-----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, It/VL2he9Kd2Vopnn4hWVvL5IyNEvvbjmjx3kpt9uwGMFiFa8PORNYEHJ9dJbiS0 X30Pe1WFY3WX1Je9lcBVrw== 0000950124-04-002050.txt : 20040505 0000950124-04-002050.hdr.sgml : 20040505 20040505161002 ACCESSION NUMBER: 0000950124-04-002050 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040505 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MASCO CORP /DE/ CENTRAL INDEX KEY: 0000062996 STANDARD INDUSTRIAL CLASSIFICATION: MILLWOOD, VENEER, PLYWOOD & STRUCTURAL WOOD MEMBERS [2430] IRS NUMBER: 381794485 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05794 FILM NUMBER: 04781747 BUSINESS ADDRESS: STREET 1: 21001 VAN BORN RD CITY: TAYLOR STATE: MI ZIP: 48180 BUSINESS PHONE: 3132747400 MAIL ADDRESS: STREET 1: 21001 VAN BORN ROAD CITY: TAYLOR STATE: MI ZIP: 48180 FORMER COMPANY: FORMER CONFORMED NAME: MASCO SCREW PRODUCTS CO DATE OF NAME CHANGE: 19731025 10-Q 1 k84947e10vq.txt QUARTERLY REPORT FOR PERIOD ENDED MARCH 31, 2004 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTER ENDED MARCH 31, 2004. COMMISSION FILE NUMBER 1-5794 MASCO CORPORATION - -------------------------------------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 38-1794485 - -------------------------------------------------------------------------------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 21001 VAN BORN ROAD, TAYLOR, MICHIGAN 48180 - -------------------------------------------------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (313) 274-7400 - -------------------------------------------------------------------------------- (TELEPHONE NUMBER) INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ] INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS DEFINED IN EXCHANGE ACT RULE 12B-2). YES [X] NO [ ] INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICAL DATE.
SHARES OUTSTANDING AT CLASS MAY 1, 2004 ----- --------------------- COMMON STOCK, PAR VALUE $1 PER SHARE 438,029,000
MASCO CORPORATION INDEX
PAGE NO. -------- Part I. Financial Information Item 1. Financial Statements: Condensed Consolidated Balance Sheets - March 31, 2004 and December 31, 2003 1 Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2004 and 2003 2 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2004 and 2003 3 Notes to Condensed Consolidated Financial Statements 4-13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14-18 Item 4. Controls and Procedures 19 Part II. Other Information 20-21 Item 1. Legal Proceedings Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Securities Item 6. Exhibits and Reports on Form 8-K Signature
MASCO CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) MARCH 31, 2004 AND DECEMBER 31, 2003 (DOLLARS IN MILLIONS EXCEPT SHARE DATA)
MARCH 31, DECEMBER 31, 2004 2003 --------- ------------ ASSETS Current assets: Cash and cash investments $ 624 $ 795 Accounts and notes receivable, net 1,820 1,674 Prepaid expenses and other 270 316 Inventories: Raw material 371 405 Finished goods 528 472 Work in process 134 142 ------- ------- 1,033 1,019 ------- ------- Total current assets 3,747 3,804 Property and equipment, net 2,153 2,339 Goodwill 4,417 4,491 Other intangible assets, net 338 344 Assets held for sale 331 --- Other assets 1,263 1,171 ------- ------- Total assets $12,249 $12,149 ======= ======= LIABILITIES Current liabilities: Notes payable $ 313 $ 334 Accounts payable 808 715 Accrued liabilities 986 1,050 ------- ------- Total current liabilities 2,107 2,099 Long-term debt 4,197 3,848 Liabilities held for sale 99 --- Deferred income taxes and other 719 746 ------- ------- Total liabilities 7,122 6,693 ------- ------- Commitments and contingencies SHAREHOLDERS' EQUITY Preferred shares, par value $1 per share Authorized shares: 1,000,000; issued: 2004 - 20,000; 2003 - 20,000 --- --- Common shares, par value $1 per share Authorized shares: 1,400,000,000; issued: 2004 - 442,730,000; 2003 - 458,380,000 443 458 Paid-in capital 1,051 1,443 Retained earnings 3,394 3,299 Accumulated other comprehensive income (loss) 402 421 Less: Restricted stock awards (163) (165) ------- ------- Total shareholders' equity 5,127 5,456 ------- ------- Total liabilities and shareholders' equity $12,249 $12,149 ======= =======
See notes to condensed consolidated financial statements. 1 MASCO CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003 (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
THREE MONTHS ENDED MARCH 31, ---------------------------- 2004 2003 ---------- ---------- Net sales $2,806 $2,352 Cost of sales 1,955 1,644 ------ ------ Gross profit 851 708 Selling, general and administrative expenses 485 420 (Income) regarding litigation settlement (21) (13) ------ ------ Operating profit 387 301 ------ ------ Other income (expense), net: Interest expense (53) (67) Other, net 52 13 ------ ------ (1) (54) ------ ------ Income from continuing operations before income taxes and minority interest 386 247 Income taxes 140 85 ------ ------ Income from continuing operations before minority interest 246 162 Minority interest 5 4 ------ ------ Income from continuing operations 241 158 (Loss) income from discontinued operations, after income taxes (73) 8 ------ ------ Net income $ 168 $ 166 ====== ====== Earnings per common share: Basic: Income from continuing operations $ .53 $ .32 (Loss) income from discontinued operations, after income taxes (.16) .02 ------ ------ Net income $ .37 $ .34 ====== ====== Diluted: Income from continuing operations $ .52 $ .30 (Loss) income from discontinued operations, after income taxes (.16) .01 ------ ------ Net income $ .36 $ .32 ====== ====== Cash dividends declared and paid per common share $ .16 $ .14 ====== ======
See notes to condensed consolidated financial statements. 2 MASCO CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003 (DOLLARS IN MILLIONS)
THREE MONTHS ENDED MARCH 31, ------------------ 2004 2003 ------ ------ CASH FLOWS FROM (FOR) OPERATING ACTIVITIES: Cash provided by operations $ 246 $ 236 (Increase) in receivables (236) (113) (Increase) in inventories (73) (59) Increase in accounts payable and accrued liabilities, net 161 51 ------ ------ Total cash from operating activities 98 115 ------ ------ CASH FLOWS FROM (FOR) FINANCING ACTIVITIES: Issuance of notes, net of issuance costs 299 --- Increase in debt 6 11 Payment of debt (16) (37) Retirement of notes (5) --- Proceeds from settlement of swaps 55 --- Purchase of Company common stock for: Retirement (422) (214) Long-term stock incentive award plan --- (48) Issuance of Company common stock 10 --- Cash dividends paid (76) (71) ------ ------ Total cash (for) financing activities (149) (359) ------ ------ CASH FLOWS FROM (FOR) INVESTING ACTIVITIES: Capital expenditures (55) (78) Purchases of marketable securities (169) (43) Sales (purchases) of other investments, net 13 (10) Proceeds from disposition of marketable securities 109 99 Acquisition of companies, net of cash acquired --- (52) Decrease in long-term notes receivable 1 12 Other, net 16 (8) ------ ------ Total cash (for) investing activities (85) (80) ------ ------ Effect of exchange rates on cash and cash investments (3) 6 ------ ------ CASH AND CASH INVESTMENTS: Decrease for the quarter (139) (318) Cash held by discontinued operations (32) --- At January 1 795 1,067 ------ ------ At March 31 $ 624 $ 749 ====== ======
See notes to condensed consolidated financial statements. 3 MASCO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) A. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, of a normal recurring nature, necessary to present fairly its financial position as at March 31, 2004 and the results of operations and changes in cash flows for the three months ended March 31, 2004 and 2003. The condensed consolidated balance sheet at December 31, 2003 was derived from audited financial statements. Certain prior-year amounts have been reclassified to conform to the 2004 presentation in the condensed consolidated financial statements. The results of operations related to discontinued operations have been reclassified and separately stated in the accompanying condensed consolidated statements of income for 2004 and 2003. In the Company's condensed consolidated balance sheet as at March 31, 2004, the assets and liabilities of these businesses held for sale have been reclassified and separately stated. The assets and liabilities of these businesses held for sale as at December 31, 2003 have not been reclassified in the related accompanying condensed consolidated balance sheet. In the Company's condensed consolidated statements of cash flows for the three months ended March 31, 2004 and 2003, the cash flows of discontinued operations are not separately classified. 4 MASCO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) Note A - concluded: STOCK OPTIONS AND AWARDS. The Company has implemented the fair value method of accounting for stock-based compensation prescribed by Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation" effective January 1, 2003. The Company is using the prospective method, as defined by SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment to SFAS No. 123," for determining stock-based compensation expense. Accordingly, options granted, modified or settled subsequent to January 1, 2003 are accounted for using the fair value method, and options granted prior to January 1, 2003 continue to be accounted for using the intrinsic value method. In the first quarter of 2004, 155,000 option shares, including restoration option shares, were awarded. The following table illustrates the pro forma effect on net income and earnings per common share as if the fair value method were applied to all previously issued and outstanding and unvested stock options, in millions except per common share data:
THREE MONTHS ENDED MARCH 31, ------------------ 2004 2003 ---- ---- Net income, as reported $168 $166 Add: Stock-based employee compensation expense included in reported net income, net of tax 10 15 Deduct: Stock-based employee compensation expense, net of tax (10) (15) Stock-based employee compensation expense determined under the fair value method for stock options granted prior to 2003, net of tax (3) (3) ---- ---- Pro forma net income $165 $163 ==== ==== Earnings per common share: Basic as reported $.37 $.34 Basic pro forma $.36 $.33 Diluted as reported $.36 $.32 Diluted pro forma $.35 $.31
B. In the first quarter of 2004, the Company determined that several European businesses are not core to the Company's long-term growth strategy and, accordingly, has embarked on a plan to sell these businesses. The dispositions are expected to be completed within the next twelve months. In the first quarter of 2004, the Company recognized a charge for those businesses that are expected to be divested at a loss. Any gains resulting from the disposition of individual businesses, which are expected later this year, will be recognized as such transactions are completed and are expected to substantially offset the charge recognized in the first quarter of 2004. In the third quarter of 2003, the Company completed the sale of its Baldwin Hardware, Weiser Lock and Marvel Group divisions. In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the Company has accounted for the 2003 dispositions and the 2004 planned dispositions as discontinued operations. 5 MASCO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) Note B - concluded: Selected financial information for these discontinued operations is as follows for the three months ended March 31, 2004 and 2003, in millions:
THREE MONTHS ENDED MARCH 31, ------------------ 2004 2003 ----- ----- Net sales $ 95 $ 147 ===== ===== Income before income taxes $ 6 $ 13 Impairment of assets held for sale (64) -- Income taxes (15) (5) ----- ----- (Loss) income from discontinued operations, after income taxes $ (73) $ 8 ===== =====
The after-tax charge for the impairment of assets held for sale is $76 million or $.16 per common share. The unusual relationship between income tax expense and income before income taxes (including the loss on disposition of businesses) in 2004 results primarily from the expected loss providing no current tax benefit in the countries where the loss is anticipated to be incurred and from the expensing of deferred tax assets of the discontinued operations which are no longer expected to be realized. In the first quarter of 2004, the Company also recorded approximately $2 million of severance and termination benefit expenses, included in income before income taxes from discontinued operations. The Company expects such costs to approximate $10 million in aggregate, which will be recognized over the next twelve months. The impairment of assets held for sale primarily includes the write-downs of goodwill of $29 million and fixed assets of $35 million. Total assets and liabilities held for sale consist primarily of the following at March 31, 2004 (after the impairment charge recorded in the first quarter of 2004), in millions: Accounts receivable $ 76 Inventories 54 Property and equipment, net 125 Goodwill 37 Other assets 39 ---- Total assets $331 ==== Accounts payable $ 38 Accrued salaries, wages and related benefits 27 Other accrued expenses 34 ---- Total liabilities $ 99 ====
The discontinued operations were previously included in each of the Company's segments, except the Installation and Other Services segment. 6 MASCO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) C. The changes in the carrying amount of goodwill for the quarter ended March 31, 2004, by segment, are as follows, in millions:
BALANCE HELD FOR BALANCE DEC. 31, 2003 ADDITIONS SALE(A) OTHER(B) MAR. 31, 2004 ------------- --------- -------- -------- ------------- Cabinets and Related Products $ 708 $ --- $ (63) $(10) $ 635 Plumbing Products 498 --- --- 1 499 Installation and Other Services 1,701 --- --- --- 1,701 Decorative Architectural Products 398 --- --- 3 401 Other Specialty Products 1,186 --- (3) (2) 1,181 ------ ----- ----- ---- ------ Total $4,491 $ --- $ (66) $ (8) $4,417 ====== ===== ===== ==== ======
(A) During the first quarter of 2004, the Company reclassified the goodwill related to businesses held for sale. In late March 2004, the Company recognized a charge for those businesses expected to be divested at a loss; the charge included a write-down of goodwill of $29 million. (B) Other principally includes foreign currency translation adjustments, reclassifications and other purchase price adjustments related to the finalization of certain purchase price allocations. Other indefinite-lived intangible assets include registered trademarks of $255 million at March 31, 2004. The carrying value of the Company's definite-lived intangible assets is $83 million at March 31, 2004 (net of accumulated amortization of $50 million) and principally includes customer relationships and non-compete agreements. D. Depreciation and amortization expense is $59 million and $55 million for the three months ended March 31, 2004 and 2003, respectively. E. The Company maintains investments in marketable securities (including marketable equity securities and bond funds) and a number of private equity funds, principally as part of its tax planning strategies, as any gains enhance the utilization of tax capital loss carryforwards. Included in other long-term assets are the following financial investments, in millions:
MARCH 31, DECEMBER 31, 2004 2003 -------- ------------ Marketable equity securities $ 482 $392 Bond funds 128 125 Private equity funds 329 332 Metaldyne Corporation 78 76 TriMas Corporation 25 25 Other investments 9 9 ------ ---- Total $1,051 $959 ====== ====
7 MASCO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) Note E - concluded: The Company's investments in marketable equity securities and bond funds at March 31, 2004 and December 31, 2003 are as follows, in millions:
PRE-TAX --------------------- UNREALIZED UNREALIZED RECORDED COST BASIS GAINS LOSSES BASIS ---------- ---------- ---------- -------- MARCH 31, 2004 Marketable equity securities $437 $46 $(1) $482 Bond funds $117 $11 $-- $128 DECEMBER 31, 2003 Marketable equity securities $361 $35 $(4) $392 Bond funds $115 $10 $-- $125
The Company has investments in over 100 different marketable equity securities and bond funds at March 31, 2004; the unrealized loss is related to fourteen marketable equity securities with a cost basis of $36 million. These marketable equity securities have primarily been in an unrealized loss position for less than three months. Based on the Company's review, the Company considers the unrealized losses related to these investments to be temporary. Income from financial investments is included in other, net within other income (expense), net, and is summarized as follows, in millions:
THREE MONTHS ENDED MARCH 31, ------------------ 2004 2003 ---- ---- Realized gains from marketable securities $ 19 $ 8 Realized losses from marketable securities (3) -- Dividend income from marketable securities 5 5 Income (expense) from other investments, net 13 (1) Dividend income from other investments 2 2 ---- ---- Income from financial investments, net $ 36 $ 14 ==== ====
F. The Company's total comprehensive income is as follows, in millions:
THREE MONTHS ENDED MARCH 31, ------------------ 2004 2003 ---- ---- Net income $168 $166 Other comprehensive income (loss): Cumulative translation adjustments (28) 39 Unrealized gain (loss) on marketable securities, net 9 (17) ---- ---- Total comprehensive income $149 $188 ==== ====
The unrealized gain (loss) on marketable securities is net of income tax (credit) of $6 million and $(10) million for the three months ended March 31, 2004 and 2003, respectively. 8 MASCO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) Note F - concluded: The components of accumulated other comprehensive income (loss) are as follows, in millions:
MARCH 31, DECEMBER 31, 2004 2003 -------- ------------ Unrealized gain on marketable securities, net $ 35 $ 26 Minimum pension liability (61) (61) Cumulative translation adjustments 428 456 ---- ---- Accumulated other comprehensive income (loss) $402 $421 ==== ====
Unrealized gain on marketable securities is reported net of income tax of $21 million and $15 million at March 31, 2004 and December 31, 2003, respectively. The minimum pension liability is reported net of income tax credit of $35 million at both March 31, 2004 and December 31, 2003. G. The Company owns 64 percent of Hansgrohe AG. The minority interest of $72 million and $70 million at March 31, 2004 and December 31, 2003, respectively, is recorded in the balance sheet caption deferred income taxes and other liabilities on the Company's condensed consolidated balance sheets. H. On March 9, 2004, the Company issued $300 million of floating rate notes due 2007, resulting in net proceeds of $299 million. The interest rate is calculated based on the three-month London Interbank Offered Rate ("LIBOR") plus .25%. In March 2004, the Company terminated two interest rate swaps relating to $850 million of fixed rate debt. These swap agreements were accounted for as fair value hedges. The gain of approximately $45 million from the termination of these swaps is being amortized as a reduction of interest expense over the remaining term of the debt, through July 2012. In late March 2004, the Company entered into new interest rate swaps for the purpose of converting a portion of fixed rate debt to floating rate debt, which is expected to reduce interest expense, given current interest rates. The average variable interest rates are based on LIBOR plus a fixed adjustment factor. The average effective interest rate on the interest rate swaps is 2.275%. At March 31, 2004, the interest rate swap agreements covered a notional amount of $850 million of the Company's fixed rate debt due July 15, 2012 with an interest rate of 5.875%. 9 MASCO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) I. The net periodic pension cost for the Company's qualified defined-benefit pension plans is as follows, in millions:
THREE MONTHS ENDED MARCH 31, ------------------ 2004 2003 ---- ---- Service cost $ 3 $ 4 Interest cost 7 10 Expected return on plan assets (6) (8) Amortization of net loss 2 1 ---- ---- Net periodic pension cost $ 6 $ 7 ==== ====
Net periodic pension cost for the Company's non-qualified unfunded supplemental pension plans was $4 million and $3 million for the three months ended March 31, 2004 and 2003, respectively. J. The following table presents information about the Company by segment and geographic area, in millions:
THREE MONTHS ENDED MARCH 31, ------------------------------------- 2004 2003 2004 2003 ------------------------------------- NET SALES (A) OPERATING PROFIT ---------------- ---------------- The Company's operations by segment were: Cabinets and Related Products $ 779 $ 658 $109 $ 82 Plumbing Products 739 623 96 86 Installation and Other Services 630 542 81 77 Decorative Architectural Products 370 288 64 55 Other Specialty Products 288 241 45 37 ------ ------ ---- ---- Total $2,806 $2,352 $395 $337 ====== ====== ==== ==== The Company's operations by geographic area were: North America $2,271 $1,927 $329 $276 International, principally Europe 535 425 66 61 ------ ------ ---- ---- Total $2,806 $2,352 395 337 ====== ====== General corporate expense, net (36) (28) Gain on sale of corporate fixed assets 7 -- Accelerated benefits (B) -- (21) Income regarding litigation settlement (C) 21 13 ---- ---- Operating profit 387 301 Other income (expense), net (1) (54) ---- ---- Income from continuing operations before income taxes and minority interest $386 $247 ==== ====
(A) Intra-segment sales were not material. (B) 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. (C) The Company recorded income regarding the litigation discussed in Note N related to the Company's subsidiary, Behr Process Corporation. Behr is included in the Decorative Architectural Products segment. 10 MASCO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) K. Other, net, which is included in other income (expense), net, includes the following, in millions:
THREE MONTHS ENDED MARCH 31, ------------------ 2004 2003 ---- ---- Income from cash and cash investments $ 2 $ 2 Other interest income 2 2 Income from financial investments, net 36 14 Other items, net 12 (5) ---- ---- $ 52 $ 13 ==== ====
Other items, net for the first quarter of 2004 primarily include $6 million of currency translation gains. L. The following are reconciliations of the numerators and denominators used in the computations of basic and diluted earnings per common share, in millions:
THREE MONTHS ENDED MARCH 31, ------------------ 2004 2003 ---- ---- Numerator (basic and diluted): Income from continuing operations $241 $158 (Loss) income from discontinued operations, after income taxes (73) 8 ---- ---- Net income $168 $166 ==== ==== Denominator: Basic common shares (based on weighted average) 457 492 Add: Contingent common shares 7 28 Stock option dilution 4 -- ---- ---- Diluted common shares 468 520 ==== ====
For both the three months ended March 31, 2004 and 2003, approximately 24 million common shares related to the Zero Coupon Convertible Senior Notes due 2031 were not included in the computation of diluted earnings per common share since, at March 31, 2004 and 2003, they were not convertible according to their terms. Additionally, 3.1 million common shares and 23.2 million common shares for the three months ended March 31, 2004 and 2003, respectively, related to stock options were excluded from the computation of diluted earnings per common share due to their anti-dilutive effect, since the option exercise price for those shares was greater than the Company's average common stock price during such periods. In the first quarter of 2004, the Company repurchased and retired approximately 15 million shares of Company common stock, at a cost aggregating approximately $422 million. At March 31, 2004, the Company has approximately 33 million common shares remaining under the December 2003 Board of Directors repurchase authorization. 11 MASCO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) M. In the first quarter of 2004, the Company adopted Financial Accounting Standards Board ("FASB") Interpretation No. 46 - Revised ("FIN 46R"), "Consolidation of Variable Interest Entities." FIN 46R requires that a company that is the primary beneficiary of a variable interest entity consolidate the assets, liabilities and results of operations of the variable interest entity in the company's consolidated financial statements. The adoption of FIN 46R did not have a material impact on the Company's condensed consolidated financial statements. N. LITIGATION. The Company is subject to lawsuits and pending or asserted claims with respect to matters generally arising in the ordinary course of business. As the Company reported in previous filings, late in the second half of 2002, the Company and its subsidiary, Behr Process Corporation, agreed to two Settlements (the National Settlement and the Washington State Settlement) to resolve all class action lawsuits pending in the United States involving certain exterior wood coating products formerly manufactured by Behr. The deadline for claims in the Washington State Settlement was January 17, 2004. In the first quarter of 2004, the Company paid out approximately $2 million for claims and received insurance reimbursements aggregating approximately $1 million; the insurance reimbursements were recognized as income. The Company estimated the average cost per claim received and, as a result, estimated that the remaining unpaid claims and administration costs related to the Washington State Settlement will approximate $30 million at March 31, 2004. Accordingly, the Company reduced the litigation accrual (recognized income) by approximately $20 million in the first quarter of 2004. The remaining accrual for the National Settlement at March 31, 2004 related to claims and administrative costs is approximately $10 million. The Company expects that the evaluation, processing and payment of claims for both the Washington State Settlement and the National Settlement will be completed by September 30, 2004. STOCK PRICE GUARANTEES. Stock price guarantees as of March 31, 2004 are summarized as follows, in millions except per share data:
SHARES ISSUED SETTLEMENT - -------------- MINIMUM OPTIONS(A) # OF ISSUE STOCK PRICE ------------- MATURITY SHARES PRICE GUARANTEE SHARES CASH DATE - ------------------------------------------------------------------ 17 $25.21 $31.20 1 $ 21 7/31/04 1 $30.00 $40.00 -- 16 12/31/04-4/30/05 -- -- ---- 18 1 $ 37 == == ====
(A) Amounts are calculated based on the ten-day average of the high and low Company common stock prices ending March 31, 2004 of $29.92. Shares contingently issuable under these agreements are included in the calculation of diluted earnings per common share. 12 MASCO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED) Note N - concluded: WARRANTY. The following is a reconciliation of the Company's warranty liability, in millions:
2004 ---- Balance at January 1 $ 90 Accruals for warranties issued during the quarter 9 Accruals related to pre-existing warranties 6 Settlements made (in cash or kind) during the quarter (7) Discontinued operations (3) Other, net (including foreign exchange impact) (4) ---- Balance at March 31 $ 91 ====
13 MASCO CORPORATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FIRST QUARTER 2004 VERSUS FIRST QUARTER 2003 SALES AND OPERATIONS The following table sets forth the Company's net sales and operating profit margins by segment and geographic area, dollars in millions:
PERCENT INCREASE THREE MONTHS ENDED ---------------- MARCH 31, 2004 ------------------ VS. 2004 2003 2003 ------ ------ ---- NET SALES: Cabinets and Related Products $ 779 $ 658 18% Plumbing Products 739 623 19% Installation and Other Services 630 542 16% Decorative Architectural Products 370 288 28% Other Specialty Products 288 241 20% ------ ------ Total $2,806 $2,352 19% ====== ====== North America $2,271 $1,927 18% International, principally Europe 535 425 26% ------ ------ Total $2,806 $2,352 19% ====== ======
THREE MONTHS ENDED MARCH 31, ------------------ 2004 2003 ---- ---- OPERATING PROFIT MARGINS: (A) Cabinets and Related Products 14.0% 12.5% Plumbing Products 13.0% 13.8% Installation and Other Services 12.9% 14.2% Decorative Architectural Products 17.3% 19.1% Other Specialty Products 15.6% 15.4% North America 14.5% 14.3% International, principally Europe 12.3% 14.4% Total 14.1% 14.3% Operating profit margins, as reported 13.8% 12.8%
(A) Before general corporate expense, net, of $36 million and income regarding the litigation settlement related to the Decorative Architectural Products segment of $21 million for the three months ended March 31, 2004. Before general corporate expense, net, of $28 million, accelerated benefits related to the unexpected passing of the Company's President and Chief Operating Officer of $21 million and income regarding the litigation settlement related to the Decorative Architectural Products segment of $13 million for the three months ended March 31, 2003. 14 MASCO CORPORATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company reports its financial results in accordance with generally accepted accounting principles ("GAAP") in the United States. However, the Company believes that certain non-GAAP performance measures and ratios, used in managing the business, may provide users of this financial information with additional meaningful comparisons between current results and results in prior periods. Non-GAAP financial measures and ratios should be viewed in addition to, and not as an alternative for, the Company's reported results. NET SALES Net sales for the three months ended March 31, 2004 increased 19 percent from the comparable period in 2003. The following table reconciles reported net sales to net sales excluding acquisitions and the effect of currency translation, in millions:
THREE MONTHS ENDED MARCH 31, ------------------------ 2004 2003 --------- --------- Net sales, as reported $ 2,806 $ 2,352 Acquisitions (16) --- --------- --------- Net sales, excluding acquisitions 2,790 2,352 Currency translation (73) --- --------- --------- Net sales, excluding acquisitions and the effect of currency translation $ 2,717 $ 2,352 ========= =========
Net sales of Cabinets and Related Products increased 18 percent in the first quarter of 2004 compared with 2003, primarily due to increased sales volume of assembled cabinets and a more favorable product mix. Results were positively impacted by the continuing strength of new construction markets and retail distribution channels. Net sales of Plumbing Products increased 19 percent in the first quarter of 2004 compared with 2003, primarily due to a more favorable product mix as well as the favorable impact of a weaker U.S. dollar which increased International net sales included in this segment. Net sales of Installation and Other Services increased 16 percent in the first quarter of 2004 compared with 2003, primarily due to increased sales of non-insulation products in 2004 and as a result of increased new construction and housing starts. Adverse weather conditions in the first quarter of 2003 negatively impacted 2003 results. Net sales of Decorative Architectural Products increased 28 percent in the first quarter of 2004 compared with 2003, primarily due to increased sales of paints and stains and certain decorative hardware. Net sales of Other Specialty Products increased 20 percent in the first quarter of 2004 compared with 2003, primarily due to a change in product mix, including increased sales of fiberglass doors and windows as well as increased sales of vinyl windows. In addition, the favorable impact of a weaker U.S. dollar increased International net sales included in this segment. 15 MASCO CORPORATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net sales from North American and International operations for the first quarter of 2004 increased 18 percent and 26 percent, respectively, compared with the first quarter of 2003. In the first quarter of 2004, International sales continued to be positively affected by a weaker U.S. dollar, principally against the Euro, which increased International net sales by approximately 17 percent. OPERATING MARGINS The Company's gross profit margins were 30.3 percent for the first quarter of 2004 compared with 30.1 percent for the comparable period in 2003. Gross profit margins in the first quarter of 2004 were adversely impacted by anticipated increases in certain operating expenses, including increased material costs, which offset the positive impact of higher sales volume. Selling, general and administrative expenses as a percentage of sales were 17.3 percent for the first quarter of 2004 and 17.9 percent for the comparable period of the prior year. Selling, general and administrative expenses in the first quarter of 2003 included $21 million of accelerated benefit expense relating to the unexpected passing of the Company's President and Chief Operating Officer. Selling, general and administrative expenses for the first quarter of 2004 include the effect of higher promotion costs as well as costs and expenses associated with complying with the new requirements of the Sarbanes-Oxley legislation. Operating income in the first quarters of 2004 and 2003 also benefited from $21 million and $13 million, respectively, of income regarding the Behr litigation settlement. Operating profit margins for the Cabinets and Related Products segment for the first quarter of 2004 were 14.0 percent compared with 12.5 percent in the first quarter of 2003, and reflect the positive impact of higher sales volume and a more favorable product mix. Operating profit margins for the Plumbing Products segment were 13.0 percent in the first quarter of 2004 compared with 13.8 percent in the first quarter of 2003, primarily due to relatively higher International sales with lower margins, as well as increased material costs. Operating profit margins for the Installation and Other Services segment were 12.9 percent in the first quarter of 2004 compared with 14.2 percent in the first quarter of 2003. The operating margin decline in this segment is primarily attributable to increased sales of generally lower-margin non-insulation products as well as increased material costs. Within the Installation and Other Services segment, the availability of fiberglass insulation to support the Company's installation and distribution activities has become constrained in recent months. The high level of demand for fiberglass insulation as a result of a strong new construction market has outpaced the industry's capacity to produce additional product. The Company believes that these conditions will persist over the remainder of 2004 and is working with its diverse supplier base to secure as much material as possible. At the current time, the Company does not believe that this material shortage will have a significant impact on its operations. Operating profit margins for the Decorative Architectural Products segment were 17.3 percent for the first quarter of 2004 compared with 19.1 percent in the first quarter of 2003. The positive impact of higher sales volume of paints and stains was offset by increased material and display and advertising costs of certain decorative hardware businesses. Operating profit margins for the Other Specialty Products segment were 15.6 percent in the first quarter of 2004 compared with 15.4 percent in the first quarter of 2003. 16 MASCO CORPORATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company's operating profit margins, after general corporate expense, were 13.8 percent for the first quarter of 2004 compared with 12.8 percent for the first quarter of 2003. Excluding the income regarding litigation settlement of $21 million and $13 million in 2004 and 2003, respectively, and the accelerated benefit expense of $21 million in 2003, operating profit margins were 13.0 percent for the first quarter of 2004 compared with 13.1 percent for the first quarter of 2003. OTHER INCOME (EXPENSE), NET Other, net for the first quarter of 2004 includes $16 million of net realized gains from the sale of marketable securities, dividend income of $7 million and $13 million of income, net regarding other investments. Other, net for the first quarter of 2003 includes $8 million of realized gains from the sale of marketable securities, dividend income of $7 million and $1 million of expense, net regarding other investments. Interest expense for the first quarter of 2004 decreased $14 million to $53 million compared with $67 million in the first quarter of 2003, primarily due to debt repurchases as well as the effect of the interest rate swap agreements that converted a certain amount of fixed rate debt to lower variable rate debt. INCOME AND EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS Income and diluted earnings per common share from continuing operations for the first quarter of 2004 were $241 million and $.52 per common share compared with $158 million and $.30 per common share for the comparable period of 2003. The Company's effective tax rate for the three months ended March 31, 2004 was 36.3 percent compared with 34.4 percent for the same period in 2003. The Company estimates that its effective tax rate should approximate 36 percent for 2004. The increase in the tax rate is principally due to a change in the mix of foreign earnings to countries with higher tax rates and an increase in domestic earnings (relative to total earnings), which are generally taxed at a higher rate than earnings from the Company's foreign operations. OTHER FINANCIAL INFORMATION The Company's current ratio was 1.8 to 1 at both March 31, 2004 and December 31, 2003. For the three months ended March 31, 2004, cash of $98 million was provided by operating activities. Cash used for financing activities was $149 million, including $76 million for cash dividends paid and $422 million for the acquisition and retirement of Company common stock in open-market transactions. Cash provided by financing activities included primarily $299 million for the issuance of notes (net of issuance costs) and $55 million from interest rate swap transactions. Cash used for investing activities was $85 million, including $55 million for capital expenditures and $47 million for the net purchase of marketable securities and other investments. Cash held by discontinued operations was $32 million at March 31, 2004. First quarter 2004 cash from operations was affected by an expected and annually recurring first quarter increase in accounts receivable as compared with December 31, 2003. 17 MASCO CORPORATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company is subject to lawsuits and claims pending or asserted with respect to matters generally arising in the ordinary course of business. Note N of the Condensed Consolidated Financial Statements discusses specific claims against the Company and its subsidiary, Behr Process Corporation, with respect to certain exterior wood coating products formerly manufactured by Behr. In the first quarter of 2004, the Company issued $300 million of three-year notes (floating rate based on LIBOR plus .25%); the Company also has $261 million of debt due in early May 2004. The Company believes that its present cash balance, its cash flows from operations and, to the extent necessary, bank borrowings and future financial market activities, are sufficient to fund its working capital and other investment needs. OUTLOOK FOR THE COMPANY The Company's favorable sales performance has continued early in the second quarter with April sales up in the mid-teens. The Company also expects that certain operating expenses for the year will continue to increase, particularly for energy and certain material costs. Based on current business trends, the Company continues to be optimistic and expects to achieve record sales and earnings for the year 2004. FORWARD-LOOKING STATEMENTS Certain sections of this Quarterly Report contain statements reflecting the Company's views about its future performance and constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. These views involve risks and uncertainties that are difficult to predict and, accordingly, the Company's actual results may differ materially from the results discussed in such forward-looking statements. Readers should consider that various factors, including changes in general economic conditions, competitive market conditions and pricing pressures, relationships with key customers, industry consolidation of retailers, wholesalers and builders, shifts in distribution, the influence of e-commerce and other factors discussed in the Company's Annual Report on Form 10-K and its other filings with the Securities and Exchange Commission, may affect the Company's performance. The Company undertakes no obligation to update publicly any forward-looking statements as a result of new information, future events or otherwise. 18 MASCO CORPORATION ITEM 4. CONTROLS AND PROCEDURES a. Evaluation of Disclosure Controls and Procedures. The Company's principal executive officer and principal financial officer have concluded, based on an evaluation of the Company's "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15, that, as of March 31, 2004, the Company's disclosure controls and procedures were effective and designed to ensure that information required to be disclosed by the Company in the reports it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. b. Changes in Internal Control Over Financial Reporting. There has been no change in the Company's internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Rules 13a-15 or 15d-15 that occurred during the Company's last fiscal quarter (the Company's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. 19 MASCO CORPORATION PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Information regarding this item is set forth in Note N to the Company's Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report. ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF SECURITIES The following table provides information regarding the repurchase of Company common stock for the three months ended March 31, 2004, in millions, except average price paid per common share data:
Total Number of Maximum Number of Average Shares Purchased Shares That May Total Number Price Paid as Part of Yet Be Purchased of Shares Per Common Publicly Announced Under the Plans Period Purchased Share Plans or Programs or Programs - -------- ------------ ---------- ------------------ ----------------- 1/1/04- 1/31/04 5 $26.94 5 43 2/1/04- 2/29/04 5 $27.26 5 38 3/1/04- 3/31/04 5 $28.91 5 33 -- -- Total for the quarter 15 $27.70 15 33
In December 2003, the Company's Board of Directors authorized the repurchase of up to 50 million shares of the Company's common stock in open-market transactions or otherwise. ITEMS 3 THROUGH 5 ARE NOT APPLICABLE. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS: 12 - Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends 31a- Certification by Chief Executive Officer required by Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934 31b- Certification by Chief Financial Officer required by Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934 32 - Certifications required by Rule 13a-14(b) or 15d-14(b) of the Securities and Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code (b) REPORTS ON FORM 8-K: Report on Form 8-K dated March 18, 2004, filing the Company's press release which updated previous earnings guidance and announced quarterly dividends. 20 MASCO CORPORATION PART II. OTHER INFORMATION, CONCLUDED SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MASCO CORPORATION (Registrant) DATE: MAY 5, 2004 BY: /s/ Timothy Wadhams ------------------------------------ Timothy Wadhams Senior Vice President and Chief Financial Officer 21 MASCO CORPORATION EXHIBIT INDEX EXHIBIT Exhibit 12 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends Exhibit 31a Certification by Chief Executive Officer required by Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934 Exhibit 31b Certification by Chief Financial Officer required by Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934 Exhibit 32 Certifications required by Rule 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code EX-12 2 k84947exv12.txt COMPUTATION OF RATIO OF EARNINGS EXHIBIT 12 MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(DOLLARS IN MILLIONS) ---------------------------------------------------------- THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ---------------------------------------------- 2004 2003 2002 2001 2000 1999 -------- ------ ------ ------ ------ ------ EARNINGS BEFORE INCOME TAXES, PREFERRED STOCK DIVIDENDS AND FIXED CHARGES: Income from continuing operations before income taxes, minority interest and cumulative effect of accounting change, net $ 386 $1,280 $ 966 $ 278 $ 824 $ 805 Deduct equity in undistributed (earnings) of fifty-percent-or- less-owned companies --- --- (10) (1) (10) (19) Add interest on indebtedness, net 53 253 228 230 190 119 Add amortization of debt expense 1 12 13 10 2 1 Add estimated interest factor for rentals 9 32 24 21 17 14 ------ ------ ------ ------ ------ ------ Earnings before income taxes, minority interest, cumulative effect of accounting change, net, fixed charges and preferred stock dividends $ 449 $1,577 $1,221 $ 538 $1,023 $ 920 ====== ====== ====== ====== ====== ====== FIXED CHARGES: Interest on indebtedness $ 52 $ 253 $ 226 $ 236 $ 198 $ 122 Amortization of debt expense 1 12 13 10 2 1 Estimated interest factor for rentals 9 32 24 21 17 14 ------ ------ ------ ------ ------ ------ Total fixed charges $ 62 $ 297 $ 263 $ 267 $ 217 $ 137 ====== ====== ====== ====== ====== ====== PREFERRED STOCK DIVIDENDS(a) $ 4 $ 16 $ 14 $ 7 --- --- ------ ------ ------ ------ ------ ------ Combined fixed charges and preferred stock dividends $ 66 $ 313 $ 277 $ 274 $ 217 $ 137 ====== ====== ====== ====== ====== ====== Ratio of earnings to fixed charges 7.2 5.3 4.6 2.0 4.7 6.7 ====== ====== ====== ====== ====== ====== Ratio of earnings to combined fixed charges and preferred stock dividends(b)(c) 6.8 5.0 4.4 2.0 4.7 6.7 ====== ====== ====== ====== ====== ======
(a) Represents amount of income before provision for income taxes required to meet the preferred stock dividend requirements of the Company. (b) Excluding the 2004 pre-tax income of $21 million related to the Behr litigation accrual, the 2003 pre-tax income for litigation settlement of $72 million and the non-cash, pre-tax goodwill impairment charge of $53 million, the 2002 pre-tax charge for litigation settlement, net, of $147 million, the 2001 non-cash, pre-tax charge of $530 million and the 2000 non-cash, pre-tax charge of $145 million, the Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends would be 6.5, 5.0, 4.9, 3.9 and 5.4 for the first quarter of 2004, and the years 2003, 2002, 2001 and 2000, respectively. (c) Years prior to 2002 have not been adjusted to exclude goodwill amortization expense. EX-31.A 3 k84947exv31wa.txt 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER EXHIBIT 31a MASCO CORPORATION CERTIFICATION REQUIRED BY RULE 13a-14(a) OR 15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 I, Richard A. Manoogian, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Masco Corporation (the Registrant); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) [Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986]; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this quarterly report based on such evaluation; and d) disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 5, 2004 By: /s/ Richard A. Manoogian ---------------------------------- Richard A. Manoogian Chief Executive Officer 22 EX-31.B 4 k84947exv31wb.txt 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER EXHIBIT 31b MASCO CORPORATION CERTIFICATION REQUIRED BY RULE 13a-14(a) OR 15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 I, Timothy Wadhams, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Masco Corporation (the Registrant); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) [Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986]; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this quarterly report based on such evaluation; and d) disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 5, 2004 By: /s/ Timothy Wadhams ------------------------------ Timothy Wadhams Senior Vice President and Chief Financial Officer 23 EX-32 5 k84947exv32.txt 906 CERTIFICATION OF CEO & CFO EXHIBIT 32 MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES CERTIFICATION REQUIRED BY RULE 13a-14(b) OR 15d-14(b) OF THE SECURITIES EXCHANGE ACT OF 1934 AND SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE The certification set forth below is being submitted in connection with the Masco Corporation Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2004 (the "Report") for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Section 1350 of Chapter 63 of Title 18 of the United States Code. Richard A. Manoogian, the Chief Executive Officer, and Timothy Wadhams, the Senior Vice President and Chief Financial Officer, of Masco Corporation, each certifies that, to the best of his knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of Masco Corporation. Date: May 5, 2004 /s/ Richard A. Manoogian --------------------------------------- Name: Richard A. Manoogian Title: Chief Executive Officer Date: May 5, 2004 /s/ Timothy Wadhams --------------------------------------- Name: Timothy Wadhams Title: Senior Vice President and Chief Financial Officer A signed original of this written statement required by Section 906 has been provided to Masco Corporation and will be retained by Masco Corporation and furnished to the Securities and Exchange Commission or its staff upon request. 24 -----END PRIVACY-ENHANCED MESSAGE-----