Masco Corporation · NYSE:MAS
Masco — Q2 2011 Earnings Presentation
29 slides from Masco's earnings presentation, Jul 26, 2011
Slide 1: Second Quarter 2011 Masco Earnings Presentation
Second Quarter 2011 Masco Earnings Presentation Tuesday, July 26, 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: Q2 2011 Overview
Q2 2011 Overview Net sales decreased 1% to $2.0 billion, reflecting: − Lower sales volume related to Cabinets, including planned product exits, Installation and Decorative Architectural Products Excluding business rationalization charges, gains and impairments from financial investments, and adjusti
Slide 4: Q2 2011 Profit Reconciliation
Q2 2011 Profit Reconciliation ($ in Millions) Q2 2011 Q2 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 Income – As Reported
Slide 5: Q2 2011 EPS Reconciliation
Q2 2011 EPS Reconciliation ($ in Millions) Q2 2011 Q2 2010 Income before Income Taxes – As Reported $ 58 $ 16 Rationalization Charges 15 51 Litigation Charge 5 - Financial Investment Gains (33) - Impairment of Financial Investments - 33 Income before Income Taxes – As Adjusted 45 100 Tax at 36% rate
Slide 6: Cabinets and Related Products
Cabinets and Related Products Financial Performance Q2 2011 2nd QTR 6/30/11 3 Months Ended vs. ($ in Millions) 6/30/10 6/30/2011 6/30/2010 $ % Net Sales $330 $400 $(70) (18%) Operating (Loss) Profit* $(21) $6 $(27) N/A Operating Margin (6.4%) 1.5% Decremental Margin (39%) Commentary Brands Excluding
Slide 7: Cabinets and Related Products Q2 2011 Update
Cabinets and Related Products Q2 2011 Update Benefitting from the North American cabinet integration − Over 400 dealers have committed to the addition of a Masco Cabinetry brand since April 2010 − On track to achieve $35-$40 million of savings by end of 2012 Completed common architecture program Cou
Slide 8: Plumbing Products
Plumbing Products Financial Performance Q2 2011 2nd QTR 6/30/11 3 Months Ended vs. ($ in Millions) 6/30/10 6/30/2011 6/30/2010 $ % Net Sales $761 $682 $79 12% Operating Profit* $100 $92 $8 N/A Operating Margin 13.1% 13.5% Incremental 10% Margin Commentary Brands Increased sales volume due to: −Hansg
Slide 9: Plumbing Products Q2 2011 Update
Plumbing Products Q2 2011 Update Continue to invest in brand building, international growth, innovation and design Strong performance in the U.S. with Delta ®, Peerless ®, and Brizo ® brands − Gaining share at wholesale and retail Innovative technology is resonating with the consumer − Touch2O® tech
Slide 10: Installation and Other Services
Installation and Other Services Financial Performance Q2 2011 2nd QTR 6/30/11 3 Months Ended vs. ($ in Millions) 6/30/10 6/30/2011 6/30/2010 $ % Net Sales $294 $309 $(15) (5%) Operating (Loss)* $(24) $(21) $(3) N/A Operating Margin (8.2%) (6.8%) Decremental (20%) Margin Commentary Businesses Lower s
Slide 11: Installation and Other Services Q2 2011 Update
Installation and Other Services Q2 2011 Update Continued retrofit sales gains in 2011 Sequential share gains from Q1 2011 Increasing strategic alliances with big builders Fully implemented ERP system and realizing initial benefits Benefitting from a lean culture that we expect will drive additional
Slide 12: Decorative Architectural Products
Decorative Architectural Products Financial Performance Q2 2011 2nd QTR 6/30/11 3 Months Ended vs. ($ in Millions) 6/30/10 6/30/2011 6/30/2010 $ % Net Sales $492 $505 $(13) (3%) Operating Profit $90 $109 $(19) N/A Operating Margin 18.3% 21.6% Decremental Margin (146%) Commentary Brands Decline in sa
Slide 13: Decorative Architectural Products Q2 2011 Update
Decorative Architectural Products Q2 2011 Update Leveraging our resources to expand top-line growth − Direct to Pro® program with The Home Depot continues to gain traction − Kilz® Pro-X™ coatings line set in all The Home Depot stores in Q2 − Continue to upgrade core Premium Plus® paint line by intro
Slide 14: Other Specialty Products
Other Specialty Products Financial Performance Q2 2011 2nd QTR 6/30/11 3 Months Ended vs. ($ in Millions) 6/30/10 6/30/2011 6/30/2010 $ % Net Sales $145 $152 $(7) (5%) Operating Profit $-- $11 $(11) N/A Operating Margin --% 7.2% Decremental Margin (157%) Commentary Brands Sales declines reflect: −Lo
Slide 15: Other Specialty Products Q2 2011 Update
Other Specialty Products Q2 2011 Update Milgard Manufacturing continuing to gain share in the western United States Milgard Manufacturing is expanding into new geographies, including Texas and western Canada U.K. Window Group continuing to gain share Arrow Fastener is reinventing their core product
Slide 16: Q2 2011 Working Capital
Q2 2011 Working Capital 16.1% 50 50 15.6% Working Capital % of Sales Accounts Receivable Days 59 55 59 51 Inventory Days Accounts Payable Days Q2 -2011 Q2 - 2010 Q2 - 2011 Q2 -2010 16
Slide 17: Wrap-Up Comments
Wrap-Up Comments 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 Will continue to focus on what we can control − Improve execution through the Masco Business System − Continu
Slide 18: Questions & Answers
Questions & Answers 18
Slide 19: Appendix
Appendix 19
Slide 20: Masco Credit Facility
Masco Credit Facility $1.25 billion line established in June 2010 (amended in February 2011) with two financial covenants − Total debt to adjusted total capitalization threshold (65%) − Interest coverage (adjusted EBITDA/Interest Expense) In compliance with all covenants and had no borrowings outsta
Slide 21: Outstanding Debt Maturities
Outstanding Debt Maturities June 30, 2011 ($ In Millions) Zero Coupon Fixed $1,200 $800 $400 $0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Zero Coupon Notes have a put date of July 20, 2011. 21
Slide 22: Q2 2011 Results (As Reported)
Q2 2011 Results (As Reported) Change in Net Sales Operating Margin * Sales Q2 2011 vs. Q2 2011 Q2 2010 Q2 2010 Q2 2011 Q2 2010 Cabinets and Related Products $ 330 $ 400 -18% -8.2% -9.3% Plumbing Products 761 682 12% 12.5% 12.6% Installation and Other Services 294 309 -5% -8.8% -7.4% Decorative Archi
Slide 23: Q2 2011 Gross Profit/SG&A
Q2 2011 Gross Profit/SG&A ($ in Millions) Second Quarter $546 Gross profit negatively impacted by: $532 26.7% − Increased material costs as a 26.3% percentage of sales − Lower sales volume Gross Profit / Margin SG&A as a percent of sales increased $441 $427 due to: 21.8% 20.8% − Legal settlement − I
Slide 24: Q2 2011 Segment Rationalization Charges
Q2 2011 Segment Rationalization Charges Rationalization Charges - Q2 2011 Q2 2010 2011 YTD 2010 YTD ($ in Millions) Plant Total - Total - Total Total Severance ERP RTA Exit Closures Q1 2011 Q2 2010 YTD - 2011 YTD - 2010 Cabinets and Related Products $ - $ (3) $ - $ (3) $ (6) $ (43) $ (27) $ (54) Plu
Slide 25: Cabinets & Related Products Current Segment Dynamics
Cabinets & Related Products Current Segment Dynamics Drivers of Q2 Sales Decline Product Reduced Exit Activity Currency Total North America $49 $22 $-- $71 International --- 8 (9) (1) $49 $30 $(9) $70 25
Slide 26: 2011 Estimate - Other Financial Data
2011 Estimate - Other Financial Data ($ in Millions) 2011 Estimate 2010 Actual Rationalization Charges* ~ $65 $208 Tax Rate** ~ 70% 32% Interest Expense ~ $250 $251 General Corp. Expense ~ $135 $110 Capital Expenditures ~ $190 $137 Depreciation & Amortization ~ $260 $279 Outstanding Shares 349 milli
Slide 27: 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 28: 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. 28
Slide 29: Highest in Customer Satisfaction with Cabinets
“Highest in Customer Satisfaction with Cabinets” KraftMaid Cabinetry received the highest numerical score among cabinetry brands in the proprietary J.D. Power and Associates 2011 US Kitchen Cabinet Satisfaction StudySM. Study based on responses from 1,207 consumers measuring 7 companies and measures