Masco Corporation Reports Third Quarter 2012 Results
October 29, 2012
Taylor, Mich., (October 29, 2012) — Masco Corporation (NYSE: MAS) today reported that its net sales of $2 billion for the third quarter ended September 30, 2012 were flat compared to the third quarter of 2011. North American sales increased four percent and International sales decreased twelve percent. In local currencies, International sales decreased three percent compared with the third quarter of 2011.
Income from continuing operations was $.13 per common share and $.09 per common share for the third quarters of 2012 and 2011, respectively, excluding the items in Exhibit A and with a normalized tax rate of 36 percent. Including these items, income from continuing operations, as reported was $.06 per common share compared to $.16 per common share for the third quarter of 2011.
2012 Third Quarter Commentary
• Net sales of $2.0 billion were flat compared to the third quarter of 2011. Excluding the impact of currency translation, net sales increased 2%.
• Results for key financial measures, as adjusted for certain items (see Exhibit A) and with a normalized tax rate of 36 percent, compared to the third quarter of 2011, were as follows:
• Gross profit margins improved to 26.5 percent compared to 25.4 percent
• Operating profit margins improved to 7.2 percent compared to 6.5 percent
• Income from continuing operations was $.13 per common share compared to $.09 per common share
• Income from continuing operations, as reported, was $.06 per common share compared to $.16 per common share for the third quarter of 2011.
• Working capital as a percent of sales was 14.8 percent at September 30, 2012, the same as at September 30, 2011.
• We ended the third quarter of 2012 with approximately $1.2 billion of cash.
“Our top line in the third quarter benefitted from the increase in new home construction activity in North America, new product introductions, and from selling price increases,” said Masco’s CEO, Tim Wadhams. “These positives offset both the slow economic growth in North America and the continued weakening of Euro-Zone economies that we anticipated for the second half of 2012. On an adjusted basis, our margins improved on flat sales to 7.2 percent compared to 6.5 percent in third quarter 2011, driven by our focus on total cost productivity and improved price/commodity relationships. We are pleased with that outcome.”
During the third quarters of 2012 and 2011, we incurred pre-tax costs and charges of $28 million and $13 million, respectively, related to business rationalization initiatives. We expect full year 2012 business rationalization charges to be approximately $65 million. In the Other Specialty Products segment, as reported, one of the businesses was negatively impacted in the third quarter by a $12 million adjustment to its warranty expense as a result of the periodic review of warranty claim activity, sales volume, demographics and the estimated cost to service anticipated claims.
“We continue to make progress on our strategic initiatives, which include leveraging our brands, reducing our costs, improving our Installation and Cabinet segments and strengthening our balance sheet. We are encouraged by the continued strength in new home construction activity, driven by the stabilization and improvement of home prices in many areas of the U.S., increasing affordability and demographic trends. These factors should continue to drive demand for new homes over the next several years. Increased new home construction activity benefits virtually all of our businesses, particularly our Installation segment which has improved significantly this year, almost breaking even in the third quarter and which we expect to be profitable in the fourth quarter. In our Cabinet segment, we announced actions during the quarter, including the closure of a manufacturing location and a headcount reduction, which we expect will improve our efficiency and reduce costs by approximately $20 million on an annual basis. While we are committed to returning our Cabinet segment to profitability, we anticipate that big ticket remodeling will remain weak, even though we continue to see modest improvement in overall repair and remodeling activity,” said Tim Wadhams.
Headquartered in Taylor, Michigan, Masco Corporation is one of the world’s leading manufacturers of home improvement and building products, as well as a leading provider of services that include the installation of insulation and other building products.
The 2012 third quarter supplemental material, including a presentation in PDF format, will be distributed after the market closes on October 29, 2012 and will be available on the Company’s website at www.masco.com.
A conference call regarding information contained in this release is scheduled for Tuesday, October 30, 2012 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 (877) 550-4056 and from outside the U.S. at (706) 679-3614. Please use the conference identification number 22434422. 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 22434422. The telephone replay will be available approximately two hours after the end of the call and continue through November 15, 2012.
Statements contained in this press release 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, uncertainty in the international economy, shifts in consumer preferences and purchasing practices, and our ability to achieve cost savings through business rationalizations and other initiatives. 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 press release speak only as of the date of this press release. 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.
