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 fourth quarter increased 7 percent to $1.9 billion; in local currency, sales increased 5 percent |
• | Operating profit for the quarter grew 23 percent to $264 million; adjusted operating profit grew 20 percent to $265 million |
• | Earnings per share for the quarter decreased 10 percent to $0.27 per share; adjusted earnings per share grew 33 percent to $0.44 per share |
• | Completed the acquisition of Mercury Plastics, Inc. and signed a definitive agreement to acquire The L.D. Kichler Co. for combined expected purchase price of approximately $640 million |
• | Anticipate 2018 earnings per share to be in the range of $2.36 - $2.51 per share, and on an adjusted basis to be in the range of $2.48 - $2.63 per share |
• | On a reported basis, compared to fourth quarter 2016: |
• | Net sales increased 7 percent to $1.9 billion; in local currency, net sales increased 5 percent |
• | In local currency, North American sales increased 5 percent and international sales increased 3 percent |
• | Gross margin improved to 32.9 percent from 32.6 percent |
• | Operating margin increased 190 basis points to 14.1 percent from 12.2 percent |
• | Net income was $0.27 per share compared to $0.30 per share |
• | Compared to fourth 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 margin improved to 32.9 percent compared to 32.8 percent |
• | Operating margin increased to 14.1 percent compared to 12.6 percent |
• | Net income was $0.44 per share compared to $0.33 per share |
• | Liquidity at the end of the fourth quarter was approximately $1.3 billion |
• | Plumbing Products’ net sales increased 9 percent (6 percent excluding the impact of foreign currency translation), driven by growth in North America and internationally |
• | Decorative Architectural Products’ net sales increased 12 percent, driven by strong volume growth in both coatings and builders’ hardware |
• | Cabinetry Products’ net sales decreased 5 percent; excluding the impact of the divestiture of UK-based Moores Furniture Group in the fourth quarter, net sales decreased 1 percent |
• | Windows and Other Specialty Products’ net sales decreased 3 percent; excluding the impact of the divestiture of Arrow Fastener in the second quarter, net sales increased 6 percent, driven by net selling price increases at our North American windows business |
• | Sales for the year increased 4 percent to $7.6 billion; in local currency, sales increased 4 percent |
• | Operating profit grew 11 percent to $1,169 million; adjusted operating profit grew 9 percent to $1,173 million |
• | Operating profit margin for the year increased to 15.3 percent, a 100 basis point expansion; adjusted operating profit margin increased to 15.3 percent, a 70 basis point expansion |
• | Earnings per share for the year grew 13 percent to $1.66 per share; adjusted earnings per share grew 28 percent to $1.94 per share |
• | On a reported basis, compared to full year 2016: |
• | Net sales increased 4 percent to $7.6 billion |
• | In local currency, both North American and international sales increased 4 percent |
• | Gross margin improved to 34.2 percent from 33.4 percent |
• | Operating margin increased to 15.3 percent from 14.3 percent |
• | Net income was $1.66 per share compared to $1.47 per share |
• | Compared to full year 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 margin improved to 34.2 percent compared to 33.6 percent |
• | Operating margin increased to 15.3 percent compared to 14.6 percent |
• | Net income was $1.94 per share compared to $1.51 per share |
• | Free cash flow was $564 million |
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net sales | $ | 1,874 | $ | 1,759 | $ | 7,644 | $ | 7,357 | ||||||||
Cost of sales | 1,258 | 1,186 | 5,033 | 4,901 | ||||||||||||
Gross profit | 616 | 573 | 2,611 | 2,456 | ||||||||||||
Selling, general and administrative expenses | 352 | 358 | 1,442 | 1,403 | ||||||||||||
Operating profit | 264 | 215 | 1,169 | 1,053 | ||||||||||||
Other income (expense), net: | ||||||||||||||||
Interest expense | (39 | ) | (43 | ) | (278 | ) | (229 | ) | ||||||||
Other, net | (64 | ) | 1 | (6 | ) | 6 | ||||||||||
(103 | ) | (42 | ) | (284 | ) | (223 | ) | |||||||||
Income before income taxes | 161 | 173 | 885 | 830 | ||||||||||||
Income tax expense | 62 | 67 | 305 | 296 | ||||||||||||
Net income | 99 | 106 | 580 | 534 | ||||||||||||
Less: Net income attributable to noncontrolling interest | 12 | 8 | 47 | 43 | ||||||||||||
Net income attributable to Masco Corporation | $ | 87 | $ | 98 | $ | 533 | $ | 491 | ||||||||
Income per common share attributable to Masco Corporation (diluted): | ||||||||||||||||
Net income | $ | 0.27 | $ | 0.30 | $ | 1.66 | $ | 1.47 | ||||||||
Average diluted common shares outstanding | 314 | 323 | 318 | 330 |
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Gross Profit, Selling, General and Administrative Expenses, and Operating Profit Reconciliations | |||||||||||||||
Net sales | $ | 1,874 | $ | 1,759 | $ | 7,644 | $ | 7,357 | |||||||
Gross profit, as reported | $ | 616 | $ | 573 | $ | 2,611 | $ | 2,456 | |||||||
Rationalization charges | 1 | 4 | 4 | 14 | |||||||||||
Gross profit, as adjusted | $ | 617 | $ | 577 | $ | 2,615 | $ | 2,470 | |||||||
Gross margin, as reported | 32.9 | % | 32.6 | % | 34.2 | % | 33.4 | % | |||||||
Gross margin, as adjusted | 32.9 | % | 32.8 | % | 34.2 | % | 33.6 | % | |||||||
Selling, general and administrative expenses, as reported | $ | 352 | $ | 358 | $ | 1,442 | $ | 1,403 | |||||||
Rationalization charges | — | 2 | — | 8 | |||||||||||
Selling, general and administrative expenses, as adjusted | $ | 352 | $ | 356 | $ | 1,442 | $ | 1,395 | |||||||
Selling, general and administrative expenses as percent of net sales, as reported | 18.8 | % | 20.4 | % | 18.9 | % | 19.1 | % | |||||||
Selling, general and administrative expenses as percent of net sales, as adjusted | 18.8 | % | 20.2 | % | 18.9 | % | 19.0 | % | |||||||
Operating profit, as reported | $ | 264 | $ | 215 | $ | 1,169 | $ | 1,053 | |||||||
Rationalization charges | 1 | 6 | 4 | 22 | |||||||||||
Operating profit, as adjusted | $ | 265 | $ | 221 | $ | 1,173 | $ | 1,075 | |||||||
Operating margin, as reported | 14.1 | % | 12.2 | % | 15.3 | % | 14.3 | % | |||||||
Operating margin, as adjusted | 14.1 | % | 12.6 | % | 15.3 | % | 14.6 | % |
Twelve Months Ended December 31, 2017 | |||
Free Cash Flow Reconciliation | |||
Cash from Operations | $ | 751 | |
Capital expenditures | (173 | ) | |
Displays | (14 | ) | |
Free Cash Flow | $ | 564 |
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Income Per Common Share Reconciliation | |||||||||||||||
Income before income taxes, as reported | $ | 161 | $ | 173 | $ | 885 | $ | 830 | |||||||
Rationalization charges | 1 | 6 | 4 | 22 | |||||||||||
(Gain) from auction rate securities | — | (2 | ) | — | (3 | ) | |||||||||
(Gains) from private equity funds, net | (1 | ) | (3 | ) | (3 | ) | (5 | ) | |||||||
(Earnings) from equity investments, net | — | (1 | ) | (1 | ) | (2 | ) | ||||||||
Impairment of private equity funds | — | — | 2 | — | |||||||||||
Loss on extinguishment of debt | — | — | 107 | — | |||||||||||
Loss on sales of businesses, net | 64 | — | 13 | — | |||||||||||
Loss from other investments | — | 3 | — | 3 | |||||||||||
Income before income taxes, as adjusted | 225 | 176 | 1,007 | 845 | |||||||||||
Tax at 34% rate (36% for 2016) | (76 | ) | (63 | ) | (342 | ) | (304 | ) | |||||||
Less: Net income attributable to noncontrolling interest | 12 | 8 | 47 | 43 | |||||||||||
Net income, as adjusted | $ | 137 | $ | 105 | $ | 618 | $ | 498 | |||||||
Net income per common share, as adjusted | $ | 0.44 | $ | 0.33 | $ | 1.94 | $ | 1.51 | |||||||
Average diluted common shares outstanding | 314 | 323 | 318 | 330 |
Twelve Months Ended December 31, 2018 | ||||||||
Low End | High End | |||||||
Income Per Common Share Reconciliation | ||||||||
Net income per common share | $ | 2.36 | $ | 2.51 | ||||
Rationalization charges | 0.01 | 0.01 | ||||||
Kichler inventory purchase accounting adjustment | 0.08 | 0.08 | ||||||
Allocation to participating securities per share (1) | 0.03 | 0.03 | ||||||
Net income per common share, as adjusted | $ | 2.48 | $ | 2.63 |
December 31, 2017 | December 31, 2016 | |||||||
Balance Sheet | ||||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash investments | $ | 1,194 | $ | 990 | ||||
Short-term bank deposits | 108 | 201 | ||||||
Receivables | 1,021 | 917 | ||||||
Inventories | 796 | 712 | ||||||
Prepaid expenses and other | 96 | 114 | ||||||
Total Current Assets | 3,215 | 2,934 | ||||||
Property and equipment, net | 1,129 | 1,060 | ||||||
Goodwill | 841 | 832 | ||||||
Other intangible assets, net | 187 | 154 | ||||||
Other assets | 116 | 157 | ||||||
Total Assets | $ | 5,488 | $ | 5,137 | ||||
Liabilities | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 824 | $ | 800 | ||||
Notes payable | 116 | 2 | ||||||
Accrued liabilities | 688 | 658 | ||||||
Total Current Liabilities | 1,628 | 1,460 | ||||||
Long-term debt | 2,969 | 2,995 | ||||||
Other liabilities | 715 | 785 | ||||||
Total Liabilities | 5,312 | 5,240 | ||||||
Equity | 176 | (103 | ) | |||||
Total Liabilities and Equity | $ | 5,488 | $ | 5,137 |
As of | ||||||||
December 31, 2017 | December 31, 2016 | |||||||
Other Financial Data | ||||||||
Working Capital Days | ||||||||
Receivable days | 51 | 49 | ||||||
Inventory days | 59 | 54 | ||||||
Payable days | 72 | 70 | ||||||
Working capital | $ | 993 | $ | 829 | ||||
Working capital as a % of sales (LTM) | 13.0 | % | 11.3 | % |
Twelve Months Ended December 31, | ||||||||
2017 | 2016 | |||||||
Cash Flows From (For) Operating Activities: | ||||||||
Cash provided by operating activities | $ | 901 | $ | 877 | ||||
Working capital changes | (150 | ) | (88 | ) | ||||
Net cash from operating activities | 751 | 789 | ||||||
Cash Flows From (For) Financing Activities: | ||||||||
Retirement of notes | (535 | ) | (1,300 | ) | ||||
Purchase of Company common stock | (331 | ) | (459 | ) | ||||
Cash dividends paid | (129 | ) | (128 | ) | ||||
Dividends 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 | (33 | ) | (40 | ) | ||||
Decrease in debt, net | (3 | ) | (1 | ) | ||||
Net cash for financing activities | (577 | ) | (1,109 | ) | ||||
Cash Flows From (For) Investing Activities: | ||||||||
Capital expenditures | (173 | ) | (180 | ) | ||||
Acquisition of businesses, net of cash acquired | (89 | ) | — | |||||
Proceeds from disposition of businesses, net of cash disposed | 128 | — | ||||||
Proceeds from disposition of short-term bank deposits, net of cash purchases | 112 | 40 | ||||||
Other, net | (3 | ) | 16 | |||||
Net cash for investing activities | (25 | ) | (124 | ) | ||||
Effect of exchange rate changes on cash and cash investments | 55 | (34 | ) | |||||
Cash and Cash Investments: | ||||||||
Increase (decrease) for the period | 204 | (478 | ) | |||||
At January 1 | 990 | 1,468 | ||||||
At December 31 | $ | 1,194 | $ | 990 |
As of | ||||||||
December 31, 2017 | December 31, 2016 | |||||||
Liquidity | ||||||||
Cash and cash investments | $ | 1,194 | $ | 990 | ||||
Short-term bank deposits | 108 | 201 | ||||||
Total Liquidity | $ | 1,302 | $ | 1,191 |
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||||
2017 | 2016 | Change | 2017 | 2016 | Change | ||||||||||||||||
Plumbing Products | |||||||||||||||||||||
Net sales | $ | 972 | $ | 891 | 9 | % | $ | 3,735 | $ | 3,526 | 6 | % | |||||||||
Operating profit, as reported | $ | 169 | $ | 151 | $ | 698 | $ | 642 | |||||||||||||
Operating margin, as reported | 17.4 | % | 16.9 | % | 18.7 | % | 18.2 | % | |||||||||||||
Rationalization charges | 1 | 2 | 1 | 13 | |||||||||||||||||
Accelerated depreciation related to rationalization activity | — | — | 1 | — | |||||||||||||||||
Operating profit, as adjusted | 170 | 153 | 700 | 655 | |||||||||||||||||
Operating margin, as adjusted | 17.5 | % | 17.2 | % | 18.7 | % | 18.6 | % | |||||||||||||
Depreciation and amortization | 17 | 15 | 62 | 57 | |||||||||||||||||
EBITDA, as adjusted | $ | 187 | $ | 168 | $ | 762 | $ | 712 | |||||||||||||
Decorative Architectural Products | |||||||||||||||||||||
Net sales | $ | 494 | $ | 443 | 12 | % | $ | 2,205 | $ | 2,092 | 5 | % | |||||||||
Operating profit, as reported | $ | 88 | $ | 75 | $ | 434 | $ | 430 | |||||||||||||
Operating margin, as reported | 17.8 | % | 16.9 | % | 19.7 | % | 20.6 | % | |||||||||||||
Depreciation and amortization | 4 | 4 | 16 | 16 | |||||||||||||||||
EBITDA | $ | 92 | $ | 79 | $ | 450 | $ | 446 | |||||||||||||
Cabinetry Products | |||||||||||||||||||||
Net sales | $ | 223 | $ | 234 | (5 | )% | $ | 934 | $ | 970 | (4 | )% | |||||||||
Operating profit, as reported | $ | 25 | $ | 16 | $ | 90 | $ | 93 | |||||||||||||
Operating margin, as reported | 11.2 | % | 6.8 | % | 9.6 | % | 9.6 | % | |||||||||||||
Rationalization charges | — | — | 2 | 4 | |||||||||||||||||
Accelerated depreciation related to rationalization activity | — | 3 | — | 4 | |||||||||||||||||
Operating profit, as adjusted | 25 | 19 | 92 | 101 | |||||||||||||||||
Operating margin, as adjusted | 11.2 | % | 8.1 | % | 9.9 | % | 10.4 | % | |||||||||||||
Depreciation and amortization | 3 | 3 | 14 | 17 | |||||||||||||||||
EBITDA, as adjusted | $ | 28 | $ | 22 | $ | 106 | $ | 118 |
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||||
2017 | 2016 | Change | 2017 | 2016 | Change | ||||||||||||||||
Windows and Other Specialty Products | |||||||||||||||||||||
Net sales | $ | 185 | $ | 191 | (3 | )% | $ | 770 | $ | 769 | — | % | |||||||||
Operating profit (loss), as reported | $ | 5 | $ | 6 | $ | 52 | $ | (3 | ) | ||||||||||||
Operating margin, as reported | 2.7 | % | 3.1 | % | 6.8 | % | (0.4 | )% | |||||||||||||
Rationalization charges | — | 1 | — | 1 | |||||||||||||||||
Operating profit (loss), as adjusted | 5 | 7 | 52 | (2 | ) | ||||||||||||||||
Operating margin, as adjusted | 2.7 | % | 3.7 | % | 6.8 | % | (0.3 | )% | |||||||||||||
Depreciation and amortization | 5 | 5 | 21 | 21 | |||||||||||||||||
EBITDA, as adjusted | $ | 10 | $ | 12 | $ | 73 | $ | 19 | |||||||||||||
Total | |||||||||||||||||||||
Net sales | $ | 1,874 | $ | 1,759 | 7 | % | $ | 7,644 | $ | 7,357 | 4 | % | |||||||||
Operating profit, as reported - segment | $ | 287 | $ | 248 | $ | 1,274 | $ | 1,162 | |||||||||||||
General corporate expense, net (GCE) | (23 | ) | (33 | ) | (105 | ) | (109 | ) | |||||||||||||
Operating profit, as reported | 264 | 215 | 1,169 | 1,053 | |||||||||||||||||
Operating margin, as reported | 14.1 | % | 12.2 | % | 15.3 | % | 14.3 | % | |||||||||||||
Rationalization charges - segment | 1 | 3 | 3 | 18 | |||||||||||||||||
Accelerated depreciation - segment | — | 3 | 1 | 4 | |||||||||||||||||
Operating profit, as adjusted | 265 | 221 | 1,173 | 1,075 | |||||||||||||||||
Operating margin, as adjusted | 14.1 | % | 12.6 | % | 15.3 | % | 14.6 | % | |||||||||||||
Depreciation and amortization - segment | 29 | 27 | 113 | 111 | |||||||||||||||||
Depreciation and amortization - non-operating | 3 | 4 | 13 | 19 | |||||||||||||||||
EBITDA, as adjusted | $ | 297 | $ | 252 | $ | 1,299 | $ | 1,205 |
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||||||||
2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||||||||
North American | ||||||||||||||||||||||
Net sales | $ | 1,469 | $ | 1,389 | 6 | % | $ | 6,069 | $ | 5,834 | 4 | % | ||||||||||
Operating profit, as reported | $ | 237 | $ | 212 | $ | 1,072 | $ | 961 | ||||||||||||||
Operating margin, as reported | 16.1 | % | 15.3 | % | 17.7 | % | 16.5 | % | ||||||||||||||
Rationalization charges | 1 | — | 3 | 11 | ||||||||||||||||||
Accelerated depreciation related to rationalization activity | — | 3 | 1 | 4 | ||||||||||||||||||
Operating profit, as adjusted | 238 | 215 | 1,076 | — | 976 | |||||||||||||||||
Operating margin, as adjusted | 16.2 | % | 15.5 | % | 17.7 | % | 16.7 | % | ||||||||||||||
Depreciation and amortization | 18 | 17 | 74 | 74 | ||||||||||||||||||
EBITDA, as adjusted | $ | 256 | $ | 232 | $ | 1,150 | $ | 1,050 | ||||||||||||||
International | ||||||||||||||||||||||
Net sales | $ | 405 | $ | 370 | 9 | % | $ | 1,575 | $ | 1,523 | 3 | % | ||||||||||
Operating profit, as reported | $ | 50 | $ | 36 | $ | 202 | $ | 201 | ||||||||||||||
Operating margin, as reported | 12.3 | % | 9.7 | % | 12.8 | % | 13.2 | % | ||||||||||||||
Rationalization charges | — | 3 | — | 7 | ||||||||||||||||||
Operating profit, as adjusted | 50 | 39 | 202 | 208 | ||||||||||||||||||
Operating margin, as adjusted | 12.3 | % | 10.5 | % | 12.8 | % | 13.7 | % | ||||||||||||||
Depreciation and amortization | 11 | 10 | 39 | 37 | ||||||||||||||||||
EBITDA, as adjusted | $ | 61 | $ | 49 | $ | 241 | $ | 245 | ||||||||||||||
Total | ||||||||||||||||||||||
Net sales | $ | 1,874 | $ | 1,759 | 7 | % | $ | 7,644 | $ | 7,357 | 4 | % | ||||||||||
Operating profit, as reported - segment | $ | 287 | $ | 248 | $ | 1,274 | $ | 1,162 | ||||||||||||||
General corporate expense, net (GCE) | (23 | ) | (33 | ) | (105 | ) | (109 | ) | ||||||||||||||
Operating profit, as reported | 264 | 215 | 1,169 | 1,053 | ||||||||||||||||||
Operating margin, as reported | 14.1 | % | 12.2 | % | 15.3 | % | 14.3 | % | ||||||||||||||
Rationalization charges - segment | 1 | 3 | 3 | 18 | ||||||||||||||||||
Accelerated depreciation - segment | — | 3 | 1 | 4 | ||||||||||||||||||
Operating profit, as adjusted | 265 | 221 | 1,173 | 1,075 | ||||||||||||||||||
Operating margin, as adjusted | 14.1 | % | 12.6 | % | 15.3 | % | 14.6 | % | ||||||||||||||
Depreciation and amortization - segment | 29 | 27 | 113 | 111 | ||||||||||||||||||
Depreciation and amortization - non-operating | 3 | 4 | 13 | 19 | ||||||||||||||||||
EBITDA, as adjusted | $ | 297 | $ | 252 | $ | 1,299 | $ | 1,205 |
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