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, our ability to improve our underperforming businesses, and our ability to
maintain our competitive position in our industries. 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.
2
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.
3. Masco Q2 2013 Results – Agenda
Topic
• Summary of Results
Tim Wadhams
• Financial/Operations Review
John Sznewajs
• Outlook
Tim Wadhams
• Q&A
3
4. Key Messages Today
North American sales increase was driven by new home
construction activity and retail performance; International
sales grew despite challenging market conditions
Cabinets and Installation capitalized on market dynamics
delivering top and bottom line growth
Operating leverage and focus on cost control increased
profits
All segments positively contributed to top and bottom line
growth
4
5. Strategy Execution Highlights Q2 2013
1
Expand market
leadership
• Continued success with new and previously introduced
products and programs at retail with Plumbing Products and
Decorative Architectural Products
2
Reduce costs
• Continued commitment to cost control results in SG&A
improvement
3
• Cabinetry continues to execute on strategic plan and
delivers profit
Improve
underperforming
businesses
• Installation and Other Services capitalizes on strategic
growth with new home construction, commercial,
distribution and retrofit channels
4
Strengthen
balance sheet
5
• Strong working capital management
6. Masco Q2 2013 Results – Agenda
Topic
• Summary of Results
Tim Wadhams
• Financial/Operations Review
John Sznewajs
• Outlook
Tim Wadhams
• Q&A
6
7. Margin Expansion Demonstrates Operating Leverage
($ in Millions)
Second Quarter
2013
Revenue
$2,149
Growth
10%
Adjusted Operating Profit*
$206
Adjusted Operating Margin*
9.6%
Y-O-Y Change
$75
Y-O-Y Change
290 bps
Adjusted EPS*
$0.23
*See appendix for reconciliation to GAAP information.
Quarter Highlights
•
•
Sales growth driven by increased sales at retail and new home
construction
•
7
North American sales increased 11%; International sales
increased 6% in local currency
Incremental margins ~37% achieved from operating leverage
8. Commitment to Cost Control and Leverage on Increased
Volume Favorably Impacting Margins
Y-O-Y Change in
Operating Profit $75M
*
8
*See appendix for reconciliation
*
9. Plumbing Products:
Strong Performance in North America and International
($ in Millions)
Second Quarter
2013
Revenue
$802
Adjusted Operating Profit*
$110
Growth
Y-O-Y Change
Adjusted Operating Margin*
Y-O-Y Change
9%
$37
13.7%
380 bps
*Excluding rationalization charges of $8 million and $3 million in the second quarters of 2013 and 2012, respectively.
Quarter Highlights
•
•
North American sales growth partially offset by lost bathware business
•
International sales increase 6% in local currency due to growth in all
major channels including project work, DIY, and trade
•
9
North American faucet and toilet sales growth percentage in the midteens
Margins impacted by favorable price/commodity relationship and total
cost productivity efforts
10. Decorative Architectural Products:
Core Paint Sales Benefit from Healthy Repair and
Remodel Activity and New Product Introductions
($ in Millions)
Second Quarter
2013
Revenue
$565
Adjusted Operating Profit*
$105
Growth
Y-O-Y Change
Adjusted Operating Margin*
Y-O-Y Change
9%
$10
18.6%
20 bps
*Excludes $1 million of rationalization charges in the second quarter of 2013.
Quarter Highlights
•
•
Behr Pro, Behr’s expansion into Mexico, and retail sales of Builder’s
Hardware continue to grow
•
10
Increased sales driven by volume growth of DIY core paint and new
products
Margins positively impacted by increased volume; partially offset by
increased advertising costs and unfavorable price/commodity
relationship
11. Cabinets and Related Products:
Focus on Profitability Drives Performance
($ in Millions)
Second Quarter
2013
Revenue
Growth
Adjusted Operating Profit*
Y-O-Y Change
Adjusted Operating Margin*
Y-O-Y Change
$265
5%
$5
$9
1.9%
350 bps
*Excludes rationalization charges of $3 million and $1 million in the second quarters of 2013 and 2012, respectively.
Quarter Highlights
•
•
Results positively impacted by pricing and promotional
strategies, cost control, and productivity improvements;
partially offset by mix
•
11
Strong direct-to-builder sales
Excludes Danish RTA business, which is in discontinued
operations
12. Installation and Other Services:
Top and Bottom Line Growth Demonstrate Solid Execution
($ in Millions)
Revenue
Growth
Operating Profit
Y-O-Y Change
Operating Margin
Y-O-Y Change
Second Quarter
2013
$357
21%
$8
$17
2.2%
520 bps
Quarter Highlights
•
•
Installation sales to residential new home construction increased ~34%
•
12
Sales growth driven by higher volumes in residential new home construction,
commercial, distribution, and retrofit channels
Margin improvement driven by operating leverage and continued cost control
13. Other Specialty Products:
Strong Performance Reflects Window Share Gains and
Profit Improvement
($ in Millions)
Second Quarter
2013
Revenue
$160
Adjusted Operating Profit*
$14
Growth
Y-O-Y Change
Adjusted Operating Margin*
Y-O-Y Change
13%
$8
8.8%
450 bps
*Excludes rationalization charges of $3 million in the second quarter of 2013.
Quarter Highlights
•
•
Sales growth driven by increased new home construction and repair &
remodel sales, and new product introductions
•
13
North American window sales increased ~20%
Margin expansion fueled by increased volume and favorable
price/commodity relationship
14. Strengthening the Balance Sheet
• Continued strong working capital execution
• Will retire $200M debt maturity in August with
existing cash
$1.2 billion of cash as of 6/30/2013
14
15. Masco Q2 2013 Results – Agenda
Topic
• Summary of Results
Tim Wadhams
• Financial/Operations Review
John Sznewajs
• Outlook
Tim Wadhams
• Q&A
15
16. Delivering on 2013 Priorities – Q2 Highlights
Cabinet profit improvement
Profitably grow Installation
Successfully launch new products and programs
Reduce debt by ~$200M
Investment in strategic growth initiatives
Grow share of key brands
Total cost productivity
Geographic expansion
16
17. 2013 Outlook
Risks
Opportunities
• Velocity of U.S. economic
recovery
• Improving demand in new
home construction
• European economic
uncertainty
• Successful new product and
program launches at retail
• Mix shifts
• Share gains at retail and with
big builders
• Commodity volatility
• Strong liquidity
• Capitalize on operating
leverage
17
20. Appendix – Profit Reconciliation – Second Quarter
($ in Millions)
Q2 2013
Q2 2012
Sales
$
2,149
$
1,945
Gross Profit – As Reported
$
609
$
521
Rationalization charges
Gross Profit – As Adjusted
11
$
620
3
$
524
Gross Margin - As Reported
28.3%
26.8%
Gross Margin - As Adjusted
28.9%
26.9%
Operating Profit – As Reported
$
Rationalization charges
188
$
54
18
7
Gain from sale of fixed assets
-
(5)
Charge for litigation settlements, net
-
75
Operating Profit – As Adjusted
$
206
$
131
Operating Margin - As Reported
2.8%
Operating Margin - As Adjusted
20
8.7%
9.6%
6.7%
21. Appendix – EPS Reconciliation – Second Quarter
(in Millions)
Q2 2013
Q2 2012
Income (loss) from Continuing Operations before Income Taxes – As
Reported
$
$
131
(12)
Rationalization charges
18
7
Gain from financial investments, net
(5)
-
Gain from sale of fixed assets
-
(5)
Charge for litigation settlements, net
-
75
Interest carry costs
-
7
Income from Continuing Operations before Income Taxes – As Adjusted
$
Tax at 36% rate benefit (expense)
144
$
72
(52)
10
Less: Net income attributable to non-controlling interest
(26)
8
Net Income, as adjusted
$
82
$
38
Income per common share, as adjusted
$
0.23
$
0.11
Average Diluted Shares Outstanding
21
352
349
22. 2013 Guidance Estimates
($ in Millions)
2013 Estimate
2012 Actual
Rationalization Charges1
~ $55
$78
Tax Rate
~ 25%
198%
Interest Expense
~ $240
$254
General Corp. Expense2
~ $130
$126
Capital Expenditures
~ $150
$119
Depreciation & Amortization3
~ $190
$214
352 million
349 million
Shares Outstanding
1 – Based on current business plans.
2 – Excludes rationalization expenses of $14M for the year ended December 31, 2012.
3 – Includes accelerated depreciation of $28M for the year ended December 31, 2012. Estimate for accelerated
depreciation for the year ended December 31, 2013 is ~$17M. Such expenses are also included in the
rationalization charges.
23. Segment Mix Full Year 2012 Estimate
Business Segment
Revenue 2012
% of Total
R&R% vs. NC
NA% vs. Int’l
Plumbing
Products
$3.0B
40%
82%
59%
Decorative
Architectural
Products
$1.8B
24%
99%
100%
Cabinets and
Related Products
$0.9B
12%
69%
92%
Installation and
Other Services
$1.2B
16%
16%
100%
Other Specialty
Products
$0.6B
8%
75%
75%
73%
80%
Total company
23
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
$7.5B
100%
24. 2012 Masco International Revenue Split*
6%
15%
26%
11%
Other
United Kingdom
Northern Europe
Southern Europe
Central Europe
Eastern Europe
34%
3%
5%
Emerging Markets
International Sales Accounted for ~20%
of Total 2012 Masco Sales
24
*Based on company estimates
