Masco Corporation · NYSE:MAS
Masco — Investor Day (September 2019)
113 slides from Masco's investor day presentation, Sep 17, 2019
Slide 1: Masco Corporation Investor Day
Masco Corporation Investor Day DAVID CHAIKA VICE PRESIDENT, TREASURER AND INVESTOR RELATIONS
Slide 2: Agenda
Agenda Event Time (ET) Speakers Investor Relations Welcome 8:30 a.m. David Chaika Opening Remarks 8:35 Keith Allman Plumbing Products Segment 8:55 Richard O’Reagan Q&A 9:20 Keith Allman, Richard O’Reagan Break 9:40 Decorative Architectural Products Segment 10:00 Jai Shah Q&A 10:30 Keith Allman, Jai
Slide 3: Safe Harbor Statement
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,” “anticipat
Slide 4: Masco Corporation Investor Day
Masco Corporation Investor Day KEITH ALLMAN PRESIDENT AND CHIEF EXECUTIVE OFFICER
Slide 5: Safe Harbor Statement
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,” “anticipat
Slide 6: Agenda
Agenda Performance Since 2017 Masco’s Next Chapter Strategy for Profitable Growth 3
Slide 7: Clear Strategic Focus
Clear Strategic Focus Executing on strategy presented at our 2017 Investor Day Drive full potential of our core businesses 1 • Grew Plumbing segment above market • Continued to gain share in PRO paint market • Introduced new products and programs across segments Leverage opportunities across our por
Slide 8: Financial Performance
Financial Performance Delivering strong EPS growth over past three years REVENUE1 OPERATING PROFIT1 EPS1 ($B) ($B) ($) $8.4 $1.3 $2.67 $1.1 $7.4 $1.51 2016 2019 2016 2019 2016 2019 Reaffirming 2019 full year adjusted EPS expectation of $2.62 - $2.72 1. 2019 performance reflects company estimates and
Slide 9: Cash Flow
Cash Flow High EBITDA margin and 100% Free Cash Flow conversion EBITDA MARGIN STRONG FREE CASH FLOW E XC E E D S P E E R S E T 1 CONVERSION $1,450 18.0% $1,000 $900 120.0% $1,400 17.0% 16.0% $800 $1,350 100.0% $700 15.0% $1,300 $600 80.0% 14.0% $1,250 $500 13.0% 60.0% $400 $1,200 12.0% $300 40.0% $1
Slide 10: Capital Allocation
Capital Allocation Balanced strategy driving shareholder value Investing in the business2 ~$600M STRONG CASH FLOW OF Returning capital to shareholders3 ~$2.7B ~$2,160M Acquisitions and divestitures, net 2017-2019 1 ~$510M Retired debt due in 2018 ~$114M 1. Expected cash from operations to be generat
Slide 11: Agenda
Agenda Performance Since 2017 The Business Masco’s Next Today Chapter Strategy for Profitable Growth 8
Slide 12: Next Chapter of Masco
Next Chapter of Masco More resilient portfolio with lower ticket repair and remodel focused products D E C O R AT I V E PLUMBING PRODUC TS1 ARCHITECTURAL PRODUCTS1 2018 Sales: $4.0B 2018 Sales: $2.7B 2018 Adj. OP Margin: 18.1%2 2018 Adj. OP Margin 18.7%2 Repair and Repair and Remodel 84% Remodel 96%
Slide 13: Planned Divestiture of Cabinetry and Windows
Planned Divestiture of Cabinetry and Windows Actions will result in a higher margin business ($M) 2018 MASCO 2018 PRO FORMA MASCO $8,359 ~17% $6,654 Adjusted Operating Margin ~15% Adjusted Operating Margin $1,265 $1,126 Net Sales Adjusted Operating Profit Anticipate deploying majority of proceeds fr
Slide 14: Diversified Revenue Mix
Diversified Revenue Mix Low ticket repair and remodel business will improve financial stability REVENUE BREAKDOWN1 79% 11% 21% International 19% 22% New Home 29% Construction North Repair & 89% 81% 78% America Remodel 71% 2014 2018 2014 2018 Pro Forma Pro Forma 11 1. Based on 2014 revenues, 2018 Pro
Slide 15: Historical Sales Performance
Historical Sales Performance Pro Forma sales considerably more stable through a cycle 20% 2 years (sales peak to trough -15%) 10% 0% YoY % Change -10% -20% -30% 6 years (sales peak to trough -68%) -40% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Plumbing and Decorative Arch
Slide 16: Historical Margin Performance
Historical Margin Performance Pro Forma operating margins significantly more resilient 30% 20% 10% Operating Profit Margin 0% -10% -20% -30% -40% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Plumbing and Decorative Architectural Products OP Margin Cabinetry and Windows & Oth
Slide 17: Agenda
Agenda Performance Since 2017 Masco’s Next Chapter Strategy for Profitable Growth 14
Slide 18: Market Leading Brands
Market Leading Brands High share position in many categories ® 15
Slide 19: Innovation Leadership
Innovation Leadership Fuels future growth and customer advocacy Delta® Delta® Hansgrohe® Hansgrohe® SprayShield® Technology VoiceIQ™ Technology PowderRain® Spray Metris® Select Technology Liberty Hardware Behr Marquee® Behr/Home Depot Magnolia Home Mirrors Coating Color Solutions Center by Joanna Ga
Slide 20: Broad Distribution
Broad Distribution Diversified geographies, products, channels P R I C E P O I N TS CHANNELS1 GOOD BETTER BEST Repair & remodel 89% New construction 11% North America 78% International 22% Retail 50% Wholesale/trade 40% E-commerce 5% Specialty dealers/ 5% other 17 1. Segmentation figures based on co
Slide 21: Fundamentals of Repair and Remodel Market
Fundamentals of Repair and Remodel Market Market growth approximately 1-2% above GDP on average HOME PRICE AGE OF U.S. HOUSEHOLD HOUSING CONSUMER APPRECIATION HOUSING STOCK FORMATION TURNOVER CONFIDENCE 18
Slide 22: Clear Strategic Focus
Clear Strategic Focus Competitive advantages and strategy drives above market growth and returns 1 Drive full potential of our core businesses Above 2 Market Leverage opportunities across Growth our portfolio and Returns 3 Actively manage portfolio 19
Slide 23: Drive Full Potential of Our Core Business
Drive Full Potential of Our Core Business Investing in brands, innovation and operational excellence KEY OPPORTUNITIES Continued growth in North American and International plumbing Continued share gains in Coatings Further E-commerce penetration 20
Slide 24: Masco's Operating System
Masco’s Operating System Leveraging best practices and continuous improvement CULTURE Continuous Improvement + TOOLS = IMPACT Share best practices and use Drive results standardized tools 21
Slide 25: Actively Manage Portfolio
Actively Manage Portfolio Create value by executing on divestitures and select bolt-on acquisitions M&A CRITERIA MARKET COMPANY VALUE New categories or Accelerate organic ROIC greater than geographies within growth, drive cost risk adjusted existing product savings and/or WACC within markets bring n
Slide 26: Key Messages
Key Messages Competitive advantages to deliver consistent performance 1 Continue to deliver against commitments 2 Stronger portfolio for above market growth and resilience 3 Balanced approach to allocation of substantial free cash flow to continue to drive shareholder value 23
Slide 27: Plumbing Products
Plumbing Products RICHARD O’REAGAN GROUP PRESIDENT
Slide 28: Safe Harbor Statement
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,” “anticipat
Slide 29: Agenda
Agenda The Business Today Growth Above Market Future Outlook 3
Slide 30: Plumbing Products
Plumbing Products Segment overview 2018 REVENUE BREAKDOWN2 Revenue $4.0B Repair and Remodel Margin as 84% 16% New Home Adjusted1 18.1% Construction Currency USD / EUR / GBP / North Exposure CAD / RMB America 36% International Commodity Copper / Zinc / 64% Exposure Resins 1. Operating profit, as adju
Slide 31: Broadest Product Range in the Industry
Broadest Product Range in the Industry Opportunity for balanced growth with sustainable margins Sanitary and Bath Systems Rough Wellness Faucets and HIGHER Plumbing Showers Kitchen Sinks and Accessories Products Share LOWER Operating Margin HIGHER 5 Note: Based on company estimates.
Slide 32: Brand, Innovation and Distribution Leadership
Brand, Innovation and Distribution Leadership Demonstrated success in core competencies CHANNEL BRANDS I N N OVAT I O N B R EA K D OW N (% of 2018 Revenue1) #1 Share in Vitality Index ~30% Trade 55% North America EPA WaterSense #1 Sustained 4 Share in Germany Excellence Award years Retail 25% receiv
Slide 33: Manufacturing Footprint
Manufacturing Footprint Provides flexibility to respond to a changing marketplace 11 10 North America facilities 10 International facilities International facilities Manufacturing locations 7
Slide 34: Financial Performance
Financial Performance Consistently delivering on our commitments NET SALES ADJUSTED OPERATING PROFIT1 ($B) ($M) $4.0 $704 $724 $3.7 $667 $3.5 $3.3 $3.3 $517 $521 18.9% 18.9% 18.1% 15.6% 15.6% 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 On Track to Deliver 2017 Investor Day Targets of 4-6% Sale
Slide 35: Agenda
Agenda The Business Today Growth Above Market Future Outlook 9
Slide 36: Three Key Growth Strategies
Three Key Growth Strategies 1 Extend leadership position in North American plumbing 2 Grow in priority international markets 3 Invest to grow 10
Slide 37: Investments are Working
Investments are Working Basis for continued growth above market Designer advocacy Showroom penetration Growth outside core faucets and showers 11
Slide 38: Winning at Both Ends of the Market
Winning at Both Ends of the Market Can respond to changing consumer preferences LUXURY ENTRY LEVEL Delta® Foundations® Collection 12
Slide 39: Comprehensive E-Commerce Strategies
Comprehensive E-Commerce Strategies Infrastructure in place to support channel dynamics People & Operations Capabilities Direct to Consumer Shipping Dedicated eBusiness Team Packaging Improvements Minimum Advertised Price Enforcement Improved Lead Times Strong Customer Partnerships Digital Expertise
Slide 40: Delta Faucet Company E-Commerce Position
Delta Faucet Company E-Commerce Position Market leader with strong partnerships and above market growth O N L I N E FA U C E T E-COMMERCE MARKET GROWTH SHARE LEADER Delta Faucet Company (DFC) Market #1 350 300 Indexed Sales $ (2014 Baseline) 250 200 150 100 50 0 2015 2016 2017 2018 2015 to 2018 CAGR
Slide 41: Three Key Growth Strategies
Three Key Growth Strategies 1 Extend leadership position in North American plumbing 2 Grow in priority international markets 3 Invest to grow 15
Slide 42: Global Leader in Premium and Luxury Market
Global Leader in Premium and Luxury Market Ability to respond to global market dynamics Shanghai | China Wasselonne | France Schiltach Offenburg | Germany Willstätt Atlanta | USA subsidiary sales office 16
Slide 43: Priority International Markets
Priority International Markets Balanced attention on large core and emerging markets UK DE USA FR CN IN VN TH PH ID Focus markets: Germany, China, USA, France, UK Key Emerging markets: India, South East Asia 17
Slide 44: Industry Trendsetter in Innovation and Design
Industry Trendsetter in Innovation and Design Key elements to international appeal across countries 601 Awards since 1974 Rainfinity AXOR Edge 18
Slide 45: Expand Multi-Channel Distribution Globally
Expand Multi-Channel Distribution Globally Responsive to global channel dynamics Promotion of global Expand global trade E-commerce growth business Drive DIY expansion Grow hospitality and in Europe residential project business 19
Slide 46: Expand Into Adjacent Product Categories in China
Expand Into Adjacent Product Categories in China Bundled solution approach driving growth LAUNCHED IN 2015 LAUNCHED IN 2018/2019 Kitchen Sinks Cross-selling potential in Kitchen & Bath Drinking water solutions Water filtration solutions Shower toilets 20
Slide 47: Three Key Growth Strategies
Three Key Growth Strategies 1 Extend leadership position in North American plumbing 2 Grow in priority international markets 3 Invest to grow 21
Slide 48: Investing to Grow
Investing to Grow Continuing innovation legacy Functional Innovation Material Innovation Personalization / Customization VoiceIQ™ Technology Brizo® Concrete Faucet Precision Powder Room 22
Slide 49: Investing to Grow
Investing to Grow Building capabilities for future growth Connected Products Agile Product / Market New Product Categories Development Processes 23
Slide 50: Investing to Grow
Investing to Grow Developing smart living and digital solutions hansgrohe home RainTunes Pontos Multisensory Shower Experience Innovative Water Management System 24
Slide 51: Agenda
Agenda The Business Today Growth Above Market Future Outlook 25
Slide 52: Q&A
Q&A Keith Allman and Richard O’Reagan
Slide 53: Decorative Architectural Products
Decorative Architectural Products JAI SHAH GROUP PRESIDENT
Slide 54: Safe Harbor Statement
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,” “anticipat
Slide 55: Agenda
Agenda Segment Overview Lighting Category Coatings Category Future Outlook 3
Slide 56: Decorative Architectural Products
Decorative Architectural Products Segment overview 2018 REVENUE BREAKDOWN2 Revenue $2.7B Repair and Remodel Margin as 96% 4% Adjusted1 18.7% New Home Construction Currency USD / CAD / MXN / RMB Exposure North 100% Commodity TiO2 / Resins / Zinc America Exposure 1. Excludes Kichler inventory step up
Slide 57: Multiple Low Ticket Categories and Brands
Multiple Low Ticket Categories and Brands Broad assortment and market-leading brands COATINGS HARDWARE LIGHTING Paints, primers, stains Cabinet and bath hardware Decorative fixtures Specialty coatings Shower doors Fans Aerosols Hooks, wall plates, mirrors Landscape 5
Slide 58: Innovation Leadership
Innovation Leadership Proven track record ColorSmart® Premium Plus Ultra® Customizable shower doors digital color tool 1st paint & primer in one Behr Marquee® Paint Behr PRO Elan one-coat hide guarantee line Premium decorative 6 LED lighting
Slide 59: Channel Partnerships
Channel Partnerships #1 position across multiple categories and customers R E TA I L 25,000 independent paint dealers TRADE 3,000 independent lighting dealers & showrooms E-COMMERCE 7
Slide 60: Financial Performance
Financial Performance Consistently high earnings and cash flow generation NET SALES ADJUSTED OPERATING PROFIT1 ($B) ($M) 30.0% $2.7 $496 $433 $438 $403 25.0% $2.2 $360 $2.0 $2.1 $2.0 20.0% 20.0% 20.7% 19.9% 18.0% 18.7% 15.0% 10.0% 5.0% 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 On track to de
Slide 61: Agenda
Agenda Segment Overview Lighting Category Coatings Category Future Outlook 9
Slide 62: U.S. Lighting Industry
U.S. Lighting Industry Scale position in fragmented industry to extend our leadership U.S. RESIDENTIAL/ LIGHT COMMERCIAL LIGHTING MARKET ~$6.0B Attractive industry #1 #2 Kichler #3 Kichler well-positioned #4 #5 #6 #7 #8 Ability to realize value All Other ~50% 10 Source: Company estimates.
Slide 63: Kichler – Broad Depth and Breadth
Kichler – Broad Depth and Breadth Ability and options to grow through further penetration CHANNEL CATEGORY R&R VS. NHC Other E-commerce Other New home construction Landscape wholesale Fans Electrical wholesale Landscape Home center Repair and remodel Kichler #3 Decorative fixtures Lighting showroom
Slide 64: Lighting: An Interconnected Category
Lighting: An Interconnected Category We know the playbook to win in lighting 12
Slide 65: Kichler Post Acquisition Journey To Date
Kichler Post Acquisition Journey Laying the foundation to drive towards full potential To Date Masco Operating System embedded 13
Slide 66: Kichler Post Acquisition Journey 2020-2021
Kichler Post Acquisition Journey Laying the foundation to drive towards full potential 2020 - 2021 Targeted growth in showroom and E-commerce 14
Slide 67: Kichler Post Acquisition Journey 2021+
Kichler Post Acquisition Journey Laying the foundation to drive towards full potential 2021+ Full potential realization 15
Slide 68: Agenda
Agenda Segment Overview Lighting Category Coatings Category Future Outlook 16
Slide 69: Coatings Category
Coatings Category Transitioning from DIY focused to meaningfully diversified TOTAL U.S. ARCHITECTURAL BEHR PAINT COMPANY COATINGS MARKET (2018) SALES MIX (2018) $12.5B Opportunity PRO $7.9B PRO DIY DIY $4.6B A Leader 17 Source: Company estimates.
Slide 70: Leading Brands
Leading Brands Strong pull from consumers and professionals #1 JD Power customer satisfaction for interior paint #1 Brand awareness, consideration and conversion #1 Net promoter score #1 Most trusted paint brand in the U.S. and Canada #1 Primer brand in North America #1 Net reputation score (primer)
Slide 71: Quality Leadership
Quality Leadership #1 in quality for multiple years running 2019 Rated #1 by Ratings Consumers #1 INTERIOR BEHR Marquee Interior #1 EXTERIOR BEHR Ultra Exterior #1 EXTERIOR BEHR Premium STAIN Semi-Transparent Wood Stain/Sealer 19 Source: Independent consumer research testing firm.
Slide 72: 40-Year Partnership with The Home Depot
40-Year Partnership with The Home Depot Strongest partnership in the industry SINCE Supplier to 1979 The Home Depot Innovation of 6x the Year Award Winner 13x Partner of the Year 20
Slide 73: Coatings – Growth Strategy
Coatings – Growth Strategy 1 Extend DIY leadership 2 Drive PRO growth 3 Grow adjacencies 21
Slide 74: Extend DIY Leadership
Extend DIY Leadership #1 DIY brand U.S. DIY MARKET – $4.6B (2018) DIY $4.6B 22 Source: Company estimates.
Slide 75: DIY Growth
DIY Growth Improve shopping experience to drive increased conversion Creating Simplifying Driving Inspiration Shopping Process Conversion 23
Slide 76: DIY Growth
DIY Growth Continue to invest in innovation leadership 24
Slide 77: Coatings – Growth Strategy
Coatings – Growth Strategy 1 Extend DIY leadership 2 Drive PRO growth 3 Grow adjacencies 25
Slide 78: PRO Market
PRO Market Remains large growth opportunity U.S. PRO MARKET – $7.9B (2018) PRO $7.9B 26 Source: Company estimates.
Slide 79: PRO Growth
PRO Growth Gain share with the PRO with the right products, services and support PRO-CENTRIC PRO SERVICES PRO SALES PRODUCTS SUPPORT 27
Slide 80: Coatings – Growth Strategy
Coatings – Growth Strategy 1 Extend DIY leadership 2 Drive PRO growth 3 Grow adjacencies 28
Slide 81: Grow Adjacencies
Grow Adjacencies Leveraging brands, channels and end-user loyalty Core Products Extend into New Adjacencies 29
Slide 82: Agenda
Agenda Segment Overview Lighting Category Coatings Category Future Outlook 30
Slide 83: Q&A
Q&A Keith Allman, Jai Shah, Jeff Filley
Slide 84: Financial Overview
Financial Overview JOHN SZNEWAJS CHIEF FINANCIAL OFFICER
Slide 85: Safe Harbor Statement
Safe Harbor Statement This presentation contains statements that reflect our views about our future performance and constitute “forward- looking statements” under the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “believe,” “anticipat
Slide 86: Agenda
Agenda The Business Today – Pro Forma Repair and Remodel Fundamentals Future Outlook Capital Allocation
Slide 87: Pro Forma Financial Performance
Pro Forma Financial Performance Plumbing and Decorative Architecture demonstrate strong results NET SALES1 ADJUSTED OPERATING PROFIT1 ($M) ($M) $6,654 $5,938 $1,126 $5,621 $1,034 $5,361 $988 $802 17.6% 17.4% 16.9% 15.0% 2015 2016 2017 2018 2015 2016 2017 2018 2018 Pro Forma adjusted EPS1 of $2.16 ve
Slide 88: Agenda
Agenda The Business Today – Pro Forma Repair and Remodel Fundamentals Future Outlook Capital Allocation 5
Slide 89: Home Prices Continue to Appreciate
Home Prices Continue to Appreciate Strong correlation with repair and remodel spending 230 $350,000 R&R SPEND 210 $300,000 Remodeling Expenditures, millions 190 $250,000 Home Price Index 170 $200,000 150 $150,000 130 H O M E VA L U E S $100,000 110 $50,000 90 $0 2000 2001 2002 2003 2004 2005 2006 20
Slide 90: Average Age of Housing Stock Increasing
Average Age of Housing Stock Increasing Repair and remodel spend increases with older homes 150,000 40 145,000 AV E R A G E A G E 140,000 HOUSING STOCK 35 Thousands of Units 135,000 Years 130,000 30 125,000 120,000 25 115,000 110,000 20 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 201
Slide 91: Household Formations Accelerating
Household Formations Accelerating Younger home buyers are 50% more likely to take on DIY projects Millions HOUSEHOLD FORMATIONS of units 2.0 1.5 50 Year Median 1.3M 10 Year Median 1.0M 1.0 0.5 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 12M new
Slide 92: Existing Home Sales Remains Healthy
Existing Home Sales Remains Healthy Recent moderation could improve with lower interest rates Millions EXISTING HOME SALES of Units 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F 9 S
Slide 93: Consumer Confidence is High
Consumer Confidence is High Repair and remodel spend driven by health of the consumer CONSUMER SENTIMENT VS. REMODELING SPEND 120 $400,000 Consumer Sentiment 110 Remodeling Expenditures, millions $350,000 100 90 $300,000 Index 80 $250,000 70 60 R&R SPEND $200,000 50 40 $150,000 2000 2001 2002 2003 2
Slide 94: Agenda
Agenda The Business Today – Pro Forma Repair and Remodel Fundamentals Future Outlook Capital Allocation
Slide 95: Exposure to Tariffs on Chinese Imports
Exposure to Tariffs on Chinese Imports Actively executing on near and long-term counter measures IMPORTS FROM CHINA SUBJECT TO TARIFFS 1 (Approximate $ in Millions) Segment List 3 List 4 Total Plumbing Products $325 $200 $525 Decorative Architectural Products $200 $100 $300 Total imports subject to
Slide 96: Historical Sales Performance
Historical Sales Performance Pro Forma sales considerably more stable through a cycle 20% 2 years (sales peak to trough -15%) 10% 0% YoY % Change -10% -20% -30% 6 years (sales peak to trough -68%) -40% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Plumbing and Decorative Arch
Slide 97: Performance Through a Cycle
Performance Through a Cycle Masco better positioned for resilient performance • Improved portfolio Lower ticket and repair oriented products • Efficient fixed cost structure No significant capacity additions since 2008 recession • Strong free cash flow Lower capex and working capital offsets volume
Slide 98: Agenda
Agenda The Business Today – Pro Forma Repair and Remodel Fundamentals Future Outlook Capital Allocation
Slide 99: Capital Allocation Strategy
Capital Allocation Strategy Balanced approach to continue to drive shareholder value 1 Reinvest in the business • Capex: 2-2.25% of sales • Working capital: ~16.5% of sales 2 Maintain investment grade credit rating • Gross debt to EBITDA below 2.5x 3 Maintain relevant dividend • Dividend payout rati
Slide 100: Masco Corporation Investor Day
Masco Corporation Investor Day KEITH ALLMAN PRESIDENT AND CHIEF EXECUTIVE OFFICER
Slide 101: Safe Harbor Statement
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,” “anticipat
Slide 102: Key Messages
Key Messages Competitive advantages to deliver consistent performance 1 Continue to deliver against commitments 2 Stronger portfolio for above market growth and resilience 3 Balanced approach to allocation of substantial free cash flow to continue to drive shareholder value 4
Slide 103: Q&A
Q&A Keith Allman and John Sznewajs
Slide 104: Appendix
Appendix
Slide 105: Pro Forma Balance Sheet
Pro Forma Balance Sheet As of December 31, 2018 $M Assets Dec. 31, 2018 Pro Forma Liabilities Dec. 31, 2018 Pro Forma As Reported Held for Sale Pro Forma As Reported Held for Sale Pro Forma Current Assets: Current Liabilities: Cash and Cash Investments $559 $(7) $552 Accounts Payable $926 $(190) $73
Slide 106: Pro Forma Balance Sheet
Pro Forma Balance Sheet As of June 30, 2019 $M Assets June 30, 2019 Pro Forma Liabilities June 30, 2019 Pro Forma As Reported Held for Sale Pro Forma As Reported Held for Sale Pro Forma Current Assets: Current Liabilities: Cash and Cash Investments $325 $(7) $318 Accounts Payable $1,023 $(205) $818
Slide 107: 2019 EPS Outlook Reconciliation
2019 EPS Outlook Reconciliation 2019 Low End Midpoint High End Net income per common share $2.51 $2.56 $2.61 Rationalization charges 0.02 0.02 0.02 Impairment charges for goodwill and other intangible 0.04 0.04 0.04 assets Professional fees related to potential divestitures 0.03 0.03 0.03 Allocation
Slide 108: EPS Reconciliation
EPS Reconciliation Full Year 2016 (in Millions, Except per Common Share Data) 2016 Income before income taxes, as reported $ 832 Rationalization charges 22 (Gains) from private equity funds, net (5) (Earnings) from equity investments, net (2) (Gain) from auction rate securities (3) Loss from other i
Slide 109: EPS Reconciliation
EPS Reconciliation Full Year 2018 (in Millions, Except per Common Share Data) 2018 Income before income taxes, as reported $ 1,042 Rationalization charges 14 Kichler inventory step up adjustment 40 (Gains) from private equity funds, net (1) (Earnings) from equity investments, net (3) Income before i
Slide 110: Pro Forma EPS Reconciliation
Pro Forma EPS Reconciliation Full Year 2018 (in Millions, Except per Common Share Data) 2018 Income before income taxes, as reported $ 1,042 Less: Cabinetry Products 95 Less: Windows and Other Specialty Products 40 Pro forma income before income taxes $ 907 Rationalization charges 9 Kichler inventor
Slide 111: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation 2018, 2017 and 2016 2018 2017 2016 Net cash from operating activities $ 1,032 $ 751 $ 789 Capital expenditures (219) (173) (180) Displays (10) (14) (11) Free cash flow $ 803 $ 564 $ 598 Net income $ 784 $ 580 $ 536 Free cash flow conversion rate 102% 97% 112% 9
Slide 112: Net Sales and Operating Profit Reconciliations
Net Sales and Operating Profit Reconciliations 2018, 2017, 2016, and 2015 ($ in Millions) 2018 2017 2016 2015 Net sales, as reported $ 8,359 $ 7,642 $ 7,361 $ 7,142 Less: Cabinetry Products 950 934 970 1,025 Less: Windows and Other Specialty Products 755 770 770 756 Pro forma net sales $ 6,654 $ 5,9
Slide 113: EBITDA Reconciliations
EBITDA Reconciliations 2018, 2017, and 2016 ($ in Millions) 2018 2017 2016 Operating profit, as adjusted $ 1,265 $ 1,198 $ 1,109 Add: Depreciation and amortization 154 126 130 EBITDA, as adjusted $ 1,419 $ 1,324 $ 1,239 EBITDA margin, as adjusted 17.0% 17.3% 16.8% 11