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 $2.1 billion; excluding acquisitions, divestitures and currency, sales increased 4 percent |
• | Earnings per share grew 21 percent to $0.58 per share; adjusted earnings per share grew 25 percent to $0.65 per share |
• | Returned approximately $122 million to shareholders through share repurchases and dividends |
• | Updating 2018 anticipated earnings per share to be in the range of $2.25-$2.30 per share, and on an adjusted basis, to be in the range of $2.39-$2.44 per share compared to a previous range of $2.48-$2.55 |
• | On a reported basis, compared to third quarter 2017: |
• | Net sales increased 8 percent to $2.1 billion; in local currency and excluding acquisitions and divestitures, net sales increased 4 percent |
• | In local currency, North American sales increased 12 percent and international sales decreased 6 percent |
• | Gross margins decreased 210 basis points to 31.7 percent from 33.8 percent |
• | Operating profit decreased 3 percent to $300 million |
• | Operating margins decreased 160 basis points to 14.3 percent from 15.9 percent |
• | Net income increased to $0.58 per share, compared to $0.48 per share |
• | Compared to third 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 110 basis points to 32.7 percent compared to 33.8 percent |
• | Operating profit increased 3 percent to $320 million from $310 million |
• | Operating margins decreased 70 basis points to 15.2 percent compared to 15.9 percent |
• | Net income increased to $0.65 per share, compared to $0.52 per share |
• | Liquidity at the end of the third quarter was $569 million |
• | 2.3 million shares repurchased in the third quarter |
• | Plumbing Products’ net sales increased 4 percent (5 percent excluding the impact of foreign currency translation), driven by strong North American growth of 9 percent |
• | Decorative Architectural Products’ net sales increased 20 percent due to the acquisition of Kichler and growth in Behr’s pro initiative and builders’ hardware, partially offset by lower DIY paint sales; excluding the acquisition, net sales grew 1 percent |
• | Cabinetry Products’ net sales increased 4 percent driven by strong growth in the repair and remodel business, partially offset by the divestiture of Moores; excluding the divestiture, net sales increased 11 percent |
• | Windows and Other Specialty Products’ net sales decreased 3 percent due to lower international sales |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net sales | $ | 2,101 | $ | 1,945 | $ | 6,318 | $ | 5,789 | |||||||
Cost of sales | 1,434 | 1,288 | 4,282 | 3,781 | |||||||||||
Gross profit | 667 | 657 | 2,036 | 2,008 | |||||||||||
Selling, general and administrative expenses | 367 | 348 | 1,134 | 1,070 | |||||||||||
Operating profit | 300 | 309 | 902 | 938 | |||||||||||
Other income (expense), net: | |||||||||||||||
Interest expense | (38 | ) | (43 | ) | (117 | ) | (239 | ) | |||||||
Other, net | — | (2 | ) | (11 | ) | 37 | |||||||||
(38 | ) | (45 | ) | (128 | ) | (202 | ) | ||||||||
Income before income taxes | 262 | 264 | 774 | 736 | |||||||||||
Income tax expense | 71 | 100 | 198 | 248 | |||||||||||
Net income | 191 | 164 | 576 | 488 | |||||||||||
Less: Net income attributable to noncontrolling interest | 11 | 12 | 36 | 35 | |||||||||||
Net income attributable to Masco Corporation | $ | 180 | $ | 152 | $ | 540 | $ | 453 | |||||||
Income per common share attributable to Masco Corporation (diluted): | |||||||||||||||
Net income | $ | 0.58 | $ | 0.48 | $ | 1.73 | $ | 1.41 | |||||||
Average diluted common shares outstanding | 306 | 316 | 309 | 319 | |||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Gross Profit, Selling, General and Administrative Expenses, and Operating Profit Reconciliations | |||||||||||||||
Net sales | $ | 2,101 | $ | 1,945 | $ | 6,318 | $ | 5,789 | |||||||
Gross profit, as reported | $ | 667 | $ | 657 | $ | 2,036 | $ | 2,008 | |||||||
Rationalization charges | 5 | 1 | 8 | 3 | |||||||||||
Kichler inventory step up adjustment | 15 | — | 40 | — | |||||||||||
Gross profit, as adjusted | $ | 687 | $ | 658 | $ | 2,084 | $ | 2,011 | |||||||
Gross margin, as reported | 31.7 | % | 33.8 | % | 32.2 | % | 34.7 | % | |||||||
Gross margin, as adjusted | 32.7 | % | 33.8 | % | 33.0 | % | 34.7 | % | |||||||
Selling, general and administrative expenses, as reported | $ | 367 | $ | 348 | $ | 1,134 | $ | 1,070 | |||||||
Selling, general and administrative expenses as percent of net sales, as reported | 17.5 | % | 17.9 | % | 17.9 | % | 18.5 | % | |||||||
Operating profit, as reported | $ | 300 | $ | 309 | $ | 902 | $ | 938 | |||||||
Rationalization charges | 5 | 1 | 8 | 3 | |||||||||||
Kichler inventory step up adjustment | 15 | — | 40 | — | |||||||||||
Operating profit, as adjusted | $ | 320 | $ | 310 | $ | 950 | $ | 941 | |||||||
Operating margin, as reported | 14.3 | % | 15.9 | % | 14.3 | % | 16.2 | % | |||||||
Operating margin, as adjusted | 15.2 | % | 15.9 | % | 15.0 | % | 16.3 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Income Per Common Share Reconciliations | |||||||||||||||
Income before income taxes, as reported | $ | 262 | $ | 264 | $ | 774 | $ | 736 | |||||||
Rationalization charges | 5 | 1 | 8 | 3 | |||||||||||
Kichler inventory step up adjustment | 15 | — | 40 | — | |||||||||||
(Gains) from private equity funds, net | — | — | — | (2 | ) | ||||||||||
(Earnings) from equity investments, net | — | — | (2 | ) | (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 | 282 | 265 | 820 | 794 | |||||||||||
Tax at 26% rate (34% for 2017) | (73 | ) | (90 | ) | (213 | ) | (270 | ) | |||||||
Less: Net income attributable to noncontrolling interest | 11 | 12 | 36 | 35 | |||||||||||
Net income, as adjusted | $ | 198 | $ | 163 | $ | 571 | $ | 489 | |||||||
Net income per common share, as adjusted | $ | 0.65 | $ | 0.52 | $ | 1.85 | $ | 1.53 | |||||||
Average diluted common shares outstanding | 306 | 316 | 309 | 319 |
Twelve Months Ended December 31, 2018 | |||||||
Low End | High End | ||||||
Income Per Common Share Outlook | |||||||
Net income per common share | $ | 2.25 | $ | 2.30 | |||
Rationalization charges | 0.02 | 0.02 | |||||
Kichler inventory step up adjustment | 0.10 | 0.10 | |||||
Allocation to participating securities per share (1) | 0.02 | 0.02 | |||||
Net income per common share, as adjusted | $ | 2.39 | $ | 2.44 |
September 30, 2018 | December 31, 2017 | ||||||
Balance Sheet | |||||||
Assets | |||||||
Current Assets: | |||||||
Cash and cash investments | $ | 569 | $ | 1,194 | |||
Short-term bank deposits | — | 108 | |||||
Receivables | 1,298 | 1,066 | |||||
Inventories | 1,005 | 784 | |||||
Prepaid expenses and other | 118 | 111 | |||||
Total Current Assets | 2,990 | 3,263 | |||||
Property and equipment, net | 1,211 | 1,129 | |||||
Goodwill | 896 | 841 | |||||
Other intangible assets, net | 412 | 187 | |||||
Other assets | 101 | 114 | |||||
Total Assets | $ | 5,610 | $ | 5,534 | |||
Liabilities | |||||||
Current Liabilities: | |||||||
Accounts payable | $ | 1,040 | $ | 824 | |||
Notes payable | 2 | 116 | |||||
Accrued liabilities | 711 | 727 | |||||
Total Current Liabilities | 1,753 | 1,667 | |||||
Long-term debt | 2,971 | 2,969 | |||||
Other liabilities | 679 | 715 | |||||
Total Liabilities | 5,403 | 5,351 | |||||
Equity | 207 | 183 | |||||
Total Liabilities and Equity | $ | 5,610 | $ | 5,534 |
As of September 30, | |||||||
2018 | 2017 | ||||||
Other Financial Data | |||||||
Working Capital Days | |||||||
Receivable days | 55 | 51 | |||||
Inventory days | 68 | 63 | |||||
Payable days | 75 | 72 | |||||
Working capital | $ | 1,263 | $ | 1,094 | |||
Working capital as a % of sales (LTM) | 15.5 | % | 14.5 | % |
Nine Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Cash Flows From (For) Operating Activities: | |||||||
Cash provided by operating activities | $ | 729 | $ | 749 | |||
Working capital changes | (75 | ) | (282 | ) | |||
Net cash from operating activities | 654 | 467 | |||||
Cash Flows From (For) Financing Activities: | |||||||
Retirement of notes | (114 | ) | (535 | ) | |||
Purchase of Company common stock | (354 | ) | (312 | ) | |||
Cash dividends paid | (98 | ) | (96 | ) | |||
Dividends paid to noncontrolling interest | (89 | ) | (35 | ) | |||
Issuance of notes, net of issuance costs | — | 593 | |||||
Decrease in debt, net | (1 | ) | — | ||||
Debt extinguishment costs | — | (104 | ) | ||||
Proceeds from the exercise of stock options | 8 | — | |||||
Employee withholding taxes paid on stock-based compensation | (38 | ) | (29 | ) | |||
Net cash for financing activities | (686 | ) | (518 | ) | |||
Cash Flows From (For) Investing Activities: | |||||||
Capital expenditures | (160 | ) | (113 | ) | |||
Acquisition of business, net of cash acquired | (549 | ) | — | ||||
Proceeds from disposition of business, net of cash disposed | — | 128 | |||||
Other, net | 108 | 142 | |||||
Net cash (for) from investing activities | (601 | ) | 157 | ||||
Effect of exchange rate changes on cash and cash investments | 8 | 45 | |||||
Cash and Cash Investments: | |||||||
(Decrease) increase for the period | (625 | ) | 151 | ||||
At January 1 | 1,194 | 990 | |||||
At September 30 | $ | 569 | $ | 1,141 |
As of September 30, | |||||||
2018 | 2017 | ||||||
Liquidity | |||||||
Cash and cash investments | $ | 569 | $ | 1,141 | |||
Short-term bank deposits | — | 77 | |||||
Total Liquidity | $ | 569 | $ | 1,218 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2018 | 2017 | Change | 2018 | 2017 | Change | ||||||||||||||||
Plumbing Products | |||||||||||||||||||||
Net sales | $ | 992 | $ | 950 | 4 | % | $ | 2,995 | $ | 2,771 | 8 | % | |||||||||
Operating profit, as reported | $ | 177 | $ | 175 | $ | 534 | $ | 537 | |||||||||||||
Operating margin, as reported | 17.8 | % | 18.4 | % | 17.8 | % | 19.4 | % | |||||||||||||
Rationalization charges | 2 | — | 4 | — | |||||||||||||||||
Accelerated depreciation related to rationalization activity | — | 1 | 1 | 1 | |||||||||||||||||
Operating profit, as adjusted | 179 | 176 | 539 | 538 | |||||||||||||||||
Operating margin, as adjusted | 18.0 | % | 18.5 | % | 18.0 | % | 19.4 | % | |||||||||||||
Depreciation and amortization | 20 | 16 | 56 | 45 | |||||||||||||||||
EBITDA, as adjusted | $ | 199 | $ | 192 | $ | 595 | $ | 583 | |||||||||||||
Decorative Architectural Products | |||||||||||||||||||||
Net sales | $ | 673 | $ | 562 | 20 | % | $ | 2,024 | $ | 1,719 | 18 | % | |||||||||
Operating profit, as reported | $ | 104 | $ | 112 | $ | 338 | $ | 355 | |||||||||||||
Operating margin, as reported | 15.5 | % | 19.9 | % | 16.7 | % | 20.7 | % | |||||||||||||
Kichler inventory step up adjustment | 15 | — | 40 | — | |||||||||||||||||
Operating profit, as adjusted | 119 | 112 | 378 | 355 | |||||||||||||||||
Operating margin, as adjusted | 17.7 | % | 19.9 | % | 18.7 | % | 20.7 | % | |||||||||||||
Depreciation and amortization | 10 | 4 | 25 | 12 | |||||||||||||||||
EBITDA, as adjusted | $ | 129 | $ | 116 | $ | 403 | $ | 367 | |||||||||||||
Cabinetry Products | |||||||||||||||||||||
Net sales | $ | 239 | $ | 229 | 4 | % | $ | 724 | $ | 711 | 2 | % | |||||||||
Operating profit, as reported | $ | 23 | $ | 20 | $ | 62 | $ | 67 | |||||||||||||
Operating margin, as reported | 9.6 | % | 8.7 | % | 8.6 | % | 9.4 | % | |||||||||||||
Rationalization charges | — | — | — | 2 | |||||||||||||||||
Operating profit, as adjusted | 23 | 20 | 62 | 69 | |||||||||||||||||
Operating margin, as adjusted | 9.6 | % | 8.7 | % | 8.6 | % | 9.7 | % | |||||||||||||
Depreciation and amortization | 3 | 3 | 10 | 11 | |||||||||||||||||
EBITDA, as adjusted | $ | 26 | $ | 23 | $ | 72 | $ | 80 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2018 | 2017 | Change | 2018 | 2017 | Change | ||||||||||||||||
Windows and Other Specialty Products | |||||||||||||||||||||
Net sales | $ | 197 | $ | 204 | (3 | )% | $ | 575 | $ | 588 | (2 | )% | |||||||||
Operating profit, as reported | $ | 16 | $ | 24 | $ | 28 | $ | 50 | |||||||||||||
Operating margin, as reported | 8.1 | % | 11.8 | % | 4.9 | % | 8.5 | % | |||||||||||||
Rationalization charges | 3 | — | 3 | — | |||||||||||||||||
Operating profit, as adjusted | 19 | 24 | 31 | 50 | |||||||||||||||||
Operating margin, as adjusted | 9.6 | % | 11.8 | % | 5.4 | % | 8.5 | % | |||||||||||||
Depreciation and amortization | 6 | 5 | 17 | 16 | |||||||||||||||||
EBITDA, as adjusted | $ | 25 | $ | 29 | $ | 48 | $ | 66 | |||||||||||||
Total | |||||||||||||||||||||
Net sales | $ | 2,101 | $ | 1,945 | 8 | % | $ | 6,318 | $ | 5,789 | 9 | % | |||||||||
Operating profit, as reported - segment | $ | 320 | $ | 331 | $ | 962 | $ | 1,009 | |||||||||||||
General corporate expense, net (GCE) | (20 | ) | (22 | ) | (60 | ) | (71 | ) | |||||||||||||
Operating profit, as reported | 300 | 309 | 902 | 938 | |||||||||||||||||
Operating margin, as reported | 14.3 | % | 15.9 | % | 14.3 | % | 16.2 | % | |||||||||||||
Rationalization charges - segment | 5 | — | 7 | 2 | |||||||||||||||||
Accelerated depreciation related to rationalization activity - segment | — | 1 | 1 | 1 | |||||||||||||||||
Kichler inventory step up adjustment | 15 | — | 40 | — | |||||||||||||||||
Operating profit, as adjusted | 320 | 310 | 950 | 941 | -$336,000,000 | ||||||||||||||||
Operating margin, as adjusted | 15.2 | % | 15.9 | % | 15.0 | % | 16.3 | % | |||||||||||||
Depreciation and amortization - segment | 39 | 28 | 108 | 84 | |||||||||||||||||
Depreciation and amortization - non-operating | 2 | 2 | 6 | 10 | |||||||||||||||||
EBITDA, as adjusted | $ | 361 | $ | 340 | $ | 1,064 | $ | 1,035 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2018 | 2017 | Change | 2018 | 2017 | Change | ||||||||||||||||
North American | |||||||||||||||||||||
Net sales | $ | 1,724 | $ | 1,538 | 12 | % | $ | 5,112 | $ | 4,618 | 11 | % | |||||||||
Operating profit, as reported | $ | 272 | $ | 276 | $ | 813 | $ | 854 | |||||||||||||
Operating margin, as reported | 15.8 | % | 17.9 | % | 15.9 | % | 18.5 | % | |||||||||||||
Rationalization charges | 2 | — | 4 | 2 | |||||||||||||||||
Accelerated depreciation related to rationalization activity | — | 1 | 1 | 1 | |||||||||||||||||
Kichler inventory step up adjustment | 15 | — | 40 | — | |||||||||||||||||
Operating profit, as adjusted | 289 | 277 | 858 | 857 | |||||||||||||||||
Operating margin, as adjusted | 16.8 | % | 18.0 | % | 16.8 | % | 18.6 | % | |||||||||||||
Depreciation and amortization | 28 | 18 | 76 | 56 | |||||||||||||||||
EBITDA, as adjusted | $ | 317 | $ | 295 | $ | 934 | $ | 913 | |||||||||||||
International | |||||||||||||||||||||
Net sales | $ | 377 | $ | 407 | (7 | )% | $ | 1,206 | $ | 1,171 | 3 | % | |||||||||
Operating profit, as reported | $ | 48 | $ | 55 | $ | 149 | $ | 155 | |||||||||||||
Operating margin, as reported | 12.7 | % | 13.5 | % | 12.4 | % | 13.2 | % | |||||||||||||
Rationalization charges | 3 | — | 3 | — | |||||||||||||||||
Operating profit, as adjusted | 51 | 55 | 152 | 155 | |||||||||||||||||
Operating margin, as adjusted | 13.5 | % | 13.5 | % | 12.6 | % | 13.2 | % | |||||||||||||
Depreciation and amortization | 11 | 10 | 32 | 28 | |||||||||||||||||
EBITDA, as adjusted | $ | 62 | $ | 65 | $ | 184 | $ | 183 | |||||||||||||
Total | |||||||||||||||||||||
Net sales | $ | 2,101 | $ | 1,945 | 8 | % | $ | 6,318 | $ | 5,789 | 9 | % | |||||||||
Operating profit, as reported - segment | $ | 320 | $ | 331 | $ | 962 | $ | 1,009 | |||||||||||||
General corporate expense, net (GCE) | (20 | ) | (22 | ) | (60 | ) | (71 | ) | |||||||||||||
Operating profit, as reported | 300 | 309 | 902 | 938 | |||||||||||||||||
Operating margin, as reported | 14.3 | % | 15.9 | % | 14.3 | % | 16.2 | % | |||||||||||||
Rationalization charges - segment | 5 | — | 7 | 2 | |||||||||||||||||
Accelerated depreciation related to rationalization activity - segment | — | 1 | 1 | 1 | |||||||||||||||||
Kichler inventory step up adjustment | 15 | — | 40 | — | |||||||||||||||||
Operating profit, as adjusted | 320 | 310 | 950 | 941 | |||||||||||||||||
Operating margin, as adjusted | 15.2 | % | 15.9 | % | 15.0 | % | 16.3 | % | |||||||||||||
Depreciation and amortization - segment | 39 | 28 | 108 | 84 | |||||||||||||||||
Depreciation and amortization - non-operating | 2 | 2 | 6 | 10 | |||||||||||||||||
EBITDA, as adjusted | $ | 361 | $ | 340 | $ | 1,064 | $ | 1,035 |
&%P+S$N,"\ /#]X
M<&%C:V5T(&)E9VEN/2?ON[\G(&ED/2=7-4TP37!#96AI2'IR95-Z3E1C>FMC
M.60G/SX-"CQX.GAM<&UE=&$@>&UL;G,Z>#TB861O8F4Z;G,Z;65T82\B('@Z
M>&UP=&L](EA-4"!T;V]L:VET(#,N,"TR."P@9G)A;65W;W)K(#$N-B(^#0H)
M/')D9CI21$8@>&UL;G,ZE&![)GD5DD5[>&)ID&5[^4IRCMI\DR]C
MCC5]?@I^D!]_P,LZFN*$_;=FF".#YZ,!E9F"_(WZDTV"2W@KD4.!V&%\CW6!
MFDE^C?>!@2YYC5>!XPG/CIN#",G3F=^.K;8DSB^YJK"@11RSJ#&39P;(I4:$E@ @QR
M .8?=G!S&- ;=TMS\;F >!]TS*(J>.IUKXHD>;)VH7%C>G]WHU>&>T]XGSLO
M?#%YEA:=?2%YZ.0/=(=^:,YK=8E^&[?Z=GQ]Y:#+=V5]RHC=>$M]S7 N>3-]
MY%9;>A5]^3H'>N]^$A4@>U1]P>(Q