01—Abstract
Summary
Summary of the 10-K filed March 30, 2000. Cited figures are marked; the original filing is the authoritative source.
Masco Corporation, a Taylor, Michigan manufacturer of home improvement and building products, reported net sales of $6.307 billiona for 1999, up 19 percent from $5.280 billion in 1998, with net income of $569.6 million, or $1.28 per diluted share, compared with $565.1 million in 1998.
Growth was driven largely by acquisitions: the filing states that during 1999 and early 2000 the company merged with or acquired 13 businesses with aggregate annual sales of about $2 billionb, including the pooling-of-interests mergers with Behr Process Corporation and Mill's Pride, L.L.P. Excluding purchase acquisitions and divestitures, net sales rose 12 percent. North America generated about 83 percent of sales, with net sales of $5.238 billion, and operating profit of $867 million.
Operating profit margin before general corporate expense fell to 15.9 percent from 18.0 percent, which the company attributes to unusual expense principally related to the pooling transactions. The balance sheet expanded substantially. Total assets rose to $6.635 billionc from $5.619 billion, and long-term debt increased to $2.431 billion from $1.638 billion, driven by borrowings for purchase acquisitions.
Total debt as a percent of total capitalization rose to 44 percent from approximately 41 percent. The company fully utilized its $750 milliond bank revolving-credit facility at year-end and later amended a 364-day facility to $1 billion. Cash from operations was $490.6 million, while cash used for investing activities was $1.132 billion, including $795.0 million for 1999 purchase acquisitions.
The company expects 2000 sales and earnings to increase, assuming moderate U.S. economic growth and relatively stable interest rates. The quarterly dividend was raised nine percent to $.12 per share, the 41st consecutive annual increase. Masco also holds a 17.5 percent stake in MascoTech, Inc., and a $481.3 million carrying value of Furnishings International Inc. securities.
02—Key points
Key Highlights
- Net sales of $6.307 billion in 1999, up 19 percent from $5.280 billion in 1998; up 12 percent excluding purchase acquisitions and divestitures
- Net income of $569.6 million, or $1.28 diluted EPS, versus $565.1 million and $1.26 in 1998; results were negatively affected by unusual pooling-related expense in the third quarter
- Operating profit margin before general corporate expense fell to 15.9 percent from 18.0 percent in 1998, and net income as a percentage of sales fell to 9.0 percent from 10.7 percent
- Total long-term debt rose to $2.431 billion from $1.638 billion, and total debt as a percent of total capitalization increased to 44 percent from approximately 41 percent
- Capital expenditures were $350.9 million in 1999; the company expects 2000 capital expenditures, excluding acquisitions, to exceed $350 million
- The Home Depot accounted for $1.539 billion, or approximately 24 percent, of 1999 sales, and the filing states its loss would have a material adverse impact on the company
- The quarterly dividend was increased nine percent to $.12 per share, the 41st consecutive annual increase
03—Questions
Frequently Asked Questions
How much did Masco's sales and earnings grow in 1999?
Net sales rose 19 percent to $6.307 billion from $5.280 billion in 1998, and about 12 percent excluding purchase acquisitions and divestitures. Net income was $569.6 million, slightly above the $565.1 million reported in 1998, with diluted EPS of $1.28 versus $1.26. The filing states that unusual third-quarter expense related to pooling-of-interests transactions weighed on earnings.
What drove the increase in debt and how is the company funding acquisitions?
Long-term debt increased to $2.431 billion from $1.638 billion, principally from borrowings for purchase acquisitions. Cash used for 1999 purchase acquisitions was $795.0 million. Financing included a $300 million 7.75% debenture issuance and a net increase in other debt. The $750 million bank revolver was fully used at year-end, and a $400 million 364-day facility was later increased to $1 billion.
What is the company's outlook for 2000?
Assuming the U.S. economy maintains moderate growth and interest rates remain relatively stable, the company expects increases in both sales and earnings for 2000. It expects capital expenditures to exceed $350 million excluding 2000 acquisitions, depreciation and amortization of about $230 million, and an effective tax rate of approximately 37.0 percent.
How concentrated is the company's customer base?
Sales to The Home Depot were $1.539 billion in 1999, approximately 24 percent of sales. The company states that the loss of The Home Depot as a customer would have a material adverse impact on the company.
What are the company's other notable investments and dividend policy?
Masco holds a 17.5 percent common equity interest in MascoTech, Inc., and carried securities of Furnishings International Inc. at $481.3 million at year-end 1999. The quarterly dividend rose to $.12 per share, and total dividends declared for 1999 were $.46 per share. The company states that it expects to continue its practice of paying quarterly dividends.
04—Continue