2. Safe Harbor Statement
Written and oral statements made in this presentation that reflect our views about our future
performance constitute "forward-looking statements" under the Private Securities Litigation Reform
Act of 1995. Forward-looking statements can be identified by words such as “believe,” “anticipate,”
“appear,” “may,” “will,” “should,” “intend,” “plan,” “estimate,” “expect,” “assume,” “seek,” “forecast,”
and similar references to future periods. These views involve risks and uncertainties that are
difficult to predict and, accordingly, our actual results may differ materially from the results
discussed in our forward-looking statements. We caution you against relying on any of these
forward-looking statements. Our future performance may be affected by our reliance on new
home construction and home improvement, our reliance on key customers, the cost and availability
of raw materials, uncertainty in the international economy, shifts in consumer preferences and
purchasing practices, our ability to improve our underperforming businesses, and our ability to
maintain our competitive position in our industries. These and other factors are discussed in detail
in Item 1A, “Risk Factors” in our Annual Report on Form 10-K, as well as in our Quarterly Reports
on Form 10-Q and in other filings we make with the Securities and Exchange Commission. Our
forward-looking statements in this presentation speak only as of the date of this presentation.
Factors or events that could cause our actual results to differ may emerge from time to time, and it
is not possible for us to predict all of them. Unless required by law, we undertake no obligation to
update publicly any forward-looking statements as a result of new information, future events or
otherwise.
2
Certain of the financial and statistical data included in this presentation and the related
materials are non-GAAP financial measures as defined under Regulation G. The Company believes
that non-GAAP performance measures and ratios used in managing the business may provide
attendees of this presentation with additional meaningful comparisons between current results and
results in prior periods. Non-GAAP performance measures and ratios should be viewed in addition
to, and not as an alternative for, the Company's reported results under accounting principles
generally accepted in the United States. Additional information about the Company is contained in
the Company's filings with the SEC and is available on Masco’s web site, www.masco.com.
4. Masco – Executing on a Housing Recovery
2012
Revenue
Revenue % renovation vs. new construction
$7.5B
73%
Cumulative free cash flow last 3 years
~$1B
Employees
30,000
Market capitalization
>$6.0B
Dividend yield
Liquidity at 12/31/2012
4
2.9%
$1.4B
5. Masco – Strong Brands with Industry Leading Positions
B USINESS S EGMENT
R EVENUE 2012
%
OF
L EADING P OSITIONS
T OTAL
#1 worldwide in faucets,
fittings, showerheads
#1 in spas
24%
Leading DIY paint and stain
provider
$0.9B
12%
Leading U.S. kitchen and
bath cabinetry brands
Installation
and Other
Services
$1.2B
16%
#1 insulation contractor for
homebuilders
Other
Specialty
Products
$0.6B
7%
#1 in vinyl windows in the
western US
Plumbing
Products
$3.0B
Decorative
Architectural
Products
$1.8B
Cabinets
and Related
Products
Total company
5
$7.5B
38%
100%
6. Masco – Scope and Scale Provide Unique Opportunities
We believe we are the……
Largest
Largest
non-commodity supplier to The Home Depot
Largest
supplier to Lowe’s Kitchen and Bath segment
Largest
supplier of architectural coatings to the
U.S. DIY market
Largest
6
manufacturer of faucets in the world
installer of insulation products for the new home
construction market
9. 1. EXPAND MARKET LEADERSHIP
Key Brands Gaining Share since 2010
Examples
• Delta®, Peerless®, and Brizo® brands in U.S.
• International plumbing growth with Hansgrohe
• Decorative Architectural: Behr® #1 DIY Paint at
The Home Depot, Direct to Pro® service growth,
Kilz Pro line
• Other Specialty: Milgard® windows outperforming
market, UK growing share
• Masco Contractor Services gaining share with
insulation, retrofit and commercial channels
• Merillat® and Quality® cabinet brands gaining share
with builders
9
Gaining Share
11. 3. IMPROVE UNDERPERFORMING BUSINESSES
Improved Profitability and Positioned for Growth
Cabinets
New North American management team in place in 2012
Achieved profitability on an adjusted basis in Q2 2013
Disposition of Danish ready-to-assemble cabinet business in process
Revenue ~$250M and operating loss of ~$30M
Installation
Continued penetration of retrofit and commercial channels
Further cost reductions from lean, ERP leverage, supply chain
Achieved profitability in Q4 2012
11
12. 4. STRENGTHEN BALANCE SHEET
Declining Debt to Capitalization Ratio
87%
• $400M reduction in 2012
45%-55%
• $200M reduction in 2013
•
2012
Year End
12
Future Target
Valuation Allowance of
~$600 million on Deferred
Tax Assets is expected to be
reversed when our U.S.
businesses return to
sustained profitability
14. Key Strengths we are Leveraging
1
2
Industry innovator
3
Broad distribution
4
Masco Business System
5
14
Market-leading brands
Strong financial position
15. STRENGTH 1: MARKET LEADING BRANDS
Unparalleled Brand Strength
Cabinets & Related
Products
Plumbing
Products
Decorative
Architectural Products
Installation &
Other Services
15
Other Specialty
Products
16. STRENGTH 2: INDUSTRY INNOVATOR
Significant New Product Introductions – Last 3 Years
Examples of New Products/Technologies
2010
2011
2012
Arrow
R.E.D.
BehrProTM
Delta Toilets
2012 Revenues
70%
Existing
Products
30%*
Milgard Essence™
Windows
ACE® Salt Water
Sanitizing System
16
Kilz
PRO-XTM
Masco Cabinetry’s
ProCisionTM Process
Paint & Primer in One
with Advanced Stain
Blocking Formula
KraftMaid Vanities
* Percentage of 2012 gross sales of manufactured products attributable to new products introduced in trailing 36 months
17. STRENGTH 3: BROAD DISTRIBUTION
Winning with Winning Customers
Broad Portfolio
Big Box Retailers
• Dedicated customer-
specific service
organizations with over
750 field service
employees
Homebuilders
Wholesalers / Dealers
• Exclusive products and
• Extensive training
• A leading insulation
• Superior dealer support
services for the direct to
builder channel
contractor in the US
programs for branch and
showroom associates
through display and
technology expertise
• Premier brands drive traffic
17
18. STRENGTH 4: MASCO BUSINESS SYSTEMS
A Continuous Improvement Culture
– At the Center of Our Success
Customer focus
MBS
Innovation
Lean
Talent
Quality
18
19. STRENGTH 5: STRONG FINANCIAL POSITION
Strong Liquidity and Improving Balance Sheet
Strong Liquidity
Declining Debt to
Capitalization Ratio
(as of 9/30/2013)
Balance Sheet Liquidity as of 9/30/2013
Cash and cash investments
$1.0B
Short-term bank deposits
$0.3B
Total
87%
$1.3B
45%-55%
• A strong free cash flow business
–
–
•
~$1B last 3 years
Maintenance capex of ~$100M annually
Valuation Allowance of ~$600 million on
Deferred Tax Assets is expected to be
reversed when our U.S. businesses
return to sustained profitability
2012
Year End
Future Target
• Debt paid down by:
− $400M in 2012
− $200M in 2013
19
21. Positioned to Benefit from Positive Industry Trends
Aging housing
stock
Record low
mortgage
rates
Favorable
long-term
household
growth
21
GDP and
economic
recovery
growth
Pent up
demand from
postponed
residential
remodeling
22. Positioned for Growth
1
2
Continued brand leverage and share expansion
3
Continued cost position improvement
4
Disciplined capital deployment
5
22
Leveraged to the recovery
Delivering on 2013 priorities
23. 1. Leveraged to the Recovery
Adjusted Operating Margin*
10-14%
12%
Reflects
• lower fixed cost base
of >$600M (gross)
6%
6%
• driving lean principles
across the company
4%
2006
Last Peak
Housing
starts
2.1M
2010
2011
2012
3-5 Years
0.6M
0.6M
0.7M
~1-1.5M
30% margin on incremental volume
23
*See Appendix slide 32 for GAAP reconciliation
24. 2. Initiatives to Leverage Brands and Expand Share
Product
Introductions
Plumbing
Products
Decorative
Architectural
Products
Cabinets
and Related
Products
Installation
and Other
Services
Other
Specialty
Products
24
Strengthen
Brand Loyalty
Extend
Categories
Geographic
Expansion
25. 3. Continue to Improve Cost Position
Driven by:
Sourcing
Lean
Initiatives
Distribution
& Logistics
25
* Gross
Driven by:
~$195M*
of Total Cost
Productivity
in 2012
Actions Taken In
Prior Years
•
•
•
Plant Closures
Headcount
Reductions
System
Implementations
26. 4. Disciplined Capital Deployment
Invest in the Business
• Maintenance capex: $100M annually
Financial Flexibility
Strong Cash
Flow Generation
• Target 45%-55% debt to
capitalization vs. ~87%
Dividend
• Maintain dividend yield ~2%
Acquisitions
• Potential acquisitions (<$100M) in
support of international expansion
26
27. 5. Delivering on 2013 Priorities
Cabinet profit improvement
Profitably grow Installation
Successfully launch new products and programs
Reduce debt by ~$200M
Investment in strategic growth initiatives
Grow share of key brands
Total cost productivity
Geographic expansion
27
28. WHY INVEST IN MASCO
Strong Fundamentals - Positioned for Growth
The Strategy
The Strengths
The Growth
28
Executing initiatives to improve performance
• Continuing to reduce fixed costs, expand share and
improve underperformers
Building on market-leading positions
• Best brands, innovative products, lean practices,
strong financial position
Well-positioned for growth
• Lower cost structure higher margins, leveraged
to recovery
31. Double Digit Sales Growth for Two Consecutive Quarters
($ in Millions)
Third Quarter
2013
Revenue
$2,150
Growth
Adjusted Operating Profit*
Y-O-Y Change
12%
$222
$74
Adjusted Operating Margin*
10.3%
Adjusted EPS*
$0.27
Y-O-Y Change
260 bps
*See following slides for GAAP reconciliation
Quarter Highlights
•
•
Sales growth driven by new products at retail and new home
construction
•
Continued cost containment drives 140 bps improvement in SG&A
•
31
North American sales increased 13%; International sales
increased 5% in local currency
Operating profit expansion reflects favorable operating leverage
32. Appendix – Profit Reconciliation – Third Quarter
($ in Millions)
Q3 2013
Q3 2012
Sales
$
2,150
$
1,913
Gross Profit – As Reported
$
607
$
500
6
Gross Profit – As Adjusted
$
10
-
Rationalization charges
Other Specialty Products - warranty
12
613
$
522
Gross Margin - As Reported
28.2%
26.1%
Gross Margin - As Adjusted
28.5%
27.3%
Operating Profit – As Reported
$
Rationalization charges
212
$
108
10
27
Other Specialty Products - warranty
-
12
Charge for litigation settlements, net
-
1
Operating Profit – As Adjusted
$
222
$
148
Operating Margin - As Reported
5.6%
Operating Margin - As Adjusted
32
9.9%
10.3%
7.7%
33. Appendix – EPS Reconciliation – Third Quarter
(in Millions)
Income from Continuing Operations before Income Taxes –
Q3 2013
As Reported
Q3 2012
$
$
Rationalization charges
154
51
10
27
Gain from financial investments, net
-
(2)
Charge for litigation settlements, net
-
1
Other Specialty Products - warranty
-
12
Income from Continuing Operations before Income Taxes – As Adjusted
$
Tax at 36% rate benefit (expense)
164
$
89
(59)
11
Less: Net income attributable to non-controlling interest
(32)
9
Net Income, as adjusted
$
94
$
48
Income per common share, as adjusted
$
0.27
$
0.14
Average Diluted Shares Outstanding
33
352
350
34. 2013 Guidance Estimates
($ in Millions)
2013 Estimate
2012 Actual
Rationalization Charges1, 3
~ $55
$78
Tax Rate
~ 25%
198%
Interest Expense
~ $240
$254
General Corp. Expense2
~ $130
$126
Capital Expenditures
~ $125
$119
Depreciation & Amortization3
~ $190
$214
352 million
349 million
Shares Outstanding
1 – Based on current business plans.
2 – Excludes rationalization expenses of $14M for the year ended December 31, 2012.
3 – Includes accelerated depreciation of $28M for the year ended December 31, 2012 and estimated accelerated
depreciation for the year ended December 31, 2013 of ~$15M. Such expenses are also included in the
rationalization charges.
34
35. Segment Mix Full Year 2012
Business Segment
Revenue 2012
% of Total
R&R% vs. NC
NA% vs. Int’l
Plumbing
Products
$3.0B
40%
82%
59%
Decorative
Architectural
Products
$1.8B
24%
99%
100%
Cabinets and
Related Products
$0.9B
12%
69%
92%
Installation and
Other Services
$1.2B
16%
16%
100%
Other Specialty
Products
$0.6B
8%
75%
75%
73%
80%
Total company
35
R&R = % of sales to repair and remodel channels
NC = % of sales to new construction channels
NA = % of sales within North America
Int’l = % of sales outside North America
$7.5B
100%
36. 2012 Masco International Revenue Split*
6%
15%
26%
11%
Other
United Kingdom
Northern Europe
Southern Europe
Central Europe
Eastern Europe
34%
3%
5%
Emerging Markets
International Sales Accounted for ~20%
of Total 2012 Masco Sales
36
*Based on company estimates
