Financial Review. John Sznewajs, Chief Financial Officer

Transcription

1 Financial Review John Sznewajs, Chief Financial Officer

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 forwardlooking statements. Our future performance may be affected by the levels of home improvement activity and new home construction, our ability to maintain 13% 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 under-performing 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 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. 2

3 Agenda The Business Today Demographic & Macroeconomic Forces Future Outlook Capital Allocation 3

4 Leveraging Revenues, Driving Faster Earnings Growth Revenues ($B) Operating Profit / Margin* ($M) EPS* ($) $7.0 3% CAGR $7.1 $7.4 $ % 18% CAGR $ % $1, % $ % CAGR $1.19 $ * See appendix for GAAP reconciliation. EPS as reported was $2.28 in 2014, $1.03 in 2015 and $1.47 in

5 A Global Business, Focused on More Stable Repair and Remodeling Market Revenue Breakdown 1 North America vs. International Repair & Remodel vs. New Home Construction North America 79% 21% Int l R&R 83% 17% New Home 1. Based on 2016 revenue and company estimates. 5

6 Agenda The Business Today Demographic & Macroeconomic Forces Future Outlook Capital Allocation 6

7 Powerful Forces Provide Strong Tailwinds Growth in household formations Aging housing stock Increasing new home construction 7

8 It s True: Millennials are Still Living in the Basement! 32% % of all Year Olds Living with their Parents 30% 28% 26% Substantial pent-up demand for housing: Almost one third of year olds living with their parents Source: US Census Bureau 8

9 Household Formations Set to Accelerate Millions of units 2.0 Household Formations Year Median 1.3M Year Median 0.6M M new households expected , an average of 1.5M per year Source: US Census Bureau, John Burns Real Estate Consulting, and Harvard Joint Center for Housing Studies. 9

10 More Investment in Aging Housing Stock More Older Homes (19 million more homes over 25 years old) and Higher Average Cost per Project 61% 70% $4,550 ~5% $4, Years Ago Today 0 to 25 Years Old Over 25 Years Old Source: US Census Bureau 2015 American Housing Survey, Harvard JCHS 2015 Survey, and John Burns Real Estate Consulting. 10

11 Housing Turnover A Key Driver of R&R Investment Millions of Units 8 Housing Turnover Source: S&P and National Association of Realtors. 11

12 Housing Starts Trending Up, but Still Below Historical Median Millions of Units Year Median 1.5M Source: US Census Bureau. 12

13 US Investment in Housing Clearly Still Lags Historic Levels Private Fixed Residential Investment (PFRI) as % of GDP 7% 6% 5% 50 Year Median 4.4% 4% 3% 2% Source: Federal Reserve Bank of St. Louis FRED Economic Data. 13

14 Agenda The Business Today Demographic & Macroeconomic Forces Future Outlook Capital Allocation 14

15 Positioned for Solid Revenue Growth $B 5% CAGR ~$0.55 ~$0.35 ~$0.15 ~$0.10 $8.50 ~$ Net Sales Plumbing Products Decorative Architectural Products Cabinetry Products Windows & Other Specialty Products 2019 Net Sales Note: Segment numbers assume approximate midpoint of ranges provided. 15

16 Faster Growth in Operating Profit Driven by Operating Leverage $M 14.6% Margin 9% CAGR $350 Neutral $(25) ~16% Margin $1,400 $1, Operating Profit* Net Volume / Mix Net Price / Commodity All Other, Net 2019 Operating Profit Note: Segment numbers assume approximate midpoint of ranges provided. * See appendix for GAAP reconciliation. 16

17 Profitable Growth Leads to EPS Outperformance Revenue ($B) Operating Profit* ($B) EPS* ($) 5% CAGR 9% CAGR 18% CAGR $7.4 $8.5 $ % $1.40 ~16% $2.50 $ * See appendix for GAAP reconciliation. EPS as reported was $1.47 in

18 Agenda The Business Today Demographic & Macroeconomic Forces Future Outlook Capital Allocation 18

19 Attractive Financial Model Generates Strong Cash Flow 1 Diversified revenues 2 Lowered breakeven less cyclical 5 Disciplined capital allocation ~$2.7 Billion cash flow from operations Focused on continued margin expansion 4 Low capex and working capital needs 19

20 Powerful Cash Engine Continues to Fund Growth and Returns to Shareholders $B $2.7 $(0.65) $(0.55) $(1.5) $1.2 $1.2 12/31/2016 Liquidity Cash Flow from Operations Capital Expenditures* Dividends* Share Repurchases & Acquisitions 12/31/2019 Liquidity Note: Masco Board of Directors approved a new $1.5 billion share repurchase authorization effective on May 15, 2017, and cancelled the existing share repurchase authorization. *Capital expenditures includes capex and displays; dividends includes dividend to non-controlling interest. 20

21 Strong Balance Sheet Provides Ample Flexibility $M $1,000 $3,050 $550 $1,500 Share Repurchases & Acquisitions Cash on Hand Potential Borrowing Potential Liquidity for Share Repurchases & Acquisitions Maintain 2.5x or Lower Debt to EBITDA 21

22 ROIC Above our Cost of Capital Delivers Value Creation WACC ROIC* 16% 14% 12% 11.6% 9.2% 10.6% 10% 14.0% 8% 6% 5.8% 4% 2% 0% ROIC exceeded WACC by 550 bps in 2016 * ROIC as reported was 6.0% in 2012, 16.3% in 2013, 18.8% in 2014, 26.1% in 2015, and 40.1% in

23 Proven Business Model. Long Growth Runway. Proven record repositioning and strengthening the business Leveraging attractive, high cash generating business model Multiple growth drivers, favorable industry fundamentals 2019 Targets: EPS: $2.50 EPS CAGR: ~18% 23