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, 1997. 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 4, 1997
Common stock, par value $1 per share 164,959,000
<PAGE>
MASCO CORPORATION
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheet -
June 30, 1997 and December 31, 1996 1
Condensed Consolidated Statement of
Income for the Three Months and
Six Months Ended June 30, 1997
and 1996 2
Condensed Consolidated Statement of
Cash Flows for the Six Months Ended
June 30, 1997 and 1996 3
Notes to Condensed Consolidated
Financial Statements 4-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9-11
Unaudited Information Regarding Equity
Investments for the Three Months and
Six Months Ended June 30, 1997 and 1996 12
Part II. Other Information and Signature 13-14
<PAGE>
MASCO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 1997 and December 31, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1997 1996
<S> <C> <C>
Current assets:
Cash and cash investments $ 333,170 $ 473,730
Accounts and notes receivable, net 537,520 466,900
Prepaid expenses and other 91,840 77,200
Inventories:
Raw material 191,790 185,500
Finished goods 151,960 135,190
Work in process 104,520 91,250
448,270 411,940
Total current assets 1,410,800 1,429,770
Receivable from MascoTech, Inc. 151,380 151,380
Equity investment in MascoTech, Inc. 49,460 10,150
Equity investments in other affiliates 66,310 57,680
Securities of Furnishings International Inc. 374,140 356,340
Property and equipment, net 949,650 940,590
Acquired goodwill, net 505,320 457,350
Other noncurrent assets 289,230 298,390
Total assets $3,796,290 $3,701,650
LIABILITIES
Current liabilities:
Notes payable $ 11,270 $ 7,590
Accounts payable 129,630 149,500
Accrued liabilities 369,420 361,350
Total current liabilities 510,320 518,440
Long-term debt 1,228,730 1,236,320
Deferred income taxes and other 105,410 107,080
Total liabilities 1,844,460 1,861,840
SHAREHOLDERS' EQUITY
Common stock, par value $1 per share
Authorized shares: 400,000,000 161,650 160,870
Preferred stock, par value $1 per share
Authorized shares: 1,000,000 --- ---
Paid-in capital 158,260 140,010
Retained earnings 1,645,930 1,536,410
Cumulative translation adjustments (14,010) 2,520
Total shareholders' equity 1,951,830 1,839,810
Total liabilities and
shareholders' equity $3,796,290 $3,701,650
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE>
MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the Three Months and Six Months Ended June 30, 1997 and 1996
(Amounts in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales $913,000 $787,000 $1,767,000 $1,551,000
Cost of sales 578,200 496,570 1,117,700 976,900
Gross profit 334,800 290,430 649,300 574,100
Selling, general and administrative
expenses 187,200 169,770 368,200 339,300
Amortization of acquired goodwill 3,800 2,690 7,500 5,300
Operating profit 143,800 117,970 273,600 229,500
Other income (expense), net:
Interest expense (18,900) (16,500) (37,400) (34,000)
Re: MascoTech, Inc.:
Equity earnings (loss) 4,300 (5,570) 10,300 3,300
Interest income 2,500 --- 5,000 ---
Gain from change in investment 29,500 --- 29,500 ---
Other, net (8,800) 14,000 10,600 17,900
8,600 (8,070) 18,000 (12,800)
Income before income taxes 152,400 109,900 291,600 216,700
Income taxes 60,800 41,900 116,500 86,700
Net income $ 91,600 $ 68,000 $ 175,100 $ 130,000
Per share data:
Net income $.57 $.42 $1.09 $.81
Cash dividends declared and paid $.20 $.19 $ .40 $.38
Average shares outstanding 161,200 160,500 161,200 160,500
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Six Months Ended June 30,1997 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30
1997 1996
<S> <C> <C>
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
Cash provided by continuing operations $ 193,190 $168,800
(Increase) in receivables (69,420) (39,500)
(Increase) decrease in inventories (9,480) 1,950
Decrease in prepaid expenses 12,080 340
Increase (decrease) in current liabilities (18,910) 18,970
Total cash from operating activities
of continuing operations 107,460 150,560
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
Acquisition of companies (87,850) (100,000)
Capital expenditures (64,760) (50,840)
0ther, net (17,030) 12,780
Total cash (for) investing activities
of continuing operations (169,640) (138,060)
Discontinued operations, net --- 19,470
Total cash (for) investing activities (169,640) (118,590)
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
Increase in debt 17,170 300,420
Payment of debt (31,060) (258,910)
Cash dividends paid (64,490) (60,920)
Total cash (for) financing activities
of continuing operations (78,380) (19,410)
CASH AND CASH INVESTMENTS:
Increase (decrease) for the period (140,560) 12,560
At January 1 473,730 60,470
At June 30 $ 333,170 $ 73,030
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
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, 1997 and the results of operations for the three months and six
months ended June 30, 1997 and 1996 and cash flows for the six months ended
June 30, 1997 and 1996. The condensed consolidated balance sheet at
December 31, 1996 was derived from audited financial statements. Earnings
per share are calculated based on the weighted average common shares
outstanding. Certain amounts for the prior year periods have been
reclassified to conform to the current year presentation.
B. In the second quarter of 1997, the Company acquired Liberty Hardware
Manufacturing Corporation, a producer of quality cabinet and builders'
hardware; during the first quarter of 1997, the Company acquired Franklin
Brass Manufacturing Company, a manufacturer of bath accessories and bath
safety products, and LaGard Inc., a manufacturer of electronic locks.
In July 1997, the Company acquired: the Alvic Group, a Spanish
manufacturer and distributor of kitchen and bath cabinetry; the SKS Group,
a German manufacturer of rolling shutters and balcony railing systems; and
Texwood Industries Inc., a U.S. manufacturer of kitchen and bath cabinetry.
Combined 1996 annual net sales of companies acquired in 1997 through July
were approximately $340 million. The combined purchase price for the above
acquisitions aggregated approximately $420 million and included
approximately 2.9 million shares of Company common stock, with the balance
in cash. The acquisitions were accounted for as purchase transactions.
C. The Company expects that Statement of Financial Accounting Standards No.
128 ("SFAS 128"), "Earnings Per Share," will not have a material impact on
the calculation of earnings per share when adopted at December 31, 1997.
Although earlier application of SFAS 128 is not permitted, disclosure of
the pro forma earnings per share amounts computed in accordance with SFAS
128 is permitted. Accordingly, pro forma basic and diluted earnings per
share under SFAS 128 were $.58 and $.56, respectively, and $1.11 and $1.07,
respectively, for the second quarter and six months ended June 30, 1997.
D. Other income (expense), net consists of the following, in thousands:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Interest expense $(18,900) $(16,500) $(37,400) $(34,000)
Re: MascoTech, Inc.:
Equity earnings (loss) 4,300 (5,570) 10,300 3,300
Interest income 2,500 --- 5,000 ---
Gain from change in
investment 29,500 --- 29,500 ---
Equity earnings, other 1,700 1,880 3,500 3,900
Income from cash and
cash investments 3,600 460 7,900 1,100
Other interest income 9,500 1,160 19,400 2,300
Other, net (23,600) 10,500 (20,200) 10,600
$ 8,600 $ (8,070) $ 18,000 $(12,800)
</TABLE>
4
<PAGE>
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note D - Concluded:
In late June 1997, MascoTech, Inc., an equity affiliate, redeemed all of
its outstanding convertible preferred stock in exchange for approximately
10 million shares of its common stock. This redemption reduced the
Company's common equity ownership in MascoTech to 17 percent from 21
percent, and increased the Company's equity in MascoTech's net book value
by approximately $29.5 million. As a result, the Company recognized a pre-
tax gain of approximately $29.5 million during the second quarter of 1997.
Equity earnings from MascoTech for the first half of 1997 reflect the
Company's fourth quarter 1996 reduction in common equity ownership of
MascoTech from 45 percent to 21 percent. The equity loss from MascoTech in
the 1996 second quarter results from the Company's equity share
(approximately $11.7 million pre-tax) of losses regarding the disposition
of metal stamping businesses of MascoTech, Inc.
Other, net in the 1997 second quarter includes charges aggregating $29.5
million, which entirely offset the above-mentioned MascoTech gain,
primarily for the adjustment of the Company's Payless Cashways investment
to its estimated fair value. Other, net in the 1996 second quarter
includes an approximate $4.4 million gain from the sale of certain common
shares of TriMas Corporation.
During the first half of 1997, the Company recognized interest income at
6.625% on the $151.4 million receivable balance due from MascoTech. This
receivable balance is included in noncurrent assets inasmuch as the Company
may receive publicly traded securities of Emco Limited held by MascoTech,
in payment of a substantial portion of this balance. Emco Limited is a
Canadian manufacturer and distributor of home improvement and building
products.
Included in other interest income for the three months and six months ended
June 30, 1997 is interest income of approximately $9.0 million and $18.0
million, respectively, from the 12% pay-in-kind junior debt securities of
Furnishings International Inc. (approximately $300 million at December 31,
1996). Such interest income began to accrue in August 1996 upon the sale
of the Company's home furnishings businesses.
5
<PAGE>
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
E. 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.
<TABLE>
<CAPTION>
Combined Balance Sheet
June 30, December 31,
1997 1996
<S> <C> <C>
Current assets:
Cash and cash investments $ 467,570 $ 599,020
Marketable securities 48,440 37,760
Accounts and notes receivable, net 765,440 674,530
Prepaid expenses and other 109,840 81,320
Deferred income taxes 36,790 53,670
Net current assets of businesses held
for disposition --- 85,980
Inventories:
Raw material 247,630 238,250
Finished goods 223,900 209,590
Work in process 140,880 125,950
612,410 573,790
Total current assets 2,040,490 2,106,070
Equity investments in affiliates 265,900 221,380
Securities of Furnishings International Inc. 374,140 356,340
Property and equipment, net 1,542,620 1,523,590
Acquired goodwill, net 695,000 660,690
Net noncurrent assets of businesses
held for disposition --- 22,850
0ther assets 402,420 415,280
Total assets $5,320,570 $5,306,200
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 13,590 $ 16,620
Accounts payable 219,080 241,420
Accrued liabilities 505,570 501,800
Total current liabilities 738,240 759,840
Long-term debt 1,850,050 2,020,400
Deferred income taxes and other 303,360 300,170
Other interests in combined affiliates 477,090 385,980
Equity of shareholders of Masco Corporation 1,951,830 1,839,810
Total liabilities and shareholders' equity $5,320,570 $5,306,200
</TABLE>
6
<PAGE>
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note E - Continued:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
Combined Statement of Income 1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales $1,322,650 $1,286,260 $2,567,950 $2,566,050
Costs and expenses, net:
Cost of sales 873,370 884,440 1,695,330 1,771,660
Selling, general and
administrative expenses 239,650 229,160 473,170 461,820
Charge on disposition of
businesses, net --- 29,520 --- 31,520
Other income (expense), net:
Interest expense (27,670) (26,160) (55,210) (54,280)
Other income, net 32,780 19,040 77,650 28,100
5,110 (7,120) 22,440 (26,180)
1,107,910 1,150,240 2,146,060 2,291,180
Income before income taxes,
other interests and cumulative effect
of an accounting change 214,740 136,020 421,890 274,870
Income taxes 89,360 60,580 177,060 119,250
Other interests in combined affiliates 33,780 7,440 69,730 28,700
Income before cumulative effect of
an accounting change 91,600 68,000 175,100 126,920
Cumulative effect of an accounting
change, net --- --- --- 3,080
Net income $ 91,600 $ 68,000 $ 175,100 $ 130,000
Earnings per share:
Income before cumulative effect
of an accounting change $.57 $.42 $1.09 $.79
Cumulative effect of an accounting
change, net -- -- -- .02
Earnings per share $.57 $.42 $1.09 $.81
Cash dividends declared and paid per share $.20 $.19 $ .40 $.38
Average shares outstanding 161,200 160,500 161,200 160,500
</TABLE>
7
<PAGE>
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (concluded)
Note E - Concluded:
<TABLE>
(CAPTION>
Six Months Ended
June 30
Combined Statement of Cash Flows 1997 1996
<S> <C> <C>
Cash Flows From (For) Operating Activities:
Cash provided by continuing operations $ 318,470 $ 230,080
(Increase) in receivables (84,030) (62,400)
(Increase) decrease in inventories (5,600) 8,860
Decrease in prepaid expenses 12,040 1,370
Decrease in marketable securities, net 3,380 14,000
Increase (decrease) in current liabilities (22,070) 36,700
Total cash from operating activities 222,190 228,610
Cash Flows From (For) Investing Activities:
Capital expenditures (94,810) (81,530)
Acquisition of companies (105,980) (104,470)
Proceeds from sale of subsidiaries 76,560 184,020
Discontinued operations, net --- 19,470
Net assets held for disposition --- (820)
Other, net (79,820) 71,940
Total cash from (for) investing activities (204,050) 88,610
Cash Flows From (For) Financing Activities:
Increase in debt 37,290 301,140
Payment of debt (110,080) (516,760)
Cash dividends paid (76,800) (71,790)
Total cash (for) financing activities (149,590) (287,410)
Cash and Cash Investments:
Increase (decrease) for the period (131,450) 29,810
At January 1 599,020 169,240
At June 30 $ 467,570 $ 199,050
</TABLE>
8
<PAGE>
MASCO CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SECOND QUARTER 1997 AND THE FIRST SIX MONTHS 1997 VERSUS
SECOND QUARTER 1996 AND THE FIRST SIX MONTHS 1996
SALES AND OPERATIONS
Net sales increased 16 percent and 14 percent for the three months and six
months ended June 30, 1997, respectively, from the comparable periods in 1996.
Excluding acquisition of companies, net sales for the three months and six
months ended June 30, 1997 increased eight percent and seven percent,
respectively, from the comparable periods in 1996; these increases in net sales
are principally due to increases in unit sales volume of faucets, cabinets and
other kitchen and bath products.
Sales of Kitchen and Bath Products for the three months and six months
ended June 30, 1997 were $712 million and $1,391 million, respectively,
representing increases of 16 percent and 15 percent, respectively, from the
comparable periods in 1996; excluding acquisition of companies, net sales of
this segment increased 9 percent for both the three months and six months ended
June 30, 1997.
Sales of Other Specialty Products for the three months and six months ended
June 30, 1997 were $201 million and $376 million, respectively, representing
increases of 16 percent and 10 percent, respectively, from the comparable
periods in 1996; excluding acquisition of companies, net sales of this segment
increased 6 percent and 2 percent, respectively, for the three months and six
months ended June 30, 1997.
Net sales from North American operations for the second quarter and six
months ended June 30, 1997 were $761 million and $1,474 million, respectively,
representing increases of 14 percent and 11 percent, respectively, from the
comparable periods in 1996; excluding acquisition of companies, net sales from
these operations increased 10 percent and 9 percent, respectively, from the
comparable periods in 1996. Net sales from European operations for the second
quarter and six months ended June 30, 1997 were $152 million and $293 million,
respectively, representing increases of 29 percent and 31 percent, respectively,
from the comparable periods in 1996; excluding acquisition of companies, net
sales from these operations decreased 4 percent and 3 percent, respectively,
from the comparable periods in 1996. A stronger U.S. dollar, principally
against the German Deutsche Mark, had a negative effect on the translation of
European sales in the first half of 1997, as compared with the first half of
1996, lowering European net sales in the second quarter and six months ended
June 30, 1997 by approximately 10 percent.
The Company's operating profit margins improved in the second quarter and
first half of 1997 from the comparable 1996 periods. Cost of sales as a
percentage of sales increased slightly to 63.3 percent from 63.1 percent and to
63.3 percent from 63.0 percent for the second quarter and six months ended June
30, 1997, respectively, from the comparable periods in 1996; selling, general
and administrative expenses as a percentage of sales decreased to 20.5 percent
from 21.6 percent and to 20.8 percent from 21.9 percent for the second quarter
and six months ended June 30, 1997, respectively, from the comparable periods in
1996. The decrease in the selling, general and administrative expenses
percentage in 1997 includes the Company's cost-control initiatives and the
leveraging of fixed and semi-fixed costs over a higher sales base. The
Company's operating profit margins, before general corporate expense, were 18.0
percent and 17.8 percent, for the second quarter and six months ended June 30,
1997, respectively, as compared with 17.8 percent and 17.6 percent for the
comparable 1996 periods. Operating profit margins, after general corporate
expense, were 15.8 percent and 15.5 percent, for the second quarter and six
months ended June 30, 1997, respectively, as compared with 15.0 percent and 14.8
percent for the comparable 1996 periods.
9
<PAGE>
MASCO CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
OTHER INCOME (EXPENSE), NET
Equity earnings from MascoTech, Inc. for the first half of 1997 reflect the
Company's fourth quarter 1996 reduction in common equity ownership of MascoTech
from 45 percent to 21 percent. Included in other income (expense), net for the
second quarter and six months ended June 30, 1997 were equity earnings from
MascoTech of $4.3 million and $10.3 million, respectively, as compared with
equity losses of $5.6 million for the second quarter of 1996 and equity earnings
of $3.3 million for the six months ended June 30, 1996. Excluding the Company's
$11.7 million pre-tax equity share of MascoTech's 1996 second quarter charge
resulting from the disposition of its metal stamping businesses and the
Company's $5.0 million pre-tax equity share of unusual income related to a first
quarter 1996 MascoTech accounting change, equity earnings from MascoTech for the
second quarter and six months ended June 30, 1996 were $6.1 million and $10.0
million, respectively.
Included in other income (expense), net for the three months and six months
ended June 30, 1997 is $2.5 million and $5.0 million, respectively, of interest
income from the $151.4 million receivable balance due from MascoTech. This
receivable balance is included in noncurrent assets inasmuch as the Company may
receive publicly traded securities of Emco Limited held by MascoTech, in payment
of a substantial portion of this balance. Emco Limited is a Canadian
manufacturer and distributor of home improvement and building products.
In late June 1997, MascoTech redeemed all of its outstanding convertible
preferred stock in exchange for approximately 10 million shares of its common
stock. This redemption reduced the Company's common equity ownership in
MascoTech to 17 percent from 21 percent, and increased the Company's equity in
MascoTech's net book value by approximately $29.5 million. As a result, the
Company recognized a pre-tax gain of approximately $29.5 million during the
second quarter of 1997.
Other, net in the 1997 second quarter includes charges aggregating $29.5
million, which entirely offset the above-mentioned MascoTech gain, primarily for
the adjustment of the Company's Payless Cashways investment to its estimated
fair value. Other, net in the 1996 second quarter includes an approximate $4.4
million gain from the sale of certain common shares of TriMas Corporation.
Other interest income for the three months and six months ended June 30,
1997 includes interest income of approximately $9.0 million and $18.0 million,
respectively, from the 12% pay-in-kind junior debt securities of Furnishings
International Inc. (approximately $300 million at December 31, 1996). Such
interest income began to accrue in August 1996 upon the sale of the Company's
home furnishings businesses.
Income from cash and cash investments for the three months and six months
ended June 30, 1997 increased to $3.6 million and to $7.9 million, respectively,
from $.5 million and $1.1 million, respectively, for the comparable periods in
1996; these increases resulted from a higher average cash and cash investments
balance during the first half of 1997 as compared with the first half of 1996.
10
<PAGE>
MASCO CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (concluded)
NET INCOME AND EARNINGS PER SHARE
Net income for the second quarter of 1997 increased 35 percent to $91.6
million from $68.0 million in the comparable 1996 period, and earnings per share
increased 36 percent to $.57 from $.42. Net income for the six months ended
June 30, 1997 increased 35 percent to $175.1 million from $130.0 million in the
comparable 1996 period and earnings per share increased 35 percent to $1.09 from
$.81.
The Company's effective tax rate was 39.9 percent for the second quarter of
1997 as compared with 38.1 percent for the comparable period in 1996. The
Company estimates that its effective tax rate for 1997 will approximate 40.0
percent.
OTHER FINANCIAL INFORMATION
At June 30, 1997 current assets were 2.8 times current liabilities.
For the six months ended June 30, 1997, cash of $107.4 million was provided
by operating activities. Cash used for investing activities was $169.6 million,
including $87.9 million for the acquisition of companies, $64.7 million for
capital expenditures and $17.0 million for other cash outflows. Cash used for
financing activities was $78.4 million, including $13.9 million for the net
payment of debt and $64.5 million for cash dividends paid. The aggregate of the
preceding items represents a net cash outflow of $140.6 million.
First and second quarter 1997 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
1997 are not expected to be affected by significant increases in accounts
receivable.
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.
The Company expects that Statement of Financial Accounting Standards No.
128 ("SFAS 128"), "Earnings Per Share," will not have a material impact on the
calculation of earnings per share when adopted at December 31, 1997. Although
earlier application of SFAS 128 is not permitted, disclosure of the pro forma
earnings per share amounts computed in accordance with SFAS 128 is permitted.
Accordingly, pro forma basic and diluted earnings per share under SFAS 128 were
$.58 and $.56, respectively, and $1.11 and $1.07, respectively, for the second
quarter and six months ended June 30, 1997.
11
<PAGE>
UNAUDITED INFORMATION REGARDING EQUITY INVESTMENTS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Equity investments in affiliates consist primarily of the following
approximate common stock and partnership interests at June 30:
1997 1996
MascoTech, Inc. 17% 45%
Hans Grohe, a German partnership 27% 27%
TriMas Corporation 4% 4%
During the fourth quarter of 1996, the Company completed the sale to
MascoTech, Inc. of 17 million shares of MascoTech common stock and warrants to
purchase 10 million shares of MascoTech common stock. This transaction reduced
the Company's common equity ownership in MascoTech from 45 percent to 21
percent. In late June 1997, MascoTech redeemed all of its outstanding
convertible preferred stock in exchange for approximately 10 million shares of
its common stock. Such redemption reduced the Company's common equity ownership
in MascoTech to 17 percent from 21 percent.
The following presents the condensed financial data of MascoTech, Inc.
Amounts are in thousands.
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
Sales - Net $233,040 $345,060 $466,480 $718,980
Gross Profit $ 53,990 $ 57,930 $110,290 $119,370
Net Income (Loss)
(After Preferred
Stock Dividends) $ 21,650 $ (9,900) $ 51,070 $ 9,300
12
<PAGE>
PART II. OTHER INFORMATION
MASCO CORPORATION
Items 1, 2, 3 & 5 are not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders was held on May 21, 1997 at which
the: three nominees for the Company's Board of Directors
identified in the Company's proxy statement dated April 25, 1997 were
elected; 1997 Non-Employee Directors Stock Plan, 1997 Annual Incentive
Compensation Plan and an amendment of the 1991 Long Term Stock
Incentive Plan were approved; Board of Directors' recommendation of
Coopers & Lybrand L.L.P. as independent auditors for the Company for
the year 1997 was approved. Following is a tabulation of shares voted:
Election of Directors
<TABLE>
<CAPTION>
Richard A.
Manoogian (1) Mary Ann Krey Verne G. Istock
<S> <C> <C> <C>
For 147,022,955 147,031,140 147,031,484
Withheld 1,754,101 1,745,916 1,745,572
(1) Re-elected
1997 Amendment of
1997 Annual the 1991 Long
Non-Employee Incentive Term Stock
Approval of: Directors Stock Plan Compensation Plan Incentive Plan
For 117,108,690 146,159,361 144,478,758
Against 29,942,738 2,170,414 2,641,092
Abstentions and
Broker Non-
voters 1,725,628 447,281 1,657,206
Ratification of the Selection of Coopers & Lybrand L.L.P. as Independent
Auditors for the Company for the year 1997
For 147,247,551
Against 70,618
Abstentions and
Broker Non-
voters 1,458,887
</TABLE>
13
<PAGE>
Part II. OTHER INFORMATION (Concluded)
MASCO CORPORATION
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: August 12. 1997 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 Six Months Ended June 30, 1997 and 1996
(Amounts in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Shares for computation of primary
and fully diluted earnings
per share:
Weighted average number of
shares outstanding 161,200 160,500 161,200 160,500
Common stock equivalents:
Shares issuable assuming
conversion of debentures 4,200 4,200 4,200 4,200
Stock options 1,580 880 1,580 880
Total shares for primary
and fully diluted earnings
per share computation 166,980 165,580 166,980 165,580
Net income, adjusted to basis of
earnings per share:
Net income $91,600 $68,000 $175,100 $130,000
Add back debenture
interest, net 1,400 1,400 2,900 2,900
$93,000 $69,400 $178,000 $132,900
Primary and fully diluted
earnings per share $.56 $.42 $1.07 $.80
Earnings per share as reported $.57 $.42 $1.09 $.81
</TABLE>
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 three percent
Exhibit 12
MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
(Thousands of Dollars)
Six
Months
Ended
June 30, Year Ended December 31,
1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Earnings Before Income Taxes
And Fixed Charges:
Income from continuing
operations before income
taxes $291,600 $502,700 $351,790 $292,830 $349,190 $296,020
Deduct/add equity in
undistributed (earnings)/
losses of equity affiliates (11,250) (12,310) (17,770) 106,200 (13,750) (13,210)
Add interest on indebtedness,
net 37,590 74,790 73,400 60,360 62,860 57,190
Add amortization of debt
expense 630 1,400 1,930 2,220 2,650 2,710
Add one-third of rentals 3,440 6,150 4,970 4,220 3,190 3,290
Earnings from continuing
operations before income
taxes and fixed charges $322,010 $572,730 $414,320 $465,830 $404,140 $346,000
Fixed charges:
Interest on indebtedness
regarding continuing
operations $ 38,760 $ 77,250 $ 76,460 $ 63,220 $ 63,600 $ 69,890
Amortization of debt expense 630 1,400 1,930 2,220 2,650 2,710
One-third of rentals 3,440 6,150 4,970 4,220 3,190 3,290
$ 42,830 $ 84,800 $ 83,360 $ 69,660 $ 69,440 $ 75,890
Ratio of earnings to fixed
charges 7.5 6.8 5.0 6.7 5.8 4.6
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MASCO
CORPORATION'S JUNE 30, 1997 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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 333,170
<SECURITIES> 0
<RECEIVABLES> 537,520<F1>
<ALLOWANCES> 0
<INVENTORY> 448,270
<CURRENT-ASSETS> 1,410,800
<PP&E> 949,650<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,796,290
<CURRENT-LIABILITIES> 510,320
<BONDS> 1,228,730
0
0
<COMMON> 161,650
<OTHER-SE> 1,790,180
<TOTAL-LIABILITY-AND-EQUITY> 3,796,290
<SALES> 1,767,000
<TOTAL-REVENUES> 1,767,000
<CGS> 1,117,700
<TOTAL-COSTS> 1,117,700
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,400
<INCOME-PRETAX> 291,600
<INCOME-TAX> 116,500
<INCOME-CONTINUING> 175,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 175,100
<EPS-PRIMARY> 1.09
<EPS-DILUTED> 1.09
<FN>
<F1>Receivables and property and equipment are presented net of allowances for
doubtful accounts and accumulated depreciation and amortization, respectively.
</FN>
</TABLE>
