Masco deutsche bank june 2015.final

Deutsche Bank Global Industrials and

Basic Materials Conference Masco Corporation

Safe Harbor Statement

Statements contained 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, our ability to maintain our competitive position in our industries, risks associated with the proposed spin-off of our Services Business, our ability to realize the expected benefits of the spin-off, the timing and terms of our share repurchase program, and our ability to reduce corporate expense and simplify our organizational structure. We discuss many of the risks we face in Item 1A, “Risk Factors” in our most recent 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.

The Company believes that the non-GAAP performance measures and ratios that are contained herein, used in managing the business, may provide users of this financial information 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 Securities and Exchange Commission and is available on Masco's website at www.masco.com.

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http://www.masco.com/

K E Y M E S S A G E S T O D A Y

The New Masco: Transformation, Focus, Results

3

A Transforming

Business

Delivering

Strengthened

Performance

Clear Strategic

Focus

Organization

Operational Excellence

Portfolio and Capital

Allocation

A Transforming Business

Formed a new management team

Implemented talent framework

Instituted a center led business model

Restructured HQ

Made key business unit management changes

Increased dividend

Authorized share buy back of 50 million shares

Announced spin off of TopBuild

Reduced costs and increased efficiencies

Standardized planning processes

Prioritized capability building

Drove cost improvement culture

Transformational Initiatives

4

Revenue Breakdown – R&R vs. New Home Construction*

Revenue Breakdown – International vs. North America*

R E S U L T S

Creating a Less Cyclical Business

5

N. America

81%

Int’l

19%

R&R

71%

New home

29%

N. America

77%

Int’l

23%

R&R

82%

New home

18%

Post-Spin

More Global Diversification

Less Cyclicality

Post-Spin

Pre-Spin

Pre-Spin

*Based on 2014 revenue and company estimates. See appendix for GAAP reconciliation



6

A Transforming

Business

Delivering

Strengthened

Performance

Clear Strategic

Focus

Drive full potential of our

core businesses

Clear Strategic Focus

7

Leverage opportunities across

our portfolio

Actively manage portfolio


core businesses

S T R A T E G I C F O C U S # 1 D R I V E F U L L P O T E N T I A L O F O U R C O R E B U S I N E S S

Leverage Our Brands

8

Masco Cabinetry (cabinet manufacturer

in U.S.)

Delta® (faucet brand

in North America)

Behr® (DIY architectural

coatings in

North America)

Milgard® (vinyl window

brand in Western U.S.)

Hansgrohe® (global faucet

and mixer brand)

Arrow®, Liberty®, BrassCraft® and

Watkins® (in their respective

categories)

#2

#1

#1 #1

#1

#2


Lead in Innovation

9

30%*

Examples of New Products / Technologies

Existing

Products

2014 2013 2012

70%

Hansgrohe SelectTM

Collection

KraftMaid® New Design Launch

2014 Revenues

Delta® Toilets

Paint & Primer in One

KraftMaid® Vanities

Behr DeckOver®

Coating

KraftMaid® VantageTM Cabinetry

Behr Marquee®

Coating

Delta Temp2OTM

Showerhead

2015

Hansgrohe® Rain XLTM

Showerhead

Behr Textured DeckOver™

Coating

Axor® Starck V Collection

*Based on company estimates

10


Drive Operational Excellence

Aligned

on Key

Financial

Metrics

Capitalize on

our Strong

Operating

Leverage

Strong

Management

Team

Culture of

Accountability


11


core businesses


our portfolio

Actively manage portfolio


our portfolio

S T R A T E G I C F O C U S # 2 L E V E R A G E A C R O S S O U R P O R T F O L I O

Leverage Opportunities Across Our Portfolio

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• Talent • Purchasing • Innovation • Sales • Brands

Actively manage portfolio Actively manage portfolio


13


core businesses


our portfolio

• Financially attractive

• Differentiated / leadership position

• Aligned with other Masco businesses

• Attractive end markets*

• Accelerate organic strategies

• Meet financial hurdles

14

S T R A T E G I C F O C U S # 3 A C T I V E L Y M A N A G E P O R T F O L I O

Disciplined Portfolio Management

*Repair and Remodel, Global Segments, Low Cyclicality, Brand and Innovation Drive Value

Driving

Value

Creation

Portfolio Refinements

Strategic Acquisitions

+



15

A Transforming

Business

Delivering

Strengthened

Performance

Clear Strategic

Focus

Delivering Strengthened Performance:

Consistent Profitability

16

$7.5

$8.2

$8.5

2012 2013 2014

Revenues ($B)

$500

$721

$851

2012 2013 2014

$0.37

$0.77

$1.02

2012 2013 2014

EPS* ($)

Operating Profit* ($M)

6.5%

CAGR 30%

CAGR 66%

CAGR

*Operating Profit as adjusted, excluding intangible assets, litigation, rationalization and other charges ($198M in 2012, $48M in 2013 and $63M in 2014). Operating profit as reported was $302M in

2012, $673M in 2013 and $788M in 2014. EPS as reported was ($0.16) in 2012, $0.83 in 2013 and $2.39 in 2014.

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ROIC WACC

ROIC exceeded WACC by 160 bps in 2014

H I G H P E R F O R M A N C E

Delivering Strengthened Performance: Solid Returns

3.8%

5.8%

9.2% 10.6%

0%

2%

4%

6%

8%

10%

12%

2011 2012 2013 2014

Clear Strategies and Future Outlook

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Decorative

Architectural

Products

Segment

Cabinets

and

Related

Products

Segment

Other

Specialty

Products

Segment

Plumbing

Products

Segment

1.Extend Milgard’s leadership position in Western U.S.

2.Pursue geographic expansion with Milgard

3.Extend UK Window Group’s leadership position

Sales Growth:

9-11% CAGR

Operating Margins:

~10-13%

1.Extend leadership in N. American plumbing

2.Pursue category expansion

3.Growth in priority international markets, both organically and

inorganically

1.Extend our Consumer leadership position

2.Grow share in the PRO paint segment

3.Leverage the KILZ® and Liberty® family of brands

Sales Growth:

4-6% CAGR

Operating Margins:

~16-17%

3 Year Goals Strategic Priorities

Sales Growth:

6-9% CAGR

Operating Margins:

~18%

2015 Goal

EBIT target

$10M

1.Profitably recover KraftMaid and Merillat share

2.Execute Builder Direct turnaround

3.Achieve margin improvement targets

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Note: Future performance reflects company estimates and excludes the Installation Segment.

7% CAGR

15% CAGR

26% CAGR

Revenue* ($B)

Operating Profit* ($B)

EPS* ($)

$6.8

$8.3

2014 2017

$0.91

$1.80

2014 2017

$0.75

$1.15

2014 2017

*2014 revenue and operating profit uses a $1.10 Euro to USD foreign exchange rate . See appendix for GAAP reconciliation

Delivering Strengthened Performance:

Profitable Growth

Delivering Strengthened Performance: Strong FCF

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Invest in the business

Pay down debt

Bolt on acquisitions

Return Capital to

Shareholders

Disciplined

capital

deployment of

~$2B FCF

2015 - 2017

+

+

New Masco. Positioned to Outperform

Leveraging a portfolio of industry leading

global brands with compelling growth

strategies

Aligned management team with a clear

strategic focus

Strong free cash flow generation and capital

management driving value to shareholders

+

Transformative actions have delivered

strengthened results

21

Positioned to

Outperform

Questions and Answers

Appendix

24

($ in Millions) 2014

Net Sales

Net sales, as reported $ 8,521

Installation and Other Services 1,515

Net sales, as adjusted $ 7,006

Currency adjustment 204

Net sales, as adjusted and FX modified $ 6,802

Operating Profit

Operating Profit, as reported $ 788

Installation and Other Services (58)

Rationalization charges 64

(Income) charge for litigation settlements (9)

Costs related to spin-off of Services Business 6

Operating Profit, as adjusted $ 791

Currency adjustment (36)

Operating Profit, as adjusted and FX modified $ 755

NOTE: Financial results exclude Installation and Other Services businesses. Subsequent to the spin-off transaction, Masco will account for

the Installation and Other Services businesses as a discontinued operation and restate its financial statements. Actual restatements may

vary from amounts shown herein.

2014 Reconciliations – Sales and Operating Profit

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NOTE: Financial results exclude Installation and Other Services businesses. Subsequent to the spin-off transaction, Masco will account for

the Installation and Other Services businesses as a discontinued operation and restate its financial statements. Actual restatements may

vary from amounts shown herein.

(in millions, except per common share data) 2014

Earnings Per Common Share

Income from continuing operations

before income taxes, as reported $ 575

Installation and Other Services (58)

Rationalization charges 64

Costs related to spin-off of Services Business 6

(Income) charge for litigation settlements (9)

(Gain) from financial investments, net (4)

Loss from equity investments, net 2

Income from continuing operations

before income taxes, as adjusted 576

Tax at 36% rate (207)

Less: Net income attributable to noncontrolling interest 47

Income from continuing operations, as adjusted $ 322

Income per common share, as adjusted $ 0.91

Average diluted common shares outstanding 352

2014 Reconciliations – EPS

($ in Millions) 2015 Estimate 2014 Actual

Rationalization Charges1, 3 ~ $34 $72

Tax Rate4 ~ 36% 34%

Interest Expense7 ~ $230 $225

General Corp. Expense2 ~ $100 $103

Capital Expenditures ~ $190 $128

Depreciation &

Amortization3

~ $154 $167

Shares Repurchased5 $400-500 $158

Shares Outstanding6 347 million 352 million

1. Based on 2015 business plans. 2015 includes approximately $26 million related to spin-off transaction costs.

2. Excludes rationalization expenses of $33 million for the year ended December 31, 2014 and $17 million (estimated) for the year ended December 31, 2015.

3. Includes accelerated depreciation of $1 million for the year ended December 31, 2014. Such expenses are also included in the rationalization charges.

4. Excludes $529 million release of the valuation allowance in 2014.

5. 2015 and 2014 share repurchases include approximately 675 thousand and 1.7 million shares, respectively, to offset grants of long-term stock awards.

6. Reflects shares outstanding as of March 31, 2015 and assumes no further share repurchases in 2015.

7. Reflects ~$5 million of incremental interest expense due to the March 2015 pre-funding of our June 2015 debt maturity.

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2015 Guidance Estimates

2014 Segment Mix*

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 *Based on Company estimates.

Business Segment

Plumbing Products

Installation and Other Services

Decorative Architectural Products

$3.3B

$1.5B

$2.0B

Revenue 2014 % of Total

39%

23%

18%

$8.5B 100% Total Company

Other Specialty Products $0.7B 8%

R&R% vs. NC NA% vs. Int’l

82% 59%

99% 100%

18% 100%

74% 74%

71% 81%

Cabinets and Related Products $1.0B 12% 55% 91%

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2014 International Revenue Split*

*Based on Company estimates.

International Sales Accounted for ~19%

of Total 2014 Masco Sales

28%

5%

10%

25%

9%

14%

9%

UK

Northern Europe

Southern Europe

Central Europe

Eastern Europe

Emerging markets

Other

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Investor Relations

Masco deutsche bank june 2015.final