EXHIBIT 99
FOR IMMEDIATE RELEASE Contact:
Maria Duey
313-792-5500
MASCO CORPORATION REPORTS SECOND QUARTER RESULTS
MASCO CORPORATION HIGHLIGHTS:
SECOND QUARTER 2006
o Net sales from continuing operations increased three percent
to a second quarter record of $3.4 billion.
o Income from continuing operations was $289 million or $.72 per
common share, excluding a $78 million non-cash, pre-tax
impairment charge for financial investments and $26 million
pre-tax of costs and charges related to profit improvement
programs; including such charges, income was $217 million or
$.54 per common share.
o The Company returned $380 million to shareholders through
dividends and share repurchases.
o The Company had approximately $700 million in cash and
marketable securities at June 30, 2006.
Taylor, Michigan (August 1, 2006) - Masco Corporation (NYSE: MAS) today
reported that net sales from continuing operations for the quarter ended June
30, 2006 increased three percent to a second quarter record of $3.4 billion
compared with $3.3 billion for the second quarter of 2005. North American net
sales increased four percent and International net sales were flat. In local
currencies, International net sales increased one percent compared with the
second quarter of 2005.
Income from continuing operations, excluding the non-cash impairment
charge for financial investments and costs and charges related to profit
improvement programs in the second quarter of 2006, was $289 million or $.72 per
common share compared with $267 million or $.62 per common share for the
comparable period of 2005. The second quarters of 2006 and 2005 benefited from
net gains from the sale of financial investments of $.02 and $.04 per common
share, respectively.
Income from continuing operations for the second quarter of 2006 was
$217 million or $.54 per common share, including a $78 million non-cash, pre-tax
impairment charge for financial investments and $26 million pre-tax of costs and
charges related to profit improvement programs.
In the second quarter of 2006, the Company determined that a decline
was other-than-temporary in the estimated value of certain of its financial
investments. Accordingly, the Company recognized a $78 million non-cash, pre-tax
impairment charge for its investments, primarily related to Metaldyne
Corporation and the Heartland Industrial Partners private equity fund.
Net income for the second quarter of 2006 was $219 million or $.54 per
common share and included $2 million of income related to discontinued
operations. Net income for the second quarter of 2005 was $274 million or $.64
per common share and included $7 million of income 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. In the second
quarter of 2006, the Company incurred $11 million pre-tax of costs and charges
related to this plant closure and other profit improvement programs in the
Plumbing Products segment. In addition, the Company incurred $15 million pre-tax
of costs and charges related to the closure of a relatively small
ready-to-assemble cabinet manufacturing facility in the Cabinets and Related
Products segment. The Company expects to incur additional costs and charges
throughout 2006 for its profit improvement programs and currently anticipates
that total costs and charges related to these programs for the full-year 2006,
will aggregate approximately $70 million pre-tax, as previously announced.
Implementing these programs should improve the Company's earnings outlook for
2007 and beyond.
While the Company's 2006 second quarter operating earnings exceeded its
expectations, nevertheless results continued to be adversely affected by
increases in commodity, energy and freight costs, as well as recent declines in
housing activity and a moderation in consumer spending, partially offset by
profit improvement programs and selling price increases. The Company has
implemented and continues to implement additional selling price increases in an
effort to offset commodity and energy-related cost increases.
Assuming no further significant commodity and energy-related cost
increases and excluding costs and charges related to its profit improvement
programs and any other items, the Company continues to believe, based on current
business trends, that it will achieve 2006 full-year earnings from continuing
operations in a range of $2.40 to $2.50 per common share, as previously
announced. Including the $78 million non-cash, pre-tax ($.13 per common share)
impairment charge for financial investments and the costs and charges related to
plant closures and other profit improvement programs, which are expected to
aggregate approximately $70 million pre-tax ($.11 per common share) in 2006,
earnings from continuing operations are expected to be in a range of $2.16 to
$2.26 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, August 1, 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) 981-4900 (confirmation #8001504). 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 #8001504)
approximately two hours after the end of the call and will continue through
August 8, 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 AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005
(IN MILLIONS EXCEPT PER COMMON SHARE DATA)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2006 2005 2006 2005
------- ------- ------- -------
Net sales $ 3,389 $ 3,286 $ 6,575 $ 6,200
Cost of sales 2,403 2,318 4,709 4,404
------- ------- ------- -------
Gross profit 986 968 1,866 1,796
Selling, general and administrative expenses 532 508 1,055 1,003
Goodwill impairment charge 10 -- 10 --
(Income) regarding litigation settlement -- (3) -- (5)
------- ------- ------- -------
Operating profit 444 463 801 798
Other income (expense), net (99) (41) (129) (63)
------- ------- ------- -------
Income from continuing operations before income
taxes, minority interest and cumulative effect of
accounting change, net 345 422 672 735
Income taxes 120 150 233 251
------- ------- ------- -------
Income from continuing operations before
minority interest and cumulative effect of
accounting change, net 225 272 439 484
Minority interest 8 5 14 10
------- ------- ------- -------
Income from continuing operations before
cumulative effect of accounting change, net 217 267 425 474
Income from discontinued operations, net 2 7 1 31
Cumulative effect of accounting change, net -- -- (3) --
------- ------- ------- -------
Net income $ 219 $ 274 $ 423 $ 505
======= ======= ======= =======
Earnings per common share (diluted):
Income from continuing operations before
cumulative effect of accounting change, net $ 0.54 $ 0.62 $ 1.04 $ 1.08
Income from discontinued operations, net -- 0.01 -- 0.07
Cumulative effect of accounting change, net -- -- (0.01) --
------- ------- ------- -------
Net income $ 0.54 $ 0.64 $ 1.04 $ 1.15
======= ======= ======= =======
Average diluted common shares outstanding 402 430 407 437
======= ======= ======= =======
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
SECOND QUARTER 2006
o Net sales from continuing operations increased three percent with North
American sales increasing four percent. International sales were flat; in
local currencies, International sales increased one percent compared with
the second quarter of 2005. Net sales growth slowed from the 2006 first
quarter rate as a result of recent declines in housing activity and a
moderation in consumer spending.
o Key retailer sales from continuing operations increased one percent in the
2006 second quarter compared with an increase of nine percent in the 2005
second quarter and an increase of seven percent in the 2006 first quarter.
The Company believes that retail sales in the second quarter of 2006 were
negatively impacted by higher energy costs, which adversely affected
consumers, particularly those with lower incomes.
o Sales of North American assembled cabinets and non-insulation installation
products both were particularly strong with double-digit increases. Sales
of major faucet brands were up a combined mid-single digit. Sales of
certain products were negatively impacted by slowing housing starts and, in
addition, Installation Services were impacted by shortages of materials.
o While the Company's 2006 second quarter operating earnings exceeded its
expectations, nevertheless results continued to be adversely affected by
increases in commodity, energy and freight costs, as well as recent
declines in housing activity and a moderation in consumer spending,
partially offset by profit improvement programs and selling price
increases. The Company has implemented and continues to implement
additional selling price increases in an effort to offset continuing
commodity and energy-related cost increases.
o Sales changes by segment in the 2006 second quarter versus the 2005 second
quarter were:
- Cabinets and Related Products sales increased three percent;
- Plumbing Products sales increased two percent;
- Installation and Other Services sales increased six percent;
- Decorative Architectural Products sales increased four percent; and
- Other Specialty Products sales declined two percent.
1
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
SECOND QUARTER 2006 (CONTINUED)
o Income from continuing operations for the second quarter of 2006, excluding
the non-cash impairment charge for financial investments and the costs and
charges related to profit improvement programs, was $289 million or $.72
per common share. Income from continuing operations for the second quarter
of 2005 was $267 million or $.62 per common share.
o Income from continuing operations for the second quarter of 2006 was $217
million or $.54 per common share, including a $78 million non-cash, pre-tax
impairment charge for financial investments and $26 million pre-tax of
costs and charges related to profit improvement programs.
o Based on a review of new information from a private equity fund manager and
the continued deterioration of conditions in the automotive supplier and
transportation products markets, the Company determined that the decline in
the estimated value of certain of its financial investments was
other-than-temporary. Accordingly, in the second quarter of 2006, the
Company recognized a non-cash, pre-tax impairment charge aggregating $78
million for its investments, primarily related to Metaldyne Corporation and
the Heartland Industrial Partners private equity fund.
o As part of its profit improvement programs, the Company announced a plant
closure in the Plumbing Products segment in January 2006. In the second
quarter of 2006, the Company incurred $11 million ($28 million
year-to-date) pre-tax of costs and charges related to this plant closure
and other profit improvement programs in the Plumbing Products segment. In
addition, in the second quarter of 2006, the Company incurred $15 million
pre-tax of costs and charges related to the closure of a relatively small
ready-to-assemble cabinet manufacturing facility in the Cabinets and
Related Products segment.
o The second quarters of 2006 and 2005 benefited from net gains from the sale
of financial investments of $.02 and $.04 per common share, respectively.
o The second quarters of 2006 and 2005 included currency transaction gains
(losses) of $.01 and ($.02) per common share, respectively.
o Net income for the second quarter of 2006 was $219 million or $.54 per
common share and included $2 million of income related to discontinued
operations. Net income for the second quarter of 2005 was $274 million or
$.64 per common share and included $7 million of income related to
discontinued operations.
2
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
SECOND QUARTER 2006 (CONTINUED)
o 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 the full-year 2006 will approximate $100 million pre-tax
compared with $75 million pre-tax for 2005.
o Gross margins were 29.1 percent in the 2006 second quarter compared with
29.5 percent in the 2005 second quarter. Operating profit margins, as
reported, were 13.1 percent in the second quarter of 2006 compared with
14.1 percent in the second quarter of 2005. Operating profit margins in the
second quarter of 2006 were negatively affected by the costs and charges
related to the Company's profit improvement programs. Excluding these
charges of $26 million pre-tax in 2006 and the income regarding litigation
settlement of $3 million pre-tax in 2005, operating profit margins were
13.9 percent and 14.0 percent for the second quarters of 2006 and 2005,
respectively.
o SG&A expenses as a percent of sales, including general corporate expense,
were 15.7 percent in the 2006 second quarter compared with 15.5 percent in
the 2005 second quarter.
o General corporate expense was 1.6 percent of sales in the second quarter of
2006 compared with 1.5 percent in the comparable period of 2005.
o In April 2006, the Company completed the sale of two relatively small
businesses for net proceeds of $50 million; aggregate net sales for these
businesses were $46 million for the year ended December 31, 2005 and $11
million in 2006 through the date of sale. The Company recognized a net
gain of $2 million in the second quarter of 2006 from these transactions
included in other, net, from continuing operations.
o Accounts receivable days at the end of the second quarter were 49 days
compared with 50 days a year ago.
3
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
SECOND QUARTER 2006 (CONTINUED)
o Inventory days at the end of the second quarter were 51 days compared with
50 days a year ago.
o Accounts payable days at the end of the second quarter were 36 days
compared with 38 days a year ago.
o Working capital at June 30, 2006 (defined as accounts receivable and
inventories less accounts payable) was 18.1 percent of the last twelve
months' sales compared with 17.8 percent a year earlier.
o The Company's tax rate was 34.8 percent for the second quarter of 2006,
compared with 35.5 percent for the comparable period of the prior year. The
Company currently estimates that its tax rate for the full-year 2006 should
approximate 34 to 35 percent. The Company's 2005 tax rate on income from
continuing operations, excluding goodwill impairment charges and the
adjustment of deferred taxes related to certain European operations, would
have been 35 percent.
o At the end of the quarter, the Company had a strong balance sheet with
approximately $700 million in cash and marketable securities and $2 billion
in unused bank lines.
o Debt as a percent of total capitalization was 46 percent at June 30, 2006
compared with 49 percent at June 30, 2005.
o For the twelve months ended June 30, 2006 and June 30, 2005, return on
invested capital (as reported) was 12.9 percent and 11.7 percent,
respectively. For the twelve months ended June 30, 2006 and June 30, 2005,
return on invested capital (as reconciled) was 13.4 percent and 12.9
percent, respectively. The Company continues to believe that, excluding the
costs and charges related to the plant closures and other profit
improvement programs, 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.
o In May 2006, the Company's Board of Directors authorized the repurchase of
up to 50 million shares for retirement of the Company's common stock in
open-market transactions or otherwise, replacing the previous Board of
Directors' authorization established in 2005.
4
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
SECOND QUARTER 2006 (CONCLUDED)
o The Company repurchased and retired approximately 10 million shares of
Company common stock in each of the first and second quarters of 2006. The
Company had approximately 45 million common shares remaining under its
repurchase authorization at June 30, 2006.
o The Company's diluted common shares for purposes of calculating earnings
per common share were 402 million for the second quarter of 2006 compared
with 430 million for the second quarter of 2005.
FULL-YEAR OUTLOOK
o The Company continues to believe that it will achieve mid-single digit
organic sales growth in 2006. The Company's previously communicated
full-year earnings guidance of $2.40 to $2.50 per common share was based on
housing starts declining five percent from 2005 levels. Based on current
business trends, the Company now expects that full-year housing starts will
experience a greater decline than previously forecast of approximately
eight percent and, as a result, its earnings may be closer to the lower-end
of its guidance range of $2.40 to $2.50 per common share. This guidance
includes share repurchases of 20 million common shares through June 30,
2006 and assumes no additional share repurchases, no further significant
commodity and energy-related cost increases, and excludes costs and charges
related to profit improvement programs and any other items.
o The Company expects to incur additional costs and charges throughout 2006
for its profit improvement programs and currently anticipates that total
costs and charges related to these programs for the full-year 2006 will
aggregate approximately $70 million pre-tax, as previously announced.
Including this $70 million of anticipated costs ($.11 per common share),
and the non-cash, pre-tax impairment charge for financial investments of
$78 million ($.13 per common share), earnings from continuing operations
are expected to be in a range of $2.16 to $2.26 per common share for the
full-year 2006.
o As previously announced the Company now provides annual earnings guidance
and will no longer provide quarterly earnings guidance.
5
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FULL-YEAR OUTLOOK (CONCLUDED)
o The Company expects to continue to return a minimum of $1 billion annually
to shareholders, on average, through dividends and share repurchases 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
dividends and 97 million of share repurchases. In the second quarter of
2006, the Company returned $380 million to shareholders through dividends
and share repurchases and has returned $788 million in the first half of
2006.
o Diluted common shares for the computation of earnings per common share at
July 1, 2006 are 398 million. This excludes the impact of any third quarter
repurchases of common stock.
Statements contained herein may include certain forward-looking
statements regarding Masco's future sales, earnings growth potential and other
developments. Actual results may vary materially because of external factors
such as 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.
6
MASCO CORPORATION - 2ND 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 June 30, 2006
& 2005
4 Sales by Segment and Geographic Area - Six Months Ended June 30, 2006
& 2005
5 2006 Quarterly Segment Data - Excluding Costs and Charges for Profit
Improvement Initiatives
6 2006 Quarterly Segment Data - Including Costs and Charges for Profit
Improvement Programs
7 2005 Quarterly Segment Data - Excluding Goodwill Impairment Charge
8 2005 Quarterly Segment Data - Including Goodwill Impairment Charge
9 Other Income (Expense), Net - 2006 & 2005 Quarters
10 Consolidated Statements of Income - Three Months Ended June 30, 2006
& 2005
11 Consolidated Statements of Income - Six Months Ended June 30, 2006 & 2005
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
2006 & 2005 - BY QUARTER
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
2006 2005
------------------------------------ ---------------------------------------
YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1 YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1
---- ------ ------ ------ ------ ------- ------ ------ ------ ------
Net Sales:
- North America $2,848 $2,669 $10,513 $2,633 $2,766 $2,745 $2,369
- International 541 517 2,129 513 530 541 545
------ ------ ------- ------ ------ ------ ------
- Consolidated 3,389 3,186 12,642 3,146 3,296 3,286 2,914
Cost of Sales 2,403 2,306 9,033 2,279 2,350 2,318 2,086
------ ------ ------- ------ ------ ------ ------
Gross Profit 986 880 3,609 867 946 968 828
(Gross Margin) 29.1% 27.6% 28.5% 27.6% 28.7% 29.5% 28.4%
S,G&A Expense (before GCE & (Gain) Loss on Sale
of Corporate Fixed Assets) 479 475 1,785 438 438 460 449
(S,G&A Expense as a % of Sales) 14.1% 14.9% 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) 507 405 1,824 429 508 508 379
(Operating Margin) 15.0% 12.7% 14.4% 13.6% 15.4% 15.5% 13.0%
- North America 435 348 1,577 377 441 440 319
(Margin) 15.3% 13.0% 15.0% 14.3% 15.9% 16.0% 13.5%
- International 62 57 247 52 67 68 60
(Margin) 11.5% 11.0% 11.6% 10.1% 12.6% 12.6% 11.0%
General Corporate Expense (GCE) 53 48 192 47 51 48 46
S,G&A Expense as a % of Sales (including GCE &
(Gain) Loss on Sale of Corporate Fixed Assets) 15.7% 16.4% 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 10 -- 69 69 -- -- --
------ ------ ------- ------ ------ ------ ------
Operating Profit per F/S $ 444 $ 357 $ 1,577 $ 321 $ 458 $ 463 $ 335
====== ====== ======= ====== ====== ====== ======
Earnings per Common Share (Diluted):
Income from Continuing Operations before
Cumulative Effect of Accounting Change, Net $ 0.54 $ 0.51 $ 2.03 $ 0.34 $ 0.60 $ 0.62 $ 0.47
Income from Discontinued Operations, Net
of Income Taxes -- -- 0.16 0.07 0.01 0.01 0.06
Cumulative Effect of Accounting Change, Net -- (0.01) -- -- -- -- --
------ ------ ------- ------ ------ ------ ------
Net Income $ 0.54 $ 0.50 $ 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 for the first and second quarters of 2006 include $17
million pre-tax and $26 million pre-tax (including impairment of goodwill
of $10 million), respectively, of costs and charges related to the
Company's profit improvement programs.
- - Income from continuing operations for the second quarter of 2006 includes a
$78 million non-cash, pre-tax ($.13 per common share) impairment charge
for certain investments primarily related to Metaldyne Corporation and
Heartland Industrial Partners private equity fund.
- - 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 first two quarters of 2006 and the four
quarters of 2005 do not total to the per common share amount for the
year-to-date primarily due to the timing of capital stock transactions.
Page 2
MASCO CORPORATION
SALES BY SEGMENT AND GEOGRAPHIC AREA
THREE MONTHS ENDED JUNE 30, 2006 & 2005
(DOLLARS IN MILLIONS)
Three Months Ended
June 30, 2nd Qtr '06
------------------ vs.
2006 2005 2nd Qtr '05
------- -------- -----------
Cabinets & Related Products $ 863 $ 838 + 3%
Plumbing Products 842 823 + 2%
Installation & Other Services 812 764 + 6%
Decorative Architectural Products 525 506 + 4%
Other Specialty Products 347 355 - 2%
------ ------
Total $3,389 $3,286 + 3%
====== ======
North America $2,848 $2,745 + 4%
International, principally Europe 541 541 - 0%
------ ------
Total, as above $3,389 $3,286 + 3%
====== ======
NOTES:
- - Data exclude discontinued operations.
- - Excluding acquisitions, consolidated net sales increased three percent,
North American net sales increased four percent, and International net
sales were flat compared with the second quarter of 2005 (please see page
13 for the GAAP reconciliation).
- - International net sales in local currencies increased one percent compared
with the second quarter of 2005 (please see page 13 for the GAAP
reconciliation).
Page 3
MASCO CORPORATION
SALES BY SEGMENT AND GEOGRAPHIC AREA
SIX MONTHS ENDED JUNE 30, 2006 & 2005
(DOLLARS IN MILLIONS)
Six Months Ended
June 30, 6 Months '06
---------------- vs.
2006 2005 6 Months '05
------- ------ ------------
Cabinets & Related Products $1,715 $1,621 + 6%
Plumbing Products 1,639 1,583 + 4%
Installation & Other Services 1,618 1,457 + 11%
Decorative Architectural Products 934 877 + 6%
Other Specialty Products 669 662 + 1%
------ ------
Total $6,575 $6,200 + 6%
====== ======
North America $5,517 $5,114 + 8%
International, principally Europe 1,058 1,086 - 3%
------ ------
Total, as above $6,575 $6,200 + 6%
====== ======
NOTES:
- - Data exclude discontinued operations.
- - Excluding acquisitions, consolidated net sales increased six percent, North
American net sales increased eight percent and International net sales
decreased three percent (please see page 13 for the GAAP reconciliation).
- - International net sales in local currencies increased two percent compared
with the six months ended June 30, 2005 (please see page 13 for the GAAP
reconciliation).
Page 4
MASCO CORPORATION
QUARTERLY SEGMENT DATA - 2006
EXCLUDING COSTS AND CHARGES FOR PROFIT IMPROVEMENT PROGRAMS
(DOLLARS IN MILLIONS)
Year Qtr. 4 Qtr. 3 Qtr. 2 Qtr. 1
-------- --------- --------- ------ ------
Net Sales:
- Cabinets and Related Products $ 863 $ 852
- Plumbing Products 842 797
- Installation and Other Services 812 806
- Decorative Architectural Products 526 409
- Other Specialty Products 347 322
------ ------
- TOTAL 3,389 3,186
====== ======
- North America 2,848 2,669
- International, principally Europe 541 517
------ ------
- TOTAL, AS ABOVE 3,389 3,186
====== ======
Operating Profit:
- Cabinets and Related Products 138 121
- Plumbing Products 101 83
- Installation and Other Services 96 95
- Decorative Architectural Products 120 77
- Other Specialty Products 69 46
------ ------
- TOTAL 523 422
====== ======
- North America 409 331
- International, principally Europe 62 57
------ ------
- TOTAL, AS ABOVE 471 388
====== ======
General Corporate Expense (GCE) 53 48
(Gain) Loss on Sale of Corporate Fixed Assets, Net -- --
(Income) Regarding Litigation Settlement -- --
------ ------
Operating Profit (after GCE and Adjustments) 418 340
Other Income (Expense), Net (99) (30)
------ ------
Income from Continuing Operations before
Income Taxes, Minority Interest and Cumulative
Effect of Accounting Change, Net $ 319 $ 310
====== ======
Margins:
- Cabinets and Related Products 16.0% 14.2%
- Plumbing Products 12.0% 10.4%
- Installation and Other Services 11.7% 11.8%
- Decorative Architectural Products 22.9% 18.8%
- Other Specialty Products 19.9% 14.3%
- TOTAL 15.4% 13.2%
- North America 14.4% 12.4%
- International, principally Europe 11.6% 11.0%
- TOTAL, AS ABOVE 13.9% 12.2%
NOTES:
- - Operating profit and margins by segment and geographic area are before
general corporate expense.
- - Operating profit margins for the first and second quarters of 2006 for the
Plumbing Products segment exclude $17 million pre-tax and $11 million
pre-tax, respectively, of costs and charges related to the Company's profit
improvement programs.
- - Operating profit margin for the second quarter of 2006 for the Cabinets and
Related Products segment excludes $15 million pre-tax (including
impairment of goodwill of $10 million), of costs and charges related to
the planned closure of a relatively small ready-to-assemble cabinet
manufacturing facility.
Page 5
MASCO CORPORATION
QUARTERLY SEGMENT DATA - 2006
INCLUDING COSTS AND CHARGES FOR PROFIT IMPROVEMENT PROGRAMS
(DOLLARS IN MILLIONS)
Year Qtr. 4 Qtr. 3 Qtr. 2 Qtr. 1
------- ------ ------ ------ ------
Net Sales:
- Cabinets and Related Products $ 863 $ 852
- Plumbing Products 842 797
- Installation and Other Services 812 806
- Decorative Architectural Products 525 409
- Other Specialty Products 347 322
------ ------
- TOTAL 3,389 3,186
====== ======
- North America 2,848 2,669
- International, principally Europe 541 517
------ ------
- TOTAL, AS ABOVE 3,389 3,186
====== ======
Operating Profit:
- Cabinets and Related Products 123 121
- Plumbing Products 90 66
- Installation and Other Services 95 95
- Decorative Architectural Products 120 77
- Other Specialty Products 69 46
------ ------
- TOTAL 497 405
====== ======
- North America 435 348
- International, principally Europe 62 57
------ ------
- TOTAL, AS ABOVE 497 405
====== ======
General Corporate Expense (GCE) 53 48
(Gain) Loss on Sale of Corporate Fixed Assets, Net -- --
(Income) Regarding Litigation Settlement -- --
------ ------
Operating Profit (after GCE and Adjustments) 444 357
Other Income (Expense), Net (99) (30)
------ ------
Income from Continuing Operations before
Income Taxes, Minority Interest and Cumulative
Effect of Accounting Change, Net $ 345 $ 327
====== ======
Margins:
- Cabinets and Related Products 14.3% 14.2%
- Plumbing Products 10.7% 8.3%
- Installation and Other Services 11.7% 11.8%
- Decorative Architectural Products 22.9% 18.8%
- Other Specialty Products 19.9% 14.3%
- TOTAL 14.7% 12.7%
- North America 15.3% 13.0%
- International, principally Europe 11.5% 11.0%
- TOTAL, AS ABOVE 14.7% 12.7%
NOTES:
- - Operating profit and margins by segment and geographic area are before
general corporate expense.
- - Operating profit margins for the first and second quarters of 2006 for the
Plumbing Products segment include $17 million pre-tax and $11 million
pre-tax, respectively, of costs and charges related to the Company's profit
improvement programs. Excluding such costs and charges, the operating
profit margins in the Plumbing Products segment was 10.4 percent and 12.0
percent for the first and second quarters of 2006, respectively.
- - Operating profit margin for the second quarter of 2006 for the Cabinets and
Related Products segment includes $15 million pre-tax (including
impairment of goodwill of $10 million), of costs and charges related to
the planned closure of a relatively small ready-to-assemble cabinet
manufacturing facility. Excluding such costs and charges, the operating
profit margin in the Cabinets and Related Products segment was
16.0 percent.
Page 6
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 margin for the third quarter of 2005 for the Plumbing
Products segment includes $12 million pre-tax of costs and charges related
to the Company's profit improvement programs. Excluding such costs and
charges, the operating profit margin in the Plumbing Products segment was
14.3 percent.
- - 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 7
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 margin for the third quarter of 2005 for the Plumbing
Products segment includes $12 million pre-tax of costs and charges related
to the Company's profit improvement programs. Excluding such costs and
charges, the operating profit margin in the Plumbing Products segment was
14.3 percent.
- - 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 8
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 $(53) $(64) $(247) $(66) $(64) $(58) $(59)
Income from Cash and Cash Investments 5 14 36 14 11 6 5
Other Interest Income 1 1 7 2 3 1 1
Realized Gains from Financial Investments, Net 11 6 98 6 23 28 41
Dividend Income 1 6 16 4 4 4 4
Impairment Charge for Financial Investment (78) -- (45) -- (43) (2) --
Other, Net 14 7 (30) (3) 7 (20) (14)
---- ---- ----- ---- ---- ---- ----
Total Other Income (Expense), Net $(99) $(30) $(165) $(43) $(59) $(41) $(22)
==== ==== ===== ==== ==== ==== ====
NOTES:
- - Data exclude discontinued operations.
- - Other, net, for the second quarter of 2006 includes $8 million of realized
currency transaction gains; the second quarter of 2005 includes $14 million
of realized currency transaction losses.
Page 9
MASCO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 2006 & 2005
(DOLLARS AND SHARES IN MILLIONS, EXCEPT PER SHARE DATA)
Three Months Ended As a Percent of Sales
June 30, 3 Months Ended June 30,
% ------------------ -----------------------
Line Change 2006 2005 2006 2005
- ---- ------ ------- -------- ----- -----
1 Net Sales 3% $3,389 $3,286 100.0% 100.0%
2 Cost of Sales 4% 2,403 2,318 70.9% 70.5%
------ ------ ----- -----
3 Gross Profit 2% 986 968 29.1% 29.5%
------ ------ ----- -----
Operating Profit:
4 - Before GCE, Litigation (Income), (Gain) on Sale of
Corporate Fixed Assets and Goodwill Impairment Charge (3-8) 0% 507 508 15.0% 15.5%
5 - After GCE, Litigation (Income), (Gain) on Sale of
Corporate Fixed Assets and Goodwill Impairment Charge (3-9-10-11) -4% 444 463 13.1% 14.1%
------ ------ ----- -----
S,G&A Expense:
6 - General Corporate Expense (GCE) 10% 53 48 1.6% 1.5%
7 - (Gain) loss on Sale of Corporate Fixed Assets, Net -- -- -- --
8 - All Other 4% 479 460 14.1% 14.0%
------ ------ ----- -----
9 - Total S,G&A Expense 5% 532 508 15.7% 15.5%
------ ------ ----- -----
10 Goodwill Impairment Charge 10 -- 0.3% 0.0%
11 (Income) Regarding Litigation Settlement -- (3) -- -0.1%
12 Other Income (Expense), Net (21) (41) -0.6% -1.2%
13 Impairment Charge for Investments (78) -- -2.3% 0.0%
------ ------ ----- -----
14 Income from Continuing Operations before Income Taxes, Minority
Interest and Cumulative Effect of Accounting Change, Net (5+12+13) -18% 345 422 10.2% 12.8%
15 Income Taxes -20% 120 150 3.5% 4.6%
(Tax Rate) 34.8% 35.5%
------ ------ ----- -----
16 Income from Continuing Operations before Minority Interest
and Cumulative Effect of Accounting Change, Net -17% 225 272 6.6% 8.3%
17 Minority Interest (8) (5) -0.2% -0.2%
------ ------ ----- -----
18 Income from Continuing Operations before Cumulative Effect
of Accounting Change, Net -19% 217 267 6.4% 8.1%
19 Income from Discontinued Operations, Net of Income Taxes 2 7 0.1% 0.2%
20 Cumulative Effect of Accounting Change, Net -- -- 0.0% 0.0%
------ ------ ----- -----
21 Net Income -20% $ 219 $ 274 6.5% 8.3%
====== ====== ===== =====
Earnings Per Common Share (Diluted):
Income from Continuing Operations before Cumulative Effect
of Accounting Change, Net -13% $ 0.54 $ 0.62
Income from Discontinued Operations, Net of Income Taxes -- 0.02
Cumulative Effect of Accounting Change, Net -- --
------ ------
Net Income -15% $ 0.54 $ 0.64
====== ======
Average (Diluted) Common Shares -7% 402 430
Page 10
MASCO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2006 & 2005
(DOLLARS AND SHARES IN MILLIONS, EXCEPT PER SHARE DATA)
Six Months Ended As a Percent of Sales
June 30, 6 Months Ended June 30,
% ----------------- -----------------------
Line Change 2006 2005 2006 2005
- ---- ------ ------- ------- ----- -----
1 Net Sales 6% $6,575 $6,200 100.0% 100.0%
2 Cost of Sales 7% 4,709 4,404 71.6% 71.0%
------ ------ ----- -----
3 Gross Profit 4% 1,866 1,796 28.4% 29.0%
------ ------ ----- -----
Operating Profit:
4 - Before GCE, Litigation (Income), (Gain) on Sale of
Corporate Fixed Assets and Goodwill Impairment Charge (3-8) 3% 912 887 13.9% 14.3%
5 - After GCE, Litigation (Income), (Gain) on Sale of
Corporate Fixed Assets and Goodwill Impairment Charge (3-9-10-11) 0% 801 798 12.2% 12.9%
------ ------ ----- -----
S,G&A Expense:
6 - General Corporate Expense (GCE) 7% 101 94 1.5% 1.5%
7 - (Gain) on Sale of Corporate Fixed Assets, Net -- -- 0.0% 0.0%
8 - All Other 5% 954 909 14.5% 14.7%
------ ------ ----- -----
9 - Total S,G&A Expense 5% 1,055 1,003 16.0% 16.2%
------ ------ ----- -----
10 Goodwill Impairment Charge 10 -- 0.2% 0.0%
11 (Income) Regarding Litigation Settlement -- (5) 0.0% -0.1%
12 Other Income (Expense), Net (51) (63) -0.8% -1.0%
13 Impairment Charge for Investments (78) -- -1.2% 0.0%
------ ------ ----- -----
14 Income from Continuing Operations Before Income Taxes and
Minority Interest (5+12+13) -9% 672 735 10.2% 11.9%
15 Income Taxes -7% 233 251 3.5% 4.0%
(Tax Rate) 34.7% 34.1%
------ ------ ----- -----
16 Income from Continuing Operations Before Minority Interest -9% 439 484 6.7% 7.8%
17 Minority Interest (14) (10) -0.2% -0.2%
------ ------ ----- -----
18 Income from Continuing Operations -10% 425 474 6.5% 7.6%
19 Income from Discontinued Operations, Net of Income Taxes 1 31 0.0% 0.5%
20 Cumulative Effect of Accounting Change, Net (3) -- 0.0% 0.0%
------ ------ ----- -----
21 Net Income -16% $ 423 $ 505 6.4% 8.1%
====== ====== ===== =====
Earnings Per Common Share (Diluted):
Income from Continuing Operations -4% $ 1.04 $ 1.08
Income from Discontinued Operations, Net of Income Taxes 0.00 0.07
Cumulative Effect of Accounting Change, Net (0.01) --
------ ------
Net Income -10% $ 1.04 $ 1.16
====== ======
Average (Diluted) Common Shares -7% 407 437
Page 11
MASCO CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
June 30, December 31,
2006 2005
-------- ------------
ASSETS
Current Assets:
Cash and Cash Investments $ 606 $ 1,964
Receivable, Net 2,023 1,716
Inventories 1,313 1,127
Prepaid Expenses and Other 319 316
------- -------
Total Current Assets 4,261 5,123
Property and Equipment, Net 2,284 2,173
Goodwill 4,196 4,171
Other Intangible Assets, Net 303 307
Other Assets 723 785
------- -------
Total Assets $11,767 $12,559
======= =======
LIABILITIES
Current Liabilities:
Notes Payable $ 1,184 $ 832
Accounts Payable 979 837
Accrued Liabilities 1,263 1,225
------- -------
Total Current Liabilities 3,426 2,894
Long-Term Debt 2,810 3,915
Deferred Income Taxes and Other 899 902
------- -------
Total Liabilities 7,135 7,711
SHAREHOLDERS' EQUITY 4,632 4,848
------- -------
Total Liabilities and Shareholders' Equity $11,767 $12,559
======= =======
Page 12
MASCO CORPORATION
GAAP RECONCILIATION OF SALES GROWTH
EXCLUDING EFFECT OF ACQUISITIONS & CURRENCY TRANSLATION
(IN MILLIONS)
Three Months
Ended June 30,
---------------
2006 2005
------ ------
Consolidated Net Sales, as reported $3,389 $3,286
- Acquisitions (6) --
------ ------
Consolidated Net Sales (excl. acquisitions) $3,383 $3,286
====== ======
North American Net Sales, as reported $2,848 $2,745
- Acquisitions (6) --
------ ------
North American Net Sales (excl. acquisitions) $2,842 $2,745
====== ======
International Net Sales, as reported $ 541 $ 541
- Acquisitions -- --
------ ------
International Net Sales (excl. acquisitions) 541 541
- Currency Translation 3 --
------ ------
International Net Sales (excl. acquisitions & currency) $ 544 $ 541
====== ======
Six Months
Ended June 30,
---------------
2006 2005
------ ------
Consolidated Net Sales, as reported $6,575 $6,200
- Acquisitions (12) --
------ ------
Consolidated Net Sales (excl. acquisitions) $6,563 $6,200
====== ======
North American Net Sales, as reported $5,517 $5,114
- Acquisitions (12) --
------ ------
North American Net Sales (excl. acquisitions) $5,505 $5,114
====== ======
International Net Sales, as reported $1,058 $1,086
- Acquisitions -- --
------ ------
International Net Sales (excl. acquisitions) 1,058 1,086
- Currency Translation 48 --
------ ------
International Net Sales (excl. acquisitions & currency) $1,106 $1,086
====== ======
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 JUNE 30,
-----------------------------
2006 2005
------------- -------------
$ Margin $ Margin
---- ------ ---- ------
Operating Profit, As Reported $444 13.1% $463 14.1%
Profit Improvement Programs, Plumbing
Products Segment 11 --
Profit Improvement Programs, Cabinets
& Related Products Segment 15 --
(Income) Regarding Litigation Settlement -- (3)
---- ----
Operating Profit, As Reconciled $470 13.9% $460 14.0%
==== ====
SIX MONTHS ENDED JUNE 30,
-----------------------------
2006 2005
------------- -------------
$ Margin $ Margin
---- ------ ---- ------
Operating Profit, As Reported $801 12.2% $798 12.9%
Profit Improvement Programs, Plumbing
Products Segment 28 --
Profit Improvement Programs, Cabinets
& Related Products Segment 15 --
(Income) Regarding Litigation Settlement -- (5)
---- ----
Operating Profit, As Reconciled $844 12.8% $793 12.8%
==== ====
NOTE:
The Company believes that certain non-GAAP performance measures and ratios, used
in managing the business, may provide users of this financial information with
additional meaningful comparisons between current results and results in prior
periods. Non-GAAP performance measures and ratios should be viewed in addition
to, and not as an alternative for, the Company's reported results under
accounting principles generally accepted in the United States.
Page 14
MASCO CORPORATION
GAAP RECONCILIATION OF OPERATING PROFIT AND SHAREHOLDERS' EQUITY
(IN MILLIONS)
TWELVE
MONTHS ENDED
JUNE 30,
2006
------------
Operating Profit from Continuing Operations $1,580
Goodwill Impairment Charge 79
(Income) Regarding Litigation Settlement (1)
------
Operating Profit, As Reconciled $1,658
======
TWELVE MONTHS
ENDED JUNE 30,
---------------
2006 2005
------ ------
Shareholders' Equity, As Reported $4,632 $4,979
Goodwill Impairment Charge (after tax) 79 104
(Income) Regarding Litigation Settlement (after tax) (1) (4)
------ ------
Shareholders' Equity, As Reconciled $4,710 $5,079
====== ======
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 June 30,
--------------
2006 2005
---- ----
Net Sales $-- $62
=== ===
Income from Discontinued Operations $-- $10
Gain (Loss) on Disposal of Discontinued Operations, Net 2 (1)
--- ---
Income Before Income Taxes 2 9
Income Tax (Expense) Benefit -- (2)
--- ---
Income from Discontinued Operations, Net of Income Taxes $ 2 $ 7
=== ===
Six Months
Ended June 30,
--------------
2006 2005
---- ----
Net Sales $-- $135
=== ====
Income from Discontinued Operations $-- $ 21
Gain on Disposal of Discontinued Operations, Net 1 10
--- ----
Income Before Income Taxes 1 31
Income Tax (Expense) Benefit -- --
--- ----
Income from Discontinued Operations, Net of Income Taxes $ 1 $ 31
=== ====
NOTES:
The information for discontinued operations is for the period prior to the
respective dates of disposition.
The Company recognized additional income in discontinued operations in 2006 to
reflect the receipt of final purchase price payments, net of additional expenses
related to the disposition of businesses completed in 2005.
Page 16