01—Abstract
Summary
Summary of the 10-K filed February 11, 2020. Cited figures are marked; the original filing is the authoritative source.
Masco Corporation, a global designer, manufacturer and distributor of branded home improvement and building products, reported 2019 net sales from continuing operations of $6.71 billiona, up from $6.65 billion in 2018, and operating profit of $1.09 billion.
Income from continuing operations attributable to Masco Corporation was $639 millionb, or $2.20 per diluted share, compared with $636 million, or $2.05 per diluted share, in 2018. Net income attributable to Masco Corporation was $935 million, including $296 million from discontinued operations, largely driven by the gain on the Milgard divestiture. The company completed the sales of its Milgard Windows and Doors and UK Window Group businesses in 2019 and entered into a definitive agreement to sell its Masco Cabinetry business for approximately $1.0 billion, with closing expected in the first quarter of 2020.
The company operates two segments, Plumbing Products (BEHR-related paint is in Decorative Architectural Products) and Decorative Architectural Products, which include the BEHR paint, DELTA and HANSGROHE faucet, and KICHLER lighting brands. The Home Depot accounted for approximately 37 percent of consolidated net sales in 2019. Total debt as a percent of total capitalization was 102 percent at December 31, 2019, and shareholders' deficit was $56 millionc on a total equity basis.
Cash from operating activities was $833 milliond, and the company repurchased 20.1 million shares for $896 million during 2019. During 2019 the company increased its quarterly dividend to $0.135 per share from $0.12, and its board authorized a new $2.0 billion share repurchase program in September 2019, with $1.5 billion remaining at year end. Management anticipates using approximately $1.2 billion of cash for share repurchases in 2020.
02—Key points
Key Highlights
- Net sales from continuing operations were $6.71 billion in 2019, up from $6.65 billion in 2018; operating profit was $1.09 billion, compared with $1.08 billion in 2018.
- Diluted income from continuing operations was $2.20 per share in 2019, versus $2.05 in 2018.
- Net income attributable to Masco Corporation was $935 million, including $296 million from discontinued operations driven by the Milgard and UKWG divestitures.
- The Masco Cabinetry sale, for approximately $1.0 billion ($850 million in cash plus $150 million in preferred stock), is expected to close in the first quarter of 2020, with an expected gain of approximately $600 million.
- The Home Depot represented approximately 37 percent of consolidated net sales in 2019, and the filing identifies this concentration as a material risk.
- The company repurchased 20.1 million shares for $896 million in 2019, and expects to use approximately $1.2 billion for share repurchases in 2020.
- Total debt as a percent of total capitalization was 102 percent at December 31, 2019, versus 98 percent a year earlier, and total equity was a deficit of $56 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Masco kept $0.14.
- Revenue$6.71B100.0%
- Cost of revenue−$4.34B64.6%
- Gross profit$2.37B35.4%
- Operating costs−$1.28B19.1%
- Operating income$1.09B16.2%
- Interest, other & tax−$153.0M2.3%
- Net income$935.0M13.9%
Where FY2019 revenue went
$6.71B- Cost of revenue: $4.34B, 65% of revenue
- SG&A: $1.27B, 19% of revenue
- Net income: $935.0M, 14% of revenue
- Interest, other & tax: $153.0M, 2.3% of revenue
Kept 14% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 11, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $6.71B$6.65B | +0.8% |
| Cost of Revenue | $4.34B$4.33B | +0.2% |
| Gross Profit | $2.37B$2.33B | +1.9% |
| SG&A Expenses | $1.27B$1.25B | +1.9% |
| Operating Income | $1.09B$1.08B | +1.0% |
| Interest Expense | $159.00M$156.00M | +1.9% |
| Net Income | $935.00M$734.00M | +27.4% |
| EPS (Basic) | $3.24$2.38 | +36.1% |
| EPS (Diluted) | $3.22$2.37 | +35.9% |
| Shares Outstanding (Basic) | 287.00M305.00M | −5.9% |
| Shares Outstanding (Diluted) | 288.00M307.00M | −6.2% |
05—Questions
Frequently Asked Questions
What drove the large increase in net income in 2019?
Net income attributable to Masco Corporation was $935 million in 2019, compared with $734 million in 2018. The difference was largely due to $296 million of income from discontinued operations, which included a $368 million gain on the Milgard divestiture, partly offset by a $70 million loss on the UKWG sale.
How concentrated are Masco's sales with its largest customers?
In 2019, net sales from continuing operations to The Home Depot were $2.5 billion, approximately 37 percent of consolidated net sales. Net sales to Lowe's were less than 10 percent of consolidated net sales. The filing states that losing a substantial portion of Home Depot sales would have a material adverse effect on the business.
What is the status of the Masco Cabinetry sale?
Masco entered into a definitive agreement on November 14, 2019 to sell Masco Cabinetry for approximately $1.0 billion, consisting of $850 million in cash at closing and preferred stock with a $150 million liquidation preference. The closing is expected in the first quarter of 2020, subject to customary closing conditions, and the company expects to recognize a gain of approximately $600 million.
How is Masco returning capital to shareholders?
In 2019 Masco repurchased 20.1 million shares for $896 million and paid $144 million in cash dividends. The board authorized up to $2.0 billion of repurchases in September 2019, leaving $1.5 billion remaining at year end. The quarterly dividend was raised to $0.135 per share from $0.12 in the third quarter of 2019.
06—Continue