<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED MARCH 31, 2000. COMMISSION FILE NUMBER 1-5794
MASCO CORPORATION
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 38-1794485
- --------------------------------------------------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
21001 VAN BORN ROAD, TAYLOR, MICHIGAN 48180
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(313) 274-7400
- --------------------------------------------------------------------------------
(TELEPHONE NUMBER)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR
THE PAST 90 DAYS.
YES X NO
--- ---
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICAL DATE.
SHARES OUTSTANDING AT
CLASS MAY 1, 2000
----- ---------------------
COMMON STOCK, PAR VALUE $1 PER SHARE 448,649,700
<PAGE> 2
MASCO CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheet -
March 31, 2000 and December 31, 1999 1
Condensed Consolidated Statement of
Income for the Three Months Ended
March 31, 2000 and 1999 2
Condensed Consolidated Statement of
Cash Flows for the Three Months Ended
March 31, 2000 and 1999 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
Ended March 31, 2000 and 1999 12
Part II. Other Information and Signature 13-14
</TABLE>
<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, 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:
North America $ 1,414 $ 1,165 $ 251 $ 226
International, principally
Europe 332 226 42 31
------- ------- ------- -------
Total $ 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) Intra-company sales among segments and geographic areas 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>
<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
Net sales for the three months ended March 31, 2000 increased 26
percent to $1,746 million from $1,391 million for the comparable period in
1999; excluding purchase acquisitions, first quarter 2000 net sales increased
10 percent over the comparable period of the prior year. The increase in net
sales principally includes increases in unit sales volume of cabinets and
architectural coatings, and higher installation sales of fiberglass
insulation.
Net sales from North American operations for the first quarter of 2000
increased 21 percent to $1,414 million from $1,165 million for the comparable
period in the prior year; excluding purchase acquisitions, first quarter 1999
net sales from these operations increased 12 percent. Net sales from
International operations for the first quarter of 2000 increased 47 percent
to $332 million from $226 million for the first quarter of 1999; excluding
purchase acquisitions, net sales from International operations 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. Excluding purchase acquisitions, 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 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
PART II. OTHER INFORMATION
MASCO CORPORATION
ITEM 1. LEGAL PROCEEDINGS
A civil suit is pending in Superior Court in the State of Washington
against Behr Process Corporation, a wholly owned subsidiary of the Company. The
plaintiffs allege, among other matters, that after applying Behr's exterior wood
sealant, the surfaces suffered excessive mildewing, and that plaintiffs are,
accordingly, entitled to damages and remediation. The court has conditionally
certified the case as a class action, including in this case all purchasers of
the products who reside in nineteen counties in western Washington. Behr denies
the allegations and intends to continue to challenge the conditional class
certification. Any liability to the named plaintiffs would be wholly immaterial
to the Company. However, at this time, the Company is not able to estimate the
number of class members, the number of claims that may be filed or the aggregate
amount of damages that class members may allege. Based upon the Company's
experience to date with this product, the Company does not believe that these
matters will result in any material adverse effect on its consolidated financial
position or results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On January 26, 2000, the Company acquired Tvilum-Scanbirk A/S in a
transaction in which the seller received, in part, unregistered Masco common
stock as consideration. The seller, M0bel Invest A/S, is a corporation organized
under the laws of the Kingdom of Denmark and has its principal place of business
in that country. The seller received 3,938,682 shares of Masco common stock as
part of the consideration paid for this acquisition. The Company relied on the
exemption from registration under Section 4(2) of the Securities Act of 1933.
On April 13 and 14, 2000, the Company issued a total of 629,334
unregistered shares of common stock to satisfy in part its funding obligations
with respect to three company-sponsored defined benefit pension plans. All of
these shares were delivered to The Northern Trust Company, as trustee for the
pension plans. The Company relied on the exemption from registration under
Section 4(2) of the Securities Act of 1933.
ITEMS 3 THROUGH 5 ARE NOT APPLICABLE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
12 - Computation of Ratio of Earnings to Fixed Charges
27 - Financial Data Schedule
(B) REPORTS ON FORM 8-K:
None.
13
<PAGE> 16
PART II. OTHER INFORMATION
MASCO CORPORATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MASCO CORPORATION
(Registrant)
DATE: MAY 12, 2000 BY: /s/ Richard G. Mosteller
-------------------- --------------------------------
Richard G. Mosteller
Senior Vice-President - Finance
(Chief Financial Officer
and Authorized Signatory)
<PAGE> 17
MASCO CORPORATION
EXHIBIT INDEX
EXHIBIT
Exhibit 12 Computation of Ratio of Earnings to Fixed Charges
Exhibit 27 Financial Data Schedule
<PAGE> 1
EXHIBIT 12
MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
(THOUSANDS OF DOLLARS)
-------------------------------------------------------------
THREE
MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31
----------------------------------------------------
2000 1999 1998 1997 1996 1995
-------- ---------- ---------- -------- -------- --------
EARNINGS BEFORE INCOME TAXES
AND FIXED CHARGES:
<S> <C> <C> <C> <C> <C> <C>
Income from continuing
operations before
income taxes $276,000 $ 904,100 $ 905,500 $733,800 $575,600 $396,600
Deduct/add equity in
undistributed
(earnings)/loss of
fifty-percent-or-
less-owned companies (4,640) (18,720) (24,070) (19,470) (12,310) (17,770)
Add interest on
indebtedness, net 39,370 121,520 115,700 94,780 78,790 78,350
Add amortization of debt
expense 310 1,350 2,130 2,310 1,400 1,930
Add estimated interest
factor for rentals 4,630 16,080 11,430 9,270 7,120 5,870
-------- ---------- ---------- -------- -------- --------
Earnings before income
taxes and fixed charges $315,670 $1,024,330 $1,010,690 $820,690 $650,600 $464,980
======== ========== ========== ======== ======== ========
FIXED CHARGES:
<S> <C> <C> <C> <C> <C> <C>
Interest on indebtedness $ 41,190 $ 129,860 $ 119,750 $ 97,910 $ 81,250 $ 81,410
Amortization of debt
expense 310 1,350 2,130 2,310 1,400 1,930
Estimated interest factor
for rentals 4,630 16,080 11,430 9,270 7,120 5,870
-------- ---------- ---------- -------- -------- --------
$ 46,130 $ 147,290 $ 133,310 $109,490 $ 89,770 $ 89,210
======== ========== ========== ======== ======== ========
Ratio of earnings to fixed
charges 6.8 7.0 7.6 7.5 7.2 5.2
=== === === === === ===
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MASCO
CORPORATION'S MARCH 31, 2000 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 74,220
<SECURITIES> 0
<RECEIVABLES> 1,166,870<F1>
<ALLOWANCES> 0
<INVENTORY> 884,000
<CURRENT-ASSETS> 2,238,550
<PP&E> 1,750,380<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,207,540
<CURRENT-LIABILITIES> 1,229,310
<BONDS> 2,431,670
0
0
<COMMON> 447,550
<OTHER-SE> 2,870,380
<TOTAL-LIABILITY-AND-EQUITY> 7,207,540
<SALES> 1,746,000
<TOTAL-REVENUES> 1,746,000
<CGS> 1,125,900
<TOTAL-COSTS> 1,125,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,800
<INCOME-PRETAX> 276,000
<INCOME-TAX> 102,000
<INCOME-CONTINUING> 174,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 174,000
<EPS-BASIC> .40
<EPS-DILUTED> .39
<FN>
<F1>Receivables and property and equipment are presented net of allowances for
doubtful accounts and accumulated depreciation and amortization, respectively.
</FN>
</TABLE>
