2016 Fourth Quarter Key
Highlights
- Sales for the fourth quarter increased
3 percent to $1.8 billion; in local currencies, sales increased 4
percent
- Gross margin improved to 32.6 percent
from 31.0 percent
- Earnings per share for the quarter grew
36 percent to $0.30 per common share; adjusted earnings per share
grew 14 percent to $0.33 per common share
- Repurchased 6.6 million shares for $207
million
Masco Corporation (NYSE: MAS), one of the world’s leading
manufacturers of branded home improvement and building products,
reported net sales and operating profit growth for the fourth
quarter and full year of 2016.
2016 Fourth Quarter
Commentary
- On a reported basis, compared to fourth
quarter 2015:
- Net sales from continuing operations
increased 3 percent to $1.8 billion
- In local currency, North American sales
increased 3 percent and international sales increased 8
percent
- Gross margin improved to 32.6 percent
from 31.0 percent
- Operating margin decreased to 12.2
percent from 12.4 percent, reflecting planned growth and
incremental insurance costs
- Income from continuing operations was
$0.30 per common share compared to $0.22 per common share
- Compared to fourth 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 margin improved to 32.8 percent
compared to 31.3 percent
- Operating margin decreased to 12.6
percent compared to 12.8 percent
- Income from continuing operations was
$0.33 per common share compared to $0.29 per common share
- Liquidity at the end of the fourth
quarter was approximately $1.2 billion
2016 Fourth Quarter Operating Segment
Highlights
- Plumbing Products’ net sales increased
5 percent (7 percent excluding the impact of foreign currency
translation), driven by growth in North America and
internationally
- Decorative Architectural Products’ net
sales increased 5 percent with strong volume growth partially
offset by promotional activity
- Cabinetry Products’ net sales decreased
8 percent (7 percent excluding the impact of foreign currency
translation) due to the exit of lower margin business in the
direct-to-builder channel, partially offset by growth in the retail
and dealer channels and favorable product mix
- Windows and Other Specialty Products’
net sales decreased 2 percent. Excluding the impact of foreign
currency translation, net sales increased 2 percent, led by both
our international and North American windows businesses
“We finished the year with good fourth quarter results,” said
Keith Allman, Masco’s President and CEO. “Our Plumbing Products
segment had another record quarter on both the top and bottom
lines, demonstrating the strength of our brands and our innovative
products. Our Decorative Architectural Products segment posted
solid 5 percent growth in the quarter, and we executed our planned
investment to drive future profitable growth. Our Cabinetry
Products segment continued its strategy of exiting certain
direct-to-builder business, introducing new products, and driving
growth with our market-leading Merillat® and KraftMaid® brands. We
began to see improvements in the operations of our U.S. window
business, and we continued our disciplined capital allocation by
returning approximately $240 million to shareholders through share
repurchases and dividends during the quarter.”
2016 Full Year Key
Highlights
- Sales for the year increased 3 percent
to $7.4 billion; in local currencies, sales increased 4
percent
- Operating profit grew 15 percent to
$1,053 million; adjusted operating profit grew 16 percent to $1,075
million
- Operating profit margin for the year
increased to 14.3 percent, a 150 basis point expansion; adjusted
operating profit margin increased to 14.6 percent, a 160 basis
point expansion
- Earnings per share from continuing
operations for the year grew 43 percent to $1.47 per common share;
adjusted earnings per share from continuing operations grew 27
percent to $1.51 per common share
2016 Full Year
Commentary
- On a reported basis, compared to full
year 2015:
- Net sales from continuing operations
increased 3 percent to $7.4 billion
- In local currency, North American sales
increased 3 percent and international sales increased 6
percent
- Gross margin improved to 33.4 percent
from 31.5 percent
- Operating margin increased to 14.3
percent from 12.8 percent
- Income from continuing operations was
$1.47 per common share compared to $1.03 per common share
- Compared to full year 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 margin improved to 33.6 percent
compared to 31.6 percent
- Operating margin increased to 14.6
percent compared to 13.0 percent
- Income from continuing operations was
$1.51 per common share compared to $1.19 per common share
- Free cash flow was $535 million
“Masco delivered another strong year in 2016,” said Allman. “We
continued to execute against our long-term growth and capital
allocation strategies that we established in 2015. We demonstrated
our ability to capitalize on improving end markets by driving sales
growth and expanding our operating margin. We successfully executed
our plan to reduce leverage by paying down approximately $400
million in debt early in the year, further strengthening our
balance sheet. Lastly, we generated a significant amount of free
cash flow and continued our commitment to return capital to
shareholders by increasing our dividend and repurchasing $459
million of our shares, enabling us to once again generate solid
returns for our shareholders,” continued Allman. “We will continue
to execute our strategy and remain confident in our ability to
drive growth and productivity as we move into 2017.”
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 fourth 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 Thursday, February 9, 2017 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 47955207. 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 47955207.
The telephone replay will be available approximately two hours
after the end of the call and continue through March 9, 2017.
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 improve our under-performing U.S. window business, 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 and Twelve
Months Ended December 31, 2016 and 2015
(in millions, except per common share
data)
Three Months Ended Twelve Months Ended
December 31, December 31, 2016
2015 2016 2015 Net sales $ 1,759 $
1,715 $ 7,357 $ 7,142 Cost of sales 1,186 1,183 4,901
4,889 Gross profit 573 532 2,456 2,253
Selling, general and administrative expenses 358 320
1,403 1,339 Operating profit 215 212 1,053 914
Other income (expense), net: Interest expense (43 ) (54 ) (229 )
(225 ) Other, net 1 2 6 — (42 ) (52 )
(223 ) (225 ) Income from continuing operations before income taxes
173 160 830 689 Income tax expense 67 74 296
293 Income from continuing operations 106 86 534 396
Loss from discontinued operations, net — (1 ) —
(2 ) Net income 106 85 534 394 Less: Net income
attributable to noncontrolling interest 8 10 43
39 Net income attributable to Masco Corporation $ 98
$ 75 $ 491 $ 355 Income per
common share attributable to Masco Corporation (diluted): Income
from continuing operations $ 0.30 $ 0.22 $ 1.47 $ 1.03 Loss from
discontinued operations, net — — — (0.01 ) Net
income $ 0.30 $ 0.22 $ 1.47 $ 1.02
Average diluted common shares outstanding 323 335
330 341 Amounts attributable to Masco
Corporation: Income from continuing operations $ 98 $ 76 $ 491 $
357 Loss from discontinued operations, net — (1 ) —
(2 ) Net income $ 98 $ 75 $ 491 $ 355
Historical information is available on our website.
MASCO CORPORATION Exhibit A: Reconciliations -
Unaudited For the Three Months and Twelve Months Ended
December 31, 2016 and 2015 (in millions, except per
common share data) Three Months Ended
Twelve Months Ended December 31, December 31,
2016 2015 2016 2015
Gross Profit,
Selling, General and Administrative Expenses, and Operating Profit
Reconciliations
Net sales $ 1,759 $
1,715 $ 7,357 $
7,142 Gross profit, as reported
$ 573 $ 532 $ 2,456
$ 2,253 Rationalization charges 4 6 14 8 (Gain) on
sale of property and equipment — (2 ) — (5 )
Gross
profit, as adjusted $ 577 $
536 $ 2,470 $
2,256 Gross margin, as reported 32.6 % 31.0 %
33.4 % 31.5 % Gross margin, as adjusted 32.8 % 31.3 % 33.6 % 31.6 %
Selling, general and administrative expenses, as
reported $ 358 $ 320 $
1,403 $ 1,339 Rationalization charges 2
3 8 10
Selling, general and administrative
expenses, as adjusted $ 356 $
317 $ 1,395 $
1,329 Selling, general and administrative
expenses as percent of net sales, as reported 20.4 % 18.7 % 19.1 %
18.7 % Selling, general and administrative expenses as percent of
net sales, as adjusted 20.2 % 18.5 % 19.0 % 18.6 %
Operating profit, as reported $ 215 $
212 $ 1,053 $ 914
Rationalization charges 6 9 22 18 (Gain) on sale of property and
equipment — (2 ) — (5 )
Operating profit, as
adjusted $ 221 $ 219
$ 1,075 $ 927
Operating margin, as reported 12.2 % 12.4 % 14.3 % 12.8 % Operating
margin, as adjusted 12.6 % 12.8 % 14.6 % 13.0 %
Earnings Per
Common Share Reconciliation
Income from continuing operations before income taxes, as
reported $ 173 $ 160 $
830 $ 689 Rationalization charges 6 9 22 18
(Gain) on sale of property and equipment — (2 ) — (5 ) (Gain) from
auction rate securities (2 ) — (3 ) — (Gains) from private equity
funds, net (3 ) (1 ) (5 ) (6 ) (Earnings) from equity investments,
net (1 ) — (2 ) (2 ) Loss from other investments 3 —
3 —
Income from continuing operations before
income taxes, as adjusted 176 166 845
694 Tax at 36% rate (63 ) (60 ) (304 ) (250 ) Less: Net
income attributable to noncontrolling interest 8 10
43 39
Income from continuing operations, as
adjusted $ 105 $ 96
$ 498 $ 405
Income per common share, as adjusted $ 0.33
$ 0.29 $ 1.51
$ 1.19 Average diluted common shares
outstanding 323 335 330 341
Historical information is available on our website.
MASCO CORPORATION Condensed Consolidated Balance Sheets
and Other Financial Data - Unaudited (dollars
in millions) December 31, December
31, 2016 2015 Balance Sheet Assets
Current Assets: Cash and cash investments $ 990 $ 1,468 Short-term
bank deposits 201 248 Receivables 917 853 Inventories 712 687
Prepaid expenses and other 114 72 Total Current Assets 2,934
3,328 Property and equipment, net 1,060 1,027 Goodwill 832
839 Other intangible assets, net 154 160 Other assets 157
310 Total Assets $ 5,137 $ 5,664
Liabilities
Current Liabilities: Accounts payable $ 800 $ 749 Notes payable 2
1,004 Accrued liabilities 658 650 Total Current Liabilities
1,460 2,403 Long-term debt 2,995 2,403 Other liabilities 785
800 Total Liabilities 5,240 5,606
Equity (103
) 58 Total Liabilities and Equity $ 5,137 $ 5,664
As of December 31, December 31,
2016 2015 Other Financial Data Working
Capital Days Receivable days 49 46 Inventory days 54 52 Payable
days 70 69 Working capital $ 829 $ 791 Working capital as a % of
sales (LTM) 11.3 % 11.1 %
Historical information is available on our website.
MASCO CORPORATION Condensed Consolidated Statements of
Cash Flows and Other Financial Data - Unaudited
(dollars in millions) Twelve Months Ended
December 31, 2016 2015 Cash Flows
From (For) Operating Activities: Cash provided by operating
activities $ 814 $ 704 Working capital changes (88 ) (5 ) Net cash
from operating activities 726 699
Cash
Flows From (For) Financing Activities: Retirement of notes
(1,300 ) (500 ) Purchase of Company common stock (459 ) (456 ) Cash
dividends paid (128 ) (126 ) Dividends paid to noncontrolling
interest (31 ) (36 ) Cash distributed to TopBuild Corp. — (63 )
Issuance of TopBuild Corp. debt — 200 Issuance of notes, net of
issuance costs 889 497 Debt extinguishment costs (40 ) — Issuance
of Company common stock 1 2 Excess tax benefit from stock-based
compensation 23 75 Credit Agreement and other financing costs — (3
) Decrease in debt, net (1 ) — Net cash for financing
activities (1,046 ) (410 )
Cash Flows From (For)
Investing Activities: Capital expenditures (180 ) (158 ) Other,
net 56 (31 ) Net cash for investing activities (124 ) (189 )
Effect of exchange rate changes on cash and cash investments
(34 ) (15 )
Cash and Cash Investments: (Decrease)
increase for the period (478 ) 85 At January 1 1,468 1,383
At December 31 $ 990 $ 1,468
As
of December 31, December 31, 2016
2015 Liquidity Cash and cash investments $ 990 $
1,468 Short-term bank deposits 201 248
Total
Liquidity $ 1,191 $ 1,716
Historical information is available on our website.
MASCO CORPORATION Segment Data - Unaudited For the
Three Months and Twelve Months Ended December 31, 2016 and 2015
(dollars in millions)
Three Months Ended Twelve Months Ended December
31, December 31, 2016 2015
Change 2016 2015 Change
Plumbing Products Net sales $ 891 $ 846 5 % $
3,526 $ 3,341 6 % Operating profit, as
reported $ 151 $ 126 $ 642 $ 512 Operating margin, as reported 16.9
% 14.9 % 18.2 % 15.3 % Rationalization charges 2 7
13 9 Operating profit, as adjusted 153 133 655
521 Operating margin, as adjusted 17.2 % 15.7 % 18.6 % 15.6 %
Depreciation and amortization 15 14 57
56 EBITDA, as adjusted $ 168 $ 147 $
712 $ 577
Decorative Architectural
Products Net sales $ 443 $ 420 5 % $ 2,092
$ 2,020 4 % Operating profit, as reported $ 75 $ 85 $
430 $ 403 Operating margin, as reported 16.9 % 20.2 % 20.6 % 20.0 %
Depreciation and amortization 4 4 16 16
EBITDA $ 79 $ 89 $ 446 $ 419
Cabinetry Products Net sales $ 234 $
254 (8 )% $ 970 $ 1,025 (5 )% Operating
profit, as reported $ 16 $ 19 $ 93 $ 51 Operating margin, as
reported 6.8 % 7.5 % 9.6 % 5.0 % Rationalization charges 3 2
8 5 (Gain) on sale of property and equipment — (2 ) —
(5 ) Operating profit, as adjusted 19 19 101 51 Operating margin,
as adjusted 8.1 % 7.5 % 10.4 % 5.0 % Depreciation and
amortization 6 6 21 24 EBITDA,
as adjusted $ 25 $ 25 $ 122 $ 75
Historical information is available on our website.
MASCO CORPORATION Segment Data - Unaudited For the
Three Months and Twelve Months Ended December 31, 2016 and 2015
(dollars in millions)
Three Months Ended Twelve Months Ended December
31, December 31, 2016 2015
Change 2016 2015 Change
Windows and Other Specialty Products Net sales $ 191
$ 195 (2 )% $ 769 $ 756 2 % Operating
profit (loss), as reported $ 6 $ 7 $ (3 ) $ 57 Operating margin, as
reported 3.1 % 3.6 % (0.4 )% 7.5 % Rationalization charges 1
— 1
— Operating profit (loss),
as adjusted 7 7 (2 ) 57 Operating margin, as adjusted 3.7 % 3.6 %
(0.3 )% 7.5 % Depreciation and amortization 5 5
21 18 EBITDA, as adjusted $ 12 $
12 $ 19 $ 75
Total Net sales $
1,759 $ 1,715 3 % $ 7,357 $ 7,142 3 %
Operating profit, as reported - segment $ 248 $ 237 $ 1,162
$ 1,023 General corporate expense, net (GCE) (33 ) (25 ) (109 )
(109 ) Operating profit, as reported 215 212 1,053 914 Operating
margin, as reported 12.2 % 12.4 % 14.3 % 12.8 %
Rationalization charges - segment 6 9 22 14 Rationalization charges
- GCE — — — 4 (Gain) on sale of property and equipment — (2
) — (5 ) Operating profit, as adjusted 221 219 1,075 927
Operating margin, as adjusted 12.6 % 12.8 % 14.6 % 13.0 %
Depreciation and amortization - segment 30 29 115 114 Depreciation
and amortization - non-operating 4 4 19 13
EBITDA, as adjusted $ 255 $ 252 $ 1,209
$ 1,054
Historical information is available on our website.
MASCO CORPORATION North American and International Data -
Unaudited For the Three Months and Twelve Months Ended
December 31, 2016 and 2015 (dollars in millions)
Three Months Ended Twelve
Months Ended December 31, December 31,
2016 2015 Change 2016
2015 Change North American Net sales $ 1,389
$ 1,347 3 % $ 5,834 $ 5,645 3 %
Operating profit, as reported $ 212 $ 196 $ 961 $ 841 Operating
margin, as reported 15.3 % 14.6 % 16.5 % 14.9 %
Rationalization charges 3 6 15 10 (Gain) on sale of property and
equipment — (2 ) — (5 ) Operating profit, as adjusted
215 200 976 846 Operating margin, as adjusted 15.5 % 14.8 % 16.7 %
15.0 % Depreciation and amortization 20 20 78
78 EBITDA, as adjusted $ 235 $ 220
$ 1,054 $ 924
International Net
sales $ 370 $ 368 1 % $ 1,523 $ 1,497 2
% Operating profit, as reported $ 36 $ 41 $ 201 $ 182
Operating margin, as reported 9.7 % 11.1 % 13.2 % 12.2 %
Rationalization charges 3 3 7 4
Operating profit, as adjusted 39 44 208 186 Operating margin, as
adjusted 10.5 % 12.0 % 13.7 % 12.4 % Depreciation and
amortization 10 9 37 36 EBITDA,
as adjusted $ 49 $ 53 $ 245 $ 222
Total Net sales $ 1,759 $ 1,715 3 % $
7,357 $ 7,142 3 % Operating profit, as
reported - segment $ 248 $ 237 $ 1,162 $ 1,023 General corporate
expense, net (GCE) (33 ) (25 ) (109 ) (109 ) Operating profit, as
reported 215 212 1,053 914 Operating margin, as reported 12.2 %
12.4 % 14.3 % 12.8 % Rationalization charges - segment 6 9
22 14 Rationalization charges - GCE — — — 4 (Gain) on sale of
property and equipment — (2 ) — (5 ) Operating
profit, as adjusted 221 219 1,075 927 Operating margin, as adjusted
12.6 % 12.8 % 14.6 % 13.0 % Depreciation and amortization -
segment 30 29 115 114 Depreciation and amortization - non-operating
4 4 19 13 EBITDA, as adjusted $
255 $ 252 $ 1,209 $ 1,054
Historical information is available on our website.
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Investor ContactMasco
CorporationDavid ChaikaVice President, Treasurer and Investor
Relations313.792.5500david_chaika@mascohq.com
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