EXHIBIT 99
FOR IMMEDIATE RELEASE Contact:
Maria Duey
313-792-5500
MASCO CORPORATION REPORTS RECORD SALES FOR 2006
MASCO CORPORATION 2006 HIGHLIGHTS:
FULL-YEAR 2006
- Net sales from continuing operations increased two percent to a
record $12.8 billion.
- Income from continuing operations was $2.22 per common share,
excluding non-cash impairment charges for goodwill and financial
investments and costs and charges related to profit improvement
programs.
- Income from continuing operations, as reported, was $1.15 per
common share, including non-cash impairment charges for goodwill
and financial investments and costs and charges related to profit
improvement programs.
- Free cash flow before dividends exceeded $800 million.
- The Company returned $1.2 billion to shareholders through share
repurchases (29 million common shares) and dividends.
- The quarterly dividend was increased by 10 percent, the 48th
consecutive year in which dividends have been increased.
Taylor, Michigan (February 14, 2007) - Masco Corporation (NYSE: MAS) today
reported that net sales from continuing operations for the year ended December
31, 2006 increased two percent to a record $12.8 billion compared with $12.6
billion for 2005.
Income from continuing operations was $2.22 per common share and $2.26 per
common share for 2006 and 2005, respectively, excluding non-cash impairment
charges for goodwill and financial investments and costs and charges related to
profit improvement programs. Including these charges, income from continuing
operations, as reported, was $461 million or $1.15 per common share and $866
million or $2.01 per common share for 2006 and 2005, respectively.
Fourth quarter 2006 net sales from continuing operations declined six
percent to $2.9 billion. Results for 2006 were adversely affected by an
accelerating decline in the new home construction market in the last six months
of the year, a moderation in consumer spending for certain "big ticket" home
improvement items, such as cabinets, and the continuing negative impact of
higher commodity costs, partially offset by profit improvement programs and
selling price increases.
Income from continuing operations was $.38 per common share and $.50 per
common share for the fourth quarters of 2006 and 2005, respectively, excluding
non-cash impairment charges for goodwill in 2006 and 2005 and financial
investments and costs and charges related to profit improvement programs in
2006. Including these charges, (loss) income from continuing operations was
$(186) million or $(.48) per common share, and $140 million or $.33 per common
share, for the fourth quarters of 2006 and 2005, respectively.
During 2006, the Company recognized non-cash, pre-tax impairment charges
for goodwill aggregating $331 million ($331 million after tax). These charges,
principally related to the Company's European manufacturer of ready-to-assemble
cabinets (Tvilum-Scanbirk), reflect the long-term outlook for the business unit,
including declining demand for certain products, as well as decreased operating
profit margins. The Company also recognized non-cash, pre-tax impairment charges
for financial investments aggregating $101 million ($66 million after tax). In
2005, the Company recognized non-cash, pre-tax impairment charges for goodwill
aggregating $69 million ($69 million after tax), and non-cash, pre-tax
impairment charges for financial investments aggregating $45 million
($29 million after tax).
The Company originally estimated that 2006 costs and charges related to
profit improvement programs in the Plumbing Products segment would approximate
$70 million pre-tax compared with the actual costs and charges of $39 million
pre-tax. The reduction in anticipated cost resulted from the sale of an
operation originally scheduled for closure, and was partially offset by costs
and charges aggregating $8 million pre-tax for the closure of a relatively small
ready-to-assemble cabinet manufacturing facility in the Cabinets and Related
Products segment.
OUTLOOK 2007
New home construction has declined dramatically in the last 12 months due
to previous excessive speculative buying, rapidly rising home prices in recent
years reducing affordability and less attractive mortgage terms. Even with the
recent decline in single-family housing starts, the inventory of unsold new
homes has increased to unprecedented levels. The uncertainty that home
builders may cut production even further to reduce this inventory, and given
the large percentage of Masco sales that go to the new home construction market,
combined with the unpredictability of commodity costs, make it very difficult
for the Company to provide earnings per common share guidance for 2007.
Also negatively impacting the Company's earnings outlook for 2007 are
plant and system implementation start-up costs, costs and charges related to
additional profit improvement programs, including severance costs from headcount
reductions, higher interest expense, a moderation at retail of sales of certain
"big ticket" home improvement items, such as cabinets, and as yet unrecovered
commodity cost increases.
Housing starts declined by approximately 13 percent in 2006 compared with
2005 to 1.8 million units. Late in 2006, the housing starts run rate was between
approximately 1.5 to 1.6 million units, which is more than 20 percent below the
2005 levels. If housing starts improve from these levels, commodity costs
moderate, and home improvement retail sales improve, then the Company's earnings
per common share could be $1.80 or even higher for 2007. On the other hand, if
housing starts decline even further than current depressed levels, as some
observers predict, and commodity costs escalate, the Company's earnings per
common share for 2007 could decline to $1.50 or less.
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 today, Wednesday, February 14, 2007 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) 981-4912 (confirmation #1786247). 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 #1786247)
approximately two hours after the end of the call and will continue through
February 21, 2007.
Masco Corporation's press releases and other information are available
through the Company's toll free number, 1-888-MAS-NEWS, or under the Investor
Relations section of Masco's website at www.masco.com.
Statements contained herein may include certain forward-looking statements
regarding Masco's future sales, earnings growth potential and other
developments. Actual results may vary materially because of external factors
such as interest rate fluctuations, changes in consumer spending and other
factors over which management has no control. The Company believes that certain
non-GAAP performance measures and ratios, used in managing the business, may
provide users of this financial information with additional meaningful
comparisons between current results and results in prior periods. Non-GAAP
performance measures and ratios should be viewed in addition to, and not as an
alternative for, the Company's reported results under accounting principles
generally accepted in the United States. Additional information about the
Company's products, markets and conditions, which could affect the Company's
future performance, is contained in the Company's filings with the Securities
and Exchange Commission and is available on Masco's website at www.masco.com.
Masco undertakes no obligation to update any forward-looking statements, whether
as a result of new information, future events or otherwise.
# # #
FOR IMMEDIATE RELEASE Contact: Maria Duey
313-792-6653
MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND TWELVE MONTHS ENDED DECEMBER 31, 2006 AND 2005
(IN MILLIONS EXCEPT PER COMMON SHARE DATA)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ -------------------
2006 2005 2006 2005
------ ------ ------- -------
Net sales $2,946 $3,128 $12,778 $12,569
Cost of sales 2,203 2,267 9,259 8,985
------ ------ ------- -------
Gross profit 743 861 3,519 3,584
Selling, general and administrative expenses 492 474 2,063 1,954
Impairment charges for goodwill
321 69 331 69
Income regarding litigation settlement (1) -- (1) (6)
------ ------ ------- -------
Operating (loss) profit (69) 318 1,126 1,567
Other income (expense), net (53) (43) (226) (165)
------ ------ ------- -------
(Loss) income from continuing operations before
income taxes, minority interest and
cumulative effect of accounting change, net (122) 275 900 1,402
Income taxes 58 129 412 514
------ ------ ------- -------
(Loss) income from continuing operations before
minority interest and cumulative effect of
accounting change, net (180) 146 488 888
Minority interest 6 6 27 22
------ ------ ------- -------
(Loss) income from continuing operations before
cumulative effect of accounting change, net
(186) 140 461 866
(Loss) income from discontinued operations, net
(1) 33 30 74
Cumulative effect of accounting change, net
-- -- (3) --
------ ------ ------- -------
Net (loss) income $ (187) $ 173 $ 488 $ 940
====== ====== ======= =======
(Loss) earnings per common share (diluted):
(Loss) income from continuing operations before
cumulative effect of accounting change, net $(0.48) $ 0.33 $ 1.15 $ 2.01
(Loss) income from discontinued operations, net -- 0.08 0.08 0.17
Cumulative effect of accounting change, net -- -- (0.01) --
------ ------ ------- -------
Net (loss) income $(0.49) $ 0.41 $ 1.22 $ 2.19
====== ====== ======= =======
Average diluted common shares outstanding 385 419 400 430
====== ====== ======= =======
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FOURTH QUARTER 2006
- - Net sales from continuing operations for the quarter declined six percent
to $2.9 billion, with North American sales declining 10 percent and
International sales increasing 17 percent. In local currencies,
International sales increased seven percent compared with the fourth
quarter of 2005.
- - Sales of cabinets, windows and doors and the installation of insulation
were particularly weak when compared with the fourth quarter of 2005,
primarily due to the accelerating decline in the new home construction
market in the last six months of 2006. Sales of major faucet brands
combined and architectural coatings increased in the low-single and
mid-single digits, respectively.
- - Key retailer sales from continuing operations declined seven percent in the
2006 fourth quarter, were flat in the third quarter, and increased one
percent and seven percent in the second and first quarters of 2006,
respectively. The Company believes that retail sales in the last six months
of 2006 were negatively impacted by a moderation in consumer spending for
certain "big ticket" home improvement items, such as cabinets.
- - Sales changes by segment in the 2006 fourth quarter versus the 2005 fourth
quarter were:
- Cabinets and Related Products sales declined 12 percent;
- Plumbing Products sales increased three percent;
- Installation and Other Services sales declined nine percent;
- Decorative Architectural Products sales increased four percent;
and
- Other Specialty Products sales declined 14 percent.
1
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FOURTH QUARTER 2006 (CONTINUED)
- - As part of its profit improvement program, the Company announced a plant
closure in the Plumbing Products segment in January 2006. The Company
incurred $4 million pre-tax of costs and charges related to this plant
closure and other profit improvement programs in the Plumbing Products
segment in the fourth quarter of 2006. In addition, the Company incurred $1
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 recognized non-cash, pre-tax impairment charges for goodwill
aggregating $321 million ($321 million after tax). These charges,
principally related to the Company's European manufacturer of
ready-to-assemble cabinets (Tvilum-Scanbirk), reflect the long-term outlook
for the business unit, including declining demand for certain products, as
well as decreased operating profit margins. In 2005, the Company recognized
non-cash, pre-tax impairment charges for goodwill aggregating $69 million
($69 million after tax).
- - The Company also recognized non-cash, pre-tax impairment charges for
financial investments aggregating $15 million ($10 million after tax).
- - Income from continuing operations was $.38 per common share and $.50 per
common share in the fourth quarters of 2006 and 2005, respectively,
excluding the non-cash impairment charges for goodwill in 2006 and 2005 and
financial investments and costs and charges related to profit improvement
programs in 2006.
- - (Loss) from continuing operations for the fourth quarter of 2006 was $(186)
million or $(.48) per common share, including non-cash impairment charges
for goodwill and financial investments and costs and charges related to
profit improvement programs. Income from continuing operations for the
fourth quarter of 2005 was $.33 per common share, including non-cash
impairment charges for goodwill.
- - Net (loss) for the fourth quarter of 2006, including discontinued
operations, was $(187) million or $(.49) per common share. Net income for
the fourth quarter of 2005 was $173 million or $.41 per common share and
included income from discontinued operations of $33 million or $.08 per
common share.
2
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FOURTH QUARTER 2006 (CONTINUED)
- - The following table is provided to summarize the comments related to (loss)
income per common share:
Three Months Ended
December 31,
------------------
2006 2005
----- ----
Continuing operations (loss) income
per common share, as reported $(.48) $.33
Add back:
Profit improvement costs and charges .01 --
Impairment charges for financial investments .03 --
Impairment charges for goodwill .82 .16
----- ----
Continuing operations, as reconciled $ .38 $.50
===== ====
As reconciled, 2005 rounds to $.50 per common share
As reported includes:
Net gains from financial investments $ .01 $.01
Net (loss) income, as reported
Continuing operations $(.48) $.33
Discontinued operations -- .08
----- ----
Net (loss) income, as reported $(.49) $.41
===== ====
The Company's diluted common shares for purposes of calculating (loss) earnings
per common share were 385 million for the fourth quarter of 2006 compared with
419 million for the fourth quarter of 2005. For the fourth quarter of 2006, four
million contingent common shares and one million stock option shares were not
included in the computation of diluted (loss) per common share due to their
anti-dilutive effect. Dilutive common shares used for the reconciliation of
income of $.38 per common share were 390 million.
- - Gross margins were 25.2 percent in the fourth quarter of 2006 compared with
27.5 percent in the fourth quarter of 2005. Operating (loss) profit
margins, as reported, were (2.3) percent in the fourth quarter of 2006
compared with 10.2 percent in the fourth quarter of 2005. Excluding
non-cash, pre-tax impairment charges for goodwill of $321 million, costs
and charges related to profit improvement programs of $5 million and income
regarding litigation settlement of $1 million, operating profit margins
were 8.7 percent in the fourth quarter of 2006. Excluding non-cash, pre-tax
impairment charges for goodwill of $69 million, operating profit margins
were 12.4 percent in the fourth quarter of 2005.
3
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FOURTH QUARTER 2006 (CONCLUDED)
- - Results were adversely affected by an accelerating decline in the new home
construction market, a moderation in consumer spending for certain "big
ticket" home improvement items, such as cabinets and higher commodity
costs, partially offset by profit improvement programs and selling price
increases.
- - SG&A expenses as a percent of sales, including general corporate expense,
were 16.7 percent in the fourth quarter of 2006 and 15.2 percent in the
fourth quarter of 2005. Higher SG&A expenses in 2006 reflect increased
stock-based compensation expense and increased information systems
implementation costs and other expenses.
- - General corporate expense was 1.7 percent of sales in the fourth quarter of
2006 compared with 1.5 percent in the comparable period of 2005.
- - The reported tax on loss from continuing operations in the fourth quarter
of 2006 of $58 million and the reported tax rate on income from continuing
operations of 47 percent for the fourth quarter of 2005, principally
reflect the impact of goodwill impairment charges not being deductible for
tax purposes. Excluding the goodwill impairment charges in 2006 and 2005
and adjustments of deferred taxes related to certain European operations in
2005, the Company's tax rate was 29 percent and 35 percent in the fourth
quarters of 2006 and 2005, respectively. The decrease in the tax rate was
the result of reinstating the research and development credit by Congress
in the fourth quarter of 2006 and a change in the mix of taxable earnings
to taxing jurisdictions with lower tax rates. The Company's lower effective
tax rate in the fourth quarter of 2006 favorably impacted (loss) per common
share by $.03.
4
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FULL-YEAR 2006
- - Net sales from continuing operations for 2006 increased two percent to
$12.8 billion compared with $12.6 billion for 2005. North American sales
increased one percent and International sales increased five percent. In
local currencies, International sales increased four percent.
- - For the full-year 2006, key retailer sales from continuing operations were
flat compared with 2005.
- - Sales changes by segment for 2006 versus 2005 were:
- Cabinets and Related Products sales declined one percent;
- Plumbing Products sales increased four percent;
- Installation and Other Services sales increased three percent;
- Decorative Architectural Products sales increased six percent;
and
- Other Specialty Products sales declined five percent.
- - Income from continuing operations was $2.22 per common share and $2.26 per
common share for 2006 and 2005, respectively, excluding non-cash impairment
charges for goodwill and financial investments and costs and charges
related to profit improvement programs. Including these charges, income
from continuing operations, as reported, was $461 million or $1.15 per
common share and $866 million or $2.01 per common share, for 2006 and 2005,
respectively.
5
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FULL-YEAR 2006 (CONTINUED)
- - As part of its profit improvement program, the Company has been focused on
the rationalization of its Plumbing Products segment. As a result, in 2005,
the Company incurred $12 million pre-tax of charges related to headcount
reductions and the discontinuance of a product line. In addition, the
Company announced a plant closure in the Plumbing Products segment in
January 2006. During 2006, the Company incurred $39 million pre-tax of
costs and charges (primarily accelerated depreciation and severance
expense) related to this plant closure and other profit improvement
programs in the Plumbing Products segment.
The Company originally estimated that costs and charges for profit
improvement programs related to its Plumbing Products segment would
approximate $70 million compared with the actual charges of $39 million.
The reduced amount reflects the fourth quarter sale of a manufacturing
facility in the Plumbing Products segment which was originally planned for
closure.
In addition, in 2006, the Company incurred $8 million pre-tax of costs and
charges (including the write-down of inventory and accelerated
depreciation) related to the closure of a relatively small
ready-to-assemble cabinet manufacturing facility in the Cabinets and
Related Products segment.
- - During 2006, the Company recognized non-cash, pre-tax impairment charges
for goodwill aggregating $331 million ($331 million after tax). These
charges, principally related to the Company's European manufacturer of
ready-to-assemble cabinets (Tvilum-Scanbirk), reflect the long-term outlook
for the business unit, including declining demand for certain products, as
well as decreased operating profit margins. In 2005, the Company recognized
non-cash, pre-tax impairment charges for goodwill aggregating $69 million
($69 million after tax).
- - During 2006, the Company recognized non-cash, pre-tax impairment charges
for financial investments aggregating $101 million ($66 million after tax),
related to investments in Metaldyne, TriMas, certain private equity funds
and other investments. During 2005, the Company recognized non-cash,
pre-tax impairment charges for financial investments of $45 million ($29
million after tax) related to its investment in Furniture Brands
International common stock and certain private equity fund investments.
6
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FULL-YEAR 2006 (CONTINUED)
- - The following table is provided to summarize the comments related to income
per common share:
Twelve Months Ended
December 31,
-------------------
2006 2005
----- ----
Continuing operations income
per common share, as reported $1.15 $2.01
Add back:
Profit improvement costs and charges .08 .02
Impairment charges for financial investments .16 .07
Impairment charges for goodwill .83 .16
----- -----
Continuing operations, as reconciled $2.22 $2.26
===== =====
As reported includes:
Net gains from financial investments $ .05 $ .15
Income regarding litigation settlement $ -- $ .01
Currency transaction gains (losses) $ .02 $(.04)
Net income, as reported
Continuing operations $1.15 $2.01
Discontinued operations .08 .17
Cumulative effect of accounting change, net (.01) --
----- -----
Net income, as reported $1.22 $2.19
===== =====
Average diluted common shares outstanding 400 430
- - Gross margins were 27.5 percent in 2006 compared with 28.5 percent in 2005.
Operating profit margins, as reported, were 8.8 percent in 2006 compared
with 12.5 percent in 2005. Excluding non-cash, pre-tax impairment charges
for goodwill aggregating $331 million, costs and charges related to profit
improvement programs of $47 million and income regarding litigation
settlement of $1 million, operating profit margins were 11.8 percent in
2006. Excluding non-cash, pre-tax impairment charges for goodwill
aggregating $69 million, costs and charges related to profit improvement
programs of $12 million and income regarding litigation settlement of $6
million, operating profit margins were 13.1 percent in 2005.
7
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FULL-YEAR 2006 (CONTINUED)
- - Full-year 2006 gross margins and operating profit margins were adversely
impacted by the slowdown in the new home construction market, a moderation
in consumer spending for certain "big ticket" home improvement items, such
as cabinets, the continuing negative impact of higher commodity costs, as
well as a less favorable product mix.
- - SG&A expenses as a percent of sales, including general corporate expense,
were 16.1 percent in 2006 compared with 15.5 percent in 2005. Higher SG&A
expenses in 2006 reflect increased stock-based compensation expense, in
part reflecting the adoption of SFAS No. 123R, and increased information
systems implementation costs and other expenses.
- - General corporate expense was 1.6 percent of sales in 2006 compared with
1.5 percent in 2005.
- - The Company's reported tax rate on income from continuing operations,
excluding the impairment charges for goodwill was 33 percent in 2006 and 35
percent in 2005. The Company's lower-than-expected effective tax rate for
2006 favorably impacted earnings per common share by $.05, as a result of
the U.S. and foreign tax effect on distributed earnings. The Company
anticipates that its tax rate on income from continuing operations for 2007
will approximate 35 to 36 percent.
- - Accounts receivable days at December 31, 2006 were 50 days compared with 48
days a year ago.
- - Inventory days were 49 days at December 31, 2006 compared with 46 days a
year ago.
- - Accounts payable days were 39 days at December 31, 2006 compared with 36
days a year ago.
- - Working capital at December 31, 2006 and 2005 (defined as accounts
receivable and inventories less accounts payable) was 16.1 percent of
sales, and 15.9 percent of sales, respectively.
8
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FULL-YEAR 2006 (CONTINUED)
- - For the twelve months ended December 31, 2006 and 2005, return on invested
capital (ROIC) (as reported) was 9.8 percent and 13.0 percent,
respectively. For the twelve months ended December 31, 2006 and 2005, ROIC
(as reconciled) was 12.4 percent and 13.4 percent, respectively. While the
Company remains highly committed to the continued improvement in its ROIC,
recent business trends resulted in a reduction in earnings for 2006, which
negatively impacted ROIC in 2006. The Company, however, continues to
believe that it will achieve its ROIC goal of 18 percent by 2010.
- - Capital expenditures, including discontinued operations, were $388 million
or 3.0 percent of sales in 2006, compared with $282 million or 2.2 percent
of sales in 2005. As previously communicated, this increase is principally
related to capacity expansion and facility acquisitions. Depreciation and
amortization was $244 million in 2006 compared with $241 million in 2005.
- - During 2006, the Company repurchased 29 million shares (2 million in the
fourth quarter of 2006) of Company common stock. The Company had 36 million
common shares remaining at December 31, 2006 under its repurchase
authorization.
- - During 2006, the Company returned $1.2 billion to shareholders through
common share repurchases (29 million) and dividends. For the four-year
period (2003-2006) ended December 31, 2006, the Company has returned $4.8
billion to shareholders through the repurchase of 126 million common shares
and dividends.
- - In 2006, the Company increased its quarterly dividend by 10 percent from
$.20 to $.22 per common share. The increased quarterly dividend reflects
the Company's favorable long-term outlook, strong balance sheet and cash
flow and recent tax law changes, and makes 2006 the 48th consecutive year
in which dividends have been increased.
- - The Company's diluted common shares for purposes of calculating earnings
per common share were 400 million for the year ended December 31, 2006
compared with 430 million for the year ended December 31, 2005.
9
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
FULL-YEAR 2006 (CONCLUDED)
- - The Company's free cash flow for 2006 exceeded $800 million. For the
four-year period (2003-2006) ended December 31, 2006, the Company's free
cash flow (defined as cash from operations less capital expenditures and
before dividends) aggregated $4.2 billion.
- - During 2006, the Company also generated $71 million of cash from the net
disposition of financial investments and $160 million from the net
disposition of certain businesses.
- - 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 2007 debt maturities, including the put
option related to the Zero Coupon Notes.
- - At the end of the year, the Company had a strong balance sheet, with over
$2 billion in cash and marketable securities and $2 billion in unused bank
lines.
- - Debt as a percent of total capital was 53 percent at December 31, 2006
compared with 49 percent at December 31, 2005.
- - In January 2007, the Company repurchased for cash of $825 million, the
accreted value (94 percent of the total outstanding) of its Zero Coupon
Notes which were put to the Company in accordance with the terms of the
Notes. Had this payment taken place at December 31, 2006, debt as a percent
of total capital would have been 48 percent.
10
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
2007 OUTLOOK
- - New home construction has declined dramatically in the last 12 months due
to previous excessive speculative buying, rapidly rising home prices in
recent years reducing affordability and less attractive mortgage terms.
Even with the recent decline in single-family housing starts, the inventory
of unsold new homes has increased to unprecedented levels. The uncertainty
that home builders may cut production even further to reduce this
inventory, and given the large percentage of Masco sales that go to the new
home construction market, combined with the unpredictability of commodity
costs, make it very difficult for the Company to provide earnings per
common share guidance for 2007.
- - Also negatively impacting the Company's earnings outlook for 2007 are plant
and system implementation start-up costs, costs and charges related to
additional profit improvement programs, including severance costs from
headcount reductions, higher interest expense, a moderation at retail of
the sale of certain "big ticket" home improvement items, such as cabinets,
and as yet unrecovered commodity cost increases.
- - Housing starts declined by approximately 13 percent in 2006 compared
with 2005 to 1.8 million units. Late in 2006, the housing starts run rate
was between approximately 1.5 to 1.6 million units, which is more than 20
percent below the 2005 levels. If housing starts improve from these levels,
commodity costs moderate, and home improvement retail sales improve, then
the Company's earnings per common share could be $1.80 or even higher for
2007. On the other hand, if housing starts decline even further than
current depressed levels, as some observers predict, and commodity costs
escalate, the Company's earnings per common share for 2007 could decline to
$1.50 or less.
- - With housing starts currently running nearly 20 percent below year ago
levels, the Company currently expects first quarter 2007 sales to decline
low-double digits from last year's strong quarter and full-year sales to
decline mid-single digits.
- - The Company expects the low point in its earnings for the year to be in the
first quarter, seasonally its lowest quarter, when earnings may decline 50
percent or more from last year's first quarter earnings of $.50 per common
share when housing starts were strong.
- - Based on the current market price for the Company's common stock, diluted
common shares for the computation of earnings per common share at January
1, 2007 were 390 million. This excludes the impact of any 2007 repurchases
of common stock.
11
MASCO CORPORATION
BUSINESS AND FINANCIAL HIGHLIGHTS
Statements contained herein may include certain forward-looking statements
regarding Masco's future sales, earnings growth potential and other
developments. Actual results may vary materially because of external factors
such as 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.
###
12
MASCO CORPORATION - 4TH QUARTER 2006
Page
- ----
1 Condensed Statements of Operations - 2006 & 2005 by quarter
2 Notes to Condensed Statements of Operations - 2006 & 2005 by quarter
3 Sales by Segment and Geographic Area - Three Months Ended December 31,
2006 & 2005
4 Sales by Segment and Geographic Area - Twelve Months Ended December 31,
2006 & 2005
5 2006 Quarterly Segment Data - Excluding Costs and Charges for Profit
Improvement Programs and Impairment Charges for Goodwill
6 2006 Quarterly Segment Data - Including Costs and Charges for Profit
Improvement Programs and Impairment Charges for Goodwill
7 2005 Quarterly Segment Data - Excluding Impairment Charges for Goodwill
8 2005 Quarterly Segment Data - Including Impairment Charges for Goodwill
9 Other Income (Expense), Net - 2006 & 2005 by quarter
10 Consolidated Statements of Operations - Three Months Ended December 31,
2006 & 2005
11 Consolidated Statements of Income - Twelve Months Ended December 31, 2006
& 2005
12 Consolidated Balance Sheets
GAAP Reconciliations:
13 Sales Growth Excluding Effect of Acquisitions & Currency Translation
14 Operating (Loss) Profit and Margins
15 Operating Profit and Shareholders' Equity
16 Discontinued Operations
MASCO CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
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 $10,537 $2,348 $2,710 $2,829 $2,650 $10,440 $2,615 $2,748 $2,726 $2,351
- International 2,241 598 585 541 517 2,129 513 530 541 545
------- ------ ------ ------ ------ ------- ------ ------ ------ ------
- Consolidated 12,778 2,946 3,295 3,370 3,167 12,569 3,128 3,278 3,267 2,896
Cost of Sales 9,259 2,203 2,372 2,391 2,293 8,985 2,267 2,338 2,306 2,074
------- ------ ------ ------ ------ ------- ------ ------ ------ ------
Gross Profit 3,519 743 923 979 874 3,584 861 940 961 822
(Gross Margin) 27.5% 25.2% 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) 1,860 442 471 476 471 1,770 435 435 455 445
(S,G & A Expense as a % of Sales) 14.6% 15.0% 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) 1,659 301 452 503 403 1,814 426 505 506 377
(Operating Margin) 13.0% 10.2% 13.7% 14.9% 12.7% 14.4% 13.6% 15.4% 15.5% 13.0%
- North America 1,427 248 392 441 346 1,567 374 438 438 317
(Margin) 13.5% 10.6% 14.5% 15.6% 13.1% 15.0% 14.3% 15.9% 16.1% 13.5%
- International 232 53 60 62 57 247 52 67 68 60
(Margin) 10.4% 8.9% 10.3% 11.5% 11.0% 11.6% 10.1% 12.6% 12.6% 11.0%
General Corporate Expense (GCE) 203 50 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) 16.1% 16.7% 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 (1) (1) -- -- -- (6) -- (1) (3) (2)
Impairment Charges for Goodwill 331 321 -- 10 -- 69 69 -- -- --
------- ------ ------ ------ ------ ------- ------ ------ ------ ------
Operating Profit (Loss) per F/S $ 1,126 $ (69) $ 400 $ 440 $ 355 $ 1,567 $ 318 $ 455 $ 461 $ 333
======= ====== ====== ====== ====== ======= ====== ====== ====== ======
Earnings (Loss) per Common Share (Diluted):
Income (Loss) from Continuing Operations
before Cumulative Effect of
Accounting Change, Net $ 1.15 $(0.48) $ 0.57 $ 0.53 $ 0.50 $ 2.01 $ 0.33 $ 0.59 $ 0.62 $ 0.47
Income from Discontinued Operations, Net 0.08 -- 0.07 0.01 -- 0.17 0.08 0.02 0.02 0.06
Cumulative Effect of Accounting Change,
Net (0.01) -- -- -- (0.01) -- -- -- -- --
------- ------ ------ ------ ------ ------- ------ ------ ------ ------
Net Income (Loss) $ 1.22 $(0.49) $ 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 OPERATIONS
2006 & 2005 - BY QUARTER
NOTES:
- - Operating results for the fourth quarter of 2006 include $321 million of
non-cash, pre-tax impairment charges for goodwill ($.82 per common share,
after tax), primarily related to the Company's European ready-to-assemble
cabinet manufacturer.
- - Operating results for the first, second, third and fourth quarters of 2006
include $17 million pre-tax, $26 million pre-tax, $9 million pre-tax, and
$5 million pre-tax, respectively, of costs and charges recorded related to
the Company's profit improvement programs.
- - (Loss) income from continuing operations for the fourth quarter of 2006
includes a $15 million non-cash, pre-tax ($.03 per common share, after tax)
impairment charge related to financial investments.
- - 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 investments in 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 related to investments in Metaldyne Corporation, the Heartland
Industrial Partners private equity fund and TriMas Corporation.
- - 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 $69 million of
non-cash, pre-tax impairment charges for goodwill ($.16 per common share,
after tax) pertaining to European operations.
- - Income from continuing operations in the third quarter of 2005 includes $43
million non-cash, pre-tax ($.07 per common share, after tax) impairment
charges 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 four quarters of 2006 and 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 DECEMBER 31, 2006 & 2005
(DOLLARS IN MILLIONS)
THREE MONTHS ENDED
DECEMBER 31, 4TH QTR '06
------------------ VS.
2006 2005 4TH QTR '05
------ ------ -----------
Cabinets & Related Products $ 745 $ 842 - 12%
Plumbing Products 809 786 + 3%
Installation & Other Services 726 799 - 9%
Decorative Architectural Products 366 351 + 4%
Other Specialty Products 300 350 - 14%
------ ------
Total $2,946 $3,128 - 6%
====== ======
North America $2,348 $2,615 - 10%
International, principally Europe 598 513 + 17%
------ ------
Total, as above $2,946 $3,128 - 6%
====== ======
NOTES:
- - Data exclude discontinued operations.
- - Excluding acquisitions, consolidated net sales declined six percent, North
American net sales declined 11 percent, and International net sales
increased 17 percent compared with the fourth quarter of 2005 (please see
page 13 for the GAAP reconciliation).
- - International net sales in local currencies increased seven percent
compared with the fourth quarter of 2005 (please see page 13 for the GAAP
reconciliation).
Page 3
MASCO CORPORATION
SALES BY SEGMENT AND GEOGRAPHIC AREA
TWELVE MONTHS ENDED DECEMBER 31, 2006 & 2005
(DOLLARS IN MILLIONS)
TWELVE MONTHS ENDED
DECEMBER 31, 12 MONTHS '06
----------------- VS.
2006 2005 12 MONTHS '05
------- ------- -------------
Cabinets & Related Products $ 3,286 $ 3,324 - 1%
Plumbing Products 3,296 3,176 + 4%
Installation & Other Services 3,158 3,063 + 3%
Decorative Architectural Products 1,777 1,681 + 6%
Other Specialty Products 1,261 1,325 - 5%
------- -------
Total $12,778 $12,569 + 2%
======= =======
North America $10,537 $10,440 + 1%
International, principally Europe 2,241 2,129 + 5%
------- -------
Total, as above $12,778 $12,569 + 2%
======= =======
NOTES:
- - Data exclude discontinued operations.
- - Excluding acquisitions, consolidated net sales increased one percent; North
American net sales increased one percent and International net sales
increased five percent (please see page 13 for the GAAP reconciliation).
- - International net sales in local currencies increased four percent compared
with the twelve months ended December 31, 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
AND IMPAIRMENT CHARGES FOR GOODWILL
(DOLLARS IN MILLIONS)
YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1
------- ------ ------ ------ ------
Net Sales:
- Cabinets and Related Products $ 3,286 $ 745 $ 826 $ 863 $ 852
- Plumbing Products 3,296 809 848 842 797
- Installation and Other Services 3,158 726 814 812 806
- Decorative Architectural Products 1,777 366 477 525 409
- Other Specialty Products 1,261 300 330 328 303
------- ------ ------ ------ ------
- TOTAL 12,778 2,946 3,295 3,370 3,167
======= ====== ====== ====== ======
- North America 10,537 2,348 2,710 2,829 2,650
- International, principally Europe 2,241 598 585 541 517
------- ------ ------ ------ ------
- TOTAL, AS ABOVE 12,778 2,946 3,295 3,370 3,167
======= ====== ====== ====== ======
Operating Profit:
- Cabinets and Related Products 446 80 107 138 121
- Plumbing Products 320 48 88 101 83
- Installation and Other Services 344 65 89 95 95
- Decorative Architectural Products 371 66 108 120 77
- Other Specialty Products 225 47 69 65 44
------- ------ ------ ------ ------
- TOTAL 1,706 306 461 519 420
======= ====== ====== ====== ======
- North America 1,475 254 401 457 363
- International, principally Europe 231 52 60 62 57
------- ------ ------ ------ ------
- TOTAL, AS ABOVE 1,706 306 461 519 420
======= ====== ====== ====== ======
General Corporate Expense (GCE) 203 50 52 53 48
(Gain) Loss on Sale of Corporate Fixed
Assets, Net -- -- -- -- --
Income Regarding Litigation Settlement (1) (1) -- -- --
------- ------ ------ ------ ------
Operating Profit (after GCE and Adjustments) 1,504 257 409 466 372
Other Income (Expense), Net (226) (53) (44) (99) (30)
------- ------ ------ ------ ------
Income from Continuing Operations before
Income Taxes, Minority Interest and
Cumulative Effect of Accounting
Change, Net $ 1,278 $ 204 $ 365 $ 367 $ 342
======= ====== ====== ====== ======
Margins:
- Cabinets and Related Products 13.6% 10.7% 13.0% 16.0% 14.2%
- Plumbing Products 9.7% 5.9% 10.4% 12.0% 10.4%
- Installation and Other Services 10.9% 9.0% 10.9% 11.7% 11.8%
- Decorative Architectural Products 20.9% 18.0% 22.6% 22.9% 18.8%
- Other Specialty Products 17.8% 15.7% 20.9% 19.8% 14.5%
- TOTAL 13.4% 10.4% 14.0% 15.4% 13.3%
- North America 14.0% 10.8% 14.8% 16.2% 13.7%
- International, principally Europe 10.3% 8.7% 10.3% 11.5% 11.0%
- TOTAL, AS ABOVE 13.4% 10.4% 14.0% 15.4% 13.3%
NOTES:
- - Data exclude discontinued operations.
- - Operating profit and margins by segment and geographic area are before
general corporate expense, (gain) loss on sale of Corporate fixed assets
and income regarding litigation settlement.
- - Operating profit margins in the fourth quarter of 2006 exclude $321 million
of impairment charges for goodwill as follows: Cabinets and Related
Products ($306 million), Plumbing Products ($1 million) and Decorative
Architectural Products ($14 million).
- - Operating profit margins for the first, second, third and fourth quarters
of 2006 for the Plumbing Products segment exclude $17 million pre-tax, $11
million pre-tax, $7 million pre-tax, and $4 million pre-tax, respectively,
of costs and charges recorded related to the Company's profit improvement
programs.
- - Operating profit margins for the second, third and fourth quarters of 2006
for the Cabinets and Related Products segment exclude $15 million pre-tax,
$2 million pre-tax and $1 million pre-tax, respectively, of costs and
charges recorded 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
AND IMPAIRMENT CHARGES FOR GOODWILL
(DOLLARS IN MILLIONS)
YEAR QTR. 4 QTR. 3 QTR. 2 QTR. 1
------- ------ ------ ------ ------
Net Sales:
- Cabinets and Related Products $ 3,286 $ 745 $ 826 $ 863 $ 852
- Plumbing Products 3,296 809 848 842 797
- Installation and Other Services 3,158 726 814 812 806
- Decorative Architectural Products 1,777 366 477 525 409
- Other Specialty Products 1,261 300 330 328 303
------- ------ ------ ------ ------
- TOTAL 12,778 2,946 3,295 3,370 3,167
======= ====== ====== ====== ======
- North America 10,537 2,348 2,710 2,829 2,650
- International, principally Europe 2,241 598 585 541 517
------- ------ ------ ------ ------
- TOTAL, AS ABOVE 12,778 2,946 3,295 3,370 3,167
======= ====== ====== ====== ======
Operating Profit (Loss):
- Cabinets and Related Products 122 (227) 105 123 121
- Plumbing Products 280 43 81 90 66
- Installation and Other Services 344 65 89 95 95
- Decorative Architectural Products 357 52 108 120 77
- Other Specialty Products 225 47 69 65 44
------- ------ ------ ------ ------
- TOTAL 1,328 (20) 452 493 403
======= ====== ====== ====== ======
- North America 1,417 248 392 431 346
- International, principally Europe (89) (268) 60 62 57
------- ------ ------ ------ ------
- TOTAL, AS ABOVE 1,328 (20) 452 493 403
======= ====== ====== ====== ======
General Corporate Expense (GCE) 203 50 52 53 48
(Gain) Loss on Sale of Corporate Fixed
Assets, Net -- -- -- -- --
Income Regarding Litigation Settlement (1) (1) -- -- --
------- ------ ------ ------ ------
Operating Profit (Loss) 1,126 (69) 400 440 355
Other Income (Expense), Net (226) (53) (44) (99) (30)
------- ------ ------ ------ ------
Income (Loss) from Continuing Operations
before Income Taxes, Minority Interest
and Cumulative Effect of Accounting
Change, Net $ 900 $ (122) $ 356 $ 341 $ 325
======= ====== ====== ====== ======
Margins:
- Cabinets and Related Products 3.7% -30.5% 12.7% 14.3% 14.2%
- Plumbing Products 8.5% 5.3% 9.6% 10.7% 8.3%
- Installation and Other Services 10.9% 9.0% 10.9% 11.7% 11.8%
- Decorative Architectural Products 20.1% 14.2% 22.6% 22.9% 18.8%
- Other Specialty Products 17.8% 15.7% 20.9% 19.8% 14.5%
- TOTAL 10.4% -0.7% 13.7% 14.6% 12.7%
- North America 13.4% 10.6% 14.5% 15.2% 13.1%
- International, principally Europe -4.0% -44.8% 10.3% 11.5% 11.0%
- TOTAL, AS ABOVE 10.4% -0.7% 13.7% 14.6% 12.7%
NOTES:
- - Data exclude discontinued operations.
- - Operating profit and margins by segment and geographic area are before
general corporate expense, (gain) loss on sale of Corporate fixed assets
and income regarding litigation settlement.
- - Operating profit margins in the fourth quarter of 2006 include $321 million
of impairment charges for goodwill as follows: Cabinets and Related
Products ($306 million), Plumbing Products ($1 million) and Decorative
Architectural Products ($14 million).
- - Operating profit margins for the first, second, third and fourth quarters
of 2006 for the Plumbing Products segment include $17 million pre-tax, $11
million pre-tax, $7 million pre-tax, and $4 million pre-tax, respectively,
of costs and charges recorded related to the Company's profit improvement
programs.
- - Operating profit margins for the second, third and fourth quarters of 2006
for the Cabinets and Related Products segment include $15 million pre-tax,
$2 million pre-tax and $1 million pre-tax, respectively, of costs and
charges recorded related to the closure of a relatively small
ready-to-assemble cabinet manufacturing facility.
Page 6
MASCO CORPORATION
QUARTERLY SEGMENT DATA - 2005
EXCLUDING IMPAIRMENT CHARGES FOR GOODWILL
(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 profit and margins by segment and geographic area are before
general corporate expense, (gain) loss on sale of Corporate fixed assets
and income regarding litigation settlement.
- - Operating results for the fourth quarter of 2005 exclude non-cash, pre-tax
impairment charges for goodwill 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.
Page 7
MASCO CORPORATION
QUARTERLY SEGMENT DATA - 2005
INCLUDING IMPAIRMENT CHARGES FOR GOODWILL
(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 profit and margins by segment and geographic area are before
general corporate expense, (gain) loss on sale of Corporate fixed assets
and income regarding litigation settlement.
- - Operating results for the fourth quarter of 2005 include non-cash, pre-tax
impairment charges for goodwill 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.
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 $(240) $ (69) $(54) $ (53) $ (64) $(247) $(66) $(64) $(58) $ (59)
Income from Cash and Cash Investments 47 22 6 5 14 36 14 11 6 5
Other Interest Income 2 -- -- 1 1 7 2 3 1 1
Realized Gains from Financial Investments,
Net 31 5 9 11 6 98 6 23 28 41
Dividend Income 10 2 1 1 6 16 4 4 4 4
Impairment Charges for Financial Investments (101) (15) (8) (78) -- (45) -- (43) (2) --
Other, Net 25 2 2 14 7 (30) (3) 7 (20) (14)
----- ----- ---- ----- ----- ----- ---- ---- ---- -----
Total Other Income (Expense), Net $(226) $ (53) $(44) $ (99) $ (30) $(165) $(43) $(59) $(41) $ (22)
===== ===== ==== ===== ===== ===== ==== ==== ==== =====
NOTES:
- - Data exclude discontinued operations.
- - Other, net, for the years ended December 31, 2006 and 2005 include $14
million and $(25) million, respectively, of realized currency transaction
gains (losses). The fourth quarters of 2006 and 2005 include $(1) million
and $(2) million, respectively, of realized currency transaction (losses).
Page 9
MASCO CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2006 & 2005
(DOLLARS AND SHARES IN MILLIONS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED AS A PERCENT OF SALES
DECEMBER 31, 3 MONTHS ENDED DECEMBER 31,
% ------------------ ---------------------------
Line Change 2006 2005 2006 2005
- ---- ------ ------ ------ ----- -----
1 Net Sales -6% $2,946 $3,128 100.0% 100.0%
2 Cost of Sales -3% 2,203 2,267 74.8% 72.5%
------ ------ ----- -----
3 Gross Profit -14% 743 861 25.2% 27.5%
------ ------ ----- -----
Operating Profit (Loss):
4 - Before GCE, Litigation (Income),
(Gain) on Sale of Corporate Fixed
Assets and Impairment Charges for
Goodwill (3-8) -29% 301 426 10.2% 13.6%
5 - After GCE, Litigation (Income),
(Gain) on Sale of Corporate Fixed
Assets and Impairment Charges for
Goodwill (3-9-10-11) -122% (69) 318 -2.3% 10.2%
------ ------ ----- -----
S,G&A Expense:
6 - General Corporate Expense (GCE) 6% 50 47 1.7% 1.5%
7 - (Gain) loss on Sale of Corporate
Fixed Assets, Net -- (8) -- (0.00)
8 - All Other 2% 442 435 15.0% 13.9%
------ ------ ----- -----
9 - Total S,G&A Expense 4% 492 474 16.7% 15.2%
------ ------ ----- -----
10 Impairment Charges for Goodwill 321 69 10.9% 2.2%
11 Income Regarding Litigation Settlement (1) -- (0.00) 0.0%
12 Other Income (Expense), Net (38) (43) -1.3% -1.4%
13 Impairment Charges for Financial
Investments (15) -- -0.5% 0.0%
------ ------ ----- -----
14 (Loss) Income from Continuing
Operations before Income Taxes,
Minority Interest and Cumulative
Effect of Accounting Change,
Net (5+12+13) -144% (122) 275 -4.1% 8.8%
15 Income Taxes -55% 58 129 2.0% 4.1%
(Tax Rate) -47.5% 46.9%
------ ------ ----- -----
16 (Loss) Income from Continuing
Operations before Minority Interest
and Cumulative Effect of Accounting
Change, Net -223% (180) 146 -6.1% 4.7%
17 Minority Interest (6) (6) -0.2% -0.2%
------ ------ ----- -----
18 (Loss) Income from Continuing
Operations before Cumulative Effect
of Accounting Change, Net -233% (186) 140 -6.3% 4.5%
19 (Loss) Income from Discontinued
Operations, Net (1) 33 0.0% 1.1%
20 Cumulative Effect of Accounting
Change, Net -- -- 0.0% 0.0%
------ ------ ----- -----
21 Net (Loss) Income -208% $ (187) $ 173 -6.3% 5.5%
====== ====== ===== =====
(Loss) Earnings Per Common Share
(Diluted):
(Loss) Income from Continuing
Operations before Cumulative
Effect of Accounting Change, Net -245% $(0.48) $ 0.33
(Loss) Income from Discontinued
Operations, Net (0.00) 0.08
Cumulative Effect of Accounting
Change, Net -- --
------ ------
Net (Loss) Income -218% $(0.49) $ 0.41
====== ======
Average (Diluted) Common Shares -8% 385 419
Page 10
MASCO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2006 & 2005
(DOLLARS AND SHARES IN MILLIONS, EXCEPT PER SHARE DATA)
TWELVE MONTHS ENDED AS A PERCENT OF SALES
DECEMBER 31, 12 MONTHS ENDED DECEMBER 31,
% ------------------- ----------------------------
Line Change 2006 2005 2006 2005
- ---- ------ ------- ------- ----- ------
1 Net Sales 2% $12,778 $12,569 100.0% 100.0%
2 Cost of Sales 3% 9,259 8,985 72.5% 71.5%
------- ------- ----- -----
3 Gross Profit -2% 3,519 3,584 27.5% 28.5%
------- ------- ----- -----
Operating Profit:
4 - Before GCE, Litigation (Income),
(Gain) on Sale of Corporate Fixed
Assets and Impairment Charges
for Goodwill (3-8) -9% 1,659 1,830 13.0% 14.6%
5 - After GCE, Litigation (Income),
(Gain) on Sale of Corporate Fixed
Assets and Impairment Charges for
Goodwill (3-9-10-11) -28% 1,126 1,567 8.8% 12.5%
------- ------- ----- -----
S,G&A Expense:
6 - General Corporate Expense (GCE) 6% 203 192 1.6% 1.5%
7 - (Gain) on Sale of Corporate Fixed
Assets, Net -- 8 0.0% 0.1%
8 - All Other 6% 1,860 1,754 14.6% 14.0%
------- ------- ----- -----
9 - Total S,G&A Expense 6% 2,063 1,954 16.1% 15.5%
------- ------- ----- -----
10 Impairment Charges for Goodwill 331 69 2.6% 0.5%
11 Income Regarding Litigation Settlement (1) (6) 0.0% 0.0%
12 Other Income (Expense), Net (125) (120) -1.0% -1.0%
13 Impairment Charges for Financial
Investments (101) (45) -0.8% -0.4%
------- ------- ----- -----
14 Income from Continuing Operations
before Income Taxes, Minority
Interest and Cumulative Effect of
Accounting Change, Net (5+12+13) -36% 900 1,402 7.0% 11.2%
15 Income Taxes -20% 412 514 3.2% 4.1%
(Tax Rate) 45.8% 36.7%
------- ------- ----- -----
16 Income from Continuing Operations
before Minority Interest and
Cumulative Effect of Accounting
Change, Net -45% 488 888 3.8% 7.1%
17 Minority Interest (27) (22) -0.2% -0.2%
------- ------- ----- -----
18 Income from Continuing Operations
before Cumulative Effect
of Accounting Change, Net -47% 461 866 3.6% 6.9%
19 Income from Discontinued Operations,
Net 30 74 0.2% 0.6%
20 Cumulative Effect of Accounting
Change, Net (3) -- 0.0% 0.0%
------- ------- ----- -----
21 Net Income -48% $ 488 $ 940 3.8% 7.5%
======= ======= ===== =====
Earnings Per Common Share (Diluted):
Income from Continuing Operations -43% $ 1.15 $ 2.01
Income from Discontinued
Operations, Net 0.08 0.17
Cumulative Effect of Accounting
Change, Net (0.01) --
------- -------
Net Income -44% $ 1.22 $ 2.19
======= =======
Average (Diluted) Common Shares -7% 400 430
page 11
MASCO CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
DECEMBER 31, DECEMBER 31,
2006 2005
------------ ------------
ASSETS
Current Assets:
Cash and Cash Investments $ 1,958 $ 1,964
Receivable, Net 1,613 1,716
Inventories 1,263 1,127
Prepaid Expenses and Other 281 316
------- -------
Total Current Assets 5,115 5,123
Property and Equipment, Net 2,363 2,173
Goodwill 3,957 4,171
Other Intangible Assets, Net 306 307
Other Assets 584 785
------- -------
Total Assets $12,325 $12,559
======= =======
LIABILITIES
Current Liabilities:
Notes Payable $ 1,446 $ 832
Accounts Payable 815 837
Accrued Liabilities 1,128 1,225
------- -------
Total Current Liabilities 3,389 2,894
Long-Term Debt 3,533 3,915
Deferred Income Taxes and Other 932 902
------- -------
Total Liabilities 7,854 7,711
SHAREHOLDERS' EQUITY 4,471 4,848
------- -------
Total Liabilities and Shareholders'
Equity $12,325 $12,559
======= =======
Page 12
MASCO CORPORATION
GAAP RECONCILIATION OF SALES GROWTH
EXCLUDING EFFECT OF ACQUISITIONS & CURRENCY TRANSLATION
(IN MILLIONS)
THREE MONTHS
ENDED
DECEMBER 31,
---------------
2006 2005
------ ------
Consolidated Net Sales, as reported $2,946 $3,128
- Acquisitions (10) --
------ ------
Consolidated Net Sales (excl. acquisitions) $2,936 $3,128
====== ======
North American Net Sales, as reported $2,348 $2,615
- Acquisitions (10) --
------ ------
North American Net Sales (excl.
acquisitions) $2,338 $2,615
====== ======
International Net Sales, as reported $ 598 $ 513
- Acquisitions -- --
------ ------
International Net Sales (excl.
acquisitions) 598 513
- Currency Translation (49) --
------ ------
International Net Sales (excl. acquisitions
& currency) $ 549 $ 513
====== ======
TWELVE MONTHS
ENDED
DECEMBER 31,
-----------------
2006 2005
------- -------
Consolidated Net Sales, as reported $12,778 $12,569
- Acquisitions (27) --
------- -------
Consolidated Net Sales (excl. acquisitions) $12,751 $12,569
======= =======
North American Net Sales, as reported $10,537 $10,440
- Acquisitions (27) --
------- -------
North American Net Sales (excl.
acquisitions) $10,510 $10,440
======= =======
International Net Sales, as reported $ 2,241 $ 2,129
- Acquisitions -- --
------- -------
International Net Sales (excl.
acquisitions) 2,241 2,129
- Currency Translation (23) --
------- -------
International Net Sales (excl. acquisitions
& currency) $ 2,218 $ 2,129
======= =======
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 (LOSS) PROFIT AND MARGINS
(DOLLARS IN MILLIONS)
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
2006 2005
------------- -------------
$ MARGIN $ MARGIN
---- ------ ---- ------
Operating (Loss) Profit, As Reported $(69) -2.3% $318 10.2%
Profit Improvement Programs, Plumbing
Products Segment 4 --
Profit Improvement Programs, Cabinets &
Related Products Segment 1 --
Impairment Charges for Goodwill 321 69
Income Regarding Litigation Settlement (1) --
---- ----
Operating Profit, As Reconciled $256 8.7% $387 12.4%
==== ====
TWELVE MONTHS ENDED DECEMBER 31,
---------------------------------
2006 2005
--------------- ---------------
$ MARGIN $ MARGIN
------ ------ ------ ------
Operating Profit, As Reported $1,126 8.8% $1,567 12.5%
Profit Improvement Programs, Plumbing
Products Segment 39 12
Profit Improvement Programs, Cabinets &
Related Products Segment 8 --
Impairment Charges for Goodwill 331 69
Income Regarding Litigation Settlement (1) (6)
------ ------
Operating Profit, As Reconciled $1,503 11.8% $1,642 13.1%
====== ======
NOTE:
The Company believes that certain non-GAAP performance measures and ratios, used
in managing the business, may provide users of this financial information with
additional meaningful comparisons between current results and results in prior
periods. Non-GAAP performance measures and ratios should be viewed in addition
to, and not as an alternative for, the Company's reported results under
accounting principles generally accepted in the United States.
Page 14
MASCO CORPORATION
GAAP RECONCILIATION OF OPERATING PROFIT AND SHAREHOLDERS' EQUITY
(IN MILLIONS)
TWELVE
MONTHS ENDED
DECEMBER 31,
2006
------------
Operating Profit from Continuing Operations $1,126
Impairment Charges for Goodwill 331
Income Regarding Litigation Settlement (1)
------
Operating Profit, As Reconciled $1,456
======
TWELVE MONTHS ENDED
DECEMBER 31,
-------------------
2006 2005
------ ------
Shareholders' Equity, As Reported $4,471 $4,848
Impairment Charges for Goodwill (after tax) 331 69
Income Regarding Litigation Settlement
(after tax) (1) (4)
------ ------
Shareholders' Equity, As Reconciled $4,801 $4,913
====== ======
NOTES:
Data exclude discontinued operations.
The Company believes that certain non-GAAP performance measures and ratios, used
in managing the business, may provide users of this financial information with
additional meaningful comparisons between current results and results in prior
periods. Non-GAAP performance measures and ratios should be viewed in addition
to, and not as an alternative for, the Company's reported results under
accounting principles generally accepted in the United States.
This information is provided as detail for the calculation of return on invested
capital ("ROIC") which is calculated as after-tax operating profit (last twelve
months, as reconciled) divided by the total of average debt (net of average
cash) and average shareholders' equity.
Page 15
MASCO CORPORATION
DISCONTINUED OPERATIONS
(IN MILLIONS)
THREE MONTHS ENDED
DECEMBER 31,
------------------
2006 2005
---- ----
Net Sales $-- $ 62
=== ====
Income from Discontinued Operations $-- $ 10
(Loss) Gain on Disposal of Discontinued
Operations, Net (1) 53
--- ----
Income Before Income Taxes (1) 63
Income Tax Expense -- (30)
--- ----
(Loss) Income from Discontinued
Operations, Net $(1) $ 33
=== ====
TWELVE MONTHS ENDED
DECEMBER 31,
-------------------
2006 2005
---- ----
Net Sales $ 55 $315
==== ====
Income from Discontinued Operations $ 8 $ 49
Gain on Disposal of Discontinued
Operations, Net 50 63
---- ----
Income Before Income Taxes 58 112
Income Tax Expense (28) (38)
---- ----
Income from Discontinued Operations, Net $ 30 $ 74
==== ====
Page 16