Presentation is loading. Please wait.

Presentation is loading. Please wait.

Raymond James 34 th Annual Institutional Investors Conference March 6, 2013.

Similar presentations


Presentation on theme: "Raymond James 34 th Annual Institutional Investors Conference March 6, 2013."— Presentation transcript:

1 Raymond James 34 th Annual Institutional Investors Conference March 6, 2013

2 Safe Harbor Statement 2 Written and oral statements made in this presentation that reflect our views about our future performance constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 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 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. 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-GAAP performance measures and ratios used in managing the business may provide attendees of this presentation 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 SEC and is available on Masco’s web site,

3 INVESTMENT THESIS Strong Fundamentals - Positioned for Growth 3 The strengths The growth The strategy The company

4 Masco at a Glance Revenue % renovation vs. new construction 73% Employees 30,000 Market capitalization >$6.0B Dividend yield 2.9% Revenue $7.8B Cumulative free cash flow last 3 years ~$1B Cash at 12/31/2012 $1.4B

5 Masco – Strong Brands with Industry Leading Positions Business Segment Cabinets and Related Products Plumbing Products Installation and Other Services Decorative Architectural Products $1.2B $3.0B $1.2B $1.8B Revenue 2012% of Total 38% 24% 15% 16% $7.8B100% Total company 5 Other Specialty Products $0.6B7% R&R% vs. NC NA% vs. Int’l 82%59% 99%100% 69%73% 16%100% 75% 73%78% 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

6 Masco – Unique Scope and Scale 6 manufacturer of faucets 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 installer of insulation products for the new home construction market Largest We believe we are the……

7 INVESTMENT THESIS Strong Fundamentals - Positioned for Growth 7 The strengths The growth The strategy The company

8 Masco’s Strategic Initiatives 8 Positioned for Growth Leverage brands Innovative products Expand market leadership Total cost productivity Drive lean benefits Reduce costs Return Cabinets to profitability Drive profitability and growth in Installation Improve underperforming businesses Debt reduction Strong liquidity Strengthen Balance Sheet 4

9 1. EXPAND MARKET LEADERSHIP Key Brands Gaining Share since 2010 ExamplesGaining Share Delta ®, Peerless ®, and Brizo ® brands in U.S. International plumbing growth with Hansgrohe Decorative Architectural: Behr ® #1 DIY Paint at The Home Depot, Direct to Pro ® service growth, Kilz Pro line Other Specialty: Milgard ® windows outperforming market, UK growing share Masco Contractor Services gaining share with insulation, retrofit and commercial channels 9 Merillat ® and Quality ® cabinet brands gaining share with builders

10 2. REDUCE COSTS Significant Progress Lowering Cost Structure  Higher Margins Cumulative Gross Fixed Cost Reductions Headcount Reductions of ~50% Includes 33 closed / mothballed facilities 10

11 3. IMPROVE UNDERPERFORMING BUSINESSES Improved Profitability and Positioned for Growth Cabinets New North American management team in place in 2012 Achieved ~$32M operating profit improvement in 2012 Disposition of Danish ready-to-assemble cabinet business  Revenue ~$250M and operating loss of ~$30M Installation Continued penetration of retrofit and commercial channels Further cost reductions from lean, ERP leverage, supply chain Achieved profitability in Q

12 4. STRENGTHEN BALANCE SHEET Declining Debt to Capitalization Ratio 12 $400M reduction in 2012 Planned reduction of $200M in 2013 Valuation Allowance of ~$630 million on Deferred Tax Assets is expected to be reversed when our U.S. businesses return to sustained profitability

13 INVESTMENT THESIS Strong Fundamentals - Positioned for Growth 13 The strengths The growth The strategy The company

14 Broad distribution 3 3 Industry innovator 2 2 Market-leading brands 1 1 Masco Business System 4 4 Strong financial position 5 5 Key Strengths we are Leveraging 14

15 STRENGTH 1: MARKET LEADING BRANDS Unparalleled Brand Strength 15 Installation & Other Services Plumbing Products Cabinets & Related Products Decorative Architectural Products Other Specialty Products

16 STRENGTH 2: INDUSTRY INNOVATOR Significant New Product Introductions – Last 3 Years 30% * Examples of New Products/Technologies Existing Products % Milgard Essence™ Windows Arrow R.E.D. ACE ® Salt Water Sanitizing System 2012 Revenues 16 BehrPro TM Masco Cabinetry’s ProCision TM Process * Percentage of 2012 gross sales of manufactured products attributable to new products introduced in trailing 36 months Kilz PRO-X TM Delta Toilets Paint & Primer in One with Advanced Stain Blocking Formula KraftMaid Vanities

17 STRENGTH 3: BROAD DISTRIBUTION Winning with Winning Customers Broad Portfolio Big Box RetailersHomebuildersWholesalers / Dealers Exclusive products and services for the direct to builder channel A leading insulation contractor in the US Dedicated customer- specific service organizations with over 750 field service employees Extensive training programs for branch and showroom associates Superior dealer support through display and technology expertise Premier brands  drive traffic 17

18 Customer focus Lean QualityTalent Innovation STRENGTH 4: MASCO BUSINESS SYSTEMS A Continuous Improvement Culture – At the Center of Our Success 18 MBS

19 STRENGTH 5: STRONG FINANCIAL POSITION Strong Liquidity and Improving Balance Sheet Strong Liquidity (as of 12/31/2012) Cash and equivalents of ~$1.4B Borrowing availability of ~$870M A strong free cash flow business – ~$1B last 3 years – Maintenance capex of ~$100M annually 19 Paid down $400M in 2012 Plan to reduce debt in 2013 by $200M Declining Debt to Capitalization Ratio Valuation Allowance of ~$630 million on Deferred Tax Assets is expected to be reversed when our U.S. businesses return to sustained profitability

20 INVESTMENT THESIS Strong Fundamentals - Positioned for Growth 20 The strengths The growth The strategy The company

21 Positioned for Growth 21 Leveraged to the recovery Continued brand leverage and share expansion Continued cost position improvement Disciplined capital deployment

22 1. Leveraged to the Recovery Adjusted Operating Margin* 22 Reflects lower fixed cost base of >$600M (gross) driving lean principles across the company 30% margin on incremental volume Housing starts 2.1M0.6M ~1-1.5M *See Appendix slide 32 for GAAP reconciliation 0.7M

23 2.Initiatives to Leverage Brands and Expand Share Geographic Expansion Cabinets and Related Products Plumbing Products Installation and Other Services Decorative Architectural Products Other Specialty Products Product Introductions Extend Categories Strengthen Brand Loyalty 23

24 3. Continue to Improve Cost Position ~$195M* of Total Cost Productivity in * Gross Sourcing Lean Initiatives Driven by: Distribution & Logistics Actions Taken In Prior Years Plant Closures Headcount Reductions System Implementations

25 4. Disciplined Capital Deployment Maintenance capex: $100M annually Strong Cash Flow Generation Financial Flexibility Target 45%-55% debt to capitalization vs. ~87% Dividend Maintain dividend yield ~2% Acquisitions Potential acquisitions (<$100M) in support of international expansion 25

26 2013 Priorities Investment in strategic growth initiatives Geographic expansion Total cost productivity Reduce debt by ~$200M Cabinet profit improvement Profitably grow Installation Grow share of key brands 26 Successfully launch new products and programs

27 Masco 3-5 Years Out – A “Normal” Housing Market 27 Estimate revenues of ~$10-12B, margin of 10-14% Positioned for Growth Optimized portfolio with a strong balance sheet International expansion Positive return from assets employed in – Cabinets – Installation

28 WHY INVEST IN MASCO Strong Fundamentals - Positioned for Growth 28 Executing initiatives to improve performance Continuing to reduce fixed costs, expand share and improve underperformers The Strategy Building on market-leading positions Best brands, innovative products, lean practices, strong financial position The Strengths Well-positioned for growth Lower cost structure  higher margins, leveraged to recovery The Growth

29

30 Appendix

31 Appendix – Profit Reconciliation – Fourth Quarter 31 ($ in Millions)Q4 2012Q Sales $ 1,890 $ 1,738 Gross Profit – As Reported $ 446 $ 332 Rationalization charges Gross Profit – As Adjusted $ 473 $ 380 Gross Margin - As Reported23.6% 19.1% Gross Margin - As Adjusted25.0% 21.9% Operating Profit (Loss) – As Reported $ 21 $ (531) Impairment of goodwill and other intangible assets $ 42 $ 494 Rationalization charges Charge for litigation settlements, net 3 3 Gain from sales of fixed assets, net (3) - Operating Profit – As Adjusted $ 94 $ 27 Operating Margin - As Reported1.1% -30.6% Operating Margin - As Adjusted5.0% 1.6%

32 Appendix – Profit Reconciliation – Full-Year 32 ($ in Millions)YTD 12/31/12YTD 12/31/11 Sales $ 7,745 $ 7,467 Gross Profit – As Reported $ 1,951 $ 1,784 Rationalization charges Other Specialty Products - Warranty 12 - Gross Profit – As Adjusted $ 2,015 $ 1,875 Gross Margin - As Reported25.2% 23.9% Gross Margin - As Adjusted26.0% 25.1% Operating Profit (Loss) – As Reported $ 271 $ (295) Rationalization charges Charge for litigation settlements, net 77 9 Impairment of goodwill and other intangible assets Other Specialty Products - Warranty 12 - Gain from sales of fixed assets, net (8) - Operating Profit – As Adjusted $ 472 $ 329 Operating Margin - As Reported3.5% -4.0% Operating Margin - As Adjusted6.1% 4.4%

33 Appendix – EPS Reconciliation – Fourth Quarter 33 (in Millions)Q4 2012Q Loss from Continuing Operations before Income Taxes – As Reported $ (37) $ (593) Impairment of goodwill and other intangible assets $ 42 $ 494 Rationalization charges Charge for litigation settlements, net 3 3 Gain from sales of fixed assets, net (3) - Gain from financial investments, net (4) Income (Loss) from Continuing Operations before Income Taxes – As Adjusted $ 32 $ (39) Tax at 36% rate benefit (expense) (12) 14 Less: Net income attributable to non-controlling interest 7 5 Net Income (Loss), as adjusted $ 13 $ (30) Income (Loss) per common share, as adjusted $ 0.04 $ (0.09) Shares Outstanding

34 Appendix – EPS Reconciliation – Full-Year 34 ($ in Millions)YTD 12/31/12YTD 12/31/11 Income (Loss) from Continuing Operations before Income Taxes – As Reported $ 42 $ (472) Rationalization charges $ 78 $ 121 Charge for litigation settlements, net 77 9 Impairment of goodwill and other intangible assets Other Specialty Products - Warranty 12 - Interest carry costs 7 - Gain from sales of fixed assets, net (8) - Gain from financial investments, net (22) (73) Income (Loss) from Continuing Operations before Income Taxes – As Adjusted $ 228 $ 79 Tax at 36% rate benefit (expense) (82) (28) Less: Net income attributable to non-controlling interest Net Income, as adjusted $ 111 $ 9 Income per common share, as adjusted $ 0.32 $ 0.02 Shares Outstanding

35 3. IMPROVE UNDERPERFORMING BUSINESSES North America Cabinetry’s Strategic Initiatives 35 Rationalize operational footprint Increase overhead efficiency Cost Realignment Channel strategies Promotions Products Dealers Builders Retail Consumers Profitable Revenue Growth Customer Focus

36 ($ in Millions)2013 Estimate2012 Actual Rationalization Charges 1 ~ $40$78 Tax Rate~ 25%198% Interest Expense~ $240$254 General Corp. Expense 2 ~ $130$126 Capital Expenditures~ $165$119 Depreciation & Amortization 3 ~ $210$214 Shares Outstanding349 million 2013 Guidance Estimates 1 – Based on current business plans. 2 – Includes rationalization expenses of $14M for the year ended December 31, – Includes accelerated depreciation of $28M for the year ended December 31, Such expenses are also included in the rationalization charges.

37 2012 Masco International Revenue Split* 37 *Based on company estimates International Sales Accounted for ~22% of Total 2012 Masco Sales International Sales Accounted for ~22% of Total 2012 Masco Sales


Download ppt "Raymond James 34 th Annual Institutional Investors Conference March 6, 2013."

Similar presentations


Ads by Google