01—Abstract
Summary
Summary of the 10-K filed March 29, 2001. Cited figures are marked; the original filing is the authoritative source.
Masco Corporation, a manufacturer of home improvement and building products with a focus on brand-name products, reported net sales of $7.24 billiona for fiscal 2000, up from $6.31 billion in 1999, and net income of $591.7 million, compared with $569.6 million in 1999.
Diluted earnings per share were $1.31b, versus $1.28 in 1999. The filing attributes the sales growth mainly to acquisitions, noting that excluding purchase acquisitions and divestitures, net sales rose 4 percent. Management cites a weakening in home improvement demand in North America and Europe, a stronger U.S. dollar, higher energy costs, and customer inventory reduction programs as headwinds, and states that certain of these negative trends are expected to continue in the near term.
Margins were pressured in 2000. Operating profit margin before general corporate expense fell to 14.7 percent from 15.9 percent in 1999, including a $90 millionc non-cash pre-tax charge for the planned disposition of businesses that management considers not core to its long-term strategy. Those businesses have combined annual sales of about $600 million, and the company expects the dispositions to be substantially completed by the end of 2001.
Cash from operations rose to $733.8 milliond, and the company funded acquisitions, capital expenditures and dividends largely with new borrowings, pushing long-term debt to $3.02 billion and total debt to 49 percent of total capitalization, up from 44 percent. In March 2001 the company issued $800 million of 6 3/4% notes due 2006 and completed the acquisition of BSI Holdings, Inc., an insulation installer. The filing also discloses a pending class action involving Behr Process Corporation's exterior wood coatings, for which the company has made no provision for potential loss and states that it is defending the suits.
Shareholders received a dividend increase of eight percent during 2000 to $.13 per quarter, the 42nd consecutive annual increase. Home Depot accounted for about 26 percent of 2000 sales, and management believes losing that customer would have a material adverse impact.
02—Key points
Key Highlights
- Net sales rose to $7.24 billion in 2000 from $6.31 billion in 1999, a 15 percent increase; excluding purchase acquisitions and divestitures, sales grew 4 percent.
- Net income was $591.7 million ($1.31 diluted EPS) versus $569.6 million ($1.28 diluted EPS) in 1999.
- Operating profit margin before general corporate expense declined to 14.7 percent from 15.9 percent, weighed down by a $90 million charge for planned business dispositions.
- Planned disposition of several non-core businesses with combined annual sales of about $600 million, expected to be substantially completed by the end of 2001.
- Total debt rose to 49 percent of total capitalization from 44 percent, with long-term debt of $3.02 billion, largely from borrowings for purchase acquisitions.
- Cash from operating activities increased to $733.8 million from $490.6 million in 1999.
- Quarterly dividend raised eight percent to $.13 per share, the 42nd consecutive year of dividend increases; Home Depot represented about 26 percent of 2000 sales.
03—Questions
Frequently Asked Questions
How did Masco perform financially in 2000?
Net sales increased 15 percent to $7.24 billion and net income rose to $591.7 million, or $1.31 per diluted share, from $569.6 million, or $1.28, in 1999. Growth was driven largely by acquisitions, as sales excluding purchase acquisitions and divestitures rose 4 percent. Results were held back by softer home improvement demand, a stronger U.S. dollar, higher energy costs and a $90 million charge for planned business dispositions.
What is the outlook for the business?
The company stated that it experienced a weakening of economic and business conditions in its markets in 2000 and believes certain of the negative economic trends and business factors, including softening home improvement sales, a stronger dollar, higher energy costs and customer inventory reduction programs, will continue for the near term.
How much debt does Masco carry and how is it being managed?
Long-term debt was $3.02 billion at December 31, 2000, up from $2.43 billion a year earlier, and total debt rose to 49 percent of total capitalization from 44 percent, largely reflecting borrowings for acquisitions. In March 2001 the company issued $800 million of 6 3/4% notes due 2006 and used the proceeds to retire variable-rate bank debt. The company stated it was in compliance with its borrowing limitations and that its net worth exceeded the requirement by $776 million.
What legal risks does the filing disclose?
Subsidiary Behr Process Corporation faces a class action in Washington state, where a jury awarded damages to named plaintiffs over exterior wood coating products, and a default was entered against Behr as a discovery sanction. Behr is appealing and has not estimated potential liability, and the company has made no provision for potential loss. Additional consumer complaints have been filed in several other states and Canada, and two insurers have reserved rights or sought declarations that the claims are not covered.
How is Masco returning cash to shareholders?
The company paid $218.7 million in cash dividends in 2000 and repurchased 12.6 million shares for about $220 million under an April 2000 authorization. At year-end it had authorization to repurchase up to an additional 27.4 million shares. The quarterly dividend was increased eight percent to $.13 per share.
04—Continue