01—Abstract
Summary
Summary of the 10-K filed February 15, 2013. Cited figures are marked; the original filing is the authoritative source.
Masco Corporation's 2012 Form 10-K reports net sales of $7.745 billiona, up from $7.467 billion in 2011, and an operating profit of $271 million, compared with an operating loss of $295 million in 2011.
The company still posted a loss from continuing operations attributable to Masco Corporation of $76 millionb, or $(.22) per share, and a net loss attributable to Masco Corporation of $114 million. Results were helped by a more favorable relationship between selling prices and commodity costs, higher sales volume in North American plumbing and installation, and business rationalization savings, while the Cabinets and Related Products segment remained loss-making at an operating loss of $120 million. Impairment charges fell to $42 million in 2012 from $494 million in 2011, and the company recorded a $77 million charge for litigation settlements, primarily in the Installation and Other Services segment.
Balance sheet and liquidity were a focus. Management reduced debt by retiring $791 millionc of 5.875% notes in July 2012, partly funded by a $400 million issuance of 5.95% notes due 2022. Cash and cash investments were $1.351 billion at year-end, and total equity fell to $534 million from $742 million.
Debt as a percent of total capitalization was 87 percent, up from 84 percent. The company had no borrowings under its $1.25 billiond Credit Agreement and reported additional borrowing capacity of up to $873 million. Management stated it was in compliance with all covenants.
The filing describes a continuing strategy built on four initiatives: expanding product leadership, reducing costs, improving the Cabinets and Installation businesses, and strengthening the balance sheet. In early February 2013, the company decided to dispose of its Danish ready-to-assemble cabinet business, which had 2012 sales of approximately $250 million and an operating loss of approximately $30 million. The Home Depot accounted for approximately 28 percent of consolidated net sales in 2012, a concentration risk highlighted in the filing.
02—Key points
Key Highlights
- Net sales rose to $7.745 billion in 2012 from $7.467 billion in 2011, and operating profit improved to $271 million from an operating loss of $295 million.
- Loss from continuing operations attributable to Masco Corporation narrowed to $76 million, or $(.22) per share, from $465 million, or $(1.34) per share, in 2011.
- Impairment charges for goodwill and other intangible assets dropped to $42 million in 2012 from $494 million in 2011, though a $77 million litigation settlement charge was recorded.
- Cash and cash investments were $1.351 billion at December 31, 2012, and the company retired $791 million of 5.875% notes due July 2012.
- Total equity declined to $534 million from $742 million, and debt as a percent of total capitalization rose to 87 percent from 84 percent.
- The Home Depot was the largest customer at $2.1 billion in sales, approximately 28 percent of consolidated net sales.
- In February 2013, the company began disposing of its Danish ready-to-assemble cabinet business, which had 2012 sales of approximately $250 million and an operating loss of approximately $30 million.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2012, Masco lost $0.02.
- Revenue$7.50B100.0%
- Cost of revenue−$5.54B73.9%
- Gross profit$1.96B26.1%
- Operating costs−$1.65B22.1%
- Operating income$302.0M4.0%
- Interest, other & tax−$416.0M5.6%
- Net income−$114.0M1.5%
Where FY2012 revenue went
$7.50B- Cost of revenue: $5.54B, 74% of revenue
- SG&A: $1.53B, 20% of revenue
- Operating income: $302.0M, 4.0% of revenue
- Other operating costs: $119.0M, 1.6% of revenue
Kept 4.0% as operating incomeOperating income $302.0M · 4.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 15, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $7.50B$7.17B | +4.5% |
| Cost of Revenue | $5.54B$5.38B | +2.9% |
| Gross Profit | $1.96B$1.79B | +9.5% |
| SG&A Expenses | $1.53B$1.54B | −0.5% |
| Operating Income | $302.00M-$215.00M | +240.5% |
| Interest Expense | $254.00M$254.00M | 0.0% |
| Net Income | -$114.00M-$575.00M | +80.2% |
| EPS (Basic) | $-0.33$-1.66 | +80.1% |
| EPS (Diluted) | $-0.33$-1.66 | +80.1% |
| Shares Outstanding (Basic) | 349.00M348.00M | +0.3% |
| Shares Outstanding (Diluted) | 349.00M348.00M | +0.3% |
05—Questions
Frequently Asked Questions
How did Masco's profitability change in 2012?
Operating profit was $271 million in 2012 compared with an operating loss of $295 million in 2011. Management attributed the improvement to a more favorable relationship between selling prices and commodity costs, higher North American sales volume, business rationalization savings, and lower impairment charges, which fell to $42 million from $494 million. The company still reported a net loss attributable to Masco Corporation of $114 million for 2012.
How much debt did Masco reduce, and how is its liquidity position?
Masco retired $791 million of 5.875% notes in July 2012 and issued $400 million of 5.95% notes due 2022. It ended 2012 with cash and cash investments of $1.351 billion and no borrowings under its $1.25 billion Credit Agreement, with additional borrowing capacity of up to $873 million. Debt as a percent of total capitalization increased to 87 percent from 84 percent.
Which segments were weakest, and what is management doing about them?
The Cabinets and Related Products segment reported an operating loss of $120 million in 2012, though this was smaller than the $206 million loss in 2011. Installation and Other Services posted an operating loss of $19 million, improved from $79 million. Management is pursuing brand building, new product introductions, plant closures, and cost reductions, and in February 2013 decided to dispose of its Danish ready-to-assemble cabinet business.
What customer concentration risks does Masco disclose?
In 2012, sales to The Home Depot were $2.1 billion, approximately 28 percent of consolidated net sales. Lowe's was the second-largest customer, at less than ten percent of consolidated net sales. The filing states that the loss of a substantial portion of sales to The Home Depot or the loss of sales to Lowe's would have a material adverse effect on the business.
What did the company report about its outlook?
Management stated that its strategic initiatives should position the company for improved results in 2013 and that it expects to outperform as new home construction and repair and remodel recover. It expects 2013 capital expenditures of approximately $165 million and depreciation and amortization of approximately $210 million, excluding any potential 2013 acquisitions. Business rationalization costs are anticipated to approximate $40 million in 2013.
06—Continue