Masco Corporation (NYSE: MAS), one of the world’s leading manufacturers of branded home improvement and building products, reported its first quarter results.
“We achieved another outstanding quarter,” said Masco President and CEO, Keith Allman. “We capitalized on the continued strong demand for our products to deliver exceptional sales growth, margin expansion and an 89 percent increase in adjusted earnings per share. We also continued our capital deployment of our strong free cash flow by returning $339 million to shareholders through dividends and share repurchases during the quarter. Finally, we further strengthened our balance sheet and reduced interest expense through the successful refinancing of our 2022, 2025 and 2026 debt maturities.”
2021 First Quarter Commentary
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On a reported basis, compared to first quarter 2020:
- Net sales increased 25 percent to $1,970 million; in local currency and excluding acquisitions, net sales increased 19 percent
- In local currency, North American sales increased 21 percent and international sales increased 27 percent
- Gross margins increased 90 basis points to 35.5 percent from 34.6 percent
- Operating profit increased 62 percent to $365 million
- Operating margins increased 430 basis points to 18.5 percent from 14.2 percent
- Income from continuing operations decreased to $0.34 per share, compared to $0.48 per share
-
Compared to first quarter 2020, 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 80 basis points to 35.6 percent compared to 34.8 percent
- Operating profit increased 61 percent to $366 million from $228 million
- Operating margins increased 420 basis points to 18.6 percent compared to 14.4 percent
- Income from continuing operations increased to $0.89 per share, compared to $0.47 per share
- Liquidity at the end of the first quarter was $1,838 million (including availability under our revolving credit facility)
- Plumbing Products’ net sales increased 31 percent; in local currency and excluding acquisitions, sales increased 22 percent
- Decorative Architectural Products’ net sales increased 15 percent; in local currency and excluding acquisitions, sales increased 13 percent
“Masco is off to a strong start in 2021,” said Allman. “Our markets remain strong, and we continue to demonstrate our ability to execute extremely well in this dynamic environment. We have taken actions and developed further plans to offset the raw material and logistics inflation that we are experiencing. While we anticipate these challenges will continue for the next few quarters, we believe we are well prepared and will continue to adjust to deliver value for our customers and our shareholders. Based on our strong performance in the first quarter and continued strength in our markets, we now anticipate our earnings per share for 2021 to be in the range of $3.50 to $3.70 per share, increased from our previous expectation of $3.25 to $3.45 per share,” concluded Allman.
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 first quarter 2021 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 Wednesday, April 28, 2021 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 9998268. 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 9998268. The telephone replay will be available approximately two hours after the end of the call and continue through May 28, 2021.
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 to a lesser extent, 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 confidence, 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 and diverse 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 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. 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 Months Ended March 31, 2021 and 2020 | |||||||||
(in millions, except per common share data) | |||||||||
Three Months Ended March 31, | |||||||||
2021 | 2020 | ||||||||
Net sales | $ | 1,970 | $ | 1,581 | |||||
Cost of sales | 1,270 | 1,034 | |||||||
Gross profit | 700 | 547 | |||||||
Selling, general and administrative expenses | 335 | 322 | |||||||
Operating profit | 365 | 225 | |||||||
Other income (expense), net: | |||||||||
Interest expense | (202 | ) | (35 | ) | |||||
Other, net | (6 | ) | (16 | ) | |||||
(208 | ) | (51 | ) | ||||||
Income from continuing operations before income taxes | 157 | 174 | |||||||
Income tax expense | 43 | 33 | |||||||
Income from continuing operations | 114 | 141 | |||||||
Income from discontinued operations, net | — | 397 | |||||||
Net income | 114 | 538 | |||||||
Less: Net income attributable to noncontrolling interest | 20 | 8 | |||||||
Net income attributable to Masco Corporation | $ | 94 | $ | 530 | |||||
Income per common share attributable to Masco Corporation (diluted): | |||||||||
Income from continuing operations | $ | 0.34 | $ | 0.48 | |||||
Income from discontinued operations, net | — | 1.44 | |||||||
Net income | $ | 0.34 | $ | 1.92 | |||||
Average diluted common shares outstanding | 257 | 274 | |||||||
Amounts attributable to Masco Corporation: | |||||||||
Income from continuing operations | $ | 94 | $ | 133 | |||||
Income from discontinued operations, net | — | 397 | |||||||
Net income attributable to Masco Corporation | $ | 94 | $ | 530 | |||||
Historical information is available on our website.
MASCO CORPORATION Exhibit A: Reconciliations - Unaudited For the Three Months Ended March 31, 2021 and 2020 | |||||||
(dollars in millions) | |||||||
Three Months Ended March 31, | |||||||
2021 | 2020 | ||||||
Gross Profit, Selling, General and Administrative Expenses, and Operating Profit Reconciliations | |||||||
Net sales | $ | 1,970 | $ | 1,581 | |||
Gross profit, as reported | $ | 700 | $ | 547 | |||
Rationalization charges | 1 | 3 | |||||
Gross profit, as adjusted | $ | 701 | $ | 550 | |||
Gross margin, as reported | 35.5 | % | 34.6 | % | |||
Gross margin, as adjusted | 35.6 | % | 34.8 | % | |||
Selling, general and administrative expenses, as reported | $ | 335 | $ | 322 | |||
Selling, general and administrative expenses as percent of net sales, as reported | 17.0 | % | 20.4 | % | |||
Operating profit, as reported | $ | 365 | $ | 225 | |||
Rationalization charges | 1 | 3 | |||||
Operating profit, as adjusted | $ | 366 | $ | 228 | |||
Operating margin, as reported | 18.5 | % | 14.2 | % | |||
Operating margin, as adjusted | 18.6 | % | 14.4 | % | |||
Historical information is available on our website.
MASCO CORPORATION Exhibit A: Reconciliations - Unaudited For the Three Months Ended March 31, 2021 and 2020 | |||||||||
(in millions, except per common share data) | |||||||||
Three Months Ended March 31, | |||||||||
2021 | 2020 | ||||||||
Income Per Common Share Reconciliations | |||||||||
Income from continuing operations before income taxes, as reported | $ | 157 | $ | 174 | |||||
Rationalization charges | 1 | 3 | |||||||
Pension costs associated with expected terminated plans | 9 | 6 | |||||||
(Earnings) from equity investments, net | (2 | ) | — | ||||||
Loss on extinguishment of debt | 168 | — | |||||||
Income from continuing operations before income taxes, as adjusted | 333 | 183 | |||||||
Tax at 25% rate | (83 | ) | (46 | ) | |||||
Less: Net income attributable to noncontrolling interest | 20 | 8 | |||||||
Income from continuing operations, as adjusted | $ | 230 | $ | 129 | |||||
Income from continuing operations per common share, as adjusted | $ | 0.89 | $ | 0.47 | |||||
Average diluted common shares outstanding | 257 | 274 | |||||||
Outlook for the Twelve Months Ended December 31, 2021 | |||||||
Twelve Months Ended December 31, 2021 | |||||||
Low End | High End | ||||||
Income Per Common Share Outlook | |||||||
Income from continuing operations per common share | $ | 1.52 | $ | 1.72 | |||
Rationalization charges | 0.01 | 0.01 | |||||
Pension costs associated with expected terminated plans (1) | 1.42 | 1.42 | |||||
Loss on extinguishment of debt | 0.52 | 0.52 | |||||
Allocation to participating securities per share (2) | 0.03 | 0.03 | |||||
Income from continuing operations per common share, as adjusted | $ | 3.50 | $ | 3.70 | |||
(1) | Represents costs associated with our qualified domestic defined-benefit pension plans that are expected to be terminated in 2021. |
(2) | Represents the impact of distributed dividends and undistributed earnings to unvested restricted stock awards as well as an allocation to redeemable noncontrolling interest in accordance with the two-class method of calculating earnings per share. |
Historical information is available on our website.
MASCO CORPORATION Condensed Consolidated Balance Sheets and Other Financial Data - Unaudited March 31, 2021 and December 31, 2020 | ||||||||
(dollars in millions) | ||||||||
March 31, 2021 | December 31, 2020 | |||||||
Balance Sheet | ||||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash investments | $ | 838 | $ | 1,326 | ||||
Receivables | 1,305 | 1,138 | ||||||
Prepaid expenses and other | 97 | 149 | ||||||
Inventories | 948 | 876 | ||||||
Assets held for sale | 18 | — | ||||||
Total Current Assets | 3,206 | 3,489 | ||||||
Property and equipment, net | 894 | 908 | ||||||
Operating lease right-of-use assets | 173 | 166 | ||||||
Goodwill | 588 | 563 | ||||||
Other intangible assets, net | 378 | 357 | ||||||
Other assets | 326 | 294 | ||||||
Assets held for sale | 9 | — | ||||||
Total Assets | $ | 5,574 | $ | 5,777 | ||||
Liabilities | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 925 | $ | 893 | ||||
Notes payable | 6 | 3 | ||||||
Accrued liabilities | 803 | 1,038 | ||||||
Liabilities held for sale | 14 | — | ||||||
Total Current Liabilities | 1,748 | 1,934 | ||||||
Long-term debt | 2,955 | 2,792 | ||||||
Noncurrent operating lease liabilities | 157 | 149 | ||||||
Other liabilities | 458 | 481 | ||||||
Liabilities held for sale | 14 | — | ||||||
Total Liabilities | 5,332 | 5,356 | ||||||
Redeemable noncontrolling interest | 25 | — | ||||||
Equity | 217 | 421 | ||||||
Total Liabilities and Equity | $ | 5,574 | $ | 5,777 | ||||
As of March 31, | ||||||||
2021 | 2020 | |||||||
Other Financial Data | ||||||||
Working Capital Days | ||||||||
Receivable days | 54 | 58 | ||||||
Inventory days | 76 | 66 | ||||||
Payable days | 68 | 71 | ||||||
Working capital | $ | 1,328 | $ | 1,155 | ||||
Working capital as a % of sales (LTM) (1) | 17.5 | % | 17.0 | % | ||||
(1) | Working capital as a % of sales as of March 31, 2021, excluding acquisitions made in the first quarter of 2021 and the fourth quarter of 2020, was 16.9%. |
Historical information is available on our website.
MASCO CORPORATION Condensed Consolidated Statements of Cash Flows and Other Financial Data - Unaudited For the Three Months Ended March 31, 2021 and 2020 | |||||||||
(dollars in millions) | |||||||||
Three Months Ended March 31, | |||||||||
2021 | 2020 | ||||||||
Cash Flows From (For) Operating Activities: | |||||||||
Cash provided by operating activities | $ | 323 | $ | 7 | |||||
Working capital changes | (412 | ) | (99 | ) | |||||
Net cash for operating activities | (89 | ) | (92 | ) | |||||
Cash Flows From (For) Financing Activities: | |||||||||
Retirement of notes | (1,326 | ) | — | ||||||
Purchase of Company common stock | (303 | ) | (602 | ) | |||||
Cash dividends paid | (36 | ) | (37 | ) | |||||
Issuance of notes, net of issuance costs | 1,481 | — | |||||||
Debt extinguishment costs | (160 | ) | — | ||||||
Proceeds from the exercise of stock options | — | 20 | |||||||
Employee withholding taxes paid on stock-based compensation | (14 | ) | (22 | ) | |||||
(Decrease) increase in debt, net | (1 | ) | 2 | ||||||
Net cash for financing activities | (359 | ) | (639 | ) | |||||
Cash Flows From (For) Investing Activities: | |||||||||
Capital expenditures | (30 | ) | (24 | ) | |||||
Acquisition of business, net of cash acquired | — | (24 | ) | ||||||
Proceeds from disposition of businesses, net of cash disposed | — | 853 | |||||||
Other, net | 5 | 2 | |||||||
Net cash (for) from investing activities | (25 | ) | 807 | ||||||
Effect of exchange rate changes on cash and cash investments | (13 | ) | (6 | ) | |||||
Cash and Cash Investments: | |||||||||
(Decrease) increase for the period | (486 | ) | 70 | ||||||
At January 1 | 1,326 | 697 | |||||||
At March 31 | $ | 840 | $ | 767 | |||||
As of March 31, | |||||||
2021 | 2020 | ||||||
Liquidity | |||||||
Cash and cash investments | $ | 838 | $ | 767 | |||
Revolver availability | 1,000 | 1,000 | |||||
Total Liquidity | $ | 1,838 | $ | 1,767 | |||
Historical information is available on our website.
MASCO CORPORATION Segment Data - Unaudited For the Three Months Ended March 31, 2021 and 2020 | ||||||||||
(dollars in millions) | ||||||||||
Three Months Ended March 31, | ||||||||||
2021 | 2020 | Change | ||||||||
Plumbing Products | ||||||||||
Net sales | $ | 1,249 | $ | 955 | 31 | % | ||||
Operating profit, as reported | $ | 252 | $ | 157 | ||||||
Operating margin, as reported | 20.2 | % | 16.4 | % | ||||||
Rationalization charges | 1 | 2 | ||||||||
Operating profit, as adjusted | 253 | 159 | ||||||||
Operating margin, as adjusted | 20.3 | % | 16.6 | % | ||||||
Depreciation and amortization | 26 | 20 | ||||||||
EBITDA, as adjusted | $ | 279 | $ | 179 | ||||||
Decorative Architectural Products | ||||||||||
Net sales | $ | 721 | $ | 626 | 15 | % | ||||
Operating profit, as reported | $ | 142 | $ | 95 | ||||||
Operating margin, as reported | 19.7 | % | 15.2 | % | ||||||
Rationalization charges | — | 1 | ||||||||
Operating profit, as adjusted | 142 | 96 | ||||||||
Operating margin, as adjusted | 19.7 | % | 15.3 | % | ||||||
Depreciation and amortization | 10 | 11 | ||||||||
EBITDA, as adjusted | $ | 152 | $ | 107 | ||||||
Total | ||||||||||
Net sales | $ | 1,970 | $ | 1,581 | 25 | % | ||||
Operating profit, as reported - segment | $ | 394 | $ | 252 | ||||||
General corporate expense, net | (29 | ) | (27 | ) | ||||||
Operating profit, as reported | 365 | 225 | ||||||||
Operating margin, as reported | 18.5 | % | 14.2 | % | ||||||
Rationalization charges - segment | 1 | 3 | ||||||||
Operating profit, as adjusted | 366 | 228 | ||||||||
Operating margin, as adjusted | 18.6 | % | 14.4 | % | ||||||
Depreciation and amortization - segment | 36 | 31 | ||||||||
Depreciation and amortization - non-operating | 7 | 2 | ||||||||
EBITDA, as adjusted | $ | 409 | $ | 261 | ||||||
Historical information is available on our website.
MASCO CORPORATION North American and International Data - Unaudited For the Three Months Ended March 31, 2021 and 2020 | ||||||||||
(dollars in millions) | ||||||||||
Three Months Ended March 31, | ||||||||||
2021 | 2020 | Change | ||||||||
North American | ||||||||||
Net sales | $ | 1,529 | $ | 1,258 | 22 | % | ||||
Operating profit, as reported | $ | 308 | $ | 210 | ||||||
Operating margin, as reported | 20.1 | % | 16.7 | % | ||||||
Rationalization charges | 1 | 3 | ||||||||
Operating profit, as adjusted | 309 | 213 | ||||||||
Operating margin, as adjusted | 20.2 | % | 16.9 | % | ||||||
Depreciation and amortization | 23 | 20 | ||||||||
EBITDA, as adjusted | $ | 332 | $ | 233 | ||||||
International | ||||||||||
Net sales | $ | 441 | $ | 323 | 37 | % | ||||
Operating profit, as reported | $ | 86 | $ | 42 | ||||||
Operating margin, as reported | 19.5 | % | 13.0 | % | ||||||
Depreciation and amortization | 13 | 11 | ||||||||
EBITDA | $ | 99 | $ | 53 | ||||||
Total | ||||||||||
Net sales | $ | 1,970 | $ | 1,581 | 25 | % | ||||
Operating profit, as reported - segment | $ | 394 | $ | 252 | ||||||
General corporate expense, net | (29 | ) | (27 | ) | ||||||
Operating profit, as reported | 365 | 225 | ||||||||
Operating margin, as reported | 18.5 | % | 14.2 | % | ||||||
Rationalization charges - segment | 1 | 3 | ||||||||
Operating profit, as adjusted | 366 | 228 | ||||||||
Operating margin, as adjusted | 18.6 | % | 14.4 | % | ||||||
Depreciation and amortization - segment | 36 | 31 | ||||||||
Depreciation and amortization - non-operating | 7 | 2 | ||||||||
EBITDA, as adjusted | $ | 409 | $ | 261 | ||||||
Historical information is available on our website.
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