Safe Harbor Statement2Written and oral statements made in this presentation that reflect our views about our futureperformance constitute "forward-looking statements" under the Private Securities Litigation ReformAct 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 aredifficult to predict and, accordingly, our actual results may differ materially from the resultsdiscussed in our forward-looking statements. We caution you against relying on any of theseforward-looking statements. Our future performance may be affected by our reliance on newhome construction and home improvement, our reliance on key customers, the cost and availabilityof raw materials, uncertainty in the international economy, shifts in consumer preferences andpurchasing practices, our ability to improve our underperforming businesses, and our ability tomaintain our competitive position in our industries. These and other factors are discussed in detailin Item 1A, “Risk Factors” in our Annual Report on Form 10-K, as well as in our Quarterly Reportson Form 10-Q and in other filings we make with the Securities and Exchange Commission. Ourforward-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 itis not possible for us to predict all of them. Unless required by law, we undertake no obligation toupdate publicly any forward-looking statements as a result of new information, future events orotherwise.Certain of the financial and statistical data included in this presentation and the relatedmaterials are non-GAAP financial measures as defined under Regulation G. The Company believesthat non-GAAP performance measures and ratios used in managing the business may provideattendees of this presentation with additional meaningful comparisons between current results andresults in prior periods. Non-GAAP performance measures and ratios should be viewed in additionto, and not as an alternative for, the Companys reported results under accounting principlesgenerally accepted in the United States. Additional information about the Company is contained inthe Companys filings with the SEC and is available on Masco’s web site, www.masco.com.
Masco Q1 2013 Results – Agenda3Topic• Summary of Results Tim Wadhams• Financial/Operations Review John Sznewajs• Outlook Tim Wadhams• Q&A
Key Messages Today4Continued margin expansionSales growth driven by increased North American newhome construction activityCabinet segment improves profitability to break-evenContinued weakness in the Eurozone
Strategy Execution Highlights Q1 20135Expand marketleadershipReduce costsImproveunderperformingbusinesses123Strengthenbalance sheet4• Continued success with new product and programintroductions at retail with Plumbing and DecorativeArchitectural Products• Additional greenfield locations added in Installation andOther Services• Continued commitment to cost control• Total cost productivity savings driven by lean and sourcingefforts• Cabinetry segment achieves break-even profitability onan adjusted basis• Continued improvement in operating performance atInstallation and Other Services• Successfully negotiated a new five year unsecured $1.25Brevolving credit facility• Strong working capital management
Masco Q1 2013 Results – Agenda6Topic• Summary of Results Tim Wadhams• Financial/Operations Review John Sznewajs• Outlook Tim Wadhams• Q&A
Best First Quarter Operating Margin Since 20077($ in Millions)First Quarter2013RevenueGrowth$1,8764%Adjusted Operating Profit*Y-O-Y Change$140$22Adjusted Operating Margin*Y-O-Y Change7.5%100 bpsAdjusted EPS* $0.13Quarterly Highlights• North American sales increased 6%; International salesdecreased 2% in local currency• Sales growth driven by increased sales in new home constructionand retail• Adjusted operating profit up 19%, benefitting from operatingleverage and continued cost control*See appendix for reconciliation to GAAP information.
$118M$11M $6M $5M $140MQ1 2012Operating Profit*Net Price/Commodity Net Volume/Mix Profit Improvement& All Other NetQ1 2013Operating Profit*Commitment to Cost Control and Leverage on IncreasedVolume Favorably Impacting Margins8Y-O-Y Change inOperating Profit $22M*See appendix for reconciliation
Plumbing Products:Strong Performance in North America Partially offsetby International9Quarterly Highlights• North American faucet and toilet sales increased mid-teens percent• North American sales growth partially offset by lost bathware businessand sales declines in European markets• Margins impacted by an unfavorable commodity hedge, unfavorable mixand incremental marketing costs($ in Millions)First Quarter2013RevenueGrowth$7623%Adjusted Operating Profit*Y-O-Y Change$87($19)Adjusted Operating Margin*Y-O-Y Change11.4%(290) bps*Excluding business rationalization charges of $1 million and $9 million in the first quarters of 2013 and 2012, respectively.
Decorative Architectural Products:Weather Impacts Core Paint Sales Comparables; Direct toPro and Expansion into Mexico Continue to Grow10Quarterly Highlights• Weather negatively impacts core paint business comparables• Behr Pro, Behr’s expansion into Mexico, and retail sales of Builder’sHardware continue to grow• Margins positively impacted by the anniversary of pricing actions andreduced program costs($ in Millions)First Quarter2013RevenueGrowth$4320%Operating ProfitY-O-Y Change$89$16Operating MarginY-O-Y Change20.6%380 bps
Cabinets and Related Products:Segment Breaks Even; Profitable in North America11Quarterly Highlights• North American sales increased 5% driven by new home construction• Retail pricing and promotional strategies positively impacting results• Excludes Danish RTA business, which is in discontinued operations($ in Millions)First Quarter2013RevenueY-O-Y Change$2364%Adjusted Operating Profit*Y-O-Y Change$ -$14Adjusted Operating Margin*Y-O-Y Change0%610 bps*Excluding business rationalization charges of $4 million and $2 million in the first quarters of 2013 and 2012, respectively.
Installation and Other Services:Continued Positive Momentum on Top and Bottom Line12Quarterly Highlights• Sales growth driven by higher volumes in residential new home constructionpartially offset by the mix shift in starts composition• Installation sales to residential new home construction increased ~30%• Margin improvement driven by operating leverage and continued cost control($ in Millions)First Quarter2013RevenueGrowth$31212%Operating LossY-O-Y Change($4)$10Operating MarginY-O-Y Change(1.3%)370 bps
Other Specialty Products:Strong Performance Reflects Share Gains andProfit Improvement13Quarterly Highlights• North American window sales increased ~20%• Sales growth driven by increased new home construction and repair &remodel sales, new product introductions and share gains• Margin improvement driven by operating leverage and continued costcontrol($ in Millions)First Quarter2013RevenueY-O-Y Change$1348%Adjusted Operating Profit*Y-O-Y Change$2$7Adjusted Operating Margin*Y-O-Y Change1.5%550 bps*Excluding business rationalization charges of $3 million in the first quarter of 2013.
Strengthening the Balance Sheet• Continued strong working capital execution• We successfully entered into a new five year $1.25billion unsecured revolving credit facility14$1.0 billion of cash as of 3/31/2013
Masco Q1 2013 Results – Agenda15Topic• Summary of Results Tim Wadhams• Financial/Operations Review John Sznewajs• Outlook Tim Wadhams• Q&A
Delivering on 2013 Priorities - Q1 HighlightsInvestment in strategic growth initiativesGeographic expansionTotal cost productivityReduce debt by ~$200MCabinet profit improvementProfitably grow InstallationGrow share of key brands16Successfully launch new products and programs
2013 OutlookRisks Opportunities• European economicuncertainty• Mix shifts• Commodity volatility• Improving demand in newhome construction• Successful new product andprogram launches at retail• Share gains at retail and withbig builders• Strong liquidity• Capitalize on operatingleverage17
Appendix – Profit Reconciliation – First Quarter20($ in Millions) Q1 2013 Q1 2012Sales $ 1,876 $ 1,806Gross Profit – As Reported $ 508 $ 484Rationalization charges 6 10Gross Profit – As Adjusted $ 514 $ 494Gross Margin - As Reported 27.1% 26.8%Gross Margin - As Adjusted 27.4% 27.4%Operating Profit – As Reported $ 132 $ 109Rationalization charges 8 11Charge (income) for litigation settlements, net - (2)Operating Profit – As Adjusted $ 140 $ 118Operating Margin - As Reported 7.0% 6.0%Operating Margin - As Adjusted 7.5% 6.5%
Appendix – EPS Reconciliation – First Quarter21(in Millions) Q1 2013 Q1 2012Income from Continuing Operations before Income Taxes – As Reported $ 79 $ 60Rationalization charges 8 11Charge (income) for litigation settlements, net - (2)Gain from financial investments, net (3) (16)Income from Continuing Operations before Income Taxes – As Adjusted $ 84 $ 53Tax at 36% rate benefit (expense) (30) (19)Less: Net income attributable to non-controlling interest 9 11Net Income, as adjusted $ 45 $ 23Income per common share, as adjusted $ 0.13 $ 0.07Shares Outstanding 352 350
($ in Millions) 2013 Estimate1 2012 ActualRationalization Charges ~ $40 $78Tax Rate ~ 25% 198%Interest Expense ~ $240 $254General Corp. Expense2 ~ $130 $126Capital Expenditures ~ $165 $119Depreciation & Amortization3 ~ $200 $214Shares Outstanding for EPS 352 million 349 million2013 Guidance Estimates1 – 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. Such expenses are alsoincluded in the rationalization charges.22
Segment Mix Full Year 2012 EstimateBusiness SegmentCabinets andRelated ProductsPlumbingProductsInstallation andOther ServicesDecorativeArchitecturalProducts$0.9B$3.0B$1.2B$1.8BRevenue 2012 % of Total40%24%12%16%$7.5B 100%Total company23Other SpecialtyProducts $0.6B 8%R&R% vs. NC NA% vs. Int’l82% 59%99% 100%69% 92%16% 100%75% 75%73% 80%R&R = % of sales to repair and remodel channelsNC = % of sales to new construction channelsNA = % of sales within North AmericaInt’l = % of sales outside North America
2012 Masco International Revenue Split*24 *Based on company estimatesInternational Sales Accounted for ~20%of Total 2012 Masco Sales6%26%3%5%34%11%15%OtherUnited KingdomNorthern EuropeSouthern EuropeCentral EuropeEastern EuropeEmerging Markets