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 September 30, 1996. 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 November 1, 1996
Common stock, par value $1 per share 160,455,000
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MASCO CORPORATION
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheet -
September 30, 1996 and December 31, 1995 1
Condensed Consolidated Statement of
Income for the Three Months and
Nine Months Ended September 30, 1996
and 1995 2
Condensed Consolidated Statement of
Cash Flows for the Nine Months Ended
September 30, 1996 and 1995 3
Notes to Condensed Consolidated
Financial Statements 4-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10-12
Unaudited Information Regarding Equity
Affiliates for the Three Months and
Nine Months Ended September 30, 1996
and 1995 13
Part II. Other Information and Signature 14
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MASCO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 1996 and December 31, 1995
(Dollars in thousands)
September 30, December 31,
ASSETS 1996 1995
Current assets:
Cash and cash investments $ 196,500 $ 60,470
Accounts and notes receivable, net 526,040 439,900
Prepaid expenses and other 72,560 72,370
Inventories:
Finished goods 135,150 130,070
Raw material 193,040 171,670
Work in process 88,940 90,020
417,130 391,760
Total current assets 1,212,230 964,500
Equity investments in MascoTech, Inc. 208,740 202,380
Equity investments in other affiliates 64,560 62,570
Investments in Furnishings International Inc. 342,370 ---
Property and equipment, net 906,450 856,690
Excess of cost over acquired net assets 456,370 343,510
Other noncurrent assets 299,100 296,310
Net assets of discontinued operations --- 1,052,670
Total assets $3,489,820 $3,778,630
LIABILITIES
Current liabilities:
Notes payable $ 8,340 $ 25,690
Accounts payable 114,360 125,230
Accrued liabilities 374,870 294,930
Total current liabilities 497,570 445,850
Long-term debt 1,102,020 1,577,100
Deferred income taxes and other 113,060 100,250
Total liabilities 1,712,650 2,123,200
SHAREHOLDERS' EQUITY
Common stock, par value $1 per share
Authorized shares: 400,000,000 160,710 160,380
Preferred stock, par value $1 per share
Authorized shares: 1,000,000 --- ---
Paid-in capital 135,710 128,550
Retained earnings 1,484,200 1,366,330
Cumulative translation adjustments (3,450) 170
Total shareholders' equity 1,777,170 1,655,430
Total liabilities and
shareholders' equity $3,489,820 $3,778,630
See notes to condensed consolidated financial statements.
1
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MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the Three Months and Nine Months Ended September 30, 1996 and 1995
(Amounts in thousands except per share data)
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
Net sales $843,000 $738,000 $2,394,000 $2,173,000
Cost of sales 522,000 461,330 1,498,900 1,349,280
Gross profit 321,000 276,670 895,100 823,720
Selling, general and administrative
expenses 180,900 159,270 520,200 476,940
Amortization of excess of cost over
acquired net assets 3,300 2,700 8,600 7,000
Operating profit 136,800 114,700 366,300 339,780
Other (income) expense, net:
Interest expense 20,900 17,820 54,900 53,480
Equity earnings from
MascoTech, Inc. (6,700) (5,290) (10,000) (13,600)
Other, net (13,700) (1,340) (31,600) (15,870)
500 11,190 13,300 24,010
Income from continuing
operations before income
taxes 136,300 103,510 353,000 315,770
Income taxes 54,500 41,440 141,200 126,370
Income from continuing
operations 81,800 62,070 211,800 189,400
Income from operations of
discontinued segment (net of
income taxes of $3,360 and
$10,330 for the three months
and nine months ended September
30, 1995, respectively) --- 5,030 --- 15,500
Net income $ 81,800 $ 67,100 $ 211,800 $204,900
Earnings per share:
Continuing operations $.51 $.39 $1.32 $1.19
Discontinued operations -- .03 -- .10
Earnings per share $.51 $.42 $1.32 $1.29
Cash dividends per share:
Dividends paid $.19 $.18 $ .57 $ .54
Dividends declared $.20 $.19 $ .58 $ .55
Average shares outstanding 160,500 159,300 160,500 159,300
See notes to condensed consolidated financial statements.
2
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MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 1996 and 1995
(Dollars in thousands)
Nine Months Ended
September 30
1996 1995
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES OF
CONTINUING OPERATIONS:
Cash provided by continuing operations $258,500 $232,240
Increase in receivables (66,650) (80,610)
Increase in inventories (7,420) (29,520)
Decrease in prepaid expenses 1,440 1,810
Increase (decrease) in current liabilities 17,460 (1,980)
Total cash from operating activities
of continuing operations 203,330 121,940
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
Acquisition of companies (173,110) ---
Capital expenditures (80,380) (112,690)
Proceeds from sale of Formica investment --- 74,470
Proceeds from sales of investments 31,300 ---
Other, net 9,030 (17,680)
Total cash (for) investing activities
of continuing operations (213,160) (55,900)
Discontinued operations, net 29,030 22,300
Cash proceeds from sale of discontinued
operations 707,630 ---
Total cash from (for) investing activities 523,500 (33,600)
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
Increase in debt 136,350 379,200
Payment of debt (635,720) (367,250)
Cash dividends paid (91,430) (85,840)
Total cash (for) financing activities
of continuing operations (590,800) (73,890)
CASH AND CASH INVESTMENTS:
Increase for the period 136,030 14,450
At January 1 60,470 36,530
At September 30 $196,500 $ 50,980
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
September 30, 1996 and the results of operations for the three months and
nine months ended September 30, 1996 and 1995 and cash flows for the nine
months ended September 30, 1996 and 1995. The statement of income for the
three months and nine months ended September 30, 1995, statement of cash
flows for the nine months ended September 30, 1995 and related notes have
been reclassified to present the Company's home furnishings products
segment as discontinued operations. The condensed consolidated balance
sheet as of December 31, 1995 also includes the home furnishings products
segment as discontinued operations. The condensed consolidated balance
sheet at December 31, 1995 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. On April 1, 1996, the Company entered into an agreement for the sale of its
home furnishings products businesses to Furnishings International Inc. The
Company classified its home furnishings products segment as discontinued
operations in late November 1995. Furnishings International's investors
include 399 Venture Partners (a subsidiary of Citibank), certain members of
Furnishings International's management, the Company and certain affiliates
of Travelers Group Inc.
On August 5, 1996, the Company finalized the sale of its home furnishings
products businesses to Furnishings International Inc. Total proceeds to
Masco from the sale are in excess of $1.0 billion with approximately $710
million of the purchase price in cash. The balance consists of $285
million of 12 percent pay-in-kind junior debt securities, approximately
$57 million of 13 percent cumulative preferred stock, convertible preferred
stock and 15 percent of the common stock of Furnishings International. The
Company will record dividend income from the 13 percent cumulative
preferred stock if and when such dividends are declared. The Company
applied approximately $550 million of the proceeds from the sale of the
home furnishings products businesses to reduce debt.
Under a transitional services agreement, the Company will provide corporate
related services for a fee to Furnishings International through April 30,
1997. If requested by Furnishings International, such services may
continue after April 30, 1997, at a renegotiated fee.
The Company's estimated $650 million charge for the disposition of the home
furnishings products segment, which was recorded at December 31, 1995,
approximated the actual loss on disposition.
4
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MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
C. Other (income) expense, net consists of the following, in thousands:
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
Interest expense $20,900 $17,820 $54,900 $ 53,480
Equity earnings
from MascoTech, Inc. (6,700) (5,290) (10,000) (13,600)
Equity earnings, other (2,000) (2,970) (5,900) (7,700)
Interest income and gains
from marketable
securities and
cash investments (13,700) (2,300) (25,300) (8,410)
Other, net 2,000 3,930 (400) 240
$ 500 $11,190 $13,300 $ 24,010
Interest expense is presented net of interest expense allocated to
discontinued operations of $2.0 million and $10.4 million for the three
months ended September 30, 1996 and 1995 and $21.8 million and $31.3
million for the nine months ended September 30, 1996 and 1995,
respectively.
Equity earnings from MascoTech, Inc. for the nine months ended September
30, 1996 include the Company's equity share (approximately $11.7 million
pre-tax) of losses resulting from MascoTech's disposition of its metal
stamping businesses during the second quarter of 1996, and approximately
$5.0 million of pre-tax income related to a MascoTech accounting change in
the first quarter of 1996.
Interest income and gains from marketable securities and cash investments
for both the third quarter and nine months ended September 30, 1996 include
interest income of $5.3 million from the 12 percent pay-in-kind junior debt
securities of Furnishings International Inc. Also included for the third
quarter and nine months ended September 30, 1996 are gains aggregating $5.2
million and $12.9 million, respectively, from the sale of certain of the
Company's long-term investments.
Other, net for the nine months ended September 30, 1996 includes a second
quarter gain of approximately $4.4 million from the sale of certain common
shares of TriMas Corporation.
Included in other, net for the nine months ended September 30, 1995, was a
$15.9 million gain from the sale of the Company's investment in Formica
Corporation in the first quarter of 1995; this gain was largely offset by
charges for product line disposals.
5
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MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
D. In the third quarter of 1996, the Company acquired E. Missel GmbH, a
leading German manufacturer of plumbing specialty products; during the
second quarter of 1996, the Company acquired the Moore Group Ltd., a
United Kingdom manufacturer of kitchen and bath cabinets and Horst
Breuer GmbH, a German manufacturer of shower enclosures. The aggregate
purchase price for these companies was approximately $173 million.
The acquisitions were accounted for as purchase transactions. These
companies had combined annual net sales in 1995 of approximately $140
million.
E. During October 1996, the Company announced and completed the sale to
MascoTech, Inc. of 17 million shares of MascoTech common stock and
warrants owned by the Company to purchase 10 million shares of
MascoTech common stock. Under the sale agreement, the Company
received approximately $266 million, with $115 million cash paid at
closing. The balance of the consideration is due within one year of
the closing and may be paid entirely in cash or, at MascoTech's
option, cash and some or all of the publicly traded securities of Emco
Limited held by MascoTech.
The transaction reduced the Company's common equity ownership in
MascoTech from 45 percent to approximately 21 percent. This
transaction, when considered along with the conversion in mid-1997 of
outstanding MascoTech preferred stock into MascoTech common stock,
will reduce the Company's ownership in MascoTech to approximately 16
percent.
F. 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. The statement of income
for the three months and nine months ended September 30, 1995 and the
statement of cash flows for the nine months ended September 30, 1995
have been reclassified to present the Company's home furnishings
products segment as discontinued operations. The balance sheet as of
December 31, 1995 also includes the home furnishings products segment
as discontinued operations. Intercompany transactions have been
eliminated. Amounts, except per share data, are in thousands.
6
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MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note F - Continued:
Combined Balance Sheet
September 30, December 31,
Assets 1996 1995
Current assets:
Cash and cash investments $ 354,330 $ 169,240
Accounts and notes receivable, net 799,880 727,300
Prepaid expenses and other 76,580 56,280
Deferred income taxes 90,860 95,650
Net current assets of businesses
held for disposition --- 62,410
Inventories:
Raw material 245,040 230,290
Finished goods 199,020 198,680
Work in process 139,460 142,700
583,520 571,670
Total current assets 1,905,170 1,682,550
Equity investments in affiliates 216,790 199,330
Investments in Furnishings
International Inc. 342,370 ---
Property and equipment, net 1,491,770 1,496,840
Excess of cost over acquired net assets 704,360 618,190
Net noncurrent assets of businesses held
for disposition --- 104,510
Net assets of discontinued operations --- 1,052,670
Other noncurrent assets 430,670 390,300
Total assets $5,091,130 $5,544,390
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 10,650 $ 31,050
Accounts payable 211,060 249,330
Accrued liabilities 538,150 406,570
Total current liabilities 759,860 686,950
Long-term debt 1,741,730 2,466,210
Deferred income taxes and other 316,740 271,030
Other interests in combined affiliates 495,630 464,770
Equity of shareholders of Masco
Corporation 1,777,170 1,655,430
Total liabilities and
shareholders' equity $5,091,130 $5,544,390
7
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MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note F - Continued:
Three Months Ended Nine Months Ended
September 30 September 30
Combined Statement of Income 1996 1995 1996 1995
Net sales $1,277,660 $1,269,410 $3,843,710 $3,881,900
Costs and expenses, net:
Cost of sales 853,290 883,170 2,624,950 2,704,770
Selling, general and
administrative expenses 236,470 223,520 698,290 683,000
(Gain) loss on disposition of
businesses, net --- (7,790) 31,520 (5,290)
Other (income) expense, net:
Interest expense 29,410 32,130 83,690 103,030
Other income, net (20,620) (2,300) (48,720) (32,820)
8,790 29,830 34,970 70,210
1,098,550 1,128,730 3,389,730 3,452,690
Income from continuing operations
before income taxes and other
interests 179,110 140,680 453,980 429,210
Income taxes 77,350 61,200 196,600 187,510
Other interests in combined
affiliates 19,960 17,410 48,660 52,300
Income from continuing operations 81,800 62,070 208,720 189,400
Income from operations of
discontinued segment (net of
income taxes) --- 5,030 --- 15,500
Cumulative effect of an accounting
change, net --- --- 3,080 ---
Net income $ 81,800 $ 67,100 $ 211,800 $ 204,900
Earnings per share:
Continuing operations $.51 $.39 $1.30 $1.19
Discontinued segment -- .03 -- .10
Cumulative effect of an
accounting change -- -- .02 --
Earnings per share $.51 $.42 $1.32 $1.29
Cash dividends per share:
Dividends paid $.19 $.18 $ .57 $ .54
Dividends declared $.20 $.19 $ .58 $ .55
Average shares outstanding 160,500 159,300 160,500 159,300
8
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MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (concluded)
Note F - Concluded:
Nine Months Ended
September 30
Combined Statement of Cash Flows 1996 1995
Cash Flows From (For) Operating Activities:
Cash provided by continuing operations $ 359,450 $ 303,000
Increase in receivables (70,860) (122,480)
(Increase) decrease in inventories 900 (33,400)
(Increase) decrease in marketable
securities, net (14,270) 54,460
Decrease in prepaid expenses 1,440 14,250
Increase (decrease) in current liabilities 44,750 (22,560)
Total cash from operating activities 321,410 193,270
Cash Flows From (For) Investing Activities:
Capital expenditures (125,510) (176,890)
Acquisitions, net of cash acquired (199,050) (22,810)
Proceeds from sale of discontinued operations 707,630 ---
Proceeds from sale of subsidiaries 212,100 94,880
Proceeds from sales of investments 31,300 ---
Proceeds from sale of Formica investment --- 74,470
Discontinued operations, net 29,030 22,300
Other, net 69,620 38,540
Total cash from investing activities 725,120 30,490
Cash Flows From (For) Financing Activities:
Increase in debt 156,180 509,100
Payment of debt (909,020) (691,920)
Cash dividends paid (108,600) (101,530)
Total cash (for) financing activities (861,440) (284,350)
Cash and Cash Investments:
Increase (decrease) for the period 185,090 (60,590)
At January 1 169,240 206,150
At September 30 $ 354,330 $ 145,560
9
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MASCO CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIRD QUARTER 1996 AND THE FIRST NINE MONTHS 1996 VERSUS
THIRD QUARTER 1995 AND THE FIRST NINE MONTHS 1995
Sales and Operations
Consolidated net sales from continuing operations increased 14 percent and
10 percent for the third quarter and nine months ended September 30, 1996,
respectively, from the comparable periods in 1995.
After adjusting for acquisitions and the divestiture of two small
operations, consolidated net sales for the third quarter and nine months ended
September 30, 1996 increased 11 percent and 7 percent, respectively, from the
comparable 1995 periods. Such increases primarily reflect increases in unit
sales volume of faucets, cabinets and other kitchen and bath products.
Excluding European acquisitions in 1996, net sales from European-based
operations for the third quarter and nine months ended September 30, 1996
increased 3 percent and decreased 2 percent, respectively, from the comparable
1995 periods.
Cost of sales as a percentage of sales for the third quarter of 1996
decreased to 61.9 percent as compared with 62.5 percent for the prior year
quarter due to increased sales of higher margin products and the favorable
influence of 1996 acquisitions. Selling, general and administrative expenses as
a percentage of sales for the third quarter of 1996 decreased slightly to 21.5
percent from 21.6 percent for the third quarter of 1995.
Cost of sales as a percentage of sales for the nine months ended September
30, 1996 increased to 62.6 percent from 62.1 percent for the comparable period
in the prior year due to softness in the Company's European markets and under-
utilized plant capacity and the influence of a higher percentage of lower margin
sales to total sales during the first half of 1996. Selling, general and
administrative expenses as a percentage of sales for the nine months ended
September 30, 1996 decreased to 21.7 percent from 21.9 percent for the
comparable prior year period; such decrease is the result of higher promotional
and advertising costs in the prior-year period.
The Company's operating profit margins from continuing operations improved
in the third quarter of 1996 as compared with the third quarter of 1995 and
declined slightly for the first nine months of 1996 as compared with the first
nine months of 1995, principally for the reasons discussed above.
Other (Income) Expense
Included in other (income) expense, net for the third quarter of 1996 were
equity earnings from MascoTech, Inc. of $6.7 million, as compared with equity
earnings of $5.3 million for the comparable period of 1995.
Equity earnings from MascoTech for the nine months ended September 30, 1996
of $10.0 million include the Company's $11.7 million pre-tax ($7.2 million
after-tax) equity share of MascoTech's second quarter 1996 disposition charge
resulting from the sale of its metal stamping businesses, as well as the
Company's approximate $5.0 million pre-tax equity share of MascoTech's first
quarter 1996 non-recurring income resulting from the cumulative effect of the
adoption of a new accounting rule.
10
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Included in other (income) expense, net for the third quarter of 1996 is
interest income of $5.3 million from the 12 percent pay-in-kind junior debt
securities of Furnishings International Inc. and gains aggregating $5.2 million
from the sale of certain of the Company's long-term investments.
Other (income) expense, net for the nine months ended September 30, 1996
includes the interest income discussed above, gains aggregating $12.9 million
from the sale of certain of the Company's long-term investments and a $4.4
million gain from the sale of certain common shares of TriMas Corporation.
Included in other (income) expense, net for the nine months ended September 30,
1995 was a $15.9 million gain from the sale of the Company's investment in
Formica Corporation in the first quarter of 1995; this gain was largely offset
by charges for product line disposals.
Net Income and Earnings Per Share
After-tax income from continuing operations for the third quarter of 1996
increased 32 percent to $81.8 million from $62.1 million in the comparable 1995
period, and income per share from continuing operations increased 31 percent to
$.51 from $.39. After-tax income from continuing operations for the nine months
ended September 30, 1996 increased 12 percent to $211.8 million from $189.4
million in the comparable 1995 period, and income per share from continuing
operations increased 11 percent to $1.32 from $1.19.
Sale of Home Furnishings Products Businesses
On April 1, 1996, the Company entered into an agreement for the sale of its
home furnishings products businesses to Furnishings International Inc. The
Company classified its home furnishings products segment as discontinued
operations in late November 1995. Furnishings International's investors
currently include 399 Venture Partners (a subsidiary of Citibank), certain
members of Furnishings International's management, the Company and certain
affiliates of Travelers Group Inc.
On August 5, 1996, the Company finalized the sale of its home furnishings
products businesses to Furnishings International Inc. Total proceeds to Masco
from the sale are in excess of $1.0 billion with approximately $710 million of
the purchase price in cash. The balance consists of $285 million of 12 percent
pay-in-kind junior debt securities, approximately $57 million of 13 percent
cumulative preferred stock, convertible preferred stock and 15 percent of the
common stock of Furnishings International. The Company will record dividend
income from the 13 percent cumulative preferred stock if and when such dividends
are declared.
Proceeds from the transaction generated interest income of approximately
$.02 in per share earnings for the third quarter of 1996. Looking forward, the
Company expects to realize approximately $.04 in quarterly per share earnings
related to interest income from proceeds of the transaction.
Under a transitional services agreement, the Company will provide
corporate-related services for a fee to Furnishings International through April
30, 1997. If requested by Furnishings International, such services may continue
after such date, at a renegotiated fee.
The Company applied approximately $550 million of the proceeds from the
sale of the home furnishings products businesses to reduce debt. The balance of
the proceeds will eventually be reinvested in the future growth of the Company.
11
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The Company's estimated $650 million charge for the disposition of the home
furnishings products segment, which was recorded at December 31, 1995,
approximated the actual loss on disposition as of the sale date.
The Company's former President and Chief Operating Officer, Wayne B. Lyon,
has joined Furnishings International as its full-time Chairman, President and
Chief Executive Officer. The Company's Executive Vice President and President-
Building Products, Raymond F. Kennedy, was appointed as President and Chief
Operating Officer in August 1996.
Reduction of Investment in MascoTech, Inc.
During October 1996, the Company announced and completed the sale to
MascoTech, Inc. of 17 million shares of MascoTech common stock and warrants
owned by the Company to purchase 10 million shares of MascoTech common stock.
Under the sale agreement, the Company received approximately $266 million,
with $115 million cash paid at closing. The balance of the consideration is due
within one year of the closing and may be paid entirely in cash or, at
MascoTech's option, cash and some or all of the publicly traded securities of
Emco Limited held by MascoTech. The Company will earn interest income at 6.625
percent on the balance of the consideration. The interest income from the
consideration should principally offset the reduction in equity earnings from
MascoTech as a result of this transaction. The agreement also provided for the
extension of the existing corporate services and financing commitment agreements
between the Company and MascoTech.
The Company realized a fourth quarter pre-tax gain of approximately $60
million ($35 million after-tax) from the sale and anticipates that this gain may
be partially offset by certain fourth quarter 1996 charges.
The transaction reduced the Company's common equity ownership in MascoTech
from 45 percent to approximately 21 percent. This transaction, when considered
along with the conversion in mid-1997 of outstanding MascoTech preferred stock
into MascoTech common stock, will reduce the Company's ownership in MascoTech to
approximately 16 percent.
Other Financial Information
At September 30, 1996 current assets were 2.4 times current liabilities.
For the nine months ended September 30, 1996, cash of $203 million was
provided by operating activities of continuing operations, by $708 million from
the sale of discontinued operations, by $29 million from discontinued
operations, by $31 million from the sales of investments and by $9 million from
other cash inflows; cash decreased by $500 million for the net decrease in debt,
by $173 million for the acquisition of companies, by $80 million for the
purchase of property and equipment and by $91 million for cash dividends. The
aggregate of the preceding items represents a net cash inflow of $136 million.
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 million of debt and equity securities.
The Company believes that its present cash balance, 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.
During the third quarter of 1996, the Company increased the quarterly
dividend to $.20 from $.19 per common share. This marks the 38th consecutive
year in which dividends have been increased.
12
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UNAUDITED INFORMATION REGARDING EQUITY AFFILIATES
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Equity investments in affiliates consist primarily of the following
approximate common stock and partnership interests at September 30:
1996 1995
MascoTech, Inc. 45% 44%
Hans Grohe, a German partnership 27% 27%
TriMas Corporation 4% 5%
During October 1996, the Company announced and completed the sale to
MascoTech, Inc. of 17 million shares of MascoTech common stock and warrants
owned by the Company to purchase 10 million shares of MascoTech common stock.
The transaction reduced the Company's common equity ownership in MascoTech
from 45 percent to approximately 21 percent. This transaction, when considered
along with the conversion in mid-1997 of outstanding MascoTech preferred stock
into MascoTech common stock, will reduce the Company's ownership in MascoTech to
approximately 16 percent.
The following presents the condensed financial data of MascoTech, Inc.
Amounts are in thousands.
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
Sales - Net $290,790 $404,900 $1,009,770 $1,289,200
Gross Profit $ 55,580 $ 67,050 $ 174,950 $ 212,760
Net Income
(After Preferred
Stock Dividends) $ 16,150 $ 12,720 $ 25,450 $ 34,800
13
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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:
Report on Form 8-K dated November 13, 1996 reporting under item 2 "Acquisition
or Disposition of Assets," the announcement and completion of the sale to
MascoTech, Inc. of 17 million shares of MascoTech common stock and warrants
owned by the Company to purchase 10 million shares of MascoTech common stock.
Report on Form 8-K dated August 5, 1996 reporting under item 2 "Acquisition or
Disposition of Assets," the completion of the sale of the Company's home
furnishings products businesses pursuant to the terms of an acquisition
agreement between Furnishings International Inc. and the Company dated as of
March 29, 1996, and amended as of June 29, 1996 and August 5, 1996. The
following financial statements were filed with such report:
Masco Corporation and Consolidated Subsidiaries Unaudited Proforma
Condensed Consolidated Statement of Operations for the year ended December
31, 1995.
Unaudited Proforma Condensed Consolidated Balance Sheet as of June 30,
1996.
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: 11/13/96 By: /s/ RICHARD G. MOSTELLER
Richard G. Mosteller
Senior Vice President - Finance
(Chief Financial Officer and
Authorized Signatory)
14
<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 and Nine Months Ended September 30, 1996 and 1995
(Amounts in thousands except per share data)
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
Shares for computation of primary
and fully diluted earnings
per share:
Weighted average number of
shares outstanding 160,500 159,300 160,500 159,300
Common stock equivalents:
Shares issuable assuming
conversion of debentures 4,200 4,200 4,200 4,200
Stock options 900 700 900 700
Total shares for primary
and fully diluted earnings
per share computation 165,600 164,200 165,600 164,200
Income from continuing operations $81,800 $62,070 $211,800 $189,400
Add back of debenture interest, net 1,500 1,500 4,400 4,400
Adjusted earnings from
continuing operations 83,300 63,570 216,200 193,800
Income from operations of
discontinued segment --- 5,030 --- 15,500
Earnings attributable to
common stock $83,300 $68,600 $216,200 $209,300
Primary and fully diluted earnings
per share:
Continuing operations $.50 $.39 $1.31 $1.18
Discontinued operations -- .03 -- .09
Primary and fully diluted
earnings per share $.50 $.42 $1.31 $1.27
Earnings per share as reported $.51 $.42 $1.32 $1.29
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.
Exhibit 12
MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
(Thousands of Dollars)
Nine
Months Ended
September 30, Year Ended December 31,
1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Earnings Before Income Taxes
and Fixed Charges:
Income from continuing
operations before income
taxes $353,000 $351,790 $292,830 $349,190 $296,020 $125,140
Deduct/add equity in
undistributed (earnings)
losses of fifty-percent-
or-less-owned companies (9,630) (17,770) 106,200 (13,750) (13,210) 38,150
Add interest on indebtedness,
net 54,850 73,400 60,360 62,860 57,190 71,640
Add amortization of debt
expense 1,080 1,930 2,220 2,650 2,710 1,630
Add one-third of rentals 4,230 4,970 4,220 3,190 3,290 3,490
Earnings from continuing
operations before income
taxes and fixed charges $403,530 $414,320 $465,830 $404,140 $346,000 $240,050
Fixed Charges:
Interest on indebtedness $ 56,960 $ 76,460 $ 63,220 $ 63,600 $ 69,890 $ 72,850
Amortization of debt expense 1,080 1,930 2,220 2,650 2,710 1,630
One-third of rentals 4,230 4,970 4,220 3,190 3,290 3,490
$ 62,270 $ 83,360 $ 69,660 $ 69,440 $ 75,890 $ 77,970
Ratio of earnings to fixed
charges 6.5 5.0 6.7 5.8 4.6 3.1
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MASCO
CORPORATION'S SEPTEMBER 30, 1996 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> SEP-30-1996 SEP-30-1995
<PERIOD-START> JAN-1-1996 JAN-1-1995
<PERIOD-END> SEP-30-1996 SEP-30-1995
<CASH> 196,500 50,980
<SECURITIES> 0 0
<RECEIVABLES> 526,040<F1> 463,580<F1>
<ALLOWANCES> 0 0
<INVENTORY> 417,130 407,170
<CURRENT-ASSETS> 1,212,230 984,220
<PP&E> 906,450<F1> 831,770<F1>
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 3,489,820 4,448,530
<CURRENT-LIABILITIES> 497,570 397,660
<BONDS> 1,102,020 1,650,540
0 0
0 0
<COMMON> 160,710 160,280
<OTHER-SE> 1,616,460 2,170,700
<TOTAL-LIABILITY-AND-EQUITY> 3,489,820 4,448,530
<SALES> 2,394,000 2,173,000
<TOTAL-REVENUES> 2,394,000 2,173,000
<CGS> 1,498,900 1,349,280
<TOTAL-COSTS> 1,498,900 1,349,280
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 54,900 53,480
<INCOME-PRETAX> 353,000 315,770
<INCOME-TAX> 141,200 126,370
<INCOME-CONTINUING> 211,800 189,400
<DISCONTINUED> 0 15,500
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 211,800 204,900
<EPS-PRIMARY> 1.32 1.29
<EPS-DILUTED> 1.32 1.29
<FN>
<F1>Receivables and property and equipment are presented net of allowances for
doubtful accounts and accumulated depreciation and amortization, respectively.
</FN>
</TABLE>
