FOR IMMEDIATE RELEASE Contact:
Maria Duey
313-792-5500
MASCO CORPORATION REPORTS FIRST QUARTER RESULTS
INCREASES FULL-YEAR EARNINGS GUIDANCE
MASCO CORPORATION HIGHLIGHTS:
FIRST QUARTER 2006
- Net sales from continuing operations increased nine percent to a first
quarter record $3.2 billion.
- Income from continuing operations was $219 million or $.53 per common
share, excluding costs and charges associated with the Plumbing
Products segment; including such charges, income was $208 million or
$.51 per common share.
- The Company returned $408 million to shareholders through share
repurchases and dividends.
- The quarterly dividend was increased by 10 percent, from $.20 to $.22
per common share, making 2006 the 48th consecutive year in which
dividends have been increased.
- The Company had approximately $800 million in cash and marketable
securities at March 31.
Taylor, Michigan (May 2, 2006) - Masco Corporation (NYSE: MAS) today
reported that net sales from continuing operations for the quarter ended March
31, 2006 increased nine percent to a first quarter record of $3.2 billion
compared with $2.9 billion for the first quarter of 2005. North American sales
increased 13 percent and International sales decreased five percent. In local
currencies, International sales increased three percent compared with the first
quarter of 2005.
Income from continuing operations before the cumulative effect of an
accounting change, net, and excluding costs and charges associated with profit
improvement programs in the Plumbing Products segment for the first quarter of
2006, was $219 million or $.53 per common share compared with $207 million or
$.47 per common share for the comparable period of 2005. The first quarters of
2006 and 2005 benefited from net gains from the sale of financial investments of
$.01 and $.06 per common share, respectively.
Income from continuing operations before the cumulative effect of an
accounting change, net, for the first quarter of 2006 was $208 million or $.51
per common share including $17 million pre-tax of costs and charges associated
with profit improvement programs in the Plumbing Products segment.
Net income for the first quarter of 2006 was $204 million or $.50 per
common share after giving recognition to the cumulative effect of an accounting
change, net, of $3 million or $.01 per common share related to share-based
compensation for stock appreciation rights for foreign operations. Net income
for the first quarter of 2005 was $231 million or $.52 per common share which
included income of $24 million or $.06 per common share related to discontinued
operations.
As part of its profit improvement programs, the Company announced a plant
closure in the Plumbing Products segment in January 2006. The Company incurred
$17 million pre-tax or $.03 per common share, of costs and charges associated
with this plant closure and other profit improvement programs in the Plumbing
Products segment in the first quarter of 2006 and, as previously announced,
expects to incur additional costs throughout 2006. Implementing these programs
should improve the Company's earnings outlook for 2007 and beyond.
The Company's 2006 first quarter results, seasonally the lowest of the
year, while better than expected, nevertheless continued to be adversely
affected by recent cost increases in commodity, energy and freight costs, offset
in part by selling price increases for certain products. The Company has
implemented and continues to implement additional selling price increases for a
number of its products and believes that by the end of the first half of 2006,
many of these cost increases will be largely offset by such price increases.
Assuming no further significant commodity and energy cost increases and
excluding costs associated with its profit improvement programs and any other
items, the Company believes, based on current business trends, that it will now
achieve 2006 full-year earnings from continuing operations in a range of $2.40
to $2.50 per common share compared to the Company's previous guidance of $2.35
to $2.45 per common share. Including planned costs and charges related to plant
closures and other profit improvement programs in the Plumbing Products segment,
which are presently expected, in aggregate, to approximate $70 million pre-tax
($.11 per common share) in 2006, earnings from continuing operations are
expected to be in a range of $2.29 to $2.39 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, May 2, 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 (719)
457-2641 (confirmation #3757634). 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 #3757634)
approximately two hours after the end of the call and will continue through May
9, 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 housing starts, commodity costs, 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
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005
(IN MILLIONS EXCEPT PER COMMON SHARE DATA)
Three Months
Ended March 31,
---------------
2006 2005
------ ------
Net sales $3,186 $2,914
Cost of sales 2,306 2,086
------ ------
Gross profit 880 828
Selling, general and administrative expenses 523 495
(Income) regarding litigation settlement -- (2)
------ ------
Operating profit 357 335
Other income (expense), net (30) (22)
------ ------
Income from continuing operations before income
taxes, minority interest and cumulative effect of
accounting change, net 327 313
Income taxes 113 101
------ ------
Income from continuing operations before
minority interest and cumulative effect of
accounting change, net 214 212
Minority interest 6 5
------ ------
Income from continuing operations before
cumulative effect of accounting change, net 208 207
(Loss) income from discontinued operations,
net of income taxes (1) 24
Cumulative effect of accounting change, net (3) --
------ ------
Net income $ 204 $ 231
====== ======
Earnings per common share (diluted):
Income from continuing operations before
cumulative effect of accounting change, net $ 0.51 $ 0.47
(Loss) income from discontinued operations,
net of income taxes -- 0.06
Cumulative effect of accounting change, net (0.01) --
------ ------
Net income $ 0.50 $ 0.52
====== ======
Average diluted common shares outstanding 411 443
====== ======
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FIRST QUARTER 2006
- - Net sales from continuing operations increased nine percent with North
American sales increasing 13 percent and International sales, which were
negatively affected by a stronger U.S. dollar, principally against the
Euro, decreasing five percent. In local currencies, International sales
increased three percent compared with the first quarter of 2005.
- - Sales of assembled cabinets, paints and stains and installation services
each increased double digits in the quarter.
- - Key retailer sales from continuing operations increased seven percent in
the 2006 first quarter compared with a decline of one percent in the 2005
first quarter and an increase of five percent in the 2005 fourth quarter.
- - Sales increases by segment in the 2006 first quarter versus the 2005 first
quarter were:
- Cabinets and Related Products sales increased nine percent;
- Plumbing Products sales increased five percent;
- Installation and Other Services sales increased 16 percent;
- Decorative Architectural Products sales increased 10 percent; and
- Other Specialty Products sales increased five percent.
1
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FIRST QUARTER 2006 (CONTINUED)
- - Income from continuing operations before the cumulative effect of an
accounting change, net, and excluding costs and charges associated with
profit improvement programs in the Plumbing Products segment for the first
quarter of 2006 was $219 million or $.53 per common share compared with
analysts' consensus estimates of $.46 per common share. Income from
continuing operations for the first quarter of 2005 was $207 million
or $.47 per common share.
- - Results for the first quarters of 2006 and 2005 benefited from net gains
from the sale of financial investments of $.01 and $.06 per common share,
respectively.
- - The first quarters of 2006 and 2005 included currency transaction gains
(losses) of $.01 and ($.02) per common share, respectively. The first
quarter of 2005 also included tax benefits of $.02 per common share related
to the adjustment of estimated tax accruals.
- - First quarter 2006 results continued to be adversely affected by increases
in recent quarters in commodity, energy and freight costs. The Company has
already implemented and continues to implement additional selling price
increases for a number of its products and believes that by the end of the
first half of 2006, many of these cost increases will be largely offset by
such price increases.
- - Income from continuing operations before the cumulative effect of an
accounting change, net, for the first quarter of 2006 was $208 million or
$.51 per common share including $17 million pre-tax of costs and charges
associated with profit improvement programs in the Plumbing Products
segment.
2
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FIRST QUARTER 2006 (CONTINUED)
- - On January 1, 2003, the Company elected to prospectively change its method
of accounting for stock-based compensation; accordingly, stock options
granted, modified or settled subsequent to January 1, 2003 were accounted
for using the fair value method and have been expensed in the Company's
financial statements. Effective January 1, 2006, the Company adopted
Statement of Financial Accounting Standards No. 123R, "Share-Based
Payment," ("SFAS No. 123R") and began recording expense for unvested stock
options awarded prior to January 1, 2003 through the remaining vesting
periods. The Company currently estimates that stock-based compensation
expense for full-year 2006 will approximate $100 million pre-tax as
compared to $75 million pre-tax for 2005. In addition, as a result of the
adoption of SFAS No. 123R, the Company also recorded $3 million (after-tax)
as a cumulative effect of an accounting change, net, for stock appreciation
rights for foreign operations.
- - Net income for the first quarter of 2006 was $204 million or $.50 per
common share after giving recognition to the cumulative effect of an
accounting change, net, of $3 million or $.01 per common share related to
share-based compensation. Net income for the first quarter of 2005 was $231
million or $.52 per common share which included $24 million or $.06 per
common share of income related to discontinued operations.
- - Gross margins were 27.6 percent in the 2006 first quarter compared with
28.4 percent in the 2005 first quarter. Operating profit margins, as
reported, were 11.2 percent in the first quarter of 2006 compared with 11.5
percent in the first quarter of 2005. Operating profit margins in the first
quarter of 2006 include the negative effect of costs and charges related to
the Company's profit improvement programs in the Plumbing Products segment.
Excluding these charges of $17 million pre-tax in 2006 and the income
regarding litigation settlement of $2 million pre-tax in 2005, operating
profit margins were 11.7 percent and 11.4 percent for the first quarters of
2006 and 2005, respectively.
- - SG&A expenses as a percent of sales, including general corporate expense,
were 16.4 percent in the 2006 first quarter compared with 17.0 percent in
the 2005 first quarter.
- - General corporate expense was 1.5 percent of sales in the first quarter of
2006 compared with 1.6 percent in the comparable period of 2005.
3
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FIRST QUARTER 2006 (CONTINUED)
- - Accounts receivable days at the end of the first quarter were 50 days
compared with 51 days a year ago.
- - Inventory days at the end of the first quarter were 49 days compared with
50 days a year ago.
- - Accounts payable days at the end of the first quarter were 34 days compared
with 37 days a year ago.
- - Working capital at March 31, 2006 (defined as accounts receivable and
inventories less accounts payable) improved to 17.6 percent of the last
twelve months' sales from 18.0 percent a year earlier.
- - The Company's tax rate was 34.6 percent for the first quarter of 2006
compared with 32.3 percent for the comparable period of the prior year. The
lower tax rate for the first quarter of 2005 compared with the first
quarter of 2006 resulted primarily from certain adjustments to estimated
tax accruals related to International operations recognized in the first
quarter of 2005. The Company's 2005 tax rate on income from continuing
operations, excluding the goodwill impairment charges and the adjustment
of deferred taxes related to certain European operations, would have been
35 percent for full-year 2005. The Company currently estimates that its tax
rate on income from continuing operations for 2006 will approximate 34 to
35 percent.
- - At the end of the quarter, the Company had a strong balance sheet with
approximately $800 million in cash and marketable securities and $2 billion
in unused bank lines.
- - In the first quarter of 2006, the Company retired $800 million of 6.75%
notes due March 15, 2006. Debt as a percent of total capitalization was 46
percent at both March 31, 2006 and 2005.
4
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FIRST QUARTER 2006 (CONCLUDED)
- - For the twelve months ended March 31, 2006 and March 31, 2005, return on
invested capital (as reported) was 12.9 percent and 11.6 percent,
respectively. For the twelve months ended March 31, 2006 and March 31,
2005, return on invested capital (as reconciled) was 13.3 percent and 12.7
percent, respectively. The Company continues to believe that, excluding the
Plumbing Products segment costs and charges which are expected to aggregate
approximately $70 million pre-tax in 2006, it will approximate its 15
percent return on invested capital goal by the end of 2006, and its
approximate 18 percent goal by 2010.
- - During the quarter, the Company repurchased and retired approximately 10
million shares of Company common stock. The Company had approximately 19
million common shares remaining under its repurchase authorization at March
31, 2006.
- - The Company's diluted common shares for purposes of calculating earnings
per common share were 411 million for the first quarter of 2006 compared
with 443 million for the first quarter of 2005.
- - During the quarter, the Board of Directors increased the quarterly dividend
10 percent, from $.20 to $.22 per common share, making 2006 the 48th
consecutive year in which dividends have been increased.
FULL-YEAR OUTLOOK
- - In April 2006, the Company completed the sale of two relatively small
businesses for gross proceeds of approximately $49 million; aggregate net
sales for these businesses were $46 million for the year ended December 31,
2005 and $11 million for the first quarter of 2006.
- - The Company has already implemented and continues to implement additional
price increases for a number of its products and believes that by the end
of the first half of 2006, many of the commodity cost increases incurred in
recent quarters by the Company should be largely offset by such price
increases.
- - The Company believes that it will achieve mid-to-high single digit organic
sales growth in 2006, and, based on current business trends, believes that
it will now achieve full-year earnings from continuing operations in a
range of $2.40 to $2.50 per common share.
5
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FULL-YEAR OUTLOOK (CONCLUDED)
- - In January 2006, the Company announced a plant closure in the Plumbing
Products segment. The Company incurred $17 million pre-tax ($.03 per common
share) of costs and charges associated with this plant closure in the
Plumbing Products segment in the first quarter of 2006 and, as previously
announced, expects to incur additional costs throughout 2006. These costs
and other costs and charges related to the Company's profit improvement
programs are anticipated to aggregate approximately $70 million pre-tax in
2006. Including this $70 million of anticipated costs (approximately $.11
per common share), earnings from continuing operations are expected to be
in a range of $2.29 to $2.39 per common share in 2006.
- - 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 modest income from
financial investments. The guidance also assumes no further significant
commodity cost increases.
- - The Company's previously announced guidance was for 2006 earnings from
continuing operations to be in a range of $2.35 to $2.45 per common share
and $2.24 to $2.34 per common share including planned costs and charges
related to plant closures and other profit improvement programs.
- - As previously announced, the Company will provide annual earnings guidance,
but will no longer provide quarterly earnings guidance.
- - The Company expects to continue to return a minimum of $1 billion annually
to shareholders, on average, through share repurchases and dividends as
part of its ongoing commitment to value creation. The Company has returned
$3.6 billion to shareholders over the last three calendar years including
97 million of share repurchases and dividends. In the first quarter of
2006, the Company returned $408 million to shareholders through share
repurchases and dividends.
- - Diluted common shares for the computation of earnings per common share at
April 1, 2006 are 406 million. This excludes the impact of any second
quarter repurchases of common stock.
6
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
Statements contained herein may include certain forward-looking statements
regarding Masco's future sales, earnings growth potential and other
developments. Actual results may vary materially because of external factors
such as housing starts, commodity costs, interest rate fluctuations, changes in
consumer spending and other factors over which management has no control. The
Company believes that certain non-GAAP performance measures and ratios, used in
managing the business, may provide users of this financial information with
additional meaningful comparisons between current results and results in prior
periods. Non-GAAP performance measures and ratios should be viewed in addition
to, and not as an alternative for, the Company's reported results under
accounting principles generally accepted in the United States. Additional
information about our products, markets and conditions, which could affect our
future performance, is contained in the Company's filings with the Securities
and Exchange Commission and is available on Masco's website at www.masco.com.
Masco undertakes no obligation to update any forward-looking statements, whether
as a result of new information, future events or otherwise.
###
7
MASCO CORPORATION - 1ST QUARTER 2006
Page
- ----
1 Condensed Statements of Income - 2006 & 2005 Quarters
2 Notes to Condensed Statements of Income - 2006 & 2005 Quarters
3 Sales by Segment and Geographic Area - Three Months Ended March 31, 2006 & 2005
4 2006 Quarterly Segment Data
5 2005 Quarterly Segment Data - Excluding Goodwill Impairment Charge
6 2005 Quarterly Segment Data - Including Goodwill Impairment Charge
7 Other Income (Expense), Net - 2006 & 2005 Quarters
8 Consolidated Statements of Income - Three Months Ended March 31, 2006 & 2005
9 Consolidated Balance Sheets
GAAP Reconciliations:
10 Sales Growth Excluding Effect of Acquisitions & Currency Translation
11 Operating Profit and Margins
12 Operating Profit and Shareholders' Equity
13 Discontinued Operations
MASCO CORPORATION
CONDENSED STATEMENTS OF INCOME
2006 & 2005 - BY QUARTER
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<Table>
<Caption>
2006
-----------------------------------------------------------
YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1
--------- --------- --------- --------- ---------
Net Sales:
- North America $ 2,669
- International 517
--------- --------- --------- --------- ---------
- Consolidated 3,186
Cost of Sales 2,306
--------- --------- --------- --------- ---------
Gross Profit 880
(Gross Margin) 27.6%
S,G&A Expense (before GCE & (Gain) Loss on Sale of
Corporate Fixed Assets) 475
(S,G&A Expense as a % of Sales) 14.9%
--------- --------- --------- --------- ---------
Operating Profit (before GCE, (Gain) Loss on Sale of
Corporate Fixed Assets, Litigation (Income)
& Goodwill Impairment Charge) 405
(Operating Margin) 12.7%
- North America 348
(Margin) 13.0%
- International 57
(Margin) 11.0%
General Corporate Expense (GCE) 48
S,G&A Expense as a % of Sales (including GCE & (Gain)
Loss on Sale of Corporate Fixed Assets) 16.4%
(Gain) Loss on Sale of Corporate Fixed Assets, Net --
(Income) Regarding Litigation Settlement --
Goodwill Impairment Charge --
--------- --------- --------- --------- ---------
Operating Profit per F/S $ 357
========= ========= ========= ========= =========
Earnings per Common Share (Diluted):
Income from Continuing Operations Before Cumulative
Effect of Accounting Change, Net $ 0.51
(Loss) Income from Discontinued Operations --
Cumulative Effect of Accounting Change, Net (0.01)
--------- --------- --------- --------- ---------
Net Income $ 0.50
========= ========= ========= ========= =========
<Caption>
2005
------------------------------------------------------------
YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1
--------- --------- --------- --------- ---------
Net Sales:
- North America $ 10,513 $ 2,633 $ 2,766 $ 2,745 $ 2,369
- International 2,129 513 530 541 545
--------- --------- --------- --------- ---------
- Consolidated 12,642 3,146 3,296 3,286 2,914
Cost of Sales 9,033 2,279 2,350 2,318 2,086
--------- --------- --------- --------- ---------
Gross Profit 3,609 867 946 968 828
(Gross Margin) 28.5% 27.6% 28.7% 29.5% 28.4%
S,G&A Expense (before GCE & (Gain) Loss on Sale of
Corporate Fixed Assets) 1,785 438 438 460 449
(S,G&A Expense as a % of Sales) 14.1% 13.9% 13.3% 14.0% 15.4%
--------- --------- --------- --------- ---------
Operating Profit (before GCE, (Gain) Loss on Sale of
Corporate Fixed Assets, Litigation (Income)
& Goodwill Impairment Charge) 1,824 429 508 508 379
(Operating Margin) 14.4% 13.6% 15.4% 15.5% 13.0%
- North America 1,577 377 441 440 319
(Margin) 15.0% 14.3% 15.9% 16.0% 13.5%
- International 247 52 67 68 60
(Margin) 11.6% 10.1% 12.6% 12.6% 11.0%
General Corporate Expense (GCE) 192 47 51 48 46
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%
(Gain) Loss on Sale of Corporate Fixed Assets, Net (8) (8) -- -- --
(Income) Regarding Litigation Settlement (6) -- (1) (3) (2)
Goodwill Impairment Charge 69 69 -- -- --
--------- --------- --------- --------- ---------
Operating Profit per F/S $ 1,577 $ 321 $ 458 $ 463 $ 335
========= ========= ========= ========= =========
Earnings per Common Share (Diluted):
Income from Continuing Operations Before Cumulative
Effect of Accounting Change, Net $ 2.03 $ 0.34 $ 0.60 $ 0.62 $ 0.47
(Loss) Income from Discontinued Operations 0.16 0.07 0.01 0.01 0.06
Cumulative Effect of Accounting Change, Net -- -- -- -- --
--------- --------- --------- --------- ---------
Net Income $ 2.19 $ 0.41 $ 0.61 $ 0.64 $ 0.52
========= ========= ========= ========= =========
PLEASE SEE PAGE 2 FOR NOTES.
Page 1
MASCO CORPORATION
NOTES TO CONDENSED STATEMENTS OF INCOME
2006 & 2005 - BY QUARTER
NOTES:
- - Operating results exclude operations which were sold in 2005, 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 certain marketable
securities and 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.
- - Per common share amounts for the four quarters of 2005 do not total to
the per common share amount for the full-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 MARCH 31, 2006 & 2005
(DOLLARS IN MILLIONS)
Three Months Ended
March 31, 1st Qtr '06
----------------------- vs.
2006 2005 1st Qtr '05
---------- ---------- ----------
Cabinets & Related Products $ 852 $ 783 + 9%
Plumbing Products 797 760 + 5%
Installation & Other Services 806 693 + 16%
Decorative Architectural
Products 409 371 + 10%
Other Specialty Products 322 307 + 5%
---------- ----------
Total $ 3,186 $ 2,914 + 9%
========== ==========
North America $ 2,669 $ 2,369 + 13%
International, principally
Europe 517 545 - 5%
---------- ----------
Total, as above $ 3,186 $ 2,914 + 9%
========== ==========
NOTES:
- - Data exclude discontinued operations.
- - Excluding acquisitions, consolidated net sales increased nine percent,
North American net sales increased twelve percent and International net
sales decreased five percent (please see page 10 for the GAAP
reconciliation).
- - International sales in local currencies increased three percent compared
with the first quarter of 2005 (please see page 10 for the GAAP
reconciliation).
Page 3
MASCO CORPORATION
QUARTERLY SEGMENT DATA - 2006
(DOLLARS IN MILLIONS)
Year Qtr. 4 Qtr. 3 Qtr. 2 Qtr. 1
- ---------------------------------------------------- ------- -------- -------- -------- -------------
Net Sales:
- Cabinets and Related Products $ 852
- Plumbing Products 797
- Installation and Other Services 806
- Decorative Architectural Products 409
- Other Specialty Products 322
------- -------- -------- -------- -------------
- TOTAL 3,186
======= ======== ======== ======== =============
- North America 2,669
- International, principally Europe 517
------- -------- -------- -------- -------------
- TOTAL, AS ABOVE 3,186
======= ======== ======== ======== =============
Operating Profit:
- Cabinets and Related Products 121
- Plumbing Products 66
- Installation and Other Services 95
- Decorative Architectural Products 77
- Other Specialty Products 46
------- -------- -------- -------- -------------
- TOTAL 405
======= ======== ======== ======== =============
- North America 348
- International, principally Europe 57
------- -------- -------- -------- -------------
- TOTAL, AS ABOVE 405
======= ======== ======== ======== =============
General Corporate Expense (GCE) 48
(Gain) Loss on Sale of Corporate Fixed
Assets, Net --
(Income) Regarding Litigation Settlement --
------- -------- -------- -------- -------------
Operating Profit (after GCE and Adjustments) 357
Other Income (Expense), Net (30)
------- -------- -------- -------- -------------
Income from Continuing Operations Before
Income Taxes, Minority Interest and Cumulative
Effect of Accounting Change, Net $ 327
======= ======== ======== ======== =============
Margins:
- Cabinets and Related Products 14.2%
- Plumbing Products 8.3%
- Installation and Other Services 11.8%
- Decorative Architectural Products 18.8%
- Other Specialty Products 14.3%
- TOTAL 12.7%
- North America 13.0%
- International, principally Europe 11.0%
- TOTAL, AS ABOVE 12.7%
NOTES:
- - Operating profit and margins by segment and geographic area are before
general corporate expense.
- - Operating profit margin for the Plumbing Products segment includes $17
million of charges related to the Company's profit improvement programs.
Excluding such charges, the operating profit margin in the Plumbing
Products segment was 10.4 percent.
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
OTHER INCOME (EXPENSE), NET
2006 & 2005 - BY QUARTER
(IN MILLIONS)
2006 2005
--------------------------------------- -------------------------------------------
YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1 YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1
---- ------- ------- --------- -------- ------- -------- -------- ------ ------
Interest Expense $ (64) $ (247) $ (66) $ (64) $ (58) $ (59)
Income from Cash and Cash Investments 14 36 14 11 6 5
Other Interest Income 1 7 2 3 1 1
Realized Gains from Financial Investments, Net 6 98 6 23 28 41
Dividend Income 6 16 4 4 4 4
Impairment Charge for Marketable Securities -- (30) -- (28) (2) --
Impairment Charge for Private Equity Funds -- (15) -- (15) -- --
Other, Net 7 (30) (3) 7 (20) (14)
---- ------- ------- --------- -------- ------- -------- -------- ------ ------
Total Other Income (Expense), Net $ (30) $ (165) $ (43) $ (59) $ (41) $ (22)
==== ======= ======= ========= ======== ======= ======== ======== ====== ======
NOTES:
- - Data exclude discontinued operations.
- - Other, net, for the first quarter of 2006 includes $4 million of realized
currency transaction gains; 2005 includes $13 - million of realized
currency transaction losses.
Page 7
MASCO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2006 & 2005
(DOLLARS AND SHARES IN MILLIONS, EXCEPT PER SHARE DATA)
As a Percent
Three of Sales
Months Ended 3 Months
March 31, Ended March 31,
% ----------------- -----------------
Line Change 2006 2005 2006 2005
------- ------ ------ ------ ------
1 Net Sales 9% $3,186 $2,914 100.0% 100.0%
2 Cost of Sales 11% 2,306 2,086 72.4% 71.6%
------ ------ ----- -----
3 Gross Profit 6% 880 828 27.6% 28.4%
------ ------ ----- -----
Operating Profit:
4 - Before GCE, Litigation (Income), (Gain) on Sale of
Corporate Fixed Assets and Goodwill Impairment Charge(3-8) 7% 405 379 12.7% 13.0%
5 - After GCE, Litigation (Income), (Gain) on Sale of
Corporate Fixed Assets and Goodwill Impairment Charge
(3-9-10-11) 7% 357 335 11.2% 11.5%
------ ------ ----- -----
S,G&A Expense:
6 - General Corporate Expense (GCE) 4% 48 46 1.5% 1.6%
7 - (Gain) loss on Sale of Corporate Fixed Assets, Net -- -- -- --
8 - All Other 6% 475 449 14.9% 15.4%
------ ------ ----- -----
9 - Total S,G&A Expense 6% 523 495 16.4% 17.0%
------ ------ ----- -----
10 Goodwill Impairment Charge -- --
11 (Income) Regarding Litigation Settlement -- (2) -- -0.1%
12 Other Income (Expense), Net (30) (22) -0.9% -0.8%
------ ------ ----- -----
13 Income from Continuing Operations Before Income Taxes, Minority
Interest and Cumulative Effect of Accounting Change, Net
(5+12) 4% 327 313 10.3% 10.7%
14 Income Taxes 12% 113 101 3.5% 3.5%
(Tax Rate) 34.6% 32.3%
------ ------ ----- -----
15 Income from Continuing Operations Before Minority Interest
and Cumulative Effect of Accounting Change, Net 1% 214 212 6.7% 7.3%
16 Minority Interest (6) (5) -0.2% -0.2%
------ ------ ----- -----
17 Income from Continuing Operations Before Cumulative
Effect of Accounting Change, Net 0% 208 207 6.5% 7.1%
18 (Loss) Income from Discontinued Operations, Net of Income Taxes (1) 24 0.0% 0.8%
19 Cumulative Effect of Accounting Change, Net (3) -- -0.1% 0.0%
------ ------ ----- -----
20 Net Income -12% $204 $231 6.4% 7.9%
====== ====== ===== =====
Earnings Per Common Share (Diluted):
Income from Continuing Operations Before Cumulative Effect
of Accounting Change, Net 8% $0.51 $0.47
(Loss) Income from Discontinued Operations, Net of Income
Taxes -- 0.06
Cumulative Effect of Accounting Change, Net (0.01) --
------ ------
Net Income -5% $0.50 $0.52
====== ======
Average (Diluted) Common Shares -7% 411 443
</Table>
Page 8
MASCO CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
March 31, December 31,
ASSETS 2006 2005
---------- ------------
Current Assets:
Cash and Cash Investments $ 682 $ 1,964
Receivable, Net 1,965 1,716
Inventories 1,256 1,127
Prepaid Expenses and Other 316 316
---------- ----------
Total Current Assets 4,219 5,123
Property and Equipment, Net 2,228 2,173
Goodwill 4,189 4,171
Other Intangible Assets, Net 304 307
Other Assets 815 785
---------- ----------
Total Assets $ 11,755 $ 12,559
========== ==========
LIABILITIES
Current Liabilities:
Notes Payable $ 1,179 $ 832
Accounts Payable 945 837
Accrued Liabilities 1,242 1,225
---------- ----------
Total Current Liabilities 3,366 2,894
Long-Term Debt 2,780 3,915
Deferred Income Taxes and Other 927 902
---------- ----------
Total Liabilities 7,073 7,711
SHAREHOLDERS' EQUITY 4,682 4,848
---------- ----------
Total Liabilities and Shareholders' Equity $ 11,755 $ 12,559
========== ==========
Page 9
MASCO CORPORATION
GAAP RECONCILIATION OF SALES GROWTH
EXCLUDING EFFECT OF ACQUISITIONS & CURRENCY TRANSLATION
(IN MILLIONS)
Three Months Ended
March 31,
-----------------------
2006 2005
---------- ----------
Consolidated Net Sales, as reported $ 3,186 $ 2,914
- Acquisitions (6) --
---------- ----------
Consolidated Net Sales (excl. acquisitions) $ 3,180 $ 2,914
========== ==========
North American Net Sales, as reported $ 2,669 $ 2,369
- Acquisitions (6) --
---------- ----------
North American Net Sales (excl. acquisitions) $ 2,663 $ 2,369
========== ==========
International Net Sales, as reported $ 517 $ 545
- Acquisitions -- --
---------- ----------
International Net Sales (excl. acquisitions) 517 545
- Currency Translation 45 --
---------- ----------
International Net Sales (excl. acquisitions & currency) $ 562 $ 545
========== ==========
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 10
MASCO CORPORATION
GAAP RECONCILIATION OF OPERATING PROFIT AND MARGINS
(DOLLARS IN MILLIONS)
THREE MONTHS ENDED MARCH 31,
-------------------------------------------
2006 2005
------------------- -------------------
$ Margin $ Margin
-------- -------- -------- --------
Operating Profit, As Reported $ 357 11.2% $ 335 11.5%
Profit improvement programs Plumbing Products segment 17 --
(Income) Regarding Litigation Settlement -- (2)
-------- --------
Operating Profit, As Reconciled $ 374 11.7% $ 333 11.4%
======== ========
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 11
MASCO CORPORATION
GAAP RECONCILIATION OF OPERATING PROFIT AND SHAREHOLDERS' EQUITY
(IN MILLIONS)
TWELVE
MONTHS ENDED
MARCH 31,
2006
---------------
Operating Profit As Reported $ 1,599
Goodwill Impairment Charge 69
(Income) Regarding Litigation Settlement (4)
---------------
Operating Profit, As Reconciled $ 1,664
===============
TWELVE MONTHS ENDED
MARCH 31,
------------------------
2006 2005
---------- ----------
Shareholders' Equity, As Reported $ 4,682 $ 5,008
Goodwill Impairment Charge (after tax) 69 104
(Income) Regarding Litigation Settlement (after tax) (3) (7)
---------- ----------
Shareholders' Equity, As Reconciled $ 4,748 $ 5,105
========== ==========
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 12
MASCO CORPORATION
DISCONTINUED OPERATIONS
(IN MILLIONS)
Three Months Ended
March 31,
--------------------
2006 2005
-------- --------
Net Sales $ -- $ 72
======== ========
Income from Discontinued Operations $ -- $ 11
(Loss) Gain on Disposal of Discontinued Operations, Net (1) 11
-------- --------
(Loss) Income Before Income Taxes (1) 22
Income Tax (Expense) Benefit -- 2
-------- --------
(Loss) Income from Discontinued Operations, Net of Income Taxes $ (1) $ 24
======== ========
NOTES:
The information for discontinued operations is for the period prior to the
respective dates of disposition.
Page 13