FOR IMMEDIATE RELEASE Contact: Samuel Cypert
313-792-6646
MASCO CORPORATION REPORTS RECORD THIRD QUARTER
AND INCREASES EARNINGS GUIDANCE FOR 2004
Taylor, Michigan (November 2, 2004) -- Masco Corporation (NYSE: MAS)
today reported that net sales from continuing operations for the third quarter
ended September 30, 2004 increased 12 percent, primarily from organic growth, to
a quarterly record $3.2 billion compared with $2.8 billion for the same period
in 2003. The Company's strong third quarter performance 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 third quarter of 2004 was
$289 million compared with $258 million for the same period in 2003. Earnings
from continuing operations increased to a third quarter record of $.64 per
common share compared with $.53 per common share for the 2003 third quarter.
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 $2.31 to $2.35 per common share. This
new guidance represents an increase from the previous guidance of $2.25 to $2.30
per common share. The Company anticipates that fourth quarter 2004 earnings from
continuing operations will be in a range of $.50 to $.54 per common share,
compared with fourth quarter 2003 earnings of $.32 per common share, which
included a non-cash charge for goodwill impairment of $.09 per common share. The
fourth quarter is seasonally one of the Company's lowest quarters in terms of
sales and earnings.
The 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. The year's guidance also
includes income related to the Behr litigation of $.04 per common share in the
first nine months of 2004 (principally in the first half), but excludes any
fourth quarter Behr litigation income (as such amounts cannot be predicted), any
gains or charges for businesses to be divested, other possible unusual items and
the impact of share repurchases subsequent to September 30, 2004.
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. During the third quarter of 2004, the
Company completed the sale of two of these businesses, Jung Pumpen in Germany
and The Alvic Group in Spain. Total proceeds from the sale of these businesses
were $191 million. The Company recognized a pre-tax, net gain on the disposition
of these businesses of $108 million ($93 million or $.21 per common share, after
tax). In addition, the Company recognized an additional pre-tax charge of $31
million related to the remaining businesses held for sale due to
lower-than-expected operating results as well as weaker-than-expected demand for
the businesses that the Company is divesting (these items are included in
discontinued operations). During the third quarter of 2003, the Company
recognized a pre-tax gain from the sale of businesses aggregating approximately
$91 million and also $6 million from the operating results of those businesses
(aggregating $.12 per common share, after tax; these items are included in
discontinued operations). Including discontinued operations, net income for the
2004 third quarter increased to $359 million compared with $319 million for the
2003 third quarter, and earnings increased to $.80 per common share compared
with $.65 per common share for the third 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 November 2, 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 (719) 457-2680 (confirmation #908324). 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 #908324)
approximately two hours after the end of the call and will continue through
November 9, 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
THIRD QUARTER SALES AND EARNINGS
Amounts are in millions, except per share data.
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- ------------------------
2004 2003 2004 2003
------- ------- ------- -------
Net Sales $ 3,173 $ 2,823 $ 9,040 $ 7,803
Cost of Sales 2,182 1,949 6,224 5,414
------- ------- ------- -------
Gross Profit 991 874 2,816 2,389
Selling, General and Administrative Expenses 502 459 1,491 1,312
(Income) Regarding Litigation Settlement (2) (58) (30) (71)
------- ------- ------- -------
Operating Profit 491 473 1,355 1,148
Other Income (Expense), Net (31) (60) (43) (147)
------- ------- ------- -------
Income from Continuing Operations Before Income
Taxes and Minority Interest 460 413 1,312 1,001
Income Taxes 167 153 474 357
------- ------- ------- -------
Income from Continuing Operations Before
Minority Interest 293 260 838 644
Minority Interest 4 2 14 8
------- ------- ------- -------
Income from Continuing Operations 289 258 824 636
Income (Loss) from Discontinued Operations, After Income Taxes 70 61 (36) 78
------- ------- ------- -------
Net Income $ 359 $ 319 $ 788 $ 714
======= ======= ======= =======
Earnings per Common Share (Diluted):
Income from Continuing Operations $ 0.64 $ 0.53 $ 1.81 $ 1.28
Income (Loss) from Discontinued Operations, After Income Taxes 0.16 0.13 (0.08) 0.16
------- ------- ------- -------
Net Income $ 0.80 $ 0.65 $ 1.73 $ 1.44
======= ======= ======= =======
Average Diluted Common Shares Outstanding 449 489 455 496
======= ======= ======= =======
Third quarter 2003 earnings from continuing operations, as previously reported,
included the negative impact of accounting irregularities and impairment charges
related to two businesses in the United Kingdom aggregating $.06 per common
share. These items were offset by income from an adjustment of the Behr
litigation accrual of $.07 per common share.
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), the 2004 dispositions of Jung
Pumpen and The Alvic Group and the remaining 2004 planned dispositions of
certain other European businesses as discontinued operations.
THIRD QUARTER 2004
o Net sales from continuing operations for the quarter increased 12 percent,
primarily from organic growth, with North American sales increasing 11
percent and International sales increasing 20 percent. In local currencies,
International sales increased nine percent compared with the third quarter
of 2003. The Company's sales growth benefited from market share gains, new
products and positive economic conditions impacting the new home
construction and home improvement markets.
o Sales of assembled cabinets, installation services, windows and plumbing
products were particularly strong in the quarter.
o Income from continuing operations for the quarter was $289 million
compared with $258 million for the third quarter of 2003.
o Earnings from continuing operations increased to a third quarter record of
$.64 per common share (exceeding the Company's recently increased guidance
of $.60 to $.63 per common share) compared with $.53 per common share for
the 2003 third quarter.
o Results for the third quarter of 2004 include income from the sale of
financial investments of $.01 per common share, after tax, comparable with
the third quarter of 2003, and compared with income of $.02 and $.04 per
common share in the second quarter and first quarter of 2004, respectively.
1
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
THIRD QUARTER 2004 (CONTINUED)
o 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. During the third quarter of 2004, the
Company completed the sale of two of these businesses, Jung Pumpen in
Germany and The Alvic Group in Spain. Total proceeds from the sale of these
businesses were $191 million. The Company recognized a pre-tax, net gain on
the disposition of these businesses of $108 million ($93 million or $.21
per common share, after tax). In addition, the Company recognized an
additional pre-tax charge of $31 million related to the remaining
businesses held for sale due to lower-than-expected operating results as
well as weaker-than-expected demand for the businesses that the Company is
divesting (these items are included in discontinued operations). During the
third quarter of 2003, the Company recognized a pre-tax gain from the sale
of businesses aggregating approximately $91 million and also $6 million
from the operating results of these businesses (aggregating $.12 per common
share, after tax; these items are included in results of discontinued
operations). Including discontinued operations, net income for the 2004
third quarter increased to $359 million compared with $319 million for the
2003 third quarter, and earnings increased to $.80 per common share
compared with $.65 per common share for the third quarter of 2003.
o Third quarter 2003 earnings from continuing operations, as previously
reported, included the negative impact of accounting irregularities and
impairment charges related to two businesses in the United Kingdom
aggregating $.06 per common share. These items were offset by income from
an adjustment of the Behr litigation accrual of $.07 per common share.
o Sales to key retail customers in the quarter (which were adversely affected
by weather in certain parts of the country -- particularly sales of
architectural coatings), increased six percent compared with an eight
percent increase in the third quarter of 2003.
o Sales increases by segment, which were substantially all organic growth, in
the 2004 third quarter versus the 2003 third quarter were:
o Cabinets and Related Products sales increased 12 percent;
o Plumbing Products sales increased 12 percent;
o Installation and Other Services sales increased 15 percent;
o Decorative Architectural Products sales increased four percent; and
o Other Specialty Products sales increased 20 percent.
2
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
THIRD QUARTER 2004 (CONTINUED)
o Gross margins were 31.2 percent in the third quarter of 2004 compared
with 31.0 percent in the third quarter of 2003. Operating profit
margins as reported were 15.5 percent in the third quarter of 2004
compared with 16.8 percent in the third quarter of 2003. Excluding
income related to the Behr litigation of $2 million in 2004 and $58
million in 2003 and the European charges of $42 million in 2003,
operating profit margins were 15.4 percent in the third quarter of 2004
compared with 16.2 percent in the third quarter of 2003.
o Results in the third 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.
o The Company achieved improved operating profit margins in three of its
five segments. The lower margins in the Installation and Other Services
segment resulted primarily from 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 in this segment 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. The lower margins in the Plumbing
Products segment are primarily due to increased material costs and an
increase in sales of lower margin products offset in part by higher
sales volume of certain products.
o SG&A expenses as a percent of sales, including general corporate
expense, were 15.8 percent in the third quarter of 2004 and 16.3
percent in the third quarter of 2003. The decline was principally the
result of lower promotion and advertising costs partially offset by
higher costs and expenses associated with complying with the new
requirements of the Sarbanes-Oxley Legislation.
3
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
THIRD QUARTER 2004 (CONTINUED)
o General corporate expense was 1.7 percent of sales in the third quarter
of 2004 compared with 1.1 percent in the comparable period of 2003. The
increase is partially attributable to approximately $11 million of
incremental external costs and expenses (principally professional fees)
associated with complying with the new requirements of the
Sarbanes-Oxley Legislation.
o Accounts receivable days at the end of the third quarter were 51 days
compared with 53 days a year ago.
o Inventory days were 49 days at September 30, 2004 compared with 50 days
at September 30, 2003.
o Accounts payable days at the end of the third quarter were 38 days for
both 2004 and 2003.
o Working capital at September 30, 2004 (defined as accounts receivable
and inventories less accounts payable) improved to 18.5 percent of the
last twelve months of sales from 20.5 percent a year earlier.
o The Company's tax rate was 36.3 percent for the third quarter of 2004
compared with 37.0 percent for the comparable period of the prior year.
The Company anticipates that its tax rate for 2004 will approximate 36
percent.
o At the end of the quarter, the Company had a strong balance sheet, with
$1.3 billion in cash and marketable securities and $2.0 billion in
unused bank lines. In the third quarter of 2004, the Company generated
approximately $127 million of cash from the net disposition of
financial assets.
o Debt as a percent of total capitalization was 45 percent at both
September 30, 2004 and 2003.
o For the twelve months ended September 30, 2004 and September 30, 2003,
return on invested capital was 12.9 percent and 11.3 percent,
respectively. For the twelve months ended September 30, 2004 and
September 30, 2003, return on invested capital (as reconciled) was 12.8
percent and 10.9 percent, respectively. The Company continues to
believe that it will achieve its 15 percent return on invested capital
goal by 2008 or sooner.
4
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
THIRD QUARTER 2004 (CONCLUDED)
o The Company repurchased three million common shares during the quarter
and had 21 million common shares remaining at September 30, 2004 under
the December 2003 Board of Directors repurchase authorization of 50
million shares.
o In the first nine months of 2004, the Company has returned
approximately $1 billion to shareholders through share repurchases (27
million shares) and dividends. In 2003, the Company returned in excess
of $1 billion to shareholders through share repurchases (35 million
shares) and dividends.
o In the third quarter of 2004 the quarterly dividend was increased 12.5
percent from $.16 to $.18 per common share. In 2003, the quarterly
dividend was increased 14 percent from $.14 to $.16 per common share.
The Company has increased dividends for 46 consecutive years.
o The Company's diluted common shares for purposes of calculating
earnings per common share were 449 million for the third quarter of
2004 compared with 489 million for the third quarter of 2003.
FULL-YEAR OUTLOOK
o Based on the current market price for the Company's common stock,
diluted common shares for the computation of earnings per common share
at October 1, 2004 were 448 million; this excludes the impact of any
repurchases of common stock subsequent to September 30, 2004.
o 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 $2.31 to
$2.35 per common share. This new guidance represents an increase from
the previous guidance of $2.25 to $2.30 per common share.
o Based on current business trends, the Company anticipates that fourth
quarter 2004 earnings from continuing operations will be in a range of
$.50 to $.54 per common share, compared with fourth quarter 2003
earnings of $.32 per common share, which included a non-cash charge for
goodwill impairment of $.09 per common share. The fourth quarter is
seasonally one of the Company's lowest quarters in terms of sales and
earnings.
5
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FULL-YEAR OUTLOOK (CONTINUED)
o Earnings guidance for 2004 also includes a reduction of approximately
$.05 per common share on a full-year basis 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. The 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 incremental external costs and expenses (principally
professional fees) associated with complying with the new requirements
of the Sarbanes-Oxley Legislation aggregating approximately $26 million
for the nine months ended September 30, 2004. The guidance also
includes income related to the Behr litigation of $.04 per common share
in the first nine months of 2004 (principally in the first half), but
excludes any fourth quarter Behr litigation income (as such amounts
cannot be predicted), any gains or charges for businesses to be
divested, other possible unusual items and the impact of share
repurchases subsequent to September 30, 2004.
o The Company's marketable securities and bond funds have an aggregate
cost basis and a market value of $329 million and $346 million
respectively, including unrealized gains of $39 million and unrealized
losses of $22 million (principally Furniture Brands International
(FBN)) at September 30, 2004.
o Included in marketable securities are four million shares of Furniture
Brands International common stock, which was received in June 2002 from
the Company's investment in Furnishings International Inc. debt. The
market price of FBN during 2004 has been above and below the Company's
cost basis of $30.25 per share. If the price remains significantly
below the cost basis, the Company may record an other-than-temporary
asset impairment charge in the fourth quarter of 2004. The Company has
not included any potential charge in its guidance for the 2004 fourth
quarter or full-year earnings estimates.
6
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FULL-YEAR OUTLOOK (CONCLUDED)
o The Financial Accounting Standards Board has implemented accounting
rules that would require the Company to include 24 million shares in
the calculation of diluted earnings per common share related to the
Company's Zero Coupon Convertible Senior Notes due 2031. Currently, the
shares related to the Notes are not included in the calculation of
diluted earnings per common share, since the Notes are not convertible
according to their terms. The Company is considering alternatives to
minimize the estimated dilutive impact (approximately $.08 per common
share for 2004 and lesser amounts in prior years) of the shares related
to the Notes.
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.
###
7
MASCO CORPORATION - 3rd QUARTER 2004
PAGE
- ----
1 Condensed Statements of Income - 2004 & 2003 Quarters
2 Notes to Condensed Statements of Income - 2004 & 2003 Quarters
3 Sales by Segment and Geographic Area - Three Months Ended September 30, 2004 & 2003
4 Sales by Segment and Geographic Area - Nine Months Ended September 30, 2004 & 2003
5 2004 Quarterly Segment Data
6 2003 Quarterly Segment Data - Excluding Goodwill Impairment Charge
7 2003 Quarterly Segment Data - Including Goodwill Impairment Charge
8 Other Income (Expense), Net - 2004 & 2003 Quarters
9 Consolidated Statements of Income - Three Months Ended September 30, 2004 & 2003
10 Consolidated Statements of Income - Nine Months Ended September 30, 2004 & 2003
11 Consolidated Balance Sheets
GAAP Reconciliations:
12 Sales Growth Excluding Effect of Acquisitions & Currency Translation
13 Operating Profit and Margins
14 Operating Profit and Shareholders' Equity
15 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. 3 Qtr. 2 Qtr. 1 Year Qtr. 4 Qtr. 3 Qtr. 2 Qtr. 1
------ ------ ------ ------ ------ ------ ------ -------
Net Sales:
- North America $2,627 $2,531 $2,271 $8,763 $2,269 $2,369 $2,198 $ 1,927
- International 546 530 535 1,808 499 454 430 425
------ ------ ------ ------ ------ ------ ------ -------
- Consolidated 3,173 3,061 2,806 10,571 2,768 2,823 2,628 2,352
Cost of Sales 2,182 2,087 1,955 7,330 1,916 1,949 1,821 1,644
------ ------ ------ ------ ------ ------ ------ -------
Gross Profit 991 974 851 3,241 852 874 807 708
(Gross Margin) 31.2% 31.8% 30.3% 30.7% 30.8% 31.0% 30.7% 30.1%
S,G&A Expense (before GCE, Fixed Asset (Gain) &
Benefit Expense (Income) 449 460 456 1,648 442 426 409 371
(S,G&A Expense as a % of Sales) 14.2% 15.0% 16.3% 15.6% 16.0% 15.1% 15.6% 15.8%
------ ------ ------ ------ ------ ------ ------ -------
Operating Profit (before GCE, Fixed Asset (Gain),
Litigation (Income), Benefit Expense (Income) & Goodwill
Impairment Charge) 542 514 395 1,593 410 448 398 337
(Operating Margin) 17.1% 16.8% 14.1% 15.1% 14.8% 15.9% 15.1% 14.3%
- North America 478 442 329 1,433 353 431 373 276
(Margin) 18.2% 17.5% 14.5% 16.4% 15.6% 18.2% 17.0% 14.3%
- International 64 72 66 160 57 17 25 61
(Margin) 11.7% 13.6% 12.3% 8.8% 11.4% 3.7% 5.8% 14.4%
General Corporate Expense (GCE) 53 45 36 115 27 31 29 28
S,G&A Expense as a % of Sales
(including GCE, Fixed Asset (Gain) & Benefit Expense)
(Income) 15.8% 16.5% 17.3% 16.8% 16.9% 16.1% 16.5% 17.9%
(Gains) on Sale of Corporate Fixed Assets, Net - (1) (7) (3) - (3) - -
(Income) Regarding Litigation Settlement (2) (7) (21) (72) (1) (58) - (13)
Accelerated Benefit Expense (Income), Net - - - 16 - - (5) 21
Goodwill Impairment Charge - - - 53 48 5 - -
------ ------ ------ ------ ------ ------ ------ -------
Operating Profit per F/S $ 491 $ 477 $ 387 $1,484 $ 336 $ 473 $ 374 $ 301
====== ====== ====== ====== ====== ====== ====== =======
Earnings per Common Share (Diluted):
Income from Continuing Operations $ 0.64 $ 0.65 $ 0.52 $ 1.61 $ 0.32 $ 0.53 $ 0.44 $ 0.30
Income (Loss) From Discontinued Operations
and Gain (Loss), Net 0.16 (0.07) (0.16) 0.03 (0.13) 0.13 0.02 0.01
------ ------ ------ ------ ------ ------ ------ -------
Net Income $ 0.80 $ 0.58 $ 0.36 $ 1.64 $ 0.19 $ 0.65 $ 0.46 $ 0.32
====== ====== ====== ====== ====== ====== ====== =======
SEE PAGE 2 FOR NOTES.
Page 1
MASCO CORPORATION
NOTES TO CONDENSED STATEMENTS OF INCOME
2004 AND 2003 - BY QUARTER
RESTATED FOR DISCONTINUED OPERATIONS
NOTES:
- - Operating results exclude 2004 planned dispositions as well as operations
which were sold in 2004 and 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."
- - Income from discontinued operations in the third quarter of 2004 includes
a $108 million pre-tax gain, net ($.21 per common share, after tax) from
the sale of two businesses and an additional charge of $31 million ($.07
per common share, after tax) related to the remaining businesses held for
sale.
- - (Loss) from discontinued operations in the first and second quarters of
2004 includes pre-tax charges of $64 million ($.16 per common share, after
tax) and $44 million ($.10 per common share, after tax), respectively.
- - Operating results for the fourth quarter of 2003 reflect a non-cash,
after-tax charge for goodwill impairment of $42 million ($.09 per common
share).
- - (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).
- - Operating results reflect pre-tax 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 European
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 European business unit in the Plumbing Products segment.
- - 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).
- - 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.
- - Per common share amounts for the four quarters of 2003 and the three
quarters of 2004 do not total to the per common share amount for the
respective year and year to date due to the timing of capital stock
transactions and the effect of contingently issuable shares.
Page 2
MASCO CORPORATION
SALES BY SEGMENT AND GEOGRAPHIC AREA
THREE MONTHS ENDED SEPTEMBER 30, 2004 & 2003
(DOLLARS IN MILLIONS)
Three Months Ended
September 30, 3rd Qtr '04
-------------------- vs.
2004 2003 3rd Qtr '03
------ ------ ------------
Cabinets & Related Products $ 856 $ 761 + 12%
Plumbing Products 775 692 + 12%
Installation & Other Services 737 642 + 15%
Decorative Architectural Products 433 418 + 4%
Other Specialty Products 372 310 + 20%
------ ------
Total $3,173 $2,823 + 12%
====== ======
North America $2,627 $2,369 + 11%
International, principally Europe 546 454 + 20%
------ ------
Total, as above $3,173 $2,823 + 12%
====== ======
NOTES:
- - Data exclude discontinued operations.
- - Excluding acquisitions, consolidated net sales increased 12 percent, North
American net sales increased 10 percent and International net sales
increased 20 percent (see page 12 for the GAAP reconciliation).
- - International sales in local currencies increased nine percent compared
with the third quarter of 2003 (see page 12 for the GAAP reconciliation).
Page 3
MASCO CORPORATION
SALES BY SEGMENT AND GEOGRAPHIC AREA
NINE MONTHS ENDED SEPTEMBER 30, 2004 & 2003
(DOLLARS IN MILLIONS)
Nine Months Ended
September 30, 9 Months '04
----------------- vs.
2004 2003 9 Months '03
------ ------ ------------
Cabinets & Related Products $2,432 $2,114 + 15%
Plumbing Products 2,299 1,990 + 16%
Installation & Other Services 2,053 1,769 + 16%
Decorative Architectural Products 1,254 1,099 + 14%
Other Specialty Products 1,002 831 + 21%
------ ------
Total $9,040 $7,803 + 16%
====== ======
North America $7,429 $6,494 + 14%
International, principally Europe 1,611 1,309 + 23%
------ ------
Total, as above $9,040 $7,803 + 16%
====== ======
NOTES:
- - Data exclude discontinued operations.
- - Excluding acquisitions, consolidated net sales increased 15 percent, North
American net sales increased 14 percent and International net sales
increased 23 percent (see page 12 for the GAAP reconciliation).
- - International sales in local currencies increased 11 percent compared with
the first nine months of 2003 (see page 12 for the GAAP reconciliation).
Page 4
MASCO CORPORATION
QUARTERLY SEGMENT DATA - 2004
(DOLLARS IN MILLIONS)
Year Qtr. 4 Qtr. 3 Qtr. 2 Qtr. 1
---- ------ -------- -------- --------
Net Sales:
- Cabinets and Related Products $ 856 $ 797 $ 779
- Plumbing Products 775 785 739
- Installation and Other Services 737 686 630
- Decorative Architectural Products 433 451 370
- Other Specialty Products 372 342 288
---- ------ ------- ------- -------
- TOTAL 3,173 3,061 2,806
==== ====== ======= ======= =======
- North America 2,627 2,531 2,271
- International, principally Europe 546 530 535
---- ------ ------- ------- -------
- TOTAL, AS ABOVE 3,173 3,061 2,806
==== ====== ======= ======= =======
Operating Profit:
- Cabinets and Related Products 150 137 109
- Plumbing Products 101 117 96
- Installation and Other Services 103 88 81
- Decorative Architectural Products 102 101 64
- Other Specialty Products 86 71 45
---- ------ ------- ------- -------
- TOTAL 542 514 395
==== ====== ======= ======= =======
- North America 478 442 329
- International, principally Europe 64 72 66
---- ------ ------- ------- -------
- TOTAL, AS ABOVE 542 514 395
==== ====== ======= ======= =======
General Corporate Expense (GCE) 53 45 36
(Gains) on Sale of Corporate Fixed Assets, Net - (1) (7)
(Income) Regarding Litigation Settlement (2) (7) (21)
---- ------ ------- ------- -------
Operating Profit (after GCE and Adjustments) 491 477 387
Other Income (Expense), Net (31) (11) (1)
---- ------ ------- ------- -------
Income from Continuing Operations Before
Income Taxes and Minority Interest $ 460 $ 466 $ 386
==== ====== ======= ======= =======
Margins:
- Cabinets and Related Products 17.5% 17.2% 14.0%
- Plumbing Products 13.0% 14.9% 13.0%
- Installation and Other Services 14.0% 12.8% 12.9%
- Decorative Architectural Products 23.6% 22.4% 17.3%
- Other Specialty Products 23.1% 20.8% 15.6%
- TOTAL 17.1% 16.8% 14.1%
- North America 18.2% 17.5% 14.5%
- International, principally Europe 11.7% 13.6% 12.3%
- TOTAL, AS ABOVE 17.1% 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 (gains) on sale of Corporate fixed assets, net.
Page 5
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) 115 27 31 29 28
(Gains) on Sale of Corporate Fixed Assets, Net (3) - (3) - -
(Income) Regarding Litigation Settlement (72) (1) (58) - (13)
Accelerated Benefit Expense, (Income) 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.
- - Operating results for the fourth quarter of 2003 exclude a non-cash,
pre-tax charge for goodwill impairment of $48 million. 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 $30 million which excludes $5 million
for impairment of goodwill, in the third quarter of 2003; and $23 million
in the second quarter of 2003, respectively, for a business unit in the
Decorative Architectural Products segment; and $7 million 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 (gains) on sale
of Corporate fixed assets, net.
Page 6
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) 115 27 31 29 28
(Gains) on Sale of Corporate Fixed Assets, Net (3) - (3) - -
(Income) Regarding Litigation Settlement (72) (1) (58) - (13)
Accelerated Benefit Expense (Income), 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.
- - Operating results for the fourth quarter of 2003 reflect a non-cash,
pre-tax charge for goodwill impairment of $48 million. 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, including $5 million for
impairment of goodwill, in the third quarter of 2003; and $23 million in
the second quarter of 2003, respectively, for a business unit in the
Decorative Architectural Products segment; and $7 million 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 (gains) on sale
of Corporate fixed assets, net.
Page 7
MASCO CORPORATION
OTHER INCOME (EXPENSE), NET
2004 AND 2003 QUARTERS
(IN MILLIONS)
2004 2003
----------------------------------------- ----------------------------------------
Year Qtr.4 Qtr.3 Qtr.2 Qtr.1 Year Qtr.4 Qtr.3 Qtr.2 Qtr.1
---- ----- ------ ----- ------- ------ ------ ----- ----- -----
Interest Expense $ (55) $(52) $ (53) $(261) $(60) $(67) $(67) $(67)
Income from Cash and Cash Investments 3 1 2 8 2 2 2 2
Other Interest Income 2 1 2 8 3 2 1 2
Income from Financial Investments, Net 17 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 2 18 12 (3) (1) (4) 7 (5)
---- ----- ----- ---- ------ ----- ---- ---- ---- ----
Total Other Income (Expense), Net $ (31) $(11) $ (1) $(204) $(57) $(60) $(33) $(54)
==== ===== ===== ==== ====== ===== ==== ==== ==== ====
NOTES:
- - Data exclude discontinued operations.
- - Income from financial investments, net, includes $9 million and $52
million of net realized gains for the three months and nine months ended
September 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 nine months ended September 30, 2004 and
$(1) million and $11 million of realized currency (losses) gains for the
three months and nine months ended September 30, 2004, respectively.
Page 8
MASCO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 & 2003
(IN MILLIONS, EXCEPT PER SHARE DATA)
Three Months Ended As a Percent of Sales
September 30, 3 Months Ended September 30,
% ----------------------- ----------------------------
Line Change 2004 2003 2004 2003
- ---- ------ --------- --------- ------ ------
1 Net Sales 12% $ 3,173 $ 2,823 100.0% 100.0%
2 Cost of Sales 12% 2,182 1,949 68.8% 69.0%
--------- --------- ----- -----
3 Gross Profit 13% 991 874 31.2% 31.0%
--------- --------- ----- -----
Operating Profit:
4 - Before GCE, Litigation (Income), (Gain) on Sale
of Fixed Assets and Goodwill Charge (3-9) 21% 542 448 17.1% 15.9%
5 - After GCE, Litigation (Income), (Gain) on Sale of Fixed
Assets and Goodwill Charge (3-10-11) 4% 491 473 15.5% 16.8%
--------- --------- ----- -----
S,G&A Expense:
6 - General Corporate Expense (GCE) 71% 53 31 1.7% 1.1%
7 - (Gains) on Sale of Corporate Fixed Assets, Net - (3) 0.0% -0.1%
8 - Goodwill Impairment Charge - 5 0.0% 0.2%
9 - All Other 5% 449 426 14.2% 15.1%
--------- --------- ----- -----
10 - Total S,G&A Expense 9% 502 459 15.8% 16.3%
--------- --------- ----- -----
11 (Income) Regarding Litigation Settlement (2) (58) -0.1% -2.1%
12 Other Income (Expense), Net -48% (31) (60) -1.0% -2.1%
13 Income from Continuing Operations Before Income Taxes
and Minority Interest (5-12) 11% 460 413 14.5% 14.6%
14 Income Taxes 9% 167 153 5.3% 5.4%
(Tax Rate) 36.3% 37.0%
--------- --------- ----- -----
15 Income from Continuing Operations Before Minority Interest 13% 293 260 9.2% 9.2%
16 Minority Interest (4) (2) -0.1% -0.1%
--------- --------- ----- -----
17 Income from Continuing Operations 12% 289 258 9.1% 9.1%
18 Income from Discontinued Operations, After Income Taxes 70 61 2.2% 2.2%
--------- --------- ----- -----
19 Net Income 13% $ 359 $ 319 11.3% 11.3%
========= ========= ===== =====
Earnings Per Common Share (Diluted):
Income from Continuing Operations 22% $ 0.64 $ 0.53
Income from Discontinued Operations, After Income Taxes 0.16 0.13
--------- ---------
Net Income 23% $ 0.80 $ 0.65
========= =========
Average (Diluted) Common Shares -8% 449 489
Page 9
MASCO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 & 2003
(IN MILLIONS, EXCEPT PER SHARE DATA)
Nine Months Ended As a Percent of Sales
September 30, 9 Months Ended September 30,
% -------------------- ----------------------------
Line Change 2004 2003 2004 2003
- ---- ------ ------- --------- ------ ------
1 Net Sales 16% $ 9,040 $ 7,803 100.0% 100.0%
2 Cost of Sales 15% 6,224 5,414 68.8% 69.4%
------- -------- ----- -----
3 Gross Profit 18% 2,816 2,389 31.2% 30.6%
======= ======== ===== =====
Operating Profit:
4 - Before GCE, Litigation (Income), (Gain)
on Sale of Fixed Assets, Accelerated Benefit
Expense and Goodwill Charge (3-10) 23% 1,451 1,183 16.1% 15.2%
5 - After GCE, Litigation (Income), (Gain) on Sale
of Fixed Assets, Accelerated Benefit Expense
and Goodwill Charge (3-11-12) 18% 1,355 1,148 15.0% 14.7%
------- -------- ----- -----
S,G&A Expense:
6 - General Corporate Expense (GCE) 52% 134 88 1.5% 1.1%
7 - (Gains) on Sale of Corporate Fixed Assets, Net (8) (3) -0.1% 0.0%
8 - Accelerated Benefit Expense, Net - 16 0.0% 0.2%
9 - Goodwill Impairment Charge - 5 0.0% 0.1%
10 - All Other 13% 1,365 1,206 15.1% 15.5%
------- -------- ----- -----
11 - Total S,G&A Expense 14% 1,491 1,312 16.5% 16.8%
======= ======== ===== =====
12 (Income) Regarding Litigation Settlement -58% (30) (71) -0.3% -0.9%
13 Other Income (Expense), Net -71% (43) (147) -0.5% -1.9%
14 Income from Continuing Operations Before Income Taxes
and Minority Interest (5+13) 31% 1,312 1,001 14.5% 12.8%
15 Income Taxes 33% 474 357 5.2% 4.6%
(Tax Rate) 36.1% 35.7%
------- -------- ----- -----
16 Income from Continuing Operations Before Minority Interest 30% 838 644 9.3% 8.3%
17 Minority Interest (14) (8) -0.2% -0.1%
------- -------- ----- -----
18 Income from Continuing Operations 30% 824 636 9.1% 8.2%
19 (Loss) Income from Discontinued Operations, After Income
Taxes (36) 78 -0.4% 1.0%
------- -------- ----- -----
20 Net Income 10% $ 788 $ 714 8.7% 9.2%
======= ======== ===== =====
Earnings Per Common Share (Diluted):
Income from Continuing Operations 41% $ 1.81 $ 1.28
(Loss) Income from Discontinued Operations,
After Income Taxes (0.08) 0.16
------- --------
Net Income 20% $ 1.73 $ 1.44
======= ========
Average (Diluted) Common Shares -8% 455 496
Page 10
MASCO CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
September 30, December 31,
2004 2003
------------- ------------
ASSETS
Current Assets:
Cash and Cash Investments $ 969 $ 795
Accounts and Notes Receivable, Net 1,908 1,674
Inventories 1,126 1,019
Prepaid Expenses and Other 276 316
------- -------
Total Current Assets 4,279 3,804
Property and Equipment, Net 2,165 2,339
Goodwill 4,445 4,491
Other Intangible Assets, Net 330 344
Assets Held for Sale 175 --
Other Assets 995 1,171
------- -------
Total Assets $12,389 $12,149
======= =======
LIABILITIES
Current Liabilities:
Notes Payable $ 44 $ 334
Accounts Payable 852 715
Accrued Liabilities 1,130 1,050
------- -------
Total Current Liabilities 2,026 2,099
Long-Term Debt 4,210 3,848
Liabilities Held for Sale 60 --
Deferred Income Taxes and Other 851 746
------- -------
Total Liabilities 7,147 6,693
SHAREHOLDERS' EQUITY 5,242 5,456
------- -------
Total Liabilities and Shareholders' Equity $12,389 $12,149
======= =======
Page 11
MASCO CORPORATION
GAAP RECONCILIATION OF SALES GROWTH
EXCLUDING EFFECT OF ACQUISITIONS & CURRENCY TRANSLATION
(IN MILLIONS)
Three Months Ended September 30,
--------------------------------
2004 2003
-------- ------
Consolidated Net Sales, as reported $ 3,173 $ 2,823
- Acquisitions (11) -
------- -------
Consolidated Net Sales (excl. acquisitions) $ 3,162 $ 2,823
======= =======
North American Net Sales, as reported $ 2,627 $ 2,369
- Acquisitions (11) -
------- -------
North American Net Sales (excl. acquisitions) $ 2,616 $ 2,369
======= =======
International Net Sales, as reported $ 546 $ 454
- Acquisitions - -
------- -------
International Net Sales (excl. acquisitions) 546 454
- Currency Translation (49) -
------- -------
International Net Sales (excl. acquisitions & currency) $ 497 $ 454
======= =======
Nine Months Ended September 30,
-------------------------------
2004 2003
-------- ---------
Consolidated Net Sales, as reported $ 9,040 $ 7,803
- Acquisitions (39) -
------- -------
Consolidated Net Sales (excl. acquisitions) $ 9,001 $ 7,803
======= =======
North American Net Sales, as reported $ 7,429 $ 6,494
- Acquisitions (39) -
------- -------
North American Net Sales (excl. acquisitions) $ 7,390 $ 6,494
======= =======
International Net Sales, as reported $ 1,611 $ 1,309
- Acquisitions - -
------- -------
International Net Sales (excl. acquisitions) 1,611 1,309
- Currency Translation (160) -
------- -------
International Net Sales (excl. acquisitions & currency) $ 1,451 $ 1,309
======= =======
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 12
MASCO CORPORATION
GAAP RECONCILIATION OF OPERATING PROFIT AND MARGINS
(DOLLARS IN MILLIONS)
THREE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------
2004 2003
------------------ -----------------
$ Margin $ Margin
------ ------- ----- ------
Operating Profit, As Reported $ 491 15.5% $ 473 16.8%
(Income) Regarding Litigation Settlement (2) (58)
European Charges - 42
----- -----
Operating Profit, As Reconciled $ 489 15.4% $ 457 16.2%
===== =====
NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------------
2004 2003
-------------------- ----------------------
$ Margin $ Margin
-------- ------ -------- -------
Operating Profit, As Reported $ 1,355 15.0% $ 1,148 14.7%
(Income) Regarding Litigation Settlement (30) (71)
European Charges - 59
Accelerated Benefit Expense, Net - 16
------- -------
Operating Profit, As Reconciled $ 1,325 14.7% $ 1,152 14.8%
======= =======
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 13
MASCO CORPORATION
GAAP RECONCILIATION OF OPERATING PROFIT AND SHAREHOLDERS' EQUITY
(IN MILLIONS)
TWELVE MONTHS ENDED
SEPTEMBER 30,
--------------------
2004 2003
------- -------
Operating Profit from Continuing Operations $ 1,691 $ 1,521
Goodwill Impairment Charge 48 5
European Charges - 54
(Income) from Planned Disposition of a Business - (16)
Accelerated Benefit Expense, Net - 16
(Income) Regarding Litigation Settlement (31) (90)
------- -------
Operating Profit, As Reconciled $ 1,708 $ 1,490
======= =======
TWELVE MONTHS ENDED
SEPTEMBER 30,
--------------------------------
2004 2003 2002
------- ------- ------
Shareholders' Equity, As Reported $ 5,242 $ 5,405 $5,336
2002 Goodwill Impairment Charge (after tax) 92 92 92
Goodwill Impairment Charge (after tax) 43 5 -
European Charges (after tax) - 38 -
(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) (20) (57) 105
------- ------- ------
Shareholders' Equity, As Reconciled $ 5,357 $ 5,483 $5,533
======= ======= ======
NOTES:
Data exclude discontinued operations.
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 14
MASCO CORPORATION
DISCONTINUED OPERATIONS
(IN MILLIONS)
THREE MONTHS ENDED
SEPTEMBER 30,
-------------------
2004 2003
---- ------
Net Sales $ 99 $ 163
==== =====
Income Before Income Taxes $ 10 $ 12
Gain on Disposal of Discontinued Operations, Net 108 90
Impairment Charge for Assets Held for Sale (31) -
Income Taxes (17) (41)
---- -----
Income From Discontinued Operations, After Income Taxes $ 70 $ 61
==== =====
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
2004 2003
------ ------
Net Sales $ 302 $ 469
===== =====
Income Before Income Taxes $ 28 $ 39
Gain on Disposal of Discontinued Operations, Net 108 90
Impairment Charge for Assets Held for Sale (139) -
Income Taxes (33) (51)
----- -----
(Loss) Income From Discontinued Operations, After Income Taxes $ (36) $ 78
===== =====
NOTES:
Data exclude discontinued operations.
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.
Page 15