FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Pursuant To Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Ended June 30, 1995. Commission File Number 1-5794
MASCO CORPORATION
(Exact name of Registrant as specified in its Charter)
Delaware 38-1794485
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
21001 Van Born Road, Taylor, Michigan 48180
(Address of principal executive offices) (Zip Code)
(313) 274-7400
(Telephone Number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Shares Outstanding at
Class August 1, 1995
Common stock, par value $1 per share 160,273,000
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MASCO CORPORATION
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheet -
June 30, 1995 and December 31, 1994 1
Condensed Consolidated Statement of
Income for the Three Months and
Six Months Ended June 30, 1995
and 1994 2
Condensed Consolidated Statement of
Cash Flows for the Six Months Ended
June 30, 1995 and 1994 3
Notes to Condensed Consolidated
Financial Statements 4-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8-9
Unaudited Information Regarding Equity
Affiliates for the Three Months and
Six Months Ended June 30, 1995 and 1994 10
Part II. Other Information and Signature 11
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MASCO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 1995 and December 31, 1994
(Dollars in thousands)
June 30, December 31,
ASSETS 1995 1994
Current assets:
Cash and cash investments $ 65,810 $ 61,160
Marketable securities 11,520 9,910
Accounts and notes receivable, net 792,610 745,170
Prepaid expenses and other 120,470 126,370
Inventories
Finished goods 423,060 388,440
Raw material 412,990 333,280
Work in process 201,760 227,110
1,037,810 948,830
Total current assets 2,028,220 1,891,440
Equity investments in MascoTech, Inc. 195,870 184,960
Equity investments in other affiliates 63,240 57,790
Property and equipment, net 1,307,880 1,231,810
Excess of cost over acquired net assets 760,930 706,160
Other noncurrent assets 342,400 317,880
Total assets $4,698,540 $4,390,040
LIABILITIES
Current liabilities:
Notes payable $ 73,150 $ 48,380
Accounts payable 190,630 201,320
Accrued liabilities 361,260 351,590
Total current liabilities 625,040 601,290
Long-term debt 1,684,290 1,592,610
Deferred income taxes and other 88,340 83,460
Total liabilities 2,397,670 2,277,360
SHAREHOLDERS' EQUITY
Common stock, par value $1 per share
Authorized shares: 400,000,000 160,250 156,990
Preferred stock, par value $1 per share
Authorized shares: 1,000,000 --- ---
Paid-in capital 125,470 44,840
Retained earnings 2,005,970 1,924,740
Cumulative translation adjustments 9,180 (13,890)
Total shareholders' equity 2,300,870 2,112,680
Total liabilities and
shareholders' equity $4,698,540 $4,390,040
See notes to condensed consolidated financial statements.
1
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MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the Three Months and Six Months Ended June 30, 1995 and 1994
(Amounts in thousands except per share data)
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
Net sales $1,208,000 $1,120,000 $2,434,000 $2,170,000
Costs and expenses, net:
Cost of sales 821,900 753,500 1,637,300 1,451,500
Selling, general and
administrative expenses 261,800 233,800 522,800 463,900
Other (income) expense, net:
Interest expense 28,800 27,700 57,300 54,200
Re: MascoTech, Inc.:
Equity earnings (4,500) (10,700) (8,300) (18,100)
Interest and dividend
income and gain from
stock sale --- --- --- (4,500)
Other, net (5,600) (600) (4,800) (2,700)
18,700 16,400 44,200 28,900
1,102,400 1,003,700 2,204,300 1,944,300
Income before income taxes 105,600 116,300 229,700 225,700
Income taxes 42,200 46,200 91,900 90,300
Net income $ 63,400 $ 70,100 $ 137,800 $ 135,400
Per share data:
Net income $.40 $.44 $.87 $.86
Cash dividends declared
and paid $.18 $.17 $.36 $.34
Average shares outstanding 158,800 158,100 158,800 158,100
See notes to condensed consolidated financial statements.
2
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MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 1995 and 1994
(Dollars in thousands)
Six Months Ended
June 30
1995 1994
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
Cash provided by operations $188,450 $177,340
(Increase) in receivables, net (72,990) (59,330)
(Increase) in inventories, net (86,620) (36,150)
Decrease in prepaid expenses 6,740 7,570
(Decrease) in current liabilities (10,190) (320)
Total cash from operating activities 25,390 89,110
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
Proceeds from sale of Formica investment 74,470 ---
Proceeds from sale of MascoTech common stock --- 7,730
Capital expenditures (114,050) (91,060)
Other, net (13,920) (21,280)
Total cash (for) investing activities (53,500) (104,610)
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
Increase in debt 398,710 70,010
Payment of debt (308,970) (63,050)
Cash dividends paid (56,980) (52,920)
Total cash from (for) financing activities 32,760 (45,960)
CASH AND CASH INVESTMENTS:
Increase (decrease) for the period 4,650 (61,460)
At January 1 61,160 119,980
At June 30 $ 65,810 $ 58,520
Supplemental Cash Flow Information:
Net cash paid during the period for:
Interest $ 56,430 $ 53,980
Income taxes $ 92,640 $ 89,490
See notes to condensed consolidated financial statements.
3
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MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A. In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, of a normal
recurring nature, necessary to present fairly its financial position as at
June 30, 1995 and the results of operations for the three months and six
months ended June 30, 1995 and 1994 and cash flows for the six months ended
June 30, 1995 and 1994. The condensed consolidated balance sheet at
December 31, 1994 was derived from audited financial statements, but does
not include all disclosures required by generally accepted accounting
principles. Earnings per share are calculated based on the weighted
average common shares outstanding.
B. Other (income) expense, net consists of the following, in thousands:
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
Interest expense $28,800 $27,700 $57,300 $54,200
Re: MascoTech, Inc.:
Equity earnings (4,500) (10,700) (8,300) (18,100)
Interest and dividend
income --- --- --- (100)
Gain from sale of
common stock --- --- --- (4,400)
Equity earnings, other (2,200) (900) (4,300) (2,100)
Interest income and gains
from marketable
securities and
cash investments (4,900) (4,100) (7,900) (7,700)
Other, net 1,500 4,400 7,400 7,100
$18,700 $16,400 $44,200 $28,900
Included in other, net for the six months ended June 30, 1995, was a $15.9
million gain from the sale of the Company's investment in Formica
Corporation; this gain was offset by charges and reserves for profit
improvement programs and asset disposals that should enhance the Company's
future performance.
C. As announced during the second quarter of 1995, the Company's Board of
Directors has determined that the divestiture of the Home Furnishings Group
appears to be in the Company's and its shareholders' long-term strategic
interest and thus has directed the Company to explore alternatives with
respect to a possible divestiture. Alternatives currently being explored
include the creation of a new independent public company through either an
initial public offering or a spin-off to Company shareholders or the sale
of the Home Furnishings Group. The Company anticipates receiving
substantial cash proceeds either from a cash payment paid by the Home
Furnishings Group to the Company prior to its becoming a public company or
from the sale of the Home Furnishings Group.
Sales of the Home Furnishings Group in 1994 approximated $1.9 billion with
operating profit of approximately $80 million. While these sales
represented 42 percent of the Company's total 1994 sales, operating profit
from this group comprised less than 14 percent of the Company's 1994
operating profit.
4
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MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note C - Continued:
The Home Furnishings Group represents an investment of approximately $1.7
billion on the Company's December 31, 1994 balance sheet. While the
Company believes that the book value of its investment in the Home
Furnishings Group is realizable in the longer term in the ordinary course
of business, the Company believes that the current value of the Home
Furnishings Group is well in excess of $1 billion. Even then, depending
upon the nature and timing of a divestiture, the potential transactions,
while strengthening the Company's balance sheet, may involve a substantial
non-cash charge to the Company's financial statements.
D. The following presents the combined unaudited financial statements of the
Company, MascoTech, Inc. and TriMas Corporation as one entity, with Masco
Corporation as the parent company. Intercompany transactions have been
eliminated. Amounts, except per share data, are in thousands.
Combined Balance Sheet
June 30, December 31,
Assets 1995 1994
Current assets:
Cash and cash investments $ 195,620 $ 230,780
Marketable securities 20,400 72,020
Accounts and notes receivable, net 1,058,720 980,940
Prepaid expenses 111,030 133,490
Deferred income taxes 50,800 68,270
Net current assets of businesses
held for disposition 97,700 146,690
Inventories:
Finished goods 491,890 449,290
Raw material 477,120 404,240
Work in process 249,580 266,810
1,218,590 1,120,340
Total current assets 2,752,860 2,752,530
Equity investments in affiliates 196,760 150,310
Property and equipment, net 1,894,070 1,779,520
Excess of cost over acquired net assets 1,019,310 964,000
Net noncurrent assets of businesses held
for disposition 206,300 232,370
Other noncurrent assets 450,890 405,220
Total assets $6,520,190 $6,283,950
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 79,620 $ 52,330
Accounts payable 310,540 334,770
Accrued liabilities 476,120 457,160
Total current liabilities 866,280 844,260
Long-term debt 2,686,150 2,699,450
Deferred income taxes and other 219,960 206,630
Other interests in combined affiliates 446,930 420,930
Equity of shareholders of Masco Corporation 2,300,870 2,112,680
Total liabilities and
shareholders' equity $6,520,190 $6,283,950
5
<PAGE> MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note D - Continued:
Three Months Ended Six Months Ended
June 30 June 30
Combined Statement of Income 1995 1994 1995 1994
Net sales $1,800,730 $1,696,450 $3,611,490 $3,289,310
Costs and expenses, net:
Cost of sales 1,295,850 1,190,920 2,572,950 2,310,230
Selling, general and
administrative expenses 329,790 305,000 660,810 600,620
Other (income) expense,
net:
Interest expense 45,610 42,630 92,540 83,050
Other income, net (16,790) (7,280) (20,790) (28,190)
28,820 35,350 71,750 54,860
1,654,460 1,531,270 3,305,510 2,965,710
Income before income taxes and
other interests 146,270 165,180 305,980 323,600
Income taxes 64,150 68,650 133,290 139,450
Income before other interests 82,120 96,530 172,690 184,150
Other interests in combined
affiliates 18,720 26,430 34,890 48,750
Net income $ 63,400 $ 70,100 $ 137,800 $ 135,400
Per share data:
Net income $.40 $.44 $.87 $.86
Cash dividends declared
and paid $.18 $.17 $.36 $.34
Average shares outstanding 158,800 158,100 158,800 158,100
6
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MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (concluded)
Note D - Concluded:
Six Months Ended
June 30
Combined Statement of Cash Flows 1995 1994
Cash Flows From (For) Operating Activities:
Cash provided by operations $ 236,000 $ 224,860
(Increase) in receivables, net (102,300) (116,100)
(Increase) in inventories, net (90,720) (44,310)
(Increase) decrease in marketable
securities, net 53,230 (36,670)
(Increase) decrease in prepaid expenses 13,870 (10,410)
Increase (decrease) in current liabilities (31,910) 14,470
Total cash from operating activities 78,170 31,840
Cash Flows From (For) Investing Activities:
Capital expenditures (167,370) (158,210)
Proceeds from sale of Formica Investment 74,470 ---
Proceeds from sale of subsidiaries 37,400 20,330
Acquisitions, net of cash acquired (22,810) ---
Other, net 50,680 33,780
Total cash (for) investing activities (27,630) (104,100)
Cash Flows From (For) Financing Activities:
Increase in debt 572,460 407,250
Payment of debt (590,850) (368,880)
Cash dividends paid (67,310) (62,550)
Total cash (for) financing activities (85,700) (24,180)
Cash and Cash Investments:
(Decrease) for the period (35,160) (96,440)
At January 1 230,780 272,950
At June 30 $ 195,620 $ 176,510
7
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MASCO CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SECOND QUARTER 1995 AND THE FIRST SIX MONTHS 1995 VERSUS
SECOND QUARTER 1994 AND THE FIRST SIX MONTHS 1994
Net sales increased 8 percent and 12 percent for the second quarter and
six months ended June 30, 1995, respectively, from the comparable periods in
1994. Sales of Home Improvement and Building Products including acquisitions
increased 10 percent and 13 percent, and excluding acquisitions increased 3
percent and 8 percent for the second quarter and six months ended June 30,
1995, respectively, from the comparable periods in 1994. Sales of Home
Furnishings Products increased 5 percent and 11 percent and excluding a recent
acquisition increased 5 percent and 5 percent for the second quarter and six
months ended June 30, 1995, respectively, from the comparable periods in 1994.
The Company's operating profit margins declined in the first half of 1995
from the first half of 1994. Cost of sales as a percentage of sales increased
to 68.0 percent from 67.3 percent and 67.3 percent from 66.9 percent for the
second quarter and six months ended June 30, 1995, respectively, from the
comparable periods in 1994; these increases were the result, among others, of
changing product sales mix, higher brass costs and plant start-up costs.
Selling, general and administrative expenses as a percentage of sales increased
to 21.7 percent from 20.9 percent and 21.5 percent from 21.4 percent for the
second quarter and six months ended June 30, 1995 from the comparable periods
in 1994. The increases in selling, general and administrative expenses as a
percentage of sales are primarily due to increased promotional and advertising
costs in the 1995 periods.
Included in other (income) expense, net for the second quarter and six
months ended June 30, 1995 are equity earnings from MascoTech, Inc. aggregating
$4.5 million and $8.3 million, respectively, as compared with $10.7 million and
$18.1 million of equity earnings in the comparable 1994 periods. MascoTech's
operating results for the first half of 1995 were negatively impacted by the
reduced results, including restructuring related costs, of certain businesses
MascoTech plans to divest; and by increased costs and expenses reflecting
start-up costs associated with MascoTech's expanded capital investment
programs, launch costs for new products and increased steel costs, principally
for its core transportation-related businesses.
Also included in other (income) expense, net for the six months ended June
30, 1995, was a $15.9 million gain from the sale of the Company's investment in
Formica Corporation; this gain was offset by charges and reserves for profit
improvement programs and asset disposals that should enhance the Company's
future performance. Included in other (income) expense, net for the six months
ended June 30, 1994 was a $4.4 million gain from the sale of MascoTech stock.
8
<PAGE>
Net income for the first six months of 1995 increased modestly to $137.8
million from $135.4 million, and earnings per share increased to $.87 from
$.86. Excluding the 1994 MascoTech stock gain and year-to-date equity earnings
from MascoTech for both 1995 and 1994, net income for the first six months of
1995 would have increased 9 percent, from the comparable 1994 period. Net
income for the second quarter of 1995 decreased 10 percent to $63.4 million
from $70.1 million in the comparable 1994 period, and earnings per share
decreased 9 percent to $.40 from $.44. Excluding second quarter equity
earnings from MascoTech for both 1995 and 1994, net income for the second
quarter of 1995 would have decreased 4 percent from the comparable 1994 period.
The Company's major markets experienced a slowdown in the 1995 second
quarter as a result of lower housing activity, reduced consumer spending and
inventory reductions by certain customers. The economic decline in the
Company's major markets currently appears to have bottomed and, unless there is
a further weakening, the Company continues to anticipate improved sales and
operating profit for 1995.
As announced during the second quarter of 1995, the Company's Board of
Directors has determined that the divestiture of the Home Furnishings Group
appears to be in the Company's and its shareholders' long-term strategic
interest and thus has directed the Company to explore alternatives with respect
to a possible divestiture. Alternatives currently being explored include the
creation of a new independent public company through either an initial public
offering or a spin-off to Company shareholders or the sale of the Home
Furnishings Group. The Company anticipates receiving substantial cash proceeds
either from a cash payment paid by the Home Furnishings Group to the Company
prior to its becoming a public company or from the sale of the Home Furnishings
Group.
Sales of the Home Furnishings Group in 1994 approximated $1.9 billion with
operating profit of approximately $80 million. While these sales represented
42 percent of the Company's total 1994 sales, operating profit from this group
comprised less than 14 percent of the Company's 1994 operating profit.
The Home Furnishings Group represents an investment of approximately $1.7
billion on the Company's December 31, 1994 balance sheet. While the Company
believes that the book value of its investment in the Home Furnishings Group is
realizable in the longer term in the ordinary course of business, the Company
believes that the current value of the Home Furnishings Group is well in excess
of $1 billion. Even then, depending upon the nature and timing of a
divestiture, the potential transactions, while strengthening the Company's
balance sheet, may involve a substantial non-cash charge to the Company's
financial statements.
The Company's Home Furnishings Group includes such well-known brands as
Henredon, Drexel Heritage, Lexington, Universal, Berkline, Bench Craft,
Maitland-Smith and Robert Allen Fabrics.
The Company has on file with the Securities and Exchange Commission, an
unallocated shelf registration pursuant to which the Company is able to issue
up to a combined $759.4 million of debt and equity securities.
At June 30, 1995 current assets were 3.2 times current liabilities. First
and second quarter 1995 cash from operations was affected by an expected and
recurring first-half increase in accounts receivable. As the annual increase
in accounts receivable is historically experienced in the first half of the
year, cash flows from operations in the remaining two quarters of 1995 should
not be affected by significant increases in accounts receivable. The Company
believes that its cash flows from operations and, to the extent necessary,
future financial market activities and bank borrowings, are sufficient to fund
its working capital and other investment needs.
9
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UNAUDITED INFORMATION REGARDING EQUITY AFFILIATES
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Equity investments in affiliates consist primarily of the following
approximate common stock and partnership interests at June 30:
1995 1994
MascoTech, Inc. 44% 41%
Hans Grohe, a German partnership 27% 27%
TriMas Corporation 5% 5%
The following presents the condensed financial data of MascoTech, Inc.
Amounts are in thousands.
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
Sales - Net $439,290 $432,780 $884,300 $845,190
Gross Profit $ 68,250 $ 89,710 $143,710 $170,000
Net Income
(Before Preferred
Stock Dividends) $ 15,100 $ 29,440 $ 28,560 $ 55,740
10
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PART II. OTHER INFORMATION
MASCO CORPORATION
Items 1, 2, 3, and 5 are not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders was held on May 17, 1995 at
which the three nominees for the Company's Board of Directors
identified in the Company's proxy statement dated April 18, 1995,
were re-elected. Following is a tabulation of shares voted:
Election of Directors
Wayne B. Lyon Arman Simone Peter W. Stroh
For 132,163,830 132,171,371 132,164,850
Withheld 355,770 348,229 354,750
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
4 - Amendment No. 1 dated as of June 1, 1995 amending the
$750,000,000 Amended and Restated Credit Agreement
dated as of May 18, 1994 among Masco Corporation,
the banks party thereto and Morgan Guaranty Trust
Company of New York, as Agent.
11 - Computation of Earnings Per Share
12 - Computation of Ratio of Earnings to Fixed Charges
27 - Financial Data Schedule
(b) Reports on Form 8-K:
Report on Form 8-K dated June 8, 1995 reporting under Item 5 the
issuance of a press release relating to the possible divestiture
of the Company's Home Furnishings Group.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MASCO CORPORATION
(Registrant)
Date: August 10, 1995 By: /s/Richard G. Mosteller
Richard G. Mosteller
Senior Vice President - Finance
(Chief Financial Officer and
Authorized Signatory)
11
MASCO CORPORATION
EXHIBIT INDEX
Exhibit
Exhibit 4 Amendment No. 1 dated as of June 1, 1995 amending the
$750,000,000 Amended and Restated Credit Agreement dated
as of May 18, 1994 among Masco Corporation, the banks party
thereto and Morgan Guaranty Trust Company of New York, as
Agent.
Exhibit 11 Computation of Earnings Per Share
Exhibit 12 Computation of Ratio of Earnings to Fixed Charges
Exhibit 27 Financial Data Schedule
Exhibit 4
AMENDMENT NO. 1
dated as of June 1, 1995
amending the
$750,000,000 AMENDED AND RESTATED CREDIT AGREEMENT
dated as of May 18, 1994
among
MASCO CORPORATION
THE BANKS PARTY THERETO
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Agent
<PAGE>
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of June 1, 1995 to the
Amended and Restated Credit Agreement dated as of May 18,
1994 (the "Agreement") among MASCO CORPORATION, the BANKS
party thereto and MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Agent.
WHEREAS, the undersigned parties desire to amend
the Agreement (i) to extend the Termination Date from May
15, 1998 to May 15, 2000, (ii) to reduce certain interest
rates and fees, (iii) to increase or reduce the Commitments
of certain Banks and add The Bank of New York and The
Mitsubishi Bank, Limited as additional Banks and (iv) to
make certain other changes;
NOW, THEREFORE, the parties hereto agree as
follows:
SECTION 1. Definitions; References. Unless
otherwise specifically defined herein, each term used herein
which is defined in the Agreement has the meaning assigned
to such term in the Agreement. Each reference to "hereof,
"hereunder", "herein" and "hereby" and each other similar
reference and each reference to "this Agreement" and each
other similar reference contained in the Agreement shall
from and after the date hereof refer to the Agreement as
amended hereby.
SECTION 2. Amendment of Section 1.01. Section
1.01 of the Agreement is amended as follows:
(a) The definition of "Borrower's 1993 Form 10-K"
is deleted.
(b) The following new definitions are added in
the appropriate alphabetical order:
"Amendment No. 1" means Amendment No. 1 dated as
of June 1, 1995 to this Agreement.
"Amendment No. 1 Effective Date" means the date on
which Amendment No. 1 became effective pursuant to
Section 10 thereof.
"Borrower's 1994 Form 10-K" means the Borrower's
annual report on Form 10-K for the year ended December
<PAGE>
31, 1994, as filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of
1934, as amended.
(c) The definition of "Continuing Director" is
amended by changing the date therein from "May 18, 1994" to
"June 1, 1995".
(d) The definition of "Termination Date" is
amended by changing the date therein from "May 15, 1998" to
"May 15, 2000".
SECTION 3. Interest Rates. (a) The definition of
"CD Margin" in Section 2.07(b) of the Agreement is amended
to read as follows:
"CD Margin" means, subject to Section 2.17:
(i) for any day on which Level I Status exists,
32.50 Basis Points;
(ii) for any day on which Level II Status exists,
37.50 Basis Points;
(iii) for any day on which Level III Status
exists, 40.00 Basis Points; or
(iv) for any day on which Level IV Status exists,
42.50 Basis Points.
(b) The definition of "Assessment Rate" in
Section 2.07(b) of the Agreement is amended by changing the
statutory reference therein from "12 C.F.R. Section
327.3(d)" to "12 C.F.R. Section 327.4(a)".
(c) The definition of "Euro-Dollar Margin" in
Section 2.07(c) of the Agreement is amended to read as
follows:
"Euro-Dollar Margin" means, subject to Section
2.17:
(i) for any day on which Level I Status exists,
20.00 Basis Points;
(ii) for any day on which Level II Status exists,
25.00 Basis Points;
(iii) for any day on which Level III Status
exists, 27.50 Basis Points; or
2
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(iv) for any day on which Level IV Status exists,
30.00 Basis Points.
SECTION 4. Fees. Section 2.08 of the Agreement
is amended to read as follows:
SECTION 2.08 Fees
(a) Facility Fees. The Borrower shall pay to the
Agent for the account of the Banks ratably in
proportion to their Commitments a facility fee
calculated, subject to Section 2.17, on a daily basis
at the rate per annum of (i) 10.00 Basis Points for any
day on which Level I Status exists, (ii) 12.50 Basis
Points for any day on which Level II Status exists,
(iii) 15.00 Basis Points for any day on which Level III
Status exists or (iv) 20.00 Basis Points for any day on
which Level IV Status exists. Such facility fee shall
accrue (i) from and including the Effective Date to but
excluding the Termination Date (or earlier date of
termination of the Commitments in their entirety), on
the daily aggregate amount of the Commitments (whether
used or unused) and (ii) from and including such date
of termination of the Commitments to but excluding the
date the Loans shall be repaid in their entirety, on
the daily aggregate outstanding principal amount of the
Loans.
(b) Payments. Fees accrued under this Section
shall be payable quarterly on the last Domestic
Business Day of each March, June, September and
December and upon the termination of the Commitments in
their entirety (and, if later, the date the Loans shall
be repaid in their entirety).
SECTION 5. Application of Interest Rates and Fees. Section
2.17 is amended to read as follows:
SECTION 2.17. Application of Interest Rates and
Fees. Interest and fees shall accrue on and after the
Amendment No. 1 Effective Date at the rates described
in Sections 2.07 and 2.08. Interest and fees
(including commitment fees) for all periods prior to
the Amendment No. 1 Effective Date shall be calculated
and paid in accordance with this Agreement as in effect
before the Amendment No. 1 Effective Date.
SECTION 6. Financial Information. (a) Section
4.04(a) of the Agreement is amended by changing the date
therein from "December 31, 1993" to "December 31, 1994" and
3
<PAGE>
by changing the words "Borrower's 1993 Form 10-K" therein to
"Borrower's 1994 Form 10-K."
(b) Section 4.04(b) of the Agreement is amended
by changing the date therein from "December 31, 1993" to
"December 31, 1994".
SECTION 7. Illegality. The first sentence of
Section 8.02 of the Agreement is amended by changing the
words "the date of this Agreement" therein to "June 1,
1995".
SECTION 8. Increased Cost and Reduced Return.
The first sentence of each of Section 8.03(a) and Section
8.03(b) of the Agreement is amended by changing the words
"the date hereof" therein to "June 1, 1995".
SECTION 9. Amendment of Signature Pages. The
signature pages of the Agreement are amended as follows:
(a) The Commitment set forth opposite the name of
Morgan Guaranty Trust Company of New York is increased from
"$75,000,000" to "$80,000,000".
(b) The Commitment set forth opposite the name of
Comerica Bank is reduced from "$70,000,000" to
"$65,000,000".
(c) The Commitment set forth opposite the name of
NationsBank of Texas, N.A. is increased from "$45,000,000"
to "$55,000,000".
(d) The name of "Continental Bank N.A." is changed to
"Bank of America Illinois" and the Commitment set forth
opposite the name of such Bank is increased from
"$30,000,000" to "$60,000,000".
(e) The following new Commitment and signature line
are added after the Commitment and signature line of "ROYAL
BANK OF CANADA":
$30,000,000 THE BANK OF NEW YORK
By
Title:.
(f) The Commitment set forth opposite the name of
Commerzbank Aktiengesellschaft Grand Cayman Branch is
increased from "$20,000,000" to "$30,000,000".
4
<PAGE>
(g) The following new Commitment and signature line
are added after the Commitment and signature line of
"ISTITUTO BANCARIO SAN PAOLO DI TORINO, S.p.A.":
$20,000,000 THE MITSUBISHI BANK, LIMITED
By
Title:.
(h) The names of Bank of America NT&SA, Citibank, N.A.
and National City Bank and the Commitments set forth
opposite their respective names are deleted.
SECTION 10. Effectiveness of This Amendment.
This Amendment shall become effective on the date (the
"Amendment No. 1 Effective Date") when each of the following
conditions shall have been satisfied:
(a) the Agent shall have received counterparts
hereof signed by each of the parties listed on the
signature pages hereof (or, in the case of any party as
to which an executed counterpart shall not have been
received, the Agent shall have received in form
satisfactory to it a facsimile or other written
confirmation that such party has executed a counterpart
hereof);
(b) the Agent shall have received an opinion of
John R. Leekley, Vice President-General Counsel of the
Borrower, substantially in the form of Exhibit A
hereto;
(c) the Agent shall have received a certificate
of a duly authorized officer of the Borrower, dated the
Amendment No. 1 Effective Date, certifying that (i) as
of such date, no Default (as defined in the Agreement
as amended hereby) shall have occurred and be
continuing, and (ii) the representations and warranties
of the Borrower contained in the Agreement as amended
hereby are correct as though made on and as of such
date;
(d) the Agent shall have received, for the
account of each of The Bank of New York and The
Mitsubishi Bank, Limited, a duly executed Note dated on
or before the Amendment No. 1 Effective Date, complying
with the provisions of Section 2.05 of the Agreement;
and
(e) the Agent shall have received all documents
it may reasonably request relating to the existence of
5
<PAGE>
the Borrower, the corporate authority for and the
validity of this Amendment and any other matters
relevant hereto, all in form and substance satisfactory
to the Agent;
provided that this Amendment shall not become effective or
be binding on any party hereto unless all of the foregoing
conditions are satisfied not later than June 15, 1995. The
Agent shall promptly notify the Borrower and the Banks of
the Amendment No. 1 Effective Date, and such notice shall be
conclusive and binding on all parties hereto.
SECTION 11. Governing Law. This Amendment shall
be governed by and construed in accordance with the laws of
the State of New York.
SECTION 12. Counterparts. This Amendment may be
signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed by their respective
authorized officers as of the day and year first above
written.
The Borrower:
MASCO CORPORATION
By /s/ Robert B. Rosowski
Title: Vice President-
Controller
The Banks:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Timothy S. Broadbent
Title: Vice President
COMERICA BANK
By /s/ Charles L. Weddell
Title: Vice President
NBD BANK
By /s/ Richard H. Huttenlocher
Title: Vice President
BANK OF AMERICA NT&SA
By /s/ Steven K. Ahrenholz
Title: Vice President
7
<PAGE>
BANK OF AMERICA ILLINOIS
By /s/ Steven K. Ahrenholz
Title: Vice President
NATIONSBANK OF TEXAS, N.A.
By /s/ Michael S. Zehfuss
Title: Senior Vice President
CITIBANK, N.A.
By /s/ Barbara A. Cohen
Title: Vice President
THE FIRST NATIONAL BANK OF
CHICAGO
By /s/ Susan L. Comstock
Title: Vice President
PNC BANK, NATIONAL
ASSOCIATION
By /s/ John F. Broeren
Title: Assistant Vice
President
THE BANK OF NOVA SCOTIA
By /s/ F.C.H. Ashby
Title: Senior Manager Loan
Operations
8
<PAGE>
ROYAL BANK OF CANADA
By /s/ Patricia L. Shupert
Title: Manager, Corporate
Banking
THE BANK OF NEW YORK
By /s/ H. Stephen Griffith
Title: Vice President
COMMERZBANK AKTIENGESELLSCHAFT
GRAND CAYMAN BRANCH
By /s/ Carol M. Otten
Title: Assistant Treasurer
By /s/ Dr. Helmut R. Tollner
Title: Executive Vice
President
WACHOVIA BANK OF GEORGIA, N.A.
By /s/ Terry L. Akins
Title: Senior Vice President
CHEMICAL BANK
By /s/ Rosemary Bradley
Title: Vice President
THE DAI-ICHI KANGYO BANK, LTD.,
CHICAGO BRANCH
By /s/ Masami Tsuboi
Title: Vice President
9
<PAGE>
DEUTSCHE BANK AG CHICAGO BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By /s/ Pamela Neal
Title: Assistant Vice
President
By /s/ David S. Berger
Title: Assistant Vice
President
DRESDNER BANK AG CHICAGO AND
GRAND CAYMAN BRANCHES
By /s/ Haig Garabedian
Title: Vice President
By /s/ E.R. Holder
Title: Senior Vice President
ISTITUTO BANCARIO SAN PAOLO
DI TORINO, S.p.A.
By /s/ Roberto Gorlier
Title: First Vice President
and Deputy General
Manager
By /s/ William J. DeAngelo
Title: First Vice President
THE MITSUBISHI BANK, LIMITED
By /s/ Noboru Kobayashi
Title: Senior Vice President
and Joint General
Manager
10
<PAGE>
NATIONAL CITY BANK
By /s/ Andrew J. Walshaw
Title: Account Representative
THE SANWA BANK LIMITED
By /s/ Richard H. Ault
Title: Vice President
SOCIETY NATIONAL BANK
By /s/ Michael J. Jackson
Title: Vice President
THE SUMITOMO BANK, LIMITED
By /s/ Hiroyuki Iwami
Title: Joint General Manager
The Agent:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By /s/ Timothy S. Broadbent
Title: Vice President
11
<PAGE>
EXHIBIT A
OPINION OF
COUNSEL FOR THE BORROWER
___________ __, 199_
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
I am Vice President-General Counsel of Masco
Corporation (the "Borrower") and am familiar with the Amended
and Restated Credit Agreement dated as of May 18, 1994 among
the Borrower, the banks party thereto and Morgan Guaranty
Trust Company of New York, as Agent (the "Credit Agreement")
and Amendment No. 1 dated as of June 1, 1995 thereto
("Amendment No. 1"). Terms defined in the Credit Agreement
are used herein as therein defined. This opinion is being
rendered to you pursuant to Section 11 of Amendment No. 1.
I have examined originals or copies, certified or
otherwise identified to my satisfaction, of such documents,
corporate records, certificates of public officials and other
instruments and have conducted such other investigations of
fact and law as I have deemed necessary or advisable for
purposes of this opinion.
Upon the basis of the foregoing, I am of the opinion
that:
1. The Borrower is a corporation duly incorporated,
validly existing and in good standing under the laws of
Delaware, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals
required to carry on its businesses substantially as now
conducted.
<PAGE>
2. The execution, delivery and performance by the
Borrower of Amendment No. 1, the Credit Agreement as amended
thereby and the Notes being issued today to The Bank of New
York and The Mitsubishi Bank, Limited (the "New Notes") are
within the Borrower's corporate powers, have been duly
authorized by all necessary corporate action of the Borrower,
require no action in respect of the Borrower by, or filing in
respect of the Borrower with, any governmental body, agency or
official (except filings under the Securities Exchange Act of
1934, as amended) and do not contravene, or constitute a
default under any provision of applicable law or regulation or
of the certificate of incorporation or by-laws of the Borrower
or of any agreement, judgment, injunction, order, decree or
other instrument known to me to be binding upon the Borrower
or result in the creation or imposition of any Lien on any
asset of the Borrower or any of its Subsidiaries under any
such agreement or instrument.
3. Each of Amendment No. 1 and the Credit Agreement
as amended thereby constitutes a valid and binding agreement
of the Borrower and each of the New Notes constitutes a valid
and binding obligation of the Borrower, in each case
enforceable in accordance with its terms except as the same
may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general
principles of equity.
4. There is no action, suit or proceeding pending
against, or to the best of my knowledge threatened against or
affecting, the Borrower or any of its Subsidiaries before any
court or arbitrator or any governmental body, agency or
official which, in my opinion, is likely to have a material
adverse effect on the business or financial position of the
Borrower and its Consolidated Subsidiaries, considered as a
whole, or which in any manner draws into question the validity
or enforceability of Amendment No. 1, the Credit Agreement as
amended thereby or the New Notes.
Very truly yours,
John R. Leekley
Vice President and
General Counsel
2
<PAGE>
Exhibit 11
MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
Primary and Fully Diluted Earnings Per Share
For the Three Months and Six Months Ended June 30, 1995 and 1994
(Amounts in thousands except per share data)
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
Shares for computation of primary
and fully diluted earnings
per share:
Average number of shares
outstanding 158,800 158,100 158,800 158,100
Common stock equivalents:
Shares issuable assuming
conversion of debentures 4,200 4,200 4,200 4,200
Stock options 700 1,100 700 1,100
163,700 163,400 163,700 163,400
Net income, adjusted to basis of
earnings per share:
Net income $63,400 $70,100 $137,800 $135,400
Add interest on convertible
debentures, net of tax 1,400 1,400 2,900 2,900
$64,800 $71,500 $140,700 $138,300
Primary and fully diluted earnings
per share $.40 $.44 $.87 $.86
Earnings per share as reported $.40 $.44 $.87 $.86
This calculation is submitted in accordance with Regulation S-K
Item 601(b)(11), although not required by APB Opinion No. 15, inasmuch as
dilution for any period was less than 3 percent.
<PAGE>
Exhibit 12
<TABLE>
<CAPTION>
MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
(Thousands of Dollars)
Six
Months
Ended
June 30, Year Ended December 31,
1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Earnings Before Income Taxes
And Fixed Charges:
Income before income taxes $229,700 $322,600 $362,600 $304,800 $ 97,600 $235,900
Deduct/add equity in
undistributed (earnings)
losses of fifty-percent-
or-less-owned companies (8,070) 108,030 (13,800) (13,190) 38,090 10,540
Add interest on indebtedness,
net 57,060 103,800 104,080 100,490 124,950 125,770
Add amortization of debt
expense 1,080 2,220 2,650 2,710 1,630 1,420
Add one-third of rentals 6,340 11,180 10,970 10,800 12,530 9,610
Earnings before income
taxes and fixed charges $286,110 $547,830 $466,500 $405,610 $274,800 $383,240
Fixed charges:
Interest on indebtedness $ 58,720 $107,510 $105,420 $113,670 $128,450 $125,770
Amortization of debt expense 1,080 2,220 2,650 2,710 1,630 1,420
One-third of rentals 6,340 11,180 10,970 10,800 12,530 9,610
Fixed charges $ 66,140 $120,910 $119,040 $127,180 $142,610 $136,800
Ratio of earnings to fixed
charges 4.3 4.5 3.9 3.2 1.9 2.8
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MASCO
CORPORATION'S JUNE 30, 1995 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 65,810
<SECURITIES> 11,520
<RECEIVABLES> 792,610<F1>
<ALLOWANCES> 0
<INVENTORY> 1,037,810
<CURRENT-ASSETS> 2,028,220
<PP&E> 1,307,880<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,698,540
<CURRENT-LIABILITIES> 625,040
<BONDS> 1,684,290
<COMMON> 160,250
0
0
<OTHER-SE> 2,140,620
<TOTAL-LIABILITY-AND-EQUITY> 4,698,540
<SALES> 2,434,000
<TOTAL-REVENUES> 2,434,000
<CGS> 1,637,300
<TOTAL-COSTS> 1,637,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57,300
<INCOME-PRETAX> 229,700
<INCOME-TAX> 91,900
<INCOME-CONTINUING> 229,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 137,800
<EPS-PRIMARY> .87
<EPS-DILUTED> .87
<FN>
<F1>Receivables and property and equipment are presented net of allowances for
doubtful accounts and accumulated depreciation and amortization, respectively.
</FN>
</TABLE>
