Masco Corporation (NYSE:MAS) Q1 2022 Earnings Conference Call April 27, 2022 8:00 AM ET Company Participants David Chaika - Vice President, Treasurer & IR Keith Allman - President & CEO John Sznewajs - Vice President & CFO Conference Call Participants Stephen Kim - Evercore ISI Matthew Bouley - Barclays John Lovallo - UBS Mike Dahl - RBC Capital Markets Michael Rehaut - JP Morgan Susan Maklari - Goldman Sachs Deepa Raghavan - Wells Fargo Securities Keith Hughes - Truist Securities Garik Shmois - Loop Capita ...

STAIN REPELLENO First Quarter 2022 Earnings Presentation April 27, 2022 Safe Harbor Statement This presentation contains statements that reflect our views about our future performance and constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "outlook," "believe," "anticipate," "appear," "may," "will," "should," "intend," "plan," "estimate," "expect," "assume," "seek," "forecast," and similar reference ...

PART I [Business](index=3&type=section&id=Item%201.%20Business) Masco Corporation is a global leader in branded home improvement and building products, focusing on strategic portfolio management and shareholder returns - Masco Corporation is a global leader in branded home improvement and building products, with a portfolio including brands like **BEHR®**, **DELTA®**, **HANSGROHE®**, **KICHLER®**, and **HOT SPRING®**[13](index=13&type=chunk) - The company's strategic pillars are: driving the full potential of core businesses, leveraging enterprise opportunities, and **actively managing its portfolio**[15](index=15&type=chunk) - In 2021, the company **acquired a majority stake in Easy Sanitary Solutions B.V. (ESS) and all of Steamist, Inc**, while divesting its Hüppe GmbH business[14](index=14&type=chunk) - Masco returned value to shareholders in 2021 by repurchasing approximately **17.6 million shares** and increasing its quarterly dividend by about **68%**[14](index=14&type=chunk) [Our Business Segments](index=4&type=section&id=Our%20Business%20Segments) The company operates through Plumbing Products and Decorative Architectural Products segments, with key brands and seasonal sales patterns - The Plumbing Products segment manufactures and sells faucets, showerheads, bathing units, spas, and plumbing components under brands such as **DELTA®**, **HANSGROHE®**, and **BRASSCRAFT®**[17](index=17&type=chunk)[18](index=18&type=chunk) - The Decorative Architectural Products segment primarily includes architectural coatings like paints and primers (BEHR®, KILZ®), which accounted for approximately **30% of consolidated net sales in 2021**[21](index=21&type=chunk)[23](index=23&type=chunk) - **The Home Depot** is the largest customer for the Decorative Architectural Products segment and Masco's largest customer overall[21](index=21&type=chunk) [Human Capital Management](index=6&type=section&id=Human%20Capital%20Management) The company's human capital strategy prioritizes leadership, diversity, equity & inclusion, and the future workforce - The company's human capital strategy is built on three pillars: **leadership, diversity, equity and inclusion (DE&I), and future workforce**[27](index=27&type=chunk) U.S. Workforce Representation Statistics (as of Dec 31, 2021) | Workforce Category | Women | Racially/Ethnically Diverse | | :--- | :--- | :--- | | Leadership Team | 31% | 26% | | Salaried Workforce | 36% | 29% | | Hourly Workforce | 38% | 53% | - Masco employed approximately **20,000 people** as of December 31, 2021[36](index=36&type=chunk) - The company has implemented extensive health and safety protocols in response to the **COVID-19 pandemic**, following guidelines from the WHO and CDC[35](index=35&type=chunk) [Risk Factors](index=9&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from the COVID-19 pandemic, market cyclicality, supply chain disruptions, customer concentration, and cybersecurity threats - The ongoing **COVID-19 pandemic** poses risks of operational disruption, supply chain delays, and constraints in sourcing materials and labor[40](index=40&type=chunk)[41](index=41&type=chunk) - The business is heavily reliant on **residential repair and remodeling activity**, which is influenced by economic factors like consumer confidence and interest rates[43](index=43&type=chunk)[44](index=44&type=chunk) - Significant operational risks include **volatility in raw material costs**, dependence on third-party suppliers, and complexities of international operations[47](index=47&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk) - Sales are highly concentrated with key customers, with **The Home Depot accounting for approximately 36% of consolidated net sales in 2021**[67](index=67&type=chunk) - The company faces technology risks from potential **cybersecurity attacks** and reliance on information systems, including complex ERP system implementations[69](index=69&type=chunk)[71](index=71&type=chunk) [Properties](index=16&type=section&id=Item%202.%20Properties) The company operates numerous manufacturing and warehouse facilities globally, owning most manufacturing sites while leasing many distribution centers Principal Properties by Segment (as of Dec 31, 2021) | Location/Segment | Manufacturing | Warehouse & Distribution | | :--- | :--- | :--- | | **North America** | | | | Plumbing Products | 22 | 11 | | Decorative Architectural Products | 8 | 19 | | **Total North America** | **30** | **30** | | **International** | | | | Plumbing Products | 10 | 17 | | Decorative Architectural Products | — | — | | **Total International** | **10** | **17** | - The company **owns most of its manufacturing facilities**, both in North America and internationally, while a substantial number of warehouse and distribution facilities are leased[81](index=81&type=chunk)[83](index=83&type=chunk) [Legal Proceedings](index=17&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note U to the consolidated financial statements - Details on legal proceedings are provided in **Note U** to the consolidated financial statements[86](index=86&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=18&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company actively repurchased shares, increased dividends, and its stock performance outpaced major indices from 2016 to 2021 - In February 2021, the Board authorized a **$2.0 billion share repurchase program**, and for the year, the company repurchased **17.6 million shares for approximately $1.026 billion**[91](index=91&type=chunk) - As of December 31, 2021, **$1.128 billion remained available** under the 2021 share repurchase authorization[91](index=91&type=chunk) - The Board of Directors declared a quarterly dividend of **$0.28 per share in Q1 2022**, with the intention to increase the annual dividend to $1.12 per share[90](index=90&type=chunk) Cumulative Total Shareholder Return (2016-2021) | Index | 2016 (Base) | 2021 (End Value) | | :--- | :--- | :--- | | Masco | $100.00 | $222.07 | | S&P 500 Index | $100.00 | $212.89 | | S&P Industrials Index | $100.00 | $166.33 | | S&P Consumer Durables & Apparel Index | $100.00 | $191.45 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Sales grew in 2021, but margins contracted due to cost inflation, while capital was allocated to acquisitions, share repurchases, and dividends - The company is experiencing **higher commodity and transportation costs**, supply chain disruptions, and labor cost inflation[103](index=103&type=chunk) - Net sales for 2021 **increased 17% to $8.4 billion** compared to 2020; excluding acquisitions, divestitures, and currency effects, net sales increased 13%[107](index=107&type=chunk) - **Gross margin decreased from 36.0% in 2020 to 34.2% in 2021**, negatively impacted by increased commodity, transportation, and labor costs[110](index=110&type=chunk) - **Operating profit margin decreased from 18.0% in 2020 to 16.8% in 2021**, partially due to a $45 million goodwill impairment charge[114](index=114&type=chunk)[116](index=116&type=chunk) - The company's capital allocation strategy includes reinvesting in the business, balancing share repurchases with potential acquisitions, and maintaining a meaningful dividend[135](index=135&type=chunk) [Consolidated Results of Operations](index=21&type=section&id=Consolidated%20Results%20of%20Operations) Net sales grew 17% in 2021, but gross and operating margins declined, while debt extinguishment and pension charges significantly reduced net income Net Sales Change (2020 vs 2021, in millions) | Description | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Net sales, as reported | $8,375 | $7,188 | $1,187 | | Net sales, excluding acquisitions, divestitures and currency | $8,046 | $7,145 | $901 | Profitability Metrics (2020 vs 2021) | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Gross Profit | $2,863M | $2,587M | +$276M | | Gross Margin | 34.2% | 36.0% | -180 bps | | Operating Profit | $1,405M | $1,295M | +$110M | | Operating Margin | 16.8% | 18.0% | -120 bps | - Interest expense increased significantly to **$278 million in 2021** from $144 million in 2020, primarily due to a **$168 million loss on debt extinguishment**[115](index=115&type=chunk) - Other expenses surged to **$439 million in 2021**, mainly due to a **$430 million charge** related to the termination of domestic defined-benefit pension plans[117](index=117&type=chunk)[118](index=118&type=chunk) Income from Continuing Operations (2020 vs 2021) | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Income from continuing operations | $410M | $810M | ($400M) | | Diluted EPS from continuing operations | $1.62 | $3.04 | ($1.42) | [Business Segment and Geographic Area Results](index=26&type=section&id=Business%20Segment%20and%20Geographic%20Area%20Results) The Plumbing segment drove sales and profit growth in 2021, while the Decorative Architectural segment's profit was flat due to cost pressures Net Sales by Segment (2021 vs 2020, in millions) | Segment | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Plumbing Products | $5,135 | $4,136 | 24% | | Decorative Architectural Products | $3,240 | $3,052 | 6% | | **Total** | **$8,375** | **$7,188** | **17%** | Operating Profit by Segment (2021 vs 2020, in millions) | Segment | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Plumbing Products | $929 | $806 | 15% | | Decorative Architectural Products | $581 | $583 | 0% | | **Total** | **$1,510** | **$1,389** | **9%** | - Plumbing Products sales growth was primarily driven by a **15% increase in sales volume** and a 5% increase from acquisitions[127](index=127&type=chunk) - Decorative Architectural Products operating profit was negatively impacted by **higher commodity costs**, increased transportation expenses, and a goodwill impairment charge[130](index=130&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) The company managed its liquidity through debt refinancing, acquisitions, and significant share repurchases, ending 2021 with $926 million in cash - Cash and cash investments **decreased to $926 million** at year-end 2021 from $1.3 billion at year-end 2020[136](index=136&type=chunk) - In March 2021, the company issued **$1.5 billion of new notes** and used proceeds to retire $1.326 billion of existing notes, resulting in a **$168 million loss on debt extinguishment**[141](index=141&type=chunk)[160](index=160&type=chunk) - Capital expenditures were **$128 million in 2021**, with plans to increase to approximately $250 million in 2022[140](index=140&type=chunk) - The company repurchased **17.6 million shares for $1.026 billion in 2021** and anticipates repurchasing approximately $600 million of shares in 2022[151](index=151&type=chunk) [Cash Flows](index=32&type=section&id=Cash%20Flows) Cash from operations remained stable, while significant financing activities, including debt refinancing and share buybacks, led to a net decrease in cash Summary of Cash Flows (in millions) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash from operating activities | $930 | $953 | | Net cash (for) from financing activities | ($1,298) | ($886) | | Net cash (for) from investing activities | ($12) | $531 | | **Cash (decrease) increase** | **($400)** | **$629** | - Financing activities were dominated by debt refinancing (issuing **$1.48B**, retiring **$1.33B**) and share repurchases (**$1.03B**)[160](index=160&type=chunk) - Working capital as a percentage of net sales increased slightly from **15.6% in 2020 to 16.0% in 2021**, driven by an increase in inventory days[158](index=158&type=chunk) [Critical Accounting Policies and Estimates](index=34&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Key accounting judgments relate to revenue recognition, goodwill impairment testing, and income tax asset valuation - Critical policies include **Revenue Recognition, Goodwill and Other Intangible Assets, and Income Taxes**[168](index=168&type=chunk) - For goodwill impairment testing, the company uses a discounted cash flow method with a long-term assumed annual growth rate of **2% to 3%** and a weighted average cost of capital of approximately **7.5%**[173](index=173&type=chunk)[174](index=174&type=chunk) - In Q4 2021, a **$45 million non-cash goodwill impairment charge** was recognized for the lighting business[176](index=176&type=chunk) - The company maintains a **$17 million valuation allowance** against certain state and foreign deferred tax assets as of December 31, 2021[183](index=183&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to interest rate and foreign currency risks, but sensitivity analyses indicate these exposures are not material - The company is exposed to market risk from interest rate changes and foreign currency fluctuations, especially the **euro, British pound, Canadian dollar, and Chinese renminbi**[187](index=187&type=chunk) - Sensitivity analyses indicate that hypothetical adverse changes in foreign currency rates, investment values, or interest rates **would not have a material effect** on the company's financial position[188](index=188&type=chunk) [Financial Statements and Supplementary Data](index=38&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements, on which management and the independent auditor concluded internal controls were effective - Management assessed its internal control over financial reporting as **effective** as of December 31, 2021, based on the COSO framework[191](index=191&type=chunk) - PricewaterhouseCoopers LLP issued an **unqualified opinion** on the consolidated financial statements and the effectiveness of internal controls[192](index=192&type=chunk)[195](index=195&type=chunk) - The auditor identified the **Goodwill Impairment Assessment** as a Critical Audit Matter due to the significant management judgment involved[202](index=202&type=chunk)[204](index=204&type=chunk) [Consolidated Financial Statements](index=41&type=section&id=Consolidated%20Financial%20Statements) The financial statements detail the company's financial position, showing total assets of $5.6 billion and net income of $410 million for 2021 Consolidated Balance Sheet Highlights (in millions) | Account | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $3,422 | $3,489 | | Total Assets | $5,575 | $5,777 | | Total Current Liabilities | $1,939 | $1,934 | | Long-Term Debt | $2,949 | $2,792 | | Total Liabilities | $5,497 | $5,356 | | Total Equity | $56 | $421 | Consolidated Statement of Operations Highlights (in millions) | Account | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net Sales | $8,375 | $7,188 | $6,707 | | Gross Profit | $2,863 | $2,587 | $2,371 | | Operating Profit | $1,405 | $1,295 | $1,088 | | Net Income Attributable to Masco | $410 | $1,224 | $935 | Consolidated Statement of Cash Flows Highlights (in millions) | Account | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net cash from operating activities | $930 | $953 | $833 | | Net cash for financing activities | ($1,298) | ($886) | ($1,291) | | Net cash (for) from investing activities | ($12) | $531 | $582 | | (Decrease) increase in cash | ($400) | $629 | $138 | [Notes to Consolidated Financial Statements](index=46&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail key financial events, including acquisitions, divestitures, a goodwill impairment charge, debt refinancing, and a pension plan settlement - In 2021, the company acquired **Steamist for ~$56M cash** and a **75.1% interest in ESS for ~$58M**[284](index=284&type=chunk)[285](index=285&type=chunk)[287](index=287&type=chunk)[290](index=290&type=chunk) - The company completed the divestiture of its Hüppe business in May 2021, recognizing an **$18 million loss**[292](index=292&type=chunk)[300](index=300&type=chunk)[302](index=302&type=chunk) - A **$45 million non-cash goodwill impairment charge** was recognized in Q4 2021 related to the lighting business[328](index=328&type=chunk) - In Q2 2021, the company settled its qualified domestic defined-benefit pension plans, reclassifying a **$447 million pre-tax actuarial loss** from AOCI to earnings[384](index=384&type=chunk) - The **effective tax rate for 2021 was 31%**, higher than the U.S. statutory rate of 21%, due to state taxes and taxes on foreign earnings[454](index=454&type=chunk) [Controls and Procedures](index=84&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of year-end 2021 - The company's management, including the CEO and CFO, concluded that **disclosure controls and procedures were effective** as of December 31, 2021[468](index=468&type=chunk) - **No material changes** occurred during the fourth quarter that affected the company's internal control over financial reporting[468](index=468&type=chunk) PART III [Directors, Executive Officers, Corporate Governance, Compensation, and Security Ownership](index=85&type=section&id=Item%2010%2C%2011%2C%2012%2C%2013%2C%2014) Information on governance, compensation, and ownership is incorporated by reference from the company's 2022 Proxy Statement - Information for Items 10 through 14 is **incorporated by reference** from the company's definitive Proxy Statement for the 2022 Annual Meeting of Stockholders[473](index=473&type=chunk)[474](index=474&type=chunk)[476](index=476&type=chunk)[477](index=477&type=chunk)[478](index=478&type=chunk) Equity Compensation Plan Information (as of Dec 31, 2021) | Description | Value | | :--- | :--- | | Securities to be issued upon exercise of outstanding options, warrants and rights | 2,691,956 | | Weighted-average exercise price of outstanding options, warrants and rights | $36.67 | | Securities remaining available for future issuance | 12,923,217 | PART IV [Exhibits and Financial Statement Schedules](index=86&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits, including key agreements and certifications, filed with the Form 10-K - This section provides a comprehensive list of all financial statements, schedules, and exhibits filed with the **10-K report**[481](index=481&type=chunk) - **Financial Statement Schedule II**, detailing Valuation and Qualifying Accounts for 2019-2021, is included[482](index=482&type=chunk)[493](index=493&type=chunk) - Exhibits filed include the company's **credit agreement, indentures for its notes, and various executive and director compensation plans**[483](index=483&type=chunk)[485](index=485&type=chunk)[486](index=486&type=chunk)

Masco Corporation (NYSE:MAS) Q4 2021 Earnings Conference Call February 8, 2022 8:00 AM ET Company Participants David Chaika - Vice President, Treasurer and Investor Relations Keith Allman - President and Chief Executive Officer John Sznewajs - Vice President and Chief Financial Officer Conference Call Participants Kenneth Zener - Keybanc Capital Markets Michael Rehaut - J.P. Morgan Adam Baumgarten - Zelman & Associates Mike Dahl - RBC Capital Markets John Lovallo - UBS Susan Maklari - Goldman Sachs Phil Ng ...

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Masco Corporation (NYSE:MAS) Q3 2021 Earnings Conference Call October 27, 2021 8:00 AM ET Company Participants David Chaika – Vice President, Treasurer and Investor Relations Keith Allman – President and Chief Executive Officer John Sznewajs – Vice President and Chief Financial Officer Conference Call Participants Matthew Bouley – Barclays Susan Maklari – Goldman Sachs Mike Dahl – RBC Capital Markets Phil Ng – Jefferies Adam Baumgarten – Zelman Garik Shmois – Loop Capital Deepa Raghavan – Wells Fargo Securi ...

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Start Time: 08:00 January 1, 0000 9:05 AM ET Masco Corporation (NYSE:MAS) Q2 2021 Earnings Conference Call July 29, 2021, 08:00 AM ET Company Participants Keith Allman - President and CEO John Sznewajs - VP and CFO David Chaika - VP, Treasurer and IR Conference Call Participants Matthew Bouley - Barclays Susan Maklari - Goldman Sachs Ken Zener - KeyBanc Capital Markets Mike Dahl - RBC Capital Markets Phil Ng - Jefferies Deepa Raghavan - Wells Fargo Securities Keith Hughes - Truist David MacGregor - Longbow ...