Business Wire | Jul 30, 2020 07:00AM EDT

Masco Corporation Reports Second Quarter 2020 Results

Jul. 30, 2020

LIVONIA, Mich.--(BUSINESS WIRE)--Jul. 30, 2020--Masco Corporation (NYSE: MAS), one of the world's leading manufacturers of branded home improvement and building products, reported its second quarter results.

"I am extremely proud of our team's response during these unprecedented times," said Masco President and CEO, Keith Allman. "We have worked tirelessly to ensure the safety of our employees, to support our customers and communities, and to effectively manage our business. We delivered strong top and bottom-line growth in our Decorative Architectural Products segment and better than anticipated performance in North American Plumbing," continued Allman. "As restrictions eased, production at our closed facilities resumed, and demand for our products accelerated throughout the quarter. We leveraged increasing demand with focused cost control to expand margins in the quarter."

2020 Second Quarter Commentary

* On a reported basis, compared to second quarter 2019: Net sales decreased 4 percent to $1.8 billion; in local currency, net sales decreased 3 percent In local currency, North American sales were flat and international sales decreased 17 percent Gross margins decreased 100 basis points to 35.6 percent from 36.6 percent Operating profit decreased 2 percent to $339 million Operating margins increased 30 basis points to 19.2 percent from 18.9 percent Income from continuing operations increased to $0.80 per share, compared to $0.72 per share * Compared to second quarter 2019, results for key financial measures, as adjusted for certain items (see Exhibit A) and with a normalized tax rate of 26 percent, were as follows: Gross margins decreased 90 basis points to 35.8 percent compared to 36.7 percent Operating profit decreased 1 percent to $344 million from $349 million Operating margins increased 50 basis points to 19.5 percent compared to 19.0 percent Income from continuing operations increased to $0.84 per share, compared to $0.74 per share * Liquidity at the end of the second quarter was $2.1 billion, including full availability on $1.0 billion revolving credit facility * Plumbing Products' net sales decreased 14 percent (13 percent excluding the impact of foreign currency) primarily due to lower volumes resulting from the impact of COVID-19 * Decorative Architectural Products' net sales increased 8 percent due to strong growth in paints and other coatings products

"We remain focused on employee safety and customer support as this pandemic continues to evolve," said Allman. "While there are a number of unknowns, and assuming no additional shutdowns due to COVID, we expect strong demand for our products to continue in the third quarter. Additionally, our Board of Directors demonstrated confidence in our future by announcing its intention to raise our annual dividend 4 percent to $.56 per share beginning in the fourth quarter."

About Masco

Headquartered in Livonia, Michigan, Masco Corporation is a global leader in the design, manufacture and distribution of branded home improvement and building products. Our portfolio of industry-leading brands includes Behr(r) paint; Delta(r) and Hansgrohe(r) faucets, bath and shower fixtures; Kichler(r) decorative and outdoor lighting; and HotSpring(r) spas. We leverage our powerful brands across product categories, sales channels and geographies to create value for our customers and shareholders. For more information about Masco Corporation, visit www.masco.com.

The second quarter 2020 supplemental material, including a presentation in PDF format, is available on Masco's website at www.masco.com.

Conference Call Detail

A conference call regarding items contained in this release is scheduled for Thursday, July 30, 2020 at 9:00 a.m. ET. Participants in the call are asked to register five to ten minutes prior to the scheduled start time by dialing (855) 226-2726 (855-22MASCO) and from outside the U.S. at (706) 679-3614. Please use the conference identification number 9048068. The conference call will be webcast simultaneously and in its entirety through Masco's website. Shareholders, media representatives and others interested in Masco may participate in the webcast by registering through the Investor Relations section on Masco's website.

A replay of the call will be available on Masco's website or by phone by dialing (855) 859-2056 and from outside the U.S. at (404) 537-3406. Please use the conference identification number 9048068. The telephone replay will be available approximately two hours after the end of the call and continue through August 30, 2020.

Safe Harbor Statement

This press release 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," "anticipate," "appear," "may," "will," "should," "intend," "plan," "estimate," "expect," "assume," "seek," "forecast," and similar references to future periods. Our views about future performance 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 the levels of residential repair and remodel activity and new home construction, our ability to maintain our strong brands and reputation and to develop innovative products, our ability to maintain our competitive position in our industries, our reliance on key customers, the length and severity of the ongoing COVID-19 pandemic, including its impact on domestic and international economic activity, consumer demand for our products, our production capabilities, our employees and our supply chain; the cost and availability of materials and the imposition of tariffs, our dependence on third-party suppliers, risks associated with our international operations and global strategies, our ability to achieve the anticipated benefits of our strategic initiatives, our ability to successfully execute our acquisition strategy and integrate businesses that we have and may acquire, our ability to attract, develop and retain talented personnel, risks associated with our reliance on information systems and technology, and our ability to achieve the anticipated benefits from our investments in new technology. These and other factors are discussed in detail 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. Any forward-looking statement made by us speaks only as of the date on which it was made. 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.

MASCO CORPORATION

Condensed Consolidated Statements of Operations - Unaudited

For the Three and Six Months Ended June 30, 2020 and 2019

(in millions, except per common share data)

Three Months Ended Six Months Ended June June 30, 30,

2020 2019 2020 2019

Net sales $ 1,764 $ 1,839 $ 3,345 $ 3,352

Cost of sales 1,136 1,166 2,170 2,157

Gross profit 628 673 1,175 1,195



Selling, general and 289 326 611 642 administrative expenses

Impairment charge for other - - - 9 intangible assets

Operating profit 339 347 564 544



Other income (expense), net:

Interest expense (35) (41) (70) (80)

Other, net (2) (3) (18) (8)

(37) (44) (88) (88)

Income from continuing operations 302 303 476 456 before income taxes



Income tax expense 82 80 115 115

Income from continuing operations 220 223 361 341



Income from discontinued 14 29 411 38 operations, net

Net income 234 252 772 379



Less: Net income attributable to 10 12 18 23 noncontrolling interest

Net income attributable to Masco $ 224 $ 240 $ 754 $ 356 Corporation



Income per common shareattributable to Masco Corporation (diluted):

Income from continuing operations $ 0.80 $ 0.72 $ 1.27 $ 1.08

Income from discontinued 0.05 0.10 1.53 0.13 operations, net

Net income $ 0.85 $ 0.82 $ 2.80 $ 1.21



Average diluted common shares 263 290 268 292 outstanding



Amounts attributable to Masco Corporation:

Income from continuing operations $ 210 $ 211 $ 343 $ 318

Income from discontinued 14 29 411 38 operations, net

Net income attributable to Masco $ 224 $ 240 $ 754 $ 356 Corporation



Historical information is available on our website.

MASCO CORPORATION

Exhibit A: Reconciliations - Unaudited

For the Three and Six Months Ended June 30, 2020 and 2019

(dollars in millions)

Three Months Ended Six Months Ended June June 30, 30,

2020 2019 2020 2019

Gross Profit, Selling, Generaland Administrative Expenses, and Operating Profit Reconciliations



Net sales $ 1,764 $ 1,839 $ 3,345 $ 3,352



Gross profit, as reported $ 628 $ 673 $ 1,175 $ 1,195

Rationalization charges 3 2 6 2

Gross profit, as adjusted $ 631 $ 675 $ 1,181 $ 1,197



Gross margin, as reported 35.6 % 36.6 % 35.1 % 35.7 %

Gross margin, as adjusted 35.8 % 36.7 % 35.3 % 35.7 %



Selling, general andadministrative expenses, as $ 289 $ 326 $ 611 $ 642 reported

Rationalization charges 2 - 2 -

Selling, general andadministrative expenses, as $ 287 $ 326 $ 609 $ 642 adjusted



Selling, general andadministrative expenses as 16.4 % 17.7 % 18.3 % 19.2 %percent of net sales, as reported

Selling, general andadministrative expenses as 16.3 % 17.7 % 18.2 % 19.2 %percent of net sales, as adjusted



Operating profit, as reported $ 339 $ 347 $ 564 $ 544

Rationalization charges 5 2 8 2

Impairment charge for other - - - 9 intangible assets

Operating profit, as adjusted $ 344 $ 349 $ 572 $ 555



Operating margin, as reported 19.2 % 18.9 % 16.9 % 16.2 %

Operating margin, as adjusted 19.5 % 19.0 % 17.1 % 16.6 %



Historical information isavailable on our website.

MASCO CORPORATION

Exhibit A: Reconciliations - Unaudited

For the Three and Six Months Ended June 30, 2020 and 2019

(in millions, except per common share data)

Three Months Ended Six Months Ended June 30, June 30,

2020 2019 2020 2019

Income Per Common Share Reconciliations



Income from continuing operations $ 302 $ 303 $ 476 $ 456 before income taxes, as reported

Rationalization charges 5 2 8 2

Impairment charge for other intangible - - - 9 assets

Pension costs associated with expected 5 - 11 - terminated plans

Income from continuing operations 312 305 495 467 before income taxes, as adjusted

Tax at 26% rate (81) (79) (129) (121)

Less: Net income attributable to 10 12 18 23 noncontrolling interest

Income from continuing operations, as $ 221 $ 214 $ 348 $ 323 adjusted



Income from continuing operations per $ 0.84 $ 0.74 $ 1.30 $ 1.11 common share, as adjusted



Average diluted common shares 263 290 268 292 outstanding



Historical information is available onour website.

MASCO CORPORATION

Condensed Consolidated Balance Sheets and Other Financial Data - Unaudited

June 30, 2020 and December 31, 2019

(dollars in millions)

June 30, 2020 December 31, 2019

Balance Sheet

Assets

Current Assets:

Cash and cash investments $ 1,089 $ 697

Receivables 1,308 997

Prepaid expenses and other 78 90

Inventories 750 754

Assets held for sale - 173

Total Current Assets 3,225 2,711



Property and equipment, net 861 878

Operating lease right-of-use assets 163 176

Goodwill 521 509

Other intangible assets, net 259 259

Other assets 273 139

Assets held for sale - 355

Total Assets $ 5,302 $ 5,027



Liabilities

Current Liabilities:

Accounts payable $ 845 $ 697

Notes payable 407 2

Accrued liabilities 902 700

Liabilities held for sale - 149

Total Current Liabilities 2,154 1,548



Long-term debt 2,372 2,771

Noncurrent operating lease liabilities 150 162

Other liabilities 589 589

Liabilities held for sale - 13

Total Liabilities 5,265 5,083



Equity 37 (56)

Total Liabilities and Equity $ 5,302 $ 5,027

As of June 30,

2020 2019

Other Financial Data

Working Capital Days

Receivable days 58 58

Inventory days 66 74

Payable days 74 70

Working capital $ 1,213 $ 1,236

Working capital as a % of sales (LTM) 18.1 % 18.6 %



Historical information is available on our website.

MASCO CORPORATION

Condensed Consolidated Statements of Cash Flows and Other Financial Data -Unaudited

For the Six Months Ended June 30, 2020 and 2019

(dollars in millions)

Six Months Ended June 30,

2020 2019

Cash Flows From (For) Operating Activities:

Cash provided by operating activities $ 283 $ 510

Working capital changes 7 (297)

Net cash from operating activities 290 213



Cash Flows From (For) Financing Activities:

Purchase of Company common stock (602) (289)

Cash dividends paid (73) (70)

Dividends paid to noncontrolling interest (23) (42)

Proceeds from the exercise of stock options 21 13

Employee withholding taxes paid on stock-based (22) (16) compensation

Increase in debt, net 5 20

Credit Agreement and other financing costs - (2)

Net cash for financing activities (694) (386)



Cash Flows From (For) Investing Activities:

Capital expenditures (45) (71)

Acquisition of business, net of cash acquired (24) -

Proceeds from disposition of businesses, net of cash 865 - disposed

Other, net 3 8

Net cash from (for) investing activities 799 (63)



Effect of exchange rate changes on cash and cash (3) 2 investments



Cash and Cash Investments:

Increase (decrease) for the period 392 (234)

At January 1 697 559

At June 30 $ 1,089 $ 325

As of June 30,

2020 2019

Liquidity

Cash and cash investments $ 1,089 $ 325

Revolver availability 1,000 1,000

Total Liquidity $ 2,089 $ 1,325



Historical information is available on our website.

MASCO CORPORATION

Segment Data - Unaudited

For the Three and Six Months Ended June 30, 2020 and 2019

(dollars in millions)

Three Months Ended Six Months Ended June June 30, 30,

2020 2019 Change 2020 2019 Change

Plumbing Products

Net sales $ 868 $ 1,012 (14) % $ 1,823 $ 1,952 (7) %



Operatingprofit, as $ 155 $ 198 $ 312 $ 351 reported

Operatingmargin, as 17.9 % 19.6 % 17.1 % 18.0 % reported



Rationalization 3 2 5 2 charges

Accelerateddepreciationrelated to 1 - 1 - rationalizationactivity

Operatingprofit, as 159 200 318 353 adjusted

Operatingmargin, as 18.3 % 19.8 % 17.4 % 18.1 % adjusted



Depreciationand 20 20 40 39 amortization

EBITDA, as $ 179 $ 220 $ 358 $ 392 adjusted



DecorativeArchitectural Products

Net sales $ 896 $ 827 8 % $ 1,522 $ 1,400 9 %



Operatingprofit, as $ 201 $ 173 $ 296 $ 246 reported

Operatingmargin, as 22.4 % 20.9 % 19.4 % 17.6 % reported



Rationalization 1 - 2 - charges

Impairmentcharge forother - - - 9 intangibleassets

Operatingprofit, as 202 173 298 255 adjusted

Operatingmargin, as 22.5 % 20.9 % 19.6 % 18.2 % adjusted



Depreciationand 10 10 21 20 amortization

EBITDA, as $ 212 $ 183 $ 319 $ 275 adjusted



Total

Net sales $ 1,764 $ 1,839 (4) % $ 3,345 $ 3,352 - %



Operatingprofit, as $ 356 $ 371 $ 608 $ 597 reported -segment

Generalcorporate (17) (24) (44) (53) expense, net

Operatingprofit, as 339 347 564 544 reported

Operatingmargin, as 19.2 % 18.9 % 16.9 % 16.2 % reported



Rationalizationcharges - 4 2 7 2 segment

Accelerateddepreciationrelated to 1 - 1 - rationalizationactivity -segment

Impairmentcharge forother - - - 9 intangibleassets

Operatingprofit, as 344 349 572 555 adjusted

Operatingmargin, as 19.5 % 19.0 % 17.1 % 16.6 % adjusted



Depreciationand 30 30 61 59 amortization -segment

Depreciationand 2 3 4 5 amortization -non-operating

EBITDA, as $ 376 $ 382 $ 637 $ 619 adjusted



Historical information is available on our website.

MASCO CORPORATION

North American and International Data - Unaudited

For the Three and Six Months Ended June 30, 2020 and 2019

(dollars in millions)

Three Months Ended Six Months Ended June June 30, 30,

2020 2019 Change 2020 2019 Change

North American

Net sales $ 1,480 $ 1,488 (1) % $ 2,738 $ 2,659 3 %



Operatingprofit, as $ 321 $ 316 $ 531 $ 497 reported

Operatingmargin, as 21.7 % 21.2 % 19.4 % 18.7 % reported



Rationalization 4 2 7 2 charges

Accelerateddepreciationrelated to 1 - 1 - rationalizationactivity

Impairmentcharge forother - - - 9 intangibleassets

Operatingprofit, as 326 318 539 508 adjusted

Operatingmargin, as 22.0 % 21.4 % 19.7 % 19.1 % adjusted



Depreciationand 19 20 39 40 amortization

EBITDA, as $ 345 $ 338 $ 578 $ 548 adjusted



International

Net sales $ 284 $ 351 (19) % $ 607 $ 693 (12) %



Operatingprofit, as $ 35 $ 55 $ 77 $ 100 reported

Operatingmargin, as 12.3 % 15.7 % 12.7 % 14.4 % reported



Depreciationand 11 10 22 19 amortization

EBITDA $ 46 $ 65 $ 99 $ 119



Total

Net sales $ 1,764 $ 1,839 (4) % $ 3,345 $ 3,352 - %



Operatingprofit, as $ 356 $ 371 $ 608 $ 597 reported -segment

Generalcorporate (17) (24) (44) (53) expense, net

Operatingprofit, as 339 347 564 544 reported

Operatingmargin, as 19.2 % 18.9 % 16.9 % 16.2 % reported



Rationalizationcharges - 4 2 7 2 segment

Accelerateddepreciationrelated to 1 - 1 - rationalizationactivity

Impairmentcharge forother - - - 9 intangibleassets

Operatingprofit, as 344 349 572 555 adjusted

Operatingmargin, as 19.5 % 19.0 % 17.1 % 16.6 % adjusted



Depreciationand 30 30 61 59 amortization -segment

Depreciationand 2 3 4 5 amortization -non-operating

EBITDA, as $ 376 $ 382 $ 637 $ 619 adjusted



Historical information is available on our website.

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CONTACT: Investor Contact David Chaika Vice President, Treasurer and Investor Relations 313.792.5500 david_chaika@mascohq.com