-----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, U4+8LxTp9pUVt6B0/Px5I10zXWooX4eypd6/rl22RP3Z2/SVxiUajYK3TKLZg6+d JUWrX3tjNDibBxnOXTHvEQ== /in/edgar/work/20001101/0000950124-00-006369/0000950124-00-006369.txt : 20001106 0000950124-00-006369.hdr.sgml : 20001106 ACCESSION NUMBER: 0000950124-00-006369 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20001101 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MASCO CORP /DE/ CENTRAL INDEX KEY: 0000062996 STANDARD INDUSTRIAL CLASSIFICATION: [3430 ] IRS NUMBER: 381794485 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-05794 FILM NUMBER: 751013 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/A 1 k58101e10-qa.txt FORM 10-Q/A 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------- FORM 10-Q/A AMENDMENT NO. 1 TO FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to ----------------- ------------------- 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) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (313) 274-7400 ---------------------------- 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. 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 LIST OF ITEMS AMENDED
PAGE NO. -------- Part I. Financial Information Item 1. Financial Statements 1-8 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
EXPLANATORY NOTE: Items 1 and 2 of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000 are hereby amended by deleting the Items in their entirety and replacing them with the Items attached hereto and filed herewith. The purpose of this amendment is to provide expanded disclosure regarding the Company's business segments in the segment information note to the financial statements included in the financial statements that were included in Item 1 of the subject Form 10-Q as originally filed (the "Original Filing") and to make corresponding changes to Management's Discussion and Analysis of Financial Condition and Results of Operations that was included in Item 2 of the Original Filing. The Company recently filed a Registration Statement on Form S-3 under the Securities Act of 1933. In the course of processing the Registration Statement, the staff of the Securities and Exchange Commission furnished comments to the Company. Based on the staff's comments, the Company revised the Segment Information note to its financial statements included in its Annual Report on Form 10-K for the year ended December 31, 1999 and filed Form 10-K/A Amendment No. 1 in order to provide this expanded disclosure in the Segment Information note and to make corresponding changes to Management's Discussion and Analysis of Financial Condition and Results of Operations. This Form 10-Q/A is being filed to make corresponding changes to information contained in the Original Filing. The Company's Form 10-Q continues to speak as of the date of the Original Filing and the disclosure in that report has not been updated to speak to any later date. Any items in the Original Filing not expressly changed hereby shall be as set forth in the Original Filing. All information contained in this amendment and the Original Filing is subject to updating and supplementing as provided in the Company's periodic reports filed with the SEC subsequent to the date of such reports. 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 and geographic area, in millions:
THREE MONTHS ENDED MARCH 31 ------------------------------------------- 2000 1999 2000 1999 ------------------------------------------- Net Sales (1) Operating Profit (2) -------------------- --------------------- The Company's operations by segment were: Plumbing Products $ 473 $ 461 $ 92 $ 110 Cabinets and Related Products 631 494 87 78 Decorative Architectural Products 307 239 64 37 Insulation Installation and Other Services 183 72 25 10 Other Specialty Products 152 125 25 22 ------- ------- ------- ------- Total $ 1,746 $ 1,391 $ 293 $ 257 ======= ======= ======= ======= The Company's operations by geographic area were: North America $ 1,414 $ 1,165 $ 251 $ 226 International, principally Europe 332 226 42 31 ------- ------- ------- ------- Total, as above $ 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) Inter-company sales among segments 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 ==== ====
7 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 The following table sets forth the Company's net sales information by segment and geographic area, in millions.
PERCENT INCREASE (DECREASE) ---------------------- THREE MONTHS ENDED 2000 2000 MARCH 31, VS. VS. 2000 1999 1999 1999(A) -------- -------- -------- ----------- NET SALES: Plumbing Products $ 473 $ 461 3% 1% Cabinets and Related Products 631 494 28% 13% Decorative Architectural Products 307 239 28% 17% Insulation Installation and Other Services 183 72 154% 42% Other Specialty Products 152 125 22% (5%) -------- -------- TOTAL $ 1,746 $ 1,391 26% 10% ======== ======== North America $ 1,414 $ 1,165 21% 12% International, principally Europe 332 226 47% (1%) -------- -------- TOTAL, AS ABOVE $ 1,746 $ 1,391 26% 10% ======== ========
(A) Percent change in sales excluding purchase acquisitions. Net sales for the three months ended March 31, 2000 increased 26 percent from the comparable period in 1999; excluding purchase acquisitions, first quarter 2000 net sales increased 10 percent over the comparable period of the prior year. Changes in net sales in the following discussion exclude the influence of purchase acquisitions. Net sales of Plumbing Products increased 1 percent for the first quarter of 2000 from the comparable period of the prior year. Net sales of Cabinets and Related Products increased 13 percent for the first quarter of 2000 from the first quarter of 1999 due largely to increased unit sales volume. Net sales of Plumbing Products and Cabinets and Related Products were negatively influenced by a stronger U.S. dollar, which affected the translation of European operations included in these segments. Net sales of Decorative Architectural Products increased 17 percent for the first quarter of 2000 from the comparable period of the prior year due largely to higher unit sales volume of these products. Net sales of the Company's Insulation Installation and Other Services segment increased 42 percent in the first quarter of 2000 due largely to higher installation sales of and higher prices for fiberglass insulation and broader geographic U.S. market penetration. Net sales of Other Specialty Products decreased 5 percent for the first quarter of 2000 from the comparable period of the prior year due largely to the negative influence of a stronger U.S. dollar, which affected the translation of European operations included in this segment. Excluding this currency translation effect, net sales of this segment were flat in the first quarter of 2000 as compared with the first quarter of 1999. Net sales from North American operations for the first quarter of 2000 increased 12 percent from the comparable period in the prior year. Net sales from International operations for the first quarter of 2000 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. Net 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 seasonal 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 MASCO CORPORATION SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned thereunto duly authorized. MASCO CORPORATION (Registrant) DATE: NOVEMBER 1, 2000 BY: /s/ Richard G. Mosteller -------------------- -------------------------------- Richard G. Mosteller Senior Vice-President - Finance (Chief Financial Officer and Authorized Signatory) -----END PRIVACY-ENHANCED MESSAGE-----