-----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, TPv72coTL0h7Lbrz/DICaFJTcrgjsE92YbB43+QXDESax1rQcZRK3uYuOdq6eCsi s++97vhVDda1jzJTGaQhoQ== 0000950124-04-000437.txt : 20040213 0000950124-04-000437.hdr.sgml : 20040213 20040213090445 ACCESSION NUMBER: 0000950124-04-000437 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040213 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040213 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: 04594855 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 k82872e8vk.txt CURRENT REPORT 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) FEBRUARY 13, 2004 -------------------------------- 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.a Press Release of Masco Corporation dated February 13, 2004, reporting Masco Corporation's financial results for the fourth quarter and the full year 2003 and certain other information. 99.b Supplemental Information Package prepared for use in connection with the financial results for the fourth quarter and the full year 2003. ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION. Attached and incorporated herein by reference as Exhibit 99.a is a copy of a press release dated February 13, 2004 reporting Masco Corporation's financial results for the fourth quarter and the full year 2003, and as Exhibit 99.b is a supplemental information package prepared for use in connection with the financial results for the fourth quarter and the full year 2003. On February 13, 2004, Masco Corporation will hold an investor conference and web cast to discuss financial results for the fourth quarter and the full year 2003. This information, including the Exhibits 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: Senior Vice President and Chief Financial Officer February 13, 2004 EXHIBIT INDEX 99.a Press Release of Masco Corporation dated February 13, 2004, reporting Masco Corporation's financial results for the fourth quarter and the full year 2003 and certain other information. 99.b Supplemental Information Package prepared for use in connection with the financial results for the fourth quarter and the full year 2003. EX-99.A 3 k82872exv99wa.txt PRESS RELEASE DATED FEBRUARY 13, 2004 EXHIBIT 99.a FOR IMMEDIATE RELEASE Contact: Samuel Cypert 313-792-6646 MASCO CORPORATION REPORTS RECORD SALES AND EARNINGS FOR 2003, ANNOUNCES DIVESTITURE PROGRAM AND FORECASTS ANOTHER RECORD YEAR FOR 2004 Taylor, Michigan (February 13, 2004) - Masco Corporation (NYSE: MAS) today reported that net sales from continuing operations for the year ended December 31, 2003, aided by acquisitions, increased 20 percent to a record $10.9 billion compared with $9.1 billion for 2002. Income from continuing operations for the year ended December 31, 2003 was $740 million or $1.51 per common share, which includes the recognition of a non-cash, pre-tax goodwill impairment charge of $142 million ($118 million or $.24 per common share, after tax), the majority of which relates to European businesses that the Company plans to divest. In addition, the Company's results include previously announced charges primarily related to certain European businesses and income from an adjustment of the Behr litigation accrual, which principally offset each other. Excluding the impact of the goodwill impairment charge, income from continuing operations was $1.75 per common share. This result is above the Company's previous guidance that earnings, excluding any fourth quarter 2003 unusual items, would be in the range of $1.68 to $1.70 per common share. Fourth quarter 2003 net sales from continuing operations increased 18 percent to $2.9 billion compared with $2.4 billion in the 2002 fourth quarter. Income from continuing operations for the fourth quarter of 2003 was $93 million or $.19 per common share and included a non-cash, pre-tax charge for goodwill impairment of $137 million ($113 million or $.24 per common share, after tax). Excluding such charge, income from continuing operations was $.43 per common share. The Company reviews its business portfolio on an ongoing basis as part of its corporate strategic planning and has determined that several of its European businesses are not core to the Company's long-term growth strategy and, accordingly, has embarked on a plan of disposition. These businesses had combined 2003 net sales in excess of $350 million and the Company expects net proceeds from the dispositions to exceed $300 million. The dispositions are expected to be completed within the next twelve months and the Company expects to recognize a modest net loss upon the disposition of all of these businesses. First quarter 2004 results will include a charge to reflect those businesses that are expected to be divested at a loss. Any gains resulting from the disposition of individual businesses will be recognized as such transactions are completed. The Company continues to experience favorable sales performance in early 2004, and, based on current business trends, believes that it will achieve record sales and earnings for 2004 with full-year earnings from continuing operations in a range of $1.80 to $1.90 per common share. Earnings guidance for 2004 includes a reduction of approximately $.05 per common share resulting from the absence of earnings related to the European businesses to be divested. These businesses will be treated as discontinued operations effective in the first quarter of 2004, which will include the reclassification of their prior period results to discontinued operations. This year's earnings guidance also reflects the Company's expectation that certain operating expenses will continue to increase in 2004, including such items as energy, insurance and certain material and freight costs. Based on current business trends, the Company anticipates that first quarter 2004, earnings from continuing operations (seasonally the lowest quarter of the year) may be in a range of $.36 to $.38 per common share (excluding the disposition charge), compared with first quarter 2003 reported earnings of $.32 per common share. MASCO CORPORATION 2003 HIGHLIGHTS: FULL-YEAR 2003 - Net sales from continuing operations increased 20 percent to a record $10.9 billion. - Key retailer sales were up 10 percent to approximately $3.4 billion. - Income from continuing operations was $1.75 per common share excluding the impact of a goodwill impairment charge. - The Company retired approximately $430 million of Company debt during 2003. - The Company repurchased 37 million shares in 2003 including approximately 2 million shares for employee long-term stock incentive plans. - Working capital (defined as accounts receivable and inventories less accounts payable)as a percentage of sales improved to 18.1 percent of sales at December 31, 2003 from 22.5 percent of sales a year earlier. - The Company has approximately $1.3 billion of cash and marketable securities at year-end. FOURTH QUARTER 2003 - Net sales from continuing operations increased 18 percent to a record $2.9 billion. - Key retailer sales were up 22 percent. - Income from continuing operations was $.43 per common share excluding the impact of a goodwill impairment charge compared to $.36 per common share in 2002. 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 items contained in this release is scheduled for Friday, February 13, 2004 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 (913) 981-4900 (confirmation #675846). 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 #675846) approximately two hours after the end of the call and will continue through February 19, 2004. 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. For press releases, click on "Investor Relations" and then on "Link to News Center." 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. The Company believes that certain non-GAAP performance measures and ratios, used in managing the business, may provide users of this financial information with additional meaningful comparisons between current results and results in prior periods. Non-GAAP financial measures and ratios should be viewed in addition to, and not as an alternative for, the Company's reported results. 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 CONSOLIDATED STATEMENTS OF INCOME FOR THREE MONTHS AND TWELVE MONTHS ENDED 12/31/03 AND 12/31/02 In millions, except per share data.
Three Months Ended Twelve Months Ended December 31 December 31 ---------------------- ---------------------- 2003 2002 2003 2002 -------- -------- -------- -------- Net Sales $ 2,862 $ 2,421 $ 10,936 $ 9,149 Cost of Sales 1,982 1,685 7,586 6,258 -------- -------- -------- -------- Gross Profit 880 736 3,350 2,891 Selling, General and Administrative Expenses 490 390 1,856 1,459 Goodwill Impairment Charge 137 -- 142 -- (Income) from Disposition of a Business -- (16) -- (16) (Income) Charge Regarding Litigation Settlement, Net (1) (19) (72) 147 -------- -------- -------- -------- Operating Profit 254 381 1,424 1,301 Other Income (Expense), Net (57) (90) (208) (300) -------- -------- -------- -------- Income from Continuing Operations before Income Taxes and Minority Interest 197 291 1,216 1,001 Income Taxes 99 101 463 337 -------- -------- -------- -------- Income from Continuing Operations before Minority Interest 98 190 753 664 Minority Interest 5 -- 13 -- -------- -------- -------- -------- Income from Continuing Operations 93 190 740 664 Income (Loss) from Discontinued Operations and Gain, Net of Income Taxes (1) 5 66 18 Cumulative Effect of Accounting Change, Net -- -- -- (92) -------- -------- -------- -------- Net Income $ 92 $ 195 $ 806 $ 590 ======== ======== ======== ======== Earnings per Common Share (Diluted): Income from Continuing Operations $ 0.19 $ 0.36 $ 1.51 $ 1.29 Income (Loss) from Discontinued Operations and Gain, Net of Income Taxes -- 0.01 0.13 0.04 Cumulative Effect of Accounting Change, Net -- -- -- (0.18) -------- -------- -------- -------- Net Income $ 0.19 $ 0.37 $ 1.64 $ 1.15 ======== ======== ======== ======== Average Diluted Common Shares Outstanding 481 529 491 514 ======== ======== ======== ========
MASCO CORPORATION BUSINESS AND FINANCIAL HIGHLIGHTS Note: 2002 results have been restated to exclude operations which were sold in 2003 and treated as discontinued operations in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." FOURTH QUARTER 2003 - - Net sales from continuing operations for the quarter, aided by acquisitions, increased 18 percent with North American sales increasing 13 percent and International sales increasing 44 percent. - - Excluding acquisitions and divestitures, consolidated net sales for the quarter increased 13 percent, with North American internal sales increasing 12 percent; International internal sales increased 18 percent. In local currencies, International sales increased two percent compared with the fourth quarter of 2002. - - Excluding acquisitions and divestitures, the increase in net sales for the fourth quarter of 2003 was primarily due to stronger sales of assembled cabinets, paints and stains, installation services, vinyl windows and faucets. - - Income from continuing operations for the quarter was $93 million or $.19 per common share, and included a non-cash, pre-tax charge for goodwill impairment of $137 million ($113 million or $.24 per common share, after tax). Excluding the impairment charge, income from continuing operations was $.43 per common share compared with the Company's previous guidance of $.38 to $.40 per common share. - - Key retailer sales (excluding discontinued operations) in the quarter increased 22 percent, compared with an eight percent increase in the third quarter of 2003, 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 in the fourth quarter of 2003 also increased 22 percent compared with an increase of eight percent in the 2003 third quarter, a six percent increase in the second quarter of 2003 and a four percent increase in the first quarter of 2003. MASCO CORPORATION BUSINESS AND FINANCIAL HIGHLIGHTS FOURTH QUARTER 2003 (CONTINUED) - - Sales by segment in the 2003 fourth quarter versus the 2002 fourth quarter were: - Cabinets and Related Products sales increased 13 percent; - Plumbing Products sales increased 31 percent; - Installation and Other Services sales increased 13 percent; - Decorative Architectural Products sales increased 22 percent; and - Other Specialty Products sales increased 16 percent. - - Gross margins were 30.7 percent in the 2003 fourth quarter compared with 30.4 percent in the fourth quarter of 2002. - - Operating profit margins as reported were 8.9 percent in the fourth quarter of 2003 compared with 15.7 percent in the fourth quarter of 2002. Operating profit margins, before the goodwill impairment charge in 2003, litigation income in 2003 and 2002, and income from the planned disposition of a business in 2002, were 13.6 percent and 14.3 percent in the fourth quarters of 2003 and 2002, respectively. - - SG&A expenses as a percent of sales, including general corporate expense, were 17.1 percent compared with 16.1 percent in the 2002 fourth quarter. The increase was principally the result of increased advertising and promotion costs. - - General corporate expense was 0.9 percent of sales in the fourth quarter of 2003 compared with 1.0 percent in the comparable period of 2002. - - The Company's tax rate was 50.3 percent in the 2003 fourth quarter reflecting the impact of the goodwill impairment charge ($113 million after the tax benefit of $24 million), which had a lower tax benefit than the statutory rate. Excluding the goodwill impairment charge, the Company's tax rate was 36.8 percent in the 2003 fourth quarter compared with 34.7 percent in the 2002 fourth quarter. The increase in the tax rate is due to an increase in domestic earnings (relative to total earnings), which are taxed at a higher rate than earnings from the Company's foreign operations. MASCO CORPORATION BUSINESS AND FINANCIAL HIGHLIGHTS FOURTH QUARTER 2003 (CONCLUDED) - - The Company's diluted common shares for purposes of calculating earnings per common share were 481 million in the fourth quarter of 2003. FULL-YEAR 2003 - - Net sales from continuing operations for 2003, aided by acquisitions, increased 20 percent to over $10.9 billion compared with $9.1 billion for 2002. North American sales increased 14 percent and International sales increased 49 percent. - - Excluding acquisitions and divestitures, 2003 consolidated net sales increased 9 percent compared with 2002 sales. North American sales increased 8 percent and International sales increased 17 percent. In local currencies, International sales were flat compared with 2002. - - For the full-year 2003, income from continuing operations was $740 million or $1.51 per common share, and included a non-cash, pre-tax charge for goodwill impairment of $142 million ($118 million or $.24 per common share, after tax). Excluding such charge, income from continuing operations was $1.75 per common share. - - Sales of the Company's products continued strong in 2003 with a high single digit increase in combined internal sales growth of assembled cabinets, installation services, faucets, architectural coatings and vinyl windows. - - For the full-year 2003, key retailer sales were approximately $3.4 billion, an increase of approximately 10 percent over $3.1 billion for 2002. - - Combined sales to Home Depot, Lowe's and Wal-Mart also increased by approximately 10 percent compared with 2002. - - Sales by segment for 2003 versus 2002 were: - Cabinets and Related Products sales increased nine percent; - Plumbing Products sales increased 30 percent; - Installation and Other Services sales increased 31 percent; MASCO CORPORATION BUSINESS AND FINANCIAL HIGHLIGHTS FULL-YEAR 2003 (CONTINUED) - Decorative Architectural Products sales increased 12 percent; and - Other Specialty Products sales increased 16 percent. - - Gross margins were 30.6 percent in 2003 compared with 31.6 percent in 2002. - - Operating profit margins as reported were 13.0 percent in 2003 compared with 14.2 percent in 2002. Operating profit margins, before the goodwill impairment charge in 2003, litigation income/charge in 2003 and 2002, accelerated benefit expense in 2003, European charges in 2003 and income from the planned disposition of a business in 2002 were 14.3 percent in 2003 compared with 15.7 percent in 2002. - - Full-year 2003 gross margins and operating margins were 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. - - SG&A expenses as a percent of sales, including general corporate expense, were 17.0 percent in 2003 compared with 15.9 percent in 2002. The increase was principally the result of increased advertising, promotion and the accelerated benefit expense related to the unexpected passing of the Company's President and Chief Operating Officer. - - General corporate expense was 1.0 percent of sales in 2003 compared with 1.1 percent in 2002. MASCO CORPORATION BUSINESS AND FINANCIAL HIGHLIGHTS FULL-YEAR 2003 (CONTINUED) - - The Company's tax rate for 2003 was 38.1 percent reflecting the impact of the goodwill impairment charge ($118 million after the tax benefit of $24 million), which had a lower tax benefit than the statutory rate. Excluding the goodwill impairment charge, the Company's tax rate was 35.9 percent for 2003 compared with 33.7 percent for 2002. The increase in the tax rate is due to an increase in domestic earnings (relative to total earnings), which are taxed at a higher rate than earnings from the Company's foreign operations. The Company anticipates that its tax rate for 2004 will approximate 36 percent. - - Accounts receivable at year-end were 54 days, which were comparable with last year. - - Year-end inventory improved to 47 days for 2003 compared with 56 days for 2002. - - Accounts payable days at year-end improved to 36 days from 33 days a year ago, as the Company continues to negotiate more favorable supplier terms. - - Working capital (defined as accounts receivable and inventories less accounts payable) improved to 18.1 percent of sales at December 31, 2003 from 22.5 percent of sales at December 31, 2002. - - Capital expenditures for 2003 were $271 million or 2.5 percent of sales, compared with $285 million or 3.1 percent of sales in 2002. Depreciation and amortization was $244 million in 2003 compared with $220 million for 2002. - - During 2003, the Company retired approximately $430 million of its outstanding debt. Debt as a percent of total capitalization was 43 percent at December 31, 2003 compared with 47 percent at December 31, 2002. - - The Company repurchased approximately 37 million shares of its Common Stock during 2003, of which approximately 9 million shares were repurchased in the fourth quarter. Approximately 2 million of these shares were used for employee long-term stock incentive plans. MASCO CORPORATION BUSINESS AND FINANCIAL HIGHLIGHTS FULL-YEAR 2003 (CONCLUDED) - - In December 2003, the Company's Board of Directors authorized the purchase of up to 50 million shares of Common Stock, there are approximately 48 million shares remaining under this authorization. - - Return on invested capital was 10.6 percent on an as-reported basis for both 2003 and 2002, and 11.5 percent on an as-reconciled basis for both 2003 and 2002. The Company continues to believe it will achieve its 15 percent return on invested capital target by 2008. - - The Company's liquidity was very strong at year-end with over $1.3 billion in cash and marketable securities. In addition, the Company had unused bank lines of $2 billion. - - The Company increased its 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. - - The Company's diluted common shares for purposes of calculating earnings per common share were 491 million for the year ended December 31, 2003. - - Final court approval was received for the settlement of all class action lawsuits in the United States involving certain exterior wood coating products manufactured by the Company's subsidiary, Behr Process Corporation. MASCO CORPORATION BUSINESS AND FINANCIAL HIGHLIGHTS 2004 OUTLOOK - - The Company reviews its business portfolio on an ongoing basis as part of its corporate strategic planning and has determined that several of its European businesses are not core to the Company's long-term growth strategy and, accordingly, has embarked on a plan of disposition. These businesses had combined 2003 net sales in excess of $350 million and the Company expects net proceeds from the dispositions to exceed $300 million. The dispositions are expected to be completed within the next twelve months and the Company expects to recognize a modest net loss upon the disposition of all of these businesses. First quarter 2004 results will include a charge to reflect those businesses that are expected to be divested at a loss. Any gains resulting from the disposition of individual businesses will be recognized as such transactions are completed. - - The Company continues to experience favorable sales performance in early 2004, and, based on current business trends, believes that it will achieve record sales and earnings for 2004 with full-year earnings from continuing operations expected to be at an all-time record in a range of $1.80 to $1.90 per common share. This year's earnings guidance includes a reduction of approximately $.05 per common share resulting from the absence of earnings related to the European businesses to be divested. - - Based on current business trends, the Company anticipates that first quarter 2004 earnings from continuing operations (seasonally the lowest quarter of the year) may be in a range of $.36 to $.38 per common share (excluding any disposition charge), compared with first quarter 2003 reported earnings of $.32 per common share. - - Based on the current market price for the Company's common stock, diluted common shares for the computation of earnings per common share at January 1, 2004 are 478 million, this excludes the impact of any 2004 repurchases of common stock. MASCO CORPORATION BUSINESS AND FINANCIAL HIGHLIGHTS 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. The Company believes that certain non-GAAP performance measures and ratios, used in managing the business, may provide users of this financial information with additional meaningful comparisons between current results and results in prior periods. Non-GAAP financial measures and ratios should be viewed in addition to, and not as an alternative for, the Company's reported results. 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. ### EX-99.B 4 k82872exv99wb.txt SUPPLEMENTAL INFORMATION PACKAGE . . . EXHIBIT 99.b MASCO CORPORATION - 4TH QUARTER 2003
Page ---- 1 Condensed Statements of Income - 2003 & 2002 Quarters 2 Sales by Segment and Geographic Area - 4th Quarter 2003 & 2002 3 Sales by Segment and Geographic Area - Year 2003 & 2002 4 2003 Quarterly Segment Data - Excluding Goodwill Impairment Charge 5 2003 Quarterly Segment Data - Including Goodwill Impairment Charge 6 2002 Quarterly Segment Data 7 Other Income (Expense), Net 8 Consolidated Statements of Income - Three Months Ended December 31, 2003 & 2002 9 Consolidated Statements of Income - Years Ended December 31, 2003 & 2002 10 Consolidated Balance Sheets GAAP Reconciliations: 11 Sales Growth Excluding Acquisitions, Divestitures & International Currency - QTR 12 Sales Growth Excluding Acquisitions, Divestitures & International Currency - YTD 13 Operating Profit, Net Income and E.P.S. for the Year Ended December 31, 2002 14 Net Operating Profit and Shareholders' Equity 15 Net Operating Profit and Margins 16 Discontinued Operations - Selected Financial Data
MASCO CORPORATION CONDENSED STATEMENTS OF INCOME 2003 AND 2002 - BY QUARTER RESTATED FOR DISCONTINUED OPERATIONS (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
2003 -------------------------------------------------------- YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1 ---- ------ ------ ------ ------ Net Sales: - North America $ 8,763 $ 2,269 $ 2,369 $ 2,198 $ 1,927 - International 2,173 593 549 526 505 -------- -------- -------- -------- -------- - Consolidated 10,936 2,862 2,918 2,724 2,432 Cost of Sales 7,586 1,982 2,015 1,889 1,700 -------- -------- -------- -------- -------- Gross Profit 3,350 880 903 835 732 (Gross Margin) 30.6% 30.7% 30.9% 30.7% 30.1% S,G&A Expense (before GCE & Benefit (Income) Expense) 1,728 463 448 428 389 (S,G&A Expense as a % of Sales) 15.8% 16.2% 15.4% 15.7% 16.0% Operating Profit (before GCE, Litigation (Income) Charge, Benefit (Income) Expense, Reversal of Disposition Charge & Goodwill Impairment Charge) 1,622 417 455 407 343 (Operating Margin) 14.8% 14.6% 15.6% 14.9% 14.1% - North America 1,433 353 431 373 276 (Margin) 16.4% 15.6% 18.2% 17.0% 14.3% - International 189 64 24 34 67 (Margin) 8.7% 10.8% 4.4% 6.5% 13.3% General Corporate Expense (GCE) 112 27 28 29 28 S,G&A Expense as a % of Sales (including GCE and Benefit (Income) Expense) 17.0% 17.1% 16.3% 16.6% 18.0% (Income) Charge Regarding Litigation Settlement, Net (72) (1) (58) - (13) Accelerated Benefit (Income) Expense 16 - - (5) 21 Reversal of Charge for the Planned Disposition of Business - - - - - Goodwill Impairment Charge 142 137 5 - - -------- -------- -------- -------- -------- Operating Profit per F/S $ 1,424 $ 254 $ 480 $ 383 $ 307 ======== ======== ======== ======== ======== Earnings per Common Share (Diluted): Income From Continuing Operations $ 1.51 $ 0.19 $ 0.53 $ 0.45 $ 0.31 Income From Discontinued Operations and Gain, Net 0.13 - 0.12 0.01 0.01 Cumulative Effect of Accounting Change, Net - - - - - -------- -------- -------- -------- -------- Net Income $ 1.64 $ 0.19 $ 0.65 $ 0.46 $ 0.32 ======== ======== ======== ======== ======== 2002 -------------------------------------------------------- YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1 ---- ------ ------ ------ ------ Net Sales: - North America $ 7,686 $ 2,008 $ 2,043 $ 1,904 $ 1,731 - International 1,463 413 404 341 305 -------- -------- -------- -------- -------- - Consolidated 9,149 2,421 2,447 2,245 2,036 Cost of Sales 6,258 1,685 1,667 1,500 1,406 -------- -------- -------- -------- -------- Gross Profit 2,891 736 780 745 630 (Gross Margin) 31.6% 30.4% 31.9% 33.2% 30.9% S,G&A Expense (before GCE & Benefit (Income) Expense) 1,361 365 344 333 319 (S,G&A Expense as a % of Sales) 14.9% 15.1% 14.1% 14.8% 15.7% Operating Profit (before GCE, Litigation (Income) Charge, Benefit (Income) Expense, Reversal of Disposition Charge & Goodwill Impairment Charge) 1,530 371 436 412 311 (Operating Margin) 16.7% 15.3% 17.8% 18.4% 15.3% - North America 1,331 312 380 366 273 (Margin) 17.3% 15.5% 18.6% 19.2% 15.8% - International 199 59 56 46 38 (Margin) 13.6% 14.3% 13.9% 13.5% 12.5% General Corporate Expense (GCE) 98 25 25 24 24 S,G&A Expense as a % of Sales (including GCE and Benefit (Income) Expense) 15.9% 16.1% 15.1% 15.9% 16.8% (Income) Charge Regarding Litigation Settlement, Net 147 (19) 166 - - Accelerated Benefit (Income) Expense - - - - - Reversal of Charge for the Planned Disposition of Business (16) (16) - - - Goodwill Impairment Charge - - - - - -------- -------- -------- -------- -------- Operating Profit per F/S $ 1,301 $ 381 $ 245 $ 388 $ 287 ======== ======== ======== ======== ======== Earnings per Common Share (Diluted): Income From Continuing Operations $ 1.29 $ 0.36 $ 0.22 $ 0.42 $ 0.31 Income From Discontinued Operations and Gain, Net 0.04 0.01 0.01 0.01 - Cumulative Effect of Accounting Change, Net (0.18) - - - (0.19) -------- -------- -------- -------- -------- Net Income $ 1.15 $ 0.37 $ 0.24 $ 0.43 $ 0.12 ======== ======== ======== ======== ========
NOTES: - - Operating results for the fourth quarter of 2003 reflect a non-cash, pre-tax charge for goodwill impairment of $137 million ($.24 per common share, after tax). - - 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 sold 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) and income from nine months of operations of $21 million ($.03 per common share, after tax). - - 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 of 2003 and 2002 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), income from continuing operations for the year 2002 was $761 million or $1.48 per common share (see page 13 for the GAAP reconciliation). Page 1 MASCO CORPORATION SALES BY SEGMENT AND GEOGRAPHIC AREA 4TH QUARTER 2003 & 2002 (DOLLARS IN MILLIONS)
4th Quarter 4th Qtr '03 ----------------- vs. 2003 2002 4th Qtr '02 ---- ---- ----------- Cabinets & Related Products $ 814 $ 722 + 13% Plumbing Products 683 523 + 31% Installation & Other Services 642 568 + 13% Decorative Architectural Products 367 302 + 22% Other Specialty Products 356 306 + 16% ------ ------ Total $2,862 $2,421 + 18% ====== ====== North America $2,269 $2,008 + 13% International, principally Europe 593 413 + 44% ------ ------ Total, as above $2,862 $2,421 + 18% ====== ======
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 13 percent, North American net sales increased 12 percent and International net sales increased 18 percent. International sales in local currencies increased two percent compared with the fourth quarter of 2002 (see page 11 for the GAAP reconciliation). Page 2 MASCO CORPORATION SALES BY SEGMENT AND GEOGRAPHIC AREA YEAR 2003 & 2002 (DOLLARS IN MILLIONS)
Year 2003 ------------------- vs. 2003 2002 2002 ---- ---- ---- Cabinets & Related Products $ 3,058 $ 2,798 + 9% Plumbing Products 2,645 2,031 + 30% Installation & Other Services 2,411 1,845 + 31% Decorative Architectural Products 1,522 1,358 + 12% Other Specialty Products 1,300 1,117 + 16% ------- ------- Total $10,936 $ 9,149 + 20% ======= ======= North America $ 8,763 $ 7,686 + 14% International, principally Europe 2,173 1,463 + 49% ------- ------- Total, as above $10,936 $ 9,149 + 20% ======= =======
NOTES: - - Net sales 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 9 percent, North American net sales increased 8 percent and International net sales increased 17 percent. International sales in local currencies were flat compared with 2002 (see page 12 for the GAAP reconciliation). Page 3 MASCO CORPORATION QUARTERLY SEGMENT DATA - 2003 EXCLUDING GOODWILL IMPAIRMENT CHARGE (DOLLARS IN MILLIONS)
Year Qtr. 4 Qtr. 3 Qtr. 2 Qtr. 1 ---- ------ ------ ------ ------ Net Sales: - Cabinets and Related Products $ 3,058 $ 814 $ 802 $ 743 $ 699 - Plumbing Products 2,645 683 683 666 613 - Installation and Other Services 2,411 642 642 585 542 - Decorative Architectural Products 1,522 367 441 413 301 - Other Specialty Products 1,300 356 350 317 277 -------- -------- -------- -------- -------- - TOTAL 10,936 2,862 2,918 2,724 2,432 ======== ======== ======== ======== ======== - North America 8,763 2,269 2,369 2,198 1,927 - International, principally Europe 2,173 593 549 526 505 -------- -------- -------- -------- -------- - TOTAL, AS ABOVE 10,936 2,862 2,918 2,724 2,432 ======== ======== ======== ======== ======== Operating Profit: - Cabinets and Related Products 447 128 122 113 84 - Plumbing Products 353 81 95 93 84 - Installation and Other Services 368 93 110 88 77 - Decorative Architectural Products 219 49 58 57 55 - Other Specialty Products 235 66 70 56 43 -------- -------- -------- -------- -------- - TOTAL 1,622 417 455 407 343 ======== ======== ======== ======== ======== - North America 1,433 353 431 373 276 - International, principally Europe 189 64 24 34 67 -------- -------- -------- -------- -------- - TOTAL, AS ABOVE 1,622 417 455 407 343 ======== ======== ======== ======== ======== General Corporate Expense (GCE) 112 27 28 29 28 (Income) Related to Litigation Settlement (72) (1) (58) - (13) Accelerated Benefit (Income) Expense, Net 16 - - (5) 21 -------- -------- -------- -------- -------- Operating Profit (after GCE and Adjustments) 1,566 391 485 383 307 Other Income (Expense), Net (208) (57) (60) (35) (56) -------- -------- -------- -------- -------- Income from Continuing Operations Before Income Taxes and Minority Interest $ 1,358 $ 334 $ 425 $ 348 $ 251 ======== ======== ======== ======== ======== Margins: - Cabinets and Related Products 14.6% 15.7% 15.2% 15.2% 12.0% - Plumbing Products 13.3% 11.9% 13.9% 14.0% 13.7% - Installation and Other Services 15.3% 14.5% 17.1% 15.0% 14.2% - Decorative Architectural Products 14.4% 13.4% 13.2% 13.8% 18.3% - Other Specialty Products 18.1% 18.5% 20.0% 17.7% 15.5% - TOTAL 14.8% 14.6% 15.6% 14.9% 14.1% - North America 16.4% 15.6% 18.2% 17.0% 14.3% - International, principally Europe 8.7% 10.8% 4.4% 6.5% 13.3% - TOTAL, AS ABOVE 14.8% 14.6% 15.6% 14.9% 14.1%
NOTES: - - Data for all quarters of 2003 exclude discontinued operations. - - Operating results for the fourth quarter of 2003 exclude a non-cash, pre-tax charge for goodwill impairment of $137 million ($.24 per common share, after tax). The charge related to certain of the Company's European business units and was allocated among the segments as follows, in millions: Cabinets - $51; Plumbing Products - $36; Decorative Architectural - $19; and Other Specialty - $31. - - Operating results reflect charges of $35 million ($.05 per common share, after tax), including $5 million for impairment of goodwill, 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. - - Operating profit and margins by segment and geographic area are before general corporate expense and exclude (income) related to litigation settlement, net. Page 4 MASCO CORPORATION QUARTERLY SEGMENT DATA - 2003 INCLUDING GOODWILL IMPAIRMENT CHARGE (DOLLARS IN MILLIONS)
Year Qtr. 4 Qtr. 3 Qtr. 2 Qtr. 1 ---- ------ ------ ------ ------ Net Sales: - Cabinets and Related Products $ 3,058 $ 814 $ 802 $ 743 $ 699 - Plumbing Products 2,645 683 683 666 613 - Installation and Other Services 2,411 642 642 585 542 - Decorative Architectural Products 1,522 367 441 413 301 - Other Specialty Products 1,300 356 350 317 277 -------- -------- -------- -------- -------- - TOTAL 10,936 2,862 2,918 2,724 2,432 ======== ======== ======== ======== ======== - North America 8,763 2,269 2,369 2,198 1,927 - International, principally Europe 2,173 593 549 526 505 -------- -------- -------- -------- -------- - TOTAL, AS ABOVE 10,936 2,862 2,918 2,724 2,432 ======== ======== ======== ======== ======== Operating Profit: - Cabinets and Related Products 396 77 122 113 84 - Plumbing Products 317 45 95 93 84 - Installation and Other Services 368 93 110 88 77 - Decorative Architectural Products 195 30 53 57 55 - Other Specialty Products 204 35 70 56 43 -------- -------- -------- -------- -------- - TOTAL 1,480 280 450 407 343 ======== ======== ======== ======== ======== - North America 1,433 353 431 373 276 - International, principally Europe 47 (73) 19 34 67 -------- -------- -------- -------- -------- - TOTAL, AS ABOVE 1,480 280 450 407 343 ======== ======== ======== ======== ======== General Corporate Expense (GCE) 112 27 28 29 28 (Income) Related to Litigation Settlement (72) (1) (58) - (13) Accelerated Benefit (Income) Expense, Net 16 - - (5) 21 -------- -------- -------- -------- -------- Operating Profit (after GCE and Adjustments) 1,424 254 480 383 307 Other Income (Expense), Net (208) (57) (60) (35) (56) -------- -------- -------- -------- -------- Income from Continuing Operations Before Income Taxes and Minority Interest $ 1,216 $ 197 $ 420 $ 348 $ 251 ======== ======== ======== ======== ======== Margins: - Cabinets and Related Products 12.9% 9.5% 15.2% 15.2% 12.0% - Plumbing Products 12.0% 6.6% 13.9% 14.0% 13.7% - Installation and Other Services 15.3% 14.5% 17.1% 15.0% 14.2% - Decorative Architectural Products 12.8% 8.2% 12.0% 13.8% 18.3% - Other Specialty Products 15.7% 9.8% 20.0% 17.7% 15.5% - TOTAL 13.5% 9.8% 15.4% 14.9% 14.1% - North America 16.4% 15.6% 18.2% 17.0% 14.3% - International, principally Europe 2.2% -12.3% 3.5% 6.5% 13.3% - TOTAL, AS ABOVE 13.5% 9.8% 15.4% 14.9% 14.1%
NOTES: - - Data for all quarters of 2003 exclude discontinued operations. - - Operating results for the fourth quarter of 2003 reflect a non-cash, pre-tax charge for goodwill impairment of $137 million ($.24 per common share, after tax). The charge related to certain of the Company's European business units and was allocated among the segments as follows, in millions: Cabinets - $51; Plumbing Products - $36; Decorative Architectural - $19; and Other Specialty - $31. - - Operating results reflect charges of $35 million ($.05 per common share, after tax), including $5 million for impairment of goodwill, 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. - - Operating profit and margins by segment and geographic area are before general corporate expense and exclude (income) related to litigation settlement, net. Page 5 MASCO CORPORATION QUARTERLY SEGMENT DATA - 2002 (DOLLARS 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, Net 1,301 381 245 388 287 Other Income (Expense), Net (300) (90) (76) (71) (63) ------- ------- ------- ------- ------- Income from Continuing Operations Before Income Taxes and Minority Interest $ 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 and margins by segment and geographic area are before general corporate expense and exclude the 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 $16 million of income related to the reversal of a charge for the 2000 planned disposition of a business. Excluding such income, operating profit margins in this segment were 14.5% and 15.7% for the quarter and year ended December 31, 2002, respectively. Page 6 MASCO CORPORATION OTHER INCOME (EXPENSE), NET 2003 AND 2002 QUARTERS (DOLLARS IN MILLIONS)
2003 --------------------------------------------------- YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1 ---- ------ ------ ------ ------ Interest Expense $(262.0) $(60.2) $ (66.8) $ (67.4) $ (67.6) Equity Earnings, Net 0.5 - - - 0.5 Income from Cash and Cash Investments 8.7 2.0 1.8 2.4 2.5 Other Interest Income 8.0 3.0 2.1 1.1 1.8 Income (Loss) from Financial Investments 64.8 13.3 18.9 19.1 13.5 Loss on Early Retirement of Debt (6.9) (4.2) (2.7) - - Gain from Sale of Equity Investment 4.8 - - 4.8 - Impairment Charge for Long-Term Investments (19.2) (9.9) (9.3) - - Other, Net (6.4) (1.0) (4.3) 5.4 (6.5) ------- ------ ------- ------- ------- Total Other Income (Expense), Net $(207.7) $(57.0) $ (60.3) $ (34.6) $ (55.8) ======= ====== ======= ======= ======= 2002 --------------------------------------------------- YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1 ------- ------ ------- ------- ------- Interest Expense $(237.0) $(66.6) $ (61.1) $ (54.2) $ (55.1) Equity Earnings, Net 14.3 1.3 5.7 5.4 1.9 Income from Cash and Cash Investments 7.8 3.9 2.1 1.1 0.7 Other Interest Income 6.0 2.7 1.8 0.6 0.9 Income (Loss) from Financial Investments (35.5) (4.1) (8.4) (15.4) (7.6) Loss on Early Retirement of Debt - - - - - Gain from Sale of Equity Investment - - - - - Impairment Charge for Long-Term Investments (24.0) (24.0) - - - Other, Net (31.7) (2.9) (16.4) (8.4) (4.0) ------- ------ ------- ------- ------- Total Other Income (Expense), Net $(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 $23 million of net realized gains related to the sale of marketable securities for the twelve months ended December 31, 2003. Page 7 MASCO CORPORATION CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED DECEMBER 31, 2003 AND 2002 (IN MILLIONS, EXCEPT PER SHARE DATA)
Three Months Ended As a Percent of Sales December 31 Three Months Ended December 31 % ------------------ ------------------------------ Line Change 2003 2002 2003 2002 - ---- ------ ---- ---- ---- ---- 1 Net Sales 18% $ 2,862 $ 2,421 100.0% 100.0% 2 Cost of Sales 18% 1,982 1,685 69.3% 69.6% ------- ------- ----- ----- 3 Gross Profit 20% 880 736 30.7% 30.4% ======= ======= ===== ===== Operating Profit: 4 - Before GCE, Litigation (Income), Income from Planned Disposition and Goodwill Impairment Charge (3-7) 12% 417 371 14.6% 15.3% 5 - After GCE, Litigation (Income), Income from Planned Disposition and Goodwill Impairment Charge (3-8-9-10-11) -33% 254 381 8.9% 15.7% S,G&A Expense: 6 - General Corporate Expense (GCE) 8% 27 25 0.9% 1.0% 7 - All Other 27% 463 365 16.2% 15.1% ------- ------- ----- ----- 8 - Total S,G&A Expense 26% 490 390 17.1% 16.1% ======= ======= ===== ===== 9 (Income) for Litigation Settlement (1) (19) 0.0% -0.8% 10 (Income) from Planned Disposition of Business (C) - (16) 0.0% -0.7% 11 Goodwill Impairment Charge (A) 137 - 4.8% 0.0% 12 Other Income (Expense), Net -37% (57) (90) -2.0% -3.7% 13 Income from Continuing Operations Before Income Taxes and Minority Interest (5+12) -32% 197 291 6.9% 12.0% 14 Income Taxes -2% 99 101 3.5% 4.2% (Tax Rate) 50.3% 34.7% ------- ------- ----- ----- 15 Income from Continuing Operations Before Minority Interest -48% 98 190 3.4% 7.8% 16 Minority Interest (B) (5) - -0.2% 0.0% ------- ------- ----- ----- 17 Income from Continuing Operations -51% 93 190 3.2% 7.8% 18 (Expense) Income from Discontinued Operations, Net of Income Taxes (1) 5 0.0% 0.2% ------- ------- ----- ----- Net Income -53% $ 92 $ 195 3.2% 8.1% ======= ======= ===== ===== Earnings Per Common Share (Diluted): Income from Continuing Operations $ 0.19 $ 0.36 (Expense) Income from Discontinued Operations, Net of Income Taxes (0.00) 0.01 ------- ------- Net Income -48% $ 0.19 $ 0.37 ======= ======= Average (Diluted) Common Shares -9% 481 529
NOTES: Data for 2002 include the restatement for discontinued operations. (A) The Company completed the goodwill impairment testing in the fourth quarter of 2003 and recorded a non-cash, pre-tax charge of $137 million ($113 million or $.24 per common share, after tax) related to certain European business units. (B) The Company owns 64 percent of Hansgrohe AG; this line is the reduction of income to reflect the minority interest. (C) In the fourth quarter of 2002, the Company recognized $16 million of income relating to a plan developed in 2000 for the disposition of businesses. Page 8 MASCO CORPORATION CONSOLIDATED STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2003 AND 2002 (IN MILLIONS, EXCEPT PER SHARE DATA)
Twelve Months Ended As a Percent of Sales December 31 Twelve Months Ended December 31 % ------------------- ------------------------------- Line Change 2003 2002 2003 2002 - ---- ------ ---- ---- ---- ---- 1 Net Sales 20% $ 10,936 $ 9,149 100.0% 100.0% 2 Cost of Sales 21% 7,586 6,258 69.4% 68.4% -------- ------- ----- ----- 3 Gross Profit 16% 3,350 2,891 30.6% 31.6% -------- ------- ----- ----- Operating Profit (B): 4 - Before GCE, Benefit Expense, Net, Litigation (Income) Charge, Income from Planned Disposition and Goodwill Impairment Charge (3-8) 6% 1,622 1,530 14.8% 16.7% 5 - After GCE, Benefit Expense, Net, Litigation (Income) Charge, Income from Planned Disposition and Goodwill Impairment Charge (3-9-10-11-12) 9% 1,424 1,301 13.0% 14.2% S,G&A Expense: 6 - General Corporate Expense (GCE) 14% 112 98 1.0% 1.1% 7 - Accelerated Benefit Expense, Net (E) 16 - 0.1% 0.0% 8 - All Other 27% 1,728 1,361 15.8% 14.9% -------- ------- ----- ----- 9 - Total S,G&A Expense 27% 1,856 1,459 17.0% 15.9% -------- ------- ----- ----- 10 (Income) Charge for Litigation Settlement, Net (C) (72) 147 -0.7% 1.6% 11 (Income) from Planned Disposition of Business (F) - (16) 0.0% 0.2% 12 Goodwill Impairment Charge (A) 142 - 1.3% 0.0% 13 Other Income (Expense), Net -31% (208) (300) -1.9% -3.3% 14 Income from Continuing Operations Before Income Taxes and Minority Interest (5+13) 21% 1,216 1,001 11.1% 10.9% 15 Income Taxes 37% 463 337 4.2% 3.7% (Tax Rate) 38.1% 33.7% -------- ------- ----- ----- 16 Income from Continuing Operations Before Minority Int 13% 753 664 6.9% 7.3% 17 Minority Interest (D) (13) - -0.1% 0.0% -------- ------- ----- ----- 18 Income from Continuing Operations 11% 740 664 6.8% 7.3% 19 Income from Discontinued Operations and Gain, Net of Income Taxes 66 18 0.6% 0.2% 20 Cumulative Effect of Accounting Change, Net - (92) 0.0% -1.0% -------- ------- ----- ----- Net Income 37% $ 806 $ 590 7.4% 6.4% ======== ======= ===== ===== Earnings Per Common Share (Diluted): Income from Continuing Operations $ 1.51 $ 1.29 Income from Discontinued Operation and Gain, Net of Income Taxes 0.13 0.04 Cumulative Effect of Accounting Change, Net - (0.18) -------- ------- Net Income 43% $ 1.64 $ 1.15 ======== ======= Average (Diluted) Common Shares -5% 491 514
NOTES: Data for 2003 and 2002 include the restatement for discontinued operations. (A) Operating results for 2003 reflect a non-cash, pre-tax charge for goodwill impairment of $142 million ($118 million or $.24 per common share, after tax), including $5 million recorded in the third quarter of 2003. (B) Operating results for 2003 reflect charges of $50 million ($.07 per common share, after tax) for a business unit in the Decorative Architectural Products segment; and $4 million ($.01 per common share, after tax) for a business unit in the Plumbing Products segment. (C) Results for 2003 and 2002 include $72 million and $(147) million of income (expense), respectively, related to the litigation settlement regarding the Company's subsidiary, Behr Process Corporation, in the Decorative Architectural Products segment. (D) The Company owns 64 percent of Hansgrohe AG; this line is the reduction of income to reflect the minority interest. (E) 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. (F) In the fourth quarter of 2002, the Company recognized $16 million of income relating to a plan developed in 2000 for the disposition of businesses. Page 9 MASCO CORPORATION CONSOLIDATED BALANCE SHEETS (DOLLARS IN MILLIONS)
December 31, December 31, 2003 2002 ------------ ------------ ASSETS Current Assets: Cash and Cash Investments $ 795 $ 1,067 Receivables 1,674 1,546 Inventories 1,019 1,056 Prepaid Expenses and Other 316 281 ------------ ------------ Total Current Assets 3,804 3,950 Property and Equipment, Net 2,339 2,315 Goodwill 4,491 4,297 Other Intangible Assets, Net 344 354 Other Assets 1,171 1,134 ------------ ------------ Total Assets $ 12,149 $ 12,050 ============ ============ LIABILITIES Current Liabilities: Notes Payable $ 334 $ 321 Accounts Payable 715 541 Accrued Liabilities 1,050 1,070 ------------ ------------ Total Current Liabilities 2,099 1,932 Long-Term Debt 3,848 4,316 Deferred Income Taxes and Other 746 508 ------------ ------------ Total Liabilities 6,693 6,756 SHAREHOLDERS' EQUITY 5,456 5,294 ------------ ------------ Total Liabilities and Shareholders' Equity $ 12,149 $ 12,050 ============ ============
Page 10 MASCO CORPORATION GAAP RECONCILIATION OF SALES GROWTH EXCLUDING EFFECT OF ACQUISITIONS, DIVESTITURES & CURRENCY TRANSLATION (DOLLARS IN MILLIONS)
Three Months Ended December 31 ------------------------------ 2003 2002 ---- ---- Consolidated Net Sales, as reported $ 2,862 $ 2,421 - Acquisitions (130) - - Divestitures (A) - - ------- ------- Consolidated Net Sales (excl. acquisitions & divestitures) $ 2,732 $ 2,421 ======= ======= North American Net Sales, as reported $ 2,269 $ 2,008 - Acquisitions (25) - - Divestitures (A) - - ------- ------- North American Net Sales (excl. acquisitions & divestitures) $ 2,244 $ 2,008 ======= ======= International Net Sales, as reported $ 593 $ 413 - Acquisitions (105) - - Divestitures (A) - - ------- ------- International Net Sales (excl. acquisitions & divestitures) 488 413 - Currency Translation (65) - ------- ------- International Net Sales (excl. acquisitions, divestitures & currency) $ 423 $ 413 ======= =======
NOTES: (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 period. The Company presents this information in order to assess how the underlying businesses performed before taking into account currency fluctuations. Page 11 MASCO CORPORATION GAAP RECONCILIATION OF SALES GROWTH EXCLUDING EFFECT OF ACQUISITIONS, DIVESTITURES & CURRENCY TRANSLATION (DOLLARS IN MILLIONS)
Twelve Months Ended December 31 ------------------------------- 2003 2002 ---- ---- Consolidated Net Sales, as reported $10,936 $ 9,149 - Acquisitions (1,334) (320) - Divestitures (A) - (13) ------- ------- Consolidated Net Sales (excl. acquisitions & divestitures) $ 9,602 $ 8,816 ======= ======= North American Net Sales, as reported $ 8,763 $ 7,686 - Acquisitions (743) (213) - Divestitures (A) - (13) ------- ------- North American Net Sales (excl. acquisitions & divestitures) $ 8,020 $ 7,460 ======= ======= International Net Sales, as reported $ 2,173 $ 1,463 - Acquisitions (591) (107) - Divestitures (A) - - ------- ------- International Net Sales (excl. acquisitions & divestitures) 1,582 1,356 - Currency Translation (228) - ------- ------- International Net Sales (excl. acquisitions, divestitures & currency) $ 1,354 $ 1,356 ======= =======
NOTES: (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 12 MASCO CORPORATION GAAP RECONCILIATION OF OPERATING PROFIT, NET INCOME AND EARNINGS PER COMMON SHARE YEAR ENDED DECEMBER 31, 2002 (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
OPERATING NET EPS PROFIT INCOME ------ --------- -------- As Reported, Excluding Discontinued Operations $ 1.11 $ 1,301 $ 572 Litigation Charge, Net 0.18 147 92 Goodwill Impairment Charge 0.18 92 (Income) from Planned Disposition of Business (0.02) (16) (10) Impairment Charge for Non-Operating Assets 0.03 15 ------ --------- ------ As Reconciled $ 1.48 $ 1,432 $ 761 ====== ========= ======
The Company believes that certain non-GAAP performance measures and ratios, used in managing the business, may provide users of this financial information with additional meaningful comparisons between current results and results in prior periods. Non-GAAP financial measures and ratios should be viewed in addition to, and not as an alternative for, the Company's reported results. Page 13 MASCO CORPORATION GAAP RECONCILIATION OF NET OPERATING PROFIT AND SHAREHOLDERS' EQUITY (DOLLARS IN MILLIONS)
YEAR ENDED DECEMBER 31 ------------------ 2003 2002 ---- ---- Net Operating Profit, Excluding Discontinued Operations $ 1,424 $ 1,301 Goodwill Impairment Charge 142 - European Charges 54 - Accelerated Benefit Expense 16 - Income from Planned Disposition of a Business - (16) Behr Litigation (Income) Charge, Net (72) 147 ------- ------- Net Operating Profit, As Reconciled $ 1,564 $ 1,432 ======= =======
YEAR ENDED DECEMBER 31 ------------------ 2003 2002 ---- ---- Shareholders' Equity, As Reported $ 5,456 $ 5,294 Goodwill Impairment Charge (after tax) 118 92 European Charges (after tax) 38 - Accelerated Benefit Expense (after tax) 10 - Income from Planned Disposition of a Business (after tax) - (10) Behr Litigation (Income) Charge, Net (after tax) (45) 92 ------- ------- Shareholders' Equity, As Reconciled $ 5,577 $ 5,468 ======= =======
The Company believes that certain non-GAAP performance measures and ratios, used in managing the business, may provide users of this financial information with additional meaningful comparisons between current results and results in prior periods. Non-GAAP financial measures and ratios should be viewed in addition to, and not as an alternative for, the Company's reported results. Page 14 MASCO CORPORATION GAAP RECONCILIATION OF NET OPERATING PROFIT AND MARGINS (DOLLARS IN MILLIONS)
TWELVE MONTHS ENDED DECEMBER 31 ------------------------------------------ 2003 2002 ------------------ ------------------ Net Operating Profit, Excluding Discontinued Operations $ 1,424 13.0% $ 1,301 14.2% Goodwill Impairment Charge 142 - European Charges 54 - Accelerated Benefit Expense 16 - Income from Planned Disposition of a Business - (16) Behr Litigation (Income) Charge, Net (72) 147 ------- ------- Net Operating Profit, As Reconciled $ 1,564 14.3% $ 1,432 15.7% ======= =======
THREE MONTHS ENDED DECEMBER 31 ------------------------------------------ 2003 2002 ------------------ ------------------ Net Operating Profit, Excluding Discontinued Operations $ 254 8.9% $ 381 15.7% Goodwill Impairment Charge 137 - Income from Planned Disposition of a Business - (16) Behr Litigation (Income) (1) (19) ------- ------- Net Operating Profit, As Reconciled $ 390 13.6% $ 346 14.3% ======= =======
The Company believes that certain non-GAAP performance measures and ratios, used in managing the business, may provide users of this financial information with additional meaningful comparisons between current results and results in prior periods. Non-GAAP financial measures and ratios should be viewed in addition to, and not as an alternative for, the Company's reported results. Page 15 MASCO CORPORATION DISCONTINUED OPERATIONS - SELECTED FINANCIAL DATA (DOLLARS IN MILLIONS)
Three Months Ended Twelve Months Ended December 31 December 31 --------------- --------------- 2003 2002 2003 2002 ---- ---- ---- ---- Net Sales $ - $ 67 $198 $271 ==== ==== ==== ==== Income Before Income Taxes $ - $ 8 $ 21 $ 29 (Expense) Gain on Disposal of Discontinued Operations (1) - 89 - Income Taxes - (3) (44) (11) ---- ---- ---- ---- (Expense) Income and Gain From Discontinued Operations, Net $ (1) $ 5 $ 66 $ 18 ==== ==== ==== ====
Data for 2003 represent results through the first nine months for businesses divested at September 30, 2003. Page 16 -----END PRIVACY-ENHANCED MESSAGE-----