-----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, P12mly5w2dtDrlYpu3gjt9UWDkEdKEwe5iKMGdhmQPlIRHJ4QyEoYUyGxJYOTFbS hxQ/DjmTnbrp7eGU/pH05g== 0000950124-03-003425.txt : 20031104 0000950124-03-003425.hdr.sgml : 20031104 20031104091612 ACCESSION NUMBER: 0000950124-03-003425 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20031104 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20031104 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: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05794 FILM NUMBER: 03974554 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 8-K 1 k80528e8vk.txt FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) NOVEMBER 4, 2003 -------------------------------- MASCO CORPORATION (Exact name of Registrant as Specified in Charter) DELAWARE 1-5794 38-1794485 -------- ------ ---------- (State or Other Jurisdiction (Commission File Number) (IRS Employer of Incorporation) Identification No.) 21001 VAN BORN ROAD, TAYLOR, MICHIGAN 48180 ------------------------------------- ----- (Address of Principal Executive Offices) (Zip Code) (313) 274-7400 -------------- Registrant's telephone number, including area code ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (c) Exhibits 99 Press Release of Masco Corporation dated November 4, 2003, reporting Masco Corporation's financial results for the third quarter of 2003. ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION. Attached and incorporated herein by reference as Exhibit 99 is a copy of a press release dated November 4, 2003, reporting Masco Corporation's financial results for the third quarter of 2003 and certain other information. On November 4, 2003, Masco Corporation will hold an investor conference and web cast to disclose financial results for the third quarter of 2003. This information, including the Exhibit attached hereto, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section. It may only be incorporated by reference in another filing under the Exchange Act or the Securities Act of 1933 if such subsequent filing expressly references this Current Report on Form 8-K. 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/ Timothy Wadhams ------------------------------- Name: Timothy Wadhams Title: Vice President and Chief Financial Officer November 4, 2003 EXHIBIT INDEX 99 Press Release of Masco Corporation, dated November 4, 2003, reporting Masco Corporation's financial results for the third quarter of 2003 and certain other information. EX-99 3 k80528exv99.txt PRESS RELEASE EXHIBIT 99 FOR IMMEDIATE RELEASE Contact: - --------------------- Samuel Cypert 313-792-6646 MASCO CORPORATION REPORTS RECORD THIRD QUARTER SALES AND EARNINGS AND UPDATES FULL-YEAR EARNINGS GUIDANCE Taylor, Michigan (November 4, 2003) -- Masco Corporation (NYSE:MAS) today reported that net sales for the third quarter ended September 30, 2003, aided by acquisitions, increased 19 percent to a record $2.9 billion, compared with $2.4 billion for the third quarter of 2002. Net income for the quarter increased to $318.8 million compared with $122.8 million for the 2002 third quarter. Earnings per common share increased to $.65 compared with $.24 per common share for the 2002 third quarter. Income from continuing operations for the quarter was $261.5 million compared with $116.7 million in 2002. Earnings from continuing operations increased to a record $.53 per common share compared with $.22 per common share for the 2002 third quarter. Third quarter 2002 results included a charge of $166 million ($.20 per common share, after tax) related to the Company's subsidiary, Behr Process Corporation, class action litigation. Third quarter earnings from continuing operations of $.53 per common share included the negative impact of accounting irregularities and impairment charges related to two businesses in the United Kingdom aggregating $.06 per common share, and the exclusion of $.01 per common share related to the third quarter 2003 operating results of businesses divested in the third quarter which are included in income from discontinued operations. These items were offset by an adjustment of the Behr litigation accrual of $.07 per common share. The $.53 per common share is consistent with the Company's previous guidance that earnings would be modestly above a range of $.48-$.51 per common share which included operating results of the divested businesses. As previously announced, the Company completed the sale of its Baldwin Hardware, Weiser Lock and Marvel Group businesses in the third quarter of 2003. Under accounting rules, the Company is required to treat these businesses as discontinued operations, accordingly their operating results are retroactively excluded from the Company's consolidated statements of income from continuing operations. Third quarter results include a pre-tax gain from the sale of these businesses, aggregating approximately $91 million ($.11 per common share, after tax) and income from their results of operations of approximately $6 million ($.01 per common share, after tax), both of which are included in discontinued operations. Masco Chairman and CEO Richard A. Manoogian commented, "The positive sales and economic trends that we experienced in our businesses in the third quarter of 2003 have continued thus far in the fourth quarter. Assuming that present business conditions continue for the remainder of the current quarter, seasonally one of the year's lowest quarters for Masco, we expect to achieve record sales and earnings in 2003 and we believe that our full-year 2003 earnings from continuing operations should be in the range of $1.68 to $1.70 per common share." This new guidance represents an increase from the Company's previous guidance of $1.68 to $1.72 per common share, when adjusted to exclude the projected operating results of $.04 per common share related to Baldwin, Weiser and Marvel for the entire year which had been included in the previous guidance, and also excludes any possible fourth quarter unusual charges. Headquartered in Taylor, Michigan, Masco Corporation is one of the world's leading manufacturers of home improvement and building products as well as a leading provider of services that include the installation of insulation and other building products. A conference call regarding the Company's third quarter 2003 sales and earnings is scheduled for Tuesday, November 4, 2003 at 11:00 a.m. ET. Participants in the call are asked to register five to ten minutes prior to the scheduled start time by dialing (719) 457-2667 (confirmation #236086). The conference call will be webcast simultaneously on the Company's website at www.masco.com and supplemental material, including the financial data referred to on the call and a reconciliation of all non-GAAP information provided on the call, will also be available on the website. A replay of the call will be available on Masco's website or by phone by dialing (719) 457-0820 (replay access code #236086) approximately two hours after the end of the call and will continue through November 10, 2003. Masco Corporation's press releases and other information are available through the Company's toll free number, 1-888-MAS-NEWS, or you may visit Masco's website at www.masco.com. Statements contained herein may include certain forward-looking statements regarding Masco's future sales, earnings growth potential and other developments. Actual results may vary materially because of external factors such as interest rate fluctuations, changes in consumer spending and other factors over which management has no control. Additional information about our products, markets and conditions, which could affect our future performance, is contained in the Company's filings with the Securities and Exchange Commission and is available on Masco's website at www.masco.com. Masco undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. # # # # MASCO CORPORATION ANNOUNCES THIRD QUARTER SALES AND EARNINGS Amounts are in thousands, except per share data.
Three Months Ended Nine Months Ended September 30 September 30 -------------------------- -------------------------- 2003 2002 2003 2002 ----------- ----------- ----------- ----------- Net Sales $ 2,917,900 $ 2,446,700 $ 8,073,790 $ 6,728,230 Cost Of Sales 2,014,980 1,666,200 5,603,660 4,572,840 ----------- ----------- ----------- ----------- Gross Profit 902,920 780,500 2,470,130 2,155,390 Selling, General and Administrative Expenses 481,150 368,850 1,371,490 1,068,690 (Income) Charge Regarding Litigation Settlement (57,600) 166,000 (71,120) 166,000 ----------- ----------- ----------- ----------- Operating Profit 479,370 245,650 1,169,760 920,700 Other Income (Expense), Net (60,280) (76,280) (150,690) (210,420) ----------- ----------- ----------- ----------- Income From Continuing Operations Before Income Taxes and Minority Interest 419,090 169,370 1,019,070 710,280 Income Taxes 155,200 52,670 363,680 236,120 ----------- ----------- ----------- ----------- Income From Continuing Operations Before Minority Interest 263,890 116,700 655,390 474,160 Minority Interest 2,380 --- 8,170 --- ----------- ----------- ----------- ----------- Income From Continuing Operations 261,510 116,700 647,220 474,160 Income/Gain From Discontinued Operations, Net Of Income Taxes 57,260 6,100 66,900 13,140 Cumulative Effect Of Accounting Change, Net --- --- --- (92,400) ----------- ----------- ----------- ----------- Net Income $ 318,770 $ 122,800 $ 714,120 $ 394,900 =========== =========== =========== =========== Earnings Per Common Share (Diluted): Income From Continuing Operations $ 0.53 $ 0.22 $ 1.30 $ 0.93 Income From Discontinued Operations, Net Of Income Taxes 0.12 0.01 0.13 0.03 Cumulative Effect Of Accounting Change, Net - - - (0.18) ----------- ----------- ----------- ----------- Net Income $ 0.65 $ 0.24 $ 1.44 $ 0.78 =========== =========== =========== =========== Average Diluted Common Shares Outstanding 489,100 521,900 496,300 507,500 =========== =========== =========== ===========
MASCO CORPORATION BUSINESS AND FINANCIAL HIGHLIGHTS The Company reports its financial results in accordance with generally accepted accounting principles (GAAP). However, management 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. See the attached tables for supplemental financial data and the corresponding reconciliations to GAAP financial measures for the three months ended September 30, 2003 and September 30, 2002, as well as for the year 2002. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP. THIRD QUARTER 2003 o Net sales, aided by acquisitions, were a record $2.9 billion, increasing 19 percent over 2002 third quarter sales, with North American sales increasing 16 percent and International sales increasing 36 percent. Stronger sales to retail customers, sales of acquired companies (particularly Service Partners in our Installation Group and Hansgrohe AG in our International Plumbing Products Group) and the favorable impact of foreign currencies contributed to the sales growth in the third quarter. o Excluding acquisitions and divestitures, third quarter 2003 net sales increased 10 percent compared with third quarter 2002 sales; North American net sales increased 10 percent and International sales increased 11 percent. In local currencies, International sales, excluding acquisitions and divestitures, were flat compared with the third quarter of 2002. 1 MASCO CORPORATION BUSINESS AND FINANCIAL HIGHLIGHTS THIRD QUARTER 2003 (CONTINUED) o The Company reported net income of $318.8 million or $.65 per common share. Included in the $.65 per common share is $.12 per common share related to discontinued operations, reflecting $.01 per common share related to the third quarter 2003 operating results of the businesses divested in the quarter and a gain of $.11 per common share from such divestitures. o The Company reported income from continuing operations of $261.5 million or $.53 per common share. The $.53 per common share included the negative impact of accounting irregularities and impairment charges related to two businesses in the United Kingdom aggregating $.06 per common share, and the exclusion of $.01 per common share related to the third quarter 2003 operating results of businesses divested in the third quarter which are included in income from discontinued operations. These items were offset by an adjustment of the Behr litigation accrual of $.07 per common share. The $.53 per common share is consistent with the Company's previous guidance that earnings would be modestly above a range of $.48-$.51 per common share which included the operating results of the divested businesses. o In the second quarter of 2003, the Company recorded a non-cash, pre-tax charge which reduced operating profit by approximately $23 million ($.03 per common share, after tax) with respect to a United Kingdom business unit in the Decorative Architectural Products segment. The Company's recently completed review determined that an additional $12 million ($.02 per common share, after tax) of charges related to 2002, resulting from accounting irregularities, should be recorded in the third quarter of 2003. In addition, the review disclosed that first half 2003 results were overstated by approximately $3 million. These overstatements were corrected in the third quarter of 2003. This analysis concluded that the previously disclosed business system implementation failure allowed former management to circumvent internal controls and artificially inflate the unit's operating profit. The Company also determined that goodwill related to this business unit was impaired and recorded a pre-tax charge of $5 million ($.01 per common share, after tax). As previously noted, the Company replaced management personnel at the business unit and has implemented corrective action to prevent this situation from occurring at the unit in the future. In addition, the Company completed a review of the business plan for the business unit with the new management team and has determined that the plan, relative to certain product offerings and customer focus, should be changed. This revision in operating strategy resulted in third quarter 2003 charges aggregating approximately $15 million ($.02 per common share, after tax) related to impairment of inventories and receivables. 2 MASCO CORPORATION BUSINESS AND FINANCIAL HIGHLIGHTS THIRD QUARTER 2003 (CONTINUED) In the third quarter of 2003, the Company also detected that an employee at a United Kingdom business unit in the Plumbing Products segment had circumvented internal controls and overstated operating results by approximately $4 million ($.01 per common share, after tax) in 2002 and by approximately $3 million in the first half of 2003. These overstatements were corrected in the third quarter of 2003. The Company made the appropriate personnel change and is continuing to review the operation and its internal controls to determine if any additional changes are required. Upon completion of the review, the Company will determine if any impairment of assets exist, including goodwill (approximately $28 million at September 30, 2003). o The Company is implementing changes to its operational and financial structure in Europe which include: reorganizing its European business operations into product groups; the addition of group operating and financial personnel; training and evaluation related to internal controls; and the expansion of both external and internal audit involvement. o During the quarter, the Company completed the sale of its Baldwin Hardware and Weiser Lock businesses to The Black & Decker Corporation. Baldwin and Weiser had combined 2002 net sales of approximately $250 million. In a separate transaction, the Company also completed the sale of its Marvel Group. Total proceeds from the sale of these companies were $289 million, including cash of $284 million and notes receivable of $5 million. The Company realized a pre-tax net gain of $90.5 million ($.11 per common share, after tax) from the sale of these businesses. Under accounting rules, the Company is required to account for these businesses as discontinued operations; accordingly, their historic operating results (and the net gain from the sale of these businesses) are retroactively excluded from the Company's continuing operations. 3 MASCO CORPORATION BUSINESS AND FINANCIAL HIGHLIGHTS THIRD QUARTER 2003 (CONTINUED) o In the third quarter of 2003, the Company recorded income of $57.6 million ($.07 per common share, after tax) related to an adjustment of the Behr litigation accrual. The filing deadline for claims related to the National Settlement was September 2, 2003, and the Company received a fraction (3,700) of the previously projected claims (180,000) and currently estimates the cost of such claims to approximate $8 million compared with the $66 million originally recorded by the Company in the third quarter of 2002. o Key retailer sales (excluding discontinued operations) in the third quarter of 2003 increased eight percent, compared with a seven percent increase in the second quarter of 2003 and a five percent increase in the 2003 first quarter. Combined sales to Home Depot, Lowe's and Wal-Mart also increased by approximately eight percent in the 2003 third quarter compared with the six percent increase in the second quarter of 2003 and a four percent increase in the first quarter of 2003. o Sales by segment in the 2003 third quarter versus the 2002 third quarter were: - Cabinets and Related Products sales were up nine percent; - Plumbing Products sales were up 28 percent; - Installation and Other Services sales were up 31 percent; - Decorative Architectural Products sales were up 17 percent; and - Other Specialty Products sales were up 13 percent. Particularly strong sales in the quarter included assembled cabinets, installed sales of non-insulation products, paints and stains, and vinyl windows. o Gross margins were 30.9 percent in the 2003 third quarter compared with 31.9 percent in 2002. o Operating profit margins increased to 16.4 percent compared with 10.0 percent in the third quarter of 2002. 4 MASCO CORPORATION BUSINESS AND FINANCIAL HIGHLIGHTS THIRD QUARTER 2003 (CONTINUED) o Operating profit margins for the third quarter of 2003 include the effect of the previously discussed charges related to certain United Kingdom business units of $42 million, which are more than offset by the Behr litigation accrual adjustment of $57.6 million. Operating profit margins for the third quarter of 2002 included a Behr litigation charge of $166 million. Operating profit margins excluding these items would have been 15.9 percent and 16.8 percent for the third quarter of 2003 and 2002, respectively. o Third quarter 2003 gross margins and operating margins continue to be adversely affected by: - Increased energy, insurance and pension costs; - Higher promotion and display costs; - Stronger foreign currencies resulting in increased International sales which have lower margins; - Product mix and relatively higher sales in product segments with somewhat lower margins; and - Recently acquired companies with lower operating margins. o SG&A expense as a percent of sales was 16.5 percent compared with 15.1 percent in the 2002 third quarter, reflecting increased promotion and selling expenses and adjustments related to the United Kingdom operations previously discussed. o General corporate expense was 1.0 percent of sales in the third quarter of both 2003 and 2002. o Inventory days were 49 days at September 30, 2003 compared with 58 days at September 30, 2002. o Accounts receivable days at the end of the third quarter were 53 days compared with 57 days a year ago. o Accounts payable days at the end of the third quarter improved to 38 days from 32 days a year ago, as we continue to negotiate more favorable supplier terms. 5 MASCO CORPORATION BUSINESS AND FINANCIAL HIGHLIGHTS THIRD QUARTER 2003 (CONTINUED) o Working capital at September 30, 2003 (defined as accounts receivable and inventories less accounts payable) improved to 20.5 percent of the last twelve months of sales from 24.5 percent a year earlier. o For the twelve months ended September 30, 2003, operating profit return on net operating assets (as reconciled) declined to 16.0 percent compared with 16.3 percent for the comparable period through September 30, 2002, reflecting acquisitions in the second half of 2002. o For the twelve months ended September 30, 2003, after tax return on invested capital (as reconciled) increased to 10.7 percent compared with 10.3 percent for the comparable period through September 30, 2002. o The Company's tax rate for continuing operations was 37.0 percent in the third quarter of 2003 compared with 31.1 percent for the comparable period of the prior year. Excluding the charge for litigation settlement, the Company's 2002 third quarter tax rate was 34.1 percent. The rate increase reflects an increase in the proportion of domestic income (which is taxed at a higher effective tax rate than foreign income) as a result of the impact of recent acquisitions and charges related to the United Kingdom operations mentioned previously. The Company anticipates that its tax rate for the full year 2003 will approximate 36 percent. Based on current estimates, the Company expects its effective tax rate for 2004 will approximate 35 percent. o At the end of the quarter, the Company had a strong balance sheet, with cash and marketable securities in excess of $1.2 billion and $2 billion in unused bank lines. o During the third quarter of 2003, the Company retired approximately $300 million of its outstanding debt. Debt as a percent of total capitalization was 45 percent at September 30, 2003 and 47 percent at both June 30, 2003 and March 31, 2003. The Company has retired an additional $100 million of its debt thus far in the fourth quarter of 2003. o The Company repurchased approximately 5 million common shares during the third quarter of 2003. Through September 30, approximately 28 million common shares have been repurchased in 2003, including approximately 2 million common shares for long-term incentive compensation plans. The Company currently has approximately 22 million common shares remaining under its share repurchase authorization. 6 MASCO CORPORATION BUSINESS AND FINANCIAL HIGHLIGHTS THIRD QUARTER 2003 (CONCLUDED) o The Company increased the quarterly dividend for the 2003 fourth quarter by 14 percent (a larger percentage increase than in recent years) from $.14 to $.16 per common share. The new quarterly dividend reflects the Company's favorable long-term outlook, strong balance sheet and cash flow and recent tax law changes, and makes this the 45th consecutive year in which dividends have been increased. o As previously announced, beginning January 1, 2003, the Company began expensing stock options on a prospective basis. o The weighted average diluted common shares outstanding for the quarter were 489.1 million (498.5 million for the quarter ended June 30, 2003 and 519.6 million for the quarter ended March 31, 2003). Average diluted common shares outstanding at the end of the quarter, taking into account the reduction for shares repurchased and not included as a reduction in the quarter, would have been approximately 486 million. Contingently issuable common shares, related to share price guarantees, utilized in the calculation of earnings per common share in the third quarter were based on a quarter-end average share price of $24.51. Such contingently issuable common shares declined from 7.8 million shares at June 30, 2003 to 5.6 million common shares at September 30, 2003. o Yesterday the Company announced that its Board of Directors has appointed two new Directors: Professor David L. Johnston, 62, has served as President and Vice Chancellor of the University of Waterloo in Ontario, Canada since July 1, 1999. A specialist in securities regulation, corporation and information technology law, Professor Johnston has authored numerous books, holds an A.B. from Harvard University, an L.L.B. from Cambridge University and an L.L.B. from Queen's University, as well as honorary doctorates from twelve universities. J. Michael Losh, 57, formerly served as Executive Vice President and Chief Financial Officer of General Motors from July 1994 through August 2000 and as chairman of GMAC, General Motor's financial services group, from July 1994 until April 1999. Additional information is available on the Company's website. FULL-YEAR OUTLOOK o If present sales and economic trends continue, the Company believes that it will achieve record sales and earnings for 2003. The Company expects that full-year 2003 earnings from continuing operations should be in the range of $1.68 to $1.70 per common share, excluding any possible unusual fourth quarter items. This new guidance represents an increase from the Company's previous guidance of $1.68 to $1.72 per common share when adjusted to exclude the projected operating results of $.04 per common share related to the Company's discontinued operations (Baldwin, Weiser and Marvel) for the entire year which had been included in the previous guidance. o The Company estimates that fourth quarter earnings per common share will be in the range of $.38-$.40 per common share, excluding any possible unusual items. Statements contained herein may include certain forward-looking statements regarding Masco's future sales, earnings growth potential and other developments. Actual results may vary materially because of external factors such as interest rate fluctuations, changes in consumer spending and other factors over which management has no control. Additional information about our products, markets and conditions, which could affect our future performance, is contained in the Company's filings with the Securities and Exchange Commission and is available on Masco's website at www.masco.com. Masco undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. 7 MASCO CORPORATION - 3RD QUARTER 2003 Page ---- 1 Condensed Statement of Income - 2003 & 2002 Quarters 2 Sales by Segment and Geographic Area - 3rd Quarter 2003 & 2002 3 2003 Quarterly Segment Data 4 2002 Quarterly Segment Data 5 Other Income (Expense), Net 6 Condensed Statement of Income - Three Months Ended September 30, 2003 & 2002 7 Condensed Statement of Income - Nine Months Ended September 30, 2003 & 2002 8 Condensed Consolidated Balance Sheet GAAP Reconciliations: 9 Sales Growth Excluding Acquisitions, Divestitures & International Currency 10 Operating Profit, Net Income and E.P.S. for the Year Ended December 31, 2002 11 Net Operating Profit and Shareholders' Equity 12 Operating Profit and Margins as Reconciled 13 Discontinued Operations Selected Financial Information MASCO CORPORATION CONDENSED STATEMENT OF INCOME 2003 AND 2002 - BY QUARTER RESTATED FOR DISCONTINUED OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
2003 2002 ---------------------------------- ---------------------------------------------------------- QTR. 3 QTR. 2 QTR. 1 YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net Sales: - North America $2,369,130 $2,197,380 $1,927,070 $7,686,170 $2,007,940 $2,042,700 $1,903,970 $1,731,560 - International 548,770 526,140 505,300 1,462,700 412,700 404,000 341,000 305,000 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- - Consolidated 2,917,900 2,723,520 2,432,370 9,148,870 2,420,640 2,446,700 2,244,970 2,036,560 Cost of Sales 2,014,980 1,887,900 1,700,780 6,257,680 1,684,840 1,666,200 1,500,130 1,406,510 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Gross Profit 902,920 835,620 731,590 2,891,190 735,800 780,500 744,840 630,050 (Gross Margin) 30.9% 30.7% 30.1% 31.6% 30.4% 31.9% 33.2% 30.9% S,G&A Expense (before GCE & Benefit (Income) Expense) 453,150 428,250 389,090 1,360,420 364,730 343,850 333,230 318,610 (S,G&A Expense as a % of Sales) 15.5% 15.7% 16.0% 14.9% 15.1% 14.1% 14.8% 15.6% Operating Profit (before GCE, Litigation (Income) Charge & Benefit (Income) Expense) 449,770 407,370 342,500 1,530,770 371,070 436,650 411,610 311,440 (Operating Margin) 15.4% 15.0% 14.1% 16.7% 15.3% 17.8% 18.3% 15.3% - North America 430,270 373,480 275,680 1,331,770 312,570 380,450 365,210 273,540 (Margin) 18.2% 17.0% 14.3% 17.3% 15.6% 18.6% 19.2% 15.8% - International 19,500 33,890 66,820 199,000 58,500 56,200 46,400 37,900 (Margin) 3.6% 6.4% 13.2% 13.6% 14.2% 13.9% 13.6% 12.4% General Corporate Expense (GCE) 28,000 29,000 28,000 98,000 25,000 25,000 24,000 24,000 S,G&A Expense as a % of Sales (including GCE and Benefit (Income) Expense) 16.5% 16.6% 18.0% 15.9% 16.1% 15.1% 15.9% 16.8% (Income) Charge Regarding Litigation Settlement, Net (57,600) - (13,520) 146,800 (19,200) 166,000 - - Accelerated Benefit (Income) Expense - (5,000) 21,000 - - - - - Reversal of Charge for the Planned Disposition of a Business - - - (15,630) (15,630) - - - ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Operating Profit per F/S $ 479,370 $ 383,370 $ 307,020 $1,301,600 $ 380,900 $ 245,650 $ 387,610 $ 287,440 ========== ========== ========== ========== ========== ========== ========== ========== Earnings per Common Share (Diluted): Income From Continuing Operations $ 0.53 $ 0.45 $ 0.31 $ 1.29 $ 0.36 $ 0.22 $ 0.42 $ 0.31 Income From Discontinued Operations, Net 0.12 0.01 0.01 0.04 0.01 0.01 0.01 - Cumulative Effect of Accounting Change, Net - - - (0.18) - - - (0.19) ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net Income $ 0.65 $ 0.46 $ 0.32 $ 1.15 $ 0.37 $ 0.24 $ 0.43 $ 0.12 ========== ========== ========== ========== ========== ========== ========== ==========
NOTES: - - Operating results reflect charges of $35 million ($.05 per common share, after tax) and $23 million ($.03 per common share, after tax) in the third quarter and second quarter of 2003, respectively, for a business unit in the Decorative Architectural Products segment; and $7 million ($.01 per common share, after tax) in the third quarter of 2003 for a business unit in the Plumbing Products segment. - - Due to the unexpected passing of the Company's President and Chief Operating Officer, certain benefits were accelerated and expensed in the first quarter of 2003. A portion of the benefit liability (related to an investment in the Company's common stock) fluctuated based on the market price of Company common stock. In the second quarter of 2003, the Company recognized income relating to this liability as the obligation was marked to market, based on the Company's stock price. The liability was satisfied in the third quarter of 2003 with no impact on earnings. - - Income from discontinued operations in the third quarter of 2003 includes an after-tax net gain from the sale of Baldwin, Weiser and Marvel totaling $53.1 million ($.11 per common share). - - Data for 2002 exclude a first quarter, non-cash goodwill accounting change charge effective January 1, 2002 of $.19 per common share. In addition, per common share amounts for the four quarters do not total to the per common share amount for the year due to the timing of capital stock transactions and the effect of contingently issuable shares. - - Earnings per common share in the third quarter of 2002 include a $.20 charge for a litigation settlement. - - Earnings in the fourth quarter of 2002 include approximately $35 million of income related to insurance proceeds and the reversal of a charge related to the planned disposition of a business and approximately $36 million of charges related to non-operating asset impairments and realized losses on marketable securities. - - Excluding the effect of unusual items (principally the Behr litigation settlement charge, net and a non-cash accounting change charge related to goodwill impairment), net income for the year 2002 was $780 million or $1.52 per common share (see page 10 for the GAAP reconciliation). Page 1 MASCO CORPORATION SALES BY SEGMENT AND GEOGRAPHIC AREA 3RD QUARTER 2003 & 2002 (IN MILLIONS)
3rd Quarter 3rd Qtr '03 --------------------------- vs. 2003 2002 3rd Qtr '02 ---------- ---------- ------------------- Cabinets & Related Products $ 802 $ 738 + 9% Plumbing Products 683 535 + 28% Installation & Other Services 642 489 + 31% Decorative Architectural Products 441 376 + 17% Other Specialty Products 350 309 + 13% ---------- ---------- Total $ 2,918 $ 2,447 + 19% ========== ========== North America $ 2,369 $ 2,043 + 16% International, principally Europe 549 404 + 36% ---------- ---------- Total, as above $ 2,918 $ 2,447 + 19% ========== ==========
NOTES: - - 2002 net sales have been restated to exclude operations which were sold and treated as discontinued operations in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." - - Excluding acquisitions and divestitures, consolidated net sales increased ten percent, North American net sales increased ten percent and International net sales increased eleven percent. International sales in local currencies were flat compared with the third quarter of 2002 (see page 9 for the GAAP reconciliation). Page 2 MASCO CORPORATION QUARTERLY SEGMENT DATA - 2003 (IN MILLIONS)
Year Qtr. 4 Qtr. 3 Qtr. 2 Qtr. 1 --------- -------- ---------- ---------- --------- Net Sales: - Cabinets and Related Products $ 802 $ 743 $ 699 - Plumbing Products 683 666 613 - Installation and Other Services 642 585 542 - Decorative Architectural Products 441 413 301 - Other Specialty Products 350 317 277 --------- -------- ---------- ---------- --------- - TOTAL 2,918 2,724 2,432 ========= ======== ========== ========== ========= - North America 2,369 2,198 1,927 - International, principally Europe 549 526 505 --------- -------- ---------- ---------- --------- - TOTAL, AS ABOVE 2,918 2,724 2,432 ========= ======== ========== ========== ========= Operating Profit: - Cabinets and Related Products 122 113 84 - Plumbing Products 95 93 84 - Installation and Other Services 110 88 77 - Decorative Architectural Products 53 57 55 - Other Specialty Products 70 56 43 --------- -------- ---------- ---------- --------- - TOTAL 450 407 343 ========= ======== ========== ========== ========= - North America 431 373 276 - International, principally Europe 19 34 67 --------- -------- ---------- ---------- --------- - TOTAL, AS ABOVE 450 407 343 ========= ======== ========== ========== ========= General Corporate Expense (GCE) 28 29 28 (Income) Related to Litigation Settlement, Net (58) - (13) Accelerated Benefit (Income) Expense - (5) 21 --------- -------- ---------- ---------- --------- Operating Profit (after GCE and Adjustments) 480 383 307 Other Income (Expense), Net (60) (35) (56) --------- -------- ---------- ---------- --------- Income from Continuing Operations Before Income Taxes and Minority Interest $ 420 $ 348 $ 251 ========= ======== ========== ========== ========= Margins: - Cabinets and Related Products 15.2% 15.2% 12.0% - Plumbing Products 13.9% 14.0% 13.7% - Installation and Other Services 17.1% 15.0% 14.2% - Decorative Architectural Products 12.0% 13.8% 18.3% - Other Specialty Products 20.0% 17.7% 15.5% - TOTAL 15.4% 14.9% 14.1% - North America 18.2% 17.0% 14.3% - International, principally Europe 3.5% 6.5% 13.3% - TOTAL, AS ABOVE 15.4% 14.9% 14.1%
NOTES: - - Data for all quarters of 2003 exclude discontinued operations. - - Operating results reflect charges of $35 million ($.05 per common share, after tax) and $23 million ($.03 per common share, after tax) in the third quarter and second quarter of 2003, respectively, for a business unit in the Decorative Architectural Products segment; and $7 million ($.01 per common share, after tax) in the third quarter of 2003 for a business unit in the Plumbing Products segment. - - Due to the unexpected passing of the Company's President and Chief Operating Officer, certain benefits were accelerated and expensed in the first quarter of 2003. A portion of the benefit liability (related to an investment in the Company's common stock) fluctuated based on the market price of Company common stock. In the second quarter of 2003, the Company recognized income relating to this liability as the obligation was marked to market, based on the Company's stock price. The liability was satisfied in the third quarter of 2003 with no impact on earnings. Page 3 MASCO CORPORATION QUARTERLY SEGMENT DATA - 2002 (IN MILLIONS)
Year Qtr. 4 Qtr. 3 Qtr. 2 Qtr. 1 ------- ------- ------- ------- ------- Net Sales: - Cabinets and Related Products $ 2,798 $ 722 $ 738 $ 682 $ 656 - Plumbing Products 2,031 523 535 509 464 - Installation and Other Services 1,845 568 489 398 390 - Decorative Architectural Products 1,358 302 376 378 302 - Other Specialty Products 1,117 306 309 278 224 ------- ------- ------- ------- ------- - TOTAL 9,149 2,421 2,447 2,245 2,036 ======= ======= ======= ======= ======= - North America 7,686 2,008 2,043 1,904 1,731 - International, principally Europe 1,463 413 404 341 305 ------- ------- ------- ------- ------- - TOTAL, AS ABOVE 9,149 2,421 2,447 2,245 2,036 ======= ======= ======= ======= ======= Operating Profit: - Cabinets and Related Products 379 98 114 100 67 - Plumbing Products 334 92 83 87 72 - Installation and Other Services 304 87 82 71 64 - Decorative Architectural Products 311 55 88 99 69 - Other Specialty Products 218 55 69 55 39 ------- ------- ------- ------- ------- - TOTAL 1,546 387 436 412 311 ======= ======= ======= ======= ======= - North America 1,347 328 380 366 273 - International, principally Europe 199 59 56 46 38 ------- ------- ------- ------- ------- - TOTAL, AS ABOVE 1,546 387 436 412 311 ======= ======= ======= ======= ======= General Corporate Expense (GCE) 98 25 25 24 24 (Income) Expense Related to Litigation Settlement, Net 147 (19) 166 - - Operating Profit (after GCE and Litigation ------- ------- ------- ------- ------- (Income) Expense) 1,301 381 245 388 287 Other Income (Expense), Net (300) (90) (76) (71) (63) ------- ------- ------- ------- ------- Income from Continuing Operations Before Income Taxes and Cumulative Accounting Change, Net $ 1,001 $ 291 $ 169 $ 317 $ 224 ======= ======= ======= ======= ======= Margins: - - Cabinets and Related Products 13.5% 13.6% 15.4% 14.7% 10.2% - - Plumbing Products 16.4% 17.6% 15.5% 17.1% 15.5% - - Installation and Other Services 16.5% 15.3% 16.8% 17.8% 16.4% - - Decorative Architectural Products 22.9% 18.2% 23.4% 26.2% 22.8% - - Other Specialty Products 19.5% 18.0% 22.3% 19.8% 17.4% - - TOTAL 16.9% 16.0% 17.8% 18.4% 15.3% - - North America 17.5% 16.3% 18.6% 19.2% 15.8% - - International, principally Europe 13.6% 14.3% 13.9% 13.5% 12.5% - - TOTAL, AS ABOVE 16.9% 16.0% 17.8% 18.4% 15.3%
NOTES: - - Data for 2002 exclude discontinued operations. - - Operating profit margins above are before general corporate expense and a charge (income) for litigation settlement, net, which relates to the Decorative Architectural Products segment. - - Included in operating profit of the Plumbing Products segment for the fourth quarter and year is $15.6 million of income related to the reversal of a charge for the planned disposition of a business. Page 4 MASCO CORPORATION OTHER INCOME (EXPENSE), NET 2003 AND 2002 QUARTERS (IN MILLIONS)
2003 2002 --------------------------------------------- ------------------------------------------------- YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1 YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1 -------- ------ --------- --------- --------- --------- --------- --------- --------- --------- Interest Expense $ (66.8) $ (67.4) $ (67.6) $(237.0) $ (66.6) $ (61.1) $ (54.2) $ (55.1) Equity Earnings, Net - - 0.5 14.3 1.3 5.7 5.4 1.9 Income from Cash and Cash Investments 1.8 2.4 2.5 7.8 3.9 2.1 1.1 0.7 Other Interest Income 2.1 1.1 1.8 6.0 2.7 1.8 0.6 0.9 Income (Loss) from Financial Investments 18.9 19.1 13.5 (35.5) (4.1) (8.4) (15.4) (7.6) Loss on Early Retirement of Debt (2.7) - - - - - - - Gain from Sale of Equity Investment - 4.8 - - - - - - Impairment Charge for Long-Term Investments (9.3) - - (24.0) (24.0) - - - Other, Net (4.3) 5.4 (6.5) (31.7) (2.9) (16.4) (8.4) (4.0) -------- ------ --------- --------- --------- --------- --------- --------- --------- --------- Total Other Income (Expense), Net $ (60.3) $ (34.6) $ (55.8) $(300.1) $ (89.7) $ (76.3) $ (70.9) $ (63.2) ======== ====== ========= ========= ========= ========= ========= ========= ========= =========
NOTES: - - Data for all quarters above exclude discontinued operations. - - Income (loss) from Financial Investments includes $7.1 million of net realized gains related to the sale of marketable securities for the three months ended September 30, 2003. Page 5 MASCO CORPORATION CONDENSED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002 (IN THOUSANDS, EXCEPT PER SHARE DATA)
As a Percent of Sales Three Months Ended September 30 Three Months Ended September 30 % ------------------------------- ------------------------------- Line Change 2003 2002 2003 2002 - ---- ------ -------------- ------------ ------------ ------------ 1 Net Sales 19% $ 2,917,900 $ 2,446,700 100.0% 100.0% 2 Cost of Sales 21% 2,014,980 1,666,200 69.1% 68.1% -------------- ------------ ------------ ------------ 3 Gross Profit 16% 902,920 780,500 30.9% 31.9% -------------- ------------ ------------ ------------ Operating Profit (A): 4 - Before GCE and Litigation (Income) Charge (3-7) 3% 449,770 436,650 15.4% 17.8% 5 - After GCE and Litigation (Income) Charge (3-8-9) 95% 479,370 245,650 16.4% 10.0% S,G&A Expense: 6 - General Corporate Expense (GCE) 12% 28,000 25,000 1.0% 1.0% 7 - All Other 32% 453,150 343,850 15.5% 14.1% -------------- ------------ ------------ ------------ 8 - Total S,G&A Expense 30% 481,150 368,850 16.5% 15.1% -------------- ------------ ------------ ------------ 9 (Income) Charge for Litigation Settlement (B) (57,600) 166,000 -2.0% 6.8% 10 Other Income (Expense), Net -21% (60,280) (76,280) -2.1% -3.1% 11 Income from Continuing Operations Before Income Taxes and Minority Interest (5+10) 147% 419,090 169,370 14.4% 6.9% 12 Income Taxes 195% 155,200 52,670 5.3% 2.2% (Tax Rate) 37.0% 31.1% -------------- ------------ ------------ ------------ 13 Income from Continuing Operations Before Minority Interest 126% 263,890 116,700 9.0% 4.8% 14 Minority Interest (C) (2,380) -0.1% - -------------- ------------ ------------ ------------ 15 Income from Continuing Operations 124% 261,510 116,700 9.0% 4.8% 16 Income from Discontinued Operations, Net of Income Taxes 839% 57,260 6,100 2.0% 0.2% -------------- ------------ ------------ ------------ Net Income 160% $ 318,770 $ 122,800 10.9% 5.0% ============== ============ ============ ============ Earnings Per Common Share (Diluted): Income from Continuing Operations $ 0.53 $ 0.22 Income from Discontinued Operations, Net of Income Taxes $ 0.12 $ 0.01 -------------- ------------ Net Income 177% $ 0.65 $ 0.24 ============== ============ Average (Diluted) Common Shares -6% 489,100 521,900
NOTES: Data for 2002 exclude discontinued operations. (A) Operating results reflect charges of $35 million ($.05 per common share, after tax) in the third quarter of 2003, for a business unit in the Decorative Architectural Products segment; and $7 million ($.01 per common share, after tax) in the third quarter of 2003 for a business unit in the Plumbing Products segment. (B) In the third quarter of 2003, the Company recorded litigation income related to the Company's subsidiary, Behr Process Corporation, in the Decorative Architectural Products segment. (C) The Company owns 64% of Hansgrohe AG; this line is the reduction of income to reflect the minority interest. Page 6 MASCO CORPORATION CONDENSED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002 (IN THOUSANDS, EXCEPT PER SHARE DATA)
As a Percent of Sales Nine Months Ended September 30 Nine Months Ended September 30 % ------------------------------ ------------------------------ Line Change 2003 2002 2003 2002 - ---- ------ ------------ ------------ ---------- ------------ 1 Net Sales 20% $ 8,073,790 $ 6,728,230 100.0% 100.0% 2 Cost of Sales 23% 5,603,660 4,572,840 69.4% 68.0% ------------ ------------ ---------- ------------ 3 Gross Profit 15% 2,470,130 2,155,390 30.6% 32.0% ------------ ------------ ---------- ------------ Operating Profit (A): 4 - Before GCE, Benefit Expense, Net and Litigation (Income) Charge (3-8) 3% 1,199,640 1,159,700 14.9% 17.2% 5 - After GCE, Benefit Expense, Net and Litigation (Income) Charge (3-9-10) 27% 1,169,760 920,700 14.5% 13.7% S,G&A Expense: 6 - General Corporate Expense (GCE) 16% 85,000 73,000 1.1% 1.1% 7 - Accelerated Benefit Expense, Net (D) 16,000 - 0.2% 0.0% 8 - All Other 28% 1,270,490 995,690 15.7% 14.8% ------------ ------------ ---------- ------------ 9 - Total S,G&A Expense 28% 1,371,490 1,068,690 17.0% 15.9% ------------ ------------ ---------- ------------ 10 (Income) Charge for Litigation Settlement (B) (71,120) 166,000 -0.9% 2.5% 11 Other Income (Expense), Net -28% (150,690) (210,420) -1.9% -3.1% 12 Income from Continuing Operations Before Income Taxes, Minority Interest and Cumulative Effect of Accounting Change, Net (5+11) 43% 1,019,070 710,280 12.6% 10.6% 13 Income Taxes 54% 363,680 236,120 4.5% 3.5% (Tax Rate) 35.7% 33.2% ------------ ------------ ---------- ------------ 14 Income from Continuing Operations Before Minority Interest and Cumulative Effect of Accounting Change, Net 38% 655,390 474,160 8.1% 7.0% 15 Minority Interest (C) (8,170) - -0.1% - ------------ ------------ ---------- ------------ 16 Income from Continuing Operations 36% 647,220 474,160 8.0% 7.0% 17 Income from Discontinued Operations, Net of Income Taxes 409% 66,900 13,140 0.8% 0.2% 18 Cumulative Effect of Accounting Change, Net -100% - (92,400) - -1.4% ------------ ------------ ---------- ------------ Net Income 81% $ 714,120 $ 394,900 8.8% 5.9% ============ ============ ========== ============ Earnings Per Common Share (Diluted): Income from Continuing Operations $ 1.30 $ 0.93 Income from Discontinued Operations, Net of Income Taxes $ 0.13 $ 0.03 Cumulative Effect of Accounting Change, Net $ - $ (0.18) ------------ ------------ Net Income 85% $ 1.44 $ 0.78 ============ ============ Average (Diluted) Common Shares -2% 496,300 507,500
NOTES: Data for 2002 exclude discontinued operations. (A) Operating results reflect charges of $35 million ($.05 per common share, after tax) and $23 million ($.03 per common share, after tax) in the third quarter and second quarter of 2003, respectively, for a business unit in the Decorative Architectural Products segment; and $7 million ($.01 per common share, after tax) in the third quarter of 2003 for a business unit in the Plumbing Products segment. (B) The first nine months of 2003 includes $71.1 million of income related to the litigation settlement regarding the Company's subsidiary, Behr Process Corporation, in the Decorative Architectural Products segment. (C) The Company owns 64% of Hansgrohe AG; this line is the reduction of income to reflect the minority interest. (D) Due to the unexpected passing of the Company's President and Chief Operating Officer, certain benefits were accelerated and expensed in the first quarter of 2003. A portion of the benefit liability (related to an investment in the Company's common stock) fluctuated based on the market price of Company common stock. In the second quarter of 2003, the Company recognized income relating to this liability as the obligation was marked to market, based on the Company's stock price. The liability was satisfied in the third quarter of 2003 with no impact on earnings. Page 7 MASCO CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (IN THOUSANDS)
September 30 December 31 September 30 ASSETS 2003 2002 2002 ----------- ----------- ----------- Current Assets: Cash and Cash Investments $ 907,710 $ 1,066,570 $ 600,090 Receivables 1,830,360 1,546,360 1,715,130 Inventories 1,025,900 1,055,620 994,580 Prepaid Expenses and Other 262,750 281,220 187,770 ----------- ----------- ----------- Total Current Assets 4,026,720 3,949,770 3,497,570 Equity Investments - 67,810 95,810 Property and Equipment, Net 2,295,120 2,315,060 2,120,600 Goodwill, Net 4,505,280 4,297,150 4,138,240 Other Intangible Assets, Net 348,310 353,870 354,830 Other Noncurrent Assets 1,025,150 1,066,770 1,226,940 ----------- ----------- ----------- Total Assets $12,200,580 $12,050,430 $11,433,990 =========== =========== =========== LIABILITIES Current Liabilities: Notes Payable $ 500,040 $ 321,180 $ 311,650 Accounts Payable 706,320 541,590 565,030 Accrued Liabilities 1,096,200 1,069,680 1,010,580 ----------- ----------- ----------- Total Current Liabilities 2,302,560 1,932,450 1,887,260 Long-Term Debt 3,836,280 4,316,470 3,964,340 Deferred Taxes and Other 657,150 507,670 246,760 ----------- ----------- ----------- Total Liabilities 6,795,990 6,756,590 6,098,360 SHAREHOLDERS' EQUITY 5,404,590 5,293,840 5,335,630 ----------- ----------- ----------- Total Liabilities and Shareholders' Equity $12,200,580 $12,050,430 $11,433,990 =========== =========== ===========
Page 8 MASCO CORPORATION GAAP RECONCILIATION OF SALES GROWTH EXCLUDING EFFECT OF ACQUISITIONS, DIVESTITURES & CURRENCY TRANSLATION (IN THOUSANDS)
Three Months Ended September 30 ------------- -------------- 2003 2002 ------------- -------------- Consolidated Net Sales, as reported $ 2,917,900 $ 2,446,700 - Acquisitions (272,100) (49,850) - Divestitures (A) - (840) ------------- -------------- Consolidated Net Sales (excl. acquisitions & divestitures) $ 2,645,800 $ 2,396,010 ============= ============== North American Net Sales, as reported $ 2,369,130 $ 2,042,700 - Acquisitions (171,700) (49,850) - Divestitures (A) - (840) ------------- -------------- North American Net Sales (excl. acquisitions & divestitures) $ 2,197,430 $ 1,992,010 ============= ============== International Net Sales, as reported $ 548,770 $ 404,000 - Acquisitions (100,400) - - Divestitures - - ------------- -------------- International Net Sales (excl. acquisitions & divestitures) 448,370 404,000 - Currency Translation (43,610) - ------------- -------------- Int'l Net Sales (excl. acquisitions, divestitures & currency) $ 404,760 $ 404,000 ============= ==============
(A) Refers to divestitures completed prior to January 1, 2003. Divestitures completed subsequent to January 1, 2003 are considered discontinued operations in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The sales of discontinued operations are not included in the Company's net sales, as reported, for any period presented. The Company presents information comparing results from one period to another excluding the results of businesses acquired or disposed of in order to assess the performance of the underlying businesses and to assess to what extent acquisitions are driving growth. The Company also presents information comparing results of International operations from one period to another using constant exchange rates. To present this information, current period results for foreign entities are converted into U.S. dollars using the prior period's exchange rates, rather than exchange rates for the current year. The Company presents this information in order to assess how the underlying businesses performed before taking into account currency fluctuations. Page 9 MASCO CORPORATION GAAP RECONCILIATION OF OPERATING PROFIT, NET INCOME AND EARNINGS PER COMMON SHARE YEAR ENDED DECEMBER 31, 2002 (IN THOUSANDS, EXCEPT PER SHARE DATA)
OPERATING NET EPS PROFIT INCOME ---------- ----------- ----------- As reported $ 1.15 $ 1,301,600 $ 589,700 Litigation Charge, Net 0.18 146,800 92,300 Charge for Goodwill Impairment 0.18 92,400 (Income) from Planned Disposition of Business (0.02) (15,600) (9,800) Impairment Charge for Non-Operating Assets 0.03 15,100 ---------- ----------- ----------- As reconciled $ 1.52 $ 1,432,800 $ 779,700 ========== =========== ===========
Page 10 MASCO CORPORATION GAAP RECONCILIATION OF NET OPERATING PROFIT AND SHAREHOLDERS' EQUITY (IN THOUSANDS)
LAST TWELVE MONTHS LAST TWELVE MONTHS SEPTEMBER 30, 2003 SEPTEMBER 30, 2002 ------------------ ------------------ Net Operating Profit, Excluding Discontinued Operations $ 1,550,660 $ 1,138,570 Amortization of Goodwill - 23,040 ------------------ ------------------ Net Operating Profit, Excluding Amortization of Goodwill 1,550,660 1,161,610 (Income) from Planned Disposition of Business (15,630) - (Income) Charge for Litigation Settlement, Net (90,320) 166,000 ------------------ ------------------ Net Operating Profit, As Reconciled $ 1,444,710 $ 1,327,610 ================== ================== SEPTEMBER 30, 2003 SEPTEMBER 30, 2002 ------------------ ------------------ Shareholders' Equity, As Reported $ 5,404,590 $ 5,335,630 (Income) from Planned Disposition of Business (net of tax) (9,800) - (Income) Charge for Litigation Settlement, Net (net of tax) (57,200) 104,400 ------------------ ------------------ Shareholders' Equity, As Reconciled $ 5,337,590 $ 5,440,030 ================== ==================
Page 11 MASCO CORPORATION OPERATING PROFIT AND MARGINS AS RECONCILED (DOLLARS IN MILLIONS)
Three Months Ended September 30 ------------------------------- 2003 2002 -------------- ------------- Operating Profit - as reported $ 479 16.4% $ 246 10.0% Charges For United Kingdom Businesses: Decorative Architectural Products 35 - Plumbing Products 7 - Behr Litigation (Income) Charge (58) 166 ------ ------ Operating Profit - as Reconciled $ 463 15.9% $ 412 16.8% ====== ======
Page 12 MASCO CORPORATION DISCONTINUED OPERATIONS - SELECTED FINANCIAL DATA (IN THOUSANDS)
Three Months Ended Months Ended September 30 September 30 -------------------- -------------------- 2003 2002 2003 2002 -------- ------- -------- -------- Net Sales $ 67,970 $71,290 $198,030 $203,770 ======== ======= ======== ======== Income Before Income Taxes $ 5,650 $ 9,830 $ 20,910 $ 21,220 Gain on Disposal of Discontinued Operations 90,530 - 90,530 - Income Taxes (38,920) (3,730) (44,540) (8,080) -------- ------- -------- -------- Income From Discontinued Operations $ 57,260 $ 6,100 $ 66,900 $ 13,140 ======== ======= ======== ========
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