.
.
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EXHIBIT 99.b
MASCO CORPORATION - 4TH QUARTER 2003
Page
----
1 Condensed Statements of Income - 2003 & 2002 Quarters
2 Sales by Segment and Geographic Area - 4th Quarter 2003 & 2002
3 Sales by Segment and Geographic Area - Year 2003 & 2002
4 2003 Quarterly Segment Data - Excluding Goodwill Impairment Charge
5 2003 Quarterly Segment Data - Including Goodwill Impairment Charge
6 2002 Quarterly Segment Data
7 Other Income (Expense), Net
8 Consolidated Statements of Income - Three Months Ended December 31, 2003 & 2002
9 Consolidated Statements of Income - Years Ended December 31, 2003 & 2002
10 Consolidated Balance Sheets
GAAP Reconciliations:
11 Sales Growth Excluding Acquisitions, Divestitures & International Currency - QTR
12 Sales Growth Excluding Acquisitions, Divestitures & International Currency - YTD
13 Operating Profit, Net Income and E.P.S. for the Year Ended December 31, 2002
14 Net Operating Profit and Shareholders' Equity
15 Net Operating Profit and Margins
16 Discontinued Operations - Selected Financial Data
MASCO CORPORATION
CONDENSED STATEMENTS OF INCOME
2003 AND 2002 - BY QUARTER
RESTATED FOR DISCONTINUED OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
2003
--------------------------------------------------------
YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1
---- ------ ------ ------ ------
Net Sales:
- North America $ 8,763 $ 2,269 $ 2,369 $ 2,198 $ 1,927
- International 2,173 593 549 526 505
-------- -------- -------- -------- --------
- Consolidated 10,936 2,862 2,918 2,724 2,432
Cost of Sales 7,586 1,982 2,015 1,889 1,700
-------- -------- -------- -------- --------
Gross Profit 3,350 880 903 835 732
(Gross Margin) 30.6% 30.7% 30.9% 30.7% 30.1%
S,G&A Expense (before GCE & Benefit (Income) Expense) 1,728 463 448 428 389
(S,G&A Expense as a % of Sales) 15.8% 16.2% 15.4% 15.7% 16.0%
Operating Profit (before GCE, Litigation (Income) Charge,
Benefit (Income) Expense, Reversal of Disposition Charge
& Goodwill Impairment Charge) 1,622 417 455 407 343
(Operating Margin) 14.8% 14.6% 15.6% 14.9% 14.1%
- North America 1,433 353 431 373 276
(Margin) 16.4% 15.6% 18.2% 17.0% 14.3%
- International 189 64 24 34 67
(Margin) 8.7% 10.8% 4.4% 6.5% 13.3%
General Corporate Expense (GCE) 112 27 28 29 28
S,G&A Expense as a % of Sales
(including GCE and Benefit (Income) Expense) 17.0% 17.1% 16.3% 16.6% 18.0%
(Income) Charge Regarding Litigation Settlement, Net (72) (1) (58) - (13)
Accelerated Benefit (Income) Expense 16 - - (5) 21
Reversal of Charge for the Planned Disposition of Business - - - - -
Goodwill Impairment Charge 142 137 5 - -
-------- -------- -------- -------- --------
Operating Profit per F/S $ 1,424 $ 254 $ 480 $ 383 $ 307
======== ======== ======== ======== ========
Earnings per Common Share (Diluted):
Income From Continuing Operations $ 1.51 $ 0.19 $ 0.53 $ 0.45 $ 0.31
Income From Discontinued Operations and Gain, Net 0.13 - 0.12 0.01 0.01
Cumulative Effect of Accounting Change, Net - - - - -
-------- -------- -------- -------- --------
Net Income $ 1.64 $ 0.19 $ 0.65 $ 0.46 $ 0.32
======== ======== ======== ======== ========
2002
--------------------------------------------------------
YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1
---- ------ ------ ------ ------
Net Sales:
- North America $ 7,686 $ 2,008 $ 2,043 $ 1,904 $ 1,731
- International 1,463 413 404 341 305
-------- -------- -------- -------- --------
- Consolidated 9,149 2,421 2,447 2,245 2,036
Cost of Sales 6,258 1,685 1,667 1,500 1,406
-------- -------- -------- -------- --------
Gross Profit 2,891 736 780 745 630
(Gross Margin) 31.6% 30.4% 31.9% 33.2% 30.9%
S,G&A Expense (before GCE & Benefit (Income) Expense) 1,361 365 344 333 319
(S,G&A Expense as a % of Sales) 14.9% 15.1% 14.1% 14.8% 15.7%
Operating Profit (before GCE, Litigation (Income) Charge,
Benefit (Income) Expense, Reversal of Disposition Charge
& Goodwill Impairment Charge) 1,530 371 436 412 311
(Operating Margin) 16.7% 15.3% 17.8% 18.4% 15.3%
- North America 1,331 312 380 366 273
(Margin) 17.3% 15.5% 18.6% 19.2% 15.8%
- International 199 59 56 46 38
(Margin) 13.6% 14.3% 13.9% 13.5% 12.5%
General Corporate Expense (GCE) 98 25 25 24 24
S,G&A Expense as a % of Sales
(including GCE and Benefit (Income) Expense) 15.9% 16.1% 15.1% 15.9% 16.8%
(Income) Charge Regarding Litigation Settlement, Net 147 (19) 166 - -
Accelerated Benefit (Income) Expense - - - - -
Reversal of Charge for the Planned Disposition of Business (16) (16) - - -
Goodwill Impairment Charge - - - - -
-------- -------- -------- -------- --------
Operating Profit per F/S $ 1,301 $ 381 $ 245 $ 388 $ 287
======== ======== ======== ======== ========
Earnings per Common Share (Diluted):
Income From Continuing Operations $ 1.29 $ 0.36 $ 0.22 $ 0.42 $ 0.31
Income From Discontinued Operations and Gain, Net 0.04 0.01 0.01 0.01 -
Cumulative Effect of Accounting Change, Net (0.18) - - - (0.19)
-------- -------- -------- -------- --------
Net Income $ 1.15 $ 0.37 $ 0.24 $ 0.43 $ 0.12
======== ======== ======== ======== ========
NOTES:
- - Operating results for the fourth quarter of 2003 reflect a non-cash,
pre-tax charge for goodwill impairment of $137 million ($.24 per common
share, after tax).
- - 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 sold 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) and income from nine months
of operations of $21 million ($.03 per common share, after tax).
- - 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 of 2003 and 2002 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), income from continuing operations for the year 2002
was $761 million or $1.48 per common share (see page 13 for the GAAP
reconciliation).
Page 1
MASCO CORPORATION
SALES BY SEGMENT AND GEOGRAPHIC AREA
4TH QUARTER 2003 & 2002
(DOLLARS IN MILLIONS)
4th Quarter 4th Qtr '03
----------------- vs.
2003 2002 4th Qtr '02
---- ---- -----------
Cabinets & Related Products $ 814 $ 722 + 13%
Plumbing Products 683 523 + 31%
Installation & Other Services 642 568 + 13%
Decorative Architectural Products 367 302 + 22%
Other Specialty Products 356 306 + 16%
------ ------
Total $2,862 $2,421 + 18%
====== ======
North America $2,269 $2,008 + 13%
International, principally Europe 593 413 + 44%
------ ------
Total, as above $2,862 $2,421 + 18%
====== ======
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
13 percent, North American net sales increased 12 percent and International
net sales increased 18 percent. International sales in local currencies
increased two percent compared with the fourth quarter of 2002 (see page 11
for the GAAP reconciliation).
Page 2
MASCO CORPORATION
SALES BY SEGMENT AND GEOGRAPHIC AREA
YEAR 2003 & 2002
(DOLLARS IN MILLIONS)
Year 2003
------------------- vs.
2003 2002 2002
---- ---- ----
Cabinets & Related Products $ 3,058 $ 2,798 + 9%
Plumbing Products 2,645 2,031 + 30%
Installation & Other Services 2,411 1,845 + 31%
Decorative Architectural Products 1,522 1,358 + 12%
Other Specialty Products 1,300 1,117 + 16%
------- -------
Total $10,936 $ 9,149 + 20%
======= =======
North America $ 8,763 $ 7,686 + 14%
International, principally Europe 2,173 1,463 + 49%
------- -------
Total, as above $10,936 $ 9,149 + 20%
======= =======
NOTES:
- - Net sales 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 9 percent, North American net sales increased 8 percent and
International net sales increased 17 percent. International sales in
local currencies were flat compared with 2002 (see page 12 for the GAAP
reconciliation).
Page 3
MASCO CORPORATION
QUARTERLY SEGMENT DATA - 2003
EXCLUDING GOODWILL IMPAIRMENT CHARGE
(DOLLARS IN MILLIONS)
Year Qtr. 4 Qtr. 3 Qtr. 2 Qtr. 1
---- ------ ------ ------ ------
Net Sales:
- Cabinets and Related Products $ 3,058 $ 814 $ 802 $ 743 $ 699
- Plumbing Products 2,645 683 683 666 613
- Installation and Other Services 2,411 642 642 585 542
- Decorative Architectural Products 1,522 367 441 413 301
- Other Specialty Products 1,300 356 350 317 277
-------- -------- -------- -------- --------
- TOTAL 10,936 2,862 2,918 2,724 2,432
======== ======== ======== ======== ========
- North America 8,763 2,269 2,369 2,198 1,927
- International, principally Europe 2,173 593 549 526 505
-------- -------- -------- -------- --------
- TOTAL, AS ABOVE 10,936 2,862 2,918 2,724 2,432
======== ======== ======== ======== ========
Operating Profit:
- Cabinets and Related Products 447 128 122 113 84
- Plumbing Products 353 81 95 93 84
- Installation and Other Services 368 93 110 88 77
- Decorative Architectural Products 219 49 58 57 55
- Other Specialty Products 235 66 70 56 43
-------- -------- -------- -------- --------
- TOTAL 1,622 417 455 407 343
======== ======== ======== ======== ========
- North America 1,433 353 431 373 276
- International, principally Europe 189 64 24 34 67
-------- -------- -------- -------- --------
- TOTAL, AS ABOVE 1,622 417 455 407 343
======== ======== ======== ======== ========
General Corporate Expense (GCE) 112 27 28 29 28
(Income) Related to Litigation Settlement (72) (1) (58) - (13)
Accelerated Benefit (Income) Expense, Net 16 - - (5) 21
-------- -------- -------- -------- --------
Operating Profit (after GCE and Adjustments) 1,566 391 485 383 307
Other Income (Expense), Net (208) (57) (60) (35) (56)
-------- -------- -------- -------- --------
Income from Continuing Operations Before
Income Taxes and Minority Interest $ 1,358 $ 334 $ 425 $ 348 $ 251
======== ======== ======== ======== ========
Margins:
- Cabinets and Related Products 14.6% 15.7% 15.2% 15.2% 12.0%
- Plumbing Products 13.3% 11.9% 13.9% 14.0% 13.7%
- Installation and Other Services 15.3% 14.5% 17.1% 15.0% 14.2%
- Decorative Architectural Products 14.4% 13.4% 13.2% 13.8% 18.3%
- Other Specialty Products 18.1% 18.5% 20.0% 17.7% 15.5%
- TOTAL 14.8% 14.6% 15.6% 14.9% 14.1%
- North America 16.4% 15.6% 18.2% 17.0% 14.3%
- International, principally Europe 8.7% 10.8% 4.4% 6.5% 13.3%
- TOTAL, AS ABOVE 14.8% 14.6% 15.6% 14.9% 14.1%
NOTES:
- - Data for all quarters of 2003 exclude discontinued operations.
- - Operating results for the fourth quarter of 2003 exclude a non-cash,
pre-tax charge for goodwill impairment of $137 million ($.24 per common
share, after tax). The charge related to certain of the Company's European
business units and was allocated among the segments as follows, in
millions: Cabinets - $51; Plumbing Products - $36; Decorative Architectural
- $19; and Other Specialty - $31.
- - Operating results reflect charges of $35 million ($.05 per common share,
after tax), including $5 million for impairment of goodwill, 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.
- - Operating profit and margins by segment and geographic area are before
general corporate expense and exclude (income) related to litigation
settlement, net.
Page 4
MASCO CORPORATION
QUARTERLY SEGMENT DATA - 2003
INCLUDING GOODWILL IMPAIRMENT CHARGE
(DOLLARS IN MILLIONS)
Year Qtr. 4 Qtr. 3 Qtr. 2 Qtr. 1
---- ------ ------ ------ ------
Net Sales:
- Cabinets and Related Products $ 3,058 $ 814 $ 802 $ 743 $ 699
- Plumbing Products 2,645 683 683 666 613
- Installation and Other Services 2,411 642 642 585 542
- Decorative Architectural Products 1,522 367 441 413 301
- Other Specialty Products 1,300 356 350 317 277
-------- -------- -------- -------- --------
- TOTAL 10,936 2,862 2,918 2,724 2,432
======== ======== ======== ======== ========
- North America 8,763 2,269 2,369 2,198 1,927
- International, principally Europe 2,173 593 549 526 505
-------- -------- -------- -------- --------
- TOTAL, AS ABOVE 10,936 2,862 2,918 2,724 2,432
======== ======== ======== ======== ========
Operating Profit:
- Cabinets and Related Products 396 77 122 113 84
- Plumbing Products 317 45 95 93 84
- Installation and Other Services 368 93 110 88 77
- Decorative Architectural Products 195 30 53 57 55
- Other Specialty Products 204 35 70 56 43
-------- -------- -------- -------- --------
- TOTAL 1,480 280 450 407 343
======== ======== ======== ======== ========
- North America 1,433 353 431 373 276
- International, principally Europe 47 (73) 19 34 67
-------- -------- -------- -------- --------
- TOTAL, AS ABOVE 1,480 280 450 407 343
======== ======== ======== ======== ========
General Corporate Expense (GCE) 112 27 28 29 28
(Income) Related to Litigation Settlement (72) (1) (58) - (13)
Accelerated Benefit (Income) Expense, Net 16 - - (5) 21
-------- -------- -------- -------- --------
Operating Profit (after GCE and Adjustments) 1,424 254 480 383 307
Other Income (Expense), Net (208) (57) (60) (35) (56)
-------- -------- -------- -------- --------
Income from Continuing Operations Before
Income Taxes and Minority Interest $ 1,216 $ 197 $ 420 $ 348 $ 251
======== ======== ======== ======== ========
Margins:
- Cabinets and Related Products 12.9% 9.5% 15.2% 15.2% 12.0%
- Plumbing Products 12.0% 6.6% 13.9% 14.0% 13.7%
- Installation and Other Services 15.3% 14.5% 17.1% 15.0% 14.2%
- Decorative Architectural Products 12.8% 8.2% 12.0% 13.8% 18.3%
- Other Specialty Products 15.7% 9.8% 20.0% 17.7% 15.5%
- TOTAL 13.5% 9.8% 15.4% 14.9% 14.1%
- North America 16.4% 15.6% 18.2% 17.0% 14.3%
- International, principally Europe 2.2% -12.3% 3.5% 6.5% 13.3%
- TOTAL, AS ABOVE 13.5% 9.8% 15.4% 14.9% 14.1%
NOTES:
- - Data for all quarters of 2003 exclude discontinued operations.
- - Operating results for the fourth quarter of 2003 reflect a non-cash,
pre-tax charge for goodwill impairment of $137 million ($.24 per common
share, after tax). The charge related to certain of the Company's European
business units and was allocated among the segments as follows, in
millions: Cabinets - $51; Plumbing Products - $36; Decorative Architectural
- $19; and Other Specialty - $31.
- - Operating results reflect charges of $35 million ($.05 per common share,
after tax), including $5 million for impairment of goodwill, 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.
- - Operating profit and margins by segment and geographic area are before
general corporate expense and exclude (income) related to litigation
settlement, net.
Page 5
MASCO CORPORATION
QUARTERLY SEGMENT DATA - 2002
(DOLLARS 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, Net 1,301 381 245 388 287
Other Income (Expense), Net (300) (90) (76) (71) (63)
------- ------- ------- ------- -------
Income from Continuing Operations Before Income
Taxes and Minority Interest $ 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 and margins by segment and geographic area are before
general corporate expense and exclude the 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 $16 million of income related to the reversal of
a charge for the 2000 planned disposition of a business. Excluding such
income, operating profit margins in this segment were 14.5% and 15.7% for
the quarter and year ended December 31, 2002, respectively.
Page 6
MASCO CORPORATION
OTHER INCOME (EXPENSE), NET
2003 AND 2002 QUARTERS
(DOLLARS IN MILLIONS)
2003
---------------------------------------------------
YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1
---- ------ ------ ------ ------
Interest Expense $(262.0) $(60.2) $ (66.8) $ (67.4) $ (67.6)
Equity Earnings, Net 0.5 - - - 0.5
Income from Cash and Cash Investments 8.7 2.0 1.8 2.4 2.5
Other Interest Income 8.0 3.0 2.1 1.1 1.8
Income (Loss) from Financial Investments 64.8 13.3 18.9 19.1 13.5
Loss on Early Retirement of Debt (6.9) (4.2) (2.7) - -
Gain from Sale of Equity Investment 4.8 - - 4.8 -
Impairment Charge for Long-Term Investments (19.2) (9.9) (9.3) - -
Other, Net (6.4) (1.0) (4.3) 5.4 (6.5)
------- ------ ------- ------- -------
Total Other Income (Expense), Net $(207.7) $(57.0) $ (60.3) $ (34.6) $ (55.8)
======= ====== ======= ======= =======
2002
---------------------------------------------------
YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1
------- ------ ------- ------- -------
Interest Expense $(237.0) $(66.6) $ (61.1) $ (54.2) $ (55.1)
Equity Earnings, Net 14.3 1.3 5.7 5.4 1.9
Income from Cash and Cash Investments 7.8 3.9 2.1 1.1 0.7
Other Interest Income 6.0 2.7 1.8 0.6 0.9
Income (Loss) from Financial Investments (35.5) (4.1) (8.4) (15.4) (7.6)
Loss on Early Retirement of Debt - - - - -
Gain from Sale of Equity Investment - - - - -
Impairment Charge for Long-Term Investments (24.0) (24.0) - - -
Other, Net (31.7) (2.9) (16.4) (8.4) (4.0)
------- ------ ------- ------- -------
Total Other Income (Expense), Net $(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 $23 million of net
realized gains related to the sale of marketable securities for the twelve
months ended December 31, 2003.
Page 7
MASCO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31, 2003 AND 2002
(IN MILLIONS, EXCEPT PER SHARE DATA)
Three Months Ended As a Percent of Sales
December 31 Three Months Ended December 31
% ------------------ ------------------------------
Line Change 2003 2002 2003 2002
- ---- ------ ---- ---- ---- ----
1 Net Sales 18% $ 2,862 $ 2,421 100.0% 100.0%
2 Cost of Sales 18% 1,982 1,685 69.3% 69.6%
------- ------- ----- -----
3 Gross Profit 20% 880 736 30.7% 30.4%
======= ======= ===== =====
Operating Profit:
4 - Before GCE, Litigation (Income), Income from Planned
Disposition and Goodwill Impairment Charge (3-7) 12% 417 371 14.6% 15.3%
5 - After GCE, Litigation (Income), Income from Planned
Disposition and Goodwill Impairment Charge (3-8-9-10-11) -33% 254 381 8.9% 15.7%
S,G&A Expense:
6 - General Corporate Expense (GCE) 8% 27 25 0.9% 1.0%
7 - All Other 27% 463 365 16.2% 15.1%
------- ------- ----- -----
8 - Total S,G&A Expense 26% 490 390 17.1% 16.1%
======= ======= ===== =====
9 (Income) for Litigation Settlement (1) (19) 0.0% -0.8%
10 (Income) from Planned Disposition of Business (C) - (16) 0.0% -0.7%
11 Goodwill Impairment Charge (A) 137 - 4.8% 0.0%
12 Other Income (Expense), Net -37% (57) (90) -2.0% -3.7%
13 Income from Continuing Operations Before Income Taxes
and Minority Interest (5+12) -32% 197 291 6.9% 12.0%
14 Income Taxes -2% 99 101 3.5% 4.2%
(Tax Rate) 50.3% 34.7%
------- ------- ----- -----
15 Income from Continuing Operations Before Minority Interest -48% 98 190 3.4% 7.8%
16 Minority Interest (B) (5) - -0.2% 0.0%
------- ------- ----- -----
17 Income from Continuing Operations -51% 93 190 3.2% 7.8%
18 (Expense) Income from Discontinued Operations, Net of Income Taxes (1) 5 0.0% 0.2%
------- ------- ----- -----
Net Income -53% $ 92 $ 195 3.2% 8.1%
======= ======= ===== =====
Earnings Per Common Share (Diluted):
Income from Continuing Operations $ 0.19 $ 0.36
(Expense) Income from Discontinued Operations, Net of Income
Taxes (0.00) 0.01
------- -------
Net Income -48% $ 0.19 $ 0.37
======= =======
Average (Diluted) Common Shares -9% 481 529
NOTES:
Data for 2002 include the restatement for discontinued operations.
(A) The Company completed the goodwill impairment testing in the fourth quarter
of 2003 and recorded a non-cash, pre-tax charge of $137 million ($113
million or $.24 per common share, after tax) related to certain European
business units.
(B) The Company owns 64 percent of Hansgrohe AG; this line is the reduction of
income to reflect the minority interest.
(C) In the fourth quarter of 2002, the Company recognized $16 million of income
relating to a plan developed in 2000 for the disposition of businesses.
Page 8
MASCO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2003 AND 2002
(IN MILLIONS, EXCEPT PER SHARE DATA)
Twelve Months Ended As a Percent of Sales
December 31 Twelve Months Ended December 31
% ------------------- -------------------------------
Line Change 2003 2002 2003 2002
- ---- ------ ---- ---- ---- ----
1 Net Sales 20% $ 10,936 $ 9,149 100.0% 100.0%
2 Cost of Sales 21% 7,586 6,258 69.4% 68.4%
-------- ------- ----- -----
3 Gross Profit 16% 3,350 2,891 30.6% 31.6%
-------- ------- ----- -----
Operating Profit (B):
4 - Before GCE, Benefit Expense, Net, Litigation (Income)
Charge, Income from Planned Disposition and Goodwill
Impairment Charge (3-8) 6% 1,622 1,530 14.8% 16.7%
5 - After GCE, Benefit Expense, Net, Litigation (Income)
Charge, Income from Planned Disposition and Goodwill
Impairment Charge (3-9-10-11-12) 9% 1,424 1,301 13.0% 14.2%
S,G&A Expense:
6 - General Corporate Expense (GCE) 14% 112 98 1.0% 1.1%
7 - Accelerated Benefit Expense, Net (E) 16 - 0.1% 0.0%
8 - All Other 27% 1,728 1,361 15.8% 14.9%
-------- ------- ----- -----
9 - Total S,G&A Expense 27% 1,856 1,459 17.0% 15.9%
-------- ------- ----- -----
10 (Income) Charge for Litigation Settlement, Net (C) (72) 147 -0.7% 1.6%
11 (Income) from Planned Disposition of Business (F) - (16) 0.0% 0.2%
12 Goodwill Impairment Charge (A) 142 - 1.3% 0.0%
13 Other Income (Expense), Net -31% (208) (300) -1.9% -3.3%
14 Income from Continuing Operations Before Income Taxes and
Minority Interest (5+13) 21% 1,216 1,001 11.1% 10.9%
15 Income Taxes 37% 463 337 4.2% 3.7%
(Tax Rate) 38.1% 33.7%
-------- ------- ----- -----
16 Income from Continuing Operations Before Minority Int 13% 753 664 6.9% 7.3%
17 Minority Interest (D) (13) - -0.1% 0.0%
-------- ------- ----- -----
18 Income from Continuing Operations 11% 740 664 6.8% 7.3%
19 Income from Discontinued Operations and Gain, Net of
Income Taxes 66 18 0.6% 0.2%
20 Cumulative Effect of Accounting Change, Net - (92) 0.0% -1.0%
-------- ------- ----- -----
Net Income 37% $ 806 $ 590 7.4% 6.4%
======== ======= ===== =====
Earnings Per Common Share (Diluted):
Income from Continuing Operations $ 1.51 $ 1.29
Income from Discontinued Operation and Gain, Net of
Income Taxes 0.13 0.04
Cumulative Effect of Accounting Change, Net - (0.18)
-------- -------
Net Income 43% $ 1.64 $ 1.15
======== =======
Average (Diluted) Common Shares -5% 491 514
NOTES:
Data for 2003 and 2002 include the restatement for discontinued operations.
(A) Operating results for 2003 reflect a non-cash, pre-tax charge for
goodwill impairment of $142 million ($118 million or $.24 per common
share, after tax), including $5 million recorded in the third quarter
of 2003.
(B) Operating results for 2003 reflect charges of $50 million ($.07 per
common share, after tax) for a business unit in the Decorative
Architectural Products segment; and $4 million ($.01 per common share,
after tax) for a business unit in the Plumbing Products segment.
(C) Results for 2003 and 2002 include $72 million and $(147) million of
income (expense), respectively, related to the litigation settlement
regarding the Company's subsidiary, Behr Process Corporation, in the
Decorative Architectural Products segment.
(D) The Company owns 64 percent of Hansgrohe AG; this line is the reduction
of income to reflect the minority interest.
(E) 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.
(F) In the fourth quarter of 2002, the Company recognized $16 million of
income relating to a plan developed in 2000 for the disposition of
businesses.
Page 9
MASCO CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
December 31, December 31,
2003 2002
------------ ------------
ASSETS
Current Assets:
Cash and Cash Investments $ 795 $ 1,067
Receivables 1,674 1,546
Inventories 1,019 1,056
Prepaid Expenses and Other 316 281
------------ ------------
Total Current Assets 3,804 3,950
Property and Equipment, Net 2,339 2,315
Goodwill 4,491 4,297
Other Intangible Assets, Net 344 354
Other Assets 1,171 1,134
------------ ------------
Total Assets $ 12,149 $ 12,050
============ ============
LIABILITIES
Current Liabilities:
Notes Payable $ 334 $ 321
Accounts Payable 715 541
Accrued Liabilities 1,050 1,070
------------ ------------
Total Current Liabilities 2,099 1,932
Long-Term Debt 3,848 4,316
Deferred Income Taxes and Other 746 508
------------ ------------
Total Liabilities 6,693 6,756
SHAREHOLDERS' EQUITY 5,456 5,294
------------ ------------
Total Liabilities and Shareholders' Equity $ 12,149 $ 12,050
============ ============
Page 10
MASCO CORPORATION
GAAP RECONCILIATION OF SALES GROWTH
EXCLUDING EFFECT OF ACQUISITIONS, DIVESTITURES & CURRENCY TRANSLATION
(DOLLARS IN MILLIONS)
Three Months Ended December 31
------------------------------
2003 2002
---- ----
Consolidated Net Sales, as reported $ 2,862 $ 2,421
- Acquisitions (130) -
- Divestitures (A) - -
------- -------
Consolidated Net Sales (excl. acquisitions & divestitures) $ 2,732 $ 2,421
======= =======
North American Net Sales, as reported $ 2,269 $ 2,008
- Acquisitions (25) -
- Divestitures (A) - -
------- -------
North American Net Sales (excl. acquisitions & divestitures) $ 2,244 $ 2,008
======= =======
International Net Sales, as reported $ 593 $ 413
- Acquisitions (105) -
- Divestitures (A) - -
------- -------
International Net Sales (excl. acquisitions & divestitures) 488 413
- Currency Translation (65) -
------- -------
International Net Sales (excl. acquisitions, divestitures & currency) $ 423 $ 413
======= =======
NOTES:
(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 period. The Company presents this information in order to assess
how the underlying businesses performed before taking into account currency
fluctuations.
Page 11
MASCO CORPORATION
GAAP RECONCILIATION OF SALES GROWTH
EXCLUDING EFFECT OF ACQUISITIONS, DIVESTITURES & CURRENCY TRANSLATION
(DOLLARS IN MILLIONS)
Twelve Months Ended December 31
-------------------------------
2003 2002
---- ----
Consolidated Net Sales, as reported $10,936 $ 9,149
- Acquisitions (1,334) (320)
- Divestitures (A) - (13)
------- -------
Consolidated Net Sales (excl. acquisitions & divestitures) $ 9,602 $ 8,816
======= =======
North American Net Sales, as reported $ 8,763 $ 7,686
- Acquisitions (743) (213)
- Divestitures (A) - (13)
------- -------
North American Net Sales (excl. acquisitions & divestitures) $ 8,020 $ 7,460
======= =======
International Net Sales, as reported $ 2,173 $ 1,463
- Acquisitions (591) (107)
- Divestitures (A) - -
------- -------
International Net Sales (excl. acquisitions & divestitures) 1,582 1,356
- Currency Translation (228) -
------- -------
International Net Sales (excl. acquisitions, divestitures & currency) $ 1,354 $ 1,356
======= =======
NOTES:
(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 12
MASCO CORPORATION
GAAP RECONCILIATION OF OPERATING PROFIT, NET INCOME AND EARNINGS PER
COMMON SHARE
YEAR ENDED DECEMBER 31, 2002
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
OPERATING NET
EPS PROFIT INCOME
------ --------- --------
As Reported, Excluding Discontinued Operations $ 1.11 $ 1,301 $ 572
Litigation Charge, Net 0.18 147 92
Goodwill Impairment Charge 0.18 92
(Income) from Planned Disposition of Business (0.02) (16) (10)
Impairment Charge for Non-Operating Assets 0.03 15
------ --------- ------
As Reconciled $ 1.48 $ 1,432 $ 761
====== ========= ======
The Company believes that certain non-GAAP performance measures and ratios, used
in managing the business, may provide users of this financial information with
additional meaningful comparisons between current results and results in prior
periods. Non-GAAP financial measures and ratios should be viewed in addition to,
and not as an alternative for, the Company's reported results.
Page 13
MASCO CORPORATION
GAAP RECONCILIATION OF NET OPERATING PROFIT AND SHAREHOLDERS' EQUITY
(DOLLARS IN MILLIONS)
YEAR ENDED
DECEMBER 31
------------------
2003 2002
---- ----
Net Operating Profit, Excluding Discontinued Operations $ 1,424 $ 1,301
Goodwill Impairment Charge 142 -
European Charges 54 -
Accelerated Benefit Expense 16 -
Income from Planned Disposition of a Business - (16)
Behr Litigation (Income) Charge, Net (72) 147
------- -------
Net Operating Profit, As Reconciled $ 1,564 $ 1,432
======= =======
YEAR ENDED
DECEMBER 31
------------------
2003 2002
---- ----
Shareholders' Equity, As Reported $ 5,456 $ 5,294
Goodwill Impairment Charge (after tax) 118 92
European Charges (after tax) 38 -
Accelerated Benefit Expense (after tax) 10 -
Income from Planned Disposition of a Business (after tax) - (10)
Behr Litigation (Income) Charge, Net (after tax) (45) 92
------- -------
Shareholders' Equity, As Reconciled $ 5,577 $ 5,468
======= =======
The Company believes that certain non-GAAP performance measures and ratios, used
in managing the business, may provide users of this financial information with
additional meaningful comparisons between current results and results in prior
periods. Non-GAAP financial measures and ratios should be viewed in addition to,
and not as an alternative for, the Company's reported results.
Page 14
MASCO CORPORATION
GAAP RECONCILIATION OF NET OPERATING PROFIT AND MARGINS
(DOLLARS IN MILLIONS)
TWELVE MONTHS
ENDED DECEMBER 31
------------------------------------------
2003 2002
------------------ ------------------
Net Operating Profit, Excluding Discontinued Operations $ 1,424 13.0% $ 1,301 14.2%
Goodwill Impairment Charge 142 -
European Charges 54 -
Accelerated Benefit Expense 16 -
Income from Planned Disposition of a Business - (16)
Behr Litigation (Income) Charge, Net (72) 147
------- -------
Net Operating Profit, As Reconciled $ 1,564 14.3% $ 1,432 15.7%
======= =======
THREE MONTHS
ENDED DECEMBER 31
------------------------------------------
2003 2002
------------------ ------------------
Net Operating Profit, Excluding Discontinued Operations $ 254 8.9% $ 381 15.7%
Goodwill Impairment Charge 137 -
Income from Planned Disposition of a Business - (16)
Behr Litigation (Income) (1) (19)
------- -------
Net Operating Profit, As Reconciled $ 390 13.6% $ 346 14.3%
======= =======
The Company believes that certain non-GAAP performance measures and ratios, used
in managing the business, may provide users of this financial information with
additional meaningful comparisons between current results and results in prior
periods. Non-GAAP financial measures and ratios should be viewed in addition to,
and not as an alternative for, the Company's reported results.
Page 15
MASCO CORPORATION
DISCONTINUED OPERATIONS - SELECTED FINANCIAL DATA
(DOLLARS IN MILLIONS)
Three Months Ended Twelve Months Ended
December 31 December 31
--------------- ---------------
2003 2002 2003 2002
---- ---- ---- ----
Net Sales $ - $ 67 $198 $271
==== ==== ==== ====
Income Before Income Taxes $ - $ 8 $ 21 $ 29
(Expense) Gain on Disposal of Discontinued Operations (1) - 89 -
Income Taxes - (3) (44) (11)
---- ---- ---- ----
(Expense) Income and Gain From Discontinued Operations, Net $ (1) $ 5 $ 66 $ 18
==== ==== ==== ====
Data for 2003 represent results through the first nine months for businesses
divested at September 30, 2003.
Page 16