UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005
COMMISSION FILE NUMBER 1-5794
MASCO CORPORATION
(Exact name of Registrant as Specified in Charter)
DELAWARE 1-5794 38-1794485
-------- ------ ----------
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
21001 VAN BORN ROAD, TAYLOR, MICHIGAN 48180
------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(313) 274-7400
--------------
Registrant's telephone number, including area code
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Shares Outstanding at August 1, 2005
----- ------------------------------------
Common stock, par value $1.00 per share 430,400,000
MASCO CORPORATION
INDEX
PAGE NO.
--------
Part I. Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets -
June 30, 2005 and December 31, 2004 1
Condensed Consolidated Statements of
Income for the Three Months and Six
Months Ended June 30, 2005 and 2004 2
Condensed Consolidated Statements of
Cash Flows for the Six Months Ended
June 30, 2005 and 2004 3
Notes to Condensed Consolidated
Financial Statements 4-13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 14-19
Item 4. Controls and Procedures 20
Part II. Other Information 21-22
Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity Securities and
Use of Proceeds
Item 4. Submission of Matters to a Vote of Security
Holders
Item 6. Exhibits
MASCO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
JUNE 30, 2005 AND DECEMBER 31, 2004
(DOLLARS IN MILLIONS EXCEPT SHARE DATA)
JUNE 30, DECEMBER 31,
2005 2004
-------- -----------
ASSETS
Current assets:
Cash and cash investments $ 1,538 $ 1,256
Accounts and notes receivable, net 1,956 1,732
Prepaid expenses and other 269 282
Inventories:
Raw material 434 406
Finished goods 618 577
Work in process 172 149
------- -------
1,224 1,132
------- -------
Total current assets 4,987 4,402
Property and equipment, net 2,205 2,272
Goodwill 4,307 4,408
Other intangible assets, net 317 326
Other assets 835 1,133
------- -------
Total assets $12,651 $12,541
======= =======
LIABILITIES
Current liabilities:
Notes payable $ 875 $ 80
Accounts payable 951 837
Accrued liabilities 1,206 1,230
------- -------
Total current liabilities 3,032 2,147
Long-term debt 3,876 4,187
Deferred income taxes and other 764 784
------- -------
Total liabilities 7,672 7,118
------- -------
Commitments and contingencies
SHAREHOLDERS' EQUITY
Preferred shares, par value $1 per share
Authorized shares: 1,000,000; issued:
2005 - None; 2004 - None -- --
Common shares, par value $1 per share
Authorized shares: 1,400,000,000; issued:
2005 - 431,230,000; 2004 - 446,720,000 431 447
Paid-in capital 133 642
Retained earnings 4,217 3,880
Accumulated other comprehensive income 406 627
Less: Restricted stock awards (208) (173)
------- -------
Total shareholders' equity 4,979 5,423
------- -------
Total liabilities and
shareholders' equity $12,651 $12,541
======= =======
See notes to condensed consolidated financial statements.
1
MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
2005 2004 2005 2004
------- ------- ------- -------
Net sales $ 3,348 $ 3,061 $ 6,317 $ 5,867
Cost of sales 2,363 2,087 4,491 4,042
------- ------- ------- -------
Gross profit 985 974 1,826 1,825
Selling, general and administrative expenses 515 504 1,015 989
(Income) regarding litigation settlement (3) (7) (5) (28)
------- ------- ------- -------
Operating profit 473 477 816 864
------- ------- ------- -------
Other income (expense), net:
Interest expense (57) (52) (116) (105)
Other, net 16 41 53 93
------- ------- ------- -------
(41) (11) (63) (12)
------- ------- ------- -------
Income from continuing operations before
income taxes and minority interest 432 466 753 852
Income taxes 153 167 257 307
------- ------- ------- -------
Income from continuing operations
before minority interest 279 299 496 545
Minority interest 5 5 10 10
------- ------- ------- -------
Income from continuing operations 274 294 486 535
Income (loss) from discontinued operations,
net of income taxes -- (33) 19 (106)
------- ------- ------- -------
Net income $ 274 $ 261 $ 505 $ 429
======= ======= ======= =======
Earnings per common share:
Basic:
Income from continuing operations $ .65 $ .66 $ 1.14 $ 1.19
Income (loss) from discontinued
operations, net of income taxes -- (.08) .04 (.24)
------- ------- ------- -------
Net income $ .65 $ .59 $ 1.18 $ .95
======= ======= ======= =======
Diluted:
Income from continuing operations $ .64 $ .65 $ 1.11 $ 1.16
Income (loss) from discontinued
operations, net of income taxes -- (.07) .04 (.23)
------- ------- ------- -------
Net income $ .64 $ .58 $ 1.16 $ .93
======= ======= ======= =======
Cash dividends per common share:
Declared $ .20 $ .16 $ .40 $ .32
======= ======= ======= =======
Paid $ .20 $ .16 $ .38 $ .32
======= ======= ======= =======
See notes to condensed consolidated financial statements.
2
MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004
(DOLLARS IN MILLIONS)
SIX MONTHS ENDED
JUNE 30,
----------------
2005 2004
------ ------
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
Cash provided by operations $ 659 $ 715
(Increase) in receivables (288) (348)
(Increase) in inventories (126) (174)
Increase in accounts payable and accrued
liabilities, net 174 291
------ ------
Total cash from operating activities 419 484
------ ------
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
Increase in debt 1 120
Payment of debt (36) (20)
Issuance of notes, net of issuance costs 494 299
Issuance of Company common stock 24 22
Retirement of notes -- (266)
Proceeds from settlement of swaps -- 55
Purchase of Company common stock (607) (719)
Cash dividends paid (167) (149)
------ ------
Total cash (for) financing activities (291) (658)
------ ------
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
Capital expenditures (126) (124)
Purchases of marketable securities (90) (242)
Proceeds from marketable securities 192 300
Proceeds from disposition of:
Other investments, net 15 22
Businesses, net of cash disposed 103 --
Acquisition of companies, net of cash acquired (5) (13)
Other, net 19 18
------ ------
Total cash from (for) investing activities 108 (39)
------ ------
Effect of exchange rates on cash and cash
investments 8 (10)
------ ------
CASH AND CASH INVESTMENTS:
Increase (decrease) for the period 244 (223)
Cash at businesses held for sale -- (45)
At January 1 (including discontinued operations) 1,294 795
------ ------
At June 30 $1,538 $ 527
====== ======
See notes to condensed consolidated financial statements.
3
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
A. In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, of a normal
recurring nature, necessary to present fairly its financial position as at
June 30, 2005 and the results of operations for the three months and six
months ended June 30, 2005 and 2004 and changes in cash flows for the six
months ended June 30, 2005 and 2004. The condensed consolidated balance
sheet at December 31, 2004 was derived from audited financial statements.
Certain prior-year amounts have been reclassified to conform to the 2005
presentation in the condensed consolidated financial statements. The
results of operations related to discontinued operations have been
separately stated in the accompanying condensed consolidated statements of
income for 2005 and 2004. In the Company's condensed consolidated
statements of cash flows for the six months ended June 30, 2005 and 2004,
the cash flows of discontinued operations are not separately classified.
4
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Note A - concluded:
STOCK OPTIONS AND AWARDS. In December 2004, the Financial Accounting
Standards Board ("FASB") issued a revision to Statement of Financial
Accounting Standards No. 123 ("SFAS No. 123R"), "Accounting for
Stock-Based Compensation," which supersedes Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS
No. 123R requires companies to measure and recognize the cost (fair value)
of employee services received in exchange for stock options. SFAS No. 123R
also clarifies and expands guidance in several areas including measuring
fair value and classification of employee stock-based compensation,
including stock options, restricted stock awards and stock appreciation
rights. In April 2005, the Securities and Exchange Commission amended the
compliance dates for SFAS No. 123R and extended the implementation date to
the beginning of a company's next fiscal year beginning after June 15,
2005. Based on the amended compliance dates, the Company will adopt SFAS
No. 123R effective January 1, 2006. The Company is currently evaluating
which implementation method it will use and the impact the provisions of
SFAS No. 123R will have on its consolidated financial statements. The
Company has been using the fair value method for options granted, modified
or settled subsequent to January 1, 2003. In the first half of 2005,
4,113,040 option shares, including restoration option shares, were
awarded. The following table illustrates the pro forma effect on net
income and earnings per common share for the three months and six months
ended June 30, 2005 and 2004, as if the fair value method were applied to
all previously issued, outstanding and unvested stock options, in millions
except per common share data:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------- ---------------
2005 2004 2005 2004
---- ---- ----- ----
Net income, as reported $274 $261 $ 505 $429
Add:
Stock-based employee
compensation expense
included in reported
net income, net of tax 11 10 24 20
Deduct:
Stock-based employee
compensation expense,
net of tax (11) (10) (24) (20)
Stock-based employee
compensation expense
determined under the fair
value method for stock
options granted prior to
2003, net of tax (1) (3) (3) (6)
---- ---- ----- ----
Pro forma net income $273 $258 $ 502 $423
==== ==== ===== ====
Earnings per common share:
Basic as reported $.65 $.59 $1.18 $.95
Basic pro forma $.64 $.58 $1.17 $.94
Diluted as reported $.64 $.58 $1.16 $.93
Diluted pro forma $.63 $.57 $1.15 $.92
5
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
B. In early 2005, in separate transactions, the Company disposed of its
Gebhardt Consolidated and GMU Group businesses in Europe. Gebhardt
Consolidated supplies ventilation products and GMU Group manufactures
cabinets. Total gross proceeds from the sale of Gebhardt Consolidated and
the GMU Group were $130 million; $89 million in cash proceeds was received
during the first quarter of 2005 and the remaining $41 million was
collected in early April 2005. The Company recognized a pre-tax net gain
(included in discontinued operations) on the disposition of these
businesses of $11 million, principally related to Gebhardt Consolidated.
The assets and liabilities held for sale at December 31, 2004 of $163
million and $44 million, respectively, have been included in the other
assets and deferred income taxes and other captions on the condensed
consolidated balance sheet. Net proceeds from the dispositions completed
in 2005 and 2004 aggregated $281 million. In the second quarter of 2005,
the Company recognized an additional $1 million of expenses, primarily
related to professional fees incurred for the disposition of businesses,
which was offset by income related to the adjustment of prior accruals for
severance and termination benefits.
Selected financial information for discontinued operations, during the
period owned by the Company, is as follows for the three months and six
months ended June 30, 2005 and 2004, in millions:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
2005 2004 2005 2004
----- ----- ----- -----
Net sales $ -- $ 108 $ 17 $ 203
===== ===== ===== =====
Income from discontinued
operations $ 1 $ 12 $ 4 $ 18
(Loss) gain on disposal of
discontinued operations,
net (1) -- 10 --
Impairment of assets held
for sale -- (44) -- (108)
----- ----- ----- -----
Income (loss) before income
taxes -- (32) 14 (90)
Income tax benefit (expense) -- (1) 5 (16)
----- ----- ----- -----
Income (loss) from
discontinued operations,
net of income taxes $ -- $ (33) $ 19 $(106)
===== ===== ===== =====
The unusual relationship between income tax benefit and income before
income taxes (including the net gain on disposal of discontinued
operations) in 2005 results from the gain requiring no current tax expense
and the reversal of deferred tax liabilities of the discontinued
operations which are no longer expected to be incurred. The after-tax
charge for the impairment of assets held for sale of $120 million included
$12 million for the expensing of deferred tax assets of the discontinued
operations for the six months ended June 30, 2004.
6
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
C. The changes in the carrying amount of goodwill for the six-month period
ended June 30, 2005, by segment, are as follows, in millions:
BALANCE BALANCE
DEC. 31, 2004 ADDITIONS(A) OTHER(B) JUNE 30, 2005
------------- ------------ -------- -------------
Cabinets and Related
Products $ 644 $ -- $ (50) $ 594
Plumbing Products 514 -- (33) 481
Installation and Other
Services 1,710 4 -- 1,714
Decorative Architectural
Products 344 -- (5) 339
Other Specialty Products 1,196 12 (29) 1,179
------ ----- ----- ------
Total $4,408 $ 16 $(117) $4,307
====== ===== ===== ======
(A) Additions include several relatively small acquisitions in the Installation
and Other Services segment and contingent consideration for prior
acquisitions.
(B) Other principally includes foreign currency translation adjustments.
Other indefinite-lived intangible assets include registered trademarks of
$254 million at June 30, 2005. The carrying value of the Company's
definite-lived intangible assets is $63 million at June 30, 2005 (net of
accumulated amortization of $73 million) and principally includes customer
relationships and non-compete agreements. Amortization expense for
definite-lived intangible assets was $4 million and $9 million for the
three months and six months ended June 30, 2005, respectively, and $5
million and $10 million for the three months and six months ended June 30,
2004, respectively.
D. Depreciation and amortization expense is $123 million and $118 million for
the six months ended June 30, 2005 and 2004, respectively.
E. The Company has maintained investments in marketable securities and a
number of private equity funds, principally as part of its tax planning
strategies, as any gains enhance the utilization of tax capital loss
carryforwards. Included in other assets are the following financial
investments, in millions:
JUNE 30, DECEMBER 31,
2005 2004
-------- ------------
Marketable securities:
Furniture Brands International $ 86 $100
Other 68 163
Private equity funds 297 308
Metaldyne Corporation 89 84
TriMas Corporation 46 46
Other investments 10 9
---- ----
Total $596 $710
==== ====
The Company's investments in marketable securities at June 30, 2005 and
December 31, 2004 are as follows, in millions:
PRE-TAX
-----------------------
UNREALIZED UNREALIZED RECORDED
COST BASIS GAINS LOSSES BASIS
---------- ---------- ---------- --------
June 30, 2005 $158 $ 10 $(14) $154
December 31, 2004 $227 $ 36 $ -- $263
7
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Note E - concluded:
The fair value of the Company's investments in temporarily-impaired
marketable securities was $86 million; such investments have been in an
unrealized loss position for less than twelve months at June 30, 2005.
The Company had investments in over 30 different marketable securities at
June 30, 2005. The Company reviews industry analyst reports, key ratios
and statistics, market analyses and other factors for each investment to
determine if an unrealized loss is other-than-temporary. The unrealized
loss at June 30, 2005 is primarily related to one marketable security,
Furniture Brands International (NYSE: FBN) common stock (four million
shares). In the fourth quarter of 2004, the Company recognized an
impairment charge of $21 million related to its investment in FBN and
reduced the cost basis from $30.25 per share to $25.05 per share, the
market value at December 31, 2004. Based on its review, the Company
considers the unrealized loss at June 30, 2005, related to this
investment, to be temporary.
Income from financial investments, included in other, net, within other
income (expense), net, is as follows, in millions:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
2005 2004 2005 2004
---- ---- ---- ----
Realized gains from
marketable securities $ 1 $ 16 $ 28 $ 35
Realized losses from
marketable securities (3) (7) (4) (10)
Dividend income from
marketable securities 1 4 2 9
Income from other
investments, net 30 5 45 18
Dividend income from
other investments 3 3 6 5
---- ---- ---- ----
Income from financial
investments, net $ 32 $ 21 $ 77 $ 57
==== ==== ==== ====
Impairment charge for
marketable securities $ (2) $ -- $ (2) $ --
==== ==== ==== ====
F. The Company's total comprehensive income is as follows, in millions:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------- ----------------
2005 2004 2005 2004
----- ---- ----- ----
Net income $ 274 $261 $ 505 $429
Other comprehensive income
(loss):
Cumulative translation
adjustments (108) 3 (195) (25)
Unrealized gain (loss) on
marketable securities, net 2 (24) (26) (15)
----- ---- ----- ----
Total comprehensive income $ 168 $240 $ 284 $389
===== ==== ===== ====
The unrealized gain (loss) on marketable securities is net of income tax
(credits) of $2 million and $(14) million for the three months and six
months ended June 30, 2005, respectively, and $(15) million and $(9)
million for the three months and six months ended June 30, 2004,
respectively.
8
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Note F - concluded:
The components of accumulated other comprehensive income are as follows,
in millions:
JUNE 30, DECEMBER 31,
2005 2004
-------- ------------
Cumulative translation adjustments $475 $670
Unrealized (loss) gain on marketable
securities, net (3) 23
Minimum pension liability (66) (66)
---- ----
Accumulated other comprehensive income $406 $627
==== ====
Unrealized (loss) gain on marketable securities, net is reported net of
income tax (credit) of $(1) million and $13 million at June 30, 2005 and
December 31, 2004, respectively.
The minimum pension liability is reported net of income tax credit of $38
million at both June 30, 2005 and December 31, 2004.
G. The Company owns 64 percent of Hansgrohe AG. The minority interest of $85
million and $80 million at June 30, 2005 and December 31, 2004,
respectively, is recorded in the caption deferred income taxes and other
liabilities on the Company's condensed consolidated balance sheets.
H. On June 10, 2005, the Company issued $500 million of fixed-rate 4.80%
notes due 2015, resulting in net proceeds of $494 million.
I. The net periodic pension cost for the Company's qualified defined-benefit
pension plans is as follows, in millions:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
2005 2004 2005 2004
---- ---- ---- ----
Service cost $ 4 $ 3 $ 8 $ 6
Interest cost 10 9 20 16
Expected return on plan assets (9) (7) (19) (13)
Amortization of net loss 1 1 3 3
---- ---- ---- ----
Net periodic pension cost $ 6 $ 6 $ 12 $ 12
==== ==== ==== ====
Net periodic pension cost for the Company's non-qualified unfunded
supplemental pension plans was $4 million and $9 million for the three
months and six months ended June 30, 2005, respectively, and $5 million
and $9 million for the three months and six months ended June 30, 2004,
respectively.
9
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
J. The following table presents information about the Company by segment and
geographic area, in millions:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------------- ---------------------------------
2005 2004 2005 2004 2005 2004 2005 2004
--------------------------------- ---------------------------------
NET SALES (A) OPERATING PROFIT NET SALES (A) OPERATING PROFIT
--------------------------------- ---------------------------------
The Company's operations by
segment were:
Cabinets and Related Products $ 900 $ 797 $ 144 $ 137 $1,738 $1,576 $ 268 $ 246
Plumbing Products 823 785 108 117 1,583 1,524 187 213
Installation and Other Services 764 686 102 88 1,457 1,316 182 169
Decorative Architectural Products 506 451 96 101 877 821 155 165
Other Specialty Products 355 342 68 71 662 630 113 116
------ ------ ------ ------ ------ ------ ------ ------
Total $3,348 $3,061 $ 518 $ 514 $6,317 $5,867 $ 905 $ 909
====== ====== ====== ====== ====== ====== ====== ======
The Company's operations by
geographic area were:
North America $2,784 $2,531 $ 447 $ 442 $5,189 $4,802 $ 773 $ 771
International, principally Europe 564 530 71 72 1,128 1,065 132 138
------ ------ ------ ------ ------ ------ ------ ------
Total $3,348 $3,061 518 514 $6,317 $5,867 905 909
====== ====== ====== ======
General corporate expense, net (48) (45) (94) (81)
Income regarding litigation settlement(B) 3 7 5 28
Gain on sale of corporate fixed assets -- 1 -- 8
------ ------ ------ ------
Operating profit 473 477 816 864
Other income (expense), net (41) (11) (63) (12)
------ ------ ------ ------
Income from continuing operations
before income taxes and minority
interest $ 432 $ 466 $ 753 $ 852
====== ====== ====== ======
(A) Intra-segment sales were not material.
(B) The Company recorded income regarding the litigation discussed in Note M
related to the Company's subsidiary, Behr Process Corporation. Behr is
included in the Decorative Architectural Products segment.
10
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
K. Other, net, which is included in other income (expense), net, includes the
following, in millions:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
2005 2004 2005 2004
---- ---- ---- ----
Income from cash and
cash investments $ 5 $ 1 $ 11 $ 3
Other interest income 1 1 2 3
Income from financial
investments, net (Note E) 32 21 77 57
Impairment charge for
marketable securities (2) -- (2) --
Other items, net (20) 18 (35) 30
---- ---- ---- ----
$ 16 $ 41 $ 53 $ 93
==== ==== ==== ====
Other items, net for the three months and six months ended June 30, 2005
include $14 million and $27 million, respectively, of currency transaction
losses. Other items, net for the three months and six months ended June
30, 2004 include $6 million and $12 million, respectively, of currency
transaction gains. Other items, net for the three months and six months
ended June 30, 2004 also include a $5 million gain from the sale of
non-operating assets.
L. The following are reconciliations of the numerators and denominators used
in the computations of basic and diluted earnings per common share, in
millions:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
2005 2004 2005 2004
----- ----- ----- -----
Numerator (basic and diluted):
Income from continuing
operations $ 274 $ 294 $ 486 $ 535
Income (loss) from
discontinued operations,
net of income taxes -- (33) 19 (106)
----- ----- ----- -----
Net income, as reported $ 274 $ 261 $ 505 $ 429
===== ===== ===== =====
Denominator:
Basic common shares (based
on weighted average) 423 443 428 450
Add:
Contingent common shares 3 6 4 6
Stock option dilution 4 4 5 4
----- ----- ----- -----
Diluted common shares 430 453 437 460
===== ===== ===== =====
Income per common share amounts for the first two quarters of 2005 and
2004 do not total to the per common share amounts for the six months ended
June 30, 2005 and 2004 due to the timing of stock repurchases and the
effect of contingently issuable shares.
For both the three months and six months ended June 30, 2005, the Company
did not include any common shares related to the Zero Coupon Convertible
Senior Notes ("Notes") in the calculation of diluted earnings per common
share, as the price of the Company's common stock at June 30, 2005 did not
exceed the equivalent accreted value of the Notes.
11
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Note L - concluded:
In the first half of 2005, the Company repurchased and retired
approximately 18 million shares of Company common stock, for cash
aggregating approximately $607 million. At June 30, 2005, the Company had
approximately 42 million common shares remaining under the March 2005
Board of Directors repurchase authorization.
Additionally, 0.9 million and 0.7 million common shares for the three
months and six months ended June 30, 2005, respectively, and 1.9 million
and 2.9 million common shares for the three months and six months ended
June 30, 2004, respectively, related to stock options were excluded from
the computation of diluted earnings per common share due to their
antidilutive effect, since the option exercise price was greater than the
Company's average common stock price for these periods.
M. LITIGATION. The Company is subject to lawsuits and pending or asserted
claims with respect to matters generally arising in the ordinary course of
business.
As the Company reported in previous filings, late in the second half of
2002, the Company and its subsidiary, Behr Process Corporation, agreed to
two Settlements (the National Settlement and the Washington State
Settlement) to resolve all class action lawsuits pending in the United
States involving certain exterior wood coating products formerly
manufactured by Behr Process Corporation.
The following is a reconciliation of the Company's Behr Process Settlement
liability, in millions:
Balance at January 1, 2005 $ 19
Payments on claims (9)
Reduction for liabilities paid
by insurance carriers (5)
----
Balance at June 30, 2005 $ 5
====
The Company expects that the evaluation, processing and payment of claims
for both the National Settlement and the Washington State Settlement
should be completed by December 31, 2005.
As previously disclosed, several lawsuits have been brought against the
Company and a number of its insulation installation companies in the
federal court in Atlanta, Georgia, alleging that certain practices violate
provisions of federal and state antitrust laws. The Company believes that
the conduct of the Company and its insulation installation companies,
which have been the subject of these lawsuits, has not violated any
antitrust laws.
As previously disclosed, European governmental authorities are
investigating possible anticompetitive business practices relating to the
plumbing and heating industries in Europe. The investigations involve a
number of European companies, including certain of the Company's European
manufacturing divisions and a number of other large businesses. In
addition, several private antitrust lawsuits have been filed in the United
States against, among others, the Company and several other companies that
are being investigated, which appear to be an outgrowth of the European
investigations. The Company believes that it will not incur material
liability as a result of the matters that are subject to these
investigations or as a result of any such lawsuits.
12
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
Note M - concluded:
WARRANTY. The following is a reconciliation of the Company's warranty
liability, in millions:
Balance at January 1, 2005 $100
Accruals for warranties issued during the period 30
Accruals related to pre-existing warranties 1
Settlements made (in cash or kind) during the period (26)
Other, net (including foreign exchange impact) (3)
----
Balance at June 30, 2005 $102
====
STOCK PRICE GUARANTEES. In May 2005, the Company settled the guarantee
related to the value of 1.6 million shares of Company common stock for a
stock price of $40 per share related to a 2001 divestiture. The guarantee
was settled for cash and stock aggregating approximately $12 million. At
June 30, 2005, there were no outstanding stock price guarantees.
N. In June 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections - a Replacement to APB Opinion No. 20 and SFAS No. 3." SFAS
No. 154 requires retrospective application to prior periods' financial
statements of a voluntary change in accounting principle, unless it is
impracticable. Previously, most voluntary changes in accounting principle
were recognized by including the cumulative effect of changing to the new
accounting principle in net income of the period of the change. The
adoption of SFAS No. 154 is effective for accounting changes and error
corrections subsequent to December 31, 2005, and is not expected to have a
material effect on the Company's consolidated financial statements.
O. In July 2005, the Company's key employees who participated in the
Executive Stock Purchase Program settled their outstanding five-year full
recourse personal loans with a bank syndicate. The Company had guaranteed
the repayment of the loans; however, all such loans were settled with no
requirement for the Company to fulfill such guarantees.
13
MASCO CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SECOND QUARTER 2005 AND THE FIRST SIX MONTHS 2005 VERSUS
SECOND QUARTER 2004 AND THE FIRST SIX MONTHS 2004
SALES AND OPERATING PROFIT MARGINS
The following table sets forth the Company's net sales and operating
profit margins by segment and geographic area, dollars in millions:
THREE MONTHS ENDED
JUNE 30, PERCENT INCREASE
------------------ ----------------
2005 2004 2005 VS. 2004
------ ------ ----------------
NET SALES:
Cabinets and Related Products $ 900 $ 797 13%
Plumbing Products 823 785 5%
Installation and Other Services 764 686 11%
Decorative Architectural Products 506 451 12%
Other Specialty Products 355 342 4%
------ ------
Total $3,348 $3,061 9%
====== ======
North America $2,784 $2,531 10%
International, principally Europe 564 530 6%
------ ------
Total $3,348 $3,061 9%
====== ======
SIX MONTHS ENDED
JUNE 30,
------------------
2005 2004
------ ------
NET SALES:
Cabinets and Related Products $1,738 $1,576 10%
Plumbing Products 1,583 1,524 4%
Installation and Other Services 1,457 1,316 11%
Decorative Architectural Products 877 821 7%
Other Specialty Products 662 630 5%
------ ------
Total $6,317 $5,867 8%
====== ======
North America $5,189 $4,802 8%
International, principally Europe 1,128 1,065 6%
------ ------
Total $6,317 $5,867 8%
====== ======
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
2005 2004 2005 2004
------ ------ ------- -------
OPERATING PROFIT MARGIN: (A)
Cabinets and Related Products 16.0% 17.2% 15.4% 15.6%
Plumbing Products 13.1% 14.9% 11.8% 14.0%
Installation and Other Services 13.4% 12.8% 12.5% 12.8%
Decorative Architectural Products 19.0% 22.4% 17.7% 20.1%
Other Specialty Products 19.2% 20.8% 17.1% 18.4%
North America 16.1% 17.5% 14.9% 16.1%
International, principally Europe 12.6% 13.6% 11.7% 13.0%
Total 15.5% 16.8% 14.3% 15.5%
TOTAL OPERATING PROFIT MARGIN,
AS REPORTED 14.1% 15.6% 12.9% 14.7%
(A) Before general corporate expense of $48 million and $94 million for
the three-month and six-month periods ended June 30, 2005, respectively,
and before income regarding the litigation settlement related to the Decorative
Architectural Products segment of $3 million and $5 million for the three-month
and six-month periods ended June 30, 2005, respectively. Before general
corporate expense of $45 million and $81 million for the three-month and
six-month periods ended June 30, 2004, respectively, gain on sale of Corporate
fixed assets of $1 million and $8 million for the three-month and six-month
periods ended June 30, 2004, respectively, and before income regarding the
litigation settlement related to the Decorative Architectural Products segment
of $7 million and $28 million for the three-month and six-month periods ended
June 30, 2004, respectively.
14
MASCO CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company reports its financial results in accordance with generally
accepted accounting principles ("GAAP") in the United States. However, the
Company believes that certain non-GAAP performance measures and ratios, used in
managing the business, may provide users of this financial information with
additional meaningful comparisons between current results and results in prior
periods. Non-GAAP financial measures and ratios should be viewed in addition to,
and not as an alternative for, the Company's reported results.
NET SALES
Net sales increased nine percent and eight percent, respectively, for the
three-month and six-month periods ended June 30, 2005 from the comparable
periods in 2004. Excluding results from acquisitions, net sales increased nine
percent and seven percent, respectively, (including a one percent increase in
both periods relating to the effect of currency translation) for the three-month
and six-month periods ended June 30, 2005. The following table reconciles
reported net sales to net sales, excluding acquisitions and the effect of
currency translation, in millions:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
2005 2004 2005 2004
------ ------ ------ ------
Net sales, as reported $3,348 $3,061 $6,317 $5,867
Acquisitions (5) -- (10) --
------ ------ ------ ------
Net sales, excluding
acquisitions 3,343 3,061 6,307 5,867
Currency translation (21) -- (44) --
------ ------ ------ ------
Net sales, excluding
acquisitions and the
effect of currency
translation $3,322 $3,061 $6,263 $5,867
====== ====== ====== ======
Net sales of Cabinets and Related Products increased 13 percent and 10
percent, respectively, in the three-month and six-month periods ended June 30,
2005 compared with the same periods of 2004, primarily due to increased sales
volume in the new construction market.
Net sales of Plumbing Products increased five percent and four percent,
respectively, in the three-month and six-month periods ended June 30, 2005
compared with the same periods of 2004, principally due to the favorable impact
of a weaker U.S. dollar as well as increased sales through the Company's
wholesale distribution channel. Such sales increases were offset by a less
favorable product mix and by continuing weakness impacting certain products sold
through retail markets.
Net sales of Installation and Other Services increased 11 percent in both
the three-month and six-month periods ended June 30, 2005 compared with the same
periods of 2004, primarily due to increased selling prices as well as increased
sales volume of non-insulation products and continued increases in new
construction markets.
Net sales of Decorative Architectural Products increased 12 percent and
seven percent, respectively, in the three-month and six-month periods ended June
30, 2005 compared with the same periods of 2004, primarily due to increased
selling prices and increased sales volume in the second quarter for paints and
stains.
15
MASCO CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net sales of Other Specialty Products increased four percent and five
percent, respectively, in the three-month and six-month periods ended June 30,
2005 compared with the same periods of 2004, primarily due to an increase in
sales volume of vinyl and fiberglass windows and doors to North American new
construction markets. Such sales increases were offset, in part, by reduced
sales of European operations included in this segment.
Net sales from North American operations for the three-month and six-month
periods ended June 30, 2005 increased 10 percent and eight percent,
respectively, compared with the same periods of 2004, primarily due to the
reasons discussed above. Net sales from International operations for both the
three-month and six-month periods ended June 30, 2005 increased six percent
compared with the same periods of 2004, primarily due to increased sales of
cabinets and plumbing products, as well as a weaker U.S. dollar, principally
against the Euro, which increased International sales by approximately four
percent for both the three-month and six-month periods ended June 30, 2005.
OPERATING MARGINS
The Company's gross profit margins were 29.4 percent and 28.9 percent,
respectively, for the three-month and six-month periods ended June 30, 2005
compared with 31.8 percent and 31.1 percent, respectively, for the comparable
periods in 2004. The decrease in gross profit margins reflects increased
commodity, energy and freight costs, as well as a less favorable product mix,
offset, in part, by increased sales volume. Operating profit for the three-month
and six-month periods ended June 30, 2005 includes $3 million and $5 million,
respectively, of income regarding the Behr litigation settlement. Operating
profit for the three-month and six-month periods ended June 30, 2004 includes $7
million and $28 million of income regarding the Behr litigation settlement.
Operating profit margins for the Cabinets and Related Products segment for
the three-month and six-month periods ended June 30, 2005 were 16.0 percent and
15.4 percent, respectively, compared with 17.2 percent and 15.6 percent,
respectively, for the same periods of 2004, and reflect the impact of increased
commodity and freight costs, as well as a shift to a less favorable product mix,
which offset the positive impact of higher sales volume.
Operating profit margins for the Plumbing Products segment were 13.1
percent and 11.8 percent, respectively, for the three-month and six-month
periods ended June 30, 2005 compared with 14.9 percent and 14.0 percent,
respectively, for the same periods of 2004, primarily due to a less favorable
product mix, as well as increased commodity costs and lower results of European
operations included in this segment.
Operating profit margins for the Installation and Other Services segment
were 13.4 percent and 12.5 percent, respectively, for the three-month and
six-month periods ended June 30, 2005 compared with 12.8 percent for both of the
comparable periods of 2004. The operating profit margin increase in this segment
is primarily attributable to increased selling prices that were realized in the
first half of 2005, as well as the favorable impact of higher sales volume.
Within the Installation and Other Services segment, the availability of
fiberglass insulation to support the Company's installation and distribution
activities continues to be constrained. The high level of demand for fiberglass
insulation as a result of the strong new construction market has outpaced the
industry's capacity to produce additional product. While improving, the Company
believes that these conditions will persist over the remainder of 2005 and is
working with its diverse supplier base to secure as much material as possible.
At the current time, the Company does not believe that this material shortage
will have a significant impact on its operations.
16
MASCO CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating profit margins for the Decorative Architectural Products segment
were 19.0 percent and 17.7 percent, respectively, for the three-month and
six-month periods ended June 30, 2005 compared with 22.4 percent and 20.1
percent, respectively, for the same periods of 2004. The operating profit margin
decline is primarily due to increased material costs offset, in part, by
increased selling prices and sales volume of paints and stains.
Operating profit margins for the Other Specialty Products segment were
19.2 percent and 17.1 percent, respectively, for the three-month and six-month
periods ended June 30, 2005 compared with 20.8 percent and 18.4 percent,
respectively, for the same periods of 2004. The operating profit margin decline
is primarily attributable to increased commodity costs and lower results of
European operations included in this segment.
The Company's operating profit margins, as reported, were 14.1 percent and
12.9 percent, respectively, for the three-month and six-month periods ended June
30, 2005 compared with 15.6 percent and 14.7 percent, respectively, for the same
periods of 2004. The Company's operating profit margins, excluding the Behr
litigation income of $3 million and $5 million for the three-month and six-month
periods ended June 30, 2005, respectively, and $7 million and $28 million for
the three-month and six-month periods ended June 30, 2004, respectively, were
14.0 percent and 12.8 percent for the three-month and six-month periods ended
June 30, 2005, respectively, and 15.4 percent and 14.2 percent for the
three-month and six-month periods ended June 30, 2004, respectively. The
Company's operating profit margins decreased for the three-month and six-month
periods ended June 30, 2005 compared with the same periods of 2004, principally
due to the reasons discussed above.
OTHER INCOME (EXPENSE), NET
Other, net, for the three-month and six-month periods ended June 30, 2005
includes $(2) million and $24 million, respectively, of realized (losses) gains,
net, from the sale of marketable securities, dividend income of $4 million and
$8 million, respectively, and $30 million and $45 million, respectively, of
income from other investments, net. Other items, net for the three-month and
six-month periods ended June 30, 2005 include $14 million and $27 million,
respectively, of currency transaction losses.
Other, net, for the three-month and six-month periods ended June 30, 2004
includes $9 million and $25 million, respectively, of realized gains, net, from
the sale of marketable securities, dividend income of $7 million and $14
million, respectively, and $5 million and $18 million, respectively, of income
from other investments, net. Other items, net for the three-month and six-month
periods ended June 30, 2004 include $6 million and $12 million, respectively, of
currency transaction gains. Other items, net for the three-month and six-month
periods ended June 30, 2004 also include a $5 million gain from the sale of
non-operating assets.
Interest expense for the three-month and six-month periods ended June 30,
2005 increased $5 million and $11 million, respectively, to $57 million and $116
million, compared with interest expense of $52 million and $105 million,
respectively, for the same periods of 2004, primarily due to the impact of
increasing interest rates.
17
MASCO CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INCOME AND EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS
Income from continuing operations for the three-month and six-month
periods ended June 30, 2005 was $274 million and $486 million, respectively,
compared with $294 million and $535 million, respectively, for the comparable
periods of 2004. Diluted earnings per common share from continuing operations
for the three-month and six-month periods ended June 30, 2005 were $.64 and
$1.11 per common share, respectively, compared with $.65 and $1.16 per common
share, respectively, for the comparable periods of 2004. The Company's effective
tax rate was 35.4 percent and 34.1 percent, respectively, for the three-month
and six-month periods ended June 30, 2005, compared with 35.8 percent and 36.0
percent, respectively, for the same periods in 2004. The Company estimates that
its effective tax rate should approximate 35 percent for the full year 2005.
OTHER FINANCIAL INFORMATION
The Company's current ratio was 1.6 to 1 and 2.1 to 1 at June 30, 2005 and
December 31, 2004, respectively. The decline in the current ratio is
primarily due to the reclassification to current liabilities of $800 million of
6.75% notes that will become due and payable on March 15, 2006. On June 10,
2005, the Company issued $500 million of fixed-rate 4.80% notes due 2015,
resulting in net proceeds of $494 million.
For the six months ended June 30, 2005, cash of $419 million was provided
by operating activities. Cash used for financing activities was $291 million,
including $167 million for cash dividends paid and $607 million for the
acquisition and retirement of Company common stock in open-market transactions.
Cash provided by financing activities included $494 million from the issuance of
notes (net of issuance costs) and $24 million from the issuance of Company
common stock for the exercise of stock options. Cash provided by investing
activities was $108 million and primarily included $117 million from the net
sales of marketable securities and other investments and $103 million of net
proceeds from the disposition of businesses. Cash used for investing activities
primarily included $126 million for capital expenditures.
Note M to the Condensed Consolidated Financial Statements discusses
specific claims pending against the Company. The Company is also subject to
lawsuits and claims pending or asserted with respect to matters generally
arising in the ordinary course of business.
The Company believes that its present cash balance, its cash flows from
operations and, to the extent necessary, bank borrowings and future financial
market activities, are sufficient to fund its working capital and other
investment needs.
OUTLOOK FOR THE COMPANY
The Company's 2005 first half results were adversely affected by increases
in commodity, energy and freight costs, which have not been offset due, in part,
to the lag in implementing selling price increases to customers, as well as a
less favorable product mix. Second quarter 2005 sales and earnings, however,
were better-than-expected, due to the strong new construction market as well as
an improvement in key retailer sales.
The Company is committed to its strategy of value creation and continues
to be focused on the simplification of its business model, cash flow generation,
improvement in return on invested capital and the return of cash to shareholders
through share repurchases and dividends.
18
MASCO CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Consistent with this strategy, the Company is pursuing a variety of
initiatives to offset cost increases and increase operating profit including
sourcing programs, the restructuring of certain of its businesses (including
consolidations), manufacturing rationalization, headcount reductions and other
profit improvement programs. As previously disclosed, the Company believes these
initiatives will reduce annual costs by $200 million by the end of 2007. Costs
and charges related to the acceleration of these profit improvement programs,
when combined with recent additional energy-related and commodity cost increases
and the adverse effect of changes in currency values, are expected to negatively
affect the Company's full-year 2005 earnings from continuing operations.
Implementing these initiatives should improve the Company's earnings outlook for
2006 and beyond.
FORWARD-LOOKING STATEMENTS
Certain sections of this Quarterly Report contain statements reflecting
the Company's views about its future performance and constitute "forward-looking
statements" under the Private Securities Litigation Reform Act of 1995. These
views involve risks and uncertainties that are difficult to predict and,
accordingly, the Company's actual results may differ materially from the results
discussed in such forward-looking statements. Readers should consider that
various factors, including changes in general economic conditions, competitive
market conditions and pricing pressures, relationships with key customers,
industry consolidation of retailers, wholesalers and builders, shifts in
distribution, the influence of e-commerce and other factors discussed in the
Company's Annual Report on Form 10-K and its other filings with the Securities
and Exchange Commission, may affect the Company's performance. The Company
undertakes no obligation to update publicly any forward-looking statements as a
result of new information, future events or otherwise.
19
MASCO CORPORATION
ITEM 4. CONTROLS AND PROCEDURES
a. Evaluation of Disclosure Controls and Procedures.
The Company's principal executive officer and principal financial
officer have concluded, based on the evaluation required by
paragraph (b) of Rule 13a-15 under the Securities Exchange Act of
1934, of the Company's "disclosure controls and procedures" (as
defined in paragraph (e) of Rule 13a-15), that, as of June 30, 2005,
the Company's disclosure controls and procedures were effective.
b. Changes in Internal Control Over Financial Reporting.
In connection with the evaluation, required by paragraph (d) of Rule
13a-15 under the Securities Exchange Act of 1934, of the Company's
"internal control over financial reporting" (as defined in paragraph
(f) of Rule 13a-15), there was no change in the Company's internal
control over financial reporting during the quarter ended June 30,
2005, that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial
reporting.
20
MASCO CORPORATION
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information regarding this item is set forth in Note M to the Company's
Condensed Consolidated Financial Statements included in Part I, Item 1 of this
Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table provides information regarding the repurchase of
Company common stock for the three months ended June 30, 2005, in millions
except average price paid per common share data:
TOTAL NUMBER OF MAXIMUM NUMBER OF
SHARES PURCHASED SHARES THAT MAY
TOTAL NUMBER AVERAGE PRICE AS PART OF YET BE PURCHASED
OF SHARES PAID PER PUBLICLY ANNOUNCED UNDER THE PLANS
PERIOD PURCHASED COMMON SHARE PLANS OR PROGRAMS OR PROGRAMS
- ------------- ------------ ------------- ------------------ -----------------
4/1/05-
4/30/05 3 $33.18 3 44
5/1/05-
5/31/05 2 $30.71 2 42
6/1/05-
6/30/05 -- $32.28 -- 42
--- ---
Total for
the quarter 5 $32.25 5
In March 2005, the Company's Board of Directors authorized the repurchase
of up to an additional 50 million shares of the Company's common stock in open
market transactions or otherwise, which replaced the December 2003
authorization. At the date of the new repurchase authorization, the Company
had seven million shares remaining under the 2003 authorization.
ITEMS 3 AND 5 ARE NOT APPLICABLE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders was held on May 10, 2005 at which the
stockholders voted upon (1) the election of three nominees for Class II
Directors and one nominee for Class I Director, (2) the approval of the 2005
Long Term Stock Incentive Plan and (3) ratification of the selection of
PricewaterhouseCoopers LLP as independent auditors for the Company for 2005. The
following is a tabulation of the votes.
ELECTION OF CLASS II DIRECTORS:
For Withheld
--- ----------
Verne G. Istock 378,549,954 5,718,740
David L. Johnston 378,556,622 5,712,072
J. Michael Losh 346,264,232 38,004,462
21
MASCO CORPORATION
PART II. OTHER INFORMATION - CONTINUED
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (CONCLUDED)
ELECTION OF CLASS I DIRECTOR:
For Withheld
--- --------
Dennis W. Archer 380,717,234 3,551,460
The other directors whose terms of office continued after the Annual Meeting are
Peter A. Dow, Anthony F. Earley, Jr., Thomas G. Denomme, Richard A. Manoogian
and Mary Ann Van Lokeren.
APPROVAL OF THE 2005 LONG TERM STOCK INCENTIVE PLAN:
Abstentions and
For Against Broker Non-Votes
- ----------- ---------- ----------------
308,026,098 38,899,094 708,818
APPROVAL OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
AUDITORS FOR THE COMPANY FOR 2005:
Abstentions and
For Against Broker Non-Votes
- ----------- --------- ----------------
379,461,917 2,543,451 2,263,326
ITEM 6. EXHIBITS
4bi - Directors' resolutions establishing Masco Corporation 4.80%
Notes due 2015, together with form of note (filed herewith)
under the Indenture dated as of February 12, 2001 between
Masco Corporation and J. P. Morgan Trust Company, National
Association (successor in interest to Bank One Trust
Company, National Association), as Trustee (which Indenture
has been filed as an Exhibit to the Company's Form 10-K for
the year ended December 31, 2000)
12 - Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
31a - Certification by Chief Executive Officer required by Rule
13a-14(a) or 15d-14(a) of the Securities Exchange Act of
1934
31b - Certification by Chief Financial Officer required by Rule
13a-14(a) or 15d-14(a) of the Securities Exchange Act of
1934
32 - Certification required by Rule 13a-14(b) or 15d-14(b) of the
Securities Exchange Act of 1934 and Section 1350 of Chapter
63 of Title 18 of the United States Code
99 - Directors' resolution regarding the filling of vacancies on
the Board of Directors
22
MASCO CORPORATION
PART II. OTHER INFORMATION - CONCLUDED
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MASCO CORPORATION
(Registrant)
DATE: AUGUST 4, 2005 BY: /s/ Timothy Wadhams
---------------------------------
Timothy Wadhams
Senior Vice President and
Chief Financial Officer
23
MASCO CORPORATION
EXHIBIT INDEX
EXHIBIT
-------
Exhibit 4bi Directors' resolutions establishing Masco Corporation 4.80% Notes
due 2015, together with form of note (filed herewith) under the
Indenture dated as of February 12, 2001 between Masco Corporation
and J. P. Morgan Trust Company, National Association (successor
in interest to Bank One Trust Company, National Association), as
Trustee (which Indenture has been filed as an Exhibit to the
Company's Form 10-K for the year ended December 31, 2000)
Exhibit 12 Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
Exhibit 31a Certification by Chief Executive Officer required by
Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act
of 1934
Exhibit 31b Certification by Chief Financial Officer required by
Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act
of 1934
Exhibit 32 Certification required by Rule 13a-14(b) or 15d-14(b) of the
Securities Exchange Act of 1934 and Section 1350 of Chapter 63 of
Title 18 of the United States Code
Exhibit 99 Directors' resolution regarding the filling of vacancies on the
Board of Directors