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Masco Corporation Reports First Quarter Results

Published on 2010-05-14. Author : SpecialChem

TAYLOR, Mich. -- Masco Corporation reported that net sales from continuing operations for the quarter ended March 31, 2010 increased three percent to $1.9 billion compared with $1.8 billion for the first quarter of 2009. North American sales were flat and International sales increased 16 percent. In local currencies, International sales increased nine percent compared with the first quarter of 2009.

The first quarter of 2010 results were positively affected by increased sales volume of plumbing products and windows, a more favorable product mix of paints and stains, and the improved relationship between selling prices and commodity costs. First quarter 2010 results were also positively affected by the benefits associated with business rationalizations and other cost savings initiatives. Such increases were partially offset by lower sales volume of installation and other services and lower selling prices for certain products.

(Loss) from continuing operations was $(.02) per common share in the first quarter of 2010 compared to (loss) from continuing operations of $(.24) per common share in the first quarter of 2009.

"We are very pleased with our first quarter 2010 financial results. Excluding the benefit from foreign currency translation our sales increased modestly from the first quarter 2009 - the first positive quarterly sales comparison in the last several years. While the quarter started slowly, business activity picked up as the weather improved in both North America and Europe and we have strong momentum going into the second quarter, particularly on the retail side of the business," said Masco's CEO Tim Wadhams. "Innovative new products drove market share gains and we continued to drive strong incremental margins in the quarter. We are proud of the Masco Team, worldwide, as we continue to focus on strengthening our leadership brands and enhancing customer experience with our products and services through innovation and quality while continuing to drive lean principles to improve our execution," said Tim Wadhams.

We continue to focus on the rationalization of our businesses, including business consolidations, plant closures, headcount reductions, system implementations and other initiatives. During the first quarters of 2010 and 2009, we incurred costs and charges of $14 million pre-tax ($.03 per common share, after tax) and $24 million pre-tax ($.04 per common share, after tax), respectively, related to these initiatives.

The unusual relationship between pre-tax income and tax expense in the first quarter of 2010 principally reflects $9 million ($.03 per common share) of additional tax expenses related to previously established accruals for changes in uncertain tax positions. In the first quarter of 2009, although the Company had a loss before income tax of $61 million, tax expense was $17 million ($.05 per common share) reflecting income tax liabilities in certain jurisdictions where losses provided no tax benefit.

We retired $300 million of floating rate notes that matured in March. On March 10, 2010, we issued $500 million of 7.125 percent ten-year notes. As a result, the Company's interest expense is expected to increase by approximately $30 million ($.05 per common share, after tax) for the full-year 2010.

Subsequent Event

As previously announced in February 2010, the Company is combining its Builder Cabinet Group and Retail Cabinet Group to form Masco Cabinetry. Masco Cabinetry continues to review its product offerings and has determined in late April that it will discontinue the manufacture of ready-to-assemble and other non-core in-stock assembled product lines as they are not consistent with Masco Cabinetry's strategy of growth through brand building and innovation. These product lines had aggregate annual sales of approximately $200 million in 2009. The Company anticipates it will close two manufacturing facilities associated with these products in the first half of 2011. The Company expects to incur approximately $115 million (principally recognized ratably over the next 15 months) of pre-tax charges related to the anticipated plant closures including approximately $90 million related to non-cash charges principally associated with property, plant and equipment and approximately $25 million of other cash charges. These charges, including the previously announced integration charges of approximately $40 million, will result in aggregate pre-tax charges of approximately $155 million related to the integration of the Builder and Retail Cabinet groups into Masco Cabinetry.

Based on the incremental actions outlined above, the Company anticipates that full year 2010 rationalization charges will aggregate approximately $140 million compared with the previously announced $70 million.

Outlook 2010

We expect that business conditions in 2010 will continue to show modest improvement compared to 2009. While we are concerned about the impact of current unemployment levels, foreclosure activity and access to financing, we believe that housing starts will improve in 2010 and will increase to a range of 600,000 to 700,000 units from 554,000 units in 2009.

While we anticipate that expenditures on repair and remodel activity will improve modestly in 2010 from 2009 levels, we believe that big-ticket items will continue to be deferred, in the short-term, until general economic conditions, credit availability and home prices improve.

We are confident that the long-term fundamentals for the new home construction and home improvement markets are positive. We believe that our strong financial position, together with our current strategy of investing in leadership brands (including: KraftMaid and Merillat cabinets, Delta and Hansgrohe faucets, Behr paint and Milgard windows), our continued focus on innovation and our commitment to lean principles will allow us to drive long-term growth and create value for our shareholders.

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.

Statements contained herein, or otherwise made available, that reflect the Company's views about its future performance may constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. These views involve risks and uncertainties that are difficult to predict and the Company's results may differ materially from the results discussed in such forward-looking statements. For further information, refer to our most recent Annual Report on Form 10-K (particularly the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections) and to any subsequent Quarterly Reports on Form 10-Q, all of which are on file with the Securities and Exchange Commission. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Certain of the financial and statistical data made available are non-GAAP financial measures as defined by the SEC's Regulation G. The Company believes that such non-GAAP performance measures and ratios used in managing the business may provide users with 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

Source: Masco Corporation


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