EX-99 2 k46815exv99.htm EXHIBIT 99 exv99
         
(MASCO LOGO)
  FOR IMMEDIATE RELEASE
 
        
Media Contact
  Investor Contact
Sharon Rothwell
  Maria Duey
Vice President – Corporate Affairs
  Vice President – Investor Relations
313.792.6028
  313.792.5500
sharon_rothwell@mascohq.com
  maria_duey@mascohq.com
MASCO CORPORATION REPORTS THIRD QUARTER 2008 RESULTS
Third Quarter 2008
  •   Net sales from continuing operations declined 16 percent to $2.5 billion.
 
  •   Income from continuing operations was $36 million or $.10 per common share.
 
  •   The Company increased the quarterly dividend to $.235 per common share, making 2008 the 50th consecutive year in which dividends have been increased.
 
  •   The Company completed the previously announced divestiture plan, generating total net proceeds of $174 million.
 
  •   The Company had over $1 billion of cash at September 30, 2008.
Taylor, Mich., (October 28, 2008) — Masco Corporation (NYSE: MAS) today reported that net sales from continuing operations for the quarter ended September 30, 2008 declined 16 percent to $2.5 billion compared with $3.0 billion for the third quarter of 2007. North American sales declined 18 percent and International sales declined six percent. In local currencies, International sales declined 11 percent compared with the third quarter of 2007.
Income from continuing operations was $36 million or $.10 per common share and $206 million or $.56 per common share in the third quarters of 2008 and 2007, respectively.
The third quarter of 2008 results were adversely affected by significantly lower sales volume to the new home construction market and a continued decline in consumer spending for home improvement products.
The Company continues to focus on the rationalization of its businesses, including sourcing programs, business consolidations, plant closures, headcount reductions and other initiatives. During the third quarters of 2008 and 2007, the Company incurred costs and charges of $16 million pre-tax ($.03 per common share, after tax) and $12 million pre-tax ($.02 per common share, after tax), respectively, related to these initiatives. Since late 2006, the Company has aggressively reduced its cost structure including closing 14 manufacturing facilities, reducing headcount by 20,000 (which includes an approximate 33 percent of its North American workforce) and reducing installation branches by over 25 percent.

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The third quarter of 2008 was also impacted by a higher tax rate which reduced earnings by $.13 per common share compared with the third quarter of 2007.
As previously disclosed, in the first quarter of 2008, the Company determined that several European business units were not core to the Company’s long-term growth strategy and, accordingly, embarked on a plan of disposition which was completed in the third quarter of 2008. Proceeds of $174 million (including $28 million in the third quarter) were generated through the disposition of these business units.
Business conditions remain difficult in the Company’s markets, as the Company experienced a further significant reduction in sales of its products and services late in the third quarter of 2008, which has continued into October. The Company continues to estimate that 2008 housing starts will decline to a range of 900,000 to 1,000,000 units, compared to 1.3 million units in 2007. In the first nine months of 2008, housing starts declined 31 percent from 2007. However, the Company anticipates that consumer spending for home improvement products and demand for certain of the Company’s International products will continue to decline more than previously anticipated in the near term.
While the unprecedented changes in the global economic and financial market environment make forecasting future business conditions extremely difficult, the Company currently estimates that its fourth quarter sales will decline approximately 20 percent compared to 2007. As a result, the Company currently estimates that its full-year 2008 sales will decline by mid-teens compared to 2007. The Company’s previous guidance estimated that its full- year 2008 percentage sales decline would be low-double digits to mid-teens.
The Company currently estimates that its 2008 full-year earnings will be in a range of $.25 to $.30 per common share, reflecting the additional sales decline. The guidance also includes approximately $22 million pretax ($.04 per common share, after tax) of additional costs and charges for plans undertaken to further rationalize the Company’s business, but does not include any additional costs and charges that may result from the continued evaluation of the Company’s businesses or any other charges. The Company’s previous earnings guidance was a range of $.50 to $.65 per common share for the full-year 2008.
The Company continues to estimate that 2008 free cash flow (cash from operations, after capital expenditures and before dividends) will be relatively strong and approximate $600 million.
The Company’s guidance also reflects increasingly competitive market conditions for its services and products and higher costs for freight and logistics and for certain materials, including commodities impacted by energy costs.
The Company’s guidance includes the Company’s estimate that its full-year tax rate will approximate 56 to 57 percent (due to the U.S. tax on the anticipated repatriation of low-taxed foreign earnings to utilize the Company’s foreign tax credit carryforward) which, compared to the Company’s normalized tax rate of approximately 36 percent, will reduce earnings by approximately $.18 per common share.
The Company’s guidance includes impairment charges for financial investments and currency losses incurred in the first nine months of 2008 which, together with the expected

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increase in the tax rate, decrease full-year estimated earnings by approximately $.27 per common share.
Although the Company expects market conditions in its industry, over the next several quarters, to be very challenging, the Company is confident that the long-term fundamentals for the new home construction and home improvement products markets are positive. The Company believes that its strong financial position (including cash of over $1 billion at September 30, 2008, modest debt maturities until 2012, unused bank lines and its ability to generate strong cash flow) together with its current strategy of investing in leadership brands, innovative growth and flexible and scalable supply chains along with a strong focus on cash flow to fund our dividend, will allow us to drive long-term growth and incremental leverage for our shareholders.
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.
The Company is providing an Earnings Presentation, in a PDF format, on its Web site by 9:00 a.m. ET, October 28, 2008, that can be viewed as part of the conference call. Please refer to the Earnings Presentation for additional Business Highlights.
A conference call regarding items contained in this release is scheduled for Tuesday, October 28, 2008 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) 325-2433 (confirmation #7942632). The conference call will be webcast simultaneously on the Company’s Web site at www.masco.com and supplemental material, including the financial data referred to on the call and a reconciliation of non-GAAP information provided on the call, will also be available on the Web site. A replay of the call will be available on Masco’s Web site or by phone by dialing (719) 457-0820 (replay access code #7942632) approximately two hours after the end of the call and will continue through November 4, 2008.
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 Web site at www.masco.com.
# # #
Statements contained herein, or otherwise made available, that reflect the Company’s views about its future performance may 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 the Company’s results may differ materially from the results discussed in such forward-looking statements. For further information, refer to our most recent Annual Report on Form 10-K (particularly the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections) and to any subsequent Quarterly Reports on Form 10-Q, all of which are on file with the Securities and Exchange Commission. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Certain of the financial and statistical data made available are non-GAAP financial measures as defined by the SEC’s Regulation G. The Company believes that such non-GAAP performance measures and ratios used in managing the business may provide users with 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 is contained in the Company’s filings with the SEC and is available on Masco’s Web site.

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MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME — UNAUDITED
For the Three Months and Nine Months Ended September 30, 2008 and 2007
(In Millions Except Per Common Share Data)
                                 
    Three Months Ended     Nine Months Ended  
    September 30     September 30  
    2008     2007     2008     2007  
Net sales
   $ 2,528     $ 3,005     $ 7,621     $ 8,897  
Cost of sales
     1,880       2,155       5,643       6,420  
 
                        
Gross profit
     648       850       1,978       2,477  
Selling, general and administrative expenses
     452       479       1,413       1,493  
 
                        
Operating profit
     196       371       565       984  
Other income (expense), net
     (57 )     (45 )     (197 )     (130 )
 
                        
Income from continuing operations before income taxes and minority interest
     139       326       368       854  
Income taxes
     92       109       207       302  
 
                        
Income from continuing operations before minority interest
     47       217       161       552  
Minority interest
     11       11       35       27  
 
                        
Income from continuing operations
     36       206       126       525  
(Loss) income from discontinued operations, net
     (3 )     (1 )     (9 )     12  
 
                        
Net income
   $ 33     $ 205     $ 117     $ 537  
 
                        
 
                                
Earnings per common share (diluted):
                                
Income from continuing operations
   $ 0.10     $ 0.56     $ 0.36     $ 1.40  
(Loss) income from discontinued operations, net
     (0.01 )     —       (0.03 )     0.03  
 
                        
Net income
   $ 0.09     $ 0.56     $ 0.33     $ 1.43  
 
                        
 
                                
Average diluted common shares outstanding
     352       367       354       376  
 
                        

 

 

Masco Corporation
Key Financial Data — Unaudited
Q3 — 2008 (In Millions, Except Earnings Per Share and Working Capital Days)
                         
Sales & Earnings   Q3 - 2008   Q3 - 2007   Change
Net Sales
   $ 2,528     $ 3,005       -16 %
Operating Profit
   $ 196     $ 371       -47 %
Operating Profit %
     7.8 %     12.3 %        (450) bps
Other Income (Expense), Net
   $ (57 )   $ (45 )     27 %
Income Taxes
   $ 92     $ 109       -16 %
Minority Interest
   $ 11     $ 11       0 %
Income from Continuing Operations
   $ 36     $ 206       -83 %
Diluted EPS from Continuing Operations
   $ 0.10     $ 0.56       -82 %
                         
Operating Expenses   Q3 - 2008   Q3 - 2007   Change
Cost of Sales
   $ 1,880     $ 2,155       -13 %
Gross Margin
     25.6 %     28.3 %        (270) bps
SG&A Expenses (Including GCE)
   $ 452     $ 479       -6 %
SG&A as a % of net sales
     17.9 %     15.9 %        (200) bps
General Corporate Expense (GCE)
   $ 32     $ 44       -27 %
General Corp Expense as a % of net sales
     1.3 %     1.5 %           20 bps
                         
Business Segments   Q3 - 2008   Q3 - 2007   Change
Cabinets and Related Products:
                        
Net Sales
   $ 584     $ 736       -21 %
Operating Profit
   $ 23     $ 105       -78 %
Operating Profit % to Net Sales
     3.9 %     14.3 %        (1,040) bps
 
                        
Plumbing Products:
                        
Net Sales
   $ 805     $ 865       -7 %
Operating Profit
   $ 88     $ 100       -12 %
Operating Profit % to Net Sales
     10.9 %     11.6 %             (70) bps
 
                        
Installation and Other Services:
                        
Net Sales
   $ 492     $ 689       -29 %
Operating Profit
   $ 10     $ 60       -83 %
Operating Profit % to Net Sales
     2.0 %     8.7 %        (670) bps
 
                        
Decorative Architectural Products:
                        
Net Sales
   $ 446     $ 467       -4 %
Operating Profit
   $ 94     $ 114       -18 %
Operating Profit % to Net Sales
     21.1 %     24.4 %        (330) bps
 
                        
Other Specialty Products:
                        
Net Sales
   $ 201     $ 248       -19 %
Operating Profit
   $ 16     $ 36       -56 %
Operating Profit % to Net Sales
     8.0 %     14.5 %        (650) bps
 
                        
Total Segment Reported:
                        
Net Sales
   $ 2,528     $ 3,005       -16 %
Operating Profit
   $ 231     $ 415       -44 %
Operating Profit % to Net Sales
     9.1 %     13.8 %        (470) bps
 
                        
Change in Key Retailer Sales
     -11 %     -1 %        

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Masco Corporation
Key Financial Data — Unaudited
Q3 — 2008 (In Millions, Except Earnings Per Share and Working Capital Days)
                         
Business Regions   Q3 - 2008   Q3 - 2007   Change
North America
                        
Net Sales
   $ 1,975     $ 2,417       -18 %
Operating Profit
   $ 193     $ 346       -44 %
Operating Profit % to Net Sales
     9.8 %     14.3 %        (450) bps
 
                        
International, principally Europe
                        
Net Sales
   $ 553     $ 588       -6 %
Operating Profit
   $ 38     $ 69       -45 %
Operating Profit % to Net Sales
     6.9 %     11.7 %        (480) bps
                                 
Working Capital   Q3 - 2008   Q3 - 2007   Change        
Receivable Days
     50       51       (1 )   days
Inventory Days
     52       49       3     days
Payable Days
     41       42       (1 )   days
Working Capital (Receivables+Inventory-Payables)
   $ 1,805     $ 2,130       -15 %        
Working Capital as a % of Sales (As Reported TTM*)
     17.6 %     17.7 %     10     bps
                 
Other   Q3 - 2008   Q3 - 2007
Dividend Payments (year-to-date)
   $ 251     $ 262  
Cash Paid for Share Repurchases (year-to-date)
   $ 160     $ 804  
Common Shares Repurchased (year-to-date)
     9       29  
Common Shares Repurchased (QTR)
     1       7  
CAPEX (year-to-date)
   $ 142     $ 174  
Depreciation and Amortization (year-to-date)
   $ 179     $ 185  
Return on Invested Capital (As Reported TTM)
     5.8 %     8.0 %
Return on Invested Capital (As Reconciled TTM)
     6.7 %     10.4 %
Average diluted common shares outstanding (QTR)
     352       367  
Average diluted common shares outstanding (October 1)
     351       364  
 
                
Effective Tax Rate (QTR)
     66.2 %     33.4 %
                 
Debt Ratio   Q3 - 2008   Q2 - 2008
Long-term Debt
   $ 3,961     $ 3,960  
Notes Payable
   $ 115     $ 116  
Total Debt
   $ 4,076     $ 4,076  
 
                
Shareholders’ Equity
   $ 3,750     $ 3,954  
 
                
Debt to Capital
     52.1 %     50.8 %
 
*   - Trailing Twelve Months

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MASCO CORPORATION — 3rd Quarter 2008
     
Page    
 
    
1
  Condensed Consolidated Statements of Operations — 2008 & 2007 by Quarter — Unaudited
 
    
2
  Notes to Condensed Consolidated Statements of Operations — 2008 & 2007 by Quarter — Unaudited
 
    
3
  Sales by Segment and Geographic Area — Three Months Ended September 30, 2008 & 2007 — Unaudited
 
    
4
  Sales by Segment and Geographic Area — Nine Months Ended September 30, 2008 & 2007 — Unaudited
 
    
5
 
2008 Quarterly Segment Data Excluding Costs and Charges for Business Rationalizations and Other Initiatives — Unaudited
 
    
6
 
2008 Quarterly Segment Data Including Costs and Charges for Business Rationalizations and Other Initiatives — Unaudited
 
    
7
 
2007 Quarterly Segment Data Excluding Net Costs and Charges for Business Rationalizations and Other Initiatives and Impairment Charges for Goodwill and Other Intangible Assets — Unaudited
 
    
8
 
2007 Quarterly Segment Data Including Net Costs and Charges for Business Rationalizations and Other Initiatives and Impairment Charges for Goodwill and Other Intangible Assets — Unaudited
 
    
9
  Other Income (Expense), Net — 2008 & 2007 by Quarter — Unaudited
 
    
10
  Condensed Consolidated Statements of Income — Three Months Ended September 30, 2008 & 2007 — Unaudited
 
    
11
  Condensed Consolidated Statements of Income — Nine Months Ended September 30, 2008 & 2007 — Unaudited
 
    
12
  Condensed Consolidated Balance Sheets — Unaudited
 
    
13
  Discontinued Operations — Unaudited
 
    
 
  GAAP Reconciliations:
 
    
14
  Sales Growth Excluding the Effect of Acquisitions and Currency Translation — Unaudited
 
    
15
  Operating Profit and Margins — Unaudited
 
    
16
  Operating Profit and Shareholders’ Equity — Unaudited

 

 

MASCO CORPORATION
Condensed Consolidated Statements of Operations
2008 & 2007 — by Quarter — Unaudited
(dollars in millions, except per share data)
                                                                                   
    2008       2007  
    Year     Qtr. 4     Qtr. 3     Qtr. 2     Qtr. 1       Year     Qtr. 4     Qtr. 3     Qtr. 2     Qtr. 1  
Net Sales:
                                                                                  
- North America
                   $ 1,975     $ 2,067     $ 1,893       $ 9,271     $ 2,048     $ 2,417     $ 2,548     $ 2,258  
- International, principally Europe
                     553       576       557         2,261       587       588       541       545  
 
                                                              
 
                                                                                  
- Consolidated
                     2,528       2,643       2,450         11,532       2,635       3,005       3,089       2,803  
 
                                                                                  
Cost of Sales
                     1,880       1,943       1,820         8,380       1,960       2,155       2,198       2,067  
 
                                                              
 
                                                                                  
Gross Profit
                     648       700       630         3,152       675       850       891       736  
(Gross Margin as a % of Sales)
                     25.6 %     26.5 %     25.7 %       27.3 %     25.6 %     28.3 %     28.8 %     26.3 %
 
                                                                                  
S,G&A Expense (before GCE & (Gain) on Sale of Corp- orate Fixed Assets, (Income) / Charge for Planned Dis- position of Business, and Charge for Litigation Settlement)
                     417       450       427         1,806       449       435       486       436  
(S,G&A Expense as a % of Sales)
                     16.5 %     17.0 %     17.4 %       15.7 %     17.0 %     14.5 %     15.7 %     15.6 %
 
                                                              
 
                                                                                  
Operating Profit (before GCE, (Gain) on Sale of Corporate Fixed Assets, (Income)/ Charge for Planned Dispostion of Business, Charge for Litigation Settlement & Impairment Charges for Goodwill and Other Intangible Assets)
                     231       250       203         1,346       226       415       405       300  
(Operating Margin as a % of Sales)
                     9.1 %     9.5 %     8.3 %       11.7 %     8.6 %     13.8 %     13.1 %     10.7 %
 
                                                                                  
- North America
                     193       200       149         1,008       60       346       360       242  
(Margin as a % of Sales)
                     9.8 %     9.7 %     7.9 %       10.9 %     2.9 %     14.3 %     14.1 %     10.7 %
- International, principally Europe
                     38       50       54         219       47       69       45       58  
(Margin as a % of Sales)
                     6.9 %     8.7 %     9.7 %       9.7 %     8.0 %     11.7 %     8.3 %     10.6 %
 
                                                                                  
General Corporate Expense (GCE), Net
                     32       35       43         181       37       44       49       51  
 
                                                                                  
S,G&A Expense as a % of Sales (Including GCE & (Gain) on Sale of Corporate Fixed Assets)
                     17.8 %     18.4 %     19.2 %       17.2 %     18.4 %     15.9 %     17.2 %     17.3 %
 
                                                                                  
(Gain) on Sale of Corporate Fixed Assets, Net
                     —       —       —         (8 )     —       —       (5 )     (3 )
 
                                                                                  
(Income) / Charge for Planned Disposition of Business
                     (6 )     —       6         —       —       —       —       —  
 
                                                                                  
Charge for Litigation Settlement
                     9       —       —         —       —       —       —       —  
 
                                                                                  
Impairment Charges for Goodwill and Other Intangible Assets
                     —       —       —         119       119       —       —       —  
 
                                                                                  
 
                                                              
Operating Profit per F/S
                   $ 196     $ 215     $ 154       $ 1,054     $ 70     $ 371     $ 361     $ 252  
 
                                                              
 
                                                                                  
Earnings (Loss) per Common Share (Diluted):
                                                                                  
 
                                                                                  
Income (Loss) from Continuing Operations
                   $ 0.10     $ 0.20     $ 0.05       $ 1.32     $ (0.09 )   $ 0.56     $ 0.49     $ 0.35  
 
                                                                                  
(Loss) Income from Discontinued Operations, Net
                     (0.01 )     0.03       (0.04 )       (0.29 )     (0.33 )     —       0.02       0.02  
 
                                                                                  
 
                                                              
Net Income (Loss)
                   $ 0.09     $ 0.23     $ 0.01       $ 1.03     $ (0.42 )   $ 0.56     $ 0.51     $ 0.37  
 
                                                              
Please see page 2 for Notes.

Page 1

 

MASCO CORPORATION
Notes to Condensed Consolidated Statements of Operations
2008 & 2007 — by Quarter — Unaudited
Notes:
–   Operating results in the first and third quarters of 2008 include a charge of $6 million pre–tax and after tax, and income of $6 million pre–tax and after tax, respectively, for the planned disposition of a business. This business was previously reported in discontinued operations. Operating results for the first and second quarters of 2008 have been restated to include the results of this business in continuing operations, where it is reported beginning in the third quarter 2008. Results for 2007 have not been restated.
 
–   Operating results for the first, second and third quarters of 2008 include costs and charges related to business rationalizations and other initiatives of $9 million pre–tax ($.02 per common share, after tax), $15 million pre–tax ($.03 per common share after tax) and $16 million pre–tax ($.03 per common share, after tax), respectively.
 
–   Income from continuing operations for the first, second and third quarters of 2008 includes non–cash impairment charges for financial investments of $26 million pre–tax ($.05 per common share, after tax), $3 million pre–tax and $1 million pre–tax, respectively.
 
–   Income (loss) from discontinued operations for the first and second quarters of 2008 includes non–cash charges for those business units that are expected to be divested at a loss of $43 million pre–tax ($.06 per common share, after tax) and $2 million pre–tax, respectively.
 
–   Operating results for the first, second, third and fourth quarters of 2007 include costs and charges related to business rationalizations and other initiatives of $25 million pre–tax ($.04 per common share, after tax), $23 million pre–tax ($.04 per common share, after tax), $12 million pre–tax ($.02 per common share, after tax, net of an $8 million gain from the sale of fixed assets) and $19 million pre–tax ($.03 per common share, after tax), respectively.
 
–   Operating results for the fourth quarter of 2007 include non–cash impairment charges for goodwill and other intangible assets of $119 million pre–tax ($.28 per common share, after tax).
 
–   Income (loss) from continuing operations for the second and third quarters of 2007 includes non–cash impairment charges for financial investments of $10 million pre–tax ($.02 per common share, after tax) and $12 million pre–tax ($.02 per common share, after tax), respectively.
 
–   Income from continuing operations for the first, second, third and fourth quarters of 2007 includes income related to financial investments of $22 million pre–tax ($.04 per common share, after tax), $7 million pre–tax ($.01 per common share, after tax), $11 million pre–tax ($.02 per common share, after tax) and $3 million pre–tax ($.01 per common share, after tax), respectively.
 
–   Loss from discontinued operations for the fourth quarter of 2007 includes a non–cash impairment charge for goodwill of $108 million pre–tax ($.30 per common share, after tax).
 
–   Per common share amounts for the three quarters of 2008 and the four quarters of 2007 do not total to the per common share amounts for the year, primarily due to the timing of common stock transactions.

Page 2

 

MASCO CORPORATION
Sales by Segment and Geographic Area
Three Months Ended September 30, 2008 & 2007 — Unaudited
(dollars in millions)
                         
    Three Months Ended     3rd Qtr ’08  
    September 30,     vs.  
    2008     2007     3rd Qtr ’07  
Cabinets and Related Products
   $ 584     $ 736     – 21 %
 
                        
Plumbing Products
     805       865     – 7 %
 
Installation and Other Services
     492       689     – 29 %
 
Decorative Architectural Products
     446       467     – 4 %
 
Other Specialty Products
     201       248     – 19 %
 
                        
 
                    
Total
   $ 2,528     $ 3,005     – 16 %
 
                    
 
                        
North America
   $ 1,975     $ 2,417     – 18 %
 
International, principally Europe
     553       588     – 6 %
 
                        
 
                    
Total, as above
   $ 2,528     $ 3,005     – 16 %
 
                    
Notes:
–   Data exclude discontinued operations.
 
–   Excluding acquisitions, consolidated net sales decreased 16 percent, North American net sales decreased 19 percent and International net sales decreased six percent compared with the third quarter of 2007 (please see page 14 for the GAAP reconciliation).
 
–   International net sales in local currencies decreased 11 percent compared with the third quarter of 2007 (please see page 14 for the GAAP reconciliation).

Page 3

 

MASCO CORPORATION
Sales by Segment and Geographic Area
Nine Months Ended September 30, 2008 & 2007 — Unaudited
(dollars in millions)
                         
    Nine Months Ended     9 Months ’08  
    September 30,     vs.  
    2008     2007     9 Months ’07  
Cabinets and Related Products
   $ 1,788     $ 2,164     – 17 %
 
Plumbing Products
     2,483       2,572     – 3 %
 
Installation and Other Services
     1,486       2,026     – 27 %
 
Decorative Architectural Products
     1,301       1,421     – 8 %
 
Other Specialty Products
     563       714     – 21 %
 
 
                    
Total
   $ 7,621     $ 8,897     – 14 %
 
                    
 
                        
North America
   $ 5,935     $ 7,223     – 18 %
 
International, principally Europe
     1,686       1,674     + 1 %
 
 
                    
Total, as above
   $ 7,621     $ 8,897     – 14 %
 
                    
Notes:
–   Data exclude discontinued operations.
 
–   Excluding acquisitions, consolidated net sales decreased 15 percent, North American net sales decreased 19 percent and International net sales increased one percent compared with the the first nine months of 2007 (please see page 14 for the GAAP reconciliation).
 
–   International net sales in local currencies decreased nine percent compared with the first nine months of 2007 (please see page 14 for the GAAP reconciliation).

Page 4

 

MASCO CORPORATION
Quarterly Segment Data — 2008
Excluding Costs & Charges for Business Rationalizations and Other Initiatives — Unaudited
(dollars in millions)
                                         
    Year     Qtr. 4     Qtr. 3     Qtr. 2     Qtr. 1  
Net Sales:
                                        
- Cabinets and Related Products
                   $ 584     $ 608     $ 596  
- Plumbing Products
                     805       857       821  
- Installation and Other Services
                     492       508       486  
- Decorative Architectural Products
                     446       476       379  
- Other Specialty Products
                     201       194       168  
 
                              
- Total
                   $ 2,528     $ 2,643     $ 2,450  
 
                              
 
                                        
- North America
                   $ 1,975     $ 2,067     $ 1,893  
- International, principally Europe
                     553       576       557  
 
                              
- Total, as above
                   $ 2,528     $ 2,643     $ 2,450  
 
                              
 
                                        
Operating Profit:
                                        
- Cabinets and Related Products
                   $ 29     $ 40     $ 29  
- Plumbing Products
                     95       109       102  
- Installation and Other Services
                     11       8       (1 )
- Decorative Architectural Products
                     95       90       74  
- Other Specialty Products
                     17       13       8  
 
                              
- Total
                   $ 247     $ 260     $ 212  
 
                              
 
                                        
- North America
                   $ 200     $ 207     $ 157  
- International, principally Europe
                     47       53       55  
 
                              
- Total, as above
                   $ 247     $ 260     $ 212  
 
                              
 
                                        
General Corporate Expense (GCE), Net
                     32       30       43  
 
                                        
(Gain) on Sale of Corporate Fixed Assets, Net
                     —       —       —  
 
                                        
Charge for Litigation Settlement
                     (9 )     —       —  
 
                                        
Income / (Charge) for Planned Disposition of Business
                     6       —       (6 )
 
                                        
 
                              
Operating Profit (after GCE and Adjustments)
                     212       230       163  
 
                                        
Other Income (Expense), Net
                     (57 )     (56 )     (84 )
 
                              
 
                                        
Income from Continuing Operations before Income Taxes and Minority Interest
                   $ 155     $ 174     $ 79  
 
                              
 
                                        
Margins:
                                        
- Cabinets and Related Products
                     5.0 %     6.6 %     4.9 %
- Plumbing Products
                     11.8 %     12.7 %     12.4 %
- Installation and Other Services
                     2.2 %     1.6 %     -0.2 %
- Decorative Architectural Products
                     21.3 %     18.9 %     19.5 %
- Other Specialty Products
                     8.5 %     6.7 %     4.8 %
- Total
                     9.8 %     9.8 %     8.7 %
 
                                        
- North America
                     10.1 %     10.0 %     8.3 %
- International, principally Europe
                     8.5 %     9.2 %     9.9 %
- Total, as above
                     9.8 %     9.8 %     8.7 %
Notes:
–   Data exclude discontinued operations.
 
–   Operating profit and margins by segment and geographic area are before general corporate expense and (gain) on sale of Corporate fixed assets, charge for litigation settlement and (income)/charge for planned disposition of a business.
 
–   Operating profit margins for the third quarter of 2008 exclude costs and charges of $16 million pre-tax for business rationalizations and other initiatives as follows: Cabinets and Related Products ($6 million), Plumbing Products ($7 million), Installation and Other Services ($1 million), Decorative Architectural Products ($1 million), and Other Specialty Products ($1 million).
 
–   Operating profit margins for the second quarter of 2008 exclude costs and charges of $15 million pre-tax for business rationalizations and other initiatives as follows: Cabinets and Related Products ($3 million), Plumbing Products ($2 million), Installation and Other Services ($4 million), Decorative Architectural Products ($1 million) and GCE ($5 million).
 
–   Operating profit margins for the first quarter of 2008 exclude costs and charges of $9 million pre-tax for business rationalizations and other initiatives as follows: Cabinets and Related Products ($1 million), Plumbing Products ($3 million), and Installation and Other Services ($5 million).

Page 5

 

MASCO CORPORATION
Quarterly Segment Data — 2008
Including Costs & Charges for Business Rationalizations and Other Initiatives — Unaudited
(dollars in millions)
                                         
    Year     Qtr. 4     Qtr. 3     Qtr. 2     Qtr. 1  
Net Sales:
                                        
- Cabinets and Related Products
                   $ 584     $ 608     $ 596  
- Plumbing Products
                     805       857       821  
- Installation and Other Services
                     492       508       486  
- Decorative Architectural Products
                     446       476       379  
- Other Specialty Products
                     201       194       168  
 
                              
- Total
                   $ 2,528     $ 2,643     $ 2,450  
 
                              
 
                                        
- North America
                   $ 1,975     $ 2,067     $ 1,893  
- International, principally Europe
                     553       576       557  
 
                              
- Total, as above
                   $ 2,528     $ 2,643     $ 2,450  
 
                              
 
                                        
Operating Profit:
                                        
- Cabinets and Related Products
                   $ 23     $ 37     $ 28  
- Plumbing Products
                     88       107       99  
- Installation and Other Services
                     10       4       (6 )
- Decorative Architectural Products
                     94       89       74  
- Other Specialty Products
                     16       13       8  
 
                              
- Total
                   $ 231     $ 250     $ 203  
 
                              
 
                                        
- North America
                   $ 193     $ 200     $ 149  
- International, principally Europe
                     38       50       54  
 
                              
- Total, as above
                   $ 231     $ 250     $ 203  
 
                              
 
                                        
General Corporate Expense (GCE), Net
                     32       35       43  
 
                                        
(Gain) on Sale of Corporate Fixed Assets, Net
                     —       —       —  
 
                                        
Charge for Litigation Settlement
                     (9 )     —       —  
 
                                        
Income / (Charge) for Planned Disposition of Business
                     6       —       (6 )
 
                                        
 
                              
Operating Profit (after GCE and Adjustments)
                     196       215       154  
 
                                        
Other Income (Expense), Net
                     (57 )     (56 )     (84 )
 
                              
 
                                        
Income from Continuing Operations before Income Taxes and Minority Interest
                   $ 139     $ 159     $ 70  
 
                              
 
                                        
Margins:
                                        
- Cabinets and Related Products
                     3.9 %     6.1 %     4.7 %
- Plumbing Products
                     10.9 %     12.5 %     12.1 %
- Installation and Other Services
                     2.0 %     0.8 %     -1.2 %
- Decorative Architectural Products
                     21.1 %     18.7 %     19.5 %
- Other Specialty Products
                     8.0 %     6.7 %     4.8 %
- Total
                     9.1 %     9.5 %     8.3 %
 
                                        
- North America
                     9.8 %     9.7 %     7.9 %
- International, principally Europe
                     6.9 %     8.7 %     9.7 %
- Total, as above
                     9.1 %     9.5 %     8.3 %
Notes:
–   Data exclude discontinued operations.
 
    Operating profit and margins by segment and geographic area are before general corporate expense and (gain) on sale of Corporate fixed assets, charge for litigation settlement and (income)/charge for planned disposition of a business.
 
–   Operating profit margins for the third quarter of 2008 include costs and charges of $16 million pre-tax for business rationalizations and other initiatives as follows: Cabinets and Related Products ($6 million), Plumbing Products ($7 million), Installation and Other Services ($1 million), Decorative Architectural Products ($1 million), and Other Specialty Products ($1 million).
 
–   Operating profit margins for the second quarter of 2008 include costs and charges of $15 million pre-tax for business rationalizations and other initiatives as follows: Cabinets and Related Products ($3 million), Plumbing Products ($2 million), Installation and Other Services ($4 million), Decorative Architectural Products ($1 million) and GCE ($5 million).
 
–   Operating profit margins for the first quarter of 2008 include costs and charges of $9 million pre-tax for business rationalizations and other initiatives as follows: Cabinets and Related Products ($1 million), Plumbing Products ($3 million), and Installation and Other Services ($5 million).

Page 6

 

MASCO CORPORATION
Quarterly Segment Data — 2007
Excluding Net Costs & Charges for Business Rationalizations and Other Initiatives
and Impairment Charges for Goodwill and Other Intangible Assets — Unaudited
(dollars in millions)
                                         
    Year     Qtr. 4     Qtr. 3     Qtr. 2     Qtr. 1  
Net Sales:
                                        
- Cabinets and Related Products
   $ 2,829     $ 665     $ 736     $ 737     $ 691  
- Plumbing Products
     3,391       819       865       869       838  
- Installation and Other Services
     2,615       589       689       699       638  
- Decorative Architectural Products
     1,768       347       467       534       420  
- Other Specialty Products
     929       215       248       250       216  
 
                              
- Total
   $ 11,532     $ 2,635     $ 3,005     $ 3,089     $ 2,803  
 
                              
 
                                        
- North America
   $ 9,271     $ 2,048     $ 2,417     $ 2,548     $ 2,258  
- International, principally Europe
     2,261       587       588       541       545  
 
                              
- Total, as above
   $ 11,532     $ 2,635     $ 3,005     $ 3,089     $ 2,803  
 
                              
 
                                        
Operating Profit:
                                        
- Cabinets and Related Products
   $ 368     $ 71     $ 108     $ 107     $ 82  
- Plumbing Products
     349       66       103       97       83  
- Installation and Other Services
     197       34       65       62       36  
- Decorative Architectural Products
     385       62       114       116       93  
- Other Specialty Products
     119       12       36       42       29  
 
                              
- Total
   $ 1,418     $ 245     $ 426     $ 424     $ 323  
 
                              
 
                                        
- North America
   $ 1,191     $ 195     $ 356     $ 377     $ 263  
- International, principally Europe
     227       50       70       47       60  
 
                              
- Total, as above
   $ 1,418     $ 245     $ 426     $ 424     $ 323  
 
                              
 
                                        
General Corporate Expense (GCE), Net
     174       37       43       45       49  
 
                                        
(Gain) on Sale of Corporate Fixed Assets, Net
     (8 )     —       —       (5 )     (3 )
 
                                        
 
                              
Operating Profit (after GCE and Adjustments)
     1,252       208       383       384       277  
 
                                        
Other Income (Expense), Net
     (188 )     (58 )     (45 )     (64 )     (21 )
 
                              
 
                                        
Income from Continuing Operations before Income Taxes and Minority Interest
   $ 1,064     $ 150     $ 338     $ 320     $ 256  
 
                              
 
                                        
Margins:
                                        
- Cabinets and Related Products
     13.0 %     10.7 %     14.7 %     14.5 %     11.9 %
- Plumbing Products
     10.3 %     8.1 %     11.9 %     11.2 %     9.9 %
- Installation and Other Services
     7.5 %     5.8 %     9.4 %     8.9 %     5.6 %
- Decorative Architectural Products
     21.8 %     17.9 %     24.4 %     21.7 %     22.1 %
- Other Specialty Products
     12.8 %     5.6 %     14.5 %     16.8 %     13.4 %
- Total
     12.3 %     9.3 %     14.2 %     13.7 %     11.5 %
 
                                        
- North America
     12.8 %     9.5 %     14.7 %     14.8 %     11.6 %
- International, principally Europe
     10.0 %     8.5 %     11.9 %     8.7 %     11.0 %
- Total, as above
     12.3 %     9.3 %     14.2 %     13.7 %     11.5 %
Notes:
–   Data exclude discontinued operations.
 
–   Operating profit and margins by segment and geographic area are before general corporate expense and (gain) on sale of Corporate fixed assets.
 
–   Operating profit margins for the fourth quarter of 2007 exclude $119 million of impairment charges for goodwill and other intangible assets as follows: Plumbing Products ($69 million) and Other Specialty Products ($50 million).
 
–   Operating profit margins for the fourth quarter of 2007 exclude costs and charges of $19 million pre-tax related business rationalizations and other initiatives as follows: Cabinets and Related Products ($8 million), Plumbing Products ($5 million) and Installation and Other Services ($6 million).
 
–   Operating profit margins for the third quarter of 2007 exclude net costs and charges of $12 million pre-tax related to business rationalizations and other initiatives as follows: Cabinets and Related Products ($3 million, net of an $8 million gain from the sale of fixed assets), Plumbing Products ($3 million), Installation and Other Services ($5 million), and GCE ($1 million).
 
–   Operating profit margins for the second quarter of 2007 exclude costs and charges of $23 million pre-tax related to business rationalizations and other initiatives as follows: Cabinets and Related Products ($11 million), Plumbing Products ($2 million), Installation and Other Services ($4 million), Decorative Architectural Products ($1 million), Other Specialty Products ($1 million) and GCE ($4 million).
 
–   Operating profit margins for the first quarter of 2007 exclude costs and charges of $25 million pre-tax related to business rationalizations and other initiatives as follows: Cabinets and Related Products ($10 million), Plumbing Products ($6 million), Installation and Other Services ($6 million), Other Specialty Products ($1 million) and GCE ($2 million).

Page 7

 

MASCO CORPORATION
Quarterly Segment Data — 2007
Including Net Costs & Charges for Business Rationalizations and Other Initiatives
and Impairment Charges for Goodwill and Other Intangible Assets — Unaudited
(dollars in millions)
                                         
    Year     Qtr. 4     Qtr. 3     Qtr. 2     Qtr. 1  
Net Sales:
                                        
- Cabinets and Related Products
   $ 2,829     $ 665     $ 736     $ 737     $ 691  
- Plumbing Products
     3,391       819       865       869       838  
- Installation and Other Services
     2,615       589       689       699       638  
- Decorative Architectural Products
     1,768       347       467       534       420  
- Other Specialty Products
     929       215       248       250       216  
 
                              
- Total
   $ 11,532     $ 2,635     $ 3,005     $ 3,089     $ 2,803  
 
                              
 
                                        
- North America
   $ 9,271     $ 2,048     $ 2,417     $ 2,548     $ 2,258  
- International, principally Europe
     2,261       587       588       541       545  
 
                              
- Total, as above
   $ 11,532     $ 2,635     $ 3,005     $ 3,089     $ 2,803  
 
                              
 
                                        
Operating Profit (Loss):
                                        
- Cabinets and Related Products
   $ 336     $ 63     $ 105     $ 96     $ 72  
- Plumbing Products
     264       (8 )     100       95       77  
- Installation and Other Services
     176       28       60       58       30  
- Decorative Architectural Products
     384       62       114       115       93  
- Other Specialty Products
     67       (38 )     36       41       28  
 
                              
- Total
   $ 1,227     $ 107     $ 415     $ 405     $ 300  
 
                              
 
                                        
- North America
   $ 1,008     $ 60     $ 346     $ 360     $ 242  
- International, principally Europe
     219       47       69       45       58  
 
                              
- Total, as above
   $ 1,227     $ 107     $ 415     $ 405     $ 300  
 
                              
 
                                        
General Corporate Expense (GCE), Net
     181       37       44       49       51  
 
                                        
(Gain) on Sale of Corporate Fixed Assets, Net
     (8 )     —       —       (5 )     (3 )
 
                                        
 
                              
Operating Profit (after GCE and Adjustments)
     1,054       70       371       361       252  
 
                                        
Other Income (Expense), Net
     (188 )     (58 )     (45 )     (64 )     (21 )
 
                              
 
                                        
Income from Continuing Operations before Income Taxes and Minority Interest
   $ 866     $ 12     $ 326     $ 297     $ 231  
 
                              
 
                                        
Margins:
                                        
- Cabinets and Related Products
     11.9 %     9.5 %     14.3 %     13.0 %     10.4 %
- Plumbing Products
     7.8 %     -1.0 %     11.6 %     10.9 %     9.2 %
- Installation and Other Services
     6.7 %     4.8 %     8.7 %     8.3 %     4.7 %
- Decorative Architectural Products
     21.7 %     17.9 %     24.4 %     21.5 %     22.1 %
- Other Specialty Products
     7.2 %     -17.7 %     14.5 %     16.4 %     13.0 %
- Total
     10.6 %     4.1 %     13.8 %     13.1 %     10.7 %
 
                                        
- North America
     10.9 %     2.9 %     14.3 %     14.1 %     10.7 %
- International, principally Europe
     9.7 %     8.0 %     11.7 %     8.3 %     10.6 %
- Total, as above
     10.6 %     4.1 %     13.8 %     13.1 %     10.7 %
Notes:
–   Data exclude discontinued operations.
 
–   Operating profit and margins by segment and geographic area are before general corporate expense and (gain) on sale of Corporate fixed assets.
 
–   Operating profit margins for the fourth quarter of 2007 include $119 million of impairment charges for goodwill and other intangible assets as follows: Plumbing Products ($69 million) and Other Specialty Products ($50 million).
 
–   Operating profit margins for the fourth quarter of 2007 include net costs and charges of $19 million pre-tax related to business rationalizations and other initiatives as follows: Cabinets and Related Products ($8 million), Plumbing Products ($5 million) and Installation and Other Services ($6 million).
 
–   Operating profit margins for the third quarter of 2007 include net costs and charges of $12 million pre-tax related to business rationalizations and other initiatives as follows: Cabinets and Related Products ($3 million, net of an $8 million gain from the sale of fixed assets), Plumbing Products ($3 million), Installation and Other Services ($5 million), and GCE ($1 million).
 
–   Operating profit margins for the second quarter of 2007 include costs and charges of $23 million pre-tax related to business rationalizations and other initiatives as follows: Cabinets and Related Products ($11 million), Plumbing Products ($2 million), Installation and Other Services ($4 million), Decorative Architectural Products ($1 million), Other Specialty Products ($1 million) and GCE ($4 million).
 
–   Operating profit margins for the first quarter of 2007 include costs and charges of $25 million pre-tax related to business rationalizations and other initiatives as follows: Cabinets and Related Products ($10 million), Plumbing Products ($6 million), Installation and Other Services ($6 million), Other Specialty Products ($1 million) and GCE ($2 million).

Page 8

 

MASCO CORPORATION
Other Income (Expense), Net
2008 & 2007 — by Quarter — Unaudited
(in millions)
                                                                                   
    2008       2007  
    Year     Qtr. 4     Qtr. 3     Qtr. 2     Qtr. 1       Year     Qtr. 4     Qtr. 3     Qtr. 2     Qtr. 1  
Interest Expense
                   $ (59 )   $ (57 )   $ (56 )     $ (258 )   $ (61 )   $ (65 )   $ (69 )   $ (63 )
               
Income from Cash and Cash Investments
                     6       5       6         37       8       7       8       14  
               
Other Interest Income
                     1       —       —         3       1       1       1       —  
               
Realized (Losses) Gains from Financial Investments, Net
                     —       3       (3 )       43       3       11       7       22  
               
Dividend Income
                     —       —       —         6       —       —       1       5  
               
Impairment Charges for Financial Investments
                     (1 )     (3 )     (26 )       (22 )     —       (12 )     (10 )     —  
               
Other, Net
                     (4 )     (4 )     (5 )       3       (9 )     13       (2 )     1  
               
 
                                                              
Total Other Income (Expense), Net
                   $ (57 )   $ (56 )   $ (84 )     $ (188 )   $ (58 )   $ (45 )   $ (64 )   $ (21 )
 
                                                              
Notes:
–   Data exclude discontinued operations.
 
–   Other, net, includes currency (losses) of $(11) million, $(4) million and $(4) million for the first, second, and third quarters of 2008, respectively.
 
–   Other, net, includes currency gains (losses) of $3 million, $9 million and $(3) million for the second, third and fourth quarters of 2007, respectively.

Page 9

 

MASCO CORPORATION
Condensed Consolidated Statements of Income
Three Months Ended September 30, 2008 & 2007 — Unaudited
(dollars and shares in millions, except per share data)
                                             
                Three Months Ended     As a Percent of Sales  
        %     September 30,     Three Months Ended September 30,  
Line       Change     2008     2007     2008     2007  
1
   Net Sales     -16 %   $ 2,528     $ 3,005       100.0 %     100.0 %
 
                                            
2
   Cost of Sales     -13 %     1,880       2,155       74.4 %     71.7 %
 
                                            
 
                                    
3
   Gross Profit     -24 %     648       850       25.6 %     28.3 %
 
                                    
 
                                            
 
   Operating Profit                                        
 
                                            
4
   - Before GCE, (Gain) on Sale of Corporate Fixed Assets, Charge for Litigation Settlement and (Income)/Charge for Planned Disposition of Business (3-10)     -44 %     231       415       9.1 %     13.8 %
 
                                            
5
   - After GCE, (Gain) on Sale of Corporate Fixed Assets, Charge for Litigation Settlement and (Income)/Charge for Planned Disposition of Business (3-11)     -47 %     196       371       7.8 %     12.3 %
 
                                            
 
                                    
 
   S,G&A Expense:                                        
 
                                            
6
   - General Corporate Expense (GCE)     -27 %     32       44       1.3 %     1.5 %
 
                                            
7
   - (Gain) on Sales of Corporate Fixed Assets, Net             —       —                  
 
                                            
8
   - Charge for Litigation Settlement             9       —       0.4 %     0.0 %
 
                                            
9
   - (Income) Charge for Planned Disposition of Business             (6 )     —                  
 
                                            
10
   - All Other     -4 %     417       435       16.5 %     14.5 %
 
                                    
 
                                            
11
   - Total S,G&A Expense     -6 %     452       479       17.9 %     15.9 %
 
                                    
 
                                            
12
   Other Income (Expense), Net             (56 )     (33 )     -2.2 %     -1.1 %
 
                                            
13
   Impairment Charges for Financial Investments             (1 )     (12 )     0.0 %     -0.4 %
 
                                    
 
                                            
14
   Income from Continuing Operations before Income Taxes and Minority Interest (5+12+13)     -57 %     139       326       5.5 %     10.8 %
 
                                            
15
   Income Taxes     -16 %     92       109       3.6 %     3.6 %
 
  
(Tax Rate)
             66.2 %     33.4 %                
 
                                    
 
                                            
16
   Income from Continuing Operations before Minority Interest     -78 %     47       217       1.9 %     7.2 %
 
                                            
17
   Minority Interest             (11 )     (11 )     -0.4 %     -0.4 %
 
                                    
 
                                            
18
   Income from Continuing Operations     -83 %     36       206       1.4 %     6.9 %
 
                                            
19
   (Loss) from Discontinued Operations, Net             (3 )     (1 )     -0.1 %     0.0 %
 
                                            
 
                                    
20
   Net Income     -84 %   $ 33     $ 205       1.3 %     6.8 %
 
                                    
 
                                            
 
   Earnings Per Common Share (Diluted):                                        
 
                                            
 
  
Income from Continuing Operations
     -82 %   $ 0.10     $ 0.56                  
 
                                            
 
  
(Loss) from Discontinued Operations, Net
             (0.01 )     (0.00 )                
 
                                            
 
                                        
 
  
Net Income
     -83 %   $ 0.09     $ 0.56                  
 
                                        
 
                                            
 
   Average (Diluted) Common Shares     -4 %     352       367                  

Page 10

 

MASCO CORPORATION
Condensed Consolidated Statements of Income
Nine Months Ended September 30, 2008 & 2007 — Unaudited
(dollars and shares in millions, except per share data)
                                               
                Nine Months Ended       As a Percent of Sales  
        %     September 30,       Nine Months Ended September 30,  
Line       Change     2008     2007       2008     2007  
1
   Net Sales     -14 %   $ 7,621     $ 8,897         100.0 %     100.0 %
 
                                              
2
   Cost of Sales     -12 %     5,643       6,420         74.0 %     72.2 %
 
                                              
 
                                      
 
                                              
3
   Gross Profit     -20 %     1,978       2,477         26.0 %     27.8 %
 
                                      
 
                                              
 
   Operating Profit                                          
 
                                              
4
   - Before GCE, (Gain) on Sale of Corporate Fixed Assets, Charge for Litigation Settlement and (Income)/Charge for Planned Disposition of Business (3-10)     -39 %     684       1,120         9.0 %     12.6 %
 
                                              
5
   - After GCE, (Gain) on Sale of Corporate Fixed Assets, Charge for Litigation Settlement and (Income)/Charge for Planned Disposition of Business (3-11)     -43 %     565       984         7.4 %     11.1 %
 
                                      
 
                                              
 
   S,G&A Expense:                                          
 
                                              
6
   - General Corporate Expense (GCE)     -24 %     110       144         1.4 %     1.6 %
 
                                              
7
   - (Gain) on Sales of Corporate Fixed Assets, Net             —       (8 )                  
 
                                              
8
   - Charge for Litigation Settlement             9       —         0.1 %     0.0 %
 
                                              
9
   - (Income) Charge for Planned Disposition of Business             —       —                    
 
                                              
10
   - All Other     -5 %     1,294       1,357         17.0 %     15.3 %
 
                                              
 
                                      
 
                                              
11
   - Total S,G&A Expense (6+7+8+9+10)     -5 %     1,413       1,493         18.5 %     16.8 %
 
                                      
 
                                              
12
   Other Income (Expense), Net             (167 )     (108 )       -2.2 %     -1.2 %
 
                                              
13
   Impairment Charges for Financial Investments             (30 )     (22 )       -0.4 %     -0.2 %
 
                                              
 
                                      
 
                                              
14
   Income from Continuing Operations before Income Taxes and Minority Interest (5+12+13)     -57 %     368       854         4.8 %     9.6 %
 
                                              
15
   Income Taxes     -31 %     207       302         2.7 %     3.4 %
 
   (Tax Rate)             56.3 %     35.4 %                  
 
                                      
 
                                              
16
   Income from Continuing Operations before Minority Interest     -71 %     161       552         2.1 %     6.2 %
 
                                              
17
   Minority Interest             (35 )     (27 )       -0.5 %     -0.3 %
 
                                              
 
                                      
 
                                              
18
   Income from Continuing Operations     -76 %     126       525         1.7 %     5.9 %
 
                                              
19
   (Loss) Income from Discontinued Operations, Net             (9 )     12         -0.1 %     0.1 %
 
                                              
 
                                      
 
                                              
20
   Net Income     -78 %   $ 117     $ 537         1.5 %     6.0 %
 
                                      
 
                                              
 
   Earnings Per Common Share (Diluted):                                          
 
                                              
 
  
Income from Continuing Operations
     -75 %   $ 0.36     $ 1.40                    
 
                                              
 
  
(Loss) Income from Discontinued Operations, Net
             (0.03 )     0.03                    
 
                                              
 
                                          
 
                                              
 
  
Net Income
     -77 %   $ 0.33     $ 1.43                    
 
                                          
 
                                              
 
   Average (Diluted) Common Shares     -6 %     354       376                    

Page 11

 

MASCO CORPORATION
Condensed Consolidated Balance Sheets — Unaudited
(in millions)
                 
    September 30,     December 31,  
    2008     2007  
Assets
                
 
Current Assets:
                
 
Cash and Cash Investments
   $ 1,030     $ 922  
 
Receivables
     1,442       1,405  
 
Inventories
     1,080       1,126  
 
Prepaid Expenses and Other
     284       355  
 
            
 
Total Current Assets
     3,836       3,808  
 
Property and Equipment, Net
     2,194       2,367  
 
Goodwill
     3,888       3,938  
 
Other Intangible Assets, Net
     316       323  
 
Other Assets
     403       471  
 
 
            
Total Assets
   $ 10,637     $ 10,907  
 
            
 
                
Liabilities
                
 
Current Liabilities:
                
 
Accounts Payable
   $ 717     $ 714  
 
Notes Payable
     115       122  
 
Accrued Liabilities
     1,068       1,072  
 
 
            
Total Current Liabilities
     1,900       1,908  
 
Long-Term Debt
     3,961       3,966  
 
Deferred Income Taxes and Other
     1,026       1,008  
 
 
            
Total Liabilities
     6,887       6,882  
 
Shareholders’ Equity
     3,750       4,025  
 
 
            
Total Liabilities and Shareholders’ Equity
   $ 10,637     $ 10,907  
 
            

Page 12

 

MASCO CORPORATION
Discontinued Operations — Unaudited
(in millions)
                 
    Three Months Ended  
    September 30,  
    2008     2007  
Net Sales
   $ 7     $ 73  
 
 
            
Income from Discontinued Operations
   $ 1     $ 3  
 
(Loss) on Disposal of Discontinued Operations, Net
     (4 )     (4 )
 
 
            
Income Before Income Tax
     (3 )     (1 )
 
Income Tax Benefit (Expense)
     —       —  
 
            
 
Income from Discontinued Operations, Net
   $ (3 )   $ (1 )
 
            
                 
    Nine Months Ended  
    September 30,  
    2008     2007  
Net Sales
   $ 100     $ 229  
 
            
Income from Discontinued Operations
   $ 13     $ 14  
 
Gain (Loss) on Disposal of Discontinued Operations, Net
     3       (1 )
 
Impairment of Assets Held for Sale
     (45 )     —  
 
 
            
(Loss) Income Before Income Tax
     (29 )     13  
 
Income Tax Benefit (Expense)
     20       (1 )
 
            
 
(Loss) Income from Discontinued Operations, Net
   $ (9 )   $ 12  
 
            

Page 13

 

MASCO CORPORATION
GAAP Reconciliation of Sales Growth
Excluding the Effect of Acquisitions and Currency Translation — Unaudited
(in millions)
                 
    Three Months Ended
September 30,		  
    2008     2007  
Consolidated Net Sales, As Reported
   $ 2,528     $ 3,005  
 
- Acquisitions
     (16 )     —  
 
 
            
Consolidated Net Sales, Excluding Acquisitions
   $ 2,512     $ 3,005  
 
            
 
North American Net Sales, As Reported
   $ 1,975     $ 2,417  
 
- Acquisitions
     (16 )     —  
 
 
            
North American Net Sales, Excluding Acquisitions
   $ 1,959     $ 2,417  
 
            
 
International Net Sales, As Reported
   $ 553     $ 588  
 
- Acquisitions
     —       —  
 
            
 
International Net Sales, Excluding Acquisitions
     553       588  
 
- Currency Translation
     (31 )     —  
 
 
            
International Net Sales, Excluding Acquisitions and Currency Translation
   $ 522     $ 588  
 
            
                 
    NIne Months Ended
September 30,		  
    2008     2007  
Consolidated Net Sales, As Reported
   $ 7,621     $ 8,897  
 
- Acquisitions
     (65 )     —  
 
 
            
Consolidated Net Sales, Excluding Acquisitions
   $ 7,556     $ 8,897  
 
            
 
North American Net Sales, As Reported
   $ 5,935     $ 7,223  
 
- Acquisitions
     (65 )     —  
 
 
            
North American Net Sales, Excluding Acquisitions
   $ 5,870     $ 7,223  
 
            
 
International Net Sales, As Reported
   $ 1,686     $ 1,674  
 
- Acquisitions
     —       —  
 
            
 
International Net Sales, Excluding Acquisitions
     1,686       1,674  
 
- Currency Translation
     (156 )     —  
 
 
            
International Net Sales, Excluding Acquisitions and Currency Translation
   $ 1,530     $ 1,674  
 
            
Notes:
–   Data exclude discontinued operations.
 
–   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 14

 

MASCO CORPORATION
GAAP Reconciliation of Operating Profit and Margins — Unaudited
(dollars in Millions)
                                 
    Three Months Ended September 30,  
    2008     2007  
    $     Margin     $     Margin  
Operating Profit, As Reported
   $ 196       7.8 %   $ 371       12.3 %
 
Business Rationalizations and Other Initiatives
     16               12          
 
 
                            
Operating Profit, As Reconciled
   $ 212       8.4 %   $ 383       12.7 %
 
                            
                                 
    Nine Months Ended September 30,  
    2008     2007  
    $     Margin     $     Margin  
Operating Profit, As Reported
   $ 565       7.4 %   $ 984       11.1 %
 
Business Rationalizations and Other Initiatives
     40               60          
 
 
                            
Operating Profit, As Reconciled
   $ 605       7.9 %   $ 1,044       11.7 %
 
                            
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.

Page 15

 

MASCO CORPORATION
GAAP Reconciliation of Operating Profit and Shareholders’ Equity — Unaudited
(in millions)
         
    Twelve  
    Months Ended  
    September 30,  
    2008  
Operating Profit, As Reported
   $ 635  
 
        
Income Regarding Litigation Settlement
     9  
 
        
Impairment Charges for Goodwill and Other Intangible Assets, Continuing Operations
     119  
 
      
 
        
Operating Profit, As Reconciled
   $ 763  
 
      
                 
    Twelve Months Ended  
    September 30,  
    2008     2007  
Shareholders’ Equity, As Reported
   $ 3,750     $ 4,203  
 
                
Impairment Charges for Goodwill and Other Intangible Assets (after tax)
     208       321  
 
                
Income Regarding Litigation Settlement (after tax)
     6       (1 )
 
 
            
Shareholders’ Equity, As Reconciled
   $ 3,964     $ 4,523  
 
            
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 16