Masco Corporation · NYSE:MAS
Masco — Q3 2011 Earnings Presentation
33 slides from Masco's earnings presentation, Oct 25, 2011
Slide 1: Third Quarter 2011 Masco Earnings Presentation
Third Quarter 2011 Masco Earnings Presentation Tuesday, October 25, 2011 8:00 a.m. ET 1
Slide 2: looking statements can be identified by words such as “believe,” “anticipate,” “appear,” “may,” “will,”
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: Q3 Highlights and Commentary
Q3 Highlights and Commentary Commodity cost pressures, competitive retail environments and depressed consumer confidence continue to impact performance In this challenging environment we: − Maintained or gained share in our major product categories − Introduced new products and programs in retai
Slide 4: Rationalization & Divestiture Activities
Rationalization & Divestiture Activities Plant closures − Milgard Manufacturing exited Tempering Business in September − Milgard Manufacturing announced the closure of three plants in October Headcount reductions of ~750 across the company from September until end of year 2011 Divestitures − A
Slide 5: Q3 2011 Overview
Q3 2011 Overview Net sales increased 3% to $2.0 billion, reflecting − Favorable currency translation increased sales 2% and offset planned cabinet product exits Excluding business rationalization charges, gains from financial investments, impairment of intangible assets, and adjusting for a norm
Slide 6: Q3 2011 Profit Reconciliation
Q3 2011 Profit Reconciliation ($ in Millions) Q3 2011 Q3 2010 Sales $ 2,006 $ 1,957 Gross Profit – As Reported $ 495 $ 494 Rationalization Charges 8 32 Gross Profit – As Adjusted $ 503 $ 526 Gross Margin - As Reported 24.7% 25.2% Gross Margin - As Adjusted 25.1% 26.9% Operating Income – As Reported
Slide 7: Q3 2011 EPS Reconciliation
Q3 2011 EPS Reconciliation (in Millions) Q3 2011 Q3 2010 Income before Income Taxes – As Reported $ 61 $ 38 Rationalization Charges 13 39 Litigation Charge 1 - Impairment of intangible assets 7 - Financial Investment (Income) Expense (19) 3 Income before Income Taxes – As Adjusted 63 80 Tax at 36% r
Slide 8: Cabinets and Related Products
Cabinets and Related Products Financial Performance Q3 2011 9/30/11 vs. ($ in Millions) 3 Months Ended 9/30/10 9/30/2011 9/30/2010 $ % Net Sales $307 $357 $(50) (14%) Operating (Loss)* $(27) $(27) $-- N/A Operating Margin (8.8%) (7.6%) Incremental Margin N/A Commentary Brands Excluding planned pro
Slide 9: Cabinets and Related Products Q3 2011 Update
Cabinets and Related Products Q3 2011 Update Benefitting from the North American cabinet integration − Significant Q3 profit improvements driven by integration savings, lean and sourcing activities and spending reductions Countertop model continues to gain traction − Driving higher attachment ra
Slide 10: KraftMaid "Tops & Bottoms" Programs
KraftMaid “Tops & Bottoms” Programs Home Centers KraftMaid Kitchen Tops KraftMaid Vanity & Granite Program Denova™ Tops Program Initial Lowe’s store rollout a 1100 Lowe’s stores set with success the program Expansion to additional stores Simplified purchase process scheduled for Q4 Pushed
Slide 11: Plumbing Products
Plumbing Products Financial Performance Q3 2011 9/30/11 vs. ($ in Millions) 3 Months Ended 9/30/10 9/30/2011 9/30/2010 $ % Net Sales $768 $686 $82 12% Operating Profit* $92 $100 $(8) N/A Operating Margin 12.0% 14.6% Incremental Margin N/A Commentary Brands Increased sales due to: − Hansgrohe® and
Slide 12: Plumbing Products Q3 2011 Update
Plumbing Products Q3 2011 Update Gaining share in the U.S. with Delta®, Peerless®, and Brizo® brands − New Peerless and Delta product launches at Lowe’s Continued international growth with Hansgrohe products Continuing to invest in brand building, new product development and international grow
Slide 13: EPA names Delta Faucet WaterSense Partner of the Year
® ® EPA names Delta Faucet Watersense Partner of the Year Delta Faucet Company was recognized for its outstanding support of the U.S. Environmental Protection Agency’s WaterSense program and ongoing commitment to promoting advancements in water efficiency The EPA’s WaterSense program aims to pro
Slide 14: Installation and Other Services
Installation and Other Services Financial Performance Q3 2011 9/30/11 vs. ($ in Millions) 3 Months Ended 9/30/10 9/30/2011 9/30/2010 $ % Net Sales $315 $292 $23 8% Operating (Loss)* $(18) $(20) $2 N/A Operating Margin (5.7%) (6.8%) Incremental Margin 9% Commentary Businesses Increased sales due to
Slide 15: Installation and Other Services Q3 2011 Update
Installation and Other Services Q3 2011 Update Year-over-year overall share gains Continued strong retrofit sales gains in Q3 Increasing penetration of multi-family channel Increasing strategic alliances with big builders Benefitting from a lean culture that we expect will drive additional
Slide 16: Decorative Architectural Products
Decorative Architectural Products Financial Performance Q3 2011 9/30/11 vs. ($ in Millions) 3 Months Ended 9/30/10 9/30/2011 9/30/2010 $ % Net Sales $455 $463 $(8) (2%) Operating Profit $88 $104 $(16) N/A Operating Margin 19.3% 22.5% Decremental Margin (200%) Commentary Brands Decreased sales due
Slide 17: Decorative Architectural Products Q3 2011 Update
Decorative Architectural Products Q3 2011 Update Leveraging our resources to expand top-line growth − Direct to Pro® program with The Home Depot continues to gain traction − Continued investment in new product & merchandising innovation − Focused on the international expansion of our paint busines
Slide 18: Other Specialty Products
Other Specialty Products Financial Performance Q3 2011 9/30/11 vs. ($ in Millions) 3 Months Ended 9/30/10 9/30/2011 9/30/2010 $ % Net Sales $161 $159 $2 1% Operating Profit $14 $11 $3 N/A Operating Margin 8.7% 6.9% Incremental Margin 150% Commentary Brands Increased sales due to: −Positive impact
Slide 19: Other Specialty Products Q3 2011 Update
Other Specialty Products Q3 2011 Update Milgard Manufacturing has outperformed depressed repair and remodel and new home construction markets − Continuing to gain share in the western United States − Expanding into new geographies including Texas and western Canada − Successful new product introdu
Slide 20: Milgard Window New Product Introductions
Milgard Window New Product Introductions Essence Series™ Wood Windows Vinyl Exterior Frame Colors and Doors Sales exceeded expectations in the Currently sold in all of Milgard’s western limited market release markets We expect sales will continue to expand Sold as an upgrade option in four a
Slide 21: Q3 2011 Working Capital
Q3 2011 Working Capital 16.2% 48 49 14.8% Working Capital % of Sales Accounts Receivable Days 56 53 62 51 Inventory Days Accounts Payable Days Q3 -2011 Q3 - 2010 Q3 - 2011 Q3 -2010 21
Slide 22: Closing Commentary
Closing Commentary Market conditions continue to be challenging − 2011 total housing starts forecast projected to be flat with 2010 − Repair and remodel activity still slow for larger projects We continue to take actions to reduce our cost structure − Multiple plant closures − Reduced headcount
Slide 23: Questions & Answers
Questions & Answers 23
Slide 24: Appendix
Appendix 24
Slide 25: Masco Credit Facility
Masco Credit Facility $1.25 billion line established in June 2010 (amended in February 2011) with two financial covenants − Total debt to adjusted total capitalization threshold (65%) − Interest coverage (adjusted EBITDA/Interest Expense) In compliance with all covenants and had no borrowings ou
Slide 26: Outstanding Debt Maturities
$0 $400 $800 $1,200 2011 2012 2013 2014 2015 September 30, 2011 2016 2017 2018 2019 2020 2021 2022 ($ In Millions) 2023 Fixed 2024 2025 2026 Outstanding Debt Maturities 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 26
Slide 27: Q3 2011 Results (As Reported)
Q3 2011 Results (As Reported) Change in Net Sales Operating Margin * Sales Q3 2011 vs. Q3 Q3 2011 Q3 2010 2010 Q3 2011 Q3 2010 Cabinets and Related Products $ 307 $ 357 -14% -11.1% -17.1% Plumbing Products 768 686 12% 11.8% 14.1% Installation and Other Services 315 292 8% -8.6% -7.5% Decorative Arch
Slide 28: Q3 2011 Gross Profit/SG&A
Q3 2011 Gross Profit/SG&A ($ in Millions) Third Quarter Gross profit impacted by: $495 $494 25.2% − Increased material costs 24.7% − Under-absorption of fixed costs − Lower business rationalization costs Gross Profit / Margin SG&A impacted by: $393 $392 − Increased sales 19.6% 20.0% − Increased
Slide 29: Q3 2011 Segment Rationalization Charges
Q3 2011 Segment Rationalization Charges Rationalization Charges - Q3 2011 Q3 2010 2011 YTD 2010 YTD ($ in Millions) Plant Total - Total - Total Total Severance ERP RTA Exit Closures Q3 2011 Q3 2010 YTD - 2011 YTD - 2010 Cabinets and Related Products $ (1) $ (3) $ (1) $ (2) $ (7) $ (34) $ (35) $ (88)
Slide 30: Cabinets & Related Products Current Segment Dynamics
Cabinets & Related Products Current Segment Dynamics Drivers of Q3 Sales Decline Product Reduced Exit Activity Currency Total North America $(38) $(10) --$ $(48) International -- (10) 8 (2) $(38) $(20) $8 $(50) 30
Slide 31: 2011 Estimate - Other Financial Data
2011 Estimate - Other Financial Data ($ in Millions) 2011 Estimate 2010 Actual Rationalization Charges* ~ $100 $208 Tax Rate** ~ 200% 32% Interest Expense ~ $250 $251 General Corp. Expense ~ $125 $110 Capital Expenditures ~ $170 $137 Depreciation & Amortization ~ $260 $279 Outstanding Shares 348 mil
Slide 32: 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 33: 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 as of 12/31/2010. 33