-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FtNI9EpuRruPSxNgJy0fToNNHHYOYSXFxE3iEnQicLzsLyNIKpAyIzc0q1cdOv1c YCintvQoVe4GnyPWVTQtrg== 0000062996-97-000011.txt : 19970814 0000062996-97-000011.hdr.sgml : 19970814 ACCESSION NUMBER: 0000062996-97-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MASCO CORP /DE/ CENTRAL INDEX KEY: 0000062996 STANDARD INDUSTRIAL CLASSIFICATION: HOUSEHOLD FURNITURE [2510] IRS NUMBER: 381794485 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05794 FILM NUMBER: 97658683 BUSINESS ADDRESS: STREET 1: 21001 VAN BORN RD CITY: TAYLOR STATE: MI ZIP: 48180 BUSINESS PHONE: 3132747400 MAIL ADDRESS: STREET 1: 21001 VAN BORN ROAD CITY: TAYLOR STATE: MI ZIP: 48180 FORMER COMPANY: FORMER CONFORMED NAME: MASCO SCREW PRODUCTS CO DATE OF NAME CHANGE: 19731025 10-Q 1 MASCO CORPORATION 2ND QUARTER 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended June 30, 1997. Commission File Number 1-5794 MASCO CORPORATION (Exact name of Registrant as specified in its Charter) Delaware 38-1794485 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 21001 Van Born Road, Taylor, Michigan 48180 (Address of principal executive offices) (Zip Code) (313) 274-7400 (Telephone Number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Shares Outstanding at Class August 4, 1997 Common stock, par value $1 per share 164,959,000 MASCO CORPORATION INDEX Page No. Part I. Financial Information Item 1. Financial Statements: Condensed Consolidated Balance Sheet - June 30, 1997 and December 31, 1996 1 Condensed Consolidated Statement of Income for the Three Months and Six Months Ended June 30, 1997 and 1996 2 Condensed Consolidated Statement of Cash Flows for the Six Months Ended June 30, 1997 and 1996 3 Notes to Condensed Consolidated Financial Statements 4-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-11 Unaudited Information Regarding Equity Investments for the Three Months and Six Months Ended June 30, 1997 and 1996 12 Part II. Other Information and Signature 13-14 MASCO CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET June 30, 1997 and December 31, 1996 (Dollars in thousands)
June 30, December 31, ASSETS 1997 1996 Current assets: Cash and cash investments $ 333,170 $ 473,730 Accounts and notes receivable, net 537,520 466,900 Prepaid expenses and other 91,840 77,200 Inventories: Raw material 191,790 185,500 Finished goods 151,960 135,190 Work in process 104,520 91,250 448,270 411,940 Total current assets 1,410,800 1,429,770 Receivable from MascoTech, Inc. 151,380 151,380 Equity investment in MascoTech, Inc. 49,460 10,150 Equity investments in other affiliates 66,310 57,680 Securities of Furnishings International Inc. 374,140 356,340 Property and equipment, net 949,650 940,590 Acquired goodwill, net 505,320 457,350 Other noncurrent assets 289,230 298,390 Total assets $3,796,290 $3,701,650 LIABILITIES Current liabilities: Notes payable $ 11,270 $ 7,590 Accounts payable 129,630 149,500 Accrued liabilities 369,420 361,350 Total current liabilities 510,320 518,440 Long-term debt 1,228,730 1,236,320 Deferred income taxes and other 105,410 107,080 Total liabilities 1,844,460 1,861,840 SHAREHOLDERS' EQUITY Common stock, par value $1 per share Authorized shares: 400,000,000 161,650 160,870 Preferred stock, par value $1 per share Authorized shares: 1,000,000 --- --- Paid-in capital 158,260 140,010 Retained earnings 1,645,930 1,536,410 Cumulative translation adjustments (14,010) 2,520 Total shareholders' equity 1,951,830 1,839,810 Total liabilities and shareholders' equity $3,796,290 $3,701,650
See notes to condensed consolidated financial statements. 1 MASCO CORPORATION CONDENSED CONSOLIDATED STATEMENT OF INCOME For the Three Months and Six Months Ended June 30, 1997 and 1996 (Amounts in thousands except per share data)
Three Months Ended Six Months Ended June 30 June 30 1997 1996 1997 1996 Net sales $913,000 $787,000 $1,767,000 $1,551,000 Cost of sales 578,200 496,570 1,117,700 976,900 Gross profit 334,800 290,430 649,300 574,100 Selling, general and administrative expenses 187,200 169,770 368,200 339,300 Amortization of acquired goodwill 3,800 2,690 7,500 5,300 Operating profit 143,800 117,970 273,600 229,500 Other income (expense), net: Interest expense (18,900) (16,500) (37,400) (34,000) Re: MascoTech, Inc.: Equity earnings (loss) 4,300 (5,570) 10,300 3,300 Interest income 2,500 --- 5,000 --- Gain from change in investment 29,500 --- 29,500 --- Other, net (8,800) 14,000 10,600 17,900 8,600 (8,070) 18,000 (12,800) Income before income taxes 152,400 109,900 291,600 216,700 Income taxes 60,800 41,900 116,500 86,700 Net income $ 91,600 $ 68,000 $ 175,100 $ 130,000 Per share data: Net income $.57 $.42 $1.09 $.81 Cash dividends declared and paid $.20 $.19 $ .40 $.38 Average shares outstanding 161,200 160,500 161,200 160,500
See notes to condensed consolidated financial statements. 2 MASCO CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS For the Six Months Ended June 30,1997 and 1996 (Dollars in thousands)
Six Months Ended June 30 1997 1996 CASH FLOWS FROM (FOR) OPERATING ACTIVITIES: Cash provided by continuing operations $ 193,190 $168,800 (Increase) in receivables (69,420) (39,500) (Increase) decrease in inventories (9,480) 1,950 Decrease in prepaid expenses 12,080 340 Increase (decrease) in current liabilities (18,910) 18,970 Total cash from operating activities of continuing operations 107,460 150,560 CASH FLOWS FROM (FOR) INVESTING ACTIVITIES: Acquisition of companies (87,850) (100,000) Capital expenditures (64,760) (50,840) 0ther, net (17,030) 12,780 Total cash (for) investing activities of continuing operations (169,640) (138,060) Discontinued operations, net --- 19,470 Total cash (for) investing activities (169,640) (118,590) CASH FLOWS FROM (FOR) FINANCING ACTIVITIES: Increase in debt 17,170 300,420 Payment of debt (31,060) (258,910) Cash dividends paid (64,490) (60,920) Total cash (for) financing activities of continuing operations (78,380) (19,410) CASH AND CASH INVESTMENTS: Increase (decrease) for the period (140,560) 12,560 At January 1 473,730 60,470 At June 30 $ 333,170 $ 73,030
See notes to condensed consolidated financial statements. 3 MASCO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS A. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, of a normal recurring nature, necessary to present fairly its financial position as at June 30, 1997 and the results of operations for the three months and six months ended June 30, 1997 and 1996 and cash flows for the six months ended June 30, 1997 and 1996. The condensed consolidated balance sheet at December 31, 1996 was derived from audited financial statements. Earnings per share are calculated based on the weighted average common shares outstanding. Certain amounts for the prior year periods have been reclassified to conform to the current year presentation. B. In the second quarter of 1997, the Company acquired Liberty Hardware Manufacturing Corporation, a producer of quality cabinet and builders' hardware; during the first quarter of 1997, the Company acquired Franklin Brass Manufacturing Company, a manufacturer of bath accessories and bath safety products, and LaGard Inc., a manufacturer of electronic locks. In July 1997, the Company acquired: the Alvic Group, a Spanish manufacturer and distributor of kitchen and bath cabinetry; the SKS Group, a German manufacturer of rolling shutters and balcony railing systems; and Texwood Industries Inc., a U.S. manufacturer of kitchen and bath cabinetry. Combined 1996 annual net sales of companies acquired in 1997 through July were approximately $340 million. The combined purchase price for the above acquisitions aggregated approximately $420 million and included approximately 2.9 million shares of Company common stock, with the balance in cash. The acquisitions were accounted for as purchase transactions. C. The Company expects that Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share," will not have a material impact on the calculation of earnings per share when adopted at December 31, 1997. Although earlier application of SFAS 128 is not permitted, disclosure of the pro forma earnings per share amounts computed in accordance with SFAS 128 is permitted. Accordingly, pro forma basic and diluted earnings per share under SFAS 128 were $.58 and $.56, respectively, and $1.11 and $1.07, respectively, for the second quarter and six months ended June 30, 1997. D. Other income (expense), net consists of the following, in thousands:
Three Months Ended Six Months Ended June 30 June 30 1997 1996 1997 1996 Interest expense $(18,900) $(16,500) $(37,400) $(34,000) Re: MascoTech, Inc.: Equity earnings (loss) 4,300 (5,570) 10,300 3,300 Interest income 2,500 --- 5,000 --- Gain from change in investment 29,500 --- 29,500 --- Equity earnings, other 1,700 1,880 3,500 3,900 Income from cash and cash investments 3,600 460 7,900 1,100 Other interest income 9,500 1,160 19,400 2,300 Other, net (23,600) 10,500 (20,200) 10,600 $ 8,600 $ (8,070) $ 18,000 $(12,800)
4 MASCO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Note D - Concluded: In late June 1997, MascoTech, Inc., an equity affiliate, redeemed all of its outstanding convertible preferred stock in exchange for approximately 10 million shares of its common stock. This redemption reduced the Company's common equity ownership in MascoTech to 17 percent from 21 percent, and increased the Company's equity in MascoTech's net book value by approximately $29.5 million. As a result, the Company recognized a pre- tax gain of approximately $29.5 million during the second quarter of 1997. Equity earnings from MascoTech for the first half of 1997 reflect the Company's fourth quarter 1996 reduction in common equity ownership of MascoTech from 45 percent to 21 percent. The equity loss from MascoTech in the 1996 second quarter results from the Company's equity share (approximately $11.7 million pre-tax) of losses regarding the disposition of metal stamping businesses of MascoTech, Inc. Other, net in the 1997 second quarter includes charges aggregating $29.5 million, which entirely offset the above-mentioned MascoTech gain, primarily for the adjustment of the Company's Payless Cashways investment to its estimated fair value. Other, net in the 1996 second quarter includes an approximate $4.4 million gain from the sale of certain common shares of TriMas Corporation. During the first half of 1997, the Company recognized interest income at 6.625% on the $151.4 million receivable balance due from MascoTech. This receivable balance is included in noncurrent assets inasmuch as the Company may receive publicly traded securities of Emco Limited held by MascoTech, in payment of a substantial portion of this balance. Emco Limited is a Canadian manufacturer and distributor of home improvement and building products. Included in other interest income for the three months and six months ended June 30, 1997 is interest income of approximately $9.0 million and $18.0 million, respectively, from the 12% pay-in-kind junior debt securities of Furnishings International Inc. (approximately $300 million at December 31, 1996). Such interest income began to accrue in August 1996 upon the sale of the Company's home furnishings businesses. 5 MASCO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) E. The following presents the combined unaudited financial statements of the Company, MascoTech, Inc. and TriMas Corporation as one entity, with Masco Corporation as the parent company. Intercompany transactions have been eliminated. Amounts, except per share data, are in thousands.
Combined Balance Sheet June 30, December 31, 1997 1996 Current assets: Cash and cash investments $ 467,570 $ 599,020 Marketable securities 48,440 37,760 Accounts and notes receivable, net 765,440 674,530 Prepaid expenses and other 109,840 81,320 Deferred income taxes 36,790 53,670 Net current assets of businesses held for disposition --- 85,980 Inventories: Raw material 247,630 238,250 Finished goods 223,900 209,590 Work in process 140,880 125,950 612,410 573,790 Total current assets 2,040,490 2,106,070 Equity investments in affiliates 265,900 221,380 Securities of Furnishings International Inc. 374,140 356,340 Property and equipment, net 1,542,620 1,523,590 Acquired goodwill, net 695,000 660,690 Net noncurrent assets of businesses held for disposition --- 22,850 0ther assets 402,420 415,280 Total assets $5,320,570 $5,306,200 Liabilities and Shareholders' Equity Current liabilities: Notes payable $ 13,590 $ 16,620 Accounts payable 219,080 241,420 Accrued liabilities 505,570 501,800 Total current liabilities 738,240 759,840 Long-term debt 1,850,050 2,020,400 Deferred income taxes and other 303,360 300,170 Other interests in combined affiliates 477,090 385,980 Equity of shareholders of Masco Corporation 1,951,830 1,839,810 Total liabilities and shareholders' equity $5,320,570 $5,306,200
6 MASCO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Note E - Continued:
Three Months Ended Six Months Ended June 30 June 30 Combined Statement of Income 1997 1996 1997 1996 Net sales $1,322,650 $1,286,260 $2,567,950 $2,566,050 Costs and expenses, net: Cost of sales 873,370 884,440 1,695,330 1,771,660 Selling, general and administrative expenses 239,650 229,160 473,170 461,820 Charge on disposition of businesses, net --- 29,520 --- 31,520 Other income (expense), net: Interest expense (27,670) (26,160) (55,210) (54,280) Other income, net 32,780 19,040 77,650 28,100 5,110 (7,120) 22,440 (26,180) 1,107,910 1,150,240 2,146,060 2,291,180 Income before income taxes, other interests and cumulative effect of an accounting change 214,740 136,020 421,890 274,870 Income taxes 89,360 60,580 177,060 119,250 Other interests in combined affiliates 33,780 7,440 69,730 28,700 Income before cumulative effect of an accounting change 91,600 68,000 175,100 126,920 Cumulative effect of an accounting change, net --- --- --- 3,080 Net income $ 91,600 $ 68,000 $ 175,100 $ 130,000 Earnings per share: Income before cumulative effect of an accounting change $.57 $.42 $1.09 $.79 Cumulative effect of an accounting change, net -- -- -- .02 Earnings per share $.57 $.42 $1.09 $.81 Cash dividends declared and paid per share $.20 $.19 $ .40 $.38 Average shares outstanding 161,200 160,500 161,200 160,500
7 MASCO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (concluded) Note E - Concluded: (CAPTION> Six Months Ended June 30 Combined Statement of Cash Flows 1997 1996 Cash Flows From (For) Operating Activities: Cash provided by continuing operations $ 318,470 $ 230,080 (Increase) in receivables (84,030) (62,400) (Increase) decrease in inventories (5,600) 8,860 Decrease in prepaid expenses 12,040 1,370 Decrease in marketable securities, net 3,380 14,000 Increase (decrease) in current liabilities (22,070) 36,700 Total cash from operating activities 222,190 228,610 Cash Flows From (For) Investing Activities: Capital expenditures (94,810) (81,530) Acquisition of companies (105,980) (104,470) Proceeds from sale of subsidiaries 76,560 184,020 Discontinued operations, net --- 19,470 Net assets held for disposition --- (820) Other, net (79,820) 71,940 Total cash from (for) investing activities (204,050) 88,610 Cash Flows From (For) Financing Activities: Increase in debt 37,290 301,140 Payment of debt (110,080) (516,760) Cash dividends paid (76,800) (71,790) Total cash (for) financing activities (149,590) (287,410) Cash and Cash Investments: Increase (decrease) for the period (131,450) 29,810 At January 1 599,020 169,240 At June 30 $ 467,570 $ 199,050
8 MASCO CORPORATION Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SECOND QUARTER 1997 AND THE FIRST SIX MONTHS 1997 VERSUS SECOND QUARTER 1996 AND THE FIRST SIX MONTHS 1996 SALES AND OPERATIONS Net sales increased 16 percent and 14 percent for the three months and six months ended June 30, 1997, respectively, from the comparable periods in 1996. Excluding acquisition of companies, net sales for the three months and six months ended June 30, 1997 increased eight percent and seven percent, respectively, from the comparable periods in 1996; these increases in net sales are principally due to increases in unit sales volume of faucets, cabinets and other kitchen and bath products. Sales of Kitchen and Bath Products for the three months and six months ended June 30, 1997 were $712 million and $1,391 million, respectively, representing increases of 16 percent and 15 percent, respectively, from the comparable periods in 1996; excluding acquisition of companies, net sales of this segment increased 9 percent for both the three months and six months ended June 30, 1997. Sales of Other Specialty Products for the three months and six months ended June 30, 1997 were $201 million and $376 million, respectively, representing increases of 16 percent and 10 percent, respectively, from the comparable periods in 1996; excluding acquisition of companies, net sales of this segment increased 6 percent and 2 percent, respectively, for the three months and six months ended June 30, 1997. Net sales from North American operations for the second quarter and six months ended June 30, 1997 were $761 million and $1,474 million, respectively, representing increases of 14 percent and 11 percent, respectively, from the comparable periods in 1996; excluding acquisition of companies, net sales from these operations increased 10 percent and 9 percent, respectively, from the comparable periods in 1996. Net sales from European operations for the second quarter and six months ended June 30, 1997 were $152 million and $293 million, respectively, representing increases of 29 percent and 31 percent, respectively, from the comparable periods in 1996; excluding acquisition of companies, net sales from these operations decreased 4 percent and 3 percent, respectively, from the comparable periods in 1996. A stronger U.S. dollar, principally against the German Deutsche Mark, had a negative effect on the translation of European sales in the first half of 1997, as compared with the first half of 1996, lowering European net sales in the second quarter and six months ended June 30, 1997 by approximately 10 percent. The Company's operating profit margins improved in the second quarter and first half of 1997 from the comparable 1996 periods. Cost of sales as a percentage of sales increased slightly to 63.3 percent from 63.1 percent and to 63.3 percent from 63.0 percent for the second quarter and six months ended June 30, 1997, respectively, from the comparable periods in 1996; selling, general and administrative expenses as a percentage of sales decreased to 20.5 percent from 21.6 percent and to 20.8 percent from 21.9 percent for the second quarter and six months ended June 30, 1997, respectively, from the comparable periods in 1996. The decrease in the selling, general and administrative expenses percentage in 1997 includes the Company's cost-control initiatives and the leveraging of fixed and semi-fixed costs over a higher sales base. The Company's operating profit margins, before general corporate expense, were 18.0 percent and 17.8 percent, for the second quarter and six months ended June 30, 1997, respectively, as compared with 17.8 percent and 17.6 percent for the comparable 1996 periods. Operating profit margins, after general corporate expense, were 15.8 percent and 15.5 percent, for the second quarter and six months ended June 30, 1997, respectively, as compared with 15.0 percent and 14.8 percent for the comparable 1996 periods. 9 MASCO CORPORATION Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) OTHER INCOME (EXPENSE), NET Equity earnings from MascoTech, Inc. for the first half of 1997 reflect the Company's fourth quarter 1996 reduction in common equity ownership of MascoTech from 45 percent to 21 percent. Included in other income (expense), net for the second quarter and six months ended June 30, 1997 were equity earnings from MascoTech of $4.3 million and $10.3 million, respectively, as compared with equity losses of $5.6 million for the second quarter of 1996 and equity earnings of $3.3 million for the six months ended June 30, 1996. Excluding the Company's $11.7 million pre-tax equity share of MascoTech's 1996 second quarter charge resulting from the disposition of its metal stamping businesses and the Company's $5.0 million pre-tax equity share of unusual income related to a first quarter 1996 MascoTech accounting change, equity earnings from MascoTech for the second quarter and six months ended June 30, 1996 were $6.1 million and $10.0 million, respectively. Included in other income (expense), net for the three months and six months ended June 30, 1997 is $2.5 million and $5.0 million, respectively, of interest income from the $151.4 million receivable balance due from MascoTech. This receivable balance is included in noncurrent assets inasmuch as the Company may receive publicly traded securities of Emco Limited held by MascoTech, in payment of a substantial portion of this balance. Emco Limited is a Canadian manufacturer and distributor of home improvement and building products. In late June 1997, MascoTech redeemed all of its outstanding convertible preferred stock in exchange for approximately 10 million shares of its common stock. This redemption reduced the Company's common equity ownership in MascoTech to 17 percent from 21 percent, and increased the Company's equity in MascoTech's net book value by approximately $29.5 million. As a result, the Company recognized a pre-tax gain of approximately $29.5 million during the second quarter of 1997. Other, net in the 1997 second quarter includes charges aggregating $29.5 million, which entirely offset the above-mentioned MascoTech gain, primarily for the adjustment of the Company's Payless Cashways investment to its estimated fair value. Other, net in the 1996 second quarter includes an approximate $4.4 million gain from the sale of certain common shares of TriMas Corporation. Other interest income for the three months and six months ended June 30, 1997 includes interest income of approximately $9.0 million and $18.0 million, respectively, from the 12% pay-in-kind junior debt securities of Furnishings International Inc. (approximately $300 million at December 31, 1996). Such interest income began to accrue in August 1996 upon the sale of the Company's home furnishings businesses. Income from cash and cash investments for the three months and six months ended June 30, 1997 increased to $3.6 million and to $7.9 million, respectively, from $.5 million and $1.1 million, respectively, for the comparable periods in 1996; these increases resulted from a higher average cash and cash investments balance during the first half of 1997 as compared with the first half of 1996. 10 MASCO CORPORATION Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (concluded) NET INCOME AND EARNINGS PER SHARE Net income for the second quarter of 1997 increased 35 percent to $91.6 million from $68.0 million in the comparable 1996 period, and earnings per share increased 36 percent to $.57 from $.42. Net income for the six months ended June 30, 1997 increased 35 percent to $175.1 million from $130.0 million in the comparable 1996 period and earnings per share increased 35 percent to $1.09 from $.81. The Company's effective tax rate was 39.9 percent for the second quarter of 1997 as compared with 38.1 percent for the comparable period in 1996. The Company estimates that its effective tax rate for 1997 will approximate 40.0 percent. OTHER FINANCIAL INFORMATION At June 30, 1997 current assets were 2.8 times current liabilities. For the six months ended June 30, 1997, cash of $107.4 million was provided by operating activities. Cash used for investing activities was $169.6 million, including $87.9 million for the acquisition of companies, $64.7 million for capital expenditures and $17.0 million for other cash outflows. Cash used for financing activities was $78.4 million, including $13.9 million for the net payment of debt and $64.5 million for cash dividends paid. The aggregate of the preceding items represents a net cash outflow of $140.6 million. First and second quarter 1997 cash from operations was affected by an expected and recurring first-half increase in accounts receivable. As the annual increase in accounts receivable is historically experienced in the first half of the year, cash flows from operations in the remaining two quarters of 1997 are not expected to be affected by significant increases in accounts receivable. The Company has on file with the Securities and Exchange Commission, an unallocated shelf registration pursuant to which the Company is able to issue up to a combined $759 million of debt and equity securities. The Company believes that its present cash balance, its cash flows from operations and, to the extent necessary, future financial market activities and bank borrowings, are sufficient to fund its working capital and other investment needs. The Company expects that Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share," will not have a material impact on the calculation of earnings per share when adopted at December 31, 1997. Although earlier application of SFAS 128 is not permitted, disclosure of the pro forma earnings per share amounts computed in accordance with SFAS 128 is permitted. Accordingly, pro forma basic and diluted earnings per share under SFAS 128 were $.58 and $.56, respectively, and $1.11 and $1.07, respectively, for the second quarter and six months ended June 30, 1997. 11 UNAUDITED INFORMATION REGARDING EQUITY INVESTMENTS FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996 Equity investments in affiliates consist primarily of the following approximate common stock and partnership interests at June 30: 1997 1996 MascoTech, Inc. 17% 45% Hans Grohe, a German partnership 27% 27% TriMas Corporation 4% 4% During the fourth quarter of 1996, the Company completed the sale to MascoTech, Inc. of 17 million shares of MascoTech common stock and warrants to purchase 10 million shares of MascoTech common stock. This transaction reduced the Company's common equity ownership in MascoTech from 45 percent to 21 percent. In late June 1997, MascoTech redeemed all of its outstanding convertible preferred stock in exchange for approximately 10 million shares of its common stock. Such redemption reduced the Company's common equity ownership in MascoTech to 17 percent from 21 percent. The following presents the condensed financial data of MascoTech, Inc. Amounts are in thousands. Three Months Ended Six Months Ended June 30 June 30 1997 1996 1997 1996 Sales - Net $233,040 $345,060 $466,480 $718,980 Gross Profit $ 53,990 $ 57,930 $110,290 $119,370 Net Income (Loss) (After Preferred Stock Dividends) $ 21,650 $ (9,900) $ 51,070 $ 9,300 12 PART II. OTHER INFORMATION MASCO CORPORATION Items 1, 2, 3 & 5 are not applicable. Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Stockholders was held on May 21, 1997 at which the: three nominees for the Company's Board of Directors identified in the Company's proxy statement dated April 25, 1997 were elected; 1997 Non-Employee Directors Stock Plan, 1997 Annual Incentive Compensation Plan and an amendment of the 1991 Long Term Stock Incentive Plan were approved; Board of Directors' recommendation of Coopers & Lybrand L.L.P. as independent auditors for the Company for the year 1997 was approved. Following is a tabulation of shares voted: Election of Directors
Richard A. Manoogian (1) Mary Ann Krey Verne G. Istock For 147,022,955 147,031,140 147,031,484 Withheld 1,754,101 1,745,916 1,745,572 (1) Re-elected 1997 Amendment of 1997 Annual the 1991 Long Non-Employee Incentive Term Stock Approval of: Directors Stock Plan Compensation Plan Incentive Plan For 117,108,690 146,159,361 144,478,758 Against 29,942,738 2,170,414 2,641,092 Abstentions and Broker Non- voters 1,725,628 447,281 1,657,206 Ratification of the Selection of Coopers & Lybrand L.L.P. as Independent Auditors for the Company for the year 1997 For 147,247,551 Against 70,618 Abstentions and Broker Non- voters 1,458,887
13 Part II. OTHER INFORMATION (Concluded) MASCO CORPORATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 11 - Computation of Earnings Per Share 12 - Computation of Ratio of Earnings to Fixed Charges 27 - Financial Data Schedule (b) Reports on Form 8-K: None SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MASCO CORPORATION (Registrant) Date: August 12. 1997 By: /s/ Richard G. Mosteller Richard G. Mosteller Senior Vice-President - Finance (Chief Financial Officer and Authorized Signatory) 14 MASCO CORPORATION EXHIBIT INDEX Exhibit Exhibit 11 Computation of Earnings Per Share Exhibit 12 Computation of Ratio of Earnings to Fixed Charges Exhibit 27 Financial Data Schedule EX-11 2 MASCO CORPORATION 2ND QUARTER 10-Q EXHIBIT 11 Exhibit 11 MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE Primary and Fully Diluted Earnings Per Share For the Three Months and Six Months Ended June 30, 1997 and 1996 (Amounts in thousands except per share data)
Three Months Ended Six Months Ended June 30 June 30 1997 1996 1997 1996 Shares for computation of primary and fully diluted earnings per share: Weighted average number of shares outstanding 161,200 160,500 161,200 160,500 Common stock equivalents: Shares issuable assuming conversion of debentures 4,200 4,200 4,200 4,200 Stock options 1,580 880 1,580 880 Total shares for primary and fully diluted earnings per share computation 166,980 165,580 166,980 165,580 Net income, adjusted to basis of earnings per share: Net income $91,600 $68,000 $175,100 $130,000 Add back debenture interest, net 1,400 1,400 2,900 2,900 $93,000 $69,400 $178,000 $132,900 Primary and fully diluted earnings per share $.56 $.42 $1.07 $.80 Earnings per share as reported $.57 $.42 $1.09 $.81
This calculation is submitted in accordance with Regulation S-K Item 601(b)(11), although not required by APB Opinion No. 15, inasmuch as dilution for any period was less than three percent EX-12 3 MASCO CORPORATION 2ND QUARTER 10-Q EXHIBIT 12 Exhibit 12 MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES Computation of Ratio of Earnings to Fixed Charges
(Thousands of Dollars) Six Months Ended June 30, Year Ended December 31, 1997 1996 1995 1994 1993 1992 Earnings Before Income Taxes And Fixed Charges: Income from continuing operations before income taxes $291,600 $502,700 $351,790 $292,830 $349,190 $296,020 Deduct/add equity in undistributed (earnings)/ losses of equity affiliates (11,250) (12,310) (17,770) 106,200 (13,750) (13,210) Add interest on indebtedness, net 37,590 74,790 73,400 60,360 62,860 57,190 Add amortization of debt expense 630 1,400 1,930 2,220 2,650 2,710 Add one-third of rentals 3,440 6,150 4,970 4,220 3,190 3,290 Earnings from continuing operations before income taxes and fixed charges $322,010 $572,730 $414,320 $465,830 $404,140 $346,000 Fixed charges: Interest on indebtedness regarding continuing operations $ 38,760 $ 77,250 $ 76,460 $ 63,220 $ 63,600 $ 69,890 Amortization of debt expense 630 1,400 1,930 2,220 2,650 2,710 One-third of rentals 3,440 6,150 4,970 4,220 3,190 3,290 $ 42,830 $ 84,800 $ 83,360 $ 69,660 $ 69,440 $ 75,890 Ratio of earnings to fixed charges 7.5 6.8 5.0 6.7 5.8 4.6
EX-27 4 MASCO CORPORATION 2ND QUARTER 10-Q EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MASCO CORPORATION'S JUNE 30, 1997 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 333,170 0 537,520 0 448,270 1,410,800 949,650 0 3,796,290 510,320 1,228,730 0 0 161,650 1,790,180 3,796,290 1,767,000 1,767,000 1,117,700 1,117,700 0 0 37,400 291,600 116,500 175,100 0 0 0 175,100 1.09 1.09 Receivables and property and equipment are presented net of allowances for doubtful accounts and accumulated depreciation and amortization, respectively.
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