Masco Corporation Reports Fourth Quarter and 2020 Year-End Results

Rhea-AI Summary

Masco Corporation (NYSE: MAS) reported a strong performance for the fourth quarter and full year of 2020. Net sales rose 13% to $1,860 million in Q4, with North American sales increasing 13% and international sales up 8%. Gross margin improved to 35.5% and operating margin reached 16.5%. For the full year, sales increased 7% to $7,188 million, bolstered by a 19% rise in operating profit. The company announced a 68% dividend increase to $0.94 per share and a $2 billion share repurchase plan, reflecting confidence in future growth prospects.

Positive

• Net sales increased 13% in Q4 2020 to $1,860 million.
• Operating profit rose 19% to $1,295 million for the full year.
• Earnings per share increased 38% to $3.04 for the full year.
• Announced a 68% increase in annual dividend to $0.94 per share.
• Approved a new $2 billion share repurchase program.

Negative

• International sales declined 1% for the full year.

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^® paint; Delta^® and Hansgrohe^® faucets, bath and shower fixtures; Kichler^® decorative and outdoor lighting; and HotSpring^® 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 December 31,								Year Ended 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 administrative expenses		353				310				1,292				1,274
Impairment charge for other intangible assets		—				—				—				9
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 operations before income taxes		275				217				1,131				914
Income tax expense		67				49				269				230
Income from continuing operations		208				168				862				684
Income from discontinued operations, net		3				295				414				296
Net income		211				463				1,276				980
Less: Net income attributable to noncontrolling interest		16				10				52				45
Net income attributable to Masco Corporation		$	195			$	453			$	1,224			$	935
Income per common share attributable to Masco Corporation (diluted):
Income from continuing operations		$	0.73			$	0.56			$	3.04			$	2.20
Income from discontinued operations, net		0.01				1.03				1.55				1.02
Net income		$	0.74			$	1.59			$	4.59			$	3.22
Average diluted common shares outstanding		261				282				264				288
Amounts attributable to Masco Corporation:
Income from continuing operations		$	192			$	158			$	810			$	639
Income from discontinued operations, net		3				295				414				296
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 December 31,								Year Ended December 31,
		2020				2019				2020				2019
Gross Profit, Selling, General and Administrative Expenses, and Operating Profit Reconciliations
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 and administrative expenses, as reported		$	353			$	310			$	1,292			$	1,274
Rationalization charges		—				—				2				4
Selling, general and administrative expenses, as adjusted		$	353			$	310			$	1,290			$	1,270
Selling, general and administrative expenses as percent of net sales, as reported		19.0		%		18.9		%		18.0		%		19.0		%
Selling, general and administrative expenses as percent of net sales, as adjusted		19.0		%		18.9		%		17.9		%		18.9		%
Operating profit, as reported		$	307			$	255			$	1,295			$	1,088
Rationalization charges		2				2				11				13
Impairment charge for other intangible assets		—				—				—				9
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 December 31,								Year Ended December 31,
	2020				2019				2020				2019
Income Per Common Share Reconciliation
Income from continuing operations before income taxes, as reported	$	275			$	217			$	1,131			$	914
Rationalization charges	2				2				11				13
Impairment charge for other intangible assets	—				—				—				9
Pension costs associated with expected terminated plans	6				—				23				—
Income related to an escrow settlement	(9		)		—				(9		)		—
Currency translation loss on liquidation of dormant entities	9				—				9				—
(Earnings) from equity investments, net	(2		)		—				(3		)		(1		)
Loss on extinguishment of debt	—				—				6				—
Income from continuing operations before income taxes, as adjusted	281				219				1,168				935
Tax at 25% rate	(70		)		(55		)		(292		)		(234		)
Less: Net income attributable to noncontrolling interest	16				10				52				45
Income from continuing operations, as adjusted	$	195			$	154			$	824			$	656
Income from continuing operations per common share, as adjusted	$	0.75			$	0.55			$	3.12			$	2.28
Average diluted common shares outstanding	261				282				264				288

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.

MASCO CORPORATION Condensed Consolidated Balance Sheets and Other Financial Data - Unaudited December 31, 2020 and 2019
		(dollars in millions)
		December 31, 2020				December 31, 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 compensation		(25		)		(23		)
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 disposed		870				722
Other, net		2				22
Net cash from investing activities		531				582
Effect of exchange rate changes on cash and cash investments		31				14
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 December 31,											Year Ended December 31,
	2020				2019				Change			2020				2019				Change
Plumbing Products
Net sales	$	1,172			$	1,026			14	%		$	4,136			$	3,984			4	%
Operating profit, as reported	$	223			$	178						$	806			$	708
Operating margin, as reported	19.0		%		17.3		%					19.5		%		17.8		%
Rationalization charges	1				2							6				13
Accelerated depreciation related to rationalization activity	—				—							1				—
Operating profit, as adjusted	224				180							813				721
Operating margin, as adjusted	19.1		%		17.5		%					19.7		%		18.1		%
Depreciation and amortization	22				21							83				80
EBITDA, as adjusted	$	246			$	201						$	896			$	801
Decorative Architectural Products
Net sales	$	688			$	613			12	%		$	3,052			$	2,723			12	%
Operating profit, as reported	$	108			$	100						$	583			$	480
Operating margin, as reported	15.7		%		16.3		%					19.1		%		17.6		%
Rationalization charges	1				—							4				—
Impairment charge for other intangible assets	—				—							—				9
Operating profit, as adjusted	109				100							587				489
Operating margin, as adjusted	15.8		%		16.3		%					19.2		%		18.0		%
Depreciation and amortization	10				10							41				41
EBITDA, as adjusted	$	119			$	110						$	628			$	530
Total
Net sales	$	1,860			$	1,639			13	%		$	7,188			$	6,707			7	%
Operating profit, as reported - segment	$	331			$	278						$	1,389			$	1,188
General corporate expense, net	(24)				(23)							(94)				(100)
Operating profit, as reported	307				255							1,295				1,088
Operating margin, as reported	16.5		%		15.6		%					18.0		%		16.2		%
Rationalization charges - segment	2				2							10				13
Accelerated depreciation related to rationalization activity - segment	—				—							1				—
Impairment charge for other intangible assets	—				—							—				9
Operating profit, as adjusted	309				257							1,306				1,110
Operating margin, as adjusted	16.6		%		15.7		%					18.2		%		16.5		%
Depreciation and amortization - segment	32				31							124				121
Depreciation and amortization - non-operating	2				2							8				9
EBITDA, as adjusted	$	343			$	290						$	1,438			$	1,240

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 December 31,											Year Ended December 31,
	2020				2019				Change			2020				2019				Change
North American
Net sales	$	1,468			$	1,295			13	%		$	5,805			$	5,328			9	%
Operating profit, as reported	$	268			$	228						$	1,167			$	987
Operating margin, as reported	18.3		%		17.6		%					20.1		%		18.5		%
Rationalization charges	2				2							10				13
Accelerated depreciation related to rationalization activity	—				—							1				—
Impairment charge for other intangible assets	—				—							—				9
Operating profit, as adjusted	270				230							1,178				1,009
Operating margin, as adjusted	18.4		%		17.8		%					20.3		%		18.9		%
Depreciation and amortization	20				20							80				81
EBITDA, as adjusted	$	290			$	250						$	1,258			$	1,090
International
Net sales	$	392			$	344			14	%		$	1,383			$	1,379			—	%
Operating profit, as reported	$	63			$	50						$	222			$	201
Operating margin, as reported	16.1		%		14.5		%					16.1		%		14.6		%
Depreciation and amortization	12				11							44				40
EBITDA	$	75			$	61						$	266			$	241
Total
Net sales	$	1,860			$	1,639			13	%		$	7,188			$	6,707			7	%
Operating profit, as reported - segment	$	331			$	278						$	1,389			$	1,188
General corporate expense, net	(24)				(23)							(94)				(100)
Operating profit, as reported	307				255							1,295				1,088
Operating margin, as reported	16.5		%		15.6		%					18.0		%		16.2		%
Rationalization charges - segment	2				2							10				13
Accelerated depreciation related to rationalization activity - segment	—				—							1				—
Impairment charge for other intangible assets	—				—							—				9
Operating profit, as adjusted	309				257							1,306				1,110
Operating margin, as adjusted	16.6		%		15.7		%					18.2		%		16.5		%
Depreciation and amortization - segment	32				31							124				121
Depreciation and amortization - non-operating	2				2							8				9
EBITDA, as adjusted	$	343			$	290						$	1,438			$	1,240

Historical information is available on our website.

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

FAQ

What were Masco's earnings per share for the fourth quarter of 2020?

Masco's earnings per share for Q4 2020 was $0.73, compared to $0.56 in Q4 2019.

How much did Masco's net sales increase in the fourth quarter of 2020?

Net sales for Masco increased by 13% to $1,860 million in the fourth quarter of 2020.

What is Masco's full year 2020 operating profit?

Masco's operating profit for the full year 2020 was $1,295 million, up 19% from the previous year.

When will Masco's new dividend increase take effect?

Masco's new dividend of $0.94 per share will take effect beginning in the second quarter of 2021.

What share repurchase authorization was approved by Masco's Board?

Masco's Board approved a new $2 billion share repurchase authorization effective February 10, 2021.