Masco Corporation Reports First Quarter 2011 Results

TAYLOR, Mich., April 25, 2011 /PRNewswire/ --

2011 First Quarter Commentary

  • Sales declined four percent to $1.8 billion.
  • Results for key financial measures, as adjusted for certain items (see Exhibit A) and with a normalized tax rate of 36 percent, compared to the first quarter of 2010 were as follows:
    • Gross profit margins were 25.3 percent compared to 26.7 percent.
    • Operating profit margins were 3.0 percent compared to 5.0 percent.
    • (Loss) income was $(.05) per common share compared to $.03 per common share.
  • Loss, as reported, was $(.13) per common share compared to $(.02) per common share for the first quarter of 2010.
  • Working capital as a percent of sales improved to 15.5 percent at March 31, 2011, compared to 16.3 percent at March 31, 2010.
  • We ended the first quarter of 2011 with over $1.5 billion of cash.

Masco Corporation (NYSE: MAS) today reported that net sales for the first quarter ended March 31, 2011 decreased four percent, to $1.8 billion, compared to the first quarter of 2010.  North American sales decreased seven percent and International sales increased four percent.  In local currencies, International sales increased five percent compared with the first quarter of 2010.

(Loss) income was $(.05) per common share and $.03 per common share for the first quarters of 2011 and 2010, respectively, excluding the items in Exhibit A and with a normalized tax rate of 36 percent.  Including these items, loss, as reported was $(.13) per common share and $(.02) per common share for the first quarters ended March 31, 2011 and 2010, respectively.

"As anticipated, the trends impacting our business, including depressed new home construction, the deferral of "big ticket" repair and remodel activity and commodity cost pressures have continued into 2011.  In the first quarter of 2011, our sales were down four percent.  Excluding cabinet products that we are exiting, as previously announced, our sales would have been down just one percent compared to a relatively strong first quarter of 2010, which benefited from the homebuyer tax credit that expired in mid-2010.  In addition, on that same basis, sales in February and March of 2011 were basically flat with 2010.  Plumbing Products sales were strong in first quarter of 2011 compared to last year and we believe that our North American cabinet business and our installation business, while still depressed, were able to gain share sequentially, compared to fourth quarter of 2010.  We continue to manage our cost structure aggressively across our business and we anticipate that actions we have taken, or expect to take, to drive productivity, cost reductions, supply chain efficiencies and price increases will offset the impact of commodity and energy cost increases and other cost inflations for full-year 2011," said Masco's CEO Tim Wadhams.

Loss for the three months ended March 31, 2011 included gains of $17 million pre-tax related to the sale of financial investments.

We continue to focus on the rationalization of our businesses, including business consolidations, plant closures, headcount reductions, system implementations and other initiatives.  During the first quarters of 2011 and 2010, we incurred costs and charges of $32 million pre-tax ($.06 per common share, after tax) and $14 million pre-tax ($.03 per common share, after tax), respectively, related to these initiatives.

Outlook 2011

"While we still believe that the second half of 2011 will be stronger than the first half, our enthusiasm has been tempered somewhat.  Job growth has been modest at best, energy costs have increased, reflecting the turmoil in the Middle East and most economists have reduced their forecasts for 2011, including for housing starts.  Given the uncertainty of the timing and strength of the recovery in our markets, we will continue to focus on the things we can control to improve our execution and strengthen our brands.  The Masco Business System continues to drive positive change across the Company.  Our cabinet integration is on plan and we expect will drive fixed cost reductions and share gains; we have strengthened our brands and our focus on innovation is driving exciting new opportunities across all of our product groups, and we have added outstanding talent to our leadership teams to enhance the development and execution of our business strategies," said Tim Wadhams.  

Longer-term, we are confident about the fundamentals for the new home construction and home improvement markets and we are optimistic about the future.  We expect that improvements in our markets and in consumer spending, together with the changes we are driving across Masco and our financial strength will create significant value for our shareholders.

Headquartered in Taylor, Michigan, Masco Corporation is one of the world's leading manufacturers of home improvement and building products, as well as a leading provider of services that include the installation of insulation and other building products.    

The 2011 first quarter supplemental material, including a presentation in PDF format, will be distributed after the market closes on April 25, 2011 and will be available on the Company's Web site at www.masco.com.

A conference call regarding items contained in this release is scheduled for Tuesday, April 26, 2011 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 (913) 312-9335 (confirmation #1737120).  The conference call will be webcast simultaneously on the Company's Web site at www.masco.com and supplemental material, including the financial data referred to on the call and a reconciliation of non-GAAP information provided on the call, will also be available on the Web site.  

A replay of the call will be available on Masco's Web site or by phone by dialing (719) 457-0820 (replay access code #1737120) approximately two hours after the end of the call and will continue through May 3, 2011.

Masco Corporation's press releases and other information are available through the Company's toll free number, 1-888-MAS-NEWS, or under the Investor Relations section of Masco's Web site at www.masco.com.  

Statements contained in this press release that reflect our views about our future performance constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995.  Forward-looking statements can be identified by words such as "believe," "anticipate," "appear," "may," "will," "intend," "plan," "estimate," "expect," "assume," "seek," 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, shifts in consumer preferences and purchasing practices, and our ability to achieve cost savings through the Masco Business System and other initiatives.  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 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.

The Company believes that the non-GAAP performance measures and ratios that are contained herein, used in managing the business, may provide users of this financial information 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 Securities and Exchange Commission and is available on Masco's Web site at www.masco.com.

MASCO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED

For the Three Months Ended March 31, 2011 and 2010

(In Millions, Except Per Common Share Data)










Three Months Ended


March 31,


2011


2010





Net sales

$ 1,772


$ 1,852

Cost of Sales

1,347


1,360

Gross profit

425


492

Selling, general and administrative expenses

404


414

Operating profit

21


78

Other income (expense), net

(42)


(56)

(Loss) income before income taxes

(21)


22

Income tax expense

13


18

Net (loss) income

(34)


4

Less: Net income attributable to non-controlling interest

(12)


(11)

Net loss attributable to Masco Corporation

$    (46)


$      (7)





Loss per common share attributable to Masco




Corporation (diluted):




Net loss attributable to Masco Corporation

$ (0.13)


$ (0.02)





Average diluted common shares outstanding

349


350





Amounts attributable to Masco Corporation:




Net loss attributable to Masco Corporation

$    (46)


$      (7)



Masco Corporation

Key Financial Data As Reported - Unaudited

Q1 - 2011 and 2010

(In Millions, Except Earnings Per Share)















Sales & Earnings

3/31/2011


3/31/2010


Change


Net Sales

$           1,772


$           1,852


-4%


Operating Profit

$                21


$                78


N/A


Operating Profit % of Net Sales

1.2%


4.2%


(300)

bps

Other Income (Expense), Net

$              (42)


$              (56)


$               14


Income Tax Expense

$                13


$                18


N/A


Loss Attributable to Masco Corporation

$              (46)


$                (7)


N/A


Diluted EPS

$           (0.13)


$           (0.02)


N/A









Operating Expenses

3/31/2011


3/31/2010


Change


Cost of Sales

$           1,347


$           1,360


-1%


  Gross Margin

24.0%


26.6%


(260)

bps

SG&A Expenses (Including GCE)

$              404


$              414


-2%


  SG&A as a % of  net sales

22.8%


22.4%


(40)

bps

General Corporate Expense (GCE)

$                32


$                30


7%


   General Corp Expense as a % of net sales

1.8%


1.6%


20

bps








Business Segments

3/31/2011


3/31/2010


Change


Cabinets and Related Products:







 Net Sales

$              307


$              403


-24%


 Operating Loss

$              (50)


$              (15)


N/A


Operating Loss % of Net Sales

-16.3%


-3.7%


(1,260)

bps

Plumbing Products:







 Net Sales

$              710


$              663


7%


 Operating Profit

$                84


$                84


N/A


Operating Profit % of Net Sales

11.8%


12.7%


(90)

bps

Installation and Other Services:







 Net Sales

$              254


$              273


-7%


 Operating Loss

$              (40)


$              (42)


N/A


Operating Loss % of Net Sales

-15.7%


-15.4%


(30)

bps

Decorative Architectural Products:







 Net Sales

$              375


$              389


-4%


 Operating Profit

$                69


$                87


N/A


Operating Profit % of Net Sales

18.4%


22.4%


(400)

bps

Other Specialty Products:







 Net Sales

$              126


$              124


2%


 Operating Loss

$              (10)


$                (6)


N/A


Operating Loss % of Net Sales

-7.9%


-4.8%


(310)

bps








Total Segment Reported:







 Net Sales

$           1,772


$           1,852


-4%


 Operating Profit

$                53


$              108


N/A


Operating Profit % of Net Sales

3.0%


5.8%


(280)

bps



Masco Corporation

Key Financial Data As Reported - Unaudited

Q1 - 2011 and 2010

(In Millions, Except Earnings Per Share)









Business Regions

3/31/2011


3/31/2010


Change


North America







 Net Sales

$           1,333


$           1,430


-7%


 Operating Profit

$                11


$                64


N/A


Operating Profit % of Net Sales

0.8%


4.5%


(370)

bps

International, principally Europe







 Net Sales

$              439


$              422


4%


 Operating Profit

$                42


$                44


N/A


Operating Profit % of Net Sales

9.6%


10.4%


(80)

bps








Working Capital

3/31/2011


3/31/2010




Receivable Days

50


51


(1)


Inventory Days

55


53


2


Payable Days

57


49


8


Working Capital (Receivables+Inventory-Payables)

$           1,165


$           1,279


-9%


Working Capital as a % of Sales (As Reported TTM(1))

15.5%


16.3%


(80)

bps








Other

3/31/2011


3/31/2010




Dividend Payments

$                27


$                27




Cash Paid for Share Repurchases(2)

$                30


$                45




Common Shares Repurchased(2)

2


3




CAPEX

$                29


$                26




Depreciation and Amortization

$                75


$                60




Average diluted common shares outstanding

349


350











Balance Sheet Information







Long-Term Debt

$           4,030


$           4,100




Notes Payable

$                66


$                66




Total Debt

$           4,096


$           4,166




Shareholders' Equity

$           1,550


$           2,703




Debt to Capital

73%


61%




Cash

1,505


1,378











(1) - Trailing Twelve Months

(2) - Common shares were repurchased to offset the effect of stock award grants in the first quarters of 2011 and 2010.



MASCO CORPORATION

Reconciliations - Exhibit A

For the Three Months Ended March 31, 2011 and 2010

(In Millions, Except Per Common Share Data)





Gross Profit and Operating Profit Reconciliations





Three Months Ended


March 31,


2011


2010

Sales

$ 1,772


$ 1,852





Gross profit, as reported

$    425


$    492





Rationalization charges

24


3





Gross profit, as adjusted

$    449


$    495





Gross margin, as reported

24.0%


26.6%

Gross margin, as adjusted

25.3%


26.7%









Operating profit, as reported

$      21


$      78





Rationalization charges

32


14





Operating profit, as adjusted

$      53


$      92





Operating margin, as reported

1.2%


4.2%

Operating margin, as adjusted

3.0%


5.0%









Earnings Per Common Share Reconciliation





Three Months Ended


March 31,


2011


2010

(Loss) income before income taxes - as reported

$    (21)


$      22





Rationalization charges

32


14





Gains from financial investments

(17)


-





(Loss) income before income taxes - as adjusted

(6)


$      36





Tax at 36% rate

2


(13)





Less: Net income attributable to non-controlling interest

(12)


(11)





Net (loss) income - as adjusted

$    (16)


$      12





(Loss) earnings per common share - as adjusted

$ (0.05)


$   0.03





Shares outstanding

349


350









The Company believes that certain non-GAAP performance measures and ratios used in managing the business may provide 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.



SOURCE Masco Corporation



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