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 11 percent to $2.3 billion; excluding acquisitions, divestitures and currency, sales increased 6 percent |
• | Earnings per share grew 33 percent to $0.68 per share; adjusted earnings per share grew 21 percent to $0.75 per share |
• | Returned approximately $147 million to shareholders through share repurchases and dividends |
• | Updating 2018 anticipated earnings per share to be in the range of $2.34-$2.41 per share, and on an adjusted basis, to be in the range of $2.48-$2.55 per share compared to a previous range of $2.48-$2.63 |
• | Board announces intent to increase annual dividend by $0.06 per share to $0.48 per share, beginning in the fourth quarter |
• | On a reported basis, compared to second quarter 2017: |
• | Net sales increased 11 percent to $2.3 billion; in local currency and excluding acquisitions and divestitures, net sales increased 6 percent |
• | In local currency, North American sales increased 12 percent and international sales matched prior year |
• | Gross margins decreased 340 basis points to 32.7 percent from 36.1 percent |
• | Operating profit decreased 4 percent to $358 million primarily due to the acquisition related inventory step up adjustment of $20 million |
• | Operating margins decreased 240 basis points to 15.6 percent from 18.0 percent |
• | Net income increased to $0.68 per share compared to $0.51 per share |
• | Compared to second 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 250 basis points to 33.6 percent compared to 36.1 percent |
• | Operating profit increased 2 percent to $380 million from $372 million |
• | Operating margins decreased 150 basis points to 16.5 percent compared to 18.0 percent |
• | Net income increased to $0.75 per share, compared to $0.62 per share |
• | Liquidity at the end of the second quarter was $384 million |
• | 3.0 million shares were repurchased in the second quarter |
• | Plumbing Products’ net sales increased 9 percent (6 percent excluding the impact of foreign currency translation), driven by North American and international growth |
• | Decorative Architectural Products’ net sales increased 22 percent due to the acquisition of Kichler and growth in paints and other coatings products and builders’ hardware; excluding the acquisition, net sales grew 6 percent |
• | Cabinetry Products’ net sales increased 7 percent due to strong growth in the repair and remodel business, partially offset by the divestiture of Moores |
• | Windows and Other Specialty Products’ net sales decreased 7 percent; excluding the impact of foreign currency translation and the divestiture of Arrow Fastener, sales matched prior year |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net sales | $ | 2,297 | $ | 2,066 | $ | 4,217 | $ | 3,844 | |||||||
Cost of sales | 1,547 | 1,320 | 2,848 | 2,493 | |||||||||||
Gross profit | 750 | 746 | 1,369 | 1,351 | |||||||||||
Selling, general and administrative expenses | 392 | 374 | 767 | 722 | |||||||||||
Operating profit | 358 | 372 | 602 | 629 | |||||||||||
Other income (expense), net: | |||||||||||||||
Interest expense | (38 | ) | (153 | ) | (79 | ) | (196 | ) | |||||||
Other, net | (8 | ) | 43 | (11 | ) | 39 | |||||||||
(46 | ) | (110 | ) | (90 | ) | (157 | ) | ||||||||
Income before income taxes | 312 | 262 | 512 | 472 | |||||||||||
Income tax expense | 88 | 86 | 127 | 148 | |||||||||||
Net income | 224 | 176 | 385 | 324 | |||||||||||
Less: Net income attributable to noncontrolling interest | 13 | 13 | 25 | 23 | |||||||||||
Net income attributable to Masco Corporation | $ | 211 | $ | 163 | $ | 360 | $ | 301 | |||||||
Income per common share attributable to Masco Corporation (diluted): | |||||||||||||||
Net income | $ | 0.68 | $ | 0.51 | $ | 1.15 | $ | 0.93 | |||||||
Average diluted common shares outstanding | 309 | 319 | 311 | 320 | |||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Gross Profit, Selling, General and Administrative Expenses, and Operating Profit Reconciliations | |||||||||||||||
Net sales | $ | 2,297 | $ | 2,066 | $ | 4,217 | $ | 3,844 | |||||||
Gross profit, as reported | $ | 750 | $ | 746 | $ | 1,369 | $ | 1,351 | |||||||
Rationalization charges | 2 | — | 3 | 2 | |||||||||||
Kichler inventory step up adjustment | 20 | — | 25 | — | |||||||||||
Gross profit, as adjusted | $ | 772 | $ | 746 | $ | 1,397 | $ | 1,353 | |||||||
Gross margin, as reported | 32.7 | % | 36.1 | % | 32.5 | % | 35.1 | % | |||||||
Gross margin, as adjusted | 33.6 | % | 36.1 | % | 33.1 | % | 35.2 | % | |||||||
Selling, general and administrative expenses, as reported | $ | 392 | $ | 374 | $ | 767 | $ | 722 | |||||||
Selling, general and administrative expenses as percent of net sales, as reported | 17.1 | % | 18.1 | % | 18.2 | % | 18.8 | % | |||||||
Operating profit, as reported | $ | 358 | $ | 372 | $ | 602 | $ | 629 | |||||||
Rationalization charges | 2 | — | 3 | 2 | |||||||||||
Kichler inventory step up adjustment | 20 | — | 25 | — | |||||||||||
Operating profit, as adjusted | $ | 380 | $ | 372 | $ | 630 | $ | 631 | |||||||
Operating margin, as reported | 15.6 | % | 18.0 | % | 14.3 | % | 16.4 | % | |||||||
Operating margin, as adjusted | 16.5 | % | 18.0 | % | 14.9 | % | 16.4 | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Income Per Common Share Reconciliations | |||||||||||||||
Income before income taxes, as reported | $ | 312 | $ | 262 | $ | 512 | $ | 472 | |||||||
Rationalization charges | 2 | — | 3 | 2 | |||||||||||
Kichler inventory step up adjustment | 20 | — | 25 | — | |||||||||||
(Gains) from private equity funds, net | — | (1 | ) | — | (2 | ) | |||||||||
(Earnings) from equity investments, net | (2 | ) | (1 | ) | (2 | ) | (1 | ) | |||||||
Loss on extinguishment of debt | — | 107 | — | 107 | |||||||||||
(Gain) on sale of business | — | (49 | ) | — | (49 | ) | |||||||||
Income before income taxes, as adjusted | 332 | 318 | 538 | 529 | |||||||||||
Tax at 26% rate (34% for 2017) | (86 | ) | (108 | ) | (140 | ) | (180 | ) | |||||||
Less: Net income attributable to noncontrolling interest | 13 | 13 | 25 | 23 | |||||||||||
Net income, as adjusted | $ | 233 | $ | 197 | $ | 373 | $ | 326 | |||||||
Net income per common share, as adjusted | $ | 0.75 | $ | 0.62 | $ | 1.20 | $ | 1.02 | |||||||
Average diluted common shares outstanding | 309 | 319 | 311 | 320 |
Twelve Months Ended December 31, 2018 | |||||||
Low End | High End | ||||||
Income Per Common Share Outlook | |||||||
Net income per common share | $ | 2.34 | $ | 2.41 | |||
Rationalization charges | 0.02 | 0.02 | |||||
Kichler inventory purchase accounting adjustment | 0.10 | 0.10 | |||||
Allocation to participating securities per share (1) | 0.02 | 0.02 | |||||
Net income per common share, as adjusted | $ | 2.48 | $ | 2.55 |
June 30, 2018 | December 31, 2017 | ||||||
Balance Sheet | |||||||
Assets | |||||||
Current Assets: | |||||||
Cash and cash investments | $ | 384 | $ | 1,194 | |||
Short-term bank deposits | — | 108 | |||||
Receivables | 1,444 | 1,066 | |||||
Inventories | 1,017 | 784 | |||||
Prepaid expenses and other | 117 | 111 | |||||
Total Current Assets | 2,962 | 3,263 | |||||
Property and equipment, net | 1,187 | 1,129 | |||||
Goodwill | 890 | 841 | |||||
Other intangible assets, net | 417 | 187 | |||||
Other assets | 109 | 114 | |||||
Total Assets | $ | 5,565 | $ | 5,534 | |||
Liabilities | |||||||
Current Liabilities: | |||||||
Accounts payable | $ | 1,093 | $ | 824 | |||
Notes payable | 2 | 116 | |||||
Accrued liabilities | 675 | 727 | |||||
Total Current Liabilities | 1,770 | 1,667 | |||||
Long-term debt | 2,970 | 2,969 | |||||
Other liabilities | 699 | 715 | |||||
Total Liabilities | 5,439 | 5,351 | |||||
Equity | 126 | 183 | |||||
Total Liabilities and Equity | $ | 5,565 | $ | 5,534 |
As of June 30, | |||||||
2018 | 2017 | ||||||
Other Financial Data | |||||||
Working Capital Days | |||||||
Receivable days | 56 | 52 | |||||
Inventory days | 70 | 63 | |||||
Payable days | 72 | 72 | |||||
Working capital | $ | 1,368 | $ | 1,138 | |||
Working capital as a % of sales (LTM) | 17.1 | % | 15.2 | % |
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Cash Flows From (For) Operating Activities: | |||||||
Cash provided by operating activities | $ | 499 | $ | 535 | |||
Working capital changes | (206 | ) | (380 | ) | |||
Net cash from operating activities | 293 | 155 | |||||
Cash Flows From (For) Financing Activities: | |||||||
Retirement of notes | (114 | ) | (535 | ) | |||
Purchase of Company common stock | (265 | ) | (134 | ) | |||
Cash dividends paid | (65 | ) | (64 | ) | |||
Dividends paid to noncontrolling interest | (89 | ) | (35 | ) | |||
Issuance of notes, net of issuance costs | — | 593 | |||||
(Decrease) increase in debt, net | (1 | ) | 1 | ||||
Debt extinguishment costs | — | (104 | ) | ||||
Employee withholding taxes paid on stock-based compensation | (33 | ) | (27 | ) | |||
Net cash for financing activities | (567 | ) | (305 | ) | |||
Cash Flows From (For) Investing Activities: | |||||||
Capital expenditures | (103 | ) | (77 | ) | |||
Acquisition of business, net of cash acquired | (548 | ) | — | ||||
Proceeds from disposition of business, net of cash disposed | — | 126 | |||||
Other, net | 107 | 75 | |||||
Net cash (for) from investing activities | (544 | ) | 124 | ||||
Effect of exchange rate changes on cash and cash investments | 8 | 28 | |||||
Cash and Cash Investments: | |||||||
(Decrease) increase for the period | (810 | ) | 2 | ||||
At January 1 | 1,194 | 990 | |||||
At June 30 | $ | 384 | $ | 992 |
As of June 30, | |||||||
2018 | 2017 | ||||||
Liquidity | |||||||
Cash and cash investments | $ | 384 | $ | 992 | |||
Short-term bank deposits | — | 144 | |||||
Total Liquidity | $ | 384 | $ | 1,136 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
2018 | 2017 | Change | 2018 | 2017 | Change | ||||||||||||||||
Plumbing Products | |||||||||||||||||||||
Net sales | $ | 1,032 | $ | 949 | 9 | % | $ | 2,003 | $ | 1,821 | 10 | % | |||||||||
Operating profit, as reported | $ | 194 | $ | 200 | $ | 357 | $ | 362 | |||||||||||||
Operating margin, as reported | 18.8 | % | 21.1 | % | 17.8 | % | 19.9 | % | |||||||||||||
Rationalization charges | 1 | — | 2 | — | |||||||||||||||||
Accelerated depreciation related to rationalization activity | 1 | — | 1 | — | |||||||||||||||||
Operating profit, as adjusted | 196 | 200 | 360 | 362 | |||||||||||||||||
Operating margin, as adjusted | 19.0 | % | 21.1 | % | 18.0 | % | 19.9 | % | |||||||||||||
Depreciation and amortization | 18 | 15 | 36 | 29 | |||||||||||||||||
EBITDA, as adjusted | $ | 214 | $ | 215 | $ | 396 | $ | 391 | |||||||||||||
Decorative Architectural Products | |||||||||||||||||||||
Net sales | $ | 806 | $ | 661 | 22 | % | $ | 1,351 | $ | 1,157 | 17 | % | |||||||||
Operating profit, as reported | $ | 145 | $ | 149 | $ | 234 | $ | 243 | |||||||||||||
Operating margin, as reported | 18.0 | % | 22.5 | % | 17.3 | % | 21.0 | % | |||||||||||||
Kichler inventory step up adjustment | 20 | — | 25 | — | |||||||||||||||||
Operating profit, as adjusted | 165 | 149 | 259 | 243 | |||||||||||||||||
Operating margin, as adjusted | 20.5 | % | 22.5 | % | 19.2 | % | 21.0 | % | |||||||||||||
Depreciation and amortization | 10 | 4 | 15 | 8 | |||||||||||||||||
EBITDA, as adjusted | $ | 175 | $ | 153 | $ | 274 | $ | 251 | |||||||||||||
Cabinetry Products | |||||||||||||||||||||
Net sales | $ | 268 | $ | 251 | 7 | % | $ | 485 | $ | 482 | 1 | % | |||||||||
Operating profit, as reported | $ | 33 | $ | 31 | $ | 39 | $ | 47 | |||||||||||||
Operating margin, as reported | 12.3 | % | 12.4 | % | 8.0 | % | 9.8 | % | |||||||||||||
Rationalization charges | — | — | — | 2 | |||||||||||||||||
Operating profit, as adjusted | 33 | 31 | 39 | 49 | |||||||||||||||||
Operating margin, as adjusted | 12.3 | % | 12.4 | % | 8.0 | % | 10.2 | % | |||||||||||||
Depreciation and amortization | 4 | 4 | 7 | 8 | |||||||||||||||||
EBITDA, as adjusted | $ | 37 | $ | 35 | $ | 46 | $ | 57 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
2018 | 2017 | Change | 2018 | 2017 | Change | ||||||||||||||||
Windows and Other Specialty Products | |||||||||||||||||||||
Net sales | $ | 191 | $ | 205 | (7 | )% | $ | 378 | $ | 384 | (2 | )% | |||||||||
Operating profit, as reported | $ | 8 | $ | 18 | $ | 12 | $ | 26 | |||||||||||||
Operating margin, as reported | 4.2 | % | 8.8 | % | 3.2 | % | 6.8 | % | |||||||||||||
Depreciation and amortization | 5 | 6 | 11 | 11 | |||||||||||||||||
EBITDA | $ | 13 | $ | 24 | $ | 23 | $ | 37 | |||||||||||||
Total | |||||||||||||||||||||
Net sales | $ | 2,297 | $ | 2,066 | 11 | % | $ | 4,217 | $ | 3,844 | 10 | % | |||||||||
Operating profit, as reported - segment | $ | 380 | $ | 398 | $ | 642 | $ | 678 | |||||||||||||
General corporate expense, net (GCE) | (22 | ) | (26 | ) | (40 | ) | (49 | ) | |||||||||||||
Operating profit, as reported | 358 | 372 | 602 | 629 | |||||||||||||||||
Operating margin, as reported | 15.6 | % | 18.0 | % | 14.3 | % | 16.4 | % | |||||||||||||
Rationalization charges - segment | 1 | — | 2 | 2 | |||||||||||||||||
Accelerated depreciation related to rationalization activity - segment | 1 | — | 1 | — | |||||||||||||||||
Kichler inventory step up adjustment | 20 | — | 25 | — | |||||||||||||||||
Operating profit, as adjusted | 380 | 372 | 630 | 631 | -$336,000,000 | ||||||||||||||||
Operating margin, as adjusted | 16.5 | % | 18.0 | % | 14.9 | % | 16.4 | % | |||||||||||||
Depreciation and amortization - segment | 37 | 29 | 69 | 56 | |||||||||||||||||
Depreciation and amortization - non-operating | 2 | 4 | 4 | 8 | |||||||||||||||||
EBITDA, as adjusted | $ | 419 | $ | 405 | $ | 703 | $ | 695 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
2018 | 2017 | Change | 2018 | 2017 | Change | ||||||||||||||||
North American | |||||||||||||||||||||
Net sales | $ | 1,872 | $ | 1,668 | 12 | % | $ | 3,388 | $ | 3,080 | 10 | % | |||||||||
Operating profit, as reported | $ | 323 | $ | 340 | $ | 541 | $ | 578 | |||||||||||||
Operating margin, as reported | 17.3 | % | 20.4 | % | 16.0 | % | 18.8 | % | |||||||||||||
Rationalization charges | 1 | — | 2 | 2 | |||||||||||||||||
Accelerated depreciation related to rationalization activity | 1 | — | 1 | — | |||||||||||||||||
Kichler inventory step up adjustment | 20 | — | 25 | — | |||||||||||||||||
Operating profit, as adjusted | 345 | 340 | 569 | 580 | |||||||||||||||||
Operating margin, as adjusted | 18.4 | % | 20.4 | % | 16.8 | % | 18.8 | % | |||||||||||||
Depreciation and amortization | 27 | 20 | 48 | 38 | |||||||||||||||||
EBITDA, as adjusted | $ | 372 | $ | 360 | $ | 617 | $ | 618 | |||||||||||||
International | |||||||||||||||||||||
Net sales | $ | 425 | $ | 398 | 7 | % | $ | 829 | $ | 764 | 9 | % | |||||||||
Operating profit, as reported | $ | 57 | $ | 58 | $ | 101 | $ | 100 | |||||||||||||
Operating margin, as reported | 13.4 | % | 14.6 | % | 12.2 | % | 13.1 | % | |||||||||||||
Depreciation and amortization | 10 | 9 | 21 | 18 | |||||||||||||||||
EBITDA | $ | 67 | $ | 67 | $ | 122 | $ | 118 | |||||||||||||
Total | |||||||||||||||||||||
Net sales | $ | 2,297 | $ | 2,066 | 11 | % | $ | 4,217 | $ | 3,844 | 10 | % | |||||||||
Operating profit, as reported - segment | $ | 380 | $ | 398 | $ | 642 | $ | 678 | |||||||||||||
General corporate expense, net (GCE) | (22 | ) | (26 | ) | (40 | ) | (49 | ) | |||||||||||||
Operating profit, as reported | 358 | 372 | 602 | 629 | |||||||||||||||||
Operating margin, as reported | 15.6 | % | 18.0 | % | 14.3 | % | 16.4 | % | |||||||||||||
Rationalization charges - segment | 1 | — | 2 | 2 | |||||||||||||||||
Accelerated depreciation related to rationalization activity - segment | 1 | — | 1 | — | |||||||||||||||||
Kichler inventory step up adjustment | 20 | — | 25 | — | |||||||||||||||||
Operating profit, as adjusted | 380 | 372 | 630 | 631 | |||||||||||||||||
Operating margin, as adjusted | 16.5 | % | 18.0 | % | 14.9 | % | 16.4 | % | |||||||||||||
Depreciation and amortization - segment | 37 | 29 | 69 | 56 | |||||||||||||||||
Depreciation and amortization - non-operating | 2 | 4 | 4 | 8 | |||||||||||||||||
EBITDA, as adjusted | $ | 419 | $ | 405 | $ | 703 | $ | 695 |
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