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Masco Corporation Reports Second Quarter 2020 Results

·11 mins read

Key Results

  • Sales decreased 4 percent to $1.8 billion; in local currency, sales decreased 3 percent

  • Operating profit for the quarter decreased 2 percent to $339 million; adjusted operating profit decreased 1 percent to $344 million

  • Operating margin increased 30 basis points to 19.2 percent; adjusted operating margin increased 50 basis points to 19.5 percent

  • Earnings per share from continuing operations increased 11 percent to $0.80 per share; adjusted earnings per share from continuing operations increased 14 percent to $0.84 per share

  • Board announces intent to increase annual dividend by $.02 per share to $.56 per share, beginning in the fourth quarter

Masco Corporation (NYSE: MAS), one of the world’s leading manufacturers of branded home improvement and building products, reported its second quarter results.

"I am extremely proud of our team’s response during these unprecedented times," said Masco President and CEO, Keith Allman. "We have worked tirelessly to ensure the safety of our employees, to support our customers and communities, and to effectively manage our business. We delivered strong top and bottom-line growth in our Decorative Architectural Products segment and better than anticipated performance in North American Plumbing," continued Allman. "As restrictions eased, production at our closed facilities resumed, and demand for our products accelerated throughout the quarter. We leveraged increasing demand with focused cost control to expand margins in the quarter."

2020 Second Quarter Commentary

  • On a reported basis, compared to second quarter 2019:

    • Net sales decreased 4 percent to $1.8 billion; in local currency, net sales decreased 3 percent

    • In local currency, North American sales were flat and international sales decreased 17 percent

    • Gross margins decreased 100 basis points to 35.6 percent from 36.6 percent

    • Operating profit decreased 2 percent to $339 million

    • Operating margins increased 30 basis points to 19.2 percent from 18.9 percent

    • Income from continuing operations increased to $0.80 per share, compared to $0.72 per share

  • Compared to second quarter 2019, results for key financial measures, as adjusted for certain items (see Exhibit A) and with a normalized tax rate of 26 percent, were as follows:

    • Gross margins decreased 90 basis points to 35.8 percent compared to 36.7 percent

    • Operating profit decreased 1 percent to $344 million from $349 million

    • Operating margins increased 50 basis points to 19.5 percent compared to 19.0 percent

    • Income from continuing operations increased to $0.84 per share, compared to $0.74 per share

  • Liquidity at the end of the second quarter was $2.1 billion, including full availability on $1.0 billion revolving credit facility

  • Plumbing Products’ net sales decreased 14 percent (13 percent excluding the impact of foreign currency) primarily due to lower volumes resulting from the impact of COVID-19

  • Decorative Architectural Products’ net sales increased 8 percent due to strong growth in paints and other coatings products

"We remain focused on employee safety and customer support as this pandemic continues to evolve," said Allman. "While there are a number of unknowns, and assuming no additional shutdowns due to COVID, we expect strong demand for our products to continue in the third quarter. Additionally, our Board of Directors demonstrated confidence in our future by announcing its intention to raise our annual dividend 4 percent to $.56 per share beginning in the fourth quarter."

About Masco

Headquartered in Livonia, Michigan, Masco Corporation is a global leader in the design, manufacture and distribution of branded home improvement and building products. Our portfolio of industry-leading brands includes Behr® paint; Delta® and Hansgrohe® faucets, bath and shower fixtures; Kichler® decorative and outdoor lighting; and HotSpring® spas. We leverage our powerful brands across product categories, sales channels and geographies to create value for our customers and shareholders. For more information about Masco Corporation, visit www.masco.com.

The second quarter 2020 supplemental material, including a presentation in PDF format, is available on Masco’s website at www.masco.com.

Conference Call Detail

A conference call regarding items contained in this release is scheduled for Thursday, July 30, 2020 at 9:00 a.m. ET. Participants in the call are asked to register five to ten minutes prior to the scheduled start time by dialing (855) 226-2726 (855-22MASCO) and from outside the U.S. at (706) 679-3614. Please use the conference identification number 9048068. The conference call will be webcast simultaneously and in its entirety through Masco’s website. Shareholders, media representatives and others interested in Masco may participate in the webcast by registering through the Investor Relations section on Masco’s website.

A replay of the call will be available on Masco’s website or by phone by dialing (855) 859-2056 and from outside the U.S. at (404) 537-3406. Please use the conference identification number 9048068. The telephone replay will be available approximately two hours after the end of the call and continue through August 30, 2020.

Safe Harbor Statement

This press release contains statements that reflect our views about our future performance and constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "outlook," "believe," "anticipate," "appear," "may," "will," "should," "intend," "plan," "estimate," "expect," "assume," "seek," "forecast," and similar references to future periods. Our views about future performance involve risks and uncertainties that are difficult to predict and, accordingly, our actual results may differ materially from the results discussed in our forward-looking statements. We caution you against relying on any of these forward-looking statements.

Our future performance may be affected by the levels of residential repair and remodel activity and new home construction, our ability to maintain our strong brands and reputation and to develop innovative products, our ability to maintain our competitive position in our industries, our reliance on key customers, the length and severity of the ongoing COVID-19 pandemic, including its impact on domestic and international economic activity, consumer demand for our products, our production capabilities, our employees and our supply chain; the cost and availability of materials and the imposition of tariffs, our dependence on third-party suppliers, risks associated with our international operations and global strategies, our ability to achieve the anticipated benefits of our strategic initiatives, our ability to successfully execute our acquisition strategy and integrate businesses that we have and may acquire, our ability to attract, develop and retain talented personnel, risks associated with our reliance on information systems and technology, and our ability to achieve the anticipated benefits from our investments in new technology. These and other factors are discussed in detail in our most recent Annual Report on Form 10-K, as well as in our Quarterly Reports on Form 10-Q and in other filings we make with the Securities and Exchange Commission. Any forward-looking statement made by us speaks only as of the date on which it was made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. Unless required by law, we undertake no obligation to update publicly any forward-looking statements as a result of new information, future events or otherwise.

MASCO CORPORATION

Condensed Consolidated Statements of Operations - Unaudited

For the Three and Six Months Ended June 30, 2020 and 2019

(in millions, except per common share data)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Net sales

$

1,764

$

1,839

$

3,345

$

3,352

Cost of sales

1,136

1,166

2,170

2,157

Gross profit

628

673

1,175

1,195

Selling, general and administrative expenses

289

326

611

642

Impairment charge for other intangible assets

9

Operating profit

339

347

564

544

Other income (expense), net:

Interest expense

(35)

(41)

(70)

(80)

Other, net

(2)

(3)

(18)

(8)

(37)

(44)

(88)

(88)

Income from continuing operations before income taxes

302

303

476

456

Income tax expense

82

80

115

115

Income from continuing operations

220

223

361

341

Income from discontinued operations, net

14

29

411

38

Net income

234

252

772

379

Less: Net income attributable to noncontrolling interest

10

12

18

23

Net income attributable to Masco Corporation

$

224

$

240

$

754

$

356

Income per common share attributable to Masco Corporation (diluted):

Income from continuing operations

$

0.80

$

0.72

$

1.27

$

1.08

Income from discontinued operations, net

0.05

0.10

1.53

0.13

Net income

$

0.85

$

0.82

$

2.80

$

1.21

Average diluted common shares outstanding

263

290

268

292

Amounts attributable to Masco Corporation:

Income from continuing operations

$

210

$

211

$

343

$

318

Income from discontinued operations, net

14

29

411

38

Net income attributable to Masco Corporation

$

224

$

240

$

754

$

356

Historical information is available on our website.

MASCO CORPORATION

Exhibit A: Reconciliations - Unaudited

For the Three and Six Months Ended June 30, 2020 and 2019

(dollars in millions)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Gross Profit, Selling, General and Administrative Expenses, and Operating Profit Reconciliations

Net sales

$

1,764

$

1,839

$

3,345

$

3,352

Gross profit, as reported

$

628

$

673

$

1,175

$

1,195

Rationalization charges

3

2

6

2

Gross profit, as adjusted

$

631

$

675

$

1,181

$

1,197

Gross margin, as reported

35.6

%

36.6

%

35.1

%

35.7

%

Gross margin, as adjusted

35.8

%

36.7

%

35.3

%

35.7

%

Selling, general and administrative expenses, as reported

$

289

$

326

$

611

$

642

Rationalization charges

2

2

Selling, general and administrative expenses, as adjusted

$

287

$

326

$

609

$

642

Selling, general and administrative expenses as percent of net sales, as reported

16.4

%

17.7

%

18.3

%

19.2

%

Selling, general and administrative expenses as percent of net sales, as adjusted

16.3

%

17.7

%

18.2

%

19.2

%

Operating profit, as reported

$

339

$

347

$

564

$

544

Rationalization charges

5

2

8

2

Impairment charge for other intangible assets

9

Operating profit, as adjusted

$

344

$

349

$

572

$

555

Operating margin, as reported

19.2

%

18.9

%

16.9

%

16.2

%

Operating margin, as adjusted

19.5

%

19.0

%

17.1

%

16.6

%

Historical information is available on our website.

MASCO CORPORATION

Exhibit A: Reconciliations - Unaudited

For the Three and Six Months Ended June 30, 2020 and 2019

(in millions, except per common share data)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Income Per Common Share Reconciliations

Income from continuing operations before income taxes, as reported

$

302

$

303

$

476

$

456

Rationalization charges

5

2

8

2

Impairment charge for other intangible assets

9

Pension costs associated with expected terminated plans

5

11

Income from continuing operations before income taxes, as adjusted

312

305

495

467

Tax at 26% rate

(81)

(79)

(129)

(121)

Less: Net income attributable to noncontrolling interest

10

12

18

23

Income from continuing operations, as adjusted

$

221

$

214

$

348

$

323

Income from continuing operations per common share, as adjusted

$

0.84

$

0.74

$

1.30

$

1.11

Average diluted common shares outstanding

263

290

268

292

Historical information is available on our website.

MASCO CORPORATION

Condensed Consolidated Balance Sheets and Other Financial Data - Unaudited

June 30, 2020 and December 31, 2019

(dollars in millions)

June 30, 2020

December 31, 2019

Balance Sheet

Assets

Current Assets:

Cash and cash investments

$

1,089

$

697

Receivables

1,308

997

Prepaid expenses and other

78

90

Inventories

750

754

Assets held for sale

173

Total Current Assets

3,225

2,711

Property and equipment, net

861

878

Operating lease right-of-use assets

163

176

Goodwill

521

509

Other intangible assets, net

259

259

Other assets

273

139

Assets held for sale

355

Total Assets

$

5,302

$

5,027

Liabilities

Current Liabilities:

Accounts payable

$

845

$

697

Notes payable

407

2

Accrued liabilities

902

700

Liabilities held for sale

149

Total Current Liabilities

2,154

1,548

Long-term debt

2,372

2,771

Noncurrent operating lease liabilities

150

162

Other liabilities

589

589

Liabilities held for sale

13

Total Liabilities

5,265

5,083

Equity

37

(56)

Total Liabilities and Equity

$

5,302

$

5,027

As of June 30,

2020

2019

Other Financial Data

Working Capital Days

Receivable days

58

58

Inventory days

66

74

Payable days

74

70

Working capital

$

1,213

$

1,236

Working capital as a % of sales (LTM)

18.1

%

18.6

%

Historical information is available on our website.

MASCO CORPORATION

Condensed Consolidated Statements of Cash Flows and Other Financial Data - Unaudited

For the Six Months Ended June 30, 2020 and 2019

(dollars in millions)

Six Months Ended June 30,

2020

2019

Cash Flows From (For) Operating Activities:

Cash provided by operating activities

$

283

$

510

Working capital changes

7

(297)

Net cash from operating activities

290

213

Cash Flows From (For) Financing Activities:

Purchase of Company common stock

(602)

(289)

Cash dividends paid

(73)

(70)

Dividends paid to noncontrolling interest

(23)

(42)

Proceeds from the exercise of stock options

21

13

Employee withholding taxes paid on stock-based compensation

(22)

(16)

Increase in debt, net

5

20

Credit Agreement and other financing costs

(2)

Net cash for financing activities

(694)

(386)

Cash Flows From (For) Investing Activities:

Capital expenditures

(45)

(71)

Acquisition of business, net of cash acquired

(24)

Proceeds from disposition of businesses, net of cash disposed

865

Other, net

3

8

Net cash from (for) investing activities

799

(63)

Effect of exchange rate changes on cash and cash investments

(3)

2

Cash and Cash Investments:

Increase (decrease) for the period

392

(234)

At January 1

697

559

At June 30

$

1,089

$

325

As of June 30,

2020

2019

Liquidity

Cash and cash investments

$

1,089

$

325

Revolver availability

1,000

1,000

Total Liquidity

$

2,089

$

1,325

...

Historical information is available on our website.

MASCO CORPORATION

Segment Data - Unaudited

For the Three and Six Months Ended June 30, 2020 and 2019

(dollars in millions)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

Change

2020

2019

Change

Plumbing Products

Net sales

$

868

$

1,012

(14)

%

$

1,823

$

1,952

(7)

%

Operating profit, as reported

$

155

$

198

$

312

$

351

Operating margin, as reported

17.9

%

19.6

%

17.1

%

18.0

%

Rationalization charges

3

2

5

2

Accelerated depreciation related to rationalization activity

1

1

Operating profit, as adjusted

159

200

318

353

Operating margin, as adjusted

18.3

%

19.8

%

17.4

%

18.1

%

Depreciation and amortization

20

20

40

39

EBITDA, as adjusted

$

179

$

220

$

358

$

392

Decorative Architectural Products

Net sales

$

896

$

827

8

%

$

1,522

$

1,400

9

%

Operating profit, as reported

$

201

$

173

$

296

$

246

Operating margin, as reported

22.4

%

20.9

%

19.4

%

17.6

%

Rationalization charges

1

2

Impairment charge for other intangible assets

9

Operating profit, as adjusted

202

173

298

255

Operating margin, as adjusted

22.5

%

20.9

%

19.6

%

18.2

%

Depreciation and amortization

10

10

21

20

EBITDA, as adjusted

$

212

$

183

$

319

$

275

Total

Net sales

$

1,764

$

1,839

(4)

%

$

3,345

$

3,352

%

Operating profit, as reported - segment

$

356

$

371

$

608

$

597

General corporate expense, net

(17)

(24)

(44)

(53)

Operating profit, as reported

339

347

564

544

Operating margin, as reported

19.2

%

18.9

%

16.9

%

16.2

%

Rationalization charges - segment

4

2

7

2

Accelerated depreciation related to rationalization activity - segment

1

1

Impairment charge for other intangible assets

9

Operating profit, as adjusted

344

349

572

555

Operating margin, as adjusted

19.5

%

19.0

%

17.1

%

16.6

%

Depreciation and amortization - segment

30

30

61

59

Depreciation and amortization - non-operating

2

3

4

5

EBITDA, as adjusted

$

376

$

382

$

637

$

619

Historical information is available on our website.

MASCO CORPORATION

North American and International Data - Unaudited

For the Three and Six Months Ended June 30, 2020 and 2019

(dollars in millions)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

Change

2020

2019

Change

North American

Net sales

$

1,480

$

1,488

(1)

%

$

2,738

$

2,659

3

%

Operating profit, as reported

$

321

$

316

$

531

$

497

Operating margin, as reported

21.7

%

21.2

%

19.4

%

18.7

%

Rationalization charges

4

2

7

2

Accelerated depreciation related to rationalization activity

1

1

Impairment charge for other intangible assets

9

Operating profit, as adjusted

326

318

539

508

Operating margin, as adjusted

22.0

%

21.4

%

19.7

%

19.1

%

Depreciation and amortization

19

20

39

40

EBITDA, as adjusted

$

345

$

338

$

578

$

548

International

Net sales

$

284

$

351

(19)

%

$

607

$

693

(12)

%

Operating profit, as reported

$

35

$

55

$

77

$

100

Operating margin, as reported

12.3

%

15.7

%

12.7

%

14.4

%

Depreciation and amortization

11

10

22

19

EBITDA

$

46

$

65

$

99

$

119

Total

Net sales

$

1,764

$

1,839

(4)

%

$

3,345

$

3,352

%

Operating profit, as reported - segment

$

356

$

371

$

608

$

597

General corporate expense, net

(17)

(24)

(44)

(53)

Operating profit, as reported

339

347

564

544

Operating margin, as reported

19.2

%

18.9

%

16.9

%

16.2

%

Rationalization charges - segment

4

2

7

2

Accelerated depreciation related to rationalization activity

1

1

Impairment charge for other intangible assets

9

Operating profit, as adjusted

344

349

572

555

Operating margin, as adjusted

19.5

%

19.0

%

17.1

%

16.6

%

Depreciation and amortization - segment

30

30

61

59

Depreciation and amortization - non-operating

2

3

4

5

EBITDA, as adjusted

$

376

$

382

$

637

$

619

Historical information is available on our website.

View source version on businesswire.com: https://www.businesswire.com/news/home/20200730005112/en/

Contacts

Investor Contact
David Chaika
Vice President, Treasurer and Investor Relations
313.792.5500
david_chaika@mascohq.com