Mas q3-2017-earnings-presentation

Masco Corporation Third Quarter 2017 Earnings PresentationOctober 24, 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.

2

Masco Q3 2017 Results

Topic

• Summary of Results Keith Allman

• Financial/Operations Review John Sznewajs

• Q&A

3

Q 3 2 0 1 7 I N R E V I E W

Continuing Progress on Strategic Initiatives

• Top line growth driven by Plumbing and Decorative Architectural segments

• Margin expansion resulting from Windows turnaround

• Repurchased 4 million shares for $178 million

• Earnings per share target range updated to $1.93 to $1.97 from $1.93 to $2.00 per common share which reflects the impact of the severe hurricanes

Driving Shareholder

Value

4

Topic



• Q&A


5

($ in Millions) Third Quarter 2017

Revenue Y-O-Y Change

$1,9363%

Operating Profit* Y-O-Y Change

$296$21

Operating Margin* Y-O-Y Change

15.3%60 bps

Adjusted EPS*Y-O-Y Change

$0.5022%

24th Consecutive Quarter of Sales and Operating Profit Growth

*See Appendix for GAAP reconciliation. Quarter Highlights• Total company sales increased 2% excluding the effects of foreign currency translation• In local currency, North American sales increased 2% and international sales increased 4% • FX favorably impacted sales by approximately $15 million• Estimated Q3 2017 revenue impact due to hurricanes of approximately $15 million;

approximately $5 million in Q4 2017 6

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

Solid North American and International Top Line Growth

7



$9516%


$176($3)


18.5%(140) bps

* Excludes business rationalization charges for the third quarter 2017 and 2016 of $1 million and $5 million, respectively.

Quarter Highlights• Total segment sales increased by 4% excluding the effects of foreign currency translation • In local currency, North American sales increased 4% and international sales increased 6%• FX favorably impacted sales by approximately $13 million• Margins impacted by increases in strategic growth initiatives and other variable expenses

totaling approximately $10 million

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 Continues to Fuel Growth

8



$5533%

Operating Profit Y-O-Y Change

$104($7)

Operating Margin Y-O-Y Change

18.8%(190) bps

Quarter Highlights• Behr’s pro initiative achieved double digit growth• Builders’ hardware benefited from shower door program expansion and growth in E-commerce• Operating profit impacted by unfavorable price to commodity relationship• New retail cabinetry hardware program was not fully set in Q3 2017 as planned; expect

approximately $8 million of reset cost in Q4 2017

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

KraftMaid® Retail and Dealer Business Grows Double Digits

9



$229(4%)


$19($1)


8.3%(10) bps

* Excludes business rationalization charges for the third quarter 2016 of $1 million.

Quarter Highlights• Repair and remodel growth more than offset by higher than anticipated declines in United

States and UK new home construction • Margin negatively impacted by planned costs of approximately $6 million related to the

impact of Chinese plywood duties and tariffs and new product launches

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

North American Windows Turnaround Delivers Strong Results

10



$2030%

Operating Profit Y-O-Y Change

$23$33

Operating Margin Y-O-Y Change

11.3%1620 bps

Quarter Highlights• North American windows drove strong 12% growth• Segment sales increased 9% excluding the divestiture of Arrow Fastener

Arrow FastenerDivestiture Impact (in millions)

Third Quarter2016

Fourth Quarter2016

Sales $17 $18

Operating Profit $3 $5

Strong Balance Sheet

Liquidity as of 9/30/2017

Cash and cash investments $1.1B

Short-term bank deposits $0.1B

Total $1.2B

Disciplined Capital Allocation

• Repurchased approximately 4 million shares in Q3 for $178 million

11


12

Topic



• Q&A

Q&A

Appendix

Appendix – Profit Reconciliations – Third Quarter

15

($ in Millions) Q3 2017 Q3 2016

Net sales $ 1,936 $ 1,877

Gross profit, as reported $ 650 $ 614 Rationalization charges 1 4

Gross profit, as adjusted $ 651 $ 618

Gross margin, as reported 33.6% 32.7%Gross margin, as adjusted 33.6% 32.9%

Selling, general and administrative expenses, as reported $ 355 $ 345 Rationalization charges - 2

Selling, general and administrative expenses, as adjusted $ 355 $ 343

Selling, general and administrative expenses as percent of net sales, as reported 18.3% 18.4%Selling, general and administrative expenses as percent of net sales, as adjusted 18.3% 18.3%

Operating profit, as reported $ 295 $ 269 Rationalization charges 1 6

Operating profit, as adjusted $ 296 $ 275

Operating margin, as reported 15.2% 14.3%Operating margin, as adjusted 15.3% 14.7%

Presenter

Presentation Notes

Added and deleted categories

Appendix – EPS Reconciliation – Third Quarter

16

(in Millions, Except per Common Share Data) Q3 2017 Q3 2016

Income before income taxes, as reported $ 256 $ 227 Rationalization charges 1 6 (Gain) on sale of business (2) - (Gains) from private equity funds, net - (1)Impairment of private equity funds 2 -

Income before income taxes, as adjusted $ 257 $ 232 Tax at 34% rate (36% for 2016) (87) (84)Less: Net income attributable to noncontrolling interest 12 12

Net income, as adjusted $ 158 $ 136

Net income per common share, as adjusted $ 0.50 $ 0.41

Average diluted common shares outstanding 316 329

Presenter

Presentation Notes


Appendix – EPS Reconciliation – Full Year Outlook

17

Low End High End

Net income per common share 1.80$ 1.84$ Loss on extinguishment of debt 0.22 0.22 (Gain) on sale of business (0.11) (0.11) Allocation to participating securities per share (1) 0.02 0.02

Net income per common share, as adjusted 1.93$ 1.97$

Twelve Months Ended December 31, 2017

(1) Represents the impact of distributed dividends and undistributed earnings to unvested restricted stock awards in accordance with the two-class method of calculating earnings per share.

Presenter

Presentation Notes


($ in Millions) 2017 Estimate 2016 Actual

Rationalization Charges ~ $5 $22

Tax Rate1 ~ 34% 36%

Quarterly Interest Expense ~ $41 $229

General Corp. Expense ~ $105 $109

Capital Expenditures ~ $180 $180

Depreciation & Amortization ~ $130 $134

Foreign Currency Translation Impact to Sales2 ~ $10 ($68)

Shares Repurchased3 $400-500 $459

2017 Guidance Estimates

18

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 September 30, 2017.3. 2017 and 2016 share repurchases include approximately 819,000 and 1.1 million shares that were repurchased to offset grants o f 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%

19

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%

20

United Kingdom

Northern Europe

Other

Emerging Markets

Eastern Europe

Southern Europe

Central Europe

Investor Relations

Mas q3-2017-earnings-presentation