EXHIBIT 99
FOR IMMEDIATE RELEASE Contact: Samuel Cypert
313-792-6646
MASCO CORPORATION REPORTS RECORD FIRST QUARTER
AND INCREASES EARNINGS GUIDANCE FOR 2004
Taylor, Michigan (May 3, 2004) - Masco Corporation (NYSE: MAS) today
reported net sales from continuing operations for the first quarter ended March
31, 2004 increased 19 percent to a first quarter record $2.8 billion compared
with $2.4 billion for the first quarter of 2003. Income from continuing
operations for the first quarter of 2004 was $241 million compared with $158
million in the first quarter of 2003. Earnings from continuing operations
increased to a first quarter record $.52 per common share compared with $.30 per
common share for the 2003 first quarter.
Results for the first quarter 2004 and 2003 include income related to
adjustments of the Behr litigation accrual of $.03 and $.02 per common share,
after tax, respectively, and incremental income from financial investments of
$.03 per common share, after tax compared with first quarter 2003.
The Company previously announced the planned disposition of several
European businesses that are not core to the Company's long-term growth
strategy. These businesses had combined 2003 net sales in excess of $350 million
and the Company expects net proceeds from the dispositions to exceed $300
million. The dispositions are expected to be completed within the next twelve
months. First quarter 2004 results include an after-tax charge aggregating $76
million ($.16 per common share) to reflect those businesses that are expected to
be divested at a loss, and after-tax income from their operations of
approximately $4 million, both of which are included in discontinued operations.
Any gains resulting from the disposition of individual businesses, which are
expected later this year, will be recognized as such transactions are completed
and are expected to substantially offset the first quarter 2004 charge.
Including these discontinued operations and the anticipated loss on the
disposition of certain of these businesses, net income for the quarter increased
to $168 million compared with $166 million for the 2003 first quarter; earnings
increased to $.36 per common share compared with $.32 per common share for the
2003 first quarter.
The Company's strong first quarter performance, including 19 percent
organic sales growth, benefited from market share gains, new products and
positive economic conditions impacting new home construction and home
improvement markets. First quarter 2003 operating performance was negatively
impacted by adverse weather conditions which reduced demand for certain of the
Company's products.
The Company continues to experience better than expected sales
performance thus far in 2004, and, based on current business trends, believes
that it will achieve record sales and earnings for 2004 with full-year
earnings from continuing operations in a range of $2.00 to $2.10 per common
share. The new earnings guidance represents an increase from the
previous guidance of $1.80 to $1.90 per common share. This year's new earnings
guidance includes the benefit of recent common share repurchases and reflects
increases in certain operating expenses, including such items as energy,
insurance and certain material and freight costs, and excludes first quarter
income related to the Behr litigation and the charge for businesses to be
divested. The earnings projection does not reflect any potential additional
income related to the Behr litigation for the remainder of 2004, as such amounts
cannot be predicted.
Based on current business trends, the Company anticipates that second
quarter 2004 earnings from continuing operations will be in a range of $.50 to
$.53 per common share compared with second quarter 2003 earnings of $.44 per
common share.
Headquartered in Taylor, Michigan, Masco Corporation is one of the
world's leading manufacturers of home improvement and building products as well
as a leading provider of services that include the installation of insulation
and other building products.
A conference call regarding items contained in this release is
scheduled for Monday, May 3, 2004 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 (913) 981-4910 (confirmation #423996). 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 (718) 457-0820 (replay access code #423996)
approximately two hours after the end of the call and will continue through May
10, 2004.
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. For press releases, click on "Investor Relations" and
then on "Link to News Center."
Statements contained herein may include certain forward-looking
statements regarding Masco's future sales, earnings growth potential and other
developments. Actual results may vary materially because of external factors
such as interest rate fluctuations, changes in consumer spending and other
factors over which management has no control. The Company believes that certain
non-GAAP performance measures and ratios, used in managing the business, may
provide users of this financial information with additional meaningful
comparisons between current results and results in prior periods. Non-GAAP
performance measures and ratios should be viewed in addition to, and not as an
alternative for, the Company's reported results under accounting principles
generally accepted in the United States. Additional information about our
products, markets and conditions, which could affect 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
FIRST QUARTER SALES AND EARNINGS
Amounts are in millions, except per share data.
Three Months Ended
March 31,
-------------------
2004 2003
---- ----
Net Sales $ 2,806 $ 2,352
Cost of Sales 1,955 1,644
------- -------
Gross Profit 851 708
Selling, General and Administrative Expenses 485 420
(Income) Regarding Litigation Settlement (21) (13)
------- -------
Operating Profit 387 301
Other Income (Expense), Net (1) (54)
------- -------
Income from Continuing Operations before Income
Taxes and Minority Interest 386 247
Income Taxes 140 85
------- -------
Income from Continuing Operations before
Minority Interest 246 162
Minority Interest 5 4
------- -------
Income from Continuing Operations 241 158
(Loss) Income from Discontinued Operations, After Income Taxes (73) 8
------- -------
Net Income $ 168 $ 166
======= =======
Earnings per Common Share (Diluted):
Income from Continuing Operations $ 0.52 $ 0.30
(Loss) Income from Discontinued Operations, After Income Taxes (0.16) 0.01
------- -------
Net Income $ 0.36 $ 0.32
======= =======
Average Diluted Common Shares Outstanding 468 520
======= =======
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," the Company has accounted for the 2003 dispositions (Baldwin
Hardware, Weiser Lock and The Marvel Group) and the 2004 planned dispositions of
certain European businesses as discontinued operations.
FIRST QUARTER 2004
- - Net sales from continuing operations for the quarter increased 19 percent
with North American sales increasing 18 percent and International sales
increasing 26 percent. In local currencies, International sales increased
nine percent compared with the first quarter of 2003. The Company's 19
percent organic sales growth benefitted from market share gains, new
products and positive economic conditions impacting new home construction
and home improvement markets.
- - All of the Company's business segments, including its European operations,
experienced strong sales growth. Sales of assembled cabinets, paints and
stains, installation services, windows and faucets were particularly
strong.
- - Income from continuing operations for the quarter was $241 million compared
with $158 million for the first quarter of 2003.
- - Earnings from continuing operations increased to a first quarter record of
$.52 per common share (exceeding the Company's recently increased guidance
of $.42 to $.44 per common share) compared with $.30 per common share for
the 2003 first quarter.
- - First quarter 2004 and 2003 results include pre-tax income of $21 million
($.03 per common share, after tax) and $13 million ($.02 per common share,
after tax), respectively, related to adjustments of the Behr litigation
accrual. Results for first quarter 2004 also include $36 million of pre-tax
income ($.05 per common share, after tax) from financial investments
compared with $14 million ($.02 per common share, after tax) in the 2003
first quarter.
- - The Company previously announced the planned disposition of several
European businesses that are not core to the Company's long-term growth
strategy. These businesses had combined 2003 net sales in excess of $350
million and the Company expects net proceeds from the dispositions to
exceed $300 million.
1
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FIRST QUARTER 2004 (CONTINUED)
The dispositions are expected to be completed within the next twelve
months. First quarter 2004 results include an after-tax charge aggregating
$76 million ($.16 per common share) to reflect those businesses that are
expected to be divested at a loss, and after-tax income from their
operations of approximately $4 million, both of which are included in
discontinued operations. Any gains resulting from the disposition of
individual businesses, which are expected later this year, will be
recognized as such transactions are completed and are expected to
substantially offset the first quarter 2004 charge. Including these
discontinued operations and the anticipated loss on the disposition of
certain of these businesses, net income for the quarter increased to $168
million compared with $166 million for the 2003 first quarter; earnings
increased to $.36 per common share compared with $.32 per common share for
the 2003 first quarter.
- - 2003 results were negatively affected by adverse weather conditions
(particularly impacting new residential construction and retail sales in
certain parts of the country) that reduced first quarter 2003 results.
First quarter 2003 earnings were also adversely affected by the expense
resulting from the accelerated vesting of deferred compensation due to
the unexpected passing of Masco's President, which reduced earnings by
approximately $.03 per common share, after tax.
- - Key retailer sales in the quarter, from continuing operations, increased 20
percent compared with a five percent increase in the first quarter of
2003. Combined sales to Home Depot, Lowe's and Wal-Mart in the first
quarter of 2004 increased 21 percent compared with a four percent increase
in the 2003 first quarter.
- - Sales by segment in the 2004 first quarter versus the 2003 first quarter
were:
- Cabinets and Related Products sales increased 18 percent;
- Plumbing Products sales increased 19 percent;
- Installation and Other Services sales increased 16 percent;
- Decorative Architectural Products sales increased 28 percent; and
- Other Specialty Products sales increased 20 percent.
2
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FIRST QUARTER 2004 (CONTINUED)
- - Gross margins were 30.3 percent in the 2004 first quarter compared with
30.1 percent in the first quarter of 2003.
- - Operating profit margins as reported were 13.8 percent in the first quarter
of 2004 compared with 12.8 percent in the first quarter of 2003. Excluding
the income regarding the litigation settlement of $21 million and $13
million in 2004 and 2003, respectively, and the accelerated benefit expense
of $21 million in 2003, operating profit margins were 13.0 percent for the
first quarter of 2004 compared with 13.1 percent for the first quarter of
2003.
- - Results in the first quarter of 2004 include the effect of previously
communicated increases in certain operating expenses, including certain
materials, energy, freight, insurance, promotional and other costs, which
partially offset the positive impact of higher sales volume.
- - SG&A expenses as a percent of sales, including general corporate expense,
were 17.3 percent for the first quarter 2004 compared with 17.9 percent in
the 2003 first quarter.
- - General corporate expense was 1.3 percent of sales in the first quarter of
2004 compared with 1.2 percent in the comparable period of 2003. The
increase is primarily attributable to costs and expenses associated with
complying with the new requirements of the Sarbanes-Oxley legislation.
- - Inventory days were 49 days at March 31, 2004 compared with 58 days at
March 31, 2003.
- - Accounts receivable days at the end of the first quarter were 53 days
compared with 55 days a year ago.
- - Accounts payable days at the end of the first quarter improved to 36 days
from 34 days a year ago, as the Company continues to negotiate more
favorable supplier terms.
- - Working capital at March 31, 2004 (defined as accounts receivable and
inventories less accounts payable) improved to 18.5 percent of the last
twelve months of sales from 21.9 percent a year earlier.
3
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FIRST QUARTER 2004 (CONCLUDED)
- - The Company's tax rate was 36.3 percent for the first quarter of 2004
compared with 34.4 percent for the comparable period of the prior year. The
increase in the tax rate was due principally to a change in the mix of
foreign earnings to countries with higher tax rates and an increase in
domestic earnings (relative to total earnings), which are taxed at a higher
rate than earnings from the Company's foreign operations. The Company
anticipates that its tax rate for 2004 will approximate 36 percent.
- - At the end of the quarter, the Company had a strong balance sheet, with
$1.2 billion in cash and marketable securities and $2.0 billion in unused
bank lines.
- - Debt as a percent of total capitalization was 47 percent at both March 31,
2004 and 2003. The Company issued $300 million of three-year notes
(floating rate, based on LIBOR plus .25 percent) in the first quarter of
2004, the proceeds of which will be used to retire $261 million of debt due
in early May 2004.
- - For the twelve months ended March 31, 2004 and March 31, 2003, return on
invested capital (as reported) was 11.5 percent and 10.7 percent,
respectively. For the twelve months ended March 31, 2004 and March 31,
2003, return on invested capital (as reconciled) was 11.6 percent and 11.5
percent, respectively. The Company continues to believe that it will
achieve its 15 percent return on invested capital goal by 2008.
- - The Company repurchased approximately 15 million common shares during the
quarter and had 33 million common shares remaining under the December 2003
Board of Directors repurchase authorization at March 31, 2004.
- - Over the past five quarters, the Company has returned in excess of $1.5
billion to shareholders through share repurchases (50 million shares) and
dividends.
- - The Company's diluted common shares for purposes of calculating earnings
per common share were 468 million for the first quarter of 2004 compared
with 520 million for the first quarter of 2003.
4
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FULL-YEAR OUTLOOK
- - Based on the current market price for the Company's common stock, diluted
common shares for the computation of earnings per common share at April 1,
2004 are 461 million; this excludes the impact of any repurchases of common
stock subsequent to March 31, 2004.
- - The Company continues to experience better than expected sales performance
thus far in 2004, and, based on current business trends, believes that it
will achieve record sales and earnings for 2004 with full-year earnings
from continuing operations in a range of $2.00 to $2.10 per common share.
The new earnings guidance represents an increase from the previous guidance
of $1.80 to $1.90 per common share.
- - The new full-year 2004 guidance assumes that housing starts will remain
flat to a decline of five percent compared with 2003. The Company's
previous guidance assumed that housing starts would decline five to ten
percent compared with 2003. The Company estimates that a one percent change
in housing starts equates to approximately a $.02 impact on earnings per
common share. Earnings guidance for 2004 also includes a reduction of
approximately $.05 per common share resulting from the absence of earnings
related to the European businesses to be divested. These businesses have
been treated as discontinued operations effective in the first quarter of
2004, which includes the reclassification of their prior period results to
discontinued operations. This year's earnings guidance also reflects
increases in certain operating expenses, including such items as energy,
insurance and certain material and freight costs, and excludes income
related to the Behr litigation and the charge for businesses to be
divested. Also, the guidance does not include any additional share
repurchases subsequent to March 31, 2004.
- - Based on current business trends, the Company anticipates that second
quarter 2004 earnings from continuing operations will be in a range of $.50
to $.53 per common share compared with second quarter 2003 earnings of $.44
per common share.
5
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
Statements contained herein may include certain forward-looking
statements regarding Masco's future sales, earnings growth potential and other
developments. Actual results may vary materially because of external factors
such as interest rate fluctuations, changes in consumer spending and other
factors over which management has no control. The Company believes that certain
non-GAAP performance measures and ratios, used in managing the business, may
provide users of this financial information with additional meaningful
comparisons between current results and results in prior periods. Non-GAAP
performance measures and ratios should be viewed in addition to, and not as an
alternative for, the Company's reported results under accounting principles
generally accepted in the United States. Additional information about our
products, markets and conditions, which could affect 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.
###
6
MASCO CORPORATION - 1ST QUARTER 2004
Page
- ----
1 Condensed Statements of Income - 2004 & 2003 Quarters
2 Sales by Segment and Geographic Area - 1st Quarter 2004 & 2003
3 2004 Quarterly Segment Data
4 2003 Quarterly Segment Data - Excluding Goodwill Impairment Charge
5 2003 Quarterly Segment Data - Including Goodwill Impairment Charge
6 Other Income (Expense), Net
7 Consolidated Statements of Income - 1st Quarter 2004 & 2003
8 Consolidated Balance Sheets
GAAP Reconciliations:
9 Sales Growth Excluding Effect of Acquisitions & Currency
Translation
10 Operating Profit and Margins
11 Operating Profit and Shareholders' Equity
12 Discontinued Operations
MASCO CORPORATION
CONDENSED STATEMENTS OF INCOME
2004 AND 2003 - BY QUARTER
RESTATED FOR DISCONTINUED OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
2004 2003
-------- -----------------------------------------------------------
QTR. 1 YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1
------ ---- ------ ------ ------ ------
Net Sales:
- North America $ 2,271 $ 8,763 $ 2,269 $ 2,369 $ 2,198 $ 1,927
- International 535 1,808 499 454 430 425
-------- -------- -------- -------- -------- --------
- Consolidated 2,806 10,571 2,768 2,823 2,628 2,352
Cost of Sales 1,955 7,330 1,916 1,949 1,821 1,644
-------- -------- -------- -------- -------- --------
Gross Profit 851 3,241 852 874 807 708
(Gross Margin) 30.3% 30.7% 30.8% 31.0% 30.7% 30.1%
S,G&A Expense (before GCE, Fixed Asset (Gain) Loss &
Benefit (Income) Expense) 456 1,648 442 426 409 371
(S,G&A Expense as a % of Sales) 16.3% 15.6% 16.0% 15.1% 15.6% 15.8%
-------- -------- -------- -------- -------- --------
Operating Profit (before GCE, Fixed Asset (Gain) Loss,
Litigation (Income), Benefit (Income) Expense & Goodwill
Impairment Charge) 395 1,593 410 448 398 337
(Operating Margin) 14.1% 15.1% 14.8% 15.9% 15.1% 14.3%
- North America 329 1,433 353 431 373 276
(Margin) 14.5% 16.4% 15.6% 18.2% 17.0% 14.3%
- International 66 160 57 17 25 61
(Margin) 12.3% 8.8% 11.4% 3.7% 5.8% 14.4%
General Corporate Expense (GCE) 36 109 27 25 29 28
S,G&A Expense as a % of Sales
(including GCE, Fixed Asset (Gain) Loss & Benefit
(Income) Expense) 17.3% 16.8% 16.9% 16.1% 16.5% 17.9%
(Gain) Loss on Sale of Corporate Fixed Assets (7) 3 -- 3 -- --
(Income) Regarding Litigation Settlement (21) (72) (1) (58) -- (13)
Accelerated Benefit (Income) Expense, Net -- 16 -- -- (5) 21
Goodwill Impairment Charge -- 53 48 5 -- --
-------- -------- -------- -------- -------- --------
Operating Profit per F/S $ 387 $ 1,484 $ 336 $ 473 $ 374 $ 301
======== ======== ======== ======== ======== ========
Earnings per Common Share (Diluted):
Income from Continuing Operations $ 0.52 $ 1.61 $ 0.32 $ 0.53 $ 0.44 $ 0.30
(Loss) Income From Discontinued Operations
and Gain (Loss), Net (0.16) 0.03 (0.13) 0.13 0.02 0.01
-------- -------- -------- -------- -------- --------
Net Income $ 0.36 $ 1.64 $ 0.19 $ 0.65 $ 0.46 $ 0.32
======== ======== ======== ======== ======== ========
NOTES:
- Results exclude 2004 planned dispositions as well as operations which
were sold in 2003 and treated as discontinued operations in accordance
with SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets."
- Operating results for the fourth quarter of 2003 reflect a non-cash,
after-tax charge for goodwill impairment of $43 million ($.09 per common
share).
- 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.
- As previously disclosed, certain benefits were accelerated and expensed
(due to the unexpected passing of the Company's President) in the first
quarter of 2003. 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 $53 million ($.11 per common share) and income from nine
months of operations of $21 million ($.03 per common share, after tax).
- Income (loss) from discontinued operations in the fourth quarter of 2003
includes a non-cash, after-tax charge for goodwill impairment of $71
million ($.15 per common share).
- Per common share amounts for the four quarters of 2003 do not total to
the per common share amount for the year due to the timing of capital
stock transactions and the effect of contingently issuable shares.
Page 1
MASCO CORPORATION
SALES BY SEGMENT AND GEOGRAPHIC AREA
1ST QUARTER 2004 & 2003
(DOLLARS IN MILLIONS)
1st Quarter 1st Qtr '04
------------- vs.
2004 2003 1st Qtr '03
---- ---- -----------
Cabinets & Related Products $ 779 $ 658 + 18%
Plumbing Products 739 623 + 19%
Installation & Other Services 630 542 + 16%
Decorative Architectural Products 370 288 + 28%
Other Specialty Products 288 241 + 20%
------ ------
Total $2,806 $2,352 + 19%
====== ======
North America $2,271 $1,927 + 18%
International, principally Europe 535 425 + 26%
------ ------
Total, as above $2,806 $2,352 + 19%
====== ======
NOTES:
- - Data exclude discontinued operations.
- - Excluding acquisitions, consolidated net sales also increased 19 percent,
North American net sales increased 17 percent and International net sales
increased 26 percent. International sales in local currencies increased nine
percent compared with the first quarter of 2003 (see page 9 for the GAAP
reconciliation).
Page 2
MASCO CORPORATION
QUARTERLY SEGMENT DATA - 2004
(DOLLARS IN MILLIONS)
Year Qtr. 4 Qtr. 3 Qtr. 2 Qtr. 1
------ ------ ------ ------ ------
Net Sales:
- - Cabinets and Related Products $ 779
- - Plumbing Products 739
- - Installation and Other Services 630
- - Decorative Architectural Products 370
- - Other Specialty Products 288
------ ------ ------ ------ ------
- - TOTAL 2,806
====== ====== ====== ====== ======
- - North America 2,271
- - International, principally Europe 535
------ ------ ------ ------ ------
- - TOTAL, AS ABOVE 2,806
====== ====== ====== ====== ======
Operating Profit:
- - Cabinets and Related Products 109
- - Plumbing Products 96
- - Installation and Other Services 81
- - Decorative Architectural Products 64
- - Other Specialty Products 45
------ ------ ------ ------ ------
- - TOTAL 395
====== ====== ====== ====== ======
- - North America 329
- - International, principally Europe 66
------ ------ ------ ------ ------
- - TOTAL, AS ABOVE 395
====== ====== ====== ====== ======
General Corporate Expense (GCE) 36
(Gain) on Sale of Corporate Fixed Assets (7)
(Income) Regarding Litigation Settlement (21)
------ ------ ------ ------ ------
Operating Profit (after GCE and Adjustments) 387
Other Income (Expense), Net (1)
------ ------ ------ ------ ------
Income from Continuing Operations Before
Income Taxes and Minority Interest $ 386
====== ====== ====== ====== ======
Margins:
- - Cabinets and Related Products 14.0%
- - Plumbing Products 13.0%
- - Installation and Other Services 12.9%
- - Decorative Architectural Products 17.3%
- - Other Specialty Products 15.6%
- - TOTAL 14.1%
- - North America 14.5%
- - International, principally Europe 12.3%
- - TOTAL, AS ABOVE 14.1%
NOTES:
- - Data exclude discontinued operations.
- - Operating profit and margins by segment and geographic area are before general
corporate expense and exclude (income) regarding litigation settlement and the
(gain) on sale of Corporate fixed assets.
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 $ 2,879 $ 765 $ 761 $ 695 $ 658
- - Plumbing Products 2,684 694 692 675 623
- - Installation and Other Services 2,411 642 642 585 542
- - Decorative Architectural Products 1,449 350 418 393 288
- - Other Specialty Products 1,148 317 310 280 241
-------- -------- -------- -------- --------
- - TOTAL 10,571 2,768 2,823 2,628 2,352
======== ======== ======== ======== ========
- - North America 8,763 2,269 2,369 2,198 1,927
- - International, principally Europe 1,808 499 454 430 425
-------- -------- -------- -------- --------
- - TOTAL, AS ABOVE 10,571 2,768 2,823 2,628 2,352
======== ======== ======== ======== ========
Operating Profit:
- - Cabinets and Related Products 441 127 122 110 82
- - Plumbing Products 360 83 96 95 86
- - Installation and Other Services 368 93 110 88 77
- - Decorative Architectural Products 215 48 57 55 55
- - Other Specialty Products 209 59 63 50 37
-------- -------- -------- -------- --------
- - TOTAL 1,593 410 448 398 337
======== ======== ======== ======== ========
- - North America 1,433 353 431 373 276
- - International, principally Europe 160 57 17 25 61
-------- -------- -------- -------- --------
- - TOTAL, AS ABOVE 1,593 410 448 398 337
======== ======== ======== ======== ========
General Corporate Expense (GCE) 109 27 25 29 28
Loss on Sale of Corporate Fixed Assets 3 - 3 - -
(Income) Regarding Litigation Settlement (72) (1) (58) - (13)
Accelerated Benefit (Income) Expense, Net 16 - - (5) 21
-------- -------- -------- -------- --------
Operating Profit (after GCE and Adjustments) 1,537 384 478 374 301
Other Income (Expense), Net (204) (57) (60) (33) (54)
-------- -------- -------- -------- --------
Income from Continuing Operations Before
Income Taxes and Minority Interest $ 1,333 $ 327 $ 418 $ 341 $ 247
======== ======== ======== ======== ========
Margins:
- - Cabinets and Related Products 15.3% 16.6% 16.0% 15.8% 12.5%
- - Plumbing Products 13.4% 12.0% 13.9% 14.1% 13.8%
- - Installation and Other Services 15.3% 14.5% 17.1% 15.0% 14.2%
- - Decorative Architectural Products 14.8% 13.7% 13.6% 14.0% 19.1%
- - Other Specialty Products 18.2% 18.6% 20.3% 17.9% 15.4%
- - TOTAL 15.1% 14.8% 15.9% 15.1% 14.3%
- - North America 16.4% 15.6% 18.2% 17.0% 14.3%
- - International, principally Europe 8.8% 11.4% 3.7% 5.8% 14.4%
- - TOTAL, AS ABOVE 15.1% 14.8% 15.9% 15.1% 14.3%
NOTES:
- - Data exclude discontinued operations, including operations sold in 2003 and
2004 planned dispositions.
- - Operating results for the fourth quarter of 2003 exclude a non-cash, pre-tax
charge for goodwill impairment of $48 million ($.09 per common share, after
tax). The charge related to certain of the Company's European business units
and was allocated among the Plumbing Products segment ($17 million) and the
Other Specialty Products segment ($31 million).
- - 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) regarding litigation settlement and the
loss on sale of Corporate fixed assets.
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 $ 2,879 $ 765 $ 761 $ 695 $ 658
- - Plumbing Products 2,684 694 692 675 623
- - Installation and Other Services 2,411 642 642 585 542
- - Decorative Architectural Products 1,449 350 418 393 288
- - Other Specialty Products 1,148 317 310 280 241
-------- -------- -------- -------- --------
- - TOTAL 10,571 2,768 2,823 2,628 2,352
======== ======== ======== ======== ========
- - North America 8,763 2,269 2,369 2,198 1,927
- - International, principally Europe 1,808 499 454 430 425
-------- -------- -------- -------- --------
- - TOTAL, AS ABOVE 10,571 2,768 2,823 2,628 2,352
======== ======== ======== ======== ========
Operating Profit:
- - Cabinets and Related Products 441 127 122 110 82
- - Plumbing Products 343 66 96 95 86
- - Installation and Other Services 368 93 110 88 77
- - Decorative Architectural Products 210 48 52 55 55
- - Other Specialty Products 178 28 63 50 37
-------- -------- -------- -------- --------
- - TOTAL 1,540 362 443 398 337
======== ======== ======== ======== ========
- - North America 1,433 353 431 373 276
- - International, principally Europe 107 9 12 25 61
-------- -------- -------- -------- --------
- - TOTAL, AS ABOVE 1,540 362 443 398 337
======== ======== ======== ======== ========
General Corporate Expense (GCE) 109 27 25 29 28
Loss on Sale of Corporate Fixed Assets 3 - 3 - -
(Income) Regarding Litigation Settlement (72) (1) (58) - (13)
Accelerated Benefit (Income) Expense, Net 16 - - (5) 21
-------- -------- -------- -------- --------
Operating Profit (after GCE and Adjustments) 1,484 336 473 374 301
Other Income (Expense), Net (204) (57) (60) (33) (54)
-------- -------- -------- -------- --------
Income from Continuing Operations Before
Income Taxes and Minority Interest $ 1,280 $ 279 $ 413 $ 341 $ 247
======== ======== ======== ======== ========
Margins:
- - Cabinets and Related Products 15.3% 16.6% 16.0% 15.8% 12.5%
- - Plumbing Products 12.8% 9.5% 13.9% 14.1% 13.8%
- - Installation and Other Services 15.3% 14.5% 17.1% 15.0% 14.2%
- - Decorative Architectural Products 14.5% 13.7% 12.4% 14.0% 19.1%
- - Other Specialty Products 15.5% 8.8% 20.3% 17.9% 15.4%
- - TOTAL 14.6% 13.1% 15.7% 15.1% 14.3%
- - North America 16.4% 15.6% 18.2% 17.0% 14.3%
- - International, principally Europe 5.9% 1.8% 2.6% 5.8% 14.4%
- - TOTAL, AS ABOVE 14.6% 13.1% 15.7% 15.1% 14.3%
NOTES:
- - Data exclude discontinued operations, including operations sold in 2003 and
2004 planned dispositions.
- - Operating results for the fourth quarter of 2003 reflect a non-cash, pre-tax
charge for goodwill impairment of $48 million ($.09 per common share, after
tax). The charge related to certain of the Company's European business units
and was allocated among the Plumbing Products segment ($17 million) and the
Other Specialty Products segment ($31 million).
- - 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) regarding litigation settlement and the
loss on sale of Corporate fixed assets.
Page 5
MASCO CORPORATION
OTHER INCOME (EXPENSE), NET
2004 AND 2003 QUARTERS
(DOLLARS IN MILLIONS)
2004 2003
-------------------------------------- -----------------------------------------
YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1 YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1
----- ------ ------ ------ ------ ----- ------ ------ ------ ------
Interest Expense $ (53) $(261) $ (60) $ (67) $ (67) $ (67)
Income from Cash and Cash Investments 2 8 2 2 2 2
Other Interest Income 2 8 3 2 1 2
Income from Financial Investments, Net 36 65 13 19 19 14
Loss on Early Retirement of Debt - (7) (4) (3) - -
Gain from Sale of Equity Investment - 5 - - 5 -
Impairment Charge for Long-Term Investments - (19) (10) (9) - -
Other, Net 12 (3) (1) (4) 7 (5)
----- ------ ------ ------ ------ ----- ------ ------ ------ ------
Total Other Income (Expense), Net $ (1) $(204) $ (57) $ (60) $ (33) $ (54)
===== ====== ====== ====== ====== ===== ====== ====== ====== ======
NOTES:
- - Data exclude discontinued operations.
- - Income from financial investments, net for the first quarter of 2004 includes
$16 million of net realized gains related to the sale of marketable
securities.
- - Other, net for the first quarter of 2004 includes realized currency gains of
approximately $6 million.
Page 6
MASCO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2004 & 2003
(IN MILLIONS, EXCEPT PER SHARE DATA)
Three Months Ended
March 31,
% ------------------
Line Change 2004 2003
- --- ------ ------- ---------
1 Net Sales 19% $ 2,806 $ 2,352
2 Cost of Sales 19% 1,955 1,644
------- ---------
3 Gross Profit 20% 851 708
------- ---------
Operating Profit:
4 - Before GCE, Litigation (Income), (Gain) on Sale of Fixed Assets and
Accelerated Benefit Expense (3-9) 17% 395 337
5 - After GCE, Litigation (Income), (Gain) on Sale of Fixed Assets and
Accelerated Benefit Expense (3-10-11) 29% 387 301
------- ---------
S,G&A Expense:
6 - General Corporate Expense (GCE) 29% 36 28
7 - (Gain) on Sale of Corporate Fixed Assets 0% (7) -
8 - Accelerated Benefit Expense -100% - 21
9 - All Other 23% 456 371
------- ---------
10 - Total S,G&A Expense 15% 485 420
------- ---------
11 (Income) Regarding Litigation Settlement 62% (21) (13)
12 Other Income (Expense), Net -98% (1) (54)
13 Income from Continuing Operations Before Income Taxes
and Minority Interest (5+12) 56% 386 247
14 Income Taxes 65% 140 85
(Tax Rate) 36.3% 34.4%
------- ---------
15 Income from Continuing Operations Before Minority Interest 52% 246 162
16 Minority Interest (5) (4)
------- ---------
17 Income from Continuing Operations 53% 241 158
18 (Loss) Income from Discontinued Operations, After Income Taxes 25% (73) 8
------- ---------
19 Net Income 1% $ 168 $ 166
======= =========
Earnings Per Common Share (Diluted):
Income from Continuing Operations 71% $ 0.52 $ 0.30
(Loss) Income from Discontinued Operations, After Income Taxes (0.16) 0.01
------- ---------
Net Income 12% $ 0.36 $ 0.32
======= =========
Average (Diluted) Common Shares -10% 468 520
As a Percent of Sales
Three Months Ended March 31,
----------------------------
Line 2004 2003
- --- -------- --------
1 Net Sales 100.0% 100.0%
2 Cost of Sales 69.7% 69.9%
-------- ------
3 Gross Profit 30.3% 30.1%
-------- ------
Operating Profit:
4 - Before GCE, Litigation (Income), (Gain) on Sale of Fixed Assets
and Accelerated Benefit Expense (3-9) 14.1% 14.3%
5 - After GCE, Litigation (Income), (Gain) on Sale of Fixed Assets
and Accelerated Benefit Expense (3-10-11) 13.8% 12.8%
S,G&A Expense:
6 - General Corporate Expense (GCE) 1.3% 1.2%
7 - (Gain) on Sale of Corporate Fixed Assets -0.2% 0.0%
8 - Accelerated Benefit Expense 0.0% 0.9%
9 - All Other 16.3% 15.8%
-------- ------
10 - Total S,G&A Expense 17.3% 17.9%
-------- ------
11 (Income) Regarding Litigation Settlement -0.7% -0.6%
12 Other Income (Expense), Net 0.0% -2.3%
13 Income from Continuing Operations Before Income Taxes
and Minority Interest (5+12) 13.8% 10.5%
14 Income Taxes 5.0% 3.6%
(Tax Rate)
-------- ------
15 Income from Continuing Operations Before Minority Interest 8.8% 6.9%
16 Minority Interest -0.2% -0.2%
-------- ------
17 Income from Continuing Operations 8.6% 6.7%
18 (Loss) Income from Discontinued Operations, After Income Taxes -2.6% 0.3%
-------- ------
19 Net Income 6.0% 7.1%
======== ======
Earnings Per Common Share (Diluted):
Income from Continuing Operations
(Loss) Income from Discontinued Operations, After Income Taxes
Net Income
Average (Diluted) Common Shares
NOTE:
Data exclude discontinued operations.
Page 7
MASCO CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
March 31, December 31,
2004 2003
--------- ------------
ASSETS
Current Assets:
Cash and Cash Investments $ 624 $ 795
Receivables 1,820 1,674
Inventories 1,033 1,019
Prepaid Expenses and Other 270 316
--------- ------------
Total Current Assets 3,747 3,804
Property and Equipment, Net 2,153 2,339
Goodwill 4,417 4,491
Other Intangible Assets, Net 338 344
Assets of Discontinued Operations 331 --
Other Assets 1,263 1,171
--------- ------------
Total Assets $ 12,249 $ 12,149
========== ============
LIABILITIES
Current Liabilities:
Notes Payable $ 313 $ 334
Accounts Payable 808 715
Accrued Liabilities 986 1,050
--------- ------------
Total Current Liabilities 2,107 2,099
Long-Term Debt 4,197 3,848
Liabilities of Discontinued Operations 99 --
Deferred Income Taxes and Other 719 746
--------- ------------
Total Liabilities 7,122 6,693
SHAREHOLDERS' EQUITY 5,127 5,456
--------- ------------
Total Liabilities and Shareholders' Equity $ 12,249 $ 12,149
========== ============
Page 8
MASCO CORPORATION
GAAP RECONCILIATION OF SALES GROWTH
EXCLUDING EFFECT OF ACQUISITIONS & CURRENCY TRANSLATION
(DOLLARS IN MILLIONS)
Three Months Ended March 31,
----------------------------
2004 2003
------- ---------
Consolidated Net Sales, as reported $ 2,806 $ 2,352
- Acquisitions (16) -
------- ---------
Consolidated Net Sales (excl. acquisitions) $ 2,790 $ 2,352
======= =========
North American Net Sales, as reported $ 2,271 $ 1,927
- Acquisitions (16) -
------- ---------
North American Net Sales (excl. acquisitions) $ 2,255 $ 1,927
======= =========
International Net Sales, as reported $ 535 $ 425
- Acquisitions - -
------- ---------
International Net Sales (excl. acquisitions) 535 425
- Currency Translation (73) -
------- ---------
International Net Sales (excl. acquisitions & currency) $ 462 $ 425
======= =========
NOTES:
The Company presents information comparing results from one period to another
excluding the results of businesses acquired in order to assess the performance
of the underlying businesses and to assess to what extent acquisitions are
driving growth.
The Company also presents information comparing results of International
operations from one period to another using constant exchange rates. To present
this information, current period results for foreign entities are converted into
U.S. dollars using the prior period's exchange rates, rather than exchange rates
for the current period. The Company presents this information in order to assess
how the underlying businesses performed in local currencies before taking into
account currency fluctuations.
Page 9
MASCO CORPORATION
GAAP RECONCILIATION OF OPERATING PROFIT AND MARGINS
(DOLLARS IN MILLIONS)
THREE MONTHS ENDED MARCH 31,
----------------------------------
2004 2003
-------------- ---------------
Operating Profit, As Reported $ 387 13.8% $ 301 12.8%
Accelerated Benefit Expense - 21
(Income) Regarding Litigation Settlement (21) (13)
----- -----
Operating Profit, As Reconciled $ 366 13.0% $ 309 13.1%
===== =====
NOTE:
The Company believes that certain non-GAAP performance measures and ratios, used
in managing the business, may provide users of this financial information with
additional meaningful comparisons between current results and results in prior
periods. Non-GAAP performance measures and ratios should be viewed in addition
to, and not as an alternative for, the Company's reported results under
accounting principles generally accepted in the United States.
Page 10
MASCO CORPORATION
GAAP RECONCILIATION OF OPERATING PROFIT AND SHAREHOLDERS' EQUITY
(DOLLARS IN MILLIONS)
TWELVE MONTHS ENDED
MARCH 31,
------------------------------
2004 2003
-------------- --------------
Operating Profit, As Reported $ 1,570 $ 1,355
Goodwill Impairment Charge 53 -
European Charges 54 -
(Income) from Planned Disposition of a Business - (16)
(Income) Charge Regarding Litigation Settlement, Net (80) 134
-------------- --------------
Operating Profit, As Reconciled $ 1,597 $ 1,473
============== ==============
TWELVE MONTHS ENDED
MARCH 31,
------------------------------
2004 2003
-------------- --------------
Shareholders' Equity, As Reported $ 5,127 $ 5,199
Goodwill Impairment Charge (after tax) 48 -
European Charges (after tax) 38 -
(Income) from Planned Disposition of a Business (after tax) - (10)
(Income) Charge Regarding Litigation Settlement, Net (after tax) (50) 84
-------------- --------------
Shareholders' Equity, As Reconciled $ 5,163 $ 5,273
============== ==============
NOTES:
Data for the twelve months ended March 31, 2003 has not been restated to
exclude discontinued operations (operations sold in 2003 or 2004 planned
dispositions).
The Company believes that certain non-GAAP performance measures and ratios, used
in managing the business, may provide users of this financial information with
additional meaningful comparisons between current results and results in prior
periods. Non-GAAP performance measures and ratios should be viewed in addition
to, and not as an alternative for, the Company's reported results under
accounting principles generally accepted in the United States.
This information is provided to explain the calculation of return on invested
capital ("ROIC") which is calculated as after-tax operating profit (last twelve
months) divided by average debt (net of cash) and average shareholder's equity.
Page 11
MASCO CORPORATION
DISCONTINUED OPERATIONS
(DOLLARS IN MILLIONS)
Three Months Ended
March 31,
------------------
2004 2003
------ -------
Net Sales $ 95 $ 147
====== =======
Income Before Income Taxes $ 6 $ 13
Impairment Of Assets Of Discontinued Operations (64) -
Income Taxes (15) (5)
------ -------
(Loss) Income From Discontinued Operations, After Income Taxes $ (73) $ 8
====== =======
The unusual relationship between income tax expense and income before income
taxes (including the loss on disposition of businesses) in 2004 results
primarily from the expected loss providing no current tax benefit in the
countries where the loss is anticipated to be incurred and from the expensing of
deferred tax assets of the discontinued operations which are no longer expected
to be realized.
Discontinued operations represent results of European businesses which are
planned to be divested in 2004 as well as businesses sold in 2003 and treated as
discontinued operations in accordance with SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets."
Page 12