Masco Annua lReport2005


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Masco Annua lReport2005

  1. 1. Masco Corporation Annual Report 2005 Building Solutions
  2. 2. On the Cover TABLE OF CONTENTS Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Building Solutions is a strategy that is built on a Letter to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 2 unique value proposition that is end-user driven Our Products and Services Segments and focuses on continual differentiation based Cabinets and Related Products . . . . . . . . . . . . . . 4 on understanding our customers and market Plumbing Products . . . . . . . . . . . . . . . . . . . . . . . . 5 opportunities. Masco Corporation is “Building Installation and Other Services . . . . . . . . . . . . . . 6 Solutions” for our customers through innova- Decorative Architectural Products . . . . . . . . . . . 7 tion to increase shareholder value. The five Other Specialty Products . . . . . . . . . . . . . . . . . . . 8 building blocks represent our products and services segments. Financial Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Building Solutions for Our Customers New Construction . . . . . . . . . . . . . . . . . . . . . . . . 11 Home Improvement . . . . . . . . . . . . . . . . . . . . . . 11 Consumers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Building Solutions Through Innovation . . . . . . . . . 15 Building Solutions to Increase Shareholder Value Shareholder Returns . . . . . . . . . . . . . . . . . . . . . . 17 Financial Highlights . . . . . . . . . . . . . . . . . . . . . . 18 Corporate Responsibility and Governance . . . . 19 Leadership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Corporate Leadership . . . . . . . . . . . . . . . . . . . . . . . . 22 Certifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Forty-Nine Years of Sales Growth . . . . . . . . . . . . . . 24 Form 10-K Information for Shareholders . . . . Inside Back Cover FORWARD-LOOKING STATEMENTS NON-GAAP DISCLOSURE Our Annual Report to Shareholders contains The Company believes that certain non-GAAP statements reflecting our views about the (Generally Accepted Accounting Principles) Company’s future performance. These state- performance measures and ratios, used in ments are “forward-looking statements” under managing the business, may provide users of the Private Securities Litigation Reform Act of this financial information with additional 1995. Actual results may differ materially from meaningful comparisons between current results the results discussed in such forward-looking and results in prior periods of ongoing opera- statements. For an explanation of various factors tions. Non-GAAP performance measures and that may affect our performance, readers should ratios should be viewed in addition to, refer to the “Risk Factors” section of our Annual and not as an alternative for, the Company’s Report on Form 10-K included herein, as reported results under accounting principles well as the comment at the beginning of generally accepted in the United States. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in that Report. The Company undertakes no obligation to update any forward-looking state- ments, whether as a result of new information, future events or otherwise.
  3. 3. Financial Highlights Dollars In Millions Except Per Common Share Data 49-Year 5-Year 2005 Growth Growth vs Rate Rate 2004 2005 2004 2000 1956 Net Sales 16% 15% 7% $12,642 $11,850 $ 6,388 $ 11 Operating Profit 1, 2 16% 13% -1% $ 1,577 $ 1,592 $ 867 $ 1 Income from Continuing Operations 1, 2, 3 17% 11% -8% $ 872 $ 949 $ 527 $ 0 Income from Continuing Operations as a % of Net Sales 7% 8% 8% 4% Per Common Share Data: Income from Continuing Operations 14% 12% -2% $ 2.03 $ 2.08 $ 1.17 $0.005 /16 Cash Dividends Paid 16% 10% 18% $ 0.78 $ 0.66 $ 0.49 $0.001 /16 Amounts exclude discontinued operations. The year 2005 includes a non-cash goodwill impairment charge of $69 million after tax ($69 million pre-tax) and income of $4 million after 1 tax ($6 million pre-tax) related to the Behr litigation settlement. The year 2004 includes a non-cash goodwill impairment charge of $104 million after tax ($112 million pre-tax) and income of $19 million after 2 tax ($30 million pre-tax) related to the Behr litigation settlement. The year 2000 includes a non-cash charge of $94 million after tax ($145 million pre-tax) for the planned disposition of businesses and the 3 write-down of certain investments. 2005 Masco Corporation Annual Report Building Solutions 1
  4. 4. Building Solutions To Our Shareholders: We are pleased to report that, once again, Masco Corporation achieved record sales in 2005 and that our share price reached an all-time high Business consolidations, together with divesti- early in the year. It is disappointing, though, to tures, have reduced our business units from 67 in report that our 2005 earnings did not meet our early 2003 to less than 40 at year-end 2005. initial expectations. After achieving record sales and income in 2004, it was our goal to continue While these initiatives resulted in additional that trend. However, in 2005, along with many costs and charges in 2005 and will result in costs other companies, we were adversely affected by and charges in 2006, we believe that these significant and unanticipated increases in com- actions will have reduced annual costs by $200 modity and raw materials costs. million by the end of 2007 and will improve the Company’s long-term earnings outlook. Energy costs such as oil and natural gas reached record heights last year, compounded by the Going forward, we are greatly encouraged by impact of the closure of several refineries due to the “Building Solutions” that Masco has devel- the tragic Gulf Coast hurricanes. At the same oped. Building Solutions is a strategy that is time, the costs of raw materials including fiber- built on a unique value proposition that is end- glass insulation, copper, resins and titanium user driven and focuses on continual differenti- dioxide (a key component of paint), also ation based on understanding our customers increased to unprecedented levels. We believe and market opportunities. We continue to exe- that we will offset a great majority of these cost cute our strategic plan by Building Solutions for increases by the end of the first half of 2006. The our customers through innovative products, lag time in implementing selling price increases services and processes to increase shareholder with larger customers in 2005, however, resulted value. in profit and margin loss this past year. We are committed to growing with all of our In addition to implementing price increases, we customers by Building Solutions to meet their are addressing these escalating costs through needs. Our added focus on the installation side restructuring, consolidation, manufacturing of our business creates growth as we offer both rationalization, headcount reductions and other products and installation services on a national profit improvement programs, including sourc- scale for our builder customers. Our capabilities ing from emerging markets in Asia. have expanded to allow us to offer paint, win- dows and cabinets as part of the installation During 2005, we consolidated a number of our process. Providing both our builder and retailer businesses to leverage synergies, share best prac- customers with consumer-desired products, as tices and reduce costs where possible. We also well as other value-added solutions such as divested companies that did not fit strategically. consumer research aimed at converting shop- pers into buyers, remains a top priority. 2005 Masco Corporation Annual Report 2 Building Solutions
  5. 5. Building Solutions through innovation, we place great emphasis on new product and process development and have established incentive programs with additional funding towards this effort. You will see many of these outstanding new products later in this report. We believe that over 90 percent of our sales are from products enjoying a leadership position in their respective market niches—providing our customers with the market and brand strength necessary to remain competitive. We continue to focus on enhancing Building Solutions to increase shareholder value. In 2005, we returned $1.3 billion to shareholders through share repurchases (31 million common shares) and dividends. We also increased our dividend by 11 percent, making 2005 the 47th consecutive year in which dividends have been increased. We recognize that in today’s highly competitive global economy, we must continually review our strategies and businesses to maintain an edge over our competitors and remain important to our customers. We are placing significant ALAN H. BARRY emphasis on growing our talent base, providing President and Chief Operating Officer top-flight leadership programs to hone the skills and advance the capabilities of our future lead- RICHARD A. MANOOGIAN ers. We are confident that we are building the Chairman of the Board and right solutions and the right management team Chief Executive Officer to further strengthen our leading positions in the global marketplace. We are proud of the many achievements that our Company made in 2005. As we work to achieve our goals moving forward, we want to recognize the commitment and contributions of our more than 60,000 employees, who continue to play a vital role in Masco Corporation’s ongoing success. Richard A. Manoogian Chairman of the Board and Chief Executive Officer Alan H. Barry President and Chief Operating Officer
  6. 6. The Cabinets and Related Products segment includes assembled and ready-to-assemble kitchen and bath cabi- nets; home office workstations; entertainment centers; storage prod- ucts; bookcases; and kitchen utility products. The Company believes that it is the largest U.S. manufacturer of kitchen and bath cabinetry, offering approximately 300 styles in more than 20 product lines. Cabinets and Related Products ™ ® ™
  7. 7. The Plumbing Products segment includes faucets; plumbing fittings and valves; showerheads and hand showers; bathtubs and shower enclosures; and spas. Masco is a world leader in the manufacture of plumbing products. Plumbing Products ® ® ®
  8. 8. The Installation and Other Services segment includes the sale and installation principally of insulation as well as cabinetry, fireplaces, gutters, garage doors, bath accessories, shelving, windows and paint. Masco provides a variety of installation services for homebuilders across North America. Installation and Other Services ™ ®
  9. 9. The Decorative Architectural Products segment includes paints and stains; and door, window and other hardware. Decorative Architectural Products ®
  10. 10. The Other Specialty Products segment includes windows, window frame components and patio doors; electronic locksets; staple gun tackers, staples and other fastening tools; and hydronic radiators and heat convectors. Other Specialty Products ™
  11. 11. Financial Summary Amounts exclude discontinued operations. 2005 Masco Corporation Annual Report Building Solutions 9
  13. 13. Our Customers Building Solutions for New Construction The single-family new home construction market has been strong for well over a decade, with underlying fundamentals supporting its future • Behr Process Corporation, together with MCS, vitality. Production builders, however, are now introduced Behr Premium Select™, a new line of facing unprecedented challenges, including premium paints exclusively formulated for access to land, labor and capital, as well as regu- application in single-family new home construc- latory constraints. Additionally, builders are tion. MCS will offer Behr Premium Select paint attempting to develop brands, differentiate prod- as a new installation service for homebuilders. ucts, streamline operations and create customers for life, focusing on total customer satisfaction. • Merillat is completing phase two of its Super Model Home Research. This research provides Masco is uniquely positioned to help meet builders with statistically significant and today’s challenges and partner with our builder detailed information about what consumers customers to accomplish their objectives, there- are looking for in their new homes and what by making us more integral to the basic opera- features are most likely to convert shoppers tions of their business. This unique capability into buyers. originates from our position as more than just a supplier of products and services. We are a Home Improvement resource for brands, distribution and installation Big box retailers, mass merchandisers, traditional capability, with the ability to customize our home centers, local hardware stores and specialty approach to support each of our customers’ spe- retailers and dealers are all competing for a cific value propositions and priorities. In short, greater share of the consumer’s disposable Masco is valued as a solutions provider by our income. Consumers are demanding more from customers in this channel. their home improvement and repair experience in Building Solutions for our new construction cus- exchange for their discretionary income. tomers include: Moreover, as many of the players in the home improvement market strive to attract the same • BuildLogixSM is a value-integration process target audience, distinctions among the retail for- developed by Masco Contractor Services mats begin to blur, creating consumer confusion. (MCS) to eliminate supply-chain waste and inefficiency, reduce builder cycle times and Success in the home improvement market is improve builder customer satisfaction. The dependent on a clear strategic focus that pro- BuildLogix program defines the sequencing of vides an understanding of the breadth and products and processes in the build cycle with depth of products, services and experiences that the goal of increasing Masco’s involvement in will delight the “right” consumer and build various stages of the construction process. 2005 Masco Corporation Annual Report Building Solutions 11
  14. 14. Consumers will not accept look-alike products, retailer brand loyalty. Masco’s extensive “good, lack of innovation and “joyless” shopping. They better, best” product portfolio and broad distri- also reject impersonal service and demand supe- bution, in combination with the complementary rior quality. Customization is the ultimate con- nature of our brands, products and services, sumer preference, with enough options to enable us to drive meaningful differentiation to excite, but not so many as to overwhelm the address the diverse segments of the home selection process. improvement market. At Masco, we believe that this ever-more- We also attribute our retail success to extensive demanding consumer presents an opportunity training programs, conducted by Masco employees, for us to create a competitive advantage for our including those that we have instituted in the paint products and services. We do this by applying and cabinet departments of certain of our key insights gained from researching and under- retailer customers. standing consumer demographics, attitudinal Building Solutions for our home improvement data and life-stage and lifestyle preferences. customers include: Today’s consumer is more concerned about making their house fit the way they live and less • Masco’s recent BathScapes® program for a concerned about its resale value. Their home and major Canadian retailer created a total category home improvement shopping experience must solution for over 400 of their stores across be an expression of their values. Canada. Masco worked with this retailer to reduce the number of product suppliers for the Building Solutions that we have provided for bath section in its stores. According to the consumers include: retailer, Masco was one of the few companies • KraftMaid Cabinetry’s new Venicia™ series of in the world with the variety of products to selectively distributed cabinets, offered at rea- become the primary supplier in this category. sonable prices, combines the high-end appeal • Based on extensive color, demographic and of European styling with the practical func- psychographic research, Behr Process tionality required by North American con- Corporation developed the Colores Origenes™ sumers. Venicia cabinets allow consumers to Color Palette to enhance a major retailer’s customize their own cabinetry solution, from strategic initiative to target Hispanic con- pure minimalist to European transitional. sumers. Colores Origenes, created and intro- • Hansgrohe’s Phillipe Starck Collection builds duced in select markets, includes a unique color on the success of its Axor Starck™ faucets by palette with color cards and support and joining with German kitchen-bath product training materials in Spanish. manufacturer Duravit in product development, Consumers cross-marketing and selling. The collaboration provides consumers with a coordinated luxury Today’s consumers are more discriminating and bath offering, including tubs, lavatories and diverse than at any other time in history. bidets, all part of the high-end Axor™ collection. 2005 Masco Corporation Annual Report 12 Building Solutions
  17. 17. Innovation Building Solutions Through In today’s crowded, complex and global marketplace, companies are finding it increas- ingly difficult to develop a competitive edge. Innovation —doing things differently and applying new ideas to real situations in order to • Behr’s kitchen and bath paint with create meaningful value for customers and Nanoguard® technology is engineered for shareholders—is critical to creating that edge. greater toughness and moisture resistance in a waterborne latex coating by employing the lat- Innovation involves people, passion, creativity est advances in materials science. This product and business savvy. Innovation requires under- is designed to create a harder, more durable standing customer and consumer needs and surface that is resistant to water, mildew, stains, values, and then developing solutions that and grease in high traffic areas of the home. improve the customer/consumer experience This product is available in over 2,000 shades and our performance. Innovation is also a in the Sateen Lustre™ sheen featured in Behr’s strategy—one that provides customers with a Premium Plus® coating lines. compelling reason to choose Masco and its • Milgard Windows fabricates premium quality brands. windows and patio doors utilizing fiberglass Our employees bring tremendous creativity and frames—a material with substantial structural enthusiasm to creating new solutions. The fol- and thermal performance characteristics. lowing are just a few of our many outstanding While the exterior color finish is virtually product innovations: maintenance-free, the fiberglass WoodClad™ product series presents a real wood veneered • The Brizo™ Pascal™ culinary faucet with Smart interior of elegant, clear vertical-grain Douglas Technology, manufactured by Delta Faucet Fir. Milgard is also preparing to launch a new Company, is the first faucet designed more line of complex frame shapes by creating fiber- as a kitchen “appliance.” It focuses on the glass radius and arch-top window styles uti- actual art of cooking, improving efficiency and lizing its own innovative proprietary process. ease-of-use. Combining hands-free and touch- control technology, water flow is activated by either “tapping” the faucet or using the hands-free option. The Pascal faucet is designed for commercial and residential applications, providing water conservation and hygiene benefits for professionals and consumers alike. 2005 Masco Corporation Annual Report Building Solutions 15
  19. 19. Shareholder Value Building Solutions to Increase Behind Masco’s growth stands a strategic com- mitment to building greater shareholder value. We have demonstrated this commitment through a variety of actions, including returning $3.6 billion to shareholders, through share repurchases and dividends, for the three-year period ended December 31, 2005, increasing our dividend for 47 consecutive years and continuing to review our corporate strategies and share- holder goals to build even better solutions as we move forward. In addition to our focus on achieving our finan- cial objectives for our shareholders, Masco has always strived to maintain the highest stan- dards of excellence, accountability and leader- ship. We’re proud of the programs that we have SHARE REPURCHASES in place to encourage social responsibility—not only at the corporate level but among our oper- • The Company repurchased 31 million shares ating companies as well. of its common stock during 2005 and had 29 million common shares remaining at December 31, 2005 under the March 2005 Shareholder Returns Board of Directors repurchase authorization of • We continue to focus on initiatives that 50 million shares. enable the Company to create value for our • Masco repurchased 97 million common shares shareholders. Through a combination of in the last three years, representing approxi- growth, share repurchases and dividends, we mately 20 percent of our shares outstanding at believe that we will be able to achieve returns the beginning of this period. of 12 to 15 percent a year, on average, for the next several years. CASH DIVIDENDS Average Annual Return to Shareholders • The Company increased its quarterly divi- Organic Sales Growth 6-8% dend in 2005 by 11 percent to $.20 from $.18 per common share. The new quarterly divi- Share Repurchase 4-5% dend reflects the Company’s favorable Cash Dividends 2% long-term outlook, and strong balance sheet Total 12-15% Assumes operating margins at 2005 levels. 2005 Masco Corporation Annual Report Building Solutions 17
  20. 20. and cash flow, and makes 2005 the 47th in 2004. Excluding non-cash, pre-tax goodwill consecutive year in which dividends were impairment charges and income related to the increased. Behr litigation settlement, operating profit mar- gins were 13.0 percent in 2005 compared with CASH RETURNED TO SHAREHOLDERS 14.1 percent in 2004. Operating margins were • In 2005 and 2004, the Company returned adversely impacted by increased commodity, $1.3 billion and $1.2 billion, respectively, to freight, energy and other petroleum-based shareholders through share repurchases and costs, as well as a less favorable product mix. dividends. • Income from continuing operations for 2005, which was adversely impacted by increased Financial Highlights costs, declined to $872 million compared with $949 million in 2004, including non-cash, after- • Net sales from continuing operations were a tax charges for goodwill impairment of $69 record $12.6 billion, a seven percent increase million and $104 million in 2005 and 2004, over the $11.9 billion that we achieved in 2004. respectively. Earnings from continuing opera- Since the Company had no significant acquisi- tions were $2.03 per common share in 2005 tions during the past year, virtually all of that compared with $2.08 per common share in increase was from organic growth. 2004, including the non-cash, after-tax charges for goodwill impairment. PROFIT IMPROVEMENT PROGRAMS • During 2005, our profit improvement initiatives resulted in costs of approximately $30 million and savings of approximately $40 million. • The Company continues to reduce costs and add value through sourcing from emerging markets, including Asia. We now have over 1,300 employees and 400,000 square feet of manufacturing and distribution space in China. Our Asian sourcing has grown from • Net sales from North American operations, $200 million in 2003 to $450 million in 2004 accounting for 83 percent of the Company’s and in 2005 exceeded our goal of $550 million. sales, increased eight percent to $10.5 billion in We generally save 25 to 30 percent on products 2005 from $9.7 billion in 2004. Net sales of $2.1 and components that we source from Asia. billion from International operations, primarily in Europe, increased one percent from 2004. CAPITAL EXPENDITURES • Including discontinued operations, capital • Excluding the charges for goodwill expenditures were $282 million or 2.2 percent impairment in 2005 and 2004, earnings from of sales in 2005 compared with $310 million continuing operations in 2005 were $2.19 per or 2.5 percent of sales in 2004. Including dis- common share, compared with $2.31 per com- continued operations, depreciation and amor- mon share in 2004. tization expense was $241 million in 2005 • Operating profit margins, as reported, were compared with $237 million in 2004. 12.5 percent in 2005 compared with 13.4 percent 2005 Masco Corporation Annual Report 18 Building Solutions
  21. 21. CASH FLOW • In 2005, the Company achieved free cash flow (defined as cash from operations less capital expenditures and before dividends) of over $1 billion, for the third consecutive year. RETURN ON INVESTED CAPITAL (ROIC) • For the twelve months ended December 31, 2005 and 2004, return on invested capital (as reported) was 13.0 percent and 12.0 percent, respectively. We continue to believe that we will approximate our goal of 15 percent ROIC by the end of 2006 and 18 percent by 2010. LIQUIDITY • The Company ended 2005 in a strong financial position with over $2 billion in cash and mar- ketable securities, even after using $986 million to repurchase common shares in 2005. • In 2005, the Company generated $193 million of cash from the net disposition of financial investments and $278 million from the net dis- position of certain businesses. • During 2005, the Company issued $500 million of fixed-rate 4.8% notes due 2015. The Corporate Responsibility Company issued this debt to take advantage of and Governance favorable interest rates and in anticipation of $800 million of debt maturing in March 2006. • In late 2004, Masco published its first Corporate Sustainability Report that was BALANCE SHEET intended to provide stakeholders with a meas- • Working capital at December 31, 2005 (defined urement of our performance, a balanced and as accounts receivable and inventories less reasonable picture of Masco’s sustainability accounts payable) improved to 15.9 percent of practices, outcomes and activities as well as sales from 16.8 percent a year earlier. our track record in economic, environmental and social responsibility. CAPITALIZATION • We also believe in supporting the communi- • Debt as a percent of total capital was 49 per- ties in which we live and operate. As a respon- cent at December 31, 2005 compared with 44 sible corporate citizen, our Company, directly percent at December 31, 2004. and through the Masco Corporation 2005 Masco Corporation Annual Report Building Solutions 19
  22. 22. Foundation, provides financial and product • We would especially like to thank our former support to not-for-profit organizations that president, Wayne B. Lyon, who retired from promote affordable housing, and cultural and our Board of Directors last year, for his guid- other civic initiatives. ance and dedication during his many years of valued service to the Company. • During a year filled with natural disasters and human tragedy brought on by the Pacific Rim Leadership Tsunami and the multiple hurricanes that Masco’s greatest strength is its people. We impacted America’s Gulf Coast, Masco was strongly believe that outstanding performance proud to match employee gifts and respond to is achieved by people who are provided the the devastation directly with contributions of proper environment in which to excel and grow. cash and products for rebuilding communities We develop and recruit people who are able to and lives. The Foundation also aided the Gulf creatively apply their business knowledge with- Coast with funding directed to the American in a highly competitive global industry. While Red Cross and the Hands On Network, among Masco’s culture has evolved, the founding prin- others, to assist with bringing volunteer ciples that value individual initiative, innova- resources and related support to the region. tive management and maximum contribution • Masco’s Foundation also helped to rebuild have not changed. lives through a variety of initiatives including its major sponsorship of Habitat for We are committed to continually identifying Humanity’s® Jimmy Carter Work Project that and developing future generations of senior built 250 homes for low-income families leadership. Through Masco’s Leadership across the State of Michigan during one week Program and Masters of Business in June. Administration (MBA) Program and other in- house programs, we contribute to the training • We continue to strengthen our Ethics Program. and nourishing of our future leaders. In 2005, we created a separate position of Corporate Ethics Officer, expanded our train- • The Masco Leadership Program, begun in ing programs and enhanced our hotline to 2000 in partnership with Michigan State reach employees worldwide. In addition, we University’s Eli Broad School of Business, pro- continue to successfully advance ethics aware- vides key employees with a solid educational ness, as evidenced by the promotion of our foundation, as well as a practical application hotline and our high on-line training comple- of operational and leadership skills. Since its tion rates. We also introduced our on-line inception, 150 employees, representing ethics training course in Chinese. numerous operating companies, have gradu- • Excluding the Company’s Chief Executive ated from this innovative program. Officer, all Directors are independent under • The Masco MBA Program, developed in 1997, New York Stock Exchange standards and all is dedicated to developing our high-potential members of the Audit Committee, employees to take on strategic leadership roles Organization and Compensation Committee throughout the Masco family of companies. and Corporate Governance and Nominating Since its inception, 137 employees have grad- Committee are independent. uated from this program. 2005 Masco Corporation Annual Report 20 Building Solutions
  24. 24. Corporate Leadership Corporate Officers and Operating Executives Board of Directors WILLIAM T. ANDERSON DANIEL R. FOLEY RICHARD G. MOSTELLER Vice President–Controller Vice President– Vice President and DENNIS W. ARCHER 1, 3 Corporate Accounting Human Resources Senior Financial Advisor Chairman RONALD W. AYERS LAU FRANDSEN SHARON J. ROTHWELL Dickinson Wright PLLC Group President President–Masco Europe Vice President– THOMAS G. DENOMME 1, 3 Corporate Affairs GRAHAM BALLS EUGENE A. GARGARO, JR. Retired Vice Chairman and JAI SHAH Vice President–Controller Vice President and Secretary Chief Administrative Officer European Operations Vice President– Chrysler Corporation TED GOOLD Strategic Planning ALAN H. BARRY Group Vice President PETER A. DOW 1, 2 BARRY J. SILVERMAN President and Retired Vice Chairman, Chief CLAY H. KIEFABER Chief Operating Officer Vice President–Associate Operating Officer and Executive Group President General Counsel Committee Chairman DR. LILLIAN BAUDER LARRY J. LA BO Campbell-Ewald JOHN G. SZNEWAJS Vice President Vice President–Controller Vice President–Corporate ANTHONY F EARLEY, JR. 1, 3 . NICHOLAS BILLIG North American Operations Development and Treasurer Chairman, Chief Executive Group Vice President JOHN R. LEEKLEY Officer, President and Chief DAVID W. VAN HISE JOHN C. CALKINS Senior Vice President and Operating Officer Vice President–International Vice President– General Counsel DTE Energy Company JERRY VOLAS Corporate Services RICHARD A. MANOOGIAN VERNE G. ISTOCK 1, 2, 3 Group Vice President THOMAS N. CHIEFFE Chairman of the Board and Retired Chairman and President THOMAS VOSS Group Vice President Chief Executive Officer Bank One Corporation Executive Vice DONALD J. DEMARIE, JR. KAREN R. MENDELSOHN DAVID L. JOHNSTON 2, 3 President–Europe Group President Vice President– President and Vice Chancellor TIMOTHY WADHAMS Sales and Marketing of the University of Waterloo in WAYNE DEVINE Senior Vice President and Ontario, Canada DONALD J. MILROY Group Vice President Chief Financial Officer Group Vice President J. MICHAEL LOSH 1 DAVID A. DORAN JOHN C.WILLS Retired Chief Financial Officer JERRY W. MOLLIEN Vice President–Taxes Group President and Executive Vice President Vice President–Corporate Taxes General Motors Corporation CHARLES A. DOWD, JR. TIMOTHY J. MONTEITH Group President RICHARD A. MANOOGIAN Vice President and Chairman of the Board and MARIA C. DUEY Chief Information Officer Chief Executive Officer Vice President– Masco Corporation Investor Relations MARY ANN VAN LOKEREN 2, 3 JEFFREY D. FILLEY Chairman and Group Vice President Chief Executive Officer Krey Distributing Company 1 Member of Audit Committee 2 Member of Organization and Compensation Committee 2005 Masco Corporation Annual Report 3 Member of Corporate Governance and Nominating Committee 22 Building Solutions
  25. 25. Certifications Richard A. Manoogian and Timothy Wadhams have provided certifications to the Securities and Exchange Commission as required by Section 302 of the Sarbanes-Oxley Act of 2002. These certifications are included as Exhibits within the Company to examine and evaluate 31.a and 31.b to the Company’s Form 10-K for the adequacy and effectiveness of established the year ended December 31, 2005. internal controls as related to Company policies, procedures and objectives. The accompanying As required by the New York Stock Exchange report of the Company’s Independent (NYSE), on June 7, 2005, Richard A. Manoogian Registered Public Accounting Firm states their submitted the annual Chief Executive Officer opinion on the Company’s consolidated finan- certification to the NYSE that stated that he cial statements, management’s assessment of was not aware of any violation by the internal controls over financial reporting and Company of the NYSE corporate governance the effectiveness of internal controls over listing standards. financial reporting, based on audits conducted in accordance with the standards of the Responsibility for Public Company Accounting Oversight Board Financial Statements (United States). Management is responsible for the fairness and The Audit Committee of the Board of Directors integrity of the Company’s consolidated finan- meets periodically with both management and cial statements. In order to meet this responsi- the independent registered public accounting bility, management maintains formal policies firm to provide oversight with respect to the and procedures that are consistent with high Company’s financial reporting process and standards of accounting and administrative system of internal controls. practices, which are regularly communicated within the organization. In addition, manage- ment maintains a program of internal auditing 2005 Masco Corporation Annual Report Building Solutions 23
  26. 26. Forty-Nine Years of Sales Growth 2005 Masco Corporation Annual Report 24 Building Solutions
  27. 27. Information for Shareholders for certificates and optional cash payments regarding the Plan should be sent to: COMPANY PROFILE The Bank of New York Masco Corporation is one of the world’s largest man- Dividend Reinvestment Department ufacturers of brand-name consumer products for the P.O. Box 1958 home improvement and new construction markets. The Company is also a leading provider of services Newark, NJ 07101-1958 that include the sale and installation of insulation and Duplicate Mailings other building products. Shares owned by one person, but held in different Our products include faucets, kitchen and bath cabi- forms of the same name (e.g., John Smith, John B. Smith, nets, architectural coatings (paints and stains), bath J.B. Smith), may result in duplicate mailings of share- and shower units, spas, showering and plumbing holder information at added expense to the Company. specialties, windows and electronic locksets and other Please notify The Bank of New York by calling hardware. 800-524-4458 in order to eliminate such duplication. The Company has approximately 62,000 employees Multiple shareholders who reside at one address and and over 120 manufacturing facilities. Masco’s princi- hold their shares through a bank or broker may receive pal manufacturing facilities are located throughout only one Annual Report and Proxy Statement. This the United States. International operations are located “householding” procedure reduces duplicate mailings primarily in Europe. and Company expenses. Shareholders who wish to opt out of householding should contact their bank or broker. EXECUTIVE OFFICES Masco Corporation Other Inquiries 21001 Van Born Road All other shareholder inquiries, including those Taylor, MI 48180 regarding lost, stolen or destroyed stock certificates, Phone: 313-274-7400, Fax: 313-792-4177 should be directed to: The Bank of New York INDEPENDENT REGISTERED PUBLIC Investor Services Department ACCOUNTING FIRM P.O. Box 11258 PricewaterhouseCoopers LLP New York, NY 10286-1258 PricewaterhouseCoopers Plaza Phone: 800-524-4458 (in the U.S.) 1900 St. Antoine 212-815-3700 (outside of the U.S.) Detroit, MI 48226-2263 888-269-5221 (hearing inpaired-TTY phone) E-Mail Address: STOCK EXCHANGE INFORMATION Masco Corporation’s common stock is traded on the INTERNET CONTACT New York Stock Exchange under the symbol MAS. Current information about Masco Corporation can be found by visiting our home page on the TRANSFER AGENT, REGISTRAR AND Internet at or via e-mail at DIVIDEND DISBURSING AGENT Answers to many of your shareholder questions and requests for forms are available by visiting The Bank INVESTOR RELATIONS CONTACT of New York’s web site at Additional information about the Company is avail- able without charge to shareholders who direct a Transfer and Address Changes request to: Send certificates for transfer and address changes to: Maria C. Duey The Bank of New York Vice President–Investor Relations Receive and Deliver Department Masco Corporation P.O. Box 11002 21001 Van Born Road New York, NY 10286-1002 Taylor, MI 48180 Dividend Reinvestment Plan ANNUAL MEETING OF SHAREHOLDERS Masco Corporation has appointed The Bank of New York to serve as agent for its Dividend Reinvestment The 2006 Annual Meeting of Shareholders of Masco Plan. All enrollments, terminations, sales, requests Corporation will be held at the executive offices of the Company on May 9, 2006 at 10:00 a.m., E.D.T.
  28. 28. Masco Corporation 21001 Van Born Road Taylor, MI 48180 313.274.7400