01—Abstract
Summary
Summary of the 10-K filed February 21, 2012. Cited figures are marked; the original filing is the authoritative source.
Masco Corporation manufactures, distributes and installs home improvement and building products, including faucets, cabinets, architectural coatings and windows, and is one of the largest installers of insulation for new home construction.
Approximately 76 percent of 2011 sales came from North American operations. Net sales were $7.47 billiona in 2011, essentially flat with $7.49 billion in 2010, while the company reported an operating loss of $295 million and a net loss attributable to Masco Corporation of $575 million, driven largely by $494 million of non-cash pre-tax impairment charges for goodwill and other intangible assets. Shareholders' equity fell to $742 million at December 31, 2011 (total equity, including noncontrolling interest), and long-term debt was $3.22 billion.
Cash and cash investments were approximately $1.7 billionb at year-end, and the company reported a debt to total capitalization ratio of 84 percent at December 31, 2011. Management cited increased commodity costs, a continuing decline in home values, weak job creation and depressed consumer confidence as factors hindering a housing recovery. The company said it continued to rationalize operations, closing facilities and reducing headcount, and incurred business rationalization costs of $121 million in 2011.
Its largest customer, The Home Depot, accounted for $2.0 billionc of 2011 sales, approximately 27 percent of consolidated net sales. A Second Amendment to the Credit Agreement, entered February 13, 2012, allows add-back to shareholders' equity of $1.6 billion in 2010 and 2011 non-cash charges and revises the minimum interest coverage ratio to 2.25 to 1.00 through December 31, 2012.
The company expects 2012 capital expenditures of approximately $180 milliond and depreciation and amortization of approximately $219 million, and anticipates rationalization costs of approximately $20 million in 2012. It is cautiously optimistic about 2012 economic trends, noting that housing starts improved in 2011 to 607,000 units, and it states that it believes its strategy should position it for improved results in 2012 even in a flat housing market.
02—Key points
Key Highlights
- Net sales of $7.47 billion in 2011, compared with $7.49 billion in 2010 and $7.66 billion in 2009.
- Operating loss of $295 million in 2011, including $494 million of pre-tax impairment charges for goodwill and other intangible assets.
- Net loss attributable to Masco Corporation of $575 million, or $(1.66) per basic and diluted share, compared with $1.04 billion in 2010.
- Cash and cash investments of $1.656 billion at December 31, 2011, and no borrowings under the $1.25 billion Credit Agreement.
- Total debt was 84 percent of total capitalization at December 31, 2011, up from 72 percent at December 31, 2010; the working capital ratio fell to 1.5 to 1 from 2.3 to 1, largely due to $791 million of 5.875% Notes classified as current.
- The Home Depot was the largest customer at approximately 27 percent of 2011 consolidated net sales, or $2.0 billion.
- Quarterly dividends of $.075 per share were paid in each quarter of 2011, totaling $.30 for the year.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2011, Masco lost $0.08.
- Revenue$7.17B100.0%
- Cost of revenue−$5.38B75.1%
- Gross profit$1.79B24.9%
- Operating costs−$2.00B27.9%
- Operating income−$215.0M3.0%
- Interest, other & tax−$360.0M5.0%
- Net income−$575.0M8.0%
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 21, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $7.17B$7.49B | −4.2% |
| Cost of Revenue | $5.38B$5.65B | −4.8% |
| Gross Profit | $1.79B$1.83B | −2.5% |
| SG&A Expenses | $1.54B$1.60B | −3.4% |
| Operating Income | -$215.00M-$463.00M | +53.6% |
| Interest Expense | $254.00M$251.00M | +1.2% |
| Net Income | -$575.00M-$1.04B | +44.9% |
| EPS (Basic) | $-1.66$-3.00 | +44.7% |
| EPS (Diluted) | $-1.66$-3.00 | +44.7% |
| Shares Outstanding (Basic) | 348.00M349.00M | −0.3% |
| Shares Outstanding (Diluted) | 348.00M349.00M | −0.3% |
05—Questions
Frequently Asked Questions
Why did Masco report a net loss in 2011?
The net loss attributable to Masco Corporation of $575 million was driven largely by non-cash, pre-tax impairment charges for goodwill and other intangible assets of $494 million, along with an operating loss in several segments. The filing also cites $121 million of business rationalization costs and charges and a $9 million litigation settlement charge.
How much debt does Masco have and when does it come due?
Long-term debt was $3.22 billion at December 31, 2011, with $803 million of current maturities. The company has $791 million of 5.875% fixed-rate notes due July 15, 2012, and plans to refinance a portion of them in 2012, with forward interest rate swaps covering a notional amount of $400 million.
How did the Second Amendment to the Credit Agreement change Masco's borrowing capacity?
The Second Amendment, entered February 13, 2012, allows add-back to shareholders' equity of certain non-cash charges taken in 2010 and 2011 aggregating $1.6 billion after tax, and permits add-back of up to $250 million of future non-cash charges. At December 31, 2011, the company had additional borrowing capacity of up to $630 million, subject to availability.
What is Masco's exposure to The Home Depot?
Sales to The Home Depot were $2.0 billion in 2011, approximately 27 percent of consolidated net sales. The filing states that the loss of a substantial portion of these sales would have a material adverse effect on the business, and Behr paint products are sold exclusively through that retailer's stores.
What does management expect for 2012?
Management said it is cautiously optimistic about economic trends in 2012 and believes its initiatives should position the company for improved results even in a flat housing market. It expects 2012 capital expenditures of approximately $180 million, depreciation and amortization of approximately $219 million, and rationalization costs of approximately $20 million, and it anticipates contributing $60 million to $70 million to its defined-benefit plans.
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