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 March 31, 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 May 1, 1995
Common stock, par value $1 per share 158,461,000
<PAGE>
MASCO CORPORATION
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheet -
March 31, 1995 and December 31, 1994 1
Condensed Consolidated Statement of
Income for the Three Months Ended
March 31, 1995 and 1994 2
Condensed Consolidated Statement of
Cash Flows for the Three Months Ended
March 31, 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
Unaudited Information Regarding Equity
Affiliates for the Three Months
Ended March 31, 1995 and 1994 9
Part II. Other Information and Signature 10
<PAGE>
MASCO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 1995 and December 31, 1994
(Dollars in thousands)
March 31, December 31,
ASSETS 1995 1994
Current assets:
Cash and cash investments $ 55,210 $ 61,160
Marketable securities 11,520 9,910
Accounts and notes receivable, net 798,030 745,170
Prepaid expenses and other 121,030 126,370
Inventories:
Finished goods 422,730 388,440
Raw material 398,610 333,280
Work in process 186,080 227,110
1,007,420 948,830
Total current assets 1,993,210 1,891,440
Equity investments in MascoTech, Inc. 191,740 184,960
Equity investments in other affiliates 60,690 57,790
Property and equipment, net 1,268,850 1,231,810
Excess of cost over acquired net assets 708,210 706,160
Other noncurrent assets 320,020 317,880
Total assets $4,542,720 $4,390,040
LIABILITIES
Current liabilities:
Notes payable $ 92,970 $ 48,380
Accounts payable 189,940 201,320
Accrued liabilities 384,800 351,590
Total current liabilities 667,710 601,290
Long-term debt 1,571,980 1,592,610
Deferred income taxes and other 85,930 83,460
Total liabilities 2,325,620 2,277,360
SHAREHOLDERS' EQUITY
Common stock, par value $1 per share
Authorized shares: 400,000,000 158,750 156,990
Preferred stock, par value $1 per share
Authorized shares: 1,000,000 --- ---
Paid-in capital 84,510 44,840
Retained earnings 1,971,590 1,924,740
Cumulative translation adjustments 2,250 (13,890)
Total shareholders' equity 2,217,100 2,112,680
Total liabilities and
shareholders' equity $4,542,720 $4,390,040
See notes to condensed consolidated financial statements.
1
<PAGE>
MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the Three Months Ended March 31, 1995 and 1994
(Amounts in thousands except per share data)
Three Months Ended March 31
1995 1994
Net sales $1,226,000 $1,050,000
Costs and expenses, net:
Cost of sales 815,400 698,000
Selling, general and administrative
expenses 261,000 230,100
Other (income) expense, net:
Interest expense 28,500 26,500
Re: MascoTech, Inc.:
Equity earnings (3,800) (7,400)
Gain from stock sale --- (4,400)
Other, net 800 (2,200)
25,500 12,500
1,101,900 940,600
Income before income taxes 124,100 109,400
Income taxes 49,700 44,100
Net income $ 74,400 $ 65,300
Per share data:
Net income $.47 $.42
Cash dividends declared and paid $.18 $.17
Average shares outstanding 158,400 156,500
See notes to condensed consolidated financial statements.
2
<PAGE>
MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 1995 and 1994
(Dollars in thousands)
Three Months Ended
March 31
1995 1994
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
Cash provided by operations $ 91,090 $ 85,880
(Increase) in receivables (95,230) (68,380)
(Increase) in inventories (58,590) (17,680)
Decrease in prepaid expenses 5,340 8,960
Increase (decrease) in current liabilities 20,550 (3,630)
Total cash from (for) operating activities (36,840) 5,150
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
Proceeds from sale of Formica Investment 73,770 ---
Capital expenditures (59,620) (47,680)
Other, net 21,060 (1,740)
Total cash from (for) investing activities 35,210 (49,420)
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
Increase in debt 97,030 27,020
Payment of debt (73,070) (30,530)
Cash dividends paid (28,280) (26,280)
Total cash (for) financing activities (4,320) (29,790)
CASH AND CASH INVESTMENTS:
(Decrease) for the quarter (5,950) (74,060)
At January 1 61,160 119,980
At March 31 $ 55,210 $ 45,920
Supplemental Cash Flow Information:
Net cash paid during the period for:
Interest $ 26,380 $ 25,770
Income taxes $ 24,010 $ 22,010
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
March 31, 1995 and the results of operations and changes in cash flows for
the three months ended March 31, 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
March 31
1995 1994
Interest expense $28,500 $26,500
Re: MascoTech, Inc.
Equity earnings (3,800) (7,400)
Gain from stock sale --- (4,400)
Equity earnings, other (2,100) (1,200)
Interest income and gains from
marketable securities and
cash investments (3,000) (3,600)
Other, net 5,900 2,600
$25,500 $12,500
Included in other, net for the three months ended March 31, 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.
4
<PAGE>
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
C. 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
March 31, December 31,
Assets 1995 1994
Current assets:
Cash and cash investments $ 183,060 $ 230,780
Marketable securities 42,790 72,020
Accounts and notes receivable, net 1,080,550 980,940
Prepaid expenses 124,890 133,490
Deferred income taxes 67,810 68,270
Net current assets of businesses
held for disposition 121,470 146,690
Inventories:
Finished goods 491,400 449,290
Raw material 454,370 404,240
Work in process 235,670 266,810
1,181,440 1,120,340
Total current assets 2,802,010 2,752,530
Equity investments in affiliates 182,090 150,310
Property and equipment, net 1,837,990 1,779,520
Excess of cost over acquired net assets 968,430 964,000
Net assets of discontinued operations 189,720 232,370
Other assets 425,740 405,220
Total assets $6,405,980 $6,283,950
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 99,070 $ 52,330
Accounts payable 316,630 334,770
Accrued liabilities 511,980 457,160
Total current liabilities 927,680 844,260
Long-term debt 2,612,410 2,699,450
Deferred income taxes and other 214,930 206,630
Other interests in combined affiliates 433,860 420,930
Equity of shareholders of Masco Corporation 2,217,100 2,112,680
Total liabilities and
shareholders' equity $6,405,980 $6,283,950
5
<PAGE>
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note C - Continued:
Three Months Ended
March 31
Combined Statement of Income 1995 1994
Net sales $1,810,760 $1,592,860
Costs and expenses, net:
Cost of sales 1,277,100 1,119,310
Selling, general and
administrative expenses 331,020 295,620
Other (income) expense, net:
Interest expense 46,930 40,420
Other income, net (4,000) (20,910)
42,930 19,510
1,651,050 1,434,440
Income before income taxes and
other interests 159,710 158,420
Income taxes 69,140 70,800
Income before other interests 90,570 87,620
Other interests in combined affiliates 16,170 22,320
Net income $ 74,400 $ 65,300
Per share data:
Net income $.47 $.42
Cash dividends declared and paid $.18 $.17
Average shares outstanding 158,400 156,500
6
<PAGE>
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (concluded)
Note C - Concluded:
Three Months Ended
March 31
Combined Statement of Cash Flows 1995 1994
Cash Flows From (For) Operating Activities:
Cash provided by operations $ 119,190 $ 107,330
(Increase) in receivables (127,610) (114,370)
(Increase) in inventories (56,860) (27,930)
(Increase) decrease in
marketable securities, net 30,840 (30,010)
Decrease in prepaid expenses 2,200 1,930
Increase in current liabilities 19,400 1,580
Total cash (for)
operating activities (12,840) (61,470)
Cash Flows From (For) Investing Activities:
Capital expenditures (87,980) (78,940)
Proceeds from sale of Formica Investment 73,770 ---
Proceeds from sale of subsidiaries 28,880 ---
Acquisitions, net of cash acquired (21,190) ---
Other, net 48,900 39,390
Total cash from (for)
investing activities 42,380 (39,550)
Cash Flows From (For) Financing Activities:
Increase in debt 270,780 364,260
Payment of debt (314,580) (353,450)
Cash dividends paid (33,460) (30,890)
Total cash from (for)
financing activities (77,260) (20,080)
Cash and Cash Investments:
(Decrease) for the period (47,720) (121,100)
At January 1 230,780 272,950
At March 31 $ 183,060 $ 151,850
7
<PAGE>
MASCO CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FIRST QUARTER 1995 VERSUS FIRST QUARTER 1994
Net sales for the three months ended March 31, 1995 increased 17 percent to
$1,226 million from $1,050 million in the comparable period in 1994. Home
Improvement and Building Products sales increased 16 percent for the three
months ended March 31, 1995 from the comparable period in 1994. Home
Furnishings Products sales for the three months ended March 31, 1995
increased 17 percent from the comparable period in 1994. After adjusting for
recent acquisitions, net sales of Home Improvement and Building Products
increased 13 percent and net sales of Home Furnishings Products increased
five percent.
Cost of sales as a percentage of sales was 66.5 percent for both of the
1995 and 1994 first quarters. Selling, general and administrative expenses as
a percentage of sales for the three months ended March 31, 1995 decreased to
21.3 percent from 21.9 percent in the comparable period in 1994.
The Company's operating profit margins continued to improve in the 1995
first quarter, with major product lines benefitting primarily from increased
sales and profit improvement programs.
Included in other (income) expense, net for the three months ended
March 31, 1995 are equity earnings from MascoTech, Inc. of $3.8 million as
compared with equity earnings of $7.4 million in the comparable period in
1994. Also included in other (income) expense for the three months ended
March 31, 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. Also included in other (income)
expense for the three months ended March 31, 1994 was a $4.4 million gain
from the sale of MascoTech stock.
Net income for the first quarter of 1995 increased 14 percent to
$74.4 million from $65.3 million in the comparable period in 1994, and earnings
per share increased 12 percent to $.47 from $.42. Excluding the 1994 MascoTech
stock gain and equity earnings from affiliates in both first quarters, net
income would have increased 23 percent.
While higher interest rates have resulted in lower residential construction
activity and a moderation in consumer spending resulting in lower demand for
some of our products, the Company continues to anticipate improved sales and
operating profit for 1995.
At March 31, 1995 current assets were three times current liabilities.
First quarter 1995 cash from operations was affected by an expected and
recurring first quarter increase in accounts receivable. As the annual
increase in accounts receivable is historically experienced in the first
quarter, cash from operations in the remaining three quarters of 1995 should
not be affected by significant increases in accounts receivable. The Company
believes that its cash 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.
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.
8
<PAGE>
UNAUDITED INFORMATION REGARDING EQUITY AFFILIATES
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
Equity investments in affiliates consist primarily of the following
approximate common stock and partnership interests at March 31:
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 March 31
1995 1994
Sales - Net $445,010 $412,410
Gross Profit $ 75,460 $ 80,290
Net Income (Before
Preferred Stock
Dividends) $ 13,460 $ 26,300
9
<PAGE>
PART II. OTHER INFORMATION
MASCO CORPORATION
Items 1 through 5 are not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
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:
None.
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: May 15, 1995 By:
Richard G. Mosteller
Senior Vice-President - Finance
(Chief Financial officer
and authorized signatory)
10
<PAGE>
MASCO CORPORATION
EXHIBIT INDEX
Exhibit
Exhibit 11 Computation of Earnings Per Share
Exhibit 12 Computation of Ratio of Earnings to Fixed Charges
Exhibit 27 Financial Data Schedule
Exhibit 11
MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
Primary and Fully Diluted Earnings Per Share
For the Three Months Ended March 31, 1995 and 1994
(Amounts in thousands except per share amounts)
Three Months Ended
March 31
1995 1994
Shares for computation of primary and
fully diluted earnings per share:
Average number of shares outstanding 158,400 156,500
Common stock equivalents:
Shares issuable assuming
conversion of debentures 4,200 4,200
Stock options 700 1,400
163,300 162,100
Net income, adjusted to basis of
earnings per share:
Net income $74,400 $65,300
Add interest on convertible
debentures, net of tax 1,500 1,500
$75,900 $66,800
Primary and fully diluted earnings per
share $.47 $.42
Earnings per share as reported $.47 $.42
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 either period was less than 3 percent.
<PAGE>
Exhibit 12
MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
<TABLE>
(Thousands of Dollars)
Three
Months
Ended
March 31, 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 $124,100 $322,600 $362,600 $304,800 $ 97,600 $235,900
Deduct/add equity in
undistributed (earnings)
losses of fifty-percent-
or-less-owned companies (3,800) 108,030 (13,800) (13,190) 38,090 10,540
Add interest on indebtedness,
net 28,440 103,800 104,080 100,490 124,950 125,770
Add amortization of debt
expense 550 2,220 2,650 2,710 1,630 1,420
Add one-third of rentals 3,200 11,180 10,970 10,800 12,530 9,610
Earnings before income
taxes and fixed charges $152,490 $547,830 $466,500 $405,610 $274,800 $383,240
Fixed charges:
Interest on indebtedness $ 29,400 $107,510 $105,420 $113,670 $128,450 $125,770
Amortization of debt expense 550 2,220 2,650 2,710 1,630 1,420
One-third of rentals 3,200 11,180 10,970 10,800 12,530 9,610
$ 33,150 $120,910 $119,040 $127,180 $142,610 $136,800
Ratio of earnings to fixed
charges 4.6 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 MARCH 31, 1995 FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 55,210
<SECURITIES> 11,520
<RECEIVABLES> 798,030<F1>
<ALLOWANCES> 0
<INVENTORY> 1,007,420
<CURRENT-ASSETS> 1,993,210
<PP&E> 1,268,850<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,542,720
<CURRENT-LIABILITIES> 667,710
<BONDS> 1,571,980
<COMMON> 158,750
0
0
<OTHER-SE> 2,058,350
<TOTAL-LIABILITY-AND-EQUITY> 2,217,100
<SALES> 1,226,000
<TOTAL-REVENUES> 1,226,000
<CGS> 815,400
<TOTAL-COSTS> 815,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,500
<INCOME-PRETAX> 124,100
<INCOME-TAX> 49,700
<INCOME-CONTINUING> 124,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 74,400
<EPS-PRIMARY> .47
<EPS-DILUTED> .47
<FN>
<F1>Receivables and property and equipment are presented net of allowances for
doubtful accounts and accumulated depreciation and amortization, respectively.
</FN>
</TABLE>
