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Unlocking Shareholder Value: Strategic Review Update MASCO CORPORATION September 30, 2014

Masco - Investor Presentation - September 2014

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Masco - Investor Presentation - September 2014

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Page 1: Masco - Investor Presentation - September 2014

Unlocking Shareholder Value: Strategic Review Update

MASCO CORPORATION

September 30, 2014

Page 2: Masco - Investor Presentation - September 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.

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Page 3: Masco - Investor Presentation - September 2014

Agenda

● Highlights of the Announcement

● Creating Two Companies – Transaction Overview

● Share Repurchase Program

● Corporate Efficiency Measures

● Executing Our Plan

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Page 4: Masco - Investor Presentation - September 2014

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

Page 5: Masco - Investor Presentation - September 2014

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

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Spin-off of Installation and Other Services businesses

Reduce corporate expense

Share repurchase program

1

2

3

Page 6: Masco - Investor Presentation - September 2014

Agenda

● Highlights of the Announcement

● Creating Two Companies – Transaction Overview

● Share Repurchase Program

● Corporate Efficiency Measures

● Executing Our Plan

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Page 7: Masco - Investor Presentation - September 2014

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

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Masco 2013 Revenue: $6.8B

Focus: Branded Building Products

The New “Services Business” 2013 Revenue: $1.4B

Focus: Installation and Distribution Services

Page 8: Masco - Investor Presentation - September 2014

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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Page 9: Masco - Investor Presentation - September 2014

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

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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

Page 10: Masco - Investor Presentation - September 2014

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

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Page 11: Masco - Investor Presentation - September 2014

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

Page 12: Masco - Investor Presentation - September 2014

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%

Page 13: Masco - Investor Presentation - September 2014

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.

Page 14: Masco - Investor Presentation - September 2014

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

Page 15: Masco - Investor Presentation - September 2014

Agenda

● Highlights of the Announcement

● Creating Two Companies – Transaction Overview

● Share Repurchase Program

● Corporate Efficiency Measures

● Executing Our Plan

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Page 16: Masco - Investor Presentation - September 2014

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

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Overview

Page 17: Masco - Investor Presentation - September 2014

Disciplined Capital

Deployment

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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

Page 18: Masco - Investor Presentation - September 2014

Agenda

● Highlights of the Announcement

● Creating Two Companies – Transaction Overview

● Share Repurchase Program

● Corporate Efficiency Measures

● Executing Our Plan

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Page 19: Masco - Investor Presentation - September 2014

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

Page 20: Masco - Investor Presentation - September 2014

Agenda

● Highlights of the Announcement

● Creating Two Companies – Transaction Overview

● Share Repurchase Program

● Corporate Efficiency Measures

● Executing Our Plan

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Page 21: Masco - Investor Presentation - September 2014

Executing Our Plan

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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

Page 22: Masco - Investor Presentation - September 2014

I n S u m m a r y

Driving Improved Performance

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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

Page 23: Masco - Investor Presentation - September 2014

Unlocking Shareholder Value: Strategic Review Update

MASCO CORPORATION

September 30, 2014