First Quarter 2014 Earnings Presentation

Transcription

1 MASCO CORPORATION First Quarter 2014 Earnings Presentation April 25, 2014

2 Safe Harbor Statement Written and oral statements made in this presentation that reflect our views about our future performance constitute "forward-looking 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, and our ability to maintain our competitive position in our industries. 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. 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. Certain of the financial and statistical data included in this presentation and the related materials are non-gaap financial measures as defined under Regulation G. The Company believes that non-gaap performance measures and ratios used in managing the business may provide attendees of this presentation 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 SEC and is available on Masco s Web Site, 2

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

4 Key Messages Today North American sales driven by new products and programs, coupled with new home construction and repair and remodel activity International sales strengthened by new products and strong execution in an improving environment Focus on execution dampened impact of weather in much of North America 4

5 2014 Priorities Grow share of market-leading brands Accelerate customer-focused innovation pipeline Focus on execution to drive profitable growth in cabinets and installation Further penetrate international markets Drive operational leverage through focus on cost containment Strengthen the balance sheet, including reducing debt by $ million by

6 Masco Q Results Topic Summary of Results Keith Allman Financial/Operations Review John Sznewajs Outlook Keith Allman Q&A 6

7 Ten Consecutive Quarters of Sales and Profit Growth ($ in Millions) Revenue Change Adjusted Operating Profit* Adjusted Operating Margin* First Quarter 2014 $1,965 5% $157 12% 8.0% 50 bps Adjusted EPS* $0.15 *See Appendix for GAAP reconciliation. Quarter Highlights 10 th consecutive quarter of top and bottom line growth North American sales increased 3%; international sales increased 7% in local currency Execution helped mitigate the effects of weather in much of North America 7

8 Continued Improvement in Operating Margins in Operating Profit $17M *See appendix for GAAP reconciliation. 8

9 PLUMBING PRODUCTS International Drives Sales and Profit Growth ($ in Millions) Revenue Change Adjusted Operating Profit* Adjusted Operating Margin* First Quarter 2014 $800 5% $121 39% 15.1% 370 bps *Excluding business rationalization charges of $2 million and $1 million in the first quarters of 2014 and 2013, respectively. Quarter Highlights New product success continues International sales increased mid-single-digit percentage in local currency Strong sales to wholesale/trade 9

10 DECORATIVE ARCHITECTURAL PRODUCTS Pro Sales Continue to Expand ($ in Millions) Revenue Change Operating Profit Operating Margin First Quarter 2014 $441 2% $76 (15%) 17.2% (340) bps Quarter Highlights New products and Pro initiative continue to drive gallon growth Share gains and volume growth in builders hardware Margins adversely impacted by ~$5 million due to timing of advertising costs 10

11 CABINETS AND RELATED PRODUCTS Business Stabilization Work Continues ($ in Millions) Revenue Change Adjusted Operating Loss* Adjusted Operating Margin* First Quarter 2014 $237 --% $(9) N/M (3.8%) (380) bps *Excluding business rationalization charges of $3 million and $4 million in the first quarters of 2014 and 2013, respectively. Quarter Highlights Mid-single-digit percentage sales growth in the builder and dealer channels Continued traction with customer-focused new products Margins adversely impacted by: ERP optimization Plant closure and weather inefficiencies 11

12 INSTALLATION AND OTHER SERVICES Strong Growth Despite Difficult Weather Conditions ($ in Millions) Revenue Change Operating Loss Operating Margin First Quarter 2014 $335 7% $(4) --% (1.2%) 10 bps Quarter Highlights Sales growth driven by improvement in residential new home construction, commercial and distribution channels Profit impacted by multi-family mix, investments to grow the business and weather inefficiencies 12

13 OTHER SPECIALTY PRODUCTS Share Expansion Drives Strong Growth ($ in Millions) Revenue Change Adjusted Operating Profit* Adjusted Operating Margin* First Quarter 2014 $152 13% $5 150% 3.3% 180 bps *Excluding business rationalization charge of $3 million in the first quarter of Quarter Highlights Share expansion drives mid-teens-percentage sales growth in North America and International windows Milgard ERP implementation continues 13

14 Strong Balance Sheet Q Accomplishments Working capital as a percent of sales improved to 13.3% in Q1 2014, compared to 14.2% in Q Balance Sheet Liquidity as of 3/31/2014 Cash and cash investments $0.9B Short-term bank deposits $0.3B Total $1.2B 14

15 Masco Q Results Topic Summary of Results Keith Allman Financial/Operations Review John Sznewajs Outlook Keith Allman Q&A 15

16 Outlook RISKS Velocity of global economic recovery Consumer confidence Commodity volatility Housing affordability/ financing costs/mortgage availability OPPORTUNITIES Share gains in all channels Continued international market penetration New product adjacencies Operating leverage Improving repair and remodel demand, including big ticket items Continued growth/demand in new home construction Strong liquidity 16

17 Q&A

18 Appendix

19 Appendix Profit Reconciliation First Quarter ($ in Millions) Q Q Sales $ 1,965 $ 1,876 Gross Profit As Reported $ 547 $ 508 Rationalization Charges 4 6 Gross Profit As Adjusted $ 551 $ 514 Gross Margin - As Reported 27.8% 27.1% Gross Margin - As Adjusted 28.0% 27.4% Operating Profit As Reported $ 152 $ 132 Rationalization Charges 5 8 Operating Profit As Adjusted $ 157 $ 140 Operating Margin - As Reported 7.7% 7.0% Operating Margin - As Adjusted 8.0% 7.5% 19

20 Appendix EPS Reconciliation First Quarter (in Millions, Except per Common Share Data) Q Q Income from Continuing Operations before Income Taxes As Reported $ 93 $ 85 Rationalization charges 5 8 Gains from financial investments, net - (3) Equity investments loss (earnings),net 2 (6) Income from Continuing Operations before Income Taxes As Adjusted $ 100 $ 84 Tax at 36% rate (36) (30) Less: Net income attributable to noncontrolling interest 12 9 Net Income, as adjusted $ 52 $ 45 Income per common share, as adjusted $ 0.15 $ 0.13 Average Diluted Shares Outstanding

21 2014 Guidance Estimates ($ in Millions) 2014 Estimate 2013 Actual Rationalization Charges 1, 3 ~ $10 $48 Tax Rate ~ 17% 26% Interest Expense ~ $225 $235 General Corp. Expense 2 ~ $130 $134 Capital Expenditures ~ $200 $126 Depreciation & ~ $175 $186 Amortization 3 Shares Outstanding 352 million 352 million 1. Based on 2014 business plans. 2. Includes rationalization expenses of $3M for the year ended December 31, Includes accelerated depreciation of $13M for the year ended December 31, 2013 and estimated accelerated depreciation for the year ended December 31, 2014 of ~$1M. Such expenses are also included in the rationalization charges. 21

22 2013 Segment Mix* Business Segment Revenue 2013 % of Total R&R% vs. NC NA% vs. Int l Plumbing Products $3.2B 39% 82% 59% Decorative Architectural Products $1.9B 23% 99% 100% Installation and Other Services $1.4B 17% 18% 100% Cabinets and Related Products $1.0B 12% 57% 93% Other Specialty Products $0.7B 9% 74% 76% Total Company $8.2B 100% 72% 81% 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. 22

23 2013 International Revenue Split* 10% 23% 9% 14% 6% 7% UK Northern Europe Southern Europe Central Europe Eastern Europe Emerging markets Other 31% International Sales Accounted for ~20% of Total 2013 Masco Sales *Based on Company estimates. 23