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0000950123-09-027815.txt : 20090730
0000950123-09-027815.hdr.sgml : 20090730
20090730172822
ACCESSION NUMBER: 0000950123-09-027815
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 7
CONFORMED PERIOD OF REPORT: 20090630
FILED AS OF DATE: 20090730
DATE AS OF CHANGE: 20090730
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: MASCO CORP /DE/
CENTRAL INDEX KEY: 0000062996
STANDARD INDUSTRIAL CLASSIFICATION: MILLWOOD, VENEER, PLYWOOD & STRUCTURAL WOOD MEMBERS [2430]
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: 09974769
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
k48075e10vq.htm
FORM 10-Q
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2009
Commission file number: 1-5794
Masco Corporation
(Exact name of Registrant as Specified in Charter)
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Delaware
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38-1794485 |
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(State or Other
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(IRS Employer |
Jurisdiction
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Identification No.) |
of Incorporation) |
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21001 Van Born Road, Taylor, Michigan
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48180 |
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(Address of Principal Executive Offices)
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(Zip Code) |
(313) 274-7400
(Registrants telephone number, including area code)
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
(or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate website, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such files).
þ Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. (See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.)
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Large accelerated filer þ
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Accelerated filer o
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Smaller reporting company o
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Non-accelerated filer o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
o Yes þ No
Indicate the number of shares outstanding of each of the issuers classes of common stock, as
of the latest practicable date.
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Class
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Shares Outstanding at July 28, 2009 |
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Common stock, par value $1.00 per share
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359,200,000 |
MASCO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
June 30, 2009 and December 31, 2008
(In Millions, Except Share Data)
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June 30, |
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December 31, |
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2009 |
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2008 |
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ASSETS |
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Current assets: |
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Cash and cash investments |
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$ |
926 |
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$ |
1,028 |
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Receivables |
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1,236 |
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999 |
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Prepaid expenses and other |
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346 |
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332 |
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Inventories: |
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Finished goods |
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475 |
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483 |
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Raw material |
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308 |
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333 |
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Work in process |
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103 |
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125 |
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886 |
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941 |
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Total current assets |
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3,394 |
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3,300 |
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Property and equipment, net |
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2,066 |
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2,136 |
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Goodwill |
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3,378 |
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3,371 |
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Other intangible assets, net |
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295 |
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299 |
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Other assets |
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354 |
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377 |
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Total assets |
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$ |
9,487 |
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$ |
9,483 |
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LIABILITIES |
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Current liabilities: |
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Notes payable |
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$ |
370 |
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$ |
71 |
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Accounts payable |
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637 |
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531 |
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Accrued liabilities |
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862 |
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945 |
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Total current liabilities |
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1,869 |
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1,547 |
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Long-term debt |
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3,610 |
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3,915 |
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Deferred income taxes and other |
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1,003 |
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1,040 |
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Total liabilities |
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6,482 |
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6,502 |
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Commitments and contingencies |
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EQUITY |
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Masco Corporations shareholders equity: |
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Common shares, par value $1 per share
Authorized shares: 1,400,000,000; issued
and outstanding: 2009 350,000,000;
2008 351,400,000 |
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350 |
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351 |
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Preferred shares authorized: 1,000,000; issued
and outstanding: 2009 None; 2008 None |
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Paid-in capital |
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23 |
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Retained earnings |
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2,082 |
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2,162 |
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Accumulated other comprehensive income |
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387 |
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308 |
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Total Masco Corporations shareholders equity |
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2,842 |
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2,821 |
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Noncontrolling interest |
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163 |
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160 |
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Total equity |
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3,005 |
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2,981 |
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Total liabilities and equity |
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$ |
9,487 |
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$ |
9,483 |
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See notes to condensed consolidated financial statements.
1
MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
For the Three Months and Six Months Ended June 30, 2009 and 2008
(In Millions Except Per Common Share Data)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2009 |
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2008 |
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2009 |
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2008 |
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Net sales |
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$ |
2,036 |
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$ |
2,643 |
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$ |
3,855 |
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$ |
5,093 |
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Cost of sales |
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1,490 |
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1,943 |
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2,893 |
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3,763 |
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Gross profit |
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546 |
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700 |
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962 |
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1,330 |
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Selling, general and administrative expenses |
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434 |
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485 |
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849 |
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961 |
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Charge for defined-benefit plan curtailment |
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8 |
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Operating profit |
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112 |
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215 |
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105 |
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369 |
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Other income (expense), net: |
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Interest expense |
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(57 |
) |
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(57 |
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(113 |
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(113 |
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Impairment charge for financial investments |
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(7 |
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(3 |
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(10 |
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(29 |
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Other, net |
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15 |
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4 |
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15 |
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2 |
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(49 |
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(56 |
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(108 |
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(140 |
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Income (loss) from continuing operations
before income taxes |
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63 |
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159 |
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(3 |
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229 |
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Income taxes |
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1 |
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75 |
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9 |
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115 |
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Income (loss) from continuing operations |
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62 |
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84 |
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(12 |
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114 |
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Income (loss) from discontinued operations,
net |
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1 |
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10 |
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1 |
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(6 |
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Net income (loss) |
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63 |
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94 |
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(11 |
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108 |
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Less: Net income attributable to
noncontrolling interest |
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8 |
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12 |
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15 |
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24 |
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Net income (loss) attributable to Masco
Corporation |
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$ |
55 |
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$ |
82 |
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$ |
(26 |
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$ |
84 |
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Earnings (loss) per common share attributable
to Masco Corporation: |
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Basic: |
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Income (loss) from continuing operations |
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$ |
.15 |
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$ |
.20 |
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$ |
(.08 |
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$ |
.24 |
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Income (loss) from discontinued
operations, net |
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.03 |
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(.02 |
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Net income (loss) |
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$ |
.15 |
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$ |
.23 |
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$ |
(.08 |
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$ |
.23 |
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Diluted: |
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Income (loss) from continuing operations |
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$ |
.15 |
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$ |
.20 |
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$ |
(.08 |
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$ |
.24 |
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Income (loss) from discontinued
operations, net |
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.03 |
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(.02 |
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Net income (loss) |
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$ |
.15 |
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$ |
.23 |
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$ |
(.08 |
) |
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$ |
.23 |
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Amounts attributable to Masco Corporation: |
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Income (loss) from continuing operations |
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$ |
54 |
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$ |
72 |
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$ |
(27 |
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$ |
90 |
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Income (loss) from discontinued operations,
net |
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1 |
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10 |
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1 |
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(6 |
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Net income (loss) |
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$ |
55 |
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$ |
82 |
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$ |
(26 |
) |
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$ |
84 |
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See notes to condensed consolidated financial statements.
2
MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Six Months Ended June 30, 2009 and 2008
(In Millions)
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Six Months Ended |
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June 30, |
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2009 |
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2008 |
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CASH FLOWS FROM (FOR) OPERATING ACTIVITIES: |
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Cash provided by operations |
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$ |
217 |
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$ |
385 |
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(Increase) in receivables |
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(225 |
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(193 |
) |
Decrease (increase) in inventories |
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68 |
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(78 |
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Increase in accounts payable and accrued
liabilities, net |
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50 |
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65 |
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Net cash from operating activities |
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110 |
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179 |
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CASH FLOWS FROM (FOR) FINANCING ACTIVITIES: |
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Increase in debt |
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2 |
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Payment of debt |
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(5 |
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(13 |
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Purchase of Company common stock |
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(11 |
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(147 |
) |
Cash dividends paid |
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(112 |
) |
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(168 |
) |
Dividend payment to noncontrolling interest |
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(16 |
) |
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(22 |
) |
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Net cash (for) financing activities |
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(142 |
) |
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(350 |
) |
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CASH FLOWS FROM (FOR) INVESTING ACTIVITIES: |
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Capital expenditures |
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(50 |
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(92 |
) |
Proceeds from disposition of: |
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Marketable securities |
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3 |
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9 |
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Other financial investments, net |
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2 |
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21 |
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Businesses, net of cash disposed |
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151 |
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Property and equipment |
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9 |
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12 |
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Acquisition of businesses, net of cash acquired |
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(8 |
) |
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(17 |
) |
Other, net |
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(17 |
) |
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(11 |
) |
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Net cash (for) from investing activities |
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(61 |
) |
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|
73 |
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Effect of exchange rate changes on cash and cash
investments |
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(9 |
) |
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|
29 |
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CASH AND CASH INVESTMENTS: |
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Decrease for the period |
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(102 |
) |
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|
(69 |
) |
At January 1 |
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1,028 |
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|
922 |
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At June 30 |
|
$ |
926 |
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$ |
853 |
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|
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See notes to condensed consolidated financial statements.
3
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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, 2009 and the results of operations for the three months
and six months ended June 30, 2009 and 2008 and cash flows for the six months ended June 30,
2009 and 2008. The condensed consolidated balance sheet at December 31, 2008 was derived from
audited financial statements. |
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|
Certain prior-year amounts have been reclassified to conform to the 2009 presentation in the
condensed consolidated financial statements. The results of operations related to 2008
discontinued operations have been separately stated in the accompanying condensed consolidated
statements of income for the three months and six months ended June 30, 2008. In the Companys
condensed consolidated statements of cash flows for the six months ended June 30, 2009 and
2008, cash flows of discontinued operations are not separately classified. |
|
|
|
The Company has evaluated subsequent events through July 30, 2009, the date the Companys
condensed consolidated financial statements were issued. |
|
|
|
Recently Issued Accounting Pronouncements |
|
|
|
In June 2009, the Financial Accounting Standards Board (the FASB) issued SFAS No. 168, The
FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles a Replacement of SFAS No. 162, (SFAS No. 168). SFAS No. 168 establishes the
FASB Standards Account Codification (Codification) as the source of authoritative U.S.
generally accepted accounting principles (GAAP) to be applied to nongovernmental entities
and rules and interpretive releases of the SEC as authoritative GAAP for SEC registrants.
SFAS No. 168 is effective for the quarter ended September 30, 2009 and will supersede all
then-existing non-SEC accounting and reporting standards. Once SFAS No. 168 is in effect, all
of its content will carry the same level of authority; the GAAP hierarchy will be modified to
include only two levels of GAAP: authoritative and nonauthoritative. The Company does not
anticipate that the adoption of this pronouncement will have a significant effect on its
condensed consolidated financial statements or disclosures. |
|
|
|
In May 2009, the FASB issued SFAS No. 165, Subsequent Events, (SFAS No. 165). SFAS No.
165 requires the disclosure of the date through which an entity has evaluated subsequent
events and whether that date represents the date the financial statements were issued or were
available to be issued. The Company adopted SFAS No. 165 effective June 30, 2009. The
adoption of this pronouncement did not have an effect on its condensed consolidated financial
statements. |
|
|
|
In April 2009, the FASB issued FASB Staff Position No. FAS 141(R)-1, Accounting for Assets
Acquired and Liabilities Assumed in a Business Combination that Arise from Contingencies,
(FSP No. FAS 141(R)-1). FSP No. FAS 141(R)-1 amends and clarifies the accounting,
measurement and recognition provisions and the related disclosures arising from contingencies
in a business combination under FAS No. 141(R). FSP No. FAS 141(R)-1 is effective for the
Company for any business combination that is completed subsequent to January 1, 2009. |
4
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
Note A concluded:
|
|
In April 2009, the FASB issued FASB Staff Position No. 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability have Significantly Decreased and
Identifying Transactions that are not Orderly, (FSP No. FAS 157-4). FSP No. FAS 157-4
provides additional guidance for estimating fair value under FAS No. 157 when the volume and
level of market activity for an asset or liability have significantly decreased when compared
with normal market activity for the asset or liability. If there is a significant decrease in
the volume and activity for the asset or liability, transactions or quoted prices may not be
determinative of fair value in an orderly transaction and further analysis and adjustment of
the transactions or quoted prices may be necessary. FSP No. FAS 157-4 is effective for the
quarter ended June 30, 2009 and there were not any adjustments to the Companys estimates of
fair value for assets and liabilities measured at fair value upon adoption. |
|
|
|
In April 2009, the FASB issued FASB Staff Position No. FAS 115-2 and FAS 124-2, Recognition
and Presentation of Other-Than-Temporary Impairments, (FSP No. FAS 115-2 and FAS 124-2).
FSP No. FAS 115-2 and FAS 124-2 amends the method for determining whether an
other-than-temporary impairment exists and the classification of the impairment charge for
debt securities and the related disclosures. FSP No. FAS 115-2 and FAS 124-2 is effective for
the quarter ended June 30, 2009 and there were not any adjustments to the Companys condensed
consolidated financial statements upon adoption. |
|
|
|
In April 2009, the FASB issued FASB Staff Position No. FAS 107-1 and APB 28-1, Interim
Disclosures about Fair Value of Financial Instruments, (FSP No. FAS 107-1 and APB 28-1).
FSP No. FAS 107-1 and APB 28-1 amends SFAS No. 107, Disclosures about Fair Value of Financial
Instruments to require disclosures about the fair value of financial instruments for interim
reporting periods. FSP No. FAS 107-1 and APB 28-1 is effective for the quarter ended June 30,
2009 and the Company has disclosed the fair value of financial instruments in Note J to the
condensed consolidated financial statements. |
B. |
|
During the second quarter of 2009, the Company recorded income of $1 million included in gain
on disposal of discontinued operations related to cash received for a disposition completed in
prior years. |
|
|
|
During the first quarter of 2008, the Company determined that several European business units
(previously included in the Plumbing Products segment and the Other Specialty Products
segment) were not core to the Companys long-term growth strategy and, accordingly, embarked
on a plan of disposition; the dispositions were completed in August 2008. In accordance with
SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, (SFAS No.
144), the Company has accounted for the 2008 dispositions as discontinued operations. |
5
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
Note B concluded:
|
|
The impairment charge in the first quarter of 2008 included $6 million related to a business
unit that was reclassified from discontinued operations to continuing operations in the third
quarter of 2008, since the business unit would not be sold. The related assets and
liabilities were also reclassified out of assets and liabilities held for sale. In addition,
the Company recognized pre-tax income of $6 million for the three months ended September 30,
2008 related to the reversal of the impairment charge recorded in the first quarter of 2008.
The income resulted from an adjustment of the assets to the lower of the carrying value, prior
to inclusion in assets held for sale, adjusted for depreciation expenses, or current market
value. As a result, this business unit is reported in continuing operations in 2008 and 2009;
the related charge of $6 million is reported in continuing operations in 2008. |
|
|
|
Selected financial information for these discontinued operations was as follows, in millions: |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, 2008 |
|
|
June 30, 2008 |
|
Net sales |
|
$ |
32 |
|
|
$ |
94 |
|
|
|
|
|
|
|
|
Income from discontinued
operations |
|
$ |
5 |
|
|
$ |
12 |
|
Gain on disposal of discontinued
operations |
|
|
7 |
|
|
|
7 |
|
Impairment of assets held for sale |
|
|
(2 |
) |
|
|
(45 |
) |
|
|
|
|
|
|
|
Income (loss) before income tax |
|
|
10 |
|
|
|
(26 |
) |
Income tax benefit |
|
|
|
|
|
|
20 |
|
|
|
|
|
|
|
|
Income (loss) from discontinued
operations, net |
|
$ |
10 |
|
|
$ |
(6 |
) |
|
|
|
|
|
|
|
|
|
The unusual relationship between income taxes and income (loss) before income taxes in 2008
(excluding the impairment charge for assets held for sale and the net gain on disposals)
resulted primarily from certain losses providing no current tax benefit and from income not
subject to taxes. |
C. |
|
The Companys 2005 Long Term Stock Incentive Plan (the 2005 Plan) provides for the issuance
of stock-based incentives in various forms to employees and non-employee Directors of the
Company. At June 30, 2009, outstanding stock-based incentives were in the form of long-term
stock awards, stock options, phantom stock awards and stock appreciation rights. Pre-tax
compensation expense (income) and the related income tax benefit, for these stock-based
incentives, were as follows, in millions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Long-term stock awards |
|
$ |
13 |
|
|
$ |
11 |
|
|
$ |
21 |
|
|
$ |
23 |
|
Stock options |
|
|
8 |
|
|
|
10 |
|
|
|
15 |
|
|
|
18 |
|
Phantom stock awards and stock
appreciation rights |
|
|
2 |
|
|
|
(2 |
) |
|
|
2 |
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
23 |
|
|
$ |
19 |
|
|
$ |
38 |
|
|
$ |
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit |
|
$ |
9 |
|
|
$ |
7 |
|
|
$ |
14 |
|
|
$ |
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
Note C continued:
|
|
In June 2009, the Company recognized $6 million of accelerated stock compensation expense (for
previously granted stock awards and options) related to the retirement from full-time
employment of the Companys Executive Chairman of the Board of Directors; he will continue to
serve as a non-executive, non-employee Chairman of the Board of Directors. |
|
|
|
Long-Term Stock Awards |
|
|
|
Long-term stock awards are granted to key employees and non-employee Directors of the Company
and do not cause net share dilution inasmuch as the Company continues the practice of
repurchasing and retiring an equal number of shares on the open market. |
|
|
|
The Companys long-term stock award activity was as follows, shares in millions: |
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
June 30, |
|
|
2009 |
|
2008 |
Unvested stock award shares at January 1 |
|
|
8 |
|
|
|
9 |
|
Weighted average grant date fair value |
|
$ |
26 |
|
|
$ |
28 |
|
|
|
|
|
|
|
|
|
|
Stock award shares granted |
|
|
2 |
|
|
|
1 |
|
Weighted average grant date fair value |
|
$ |
8 |
|
|
$ |
21 |
|
|
|
|
|
|
|
|
|
|
Stock award shares vested |
|
|
1 |
|
|
|
1 |
|
Weighted average grant date fair value |
|
$ |
26 |
|
|
$ |
27 |
|
|
|
|
|
|
|
|
|
|
Stock award shares forfeited |
|
|
|
|
|
|
|
|
Weighted average grant date fair value |
|
$ |
26 |
|
|
$ |
28 |
|
|
|
|
|
|
|
|
|
|
Unvested stock award shares at June 30 |
|
|
9 |
|
|
|
9 |
|
Weighted average grant date fair value |
|
$ |
22 |
|
|
$ |
26 |
|
|
|
At June 30, 2009 and 2008, there was $144 million and $182 million, respectively, of total
unrecognized compensation expense related to unvested stock awards; such awards had a weighted
average remaining vesting period of seven years at both dates. |
|
|
|
The total market value (at the vesting date) of stock award shares which vested during the six
months ended June 30, 2009 and 2008 was $11 million and $21 million, respectively. |
|
|
|
Stock Options |
|
|
|
Stock options are granted to key employees and non-employee Directors of the Company. The
exercise price equals the market price of the Companys common stock at the grant date. These
options generally become exercisable (vest ratably) over five years beginning on the first
anniversary from the date of grant and expire no later than 10 years after the grant date.
The 2005 Plan does not permit the granting of restoration stock options, except for
restoration options resulting from options previously granted under the 1991 Plan.
Restoration stock options become exercisable six months from the date of grant. |
7
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
Note C continued:
|
|
The Company granted 5,757,700 of stock option shares in the six months ended June 30, 2009
with a grant date exercise price approximating $8 per share. In the first half of 2009,
838,200 stock option shares were forfeited (including options that expired unexercised). |
|
|
|
The Companys stock option activity was as follows, shares in millions: |
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
June 30, |
|
|
2009 |
|
2008 |
Option shares outstanding, January 1 |
|
|
31 |
|
|
|
26 |
|
Weighted average exercise price |
|
$ |
25 |
|
|
$ |
27 |
|
|
|
|
|
|
|
|
|
|
Option shares granted, including restoration
options |
|
|
6 |
|
|
|
6 |
|
Weighted average exercise price |
|
$ |
8 |
|
|
$ |
19 |
|
|
|
|
|
|
|
|
|
|
Option shares exercised |
|
|
|
|
|
|
|
|
Aggregate intrinsic value on date of
exercise (A) |
|
$ |
million |
|
$ |
million |
Weighted average exercise price |
|
$ |
|
|
|
$ |
20 |
|
|
|
|
|
|
|
|
|
|
Option shares forfeited |
|
|
1 |
|
|
|
|
|
Weighted average exercise price |
|
$ |
25 |
|
|
$ |
28 |
|
|
|
|
|
|
|
|
|
|
Option shares outstanding, June 30 |
|
|
36 |
|
|
|
32 |
|
Weighted average exercise price |
|
$ |
23 |
|
|
$ |
25 |
|
Weighted average remaining option term
(in years) |
|
|
6 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
Option shares vested and expected to vest,
June 30 |
|
|
36 |
|
|
|
31 |
|
Weighted average exercise price |
|
$ |
23 |
|
|
$ |
25 |
|
Aggregate intrinsic value (A) |
|
$ |
8 million |
|
$ |
million |
Weighted average remaining option term
(in years) |
|
|
6 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
Option shares exercisable (vested), June 30 |
|
|
20 |
|
|
|
16 |
|
Weighted average exercise price |
|
$ |
26 |
|
|
$ |
26 |
|
Aggregate intrinsic value (A) |
|
$ |
million |
|
$ |
million |
Weighted average remaining option term
(in years) |
|
|
5 |
|
|
|
5 |
|
|
|
|
(A) |
|
Aggregate intrinsic value is calculated using the Companys stock price at each respective
date, less the exercise price (grant date price) multiplied by the number of shares. |
|
|
At June 30, 2009 and 2008, there was $54 million and $78 million, respectively, of
unrecognized compensation expense (using the Black-Scholes option pricing model) related to
unvested stock options; such options had a weighted average vesting period of three years in
2009 and four years in 2008. |
8
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
Note C concluded:
|
|
The weighted average grant date fair value of option shares granted and the assumptions used
to estimate those values using a Black-Scholes option pricing model, were as follows: |
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
June 30, |
|
|
2009 |
|
2008 |
Weighted average grant date fair value |
|
$ |
2.23 |
|
|
$ |
3.73 |
|
Risk-free interest rate |
|
|
2.59 |
% |
|
|
3.25 |
% |
Dividend yield |
|
|
3.73 |
% |
|
|
4.95 |
% |
Volatility factor |
|
|
39.07 |
% |
|
|
32.00 |
% |
Expected option life |
|
6 years |
|
6 years |
D. |
|
The Company sponsors qualified defined-benefit and defined-contribution retirement plans for
most of its employees. In addition to the Companys qualified defined-benefit pension plans,
the Company has unfunded non-qualified defined-benefit pension plans covering certain
employees, which provide for benefits in addition to those provided by the qualified pension
plans. Substantially all salaried employees participate in non-contributory
defined-contribution retirement plans, to which payments are determined annually by the
Organization and Compensation Committee of the Board of Directors. |
|
|
Net periodic pension cost for the Companys defined-benefit pension plans was as follows, in
millions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
Qualified |
|
|
Non-Qualified |
|
|
Qualified |
|
|
Non-Qualified |
|
Service cost |
|
$ |
2 |
|
|
$ |
1 |
|
|
$ |
4 |
|
|
$ |
|
|
Interest cost |
|
|
8 |
|
|
|
1 |
|
|
|
14 |
|
|
|
2 |
|
Expected return on plan assets |
|
|
(5 |
) |
|
|
|
|
|
|
(14 |
) |
|
|
|
|
Amortization of prior service cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Recognized curtailment loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of net loss |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost |
|
$ |
7 |
|
|
$ |
2 |
|
|
|
4 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
Qualified |
|
|
Non-Qualified |
|
|
Qualified |
|
|
Non-Qualified |
|
Service cost |
|
$ |
6 |
|
|
$ |
1 |
|
|
$ |
9 |
|
|
$ |
1 |
|
Interest cost |
|
|
19 |
|
|
|
3 |
|
|
|
28 |
|
|
|
4 |
|
Expected return on plan assets |
|
|
(13 |
) |
|
|
|
|
|
|
(30 |
) |
|
|
|
|
Amortization of prior service cost |
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
1 |
|
Recognized curtailment loss |
|
|
3 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
Amortization of net loss |
|
|
7 |
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost |
|
$ |
22 |
|
|
$ |
10 |
|
|
|
8 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In March 2009, based on managements recommendation, the Board of Directors approved a
plan to freeze all future benefit accruals under substantially all of the Companys domestic
qualified and non-qualified defined-benefit pension plans. The freeze is effective January 1,
2010. As a result of this action, the liabilities for the plans impacted by the freeze were
remeasured and the Company recognized a curtailment charge of $8 million in the first quarter
of 2009. In addition, the Company expects net periodic pension costs related to the domestic
defined-benefit pension plans that were remeasured to decrease by approximately $14 million in
2009 to $31 million from the original forecast of $45 million at December 31, 2008. |
9
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
Note D concluded:
|
|
Major assumptions used in accounting for the Companys domestic defined-benefit pension plans
that have been frozen were as follows: |
|
|
|
|
|
|
|
At March 31, 2009 |
Discount rate for obligations |
|
|
7.3 |
% |
Expected return on plan assets |
|
|
8.0 |
% |
Discount rate for net periodic pension cost |
|
|
6.1 |
% |
|
|
The discount rate for obligations was based upon the expected duration of each defined-benefit
pension plans liabilities matched to the March 31, 2009 Citigroup Pension Discount Curve.
Such rates for the Companys domestic defined-benefit pension plans that have been frozen
ranged from 7.0 percent to 7.4 percent, with the most significant portion of the liabilities
having a discount rate for obligations of 7.4 percent at March 31, 2009. |
|
|
The Company determined the expected long-term rate of return on plan assets by reviewing an
analysis of expected and historical rates of return of various asset classes based upon the
current and long-term target asset allocation of the plan assets. The measurement date used
to determine the defined-benefit pension expense was March 31. |
E. |
|
The changes in the carrying amount of goodwill for the six months ended June 30, 2009, by
segment, were as follows, in millions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At |
|
|
|
|
|
|
|
|
|
|
At |
|
|
|
Dec. 31, 2008 |
|
|
Additions (A) |
|
|
Other(B) |
|
|
June 30, 2009 |
|
Cabinets and Related
Products |
|
$ |
225 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
225 |
|
Plumbing Products |
|
|
248 |
|
|
|
4 |
|
|
|
3 |
|
|
|
255 |
|
Installation and Other
Services |
|
|
1,768 |
|
|
|
|
|
|
|
|
|
|
|
1,768 |
|
Decorative Architectural
Products |
|
|
294 |
|
|
|
|
|
|
|
|
|
|
|
294 |
|
Other Specialty Products |
|
|
836 |
|
|
|
|
|
|
|
|
|
|
|
836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
3,371 |
|
|
$ |
4 |
|
|
$ |
3 |
|
|
$ |
3,378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
|
Additions include acquisitions. |
|
(B) |
|
Other principally includes the effect of foreign currency translation,
reclassifications and purchase price adjustments related to prior-year acquisitions. |
|
|
Other indefinite-lived intangible assets were $196 million and $195 million at June 30, 2009
and December 31, 2008, respectively, and principally included registered trademarks. The
carrying value of the Companys definite-lived intangible assets was $99 million (net of
accumulated amortization of $62 million) at June 30, 2009 and $104 million (net of accumulated
amortization of $56 million) at December 31, 2008, and principally included customer
relationships and non-compete agreements. |
F. |
|
Depreciation and amortization expense was $128 million and $119 million, respectively, for
the six months ended June 30, 2009 and 2008. |
10
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
G. |
|
The Company has maintained investments in available-for-sale securities and a number of
private equity funds, principally as part of its tax planning strategies, as any gains enhance
the utilization of any current and future tax capital losses. Financial investments included
in other assets were as follows, in millions: |
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Asahi Tec Corporation common
and preferred stock |
|
$ |
69 |
|
|
$ |
73 |
|
TriMas Corporation |
|
|
8 |
|
|
|
3 |
|
Auction rate securities |
|
|
22 |
|
|
|
22 |
|
Marketable securities |
|
|
|
|
|
|
3 |
|
Private equity funds |
|
|
126 |
|
|
|
138 |
|
Other investments |
|
|
9 |
|
|
|
10 |
|
|
|
|
|
|
|
|
Total |
|
$ |
234 |
|
|
$ |
249 |
|
|
|
|
|
|
|
|
|
|
The Companys investments in available-for-sale securities at June 30, 2009 and December 31,
2008 (including marketable securities, auction rate securities, Asahi Tec Corporation common
and preferred stock and TriMas Corporation) were as follows, in millions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax |
|
|
|
|
|
|
|
|
Unrealized |
|
Unrealized |
|
Recorded |
|
|
Cost Basis |
|
Gains |
|
Losses |
|
Basis |
June 30, 2009 |
|
$ |
72 |
|
|
$ |
27 |
|
|
$ |
|
|
|
$ |
99 |
|
|
December 31, 2008 |
|
$ |
75 |
|
|
$ |
26 |
|
|
$ |
|
|
|
$ |
101 |
|
11
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
Note G continued:
|
|
The Companys investments in private equity funds and other private investments are carried at
cost. It is not practicable for the Company to estimate a fair value because the private
equity funds have no quoted market price and sufficient information is not readily available
for the Company to utilize a valuation model to determine the fair value for each fund. These
investments are evaluated quarterly for potential other-than-temporary impairment when
impairment indicators are present, or when an event or change in circumstances has occurred,
that may have a significant adverse effect on the fair value of the investment. Impairment
indicators the Company considers include the following: whether there has been a significant
deterioration in earnings performance, asset quality or business prospects; a significant
adverse change in the regulatory, economic or technological environment; a significant adverse
change in the general market condition or geographic area in which the investment operates;
industry and sector performance; current equity and credit market conditions; and any bona
fide offers to purchase the investment for less than the carrying value. The Company also
considers specific adverse conditions related to the financial health of and business outlook
for the fund, including industry and sector performance. The significant assumptions utilized
in analyzing a fund for potential other-than-temporary impairment include current economic
conditions, market analysis for specific funds and performance indicators in the automotive
and transportation, residential and commercial construction, bio-technology, health care and
information technology sectors in which the applicable funds investments operate. Since
there is no active trading market for these investments, they are for the most part illiquid.
These investments, by their nature, can also have a relatively higher degree of business risk,
including financial leverage, than other financial investments. Future changes in market
conditions, the future performance of the underlying investments or new information provided
by private equity fund managers could affect the recorded values of such investments and the
amounts realized upon liquidation. During the three months and six months ended June 30,
2009, the Company determined that the decline in the estimated value of three private equity
funds (with a carrying value of $8 million prior to impairment) and five private equity funds
(with a carrying value of $41 million prior to impairment), respectively, was
other-than-temporary and, accordingly, recognized non-cash, pre-tax impairment charges of $7
million and $10 million, respectively, for the three months and six months ended June 30,
2009. |
|
|
The remaining private equity investments, with an aggregate carrying value of $95 million at
both June 30, 2009 and December 31, 2008, were not evaluated for impairment, as there were no
indicators of impairment or identified events or changes in circumstances that would have a
significant adverse effect on the fair value of the investments. |
12
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
Note G concluded:
|
|
Income from financial investments, net, included in other, net, within other income (expense),
net, and impairment charges for financial investments were as follows, in millions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Realized gains from
marketable securities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Realized losses from
marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
Dividend income from
marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from other
investments, net |
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
3 |
|
Dividend income from
other investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from financial
investments, net |
|
$ |
|
|
|
$ |
3 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment charges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private equity funds |
|
$ |
(7 |
) |
|
$ |
(3 |
) |
|
$ |
(10 |
) |
|
$ |
(7 |
) |
TriMas Corporation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment charges |
|
$ |
(7 |
) |
|
$ |
(3 |
) |
|
$ |
(10 |
) |
|
$ |
(29 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
H. |
|
During 2009 and 2008, the Company had entered into foreign currency exchange contracts to
hedge currency fluctuations related to intercompany loans denominated in non-functional
currencies. At June 30, 2009 and December 31, 2008, the Company had recorded losses of $3
million and $16 million, respectively, on the foreign currency exchange contract, which is
more than offset by gains related to the translation of loans and accounts denominated in
non-functional currencies. Gains (losses) related to these contracts are recorded in the
Companys consolidated statements of income in other income (expense), net. For the three
months and six months ended June 30, 2009, the Company had recorded losses of $2 million and
$3 million, respectively, related to these foreign currency exchange contracts. For both the
three months and six months ended June 30, 2008, the Company had recorded a loss of $4 million
related to these foreign currency exchange contracts. |
|
|
|
During 2009 and 2008, the Company, including certain European operations, also had entered
into foreign currency forward contracts to manage a portion of its exposure to currency
fluctuations in the European euro and the U.S. dollar. At June 30, 2009 and December 31,
2008, the Company had recorded gains of $1 million and $2 million, respectively, on these
contracts based upon period-end market prices. Gains (losses) related to these contracts are
recorded in the Companys consolidated statements of income in other income (expense), net.
For the three months and six months ended June 30, 2009, the Company had recorded losses of $2
million and $1 million, respectively, related to these foreign currency exchange contracts.
For the six months ended June 30, 2008, the Company had recorded a loss of $2 million related to these foreign currency exchange contracts. |
|
|
In the event that the counterparties fail to meet the terms of the foreign currency forward
contracts, the Companys exposure is limited to the aggregate foreign currency rate
differential with such institutions. |
13
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
I. |
|
At June 30, 2009 and December 31, 2008, there were outstanding $108 million principal amount
of Zero Coupon Convertible Senior Notes due 2031, with an accreted value of $55 million and
$54 million, respectively. |
|
|
The Company adopted FASB Staff Position No. APB 14-1, Accounting for Convertible Debt
Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement),
(FSP No. APB 14-1) effective January 1, 2009. The adoption of FSP No. APB 14-1 will have no
impact on 2009 results; the Company recorded a $1 million cumulative effect of accounting
change as of January 1, 2007 and the adoption had no impact on the Companys condensed
consolidated financial statements for the periods ended June 30, 2009 and 2008. |
|
|
At the Companys request, in late April 2009, the Company and its Bank Group modified the
terms of its Five-Year Revolving Credit Facility, which expires February 2011. After
reviewing its anticipated liquidity position, the Company requested that the maximum amount
the Company could borrow under this facility be reduced to $1.25 billion from $2.0 billion; in
addition, the debt to total capitalization ratio has been increased from 60 percent to 65
percent. The debt to total capitalization ratio and the minimum net worth covenant have also
been amended to allow the add-back, if incurred, of up to the first $500 million of certain
non-cash charges, including goodwill and other intangible asset impairment charges that would
negatively impact shareholders equity. Under the terms of the
Amended Credit Facility, any outstanding Letters of Credit reduce the Companys borrowing capacity. At June 30, 2009, the Company had $57 million of
unused Letters of Credit; accordingly, the Companys remaining borrowing capacity is approximately $1.2 billion. The Company
incurred approximately $2 million of fees and expenses associated with the Amendment. The
Company, if the facility is utilized, will incur higher borrowing costs as a result of the
Amendment. |
|
|
At June 30, 2009, the Company was in compliance with the requirements of the Amended Five-Year
Revolving Credit Facility. |
J. |
|
On January 1, 2008, the Company adopted SFAS No. 157 for its financial assets and
liabilities. On January 1, 2009, the Company adopted SFAS No. 157 for its non-financial
assets and liabilities; such adoption did not have a significant effect on its condensed
consolidated financial statements. SFAS No. 157 defines fair value, establishes a framework
for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157
defines fair value as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date.
SFAS No. 157 further defines a fair value hierarchy, as follows: Level 1 inputs as quoted
prices in active markets for identical assets or liabilities; Level 2 inputs as observable
inputs other than Level 1 prices, such as quoted market prices for similar assets or
liabilities or other inputs that are observable or can be corroborated by market data; and
Level 3 inputs as unobservable inputs that are supported by little or no market activity and
that are financial instruments whose value is determined using pricing models or instruments
for which the determination of fair value requires significant management judgment or
estimation. |
14
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
Note J continued:
|
|
Financial investments that are available to be traded on readily accessible stock exchanges
(domestic or foreign) are considered to have active markets and have been valued using Level 1
inputs. Financial investments that are not available to be traded on a public market or have
limited secondary markets, or contain provisions that limit the ability to sell the investment
are considered to have inactive markets and have been valued using Level 2 or 3 inputs. The
Company incorporated credit risk into the valuations of financial investments by estimating
the likelihood of non-performance by the counterparty to the applicable transactions. The
estimate included the length of time relative to the contract, financial condition of the
counterparty and current market conditions. The criteria for estimating if a market was
active or inactive were based on the individual facts and circumstances. |
15
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
Note J continued:
|
|
Financial assets and (liabilities) measured at fair value on a recurring basis at each
reporting period and the amounts for each level within the fair value hierarchy established by
SFAS No. 157, were as follows, in millions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using |
|
|
|
|
|
|
|
|
|
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
Quoted |
|
|
Other |
|
|
Significant |
|
|
|
|
|
|
|
Market |
|
|
Observable |
|
|
Unobservable |
|
|
|
June 30, |
|
|
Prices |
|
|
Inputs |
|
|
Inputs |
|
|
|
2009 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Asahi Tec Corporation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock |
|
$ |
68 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
68 |
|
Common stock |
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
Foreign currency exchange
contracts (A) |
|
|
(2 |
) |
|
|
|
|
|
|
(2 |
) |
|
|
|
|
Auction rate securities |
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
22 |
|
TriMas Corporation |
|
|
8 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
97 |
|
|
$ |
9 |
|
|
$ |
(2 |
) |
|
$ |
90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using |
|
|
|
|
|
|
|
|
|
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
Quoted |
|
|
Other |
|
|
Significant |
|
|
|
|
|
|
|
Market |
|
|
Observable |
|
|
Unobservable |
|
|
|
Dec. 31, |
|
|
Prices |
|
|
Inputs |
|
|
Inputs |
|
|
|
2008 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Asahi Tec Corporation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock |
|
$ |
72 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
72 |
|
Common stock |
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
Foreign currency exchange
contracts (A) |
|
|
(14 |
) |
|
|
|
|
|
|
(14 |
) |
|
|
|
|
Auction rate securities |
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
22 |
|
Marketable securities |
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
TriMas Corporation |
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
Other investments |
|
|
3 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
90 |
|
|
$ |
7 |
|
|
$ |
(11 |
) |
|
$ |
94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
|
The foreign currency exchange contracts include contracts entered into to hedge
currency fluctuations related to intercompany loans denominated in non-functional
currencies and to manage exposure to currency fluctuations in the European euro and U.S.
dollar. The loss on the foreign currency exchange contracts is more than offset by gains
related to the translation of loans and accounts denominated in non-functional
currencies. |
16
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
Note J continued:
|
|
The following table summarizes the changes in Level 3 financial assets measured at fair value
on a recurring basis for the six months ended June 30, 2009 and the year ended December 31,
2008, in millions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asahi Tec |
|
|
Auction Rate |
|
|
|
|
|
|
Preferred Stock |
|
|
Securities |
|
|
Total |
|
Fair value January 1, 2009 |
|
$ |
72 |
|
|
$ |
22 |
|
|
$ |
94 |
|
Total losses included in earnings |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (losses) |
|
|
(4 |
) |
|
|
|
|
|
|
(4 |
) |
Purchases, issuances, settlements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value at June 30, 2009 |
|
$ |
68 |
|
|
$ |
22 |
|
|
$ |
90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asahi Tec |
|
|
Auction Rate |
|
|
|
|
|
|
Preferred Stock |
|
|
Securities |
|
|
Total |
|
Fair value January 1, 2008 |
|
$ |
55 |
|
|
$ |
22 |
|
|
$ |
77 |
|
Total losses included in earnings |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains |
|
|
17 |
|
|
|
|
|
|
|
17 |
|
Purchases, issuances, settlements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value at December 31, 2008 |
|
$ |
72 |
|
|
$ |
22 |
|
|
$ |
94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
The preferred stock of Asahi Tec has been valued primarily using a discounted cash flow model,
because there are currently no observable prices in an active market for the same or similar
securities. The significant inputs in the discounted cash flow model used to value the Asahi
Tec preferred stock include: the present value of future dividends, present value of
redemption rights, fair value of conversion rights and the discount rate based on credit
spreads for Japanese-issued preferred securities. |
|
|
The fair values of the auction rate securities held by the Company have been estimated using a
discounted cash flow model (Level 3 input). The significant inputs in the discounted cash
flow model used to value the auction rate securities include: expected maturity of auction
rate securities, discount rate used to determine the present value of expected cash flows and
assumptions for credit defaults, since the auction rate securities are backed by credit
default swap agreements. |
|
|
The Company also has investments in private equity funds and other private investments which
are carried at cost and are evaluated for potential impairment when impairment indicators are
present, or when an event or change in circumstances has occurred, that may have a significant
adverse effect on the fair value of the investment. There is no active trading market for
these investments and they are for the most part illiquid. Due to the significant
unobservable inputs, the fair value measurements used to evaluate impairment are a Level 3
input. |
17
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
Note J concluded:
|
|
Financial investments measured at fair value on a non-recurring basis during the period and
the amounts for each level within the fair value hierarchy established by SFAS No. 157, were
as follows, in millions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using |
|
|
|
|
|
|
|
|
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
Quoted |
|
Other |
|
Significant |
|
|
|
|
|
|
|
|
Market |
|
Observable |
|
Unobservable |
|
Total |
|
|
June 30, |
|
Prices |
|
Inputs |
|
Inputs |
|
Gains |
|
|
2009 |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
(Losses) |
Private equity funds |
|
$ |
31 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
31 |
|
|
$ |
(10 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using |
|
|
|
|
|
|
|
|
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted |
|
|
Other |
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
Market |
|
|
Observable |
|
|
Unobservable |
|
|
Total |
|
|
|
Dec. 31, |
|
|
Prices |
|
|
Inputs |
|
|
Inputs |
|
|
Gains |
|
|
|
2008 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
(Losses) |
|
Private equity funds |
|
$ |
43 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
43 |
|
|
$ |
(23 |
) |
Other private
investments |
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
47 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
47 |
|
|
$ |
(26 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2009, the Company determined that the decline in the estimated value of several private
equity fund investments was other-than-temporary and, accordingly, recognized non-cash,
pre-tax impairment charges of $7 million and $10 million, respectively, for the three months
and six months ended June 30, 2009. During 2008, the Company determined that the decline in
the estimated value of several private equity funds was other-than-temporary and, accordingly,
recognized non-cash, pre-tax impairment charges of $23 million for the year ended December 31,
2008. |
|
|
The fair value of the Companys short-term and long-term fixed-rate debt instruments is based
principally upon quoted market prices for the same or similar issues or the current rates
available to the Company for debt with similar terms and remaining maturities. The aggregate
estimated market value of long-term debt at June 30, 2009 was approximately $3.4 billion,
compared with the aggregate carrying value of $4.0 billion. The aggregate estimated market
value of short-term and long-term debt at December 31, 2008 was approximately $3.0 billion,
compared with the aggregate carrying value of $3.9 billion. |
18
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
K. |
|
Effective January 1, 2009, the Company adopted SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements an amendment of ARB No. 51, (SFAS No. 160). At June
30, 2009 and December 31, 2008, the Company owns 68 percent of Hansgrohe AG. SFAS No. 160
requires the reclassification of the Companys noncontrolling interest in Hansgrohe AG to
shareholders equity from deferred income taxes and other. At December 31, 2008, the Company
did not have a balance in paid-in capital due to repurchases of Company common stock. The
Companys activity in shareholders equity was as follows, in millions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
Common |
|
|
Paid-in- |
|
|
Retained |
|
|
Comprehensive |
|
|
Noncontrolling |
|
|
|
Total |
|
|
Shares |
|
|
Capital |
|
|
Earnings |
|
|
Income |
|
|
Interest |
|
Balance, January 1, 2008 |
|
$ |
4,142 |
|
|
$ |
359 |
|
|
$ |
|
|
|
$ |
2,969 |
|
|
$ |
661 |
|
|
$ |
153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
|
(352 |
) |
|
|
|
|
|
|
|
|
|
|
(391 |
) |
|
|
|
|
|
|
39 |
|
Cumulative translation adjustments |
|
|
(221 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(210 |
) |
|
|
(11 |
) |
Unrealized gain on marketable
securities, net of income tax of $4 |
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7 |
|
|
|
|
|
Prior service cost and net loss, net
of income tax benefit of $86 |
|
|
(150 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(150 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive (loss) income |
|
|
(716 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued |
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares retired: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchased |
|
|
(160 |
) |
|
|
(9 |
) |
|
|
(71 |
) |
|
|
(80 |
) |
|
|
|
|
|
|
|
|
Surrendered (non-cash) |
|
|
(7 |
) |
|
|
|
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared |
|
|
(357 |
) |
|
|
|
|
|
|
|
|
|
|
(336 |
) |
|
|
|
|
|
|
(21 |
) |
Stock-based compensation |
|
|
78 |
|
|
|
|
|
|
|
78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008 |
|
$ |
2,981 |
|
|
$ |
351 |
|
|
$ |
|
|
|
$ |
2,162 |
|
|
$ |
308 |
|
|
$ |
160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
|
(11 |
) |
|
|
|
|
|
|
|
|
|
|
(26 |
) |
|
|
|
|
|
|
15 |
|
Cumulative translation adjustments |
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
4 |
|
Unrealized gain on marketable
securities, net of income tax of $3 |
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
|
|
Prior service cost and net loss, net
of income tax of $36 |
|
|
62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss) |
|
|
72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued |
|
|
|
|
|
|
1 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Shares retired: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchased |
|
|
(11 |
) |
|
|
(2 |
) |
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Surrendered (non-cash) |
|
|
(3 |
) |
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared |
|
|
(54 |
) |
|
|
|
|
|
|
|
|
|
|
(54 |
) |
|
|
|
|
|
|
|
|
Dividend payments to noncontrolling
interest |
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16 |
) |
Stock-based compensation |
|
|
36 |
|
|
|
|
|
|
|
36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2009 |
|
$ |
3,005 |
|
|
$ |
350 |
|
|
$ |
23 |
|
|
$ |
2,082 |
|
|
$ |
387 |
|
|
$ |
163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest includes accumulated other comprehensive income of $29 million, $25
million and $36 million at June 30, 2009, and December 31, 2008 and January 1, 2008,
respectively. |
19
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
Note K concluded:
|
|
The Companys total comprehensive income was as follows, in millions: |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
June 30, 2009 |
|
|
|
Attributable to |
|
|
Noncontrolling |
|
|
|
Masco Corporation |
|
|
Interest |
|
Net income |
|
$ |
55 |
|
|
$ |
8 |
|
Other comprehensive
income (loss): |
|
|
|
|
|
|
|
|
Cumulative
translation
adjustments |
|
|
80 |
|
|
|
15 |
|
Unrealized gain
on marketable
securities, net |
|
|
3 |
|
|
|
|
|
Prior service cost
and net loss, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive
income |
|
$ |
138 |
|
|
$ |
23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, 2008 |
|
|
June 30, 2008 |
|
|
|
Attributable to |
|
|
Noncontrolling |
|
|
Attributable to |
|
|
Noncontrolling |
|
|
|
Masco Corporation |
|
|
Interest |
|
|
Masco Corporation |
|
|
Interest |
|
Net income |
|
$ |
82 |
|
|
$ |
12 |
|
|
$ |
84 |
|
|
$ |
24 |
|
Other comprehensive
income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
translation
adjustments |
|
|
(10 |
) |
|
|
(3 |
) |
|
|
97 |
|
|
|
14 |
|
Unrealized gain on
marketable
securities, net |
|
|
1 |
|
|
|
|
|
|
|
8 |
|
|
|
|
|
Prior service cost
and net loss, net |
|
|
1 |
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive
income |
|
$ |
74 |
|
|
$ |
9 |
|
|
$ |
191 |
|
|
$ |
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The unrealized gain on marketable securities, net, is net of income tax of $1 million for
the three months ended June 30, 2009, and $1 million and $5 million, respectively, for the
three months and six months ended June 30, 2008. The prior service cost and net loss, net, is
net of income tax of $1 million for both the three months and six months ended June 30,2008. |
|
|
In the first quarter of 2009, the Company announced the reduction of its quarterly dividend to
$.075 per common share ($.30 per common share annually) from $.235 per common share ($.94 per
common share annually). On the basis of amounts paid (declared), cash dividends per common
share were $.075 ($.075) and $.31 ($.15) for the three months and six months ended June 30,
2009, respectively. On the basis of amounts paid (declared), cash dividends per common share
were $.23 ($.23) and $.46 ($.46) for the three months and six months ended June 30, 2008,
respectively. |
20
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
L. |
|
Information about the Company by segment and geographic area was as follows, in millions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Net Sales(A) |
|
|
Operating Profit (Loss) |
|
|
Net Sales(A) |
|
|
Operating Profit (Loss) |
|
|
|
|
|
|
|
|
The Companys operations by
segment were: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cabinets and Related Products |
|
$ |
419 |
|
|
$ |
608 |
|
|
$ |
(12 |
) |
|
$ |
37 |
|
|
$ |
814 |
|
|
$ |
1,204 |
|
|
$ |
(40 |
) |
|
$ |
65 |
|
Plumbing Products |
|
|
654 |
|
|
|
857 |
|
|
|
70 |
|
|
|
107 |
|
|
|
1,260 |
|
|
|
1,678 |
|
|
|
100 |
|
|
|
206 |
|
Installation and Other Services |
|
|
312 |
|
|
|
508 |
|
|
|
(34 |
) |
|
|
4 |
|
|
|
629 |
|
|
|
994 |
|
|
|
(70 |
) |
|
|
(2 |
) |
Decorative Architectural Products |
|
|
505 |
|
|
|
476 |
|
|
|
116 |
|
|
|
89 |
|
|
|
891 |
|
|
|
855 |
|
|
|
191 |
|
|
|
163 |
|
Other Specialty Products |
|
|
146 |
|
|
|
194 |
|
|
|
7 |
|
|
|
13 |
|
|
|
261 |
|
|
|
362 |
|
|
|
|
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,036 |
|
|
$ |
2,643 |
|
|
$ |
147 |
|
|
$ |
250 |
|
|
$ |
3,855 |
|
|
$ |
5,093 |
|
|
$ |
181 |
|
|
$ |
453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys operations by
geographic area were: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
$ |
1,630 |
|
|
$ |
2,067 |
|
|
$ |
119 |
|
|
$ |
200 |
|
|
$ |
3,064 |
|
|
$ |
3,960 |
|
|
$ |
138 |
|
|
$ |
349 |
|
International, principally
Europe |
|
|
406 |
|
|
|
576 |
|
|
|
28 |
|
|
|
50 |
|
|
|
791 |
|
|
|
1,133 |
|
|
|
43 |
|
|
|
104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,036 |
|
|
$ |
2,643 |
|
|
|
147 |
|
|
|
250 |
|
|
$ |
3,855 |
|
|
$ |
5,093 |
|
|
|
181 |
|
|
|
453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General corporate expense, net |
|
|
|
|
|
|
|
|
|
|
(27 |
) |
|
|
(35 |
) |
|
|
|
|
|
|
|
|
|
|
(60 |
) |
|
|
(78 |
) |
Accelerated stock compensation
expense (B) |
|
|
|
|
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6 |
) |
|
|
|
|
(Loss) on corporate fixed assets,
net |
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
Charge for defined-benefit plan
curtailment (C) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8 |
) |
|
|
|
|
Charge for planned disposition of
business (D) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
|
|
|
|
|
|
|
|
|
112 |
|
|
|
215 |
|
|
|
|
|
|
|
|
|
|
|
105 |
|
|
|
369 |
|
Other income (expense), net |
|
|
|
|
|
|
|
|
|
|
(49 |
) |
|
|
(56 |
) |
|
|
|
|
|
|
|
|
|
|
(108 |
) |
|
|
(140 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing
operations before
income taxes |
|
|
|
|
|
|
|
|
|
$ |
63 |
|
|
$ |
159 |
|
|
|
|
|
|
|
|
|
|
$ |
(3 |
) |
|
$ |
229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
|
Inter-segment sales were not material. |
|
(B) |
|
See Note C to the condensed consolidated financial statements. |
|
(C) |
|
In March 2009, the Company recognized a curtailment loss related to the plan to freeze all
future benefit accruals beginning January 1, 2010 under substantially all of the Companys
domestic qualified and non-qualified defined-benefit pension plans. |
|
(D) |
|
See Note B to the condensed consolidated financial statements. |
21
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
M. |
|
Other, net, which is included in other income (expense), net, was as follows, in millions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Income from cash and
cash investments |
|
$ |
1 |
|
|
$ |
5 |
|
|
$ |
4 |
|
|
$ |
11 |
|
Income from financial
investments, net (Note G) |
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
Other items, net |
|
|
14 |
|
|
|
(4 |
) |
|
|
11 |
|
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
15 |
|
|
$ |
4 |
|
|
$ |
15 |
|
|
$ |
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other items, net, included $11 million and $9 million of currency gains for the three months
and six months ended June 30, 2009, respectively. Other items, net, included $4 million and
$15 million of currency losses for the three months and six months ended June 30, 2008,
respectively. |
|
N. |
|
Reconciliations of the numerators and denominators used in the computations of basic and
diluted earnings per common share were as follows, in millions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Numerator (basic and diluted): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations |
|
$ |
54 |
|
|
$ |
72 |
|
|
$ |
(27 |
) |
|
$ |
90 |
|
Allocation to unvested
restricted stock awards |
|
|
(1 |
) |
|
|
(2 |
) |
|
|
(1 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations attributable to
common shareholders |
|
|
53 |
|
|
|
70 |
|
|
|
(28 |
) |
|
|
86 |
|
Income (loss) from
discontinued operations, net |
|
|
1 |
|
|
|
10 |
|
|
|
1 |
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to
common shareholders |
|
$ |
54 |
|
|
$ |
80 |
|
|
$ |
(27 |
) |
|
$ |
80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic common shares (based
upon weighted average) |
|
|
350 |
|
|
|
354 |
|
|
|
351 |
|
|
|
355 |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock option dilution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted common shares |
|
|
350 |
|
|
|
354 |
|
|
|
351 |
|
|
|
355 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
Note N concluded:
|
|
Effective January 1, 2009, the Company adopted FASB Staff Position No. EITF 03-6-1,
Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating
Securities, (FSP EITF 03-6-1). FSP EITF 03-6-1 clarifies that share-based payment awards
that entitle their holders to receive non-forfeitable dividends prior to vesting should be
considered participating securities. The Company has granted restricted stock awards that
contain non-forfeitable rights to dividends on unvested shares; such unvested restricted stock
awards are considered participating securities under FSP EITF 03-6-1. As participating
securities, the unvested shares are required to be included in the calculation of the
Companys basic earnings per common share, using the two-class method. The two-class method
of computing earnings per common share is an allocation method that calculates earnings per
share for each class of common stock and participating security according to dividends
declared and participation rights in undistributed earnings. Unvested restricted stock awards
were previously included in the Companys diluted share calculation using the treasury stock
method. For the six months ended June 30, 2009, the Company did not allocate any loss to the
unvested restricted stock awards (participating securities), due to the anti-dilutive effect;
however, dividends were allocated to the unvested restricted stock awards (participating
securities) for both the three months and six months ended June 30, 2009. For the three
months ended June 30, 2009, the Company allocated income to the unvested restricted stock
awards (participating securities). |
|
|
|
At June 30, 2009 and 2008, the Company did not include any common shares related to the Zero
Coupon Convertible Senior Notes (Notes) in the calculation of diluted earnings per common
share, as the price of the Companys common stock at June 30, 2009 and 2008 did not exceed the
equivalent accreted value of the Notes. |
|
|
|
Additionally, 36 million common shares for both the three months and six months ended June 30,
2009, and 32 million common shares for both the three months and six months ended June 30,
2008 related to stock options were excluded from the computation of diluted earnings per
common share due to their antidilutive effect. |
|
|
|
In the first six months of 2009, the Company granted two million shares of stock awards. In
the first half of 2009, the Company also repurchased and retired approximately two million
shares of Company common stock, for cash aggregating $11 million to offset the dilutive impact
of these stock awards. At June 30, 2009, the Company had 30 million shares of its common stock
remaining under the July 2007 Board of Directors repurchase authorization. |
23
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)
O. |
|
The Company is subject to lawsuits and pending or asserted claims with respect to matters
generally arising in the ordinary course of business. |
|
|
|
As previously disclosed, a lawsuit has been brought against the Company and a number of its
insulation installation companies in the federal court in Atlanta, Georgia alleging that
certain practices violate provisions of the federal antitrust laws. In February 2009, the
federal court in Atlanta certified a class of 377 insulation contractors. Two additional
lawsuits, seeking class action status and alleging anticompetitive conduct, were filed against
the Company and a number of its insulation suppliers. One of these lawsuits was filed in a
Florida state court and has been dismissed by the court with prejudice. The other lawsuit was
filed in federal court in northern California and was subsequently transferred to federal
court in Atlanta, Georgia. The Company is vigorously defending the pending cases. Based upon
the advice of its outside counsel, the Company believes that the conduct of the Company and
its insulation installation companies, which has been the subject of the above-described
lawsuits, has not violated any antitrust laws. The Company is unable at this time to reliably
estimate any potential liability which might occur from an adverse judgment. There cannot be
any assurance that the Company will ultimately prevail in the remaining lawsuits, or, if
unsuccessful, that the ultimate liability would not be material and would not have a material
adverse effect on its businesses or the methods used by its insulation installation companies
in doing business. |
|
|
|
As previously disclosed, European governmental authorities are investigating possible
anticompetitive business practices relating to the plumbing and heating industries in Europe.
The investigations involve a number of European companies, including certain of the Companys
European manufacturing divisions and a number of other large businesses. The Company believes
that it will not incur material liability as a result of the matters that are subject to these
investigations. |
|
P. |
|
Changes in the Companys warranty liability were as follows, in millions: |
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
Twelve Months Ended |
|
|
|
June 30, 2009 |
|
|
December 31, 2008 |
|
Balance at January 1 |
|
$ |
119 |
|
|
$ |
133 |
|
Accruals for warranties
issued during the period |
|
|
11 |
|
|
|
42 |
|
Accruals related to
pre-existing warranties |
|
|
2 |
|
|
|
6 |
|
Settlements made (in cash or
kind) during the period |
|
|
(19 |
) |
|
|
(53 |
) |
Other, net |
|
|
(1 |
) |
|
|
(9 |
) |
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
112 |
|
|
$ |
119 |
|
|
|
|
|
|
|
|
Q. |
|
Because the Companys projected pre-tax income is near break-even, small changes in projected pre-tax income may cause
large changes in the estimated annual effective tax rate thereby producing potentially unreliable estimates of tax expense.
Since these small changes to pre-tax income are likely to occur, the Company recorded the tax expense for the first six
months of 2009 using the actual effective tax rate on the year-to-date pre-tax income and did not use the estimated annual
effective tax rate. |
24
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (concluded)
Note Q concluded:
|
|
The unusual relationship between income tax expense and loss from continuing operations before
income taxes in the first six months of 2009 results primarily from an increase in the
valuation allowance on the 2008 net operating loss carryforward of $4 million due to the
anticipated continued losses of certain subsidiaries during 2009, losses in certain state and
local jurisdictions providing no tax benefit and tax expense associated with foreign earnings
that are not permanently reinvested. |
|
|
|
During the first six months of 2009, the Companys liability for unrecognized tax benefits and
accrued interest and penalties decreased by $12 million and $3 million, respectively, due
primarily to a settlement with a tax authority on various unrecognized tax benefits. As a
result of tax audit closings, settlements and expiration of applicable statutes of limitations
in various jurisdictions within the next 12 months, the Company anticipates that it is
reasonably possible that the liability for unrecognized tax benefits could be reduced by
approximately $8 million. |
|
|
|
For the three months and six months ended June 30, 2009, the Company reported tax expense of
$1 million and $9 million, respectively, which is the result of applying a discrete tax rate
for the six months ended June 30, 2009. |
25
MASCO CORPORATION
|
|
|
Item 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
SECOND QUARTER 2009 AND THE FIRST SIX MONTHS 2009 VERSUS
SECOND QUARTER 2008 AND THE FIRST SIX MONTHS 2008
SALES AND OPERATIONS
The following table sets forth the Companys net sales and operating profit margins by
business segment and geographic area, dollars in millions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Percent |
|
|
|
June 30, |
|
|
(Decrease) Increase |
|
|
|
2009 |
|
|
2008 |
|
|
2009 vs. 2008 |
|
Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
Cabinets and Related Products |
|
$ |
419 |
|
|
$ |
608 |
|
|
|
(31 |
%) |
Plumbing Products |
|
|
654 |
|
|
|
857 |
|
|
|
(24 |
%) |
Installation and Other Services |
|
|
312 |
|
|
|
508 |
|
|
|
(39 |
%) |
Decorative Architectural Products |
|
|
505 |
|
|
|
476 |
|
|
|
6 |
% |
Other Specialty Products |
|
|
146 |
|
|
|
194 |
|
|
|
(25 |
%) |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,036 |
|
|
$ |
2,643 |
|
|
|
(23 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
$ |
1,630 |
|
|
$ |
2,067 |
|
|
|
(21 |
%) |
International, principally Europe |
|
|
406 |
|
|
|
576 |
|
|
|
(30 |
%) |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,036 |
|
|
$ |
2,643 |
|
|
|
(23 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
June 30, |
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
Cabinets and Related Products |
|
$ |
814 |
|
|
$ |
1,204 |
|
|
|
(32 |
%) |
Plumbing Products |
|
|
1,260 |
|
|
|
1,678 |
|
|
|
(25 |
%) |
Installation and Other Services |
|
|
629 |
|
|
|
994 |
|
|
|
(37 |
%) |
Decorative Architectural Products |
|
|
891 |
|
|
|
855 |
|
|
|
4 |
% |
Other Specialty Products |
|
|
261 |
|
|
|
362 |
|
|
|
(28 |
%) |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
3,855 |
|
|
$ |
5,093 |
|
|
|
(24 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
$ |
3,064 |
|
|
$ |
3,960 |
|
|
|
(23 |
%) |
International, principally Europe |
|
|
791 |
|
|
|
1,133 |
|
|
|
(30 |
%) |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
3,855 |
|
|
$ |
5,093 |
|
|
|
(24 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
Operating Profit (Loss) Margins: (A) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cabinets and Related Products |
|
|
(2.9 |
%) |
|
|
6.1 |
% |
|
|
(4.9 |
%) |
|
|
5.4 |
% |
Plumbing Products |
|
|
10.7 |
% |
|
|
12.5 |
% |
|
|
7.9 |
% |
|
|
12.3 |
% |
Installation and Other Services |
|
|
(10.9 |
%) |
|
|
.8 |
% |
|
|
(11.1 |
%) |
|
|
(.2 |
%) |
Decorative Architectural Products |
|
|
23.0 |
% |
|
|
18.7 |
% |
|
|
21.4 |
% |
|
|
19.1 |
% |
Other Specialty Products |
|
|
4.8 |
% |
|
|
6.7 |
% |
|
|
|
% |
|
|
5.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
|
7.3 |
% |
|
|
9.7 |
% |
|
|
4.5 |
% |
|
|
8.8 |
% |
International, principally Europe |
|
|
6.9 |
% |
|
|
8.7 |
% |
|
|
5.4 |
% |
|
|
9.2 |
% |
Total |
|
|
7.2 |
% |
|
|
9.5 |
% |
|
|
4.7 |
% |
|
|
8.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating profit margin,
as reported |
|
|
5.5 |
% |
|
|
8.1 |
% |
|
|
2.7 |
% |
|
|
7.2 |
% |
|
|
|
(A) |
|
Before general corporate expense, net, the accelerated stock compensation expense, the
charge for the defined-benefit plan curtailment, the (loss) on corporate fixed assets, net,
and the charge for planned disposition of business; see Note L to the condensed consolidated
financial statements. |
26
MASCO CORPORATION
|
|
|
Item 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The Company reports its financial results in accordance with generally accepted accounting
principles (GAAP) in the United States. However, the Company believes that certain non-GAAP
performance measures and ratios, used in managing the business, may provide users of this financial
information 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 Companys reported results.
NET SALES
Net sales decreased for both the three-month and six-month periods ended June 30, 2009 from
the comparable periods of 2008. Excluding results from acquisitions and the effect of currency
translation, net sales decreased 20 percent and 21 percent, respectively, for the three-month and
six-month periods ended June 30, 2009. The following table reconciles reported net sales to net
sales, excluding acquisitions and the effect of currency translation, in millions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Net sales, as reported |
|
$ |
2,036 |
|
|
$ |
2,643 |
|
|
$ |
3,855 |
|
|
$ |
5,093 |
|
Acquisitions |
|
|
(3 |
) |
|
|
|
|
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales, excluding
acquisitions |
|
|
2,033 |
|
|
|
2,643 |
|
|
|
3,846 |
|
|
|
5,093 |
|
Currency translation |
|
|
80 |
|
|
|
|
|
|
|
165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales, excluding
acquisitions and the
effect of currency
translation |
|
$ |
2,113 |
|
|
$ |
2,643 |
|
|
$ |
4,011 |
|
|
$ |
5,093 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales from North American operations decreased in 2009, primarily due to the continuing
decline in the new home construction market, which reduced sales by 14 percent in both the
three-month and six-month periods ended June 30, 2009 compared to the same periods of 2008 and a
continued decline in consumer spending for home improvement products, which reduced sales by ten
percent and 11 percent, respectively, in the three-month and six-month periods ended June 30, 2009
compared to the same periods of 2008. North American net sales for both the three-month and
six-month periods ended June 30, 2009 were negatively affected by lower sales volume of
installation and other services, plumbing products, cabinets and windows. Such sales declines were
partially offset by increased sales of paints and stains and increased selling prices for certain
products.
In local currencies, net sales from International operations decreased 17 percent in both the
three-month and six-month periods ended June 30, 2009, primarily due to lower sales volume of
International plumbing products, cabinets and windows, partially offset by selling price increases.
Net sales from International operations decreased in 2009, due to a stronger U.S. dollar, which
decreased International net sales by 12 percent and 13 percent in the three-month and six-month
periods ended June 30, 2009, respectively, compared to the same periods of 2008.
27
MASCO CORPORATION
|
|
|
Item 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Net sales of Cabinets and Related Products decreased in 2009, due to lower sales volume of
cabinets in the new home construction and retail markets, as well as a less favorable product mix,
which, combined, reduced sales in this segment by 25 percent and 27 percent, respectively, in the
three-month and six-month periods ended June 30, 2009 compared to the same periods of 2008. A
stronger U.S. dollar decreased sales by three percent in both the three-month and six-month periods
ended June 30, 2009 compared to the same periods of 2008. In local currencies, net sales of
International operations reduced sales in this segment by six percent and five percent,
respectively, in the three-month and six-month periods ended June 30, 2009 compared to the same
periods of 2008. Segment sales declines were partially offset by selling price increases and
acquisitions.
Net sales of Plumbing Products decreased in 2009, due to lower sales volume to North American
retailers and wholesalers, which reduced sales by 14 percent and 13 percent, respectively, in the
three-month and six-month periods ended June 30, 2009 compared to the same periods of 2008. A
stronger U.S. dollar decreased sales by six percent and seven percent, respectively, in the
three-month and six-month periods ended June 30, 2009 compared to the same periods of 2008. In
local currencies, net sales of International operations reduced sales in this segment by eight
percent in both the three-month and six-month periods ended June 30, 2009 compared to the same
periods of 2008. Segment sales declines were partially offset by selling price increases.
Net sales of Installation and Other Services decreased for both the three-month and six-month
periods ended June 30, 2009, primarily due to significantly lower sales volume related to the
continuing slowdown in the new home construction market.
Net sales of Decorative Architectural Products increased in 2009, primarily due to increased
retail sales volume and late 2008 selling price increases related to paints and stains, which
offset lower retail sales volume of builders hardware. Sales of paints and stains benefited from
new product introductions and promotional activities.
Net sales of Other Specialty Products decreased in 2009, primarily due to lower sales volume
of windows related to the continued slowdown in the new home construction market, particularly in
the western United States, and selling price decreases which, on a combined basis, decreased sales
in this segment by 13 percent and 17 percent, respectively, in the three-month and six-month
periods ended June 30, 2009 compared to the same periods of 2008. Net sales in this segment also
decreased by three percent in both the three-month and six-month periods ended June 30, 2009,
compared to the same periods in 2008, due to a decline in retail sales of staple gun tackers and
other fastening tools. A stronger U.S. dollar decreased sales by five percent and six percent,
respectively, in the three-month and six-month periods ended June 30, 2009 compared to the same
periods of 2008. In local currencies, net sales of International operations reduced sales in this
segment by two percent and three percent, respectively, in the three-month and six-month periods
ended June 30, 2009 compared to the same periods of 2008.
28
MASCO CORPORATION
|
|
|
Item 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
OPERATING MARGINS
The Companys gross profit margins were 26.8 percent and 24.9 percent, respectively, for the
three-month and six-month periods ended June 30, 2009 compared with 26.5 percent and 26.1 percent
for the comparable periods of 2008. Selling, general and administrative expenses declined to $434
million and $849 million, respectively, for the three-month and six-month periods ended June 30,
2009 from $485 million and $961 million, respectively, in the comparable periods of 2008; however,
as a percentage of sales, such expenses were 21.3 percent and 22.0 percent, respectively, for the
three-month and six-month periods ended June 30, 2009 and 18.4 percent and 18.9 percent,
respectively, for the comparable periods of 2008, reflecting lower sales volume, as well as
increased plant closure and system implementation costs. Such declines in operating profit margins
were partially offset by the improved relationship between selling prices and commodity costs, as
well as the benefits associated with business rationalizations and other cost savings initiatives.
The Company has been focused on the strategic rationalization of its businesses, including
business consolidations, plant closures, headcount reductions, system implementations and other
initiatives. Operating profit for the three-month and six-month periods ended June 30, 2009
includes $22 million and $46 million, respectively, of costs and charges related to the Companys
business rationalizations and other initiatives. For the three-month and six-month periods ended
June 30, 2008, the Company incurred $15 million and $24 million, respectively, related to these
initiatives. During the first six months of 2009, the Company closed two manufacturing facilities,
reduced headcount by 3,000 employees and reduced installation branches by six locations. Based on
current plans, the Company anticipates costs and charges related to the Companys business
rationalizations and other initiatives to approximate $85 million in 2009. The Company continues
to evaluate its businesses and may implement additional rationalization programs based on changes
in the Companys markets which could result in further costs and charges.
The operating loss in the Cabinets and Related Products segment in 2009 reflects lower sales
volume in the new home construction and retail markets and the related under-absorption of fixed
costs, as well as a less favorable product mix, which on a combined basis reduced operating margins
by approximately seven percentage points and six percentage points, respectively, for the
three-month and six-month periods ended June 30, 2009 compared to 2008. This segment was also
negatively affected by the lower results of International operations, as well as increased
severance, plant closure and system implementation costs. Such declines were partially offset by
selling price increases as well as the benefits associated with business rationalizations and other
cost savings initiatives.
The decrease in operating profit margins in the Plumbing Products segment for both the
three-month and six-month periods ended June 30, 2009 reflect lower sales volume and the related
under-absorption of fixed costs, as well as a less favorable product mix of International plumbing
products and increased severance and plant closure costs. Such declines in operating profit margins
were partially offset by the improved relationship between selling prices and commodity costs and
the benefits associated with business rationalizations and other cost savings initiatives.
The increase in operating loss in the Installation and Other Services segment for both the
three-month and six-month periods ended June 30, 2009 is primarily due to lower sales volume and
the related under-absorption of fixed costs, as well as increased system implementation costs.
29
MASCO CORPORATION
|
|
|
Item 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The increase in operating profit margins for the Decorative Architectural Products segment for
both the three-month and six-month periods ended June 30, 2009 is primarily due to increased sales
volume and selling price increases related to paints and stains which offset increased material
costs and lower advertising costs related to builders hardware and lower sales volume of builders
hardware.
The decrease in operating profit margins for the Other Specialty Products segment for both the
three-month and six-month periods ended June 30, 2009 reflects lower sales volume of windows and
staple gun tackers and other fastening tools and the related under-absorption of fixed costs, as
well as increased severance and plant closure costs and a less favorable product mix.
OTHER INCOME (EXPENSE), NET
Other items, net, for the three-month and six-month periods ended June 30, 2009 included $11
million and $9 million, respectively, of currency gains.
For the three-month and six-month periods ended June 30, 2009, the Company recognized
non-cash, pre-tax impairment charges of $7 million and $10 million, respectively, related to
financial investments in private equity funds.
Other, net, for the six-month period ended June 30, 2008 included $3 million of realized
losses, net, from the sale of marketable securities. Other, net, for both the three-month and
six-month periods ended June 30, 2008 also included $3 million of income from other investments,
net. Other items, net, for the three-month and six-month periods ended June 30, 2008 included $4
million and $15 million, respectively, of currency losses.
For the three-month and six-month periods ended June 30, 2008, the Company recognized a
non-cash, pre-tax impairment charge of $3 million and $7 million, respectively, related to
financial investments in private equity funds. For the six-month period ended June 30, 2008, the
Company recognized a non-cash, pre-tax impairment charge of $22 million related to its investment
in a marketable security.
Interest expense was $57 million for both the three-month period ended June 30, 2009 and 2008.
Interest expense was $113 million for both the six-month periods ended June 30, 2009 and 2008.
INCOME (LOSS) AND EARNINGS (LOSS) PER COMMON SHARE FROM CONTINUING OPERATIONS
Income (loss) from continuing operations (attributable to Masco Corporation) for the three-month and six-month periods ended June
30, 2009 was $54 million and $(27) million, respectively, compared with $72 million and $90
million, respectively, for the comparable periods of 2008. Diluted earnings (loss) per common share
from continuing operations (attributable to Masco Corporation) for the three-month and six-month periods ended June 30, 2009 were $.15
per common share and $(.08) per common share, respectively, compared with $.20 per common share and
$.24 per common share, respectively, for the comparable periods of 2008.
30
MASCO CORPORATION
|
|
|
Item 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
For the three months and six months ended June 30, 2009, the Company reported tax expense of
$1 million and $9 million, respectively. Compared to a normal tax rate of approximately 36
percent, the tax rate in the second quarter of 2009 had a positive impact of $.06 per common share.
A discrete calculation was used to report tax expense rather than an estimated annual tax rate, as
the estimated range of the annual loss for the Company in 2009 produces significant variability and
makes it difficult to reasonably estimate the annual effective tax rate. While the Company expects
a full-year loss, the Company expects to have tax expense for the year primarily due to losses in
certain jurisdictions providing no tax benefit. The Companys effective tax rate was 47 percent
and 50 percent, respectively, for the three-month and six-month periods ended June 30, 2008.
OTHER FINANCIAL INFORMATION
The Companys current ratio was 1.8 to 1 and 2.1 to 1, respectively, at June 30, 2009 and
December 31, 2008.
For the six months ended June 30, 2009, cash of $110 million was provided by operating
activities. Net cash used for financing activities was $142 million, and included $112 million for
the payment of cash dividends and $11 million for the acquisition of Company common stock in
open-market transactions to offset the dilutive impact of stock awards. Net cash used for
investing activities was $61 million and included $50 million for capital expenditures.
First six months 2009 cash from operations was affected by an expected and annually recurring
first half increase in accounts receivable compared with December 31, 2008.
The Companys cash and cash investments decreased to $926 million at June 30, 2009 from $1,028
million at December 31, 2008. The Companys cash and cash investments consist of overnight
interest bearing money market demand and time deposit accounts, money market mutual funds and
government securities. While the Company attempts to diversify these investments in a prudent
manner to minimize risk, it is possible that the continuing global turmoil in the financial markets
could result in failures of additional financial institutions or other events and thereby affect
the security or availability of these investments.
At June 30, 2009, the Amended Five-Year Revolving Credit Agreement contains limitations on
additional borrowings. Under the terms of the Amended Credit Facility, any outstanding Letters of Credit reduce the Companys borrowing capacity. At June 30, 2009, the Company had $57 million of unused Letters of Credit; accordingly, the Companys remaining borrowing capacity is
approximately $1.2 billion. At June 30, 2009, the Amended Five-Year Revolving
Credit Agreement also contains a requirement for maintaining a certain level of net worth; the
Companys net worth exceeded such requirement by $1.0 billion.
The Company also announced the reduction of its quarterly dividend to $.075 per common share
($.30 per common share annually) from $.235 per common share ($.94 per common share annually).
The Company is subject to lawsuits and claims pending or asserted with respect to matters
generally arising in the ordinary course of business. Note O to the condensed consolidated
financial statements discusses certain specific claims pending against the Company.
31
MASCO CORPORATION
|
|
|
Item 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The Company believes that its present cash balance, cash flows from operations and, to the
extent necessary, bank borrowings and future financial market activities, are sufficient to fund
its working capital and other investment needs.
OUTLOOK FOR THE COMPANY
Business conditions remain difficult in the Companys markets. The Company continues to
estimate that 2009 housing starts will decline 40 percent to approximately 550,000 units. The
Company also anticipates that consumer spending for home improvement products in North American and
International markets will continue at depressed levels in the near term.
Although the Company is confident that the long-term fundamentals for the new home
construction and home improvement markets are positive, the Company expects that market conditions
will be extremely challenging over the next several quarters, given the continued uncertainty in
the global economic and financial markets. Accordingly, the Company will focus on liquidity
preservation to ensure its ability to fund its business operations, growth opportunities that may
arise and a relatively modest debt maturity due in early 2010.
The Company believes that its strong financial position (including cash of over $900 million
at June 30, 2009, its ability to generate positive cash flow during 2009 and unused bank lines)
together with its current strategy of re-aligning its cost structure, investing in leadership
brands, driving innovation and re-engineering its supply chains, will allow it to drive long-term
growth and create value for its shareholders.
FORWARD-LOOKING STATEMENTS
Certain sections of this Quarterly Report contain statements reflecting the Companys views
about its future performance which 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 Companys results may differ materially from the results discussed in
such forward-looking statements. For further information, readers should refer to the Companys
most recent Annual Report on Form 10-K (Risk Factors and Managements 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 publicly any forward-looking statements as a result of new
information, future events or otherwise.
32
MASCO CORPORATION
|
|
|
Item 4. |
|
CONTROLS AND PROCEDURES |
|
a. |
|
Evaluation of Disclosure Controls and Procedures. |
|
|
|
|
The Companys principal executive officer and principal financial officer have concluded,
based on an evaluation of the Companys disclosure controls and procedures (as defined in
the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)), as required by paragraph
(b) of Exchange Act Rules 13a-15 or 15d-15, that, as of June 30, 2009, the Companys
disclosure controls and procedures were effective. |
|
|
b. |
|
Changes in Internal Control Over Financial Reporting. |
|
|
|
|
In connection with the evaluation of the Companys internal control over financial reporting
that occurred during the quarter ended June 30, 2009, which is required under the Securities
Exchange Act of 1934 by paragraph (d) of Exchange Rules 13a-15 or 15d-15, (as defined in
paragraph (f) of Rule 13a-15), management determined that, except as noted below, there was
no change that has materially affected or is reasonably likely to materially affect internal
control over financial reporting. |
|
|
|
|
During the second quarter of 2009, the Company continued a phased deployment of new
Enterprise Resource Planning (ERP) systems at Masco Builder Cabinet Group and Masco
Contractor Services, two of the Companys larger business units. These new systems
represent process improvement initiatives and are not in response to any identified
deficiency or weakness in the Companys internal control over financial reporting. However,
these business process initiatives are significant in scale and complexity and will result
in modifications to certain internal controls. These systems are designed to enhance the
overall system of internal control over financial reporting through further automation and
integration of various business processes. |
33
MASCO CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information regarding certain legal proceedings involving the Company is set forth in Note O
to the Companys condensed consolidated financial statements included in Part I, Item 1 of this
Quarterly Report.
Item 1A. Risk Factors
Information regarding risk factors of the Company is set forth in Item 1A, Risk Factors in
the Companys Annual Report on Form 10-K for the year ended December 31, 2008.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of stockholders was held on May 12, 2009 at which the stockholders voted
upon (1) the election of three nominees for Class III Directors; (2) the ratification of the
selection of PricewaterhouseCoopers LLP as independent auditors for the Company for 2009; (3) the
approval of the amendment of the Companys 2005 Long Term Stock Incentive Plan and (4) the approval
of the material terms of the performance goals under the Companys 2005 Long Term Stock Incentive
Plan. The following is a tabulation of the votes.
Election of Class III Directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For |
|
Against |
|
Abstentions |
Thomas G. Denomme |
|
|
304,551,717 |
|
|
|
13,684,490 |
|
|
|
304,982 |
|
Richard A. Manoogian |
|
|
303,123,082 |
|
|
|
15,155,711 |
|
|
|
262,396 |
|
Mary Ann Van Lokeren |
|
|
282,001,929 |
|
|
|
36,183,831 |
|
|
|
355,429 |
|
The other directors whose terms of office continued after the Annual Meeting are Dennis W. Archer,
Anthony F. Earley, Jr., Verne G. Istock, David L. Johnston, J. Michael Losh, Lisa A. Payne and
Timothy Wadhams.
Ratification of the selection of PricewaterhouseCoopers LLP as independent auditors for the Company
for 2009:
|
|
|
|
|
For |
|
Against |
|
Abstentions |
311,846,147
|
|
6,542,541
|
|
152,501 |
Approval of the amendment of the Companys 2005 Long Term Stock Incentive Plan:
|
|
|
|
|
|
|
For |
|
Against |
|
Abstentions |
|
Broker Non-Votes |
239,514,137
|
|
54,992,400
|
|
561,079
|
|
23,473,573 |
Approval of the material terms of the performance goals under the Companys 2005 Long Term Stock
Incentive Plan:
|
|
|
|
|
|
|
For |
|
Against |
|
Abstentions |
|
Broker Non-Votes |
266,794,089
|
|
27,704,674
|
|
569,653
|
|
23,472,773 |
34
MASCO CORPORATION
PART II. OTHER INFORMATION, continued
Item 6. Exhibits
|
|
|
|
|
4
|
|
-
|
|
Amendment No. 2 to 5 Year Revolving Credit Agreement dated as of
April 22, 2009 among Masco Corporation and Masco Europe S.á.r.l., as borrowers, the
banks parties thereto, as lenders, and JPMorgan Chase Bank, N.A., as administrative
agent. Incorporated by reference to Exhibit 4 of Mascos Form 10-Q filed April 30,
2009 |
|
|
|
|
|
10
|
|
-
|
|
Agreement dated as of June 29, 2009 between Richard A. Manoogian and
Masco Corporation (superseding the letter dated April 30, 2007 between Richard A.
Manoogian and Masco Corporation) |
|
|
|
|
|
12
|
|
-
|
|
Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends |
|
|
|
|
|
31a
|
|
-
|
|
Certification by Chief Executive Officer Required by Rule 13a-14(a)
or 15d-14(a) of the Securities Exchange Act of 1934 |
|
|
|
|
|
31b
|
|
-
|
|
Certification by Chief Financial Officer Required by Rule 13a-14(a)
or 15d-14(a) of the Securities Exchange Act of 1934 |
|
|
|
|
|
32
|
|
-
|
|
Certification Required by Rule 13a-14(b) or 15d-14(b) of the
Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the
United States Code |
|
|
|
|
|
101
|
|
-
|
|
Interactive Data File |
35
MASCO CORPORATION
PART II. OTHER INFORMATION, concluded
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 |
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ John G. Sznewajs
|
|
|
|
|
Name:
|
|
John G. Sznewajs |
|
|
|
|
Title:
|
|
Vice President, Treasurer and
Chief Financial Officer |
|
|
July 30, 2009
36
MASCO CORPORATION
EXHIBIT INDEX
|
|
|
Exhibit |
|
|
|
|
|
Exhibit 4
|
|
Amendment No. 2 to 5 Year Revolving Credit Agreement dated as of April
22, 2009 among Masco Corporation and Masco Europe S.á.r.l., as borrowers, the
banks parties thereto, as lenders, and JPMorgan Chase Bank, N.A., as
administrative agent. Incorporated by reference to Exhibit 4 of Mascos Form
10-Q filed April 30, 2009 |
|
|
|
Exhibit 10
|
|
Agreement dated as of June 29, 2009 between Richard
A. Manoogian and Masco Corporation (superseding the
letter dated April 30, 2007 between Richard A.
Manoogian and Masco Corporation) |
|
|
|
Exhibit 12
|
|
Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends |
|
|
|
Exhibit 31a
|
|
Certification by Chief Executive Officer Required by
Rule 13a-14(a) or 15d-14(a) of the Securities
Exchange Act of 1934 |
|
|
|
Exhibit 31b
|
|
Certification by Chief Financial Officer Required by
Rule 13a-14(a) or 15d-14(a) of the Securities
Exchange Act of 1934 |
|
|
|
Exhibit 32
|
|
Certification Required by Rule 13a-14(b) or 15d-14(b)
of the Securities Exchange Act of 1934 and Section
1350 of Chapter 63 of Title 18 of the United States
Code |
|
|
|
Exhibit 101
|
|
Interactive Data File |
EX-10
2
k48075exv10.htm
EX-10
EX-10
EXHIBIT
10
June 29, 2009
Mr. Richard A. Manoogian
Executive Chairman
Masco Corporation
21001 Van Born Road
Taylor, MI 48180
Dear Richard:
This letter will confirm our discussions and understandings with regard to your retirement from a
full-time senior executive position with Masco Corporation and will supersede the letter from Peter
A. Dow dated April 3, 2007. This letter agreement has the approval of the Organization and
Compensation Committee, the Corporate Governance and Nominating Committee and the full Board and
summarizes our understandings for going forward.
Transition. Following your retirement as a Masco Corporation employee as of June 30, 2009,
you have agreed to serve, but at the ongoing pleasure of the Board, as the Companys non-executive
Chairman of the Board.
Compensation. As long as you serve in the capacity as Chairman of the Board, your
compensation will consist of the following:
|
|
|
As a non-employee director, you will receive the same retainer and other compensation as
the other non-employee directors. (You will not, of course, receive the initial one-time
option granted to new non-employee directors.) |
|
|
|
|
You will also receive an additional cash retainer for your service as Chairman of the
Board at an annual rate of $350,000. |
Business support. In order to assist you in discharging your duties as Chairman of the
Board, at no cost to you, the Company will provide for this purpose:
|
|
|
Administrative support comparable to that currently provided. |
|
|
|
|
Office space for you and such administrative support comparable to that currently
provided. |
|
|
|
|
Reasonable supporting equipment, supplies, subscriptions and other services related to
the office space occupied by you and your administrative support comparable to that
currently provided. |
21001 VAN BORN ROAD
TAYLOR, MICHIGAN 48180
313-274-7400
MASCO CORPORATION
In addition, to further assist you in discharging such duties, at no cost to you, the Company will
make available use of the Companys car and driver and use of Company aircraft.
Other benefits. In addition to the compensation and business support to be provided above,
as long as you serve as Chairman of the Board, the Company will:
|
|
|
Provide office space for your personal financial and administrative staff at the
Companys headquarters and provide reasonable supporting equipment, supplies, subscriptions
and other services related to the office space occupied by you and such staff, in each case
comparable to that currently provided. |
|
|
|
You will reimburse the Company for the full cost of such space and other items
calculated on the same basis as you are currently charged; and |
|
|
|
|
All such staff will be compensated directly by you (any personnel currently
being compensated by the Company and reimbursed by you to the Company are to be
transitioned to your personal payroll no later than January 1, 2010). |
|
|
|
At no cost to you (other than personal income tax consequences), make available for your
reasonable personal use: |
|
|
|
The Companys car and driver; and |
|
|
|
|
Company aircraft, subject to availability of aircraft and flight personnel and
the priority use of such aircraft and flight personnel for Company business
purposes. |
After termination of your services as Chairman of the Board, the Company will continue to provide
the following for your personal use, on the terms set forth below:
|
|
|
At no cost to you (other than personal income tax consequences): |
|
|
|
One administrative assistant comparable to that currently provided. |
|
|
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Office space for you and such administrative assistant, whether such office
space is provided at the Companys headquarters or elsewhere as provided below
comparable to that currently provided. |
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Reasonable supporting equipment, supplies, subscriptions and other services
related to the office space occupied by you and such administrative assistant
comparable to that currently provided. |
|
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Provided that you reimburse the Company for the full cost thereof calculated on the same
basis as you are currently charged, the Company will provide: |
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Office space for your personal financial and administrative staff, and |
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Reasonable supporting equipment, supplies, subscriptions and other services
related to the office space occupied by such staff. |
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Provided that you reimburse the Company for the incremental cost thereof, the Company
will continue to make available for your reasonable personal use: |
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The Companys car and driver; and |
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Company aircraft, subject to availability of aircraft and flight personnel and
the priority use of such aircraft and flight personnel for Company business
purposes. |
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|
All such office space to be provided after termination of your services as Chairman of the Board
will be provided at the Companys headquarters, except that if the Companys headquarters are
relocated or if the Company, in its good faith judgment, determines that any such office space in
the Companys
headquarters is not available for your use (including office space for you and one personal administrative assistant position), the Company will assist you in the
relocation of such office space elsewhere in the Detroit metropolitan area that is
convenient to you.
|
2
MASCO CORPORATION
|
|
|
The Companys obligation to provide each of the foregoing benefits shall continue only
so long as the Company is legally permitted to provide you with such benefit and to accept
reimbursement (if the Company is not legally permitted to provide such benefit or accept
reimbursement, the Company will have no further obligation to make such benefit available
or to compensate you for your loss of the benefit). |
You understand that future interpretations of Section 409A of the Internal Revenue Code may result
in a delay of six months in your receipt of benefits under the preceding paragraph. If that
occurs, the Company will make you whole, to the extent legally permitted, for the temporary loss of
such benefits.
If the understandings expressed above conform with your own understanding of the results of our
discussions, please sign and return a copy of this letter to us, at which time it will become an
agreement binding upon you and the Company and the Companys successors and assigns.
Agreed:
|
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/s/ Richard A. Manoogian |
MASCO CORPORATION |
|
Richard A. Manoogian |
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By: |
/s/ Mary Ann Van Lokeren
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Mary Ann Van Lokeren |
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Chair,
Organization and Compensation Committee |
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By: |
/s/ Verne G. Istock
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Verne G. Istock |
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Presiding Director,
Masco Corporation Board of Directors, and
Chair,
Corporate Governance and Nominating Committee |
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|
3
EX-12
3
k48075exv12.htm
EX-12
EX-12
Exhibit 12
MASCO CORPORATION
Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
|
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(Dollars in Millions) |
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Six |
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|
Months |
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Ended |
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June 30, |
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|
Year Ended December 31, |
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2009 |
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2008 |
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2007 |
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2006 |
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2005 |
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2004 |
|
Earnings Before Income Taxes,
Preferred Stock Dividends
and Fixed Charges: |
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|
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|
|
|
|
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|
(Loss) income from continuing
operations before income taxes and
cumulative
effect of
accounting change, net |
|
$ |
(3 |
) |
|
$ |
(211 |
) |
|
$ |
866 |
|
|
$ |
891 |
|
|
$ |
1,454 |
|
|
$ |
1,630 |
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|
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|
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|
Deduct equity in undistributed
(earnings) of fifty-percent-or-
less-owned companies |
|
|
|
|
|
|
(1 |
) |
|
|
(2 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
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|
|
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|
|
|
|
|
|
|
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|
|
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|
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|
|
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|
|
Add interest on indebtedness, net |
|
|
112 |
|
|
|
228 |
|
|
|
258 |
|
|
|
241 |
|
|
|
246 |
|
|
|
214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Add amortization of debt expense |
|
|
3 |
|
|
|
4 |
|
|
|
5 |
|
|
|
4 |
|
|
|
6 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add estimated interest factor for
rentals |
|
|
22 |
|
|
|
51 |
|
|
|
55 |
|
|
|
52 |
|
|
|
40 |
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
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|
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|
|
Earnings before income taxes,
minority interest, cumulative
effect of
accounting change, net, fixed
charges and preferred
stock dividends |
|
$ |
134 |
|
|
$ |
71 |
|
|
$ |
1,182 |
|
|
$ |
1,187 |
|
|
$ |
1,745 |
|
|
$ |
1,882 |
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|
Fixed Charges: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on indebtedness |
|
$ |
111 |
|
|
$ |
228 |
|
|
$ |
259 |
|
|
$ |
241 |
|
|
$ |
244 |
|
|
$ |
214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Amortization of debt expense |
|
|
3 |
|
|
|
4 |
|
|
|
5 |
|
|
|
4 |
|
|
|
6 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated interest factor for
rentals |
|
|
22 |
|
|
|
51 |
|
|
|
55 |
|
|
|
52 |
|
|
|
40 |
|
|
|
33 |
|
|
|
|
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|
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|
|
|
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|
Total fixed charges |
|
$ |
136 |
|
|
$ |
283 |
|
|
$ |
319 |
|
|
$ |
297 |
|
|
$ |
290 |
|
|
$ |
253 |
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|
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|
|
|
Preferred stock dividends(a) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
8 |
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|
|
|
|
|
|
Combined fixed charges and
preferred stock dividends |
|
$ |
136 |
|
|
$ |
283 |
|
|
$ |
319 |
|
|
$ |
297 |
|
|
$ |
290 |
|
|
$ |
261 |
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Ratio of earnings to fixed charges |
|
|
1.0 |
|
|
|
0.3 |
|
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|
3.7 |
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|
4.0 |
|
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6.0 |
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7.4 |
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|
Ratio of earnings to combined fixed
charges and preferred stock
dividends |
|
|
1.0 |
|
|
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0.3 |
|
|
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3.7 |
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4.0 |
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6.0 |
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7.2 |
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|
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|
Ratio of earnings to combined fixed
charges and preferred stock dividends
excluding certain items (b) |
|
|
1.1 |
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|
|
2.1 |
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|
|
4.1 |
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5.4 |
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6.2 |
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7.2 |
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(a) |
|
Represents amount of income before provision for income taxes required to meet the preferred
stock dividend requirements of the Company. |
|
(b) |
|
Excludes the 2009 non-cash, pre-tax impairment charge for financial investments of $10
million; 2008 non-cash, pre-tax impairment charge for goodwill and other intangible assets of
$467 million, financial investments of $58 million and litigation expense of $9 million; 2007
non-cash, pre-tax impairment charges for goodwill and other intangible assets of $119 million
and the non-cash, pre-tax charge for financial investments of $22 million; 2006 non-cash,
pre-tax impairment charges for goodwill and financial investments of $317 million and $101
million, respectively, and the pre-tax income related to the Behr litigation settlement of $1
million; the 2005 pre-tax income related to the Behr litigation settlement of $6 million and
the non-cash, pre-tax impairment charge for financial investments of $45 million; and the 2004
pre-tax income related to the Behr litigation settlement of $30 million, and the pre-tax
impairment charge of $21 million related to a marketable security. |
EX-31.A
4
k48075exv31wa.htm
EX-31.A
EX-31.A
Exhibit 31a
MASCO CORPORATION
Certification Required by Rule 13a-14(a) or 15d-14(a)
of the Securities Exchange Act of 1934
I, Timothy Wadhams, certify that:
1. |
|
I have reviewed this quarterly report on Form 10-Q of Masco Corporation (the Registrant); |
|
2. |
|
Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
|
3. |
|
Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
|
4. |
|
The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
|
designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared; |
|
|
b) |
|
designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted
accounting principles; |
|
|
c) |
|
evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures as of the end of the period covered by this report based on such evaluation;
and |
|
|
d) |
|
disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrants internal control
over financial reporting; and |
5. |
|
The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions): |
|
a) |
|
all significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information;
and |
|
|
b) |
|
any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal control over financial reporting. |
|
|
|
|
|
|
|
|
Date: July 30, 2009 |
By: |
/s/ Timothy Wadhams
|
|
|
|
Timothy Wadhams |
|
|
|
President and Chief Executive Officer |
|
|
EX-31.B
5
k48075exv31wb.htm
EX-31.B
EX-31.B
Exhibit 31b
MASCO CORPORATION
Certification Required by Rule 13a-14(a) or 15d-14(a)
of the Securities Exchange Act of 1934
I, John G. Sznewajs, certify that:
1. |
|
I have reviewed this quarterly report on Form 10-Q of Masco Corporation (the Registrant); |
|
2. |
|
Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
|
3. |
|
Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
|
4. |
|
The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
|
designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared; |
|
|
b) |
|
designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted
accounting principles; |
|
|
c) |
|
evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures as of the end of the period covered by this report based on such evaluation;
and |
|
|
d) |
|
disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrants internal control
over financial reporting; and |
5. |
|
The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions): |
|
a) |
|
all significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information;
and |
|
|
b) |
|
any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal control over financial reporting. |
|
|
|
|
|
|
|
|
Date: July 30, 2009 |
By: |
/s/ John G. Sznewajs
|
|
|
|
John G. Sznewajs |
|
|
|
Vice President, Treasurer and
Chief Financial Officer |
|
|
EX-32
6
k48075exv32.htm
EX-32
EX-32
Exhibit 32
MASCO CORPORATION
Certification Required by Rule 13a-14(b) or 15d-14(b)
of the Securities Exchange Act of 1934 and
Section 1350 of Chapter 63 of Title 18 of the
United States Code
The certification set forth below is being submitted in connection with the Masco Corporation
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009 (the Report) for the
purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934
(the Exchange Act) and Section 1350 of Chapter 63 of Title 18 of the United States Code.
Timothy Wadhams, the President and Chief Executive Officer, and John G. Sznewajs, the Vice
President, Treasurer and Chief Financial Officer, of Masco Corporation, each certifies that, to the
best of his knowledge:
|
1. |
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and |
|
|
2. |
|
The information contained in the Report fairly presents, in all material
respects, the consolidated financial condition and results of operations of Masco
Corporation. |
|
|
|
|
|
|
|
|
Date: July 30, 2009 |
/s/ Timothy Wadhams
|
|
|
Name: |
Timothy Wadhams |
|
|
Title: |
President and
Chief Executive Officer |
|
|
|
|
|
Date: July 30, 2009 |
/s/ John G. Sznewajs
|
|
|
Name: |
John G. Sznewajs |
|
|
Title: |
Vice President, Treasurer and
Chief Financial Officer |
|
|
GRAPHIC
7
k48075k4807501.gif
GRAPHIC
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end
-----END PRIVACY-ENHANCED MESSAGE-----