Exhibit 99
FOR IMMEDIATE RELEASE Contact:
Maria Duey
313-792-5500
MASCO CORPORATION REPORTS THIRD QUARTER RESULTS
AND A REDUCTION IN ANTICIPATED EARNINGS FOR 2006
MASCO CORPORATION HIGHLIGHTS:
THIRD QUARTER 2006
- Net sales from continuing operations increased one percent to
$3.3 billion.
- Income from continuing operations was $236 million or $.60 per
common share, excluding an $8 million non-cash, pre-tax
impairment charge for financial investments and $9 million
pre-tax of costs and charges related to profit improvement
programs; including such charges, income from continuing
operations was $225 million or $.57 per common share.
- The Company returned $263 million to shareholders through
dividends and share repurchases.
- The Company had $870 million in cash and marketable securities
at September 30, 2006.
Taylor, Michigan (October 31, 2006) - Masco Corporation (NYSE: MAS) today
reported that net sales from continuing operations for the quarter ended
September 30, 2006 increased one percent to $3.3 billion. North American net
sales decreased one percent and International net sales increased 10 percent. In
local currencies, International net sales increased five percent compared with
the third 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 third quarters of 2006 and 2005, was $236 million or
$.60 per common share and $290 million or $.68 per common share, respectively.
The third quarters of 2006 and 2005 benefited from net gains from the sale of
financial investments of $.01 and $.04 per common share, respectively.
Income from continuing operations for the third quarter of 2006 was $225
million or $.57 per common share, including an $8 million non-cash, pre-tax
impairment charge for financial investments and $9 million pre-tax of costs and
charges related to profit improvement programs. Income from continuing
operations for the third quarter of 2005 was $254 million or $.59 per common
share, including a $43 million non-cash, pre-tax impairment charge for financial
investments and $12 million pre-tax of costs and charges related to profit
improvement programs.
Net income for the third quarter of 2006 was $252 million or $.64 per
common share and included a $50 million pre-tax net gain ($.07 per common share,
after tax) from discontinued operations. Net income for the third quarter of
2005 was $262 million or $.61 per common share and included $8 million of
after-tax income ($.02 per common share) from discontinued operations.
In September 2006, the Company completed the sale of Computerized Security
Systems ("CSS"). CSS supplies electronic locksets primarily to hospitality
markets in the United States and had annual sales of $73 million. This
disposition was completed pursuant to the Company's determination that this
business unit was not core to the Company's long-term strategy. Under generally
accepted accounting principles, the net gain on this transaction, along with
2006 year-to-date and prior-period operating results, are reflected in
discontinued operations. Total net proceeds from the sale were $91 million; the
Company recognized a $51 million pre-tax net gain (included in discontinued
operations) on the disposition of CSS.
As part of its profit improvement programs, the Company announced a plant
closure in the Plumbing Products segment in January 2006. In the third quarter
of 2006, the Company incurred $9 million pre-tax ($52 million year-to-date) of
costs and charges related to this plant closure and other profit improvement
programs in the Plumbing Products and the Cabinets and Related Products
segments. The Company expects to incur additional costs and charges during the
fourth quarter of 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.
The Company's results continued to be adversely affected by accelerating
declines in housing activity, a moderation in consumer spending and increased
commodity costs, partially offset by profit improvement programs and selling
price increases. The Company has implemented additional selling price increases
in an effort to at least partially offset commodity cost increases.
A softening of incoming orders for building products and services along
with a forecasted deeper-than-expected decline in year-over-year single family
housing starts for the last several months of 2006 are expected to result in the
Company's fourth quarter net sales being down mid-single digits compared with
the fourth quarter of 2005. Accordingly, full-year earnings from continuing
operations, excluding costs and charges related to profit improvement programs,
impairment charges for investments and any other items, may be closer to $2.20
per common share rather than the Company's most recent guidance of $2.25 to
$2.30 per common share. Including such charges, earnings from continuing
operations may be closer to $1.95 per common share for the full-year 2006.
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, October 31, 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) 981-5584 (confirmation #3471288). 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 #3471288)
approximately two hours after the end of the call and will continue through
November 7, 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 NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(IN MILLIONS EXCEPT PER COMMON SHARE DATA)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2006 2005 2006 2005
------- ------- ------- -------
Net sales $ 3,295 $ 3,278 $ 9,832 $ 9,441
Cost of sales 2,372 2,338 7,056 6,718
------- ------- ------- -------
Gross profit 923 940 2,776 2,723
Selling, general and administrative expenses 523 486 1,571 1,480
Goodwill impairment charge -- -- 10 --
(Income) regarding litigation settlement -- (1) -- (6)
------- ------- ------- -------
Operating profit 400 455 1,195 1,249
Other income (expense), net (44) (59) (173) (122)
------- ------- ------- -------
Income from continuing operations before income
taxes, minority interest and cumulative effect of
accounting change, net 356 396 1,022 1,127
Income taxes 124 136 354 385
------- ------- ------- -------
Income from continuing operations before
minority interest and cumulative effect of
accounting change, net 232 260 668 742
Minority interest 7 6 21 16
------- ------- ------- -------
Income from continuing operations before
cumulative effect of accounting change, net 225 254 647 726
Income from discontinued operations, net 27 8 31 41
Cumulative effect of accounting change, net -- -- (3) --
------- ------- ------- -------
Net income $ 252 $ 262 $ 675 $ 767
======= ======= ======= =======
Earnings per common share (diluted):
Income from continuing operations before
cumulative effect of accounting change, net $ 0.57 $ 0.59 $ 1.61 $ 1.67
Income from discontinued operations, net 0.07 0.02 0.08 0.09
Cumulative effect of accounting change, net -- -- (0.01) --
------- ------- ------- -------
Net income $ 0.64 $ 0.61 $ 1.68 $ 1.77
======= ======= ======= =======
Average diluted common shares outstanding 393 427 402 434
======= ======= ======= =======
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
THIRD QUARTER 2006
- - Net sales from continuing operations increased one percent; North American
sales decreased one percent and International sales increased 10 percent.
In local currencies, International sales increased five percent compared
with the third quarter of 2005. Net sales slowed from the first half of
2006 as a result of an accelerating decline in housing activity and a
moderation in consumer spending in North America.
- - Key retailer sales from continuing operations were flat in the 2006 third
quarter compared with an increase of one percent in the 2005 third quarter
and increases of one percent in the 2006 second quarter and seven percent
in the 2006 first quarter. The Company believes that retail sales in the
third quarter of 2006 were negatively impacted by a softening in demand
for larger ticket items.
- - Sales of non-insulation installed products were particularly strong with
double-digit increases. Sales of major faucet brands combined and
architectural coatings were up mid-single digits. Sales of assembled
cabinets were up modestly. Sales of certain products and services,
including windows and doors and installation of insulation, were
negatively impacted by a slowdown in the new construction market and
experienced mid-single-digit declines. Sales of ready-to-assemble cabinets
declined double-digits in the quarter.
- - Sales changes by segment in the 2006 third quarter versus the 2005 third
quarter were:
- Cabinets and Related Products sales declined four percent;
- Plumbing Products sales increased five percent;
- Installation and Other Services sales increased one percent;
- Decorative Architectural Products sales increased five percent; and
- Other Specialty Products sales declined six percent.
- - Results continued to be adversely affected by accelerating declines in
housing activity, a moderation in consumer spending and increased
commodity costs, partially offset by profit improvement programs and
selling price increases.
1
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
THIRD QUARTER 2006 (CONTINUED)
- - Income from continuing operations, excluding the non-cash impairment
charge for financial investments and costs and charges related to profit
improvement programs in the third quarters of 2006 and 2005, was $236
million or $.60 per common share and $290 million or $.68 per common
share, respectively.
- - Income from continuing operations for the third quarter of 2006 was $225
million or $.57 per common share, including an $8 million non-cash,
pre-tax impairment charge for financial investments and $9 million pre-tax
of costs and charges related to profit improvement programs. Income from
continuing operations for the third quarter of 2005 was $254 million or
$.59 per common share, including a $43 million non-cash, pre-tax
impairment charge for financial investments and $12 million pre-tax of
costs and charges related to profit improvement programs.
- - As part of its profit improvement programs, the Company announced a plant
closure in the Plumbing Products segment in January 2006. In the third
quarter of 2006, the Company incurred $7 million ($35 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 third quarter of 2006, the Company incurred $2 million
($17 million year-to-date) 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. In the third
quarter of 2005, the Company incurred $12 million pre-tax of costs and
charges related to profit improvement programs in the Plumbing Products
segment.
- - The third quarters of 2006 and 2005 benefited from net gains from the sale
of financial investments of $.01 and $.04 per common share, respectively.
- - The third quarters of 2006 and 2005 both included currency transaction
gains of $.01 per common share.
- - Net income for the third quarter of 2006 was $252 million or $.64 per
common share and included $27 million of after-tax income or $.07 per
common share from discontinued operations (including a $50 million pre-tax
net gain). Net income for the third quarter of 2005 was $262 million or
$.61 per common share and included $8 million of after-tax income or $.02
per common share from discontinued operations.
2
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
THIRD QUARTER 2006 (CONTINUED)
- - To summarize the comments related to earnings per common share, we have
provided the following table:
Three Months Ended
September 30,
------------------
2006 2005
----- -----
Continuing operations, as reported $0.57 $0.59
Add back:
Profit improvement costs and charges $0.01 $0.02
Impairment charge for financial investments $0.01 $0.07
----- -----
Continuing operations, as reconciled $0.60 $0.68
===== =====
As reported includes:
Net gains from financial investments $0.01 $0.04
Currency transaction gains $0.01 $0.01
As reconciled, 2006 rounds to $.60 per common share.
Net income, as reported
Continuing operations $0.57 $0.59
Discontinued operations $0.07 $0.02
----- -----
Net income, as reported $0.64 $0.61
===== =====
- - Gross margins were 28.0 percent in the 2006 third quarter compared with
28.7 percent in the 2005 third quarter. Operating profit margins, as
reported, were 12.1 percent in the third quarter of 2006 compared with
13.9 percent in the third quarter of 2005. Operating profit margins in the
third quarters of 2006 and 2005 were negatively affected by the costs and
charges related to the Company's profit improvement programs. Excluding
these charges of $9 million pre-tax and $12 million pre-tax in 2006 and
2005, respectively, and the income regarding litigation settlement of $1
million pre-tax in 2005, operating profit margins were 12.4 percent and
14.2 percent for the third quarters of 2006 and 2005, respectively. The
Company's operating profit margins were also negatively affected by
lower-than-anticipated sales volume, increased commodity costs and a less
favorable product mix.
3
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
THIRD 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 the full-year 2006 will approximate $100 million pre-tax
compared with $75 million pre-tax for the full-year 2005.
- - SG&A expenses as a percent of sales, including general corporate expense,
were 15.9 percent in the 2006 third quarter compared with 14.8 percent in
the 2005 third quarter. On a year-to-date basis, SG&A expenses as a
percent of sales were 16.0 percent at September 30, 2006 compared with
15.7 percent at September 30, 2005. Higher SG&A expenses in 2006 reflect
increased stock-based compensation expense and modest increases in
information system implementation costs and other expenses.
- - General corporate expense was 1.6 percent of sales in both the third
quarters of 2006 and 2005.
- - In September 2006, the Company completed the sale of Computerized Security
Systems ("CSS"). This disposition was completed pursuant to the Company's
determination that this business unit was not core to the Company's
long-term strategy. CSS supplies electronic locksets primarily to
hospitality markets in the United States, had annual sales of $73 million
and was included in the Other Specialty Products segment. Under generally
accepted accounting principles, the net gain on this transaction along
with 2006 year-to-date and prior-period operating results are reflected in
discontinued operations (CSS contributed $.01 per common share in 2005 and
on a full-year basis in 2006, was expected to contribute $.02 per common
share). Total net proceeds from the sale were $91 million; the Company
recognized a $51 million pre-tax net gain (included in discontinued
operations) on the disposition of CSS.
- - The Company received total net proceeds of $145 million and recognized a
pre-tax net gain of $53 million related to the sale of several businesses
in the first nine months of 2006.
4
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
THIRD QUARTER 2006 (CONTINUED)
- - Accounts receivable days at the end of the third quarter were 50 days
compared with 49 days a year ago.
- - Inventory days at the end of the third quarter were 50 days compared with
47 days a year ago.
- - Accounts payable days at the end of the third quarter were 37 days
compared with 36 days a year ago.
- - Working capital at September 30, 2006 (defined as accounts receivable and
inventories less accounts payable) was 17.6 percent of the last twelve
months' sales compared with 17.7 percent a year earlier.
- - The Company's tax rate was 34.8 percent for the third quarter of 2006,
compared with 34.3 percent for the comparable period of the prior year.
The Company currently estimates that its tax rate should approximate 34 to
35 percent for the full-year 2006.
- - At the end of the quarter, the Company had a strong balance sheet with
$870 million in cash and marketable securities and $2 billion in unused
bank lines.
- - Debt as a percent of total capitalization was 46 percent at September 30,
2006 compared with 49 percent at September 30, 2005.
- - For the twelve months ended September 30, 2006 and September 30, 2005,
return on invested capital (ROIC) (as reported) was 12.4 percent and 11.9
percent, respectively. For the twelve months ended September 30, 2006 and
September 30, 2005, ROIC (as reconciled) was 12.9 percent and 13.0
percent, respectively. While the Company remains highly committed to the
continued improvement in its ROIC, based on current business trends, which
have resulted in a reduction in anticipated earnings for 2006, the Company
does not anticipate that it will achieve its 15 percent ROIC goal by the
end of 2006. However, the Company continues to believe that it will
achieve its ROIC goal of 18 percent by 2010.
5
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
THIRD QUARTER 2006 (CONCLUDED)
- - Through the first nine months of 2006, the Company has repurchased and
retired 27 million shares (7 million in the third quarter of 2006) of
Company common stock. The Company had 38 million common shares remaining
under its repurchase authorization at September 30, 2006.
- - The Company's diluted common shares for purposes of calculating earnings
per common share were 393 million for the third quarter of 2006 compared
with 427 million for the third quarter of 2005.
FULL-YEAR OUTLOOK
- - On October 3, 2006, the Company issued $1 billion of fixed-rate 6.125%
Notes due 2016, resulting in net proceeds of $988 million. The Note
offering was in anticipation of the 2007 debt maturities.
- - The Company's results continued to be adversely affected by accelerating
declines in housing activity, a moderation in consumer spending and
increased commodity costs, partially offset by profit improvement programs
and selling price increases. The Company has implemented additional
selling price increases in an effort to at least partially offset
commodity cost increases.
- - A softening of incoming orders for building products and services along
with a forecasted deeper-than-expected decline in year-over-year single
family housing starts for the last several months of 2006 are expected to
result in the Company's fourth quarter net sales being down mid-single
digits compared with the fourth quarter of 2005. Accordingly, full-year
earnings from continuing operations, excluding costs and charges related
to profit improvement programs, impairment charges for investments and any
other items, may be closer to $2.20 per common share rather than the
Company's most recent guidance of $2.25 to $2.30 per common share.
6
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FULL-YEAR OUTLOOK (CONCLUDED)
- - The Company expects to incur additional costs and charges during the
fourth quarter of 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 $86 million ($.14 per common share), earnings
from continuing operations may be closer to $1.95 per common share for the
full-year 2006.
- - 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 third quarter of
2006, the Company returned $263 million to shareholders through dividends
and share repurchases and has already returned over $1 billion in the
first nine months of 2006.
- - Diluted common shares for the computation of earnings per common share at
October 1, 2006 are 390 million. This excludes the impact of any fourth
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.
7
MASCO CORPORATION - 3RD 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 September 30,
2006 & 2005
4 Sales by Segment and Geographic Area - Nine Months Ended September 30,
2006 & 2005
5 2006 Quarterly Segment Data - Excluding Costs and Charges for Profit
Improvement Programs
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 September 30, 2006
& 2005
11 Consolidated Statements of Income - Nine Months Ended September 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 $2,710 $2,829 $2,650 $10,440 $2,615 $2,748 $2,726 $2,351
- International 585 541 517 2,129 513 530 541 545
------ ------ ------ ------- ------ ------ ------ ------
- Consolidated 3,295 3,370 3,167 12,569 3,128 3,278 3,267 2,896
Cost of Sales 2,372 2,391 2,293 8,985 2,267 2,338 2,306 2,074
------ ------ ------ ------- ------ ------ ------ ------
Gross Profit 923 979 874 3,584 861 940 961 822
(Gross Margin) 28.0% 29.1% 27.6% 28.5% 27.5% 28.7% 29.4% 28.4%
S, G&A Expense (before GCE & (Gain) Loss
on Sale of Corporate Fixed Assets) 471 476 471 1,770 435 435 455 445
(S,G&A Expense as a % of Sales) 14.3% 14.1% 14.9% 14.1% 13.9% 13.3% 13.9% 15.4%
------ ------ ------ ------- ------ ------ ------ ------
Operating Profit (before GCE, (Gain) Loss
on Sale of Corporate Fixed Assets,
Litigation (Income) & Goodwill
Impairment Charge) 452 503 403 1,814 426 505 506 377
(Operating Margin) 13.7% 14.9% 12.7% 14.4% 13.6% 15.4% 15.5% 13.0%
- North America 392 441 346 1,567 374 438 438 317
(Margin) 14.5% 15.6% 13.1% 15.0% 14.3% 15.9% 16.1% 13.5%
- International 60 62 57 247 52 67 68 60
(Margin) 10.3% 11.5% 11.0% 11.6% 10.1% 12.6% 12.6% 11.0%
General Corporate Expense (GCE) 52 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) 15.9% 15.7% 16.4% 15.5% 15.2% 14.8% 15.4% 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 $ 400 $ 440 $ 355 $ 1,567 $ 318 $ 455 $ 461 $ 333
====== ====== ====== ======= ====== ====== ====== ======
Earnings per Common Share (Diluted):
Income from Continuing Operations
before Cumulative Effect of
Accounting Change, Net $ 0.57 $ 0.53 $ 0.50 $ 2.01 $ 0.33 $ 0.59 $ 0.62 $ 0.47
Income from Discontinued Operations,
Net of Income Taxes 0.07 0.01 -- 0.17 0.08 0.02 0.02 0.06
Cumulative Effect of Accounting
Change, Net -- -- (0.01) -- -- -- -- --
------ ------ ------ ------- ------ ------ ------ ------
Net Income $ 0.64 $ 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, second and third quarters of 2006 include
$17 million pre-tax, $26 million pre-tax (including impairment of goodwill
of $10 million) and $9 million pre-tax, respectively, of costs and charges
related to the Company's profit improvement programs.
- - Income from continuing operations for the third quarter of 2006 includes an
$8 million non-cash, pre-tax ($.01 per common share, after tax) impairment
charge for certain private equity funds.
- - Income from continuing operations for the second quarter of 2006 includes a
$78 million non-cash, pre-tax ($.13 per common share, after tax) impairment
charge for certain investments, primarily related to Metaldyne Corporation
and Heartland Industrial Partners private equity fund.
- - Income from discontinued operations for the third quarter of 2006 includes
a $50 million pre-tax net gain ($.07 per common share, after tax) from the
disposition of businesses.
- - Operating results exclude operations which were sold in the third quarter
of 2006 and during 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 $43
million pre-tax of impairment charges ($.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 and fourth quarters of
2005 include net pre-tax gains from the sale of businesses aggregating $10
million and $50 million, respectively.
- - Per common share amounts for the first three quarters of 2006 and the four
quarters of 2005 do not total to the per common share amounts 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 SEPTEMBER 30, 2006 & 2005
(DOLLARS IN MILLIONS)
Three Months Ended
September 30, 3rd Qtr '06
------------------ vs.
2006 2005 3rd Qtr '05
------ ------ -----------
Cabinets & Related Products $ 826 $ 861 - 4%
Plumbing Products 848 807 + 5%
Installation & Other Services 814 807 + 1%
Decorative Architectural
Products 477 453 + 5%
Other Specialty Products 330 350 - 6%
------ ------
Total $3,295 $3,278 + 1%
====== ======
North America $2,710 $2,748 - 1%
International, principally
Europe 585 530 + 10%
------ ------
Total, as above $3,295 $3,278 + 1%
====== ======
NOTES:
- - Data exclude discontinued operations.
- - Excluding acquisitions, consolidated net sales were flat, North American
net sales declined two percent, and International net sales increased 10
percent compared with the third quarter of 2005 (please see page 13 for the
GAAP reconciliation).
- - International net sales in local currencies increased five percent compared
with the third quarter of 2005 (please see page 13 for the GAAP
reconciliation).
Page 3
MASCO CORPORATION
SALES BY SEGMENT AND GEOGRAPHIC AREA
NINE MONTHS ENDED SEPTEMBER 30, 2006 & 2005
(DOLLARS IN MILLIONS)
Nine Months Ended
September 30, 9 Months '06
----------------- vs.
2006 2005 9 Months '05
------ ------ ------------
Cabinets & Related Products $2,541 $2,482 + 2%
Plumbing Products 2,487 2,390 + 4%
Installation & Other Services 2,432 2,264 + 7%
Decorative Architectural
Products 1,411 1,330 + 6%
Other Specialty Products 961 975 - 1%
------ ------
Total $9,832 $9,441 + 4%
====== ======
North America $8,189 $7,825 + 5%
International, principally
Europe 1,643 1,616 + 2%
------ ------
Total, as above $9,832 $9,441 + 4%
====== ======
NOTES:
- - Data exclude discontinued operations.
- - Excluding acquisitions, consolidated net sales increased four percent;
North American net sales increased four percent and International net sales
increased two percent (please see page 13 for the GAAP reconciliation).
- - International net sales in local currencies increased three percent
compared with the nine months ended September 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 $ 826 $ 863 $ 852
- Plumbing Products 848 842 797
- Installation and Other Services 814 812 806
- Decorative Architectural Products 477 525 409
- Other Specialty Products 330 328 303
------ ------ ------
- TOTAL 3,295 3,370 3,167
====== ====== ======
- North America 2,710 2,829 2,650
- International, principally Europe 585 541 517
------ ------ ------
- TOTAL, AS ABOVE 3,295 3,370 3,167
====== ====== ======
Operating Profit:
- Cabinets and Related Products 107 138 121
- Plumbing Products 88 101 83
- Installation and Other Services 89 95 95
- Decorative Architectural Products 108 120 77
- Other Specialty Products 69 65 44
------ ------ ------
- TOTAL 461 519 420
====== ====== ======
- North America 401 457 363
- International, principally Europe 60 62 57
------ ------ ------
- TOTAL, AS ABOVE 461 519 420
====== ====== ======
General Corporate Expense (GCE) 52 53 48
(Gain) Loss on Sale of Corporate Fixed Assets, Net -- -- --
(Income) Regarding Litigation Settlement -- -- --
------ ------ ------
Operating Profit (after GCE and Adjustments) 409 466 372
Other Income (Expense), Net (44) (99) (30)
------ ------ ------
Income from Continuing Operations before
Income Taxes, Minority Interest and Cumulative
Effect of Accounting Change, Net $ 365 $ 367 $ 342
====== ====== ======
Margins:
- Cabinets and Related Products 13.0% 16.0% 14.2%
- Plumbing Products 10.4% 12.0% 10.4%
- Installation and Other Services 10.9% 11.7% 11.8%
- Decorative Architectural Products 22.6% 22.9% 18.8%
- Other Specialty Products 20.9% 19.8% 14.5%
- TOTAL 14.0% 15.4% 13.3%
- North America 14.8% 16.2% 13.7%
- International, principally Europe 10.3% 11.5% 11.0%
- TOTAL, AS ABOVE 14.0% 15.4% 13.3%
NOTES:
- - Operating profit and margins by segment and geographic area are before
general corporate expense.
- - Operating profit margins for the first, second and third quarters of 2006
for the Plumbing Products segment exclude $17 million pre-tax, $11 million
pre-tax and $7 million pre-tax, respectively, of costs and charges related
to the Company's profit improvement programs.
- - Operating profit margin for the second and third quarters of 2006 for the
Cabinets and Related Products segment exclude $15 million pre-tax
(including impairment of goodwill of $10 million) and $2 million pre-tax,
respectively, of costs and charges related to the 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 $ 826 $ 863 $ 852
- Plumbing Products 848 842 797
- Installation and Other Services 814 812 806
- Decorative Architectural Products 477 525 409
- Other Specialty Products 330 328 303
------ ------ ------
- TOTAL 3,295 3,370 3,167
====== ====== ======
- North America 2,710 2,829 2,650
- International, principally Europe 585 541 517
------ ------ ------
- TOTAL, AS ABOVE 3,295 3,370 3,167
====== ====== ======
Operating Profit:
- Cabinets and Related Products 105 123 121
- Plumbing Products 81 90 66
- Installation and Other Services 89 95 95
- Decorative Architectural Products 108 120 77
- Other Specialty Products 69 65 44
------ ------ ------
- TOTAL 452 493 403
====== ====== ======
- North America 392 431 346
- International, principally Europe 60 62 57
------ ------ ------
- TOTAL, AS ABOVE 452 493 403
====== ====== ======
General Corporate Expense (GCE) 52 53 48
(Gain) Loss on Sale of Corporate Fixed Assets, Net -- -- --
(Income) Regarding Litigation Settlement -- -- --
------ ------ ------
Operating Profit (after GCE and Adjustments) 400 440 355
Other Income (Expense), Net (44) (99) (30)
------ ------ ------
Income from Continuing Operations before
Income Taxes, Minority Interest and Cumulative
Effect of Accounting Change, Net $ 356 $ 341 $ 325
====== ====== ======
Margins:
- Cabinets and Related Products 12.7% 14.3% 14.2%
- Plumbing Products 9.6% 10.7% 8.3%
- Installation and Other Services 10.9% 11.7% 11.8%
- Decorative Architectural Products 22.6% 22.9% 18.8%
- Other Specialty Products 20.9% 19.8% 14.5%
- TOTAL 13.7% 14.6% 12.7%
- North America 14.5% 15.2% 13.1%
- International, principally Europe 10.3% 11.5% 11.0%
- TOTAL, AS ABOVE 13.7% 14.6% 12.7%
NOTES:
- - Operating profit and margins by segment and geographic area are before
general corporate expense.
- - Operating profit margins for the first, second and third quarters of 2006
for the Plumbing Products segment include $17 million pre-tax, $11 million
pre-tax and $7 million pre-tax, respectively, 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
10.4 percent, 12.0 percent and 10.4 percent for the first, second and third
quarters of 2006, respectively.
- - Operating profit margins for the second and third quarters of 2006 for the
Cabinets and Related Products segment include $15 million pre-tax
(including impairment of goodwill of $10 million) and $2 million pre-tax,
respectively, of costs and charges related to the 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 and 13.0 percent for the second and third
quarters of 2006, respectively.
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 1,325 350 350 336 289
------- ------ ------ ------ ------
- TOTAL 12,569 3,128 3,278 3,267 2,896
======= ====== ====== ====== ======
- North America 10,440 2,615 2,748 2,726 2,351
- International, principally Europe 2,129 513 530 541 545
------- ------ ------ ------ ------
- TOTAL, AS ABOVE 12,569 3,128 3,278 3,267 2,896
======= ====== ====== ====== ======
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 265 79 77 66 43
------- ------ ------ ------ ------
- TOTAL 1,814 426 505 506 377
======= ====== ====== ====== ======
- North America 1,567 374 438 438 317
- International, principally Europe 247 52 67 68 60
------- ------ ------ ------ ------
- TOTAL, AS ABOVE 1,814 426 505 506 377
======= ====== ====== ====== ======
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) 1,636 387 455 461 333
Other Income (Expense), Net (165) (43) (59) (41) (22)
------- ------ ------ ------ ------
Income from Continuing Operations Before
Income Taxes and Minority Interest $ 1,471 $ 344 $ 396 $ 420 $ 311
======= ====== ====== ====== ======
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 20.0% 22.6% 22.0% 19.6% 14.9%
- TOTAL 14.4% 13.6% 15.4% 15.5% 13.0%
- North America 15.0% 14.3% 15.9% 16.1% 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 1,325 350 350 336 289
------- ------ ------ ------ ------
- TOTAL 12,569 3,128 3,278 3,267 2,896
======= ====== ====== ====== ======
- North America 10,440 2,615 2,748 2,726 2,351
- International, principally Europe 2,129 513 530 541 545
------- ------ ------ ------ ------
- TOTAL, AS ABOVE 12,569 3,128 3,278 3,267 2,896
======= ====== ====== ====== ======
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 229 43 77 66 43
------- ------ ------ ------ ------
- TOTAL 1,745 357 505 506 377
======= ====== ====== ====== ======
- North America 1,567 374 438 438 317
- International, principally Europe 178 (17) 67 68 60
------- ------ ------ ------ ------
- TOTAL, AS ABOVE 1,745 357 505 506 377
======= ====== ====== ====== ======
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) 1,567 318 455 461 333
Other Income (Expense), Net (165) (43) (59) (41) (22)
------- ------ ------ ------ ------
Income from Continuing Operations Before
Income Taxes and Minority Interest $ 1,402 $ 275 $ 396 $ 420 $ 311
======= ====== ====== ====== ======
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 17.3% 12.3% 22.0% 19.6% 14.9%
- TOTAL 13.9% 11.4% 15.4% 15.5% 13.0%
- North America 15.0% 14.3% 15.9% 16.1% 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
-------------------------------- ---------------------------------
QTR. QTR. QTR. QTR. QTR. QTR. QTR. QTR.
YEAR 4 3 2 1 YEAR 4 3 2 1
---- ---- ---- ---- ---- ----- ---- ---- ---- ----
Interest Expense $(54) $(53) $(64) $(247) $(66) $(64) $(58) $(59)
Income from Cash and
Cash Investments 6 5 14 36 14 11 6 5
Other Interest
Income -- 1 1 7 2 3 1 1
Realized Gains from
Financial Investments, Net 9 11 6 98 6 23 28 41
Dividend Income 1 1 6 16 4 4 4 4
Impairment Charge
for Financial Investments (8) (78) -- (45) -- (43) (2) --
Other, Net 2 14 7 (30) (3) 7 (20) (14)
---- ---- ---- ----- ---- ---- ---- ----
Total Other Income
(Expense), Net $(44) $(99) $(30) $(165) $(43) $(59) $(41) $(22)
==== ==== ==== ===== ==== ==== ==== ====
NOTES:
- - Data exclude discontinued operations.
- - Other, net, for the third quarters of 2006 and 2005 include $3 million and
$4 million, respectively, of realized currency transaction gains .
Page 9
MASCO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 & 2005
(DOLLARS AND SHARES IN MILLIONS, EXCEPT PER SHARE DATA)
As a Percent of Sales
Three Months Ended 3 Months Ended
September 30, September 30,
% ------------------ ---------------------
Line Change 2006 2005 2006 2005
- ---- ------ ------ ------ ----- -----
1 Net Sales 1% $3,295 $3,278 100.0% 100.0%
2 Cost of Sales 1% 2,372 2,338 72.0% 71.3%
------ ------ ----- -----
3 Gross Profit -2% 923 940 28.0% 28.7%
------ ------ ----- -----
Operating Profit:
4 - Before GCE, Litigation (Income), (Gain) on Sale of
Corporate Fixed Assets and Goodwill Impairment Charge(3-8) -10% 452 505 13.7% 15.4%
5 - After GCE, Litigation (Income), (Gain) on Sale of
Corporate Fixed Assets and Goodwill Impairment Charge (3-9-10-11) -12% 400 455 12.1% 13.9%
------ ------ ----- -----
S, G&A Expense:
6 - General Corporate Expense (GCE) 2% 52 51 1.6% 1.6%
7 - (Gain) loss on Sale of Corporate Fixed Assets, Net -- -- -- --
8 - All Other 8% 471 435 14.3% 13.3%
------ ------ ----- -----
9 - Total S, G&A Expense 8% 523 486 15.9% 14.8%
------ ------ ----- -----
10 Goodwill Impairment Charge -- -- 0.0% 0.0%
11 (Income) Regarding Litigation Settlement -- (1) -- 0.0%
12 Other Income (Expense), Net (36) (16) -1.1% -0.5%
13 Impairment Charge for Investments (8) (43) -0.2% -1.3%
------ ------ ----- -----
14 Income from Continuing Operations before Income Taxes, Minority
Interest and Cumulative Effect of Accounting Change, Net (5+12+13) -10% 356 396 10.8% 12.1%
15 Income Taxes -9% 124 136 3.8% 4.1%
(Tax Rate) 34.8% 34.3%
------ ------ ----- -----
16 Income from Continuing Operations before Minority Interest
and Cumulative Effect of Accounting Change, Net -11% 232 260 7.0% 7.9%
17 Minority Interest (7) (6) -0.2% -0.2%
------ ------ ----- -----
18 Income from Continuing Operations before Cumulative Effect
of Accounting Change, Net -11% 225 254 6.8% 7.7%
19 Income from Discontinued Operations, Net 27 8 0.8% 0.2%
20 Cumulative Effect of Accounting Change, Net -- -- 0.0% 0.0%
------ ------ ----- -----
21 Net Income -4% $ 252 $ 262 7.6% 8.0%
====== ====== ===== =====
Earnings Per Common Share (Diluted):
Income from Continuing Operations before Cumulative Effect
of Accounting Change, Net -4% $ 0.57 $ 0.59
Income from Discontinued Operations, Net 0.07 0.02
Cumulative Effect of Accounting Change, Net -- --
------ ------
Net Income 5% $ 0.64 $ 0.61
====== ======
Average (Diluted) Common Shares -8% 393 427
Page 10
MASCO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 & 2005
(DOLLARS AND SHARES IN MILLIONS, EXCEPT PER SHARE DATA)
As a Percent of Sales
Nine Months Ended 9 Months Ended
September 30, September 30,
% ----------------- ---------------------
Line Change 2006 2005 2006 2005
- ---- ------ ------ ------ ----- -----
1 Net Sales 4% $9,832 $9,441 100.0% 100.0%
2 Cost of Sales 5% 7,056 6,718 71.8% 71.2%
------ ------ ----- -----
3 Gross Profit 2% 2,776 2,723 28.2% 28.8%
------ ------ ----- -----
Operating Profit:
4 - Before GCE, Litigation (Income), (Gain) on Sale of
Corporate Fixed Assets and Goodwill Impairment Charge(3-8) -2% 1,358 1,388 13.8% 14.7%
5 - After GCE, Litigation (Income), (Gain) on Sale of
Corporate Fixed Assets and Goodwill Impairment Charge (3-9-10-11) -4% 1,195 1,249 12.2% 13.2%
------ ------ ----- -----
S, G&A Expense:
6 - General Corporate Expense (GCE) 6% 153 145 1.6% 1.5%
7 - (Gain) on Sale of Corporate Fixed Assets, Net -- -- 0.0% 0.0%
8 - All Other 6% 1,418 1,335 14.4% 14.1%
------ ------ ----- -----
9 - Total S, G&A Expense 6% 1,571 1,480 16.0% 15.7%
------ ------ ----- -----
10 Goodwill Impairment Charge 10 -- 0.1% 0.0%
11 (Income) Regarding Litigation Settlement -- (6) 0.0% -0.1%
12 Other Income (Expense), Net (87) (77) -0.9% -0.8%
13 Impairment Charge for Investments (86) (45) -0.9% -0.5%
------ ------ ----- -----
14 Income from Continuing Operations Before Income Taxes and
Minority Interest (5+12+13) -9% 1,022 1,127 10.4% 11.9%
15 Income Taxes -8% 354 385 3.6% 4.1%
(Tax Rate) 34.6% 34.2%
------ ------ ----- -----
16 Income from Continuing Operations Before Minority Interest -10% 668 742 6.8% 7.9%
17 Minority Interest (21) (16) -0.2% -0.2%
------ ------ ----- -----
18 Income from Continuing Operations -11% 647 726 6.6% 7.7%
19 Income from Discontinued Operations, Net 31 41 0.3% 0.4%
20 Cumulative Effect of Accounting Change, Net (3) -- 0.0% 0.0%
------ ------ ----- -----
21 Net Income -12% $ 675 $ 767 6.9% 8.1%
====== ====== ===== =====
Earnings Per Common Share (Diluted):
Income from Continuing Operations -4% $ 1.61 $ 1.67
Income from Discontinued Operations, Net 0.08 0.09
Cumulative Effect of Accounting Change, Net (0.01) --
------ ------
Net Income -5% $ 1.68 $ 1.77
====== ======
Average (Diluted) Common Shares -7% 402 434
Page 11
MASCO CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
September 30, December 31,
2006 2005
------------- ------------
ASSETS
Current Assets:
Cash and Cash Investments $ 772 $ 1,964
Receivable, Net 1,898 1,716
Inventories 1,308 1,127
Prepaid Expenses and Other 323 316
------- -------
Total Current Assets 4,301 5,123
Property and Equipment, Net 2,318 2,173
Goodwill 4,211 4,171
Other Intangible Assets, Net 303 307
Other Assets 675 785
------- -------
Total Assets $11,808 $12,559
======= =======
LIABILITIES
Current Liabilities:
Notes Payable $ 1,491 $ 832
Accounts Payable 923 837
Accrued Liabilities 1,315 1,225
------- -------
Total Current Liabilities 3,729 2,894
Long-Term Debt 2,477 3,915
Deferred Income Taxes and Other 910 902
------- -------
Total Liabilities 7,116 7,711
SHAREHOLDERS' EQUITY 4,692 4,848
------- -------
Total Liabilities and Shareholders' Equity $11,808 $12,559
======= =======
Page 12
MASCO CORPORATION
GAAP RECONCILIATION OF SALES GROWTH
EXCLUDING EFFECT OF ACQUISITIONS & CURRENCY TRANSLATION
(IN MILLIONS)
Three Months Ended
September 30,
------------------
2006 2005
------ ---------
Consolidated Net Sales, as reported $3,295 $3,278
- Acquisitions (4) --
------ ------
Consolidated Net Sales (excl. acquisitions) $3,291 $3,278
====== ======
North American Net Sales, as reported $2,710 $2,748
- Acquisitions (4) --
------ ------
North American Net Sales (excl. acquisitions) $2,706 $2,748
====== ======
International Net Sales, as reported $ 585 $ 530
- Acquisitions -- --
------ ------
International Net Sales (excl. acquisitions) 585 530
- Currency Translation (26) --
------ ------
International Net Sales (excl. acquisitions &
currency) $ 559 $ 530
====== ======
Nine Months Ended
September 30,
-----------------
2006 2005
------ --------
Consolidated Net Sales, as reported $9,832 $9,441
- Acquisitions (16) --
------ ------
Consolidated Net Sales (excl. acquisitions) $9,816 $9,441
====== ======
North American Net Sales, as reported $8,189 $7,825
- Acquisitions (16) --
------ ------
North American Net Sales (excl. acquisitions) $8,173 $7,825
====== ======
International Net Sales, as reported $1,643 $1,616
- Acquisitions -- --
------ ------
International Net Sales (excl. acquisitions) 1,643 1,616
- Currency Translation 24 --
------ ------
International Net Sales (excl. acquisitions &
currency) $1,667 $1,616
====== ======
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 SEPTEMBER 30,
--------------------------------
2006 2005
------------- ----------------
$ Margin $ Margin
---- ------ ---- ---------
Operating Profit, As Reported $400 12.1% $455 13.9%
Profit Improvement Programs, Plumbing Products
Segment 7 12
Profit Improvement Programs, Cabinets & Related
Products Segment 2 --
(Income) Regarding Litigation Settlement -- (1)
---- ----
Operating Profit, As Reconciled $409 12.4% $466 14.2%
==== ====
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------
2006 2005
--------------- ----------------
$ Margin $ Margin
------ ------ ------ -------
Operating Profit, As Reported $1,195 12.2% $1,249 13.2%
Profit Improvement Programs, Plumbing Products
Segment 35 12
Profit Improvement Programs, Cabinets & Related
Products Segment 17 --
(Income) Regarding Litigation Settlement -- (6)
------ ------
Operating Profit, As Reconciled $1,247 12.7% $1,255 13.3%
====== ======
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
SEPTEMBER 30,
2006
-------------
Operating Profit from Continuing Operations $1,513
Goodwill Impairment Charge 79
(Income) Regarding Litigation Settlement --
------
Operating Profit, As Reconciled $1,592
======
TWELVE MONTHS
ENDED
SEPTEMBER 30,
---------------
2006 2005
------ ------
Shareholders' Equity, As Reported $4,692 $4,997
Goodwill Impairment Charge (after tax) 79 104
(Income) Regarding Litigation Settlement (after tax) -- (4)
------ ------
Shareholders' Equity, As Reconciled $4,771 $5,097
====== ======
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
September 30,
------------------
2006 2005
---- ----
Net Sales $ 17 $82
==== ===
Income from Discontinued Operations $ 2 $13
Gain on Disposal of Discontinued Operations, Net 50 --
---- ---
Income Before Income Taxes 52 13
Income Tax Expense (25) (5)
---- ---
Income from Discontinued Operations, Net $ 27 $ 8
==== ===
Nine Months Ended
September 30,
-----------------
2006 2005
---- ----
Net Sales $ 55 $253
==== ====
Income from Discontinued Operations $ 8 $ 39
Gain on Disposal of Discontinued Operations, Net 51 10
---- ----
Income Before Income Taxes 59 49
Income Tax Expense (28) (8)
---- ----
Income from Discontinued Operations, Net $ 31 $ 41
==== ====
NOTE:
The information for discontinued operations is for the period prior to the
respective dates of disposition.
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