01—Abstract
Summary
Summary of the 10-K filed February 9, 2023. Cited figures are marked; the original filing is the authoritative source.
Masco Corporation's 2022 Form 10-K reports net sales of $8.68 billiona, up from $8.375 billion in 2021, with net sales up four percent overall and six percent excluding acquisitions, divestitures and currency translation.
The increase was driven primarily by higher net selling prices, which added nine percent, partially offset by lower sales volume (down three percent) and unfavorable currency translation (down two percent). Gross margin fell to 31.3 percent from 34.2 percent, and operating profit declined to $1.297 billionb from $1.405 billion, with operating profit margin at 14.9 percent versus 16.8 percent. Management cites increased commodity and transportation costs, production inefficiencies, lower volume, unfavorable sales mix and higher marketing costs as headwinds.
Income from continuing operations attributable to Masco rose to $844 millionc, or $3.63 diluted per share, compared with $410 million, or $1.62, in 2021, largely because 2021 included a $430 million pension and post-retirement expense and a $168 million debt extinguishment loss. The balance sheet shows total shareholders' deficit of $480 million and total equity of a $262 million deficit at December 31, 2022, with total debt as a percent of total capitalization at 109 percent. Cash and cash investments declined to $452 million from $926 million, and operating cash flow was $840 million.
The company repurchased and retired 16.6 million shares for about $914 milliond, paid $258 million in cash dividends, and declared a first-quarter 2023 quarterly dividend of $0.285 per share, with the intention to raise the annual dividend to $1.14. It anticipates roughly $500 million of share repurchases in 2023 and capital expenditures of about $250 million. Concentration is a key investor consideration: The Home Depot accounted for $3.3 billion, or approximately 38 percent, of consolidated net sales in 2022, and the Behr paint business grants The Home Depot exclusivity in North American retail.
Architectural coatings represented approximately 32 percent of consolidated net sales. The filing also notes that management is unable to fully estimate the impact of changing market conditions on future financial condition.
02—Key points
Key Highlights
- Net sales rose four percent to $8.68 billion, driven mainly by net selling prices that added nine percent, while sales volume decreased three percent.
- Gross margin declined to 31.3 percent from 34.2 percent, and operating profit fell to $1.297 billion from $1.405 billion due to commodity and transportation costs, under-absorption and higher marketing costs.
- Diluted income from continuing operations per share was $3.63, up from $1.62, though 2021 results included a $430 million pension and post-retirement expense and a $168 million debt extinguishment loss.
- Total shareholders' deficit was $480 million at December 31, 2022, and total debt as a percent of total capitalization was 109 percent.
- The company repurchased 16.6 million shares for about $914 million in 2022, and its Board authorized up to $2.0 billion of repurchases, with $2.0 billion remaining at year-end.
- The Home Depot represented about 38 percent of consolidated net sales, with $3.3 billion in sales, and the Behr brand grants it retail exclusivity in North America.
- Cash and cash investments fell to $452 million from $926 million, with operating cash flow of $840 million and a 2023 quarterly dividend declared at $0.285 per share.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Masco kept $0.10.
- Revenue$8.68B100.0%
- Cost of revenue−$5.97B68.7%
- Gross profit$2.71B31.3%
- Operating costs−$1.42B16.3%
- Operating income$1.30B14.9%
- Interest, other & tax−$453.0M5.2%
- Net income$844.0M9.7%
Where FY2022 revenue went
$8.68B- Cost of revenue: $5.97B, 69% of revenue
- SG&A: $1.39B, 16% of revenue
- Net income: $844.0M, 9.7% of revenue
- Interest, other & tax: $453.0M, 5.2% of revenue
Kept 9.7% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 9, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $8.68B$8.38B | +3.6% |
| Cost of Revenue | $5.97B$5.51B | +8.3% |
| Gross Profit | $2.71B$2.86B | −5.2% |
| SG&A Expenses | $1.39B$1.41B | −1.6% |
| Operating Income | $1.30B$1.41B | −7.7% |
| Interest Expense | $108.00M$278.00M | −61.2% |
| Net Income | $844.00M$410.00M | +105.9% |
| EPS (Basic) | $3.65$1.63 | +123.9% |
| EPS (Diluted) | $3.63$1.62 | +124.1% |
| Shares Outstanding (Basic) | 231.00M249.00M | −7.2% |
| Shares Outstanding (Diluted) | 232.00M251.00M | −7.6% |
05—Questions
Frequently Asked Questions
How did Masco perform financially in 2022?
Net sales increased four percent to $8.68 billion, and income from continuing operations attributable to Masco rose to $844 million, or $3.63 per diluted share, from $410 million, or $1.62, in 2021. Operating profit decreased eight percent to $1.297 billion, and operating profit margin declined to 14.9 percent from 16.8 percent.
What drove the change in sales and margins?
Higher net selling prices increased sales by nine percent, while lower sales volume decreased sales by three percent and unfavorable currency translation decreased sales by two percent. Gross margin was pressured by increased commodity and transportation costs, production inefficiencies, lower volume, unfavorable sales mix and higher excess and obsolete inventory charges.
How is Masco returning capital to shareholders?
In 2022 Masco repurchased and retired 16.6 million shares for about $914 million and paid $258 million in cash dividends. The Board declared a first-quarter 2023 dividend of $0.285 per share, with the intention to increase the annual dividend to $1.14, and management anticipates about $500 million of share repurchases in 2023.
What are the main concentration and customer risks?
Sales are concentrated with three significant customers. The Home Depot accounted for $3.3 billion, or approximately 38 percent, of consolidated net sales in 2022. The filing states that losing a substantial portion of these sales would have a material adverse effect on the business, and the Behr exclusivity arrangement limits sales of those brands to other retail customers.
What is the company's financial position and liquidity?
At December 31, 2022, Masco had cash and cash investments of $452 million, a current ratio of 1.6 to 1, and total debt as a percent of total capitalization of 109 percent. Total shareholders' deficit was $480 million, and the company stated it was in compliance with all covenants under its 2022 Credit Agreement, with no borrowings outstanding at year-end.
06—Continue