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 increased 8 percent to $1.9 billion; in local currency, sales increased 5 percent |
• | Excluding acquisitions and divestitures, sales increased 7 percent; in local currency, sales increased 5 percent |
• | Earnings per share grew 9 percent to $0.47 per share; adjusted earnings per share grew 13 percent to $0.45 per share |
• | Completed the acquisition of The L.D. Kichler Co. for approximately $550 million and returned approximately $183 million to shareholders through dividends and share repurchases |
• | Affirming 2018 anticipated 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 first quarter 2017: |
• | Net sales increased 8 percent to $1.9 billion; in local currency, net sales increased 5 percent |
• | In local currency, North American sales increased 7 percent and international sales decreased 2 percent |
• | Gross margins decreased 180 basis points to 32.2 percent from 34.0 percent |
• | Operating margins decreased 180 basis points to 12.7 percent from 14.5 percent |
• | Net income increased to $0.47 per share compared to $0.43 per share |
• | Compared to first quarter 2017, results for key financial measures, as adjusted for certain items (see Exhibit A) and with a normalized tax rate of 26 percent (34 percent in 2017), were as follows: |
• | Gross margins decreased 150 basis points to 32.6 percent compared to 34.1 percent |
• | Operating margins decreased 160 basis points to 13.0 percent compared to 14.6 percent |
• | Net income increased to $0.45 per share, compared to $0.40 per share |
• | Liquidity at the end of the first quarter was approximately $469 million |
• | 3.7 million shares were repurchased in the first quarter |
• | Plumbing Products’ net sales increased 11 percent (6 percent excluding the impact of foreign currency translation), driven by North American growth |
• | Decorative Architectural Products’ net sales increased 10 percent due to the acquisition of Kichler as well as growth from Behr’s pro initiative and Liberty’s builders’ hardware business |
• | Cabinetry Products’ net sales decreased 6 percent due to the divestiture of Moores as well as decreased sales to U.S. builders, partially offset by mid-single digit growth in the repair and remodel business |
• | Windows and Other Specialty Products’ net sales increased 4 percent (2 percent excluding the impact of foreign currency translation) due to strong growth in our North American windows business |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Net sales | $ | 1,920 | $ | 1,778 | |||
Cost of sales | 1,301 | 1,173 | |||||
Gross profit | 619 | 605 | |||||
Selling, general and administrative expenses | 375 | 348 | |||||
Operating profit | 244 | 257 | |||||
Other income (expense), net: | |||||||
Interest expense | (41 | ) | (43 | ) | |||
Other, net | (3 | ) | (4 | ) | |||
(44 | ) | (47 | ) | ||||
Income before income taxes | 200 | 210 | |||||
Income tax expense | 39 | 62 | |||||
Net income | 161 | 148 | |||||
Less: Net income attributable to noncontrolling interest | 12 | 10 | |||||
Net income attributable to Masco Corporation | $ | 149 | $ | 138 | |||
Income per common share attributable to Masco Corporation (diluted): | |||||||
Net income | $ | 0.47 | $ | 0.43 | |||
Average diluted common shares outstanding | 313 | 321 | |||||
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Gross Profit, Selling, General and Administrative Expenses, and Operating Profit Reconciliations | |||||||
Net sales | $ | 1,920 | $ | 1,778 | |||
Gross profit, as reported | $ | 619 | $ | 605 | |||
Rationalization charges | 1 | 2 | |||||
Kichler inventory step up adjustment | 5 | — | |||||
Gross profit, as adjusted | $ | 625 | $ | 607 | |||
Gross margin, as reported | 32.2 | % | 34.0 | % | |||
Gross margin, as adjusted | 32.6 | % | 34.1 | % | |||
Selling, general and administrative expenses, as reported | $ | 375 | $ | 348 | |||
Selling, general and administrative expenses as percent of net sales, as reported | 19.5 | % | 19.6 | % | |||
Operating profit, as reported | $ | 244 | $ | 257 | |||
Rationalization charges | 1 | 2 | |||||
Kichler inventory step up adjustment | 5 | — | |||||
Operating profit, as adjusted | $ | 250 | $ | 259 | |||
Operating margin, as reported | 12.7 | % | 14.5 | % | |||
Operating margin, as adjusted | 13.0 | % | 14.6 | % |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Income Per Common Share Reconciliations | |||||||
Income before income taxes, as reported | $ | 200 | $ | 210 | |||
Rationalization charges | 1 | 2 | |||||
Kichler inventory step up adjustment | 5 | — | |||||
(Gains) from private equity funds, net | — | (1 | ) | ||||
Income before income taxes, as adjusted | 206 | 211 | |||||
Tax at 26% rate (34% for 2017) | (54 | ) | (72 | ) | |||
Less: Net income attributable to noncontrolling interest | 12 | 10 | |||||
Net income, as adjusted | $ | 140 | $ | 129 | |||
Net income per common share, as adjusted | $ | 0.45 | $ | 0.40 | |||
Average diluted common shares outstanding | 313 | 321 |
Twelve Months Ended December 31, 2018 | ||||||||
Low End | High End | |||||||
Income Per Common Share Outlook | ||||||||
Net income per common share | $ | 2.36 | $ | 2.51 | ||||
Rationalization charges | 0.01 | 0.01 | ||||||
Kichler inventory purchase accounting adjustment | 0.09 | 0.09 | ||||||
Allocation to participating securities per share (1) | 0.02 | 0.02 | ||||||
Net income per common share, as adjusted | $ | 2.48 | $ | 2.63 |
March 31, 2018 | December 31, 2017 | ||||||
Balance Sheet | |||||||
Assets | |||||||
Current Assets: | |||||||
Cash and cash investments | $ | 370 | $ | 1,194 | |||
Short-term bank deposits | 99 | 108 | |||||
Receivables | 1,356 | 1,066 | |||||
Inventories | 1,050 | 784 | |||||
Prepaid expenses and other | 118 | 111 | |||||
Total Current Assets | 2,993 | 3,263 | |||||
Property and equipment, net | 1,183 | 1,129 | |||||
Goodwill | 891 | 841 | |||||
Other intangible assets, net | 429 | 187 | |||||
Other assets | 134 | 114 | |||||
Total Assets | $ | 5,630 | $ | 5,534 | |||
Liabilities | |||||||
Current Liabilities: | |||||||
Accounts payable | $ | 1,008 | $ | 824 | |||
Notes payable | 116 | 116 | |||||
Accrued liabilities | 646 | 727 | |||||
Total Current Liabilities | 1,770 | 1,667 | |||||
Long-term debt | 2,971 | 2,969 | |||||
Other liabilities | 706 | 715 | |||||
Total Liabilities | 5,447 | 5,351 | |||||
Equity | 183 | 183 | |||||
Total Liabilities and Equity | $ | 5,630 | $ | 5,534 |
As of March 31, | |||||||
2018 | 2017 | ||||||
Other Financial Data | |||||||
Working Capital Days | |||||||
Receivable days | 57 | 53 | |||||
Inventory days | 71 | 61 | |||||
Payable days | 71 | 71 | |||||
Working capital | $ | 1,398 | $ | 1,086 | |||
Working capital as a % of sales (LTM) | 18.0 | % | 14.6 | % |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Cash Flows From (For) Operating Activities: | |||||||
Cash provided by operating activities | $ | 210 | $ | 246 | |||
Working capital changes | (265 | ) | (395 | ) | |||
Net cash for operating activities | (55 | ) | (149 | ) | |||
Cash Flows From (For) Financing Activities: | |||||||
Purchase of Company common stock | (150 | ) | (87 | ) | |||
Cash dividends paid | (33 | ) | (32 | ) | |||
Employee withholding taxes paid on stock-based compensation | (32 | ) | (14 | ) | |||
Net cash for financing activities | (215 | ) | (133 | ) | |||
Cash Flows From (For) Investing Activities: | |||||||
Capital expenditures | (40 | ) | (37 | ) | |||
Acquisition of businesses, net of cash acquired | (548 | ) | — | ||||
Other, net | 14 | 11 | |||||
Net cash for investing activities | (574 | ) | (26 | ) | |||
Effect of exchange rate changes on cash and cash investments | 20 | 7 | |||||
Cash and Cash Investments: | |||||||
Decrease for the period | (824 | ) | (301 | ) | |||
At January 1 | 1,194 | 990 | |||||
At March 31 | $ | 370 | $ | 689 |
As of March 31, | |||||||
2018 | 2017 | ||||||
Liquidity | |||||||
Cash and cash investments | $ | 370 | $ | 689 | |||
Short-term bank deposits | 99 | 194 | |||||
Total Liquidity | $ | 469 | $ | 883 |
Three Months Ended March 31, | ||||||||||
2018 | 2017 | Change | ||||||||
Plumbing Products | ||||||||||
Net sales | $ | 971 | $ | 872 | 11 | % | ||||
Operating profit, as reported | $ | 163 | $ | 162 | ||||||
Operating margin, as reported | 16.8 | % | 18.6 | % | ||||||
Rationalization charges | 1 | — | ||||||||
Operating profit, as adjusted | 164 | 162 | ||||||||
Operating margin, as adjusted | 16.9 | % | 18.6 | % | ||||||
Depreciation and amortization | 18 | 14 | ||||||||
EBITDA, as adjusted | $ | 182 | $ | 176 | ||||||
Decorative Architectural Products | ||||||||||
Net sales | $ | 545 | $ | 496 | 10 | % | ||||
Operating profit, as reported | $ | 89 | $ | 94 | ||||||
Operating margin, as reported | 16.3 | % | 19.0 | % | ||||||
Kichler inventory step up adjustment | 5 | — | ||||||||
Operating profit, as adjusted | 94 | 94 | ||||||||
Operating margin, as adjusted | 17.2 | % | 19.0 | % | ||||||
Depreciation and amortization | 5 | 4 | ||||||||
EBITDA, as adjusted | $ | 99 | $ | 98 | ||||||
Cabinetry Products | ||||||||||
Net sales | $ | 217 | $ | 231 | (6 | )% | ||||
Operating profit, as reported | $ | 6 | $ | 16 | ||||||
Operating margin, as reported | 2.8 | % | 6.9 | % | ||||||
Rationalization charges | — | 2 | ||||||||
Operating profit, as adjusted | 6 | 18 | ||||||||
Operating margin, as adjusted | 2.8 | % | 7.8 | % | ||||||
Depreciation and amortization | 3 | 4 | ||||||||
EBITDA, as adjusted | $ | 9 | $ | 22 |
Three Months Ended March 31, | ||||||||||
2018 | 2017 | Change | ||||||||
Windows and Other Specialty Products | ||||||||||
Net sales | $ | 187 | $ | 179 | 4 | % | ||||
Operating profit, as reported | $ | 4 | $ | 8 | ||||||
Operating margin, as reported | 2.1 | % | 4.5 | % | ||||||
Depreciation and amortization | 6 | 5 | ||||||||
EBITDA | $ | 10 | $ | 13 | ||||||
Total | ||||||||||
Net sales | $ | 1,920 | $ | 1,778 | 8 | % | ||||
Operating profit, as reported - segment | $ | 262 | $ | 280 | ||||||
General corporate expense, net (GCE) | (18 | ) | (23 | ) | ||||||
Operating profit, as reported | 244 | 257 | ||||||||
Operating margin, as reported | 12.7 | % | 14.5 | % | ||||||
Rationalization charges - segment | 1 | 2 | ||||||||
Kichler inventory step up adjustment | 5 | — | ||||||||
Operating profit, as adjusted | 250 | 259 | -$336,000,000 | |||||||
Operating margin, as adjusted | 13.0 | % | 14.6 | % | ||||||
Depreciation and amortization - segment | 32 | 27 | ||||||||
Depreciation and amortization - non-operating | 2 | 4 | ||||||||
EBITDA, as adjusted | $ | 284 | $ | 290 |
Three Months Ended March 31, | ||||||||||
2018 | 2017 | Change | ||||||||
North American | ||||||||||
Net sales | $ | 1,516 | $ | 1,412 | 7 | % | ||||
Operating profit, as reported | $ | 218 | $ | 238 | ||||||
Operating margin, as reported | 14.4 | % | 16.9 | % | ||||||
Rationalization charges | 1 | 2 | ||||||||
Kichler inventory step up adjustment | 5 | — | ||||||||
Operating profit, as adjusted | 224 | 240 | ||||||||
Operating margin, as adjusted | 14.8 | % | 17.0 | % | ||||||
Depreciation and amortization | 21 | 18 | ||||||||
EBITDA, as adjusted | $ | 245 | $ | 258 | ||||||
International | ||||||||||
Net sales | $ | 404 | $ | 366 | 10 | % | ||||
Operating profit, as reported | $ | 44 | $ | 42 | ||||||
Operating margin, as reported | 10.9 | % | 11.5 | % | ||||||
Depreciation and amortization | 11 | 9 | ||||||||
EBITDA | $ | 55 | $ | 51 | ||||||
Total | ||||||||||
Net sales | $ | 1,920 | $ | 1,778 | 8 | % | ||||
Operating profit, as reported - segment | $ | 262 | $ | 280 | ||||||
General corporate expense, net (GCE) | (18 | ) | (23 | ) | ||||||
Operating profit, as reported | 244 | 257 | ||||||||
Operating margin, as reported | 12.7 | % | 14.5 | % | ||||||
Rationalization charges - segment | 1 | 2 | ||||||||
Kichler inventory step up adjustment | 5 | — | ||||||||
Operating profit, as adjusted | 250 | 259 | ||||||||
Operating margin, as adjusted | 13.0 | % | 14.6 | % | ||||||
Depreciation and amortization - segment | 32 | 27 | ||||||||
Depreciation and amortization - non-operating | 2 | 4 | ||||||||
EBITDA, as adjusted | $ | 284 | $ | 290 |
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