Second Quarter Earnings Presentation

Transcription

1 MASCO CORPORATION Second Quarter Earnings Presentation July 28, 2015

2 Safe Harbor Statement Statements contained in this presentation that reflect our views about our future performance constitute forwardlooking statements under the Private Securities Litigation Reform Act of 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. These views 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 our reliance on new home construction and home improvement, our reliance on key customers, the cost and availability of raw materials, uncertainty in the international economy, shifts in consumer preferences and purchasing practices, our ability to improve our underperforming businesses, our ability to maintain our competitive position in our industries, the timing and terms of our share repurchase program, and our ability to reduce corporate expense and simplify our organizational structure. We discuss many of the risks we face 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. Our forward-looking statements in this presentation speak only as of the date of this presentation. 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. The Company believes that the non-gaap performance measures and ratios that are contained herein, used in managing the business, may provide users of this financial information with additional meaningful comparisons between current results and results in prior periods. Non-GAAP performance measures and ratios should be viewed in addition to, and not as an alternative for, the Company's reported results under accounting principles generally accepted in the United States. Additional information about the Company is contained in the Company's filings with the Securities and Exchange Commission and is available on Masco's website at 2

3 Masco Q Results Topic Summary of Results Keith Allman Financial/Operations Review John Sznewajs Q&A 3

4 Q I N R E V I E W Strong Operating Leverage and Execution Drive Outperformance Strong growth across all segments in local currency Driving Performance Operational leverage drives profit growth Cabinetry turnaround accelerated Repurchased ~3.8 million shares Completed spin-off of TopBuild Corp. 4

5 Masco Q Results Topic Summary of Results Keith Allman Financial/Operations Review John Sznewajs Q&A 5

6 Strong Performance from all Segments ($ in Millions) Revenue Operating Profit* Operating Margin* Adjusted EPS* Second Quarter 2015 $1,929 3% $280 22% 14.5% 230 bps $ % *See Appendix for GAAP reconciliation. Quarter Highlights Total company sales increased 7% excluding the effects of foreign currency translation North American sales increased 7%; International sales increased 5% in local currency FX negatively impacted sales by $77 million and profit by $19 million 6

7 P L U M B I N G P R O D U C T S Wholesale/Trade and Retail Continues to Drive Growth ($ in Millions) Revenue Operating Profit Operating Margin Second Quarter 2015 $846 0% $138 (1%) 16.3% (10 bps) Quarter Highlights North American sales increased 8%; International sales increased 4% in local currency FX negatively impacted sales by approximately $63 million and profit by $12 million Wholesale/trade and retail channels continue strong performance 7

8 D E C O R A T I V E A R C H I T E C T U R A L P R O D U C T S New Products & Pro Paint Drive Sales Growth ($ in Millions) Revenue Operating Profit Operating Margin Second Quarter 2015 $622 4% $133 18% 21.4% 240 bps Quarter Highlights Sales increased 6% excluding the effects of foreign currency translation New Behr Marquee drives core sales growth Behr Pro initiative continues to gain momentum Margins enhanced by the timing of promotional spend from Q2 to Q3 8

9 C A B I N E T S A N D R E L A T E D P R O D U C T S Business Turnaround Accelerating ($ in Millions) Revenue Operating Profit Operating Margin Second Quarter 2015 $269 6% $15 N/M 5.6% 880 bps Quarter Highlights Home center sales drive top-line growth KraftMaid dealer channel sales increased mid-single digits Improved operating efficiencies driving margin expansion 9

10 O T H E R S P E C I A LT Y P R O D U C T S Growth and Positive Mix Drive Performance ($ in Millions) Revenue Operating Profit* Operating Margin* Second Quarter 2015 $192 8% $21 40% 10.9% 250 bps *Excludes business rationalization charges for the second quarter 2014 of $1 million. Quarter Highlights Sales increased 10% excluding the effects of foreign currency translation Strong performance across all channels and geographies in North American windows Completed acquisition of U.K.-based Evolution Manufacturing 10

11 Strong Balance Sheet and Disciplined Capital Allocation Liquidity as of 6/30/2015 Cash and cash investments $1.3B Short-term bank deposits $0.2B Total $1.5B Q Accomplishments Repurchased approximately 3.8 million shares Board of Directors intends to increase annual dividend by $.02 per share beginning with the dividend to be paid in Q

12 Masco Q Results Topic Summary of Results Keith Allman Financial/Operations Review John Sznewajs Q&A 12

13 Q&A

14 Appendix

15 Appendix Profit Reconciliation Second Quarter ($ in Millions) Q Q Net Sales $ 1,929 $ 1,876 Gross Profit As Reported $ 637 $ 575 Rationalization charges - - Gross Profit As Adjusted $ 637 $ 575 Gross Margin - As Reported 33.0% 30.7% Gross Margin - As Adjusted 33.0% 30.7% Operating Profit As Reported $ 279 $ 221 Rationalization charges 1 8 Operating Profit As Adjusted $ 280 $ 229 Operating Margin - As Reported 14.5% 11.8% Operating Margin - As Adjusted 14.5% 12.2% 15

16 Appendix EPS Reconciliation Second Quarter (in Millions, Except per Common Share Data) Q Q Income from Continuing Operations before Income Taxes As Reported $ 221 $ 171 Rationalization charges 1 8 Gains from financial investments, net (2) (3) Earnings from equity investments, net (2) - Income from Continuing Operations before Income Taxes As Adjusted $ 218 $ 176 Tax at 36% rate (78) (63) Less: Net income attributable to noncontrolling interest Income from Continuing Operations, as adjusted $ 130 $ 100 Income per common share, as adjusted $ 0.38 $ 0.28 Average Diluted Shares Outstanding

17 2015 Guidance Estimates ($ in Millions) 2015 Estimate Actual 1 Rationalization Charges 2, 3 ~ $7 $64 Tax Rate 4 ~ 40% 34% Interest Expense 5 ~ $230 $225 General Corp. Expense 6 ~ $100 $119 Capital Expenditures ~ $160 $115 Depreciation & ~ $130 $141 Amortization 3 Shares Repurchased 7 $ $158 Shares Outstanding million 352 million 1. Guidance and 2014 results exclude TopBuild. 2. Based on 2015 business plans. 3. Includes accelerated depreciation of $1 million for the year ended December 31, Such expense is also included in the rationalization charges tax rate is impacted by an $18 million valuation allowance as a result of our decision to spin off TopBuild tax rate excludes the $529 million release of the valuation allowance. 5. Reflects ~$5 million of incremental interest expense due to the March 2015 pre-funding of our June 2015 debt maturity. 6. Excludes rationalization expenses of $27 million for the year ended December 31, 2014 and $4 million (estimated) for the year ended December 31, and 2014 share repurchases include approximately 720,000 and 1.7 million shares, respectively, to offset grants of long-term stock awards. 8. Reflects weighted average shares outstanding as of June 30, 2015 and assumes no further share repurchases in

18 2014 Segment Mix* Business Segment Revenue 2014 % of Total R&R% vs. NC NA% vs. Int l Plumbing Products $3.3B 47% 82% 59% Decorative Architectural Products $2.0B 29% 99% 100% Cabinets and Related Products $1.0B 14% 55% 91% Other Specialty Products $0.7B 10% 74% 74% Total Company $ 7.0B 100% 82% 77% R&R = % of sales to repair and remodel channels NC = % of sales to new construction channels NA = % of sales within North America Int l = % of sales outside North America * Based on Company estimates; excludes TopBuild Corp. 18

19 2014 International Revenue Split* 9% 9% 14% 28% 10% 5% UK Northern Europe Southern Europe Central Europe Eastern Europe Emerging markets Other 25% International Sales Accounted for ~23% of Total 2014 Masco Sales *Based on Company estimates; excludes TopBuild Corp. 19