MAS Masco Corp

Key Highlights

• Sales for the first quarter increased 4 percent to $1.7 billion; sales increased 5 percent excluding the impact of foreign currency translation
• Adjusted operating profit grew 39 percent to $237 million
• Adjusted operating profit margin for the quarter increased to 13.8 percent, a 350 basis point expansion
• Adjusted EPS for the quarter grew 78 percent to $.32 per common share

Masco Corporation (NYSE: MAS), one of the world’s leading manufacturers of branded home improvement and building products, reported net sales and adjusted operating profit growth in the first quarter of 2016. Adjusted operating profit margin rose to 13.8 percent, representing a 350 basis point increase over the prior year.

“The year is off to a great start with strong performances from all of our businesses,” said Masco President and CEO Keith Allman. “Our industry-leading plumbing businesses maintained their positive momentum by delivering another quarter of top- and bottom-line growth both domestically and internationally. Our Decorative Architectural Products segment benefitted from increased demand for Behr’s core DIY, Behr Pro® and Liberty Hardware branded products. Our cabinetry business continued to make progress against its strategic plan to optimize sales mix and increase profitability. Finally, our windows businesses capitalized on repair and remodel and new home construction growth in the U.S. and U.K.”

2016 First Quarter Commentary

• Compared to first quarter 2015, net sales from continuing operations increased 4 percent to $1.7 billion. In local currency, North American sales increased 6 percent and international sales increased 2 percent
• Compared to first quarter 2015, results for key financial measures, as adjusted for certain items (see Exhibit A) and with a normalized tax rate of 36 percent, were as follows:
  • Gross margins improved to 33.1 percent compared to 29.9 percent
  • Operating margins improved to 13.8 percent compared to 10.3 percent
  • Income from continuing operations was $.32 per common share compared to $.18 per common share

• Income from continuing operations, as reported, was $.32 per common share
• Liquidity at the end of the first quarter was approximately $2.4 billion (includes $900 million of cash from the issuance of notes in March 2016). Subsequently, $1.3 billion of cash was paid for the retirement of debt in April
• 3.2 million shares were repurchased in the first quarter

2016 First Quarter Operating Segment Highlights

• Plumbing Products’ net sales increased 2 percent (4 percent excluding the impact of foreign currency translation) driven by growth in the wholesale/trade channel
• Decorative Architectural Products’ net sales increased 9 percent, fueled by strong growth in Behr’s core DIY products and Behr Pro® products
• Cabinetry Products’ net sales decreased 5 percent, due to the exit of lower margin business in the builder channel, which was partially offset by continued growth in the dealer channel
• Windows and Other Specialty Products’ net sales increased 9 percent (11 percent excluding the impact of foreign currency translation) led by the strong performance of our North American windows business

Outlook

“The fundamentals driving our business are progressing in line with our expectations, and our performance this quarter demonstrates that we are fully focused on achieving our financial and operational objectives,” continued Mr. Allman. “We remain confident in our ability to successfully execute against our long-term growth strategies by leveraging our brand portfolio, industry-leading positions and our Masco Operating System. We expect that these growth strategies, coupled with our disciplined capital allocation approach and strengthening balance sheet, will continue to create shareholder value in 2016.”

About Masco

Headquartered in Taylor, 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; KraftMaid® and Merillat® cabinets; Milgard® windows and doors; and Hot Spring® 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 2016 first quarter supplemental material, including a presentation in PDF format, is available on the Company’s website at www.masco.com.

Conference Call Details

A conference call regarding items contained in this release is scheduled for Tuesday, April 26, 2016 at 8:00 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 75969468. The conference call will be webcast simultaneously and in its entirety through the Company’s website. Shareholders, media representatives and others interested in Masco may participate in the webcast by registering through the Investor Relations section on the Company’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 75969468. The telephone replay will be available approximately two hours after the end of the call and continue through May 26, 2016.

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 “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 home improvement activity and new home construction, our ability to maintain our strong brands and to develop and introduce new and improved products, our ability to maintain our competitive position in our industries, our reliance on key customers, our ability to achieve the anticipated benefits of our strategic initiatives, our ability to sustain the performance of our cabinetry businesses, the cost and availability of raw materials, our dependence on third party suppliers, and risks associated with international operations and global strategies. These and other factors are discussed in detail in Item 1A, “Risk Factors” 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. The forward-looking statements in this press release speak only as of the date of this press release. 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 Months Ended March 31, 2016 and 2015   (in millions, except per common share data)   Three Months Ended March 31, 2016   2015 Net sales $ 1,720 $ 1,659 Cost of sales 1,151   1,164   Gross profit 569 495   Selling, general and administrative expenses 335   330   Operating profit 234 165   Other income (expense), net: Interest expense (56 ) (56 ) Other, net (1 ) 1   (57 ) (55 ) Income from continuing operations before income taxes 177 110   Income tax expense (58 ) (40 ) Income from continuing operations 119 70   Income from discontinued operations, net —   3   Net income 119 73   Less: Net income attributable to noncontrolling interest 10   9   Net income attributable to Masco Corporation $ 109   $ 64     Income per common share attributable to Masco Corporation (diluted): Income from continuing operations $ 0.32 $ 0.17 Income from discontinued operations, net —   0.01   Net income $ 0.32   $ 0.18     Average diluted common shares outstanding 333   347     Amounts attributable to Masco Corporation: Income from continuing operations $ 109 $ 61 Income from discontinued operations, net —   3   Net income attributable to Masco Corporation $ 109   $ 64    

Historical information is available on our website.

  MASCO CORPORATION Exhibit A: Reconciliations - Unaudited For the Three Months Ended March 31, 2016 and 2015   (in millions, except per common share data)   Three Months Ended March 31, 2016   2015

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

  Net sales $ 1,720   $ 1,659     Gross profit, as reported $ 569 $ 495 Rationalization charges 1   1   Gross profit, as adjusted $ 570   $ 496     Gross margin, as reported 33.1 % 29.8 % Gross margin, as adjusted 33.1 % 29.9 %   Selling, general and administrative expenses, as reported $ 335 $ 330 Rationalization charges 2   5   Selling, general and administrative expenses, as adjusted $ 333   $ 325     Selling, general and administrative expenses as percent of net sales, as reported 19.5 % 19.9 % Selling, general and administrative expenses as percent of net sales, as adjusted 19.4 % 19.6 %   Operating profit, as reported $ 234 $ 165 Rationalization charges 3   6   Operating profit, as adjusted $ 237   $ 171     Operating margin, as reported 13.6 % 9.9 % Operating margin, as adjusted 13.8 % 10.3 %  

Earnings Per Common Share Reconciliation

  Income from continuing operations before income taxes, as reported $ 177 $ 110 Rationalization charges 3 6 Gains from private equity funds, net — (2 ) Earnings from equity investments, net (1 ) —   Income from continuing operations before income taxes, as adjusted 179 114 Tax at 36% rate (64 ) (41 ) Less: Net income attributable to noncontrolling interest 10   9   Income from continuing operations, as adjusted $ 105   $ 64     Income per common share, as adjusted $ 0.32     $ 0.18     Average diluted common shares outstanding 333   347    

Historical information is available on our website.

    MASCO CORPORATION Condensed Consolidated Balance Sheets and Other Financial Data - Unaudited   (dollars in millions)   December 31, March 31, 2016 2015 Balance Sheet Assets Current Assets: Cash and cash investments $ 2,175 $ 1,468 Short-term bank deposits 195 248 Receivables 1,036 853 Inventories 755 687 Prepaid expenses and other 87   72   Total Current Assets 4,248 3,328   Property and equipment, net 1,040 1,027 Goodwill 844 839 Other intangible assets, net 158 160 Other assets 264   310   Total Assets $ 6,554   $ 5,664     Liabilities Current Liabilities: Accounts payable $ 834 $ 749 Notes payable 1,303 1,004 Accrued liabilities 652   752   Total Current Liabilities 2,789 2,505   Long-term debt 2,993 2,403 Other liabilities 688   698   Total Liabilities 6,470 5,606   Equity 84   58   Total Liabilities and Equity $ 6,554   $ 5,664     As of March 31, 2016 March 31, 2015 Other Financial Data Working Capital Days Receivable days 50 51 Inventory days 56 56 Payable days 70 68 Working capital $ 957 $ 968 Working capital as a % of sales (LTM) 13.3 % 13.8 %   Historical information is available on our website.   MASCO CORPORATION Condensed Consolidated Statements of Cash Flows* and Other Financial Data - Unaudited   (dollars in millions)   Three Months Ended March 31, 2016   2015 Cash Flows From (For) Operating Activities: Cash provided by operating activities $ 189 $ 144 Working capital changes (289 ) (296 ) Net cash for operating activities (100 ) (152 )   Cash Flows From (For) Financing Activities: Purchase of Company common stock (86 ) (103 ) Cash dividends paid (32 ) (32 ) Issuance of notes, net of issuance costs 889 497 Issuance of Company common stock 1 — Excess tax benefit from stock-based compensation 11 — Decrease in debt, net (2 ) —   Net cash from financing activities 781   362     Cash Flows From (For) Investing Activities: Capital expenditures (37 ) (32 ) Other, net 57   43   Net cash from investing activities 20   11     Effect of exchange rate changes on cash and cash investments 6 (26 )   Cash and Cash Investments: Increase for the period 707 195 At January 1 1,468   1,383   At March 31 $ 2,175   $ 1,578     As of March 31, 2016 2015 Liquidity* Cash and cash investments $ 2,175 $ 1,578 Short-term bank deposits 195   197   Total Liquidity $ 2,370   $ 1,775  

 

* Prior period amounts not restated for spin off of TopBuild Corp.   Historical information is available on our website.     MASCO CORPORATION Segment Data - Unaudited For the Three Months Ended March 31, 2016 and 2015   (dollars in millions)   Three Months Ended March 31, 2016   2015 Change Plumbing Products Net sales $ 813   $ 796   2 %   Operating profit, as reported $ 129 $ 111 Operating margin, as reported 15.9 % 13.9 %   Rationalization charges 2   1   Operating profit, as adjusted 131 112 Operating margin, as adjusted 16.1 % 14.1 %   Depreciation and amortization 14   14     EBITDA, as adjusted $ 145   $ 126     Decorative Architectural Products Net sales $ 493   $ 451   9 %   Operating profit, as reported $ 105 $ 83 Operating margin, as reported 21.3 % 18.4 %   Depreciation and amortization 4   4     EBITDA $ 109   $ 87     Cabinetry Products Net sales $ 236   $ 249   (5 )%   Operating profit (loss), as reported $ 24 $ (4 ) Operating margin, as reported 10.2 % (1.6 )%   Rationalization charges 1   2   Operating profit (loss), as adjusted 25 (2 ) Operating margin, as adjusted 10.6 % (0.8 )%   Depreciation and amortization 5   7     EBITDA, as adjusted $ 30   $ 5    

Historical information is available on our website.

  MASCO CORPORATION Segment Data - Unaudited For the Three Months Ended March 31, 2016 and 2015

(dollars in millions)

    Three Months Ended March 31, 2016   2015 Change Windows and Other Specialty Products Net sales $ 178   $ 163   9 %   Operating profit, as reported $ 3 $ 6 Operating margin, as reported 1.7 % 3.7 %   Depreciation and amortization 5   4     EBITDA $ 8   $ 10     Total Net sales $ 1,720   $ 1,659   4 %   Operating profit, as reported - segment $ 261 $ 196 General corporate expense, net (GCE) (27 ) (31 ) Operating profit, as reported 234 165 Operating margin, as reported 13.6 % 9.9 %   Rationalization charges - segment 3 3 Rationalization charges - GCE —   3   Operating profit, as adjusted 237 171 Operating margin, as adjusted 13.8 % 10.3 %   Depreciation and amortization - segment 28 29 Depreciation and amortization - non-operating 4   2     EBITDA, as adjusted $ 269   $ 202    

Historical information is available on our website.

   

MASCO CORPORATION

North American and International Data - Unaudited

For the Three Months Ended March 31, 2016 and 2015

 

(dollars in millions)

  Three Months Ended March 31,   2016       2015   Change North American Net sales $ 1,350   $ 1,282   5 %   Operating profit, as reported $ 215 $ 151 Operating margin, as reported

15.9

%

 

11.8

%

  Rationalization charges   2     2   Operating profit, as adjusted 217 153

Operating margin, as adjusted

16.1

%

11.9

%

  Depreciation and amortization   19     20     EBITDA, as adjusted $ 236   $ 173     International Net sales $ 370   $ 377   (2 )%   Operating profit, as reported $ 46 $ 45 Operating margin, as reported

12.4

%

 

11.9

%

  Rationalization charges   1     1   Operating profit, as adjusted 47 46 Operating margin, as adjusted 12.7 %

 

12.2

%

  Depreciation and amortization   9     9     EBITDA, as adjusted $ 56   $ 55     Total Net sales $ 1,720   $ 1,659   4 %   Operating profit, as reported - segment $ 261 $ 196 General corporate expense, net (GCE)   (27 )   (31 ) Operating profit, as reported 234 165 Operating margin, as reported 13.6

%

 

9.9

%

  Rationalization charges - segment 3 3 Rationalization charges - GCE   —    

3

  Operating profit, as adjusted 237 171 Operating margin, as adjusted

13.8

%

 

10.3

%

  Depreciation and amortization - segment 28 29 Depreciation and amortization - non-operating   4     2     EBITDA, as adjusted $ 269   $ 202  

Historical information is available on our website.

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Masco CorporationInvestor ContactIrene TasiDirector - Investor Relations313.792.5500irene_tasi@mascohq.com