Masco Q4 2013 Earnings Presentation

2,097 views
2,007 views

Published on

Published in: Economy & Finance, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
2,097
On SlideShare
0
From Embeds
0
Number of Embeds
1,710
Actions
Shares
0
Downloads
4
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Masco Q4 2013 Earnings Presentation

  1. 1. Fourth Quarter 2013 Masco Earnings Presentation
  2. 2. Safe Harbor Statement Statements contained 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 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. 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. The Company believes that the non-GAAP performance measures and ratios that are contained herein, used in managing the business, may provide users of this financial information 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 Company's reported results under accounting principles generally accepted in the United States. Additional information about the Company is contained in the Company's filings with the Securities and Exchange Commission and is available on Masco's website at www.masco.com. 2
  3. 3. Masco Q4 and Full-Year 2013 Results – Agenda Topic • Summary of Results Tim Wadhams • Financial/Operations Review John Sznewajs • Outlook Keith Allman • Q&A 3
  4. 4. Key Messages Today New home construction and improved repair and remodel activity drive North American sales; international sales continue growth momentum New product introductions in Paint and Plumbing drive consumer demand and sales growth Cabinets and Installation return to profitability in 2013 Operating leverage and cost control improve profitability; sales and profit grow across all segments Masco delivers solid 4th quarter resulting in a strong 2013 performance 4
  5. 5. Delivering 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 expansion 5
  6. 6. Strategy Execution Highlights Q4 2013 1 • Innovation drives successful product and program introductions Expand market leadership • Wholesale/dealer channel sales continue to increase • Focused execution delivers share gains 2 Reduce costs 3 Improve underperforming businesses 4 Strengthen balance sheet 6 • Continued commitment to cost control results in SG&A leverage and margin improvement • Dealer and builder channels drive North American cabinetry growth • Installation growth in new home construction, commercial, distribution and retrofit channels • Finalized sale of Danish cabinetry business • Strong working capital management • Free cash flow exceeds $500 million • Balance sheet liquidity at year-end of $1.5 billion
  7. 7. Masco Q4 and Full-Year 2013 Results – Agenda Topic • Summary of Results Tim Wadhams • Financial/Operations Review John Sznewajs • Outlook Keith Allman • Q&A 7
  8. 8. Ninth Consecutive Quarter of Sales & Profit Growth ($ in Millions) Revenue Y-O-Y Growth Fourth Quarter 2013 Full Year 2013 $1,998 $8,173 9% 9% Adjusted Operating Profit* $153 $721 Adjusted Operating Margin* 7.7% 210 bps 8.8% 210 bps Adjusted EPS* $0.15 $0.77 Y-O-Y Growth Y-O-Y Growth 49% *See appendix for GAAP reconciliation. Full Year Highlights • North American sales increased 10%; international sales increased 4% in local currency • Sales growth driven by new products at retail and improved new home construction and repair and remodeling activity • Margin expansion reflects operating leverage and cost control • 8 Q4 was impacted by approx. $6 million of unanticipated insurance costs 44%
  9. 9. Continued Improvement in Operating Profit Y-O-Y Change in Adjusted Operating Profit $221M* 9 *See appendix for GAAP reconciliation
  10. 10. Plumbing Products: Strong Faucet Sales Drive Segment Growth Fourth Quarter 2013 Full Year 2013 Revenue $799 $3,183 Adjusted Operating Profit* $97 $418 Adjusted Operating Margin* 12.1% 13.1% ($ in Millions) Y-O-Y Growth Y-O-Y Growth Y-O-Y Growth 8% 35% 240 bps 8% 26% 190 bps *Excluding business rationalization charges of $9 million and $7 million in the fourth quarters of 2013 and 2012, respectively, and $24 million and $25 million for the full year 2013 and 2012, respectively. Quarter Highlights • • International growth drives mid-single-digit percentage gains, outpacing Eurozone economies • New programs continue to drive growth • 10 Strong performance with both trade and retail driven by increased repair and remodel activity Improved margins due to increased volume
  11. 11. Decorative Architectural Products: New Products Continue to Drive Growth Fourth Quarter 2013 Full Year 2013 Revenue $408 $1,927 Adjusted Operating Profit* $66 $353 Adjusted Operating Margin* 16.2% 18.3% ($ in Millions) Y-O-Y Growth Y-O-Y Growth Y-O-Y Growth 6% 2% (60) bps 6% 7% 20 bps *Excluding business rationalization charges of $1 million and $2 million in the fourth quarter and full year 2013, respectively. Quarter Highlights • • Share gains and new programs drive high-teens percentage growth in builder hardware • 11 New product introductions, Pro, and international drive high-single-digit percentage paint gallon growth Investment in promotions/advertising to drive gallon growth impacted margins
  12. 12. Cabinets and Related Products: Focused Execution Drives Profitable Growth Fourth Quarter 2013 Full Year 2013 Revenue $251 $1,014 Adjusted Operating (Loss) Profit* ($4) 76% $2 104% Adjusted Operating Margin* (1.6%) 0.2% ($ in Millions) Y-O-Y Growth Y-O-Y Growth Y-O-Y Growth 9% 580 bps 8% 610 bps *Excluding business rationalization charges of $2 million and $23 million in the fourth quarters of 2013 and 2012, respectively, and $12 million and $34 million for the full year 2013 and 2012, respectively. Quarter Highlights • • Sales growth benefitted from increased new housing starts • U.K. demand continues to improve • 12 Increased KraftMaid dealer channel sales driven by strong repair and remodel activity and new product introductions Improved operating results by $13 million ($57 million for the year)
  13. 13. Installation and Other Services: Ten Quarters of Consecutive Y-O-Y Sales and Profit Growth Fourth Quarter 2013 Full Year 2013 Revenue $373 $1,412 Adjusted Operating Profit* $15 $38 ($ in Millions) Y-O-Y Growth Y-O-Y Growth Adjusted Operating Margin* Y-O-Y Growth 15% 17% 150% 311% 4.0% 2.7% 210 bps 420 bps *Excluding business rationalization charges of $1 million in each of the full years 2013 and 2012. Quarter Highlights • • Increased take-per-unit, upgrades and share gains drive growth • Margins continue to improve as a result of operating leverage and productivity improvements • 13 Sales growth driven by higher volumes in residential new home construction, commercial, distribution and retrofit channels Improved operating profit by $9 million ($56 million for the year)
  14. 14. Other Specialty Products: Strong Performance by North American Windows ($ in Millions) Revenue Y-O-Y Growth Adjusted Operating Profit* Y-O-Y Growth Adjusted Operating Margin* Y-O-Y Growth Fourth Quarter 2013 Full Year 2013 $167 $637 $9 $41 5.4% 6.4% 9% 29% 80 bps 11% 71% 220 bps *Excluding business rationalization charge of $6 million and $1 million in the full year 2013 and 2012, respectively. Excluding warranty change in estimate of $12 million in the full year of 2012. Also excludes impairment charges for goodwill and other intangible assets of $42 million in the fourth quarter and full year 2012. Quarter Highlights • • Milgard continues to gain share in existing and new markets • Continued traction with new products and favorable mix • 14 North American window sales volume growth percentage in the low teens driven by increases across all channels Margin expansion driven by operating leverage
  15. 15. Strengthening the Balance Sheet 2013 Accomplishments • Retired $200M debt maturity in August with existing cash • Working capital as a percent of LTM sales improved to 10.6% in 2013, compared to 12.1% in 2012 • Free cash flow exceeds $500M Balance Sheet Liquidity as of 12/31/2013 Cash and cash investments Short-term bank deposits $0.3B Total 15 $1.2B $1.5B
  16. 16. Masco Q4 and Full-Year 2013 Results – Agenda Topic • Summary of Results Tim Wadhams • Financial/Operations Review John Sznewajs • Outlook Keith Allman • Q&A 16
  17. 17. Outlook Risks • Velocity of global economic recovery • Consumer confidence • Commodity volatility • Housing affordability/financing costs/mortgage availability Opportunities • Improving repair and remodel demand, including big ticket items • Continued growth/demand in new home construction • Share gains at retail and with big builders • Strong liquidity • Capitalize on operating leverage 17
  18. 18. 2014 Priorities Grow share of market-leading brands Accelerate customer-focused innovation pipeline Focus on execution to drive profitable growth in cabinets and installation Further penetrate international markets Drive operational leverage through focus on cost containment Strengthen the balance sheet including reducing debt by $300-500 million by 2016 18
  19. 19. Q&A
  20. 20. Appendix – Profit Reconciliation – Fourth Quarter ($ in M illions) Q4 2013 Q4 2012 Sales $ 1,998 $ 1,831 Gross Profit – As Reported $ 531 $ 451 10 Rationalization charges Gross Profit – As Adjusted $ Gross Margin - As Reported Gross Margin - As Adjusted Operating Profit – As Reported 541 27 $ 26.6% 27.1% $ Rationalization charges 141 478 24.6% 26.1% $ 31 12 30 Impairment of goodwill and other intangible assets - 42 Charge for litigation settlements, net - 3 Gain from sales of fixed assets, net - (3) Operating Profit – As Adjusted Operating Margin - As Reported Operating Margin - As Adjusted 20 $ 153 7.1% 7.7% $ 103 1.7% 5.6%
  21. 21. Appendix – Profit Reconciliation – Full-Year ($ in M illions) 2013 2012 Sales $ 8,173 $ 7,495 Gross Profit – As Reported $ 2,255 $ 1,956 Rationalization charges Other Specialty Products - Warranty Gross Profit – As Adjusted 33 $ Gross Margin - As Reported Gross Margin - As Adjusted Operating Profit – As Reported Operating Margin - As Reported Operating Margin - As Adjusted 21 $ 27.6% 28.0% $ Rationalization charges Impairment of goodwill and other intangible assets Charge for litigation settlements, net Gain from sales of fixed assets, net Other Specialty Products - warranty Operating Profit – As Adjusted 2,288 50 12 673 26.1% 26.9% $ 48 $ 721 8.2% 8.8% 2,018 302 75 42 77 (8) 12 $ 500 4.0% 6.7%
  22. 22. Appendix – EPS Reconciliation – Fourth Quarter (in M illions, Ex cept per Com m on Share Data) Income (Loss) from Continuing Operations before Income Taxes – As Reported Q4 2013 $ Q4 2012 70 $ (26) Rationalization charges 12 30 Currency translation expense – Masco Denmark 18 - Gains from financial investments, net (3) (4) Charge for litigation settlements, net - 3 Impairment of goodwill and other intangible assets - 42 Gain from sales of fixed assets - (3) Income from Continuing Operations before Income Taxes – As Adjusted $ Tax at 36% rate 97 $ 42 (35) 11 Less: Net income attributable to non-controlling interest (15) 7 Net Income, as adjusted $ 51 $ 20 Income per common share, as adjusted $ 0.15 $ 0.06 Average Diluted Shares Outstanding 22 352 349
  23. 23. Appendix – EPS Reconciliation – Full-Year (in M illions, Ex cept per Com m on Share Data) Income from Continuing Operations before Income Taxes – As Reported 2013 $ 2012 434 $ 73 Rationalization charges 48 75 Currency translation expense – Masco Denmark 18 - Gains from financial investments, net (11) (22) Charge for litigation settlements, net - 77 Impairment of goodwill and other intangible assets - 42 Gain from sales of fixed assets, net - (8) Other Specialty Products - warranty - 12 Interest carry costs - 7 Income from Continuing Operations before Income Taxes – As Adjusted $ Tax at 36% rate 489 $ 256 (176) 41 Less: Net income attributable to non-controlling interest (92) 35 Net Income, as adjusted $ 272 $ 129 Income per common share, as adjusted $ 0.77 $ 0.37 Shares Outstanding 23 352 349
  24. 24. 2014 Guidance Estimates ($ in Millions) 2014 Estimate 2013 Actual Rationalization Charges1, 3 ~ $10 $48 Tax Rate ~ 17% 26% Interest Expense ~ $225 $235 General Corp. Expense2 ~ $130 $134 Capital Expenditures ~ $200 $126 Depreciation & Amortization3 ~ $175 $186 352 million 352 million Shares Outstanding 1 – Based on 2014 business plans. 2 – Includes rationalization expenses of $3M for the year ended December 31, 2013. 3 – Includes accelerated depreciation of $13M for the year ended December 31, 2013 and estimated accelerated depreciation for the year ended December 31, 2014 of ~$1M. Such expenses are also included in the rationalization charges. 24
  25. 25. 2013 Segment Mix* Business Segment Revenue 2013 % of Total R&R% vs. NC NA% vs. Int’l Plumbing Products $3.2B 39% 82% 59% Decorative Architectural Products $1.9B 23% 99% 100% Installation and Other Services $1.4B 17% 18% 100% Cabinets and Related Products $1.0B 12% 57% 93% Other Specialty Products $0.7B 9% 74% 76% 72% 81% Total Company 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 25 *Based on Company estimates. $8.2B 100%
  26. 26. 2013 International Revenue Split* 10% 23% 14% UK Northern Europe Southern Europe 7% 9% Central Europe Eastern Europe Emerging markets 6% Other 31% International Sales Accounted for ~20% of Total 2013 Masco Sales 26 *Based on Company estimates.

×