EXHIBIT 99
FOR IMMEDIATE RELEASE Contact:
- --------------------- Samuel Cypert
313-792-6646
MASCO CORPORATION REPORTS RECORD
THIRD QUARTER SALES AND EARNINGS AND UPDATES
FULL-YEAR EARNINGS GUIDANCE
Taylor, Michigan (November 4, 2003) -- Masco Corporation (NYSE:MAS)
today reported that net sales for the third quarter ended September 30, 2003,
aided by acquisitions, increased 19 percent to a record $2.9 billion, compared
with $2.4 billion for the third quarter of 2002. Net income for the quarter
increased to $318.8 million compared with $122.8 million for the 2002 third
quarter. Earnings per common share increased to $.65 compared with $.24 per
common share for the 2002 third quarter. Income from continuing operations for
the quarter was $261.5 million compared with $116.7 million in 2002. Earnings
from continuing operations increased to a record $.53 per common share compared
with $.22 per common share for the 2002 third quarter. Third quarter 2002
results included a charge of $166 million ($.20 per common share, after tax)
related to the Company's subsidiary, Behr Process Corporation, class action
litigation.
Third quarter earnings from continuing operations of $.53 per common
share included the negative impact of accounting irregularities and impairment
charges related to two businesses in the United Kingdom aggregating $.06 per
common share, and the exclusion of $.01 per common share related to the third
quarter 2003 operating results of businesses divested in the third quarter which
are included in income from discontinued operations. These items were offset by
an adjustment of the Behr litigation accrual of $.07 per common share. The $.53
per common share is consistent with the Company's previous guidance that
earnings would be modestly above a range of $.48-$.51 per common share which
included operating results of the divested businesses.
As previously announced, the Company completed the sale of its Baldwin
Hardware, Weiser Lock and Marvel Group businesses in the third quarter of 2003.
Under accounting rules, the Company is required to treat these businesses as
discontinued operations, accordingly their operating results are retroactively
excluded from the Company's consolidated statements of income from continuing
operations. Third quarter results include a pre-tax gain from the sale of these
businesses, aggregating approximately $91 million ($.11 per common share, after
tax) and income from their results of operations of approximately $6 million
($.01 per common share, after tax), both of which are included in discontinued
operations.
Masco Chairman and CEO Richard A. Manoogian commented, "The positive
sales and economic trends that we experienced in our businesses in the third
quarter of 2003 have continued thus far in the fourth quarter. Assuming that
present business conditions continue for the remainder of the current quarter,
seasonally one of the year's lowest quarters for Masco, we expect to achieve
record sales and earnings in 2003 and we believe that our full-year 2003
earnings from continuing operations should be in the range of $1.68 to $1.70 per
common share." This new guidance represents an increase from the Company's
previous guidance of $1.68 to $1.72 per common share, when adjusted to exclude
the projected operating results of $.04 per common share related to Baldwin,
Weiser and Marvel for the entire year which had been included in the previous
guidance, and also excludes any possible fourth quarter unusual charges.
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 third quarter 2003 sales and
earnings is scheduled for Tuesday, November 4, 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) 457-2667 (confirmation #236086). 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 #236086) approximately two hours after the end of the call and will
continue through November 10, 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 undertakes no
obligation to update any forward-looking statements, whether as a result of new
information, future events or otherwise.
# # # #
MASCO CORPORATION ANNOUNCES
THIRD QUARTER SALES AND EARNINGS
Amounts are in thousands, except per share data.
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------- --------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Net Sales $ 2,917,900 $ 2,446,700 $ 8,073,790 $ 6,728,230
Cost Of Sales 2,014,980 1,666,200 5,603,660 4,572,840
----------- ----------- ----------- -----------
Gross Profit 902,920 780,500 2,470,130 2,155,390
Selling, General and Administrative Expenses 481,150 368,850 1,371,490 1,068,690
(Income) Charge Regarding Litigation Settlement (57,600) 166,000 (71,120) 166,000
----------- ----------- ----------- -----------
Operating Profit 479,370 245,650 1,169,760 920,700
Other Income (Expense), Net (60,280) (76,280) (150,690) (210,420)
----------- ----------- ----------- -----------
Income From Continuing Operations Before Income Taxes and
Minority Interest 419,090 169,370 1,019,070 710,280
Income Taxes 155,200 52,670 363,680 236,120
----------- ----------- ----------- -----------
Income From Continuing Operations Before Minority Interest 263,890 116,700 655,390 474,160
Minority Interest 2,380 --- 8,170 ---
----------- ----------- ----------- -----------
Income From Continuing Operations 261,510 116,700 647,220 474,160
Income/Gain From Discontinued Operations, Net Of Income Taxes 57,260 6,100 66,900 13,140
Cumulative Effect Of Accounting Change, Net --- --- --- (92,400)
----------- ----------- ----------- -----------
Net Income $ 318,770 $ 122,800 $ 714,120 $ 394,900
=========== =========== =========== ===========
Earnings Per Common Share (Diluted):
Income From Continuing Operations $ 0.53 $ 0.22 $ 1.30 $ 0.93
Income From Discontinued Operations, Net Of Income Taxes 0.12 0.01 0.13 0.03
Cumulative Effect Of Accounting Change, Net - - - (0.18)
----------- ----------- ----------- -----------
Net Income $ 0.65 $ 0.24 $ 1.44 $ 0.78
=========== =========== =========== ===========
Average Diluted Common Shares Outstanding 489,100 521,900 496,300 507,500
=========== =========== =========== ===========
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 September 30, 2003 and September
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.
THIRD QUARTER 2003
o Net sales, aided by acquisitions, were a record $2.9 billion, increasing 19
percent over 2002 third quarter sales, with North American sales increasing
16 percent and International sales increasing 36 percent. Stronger sales to
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
contributed to the sales growth in the third quarter.
o Excluding acquisitions and divestitures, third quarter 2003 net sales
increased 10 percent compared with third quarter 2002 sales; North American
net sales increased 10 percent and International sales increased 11
percent. In local currencies, International sales, excluding acquisitions
and divestitures, were flat compared with the third quarter of 2002.
1
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
THIRD QUARTER 2003 (CONTINUED)
o The Company reported net income of $318.8 million or $.65 per common
share. Included in the $.65 per common share is $.12 per common share
related to discontinued operations, reflecting $.01 per common share
related to the third quarter 2003 operating results of the businesses
divested in the quarter and a gain of $.11 per common share from such
divestitures.
o The Company reported income from continuing operations of $261.5
million or $.53 per common share. The $.53 per common share included the
negative impact of accounting irregularities and impairment charges related
to two businesses in the United Kingdom aggregating $.06 per common share,
and the exclusion of $.01 per common share related to the third quarter
2003 operating results of businesses divested in the third quarter which
are included in income from discontinued operations. These items were
offset by an adjustment of the Behr litigation accrual of $.07 per common
share. The $.53 per common share is consistent with the Company's previous
guidance that earnings would be modestly above a range of $.48-$.51 per
common share which included the operating results of the divested
businesses.
o 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 United Kingdom business unit
in the Decorative Architectural Products segment. The Company's recently
completed review determined that an additional $12 million ($.02 per common
share, after tax) of charges related to 2002, resulting from accounting
irregularities, should be recorded in the third quarter of 2003. In
addition, the review disclosed that first half 2003 results were
overstated by approximately $3 million. These overstatements were corrected
in the third quarter of 2003. This analysis concluded that the previously
disclosed business system implementation failure allowed former management
to circumvent internal controls and artificially inflate the unit's
operating profit. The Company also determined that goodwill related to this
business unit was impaired and recorded a pre-tax charge of $5 million
($.01 per common share, after tax). As previously noted, the Company
replaced management personnel at the business unit and has implemented
corrective action to prevent this situation from occurring at the unit in
the future.
In addition, the Company completed a review of the business plan for the
business unit with the new management team and has determined that the
plan, relative to certain product offerings and customer focus, should be
changed. This revision in operating strategy resulted in third quarter 2003
charges aggregating approximately $15 million ($.02 per common share, after
tax) related to impairment of inventories and receivables.
2
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
THIRD QUARTER 2003 (CONTINUED)
In the third quarter of 2003, the Company also detected that an employee at
a United Kingdom business unit in the Plumbing Products segment had
circumvented internal controls and overstated operating results by
approximately $4 million ($.01 per common share, after tax) in 2002 and by
approximately $3 million in the first half of 2003. These overstatements
were corrected in the third quarter of 2003. The Company made the
appropriate personnel change and is continuing to review the operation and
its internal controls to determine if any additional changes are required.
Upon completion of the review, the Company will determine if any impairment
of assets exist, including goodwill (approximately $28 million at September
30, 2003).
o The Company is implementing changes to its operational and financial
structure in Europe which include: reorganizing its European business
operations into product groups; the addition of group operating and
financial personnel; training and evaluation related to internal controls;
and the expansion of both external and internal audit involvement.
o During the quarter, the Company completed the sale of its Baldwin Hardware
and Weiser Lock businesses to The Black & Decker Corporation. Baldwin and
Weiser had combined 2002 net sales of approximately $250 million. In a
separate transaction, the Company also completed the sale of its Marvel
Group. Total proceeds from the sale of these companies were $289 million,
including cash of $284 million and notes receivable of $5 million. The
Company realized a pre-tax net gain of $90.5 million ($.11 per common
share, after tax) from the sale of these businesses. Under accounting
rules, the Company is required to account for these businesses as
discontinued operations; accordingly, their historic operating results (and
the net gain from the sale of these businesses) are retroactively excluded
from the Company's continuing operations.
3
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
THIRD QUARTER 2003 (CONTINUED)
o In the third quarter of 2003, the Company recorded income of $57.6 million
($.07 per common share, after tax) related to an adjustment of the Behr
litigation accrual. The filing deadline for claims related to the National
Settlement was September 2, 2003, and the Company received a fraction
(3,700) of the previously projected claims (180,000) and currently
estimates the cost of such claims to approximate $8 million compared with
the $66 million originally recorded by the Company in the third quarter of
2002.
o Key retailer sales (excluding discontinued operations) in the third quarter
of 2003 increased eight percent, compared with a seven percent increase in
the second quarter of 2003 and a five percent increase in the 2003 first
quarter. Combined sales to Home Depot, Lowe's and Wal-Mart also increased
by approximately eight percent in the 2003 third quarter compared with the
six percent increase in the second quarter of 2003 and a four percent
increase in the first quarter of 2003.
o Sales by segment in the 2003 third quarter versus the 2002 third quarter
were:
- Cabinets and Related Products sales were up nine percent;
- Plumbing Products sales were up 28 percent;
- Installation and Other Services sales were up 31 percent;
- Decorative Architectural Products sales were up 17 percent; and
- Other Specialty Products sales were up 13 percent.
Particularly strong sales in the quarter included assembled cabinets, installed
sales of non-insulation products, paints and stains, and vinyl windows.
o Gross margins were 30.9 percent in the 2003 third quarter compared with
31.9 percent in 2002.
o Operating profit margins increased to 16.4 percent compared with 10.0
percent in the third quarter of 2002.
4
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
THIRD QUARTER 2003 (CONTINUED)
o Operating profit margins for the third quarter of 2003 include the effect
of the previously discussed charges related to certain United Kingdom
business units of $42 million, which are more than offset by the Behr
litigation accrual adjustment of $57.6 million. Operating profit margins
for the third quarter of 2002 included a Behr litigation charge of $166
million. Operating profit margins excluding these items would have been
15.9 percent and 16.8 percent for the third quarter of 2003 and 2002,
respectively.
o Third quarter 2003 gross margins and operating margins continue to be
adversely affected by:
- Increased energy, insurance and pension costs;
- Higher promotion and display costs;
- Stronger foreign currencies resulting in increased International sales
which have lower margins;
- Product mix and relatively higher sales in product segments with
somewhat lower margins; and
- Recently acquired companies with lower operating margins.
o SG&A expense as a percent of sales was 16.5 percent compared with 15.1
percent in the 2002 third quarter, reflecting increased promotion and
selling expenses and adjustments related to the United Kingdom operations
previously discussed.
o General corporate expense was 1.0 percent of sales in the third quarter of
both 2003 and 2002.
o Inventory days were 49 days at September 30, 2003 compared with 58 days at
September 30, 2002.
o Accounts receivable days at the end of the third quarter were 53 days
compared with 57 days a year ago.
o Accounts payable days at the end of the third quarter improved to 38 days
from 32 days a year ago, as we continue to negotiate more favorable
supplier terms.
5
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
THIRD QUARTER 2003 (CONTINUED)
o Working capital at September 30, 2003 (defined as accounts receivable and
inventories less accounts payable) improved to 20.5 percent of the last
twelve months of sales from 24.5 percent a year earlier.
o For the twelve months ended September 30, 2003, operating profit return on
net operating assets (as reconciled) declined to 16.0 percent compared
with 16.3 percent for the comparable period through September 30, 2002,
reflecting acquisitions in the second half of 2002.
o For the twelve months ended September 30, 2003, after tax return on
invested capital (as reconciled) increased to 10.7 percent compared with
10.3 percent for the comparable period through September 30, 2002.
o The Company's tax rate for continuing operations was 37.0 percent in the
third quarter of 2003 compared with 31.1 percent for the comparable period
of the prior year. Excluding the charge for litigation settlement, the
Company's 2002 third quarter tax rate was 34.1 percent. The rate increase
reflects an increase in the proportion of domestic income (which is taxed
at a higher effective tax rate than foreign income) as a result of the
impact of recent acquisitions and charges related to the United Kingdom
operations mentioned previously. The Company anticipates that its tax rate
for the full year 2003 will approximate 36 percent. Based on current
estimates, the Company expects its effective tax rate for 2004 will
approximate 35 percent.
o At the end of the quarter, the Company had a strong balance sheet, with
cash and marketable securities in excess of $1.2 billion and $2 billion
in unused bank lines.
o During the third quarter of 2003, the Company retired approximately
$300 million of its outstanding debt. Debt as a percent of total
capitalization was 45 percent at September 30, 2003 and 47 percent at both
June 30, 2003 and March 31, 2003. The Company has retired an additional
$100 million of its debt thus far in the fourth quarter of 2003.
o The Company repurchased approximately 5 million common shares during the
third quarter of 2003. Through September 30, approximately 28 million
common shares have been repurchased in 2003, including approximately 2
million common shares for long-term incentive compensation plans. The
Company currently has approximately 22 million common shares remaining
under its share repurchase authorization.
6
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
THIRD QUARTER 2003 (CONCLUDED)
o The Company increased the quarterly dividend for the 2003 fourth quarter by
14 percent (a larger percentage increase than in recent years) from $.14 to
$.16 per common share. The new quarterly dividend reflects the Company's
favorable long-term outlook, strong balance sheet and cash flow and recent
tax law changes, and makes this the 45th consecutive year in which
dividends have been increased.
o As previously announced, beginning January 1, 2003, the Company began
expensing stock options on a prospective basis.
o The weighted average diluted common shares outstanding for the quarter
were 489.1 million (498.5 million for the quarter ended June 30, 2003 and
519.6 million for the quarter ended March 31, 2003). Average diluted common
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 486 million. Contingently issuable
common shares, related to share price guarantees, utilized in the
calculation of earnings per common share in the third quarter were based on
a quarter-end average share price of $24.51. Such contingently issuable
common shares declined from 7.8 million shares at June 30, 2003 to 5.6
million common shares at September 30, 2003.
o Yesterday the Company announced that its Board of Directors has appointed
two new Directors:
Professor David L. Johnston, 62, has served as President and Vice
Chancellor of the University of Waterloo in Ontario, Canada since July 1,
1999. A specialist in securities regulation, corporation and information
technology law, Professor Johnston has authored numerous books, holds an
A.B. from Harvard University, an L.L.B. from Cambridge University and an
L.L.B. from Queen's University, as well as honorary doctorates from twelve
universities.
J. Michael Losh, 57, formerly served as Executive Vice President and Chief
Financial Officer of General Motors from July 1994 through August 2000 and
as chairman of GMAC, General Motor's financial services group, from July
1994 until April 1999.
Additional information is available on the Company's website.
FULL-YEAR OUTLOOK
o If present sales and economic trends continue, the Company believes
that it will achieve record sales and earnings for 2003. The Company
expects that full-year 2003 earnings from continuing operations should be
in the range of $1.68 to $1.70 per common share, excluding any possible
unusual fourth quarter items. This new guidance represents an increase from
the Company's previous guidance of $1.68 to $1.72 per common share when
adjusted to exclude the projected operating results of $.04 per common
share related to the Company's discontinued operations (Baldwin, Weiser and
Marvel) for the entire year which had been included in the previous
guidance.
o The Company estimates that fourth quarter earnings per common share will be
in the range of $.38-$.40 per common share, excluding any possible unusual
items.
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 undertakes no
obligation to update any forward-looking statements, whether as a result of new
information, future events or otherwise.
7
MASCO CORPORATION - 3RD QUARTER 2003
Page
----
1 Condensed Statement of Income - 2003 & 2002 Quarters
2 Sales by Segment and Geographic Area - 3rd 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 September 30,
2003 & 2002
7 Condensed Statement of Income - Nine Months Ended September 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
12 Operating Profit and Margins as Reconciled
13 Discontinued Operations Selected Financial Information
MASCO CORPORATION
CONDENSED STATEMENT OF INCOME
2003 AND 2002 - BY QUARTER
RESTATED FOR DISCONTINUED OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2003 2002
---------------------------------- ----------------------------------------------------------
QTR. 3 QTR. 2 QTR. 1 YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Sales:
- North America $2,369,130 $2,197,380 $1,927,070 $7,686,170 $2,007,940 $2,042,700 $1,903,970 $1,731,560
- International 548,770 526,140 505,300 1,462,700 412,700 404,000 341,000 305,000
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
- Consolidated 2,917,900 2,723,520 2,432,370 9,148,870 2,420,640 2,446,700 2,244,970 2,036,560
Cost of Sales 2,014,980 1,887,900 1,700,780 6,257,680 1,684,840 1,666,200 1,500,130 1,406,510
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross Profit 902,920 835,620 731,590 2,891,190 735,800 780,500 744,840 630,050
(Gross Margin) 30.9% 30.7% 30.1% 31.6% 30.4% 31.9% 33.2% 30.9%
S,G&A Expense (before GCE &
Benefit (Income) Expense) 453,150 428,250 389,090 1,360,420 364,730 343,850 333,230 318,610
(S,G&A Expense as a % of Sales) 15.5% 15.7% 16.0% 14.9% 15.1% 14.1% 14.8% 15.6%
Operating Profit (before GCE,
Litigation (Income) Charge
& Benefit (Income) Expense) 449,770 407,370 342,500 1,530,770 371,070 436,650 411,610 311,440
(Operating Margin) 15.4% 15.0% 14.1% 16.7% 15.3% 17.8% 18.3% 15.3%
- North America 430,270 373,480 275,680 1,331,770 312,570 380,450 365,210 273,540
(Margin) 18.2% 17.0% 14.3% 17.3% 15.6% 18.6% 19.2% 15.8%
- International 19,500 33,890 66,820 199,000 58,500 56,200 46,400 37,900
(Margin) 3.6% 6.4% 13.2% 13.6% 14.2% 13.9% 13.6% 12.4%
General Corporate Expense (GCE) 28,000 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) 16.5% 16.6% 18.0% 15.9% 16.1% 15.1% 15.9% 16.8%
(Income) Charge Regarding Litigation
Settlement, Net (57,600) - (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 $ 479,370 $ 383,370 $ 307,020 $1,301,600 $ 380,900 $ 245,650 $ 387,610 $ 287,440
========== ========== ========== ========== ========== ========== ========== ==========
Earnings per Common Share (Diluted):
Income From Continuing Operations $ 0.53 $ 0.45 $ 0.31 $ 1.29 $ 0.36 $ 0.22 $ 0.42 $ 0.31
Income From Discontinued
Operations, Net 0.12 0.01 0.01 0.04 0.01 0.01 0.01 -
Cumulative Effect of Accounting
Change, Net - - - (0.18) - - - (0.19)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income $ 0.65 $ 0.46 $ 0.32 $ 1.15 $ 0.37 $ 0.24 $ 0.43 $ 0.12
========== ========== ========== ========== ========== ========== ========== ==========
NOTES:
- - Operating results reflect charges of $35 million ($.05 per common share,
after tax) and $23 million ($.03 per common share, after tax) in the third
quarter and second quarter of 2003, respectively, for a business unit in
the Decorative Architectural Products segment; and $7 million ($.01 per
common share, after tax) in the third quarter of 2003 for a business unit
in the Plumbing Products segment.
- - Due to the unexpected passing of the Company's President and Chief
Operating Officer, certain benefits were accelerated and expensed in the
first quarter of 2003. A portion of the benefit liability (related to an
investment in the Company's common stock) fluctuated based on the market
price of Company common stock. In the second quarter of 2003, the Company
recognized income relating to this liability as the obligation was marked
to market, based on the Company's stock price. The liability was satisfied
in the third quarter of 2003 with no impact on earnings.
- - Income from discontinued operations in the third quarter of 2003 includes
an after-tax net gain from the sale of Baldwin, Weiser and Marvel totaling
$53.1 million ($.11 per common share).
- - 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
3RD QUARTER 2003 & 2002
(IN MILLIONS)
3rd Quarter 3rd Qtr '03
--------------------------- vs.
2003 2002 3rd Qtr '02
---------- ---------- -------------------
Cabinets & Related Products $ 802 $ 738 + 9%
Plumbing Products 683 535 + 28%
Installation & Other Services 642 489 + 31%
Decorative Architectural Products 441 376 + 17%
Other Specialty Products 350 309 + 13%
---------- ----------
Total $ 2,918 $ 2,447 + 19%
========== ==========
North America $ 2,369 $ 2,043 + 16%
International, principally Europe 549 404 + 36%
---------- ----------
Total, as above $ 2,918 $ 2,447 + 19%
========== ==========
NOTES:
- - 2002 net sales have been restated to exclude operations which were sold and
treated as discontinued operations in accordance with SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets."
- - Excluding acquisitions and divestitures, consolidated net sales increased
ten percent, North American net sales increased ten percent and
International net sales increased eleven percent. International sales in
local currencies were flat compared with the third 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 $ 802 $ 743 $ 699
- Plumbing Products 683 666 613
- Installation and Other Services 642 585 542
- Decorative Architectural Products 441 413 301
- Other Specialty Products 350 317 277
--------- -------- ---------- ---------- ---------
- TOTAL 2,918 2,724 2,432
========= ======== ========== ========== =========
- North America 2,369 2,198 1,927
- International, principally Europe 549 526 505
--------- -------- ---------- ---------- ---------
- TOTAL, AS ABOVE 2,918 2,724 2,432
========= ======== ========== ========== =========
Operating Profit:
- Cabinets and Related Products 122 113 84
- Plumbing Products 95 93 84
- Installation and Other Services 110 88 77
- Decorative Architectural Products 53 57 55
- Other Specialty Products 70 56 43
--------- -------- ---------- ---------- ---------
- TOTAL 450 407 343
========= ======== ========== ========== =========
- North America 431 373 276
- International, principally Europe 19 34 67
--------- -------- ---------- ---------- ---------
- TOTAL, AS ABOVE 450 407 343
========= ======== ========== ========== =========
General Corporate Expense (GCE) 28 29 28
(Income) Related to Litigation Settlement, Net (58) - (13)
Accelerated Benefit (Income) Expense - (5) 21
--------- -------- ---------- ---------- ---------
Operating Profit (after GCE and Adjustments) 480 383 307
Other Income (Expense), Net (60) (35) (56)
--------- -------- ---------- ---------- ---------
Income from Continuing Operations Before
Income Taxes and Minority Interest $ 420 $ 348 $ 251
========= ======== ========== ========== =========
Margins:
- Cabinets and Related Products 15.2% 15.2% 12.0%
- Plumbing Products 13.9% 14.0% 13.7%
- Installation and Other Services 17.1% 15.0% 14.2%
- Decorative Architectural Products 12.0% 13.8% 18.3%
- Other Specialty Products 20.0% 17.7% 15.5%
- TOTAL 15.4% 14.9% 14.1%
- North America 18.2% 17.0% 14.3%
- International, principally Europe 3.5% 6.5% 13.3%
- TOTAL, AS ABOVE 15.4% 14.9% 14.1%
NOTES:
- - Data for all quarters of 2003 exclude discontinued operations.
- - Operating results reflect charges of $35 million ($.05 per common share,
after tax) and $23 million ($.03 per common share, after tax) in the third
quarter and second quarter of 2003, respectively, for a business unit in
the Decorative Architectural Products segment; and $7 million ($.01 per
common share, after tax) in the third quarter of 2003 for a business unit
in the Plumbing Products segment.
- - Due to the unexpected passing of the Company's President and Chief
Operating Officer, certain benefits were accelerated and expensed in the
first quarter of 2003. A portion of the benefit liability (related to an
investment in the Company's common stock) fluctuated based on the market
price of Company common stock. In the second quarter of 2003, the Company
recognized income relating to this liability as the obligation was marked
to market, based on the Company's stock price. The liability was satisfied
in the third quarter of 2003 with no impact on earnings.
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 1,358 302 376 378 302
- Other Specialty Products 1,117 306 309 278 224
------- ------- ------- ------- -------
- TOTAL 9,149 2,421 2,447 2,245 2,036
======= ======= ======= ======= =======
- North America 7,686 2,008 2,043 1,904 1,731
- International, principally Europe 1,463 413 404 341 305
------- ------- ------- ------- -------
- TOTAL, AS ABOVE 9,149 2,421 2,447 2,245 2,036
======= ======= ======= ======= =======
Operating Profit:
- Cabinets and Related Products 379 98 114 100 67
- Plumbing Products 334 92 83 87 72
- Installation and Other Services 304 87 82 71 64
- Decorative Architectural Products 311 55 88 99 69
- Other Specialty Products 218 55 69 55 39
------- ------- ------- ------- -------
- TOTAL 1,546 387 436 412 311
======= ======= ======= ======= =======
- North America 1,347 328 380 366 273
- International, principally Europe 199 59 56 46 38
------- ------- ------- ------- -------
- TOTAL, AS ABOVE 1,546 387 436 412 311
======= ======= ======= ======= =======
General Corporate Expense (GCE) 98 25 25 24 24
(Income) Expense Related to Litigation Settlement, Net 147 (19) 166 - -
Operating Profit (after GCE and Litigation
------- ------- ------- ------- -------
(Income) Expense) 1,301 381 245 388 287
Other Income (Expense), Net (300) (90) (76) (71) (63)
------- ------- ------- ------- -------
Income from Continuing Operations Before
Income Taxes and Cumulative Accounting
Change, Net $ 1,001 $ 291 $ 169 $ 317 $ 224
======= ======= ======= ======= =======
Margins:
- - Cabinets and Related Products 13.5% 13.6% 15.4% 14.7% 10.2%
- - Plumbing Products 16.4% 17.6% 15.5% 17.1% 15.5%
- - Installation and Other Services 16.5% 15.3% 16.8% 17.8% 16.4%
- - Decorative Architectural Products 22.9% 18.2% 23.4% 26.2% 22.8%
- - Other Specialty Products 19.5% 18.0% 22.3% 19.8% 17.4%
- - TOTAL 16.9% 16.0% 17.8% 18.4% 15.3%
- - North America 17.5% 16.3% 18.6% 19.2% 15.8%
- - International, principally Europe 13.6% 14.3% 13.9% 13.5% 12.5%
- - TOTAL, AS ABOVE 16.9% 16.0% 17.8% 18.4% 15.3%
NOTES:
- - Data for 2002 exclude discontinued operations.
- - Operating profit 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 $ (66.8) $ (67.4) $ (67.6) $(237.0) $ (66.6) $ (61.1) $ (54.2) $ (55.1)
Equity Earnings, Net - - 0.5 14.3 1.3 5.7 5.4 1.9
Income from Cash and Cash
Investments 1.8 2.4 2.5 7.8 3.9 2.1 1.1 0.7
Other Interest Income 2.1 1.1 1.8 6.0 2.7 1.8 0.6 0.9
Income (Loss) from Financial
Investments 18.9 19.1 13.5 (35.5) (4.1) (8.4) (15.4) (7.6)
Loss on Early Retirement of Debt (2.7) - - - - - - -
Gain from Sale of Equity
Investment - 4.8 - - - - - -
Impairment Charge for Long-Term
Investments (9.3) - - (24.0) (24.0) - - -
Other, Net (4.3) 5.4 (6.5) (31.7) (2.9) (16.4) (8.4) (4.0)
-------- ------ --------- --------- --------- --------- --------- --------- --------- ---------
Total Other Income (Expense), Net $ (60.3) $ (34.6) $ (55.8) $(300.1) $ (89.7) $ (76.3) $ (70.9) $ (63.2)
======== ====== ========= ========= ========= ========= ========= ========= ========= =========
NOTES:
- - Data for all quarters above exclude discontinued operations.
- - Income (loss) from Financial Investments includes $7.1 million of net
realized gains related to the sale of marketable securities for the three
months ended September 30, 2003.
Page 5
MASCO CORPORATION
CONDENSED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(IN THOUSANDS, EXCEPT PER SHARE DATA)
As a Percent of Sales
Three Months Ended September 30 Three Months Ended September 30
% ------------------------------- -------------------------------
Line Change 2003 2002 2003 2002
- ---- ------ -------------- ------------ ------------ ------------
1 Net Sales 19% $ 2,917,900 $ 2,446,700 100.0% 100.0%
2 Cost of Sales 21% 2,014,980 1,666,200 69.1% 68.1%
-------------- ------------ ------------ ------------
3 Gross Profit 16% 902,920 780,500 30.9% 31.9%
-------------- ------------ ------------ ------------
Operating Profit (A):
4 - Before GCE and Litigation (Income) Charge (3-7) 3% 449,770 436,650 15.4% 17.8%
5 - After GCE and Litigation (Income) Charge (3-8-9) 95% 479,370 245,650 16.4% 10.0%
S,G&A Expense:
6 - General Corporate Expense (GCE) 12% 28,000 25,000 1.0% 1.0%
7 - All Other 32% 453,150 343,850 15.5% 14.1%
-------------- ------------ ------------ ------------
8 - Total S,G&A Expense 30% 481,150 368,850 16.5% 15.1%
-------------- ------------ ------------ ------------
9 (Income) Charge for Litigation Settlement (B) (57,600) 166,000 -2.0% 6.8%
10 Other Income (Expense), Net -21% (60,280) (76,280) -2.1% -3.1%
11 Income from Continuing Operations Before Income
Taxes and Minority Interest (5+10) 147% 419,090 169,370 14.4% 6.9%
12 Income Taxes 195% 155,200 52,670 5.3% 2.2%
(Tax Rate) 37.0% 31.1%
-------------- ------------ ------------ ------------
13 Income from Continuing Operations Before Minority
Interest 126% 263,890 116,700 9.0% 4.8%
14 Minority Interest (C) (2,380) -0.1% -
-------------- ------------ ------------ ------------
15 Income from Continuing Operations 124% 261,510 116,700 9.0% 4.8%
16 Income from Discontinued Operations, Net of Income
Taxes 839% 57,260 6,100 2.0% 0.2%
-------------- ------------ ------------ ------------
Net Income 160% $ 318,770 $ 122,800 10.9% 5.0%
============== ============ ============ ============
Earnings Per Common Share (Diluted):
Income from Continuing Operations $ 0.53 $ 0.22
Income from Discontinued Operations, Net of
Income Taxes $ 0.12 $ 0.01
-------------- ------------
Net Income 177% $ 0.65 $ 0.24
============== ============
Average (Diluted) Common Shares -6% 489,100 521,900
NOTES:
Data for 2002 exclude discontinued operations.
(A) Operating results reflect charges of $35 million ($.05 per common share,
after tax) in the third quarter of 2003, for a business unit in the
Decorative Architectural Products segment; and $7 million ($.01 per common
share, after tax) in the third quarter of 2003 for a business unit in the
Plumbing Products segment.
(B) In the third quarter of 2003, the Company recorded litigation income
related to the Company's subsidiary, Behr Process Corporation, in the
Decorative Architectural Products segment.
(C) The Company owns 64% of Hansgrohe AG; this line is the reduction of income
to reflect the minority interest.
Page 6
MASCO CORPORATION
CONDENSED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(IN THOUSANDS, EXCEPT PER SHARE DATA)
As a Percent of Sales
Nine Months Ended September 30 Nine Months Ended September 30
% ------------------------------ ------------------------------
Line Change 2003 2002 2003 2002
- ---- ------ ------------ ------------ ---------- ------------
1 Net Sales 20% $ 8,073,790 $ 6,728,230 100.0% 100.0%
2 Cost of Sales 23% 5,603,660 4,572,840 69.4% 68.0%
------------ ------------ ---------- ------------
3 Gross Profit 15% 2,470,130 2,155,390 30.6% 32.0%
------------ ------------ ---------- ------------
Operating Profit (A):
4 - Before GCE, Benefit Expense, Net and Litigation
(Income) Charge (3-8) 3% 1,199,640 1,159,700 14.9% 17.2%
5 - After GCE, Benefit Expense, Net and Litigation
(Income) Charge (3-9-10) 27% 1,169,760 920,700 14.5% 13.7%
S,G&A Expense:
6 - General Corporate Expense (GCE) 16% 85,000 73,000 1.1% 1.1%
7 - Accelerated Benefit Expense, Net (D) 16,000 - 0.2% 0.0%
8 - All Other 28% 1,270,490 995,690 15.7% 14.8%
------------ ------------ ---------- ------------
9 - Total S,G&A Expense 28% 1,371,490 1,068,690 17.0% 15.9%
------------ ------------ ---------- ------------
10 (Income) Charge for Litigation Settlement (B) (71,120) 166,000 -0.9% 2.5%
11 Other Income (Expense), Net -28% (150,690) (210,420) -1.9% -3.1%
12 Income from Continuing Operations Before Income
Taxes, Minority Interest and Cumulative Effect
of Accounting Change, Net (5+11) 43% 1,019,070 710,280 12.6% 10.6%
13 Income Taxes 54% 363,680 236,120 4.5% 3.5%
(Tax Rate) 35.7% 33.2%
------------ ------------ ---------- ------------
14 Income from Continuing Operations Before
Minority Interest and Cumulative Effect
of Accounting Change, Net 38% 655,390 474,160 8.1% 7.0%
15 Minority Interest (C) (8,170) - -0.1% -
------------ ------------ ---------- ------------
16 Income from Continuing Operations 36% 647,220 474,160 8.0% 7.0%
17 Income from Discontinued Operations, Net of
Income Taxes 409% 66,900 13,140 0.8% 0.2%
18 Cumulative Effect of Accounting Change, Net -100% - (92,400) - -1.4%
------------ ------------ ---------- ------------
Net Income 81% $ 714,120 $ 394,900 8.8% 5.9%
============ ============ ========== ============
Earnings Per Common Share (Diluted):
Income from Continuing Operations $ 1.30 $ 0.93
Income from Discontinued Operations, Net of
Income Taxes $ 0.13 $ 0.03
Cumulative Effect of Accounting Change, Net $ - $ (0.18)
------------ ------------
Net Income 85% $ 1.44 $ 0.78
============ ============
Average (Diluted) Common Shares -2% 496,300 507,500
NOTES:
Data for 2002 exclude discontinued operations.
(A) Operating results reflect charges of $35 million ($.05 per common share,
after tax) and $23 million ($.03 per common share, after tax) in the third
quarter and second quarter of 2003, respectively, for a business unit in
the Decorative Architectural Products segment; and $7 million ($.01 per
common share, after tax) in the third quarter of 2003 for a business unit
in the Plumbing Products segment.
(B) The first nine months of 2003 includes $71.1 million of income related to
the litigation settlement regarding the Company's subsidiary, Behr Process
Corporation, in the Decorative Architectural Products segment.
(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. A portion of the benefit liability (related to an
investment in the Company's common stock) fluctuated based on the market
price of Company common stock. In the second quarter of 2003, the Company
recognized income relating to this liability as the obligation was marked
to market, based on the Company's stock price. The liability was satisfied
in the third quarter of 2003 with no impact on earnings.
Page 7
MASCO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
September 30 December 31 September 30
ASSETS 2003 2002 2002
----------- ----------- -----------
Current Assets:
Cash and Cash Investments $ 907,710 $ 1,066,570 $ 600,090
Receivables 1,830,360 1,546,360 1,715,130
Inventories 1,025,900 1,055,620 994,580
Prepaid Expenses and Other 262,750 281,220 187,770
----------- ----------- -----------
Total Current Assets 4,026,720 3,949,770 3,497,570
Equity Investments - 67,810 95,810
Property and Equipment, Net 2,295,120 2,315,060 2,120,600
Goodwill, Net 4,505,280 4,297,150 4,138,240
Other Intangible Assets, Net 348,310 353,870 354,830
Other Noncurrent Assets 1,025,150 1,066,770 1,226,940
----------- ----------- -----------
Total Assets $12,200,580 $12,050,430 $11,433,990
=========== =========== ===========
LIABILITIES
Current Liabilities:
Notes Payable $ 500,040 $ 321,180 $ 311,650
Accounts Payable 706,320 541,590 565,030
Accrued Liabilities 1,096,200 1,069,680 1,010,580
----------- ----------- -----------
Total Current Liabilities 2,302,560 1,932,450 1,887,260
Long-Term Debt 3,836,280 4,316,470 3,964,340
Deferred Taxes and Other 657,150 507,670 246,760
----------- ----------- -----------
Total Liabilities 6,795,990 6,756,590 6,098,360
SHAREHOLDERS' EQUITY 5,404,590 5,293,840 5,335,630
----------- ----------- -----------
Total Liabilities and Shareholders' Equity $12,200,580 $12,050,430 $11,433,990
=========== =========== ===========
Page 8
MASCO CORPORATION
GAAP RECONCILIATION OF SALES GROWTH
EXCLUDING EFFECT OF ACQUISITIONS, DIVESTITURES & CURRENCY TRANSLATION
(IN THOUSANDS)
Three Months Ended September 30
------------- --------------
2003 2002
------------- --------------
Consolidated Net Sales, as reported $ 2,917,900 $ 2,446,700
- Acquisitions (272,100) (49,850)
- Divestitures (A) - (840)
------------- --------------
Consolidated Net Sales (excl. acquisitions & divestitures) $ 2,645,800 $ 2,396,010
============= ==============
North American Net Sales, as reported $ 2,369,130 $ 2,042,700
- Acquisitions (171,700) (49,850)
- Divestitures (A) - (840)
------------- --------------
North American Net Sales (excl. acquisitions & divestitures) $ 2,197,430 $ 1,992,010
============= ==============
International Net Sales, as reported $ 548,770 $ 404,000
- Acquisitions (100,400) -
- Divestitures - -
------------- --------------
International Net Sales (excl. acquisitions & divestitures) 448,370 404,000
- Currency Translation (43,610) -
------------- --------------
Int'l Net Sales (excl. acquisitions, divestitures & currency) $ 404,760 $ 404,000
============= ==============
(A) Refers to divestitures completed prior to January 1, 2003. Divestitures
completed subsequent to January 1, 2003 are considered discontinued operations
in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." The sales of discontinued operations are not included in the
Company's net sales, as reported, for any period presented.
The Company presents information comparing results from one period to another
excluding the results of businesses acquired or disposed of in order to assess
the performance of the underlying businesses and to assess to what extent
acquisitions are driving growth.
The Company also presents information comparing results of International
operations from one period to another using constant exchange rates. To present
this information, current period results for foreign entities are converted into
U.S. dollars using the prior period's exchange rates, rather than exchange rates
for the current year. The Company presents this information in order to assess
how the underlying businesses performed before taking into account currency
fluctuations.
Page 9
MASCO CORPORATION
GAAP RECONCILIATION OF OPERATING PROFIT, NET INCOME AND EARNINGS
PER COMMON SHARE
YEAR ENDED DECEMBER 31, 2002
(IN THOUSANDS, EXCEPT PER SHARE DATA)
OPERATING NET
EPS PROFIT INCOME
---------- ----------- -----------
As reported $ 1.15 $ 1,301,600 $ 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 $ 1,432,800 $ 779,700
========== =========== ===========
Page 10
MASCO CORPORATION
GAAP RECONCILIATION OF NET OPERATING PROFIT AND SHAREHOLDERS' EQUITY
(IN THOUSANDS)
LAST TWELVE MONTHS LAST TWELVE MONTHS
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
------------------ ------------------
Net Operating Profit, Excluding Discontinued Operations $ 1,550,660 $ 1,138,570
Amortization of Goodwill - 23,040
------------------ ------------------
Net Operating Profit, Excluding Amortization of Goodwill 1,550,660 1,161,610
(Income) from Planned Disposition of Business (15,630) -
(Income) Charge for Litigation Settlement, Net (90,320) 166,000
------------------ ------------------
Net Operating Profit, As Reconciled $ 1,444,710 $ 1,327,610
================== ==================
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
------------------ ------------------
Shareholders' Equity, As Reported $ 5,404,590 $ 5,335,630
(Income) from Planned Disposition of Business (net of tax) (9,800) -
(Income) Charge for Litigation Settlement, Net (net of tax) (57,200) 104,400
------------------ ------------------
Shareholders' Equity, As Reconciled $ 5,337,590 $ 5,440,030
================== ==================
Page 11
MASCO CORPORATION
OPERATING PROFIT AND MARGINS AS RECONCILED
(DOLLARS IN MILLIONS)
Three Months Ended September 30
-------------------------------
2003 2002
-------------- -------------
Operating Profit - as reported $ 479 16.4% $ 246 10.0%
Charges For United Kingdom Businesses:
Decorative Architectural Products 35 -
Plumbing Products 7 -
Behr Litigation (Income) Charge (58) 166
------ ------
Operating Profit - as Reconciled $ 463 15.9% $ 412 16.8%
====== ======
Page 12
MASCO CORPORATION
DISCONTINUED OPERATIONS - SELECTED FINANCIAL DATA
(IN THOUSANDS)
<Table>
<Caption>
Three Months Ended Months Ended
September 30 September 30
-------------------- --------------------
2003 2002 2003 2002
-------- ------- -------- --------
Net Sales $ 67,970 $71,290 $198,030 $203,770
======== ======= ======== ========
Income Before Income Taxes $ 5,650 $ 9,830 $ 20,910 $ 21,220
Gain on Disposal of Discontinued Operations 90,530 - 90,530 -
Income Taxes (38,920) (3,730) (44,540) (8,080)
-------- ------- -------- --------
Income From Discontinued Operations $ 57,260 $ 6,100 $ 66,900 $ 13,140
======== ======= ======== ========
</Table>
Page 13