-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SSiRAEnKVBuXvn2/n4YjupjuV+azhANjkbqPOCJoPNWXaS9KlDcvRmhjn6NxhuxB Q3bMQ1SkKqTC8Rme8lLf3A== 0000950124-00-003139.txt : 20000515 0000950124-00-003139.hdr.sgml : 20000515 ACCESSION NUMBER: 0000950124-00-003139 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MASCO CORP /DE/ CENTRAL INDEX KEY: 0000062996 STANDARD INDUSTRIAL CLASSIFICATION: HEATING EQUIP, EXCEPT ELEC & WARM AIR & PLUMBING FIXTURES [3430] IRS NUMBER: 381794485 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05794 FILM NUMBER: 630101 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 FORM 10-Q - QUARTERLY REPORT ENDING 3-31-00 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTER ENDED MARCH 31, 2000. COMMISSION FILE NUMBER 1-5794 MASCO CORPORATION - -------------------------------------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 38-1794485 - -------------------------------------------------------------------------------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 21001 VAN BORN ROAD, TAYLOR, MICHIGAN 48180 - -------------------------------------------------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (313) 274-7400 - -------------------------------------------------------------------------------- (TELEPHONE NUMBER) INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO --- --- INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICAL DATE. SHARES OUTSTANDING AT CLASS MAY 1, 2000 ----- --------------------- COMMON STOCK, PAR VALUE $1 PER SHARE 448,649,700 2 MASCO CORPORATION INDEX
PAGE NO. -------- Part I. Financial Information Item 1. Financial Statements: Condensed Consolidated Balance Sheet - March 31, 2000 and December 31, 1999 1 Condensed Consolidated Statement of Income for the Three Months Ended March 31, 2000 and 1999 2 Condensed Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2000 and 1999 3 Notes to Condensed Consolidated Financial Statements 4-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-11 Unaudited Information Regarding Equity Investments for the Three Months Ended March 31, 2000 and 1999 12 Part II. Other Information and Signature 13-14
3 MASCO CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET MARCH 31, 2000 AND DECEMBER 31, 1999 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
MARCH 31, DECEMBER 31, ASSETS 2000 1999 ------ ---------- ------------ Current assets: Cash and cash investments $ 74,220 $ 230,780 Accounts and notes receivable, net 1,166,870 1,002,630 Prepaid expenses and other 113,460 106,500 Inventories: Raw material 341,480 307,060 Finished goods 352,640 290,440 Work in process 189,880 172,370 ---------- ---------- 884,000 769,870 ---------- ---------- Total current assets 2,238,550 2,109,780 Equity investment in MascoTech, Inc. 72,730 69,930 Equity investments in other affiliates 128,170 133,550 Securities of Furnishings International Inc. 514,370 481,270 Property and equipment, net 1,750,380 1,624,360 Acquired goodwill, net 1,876,840 1,742,930 Other noncurrent assets 626,500 473,100 ---------- ---------- Total assets $7,207,540 $6,634,920 ========== ========== LIABILITIES ----------- Current liabilities: Notes payable $ 363,240 $ 62,300 Accounts payable 272,440 243,810 Accrued liabilities 593,630 540,320 ---------- ---------- Total current liabilities 1,229,310 846,430 Long-term debt 2,431,670 2,431,270 Deferred income taxes and other 228,630 220,720 ---------- ---------- Total liabilities 3,889,610 3,498,420 ---------- ---------- SHAREHOLDERS' EQUITY -------------------- Common stock, par value $1 per share Authorized shares: 900,000,000 447,550 443,510 Preferred shares authorized: 1,000,000 --- --- Paid-in capital 678,380 601,990 Retained earnings 2,271,670 2,151,520 Other comprehensive income (loss) (79,670) (60,520) ---------- ---------- Total shareholders' equity 3,317,930 3,136,500 ---------- ---------- Total liabilities and shareholders' equity $7,207,540 $6,634,920 ========== ==========
See notes to condensed consolidated financial statements. 1 4 MASCO CORPORATION CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) ------------------------
THREE MONTHS ENDED MARCH 31 ----------------------------- 2000 1999 ---------- ----------- Net sales $1,746,000 $1,391,000 Cost of sales 1,125,900 874,400 ---------- ---------- Gross profit 620,100 516,600 Selling, general and administrative expenses 337,400 273,500 Amortization of acquired goodwill 14,200 8,300 ---------- ---------- Operating profit 268,500 234,800 ---------- ---------- Other income (expense), net: Interest expense (38,800) (26,600) Equity earnings from MascoTech, Inc. 4,300 4,000 Other, net 42,000 31,100 ---------- ---------- 7,500 8,500 ---------- ---------- Income before income taxes 276,000 243,300 Income taxes 102,000 91,400 ---------- ---------- Net income $ 174,000 $ 151,900 ========== ========== Earnings per share: Basic $.40 $.35 ==== ==== Diluted $.39 $.34 ==== ==== Cash dividends declared and paid per share $.12 $.11 ==== ====
See notes to condensed consolidated financial statements. 2 5 MASCO CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (DOLLARS IN THOUSANDS) --------------------
THREE MONTHS ENDED MARCH 31 ---------------------- 2000 1999 --------- --------- CASH FLOWS FROM (FOR) OPERATING ACTIVITIES: Cash provided by operations $ 165,210 $ 164,670 Increase in receivables (133,530) (128,580) Increase in inventories (64,620) (43,080) Increase in accounts payable and accrued liabilities, net 51,470 49,890 --------- --------- Total cash from operating activities 18,530 42,900 --------- --------- CASH FLOWS FROM (FOR) INVESTING ACTIVITIES: Acquisition of companies, net of cash acquired (170,360) (62,720) Capital expenditures (86,110) (72,510) Investments in noncurrent assets and other, net (128,410) (13,280) --------- --------- Total cash (for) investing activities (384,880) (148,510) --------- --------- CASH FLOWS FROM (FOR) FINANCING ACTIVITIES: Increase in debt 287,870 5,150 Payment of debt (24,730) (37,400) Purchase of Company common stock -- (48,770) Cash dividends paid (53,350) (37,230) --------- --------- Total cash from (for) financing activities 209,790 (118,250) --------- --------- CASH AND CASH INVESTMENTS: Decrease for the quarter (156,560) (223,860) At January 1 230,780 553,150 --------- --------- At March 31 $ 74,220 $ 329,290 ========= =========
See notes to condensed consolidated financial statements. 3 6 MASCO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS A. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, of a normal recurring nature, necessary to present fairly its financial position as at March 31, 2000 and the results of operations and changes in cash flows for the three months ended March 31, 2000 and 1999. The condensed consolidated balance sheet at December 31, 1999 was derived from audited financial statements. The first quarter of 1999 has been restated to include the results of transactions accounted for as poolings of interests during the third quarter of 1999. B. The following are reconciliations of the numerators and denominators used in the computations of basic and diluted earnings per share, in thousands:
THREE MONTHS ENDED MARCH 31 ------------------- 2000 1999 -------- -------- Numerator: Net income $174,000 $151,900 ======== ======== Denominator: Basic shares (based on weighted average) 439,700 436,400 Add: Contingently issued award shares 6,900 7,300 Stock option dilution 1,400 3,100 -------- -------- Diluted shares 448,000 446,800 ======== ========
C. During the first quarter of 2000, in purchase transactions, the Company acquired Tvilum-Scanbirk A/S, a manufacturer of ready-to-assemble products, including cabinetry, shelving, storage units and workstations, and a smaller company. Headquartered in Faarvang, Denmark, Tvilum-Scanbirk had sales in 1999 in excess of $200 million. The aggregate net purchase price of these purchase acquisitions, excluding assumed debt of approximately $60 million, was approximately $260 million and included approximately four million shares of Company common stock valued at approximately $90 million. The purchase agreements provide for the payment of additional consideration, contingent upon certain conditions being met. Such additional consideration would be recorded as additional purchase price. The excess of the aggregate acquisition costs for these purchase acquisitions over the calculated fair value of net assets acquired has been recorded as acquired goodwill, to be amortized over periods not exceeding forty years. 4 7 MASCO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) D. Other income (expense), net consists of the following, in thousands:
THREE MONTHS ENDED MARCH 31 --------------------- 2000 1999 -------- -------- Interest expense $(38,800) $(26,600) Equity earnings from MascoTech, Inc. 4,300 4,000 Equity earnings, other 1,000 1,600 Income from cash and cash investments 1,400 5,300 Other interest income 14,100 12,800 Other, net 25,500 11,400 -------- -------- $ 7,500 $ 8,500 ======== ========
Interest expense for the year 2000 first quarter increased $12.2 million over first quarter 1999 interest expense. This increase was substantially offset by income and gains, net regarding certain non-operating assets included in other, net. Other interest income for the three months ended March 31, 2000 and 1999 included $12.8 million and $11.3 million, respectively, of interest income from the 12% pay-in-kind junior debt securities of Furnishings International Inc. (approximately $424 million at December 31, 1999). Other, net for the three months ended March 31, 2000 and 1999 results primarily from income and gains, net regarding certain non-operating assets. E. The following table presents information about the Company by segment, in millions:
THREE MONTHS ENDED MARCH 31 ------------------------------------------- 2000 1999 2000 1999 ------------------------------------------- Net Sales (1) Operating Profit (2) -------------------- --------------------- The Company's operations by segment were: North America $ 1,414 $ 1,165 $ 251 $ 226 International, principally Europe 332 226 42 31 ------- ------- ------- ------- Total $ 1,746 $ 1,391 293 257 ======= ======= General corporate expense, net (25) (22) ------- ------- Operating profit, after general corporate expense 268 235 Other income (expense), net 8 8 ------- ------- Income before income taxes $ 276 $ 243 ======= =======
(1) Intra-company sales among segments and geographic areas were not material. (2) Operating profit shown is after reduction for amortization of acquired goodwill. 5 8 MASCO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) F. The Company's total comprehensive income was as follows, in thousands:
THREE MONTHS ENDED MARCH 31 ----------------------- 2000 1999 --------- --------- Net income $ 174,000 $ 151,900 Other comprehensive income (loss), currency translation adjustments (19,150) (24,510) --------- --------- Total comprehensive income $ 154,850 $ 127,390 ========= =========
At March 31, 2000 and 1999, the value of certain foreign currencies, including the German deutsche mark, Danish kroner and Dutch guilder, declined relative to the value of the U.S. dollar at December 31, 1999 and 1998, respectively. G. The following presents the combined unaudited financial statements of the Company and MascoTech, Inc. as one entity with Masco Corporation as the parent company. Intercompany transactions have been eliminated. Amounts, except per share data, are in thousands.
COMBINED BALANCE SHEET MARCH 31, DECEMBER 31, ASSETS 2000 1999 ---------- ---------- Current assets: Cash and cash investments $ 85,310 $ 235,270 Receivables 1,430,850 1,221,590 Prepaid expenses and other 154,740 169,570 Inventories: Raw material 392,190 358,480 Finished goods 436,240 376,680 Work in process 238,910 218,310 ---------- ---------- 1,067,340 953,470 ---------- ---------- Total current assets 2,738,240 2,579,900 Equity investments in affiliates 236,610 244,280 Securities of Furnishings International Inc. 514,370 481,270 Property and equipment, net 2,477,870 2,347,040 Acquired goodwill, net 2,661,880 2,519,530 Other noncurrent assets 666,270 511,510 ---------- ---------- Total assets $9,295,240 $8,683,530 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable $ 366,130 $ 62,300 Accounts payable 399,330 358,300 Accrued liabilities 708,020 654,230 ---------- ---------- Total current liabilities 1,473,480 1,074,830 Long-term debt 3,802,930 3,804,160 Deferred income taxes and other 437,370 420,320 Other interests in combined affiliates 263,530 247,720 Equity of shareholders of Masco Corporation 3,317,930 3,136,500 ---------- ---------- Total liabilities and shareholders' equity $9,295,240 $8,683,530 ========== ==========
6 9 MASCO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE G - CONTINUED:
THREE MONTHS ENDED MARCH 31 --------------------------- COMBINED STATEMENT OF INCOME 2000 1999 ----------- ----------- Net sales $ 2,204,100 $ 1,836,660 ----------- ----------- Costs and expenses, net: Cost of sales 1,464,600 1,204,040 ----------- ----------- Selling, general and administrative expenses 407,770 328,940 ----------- ----------- Other income (expense), net: Interest expense (60,610) (47,550) Other income, net 43,260 29,910 ----------- ----------- (17,350) (17,640) ----------- ----------- 1,889,720 1,550,620 ----------- ----------- Income before income taxes and other interests 314,380 286,040 Income taxes 119,080 114,360 ----------- ----------- Income before other interests 195,300 171,680 Other interests in combined affiliates 21,300 19,780 ----------- ----------- Net income $ 174,000 $ 151,900 =========== =========== Earnings per share: Basic $.40 $.35 ==== ==== Diluted $.39 $.34 ==== ==== Cash dividends declared and paid per share $.12 $.11 ==== ====
10 MASCO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED) NOTE G - CONCLUDED:
THREE MONTHS ENDED MARCH 31 ------------------------ COMBINED STATEMENT OF CASH FLOWS 2000 1999 ----------- ----------- CASH FLOWS FROM (FOR) OPERATING ACTIVITIES: Cash provided by operations $ 219,510 $ 219,940 Increase in receivables (176,990) (181,270) Increase in inventories (61,380) (41,160) Increase in current liabilities, net 91,780 64,960 ----------- ----------- Total cash from operating activities 72,920 62,470 ----------- ----------- CASH FLOWS FROM (FOR) INVESTING ACTIVITIES: Capital expenditures (112,110) (102,450) Acquisition of companies, net of cash acquired (190,320) (62,720) Investments in noncurrent assets and other, net (121,820) (12,870) ----------- ----------- Total cash (for) investing activities (424,250) (178,040) ----------- ----------- CASH FLOWS FROM (FOR) FINANCING ACTIVITIES: Increase in debt 335,180 60,000 Payment of debt (77,550) (76,730) Purchase of Company common stock (---) (61,050) Cash dividends paid (56,260) (39,860) ----------- ----------- Total cash from (for) financing activities 201,370 (117,640) ----------- ----------- CASH AND CASH INVESTMENTS: Decrease for the quarter (149,960) (233,210) At January 1 235,270 582,540 ----------- ----------- At March 31 $ 85,310 $ 349,330 =========== ===========
8 11 MASCO CORPORATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FIRST QUARTER 2000 VERSUS FIRST QUARTER 1999 Management's discussion and analysis of financial condition and results of operations pertaining to the first quarter of 1999 has been restated for transactions accounted for as poolings of interests during the third quarter of 1999. SALES AND OPERATIONS Net sales for the three months ended March 31, 2000 increased 26 percent to $1,746 million from $1,391 million for the comparable period in 1999; excluding purchase acquisitions, first quarter 2000 net sales increased 10 percent over the comparable period of the prior year. The increase in net sales principally includes increases in unit sales volume of cabinets and architectural coatings, and higher installation sales of fiberglass insulation. Net sales from North American operations for the first quarter of 2000 increased 21 percent to $1,414 million from $1,165 million for the comparable period in the prior year; excluding purchase acquisitions, first quarter 1999 net sales from these operations increased 12 percent. Net sales from International operations for the first quarter of 2000 increased 47 percent to $332 million from $226 million for the first quarter of 1999; excluding purchase acquisitions, net sales from International operations decreased approximately 1 percent when compared with the first quarter of 1999. A stronger U.S. dollar, principally against the German deutsche mark, had an unfavorable effect on the translation of International sales in the first quarter of 2000 as compared with the first quarter of 1999; the Company anticipates that unfavorable foreign currency translation effects may continue for the balance of the year. Excluding purchase acquisitions, sales from International operations in the first quarter of 2000 in local currencies increased by approximately 8 percent. Cost of sales as a percentage of sales increased to 64.5 percent for the first quarter of 2000 from 62.9 percent for the comparable period in 1999. The increase in cost of sales as a percentage of sales includes costs related to a slower than anticipated new product launch, plant startup and relocation costs, lower gross margins of certain acquired companies and a less favorable product mix. Excluding amortization of acquired goodwill ($14.2 million and $8.3 million for the first quarters of 2000 and 1999, respectively), selling, general and administrative expenses as a percentage of sales for the first quarter of 2000 decreased to 19.3 percent from 19.7 percent for the comparable period in 1999. The Company's cost-containment initiatives including the leveraging of fixed costs over a higher sales base contributed to the decrease in selling, general and administrative expenses as a percentage of sales. The Company's operating profit margin, before general corporate expense and goodwill amortization, was 17.6 percent for the first quarter of 2000 as compared with 19.0 percent for the first quarter of 1999. Operating profit margin, after general corporate expense and goodwill amortization, was 15.4 percent for the first quarter of 2000 as compared with 16.9 percent for the first quarter of 1999. The Company's operating profit margin decreased in the first quarter of 2000 as compared with the first quarter of 1999, due principally to higher cost of sales and higher goodwill amortization as a percentage of sales. 9 12 MASCO CORPORATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OTHER INCOME (EXPENSE), NET Equity earnings from MascoTech, Inc. for the first quarter of 2000 were $4.3 million as compared with equity earnings from MascoTech of $4.0 million for the comparable period of 1999. Included in other interest income for the three months ended March 31, 2000 and 1999 is $12.8 million and $11.3 million, respectively, of interest income from the 12% pay-in-kind junior debt securities of Furnishings International Inc. (approximately $424 million at December 31, 1999). Other, net for the three months ended March 31, 2000 and 1999 was $25.5 million and $11.4 million, respectively, and resulted primarily from income and gains, net regarding certain non-operating assets. Interest expense for the year 2000 first quarter increased $12.2 million to $38.8 million over first quarter 1999 interest expense of $26.6 million. This increase was substantially offset by income and gains, net regarding certain non-operating assets included in other, net. NET INCOME AND EARNINGS PER SHARE Net income and diluted earnings per share for the first quarter of 2000 each increased 15 percent to $174.0 million and $.39 from $151.9 million and $.34, respectively, for the comparable period of 1999. OTHER FINANCIAL INFORMATION The Company's current ratio was 1.8 to 1 at March 31, 2000, and was negatively influenced by short-term acquisition-related borrowings; such ratio was 2.5 to 1 at December 31, 1999. For the three months ended March 31, 2000, cash of $18.5 million was provided by operating activities. Cash used for investing activities was $384.9 million, including $170.4 million for acquisitions, $86.1 million for capital expenditures and $128.4 million for investments in noncurrent assets and other, net. Cash provided by financing activities was $209.8 million, including $263.1 million from a net increase in bank debt largely for acquisitions, and $53.3 million for cash dividends paid. The aggregate of the preceding items represents a net cash outflow of $156.6 million. Changes in working capital and debt as indicated on the statement of cash flows exclude the working capital and debt of acquired companies at the time of acquisition. First quarter 2000 cash from operations was affected by an expected and annually recurring first quarter increase in accounts receivable (although there was no significant increase in receivable days). Most of the annual increase in accounts receivable resulting from sales increases is typically experienced in the first half of the year. During April 2000, the Company's Board of Directors authorized the repurchase of up to 40 million shares of its common stock in open-market transactions or otherwise. 10 13 MASCO CORPORATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company has on file with the Securities and Exchange Commission ("SEC"), an unallocated shelf registration pursuant to which the Company is able to issue up to a combined $109 million of debt and equity securities. The Company intends to file a shelf registration statement with the SEC during 2000 to authorize the issuance of additional debt and equity securities. The Company believes that its present cash balance, its 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. OTHER MATTERS A single currency called the euro was introduced in Europe on January 1, 1999. Eleven of the fifteen member countries of the European Union adopted the euro as their common legal currency as of that date. Fixed conversion rates between these participating countries' existing currencies (the "legacy currencies") and the euro were established as of that date. The legacy currencies will remain legal tender as denominations of the euro until at least January 1, 2002 (but not intended to be later than July 1, 2002). During this transition period, parties may settle non-cash transactions using either the euro or a participating country's legacy currency. Cash transactions will continue to be settled in the legacy currencies of participating countries until January 1, 2002, when euro-denominated currency will be issued. The Company is currently completing changes to existing systems to facilitate a smooth transition to the new currency and believes that conversion to the euro will not have a material effect on the Company's financial position or results of operations. 11 14 MASCO CORPORATION ITEM 2. UNAUDITED INFORMATION REGARDING EQUITY INVESTMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 Equity investments in affiliates consist primarily of the following approximate common stock and partnership interests at March 31:
2000 1999 ---- ---- MascoTech, Inc. 17.5% 17% Emco Limited, a Canadian company 42 % 42% Hans Grohe, a German company 27 % 27%
The following presents condensed financial data of MascoTech, Inc., in thousands.
THREE MONTHS ENDED MARCH 31 --------------------------- 2000 1999 -------- -------- Sales - Net $459,400 $448,660 ======== ======== Gross Profit $119,400 $116,020 ======== ======== Net Income $ 25,820 $ 23,860 ======== ========
12 15 PART II. OTHER INFORMATION MASCO CORPORATION ITEM 1. LEGAL PROCEEDINGS A civil suit is pending in Superior Court in the State of Washington against Behr Process Corporation, a wholly owned subsidiary of the Company. The plaintiffs allege, among other matters, that after applying Behr's exterior wood sealant, the surfaces suffered excessive mildewing, and that plaintiffs are, accordingly, entitled to damages and remediation. The court has conditionally certified the case as a class action, including in this case all purchasers of the products who reside in nineteen counties in western Washington. Behr denies the allegations and intends to continue to challenge the conditional class certification. Any liability to the named plaintiffs would be wholly immaterial to the Company. However, at this time, the Company is not able to estimate the number of class members, the number of claims that may be filed or the aggregate amount of damages that class members may allege. Based upon the Company's experience to date with this product, the Company does not believe that these matters will result in any material adverse effect on its consolidated financial position or results of operations. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS On January 26, 2000, the Company acquired Tvilum-Scanbirk A/S in a transaction in which the seller received, in part, unregistered Masco common stock as consideration. The seller, M0bel Invest A/S, is a corporation organized under the laws of the Kingdom of Denmark and has its principal place of business in that country. The seller received 3,938,682 shares of Masco common stock as part of the consideration paid for this acquisition. The Company relied on the exemption from registration under Section 4(2) of the Securities Act of 1933. On April 13 and 14, 2000, the Company issued a total of 629,334 unregistered shares of common stock to satisfy in part its funding obligations with respect to three company-sponsored defined benefit pension plans. All of these shares were delivered to The Northern Trust Company, as trustee for the pension plans. The Company relied on the exemption from registration under Section 4(2) of the Securities Act of 1933. ITEMS 3 THROUGH 5 ARE NOT APPLICABLE. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS: 12 - Computation of Ratio of Earnings to Fixed Charges 27 - Financial Data Schedule (B) REPORTS ON FORM 8-K: None. 13 16 PART II. OTHER INFORMATION MASCO CORPORATION SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MASCO CORPORATION (Registrant) DATE: MAY 12, 2000 BY: /s/ Richard G. Mosteller -------------------- -------------------------------- Richard G. Mosteller Senior Vice-President - Finance (Chief Financial Officer and Authorized Signatory) 17 MASCO CORPORATION EXHIBIT INDEX EXHIBIT Exhibit 12 Computation of Ratio of Earnings to Fixed Charges Exhibit 27 Financial Data Schedule EX-12 2 COMPUTATION OF RATIO OF EARNINGS 1 EXHIBIT 12 MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(THOUSANDS OF DOLLARS) ------------------------------------------------------------- THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31 ---------------------------------------------------- 2000 1999 1998 1997 1996 1995 -------- ---------- ---------- -------- -------- -------- EARNINGS BEFORE INCOME TAXES AND FIXED CHARGES: Income from continuing operations before income taxes $276,000 $ 904,100 $ 905,500 $733,800 $575,600 $396,600 Deduct/add equity in undistributed (earnings)/loss of fifty-percent-or- less-owned companies (4,640) (18,720) (24,070) (19,470) (12,310) (17,770) Add interest on indebtedness, net 39,370 121,520 115,700 94,780 78,790 78,350 Add amortization of debt expense 310 1,350 2,130 2,310 1,400 1,930 Add estimated interest factor for rentals 4,630 16,080 11,430 9,270 7,120 5,870 -------- ---------- ---------- -------- -------- -------- Earnings before income taxes and fixed charges $315,670 $1,024,330 $1,010,690 $820,690 $650,600 $464,980 ======== ========== ========== ======== ======== ======== FIXED CHARGES: Interest on indebtedness $ 41,190 $ 129,860 $ 119,750 $ 97,910 $ 81,250 $ 81,410 Amortization of debt expense 310 1,350 2,130 2,310 1,400 1,930 Estimated interest factor for rentals 4,630 16,080 11,430 9,270 7,120 5,870 -------- ---------- ---------- -------- -------- -------- $ 46,130 $ 147,290 $ 133,310 $109,490 $ 89,770 $ 89,210 ======== ========== ========== ======== ======== ======== Ratio of earnings to fixed charges 6.8 7.0 7.6 7.5 7.2 5.2 === === === === === ===
EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MASCO CORPORATION'S MARCH 31, 2000 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 74,220 0 1,166,870 0 884,000 2,238,550 1,750,380 0 7,207,540 1,229,310 2,431,670 0 0 447,550 2,870,380 7,207,540 1,746,000 1,746,000 1,125,900 1,125,900 0 0 38,800 276,000 102,000 174,000 0 0 0 174,000 .40 .39 Receivables and property and equipment are presented net of allowances for doubtful accounts and accumulated depreciation and amortization, respectively.
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