01—Abstract
Summary
Summary of the 10-K filed February 8, 2024. Cited figures are marked; the original filing is the authoritative source.
Masco Corporation's 2023 results show lower demand offset by higher pricing.
Net sales were $7,967 milliona, down eight percent from $8,680 million in 2022, as lower sales volume reduced sales by 11 percent and higher net selling prices added three percent. Gross margin rose to 35.6 percent from 31.3 percent, and operating profit was $1,348 million versus $1,297 million, with operating profit margin at 16.9 percent versus 14.9 percent. Net income attributable to Masco Corporation was $908 million, or $4.02 per diluted share, compared with $844 million and $3.63 a year earlier.
The filing cites cost savings initiatives, lower transportation costs, a $40 millionb insurance settlement and lower excess and obsolete inventory charges as margin support. Cash flow and balance sheet items improved. Net cash from operating activities was $1,413 million, up from $840 million, driven by operating profit and lower inventory.
Masco repurchased and retired 6.2 million shares for about $356 millionc, paid $257 million in cash dividends, and acquired Sauna360 Group Oy for about $136 million net of cash acquired. Total debt as a percent of total capitalization fell to 97 percent from 109 percent, and the $200 million 364-day term loan was repaid at maturity. The company expects capital expenditures of about $200 million and share repurchases of about $600 million in 2024, excluding acquisitions.
Concentration and demand remain the key risks. The Home Depot accounted for $3.1 billiond, or approximately 39 percent, of 2023 consolidated net sales, and the Behr brand grants The Home Depot exclusivity in North American retail.
Architectural coatings were about 32 percent of consolidated net sales in 2023. The filing also reports a $15 million non-cash impairment charge on a trademark in the Decorative Architectural Products segment, and the company declared a first-quarter 2024 dividend of $0.29 per share, an intended annual increase of two percent to $1.16.
02—Key points
Key Highlights
- Net sales fell eight percent to $7,967 million, with lower sales volume reducing sales by 11 percent, partly offset by three percent higher net selling prices.
- Gross margin expanded to 35.6 percent from 31.3 percent, supported by higher net selling prices, cost savings initiatives and lower transportation costs.
- Operating profit rose four percent to $1,348 million, and operating profit margin increased to 16.9 percent from 14.9 percent.
- Net income attributable to Masco Corporation was $908 million, or $4.02 per diluted share, up from $3.63 in 2022.
- Operating cash flow was $1,413 million, versus $840 million in 2022, primarily from operating profit and lower inventory.
- The Home Depot represented about 39 percent of 2023 consolidated net sales ($3.1 billion), and Behr brand exclusivity in North American retail is granted to The Home Depot.
- Masco repurchased 6.2 million shares for about $356 million in 2023, with about $600 million of repurchases anticipated in 2024 outside potential acquisitions.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Masco kept $0.11.
- Revenue$7.97B100.0%
- Cost of revenue−$5.13B64.4%
- Gross profit$2.84B35.6%
- Operating costs−$1.49B18.7%
- Operating income$1.35B16.9%
- Interest, other & tax−$440.0M5.5%
- Net income$908.0M11.4%
Where FY2023 revenue went
$7.97B- Cost of revenue: $5.13B, 64% of revenue
- SG&A: $1.47B, 18% of revenue
- Net income: $908.0M, 11% of revenue
- Interest, other & tax: $440.0M, 5.5% of revenue
Kept 11% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 8, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $7.97B$8.68B | −8.2% |
| Cost of Revenue | $5.13B$5.97B | −14.0% |
| Gross Profit | $2.84B$2.71B | +4.5% |
| SG&A Expenses | $1.47B$1.39B | +6.0% |
| Operating Income | $1.35B$1.30B | +3.9% |
| Interest Expense | $106.00M$108.00M | −1.9% |
| Net Income | $908.00M$844.00M | +7.6% |
| EPS (Basic) | $4.03$3.65 | +10.4% |
| EPS (Diluted) | $4.02$3.63 | +10.7% |
| Shares Outstanding (Basic) | 225.00M231.00M | −2.6% |
| Shares Outstanding (Diluted) | 226.00M232.00M | −2.6% |
05—Questions
Frequently Asked Questions
Why did Masco's sales decline in 2023 while profitability improved?
Net sales decreased eight percent because lower sales volume reduced sales by 11 percent and unfavorable sales mix reduced them by one percent. Higher net selling prices, which increased sales by three percent, partly offset these declines. Profitability improved because higher selling prices, cost savings initiatives, lower transportation costs, an insurance settlement payment and lower excess and obsolete inventory charges supported gross profit and operating profit.
How concentrated is Masco's customer base?
Sales are concentrated with three significant customers. The Home Depot accounted for $3.1 billion, or approximately 39 percent, of 2023 consolidated net sales, and net sales to Ferguson and Lowe's were each less than 10 percent. The filing states that the loss of a substantial portion of sales to The Home Depot would have a material adverse impact on the business.
What is Masco's capital allocation plan?
In 2023 Masco repurchased and retired 6.2 million shares for about $356 million and paid $257 million in cash dividends. It acquired Sauna360 for about $136 million net of cash acquired. The Board declared a first-quarter 2024 quarterly dividend of $0.29 per share with the intention to raise the annual dividend two percent to $1.16 per share. For 2024, the company anticipates about $600 million of share repurchases outside any potential acquisitions and about $200 million of capital expenditures.
How strong is Masco's balance sheet and liquidity?
Cash and cash investments were $634 million at December 31, 2023, up from $452 million. The current ratio was 1.7 to 1, compared with 1.6 to 1 a year earlier, and total debt as a percent of total capitalization was 97 percent, down from 109 percent. No borrowings were outstanding under the $1.0 billion 2022 Credit Agreement, and the company was in compliance with its covenants.
What are the main risks the filing highlights for investors?
The filing highlights dependence on residential repair and remodeling activity and, to a lesser extent, new home construction; variability in the cost and availability of brass, resins, titanium dioxide and zinc; customer concentration with The Home Depot; competition from private label and digitally native brands; and international exposure, with 20 percent of 2023 sales made outside North America. It also cites a $15 million impairment on a trademark in the Decorative Architectural Products segment due to competitive market conditions and higher cost of capital in the lighting business.
06—Continue