Masco Annual Report2004

Masco Corporation

Building a Dynamic Future
2004 Annual Report

About Masco
Masco Corporation is a world leader in the manufacture of home improvement and building
products. Masco is also a leading provider of services that include the sale and installation of
insulation and other building products. We provide brand-name, value-added products and
services for the home and family that can be used with confidence and displayed with pride.

ON THE COVER
To enhance market share growth and pricing power, Masco continues to intensify its focus on new-
product development. In our decorative architectural products segment, Behr Process Corporation
recently introduced a variety of new exterior wood finishes, including one specifically designed for
log homes—achieving very favorable market recognition. Additionally, the cover design showcases
Milgard Windows, featuring its popular Fiberglass WoodClad™ windows.

TABLE OF CONTENTS
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Building on Leadership Brands . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Letter to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Building a Dynamic Future. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Financial Highlights for 2004 . . . . . . . . . . . . . . . . . . . . . . . . . 5
Strategic Redirection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Leveraging Synergies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Portfolio Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
New-Product Development . . . . . . . . . . . . . . . . . . . . . . . . . 16
Customer Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Asia Sourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Improving Shareholder Returns. . . . . . . . . . . . . . . . . . . . . . 22
Corporate Responsibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Future Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Forty-Eight Years of Sales Growth . . . . . . . . . . . . . . . . . . . . . . . 26
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Corporate Leadership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Division Operating Executives . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Form 10-K
Information for Shareholders . . . . . . . . . . . . . Inside Back Cover

FORWARD-LOOKING STATEMENTS
Our Annual Report to Shareholders contains statements reflecting our views about the Company’s future performance. These
statements are “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. Actual results may
differ materially from the results discussed in such forward-looking statements. Readers should refer to the comment at the
beginning of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our
Annual Report on Form 10-K included herein, which explains that various factors may affect our projected performance. The
Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future
events or otherwise.

NON-GAAP DISCLOSURE
The Company believes that certain non-GAAP (Generally Accepted Accounting Principles) performance measures and
ratios, used in managing the business, may provide users of this financial information with additional meaningful compar-
isons between current results and results in prior periods of ongoing operations. Non-GAAP performance measures and
ratios should be viewed in addition to, and not as an alternative for, the Company’s reported results under accounting prin-
ciples generally accepted in the United States. For a reconciliation of 2004 sales growth excluding acquisitions and divesti-
tures, please refer to page 19 of the Form 10-K included herein.

BUILDING A DYNAMIC FUTURE

Financial Highlights
Dollars in Millions Except Per Common Share Data
48-Year 5-Year
Growth Growth 2004
Rate Rate vs 2003 2004 2003 1999 1956
Net Sales 16% 17% 14% $12,074 $10,571 $5,577 $ 11
1, 2
Operating Profit 17% 14% 6% $ 1,569 $ 1,484 $ 807 $ 1
Income from
Continuing Operations1, 2 17% 13% 18% $ 930 $ 790 $ 502 $ 0
1, 2
Income from Continuing Operations as a % of :
Net Sales 8% 7% 9% 4%
3
Shareholders’ Equity 17% 15% 19% 9%
Shareholders’ Equity 16% 12% - 1% $ 5,423 $ 5,456 $3,019 $ 5
Per Common Share Data:
Income from
Continuing Operations1, 2 14% 13% 27% $ 2.04 $ 1.61 $ 1.12 $0.005/16
$0.001/16
Cash Dividends Paid 16% 8% 14% $ 0.66 $ 0.58 $ 0.45
Amounts, except for shareholders’ equity, have been restated to exclude discontinued operations.
The year 2004 includes a non-cash goodwill impairment charge of $141 million after tax ($168 million pre-tax) and income of $19 million after tax ($30 million
1
pre-tax) related to the Behr litigation settlement.
The year 2003 includes a non-cash goodwill impairment charge of $47 million after tax ($53 million pre-tax) and income of $45 million after tax ($72 million
2
pre-tax) related to the Behr litigation settlement.
Based on shareholders’ equity as of the beginning of the year.
3

FIVE YEARS OF SALES GROWTH In Millions
’04
’03
’02
’01
’00

2004 Annual Report ~ 1


Building on Leadership Brands
Net Sales
CABINETS AND RELATED PRODUCTS Dollars In Millions
Masco is the largest U.S. manufacturer of kitchen and bath cabinetry,
offering approximately 300 styles in more than 20 lines from our U.S.
companies: KraftMaid, Merillat, Mill’s Pride, Texwood and Zenith. Our
European cabinet companies include The Aran Group, The Moores
Group and Tvilum-Scanbirk. This segment includes assembled and
ready-to-assemble kitchen and bath cabinets; home office workstations;
entertainment centers; storage products; bookcases; and kitchen utility
products.

PLUMBING PRODUCTS
Masco is a world leader in the manufacture of plumbing products. This
segment includes faucets; plumbing fittings and valves; showerheads
and hand showers; bathtubs and shower enclosures; and spas. Leading
faucet brands include Bristan™, Damixa®, Delta®, Hansgrohe®, Mariani™,
Newport Brass® and Peerless®. Leading plumbing specialty brands
include Alsons®, Aqua Glass®, BrassCraft®, Brasstech®, Cobra®, Ginger®,
Gummers™, Heritage™, Hot Spring®, NewTeam™ and PlumbShop®.

INSTALLATION AND OTHER SERVICES
Masco provides a variety of installation services for homebuilders
across the U.S. and in Canada. Included in this segment are the sale and
installation principally of insulation as well as cabinetry, fireplaces, gut-
ters, bath accessories, garage doors, shelving and windows. Under the
Masco Contractor Services umbrella, this segment includes installation
industry leaders such as Cary Insulation, Gale Insulation, Quality
Insulation, Sacramento Building Products and Williams Insulation.

DECORATIVE ARCHITECTURAL PRODUCTS
This segment includes paints and stains; and door, window and other
hardware. Market leaders in paints and stains include Behr Process
Corporation and Masterchem Industries, with top-selling brands
Behr®, Behr Premium Plus®, Casual Colors®, Expressions™, Kilz® and
Hammerite®. Leading hardware brands include Bath Unlimited®,
Brainerd®, Franklin Brass®, and Liberty® in the U.S. and Avocet™ in
Europe. This segment also includes Vapor Technologies, which provides
coatings technology and manufacturing process equipment for many
Masco products.

OTHER SPECIALTY PRODUCTS
The Other Specialty Products segment includes windows, window
frame components and patio doors; electronic locksets; staple gun
tackers, staples and other fastening tools; and hydronic radiators and
heat convectors. Companies in this segment include Arrow Fastener,
Computerized Security Systems, Faucet Queens and Milgard
Manufacturing in the U.S., and The Brugman Group, Cambrian
Windows, Duraflex, Griffin Windows, Premier Manufacturing, Superia
Radiatoren and Vasco in Europe.

2 ~ Masco Corporation

Masco Contractor Services Aqua Glass tub, Delta faucet, Milgard windows Delta faucet

Bath Unlimited
accessories
Merillat cabinetry Alsons shower system Behr paint

Delta faucet, Hüppe collapsible
shower doors, Mirolin tub Texwood cabinetry Hot Spring spa


March 2005

Building a Dynamic Future
We are pleased to report that in 2004 your Company achieved
record sales, net income and earnings per common share, and
Masco’s share price reached an all-time high.

Our success was in large part due to a change in strategic direction to focus on
increasing shareholder value by improving the Company’s return on invested
capital (ROIC) through strong internal growth, share repurchases and balance sheet
simplification.

The new strategic direction, which we announced in early 2003, was designed to
benefit our shareholders by leveraging the critical mass of brands that we developed
in 1997 through 2002 through our acquisition of a number of leading home improve-
ment and building product companies. During this period of rapid growth, our goal
was to broaden our product and services offerings to customers and consumers, to
make Masco more important to a dramatically consolidating customer base, includ-
ing home centers and homebuilders, and to address the increasing globalization of
our markets.

While we were successful in building
what we believe is one of the world’s
leading providers of home improvement
and building products and services dur-
ing the period prior to 2003, we did not
create satisfactory shareholder value, we
increased debt as a percentage of total
capitalization and we experienced a
decline in ROIC.

Our recent change in strategic direction
has focused the resources of the
Company on improving return to share-
holders and contributed significantly to
Richard A. Manoogian
Chairman and Chief Executive Officer
our record results in 2004.
Alan H. Barry
President and Chief Operating Officer


Financial Highlights for 2004
NET SALES AND OPERATING PROFIT
Net sales from continuing operations were a record $12.1 billion, a 14 percent increase
over the $10.6 billion that we achieved in 2003. Since the Company had no acquisi-
tions of significant size during the past year, virtually all of this increase was from
internal growth.

NET SALES AND OPERATING PROFIT
Dollars in Millions

Year Net Sales Operating Profit
2004 $12,074 $1,569
2003 10,571 1,484
2002 8,831 1,267
2001 7,705 1,011
2000 6,506 888
1999 5,577 807
5-Year Growth Rate 17% 14%
Amounts have been restated to exclude discontinued operations.

Net sales from North American operations, accounting for 82 percent of the
Company’s sales, increased 13 percent to $9.9 billion in 2004 from $8.8 billion in 2003.
Net sales from International operations, principally in Europe, increased 21 percent
to $2.2 billion in 2004 from $1.8 billion in 2003.

Income from continuing operations for 2004 was $930 million compared with
$790 million in 2003, including non-cash, after-tax charges for goodwill impairment
of $141 million ($168 million pre-tax) and $47 million ($53 million pre-tax) in 2004 and
2003, respectively. Earnings from continuing operations were $2.04 per common
share compared with $1.61 per common share in 2003. Excluding the charges for
goodwill impairment, earnings from continuing operations were $2.35 per common
share and $1.70 per common share for 2004 and 2003, respectively.



Our operating profit margins from continuing operations, as reported, were 13.0 per-
cent in 2004, compared with 14.0 percent in 2003. Excluding goodwill impairment
charges, operating profit margins were 14.4 percent and 14.5 percent in 2004 and 2003,
respectively. These margins were adversely affected by increased commodity costs
not recovered due to the normal delay from a timing standpoint in implementing
selling price increases to customers, costs associated with the Sarbanes-Oxley legisla-
tion, increased energy and freight costs, stronger foreign currencies resulting in
increased International sales that have lower margins, product mix and relatively
higher sales in product segments with somewhat lower margins.

CASH FLOW
In 2004, the Company achieved free cash flow (defined as cash from operations less
capital expenditures and before dividends) of over $1 billion, for the second consec-
utive year. Our cash flow has benefited from improved balance sheet management,
particularly related to working capital management.

CAPITAL EXPENDITURES
Capital expenditures for the year, including discontinued operations, were $310 mil-
lion compared with $271 million for 2003. We continue to invest capital to support
internal growth opportunities across our businesses. Depreciation and amortization
for 2004 was $237 million compared with $244 million for 2003.

LIQUIDITY
The Company ended 2004 in a strong financial position with cash and marketable
securities in excess of $1.5 billion, even after using approximately $900 million to
repurchase common shares for retirement. In keeping with our commitment to
reduce the Company’s financial investments, our marketable equity securities and
bond funds portfolio was reduced to $263 million at year-end compared with $517
million at the end of 2003.

The Company renegotiated its debt agreements with its banks and replaced its then
existing credit agreements with a $2.0 billion five-year revolving credit agreement
payable in November 2009. At year-end, there were no borrowings under this new
agreement.


Hansgrohe faucets



BALANCE SHEET
Our focus on balance sheet management in 2004 resulted in the following:

• Accounts receivable at the end of 2004 were 49 days, compared with 53 days for
2003;
• Year-end inventories increased slightly to 49 days, compared with 48 days in 2003;
• Accounts payable days at year-end improved to 36 days, compared with 35 days
in 2003, as the Company continues to negotiate more favorable supplier terms; and
• Working capital at year-end (defined as accounts receivable and inventories less
accounts payable) improved to 16.8 percent of sales, from 18.1 percent a year earlier.

CAPITALIZATION
Consistent with our commitment to improve ROIC, we continued to aggressively man-
age our capital base by repurchasing 31 million common shares in 2004 for approxi-
mately $900 million. In the
past two years, our com-
mon shares outstanding
have been reduced by 66
million through share
repurchases.

Debt as a percent of total
capitalization at the end
of 2004 was 44 percent,
compared with 43 percent
at year-end 2003.

Ginger mirror and light fixtures, Mirolin bathtub, Newport
Brass vanity & plumbing fixtures


Strategic Redirection
During the past two years, Masco has undertaken a critical
forward-looking strategic planning initiative designed to
identify opportunities to further strengthen the Company,
grow our market leadership positions and enhance long-term
shareholder value.

STRATEGIC AGENDA
STRATEGIC AGENDA
2004 Goals 2004 Results
Return on Invested Capital Improve 12.0% compared with 11.1% in 2003
Average Annual Internal
Sales Growth 6–8% 14%
Average Annual Sales Growth
through Acquisitions 5% or less Less than 1%
Average Annual Operating
Profit Margins 13–15% 13.0%
Cash Flow Above Average Free cash flow exceeded $1 billion
Average Annual Return to
Shareholders, including
Dividends 12–15% 29%



LEADERSHIP PRODUCTS AND SERVICES
Dollars in Millions
2004 Sales Percent of Total
Cabinets and Related Products $ 3,131 26%
Installation and Other Services 2,771 23%
Plumbing Products 2,468 20%
Decorative Architectural Products 1,606 13%
Other Specialty Products 1,159 10%
Leadership Sales $11,135 92%
Other Sales 939 8%
Total Sales $12,074 100%

Your Company spent a number of years and significant resources developing a criti-
cal mass of businesses that provide leadership products and services and highly rec-
ognized brands. These brands target diverse price points and distribution channels in
the home improvement and building products and services industries. That strategy
proved effective, solidifying our position in the marketplace while simultaneously
improving our importance to customers.

Today, over 90 percent of our sales are represented by products and services that we
believe are leaders in their respective market niches—a position unmatched by any
other company in the markets in which we compete. Having built this critical mass,
we are now focused on improving value for our shareholders by:

• Leveraging synergies;
• Refining our business portfolio;
• Enhancing new-product development;
• Focusing on key customers; and
• Sourcing products and components from Asia.


Delta faucet, KraftMaid cabinetry



Milgard windows


Leveraging Synergies
We are leveraging synergies among operating companies through the establish-
ment of product platforms, each under the direction of a Group President with
responsibility for the performance of operating companies within these platforms.
These product platforms are:
• Cabinets;
• Plumbing Products;
• Decorative Architectural Products, including coatings;
• Installation Services; and
• Other Specialty Products, including windows.

In each of these platforms, global steering committees are focusing on sourcing initia-
tives, shared best practices, cost-reduction efforts, joint marketing programs and
manufacturing rationalization.

This process is perhaps best illustrated by Masco Contractor Services (MCS), which
today supplies and installs products in approximately 50 percent of the new homes
built in the United States. We are leveraging our unique installation services capabil-
ities and relationships to enhance our sales of other products by offering our builder
customers installation of more than 20 separate categories of products. We are
excited about the opportunities to provide logistical advantages to our builder
customers by installing both insulation and non-insulation products, including
Masco-manufactured products such as cabinets and windows. Through our broad
installation and distribution system, Masco is the only company that currently offers
homebuilders nationwide installation services.

Although MCS is the undisputed leader in providing installation services, our serv-
ices revenues currently represent only a small portion of the installation costs of
building a home, offering significant opportunities for future growth.



Portfolio Review
In order to improve profitability and improve returns on
capital deployed, we continue to review our portfolio of
companies, concentrating on those that fully support our
strategic alignment and competitive core, perform to our
expectations and are less susceptible to foreign competition.
Through consolidations and divestitures in 2004, we reduced
the number of operating units from 63 to 47; we expect further
consolidation as we continue to streamline our operations.

During 2004 and early 2005, Masco divested the following six European
companies: Alma Küchen, The Alvic Group, Gebhardt Ventilatoren, Jüng Pumpen,
E. Missel, and SKS Group.

ORGANIZATION RESTRUCTURING

In 2004, we also consolidated a number of our operating companies:

• We structured our plumbing products operations into a single platform and have
several consolidations underway.
• We have refined the organizational structure and the strategic focus of our cabinet
businesses to better serve our builder customers and our retail customers.
• PowerShot, a manufacturer of fastening products, was assimilated into Arrow
Fastener.
• European operations were structured into three platforms, resulting in the reduc-
tion of reporting units from 29 to 19.

These organizational changes should enable Masco to continue to drive worldwide
synergies and cost savings in the future.


ACQUISITION STRATEGY
Historically, Masco’s goal has been to grow the Company’s sales through acquisition
at an average annual rate of five to 10 percent. As part of our strategic redirection, we
have reduced our annual sales growth target through acquisition to five percent or
less. Likely candidates would be “bolt-on” acquisitions that meet our financial crite-
ria and add a product extension, geographic presence or a new service or manufac-
turing capacity to one of our existing product or services platforms. There were no
significant acquisitions in 2004.

Watkins Hot Spring Solana spa



New-Product Development
To enhance market share growth, in recent years we have
intensified our focus on new-product development. We esti-
mate that currently 25 to 30 percent of our manufactured
product sales come from products that have been introduced
during the past three years.

Milgard Windows continued its new-product initiatives and, in 2004, in order to
expand to markets in the eastern U.S., introduced its new double- and single-hung
windows and fiberglass French and sliding doors. Fiberglass is relatively new to the
window market and provides dimensional stability that is impervious to outside ele-
ments. The unique combination of fiberglass with a finely crafted interior wood
veneer was hailed by Woman’s Day Special Interest Publications as the most innovative
new product of 2004.

In architectural products, Behr also introduced several new products in 2004, includ-
ing Behr Semi-Transparent Concrete Stain, Behr Wet-Look Sealer and Log Home and
Barn Finishes.

A number of exciting new plumbing
products have been introduced in early
ˆ
2005. These include the Simply PUR™ filtra-
tion faucet, a faucet system developed in
partnership with Procter & Gamble that
offers a convenient and easily changeable
filter, and the H2Okinetics Technology™ that
changes the shape of water droplets to
create a warmer, more luxurious shower
experience, using less water.
Behr paint, Milgard windows


ˆ
Delta Simply PUR™ filtration faucet



For 2005, Bath Unlimited is launching three new bath-accessory designs available to
builders, architects and specifiers: an old-world style, a traditional design and a
Southwest theme; and Hansgrohe introduced Citterio™, a new high-end line of faucets.

In Installation Services, MCS is installing a variety of new products, including closet
organizers manufactured by other Masco operating companies. In addition, MCS
introduced its new Diamond Class Level for its Environments for Living® program,
SM

that offers significant improvements in comfort and energy savings to homeowners.

THE SEVEN PILLARS OF THE ENVIRONMENTS FOR LIVING® PROGRAM


Customer Programs
Customer programs are driven by research in consultation
with our builder, retailer and wholesaler customers. These
programs are designed to provide incentives for mutual growth
and to help our customers better market our products to con-
sumers. For example, a recent study conducted by our Builder
Cabinet Group identified consumer model-home shopping and
buying behaviors to help our builder customers ensure that
their cabinet choices, design centers and marketing programs
present products and upgrade options in ways that best
address consumers’ needs and interests.

KEY RETAILER PROGRAM
Since 1986, the Key Retailer Program has grown
significantly with 2004 sales reaching $3.7 billion,
compared with $3.4 billion in 2003. Building on
the customized programs that we offer to our
retailer customers, we have established value-
added programs at both the corporate and oper-
ating company levels.

These newly expanded programs include: transportation, logistics, inventory
replenishment, technology, consumer research, product development, visual
merchandising, advertising and brand management.

BUILDER ALLIANCE PROGRAM
Since its establishment in 1987, the Masco Builder Alliance Program has been contin-
ually enhanced to reflect the needs of the marketplace and the voice of our customers.



The Masco Builder Alliance Program serves builder customers through a wide
range of customized initiatives, including Masco database management, targeted
product-based rebate programs, design center support services and other value-
added services.

In 2004, Masco continued to finalize a number of national arrangements with key
homebuilders that incentivize our customers to make us their primary installer of
insulation and other building products. Arrangements have now been executed with
five of the top 10 U.S. homebuilders with additional arrangements expected to be
finalized in 2005. We continue to increase sales through penetration of non-insulation
installation services.

Masco Contractor Services, Milgard windows


Asia Sourcing
As Asian countries have become major manufacturing centers
with lower costs for labor, land and facilities, we have
expanded our operations there, and now have approximately
1,400 employees and approximately 400,000 square feet of
manufacturing and distribution space in China. In 2004, we
outsourced over $400 million of products and components
compared with over $200 million in 2003, resulting in
significant cost savings.

Our established capabilities in China provide a base for further expansion of manu-
facturing and assembly in that country, and are already allowing Masco to serve
Asian consumers as the markets for our products grow.

Moores cabinetry



Improving Shareholder Returns
We continue to focus on initiatives that enable the Company
to create value for our shareholders. In 2003, the Company
established a goal of achieving a 15 percent ROIC by 2008 or
sooner. For the 12 months ended December 31, 2004, ROIC
was 12.0 percent compared with 11.1 percent in 2003. In both
2004 and 2003, the Company returned more than $1 billion to
shareholders through share repurchases and dividends.

SHARE REPURCHASE
The Company has continued its active share-repurchase program; in 2004 approxi-
mately 31 million common shares were repurchased and retired. During the first two
months of 2005, the Company repurchased an additional six million shares of
Company common stock (including approximately two million shares which were
subsequently reissued for the long-term stock incentive award plan).

We believe that our shares continue to be attractively valued and, depending on mar-
ket conditions and other factors, we expect to continue to be relatively aggressive in
our share-repurchase program.

DIVIDENDS
In 2004, the quarterly cash dividend was increased to $.18 from $.16 per common
share. This 12.5 percent increase reflects our favorable long-term outlook, strong bal-
ance sheet and cash flow, and recent positive changes in the tax law. This marks the
46th consecutive year in which dividends have been increased.


Corporate Responsibility
SUSTAINABILITY REPORT
In an effort to inform our shareholders of Masco’s economic, environ-
mental and social performance, in 2004 we published our first
Corporate Sustainability Report, which can be viewed on Masco’s web
site at www.masco.com. Sustainability is the concept that guides Masco
in measuring and continuously improving our performance with the
intent of ensuring that our business activities contribute to the well-
being of society and the environment. The report is intended to pro-
vide stakeholders with a balanced and reasonable picture of Masco’s sustainability
practices, outcomes and activities.

GOVERNANCE
Independent Directors
In 2004, we continued to enhance our corporate governance through the addition of
a new independent director, Dennis W. Archer, Chairman of Dickinson Wright PLLC,
a Detroit-based law firm, former two-term mayor of the city of Detroit and former
Associate Justice of the Michigan Supreme Court. His addition to the Board increased
the number of independent directors from seven to eight. All members of the Audit
Committee, Organization and Compensation Committee and Corporate Governance
and Nominating Committee are independent.

Code of Business Ethics
To reinforce our commitment to ethical business practices, we are continuing to develop
processes and systems to enhance our ability to communicate requirements, confirm
compliance and train employees in ethical behaviors and expectations related to our
Code of Business Ethics program. For example, in 2003 we installed a toll-free employee
ethics “hotline” and introduced comprehensive Internet-based ethical and legal compli-
ance training programs to our U.S. employees. We have translated our Code of Business
Ethics into additional languages for distribution internationally, and are adapting our eth-
ical and legal compliance training for our International operations.



Future Outlook
We continue to view the future with excitement and optimism,
and we expect continued improvement in both sales and
earnings in 2005. In addition to the strategic initiatives
outlined in this report, your Company continues to benefit
from a broad offering of brand-name products and
increasingly diversified installation services, new-product
development and strong representation in all channels of
distribution for our products.

Despite the market advantages that we have established and maintained, Masco con-
tinues to face a number of challenges, including increasing commodity costs and pric-
ing pressures and competition from certain import products.

Macro-economic factors, such as slower economic growth, relatively higher commod-
ity, energy and freight costs, and anticipated increases in mortgage interest rates, may
have a negative impact on our businesses. Nevertheless, we believe that our market
leadership positions, our market share growth, our business mix of new construction
and remodeling and our broad array of leading brand-name products and services
will enable us to achieve another year of record sales and earnings in 2005.

We greatly appreciate the proven commitment, capabilities and enthusiasm of our
over 60,000 employees who contribute to the achievement of our financial and oper-
ational objectives. We look forward to their continued efforts as we strive to make
2005 another record year with sustained increases in returns to our shareholders.

Richard A. Manoogian

Alan H. Barry
President and Chief Operating Officer


Ginger mirror and lighting, Liberty hardware, Merillat cabinetry, Newport Brass faucet



Forty-Eight Years of Sales Growth


Masco Brands
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Quality ™

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Selected Financial Data
Dollars In Millions Except Per Common Share Data

2004 2003 2002 2001 2000
1
Net sales $12,074 $10,571 $ 8,831 $ 7,705 $ 6,506
Operating profit 1, 2, 3, 4, 5 $ 1,569 $ 1,484 $ 1,267 $ 1,011 $ 888
Income from continuing operations1, 2, 3, 4, 5, 6, 7, 8 $ 930 $ 790 $ 547 $ 183 $ 540
Per share of common stock:
Income from continuing operations1, 2, 3, 4, 5, 6, 7, 8:
Basic $2.09 $1.65 $1.13 $0.40 $1.22
Diluted $2.04 $1.61 $1.06 $0.39 $1.20
Dividends declared $0.68 $0.60 $0.55 $0.53 $0.50
Dividends paid $0.66 $0.58 $0.54 1/2 $0.52 1/2 $0.49
Income from continuing operations as a % of 1, 2, 3, 4, 5, 6, 7, 8:
Net sales 8% 7% 6% 2% 8%
Shareholders’ equity 9 17% 15% 14% 6% 18%
At December 31:
Total assets $12,541 $12,173 $12,050 $ 9,021 $ 7,604
Long-term debt $ 4,187 $ 3,848 $ 4,316 $ 3,628 $ 3,018
Shareholders’ equity $ 5,423 $ 5,456 $ 5,294 $ 3,958 $ 3,286
Book value per common share $ 11.89 $ 11.11 $ 10.30 $ 8.33 $ 7.27
1
The year 2004 includes a non-cash goodwill impairment charge of $141 million after tax ($168 million pre-tax) and income of $19 million after tax ($30 million pre-tax)
2
related to the Behr litigation settlement.
The year 2003 includes a non-cash goodwill impairment charge of $47 million after tax ($53 million pre-tax) and income of $45 million after tax ($72 million pre-tax) related to
3
the Behr litigation settlement.
The year 2002 includes a $92 million after tax ($147 million pre-tax), net charge for the Behr litigation settlement and pre-tax income of $16 million for the planned disposition of
4
a business.
Operating profit for 2001 and 2000 includes goodwill amortization of $87 million and $60 million, respectively.
5
The year 2002 includes a $92 million after-tax ($117 million pre-tax), non-cash goodwill impairment charge recognized as a cumulative effect of a change in accounting principle.
6
The year 2001 includes a $344 million after-tax ($530 million pre-tax), non-cash charge for the write-down of certain investments, principally securities of Furnishings International Inc.
7
The year 2000 includes a $94 million after-tax ($145 million pre-tax), non-cash charge for the planned disposition of businesses and the write-down of certain investments.
8
Based on shareholders’ equity as of the beginning of the year.
9

OPERATING PROFIT AS A PERCENT OF NET SALES1, 2
20043 20034 20025 20016 20006
As reported 13.0% 14.0% 14.3% 13.1% 13.6%
Before general corporate expense 14.6% 15.1% 15.5% 14.4% 15.2%
As reconciled 15.7% 14.9% 17.0% 15.5% 16.1%

1

General corporate expense is reported in Note P to the Consolidated Financial
2
MASCO COMMON SHARE
Statements contained in our Annual Report on Form 10-K included herein.
MARKET PRICE—P/E RATIO
The year 2004 includes a non-cash, pre-tax goodwill impairment charge of
3
$168 million and pre-tax income of $30 million related to the Behr Price/
litigation settlement.
Market Earnings Earnings
The year 2003 includes a non-cash, pre-tax goodwill impairment charge of $53 million Price Per Common Ratio
4
and pre-tax income of $72 million related to the Behr litigation settlement.
Year High Low Share1 High Low
The year 2002 includes a pre-tax net charge of $147 million for the Behr litigation
5
2004 $37.02 $25.88 $2.04 18 – 13
settlement, and pre-tax income of $16 million related to the planned disposition
2003 28.44 16.59 1.61 18 – 10
of a business.
2002 29.43 17.25 1.06 28 – 16
Operating profit for 2001 and 2000 includes goodwill amortization expense of
6
2001 26.94 17.76 .39 69 – 46
$87 million and $60 million, respectively.
2000 27.00 14.50 1.20 23 – 12
Amounts are calculated using income from continuing operations and have
1
been restated to exclude discontinued operations.


Corporate Leadership
CORPORATE OFFICERS AND
DIRECTORS
OPERATING EXECUTIVES
DENNIS W. ARCHER4 WILLIAM T. ANDERSON JOHN R. LEEKLEY
Chairman Vice President–Controller Senior Vice President and
Dickinson Wright PLLC, a law firm European Operations General Counsel
Director since 2004
RONALD W. AYERS RICHARD A. MANOOGIAN
THOMAS G. DENOMME1, 3, 4 Group President Chairman of the Board and
Retired Vice Chairman and Chief Administrative Officer Chief Executive Officer
ALAN H. BARRY
Chrysler Corporation
KAREN R. MENDELSOHN
President and
Director since 1998
Chief Operating Officer Vice President–Sales and
1, 2
PETER A. DOW Marketing
DR. LILLIAN BAUDER
Retired Vice Chairman, Chief Operating Officer and
DONALD J. MILROY
Vice President
Executive Committee Chairman
Group Vice President
Campbell-Ewald, an advertising company JOHN C. CALKINS
Director since 2001 JERRY W. MOLLIEN
Vice President–Corporate
Services Vice President–Corporate Taxes
ANTHONY F. EARLEY, JR.1, 4
Chairman, Chief Executive Officer, THOMAS N. CHIEFFE RICHARD G. MOSTELLER
President and Chief Operating Officer Group Vice President Vice President and
DTE Energy Company Senior Financial Advisor
SAMUEL A. CYPERT
Director since 2001
SHARON J. ROTHWELL
Vice President–Investor
1, 2, 4
VERNE G. ISTOCK Relations Vice President-Corporate Affairs
Retired Chairman/President
DONALD J. DEMARIE, JR. ROBERT B. ROSOWSKI
Bank One Corporation
Group President Vice President and Treasurer
Director since 1997
WAYNE DEVINE BARRY J. SILVERMAN
DAVID L. JOHNSTON2, 4
Group Vice President Vice President–Associate
President and Vice Chancellor of the
General Counsel
University of Waterloo in Ontario, Canada
DAVID A. DORAN
Director since 2003
JOHN G. SZNEWAJS
Vice President–Taxes
Vice President–Business
J. MICHAEL LOSH1
CHARLES A. DOWD, JR. Development
Interim Chief Financial Officer
Group President
Cardinal Health, Inc.
DAVID W. VAN HISE
DANIEL R. FOLEY
Director since 2003
Vice President–International
Vice President–Human
WAYNE B. LYON
JERRY VOLAS
Resources
Retired Chairman
LAU FRANDSEN
LifeStyle Furnishings International Ltd.
THOMAS VOSS
Director since 1988 President–Masco Europe
Executive Vice
3
RICHARD A. MANOOGIAN EUGENE A. GARGARO, JR. President–Europe
Chairman of the Board and Chief Executive Officer Vice President and Secretary
TIMOTHY WADHAMS
Masco Corporation
TED GOOLD
Director since 1964 Senior Vice President and
Chief Financial Officer
2, 4
MARY ANN VAN LOKEREN
CLAY H. KIEFABER ALFONS WALDER
Krey Distributing Company, a beverage Group Vice President
distribution firm LARRY J. LA BO JOHN C. WILLS
Director since 1997 Vice President–Controller
Group President
North American Operations

Member of Audit Committee
1
Member of Organization and Compensation Committee
2
Member of Executive Committee
3
Member of Corporate Governance and Nominating Committee
4


Division Operating Executives
ALLAN ABRAMS ROGER A. CARLSON STEVE LEE STEVEN P. RAIA

VASKEN ALTOUNIAN JEFFREY D. FILLEY JOSEPH MAHON RENZO RASTELLI

OLE LUND ANDERSEN KLAUS GROHE NICHOLAS MATTEN BASTIAN SCHAEFER

A. JAMES ARUFFO STEVEN M. HAMMOCK JIM McCARTHY WILLIAM F. SCHMIDT

ROBERT BALL LARRY B. HIGGINS REINHARD METZGER RONALD D. SMITH

MARC BICKLER DAVID B. HUMENIK MARK MOORE JAMES J. SWEENEY, JR.

NICHOLAS BILLIG ECKHARD KEILL JAN NUYTS TODD TALBOT

FRANK BUSAM STANLEY G. KORTE DOMINIC PRIMUCCI DONALD K. WOODY

CERTIFICATIONS
Richard A. Manoogian and Timothy Wadhams have provided certifications to the Securities and
Exchange Commission as required by Section 302 of the Sarbanes-Oxley Act of 2002. These
certifications are included as Exhibits 31.a and 31.b to the Company’s Form 10-K for the year ended
December 31, 2004.

As required by the New York Stock Exchange (NYSE), on May 25, 2004, Richard A. Manoogian sub-
mitted the annual CEO certification to the NYSE that stated he was not aware of any violation by the
Company of the NYSE corporate governance listing standards.

RESPONSIBILITY FOR FINANCIAL STATEMENTS
Management is responsible for the fairness and integrity of the Company’s consolidated financial
statements. In order to meet this responsibility, management maintains formal policies and proce-
dures that are consistent with high standards of accounting and administrative practices, which are
regularly communicated within the organization. In addition, management maintains a program of
internal auditing within the Company to examine and evaluate the adequacy and effectiveness of
established internal controls as related to Company policies, procedures and objectives. The accom-
panying report of the Company’s independent registered public accounting firm states their opinion
on the Company’s consolidated financial statements, management’s assessment of internal controls
over financial reporting, and the effectiveness of internal controls over financial reporting, based on
audits conducted in accordance with auditing standards established by the Public Company
Accounting Oversight Board.

The Audit Committee of the Board of Directors meets periodically with both management and the
independent registered public accounting firm to provide oversight with respect to the Company’s
financial reporting process and system of internal controls.


Information for Shareholders
and optional cash payments regarding the Plan should be
COMPANY PROFILE
sent to:
Masco Corporation is one of the world’s largest manufac-
turers of brand-name consumer products for the home and The Bank of New York
family. The Company is also a leading provider of services Dividend Reinvestment Department
that include the sale and installation of insulation and other P.O. Box 1958
building products. Newark, NJ 07101-1958
Our products include faucets, kitchen and bath cabinets, Duplicate Mailings
architectural coatings (paints and stains), bath and shower Shares owned by one person, but held in different forms of
units, spas and hot tubs, showering and plumbing special- the same name (e.g., John Smith, John B. Smith, J.B. Smith),
ties, windows and electronic locksets and other hardware. may result in duplicate mailings of shareholder informa-
tion at added expense to the Company.
The Company has approximately 6,300 shareholders of
record and 62,000 employees. Masco’s principal manufac- Please notify The Bank of New York by calling 800-524-
turing facilities are located throughout the United States. 4458 in order to eliminate such duplication.
International operations are primarily located in Europe.
Multiple shareholders who reside at one address and hold
EXECUTIVE OFFICES their shares through a bank or broker may receive only one
Masco Corporation Annual Report and Proxy Statement. This “householding”
21001 Van Born Road procedure reduces duplicate mailings and Company
Taylor, MI 48180 expenses. Shareholders who wish to opt out of household-
Phone: 313-274-7400 ing should contact their bank or broker.
Fax: 313-792-4177
Other Inquiries
All other shareholder inquiries, including those regarding lost,
INDEPENDENT REGISTERED
stolen or destroyed stock certificates, should be directed to:
PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP The Bank of New York
400 Renaissance Center Shareholder Relations Department
Detroit, MI 48243 P.O. Box 11258
Church Street Station
STOCK EXCHANGE INFORMATION
New York, NY 10286
Masco Corporation common stock is traded on the New
800-524-4458
York Stock Exchange under the symbol MAS.
E-Mail Address: shareowners@bankofny.com
TRANSFER AGENT, REGISTRAR AND
INTERNET
DIVIDEND DISBURSING AGENT
Current information on Masco Corporation can be found
Answers to many of your shareholder questions and
by visiting our home page on the Internet at
requests for forms are available by visiting The Bank of
www.masco.com.
New York’s web site at www.stockbny.com.
INVESTOR RELATIONS CONTACT
Transfer and Address Changes
Additional information about the Company is available
Send certificates for transfer and address changes to:
without charge to shareholders who direct a request to:
The Bank of New York
Samuel A. Cypert
Receive and Deliver Department
Vice President–Investor Relations
P.O. Box 11002
Masco Corporation
Church Street Station
21001 Van Born Road
New York, NY 10286
Taylor, MI 48180
Dividend Reinvestment Plan
Masco Corporation has appointed The Bank of New York ANNUAL MEETING OF SHAREHOLDERS
to serve as agent for its Dividend Reinvestment Plan. All The 2005 Annual Meeting of Shareholders of Masco
enrollments, terminations, sales, requests for certificates Corporation will be held at the executive offices of the
Company on May 10, 2005 at 10:00 a.m., E.D.T.

m
Masco Corporation
21001 Van Born Road
Taylor, MI 48180
313.274.7400
www.masco.com

Masco Annual Report2004

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