01—Abstract
Summary
Summary of the 10-K filed February 22, 2008. Cited figures are marked; the original filing is the authoritative source.
Masco Corporation manufactures, distributes and installs home improvement and building products, with about 80 percent of 2007 sales generated by North American operations.
Net sales for 2007 were $11.77 billiona, down from $12.72 billion in 2006, and operating profit fell to $959 million from $1.14 billion. Results were hurt by impairment charges for goodwill and other intangible assets of $227 million in 2007, a sharp decline in new home construction, and softer consumer spending on home improvement. Income from continuing operations was $397 million, or $1.06 per diluted share, compared with $478 million, or $1.20 per diluted share, in 2006.
The company ended 2007 with cash and cash investments of $922 millionb, down from $1.96 billion, after repurchasing $857 million of common stock and paying $347 million in dividends. Long-term debt rose to $3.97 billion, and total debt as a percent of total capitalization decreased to 50 percent from 53 percent. Management described market conditions for the next several quarters as very challenging, expected further declines in housing starts and home improvement spending in 2008, and planned to continue share repurchases and dividend increases through 2008.
The Home Depot, the largest customer, accounted for approximately 20 percent of consolidated net sales in 2007. Shareholders' equity declined to $4.03 billionc from $4.47 billion, and the company announced a plan to dispose of several European business units expected to yield proceeds exceeding $140 million.
02—Key points
Key Highlights
- Net sales of $11.77 billion in 2007, down from $12.72 billion in 2006; Installation and Other Services sales fell to $2.62 billion from $3.16 billion.
- Operating profit of $959 million in 2007 versus $1.14 billion in 2006, including $227 million of goodwill and other intangible asset impairment charges.
- Diluted earnings from continuing operations of $1.06 per share, down from $1.20 per share in 2006.
- Other Specialty Products posted an operating loss of $28 million in 2007, after impairment charges of $158 million in that segment.
- Cash and cash investments declined to $922 million from $1.96 billion, while $857 million was spent repurchasing common stock.
- The Home Depot accounted for approximately 20 percent of 2007 consolidated net sales ($2.4 billion).
- Quarterly dividend increased five percent to $.23 per share, the 49th consecutive year of dividend increases; a planned disposition of several European business units is expected to be completed within twelve months.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2007, Masco kept $0.03.
- Revenue$11.41B100.0%
- Cost of revenue−$8.28B72.5%
- Gross profit$3.13B27.5%
- Operating costs−$2.07B18.2%
- Operating income$1.06B9.3%
- Interest, other & tax−$675.0M5.9%
- Net income$386.0M3.4%
Where FY2007 revenue went
$11.41B- Cost of revenue: $8.28B, 73% of revenue
- SG&A: $1.95B, 17% of revenue
- Net income: $386.0M, 3.4% of revenue
- Other operating costs: $119.0M, 1.0% of revenue
- Interest, other & tax: $675.0M, 5.9% of revenue
Kept 3.4% as net incomeNet income $386.0M · 3.4%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2007filed February 22, 2008Financial Statements
05—Questions
Frequently Asked Questions
Why did Masco's operating profit decline in 2007?
Operating profit fell to $959 million from $1.14 billion, mainly because of $227 million in goodwill and other intangible asset impairment charges and lower sales volume from the continued decline in new home construction and softer consumer spending on home improvement products.
How did Masco's segments perform in 2007?
Plumbing Products net sales rose to $3.45 billion from $3.30 billion, and Decorative Architectural Products rose to $1.77 billion from $1.72 billion. Cabinets and Related Products fell to $2.83 billion from $3.29 billion, Installation and Other Services fell to $2.62 billion from $3.16 billion, and Other Specialty Products fell to $1.11 billion from $1.26 billion.
What did management say about 2008 expectations?
Management expects further declines in housing starts and a decline in consumer spending on home improvement products in 2008, believes 2008 will be a difficult year for the U.S. economy, and expects market conditions in the next several quarters to be very challenging. It also expects to continue its share repurchase program and dividend increases throughout 2008.
How did Masco's liquidity and debt position change?
Cash and cash investments fell to $922 million from $1.96 billion. The company retired $1.425 billion of notes and repurchased the Zero Coupon Convertible Senior Notes for $825 million in January 2007, while issuing $596 million of new notes. The company had a $2.0 billion revolving credit agreement with no amounts outstanding at December 31, 2007.
How concentrated is Masco's customer base?
The Home Depot is the largest customer, with 2007 sales of $2.4 billion, or approximately 20 percent of consolidated net sales. The filing states that the loss of a substantial portion of these sales would have a material adverse impact on the company.
06—Continue