Masco Corporation Reports Second Quarter 2011 Results

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

2011 Second Quarter Commentary

  • Sales declined one percent to $2.0 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 second quarter of 2010 were as follows:
    • Gross profit margins were 26.9 percent compared to 28.4 percent.
    • Operating profit margins were 5.5 percent compared to 8.3 percent.
    • Income was $.05 per common share compared to $.16 per common share.
  • Income, as reported, was $.02 per common share compared to $.01 per common share for the second quarter of 2010.
  • Working capital as a percent of sales improved to 15.6 percent at June 30, 2011, compared to 16.1 percent at June 30, 2010.
  • We ended the second quarter of 2011 with over $1.6 billion of cash.

Masco Corporation (NYSE: MAS) today reported that net sales for the second quarter ended June 30, 2011 decreased one percent to $2.0 billion, compared to the second quarter of 2010.  North American sales decreased six percent and International sales increased 18 percent.  In local currencies, International sales increased five percent compared with the second quarter of 2010.

(Logo:  http://photos.prnewswire.com/prnh/20110624/DE25791LOGO )

Income was $.05 per common share and $.16 per common share for the second quarters of 2011 and 2010, respectively, excluding the items in Exhibit A and with a normalized tax rate of 36 percent.  Including these items, income, as reported, was $.02 per common share and $.01 per common share for the second quarters ended June 30, 2011 and 2010, respectively.

"Our sales would have increased one percent (excluding cabinet products that we have exited, as previously announced) compared to second quarter 2010, reflecting strong sales of plumbing related products driven by share gains of our Hansgrohe and Delta brands and foreign currency translation.  The second quarter of 2011 was negatively impacted by continued declines in new home construction and in the deferral of "big ticket" repair and remodel activity," said Tim Wadhams. "We completed several of the major initiatives that have been underway in our installation services and North American cabinet operations which marked significant milestones for these businesses.  We believe that our installation business gained share sequentially in the second quarter of 2011 and our North American cabinet business maintained share in the second quarter of 2011, continuing the momentum from the first quarter of 2011.  In addition, we further reduced cabinet capacity by idling another manufacturing facility."

Income for the three months ended June 30, 2011 included $33 million of pre-tax gains ($.06 per common share, after tax) related to the sale of financial investments.  Income for the three months ended June 30, 2010 included $33 million of pre-tax charges ($.06 per common share, after tax) related to the impairment 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 second quarters of 2011 and 2010, we incurred costs and charges of $15 million pre-tax ($.03 per common share, after tax) and $51 million pre-tax ($.09 per common share, after tax), respectively, related to these initiatives.

Outlook 2011

"The lack of job creation, high cost of energy and declining consumer confidence have made forecasting the timing and strength of the recovery extremely difficult.  Most economists have reduced their forecasts for 2011, including housing start levels which are now projected to be flat with 2010.  As such, we believe that growth in the second half of 2011 will be challenged. Longer-term however, we are confident about the fundamentals for the new home construction and home improvement markets and we are optimistic about the future," said Tim Wadhams. "We will continue to focus on the things we can control to improve our execution and strengthen our brands.  We have several new programs that we are funding today that we believe will drive future growth opportunities across our businesses.  We are very encouraged with the progress we are making to increase our penetration with North American cabinet dealers and with the professional painter.  We also have exciting new programs that will launch later this year in plumbing, cabinets and builders hardware and we continue to invest in the development of international opportunities for paint and plumbing.  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 second quarter supplemental material, including a presentation in PDF format, will be distributed after the market closes on July 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, July 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) 312-9304 (confirmation #6636952).  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 #6636952) approximately two hours after the end of the call and will continue through August 2, 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 and Six Months Ended June 30, 2011 and 2010

(In Millions, Except Per Common Share Data)


















Three Months Ended


Six Months Ended


June 30,


June 30,


2011


2010


2011


2010









Net sales

$ 2,022


$ 2,048


$ 3,794


$ 3,900

Cost of Sales

1,490


1,502


2,837


2,862

Gross profit

532


546


957


1,038









Selling, general and administrative expenses

441


427


845


841

Operating profit

91


119


112


197









Other income (expense), net

(33)


(103)


(75)


(159)

Income before income taxes

58


16


37


38









Income tax expense

38


4


51


22

Net income (loss)

20


12


(14)


16









Less: Net income attributable to non-controlling interest

(12)


(9)


(24)


(20)

Net income (loss) attributable to Masco Corporation

$        8


$        3


$    (38)


$      (4)









Income (loss) per common share attributable to Masco








Corporation (diluted):








Net income (loss) attributable to Masco Corporation

$   0.02


$   0.01


$ (0.11)


$ (0.02)









Average diluted common shares outstanding

349


349


348


349









Amounts attributable to Masco Corporation:








Net income (loss) attributable to Masco Corporation

$        8


$        3


$    (38)


$      (4)



Masco Corporation





Key Financial Data As Reported - Unaudited





Q2 - 2011 and 2010





(In Millions, Except Earnings Per Share)















Sales & Earnings

6/30/2011

6/30/2010

Change


Net Sales

$          2,022

$          2,048

-1%


Operating Profit

$               91

$             119

N/A


Operating Profit % of Net Sales

4.5%

5.8%

(130)

bps

Other Income (Expense), Net

$             (33)

$           (103)

$             70


Income Tax Expense

$               38

$                 4

N/A


Income Attributable to Masco Corporation

$                 8

$                 3

N/A


Diluted EPS

$            0.02

$            0.01

N/A







Operating Expenses

6/30/2011

6/30/2010

Change


Cost of Sales

$         1,490

$         1,502

-1%


  Gross Margin

26.3%

26.7%

(40)

bps

SG&A Expenses (Including GCE)

$            441

$            427

3%


  SG&A as a % of  net sales

21.8%

20.8%

(100)

bps

General Corporate Expense (GCE)

$              36

$              27

33%


   General Corp Expense as a % of net sales

1.8%

1.3%

50

bps






Business Segments

6/30/2011

6/30/2010

Change


Cabinets and Related Products:





 Net Sales

$           330

$           400

-18%


 Operating Loss

$            (27)

$           (37)

N/A


Operating Loss % of Net Sales

-8.2%

-9.3%

110

bps

Plumbing Products:





 Net Sales

$           761

$           682

12%


 Operating Profit

$             95

$             86

N/A


Operating Profit % of Net Sales

12.5%

12.6%

(10)

bps

Installation and Other Services:





 Net Sales

$           294

$           309

-5%


 Operating Loss

$            (26)

$           (23)

N/A


Operating Loss % of Net Sales

-8.8%

-7.4%

(140)

bps

Decorative Architectural Products:





 Net Sales

$           492

$          505

-3%


 Operating Profit

$             90

$          109

N/A


Operating Profit % of Net Sales

18.3%

21.6%

(330)

bps

Other Specialty Products:





 Net Sales

$          145

$          152

-5%


 Operating Profit

$               -

$            11

N/A


Operating Profit % of Net Sales

0.0%

7.2%

(720)

bps






Total Segment Reported:





 Net Sales

$       2,022

$       2,048

-1%


 Operating Profit

$          132

$          146

N/A


Operating Profit % of Net Sales

6.5%

7.1%

(60)

bps








Masco Corporation





Key Financial Data As Reported - Unaudited





Q2 - 2011 and 2010





(In Millions, Except Earnings Per Share)










Business Regions

6/30/2011

6/30/2010

Change


North America





 Net Sales

$         1,563

$          1,659

-6%


 Operating Profit

$              87

$             114

N/A


Operating Profit % of Net Sales

5.6%

6.9%

(130)

bps

International, principally Europe





 Net Sales

$            459

$               89

18%


 Operating Profit

$              45

$               32

N/A


Operating Profit % of Net Sales

9.8%

8.2%

160

bps



Masco Corporation





Key Financial Data As Reported - Unaudited





Year-to-date June 30, 2011 and 2010





(In Millions, Except Earnings Per Share)















Sales & Earnings

6/30/2011

6/30/2010

Change


Net Sales

$             3,794

$             3,900

-3%


Operating Profit

$                112

$                197

N/A


Operating Profit % of Net Sales

3.0%

5.1%

(210)

bps

Other Income (Expense), Net

$                (75)

$              (159)

$                84


Income Tax Expense

$                  51

$                  22

N/A


(Loss) Attributable to Masco Corporation

$                (38)

$                  (4)

N/A


Diluted EPS

$             (0.11)

$             (0.02)

N/A







Operating Expenses

6/30/2011

6/30/2010

Change


Cost of Sales

$              2,837

$             2,862

-1%


  Gross Margin

25.2%

26.6%

(140)

bps

SG&A Expenses (Including GCE)

$                 845

$                841

0%


  SG&A as a % of  net sales

22.3%

21.6%

(70)

bps

General Corporate Expense (GCE)

$                   68

$                  57

19%


   General Corp Expense as a % of net sales

1.8%

1.5%

30

bps






Business Segments

6/30/2011

6/30/2010

Change


Cabinets and Related Products:





 Net Sales

$                 637

$                803

-21%


 Operating Loss

$                 (77)

$                (52)

N/A


Operating Loss % of Net Sales

-12.1%

-6.5%

(560)

bps

Plumbing Products:





 Net Sales

$              1,471

$             1,345

9%


 Operating Profit

$                 179

$                170

N/A


Operating Profit % of Net Sales

12.2%

12.6%

(40)

bps

Installation and Other Services:





 Net Sales

$                 548

$                582

-6%


 Operating Loss

$                 (66)

$                (65)

N/A


Operating Loss % of Net Sales

-12.0%

-11.2%

(80)

bps

Decorative Architectural Products:





 Net Sales

$                 867

$                  94

-3%


 Operating Profit

$                 159

$                196

N/A


Operating Profit % of Net Sales

18.3%

21.9%

(360)

bps

Other Specialty Products:





 Net Sales

$                 271

$                276

-2%


 Operating (Loss) Profit

$                 (10)

$                    5

N/A


Operating (Loss) Profit % of Net Sales

-3.7%

1.8%

(550)

bps






Total Segment Reported:





 Net Sales

$              3,794

$             3,900

-3%


 Operating Profit

$                 185

$                254

N/A


Operating Profit % of Net Sales

4.9%

6.5%

(160)

bps








Masco Corporation





Key Financial Data As Reported - Unaudited





Year-to-date June 30, 2011 and 2010





(In Millions, Except Earnings Per Share)










Business Regions

6/30/2011

6/30/2010

Change


North America





 Net Sales

$         2,896

$             3,089

-6%


 Operating Profit

$              98

$                178

N/A


Operating Profit % of Net Sales

3.4%

5.8%

(240)

bps

International, principally Europe





 Net Sales

$            898

$                811

11%


 Operating Profit

$              87

$                  76

N/A


Operating Profit % of Net Sales

9.7%

9.4%

30

bps






Working Capital

6/30/2011

6/30/2010



Receivable Days

50

50

-


Inventory Days

59

55

4


Payable Days

59

51

8


Working Capital (Receivables+Inventory-Payables)

$         1,168

$            1,268

-8%


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

15.6%

16.1%

(50)

bps






Other

6/30/2011

6/30/2010



Dividend Payments

$              54

$                 54



Cash Paid for Share Repurchases(2)

$              30

$                 45



Common Shares Repurchased(2)

2

3



CAPEX

$              67

$                 62



Depreciation and Amortization

$            137

$               137



Average diluted common shares outstanding

348

349








Balance Sheet Information





Long-Term Debt

$         4,027

$            4,038



Notes Payable

$              65

$                 66



Total Debt

$         4,092

$            4,104



Shareholders' Equity

$         1,537

$            2,608



Debt to Capital

73%

61%



Cash

1,611

1,384








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 June 30, 2011 and 2010

(In Millions, Except Per Common Share Data)





Gross Profit and Operating Profit Reconciliations





Three Months Ended


June 30,


2011


2010

Sales

$ 2,022


$ 2,048





Gross profit, as reported

$    532


$    546





Rationalization charges

11


36





Gross profit, as adjusted

$    543


$    582





Gross margin, as reported

26.3%


26.7%

Gross margin, as adjusted

26.9%


28.4%









Operating profit, as reported

$      91


$    119





Rationalization charges

15


51





Litigation charge

5


-





Operating profit, as adjusted

$    111


$    170





Operating margin, as reported

4.5%


5.8%

Operating margin, as adjusted

5.5%


8.3%









Earnings Per Common Share Reconciliation





Three Months Ended


June 30,


2011


2010

Income before income taxes - as reported

$      58


$      16





Rationalization charges

15


51





Litigation charge

5







(Gains) losses from financial investments

(33)


-





Impairment of financial investments

-


33





Income before income taxes - as adjusted

$      45


$    100





Tax at 36% rate

(16)


(36)





Less: Net income attributable to non-controlling interest

(12)


(9)





Net income - as adjusted

$      17


$      55





Earnings per common share - as adjusted

$   0.05


$   0.16





Shares outstanding

349


349









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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