Masco Corporation · NYSE:MAS

Masco — JP Morgan Homebuilding & Building Products Conference 2011

57 slides from Masco's conference presentation, May 25, 2011

  1. Slide 1: JP Morgan Homebuilding & Building Products Conference

    JP Morgan Homebuilding & Building Products Conference May 25, 2011 1

  2. Slide 2: Forward-looking statements

    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,” “appea

  3. Slide 3: Global leader in innovation and marketing of quality building products

    Global leader in the innovation and marketing of quality building products and services. • 2010 Financial Data Sales $7.6 billion Operating Profit* $430 million Free Cash Flow $300 million • Cash on Hand at 12/31/2010 $1.7 billion *Excludes business rationalization charges of $208 million and charge

  4. Slide 4: Investment Considerations

    Investment Considerations  Scale  Distribution  Brands  Operating Leverage  History of Strong Cash Flow  Disciplined Operating System  Long-term Fundamentals For Our Markets Are Positive The discipline of the Masco Business System will drive sustainable competitive advantage 4

  5. Slide 5: Scale – Masco is the Industry Leader

    Scale – Masco is the Industry Leader We believe we are the …  Largest faucet manufacturer in the world  Largest cabinet manufacturer in the world  Largest non-commodity supplier to The Home Depot  Largest supplier to Lowe’s Kitchen and Bath segment  Largest supplier of architectural coatings to

  6. Slide 6: Investment Considerations

    Investment Considerations  Scale  Distribution  Brands  Operating Leverage  History of Strong Cash Flow  Disciplined Operating System  Long-term Fundamentals For Our Markets Are Positive The discipline of the Masco Business System will drive sustainable competitive advantage 6

  7. Slide 7: Broad Distribution Across Multiple Channels

    Broad Distribution Across Multiple Channels Big Box Retailers Homebuilders Wholesalers/Dealers • Dedicated customer- • Unique direct-to-builder • Extensive training specific service channel for certain programs for branch and organizations with products and services showroom associates over 1,000 fi

  8. Slide 8: Investment Considerations

    Investment Considerations  Scale  Distribution  Brands  Operating Leverage  History of Strong Cash Flow  Disciplined Operating System  Long-term Fundamentals For Our Markets Are Positive The discipline of the Masco Business System will drive sustainable competitive advantage 8

  9. Slide 9: 2010 Revenues

    Decorative Cabinets & Related Plumbing Installation & Other Specialty 2010 Revenues Architectural Products Products Other Services Products Products $1.5B $2.7B $1.1B $1.7B $600M Selected Brands 9

  10. Slide 10: Cabinets and Related Products

    Cabinets and Related Products Financial Performance Q1 2011 1st QTR 3/31/11 3 Months Ended vs. ($ in Millions) 3/31/11 3/31/10 3/31/2011 3/31/2010 $ % Net Sales $307 $403 ($96) (24%) Operating (Loss)* $(29) $(4) $(25) N/A Operating Margin (9.4%) (1.0%) Decremental (26%) Margin Commentary Brands  Ex

  11. Slide 11: Cabinets and Related Products Q1 2011 Update

    Cabinets and Related Products Q1 2011 Update  Benefitting from the North American cabinet integration − Gaining share, sequentially first quarter of 2011 versus fourth quarter of 2010 − New dealers are being added rapidly  Reduced dealer set-up time  Over 300 dealers have added a Masco Cabinetry

  12. Slide 12: Plumbing Products

    Plumbing Products Financial Performance Q1 2011 1st QTR 3/31/11 3 Months Ended vs. ($ in Millions) 3/31/11 3/31/10 3/31/2011 3/31/2010 $ % Net Sales $710 $663 $47 7% Operating Profit* $90 $85 $5 N/A Operating Margin 12.7% 12.8% Incremental 11% Margin Commentary Brands  Increased sales volume in Nor

  13. Slide 13: Plumbing Products Q1 2011 Update

    Plumbing Products Q1 2011 Update  Continue to invest in brand building, innovation and design  Gaining share in faucets at wholesale and retail  Innovative technology is resonating with the consumer − Touch2O® technology is launching in lavatory faucets in April 2011  Global expansion model is w

  14. Slide 14: Installation and Other Services

    Installation and Other Services Financial Performance Q1 2011 1st QTR 3/31/11 3 Months Ended vs. ($ in Millions) 3/31/2011 3/31/10 3/31/2011 3/31/2010 $ % Net Sales $254 $273 $(19) (7%) Operating (Loss)* $(38) $(40) $2 N/A Operating Margin (15.0%) (14.7%) Decremental N/A Margin Commentary Businesses

  15. Slide 15: Installation and Other Services Q1 2011 Update

    Installation and Other Services Q1 2011 Update  Continuing to improve our insulation position − Added salespeople − Expanded strategic relationship with Owens Corning  Gaining share, sequentially first quarter of 2011 versus fourth quarter of 2010  Continued retrofit sales gains in 2011  ERP sys

  16. Slide 16: Decorative Architectural Products

    Decorative Architectural Products Financial Performance Q1 2011 1st QTR 3/31/11 3 Months Ended vs. ($ in Millions) 3/31/2011 3/31/10 3/31/2011 3/31/2010 $ % Net Sales $375 $389 $(14) (4%) Operating Profit* $70 $87 $(17) N/A Operating Margin 18.7% 22.4% Decremental ( 121%) Margin Commentary Brands 

  17. Slide 17: Decorative Architectural Products Q1 2011 Update

    Decorative Architectural Products Q1 2011 Update  Leveraging our resources to expand top-line growth − Direct to Pro® program with The Home Depot continues to gain traction − Launched the Kilz® Pro-X™ coatings line program in first quarter of 2011 with all The Home Depot stores to be set by the end

  18. Slide 18: Other Specialty Products

    Other Specialty Products Financial Performance Q1 2011 1st QTR 3/31/11 3 Months Ended vs. ($ in Millions) 3/31/2011 3/31/10 3/31/2011 3/31/2010 $ % Net Sales $126 $124 $2 2% Operating (Loss) $(10) ($6) $(4) N/A Operating Margin (7.9%) (4.8%) Decremental N/A Margin Commentary Brands  Sales increases

  19. Slide 19: Other Specialty Products Q1 2011 Update

    Other Specialty Products Q1 2011 Update  Milgard Manufacturing continuing to gain share in the Western United States housing market in the first quarter of 2011  Milgard Manufacturing is expanding into new geographies including Texas and Western Canada  U.K. Window Group continuing to gain share

  20. Slide 20: Unparalleled Brand Strength

    Unparalleled Brand Strength Masco’s continuing commitment to innovation will create sustainable competitive advantage for our brands 20

  21. Slide 21: Investment Considerations

    Investment Considerations  Scale  Distribution  Brands  Operating Leverage  History of Strong Cash Flow  Disciplined Operating System  Long-term Fundamentals For Our Markets Are Positive The discipline of the Masco Business System will drive sustainable competitive advantage 21

  22. Slide 22: Operational Leverage

    Operational Leverage  Aggressively managing capacity − Gross fixed cost reduction (2006-2010) estimated at ~ $500M  Annual maintenance capex ~ $110M  High contribution margins − 30% Company wide average Masco’s commitment to lean principles should drive increased productivity 22

  23. Slide 23: Gross Fixed Cost Reduction

    Gross Fixed Cost Reduction $600 ~$500 $500 $400 ~$400 $300 ~$250 $200 ~ $100 $100 $- 2007 2008 2009 2010 Accumulated Fixed Cost Reductions (Millions) Includes 21 closed/moth balled facilities and headcount reductions of 45% 23

  24. Slide 24: Investment Considerations

    Investment Considerations  Scale  Distribution  Brands  Operating Leverage  History of Strong Cash Flow  Disciplined Operating System  Long-term Fundamentals For Our Markets Are Positive The discipline of the Masco Business System will drive sustainable competitive advantage 24

  25. Slide 25: History of Strong Cash Flow

    History of Strong Cash Flow Year Housing Sales Free  Limited capital required to fund Starts Cash expected growth (Thousands) Flow  Strong working capital 2003 1,848 $10.1B $1.2B management 2004 1,959 $11.3B $1.1B  Returned $6B to shareholders 2005 2,068 $12.2B $1.0B from 2003 to 2007 in the form

  26. Slide 26: Investment Considerations

    Investment Considerations  Scale  Distribution  Brands  Operating Leverage  History of Strong Cash Flow  Disciplined Operating System  Long-term Fundamentals For Our Markets Are Positive The discipline of the Masco Business System will drive sustainable competitive advantage 26

  27. Slide 27: Masco Business System

    Masco Business System 27

  28. Slide 28: MBS Creates Competitive Differentiation

    MBS Creates Competitive Differentiation Customer Focus Lean MBS Innovation Quality Talent Management Masco’s management framework to inspire brand loyalty 28

  29. Slide 29: Masco Cabinetry Innovation

    DeNova™ Countertops  Combination enables faster growth of countertop business  Unique solution simplifies the supply chain CoreGuard™ Sink Virtual Selection Center Base  Realistic kitchen  Helps protect visualization consumer’s dramatically improves investment from purchase experience water dama

  30. Slide 30: Watkins' Ace Salt Water Sanitizing System

    Watkins’ Ace Salt Water Sanitizing System 30

  31. Slide 31: Delta Hands-Free Faucet Touch2O Technology

    Delta Hands-Free Faucet Touch2O® Technology 31

  32. Slide 32: Delta winning with innovation

     Delta winning with innovation − Touch2O Technology − MagnaTite Docking System − In2ition Shower System Delta Faucet Big Box Retail End-Cap 32

  33. Slide 33: Delta Faucet Brand Momentum

    54% 53% 50% 52% 47% 48% 48%  9 point gain in 41% 46% unaided brand awareness in 2 Company A Company B years ‘08 ‘09 ‘10 ‘08 ‘09 ‘10 ‘08 ‘09 ‘10 Brand Equity Study, Burke Institute, July 2010, Sept. 2009, Sept. 2008 Delta Faucet Brand Momentum Innovation and Brand Investment 33

  34. Slide 34: Behr Premium Plus Ultra

    Premium Plus Ultra® Behr Premium Plus Ultra® Paint and Primer in One 34

  35. Slide 35: Behr Direct to Pro

    Behr Direct to Pro® KILZ PRO-X™ 35

  36. Slide 36: Arrow's R.E.D.

    Arrow’s R.E.D. 36

  37. Slide 37: Milgard Essence Series

    Milgard Essence™ Series  Completely new approach to making a wood window  Result is a superior, long-lasting wood window providing greater energy efficiency and durability Milgard Essence™ 37

  38. Slide 38: Milgard Simplicity

     Energy-efficient vinyl windows at a remarkable value  The window they want  The price they need Milgard Simplicity™ 38

  39. Slide 39: Investment Considerations

    Investment Considerations  Scale  Distribution  Brands  Operating Leverage  History of Strong Cash Flow  Disciplined Operating System  Long-term Fundamentals For Our Markets Are Positive The discipline of the Masco Business System will drive sustainable competitive advantage 39

  40. Slide 40: Wrap-Up Comments

    Wrap-Up Comments  Anticipate slow start but improving market conditions in 2011 − 2011 total housing starts forecast – up approximately 10% − Expect modest improvement in repair and remodel activity  Will continue to focus on what we can control to improve execution and strengthen our brands − Emb

  41. Slide 41: Appendix

    Appendix 41

  42. Slide 42: Masco Credit Facility

    Masco Credit Facility  $1.25 billion line established in June 2010 (amended in February 2011) with two financial covenants − Total debt to adjusted total capitalization threshold (65%) − Interest coverage (adjusted EBITDA/Interest Expense)  In compliance with all covenants and had no borrowings ou

  43. Slide 43: Outstanding Debt Maturities

    Outstanding Debt Maturities March 31, 2011 ($ In Millions) Zero Coupon Fixed $1,200 $800 $400 $0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Zero Coupon Notes have a put date of July 20, 2011. 43

  44. Slide 44: Q1 2011 Results (As Reported)

    Q1 2011 Results (As Reported) ($ In Millions) Net Sales Change in Sales Operating Margin* Q1 2011 Q1 2010 2011 vs. 2010 Q1 2011 Q1 2010 Cabinets and Related Products $307 $403 (24%) (16.3%) (3.7%) Plumbing Products 710 663 7% 11.8% 12.7% Installation and Other Services 254 273 ( 7%) ( 15.7%) (15.4%)

  45. Slide 45: Q1 2011 Gross Profit/SG&A

    Q1 2011 Gross Profit/SG&A ($ in Millions) First Quarter  Gross profit negatively impacted by: $492 − Increased rationalization charges $425 26.6% − Less favorable relationship between 24.0% selling prices and commodity costs − Lower sales volume Gross Profit / Margin  SG&A as a percent of sales in

  46. Slide 46: Q1 2011 Segment Rationalization Charges

    Q1 2011 Segment Rationalization Charges Rationalization Charges - Q1 2011 Q1 2010 ($ in Millions) Plant Total - Total - Severance ERP RTA Exit Closures Q1 2011 Q1 2010 Cabinets and Related Products $ - $ (2) $ - $ (19) $ (21) $ (11) Plumbing Products - (6) - - (6) (1) Installation and Other Services

  47. Slide 47: 2011 Estimate - Other Financial Data

    2011 Estimate - Other Financial Data ($ in Millions) 2011 Estimate 2010 Actual Rationalization Charges* ~ $65 $208 Tax Rate** ~ 60% 32% Interest Expense ~ $250 $251 General Corp. Expense ~ $140 $110 Capital Expenditures ~ $190 $137 Depreciation & Amortization ~ $260 $279 Outstanding Shares 349 milli

  48. Slide 48: Full-Year 2010 Results (As Adjusted)

    Full-Year 2010 Results (As Adjusted) Net Sales Change in Sales Operating Margin* ($ in millions) Full-Year Full-Year Full-Year Full-Year 2010 2009 2010 vs.2009 2010 2009 Cabinets and Related Products $ 1,464 $ 1,674 -13% -4.8% -1.3% Plumbing Products 2,692 2,564 5% 12.9% 11.5% Installation and Other

  49. Slide 49: Full-Year 2010 Results (As Reported)

    Full-Year 2010 Results (As Reported) Net Sales Change in Sales Operating Margin* ($ in millions) Full-Year Full-Year Full_Year Full-Year 2010 2009 2010 vs.2009 2010 2009 Cabinets and Related Products $ 1,464 $ 1,674 -13% -17.1% -3.8% Plumbing Products 2,692 2,564 5% 12.3% 9.2% Installation and Other

  50. Slide 50: Cabinets and Related Products

    Cabinets and Related Products Financial Performance FY 2010 Brands 12/31/10 Full-Year vs. ($ in Millions) 12 Months Ended 12/31/09 12/31/2010 12/31/2009 $ % Net Sales $1,464 $1,674 $(210) (13%) Operating (Loss)* $(71) $(21) $(50) N/A Operating Margin (4.8%) (1.3%) Decremental (24%) Margin Segment Mi

  51. Slide 51: Plumbing Products

    Plumbing Products Financial Performance FY 2010 Brands 12/31/10 Full-Year vs. ($ in Millions) 12 Months Ended 12/31/09 12/31/2010 12/31/2009 $ % Net Sales $2,692 $2,564 $128 5% Operating Profit* $347 $295 $52 N/A Operating Margin 12.9% 11.5% Incremental 41% Margin Segment Mix 20% - 25% 40% 60% 75% -

  52. Slide 52: Installation and Other Services

    Installation and Other Services Financial Performance FY 2010 Businesses 12/31/10 Full-Year vs. ($ in Millions) 12 Months Ended 12/31/09 12/31/2010 12/31/2009 $ % Contractor Net Sales $1,147 $1,256 $(109) (9%) Operating (Loss)* $(106) $(107) $1 N/A Operating Margin (9.2%) (8.5%) Decremental N/A Marg

  53. Slide 53: Decorative Architectural Products

    Decorative Architectural Products Financial Performance FY 2010 Brands 12/31/10 Full-Year vs. ($ in Millions) 12 Months Ended 12/31/09 12/31/2010 12/31/2009 $ % Net Sales $1,693 $1,714 $(21) (1%) Operating Profit* $350 $376 $(26) N/A Operating Margin 20.7% 21.9% Decremental (124%) Margin Segment Mix

  54. Slide 54: Other Specialty Products

    Other Specialty Products Financial Performance FY 2010 Brands 12/31/10 Full-Year vs. ($ in Millions) 12 Months Ended 12/31/09 12/31/2010 12/31/2009 $ % Net Sales $596 $584 $12 2% Operating Profit $19 $27 $(8) N/A Operating Margin 3.2% 4.6% Decremental N/A Margin Segment Mix 20% - 25% 30% 70% - 75% 8

  55. Slide 55: Segment Mix Full-Year 2010 - Estimate

    Segment Mix Full-Year 2010 - Estimate New Segment International North America Construction Cabinets and 25% 75% 25% - 30% Related Products Plumbing 40% 60% 20% - 25% Products Installation and -- 100% 90+% Other Services Decorative Architectural -- 100% <5% Products Other Specialty 25% 75% 20% - 30%

  56. Slide 56: Masco International Revenue Split

    Masco International Revenue Split* 6% 6% 7% 36% Central Europe United Kingdom Emerging Markets 9% Eastern Europe Northern Europe North America Southern Europe 11% 25% *Based on company estimates. 56

  57. Slide 57: Additional Inquiries Contact

    Additional Inquiries Contact: Maria Duey Vice President of Investor Relations [email protected] 313-792-5500 57

Masco — JP Morgan Homebuilding & Building Products Conference 2011 on 6ix