Q2 2017 earnings deck

Masco Corporation Second Quarter 2017 Earnings PresentationJuly 27, 2017

Safe Harbor Statement

This presentation contains statements 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 ofour strategic initiatives, our ability to improve our under-performing U.S. window business, 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 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.

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Masco Q2 2017 Results

Topic

• Summary of Results Keith Allman

• Financial/Operations Review John Sznewajs

• Q&A

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Q 2 2 0 1 7 I N R E V I E W

Executing on Strategic Plan in 2017

• Top line growth driven by Plumbing and Decorative Architectural segments

• Margin expansion resulting from Windows turnaround and strong Plumbing performance

• Completed sale of Arrow Fastener for proceeds of $126 million

• Repurchased 1.2 million shares for $42 million

• Earnings per share target range updated to $1.93 to $2.00 from $1.90 to $2.00 per common share*

• Board announced intention to increase annual dividend by $0.02 beginning in the fourth quarter

Driving Shareholder

Value

4*Future performance reflects company estimates

Topic



• Q&A


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($ in Millions) Second Quarter 2017

Revenue Y-O-Y Change

$2,0573%

Operating Profit* Y-O-Y Change

$357$15

Operating Margin* Y-O-Y Change

17.4%30 bps

Adjusted EPS*Y-O-Y Change

$0.6030%

23rd Consecutive Quarter of Sales and Operating Profit Growth

*See Appendix for GAAP reconciliation.

Quarter Highlights• Total company sales increased 4% excluding the effects of foreign currency translation• In local currency, North American sales increased 4% and international sales increased 4% • FX negatively impacted sales by $23 million

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

Solid Top and Bottom Line Growth Against Difficult Comp

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$9493%


$198$6


20.9%10 bps

* Excludes business rationalization charges for the second quarter 2016 of $4 million.

Quarter Highlights• Total segment sales increased by 5% excluding the effects of foreign currency translation • In local currency, North American sales increased 4% and international sales increased 5%• FX negatively impacted sales by approximately $16 million• Delta, Hansgrohe, and Watkins each achieved a record quarter for sales and operating profit

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

Pro Initiative and Program Expansion Drive Growth

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$6535%

Operating Profit Y-O-Y Change

$141$2

Operating Margin Y-O-Y Change

21.6%(80) bps

Quarter Highlights• Behr’s pro initiative achieved double digit growth• Builders’ hardware benefited from shower door program expansion and continued growth• Operating profit impacted by unfavorable price to commodity relationship in coatings • Program reset costs of approximately $10 million related to a retail cabinet hardware

program win anticipated in Q3 2017

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

Steady Growth in Repair and Remodel Business

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$251(4%)


$30($7)


12.0%(220) bps

* Excludes business rationalization charges for the second quarter 2016 of $3 million.

Quarter Highlights• Achieved mid-single digit growth in repair and remodel business against a tough double

digit comp• Repair and remodel growth more than offset by declines in new home construction resulting

from the exit of certain low margin business• Expect to incur costs of approximately $7 million in Q3 2017 related to new product

launches and the impact of Chinese plywood duties and tariffs

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

Significant Improvement to the Top and Bottom Line

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$2044%

Operating Profit Y-O-Y Change

$18$20

Operating Margin Y-O-Y Change

8.8%980 bps

Quarter Highlights• Sales increased 7% excluding the effects of foreign currency translation• North American windows delivered strong 10% growth• The Arrow Fastener divestiture will impact second half sales by approximately $38 million

and operating profit by approximately $8 million (split approximately evenly between Q3 and Q4)

Strong Balance Sheet

Liquidity as of 6/30/2017

Cash and cash investments $1.0B

Short-term bank deposits $0.1B

Total $1.1B

Disciplined Capital Allocation

• Repurchased approximately 1.2 million shares in Q2 for $42 million• Refinanced high coupon debt, reducing interest expense by

approximately $3 million per quarter starting in Q3 2017

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Topic



• Q&A

Q&A

Appendix

Appendix – Profit Reconciliation – Second Quarter

($ in Millions) Q2 2017 Q2 2016

Net sales $ 2,057 $ 2,001

Gross profit, as reported $ 737 $ 700 Rationalization charges - 5

Gross profit, as adjusted $ 737 $ 705

Gross margin, as reported 35.8% 35.0%Gross margin, as adjusted 35.8% 35.2%

Selling, general and administrative expenses, as reported $ 380 $ 365 Rationalization charges - 2

Selling, general and administrative expenses, as adjusted $ 380 $ 363

Selling, general and administrative expenses as percent of net sales, as reported

18.5% 18.2%

Selling, general and administrative expenses as percent of net sales, as adjusted

18.5% 18.1%

Operating profit, as reported $ 357 $ 335 Rationalization charges - 7

Operating profit, as adjusted $ 357 $ 342

Operating margin, as reported 17.4% 16.7%Operating margin, as adjusted 17.4% 17.1%

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Appendix – EPS Reconciliation – Second Quarter

(in Millions, Except per Common Share Data) Q2 2017 Q2 2016

Income before income taxes, as reported $ 255 $ 253 Rationalization charges - 7 (Gain) on sale of business (49) - (Gain) from auction rate securities - (1)(Gains) from private equity funds, net (1) (1)(Earnings) from equity investments, net (1) - Loss on extinguishment of debt 107 -

Income before income taxes, as adjusted $ 311 $ 258 Tax at 34% rate (36% for 2016) (106) (93)Less: Net income attributable to noncontrolling interest 13 13

Net income, as adjusted $ 192 $ 152

Net income per common share, as adjusted $ 0.60 $ 0.46

Average diluted common shares outstanding 319 331

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Appendix – EPS Reconciliation – Full Year Outlook

Low End High End

Net income per common share 1.81$ 1.88$ Loss on extinguishment of debt 0.22 0.22 (Gain) on sale of business (0.10) (0.10)

Net income per common share, as adjusted 1.93$ 2.00$

Twelve Months Ended December 31, 2017

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($ in Millions) 2017 Estimate 2016 Actual

Rationalization Charges ~ $3 $22

Tax Rate1 ~ 34% 36%

Quarterly Interest Expense (Q3 & Q4 2017) ~ $41 $229

General Corp. Expense ~ $100 $109

Capital Expenditures ~ $190 $180

Depreciation & Amortization ~ $130 $134

Foreign Currency Translation Impact to Sales2 ~ ($15) ($68)

Shares Repurchased3 $400-500 $459

2017 Guidance Estimates

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1. Reduction in tax rate from prior guidance primarily due to the adoption of ASU 2016-09 related to stock-based compensation.2. Based on rates as of June 30, 2017.3. 2017 and 2016 share repurchases include approximately 817,000 and 1.1 million shares that were repurchased to offset grants of long-term stock awards.

2016 Segment Mix*

R&R = % of sales to repair and remodel channelsNC = % of sales to new construction channels NA = % of sales within North AmericaInt’l = % of sales outside North America

* Based on Company estimates

Business Segment

PlumbingProducts

DecorativeArchitecturalProducts

$3.5B

$2.1B

Revenue 2016 % of Total

48%

28%

$ 7.4B 100%Total Company

Windows and Other Specialty Products

$0.8B 11%

R&R% vs. NC NA% vs. Int’l

82% 63%

99% 100%

71% 78%

83% 79%

Cabinetry Products $1.0B 13% 61% 94%

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2016 International Revenue Split*

*Based on Company estimates

International Sales Accounted for ~21% of Total 2016 Masco Sales

27%

5%

8%

28%

6%

16%

10%

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United Kingdom

Northern Europe

Other

Emerging Markets

Eastern Europe

Southern Europe

Central Europe

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