Masco Corporation Reports Fourth Quarter and 2017 Year-End Results February 08, 2018

Transcription

1 Masc Crpratin Reprts Furth Quarter and 2017 Year-End Results February 08, Furth Quarter Key Highlights Sales fr the furth quarter increased 7 percent t $1.9 billin; in lcal currency, sales increased 5 percent Operating prfit fr the quarter grew 23 percent t $264 millin; adjusted perating prfit grew 20 percent t $265 millin Earnings per share fr the quarter decreased 10 percent t $0.27 per share; adjusted earnings per share grew 33 percent t $0.44 per share Cmpleted the acquisitin f Mercury Plastics, Inc. and signed a definitive agreement t acquire The L.D. Kichler C. fr cmbined expected purchase price f apprximately $640 millin Anticipate 2018 earnings per share t be in the range f $ $2.51 per share, and n an adjusted basis t be in the range f $ $2.63 per share LIVONIA, Mich.--(BUSINESS WIRE)-- Masc Crpratin (NYSE: MAS), ne f the wrld s leading manufacturers f branded hme imprvement and building prducts, reprted strng net sales and perating prfit grwth fr the furth quarter and full year f Furth Quarter Cmmentary On a reprted basis, cmpared t furth quarter 2016: Net sales increased 7 percent t $1.9 billin; in lcal currency, net sales increased 5 percent In lcal currency, Nrth American sales increased 5 percent and internatinal sales increased 3 percent Grss margin imprved t 32.9 percent frm 32.6 percent Operating margin increased 190 basis pints t 14.1 percent frm 12.2 percent Net incme was $0.27 per share cmpared t $0.30 per share Cmpared t furth quarter 2016, results fr key financial measures, as adjusted fr certain items (see Exhibit A) and with a nrmalized tax rate f 34 percent (36 percent in 2016), were as fllws: Grss margin imprved t 32.9 percent cmpared t 32.8 percent Operating margin increased t 14.1 percent cmpared t 12.6 percent Net incme was $0.44 per share cmpared t $0.33 per share Liquidity at the end f the furth quarter was apprximately $1.3 billin 2017 Furth Quarter Operating Segment Highlights

2 Plumbing Prducts net sales increased 9 percent (6 percent excluding the impact f freign currency translatin), driven by grwth in Nrth America and internatinally Decrative Architectural Prducts net sales increased 12 percent, driven by strng vlume grwth in bth catings and builders hardware Cabinetry Prducts net sales decreased 5 percent; excluding the impact f the divestiture f UK-based Mres Furniture Grup in the furth quarter, net sales decreased 1 percent Windws and Other Specialty Prducts net sales decreased 3 percent; excluding the impact f the divestiture f Arrw Fastener in the secnd quarter, net sales increased 6 percent, driven by net selling price increases at ur Nrth American windws business We finished 2017 with a great furth quarter, said Keith Allman, Masc s President and CEO. Our Plumbing Prducts and Decrative Architectural Prducts segments delivered strng tp- and bttm-line grwth. Additinally, we clsed n the acquisitin f Mercury Plastics, Inc. in ur Plumbing Prducts segment, and reached an agreement t acquire The L.D. Kichler C Full Year Key Highlights Sales fr the year increased 4 percent t $7.6 billin; in lcal currency, sales increased 4 percent Operating prfit grew 11 percent t $1,169 millin; adjusted perating prfit grew 9 percent t $1,173 millin Operating prfit margin fr the year increased t 15.3 percent, a 100 basis pint expansin; adjusted perating prfit margin increased t 15.3 percent, a 70 basis pint expansin Earnings per share fr the year grew 13 percent t $1.66 per share; adjusted earnings per share grew 28 percent t $1.94 per share 2017 Full Year Cmmentary On a reprted basis, cmpared t full year 2016: Net sales increased 4 percent t $7.6 billin In lcal currency, bth Nrth American and internatinal sales increased 4 percent Grss margin imprved t 34.2 percent frm 33.4 percent Operating margin increased t 15.3 percent frm 14.3 percent Net incme was $1.66 per share cmpared t $1.47 per share Cmpared t full year 2016, results fr key financial measures, as adjusted fr certain items (see Exhibit A) and with a nrmalized tax rate f 34 percent (36 percent in 2016), were as fllws: Grss margin imprved t 34.2 percent cmpared t 33.6 percent Operating margin increased t 15.3 percent cmpared t 14.6 percent Net incme was $1.94 per share cmpared t $1.51 per share Free cash flw was $564 millin

3 We had anther gd year in 2017 as we cntinued t execute against the lng-term grwth and capital allcatin strategies that we established in 2015, said Allman. Our Plumbing Prducts segment achieved anther year f tp- and bttm-line grwth, and ur Decrative Architectural Prducts segment cntinued t grw its successful pr paint initiative. Cabinetry Prducts grew its KraftMaid brand in the repair and remdel market, and late in the furth quarter, we began setting a new retail prgram with ur Cardell cabinetry brand. I am als pleased with the prgress we made in ur Windws and Other Specialty Prducts segment, as we delivered a $54 millin imprvement in adjusted perating prfit in Lastly, we cntinued ur cmmitment t deply capital t create sharehlder value by increasing ur dividend fr the furth year in a rw, repurchasing $331 millin in shares, and cmmitting apprximately $640 millin t acquisitins. As we lk twards 2018, we believe we are well psitined t drive prfitable grwth and create sharehlder value by cntinuing t execute n ur strategies, cntinued Allman. The fundamentals f ur industry remain strng, and with the mmentum we have acrss ur segments, the anticipated benefits f the recent tax refrm legislatin, and the expected accretin f ur tw acquisitins, we anticipate ur adjusted earnings per share t be in the range f $2.48 t $2.63 fr Abut Masc Headquartered in Livnia, Michigan, Masc Crpratin is a glbal leader in the design, manufacture and distributin f branded hme imprvement and building prducts. Our prtfli f industry-leading brands includes Behr paint; Delta and Hansgrhe faucets and bath and shwer fixtures; KraftMaid and Merillat cabinets; Milgard windws and drs; and Ht Spring spas, amng thers. We leverage ur pwerful brands acrss prduct categries, sales channels and gegraphies t create value fr ur custmers and sharehlders. Fr mre infrmatin abut Masc Crpratin, visit The 2017 furth quarter and full year supplemental material, including a presentatin in PDF frmat, is available n the Cmpany s website at Cnference Call Details A cnference call regarding items cntained in this release is scheduled fr Thursday, February 8, 2018 at 8:00 a.m. ET. Participants in the call are asked t register five t ten minutes prir t the scheduled start time by dialing (855) (855-22MASCO) and frm utside the U.S. at (706) Please use the cnference identificatin number The cnference call will be webcast simultaneusly and in its entirety thrugh the Cmpany s website. Sharehlders, media representatives and thers interested in Masc may participate in the webcast by registering thrugh the Investr Relatins sectin n the Cmpany s website. A replay f the call will be available n Masc s website r by phne by dialing (855) and frm utside the U.S. at (404) Please use the cnference identificatin number The telephne replay will be available apprximately tw hurs after the end f the call and cntinue thrugh March 10, Safe Harbr Statement

4 This press release cntains statements that reflect ur views abut ur future perfrmance and cnstitute frward-lking statements under the Private Securities Litigatin Refrm Act f Frward-lking statements can be identified by wrds such as believe, anticipate, appear, may, will, shuld, intend, plan, estimate, expect, assume, seek, frecast, and similar references t future perids. Our views abut future perfrmance invlve risks and uncertainties that are difficult t predict and, accrdingly, ur actual results may differ materially frm the results discussed in ur frward-lking statements. We cautin yu against relying n any f these frward-lking statements. Our future perfrmance may be affected by the levels f residential repair and remdel activity and new hme cnstructin, ur ability t maintain ur strng brands and reputatin and t develp new prducts, ur ability t maintain ur cmpetitive psitin in ur industries, ur reliance n key custmers, the cst and availability f raw materials, ur dependence n third-party suppliers, risks assciated with internatinal peratins and glbal strategies, ur ability t achieve the anticipated benefits f ur strategic initiatives, ur ability t successfully execute ur acquisitin strategy and integrate businesses that we have and may acquire, ur ability t attract, develp and retain talented persnnel, ur ability t achieve the anticipated benefits frm ur investments in new technlgy, risks assciated with ur reliance n infrmatin systems and technlgy, and ur ability t sustain the imprved results f ur U.S. windw business. These and ther factrs are discussed in detail in Item 1A, Risk Factrs in ur mst recent Annual Reprt n Frm 10-K, as well as in ur Quarterly Reprts n Frm 10-Q and in ther filings we make with the Securities and Exchange Cmmissin. Any frward-lking statement made by us speaks nly as f the date n which it was made. Factrs r events that culd cause ur actual results t differ may emerge frm time t time, and it is nt pssible fr us t predict all f them. Unless required by law, we undertake n bligatin t update publicly any frward-lking statements as a result f new infrmatin, future events r therwise. MASCO CORPORATION Cndensed Cnslidated Statements f Operatins - Unaudited Fr the Three Mnths and Twelve Mnths December 31, 2017 and 2016 (in millins, except per cmmn share data) Three Mnths Twelve Mnths December 31, December 31, Net sales $ 1,874 $ 1,759 $ 7,644 $ 7,357 Cst f sales 1,258 1,186 5,033 4,901

5 Grss prfit ,611 2,456 Selling, general and administrative expenses ,442 1,403 Operating prfit ,169 1,053 Other incme (expense), net: Interest expense (39) (43) (278) (229) Other, net (64) 1 (6) 6 (103) (42) (284) (223) Incme befre incme taxes Incme tax expense Net incme Less: Net incme attributable t nncntrlling interest Net incme attributable t Masc Crpratin $ 87 $ 98 $ 533 $ 491 Incme per cmmn share attributable t Masc Crpratin (diluted): Net incme $ 0.27 $ 0.30 $ 1.66 $ 1.47 Average diluted cmmn shares utstanding Histrical infrmatin is available n ur website. MASCO CORPORATION Exhibit A: Recnciliatins - Unaudited Fr the Three Mnths and Twelve Mnths December 31, 2017 and 2016 (dllars in millins)

6 Three Mnths Twelve Mnths December 31, December 31, Grss Prfit, Selling, General and Administrative Expenses, and Operating Prfit Recnciliatins Net sales $ 1,874 $ 1,759 $7,644 $ 7,357 Grss prfit, as reprted $ 616 $ 573 $2,611 $ 2,456 Ratinalizatin charges Grss prfit, as adjusted $ 617 $ 577 $2,615 $ 2,470 Grss margin, as reprted 32.9% 32.6 % 34.2 % 33.4 % Grss margin, as adjusted 32.9% 32.8 % 34.2 % 33.6 % Selling, general and administrative expenses, as reprted $ 352 $ 358 $1,442 $ 1,403 Ratinalizatin charges 2 8 Selling, general and administrative expenses, as adjusted $ 352 $ 356 $1,442 $ 1,395 Selling, general and administrative expenses as percent f net sales, as reprted 18.8% 20.4 % 18.9 % 19.1 % Selling, general and administrative expenses as percent f net sales, as adjusted 18.8% 20.2 % 18.9 % 19.0 % Operating prfit, as reprted $ 264 $ 215 $1,169 $ 1,053 Ratinalizatin charges Operating prfit, as adjusted $ 265 $ 221 $1,173 $ 1,075

7 Operating margin, as reprted 14.1% 12.2 % 15.3 % 14.3 % Operating margin, as adjusted 14.1% 12.6 % 15.3 % 14.6 % Free Cash Flw Recnciliatin Twelve Mnths December 31, 2017 Cash frm Operatins $ 751 Capital expenditures (173) Displays (14) Free Cash Flw $ 564 Histrical infrmatin is available n ur website. MASCO CORPORATION Exhibit A: Recnciliatins - Unaudited Fr the Three Mnths and Twelve Mnths December 31, 2017 and 2016 (in millins, except per cmmn share data) Three Mnths Twelve Mnths December 31, December 31, Incme Per Cmmn Share Recnciliatin Incme befre incme taxes, as reprted $ 161 $ 173 $ 885 $ 830 Ratinalizatin charges (Gain) frm auctin rate securities (2) (3) (Gains) frm private equity funds, net (1) (3) (3) (5)

8 (Earnings) frm equity investments, net (1) (1) (2) Impairment f private equity funds 2 Lss n extinguishment f debt 107 Lss n sales f businesses, net Lss frm ther investments 3 3 Incme befre incme taxes, as adjusted , Tax at 34% rate (36% fr 2016) (76) (63) (342) (304) Less: Net incme attributable t nncntrlling interest Net incme, as adjusted $ 137 $ 105 $ 618 $ 498 Net incme per cmmn share, as adjusted $ 0.44 $ 0.33 $ 1.94 $ 1.51 Average diluted cmmn shares utstanding Outlk fr the Twelve Mnths December 31, 2018 Twelve Mnths December 31, 2018 Lw End High End Incme Per Cmmn Share Recnciliatin Net incme per cmmn share $ 2.36 $ 2.51 Ratinalizatin charges Kichler inventry purchase accunting adjustment Allcatin t participating securities per share (1) Net incme per cmmn share, as adjusted $ 2.48 $ 2.63 (1) Represents the impact f distributed dividends and undistributed earnings t unvested restricted stck awards in accrdance with the tw-class methd f calculating earnings per share. Histrical infrmatin is available n ur website.

9 MASCO CORPORATION Cndensed Cnslidated Balance Sheets and Other Financial Data - Unaudited December 31, 2017 and 2016 (dllars in millins) December 31, December 31, Balance Sheet Assets Current Assets: Cash and cash investments $ 1,194 $ 990 Shrt-term bank depsits Receivables 1, Inventries Prepaid expenses and ther Ttal Current Assets 3,215 2,934 Prperty and equipment, net 1,129 1,060 Gdwill Other intangible assets, net Other assets Ttal Assets $ 5,488 $ 5,137 Liabilities Current Liabilities: Accunts payable $ 824 $ 800 Ntes payable Accrued liabilities

10 Ttal Current Liabilities 1,628 1,460 Lng-term debt 2,969 2,995 Other liabilities Ttal Liabilities 5,312 5,240 Equity 176 (103 ) Ttal Liabilities and Equity $ 5,488 $ 5,137 As f December 31, December 31, Other Financial Data Wrking Capital Days Receivable days Inventry days Payable days Wrking capital $ 993 $ 829 Wrking capital as a % f sales (LTM) 13.0 % 11.3 % Histrical infrmatin is available n ur website. MASCO CORPORATION Cndensed Cnslidated Statements f Cash Flws and Other Financial Data - Unaudited Fr the Twelve Mnths December 31, 2017 and 2016 (in millins) Twelve Mnths December 31,

11 Cash Flws Frm (Fr) Operating Activities: Cash prvided by perating activities $ 901 $ 877 Wrking capital changes (150) (88) Net cash frm perating activities Cash Flws Frm (Fr) Financing Activities: Retirement f ntes (535) (1,300) Purchase f Cmpany cmmn stck (331) (459) Cash dividends paid (129) (128) Dividends paid t nncntrlling interest (35) (31) Issuance f ntes, net f issuance csts Debt extinguishment csts (104) (40) Issuance f Cmpany cmmn stck 1 Emplyee withhlding taxes paid n stck-based cmpensatin (33) (40) Decrease in debt, net (3) (1) Net cash fr financing activities (577) (1,109) Cash Flws Frm (Fr) Investing Activities: Capital expenditures (173 ) (180 ) Acquisitin f businesses, net f cash acquired (89 ) Prceeds frm dispsitin f businesses, net f cash dispsed 128 Prceeds frm dispsitin f shrt-term bank depsits, net f cash purchases Other, net (3 ) 16 Net cash fr investing activities (25 ) (124 ) Effect f exchange rate changes n cash and cash investments 55 (34 )

12 Cash and Cash Investments: Increase (decrease) fr the perid 204 (478) At January ,468 At December 31 $ 1,194 $ 990 As f December 31, December 31, Liquidity Cash and cash investments $ 1,194 $ 990 Shrt-term bank depsits Ttal Liquidity $ 1,302 $ 1,191 Histrical infrmatin is available n ur website. MASCO CORPORATION Segment Data - Unaudited Fr the Three Mnths and Twelve Mnths December 31, 2017 and 2016 (dllars in millins) Three Mnths Twelve Mnths December 31, December 31, Change Change Plumbing Prducts Net sales $ 972 $ % $ 3,735 $ 3,526 6 % Operating prfit, as reprted $ 169 $ 151 $ 698 $ 642

13 Operating margin, as reprted 17.4% 16.9% 18.7% 18.2% Ratinalizatin charges Accelerated depreciatin related t ratinalizatin activity 1 Operating prfit, as adjusted Operating margin, as adjusted 17.5% 17.2% 18.7% 18.6% Depreciatin and amrtizatin EBITDA, as adjusted $ 187 $ 168 $ 762 $ 712 Decrative Architectural Prducts Net sales $ 494 $ % $ 2,205 $ 2,092 5 % Operating prfit, as reprted $ 88 $ 75 $ 434 $ 430 Operating margin, as reprted 17.8% 16.9% 19.7% 20.6% Depreciatin and amrtizatin EBITDA $ 92 $ 79 $ 450 $ 446 Cabinetry Prducts Net sales $ 223 $ 234 (5 )% $ 934 $ 970 (4 )% Operating prfit, as reprted $ 25 $ 16 $ 90 $ 93 Operating margin, as reprted 11.2 % 6.8 % 9.6 % 9.6 % Ratinalizatin charges 2 4

14 Accelerated depreciatin related t ratinalizatin activity 3 4 Operating prfit, as adjusted Operating margin, as adjusted 11.2% 8.1% 9.9% 10.4% Depreciatin and amrtizatin EBITDA, as adjusted $ 28 $ 22 $ 106 $ 118 Histrical infrmatin is available n ur website. MASCO CORPORATION Segment Data - Unaudited Fr the Three Mnths and Twelve Mnths December 31, 2017 and 2016 (dllars in millins) Three Mnths Twelve Mnths December 31, December 31, Change Change Windws and Other Specialty Prducts Net sales $ 185 $ 191 (3 )% $ 770 $ 769 % Operating prfit (lss), as reprted $ 5 $ 6 $ 52 $ (3 ) Operating margin, as reprted 2.7% 3.1 % 6.8% (0.4)% Ratinalizatin charges 1 1 Operating prfit (lss), as adjusted (2 ) Operating margin, as adjusted 2.7% 3.7 % 6.8% (0.3)% Depreciatin and amrtizatin

15 EBITDA, as adjusted $ 10 $ 12 $ 73 $ 19 Ttal Net sales $ 1,874 $ 1,759 7 % $ 7,644 $ 7,357 4 % Operating prfit, as reprted - segment $ 287 $ 248 $ 1,274 $ 1,162 General crprate expense, net (GCE) (23) (33) (105) (109) Operating prfit, as reprted ,169 1,053 Operating margin, as reprted 14.1% 12.2 % 15.3% 14.3% Ratinalizatin charges - segment Accelerated depreciatin - segment Operating prfit, as adjusted ,173 1,075 Operating margin, as adjusted 14.1% 12.6 % 15.3% 14.6% Depreciatin and amrtizatin - segment Depreciatin and amrtizatin - nnperating EBITDA, as adjusted $ 297 $ 252 $ 1,299 $ 1,205 Histrical infrmatin is available n ur website. MASCO CORPORATION Nrth American and Internatinal Data - Unaudited Fr the Three Mnths and Twelve Mnths December 31, 2017 and 2016

16 (dllars in millins) Three Mnths Twelve Mnths December 31, December 31, Change Change Nrth American Net sales $ 1,469 $ 1,389 6% $ 6,069 $ 5,834 4 % Operating prfit, as reprted $ 237 $ 212 $ 1,072 $ 961 Operating margin, as reprted 16.1% 15.3 % 17.7% 16.5% Ratinalizatin charges Accelerated depreciatin related t ratinalizatin activity Operating prfit, as adjusted , Operating margin, as adjusted 16.2% 15.5 % 17.7% 16.7% Depreciatin and amrtizatin EBITDA, as adjusted $ 256 $ 232 $ 1,150 $ 1,050 Internatinal Net sales $ 405 $ 370 9% $ 1,575 $ 1,523 3 % Operating prfit, as reprted $ 50 $ 36 $ 202 $ 201 Operating margin, as reprted 12.3 % 9.7 % 12.8 % 13.2 % Ratinalizatin charges 3 7

17 Operating prfit, as adjusted Operating margin, as adjusted 12.3% 10.5 % 12.8% 13.7% Depreciatin and amrtizatin EBITDA, as adjusted $ 61 $ 49 $ 241 $ 245 Ttal Net sales $ 1,874 $ 1,759 7% $ 7,644 $ 7,357 4 % Operating prfit, as reprted - segment $ 287 $ 248 $ 1,274 $ 1,162 General crprate expense, net (GCE) (23) (33) (105) (109) Operating prfit, as reprted ,169 1,053 Operating margin, as reprted 14.1% 12.2 % 15.3% 14.3% Ratinalizatin charges - segment Accelerated depreciatin - segment Operating prfit, as adjusted ,173 1,075 Operating margin, as adjusted 14.1% 12.6 % 15.3% 14.6% Depreciatin and amrtizatin - segment Depreciatin and amrtizatin - nnperating EBITDA, as adjusted $ 297 $ 252 $ 1,299 $ 1,205 Histrical infrmatin is available n ur website.

18 View surce versin n businesswire.cm: Surce: Masc Crpratin Investr Cntact Masc Crpratin David Chaika Vice President, Treasurer and Investr Relatins david_chaika@maschq.cm