Masco deutsche bank june 2015.final

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. 2
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
Drive full potential of our core businesses Clear Strategic Focus 7 Leverage opportunities across our portfolio Actively manage portfolio Drive full potential of our 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
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 Lead in Innovation 9 30%* Examples of New Products / Technologies Existing Products 201420132012 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 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 Drive Operational Excellence Aligned on Key Financial Metrics Capitalize on our Strong Operating Leverage Strong Management Team Culture of Accountability
Clear Strategic Focus 11 Drive full potential of our core businesses Leverage opportunities across our portfolio Actively manage portfolio Leverage opportunities across 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 12 • Talent • Purchasing • Innovation • Sales • Brands
Actively manage portfolioActively manage portfolio Clear Strategic Focus 13 Drive full potential of our core businesses Leverage opportunities across 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 +
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.
17 ROICWACC 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 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 GoalsStrategic Priorities Sales Growth: 6-9% CAGR Operating Margins: ~18% 2015 Goal EBIT target $10M 1.Profitably recover KraftMaid and Merillat share 2.Execute Builder Direct turnaround 3.Achieve margin improvement targets
19Note: Future performance reflects company estimates and excludes the Installation Segment. 7% CAGR 15% CAGR 26% CAGR Revenue* ($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 20 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
25 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. 26 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% 27
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 28

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