Business Wire | Apr 28, 2021 07:00AM EDT

Masco Corporation Reports First Quarter 2021 Results

Apr. 28, 2021

LIVONIA, Mich.--(BUSINESS WIRE)--Apr. 28, 2021--Masco Corporation (NYSE: MAS), one of the world's leading manufacturers of branded home improvement and building products, reported its first quarter results.

"We achieved another outstanding quarter," said Masco President and CEO, Keith Allman. "We capitalized on the continued strong demand for our products to deliver exceptional sales growth, margin expansion and an 89 percent increase in adjusted earnings per share. We also continued our capital deployment of our strong free cash flow by returning $339 million to shareholders through dividends and share repurchases during the quarter. Finally, we further strengthened our balance sheet and reduced interest expense through the successful refinancing of our 2022, 2025 and 2026 debt maturities."

2021 First Quarter Commentary

* On a reported basis, compared to first quarter 2020: Net sales increased 25 percent to $1,970 million; in local currency and excluding acquisitions, net sales increased 19 percent In local currency, North American sales increased 21 percent and international sales increased 27 percent Gross margins increased 90 basis points to 35.5 percent from 34.6 percent Operating profit increased 62 percent to $365 million Operating margins increased 430 basis points to 18.5 percent from 14.2 percent Income from continuing operations decreased to $0.34 per share, compared to $0.48 per share * Compared to first quarter 2020, 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 margins increased 80 basis points to 35.6 percent compared to 34.8 percent Operating profit increased 61 percent to $366 million from $228 million Operating margins increased 420 basis points to 18.6 percent compared to 14.4 percent Income from continuing operations increased to $0.89 per share, compared to $0.47 per share * Liquidity at the end of the first quarter was $1,838 million (including availability under our revolving credit facility) * Plumbing Products' net sales increased 31 percent; in local currency and excluding acquisitions, sales increased 22 percent * Decorative Architectural Products' net sales increased 15 percent; in local currency and excluding acquisitions, sales increased 13 percent

"Masco is off to a strong start in 2021," said Allman. "Our markets remain strong, and we continue to demonstrate our ability to execute extremely well in this dynamic environment. We have taken actions and developed further plans to offset the raw material and logistics inflation that we are experiencing. While we anticipate these challenges will continue for the next few quarters, we believe we are well prepared and will continue to adjust to deliver value for our customers and our shareholders. Based on our strong performance in the first quarter and continued strength in our markets, we now anticipate our earnings per share for 2021 to be in the range of $3.50 to $3.70 per share, increased from our previous expectation of $3.25 to $3.45 per share," 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 first quarter 2021 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 Wednesday, April 28, 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 9998268. 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 9998268. The telephone replay will be available approximately two hours after the end of the call and continue through May 28, 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 Ended March 31, 2021 and 2020

(in millions, except per common share data)

Three Months Ended March 31,

2021 2020

Net sales $ 1,970 $ 1,581

Cost of sales 1,270 1,034

Gross profit 700 547



Selling, general and administrative expenses 335 322

Operating profit 365 225



Other income (expense), net:

Interest expense (202 ) (35 )

Other, net (6 ) (16 )

(208 ) (51 )

Income from continuing operations before income taxes 157 174



Income tax expense 43 33

Income from continuing operations 114 141



Income from discontinued operations, net - 397

Net income 114 538



Less: Net income attributable to noncontrolling 20 8 interest

Net income attributable to Masco Corporation $ 94 $ 530



Income per common share attributable to Masco Corporation (diluted):

Income from continuing operations $ 0.34 $ 0.48

Income from discontinued operations, net - 1.44

Net income $ 0.34 $ 1.92



Average diluted common shares outstanding 257 274



Amounts attributable to Masco Corporation:

Income from continuing operations $ 94 $ 133

Income from discontinued operations, net - 397

Net income attributable to Masco Corporation $ 94 $ 530

Historical information is available on our website.

MASCO CORPORATION

Exhibit A: Reconciliations - Unaudited

For the Three Months Ended March 31, 2021 and 2020

(dollars in millions)

Three Months Ended March 31,

2021 2020

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



Net sales $ 1,970 $ 1,581



Gross profit, as reported $ 700 $ 547

Rationalization charges 1 3

Gross profit, as adjusted $ 701 $ 550



Gross margin, as reported 35.5 % 34.6 %

Gross margin, as adjusted 35.6 % 34.8 %



Selling, general and administrative expenses, as reported $ 335 $ 322



Selling, general and administrative expenses as percent of 17.0 % 20.4 %net sales, as reported



Operating profit, as reported $ 365 $ 225

Rationalization charges 1 3

Operating profit, as adjusted $ 366 $ 228



Operating margin, as reported 18.5 % 14.2 %

Operating margin, as adjusted 18.6 % 14.4 %

Historical information is available on our website.

MASCO CORPORATION

Exhibit A: Reconciliations - Unaudited

For the Three Months Ended March 31, 2021 and 2020

(in millions, except per common share data)

Three Months Ended March 31,

2021 2020

Income Per Common Share Reconciliations



Income from continuing operations before income taxes, $ 157 $ 174 as reported

Rationalization charges 1 3

Pension costs associated with expected terminated 9 6 plans

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

Loss on extinguishment of debt 168 -

Income from continuing operations before income taxes, 333 183 as adjusted

Tax at 25% rate (83 ) (46 )

Less: Net income attributable to noncontrolling 20 8 interest

Income from continuing operations, as adjusted $ 230 $ 129



Income from continuing operations per common share, as $ 0.89 $ 0.47 adjusted



Average diluted common shares outstanding 257 274

Outlook for the Twelve Months Ended December 31, 2021

Twelve Months Ended December 31, 2021

Low End

High End

Income Per Common Share Outlook

Income from continuing operations per common share

$

1.52

$

1.72

Rationalization charges

0.01

0.01

Pension costs associated with expected terminated plans (1)

1.42

1.42

Loss on extinguishment of debt

0.52

0.52

Allocation to participating securities per share (2)

0.03

0.03

Income from continuing operations per common share, as adjusted

$

3.50

$

3.70

Outlook for the Twelve Months Ended December 31, 2021

Twelve Months Ended December 31, 2021

Low End High End

Income Per Common Share Outlook



Income from continuing operations per common $ 1.52 $ 1.72 share

Rationalization charges 0.01 0.01

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

Loss on extinguishment of debt 0.52 0.52

Allocation to participating securities per share 0.03 0.03 (2)

Income from continuing operations per common $ 3.50 $ 3.70 share, as 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 as well as an allocation to redeemable noncontrolling interest in accordance with the two-class method of calculating earnings per share.

Historical information is available on our website.

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

Represents the impact of distributed dividends and undistributed earnings(2) to unvested restricted stock awards as well as an allocation to redeemable noncontrolling interest 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

March 31, 2021 and December 31, 2020

(dollars in millions)

March 31, 2021 December 31, 2020

Balance Sheet

Assets

Current Assets:

Cash and cash investments $ 838 $ 1,326

Receivables 1,305 1,138

Prepaid expenses and other 97 149

Inventories 948 876

Assets held for sale 18 -

Total Current Assets 3,206 3,489



Property and equipment, net 894 908

Operating lease right-of-use assets 173 166

Goodwill 588 563

Other intangible assets, net 378 357

Other assets 326 294

Assets held for sale 9 -

Total Assets $ 5,574 $ 5,777



Liabilities

Current Liabilities:

Accounts payable $ 925 $ 893

Notes payable 6 3

Accrued liabilities 803 1,038

Liabilities held for sale 14 -

Total Current Liabilities 1,748 1,934



Long-term debt 2,955 2,792

Noncurrent operating lease liabilities 157 149

Other liabilities 458 481

Liabilities held for sale 14 -

Total Liabilities 5,332 5,356



Redeemable noncontrolling interest 25 -



Equity 217 421

Total Liabilities and Equity $ 5,574 $ 5,777

As of March 31,

2021 2020

Other Financial Data

Working Capital Days

Receivable days 54 58

Inventory days 76 66

Payable days 68 71

Working capital $ 1,328 $ 1,155

Working capital as a % of sales (LTM) (1) 17.5 % 17.0 %

(1)

Working capital as a % of sales as of March 31, 2021, excluding acquisitions made in the first quarter of 2021 and the fourth quarter of 2020, was 16.9%.

Historical information is available on our website.

Working capital as a % of sales as of March 31, 2021, excluding(1) acquisitions made in the first quarter of 2021 and the fourth quarter of 2020, was 16.9%.

Historical information is available on our website.

MASCO CORPORATION

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

For the Three Months Ended March 31, 2021 and 2020

(dollars in millions)

Three Months Ended March 31,

2021 2020

Cash Flows From (For) Operating Activities:

Cash provided by operating activities $ 323 $ 7

Working capital changes (412 ) (99 )

Net cash for operating activities (89 ) (92 )



Cash Flows From (For) Financing Activities:

Retirement of notes (1,326 ) -

Purchase of Company common stock (303 ) (602 )

Cash dividends paid (36 ) (37 )

Issuance of notes, net of issuance costs 1,481 -

Debt extinguishment costs (160 ) -

Proceeds from the exercise of stock options - 20

Employee withholding taxes paid on stock-based (14 ) (22 ) compensation

(Decrease) increase in debt, net (1 ) 2

Net cash for financing activities (359 ) (639 )



Cash Flows From (For) Investing Activities:

Capital expenditures (30 ) (24 )

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

Proceeds from disposition of businesses, net of cash - 853 disposed

Other, net 5 2

Net cash (for) from investing activities (25 ) 807



Effect of exchange rate changes on cash and cash (13 ) (6 ) investments



Cash and Cash Investments:

(Decrease) increase for the period (486 ) 70

At January 1 1,326 697

At March 31 $ 840 $ 767

As of March 31,

2021

2020

Liquidity

Cash and cash investments

$

838

$

767

Revolver availability

1,000

1,000

Total Liquidity

$

1,838

$

1,767

Historical information is available on our website.

As of March 31,

2021 2020

Liquidity

Cash and cash investments $ 838 $ 767

Revolver availability 1,000 1,000

Total Liquidity $ 1,838 $ 1,767

Historical information is available on our website.

MASCO CORPORATION

Segment Data - Unaudited

For the Three Months Ended March 31, 2021 and 2020

(dollars in millions)

Three Months Ended March 31,

2021 2020 Change

Plumbing Products

Net sales $ 1,249 $ 955 31 %



Operating profit, as reported $ 252 $ 157

Operating margin, as reported 20.2 % 16.4 %



Rationalization charges 1 2

Operating profit, as adjusted 253 159

Operating margin, as adjusted 20.3 % 16.6 %



Depreciation and amortization 26 20

EBITDA, as adjusted $ 279 $ 179



Decorative Architectural Products

Net sales $ 721 $ 626 15 %



Operating profit, as reported $ 142 $ 95

Operating margin, as reported 19.7 % 15.2 %



Rationalization charges - 1

Operating profit, as adjusted 142 96

Operating margin, as adjusted 19.7 % 15.3 %



Depreciation and amortization 10 11

EBITDA, as adjusted $ 152 $ 107



Total

Net sales $ 1,970 $ 1,581 25 %



Operating profit, as reported - segment $ 394 $ 252

General corporate expense, net (29 ) (27 )

Operating profit, as reported 365 225

Operating margin, as reported 18.5 % 14.2 %



Rationalization charges - segment 1 3

Operating profit, as adjusted 366 228

Operating margin, as adjusted 18.6 % 14.4 %



Depreciation and amortization - segment 36 31

Depreciation and amortization - 7 2 non-operating

EBITDA, as adjusted $ 409 $ 261

Historical information is available on our website.

MASCO CORPORATION

North American and International Data - Unaudited

For the Three Months Ended March 31, 2021 and 2020

(dollars in millions)

Three Months Ended March 31,

2021 2020 Change

North American

Net sales $ 1,529 $ 1,258 22 %



Operating profit, as reported $ 308 $ 210

Operating margin, as reported 20.1 % 16.7 %



Rationalization charges 1 3

Operating profit, as adjusted 309 213

Operating margin, as adjusted 20.2 % 16.9 %



Depreciation and amortization 23 20

EBITDA, as adjusted $ 332 $ 233



International

Net sales $ 441 $ 323 37 %



Operating profit, as reported $ 86 $ 42

Operating margin, as reported 19.5 % 13.0 %



Depreciation and amortization 13 11

EBITDA $ 99 $ 53



Total

Net sales $ 1,970 $ 1,581 25 %



Operating profit, as reported - segment $ 394 $ 252

General corporate expense, net (29 ) (27 )

Operating profit, as reported 365 225

Operating margin, as reported 18.5 % 14.2 %



Rationalization charges - segment 1 3

Operating profit, as adjusted 366 228

Operating margin, as adjusted 18.6 % 14.4 %



Depreciation and amortization - segment 36 31

Depreciation and amortization - 7 2 non-operating

EBITDA, as adjusted $ 409 $ 261

Historical information is available on our website.

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CONTACT: Investor Contact

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