01—Abstract
Summary
Summary of the 10-K/A filed November 1, 2000. Cited figures are marked; the original filing is the authoritative source.
Masco Corporation's Form 10-K/A (Amendment No. 1) for the fiscal year ended December 31, 1999 was filed to expand disclosure in the Segment Information note and make corresponding changes to MD&A, following SEC staff comments on a Form S-3 registration statement.
The filing reports 1999 net sales of $6,307 milliona, up 19 percent from $5,280 million in 1998, with net income of $569.6 million and diluted earnings per share of $1.28, compared with $1.26 in 1998. Growth was supported by 1999 purchase acquisitions costing approximately $850 million and mergers with Behr Process Corporation, Mill's Pride, L.P. and a smaller company, accounted for as poolings of interests, with 1999 results affected by unusual third-quarter expense related to those poolings. Operating profit before general corporate expense was 15.9 percent of sales in 1999, down from 18.0 percent in 1998, and net income as a percentage of sales was 9.0 percent versus 10.7 percent in 1998.
Insulation Installation and Other Services showed the strongest segment profit growth, with operating profit of $79 millionb versus $30 million, while Decorative Architectural Products fell 27 percent in operating profit. Total debt rose to 44 percent of total capitalization from approximately 41 percent, largely from acquisition borrowings; long-term debt reached $2,431.3 million at year-end 1999. Management expects increases in both sales and earnings for 2000, a 2000 effective tax rate of about 37.0 percent, and capital expenditures above $350 million excluding 2000 acquisitions.
02—Key points
Key Highlights
- Net sales rose 19 percent to $6,307 million in 1999; excluding purchase acquisitions and divestitures, sales increased 12 percent.
- Net income was $569.6 million in 1999 versus $565.1 million in 1998; diluted EPS was $1.28 compared with $1.26, with unusual pooling-related expense weighing on results.
- Operating profit margin before general corporate expense declined to 15.9 percent from 18.0 percent, reflecting unusual pooling-related expense.
- Total debt rose to 44 percent of total capitalization from approximately 41 percent, and long-term debt increased to $2,431.3 million, mainly from acquisition financing.
- Acquisitions totaled about $795 million in cash in 1999 for purchase acquisitions, with aggregate net purchase price of approximately $850 million including 1.6 million Company shares.
- Cash dividends were increased nine percent to $.12 per quarter, marking the 41st consecutive year of dividend increases.
- Management expects increases in both sales and earnings for 2000, and the amendment expands segment disclosure in response to SEC staff comments.
03—Questions
Frequently Asked Questions
Why was this 10-K/A filed?
The amendment was filed to provide expanded disclosure regarding the Company's business segments in the Segment Information note and to make corresponding changes to MD&A. The filing states this followed SEC staff comments received while processing a Form S-3 registration statement. The financial results themselves were not restated.
How did Masco's 1999 sales and profitability compare with 1998?
Net sales were $6,307 million in 1999 versus $5,280 million in 1998, a 19 percent increase. Net income was $569.6 million versus $565.1 million, and net income as a percentage of sales was 9.0 percent versus 10.7 percent. Operating profit margin before general corporate expense fell to 15.9 percent from 18.0 percent.
What drove the decline in margins?
The filing attributes the decline in 1999 operating margin principally to unusual expense related to transactions accounted for as poolings of interests, particularly the third-quarter mergers with Behr Process Corporation and Mill's Pride, L.P. Product mix also negatively influenced the Plumbing Products margin, and the Decorative Architectural Products margin fell to 10.5 percent from 18.2 percent.
How did Masco fund its 1999 acquisitions and what is its debt position?
Acquisitions were funded largely with bank borrowings and debt issuance, including $300 million of 7.75% debentures due 2029. Total debt rose to 44 percent of total capitalization from approximately 41 percent. At year-end 1999 the $750 million bank revolving-credit facility was fully utilized, and a $400 million 364-day facility was later increased to $1 billion.
What is the 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 estimates an effective tax rate of approximately 37.0 percent and expects capital expenditures, excluding 2000 acquisitions, to exceed $350 million.
04—Continue