Fourth Quarter and Full Year 2016 Earnings Presentation. February 9, 2017

Transcription

1 Fourth Quarter and Full Year 2016 Earnings Presentation February 9, 2017

2 Safe Harbor Statement This presentation contains statements that reflect our views about our future performance and 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. 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 underperforming 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. 2

3 Masco Q4 and Full Year 2016 Results Topic Summary of Results Keith Allman Financial/Operations Review John Sznewajs Q&A 3

4 I N R E V I E W Continued Execution of Strategy Drives Results Gained share with our strong brands Invested in new products and programs Driving Shareholder Value Drove top and bottom line growth Positioned Masco for further growth Expanded profit margin Strengthened balance sheet Returned over $585 million to shareholders 4

5 Masco Q4 and Full Year 2016 Results Topic Summary of Results Keith Allman Financial/Operations Review John Sznewajs Q&A 5

6 21st Consecutive Quarter of Sales and Operating Profit Growth ($ in Millions) Revenue Operating Profit* Operating Margin* Adjusted EPS* Fourth Quarter 2016 $1,759 3% $221 $2 12.6% (20) bps $ % Full-Year 2016 $7,357 3% $1,075 $ % 160 bps $ % *See Appendix for GAAP reconciliation. Quarter Highlights Total company sales increased 4% excluding the effects of foreign currency translation North American sales increased 3%; international sales increased 8% in local currency Operating profit impacted by increased insurance costs of approximately $10 million (approximately $.02 per share) 6

7 P L U M B I N G P R O D U C T S Delivers Profitable Growth and Margin Expansion ($ in Millions) Revenue Operating Profit* Operating Margin* Fourth Quarter 2016 $891 5% $153 $ % 150 bps Full-Year 2016 $3,526 6% $655 $ % 300 bps *Excludes business rationalization charges for the fourth quarter and the full year 2016 of $2 million and $13 million, respectively, and for the fourth quarter and the full year 2015 of $7 million and $9 million, respectively. Quarter Highlights Sales increased by 7% excluding the effects of foreign currency translation driven by record performances at Delta, Hansgrohe and Watkins FX negatively impacted sales by approximately $14 million Operating profit impacted by higher insurance costs of approximately $5 million and strategic growth investments of approximately $10 million 7

8 D E C O R AT I V E A R C H I T E C T U R A L P R O D U C T S Pro Initiative and New Programs Drive Growth ($ in Millions) Revenue Operating Profit Operating Margin Fourth Quarter 2016 $443 5% $75 ($10) 16.9% (330) bps Full-Year 2016 $2,092 4% $430 $ % 60 bps Quarter Highlights Strong demand for Behr Pro and DIY products Builders hardware benefited from shower door program expansion Performance impacted by planned increases in strategic growth investments and promotional allowances, and unfavorable price to commodity, totaling approximately $20 million 8

9 C A B I N E T R Y P R O D U C T S KraftMaid Product Strength Improves Margins ($ in Millions) Revenue Operating Profit* Operating Margin* Fourth Quarter 2016 $234 (8%) $19 $ - 8.1% 60 bps Full-Year 2016 $970 (5%) $101 $ % 540 bps *Excludes business rationalization charges for the fourth quarter and the full year 2016 of $3 million and $8 million, respectively. Excludes business rationalization charges for the fourth quarter and full year 2015 of $2 million and $5 million, respectively, and gain from sale of property and equipment for the fourth quarter and the full year 2015 of $2 million and $5 million, respectively. Quarter Highlights Retail and dealer sales driven by continued success of KraftMaid products Growth in retail and dealer sales more than offset by the exit of certain less profitable direct-to-builder business 9

10 W I N D O W S A N D O T H E R S P E C I A LT Y P R O D U C T S Improvements at Milgard on Plan ($ in Millions) Revenue Operating Profit (Loss)* Operating Margin* Fourth Quarter 2016 $191 (2%) $7 $ - 3.7% 10 bps Full-Year 2016 $769 2% ($2) ($59) (0.3%) (780) bps *Excludes business rationalization charges for the fourth quarter and full year 2016 of $1 million. Quarter Highlights Sales increased 2% excluding the effects of foreign currency translation European window sales increased 6% in local currency 10

11 Strong Balance Sheet Liquidity as of 12/31/2016 Cash and cash investments $1.0B Short-term bank deposits $0.2B Total $1.2B Disciplined Capital Allocation Repurchased approximately 14.9 million shares in million shares left in our 50 million share repurchase program Increased annual dividend by $0.02 to $0.40 per share Rating raised by Fitch to investment grade 11

12 Masco Q4 and Full Year 2016 Results Topic Summary of Results Keith Allman Financial/Operations Review John Sznewajs Q&A 12

13 Q&A

14 Appendix

15 Appendix Profit Reconciliation Fourth Quarter ($ in Millions) Q Q Net Sales $ 1,759 $ 1,715 Gross Profit As Reported $ 573 $ 532 Rationalization charges 4 6 (Gain) on sale of property and equipment - (2) Gross Profit As Adjusted $ 577 $ 536 Gross Margin - As Reported 32.6% 31.0% Gross Margin - As Adjusted 32.8% 31.3% Selling, General and Administrative Expenses As Reported $ 358 $ 320 Rationalization charges 2 3 Selling, General and Administrative Expenses As Adjusted $ 356 $ 317 Selling, General and Administrative Expenses as Percent of Net Sales As Reported 20.4% 18.7% Selling, General and Administrative Expenses as Percent of Net Sales As Adjusted 20.2% 18.5% Operating Profit As Reported $ 215 $ 212 Rationalization charges 6 9 (Gain) on sale of property and equipment - (2) Operating Profit As Adjusted $ 221 $ 219 Operating Margin - As Reported 12.2% 12.4% Operating Margin - As Adjusted 12.6% 12.8% 15

16 Appendix Profit Reconciliation Full Year ($ in Millions) Net Sales $ 7,357 $ 7,142 Gross Profit As Reported $ 2,456 $ 2,253 Rationalization charges 14 8 (Gain) on sale of property and equipment - (5) Gross Profit As Adjusted $ 2,470 $ 2,256 Gross Margin - As Reported 33.4% 31.5% Gross Margin - As Adjusted 33.6% 31.6% Selling, General and Administrative Expenses As Reported $ 1,403 $ 1,339 Rationalization charges 8 10 Selling, General and Administrative Expenses As Adjusted $ 1,395 $ 1,329 Selling, General and Administrative Expenses as Percent of Net Sales As Reported 19.1% 18.7% Selling, General and Administrative Expenses as Percent of Net Sales As Adjusted 19.0% 18.6% Operating Profit As Reported $ 1,053 $ 914 Rationalization charges (Gain) on sale of property and equipment - (5) Operating Profit As Adjusted $ 1,075 $ 927 Operating Margin - As Reported 14.3% 12.8% Operating Margin - As Adjusted 14.6% 13.0% 16

17 Appendix EPS Reconciliation Fourth Quarter (in Millions, Except per Common Share Data) Q Q Income from Continuing Operations before Income Taxes As Reported $ 173 $ 160 Rationalization charges 6 9 (Gain) on sale of property and equipment - (2) (Gain) from auction rate securities (2) - (Gains) from private equity funds, net (3) (1) (Earnings) from equity investments, net (1) - Loss from other investments 3 - Income from Continuing Operations before Income Taxes As Adjusted $ 176 $ 166 Tax at 36% rate (63) (60) Less: Net income attributable to noncontrolling interest 8 10 Income from Continuing Operations, as adjusted $ 105 $ 96 Income per common share, as adjusted $ 0.33 $ 0.29 Average Diluted Shares Outstanding

18 Appendix EPS Reconciliation Full Year (in millions, except per common share data) Income from Continuing Operations before Income Taxes As Reported $ 830 $ 689 Rationalization charges (Gain) on sale of property and equipment - (5) (Gain) from auction rate securities (3) - (Gains) from private equity funds, net (5) (6) (Earnings) from equity investments, net (2) (2) Loss from other investments 3 - Income from Continuing Operations before Income Taxes As Adjusted $ 845 $ 694 Tax at 36% rate (304) (250) Less: Net income attributable to non-controlling interest Income from Continuing Operations, as adjusted $ 498 $ 405 Income per common share, as adjusted $ 1.51 $ 1.19 Average Diluted Shares Outstanding

19 2017 Guidance Estimates ($ in Millions) 2017 Estimate 2016 Actual Rationalization Charges 1 ~ $2 $22 Tax Rate ~ 36% 36% Interest Expense ~ $175 $229 General Corp. Expense ~ $100 $109 Capital Expenditures ~ $200 $180 Depreciation & Amortization ~ $130 $134 Foreign Currency Translation Impact to Sales 2 ~ ($100) ($68) Shares Repurchased 3 $ $459 Shares Outstanding million 323 million 1. Based on 2017 business plans. 2. Based on rates as of December 29, share repurchases include approximately 1.1 million shares that were repurchased to offset grants of long-term stock awards. 4. Reflects weighted average diluted shares outstanding for the fourth quarter 2016 and assumes no share repurchases in

20 2016 Segment Mix* Business Segment Revenue 2016 % of Total R&R% vs. NC NA% vs. Int l Plumbing Products $3.5B 48% 82% 63% Decorative Architectural Products $2.1B 28% 99% 100% Cabinetry Products $1.0B 13% 61% 94% Windows and Other Specialty Products $0.8B 11% 71% 78% Total Company $ 7.4B 100% 83% 79% 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 20

21 2016 International Revenue Split* 10% United Kingdom 16% 27% Northern Europe Southern Europe Central Europe Eastern Europe Emerging Markets 6% 5% Other 8% 28% International Sales Accounted for ~21% of Total 2016 Masco Sales *Based on Company estimates 21