Masco Corporation Reports 2010 Results

TAYLOR, Mich., Feb. 14, 2011 /PRNewswire/ --

2010 Full-Year Commentary

• Sales declined three percent to $7.6 billion.
• 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 full-year of 2009 were as follows:
  • Gross profit margins were 26.4 percent compared to 26.5 percent.
  • Operating profit margins were 5.7 percent compared to 5.6 percent.
  • Income was $.16 per common share compared to $.31 per common share.
• (Loss) from continuing operations, as reported was $(3.00) per common share compared to $(.41) per common share for the full-year of 2009.
• We recorded a valuation allowance related to U.S. deferred tax assets and an impairment charge for goodwill and other intangible assets.  These charges reduced our reported earnings by $(2.76) per common share for the full-year and fourth quarter of 2010.
• Working capital as a percent of sales improved to 13.4 percent at December 31, 2010, compared to 14.7 percent at December 31, 2009.
• Free cash flow (cash from operations, less capital expenditures, before dividends) approximated $290 million.
• We ended 2010 with over $1.7 billion of cash.

Masco Corporation (NYSE: MAS) today reported that net sales from continuing operations for the year ended December 31, 2010 decreased three percent to $7.6 billion.  North American sales decreased three percent and International sales were flat.  In local currencies, International sales increased five percent compared with 2009.

Income from continuing operations was $.16 per common share and $.31 per common share for 2010 and 2009, respectively, excluding the items in Exhibit A and with a normalized tax rate of 36 percent.  Including these items, loss from continuing operations, as reported was $(3.00) per common share and $(.41) per common share for the years ended December 31, 2010 and 2009, respectively.

"Industry conditions in 2010 continued to be challenging and it was a tough year for Masco.  In many ways 2010 was a tale of two halves.  We came out of 2009 with good momentum and our sales in the first half of 2010 were up two percent.  As the year progressed, the expiration of the home buyer tax credit, increasing commodity costs and the competitive environment made the second half of 2010 much more challenging and our sales were down seven percent compared to second half 2009.  Our installation and cabinet businesses which are tied to new home construction and "big ticket" repair and remodel activity were particularly hard hit.  We are encouraged that in a difficult environment, our full-year adjusted gross margins (26.4 percent) and operating profit (5.7 percent) were essentially flat with 2009 even though sales were down three percent.  We accomplished a lot in 2010 as we focused on strengthening our brands and improving our execution.  We continued to implement the Masco Business System (MBS) across the enterprise, introduced innovative new products including Delta®Touch20® faucets, Arrow®RED® line of staplers, and Kilz® Pro-X™ paint, and enhanced our financial flexibility, ending the year with $1.7 billion of cash," said Masco's CEO Tim Wadhams.

We continue to focus on the rationalization of our businesses, including business consolidations, plant closures, headcount reductions, system implementations and other initiatives.  During 2010 and 2009, we incurred costs and charges of $208 million pre-tax ($.38 per common share, after tax) and $94 million pre-tax ($.17 per common share, after tax), respectively, related to these initiatives.

In 2010, we recorded non-cash, pre-tax impairment charges for goodwill and other intangible assets and deferred tax assets valuation allowance aggregating $1,092 million ($2.76 per common share, after tax).  The impairment charge for goodwill and other intangible assets is primarily related to our Installation and Other Services segment and reflects our expectation that the recovery in new home construction will be modestly slower than previously anticipated.  The charge for deferred tax assets valuation allowance reflects accounting guidance that requires a valuation allowance on deferred tax assets because we are in a three-year cumulative loss position, due to U.S. operating losses and the U.S.  goodwill impairment charge that primarily occurred in the fourth quarter of 2010.  These losses negated our ability to utilize our previously identified tax planning strategy.  We expect to have the deferred tax assets available to us to offset cash taxes on future income.  During 2009, we recorded a non-cash pre-tax impairment charge for goodwill (in the fourth quarter) of $262 million ($.51 per common share, after tax).  

We recently successfully amended our revolving credit facility to reflect the impact of our impairment charges for goodwill and other intangible assets and the valuation allowance for our deferred tax assets on our net worth; we continue to have borrowing capacity of approximately $1 billion available under the revolving credit facility.

Fourth Quarter 2010

2010 Fourth Quarter Commentary

• Sales decreased nine percent to $1.7 billion.
• Results for key financial measures, as adjusted for certain items (see Exhibit B) and with a normalized tax rate of 36 percent, compared to the fourth quarter of 2009 were as follows:
  • Gross profit margins were 23.2 percent compared to 26.9 percent.
  • Operating profit margins were 1.6 percent compared to 4.8 percent.
  • (Loss) income was $(.08) per common share compared to $.05 per common share.
• (Loss) income from continuing operations, as reported was $(2.96) per common share compared to $(.49) per common share in the fourth quarter of 2009.

Fourth quarter 2010 net sales from continuing operations decreased nine percent to $1.7 billion compared with $1.9 billion for the fourth quarter of 2009.  North American sales decreased nine percent and International sales decreased seven percent.  In local currencies, International sales were flat compared with the fourth quarter of 2009.  

(Loss) income from continuing operations was $(.08) per common share and $.05 per common share, for the fourth quarters of 2010 and 2009, respectively, excluding the items in Exhibit B and with a normalized tax rate of 36 percent.  Including these items, loss from continuing operations, as reported, was $(2.96) per common share in the fourth quarter of 2010 compared to $(.49) per common share in the fourth quarter of 2009.  

During the fourth quarters of 2010 and 2009, we incurred business rationalization costs and charges of $104 million pre-tax ($.19 per common share, after tax; this includes a non-cash, pre-tax charge of $67 million related to a fourth quarter 2010 decision to close a cabinet facility that had previously been idled) and $27 million pre-tax ($.05 per common share, after tax), respectively.  

Outlook 2011

"The trends impacting our business including depressed new home construction, the deferral of "big ticket" repair and remodel activity and commodity cost pressures have continued into early 2011.  We expect a challenging business environment, particularly in the first half of 2011; we expect the second half of 2011 to be stronger. The MBS continues to drive positive change across Masco:  although we are incurring short-term costs, our Cabinet integration is on plan and we expect will ultimately drive fixed cost reductions and share gains; we have strengthened our brands, our focus on innovation is driving new opportunities and we have added outstanding talent to our leadership teams to enhance the development and execution of our business strategies," said Tim Wadhams.

"In addition, we recently announced our agreement between Masco Contractor Services and Owens Corning, which we believe will grow sales, create efficiencies in logistics, lower working capital, provide consistent supply and better service for our customers.  We are confident about the long-term fundamentals for the new home construction and home improvement markets and we are optimistic about the future.  We expect that improvements in our markets and in consumer spending together with the changes we are driving across Masco will create significant value for our shareholders and want to thank the Masco Team for their continued dedication to making it all happen," 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 2010 fourth quarter supplemental material, including a presentation in PDF format, will be distributed after the market closes on February 14, 2011 and will be available on the Company's Web site at www.masco.com.

A conference call regarding items contained in this release is scheduled for Tuesday, February 15, 2011 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 (913) 312-1393 (confirmation #5663649).  The conference call will be webcast simultaneously on the Company's Web site at www.masco.com and supplemental material, including the financial data referred to on the call and a reconciliation of non-GAAP information provided on the call, will also be available on the Web site.  

A replay of the call will be available on Masco's Web site or by phone by dialing (719) 457-0820 (replay access code #5663649) approximately two hours after the end of the call and will continue through February 22, 2011.

Masco Corporation's press releases and other information are available through the Company's toll free number, 1-888-MAS-NEWS, or under the Investor Relations section of Masco's Website at www.masco.com.

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," "intend," "plan," "estimate," "expect," "assume," "seek," 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, and our ability to achieve cost savings through the Masco Business System and other initiatives.  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 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 is not possible for us to predict all of them.  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 Web site at www.masco.com.

SOURCE Masco Corporation

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