2014 masco corporation jp morgan v2
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Transcript of 2014 masco corporation jp morgan v2
J.P. Morgan 7th Annual Homebuilding and Building Products Conference
May 15, 2014
MASCO CORPORATION
Safe Harbor Statement
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Written and oral statements made in this presentation that reflect our views about our future performance constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “believe,” “anticipate,” “appear,” “may,” “will,” “should,” “intend,” “plan,” “estimate,” “expect,” “assume,” “seek,” “forecast,” and similar references to future periods. These views involve risks and uncertainties that are difficult to predict and, accordingly, our actual results may differ materially from the results discussed in our forward-looking statements. We caution you against relying on any of these forward-looking statements. Our future performance may be affected by our reliance on new home construction and home improvement, our reliance on key customers, the cost and availability of raw materials, uncertainty in the international economy, shifts in consumer preferences and purchasing practices, our ability to improve our underperforming businesses, and our ability to maintain our competitive position in our industries. These and other factors are discussed in detail in Item 1A, “Risk Factors” in our Annual Report on Form 10-K, as well as in our Quarterly Reports on Form 10-Q and in other filings we make with the Securities and Exchange Commission. Our forward-looking statements in this presentation speak only as of the date of this presentation. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. Unless required by law, we undertake no obligation to update publicly any forward-looking statements as a result of new information, future events or otherwise.
Certain of the financial and statistical data included in this presentation and the related materials are non-GAAP
financial measures as defined under Regulation G. The Company believes that non-GAAP performance measures and ratios used in managing the business may provide attendees of this presentation with additional meaningful comparisons between current results and results in prior periods. Non-GAAP performance measures and ratios should be viewed in addition to, and not as an alternative for, the Company's reported results under accounting principles generally accepted in the United States. Additional information about the Company is contained in the Company's filings with the SEC and is available on Masco’s web site, www.masco.com.
Agenda
● Masco Performance - Momentum
● Early Observations – Powerful Capabilities – Strengths – Opportunities
● Go Forward Plan
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M A S C O P E R F O R M A N C E
Keith Allman, President and CEO
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Automotive Industry
• 15 years • Proven track record
in manufacturing, lean principles and operations
Merillat Industries
• 8 years • Responsible for supply chain,
product development and sales
• Now part of Masco Cabinetry
Delta Faucet
Company
• 5 years • President • Spearheaded
turnaround • Reinvigorated the
Delta® brand and company performance
MASCO Kitchen and Bath
• 2 years • Group President • Approx. half the
revenues of MASCO
MASCO
• President & CEO • Appointed
Feb. 14, 2014
M A S C O P E R F O R M A N C E
Masco Drove Improvement During the Downturn
Reduced fixed costs
Strengthened management
Improved underperformers
Refined portfolio
• Installation profitable Q4 2012
• Cabinets profitable on an adjusted basis Q2 2013
• Reduced fixed gross costs by ~$600M, lowered breakeven
• Divested Danish cabinet business
• Aligned organization with strategic goal setting and improved planning process
• Topgraded talent at several BUs
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Masco is Delivering Growth and Strong Cash Flow Generation
6 *Operating Profit as adjusted, excluding goodwill, litigation, rationalization and other charges ($570M in 2011, $198M in 2012, and $48M in 2013). Operating (loss)/profit as reported, ($215M) in 2011, $302M in 2012 and $673 M in 2013.
$7.2
$7.5
$8.2
2011 2012 2013
Revenues ($B)
$355
$500
$721
2011 2012 2013
$75
$139
$514
2011 2012 2013
Cash Flow ($M)
Operating Profit* ($M)
M A S C O P E R F O R M A N C E
Masco Delivered a Solid Performance in 2013
Revenue $8.2B
Market cap >$7.9B
Dividend yield 1.4%
Free Cash Flow >$500M
Focused on Repair & Remodel (Breakdown of 2013 Revenue)
New Construction
Repair & Remodel 72% 28%
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12/31/2013
Liquidity $1.5B
Agenda
● Masco Performance - Momentum
● Early Observations – Powerful Capabilities – Strengths – Opportunities
● Go Forward Plan
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Masco Strengths
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1 Unparalleled brand strength
2 Customer focused innovation
3 Broad market coverage
4 Strong financial position
M A S C O S T R E N G T H S
1. Unparalleled Brand Strength Drives Share Gains
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Masco Cabinetry (cabinet manufacturer
in U.S.)
Delta (faucet brand
in North America)
Masco Contractor Services (installer of
insulation in U.S.)
Behr (DIY architectural
coatings in North America)
Milgard (vinyl window
brand in Western U.S.)
Hansgrohe (global faucet
& mixer brand)
Arrow, Liberty, BrassCraft and
Watkins (in their respective market categories)
#2
#1
#1 #1
#1
#1
#2
M A S C O S T R E N G T H S
2. Customer Focused Innovation
11 * Percentage of 2013 gross sales of manufactured products attributable to new products introduced in trailing 36 months
30%*
Examples of New Products/Technologies
Existing Products
2013 2012 2011
70%
Hansgrohe SelectTM
Collection
KraftMaid New Design Launch
2013 Revenues
BehrPro® Paint
Masco Cabinetry’s ProCision® Process
Kilz PRO-X® Paint
Delta® Toilets
Paint & Primer in One with Advanced Stain
Blocking Formula
KraftMaid® Vanities
Behr DeckOver®
Coating
M A S C O S T R E N G T H S
3. Broad Coverage Across Segments, Price Points and Channels
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Segments Price Points Channels
New construction
28%
Repair / remodel 72%
International 19%
N. America 81%
• Low ticket value ~$20
• High ticket luxury ~$20K
• Direct-to-Builder
• Big box retail
• Wholesale / dealer trade
M A S C O S T R E N G T H S
4. Strong Financial Position
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Strong Liquidity (as of 3/31/2014)
● A strong operating cash flow business – ~$1B last 3 years – Maintenance capex of ~$100M annually
● Valuation allowance of ~$550 million on deferred tax assets is expected to be reversed when our U.S. businesses return to sustained profitability
● Plan to reduce debt by $300M–$500M by 2016
Declining Debt to Capitalization Ratio
2013Year End
FutureTarget
Balance Sheet Liquidity
Cash and cash investments $0.9B
Short-term bank deposits $0.3B
Total $1.2B
82%
45%–55%
Agenda
● Masco Performance - Momentum
● Early Observations – Powerful Capabilities – Strengths – Opportunities
● Go Forward Plan
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Masco Opportunities
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2. Leverage
opportunities across our portfolio
1. Drive full
potential of our core businesses
3. Actively manage portfolio
O P P O RT U N I T I E S
M A S C O O P P O R T U N I T I E S
1. Drive Full Potential of Our Core Businesses
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Current Examples:
● Extended Delta® brand to toilets and showers based on the power of the brand
● Increased Behr marketing to the professional painter to add a new channel
● Extended Hansgrohe into new international markets
1.
M A S C O O P P O R T U N I T I E S
2. Leverage Opportunities Across Our Portfolio
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● Improved supply chain by implementing best practices across our portfolio
● Reduced material costs from integrated purchasing
● Applied value engineering across businesses
Current Examples:
2.
M A S C O O P P O R T U N I T I E S
3. Actively Manage Portfolio
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● Divested underperforming Danish cabinet business
● Integrated Alsons® showerheads into Delta to provide cost savings and brand extensions
● Acquired opening price point spa business to augment Watkins’ spas
Current Examples:
3.
Agenda
● Masco Performance - Momentum
● Early Observations – Powerful Capabilities – Strengths – Opportunities
● Go Forward Plan
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Go Forward Plan
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1
2 Immersion in the business
3
Strategic Plan
Listening tour • Customers • Investors • Employees
Short term plan • Assess team • Determine org structure • Implement operating model
Year-End 2014
Momentum Powerful Capabilities Go Forward Plan
Key Messages
● Masco is a strong company, and we believe we are positioned to outperform the recovery
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● Focused on execution to take advantage of strengths and drive opportunities faster
● Plan to communicate updated strategy by year-end 2014
J.P. Morgan 7th Annual Homebuilding and Building Products Conference
May 15, 2014
MASCO CORPORATION
Appendix
($ in Millions) 2014 Estimate 2013 Actual
Rationalization Charges1, 3 ~ $10 $48
Tax Rate ~ 17% 26%
Interest Expense ~ $225 $235
General Corp. Expense2 ~ $130 $134
Capital Expenditures ~ $200 $126
Depreciation & Amortization3
~ $175 $186
Shares Outstanding 352 million 352 million
2014 Guidance Estimates
1. Based on 2014 business plans.
2. Includes rationalization expenses of $3M for the year ended December 31, 2013.
3. Includes accelerated depreciation of $13M for the year ended December 31, 2013 and estimated accelerated depreciation for the year ended December 31, 2014 of ~$1M. Such expenses are also included in the rationalization charges.
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2013 Segment Mix*
R&R = % of sales to repair and remodel channels NC = % of sales to new construction channels NA = % of sales within North America Int’l = % of sales outside North America *Based on Company estimates.
Business Segment
Plumbing Products
Installation and Other Services
Decorative Architectural Products
$3.2B
$1.4B
$1.9B
Revenue 2013 % of Total
39%
23%
17%
$8.2B 100% Total Company
Other Specialty Products $0.7B 9%
R&R% vs. NC NA% vs. Int’l
82% 59%
99% 100%
18% 100%
74% 76%
72% 81%
Cabinets and Related Products $1.0B 12% 57% 93%
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2013 International Revenue Split*
*Based on Company estimates.
International Sales Accounted for ~20% of Total 2013 Masco Sales
23%
7%
6%
31%
9%
14%
10%
UKNorthern EuropeSouthern EuropeCentral EuropeEastern EuropeEmerging marketsOther
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