(State or Other Jurisdiction of Incorporation or Organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices) | (Zip Code) |
Title of each class | Trading Symbol | Name of each exchange on which registered |
MASCO CORPORATION | ||
By: | /s/ John G. Sznewajs | |
Name: | John G. Sznewajs | |
Title: | Vice President, Chief Financial Officer | |
• | Sales decreased 1 percent to $2.3 billion; in local currency, sales matched prior year |
• | Operating profit for the quarter increased 9 percent to $392 million; adjusted operating profit increased 5 percent to $399 million |
• | Earnings per share increased 21 percent to $0.82 per share; adjusted earnings per share increased 16 percent to $0.88 per share |
• | Updating 2019 anticipated earnings per share to be in the range of $2.51 - $2.61 per share, and on an adjusted basis, to be in the range of $2.62 - $2.72 per share, compared to a previous range of $2.60 - $2.80 |
• | Board announces intent to increase annual dividend by $.06 per share to $.54 per share, beginning in the fourth quarter |
• | On a reported basis, compared to second quarter 2018: |
• | Net sales decreased 1 percent to $2.3 billion; in local currency, net sales matched prior year |
• | In local currency, North American sales increased 1 percent and international sales decreased 4 percent |
• | Gross margins increased 170 basis points to 34.4 percent from 32.7 percent |
• | Operating profit increased 9 percent to $392 million |
• | Operating margins increased 160 basis points to 17.2 percent from 15.6 percent |
• | Net income increased to $0.82 per share, compared to $0.68 per share |
• | Compared to second quarter 2018, results for key financial measures, as adjusted for certain items (see Exhibit A) and with a normalized tax rate of 25 percent, were as follows: |
• | Gross margins increased 90 basis points to 34.5 percent compared to 33.6 percent |
• | Operating profit increased 5 percent to $399 million from $380 million |
• | Operating margins increased 100 basis points to 17.5 percent compared to 16.5 percent |
• | Net income increased to $0.88 per share, compared to $0.76 per share |
• | Liquidity at the end of the second quarter was $325 million |
• | Repurchased 4.3 million shares in the quarter |
• | Plumbing Products’ net sales decreased 2 percent (flat excluding the impact of foreign currency) due to lower volume and currency, partially offset by pricing |
• | Decorative Architectural Products’ net sales increased 3 percent due to growth in paints and other coating products |
• | Cabinetry Products’ net sales decreased 6 percent due to lower volume, partially offset by pricing |
• | Windows and Other Specialty Products’ net sales decreased 3 percent due to lower volume, partially offset by favorable mix in North America and pricing |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net sales | $ | 2,275 | $ | 2,297 | $ | 4,183 | $ | 4,217 | |||||||
Cost of sales | 1,493 | 1,547 | 2,802 | 2,848 | |||||||||||
Gross profit | 782 | 750 | 1,381 | 1,369 | |||||||||||
Selling, general and administrative expenses | 390 | 392 | 762 | 767 | |||||||||||
Impairment charges for goodwill and other intangible assets | — | — | 16 | — | |||||||||||
Operating profit | 392 | 358 | 603 | 602 | |||||||||||
Other income (expense), net: | |||||||||||||||
Interest expense | (41 | ) | (38 | ) | (80 | ) | (79 | ) | |||||||
Other, net | (4 | ) | (8 | ) | (8 | ) | (11 | ) | |||||||
(45 | ) | (46 | ) | (88 | ) | (90 | ) | ||||||||
Income before income taxes | 347 | 312 | 515 | 512 | |||||||||||
Income tax expense | 95 | 88 | 136 | 127 | |||||||||||
Net income | 252 | 224 | 379 | 385 | |||||||||||
Less: Net income attributable to noncontrolling interest | 12 | 13 | 23 | 25 | |||||||||||
Net income attributable to Masco Corporation | $ | 240 | $ | 211 | $ | 356 | $ | 360 | |||||||
Income per common share attributable to Masco Corporation (diluted): | |||||||||||||||
Net income | $ | 0.82 | $ | 0.68 | $ | 1.21 | $ | 1.15 | |||||||
Average diluted common shares outstanding | 290 | 309 | 292 | 311 | |||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Gross Profit, Selling, General and Administrative Expenses, and Operating Profit Reconciliations | |||||||||||||||
Net sales | $ | 2,275 | $ | 2,297 | $ | 4,183 | $ | 4,217 | |||||||
Gross profit, as reported | $ | 782 | $ | 750 | $ | 1,381 | $ | 1,369 | |||||||
Rationalization charges | 2 | 2 | 2 | 3 | |||||||||||
Kichler inventory step up adjustment | — | 20 | — | 25 | |||||||||||
Gross profit, as adjusted | $ | 784 | $ | 772 | $ | 1,383 | $ | 1,397 | |||||||
Gross margin, as reported | 34.4 | % | 32.7 | % | 33.0 | % | 32.5 | % | |||||||
Gross margin, as adjusted | 34.5 | % | 33.6 | % | 33.1 | % | 33.1 | % | |||||||
Selling, general and administrative expenses, as reported | $ | 390 | $ | 392 | $ | 762 | $ | 767 | |||||||
Professional fees related to potential divestitures | 5 | — | 8 | — | |||||||||||
Selling, general and administrative expenses, as adjusted | $ | 385 | $ | 392 | $ | 754 | $ | 767 | |||||||
Selling, general and administrative expenses as percent of net sales, as reported | 17.1 | % | 17.1 | % | 18.2 | % | 18.2 | % | |||||||
Selling, general and administrative expenses as percent of net sales, as adjusted | 16.9 | % | 17.1 | % | 18.0 | % | 18.2 | % | |||||||
Operating profit, as reported | $ | 392 | $ | 358 | $ | 603 | $ | 602 | |||||||
Rationalization charges | 2 | 2 | 2 | 3 | |||||||||||
Kichler inventory step up adjustment | — | 20 | — | 25 | |||||||||||
Impairment charges for goodwill and other intangible assets | — | — | 16 | — | |||||||||||
Professional fees related to potential divestitures | 5 | — | 8 | — | |||||||||||
Operating profit, as adjusted | $ | 399 | $ | 380 | $ | 629 | $ | 630 | |||||||
Operating margin, as reported | 17.2 | % | 15.6 | % | 14.4 | % | 14.3 | % | |||||||
Operating margin, as adjusted | 17.5 | % | 16.5 | % | 15.0 | % | 14.9 | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Income Per Common Share Reconciliations | |||||||||||||||
Income before income taxes, as reported | $ | 347 | $ | 312 | $ | 515 | $ | 512 | |||||||
Rationalization charges | 2 | 2 | 2 | 3 | |||||||||||
Kichler inventory step up adjustment | — | 20 | — | 25 | |||||||||||
Impairment charges for goodwill and other intangible assets | — | — | 16 | — | |||||||||||
Professional fees related to potential divestitures | 5 | — | 8 | — | |||||||||||
(Earnings) from equity investments, net | — | (2 | ) | — | (2 | ) | |||||||||
Income before income taxes, as adjusted | 354 | 332 | 541 | 538 | |||||||||||
Tax at 25% rate | (88 | ) | (83 | ) | (135 | ) | (135 | ) | |||||||
Less: Net income attributable to noncontrolling interest | 12 | 13 | 23 | 25 | |||||||||||
Net income, as adjusted | $ | 254 | $ | 236 | $ | 383 | $ | 378 | |||||||
Net income per common share, as adjusted | $ | 0.88 | $ | 0.76 | $ | 1.31 | $ | 1.22 | |||||||
Average diluted common shares outstanding | 290 | 309 | 292 | 311 |
Twelve Months Ended December 31, 2019 | |||||||
Low End | High End | ||||||
Income Per Common Share Outlook | |||||||
Net income per common share | $ | 2.51 | $ | 2.61 | |||
Rationalization charges | 0.02 | 0.02 | |||||
Impairment charges for goodwill and other intangible assets | 0.04 | 0.04 | |||||
Professional fees related to potential divestitures | 0.03 | 0.03 | |||||
Allocation to participating securities per share (1) | 0.02 | 0.02 | |||||
Net income per common share, as adjusted | $ | 2.62 | $ | 2.72 |
June 30, 2019 | December 31, 2018 | ||||||
Balance Sheet | |||||||
Assets | |||||||
Current Assets: | |||||||
Cash and cash investments | $ | 325 | $ | 559 | |||
Receivables | 1,423 | 1,153 | |||||
Inventories | 975 | 946 | |||||
Prepaid expenses and other | 120 | 108 | |||||
Total Current Assets | 2,843 | 2,766 | |||||
Property and equipment, net | 1,212 | 1,223 | |||||
Operating lease right-of-use assets | 228 | — | |||||
Goodwill | 891 | 898 | |||||
Other intangible assets, net | 387 | 406 | |||||
Other assets | 92 | 100 | |||||
Total Assets | $ | 5,653 | $ | 5,393 | |||
Liabilities | |||||||
Current Liabilities: | |||||||
Accounts payable | $ | 1,023 | $ | 926 | |||
Notes payable | 231 | 8 | |||||
Accrued liabilities | 699 | 750 | |||||
Total Current Liabilities | 1,953 | 1,684 | |||||
Long-term debt | 2,771 | 2,971 | |||||
Other liabilities | 858 | 669 | |||||
Total Liabilities | 5,582 | 5,324 | |||||
Equity | 71 | 69 | |||||
Total Liabilities and Equity | $ | 5,653 | $ | 5,393 |
As of June 30, | |||||||
2019 | 2018 | ||||||
Other Financial Data | |||||||
Working Capital Days | |||||||
Receivable days | 54 | 56 | |||||
Inventory days | 67 | 70 | |||||
Payable days | 72 | 72 | |||||
Working capital | $ | 1,375 | $ | 1,368 | |||
Working capital as a % of sales (LTM) | 16.5 | % | 17.1 | % |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Cash Flows From (For) Operating Activities: | |||||||
Cash provided by operating activities | $ | 510 | $ | 499 | |||
Working capital changes | (297 | ) | (206 | ) | |||
Net cash from operating activities | 213 | 293 | |||||
Cash Flows From (For) Financing Activities: | |||||||
Retirement of notes | — | (114 | ) | ||||
Purchase of Company common stock | (289 | ) | (265 | ) | |||
Cash dividends paid | (70 | ) | (65 | ) | |||
Dividends paid to noncontrolling interest | (42 | ) | (89 | ) | |||
Proceeds from the exercise of stock options | 13 | — | |||||
Employee withholding taxes paid on stock-based compensation | (16 | ) | (33 | ) | |||
Increase (decrease) in debt, net | 20 | (1 | ) | ||||
Credit Agreement and other financing costs | (2 | ) | — | ||||
Net cash for financing activities | (386 | ) | (567 | ) | |||
Cash Flows From (For) Investing Activities: | |||||||
Capital expenditures | (71 | ) | (103 | ) | |||
Acquisition of business, net of cash acquired | — | (548 | ) | ||||
Other, net | 8 | 107 | |||||
Net cash for investing activities | (63 | ) | (544 | ) | |||
Effect of exchange rate changes on cash and cash investments | 2 | 8 | |||||
Cash and Cash Investments: | |||||||
Decrease for the period | (234 | ) | (810 | ) | |||
At January 1 | 559 | 1,194 | |||||
At June 30 | $ | 325 | $ | 384 |
As of June 30, | |||||||
2019 | 2018 | ||||||
Liquidity | |||||||
Cash and cash investments | $ | 325 | $ | 384 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
2019 | 2018 | Change | 2019 | 2018 | Change | ||||||||||||||||
Plumbing Products | |||||||||||||||||||||
Net sales | $ | 1,012 | $ | 1,032 | (2 | )% | $ | 1,952 | $ | 2,003 | (3 | )% | |||||||||
Operating profit, as reported | $ | 198 | $ | 194 | $ | 351 | $ | 357 | |||||||||||||
Operating margin, as reported | 19.6 | % | 18.8 | % | 18.0 | % | 17.8 | % | |||||||||||||
Rationalization charges | 2 | 1 | 2 | 2 | |||||||||||||||||
Accelerated depreciation related to rationalization activity | — | 1 | — | 1 | |||||||||||||||||
Operating profit, as adjusted | 200 | 196 | 353 | 360 | |||||||||||||||||
Operating margin, as adjusted | 19.8 | % | 19.0 | % | 18.1 | % | 18.0 | % | |||||||||||||
Depreciation and amortization | 20 | 18 | 39 | 36 | |||||||||||||||||
EBITDA, as adjusted | $ | 220 | $ | 214 | $ | 392 | $ | 396 | |||||||||||||
Decorative Architectural Products | |||||||||||||||||||||
Net sales | $ | 827 | $ | 806 | 3 | % | $ | 1,400 | $ | 1,351 | 4 | % | |||||||||
Operating profit, as reported | $ | 173 | $ | 145 | $ | 246 | $ | 234 | |||||||||||||
Operating margin, as reported | 20.9 | % | 18.0 | % | 17.6 | % | 17.3 | % | |||||||||||||
Kichler inventory step up adjustment | — | 20 | — | 25 | |||||||||||||||||
Impairment charge for other intangible assets | — | — | 9 | — | |||||||||||||||||
Operating profit, as adjusted | 173 | 165 | 255 | 259 | |||||||||||||||||
Operating margin, as adjusted | 20.9 | % | 20.5 | % | 18.2 | % | 19.2 | % | |||||||||||||
Depreciation and amortization | 10 | 10 | 20 | 15 | |||||||||||||||||
EBITDA, as adjusted | $ | 183 | $ | 175 | $ | 275 | $ | 274 | |||||||||||||
Cabinetry Products | |||||||||||||||||||||
Net sales | $ | 251 | $ | 268 | (6 | )% | $ | 488 | $ | 485 | 1 | % | |||||||||
Operating profit, as reported | $ | 33 | $ | 33 | $ | 53 | $ | 39 | |||||||||||||
Operating margin, as reported | 13.1 | % | 12.3 | % | 10.9 | % | 8.0 | % | |||||||||||||
Professional fees related to potential divestitures | 1 | — | 3 | — | |||||||||||||||||
Operating profit, as adjusted | 34 | 33 | 56 | 39 | |||||||||||||||||
Operating margin, as adjusted | 13.5 | % | 12.3 | % | 11.5 | % | 8.0 | % | |||||||||||||
Depreciation and amortization | 4 | 4 | 7 | 7 | |||||||||||||||||
EBITDA, as adjusted | $ | 38 | $ | 37 | $ | 63 | $ | 46 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
2019 | 2018 | Change | 2019 | 2018 | Change | ||||||||||||||||
Windows and Other Specialty Products | |||||||||||||||||||||
Net sales | $ | 185 | $ | 191 | (3 | )% | $ | 343 | $ | 378 | (9 | )% | |||||||||
Operating profit (loss), as reported | $ | 7 | $ | 8 | $ | (4 | ) | $ | 12 | ||||||||||||
Operating margin, as reported | 3.8 | % | 4.2 | % | (1.2 | )% | 3.2 | % | |||||||||||||
Impairment charge for goodwill | — | — | 7 | — | |||||||||||||||||
Professional fees related to potential divestitures | 4 | — | 5 | — | |||||||||||||||||
Operating profit, as adjusted | 11 | 8 | 8 | 12 | |||||||||||||||||
Operating margin, as adjusted | 5.9 | % | 4.2 | % | 2.3 | % | 3.2 | % | |||||||||||||
Depreciation and amortization | 5 | 5 | 11 | 11 | |||||||||||||||||
EBITDA, as adjusted | $ | 16 | $ | 13 | $ | 19 | $ | 23 | |||||||||||||
Total | |||||||||||||||||||||
Net sales | $ | 2,275 | $ | 2,297 | (1 | )% | $ | 4,183 | $ | 4,217 | (1 | )% | |||||||||
Operating profit, as reported - segment | $ | 411 | $ | 380 | $ | 646 | $ | 642 | |||||||||||||
General corporate expense, net | (19 | ) | (22 | ) | (43 | ) | (40 | ) | |||||||||||||
Operating profit, as reported | 392 | 358 | 603 | 602 | |||||||||||||||||
Operating margin, as reported | 17.2 | % | 15.6 | % | 14.4 | % | 14.3 | % | |||||||||||||
Rationalization charges - segment | 2 | 1 | 2 | 2 | |||||||||||||||||
Accelerated depreciation related to rationalization activity - segment | — | 1 | — | 1 | |||||||||||||||||
Kichler inventory step up adjustment | — | 20 | — | 25 | |||||||||||||||||
Impairment charges for goodwill and other intangible assets | — | — | 16 | — | |||||||||||||||||
Professional fees related to potential divestitures | 5 | — | 8 | — | |||||||||||||||||
Operating profit, as adjusted | 399 | 380 | 629 | 630 | |||||||||||||||||
Operating margin, as adjusted | 17.5 | % | 16.5 | % | 15.0 | % | 14.9 | % | |||||||||||||
Depreciation and amortization - segment | 39 | 37 | 77 | 69 | |||||||||||||||||
Depreciation and amortization - non-operating | 3 | 2 | 5 | 4 | |||||||||||||||||
EBITDA, as adjusted | $ | 441 | $ | 419 | $ | 711 | $ | 703 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
2019 | 2018 | Change | 2019 | 2018 | Change | ||||||||||||||||
North American | |||||||||||||||||||||
Net sales | $ | 1,891 | $ | 1,872 | 1 | % | $ | 3,426 | $ | 3,388 | 1 | % | |||||||||
Operating profit, as reported | $ | 364 | $ | 323 | $ | 566 | $ | 541 | |||||||||||||
Operating margin, as reported | 19.2 | % | 17.3 | % | 16.5 | % | 16.0 | % | |||||||||||||
Rationalization charges | 2 | 1 | 2 | 2 | |||||||||||||||||
Accelerated depreciation related to rationalization activity | — | 1 | — | 1 | |||||||||||||||||
Kichler inventory step up adjustment | — | 20 | — | 25 | |||||||||||||||||
Impairment charge for other intangible assets | — | — | 9 | — | |||||||||||||||||
Professional fees related to potential divestitures | 3 | — | 6 | — | |||||||||||||||||
Operating profit, as adjusted | 369 | 345 | 583 | 569 | |||||||||||||||||
Operating margin, as adjusted | 19.5 | % | 18.4 | % | 17.0 | % | 16.8 | % | |||||||||||||
Depreciation and amortization | 29 | 27 | 56 | 48 | |||||||||||||||||
EBITDA, as adjusted | $ | 398 | $ | 372 | $ | 639 | $ | 617 | |||||||||||||
International | |||||||||||||||||||||
Net sales | $ | 384 | $ | 425 | (10 | )% | $ | 757 | $ | 829 | (9 | )% | |||||||||
Operating profit, as reported | $ | 47 | $ | 57 | $ | 80 | $ | 101 | |||||||||||||
Operating margin, as reported | 12.2 | % | 13.4 | % | 10.6 | % | 12.2 | % | |||||||||||||
Impairment charge for goodwill | — | — | 7 | — | |||||||||||||||||
Professional fees related to potential divestitures | 2 | — | 2 | — | |||||||||||||||||
Operating profit, as adjusted | 49 | 57 | 89 | 101 | |||||||||||||||||
Operating margin, as adjusted | 12.8 | % | 13.4 | % | 11.8 | % | 12.2 | % | |||||||||||||
Depreciation and amortization | 10 | 10 | 21 | 21 | |||||||||||||||||
EBITDA, as adjusted | $ | 59 | $ | 67 | $ | 110 | $ | 122 | |||||||||||||
Historical information is available on our website. |
(dollars in millions) | |||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
2019 | 2018 | Change | 2019 | 2018 | Change | ||||||||||||||||
Total | |||||||||||||||||||||
Net sales | $ | 2,275 | $ | 2,297 | (1 | )% | $ | 4,183 | $ | 4,217 | (1 | )% | |||||||||
Operating profit, as reported - segment | $ | 411 | $ | 380 | $ | 646 | $ | 642 | |||||||||||||
General corporate expense, net | (19 | ) | (22 | ) | (43 | ) | (40 | ) | |||||||||||||
Operating profit, as reported | 392 | 358 | 603 | 602 | |||||||||||||||||
Operating margin, as reported | 17.2 | % | 15.6 | % | 14.4 | % | 14.3 | % | |||||||||||||
Rationalization charges - segment | 2 | 1 | 2 | 2 | |||||||||||||||||
Accelerated depreciation related to rationalization activity | — | 1 | — | 1 | |||||||||||||||||
Kichler inventory step up adjustment | — | 20 | — | 25 | |||||||||||||||||
Impairment charges for goodwill and other intangible assets | — | — | 16 | — | |||||||||||||||||
Professional fees related to potential divestitures | 5 | — | 8 | — | |||||||||||||||||
Operating profit, as adjusted | 399 | 380 | 629 | 630 | |||||||||||||||||
Operating margin, as adjusted | 17.5 | % | 16.5 | % | 15.0 | % | 14.9 | % | |||||||||||||
Depreciation and amortization - segment | 39 | 37 | 77 | 69 | |||||||||||||||||
Depreciation and amortization - non-operating | 3 | 2 | 5 | 4 | |||||||||||||||||
EBITDA, as adjusted | $ | 441 | $ | 419 | $ | 711 | $ | 703 |
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