EXHIBIT 99.A
FOR IMMEDIATE RELEASE Contact: Maria Duey
313-792-6653
FOR IMMEDIATE RELEASE Contact:
Maria Duey
313-792-5500
MASCO CORPORATION REPORTS RECORD SALES FOR 2005
MASCO CORPORATION 2005 HIGHLIGHTS:
FULL-YEAR 2005
- Net sales from continuing operations increased seven percent to a
record $12.6 billion.
- Income from continuing operations was $2.19 per common share
excluding the impact of a goodwill impairment charge and $2.03
per common share including the impairment charge.
- Free cash flow before dividends exceeded $1 billion.
- The Company returned $1.3 billion to shareholders through share
repurchases (31 million shares) and dividends.
- The quarterly dividend was increased by 11 percent, the 47th
consecutive year in which dividends have been increased.
- The Company had over $2 billion of cash and marketable securities
at year-end.
Taylor, Michigan (February 14, 2006) - Masco Corporation (NYSE: MAS) today
reported that net sales from continuing operations for the year ended December
31, 2005 increased seven percent, primarily from organic growth, to a record
$12.6 billion compared with $11.9 billion for 2004.
Income from continuing operations was $941 million or $2.19 per common
share, excluding the impact of the non-cash, after-tax goodwill impairment
charge of $69 million pertaining to certain European operations. Income from
continuing operations for the year ended December 31, 2005 was $872 million or
$2.03 per common share, including the impact of the goodwill impairment charge.
Income from continuing operations was $1,053 million in 2004 or $2.31 per common
share, excluding the impact of the non-cash, after-tax goodwill impairment
charge of $104 million. Income from continuing operations was $949 million or
$2.08 per common share, including the impact of the goodwill impairment charge.
Results for the year ended December 31, 2005 benefited from the strong new
construction market and certain selling price increases, which were more than
offset by increases in commodity, energy and freight costs, as well as a less
favorable product mix. Results for 2005 also benefited from net gains related to
the Company's financial investments.
Fourth quarter 2005 net sales from continuing operations increased six
percent to over $3.1 billion compared with $3.0 billion in the 2004 fourth
quarter. Income from continuing operations for the fourth quarter of 2005 was
$211 million or $.50 per common share, excluding the non-cash, after-tax
goodwill impairment charge of $69 million. Including such charge, income from
continuing operations was $142 million or $.34 per common share. Income from
continuing operations for the fourth quarter of 2004 was $243 million or $.54
per common share, excluding the non-cash, after-tax goodwill impairment charge
of $104 million. Including such charge, income from continuing operations was
$139 million or $.31 per common share.
Results for the fourth quarter of 2005 benefited from net gains from the
sale of financial investments and other assets of $.02 per common share offset
by $.02 per common share from an adjustment of deferred taxes related to certain
European operations. Results for the fourth quarter of 2004 benefited from net
gains from the sale of financial investments of $.06 per common share partially
offset by an impairment charge of $.03 per common share related to the Company's
investment in Furniture Brands International common stock. Results for the 2004
fourth quarter also benefited from a reduction in the Company's tax rate related
to the utilization of foreign tax credits generated in the 2004 fourth quarter
on distributions of foreign earnings which benefited earnings by $.02 per common
share.
During the fourth quarter of 2005, pursuant to the Company's strategy of
reviewing its business portfolio for potential consolidations and divestitures,
the Company completed the sale of two additional businesses in the Cabinets and
Related Products segment with combined annual sales of approximately $200
million for aggregate proceeds of approximately $200 million. The Company
recognized a pre-tax net gain on the disposition of these businesses of $50
million, which is included in income from discontinued operations.
Assuming no further significant commodity cost increases and excluding any
additional costs associated with its cost reduction programs and any other
items, the Company believes, based on current business trends, that it will
achieve 2006 full-year earnings from continuing operations in a range of $2.35
to $2.45 per common share. Including planned costs and charges related to plant
closures and other profit improvement programs, which are presently expected to
approximate $70 million pre-tax 2006, earnings from continuing operations are
expected to be in a range of $2.24 to $2.34 per common share.
Headquartered in Taylor, Michigan, Masco Corporation is one of the world's
leading manufacturers of home improvement and building products as well as a
leading provider of services that include the installation of insulation and
other building products.
A conference call regarding items contained in this release is scheduled
for Tuesday, February 14, 2006 at 11:00 a.m. ET. Participants in the call are
asked to register five to ten minutes prior to the scheduled start time by
dialing (913) 981-4902 (confirmation #4758760). 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 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 #4758760)
approximately two hours after the end of the call and will continue through
February 21, 2006.
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
12/31/05 AND 12/31/04
(in millions, except per share data)
Three Months Ended Years Ended
December 31, December 31,
------------------ --------------------
2005 2004 2005 2004
------ ------ ------- -------
Net Sales $3,146 $2,975 $12,642 $11,850
Cost of Sales 2,279 2,088 9,033 8,187
------ ------ ------- -------
Gross Profit 867 887 3,609 3,663
Selling, General and Administrative Expenses 477 514 1,969 1,989
(Income) Regarding Litigation Settlement -- -- (6) (30)
Goodwill Impairment Charge 69 112 69 112
------ ------ ------- -------
Operating Profit 321 261 1,577 1,592
Other Income (Expense), Net (43) (7) (165) (50)
------ ------ ------- -------
Income from Continuing Operations before Income
Taxes and Minority Interest 278 254 1,412 1,542
Income Taxes 130 110 518 574
------ ------ ------- -------
Income from Continuing Operations before
Minority Interest 148 144 894 968
Minority Interest 6 5 22 19
------ ------ ------- -------
Income from Continuing Operations 142 139 872 949
Income (Loss) from Discontinued Operations,
Net of Income Taxes 31 (34) 68 (56)
------ ------ ------- -------
Net Income $ 173 $ 105 $ 940 $ 893
====== ====== ======= =======
Earnings per Common Share (Diluted):
Income from Continuing Operations $ 0.34 $ 0.31 $ 2.03 $ 2.08
Income (Loss) from Discontinued Operations,
Net of Income Taxes 0.07 (0.07) 0.16 (0.12)
------ ------ ------- -------
Net Income $ 0.41 $ 0.23 $ 2.19 $ 1.96
====== ====== ======= =======
Average Diluted Common Shares Outstanding 419 451 430 456
====== ====== ======= =======
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 2004 planned dispositions
of Jung Pumpen, The Alvic Group, Alma Kuchen, E. Missel and SKS Group, the first
quarter 2005 planned dispositions of Gebhardt Consolidated and GMU Group and the
fourth quarter 2005 additional dispositions of Zenith Products and Aran Group as
discontinued operations.
FOURTH QUARTER 2005
- - Net sales from continuing operations for the quarter increased six percent
to $3.1 billion, primarily from organic growth, with North American sales
increasing nine percent and International sales decreasing eight percent.
In local currencies, International sales were flat compared with the fourth
quarter of 2004.
- - Sales of assembled cabinets, plumbing products and windows in North America
were particularly strong in the quarter increasing in the aggregate over 13
percent compared with the fourth quarter of 2004. Installation and Other
Services sales were also strong and increased 11 percent compared with the
fourth quarter of 2004.
- - Sales at retail continued the relatively slower growth exhibited in the
third quarter. Key retailer sales from continuing operations increased five
percent in the 2005 fourth quarter compared with the fourth quarter of 2004
and a two percent increase in the third quarter of 2005. The Company
believes retail sales were negatively impacted by higher energy costs
adversely affecting lower-income consumers and inventory adjustments by
certain retail customers.
- - Income from continuing operations for the quarter was $211 million
(excluding a non-cash, after-tax charge of $69 million for goodwill
impairment related to certain European businesses) compared with $243
million (excluding a non-cash, after-tax charge of $104 million for
goodwill impairment related to certain European businesses) for the fourth
quarter of 2004. Reported income from continuing operations, including the
goodwill impairment charges, was $142 million and $139 million for the
fourth quarters of 2005 and 2004, respectively.
- - Excluding the charges for goodwill impairment in both periods, reported
earnings from continuing operations were $.50 per common share for the
fourth quarter of 2005, compared with the Company's most recent guidance of
$.48 to $.52 per common share, and $.54 per common share for the fourth
quarter of 2004.
1
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FOURTH QUARTER 2005 (CONTINUED)
- - Including the charges for goodwill impairment in both periods, reported
earnings from continuing operations were $.34 per common share for the
fourth quarter of 2005 and $.31 per common share for the fourth quarter of
2004.
- - Results for the fourth quarter of 2005 benefited from net gains from the
sale of financial investments and other assets of $.02 per common share
offset by $.02 per common share from an adjustment of deferred taxes
related to certain European operations. Results for the fourth quarter of
2004 benefited from net gains from the sale of financial investments of
$.06 per common share partially offset by an impairment charge of $.03 per
common share related to the Company's investment in Furniture Brands
International common stock. Results for the 2004 fourth quarter also
benefited from a reduction in the Company's tax rate related to the
utilization of foreign tax credits generated in the 2004 fourth quarter on
distributions of foreign earnings which benefited earnings by $.02 per
common share.
- - Sales changes by segment, which were substantially all organic growth, in
the 2005 fourth quarter versus the 2004 fourth quarter were:
- Cabinets and Related Products sales increased six percent;
- Plumbing Products sales increased four percent;
- Installation and Other Services sales increased 11 percent;
- Decorative Architectural Products sales declined one percent; and
- Other Specialty Products sales increased seven percent.
- - Sales in certain segments were negatively impacted by weaker foreign
currencies and in addition, inventory adjustments by certain retail
customers (principally in the Decorative Architectural Products segment).
2
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FOURTH QUARTER 2005 (CONCLUDED)
- - Gross margins were 27.6 percent in the fourth quarter of 2005 compared with
29.8 percent in the fourth quarter of 2004. Operating profit margins as
reported were 10.2 percent in the fourth quarter of 2005 compared with 8.8
percent in the fourth quarter of 2004. Excluding non-cash, pre-tax charges
for goodwill impairment of $69 million in the fourth quarter of 2005 and
$112 million in the fourth quarter of 2004, operating profit margins were
12.4 percent in the fourth quarter of 2005 compared with 12.5 percent in
the fourth quarter of 2004.
- - Results for the fourth quarter of 2005 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 commodity, freight, energy and other petroleum-based product
costs.
- - SG&A expenses as a percent of sales, including general corporate expense,
were 15.2 percent in the fourth quarter of 2005 and 17.3 percent in the
fourth quarter of 2004.
- - General corporate expense was 1.5 percent of sales in the fourth quarter of
2005 compared with 2.0 percent in the comparable period of 2004.
- - The reported tax rates on income from continuing operations of 46.8 percent
and 43.3 percent for the fourth quarters of 2005 and 2004, respectively,
principally reflect the impact of a lower tax benefit on the goodwill
impairment charges. Excluding the goodwill impairment charges in 2005 and
2004 and the adjustment of deferred taxes related to certain European
operations in 2005 and the impact of the distribution of foreign earnings
in 2004 the Company's tax rate was 35 percent in the fourth quarters of
both 2005 and 2004.
- - The Company's diluted common shares for purposes of calculating earnings
per common share were 419 million for the fourth quarter of 2005 compared
with 451 million for the fourth quarter of 2004.
3
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FULL-YEAR 2005
- - Net sales from continuing operations for 2005 increased seven percent to
$12.6 billion compared with $11.9 billion for 2004. North American sales
increased eight percent and International sales increased one percent. In
local currencies, International sales also increased one percent.
- - Sales of assembled cabinets, installation services and windows in North
America were particularly strong in 2005.
- - For the full-year 2005, key retailer sales were $3.8 billion, an increase
of approximately four percent over $3.7 billion for 2004.
- - Sales increases by segment, which were substantially all organic growth,
for 2005 versus 2004 were:
- Cabinets and Related Products sales increased eight percent;
- Plumbing Products sales increased four percent;
- Installation and Other Services sales increased 11 percent;
- Decorative Architectural Products sales increased four percent; and
- Other Specialty Products sales increased four percent.
- - Excluding the charges for goodwill impairment in 2005 and 2004, earnings
from continuing operations for 2005 were $2.19 per common share, compared
with the Company's most recent guidance, as adjusted for discontinued
operations, of $2.16 to $2.20 per common share, and $2.31 per common share
for 2004.
- - The Company sold Zenith Products in North America and Aran Group in Europe
in the fourth quarter of 2005 with combined annual sales of approximately
$200 million for aggregate proceeds of approximately $200 million. Under
Generally Accepted Accounting Principles, the net gain on these
transactions, along with 2005 full-year and prior period operating results
of these companies, is reflected in discontinued operations. The impact of
including these businesses in discontinued operations is to reduce
full-year results of continuing operations by $.05 per common share.
4
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FULL-YEAR 2005 (CONTINUED)
- - For the full-year 2005, reported income from continuing operations was $872
million compared with $949 million in 2004, including non-cash, after-tax
charges for goodwill impairment of $69 million and $104 million in 2005 and
2004, respectively. Reported earnings from continuing operations were $2.03
per common share compared with $2.08 per common share in 2004, including
the non-cash, after-tax charges for goodwill impairment.
- - Gross margins were 28.5 percent in 2005 compared with 30.9 percent in 2004.
Operating profit margins as reported were 12.5 percent in 2005 compared
with 13.4 percent in 2004. Excluding non-cash, pre-tax goodwill impairment
charges of $69 million in 2005 and $112 million in 2004 and income related
to the Behr litigation of $6 million in 2005 and $30 million in 2004,
operating profit margins were 13.0 percent in 2005 compared with 14.1
percent in 2004.
- - Full-year 2005 gross margins and operating margins were adversely impacted
by increased commodity, freight, energy and other petroleum-based product
costs, as well as a less favorable product mix.
- - SG&A expenses as a percent of sales, including general corporate expense,
were 15.6 percent in 2005 compared with 16.8 percent in 2004.
- - General corporate expense was 1.5 percent of sales in 2005 compared with
1.6 percent in 2004.
- - The Company's reported tax rate on income from continuing operations,
excluding the goodwill impairment charges in 2005 and 2004, the adjustment
of deferred taxes related to certain European operations in 2005 and the
impact of the distributions of foreign earnings in 2004 was 35 percent for
both full-year 2005 and 2004. The Company anticipates that its tax rate on
income from continuing operations for 2006 will approximate 36 percent.
5
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FULL-YEAR 2005 (CONTINUED)
- - Accounts receivable days at December 31, 2005 were 48 days compared with 49
days a year ago.
- - Inventory days were 46 days at December 31, 2005 compared with 49 days a
year ago.
- - Accounts payable days were 36 days at both December 31, 2005 and 2004.
- - Working capital at December 31, 2005 (defined as accounts receivable and
inventories less accounts payable) improved to 15.9 percent of sales from
16.8 percent a year earlier.
- - For the twelve months ended December 31, 2005 and December 31, 2004, return
on invested capital was 13.0 percent and 12.0 percent, respectively. For
the twelve months ended December 31, 2005 and December 31, 2004, return on
invested capital (as reconciled) was 13.4 percent and 12.9 percent,
respectively. The Company continues to believe that it will approximate its
15 percent return on invested capital goal by the end of 2006 and 18
percent goal by 2010.
- - Capital expenditures including discontinued operations were $282 million or
2.2 percent of sales in 2005, compared with $310 million or 2.5 percent of
sales in 2004. Certain capital expenditures principally related to capacity
expansion and facility acquisitions that were originally expected to occur
in 2005 will occur in 2006 and capital expenditures are expected to
aggregate $420 million in 2006. Depreciation and amortization was $241
million in 2005 compared with $237 million in 2004.
- - The Company repurchased 31 million shares of its common stock during 2005,
of which eight million shares were repurchased in the fourth quarter. The
Company had 29 million common shares remaining at December 31, 2005 under
the March 2005 Board of Directors repurchase authorization of 50 million
shares.
6
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FULL-YEAR 2005 (CONCLUDED)
- - In 2005 the Company returned $1.3 billion to shareholders through share
repurchases (31 million) and dividends. For the three-year period
(2003-2005) ended December 31, 2005, the Company has returned $3.6 billion
to shareholders through the repurchase of 97 million shares and dividends.
- - The Company increased its quarterly dividend in 2005 by 11 percent from
$.18 to $.20 per common share. The increased quarterly dividend reflects
the Company's favorable long-term outlook, strong balance sheet and cash
flow and recent tax law changes, and makes 2005 the 47th consecutive year
in which dividends have been increased.
- - The Company's diluted common shares for purposes of calculating earnings
per common share were 430 million for the year ended December 31, 2005
compared with 456 million for the year ended December 31, 2004.
- - On June 10, 2005, the Company issued $500 million of fixed-rate 4.8% notes
due 2015, resulting in net proceeds of $494 million. The Company issued
this debt to take advantage of favorable interest rates and in anticipation
of $800 million of debt maturing in March 2006.
- - At the end of the year, the Company had a strong balance sheet, with over
$2 billion in cash and marketable securities and $2 billion in unused bank
lines. The Company will utilize $800 million of its cash to redeem debt
maturing in March 2006.
- - The Company's marketable securities had an aggregate cost basis of $94
million, with an aggregate market value of $115 million, including
unrealized gains of $21 million at December 31, 2005.
- - In 2005 free cash flow was over $1 billion. For the three-year period
(2003-2005) ended December 31, 2005, the Company's free cash flow (defined
as cash from operations less capital expenditures and before dividends)
aggregated $3.4 billion.
- - In 2005, the Company generated $193 million of cash from the net
disposition of financial investments and $278 million from the net
disposition of certain businesses.
- - Debt as a percent of total capital was 49 percent at December 31, 2005
compared with 44 percent at December 31, 2004.
7
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
2006 OUTLOOK
- - Based on the current market price for the Company's common stock, diluted
common shares for the computation of earnings per common share at January
1, 2006 are 418 million. This excludes the impact of any 2006 repurchases
of common stock.
- - The Company believes that it will achieve further organic sales growth in
2006, and, based on current business trends, believes that it will achieve
full-year earnings from continuing operations in a range of $2.35 to $2.45
per common share, including approximately $60 million of increased benefits
to be realized in 2006 from our cost reduction programs.
- - The Company's full-year guidance is based on housing starts declining five
percent from 2005 levels, share repurchases of a minimum 20 million common
shares, modest margin improvement reflecting selling price increases
offsetting rising commodity costs and anticipated income from financial
investments. The guidance also assumes no further significant commodity
cost increases.
- - The Company in January 2006 announced a planned plant closure in the
Plumbing Products segment. The costs associated with the closure are
expected to be incurred over the remainder of 2006. These costs and other
costs and charges related to the Company's cost reduction initiatives are
anticipated to aggregate approximately $70 million in 2006. Including this
$70 million of anticipated costs (approximately $.11 per common share)
guidance for earnings from continuing operations would be in a range of
$2.24 to $2.34 per common share.
- - While the Company will continue to provide annual guidance, it will no
longer provide quarterly earnings guidance.
8
PROFIT IMPROVEMENT PROGRAMS
---------------------------
- - The Company remains committed to its strategy of value creation and is
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.
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.
- - MAJOR PROGRAM COMPONENTS
------------------------
- Asian sourcing has grown from $200 million in 2003, $450 million in
2004 to in excess of our $550 million goal in 2005. We have previously
indicated that we save 25-30% on items we outsource to Asia.
- Consolidations, together with divestitures, have reduced our business
units from 67 in early 2003 to less than 40 at December 31, 2005.
- - PROGRAM COSTS
-------------
We estimate that direct costs associated with our cost reduction
initiatives approximated $30 million in 2005, and anticipate that direct
costs will approximate $70 million (primarily related to manufacturing
plant closures) or $.11 per common share in 2006. The quarterly timing of
recording costs in 2006 will be driven by events over the course of the
year.
- - PROGRAM BENEFITS
----------------
We believe that we realized additional cost reduction benefits in 2005 of
approximately $40 million. Additional cost reduction benefits in 2006 are
expected to approximate $60 million. The Company expects to realize the
full extent of the benefits from these initiatives in 2007 and beyond.
Minimal additional costs related to implementing these programs are
presently expected for 2007.
- - We expect to provide further detail related to our cost reduction programs
during our March 30, 2006 Investor Conference.
9
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.
###
10
MASCO CORPORATION - 4TH QUARTER 2005
Page
- ----
1 Condensed Statements of Income - 2005 & 2004 Quarters
2 Notes to Condensed Statements of Income - 2005 & 2004 Quarters
3 Sales by Segment and Geographic Area - Three Months Ended December 31,
2005 & 2004
4 Sales by Segment and Geographic Area - Twelve Months Ended December 31,
2005 & 2004
5 2005 Quarterly Segment Data - Excluding Goodwill Impairment Charge
6 2005 Quarterly Segment Data - Including Goodwill Impairment Charge
7 2004 Quarterly Segment Data - Excluding Goodwill Impairment Charge
8 2004 Quarterly Segment Data - Including Goodwill Impairment Charge
9 Other Income (Expense), Net - 2005 & 2004 Quarters
10 Consolidated Statements of Income - Three Months Ended December 31,
2005 & 2004
11 Consolidated Statements of Income - Twelve Months Ended December 31,
2005 & 2004
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
2005 & 2004 - BY QUARTER
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
2005 2004
--------------------------------------- ---------------------------------------
YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1 YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1
------- ------ ------ ------ ------ ------- ------ ------ ------ ------
Net Sales:
- North America $10,513 $2,633 $2,766 $2,745 $2,369 $ 9,740 $2,418 $2,591 $2,495 $2,236
- International 2,129 513 530 541 545 2,110 557 526 509 518
------- ------ ------ ------ ------ ------- ------ ------ ------ ------
- Consolidated 12,642 3,146 3,296 3,286 2,914 11,850 2,975 3,117 3,004 2,754
Cost of Sales 9,033 2,279 2,350 2,318 2,086 8,187 2,088 2,139 2,044 1,916
------- ------ ------ ------ ------ ------- ------ ------ ------ ------
Gross Profit 3,609 867 946 968 828 3,663 887 978 960 838
(Gross Margin) 28.5% 27.6% 28.7% 29.5% 28.4% 30.9% 29.8% 31.4% 32.0% 30.4%
S,G&A Expense (before GCE & (Gain) Loss on
Sale of Corporate Fixed Assets) 1,785 438 438 460 449 1,802 453 444 455 450
(S,G&A Expense as a % of Sales) 14.1% 13.9% 13.3% 14.0% 15.4% 15.2% 15.2% 14.2% 15.1% 16.3%
------- ------ ------ ------ ------ ------- ------ ------ ------ ------
Operating Profit (before GCE, (Gain) Loss on
Sale of Corporate Fixed Assets, Litigation
(Income) & Goodwill Impairment Charge) 1,824 429 508 508 379 1,861 434 534 505 388
(Operating Margin) 14.4% 13.6% 15.4% 15.5% 13.0% 15.7% 14.6% 17.1% 16.8% 14.1%
- North America 1,577 377 441 440 319 1,616 386 472 435 323
(Margin) 15.0% 14.3% 15.9% 16.0% 13.5% 16.6% 16.0% 18.2% 17.4% 14.4%
- International 247 52 67 68 60 245 48 62 70 65
(Margin) 11.6% 10.1% 12.6% 12.6% 11.0% 11.6% 8.6% 11.8% 13.8% 12.5%
General Corporate Expense (GCE) 192 47 51 48 46 194 60 53 45 36
S,G&A Expense as a % of Sales (including GCE
& (Gain) Loss on Sale of Corporate Fixed
Assets) 15.6% 15.2% 14.8% 15.5% 17.0% 16.8% 17.3% 15.9% 16.6% 17.4%
(Gain) Loss on Sale of Corporate Fixed Assets,
Net (8) (8) -- -- -- (7) 1 -- (1) (7)
(Income) Regarding Litigation Settlement (6) -- (1) (3) (2) (30) -- (2) (7) (21)
Goodwill Impairment Charge 69 69 -- -- -- 112 112 -- -- --
------- ------ ------ ------ ------ ------- ------ ------ ------ ------
Operating Profit per F/S $ 1,577 $ 321 $ 458 $ 463 $ 335 $ 1,592 $ 261 $ 483 $ 468 $ 380
======= ====== ====== ====== ====== ======= ====== ====== ====== ======
Earnings per Common Share (Diluted):
Income from Continuing Operations $ 2.03 $ 0.34 $ 0.60 $ 0.62 $ 0.47 $ 2.08 $ 0.31 $ 0.63 $ 0.64 $ 0.51
Income (Loss) from Discontinued Operations 0.16 0.07 0.01 0.01 0.06 (0.12) (0.07) 0.17 (0.06) (0.15)
------- ------ ------ ------ ------ ------- ------ ------ ------ ------
Net Income $ 2.19 $ 0.41 $ 0.61 $ 0.64 $ 0.52 $ 1.96 $ 0.23 $ 0.80 $ 0.58 $ 0.36
======= ====== ====== ====== ====== ======= ====== ====== ====== ======
PLEASE SEE PAGE 2 FOR NOTES.
Page 1
MASCO CORPORATION
NOTES TO CONDENSED STATEMENTS OF INCOME
2005 & 2004 - BY QUARTER
NOTES:
- - Operating results exclude 2004 planned dispositions as well as other
operations which were sold in 2005 and 2004, all of which were 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 2005 reflect a non-cash,
pre-tax charge for goodwill impairment of $69 million ($69 million or $.16
per common share, after tax) pertaining to European operations.
- - Income from continuing operations in the third quarter of 2005 includes $43
million of pre-tax impairment charges ($.07 per common share, after tax)
related to the Company's investments in Furniture Brands International
common stock and certain private equity funds.
- - Income from discontinued operations in the first quarter of 2005 ($.04 per
common share, after tax) includes a net $10 million pre-tax gain from the
sale of two businesses. Income from discontinued operations in the fourth
quarter of 2005 includes a net $50 million pre-tax gain from the sale of
two businesses.
- - Operating results for the fourth quarter of 2004 reflect a non-cash,
pre-tax charge for goodwill impairment of $112 million ($104 million or
$.23 per common share, after tax).
- - Income from discontinued operations in the third quarter of 2004 includes a
$108 million pre-tax gain, net ($93 million or $.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 impairment charges of $64 million ($76
million or $.16 per common share, after tax), $44 million ($44 million or
$.10 per common share, after tax) and $31 million ($31 million or $.07 per
common share, after tax), respectively.
- - Per common share amounts for the four quarters of 2005 and 2004 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, 2005 & 2004
(DOLLARS IN MILLIONS)
Three Months Ended
December 31, 4th Qtr '05
------------------ vs.
2005 2004 4th Qtr '04
------ ------ -----------
Cabinets & Related Products $ 842 $ 798 + 6%
Plumbing Products 786 758 + 4%
Installation & Other Services 799 718 + 11%
Decorative Architectural Products 351 356 - 1%
Other Specialty Products 368 345 + 7%
------ ------
Total $3,146 $2,975 + 6%
====== ======
North America $2,633 $2,418 + 9%
International, principally Europe 513 557 - 8%
------ ------
Total, as above $3,146 $2,975 + 6%
====== ======
NOTES:
- - Data exclude discontinued operations.
- - Excluding acquisitions, consolidated net sales increased six percent, North
American net sales increased nine percent and International net sales
decreased eight percent (please see page 13 for the GAAP reconciliation).
- - International sales in local currencies were flat compared with the fourth
quarter of 2004 (please see page 13 for the GAAP reconciliation).
Page 3
MASCO CORPORATION
SALES BY SEGMENT AND GEOGRAPHIC AREA
TWELVE MONTHS ENDED DECEMBER 31, 2005 & 2004
(DOLLARS IN MILLIONS)
Twelve Months Ended
December 31, 12 Months '05
------------------- vs.
2005 2004 12 Months '04
------- ------- -------------
Cabinets & Related Products $ 3,324 $ 3,065 + 8%
Plumbing Products 3,176 3,057 + 4%
Installation & Other Services 3,063 2,771 + 11%
Decorative Architectural Products 1,681 1,610 + 4%
Other Specialty Products 1,398 1,347 + 4%
------- -------
Total $12,642 $11,850 + 7%
======= =======
North America $10,513 $ 9,740 + 8%
International, principally Europe 2,129 2,110 + 1%
------- -------
Total, as above $12,642 $11,850 + 7%
======= =======
NOTES:
- - Data exclude discontinued operations.
- - Excluding acquisitions, consolidated net sales increased seven percent,
North American net sales increased eight percent and International net
sales increased one percent (please see page 13 for the GAAP
reconciliation).
- - International sales in local currencies increased one percent compared with
the year ended December 31, 2004 (please see page 13 for the GAAP
reconciliation).
Page 4
MASCO CORPORATION
QUARTERLY SEGMENT DATA - 2005
EXCLUDING GOODWILL IMPAIRMENT CHARGE
(DOLLARS IN MILLIONS)
Year Qtr. 4 Qtr. 3 Qtr. 2 Qtr. 1
------- ------ ------ ------ ------
Net Sales:
- Cabinets and Related Products $ 3,324 $ 842 $ 861 $ 838 $ 783
- Plumbing Products 3,176 786 807 823 760
- Installation and Other Services 3,063 799 807 764 693
- Decorative Architectural Products 1,681 351 453 506 371
- Other Specialty Products 1,398 368 368 355 307
------- ------ ------ ------ ------
- TOTAL 12,642 3,146 3,296 3,286 2,914
======= ====== ====== ====== ======
- North America 10,513 2,633 2,766 2,745 2,369
- International, principally Europe 2,129 513 530 541 545
------- ------ ------ ------ ------
- TOTAL, AS ABOVE 12,642 3,146 3,296 3,286 2,914
======= ====== ====== ====== ======
Operating Profit:
- Cabinets and Related Products 515 128 137 134 116
- Plumbing Products 374 84 103 108 79
- Installation and Other Services 382 90 110 102 80
- Decorative Architectural Products 278 45 78 96 59
- Other Specialty Products 275 82 80 68 45
------- ------ ------ ------ ------
- TOTAL 1,824 429 508 508 379
======= ====== ====== ====== ======
- North America 1,577 377 441 440 319
- International, principally Europe 247 52 67 68 60
------- ------ ------ ------ ------
- TOTAL, AS ABOVE 1,824 429 508 508 379
======= ====== ====== ====== ======
General Corporate Expense (GCE) 192 47 51 48 46
(Gain) Loss on Sale of Corporate Fixed
Assets, Net (8) (8) -- -- --
(Income) Regarding Litigation Settlement (6) -- (1) (3) (2)
------- ------ ------ ------ ------
Operating Profit (after GCE and Adjustments) 1,646 390 458 463 335
Other Income (Expense), Net (165) (43) (59) (41) (22)
------- ------ ------ ------ ------
Income from Continuing Operations Before
Income Taxes and Minority Interest $ 1,481 $ 347 $ 399 $ 422 $ 313
======= ====== ====== ====== ======
Margins:
- Cabinets and Related Products 15.5% 15.2% 15.9% 16.0% 14.8%
- Plumbing Products 11.8% 10.7% 12.8% 13.1% 10.4%
- Installation and Other Services 12.5% 11.3% 13.6% 13.4% 11.5%
- Decorative Architectural Products 16.5% 12.8% 17.2% 19.0% 15.9%
- Other Specialty Products 19.7% 22.3% 21.7% 19.2% 14.7%
- TOTAL 14.4% 13.6% 15.4% 15.5% 13.0%
- North America 15.0% 14.3% 15.9% 16.0% 13.5%
- International, principally Europe 11.6% 10.1% 12.6% 12.6% 11.0%
- TOTAL, AS ABOVE 14.4% 13.6% 15.4% 15.5% 13.0%
NOTES:
- - Data exclude discontinued operations.
- - Operating results above for the fourth quarter of 2005 exclude a non-cash,
pre-tax charge for goodwill impairment of $69 million. The charge related
to certain of the Company's European business units and was allocated among
the Plumbing Products segment ($7 million); Decorative Architectural
Products segment ($26 million); and Other Specialty Products segment ($36
million).
- - Operating profit and margins by segment and geographic area are before
general corporate expense, (gain) on sale of Corporate fixed assets and
(income) regarding the litigation settlement.
Page 5
MASCO CORPORATION
QUARTERLY SEGMENT DATA - 2005
INCLUDING GOODWILL IMPAIRMENT CHARGE
(DOLLARS IN MILLIONS)
Year Qtr. 4 Qtr. 3 Qtr. 2 Qtr. 1
------- ------ ------ ------ ------
Net Sales:
- Cabinets and Related Products $ 3,324 $ 842 $ 861 $ 838 $ 783
- Plumbing Products 3,176 786 807 823 760
- Installation and Other Services 3,063 799 807 764 693
- Decorative Architectural Products 1,681 351 453 506 371
- Other Specialty Products 1,398 368 368 355 307
------- ------ ------ ------ ------
- TOTAL 12,642 3,146 3,296 3,286 2,914
======= ====== ====== ====== ======
- North America 10,513 2,633 2,766 2,745 2,369
- International, principally Europe 2,129 513 530 541 545
------- ------ ------ ------ ------
- TOTAL, AS ABOVE 12,642 3,146 3,296 3,286 2,914
======= ====== ====== ====== ======
Operating Profit:
- Cabinets and Related Products 515 128 137 134 116
- Plumbing Products 367 77 103 108 79
- Installation and Other Services 382 90 110 102 80
- Decorative Architectural Products 252 19 78 96 59
- Other Specialty Products 239 46 80 68 45
------- ------ ------ ------ ------
- TOTAL 1,755 360 508 508 379
======= ====== ====== ====== ======
- North America 1,577 377 441 440 319
- International, principally Europe 178 (17) 67 68 60
------- ------ ------ ------ ------
- TOTAL, AS ABOVE 1,755 360 508 508 379
======= ====== ====== ====== ======
General Corporate Expense (GCE) 192 47 51 48 46
(Gain) Loss on Sale of Corporate Fixed
Assets, Net (8) (8) -- -- --
(Income) Regarding Litigation Settlement (6) -- (1) (3) (2)
------- ------ ------ ------ ------
Operating Profit (after GCE and Adjustments) 1,577 321 458 463 335
Other Income (Expense), Net (165) (43) (59) (41) (22)
------- ------ ------ ------ ------
Income from Continuing Operations Before
Income Taxes and Minority Interest $ 1,412 $ 278 $ 399 $ 422 $ 313
======= ====== ====== ====== ======
Margins:
- Cabinets and Related Products 15.5% 15.2% 15.9% 16.0% 14.8%
- Plumbing Products 11.6% 9.8% 12.8% 13.1% 10.4%
- Installation and Other Services 12.5% 11.3% 13.6% 13.4% 11.5%
- Decorative Architectural Products 15.0% 5.4% 17.2% 19.0% 15.9%
- Other Specialty Products 17.1% 12.5% 21.7% 19.2% 14.7%
- TOTAL 13.9% 11.4% 15.4% 15.5% 13.0%
- North America 15.0% 14.3% 15.9% 16.0% 13.5%
- International, principally Europe 8.4% -3.3% 12.6% 12.6% 11.0%
- TOTAL, AS ABOVE 13.9% 11.4% 15.4% 15.5% 13.0%
NOTES:
- - Data exclude discontinued operations.
- - Operating results above for the fourth quarter of 2005 include a non-cash,
pre-tax charge for goodwill impairment of $69 million. The charge related
to certain of the Company's European business units and was allocated among
the Plumbing Products segment ($7 million); Decorative Architectural
Products segment ($26 million); and Other Specialty Products segment ($36
million).
- - Operating profit and margins by segment and geographic area are before
general corporate expense, (gain) on sale of Corporate fixed assets and
(income) regarding the litigation settlement.
Page 6
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 $ 3,065 $ 798 $ 800 $ 740 $ 727
- 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 11,850 2,975 3,117 3,004 2,754
======= ====== ====== ====== ======
- North America 9,740 2,418 2,591 2,495 2,236
- International, principally Europe 2,110 557 526 509 518
------- ------ ------ ------ ------
- TOTAL, AS ABOVE 11,850 2,975 3,117 3,004 2,754
======= ====== ====== ====== ======
Operating Profit:
- Cabinets and Related Products 519 147 142 128 102
- 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 1,861 434 534 505 388
======= ====== ====== ====== ======
- North America 1,616 386 472 435 323
- International, principally Europe 245 48 62 70 65
------- ------ ------ ------ ------
- TOTAL, AS ABOVE 1,861 434 534 505 388
======= ====== ====== ====== ======
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) 1,704 373 483 468 380
Other Income (Expense), Net (50) (7) (31) (11) (1)
------- ------ ------ ------ ------
Income from Continuing Operations Before
Income Taxes and Minority Interest $ 1,654 $ 366 $ 452 $ 457 $ 379
======= ====== ====== ====== ======
Margins:
- Cabinets and Related Products 16.9% 18.4% 17.8% 17.3% 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% 16.0% 18.2% 17.4% 14.4%
- International, principally Europe 11.6% 8.6% 11.8% 13.8% 12.5%
- TOTAL, AS ABOVE 15.7% 14.6% 17.1% 16.8% 14.1%
NOTES:
- - Data exclude discontinued operations.
- - Operating results above for the fourth quarter of 2004 exclude a non-cash,
pre-tax charge for goodwill impairment of $112 million. The charge related
to certain of the Company's European business units and was allocated among
the 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 7
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 $ 3,065 $ 798 $ 800 $ 740 $ 727
- 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 11,850 2,975 3,117 3,004 2,754
======= ====== ====== ====== ======
- North America 9,740 2,418 2,591 2,495 2,236
- International, principally Europe 2,110 557 526 509 518
------- ------ ------ ------ ------
- TOTAL, AS ABOVE 11,850 2,975 3,117 3,004 2,754
======= ====== ====== ====== ======
Operating Profit:
- Cabinets and Related Products 519 147 142 128 102
- 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 1,749 322 534 505 388
======= ====== ====== ====== ======
- North America 1,616 386 472 435 323
- International, principally Europe 133 (64) 62 70 65
------- ------ ------ ------ ------
- TOTAL, AS ABOVE 1,749 322 534 505 388
======= ====== ====== ====== ======
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) 1,592 261 483 468 380
Other Income (Expense), Net (50) (7) (31) (11) (1)
------- ------ ------ ------ ------
Income from Continuing Operations Before
Income Taxes and Minority Interest $ 1,542 $ 254 $ 452 $ 457 $ 379
======= ====== ====== ====== ======
Margins:
- Cabinets and Related Products 16.9% 18.4% 17.8% 17.3% 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 14.8% 10.8% 17.1% 16.8% 14.1%
- North America 16.6% 16.0% 18.2% 17.4% 14.4%
- International, principally Europe 6.3% -11.5% 11.8% 13.8% 12.5%
- TOTAL, AS ABOVE 14.8% 10.8% 17.1% 16.8% 14.1%
NOTES:
- - Data exclude discontinued operations.
- - Operating results above for the fourth quarter of 2004 include a non-cash,
pre-tax charge for goodwill impairment of $112 million. The charge related
to certain of the Company's European business units and was allocated among
the 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 8
MASCO CORPORATION
OTHER INCOME (EXPENSE), NET
2005 & 2004 - BY QUARTER
(IN MILLIONS)
2005 2004
------------------------------------- -------------------------------------
YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1 YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1
----- ------ ------ ------ ------ ----- ------ ------ ------ ------
Interest Expense $(247) $(66) $(64) $(58) $(59) $(217) $(57) $(55) $(52) $(53)
Income from Cash and Cash Investments 36 14 11 6 5 11 6 2 1 2
Other Interest Income 7 2 3 1 1 7 2 2 1 2
Realized Gains from Financial Investments, Net 98 6 23 28 41 92 40 9 14 29
Dividend Income 16 4 4 4 4 27 5 8 7 7
Impairment Charge for Marketable Securities (30) -- (28) (2) -- (21) (21) -- -- --
Impairment Charge for Private Equity Funds (15) -- (15) -- -- -- -- -- -- --
Other, Net (30) (3) 7 (20) (14) 51 18 3 18 12
----- ---- ---- ---- ---- ----- ---- ---- ---- ----
Total Other Income (Expense), Net $(165) $(43) $(59) $(41) $(22) $ (50) $ (7) $(31) $(11) $ (1)
===== ==== ==== ==== ==== ===== ==== ==== ==== ====
NOTES:
- - Data exclude discontinued operations.
- - Other, net, for 2005 includes $25 million of realized currency transaction
losses; 2004 includes $26 million of realized currency transaction gains.
- - Other, net, for the fourth quarter of 2005 principally includes $2 million
of realized currency transaction losses; the fourth quarter of 2004
includes $15 million of realized currency transaction gains.
- - The third quarter of 2005 and the fourth quarter of 2004 impairment charges
for marketable securities relate 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, 2005 & 2004
(DOLLARS AND SHARES IN MILLIONS, EXCEPT PER SHARE DATA)
As a Percent of Sales
Three Months Ended 3 Months Ended
December 31, December 31,
% ------------------ ---------------------
Line Change 2005 2004 2005 2004
- ---- ------ ------ ------ ----- -----
1 Net Sales 6% $3,146 $2,975 100.0% 100.0%
2 Cost of Sales 9% 2,279 2,088 72.4% 70.2%
------ ------ ----- -----
3 Gross Profit -2% 867 887 27.6% 29.8%
------ ------ ----- -----
Operating Profit:
4 - Before GCE, Litigation (Income), (Gain) on Sale of
Corporate Fixed Assets and Goodwill Impairment Charge(3-8) -1% 429 434 13.6% 14.6%
5 - After GCE, Litigation (Income), (Gain) on Sale of
Corporate Fixed Assets and Goodwill Impairment
Charge (3-9-10-11) 23% 321 261 10.2% 8.8%
------ ------ ----- -----
S,G&A Expense:
6 - General Corporate Expense (GCE) -22% 47 60 1.5% 2.0%
7 - (Gain) loss on Sale of Corporate Fixed Assets, Net (8) 1 -0.3% 0.00
8 - All Other -3% 438 453 13.9% 15.2%
------ ------ ----- -----
9 - Total S,G&A Expense -7% 477 514 15.2% 17.3%
------ ------ ----- -----
10 Goodwill Impairment Charge 69 112
11 (Income) Regarding Litigation Settlement -- -- 0.0% 0.0%
12 Other Income (Expense), Net (43) (7) -1.4% -0.2%
------ ------ ----- -----
13 Income from Continuing Operations Before Income Taxes and
Minority Interest (5+12) 9% 278 254 8.8% 8.5%
14 Income Taxes 18% 130 110 4.1% 3.7%
(Tax Rate) 46.8% 43.3%
------ ------ ----- -----
15 Income from Continuing Operations Before Minority Interest 3% 148 144 4.7% 4.8%
16 Minority Interest (6) (5) -0.2% -0.2%
------ ------ ----- -----
17 Income from Continuing Operations 2% 142 139 4.5% 4.7%
18 Income (Loss) from Discontinued Operations, Net of Income Taxes 31 (34) 1.0% -1.1%
------ ------ ----- -----
19 Net Income 65% $ 173 $ 105 5.5% 3.5%
====== ====== ===== =====
Earnings Per Common Share (Diluted):
Income from Continuing Operations 10% $ 0.34 $ 0.31
Income (Loss) from Discontinued Operations, Net of Income Taxes 0.07 (0.07)
------ ------
Net Income 77% $ 0.41 $ 0.23
====== ======
Average (Diluted) Common Shares -7% 419 451
Page 10
MASCO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2005 & 2004
(DOLLARS AND SHARES IN MILLIONS, EXCEPT PER SHARE DATA)
As a Percent of Sales
Twelve Months Ended 12 Months Ended
December 31, December 31,
% ------------------- ---------------------
Line Change 2005 2004 2005 2004
- ---- ------ ------- ------- ----- -----
1 Net Sales 7% $12,642 $11,850 100.0% 100.0%
2 Cost of Sales 10% 9,033 8,187 71.5% 69.1%
------- ------- ----- -----
3 Gross Profit -1% 3,609 3,663 28.5% 30.9%
------- ------- ----- -----
Operating Profit:
4 - Before GCE, Litigation (Income), (Gain) on Sale of
Corporate Fixed Assets and Goodwill Impairment Charge(3-8) -2% 1,824 1,861 14.4% 15.7%
5 - After GCE, Litigation (Income), (Gain) on Sale of
Corporate Fixed Assets and Goodwill Impairment Charge
(3-9-10-11) -1% 1,577 1,592 12.5% 13.4%
------- ------- ----- -----
S,G&A Expense:
6 - General Corporate Expense (GCE) -1% 192 194 1.5% 1.6%
7 - (Gain) on Sale of Corporate Fixed Assets, Net (8) (7) -0.1% -0.1%
8 - All Other -1% 1,785 1,802 14.1% 15.2%
------- ------- ----- -----
9 - Total S,G&A Expense -1% 1,969 1,989 15.6% 16.8%
------- ------- ----- -----
10 Goodwill Impairment Charge 69 112
11 (Income) Regarding Litigation Settlement (6) (30) 0.0% -0.3%
12 Other Income (Expense), Net (165) (50) -1.3% -0.4%
------- ------- ----- -----
13 Income from Continuing Operations Before Income Taxes and
Minority Interest (5+12) -8% 1,412 1,542 11.2% 13.0%
14 Income Taxes -10% 518 574 4.1% 4.8%
(Tax Rate) 36.7% 37.2%
------- ------- ----- -----
15 Income from Continuing Operations Before Minority Interest -8% 894 968 7.1% 8.2%
16 Minority Interest (22) (19) -0.2% -0.2%
------- ------- ----- -----
17 Income from Continuing Operations -8% 872 949 6.9% 8.0%
18 Income (Loss) from Discontinued Operations, Net of Income Taxes 68 (56) 0.5% -0.5%
------- ------- ----- -----
19 Net Income 5% $ 940 $ 893 7.4% 7.5%
======= ======= ===== =====
Earnings Per Common Share (Diluted):
Income from Continuing Operations -3% $ 2.03 $ 2.08
Income (Loss) from Discontinued Operations, Net of Income Taxes 0.16 (0.12)
------- -------
Net Income 12% $ 2.19 $ 1.96
======= =======
Average (Diluted) Common Shares -6% 430 456
Page 11
MASCO CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
December 31, December 31,
2005 2004
------------ ------------
ASSETS
Current Assets:
Cash and Cash Investments $ 1,964 $ 1,256
Receivable, Net 1,716 1,732
Inventories 1,127 1,132
Prepaid Expenses and Other 316 282
------- -------
Total Current Assets 5,123 4,402
Property and Equipment, Net 2,173 2,272
Goodwill 4,171 4,408
Other Intangible Assets, Net 307 326
Other Assets 785 1,133
------- -------
Total Assets $12,559 $12,541
======= =======
LIABILITIES
Current Liabilities:
Notes Payable $ 832 $ 80
Accounts Payable 837 837
Accrued Liabilities 1,225 1,230
------- -------
Total Current Liabilities 2,894 2,147
Long-Term Debt 3,915 4,187
Deferred Income Taxes and Other 902 784
------- -------
Total Liabilities 7,711 7,118
SHAREHOLDERS' EQUITY 4,848 5,423
------- -------
Total Liabilities and Shareholders' Equity $12,559 $12,541
======= =======
Page 12
MASCO CORPORATION
GAAP RECONCILIATION OF SALES GROWTH
EXCLUDING EFFECT OF ACQUISITIONS & CURRENCY TRANSLATION
(IN MILLIONS)
Three Months Ended
December 31,
------------------
2005 2004
------ ------
Consolidated Net Sales, as reported $3,146 $2,975
- Acquisitions (7) --
------ ------
Consolidated Net Sales (excl. acquisitions) $3,139 $2,975
====== ======
North American Net Sales, as reported $2,633 $2,418
- Acquisitions (7) --
------ ------
North American Net Sales (excl. acquisitions) $2,626 $2,418
====== ======
International Net Sales, as reported $ 513 $ 557
- Acquisitions -- --
------ ------
International Net Sales (excl. acquisitions) 513 557
- Currency Translation 44 --
------ ------
International Net Sales (excl. acquisitions & currency) $ 557 $ 557
====== ======
Twelve Months Ended
December 31,
-------------------
2005 2004
------- -------
Consolidated Net Sales, as reported $12,642 $11,850
- Acquisitions (21) --
------- -------
Consolidated Net Sales (excl. acquisitions) $12,621 $11,850
======= =======
North American Net Sales, as reported $10,513 $ 9,740
- Acquisitions (21) --
------- -------
North American Net Sales (excl. acquisitions) $10,492 $ 9,740
======= =======
International Net Sales, as reported $ 2,129 $ 2,110
- Acquisitions -- --
------- -------
International Net Sales (excl. acquisitions) 2,129 2,110
- Currency Translation 5 --
------- -------
International Net Sales (excl. acquisitions & currency) $ 2,134 $ 2,110
======= =======
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,
-------------------------------
2005 2004
------------- -------------
$ Margin $ Margin
---- ------ ---- ------
Operating Profit, As Reported $321 10.2% $261 8.8%
Goodwill Impairment Charge 69 112
(Income) Regarding Litigation Settlement -- --
---- ----
Operating Profit, As Reconciled $390 12.4% $373 12.5%
==== ====
TWELVE MONTHS ENDED DECEMBER 31,
---------------------------------
2005 2004
--------------- ---------------
$ Margin $ Margin
------ ------ ------ ------
Operating Profit, As Reported $1,577 12.5% $1,592 13.4%
Goodwill Impairment Charge 69 112
(Income) Regarding Litigation Settlement (6) (30)
------ ------
Operating Profit, As Reconciled $1,640 13.0% $1,674 14.1%
====== ======
NOTE:
The Company believes that certain non-GAAP performance measures and ratios, used
in managing the business, may provide users of this financial information with
additional meaningful comparisons between current results and results in prior
periods. Non-GAAP performance measures and ratios should be viewed in addition
to, and not as an alternative for, the Company's reported results under
accounting principles generally accepted in the United States.
Page 14
MASCO CORPORATION
GAAP RECONCILIATION OF OPERATING PROFIT AND SHAREHOLDERS' EQUITY
(IN MILLIONS)
TWELVE
MONTHS ENDED
DECEMBER 31,
2005
------------
Operating Profit from Continuing Operations $1,577
Goodwill Impairment Charge 69
(Income) Regarding Litigation Settlement (6)
------
Operating Profit, As Reconciled $1,640
======
TWELVE MONTHS ENDED
DECEMBER 31,
-------------------
2005 2004
------ ------
Shareholders' Equity, As Reported $4,848 $5,423
Goodwill Impairment Charge (after tax) 69 104
(Income) Regarding Litigation Settlement (after tax) (4) (19)
------ ------
Shareholders' Equity, As Reconciled $4,913 $5,508
====== ======
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 as detail for the calculation of return on invested
capital ("ROIC") which is calculated as after-tax operating profit (last twelve
months, as reconciled) 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,
------------------
2005 2004
---- ----
Net Sales $ 44 $114
==== ====
Income (Loss) from Discontinued Operations $ 7 $(47)
Gain (loss) on Disposal of Discontinued
Operations, Net 53 (2)
---- ----
Income (Loss) Before Income Taxes 60 (49)
Income Tax (Expense) Benefit (29) 15
---- ----
Income (Loss) from Discontinued
Operations, Net of Income Taxes $ 31 $(34)
==== ====
Twelve Months Ended
December 31,
-------------------
2005 2004
---- -----
Net Sales $242 $ 581
==== =====
Income from Discontinued Operations $ 39 $ 5
Gain on Disposal of Discontinued
Operations, Net 63 106
Impairment of Assets Held for Sale -- (139)
---- -----
Income (Loss) Before Income Taxes 102 (28)
Income Tax (34) (28)
---- -----
Income (Loss) from Discontinued
Operations, Net of Income Taxes $ 68 $ (56)
==== =====
NOTES:
The unusual relationship between income tax and loss before income taxes in 2004
(including the impairment charge for assets held for sale and the net gain on
disposals) resulted primarily from the expected loss providing no current tax
benefit and the reversal of deferred tax assets of the discontinued operations
which were no longer expected to be realized. The after-tax charge for the
impairment of assets held for sale of $151 million included $12 million for the
expensing of deferred tax assets of the discontinued operations for the twelve
months ended December 31, 2004.
The information for discontinued operations is for the period prior to the
respective dates of disposition.
Page 16