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Masco Corporation Reports First Quarter 2021 Results

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Highlights

  • Sales increased 25 percent to $1,970 million; in local currency, sales increased 22 percent
  • Operating profit increased 62 percent to $365 million; adjusted operating profit increased 61 percent to $366 million
  • Operating margin increased 430 basis points to 18.5 percent; adjusted operating margin increased 420 basis points to 18.6 percent
  • Earnings per share from continuing operations decreased 29 percent to $0.34 per share; adjusted earnings per share from continuing operations increased 89 percent to $0.89 per share
  • Repurchased 5.5 million shares for $303 million
  • Anticipate 2021 earnings per share in the range of $1.52 - $1.72, and on an adjusted basis, in the range of $3.50 - $3.70, an increase from previously announced expectation of $3.25 - $3.45.

Masco Corporation (NYSE:MAS), one of the world's leading manufacturers of branded home improvement and building products, reported its first quarter results.

"We achieved another outstanding quarter," said Masco President and CEO, Keith Allman. "We capitalized on the continued strong demand for our products to deliver exceptional sales growth, margin expansion and an 89 percent increase in adjusted earnings per share. We also continued our capital deployment of our strong free cash flow by returning $339 million to shareholders through dividends and share repurchases during the quarter. Finally, we further strengthened our balance sheet and reduced interest expense through the successful refinancing of our 2022, 2025 and 2026 debt maturities."

2021 First Quarter Commentary

  • On a reported basis, compared to first quarter 2020:
    • Net sales increased 25 percent to $1,970 million; in local currency and excluding acquisitions, net sales increased 19 percent
    • In local currency, North American sales increased 21 percent and international sales increased 27 percent
    • Gross margins increased 90 basis points to 35.5 percent from 34.6 percent
    • Operating profit increased 62 percent to $365 million
    • Operating margins increased 430 basis points to 18.5 percent from 14.2 percent
    • Income from continuing operations decreased to $0.34 per share, compared to $0.48 per share
  • Compared to first quarter 2020, results for key financial measures, as adjusted for certain items (see Exhibit A) and with a normalized tax rate of 25 percent, were as follows:
    • Gross margins increased 80 basis points to 35.6 percent compared to 34.8 percent
    • Operating profit increased 61 percent to $366 million from $228 million
    • Operating margins increased 420 basis points to 18.6 percent compared to 14.4 percent
    • Income from continuing operations increased to $0.89 per share, compared to $0.47 per share
  • Liquidity at the end of the first quarter was $1,838 million (including availability under our revolving credit facility)
  • Plumbing Products' net sales increased 31 percent; in local currency and excluding acquisitions, sales increased 22 percent
  • Decorative Architectural Products' net sales increased 15 percent; in local currency and excluding acquisitions, sales increased 13 percent

"Masco is off to a strong start in 2021," said Allman. "Our markets remain strong, and we continue to demonstrate our ability to execute extremely well in this dynamic environment. We have taken actions and developed further plans to offset the raw material and logistics inflation that we are experiencing. While we anticipate these challenges will continue for the next few quarters, we believe we are well prepared and will continue to adjust to deliver value for our customers and our shareholders. Based on our strong performance in the first quarter and continued strength in our markets, we now anticipate our earnings per share for 2021 to be in the range of $3.50 to $3.70 per share, increased from our previous expectation of $3.25 to $3.45 per share," concluded Allman.

About Masco

Headquartered in Livonia, Michigan, Masco Corporation is a global leader in the design, manufacture and distribution of branded home improvement and building products. Our portfolio of industry-leading brands includes Behr® paint; Delta® and Hansgrohe® faucets, bath and shower fixtures; Kichler® decorative and outdoor lighting; and HotSpring® spas. We leverage our powerful brands across product categories, sales channels and geographies to create value for our customers and shareholders. For more information about Masco Corporation, visit www.masco.com.

The first quarter 2021 supplemental material, including a presentation in PDF format, is available on Masco's website at www.masco.com.

Conference Call Detail

A conference call regarding items contained in this release is scheduled for Wednesday, April 28, 2021 at 8:00 a.m. ET. Participants in the call are asked to register five to ten minutes prior to the scheduled start time by dialing (855) 226-2726 (855-22MASCO) and from outside the U.S. at (706) 679-3614. Please use the conference identification number 9998268. The conference call will be webcast simultaneously and in its entirety through Masco's website. Shareholders, media representatives and others interested in Masco may participate in the webcast by registering through the Investor Relations section on Masco's website.

A replay of the call will be available on Masco's website or by phone by dialing (855) 859-2056 and from outside the U.S. at (404) 537-3406. Please use the conference identification number 9998268. The telephone replay will be available approximately two hours after the end of the call and continue through May 28, 2021.

Safe Harbor Statement

This press release contains statements that reflect our views about our future performance and constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "outlook," "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 residential repair and remodel activity, and to a lesser extent, new home construction, our ability to maintain our strong brands and reputation and to develop innovative products, our ability to maintain our competitive position in our industries, our reliance on key customers, the length and severity of the ongoing COVID-19 pandemic, including its impact on domestic and international economic activity, consumer confidence, our production capabilities, our employees and our supply chain; the cost and availability of materials and the imposition of tariffs, our dependence on third-party suppliers, risks associated with our international operations and global strategies, our ability to achieve the anticipated benefits of our strategic initiatives, our ability to successfully execute our acquisition strategy and integrate businesses that we have and may acquire, our ability to attract, develop and retain talented and diverse personnel, risks associated with our reliance on information systems and technology, and our ability to achieve the anticipated benefits from our investments in new technology. 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. Any forward-looking statement made by us speaks only as of the date on which it was made. 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.

MASCO CORPORATION

Condensed Consolidated Statements of Operations - Unaudited

For the Three Months Ended March 31, 2021 and 2020

(in millions, except per common share data)

 

 

Three Months Ended March 31,

 

2021

 

2020

Net sales

$

1,970

 

 

 

$

1,581

 

 

Cost of sales

1,270

 

 

 

1,034

 

 

Gross profit

700

 

 

 

547

 

 

 

 

 

 

Selling, general and administrative expenses

335

 

 

 

322

 

 

Operating profit

365

 

 

 

225

 

 

 

 

 

 

Other income (expense), net:

 

 

 

Interest expense

(202

)

 

 

(35

)

 

Other, net

(6

)

 

 

(16

)

 

 

(208

)

 

 

(51

)

 

Income from continuing operations before income taxes

157

 

 

 

174

 

 

 

 

 

 

Income tax expense

43

 

 

 

33

 

 

Income from continuing operations

114

 

 

 

141

 

 

 

 

 

 

Income from discontinued operations, net

 

 

 

397

 

 

Net income

114

 

 

 

538

 

 

 

 

 

 

Less: Net income attributable to noncontrolling interest

20

 

 

 

8

 

 

Net income attributable to Masco Corporation

$

94

 

 

 

$

530

 

 

 

 

 

 

Income per common share attributable to Masco Corporation (diluted):

 

 

 

Income from continuing operations

$

0.34

 

 

 

$

0.48

 

 

Income from discontinued operations, net

 

 

 

1.44

 

 

Net income

$

0.34

 

 

 

$

1.92

 

 

 

 

 

 

Average diluted common shares outstanding

257

 

 

 

274

 

 

 

 

 

 

Amounts attributable to Masco Corporation:

 

 

 

Income from continuing operations

$

94

 

 

 

$

133

 

 

Income from discontinued operations, net

 

 

 

397

 

 

Net income attributable to Masco Corporation

$

94

 

 

 

$

530

 

 

Historical information is available on our website.

MASCO CORPORATION

Exhibit A: Reconciliations - Unaudited

For the Three Months Ended March 31, 2021 and 2020

(dollars in millions)

 

 

Three Months Ended March 31,

 

2021

 

2020

Gross Profit, Selling, General and Administrative Expenses, and Operating Profit Reconciliations

 

 

 

 

 

 

 

Net sales

$

1,970

 

 

$

1,581

 

 

 

 

 

Gross profit, as reported

$

700

 

 

$

547

 

Rationalization charges

1

 

 

3

 

Gross profit, as adjusted

$

701

 

 

$

550

 

 

 

 

 

Gross margin, as reported

35.5

%

 

34.6

%

Gross margin, as adjusted

35.6

%

 

34.8

%

 

 

 

 

Selling, general and administrative expenses, as reported

$

335

 

 

$

322

 

 

 

 

 

Selling, general and administrative expenses as percent of net sales, as reported

17.0

%

 

20.4

%

 

 

 

 

Operating profit, as reported

$

365

 

 

$

225

 

Rationalization charges

1

 

 

3

 

Operating profit, as adjusted

$

366

 

 

$

228

 

 

 

 

 

Operating margin, as reported

18.5

%

 

14.2

%

Operating margin, as adjusted

18.6

%

 

14.4

%

Historical information is available on our website.

MASCO CORPORATION

Exhibit A: Reconciliations - Unaudited

For the Three Months Ended March 31, 2021 and 2020

(in millions, except per common share data)

 

 

Three Months Ended March 31,

 

2021

 

2020

Income Per Common Share Reconciliations

 

 

 

 

 

 

 

Income from continuing operations before income taxes, as reported

$

157

 

 

 

$

174

 

 

Rationalization charges

1

 

 

 

3

 

 

Pension costs associated with expected terminated plans

9

 

 

 

6

 

 

(Earnings) from equity investments, net

(2

)

 

 

 

 

Loss on extinguishment of debt

168

 

 

 

 

 

Income from continuing operations before income taxes, as adjusted

333

 

 

 

183

 

 

Tax at 25% rate

(83

)

 

 

(46

)

 

Less: Net income attributable to noncontrolling interest

20

 

 

 

8

 

 

Income from continuing operations, as adjusted

$

230

 

 

 

$

129

 

 

 

 

 

 

Income from continuing operations per common share, as adjusted

$

0.89

 

 

 

$

0.47

 

 

 

 

 

 

Average diluted common shares outstanding

257

 

 

 

274

 

 

Outlook for the Twelve Months Ended December 31, 2021

 

Twelve Months Ended December 31, 2021

 

Low End

 

High End

Income Per Common Share Outlook

 

 

 

 

 

 

 

Income from continuing operations per common share

$

1.52

 

 

$

1.72

 

Rationalization charges

0.01

 

 

0.01

 

Pension costs associated with expected terminated plans (1)

1.42

 

 

1.42

 

Loss on extinguishment of debt

0.52

 

 

0.52

 

Allocation to participating securities per share (2)

0.03

 

 

0.03

 

Income from continuing operations per common share, as adjusted

$

3.50

 

 

$

3.70

 

(1)

Represents costs associated with our qualified domestic defined-benefit pension plans that are expected to be terminated in 2021.

(2)

Represents the impact of distributed dividends and undistributed earnings to unvested restricted stock awards as well as an allocation to redeemable noncontrolling interest in accordance with the two-class method of calculating earnings per share.

Historical information is available on our website.

MASCO CORPORATION

Condensed Consolidated Balance Sheets and Other Financial Data - Unaudited

March 31, 2021 and December 31, 2020

(dollars in millions)

 

 

March 31, 2021

 

December 31, 2020

Balance Sheet

 

 

 

Assets

 

 

 

Current Assets:

 

 

 

Cash and cash investments

$

838

 

 

$

1,326

 

Receivables

1,305

 

 

1,138

 

Prepaid expenses and other

97

 

 

149

 

Inventories

948

 

 

876

 

Assets held for sale

18

 

 

 

Total Current Assets

3,206

 

 

3,489

 

 

 

 

 

Property and equipment, net

894

 

 

908

 

Operating lease right-of-use assets

173

 

 

166

 

Goodwill

588

 

 

563

 

Other intangible assets, net

378

 

 

357

 

Other assets

326

 

 

294

 

Assets held for sale

9

 

 

 

Total Assets

$

5,574

 

 

$

5,777

 

 

 

 

 

Liabilities

 

 

 

Current Liabilities:

 

 

 

Accounts payable

$

925

 

 

$

893

 

Notes payable

6

 

 

3

 

Accrued liabilities

803

 

 

1,038

 

Liabilities held for sale

14

 

 

 

Total Current Liabilities

1,748

 

 

1,934

 

 

 

 

 

Long-term debt

2,955

 

 

2,792

 

Noncurrent operating lease liabilities

157

 

 

149

 

Other liabilities

458

 

 

481

 

Liabilities held for sale

14

 

 

 

Total Liabilities

5,332

 

 

5,356

 

 

 

 

 

Redeemable noncontrolling interest

25

 

 

 

 

 

 

 

 

Equity

217

 

 

421

 

Total Liabilities and Equity

$

5,574

 

 

$

5,777

 

 

 

As of March 31,

 

 

2021

 

2020

 

Other Financial Data

 

 

 

 

Working Capital Days

 

 

 

 

Receivable days

54

 

 

58

 

 

Inventory days

76

 

 

66

 

 

Payable days

68

 

 

71

 

 

Working capital

$

1,328

 

 

$

1,155

 

 

Working capital as a % of sales (LTM) (1)

17.5

%

 

17.0

%

 

(1)

Working capital as a % of sales as of March 31, 2021, excluding acquisitions made in the first quarter of 2021 and the fourth quarter of 2020, was 16.9%.

Historical information is available on our website.

MASCO CORPORATION

Condensed Consolidated Statements of Cash Flows and Other Financial Data - Unaudited

For the Three Months Ended March 31, 2021 and 2020

(dollars in millions)

 

 

Three Months Ended March 31,

 

2021

 

2020

Cash Flows From (For) Operating Activities:

 

 

 

Cash provided by operating activities

$

323

 

 

 

$

7

 

 

Working capital changes

(412

)

 

 

(99

)

 

Net cash for operating activities

(89

)

 

 

(92

)

 

 

 

 

 

Cash Flows From (For) Financing Activities:

 

 

 

Retirement of notes

(1,326

)

 

 

 

 

Purchase of Company common stock

(303

)

 

 

(602

)

 

Cash dividends paid

(36

)

 

 

(37

)

 

Issuance of notes, net of issuance costs

1,481

 

 

 

 

 

Debt extinguishment costs

(160

)

 

 

 

 

Proceeds from the exercise of stock options

 

 

 

20

 

 

Employee withholding taxes paid on stock-based compensation

(14

)

 

 

(22

)

 

(Decrease) increase in debt, net

(1

)

 

 

2

 

 

Net cash for financing activities

(359

)

 

 

(639

)

 

 

 

 

 

Cash Flows From (For) Investing Activities:

 

 

 

Capital expenditures

(30

)

 

 

(24

)

 

Acquisition of business, net of cash acquired

 

 

 

(24

)

 

Proceeds from disposition of businesses, net of cash disposed

 

 

 

853

 

 

Other, net

5

 

 

 

2

 

 

Net cash (for) from investing activities

(25

)

 

 

807

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash investments

(13

)

 

 

(6

)

 

 

 

 

 

Cash and Cash Investments:

 

 

 

(Decrease) increase for the period

(486

)

 

 

70

 

 

At January 1

1,326

 

 

 

697

 

 

At March 31

$

840

 

 

 

$

767

 

 

 

As of March 31,

 

2021

 

2020

Liquidity

 

 

 

Cash and cash investments

$

838

 

 

$

767

 

Revolver availability

1,000

 

 

1,000

 

Total Liquidity

$

1,838

 

 

$

1,767

 

Historical information is available on our website.

MASCO CORPORATION

Segment Data - Unaudited

For the Three Months Ended March 31, 2021 and 2020

(dollars in millions)

 

 

Three Months Ended March 31,

 

 

 

2021

 

2020

 

Change

Plumbing Products

 

 

 

 

 

Net sales

$

1,249

 

 

$

955

 

 

31

%

 

 

 

 

 

 

Operating profit, as reported

$

252

 

 

$

157

 

 

 

Operating margin, as reported

 

20.2

%

 

 

16.4

%

 

 

 

 

 

 

 

 

Rationalization charges

 

1

 

 

 

2

 

 

 

Operating profit, as adjusted

 

253

 

 

 

159

 

 

 

Operating margin, as adjusted

 

20.3

%

 

 

16.6

%

 

 

 

 

 

 

 

 

Depreciation and amortization

 

26

 

 

 

20

 

 

 

EBITDA, as adjusted

$

279

 

 

$

179

 

 

 

 

 

 

 

 

 

Decorative Architectural Products

 

 

 

 

 

Net sales

$

721

 

 

$

626

 

 

15

%

 

 

 

 

 

 

Operating profit, as reported

$

142

 

 

$

95

 

 

 

Operating margin, as reported

 

19.7

%

 

 

15.2

%

 

 

 

 

 

 

 

 

Rationalization charges

 

 

 

 

1

 

 

 

Operating profit, as adjusted

 

142

 

 

 

96

 

 

 

Operating margin, as adjusted

 

19.7

%

 

 

15.3

%

 

 

 

 

 

 

 

 

Depreciation and amortization

 

10

 

 

 

11

 

 

 

EBITDA, as adjusted

$

152

 

 

$

107

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

Net sales

$

1,970

 

 

$

1,581

 

 

25

%

 

 

 

 

 

 

Operating profit, as reported - segment

$

394

 

 

$

252

 

 

 

General corporate expense, net

 

(29

)

 

 

(27

)

 

 

Operating profit, as reported

 

365

 

 

 

225

 

 

 

Operating margin, as reported

 

18.5

%

 

 

14.2

%

 

 

 

 

 

 

 

 

Rationalization charges - segment

 

1

 

 

 

3

 

 

 

Operating profit, as adjusted

 

366

 

 

 

228

 

 

 

Operating margin, as adjusted

 

18.6

%

 

 

14.4

%

 

 

 

 

 

 

 

 

Depreciation and amortization - segment

 

36

 

 

 

31

 

 

 

Depreciation and amortization - non-operating

 

7

 

 

 

2

 

 

 

EBITDA, as adjusted

$

409

 

 

$

261

 

 

 

Historical information is available on our website.

MASCO CORPORATION

North American and International Data - Unaudited

For the Three Months Ended March 31, 2021 and 2020

(dollars in millions)

 

 

Three Months Ended March 31,

 

 

 

2021

 

2020

 

Change

North American

 

 

 

 

 

Net sales

$

1,529

 

 

$

1,258

 

 

22

%

 

 

 

 

 

 

Operating profit, as reported

$

308

 

 

$

210

 

 

 

Operating margin, as reported

 

20.1

%

 

 

16.7

%

 

 

 

 

 

 

 

 

Rationalization charges

 

1

 

 

 

3

 

 

 

Operating profit, as adjusted

 

309

 

 

 

213

 

 

 

Operating margin, as adjusted

 

20.2

%

 

 

16.9

%

 

 

 

 

 

 

 

 

Depreciation and amortization

 

23

 

 

 

20

 

 

 

EBITDA, as adjusted

$

332

 

 

$

233

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

Net sales

$

441

 

 

$

323

 

 

37

%

 

 

 

 

 

 

Operating profit, as reported

$

86

 

 

$

42

 

 

 

Operating margin, as reported

 

19.5

%

 

 

13.0

%

 

 

 

 

 

 

 

 

Depreciation and amortization

 

13

 

 

 

11

 

 

 

EBITDA

$

99

 

 

$

53

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

Net sales

$

1,970

 

 

$

1,581

 

 

25

%

 

 

 

 

 

 

Operating profit, as reported - segment

$

394

 

 

$

252

 

 

 

General corporate expense, net

 

(29

)

 

 

(27

)

 

 

Operating profit, as reported

 

365

 

 

 

225

 

 

 

Operating margin, as reported

 

18.5

%

 

 

14.2

%

 

 

 

 

 

 

 

 

Rationalization charges - segment

 

1

 

 

 

3

 

 

 

Operating profit, as adjusted

 

366

 

 

 

228

 

 

 

Operating margin, as adjusted

 

18.6

%

 

 

14.4

%

 

 

 

 

 

 

 

 

Depreciation and amortization - segment

 

36

 

 

 

31

 

 

 

Depreciation and amortization - non-operating

 

7

 

 

 

2

 

 

 

EBITDA, as adjusted

$

409

 

 

$

261

 

 

 

Historical information is available on our website.

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