Business Wire | Feb 9, 2021 07:00AM EST

Masco Corporation Reports Fourth Quarter and 2020 Year-End Results

Feb. 09, 2021

LIVONIA, Mich.--(BUSINESS WIRE)--Feb. 09, 2021--Masco Corporation (NYSE: MAS), one of the world's leading manufacturers of branded home improvement and building products, reported its results for the fourth quarter and full year of 2020.

2020 Fourth Quarter Commentary

* On a reported basis, compared to fourth quarter 2019: Net sales increased 13 percent to $1,860 million; in local currency, net sales increased 12 percent In local currency, North American sales increased 13 percent and international sales increased 8 percent Gross margin increased 100 basis points to 35.5 percent from 34.5 percent Operating margin increased 90 basis points to 16.5 percent from 15.6 percent Income from continuing operations increased to $0.73 per share, compared to $0.56 per share * Compared to fourth quarter 2019, results for key financial measures, as adjusted for certain items (see Exhibit A) and with a normalized tax rate of 25 percent (reduced from previously guided normalized tax rate of 26%), were as follows: Gross margin increased 100 basis points to 35.6 percent from 34.6 percent Operating margin increased 90 basis points to 16.6 percent from 15.7 percent Income from continuing operations increased to $0.75 per share, compared to $0.55 per share * Liquidity at the end of the fourth quarter was $2,326 million (including availability under revolving credit facility) * Plumbing Products' net sales increased 14 percent (12 percent excluding the impact of foreign currency) * Decorative Architectural Products' net sales increased 12 percent

"We experienced robust demand in the fourth quarter, operated safely and efficiently, and finished the year strong," said Keith Allman, Masco's President and CEO. "We continued to successfully execute our strategy, which resulted in earnings per share growth of 36 percent and a net sales increase of 13 percent. We also returned $162 million to shareholders through share repurchases and dividends during the fourth quarter, and recently completed three bolt-on acquisitions, which we expect to contribute approximately 3% top-line growth in 2021."

2020 Full Year Key Results

* Sales for the year increased 7 percent to $7,188 million; in local currency, sales increased 7 percent * Operating profit grew 19 percent to $1,295 million; adjusted operating profit grew 18 percent to $1,306 million * Returned $872 million to shareholders through share repurchases and dividends * Earnings per share from continuing operations for the year grew 38 percent to $3.04 per share; adjusted earnings per share from continuing operations grew 37 percent to $3.12 per share

2020 Full Year Commentary

* On a reported basis, compared to full year 2019: Net sales increased 7 percent to $7,188 million In local currency, North American sales increased 9 percent and international sales decreased 1 percent Gross margin increased 60 basis points to 36.0 percent from 35.4 percent Operating margin increased 180 basis points to 18.0 percent from 16.2 percent Operating profit increased 19 percent to $1,295 million from $1,088 million Income from continuing operations increased 38 percent to $3.04 per share compared to $2.20 per share * Compared to full year 2019, results for key financial measures, as adjusted for certain items (see Exhibit A) and with a normalized tax rate of 25 percent, were as follows: Gross margin increased 60 basis points to 36.1 percent from 35.5 percent Operating margin increased 170 basis points to 18.2 percent from 16.5 percent Operating profit increased 18 percent to $1,306 million from $1,110 million Income from continuing operations increased 37 percent to $3.12 per share compared to $2.28 per share

"We closed out 2020 on a high note and our results for the year demonstrate the power of Masco's differentiated portfolio of leading repair and remodel brands, strong cash generation capabilities, and most of all, the commitment of our people," said Allman. "In an ever-changing environment, our employees continued to meet the needs of our customers and deliver value for our shareholders. Thanks to their dedicated efforts, we surpassed our previously guided expectation of achieving $2.80 - $3.00 of adjusted earnings per share in 2021, a full year earlier than planned."

"We anticipate the demand for our products will remain strong in 2021," said Allman. "The key housing fundamentals that drive our business, such as home price appreciation and existing home turnover, improved during the second half of 2020, and consumers are clearly viewing the value of their homes more favorably in light of the pandemic. Given these dynamics, we anticipate 2021 adjusted earnings per share to range from $3.25 to $3.45 per share."

Dividend and Share Repurchase Authorization

Masco's Board of Directors announced its intention to increase the Company's annual dividend to $0.94 per share from $0.56 per share, a 68 percent increase, beginning in the second quarter of 2021.

The Board also approved a new $2.0 billion share repurchase authorization effective February 10, 2021, replacing the existing authorization.

"The anticipated dividend increase we've announced today, along with the new $2.0 billion share repurchase authorization, underscores our strong financial position and the Board's confidence in our future," concluded Allman.

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 2020 fourth quarter and full year supplemental material, including a presentation in PDF format, is available on the Company's website at www.masco.com.

Conference Call Details

A conference call regarding items contained in this release is scheduled for Tuesday, February 9, 2021 at 8:00 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 1576288. The conference call will be webcast simultaneously and in its entirety through the Company's website. Shareholders, media representatives and others interested in Masco may participate in the webcast by registering through the Investor Relations section on the Company'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 1576288. The telephone replay will be available approximately two hours after the end of the call and continue through March 9, 2021.

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 to a lesser extent, 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 confidence, 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 and diverse 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 Item 1A "Risk Factors" 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 Months and Years Ended December 31, 2020 and 2019

(in millions, except per common share data)

Three Months Ended Year Ended December 31, December 31,

2020 2019 2020 2019

Net sales $ 1,860 $ 1,639 $ 7,188 $ 6,707

Cost of sales 1,200 1,074 4,601 4,336

Gross profit 660 565 2,587 2,371



Selling, general and 353 310 1,292 1,274 administrative expenses

Impairment charge for other - - - 9 intangible assets

Operating profit 307 255 1,295 1,088



Other income (expense), net:

Interest expense (34 ) (40 ) (144 ) (159 )

Other, net 2 2 (20 ) (15 )

(32 ) (38 ) (164 ) (174 )

Income from continuing 275 217 1,131 914 operations before income taxes



Income tax expense 67 49 269 230

Income from continuing 208 168 862 684 operations



Income from discontinued 3 295 414 296 operations, net

Net income 211 463 1,276 980



Less: Net income attributable 16 10 52 45 to noncontrolling interest

Net income attributable to $ 195 $ 453 $ 1,224 $ 935 Masco Corporation



Income per common shareattributable to Masco Corporation (diluted):

Income from continuing $ 0.73 $ 0.56 $ 3.04 $ 2.20 operations

Income from discontinued 0.01 1.03 1.55 1.02 operations, net

Net income $ 0.74 $ 1.59 $ 4.59 $ 3.22



Average diluted common shares 261 282 264 288 outstanding



Amounts attributable to Masco Corporation:

Income from continuing $ 192 $ 158 $ 810 $ 639 operations

Income from discontinued 3 295 414 296 operations, net

Net income $ 195 $ 453 $ 1,224 $ 935

Historical information is available on our website.

MASCO CORPORATION

Exhibit A: Reconciliations - Unaudited

For the Three Months and Years Ended December 31, 2020 and 2019

(dollars in millions)

Three Months Ended Year Ended December 31, December 31,

2020 2019 2020 2019

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



Net sales $ 1,860 $ 1,639 $ 7,188 $ 6,707



Gross profit, as reported $ 660 $ 565 $ 2,587 $ 2,371

Rationalization charges 2 2 9 9

Gross profit, as adjusted $ 662 $ 567 $ 2,596 $ 2,380



Gross margin, as reported 35.5 % 34.5 % 36.0 % 35.4 %

Gross margin, as adjusted 35.6 % 34.6 % 36.1 % 35.5 %



Selling, general andadministrative expenses, as $ 353 $ 310 $ 1,292 $ 1,274 reported

Rationalization charges - - 2 4

Selling, general andadministrative expenses, as $ 353 $ 310 $ 1,290 $ 1,270 adjusted



Selling, general andadministrative expenses as 19.0 % 18.9 % 18.0 % 19.0 %percent of net sales, asreported

Selling, general andadministrative expenses as 19.0 % 18.9 % 17.9 % 18.9 %percent of net sales, asadjusted



Operating profit, as reported $ 307 $ 255 $ 1,295 $ 1,088

Rationalization charges 2 2 11 13

Impairment charge for other - - - 9 intangible assets

Operating profit, as adjusted $ 309 $ 257 $ 1,306 $ 1,110



Operating margin, as reported 16.5 % 15.6 % 18.0 % 16.2 %

Operating margin, as adjusted 16.6 % 15.7 % 18.2 % 16.5 %

Historical information is available on our website.

MASCO CORPORATION

Exhibit A: Reconciliations - Unaudited

For the Three Months and Years Ended December 31, 2020 and 2019

(in millions, except per common share data)

Three Months Ended Year Ended December 31, December 31,

2020 2019 2020 2019

Income Per Common Share Reconciliation



Income from continuing operations $ 275 $ 217 $ 1,131 $ 914 before income taxes, as reported

Rationalization charges 2 2 11 13

Impairment charge for other - - - 9 intangible assets

Pension costs associated with 6 - 23 - expected terminated plans

Income related to an escrow (9 ) - (9 ) - settlement

Currency translation loss on 9 - 9 - liquidation of dormant entities

(Earnings) from equity investments, (2 ) - (3 ) (1 )net

Loss on extinguishment of debt - - 6 -

Income from continuing operations 281 219 1,168 935 before income taxes, as adjusted

Tax at 25% rate (70 ) (55 ) (292 ) (234 )

Less: Net income attributable to 16 10 52 45 noncontrolling interest

Income from continuing operations, $ 195 $ 154 $ 824 $ 656 as adjusted



Income from continuing operations $ 0.75 $ 0.55 $ 3.12 $ 2.28 per common share, as adjusted



Average diluted common shares 261 282 264 288 outstanding

Outlook for the Year Ended December 31, 2021

Year Ended December 31, 2021

Low End

High End

Income Per Common Share Reconciliation

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 share (2)

0.02

0.02

Income from continuing operations per common share, as adjusted

$

3.25

$

3.45

(1) Represents costs associated with our qualified domestic defined-benefit pension plans that are expected to be terminated in 2021.

(2) Represents the impact of distributed dividends and undistributed earnings to unvested restricted stock awards in accordance with the two-class method of calculating earnings per share.

Historical information is available on our website.

Outlook for the Year Ended December 31, 2021

Year Ended December 31, 2021

Low End High End

Income Per Common Share Reconciliation



Income from continuing operations per common share $ 1.80 $ 2.00

Rationalization charges 0.01 0.01

Pension costs associated with expected terminated 1.42 1.42plans (1)

Allocation to participating securities per share (2) 0.02 0.02

Income from continuing operations per common share, $ 3.25 $ 3.45as adjusted

(1) Represents costs associated with our qualified domestic defined-benefit pension plans that are expected to be terminated in 2021.

(2) Represents the impact of distributed dividends and undistributed earnings to unvested restricted stock awards in accordance with the two-class method of calculating earnings per share.

Historical information is available on our website.

MASCO CORPORATION

Condensed Consolidated Balance Sheets and Other Financial Data - Unaudited

December 31, 2020 and 2019

(dollars in millions)

December 31, December 31, 2020 2019

Balance Sheet

Assets

Current Assets:

Cash and cash investments $ 1,326 $ 697

Receivables 1,138 997

Inventories 876 754

Prepaid expenses and other 149 90

Assets held for sale - 173

Total Current Assets 3,489 2,711



Property and equipment, net 908 878

Goodwill 563 509

Other intangible assets, net 357 259

Operating lease right-of-use assets 166 176

Other assets 294 139

Assets held for sale - 355

Total Assets $ 5,777 $ 5,027



Liabilities

Current Liabilities:

Accounts payable $ 893 $ 697

Notes payable 3 2

Accrued liabilities 1,038 700

Liabilities held for sale - 149

Total Current Liabilities 1,934 1,548



Long-term debt 2,792 2,771

Noncurrent operating lease liabilities 149 162

Other liabilities 481 589

Liabilities held for sale - 13

Total Liabilities 5,356 5,083



Equity 421 (56 )

Total Liabilities and Equity $ 5,777 $ 5,027

As of December 31,

2020 2019

Other Financial Data

Working Capital Days

Receivable days 54 54

Inventory days 72 67

Payable days 71 68

Working capital $ 1,121 $ 1,054

Working capital as a % of sales (LTM) (1) 15.6 % 15.7 %

(1) Working capital as a % of sales for 2020, excluding acquisitions made in the fourth quarter, was 15.2%.

Historical information is available on our website.

MASCO CORPORATION

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

For the Years Ended December 31, 2020 and 2019

(dollars in millions)

Year Ended December 31,

2020 2019

Cash Flows From (For) Operating Activities:

Cash provided by operating activities $ 851 $ 839

Working capital changes 102 (6 )

Net cash from operating activities 953 833



Cash Flows From (For) Financing Activities:

Retirement of notes (400 ) (201 )

Purchase of Company common stock (727 ) (896 )

Cash dividends paid (145 ) (144 )

Dividends paid to noncontrolling interest (23 ) (42 )

Issuance of notes, net of issuance costs 415 -

Payment of debt (2 ) (8 )

Debt extinguishment costs (5 ) (2 )

Proceeds from the exercise of stock options 26 27

Employee withholding taxes paid on stock-based (25 ) (23 )compensation

Credit Agreement and other financing costs - (2 )

Net cash for financing activities (886 ) (1,291 )



Cash Flows From (For) Investing Activities:

Capital expenditures (114 ) (162 )

Acquisition of businesses, net of cash acquired (227 ) -

Proceeds from disposition of businesses, net of cash 870 722 disposed

Other, net 2 22

Net cash from investing activities 531 582



Effect of exchange rate changes on cash and cash 31 14 investments



Cash and Cash Investments:

Increase for the year 629 138

At January 1 697 559

At December 31 $ 1,326 $ 697

As of December 31,

2020 2019

Liquidity

Cash and cash investments $ 1,326 $ 697

Revolver availability 1,000 1,000

Total Liquidity $ 2,326 $ 1,697

Historical information is available on our website.

MASCO CORPORATION

Segment Data - Unaudited

For the Three Months and Years Ended December 31, 2020 and 2019

(dollars in millions)

Three Months Ended Year Ended December 31, December 31,

2020 2019 Change 2020 2019 Change

Plumbing Products

Net sales $ 1,172 $ 1,026 14 % $ 4,136 $ 3,984 4 %



Operatingprofit, as $ 223 $ 178 $ 806 $ 708 reported

Operatingmargin, as 19.0 % 17.3 % 19.5 % 17.8 % reported



Rationalization 1 2 6 13 charges

Accelerateddepreciationrelated to - - 1 - rationalizationactivity

Operatingprofit, as 224 180 813 721 adjusted

Operatingmargin, as 19.1 % 17.5 % 19.7 % 18.1 % adjusted



Depreciationand 22 21 83 80 amortization

EBITDA, as $ 246 $ 201 $ 896 $ 801 adjusted



DecorativeArchitectural Products

Net sales $ 688 $ 613 12 % $ 3,052 $ 2,723 12 %



Operatingprofit, as $ 108 $ 100 $ 583 $ 480 reported

Operatingmargin, as 15.7 % 16.3 % 19.1 % 17.6 % reported



Rationalization 1 - 4 - charges

Impairmentcharge forother - - - 9 intangibleassets

Operatingprofit, as 109 100 587 489 adjusted

Operatingmargin, as 15.8 % 16.3 % 19.2 % 18.0 % adjusted



Depreciationand 10 10 41 41 amortization

EBITDA, as $ 119 $ 110 $ 628 $ 530 adjusted



Total

Net sales $ 1,860 $ 1,639 13 % $ 7,188 $ 6,707 7 %



Operatingprofit, as $ 331 $ 278 $ 1,389 $ 1,188 reported -segment

Generalcorporate (24) (23) (94) (100) expense, net

Operatingprofit, as 307 255 1,295 1,088 reported

Operatingmargin, as 16.5 % 15.6 % 18.0 % 16.2 % reported



Rationalizationcharges - 2 2 10 13 segment

Accelerateddepreciationrelated to - - 1 - rationalizationactivity -segment

Impairmentcharge forother - - - 9 intangibleassets

Operatingprofit, as 309 257 1,306 1,110 adjusted

Operatingmargin, as 16.6 % 15.7 % 18.2 % 16.5 % adjusted



Depreciationand 32 31 124 121 amortization -segment

Depreciationand 2 2 8 9 amortization -non-operating

EBITDA, as $ 343 $ 290 $ 1,438 $ 1,240 adjusted

Historical information is available on our website.

MASCO CORPORATION

North American and International Data - Unaudited

For the Three Months and Years Ended December 31, 2020 and 2019

(dollars in millions)

Three Months Ended Year Ended December 31, December 31,

2020 2019 Change 2020 2019 Change

North American

Net sales $ 1,468 $ 1,295 13 % $ 5,805 $ 5,328 9 %



Operatingprofit, as $ 268 $ 228 $ 1,167 $ 987 reported

Operatingmargin, as 18.3 % 17.6 % 20.1 % 18.5 % reported



Rationalization 2 2 10 13 charges

Accelerateddepreciationrelated to - - 1 - rationalizationactivity

Impairmentcharge forother - - - 9 intangibleassets

Operatingprofit, as 270 230 1,178 1,009 adjusted

Operatingmargin, as 18.4 % 17.8 % 20.3 % 18.9 % adjusted



Depreciationand 20 20 80 81 amortization

EBITDA, as $ 290 $ 250 $ 1,258 $ 1,090 adjusted



International

Net sales $ 392 $ 344 14 % $ 1,383 $ 1,379 - %



Operatingprofit, as $ 63 $ 50 $ 222 $ 201 reported

Operatingmargin, as 16.1 % 14.5 % 16.1 % 14.6 % reported



Depreciationand 12 11 44 40 amortization

EBITDA $ 75 $ 61 $ 266 $ 241



Total

Net sales $ 1,860 $ 1,639 13 % $ 7,188 $ 6,707 7 %



Operatingprofit, as $ 331 $ 278 $ 1,389 $ 1,188 reported -segment

Generalcorporate (24) (23) (94) (100) expense, net

Operatingprofit, as 307 255 1,295 1,088 reported

Operatingmargin, as 16.5 % 15.6 % 18.0 % 16.2 % reported



Rationalizationcharges - 2 2 10 13 segment

Accelerateddepreciationrelated to - - 1 - rationalizationactivity -segment

Impairmentcharge forother - - - 9 intangibleassets

Operatingprofit, as 309 257 1,306 1,110 adjusted

Operatingmargin, as 16.6 % 15.7 % 18.2 % 16.5 % adjusted



Depreciationand 32 31 124 121 amortization -segment

Depreciationand 2 2 8 9 amortization -non-operating

EBITDA, as $ 343 $ 290 $ 1,438 $ 1,240 adjusted

Historical information is available on our website.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210209005337/en/

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