Masco Corporation · NYSE:MAS
Masco — Q4 2010 Earnings Presentation
38 slides from Masco's earnings presentation, Feb 15, 2011
Slide 1: Fourth Quarter 2010 Masco Earnings Presentation
Fourth Quarter 2010 Masco Earnings Presentation Tuesday, February 15, 2011 8:00 a.m. ET 1
Slide 2: Forward-looking statements and non-GAAP disclaimer
Written and oral statements made in this presentation 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,” “appea
Slide 3: Fourth Quarter 2010 Overview
Fourth Quarter 2010 Overview Net sales decreased 9% to $1.7 billion, reflecting: − Reduced sales of cabinets, including planned product exits, and installation services − Unfavorable currency translation of 2% Excluding business rationalization charges, non-cash impairment charges for goodwill a
Slide 4: Fourth Quarter 2010 Overview
Fourth Quarter 2010 Overview Goodwill/intangible impairment - $721 million, primarily Installation − Reduced terminal year starts (from 1.6 million to 1.5 million) − Increased discount rate Deferred tax assets – valuation allowance - $371 million − Three-year cumulative loss negates previously i
Slide 5: Full-Year 2010 Overview
Full-Year 2010 Overview Net sales decreased 3% to $7.6 billion, reflecting: − Reduced sales of cabinets, including planned product exits, and installation services − Unfavorable currency translation of 1% Excluding business rationalization charges, non-cash impairment charges for goodwill and ot
Slide 6: 2010 Summary
2010 Summary Relatively solid operating performance in 2009 with momentum going into 2010 Second half of 2010 more challenging − Housing starts slowed − Expenditures for big ticket repair and remodel items continued to be deferred − Commodity costs increased Full year adjusted: 2010 2009 Gross
Slide 7: We Are Strengthening Our Competitive Position
We Are Strengthening Our Competitive Position Invested to strengthen our brands Achieved approximately $500 million in gross fixed cost reductions Enhanced supply chain initiatives Improved our working capital Accelerated innovation − Watkins Ace® Sanitizer − Arrow Fastener RED® fastening
Slide 8: Cabinets and Related Products
Cabinets and Related Products Financial Performance Q4 2010 Financial Performance FY 2010 4th QTR 12/31/10 Full-Year 12/31/10 3 Months Ended vs. 12 Months Ended vs. ($ in Millions) 12/31/09 ($ in Millions) 12/31/09 12/31/2010 12/31/2009 $ % 12/31/2010 12/31/2009 $ % Net Sales $304 $426 $(122) (29%)
Slide 9: 2011 Outlook: Cabinets and Related Products
2011 Outlook Cabinets and Related Products Integrated our businesses and “right-sized” footprint with the closure of seven facilities and reduction of approximately $180 million in fixed costs ($140 million complete; anticipate an additional $40 million). Clear, well-articulated brand strategy t
Slide 10: Plumbing Products
Plumbing Products Financial Performance Q4 2010 Financial Performance FY 2010 4th QTR 12/31/10 Full-Year 12/31/10 3 Months Ended vs. 12 Months Ended vs. ($ in Millions) 12/31/09 ($ in Millions) 12/31/09 12/31/2010 12/31/2009 $ % 12/31/2010 12/31/2009 $ % Net Sales $661 $671 $(10) (1%) Net Sales $2,6
Slide 11: Installation and Other Services
Installation and Other Services Financial Performance Q4 2010 Financial Performance FY 2010 4th QTR 12/31/10 Full-Year 12/31/10 3 Months Ended vs. 12 Months Ended vs. ($ in Millions) 12/31/09 ($ in Millions) 12/31/09 12/31/2010 12/31/2009 $ % 12/31/2010 12/31/2009 $ % Net Sales $273 $295 $(22) (7%)
Slide 12: 2011 Outlook: Installation and Other Services
2011 Outlook Installation and Other Services Lowered fixed costs in excess of $180 million. Entered into an agreement with Owens Corning that we believe will enhance our ability to grow sales, create efficiencies in logistics, lower working capital, and provide consistent supply and better servi
Slide 13: Decorative Architectural Products
Decorative Architectural Products Financial Performance Q4 2010 Financial Performance FY 2010 4th QTR 12/31/10 Full-Year 12/31/10 3 Months Ended vs. 12 Months Ended vs. ($ in Millions) 12/31/09 ($ in Millions) 12/31/09 12/31/2010 12/31/2009 $ % 12/31/2010 12/31/2009 $ % Net Sales $336 $349 $(13) (4%
Slide 14: Other Specialty Products
Other Specialty Products Financial Performance Q4 2010 Financial Performance FY 2010 4th QTR 12/31/10 Full-Year 12/31/10 3 Months Ended vs. 12 Months Ended vs. ($ in Millions) 12/31/09 ($ in Millions) 12/31/09 12/31/2010 12/31/2009 $ % 12/31/2010 12/31/2009 $ % Net Sales $161 $157 $4 3% Net Sales $5
Slide 15: Q4 2010 Working Capital
Q4 2010 Working Capital 47 48 14.7% 13.4% Working Capital % of Sales Accounts Receivable Days 49 51 48 47 Inventory Days Accounts Payable Days Q4 - 2010 Q4 - 2009 Q4 - 2010 Q4 - 2009 15
Slide 16: Wrap-Up Comments
Wrap-Up Comments Anticipate slow start but improving market conditions in 2011 − 2011 total housing starts forecast – up approximately 15% − Expect modest improvement in repair and remodel activity Will continue to focus on what we can control to improve execution and strengthen our brands − Emb
Slide 17: Questions & Answers
Questions & Answers 17
Slide 18: Appendix
Appendix 18
Slide 19: Q4 2010 EPS Reconciliation
Q4 2010 EPS Reconciliation ($ in Millions) Q4 2010 Q4 2009 Loss from Continuing Operations before Income Taxes – As $ (853) $ (246) Reported Rationalization Charges 104 27 Goodwill Imairment Charges 721 262 Other One-Time Charges - - (Loss) Income from Continuing Operations before Income (28) 43 Tax
Slide 20: Q4 2010 Profit Reconciliation
Q4 2010 Profit Reconciliation ($ in Millions) Q4 2010 Q4 2009 Sales $ 1,735 $ 1,898 Gross Profit – As Reported $ 308 $ 495 Rationalization Charges 95 15 Gross Profit – As Adjusted $ 403 $ 510 Gross Margin - As Reported 17.8% 26.1% Gross Margin - As Adjusted 23.2% 26.9% Operating Loss – As Reported $
Slide 21: 2010 Impairment of Goodwill and Other Intangible Assets
2010 Impairment of Goodwill and Other Intangible Assets Total non-cash, pre-tax charge of $721 million ($1.70 per common share, after tax). Primarily related to Installation and Other Services segment. Terminal year housing start assumption reduced to 1.5 million from 1.6 million housing start
Slide 22: 2010 Deferred Tax Assets – Valuation Allowance
2010 Deferred Tax Assets – Valuation Allowance Recorded a $371 million non-cash charge to income tax expense to establish a tax valuation allowance related to U.S. deferred tax assets. Does not impact cash flow or liquidity. Resulted from the U.S. operating losses and significant U.S. goodwill
Slide 23: Credit Facility Amended February 11, 2011
Credit Facility Amended February 11, 2011 $1.25 billion line established in June 2010 with two financial covenants − Total debt to total capitalization threshold (65%) − Interest coverage (adjusted EBITDA/Interest Expense) In compliance with all covenants and had no borrowings outstanding at Dec
Slide 24: Full-Year 2010 EPS Reconciliation
Full-Year 2010 EPS Reconciliation ($ in Millions) YTD 12/31/10 YTD 12/31/09 Loss from Continuing Operations before Income Taxes – As $ (777) $ (151) Reported Rationalization Charges 208 94 Goodwill Impairment Charges 721 262 Other One-Time Charges* - 23 Income from Continuing Operations before Incom
Slide 25: Full-Year 2010 Profit Reconciliation
Full-Year 2010 Profit Reconciliation ($ in Millions) YTD 12/31/10 YTD 12/31/09 Sales $ 7,592 $ 7,792 Gross Profit – As Reported $ 1,840 $ 2,018 Rationalization Charges 166 43 Gross Profit – As Adjusted $ 2,006 $ 2,061 Gross Margin - As Reported 24.2% 25.9% Gross Margin - As Adjusted 26.4% 26.5% Oper
Slide 26: Cabinets & Related Products Current Segment Dynamics
Cabinets & Related Products Current Segment Dynamics Drivers of 4Q Sales Decline Product Reduced Exit Activity Currency Total North America $40 $49 $-- $89 International --- 26 7 33 $40 $75 $7 $122 Drivers of Full-Year Sales Decline Product Reduced Currency Total Exit Activity North America $69 $78
Slide 27: Installation and Other Services Current Segment Dynamics
Installation and Other Services Current Segment Dynamics YTD 4Q 3Q 2Q 1Q Starts lagged 90 days 1% (1%) 12% 17% (20%) Segment sales change (9%) (7%) (12%) (1%) (14%) Quarterly performance influenced by cycle time variability − Tax Credit impact Sales impacted by: − Price competition − Smaller hom
Slide 28: 2011 Estimate - Other Financial Data
2011 Estimate - Other Financial Data ($ in Millions) 2011 Estimate 2010 Actual Rationalization Charges* ~ $65 $208 Tax Rate** ~ 60% 32% Interest Expense ~ $250 $251 General Corp. Expense ~ $140 $110 Capital Expenditures ~ $190 $137 Depreciation & Amortization ~ $260 $279 Outstanding Shares 349 milli
Slide 29: Segment Mix Full-Year 2010 - Estimate
Segment Mix Full-Year 2010 - Estimate New Segment International North America Construction Cabinets and 25% 75% 25% - 30% Related Products Plumbing 40% 60% 20% - 25% Products Installation and -- 100% 90+% Other Services Decorative -- 100% <5% Architectural Products Other Specialty 25% 75% 20% - 30%
Slide 30: Masco International Revenue Split
Masco International Revenue Split* 6% 6% 7% 36% Central Europe United Kingdom Emerging Markets 9% Eastern Europe Northern Europe North America Southern Europe 11% 25% *Based on company estimates. 30
Slide 31: Fourth Quarter 2010 Results (As Reported)
Fourth Quarter 2010 Results (As Reported) ($ In Millions) Net Sales Change in Sales Operating Margin* Q4 2010 Q4 2009 2010 vs. 2009 Q4 2010 Q4 2009 Cabinets and Related Products $304 $426 (29%) (45.1%) (1.9%) Plumbing Products 661 671 (1%) 9.7% 5.2% Installation and Other Services 273 295 (7%) (273.
Slide 32: Fourth Quarter 2010 Results (As Adjusted)
Fourth Quarter 2010 Results (As Adjusted) ($ In Millions) Net Sales Change in Sales Operating Margin* Q4 2010 Q4 2009 2010 vs. 2009 Q4 2010 Q4 2009 Cabinets and Related Products $304 $426 (29%) (15.1%) 2.1% Plumbing Products 661 671 (1%) 10.6% 11.9% Installation and Other Services 273 295 (7%) (9.2%
Slide 33: Full-Year 2010 Results (As Reported)
Full-Year 2010 Results (As Reported) ($ In Millions) Net Sales Change in Sales Operating Margin* FY 2010 FY 2009 2010 vs. 2009 FY 2010 FY 2009 Cabinets and Related Products $1,464 $1,674 (13%) (17.1%) (3.8%) Plumbing Products 2,692 2,564 5% 12.3% 9.2% Installation and Other Services 1,147 1,256 (9%)
Slide 34: Full-Year 2010 Results (As Adjusted)
Full-Year 2010 Results (As Adjusted) ($ In Millions) Net Sales Change in Sales Operating Margin* FY 2010 FY 2009 2010 vs. 2009 FY 2010 FY 2009 Cabinets and Related Products $1,464 $1,674 (13%) (4.8%) (1.3%) Plumbing Products 2,692 2,564 5% 12.9% 11.5% Installation and Other Services 1,147 1,256 (9%)
Slide 35: 2010 – Gross Profit/SG&A (As Reported)
2010 – Gross Profit/SG&A (As Reported) ($ in Millions) Fourth Quarter Full-Year $495 $2,018 26.1% $1,840 25.9% $308 24.2% 17.8% Gross Profit / Margin Gross Profit / Margin $430 $385 22.7% 22.2% $1,618 $1,701 21.3% 21.8% SG&A as a % of Sales Q4 - 2010 Q4 - 2009 SG&A as a % of Sales Full-Year - 2010 F
Slide 36: Q4 2010 Segment Rationalization Charges
Q4 2010 Segment Rationalization Charges Rationalization Charges - Q4 2010 Q4 2009 2010 YTD 2009 YTD ($ in Millions) Plant Total - Q4 Total - Total Total Severance ERP RTA Exit Closures 2010 Q4 2009 YTD - 2010 YTD - 2009 Cabinets and Related Products $ (1) $ (69) $ - $ (21) $ (91) $ (17) $ (179) $ (4
Slide 37: Full-Year 2010 Segment Rationalization Charges
Full-Year 2010 Segment Rationalization Charges Rationalization Charges - December 31, 2010 FY 2009 ($ in Millions) Plant Total - FY Total - FY Severance ERP RTA Exit Closures 2010 2009 Cabinets and Related Products $ (6) $ (87) $ (2) $ (84) $ (179) $ (43) Plumbing Products (7) (8) - - (15) (19) Inst
Slide 38: Outstanding Debt Maturities
$0 $400 $800 $1,200 2010 2011 2012 2013 2014 December 31, 2010 2015 2016 2017 2018 2019 2020 2021 Zero Coupon 2022 2023 2024 ($ In Millions) 2025 2026 Outstanding Debt Maturities 2027 Fixed 2028 2029 2030 2031 2032 2033 2034 2035 2036 38