01—Abstract
Summary
Summary of the 10-K filed February 8, 2022. Cited figures are marked; the original filing is the authoritative source.
Masco Corporation reported net sales of $8.4 billiona for 2021, up 17 percent from 2020.
Excluding acquisitions, divestitures and the effect of currency translation, net sales increased 13 percent. Plumbing Products net sales rose 24 percent to $5.1 billionb, and Decorative Architectural Products net sales rose 6 percent to $3.2 billion. Gross margin declined to 34.2 percent from 36.0 percent, as increased commodity, transportation and labor costs more than offset higher volume, favorable net selling prices and cost savings.
Operating profit was $1,405 millionc, with an operating margin of 16.8 percent versus 18.0 percent in 2020. Diluted income per share from continuing operations was $1.62, compared with $3.04 in 2020. Net income was weighed down by non-operating items.
Other, net was an expense of $439 milliond, primarily reflecting $430 million of net periodic pension and post-retirement benefit expense, including a $399 million net settlement loss from terminating the qualified domestic defined-benefit pension plans. Interest expense rose to $278 million, including a $168 million loss on debt extinguishment from early retirement of notes in the first quarter of 2021. Income tax expense was $210 million, with an effective tax rate of 31 percent.
Net cash from operating activities was $930 million, and capital expenditures were $128 million. The company returned capital to shareholders, repurchasing 17.6 million shares for approximately $1,026 million in 2021 and paying $211 million in cash dividends. It expects to use approximately $600 million for share repurchases in 2022 and declared a first-quarter 2022 dividend of $0.28 per share, with the intention to increase the annual dividend to $1.12 per share.
Total debt was 98 percent of total capitalization at December 31, 2021, up from 87 percent, and total equity was $56 million. The Home Depot accounted for approximately 36 percent of consolidated net sales, or $3.0 billion.
02—Key points
Key Highlights
- Net sales of $8.4 billion rose 17 percent; excluding acquisitions, divestitures and currency translation, net sales rose 13 percent.
- Gross margin fell to 34.2 percent from 36.0 percent, pressured by commodity, transportation and labor costs.
- Operating profit was $1,405 million (16.8 percent margin) versus $1,295 million (18.0 percent) in 2020; a $45 million goodwill impairment in the lighting business weighed on results.
- Net income attributable to Masco Corporation was $410 million, with diluted income per share from continuing operations of $1.62, versus $3.04 in 2020.
- A $399 million pension settlement loss from terminating qualified domestic defined-benefit plans drove other, net expense of $439 million.
- Repurchased 17.6 million shares for $1,026 million and expects approximately $600 million of repurchases in 2022; quarterly dividend raised to $0.28 with an intention to reach $1.12 annually.
- Total debt was 98 percent of total capitalization at year-end 2021, up from 87 percent; cash and cash investments were $926 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, Masco kept $0.05.
- Revenue$8.38B100.0%
- Cost of revenue−$5.51B65.8%
- Gross profit$2.86B34.2%
- Operating costs−$1.46B17.4%
- Operating income$1.41B16.8%
- Interest, other & tax−$995.0M11.9%
- Net income$410.0M4.9%
Where FY2021 revenue went
$8.38B- Cost of revenue: $5.51B, 66% of revenue
- SG&A: $1.41B, 17% of revenue
- Net income: $410.0M, 4.9% of revenue
- Other operating costs: $45.0M, 0.5% of revenue
- Interest, other & tax: $995.0M, 12% of revenue
Kept 4.9% as net incomeOther operating costs $45.0M · 0.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 8, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $8.38B$7.19B | +16.5% |
| Cost of Revenue | $5.51B$4.60B | +19.8% |
| Gross Profit | $2.86B$2.59B | +10.7% |
| SG&A Expenses | $1.41B$1.29B | +9.4% |
| Operating Income | $1.41B$1.29B | +8.5% |
| Interest Expense | $278.00M$144.00M | +93.1% |
| Net Income | $410.00M$1.22B | −66.5% |
| EPS (Basic) | $1.63$4.60 | −64.6% |
| EPS (Diluted) | $1.62$4.59 | −64.7% |
| Shares Outstanding (Basic) | 249.00M264.00M | −5.7% |
| Shares Outstanding (Diluted) | 251.00M264.00M | −4.9% |
05—Questions
Frequently Asked Questions
What drove the increase in net sales in 2021?
Net sales increased 17 percent to $8.4 billion. Higher plumbing product sales volume contributed nine percent, favorable net selling prices of paints, coatings and plumbing products added three percent, and acquisitions of Kraus, ESS, Work Tools and Steamist added three percent. Favorable currency translation contributed one percent, while the divestiture of Hüppe reduced sales by one percent.
Why did net income fall so sharply compared with 2020?
Income from continuing operations fell to $410 million from $810 million. The main drivers were other, net expense of $439 million, including $430 million of net periodic pension and post-retirement benefit expense (with a $399 million settlement loss on terminating the qualified domestic pension plans), and a $168 million loss on debt extinguishment recorded in interest expense. Gross margin also declined to 34.2 percent from 36.0 percent.
How much did the company return to shareholders, and what are its plans for 2022?
In 2021, Masco repurchased 17.6 million shares for approximately $1,026 million and paid $211 million in cash dividends. The company anticipates using approximately $600 million for share repurchases in 2022 and declared a quarterly dividend of $0.28 per share in the first quarter of 2022, with the intention to increase the annual dividend to $1.12 per share. At December 31, 2021, $1,128 million remained under the 2021 repurchase authorization.
How concentrated is the company's customer base and product mix?
Sales are concentrated with three significant customers. Net sales to The Home Depot were $3.0 billion, approximately 36 percent of consolidated net sales. Net sales of architectural coatings, including BEHR paint, were approximately 30 percent of consolidated net sales in 2021. The filing states that loss of a substantial portion of sales to The Home Depot would have a material adverse effect on the business.
What is the company's balance sheet position?
Cash and cash investments were $926 million at December 31, 2021, versus $1.3 billion a year earlier. Long-term debt was $2,949 million, and the company reported a current ratio of 1.8 to 1. Total debt was 98 percent of total capitalization, compared with 87 percent in 2020. Total equity was $56 million, and Masco had no borrowings outstanding under its Amended Credit Agreement at year-end, with covenants in compliance.
06—Continue