EXHIBIT 99
FOR IMMEDIATE RELEASE
Contact:
Samuel Cypert
313-792-6646
MASCO CORPORATION REPORTS RECORD SALES AND EARNINGS FOR 2004
AND FORECASTS ANOTHER RECORD YEAR FOR 2005
MASCO CORPORATION 2004 HIGHLIGHTS:
FULL-YEAR 2004
- Net sales from continuing operations increased 14 percent to a
record $12.1 billion.
- Income from continuing operations was $2.35 per common share
excluding the impact of a goodwill impairment charge and $2.04
per common share including the impairment charge.
- Free cash flow before dividends exceeded $1.1 billion.
- The Company returned $1.2 billion to shareholders through
share repurchases (31 million shares) and dividends.
- The quarterly dividend was increased by 12.5 percent, the 46th
consecutive year in which dividends have been increased.
- The Company had $1.5 billion of cash and marketable securities
at year-end.
Taylor, Michigan (February 23, 2005) - Masco Corporation (NYSE: MAS) today
reported that net sales from continuing operations for the year ended December
31, 2004 increased 14 percent, primarily from organic growth, to a record $12.1
billion compared with $10.6 billion for 2003.
Income from continuing operations for the year ended December 31, 2004 was
$1,071 million or $2.35 per common share, excluding the impact of a goodwill
impairment charge pertaining to certain European operations. Including the
impact of this non-cash, after-tax goodwill impairment charge of $141 million,
earnings from continuing operations were $930 million or $2.04 per common share.
Results for the year ended December 31, 2004 benefited from strong organic
sales growth partially offset by increases in commodity costs which were not
recovered due to the delay in implementing selling price increases to customers,
costs associated with the Sarbanes-Oxley Legislation and increased energy and
freight costs. In addition, 2004 benefited from net gains related to the
liquidation of a portion of the Company's financial investments and from income
related to the Behr litigation.
Fourth quarter of 2004 net sales from continuing operations increased 10
percent to over $3.0 billion compared with $2.8 billion in the 2003 fourth
quarter. Income from continuing operations for the fourth quarter of 2004 was
$247 million or $.55 per common share, excluding the non-cash, after-tax
goodwill impairment charge of $141 million. Including such charge, income from
continuing operations was $106 million or $.23 per common share.
Results for the fourth quarter of 2004 benefited from pre-tax gains from
the sale of financial investments of $40 million or $.06 per common share after
tax partially offset by a pre-tax impairment charge of $21 million or $.03 per
common stock after tax related to the Company's investment in Furniture Brands
International common stock. Results also benefited from a reduction in the
Company's tax rate related to the utilization of foreign tax credits generated
in the fourth quarter on distributions of foreign earnings which benefited
earnings by $.02 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. During the fourth quarter of 2004, the
Company completed the additional sale of three of these businesses: Alma Kuchen,
E. Missel and SKS Group.
Including discontinued operations, net income for the 2004 fourth quarter
increased to $246 million compared with $205 million for the 2003 fourth
quarter, and earnings increased to $.55 per common share compared with $.43 per
common share for the fourth quarter of 2003, excluding non-cash, after-tax
goodwill impairment charges of $141 million and $113 million in 2004 and 2003,
respectively. Including discontinued operations and the goodwill impairment
charges, net income for the 2004 fourth quarter increased to $105 million
compared with $92 million for the 2003 fourth quarter, and earnings increased to
$.23 per common share compared with $.19 per common share for the fourth quarter
of 2003.
The Company believes, based on current business trends, that it will
achieve record sales and earnings for 2005 with full-year earnings from
continuing operations in a range of $2.40 to $2.50 per common share. The Company
anticipates that first quarter 2005 earnings from continuing operations
(seasonally the lowest quarter of the year) are expected to be in a range of
$.44 to $.47 per common share, compared with first quarter 2004 earnings from
continuing operations of $.52 per common share, which included $.03 per common
share of income related to the Behr litigation and $.07 per common share of
previously disclosed other income, principally net gains from the sale of
financial investments. The Company's guidance reflects recent additional
increases in commodity costs which the Company believes will not be offset with
selling price increases until later in 2005.
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 Wednesday, February 23, 2005 at 1:00 p.m. ET. Participants in the call are
asked to register five to ten minutes prior to the scheduled start time by
dialing (719) 457-2632 (confirmation #8393274). 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 #8393274)
approximately two hours after the end of the call and will continue through
March 2, 2005.
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
CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS AND YEARS ENDED
12/31/04 AND 12/31/03
(in millions, except per share data)
Three Months Ended Years Ended
December 31, December 31,
------------------ -------------------
2004 2003 2004 2003
-------- -------- --------- --------
Net Sales $ 3,034 $ 2,768 $ 12,074 $ 10,571
Cost of Sales 2,132 1,916 8,356 7,330
------- ------- -------- --------
Gross Profit 902 852 3,718 3,241
Selling, General and Administrative
Expenses 520 469 2,011 1,776
(Income) from Litigation Settlement - (1) (30) (72)
Goodwill Impairment Charge 168 48 168 53
------- ------- -------- --------
Operating Profit 214 336 1,569 1,484
Other Income (Expense), Net (8) (57) (51) (204)
------- ------- -------- --------
Income from Continuing Operations
before Income Taxes and
Minority Interest 206 279 1,518 1,280
Income Taxes 95 120 569 477
------- ------- -------- --------
Income from Continuing
Operations before Minority
Interest 111 159 949 803
Minority Interest 5 5 19 13
------- ------- -------- --------
Income from Continuing
Operations 106 154 930 790
(Loss) Income from Discontinued
Operations, Net of Income Taxes (1) (62) (37) 16
------- ------- -------- --------
Net Income $ 105 $ 92 $ 893 $ 806
======= ======= ======== ========
Earnings per Common Share (Diluted):
Income from Continuing
Operations $ 0.23 $ 0.32 $ 2.04 $ 1.61
(Loss) Income from
Discontinued Operations,
Net of Income Taxes - (0.13) (0.08) 0.03
------- ------- -------- --------
Net Income $ 0.23 $ 0.19 $ 1.96 $ 1.64
======= ======= ======== ========
Average Diluted Common Shares
Outstanding 451 481 456 491
======= ======= ======== ========
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, The Alvic Group, Alma Kuchen, E. Missel and SKS Group and the remaining
2004 planned dispositions of certain other European businesses as discontinued
operations.
FOURTH QUARTER 2004
- - Net sales from continuing operations for the quarter increased 10 percent
to over $3.0 billion, primarily from organic growth, with North American
sales increasing eight percent and International sales increasing 17
percent. In local currencies, International sales increased seven percent
compared with the fourth 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.
- - Sales of assembled cabinets, installation services, windows and plumbing
products were particularly strong in the quarter.
- - Income from continuing operations for the quarter was $247 million
(excluding a non-cash, after-tax charge of $141 million for goodwill
impairment pertaining to certain European operations) compared with $196
million (excluding a non-cash, after-tax charge of $42 million for
goodwill impairment pertaining to certain European operations) for the
fourth quarter of 2003. Reported income from continuing operations,
including the goodwill impairment charges, was $106 million and $154
million for the fourth quarter of 2004 and 2003, respectively.
- - Excluding the charges for goodwill impairment in both periods, earnings
from continuing operations were $.55 per common share for the fourth
quarter of 2004 and $.41 per common share for the fourth quarter of 2003.
- - Including the charges for goodwill impairment in both periods, earnings
from continuing operations were $.23 per common share for the fourth
quarter of 2004 and $.32 per common share for the fourth quarter of 2003.
1
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FOURTH QUARTER 2004 (CONTINUED)
- - Expected results for the fourth quarter of 2004 were adversely impacted by
lower than anticipated margins in the installation and other services
segment as well as certain other businesses principally resulting from the
time lag in implementing price increases related to material cost
increases. As previously communicated the Company has experienced
substantial cost increases for insulation over the past 16 months and
significant cost increases as well for non-insulation products that the
Company installs. Historically, the Company has generally been able to
increase its selling prices to reflect certain material cost increases.
However, the Company has not yet been able to increase selling prices to
offset all such cost increases contributing to a decline in operating
profit margin. In developing the previous fourth quarter guidance it was
anticipated that margins would be in the range of 14.0 to 14.5 percent
versus the 12.0 percent actually achieved in this segment.
- - Results for the fourth quarter of 2004 benefited from pre-tax gains from
the sale of financial investments of $40 million or $.06 per common share
after tax partially offset by a pre-tax impairment charge of $21 million
or $.03 per common share after tax related to the Company's investment in
Furniture Brands International common stock. Results also benefited from a
reduction in the Company's tax rate related to the utilization of foreign
tax credits generated in the fourth quarter on distributions of foreign
earnings which benefited earnings by $.02 per common share.
- - In the fourth quarter of 2004, the Company repatriated cash related to
accumulated earnings from certain of its foreign subsidiaries to the
United States of approximately $500 million.
- - 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 fourth quarter of
2004, the Company completed the additional sale of three of these
businesses: Alma Kuchen, E. Missel and SKS Group.
- - Sales to key retail customers in the quarter were comparable to the fourth
quarter of 2003, partially reflecting the impact of adverse weather in
certain parts of the country, which contributed to relatively slow sales
of architectural coatings. The Company's other distribution channels
experienced strong growth in the fourth quarter of 2004.
- - Sales increases by segment, which were substantially all organic growth,
in the 2004 fourth quarter versus the 2003 fourth quarter were:
- Cabinets and Related Products sales increased 12 percent;
- Plumbing Products sales increased 9 percent;
- Installation and Other Services sales increased 12 percent;
- Decorative Architectural Products sales increased 2 percent;
and
- Other Specialty Products sales increased 9 percent.
2
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FOURTH QUARTER 2004 (CONTINUED)
- - Gross margins were 29.7 percent in the fourth quarter of 2004 compared
with 30.8 percent in the fourth quarter of 2003. Operating profit margins
as reported were 7.1 percent in the fourth quarter of 2004 compared with
12.1 percent in the fourth quarter of 2003. Excluding non-cash, pre-tax
charges for goodwill impairment of $168 million in the fourth quarter of
2004 and $48 million in the fourth quarter of 2003 and pre-tax income
related to the Behr litigation of $1 million in the fourth quarter of
2003, operating profit margins were 12.6 percent in the fourth quarter of
2004 compared with 13.8 percent in the fourth quarter of 2003.
- - Results in the fourth quarter of 2004 include the positive impact of
higher sales volume, which was offset by the negative effect of previously
communicated increases in a number of operating expenses, including such
items as certain commodity, freight, energy and other petroleum-based
products, as well as costs and expenses associated with complying with the
new requirements of the Sarbanes-Oxley Legislation.
- - SG&A expenses as a percent of sales, including general corporate expense,
were 17.1 percent in the fourth quarter of 2004 and 16.9 percent in the
fourth quarter of 2003. The increase was the result of higher general
corporate expense.
- - General corporate expense was 2.0 percent of sales in the fourth quarter
of 2004 compared with 1.0 percent in the comparable period of 2003. The
increase includes $8 million of incremental external costs and expenses
(principally professional fees) associated with complying with the new
requirements of the Sarbanes-Oxley Legislation, as well as $5 million of
increased expense associated with stock options.
- - The Company's tax rate, on income from continuing operations for the
fourth quarter, excluding goodwill impairment charges and excluding the
impact of the distribution of foreign earnings in 2004, was 36.6 percent
in 2004 compared to 38.5 percent in the fourth quarter of 2003. The
decrease results primarily from lower foreign taxes in the fourth quarter
of 2004. The reported tax rates on income from continuing operations of
46.1 percent and 43.0 percent for the fourth quarter of 2004 and 2003,
respectively, principally reflect the impact of a lower tax benefit on
goodwill impairment.
3
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FOURTH QUARTER 2004 (CONCLUDED)
- - The Company's diluted common shares for purposes of calculating earnings
per common share were 451 million for the fourth quarter of 2004 compared
with 481 million for the fourth quarter of 2003.
FULL-YEAR 2004
- - Net sales from continuing operations for 2004 increased 14 percent to
$12.1 billion compared with $10.6 billion for 2003. North American sales
increased 13 percent and International sales increased 21 percent. In
local currencies, International sales increased 10 percent.
- - Excluding the charges for goodwill impairment, earnings from continuing
operations for 2004 were $2.35 per common share, compared with the
Company's most recent guidance of $2.31 to $2.35 per common share, and
$1.70 per common share for 2003.
- - For the full-year 2004, income from continuing operations was $930 million
compared with $790 million in 2003, including non-cash, after-tax charges
for goodwill impairment of $141 million and $47 million in 2004 and 2003,
respectively. Earnings from continuing operations were $2.04 per common
share compared with $1.61 per common share in 2003, including the
non-cash, after-tax charges for goodwill impairment.
- - Sales of the Company's products continued strong in 2004 with low double-
digit increases in internal sales growth of assembled cabinets,
installation services, faucets, architectural coatings and vinyl and
fiberglass windows and doors.
- - For the full-year 2004, key retailer sales were approximately $3.7
billion, an increase of approximately 10 percent over $3.4 billion for
2003.
4
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FULL-YEAR 2004 (CONTINUED)
- - Sales increases by segment, which were substantially all organic growth,
for 2004 versus 2003 were:
- Cabinets and Related Products sales increased 14 percent;
- Plumbing Products sales increased 14 percent;
- Installation and Other Services sales increased 15 percent;
- Decorative Architectural Products sales increased 11 percent;
and
- Other Specialty Products sales increased 17 percent.
- - Gross margins were 30.8 percent in 2004 compared with 30.7 percent in
2003. Operating profit margins as reported were 13.0 percent in 2004
compared with 14.0 percent in 2003. Excluding non-cash, pre-tax goodwill
impairment charges of $168 million in 2004 and $53 million in 2003, income
related to the Behr litigation of $30 million in 2004 and $72 million in
2003, accelerated benefit expense of $16 million in 2003 and the European
charges of $54 million in 2003, operating profit margins were 14.1 percent
in 2004 compared with 14.5 percent in 2003.
- - Full-year 2004 gross margins and operating margins include the effect of:
- Increased commodity costs which were not offset due to the
delay in implementing selling price increases;
- Increased energy and freight costs;
- Stronger foreign currencies resulting in increased
International sales which have lower margins;
- Product mix and relatively higher sales in segments with
somewhat lower margins;
- Costs associated with complying with the new requirements of
the Sarbanes-Oxley Legislation; and
- Increased expense associated with stock options.
- - The Company's installation business continues to be constrained by the
lack of adequate availability of fiberglass insulation. The high level of
demand for fiberglass insulation as a result of the strength of the new
residential construction market has outpaced the industry's capacity to
produce additional product.
- - SG&A expenses as a percent of sales, including general corporate expense,
were 16.7 percent in 2004 compared with 16.8 percent in 2003.
5
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FULL-YEAR 2004 (CONTINUED)
- - General corporate expense was 1.6 percent of sales in 2004 compared with
1.1 percent in 2003. The increase is primarily attributable to $34 million
of incremental external costs and expenses (principally professional fees)
associated with complying with the new requirements of the Sarbanes-Oxley
Legislation, as well as $18 million of increased expense associated with
stock options.
- - The Company's tax rate on income from continuing operations, excluding
goodwill impairment charges and excluding the impact of the distribution
of foreign earnings in 2004, was 36.2 percent in 2004 and in 2003. The
reported tax rates on income from continuing operations of 37.5 percent
and 37.3 percent for 2004 and 2003, respectively, were adversely impacted
by lower tax benefits on goodwill impairment charges recorded in the
fourth quarter of both periods. The Company anticipates that its tax rate
on income from continuing operations for 2005 will approximate 35 percent.
- - Accounts receivable days at December 31, 2004 were 49 days compared with
53 days a year ago.
- - Inventory days were 49 days at December 31, 2004 compared with 48 days at
December 31, 2003.
- - Accounts payable days at December 31, 2004 were 36 days compared with 35
days at December 31, 2003, as the Company continues to negotiate more
favorable supplier terms.
- - Working capital at December 31, 2004 (defined as accounts receivable and
inventories less accounts payable) improved to 16.8 percent of sales from
18.1 percent a year earlier.
- - At the end of the year, the Company had a strong balance sheet, with $1.5
billion in cash and marketable securities and $2.0 billion in unused bank
lines.
- - In 2004, the Company generated approximately $330 million of cash from the
net disposition of financial investments and $172 million net from the
disposition of certain European businesses.
- - Debt as a percent of total capital was 44 percent at December 31, 2004
compared with 43 percent at December 31, 2003.
6
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FULL-YEAR 2004 (CONTINUED)
- - For the twelve months ended December 31, 2004 and December 31, 2003,
return on invested capital was 12.0 percent and 11.1 percent,
respectively. For the twelve months ended December 31, 2004 and December
31, 2003, return on invested capital (as reconciled) was 12.9 percent and
11.3 percent, respectively.
- - Capital expenditures including discontinued operations were $310 million
or 2.5 percent of sales in 2004, compared with $271 million or 2.4 percent
of sales in 2003. Depreciation and amortization was $237 million in 2004
compared with $244 million in 2003.
- - The Company repurchased 31 million shares of its common stock during 2004,
of which 4 million shares were repurchased in the fourth quarter. The
Company had 17 million common shares remaining at December 31, 2004 under
the December 2003 Board of Directors repurchase authorization of 50
million shares.
- - In 2004, the Company returned $1.2 billion to shareholders through share
repurchases (31 million shares) and dividends. In 2003, the Company
returned $1.1 billion to shareholders through share repurchases (35
million shares) and dividends.
- - The Company increased its quarterly dividend in 2004 by 12.5 percent from
$.16 to $.18 per common share. The new quarterly dividend reflects the
Company's favorable long-term outlook, strong balance sheet and cash flow
and recent tax law changes, and makes 2004 the 46th consecutive year in
which dividends have been increased.
- - The Company's diluted common shares for purposes of calculating earnings
per common share were 456 million for the year ended December 31, 2004
compared with 491 million for the year ended December 31, 2003.
- - The Company's marketable securities at year-end had an aggregate cost
basis and a market value of $227 million and $263 million, respectively,
including unrealized gains of $36 million at December 31, 2004.
- - The Company's free cash flow (defined as cash from operations less capital
expenditures and before dividends) exceeded $1.1 billion in both 2004 and
2003.
7
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FULL-YEAR 2004 (CONCLUDED)
- - The Company renegotiated its debt agreements with its banks and entered
into a $2.0 billion five-year revolving credit agreement payable in
November 2009. At December 31, 2004, there were no borrowings under this
agreement.
- - In December 2004, the Company completed an exchange of New Zero Coupon
Notes ("New Notes") for its Old Zero Coupon Notes ("Old Notes") with over
99 percent of the Notes being exchanged by holders.
- - The New Notes have substantially the same terms as the Old Notes, except
upon conversion of the New Notes, the Company will pay the conversion
price, to the accreted value of the Notes, in cash and any value greater
than the accreted value will be settled in cash or shares of Company
common stock, which substantially limits the potential dilution that had
related to the Old Notes.
2005 OUTLOOK
- - The Company believes that it will achieve further organic sales growth in
2005, and, based on current business trends, believes that it will achieve
record sales and earnings for 2005 with full-year earnings from continuing
operations expected to be at an all-time record in a range of $2.40 to
$2.50 per common share.
- - The Company's guidance is based on housing starts declining five percent
from 2004 levels, share repurchases 12 million common shares, modest
margin improvement reflecting selling price increases offsetting rising
commodity costs and anticipated income from the sale of financial
investments. The guidance also assumes no further significant commodity
cost increases.
- - The Company experienced greater-than-expected commodity cost increases in
late 2004 which reduced expected gross margins in the fourth quarter.
These higher costs are continuing in 2005 and will likely have an adverse
impact on first half results. The Company is implementing additional price
increases on a number of its products and believes by the end of the
second quarter that most of these commodity cost increases will be largely
offset.
The Company believes that the impact of these recent cost increases and
shortages of certain materials will reduce earnings by approximately $.05
to $.10 per common share in the first half of 2005, largely in the first
quarter.
8
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
2005 OUTLOOK (CONCLUDED)
- - Based on current business trends, the Company anticipates that first
quarter 2005 earnings from continuing operations (seasonally the lowest
quarter of the year) reflecting higher commodity costs are expected to be
in a range of $.44 to $.47 per common share, compared with first quarter
2004 earnings from continuing operations of $.52 per common share, which
included $.03 per common share of income related to the Behr litigation
and $.07 per common share of previously disclosed other income,
principally net gains on the sale of financial investments.
- - Based on the current market price for the Company's common stock, diluted
common shares for the computation of earnings per common share at January
1, 2005 are 449 million. This excludes the impact of any 2005 repurchases
of common stock.
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.
# # #
9
MASCO CORPORATION - 4TH 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 December 31, 2004 & 2003
4 Sales by Segment and Geographic Area - Years Ended December 31, 2004 & 2003
5 2004 Quarterly Segment Data - Excluding Goodwill Impairment Charge
6 2004 Quarterly Segment Data - Including Goodwill Impairment Charge
7 2003 Quarterly Segment Data - Excluding Goodwill Impairment Charge
8 2003 Quarterly Segment Data - Including Goodwill Impairment Charge
9 Other Income (Expense), Net - 2004 & 2003 Quarters
10 Consolidated Statements of Income - Three Months Ended December 31, 2004 & 2003
11 Consolidated Statements of Income - Years Ended December 31, 2004 & 2003
12 Consolidated Balance Sheets
GAAP Reconciliations:
13 Sales Growth Excluding Effect of Acquisitions & Currency Translation
14 Operating Profit and Margins
15 Operating Profit and Shareholders' Equity
16 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
---------------------------------------------------------------
YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1
-------- -------- -------- -------- --------
Net Sales:
- North America $ 9,879 $ 2,450 $ 2,627 $ 2,531 $ 2,271
- International 2,195 584 546 530 535
-------- -------- -------- -------- --------
- Consolidated 12,074 3,034 3,173 3,061 2,806
Cost of Sales 8,356 2,132 2,182 2,087 1,955
-------- -------- -------- -------- --------
Gross Profit 3,718 902 991 974 851
(Gross Margin) 30.8% 29.7% 31.2% 31.8% 30.3%
S,G&A Expense (before GCE, Fixed Asset (Gain) Loss &
Benefit Expense (Income)) 1,824 459 449 460 456
(S,G&A Expense as a % of Sales) 15.1% 15.1% 14.2% 15.0% 16.3%
-------- -------- -------- -------- --------
Operating Profit (before GCE, Fixed Asset (Gain) Loss,
Litigation (Income), Benefit Expense (Income) & Goodwill
Impairment Charge) 1,894 443 542 514 395
(Operating Margin) 15.7% 14.6% 17.1% 16.8% 14.1%
- North America 1,639 390 478 442 329
(Margin) 16.6% 15.9% 18.2% 17.5% 14.5%
- International 255 53 64 72 66
(Margin) 11.6% 9.1% 11.7% 13.6% 12.3%
General Corporate Expense (GCE) 194 60 53 45 36
S,G&A Expense as a % of Sales
(including GCE, Fixed Asset (Gain) Loss & Benefit
Expense (Income)) 16.7% 17.1% 15.8% 16.5% 17.3%
(Gain) Loss on Sale of Corporate Fixed Assets, Net (7) 1 - (1) (7)
(Income) Regarding Litigation Settlement (30) - (2) (7) (21)
Accelerated Benefit Expense (Income), Net - - - - -
Goodwill Impairment Charge 168 168 - - -
-------- -------- -------- -------- --------
Operating Profit per F/S $ 1,569 $ 214 $ 491 $ 477 $ 387
======== ======== ======== ======== ========
Earnings per Common Share (Diluted):
Income from Continuing Operations $ 2.04 $ 0.23 $ 0.64 $ 0.65 $ 0.52
(Loss) Income From Discontinued Operations (0.08) - 0.16 (0.07) (0.16)
-------- -------- -------- -------- --------
Net Income $ 1.96 $ 0.23 $ 0.80 $ 0.58 $ 0.36
======== ======== ======== ======== ========
2003
----------------------------------------------------------------
YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1
-------- -------- -------- -------- --------
Net Sales:
- North America $ 8,763 $ 2,269 $ 2,369 $ 2,198 $ 1,927
- International 1,808 499 454 430 425
-------- -------- -------- -------- --------
- Consolidated 10,571 2,768 2,823 2,628 2,352
Cost of Sales 7,330 1,916 1,949 1,821 1,644
-------- -------- -------- -------- --------
Gross Profit 3,241 852 874 807 708
(Gross Margin) 30.7% 30.8% 31.0% 30.7% 30.1%
S,G&A Expense (before GCE, Fixed Asset (Gain) Loss &
Benefit Expense (Income)) 1,648 442 426 409 371
(S,G&A Expense as a % of Sales) 15.6% 16.0% 15.1% 15.6% 15.8%
-------- -------- -------- -------- --------
Operating Profit (before GCE, Fixed Asset (Gain) Loss,
Litigation (Income), Benefit Expense (Income) & Goodwill
Impairment Charge) 1,593 410 448 398 337
(Operating Margin) 15.1% 14.8% 15.9% 15.1% 14.3%
- North America 1,433 353 431 373 276
(Margin) 16.4% 15.6% 18.2% 17.0% 14.3%
- International 160 57 17 25 61
(Margin) 8.8% 11.4% 3.7% 5.8% 14.4%
General Corporate Expense (GCE) 115 27 31 29 28
S,G&A Expense as a % of Sales
(including GCE, Fixed Asset (Gain) Loss & Benefit
Expense (Income)) 16.8% 16.9% 16.1% 16.5% 17.9%
(Gain) Loss 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
Goodwill Impairment Charge 53 48 5 - -
-------- -------- -------- -------- --------
Operating Profit per F/S $ 1,484 $ 336 $ 473 $ 374 $ 301
======== ======== ======== ======== ========
Earnings per Common Share (Diluted):
Income from Continuing Operations $ 1.61 $ 0.32 $ 0.53 $ 0.44 $ 0.30
(Loss) Income From Discontinued Operations 0.03 (0.13) 0.13 0.02 0.01
-------- -------- -------- -------- --------
Net Income $ 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."
- - Operating results for the fourth quarter of 2004 reflect a non-cash,
pre-tax charge for goodwill impairment of $168 million ($141 million or
$.31 per common share, after tax).
- - 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.
- - Income (loss) from discontinued operations in the first, second and third
quarters of 2004 includes pre-tax charges of $64 million ($.16 per common
share, after tax), $44 million ($.10 per common share, after tax) and $31
million ($.07 per common share, after tax), respectively.
- - 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).
- - (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 in 2003 reflect non-cash, pre-tax charges of $50 million
($.08 per common share, after tax) for a European business unit in the
Decorative Architectural Products segment, and $4 million ($.01 per common
share, after tax) 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 the Company's Baldwin, Weiser and
Marvel businesses 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 2004 and 2003 may not
total to the per common share amount for the respective year 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 DECEMBER 31, 2004 & 2003
(DOLLARS IN MILLIONS)
Three Months Ended
December 31, 4th Qtr '04
------------------ vs.
2004 2003 4th Qtr '03
------- ------- -----------
Cabinets & Related Products $ 857 $ 765 + 12%
Plumbing Products 758 694 + 9%
Installation & Other Services 718 642 + 12%
Decorative Architectural Products 356 350 + 2%
Other Specialty Products 345 317 + 9%
------- -------
Total $ 3,034 $ 2,768 + 10%
======= =======
North America $ 2,450 $ 2,269 + 8%
International, principally Europe 584 499 + 17%
------- -------
Total, as above $ 3,034 $ 2,768 + 10%
======= =======
NOTES:
- - Data exclude discontinued operations.
- - Excluding acquisitions, consolidated net sales increased 9 percent, North
American net sales increased 8 percent and International net sales
increased 17 percent (see page 13 for the GAAP reconciliation).
- - International sales in local currencies increased 7 percent compared with
the fourth quarter of 2003 (see page 13 for the GAAP reconciliation).
Page 3
MASCO CORPORATION
SALES BY SEGMENT AND GEOGRAPHIC AREA
YEARS ENDED DECEMBER 31, 2004 & 2003
(DOLLARS IN MILLIONS)
Years Ended December 31, 2004
------------------------ vs.
2004 2003 2003
-------- -------- --------
Cabinets & Related Products $ 3,289 $ 2,879 + 14%
Plumbing Products 3,057 2,684 + 14%
Installation & Other Services 2,771 2,411 + 15%
Decorative Architectural Products 1,610 1,449 + 11%
Other Specialty Products 1,347 1,148 + 17%
-------- --------
Total $ 12,074 $ 10,571 + 14%
======== ========
North America $ 9,879 $ 8,763 + 13%
International, principally Europe 2,195 1,808 + 21%
-------- --------
Total, as above $ 12,074 $ 10,571 + 14%
======== ========
NOTES:
- - Data exclude discontinued operations.
- - Excluding acquisitions, consolidated net sales increased 14 percent, North
American net sales increased 12 percent and International net sales
increased 21 percent (see page 13 for the GAAP reconciliation).
- - International sales in local currencies increased 10 percent compared with
2003 (see page 13 for the GAAP reconciliation).
Page 4
MASCO CORPORATION
QUARTERLY SEGMENT DATA - 2004
EXCLUDING GOODWILL IMPAIRMENT CHARGE
(DOLLARS IN MILLIONS)
Year Qtr. 4 Qtr. 3 Qtr. 2 Qtr. 1
-------- ------- ------- ------- -------
Net Sales:
- Cabinets and Related Products $ 3,289 $ 857 $ 856 $ 797 $ 779
- Plumbing Products 3,057 758 775 785 739
- Installation and Other Services 2,771 718 737 686 630
- Decorative Architectural Products 1,610 356 433 451 370
- Other Specialty Products 1,347 345 372 342 288
-------- ------- ------- ------- -------
- TOTAL 12,074 3,034 3,173 3,061 2,806
======== ======= ======= ======= =======
- North America 9,879 2,450 2,627 2,531 2,271
- International, principally Europe 2,195 584 546 530 535
-------- ------- ------- ------- -------
- TOTAL, AS ABOVE 12,074 3,034 3,173 3,061 2,806
======== ======= ======= ======= =======
Operating Profit:
- Cabinets and Related Products 552 156 150 137 109
- Plumbing Products 395 81 101 117 96
- Installation and Other Services 358 86 103 88 81
- Decorative Architectural Products 331 64 102 101 64
- Other Specialty Products 258 56 86 71 45
-------- ------- ------- ------- -------
- TOTAL 1,894 443 542 514 395
======== ======= ======= ======= =======
- North America 1,639 390 478 442 329
- International, principally Europe 255 53 64 72 66
-------- ------- ------- ------- -------
- TOTAL, AS ABOVE 1,894 443 542 514 395
======== ======= ======= ======= =======
General Corporate Expense (GCE) 194 60 53 45 36
(Gain) Loss on Sale of Corporate Fixed Assets, Net (7) 1 - (1) (7)
(Income) Regarding Litigation Settlement (30) - (2) (7) (21)
-------- ------- ------- ------- -------
Operating Profit (after GCE and Adjustments) 1,737 382 491 477 387
Other Income (Expense), Net (51) (8) (31) (11) (1)
-------- ------- ------- ------- -------
Income from Continuing Operations Before
Income Taxes and Minority Interest $ 1,686 $ 374 $ 460 $ 466 $ 386
======== ======= ======= ======= =======
Margins:
- Cabinets and Related Products 16.8% 18.2% 17.5% 17.2% 14.0%
- Plumbing Products 12.9% 10.7% 13.0% 14.9% 13.0%
- Installation and Other Services 12.9% 12.0% 14.0% 12.8% 12.9%
- Decorative Architectural Products 20.6% 18.0% 23.6% 22.4% 17.3%
- Other Specialty Products 19.2% 16.2% 23.1% 20.8% 15.6%
- TOTAL 15.7% 14.6% 17.1% 16.8% 14.1%
- North America 16.6% 15.9% 18.2% 17.5% 14.5%
- International, principally Europe 11.6% 9.1% 11.7% 13.6% 12.3%
- TOTAL, AS ABOVE 15.7% 14.6% 17.1% 16.8% 14.1%
NOTES:
- - Data exclude discontinued operations.
- - Operating results for the fourth quarter of 2004 exclude a non-cash,
pre-tax charge for goodwill impairment of $168 million. The charge related
to certain of the Company's European business units and was allocated
among the Cabinets and Related Products segment ($56 million); Plumbing
Products segment ($25 million); Decorative Architectural Products segment
($62 million); and Other Specialty Products segment ($25 million).
- - Operating profit and margins by segment and geographic area are before
general corporate expense and exclude (income) regarding the litigation
settlement and (gain) loss on sale of Corporate fixed assets, net.
Page 5
MASCO CORPORATION
QUARTERLY SEGMENT DATA - 2004
INCLUDING GOODWILL IMPAIRMENT CHARGE
(DOLLARS IN MILLIONS)
Year Qtr. 4 Qtr. 3 Qtr. 2 Qtr. 1
-------- ------- ------- ------- -------
Net Sales:
- Cabinets and Related Products $ 3,289 $ 857 $ 856 $ 797 $ 779
- Plumbing Products 3,057 758 775 785 739
- Installation and Other Services 2,771 718 737 686 630
- Decorative Architectural Products 1,610 356 433 451 370
- Other Specialty Products 1,347 345 372 342 288
-------- ------- ------- ------- -------
- TOTAL 12,074 3,034 3,173 3,061 2,806
======== ======= ======= ======= =======
- North America 9,879 2,450 2,627 2,531 2,271
- International, principally Europe 2,195 584 546 530 535
-------- ------- ------- ------- -------
- TOTAL, AS ABOVE 12,074 3,034 3,173 3,061 2,806
======== ======= ======= ======= =======
Operating Profit:
- Cabinets and Related Products 496 100 150 137 109
- Plumbing Products 370 56 101 117 96
- Installation and Other Services 358 86 103 88 81
- Decorative Architectural Products 269 2 102 101 64
- Other Specialty Products 233 31 86 71 45
-------- ------- ------- ------- -------
- TOTAL 1,726 275 542 514 395
======== ======= ======= ======= =======
- North America 1,639 390 478 442 329
- International, principally Europe 87 (115) 64 72 66
-------- ------- ------- ------- -------
- TOTAL, AS ABOVE 1,726 275 542 514 395
======== ======= ======= ======= =======
General Corporate Expense (GCE) 194 60 53 45 36
(Gain) Loss on Sale of Corporate Fixed Assets, Net (7) 1 - (1) (7)
(Income) Regarding Litigation Settlement (30) - (2) (7) (21)
-------- ------- ------- ------- -------
Operating Profit (after GCE and Adjustments) 1,569 214 491 477 387
Other Income (Expense), Net (51) (8) (31) (11) (1)
-------- ------- ------- ------- -------
Income from Continuing Operations Before Income
Taxes and Minority Interest $ 1,518 $ 206 $ 460 $ 466 $ 386
======== ======= ======= ======= =======
Margins:
- Cabinets and Related Products 15.1% 11.7% 17.5% 17.2% 14.0%
- Plumbing Products 12.1% 7.4% 13.0% 14.9% 13.0%
- Installation and Other Services 12.9% 12.0% 14.0% 12.8% 12.9%
- Decorative Architectural Products 16.7% 0.6% 23.6% 22.4% 17.3%
- Other Specialty Products 17.3% 9.0% 23.1% 20.8% 15.6%
- TOTAL 14.3% 9.1% 17.1% 16.8% 14.1%
- North America 16.6% 15.9% 18.2% 17.5% 14.5%
- International, principally Europe 4.0% -19.7% 11.7% 13.6% 12.3%
- TOTAL, AS ABOVE 14.3% 9.1% 17.1% 16.8% 14.1%
NOTES:
- - Data exclude discontinued operations.
- - Operating results for the fourth quarter of 2004 include a non-cash,
pre-tax charge for goodwill impairment of $168 million. The charge related
to certain of the Company's European business units and was allocated
among the Cabinets and Related Products segment ($56 million); Plumbing
Products segment ($25 million); Decorative Architectural Products segment
($62 million); and Other Specialty Products segment ($25 million).
- - Operating profit and margins by segment and geographic area are before
general corporate expense and exclude (income) regarding the litigation
settlement and (gain) loss on sale of Corporate fixed assets, net.
Page 6
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
(Gain) 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 in the third quarter of
2003 exclude a $5 million charge for the impairment of goodwill related
to a business unit in the Decorative Architectural Products segment.
- - Operating results in 2003 reflect non-cash, pre-tax charges of $50 million
($.08 per common share, after tax) for a European business unit in the
Decorative Architectural Products segment; and $4 million ($.01 per common
share, after tax) for a European 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 (gain) on sale
of Corporate fixed assets, net.
Page 7
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
(Gain) 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 for the third quarter of
2003 include a $5 million charge for the impairment of goodwill related to
a business unit in the Decorative Architectural Products segment.
- - Operating results in 2003 reflect non-cash, pre-tax charges of $50 million
($.08 per common share, after tax) for a European business unit in the
Decorative Architectural Products segment; and $4 million ($.01 per common
share, after tax) for a European 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 (gain) on sale
of Corporate fixed assets, net.
Page 8
MASCO CORPORATION
OTHER INCOME (EXPENSE), NET
2004 AND 2003 QUARTERS
(IN MILLIONS)
2004
------------------------------------------------------
YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1
------ ------ ------ ------ ------
Interest Expense $ (217) $ (57) $ (55) $ (52) $ (53)
Income from Cash and Cash Investments 11 5 3 1 2
Other Interest Income 6 1 2 1 2
Realized Gains from the Sale of Financial Investments, Net 92 40 9 14 29
Dividend Income 27 5 8 7 7
Loss on Early Retirement of Debt - - - - -
Gain from Sale of Equity Investment - - - - -
Impairment Charge for Investments (21) (21) - - -
Other, Net 51 19 2 18 12
------ ------ ------ ------ ------
Total Other Income (Expense), Net $ (51) $ (8) $ (31) $ (11) $ (1)
====== ====== ====== ====== ======
2003
------------------------------------------------------
YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1
------ ------ ------ ------ ------
Interest Expense $ (261) $ (60) $ (67) $ (67) $ (67)
Income from Cash and Cash Investments 8 2 2 2 2
Other Interest Income 8 3 2 1 2
Realized Gains from the Sale of Financial Investments, Net 40 7 13 13 7
Dividend Income 25 6 6 6 7
Loss on Early Retirement of Debt (7) (4) (3) - -
Gain from Sale of Equity Investment 5 - - 5 -
Impairment Charge for Investments (19) (10) (9) - -
Other, Net (3) (1) (4) 7 (5)
------ ------ ------ ------ ------
Total Other Income (Expense), Net $ (204) $ (57) $ (60) $ (33) $ (54)
====== ====== ====== ====== ======
NOTES:
- - Data exclude discontinued operations.
- - 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 in the second quarter of 2004 and $15 million and $26
million of realized currency gains for the three months and twelve months
ended December 31, 2004, respectively.
- - The impairment charge recognized in the fourth quarter of 2004 relates to
the Company's investment in Furniture Brands International common stock.
Page 9
MASCO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31, 2004 & 2003
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
Three Months Ended As a Percent of Sales
December 31, 3 Months Ended December 31,
----------------------- ---------------------------
%
Line Change 2004 2003 2004 2003
- ---------- ------ ---------- ---------- ----- -----
1 Net Sales 10% $ 3,034 $ 2,768 100.0% 100.0%
2 Cost of Sales 11% 2,132 1,916 70.3% 69.2%
---------- ---------- ----- -----
3 Gross Profit 6% 902 852 29.7% 30.8%
---------- ---------- ----- -----
Operating Profit:
4 - Before GCE, Litigation (Income), Loss on Sale of
Fixed Assets and Goodwill Impairment Charge (3-8) 8% 443 410 14.6% 14.8%
5 - After GCE, Litigation (Income), Loss on Sale of
Fixed Assets and Goodwill Impairment Charge (3-9-10-11) -36% 214 336 7.1% 12.1%
---------- ---------- ----- -----
S,G&A Expense:
6 - General Corporate Expense (GCE) 122% 60 27 2.0% 1.0%
7 - Loss on Sale of Corporate Fixed Assets, Net 1 - 0.0% 0.0%
8 - All Other 4% 459 442 15.1% 16.0%
---------- ---------- ----- -----
9 - Total S,G&A Expense 11% 520 469 17.1% 16.9%
---------- ---------- ----- -----
10 Goodwill Impairment Charge 250% 168 48 5.5% 1.7%
11 (Income) Regarding Litigation Settlement - (1) 0.0% 0.0%
12 Other Income (Expense), Net -86% (8) (57) -0.3% -2.1%
13 Income from Continuing Operations Before Income Taxes
and Minority Interest (5+12) -26% 206 279 6.8% 10.1%
14 Income Taxes -21% 95 120 3.1% 4.3%
(Tax Rate) 46.1% 43.0%
---------- ---------- ----- -----
15 Income from Continuing Operations Before Minority Interest -30% 111 159 3.7% 5.7%
16 Minority Interest (5) (5) -0.2% -0.2%
---------- ---------- ----- -----
17 Income from Continuing Operations -31% 106 154 3.5% 5.6%
18 (Loss) from Discontinued Operations, Net of Income Taxes (1) (62) 0.0% -2.2%
---------- ---------- ----- -----
19 Net Income 14% $ 105 $ 92 3.5% 3.3%
========== ========== ===== =====
Earnings Per Common Share (Diluted):
Income from Continuing Operations -28% $ 0.23 $ 0.32
(Loss) from Discontinued Operations, Net of Income Taxes - (0.13)
---------- ----------
Net Income 22% $ 0.23 $ 0.19
========== ==========
Average (Diluted) Common Shares -6% 451 481
Page 10
MASCO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2004 & 2003
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
Years Ended As a Percent of Sales
December 31, Years Ended December 31,
----------------------- ------------------------
%
Line Change 2004 2003 2004 2003
- ---------- ------ ---------- ---------- ----- -----
1 Net Sales 14% $ 12,074 $ 10,571 100.0% 100.0%
2 Cost of Sales 14% 8,356 7,330 69.2% 69.3%
---------- ---------- ----- -----
3 Gross Profit 15% 3,718 3,241 30.8% 30.7%
---------- ---------- ----- -----
Operating Profit:
4 - Before GCE, Litigation (Income), (Gain) on Sale of
Fixed Assets, Accelerated Benefit Expense and
Goodwill Impairment Charge (3-9) 19% 1,894 1,593 15.7% 15.1%
5 - After GCE, Litigation (Income), (Gain) on Sale of
Fixed Assets, Accelerated Benefit Expense and
Goodwill Impairment Charge (3-10-11-12) 6% 1,569 1,484 13.0% 14.0%
---------- ---------- ----- -----
S,G&A Expense:
6 - General Corporate Expense (GCE) 69% 194 115 1.6% 1.1%
7 - (Gains) on Sale of Corporate Fixed Assets, Net (7) (3) -0.1% 0.0%
8 - Accelerated Benefit Expense, Net - 16 0.0% 0.2%
9 - All Other 11% 1,824 1,648 15.1% 15.6%
---------- ---------- ----- -----
10 - Total S,G&A Expense 13% 2,011 1,776 16.7% 16.8%
---------- ---------- ----- -----
11 Goodwill Impairment Charge 168 53 1.4% 0.5%
12 (Income) Regarding Litigation Settlement -58% (30) (72) -0.2% -0.7%
13 Other Income (Expense), Net -75% (51) (204) -0.4% -1.9%
14 Income from Continuing Operations Before Income Taxes
and Minority Interest (5+13) 19% 1,518 1,280 12.6% 12.1%
15 Income Taxes 19% 569 477 4.7% 4.5%
(Tax Rate) 37.5% 37.3%
---------- ---------- ----- -----
16 Income from Continuing Operations Before Minority
Interest 18% 949 803 7.9% 7.6%
17 Minority Interest (19) (13) -0.2% -0.1%
---------- ---------- ----- -----
18 Income from Continuing Operations 18% 930 790 7.7% 7.5%
19 (Loss) Income from Discontinued Operations, Net of
Income Taxes (37) 16 -0.3% 0.2%
---------- ---------- ----- -----
20 Net Income 11% $ 893 $ 806 7.4% 7.6%
========== ========== ===== =====
Earnings Per Common Share (Diluted):
Income from Continuing Operations 27% $ 2.04 $ 1.61
(Loss) Income from Discontinued Operations,
Net of Income Taxes (0.08) 0.03
---------- ----------
Net Income 19% $ 1.96 $ 1.64
========== ==========
Average (Diluted) Common Shares -7% 456 491
Page 11
MASCO CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
December 31, December 31,
2004 2003
------------ ------------
ASSETS
Current Assets:
Cash and Cash Investments $ 1,256 $ 795
Accounts and Notes Receivable, Net 1,732 1,674
Inventories 1,132 1,019
Prepaid Expenses and Other 282 316
---------- ----------
Total Current Assets 4,402 3,804
Property and Equipment, Net 2,272 2,339
Goodwill 4,408 4,491
Other Intangible Assets, Net 326 344
Assets Held for Sale 163 -
Other Assets 970 1,171
---------- ----------
Total Assets $ 12,541 $ 12,149
========== ==========
LIABILITIES
Current Liabilities:
Notes Payable $ 80 $ 334
Accounts Payable 837 715
Accrued Liabilities 1,230 1,050
---------- ----------
Total Current Liabilities 2,147 2,099
Long-Term Debt 4,187 3,848
Liabilities Held for Sale 44 -
Deferred Income Taxes and Other 740 746
---------- ----------
Total Liabilities 7,118 6,693
SHAREHOLDERS' EQUITY 5,423 5,456
---------- ----------
Total Liabilities and Shareholders' Equity $ 12,541 $ 12,149
========== ==========
Page 12
MASCO CORPORATION
GAAP RECONCILIATION OF SALES GROWTH
EXCLUDING EFFECT OF ACQUISITIONS & CURRENCY TRANSLATION
(IN MILLIONS)
Three Months Ended December 31,
-------------------------------
2004 2003
---------- ----------
Consolidated Net Sales, as reported $ 3,034 $ 2,768
- Acquisitions (7) -
---------- ----------
Consolidated Net Sales (excl. acquisitions) $ 3,027 $ 2,768
========== ==========
North American Net Sales, as reported $ 2,450 $ 2,269
- Acquisitions (7) -
---------- ----------
North American Net Sales (excl. acquisitions) $ 2,443 $ 2,269
========== ==========
International Net Sales, as reported $ 584 $ 499
- Acquisitions - -
---------- ----------
International Net Sales (excl. acquisitions) 584 499
- Currency Translation (49) -
---------- ----------
International Net Sales (excl. acquisitions & currency) $ 535 $ 499
========== ==========
Years Ended December 31,
-------------------------------
2004 2003
---------- ----------
Consolidated Net Sales, as reported $ 12,074 $ 10,571
- Acquisitions (46) -
---------- ----------
Consolidated Net Sales (excl. acquisitions) $ 12,028 $ 10,571
========== ==========
North American Net Sales, as reported $ 9,879 $ 8,763
- Acquisitions (46) -
---------- ----------
North American Net Sales (excl. acquisitions) $ 9,833 $ 8,763
========== ==========
International Net Sales, as reported $ 2,195 $ 1,808
- Acquisitions - -
---------- ----------
International Net Sales (excl. acquisitions) 2,195 1,808
- Currency Translation (209) -
---------- ----------
International Net Sales (excl. acquisitions & currency) $ 1,986 $ 1,808
========== ==========
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 13
MASCO CORPORATION
GAAP RECONCILIATION OF OPERATING PROFIT AND MARGINS
(DOLLARS IN MILLIONS)
THREE MONTHS ENDED DECEMBER 31,
-----------------------------------
2004 2003
-------------- ----------------
$ Margin $ Margin
------ ------ ----- --------
Operating Profit, As Reported $ 214 7.1% $ 336 12.1%
(Income) Regarding Litigation Settlement - (1)
Goodwill Impairment Charge 168 48
------ -----
Operating Profit, As Reconciled $ 382 12.6% $ 383 13.8%
====== =====
YEARS ENDED DECEMBER 31,
-----------------------------------
2004 2003
---------------- ----------------
$ Margin $ Margin
------ -------- ------ --------
Operating Profit, As Reported $1,569 13.0% $1,484 14.0%
Goodwill Impairment Charge 168 53
European Charges - 54
Accelerated Benefit Expense, Net - 16
(Income) Regarding Litigation Settlement (30) (72)
------ ------
Operating Profit, As Reconciled $1,707 14.1% $1,535 14.5%
====== ======
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 14
MASCO CORPORATION
GAAP RECONCILIATION OF OPERATING PROFIT AND SHAREHOLDERS' EQUITY
(IN MILLIONS)
YEARS ENDED DECEMBER 31,
------------------------
2004 2003
---- ----
Operating Profit from Continuing Operations $ 1,569 $ 1,484
Goodwill Impairment Charge 168 53
European Charges - 54
Accelerated Benefit Expense, Net - 16
(Income) Regarding Litigation Settlement (30) (72)
---------- ----------
Operating Profit, As Reconciled $ 1,707 $ 1,535
========== ==========
AT DECEMBER 31,
-------------------------------------------
2004 2003 2002
---- ---- ----
Shareholders' Equity, As Reported $ 5,423 $ 5,456 $ 5,294
Goodwill Impairment Charge (after tax) 141 47 92
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) (19) (45) 92
---------- ---------- ----------
Shareholders' Equity, As Reconciled $ 5,545 $ 5,506 $ 5,468
========== ========== ==========
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 average cash) and average
shareholders' equity.
Page 15
MASCO CORPORATION
DISCONTINUED OPERATIONS
(IN MILLIONS)
Three Months Ended
December 31,
---------------------------
2004 2003
---- ----
Net Sales $ 55 $ 94
========== ==========
Income (Loss) Before Income Taxes $ 1 $ (82)
Loss on Disposal of Discontinued Operations, Net (2) (1)
----------- -----------
(Loss) Income Before Income Taxes $ (1) (83)
Income Tax Credit - 21
---------- ----------
Loss From Discontinued Operations, After Income Taxes $ (1) $ (62)
========== ==========
Years Ended
December 31,
--------------------------
2004 2003
---- ----
Net Sales $ 357 $ 563
========== ==========
Income (Loss) Before Income Taxes $ 29 $ (43)
Gain on Disposal of Discontinued Operations, Net 106 89
Impairment Charge for Assets Held for Sale (139) -
---------- ----------
(Loss) Income Before Income Taxes (4) 46
Income Taxes (33) (30)
---------- ----------
(Loss) Income From Discontinued Operations, After Income
Taxes $ (37) $ 16
========== ==========
NOTE:
The unusual relationship between income tax and (loss) income before income
taxes (including the impairment charge for assets held for sale and the net gain
on disposals) 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 16