Taylor, Mich. — Masco Corporation (NYSE: MAS) today reported that net sales for the second quarter ended June 30, 2012 were flat at $2.0 billion compared to the second quarter of 2011. North American sales increased three percent and International sales decreased nine percent. In local currencies, International sales were flat compared with the second quarter of 2011.
Income from continuing operations was $.10 per common share and $.06 per common share for the second quarters of 2012 and 2011, respectively, excluding the items in Exhibit A and with a normalized tax rate of 36 percent. Including these items, (loss) income from continuing operations, as reported was ($.17) per common share compared to $.04 per common share for the second quarter of 2011.
2012 Second Quarter Commentary
• Net sales at $2.0 billion were flat compared to the second quarter of 2011. Excluding the impact of currency translation, net sales increased 3%.
• Results for key financial measures, as adjusted for certain items (see Exhibit A) and with a normalized tax rate of 36 percent, compared to the second quarter of 2011, were as follows:
• Gross profit margins declined to 26.1 percent compared to 27.2 percent
• Operating profit margins improved to 6.2 percent compared to 5.8 percent
• Income from continuing operations was $.10 per common share compared to $.06 per common share
• (Loss) income from continuing operations, as reported, was ($.17) per common share compared to $.04 per common share for the second quarter of 2011.
• Working capital as a percent of sales improved to 14.6 percent at June 30, 2012, compared to 15.6 percent at June 30, 2011.
• We ended the second quarter of 2012 with approximately $1.9 billion of cash.
“While general economic activity slowed in the second quarter and our sales were flat compared to last year, our top line benefitted from increased new home construction activity and sales of plumbing products in North America, and from selling price increases. Also, despite the weakening economic environment in Europe, our international sales were flat in local currencies,” said Masco’s CEO, Tim Wadhams. “In addition, our focus on total cost productivity helped drive leverage in our SG&A expenses and, as a result, we saw our operating margin improve slightly. As planned, in mid-July we improved our balance sheet by repaying our $745 million debt maturity, leaving us with approximately $1.2 billion of cash as we head into the second half of the year.”
During the second quarters of 2012 and 2011, we incurred costs and charges of $7 million pre-tax and $15 million pre-tax, respectively, related to business rationalization initiatives.
As previously disclosed, we reached an agreement in principle to settle the Columbus Drywall, Inc. litigation. We have agreed to pay $75 million in exchange for full release of all claims.
“We continue to make progress on our strategic initiatives, which include leveraging our brands, reducing our costs, improving our Installation and Cabinet segments and strengthening our balance sheet. Our Installation and Cabinet segments improved their performance by approximately $20 million in operating profit, in aggregate, compared to second quarter 2011, and for the first half of 2012, these segments achieved over $45 million of operating profit improvement,” said Tim Wadhams. “We expect both segments to benefit in the second half of 2012 from the continued improvement in North America new home construction activity. However, implementing our countertop and dealer strategies for Cabinets has been challenging and will reduce our second half expectations for Cabinet segment improvement. In addition, while we are relatively pleased with our first half results, we expect the second half of 2012 to be less robust than previously anticipated, as the U.S. economy appears to be losing momentum and Euro-zone economies continue to struggle,” said Tim Wadhams.
Headquartered in Taylor, Michigan, Masco Corporation is one of the world’s leading manufacturers of home improvement and building products, as well as a leading provider of services that include the installation of insulation and other building products.
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