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, and our ability to achieve cost savings through business rationalizations and
other initiatives. 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.
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.
2
3. Masco Q3 2012 Results – Agenda
Topic
• Summary of Results Tim Wadhams
• Financial/Operations Review John Sznewajs
• Outlook Tim Wadhams
• Q&A
3
4. Key Messages Today
• Sales growth in North America of 4% offset by
challenging economic conditions in Europe
• Strengthening new home construction activity
positively impacting sales
• Repair and remodel activity improved modestly; big
ticket remodel remains weak
• Successful execution on price/commodity relationships
and total cost productivity continue to improve margins
4
6. Strategy Execution Highlights
1
• New Delta brand extensions at retail with toilets
Expand market • Expansion of Behr Paint with The Home Depot Mexico
leadership • New Builder’s Hardware programs driving share gains
2
• Exceeding total cost productivity targets
Reduce costs • Additional headcount reductions and plant closures
3
• Installation segment nearly break even in Q3
Improve • Additional rationalization actions taken in the Cabinet
underperforming segment
businesses
4 • Debt pay down in July 2012
Strengthen • Cash at 9/30/2012 is $1.2 billion
Balance Sheet
6
7. Laser Focus on Achieving Breakeven
Cabinets
YTD operating profit improvement of $20M, principally driven by
cost reductions in North America
Benefits from increased new home construction activity offset by:
• Market conditions in European economies
• Challenges implementing North American dealer and
countertop strategies
Plant closure and headcount reduction actions announced in the
third quarter expected to reduce costs by $20M annually
Installation
Almost breakeven in Q3 2012
YTD operating profit improvement of $41M driven by new home
construction activity, cost reductions from lean, ERP leverage,
and supply chain management
Continued penetration of retrofit and commercial channels
7
8. Masco Q3 2012 Results – Agenda
Topic
• Summary of Results Tim Wadhams
• Financial/Operations Review John Sznewajs
• Outlook Tim Wadhams
• Q&A
8
9. Profit Margin Growth on Flat Sales
Third Quarter
($ in Millions)
2012
Revenue $1,976
Y-O-Y Change (0%)*
Adjusted Operating Profit** $142
Y-O-Y Change $14
Adjusted Operating Margin** 7.2%
Y-O-Y Change 70 bps
Adjusted EPS** $0.13
*Excluding the effect of currency, third quarter 2012 sales increased 2% compared to 2011.
** As reported operating profit $101M; operating margin 5.1%; E.P.S. of $.06; see appendix for reconciliation.
9
10.
11. Plumbing Products:
Strong Performance in North American Faucets
Third Quarter
($ in Millions)
2012
Revenue $736
Y-O-Y Change (4%)*
Adjusted Operating Profit** $81
Y-O-Y Change ($11)
Adjusted Operating Margin** 11%
Y-O-Y Change (100) bps
*Excluding the effect of currency, third quarter sales 2012 increased 1% compared to 2011.
**Excludes business rationalization charges of $6M and $1M in the third quarter of 2012 and 2011, respectively.
Highlights
• Sales of North American faucets increased high single digits
• International sales flat in local currency
• Margin negatively impacted by:
• Incremental program costs of $5 million
• Currency of $5 million
11
12. Decorative Architectural Products:
Top Line Growth, Y-O-Y Margin Improvement
Third Quarter
($ in Millions)
2012
Revenue $481
Growth 6%
Operating Profit $96
Y-O-Y Change $8
Operating Margin 20.0%
Y-O-Y Change 70 bps
Highlights
• Revenues benefitted by Behr Paint and Primer in One sales and price
increases
• Operating profit margin impacted by favorable price/commodity
relationship and improved results in Builder’s Hardware
12
13. Cabinets and Related Products:
International Weakness Slowing Segment Improvement
Third Quarter
($ in Millions)
2012
Revenue $291
Y-O-Y Change (5%)*
Adjusted Operating Loss** $(26)
Y-O-Y Change $1
Adjusted Operating Margin** (8.9%)
Y-O-Y Change (10) bps
*Excluding the effect of currency, third quarter 2012 sales decreased 2% compared to 2011.
**Excludes business rationalization charges of $9M and $7M in the third quarter of 2012 and 2011, respectively.
Highlights
• North American new home construction and home center sales
strength offset by weaker dealer sales
• International sales impacted by continued weak European macro-
economic conditions
• North American profit improvement partially offset by International
results
13
14. Installation and Other Services:
Strong Execution Reflected in Top & Bottom Line
Performance
Third Quarter
($ in Millions)
2012
Revenue $312
Growth 9%
Adjusted Operating Loss ($1)
Y-O-Y Change* $12
Adjusted Operating Margin (0.3%)
Y-O-Y Change* 420 bps
*Excludes business rationalization charges of $1M and $2M in the third quarter of 2012 and 2011, respectively.
Highlights
• Continued growth in new home construction, commercial and retrofit
• Strong insulation installation sales growth of ~20%
• Margins reflect operating leverage and profit improvement initiatives
14
15. Other Specialty Products:
Strong North American Window Performance
Third Quarter
($ in Millions)
2012
Revenue $156
Y-O-Y Change (3%)
Adjusted Operating Profit* $16
Y-O-Y Change $2
Adjusted Operating Margin* 10.3%
Y-O-Y Change 160 bps
*Excludes business rationalization charges of $1M and $2M in the third quarter of 2012 and 2011, respectively.
Also excludes warranty change in estimate of $12M in the third quarter of 2012.
Highlights
• North American window sales increased high single digits driven by new
home construction and replacement window sales, partially offset by the exit
of select US window markets in late 2011
• Margin improvement fueled by profit improvement initiatives
• Softness in hand tools sales principally driven by a weaker roofing market
15
16. Masco Q3 2012 Results – Agenda
Topic
• Summary of Results Tim Wadhams
• Financial/Operations Review John Sznewajs
• Outlook Tim Wadhams
• Q&A
16
17. Delivering on 2012 Priorities – Q3 Highlights
Cabinet profit improvement
Installation profit improvement
Successfully launch new products and programs
Reduce debt by ~$400M/refinance $400M
Investment in strategic growth initiatives
Grow share of key brands
Total cost productivity
Geographic expansion
17
18. Outlook
Tailwinds Headwinds
• Improving demand in new • Continued slow economic
home construction activity in European
economies
• Successful product
introductions at retail • Aggressive promotional
environment at retail
• Favorable price/commodity
relationships • International Plumbing mix
impact
• Improved balance sheet
• Commodity cost volatility
• Additional profit improvement
opportunities identified and • Slow and uneven recovery in
actions taken U.S. repair and remodel
activity
18
21. Appendix – Profit Reconciliation
($ in Millions) Q3 2012 Q3 2011
Sales $ 1,976 $ 1,978
Gross Profit – As Reported $ 500 $ 495
Rationalization Charges 11 8
Other Specialty Products - Warranty 12 -
Gross Profit – As Adjusted $ 523 $ 503
Gross Margin - As Reported 25.3% 25.0%
Gross Margin - As Adjusted 26.5% 25.4%
Operating Income – As Reported $ 101 $ 114
Rationalization Charges 28 13
Litigation Charge 1 1
Other Specialty Products - Warranty 12 -
Operating Profit – As Adjusted $ 142 $ 128
Operating Margin - As Reported 5.1% 5.8%
Operating Margin - As Adjusted 7.2% 6.5%
21
22. Appendix – EPS Reconciliation
(in Millions) Q3 2012 Q3 2011
Income from Continuing Operations before Income Taxes – As Reported $ 45 $ 73
Rationalization Charges 28 13
Litigation Charge 1 1
Financial Investment (Income), Net (2) (19)
Other Specialty Products - Warranty 12 -
Income from Continuing Operations before Income Taxes – As Adjusted 84 68
Tax at 36% rate benefit (expense) (30) (24)
Less: Net income attributable to non-controlling interest (9) (13)
Net Income – as adjusted $ 45 $ 31
Income per common share – as adjusted $ 0.13 $ 0.09
Shares 350 348
22
23. 2012 Guidance Estimates
($ in Millions) 2012 Estimate 2011 Actual
Rationalization Charges1 ~ $65 $121
Tax Rate2 ~ 110% 18%
Interest Expense ~ $250 $254
General Corp. Expense3 ~ $125 $118
Capital Expenditures ~ $130 $151
Depreciation & ~ $210 $263
Amortization4
Outstanding Shares 350 million 348 million
1 – Based on current business plans.
2 – Tax rate for 2011 excludes the valuation allowance on the Federal deferred income tax assets and the
impairment charge for goodwill and other intangible assets.
3 – Excludes rationalization expenses of $11M incurred through September 30, 2012.
4 – Includes accelerated depreciation of $58M for the year ended December 31, 2011 and $12M for the nine
months ended September 30, 2012. Such expenses are also included in the rationalization charges.
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Editor's Notes
We began 2012 by communicating the Strategic Initiatives which we would focus on in 2012 to deliver greater performance and outperform a housing recovery.
