fourth quarter 2015 earnings presentation

Fourth Quarter and Full Year

2015 Earnings Presentation

February 9, 2016

Safe Harbor Statement

Statements contained in this presentation that reflect our views about our future performance and 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. Our views

about future performance 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 the levels of home improvement activity and new home

construction, our ability to maintain our strong brands and to develop and introduce new and improved

products, our ability to maintain our competitive position in our industries, our reliance on key customers, our

ability to achieve the anticipated benefits of our strategic initiatives, our ability to sustain the performance of

our cabinetry businesses, the cost and availability of raw materials, our dependence on third party suppliers,

and risks associated with international operations and global strategies. These and other factors are

discussed in detail 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. The forward-looking statements in this press release speak only as of the date of this press

release. 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.

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Masco Q4 and Full Year 2015 Results

Topic

• Summary of Results Keith Allman

• Financial/Operations Review John Sznewajs

• Q&A

3

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

Execution on Strategic Initiatives Drives Performance

• Services businesses successfully spun off

• Share gains and focused execution grew top line

• Operating leverage and cost productivity drove profit

margin expansion

• U.S. cabinet business exceeded performance expectations

• 17.2 million shares repurchased

4

Driving

Shareholder

Value


Topic



• Q&A

5

Strong Performance Both in North America and Internationally

6

*See Appendix for GAAP reconciliation.

Quarter Highlights

• Total company sales increased 6% excluding the effects of foreign currency

translation

• North American sales increased 5%; International sales increased 4% in local

currency

• FX negatively impacted sales by $45 million and operating profit by $6 million

($ in Millions) Fourth Quarter

2015

Full-Year

2015

Revenue Y-O-Y Change

$1,715

3%

$7,142

2%

Operating Profit* Y-O-Y Change

$219 $52

$927 $151

Operating Margin* Y-O-Y Change

12.8% 280 bps

13.0% 190 bps

Adjusted EPS* Y-O-Y Change

$0.29 61%

$1.19 35%

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

7

Continued Positive Momentum on Top and Bottom Line

Quarter Highlights

• North American sales increased 14% excluding the impact of Canadian

currency; International sales increased 5% in local currency

• FX negatively impacted sales by approximately $41 million and operating

profit by $5 million

• Continued strong performance in retail and wholesale/trade channels

*Excludes business rationalization charges for the fourth quarter and full year 2015 of $7 million and $9 million,

respectively, and for the fourth quarter and full year 2014 of $3 million and $5 million, respectively.


2015

Full-Year

2015


$846

5%

$3,341

1%


$133 $17

$521 $4


15.7% 130 bps

15.6% -

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

8

Behr Pro® Momentum Masked by Challenging Year-Over-Year Comparisons

Quarter Highlights

• Behr Pro® growth masked by challenging year-over-year comparisons

• Realized mid-single digit gallon growth when excluding the impact of

inventory replenishment timing in Q4 2014


2015

Full-Year

2015


$420 (4%)

$2,020

1%

Operating Profit Y-O-Y Change

$85 $5

$403 $43

Operating Margin Y-O-Y Change

20.2% 190 bps

20.0% 200 bps

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

9

Operational Execution, Mix and Pricing Drove Performance

Quarter Highlights

• Strong retail sales more than offset the exit of certain less profitable direct-to-builder

business

• KraftMaid Vantage® continued its strong performance in the dealer channel

• Improved operating efficiencies, positive mix and pricing actions drove margin

expansion

*Excludes business rationalization charges for the fourth quarter and full year 2015 of $2 million and $5 million, respectively,

and gain from sale of property and equipment for the fourth quarter and full year 2015 of $2 million and $5 million, respectively.

Excludes business rationalization charges for full year 2014 of $31 million.


2015

Full-Year

2015


$254 5%

$1,025

3%


$19 $26

$51 $82


7.5% 1,040 bps

5.0% 810 bps

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

10

Consistent Top Line Growth by North American Windows

Quarter Highlights

• Sales increased 9% excluding the effects of foreign currency translation

• Share expansion and positive mix drove revenue growth

• Operating margin impacted by ERP expense and other costs


2015

Full-Year

2015


$195 8%

$756 8%


$7 ($1)

$57 $9


3.6% (80 bps)

7.5% 70 bps

*Excludes business rationalization charges for full year 2014 of $1 million.

Strong Balance Sheet and Disciplined Capital Allocation

Liquidity as of 12/31/2015

Cash and cash investments $1.5B

Short-term bank deposits $0.2B

Total $1.7B

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Disciplined Capital Allocation

• Repurchased approximately 17.2 million shares in 2015

• Increased dividend by 6%

• Well positioned to retire $300-$500 million of debt


Topic



• Q&A

12

Appendix

Appendix – Profit Reconciliation – Fourth Quarter

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($ in Millions) Q4 2015 Q4 2014

Net Sales $ 1,715 $ 1,666

Gross Profit – As Reported $ 532 $ 481

Rationalization charges 6 3

(Gain) on sale of property and equipment (2) -

Gross Profit – As Adjusted $ 536 $ 484

Gross Margin - As Reported 31.0% 28.9% Gross Margin - As Adjusted 31.3% 29.1%

Selling, General and Administrative Expenses – As Reported $ 320 $ 323


Selling, General and Administrative Expenses – As Adjusted $ 317 $ 316

Selling, General and Administrative Expenses as Percent of Net Sales – As Reported 18.7% 19.4% Selling, General and Administrative Expenses as Percent of Net Sales – As Adjusted 18.5% 19.0%

Operating Profit – As Reported $ 212 $ 166



(Income) from litigation settlements - (9)

Operating Profit – As Adjusted $ 219 $ 167

Operating Margin - As Reported 12.4% 10.0% Operating Margin - As Adjusted 12.8% 10.0%

Appendix – Profit Reconciliation – Full Year

16

($ in Millions) 2015 2014

Net Sales $ 7,142 $ 7,006

Gross Profit – As Reported $ 2,253 $ 2,060



Gross Profit – As Adjusted $ 2,256 $ 2,095

Gross Margin - As Reported 31.5% 29.4% Gross Margin - As Adjusted 31.6% 29.9%

Selling, General and Administrative Expenses – As Reported $ 1,339 $ 1,347


Selling, General and Administrative Expenses – As Adjusted $ 1,329 $ 1,318

Selling, General and Administrative Expenses as Percent of Net Sales – As Reported 18.7% 19.2% Selling, General and Administrative Expenses as Percent of Net Sales – As Adjusted 18.6% 18.8%

Operating Profit – As Reported $ 914 $ 721




Operating Profit – As Adjusted $ 927 $ 776

Operating Margin - As Reported 12.8% 10.3% Operating Margin - As Adjusted 13.0% 11.1%

Appendix – EPS Reconciliation – Fourth Quarter

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(in Millions, Except per Common Share Data) Q4 2015 Q4 2014

Income from Continuing Operations before Income Taxes – As Reported $ 160 $ 111



(Gain) from financial investments, net (1) -


Income from Continuing Operations before Income Taxes – As Adjusted $ 166 $ 112

Tax at 36% rate (60) (40)

Less: Net income attributable to noncontrolling interest 10 9

Income from Continuing Operations, as adjusted $ 96 $ 63

Income per common share, as adjusted $ 0.29 $ 0.18

Average Diluted Shares Outstanding 335 351

Appendix – EPS Reconciliation – Full Year

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(in millions, except per common share data) 2015 2014

Income from Continuing Operations before Income Taxes – As Reported $ 689 $ 507



(Gains) from financial investments, net (6) (4)

(Earnings) losses from equity investments, net (2) 2


Income from Continuing Operations before Income Taxes – As Adjusted $ 694 $ 560

Tax at 36% rate (250) (202)

Less: Net income attributable to non-controlling interest 39 47

Income from Continuing Operations, as adjusted $ 405 $ 311

Income per common share, as adjusted $ 1.19 $ 0.88

Average Diluted Shares Outstanding 341 352

($ in Millions) 2016 Estimate 2015 Actual1

Rationalization Charges2 ~ $8 $18

Tax Rate3 ~ 36% 43%

Interest Expense ~ $225 $225

General Corp. Expense4 ~ $100 $105

Capital Expenditures ~ $190 $152

Depreciation & Amortization ~ $140 $127

Shares Repurchased5 $400-500 $456

Shares Outstanding6

335 million 335 million

1. 2015 results exclude TopBuild Corp.

2. Based on 2016 business plans.

3. 2015 tax rate is impacted by a $21 million valuation allowance resulting from our decision to spin off TopBuild, and a $12 million net charge on substantially

all undistributed foreign earnings and change in tax law on related foreign earnings.

4. Excludes rationalization expenses of $4 million for the year ended December 31, 2015.

5. 2015 share repurchases include approximately 741,000 shares that were repurchased to offset grants of long-term stock awards.

6. Reflects weighted average diluted shares outstanding for the fourth quarter 2015 and assumes no share repurchases in 2016.

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2016 Guidance Estimates

2015 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 2015 % of Total

47%

28%

$ 7.1B 100% Total Company

Other Specialty Products

$0.8B 11%

R&R% vs. NC NA% vs. Int’l

83% 63%

99% 100%

70% 76%

83% 79%

Cabinets and Related Products

$1.0B 14% 57% 92%

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2015 International Revenue Split*

*Based on Company estimates; excludes TopBuild Corp.

International Sales Accounted for ~21%

of Total 2015 Masco Sales

29%

5%

8%

26%

5%

17%

10%

UK

Northern Europe

Southern Europe

Central Europe

Eastern Europe

Emerging markets

Other

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fourth quarter 2015 earnings presentation

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