Slide 1: Fourth Quarter and Full Year 2019 Earnings Presentation
MASCO CORPORATION Fourth Quarter and Full Year 2019 Earnings Presentation February 11, 2020
Slide 2: 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 “outlook,” “believe,”
Slide 3: Agenda
Agenda Performance Summary Since of Results 2017Allman – Keith Financial / Operations Review – John Sznewajs Q&A 3
Slide 4: Delivered on Commitments to Drive Shareholder Value
Q4 2019 IN REVIEW Delivered on Commitments to Drive Shareholder Value • Solid top-line growth in North American plumbing and paint Driving • Completed the sale of Milgard Windows and Doors Shareholder Value • Signed agreement for sale of Masco Cabinetry business • Repurchased 8.6 million shares for
Slide 5: Executed on Transformation of Business
2019 IN REVIEW Executed on Transformation of Business • Drove top-line growth and mitigated impact of tariffs • Gained share and invested in new products and programs • Grew adjusted EPS by 6% Driving Shareholder • Returned over $1 billion to shareholders Value • Completed divestitures of windows bu
Slide 6: Agenda
Agenda Summary of Results – Keith Allman Financial / Operations Review – John Sznewajs Q&A 6
Slide 7: Finished Year on Plan Achieving 6% Adjusted EPS Growth
MASCO CORPORATION Finished Year on Plan Achieving 6% Adjusted EPS Growth Fourth Quarter Full Year ($ in Millions) 2019 2019 Revenue $1,639 $6,707 Y-O-Y Change - 1% Operating Profit* $257 $1,110 Y-O-Y Change ($24) ($16) Operating Margin* 15.7% 16.5% Y-O-Y Change (150) bps (40) bps Adjusted EPS* $0.54
Slide 8: Strong North American Plumbing Growth
PLUMBING PRODUCTS Strong North American Plumbing Growth Fourth Quarter Full Year ($ in Millions) 2019 2019 Revenue $1,026 $3,984 Y-O-Y Change 2% - Operating Profit* $180 $721 Y-O-Y Change ($5) ($3) Operating Margin* 17.5% 18.1% Y-O-Y Change (90) bps - *Excludes business rationalization charges for t
Slide 9: Solid Paint Performance
DECORATIVE ARCHITECTURAL PRODUCTS Solid Paint Performance Fourth Quarter Full Year ($ in Millions) 2019 2019 Revenue $613 $2,723 Y-O-Y Change (3%) 3% Operating Profit* $100 $489 Y-O-Y Change ($18) ($7) Operating Margin* 16.3% 18.0% Y-O-Y Change (240) bps (70) bps *Excludes impairment charge for full
Slide 10: Strong Balance Sheet
Strong Balance Sheet Balance Sheet Metrics as of 12/31/2019 Cash and cash investments $697M Revolver availability $1,000M Total liquidity $1,697M Net leverage 1.7x Working capital as a % of sales 15.7% Highlights • Working capital as a percentage of sales improved 10 bps compared to prior year • Rep
Slide 11: Agenda
Agenda Summary of Results – Keith Allman Financial / Operations Review – John Sznewajs Q&A 11
Slide 12: MASCO
MASCO
Slide 13: Appendix
Appendix MASCO
Slide 14: Profit Reconciliations – Fourth Quarter
Profit Reconciliations – Fourth Quarter ($ in Millions) Q4 2019 Q4 2018 Net sales $ 1,639 $ 1,635 Gross profit, as reported $ 565 $ 568 Rationalization charges 2 4 Gross profit, as adjusted $ 567 $ 572 Gross margin, as reported 34.5% 34.7% Gross margin, as adjusted 34.6% 35.0% Selling, general and a
Slide 15: Profit Reconciliations – Full Year
Profit Reconciliations – Full Year ($ in Millions) 2019 2018 Net sales $ 6,707 $ 6,654 Gross profit, as reported $ 2,371 $ 2,327 Rationalization charges 9 9 Kichler inventory step up adjustment - 40 Gross profit, as adjusted $ 2,380 $ 2,376 Gross margin, as reported 35.4% 35.0% Gross margin, as adju
Slide 16: EPS Reconciliation – Fourth Quarter
EPS Reconciliation – Fourth Quarter (in Millions, Except per Common Share Data) Q4 2019 Q4 2018 Income from continuing operations before income taxes, as reported $ 217 $ 236 Rationalization charges 2 4 (Gains) from private equity funds, net - (1) (Earnings) from equity investments, net - (1) Income
Slide 17: EPS Reconciliation – Full Year
EPS Reconciliation – Full Year (in Millions, Except per Common Share Data) 2019 2018 Income from continuing operations before income taxes, as reported $ 914 $ 907 Rationalization charges 13 9 Kichler inventory step up adjustment - 40 Impairment charge for other intangible assets 9 - (Gains) from pr
Slide 18: Working Capital as a % of Sales and EPS Outlook Reconciliation
Working Capital as a % of Sales and EPS Outlook Reconciliation (in Millions) As of December 31, 2019 Receivables $ 997 Inventories 754 Less: Accounts payable (697) Working Capital $ 1,054 Working capital as a % of sales (last 12 months) 15.7% 2020 Low End High End Income from continuing operations p
Slide 19: Net Leverage Reconciliation
Net Leverage Reconciliation ($ in Millions) December 31,2019 Debt $ 2,773 Less: Cash and cash investments (697) Net Debt $ 2,076 Year End ($ in Millions) December 31, 2019 Operating profit, as reported $ 1,088 Rationalization charges 13 Impairment charge for other intangible assets 9 Operating profi
Slide 20: Return on Invested Capital & Free Cash Flow Reconciliation
Return on Invested Capital & Free Cash Flow Reconciliation Return on Invested Capital Reconciliation ($ Millions) December 31, 2019 Income from continuing operations, as adjusted $ 647 Average invested capital: Average shareholders' equity $ 7 Average debt 2,876 Less: Average cash and cash investmen
Slide 21: Operating Profit Reconciliation by Quarter – 2019 & 2018
Operating Profit Reconciliation by Quarter – 2019 & 2018 ($ in Millions) Q4 2019 Q3 2019 Q2 2019 Q1 2019 Net sales, as reported $ 1,639 $ 1,716 $ 1,839 $ 1,513 Operating profit, as reported $ 255 $ 289 $ 347 $ 197 Rationalization charges 2 9 2 - Impairment charge for other intangible assets - - - 9
Slide 22: EPS Reconciliation by Quarter – 2019 & 2018
EPS Reconciliation by Quarter – 2019 & 2018 (in Millions, Except per Common Share Data) Q4 2019 Q3 2019 Q2 2019 Q1 2019 Income from continuing operations before income taxes, as reported $ 217 $ 241 $ 303 $ 153 Rationalization charges 2 9 2 - Impairment charge for other intangible assets - - - 9 (Ea
Slide 23: Additional Items by Quarter – 2019 & 2018
Additional Items by Quarter – 2019 & 2018 (in Millions) Q4 2019 Q3 2019 Q2 2019 Q1 2019 Additional Items: Receivables $ 997 $ 1,095 $ 1,226 $ 1,122 Inventories 754 819 829 862 Accounts Payable 697 768 819 765 General Corporate Expense (23) (24) (24) (29) (in Millions) Q4 2018 Q3 2018 Q2 2018 Q1 2018
Slide 24: 2019 Segment Mix
2019 Segment Mix* Total Geographic Business 2019 Revenue Split Segment Revenue R&R% vs. NC NA% vs. Int’l Plumbing Products $4.0B 84% 65% North America 79% Decorative $2.7B 100% 96% Architectural Products Europe 12% Total Company $ 6.7B 89% 79% China Other United Kingdom 3% 3% 3% R&R = % of sales to
Slide 25: 2020 Estimates
2020 Estimates Item Assumption Rationalization charges ~$5m Tax rate 26% General corporate expense ~$95m Interest Expense ~$140m Capital expenditures ~$150m (includes maintenance capex of ~$75m) Depreciation and amortization ~$140m Share Repurchases ~1.2b (includes use of divestiture proceeds) Avera
Slide 26: 2020 Outlook
2020 Outlook 2020 2020 Adjusted Additional 2020 Business Segment Sales Operating Profit Guidance Growth Margin • First half 2020 operating margin down ~100 bps 2 – 4% Similar to 2019 Plumbing Products • No material impact from FX (ex currency) margin of 18.1% at current rates • 2020 D&A ~$85m • Unfa