EXHIBIT 99
FOR IMMEDIATE RELEASE Contact: Samuel Cypert
313-792-6646
MASCO CORPORATION REPORTS RECORD SECOND QUARTER
AND INCREASES EARNINGS GUIDANCE FOR 2004
Taylor, Michigan (August 3, 2004) - Masco Corporation (NYSE: MAS) today
reported that net sales from continuing operations for the second quarter ended
June 30, 2004 increased 16 percent to a quarterly record $3.1 billion compared
with $2.6 billion for the same period in 2003. The Company's strong second
quarter performance, including 16 percent organic sales growth, benefited from
market share gains, new products and positive economic conditions impacting the
new home construction and home improvement markets.
Income from continuing operations for the second quarter of 2004 was $294
million compared with $220 million for the same period in 2003. Earnings from
continuing operations increased to a second quarter record of $.65 per common
share compared with $.44 per common share for the 2003 second quarter. Results
for the 2004 second quarter include after-tax income of $.01 per common share
related to insurance proceeds from the Behr litigation and after-tax
incremental income of $.01 per common share (compared with the 2003 second
quarter) from the sale of marketable securities and other non-operating assets.
Second quarter 2003 operating performance was negatively impacted by
adverse weather conditions, which reduced demand for certain of the Company's
products, and by a non-cash charge of $23 million ($.03 per common share, after
tax) resulting from a system failure at one of the Company's European
operations.
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 $2.25 to $2.30 per common share. This new
guidance represents an increase from the previous guidance of $2.00 to $2.10 per
common share. This new guidance also includes the benefit of recent common share
repurchases and continues to reflect increases in a number of operating
expenses, including such items as certain material, freight, energy and
insurance costs, as well as costs and expenses associated with complying with
the new requirements of the Sarbanes-Oxley Legislation. This new guidance
includes realized income related to the Behr litigation of $.04 per common share
in the first half of 2004 but excludes any future Behr litigation income (as
such amounts cannot be predicted), any gains or charges for businesses to be
divested and any other possible unusual items.
Based on current business trends, the Company anticipates that third
quarter 2004 earnings from continuing operations will be in a range of $.57 to
$.60 per common share compared with relatively strong third quarter 2003
earnings of $.53 per common share.
The Company previously announced, in the first quarter of 2004, the
planned disposition of several European businesses that are not core to the
Company's long-term growth strategy. The second quarter 2004 results include
after-tax income from their operations of $11 million, and an additional
after-tax charge aggregating $44 million ($.10 per common share) for those
businesses that are expected to be divested at a loss, both of which are
included in discontinued operations. The charge (reduction in expected proceeds)
principally relates to operations located in Spain and is primarily the result
of lower-than-expected operating results of those 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 the
Company continues to expect that the gains will substantially offset the 2004
charges. Including the operating results of these discontinued operations and
the second quarter charge for certain of these businesses, net income for the
quarter increased to $261 million compared with $229 million for the 2003 second
quarter; and earnings increased to $.58 per common share compared with $.46 per
common share for the second quarter of 2003.
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 August 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)
981-5522 (confirmation #119503). 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 #119503)
approximately two hours after the end of the call and will continue through
August 10, 2004.
Masco Corporation's press releases and other information are available
through the Company's toll free number, 1-888-MAS-NEWS, or under the Investor
Relations section of Masco's 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. 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 the
Company's products, markets and conditions, which could affect the Company's
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
SECOND QUARTER SALES AND EARNINGS
Amounts are in millions, except per share data.
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2004 2003 2004 2003
------- ------- ------- -------
Net Sales $ 3,061 $ 2,628 $ 5,867 $ 4,980
Cost of Sales 2,087 1,821 4,042 3,465
------- ------- ------- -------
Gross Profit 974 807 1,825 1,515
Selling, General and Administrative Expenses 504 433 989 853
(Income) Regarding Litigation Settlement (7) - (28) (13)
------- ------- ------- -------
Operating Profit 477 374 864 675
Other Income (Expense), Net (11) (33) (12) (87)
------- ------- ------- -------
Income from Continuing Operations before Income
Taxes and Minority Interest 466 341 852 588
Income Taxes 167 119 307 204
------- ------- ------- -------
Income from Continuing Operations before
Minority Interest 299 222 545 384
Minority Interest 5 2 10 6
------- ------- ------- -------
Income from Continuing Operations 294 220 535 378
(Loss) Income from Discontinued Operations, After Income Taxes (33) 9 (106) 17
------- ------- ------- -------
Net Income $ 261 $ 229 $ 429 $ 395
======= ======= ======= =======
Earnings per Common Share (Diluted):
Income from Continuing Operations $ 0.65 $ 0.44 $ 1.16 $ 0.75
(Loss) Income from Discontinued Operations, After Income Taxes (0.07) 0.02 (0.23) 0.03
------- ------- ------- -------
Net Income $ 0.58 $ 0.46 $ 0.93 $ 0.79
======= ======= ======= =======
Average Diluted Common Shares Outstanding 453 499 460 503
======= ======= ======= =======
Prior year amounts have been restated to reflect discontinued operations.
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.
SECOND QUARTER 2004
- - Net sales from continuing operations for the quarter increased 16 percent
with North American sales increasing 15 percent and International sales
increasing 23 percent. In local currencies, International sales increased
14 percent compared with the second quarter of 2003. The Company's organic
sales growth of 16 percent benefited from market share gains, new products
and positive economic conditions impacting the 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, vinyl windows and plumbing products were
particularly strong.
- - Income from continuing operations for the quarter was $294 million
compared with $220 million for the second quarter of 2003.
- - Earnings from continuing operations increased to a second quarter record
of $.65 per common share (exceeding the Company's recently increased
guidance of $.58 to $.60 per common share) compared with $.44 per common
share for the 2003 second quarter.
- - Results for the second quarter of 2004 include income related to insurance
proceeds from the Behr litigation of $.01 per common share, after tax and
incremental income from the sale of marketable securities and other
non-operating assets of $.01 per common share, after tax compared with the
second quarter of 2003. Income from the sale of marketable securities and
other non-operating assets aggregated $.03 per common share, after tax and
$.02 per common share, after tax in the second quarters of 2004 and 2003,
respectively. In the second quarter of 2004, the Company generated
approximately $120 million of cash from the net disposition of marketable
securities.
1
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
SECOND QUARTER 2004 (CONTINUED)
- - The Company previously announced, in the first quarter of 2004, the
planned disposition of several European businesses that are not core to
the Company's long-term growth strategy. The second quarter 2004 results
include after-tax income from their operations of $11 million, an
additional after-tax charge aggregating $44 million ($.10 per common
share) for those businesses that are expected to be divested at a loss,
both of which are included in discontinued operations. The charge
(reduction in expected proceeds) principally relates to operations located
in Spain and is primarily the result of lower-than-expected operating
results of those 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 the Company continues
to expect that the gains will substantially offset the 2004 charges.
Including the operating results of these discontinued operations and the
second quarter charge mentioned above, net income for the quarter
increased to $261 million compared with $229 million for the 2003 second
quarter; and earnings increased to $.58 per common share compared with
$.46 per common share for the second quarter of 2003.
- - Second quarter 2003 results were negatively affected by adverse weather
conditions (particularly impacting new home construction and retail sales
in certain parts of the country) and by a non-cash charge of $23 million
($.03 per common shares, after tax) resulting from a system failure at one
of the Company's European operations.
- - Sales to key retail customers in the quarter, from continuing operations,
increased 14 percent compared with a seven percent increase in the second
quarter of 2003.
- - Sales increases by segment, which were substantially all organic growth,
in the 2004 second quarter versus the 2003 second quarter were:
- Cabinets and Related Products sales increased 15 percent;
- Plumbing Products sales increased 16 percent;
- Installation and Other Services sales increased 17 percent;
- Decorative Architectural Products sales increased 15 percent;
and
- Other Specialty Products sales increased 22 percent.
2
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
SECOND QUARTER 2004 (CONTINUED)
- - Gross margins were 31.8 percent in the second quarter of 2004 compared
with 30.7 percent in the second quarter of 2003.
- - Operating profit margins as reported were 15.6 percent in the second
quarter of 2004 compared with 14.2 percent in the second quarter of 2003.
Excluding income related to insurance proceeds from the Behr litigation of
$7 million in 2004 and the European charge of $23 million and accelerated
benefit income of $5 million in 2003, operating profit margins were 15.4
percent for the second quarter of 2004 compared with 14.9 percent for the
second quarter of 2003.
- - Results in the second quarter of 2004 include the positive impact of
higher sales volume, which was partially offset by the negative effect of
previously communicated increases in a number of operating expenses,
including such items as certain material, freight, energy and insurance
costs, as well as costs and expenses associated with complying with the
new requirements of the Sarbanes-Oxley Legislation.
- - The Company experienced improved operating profit margins in all of its
segments except the Installation and Other Services segment. The lower
margins in the Installation and Other Services segment are primarily
attributed to increased material costs and an increase in sales of
generally lower-margin, non-insulation products. Historically, the Company
has generally been able to increase its selling prices to reflect certain
material cost increases. Typically, the benefits of such selling price
increases are reflected in subsequent periods as there is a time lag as a
result of existing contractual obligations.
- - SG&A expenses as a percent of sales, including general corporate expense,
were 16.5 percent for the second quarters of both 2004 and 2003.
- - General corporate expense was 1.5 percent of sales in the second quarter
of 2004 compared with 1.1 percent in the comparable period of 2003. The
increase is primarily attributable to approximately $10 million of
incremental costs and expenses associated with complying with the new
requirements of the Sarbanes-Oxley Legislation.
- - Inventory days were 52 days at June 30, 2004 compared with 57 days at June
30, 2003.
- - Accounts receivable days at the end of the second quarter were 54 days
compared with 53 days a year ago.
3
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
SECOND QUARTER 2004 (CONCLUDED)
- - Accounts payable days at the end of the second quarter improved to 38 days
from 32 days a year ago, as the Company continues to negotiate more
favorable supplier terms.
- - Working capital at June 30, 2004 (defined as accounts receivable and
inventories less accounts payable) improved to 19.2 percent of the last
twelve months of sales from 22.0 percent a year earlier.
- - The Company's tax rate was 35.8 percent for the second quarter of 2004
compared with 34.9 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. 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
$1.0 billion in cash and marketable securities and $1.9 billion in unused
bank lines.
- - Debt as a percent of total capitalization was 47 percent at both June 30,
2004 and 2003.
- - For the twelve months ended June 30, 2004 and June 30, 2003, return on
invested capital was 12.2 percent and 9.8 percent, respectively. For the
twelve months ended June 30, 2004 and June 30, 2003, return on invested
capital (as reconciled) was 12.0 percent and 10.8 percent, respectively.
The Company continues to believe that it will achieve its 15 percent
return on invested capital goal by 2008.
- - The Company repurchased nine million common shares during the quarter and
had 24 million common shares remaining at June 30, 2004 under the December
2003 Board of Directors repurchase authorization of 50 million shares.
- - In the first six months of 2004, the Company has returned over $800
million to shareholders through share repurchases (24 million shares) and
dividends. In 2003, the Company returned in excess of $1 billion to
shareholders through share repurchases (35 million shares) and dividends.
- - The Company's diluted common shares for purposes of calculating earnings
per common share were 453 million for the second quarter of 2004 compared
with 499 million for the second 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 July 1,
2004 are 451 million; this excludes the impact of any repurchases of
common stock subsequent to June 30, 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 $2.25 to $2.30 per common share.
The new earnings guidance represents an increase from the previous
guidance of $2.00 to $2.10 per common share.
- - Based on current business trends, the Company anticipates that third
quarter 2004 earnings from continuing operations will be in a range of
$.57 to $.60 per common share, compared with relatively strong third
quarter 2003 earnings of $.53 per common share.
- - The new guidance assumes that 2004 housing starts will approximate 2003
levels. 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 new earnings guidance includes the benefit
of recent common share repurchases and continues to reflect increases in a
number of operating expenses, including such items as certain material,
freight, energy and insurance costs, as well as costs and expenses
associated with complying with the new requirements of the Sarbanes-Oxley
Legislation. This new guidance also includes income related to the Behr
litigation of $.04 per common share in the first half of 2004, but
excludes any future Behr litigation income (as such amounts cannot be
predicted), any gains or charges for businesses to be divested, any other
possible unusual items and any share repurchases subsequent to June 30,
2004.
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 - 2ND QUARTER 2004
Page
1 Condensed Statements of Income - 2004 & 2003 Quarters
2 Sales by Segment and Geographic Area - Three Months Ended June 30,
2004 & 2003
3 Sales by Segment and Geographic Area - Six Months Ended June 30, 2004 &
2003
4 2004 Quarterly Segment Data
5 2003 Quarterly Segment Data - Excluding Goodwill Impairment Charge
6 2003 Quarterly Segment Data - Including Goodwill Impairment Charge
7 Other Income (Expense), Net - 2004 & 2003 Quarters
8 Consolidated Statements of Income - Three Months Ended June 30, 2004 &
2003
9 Consolidated Statements of Income - Six Months Ended June 30, 2004 & 2003
10 Consolidated Balance Sheets
GAAP Reconciliations:
11 Sales Growth Excluding Effect of Acquisitions & Currency Translation
12 Operating Profit and Margins
13 Operating Profit and Shareholders' Equity
14 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. 2 QTR. 1 YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1
-------- ------- ------- ------- ------- -------- -------
Net Sales:
- North America $ 2,531 $ 2,271 $ 8,763 $ 2,269 $ 2,369 $ 2,198 $ 1,927
- International 530 535 1,808 499 454 430 425
-------- ------- ------- ------- ------- -------- -------
- Consolidated 3,061 2,806 10,571 2,768 2,823 2,628 2,352
Cost of Sales 2,087 1,955 7,330 1,916 1,949 1,821 1,644
-------- ------- ------- ------- ------- -------- -------
Gross Profit 974 851 3,241 852 874 807 708
(Gross Margin) 31.8% 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) 460 456 1,648 442 426 409 371
(S,G&A Expense as a % of Sales) 15.0% 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) 514 395 1,593 410 448 398 337
(Operating Margin) 16.8% 14.1% 15.1% 14.8% 15.9% 15.1% 14.3%
- North America 442 329 1,433 353 431 373 276
(Margin) 17.5% 14.5% 16.4% 15.6% 18.2% 17.0% 14.3%
- International 72 66 160 57 17 25 61
(Margin) 13.6% 12.3% 8.8% 11.4% 3.7% 5.8% 14.4%
General Corporate Expense (GCE) 45 36 109 27 25 29 28
S,G&A Expense as a % of Sales
(including GCE, Fixed Asset (Gain) Loss & Benefit
(Income) Expense) 16.5% 17.3% 16.8% 16.9% 16.1% 16.5% 17.9%
(Gain) Loss on Sale of Corporate Fixed Assets (1) (7) 3 - 3 - -
(Income) Regarding Litigation Settlement (7) (21) (72) (1) (58) - (13)
Accelerated Benefit (Income) Expense, Net - - 16 - - (5) 21
Goodwill Impairment Charge - - 53 48 5 - -
-------- ------- ------- ------- ------- -------- -------
Operating Profit per F/S $ 477 $ 387 $ 1,484 $ 336 $ 473 $ 374 $ 301
======== ======= ======= ======= ======= ======== =======
Earnings per Common Share (Diluted):
Income from Continuing Operations $ 0.65 $ 0.52 $ 1.61 $ 0.32 $ 0.53 $ 0.44 $ 0.30
(Loss) Income From Discontinued Operations
and Gain (Loss), Net (0.07) (0.16) 0.03 (0.13) 0.13 0.02 0.01
-------- ------- ------- ------- ------- -------- -------
Net Income $ 0.58 $ 0.36 $ 1.64 $ 0.19 $ 0.65 $ 0.46 $ 0.32
======== ======= ======= ======= ======= ======== =======
NOTES:
- - Operating results exclude 2004 planned dispositions as well as operations
which were sold in 2003, all of which are 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. 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 related to this liability as the obligation was marked
to market, based on the Company's stock price, at the end of each
reporting period. 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).
- - 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
THREE MONTHS ENDED JUNE 30, 2004 & 2003
(DOLLARS IN MILLIONS)
Three Months Ended
June 30, 2nd Qtr '04
------------------------------ vs.
2004 2003 2nd Qtr '03
------------- ------------- ------------
Cabinets & Related Products $ 797 $ 695 + 15%
Plumbing Products 785 675 + 16%
Installation & Other Services 686 585 + 17%
Decorative Architectural Products 451 393 + 15%
Other Specialty Products 342 280 + 22%
------------- -------------
Total $3,061 $ 2,628 + 16%
============= =============
North America $ 2,531 $ 2,198 + 15%
International, principally Europe 530 430 + 23%
------------- -------------
Total, as above $ 3,061 $ 2,628 + 16%
============= =============
NOTES:
- - Data exclude discontinued operations.
- - Excluding acquisitions, consolidated net sales increased 16 percent, North
American net sales increased 15 percent and International net sales
increased 23 percent (see page 11 for the GAAP reconciliation).
- - International sales in local currencies increased 14 percent compared with
the second quarter of 2003 (see page 11 for the GAAP reconciliation).
Page 2
MASCO CORPORATION
SALES BY SEGMENT AND GEOGRAPHIC AREA
SIX MONTHS ENDED JUNE 30, 2004 & 2003
(DOLLARS IN MILLIONS)
Six Months Ended June 30, Six Months '04
----------------------------- vs.
2004 2003 Six Months '03
----------- -------------- --------------
Cabinets & Related Products $ 1,576 $ 1,353 + 16%
Plumbing Products 1,524 1,298 + 17%
Installation & Other Services 1,316 1,127 + 17%
Decorative Architectural Products 821 681 + 21%
Other Specialty Products 630 521 + 21%
----------- --------------
Total $ 5,867 $ 4,980 + 18%
=========== ==============
North America $ 4,802 $ 4,125 + 16%
International, principally Europe 1,065 855 + 25%
----------- --------------
Total, as above $ 5,867 $ 4,980 + 18%
=========== ==============
NOTES:
- - Data exclude discontinued operations.
- - Excluding acquisitions, consolidated net sales increased 17 percent, North
American net sales increased 16 percent and International net sales
increased 25 percent (see page 11 for the GAAP reconciliation).
- - International sales in local currencies increased 12 percent compared with
the second quarter of 2003 (see page 11 for the GAAP reconciliation).
Page 3
MASCO CORPORATION
QUARTERLY SEGMENT DATA - 2004
(DOLLARS IN MILLIONS)
Year Qtr. 4 Qtr. 3 Qtr. 2 Qtr. 1
------ ------ ------- ------- -------
Net Sales:
- Cabinets and Related Products $ 797 $ 779
- Plumbing Products 785 739
- Installation and Other Services 686 630
- Decorative Architectural Products 451 370
- Other Specialty Products 342 288
------ ------ ------- ------- -------
- TOTAL 3,061 2,806
====== ====== ======= ======= =======
- North America 2,531 2,271
- International, principally Europe 530 535
------ ------ ------- ------- -------
- TOTAL, AS ABOVE 3,061 2,806
====== ====== ======= ======= =======
Operating Profit:
- Cabinets and Related Products 137 109
- Plumbing Products 117 96
- Installation and Other Services 88 81
- Decorative Architectural Products 101 64
- Other Specialty Products 71 45
------ ------ ------- ------- -------
- TOTAL 514 395
====== ====== ======= ======= =======
- North America 442 329
- International, principally Europe 72 66
------ ------ ------- ------- =======
- TOTAL, AS ABOVE 514 395
====== ====== ======= ======= =======
General Corporate Expense (GCE) 45 36
(Gain) on Sale of Corporate Fixed Assets (1) (7)
(Income) Regarding Litigation Settlement (7) (21)
------ ------ ------- ------- -------
Operating Profit (after GCE and Adjustments) 477 387
Other Income (Expense), Net (11) (1)
------ ------ ------- ------- -------
Income from Continuing Operations Before
Income Taxes and Minority Interest $ 466 $ 386
====== ====== ======= ======= =======
Margins:
- Cabinets and Related Products 17.2% 14.0%
- Plumbing Products 14.9% 13.0%
- Installation and Other Services 12.8% 12.9%
- Decorative Architectural Products 22.4% 17.3%
- Other Specialty Products 20.8% 15.6%
- TOTAL 16.8% 14.1%
- North America 17.5% 14.5%
- International, principally Europe 13.6% 12.3%
- TOTAL, AS ABOVE 16.8% 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 the litigation
settlement and the (gain) on sale of Corporate fixed assets.
Page 4
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, in the third
quarter of 2003; and $23 million ($.03 per common share, after tax) in the
second 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.
- - 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 the litigation
settlement, accumulated benefit (income) expense, net and the loss on sale
of Corporate fixed assets.
Page 5
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, in the third
quarter of 2003; and $23 million ($.03 per common share, after tax) in the
second 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.
- - 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 the litigation
settlement, accumulated benefit (income) expense, net and the loss on sale
of Corporate fixed assets.
Page 6
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 $ (52) $ (53) $ (261) $ (60) $ (67) $ (67) $ (67)
Income from Cash and Cash Investments 1 2 8 2 2 2 2
Other Interest Income 1 2 8 3 2 1 2
Income from Financial Investments, Net 21 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 18 12 (3) (1) (4) 7 (5)
----- ------ ------ ------- ------ ------ ------ ----- -------- -------
Total Other Income (Expense), Net $ (11) $ (1) $ (204) $ (57) $ (60) $ (33) $ (54)
===== ====== ====== ======= ====== ====== ====== ===== ======== =======
NOTES:
- - Data exclude discontinued operations.
- - Income from financial investments, net, includes $9 million and $25
million of net realized gains related to the sale of marketable securities
for the three months and six months ended June 30, 2004, respectively.
- - Other, net, includes principally the monetization and disposition of other
non-operating assets, including a $5 million gain from the sale of
non-operating assets for the three months ended June 30, 2004 and $6
million of realized currency gains in both the first and second quarter of
2004.
Page 7
MASCO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2004 & 2003
(IN MILLIONS, EXCEPT PER SHARE DATA)
Three Months Ended As a Percent of Sales
June 30, Three Months Ended June 30,
% ------------------- ---------------------------
Line Change 2004 2003 2004 2003
- ------------ ------- -------- ------- ------------ -----------
1 Net Sales 16% $ 3,061 $ 2,628 100.0% 100.0%
2 Cost of Sales 15% 2,087 1,821 68.2% 69.3%
-------- ------- ----------- ----------
3 Gross Profit 21% 974 807 31.8% 30.7%
-------- ------- ----------- ----------
Operating Profit:
4 - Before GCE, Litigation (Income), (Gain) on Sale
of Fixed Assets and Accelerated Benefit (Income) (3-9) 29% 514 398 16.8% 15.1%
5 - After GCE, Litigation (Income), (Gain) on Sale
of Fixed Assets and Accelerated Benefit (Income) (3-10-11) 28% 477 374 15.6% 14.2%
-------- ------- ----------- ----------
S,G&A Expense:
6 - General Corporate Expense (GCE) 55% 45 29 1.5% 1.1%
7 - (Gain) on Sale of Corporate Fixed Assets (1) - 0.0% 0.0%
8 - Accelerated Benefit (Income) - (5) 0.0% -0.2%
9 - All Other 12% 460 409 15.0% 15.6%
-------- ------- ----------- ----------
10 - Total S,G&A Expense 16% 504 433 16.5% 16.5%
-------- ------- ----------- ----------
11 (Income) Regarding Litigation Settlement (7) - -0.2% 0.0%
12 Other Income (Expense), Net -67% (11) (33) -0.4% -1.3%
13 Income from Continuing Operations Before Income Taxes
and Minority Interest (5+12) 37% 466 341 15.2% 13.0%
14 Income Taxes 40% 167 119 5.5% 4.5%
(Tax Rate) 35.8% 34.9%
-------- ------- ----------- ----------
15 Income from Continuing Operations Before Minority Interest 35% 299 222 9.8% 8.4%
16 Minority Interest (5) (2) -0.2% -0.1%
-------- ------- ----------- ----------
17 Income from Continuing Operations 34% 294 220 9.6% 8.4%
18 (Loss) Income from Discontinued Operations, After
Income Taxes (33) 9 -1.1% 0.3%
-------- ------- ----------- ----------
19 Net Income 14% $ 261 $ 229 8.5% 8.7%
======== ======= =========== ==========
Earnings Per Common Share (Diluted):
Income from Continuing Operations 47% $ 0.65 $ 0.44
(Loss) Income from Discontinued Operations,
After Income Taxes (0.07) 0.02
-------- -------
Net Income 25% $ 0.58 $ 0.46
======== =======
Average (Diluted) Common Shares -9% 453 499
NOTE:
Data exclude discontinued operations.
Page 8
MASCO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2004 & 2003
(IN MILLIONS, EXCEPT PER SHARE DATA)
Six Months Ended As a Percent of Sales
June 30, Six Months Ended June 30,
% ----------------- -----------------------------
Line Change 2004 2003 2004 2003
- ------------ ------- -------- ------- -------------- ----------
1 Net Sales 18% $ 5,867 $ 4,980 100.0% 100.0%
2 Cost of Sales 17% 4,042 3,465 68.9% 69.6%
-------- ------- -------------- ----------
3 Gross Profit 20% 1,825 1,515 31.1% 30.4%
-------- ------- -------------- ----------
Operating Profit:
4 - Before GCE, Litigation (Income), (Gain) on Sale of Fixed
Assets and Accelerated Benefit Expense (3-9) 24% 909 735 15.5% 14.8%
5 - After GCE, Litigation (Income), (Gain) on Sale of Fixed
Assets and Accelerated Benefit Expense (3-10-11) 28% 864 675 14.7% 13.6%
-------- ------- -------------- ----------
S,G&A Expense:
6 - General Corporate Expense (GCE) 42% 81 57 1.4% 1.1%
7 - (Gain) on Sale of Corporate Fixed Assets (8) - -0.1% 0.0%
8 - Accelerated Benefit Expense - 16 0.0% 0.3%
9 - All Other 17% 916 780 15.6% 15.7%
-------- ------- -------------- ----------
10 - Total S,G&A Expense 16% 989 853 16.9% 17.1%
-------- ------- -------------- ----------
11 (Income) Regarding Litigation Settlement 115% (28) (13) -0.5% -0.3%
12 Other Income (Expense), Net -86% (12) (87) -0.2% -1.7%
13 Income from Continuing Operations Before Income Taxes
and Minority Interest (5+12) 45% 852 588 14.5% 11.8%
14 Income Taxes 50% 307 204 5.2% 4.1%
(Tax Rate) 36.0% 34.7%
-------- ------- -------------- ----------
15 Income from Continuing Operations Before Minority Interest 42% 545 384 9.3% 7.7%
16 Minority Interest (10) (6) -0.2% -0.1%
-------- ------- -------------- ----------
17 Income from Continuing Operations 42% 535 378 9.1% 7.6%
18 (Loss) Income from Discontinued Operations, After Income
Taxes (106) 17 -1.8% 0.3%
-------- ------- -------------- ----------
19 Net Income 9% $ 429 $ 395 7.3% 7.9%
======== ======= ============== ==========
Earnings Per Common Share (Diluted):
Income from Continuing Operations 55% $ 1.16 $ 0.75
(Loss) Income from Discontinued Operations, After
Income Taxes (0.23) 0.03
-------- -------
Net Income 19% $ 0.93 $ 0.79
======== =======
Average (Diluted) Common Shares -9% 460 503
Note:
Data exclude discontinued operations.
Page 9
MASCO CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
June 30, December 31,
ASSETS 2004 2003
------------ -----------
Current Assets:
Cash and Cash Investments $ 527 $ 795
Receivables 1,929 1,674
Inventories 1,134 1,019
Prepaid Expenses and Other 277 316
------------ -----------
Total Current Assets 3,867 3,804
Property and Equipment, Net 2,165 2,339
Goodwill 4,443 4,491
Other Intangible Assets, Net 334 344
Assets Held for Sale 319 ---
Other Assets 1,149 1,171
------------ -----------
Total Assets $ 12,277 $ 12,149
============ ===========
LIABILITIES
Current Liabilities:
Notes Payable $ 136 $ 334
Accounts Payable 869 715
Accrued Liabilities 1,045 1,050
------------ -----------
Total Current Liabilities 2,050 2,099
Long-Term Debt 4,297 3,848
Liabilities Held for Sale 98 ---
Deferred Income Taxes and Other 812 746
------------ -----------
Total Liabilities 7,257 6,693
SHAREHOLDERS' EQUITY 5,020 5,456
------------ -----------
Total Liabilities and
Shareholders' Equity $ 12,277 $ 12,149
============ ===========
Page 10
MASCO CORPORATION
GAAP RECONCILIATION OF SALES GROWTH
EXCLUDING EFFECT OF ACQUISITIONS & CURRENCY TRANSLATION
(DOLLARS IN MILLIONS)
Three Months Ended June 30,
-----------------------------
2004 2003
-------------- -----------
Consolidated Net Sales, as reported $ 3,061 $ 2,628
- Acquisitions (12) -
-------------- -----------
Consolidated Net Sales (excl. acquisitions) $ 3,049 $ 2,628
============== ===========
North American Net Sales, as reported $ 2,531 $ 2,198
- Acquisitions (12) -
-------------- -----------
North American Net Sales (excl. acquisitions) $ 2,519 $ 2,198
============== ===========
International Net Sales, as reported $ 530 $ 430
- Acquisitions - -
-------------- -----------
International Net Sales (excl. acquisitions) 530 430
- Currency Translation (38) -
-------------- -----------
International Net Sales (excl. acquisitions & currency) $ 492 $ 430
============== ===========
Six Months Ended June 30,
-----------------------------
2004 2003
-------------- -----------
Consolidated Net Sales, as reported $ 5,867 $ 4,980
- Acquisitions (28) -
-------------- -----------
Consolidated Net Sales (excl. acquisitions) $ 5,839 $ 4,980
============== ===========
North American Net Sales, as reported $ 4,802 $ 4,125
- Acquisitions (28) -
-------------- -----------
North American Net Sales (excl. acquisitions) $ 4,774 $ 4,125
============== ===========
International Net Sales, as reported $ 1,065 $ 855
- Acquisitions - -
-------------- -----------
International Net Sales (excl. acquisitions) 1,065 855
- Currency Translation (111) -
-------------- -----------
International Net Sales (excl. acquisitions & currency) $ 954 $ 855
============== ===========
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 11
MASCO CORPORATION
GAAP RECONCILIATION OF OPERATING PROFIT AND MARGINS
(DOLLARS IN MILLIONS)
THREE MONTHS ENDED JUNE 30,
------------------------------------------------
2004 2003
----------------------- ------------------
$ Margin $ Margin
--------- -------- ----- --------
Operating Profit, As Reported $ 477 15.6% $ 374 14.2%
Accelerated Benefit (Income) - (5)
European Charge - 23
(Income) Regarding Litigation Settlement (7) -
--------- -----
Operating Profit, As Reconciled $ 470 15.4% $ 392 14.9%
========= =====
SIX MONTHS ENDED JUNE 30,
------------------------------------------------
2004 2003
----------------------- ------------------
$ Margin $ Margin
--------- --------- ----- --------
Operating Profit, As Reported $ 864 14.7% $ 675 13.6%
Accelerated Benefit Expense - 16
European Charge - 23
(Income) Regarding Litigation Settlement (28) (13)
--------- -----
Operating Profit, As Reconciled $ 836 14.2% $ 701 14.1%
========= =====
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 12
MASCO CORPORATION
GAAP RECONCILIATION OF OPERATING PROFIT AND SHAREHOLDERS' EQUITY
(DOLLARS IN MILLIONS)
TWELVE MONTHS ENDED
JUNE 30,
-----------------------------------------
2004 2003
---------------- ----------------
Operating Profit from Continuing Operations $ 1,673 $ 1,285
Goodwill Impairment Charge 53 -
European Charges 31 23
(Income) from Planned Disposition of a Business - (16)
Accelerated Benefit Expense, Net - 16
(Income) Charge Regarding Litigation Settlement, Net (86) 134
---------------- ---------------
Operating Profit, As Reconciled $ 1,671 $ 1,442
================ ===============
TWELVE MONTHS ENDED
JUNE 30,
--------------------------------------------------------------
2004 2003 2002
---------------- --------------- ---------------
Shareholders' Equity, As Reported $ 5,020 $ 5,308 $ 5,082
2002 Goodwill Impairment Charge (after tax) 92 92 92
Goodwill Impairment Charge (after tax) 48 - -
European Charges (after tax) 22 16 -
(Income) from Planned Disposition of a Business (after tax) - (10) -
Accelerated Benefit Expense, Net (after tax) - 10 -
(Income) Charge Regarding Litigation Settlement, Net (after tax) (55) 84
---------------- --------------- ---------------
Shareholders' Equity, As Reconciled $ 5,127 $ 5,550 $ 5,174
================ =============== ===============
NOTES:
Data for the twelve months ended June 30, 2004 and 2003 have 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 the total of average debt (net of cash) and average
shareholders' equity.
Page 13
MASCO CORPORATION
DISCONTINUED OPERATIONS
(DOLLARS IN MILLIONS)
Three Months Ended
June 30,
------------------------------
2004 2003
------------ --------------
Net Sales $ 108 $ 159
============ ==============
Income Before Income Taxes $ 12 $ 14
Impairment Of Assets Of Discontinued Operations (44) -
Income Taxes (1) (5)
------------ --------------
(Loss) Income From Discontinued Operations, After Income Taxes $ (33) $ 9
============ ==============
Six Months Ended
June 30,
------------------------------
2004 2003
------------ --------------
Net Sales $ 203 $ 306
============ ==============
Income Before Income Taxes $ 18 $ 27
Impairment Of Assets Of Discontinued Operations (108) -
Income Taxes (16) (10)
------------ --------------
(Loss) Income From Discontinued Operations, After Income Taxes $ (106) $ 17
============ ==============
NOTES:
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, all of which
are treated as discontinued operations in accordance with SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets."
14