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Masco - Investor Presentation - September 2014
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Unlocking Shareholder Value: Strategic Review Update
MASCO CORPORATION
September 30, 2014
Safe Harbor Statement
Written and oral statements made in this presentation that reflect our views about our future performance 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. These views 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 our reliance on new home construction and home improvement, our reliance on key customers, the cost and availability of raw materials, uncertainty in the international economy, shifts in consumer preferences and purchasing practices, our ability to improve our underperforming businesses, our ability to maintain our competitive position in our industries, risks associated with the proposed spin-off of our Services Business, our ability to realize the expected benefits of the spin-off, the timing and terms of our share repurchase program, and our ability to reduce corporate expense and simplify our organizational structure. We discuss many of the risks we face in Item 1A, “Risk Factors” in our 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. Our 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
Agenda
● Highlights of the Announcement
● Creating Two Companies – Transaction Overview
● Share Repurchase Program
● Corporate Efficiency Measures
● Executing Our Plan
3
H i g h l i g h t s o f t h e A n n o u n c e m e n t
A Clear Strategic Focus
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2. Leverage
opportunities across our portfolio
1. Drive full
potential of our core
businesses
3. Actively manage portfolio
D R I V I N G S H A R E H O L D E R V A L U E
H i g h l i g h t s o f t h e A n n o u n c e m e n t
Key Initiatives to Unlock Shareholder Value
Unlocking Shareholder
Value
5
Spin-off of Installation and Other Services businesses
Reduce corporate expense
Share repurchase program
1
2
3
Agenda
● Highlights of the Announcement
● Creating Two Companies – Transaction Overview
● Share Repurchase Program
● Corporate Efficiency Measures
● Executing Our Plan
6
T r a n s a c t i o n O v e r v i e w
Creating Two Strong Public Companies
• Differentiated businesses with strong technical competence in their respective manufacturing and service sectors
• Targeted investment opportunity for investors via a tax-free distribution of shares to Masco Corporation shareholders
• Completion targeted for mid-year 2015
7
Masco 2013 Revenue: $6.8B
Focus: Branded Building Products
The New “Services Business” 2013 Revenue: $1.4B
Focus: Installation and Distribution Services
Service Partners
Leading distributor of insulation and related accessories, gutters, fireplaces, roofing, as well as other building products
Examples of Products Distributed
T r a n s a c t i o n O v e r v i e w – S e r v i c e s B u s i n e s s
The Services Business Today - A Strong Platform
Masco Contractor Services
Leading installer of insulation, gutters, fireplaces, garage doors and more as well as recognized building science expertise
Examples of Products Installed
Garage Doors
Insulation Gutters Fireplaces Roofing Cellulose Insulation
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T r a n s a c t i o n O v e r v i e w - S e r v i c e s B u s i n e s s
Growing and Well-Positioned in New Construction
9
Growth in Revenues ($B)
$1.0 $1.1
$1.2 $1.4
2010 2011 2012 2013
New Construction
Repair & Remodel 20% 80%
Leveraged to New Construction
~11% CAGR
T r a n s a c t i o n O v e r v i e w - S e r v i c e s B u s i n e s s
A Leading Player with Significant Competitive Advantages
Leading provider of installation and distribution services
Strong local relationships with national resources
Commercial and retrofit channels supplement new residential construction business
Building science – energy efficiency and home performance expertise
Talented leadership team
Extensive nationwide footprint
Strong balance sheet to support organic growth and disciplined acquisitions
10
T r a n s a c t i o n O v e r v i e w – S e r v i c e s B u s i n e s s
Multiple Growth Drivers
Capitalize on new construction recovery and building code updates
Deeper penetration of existing markets
Further expansion into commercial and retrofit
Building science expertise
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1
2 3
4
T r a n s a c t i o n O v e r v i e w – M a s c o
Masco Post-Spin - A Leader in Branded Building Products
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BUSINESS SEGMENT
Cabinets and Related Products
Plumbing Products
Decorative Architectural Products
$1.0B
$3.2B
$1.9B
2013 REVENUE
$6.8B Total company
Windows & Other Specialty
$0.7B
LEADING POSITIONS
Leading U.S. kitchen and bath cabinetry brands
#1 worldwide in faucets, fittings, showerheads
#1 in spas
Leading DIY paint and stain provider
#1 in vinyl windows in the western U.S.
15%
47%
28%
% OF TOTAL
10%
T r a n s a c t i o n O v e r v i e w – M a s c o
Increased Focus on International; Repair and Remodel
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Pre-Spin
N. America 19% 81% Int’l
R&R 28% 72% New home
N. America 23% 77% Int’l
R&R 17% 83% New home
Post-Spin
Revenue Breakdown – International vs. North America
Revenue Breakdown – R&R vs. New Home Construction
Data is 2013 full year revenue. Post-spin is proforma for the anticipated spin-off of the Services Business.
T r a n s a c t i o n O v e r v i e w – M a s c o
Significant Growth Opportunities
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BUSINESS SEGMENT
Cabinets and Related Products
Plumbing Products
Decorative Architectural Products
Windows & Other Specialty
GROWTH PLAN
Dealer channel penetration Retail channel share gain
International expansion Adjacent bathing products
Grow with professional paint customers International expansion
Share gains through industry-leading products Expansion into new geographies
Agenda
● Highlights of the Announcement
● Creating Two Companies – Transaction Overview
● Share Repurchase Program
● Corporate Efficiency Measures
● Executing Our Plan
15
S h a r e R e p u r c h a s e P l a n
Returning Capital to Shareholders
● Repurchase of up to 50 million shares of Masco common stock – Approximately 14% of current shares outstanding
– Represents approximately $1.2 billion at the current stock price
– Repurchases expected to be made over a multi-year period starting in 2014
● Enables Masco to return significant cash to shareholders
● The purchases will be funded with cash on hand – $1.4B of cash and equivalents as of June 30, 2014
– $600 million of cash off-shore
16
Overview
Disciplined Capital
Deployment
17
Invest in the business
Pay down debt
Bolt on acquisitions
Shareholder-friendly activities
S h a r e R e p u r c h a s e P l a n
Capital Allocation – A Disciplined and Balanced Approach
• Capital expenditure of approximately 2% of sales
• $300-500 million over the next two to three years
• Disciplined approach to bolt on acquisitions
• Repurchase up to 50 million shares
• Dividend expense of approximately $130 million
Agenda
● Highlights of the Announcement
● Creating Two Companies – Transaction Overview
● Share Repurchase Program
● Corporate Efficiency Measures
● Executing Our Plan
18
C o r p o r a t e E f f i c i e n c y M e a s u r e s
Making Masco a More Effective Organization
● Realignment of assets and employees between Masco and the new Services Business
● Reduction of corporate overhead – Annual savings of ~$35-$40M – Estimated one time cost ~$30M
● Increased organizational speed and decision making agility
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A more efficient, lower cost company
Agenda
● Highlights of the Announcement
● Creating Two Companies – Transaction Overview
● Share Repurchase Program
● Corporate Efficiency Measures
● Executing Our Plan
20
Executing Our Plan
21
Complete spin-off
2014
H2
2015
H1 H2
Communicate long-term growth strategy at 2015 Investor Day
Share repurchases – ongoing
Implementing overhead savings
February 9, 2015
I n S u m m a r y
Driving Improved Performance
22
Transforming • Delivering on the promise of transformation
• Unlocking value by creating two strong companies with independent growth opportunities
• Returning capital to shareholders
• Maintaining our focus on continued strong operating performance and free cash flow generation
• Streamlining corporate expense and organizational structure
Two Strong Companies
Share Repurchase Program
Reduce Corporate Expense
Balanced Capital Allocation
Unlocking Shareholder Value: Strategic Review Update
MASCO CORPORATION
September 30, 2014