<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-Q/A
AMENDMENT NO. 1
TO
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
----------------- -------------------
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)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (313) 274-7400
----------------------------
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 (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), 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, 2000
----- ---------------------
COMMON STOCK, PAR VALUE $1 PER SHARE 448,649,700
<PAGE> 2
MASCO CORPORATION
LIST OF ITEMS AMENDED
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements 1-8
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
Ended March 31, 2000 and 1999 12
</TABLE>
EXPLANATORY NOTE:
Items 1 and 2 of the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000 are hereby amended by deleting the Items in their
entirety and replacing them with the Items attached hereto and filed herewith.
The purpose of this amendment is to provide expanded disclosure regarding
the Company's business segments in the segment information note to the financial
statements included in the financial statements that were included in Item 1 of
the subject Form 10-Q as originally filed (the "Original Filing") and to make
corresponding changes to Management's Discussion and Analysis of Financial
Condition and Results of Operations that was included in Item 2 of the Original
Filing. The Company recently filed a Registration Statement on Form S-3 under
the Securities Act of 1933. In the course of processing the Registration
Statement, the staff of the Securities and Exchange Commission furnished
comments to the Company. Based on the staff's comments, the Company revised the
Segment Information note to its financial statements included in its Annual
Report on Form 10-K for the year ended December 31, 1999 and filed Form 10-K/A
Amendment No. 1 in order to provide this expanded disclosure in the Segment
Information note and to make corresponding changes to Management's Discussion
and Analysis of Financial Condition and Results of Operations. This Form 10-Q/A
is being filed to make corresponding changes to information contained in the
Original Filing.
The Company's Form 10-Q continues to speak as of the date of the Original
Filing and the disclosure in that report has not been updated to speak to any
later date. Any items in the Original Filing not expressly changed hereby shall
be as set forth in the Original Filing. All information contained in this
amendment and the Original Filing is subject to updating and supplementing as
provided in the Company's periodic reports filed with the SEC subsequent to the
date of such reports.
<PAGE> 3
MASCO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2000 AND DECEMBER 31, 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 2000 1999
------ ---------- ------------
<S> <C> <C>
Current assets:
Cash and cash investments $ 74,220 $ 230,780
Accounts and notes receivable, net 1,166,870 1,002,630
Prepaid expenses and other 113,460 106,500
Inventories:
Raw material 341,480 307,060
Finished goods 352,640 290,440
Work in process 189,880 172,370
---------- ----------
884,000 769,870
---------- ----------
Total current assets 2,238,550 2,109,780
Equity investment in MascoTech, Inc. 72,730 69,930
Equity investments in other affiliates 128,170 133,550
Securities of Furnishings International Inc. 514,370 481,270
Property and equipment, net 1,750,380 1,624,360
Acquired goodwill, net 1,876,840 1,742,930
Other noncurrent assets 626,500 473,100
---------- ----------
Total assets $7,207,540 $6,634,920
========== ==========
LIABILITIES
-----------
Current liabilities:
Notes payable $ 363,240 $ 62,300
Accounts payable 272,440 243,810
Accrued liabilities 593,630 540,320
---------- ----------
Total current liabilities 1,229,310 846,430
Long-term debt 2,431,670 2,431,270
Deferred income taxes and other 228,630 220,720
---------- ----------
Total liabilities 3,889,610 3,498,420
---------- ----------
SHAREHOLDERS' EQUITY
--------------------
Common stock, par value $1 per share
Authorized shares: 900,000,000 447,550 443,510
Preferred shares authorized: 1,000,000 --- ---
Paid-in capital 678,380 601,990
Retained earnings 2,271,670 2,151,520
Other comprehensive income (loss) (79,670) (60,520)
---------- ----------
Total shareholders' equity 3,317,930 3,136,500
---------- ----------
Total liabilities and
shareholders' equity $7,207,540 $6,634,920
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE> 4
MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
-----------------------------
2000 1999
---------- -----------
<S> <C> <C>
Net sales $1,746,000 $1,391,000
Cost of sales 1,125,900 874,400
---------- ----------
Gross profit 620,100 516,600
Selling, general and administrative expenses 337,400 273,500
Amortization of acquired goodwill 14,200 8,300
---------- ----------
Operating profit 268,500 234,800
---------- ----------
Other income (expense), net:
Interest expense (38,800) (26,600)
Equity earnings from MascoTech, Inc. 4,300 4,000
Other, net 42,000 31,100
---------- ----------
7,500 8,500
---------- ----------
Income before income taxes 276,000 243,300
Income taxes 102,000 91,400
---------- ----------
Net income $ 174,000 $ 151,900
========== ==========
Earnings per share:
Basic $.40 $.35
==== ====
Diluted $.39 $.34
==== ====
Cash dividends declared and paid per share $.12 $.11
==== ====
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 5
MASCO CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(DOLLARS IN THOUSANDS)
--------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
----------------------
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
Cash provided by operations $ 165,210 $ 164,670
Increase in receivables (133,530) (128,580)
Increase in inventories (64,620) (43,080)
Increase in accounts payable and
accrued liabilities, net 51,470 49,890
--------- ---------
Total cash from operating activities 18,530 42,900
--------- ---------
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
Acquisition of companies, net of cash acquired (170,360) (62,720)
Capital expenditures (86,110) (72,510)
Investments in noncurrent assets and other, net (128,410) (13,280)
--------- ---------
Total cash (for) investing activities (384,880) (148,510)
--------- ---------
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
Increase in debt 287,870 5,150
Payment of debt (24,730) (37,400)
Purchase of Company common stock -- (48,770)
Cash dividends paid (53,350) (37,230)
--------- ---------
Total cash from (for) financing activities 209,790 (118,250)
--------- ---------
CASH AND CASH INVESTMENTS:
Decrease for the quarter (156,560) (223,860)
At January 1 230,780 553,150
--------- ---------
At March 31 $ 74,220 $ 329,290
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 6
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, 2000 and the results of operations and changes in cash flows for
the three months ended March 31, 2000 and 1999. The condensed consolidated
balance sheet at December 31, 1999 was derived from audited financial
statements. The first quarter of 1999 has been restated to include the
results of transactions accounted for as poolings of interests during the
third quarter of 1999.
B. The following are reconciliations of the numerators and denominators used
in the computations of basic and diluted earnings per share, in thousands:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-------------------
2000 1999
-------- --------
<S> <C> <C>
Numerator:
Net income $174,000 $151,900
======== ========
Denominator:
Basic shares (based on weighted average) 439,700 436,400
Add:
Contingently issued award shares 6,900 7,300
Stock option dilution 1,400 3,100
-------- --------
Diluted shares 448,000 446,800
======== ========
</TABLE>
C. During the first quarter of 2000, in purchase transactions, the Company
acquired Tvilum-Scanbirk A/S, a manufacturer of ready-to-assemble
products, including cabinetry, shelving, storage units and workstations,
and a smaller company. Headquartered in Faarvang, Denmark, Tvilum-Scanbirk
had sales in 1999 in excess of $200 million. The aggregate net purchase
price of these purchase acquisitions, excluding assumed debt of
approximately $60 million, was approximately $260 million and included
approximately four million shares of Company common stock valued at
approximately $90 million.
The purchase agreements provide for the payment of additional
consideration, contingent upon certain conditions being met. Such
additional consideration would be recorded as additional purchase price.
The excess of the aggregate acquisition costs for these purchase
acquisitions over the calculated fair value of net assets acquired has
been recorded as acquired goodwill, to be amortized over periods not
exceeding forty years.
4
<PAGE> 7
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
D. Other income (expense), net consists of the following, in thousands:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
---------------------
2000 1999
-------- --------
<S> <C> <C>
Interest expense $(38,800) $(26,600)
Equity earnings from MascoTech, Inc. 4,300 4,000
Equity earnings, other 1,000 1,600
Income from cash and cash investments 1,400 5,300
Other interest income 14,100 12,800
Other, net 25,500 11,400
-------- --------
$ 7,500 $ 8,500
======== ========
</TABLE>
Interest expense for the year 2000 first quarter increased $12.2 million
over first quarter 1999 interest expense. This increase was substantially
offset by income and gains, net regarding certain non-operating assets
included in other, net.
Other interest income for the three months ended March 31, 2000 and 1999
included $12.8 million and $11.3 million, respectively, of interest income
from the 12% pay-in-kind junior debt securities of Furnishings
International Inc. (approximately $424 million at December 31, 1999).
Other, net for the three months ended March 31, 2000 and 1999 results
primarily from income and gains, net regarding certain non-operating
assets.
E. The following table presents information about the Company by segment and
geographic area, in millions:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
-------------------------------------------
2000 1999 2000 1999
-------------------------------------------
Net Sales (1) Operating Profit (2)
-------------------- ---------------------
<S> <C> <C> <C> <C>
The Company's operations by
segment were:
Plumbing Products $ 473 $ 461 $ 92 $ 110
Cabinets and Related Products 631 494 87 78
Decorative Architectural
Products 307 239 64 37
Insulation Installation and
Other Services 183 72 25 10
Other Specialty Products 152 125 25 22
------- ------- ------- -------
Total $ 1,746 $ 1,391 $ 293 $ 257
======= ======= ======= =======
The Company's operations
by geographic area were:
North America $ 1,414 $ 1,165 $ 251 $ 226
International, principally
Europe 332 226 42 31
------- ------- ------- -------
Total, as above $ 1,746 $ 1,391 $ 293 $ 257
======= =======
General corporate expense, net (25) (22)
Operating profit, after general ------- -------
corporate expense 268 235
Other income (expense), net 8 8
------- -------
Income before income taxes $ 276 $ 243
======= =======
</TABLE>
(1) Inter-company sales among segments were not material.
(2) Operating profit shown is after reduction for amortization of acquired
goodwill.
5
<PAGE> 8
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
F. The Company's total comprehensive income was as follows, in thousands:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-----------------------
2000 1999
--------- ---------
<S> <C> <C>
Net income $ 174,000 $ 151,900
Other comprehensive income (loss),
currency translation adjustments (19,150) (24,510)
--------- ---------
Total comprehensive income $ 154,850 $ 127,390
========= =========
</TABLE>
At March 31, 2000 and 1999, the value of certain foreign currencies,
including the German deutsche mark, Danish kroner and Dutch guilder,
declined relative to the value of the U.S. dollar at December 31, 1999 and
1998, respectively.
G. The following presents the combined unaudited financial statements of the
Company and MascoTech, Inc. 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
MARCH 31, DECEMBER 31,
ASSETS 2000 1999
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash investments $ 85,310 $ 235,270
Receivables 1,430,850 1,221,590
Prepaid expenses and other 154,740 169,570
Inventories:
Raw material 392,190 358,480
Finished goods 436,240 376,680
Work in process 238,910 218,310
---------- ----------
1,067,340 953,470
---------- ----------
Total current assets 2,738,240 2,579,900
Equity investments in affiliates 236,610 244,280
Securities of Furnishings International Inc. 514,370 481,270
Property and equipment, net 2,477,870 2,347,040
Acquired goodwill, net 2,661,880 2,519,530
Other noncurrent assets 666,270 511,510
---------- ----------
Total assets $9,295,240 $8,683,530
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 366,130 $ 62,300
Accounts payable 399,330 358,300
Accrued liabilities 708,020 654,230
---------- ----------
Total current liabilities 1,473,480 1,074,830
Long-term debt 3,802,930 3,804,160
Deferred income taxes and other 437,370 420,320
Other interests in combined affiliates 263,530 247,720
Equity of shareholders of Masco Corporation 3,317,930 3,136,500
---------- ----------
Total liabilities and shareholders' equity $9,295,240 $8,683,530
========== ==========
</TABLE>
6
<PAGE> 9
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE G - CONTINUED:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
---------------------------
COMBINED STATEMENT OF INCOME 2000 1999
----------- -----------
<S> <C> <C>
Net sales $ 2,204,100 $ 1,836,660
----------- -----------
Costs and expenses, net:
Cost of sales 1,464,600 1,204,040
----------- -----------
Selling, general and administrative expenses 407,770 328,940
----------- -----------
Other income (expense), net:
Interest expense (60,610) (47,550)
Other income, net 43,260 29,910
----------- -----------
(17,350) (17,640)
----------- -----------
1,889,720 1,550,620
----------- -----------
Income before income taxes and other interests 314,380 286,040
Income taxes 119,080 114,360
----------- -----------
Income before other interests 195,300 171,680
Other interests in combined affiliates 21,300 19,780
----------- -----------
Net income $ 174,000 $ 151,900
=========== ===========
Earnings per share:
Basic $.40 $.35
==== ====
Diluted $.39 $.34
==== ====
Cash dividends declared and paid per share $.12 $.11
==== ====
</TABLE>
7
<PAGE> 10
MASCO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)
NOTE G - CONCLUDED:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------------
COMBINED STATEMENT OF CASH FLOWS 2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
Cash provided by operations $ 219,510 $ 219,940
Increase in receivables (176,990) (181,270)
Increase in inventories (61,380) (41,160)
Increase in current liabilities, net 91,780 64,960
----------- -----------
Total cash from operating activities 72,920 62,470
----------- -----------
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
Capital expenditures (112,110) (102,450)
Acquisition of companies, net of cash acquired (190,320) (62,720)
Investments in noncurrent assets and other, net (121,820) (12,870)
----------- -----------
Total cash (for) investing activities (424,250) (178,040)
----------- -----------
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
Increase in debt 335,180 60,000
Payment of debt (77,550) (76,730)
Purchase of Company common stock --- (61,050)
Cash dividends paid (56,260) (39,860)
----------- -----------
Total cash from (for) financing activities 201,370 (117,640)
----------- -----------
CASH AND CASH INVESTMENTS:
Decrease for the quarter (149,960) (233,210)
At January 1 235,270 582,540
----------- -----------
At March 31 $ 85,310 $ 349,330
=========== ===========
</TABLE>
8
<PAGE> 11
MASCO CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FIRST QUARTER 2000 VERSUS FIRST QUARTER 1999
Management's discussion and analysis of financial condition and results
of operations pertaining to the first quarter of 1999 has been restated for
transactions accounted for as poolings of interests during the third quarter
of 1999.
SALES AND OPERATIONS
The following table sets forth the Company's net sales information by segment
and geographic area, in millions.
<TABLE>
<CAPTION>
PERCENT INCREASE
(DECREASE)
----------------------
THREE MONTHS ENDED 2000 2000
MARCH 31, VS. VS.
2000 1999 1999 1999(A)
-------- -------- -------- -----------
<S> <C> <C> <C> <C>
NET SALES:
Plumbing Products $ 473 $ 461 3% 1%
Cabinets and Related Products 631 494 28% 13%
Decorative Architectural Products 307 239 28% 17%
Insulation Installation and Other
Services 183 72 154% 42%
Other Specialty Products 152 125 22% (5%)
-------- --------
TOTAL $ 1,746 $ 1,391 26% 10%
======== ========
North America $ 1,414 $ 1,165 21% 12%
International, principally Europe 332 226 47% (1%)
-------- --------
TOTAL, AS ABOVE $ 1,746 $ 1,391 26% 10%
======== ========
</TABLE>
(A) Percent change in sales excluding purchase acquisitions.
Net sales for the three months ended March 31, 2000 increased 26
percent from the comparable period in 1999; excluding purchase acquisitions,
first quarter 2000 net sales increased 10 percent over the comparable period of
the prior year.
Changes in net sales in the following discussion exclude the influence
of purchase acquisitions.
Net sales of Plumbing Products increased 1 percent for the first
quarter of 2000 from the comparable period of the prior year. Net sales of
Cabinets and Related Products increased 13 percent for the first quarter of 2000
from the first quarter of 1999 due largely to increased unit sales volume. Net
sales of Plumbing Products and Cabinets and Related Products were negatively
influenced by a stronger U.S. dollar, which affected the translation of European
operations included in these segments.
Net sales of Decorative Architectural Products increased 17 percent for
the first quarter of 2000 from the comparable period of the prior year due
largely to higher unit sales volume of these products. Net sales of the
Company's Insulation Installation and Other Services segment increased 42
percent in the first quarter of 2000 due largely to higher installation sales of
and higher prices for fiberglass insulation and broader geographic U.S. market
penetration.
Net sales of Other Specialty Products decreased 5 percent for the first
quarter of 2000 from the comparable period of the prior year due largely to the
negative influence of a stronger U.S. dollar, which affected the translation of
European operations included in this segment. Excluding this currency
translation effect, net sales of this segment were flat in the first quarter of
2000 as compared with the first quarter of 1999.
Net sales from North American operations for the first quarter of 2000
increased 12 percent from the comparable period in the prior year. Net sales
from International operations for the first quarter of 2000 decreased
approximately 1 percent when compared with the first quarter of 1999. A stronger
U.S. dollar, principally against the German deutsche mark, had an unfavorable
effect on the translation of International sales in the first quarter of 2000 as
compared with the first quarter of 1999; the Company anticipates that
unfavorable foreign currency translation effects may continue for the balance of
the year. Net sales from International operations in the first quarter of 2000
in local currencies increased by approximately 8 percent.
Cost of sales as a percentage of sales increased to 64.5 percent for
the first quarter of 2000 from 62.9 percent for the comparable period in 1999.
The increase in cost of sales as a percentage of sales includes costs related to
a slower than anticipated new product launch, plant startup and relocation
costs, lower gross margins of certain acquired companies and a less favorable
product mix. Excluding amortization of acquired goodwill ($14.2 million and $8.3
million for the first quarters of 2000 and 1999, respectively), selling, general
and administrative expenses as a percentage of sales for the first quarter of
2000 decreased to 19.3 percent from 19.7 percent for the comparable period in
1999. The Company's cost-containment initiatives including the leveraging of
fixed costs over a higher sales base contributed to the decrease in selling,
general and administrative expenses as a percentage of sales.
The Company's operating profit margin, before general corporate expense
and goodwill amortization, was 17.6 percent for the first quarter of 2000 as
compared with 19.0 percent for the first quarter of 1999. Operating profit
margin, after general corporate expense and goodwill amortization, was 15.4
percent for the first quarter of 2000 as compared with 16.9 percent for the
first quarter of 1999. The Company's operating profit margin decreased in the
first quarter of 2000 as compared with the first quarter of 1999, due
principally to higher cost of sales and higher goodwill amortization as a
percentage of sales.
9
<PAGE> 12
MASCO CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OTHER INCOME (EXPENSE), NET
Equity earnings from MascoTech, Inc. for the first quarter of 2000 were
$4.3 million as compared with equity earnings from MascoTech of $4.0 million
for the comparable period of 1999.
Included in other interest income for the three months ended March 31,
2000 and 1999 is $12.8 million and $11.3 million, respectively, of interest
income from the 12% pay-in-kind junior debt securities of Furnishings
International Inc. (approximately $424 million at December 31, 1999).
Other, net for the three months ended March 31, 2000 and 1999 was $25.5
million and $11.4 million, respectively, and resulted primarily from income
and gains, net regarding certain non-operating assets.
Interest expense for the year 2000 first quarter increased $12.2
million to $38.8 million over first quarter 1999 interest expense of $26.6
million. This increase was substantially offset by income and gains, net
regarding certain non-operating assets included in other, net.
NET INCOME AND EARNINGS PER SHARE
Net income and diluted earnings per share for the first quarter of 2000
each increased 15 percent to $174.0 million and $.39 from $151.9 million and
$.34, respectively, for the comparable period of 1999.
OTHER FINANCIAL INFORMATION
The Company's current ratio was 1.8 to 1 at March 31, 2000, and was
negatively influenced by short-term acquisition-related borrowings; such
ratio was 2.5 to 1 at December 31, 1999.
For the three months ended March 31, 2000, cash of $18.5 million was
provided by operating activities. Cash used for investing activities was
$384.9 million, including $170.4 million for acquisitions, $86.1 million for
capital expenditures and $128.4 million for investments in noncurrent assets
and other, net. Cash provided by financing activities was $209.8 million,
including $263.1 million from a net increase in bank debt largely for
acquisitions, and $53.3 million for cash dividends paid. The aggregate of the
preceding items represents a net cash outflow of $156.6 million. Changes in
working capital and debt as indicated on the statement of cash flows exclude
the working capital and debt of acquired companies at the time of
acquisition.
First quarter 2000 cash from operations was affected by an expected and
annually recurring seasonal first quarter increase in accounts receivable
(although there was no significant increase in receivable days). Most of the
annual increase in accounts receivable resulting from sales increases is
typically experienced in the first half of the year.
During April 2000, the Company's Board of Directors authorized the
repurchase of up to 40 million shares of its common stock in open-market
transactions or otherwise.
10
<PAGE> 13
MASCO CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company has on file with the Securities and Exchange Commission
("SEC"), an unallocated shelf registration pursuant to which the Company is
able to issue up to a combined $109 million of debt and equity securities.
The Company intends to file a shelf registration statement with the SEC
during 2000 to authorize the issuance of additional debt and equity
securities.
The Company believes that its present cash balance, its cash flows from
operations and, to the extent necessary, bank borrowings and future financial
market activities, are sufficient to fund its working capital and other
investment needs.
OTHER MATTERS
A single currency called the euro was introduced in Europe on January
1, 1999. Eleven of the fifteen member countries of the European Union adopted
the euro as their common legal currency as of that date. Fixed conversion
rates between these participating countries' existing currencies (the "legacy
currencies") and the euro were established as of that date. The legacy
currencies will remain legal tender as denominations of the euro until at
least January 1, 2002 (but not intended to be later than July 1, 2002).
During this transition period, parties may settle non-cash transactions using
either the euro or a participating country's legacy currency. Cash
transactions will continue to be settled in the legacy currencies of
participating countries until January 1, 2002, when euro-denominated currency
will be issued. The Company is currently completing changes to existing
systems to facilitate a smooth transition to the new currency and believes
that conversion to the euro will not have a material effect on the Company's
financial position or results of operations.
11
<PAGE> 14
MASCO CORPORATION
ITEM 2. UNAUDITED INFORMATION REGARDING EQUITY INVESTMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Equity investments in affiliates consist primarily of the following
approximate common stock and partnership interests at March 31:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
MascoTech, Inc. 17.5% 17%
Emco Limited, a Canadian company 42 % 42%
Hans Grohe, a German company 27 % 27%
</TABLE>
The following presents condensed financial data of MascoTech, Inc., in
thousands.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
---------------------------
2000 1999
-------- --------
<S> <C> <C>
Sales - Net $459,400 $448,660
======== ========
Gross Profit $119,400 $116,020
======== ========
Net Income $ 25,820 $ 23,860
======== ========
</TABLE>
12
<PAGE> 15
MASCO CORPORATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
MASCO CORPORATION
(Registrant)
DATE: NOVEMBER 1, 2000 BY: /s/ Richard G. Mosteller
-------------------- --------------------------------
Richard G. Mosteller
Senior Vice-President - Finance
(Chief Financial Officer
and Authorized Signatory)
