FOR IMMEDIATE RELEASE Contact:
Samuel Cypert
313-792-6646
MASCO CORPORATION REPORTS
RECORD SECOND QUARTER SALES AND EARNINGS,
UPDATES EARNINGS GUIDANCE AND ANNOUNCES
INTENT TO INCREASE QUARTERLY DIVIDEND
Taylor, Michigan (August 6, 2003) -- Masco Corporation (NYSE:MAS)
today reported that net sales for the second quarter ended June 30, 2003, aided
by acquisitions, increased 20 percent to a record $2.8 billion, compared with
$2.3 billion for the second quarter of 2002. Net income for the quarter
increased seven percent to a record $229.6 million compared with $214.3 million
for the 2002 second quarter. Earnings per common share also increased seven
percent to $.46 compared with $.43 per common share for the 2002 second quarter.
Although a record quarter, operating profit margins in 2003 have been
negatively impacted by sales being somewhat lower than expected due to adverse
weather conditions in certain markets, by higher energy, insurance and pension
costs and by a non-cash charge resulting from a system failure during efforts to
convert to a new business system at one of the Company's European operations.
Masco Chairman and CEO Richard A. Manoogian commented, "Given the
current economic environment, we are pleased with our performance in the second
quarter and expect the second half of 2003 to be even stronger than the first
half. If present positive sales and economic trends continue, the Company
believes that third quarter earnings per common share should approximate $.48 to
$.51 and continues to expect to achieve record sales and earnings for 2003 with
full-year earnings in a range of $1.68 to $1.72 per common share, modestly
higher than the Company's previous guidance."
Masco also announced that it is the present intent of the Company's
Board of Directors to increase the quarterly dividend in the fourth quarter by
14 percent from $.14 to $.16 per common share. The new quarterly dividend
reflects the Company's favorable long-term outlook, strong balance sheet and
cash flow and recent tax law changes, and would make this the 45th consecutive
year in which dividends have been increased.
Headquartered in Taylor, Michigan, Masco Corporation is one of the
world's leading manufacturers of home improvement and building products as well
as a leading provider of services that include the installation of insulation
and other building products.
A conference call regarding the Company's second quarter 2003 sales and
earnings is scheduled for Wednesday, August 6, 2003 at 11:00 a.m. ET.
Participants in the call are asked to register five to ten minutes prior to the
scheduled start time by dialing (719) 457-2661 (confirmation #375048). 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 #375048) approximately two hours after the end of the call and will
continue through August 12, 2003.
Masco Corporation's press releases and other information are available
through the Company's toll free number, 1-888-MAS-NEWS, or you may visit Masco's
website at www.masco.com.
# # # #
Statements contained herein may include certain forward-looking statements
regarding Masco's future sales, earnings growth potential and other
developments. Actual results may vary materially because of external factors
such as interest rate fluctuations, changes in consumer spending and other
factors over which management has no control. Additional information about our
products, markets and conditions, which could affect our future performance, is
contained in the Company's filings with the Securities and Exchange Commission
and is available on Masco's website at www.masco.com.
MASCO CORPORATION REPORTS RECORD
SECOND QUARTER SALES AND EARNINGS
Amounts are in thousands, except per share data.
Three Months Ended Six Months Ended
June 30 June 30
---------------------------- ----------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Net Sales $2,787,650 $2,314,000 $5,285,950 $4,414,000
Cost of Sales 1,934,360 1,549,650 3,678,900 3,003,700
----------- ----------- ----------- -----------
Gross Profit 853,290 764,350 1,607,050 1,410,300
Selling, General And
Administrative Expenses 464,280 369,250 916,660 724,600
(Income) Regarding Litigation Settlement --- --- (13,520) ---
----------- ----------- ----------- -----------
Operating Profit 389,010 395,100 703,910 685,700
Other Income (Expense), net (33,620) (70,400) (88,670) (133,400)
----------- ----------- ----------- -----------
Income before Income Taxes, Minority
Interest and Cumulative Effect of
Accounting Change, net 355,390 324,700 615,240 552,300
Income Taxes 123,700 110,400 214,100 187,800
----------- ----------- ----------- -----------
Income before Minority Interest and Cumulative
Effect of Accounting Change, net 231,690 214,300 401,140 364,500
Minority Interest 2,140 --- 5,790 ---
----------- ----------- ----------- -----------
Income before Cumulative Effect of Accounting Change, net 229,550 214,300 395,350 364,500
Cumulative Effect of Accounting Change, net --- --- --- (92,400)
----------- ----------- ----------- -----------
Net Income $229,550 $214,300 $395,350 $272,100
=========== =========== =========== ===========
Earnings Per Common Share (Diluted):
Income before Cumulative Effect of Accounting Change, net $0.46 $0.43 $0.79 $0.74
Cumulative Effect of Accounting Change, net --- --- --- (0.19)
----------- ----------- ----------- -----------
As Reported $0.46 $0.43 $0.79 $0.55
=========== =========== =========== ===========
Average Diluted Common Shares Outstanding 498,500 498,500 502,500 492,500
=========== =========== =========== ===========
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
The Company reports its financial results in accordance with generally accepted
accounting principles (GAAP). However, management believes that certain non-GAAP
performance measures and ratios, used in managing the business, may provide
users of this financial information with additional meaningful comparisons
between current results and results in prior periods. See the attached tables
for supplemental financial data and the corresponding reconciliations to GAAP
financial measures for the three months ended June 30, 2003 and June 30, 2002,
as well as for the year 2002. Non-GAAP financial measures should be viewed in
addition to, and not as an alternative for, the Company's reported results
prepared in accordance with GAAP.
SECOND QUARTER 2003
- - Net sales, aided by acquisitions, were a record $2.8 billion, increasing 20
percent over 2002 second quarter sales, with North American sales
increasing 15 percent and International sales increasing 54 percent.
Stronger sales to non-retail customers, sales of acquired companies
(particularly Service Partners in our Installation Group and Hansgrohe AG
in our International Plumbing Products Group) and the favorable impact of
foreign currencies more than offset slower sales growth with certain of the
Company's retail customers.
- - Excluding acquisitions and divestitures, second quarter 2003 consolidated
net sales increased seven percent compared with second quarter 2002 sales;
North American sales increased five percent and International sales
increased 18 percent. In local currencies, International sales decreased
one percent compared with 2002.
- - Given the second quarter economic challenges, including adverse weather
conditions in certain markets and higher energy costs reducing consumer
disposable income, the Company is pleased with it's internal sales growth
rate of seven percent during the quarter. This rate of organic growth
(which includes the benefit of higher foreign currencies) compares
favorably with most of our peer group.
1
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
SECOND QUARTER 2003 (CONTINUED)
- - The Company reported net income of $229.6 million or $.46 per common share
(both records for any quarter in the Company's history), modestly above the
Company's previous earnings guidance range of $.43 to $.45 per common
share.
- - In the second quarter of 2003, the Company recorded a non-cash pre-tax
charge which reduced operating profit by approximately $23 million ($.03
per common share, after tax) with respect to a European business unit in
the Decorative Architectural Products segment. The charge resulted from
business system failures at the unit during efforts to convert to a new
business system in 2001 and 2002, and the unit management's inadequate
response to the problem. The failures primarily impacted the accurate
recognition of cost of sales for the operation's more than 20,000 SKU's of
product manufactured and supplied by its subsidiaries and third parties in
Asia, with a corresponding misstatement of certain balance sheet accounts.
The Company has implemented corrective action to prevent this situation
from occurring at the unit in the future, including replacement of members
of the unit's senior management. While this unit remains profitable,
nevertheless the Company is continuing to analyze the business unit's
profitability and cash flow prospects and to determine if any impairment of
assets exists, including a portion of the goodwill.
- - The second quarter earnings charge of $.03 per common share, as mentioned
above, was partially offset by net gains of $.02 per common share from the
sale of marketable securities and other investments.
- - Key retailer sales growth in the second quarter of 2003 increased six
percent, compared with a four percent increase in the first quarter of
2003. Combined sales to Home Depot, Lowe's and Wal-Mart increased by
approximately six percent in the 2003 second quarter compared with a three
percent increase in the first quarter of 2003 and an 11 percent increase in
the 2002 second quarter.
2
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
SECOND QUARTER 2003 (CONTINUED)
- - Sales by segment in the 2003 second quarter versus the 2002 second quarter
were:
- Cabinets and Related Products sales were up nine percent;
- Plumbing Products sales were up 31 percent;
- Installation and Other Services sales were up 47 percent;
- Decorative Architectural Products sales were up seven percent; and
- Other Specialty Products sales increased 14 percent.
Particularly strong product sales in the quarter included assembled cabinets at
retail, installed sales of non-insulation products, paints and stains and vinyl
windows.
- - Gross margins were 30.6 percent in the 2003 second quarter compared with
33.0 percent in 2002.
- - Operating profit margins decreased to 14.0 percent compared with 17.1
percent in the second quarter of 2002.
- - Excluding the pre-tax charge related to a European business unit, gross
margins would have been 31.4 percent and operating profit margins would
have been 14.8 percent.
3
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
SECOND QUARTER 2003 (CONTINUED)
- - Second quarter 2003 gross margins and operating margins were adversely
affected by:
- Increased energy, insurance and pension costs;
- Higher promotion and display costs;
- Weather conditions in certain markets;
- Higher foreign currencies resulting in increased international sales
which have lower margins;
- Product mix and relatively higher sales in product segments with
somewhat lower margins; and
- Recently acquired companies with lower operating margins.
- - SG&A expense as a percent of sales was 16.7 percent compared with 16.0
percent in the 2002 second quarter, reflecting increased promotional
selling expenses and increased pension and insurance costs.
- - General corporate expense was 1.0 percent of sales in the second quarter of
both 2003 and 2002.
- - Inventory days were 58 days at June 30, 2003 compared with 60 days at June
30, 2002.
- - Accounts receivable days at the end of the second quarter were 53 days
compared with 57 days a year ago.
- - Accounts payable days at the end of the second quarter improved to 32 days
from 26 days a year ago, as we continue to negotiate more favorable
supplier terms.
- - Working capital at June 30, 2003 (defined as accounts receivable and
inventories less accounts payable) improved to 22.0 percent of the last
twelve months of sales from 23.4 percent a year earlier.
4
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
SECOND QUARTER 2003 (CONTINUED)
- - For the twelve months ended June 30, 2003, operating profit return on net
operating assets, (as reconciled) declined to 16.9 percent for the 2003
second quarter compared with 17.6 percent for the comparable period through
June 30, 2002, reflecting acquisitions in the second half of 2002.
- - For the twelve months ended June 30, 2003, return on invested capital (as
reconciled) increased to 11.1 percent compared to 10.8 percent for the
comparable period through June 30, 2002.
- - The Company's tax rate was 34.8 percent in the second quarter of 2003
compared with 34.0 percent for the comparable period of the prior year. The
rate increase is principally the result of recent acquisitions increasing
the proportion of domestic income, which is generally taxed at higher rates
than foreign income. The Company anticipates that its tax rate for all of
2003 will approximate 35 percent.
- - At the end of the quarter, the Company had a strong balance sheet, with
approximately $1.1 billion in cash and marketable securities and $2 billion
in unused bank lines.
- - Debt as a percent of total capitalization was 47 percent at both June 30,
2003 and March 31, 2003.
- - The Company repurchased approximately nine million common shares during the
second quarter of 2003. Through June 30, approximately 23 million shares
have been repurchased in 2003, including approximately 2 million shares for
long-term incentive compensation plans. The Company currently has
approximately 28 million shares remaining under its share repurchase
authorization.
- - The Company announced its Board of Directors' intent to increase the
quarterly dividend in the fourth quarter by 14 percent (a larger percentage
increase than in recent years) from $.14 to $.16 per common share. The new
quarterly dividend reflects the Company's favorable long-term outlook,
strong balance sheet and cash flow and recent tax law changes, and would
make this the 45th consecutive year in which dividends have been increased.
- - As previously announced, beginning January 1, 2003, the Company began
expensing stock options on a prospective basis.
5
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
SECOND QUARTER 2003 (CONCLUDED)
- - The weighted average diluted shares outstanding for the quarter were 498.5
million (519.6 million for the quarter ended March 31, 2003). Average
diluted shares outstanding at the end of the quarter, taking into account
the reduction for shares repurchased and not included as a reduction in the
quarter would have been approximately 494 million. Contingently issuable
shares, related to share price guarantees, utilized in the calculation of
earnings per common share in the second quarter were based on a quarter-end
average share price of $24.19. Such contingently issuable shares declined
from 19.6 million shares at March 31, 2003 to 7.8 million shares at June
30, 2003.
- - During the quarter, the Company completed the sale of its 42 percent equity
interest in Emco Limited for cash proceeds of approximately $75 million.
The sale resulted in a pre-tax gain of $4.8 million.
- - In early July, the Company announced that it had signed a letter of intent
providing for the purchase by The Black & Decker Corporation of Masco's
Baldwin Hardware and Weiser Lock businesses. Baldwin and Weiser had
combined 2002 net sales of approximately $250 million. The transaction is
expected to close late in 2003 and is subject to final negotiation of a
definitive purchase agreement, necessary regulatory clearances and approval
from the Boards of Directors of both Companies. The Company expects to
realize a gain on this transaction.
FULL-YEAR OUTLOOK
- - The Company currently expects the second half of 2003 to be even stronger
than the first half. If present positive sales and economic trends
continue, the Company believes that third quarter earnings per common share
should approximate a record $.48 to $.51 and continues to expect to achieve
record sales and earnings for 2003 with full-year earnings in a range of
$1.68 to $1.72 per common share, modestly higher than the Company's
previous guidance.
Statements contained herein may include certain forward-looking statements
regarding Masco's future sales, earnings growth potential and other
developments. Actual results may vary materially because of external factors
such as interest rate fluctuations, changes in consumer spending and other
factors over which management has no control. Additional information about our
products, markets and conditions, which could affect our future performance, is
contained in the Company's filings with the Securities and Exchange Commission
and is available on Masco's website at www.masco.com.
6
MASCO CORPORATION - 2ND QUARTER 2003
Page
----
1 Condensed Statement of Income - 2003 & 2002 Quarters
2 Sales by Segment and Geographic Area - 2nd Quarter 2003 & 2002
3 2003 Quarterly Segment Data
4 2002 Quarterly Segment Data
5 Other Income (Expense), Net
6 Condensed Statement of Income - Three Months Ended June 30, 2003 & 2002
7 Condensed Statement of Income - Six Months Ended June 30, 2003 & 2002
8 Condensed Consolidated Balance Sheet
GAAP Reconciliations:
9 Sales Growth Excluding Acquisitions, Divestitures & International Currency
10 Operating Profit, Net Income and E.P.S. for the Year Ended December 31, 2002
11 Net Operating Profit and Shareholders' Equity
MASCO CORPORATION
CONDENSED STATEMENT OF INCOME
2003 AND 2002 - BY QUARTER
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2003 2002
------------------------ -------------------------------------------------------------
QTR. 2 QTR. 1 YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Sales:
- North America $2,261,510 $1,993,000 $7,956,700 $2,074,700 $2,114,000 $1,973,000 $1,795,000
- International 526,140 505,300 1,462,700 412,700 404,000 341,000 305,000
---------- ---------- ---------- ---------- ---------- ---------- ----------
- Consolidated 2,787,650 2,498,300 9,419,400 2,487,400 2,518,000 2,314,000 2,100,000
Cost of Sales 1,934,360 1,744,540 6,450,590 1,729,850 1,717,040 1,549,650 1,454,050
---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross Profit 853,290 753,760 2,968,810 757,550 800,960 764,350 645,950
(Gross Margin) 30.6% 30.2% 31.5% 30.5% 31.8% 33.0% 30.8%
S,G&A Expense (before
GCE, Litigation
(Income) Charge & Benefit
(Income) Expense) 440,280 403,380 1,408,540 377,480 354,460 345,250 331,350
(S,G&A Expense as a % of Sales) 15.8% 16.1% 15.0% 15.2% 14.1% 14.9% 15.8%
Operating Profit (before
GCE, Litigation
(Income) Charge & Benefit
(Income) Expense) 413,010 350,380 1,560,270 380,070 446,500 419,100 314,600
(Operating Margin) 14.8% 14.0% 16.6% 15.3% 17.7% 18.1% 15.0%
- North America 379,120 283,560 1,361,270 321,570 390,300 372,700 276,700
(Margin) 16.8% 14.2% 17.1% 15.5% 18.5% 18.9% 15.4%
- International 33,890 66,820 199,000 58,500 56,200 46,400 37,900
(Margin) 6.4% 13.2% 13.6% 14.2% 13.9% 13.6% 12.4%
General Corporate Expense (GCE) 29,000 28,000 98,000 25,000 25,000 24,000 24,000
S,G&A Expense as a % of Sales
(including GCE and Benefit
(Income) Expense) 16.7% 18.1% 16.0% 16.2% 15.1% 16.0% 16.9%
(Income) Charge Regarding
Litigation Settlement, Net - (13,520) 146,800 (19,200) 166,000 - -
Accelerated Benefit (Income) Expense (5,000) 21,000 - - - - -
Reversal of Charge for the Planned
Disposition of a Business - - (15,630) (15,630) - - -
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating Profit per F/S $ 389,010 $ 314,900 $1,331,100 $ 389,900 $ 255,500 $ 395,100 $ 290,600
========== ========== ========== ========== ========== ========== ==========
Earnings per Common Share (Diluted):
Income Before Cumulative Effect of
Accounting Change, Net $ 0.46 $ 0.32 $ 1.33 $ 0.37 $ 0.24 $ 0.43 $ 0.31
Cumulative Effect of Accounting
Change, Net - - (0.18) - - - (0.19)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income $ 0.46 $ 0.32 $ 1.15 $ 0.37 $ 0.24 $ 0.43 $ 0.12
========== ========== ========== ========== ========== ========== ==========
NOTES:
- - In the second quarter of 2003, the Company recorded a non-cash pre-tax
charge of approximately $23 million ($.03 per common share, after tax)
related to a business system failure at a European business unit in the
Decorative Architectural Products segment. The charge resulted from system
failures at the unit and the unit managements' inadequate response to these
failures during efforts to convert to a new business system in 2001 and
2002. The failures primarily impacted accurate recognition of cost of sales
associated with over 20,000 sku's at the business unit with a corresponding
misstatement of certain balance sheet accounts.
- - Due to the unexpected passing of the Company's President and Chief
Operating Officer, certain benefits were accelerated and expensed in the
first quarter of 2003. A portion of the benefit liability (related to an
investment in the Company's common stock) fluctuates based on the market
price of Company common stock. In the second quarter of 2003, the Company
recognized income relating to this liability as the obligation is marked to
market, based on the Company's stock price, at the end of each reporting
period.
- - Data for 2002 exclude a first quarter, non-cash goodwill accounting change
charge effective January 1, 2002 of $.19 per common share. In addition, per
common share amounts for the four quarters do not total to the per common
share amount for the year due to the timing of capital stock transactions
and the effect of contingently issuable shares.
- - Earnings per common share in the third quarter of 2002 include a $.20
charge for a litigation settlement.
- - Earnings in the fourth quarter of 2002 include approximately $35 million of
income related to insurance proceeds and the reversal of a charge related
to the planned disposition of a business and approximately $36 million of
charges related to non-operating asset impairments and realized losses on
marketable securities.
- - Excluding the effect of unusual items (principally the Behr litigation
settlement charge, net and a non-cash accounting change charge related to
goodwill impairment), net income for the year 2002 was $780 million or
$1.52 per common share (see page 10 for the GAAP reconciliation).
Page 1
MASCO CORPORATION
SALES BY SEGMENT AND GEOGRAPHIC AREA
2ND QUARTER 2003 & 2002
(IN MILLIONS)
2nd Quarter 2nd Qtr '03
----------------------------- vs.
2003 2002 2nd Qtr '02
------------- ------------- ------------------
Cabinets & Related Products $ 743 $ 682 + 9%
Plumbing Products 666 509 + 31%
Installation & Other Services 585 398 + 47%
Decorative Architectural Products 469 440 + 7%
Other Specialty Products 325 285 + 14%
------------- -------------
Total $ 2,788 $ 2,314 + 20%
============= =============
North America $ 2,262 $ 1,973 + 15%
International 526 341 + 54%
------------- -------------
Total, as above $ 2,788 $ 2,314 + 20%
============= =============
NOTE:
- - Excluding acquisitions and divestitures, consolidated net sales increased 7
percent, North American net sales increased 5 percent and International net
sales increased eighteen percent. International sales in local currencies
decreased 1 percent compared with the second quarter of 2002 (see page 9
for the GAAP reconciliation).
Page 2
MASCO CORPORATION
QUARTERLY SEGMENT DATA - 2003
(IN MILLIONS)
Year Qtr. 4 Qtr. 3 Qtr. 2 Qtr. 1
--------------- --------------- -------------- -------------- ---------------
Net Sales:
- Cabinets and Related Products $ 743 $ 699
- Plumbing Products 666 613
- Installation and Other Services 585 542
- Decorative Architectural Products 469 360
- Other Specialty Products 325 284
--------------- --------------- -------------- -------------- ---------------
- TOTAL 2,788 2,498
=============== =============== ============== ============== ===============
- North America 2,262 1,993
- International, principally Europe 526 505
--------------- --------------- -------------- -------------- ---------------
- TOTAL, AS ABOVE 2,788 2,498
=============== =============== ============== ============== ===============
Operating Profit:
- Cabinets and Related Products 113 84
- Plumbing Products 93 84
- Installation and Other Services 88 77
- Decorative Architectural Products 62 62
- Other Specialty Products 57 43
--------------- --------------- -------------- -------------- ---------------
- TOTAL 413 350
=============== =============== ============== ============== ===============
- North America 379 283
- International, principally Europe 34 67
--------------- --------------- -------------- -------------- ---------------
- TOTAL, AS ABOVE 413 350
=============== =============== ============== ============== ===============
General Corporate Expense (GCE) 29 28
(Income) Related to Litigation
Settlement, Net - (14)
Accelerated Benefit (Income) Expense (5) 21
--------------- --------------- -------------- -------------- ---------------
Operating Profit (after GCE
and Adjustments) 389 315
Other Income (Expense), Net (34) (55)
--------------- --------------- -------------- -------------- ---------------
Income Before Tax and Minority Interest $ 355 $ 260
=============== =============== ============== ============== ===============
Margins:
- Cabinets and Related Products 15.2% 12.0%
- Plumbing Products 14.0% 13.7%
- Installation and Other Services 15.0% 14.2%
- Decorative Architectural Products 13.2% 17.2%
- Other Specialty Products 17.5% 15.1%
- TOTAL 14.8% 14.0%
- North America 16.8% 14.2%
- International, principally Europe 6.5% 13.3%
- TOTAL, AS ABOVE 14.8% 14.0%
NOTES:
- - Operating profit margins above are before general corporate expense, income
related to a litigation settlement (which relates to the Decorative
Architectural Products segment) and accelerated benefit (income) expense.
- - In the second quarter of 2003, the Company recorded a non-cash pre-tax
charge of approximately $23 million ($.03 per common share, after tax)
related to a business system failure at a European business unit in the
Decorative Architectural Products segment.
- - Due to the unexpected passing of the Company's President and Chief
Operating Officer, certain benefits were accelerated and expensed in the
first quarter of 2003. In the second quarter of 2003, the Company
recognized income relating to this liability as the obligation is marked to
market, based on the Company's stock price, at the end of each reporting
period.
Page 3
MASCO CORPORATION
QUARTERLY SEGMENT DATA - 2002
(IN MILLIONS)
Year Qtr. 4 Qtr. 3 Qtr. 2 Qtr. 1
------- ------- ------- ------- -------
Net Sales:
- Cabinets and Related Products $ 2,798 $ 722 $ 738 $ 682 $ 656
- Plumbing Products 2,031 523 535 509 464
- Installation and Other Services 1,845 568 489 398 390
- Decorative Architectural Products 1,599 361 439 440 359
- Other Specialty Products 1,146 313 317 285 231
------- ------- ------- ------- -------
- TOTAL 9,419 2,487 2,518 2,314 2,100
======= ======= ======= ======= =======
- North America 7,956 2,074 2,114 1,973 1,795
- International, principally Europe 1,463 413 404 341 305
------- ------- ------- ------- -------
- TOTAL, AS ABOVE 9,419 2,487 2,518 2,314 2,100
======= ======= ======= ======= =======
Operating Profit:
- Cabinets and Related Products 379 98 114 100 67
- Plumbing Products 334 92 83 87 72
- Installation and Other Services 304 87 82 71 64
- Decorative Architectural Products 338 63 97 105 73
- Other Specialty Products 221 56 70 56 39
------- ------- ------- ------- -------
- TOTAL 1,576 396 446 419 315
======= ======= ======= ======= =======
- North America 1,377 337 390 373 277
- International, principally Europe 199 59 56 46 38
------- ------- ------- ------- -------
- TOTAL, AS ABOVE 1,576 396 446 419 315
======= ======= ======= ======= =======
General Corporate Expense (GCE) 98 25 25 24 24
(Income) Expense Related to Litigation Settlement, Net 147 (19) 166 - -
Operating Profit (after GCE and Litigation
(Income) Expense) ------- ------- ------- ------- -------
1,331 390 255 395 291
Other Income (Expense), Net (300) (91) (76) (70) (63)
------- ------- ------- ------- -------
Income Before Tax and Accounting Change, Net $ 1,031 $ 299 $ 179 $ 325 $ 228
======= ======= ======= ======= =======
Margins:
- Cabinets and Related Products 13.5% 13.6% 15.4% 14.7% 10.2%
- Plumbing Products 16.4% 17.6% 15.5% 17.1% 15.5%
- Installation and Other Services 16.5% 15.3% 16.8% 17.8% 16.4%
- Decorative Architectural Products 21.1% 17.5% 22.1% 23.9% 20.3%
- Other Specialty Products 19.3% 17.9% 22.1% 19.6% 16.9%
- TOTAL 16.7% 15.9% 17.7% 18.1% 15.0%
- North America 17.3% 16.2% 18.4% 18.9% 15.4%
- International, principally Europe 13.6% 14.3% 13.9% 13.5% 12.5%
- TOTAL, AS ABOVE 16.7% 15.9% 17.7% 18.1% 15.0%
NOTES:
- - Operating profit margins above are before general corporate expense and a
charge (income) for litigation settlement, net, which relates to the
Decorative Architectural Products segment.
- - Included in operating profit of the Plumbing Products segment for the
fourth quarter and year is $15.6 million of income related to the reversal
of a charge for the planned disposition of a business.
Page 4
MASCO CORPORATION
OTHER INCOME (EXPENSE), NET
2003 AND 2002 QUARTERS
(IN MILLIONS)
2003 2002
------------------------------------------------ ---------------------------------------------------
YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1 YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1
------- ------- ------- ------- ------- -------- ------- ------- ------- -------
Interest Expense $ (67.5) $ (67.6) $ (236.9) $ (66.6) $ (61.0) $ (54.2) $ (55.1)
Impairment Charge for
Long-Term Investments - - (24.1) (24.1) - - -
Income from Cash and
Cash Investments 2.4 2.5 7.9 3.9 2.1 1.1 0.8
Other Interest Income 1.1 1.9 6.1 2.7 1.9 0.6 0.9
Equity Earnings, Net - 0.5 14.2 1.2 5.7 5.4 1.9
Other, Net (A) 30.4 7.7 (67.3) (7.5) (25.0) (23.3) (11.5)
------- ------- ------- ------- ------- -------- ------- ------- ------- -------
Total Other Income
(Expense), Net $ (33.6) $ (55.0) $ (300.1) $ (90.4) $ (76.3) $ (70.4) $ (63.0)
======= ======= ======= ======= ======= ======== ======= ======= ======= =======
NOTE:
(A) Other, net for the quarter ended June 30, 2003 includes net realized gains
on the sale of marketable securities of $8.7 million, net gains from other
investments of $4.3 million and gain from the sale of an equity investment
of $4.8 million. Other, net also includes dividend income of $6.1 million.
Page 5
MASCO CORPORATION
CONDENSED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2003 AND 2002
(IN THOUSANDS, EXCEPT PER SHARE DATA)
As a Percent of Sales
% Three Months Ended June 30 Three Months Ended June 30
--------------------------- --------------------------
Line Change 2003 2002 2003 2002
- ---- ------ ----------- ----------- ----------- -----------
1 Net Sales 20% $ 2,787,650 $ 2,314,000 100.0% 100.0%
2 Cost of Sales 25% 1,934,360 1,549,650 69.4% 67.0%
----------- ----------- ----------- -----------
3 Gross Profit 12% 853,290 764,350 30.6% 33.0%
----------- ----------- ----------- -----------
Operating Profit (A):
4 - Before GCE, Benefit (Income) (3-8) -1% 413,010 419,100 14.8% 18.1%
5 - After GCE, Benefit (Income) (3-9) -2% 389,010 395,100 14.0% 17.1%
S,G&A Expense:
6 - General Corporate Expense (GCE) 21% 29,000 24,000 1.0% 1.0%
7 - Accelerated Benefit (Income) (C) (5,000) - -0.2%
8 - All Other 28% 440,280 345,250 15.8% 14.9%
----------- ----------- ----------- -----------
9 - Total S,G&A Expense 26% 464,280 369,250 16.7% 16.0%
----------- ----------- ----------- -----------
10 Other Income (Expense), Net -52% (33,620) (70,400) -1.2% -3.0%
11 Income Before Income Taxes and Minority Interest (5-10) 9% 355,390 324,700 12.7% 14.0%
12 Income Taxes 12% 123,700 110,400 4.4% 4.8%
(Tax Rate) 34.8% 34.0%
----------- ----------- ----------- -----------
13 Income Before Minority Interest 8% 231,690 214,300 8.3% 9.3%
14 Minority Interest (B) (2,140) - -0.1%
----------- ----------- ----------- -----------
15 Net Income 7% $ 229,550 $ 214,300 8.2% 9.3%
=========== =========== =========== ===========
Earnings Per Common Share (Diluted) 7% $ 0.46 $ 0.43
=========== ===========
Average (Diluted) Common Shares 0% 498,500 498,500
NOTES:
(A) In the second quarter of 2003, the Company recorded a non-cash pre-tax
charge of approximately $23 million ($.03 per common share, after tax)
related to a business system failure at a European business unit in the
Decorative Architectural Products segment.
(B) The Company owns 64% of Hansgrohe AG; this line is the reduction of income
to reflect the minority interest.
(C) Due to the unexpected passing of the Company's President and Chief
Operating Officer, certain benefits were accelerated and expensed in the
first quarter of 2003. In the second quarter of 2003, the Company
recognized income relating to this liability as the obligation is marked to
market, based on the Company's stock price, at the end of each reporting
period.
Page 6
MASCO CORPORATION
CONDENSED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(IN THOUSANDS, EXCEPT PER SHARE DATA)
As a Percent of Sales
% Six Months Ended June 30 Six Months Ended June 30
--------------------------- --------------------------
Line Change 2003 2002 2003 2002
- ---- ------ ----------- ----------- ----------- -----------
1 Net Sales 20% $ 5,285,950 $ 4,414,000 100.0% 100.0%
2 Cost of Sales 22% 3,678,900 3,003,700 69.6% 68.0%
----------- ----------- ----------- -----------
3 Gross Profit 14% 1,607,050 1,410,300 30.4% 32.0%
----------- ----------- ----------- -----------
Operating Profit (A):
4 - Before GCE, Litigation Income and Benefit
Expense, Net (3-8) 4% 763,390 733,700 14.4% 16.6%
5 - After GCE, Litigation Income and Benefit
Expense, Net (3-9+10) 3% 703,910 685,700 13.3% 15.5%
S,G&A Expense:
6 - General Corporate Expense (GCE) 19% 57,000 48,000 1.1% 1.1%
7 - Accelerated Benefit Expense, Net (D) 16,000 - 0.3%
8 - All Other 25% 843,660 676,600 16.0% 15.3%
----------- ----------- ----------- -----------
9 - Total S,G&A Expense 27% 916,660 724,600 17.3% 16.4%
----------- ----------- ----------- -----------
10 (Income) Related to Litigation Settlement (B) (13,520) - -0.3%
11 Other Income (Expense), Net -34% (88,670) (133,400) -1.7% -3.0%
12 Income Before Income Taxes, Minority
Interest and Cumulative Effect of Accounting
Change, Net (5-11) 11% 615,240 552,300 11.6% 12.5%
13 Income Taxes 14% 214,100 187,800 4.1% 4.3%
(Tax Rate) 34.8% 34.0%
----------- ----------- ----------- -----------
14 Income Before Minority Interest and Cumulative
Effect of Accounting Change, Net 10% 401,140 364,500 7.6% 8.3%
15 Minority Interest (C) (5,790) - -0.1%
16 Cumulative Effect of Accounting Change, Net - (92,400) -2.1%
----------- ----------- ----------- -----------
17 Net Income 45% $ 395,350 $ 272,100 7.5% 6.2%
=========== =========== =========== ===========
Earnings Per Common Share (Diluted):
Income Before Cumulative Effect of
Accounting Change, Net $ 0.79 $ 0.74
Cumulative Effect of Accounting Change, Net - (0.19)
----------- -----------
Net Income $ 0.79 $ 0.55
=========== ===========
Average (Diluted) Common Shares 2% 502,500 492,500
NOTES:
(A) In the second quarter of 2003, the Company recorded a non-cash pre-tax
charge of approximately $23 million ($.03 per common share, after tax)
related to a business system failure at a European business unit in the
Decorative Architectural Products segment.
(B) The first six months of 2003 includes $13.5 million of income related to
insurance proceeds for a litigation settlement regarding the Company's
subsidiary, Behr Process Corporation.
(C) The Company owns 64% of Hansgrohe AG; this line is the reduction of income
to reflect the minority interest.
(D) Due to the unexpected passing of the Company's President and Chief
Operating Officer, certain benefits were accelerated and expensed in the
first quarter of 2003. In the second quarter of 2003, the Company
recognized income relating to this liability as the obligation is marked to
market, based on the Company's stock price, at the end of each reporting
period.
Page 7
MASCO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
June 30, December 31, June 30,
ASSETS 2003 2002 2002
---------------------- ----------------------- ----------------------
Current Assets:
Cash and Cash Investments $ 785,440 $ 1,066,570 $ 628,750
Receivables 1,775,960 1,546,360 1,520,630
Inventories 1,161,850 1,055,620 989,130
Prepaid Expenses and Other 263,130 281,220 176,100
---------------------- ----------------------- ----------------------
Total Current Assets 3,986,380 3,949,770 3,314,610
Equity Investments - 67,810 94,360
Property and Equipment, Net 2,424,600 2,315,060 2,096,200
Goodwill, Net 4,507,530 4,297,150 3,426,590
Other Intangible Assets, Net 348,290 353,870 301,320
Other Noncurrent Assets 1,013,180 1,066,770 1,185,000
---------------------- ----------------------- ----------------------
Total Assets $ 12,279,980 $ 12,050,430 $ 10,418,080
====================== ======================= ======================
LIABILITIES
Current Liabilities:
Notes Payable $ 809,050 $ 321,180 $ 134,510
Accounts Payable 676,520 541,590 469,130
Accrued Liabilities 1,152,530 1,069,680 925,120
---------------------- ----------------------- ----------------------
Total Current Liabilities 2,638,100 1,932,450 1,528,760
Long-Term Debt 3,816,730 4,316,470 3,635,480
Deferred Taxes and Other 517,540 507,670 172,060
---------------------- ----------------------- ----------------------
Total Liabilities 6,972,370 6,756,590 5,336,300
SHAREHOLDERS' EQUITY 5,307,610 5,293,840 5,081,780
---------------------- ----------------------- ----------------------
Total Liabilities and Shareholders' Equity $ 12,279,980 $ 12,050,430 $ 10,418,080
====================== ======================= ======================
Page 8
MASCO CORPORATION
GAAP RECONCILIATION OF SALES GROWTH
EXCLUDING EFFECT OF ACQUISITIONS, DIVESTITURES & CURRENCY TRANSLATION
(IN THOUSANDS)
Three Months Ended June 30,
----------------------------------------------
2003 2002
--------------------- ---------------------
Consolidated Net Sales, as reported $ 2,787,650 $ 2,314,000
- Acquisitions (333,900) (20,200)
- Divestitures - (900)
--------------------- ---------------------
Consolidated Net Sales (excl. acquisitions & divestitures) $ 2,453,750 $ 2,292,900
===================== =====================
North American Net Sales, as reported $ 2,261,510 $ 1,973,070
- Acquisitions (189,600) (1,700)
- Divestitures - (900)
--------------------- ---------------------
North American Net Sales (excl. acquisitions & divestitures) $ 2,071,910 $ 1,970,470
===================== =====================
International Net Sales, as reported $ 526,140 $ 340,930
- Acquisitions (144,300) (18,500)
- Divestitures - -
--------------------- ---------------------
International Net Sales (excl. acquisitions & divestitures) 381,840 322,430
- Currency Translation (63,800)
--------------------- ---------------------
Int'l Net Sales (excl. acquisitions, divestitures & currency) $ 318,040 $ 322,430
===================== =====================
The Company presents information comparing results from one period to another
excluding the results of businesses acquired or disposed of in order to assess
the performance of the underlying businesses and to assess to what extent
acquisitions are driving growth.
The Company also presents information comparing results of International
operations from one period to another using constant exchange rates. To present
this information, current period results for foreign entities are converted into
U.S. dollars using the prior period's exchange rates, rather than exchange rates
for the current year. The Company presents this information in order to assess
how the underlying businesses performed before taking into account currency
fluctuations.
Page 9
MASCO CORPORATION
GAAP RECONCILIATION OF OPERATING PROFIT, NET INCOME AND EARNINGS PER SHARE
YEAR ENDED DECEMBER 31, 2002
(IN THOUSANDS, EXCEPT PER SHARE DATA)
OPERATING NET
EPS PROFIT INCOME
--------------- ------------------ -------------------
As reported $ 1.15 $ 1,331,100 $ 589,700
Litigation Charge, Net 0.18 146,800 92,300
Charge for Goodwill Impairment 0.18 92,400
(Income) From Planned Disposition of Business (0.02) (15,600) (9,800)
Impairment Charge for Non-Operating Assets 0.03 15,100
--------------- ------------------ -------------------
As reconciled $ 1.52 $ 1,462,300 $ 779,700
=============== ================== ===================
Page 10
MASCO CORPORATION
GAAP RECONCILIATION OF NET OPERATING PROFIT AND SHAREHOLDERS' EQUITY
(in thousands)
LAST TWELVE MONTHS
JUNE 30, 2003 JUNE 30, 2002
--------------------- --------------------
Net Operating Profit, as reported $ 1,349,310 $ 1,240,580
Amortization of Goodwill - 47,100
--------------------- --------------------
Net Operating Profit, Excluding Amortization of Goodwill 1,349,310 $ 1,287,680
====================
(Income) From Planned Disposition of Business (15,630)
Charge for Litigation Settlement, net 133,280
---------------------
Net Operating Profit, as reconciled $ 1,466,960
=====================
JUNE 30, 2003
---------------------
Shareholders' Equity, as reported $ 5,307,610
(Income) From Planned Disposition of Business (net of tax) (9,800)
Charge for Litigation Settlement, net (net of tax) 83,500
---------------------
Shareholders' Equity, as reconciled $ 5,381,310
=====================
Page 11