-----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, AnF1hq65+R/Sy/hRZTUpw3pqNNV0cXMcqoICcvMLPyHbChYSbGmdU5tfBZwjGgUW VMmghgJE5IPM/DiKlVQniA== 0000950124-05-004594.txt : 20050802 0000950124-05-004594.hdr.sgml : 20050802 20050802092230 ACCESSION NUMBER: 0000950124-05-004594 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050802 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050802 DATE AS OF CHANGE: 20050802 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: 05990173 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 k97116e8vk.txt CURRENT REPORT, DATED AUGUST 2, 2005 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) AUGUST 2, 2005 -------------------------------- 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 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION. Attached and incorporated herein by reference as Exhibit 99 is a copy of a press release dated August 2, 2005 reporting Masco Corporation's financial results for the second quarter of 2005 and certain other information and a supplemental information package prepared for use in connection with the financial results for the second quarter. On August 2, 2005, Masco Corporation will hold an investor conference and web cast to discuss financial results for the second quarter of 2005. 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. ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits 99 Press Release of Masco Corporation dated August 2, 2005, reporting Masco Corporation's financial results for the second quarter of 2005 and certain other information and supplemental information prepared for use in connection with the financial results for the second quarter. 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 August 2, 2005 EXHIBIT INDEX 99 Press Release of Masco Corporation dated August 2, 2005, reporting Masco Corporation's financial results for the second quarter of 2005 and certain other information and supplemental information prepared for use in connection with the financial results for the second quarter. EX-99 2 k97116exv99.txt PRESS RELEASE DATED AUGUST 2, 2005 FOR IMMEDIATE RELEASE Contact: Maria Duey 313-792-5500 MASCO CORPORATION REPORTS SECOND QUARTER RESULTS MASCO CORPORATION HIGHLIGHTS: SECOND QUARTER 2005 - Net sales from continuing operations increased nine percent to a record $3.3 billion. - Income from continuing operations was $274 million or $.64 per common share. - The Company returned $229 million to shareholders through share repurchases and dividends. - The Company issued $500 million of fixed-rate 4.80% notes due 2015 and had over $1.6 billion in cash and marketable securities at June 30, 2005. Taylor, Michigan (August 2, 2005) - Masco Corporation (NYSE: MAS) today reported that net sales from continuing operations for the quarter ended June 30, 2005 increased nine percent to a record $3.3 billion compared with $3.1 billion for the second quarter of 2004. Income from continuing operations for the second quarter of 2005 was $274 million or $.64 per common share compared with $294 million or $.65 per common share for the comparable period of 2004. Results for the second quarter of 2005 benefited from other income, principally net gains from financial investments, of $.04 per common share, partially offset by realized currency transaction losses of $.02 per common share. The second quarter of 2004 benefited from $.03 per common share of other income, principally net gains from financial investments and other non-operating assets, as well as $.01 per common share of income related to insurance proceeds from the Behr litigation settlement and $.01 per common share of realized currency transaction gains. The Company's 2005 first half results were adversely affected by increases in commodity, energy and freight costs, which have not been totally recovered due, in part, to the lag in implementing selling price increases to customers, as well as product mix. Second quarter 2005 sales and earnings, however, were better-than-expected due to the strong new construction market as well as an improvement in key retailer sales. The Company previously announced, in the first quarter of 2004, the planned disposition of several European businesses that are not core to the Company's long-term growth strategy. Net income for the second quarter of 2005 did not include any net income (loss) related to discontinued operations, since the Company completed the disposition process in the first quarter of 2005. The second quarter of 2004 results include after-tax income from discontinued operations of $11 million, and an additional after-tax charge aggregating $44 million ($.10 per common share) for those businesses that were expected to be divested at a loss, both of which are included in discontinued operations. Including the operating results of these discontinued operations and the charge for certain of these businesses, net income for the 2004 second quarter was $261 million or $.58 per common share. The Company is committed to its strategy of value creation and continues to be focused on the simplification of its business model, cash flow generation, improvement in return on invested capital and the return of cash to shareholders through share repurchases and dividends. Consistent with this strategy, the Company is pursuing a variety of initiatives to offset cost increases and increase operating profit, including sourcing programs, the restructuring of certain of its businesses (including consolidations), manufacturing rationalization, headcount reductions and other profit improvement programs. As previously disclosed, the Company believes these initiatives will reduce annual costs by $200 million by the end of 2007. Costs and charges related to the acceleration of these profit improvement programs, when combined with recent additional energy-related and commodity cost increases and the adverse effect of changes in currency values, are expected to result in the Company's full-year 2005 earnings from continuing operations being closer to $2.30 per common share than the previous guidance of approximately $2.40 per common share. Implementing these initiatives should improve the Company's earnings outlook for 2006 and beyond. Based on current business trends, the Company anticipates that third quarter 2005 earnings from continuing operations will be in the range of $.60 to $.64 per common share compared with third quarter 2004 earnings from continuing operations of $.64 per common share. 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 Tuesday, August 2, 2005 at 11:00 a.m. ET. Participants in the call are asked to register five to ten minutes prior to the scheduled start time by dialing (719) 457-2692 (confirmation #4876876). 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 #4876876) approximately two hours after the end of the call and will continue through August 9, 2005. Masco Corporation's press releases and other information are available through the Company's toll free number, 1-888-MAS-NEWS, or under the Investor Relations section of Masco's website at www.masco.com. Statements contained herein may include certain forward-looking statements regarding Masco's future sales, earnings growth potential and other developments. Actual results may vary materially because of external factors such as interest rate fluctuations, changes in consumer spending and other factors over which management has no control. 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 performance measures and ratios should be viewed in addition to, and not as an alternative for, the Company's reported results under accounting principles generally accepted in the United States. Additional information about the Company's products, markets and conditions, which could affect the Company's 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 THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2005 AND JUNE 30, 2004
(in millions except per common share data) Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------ 2005 2004 2005 2004 ------- ------- ------- ------- Net Sales $ 3,348 $ 3,061 $ 6,317 $ 5,867 Cost of Sales 2,363 2,087 4,491 4,042 ------- ------- ------- ------- Gross Profit 985 974 1,826 1,825 Selling, General and Administrative Expenses 515 504 1,015 989 (Income) Regarding Litigation Settlement (3) (7) (5) (28) ------- ------- ------- ------- Operating Profit 473 477 816 864 Other Income (Expense), Net (41) (11) (63) (12) ------- ------- ------- ------- Income from Continuing Operations before Income Taxes and Minority Interest 432 466 753 852 Income Taxes 153 167 257 307 ------- ------- ------- ------- Income from Continuing Operations before Minority Interest 279 299 496 545 Minority Interest 5 5 10 10 ------- ------- ------- ------- Income from Continuing Operations 274 294 486 535 Income (Loss) from Discontinued Operations, Net of Income Taxes - (33) 19 (106) ------- ------- ------- ------- Net Income $ 274 $ 261 $ 505 $ 429 ======= ======= ======= ======= Earnings per Common Share (Diluted): Income from Continuing Operations $ 0.64 $ 0.65 $ 1.11 $ 1.16 Income (Loss) from Discontinued Operations, Net of Income Taxes - (0.07) 0.04 (0.23) ------- ------- ------- ------- Net Income $ 0.64 $ 0.58 $ 1.16 $ 0.93 ======= ======= ======= ======= Average Diluted Common Shares Outstanding 430 453 437 460 ======= ======= ======= =======
MASCO CORPORATION BUSINESS AND FINANCIAL HIGHLIGHTS In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the Company has accounted for the 2004 dispositions of Jung Pumpen, The Alvic Group, Alma Kuchen, E. Missel and SKS Group, and the 2005 dispositions of Gebhardt Consolidated and the GMU Group as discontinued operations. SECOND QUARTER 2005 - - Net sales from continuing operations increased nine percent, with North American sales increasing 10 percent and International sales increasing six percent. Second quarter net sales in North America benefited from strong housing starts and improved retail sales. In local currencies, International sales increased two percent compared with the second quarter of 2004. - - Sales of assembled cabinets, installation services, paints and stains and windows were particularly strong in the quarter. - - Key retailer sales from continuing operations improved significantly from recent quarters to an increase of 10 percent in the 2005 second quarter compared with a two percent decrease in the first quarter of 2005 and a 14 percent increase in the second quarter of 2004. - - Sales by segment in the 2005 second quarter versus the 2004 second quarter were: - Cabinets and Related Products sales increased 13 percent; - Plumbing Products sales increased five percent; - Installation and Other Services sales increased 11 percent; - Decorative Architectural Products sales increased 12 percent; and - Other Specialty Products sales increased four percent. - - Income from continuing operations was $274 million compared with $294 million for the second quarter of 2004. 1 MASCO CORPORATION BUSINESS AND FINANCIAL HIGHLIGHTS SECOND QUARTER 2005 (CONTINUED) - - Earnings from continuing operations were $.64 per common share compared with the Company's guidance of $.58 to $.62 per common share and compared with $.65 per common share for the 2004 second quarter. - - Results for the second quarter of 2005 benefited from other income of $.04 per common share, principally net gains from financial investments. The second quarter of 2004 included $.03 per common share of other income, principally net gains from financial investments and other non-operating assets, as well as $.01 per common share of income related to insurance proceeds from the Behr litigation settlement. - - Results for the second quarter of 2005 include realized currency transaction losses of $14 million ($.02 per common share, after tax) compared with $6 million of realized currency transaction gains ($.01 per common share, after tax) in the second quarter of 2004. - - The Company previously announced, in the first quarter of 2004, the planned disposition of several European businesses that are not core to the Company's long-term growth strategy. Net income for the second quarter of 2005 was $274 million or $.64 per common share and did not include any net income (loss) related to discontinued operations, since the Company completed the disposition process in the first quarter of 2005. The second quarter of 2004 results include after-tax income from discontinued operations of $11 million, and an additional after-tax charge aggregating $44 million ($.10 per common share) for those businesses that were expected to be divested at a loss, both of which are included in discontinued operations. Including the operating results of these discontinued operations and the charge for certain of these businesses, net income for the 2004 second quarter was $261 million or $.58 per common share. Total net proceeds for the dispositions completed in 2005 and 2004 aggregated $281 million. - - The Company's 2005 second quarter results benefited from strong organic sales growth, partially offset by continued increases in commodity, energy and freight costs, which have not been fully recovered due, in part, to the lag in implementing selling price increases to customers. 2 MASCO CORPORATION BUSINESS AND FINANCIAL HIGHLIGHTS SECOND QUARTER 2005 (CONTINUED) - - Gross margins were 29.4 percent in the 2005 second quarter compared with 31.8 percent in the second quarter of 2004. Operating profit margins, as reported, were 14.1 percent in the second quarter of 2005 compared with 15.6 percent in the second quarter of 2004. Excluding the pre-tax income regarding the litigation settlement of $3 million and $7 million in 2005 and 2004, respectively, operating profit margins were 14.0 percent in the second quarter of 2005 compared with 15.4 percent in the second quarter of 2004. Operating profit margins in the second quarter of 2005 were adversely impacted by increases in certain operating expenses, including increased commodity, energy and freight costs, as well as product mix. - - SG&A expenses as a percent of sales, including general corporate expense, were 15.4 percent in the second quarter of 2005 compared with 16.5 percent in the 2004 second quarter. - - General corporate expense was 1.4 percent of sales in the second quarter of 2005 compared with 1.5 percent in the comparable period of 2004. - - Inventory days were 50 days at June 30, 2005 compared with 52 days at June 30, 2004. - - Accounts receivable days at the end of the second quarter were 50 days compared with 54 days a year ago. - - Accounts payable days were 38 days at both June 30, 2005 and 2004. - - Working capital at June 30, 2005 (defined as accounts receivable and inventories less accounts payable) improved to 17.8 percent of the last twelve months' sales from 19.2 percent a year earlier. - - The Company's tax rate was 35.4 percent for the second quarter of 2005 compared with 35.8 percent for the comparable period of the prior year. The Company estimates that its effective tax rate for the full-year 2005 should approximate 35 percent. 3 MASCO CORPORATION BUSINESS AND FINANCIAL HIGHLIGHTS SECOND QUARTER 2005 (CONCLUDED) - - On June 10, 2005, the Company issued $500 million of fixed-rate 4.80% notes due 2015, resulting in net proceeds of $494 million. - - At the end of the quarter, the Company had a strong balance sheet with over $1.6 billion in cash and marketable securities and $2 billion in unused bank lines. The Company intends to use a portion of its cash to retire $800 million of 6.75% notes due in March 2006. - - In the second quarter of 2005, the Company generated approximately $48 million of cash from the net sale of financial investments. - - Debt as a percent of total capitalization was 49 percent at June 30, 2005 compared with 47 percent at June 30, 2004. - - For the twelve months ended June 30, 2005 and June 30, 2004, return on invested capital (as reported) was 11.7 percent and 12.2 percent, respectively. For the twelve months ended June 30, 2005 and June 30, 2004, return on invested capital (as reconciled) was 12.9 percent and 12.1 percent, respectively. The Company continues to believe that it will achieve its 15 percent return on invested capital goal by the end of 2006 and 18 percent by 2010. - - During the quarter, the Company repurchased approximately five million common shares. The Company had approximately 42 million common shares remaining under its repurchase authorization at June 30, 2005. - - The Company's diluted common shares for purposes of calculating earnings per common share were 430 million for the second quarter of 2005 compared with 453 million for the second quarter of 2004. 4 MASCO CORPORATION BUSINESS AND FINANCIAL HIGHLIGHTS FULL-YEAR OUTLOOK - - The Company remains committed to its strategy of value creation and is focused on the simplification of its business model, cash flow generation, improvement in return on invested capital and the return of cash to shareholders through share repurchases and dividends. - - Consistent with this strategy, the Company is pursuing a variety of initiatives to increase operating income, including sourcing programs, the restructuring of certain of its businesses (including consolidations), manufacturing rationalization, headcount reductions and other profit improvement programs. As previously disclosed, the Company believes these initiatives will reduce annual costs by $200 million by the end of 2007. Costs and charges related to the acceleration of these profit improvement programs, when combined with recent additional energy-related and commodity cost increases and the adverse effect of changes in currency values, are expected to result in the Company's full-year 2005 earnings from continuing operations being closer to $2.30 per common share than the previous guidance of the low end of a range of $2.40 to $2.50 per common share. Implementing these initiatives should improve the Company's earnings outlook for 2006 and beyond. - - Based on current business trends, the Company anticipates that third quarter 2005 earnings from continuing operations will be in the range of $.60 to $.64 per common share compared with third quarter 2004 earnings from continuing operations of $.64 per common share. - - The Company's guidance is based on no additional share repurchases beyond the 18 million common shares repurchased in the first half of 2005, modest margin improvement in the second half of 2005 compared with the first half of 2005, reflecting selling price increases further offsetting higher commodity costs, and anticipated income from financial investments, and excludes any other items. - - The Company expects to return a minimum of $1 billion annually to shareholders, on average, over the next several years through share repurchases and dividends as part of its ongoing commitment to value creation. In 2004 and 2003, the Company returned $2.3 billion, in aggregate, to shareholders through share repurchases and dividends. In the first half of 2005, the Company returned $774 million to shareholders through share repurchases and dividends. 5 MASCO CORPORATION BUSINESS AND FINANCIAL HIGHLIGHTS FULL-YEAR OUTLOOK (CONCLUDED) - - Based on the current market price for the Company's common stock, diluted common shares for the computation of earnings per common share at July 1, 2005 are 429 million. This excludes the impact of any third quarter repurchases of common stock. 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 performance measures and ratios should be viewed in addition to, and not as an alternative for, the Company's reported results under accounting principles generally accepted in the United States. Additional information about our products, markets and conditions, which could affect the Company's 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. ### 6 MASCO CORPORATION - 2ND QUARTER 2005 Page 1 Condensed Statements of Income - 2005 & 2004 Quarters 2 Notes to Condensed Statements of Income - 2005 & 2004 Quarters 3 Sales by Segment and Geographic Area - Three Months Ended June 30, 2005 & 2004 4 Sales by Segment and Geographic Area - Six Months Ended June 30, 2005 & 2004 5 2005 Quarterly Segment Data 6 2004 Quarterly Segment Data - Excluding Goodwill Impairment Charge 7 2004 Quarterly Segment Data - Including Goodwill Impairment Charge 8 Other Income (Expense), Net - 2005 & 2004 Quarters 9 Consolidated Statements of Income - Three Months Ended June 30, 2005 & 2004 10 Consolidated Statements of Income - Six Months Ended June 30, 2005 & 2004 11 Consolidated Balance Sheets GAAP Reconciliations: 12 Sales Growth Excluding Effect of Acquisitions & Currency Translation 13 Operating Profit and Margins 14 Operating Profit and Shareholders' Equity 15 Discontinued Operations MASCO CORPORATION CONDENSED STATEMENTS OF INCOME 2005 & 2004 - BY QUARTER (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
2005 2004 ---------------------------------- --------------------------------------- YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1 YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1 ---- ------ ------ ------- ------- ------- ------- ------- ------- ------- Net Sales: - North America $ 2,784 $ 2,405 $ 9,879 $ 2,450 $ 2,627 $ 2,531 $ 2,271 - International 564 564 2,195 584 546 530 535 ---- ------ ------ ------- ------- ------- ------- ------- ------- ------- - Consolidated 3,348 2,969 12,074 3,034 3,173 3,061 2,806 Cost of Sales 2,363 2,128 8,356 2,132 2,182 2,087 1,955 ---- ------ ------ ------- ------- ------- ------- ------- ------- ------- Gross Profit 985 841 3,718 902 991 974 851 (Gross Margin) 29.4% 28.3% 30.8% 29.7% 31.2% 31.8% 30.3% S,G&A Expense (before GCE & (Gain) Loss on Sale of Corporate Fixed Assets) 467 454 1,824 459 449 460 456 (S,G&A Expense as a % of Sales) 13.9% 15.3% 15.1% 15.1% 14.2% 15.0% 16.3% ---- ------ ------ ------- ------- ------- ------- ------- ------- ------- Operating Profit (before GCE, (Gain) Loss on Sale of Corporate Fixed Assets & Goodwill Impairment Charge) 518 387 1,894 443 542 514 395 (Operating Margin) 15.5% 13.0% 15.7% 14.6% 17.1% 16.8% 14.1% - North America 447 326 1,639 390 478 442 329 (Margin) 16.1% 13.6% 16.6% 15.9% 18.2% 17.5% 14.5% - International 71 61 255 53 64 72 66 (Margin) 12.6% 10.8% 11.6% 9.1% 11.7% 13.6% 12.3% General Corporate Expense (GCE) 48 46 194 60 53 45 36 S,G&A Expense as a % of Sales (including GCE & (Gain) Loss on Sale of Corporate Fixed Assets) 15.4% 16.8% 16.7% 17.1% 15.8% 16.5% 17.3% (Gain) Loss on Sale of Corporate Fixed Assets, Net - - (7) 1 - (1) (7) (Income) Regarding Litigation Settlement (3) (2) (30) - (2) (7) (21) Goodwill Impairment Charge - - 168 168 - - - ---- ------ ------ ------- ------- ------- ------- ------- ------- ------- Operating Profit per F/S $ 473 $ 343 $ 1,569 $ 214 $ 491 $ 477 $ 387 ==== ====== ====== ======= ======= ======= ======= ======= ======= ======= Earnings per Common Share (Diluted): Income from Continuing Operations $ 0.64 $ 0.48 $ 2.04 $ 0.23 $ 0.64 $ 0.65 $ 0.52 Income (Loss) from Discontinued Operations - 0.04 (0.08) - 0.16 (0.07) (0.16) ---- ------ ------ ------- ------- ------- ------- ------- ------- ------- Net Income $ 0.64 $ 0.52 $ 1.96 $ 0.23 $ 0.80 $ 0.58 $ 0.36 ==== ====== ====== ======= ======= ======= ======= ======= ======= =======
PLEASE SEE PAGE 2 FOR NOTES. Page 1 MASCO CORPORATION NOTES TO CONDENSED STATEMENTS OF INCOME 2005 & 2004 - BY QUARTER NOTES: - - Operating results exclude 2004 planned dispositions as well as operations which were sold in 2005 and 2004, all of which were treated as discontinued operations in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." - - Income from discontinued operations in the first quarter of 2005 includes an $11 million pre-tax gain, net ($.04 per common share, after tax) from the sale of two businesses. - - Operating results for the fourth quarter of 2004 reflect a non-cash, pre-tax charge for goodwill impairment of $168 million ($141 million or $.31 per common share, after tax). - - Income from discontinued operations in the third quarter of 2004 includes a $108 million pre-tax gain, net ($93 million or $.21 per common share, after tax) from the sale of two businesses. - - Income (loss) from discontinued operations in the first, second and third quarters of 2004 includes pre-tax impairment charges of $64 million ($76 million or $.16 per common share, after tax), $44 million ($44 million or $.10 per common share, after tax) and $31 million ($31 million or $.07 per common share, after tax), respectively. - - Per common share amounts for the four quarters of 2004 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. Page 2 MASCO CORPORATION SALES BY SEGMENT AND GEOGRAPHIC AREA THREE MONTHS ENDED JUNE 30, 2005 & 2004 (DOLLARS IN MILLIONS)
Three Months Ended June 30, 2nd Qtr '05 ------------------ vs. 2005 2004 2nd Qtr '04 ------- ------- -------------- Cabinets & Related Products $ 900 $ 797 + 13% Plumbing Products 823 785 + 5% Installation & Other Services 764 686 + 11% Decorative Architectural Products 506 451 + 12% Other Specialty Products 355 342 + 4% ------- ------- Total $ 3,348 $ 3,061 + 9% ======= ======= North America $ 2,784 $ 2,531 + 10% International, principally Europe 564 530 + 6% ------- ------- Total, as above $ 3,348 $ 3,061 + 9% ======= =======
NOTES: - - Data exclude discontinued operations. - - Excluding acquisitions, consolidated net sales increased nine percent, North American net sales increased 10 percent and International net sales increased six percent (please see page 12 for the GAAP reconciliation). - - International sales in local currencies increased two percent compared with the second quarter of 2004 (please see page 12 for the GAAP reconciliation). Page 3 MASCO CORPORATION SALES BY SEGMENT AND GEOGRAPHIC AREA SIX MONTHS ENDED JUNE 30, 2005 & 2004 (DOLLARS IN MILLIONS)
Six Months Ended June 30, 6 Months '05 ------------------------- vs. 2005 2004 6 Months '04 ---------- ---------- ----------- Cabinets & Related Products $ 1,738 $ 1,576 + 10% Plumbing Products 1,583 1,524 + 4% Installation & Other Services 1,457 1,316 + 11% Decorative Architectural Products 877 821 + 7% Other Specialty Products 662 630 + 5% ---------- ---------- Total $ 6,317 $ 5,867 + 8% ========== ========== North America $ 5,189 $ 4,802 + 8% International, principally Europe 1,128 1,065 + 6% ----------- ---------- Total, as above $ 6,317 $ 5,867 + 8% ========== ==========
NOTES: - - Data exclude discontinued operations. - - Excluding acquisitions, consolidated net sales increased seven percent, North American net sales increased eight percent and International net sales increased six percent (please see page 12 for the GAAP reconciliation). - - International sales in local currencies increased two percent compared with the first six months of 2004 (please see page 12 for the GAAP reconciliation). Page 4 MASCO CORPORATION QUARTERLY SEGMENT DATA - 2005 (DOLLARS IN MILLIONS)
Year Qtr. 4 Qtr. 3 Qtr. 2 Qtr. 1 ---------- ----------- ----------- ---------- ---------- Net Sales: - Cabinets and Related Products $ 900 $ 838 - Plumbing Products 823 760 - Installation and Other Services 764 693 - Decorative Architectural Products 506 371 - Other Specialty Products 355 307 ---------- ----------- ----------- ---------- ---------- - TOTAL 3,348 2,969 ========== =========== =========== ========== ========== - North America 2,784 2,405 - International, principally Europe 564 564 ---------- ----------- ----------- ---------- ---------- - TOTAL, AS ABOVE 3,348 2,969 ========== =========== =========== ========== ========== Operating Profit: - Cabinets and Related Products 144 124 - Plumbing Products 108 79 - Installation and Other Services 102 80 - Decorative Architectural Products 96 59 - Other Specialty Products 68 45 ---------- ----------- ----------- ---------- ---------- - TOTAL 518 387 ========== =========== =========== ========== ========== - North America 447 326 - International, principally Europe 71 61 ---------- ----------- ----------- ---------- ---------- - TOTAL, AS ABOVE 518 387 ========== =========== =========== ========== ========== General Corporate Expense (GCE) 48 46 (Gain) Loss on Sale of Corporate Fixed Assets, Net - - (Income) Regarding Litigation Settlement (3) (2) ---------- ----------- ----------- ---------- ---------- Operating Profit (after GCE and Adjustments) 473 343 Other Income (Expense), Net (41) (22) ---------- ----------- ----------- ---------- ---------- Income from Continuing Operations Before Income Taxes and Minority Interest $ 432 $ 321 ========== =========== =========== ========== ========== Margins: - Cabinets and Related Products 16.0% 14.8% - Plumbing Products 13.1% 10.4% - Installation and Other Services 13.4% 11.5% - Decorative Architectural Products 19.0% 15.9% - Other Specialty Products 19.2% 14.7% - TOTAL 15.5% 13.0% - North America 16.1% 13.6% - International, principally Europe 12.6% 10.8% - TOTAL, AS ABOVE 15.5% 13.0%
NOTES: - - Data exclude discontinued operations. - - Operating profit and margins by segment and geographic area are before general corporate expense and exclude (income) regarding the litigation settlement. Page 5 MASCO CORPORATION QUARTERLY SEGMENT DATA - 2004 EXCLUDING GOODWILL IMPAIRMENT CHARGE (DOLLARS IN MILLIONS)
Year Qtr. 4 Qtr. 3 Qtr. 2 Qtr. 1 ------- ------ ------ ------ ------ Net Sales: - Cabinets and Related Products $ 3,289 $ 857 $ 856 $ 797 $ 779 - Plumbing Products 3,057 758 775 785 739 - Installation and Other Services 2,771 718 737 686 630 - Decorative Architectural Products 1,610 356 433 451 370 - Other Specialty Products 1,347 345 372 342 288 ------ ------ ------ ------ ------ - TOTAL 12,074 3,034 3,173 3,061 2,806 ======= ====== ====== ====== ====== - North America 9,879 2,450 2,627 2,531 2,271 - International, principally Europe 2,195 584 546 530 535 ------- ------ ------ ------ ------ - TOTAL, AS ABOVE 12,074 3,034 3,173 3,061 2,806 ======= ====== ====== ====== ====== Operating Profit: - Cabinets and Related Products 552 156 150 137 109 - Plumbing Products 395 81 101 117 96 - Installation and Other Services 358 86 103 88 81 - Decorative Architectural Products 331 64 102 101 64 - Other Specialty Products 258 56 86 71 45 ------- ------ ------ ------ ------ - TOTAL 1,894 443 542 514 395 ======= ====== ====== ====== ====== - North America 1,639 390 478 442 329 - International, principally Europe 255 53 64 72 66 ------- ------ ------ ------ ------ - TOTAL, AS ABOVE 1,894 443 542 514 395 ======= ====== ====== ====== ====== General Corporate Expense (GCE) 194 60 53 45 36 (Gain) Loss on Sale of Corporate Fixed Assets, Net (7) 1 - (1) (7) (Income) Regarding Litigation Settlement (30) - (2) (7) (21) ------- ------ ------ ------ ------ Operating Profit (after GCE and Adjustments) 1,737 382 491 477 387 Other Income (Expense), Net (51) (8) (31) (11) (1) ------- ------ ------ ------ ------ Income from Continuing Operations Before Income Taxes and Minority Interest $ 1,686 $ 374 $ 460 $ 466 $ 386 ======= ====== ====== ====== ====== Margins: - Cabinets and Related Products 16.8% 18.2% 17.5% 17.2% 14.0% - Plumbing Products 12.9% 10.7% 13.0% 14.9% 13.0% - Installation and Other Services 12.9% 12.0% 14.0% 12.8% 12.9% - Decorative Architectural Products 20.6% 18.0% 23.6% 22.4% 17.3% - Other Specialty Products 19.2% 16.2% 23.1% 20.8% 15.6% - TOTAL 15.7% 14.6% 17.1% 16.8% 14.1% - North America 16.6% 15.9% 18.2% 17.5% 14.5% - International, principally Europe 11.6% 9.1% 11.7% 13.6% 12.3% - TOTAL, AS ABOVE 15.7% 14.6% 17.1% 16.8% 14.1%
NOTES: - - Data exclude discontinued operations. - - Operating results for the fourth quarter of 2004 exclude a non-cash, pre-tax charge for goodwill impairment of $168 million. The charge related to certain of the Company's European business units and was allocated among the Cabinets and Related Products segment ($56 million); Plumbing Products segment ($25 million); Decorative Architectural Products segment ($62 million); and Other Specialty Products segment ($25 million). - - Operating profit and margins by segment and geographic area are before general corporate expense and exclude (income) regarding the litigation settlement and (gain) loss on sale of Corporate fixed assets, net. Page 6 MASCO CORPORATION QUARTERLY SEGMENT DATA - 2004 INCLUDING GOODWILL IMPAIRMENT CHARGE (DOLLARS IN MILLIONS)
Year Qtr. 4 Qtr. 3 Qtr. 2 Qtr. 1 --------- ---------- --------- ---------- ---------- Net Sales: - Cabinets and Related Products $ 3,289 $ 857 $ 856 $ 797 $ 779 - Plumbing Products 3,057 758 775 785 739 - Installation and Other Services 2,771 718 737 686 630 - Decorative Architectural Products 1,610 356 433 451 370 - Other Specialty Products 1,347 345 372 342 288 --------- ---------- --------- ---------- ---------- - TOTAL 12,074 3,034 3,173 3,061 2,806 ========= ========== ========= ========== ========== - North America 9,879 2,450 2,627 2,531 2,271 - International, principally Europe 2,195 584 546 530 535 --------- ---------- --------- ---------- ---------- - TOTAL, AS ABOVE 12,074 3,034 3,173 3,061 2,806 ========= ========== ========= ========== ========== Operating Profit: - Cabinets and Related Products 496 100 150 137 109 - Plumbing Products 370 56 101 117 96 - Installation and Other Services 358 86 103 88 81 - Decorative Architectural Products 269 2 102 101 64 - Other Specialty Products 233 31 86 71 45 --------- ---------- --------- ---------- ---------- - TOTAL 1,726 275 542 514 395 ========= ========== ========= ========== ========== - North America 1,639 390 478 442 329 - International, principally Europe 87 (115) 64 72 66 --------- ---------- --------- ---------- ---------- - TOTAL, AS ABOVE 1,726 275 542 514 395 ========= ========== ========= ========== ========== General Corporate Expense (GCE) 194 60 53 45 36 (Gain) Loss on Sale of Corporate Fixed Assets, Net (7) 1 - (1) (7) (Income) Regarding Litigation Settlement (30) - (2) (7) (21) --------- ---------- --------- ---------- ---------- Operating Profit (after GCE and Adjustments) 1,569 214 491 477 387 Other Income (Expense), Net (51) (8) (31) (11) (1) --------- ---------- --------- ---------- ---------- Income from Continuing Operations Before Income Taxes and Minority Interest $ 1,518 $ 206 $ 460 $ 466 $ 386 ========= ========== ========= ========== ========== Margins: - Cabinets and Related Products 15.1% 11.7% 17.5% 17.2% 14.0% - Plumbing Products 12.1% 7.4% 13.0% 14.9% 13.0% - Installation and Other Services 12.9% 12.0% 14.0% 12.8% 12.9% - Decorative Architectural Products 16.7% 0.6% 23.6% 22.4% 17.3% - Other Specialty Products 17.3% 9.0% 23.1% 20.8% 15.6% - TOTAL 14.3% 9.1% 17.1% 16.8% 14.1% - North America 16.6% 15.9% 18.2% 17.5% 14.5% - International, principally Europe 4.0% -19.7% 11.7% 13.6% 12.3% - TOTAL, AS ABOVE 14.3% 9.1% 17.1% 16.8% 14.1%
NOTES: - - Data exclude discontinued operations. - - Operating results for the fourth quarter of 2004 include a non-cash, pre-tax charge for goodwill impairment of $168 million. The charge related to certain of the Company's European business units and was allocated among the Cabinets and Related Products segment ($56 million); Plumbing Products segment ($25 million); Decorative Architectural Products segment ($62 million); and Other Specialty Products segment ($25 million). - - Operating profit and margins by segment and geographic area are before general corporate expense and exclude (income) regarding the litigation settlement and (gain) loss on sale of Corporate fixed assets, net. Page 7 MASCO CORPORATION OTHER INCOME (EXPENSE), NET 2005 & 2004 - BY QUARTER (IN MILLIONS)
2005 2004 ------------------------------------- ---------------------------------------- YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1 YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1 ---- ------ ------ ------ ------ ------ ------ ------ ------ ------- Interest Expense $ (57) $ (59) $ (217) $ (57) $ (55) $ (52) $ (53) Income from Cash and Cash Investments 5 6 11 5 3 1 2 Other Interest Income 1 1 6 1 2 1 2 Realized Gains from Financial Investments, Net 28 41 92 40 9 14 29 Dividend Income 4 4 27 5 8 7 7 Impairment Charge for Marketable Securities (2) - (21) (21) - - - Other, Net (20) (15) 51 19 2 18 12 ---- ------ ------ ------ ------ ------ ------ ------ ------ ------ Total Other Income (Expense), Net $ (41) $ (22) $ (51) $ (8) $ (31) $ (11) $ (1) ==== ====== ====== ====== ====== ====== ====== ====== ====== ======
NOTES: - - Data exclude discontinued operations. - - Other, net for the second quarter of 2005 principally includes $14 million of realized currency transaction losses; the second quarter of 2004 includes $6 million of realized currency transaction gains and a $5 million gain from the sale of non-operating assets. - - The fourth quarter 2004 impairment charge relates to the Company's investment in Furniture Brands International common stock. Page 8 MASCO CORPORATION CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED JUNE 30, 2005 & 2004 (DOLLARS AND SHARES IN MILLIONS, EXCEPT PER SHARE DATA)
Three Months Ended As a Percent of Sales June 30, 3 Months Ended June 30, % ------------------------- ------------------------- Line Change 2005 2004 2005 2004 - ---- ------ ---------- ----------- ---------- ----- 1 Net Sales 9% $ 3,348 $ 3,061 100.0% 100.0% 2 Cost of Sales 13% 2,363 2,087 70.6% 68.2% ---------- ----------- ---------- ----- 3 Gross Profit 1% 985 974 29.4% 31.8% ---------- ----------- ---------- ----- Operating Profit: 4 - Before GCE, Litigation (Income)+(Gain) on Sale of Corporate Fixed Assets (3-8) 1% 518 514 15.5% 16.8% 5 - After GCE, Litigation (Income)+(Gain) on Sale of Corporate Fixed Assets (3-9-10) 1% 473 477 14.1% 15.6% ---------- ----------- ---------- ----- S,G&A Expense: 6 - General Corporate Expense (GCE) 7% 48 45 1.4% 1.5% 7 - (Gain) on Sale of Corporate Fixed Assets, Net - (1) - 0.0% 8 - All Other 2% 467 460 13.9% 15.0% ---------- ----------- ---------- ----- 9 - Total S,G&A Expense 2% 515 504 15.4% 16.5% ---------- ----------- ---------- ----- 10 (Income) Regarding Litigation Settlement (3) (7) -0.1% -0.2% 11 Other Income (Expense), Net (41) (11) -1.2% -0.4% ---------- ----------- ---------- ----- 12 Income from Continuing Operations Before Income Taxes and Minority Interest (5+11) -7% 432 466 12.9% 15.2% 13 Income Taxes -8% 153 167 4.6% 5.5% (Tax Rate) 35.4% 35.8% ---------- ----------- ---------- ----- 14 Income from Continuing Operations Before Minority Interest -7% 279 299 8.3% 9.8% 15 Minority Interest (5) (5) -0.1% -0.2% ---------- ----------- ---------- ----- 16 Income from Continuing Operations -7% 274 294 8.2% 9.6% 17 (Loss) from Discontinued Operations, Net of Income Taxes - (33) - -1.1% ---------- ----------- ---------- ----- 18 Net Income 5% $ 274 $ 261 8.2% 8.5% ========== =========== ========== ===== Earnings Per Common Share (Diluted): Income from Continuing Operations -2% $ 0.64 $ 0.65 (Loss) from Discontinued Operations, Net of Income Taxes - (0.07) ---------- ----------- Net Income 11% $ 0.64 $ 0.58 ========== =========== Average (Diluted) Common Shares -5% 430 453
Page 9 MASCO CORPORATION CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2005 & 2004 (DOLLARS AND SHARES IN MILLIONS, EXCEPT PER SHARE DATA)
Six Months Ended As a Percent of Sales June 30, 6 Months Ended June 30, % ------------------------- ------------------------- Line Change 2005 2004 2005 2004 - ---- ------ ---------- ----------- ---------- --------- 1 Net Sales 8% $ 6,317 $ 5,867 100.0% 100.0% 2 Cost of Sales 11% 4,491 4,042 71.1% 68.9% ---------- ----------- ---------- --------- 3 Gross Profit 0% 1,826 1,825 28.9% 31.1% ---------- ----------- ---------- --------- Operating Profit: 4 - Before GCE, Litigation (Income)+(Gain) on Sale of Corporate Fixed Assets (3-8) 0% 905 909 14.3% 15.5% 5 - After GCE, Litigation (Income)+(Gain) on Sale of Corporate Fixed Assets (3-9-10) -6% 816 864 12.9% 14.7% ---------- ----------- ---------- --------- S,G&A Expense: 6 - General Corporate Expense (GCE) 16% 94 81 1.5% 1.4% 7 - (Gain) on Sale of Corporate Fixed Assets, Net - (8) - -0.1% 8 - All Other 1% 921 916 14.6% 15.6% ---------- ----------- ---------- --------- 9 - Total S,G&A Expense 3% 1,015 989 16.1% 16.9% ---------- ----------- ---------- --------- 10 (Income) Regarding Litigation Settlement (5) (28) -0.1% -0.5% 11 Other Income (Expense), Net (63) (12) -1.0% -0.2% ---------- ----------- ---------- --------- 12 Income from Continuing Operations Before Income Taxes and Minority Interest (5+11) -12% 753 852 11.9% 14.5% 13 Income Taxes -16% 257 307 4.1% 5.2% (Tax Rate) 34.1% 36.0% ---------- ----------- ---------- --------- 14 Income from Continuing Operations Before Minority Interest -9% 496 545 7.9% 9.3% 15 Minority Interest (10) (10) -0.2% -0.2% ---------- ----------- ---------- --------- 16 Income from Continuing Operations -9% 486 535 7.7% 9.1% 17 Income (Loss) from Discontinued Operations, Net of Income Taxes 19 (106) 0.3% -1.8% ---------- ----------- ---------- --------- 18 Net Income 18% $ 505 $ 429 8.0% 7.3% ========== =========== ========== ========= Earnings Per Common Share (Diluted): Income from Continuing Operations -4% $ 1.11 $ 1.16 Income (Loss) from Discontinued Operations, Net of Income Taxes 0.04 (0.23) ---------- ----------- Net Income 24% $ 1.16 $ 0.93 ========== =========== Average (Diluted) Common Shares -5% 437 460
Page 10 MASCO CORPORATION CONSOLIDATED BALANCE SHEETS (IN MILLIONS)
June 30, December 31, 2005 2004 -------- ------------ ASSETS Current Assets: Cash and Cash Investments $ 1,538 $ 1,256 Accounts and Notes Receivable, Net 1,956 1,732 Inventories 1,224 1,132 Prepaid Expenses and Other 269 282 -------- ------------ Total Current Assets 4,987 4,402 Property and Equipment, Net 2,205 2,272 Goodwill 4,307 4,408 Other Intangible Assets, Net 317 326 Other Assets 835 1,133 -------- ------------ Total Assets $ 12,651 $ 12,541 ======== ============ LIABILITIES Current Liabilities: Notes Payable $ 875 $ 80 Accounts Payable 951 837 Accrued Liabilities 1,206 1,230 -------- ------------ Total Current Liabilities 3,032 2,147 Long-Term Debt 3,876 4,187 Deferred Income Taxes and Other 764 784 -------- ------------ Total Liabilities 7,672 7,118 SHAREHOLDERS' EQUITY 4,979 5,423 -------- ------------ Total Liabilities and Shareholders' Equity $ 12,651 $ 12,541 ======== ============
Page 11 MASCO CORPORATION GAAP RECONCILIATION OF SALES GROWTH EXCLUDING EFFECT OF ACQUISITIONS & CURRENCY TRANSLATION (IN MILLIONS)
Three Months Ended June 30, --------------------------- 2005 2004 ------- ------- Consolidated Net Sales, as reported $ 3,348 $ 3,061 - Acquisitions (5) - ------- ------- Consolidated Net Sales (excl. acquisitions) $ 3,343 $ 3,061 ======= ======= North American Net Sales, as reported $ 2,784 $ 2,531 - Acquisitions (5) - ------- ------- North American Net Sales (excl. acquisitions) $ 2,779 $ 2,531 ======= ======= International Net Sales, as reported $ 564 $ 530 - Acquisitions - - ------- ------- International Net Sales (excl. acquisitions) 564 530 - Currency Translation (21) - ------- ------- International Net Sales (excl. acquisitions & currency) $ 543 $ 530 ======= =======
Six Months Ended June 30, --------------------------- 2005 2004 ------- ------- Consolidated Net Sales, as reported $ 6,317 $ 5,867 - Acquisitions (10) - ------- ------- Consolidated Net Sales (excl. acquisitions) $ 6,307 $ 5,867 ======= ======= North American Net Sales, as reported $ 5,189 $ 4,802 - Acquisitions (10) - ------- ------- North American Net Sales (excl. acquisitions) $ 5,179 $ 4,802 ======= ======= International Net Sales, as reported $ 1,128 $ 1,065 - Acquisitions - - ------- ------- International Net Sales (excl. acquisitions) 1,128 1,065 - Currency Translation (44) - ------- ------- International Net Sales (excl. acquisitions & currency) $ 1,084 $ 1,065 ======= =======
NOTES: The Company presents information comparing results from one period to another excluding the results of businesses acquired 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 in local currencies before taking into account currency fluctuations. Page 12 MASCO CORPORATION GAAP RECONCILIATION OF OPERATING PROFIT AND MARGINS (DOLLARS IN MILLIONS)
THREE MONTHS ENDED JUNE 30, ----------------------------------------------- 2005 2004 --------------------- ------------------ $ Margin $ Margin ------- ------ ------ ------ Operating Profit, As Reported $ 473 14.1% $ 477 15.6% (Income) Regarding Litigation Settlement (3) (7) ------- ------ Operating Profit, As Reconciled $ 470 14.0% $ 470 15.4% ======= ======
SIX MONTHS ENDED JUNE 30, ----------------------------------------------- 2005 2004 --------------------- ------------------ $ Margin $ Margin ------- ------ ------ ------ Operating Profit, As Reported $ 816 12.9% $ 864 14.7% (Income) Regarding Litigation Settlement (5) (28) ------- ------ Operating Profit, As Reconciled $ 811 12.8% $ 836 14.2% ======= ======
NOTE: 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 performance measures and ratios should be viewed in addition to, and not as an alternative for, the Company's reported results under accounting principles generally accepted in the United States. Page 13 MASCO CORPORATION GAAP RECONCILIATION OF OPERATING PROFIT AND SHAREHOLDERS' EQUITY (IN MILLIONS)
TWELVE MONTHS ENDED JUNE 30, ------------------------------- 2005 2004 ------- ------- Operating Profit from Continuing Operations $ 1,521 $ 1,673 Goodwill Impairment Charge 168 53 European Charges - 31 (Income) Regarding Litigation Settlement (7) (86) ------- ------- Operating Profit, As Reconciled $ 1,682 $ 1,671 ======= ========
TWELVE MONTHS ENDED JUNE 30, ------------------------------- 2005 2004 ------- ------- Shareholders' Equity, As Reported $ 4,979 $ 5,020 Goodwill Impairment Charge (after tax) 141 47 European Charges (after tax) - 22 (Income) Regarding Litigation Settlement (after tax) (4) (55) ------- ------- Shareholders' Equity, As Reconciled $ 5,116 $ 5,034 ======= =======
NOTES: Data exclude discontinued operations. 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 performance measures and ratios should be viewed in addition to, and not as an alternative for, the Company's reported results under accounting principles generally accepted in the United States. This information is provided as detail for the calculation of return on invested capital ("ROIC") which is calculated as after-tax operating profit (last twelve months, as reconciled) divided by the total of average debt (net of average cash) and average shareholders' equity. Page 14 MASCO CORPORATION DISCONTINUED OPERATIONS (IN MILLIONS)
Three Months Ended June 30, ------------------------- 2005 2004 ------- ------ Net Sales $ - $ 108 ======= ====== Income from Discontinued Operations $ 1 $ 12 (Loss) on Disposal of Discontinued Operations, Net (1) - Impairment of Assets Held for Sale - (44) ------- ------ (Loss) Before Income Taxes - (32) Income Tax (Expense) - (1) ------- ------ (Loss) from Discontinued Operations, Net of Income Taxes $ - $ (33) ======= ======
Six Months Ended June 30, ------------------------- 2005 2004 ------- ------ Net Sales $ 17 $ 203 ======= ====== Income from Discontinued Operations $ 4 $ 18 Gain on Disposal of Discontinued Operations, Net 10 - Impairment of Assets Held for Sale - (108) ------- ------ Income (Loss) Before Income Taxes 14 (90) Income Tax Benefit (Expense) 5 (16) ------- ------ Income (Loss) from Discontinued Operations, Net of Income Taxes $ 19 $ (106) ======= ======
NOTES: The unusual relationship between income tax benefit and income before income taxes (including the gain on the disposition of businesses) for the six months ended June 30, 2005 results from the gain requiring no current tax expense and the reversal of deferred tax liabilities of the discontinued operations which are no longer expected to be incurred. The after-tax charge for the impairment of assets held for sale was $76 million in the first quarter of 2004, including $12 million for the expensing of deferred tax assets of the discontinued operations, and $44 million in the second quarter of 2004. The information for discontinued operations is for the period prior to the respective dates of disposition. Page 15 -----END PRIVACY-ENHANCED MESSAGE-----