Masco Corporation · NYSE:MAS
Masco — Q4 2020 Earnings Presentation
28 slides from Masco's earnings presentation, Feb 9, 2021
Slide 1: Fourth Quarter and Full Year 2020 Earnings Presentation
MASCO CORPORATION Fourth Quarter and Full Year 2020 Earnings Presentation February 9, 2021
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains statements that reflect our views about our future performance and constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “outlook,” “believe,”
Slide 3: Agenda
Agenda Summary of Results Keith Allman Financial / Operations Review John Sznewajs Keith Allman Q&A John Sznewajs 3
Slide 4: Demonstrated Strength of Business Model
Q4 2020 IN REVIEW Demonstrated Strength of Business Model • Delivered strong top line growth in both segments • Increased adjusted operating profit 20% Driving • Expanded adjusted operating profit margin 90 bps Shareholder • Achieved adjusted EPS growth of 36% Value • Repurchased 2.3 million shares
Slide 5: Long-Term Shareholder Value Creation
2020 IN REVIEW Long-Term Shareholder Value Creation • Drove top line growth and gained share in both segments • Grew adjusted operating profit 18% and expanded operating margin 170 bps • Deployed ~$1.1 billion in capital between share repurchases, dividends, and acquisitions Driving • Increased adju
Slide 6: Agenda
Agenda Summary of Results Keith Allman Financial / Operations Review John Sznewajs Keith Allman Q&A John Sznewajs 6
Slide 7: Strong Finish to the Year
MASCO CORPORATION Strong Finish to the Year Fourth Quarter Full Year ($ in Millions) 2020 2020 Revenue $1,860 $7,188 Y-O-Y Change 13% 7% Operating Profit* $309 $1,306 Y-O-Y Change $52 $196 Operating Margin* 16.6% 18.2% Y-O-Y Change 90 bps 170 bps Adjusted EPS* $0.75 $3.12 Y-O-Y Change 36% 37% *See A
Slide 8: Plumbing Products: Robust Growth and Margin Expansion
PLUMBING PRODUCTS Robust Growth and Margin Expansion Fourth Quarter Full Year ($ in Millions) 2020 2020 Revenue $1,172 $4,136 Y-O-Y Change 14% 4% Operating Profit* $224 $813 Y-O-Y Change $44 $92 Operating Margin* 19.1% 19.7% Y-O-Y Change 160 bps 160 bps * Excludes business rationalization charges fo
Slide 9: Decorative Architectural Products: Strong Revenue Growth Across Segment
DECORATIVE ARCHITECTURAL PRODUCTS Strong Revenue Growth Across Segment Fourth Quarter Full Year ($ in Millions) 2020 2020 Revenue $688 $3,052 Y-O-Y Change 12% 12% Operating Profit* $109 $587 Y-O-Y Change $9 $98 Operating Margin* 15.8% 19.2% Y-O-Y Change -50 bps 120 bps * Excludes business rationaliz
Slide 10: Strong Balance Sheet
Strong Balance Sheet Balance Sheet Metrics as of 12/31/2020 Cash and cash investments $1,326M Revolver availability $1,000M Total liquidity $2,326M Net leverage* 1.0x Working capital as a % of sales* 15.2% Adjusted free cash flow* $1,031M * See Appendix for reconciliation. Highlights • Working capit
Slide 11: Full Year 2021 Outlook
Full Year 2021 Outlook 2021 Forecasted 2021 Forecasted Business Segment Sales Adjusted Growth Operating Profit Margin Organic: ~4-7% Acquisition: ~4% Plumbing Products ~18.0% FX: ~3% TOTAL: ~11-14% Organic: ~0-5% Decorative Acquisition: ~1.5% ~19.0% Architectural Products TOTAL: ~2-7% Organic: ~2-6%
Slide 12: Long-Term Outlook
LONG-TERM OUTLOOK Growth Above Market LONG-TERM OUTLOOK: Low ticket, repair and remodel Average Organic: ~3-5% products provide growth and annual sales growth: Acquisition: ~1-3% stability through an economic cycle Operating Expand margins through cost margin: productivity and volume leverage Market
Slide 13: Agenda
Agenda Summary of Results Keith Allman Financial / Operations Review John Sznewajs Keith Allman Q&A John Sznewajs 13
Slide 14: Masco
MASCO
Slide 15: Appendix
Appendix MASCO
Slide 16: Balanced Approach to Continue to Drive Shareholder Value
CAPITAL ALLOCATION STRATEGY Balanced Approach to Continue to Drive Shareholder Value 1 Reinvest in the business • Capex: 2-2.25% of sales • Working capital: ~16.0% of sales 2 Maintain investment grade credit rating • Gross debt to EBITDA below 2.5x 3 Maintain relevant dividend • Dividend payout rati
Slide 17: 2021 Estimates
2021 Estimates Item Assumption Rationalization charges ~$5m Tax rate 25% General corporate expense ~$95m Interest expense ~$135m Capital expenditures ~$150m (includes maintenance capex of ~$75m) Depreciation and amortization1 ~$155m Favorable foreign currency translation impact to sales2 ~$115m Shar
Slide 18: Updated Expected Dividend Schedule
Updated Expected Dividend Schedule The following table reflects our expected dividend schedule for the next four quarters. Dividend payments are subject to declaration by our Board of Directors, and the dates below do not constitute a notice of a dividend record date or imply that the Company will d
Slide 19: 2020 Segment Mix
2020 Segment Mix* Total Geographic Business 2020 Revenue Split Segment Revenue R&R% vs. NC NA% vs. Int’l Plumbing Products $4.1B 83% 67% North America 81% Decorative $3.1B 100% 96% Architectural Products Europe 12% Total Company $7.2B 89% 81% United Kingdom Other 2% China 2% 3% R&R = % of sales to r
Slide 20: 2020 Channel Mix
2020 Channel Mix* 2020 Channel Mix as a Percentage of Sales Decorative Plumbing Total Channel Architectural Products Masco Products Retail 24% 85% 50% Wholesale/trade 56% 11% 36% E-commerce 12% 4% 9% Specialty 8% 0% 5% dealers/other 20 * Based on Company estimates
Slide 21: Profit Reconciliations – Fourth Quarter
Profit Reconciliations – Fourth Quarter ($ in Millions) Q4 2020 Q4 2019 Net sales $ 1,860 $ 1,639 Gross profit, as reported $ 660 $ 565 Rationalization charges 2 2 Gross profit, as adjusted $ 662 $ 567 Gross margin, as reported 35.5% 34.5% Gross margin, as adjusted 35.6% 34.6% Selling, general and a
Slide 22: Profit Reconciliations – Full Year
Profit Reconciliations – Full Year ($ in Millions) 2020 2019 Net sales $ 7,188 $ 6,707 Gross profit, as reported $ 2,587 $ 2,371 Rationalization charges 9 9 Gross profit, as adjusted $ 2,596 $ 2,380 Gross margin, as reported 36.0% 35.4% Gross margin, as adjusted 36.1% 35.5% Selling, general and admi
Slide 23: EPS Reconciliation – Fourth Quarter
EPS Reconciliation – Fourth Quarter (in Millions, Except per Common Share Data) Q4 2020 Q4 2019 Income from continuing operations before income taxes, as reported $ 275 $ 217 Rationalization charges 2 2 Pension costs associated with expected terminated plans 6 — Income related to an escrow settlemen
Slide 24: EPS Reconciliation – Full Year
EPS Reconciliation – Full Year (in Millions, Except per Common Share Data) 2020 2019 Income from continuing operations before income taxes, as reported $ 1,131 $ 914 Rationalization charges 11 13 Impairment charge for other intangible assets — 9 Pension costs associated with expected terminated plan
Slide 25: Return on Invested Capital and Free Cash Flow Reconciliation
Return on Invested Capital and Free Cash Flow Reconciliation Return on Invested Capital Reconciliation ($ Millions) December 31, 2020 Income from continuing operations, as adjusted $ 824 Average invested capital: Average shareholders' equity $ 183 Average debt 2,784 Less: Average cash and cash inves
Slide 26: EPS Outlook Reconciliation and Working Capital as a % of Sales
EPS Outlook Reconciliation and Working Capital as a % of Sales 2021 Low End High End Income from continuing operations per common share $ 1.80 $ 2.00 Rationalization charges 0.01 0.01 Pension costs associated with expected terminated plans (1) 1.42 1.42 Allocation to participating securities per sha
Slide 27: Net Leverage Reconciliation
Net Leverage Reconciliation ($ in Millions) December 31, 2020 Debt $ 2,795 Less: Cash and cash investments (1,326) Net Debt $ 1,469 ($ in Millions) Year Ended December 31, 2020 Operating profit, as reported $ 1,295 Rationalization charges 11 Operating profit, as adjusted $ 1,306 Depreciation and amo
Slide 28: EPS Reconciliation by Quarter – 2020 & 2019
EPS Reconciliation by Quarter – 2020 & 2019 (in Millions, Except per Common Share Data) Q4 2020 Q3 2020 Q2 2020 Q1 2020 Income from continuing operations before income taxes, as reported $ 275 $ 380 $ 302 $ 174 Rationalization charges 2 1 5 3 Pension costs associated with expected terminated plans 6