q2 2015 earnings presentation

Second Quarter

Earnings Presentation

MASCO CORPORATION

July 28, 2015

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, 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/

Masco Q2 2015 Results

Topic

• Summary of Results Keith Allman

• Financial/Operations Review John Sznewajs

• Q&A

3

Q 2 2 0 1 5 I N R E V I E W

Strong Operating Leverage and Execution Drive Outperformance

● Strong growth across all segments in local currency

● Operational leverage drives profit growth

● Cabinetry turnaround accelerated

● Repurchased ~3.8 million shares

● Completed spin-off of TopBuild Corp.

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Driving Performance


Topic



• Q&A

5

Strong Performance from all Segments

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*See Appendix for GAAP reconciliation.

Quarter Highlights • Total company sales increased 7% excluding the effects of foreign currency

translation • North American sales increased 7%; International sales increased 5% in local

currency • FX negatively impacted sales by $77 million and profit by $19 million

($ in Millions) Second Quarter

2015

Revenue Y-O-Y Change

$1,929 3%

Operating Profit* Y-O-Y Change

$280 22%

Operating Margin* Y-O-Y Change

14.5% 230 bps

Adjusted EPS* Y-O-Y Change

$0.38 36%

P L U M B I N G P R O D U C T S

7

Wholesale/Trade and Retail Continues to Drive Growth


2015


$846 0%

Operating Profit Y-O-Y Change

$138 (1%)

Operating Margin Y-O-Y Change

16.3% (10 bps)

Quarter Highlights

• North American sales increased 8%; International sales increased 4% in local currency

• FX negatively impacted sales by approximately $63 million and profit by $12 million

• Wholesale/trade and retail channels continue strong performance

D E C O R AT I V E A R C H I T E C T U R A L P R O D U C T S

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New Products & Pro Paint Drive Sales Growth


2015


$622 4%


$133 18%


21.4% 240 bps

Quarter Highlights

• Sales increased 6% excluding the effects of foreign currency translation

• New Behr Marquee® drives core sales growth

• Behr Pro® initiative continues to gain momentum

• Margins enhanced by the timing of promotional spend from Q2 to Q3

C A B I N E T S A N D R E L AT E D P R O D U C T S

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Business Turnaround Accelerating


2015


$269 6%


$15 N/M


5.6% 880 bps

Quarter Highlights

• Home center sales drive top-line growth

• KraftMaid® dealer channel sales increased mid-single digits

• Improved operating efficiencies driving margin expansion

O T H E R S P E C I A LTY P R O D U C T S

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Growth and Positive Mix Drive Performance


2015


$192 8%

Operating Profit* Y-O-Y Change

$21 40%

Operating Margin* Y-O-Y Change

10.9% 250 bps

Quarter Highlights

• Sales increased 10% excluding the effects of foreign currency translation

• Strong performance across all channels and geographies in North American windows

• Completed acquisition of U.K.-based Evolution Manufacturing

*Excludes business rationalization charges for the second quarter 2014 of $1 million.

Strong Balance Sheet and Disciplined Capital Allocation

Liquidity as of 6/30/2015

Cash and cash investments $1.3B

Short-term bank deposits $0.2B

Total $1.5B

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Q2 2015 Accomplishments

• Repurchased approximately 3.8 million shares

• Board of Directors intends to increase annual dividend by $.02 per share beginning with the dividend to be paid in Q4 2015


Topic



• Q&A

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Appendix

Appendix – Profit Reconciliation – Second Quarter

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($ in Millions) Q2 2015 Q2 2014

Net Sales $ 1,929 $ 1,876

Gross Profit – As Reported $ 637 $ 575

Rationalization charges - -

Gross Profit – As Adjusted $ 637 $ 575

Gross Margin - As Reported 33.0% 30.7%

Gross Margin - As Adjusted 33.0% 30.7%

Operating Profit – As Reported $ 279 $ 221

Rationalization charges 1 8

Operating Profit – As Adjusted $ 280 $ 229

Operating Margin - As Reported 14.5% 11.8%

Operating Margin - As Adjusted 14.5% 12.2%

Appendix – EPS Reconciliation – Second Quarter

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(in Millions, Except per Common Share Data) Q2 2015 Q2 2014

Income from Continuing Operations before Income Taxes – As Reported $ 221 $ 171

Rationalization charges 1 8

Gains from financial investments, net (2) (3)

Earnings from equity investments, net (2) -

Income from Continuing Operations before Income Taxes – As Adjusted $ 218 $ 176

Tax at 36% rate (78) (63)

Less: Net income attributable to noncontrolling interest 10 13

Income from Continuing Operations, as adjusted $ 130 $ 100

Income per common share, as adjusted $ 0.38 $ 0.28

Average Diluted Shares Outstanding 344 352

($ in Millions) 2015 Estimate1 2014 Actual1

Rationalization Charges2, 3 ~ $7 $64

Tax Rate4 ~ 40% 34%

Interest Expense5 ~ $230 $225

General Corp. Expense6 ~ $100 $119

Capital Expenditures ~ $160 $115

Depreciation & Amortization3

~ $130 $141

Shares Repurchased7 $400-500 $158

Shares Outstanding8 344 million 352 million

2015 Guidance Estimates

1. Guidance and 2014 results exclude TopBuild. 2. Based on 2015 business plans. 3. Includes accelerated depreciation of $1 million for the year ended December 31, 2014. Such expense is also included in the rationalization charges. 4. 2015 tax rate is impacted by an $18 million valuation allowance as a result of our decision to spin off TopBuild. 2014 tax rate excludes the $529 million

release of the valuation allowance. 5. Reflects ~$5 million of incremental interest expense due to the March 2015 pre-funding of our June 2015 debt maturity. 6. Excludes rationalization expenses of $27 million for the year ended December 31, 2014 and $4 million (estimated) for the year ended December 31, 2015. 7. 2015 and 2014 share repurchases include approximately 720,000 and 1.7 million shares, respectively, to offset grants of long-term stock awards. 8. Reflects weighted average shares outstanding as of June 30, 2015 and assumes no further share repurchases in 2015.

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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; excludes TopBuild Corp.

Business Segment

Plumbing Products

Decorative Architectural Products

$3.3B

$2.0B

Revenue 2014 % of Total

47%

29%

$ 7.0B 100% Total Company

Other Specialty Products

$0.7B 10%

R&R% vs. NC NA% vs. Int’l

82% 59%

99% 100%

74% 74%

82% 77%

Cabinets and Related Products

$1.0B 14% 55% 91%

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2014 International Revenue Split*

*Based on Company estimates; excludes TopBuild Corp.

International Sales Accounted for ~23% 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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q2 2015 earnings presentation

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