01—Abstract
Summary
Summary of the 10-K filed February 12, 2016. Cited figures are marked; the original filing is the authoritative source.
Masco Corporation's 2015 Form 10-K reports net sales of $7.14 billiona, up from $7.01 billion in 2014, with operating profit of $914 million versus $721 million the prior year.
Operating profit as adjusted for rationalization charges and other items was $927 millionb, and the operating profit margin as reported rose to 12.8 percent from 10.3 percent. Net income attributable to Masco Corporation was $355 million, compared with $856 million in 2014, which included a $529 million tax benefit from the release of a valuation allowance. Diluted income from continuing operations per share was $1.03, versus $2.28 in 2014.
The most significant event of the year was the June 30, 2015 spin-off of the Installation and Other Services businesses as TopBuild Corp., which the filing describes as making the company less dependent on new home construction and less cyclical, and increasing the share of sales from international markets. The spin-off reduced shareholders' equity to a deficit of $135 millionc attributable to Masco Corporation, from $924 million a year earlier, and retained earnings were reduced by $828 million. Total assets fell to $5.68 billion from $7.21 billion.
Long-term debt declined to $2.42 billiond from $2.92 billion, and total debt as a percent of total capitalization was 98 percent, compared with 75 percent a year earlier. Cash flow from operations was $699 million, and the company repurchased and retired 17 million shares for $456 million. Cash, cash investments and short-term bank deposits totaled approximately $1.7 billion at year-end, of which $630 million was held in foreign subsidiaries.
Management plans to pay down $300 million to $500 million of debt over the next several quarters and expects to repurchase up to $500 million of common stock in 2016. The filing states that The Home Depot, the largest customer, accounted for net sales of $2.4 billion, or approximately 33 percent of consolidated net sales.
02—Key points
Key Highlights
- Net sales rose to $7.14 billion in 2015 from $7.01 billion in 2014, with the company stating that growth was positively affected by increased repair and remodel activity and new home construction in the U.S. and Europe.
- Operating profit was $914 million, up from $721 million, and the operating profit margin as reported was 12.8 percent, compared with 10.3 percent in 2014.
- Net income attributable to Masco Corporation was $355 million, down from $856 million in 2014, which included a $529 million tax benefit from the release of a valuation allowance.
- The June 30, 2015 spin-off of TopBuild Corp. reduced shareholders' equity to a deficit of $135 million and lowered retained earnings by $828 million.
- Total debt was 98 percent of total capitalization at December 31, 2015, up from 75 percent a year earlier, and the company plans to pay down $300 million to $500 million of debt over the next several quarters.
- The company repurchased and retired 17 million shares for $456 million in 2015 and expects to repurchase up to $500 million of common stock in 2016.
- The Home Depot was the largest customer, with net sales of $2.4 billion, or approximately 33 percent of consolidated net sales, and the filing states that losing this sales would have a material adverse effect.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Masco kept $0.05.
- Revenue$7.14B100.0%
- Cost of revenue−$4.89B68.5%
- Gross profit$2.25B31.5%
- Operating costs−$1.34B18.7%
- Operating income$914.0M12.8%
- Interest, other & tax−$559.0M7.8%
- Net income$355.0M5.0%
Where FY2015 revenue went
$7.14B- Cost of revenue: $4.89B, 68% of revenue
- SG&A: $1.34B, 19% of revenue
- Net income: $355.0M, 5.0% of revenue
- Interest, other & tax: $559.0M, 7.8% of revenue
Kept 5.0% as net incomeNet income $355.0M · 5.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 12, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $7.14B$7.01B | +1.9% |
| Cost of Revenue | $4.89B$4.95B | −1.2% |
| Gross Profit | $2.25B$2.06B | +9.4% |
| SG&A Expenses | $1.34B$1.35B | −0.6% |
| Operating Income | $914.00M$721.00M | +26.8% |
| Interest Expense | $225.00M$225.00M | 0.0% |
| Net Income | $355.00M$856.00M | −58.5% |
| EPS (Basic) | $1.03$2.40 | −57.1% |
| EPS (Diluted) | $1.02$2.38 | −57.1% |
| Shares Outstanding (Basic) | 338.00M349.00M | −3.2% |
| Shares Outstanding (Diluted) | 341.00M352.00M | −3.1% |
05—Questions
Frequently Asked Questions
How did Masco's operating results change in 2015?
Net sales increased to $7.14 billion from $7.01 billion, and operating profit rose to $914 million from $721 million. The filing attributes the gains to increased sales volume, operational efficiencies from cost-saving initiatives, and a more favorable relationship between selling prices and commodity costs, partly offset by foreign currency translation from a stronger U.S. dollar.
What was the effect of the TopBuild spin-off on Masco?
On June 30, 2015, Masco spun off its Installation and Other Services businesses as TopBuild Corp. The filing states that the spin-off made the company less dependent on new home construction and less cyclical, and increased the portion of sales from international markets. Shareholders' equity fell to a deficit of $135 million, and retained earnings decreased by $828 million as a result of the separation.
Why did net income decline in 2015 despite higher operating profit?
Net income attributable to Masco Corporation was $355 million in 2015 compared with $856 million in 2014. The 2014 results included a $529 million tax benefit from the release of a valuation allowance on deferred tax assets, while 2015 included a $21 million valuation allowance related to TopBuild deferred tax assets and a $19 million charge for taxes on undistributed foreign earnings.
How is Masco managing its debt and capital returns?
Total debt as a percent of total capitalization was 98 percent at December 31, 2015. The company repaid $500 million of 4.8% notes in June 2015, issued $500 million of 4.45% notes due 2025, and plans to pay down $300 million to $500 million of debt over the next several quarters. It also expects to repurchase up to $500 million of common stock in 2016 and had 27.8 million shares remaining under its repurchase authorization.
How concentrated is Masco's customer base?
The Home Depot was the largest customer, with 2015 net sales of $2.4 billion, approximately 33 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 all sales to Lowe's, would have a material adverse effect on the business.
06—Continue