Your SlideShare is downloading. ×

Morgan stanley 2011

783
views

Published on

Published in: Investor Relations, Business

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
783
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
9
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. Morgan StanleyGlobal Consumer ConferenceNovember 15, 2011 1
  • 2. Written and oral statements made in this presentation that reflect our views about our future performanceconstitute "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,” “intend,” “plan,”“estimate,” “expect,” “assume,” “seek,” “should,” “will,” and similar references to future periods. These viewsinvolve risks and uncertainties that are difficult to predict and, accordingly, our actual results may differmaterially from the results discussed in our forward-looking statements. We caution you against relying onany of these forward-looking statements. Our future performance may be affected by our reliance on newhome construction and home improvement, our reliance on key customers, the cost and availability of rawmaterials, shifts in consumer preferences and purchasing practices, and our ability to achieve cost savingsthrough the Masco Business System and other initiatives. These and other factors are discussed in detail inItem 1A, “Risk Factors” in our Annual Report on Form 10-K, as well as in our Quarterly Reports on Form 10-Qand in other filings we make with the Securities and Exchange Commission. Our forward-looking statementsin this presentation speak only as of the date of this presentation. Factors or events that could cause ouractual results to differ may emerge from time to time, and it is not possible for us to predict all of them. Weundertake 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-GAAPperformance measures and ratios used in managing the business may provide these meaningfulcomparisons between current results and results in prior periods. Non-GAAP performance measures andratios should be viewed in addition to, and not as an alternative for, the Companys reported results underaccounting principles generally accepted in the United States. Additional information about the Company iscontained in the Companys filings with the SEC and is available on Masco’s Web Site, www.masco.com. 2
  • 3. Global leader in the innovation andmarketing of quality building products and services. • 2010 Financial Data Sales $7.6 billion Operating Profit* $430 million Free Cash Flow $300 million • Cash on Hand at 09/30/2011 $1.6 billion *Excludes business rationalization charges of $208 million and charges for goodwill and other intangible assets of $721 million, operating loss as reported ($499) million. 3
  • 4. Investment Considerations Scale Distribution Brands Operating Leverage History of Strong Cash Flow Long-term Fundamentals For Our Markets Are Positive Driving sustainable competitive advantage through innovation, brand strength and disciplined execution 4
  • 5. Scale – Masco is the Industry LeaderWe believe we are the … Largest faucet manufacturer in the world Largest cabinet manufacturer in the world Largest non-commodity supplier to The Home Depot Largest supplier to Lowe’s Kitchen and Bath segment Largest supplier of architectural coatings to the U.S. DIY market Largest U.S. installer of building products for the new home construction market We believe Masco’s scale and position with its customers is unparalleled in the industry 5
  • 6. Investment Considerations Scale Distribution Brands Operating Leverage History of Strong Cash Flow Long-term Fundamentals For Our Markets Are Positive Driving sustainable competitive advantage through innovation, brand strength and disciplined execution 6
  • 7. Broad Distribution Across Multiple Channels Big Box Retailers Homebuilders Wholesalers/Dealers• Dedicated customer- • Unique direct-to-builder • Extensive training specific service channel for certain programs for branch and organizations with products and services showroom associates over 1,000 field • A leading insulation • Superior display and service employees contractor in the US technology expertise and• Premier brands that • Value proposition built support drive traffic upon service reliability • Strong trade brands that to retail stores and high quality brands drive sales with contractors and consumers The breadth of Masco’s product portfolio positions usto compete at multiple price points across all channels 7
  • 8. Investment Considerations Scale Distribution Brands Operating Leverage History of Strong Cash Flow Long-term Fundamentals For Our Markets Are Positive Driving sustainable competitive advantage through innovation, brand strength and disciplined execution 8
  • 9. Decorative Cabinets & Related Plumbing Installation & Other Specialty2010 Revenues Architectural Products Products Other Services Products Products $1.5B $2.7B $1.1B $1.7B $600MSelected Brands 9
  • 10. Cabinets and Related ProductsFinancial Performance Brands 9/30/11 vs. ($ in Millions) 3 Months Ended 9/30/10 9/30/2011 9/30/2010 $ %Net Sales $307 $357 $(50) (14%)Operating (Loss)* $(27) $(27) $-- N/AOperating Margin ® (8.8%) (7.6%)Incremental Margin N/ABusiness Mix (2010 est.) Segment Comments 25%-30% Sales Drivers Consumer Confidence 25% Age of Housing Stock/Housing Turnover Home Prices Housing Starts Key Commodities Lumber, Particle Board New Construction North America New Denova Countertops Repair/Remodel International Products/Programs Kraftmaid Vanity Programs at Home Centers *Excludes business rationalization charges of $7M & $34M in the third quarter of 2011 & 2010, respectively. See 10 Appendix for GAAP reconciliation.
  • 11. Cabinets and Related Products Update Benefitting from the North American cabinet integration Exit of ready-to-assemble cabinetry completed Common architecture program completed Recently idled Los Lunas, New Mexico manufacturing facility Dealer Advantage Program continues to gain momentum Gaining share with big builders Countertop model continues to gain traction KraftMaid Cabinetry ranked “Highest in Customer Satisfaction with Cabinets” by J.D. SM Power and Associates 2011 U.S. Kitchen Cabinet Satisfaction Study Heavy promotional activity continues in retail and dealer channels European markets continue to be challenging − U.K. austerity measures impacting the Moore Group and depressed consumer demand for furniture impacting Tvilum 11
  • 12. KraftMaid “Tops & Bottoms” ProgramsHome Centers KraftMaid Kitchen Tops KraftMaid Vanity & Granite Program Denova™ Tops Program  Initial Lowe’s store rollout a  1100 Lowe’s stores set with success the program  Expansion to additional stores  Simplified purchase process scheduled for Q4  Pushed attachment rates of  Additional expansion plans for tops and vanities 2012  Further sales growth anticipated in 2012 KraftMaid Vanity & Tops Program  1500 Home Depot stores scheduled to be over the next five months, including 180 Canadian stores  Program designs, sells, and ships cabinets, accessories, lighting, mirrors, countertops and sinks as one package to the consumer 12
  • 13. Plumbing ProductsFinancial Performance Brands 9/30/11 vs. ($ in Millions) 3 Months Ended 9/30/10 9/30/2011 9/30/2010 $ %Net Sales $768 $686 $82 12%Operating Profit* $92 $100 $(8) N/AOperating Margin 12.0% 14.6%Incremental N/AMargin Business Mix (2010 est.) Segment Comments 20%-25% Sales Drivers Age of Housing Stock Existing Home Sales Consumer Confidence 60% Key Commodities Brass, Zinc, Copper New Construction North America New Delta –Touch2O, Peerless Program at Repair/Remodel International Products/Programs Lowe’s Hansgrohe – Global Expansion *Excludes business rationalization charges of $1M & $3M in the third quarter of 2011 & 2010, respectively. See 13 Appendix for GAAP reconciliation. Includes metal commodity hedging gains (losses) of ($10) million and $4 million in the third quarter of 2011 & 2010, respectively.
  • 14. Plumbing Products Update Continuing to invest in brand building, new product development and international growth Gaining share in the U.S. with Delta®, Peerless®, and Brizo® brands − New Peerless and Delta product launches at Lowe’s Continuing international growth with Hansgrohe products Extending the Delta and Peerless brands to additional product categories, including tub and shower bathing systems Gaining share in hot tubs and spas with our HotSpring® and Caldera® brands − Hotspring’s Aria® spa received the “Best Buy” distinction from Consumers Digest Hansgrohe has again received the Product Design Award from the Federal Republic of Germany, a prestigious award in the field of design in Germany Delta Faucet won the 2011 Silver Effie Award, a prestigious advertising award, in recognition of the effectiveness of the marketing and communications campaign for Touch2O® products 14
  • 15. ® ®EPA names Delta Faucet Watersense Partner ofthe Year Delta Faucet Company was recognized for its outstanding support of the U.S. Environmental Protection Agency’s WaterSense program and ongoing commitment to promoting advancements in water efficiency The EPA’s WaterSense program aims to protect the future of the U.S. water supply by providing people with easy and identifiable ways to conserve water WaterSense Partner of the Year awards recognize industry partners that help advance the overall mission of the WaterSense program, demonstrate overall excellence in the water-efficiency arena and increase awareness of the WaterSense brand in a measurable way. Each year, the program recognizes just one manufacturer that demonstrates exceptional performance in each of these areas 15
  • 16. Installation and Other ServicesFinancial Performance Businesses 9/30/11 vs. ($ in Millions) 3 Months Ended 9/30/10 ® ® 9/30/2011 9/30/2010 $ %Net Sales $315 $292 $23 8%Operating (Loss)* $(18) $(20) $2 N/AOperating Margin (5.7%) (6.8%)Incremental 9%MarginBusiness Mix (2010 est.) Segment Comments 100% Sales Drivers Housing Starts Home Size/Design 90+% Energy Efficiency Key Commodities Insulation New Construction New Products/Programs Retrofit Services Repair/Remodel North America International Service Partners Locations *Excludes business rationalization charges of $2M in both the third quarter of 2011 & 2010. Also excludes impairment charge of $7M related to intangible assets in the third quarter of 2011. See Appendix for GAAP 16 reconciliation.
  • 17. Installation and Other Services Update Year-over-year overall share gains Continued retrofit sales gains in 2011 Increasing penetration of multi-family channel Increasing strategic alliances with big builders ERP system fully implemented Benefitting from a lean culture that we expect will drive additional cost savings − Integrating WellHome into MCS to leverage its sales and marketing capability and further expand this business Divestitures − Announced four divestitures in our Installation segment which were focused on non-core diversified products including framing, commercial drywall installation & millwork 17
  • 18. Decorative Architectural ProductsFinancial Performance Brands 9/30/11 vs. ($ in Millions) 3 Months Ended 9/30/10 9/30/2011 9/30/2010 $ %Net Sales $455 $463 $(8) (2%)Operating Profit $88 $104 $(16) N/AOperating Margin 19.3% 22.5%Decremental (200%)MarginBusiness Mix (2010 est.) Segment Comments Sales Drivers Existing Home Sales Lower ticket DIY product <5% Commodities Titanium Dioxide, Petroleum Based Resins, Zinc 100% New Liberty – New Hardware reset at THD New Construction North America Repair/Remodel International Products/Programs Behr – Kilz® Pro-X 18
  • 19. Decorative Architectural Products Update Leveraging our resources to expand top-line growth − Direct to Pro® program with The Home Depot continues to gain traction − Continued investment in new product & merchandising innovation − Focused on the international expansion of our paint business − Continue to upgrade core Premium Plus® paint line by introducing new low VOC formula Behr has once again achieved #1 rankings in a recent leading consumer study Behr recognized by The Home Depot as 2011 Partner of the Year Department 24 – Paint Based on 2011 Harris poll, Kilz ranked highest among paint brands for the second year in a row Liberty Hardware Manufacturing launching new programs at retail in bath and cabinet hardware 19
  • 20. Behr Direct to Pro® 20
  • 21. Other Specialty ProductsFinancial Performance Brands 9/30/11 vs. ($ in Millions) 3 Months Ended 9/30/10 9/30/2011 9/30/2010 $ %Net Sales $161 $159 $2 1%Operating Profit $14 $11 $3 N/AOperating Margin 8.7% 6.9%Incremental Margin 150%Business Mix (2010 est.) Segment Comments 20%-30% Sales Drivers Consumer Confidence 75% Energy Efficiency Home Prices Housing Starts Key Petroleum Based Resins, Glass, Steel New Construction North America Commodities Repair/Remodel International New Products Milgard – Essence Arrow – T50 Elite TM staple gun at Lowe’s *Excludes business rationalization charges of $2M in the third quarter of 2011. See Appendix for GAAP 21 reconciliation.
  • 22. Other Specialty Products Update Milgard Manufacturing has outperformed depressed repair and remodel and new home construction markets − Continuing to gain share in the western United States − Expanding into new geographies including Texas and western Canada − Successful new product introductions − Opportunity to expand further as competitors are exiting the market The Milgard Essence Series TM windows received the Crystal Achievement Award for Most Innovative New Window for a Large Manufacturer from Window and Door Magazine Milgard Manufacturing exited Tempering Business in September Milgard Manufacturing announced the closure of 3 plants in October U.K. Window Group gaining share in the U.K. Launched the Arrow ® T50 Elite TM staple gun at Lowe’s 22
  • 23. Milgard Window New Product IntroductionsEssence Series™ Wood Windows Vinyl Exterior Frame Colors and Doors  Sales exceeded expectations in the  Currently sold in all of Milgard’s western limited market release markets  We expect sales will continue to expand  Sold as an upgrade option in four as product is now available in all of premium colors Milgard’s sales regions  Received the Crystal Achievement Award for Most Innovative New Window of the Year for a Large Manufacturer from Window & Door Magazine 23
  • 24. Unparalleled Brand Strength Masco’s continuing commitment to innovation will create sustainable competitive advantage for our brands 24
  • 25. Investment Considerations Scale Distribution Brands Operating Leverage History of Strong Cash Flow Long-term Fundamentals For Our Markets Are Positive Driving sustainable competitive advantage through innovation, brand strength and disciplined execution 25
  • 26. Operational Leverage Aggressively managing capacity − Gross fixed cost reduction (2006-2010) estimated at ~ $500M Annual maintenance capex ~ $110M High contribution margins − 30% company wide average Masco’s commitment to lean principles should drive increased productivity 26
  • 27. Investment Considerations Scale Distribution Brands Operating Leverage History of Strong Cash Flow Long-term Fundamentals For Our Markets Are Positive Driving sustainable competitive advantage through innovation, brand strength and disciplined execution 27
  • 28. History of Strong Cash FlowYear Housing Sales Free  Limited capital required to fund Starts Cash expected growth (Thousands) Flow  Strong working capital2003 1,848 $10.1B $1.2B management2004 1,959 $11.3B $1.1B  Returned $6B to shareholders2005 2,068 $12.2B $1.0B from 2003 to 2007 in the form of dividends and share2006 1,801 $12.4B $820M buybacks, reducing outstanding2007 1,355 $11.4B $980M shares by 30%2008 906 $9.5B $560M2009 554 $7.8B $550M2010 588 $7.6B $300M $1.6 Billion of Cash on Hand 09/30/2011 28
  • 29. Investment Considerations Scale Distribution Brands Operating Leverage History of Strong Cash Flow Long-term Fundamentals For Our Markets Are Positive Driving sustainable competitive advantage through innovation, brand strength and disciplined execution 29
  • 30. Closing Commentary Market conditions continue to be challenging − 2011 total housing starts forecast projected to be flat with 2010 − Repair and remodel activity still slow for larger projects We continue to take actions to reduce our cost structure − Multiple plant closures − Reduced headcount − Divestitures − Leveraging our infrastructures Operational priorities − Installation and Cabinets − Driving lean benefits throughout our supply chain We are confident in the long-term fundamentals for our markets and continue to invest in: − Increasing our penetration in the North American Cabinet Dealer channel − Expanding our leadership position in North American DIY coatings − Increasing our penetration with the professional painter − Launching new programs this year in Plumbing, Cabinets and Builders’ Hardware − Developing international opportunities for Paint and Plumbing 30
  • 31. Questions & Answers 31
  • 32. Appendix 32
  • 33. Masco Credit Facility  $1.25 billion line established in June 2010 (amended in February 2011) with two financial covenants − Total debt to adjusted total capitalization threshold (65%) − Interest coverage (adjusted EBITDA/Interest Expense)  In compliance with all covenants and had no borrowings outstanding at September 30, 2011 Approximately $1 billion of borrowing availability on the line today 33
  • 34. $0 $400 $800 $1,200 2011 2012 2013 2014 2015 September 30, 2011 2016 2017 2018 2019 2020 2021 2022 ($ In Millions) 2023 Fixed 2024 2025 2026 Outstanding Debt Maturities 2027 2028 2029 2030 2031 2032 2033 2034 2035 203634
  • 35. Q3 2011 Results (As Reported) Change in Net Sales Operating Margin * Sales Q3 2011 vs. Q3 Q3 2011 Q3 2010 2010 Q3 2011 Q3 2010Cabinets and Related Products $ 307 $ 357 -14% -11.1% -17.1%Plumbing Products 768 686 12% 11.8% 14.1%Installation and Other Services 315 292 8% -8.6% -7.5%Decorative Architectural Products 455 463 -2% 19.3% 22.5%Other Specialty Products 161 159 1% 7.5% 6.9% Total Segment* $ 2,006 $ 1,957 3% 6.5% 6.6%North America $ 1,524 $ 1,528 -- 5.2% 5.2%International 482 429 12% 10.4% 11.7% Total Segment - Reported $ 2,006 $ 1,957 3% 6.5% 6.6% * Operating margin is before general corporate expense, net and $1M charge for litigation related to Cabinets and Related Products segment. 35
  • 36. Q3 2011 Gross Profit/SG&A ($ in Millions) Third Quarter  Gross profit impacted by: $495 $494 25.2% − Increased material costs 24.7% − Under-absorption of fixed costs − Lower business rationalization costs Gross Profit / Margin  SG&A impacted by: $393 $392 − Increased sales 19.6% 20.0% − Increased expenses to support strategic initiatives − Lower business rationalization costs SG&A as a % of Sales Q3 - 2011 Q3 - 2010 (SG&A includes General Corp. Expense in 2011 and 2010). 36
  • 37. Q3 2011 Segment Rationalization Charges Rationalization Charges - Q3 2011 Q3 2010 2011 YTD 2010 YTD($ in Millions) Plant Total - Total - Total Total Severance ERP RTA Exit Closures Q3 2011 Q3 2010 YTD - 2011 YTD - 2010Cabinets and Related Products $ (1) $ (3) $ (1) $ (2) $ (7) $ (34) $ (35) $ (88)Plumbing Products - (1) - - (1) (3) (12) (10)Installation and Other Services (2) - - - (2) (2) (6) (6)Decorative Architectural Products - - - - - - (1) -Other Specialty Products - (2) - - (2) - (2) -Corp. / Other (1) - - - (1) - (5) -Total Q3 2011 $ (4) $ (6) $ (1) $ (2) $ (13) $ (39) $ (61) $ (104)Total Q3 2010 $ (2) $ (5) $ (2) $ (30) $ (39)Change $ (2) $ (1) $ 1 $ 28 $ 26 37
  • 38. Cabinets & Related ProductsCurrent Segment Dynamics Drivers of Q3 Sales Decline Product Reduced Exit Activity Currency Total North America $(38) $(10) --$ $(48) International -- (10) 8 (2) $(38) $(20) $8 $(50) 38
  • 39. 2011 Estimate - Other Financial Data ($ in Millions) 2011 Estimate 2010 Actual Rationalization Charges* ~ $100 $208 Tax Rate** ~ 200% 32% Interest Expense ~ $250 $251 General Corp. Expense ~ $125 $110 Capital Expenditures ~ $170 $137 Depreciation & Amortization ~ $260 $279 Outstanding Shares 348 million 349 million*Based on current business plans.**Tax rate for 2010 excludes the valuation allowance on the Federal deferred income tax assets and the impairment chargefor goodwill and other intangible assets. 2011 is impacted by an increase in the valuation allowance on net operating lossesand losses in certain tax jurisdictions providing no tax benefit. 39
  • 40. Segment Mix Full-Year 2010 - Estimate NewSegment International North America ConstructionCabinets and 25% 75% 25% - 30%Related ProductsPlumbing 40% 60% 20% - 25%ProductsInstallation and -- 100% 90+%Other ServicesDecorative -- 100% <5%ArchitecturalProductsOther Specialty 25% 75% 20% - 30%ProductsCompany Total 22% 78% 25% - 30% 40
  • 41. Masco International Revenue Split* 6% 6% 7% 36% Central Europe United Kingdom Emerging Markets 9% Eastern Europe Northern Europe North America Southern Europe 11% 25% *Based on company estimates as of 12/31/2010. 41
  • 42. “Highest in Customer Satisfaction with Cabinets” KraftMaid Cabinetry received the highest numerical score among cabinetry brands in the proprietary J.D. Power and Associates 2011 US Kitchen Cabinet Satisfaction StudySM. Study based on responses from 1,207 consumers measuring 7 companies and measures opinions of consumers who purchased kitchen cabinets within the previous 12 months. Proprietary study results are based on experiences and perceptions of consumers surveyed in March-April 2011. Your experiences may vary. Visit jdpower.com J.D. Power and the J.D. Power award are the marks of J.D. Power and Associates. 42
  • 43. Additional Inquiries Contact: Maria DueyVice President of Investor Relations maria_duey@mascohq.com 313-792-5500 43