01—Abstract
Summary
Summary of the 10-K filed February 16, 2010. Cited figures are marked; the original filing is the authoritative source.
Masco Corporation manufactures, distributes and installs home improvement and building products, with about 79 percent of 2009 sales from North American operations.
Net sales fell to $7.79 billiona in 2009 from $9.48 billion in 2008, and the company reported a net loss attributable to Masco Corporation of $183 million, or $(.53) per share, compared with a net loss of $391 million in 2008. The results reflect a significant downturn in home improvement and new home construction markets, along with non-cash goodwill and intangible impairment charges of $262 million in 2009 and $467 million in 2008. Operating profit was $55 million in 2009 versus $90 million in 2008, and the company reduced its quarterly dividend from $.235 to $.075 per share during 2009.
The Home Depot, the largest customer, accounted for approximately 26 percent of 2009 consolidated net sales, at $2.1 billionb. Liquidity remained solid, with cash and cash investments of $1.41 billion at December 31, 2009, and cash from operations of $705 million. Management noted some signs of stabilization in the third and fourth quarters of 2009 and expects housing starts to rise to a range of 600,000 to 700,000 units in 2010 from 554,000 in 2009.
Management also expects a 2010 tax rate of approximately 37 percent and capital expenditures of approximately $190 millionc. Key risks for investors include the prolonged downturn in new home construction and home improvement activity, customer concentration with The Home Depot, the company's reduced borrowing capacity under its amended Five-Year Revolving Credit Agreement (cut to $1.25 billion from $2.0 billion), and pending antitrust class action litigation related to its insulation installation businesses. The company also announced in February 2010 the combination of its Builder Cabinet Group and Retail Cabinet Group into Masco Cabinetry.
02—Key points
Key Highlights
- Net sales declined 18 percent to $7.79 billion in 2009 from $9.48 billion in 2008, with the new home construction market down over 38 percent.
- Net loss attributable to Masco Corporation was $183 million, or $(.53) per diluted share, versus a net loss of $391 million in 2008.
- Goodwill impairment charges of $262 million pre-tax ($180 million after tax) were recorded in 2009, primarily related to a European shower enclosure manufacturer and a North American staple gun tacker manufacturer.
- Cash and cash investments increased $385 million to $1.41 billion at December 31, 2009, while net cash from operating activities was $705 million.
- The quarterly dividend was reduced to $.075 per share from $.235 per share, and total dividends declared for 2009 were $.30 per share.
- The Home Depot accounted for approximately 26 percent of 2009 consolidated net sales, at $2.1 billion; Lowe's was less than 10 percent.
- The Five-Year Revolving Credit Agreement was amended to reduce the maximum borrowing amount to $1.25 billion from $2.0 billion, and the debt to total capitalization requirement was raised to 65 percent from 60 percent.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2009, Masco lost $0.02.
- Revenue$7.66B100.0%
- Cost of revenue−$5.65B73.7%
- Gross profit$2.01B26.3%
- Operating costs−$1.94B25.3%
- Operating income$70.0M0.9%
- Interest, other & tax−$253.0M3.3%
- Net income−$183.0M2.4%
Where FY2009 revenue went
$7.66B- Cost of revenue: $5.65B, 74% of revenue
- SG&A: $1.68B, 22% of revenue
- Operating income: $70.0M, 0.9% of revenue
- Other operating costs: $262.0M, 3.4% of revenue
Kept 0.9% as operating incomeOperating income $70.0M · 0.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 16, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $7.66B$9.48B | −19.3% |
| Cost of Revenue | $5.65B$7.13B | −20.7% |
| Gross Profit | $2.01B$2.36B | −14.8% |
| SG&A Expenses | $1.68B$1.80B | −6.9% |
| Operating Income | $70.00M$90.00M | −22.2% |
| Interest Expense | $225.00M$228.00M | −1.3% |
| Net Income | -$183.00M-$391.00M | +53.2% |
| EPS (Basic) | $-0.53$-1.13 | +53.1% |
| EPS (Diluted) | $-0.53$-1.13 | +53.1% |
| Shares Outstanding (Basic) | 351.00M353.00M | −0.6% |
| Shares Outstanding (Diluted) | 351.00M353.00M | −0.6% |
05—Questions
Frequently Asked Questions
How did Masco perform in 2009 compared with 2008?
Net sales fell 18 percent to $7.79 billion from $9.48 billion. Operating profit was $55 million, compared with $90 million in 2008, and the company recorded a net loss attributable to Masco Corporation of $183 million, compared with a net loss of $391 million in 2008. Results were affected by goodwill impairment charges of $262 million in 2009 and $467 million in 2008.
How strong is Masco's liquidity position?
The company reported cash and cash investments of $1.41 billion at December 31, 2009, and net cash from operations of $705 million. It was in compliance with all debt covenants, and it had additional borrowing capacity under its amended revolving credit agreement of up to $1.2 billion, subject to availability. It has a scheduled maturity of $300 million in Floating Rate Notes in March 2010.
What does management expect for 2010?
Management expects business conditions to improve compared with 2009 and believes housing starts will rise to 600,000 to 700,000 units from 554,000 in 2009. It expects modest improvement in repair and remodel spending, an effective tax rate of approximately 37 percent, capital expenditures of approximately $190 million, and business rationalization costs of approximately $38 million, plus about $30 million to $35 million related to the Masco Cabinetry combination.
What are the main risks to Masco's business?
Key risks include the prolonged downturn in home improvement and new home construction, dependence on key customers such as The Home Depot, intense competition, rising commodity and supply chain costs, and international currency and political exposure, with over 21 percent of sales outside North America. The company also faces class action antitrust litigation related to its insulation installation businesses and possible future goodwill impairments.
06—Continue