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Masco Corporation 2012 Fourth Quarter Presentation
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Masco Corporation 2012 Fourth Quarter Presentation

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    Masco Corporation 2012 Fourth Quarter Presentation Masco Corporation 2012 Fourth Quarter Presentation Presentation Transcript

    • Fourth Quarter and Full Year 2012Masco Earnings Presentation
    • Safe Harbor Statement 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,” “appear,” “may,” “will,” “should,” “intend,” “plan,” “estimate,” “expect,” “assume,” “seek,” “forecast,” and similar references to future periods. These views 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 our reliance on new home construction and home improvement, our reliance on key customers, the cost and availability of raw materials, shifts in consumer preferences and purchasing practices, our ability to improve our underperforming businesses, and our ability to maintain our competitive position in our industries. These and other factors are discussed in detail in Item 1A, “Risk Factors” in our 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. Our forward-looking statements in this presentation speak only as of the date of this presentation. 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. Certain of the financial and statistical data included in this presentation and the related materials are non-GAAP financial measures as defined under Regulation G. The Company believes that non-GAAP performance measures and ratios used in managing the business may provide attendees of this presentation with additional meaningful comparisons between current results and results in prior periods. Non-GAAP performance measures and ratios should be viewed in addition to, and not as an alternative for, the Companys reported results under accounting principles generally accepted in the United States. Additional information about the Company is contained in the Companys filings with the SEC and is available on Masco’s web site, www.masco.com.2
    • Masco Q4 & Full Year 2012 Results – Agenda Topic • Summary of Results Tim Wadhams • Financial/Operations Review John Sznewajs • Outlook Tim Wadhams • Q&A3
    • Key Messages Today Improved Q4 results provide momentum going into 2013 Sales growth driven by increased North American new home construction activity and successful product & program introductions Margin improvement reflects operating leverage, execution on pricing and total cost productivity Strong progress on the priorities we set at the beginning of the year4
    • Delivered on 2012 Priorities Cabinet profit improvement Installation profit improvement Successfully launched new products and programs Reduced debt by ~$400M/refinanced $400M Invested in strategic growth initiatives Grew share of key brands Total cost productivity Geographic expansion5
    • Strategy Execution Highlights Full Year 2012 • New product and program introductions at retail with 1 Plumbing and Decorative Architecture Expand market • Strong residential new construction, retrofit and commercial leadership channel growth in Installation Services • Window share gains in the Western U.S. 2 • Exceeded total cost productivity targets Reduce costs • Supply chain and lean initiatives positively impacted results 3 • Significant reduction in operating losses in our Cabinet Improve and Installation segments underperforming • New management team at Masco Cabinetry businesses 4 • Debt reduction Strengthen • Strong liquidity Balance Sheet • Strong working capital management6
    • North America Cabinetry’s Strategic Initiatives 1 • Dealers • Builders Customer Focus • Retail • Consumers 2 • Channel strategies Profitable • Promotions Revenue Growth • Products 3 • Rationalize operational footprint Cost Realignment • Increase overhead efficiency7
    • Masco Q4 and Full Year 2012 Results – Agenda Topic • Summary of Results Tim Wadhams • Financial/Operations Review John Sznewajs • Outlook Tim Wadhams • Q&A8
    • Positive Contribution from All Segments in Q4 Fourth Quarter Full Year ($ in Millions) 2012 2012 Revenue $1,890 $7,745 Growth 9% 4% Adjusted Operating $94 $472 Profit* $67 $143 Y-O-Y Change Adjusted Operating 5.0% 6.1% Margin* 340 bps 170 bps Y-O-Y Change Adjusted EPS* $0.04 $0.32 *See appendix for reconciliation to GAAP information. Quarterly Highlights • North America sales increased 12%; International sales increased 2% in local currency • Sales growth driven by increased sales in retail, new home construction, and international channels • All segments contributed to sales and operating margin growth9
    • Fourth Quarter 2012 Operating Profit Reflects Successful Price/Commodity Management and Increased Volume $32M $(2M) $94M $37M $27M Y-O-Y Change in Operating Profit $67M Q4 2011 Net Net Volume/Mix Profit Q4 2012 Operating Profit* Price/Commodity Improvement & Operating Profit* All Other Net *See appendix for reconciliation10
    • Plumbing Products: Strong Performance in both North America and International Fourth Quarter Full Year ($ in Millions) 2012 2012 Revenue* $739 $2,955 Growth 10% 1% Adjusted Operating $72 $332 Profit** $16 ($6) Y-O-Y Change Adjusted Operating 9.7% 11.2% Margin** 140 bps (40) bps Y-O-Y Change *Excluding the effect of currency, sales increased 10% and 4% in the fourth quarter and full year 2012, respectively, compared to 2011. **Excludes business rationalization charges of $7M and $3M in the fourth quarter of 2012 and 2011, respectively and $25M and $15M in the full year of 2012 and 2011, respectively. Also excludes goodwill impairment charge of $1M in the fourth quarter and full year of 2011. Quarterly Highlights • North American sales increased 12% • Sales growth driven by increased sales in both retail and trade • Successful launches of toilets and new faucets with key retail partner • International sales increased 9% in local currency despite a challenging economic environment11
    • Decorative Architectural Products: Core Products and New Programs Drive Sales Growth Fourth Quarter Full Year ($ in Millions) 2012 2012 Revenue $386 $1,818 Growth 11% 9% Adjusted Operating $65 $329 Profit* $30 $46 Y-O-Y Change Adjusted Operating 16.8% 18.1% Margin* 670 bps 120 bps Y-O-Y Change *Excluding business rationalization charges of $11M and $12M in the fourth quarter and full year of 2011, respectively. Also excludes goodwill impairment charge of $75M in the fourth quarter and full year 2011. Quarterly Highlights • Sales driven by strong Behr Premium Plus Ultra sales, Behr Pro growth, Behr’s expansion into Mexico, and Builder’s Hardware performance at retail • Margins impacted by decreased program and promotional costs and the timing of price increases12
    • Cabinets and Related Products: North American Sales Grew 13% in Q4 Fourth Quarter Full Year ($ in Millions) 2012 2012 Revenue* $289 $1,189 Y-O-Y Change 1% (3%) Adjusted Operating $(26) $(83) Loss** $12 $32 Y-O-Y Change Adjusted Operating (9.0%) (7.0%) Margin** 420 bps 230 bps Y-O-Y Change *Excluding the effect of currency, sales increased 1% and decreased 2% in the fourth quarter and full year of 2012, respectively compared to 2011. **Excludes business rationalization charges of $24M and $13M in the fourth quarter of 2012 and 2011, respectively, and $37M and $47M in the full year 2012 and 2011, respectively. Also excludes goodwill impairment charge of $44M in the fourth quarter and full year of 2011. Quarterly Highlights • North American sales increased 13%, reflecting solid sales growth with our countertop, retail, dealer and builder channels • North American Cabinets driving segment operating profit13 improvement
    • Installation and Other Services: A Return to Profitability in Q4 with Strong Operating Leverage Fourth Quarter Full Year ($ in Millions) 2012 2012 Revenue $323 $1,209 Growth 13% 12% Adjusted Operating $6 ($18) Profit/Loss* $12 $53 Y-O-Y Change Adjusted Operating 1.9% (1.5%) Margin* 400 bps 510 bps Y-O-Y Change *Excludes business rationalization charges of $2M in the fourth quarter of 2011, and $1M and $8M in the full year of 2012 and 2011, respectively. Quarterly Highlights • Sales growth driven by higher volumes in residential new home construction and commercial channels, partially offset by the mix shift in starts composition • Installation sales to residential new home construction increased nearly 30%14 • Segment returned to profitability, reflecting strong operating leverage
    • Other Specialty Products: Strong Performance Reflects Share Gains and Profit Improvement Fourth Quarter Full Year ($ in Millions) 2012 2012 Revenue $153 $574 Y-O-Y Change 6% - Adjusted Operating $7 $24 Profit* $7 $20 Y-O-Y Change Adjusted Operating 4.6% 4.2% Margin 460 bps 350 bps Y-O-Y Change *Excludes business rationalization charges of $29M in the fourth quarter of 2011, and $1M and $31M in the full year of 2012 and 2011, respectively. Excludes warranty change in estimate of $12M in the full year of 2012. Also excludes impairment charges for goodwill and other intangible asset of $42M and $374M in the fourth quarter and full year of 2012 and 2011, respectively. Quarterly Highlights • Sales growth driven by increased new home construction and repair & remodel sales, new product introductions and share gains • Excluding the exit of select U.S. Window markets, North American window sales increased high teens percent • Margins impacted by profit improvement initiatives and reduced new15 product introduction costs
    • Strengthening the Balance Sheet • Continued strong working capital execution • Net debt reduction of $400M • Bank line availability of $873M $1.4 billion of cash as of 12/31/201216
    • Masco Q4 and Full Year 2012 Results – Agenda Topic • Summary of Results Tim Wadhams • Financial/Operations Review John Sznewajs • Outlook Tim Wadhams • Q&A17
    • 2013 Outlook Risks Opportunities • Impact of reduced consumer • Positive momentum coming disposable income out of 2012 • Commodity cost volatility • Improving demand in new home construction • European economic uncertainty • Successful new product and program launches at retail • Leadership changes at Masco Cabinetry • Strong liquidity18
    • Focus on 2013 Priorities Cabinet profit improvement Profitably grow Installation Successfully launch new products and programs Reduce debt by ~$200M Investment in strategic growth initiatives Grow share of key brands Total cost productivity Geographic expansion19
    • Q&A
    • Appendix – Profit Reconciliation – Fourth Quarter ($ in Millions) Q4 2012 Q4 2011 Sales $ 1,890 $ 1,738 Gross Profit – As Reported $ 446 $ 332 Rationalization charges 27 48 Gross Profit – As Adjusted $ 473 $ 380 Gross Margin - As Reported 23.6% 19.1% Gross Margin - As Adjusted 25.0% 21.9% Operating Profit (Loss) – As Reported $ 21 $ (531) Impairment of goodwill and other intangible assets $ 42 $ 494 Rationalization charges 31 61 Charge for litigation settlements, net 3 3 Gain from sales of fixed assets, net (3) - Operating Profit – As Adjusted $ 94 $ 27 Operating Margin - As Reported 1.1% -30.6% Operating Margin - As Adjusted 5.0% 1.6%21
    • Appendix – Profit Reconciliation – Full-Year ($ in Millions) YTD 12/31/12 YTD 12/31/11 Sales $ 7,745 $ 7,467 Gross Profit – As Reported $ 1,951 $ 1,784 Rationalization charges 52 91 Other Specialty Products - Warranty 12 - Gross Profit – As Adjusted $ 2,015 $ 1,875 Gross Margin - As Reported 25.2% 23.9% Gross Margin - As Adjusted 26.0% 25.1% Operating Profit (Loss) – As Reported $ 271 $ (295) Rationalization charges 78 121 Charge for litigation settlements, net 77 9 Impairment of goodwill and other intangible assets 42 494 Other Specialty Products - Warranty 12 - Gain from sales of fixed assets, net (8) - Operating Profit – As Adjusted $ 472 $ 329 Operating Margin - As Reported 3.5% -4.0% Operating Margin - As Adjusted 6.1% 4.4%22
    • Appendix – EPS Reconciliation – Fourth Quarter (in Millions) Q4 2012 Q4 2011 Loss from Continuing Operations before Income Taxes – As Reported $ (37) $ (593) Impairment of goodwill and other intangible assets $ 42 $ 494 Rationalization charges 31 61 Charge for litigation settlements, net 3 3 Gain from sales of fixed assets, net (3) - Gain from financial investments, net (4) (4) Income (Loss) from Continuing Operations before Income Taxes – As $ 32 $ (39) Adjusted Tax at 36% rate benefit (expense) (12) 14 Less: Net income attributable to non-controlling interest 7 5 Net Income (Loss), as adjusted $ 13 $ (30) Income (Loss) per common share, as adjusted $ 0.04 $ (0.09) Shares Outstanding 349 34823
    • Appendix – EPS Reconciliation – Full-Year ($ in Millions) YTD 12/31/12 YTD 12/31/11 Income (Loss) from Continuing Operations before Income Taxes – As $ 42 $ (472) Reported Rationalization charges $ 78 $ 121 Charge for litigation settlements, net 77 9 Impairment of goodwill and other intangible assets 42 494 Other Specialty Products - Warranty 12 - Interest carry costs 7 - Gain from sales of fixed assets, net (8) - Gain from financial investments, net (22) (73) Income (Loss) from Continuing Operations before Income Taxes – As $ 228 $ 79 Adjusted Tax at 36% rate benefit (expense) (82) (28) Less: Net income attributable to non-controlling interest 35 42 Net Income, as adjusted $ 111 $ 9 Income per common share, as adjusted $ 0.32 $ 0.02 Shares Outstanding 349 34824
    • 2013 Guidance Estimates ($ in Millions) 2013 Estimate 2012 ActualRationalization Charges1 ~ $40 $78Tax Rate ~ 25% 198%Interest Expense ~ $240 $254General Corp. Expense2 ~ $130 $126Capital Expenditures ~ $165 $119Depreciation & Amortization3 ~ $210 $214Shares Outstanding 349 million 349 million 1 – Based on current business plans. 2 – Includes rationalization expenses of $14M for the year ended December 31, 2012. 3 – Includes accelerated depreciation of $28M for the year ended December 31, 2012. Such expenses are also included in the rationalization charges.
    • Segment Mix Full Year 2012 Estimate Business Segment Revenue 2012 % of Total R&R% vs. NC NA% vs. Int’l Plumbing Products $3.0B 38% 82% 59% Decorative Architectural $1.8B 24% 99% 100% Products Cabinets and Related Products $1.2B 15% 69% 73% Installation and Other Services $1.2B 16% 16% 100% Other Specialty Products $0.6B 7% 75% 75% Total company $7.8B 100% 73% 78%26 R&R = % of sales to repair and remodel channels NC = % of sales to new construction channels NA = % of sales within North America Int’l = % of sales outside North America
    • 2012 Masco International Revenue Split* 7% 14% 10% 23% North America United Kingdom Northern Europe Southern Europe Central Europe Eastern Europe 34% 8% Emerging Markets 4% International Sales Accounted for ~22% of Total 2012 Masco Sales27 *Based on company estimates