attributable to Masco Corporation | $ | 148 | $ | 134 | $ | 446 | $ | 393 | |||||||
Income per common share attributable to Masco Corporation (diluted): | |||||||||||||||
Net income | $ | 0.46 | $ | 0.40 | $ | 1.38 | $ | 1.17 | |||||||
Average diluted common shares outstanding | 316 | 329 | 319 | 332 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Gross Profit, Selling, General and Administrative Expenses, and Operating Profit Reconciliations | ||||||||||||||||
Net sales | $ | 1,936 | $ | 1,877 | $ | 5,770 | $ | 5,598 | ||||||||
Gross profit, as reported | $ | 650 | $ | 614 | $ | 1,995 | $ | 1,883 | ||||||||
Rationalization charges | 1 | 4 | 3 | 10 | ||||||||||||
Gross profit, as adjusted | $ | 651 | $ | 618 | $ | 1,998 | $ | 1,893 | ||||||||
Gross margin, as reported | 33.6 | % | 32.7 | % | 34.6 | % | 33.6 | % | ||||||||
Gross margin, as adjusted | 33.6 | % | 32.9 | % | 34.6 | % | 33.8 | % | ||||||||
Selling, general and administrative expenses, as reported | $ | 355 | $ | 345 | $ | 1,090 | $ | 1,045 | ||||||||
Rationalization charges | — | 2 | — | 6 | ||||||||||||
Selling, general and administrative expenses, as adjusted | $ | 355 | $ | 343 | $ | 1,090 | $ | 1,039 | ||||||||
Selling, general and administrative expenses as percent of net sales, as reported | 18.3 | % | 18.4 | % | 18.9 | % | 18.7 | % | ||||||||
Selling, general and administrative expenses as percent of net sales, as adjusted | 18.3 | % | 18.3 | % | 18.9 | % | 18.6 | % | ||||||||
Operating profit, as reported | $ | 295 | $ | 269 | $ | 905 | $ | 838 | ||||||||
Rationalization charges | 1 | 6 | 3 | 16 | ||||||||||||
Operating profit, as adjusted | $ | 296 | $ | 275 | $ | 908 | $ | 854 | ||||||||
Operating margin, as reported | 15.2 | % | 14.3 | % | 15.7 | % | 15.0 | % | ||||||||
Operating margin, as adjusted | 15.3 | % | 14.7 | % | 15.7 | % | 15.3 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Income Per Common Share Reconciliations | ||||||||||||||||
Income before income taxes, as reported | $ | 256 | $ | 227 | $ | 724 | $ | 657 | ||||||||
Rationalization charges | 1 | 6 | 3 | 16 | ||||||||||||
(Gain) from auction rate securities | — | — | — | (1 | ) | |||||||||||
(Gains) from private equity funds, net | — | (1 | ) | (2 | ) | (2 | ) | |||||||||
(Earnings) from equity investments, net | — | — | (1 | ) | (1 | ) | ||||||||||
Impairment of private equity funds | 2 | — | 2 | — | ||||||||||||
Loss on extinguishment of debt | — | — | 107 | — | ||||||||||||
(Gain) on sale of business | (2 | ) | — | (51 | ) | — | ||||||||||
Income before income taxes, as adjusted | 257 | 232 | 782 | 669 | ||||||||||||
Tax at 34% rate (36% for 2016) | (87 | ) | (84 | ) | (266 | ) | (241 | ) | ||||||||
Less: Net income attributable to noncontrolling interest | 12 | 12 | 35 | 35 | ||||||||||||
Net income, as adjusted | $ | 158 | $ | 136 | $ | 481 | $ | 393 | ||||||||
Net income per common share, as adjusted | $ | 0.50 | $ | 0.41 | $ | 1.51 | $ | 1.18 | ||||||||
Average diluted common shares outstanding | 316 | 329 | 319 | 332 |
Twelve Months Ended December 31, 2017 | ||||||||
Low End | High End | |||||||
Income Per Common Share Outlook | ||||||||
Net income per common share | $ | 1.80 | $ | 1.84 | ||||
Loss on extinguishment of debt | 0.22 | 0.22 | ||||||
(Gain) on sale of business | (0.11 | ) | (0.11 | ) | ||||
Allocation to participating securities per share (1) | 0.02 | 0.02 | ||||||
Net income per common share, as adjusted | $ | 1.93 | $ | 1.97 |
September 30, 2017 | December 31, 2016 | ||||||
Balance Sheet | |||||||
Assets | |||||||
Current Assets: | |||||||
Cash and cash investments | $ | 1,141 | $ | 990 | |||
Short-term bank deposits | 77 | 201 | |||||
Receivables | 1,128 | 917 | |||||
Inventories | 866 | 712 | |||||
Prepaid expenses and other | 96 | 114 | |||||
Total Current Assets | 3,308 | 2,934 | |||||
Property and equipment, net | 1,097 | 1,060 | |||||
Goodwill | 801 | 832 | |||||
Other intangible assets, net | 156 | 154 | |||||
Other assets | 121 | 157 | |||||
Total Assets | $ | 5,483 | $ | 5,137 | |||
Liabilities | |||||||
Current Liabilities: | |||||||
Accounts payable | $ | 916 | $ | 800 | |||
Notes payable | 117 | 2 | |||||
Accrued liabilities | 675 | 658 | |||||
Total Current Liabilities | 1,708 | 1,460 | |||||
Long-term debt | 2,969 | 2,995 | |||||
Other liabilities | 746 | 785 | |||||
Total Liabilities | 5,423 | 5,240 | |||||
Equity | 60 | (103 | ) | ||||
Total Liabilities and Equity | $ | 5,483 | $ | 5,137 |
As of September 30, | |||||||
2017 | 2016 | ||||||
Other Financial Data | |||||||
Working Capital Days | |||||||
Receivable days | 51 | 50 | |||||
Inventory days | 63 | 56 | |||||
Payable days | 72 | 72 | |||||
Working capital | $ | 1,078 | $ | 946 | |||
Working capital as a % of sales (LTM) | 14.3 | % | 12.9 | % |
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Cash Flows From (For) Operating Activities: | |||||||
Cash provided by operating activities | $ | 745 | $ | 670 | |||
Working capital changes | (278 | ) | (187 | ) | |||
Net cash from operating activities | 467 | 483 | |||||
Cash Flows From (For) Financing Activities: | |||||||
Retirement of notes | (535 | ) | (1,300 | ) | |||
Purchase of Company common stock | (312 | ) | (242 | ) | |||
Cash dividends paid | (96 | ) | (95 | ) | |||
Dividend paid to noncontrolling interest | (35 | ) | (31 | ) | |||
Issuance of notes, net of issuance costs | 593 | 889 | |||||
Debt extinguishment costs | (104 | ) | (40 | ) | |||
Issuance of Company common stock | — | 1 | |||||
Employee withholding taxes paid on stock-based compensation | (29 | ) | (40 | ) | |||
Decrease in debt, net | — | (2 | ) | ||||
Net cash for financing activities | (518 | ) | (860 | ) | |||
Cash Flows From (For) Investing Activities: | |||||||
Capital expenditures | (113 | ) | (117 | ) | |||
Proceeds from disposition of business | 128 | — | |||||
Other, net | 142 | 77 | |||||
Net cash from (for) investing activities | 157 | (40 | ) | ||||
Effect of exchange rate changes on cash and cash investments | 45 | (10 | ) | ||||
Cash and Cash Investments: | |||||||
Increase (decrease) for the period | 151 | (427 | ) | ||||
At January 1 | 990 | 1,468 | |||||
At September 30 | $ | 1,141 | $ | 1,041 |
As of September 30, | |||||||
2017 | 2016 | ||||||
Liquidity | |||||||
Cash and cash investments | $ | 1,141 | $ | 1,041 | |||
Short-term bank deposits | 77 | 182 | |||||
Total Liquidity | $ | 1,218 | $ | 1,223 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2017 | 2016 | Change | 2017 | 2016 | Change | ||||||||||||||||
Plumbing Products | |||||||||||||||||||||
Net sales | $ | 951 | $ | 899 | 6 | % | $ | 2,763 | $ | 2,635 | 5 | % | |||||||||
Operating profit, as reported | $ | 175 | $ | 174 | $ | 529 | $ | 491 | |||||||||||||
Operating margin, as reported | 18.4 | % | 19.4 | % | 19.1 | % | 18.6 | % | |||||||||||||
Rationalization charges | — | 5 | — | 11 | |||||||||||||||||
Accelerated depreciation related to rationalization activity | 1 | — | 1 | — | |||||||||||||||||
Operating profit, as adjusted | 176 | 179 | 530 | 502 | |||||||||||||||||
Operating margin, as adjusted | 18.5 | % | 19.9 | % | 19.2 | % | 19.1 | % | |||||||||||||
Depreciation and amortization | 16 | 14 | 45 | 42 | |||||||||||||||||
EBITDA, as adjusted | $ | 192 | $ | 193 | $ | 575 | $ | 544 | |||||||||||||
Decorative Architectural Products | |||||||||||||||||||||
Net sales | $ | 553 | $ | 536 | 3 | % | $ | 1,711 | $ | 1,649 | 4 | % | |||||||||
Operating profit, as reported | $ | 104 | $ | 111 | $ | 346 | $ | 355 | |||||||||||||
Operating margin, as reported | 18.8 | % | 20.7 | % | 20.2 | % | 21.5 | % | |||||||||||||
Depreciation and amortization | 4 | 4 | 12 | 12 | |||||||||||||||||
EBITDA | $ | 108 | $ | 115 | $ | 358 | $ | 367 | |||||||||||||
Cabinetry Products | |||||||||||||||||||||
Net sales | $ | 229 | $ | 239 | (4 | )% | $ | 711 | $ | 736 | (3 | )% | |||||||||
Operating profit, as reported | $ | 19 | $ | 19 | $ | 65 | $ | 77 | |||||||||||||
Operating margin, as reported | 8.3 | % | 7.9 | % | 9.1 | % | 10.5 | % | |||||||||||||
Rationalization charges | — | — | 2 | 4 | |||||||||||||||||
Accelerated depreciation related to rationalization activity | — | 1 | — | 1 | |||||||||||||||||
Operating profit, as adjusted | 19 | 20 | 67 | 82 | |||||||||||||||||
Operating margin, as adjusted | 8.3 | % | 8.4 | % | 9.4 | % | 11.1 | % | |||||||||||||
Depreciation and amortization | 3 | 4 | 11 | 14 | |||||||||||||||||
EBITDA, as adjusted | $ | 22 | $ | 24 | $ | 78 | $ | 96 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2017 | 2016 | Change | 2017 | 2016 | Change | ||||||||||||||||
Windows and Other Specialty Products | |||||||||||||||||||||
Net sales | $ | 203 | $ | 203 | — | % | $ | 585 | $ | 578 | 1 | % | |||||||||
Operating profit (loss), as reported | $ | 23 | $ | (10 | ) | $ | 47 | $ | (9 | ) | |||||||||||
Operating margin, as reported | 11.3 | % | (4.9 | )% | 8.0 | % | (1.6 | )% | |||||||||||||
Depreciation and amortization | 5 | 6 | 16 | 16 | |||||||||||||||||
EBITDA | $ | 28 | $ | (4 | ) | $ | 63 | $ | 7 | ||||||||||||
Total | |||||||||||||||||||||
Net sales | $ | 1,936 | $ | 1,877 | 3 | % | $ | 5,770 | $ | 5,598 | 3 | % | |||||||||
Operating profit, as reported - segment | $ | 321 | $ | 294 | $ | 987 | $ | 914 | |||||||||||||
General corporate expense, net (GCE) | (26 | ) | (25 | ) | (82 | ) | (76 | ) | |||||||||||||
Operating profit, as reported | 295 | 269 | 905 | 838 | |||||||||||||||||
Operating margin, as reported | 15.2 | % | 14.3 | % | 15.7 | % | 15.0 | % | |||||||||||||
Rationalization charges - segment | — | 5 | 2 | 15 | |||||||||||||||||
Accelerated depreciation - segment | 1 | 1 | 1 | 1 | |||||||||||||||||
Operating profit, as adjusted | 296 | 275 | -$336,000,000 | 908 | 854 | -$336,000,000 | |||||||||||||||
Operating margin, as adjusted | 15.3 | % | 14.7 | % | 15.7 | % | 15.3 | % | |||||||||||||
Depreciation and amortization - segment | 28 | 28 | 84 | 84 | |||||||||||||||||
Depreciation and amortization - non-operating | 2 | 5 | 10 | 15 | |||||||||||||||||
EBITDA, as adjusted | $ | 326 | $ | 308 | $ | 1,002 | $ | 953 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2017 | 2016 | Change | 2017 | 2016 | Change | ||||||||||||||||
North American | |||||||||||||||||||||
Net sales | $ | 1,529 | $ | 1,497 | 2 | % | $ | 4,600 | $ | 4,445 | 3 | % | |||||||||
Operating profit, as reported | $ | 266 | $ | 235 | $ | 835 | $ | 749 | |||||||||||||
Operating margin, as reported | 17.4 | % | 15.7 | % | 18.2 | % | 16.9 | % | |||||||||||||
Rationalization charges | — | 4 | 2 | 11 | |||||||||||||||||
Accelerated depreciation related to rationalization activity | 1 | 1 | 1 | 1 | |||||||||||||||||
Operating profit, as adjusted | 267 | 240 | 838 | 761 | |||||||||||||||||
Operating margin, as adjusted | 17.5 | % | 16.0 | % | 18.2 | % | 17.1 | % | |||||||||||||
Depreciation and amortization | 18 | 19 | 56 | 57 | |||||||||||||||||
EBITDA, as adjusted | $ | 285 | $ | 259 | $ | 894 | $ | 818 | |||||||||||||
International | |||||||||||||||||||||
Net sales | $ | 407 | $ | 380 | 7 | % | $ | 1,170 | $ | 1,153 | 1 | % | |||||||||
Operating profit, as reported | $ | 55 | $ | 59 | $ | 152 | $ | 165 | |||||||||||||
Operating margin, as reported | 13.5 | % | 15.5 | % | 13.0 | % | 14.3 | % | |||||||||||||
Rationalization charges | — | 1 | — | 4 | |||||||||||||||||
Operating profit, as adjusted | 55 | 60 | 152 | 169 | |||||||||||||||||
Operating margin, as adjusted | 13.5 | % | 15.8 | % | 13.0 | % | 14.7 | % | |||||||||||||
Depreciation and amortization | 10 | 9 | 28 | 27 | |||||||||||||||||
EBITDA, as adjusted | $ | 65 | $ | 69 | $ | 180 | $ | 196 | |||||||||||||
Total | |||||||||||||||||||||
Net sales | $ | 1,936 | $ | 1,877 | 3 | % | $ | 5,770 | $ | 5,598 | 3 | % | |||||||||
Operating profit, as reported - segment | $ | 321 | $ | 294 | $ | 987 | $ | 914 | |||||||||||||
General corporate expense, net (GCE) | (26 | ) | (25 | ) | (82 | ) | (76 | ) | |||||||||||||
Operating profit, as reported | 295 | 269 | 905 | 838 | |||||||||||||||||
Operating margin, as reported | 15.2 | % | 14.3 | % | 15.7 | % | 15.0 | % | |||||||||||||
Rationalization charges - segment | — | 5 | 2 | 15 | |||||||||||||||||
Accelerated depreciation - segment | 1 | 1 | 1 | 1 | |||||||||||||||||
Operating profit, as adjusted | 296 | 275 | 908 | 854 | |||||||||||||||||
Operating margin, as adjusted | 15.3 | % | 14.7 | % | 15.7 | % | 15.3 | % | |||||||||||||
Depreciation and amortization - segment | 28 | 28 | 84 | 84 | |||||||||||||||||
Depreciation and amortization - non-operating | 2 | 5 | 10 | 15 | |||||||||||||||||
EBITDA, as adjusted | $ | 326 | $ | 308 | $ | 1,002 | $ | 953 |
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